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 June 30, 20172018
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) | Yes x | 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 | Yes x | No ¨ |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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| Duke Energy | Large accelerated 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 filer x | 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 ¨ | No x |
Number of shares of Common stock outstanding at June 30, 2017:July 31, 2018:
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| Registrant | Description | Shares |
| Duke Energy | Common stock, $0.001 par value | 699,950,383712,354,724 |
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 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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| 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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| | 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, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. | | | | | | | | 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 July 31, 2018: | | | | | Registrant | Description | Shares | | Duke Energy | Common stock, $0.001 par value | 712,354,724 |
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, including those related to climate change, as well as rulings that affect cost and investment recovery or have an impact on rate structures or market prices; |
| | ◦ | The extent and timing of costs and liabilities to comply with federal and state laws, regulations and legal requirements related to coal ash remediation, including amounts for required closure of certain ash impoundments, are uncertain and difficult to estimate; |
| | ◦ | The ability to recover eligible costs, including amounts associated with coal ash impoundment retirement obligations and costs related to significant weather events, and to earn an adequate return on investment through rate case proceedings and the regulatory process; |
| | ◦ | The costs of decommissioning 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 sustained downturns of the economy and the economic health of our service territories or variations in customer usage patterns, including energy efficiency efforts and use of alternative energy sources, such as self-generation and distributed generation technologies; |
| | ◦ | Federal and state regulations, laws and other efforts designed to promote and expand the use of energy efficiency measures and distributed generation technologies, such as private solar and battery storage, in Duke Energy service territories could result in customers leaving the electric distribution system, excess generation resources as well as stranded costs; |
| | ◦ | Advancements in technology; |
| | ◦ | Additional competition in electric and natural gas markets and continued industry consolidation; |
| | ◦ | The influence of weather and other natural phenomena on operations, including the economic, operational and other effects of severe storms, hurricanes, droughts, earthquakes and tornadoes, including extreme weather associated with climate change; |
| | ◦ | 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 availability of adequate interstate pipeline transportation capacity and natural gas supply; |
| | ◦ | The impact on facilities and business from a terrorist attack, cybersecurity threats, data security breaches, 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, including the financial stability of third-party service providers; |
| | ◦ | The timing and extent of changes in commodity prices and interest rates and the ability to recover such costs through the regulatory process, where appropriate, and their impact on liquidity positions and the value of underlying assets; |
| | ◦ | The results of financing efforts, including the ability to obtain financing on favorable terms, which can be affected by various factors, including credit ratings, interest rate fluctuations, and general economic conditions; |
| | ◦ | Credit ratings of the Duke Energy Registrants may be different from what is expected; |
| | ◦ | Declines in the market prices of equity and fixed-income securities and resultant cash funding requirements for defined benefit pension plans, other post-retirement benefit plans and nuclear decommissioning trust funds; |
| | ◦ | Construction and development risks associated with the completion of the Duke Energy Registrants’ capital investment projects, including risks related to financing, obtaining and complying with terms of permits, meeting construction budgets and schedules, and satisfying operating and environmental performance standards, as well as the ability to recover costs from customers in a timely manner, or at all; |
| | ◦ | Changes in rules for regional transmission organizations, including changes in rate designs and new and evolving capacity markets, and risks related to obligations created by the default of other participants; |
| | ◦ | The ability to control operation and maintenance costs; |
| | ◦ | The level of creditworthiness of counterparties to transactions; |
| | ◦ | 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; |
| | ◦ | 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; |
| | ◦ | The ability to successfully integrate the natural gas businesses following the acquisition of Piedmont Natural Gas Company, Inc. and realize anticipated benefits; and |
| | ◦ | The ability to implement our business strategy. |
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 | | Six Months Ended |
| | June 30, | | June 30, |
| (in millions, except per-share amounts) | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
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| Operating Revenues | | | | | | | |
| Regulated electric | $ | 5,118 |
| | $ | 4,965 |
| | $ | 10,031 |
| | $ | 10,018 |
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| Regulated natural gas | 275 |
| | 97 |
| | 921 |
| | 266 |
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| Nonregulated electric and other | 162 |
| | 151 |
| | 332 |
| | 306 |
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| Total operating revenues | 5,555 |
| | 5,213 |
| | 11,284 |
| | 10,590 |
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| Operating Expenses | | | | |
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| Fuel used in electric generation and purchased power | 1,541 |
| | 1,521 |
| | 2,990 |
| | 3,109 |
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| Cost of natural gas | 76 |
| | 9 |
| | 334 |
| | 58 |
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| Operation, maintenance and other | 1,407 |
| | 1,351 |
| | 2,840 |
| | 2,767 |
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| Depreciation and amortization | 835 |
| | 790 |
| | 1,694 |
| | 1,583 |
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| Property and other taxes | 307 |
| | 290 |
| | 611 |
| | 585 |
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| Impairment charges | 9 |
| | 1 |
| | 9 |
| | 4 |
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| Total operating expenses | 4,175 |
| | 3,962 |
| | 8,478 |
| | 8,106 |
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| Gains on Sales of Other Assets and Other, net | 7 |
| | 8 |
| | 18 |
| | 15 |
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| Operating Income | 1,387 |
| | 1,259 |
| | 2,824 |
| | 2,499 |
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| Other Income and Expenses | | | | |
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| Equity in earnings of unconsolidated affiliates | 36 |
| | 15 |
| | 65 |
| | 23 |
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| Other income and expenses, net | 81 |
| | 81 |
| | 167 |
| | 151 |
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| Total other income and expenses | 117 |
| | 96 |
| | 232 |
| | 174 |
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| Interest Expense | 486 |
| | 478 |
| | 977 |
| | 967 |
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| Income From Continuing Operations Before Income Taxes | 1,018 |
| | 877 |
| | 2,079 |
| | 1,706 |
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| Income Tax Expense from Continuing Operations | 327 |
| | 253 |
| | 671 |
| | 505 |
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| Income From Continuing Operations | 691 |
| | 624 |
| | 1,408 |
| | 1,201 |
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| (Loss) Income From Discontinued Operations, net of tax | (2 | ) | | (112 | ) | | (2 | ) | | 10 |
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| Net Income | 689 |
| | 512 |
| | 1,406 |
| | 1,211 |
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| Less: Net Income Attributable to Noncontrolling Interests | 3 |
| | 3 |
| | 4 |
| | 8 |
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| Net Income Attributable to Duke Energy Corporation | $ | 686 |
| | $ | 509 |
| | $ | 1,402 |
| | $ | 1,203 |
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| Earnings Per Share – Basic and Diluted | | | | | | | |
| Income from continuing operations attributable to Duke Energy Corporation common stockholders | | | | | | | |
| Basic | $ | 0.98 |
| | $ | 0.90 |
| | $ | 2.00 |
| | $ | 1.73 |
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| Diluted | $ | 0.98 |
| | $ | 0.90 |
| | $ | 2.00 |
| | $ | 1.73 |
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| (Loss) Income from discontinued operations attributable to Duke Energy Corporation common stockholders | | | | | | | |
| Basic | $ | — |
| | $ | (0.16 | ) | | $ | — |
| | $ | 0.01 |
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| Diluted | $ | — |
| | $ | (0.16 | ) | | $ | — |
| | $ | 0.01 |
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| Net income attributable to Duke Energy Corporation common stockholders | | | | | | | |
| Basic | $ | 0.98 |
| | $ | 0.74 |
| | $ | 2.00 |
| | $ | 1.74 |
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| Diluted | $ | 0.98 |
| | $ | 0.74 |
| | $ | 2.00 |
| | $ | 1.74 |
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| Weighted average shares outstanding | | | | | | | |
| Basic | 700 |
| | 689 |
| | 700 |
| | 689 |
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| Diluted | 700 |
| | 690 |
| | 700 |
| | 689 |
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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 | | Six Months Ended | | | June 30, | | June 30, | | (in millions) | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
| | Net Income | $ | 689 |
| | $ | 512 |
| | $ | 1,406 |
| | $ | 1,211 |
| | Other Comprehensive Income, net of tax | | | | | | | | | Foreign currency translation adjustments | — |
| | 58 |
| | — |
| | 107 |
| | Pension and OPEB adjustments | 1 |
| | 2 |
| | 2 |
| | 2 |
| | Net unrealized losses on cash flow hedges | (6 | ) | | (11 | ) | | (4 | ) | | (25 | ) | | Reclassification into earnings from cash flow hedges | 4 |
| | — |
| | 5 |
| | 2 |
| | Unrealized gains on available-for-sale securities | 4 |
| | 3 |
| | 8 |
| | 7 |
| | Other Comprehensive Income, net of tax | 3 |
| | 52 |
| | 11 |
| | 93 |
| | Comprehensive Income | 692 |
| | 564 |
| | 1,417 |
| | 1,304 |
| | Less: Comprehensive Income Attributable to Noncontrolling Interests | 3 |
| | 6 |
| | 4 |
| | 12 |
| | Comprehensive Income Attributable to Duke Energy Corporation | $ | 689 |
| | $ | 558 |
| | $ | 1,413 |
| | $ | 1,292 |
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DUKE ENERGY CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
| | | | | | | | | | (in millions) | June 30, 2017 | | December 31, 2016 | | ASSETS | | | | | Current Assets | | | | | Cash and cash equivalents | $ | 298 |
| | $ | 392 |
| | Receivables (net of allowance for doubtful accounts of $13 at 2017 and $14 at 2016) | 498 |
| | 751 |
| | Receivables of VIEs (net of allowance for doubtful accounts of $56 at 2017 and $54 at 2016) | 1,880 |
| | 1,893 |
| | Inventory | 3,369 |
| | 3,522 |
| | Regulatory assets (includes $52 at 2017 and $50 at 2016 related to VIEs) | 1,192 |
| | 1,023 |
| | Other | 436 |
| | 458 |
| | Total current assets | 7,673 |
| | 8,039 |
| | Property, Plant and Equipment | | | | | Cost | 124,439 |
| | 121,397 |
| | Accumulated depreciation and amortization | (40,522 | ) | | (39,406 | ) | | Generation facilities to be retired, net | 487 |
| | 529 |
| | Net property, plant and equipment | 84,404 |
| | 82,520 |
| | Other Noncurrent Assets | | | | | Goodwill | 19,425 |
| | 19,425 |
| | Regulatory assets (includes $1,121 at 2017 and $1,142 at 2016 related to VIEs) | 12,808 |
| | 12,878 |
| | Nuclear decommissioning trust funds | 6,601 |
| | 6,205 |
| | Investments in equity method unconsolidated affiliates | 1,267 |
| | 925 |
| | Other | 2,826 |
| | 2,769 |
| | Total other noncurrent assets | 42,927 |
| | 42,202 |
| | Total Assets | $ | 135,004 |
| | $ | 132,761 |
| | LIABILITIES AND EQUITY | | | | | Current Liabilities | | | | | Accounts payable | $ | 2,177 |
| | $ | 2,994 |
| | Notes payable and commercial paper | 3,488 |
| | 2,487 |
| | Taxes accrued | 432 |
| | 384 |
| | Interest accrued | 506 |
| | 503 |
| | Current maturities of long-term debt (includes $212 at 2017 and $260 at 2016 related to VIEs) | 3,472 |
| | 2,319 |
| | Asset retirement obligations | 397 |
| | 411 |
| | Regulatory liabilities | 286 |
| | 409 |
| | Other | 1,708 |
| | 2,044 |
| | Total current liabilities | 12,466 |
| | 11,551 |
| | Long-Term Debt (includes $4,018 at 2017 and $3,587 at 2016 related to VIEs) | 46,043 |
| | 45,576 |
| | Other Noncurrent Liabilities | | | | | Deferred income taxes | 14,695 |
| | 14,155 |
| | Asset retirement obligations | 10,165 |
| | 10,200 |
| | Regulatory liabilities | 7,048 |
| | 6,881 |
| | Accrued pension and other post-retirement benefit costs | 1,108 |
| | 1,111 |
| | Investment tax credits | 534 |
| | 493 |
| | Other | 1,651 |
| | 1,753 |
| | Total other noncurrent liabilities | 35,201 |
| | 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 | 38,758 |
| | 38,741 |
| | Retained earnings | 2,607 |
| | 2,384 |
| | Accumulated other comprehensive loss | (82 | ) | | (93 | ) | | Total Duke Energy Corporation stockholders' equity | 41,284 |
| | 41,033 |
| | Noncontrolling interests | 10 |
| | 8 |
| | Total equity | 41,294 |
| | 41,041 |
| | Total Liabilities and Equity | $ | 135,004 |
| | $ | 132,761 |
|
DUKE ENERGY CORPORATION
Condensed Consolidated StatementsIncorporation or Organization, Address of Cash Flows
(Unaudited)
| | | | | | | | | | | Six Months Ended | | | June 30, | | (in millions) | 2017 |
| | 2016 |
| | CASH FLOWS FROM OPERATING ACTIVITIES | | | | | Net income | $ | 1,406 |
| | $ | 1,211 |
| | Adjustments to reconcile net income to net cash provided by operating activities: | | | | | Depreciation, amortization and accretion (including amortization of nuclear fuel) | 1,953 |
| | 1,868 |
| | Equity component of AFUDC | (125 | ) | | (87 | ) | | Gains on sales of other assets | (20 | ) | | (18 | ) | | Impairment charges | 9 |
| | 198 |
| | Deferred income taxes | 669 |
| | 285 |
| | Equity in earnings of unconsolidated affiliates | (65 | ) | | (23 | ) | | Accrued pension and other post-retirement benefit costs | 13 |
| | 8 |
| | Payments for asset retirement obligations | (272 | ) | | (263 | ) | | (Increase) decrease in | | | | | Net realized and unrealized mark-to-market and hedging transactions | (12 | ) | | 199 |
| | Receivables | 293 |
| | (38 | ) | | Inventory | 153 |
| | 178 |
| | Other current assets | (148 | ) | | (51 | ) | | Increase (decrease) in | | | | | Accounts payable | (505 | ) | | (153 | ) | | Taxes accrued | 41 |
| | 216 |
| | Other current liabilities | (531 | ) | | (281 | ) | | Other assets | (101 | ) | | (9 | ) | | Other liabilities | (2 | ) | | (15 | ) | | Net cash provided by operating activities | 2,756 |
| | 3,225 |
| | CASH FLOWS FROM INVESTING ACTIVITIES | | | | | Capital expenditures | (3,931 | ) | | (3,393 | ) | | Contributions to equity method investments | (287 | ) | | (136 | ) | | Purchases of available-for-sale securities | (2,412 | ) | | (3,033 | ) | | Proceeds from sales and maturities of available-for-sale securities | 2,439 |
| | 3,059 |
| | Change in restricted cash | (44 | ) | | (21 | ) | | Other | (89 | ) | | (84 | ) | | Net cash used in investing activities | (4,324 | ) | | (3,608 | ) | | CASH FLOWS FROM FINANCING ACTIVITIES | | | | | Proceeds from the: | | | | | Issuance of long-term debt | 2,734 |
| | 3,514 |
| | Issuance of common stock related to employee benefit plans | — |
| | 7 |
| | Payments for the redemption of long-term debt | (1,009 | ) | | (795 | ) | | Proceeds from the issuance of short-term debt with original maturities greater than 90 days | 230 |
| | 500 |
| | Payments for the redemption of short-term debt with original maturities greater than 90 days | (32 | ) | | (492 | ) | | Notes payable and commercial paper | 783 |
| | (1,349 | ) | | Dividends paid | (1,200 | ) | | (1,140 | ) | | Other | (32 | ) | | (43 | ) | | Net cash provided by financing activities | 1,474 |
| | 202 |
| | Changes in cash and cash equivalents associated with assets held for sale | — |
| | 79 |
| | Net decrease in cash and cash equivalents | (94 | ) | | (102 | ) | | Cash and cash equivalents at beginning of period | 392 |
| | 383 |
| | Cash and cash equivalents at end of period | $ | 298 |
| | $ | 281 |
| | Supplemental Disclosures: | | | | | Significant non-cash transactions: | | | | | Accrued capital expenditures | $ | 589 |
| | $ | 670 |
|
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, 2015 | 688 |
| | $ | 1 |
| | $ | 37,968 |
| | $ | 2,564 |
| | $ | (692 | ) | | $ | (50 | ) | | $ | (3 | ) | | $ | (61 | ) | | $ | 39,727 |
| | $ | 44 |
| | $ | 39,771 |
| | Net income | — |
| | — |
| | — |
| | 1,203 |
| | — |
| | — |
| | — |
| | — |
| | 1,203 |
| | 8 |
| | 1,211 |
| | Other comprehensive income (loss) | — |
| | — |
| | — |
| | — |
| | 103 |
| | (23 | ) | | 7 |
| | 2 |
| | 89 |
| | 4 |
| | 93 |
| | Common stock issuances, including dividend reinvestment and employee benefits | 1 |
| | — |
| | 16 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 16 |
| | — |
| | 16 |
| | Common stock dividends | — |
| | — |
| | — |
| | (1,140 | ) | | — |
| | — |
| | — |
| | — |
| | (1,140 | ) | | — |
| | (1,140 | ) | | Distributions to noncontrolling interest in subsidiaries | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (3 | ) | | (3 | ) | | Balance at June 30, 2016 | 689 |
| | $ | 1 |
|
| $ | 37,984 |
|
| $ | 2,627 |
|
| $ | (589 | ) |
| $ | (73 | ) |
| $ | 4 |
|
| $ | (59 | ) |
| $ | 39,895 |
|
| $ | 53 |
|
| $ | 39,948 |
| | | | | | | | | | | | | | | | | | | | | | | | | Balance at December 31, 2016 | 700 |
| | $ | 1 |
| | $ | 38,741 |
| | $ | 2,384 |
| | $ | — |
| | $ | (20 | ) | | $ | (1 | ) | | $ | (72 | ) | | $ | 41,033 |
| | $ | 8 |
| | $ | 41,041 |
| | Net income | — |
| | — |
| | — |
| | 1,402 |
| | — |
| | — |
| | — |
| | — |
| | 1,402 |
| | 4 |
| | 1,406 |
| | Other comprehensive income | — |
| | — |
| | — |
| | — |
| | — |
| | 1 |
| | 8 |
| | 2 |
| | 11 |
| | — |
| | 11 |
| | Common stock issuances, including dividend reinvestment and employee benefits | — |
| | — |
| | 17 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 17 |
| | — |
| | 17 |
| | Common stock dividends | — |
| | — |
| | — |
| | (1,200 | ) | | — |
| | — |
| | — |
| | — |
| | (1,200 | ) | | — |
| | (1,200 | ) | | Distributions to noncontrolling interest in subsidiaries | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (2 | ) | | (2 | ) | Other(a) | — |
| | — |
| | — |
| | 21 |
| | — |
| | — |
| | — |
| | — |
| | 21 |
| | — |
| | 21 |
| | Balance at June 30, 2017 | 700 |
|
| $ | 1 |
|
| $ | 38,758 |
|
| $ | 2,607 |
|
| $ | — |
|
| $ | (19 | ) |
| $ | 7 |
|
| $ | (70 | ) |
| $ | 41,284 |
|
| $ | 10 |
|
| $ | 41,294 |
|
Incorporation or Organization, Address of Principal Executive Offices, Telephone Number and IRS Employer Identification Number| 1-4928 | | (a) | Cumulative-effect adjustment due to implementation of a new accounting standard related to stock-based compensation and the associated income taxes. See Note 1 for more information. |
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 | | Six Months Ended | | | June 30, | | June 30, | | (in millions) | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
| | Operating Revenues | $ | 1,729 |
| | $ | 1,675 |
| | $ | 3,445 |
| | $ | 3,415 |
| | Operating Expenses | | | | | | | | | Fuel used in electric generation and purchased power | 435 |
| | 389 |
| | 863 |
| | 810 |
| | Operation, maintenance and other | 469 |
| | 476 |
| | 951 |
| | 988 |
| | Depreciation and amortization | 269 |
| | 275 |
| | 523 |
| | 534 |
| | Property and other taxes | 71 |
| | 71 |
| | 139 |
| | 138 |
| | Total operating expenses | 1,244 |
| | 1,211 |
| | 2,476 |
| | 2,470 |
| | Operating Income | 485 |
| | 464 |
| | 969 |
| | 945 |
| | Other Income and Expenses, net | 36 |
| | 45 |
| | 73 |
| | 82 |
| | Interest Expense | 103 |
| | 107 |
| | 206 |
| | 214 |
| | Income Before Income Taxes | 418 |
| | 402 |
| | 836 |
| | 813 |
| | Income Tax Expense | 145 |
| | 141 |
| | 293 |
| | 281 |
| | Net Income | $ | 273 |
| | $ | 261 |
| | $ | 543 |
| | $ | 532 |
| | Other Comprehensive Income, net of tax | | | | | | | | | Reclassification into earnings from cash flow hedges | 1 |
| | — |
| | 1 |
| | 1 |
| | Comprehensive Income | $ | 274 |
| | $ | 261 |
| | $ | 544 |
| | $ | 533 |
|
704-382-3853
PART I56-0205520
| | 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) | June 30, 2017 |
| | December 31, 2016 |
| | ASSETS | | | | | Current Assets | | | | | Cash and cash equivalents | $ | 16 |
| | $ | 14 |
| | Receivables (net of allowance for doubtful accounts of $2 at 2017 and 2016) | 165 |
| | 160 |
| | Receivables of VIEs (net of allowance for doubtful accounts of $7 at 2017 and 2016) | 611 |
| | 645 |
| | Receivables from affiliated companies | 85 |
| | 163 |
| | Notes receivable from affiliated companies | — |
| | 66 |
| | Inventory | 1,066 |
| | 1,055 |
| | Regulatory assets | 249 |
| | 238 |
| | Other | 34 |
| | 37 |
| | Total current assets | 2,226 |
| | 2,378 |
| | Property, Plant and Equipment | | | | | Cost | 41,881 |
| | 41,127 |
| | Accumulated depreciation and amortization | (14,632 | ) | | (14,365 | ) | | Net property, plant and equipment | 27,249 |
| | 26,762 |
| | Other Noncurrent Assets | | | | | Regulatory assets | 3,060 |
| | 3,159 |
| | Nuclear decommissioning trust funds | 3,499 |
| | 3,273 |
| | Other | 929 |
| | 943 |
| | Total other noncurrent assets | 7,488 |
| | 7,375 |
| | Total Assets | $ | 36,963 |
| | $ | 36,515 |
| | LIABILITIES AND EQUITY | | | | | Current Liabilities | | | | | Accounts payable | $ | 639 |
| | $ | 833 |
| | Accounts payable to affiliated companies | 127 |
| | 247 |
| | Notes payable to affiliated companies | 534 |
| | — |
| | Taxes accrued | 162 |
| | 143 |
| | Interest accrued | 104 |
| | 102 |
| | Current maturities of long-term debt | 704 |
| | 116 |
| | Asset retirement obligations | 227 |
| | 222 |
| | Regulatory liabilities | 115 |
| | 161 |
| | Other | 409 |
| | 468 |
| | Total current liabilities | 3,021 |
|
| 2,292 |
| | Long-Term Debt | 8,520 |
| | 9,187 |
| | Long-Term Debt Payable to Affiliated Companies | 300 |
| | 300 |
| | Other Noncurrent Liabilities | | | | | Deferred income taxes | 6,742 |
| | 6,544 |
| | Asset retirement obligations | 3,644 |
| | 3,673 |
| | Regulatory liabilities | 2,885 |
| | 2,840 |
| | Accrued pension and other post-retirement benefit costs | 103 |
| | 97 |
| | Investment tax credits | 235 |
| | 203 |
| | Other | 574 |
| | 607 |
| | Total other noncurrent liabilities | 14,183 |
| | 13,964 |
| | Commitments and Contingencies |
|
| |
|
| | Equity | | | | | Member's equity | 10,947 |
| | 10,781 |
| | Accumulated other comprehensive loss | (8 | ) | | (9 | ) | | Total equity | 10,939 |
| | 10,772 |
| | Total Liabilities and Equity | $ | 36,963 |
| | $ | 36,515 |
|
704-382-3853
PART I59-0247770
DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | | | | | | | | | Six Months Ended | | | June 30, | | (in millions) | 2017 |
| | 2016 |
| | CASH FLOWS FROM OPERATING ACTIVITIES | | | | | Net income | $ | 543 |
| | $ | 532 |
| | Adjustments to reconcile net income to net cash provided by operating activities: | | | | | Depreciation and amortization (including amortization of nuclear fuel) | 688 |
| | 673 |
| | Equity component of AFUDC | (59 | ) | | (48 | ) | | Deferred income taxes | 283 |
| | 273 |
| | Accrued pension and other post-retirement benefit costs | — |
| | 2 |
| | Payments for asset retirement obligations | (123 | ) | | (118 | ) | | (Increase) decrease in | | | | | Net realized and unrealized mark-to-market and hedging transactions | 24 |
| | 3 |
| | Receivables | 36 |
| | (48 | ) | | Receivables from affiliated companies | 78 |
| | 36 |
| | Inventory | (14 | ) | | 102 |
| | Other current assets | (21 | ) | | 24 |
| | Increase (decrease) in | | | | | Accounts payable | (125 | ) | | (226 | ) | | Accounts payable to affiliated companies | (120 | ) | | (56 | ) | | Taxes accrued | 19 |
| | 188 |
| | Other current liabilities | (140 | ) | | 28 |
| | Other assets | (44 | ) | | 22 |
| | Other liabilities | (15 | ) | | (14 | ) | | Net cash provided by operating activities | 1,010 |
| | 1,373 |
| | CASH FLOWS FROM INVESTING ACTIVITIES | | | | | Capital expenditures | (1,092 | ) | | (1,031 | ) | | Purchases of available-for-sale securities | (1,225 | ) | | (1,395 | ) | | Proceeds from sales and maturities of available-for-sale securities | 1,228 |
| | 1,395 |
| | Notes receivable from affiliated companies | 66 |
| | (89 | ) | | Other | (29 | ) | | (41 | ) | | Net cash used in investing activities | (1,052 | ) | | (1,161 | ) | | CASH FLOWS FROM FINANCING ACTIVITIES | | | | | Proceeds from the issuance of long-term debt | — |
| | 992 |
| | Payments for the redemption of long-term debt | (114 | ) | | (1 | ) | | Notes payable to affiliated companies | 534 |
| | — |
| | Distributions to parent | (375 | ) | | (1,200 | ) | | Other | (1 | ) | | — |
| | Net cash provided by (used in) financing activities | 44 |
| | (209 | ) | | Net increase in cash and cash equivalents | 2 |
| | 3 |
| | Cash and cash equivalents at beginning of period | 14 |
| | 13 |
| | Cash and cash equivalents at end of period | $ | 16 |
| | $ | 16 |
| | Supplemental Disclosures: | | | | | Significant non-cash transactions: | | | | | Accrued capital expenditures | $ | 200 |
| | $ | 228 |
|
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 | 532 |
| | — |
| | 532 |
| | Other comprehensive income | — |
| | 1 |
| | 1 |
| | Distributions to parent | (1,200 | ) | | — |
| | (1,200 | ) | | Balance at June 30, 2016 | $ | 10,949 |
| | $ | (10 | ) | | $ | 10,939 |
| | | | | | | | | Balance at December 31, 2016 | $ | 10,781 |
| | $ | (9 | ) | | $ | 10,772 |
| | Net income | 543 |
| | — |
| | 543 |
| | Other comprehensive income | — |
| | 1 |
| | 1 |
| | Distributions to parent | (375 | ) | | — |
| | (375 | ) | | Other | (2 | ) | | — |
| | (2 | ) | | Balance at June 30, 2017 | $ | 10,947 |
| | $ | (8 | ) | | $ | 10,939 |
|
|
| 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 | | Six Months Ended | | | June 30, | | June 30, | | (in millions) | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
| | Operating Revenues | $ | 2,392 |
| | $ | 2,348 |
| | $ | 4,571 |
| | $ | 4,680 |
| | Operating Expenses | | | | | | | | | Fuel used in electric generation and purchased power | 831 |
| | 852 |
| | 1,557 |
| | 1,712 |
| | Operation, maintenance and other | 534 |
| | 525 |
| | 1,078 |
| | 1,117 |
| | Depreciation and amortization | 311 |
| | 296 |
| | 624 |
| | 586 |
| | Property and other taxes | 129 |
| | 120 |
| | 246 |
| | 239 |
| | Impairment charges | 2 |
| | 1 |
| | 2 |
| | 3 |
| | Total operating expenses | 1,807 |
| | 1,794 |
| | 3,507 |
| | 3,657 |
| | Gains on Sales of Other Assets and Other, net | 6 |
| | 6 |
| | 14 |
| | 12 |
| | Operating Income | 591 |
| | 560 |
| | 1,078 |
| | 1,035 |
| | Other Income and Expenses, net | 21 |
| | 28 |
| | 45 |
| | 48 |
| | Interest Expense | 196 |
| | 160 |
| | 402 |
| | 320 |
| | Income Before Income Taxes | 416 |
| | 428 |
| | 721 |
| | 763 |
| | Income Tax Expense | 139 |
| | 154 |
| | 243 |
| | 277 |
| | Net Income | 277 |
| | 274 |
| | 478 |
| | 486 |
| | Less: Net Income Attributable to Noncontrolling Interests | 3 |
| | 2 |
| | 5 |
| | 5 |
| | Net Income Attributable to Parent | $ | 274 |
| | $ | 272 |
| | $ | 473 |
| | $ | 481 |
| | | | | | | | | | | Net Income | $ | 277 |
| | $ | 274 |
| | $ | 478 |
| | $ | 486 |
| | Other Comprehensive Income, net of tax | | | | | | | | | Pension and OPEB adjustments | 1 |
| | 1 |
| | 2 |
| | 2 |
| | Net unrealized gain on cash flow hedges | 5 |
| | — |
| | 6 |
| | — |
| | Reclassification into earnings from cash flow hedges | — |
| | 2 |
| | — |
| | 3 |
| | Unrealized gains on available-for-sale securities | 1 |
| | — |
| | 2 |
| | 1 |
| | Other Comprehensive Income, net of tax | 7 |
|
| 3 |
|
| 10 |
|
| 6 |
| | Comprehensive Income | 284 |
| | 277 |
| | 488 |
| | 492 |
| | Less: Comprehensive Income Attributable to Noncontrolling Interests | 3 |
| | 2 |
| | 5 |
| | 5 |
| | Comprehensive Income Attributable to Parent | $ | 281 |
|
| $ | 275 |
|
| $ | 483 |
|
| $ | 487 |
|
56-2155481
| | 1-1232 |
PROGRESSDUKE ENERGY OHIO, INC.
Condensed Consolidated Balance Sheets(an Ohio corporation)
(Unaudited)139 East Fourth Street
| | | | | | | | | | (in millions) | June 30, 2017 |
| | December 31, 2016 |
| | ASSETS | | | | | Current Assets | | | | | Cash and cash equivalents | $ | 39 |
| | $ | 46 |
| | Receivables (net of allowance for doubtful accounts of $4 at 2017 and $6 at 2016) | 95 |
| | 114 |
| | Receivables of VIEs (net of allowance for doubtful accounts of $7 at 2017 and 2016) | 777 |
| | 692 |
| | Receivables from affiliated companies | 3 |
| | 106 |
| | Notes receivable from affiliated companies | 140 |
| | 80 |
| | Inventory | 1,621 |
| | 1,717 |
| | Regulatory assets (includes $52 at 2017 and $50 at 2016 related to VIEs) | 533 |
| | 401 |
| | Other | 196 |
| | 148 |
| | Total current assets | 3,404 |
| | 3,304 |
| | Property, Plant and Equipment | | | | | Cost | 46,317 |
| | 44,864 |
| | Accumulated depreciation and amortization | (15,652 | ) | | (15,212 | ) | | Generation facilities to be retired, net | 487 |
| | 529 |
| | Net property, plant and equipment | 31,152 |
| | 30,181 |
| | Other Noncurrent Assets | | | | | Goodwill | 3,655 |
| | 3,655 |
| | Regulatory assets (includes $1,121 at 2017 and $1,142 at 2016 related to VIEs) | 5,853 |
| | 5,722 |
| | Nuclear decommissioning trust funds | 3,102 |
| | 2,932 |
| | Other | 865 |
| | 856 |
| | Total other noncurrent assets | 13,475 |
| | 13,165 |
| | Total Assets | $ | 48,031 |
| | $ | 46,650 |
| | LIABILITIES AND EQUITY | | | | | Current Liabilities | | | | | Accounts payable | $ | 649 |
| | $ | 1,003 |
| | Accounts payable to affiliated companies | 208 |
| | 348 |
| | Notes payable to affiliated companies | 1,070 |
| | 729 |
| | Taxes accrued | 165 |
| | 83 |
| | Interest accrued | 228 |
| | 201 |
| | Current maturities of long-term debt (includes $55 at 2017 and $62 at 2016 related to VIEs) | 1,022 |
| | 778 |
| | Asset retirement obligations | 170 |
| | 189 |
| | Regulatory liabilities | 120 |
| | 189 |
| | Other | 660 |
| | 745 |
| | Total current liabilities | 4,292 |
| | 4,265 |
| | Long-Term Debt (includes $1,711 at 2017 and $1,741 at 2016 related to VIEs) | 15,950 |
| | 15,590 |
| | Long-Term Debt Payable to Affiliated Companies | 1,173 |
| | 1,173 |
| | Other Noncurrent Liabilities | | | | | Deferred income taxes | 5,662 |
| | 5,246 |
| | Asset retirement obligations | 5,288 |
| | 5,286 |
| | Regulatory liabilities | 2,511 |
| | 2,395 |
| | Accrued pension and other post-retirement benefit costs | 537 |
| | 547 |
| | Other | 321 |
| | 341 |
| | Total other noncurrent liabilities | 14,319 |
| | 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 | 8,096 |
| | 8,094 |
| | Retained earnings | 4,237 |
| | 3,764 |
| | Accumulated other comprehensive loss | (28 | ) | | (38 | ) | | Total Progress Energy, Inc. stockholders' equity | 12,305 |
| | 11,820 |
| | Noncontrolling interests | (8 | ) | | (13 | ) | | Total equity | 12,297 |
| | 11,807 |
| | Total Liabilities and Equity | $ | 48,031 |
| | $ | 46,650 |
|
704-382-3853
PART I31-0240030
PROGRESS ENERGY, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | | | | | | | | | Six Months Ended | | | June 30, | | (in millions) | 2017 |
| | 2016 |
| | CASH FLOWS FROM OPERATING ACTIVITIES | | | | | Net income | $ | 478 |
| | $ | 486 |
| | Adjustments to reconcile net income to net cash provided by operating activities: | | | | | Depreciation, amortization and accretion (including amortization of nuclear fuel) | 733 |
| | 696 |
| | Equity component of AFUDC | (48 | ) | | (30 | ) | | Gains on sales of other assets | (15 | ) | | (15 | ) | | Impairment charges | 2 |
| | 3 |
| | Deferred income taxes | 412 |
| | 285 |
| | Accrued pension and other post-retirement benefit costs | (5 | ) | | (12 | ) | | Payments for asset retirement obligations | (128 | ) | | (126 | ) | | (Increase) decrease in | | | | | Net realized and unrealized mark-to-market and hedging transactions | — |
| | 32 |
| | Receivables | (64 | ) | | (66 | ) | | Receivables from affiliated companies | 99 |
| | 306 |
| | Inventory | 95 |
| | 25 |
| | Other current assets | (200 | ) | | 45 |
| | Increase (decrease) in | | | | | Accounts payable | (211 | ) | | (26 | ) | | Accounts payable to affiliated companies | (140 | ) | | (79 | ) | | Taxes accrued | 81 |
| | 90 |
| | Other current liabilities | (148 | ) | | (162 | ) | | Other assets | (70 | ) | | (72 | ) | | Other liabilities | (18 | ) | | 15 |
| | Net cash provided by operating activities | 853 |
| | 1,395 |
| | CASH FLOWS FROM INVESTING ACTIVITIES | | | | | Capital expenditures | (1,733 | ) | | (1,441 | ) | | Purchases of available-for-sale securities | (1,108 | ) | | (1,570 | ) | | Proceeds from sales and maturities of available-for-sale securities | 1,123 |
| | 1,594 |
| | Proceeds from insurance | 4 |
| | 58 |
| | Notes receivable from affiliated companies | (60 | ) | | — |
| | Change in restricted cash | 5 |
| | (6 | ) | | Other | (26 | ) | | (14 | ) | | Net cash used in investing activities | (1,795 | ) | | (1,379 | ) | | CASH FLOWS FROM FINANCING ACTIVITIES | | | | | Proceeds from the issuance of long-term debt | 923 |
| | 1,338 |
| | Payments for the redemption of long-term debt | (326 | ) | | (320 | ) | | Notes payable to affiliated companies | 341 |
| | (392 | ) | | Dividends to parent | — |
| | (651 | ) | | Other | (3 | ) | | (1 | ) | | Net cash provided by (used in) financing activities | 935 |
| | (26 | ) | | Net decrease in cash and cash equivalents | (7 | ) | | (10 | ) | | Cash and cash equivalents at beginning of period | 46 |
| | 44 |
| | Cash and cash equivalents at end of period | $ | 39 |
| | $ | 34 |
| | Supplemental Disclosures: | | | | | Significant non-cash transactions: | | | | | Accrued capital expenditures | $ | 174 |
| | $ | 288 |
|
PROGRESS ENERGY, INC.
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Accumulated Other Comprehensive Loss | | | | | | | | | | | | | | | Net Unrealized |
| | | | Total Progress |
| | | | | | | Additional |
| | | | Net Losses on |
| | Gains on |
| | Pension and |
| | Energy, Inc. |
| | | | | | | Paid-in |
| | Retained |
| | Cash Flow |
| | Available-for- |
| | OPEB |
| | Stockholders' |
| | Noncontrolling |
| | Total |
| | (in millions) | Capital |
| | Earnings |
| | Hedges |
| | Sale Securities |
| | Adjustments |
| | Equity |
| | Interests |
| | Equity |
| | Balance at December 31, 2015 | $ | 8,092 |
| | $ | 4,831 |
| | $ | (31 | ) | | $ | — |
| | $ | (17 | ) | | $ | 12,875 |
| | $ | (22 | ) | | $ | 12,853 |
| | Net income | — |
| | 481 |
| | — |
| | — |
| | — |
| | 481 |
| | 5 |
| | 486 |
| | Other comprehensive income | — |
| | — |
| | 3 |
| | 1 |
| | 2 |
| | 6 |
| | — |
| | 6 |
| | Distributions to noncontrolling interests | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (1 | ) | | (1 | ) | | Dividends to parent | — |
| | (651 | ) | | — |
| | — |
| | — |
| | (651 | ) | | — |
| | (651 | ) | | Balance at June 30, 2016 | $ | 8,092 |
|
| $ | 4,661 |
|
| $ | (28 | ) |
| $ | 1 |
|
| $ | (15 | ) |
| $ | 12,711 |
|
| $ | (18 | ) |
| $ | 12,693 |
| | | | | | | | | | | | | | | | | | | Balance at December 31, 2016 | $ | 8,094 |
| | $ | 3,764 |
| | $ | (23 | ) | | $ | 1 |
| | $ | (16 | ) | | $ | 11,820 |
| | $ | (13 | ) | | $ | 11,807 |
| | Net income | — |
| | 473 |
| | — |
| | — |
| | — |
| | 473 |
| | 5 |
| | 478 |
| | Other comprehensive income | — |
| | — |
| | 6 |
| | 2 |
| | 2 |
| | 10 |
| | — |
| | 10 |
| | Other | 2 |
| | — |
| | — |
| | — |
| | — |
| | 2 |
| | — |
| | 2 |
| | Balance at June 30, 2017 | $ | 8,096 |
|
| $ | 4,237 |
|
| $ | (17 | ) |
| $ | 3 |
|
| $ | (14 | ) |
| $ | 12,305 |
|
| $ | (8 | ) |
| $ | 12,297 |
|
|
| 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 | | Six Months Ended | | | June 30, | | June 30, | | (in millions) | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
| | Operating Revenues | $ | 1,199 |
| | $ | 1,213 |
| | $ | 2,418 |
| | $ | 2,520 |
| | Operating Expenses | | | | | | | | | Fuel used in electric generation and purchased power | 375 |
| | 424 |
| | 739 |
| | 872 |
| | Operation, maintenance and other | 330 |
| | 321 |
| | 680 |
| | 707 |
| | Depreciation and amortization | 173 |
| | 175 |
| | 354 |
| | 350 |
| | Property and other taxes | 40 |
| | 38 |
| | 80 |
| | 79 |
| | Total operating expenses | 918 |
| | 958 |
| | 1,853 |
| | 2,008 |
| | Gains on Sales of Other Assets and Other, net | 1 |
| | — |
| | 3 |
| | 1 |
| | Operating Income | 282 |
| | 255 |
| | 568 |
| | 513 |
| | Other Income and Expenses, net | 14 |
| | 12 |
| | 33 |
| | 29 |
| | Interest Expense | 70 |
| | 64 |
| | 152 |
| | 127 |
| | Income Before Income Taxes | 226 |
| | 203 |
| | 449 |
| | 415 |
| | Income Tax Expense | 72 |
| | 72 |
| | 148 |
| | 147 |
| | Net Income and Comprehensive Income | $ | 154 |
| | $ | 131 |
| | $ | 301 |
| | $ | 268 |
|
56-0165465
DUKE ENERGY PROGRESS, LLC
Condensed Consolidated Balance Sheets
(Unaudited)
| | | | | | | | | | (in millions) | June 30, 2017 |
| | December 31, 2016 |
| | ASSETS | | | | | Current Assets | | | | | Cash and cash equivalents | $ | 12 |
| | $ | 11 |
| | Receivables (net of allowance for doubtful accounts of $1 at 2017 and $4 at 2016) | 32 |
| | 51 |
| | Receivables of VIEs (net of allowance for doubtful accounts of $5 at 2017 and 2016) | 422 |
| | 404 |
| | Receivables from affiliated companies | 5 |
| | 5 |
| | Notes receivable from affiliated companies | — |
| | 165 |
| | Inventory | 1,053 |
| | 1,076 |
| | Regulatory assets | 212 |
| | 188 |
| | Other | 76 |
| | 57 |
| | Total current assets | 1,812 |
| | 1,957 |
| | Property, Plant and Equipment | | | | | Cost | 28,936 |
| | 28,419 |
| | Accumulated depreciation and amortization | (10,734 | ) | | (10,561 | ) | | Generation facilities to be retired, net | 487 |
| | 529 |
| | Net property, plant and equipment | 18,689 |
| | 18,387 |
| | Other Noncurrent Assets | | | | | Regulatory assets | 3,379 |
| | 3,243 |
| | Nuclear decommissioning trust funds | 2,380 |
| | 2,217 |
| | Other | 536 |
| | 525 |
| | Total other noncurrent assets | 6,295 |
| | 5,985 |
| | Total Assets | $ | 26,796 |
| | $ | 26,329 |
| | LIABILITIES AND EQUITY | | | | | Current Liabilities | | | | | Accounts payable | $ | 277 |
| | $ | 589 |
| | Accounts payable to affiliated companies | 169 |
| | 227 |
| | Notes payable to affiliated companies | 633 |
| | — |
| | Taxes accrued | 61 |
| | 104 |
| | Interest accrued | 101 |
| | 102 |
| | Current maturities of long-term debt | 203 |
| | 452 |
| | Asset retirement obligations | 170 |
| | 189 |
| | Regulatory liabilities | 113 |
| | 158 |
| | Other | 308 |
| | 365 |
| | Total current liabilities | 2,035 |
| | 2,186 |
| | Long-Term Debt | 6,407 |
| | 6,409 |
| | Long-Term Debt Payable to Affiliated Companies | 150 |
| | 150 |
| | Other Noncurrent Liabilities | | | | | Deferred income taxes | 3,539 |
| | 3,323 |
| | Asset retirement obligations | 4,520 |
| | 4,508 |
| | Regulatory liabilities | 2,048 |
| | 1,946 |
| | Accrued pension and other post-retirement benefit costs | 246 |
| | 252 |
| | Investment tax credits | 145 |
| | 146 |
| | Other | 47 |
| | 51 |
| | Total other noncurrent liabilities | 10,545 |
| | 10,226 |
| | Commitments and Contingencies |
| |
| | Equity | | | | | Member's Equity | 7,659 |
| | 7,358 |
| | Total Liabilities and Equity | $ | 26,796 |
| | $ | 26,329 |
|
DUKE ENERGY PROGRESS, LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | | | | | | | | | Six Months Ended | | | June 30, | | (in millions) | 2017 |
| | 2016 |
| | CASH FLOWS FROM OPERATING ACTIVITIES | | | | | Net income | $ | 301 |
| | $ | 268 |
| | Adjustments to reconcile net income to net cash provided by operating activities: | | | | | Depreciation and amortization (including amortization of nuclear fuel) | 453 |
| | 451 |
| | Equity component of AFUDC | (26 | ) | | (20 | ) | | Gains on sales of other assets | (4 | ) | | (3 | ) | | Deferred income taxes | 224 |
| | 172 |
| | Accrued pension and other post-retirement benefit costs | (10 | ) | | (16 | ) | | Payments for asset retirement obligations | (101 | ) | | (100 | ) | | (Increase) decrease in | | | | | Net realized and unrealized mark-to-market and hedging transactions | (3 | ) | | (1 | ) | | Receivables | 3 |
| | (19 | ) | | Receivables from affiliated companies | — |
| | 7 |
| | Inventory | 23 |
| | 20 |
| | Other current assets | (50 | ) | | 131 |
| | Increase (decrease) in | | | | | Accounts payable | (218 | ) | | (28 | ) | | Accounts payable to affiliated companies | (58 | ) | | (56 | ) | | Taxes accrued | (43 | ) | | 56 |
| | Other current liabilities | (111 | ) | | (12 | ) | | Other assets | (37 | ) | | (26 | ) | | Other liabilities | (9 | ) | | (6 | ) | | Net cash provided by operating activities | 334 |
| | 818 |
| | CASH FLOWS FROM INVESTING ACTIVITIES | | | | | Capital expenditures | (840 | ) | | (704 | ) | | Purchases of available-for-sale securities | (819 | ) | | (1,299 | ) | | Proceeds from sales and maturities of available-for-sale securities | 805 |
| | 1,284 |
| | Notes receivable from affiliated companies | 165 |
| | — |
| | Other | (22 | ) | | (19 | ) | | Net cash used in investing activities | (711 | ) | | (738 | ) | | CASH FLOWS FROM FINANCING ACTIVITIES | | | | | Proceeds from the issuance of long-term debt | 15 |
| | 59 |
| | Payments for the redemption of long-term debt | (269 | ) | | (15 | ) | | Notes payable to affiliated companies | 633 |
| | (131 | ) | | Other | (1 | ) | | — |
| | Net cash provided by (used in) financing activities | 378 |
| | (87 | ) | | Net increase (decrease) in cash and cash equivalents | 1 |
| | (7 | ) | | Cash and cash equivalents at beginning of period | 11 |
| | 15 |
| | Cash and cash equivalents at end of period | $ | 12 |
| | $ | 8 |
| | Supplemental Disclosures: | | | | | Significant non-cash transactions: | | | | | Accrued capital expenditures | $ | 52 |
| | $ | 73 |
|
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 | 268 |
| | Balance at June 30, 2016 | $ | 7,327 |
| | | | | Balance at December 31, 2016 | $ | 7,358 |
| | Net income | 301 |
| | Balance at June 30, 2017 | $ | 7,659 |
|
DUKE ENERGY FLORIDA, LLC
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
| | | | | | | | | | | | | | | | | | | Three Months Ended | | Six Months Ended | | | June 30, | | June 30, | | (in millions) | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
| | Operating Revenues | $ | 1,191 |
| | $ | 1,133 |
| | $ | 2,150 |
| | $ | 2,157 |
| | Operating Expenses | | | | | | | | | Fuel used in electric generation and purchased power | 455 |
| | 429 |
| | 817 |
| | 841 |
| | Operation, maintenance and other | 203 |
| | 199 |
| | 394 |
| | 404 |
| | Depreciation and amortization | 137 |
| | 122 |
| | 269 |
| | 236 |
| | Property and other taxes | 89 |
| | 82 |
| | 166 |
| | 160 |
| | Impairment charges | 1 |
| | 1 |
| | 2 |
| | 3 |
| | Total operating expenses | 885 |
| | 833 |
| | 1,648 |
| | 1,644 |
| | Operating Income | 306 |
| | 300 |
| | 502 |
| | 513 |
| | Other Income and Expenses, net | 14 |
| | 14 |
| | 30 |
| | 19 |
| | Interest Expense | 70 |
| | 40 |
| | 140 |
| | 81 |
| | Income Before Income Taxes | 250 |
| | 274 |
| | 392 |
| | 451 |
| | Income Tax Expense | 92 |
| | 103 |
| | 144 |
| | 170 |
| | Net Income | $ | 158 |
| | $ | 171 |
| | $ | 248 |
| | $ | 281 |
| | Other Comprehensive Income, net of tax |
| |
| |
|
| |
|
| | Unrealized gains on available-for-sale securities | 1 |
| | — |
| | 2 |
| | 1 |
| | Comprehensive Income | $ | 159 |
| | $ | 171 |
| | $ | 250 |
|
| $ | 282 |
|
DUKE ENERGY FLORIDA, LLC
Condensed Consolidated Balance Sheets
(Unaudited)
| | | | | | | | | | (in millions) | June 30, 2017 |
| | December 31, 2016 |
| | ASSETS | | | | | Current Assets | | | | | Cash and cash equivalents | $ | 8 |
| | $ | 16 |
| | Receivables (net of allowance for doubtful accounts of $3 at 2017 and $2 at 2016) | 61 |
| | 61 |
| | Receivables of VIEs (net of allowance for doubtful accounts of $2 at 2017 and 2016) | 354 |
| | 288 |
| | Receivables from affiliated companies | 1 |
| | 5 |
| | Notes receivable from affiliated companies | 230 |
| | — |
| | Inventory | 568 |
| | 641 |
| | Regulatory assets (includes $52 at 2017 and $50 at 2016 related to VIEs) | 321 |
| | 213 |
| | Other (includes $33 at 2017 and $53 at 2016 related to VIEs) | 50 |
| | 125 |
| | Total current assets | 1,593 |
| | 1,349 |
| | Property, Plant and Equipment | | | | | Cost | 17,369 |
| | 16,434 |
| | Accumulated depreciation and amortization | (4,910 | ) | | (4,644 | ) | | Net property, plant and equipment | 12,459 |
| | 11,790 |
| | Other Noncurrent Assets | | | | | Regulatory assets (includes $1,121 at 2017 and $1,142 at 2016 related to VIEs) | 2,474 |
| | 2,480 |
| | Nuclear decommissioning trust funds | 723 |
| | 715 |
| | Other | 279 |
| | 278 |
| | Total other noncurrent assets | 3,476 |
| | 3,473 |
| | Total Assets | $ | 17,528 |
| | $ | 16,612 |
| | LIABILITIES AND EQUITY | | | | | Current Liabilities | | | | | Accounts payable | $ | 372 |
| | $ | 413 |
| | Accounts payable to affiliated companies | 42 |
| | 125 |
| | Notes payable to affiliated companies | — |
| | 297 |
| | Taxes accrued | 112 |
| | 33 |
| | Interest accrued | 58 |
| | 49 |
| | Current maturities of long-term debt (includes $55 at 2017 and $62 at 2016 related to VIEs) | 819 |
| | 326 |
| | Regulatory liabilities | 7 |
| | 31 |
| | Other | 322 |
| | 352 |
| | Total current liabilities | 1,732 |
| | 1,626 |
| | Long-Term Debt (includes $1,414 at 2017 and $1,442 at 2016 related to VIEs) | 6,160 |
| | 5,799 |
| | Other Noncurrent Liabilities | | | | | Deferred income taxes | 2,893 |
| | 2,694 |
| | Asset retirement obligations | 768 |
| | 778 |
| | Regulatory liabilities | 462 |
| | 448 |
| | Accrued pension and other post-retirement benefit costs | 258 |
| | 262 |
| | Other | 103 |
| | 105 |
| | Total other noncurrent liabilities | 4,484 |
| | 4,287 |
| | Commitments and Contingencies |
| |
| | Equity | | | | | Member's equity | 5,149 |
| | 4,899 |
| | Accumulated other comprehensive income | 3 |
| | 1 |
| | Total equity | 5,152 |
| | 4,900 |
| | Total Liabilities and Equity | $ | 17,528 |
| | $ | 16,612 |
|
DUKE ENERGY FLORIDA, LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | | | | | | | | | Six Months Ended | | | June 30, | | (in millions) | 2017 |
| | 2016 |
| | CASH FLOWS FROM OPERATING ACTIVITIES | | | | | Net income | $ | 248 |
| | $ | 281 |
| | Adjustments to reconcile net income to net cash provided by operating activities: | | | | | Depreciation, amortization and accretion | 274 |
| | 239 |
| | Equity component of AFUDC | (22 | ) | | (9 | ) | | Impairment charges | 2 |
| | 3 |
| | Deferred income taxes | 186 |
| | 113 |
| | Accrued pension and other post-retirement benefit costs | 2 |
| | 1 |
| | Payments for asset retirement obligations | (27 | ) | | (25 | ) | | (Increase) decrease in | | | | | Net realized and unrealized mark-to-market and hedging transactions | 2 |
| | 34 |
| | Receivables | (65 | ) | | (49 | ) | | Receivables from affiliated companies | — |
| | 23 |
| | Inventory | 72 |
| | 5 |
| | Other current assets | (47 | ) | | (13 | ) | | Increase (decrease) in | | | | | Accounts payable | 7 |
| | 3 |
| | Accounts payable to affiliated companies | (83 | ) | | (16 | ) | | Taxes accrued | 78 |
| | 5 |
| | Other current liabilities | (57 | ) | | (142 | ) | | Other assets | (32 | ) | | (47 | ) | | Other liabilities | (5 | ) | | 20 |
| | Net cash provided by operating activities | 533 |
| | 426 |
| | CASH FLOWS FROM INVESTING ACTIVITIES | | | | | Capital expenditures | (893 | ) | | (737 | ) | | Purchases of available-for-sale securities | (289 | ) | | (271 | ) | | Proceeds from sales and maturities of available-for-sale securities | 318 |
| | 310 |
| | Proceeds from insurance | 4 |
| | 58 |
| | Notes receivable from affiliated companies | (230 | ) | | — |
| | Change in restricted cash | — |
| | (6 | ) | | Other | (4 | ) | | 5 |
| | Net cash used in investing activities | (1,094 | ) | | (641 | ) | | CASH FLOWS FROM FINANCING ACTIVITIES | | | | | Proceeds from the issuance of long-term debt | 908 |
| | 1,278 |
| | Payments for the redemption of long-term debt | (57 | ) | | (5 | ) | | Notes payable to affiliated companies | (297 | ) | | (407 | ) | | Distributions to parent | — |
| | (649 | ) | | Other | (1 | ) | | (2 | ) | | Net cash provided by financing activities | 553 |
| | 215 |
| | Net decrease in cash and cash equivalents | (8 | ) | | — |
| | Cash and cash equivalents at beginning of period | 16 |
| | 8 |
| | Cash and cash equivalents at end of period | $ | 8 |
| | $ | 8 |
| | Supplemental Disclosures: | | | | | Significant non-cash transactions: | | | | | Accrued capital expenditures | $ | 122 |
| | $ | 215 |
|
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 | 281 |
| | — |
| | 281 |
| | Other comprehensive income | — |
| | 1 |
| | 1 |
| | Distribution to parent | (649 | ) | | — |
| | (649 | ) | | Balance at June 30, 2016 | $ | 4,753 |
| | $ | 1 |
| | $ | 4,754 |
| | | | | | | | | Balance at December 31, 2016 | $ | 4,899 |
| | $ | 1 |
| | $ | 4,900 |
| | Net income | 248 |
| | — |
| | 248 |
| | Other comprehensive income | — |
| | 2 |
| | 2 |
| | Other | 2 |
| | — |
| | 2 |
| | Balance at June 30, 2017 | $ | 5,149 |
| | $ | 3 |
| | $ | 5,152 |
|
DUKE ENERGY OHIO, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
| | | | | | | | | | | | | | | | | | | Three Months Ended | | Six Months Ended | | | June 30, | | June 30, | | (in millions) | 2017 |
| | 2016 |
| | 2017 |
|
| 2016 |
| | Operating Revenues | | | | | | | | | Regulated electric | $ | 328 |
| | $ | 323 |
| | $ | 665 |
| | $ | 663 |
| | Regulated natural gas | 100 |
| | 99 |
| | 270 |
| | 269 |
| | Nonregulated electric and other | 9 |
| | 6 |
| | 20 |
| | 12 |
| | Total operating revenues | 437 |
| | 428 |
| | 955 |
| | 944 |
| | Operating Expenses | | | | | | | | | Fuel used in electric generation and purchased power – regulated | 86 |
| | 100 |
| | 183 |
| | 211 |
| | Fuel used in electric generation and purchased power – nonregulated | 14 |
| | 13 |
| | 29 |
| | 23 |
| | Cost of natural gas | 10 |
| | 9 |
| | 64 |
| | 58 |
| | Operation, maintenance and other | 131 |
| | 122 |
| | 261 |
| | 241 |
| | Depreciation and amortization | 63 |
| | 64 |
| | 130 |
| | 125 |
| | Property and other taxes | 67 |
| | 65 |
| | 139 |
| | 136 |
| | Impairment charges | 1 |
| | — |
| | 1 |
| | — |
| | Total operating expenses | 372 |
| | 373 |
| | 807 |
| | 794 |
| | Gains on Sales of Other Assets and Other, net | — |
| | — |
| | — |
| | 1 |
| | Operating Income | 65 |
| | 55 |
| | 148 |
| | 151 |
| | Other Income and Expenses, net | 4 |
| | 1 |
| | 8 |
| | 3 |
| | Interest Expense | 23 |
| | 21 |
| | 45 |
| | 41 |
| | Income From Continuing Operations Before Income Taxes | 46 |
| | 35 |
| | 111 |
| | 113 |
| | Income Tax Expense From Continuing Operations | 16 |
| | 12 |
| | 39 |
| | 33 |
| | Income From Continuing Operations | 30 |
| | 23 |
| | 72 |
| | 80 |
| | Income From Discontinued Operations, net of tax | — |
| | — |
| | — |
| | 2 |
| | Net Income and Comprehensive Income | $ | 30 |
| | $ | 23 |
| | $ | 72 |
| | $ | 82 |
|
DUKE ENERGY OHIO, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
| | | | | | | | | | (in millions) | June 30, 2017 |
| | December 31, 2016 |
| | ASSETS | | | | | Current Assets | | | | | Cash and cash equivalents | $ | 9 |
| | $ | 13 |
| | Receivables (net of allowance for doubtful accounts of $2 at 2017 and 2016) | 61 |
| | 71 |
| | Receivables from affiliated companies | 74 |
| | 129 |
| | Notes receivable from affiliated companies | 63 |
| | 94 |
| | Inventory | 134 |
| | 137 |
| | Regulatory assets | 42 |
| | 37 |
| | Other | 38 |
| | 37 |
| | Total current assets | 421 |
| | 518 |
| | Property, Plant and Equipment | | | | | Cost | 8,348 |
| | 8,126 |
| | Accumulated depreciation and amortization | (2,626 | ) | | (2,579 | ) | | Net property, plant and equipment | 5,722 |
| | 5,547 |
| | Other Noncurrent Assets | | | | | Goodwill | 920 |
| | 920 |
| | Regulatory assets | 519 |
| | 520 |
| | Other | 23 |
| | 23 |
| | Total other noncurrent assets | 1,462 |
| | 1,463 |
| | Total Assets | $ | 7,605 |
| | $ | 7,528 |
| | LIABILITIES AND EQUITY | | | | | Current Liabilities | | | | | Accounts payable | $ | 267 |
| | $ | 282 |
| | Accounts payable to affiliated companies | 47 |
| | 63 |
| | Notes payable to affiliated companies | 24 |
| | 16 |
| | Taxes accrued | 100 |
| | 178 |
| | Interest accrued | 19 |
| | 19 |
| | Current maturities of long-term debt | 1 |
| | 1 |
| | Regulatory liabilities | 16 |
| | 21 |
| | Other | 77 |
| | 91 |
| | Total current liabilities | 551 |
| | 671 |
| | Long-Term Debt | 1,951 |
| | 1,858 |
| | Long-Term Debt Payable to Affiliated Companies | 25 |
| | 25 |
| | Other Noncurrent Liabilities | | | | | Deferred income taxes | 1,506 |
| | 1,443 |
| | Asset retirement obligations | 76 |
| | 77 |
| | Regulatory liabilities | 240 |
| | 236 |
| | Accrued pension and other post-retirement benefit costs | 56 |
| | 56 |
| | Other | 157 |
| | 166 |
| | Total other noncurrent liabilities | 2,035 |
| | 1,978 |
| | Commitments and Contingencies |
| |
| | Equity | | | | | Common stock, $8.50 par value, 120 million shares authorized; 90 million shares outstanding at 2017 and 2016 | 762 |
| | 762 |
| | Additional paid-in capital | 2,670 |
| | 2,695 |
| | Accumulated deficit | (389 | ) | | (461 | ) | | Total equity | 3,043 |
| | 2,996 |
| | Total Liabilities and Equity | $ | 7,605 |
| | $ | 7,528 |
|
DUKE ENERGY OHIO, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | | | | | | | | | Six Months Ended | | | June 30, | | (in millions) | 2017 |
| | 2016 |
| | CASH FLOWS FROM OPERATING ACTIVITIES | | | | | Net income | $ | 72 |
| | $ | 82 |
| | Adjustments to reconcile net income to net cash provided by operating activities: | | | | | Depreciation and amortization | 132 |
| | 127 |
| | Equity component of AFUDC | (5 | ) | | (2 | ) | | Gains on sales of other assets | — |
| | (1 | ) | | Impairment charges | 1 |
| | — |
| | Deferred income taxes | 64 |
| | 68 |
| | Accrued pension and other post-retirement benefit costs | 2 |
| | 3 |
| | Payments for asset retirement obligations | (3 | ) | | (3 | ) | | (Increase) decrease in | | | | | Net realized and unrealized mark-to-market and hedging transactions | — |
| | (2 | ) | | Receivables | 11 |
| | 3 |
| | Receivables from affiliated companies | 55 |
| | 49 |
| | Inventory | 6 |
| | (5 | ) | | Other current assets | (11 | ) | | 49 |
| | Increase (decrease) in | | | | | Accounts payable | (4 | ) | | 8 |
| | Accounts payable to affiliated companies | (16 | ) | | 23 |
| | Taxes accrued | (79 | ) | | (68 | ) | | Other current liabilities | (15 | ) | | (66 | ) | | Other assets | (12 | ) | | (8 | ) | | Other liabilities | (8 | ) | | (9 | ) | | Net cash provided by operating activities | 190 |
| | 248 |
| | CASH FLOWS FROM INVESTING ACTIVITIES | | | | | Capital expenditures | (286 | ) | | (214 | ) | | Notes receivable from affiliated companies | 31 |
| | (186 | ) | | Other | (13 | ) | | (13 | ) | | Net cash used in investing activities | (268 | ) | | (413 | ) | | CASH FLOWS FROM FINANCING ACTIVITIES | | | | | Proceeds from the issuance of long-term debt | 93 |
| | 341 |
| | Payments for the redemption of long-term debt | (1 | ) | | (52 | ) | | Notes payable to affiliated companies | 8 |
| | (103 | ) | | Dividends to parent | (25 | ) | | (25 | ) | | Other | (1 | ) | | — |
| | Net cash provided by financing activities | 74 |
| | 161 |
| | Net decrease in cash and cash equivalents | (4 | ) | | (4 | ) | | Cash and cash equivalents at beginning of period | 13 |
| | 14 |
| | Cash and cash equivalents at end of period | $ | 9 |
| | $ | 10 |
| | Supplemental Disclosures: | | | | | Significant non-cash transactions: | | | | | Accrued capital expenditures | $ | 59 |
| | $ | 30 |
|
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 | — |
| | — |
| | 82 |
| | 82 |
| | Dividends to parent | — |
| | (25 | ) | | — |
| | (25 | ) | | Balance at June 30, 2016 | $ | 762 |
| | $ | 2,695 |
| | $ | (616 | ) | | $ | 2,841 |
| | | | | | | | | | | Balance at December 31, 2016 | $ | 762 |
| | $ | 2,695 |
| | $ | (461 | ) | | $ | 2,996 |
| | Net income | — |
| | — |
| | 72 |
| | 72 |
| | Dividends to parent | — |
| | (25 | ) | | — |
| | (25 | ) | | Balance at June 30, 2017 | $ | 762 |
|
| $ | 2,670 |
|
| $ | (389 | ) |
| $ | 3,043 |
|
| | 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 | | | | | | | | | | | | | | | | | | | Three Months Ended | | Six Months Ended | | | June 30, | | June 30, | | (in millions) | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
| | Operating Revenues | $ | 742 |
| | $ | 702 |
| | $ | 1,500 |
| | $ | 1,416 |
| | Operating Expenses | | | | | | | | | Fuel used in electric generation and purchased power | 234 |
| | 220 |
| | 485 |
| | 448 |
| | Operation, maintenance and other | 192 |
| | 189 |
| | 366 |
| | 351 |
| | Depreciation and amortization | 91 |
| | 97 |
| | 216 |
| | 222 |
| | Property and other taxes | 15 |
| | 22 |
| | 37 |
| | 45 |
| | Total operating expenses | 532 |
| | 528 |
| | 1,104 |
| | 1,066 |
| | Operating Income | 210 |
| | 174 |
|
| 396 |
|
| 350 |
| | Other Income and Expenses, net | 9 |
| | 6 |
| | 17 |
| | 10 |
| | Interest Expense | 44 |
| | 47 |
| | 88 |
| | 91 |
| | Income Before Income Taxes | 175 |
| | 133 |
|
| 325 |
|
| 269 |
| | Income Tax Expense | 69 |
| | 48 |
| | 128 |
| | 89 |
| | Net Income | $ | 106 |
| | $ | 85 |
|
| $ | 197 |
|
| $ | 180 |
| | Other Comprehensive Loss, net of tax | | | | | | | | | Reclassification into earnings from cash flow hedges | — |
| | — |
| | — |
| | (1 | ) | | Comprehensive Income | $ | 106 |
| | $ | 85 |
|
| $ | 197 |
|
| $ | 179 |
|
35-0594457
DUKE ENERGY INDIANA, LLC
Condensed Consolidated Balance Sheets
(Unaudited)
| | | | | | | | | | (in millions) | June 30, 2017 |
| | December 31, 2016 |
| | ASSETS | | | | | Current Assets | | | | | Cash and cash equivalents | $ | 17 |
| | $ | 17 |
| | Receivables (net of allowance for doubtful accounts of $1 at 2017 and 2016) | 45 |
| | 105 |
| | Receivables from affiliated companies | 87 |
| | 114 |
| | Notes receivable from affiliated companies | 19 |
| | 86 |
| | Inventory | 470 |
| | 504 |
| | Regulatory assets | 159 |
| | 149 |
| | Other | 88 |
| | 45 |
| | Total current assets | 885 |
| | 1,020 |
| | Property, Plant and Equipment | | | | | Cost | 14,573 |
| | 14,241 |
| | Accumulated depreciation and amortization | (4,484 | ) | | (4,317 | ) | | Net property, plant and equipment | 10,089 |
| | 9,924 |
| | Other Noncurrent Assets | | | | | Regulatory assets | 1,100 |
| | 1,073 |
| | Other | 159 |
| | 147 |
| | Total other noncurrent assets | 1,259 |
| | 1,220 |
| | Total Assets | $ | 12,233 |
| | $ | 12,164 |
| | LIABILITIES AND EQUITY | | | | | Current Liabilities | | | | | Accounts payable | $ | 171 |
| | $ | 263 |
| | Accounts payable to affiliated companies | 50 |
| | 74 |
| | Taxes accrued | 28 |
| | 31 |
| | Interest accrued | 59 |
| | 61 |
| | Current maturities of long-term debt | 3 |
| | 3 |
| | Regulatory liabilities | 36 |
| | 40 |
| | Other | 122 |
| | 93 |
| | Total current liabilities | 469 |
| | 565 |
| | Long-Term Debt | 3,631 |
| | 3,633 |
| | Long-Term Debt Payable to Affiliated Companies | 150 |
| | 150 |
| | Other Noncurrent Liabilities | | | | | Deferred income taxes | 2,011 |
| | 1,900 |
| | Asset retirement obligations | 865 |
| �� | 866 |
| | Regulatory liabilities | 745 |
| | 748 |
| | Accrued pension and other post-retirement benefit costs | 77 |
| | 71 |
| | Investment tax credits | 148 |
| | 137 |
| | Other | 23 |
| | 27 |
| | Total other noncurrent liabilities | 3,869 |
| | 3,749 |
| | Commitments and Contingencies |
| |
| | Equity | | | | | Member's Equity | 4,114 |
| | 4,067 |
| | Total Liabilities and Equity | $ | 12,233 |
| | $ | 12,164 |
|
DUKE ENERGY INDIANA, LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | | | | | | | | | Six Months Ended | | | June 30, | | (in millions) | 2017 |
| | 2016 |
| | CASH FLOWS FROM OPERATING ACTIVITIES | | | | | Net income | $ | 197 |
| | $ | 180 |
| | Adjustments to reconcile net income to net cash provided by operating activities: | | | | | Depreciation, amortization and accretion | 218 |
| | 223 |
| | Equity component of AFUDC | (12 | ) | | (7 | ) | | Deferred income taxes | 131 |
| | 36 |
| | Accrued pension and other post-retirement benefit costs | 3 |
| | 4 |
| | Payments for asset retirement obligations | (17 | ) | | (16 | ) | | (Increase) decrease in | | | | | Net realized and unrealized mark-to-market and hedging transactions | 1 |
| | — |
| | Receivables | 73 |
| | 12 |
| | Receivables from affiliated companies | 27 |
| | 11 |
| | Inventory | 34 |
| | 62 |
| | Other current assets | (15 | ) | | (19 | ) | | Increase (decrease) in | | | | | Accounts payable | (68 | ) | | (22 | ) | | Accounts payable to affiliated companies | (24 | ) | | 4 |
| | Taxes accrued | (3 | ) | | (42 | ) | | Other current liabilities | (11 | ) | | (60 | ) | | Other assets | (13 | ) | | (29 | ) | | Other liabilities | (9 | ) | | 44 |
| | Net cash provided by operating activities | 512 |
| | 381 |
| | CASH FLOWS FROM INVESTING ACTIVITIES | | | | | Capital expenditures | (397 | ) | | (325 | ) | | Purchases of available-for-sale securities | (10 | ) | | (7 | ) | | Proceeds from sales and maturities of available-for-sale securities | 4 |
| | 5 |
| | Notes receivable from affiliated companies | 67 |
| | (64 | ) | | Other | (23 | ) | | (6 | ) | | Net cash used in investing activities | (359 | ) | | (397 | ) | | CASH FLOWS FROM FINANCING ACTIVITIES | | | | | Proceeds from the issuance of long-term debt | — |
| | 495 |
| | Payments for the redemption of long-term debt | (2 | ) | | (326 | ) | | Distributions to parent | (150 | ) | | (149 | ) | | Other | (1 | ) | | (1 | ) | | Net cash (used in) provided by financing activities | (153 | ) | | 19 |
| | Net increase in cash and cash equivalents | — |
|
| 3 |
| | Cash and cash equivalents at beginning of period | 17 |
| | 9 |
| | Cash and cash equivalents at end of period | $ | 17 |
| | $ | 12 |
| | Supplemental Disclosures: | | | | | Significant non-cash transactions: | | | | | Accrued capital expenditures | $ | 81 |
| | $ | 43 |
|
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 | — |
| | — |
| | — |
| | 180 |
| | — |
| | 180 |
| | Other comprehensive loss | — |
| | — |
| | — |
| | — |
| | (1 | ) | | (1 | ) | | Distributions to parent | — |
| | — |
| | — |
| | (149 | ) | | — |
| | (149 | ) | | Transfer to Member's Equity | (1 | ) | | (1,384 | ) | | (2,450 | ) | | 3,835 |
| | — |
| | — |
| | Balance at June 30, 2016 | $ | — |
| | $ | — |
| | $ | — |
|
| $ | 3,866 |
| | $ | — |
| | $ | 3,866 |
| | | | | | | | | | | | | | | Balance at December 31, 2016 | $ | — |
| | $ | — |
| | $ | — |
| | $ | 4,067 |
| | $ | — |
| | $ | 4,067 |
| | Net income | — |
| | — |
| | — |
| | 197 |
| | — |
| | 197 |
| | Distributions to parent | — |
| | — |
| | — |
| | (150 | ) | | — |
| | (150 | ) | | Balance at June 30, 2017 | $ | — |
| | $ | — |
| | $ | — |
|
| $ | 4,114 |
| | $ | — |
| | $ | 4,114 |
|
|
| 1-6196 | PIEDMONT NATURAL GAS COMPANY, INC. Condensed Consolidated Statements of Operations and Comprehensive Income(a North Carolina corporation)
(Unaudited)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 | | Six Months Ended |
| | June 30, | | June 30, |
| | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
|
| Operating Revenues | | | | | | | |
| Regulated natural gas | $ | 198 |
| | $ | 179 |
| | $ | 696 |
| | $ | 660 |
|
| Nonregulated natural gas and other | 3 |
| | 3 |
| | 5 |
| | 5 |
|
| Total operating revenues | 201 |
| | 182 |
| | 701 |
| | 665 |
|
| Operating Expenses | | | | | | | |
| Cost of natural gas | 65 |
| | 50 |
| | 270 |
| | 247 |
|
| Operation, maintenance and other | 76 |
| | 73 |
| | 153 |
| | 147 |
|
| Depreciation and amortization | 36 |
| | 34 |
| | 71 |
| | 68 |
|
| Property and other taxes | 12 |
| | 11 |
| | 25 |
| | 22 |
|
| Impairment charges | 7 |
| | — |
| | 7 |
| | — |
|
| Total operating expenses | 196 |
| | 168 |
| | 526 |
| | 484 |
|
| Operating Income | 5 |
| | 14 |
| | 175 |
| | 181 |
|
| Equity in Earnings of Unconsolidated Affiliates | 2 |
| | 7 |
| | 5 |
| | 23 |
|
| Other income and expenses, net | (1 | ) | | — |
| | (1 | ) | | — |
|
| Total other income and expenses | 1 |
| | 7 |
| | 4 |
| | 23 |
|
| Interest Expense | 19 |
| | 16 |
| | 39 |
| | 33 |
|
| (Loss) Income Before Income Taxes | (13 | ) | | 5 |
| | 140 |
| | 171 |
|
| Income Tax (Benefit) Expense | (5 | ) | | 2 |
| | 53 |
| | 65 |
|
| Net (Loss) Income and Comprehensive (Loss) Income | $ | (8 | ) | | $ | 3 |
| | $ | 87 |
| | $ | 106 |
|
|
| | | | | | |
| Duke Energy Corporation (Duke Energy) | Yesx | No ¨ | | Duke Energy Florida, LLC (Duke Energy Florida) |
Yesx
| PART INo ¨
|
| Duke Energy Carolinas, LLC (Duke Energy Carolinas) | Yesx |
No ¨
| | Duke Energy Ohio, Inc. (Duke Energy Ohio) | PIEDMONT NATURAL GAS COMPANY, INC.Yesx
| Condensed Consolidated Balance SheetsNo ¨
|
| Progress Energy, Inc. (Progress Energy) | (Unaudited)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).
|
| | | | | | | |
| (in millions) | June 30, 2017 |
| | December 31, 2016 |
|
| ASSETS | | | |
| Current Assets | | | |
| Cash and cash equivalents | $ | 14 |
| | $ | 25 |
|
| Receivables (net of allowance for doubtful accounts of $4 at 2017 and $3 at 2016) | 80 |
| | 232 |
|
| Receivables from affiliated companies | 8 |
| | 7 |
|
| Inventory | 38 |
| | 66 |
|
| Regulatory assets | 119 |
| | 124 |
|
| Other | 87 |
| | 21 |
|
| Total current assets | 346 |
| | 475 |
|
| Property, Plant and Equipment | | | |
| Cost | 6,430 |
| | 6,174 |
|
| Accumulated depreciation and amortization | (1,424 | ) | | (1,360 | ) |
| Net property, plant and equipment | 5,006 |
| | 4,814 |
|
| Other Noncurrent Assets | | | |
| Goodwill | 49 |
| | 49 |
|
| Regulatory assets | 346 |
| | 373 |
|
| Investments in equity method unconsolidated affiliates | 74 |
| | 212 |
|
| Other | 12 |
| | 21 |
|
| Total other noncurrent assets | 481 |
| | 655 |
|
| Total Assets | $ | 5,833 |
| | $ | 5,944 |
|
| LIABILITIES AND EQUITY | | | |
| Current Liabilities | | | |
| Accounts payable | $ | 105 |
| | $ | 155 |
|
| Accounts payable to affiliated companies | 50 |
| | 8 |
|
| Notes payable and commercial paper | — |
| | 330 |
|
| Notes payable to affiliated companies | 167 |
| | — |
|
| Taxes accrued | 21 |
| | 67 |
|
| Interest accrued | 30 |
| | 33 |
|
| Current maturities of long-term debt | 35 |
| | 35 |
|
| Other | 67 |
| | 102 |
|
| Total current liabilities | 475 |
| | 730 |
|
| Long-Term Debt | 1,911 |
| | 1,786 |
|
| Other Noncurrent Liabilities | | | |
| Deferred income taxes | 1,019 |
| | 931 |
|
| Asset retirement obligations | 15 |
| | 14 |
|
| Regulatory liabilities | 625 |
| | 608 |
|
| Accrued pension and other post-retirement benefit costs | 14 |
| | 14 |
|
| Other | 164 |
| | 189 |
|
| Total other noncurrent liabilities | 1,837 |
| | 1,756 |
|
| Commitments and Contingencies |
| |
|
| Equity | | | |
| Common stock, no par value: 100 shares authorized and outstanding at 2017 and 2016 | 860 |
| | 860 |
|
| Retained earnings | 750 |
| | 812 |
|
| Total equity | 1,610 |
| | 1,672 |
|
| Total Liabilities and Equity | $ | 5,833 |
| | $ | 5,944 |
|
|
| | | | | | |
| Duke Energy | Yesx | No ¨ | | Duke Energy Florida |
Yesx
| PART INo ¨
|
| Duke Energy Carolinas | Yesx |
No ¨
| | Duke Energy Ohio | PIEDMONT NATURAL GAS COMPANY, INC.Yesx
| 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, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
|
| | | | | | | |
| | Six Months Ended |
| | June 30, |
| (in millions) | 2017 |
| | 2016 |
|
| CASH FLOWS FROM OPERATING ACTIVITIES | | | |
| Net income | $ | 87 |
| | $ | 106 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation and amortization | 74 |
| | 74 |
|
| Impairment charges | 7 |
| | — |
|
| Deferred income taxes | 100 |
| | 70 |
|
| Equity in earnings from unconsolidated affiliates | (5 | ) | | (23 | ) |
| Accrued pension and other post-retirement benefit costs | 6 |
| | 2 |
|
| Payments for asset retirement obligations | — |
| | (4 | ) |
| (Increase) decrease in | | | |
| Net realized and unrealized mark-to-market and hedging transactions | (39 | ) | | 41 |
|
| Receivables | 155 |
| | 90 |
|
| Receivables from affiliated companies | (1 | ) | | 48 |
|
| Inventory | 28 |
| | — |
|
| Other current assets | (64 | ) | | (93 | ) |
| Increase (decrease) in | | | |
| Accounts payable | (44 | ) | | (21 | ) |
| Accounts payable to affiliated companies | 42 |
| | — |
|
| Taxes accrued | (46 | ) | | 8 |
|
| Other current liabilities | (23 | ) | | (4 | ) |
| Other assets | 28 |
| | 49 |
|
| Other liabilities | (6 | ) | | 3 |
|
| Net cash provided by operating activities | 299 |
| | 346 |
|
| CASH FLOWS FROM INVESTING ACTIVITIES | | | |
| Capital expenditures | (260 | ) | | (247 | ) |
| Contributions to equity method investments | (12 | ) | | (22 | ) |
| Other | 1 |
| | (1 | ) |
| Net cash used in investing activities | (271 | ) | | (270 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | |
| Proceeds from the: | | | |
| Issuance of long-term debt | 125 |
| | — |
|
| Issuance of common stock | — |
| | 12 |
|
| Payments for the redemption of long-term debt | — |
| | (40 | ) |
| Notes payable and commercial paper | (330 | ) | | (5 | ) |
| Notes payable to affiliated companies | 167 |
| | — |
|
| Dividends paid | — |
| | (55 | ) |
| Other | (1 | ) | | — |
|
| Net cash used in financing activities | (39 | ) | | (88 | ) |
| Net decrease in cash and cash equivalents | (11 | ) | | (12 | ) |
| Cash and cash equivalents at beginning of period | 25 |
| | 33 |
|
| Cash and cash equivalents at end of period | $ | 14 |
| | $ | 21 |
|
| Supplemental Disclosures: | | | |
| Significant non-cash transactions: | | | |
| Accrued capital expenditures | $ | 45 |
| | $ | 50 |
|
| Transfer of ownership interest of certain equity method investees to parent | 149 |
| | — |
|
|
| | | | | |
| Duke Energy | Large accelerated filerx | Accelerated filer ¨ |
Non-accelerated filer ¨
| PART ISmaller reporting company ¨
| Emerging Growth Company ¨ |
| Duke Energy Carolinas |
Large accelerated filer ¨
| PIEDMONT NATURAL GAS COMPANY, INC.Accelerated 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 | | |
| | | | | | 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 | — |
| | 106 |
| | — |
| | 106 |
|
| Common stock issuances, including dividend reinvestments and employee benefits | 12 |
| | — |
| | — |
| | 12 |
|
| Common stock dividends | — |
| | (55 | ) | | — |
| | (55 | ) |
| Balance at June 30, 2016 | $ | 740 |
| | $ | 782 |
| | $ | (1 | ) | | $ | 1,521 |
|
| | | | | | | | |
| Balance at December 31, 2016 | $ | 860 |
| | $ | 812 |
| | $ | — |
| | $ | 1,672 |
|
| Net income | — |
| | 87 |
| | — |
| | 87 |
|
| Transfer of ownership interest of certain equity method investees to parent | — |
| | (149 | ) | | — |
| | (149 | ) |
| Balance at June 30, 2017 | $ | 860 |
| | $ | 750 |
| | $ | — |
| | $ | 1,610 |
|
|
| | | | | | |
| 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 July 31, 2018:
|
| | |
| Registrant | Description | Shares |
| Duke Energy | Common stock, $0.001 par value | 712,354,724 |
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 – (Unaudited)Organization and Basis of Presentation | |
| Note 2 – Business Segments | |
| Note 3 – Regulatory Matters | |
| Note 4 – Commitments and Contingencies | |
| Note 5 – Debt and Credit Facilities | |
| Note 6 – Asset Retirement Obligations | |
| Note 7 – Goodwill | |
| 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 – Revenue | |
| 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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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, including those related to climate change, as well as rulings that affect cost and investment recovery or have an impact on rate structures or market prices; |
| |
| ◦ | The extent and timing of costs and liabilities to comply with federal and state laws, regulations and legal requirements related to coal ash remediation, including amounts for required closure of certain ash impoundments, are uncertain and difficult to estimate; |
| |
| ◦ | The ability to recover eligible costs, including amounts associated with coal ash impoundment retirement obligations and costs related to significant weather events, and to earn an adequate return on investment through rate case proceedings and the regulatory process; |
| |
| ◦ | The costs of decommissioning 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 sustained downturns of the economy and the economic health of our service territories or variations in customer usage patterns, including energy efficiency efforts and use of alternative energy sources, such as self-generation and distributed generation technologies; |
| |
| ◦ | Federal and state regulations, laws and other efforts designed to promote and expand the use of energy efficiency measures and distributed generation technologies, such as private solar and battery storage, in Duke Energy service territories could result in customers leaving the electric distribution system, excess generation resources as well as stranded costs; |
| |
| ◦ | Advancements in technology; |
| |
| ◦ | Additional competition in electric and natural gas markets and continued industry consolidation; |
| |
| ◦ | The influence of weather and other natural phenomena on operations, including the economic, operational and other effects of severe storms, hurricanes, droughts, earthquakes and tornadoes, including extreme weather associated with climate change; |
| |
| ◦ | 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 natural gas distribution and transmission activities; |
| |
| ◦ | The availability of adequate interstate pipeline transportation capacity and natural gas supply; |
| |
| ◦ | The impact on facilities and business from a terrorist attack, cybersecurity threats, data security breaches and other catastrophic events, such as fires, explosions, pandemic health events or other similar occurrences; |
| |
| ◦ | The inherent risks associated with the operation of nuclear facilities, including environmental, health, safety, regulatory and financial risks, including the financial stability of third-party service providers; |
| |
| ◦ | The timing and extent of changes in commodity prices and interest rates and the ability to recover such costs through the regulatory process, where appropriate, and their impact on liquidity positions and the value of underlying assets; |
| |
| ◦ | The results of financing efforts, including the ability to obtain financing on favorable terms, which can be affected by various factors, including credit ratings, interest rate fluctuations, compliance with debt covenants and conditions and general market and economic conditions; |
| |
| ◦ | Credit ratings of the Duke Energy Registrants may be different from what is expected; |
| |
| ◦ | Declines in the market prices of equity and fixed-income securities and resultant cash funding requirements for defined benefit pension plans, other post-retirement benefit plans and nuclear decommissioning trust funds; |
| |
| ◦ | Construction and development risks associated with the completion of the Duke Energy Registrants’ capital investment projects, including risks related to financing, obtaining and complying with terms of permits, meeting construction budgets and schedules and satisfying operating and environmental performance standards, as well as the ability to recover costs from customers in a timely manner, or at all; |
| |
| ◦ | Changes in rules for regional transmission organizations, including changes in rate designs and new and evolving capacity markets, and risks related to obligations created by the default of other participants; |
| |
| ◦ | The ability to control operation and maintenance costs; |
| |
| ◦ | The level of creditworthiness of counterparties to transactions; |
| |
| ◦ | 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 new U.S. tax legislation to our financial condition, results of operations or cash flows and our credit ratings; |
| |
| ◦ | The impacts from potential impairments of goodwill or equity method investment carrying values; and |
| |
| ◦ | The ability to implement our business strategy. |
Additional risks and uncertainties are identified and discussed in the Duke Energy Registrants' reports filed with the SEC and available at the SEC's website at sec.gov. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than described. Forward-looking statements speak only as of the date they are made and the Duke Energy Registrants expressly disclaim an obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
|
| | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended |
| | June 30, | | June 30, |
| (in millions, except per-share amounts) | 2018 |
| | 2017 |
| | 2018 |
| | 2017 |
|
| Operating Revenues | | | | | | | |
| Regulated electric | $ | 5,178 |
| | $ | 5,118 |
| | $ | 10,462 |
| | $ | 10,031 |
|
| Regulated natural gas | 291 |
| | 275 |
| | 991 |
| | 921 |
|
| Nonregulated electric and other | 174 |
| | 162 |
| | 325 |
| | 332 |
|
| Total operating revenues | 5,643 |
| | 5,555 |
| | 11,778 |
| | 11,284 |
|
| Operating Expenses | | | | |
| |
|
| Fuel used in electric generation and purchased power | 1,574 |
| | 1,541 |
| | 3,250 |
| | 2,990 |
|
| Cost of natural gas | 89 |
| | 76 |
| | 402 |
| | 334 |
|
| Operation, maintenance and other | 1,544 |
| | 1,441 |
| | 3,008 |
| | 2,909 |
|
| Depreciation and amortization | 973 |
| | 835 |
| | 1,940 |
| | 1,694 |
|
| Property and other taxes | 315 |
| | 307 |
| | 631 |
| | 611 |
|
| Impairment charges | 172 |
| | 9 |
| | 215 |
| | 9 |
|
| Total operating expenses | 4,667 |
| | 4,209 |
| | 9,446 |
| | 8,547 |
|
| Gains (Losses) on Sales of Other Assets and Other, net | 3 |
| | 7 |
| | (97 | ) | | 18 |
|
| Operating Income | 979 |
| | 1,353 |
| | 2,235 |
| | 2,755 |
|
| Other Income and Expenses | | | | |
|
| |
|
|
| Equity in earnings of unconsolidated affiliates | 36 |
| | 36 |
| | 12 |
| | 65 |
|
| Other income and expenses, net | 110 |
| | 115 |
| | 196 |
| | 236 |
|
| Total other income and expenses | 146 |
| | 151 |
| | 208 |
| | 301 |
|
| Interest Expense | 518 |
| | 486 |
| | 1,033 |
| | 977 |
|
| Income From Continuing Operations Before Income Taxes | 607 |
| | 1,018 |
| | 1,410 |
| | 2,079 |
|
| Income Tax Expense From Continuing Operations | 100 |
| | 327 |
| | 281 |
| | 671 |
|
| Income From Continuing Operations | 507 |
| | 691 |
| | 1,129 |
| | 1,408 |
|
| Loss From Discontinued Operations, net of tax | (5 | ) | | (2 | ) | | (5 | ) | | (2 | ) |
| Net Income | 502 |
| | 689 |
| | 1,124 |
| | 1,406 |
|
| Less: Net Income Attributable to Noncontrolling Interests | 2 |
| | 3 |
| | 4 |
| | 4 |
|
| Net Income Attributable to Duke Energy Corporation | $ | 500 |
| | $ | 686 |
| | $ | 1,120 |
| | $ | 1,402 |
|
| | | | | | | | |
| Earnings Per Share – Basic and Diluted | | | | | | | |
| Income from continuing operations attributable to Duke Energy Corporation common stockholders | | | | | | | |
| Basic | $ | 0.72 |
| | $ | 0.98 |
| | $ | 1.60 |
| | $ | 2.00 |
|
| Diluted | $ | 0.72 |
| | $ | 0.98 |
| | $ | 1.60 |
| | $ | 2.00 |
|
| Loss from discontinued operations attributable to Duke Energy Corporation common stockholders | | | | | | | |
| Basic | $ | (0.01 | ) | | $ | — |
| | $ | (0.01 | ) | | $ | — |
|
| Diluted | $ | (0.01 | ) | | $ | — |
| | $ | (0.01 | ) | | $ | — |
|
| Net income attributable to Duke Energy Corporation common stockholders | | | | | | | |
| Basic | $ | 0.71 |
| | $ | 0.98 |
| | $ | 1.59 |
| | $ | 2.00 |
|
| Diluted | $ | 0.71 |
| | $ | 0.98 |
| | $ | 1.59 |
| | $ | 2.00 |
|
| Weighted average shares outstanding | | | | | | | |
| Basic | 703 |
| | 700 |
| | 702 |
| | 700 |
|
| Diluted | 704 |
| | 700 |
| | 702 |
| | 700 |
|
DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
|
| | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended |
| | June 30, | | June 30, |
| (in millions) | 2018 |
| | 2017 |
| | 2018 |
| | 2017 |
|
| Net Income | $ | 502 |
| | $ | 689 |
| | $ | 1,124 |
| | $ | 1,406 |
|
| Other Comprehensive (Loss) Income, net of tax | | | | | | | |
| Pension and OPEB adjustments | 1 |
| | 1 |
| | 2 |
| | 2 |
|
| Net unrealized gains (losses) on cash flow hedges | 1 |
| | (6 | ) | | 13 |
| | (4 | ) |
| Reclassification into earnings from cash flow hedges | (2 | ) | | 4 |
| | (1 | ) | | 5 |
|
| Unrealized (losses) gains on available-for-sale securities | (2 | ) | | 4 |
| | (5 | ) | | 8 |
|
| Other Comprehensive (Loss) Income, net of tax | (2 | ) | | 3 |
| | 9 |
| | 11 |
|
| Comprehensive Income | 500 |
| | 692 |
| | 1,133 |
| | 1,417 |
|
| Less: Comprehensive Income Attributable to Noncontrolling Interests | 2 |
| | 3 |
| | 4 |
| | 4 |
|
| Comprehensive Income Attributable to Duke Energy Corporation | $ | 498 |
| | $ | 689 |
| | $ | 1,129 |
| | $ | 1,413 |
|
DUKE ENERGY CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
|
| | | | | | | |
| (in millions) | June 30, 2018 | | December 31, 2017 |
| ASSETS | | | |
| Current Assets | | | |
| Cash and cash equivalents | $ | 304 |
| | $ | 358 |
|
| Receivables (net of allowance for doubtful accounts of $18 at 2018 and $14 at 2017) | 612 |
| | 779 |
|
| Receivables of VIEs (net of allowance for doubtful accounts of $56 at 2018 and $54 at 2017) | 2,205 |
| | 1,995 |
|
| Inventory | 3,177 |
| | 3,250 |
|
| Regulatory assets (includes $51 at 2018 and 2017 related to VIEs) | 1,741 |
| | 1,437 |
|
| Other | 437 |
| | 634 |
|
| Total current assets | 8,476 |
| | 8,453 |
|
| Property, Plant and Equipment | | | |
| Cost | 130,616 |
| | 127,507 |
|
| Accumulated depreciation and amortization | (42,499 | ) | | (41,537 | ) |
| Generation facilities to be retired, net | 378 |
| | 421 |
|
| Net property, plant and equipment | 88,495 |
| | 86,391 |
|
| Other Noncurrent Assets | | | |
| Goodwill | 19,396 |
| | 19,396 |
|
| Regulatory assets (includes $1,071 at 2018 and $1,091 at 2017 related to VIEs) | 12,505 |
| | 12,442 |
|
| Nuclear decommissioning trust funds | 7,132 |
| | 7,097 |
|
| Investments in equity method unconsolidated affiliates | 1,168 |
| | 1,175 |
|
| Other | 3,087 |
| | 2,960 |
|
| Total other noncurrent assets | 43,288 |
| | 43,070 |
|
| Total Assets | $ | 140,259 |
| | $ | 137,914 |
|
| LIABILITIES AND EQUITY | | | |
| Current Liabilities | | | |
| Accounts payable | $ | 2,686 |
| | $ | 3,043 |
|
| Notes payable and commercial paper | 3,329 |
| | 2,163 |
|
| Taxes accrued | 494 |
| | 551 |
|
| Interest accrued | 530 |
| | 525 |
|
| Current maturities of long-term debt (includes $229 at 2018 and $225 at 2017 related to VIEs) | 2,852 |
| | 3,244 |
|
| Asset retirement obligations | 716 |
| | 689 |
|
| Regulatory liabilities | 485 |
| | 402 |
|
| Other | 1,699 |
| | 1,865 |
|
| Total current liabilities | 12,791 |
| | 12,482 |
|
| Long-Term Debt (includes $4,179 at 2018 and $4,306 at 2017 related to VIEs) | 49,863 |
| | 49,035 |
|
| Other Noncurrent Liabilities | | | |
| Deferred income taxes | 6,977 |
| | 6,621 |
|
| Asset retirement obligations | 9,753 |
| | 9,486 |
|
| Regulatory liabilities | 15,355 |
| | 15,330 |
|
| Accrued pension and other post-retirement benefit costs | 1,014 |
| | 1,103 |
|
| Investment tax credits | 534 |
| | 539 |
|
| Other | 1,457 |
| | 1,581 |
|
| Total other noncurrent liabilities | 35,090 |
| | 34,660 |
|
| Commitments and Contingencies | | | |
| Equity | | | |
| Common stock, $0.001 par value, 2 billion shares authorized; 712 million shares outstanding at 2018 and 700 million shares outstanding at 2017 | 1 |
| | 1 |
|
| Additional paid-in capital | 39,682 |
| | 38,792 |
|
| Retained earnings | 2,894 |
| | 3,013 |
|
| Accumulated other comprehensive loss | (70 | ) | | (67 | ) |
| Total Duke Energy Corporation stockholders' equity | 42,507 |
| | 41,739 |
|
| Noncontrolling interests | 8 |
| | (2 | ) |
| Total equity | 42,515 |
| | 41,737 |
|
| Total Liabilities and Equity | $ | 140,259 |
| | $ | 137,914 |
|
DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
| | | | | | | |
| | Six Months Ended |
| | June 30, |
| (in millions) | 2018 |
| | 2017 |
|
| CASH FLOWS FROM OPERATING ACTIVITIES | | | |
| Net income | $ | 1,124 |
| | $ | 1,406 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation, amortization and accretion (including amortization of nuclear fuel) | 2,250 |
| | 1,953 |
|
| Equity component of AFUDC | (106 | ) | | (125 | ) |
| Losses (gains) on sales of other assets | 97 |
| | (20 | ) |
| Impairment charges | 215 |
| | 9 |
|
| Deferred income taxes | 289 |
| | 669 |
|
| Equity in earnings of unconsolidated affiliates | (12 | ) | | (65 | ) |
| Accrued pension and other post-retirement benefit costs | 31 |
| | 13 |
|
| Contributions to qualified pension plans | (141 | ) | | — |
|
| Payments for asset retirement obligations | (245 | ) | | (272 | ) |
| Payment for disposal of other assets | (105 | ) | | — |
|
| Other rate case adjustments | 37 |
| | — |
|
| Provision for rate refunds | 281 |
| | — |
|
| (Increase) decrease in | | | |
| Net realized and unrealized mark-to-market and hedging transactions | 7 |
| | (12 | ) |
| Receivables | (27 | ) | | 293 |
|
| Inventory | 70 |
| | 153 |
|
| Other current assets | 21 |
| | (168 | ) |
| Increase (decrease) in | | | |
| Accounts payable | (142 | ) | | (505 | ) |
| Taxes accrued | (58 | ) | | 41 |
|
| Other current liabilities | (214 | ) | | (531 | ) |
| Other assets | (112 | ) | | (37 | ) |
| Other liabilities | 42 |
| | (2 | ) |
| Net cash provided by operating activities | 3,302 |
| | 2,800 |
|
| CASH FLOWS FROM INVESTING ACTIVITIES | | | |
| Capital expenditures | (4,375 | ) | | (3,931 | ) |
| Contributions to equity method investments | (140 | ) | | (287 | ) |
| Purchases of debt and equity securities | (1,908 | ) | | (2,412 | ) |
| Proceeds from sales and maturities of debt and equity securities | 1,866 |
| | 2,439 |
|
| Other | (88 | ) | | (153 | ) |
| Net cash used in investing activities | (4,645 | ) | | (4,344 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | |
| Proceeds from the: | | | |
| Issuance of long-term debt | 2,727 |
| | 2,734 |
|
| Issuance of common stock | 820 |
| | — |
|
| Payments for the redemption of long-term debt | (2,190 | ) | | (1,009 | ) |
| Proceeds from the issuance of short-term debt with original maturities greater than 90 days | 201 |
| | 230 |
|
| Payments for the redemption of short-term debt with original maturities greater than 90 days | (160 | ) | | (32 | ) |
| Notes payable and commercial paper | 1,090 |
| | 783 |
|
| Dividends paid | (1,199 | ) | | (1,200 | ) |
| Other | (24 | ) | | (32 | ) |
| Net cash provided by financing activities | 1,265 |
| | 1,474 |
|
| Net decrease in cash, cash equivalents and restricted cash | (78 | ) | | (70 | ) |
| Cash, cash equivalents and restricted cash at beginning of period | 505 |
| | 541 |
|
| Cash, cash equivalents and restricted cash at end of period | $ | 427 |
| | $ | 471 |
|
| Supplemental Disclosures: | | | |
| Significant non-cash transactions: | | | |
| Accrued capital expenditures | $ | 978 |
| | $ | 589 |
|
| Non-cash dividends | 52 |
| | — |
|
DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Changes in Equity
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Accumulated Other Comprehensive Income (Loss) | | | | | | |
| | | | | | | | | | | | Net Unrealized |
| | | | Total |
| | | | |
| | | | | | | | | | Net Gains |
| | (Losses) Gains |
| | | | Duke Energy |
| | | | |
| | Common |
| | | | Additional |
| | | | (Losses) on |
| | on Available- |
| | Pension and |
| | Corporation |
| | | | |
| | Stock |
| | Common |
| | Paid-in |
| | Retained |
| | Cash Flow |
| | for-Sale- |
| | OPEB |
| | Stockholders' |
| | Noncontrolling |
| | Total |
|
| (in millions) | Shares |
| | Stock |
| | Capital |
| | Earnings |
| | Hedges |
| | Securities |
| | Adjustments |
| | Equity |
| | Interests |
| | Equity |
|
| Balance at December 31, 2016 | 700 |
| | $ | 1 |
| | $ | 38,741 |
| | $ | 2,384 |
| | $ | (20 | ) | | $ | (1 | ) | | $ | (72 | ) | | $ | 41,033 |
| | $ | 8 |
| | $ | 41,041 |
|
| Net income | — |
| | — |
| | — |
| | 1,402 |
| | — |
| | — |
| | — |
| | 1,402 |
| | 4 |
| | 1,406 |
|
| Other comprehensive income | — |
| | — |
| | — |
| | — |
| | 1 |
| | 8 |
| | 2 |
| | 11 |
| | — |
| | 11 |
|
| Common stock issuances, including dividend reinvestment and employee benefits | — |
| | — |
| | 17 |
| | — |
| | — |
| | — |
| | — |
| | 17 |
| | — |
| | 17 |
|
| Common stock dividends | — |
| | — |
| | — |
| | (1,200 | ) | | — |
| | — |
| | — |
| | (1,200 | ) | | — |
| | (1,200 | ) |
| Distributions to noncontrolling interest in subsidiaries | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (2 | ) | | (2 | ) |
Other(a) | — |
| | — |
| | — |
| | 21 |
| | — |
| | — |
| | — |
| | 21 |
| | — |
| | 21 |
|
| Balance at June 30, 2017 | 700 |
| | $ | 1 |
|
| $ | 38,758 |
|
| $ | 2,607 |
|
| $ | (19 | ) |
| $ | 7 |
|
| $ | (70 | ) |
| $ | 41,284 |
|
| $ | 10 |
|
| $ | 41,294 |
|
| | | | | | | | | | | | | | | | | | | | |
| Balance at December 31, 2017 | 700 |
| | $ | 1 |
| | $ | 38,792 |
| | $ | 3,013 |
| | $ | (10 | ) | | $ | 12 |
| | $ | (69 | ) | | $ | 41,739 |
| | $ | (2 | ) | | $ | 41,737 |
|
| Net income | — |
| | — |
| | — |
| | 1,120 |
| | — |
| | — |
| | — |
| | 1,120 |
| | 4 |
| | 1,124 |
|
| Other comprehensive income (loss) | — |
| | — |
| | — |
| | — |
| | 12 |
| | (5 | ) | | 2 |
| | 9 |
| | — |
| | 9 |
|
| Common stock issuances, including dividend reinvestment and employee benefits | 12 |
| | — |
| | 890 |
| | — |
| | — |
| | — |
| | — |
| | 890 |
| | — |
| | 890 |
|
| Common stock dividends | — |
| | — |
| | — |
| | (1,251 | ) | | — |
| | — |
| | — |
| | (1,251 | ) | | — |
| | (1,251 | ) |
| Distributions to noncontrolling interest in subsidiaries | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (1 | ) | | (1 | ) |
Other(b) | — |
| | — |
| | — |
| | 12 |
| | — |
| | (12 | ) | | — |
| | — |
| | 7 |
| | 7 |
|
| Balance at June 30, 2018 | 712 |
|
| $ | 1 |
|
| $ | 39,682 |
|
| $ | 2,894 |
|
| $ | 2 |
|
| $ | (5 | ) |
| $ | (67 | ) |
| $ | 42,507 |
|
| $ | 8 |
|
| $ | 42,515 |
|
| |
| (a) | Cumulative-effect adjustment due to implementation of a new accounting standard related to stock-based compensation and the associated income taxes. |
| |
| (b) | Amounts in Retained Earnings and Accumulated Other Comprehensive Loss represent a cumulative-effect adjustment due to implementation of a new accounting standard related to Financial Instruments Classification and Measurement. See Note 1 for more information. |
DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
|
| | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended |
| | June 30, | | June 30, |
| (in millions) | 2018 |
| | 2017 |
| | 2018 |
| | 2017 |
|
| Operating Revenues | $ | 1,672 |
| | $ | 1,729 |
| | $ | 3,435 |
| | $ | 3,445 |
|
| Operating Expenses | | | | | | | |
| Fuel used in electric generation and purchased power | 407 |
| | 435 |
| | 880 |
| | 863 |
|
| Operation, maintenance and other | 499 |
| | 483 |
| | 950 |
| | 978 |
|
| Depreciation and amortization | 289 |
| | 269 |
| | 561 |
| | 523 |
|
| Property and other taxes | 75 |
| | 71 |
| | 147 |
| | 139 |
|
| Impairment charges | 177 |
| | — |
| | 190 |
| | — |
|
| Total operating expenses | 1,447 |
| | 1,258 |
| | 2,728 |
| | 2,503 |
|
| Losses on Sales of Other Assets and Other, net | (1 | ) | | — |
| | (1 | ) | | — |
|
| Operating Income | 224 |
| | 471 |
| | 706 |
| | 942 |
|
| Other Income and Expenses, net | 35 |
| | 50 |
| | 74 |
| | 100 |
|
| Interest Expense | 110 |
| | 103 |
| | 217 |
| | 206 |
|
| Income Before Income Taxes | 149 |
| | 418 |
| | 563 |
| | 836 |
|
| Income Tax Expense | 32 |
| | 145 |
| | 123 |
| | 293 |
|
| Net Income | $ | 117 |
| | $ | 273 |
| | $ | 440 |
| | $ | 543 |
|
| Other Comprehensive Income, net of tax | | | | | | | |
| Reclassification into earnings from cash flow hedges | — |
| | 1 |
| | 1 |
| | 1 |
|
| Comprehensive Income | $ | 117 |
| | $ | 274 |
| | $ | 441 |
| | $ | 544 |
|
DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Balance Sheets
(Unaudited)
|
| | | | | | | |
| (in millions) | June 30, 2018 |
| | December 31, 2017 |
|
| ASSETS | | | |
| Current Assets | | | |
| Cash and cash equivalents | $ | 16 |
| | $ | 16 |
|
| Receivables (net of allowance for doubtful accounts of $2 at 2018 and 2017) | 172 |
| | 200 |
|
| Receivables of VIEs (net of allowance for doubtful accounts of $7 at 2018 and 2017) | 704 |
| | 640 |
|
| Receivables from affiliated companies | 117 |
| | 95 |
|
| Inventory | 984 |
| | 971 |
|
| Regulatory assets | 420 |
| | 299 |
|
| Other | 21 |
| | 19 |
|
| Total current assets | 2,434 |
| | 2,240 |
|
| Property, Plant and Equipment | | | |
| Cost | 43,429 |
| | 42,939 |
|
| Accumulated depreciation and amortization | (15,248 | ) | | (15,063 | ) |
| Net property, plant and equipment | 28,181 |
| | 27,876 |
|
| Other Noncurrent Assets | | | |
| Regulatory assets | 3,234 |
| | 2,853 |
|
| Nuclear decommissioning trust funds | 3,790 |
| | 3,772 |
|
| Other | 1,036 |
| | 979 |
|
| Total other noncurrent assets | 8,060 |
| | 7,604 |
|
| Total Assets | $ | 38,675 |
| | $ | 37,720 |
|
| LIABILITIES AND EQUITY | | | |
| Current Liabilities | | | |
| Accounts payable | $ | 809 |
| | $ | 842 |
|
| Accounts payable to affiliated companies | 158 |
| | 209 |
|
| Notes payable to affiliated companies | 740 |
| | 104 |
|
| Taxes accrued | 158 |
| | 234 |
|
| Interest accrued | 109 |
| | 108 |
|
| Current maturities of long-term debt | 505 |
| | 1,205 |
|
| Asset retirement obligations | 227 |
| | 337 |
|
| Regulatory liabilities | 131 |
| | 126 |
|
| Other | 412 |
| | 486 |
|
| Total current liabilities | 3,249 |
|
| 3,651 |
|
| Long-Term Debt | 9,589 |
| | 8,598 |
|
| Long-Term Debt Payable to Affiliated Companies | 300 |
| | 300 |
|
| Other Noncurrent Liabilities | | | |
| Deferred income taxes | 3,507 |
| | 3,413 |
|
| Asset retirement obligations | 3,592 |
| | 3,273 |
|
| Regulatory liabilities | 6,292 |
| | 6,231 |
|
| Accrued pension and other post-retirement benefit costs | 99 |
| | 95 |
|
| Investment tax credits | 230 |
| | 232 |
|
| Other | 515 |
| | 566 |
|
| Total other noncurrent liabilities | 14,235 |
| | 13,810 |
|
| Commitments and Contingencies |
|
| |
|
|
| Equity | | | |
| Member's equity | 11,308 |
| | 11,368 |
|
| Accumulated other comprehensive loss | (6 | ) | | (7 | ) |
| Total equity | 11,302 |
| | 11,361 |
|
| Total Liabilities and Equity | $ | 38,675 |
| | $ | 37,720 |
|
DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
| | | | | | | |
| | Six Months Ended |
| | June 30, |
| (in millions) | 2018 |
| | 2017 |
|
| CASH FLOWS FROM OPERATING ACTIVITIES | | | |
| Net income | $ | 440 |
| | $ | 543 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation and amortization (including amortization of nuclear fuel) | 707 |
| | 688 |
|
| Equity component of AFUDC | (39 | ) | | (59 | ) |
| Losses on sales of other assets | 1 |
| | — |
|
| Impairment charges | 190 |
| | — |
|
| Deferred income taxes | 90 |
| | 283 |
|
| Accrued pension and other post-retirement benefit costs | 2 |
| | — |
|
| Contributions to qualified pension plans | (46 | ) | | — |
|
| Payments for asset retirement obligations | (114 | ) | | (123 | ) |
| Provision for rate refunds | 121 |
| | — |
|
| (Increase) decrease in | | | |
| Net realized and unrealized mark-to-market and hedging transactions | 8 |
| | 24 |
|
| Receivables | (33 | ) | | 36 |
|
| Receivables from affiliated companies | (22 | ) | | 78 |
|
| Inventory | (16 | ) | | (14 | ) |
| Other current assets | (33 | ) | | (21 | ) |
| Increase (decrease) in | | | |
| Accounts payable | (59 | ) | | (125 | ) |
| Accounts payable to affiliated companies | (51 | ) | | (120 | ) |
| Taxes accrued | (78 | ) | | 19 |
|
| Other current liabilities | (123 | ) | | (140 | ) |
| Other assets | (6 | ) | | (44 | ) |
| Other liabilities | (29 | ) | | (15 | ) |
| Net cash provided by operating activities | 910 |
| | 1,010 |
|
| CASH FLOWS FROM INVESTING ACTIVITIES | | | |
| Capital expenditures | (1,270 | ) | | (1,092 | ) |
| Purchases of debt and equity securities | (976 | ) | | (1,225 | ) |
| Proceeds from sales and maturities of debt and equity securities | 976 |
| | 1,228 |
|
| Notes receivable from affiliated companies | — |
| | 66 |
|
| Other | (64 | ) | | (29 | ) |
| Net cash used in investing activities | (1,334 | ) | | (1,052 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | |
| Proceeds from the issuance of long-term debt | 991 |
| | — |
|
| Payments for the redemption of long-term debt | (702 | ) | | (114 | ) |
| Notes payable to affiliated companies | 636 |
| | 534 |
|
| Distributions to parent | (500 | ) | | (375 | ) |
| Other | (1 | ) | | (1 | ) |
| Net cash provided by financing activities | 424 |
| | 44 |
|
| Net increase in cash and cash equivalents | — |
| | 2 |
|
| Cash and cash equivalents at beginning of period | 16 |
| | 14 |
|
| Cash and cash equivalents at end of period | $ | 16 |
| | $ | 16 |
|
| Supplemental Disclosures: | | | |
| Significant non-cash transactions: | | | |
| Accrued capital expenditures | $ | 343 |
| | $ | 200 |
|
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, 2016 | $ | 10,781 |
| | $ | (9 | ) | | $ | 10,772 |
|
| Net income | 543 |
| | — |
| | 543 |
|
| Other comprehensive income | — |
| | 1 |
| | 1 |
|
| Distributions to parent | (375 | ) | | — |
| | (375 | ) |
| Other | (2 | ) | | — |
| | (2 | ) |
| Balance at June 30, 2017 | $ | 10,947 |
| | $ | (8 | ) | | $ | 10,939 |
|
| | | | | | |
| Balance at December 31, 2017 | $ | 11,368 |
| | $ | (7 | ) | | $ | 11,361 |
|
| Net income | 440 |
| | — |
| | 440 |
|
| Other comprehensive income | — |
| | 1 |
| | 1 |
|
| Distributions to parent | (500 | ) | | — |
| | (500 | ) |
| Balance at June 30, 2018 | $ | 11,308 |
| | $ | (6 | ) | | $ | 11,302 |
|
PROGRESS ENERGY, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
|
| | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended |
| | June 30, | | June 30, |
| (in millions) | 2018 |
| | 2017 |
| | 2018 |
| | 2017 |
|
| Operating Revenues | $ | 2,498 |
| | $ | 2,392 |
| | $ | 5,074 |
| | $ | 4,571 |
|
| Operating Expenses | | | | | | | |
| Fuel used in electric generation and purchased power | 895 |
| | 831 |
| | 1,871 |
| | 1,557 |
|
| Operation, maintenance and other | 610 |
| | 549 |
| | 1,233 |
| | 1,109 |
|
| Depreciation and amortization | 380 |
| | 311 |
| | 764 |
| | 624 |
|
| Property and other taxes | 131 |
| | 129 |
| | 254 |
| | 246 |
|
| Impairment charges | 4 |
| | 2 |
| | 33 |
| | 2 |
|
| Total operating expenses | 2,020 |
| | 1,822 |
| | 4,155 |
| | 3,538 |
|
| Gains on Sales of Other Assets and Other, net | 6 |
| | 6 |
| | 12 |
| | 14 |
|
| Operating Income | 484 |
| | 576 |
| | 931 |
| | 1,047 |
|
| Other Income and Expenses, net | 42 |
| | 36 |
| | 77 |
| | 76 |
|
| Interest Expense | 203 |
| | 196 |
| | 412 |
| | 402 |
|
| Income Before Income Taxes | 323 |
| | 416 |
| | 596 |
| | 721 |
|
| Income Tax Expense | 56 |
| | 139 |
| | 92 |
| | 243 |
|
| Net Income | 267 |
| | 277 |
| | 504 |
| | 478 |
|
| Less: Net Income Attributable to Noncontrolling Interests | 2 |
| | 3 |
| | 4 |
| | 5 |
|
| Net Income Attributable to Parent | $ | 265 |
| | $ | 274 |
| | $ | 500 |
| | $ | 473 |
|
| | | | | | | | |
| Net Income | $ | 267 |
| | $ | 277 |
| | $ | 504 |
| | $ | 478 |
|
| Other Comprehensive Income, net of tax | | | | | | | |
| Pension and OPEB adjustments | 2 |
| | 1 |
| | 2 |
| | 2 |
|
| Net unrealized gains on cash flow hedges | 1 |
| | 5 |
| | 3 |
| | 6 |
|
| Unrealized (losses) gains on available-for-sale securities | (1 | ) | | 1 |
| | (1 | ) | | 2 |
|
| Other Comprehensive Income, net of tax | 2 |
|
| 7 |
|
| 4 |
|
| 10 |
|
| Comprehensive Income | 269 |
| | 284 |
| | 508 |
| | 488 |
|
| Less: Comprehensive Income Attributable to Noncontrolling Interests | 2 |
| | 3 |
| | 4 |
| | 5 |
|
| Comprehensive Income Attributable to Parent | $ | 267 |
|
| $ | 281 |
|
| $ | 504 |
|
| $ | 483 |
|
PROGRESS ENERGY, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
|
| | | | | | | |
| (in millions) | June 30, 2018 |
| | December 31, 2017 |
|
| ASSETS | | | |
| Current Assets | | | |
| Cash and cash equivalents | $ | 37 |
| | $ | 40 |
|
| Receivables (net of allowance for doubtful accounts of $5 at 2018 and $4 at 2017) | 130 |
| | 123 |
|
| Receivables of VIEs (net of allowance for doubtful accounts of $7 at 2018 and 2017) | 969 |
| | 780 |
|
| Receivables from affiliated companies | 3 |
| | 31 |
|
| Notes receivable from affiliated companies | 309 |
| | 240 |
|
| Inventory | 1,521 |
| | 1,592 |
|
| Regulatory assets (includes $51 at 2018 and 2017 related to VIEs) | 970 |
| | 741 |
|
| Other | 356 |
| | 334 |
|
| Total current assets | 4,295 |
| | 3,881 |
|
| Property, Plant and Equipment | | | |
| Cost | 48,896 |
| | 47,323 |
|
| Accumulated depreciation and amortization | (16,380 | ) | | (15,857 | ) |
| Generation facilities to be retired, net | 378 |
| | 421 |
|
| Net property, plant and equipment | 32,894 |
| | 31,887 |
|
| Other Noncurrent Assets | | | |
| Goodwill | 3,655 |
| | 3,655 |
|
| Regulatory assets (includes $1,071 at 2018 and $1,091 at 2017 related to VIEs) | 5,736 |
| | 6,010 |
|
| Nuclear decommissioning trust funds | 3,342 |
| | 3,324 |
|
| Other | 992 |
| | 931 |
|
| Total other noncurrent assets | 13,725 |
| | 13,920 |
|
| Total Assets | $ | 50,914 |
| | $ | 49,688 |
|
| LIABILITIES AND EQUITY | | | |
| Current Liabilities | | | |
| Accounts payable | $ | 816 |
| | $ | 1,006 |
|
| Accounts payable to affiliated companies | 232 |
| | 251 |
|
| Notes payable to affiliated companies | 1,152 |
| | 805 |
|
| Taxes accrued | 181 |
| | 101 |
|
| Interest accrued | 211 |
| | 212 |
|
| Current maturities of long-term debt (includes $53 at 2018 and 2017 related to VIEs) | 1,321 |
| | 771 |
|
| Asset retirement obligations | 386 |
| | 295 |
|
| Regulatory liabilities | 233 |
| | 213 |
|
| Other | 711 |
| | 729 |
|
| Total current liabilities | 5,243 |
| | 4,383 |
|
| Long-Term Debt (includes $1,660 at 2018 and $1,689 at 2017 related to VIEs) | 16,723 |
| | 16,916 |
|
| Long-Term Debt Payable to Affiliated Companies | 150 |
| | 150 |
|
| Other Noncurrent Liabilities | | | |
| Deferred income taxes | 3,806 |
| | 3,502 |
|
| Asset retirement obligations | 5,052 |
| | 5,119 |
|
| Regulatory liabilities | 5,193 |
| | 5,306 |
|
| Accrued pension and other post-retirement benefit costs | 519 |
| | 545 |
|
| Other | 256 |
| | 302 |
|
| Total other noncurrent liabilities | 14,826 |
| | 14,774 |
|
| Commitments and Contingencies |
| |
|
| Equity | | | |
| Common stock, $0.01 par value, 100 shares authorized and outstanding at 2018 and 2017 | — |
| | — |
|
| Additional paid-in capital | 9,143 |
| | 9,143 |
|
| Retained earnings | 4,855 |
| | 4,350 |
|
| Accumulated other comprehensive loss | (26 | ) | | (25 | ) |
| Total Progress Energy, Inc. stockholders' equity | 13,972 |
| | 13,468 |
|
| Noncontrolling interests | — |
| | (3 | ) |
| Total equity | 13,972 |
| | 13,465 |
|
| Total Liabilities and Equity | $ | 50,914 |
| | $ | 49,688 |
|
PROGRESS ENERGY, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
| | | | | | | |
| | Six Months Ended |
| | June 30, |
| (in millions) | 2018 |
| | 2017 |
|
| CASH FLOWS FROM OPERATING ACTIVITIES | | | |
| Net income | $ | 504 |
| | $ | 478 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation, amortization and accretion (including amortization of nuclear fuel) | 945 |
| | 733 |
|
| Equity component of AFUDC | (52 | ) | | (48 | ) |
| Gains on sales of other assets | (12 | ) | | (15 | ) |
| Impairment charges | 33 |
| | 2 |
|
| Deferred income taxes | 240 |
| | 412 |
|
| Accrued pension and other post-retirement benefit costs | 12 |
| | (5 | ) |
| Contributions to qualified pension plans | (45 | ) | | — |
|
| Payments for asset retirement obligations | (108 | ) | | (128 | ) |
| Other rate case adjustments | 37 |
| | — |
|
| Provision for rate refunds | 65 |
| | — |
|
| (Increase) decrease in | | | |
| Net realized and unrealized mark-to-market and hedging transactions | 14 |
| | — |
|
| Receivables | (196 | ) | | (64 | ) |
| Receivables from affiliated companies | 28 |
| | 99 |
|
| Inventory | 71 |
| | 95 |
|
| Other current assets | (214 | ) | | (220 | ) |
| Increase (decrease) in | | | |
| Accounts payable | 15 |
| | (211 | ) |
| Accounts payable to affiliated companies | (19 | ) | | (140 | ) |
| Taxes accrued | 80 |
| | 81 |
|
| Other current liabilities | (58 | ) | | (148 | ) |
| Other assets | (186 | ) | | (69 | ) |
| Other liabilities | 4 |
| | (18 | ) |
| Net cash provided by operating activities | 1,158 |
| | 834 |
|
| CASH FLOWS FROM INVESTING ACTIVITIES | | | |
| Capital expenditures | (1,727 | ) | | (1,733 | ) |
| Purchases of debt and equity securities | (812 | ) | | (1,108 | ) |
| Proceeds from sales and maturities of debt and equity securities | 820 |
| | 1,123 |
|
| Notes receivable from affiliated companies | (69 | ) | | (60 | ) |
| Other | (81 | ) | | (22 | ) |
| Net cash used in investing activities | (1,869 | ) | | (1,800 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | |
| Proceeds from the issuance of long-term debt | 989 |
| | 923 |
|
| Payments for the redemption of long-term debt | (635 | ) | | (326 | ) |
| Notes payable to affiliated companies | 347 |
| | 341 |
|
| Other | (3 | ) | | (3 | ) |
| Net cash provided by financing activities | 698 |
| | 935 |
|
| Net decrease in cash, cash equivalents and restricted cash | (13 | ) | | (31 | ) |
| Cash, cash equivalents and restricted cash at beginning of period | 87 |
| | 110 |
|
| Cash, cash equivalents and restricted cash at end of period | $ | 74 |
| | $ | 79 |
|
| Supplemental Disclosures: | | | |
| Significant non-cash transactions: | | | |
| Accrued capital expenditures | $ | 366 |
| | $ | 174 |
|
PROGRESS ENERGY, INC.
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Accumulated Other Comprehensive Income (Loss) | | | | | | |
| | | | | | | | Net Unrealized |
| | | | Total Progress |
| | | | |
| | Additional |
| | | | Net Losses on |
| | Gains (losses) on |
| | Pension and |
| | Energy, Inc. |
| | | | |
| | Paid-in |
| | Retained |
| | Cash Flow |
| | Available-for- |
| | OPEB |
| | Stockholders' |
| | Noncontrolling |
| | Total |
|
| (in millions) | Capital |
| | Earnings |
| | Hedges |
| | Sale Securities |
| | Adjustments |
| | Equity |
| | Interests |
| | Equity |
|
| Balance at December 31, 2016 | $ | 8,094 |
| | $ | 3,764 |
| | $ | (23 | ) | | $ | 1 |
| | $ | (16 | ) | | $ | 11,820 |
| | $ | (13 | ) | | $ | 11,807 |
|
| Net income | — |
| | 473 |
| | — |
| | — |
| | — |
| | 473 |
| | 5 |
| | 478 |
|
| Other comprehensive income | — |
| | — |
| | 6 |
| | 2 |
| | 2 |
| | 10 |
| | — |
| | 10 |
|
| Other | 2 |
| | — |
| | — |
| | — |
| | — |
| | 2 |
| | — |
| | 2 |
|
| Balance at June 30, 2017 | $ | 8,096 |
|
| $ | 4,237 |
|
| $ | (17 | ) |
| $ | 3 |
|
| $ | (14 | ) | | $ | 12,305 |
|
| $ | (8 | ) |
| $ | 12,297 |
|
| | | | | | | | | | | | | | | | |
| Balance at December 31, 2017 | $ | 9,143 |
| | $ | 4,350 |
| | $ | (18 | ) | | $ | 5 |
| | $ | (12 | ) | | $ | 13,468 |
| | $ | (3 | ) | | $ | 13,465 |
|
| Net income | — |
| | 500 |
| | — |
| | — |
| | — |
| | 500 |
| | 4 |
| | 504 |
|
| Other comprehensive income (loss) | — |
| | — |
| | 3 |
| | (1 | ) | | 2 |
| | 4 |
| | — |
| | 4 |
|
| Distributions to noncontrolling interests | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (1 | ) | | (1 | ) |
Other(a) | — |
| | 5 |
| | — |
| | (5 | ) | | — |
| | — |
| | — |
| | — |
|
| Balance at June 30, 2018 | $ | 9,143 |
|
| $ | 4,855 |
|
| $ | (15 | ) |
| $ | (1 | ) |
| $ | (10 | ) | | $ | 13,972 |
|
| $ | — |
|
| $ | 13,972 |
|
| |
| (a) | Amounts in Retained Earnings and Accumulated Other Comprehensive Loss represent a cumulative-effect adjustment due to implementation of a new accounting standard related to Financial Instruments Classification and Measurement. See Note 1 for more information. |
DUKE ENERGY PROGRESS, LLC
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
|
| | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended |
| | June 30, | | June 30, |
| (in millions) | 2018 |
| | 2017 |
| | 2018 |
| | 2017 |
|
| Operating Revenues | $ | 1,291 |
| | $ | 1,199 |
| | $ | 2,751 |
| | $ | 2,418 |
|
| Operating Expenses | | | | | | | |
| Fuel used in electric generation and purchased power | 408 |
| | 375 |
| | 917 |
| | 739 |
|
| Operation, maintenance and other | 375 |
| | 342 |
| | 756 |
| | 704 |
|
| Depreciation and amortization | 235 |
| | 173 |
| | 470 |
| | 354 |
|
| Property and other taxes | 40 |
| | 40 |
| | 75 |
| | 80 |
|
| Impairment charges | 1 |
| | — |
| | 33 |
| | — |
|
| Total operating expenses | 1,059 |
| | 930 |
| | 2,251 |
| | 1,877 |
|
| Gains on Sales of Other Assets and Other, net | 1 |
| | 1 |
| | 2 |
| | 3 |
|
| Operating Income | 233 |
| | 270 |
| | 502 |
| | 544 |
|
| Other Income and Expenses, net | 19 |
| | 26 |
| | 37 |
| | 57 |
|
| Interest Expense | 78 |
| | 70 |
| | 159 |
| | 152 |
|
| Income Before Income Taxes | 174 |
| | 226 |
| | 380 |
| | 449 |
|
| Income Tax Expense | 35 |
| | 72 |
| | 64 |
| | 148 |
|
| Net Income and Comprehensive Income | $ | 139 |
| | $ | 154 |
| | $ | 316 |
| | $ | 301 |
|
DUKE ENERGY PROGRESS, LLC
Condensed Consolidated Balance Sheets
(Unaudited)
|
| | | | | | | |
| (in millions) | June 30, 2018 |
| | December 31, 2017 |
|
| ASSETS | | | |
| Current Assets | | | |
| Cash and cash equivalents | $ | 18 |
| | $ | 20 |
|
| Receivables (net of allowance for doubtful accounts of $2 at 2018 and $1 at 2017) | 50 |
| | 56 |
|
| Receivables of VIEs (net of allowance for doubtful accounts of $5 at 2018 and 2017) | 568 |
| | 459 |
|
| Receivables from affiliated companies | 1 |
| | 3 |
|
| Inventory | 976 |
| | 1,017 |
|
| Regulatory assets | 532 |
| | 352 |
|
| Other | 33 |
| | 97 |
|
| Total current assets | 2,178 |
| | 2,004 |
|
| Property, Plant and Equipment | | | |
| Cost | 30,535 |
| | 29,583 |
|
| Accumulated depreciation and amortization | (11,296 | ) | | (10,903 | ) |
| Generation facilities to be retired, net | 378 |
| | 421 |
|
| Net property, plant and equipment | 19,617 |
| | 19,101 |
|
| Other Noncurrent Assets | | | |
| Regulatory assets | 3,573 |
| | 3,507 |
|
| Nuclear decommissioning trust funds | 2,627 |
| | 2,588 |
|
| Other | 635 |
| | 599 |
|
| Total other noncurrent assets | 6,835 |
| | 6,694 |
|
| Total Assets | $ | 28,630 |
| | $ | 27,799 |
|
| LIABILITIES AND EQUITY | | | |
| Current Liabilities | | | |
| Accounts payable | $ | 375 |
| | $ | 402 |
|
| Accounts payable to affiliated companies | 175 |
| | 179 |
|
| Notes payable to affiliated companies | 540 |
| | 240 |
|
| Taxes accrued | 90 |
| | 64 |
|
| Interest accrued | 103 |
| | 102 |
|
| Current maturities of long-term debt | 603 |
| | 3 |
|
| Asset retirement obligations | 381 |
| | 295 |
|
| Regulatory liabilities | 157 |
| | 139 |
|
| Other | 344 |
| | 376 |
|
| Total current liabilities | 2,768 |
| | 1,800 |
|
| Long-Term Debt | 6,605 |
| | 7,204 |
|
| Long-Term Debt Payable to Affiliated Companies | 150 |
| | 150 |
|
| Other Noncurrent Liabilities | | | |
| Deferred income taxes | 1,957 |
| | 1,883 |
|
| Asset retirement obligations | 4,454 |
| | 4,378 |
|
| Regulatory liabilities | 3,998 |
| | 3,999 |
|
| Accrued pension and other post-retirement benefit costs | 243 |
| | 248 |
|
| Investment tax credits | 142 |
| | 143 |
|
| Other | 48 |
| | 45 |
|
| Total other noncurrent liabilities | 10,842 |
| | 10,696 |
|
| Commitments and Contingencies |
| |
|
| Equity | | | |
| Member's Equity | 8,265 |
| | 7,949 |
|
| Total Liabilities and Equity | $ | 28,630 |
| | $ | 27,799 |
|
DUKE ENERGY PROGRESS, LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
| | | | | | | |
| | Six Months Ended |
| | June 30, |
| (in millions) | 2018 |
| | 2017 |
|
| CASH FLOWS FROM OPERATING ACTIVITIES | | | |
| Net income | $ | 316 |
| | $ | 301 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation and amortization (including amortization of nuclear fuel) | 565 |
| | 453 |
|
| Equity component of AFUDC | (26 | ) | | (26 | ) |
| Gains on sales of other assets | (2 | ) | | (4 | ) |
| Impairment charges | 33 |
| | — |
|
| Deferred income taxes | 53 |
| | 224 |
|
| Accrued pension and other post-retirement benefit costs | 7 |
| | (10 | ) |
| Contributions to qualified pension plans | (25 | ) | | — |
|
| Payments for asset retirement obligations | (89 | ) | | (101 | ) |
| Other rate case adjustments | 37 |
| | — |
|
| Provision for rate refunds | 65 |
| | — |
|
| (Increase) decrease in | | | |
| Net realized and unrealized mark-to-market and hedging transactions | 6 |
| | (3 | ) |
| Receivables | (104 | ) | | 3 |
|
| Receivables from affiliated companies | 2 |
| | — |
|
| Inventory | 41 |
| | 23 |
|
| Other current assets | (111 | ) | | (50 | ) |
| Increase (decrease) in | | | |
| Accounts payable | (17 | ) | | (218 | ) |
| Accounts payable to affiliated companies | (4 | ) | | (58 | ) |
| Taxes accrued | 26 |
| | (43 | ) |
| Other current liabilities | (38 | ) | | (111 | ) |
| Other assets | 10 |
| | (37 | ) |
| Other liabilities | 13 |
| | (9 | ) |
| Net cash provided by operating activities | 758 |
| | 334 |
|
| CASH FLOWS FROM INVESTING ACTIVITIES | | | |
| Capital expenditures | (996 | ) | | (840 | ) |
| Purchases of debt and equity securities | (573 | ) | | (819 | ) |
| Proceeds from sales and maturities of debt and equity securities | 556 |
| | 805 |
|
| Notes receivable from affiliated companies | — |
| | 165 |
|
| Other | (45 | ) | | (22 | ) |
| Net cash used in investing activities | (1,058 | ) | | (711 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | |
| Proceeds from the issuance of long-term debt | — |
| | 15 |
|
| Payments for the redemption of long-term debt | — |
| | (269 | ) |
| Notes payable to affiliated companies | 300 |
| | 633 |
|
| Other | (2 | ) | | (1 | ) |
| Net cash provided by financing activities | 298 |
| | 378 |
|
| Net (decrease) increase in cash and cash equivalents | (2 | ) | | 1 |
|
| Cash and cash equivalents at beginning of period | 20 |
| | 11 |
|
| Cash and cash equivalents at end of period | $ | 18 |
| | $ | 12 |
|
| Supplemental Disclosures: | | | |
| Significant non-cash transactions: | | | |
| Accrued capital expenditures | $ | 172 |
| | $ | 52 |
|
DUKE ENERGY PROGRESS, LLC
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
|
| | | |
| | Member's |
| (in millions) | Equity |
| Balance at December 31, 2016 | $ | 7,358 |
|
| Net income | 301 |
|
| Balance at June 30, 2017 | $ | 7,659 |
|
| | |
| Balance at December 31, 2017 | $ | 7,949 |
|
| Net income | 316 |
|
| Balance at June 30, 2018 | $ | 8,265 |
|
DUKE ENERGY FLORIDA, LLC
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
|
| | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended |
| | June 30, | | June 30, |
| (in millions) | 2018 |
| | 2017 |
| | 2018 |
| | 2017 |
|
| Operating Revenues | $ | 1,203 |
| | $ | 1,191 |
| | $ | 2,318 |
| | $ | 2,150 |
|
| Operating Expenses | | | | | | | |
| Fuel used in electric generation and purchased power | 486 |
| | 455 |
| | 953 |
| | 817 |
|
| Operation, maintenance and other | 237 |
| | 208 |
| | 474 |
| | 403 |
|
| Depreciation and amortization | 144 |
| | 137 |
| | 294 |
| | 269 |
|
| Property and other taxes | 91 |
| | 89 |
| | 179 |
| | 166 |
|
| Impairment charges | — |
| | 1 |
| | — |
| | 2 |
|
| Total operating expenses | 958 |
| | 890 |
| | 1,900 |
| | 1,657 |
|
| Operating Income | 245 |
| | 301 |
| | 418 |
| | 493 |
|
| Other Income and Expenses, net | 26 |
| | 19 |
| | 47 |
| | 39 |
|
| Interest Expense | 66 |
| | 70 |
| | 137 |
| | 140 |
|
| Income Before Income Taxes | 205 |
| | 250 |
| | 328 |
| | 392 |
|
| Income Tax Expense | 37 |
| | 92 |
| | 57 |
| | 144 |
|
| Net Income | $ | 168 |
| | $ | 158 |
| | $ | 271 |
| | $ | 248 |
|
| Other Comprehensive (Loss) Income, net of tax |
| |
| |
|
| |
|
|
| Unrealized (losses) gains on available-for-sale securities | (1 | ) | | 1 |
| | (1 | ) | | 2 |
|
| Comprehensive Income | $ | 167 |
| | $ | 159 |
| | $ | 270 |
|
| $ | 250 |
|
DUKE ENERGY FLORIDA, LLC
Condensed Consolidated Balance Sheets
(Unaudited)
|
| | | | | | | |
| (in millions) | June 30, 2018 |
| | December 31, 2017 |
|
| ASSETS | | | |
| Current Assets | | | |
| Cash and cash equivalents | $ | 14 |
| | $ | 13 |
|
| Receivables (net of allowance for doubtful accounts of $3 at 2018 and 2017) | 78 |
| | 65 |
|
| Receivables of VIEs (net of allowance for doubtful accounts of $2 at 2018 and 2017) | 400 |
| | 321 |
|
| Receivables from affiliated companies | 6 |
| | 2 |
|
| Notes receivable from affiliated companies | 423 |
| | 313 |
|
| Inventory | 546 |
| | 574 |
|
| Regulatory assets (includes $51 at 2018 and 2017 related to VIEs) | 439 |
| | 389 |
|
| Other (includes $31 at 2018 and $40 at 2017 related to VIEs) | 183 |
| | 86 |
|
| Total current assets | 2,089 |
| | 1,763 |
|
| Property, Plant and Equipment | | | |
| Cost | 18,353 |
| | 17,730 |
|
| Accumulated depreciation and amortization | (5,079 | ) | | (4,947 | ) |
| Net property, plant and equipment | 13,274 |
| | 12,783 |
|
| Other Noncurrent Assets | | | |
| Regulatory assets (includes $1,071 at 2018 and $1,091 at 2017 related to VIEs) | 2,163 |
| | 2,503 |
|
| Nuclear decommissioning trust funds | 715 |
| | 736 |
|
| Other | 307 |
| | 284 |
|
| Total other noncurrent assets | 3,185 |
| | 3,523 |
|
| Total Assets | $ | 18,548 |
| | $ | 18,069 |
|
| LIABILITIES AND EQUITY | | | |
| Current Liabilities | | | |
| Accounts payable | $ | 440 |
| | $ | 602 |
|
| Accounts payable to affiliated companies | 63 |
| | 74 |
|
| Taxes accrued | 115 |
| | 34 |
|
| Interest accrued | 53 |
| | 56 |
|
| Current maturities of long-term debt (includes $53 at 2018 and 2017 related to VIEs) | 269 |
| | 768 |
|
| Asset retirement obligations | 5 |
| | — |
|
| Regulatory liabilities | 76 |
| | 74 |
|
| Other | 357 |
| | 334 |
|
| Total current liabilities | 1,378 |
| | 1,942 |
|
| Long-Term Debt (includes $1,361 at 2018 and $1,389 at 2017 related to VIEs) | 7,183 |
| | 6,327 |
|
| Other Noncurrent Liabilities | | | |
| Deferred income taxes | 2,007 |
| | 1,761 |
|
| Asset retirement obligations | 597 |
| | 742 |
|
| Regulatory liabilities | 1,194 |
| | 1,307 |
|
| Accrued pension and other post-retirement benefit costs | 243 |
| | 264 |
|
| Other | 58 |
| | 108 |
|
| Total other noncurrent liabilities | 4,099 |
| | 4,182 |
|
| Commitments and Contingencies |
| |
|
| Equity | | | |
| Member's equity | 5,890 |
| | 5,614 |
|
| Accumulated other comprehensive (loss) income | (2 | ) | | 4 |
|
| Total equity | 5,888 |
| | 5,618 |
|
| Total Liabilities and Equity | $ | 18,548 |
| | $ | 18,069 |
|
DUKE ENERGY FLORIDA, LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
| | | | | | | |
| | Six Months Ended |
| | June 30, |
| (in millions) | 2018 |
| | 2017 |
|
| CASH FLOWS FROM OPERATING ACTIVITIES | | | |
| Net income | $ | 271 |
| | $ | 248 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation, amortization and accretion | 374 |
| | 274 |
|
| Equity component of AFUDC | (26 | ) | | (22 | ) |
| Impairment charges | — |
| | 2 |
|
| Deferred income taxes | 206 |
| | 186 |
|
| Accrued pension and other post-retirement benefit costs | 3 |
| | 2 |
|
| Contributions to qualified pension plans | (20 | ) | | — |
|
| Payments for asset retirement obligations | (19 | ) | | (27 | ) |
| (Increase) decrease in | | | |
| Net realized and unrealized mark-to-market and hedging transactions | 6 |
| | 2 |
|
| Receivables | (92 | ) | | (65 | ) |
| Receivables from affiliated companies | (4 | ) | | — |
|
| Inventory | 28 |
| | 72 |
|
| Other current assets | (114 | ) | | (67 | ) |
| Increase (decrease) in | | | |
| Accounts payable | 34 |
| | 7 |
|
| Accounts payable to affiliated companies | (11 | ) | | (83 | ) |
| Taxes accrued | 81 |
| | 78 |
|
| Other current liabilities | (21 | ) | | (57 | ) |
| Other assets | (196 | ) | | (32 | ) |
| Other liabilities | (10 | ) | | (5 | ) |
| Net cash provided by operating activities | 490 |
| | 513 |
|
| CASH FLOWS FROM INVESTING ACTIVITIES | | | |
| Capital expenditures | (731 | ) | | (893 | ) |
| Purchases of debt and equity securities | (239 | ) | | (289 | ) |
| Proceeds from sales and maturities of debt and equity securities | 264 |
| | 318 |
|
| Notes receivable from affiliated companies | (110 | ) | | (230 | ) |
| Other | (35 | ) | | — |
|
| Net cash used in investing activities | (851 | ) | | (1,094 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | |
| Proceeds from the issuance of long-term debt | 989 |
| | 908 |
|
| Payments for the redemption of long-term debt | (635 | ) | | (57 | ) |
| Notes payable to affiliated companies | — |
| | (297 | ) |
| Other | (1 | ) | | (1 | ) |
| Net cash provided by financing activities | 353 |
| | 553 |
|
| Net decrease in cash, cash equivalents and restricted cash | (8 | ) | | (28 | ) |
| Cash, cash equivalents and restricted cash at beginning of period | 53 |
| | 69 |
|
| Cash, cash equivalents and restricted cash at end of period | $ | 45 |
| | $ | 41 |
|
| Supplemental Disclosures: | | | |
| Significant non-cash transactions: | | | |
| Accrued capital expenditures | $ | 194 |
| | $ | 122 |
|
DUKE ENERGY FLORIDA, LLC
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
|
| | | | | | | | | | | |
| | | | Accumulated | | |
| | | | Other | | |
| | | | Comprehensive | | |
| | | | Income (Loss) | | |
| | | | Net Unrealized |
| | |
| | | | Gains (Losses) on |
| | |
| | Member's |
| | Available-for-Sale |
| | Total |
|
| (in millions) | Equity |
| | Securities |
| | Equity |
|
| Balance at December 31, 2016 | $ | 4,899 |
| | $ | 1 |
| | $ | 4,900 |
|
| Net income | 248 |
| | — |
| | 248 |
|
| Other comprehensive income | — |
| | 2 |
| | 2 |
|
| Other | 2 |
| | — |
| | 2 |
|
| Balance at June 30, 2017 | $ | 5,149 |
| | $ | 3 |
| | $ | 5,152 |
|
| | | | | | |
| Balance at December 31, 2017 | $ | 5,614 |
| | $ | 4 |
| | $ | 5,618 |
|
| Net income | 271 |
| | — |
| | 271 |
|
| Other comprehensive loss | — |
| | (1 | ) | | (1 | ) |
Other(a) | 5 |
| | (5 | ) | | — |
|
| Balance at June 30, 2018 | $ | 5,890 |
| | $ | (2 | ) | | $ | 5,888 |
|
Index to Combined Notes to Condensed Consolidated Financial Statements
The unaudited notes to the condensed consolidated financial statements that follow are | |
| (a) | Amounts in Member's Equity and Accumulated Other Comprehensive Income (Loss) represent 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 acrosscumulative-effect adjustment due to (i) Progress Energy's consolidationimplementation of a new accounting standard related to Financial Instruments Classification and Measurement. See Note 1 for more information.
|
DUKE ENERGY OHIO, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
|
| | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended |
| | June 30, | | June 30, |
| (in millions) | 2018 |
| | 2017 |
| | 2018 |
|
| 2017 |
|
| Operating Revenues | | | | | | | |
| Regulated electric | $ | 346 |
| | $ | 328 |
| | $ | 682 |
| | $ | 665 |
|
| Regulated natural gas | 103 |
| | 100 |
| | 277 |
| | 270 |
|
| Nonregulated electric and other | 10 |
| | 9 |
| | 24 |
| | 20 |
|
| Total operating revenues | 459 |
| | 437 |
| | 983 |
| | 955 |
|
| Operating Expenses | | | | | | | |
| Fuel used in electric generation and purchased power – regulated | 93 |
| | 86 |
| | 185 |
| | 183 |
|
| Fuel used in electric generation and purchased power – nonregulated | 14 |
| | 14 |
| | 29 |
| | 29 |
|
| Cost of natural gas | 15 |
| | 10 |
| | 69 |
| | 64 |
|
| Operation, maintenance and other | 130 |
| | 132 |
| | 261 |
| | 263 |
|
| Depreciation and amortization | 62 |
| | 63 |
| | 132 |
| | 130 |
|
| Property and other taxes | 68 |
| | 67 |
| | 145 |
| | 139 |
|
| Impairment charges | — |
| | 1 |
| | — |
| | 1 |
|
| Total operating expenses | 382 |
| | 373 |
| | 821 |
| | 809 |
|
| Loss on Sales of Other Assets and Other, net | — |
| | — |
| | (106 | ) | | — |
|
| Operating Income | 77 |
| | 64 |
| | 56 |
| | 146 |
|
| Other Income and Expenses, net | 8 |
| | 5 |
| | 14 |
| | 10 |
|
| Interest Expense | 23 |
| | 23 |
| | 45 |
| | 45 |
|
| Income Before Income Taxes | 62 |
| | 46 |
| | 25 |
| | 111 |
|
| Income Tax Expense | 16 |
| | 16 |
| | 4 |
| | 39 |
|
| Net Income and Comprehensive Income | $ | 46 |
| | $ | 30 |
| | $ | 21 |
| | $ | 72 |
|
DUKE ENERGY OHIO, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
|
| | | | | | | |
| (in millions) | June 30, 2018 |
| | December 31, 2017 |
|
| ASSETS | | | |
| Current Assets | | | |
| Cash and cash equivalents | $ | 7 |
| | $ | 12 |
|
| Receivables (net of allowance for doubtful accounts of $3 at 2018 and 2017) | 87 |
| | 68 |
|
| Receivables from affiliated companies | 71 |
| | 133 |
|
| Notes receivable from affiliated companies | — |
| | 14 |
|
| Inventory | 124 |
| | 133 |
|
| Regulatory assets | 46 |
| | 49 |
|
| Other | 30 |
| | 39 |
|
| Total current assets | 365 |
| | 448 |
|
| Property, Plant and Equipment | | | |
| Cost | 9,024 |
| | 8,732 |
|
| Accumulated depreciation and amortization | (2,696 | ) | | (2,691 | ) |
| Net property, plant and equipment | 6,328 |
| | 6,041 |
|
| Other Noncurrent Assets | | | |
| Goodwill | 920 |
| | 920 |
|
| Regulatory assets | 425 |
| | 445 |
|
| Other | 63 |
| | 21 |
|
| Total other noncurrent assets | 1,408 |
| | 1,386 |
|
| Total Assets | $ | 8,101 |
| | $ | 7,875 |
|
| LIABILITIES AND EQUITY | | | |
| Current Liabilities | | | |
| Accounts payable | $ | 267 |
| | $ | 313 |
|
| Accounts payable to affiliated companies | 47 |
| | 62 |
|
| Notes payable to affiliated companies | 219 |
| | 29 |
|
| Taxes accrued | 127 |
| | 190 |
|
| Interest accrued | 21 |
| | 21 |
|
| Current maturities of long-term debt | 452 |
| | 3 |
|
| Asset retirement obligations | 5 |
| | 3 |
|
| Regulatory liabilities | 51 |
| | 36 |
|
| Other | 71 |
| | 71 |
|
| Total current liabilities | 1,260 |
| | 728 |
|
| Long-Term Debt | 1,589 |
| | 2,039 |
|
| Long-Term Debt Payable to Affiliated Companies | 25 |
| | 25 |
|
| Other Noncurrent Liabilities | | | |
| Deferred income taxes | 778 |
| | 781 |
|
| Asset retirement obligations | 84 |
| | 81 |
|
| Regulatory liabilities | 896 |
| | 891 |
|
| Accrued pension and other post-retirement benefit costs | 83 |
| | 59 |
|
| Other | 96 |
| | 108 |
|
| Total other noncurrent liabilities | 1,937 |
| | 1,920 |
|
| Commitments and Contingencies | | | |
| Equity | | | |
| Common stock, $8.50 par value, 120 million shares authorized; 90 million shares outstanding at 2018 and 2017 | 762 |
| | 762 |
|
| Additional paid-in capital | 2,776 |
| | 2,670 |
|
| Accumulated deficit | (248 | ) | | (269 | ) |
| Total equity | 3,290 |
| | 3,163 |
|
| Total Liabilities and Equity | $ | 8,101 |
| | $ | 7,875 |
|
DUKE ENERGY OHIO, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
| | | | | | | |
| | Six Months Ended |
| | June 30, |
| (in millions) | 2018 |
| | 2017 |
|
| CASH FLOWS FROM OPERATING ACTIVITIES | | | |
| Net income | $ | 21 |
| | $ | 72 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation and amortization | 134 |
| | 132 |
|
| Equity component of AFUDC | (8 | ) | | (5 | ) |
| Losses on sales of other assets | 106 |
| | — |
|
| Impairment charges | — |
| | 1 |
|
| Deferred income taxes | (2 | ) | | 64 |
|
| Accrued pension and other post-retirement benefit costs | 2 |
| | 2 |
|
| Payments for asset retirement obligations | (2 | ) | | (3 | ) |
| Provision for rate refunds | 19 |
| | — |
|
| (Increase) decrease in | | | |
| Receivables | (7 | ) | | 11 |
|
| Receivables from affiliated companies | 62 |
| | 55 |
|
| Inventory | 9 |
| | 6 |
|
| Other current assets | 24 |
| | (11 | ) |
| Increase (decrease) in | | | |
| Accounts payable | (34 | ) | | (4 | ) |
| Accounts payable to affiliated companies | (15 | ) | | (16 | ) |
| Taxes accrued | (63 | ) | | (79 | ) |
| Other current liabilities | 8 |
| | (15 | ) |
| Other assets | (7 | ) | | (12 | ) |
| Other liabilities | (18 | ) | | (8 | ) |
| Net cash provided by operating activities | 229 |
| | 190 |
|
| CASH FLOWS FROM INVESTING ACTIVITIES | | | |
| Capital expenditures | (392 | ) | | (286 | ) |
| Cost of removal, net of salvage | (43 | ) | | (13 | ) |
| Notes receivable from affiliated companies | 14 |
| | 31 |
|
| Net cash used in investing activities | (421 | ) | | (268 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | |
| Proceeds from the issuance of long-term debt | — |
| | 93 |
|
| Payments for the redemption of long-term debt | (3 | ) | | (1 | ) |
| Notes payable to affiliated companies | 190 |
| | 8 |
|
| Dividends to parent | — |
| | (25 | ) |
| Other | — |
| | (1 | ) |
| Net cash provided by financing activities | 187 |
| | 74 |
|
| Net decrease in cash and cash equivalents | (5 | ) | | (4 | ) |
| Cash and cash equivalents at beginning of period | 12 |
| | 13 |
|
| Cash and cash equivalents at end of period | $ | 7 |
| | $ | 9 |
|
| Supplemental Disclosures: | | | |
| Significant non-cash transactions: | | | |
| Accrued capital expenditures | $ | 70 |
| | $ | 59 |
|
| Non-cash equity contribution from parent | 106 |
| | — |
|
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, 2016 | $ | 762 |
| | $ | 2,695 |
| | $ | (461 | ) | | $ | 2,996 |
|
| Net income | — |
| | — |
| | 72 |
| | 72 |
|
| Dividends to parent | — |
| | (25 | ) | | — |
| | (25 | ) |
| Balance at June 30, 2017 | $ | 762 |
| | $ | 2,670 |
| | $ | (389 | ) | | $ | 3,043 |
|
| | | | | | | | |
| Balance at December 31, 2017 | $ | 762 |
| | $ | 2,670 |
| | $ | (269 | ) | | $ | 3,163 |
|
| Net income | — |
| | — |
| | 21 |
| | 21 |
|
Contribution from parent(a) | — |
| | 106 |
| | — |
| | 106 |
|
| Balance at June 30, 2018 | $ | 762 |
|
| $ | 2,776 |
|
| $ | (248 | ) |
| $ | 3,290 |
|
| |
| (a) | Represents a non-cash settlement through equity of an intercompany payable from 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 and six months ended June 30, 2016, as Piedmont results were not consolidated by Duke Energy until after the acquisition date of October 3, 2016.Ohio to its parent. |
DUKE ENERGY INDIANA, LLC
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
|
| | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended |
| | June 30, | | June 30, |
| (in millions) | 2018 |
| | 2017 |
| | 2018 |
| | 2017 |
|
| Operating Revenues | $ | 738 |
| | $ | 742 |
| | $ | 1,469 |
| | $ | 1,500 |
|
| Operating Expenses | | | | | | | |
| Fuel used in electric generation and purchased power | 226 |
| | 234 |
| | 458 |
| | 485 |
|
| Operation, maintenance and other | 197 |
| | 194 |
| | 378 |
| | 369 |
|
| Depreciation and amortization | 126 |
| | 91 |
| | 256 |
| | 216 |
|
| Property and other taxes | 20 |
| | 15 |
| | 40 |
| | 37 |
|
| Total operating expenses | 569 |
| | 534 |
| | 1,132 |
| | 1,107 |
|
| Operating Income | 169 |
| | 208 |
|
| 337 |
|
| 393 |
|
| Other Income and Expenses, net | 6 |
| | 11 |
| | 13 |
| | 20 |
|
| Interest Expense | 43 |
| | 44 |
| | 83 |
| | 88 |
|
| Income Before Income Taxes | 132 |
| | 175 |
|
| 267 |
|
| 325 |
|
| Income Tax Expense | 34 |
| | 69 |
| | 69 |
| | 128 |
|
| Net Income and Comprehensive Income | $ | 98 |
| | $ | 106 |
|
| $ | 198 |
|
| $ | 197 |
|
DUKE ENERGY INDIANA, LLC
Condensed Consolidated Balance Sheets
(Unaudited)
|
| | | | | | | |
| (in millions) | June 30, 2018 |
| | December 31, 2017 |
|
| ASSETS | | | |
| Current Assets | | | |
| Cash and cash equivalents | $ | 24 |
| | $ | 9 |
|
| Receivables (net of allowance for doubtful accounts of $2 at 2018 and 2017) | 54 |
| | 57 |
|
| Receivables from affiliated companies | 89 |
| | 125 |
|
| Inventory | 470 |
| | 450 |
|
| Regulatory assets | 191 |
| | 165 |
|
| Other | 52 |
| | 30 |
|
| Total current assets | 880 |
| | 836 |
|
| Property, Plant and Equipment | | | |
| Cost | 15,213 |
| | 14,948 |
|
| Accumulated depreciation and amortization | (4,767 | ) | | (4,662 | ) |
| Net property, plant and equipment | 10,446 |
| | 10,286 |
|
| Other Noncurrent Assets | | | |
| Regulatory assets | 1,021 |
| | 978 |
|
| Other | 224 |
| | 189 |
|
| Total other noncurrent assets | 1,245 |
| | 1,167 |
|
| Total Assets | $ | 12,571 |
| | $ | 12,289 |
|
| LIABILITIES AND EQUITY | | | |
| Current Liabilities | | | |
| Accounts payable | $ | 171 |
| | $ | 196 |
|
| Accounts payable to affiliated companies | 58 |
| | 78 |
|
| Notes payable to affiliated companies | 221 |
| | 161 |
|
| Taxes accrued | 54 |
| | 95 |
|
| Interest accrued | 59 |
| | 57 |
|
| Current maturities of long-term debt | 62 |
| | 3 |
|
| Asset retirement obligations | 98 |
| | 54 |
|
| Regulatory liabilities | 19 |
| | 24 |
|
| Other | 123 |
| | 104 |
|
| Total current liabilities | 865 |
| | 772 |
|
| Long-Term Debt | 3,570 |
| | 3,630 |
|
| Long-Term Debt Payable to Affiliated Companies | 150 |
| | 150 |
|
| Other Noncurrent Liabilities | | | |
| Deferred income taxes | 957 |
| | 925 |
|
| Asset retirement obligations | 758 |
| | 727 |
|
| Regulatory liabilities | 1,755 |
| | 1,723 |
|
| Accrued pension and other post-retirement benefit costs | 111 |
| | 76 |
|
| Investment tax credits | 147 |
| | 147 |
|
| Other | 14 |
| | 18 |
|
| Total other noncurrent liabilities | 3,742 |
| | 3,616 |
|
| Commitments and Contingencies | | | |
| Equity | | | |
| Member's Equity | 4,244 |
| | 4,121 |
|
| Total Liabilities and Equity | $ | 12,571 |
| | $ | 12,289 |
|
DUKE ENERGY INDIANA, LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
| | | | | | | |
| | Six Months Ended |
| | June 30, |
| (in millions) | 2018 |
| | 2017 |
|
| CASH FLOWS FROM OPERATING ACTIVITIES | | | |
| Net income | $ | 198 |
| | $ | 197 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation, amortization and accretion | 258 |
| | 218 |
|
| Equity component of AFUDC | (7 | ) | | (12 | ) |
| Deferred income taxes | 36 |
| | 131 |
|
| Accrued pension and other post-retirement benefit costs | 3 |
| | 3 |
|
| Contributions to qualified pension plans | (8 | ) | | — |
|
| Payments for asset retirement obligations | (21 | ) | | (17 | ) |
| Provision for rate refunds | 49 |
| | — |
|
| (Increase) decrease in | | | |
| Net realized and unrealized mark-to-market and hedging transactions | — |
| | 1 |
|
| Receivables | 2 |
| | 73 |
|
| Receivables from affiliated companies | 36 |
| | 27 |
|
| Inventory | (20 | ) | | 34 |
|
| Other current assets | (35 | ) | | (15 | ) |
| Increase (decrease) in | | | |
| Accounts payable | 33 |
| | (68 | ) |
| Accounts payable to affiliated companies | (19 | ) | | (24 | ) |
| Taxes accrued | (41 | ) | | (3 | ) |
| Other current liabilities | 3 |
| | (11 | ) |
| Other assets | 20 |
| | (13 | ) |
| Other liabilities | (21 | ) | | (9 | ) |
| Net cash provided by operating activities | 466 |
| | 512 |
|
| CASH FLOWS FROM INVESTING ACTIVITIES | | | |
| Capital expenditures | (416 | ) | | (397 | ) |
| Purchases of debt and equity securities | (34 | ) | | (10 | ) |
| Proceeds from sales and maturities of debt and equity securities | 13 |
| | 4 |
|
| Notes receivable from affiliated companies | — |
| | 67 |
|
| Other | 2 |
| | (23 | ) |
| Net cash used in investing activities | (435 | ) | | (359 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | |
| Payments for the redemption of long-term debt | — |
| | (2 | ) |
| Notes payable to affiliated companies | 60 |
| | — |
|
| Distributions to parent | (75 | ) | | (150 | ) |
| Other | (1 | ) | | (1 | ) |
| Net cash used in financing activities | (16 | ) | | (153 | ) |
| Net increase in cash and cash equivalents | 15 |
|
| — |
|
| Cash and cash equivalents at beginning of period | 9 |
| | 17 |
|
| Cash and cash equivalents at end of period | $ | 24 |
| | $ | 17 |
|
| Supplemental Disclosures: | | | |
| Significant non-cash transactions: | | | |
| Accrued capital expenditures | $ | 62 |
| | $ | 81 |
|
DUKE ENERGY INDIANA, LLC
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
|
| | | | |
| | | Member's |
|
| (in millions) | | Equity |
|
| Balance at December 31, 2016 | | $ | 4,067 |
|
| Net income | | 197 |
|
| Distributions to parent | | (150 | ) |
| Balance at June 30, 2017 |
| $ | 4,114 |
|
| | | |
| Balance at December 31, 2017 | | $ | 4,121 |
|
| Net income | | 198 |
|
| Distributions to parent | | (75 | ) |
| Balance at June 30, 2018 |
| $ | 4,244 |
|
PIEDMONT NATURAL GAS COMPANY, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
|
| | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended |
| | June 30, | | June 30, |
| | 2018 |
| | 2017 |
| | 2018 |
| | 2017 |
|
| Operating Revenues | $ | 215 |
| | $ | 201 |
| | $ | 768 |
| | $ | 701 |
|
| Operating Expenses | | | | | | | |
| Cost of natural gas | 74 |
| | 65 |
| | 333 |
| | 270 |
|
| Operation, maintenance and other | 85 |
| | 76 |
| | 167 |
| | 153 |
|
| Depreciation and amortization | 39 |
| | 36 |
| | 78 |
| | 71 |
|
| Property and other taxes | 12 |
| | 12 |
| | 24 |
| | 25 |
|
| Impairment charges | — |
| | 7 |
| | — |
| | 7 |
|
| Total operating expenses | 210 |
| | 196 |
| | 602 |
| | 526 |
|
| Operating Income | 5 |
| | 5 |
| | 166 |
| | 175 |
|
| Other Income and Expenses | | | | | | | |
| Equity in earnings of unconsolidated affiliates | 1 |
| | 2 |
| | 3 |
| | 5 |
|
| Other income and expenses, net | 3 |
| | (1 | ) | | 6 |
| | (1 | ) |
| Total other income and expenses | 4 |
| | 1 |
| | 9 |
| | 4 |
|
| Interest Expense | 20 |
| | 19 |
| | 41 |
| | 39 |
|
| (Loss) Income Before Income Taxes | (11 | ) | | (13 | ) | | 134 |
| | 140 |
|
| Income Tax (Benefit) Expense | (3 | ) | | (5 | ) | | 32 |
| | 53 |
|
| Net (Loss) Income and Comprehensive (Loss) Income | $ | (8 | ) | | $ | (8 | ) | | $ | 102 |
| | $ | 87 |
|
PIEDMONT NATURAL GAS COMPANY, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
|
| | | | | | | |
| (in millions) | June 30, 2018 |
| | December 31, 2017 |
|
| ASSETS | | | |
| Current Assets | | | |
| Cash and cash equivalents | $ | 8 |
| | $ | 19 |
|
| Receivables (net of allowance for doubtful accounts of $3 at 2018 and $2 at 2017) | 109 |
| | 275 |
|
| Receivables from affiliated companies | 11 |
| | 7 |
|
| Notes receivable from affiliated companies | 77 |
| | — |
|
| Inventory | 38 |
| | 66 |
|
| Regulatory assets | 35 |
| | 95 |
|
| Other | 36 |
| | 52 |
|
| Total current assets | 314 |
| | 514 |
|
| Property, Plant and Equipment | | | |
| Cost | 7,089 |
| | 6,725 |
|
| Accumulated depreciation and amortization | (1,533 | ) | | (1,479 | ) |
| Net property, plant and equipment | 5,556 |
| | 5,246 |
|
| Other Noncurrent Assets | | | |
| Goodwill | 49 |
| | 49 |
|
| Regulatory assets | 297 |
| | 283 |
|
| Investments in equity method unconsolidated affiliates | 62 |
| | 61 |
|
| Other | 65 |
| | 65 |
|
| Total other noncurrent assets | 473 |
| | 458 |
|
| Total Assets | $ | 6,343 |
| | $ | 6,218 |
|
| LIABILITIES AND EQUITY | | | |
| Current Liabilities | | | |
| Accounts payable | $ | 133 |
| | $ | 125 |
|
| Accounts payable to affiliated companies | 1 |
| | 13 |
|
| Notes payable to affiliated companies | — |
| | 364 |
|
| Taxes accrued | 23 |
| | 19 |
|
| Interest accrued | 31 |
| | 31 |
|
| Current maturities of long-term debt | 250 |
| | 250 |
|
| Regulatory liabilities | 51 |
| | 3 |
|
| Other | 53 |
| | 69 |
|
| Total current liabilities | 542 |
| | 874 |
|
| Long-Term Debt | 1,787 |
| | 1,787 |
|
| Other Noncurrent Liabilities | | | |
| Deferred income taxes | 569 |
| | 564 |
|
| Asset retirement obligations | 15 |
| | 15 |
|
| Regulatory liabilities | 1,183 |
| | 1,141 |
|
| Accrued pension and other post-retirement benefit costs | 3 |
| | 5 |
|
| Other | 180 |
| | 170 |
|
| Total other noncurrent liabilities | 1,950 |
| | 1,895 |
|
| Commitments and Contingencies |
| |
|
| Equity | | | |
| Common stock, no par value: 100 shares authorized and outstanding at 2018 and 2017 | 1,160 |
| | 860 |
|
| Retained earnings | 904 |
| | 802 |
|
| Total equity | 2,064 |
| | 1,662 |
|
| Total Liabilities and Equity | $ | 6,343 |
| | $ | 6,218 |
|
PIEDMONT NATURAL GAS COMPANY, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
| | | | | | | |
| | Six Months Ended |
| | June 30, |
| (in millions) | 2018 |
| | 2017 |
|
| CASH FLOWS FROM OPERATING ACTIVITIES | | | |
| Net income | $ | 102 |
| | $ | 87 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation and amortization | 79 |
| | 74 |
|
| Impairment charges | — |
| | 7 |
|
| Deferred income taxes | 4 |
| | 100 |
|
| Equity in earnings from unconsolidated affiliates | (3 | ) | | (5 | ) |
| Accrued pension and other post-retirement benefit costs | (2 | ) | | 6 |
|
| Provision for rate refunds | 27 |
| | — |
|
| (Increase) decrease in | | | |
| Net realized and unrealized mark-to-market and hedging transactions | — |
| | (39 | ) |
| Receivables | 166 |
| | 155 |
|
| Receivables from affiliated companies | (4 | ) | | (1 | ) |
| Inventory | 28 |
| | 28 |
|
| Other current assets | 74 |
| | (64 | ) |
| Increase (decrease) in | | | |
| Accounts payable | (32 | ) | | (44 | ) |
| Accounts payable to affiliated companies | (12 | ) | | 42 |
|
| Taxes accrued | 4 |
| | (46 | ) |
| Other current liabilities | 28 |
| | (23 | ) |
| Other assets | 2 |
| | 28 |
|
| Other liabilities | (2 | ) | | (6 | ) |
| Net cash provided by operating activities | 459 |
| | 299 |
|
| CASH FLOWS FROM INVESTING ACTIVITIES | | | |
| Capital expenditures | (327 | ) | | (260 | ) |
| Contributions to equity method investments | — |
| | (12 | ) |
| Notes receivable from affiliated companies | (77 | ) | | — |
|
| Other | (2 | ) | | 1 |
|
| Net cash used in investing activities | (406 | ) | | (271 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | |
| Proceeds from the issuance of long-term debt | — |
| | 125 |
|
| Notes payable and commercial paper | — |
| | (330 | ) |
| Notes payable to affiliated companies | (364 | ) | | 167 |
|
| Capital contributions from parent | 300 |
| | — |
|
| Other | — |
| | (1 | ) |
| Net cash used in financing activities | (64 | ) | | (39 | ) |
| Net decrease in cash and cash equivalents | (11 | ) | | (11 | ) |
| Cash and cash equivalents at beginning of period | 19 |
| | 25 |
|
| Cash and cash equivalents at end of period | $ | 8 |
| | $ | 14 |
|
| Supplemental Disclosures: | | | |
| Significant non-cash transactions: | | | |
| Accrued capital expenditures | $ | 73 |
| | $ | 45 |
|
| Transfer of ownership interest of certain equity method investees to parent | — |
| | 149 |
|
PIEDMONT NATURAL GAS COMPANY, INC.
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
|
| | | | | | | | | | | |
| | Common |
| | Retained |
| | Total |
|
| (in millions) | Stock |
| | Earnings |
| | Equity |
|
| Balance at December 31, 2016 | $ | 860 |
| | $ | 812 |
| | $ | 1,672 |
|
| Net income | — |
| | 87 |
| | 87 |
|
| Transfer of ownership interest of certain equity method investees to parent | — |
| | (149 | ) | | (149 | ) |
| Balance at June 30, 2017 | $ | 860 |
| | $ | 750 |
| | $ | 1,610 |
|
| | | | | | |
| Balance at December 31, 2017 | $ | 860 |
| | $ | 802 |
| | $ | 1,662 |
|
| Net income | — |
| | 102 |
| | 102 |
|
| Contribution from parent | 300 |
| | — |
| | 300 |
|
| Balance at June 30, 2018 | $ | 1,160 |
| | $ | 904 |
| | $ | 2,064 |
|
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 | | 18 |
| Duke Energy Corporation | • | | • | | • | | • | | • | | • | | • | | | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • |
| Duke Energy Carolinas, LLC | • | | • | | • | | • | | • | | • | | | | • | | • | | • | | • | | • | | • | | | | | | • | | • | | • |
| Progress Energy, Inc. | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | | | | | • | | • | | • |
| Duke Energy Progress, LLC | • | | • | | • | | • | | • | | • | | | | • | | • | | • | | • | | • | | • | | | | | | • | | • | | • |
| Duke Energy Florida, LLC | • | | • | | • | | • | | • | | • | | | | • | | • | | • | | • | | • | | • | | | | | | • | | • | | • |
| Duke Energy Ohio, Inc. | • | | • | | • | | • | | • | | • | | • | | • | | • | | | | • | | • | | • | | | | | | • | | • | | • |
| Duke Energy Indiana, LLC | • | | • | | • | | • | | • | | • | | | | • | | • | | • | | • | | • | | • | | | | | | • | | • | | • |
| Piedmont Natural Gas Company, Inc. | • | | • | | • | | • | | • | | • | | • | | • | | • | | | | • | | | | • | | | | | | • | | • | | • |
Tables within the notes may not sum across due to (i) Progress Energy's consolidation of Duke Energy Progress, Duke Energy Florida and other subsidiaries that are not registrants and (ii) subsidiaries that are not registrants but included in the consolidated Duke Energy balances.
1. ORGANIZATION AND BASIS OF PRESENTATION
NATURE OF OPERATIONS AND BASIS OF CONSOLIDATION
Duke Energy Corporation (collectively with its subsidiaries, Duke Energy) is an energy company headquartered in Charlotte, North Carolina, subject to regulation by the Federal Energy Regulatory Commission (FERC). Duke Energy operates in the United States (U.S.) primarily through its direct and indirect subsidiaries. Certain Duke Energy subsidiaries are also subsidiary registrants, including Duke Energy Carolinas, LLC (Duke Energy Carolinas); Progress Energy, Inc. (Progress Energy); Duke Energy Progress, LLC (Duke Energy Progress); Duke Energy Florida, LLC (Duke Energy Florida); Duke Energy Ohio, Inc. (Duke Energy Ohio), Duke Energy Indiana, LLC (Duke Energy Indiana) and Piedmont Natural Gas Company, Inc. (Piedmont). When discussing Duke Energy’s consolidated financial information, it necessarily includes the results of its separate subsidiary registrants (collectively referred to as the Subsidiary Registrants), which, along with Duke Energy, are collectively referred to as the Duke Energy Registrants.
On October 3, 2016, Duke Energy completed the acquisition of Piedmont. Piedmont's results of operations and cash flows are included in the accompanying condensed consolidated financial statements of Duke Energy for the three and six months ended June 30, 2017, but not for the three and six months ended June 30, 2016, as Piedmont's earnings and cash flows are only included in Duke Energy's consolidated results subsequent to the acquisition date. See Note 2 for additional information regarding the acquisition.
In December 2016, Duke Energy completed an exit of the Latin American market to focus on its domestic regulated business, which was further bolstered by the acquisition of Piedmont. The sale of the International Energy business segment, excluding an equity method investment in National Methanol Company (NMC), was completed through two transactions including a sale of assets in Brazil to China Three Gorges (Luxembourg) Energy S.à.r.l. (China Three Gorges) and a sale of Duke Energy's remaining Latin American assets in Peru, Chile, Ecuador, Guatemala, El Salvador and Argentina to ISQ Enerlam Aggregator, L.P. and Enerlam (UK) Holding Ltd. (I Squared Capital) (collectively, the International Disposal Group). See Note 2 for additional information on the sale of International Energy.
The results of operations of the International Disposal Group have been classified as Discontinued Operations on the Condensed Consolidated Statements of Operations. Duke Energy has elected to present cash flows of discontinued operations combined with cash flows of continuing operations. Unless otherwise noted, the notes to these Condensed Consolidated Financial Statements exclude amounts related to discontinued operations. See Note 2 for additional information.
These Condensed Consolidated Financial Statements include, after eliminating intercompany transactions and balances, the accounts of the Duke Energy Registrants and subsidiaries where the respective Duke Energy Registrants have control. These Condensed Consolidated Financial Statements also reflect the Duke Energy Registrants’ proportionate share of certain jointly owned generation and transmission facilities. Substantially all of the Subsidiary Registrants' operations qualify for regulatory accounting.
Duke Energy Carolinas is a regulated public utility primarily engaged in the generation, transmission, distribution and sale of electricity in portions of North Carolina and South Carolina. Duke Energy Carolinas is subject to the regulatory provisions of the North Carolina Utilities Commission (NCUC), Public Service Commission of South Carolina (PSCSC), U.S. Nuclear Regulatory Commission (NRC) and FERC.
Progress Energy is a public utility holding company headquartered in Raleigh, North Carolina, subject to regulation by FERC. Progress Energy conducts operations through its wholly owned subsidiaries, Duke Energy Progress and Duke Energy Florida.
Duke Energy Progress is a regulated public utility primarily engaged in the generation, transmission, distribution and sale of electricity in portions of North Carolina and South Carolina. Duke Energy Progress is subject to the regulatory provisions of the NCUC, PSCSC, NRC and FERC.
Duke Energy Florida is a regulated public utility primarily engaged in the generation, transmission, distribution and sale of electricity in portions of Florida. Duke Energy Florida is subject to the regulatory provisions of the Florida Public Service Commission (FPSC), NRC and FERC.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Duke Energy Ohio is a regulated public utility primarily engaged in the transmission and distribution of electricity in portions of Ohio and Kentucky, the generation and sale of electricity in portions of Kentucky and the transportation and sale of natural gas in portions of Ohio and Kentucky. Duke Energy Ohio conducts competitive auctions for retail electricity supply in Ohio whereby the energy price is recovered from retail customers and recorded in Operating Revenues on the Condensed Consolidated Statements of Operations and Comprehensive Income. Operations in Kentucky are conducted through its wholly owned subsidiary, Duke Energy Kentucky, Inc. (Duke Energy Kentucky). References herein to Duke Energy Ohio collectively include Duke Energy Ohio and its subsidiaries, unless otherwise noted. Duke Energy Ohio is subject to the regulatory provisions of the Public Utilities Commission of Ohio (PUCO), Kentucky Public Service Commission (KPSC) and FERC.
Duke Energy Indiana is a regulated public utility primarily engaged in the generation, transmission, distribution and sale of electricity in portions of Indiana. Duke Energy Indiana is subject to the regulatory provisions of the Indiana Utility Regulatory Commission (IURC) and FERC.
Piedmont is a regulated public utility primarily engaged in the distribution of natural gas in portions of North Carolina, South Carolina and Tennessee. Piedmont is subject to the regulatory provisions of the NCUC, PSCSC, Tennessee Public Utility Commission (formerly the Tennessee Regulatory Authority) (TPUC) and FERC.
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)
BASIS OF PRESENTATION
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-K10-K/A for the year ended December 31, 2016, and the Consolidated Financial Statements and Notes in the Piedmont Annual Report on Form 10‑K for the year ended October 31, 2016.
Effective November 1, 2016, Piedmont's fiscal year-end was changed from October 31 to December 31, the year-end of Duke Energy. A transition report was filed on Form 10-Q (Form 10-QT) as of December 31, 2016, for the transition period from November 1, 2016 to December 31, 2016.2017.
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 salesDuke Energy recognizes revenue as customers obtain control of promised goods and services in an amount that reflects consideration expected in exchange for those goods or services. Generally, the delivery of electricity and natural gas areresults in the transfer of control to customers at the time the commodity is delivered and the amount of revenue recognized when service is provided or the product is delivered. Unbilled revenues are recognized by applying customer billing ratesequal to the amount billed to each customer, including estimated volumes of energy and natural gas delivered butwhen billings have not yet billed. Unbilled revenues can vary significantly from periodoccurred. See Note 13 for further information.
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Duke Energy, Progress Energy and Duke Energy Florida have restricted cash balances related primarily 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, meter reading schedules,collateral assets, escrow deposits and the impact of weather normalization or margin decoupling mechanisms.
Unbilled revenues are included within Receivables and Receivables of variable interest entities (VIEs) on. See Note 12 for additional information. Restricted cash amounts are included in Other within Current Assets and Other Noncurrent Assets. The following table presents the components of cash, cash equivalents and restricted cash included in the Condensed Consolidated Balance Sheets as shown in the following table.Sheets. |
| | | | | | | |
| (in millions) | June 30, 2017 |
| | December 31, 2016 |
|
| Duke Energy | $ | 761 |
| | $ | 831 |
|
| Duke Energy Carolinas | 310 |
| | 313 |
|
| Progress Energy | 220 |
| | 161 |
|
| Duke Energy Progress | 125 |
| | 102 |
|
| Duke Energy Florida | 95 |
| | 59 |
|
| Duke Energy Ohio | 1 |
| | 2 |
|
| Duke Energy Indiana | 13 |
| | 32 |
|
| Piedmont | 1 |
| | 77 |
|
|
| | | | | | | | | | | | | | | | | | | |
| | June 30, 2018 | | December 31, 2017 |
| | | | Duke |
| | | | Duke |
|
| | Duke |
| Progress |
| Energy |
| | Duke |
| Progress |
| Energy |
|
| | Energy |
| Energy |
| Florida |
| | Energy |
| Energy |
| Florida |
|
| Current Assets | | | | | | | |
| Cash and cash equivalents | $ | 304 |
| $ | 37 |
| $ | 14 |
| | $ | 358 |
| $ | 40 |
| $ | 13 |
|
| Other | 115 |
| 31 |
| 31 |
| | 138 |
| 40 |
| 40 |
|
| Other Noncurrent Assets | | | | | | | |
| Other | 8 |
| 6 |
| — |
| | 9 |
| 7 |
| — |
|
| Total cash, cash equivalents and restricted cash | $ | 427 |
| $ | 74 |
| $ | 45 |
| | $ | 505 |
| $ | 87 |
| $ | 53 |
|
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 12 for further information. These receivables for unbilled revenues are shown in the table below. |
| | | | | | | |
| (in millions) | June 30, 2017 |
| | December 31, 2016 |
|
| Duke Energy Ohio | $ | 70 |
| | $ | 97 |
|
| Duke Energy Indiana | 118 |
| | 123 |
|
AMOUNTS ATTRIBUTABLE TO CONTROLLING INTERESTS
For the three and six months ended June 30, 2017, the Loss from Discontinued Operations, net of tax on Duke Energy's Condensed Consolidated Statements of Operations is entirely attributable to controlling interests. The following table presents Net Income Attributable to Duke Energy Corporation for continuing operations and discontinued operations for the three and six months ended June 30, 2016. |
| | | | | | | |
| | Three Months Ended | | Six Months Ended |
| (in millions) | June 30, 2016 | | June 30, 2016 |
| Income from Continuing Operations | $ | 624 |
| | $ | 1,201 |
|
| Income from Continuing Operations Attributable to Noncontrolling Interests | — |
| | 3 |
|
| Income from Continuing Operations Attributable to Duke Energy Corporation | $ | 624 |
| | $ | 1,198 |
|
| (Loss) Income from Discontinued Operations, net of tax | $ | (112 | ) | | $ | 10 |
|
| Income from Discontinued Operations Attributable to Noncontrolling Interests, net of tax | 3 |
| | 5 |
|
| (Loss) Income from Discontinued Operations Attributable to Duke Energy Corporation, net of tax | $ | (115 | ) | | $ | 5 |
|
| Net Income | $ | 512 |
| | $ | 1,211 |
|
| Net Income Attributable to Noncontrolling Interests | 3 |
| | 8 |
|
| Net Income Attributable to Duke Energy Corporation | $ | 509 |
| | $ | 1,203 |
|
INVENTORY
Inventory is used for operations and is recorded primarily using the average cost method. Inventory related to regulated operations is valued at historical cost. Inventory related to nonregulated operations is valued at the lower of cost or market. Materials and supplies are recorded as inventory when purchased and subsequently charged to expense or capitalized to property, plant and equipment when installed. Inventory, including excess or obsolete inventory, is written-down to the lower of cost or market value. Once inventory has been written-down, it creates a new cost basis for the inventory that is not subsequently written-up. Provisions for inventory write-offs were not material at June 30, 2017,2018, and December 31, 2016.2017. The components of inventory are presented in the tables below. | | | | June 30, 2017 | June 30, 2018 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
| Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Materials and supplies | $ | 2,368 |
| | $ | 791 |
| | $ | 1,129 |
| | $ | 782 |
| | $ | 347 |
| | $ | 85 |
| | $ | 321 |
| | $ | 2 |
| $ | 2,293 |
| | $ | 769 |
| | $ | 1,085 |
| | $ | 757 |
| | $ | 328 |
| | $ | 84 |
| | $ | 313 |
| | $ | 2 |
|
| Coal | 665 |
| | 239 |
| | 262 |
| | 161 |
| | 101 |
| | 17 |
| | 147 |
| | — |
| 562 |
| | 173 |
| | 218 |
| | 109 |
| | 109 |
| | 15 |
| | 155 |
| | — |
|
| Natural gas, oil and other fuel | 336 |
| | 36 |
| | 230 |
| | 110 |
| | 120 |
| | 32 |
| | 2 |
| | 36 |
| 322 |
| | 42 |
| | 218 |
| | 110 |
| | 109 |
| | 25 |
| | 2 |
| | 36 |
|
| Total inventory | $ | 3,369 |
| | $ | 1,066 |
| | $ | 1,621 |
| | $ | 1,053 |
| | $ | 568 |
| | $ | 134 |
| | $ | 470 |
| | $ | 38 |
| $ | 3,177 |
| | $ | 984 |
| | $ | 1,521 |
| | $ | 976 |
| | $ | 546 |
| | $ | 124 |
| | $ | 470 |
| | $ | 38 |
|
| | | | December 31, 2016 | December 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 |
| | Piedmont |
| Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Materials and supplies | $ | 2,374 |
| | $ | 767 |
| | $ | 1,167 |
| | $ | 813 |
| | $ | 354 |
| | $ | 84 |
| | $ | 312 |
| | $ | 1 |
| $ | 2,293 |
| | $ | 744 |
| | $ | 1,118 |
| | $ | 774 |
| | $ | 343 |
| | $ | 82 |
| | $ | 309 |
| | $ | 2 |
|
| Coal | 774 |
| | 251 |
| | 314 |
| | 148 |
| | 166 |
| | 19 |
| | 190 |
| | — |
| 603 |
| | 192 |
| | 255 |
| | 139 |
| | 116 |
| | 17 |
| | 139 |
| | — |
|
| Natural gas, oil and other fuel | 374 |
| | 37 |
| | 236 |
| | 115 |
| | 121 |
| | 34 |
| | 2 |
| | 65 |
| 354 |
| | 35 |
| | 219 |
| | 104 |
| | 115 |
| | 34 |
| | 2 |
| | 64 |
|
| Total inventory | $ | 3,522 |
| | $ | 1,055 |
| | $ | 1,717 |
| | $ | 1,076 |
| | $ | 641 |
| | $ | 137 |
| | $ | 504 |
| | $ | 66 |
| $ | 3,250 |
| | $ | 971 |
| | $ | 1,592 |
| | $ | 1,017 |
| | $ | 574 |
| | $ | 133 |
| | $ | 450 |
| | $ | 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 on a net basis.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Excise taxes accounted for on a gross basis aswithin both operatingOperating revenues and propertyProperty and other taxes on the Condensed Consolidated Statements of Operations were as follows. | | | | Three Months Ended June 30, | | Six Months Ended June 30, | Three Months Ended June 30, | | Six Months Ended June 30, |
| (in millions) | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
| 2018 |
| | 2017 |
| | 2018 |
| | 2017 |
|
| Duke Energy | $ | 91 |
|
| $ | 87 |
|
| $ | 182 |
|
| $ | 178 |
| $ | 95 |
|
| $ | 91 |
|
| $ | 194 |
|
| $ | 182 |
|
| Duke Energy Carolinas | 9 |
| | 7 |
| | 18 |
| | 15 |
| 9 |
| | 9 |
| | 17 |
| | 18 |
|
| Progress Energy | 55 |
| | 50 |
| | 101 |
| | 96 |
| 56 |
| | 55 |
| | 110 |
| | 101 |
|
| Duke Energy Progress | 4 |
| | 4 |
| | 9 |
| | 9 |
| 5 |
| | 4 |
| | 10 |
| | 9 |
|
| Duke Energy Florida | 51 |
| | 46 |
| | 92 |
| | 87 |
| 51 |
| | 51 |
| | 100 |
| | 92 |
|
| Duke Energy Ohio | 23 |
| | 22 |
| | 51 |
| | 51 |
| 25 |
| | 23 |
| | 55 |
| | 51 |
|
| Duke Energy Indiana | 3 |
| | 8 |
| | 10 |
| | 16 |
| 5 |
| | 3 |
| | 11 |
| | 10 |
|
| Piedmont | 1 |
| | — |
| | 2 |
| | 1 |
| — |
| | 1 |
| | 1 |
| | 2 |
|
NEW ACCOUNTING STANDARDS
The new accounting standards adopted for 20172018 and 20162017 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 standardstandards had the most significant impact on the Duke Energy results of operations, cash flows and financial position for the six months ended June 30, 2017.
Stock-Based Compensation and Income Taxes. In first quarter 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 additional income tax expense for the six months ended June 30, 2017. See the Duke Energy Condensed Consolidated Statements of Changes in Equity for further information.
The following new Accounting Standards Updates (ASUs) have been issued, but have not yet been adopted by Duke Energy, as of June 30, 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 reclassify all the components of net periodic costs except for the service cost component to be presented outside of Operating income. However, Duke Energy will continue to present the service cost amount 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 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 CustomersCustomers.. In May 2014, the FASBFinancial Accounting Standards Board (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 entitledexpected in exchange for those goods or services. The amendments in this update also requirerequired 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.
Most The majority 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"). ForOther revenue arrangements, such arrangements, Duke Energy expects that theas alternative revenue from contracts with customers will be equivalent to the electricity or natural gas suppliedprograms 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-termcertain purchase power agreements (PPA).(PPAs) and lighting tariffs accounted for as leases, are excluded from the scope of this guidance and, therefore, are accounted for and evaluated for separate presentation and disclosure under other relevant accounting guidance.
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 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 and revenue from lease accounting will also be disclosed.
Duke Energy intends to useelected the modified retrospective method of adoption effective January 1, 2018. ThisUnder the modified retrospective method of adoption, prior year reported results are not restated. Adoption of this standard did not result in a material change in the timing or pattern of revenue recognition and a cumulative-effect adjustment that will bewas not recorded to retained earnings as ofat January 1, 2018, as if2018. Duke Energy utilized certain practical expedients including applying this guidance to open contracts at the standard had always been in effect. Disclosures for 2018 will includedate of adoption, expensing costs to obtain a comparison to whatcontract where the amortization period of the asset would have been reportedone year or less, ignoring the effects of a significant financing when the period between transfer of the good or service and payment is one year or less and recognizing revenues for 2018certain contracts under the currentinvoice practical expedient, which allows revenue recognition rules in order to assist financial statement users in understanding howbe consistent with invoiced amounts (including estimated billings) provided certain criteria are met, including consideration of whether the invoiced amounts reasonably represent the value provided to customers.
In preparation for adoption, Duke Energy identified material revenue streams and reviewed representative contracts and tariffs, including those associated with certain long-term customer contracts such as wholesale contracts, PPAs and other customer arrangements. Duke Energy also monitored the activities of the power and utilities industry revenue recognition task force and has changedreviewed published positions on specific industry issues to evaluate the impact, if any, on Duke Energy’s specific contracts and conclusions.
Duke Energy applied the available practical expedient to portfolios of tariffs and contracts with similar characteristics. The vast majority of sales, including energy provided to retail customers, are from tariff offerings that provide natural gas or electricity without a defined contractual term ("at-will"). In most circumstances, revenue from contracts with customers is equivalent to the electricity or natural gas supplied and billed in that period (including estimated billings). As such, adoption of the new rules did not result in a shift in the timing or pattern of revenue recognition for such sales. While there have been changes to the captions and descriptions of revenues in Duke Energy’s financial statements, the most significant impact as a result of thisadopting the standard are additional disclosures around the nature, amount, timing and to facilitate comparabilityuncertainty of revenues and cash flows arising from contracts with prior year reported results,customers. See Note 13 for further information.
Financial Instruments Classification and Measurement. In January 2018, Duke Energy adopted FASB guidance, which revised the classification and measurement of certain financial instruments. The adopted guidance changes the presentation of realized and unrealized gains and losses in certain equity securities that were previously recorded in accumulated other comprehensive income (AOCI). These gains and losses are now recorded in net income. An entity's equity investments that are accounted for under the equity method of accounting are not restated underincluded within the modified retrospective approach.
Leases. In February 2016,scope of the FASB issued revisednew guidance. This guidance had a 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' equity securities are deferred as regulatory assets or liabilities pursuant to accounting guidance for leases.regulated operations. The core principleresulting adjustment of unrealized gains and losses in AOCI to retained earnings was immaterial. The primary impact to Duke Energy as a result of implementing this guidance is that a lessee should recognizeadding disclosure requirements to present separately the financial assets and financial liabilities that arise from leases on the balance sheet.
For Duke Energy, this guidance is effectiveby measurement category and form of financial asset. See Notes 10 and 11 for interim and annual periods beginning January 1, 2019, although it can be early adopted. The guidance is applied using a modified retrospective approach. Duke Energy is currently evaluating the financial statement impact of adopting this standard and is continuing to monitor industry implementation issues, including easements, pole attachments and renewable power purchase agreements. 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.further information.
Statement of Cash Flows. In November 2016, the FASB issued revised accounting guidance to reduce diversity in practice for the presentation and classification of restricted cash on the statementCondensed Consolidated Statements of cash flows.Cash Flows. Under the updated guidance, restricted cash and restricted cash equivalents will beare included within beginning-of-period and end-of-period cash and cash equivalents on the statementCondensed Consolidated Statements of cash flows.
ForCash Flows. Duke Energy adopted this guidance is effective for the interim and annual periods beginningon January 1, 2018, although it can be early adopted.2018. The guidance will behas been applied using a retrospective transition method to each period presented. UponThe adoption by Duke Energy of the revised guidance will resultresulted in a change to the amount of cash andCash, cash equivalents and restricted cash explained when reconciling the beginning-of-period and end-of-period total amounts shown on the statementCondensed Consolidated Statements of Cash Flows. In addition, a reconciliation has been provided of Cash, cash flows.equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets that sums to the total of the same such amounts in the Condensed Consolidated Statements of Cash Flows. Prior to adoption, the Duke Energy Registrants reflectreflected changes in noncurrent restricted cash within Cash Flows from Investing Activities and changes in current restricted cash within Cash Flows from Operating Activities on the Condensed Consolidated Statements of Cash Flows.
In August 2016, the FASB issued accounting guidance addressing diversity in practice for eight separate cash flow issues. The guidance requires entities to classify distributions received from equity method investees using either the cumulative earnings approach or the nature of the distribution approach. Duke Energy adopted this guidance on January 1, 2018, and elected the nature of distribution approach. This approach requires all distributions received to be categorized based on legal documentation describing the nature of the activities generating the distribution. Cash inflows resulting in a return on investment (surplus) will be reflected in Cash Flows from Operating Activities on the Condensed Consolidated Statements of Cash Flows, whereas cash inflows resulting in a return of investment (capital) will be reflected in Cash Flows from Investing Activities on the Condensed Consolidated StatementStatements of Cash Flows. The guidance has been applied using the retrospective transition method to each period presented. There are no changes to the Condensed Consolidated Statements of Cash Flows for the periods presented as a result of this accounting change.
Financial Instruments Classification and Measurement.Retirement Benefits. In January 2016,March 2017, the FASB issued revised accounting guidance for the classification and measurementpresentation of financial instruments. Changes innet periodic costs related to benefit plans. Previous guidance required the fair valueaggregation of all equity securities will be requiredthe components of net periodic costs on the Condensed Consolidated Statement of Operations and did 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 is included within Operating Income within the same line as other compensation expenses. All other components of net periodic costs are outside of Operating Income. In addition, the updated guidance permits only the service cost component of net periodic costs to be recorded incapitalized to Inventory or Property, Plant and Equipment. This represents a change from previous guidance, which permitted all components of net income. Current GAAP allows some changes in fair value for available-for-sale equity securitiesperiodic costs 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 accountedeligible for under the equity method of accounting are not included within the scope of the new guidance.capitalization.
For Duke Energy the revised accountingadopted this guidance is effective for interim and annual periods beginning January 1, 2018, by recording a cumulative-effect adjustment to retained earnings as ofon January 1, 2018. ThisUnder previous guidance, is expected to have minimal impactDuke Energy presented the total non-capitalized net periodic costs within Operation, maintenance and other on the Condensed Consolidated Statement of Operations. The adoption of this guidance resulted in a retrospective change to reclassify the presentation of the non-service cost (benefit) components of net periodic costs to Other income and expenses. Duke Energy Registrant's Condensed Consolidated Statementsutilized the practical expedient for retrospective presentation. The change in components of Operationsnet periodic costs eligible for capitalization is applicable prospectively. Since Duke Energy’s service cost component is greater than the total net periodic costs, the change results in increased capitalization of net periodic costs, higher Operation, maintenance and Comprehensive Income as changes in the fair value of most of theother and higher Other income and expenses. The resulting prospective impact to Duke Energy Registrants' available-for-sale equity securities are deferred as regulatory assets or liabilities pursuant to accounting guidanceis an immaterial increase in Net Income. See Note 15 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
On October 3, 2016, Duke Energy acquired all outstanding common stock of Piedmont for a total cash purchase price of $5.0 billion and assumed Piedmont's existing long-term debt, which had a fair value of approximately $2.0 billion at the time of the acquisition. The acquisition provides a foundation for Duke Energy to establish a broader, long-term strategic natural gas infrastructure platform to complement its existing natural gas pipeline investments and regulated natural gas business in the Midwest. In connection with the closing of the acquisition, Piedmont became a wholly owned subsidiary of Duke Energy.further 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 – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Purchase Price Allocation
The purchase price allocationFor Duke Energy, the retrospective change resulted in higher Operation, maintenance and other and higher Other income and expenses, net, of $156 million, $131 million and $96 million for 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 valuefollowing new Accounting Standards Updates (ASUs) have been issued, but have not yet been adopted by Duke Energy, as of Piedmont'sJune 30, 2018.
Leases. In February 2016, the FASB issued revised accounting guidance for leases. The core principle of this guidance is that a lessee should recognize the assets and liabilities were determined basedthat arise from leases on significant estimatesthe balance sheet.
For Duke Energy, this guidance is effective for interim and assumptions that are judgmental in nature, including the amount and timing of projected future cash flows, discount rates reflecting risk inherent in the future cash flows and market prices of long-term debt.
annual periods beginning January 1, 2019. The majority of Piedmont’s operations are subjectguidance will be applied using a modified retrospective approach. Duke Energy expects to the rate-setting authorityelect certain of the NCUC,following practical expedients upon adoption:
|
| |
| Practical Expedient | Description |
| Package of transition practical expedients (for leases commenced prior to adoption date and must be adopted as a package) | Do not need to 1) reassess whether any expired or existing contracts are/or contain leases, 2) reassess the lease classification for any expired or existing leases and 3) reassess initial direct costs for any existing leases. |
| Short-term lease expedient (elect by class of underlying asset) | Elect as an accounting policy to not apply the recognition requirements to short-term leases by asset class. |
| Lease and non-lease components (elect by class of underlying asset) | Elect as an accounting policy to not separate non-lease components from lease components and instead account for each lease and associated non-lease component as a single lease component by asset class. |
| Hindsight expedient (when determining lease term) | Elect to use hindsight to determine the lease term. |
| Existing and expired land easements not previously accounted for as leases | Elect to not evaluate existing or expired easements under the new guidance and carry forward current accounting treatment. |
Comparative reporting requirements for initial adoption
| Elect to apply transition requirements at adoption date, recognize cumulative effect adjustment to retained earnings in period of adoption and not apply ASC 842 to comparative periods, including disclosures. |
Lessor expedient (elect by class of underlying asset)
| Elect as an accounting policy to aggregate non-lease components with the related lease component when specified conditions are met by asset class. Account for the combined component based on its predominant characteristic (revenue or operating lease). |
Duke Energy is currently evaluating the PSCSCfinancial statement impact of adopting this standard and the TPUCis continuing to monitor industry implementation issues, including pipeline laterals and are accounted for pursuant to accounting guidance for regulated operations. The rate-setting and cost recovery provisions currentlyrenewable energy PPAs. Duke Energy expects an increase in place for Piedmont’s regulated operations provide revenues derived from costs, including a return on investment of assets and liabilities included in rate base. Thus, the fair value of Piedmont's assets and liabilities subject to these rate-setting provisions approximates the pre-acquisition carrying value and does not reflect any net valuation adjustments.
The significant assets and liabilities for which valuation adjustments were reflected within the purchase price allocation include the acquired equity method investments and long-term debt. The difference between the fair value and the pre-acquisition carrying value of long-term debt for regulated operations was recorded as a regulatory asset.
The excess of the purchase price over the fair value of Piedmont's assets and liabilities on its balance sheet along with the acquisition date was recorded as goodwill. The goodwill reflectsaddition of required disclosures of key lease information. However, 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.
Under Securities and Exchange Commission (SEC) regulations, Duke Energy elected not to apply push down accounting to the stand-alone Piedmont financial statements.
Other Acquisition Related Matters
Duke Energy recorded unrealized losses on forward-starting interest rate swaps related to the acquisition financing of $75 million and $168 million for the three and six months ended June 30, 2016, respectively. See Note 9 for additional information.
During the three months ended June 30, 2017, Piedmont recorded a $7 million software impairment resulting from planned accounting system and process integration.
Pro Forma Financial Information
The following unaudited pro forma financial information reflects the combined results of operations of Duke Energy and Piedmont as if the merger had occurred as of January 1, 2016. The pro forma financial information excludes potential cost savings, intercompany revenues, Piedmont’s earnings from the equity method investment in SouthStar Energy Services, LLC (SouthStar) sold immediately prior to the merger, and after-tax nonrecurring transaction and integration costs incurred by Duke Energy and Piedmont of $57 million and $120 million for the three and six months ended June 30, 2016, respectively. 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 indicativeultimate impact of the consolidated resultsnew standard has not yet been determined. System enhancements, including additional processes and controls, will be required to facilitate the identification, tracking and reporting of operations that would have been achieved or the future consolidated results of operations of Duke Energy. |
| | | | | | | |
| | Three Months Ended | | Six Months Ended |
| (in millions) | June 30, 2016 | | June 30, 2016 |
| Operating Revenues | $ | 5,374 |
| | $ | 11,214 |
|
| Net Income Attributable to Duke Energy Corporation | 540 |
| | 1,372 |
|
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)
DISPOSITIONS
Sale of International Energy
In December 2016, Duke Energy sold its International Energy businesses, excluding the equity method investment in NMC (the International Disposal Group), in two separate transactions. Duke Energy sold its Brazilian business to China Three Gorges for approximately $1.2 billion, including the assumption of debt, and its remaining Central and South American businesses to I Squared Capital in a deal also valued at approximately $1.2 billion, including the assumption of debt. The transactions generated cash proceeds of $1.9 billion, excluding transaction costs, which were primarily used to reduce Duke Energy holding company debt.
The following table presents the resultspotential leases based upon requirements of the International Disposal Group, 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 | | Six Months Ended |
| (in millions) | June 30, 2016 | | June 30, 2016 |
| Operating Revenues | $ | 270 |
| | $ | 516 |
|
| Fuel used in electric generation and purchased power | 70 |
| | 117 |
|
| Cost of natural gas | 12 |
| | 23 |
|
| Operation, maintenance and other | 84 |
| | 155 |
|
| Depreciation and amortization | 22 |
| | 44 |
|
| Property and other taxes | 2 |
| | 5 |
|
Impairment charges (a) | 194 |
| | 194 |
|
| Gains on Sales of Other Assets and Other, net | 1 |
| | 1 |
|
| Other Income and Expenses, net | 11 |
| | 21 |
|
| Interest Expense | 22 |
| | 44 |
|
| Loss before income taxes | (124 | ) | | (44 | ) |
Income tax benefit(b) | (13 | ) | | (52 | ) |
| (Loss) Income from discontinued operations of the International Disposal Group | (111 | ) | | 8 |
|
| (Loss) Income from discontinued operations of other businesses | (1 | ) | | 2 |
|
| (Loss) Income from Discontinued Operations, net of tax | $ | (112 | ) | | $ | 10 |
|
| |
(a) | In conjunction with the advancements of marketing efforts during 2016, Duke Energy performed recoverability tests of the long-lived asset groups of International Energy. As a result, Duke Energy determined the carrying value of certain assets in Central America was not fully recoverable and recorded a pretax impairment charge of $194 million. The charge represents the excess carrying value over the estimated fair value of the assets, which was based on a Level 3 Fair Value measurement that was primarily determined from the income approach using discounted cash flows but also considered market information obtained in 2016. |
| |
(b) | Includes an income tax benefit of $95 million for the six months ended June 30, 2016 related to historical undistributed foreign earnings. See Note 16 for additional information. |
new lease standard. Duke Energy has elected notbegun the implementation of a third-party software tool to separately disclose discontinued operations onhelp with the Condensed Consolidated Statements of Cash Flows. The following table summarizes Duke Energy's cash flows from discontinued operations related toadoption and ongoing accounting under the International Disposal Group.new standard. |
| | | |
| | Six Months Ended |
| (in millions) | June 30, 2016 |
| Cash flows provided by (used in): | |
| Operating activities | $ | 144 |
|
| Investing activities | (24 | ) |
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.
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)
3.2. BUSINESS SEGMENTS
Operating segments are determined based on information used by the chief operating decision-maker in deciding how to allocate resources and evaluate the performance of the business. Duke Energy evaluates segment performance based on segment income. Segment income is defined as income from continuing operations net of income attributable to noncontrolling interests. Segment income includes intercompany revenues and expenses that are eliminated on the Condensed Consolidated Financial Statements. Certain governance costs are allocated to each segment. In addition, direct interest expense and income taxes are included in segment income.
Duke Energy
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 includeincludes the following segments: Electric Utilities and Infrastructure, Gas Utilities and Infrastructure and Commercial Renewables. Prior period information has been recast to conform to the current segment structure. See Note 2 for further information on the Piedmont and International Energy transactions.
The Electric Utilities and Infrastructure segment includes Duke Energy's regulated electric utilities in the Carolinas, Florida and the Midwest. The regulated electric utilities conduct operations through the Subsidiary Registrants that are substantially all regulated and, accordingly, qualify for regulatory accounting treatment. Electric Utilities and Infrastructure also includes Duke Energy's electric transmission infrastructure investments.
The Gas Utilities and Infrastructure segment includes Piedmont, Duke Energy's natural gas local distribution companies in Ohio and Kentucky, and Duke Energy's natural gas storage and midstream pipeline investments. Gas Utilities and Infrastructure's operations are substantially all regulated and, accordingly, qualify for regulatory accounting treatment.
Commercial Renewables is primarily comprised of nonregulated utility scale wind and solar generation assets located throughout the U.S.
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 remainder of Duke Energy’s operations is presented as Other, which is primarily comprised of unallocated corporate interest expense on holding company debt, unallocated corporate costs contributions to the Duke Energy Foundation and the operations of Duke Energy’s wholly owned captive insurance subsidiary,company, Bison Insurance Company Limited (Bison). Other also includes Duke Energy's 2517.5 percent interest in NMC,National Methanol Company (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 June 30, 2017 |
| | Electric |
| | Gas |
| | | | Total |
| | | | | | |
| | Utilities and |
| | Utilities and |
| | Commercial |
| | Reportable |
| | | | | | |
| (in millions) | Infrastructure |
| | Infrastructure |
| | Renewables |
| | Segments |
| | Other |
| | Eliminations |
| | Consolidated |
|
| Unaffiliated revenues | $ | 5,150 |
| | $ | 279 |
| | $ | 110 |
| | $ | 5,539 |
| | $ | 16 |
| | $ | — |
| | $ | 5,555 |
|
| Intersegment revenues | 8 |
| | 22 |
| | — |
| | 30 |
| | 19 |
| | (49 | ) | | — |
|
| Total revenues | $ | 5,158 |
| | $ | 301 |
| | $ | 110 |
| | $ | 5,569 |
| | $ | 35 |
| | $ | (49 | ) | | $ | 5,555 |
|
Segment income (loss)(a) | $ | 729 |
| | $ | 27 |
| | $ | 26 |
| | $ | 782 |
| | $ | (94 | ) | | $ | — |
| | $ | 688 |
|
| Add back noncontrolling interests | | | | | | | | | | | | | 3 |
|
| Loss from discontinued operations, net of tax | | | | | | | | | | | | | (2 | ) |
| Net income | | | | | | | | | | | | | $ | 689 |
|
| Segment assets | $ | 117,009 |
| | $ | 11,073 |
| | $ | 4,306 |
| | $ | 132,388 |
| | $ | 2,435 |
| | $ | 181 |
| | $ | 135,004 |
|
| | | | Three Months Ended June 30, 2016 | Three Months Ended June 30, 2018 |
| | Electric |
| | Gas |
| | | | Total |
| | | | | | | Electric |
| | Gas |
| | | | Total |
| | | | | | |
| | Utilities and |
| | Utilities and |
| | Commercial |
| | Reportable |
| | | | | | | Utilities and |
| | Utilities and |
| | Commercial |
| | Reportable |
| | | | | | |
| (in millions) | Infrastructure |
| | Infrastructure |
| | Renewables |
| | Segments |
| | Other |
| | Eliminations |
| | Consolidated |
| Infrastructure |
| | Infrastructure |
| | Renewables |
| | Segments |
| | Other |
| | Eliminations |
| | Consolidated |
|
| Unaffiliated revenues | $ | 4,993 |
| | $ | 97 |
| | $ | 112 |
| | $ | 5,202 |
| | $ | 11 |
| | $ | — |
| | $ | 5,213 |
| $ | 5,215 |
| | $ | 294 |
| | $ | 119 |
| | $ | 5,628 |
| | $ | 15 |
| | $ | — |
| | $ | 5,643 |
|
| Intersegment revenues | 8 |
| | 2 |
| | — |
| | 10 |
| | 19 |
| | (29 | ) | | — |
| 8 |
| | 24 |
| | — |
| | 32 |
| | 17 |
| | (49 | ) | | — |
|
| Total revenues | $ | 5,001 |
| | $ | 99 |
| | $ | 112 |
| | $ | 5,212 |
| | $ | 30 |
| | $ | (29 | ) | | $ | 5,213 |
| $ | 5,223 |
| | $ | 318 |
| | $ | 119 |
| | $ | 5,660 |
| | $ | 32 |
| | $ | (49 | ) | | $ | 5,643 |
|
Segment income (loss)(a)(b) | $ | 704 |
| | $ | 16 |
| | $ | 11 |
| | $ | 731 |
| | $ | (107 | ) | | $ | — |
| | $ | 624 |
| $ | 575 |
| | $ | 28 |
| | $ | 38 |
| | $ | 641 |
| | $ | (136 | ) | | $ | — |
| | $ | 505 |
|
| Add back noncontrolling interests | | | | | | | | | | | | | | 2 |
|
| Loss from discontinued operations, net of tax | | | | | | | | | | | | | (112 | ) | | | | | | | | | | | | | (5 | ) |
| Net income | | | | | | | | | | | | | $ | 512 |
| | | | | | | | | | | | | $ | 502 |
|
| Segment assets | | $ | 121,947 |
| | $ | 11,437 |
| | $ | 4,233 |
| | $ | 137,617 |
| | $ | 2,461 |
| | $ | 181 |
| | $ | 140,259 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, 2017 |
| | Electric |
| | Gas |
| | | | Total |
| | | | | | |
| | Utilities and |
| | Utilities and |
| | Commercial |
| | Reportable |
| | | | | | |
| (in millions) | Infrastructure |
| | Infrastructure |
| | Renewables |
| | Segments |
| | Other |
| | Eliminations |
| | Consolidated |
|
| Unaffiliated revenues | $ | 5,150 |
| | $ | 279 |
| | $ | 110 |
| | $ | 5,539 |
| | $ | 16 |
| | $ | — |
| | $ | 5,555 |
|
| Intersegment revenues | 8 |
| | 22 |
| | — |
| | 30 |
| | 19 |
| | (49 | ) | | — |
|
| Total revenues | $ | 5,158 |
| | $ | 301 |
| | $ | 110 |
| | $ | 5,569 |
| | $ | 35 |
| | $ | (49 | ) | | $ | 5,555 |
|
Segment income (loss)(b) | $ | 729 |
| | $ | 27 |
| | $ | 26 |
| | $ | 782 |
| | $ | (94 | ) | | $ | — |
| | $ | 688 |
|
| Add back noncontrolling interests | | | | | | | | | | | | | 3 |
|
| Loss from discontinued operations, net of tax | | | | | | | | | | | | | (2 | ) |
| Net income | | | | | | | | | | | | | $ | 689 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2018 |
| | Electric |
| | Gas |
| | | | Total |
| | | | | | |
| | Utilities and |
| | Utilities and |
| | Commercial |
| | Reportable |
| | | | | | |
| (in millions) | Infrastructure |
| | Infrastructure |
| | Renewables |
| | Segments |
| | Other |
| | Eliminations |
| | Consolidated |
|
| Unaffiliated revenues | $ | 10,530 |
| | $ | 997 |
| | $ | 220 |
| | $ | 11,747 |
| | $ | 31 |
| | $ | — |
| | $ | 11,778 |
|
| Intersegment revenues | 16 |
| | 48 |
| | — |
| | 64 |
| | 36 |
| | (100 | ) | | — |
|
| Total revenues | $ | 10,546 |
| | $ | 1,045 |
| | $ | 220 |
| | $ | 11,811 |
| | $ | 67 |
| | $ | (100 | ) | | $ | 11,778 |
|
Segment income (loss)(a)(b)(c)(d) | $ | 1,325 |
| | $ | 144 |
| | $ | 58 |
| | $ | 1,527 |
| | $ | (402 | ) | | $ | — |
| | $ | 1,125 |
|
| Add back noncontrolling interests | | | | | | | | | | | | | 4 |
|
| Loss from discontinued operations, net of tax | | | | | | | | | | | | | (5 | ) |
| Net income | | | | | | | | | | | | | $ | 1,124 |
|
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)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2017 |
| | Electric |
| | Gas |
| | | | Total |
| | | | | | |
| | Utilities and |
| | Utilities and |
| | Commercial |
| | Reportable |
| | | | | | |
| (in millions) | Infrastructure |
| | Infrastructure |
| | Renewables |
| | Segments |
| | Other |
| | Eliminations |
| | Consolidated |
|
| Unaffiliated revenues | $ | 10,090 |
| | $ | 927 |
| | $ | 238 |
| | $ | 11,255 |
| | $ | 29 |
| | $ | — |
| | $ | 11,284 |
|
| Intersegment revenues | 15 |
| | 44 |
| | — |
| | 59 |
| | 39 |
| | (98 | ) | | — |
|
| Total revenues | $ | 10,105 |
| | $ | 971 |
| | $ | 238 |
| | $ | 11,314 |
| | $ | 68 |
| | $ | (98 | ) | | $ | 11,284 |
|
Segment income (loss)(a) | $ | 1,364 |
| | $ | 160 |
| | $ | 51 |
| | $ | 1,575 |
| | $ | (171 | ) | | $ | — |
| | $ | 1,404 |
|
| Add back noncontrolling interests | | | | | | | | | | | | | 4 |
|
| Loss from discontinued operations, net of tax | | | | | | | | | | | | | (2 | ) |
| Net income | | | | | | | | | | | | | $ | 1,406 |
|
| | | | Six Months Ended June 30, 2016 | Six Months Ended June 30, 2017 |
| | Electric |
| | Gas |
| | | | Total |
| | | | | | | Electric |
| | Gas |
| | | | Total |
| | | | | | |
| | Utilities and |
| | Utilities and |
| | Commercial |
| | Reportable |
| | | | | | | Utilities and |
| | Utilities and |
| | Commercial |
| | Reportable |
| | | | | | |
| (in millions) | Infrastructure |
| | Infrastructure |
| | Renewables |
| | Segments |
| | Other |
| | Eliminations |
| | Consolidated |
| Infrastructure |
| | Infrastructure |
| | Renewables |
| | Segments |
| | Other |
| | Eliminations |
| | Consolidated |
|
| Unaffiliated revenues | $ | 10,074 |
| | $ | 266 |
| | $ | 226 |
| | $ | 10,566 |
| | $ | 24 |
| | $ | — |
| | $ | 10,590 |
| $ | 10,090 |
| | $ | 927 |
| | $ | 238 |
| | $ | 11,255 |
| | $ | 29 |
| | $ | — |
| | $ | 11,284 |
|
| Intersegment revenues | 16 |
| | 3 |
| | — |
| | 19 |
| | 35 |
| | (54 | ) | | — |
| 15 |
| | 44 |
| | — |
| | 59 |
| | 39 |
| | (98 | ) | | — |
|
| Total revenues | $ | 10,090 |
| | $ | 269 |
| | $ | 226 |
| | $ | 10,585 |
| | $ | 59 |
| | $ | (54 | ) | | $ | 10,590 |
| $ | 10,105 |
| | $ | 971 |
| | $ | 238 |
| | $ | 11,314 |
| | $ | 68 |
| | $ | (98 | ) | | $ | 11,284 |
|
Segment income (loss)(a)(b) | $ | 1,368 |
| | $ | 48 |
| | $ | 37 |
| | $ | 1,453 |
| | $ | (255 | ) | | $ | — |
| | $ | 1,198 |
| $ | 1,364 |
| | $ | 160 |
| | $ | 51 |
| | $ | 1,575 |
| | $ | (171 | ) | | $ | — |
| | $ | 1,404 |
|
| Add back noncontrolling interests | | | | | | | | | | | | | 3 |
| | | | | | | | | | | | | 4 |
|
| Income from discontinued operations, net of tax | | | | | | | | | | | | | 10 |
| |
| Loss from discontinued operations, net of tax | | | | | | | | | | | | | | (2 | ) |
| Net income | | | | | | | | | | | | | $ | 1,211 |
| | | | | | | | | | | | | $ | 1,406 |
|
| |
| (a) | Electric Utilities and Infrastructure includes regulatory and legislative impairment charges related to rate case orders, settlements or other actions of regulators or legislative bodies. See Note 3 for additional information. |
| |
| (b) | Other includes costs to achieve the Piedmont acquisition. |
| |
| (c) | Gas Utilities and Infrastructure includes an impairment of the investment in Constitution Pipeline Company, LLC (Constitution). See Notes 2 and 9Note 3 for additional information. |
| |
| (d) | Other includes the loss on the sale of the retired Beckjord Generating Station (Beckjord) described below and a valuation allowance recorded against the alternative minimum tax credits subject to sequestration. See Note 17 for additional information on the valuation allowance. |
In February 2018, Duke Energy sold Beckjord, a nonregulated facility retired during 2014, and recorded a pretax loss of $106 million within Gains (Losses) on Sales of Other Assets and Other, net and $1 million within Operation, maintenance and other on Duke Energy's Condensed Consolidated Statements of Operations for the six months ended June 30, 2018. The sale included the transfer of coal ash basins and other real property and indemnification from any and all potential future claims related to the property, whether arising under environmental laws or otherwise.
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 northernNorthern Kentucky. Gas Utilities and Infrastructure transports and sells natural gas in portions of Ohio and northernNorthern Kentucky. It conductsBoth reportable operating segments conduct operations primarily through Duke Energy Ohio and its wholly owned subsidiary, Duke Energy Kentucky.
The remainder of Duke Energy Ohio's operations is presented as Other, which is primarily comprised of governance costs allocated by its parent, Duke Energy, and revenues and expenses related to Duke Energy Ohio's contractual arrangement to buy power from the Ohio Valley Electric Corporation's (OVEC) power plants. See Note 8 for additional information on related party transactions. |
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, 2018 |
| | Electric |
| | Gas |
| | Total |
| | | | | | |
| | Utilities and |
| | Utilities and |
| | Reportable |
| | | | | | |
| (in millions) | Infrastructure |
| | Infrastructure |
| | Segments |
| | Other |
| | Eliminations |
| | Consolidated |
|
| Total revenues | $ | 346 |
| | $ | 103 |
| | $ | 449 |
| | $ | 10 |
| | $ | — |
| | $ | 459 |
|
| Segment income (loss)/Net income | 39 |
| | 18 |
| | 57 |
| | (11 | ) | | — |
| | 46 |
|
| Segment assets | $ | 5,336 |
| | $ | 2,727 |
| | $ | 8,063 |
| | $ | 40 |
| | $ | (2 | ) | | $ | 8,101 |
|
|
| | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, 2017 |
| | Electric |
| | Gas |
| | Total |
| | | | |
| | Utilities and |
| | Utilities and |
| | Reportable |
| | | | |
| (in millions) | Infrastructure |
| | Infrastructure |
| | Segments |
| | Other |
| | Consolidated |
|
| Total revenues | $ | 329 |
| | $ | 100 |
| | $ | 429 |
| | $ | 8 |
| | $ | 437 |
|
| Segment income (loss)/Net income | 22 |
| | 17 |
| | 39 |
| | (9 | ) | | 30 |
|
|
| | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2018 |
| | Electric |
| | Gas |
| | Total |
| | | | |
| | Utilities and |
| | Utilities and |
| | Reportable |
| | | | |
| (in millions) | Infrastructure |
| | Infrastructure |
| | Segments |
| | Other |
| | Consolidated |
|
| Total revenues | $ | 682 |
| | $ | 277 |
| | $ | 959 |
| | $ | 24 |
| | $ | 983 |
|
Segment income (loss)/Net income(a) | 72 |
| | 52 |
| | 124 |
| | (103 | ) | | 21 |
|
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 remainder of Duke Energy Ohio's operations is presented as Other, which is primarily comprised of governance costs allocated by its parent, Duke Energy, and revenues and expenses related to Duke Energy Ohio's contractual arrangement to buy power from the Ohio Valley Electric Corporation's (OVEC) power plants. See Note 8 for additional information on related party transactions. |
| | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, 2017 |
| | Electric |
| | Gas |
| | Total |
| | | | |
| | Utilities and |
| | Utilities and |
| | Reportable |
| | | | |
| (in millions) | Infrastructure |
| | Infrastructure |
| | Segments |
| | Other |
| | Consolidated |
|
| Total revenues | $ | 329 |
| | $ | 100 |
| | $ | 429 |
| | $ | 8 |
| | $ | 437 |
|
| Segment income (loss)/Net Income | 22 |
| | 17 |
| | 39 |
| | (9 | ) | | 30 |
|
| Segment assets | 4,879 |
| | 2,672 |
| | 7,551 |
| | 54 |
| | 7,605 |
|
|
| | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, 2016 |
| | Electric |
| | Gas |
| | Total |
| | | | |
| | Utilities and |
| | Utilities and |
| | Reportable |
| | | | |
| (in millions) | Infrastructure |
| | Infrastructure |
| | Segments |
| | Other |
| | Consolidated |
|
| Total revenues | $ | 323 |
| | $ | 98 |
| | $ | 421 |
| | $ | 7 |
| | $ | 428 |
|
| Segment income (loss)/Net Income | 19 |
| | 14 |
| | 33 |
| | (10 | ) | | 23 |
|
|
| | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2017 |
| | Electric |
| | Gas |
| | Total |
| | | | |
| | Utilities and |
| | Utilities and |
| | Reportable |
| | | | |
| (in millions) | Infrastructure |
| | Infrastructure |
| | Segments |
| | Other |
| | Consolidated |
|
| Total revenues | $ | 665 |
| | $ | 270 |
| | $ | 935 |
| | $ | 20 |
| | $ | 955 |
|
| Segment income (loss)/Net Income | 46 |
| | 42 |
| | 88 |
| | (16 | ) | | 72 |
|
|
| | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2016 |
| | Electric |
| | Gas |
| | Total |
| | | | |
| | Utilities and |
| | Utilities and |
| | Reportable |
| | | | |
| (in millions) | Infrastructure |
| | Infrastructure |
| | Segments |
| | Other |
| | Consolidated |
|
| Total revenues | $ | 663 |
| | $ | 269 |
| | $ | 932 |
| | $ | 12 |
| | $ | 944 |
|
| Segment income (loss) | $ | 55 |
| | $ | 45 |
| | $ | 100 |
| | $ | (20 | ) | | $ | 80 |
|
| Income from discontinued operations, net of tax | | | | | | | | | 2 |
|
| Net income | | | | | | | | | 82 |
|
DUKE ENERGY CAROLINAS, PROGRESS ENERGY, DUKE ENERGY PROGRESS, DUKE ENERGY FLORIDA, DUKE ENERGY INDIANA AND PIEDMONT
Piedmont has one reportable segment, Gas Utilities and Infrastructure, which transports and sells natural gas. The remainder of Piedmont's operations is presented as Other, which is comprised of certain unallocated corporate costs, including acquisition-related expenses, and earnings from Piedmont's equity method investment in SouthStar prior to its sale. Piedmont sold its 15 percent membership interest in SouthStar on October 3, 2016. Piedmont's income, net of tax, from SouthStar for the three and six months ended June 30, 2016, was $3 million and $10 million, respectively.
The remaining Subsidiary Registrants each have one reportable operating segment, Electric Utilities and Infrastructure, which generates, transmits, distributes and sells electricity. The remainder of each company's operations is presented as Other, which is comprised of certain unallocated corporate costs. Other for Progress Energy also includes interest expense on corporate debt instruments of $56 million and $111 million for the three and six months ended June 30, 2017, respectively, and $55 million and $111 million for the three and six months ended June 30, 2016, respectively. The following table summarizes the net (loss) income of Other for each of these entities. |
| | | | | | | | | | | | | | |
| | Three Months Ended | Six Months Ended |
| | June 30, | June 30, |
| (in millions) | 2017 |
| | 2016 |
| 2017 |
| | 2016 |
|
| Duke Energy Carolinas | $ | (6 | ) | | $ | (17 | ) | $ | (12 | ) | | $ | (34 | ) |
| Progress Energy | (45 | ) | | (45 | ) | (88 | ) | | (94 | ) |
| Duke Energy Progress | (4 | ) | | (8 | ) | (7 | ) | | (16 | ) |
| Duke Energy Florida | (3 | ) | | (5 | ) | (5 | ) | | (9 | ) |
| Duke Energy Indiana | (1 | ) | | (5 | ) | (3 | ) | | (7 | ) |
| Piedmont | (9 | ) | | 1 |
| (13 | ) | | 7 |
|
|
| | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2017 |
| | Electric |
| | Gas |
| | Total |
| | | | |
| | Utilities and |
| | Utilities and |
| | Reportable |
| | | | |
| (in millions) | Infrastructure |
| | Infrastructure |
| | Segments |
| | Other |
| | Consolidated |
|
| Total revenues | $ | 665 |
| | $ | 270 |
| | $ | 935 |
| | $ | 20 |
| | $ | 955 |
|
| Segment income (loss)/Net income | 46 |
| | 42 |
| | 88 |
| | (16 | ) | | 72 |
|
The assets at Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida and Duke Energy Indiana are substantially all included within(a) Other includes the Electric Utilities and Infrastructure segment at June 30, 2017. The assets at Piedmont are substantially all included withinloss on the Gas Utilities and Infrastructure segment at June 30, 2017.sale of Beckjord.
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)
4.3. REGULATORY MATTERS
RATE RELATEDRATE-RELATED INFORMATION
The NCUC, PSCSC, FPSC, IURC, PUCO, TPUC and KPSC approve rates for retail electric and natural gas services within their states. The FERC approves rates for electric sales to wholesale customers served under cost-based rates (excluding Ohio and Indiana), as well as sales of transmission service. The FERC also regulates certification and siting of new interstate natural gas pipeline projects.
Duke Energy Carolinas and Duke Energy Progress
Ash Basin Closure Costs Deferral – North Carolina
On December 30, 2016, Duke Energy Carolinas and Duke Energy Progress filed 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. Initial comments were received in March 2017,The NCUC has consolidated Duke Energy Carolinas' and reply comments were filed on April 19, 2017. On July 10, 2017, the NCUC consolidated Duke Energy Progress’ coal ash deferral requestrequests into the Duke Energy Progresstheir respective general rate case docketdockets for decision. See "2017 North Carolina Rate Case" sectionsections below for additional discussion. The NCUC also indicated that the
Power/Forward Deferral – South Carolina
On June 22, 2018, Duke Energy Carolinas coal ash deferral request will be consolidated intoand Duke Energy Carolinas' next base rate case proceeding. Progress filed a joint petition with the PSCSC seeking an accounting order authorizing deferral of certain costs incurred in connection with grid reliability, resiliency and modernization work that is being performed under the companies’ Power/Forward initiative. On July 25, 2018, the PSCSC ordered that the matter be set for filed comments and oral argument upon request of the Office of Regulatory Staff. A procedural schedule has not yet been issued. Duke Energy Carolinas and Duke Energy Progress cannot predict the outcome of this matter.
Duke Energy Carolinas
Lincoln County Combustion Turbine Addition
On June 12, 2017, Duke Energy Carolinas filed an application with the NCUC for a Certificate of Public Convenience and Necessity (CPCN) to construct and operate a new 402-megawatt (MW) simple cycle advanced combustion turbine natural gas-fueled electric generating unit at its existing Lincoln County site. The request also included construction of related transmission and natural gas pipeline interconnection facilities. If approved, construction would begin in 2018 with an estimated commercial operation date in 2024. An evidentiary hearing is scheduled for August 30, 2017. Duke Energy Carolinas cannot predict the outcome of this matter.
William States Lee Combined Cycle Facility
On April 9, 2014, the PSCSC granted Duke Energy Carolinas and North Carolina Electric Membership Corporation (NCEMC) a Certificate of Environmental Compatibility and Public Convenience and Necessity (CECPCN) for the construction and operation of a 750-MW combined-cycle natural gas-fired generating plant at Duke Energy Carolinas' existing William States Lee Generating Station in Anderson, South Carolina. Duke Energy Carolinas began construction in July 2015 and estimates a cost to build of $600 million for its share of the facility, including allowance for funds used during construction (AFUDC). The project is expected to be commercially available in late 2017. NCEMC will own approximately 13 percent of the project. On July 3, 2014, the South Carolina Coastal Conservation League (SCCL) and Southern Alliance for Clean Energy (SACE) jointly filed a Notice of Appeal with the Court of Appeals of South Carolina (S.C. Court of Appeals) seeking the court's review of the PSCSC's decision, claiming the PSCSC did not properly consider a request related to a proposed solar facility prior to granting approval of the CECPCN. The S.C. Court of Appeals affirmed the PSCSC's decision on February 10, 2016, and on March 24, 2016, denied a request for rehearing filed by SCCL and SACE. On April 21, 2016, SCCL and SACE petitioned the South Carolina Supreme Court for review of the S.C. Court of Appeals decision. On March 24, 2017, the South Carolina Supreme Court denied the request for review, thus concluding the matter.
William States Lee III Nuclear Station
In December 2007, Duke Energy Carolinas applied to the NRC for combined operating licenses (COLs) for two Westinghouse Electric Company (Westinghouse) AP1000 reactors for the proposed William States Lee III Nuclear Station (Lee 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 through 2011, although full cost recovery is not guaranteed. In December 2016, the NRC issued a COL for each reactor. Duke Energy Carolinas is not required to build the nuclear reactors as a result of the COLs being issued.
On March 29, 2017, Westinghouse filed for voluntary Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of New York. Duke Energy Carolinas is monitoring the bankruptcy proceedings to assess the impact it will have on the future construction of nuclear plants. On May 15, 2017, the NCUC issued an order requiring Duke Energy Carolinas to provide information regarding potential impacts of the Westinghouse bankruptcy on the Lee Nuclear Station, as well as Duke Energy Carolinas' plans for cost recovery and additional financial information regarding the project. The NCUC granted an extension until August 30, 2017, to provide that information. Duke Energy Carolinas cannot predict the outcome of this matter.
Duke Energy Progress
2017 North Carolina Rate Case
On June 1,August 25, 2017, Duke Energy ProgressCarolinas filed an application with the NCUC for a rate increase for retail customers of approximately $477$647 million, which representsrepresented an approximate 14.913.6 percent increase in annual base revenues. The rate increase iswas driven by capital investments subsequent to the previous base rate case, including the William States Lee Combined Cycle Facility discussed below, grid improvement projects, advanced metering infrastructure (AMI), investments in customer service technologies, costs of complying with coal combustion residuals (CCR) regulations and the North Carolina Coal Ash Management Act of 2014 (Coal Ash Act), costs relating to storm recovery, investments in customer service technologies and recovery of costs associated with renewable purchased power. An evidentiary hearing is scheduledrelated to begin November 20, 2017.licensing and development of the William States Lee III Nuclear Station (Lee Nuclear Station) discussed below.
On February 28, 2018, Duke Energy Progress cannot predictCarolinas and the outcomeNorth Carolina Public Staff filed an Agreement and Stipulation of this matter.Partial Settlement resolving certain portions of the proceeding. Terms of the settlement included a return on equity of 9.9 percent and a capital structure of 52 percent equity and 48 percent debt. As a result of the settlement, Duke Energy Carolinas recorded a pretax charge of approximately $4 million to Operation, maintenance and other on the Condensed Consolidated Statements of Operations.
On June 1, 2018, Duke Energy Carolinas and certain intervenors filed a Pilot Grid Rider Agreement and Stipulation (Grid Rider Stipulation) in which the parties agreed to the proposal Duke Energy Carolinas introduced in a post-hearing brief on April 27, 2018, along with additional commitments by Duke Energy Carolinas. Also on June 1, 2018, Duke Energy Carolinas and the Commercial Group filed a Partial Stipulation and Settlement Agreement to be considered in conjunction with the Stipulation.
Components of the Grid Rider Stipulation included:
Duke Energy Carolinas would recover Power/Forward costs through a pilot, three-year Grid Rider except for costs related to targeted undergrounding of power lines, cable and conduit replacement, and power pole replacement;
Excluded costs were to be deferred with a return until Duke Energy Carolinas’ next base rate case proceeding; and
Costs incurred during the three-year pilot, both rider recoverable and deferred, were subject to a 4.5 percent cumulative cap of total annual electric service revenue.
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)
Storm Cost Deferral FilingOn June 22, 2018, the NCUC issued an order approving the Stipulation of Partial Settlement and requiring a revenue reduction. The order also included the following material components not covered in the Stipulation:
Recovery of $554 million of deferred coal ash basin closure costs over a five-year period with a return at Duke Energy Carolinas' weighted average cost of capital (WACC);
Assessment of a $70 million management penalty ratably over a five-year period by reducing the annual recovery of the deferred coal ash costs;
Denial of Duke Energy Carolinas' request for recovery of future estimated ongoing annual coal ash costs of $201 million with approval to defer such costs with a return at Duke Energy Carolinas' WACC, to be considered for recovery in the next rate case;
Inclusion in rates of costs related to the Lee Combined Cycle Facility, two new solar facilities, and AMI deployment as requested;
Recovery of Lee Nuclear Station licensing and development cost of $347 million over a 12-year period, but denial of a return on the deferred balance of costs;
Reduction in revenue related to lower income tax expense resulting from the Federal Tax Cuts and Jobs Act (Tax Act), and a requirement to maintain all excess deferred income tax resulting from the Tax Act in a regulatory liability account pending flowback to customers as approved by the commission at the earlier of three years or Duke Energy Carolinas’ next general rate case proceeding; and
Denial of the proposed Grid Rider Stipulation related to Power/Forward costs and denial of deferral accounting treatment of the costs at this time. Duke Energy Carolinas may petition for deferral of grid modernization costs outside of a general rate case proceeding if it can show financial hardship or a stipulation that includes greater consensus among intervening parties on costs being classified as grid modernization.
As a result of the Order, Duke Energy Carolinas recorded a pretax charge of approximately $150 million to Impairment charges and Operation, maintenance and other on the Condensed Consolidated Statements of Operations. The charge is primarily related to the denial of a return on the Lee Nuclear Project and for previously recognized return impacted by the coal ash management penalty described above. On July 27, 2018, NCUC approved Duke Energy Carolinas' compliance filing. As a result, revised customer rates will become effective on August 1, 2018.
On July 20, 2018, the North Carolina Attorney General filed a Notice of Appeal to the North Carolina Supreme Court from the June 22, 2018, Order Accepting Stipulation, Deciding Contested Issues and Requiring Revenue Reduction issued by the NCUC. The Attorney General contends the commission’s order should be reversed and remanded, as it is in excess of the commission’s statutory authority; affected by errors of law; unsupported by competent, material and substantial evidence in view of the entire record as submitted; and arbitrary or capricious. The Sierra Club, North Carolina Sustainable Energy Association, North Carolina Justice Center, North Carolina Housing Coalition, Natural Resource Defense Council and Southern Alliance for Clean Energy have also filed Notices of Appeal to the North Carolina Supreme Court from the June 22, 2018, Order Accepting Stipulation, Deciding Contested Issues and Requiring Revenue Reduction. Duke Energy Carolinas cannot predict the outcome of this matter.
FERC Formula Rate Matter
On July 31, 2017, Piedmont Municipal Power Agency (PMPA) filed a complaint with FERC against Duke Energy Carolinas alleging that Duke Energy Carolinas misapplied the formula rate under the PPA between the parties by including in its rates amortization expense associated with regulatory assets and recorded in a certain account without FERC approval. On February 15, 2018, FERC issued an order ruling in favor of PMPA and ordered Duke Energy Carolinas to refund to PMPA all amounts improperly collected under the PPA. Duke Energy Carolinas has issued to PMPA and similarly situated wholesale customers refunds of approximately $25 million. FERC also set the matter for settlement and hearing. PMPA and other customers filed a protest to Duke Energy Carolinas' refund report claiming that the refunds are inadequate in that (1) Duke Energy Carolinas invoked the limitations periods in the contracts to limit the time period for which the refunds were paid and the customers disagree that this limitation applies, and (2) Duke Energy Carolinas refunded only amounts recovered through a certain account and the customers have asserted that the order applies to all regulatory assets. On July 3, 2018, FERC issued an order accepting Duke Energy Carolinas' refund report and ruling that these claims are outside the scope of FERC's February order. Duke Energy Carolinas cannot predict the outcome of this matter.
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 for the construction and operation of a 750-megawatt (MW) combined-cycle natural gas-fired generating plant at Duke Energy Carolinas' existing William States Lee Generating Station in Anderson, South Carolina. Duke Energy Carolinas began construction in July 2015 and its share of the cost to build the facility was approximately $650 million, including allowance for funds used during construction (AFUDC). Approximately $600 million is being recovered through base rate or deferral filings in North Carolina and South Carolina. The remaining amount will be included in future rate filings. The project commenced commercial operation on April 5, 2018. NCEMC will own approximately 13 percent of the project.
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)
Lee Nuclear Station
In December 2007, Duke Energy Carolinas applied to the NRC for combined operating licenses (COLs) for two Westinghouse Electric Company (Westinghouse) AP1000 reactors for the proposed William States Lee III Nuclear Station to be located at a site in Cherokee County, South Carolina. The NCUC and PSCSC concurred with the prudency of Duke Energy Carolinas incurring certain project development and preconstruction costs through several separately issued orders, although full cost recovery is not guaranteed. In December 2016, the NRC issued a COL for each reactor. Duke Energy Carolinas is not required to build the nuclear reactors as a result of the COLs being issued.
The Duke Energy Carolinas rate case filing discussed above included a request to cancel the development of the Lee Nuclear Station project, recover incurred licensing and development costs and maintain the license issued by the NRC as an option for potential future development. The cancellation request was due to the Westinghouse bankruptcy filing and other market activity. The NCUC Order issued on June 22, 2018, approved the cancellation of the Lee Nuclear Project, allowed Duke Energy Carolinas to continue to maintain the COLs, provided for recovery of the North Carolina retail allocation of project development costs, including AFUDC accrued through December 31, 2017, over 12 years and disallowed any return on the unamortized balance during the 12-year recovery period.
Given the recent repeal of certain sections of the Base Load Review Act in South Carolina combined with the cancellation of the project, Duke Energy Carolinas determined that it was no longer probable it would be allowed a return on its share of project development costs attributable to South Carolina. As a result, Duke Energy Carolinas recorded a pretax impairment of $29 million within Impairment charges on the Condensed Consolidated Statements of Operations and Comprehensive Income.
South Carolina Petition
On June 22, 2018, Duke Energy Carolinas filed a petition with the PSCSC requesting an accounting order to defer certain costs incurred in connection with the addition of the William States Lee Combined Cycle Facility, the ongoing deployment of Duke Energy Carolinas new billing and Customer Information System and the addition of the Carolinas West Primary Distribution Control Center. This request totaling approximately $33 million was approved on July 25, 2018.
Sale of Hydroelectric (Hydro) Plants
In May 2018, Duke Energy Carolinas entered an agreement for the sale of five hydro plants with a combined 18.7-MW generation capacity in the Western Carolinas region to Northbrook Energy. The completion of the transaction is subject to approval from FERC, as well as other state regulatory agencies and is contingent upon regulatory approval from the NCUC and PSCSC to defer the total estimated loss on the sale of approximately $40 million. On July 5, 2018, Duke Energy Carolinas filed for approval of the sale of the five hydro plants to Northbrook, to transfer the Certificates of Public Convenience and Necessity for the four North Carolina hydro plants and to establish a regulatory asset for the North Carolina retail portion of the difference between sales proceeds and net book value. Duke Energy Carolinas will also file with PSCSC requesting recovery for the total estimated loss. If commission approval is not received, Duke Energy Carolinas can cancel the sales agreement and retain the hydro facilities. If commission approval is received, the closing is expected to occur during the first quarter of 2019. After closing, Duke Energy Carolinas will purchase all of the capacity and energy generated by these facilities at the avoided cost for five years through power purchase agreements. Duke Energy Carolinas cannot predict the outcome of this matter.
Duke Energy Progress
2017 North Carolina Rate Case
On June 1, 2017, Duke Energy Progress filed an application with the NCUC for a rate increase for retail customers of approximately $477 million, which represented an approximate 14.9 percent increase in annual base revenues. Subsequent to the filing, Duke Energy Progress adjusted the requested amount to $420 million, representing an approximate 13 percent increase. The rate increase is driven by capital investments subsequent to the previous base rate case, costs of complying with CCR regulations and the Coal Ash Act, costs relating to storm recovery, investments in customer service technologies and recovery of costs associated with renewable purchased power.
On December 16, 2016, Duke Energy Progress filed a petition with the NCUC requesting an accounting order to defer certain costs incurred in connection with response to Hurricane Matthew and other significant storms in 2016. Duke Energy Progress proposed in the filing to true-up the total costs quarterly through August 2017. The currentfinal estimate of incremental operation and maintenance and capital costs isof $116 million. On March 15, 2017,million was filed with the North Carolina Utilities Commission Public Staff filed comments supporting deferral of a portion of Duke Energy Progress’ requested amount. Duke Energy Progress filed reply comments on April 12,NCUC in September 2017. On July 10, 2017, the NCUC consolidated Duke Energy Progress' storm deferral request into the Duke Energy Progress rate case docket for decision. See "2017
On November 22, 2017, Duke Energy Progress and the North Carolina Public Staff filed an Agreement and Stipulation of Partial Settlement resolving certain portions of the proceeding. Terms of the settlement included a return on equity of 9.9 percent and a capital structure of 52 percent equity and 48 percent debt. As a result of the settlement, in 2017 Duke Energy Progress recorded pretax charges totaling approximately $25 million to Impairment charges and Operation, maintenance and other on the Condensed Consolidated Statements of Operations, principally related to disallowances from rate base of certain projects at the Mayo and Sutton plants. On February 23, 2018, the NCUC issued an order approving the stipulation. The order also included the following material components not covered in the stipulation:
Recovery of the remaining $234 million of deferred coal ash basin closure costs over a five-year period with a return at Duke Energy Progress' WACC, excluding $9.5 million of retail deferred coal ash basin costs related to ash hauling at Duke Energy Progress' Asheville Plant;
Assessment of a $30 million management penalty ratably over a five-year period by reducing the annual recovery of the deferred coal ash costs;
Denial of Duke Energy Progress' request for recovery of future estimated ongoing annual coal ash costs of $129 million with approval to defer such costs with a return at Duke Energy Progress' WACC, to be considered for recovery in the next rate case; and
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)
Approval to recover $51 million of the approximately $80 million deferred storm costs over a five-year period with amortization beginning in October 2016. The order did not allow the deferral of the associated capital costs or a return on the deferred balance during the deferral period.
The order also impacted certain amounts that were similarly recorded on Duke Energy Carolinas' Condensed Consolidated Balance Sheets. As a result of the order, Duke Energy Progress and Duke Energy Carolinas recorded pretax charges of $68 million and $14 million, respectively, in the first quarter of 2018 to Impairment charges, Operation, maintenance and other and Interest Expense on the Condensed Consolidated Statements of Operations. These charges primarily related to the coal ash basin disallowance and previously recognized return impacted by the coal ash management penalty and deferred storm cost adjustments. Revised customer rates became effective on March 16, 2018.
On May 15, 2018, the Public Staff of the NCUC filed a Notice of Cross Appeal to the North Carolina Supreme Court from the February 23, 2018, Order Accepting Stipulation, Deciding Contested Issues and Granting Partial Rate Case" for additional discussion.Increase issued by the NCUC. The Public Staff contend the commission’s order should be reversed and remanded, as it is affected by errors of law, and is unsupported by competent, material and substantial evidence in view of the entire record as submitted. Duke Energy Progress cannot predict the outcome of this matter. The North Carolina Attorney General and Sierra Club have also filed Notices of Appeal to the North Carolina Supreme Court from the February 23, 2018, Order Accepting Stipulation, Deciding Contested Issues and Granting partial Rate Increase.
South Carolina Rate Case
In December 2016, the PSCSC approved a rate case settlement agreement among the Office of Regulatory Staff, intervenors and Duke Energy Progress. Terms of the settlement agreement included an approximate $56 million increase in revenues over a two-year period. An increase of approximately $38 million in revenues was effective January 1, 2017, and an additional increase of approximately $18.5 million in revenues was effective January 1, 2018. Duke Energy Progress amortized approximately $18.5 million from the cost of removal reserve in 2017. Other settlement terms included a rate of return on equity of 10.1 percent, recovery of coal ash costs incurred from January 1, 2015, through June 30, 2016, over a 15‑year period and ongoing deferral of allocated ash basin closure costs from July 1, 2016, until the next base rate case. The settlement also provides that Duke Energy Progress will not seek an increase in rates in South Carolina to occur prior to 2019, with limited exceptions.
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 fueldual-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 CPCNCertificate 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, 2017,2018, Duke Energy Progress filed an annual progress report for the construction of the combined-cycle plants with the NCUC, with an estimated cost of $893 million. Site preparation activities for the combined-cycle plants are underwaycomplete and construction of these plants is scheduled to beginbegan in fall 2017, with an expected in-service date in late 2019. Duke Energy Progress plans to file for future approvals related to the proposed solar generation and pilot battery storage project.
The carrying value of the 376-MW Asheville coal-fired plant, including associated ash basin closure costs, of $450$344 million and $492$385 million areis included in Generation facilities to be retired, net on Duke Energy Progress' Condensed Consolidated Balance SheetSheets as of June 30, 20172018, and December 31, 2017, respectively. Duke Energy Progress' request for a regulatory asset at the time of retirement with amortization over a 10-year period was approved by the NCUC on February 23, 2018.
Shearon Harris Nuclear Plant Expansion
In 2006, Duke Energy Progress selected a site at Harris to evaluate for possible future nuclear expansion. On February 19, 2008, Duke Energy Progress filed its COL application with the NRC for two Westinghouse AP1000 reactors at Harris, which the NRC docketed for review. On May 2, 2013, Duke Energy Progress filed a letter with the NRC requesting the NRC to suspend its review activities associated with the COL at the Harris site. The NCUC and PSCSC approved deferral of retail costs. Total deferred costs were approximately $47 million as of December 31, 2017, and are recorded in Regulatory assets on Duke Energy Progress’ Condensed Consolidated Balance Sheets. On November 17, 2016, respectively.the FERC approved Duke Energy Progress’ rate recovery request filing for the wholesale ratepayers’ share of the abandonment costs, including a debt only return to be recovered through revised formula rates and amortized over a 15-year period beginning May 1, 2014. As part of the settlement agreement for the 2017 North Carolina Rate Case discussed above, Duke Energy Progress will amortize the regulatory asset over an eight-year period. NCUC approved the settlement on February 23, 2018.
South Carolina Petitions
On June 22, 2018, Duke Energy Progress filed a petition with the PSCSC seeking an accounting order authorizing Duke Energy Progress to adopt new depreciation rates, effective March 16, 2018, that reflect the results of Duke Energy Progress’ most recent depreciation study. Also on June 22, 2018, Duke Energy Progress filed a petition with the PSCSC requesting an accounting order to defer certain costs incurred in connection with the deployment of AMI, the ongoing deployment of Duke Energy Progress' new billing and Customer Information System, new depreciation rates and costs incurred in connection with the excess return of certain state taxes from North Carolina. These requests totaling approximately $20 million were approved on July 25, 2018.
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)
FERC Form 1 Reporting Matter
On October 18, 2017, Fayetteville Public Works Commission (FPWC) filed with FERC a complaint against Duke Energy Progress. In the complaint, FPWC alleges that Duke Energy Progress’ change in its method of reporting materials and supplies inventory on FERC Form 1 for 2015 constituted a change in accounting practice that Duke Energy Progress was not permitted to implement without first obtaining FERC approval. On April 23, 2018, FERC issued an order finding that Duke Energy Progress’ new reporting methodology was not proper and required Duke Energy Progress to revise its FERC Form 1s beginning in 2014 and to issue refunds to formula rate customers. Duke Energy Progress estimates that these refunds will total approximately $14 million. On May 23, 2018, Duke Energy Progress filed a request for rehearing alleging that FERC’s order is incorrect. Duke Energy Progress revised its FERC Form 1 filings in June 2018. Duke Energy Progress cannot predict the outcome of this matter.
Duke Energy Florida
Hines Chiller Uprate ProjectStorm Restoration Cost Recovery
In September 2017, Duke Energy Florida’s service territory suffered significant damage from Hurricane Irma, resulting in approximately 1.3 million customers experiencing outages. In the fourth quarter of 2017, Duke Energy Florida also incurred preparation costs related to Hurricane Nate. On December 28, 2017, Duke Energy Florida filed a petition with the FPSC to recover incremental storm restoration costs for hurricanes Irma and Nate and to replenish the storm reserve. On February 6, 2018, the FPSC approved a stipulation that would apply tax savings resulting from the Tax Act toward storm costs effective January 2018 in lieu of implementing a storm surcharge. Storm costs are currently expected to be fully recovered by approximately mid-2021. On May 31, 2018, Duke Energy Florida filed a petition for approval of actual storm restoration costs and associated recovery process related to Hurricanes Irma and Nate. The petition is seeking the approval for the recovery in the amount of $510 million in actual recoverable storm restoration costs, including the replenishment of Duke Energy Florida’s storm reserve of $132 million, and the process for recovering these recoverable storm costs. The evidentiary hearing in this matter is scheduled for the week of October 15, 2018. At June 30, 2018, Duke Energy Florida's Condensed Consolidated Balance Sheets included approximately $295 million of recoverable costs under the FPSC's storm rule in Regulatory assets within Current Assets and Other Noncurrent Assets related to storm recovery. Duke Energy Florida cannot predict the outcome of this matter.
Tax Act
Pursuant to Duke Energy Florida's 2017 Revised and Restated Settlement Agreement, on May 31, 2018, Duke Energy Florida filed a petition related to the Tax Act, which included annual tax savings of $84 million and annual amortization of excess deferred taxes of $67 million for a total of $151 million. The pretax revenue requirement impact is $201 million, of which $50 million will be offset with accelerated depreciation of Crystal River 4 and 5 coal units and $151 million will be offset by Hurricane Irma storm cost recovery as explained in the Storm Restoration Cost Recovery section above. The petition is subject to review and approval by the FPSC. The hearing is scheduled to begin on January 8, 2019. Duke Energy Florida cannot predict the outcome of this matter.
Citrus County Combined Cycle Facility
On FebruaryOctober 2, 2017,2014, the FPSC granted Duke Energy Florida a Determination of Need for the construction of a 1,640-MW combined-cycle natural gas plant in Citrus County, Florida. On May 5, 2015, the Florida Department of Environmental Protection approved Duke Energy Florida's Site Certification Application. The project has received all required permits and approvals and construction began in October 2015. The facility is expected to be commercially available by the end of 2018 at an estimated cost of $1.5 billion, including AFUDC. Actual costs in excess of the estimated amount may not be collected from customers absent a showing of extraordinary circumstances. On April 2, 2018, Duke Energy Florida filed a petition seeking approval to include in base rates the revenue requirement for a Chiller Uprate Project (Uprate Project) atrequirements associated with the Hines Energy Complex. The Uprate Project was placed into service in March 2017 at a cost of approximately $150 million.new facility. The annual retail revenue requirement is approximately $19$200 million. On March 28, 2017,July 10, 2018, the FPSC issued an order approvingvoted to approve Duke Energy Florida's request to include the revenue requirement, which was includedrequirements for the new Citrus County combined-cycle units in base ratesrates. The rate increase for the first billing cycle of April 2017.
Levy Nuclear Project
On July 28, 2008, Duke Energy Florida appliedunit is expected to take place in November 2018 and 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 COLsrate increase for the proposed Levy Nuclear Plant Units 1 and 2. Duke Energy Floridasecond unit is not requiredexpected to buildtake place in January 2019. The plant will receive natural gas from the nuclear reactors as a result of the COLs being issued.
On January 28, 2014, Duke Energy Florida terminated the Levy engineering, procurement and construction agreement (EPC). Duke Energy Florida may be required to pay for work performed under the EPC. Duke Energy Florida recorded an exit obligation in 2014 for the termination of the EPC. This liability was recorded within Other in Other Noncurrent Liabilities with an offset primarily to Regulatory assets on the Condensed Consolidated Balance Sheets. Duke Energy Florida is allowed to recover reasonable and prudent EPC cancellation costs from its retail customers. On May 1, 2017, Duke Energy Florida filed a request with the FPSC to recover approximately $82 million of Levy Nuclear Project costs from retail customers in 2018. A hearing is scheduled in October 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.Sabal Trail pipeline discussed below.
Duke Energy Ohio
2017 Electric Security Plan Filing
On June 1, 2017, Duke Energy Ohio filed with the PUCO a request for a standard service offer in the form of an electric security plan (ESP). If approved by the PUCO, the term of the ESP would be from June 1, 2018, to May 31, 2024.2025. Terms of the ESP includedinclude continuation of market-based customer rates through competitive procurement processes for generation, continuation and expansion of existing rider mechanisms and proposed new rider mechanisms relating to regulatory mandates, costs incurred to enhance the customer experience and transform the grid and a service reliability rider for vegetation management. On February 15, 2018, the procedural schedule was suspended to facilitate ongoing settlement discussions. On April 13, 2018, Duke Energy Ohio filed a Motion to consolidate this proceeding with several other cases currently pending before the PUCO, including, but not limited to, its Electric Base Rate Case. Additionally, on April 13, 2018, Duke Energy Ohio, along with certain intervenors, filed a Stipulation and Recommendation (Stipulation) with the PUCO resolving certain issues in this proceeding. The Stipulation establishes a regulatory model for the next seven years via the approval of the ESP and continues the current model for procuring supply for non-shopping customers, including recovery mechanisms. The Stipulation is subject to the review and approval of PUCO. An evidentiary hearing to review the Stipulation and other issues in the cases will conclude on August 6, 2018. 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)
Woodsdale Station Fuel System FilingElectric 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. On June 9, 2015,September 26, 2017, the FERC ruledPUCO staff filed a report recommending a revenue decrease between approximately $18 million and $29 million and a return on equity between 9.22 percent and 10.24 percent. On February 15, 2018, the procedural schedule was suspended to facilitate ongoing settlement discussions. On April 13, 2018, Duke Energy Ohio filed a Motion to consolidate this proceeding with several other cases currently pending before the PUCO. On April 13, 2018, Duke Energy Ohio, along with certain intervenors, filed the Stipulation with the PUCO resolving certain issues in favor of PJM Interconnection, LLC (PJM) on a revised Tariff and Reliability Assurance Agreement including implementation of a Capacity Performance (CP) proposal and to amend sectionsthis proceeding. Major components of the Operating Agreement related to generation non-performance. The CP proposal includes performance-based penalties for non-compliance.Stipulation include a $19 million annual base distribution rate decrease with a return on equity of 9.84 percent based upon a capital structure of 50.75 percent equity and 49.25 percent debt. Upon approval of new rates, Duke Energy Kentucky is a Fixed Resource Requirement (FRR) entity,Ohio's rider for recovering its initial SmartGrid implementation ends as the costs will be recovered through base rates. The Stipulation also renews 14 existing riders, some of which were included in the Company's ESP, and thereforetwo new riders including the Enhanced Service Reliability Rider to recover vegetation management costs not included in base rates, up to $10 million per year (operation and maintenance only) and the Power Forward Rider to recover costs incurred to enhance the customer experience and further transform the grid (operation and maintenance and capital). The Stipulation is subject to the compliance standards through its FRR plans. A partial CP obligationreview and approval of the PUCO. An evidentiary hearing to review the Stipulation and other issues in the cases will applyconclude on August 6, 2018. In addition to the changes in revenue attributable to the Stipulation, Duke Energy Kentucky inOhio’s capital-related riders, including the delivery yearDistribution Capital Investments Rider, began to reflect the lower federal income tax rate associated with the Tax Act with updates to customers’ bills beginning JuneApril 1, 2019, with full compliance beginning June 1, 2020.2018. This change reduces electric revenue by approximately $20 million on an annualized basis. Duke Energy Kentucky has developed strategies for CP compliance investments. On May 31, 2017, Duke Energy Kentucky filed an application with the KPSC requesting authority to construct an ultra-low sulfur diesel backup fuel system for the Woodsdale Station. The back-up fuel system is projected to cost approximately $55 million and, if approved, is anticipated to be in service prior to the CP compliance deadline of April 2019. Duke Energy KentuckyOhio cannot predict the outcome of this proceeding at this time.matter.
Ohio Valley Electric Corporation
On March 31, 2017, Duke Energy Ohio filed for approval to adjust its existing price stabilization rider (Rider PSR), which is currently set at zero dollars, to pass through net costs related to its contractual entitlement to capacity and energy from the generating assets owned by OVEC. The PUCO approved Rider PSR, but set it at zero dollars in connection with the most recent ESP. 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. Various intervenors have filed motions to dismiss or stay the proceeding and Duke Energy Ohio has opposed these filings. On April 13, 2018, Duke Energy Ohio filed a Motion to consolidate this proceeding with several other cases currently pending before the PUCO. Also on April 13, 2018, Duke Energy Ohio, along with certain intervenors, filed a Stipulation with the PUCO resolving certain issues in this proceeding. The Stipulation, if approved, would activate Rider PSR for recovery of net costs incurred since January 1, 2018. The Stipulation is subject to the review and approval of PUCO. An evidentiary hearing to review the Stipulation and other issues in the cases will conclude on August 6, 2018. 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.matter.
East Bend Coal Ash Basin FilingTax Act
On December 2, 2016,July 25, 2018, Duke Energy KentuckyOhio filed withan application to establish a new rider to implement the KPSCbenefits of the Tax Act for electric distribution customers. Duke Energy Ohio requested commission approval to implement the rider effective October 1, 2018, as a request forcredit to all distribution customers based upon a CPCN for construction projects necessarypercent reduction to closeDuke Energy Ohio’s distribution rates. The new rider will flow through to customers the benefit of the lower statutory federal tax rate from 35 to 21 percent since January 1, 2018, all future benefits of the lower tax rates and repurpose an ash basina full refund of deferred income taxes collected at the East Bend facility ashigher tax rates in prior years. Deferred income taxes subject to normalization rules will be refunded consistent with federal law and deferred income taxes not subject to normalization rules will be refunded over a 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 in10-year period. An order is expected before the fourth quarter of 2018. On June 6, 2017, the KPSC approved the CPCN request.
Base Rate Case
Duke Energy Ohio filed with the PUCO an electric distribution base rate case application 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.2018 but 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 was held on June 15, 2017, and an adjudicatory hearing is scheduled to begin September 11, 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 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. On May 25, 2017, the KPSC issued an order to approve the stipulation with certain modifications. On June 1, 2017, Duke Energy Kentucky filed its acceptance of the modifications.
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 projected total capital and operations and maintenance expenditures under the ASRP were 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. Duke Energy Ohio's application for rehearing of the PUCO decision was denied on May 17, 2017.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
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 athe intervenors request for 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,June 15, 2016, Duke Energy Ohio filed an application for approval of a three-year energy efficiency and peak demand reduction portfolio of programs. A stipulation and modified stipulation were filed on December 22, 2016, and January 27, 2017, respectively. Under the terms of the stipulations, which included support for deferral authority of all costs and a cap on shared savings incentives, Duke Energy Ohio has offered its energy efficiency and peak demand reduction programs throughout 2017. On February 3, 2017, Duke Energy Ohio filed for deferral authority of its costs incurred in 2017 in respect of its proposed energy efficiency and peak demand reduction portfolio. On September 27, 2017, the PUCO issued an order approving a settlementmodified stipulation. The modifications impose an annual cap of Duke Energy Ohio’s natural gas base rate caseapproximately $38 million on program costs and authorizing the recovery of costs incurred between 2008 and 2012shared savings incentives combined, but allowed 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 remediationfile for a waiver of costs incurred subsequentin excess of the cap in 2017. The PUCO approved the waiver request up to 2012 and to submit annual filings to adjust the MGP rider for future costs. Intervening parties appealed this decision to the Ohio Supreme Court and on June 29,a total cost of $56 million. On November 21, 2017, the Ohio Supreme Court issued its decision affirming the PUCO order. Appellants have filed a request for reconsideration with the court. Duke Energy Ohio and the PUCO opposed the request. Incurred and projected investigation and remediation expenses at these MGP sites that have not been collected through the MGP rider are approximately $95 million and are recorded as Regulatory assets ongranted Duke Energy Ohio's Condensed Consolidated Balance Sheet as of June 30, 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, effective December 31, 2011. The PUCO approved a settlement related to Duke Energy Ohio’s recovery of certain costsand intervenor's applications for rehearing of the Regional Transmission Organization (RTO) realignment via a non-bypassable rider. Duke EnergySeptember 27, 2017, order. On January 10, 2018, the PUCO denied the 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 chargesConsumers' Counsel’s application 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 caserehearing 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 June 30, 2017, and December 31, 2016, recorded within Other in Current liabilities and Other in Other Noncurrent Liabilities on the Condensed Consolidated Balance Sheets. The retail portions of MTEP costs billed by MISO are recovered by Duke Energy Ohio through a non-bypassable rider. As of June 30, 2017, and December 31, 2016, Duke Energy Ohio had $71 million recorded in Regulatory assets on the Condensed Consolidated Balance Sheets.
MVP. MISO approved 17 MVP proposals prior to Duke Energy Ohio’s exit from MISO on December 31, 2011. Construction of these projects is expected to continue through 2020. Costs of these projects, including operating and maintenance costs, property and income taxes, depreciation and an allowed return, are allocated and billed to MISO transmission owners.
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 anPUCO order reversing the ALJ's decision. The FERC ruled the cost allocation methodology is not consistent with the MISO tariff and that Duke Energy Ohio has no liability for MVP costs after its withdrawal from MISO. On May 19, 2016, the FERC denied the request for rehearing filed by MISO and the MISO Transmission Owners. On July 15, 2016, the MISO Transmission Owners filed a petition for review with the U.S. Court of Appeals for the Sixth Circuit. On June 21, 2017, a three-judge panel affirmed FERC's 2015 decision holding that Duke Energy Ohio has no liability for the cost of the MVP projects constructed aftergranting Duke Energy Ohio's withdrawal from MISO. MISO has the right to file a petition for rehearing by all the Sixth Circuit judges or to file a petition with the U.S. Supreme Court seeking a review of the decision.waiver request. 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)
2014 Electric Security Plan
In April 2015, the PUCO modified and approved Duke Energy Ohio's proposed ESP, with a three-year term and an effective date of June 1, 2015. The PUCO approved a competitive procurement process for SSO load, a distribution capital investment rider and a tracking mechanism for incremental distribution expenses caused by major storms. The PUCO also approved a placeholder tariff for a price stabilization rider, but denied Duke Energy Ohio's specific request to include Duke Energy Ohio's entitlement to generation from OVEC in the rider at this time; however, the order allows Duke Energy Ohio to submit additional information to request recovery in the future. On May 4, 2015, Duke Energy Ohio filed an application for rehearing requesting the PUCO to modify or amend certain aspects of the order. On May 28, 2015, the PUCO granted all applications for rehearing filed in the case for future consideration. On March 21, 2018, the PUCO issued an order denying Duke Energy Ohio's issues on rehearing. On April 20, 2018, Duke Energy Ohio filed a second application for rehearing based upon the Commission’s March 21, 2018, Order. On May 16, 2018, the commission issued its third Entry on Rehearing granting in part, and denying in part, Duke Energy Ohio’s rehearing request. On May 21, 2018, the Ohio Manufacturing Association (OMA) filed a notice of appeal of PUCO's approval of Duke Energy Ohio’s ESP, challenging PUCO's approval of Duke Energy Ohio’s Price Stability Rider as a placeholder and its Distribution Capital Investment Rider (DCI) to recover incremental revenue requirement for distribution capital since Duke Energy Ohio’s last base rate case. On July 16, 2018, the Office of Consumers' Counsel filed its own appeal of Duke Energy Ohio’s ESP with the Ohio Supreme Court raising similar issues to that of the OMA. Duke Energy Ohio cannot predict the outcome of this matter.
Natural Gas Pipeline Extension
Duke Energy Ohio is proposing to install a new natural gas pipeline (the Central Corridor Project) in its Ohio service territory to increase system reliability and enable the retirement of older infrastructure. The pipeline is expected to cost approximately $112 million, excluding AFUDC. On January 20, 2017, Duke Energy Ohio filed an amended application with the Ohio Power Siting Board (OPSB) for approval of one of two proposed routes. A public hearing was held on June 15, 2017, and an adjudicatory hearing was scheduled to begin September 11, 2017. On August 24, 2017, an administrative law judge (ALJ) granted a request made by Duke Energy Ohio to delay the procedural schedule while it works through various issues related to the pipeline route. In April 2018, Duke Energy Ohio filed a motion with OPSB to establish a procedural schedule and filed supplemental information supporting its application. If approved, construction of the pipeline extension is expected to be completed before the 2020/2021 winter season. Duke Energy Ohio cannot predict the outcome of this matter.
Duke Energy Kentucky Electric Rate Case
On September 1, 2017, Duke Energy Kentucky filed a rate case with the KPSC requesting an increase in electric base rates of approximately $49 million, which represents an approximate 15 percent increase on the average customer bill. Subsequent to the filing, Duke Energy Kentucky adjusted the requested amount to $30.1 million, in part to reflect the benefits of the Tax Act, representing an approximate 9 percent increase on the average customer bill. The rate increase is driven by increased investment in utility plant, increased operations and maintenance expenses, and recovery of regulatory assets. The application also includes requests to implement an Environmental Surcharge Mechanism to recover environmental costs not recovered in base rates, to establish a Distribution Capital Investment Rider to recover incremental costs of specific programs, to establish a FERC Transmission Cost Reconciliation Rider to recover escalating transmission costs and to modify existing Profit Sharing Mechanism to increase customers' share of proceeds from the benefits of owning generation and to mitigate shareholder risks associated with that generation. An evidentiary hearing concluded on March 8, 2018, and the KPSC issued an order on April 13, 2018. Major components of the Order include approval of an $8.4 million increase in base rates with a return on equity at 9.725 percent based upon a capital structure of 49 percent equity on a total allocable capitalization of approximately $650 million. The Order approved the Environmental Surcharge Mechanism Rider to begin recovery in June 2018 of capital-related environmental costs, including costs related to ash and ash disposal, and environmental operation and maintenance expenses formerly recovered in base rates, including expenses for environmental reagents and emission allowances. The incremental revenue from this rider will be approximately $13 million on an annualized basis. The order settles all issues associated with the Tax Act as it relates to the electric business by lowering the income tax component of the revenue requirement and refunding protected excess deferred income taxes (EDIT) under allowable normalization rules and unprotected EDIT over 10 years. The Order denied requests to implement riders for certain transmission costs and distribution capital investments. Duke Energy Kentucky implemented new base rates on May 1, 2018. On May 3, 2018, Duke Energy Kentucky filed an application for rehearing on certain aspects of the order; on May 23, 2018, the KPSC granted a rehearing. Duke Energy Kentucky cannot predict the outcome of this matter.
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 CCR rule compliance projects (Phase I CCR Compliance Projects) to comply with the EPA's CCR rule. The projects in this Phase I filing are CCR compliance projects, including the conversion of Cayuga and Gibson stations to dry bottom ash handling and related water treatment. Duke Energy Indiana has requested timely recovery of approximately $380 million in retail capital costs, including AFUDC, and recovery of incremental operating and maintenance costs under a federal mandate tracker that provides for timely recovery of 80 percent of such costs 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 would be considered for recovery in the next rate case. Terms of the settlement agreement also require Duke Energy Indiana to perform certain reporting and groundwater monitoring. An evidentiary hearing was held on February 23, 2017, and Duke Energy Indiana filed a proposed order with the IURC on March 30, 2017. On May 24, 2017, the IURC approved the settlement agreement.
FERC Transmission Return on Equity ComplaintsComplaint
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 claim, 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.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Benton County Wind Farm Dispute
On December 16, 2013, Benton County Wind Farm LLC (BCWF) filed a lawsuit against Duke Energy Indiana seeking damages for past generation losses alleging Duke Energy Indiana violated its obligations under a 2006 PPA by refusing to offer electricity to the market at negative prices. Damage claims continue to increase during times that BCWF is not dispatched. Under 2013 revised MISO market rules, Duke Energy Indiana is required to make a price offer to MISO for the power it proposes to sell into MISO markets and MISO determines whether BCWF is dispatched. Because market prices would have been negative due to increased market participation, Duke Energy Indiana determined it would not bid at negative prices in order to balance customer needs against BCWF's need to run. BCWF contends Duke Energy Indiana must bid at the lowest negative price to ensure dispatch, while Duke Energy Indiana contends it is not obligated to bid at any particular price, that it cannot ensure dispatch with any bid and that it has reasonably balanced the parties' interests. On July 6, 2015, the U.S. District Court for the Southern District of Indiana entered judgment against BCWF on all claims. BCWF appealed the decision and on December 9, 2016, the appeals court ruled in favor of BCWF. Duke Energy Indiana recorded an obligation and a regulatory asset related to the settlement amount in fourth quarter 2016. On June 30, 2017, the parties finalized a settlement agreement. Terms of the settlement included Duke Energy Indiana paying $29 million for back damages. Additionally, the parties agreed on the method by which the contract will be bid into the market in the future. The settlement amount was paid in June 2017. The IURC issued an order on September 27, 2017, approving recovery of the settlement amount through Duke Energy Indiana's fuel clause. The IURC order has been appealed to the Indiana Court of Appeals. On May 21, 2018, the Indiana Court of Appeals upheld the commission's decision. The appellants have requested rehearing at the Indiana Court of Appeals.
Tax Act
On June 27, 2018, Duke Energy Indiana, the Indiana Office of Utility Consumer Counselor, the Indiana Industrial Group and Nucor Steel – Indiana filed testimony consistent with their Stipulation and Settlement Agreement (Settlement Agreement) in the federal tax act proceeding with the IURC. The Settlement Agreement outlines how Duke Energy Indiana will implement the impacts of the Tax Act. Material components of the Settlement Agreement are as follows:
Riders to reflect the change in the statutory federal tax rate from 35 percent to 21 percent as they are filed in 2018;
Base rates to reflect the change in the statutory federal tax rate from 35 percent to 21 percent upon IURC approval, but no later than September 1, 2018;
Duke Energy Indiana to continue to defer protected federal excess deferred income taxes (Federal EDIT) until January 1, 2020, at which time it will be returned to customers according to the Average Rate Assumption Method (ARAM) required by the Internal Revenue Service over approximately 26 years; and
Duke Energy Indiana to begin returning unprotected Federal EDIT upon IURC approval, expected by September 1, 2018, over 10 years. In order to mitigate the negative impacts to cash flow and credit metrics, the Settlement Agreement allows Duke Energy Indiana to return $7 million per year over the first five years, with a step up to $35 million per year in the following five years.
The settlement is subject to the review and approval of the IURC. An evidentiary hearing was held on July 13, 2018. Duke Energy Indiana cannot predict the outcome of this matter.
Piedmont
South Carolina Rate Stabilization Adjustment Filing
In June 2017,2018, Piedmont filed with the PSCSC under the South Carolina Rate Stabilization Act its quarterly monitoring report for the 12-month period ending March 31, 2017.2018. The filing includes a revenue deficiency calculation and tariff rates in order to permit Piedmont the opportunity to earn the rate of return on common equity established in its last general rate case. The filing also incorporates the impacts of the Tax Act by lowering the income tax component of the revenue requirement, refunding protected EDIT under allowable normalization rules, unprotected EDIT and amounts over collected from the customers from January 1, 2018, through the end of the review period for this proceeding. This filing is currently under review and audit by the South Carolina Office of Regulatory Staff. Piedmont cannot predict the outcome of this matter.
North Carolina Integrity Management Rider FilingsFiling
In May 2017,2018, Piedmont filed, and the NCUC approved, a petition under the Integrity Management Rider (IMR) mechanism to collect an additional $11.6 million in annual revenues,update rates, effective June 2017,2018, based on the eligible capital investments closed to integrity and safety projects over the six-month period ending March 31, 2017.2018, and the decrease in the corporate federal income tax rate effective January 1, 2018. The combined effect of the update was a reduction to annual revenues of approximately $5.7 million.
OTHER REGULATORY MATTERSTennessee Integrity Management Rider Filing
Atlantic Coast Pipeline
On September 2, 2014, Duke Energy, Dominion Resources (Dominion),In November 2017, Piedmont filed a petition with the TPUC under the IMR mechanism to collect an additional $3.3 million in annual revenues, effective January 2018, based on the eligible capital investments for integrity and Southern Company Gas announcedsafety projects through October 31, 2017. In January 2018, Piedmont filed an amended computation under the formation of Atlantic Coast Pipeline, LLC (ACP) to build and ownIMR mechanism, revising the proposed Atlantic Coast Pipeline (ACP pipeline), anincrease in annual revenues to approximately 600-mile interstate natural gas pipeline running from West Virginia to North Carolina. The ACP pipeline is designed to meet$0.4 million based on 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.
Duke Energy Carolinas, Duke Energy Progress and Piedmont, among others, will be customers of the pipeline. Purchases will be made under several 20-year supply contracts, subject to state regulatory approval. On September 18, 2015, ACP filed an application with the FERC requesting a CPCN authorizing ACP to construct the pipeline. ACP executed a construction agreement in September 2016. ACP also requested approval of an open access tariff and the precedent agreements it entered into with future pipeline customers. In December 2016, FERC issued a draft Environmental Impact Statement (EIS) indicating that the proposed pipeline would not cause significant harm to the environment or protected populations. The FERC issued the final EIS in July 2017. FERC approval of the application is expecteddecrease in the fall of 2017 ifcorporate federal income tax rate effective January 1, 2018. A hearing on this matter was held on April 9, 2018. In May 2018, the FERC reaches a quorum. Construction is projected to begin inTPUC approved Piedmont's request as proposed for the fourth quarter of 2017, with a targeted in-service date in the second half of 2019.IMR effective January 1, 2018.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
OTHER REGULATORY MATTERS
Progress Energy Merger FERC Mitigation
Since December 2014, the FERC Office of Enforcement has conducted an investigation of Duke Energy’s market power filings in its application for approval of the Progress Energy merger submitted in 2012. On June 8, 2018, the FERC issued an order approving a settlement agreement under which Duke Energy paid a penalty of $3.5 million. The FERC Office of Enforcement stated in its conclusion that Duke Energy violated FERC regulations by failing to fully and accurately describe certain specific matters in its market power filings. Duke neither admitted nor denied the alleged violations.
Atlantic Coast Pipeline, LLC
On September 2, 2014, Duke Energy, Dominion Resources (Dominion), Piedmont and Southern Company Gas announced the formation of Atlantic Coast Pipeline, LLC (ACP) to build and own the proposed Atlantic Coast Pipeline (ACP pipeline), an approximately 600-mile interstate natural gas pipeline running from West Virginia to North Carolina. The ACP pipeline is designed to meet, in part, the needs identified by Duke Energy Carolinas, Duke Energy Progress and Piedmont. Dominion will build and operate the ACP pipeline and holds a leading ownership percentage in ACP of 48 percent. Duke Energy owns a 47 percent interest, which is accounted for as an equity method investment 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. 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.
In 2018, the FERC issued a series of Notices to Proceed, which authorized the project to begin certain construction-related activities along the pipeline route, including supply header and compressors. On May 11, 2018, FERC issued a Notice to Proceed allowing full construction activities in specified areas of West Virginia, and on July 24, 2018, FERC issued a Notice to Proceed allowing full construction activities along the project route in North Carolina. A conditional 401 water quality certification has been issued by the Virginia Water Control Board, and ACP continues working with the Virginia Water Control Board’s staff to fulfill the outstanding conditions. Until these conditions have been satisfied, full construction activity in Virginia is not permitted.
ACP is the subject of numerous challenges in state and federal courts and agencies, including, among others, challenges of the project’s incidental take statement (ITS), crossings of the Blue Ridge Parkway, the Appalachian Trail, and the Monongahela and George Washington National Forests, the project’s U.S. Army Corps of Engineers (USACE) 404 permit, the Virginia conditional 401 water quality certification, the FERC Environmental Impact Statement order and the FERC order approving the Certificate of Public Convenience and Necessity. Each of these challenges alleges non-compliance on the part of federal and state permitting authorities and adverse ecological consequences if the project is permitted to proceed. ACP is vigorously defending these challenges and coordinating with the federal and state authorities which are the direct parties to the challenges. On May 15, 2018, the Fourth U.S. Circuit Court of Appeals vacated the Fish and Wildlife Services’ ITS for the project, stating that the ITS failed to meet the requirements of the Endangered Species Act; on May 22, 2018, ACP informed FERC that it would not proceed with construction in any areas covered by the ITS until the issue is resolved, even though construction elsewhere will continue as scheduled; on June 11, 2018, petitioners requested a rehearing of FERC’s West Virginia Notice to Proceed; on July 5, 2018, petitioners filed a motion for injunction of all construction activity along the project route, and ACP and Fish and Wildlife Services filed responses on July 11, 2018. In response to challenges of the certification of ACP’s reliance on USACE Nation Wide Permit 12 (which challenges allege that ACP cannot meet the requirements of the permit in respect of certain water crossings in West Virginia), on July 27, 2018, ACP voluntarily requested an administrative suspension of the USACE authorization in the Huntington District for water crossings in West Virginia to ensure adequate review by USACE of ACP’s crossing methodology. This request for a stay followed a July 20, 2018, motion for injunction by certain project opponents.
ACP's project manager estimates the project's pipeline development costs will range from $6.0 billion to $6.5 billion, excluding financing costs. Project construction activities, schedule and final costs are still subject to uncertainty due to potential additional permitting delays, construction productivity and other conditions and risks, which could result in potential higher project costs and a potential delay in the targeted in-service date, which is late 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)which is accounted for as an equity method investment, from Spectra Energy Partners, LP, a master limited partnership, formed by Enbridge Inc. (formerly Spectra Energy Corp.). Spectra Energy Partners, LP holds a 50 percent ownership interest in Sabal Trail and NextEra Energy has a 42.5 percent ownership interest. Sabal Trail is a joint venture to construct a 515-mile natural gas pipeline (Sabal Trail pipeline) to transport natural gas to Florida. Total estimated project costs are approximately $3.2 billion. The Sabal Trail pipeline traverses Alabama, Georgia and Florida. The primary customers of the Sabal Trail pipeline, Duke Energy Florida and Florida Power & Light Company (FP&L), have each contracted to buy pipeline capacity for 25-year initial terms. See Note 12 for additional information related to Duke Energy's ownership interest.
On February 3, 2016, the FERC issued an order granting the request for a CPCN to construct and operate the pipeline. The Sabal Trail pipeline received other required regulatory approvals and the Phase 1 mainline was placed in service in July 2017. On September 7, 2016,October 12, 2017, Sabal Trail filed a request with FERC deniedto place in service a lateral line to Duke Energy Florida's Citrus County Combined Cycle Facility. This request is required to support commissioning and testing activities at the intervenors' rehearing requests. facility. On March 16, 2018, FERC approved the Citrus lateral and it was placed in service.
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 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 argumentCircuit (D.C. Circuit Court of Appeals). On August 22, 2017, the appeals court ruled against FERC in the case for failing to include enough information on the appeal was heldimpact of greenhouse-gas emissions carried by the pipeline, vacated the CPCN order and remanded the case to FERC. In response to the August 2017 court decision, the FERC issued a draft Supplemental Environmental Impact Statement (SEIS) on April 18,September 27, 2017. On October 6, 2017, FERC and a decision is expected in the summergroup of 2017. Theindustry intervenors, including Sabal Trail and Duke Energy Florida, filed separate petitions with the D.C. Circuit Court of Appeals requesting rehearing regarding the court's decision to vacate the CPCN order. On January 31, 2018, the D.C. Circuit Court of Appeals denied the requests for rehearing. On February 2, 2018, Sabal Trail filed a request with FERC for expedited issuance of its order on remand and reissuance of the CPCN. In the alternative, the pipeline has received other required regulatory approvalsrequested that FERC issue a temporary emergency CPCN to allow for continued operations. On February 5, 2018, FERC issued the final SEIS. On February 6, 2018, FERC and the phase one mainline was placedintervenors in service in July 2017. Completionthis case each filed motions for stay with the D.C. Circuit Court to stay the court's mandate. On March 7, 2018, the D.C. Circuit Court of a lateral line to Citrus County is expected in October 2017. See Note 12Appeals granted FERC and Sabal Trail’s stay request. On March 14, 2018, FERC issued its final order on remand, which recertified the project. Requests for additional information related to Duke Energy's ownership interest.rehearing of the FERC order on remand are still pending.
Constitution Pipeline Company, LLC
Duke Energy hasowns a 24 percent ownership interest in Constitution, Pipeline Company, LLC (Constitution).which is accounted for as an equity method investment. Constitution is a natural gas pipeline project slated to transport natural gas supplies from the Marcellus supply region in northern Pennsylvania to major northeastern markets. The pipeline will be constructed and operated by Williams Partners L.P., which has a 41 percent ownership share. The remaining interest is held by Cabot Oil and Gas Corporation and WGL Holdings, Inc. Before the permitting delays discussed below, Duke Energy's total anticipated contributions arewere approximately $229 million.
On As a result of the permitting delays and project uncertainty, total anticipated contributions by Duke Energy can no longer be reasonably estimated. Since April 22, 2016, with the actions of the New York State Department of Environmental Conservation (NYSDEC), Constitution stopped construction and discontinued capitalization of future development costs until the project's uncertainty is resolved.
In December 2014, Constitution received approval from the FERC to construct and operate the proposed pipeline. However, on April 22, 2016, the NYSDEC denied Constitution’s application for a necessary water quality certification for the New York portion of the Constitution pipeline. Constitution filed legal actions in the U.S. Court of Appeals for the Second Circuit (U.S. Court of Appeals) challenging the legality and appropriateness of the NYSDEC’s decision. On November 16, 2016, oral arguments were hearddecision and on August 18, 2017, the petition was denied in part and dismissed in part. In September 2017, Constitution filed a petition for a rehearing of portions of the decision unrelated to the water quality certification, which was denied by the U.S. Court of Appeals. In January 2018, Constitution has revisedpetitioned the targetSupreme Court of the United States to review the U.S. Court of Appeals decision, and on April 30, 2018, the Supreme Court denied Constitution's petition. In October 2017, Constitution filed a petition for declaratory order requesting FERC to find that the NYSDEC waived its rights to issue a Section 401 water quality certification by not acting on Constitution's application within a reasonable period of time as required by statute. This petition was based on precedent established by another pipeline’s successful petition with FERC following a District of Columbia Circuit Court ruling. On January 11, 2018, FERC denied Constitution's petition. In February 2018, Constitution filed a rehearing request with FERC of its finding that the NYSDEC did not waive the Section 401 certification requirement. On July 19, 2018, FERC denied Constitution's rehearing request. Constitution is currently unable to approximate an in-service date to as early asfor the first half of 2019project due to the NYDSEC'sNYSDEC's denial of the water quality certification. The Constitution partners remain committed to the project and are evaluating next steps to move the project forward. On June 25, 2018, Constitution filed with FERC a Request for Extension of Time until December 2, 2020, for construction of the project. Duke Energy cannot predict the outcome of this matter.
During the six months ended June 30, 2018, Duke Energy recorded an other-than-temporary impairment (OTTI) of $55 million within Equity in earnings of unconsolidated affiliates on Duke Energy's Condensed Consolidated Statements of Operations. The charge represents the excess carrying value over the estimated fair value of the project, which was based on a Level 3 Fair Value measurement that was determined from the income approach using discounted cash flows. The impairment was primarily due to the recent actions taken by the courts and regulators to uphold the NYSDEC's denial of the certification and the delay in a ruling from the U.S. Court of Appeals.
Since April 2016,uncertainty associated with the actions of the NYSDEC, Constitution stopped construction and discontinued capitalization of future development costs until the project's uncertainty is resolved. To the extent theremaining 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.challenges.
See Note 12 for additional information related to ownership interest and carrying value of the investment.
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 June 30, 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 |
| | $ | 172 |
|
| Progress Energy and Duke Energy Florida | | | |
Crystal River Units 1 and 2(b) | 873 |
| | 113 |
|
| Duke Energy Indiana | | | |
Gallagher Units 2 and 4(c) | 280 |
| | 131 |
|
| Total Duke Energy | 1,738 |
| | $ | 416 |
|
| |
(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.
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)
5.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. Dollar amounts in the table below are included in Net property, plant and equipment on the Condensed Consolidated Balance Sheets as of June 30, 2018, 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 |
| | $ | 160 |
|
| Progress Energy and Duke Energy Florida | | | |
Crystal River Units 1 and 2(b) | 873 |
| | 102 |
|
| Duke Energy Indiana | | | |
Gallagher Units 2 and 4(c) | 280 |
| | 125 |
|
| Total Duke Energy | 1,738 |
| | $ | 387 |
|
| |
| (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 expects to retire these coal units by the end of 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.
4. COMMITMENTS AND CONTINGENCIES
ENVIRONMENTAL
The Duke Energy Registrants are subject to federal, state and local regulations regarding air and water quality, hazardous and solid waste disposal and other environmental matters. These regulations can be changed from time to time, imposing new obligations on the Duke Energy Registrants. The following environmental matters impact all of the Duke Energy Registrants.
Remediation Activities
In addition to asset retirement obligations (ARO) recorded as a result of various environmental regulations, the Duke Energy Registrants are responsible for environmental remediation at various sites. These include certain properties that are part of ongoing operations and sites formerly owned or used by Duke Energy entities. These sites are in various stages of investigation, remediation and monitoring. Managed in conjunction with relevant federal, state and local agencies, remediation activities vary based upon site conditions and location, remediation requirements, complexity and sharing of responsibility. If remediation activities involve joint and several liability provisions, strict liability, or cost recovery or contribution actions, the Duke Energy Registrants could potentially be held responsible for environmental impacts caused by other potentially responsible parties and may also benefit from insurance policies or contractual indemnities that cover some or all cleanup costs. Liabilities are recorded when losses become probable and are reasonably estimable. The total costs that may be incurred cannot be estimated because the extent of environmental impact, allocation among potentially responsible parties, remediation alternatives and/or regulatory decisions have not yet been determined at all sites. Additional costs associated with remediation activities are likely to be incurred in the future and could be significant. Costs are typically expensed as Operation, maintenance and other on the Condensed Consolidated Statements of Operations unless regulatory recovery of the costs is deemed probable.
The following tables 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. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2017 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Balance at beginning of period | $ | 98 |
| | $ | 10 |
| | $ | 18 |
| | $ | 3 |
| | $ | 14 |
| | $ | 59 |
| | $ | 10 |
| | $ | 1 |
|
| Provisions/adjustments | — |
| | 1 |
| | — |
| | — |
| | 1 |
| | (2 | ) | | — |
| | — |
|
| Cash reductions | (8 | ) | | (1 | ) | | (2 | ) | | — |
| | (2 | ) | | (4 | ) | | (1 | ) | | — |
|
| Balance at end of period | $ | 90 |
| | $ | 10 |
| | $ | 16 |
| | $ | 3 |
| | $ | 13 |
| | $ | 53 |
| | $ | 9 |
| | $ | 1 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2016 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Balance at beginning of period | $ | 94 |
| | $ | 10 |
| | $ | 17 |
| | $ | 3 |
| | $ | 14 |
| | $ | 54 |
| | $ | 12 |
| | $ | 1 |
|
| Provisions/adjustments | 27 |
| | 3 |
| | 4 |
| | 1 |
| | 3 |
| | 1 |
| | 21 |
| | — |
|
| Cash reductions | (7 | ) | | (2 | ) | | (4 | ) | | (1 | ) | | (3 | ) | | (1 | ) | | (1 | ) | | — |
|
| Balance at end of period | $ | 114 |
| | $ | 11 |
| | $ | 17 |
| | $ | 3 |
| | $ | 14 |
| | $ | 54 |
| | $ | 32 |
| | $ | 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 | $ | 70 |
|
| Duke Energy Carolinas | 23 |
|
| Duke Energy Ohio | 35 |
|
| 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. Future costs related to the Dan River release, including future civil enforcement, future regulatory directives, natural resources damages, future claims or litigation and long-term environmental impact costs, cannot be reasonably estimated at this time.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
The North Carolina Department of Environmental Quality (NCDEQ) has historically assessed Duke Energy Carolinasfollowing tables contain information regarding reserves for probable 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. Subsequentestimable costs related to the Dan River ash release, Duke Energy Carolinasvarious environmental sites. These reserves are recorded in Accounts Payable within Current Liabilities and Duke Energy ProgressOther within Other Noncurrent Liabilities on the Condensed Consolidated Balance Sheets. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2018 |
| | | | 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 | $ | 81 |
| | $ | 10 |
| | $ | 15 |
| | $ | 3 |
| | $ | 12 |
| | $ | 47 |
| | $ | 5 |
| | $ | 2 |
|
| Provisions/adjustments | 1 |
| | 2 |
| | 2 |
| | 2 |
| | (1 | ) | | (3 | ) | | 1 |
| | — |
|
| Cash reductions | (14 | ) | | (1 | ) | | (2 | ) | | (1 | ) | | (1 | ) | | (9 | ) | | (1 | ) | | — |
|
| Balance at end of period | $ | 68 |
| | $ | 11 |
| | $ | 15 |
| | $ | 4 |
| | $ | 10 |
| | $ | 35 |
| | $ | 5 |
| | $ | 2 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2017 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Balance at beginning of period | $ | 98 |
| | $ | 10 |
| | $ | 18 |
| | $ | 3 |
| | $ | 14 |
| | $ | 59 |
| | $ | 10 |
| | $ | 1 |
|
| Provisions/adjustments | — |
| | 1 |
| | — |
| | — |
| | 1 |
| | (2 | ) | | — |
| | — |
|
| Cash reductions | (8 | ) | | (1 | ) | | (2 | ) | | — |
| | (2 | ) | | (4 | ) | | (1 | ) | | — |
|
| Balance at end of period | $ | 90 |
| | $ | 10 |
| | $ | 16 |
| | $ | 3 |
| | $ | 13 |
| | $ | 53 |
| | $ | 9 |
| | $ | 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 served with a higher level of NOVs, including assessed penalties for violationsevaluated at L.V. Sutton Combined Cycle Plant (Sutton) and Dan River Steam Station. Duke Energy Carolinas and Duke Energy Progress cannot predict whetherthis time are not material except as presented in 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.table below. |
| | | |
| (in millions) | |
| Duke Energy | $ | 55 |
|
| Duke Energy Carolinas | 16 |
|
| Duke Energy Ohio | 30 |
|
| Piedmont | 2 |
|
LITIGATION
Duke Energy
Duke Energy no longer has exposure to litigation matters related to the International 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.
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 oral argument is scheduled for September 27, 2017.
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 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, which was approved by the Delaware Chancery Court on July 13, 2017. The entire settlement amount is to be funded by insurance. The settlement amount, less court-approved attorney fees, will be payable to Duke Energy.
Price Reporting Cases
Duke Energy Trading and Marketing, LLC (DETM), a non-operating Duke Energy affiliate, was a defendant, along with numerous other energy companies, in four class-action lawsuits and a fifth single-plaintiff lawsuit in a consolidated federal court proceeding in Nevada. Each of these lawsuits contained similar claims that defendants allegedly manipulated natural gas markets by various means, including providing false information to natural gas trade publications and entering into unlawful arrangements and agreements in violation of the antitrust laws of the respective states. Plaintiffs sought damages in unspecified amounts. In February 2016, DETM reached agreements in principle to settle all of the pending lawsuits. Settlement of the single-plaintiff settlement was finalized and paid in March 2016. The proposed settlement of the class action lawsuits was approved by the Court and all settlement amounts, which are not material to Duke Energy, have been paid.
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
Coal Ash Insurance Coverage Litigation
In March 2017, Duke Energy Carolinas and Duke Energy Progress filed a civil action in North Carolina Superior Court against various insurance providers. The lawsuit seeks payment for coal ash relatedash-related liabilities covered by third-party liability insurance policies. The insurance policies were issued between 1971 and 1986 and provide third-party liability insurance for property damage. The civil action seeks damages for breach of contract and indemnification for costs arising from the Coal Ash Act and the EPA CCR rule at 15 coal-fired plants in North Carolina and South Carolina. The parties are engaged in discovery. Duke Energy Carolinas and Duke Energy Progress cannot predict the outcome of this matter.
NCDEQ State Enforcement Actions
In the first quarter of 2013, the Southern Environmental Law Center (SELC) sent notices of intent to sue Duke Energy Carolinas and Duke Energy Progress related to alleged Clean Water Act (CWA) violations from coal ash basins at two of their coal-fired power plants in North Carolina. The NCDEQ filed enforcement actions 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.judge in the North Carolina Superior Court.
On August 16, 2013, the NCDEQ filed an enforcement action against Duke Energy Carolinas and Duke Energy Progress related to 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.
The court issued orders in 2016 granting Motions'Motions for Partial Summary Judgment for seven of the 14 North Carolina plants named in the enforcement actions. The litigation is concluded for these seven plants. Litigation continues for the remaining seven plants. 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' motionmotions for partial summary judgment brought by both the environmental groups and Duke Energy Carolinas and Duke Energy Progress' cross-motionProgress for partial summary judgment.the remaining seven plants. 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.order. The parties were unable to reach an agreement at mediation onin April 18, 2017. The parties submitted briefs to the court has requested the parties to make submissions on whatremaining issues remain to be tried.tried and a ruling is pending. On August 22, 2017, Duke Energy Carolinas and Duke Energy Progress filed a Petition for Discretionary Review, requesting the North Carolina Supreme Court to accept the appeal. On August 24, 2017, SELC filed a motion to dismiss the appeal. On August 1, 2018, the court dismissed the appeal.
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)
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
On June 13, 2016, the Roanoke River Basin Association (RRBA) filed a federal citizen suit in the Middle District of North Carolina alleging unpermitted discharges to surface water and groundwater violations at the Mayo Plant. On August 19, 2016, Duke Energy Progress filed a Motion to Dismiss. On April 26, 2017, the court entered an order dismissing four of the claims in the federal citizen suit. Two claims relating to alleged violations of National Pollutant Discharge Elimination System (NPDES) permit provisions survived the motion to dismiss, and Duke Energy Progress filed its response on May 10, 2017. The parties are engaged in pre-trial discovery.
On March 16, 2017, RRBA served Duke Energy Progress with a Notice of Intent to Sue under the CWAand RRBA each filed motions for alleged violations of effluent standards and limitations at the Roxboro Plant. In anticipation of litigation, Duke Energy Progress filed a Complaint for Declaratory Relief in the U.S. District Court for the Western District of Virginiasummary judgment on May 11, 2017, disputing RRBA's claims and requesting declaratory judgment in its favor. RRBA then filed a motion to dismiss or transfer venue of the declaratory action filed by Duke Energy Progress in the Western District of Virginia. Duke Energy Progress' motion of opposition was heard on July 24, 2017, and a ruling is pending. March 23, 2018.
On May 16, 2017, RRBA filed a federal citizen suit in the U.S. District Court for the Middle District of North Carolina. On July 17, 2017,Carolina, which asserts two claims relating to alleged violations of NPDES permit provisions at the Roxboro plant and one claim relating to the use of nearby water bodies. Duke Energy Progress and RRBA each filed amotions for summary judgment on April 17, 2018.
On May 8, 2018, on motion to dismiss that actionfrom Duke Energy Progress, the Court ordered trial in favorboth of the pending action in the Western District of Virginia.above matters to be consolidated and has set a trial date for December 3, 2018.
On June 20, 2017, RRBA filed a federal citizen suit in the U.S. District Court for the Middle District of North Carolina challenging the closure plans at the Mayo Plant under the EPA CCR Rule. Duke Energy Progress' response is dueProgress filed a motion to dismiss, which was granted by August 21, 2017.the court on March 30, 2018. RRBA had until April 30, 2018, to file an appeal to the Fourth Circuit but did not do so.
On August 2, 2017, RRBA filed a federal citizen suit in the U.S. District Court for the Middle District of North Carolina challenging the closure plans at the Roxboro Plant under the EPA CCR Rule. Duke Energy Progress' response is due byProgress filed a motion to dismiss on October 2, 2017.2017, which was granted by the court on May 29, 2018. RRBA had until June 28, 2018, to file an appeal to the Fourth Circuit but did not do so.
On December 6, 2017, various parties filed a federal citizen suit in the U.S. District Court for the Middle District of North Carolina for alleged violations at Duke Energy Carolinas' Belews Creek Steam Station (Belews Creek) under the CWA. Duke Energy Carolinas filed a motion to dismiss on February 5, 2018.
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, itthey might incur in connection with these matters.
Five previously filed cases involving the Riverbend, Cape Fear, H.F. Lee, Sutton and Buck plants were dismissed or settled in 2016.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
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. TheResults of Comprehensive Site Assessments testing performed by Duke Energy under the 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 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 NCDEQ sent follow-up letters on October 15, 2015, to residents near coal ash basins who have had their wells tested, stating that private well samplings at a considerable distance from coal ash basins, as well as some municipal water supplies, contain similar levels of vanadium and hexavalent chromium, which leadsled investigators to believe these constituents are naturally occurring. In March 2016, DHHS rescinded the advisories.
Duke Energy Carolinas and Duke Energy Progress have received formal demand letters from residents near Duke Energy Carolinas' and Duke Energy Progress' coal ash basins. The residents claim damages for nuisance and diminution in property value, among other things. The parties held three days of mediation discussions that ended at an impasse. On January 6, 2017, Duke Energy Carolinas and Duke Energy Progress received the plaintiffs' notice of their intent to file suits should the matter not settle. The NCDEQ preliminarily approved Duke Energy’s permanent water solution plans on January 13, 2017, and as a result shortly thereafter, Duke Energy issued a press release, providing additional details regarding the homeowner compensation package. This package consists of three components: (i) a $5,000 goodwill payment to each eligible well owner to support the transition to a new water supply, (ii) where a public water supply is available and selected by the eligible well owner, a stipend to cover 25 years of water bills and (iii) the Property Value Protection Plan. The Property Value Protection Plan is a program offered by Duke Energy designed to guarantee eligible plant neighbors the fair market value of their residential property should they decide to sell their property during the time that the plan is offered. Duke Energy received a letter from Plaintiffs' counsel indicating their intent to file suit on February 2, 2017, should a settlement not be reached by that date. Plaintiff’s counsel did not file suit upon the 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$10 million and $4$3 million, respectively.
On August 23, 2017, a class-action suit was filed in Wake County Superior Court, North Carolina, against Duke Energy Carolinas and Duke Energy Progress on behalf of certain property owners living near coal ash impoundments at Allen, Asheville, Belews Creek, Buck, Cliffside, Lee, Marshall, Mayo and Roxboro. The class is defined as those who are “well-eligible” under the Coal Ash Act or those to whom Duke Energy has promised a permanent replacement water supply and seeks declaratory and injunctive relief, along with compensatory damages. Plaintiffs allege that Duke Energy’s improper maintenance of coal ash impoundments caused harm, particularly through groundwater contamination. Despite NCDEQ’s preliminary approval, Plaintiffs contend that Duke Energy’s proposed permanent water solutions plan fails to comply with the Coal Ash Act. On September 28, 2017, Duke Energy Carolinas and Duke Energy Progress filed a Motion to Dismiss and Motion to Strike the class designation. The parties entered into a Settlement Agreement on January 24, 2018, which resulted in the dismissal of the underlying class action on January 25, 2018.
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 September 14, 2017, a complaint was filed against Duke Energy Progress in New Hanover County Superior Court by a group of homeowners residing approximately 1 mile from Duke Energy Progress' Sutton Steam Plant (Sutton). The homeowners allege that coal ash constituents have been migrating from ash impoundments at Sutton into their groundwater for decades and that in 2015, Duke Energy Progress discovered these releases of coal ash, but failed to notify any officials or neighbors and failed to take remedial action. The homeowners claim unspecified physical and mental injuries as a result of consuming their well water and seek actual damages for personal injury, medical monitoring and punitive damages. On March 6, 2018, Plaintiffs' counsel voluntarily dismissed the action without prejudice.
It is not possible to estimate the maximum exposure of loss, if any, that may occur in connection with future claims whichthat might be made by these residents.
Asbestos-related Injuries and Damages Claims
Duke Energy Carolinas has experienced numerous claims for indemnification and medical cost reimbursement related to asbestos exposure. These claims relate to damages for bodily injuries alleged to have arisen from exposure to or use of asbestos in connection with construction and maintenance activities conducted on its electric generation plants prior to 1985. As of June 30, 2017,2018, there were 87120 asserted claims for non-malignant cases with cumulative relief sought of up to $23$29 million, and 5847 asserted claims for malignant cases with cumulative relief sought of up to $16$12 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 $497$466 million at June 30, 20172018, and $512$489 million at December 31, 2016.2017. These reserves are classified in Other within Other Noncurrent Liabilities and Other within Current Liabilities on the Condensed Consolidated Balance Sheets. These reserves are based upon the minimum amount of the range of loss for current and future asbestos claims through 2036,2037, 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 20362037 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$797 million in excess of the self-insured retention. Receivables for insurance recoveries were $587$585 million at June 30, 20172018, and December 31, 2016.2017. These amounts are classified in Other within Other Noncurrent Assets and Receivables within Current Assets on the Condensed Consolidated Balance Sheets. Duke Energy Carolinas is not aware of any uncertainties regarding the legal sufficiency of insurance claims. Duke Energy Carolinas believes the insurance recovery asset is probable of recovery as the insurance carrier continues to have a strong financial strength rating.
Duke Energy Progress and Duke Energy Florida
Spent Nuclear Fuel Matters
On October 16, 2014, Duke Energy Progress and Duke Energy Florida sued the U.S. in the U.S. Court of Federal Claims. The lawsuit claimed the Department of Energy breached a contract in failing to accept spent nuclear fuel under the Nuclear Waste Policy Act of 1982 and asserted damages for the cost of on-site storage. Duke Energy Progress and Duke Energy Florida asserted damages for the period January 1, 2011, through December 31, 2013, of $48 million and $25 million, respectively. On November 17, 2017, the Court awarded Duke Energy Progress and Duke Energy Florida $48 million and $21 million, respectively, subject to appeal. No appeals were filed and Duke Energy Progress and Duke Energy Florida recognized the recoveries in the first quarter of 2018. Claims for all periods through 2013 have been resolved. On June 22, 2018, Duke Energy Progress and Duke Energy Florida filed a complaint for damages incurred for 2014 through first quarter 2018.
Duke Energy Progress
Gypsum Supply Agreement Matter
On June 30, 2017, CertainTeed Gypsum NC, Inc. (CertainTeed) filed a declaratory judgment action against Duke Energy Progress in the North Carolina Business Court relating to a gypsum supply agreement. In its complaint, CertainTeed sought an order from the court declaring that the minimum amount of gypsum Duke Energy Progress must provide to CertainTeed under the supply agreement is 50,000 tons per month through 2029. On January 29, 2018, CertainTeed filed a request to amend its Complaint and seek a preliminary injunction requiring Duke Energy Progress to provide 50,000 tons of gypsum per month through the trial date. In advance of the hearing on the Motion for Preliminary Injunction, the parties reached an agreement under which Duke Energy Progress would deliver 50,000 tons of gypsum per month through August 2018. If the Court determines that Duke Energy Progress was not obligated to provide that amount per month, CertainTeed will reimburse Duke Energy Progress. Trial in this matter was completed on July 16, 2018, and Duke Energy Progress is awaiting a ruling. If Duke Energy Progress does not prevail, Duke Energy Progress will either have to purchase additional gypsum on the open market to fulfill its contractual obligation through 2029 or pay liquidated damages. Duke Energy Progress cannot predict the outcome of this matter.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
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 Statestate 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, which was denied. On January 4, 2017, plaintiffs filed a notice of appeal to the Eleventh Circuit U.S. Court of Appeals.Appeals (Eleventh Circuit). On July 11, 2018, the Eleventh Circuit affirmed the U.S. District Court's dismissal of the lawsuit. Plaintiffs filed an appellate brief on March 16, 2017, and Duke Energy Florida filed responses on April 17, 2017. Oral argument is scheduledhave until October 9, 2018, to file a petition for August 22, 2017. Duke Energy Florida cannot predictcertiorari with the outcome of this appeal.U.S. Supreme Court.
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)
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 an EPCEngineering, Procurement and Construction agreement (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.an EPC contract. Duke Energy Florida recognized an exit obligation as a result of the termination of the EPC.
On March 31, 2014, Westinghouse filed a separate lawsuit against Duke Energy Florida in U.S. District Court for the Western District of Pennsylvania. The Pennsylvania lawsuit allegedalleging damages under the same EPC contract in excess of $510 million for engineering and design work, costs to end supplier contracts and an alleged termination fee.
On June 9, 2014, the judge in the North Carolina case ruled that the litigation willwould proceed in the Western District of North Carolina.
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, ruling in favor ofgranting Westinghouse on a $30 million termination fee claim and dismissing Duke Energy Florida's $54 million refund claim, but stating that Duke Energy Florida could use the refund claim to offset any damages for termination costs.claim. Westinghouse's claim for termination costs was unaffected by this ruling and continued to trial. At trial, Westinghouse reduced its claim for termination costs from $482 million to $424 million. Following a trial on the matter, the court issued its finalan order in December 2016 denying Westinghouse’s claim for termination costs and re-affirmingreaffirming its earlier ruling in favor of Westinghouse on the $30 million termination fee and Duke Energy Florida’s refund claim.fee. Judgment was entered against Duke Energy Florida in the amount of approximately $34 million, which includes prejudgment interest. Westinghouse has appealed the trial court's order to the U.S. Court of Appeals for the Fourth Circuit (Fourth Circuit) and Duke Energy Florida has cross-appealed. Duke Energy Florida cannot predict the ultimate outcome of the appeal of the trial court's order.
On March 29, 2017, Westinghouse filed Chapter 11 bankruptcy in the Southern District of New York, which automatically stayed the appeal. On May 23, 2017, the bankruptcy court entered an order lifting the stay with respect to the appeal. Briefing of the appeal concluded on October 20, 2017. Westinghouse and Duke Energy Florida executed a settlement agreement resolving this matter on April 5, 2018. The bankruptcy court approved the settlement and Duke Energy Florida paid approximately $34 million to Westinghouse in July 2018 pursuant to this agreement. At the request of the parties, the Fourth Circuit has issued a revised briefing schedule that provides for completion of briefing by October 20, 2017.
Ultimate resolution of these matters could have a material effect ondismissed 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.appeal.
MGP Cost Recovery Action
On December 30, 2011, Duke Energy Florida filed a lawsuit against FirstEnergy Corp. (FirstEnergy) to recover investigation and remediation costs incurred by Duke Energy Florida in connection with the restoration of two former MGP sites in Florida. Duke Energy Florida alleged that FirstEnergy, as the successor to Associated Gas & Electric Co., owes past and future contribution and response costs of up to $43 million for the investigation and remediation of MGP sites. On December 6, 2016, the trial court entered judgment against Duke Energy Florida in the case. In January 2017, Duke Energy Florida appealed the decision to the U.S. Court of Appeals for the 6thSixth Circuit, and briefing has been completed. Duke Energy Florida cannot predictwhich affirmed 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 Indiana seeking damages for past generation losses totaling approximately $16 million alleging Duke Energy Indiana violated its obligations under a 2006 PPA by refusing to offer electricity to the market at negative prices. Damage claims continue to increase during times that BCWF is not dispatched. Under 2013 revised MISO market rules, Duke Energy Indiana is required to make a price offer to MISO for the power it proposes to sell into MISO markets and MISO determines whether BCWF is dispatched. Because market prices would have been negative due to increased market participation, Duke Energy Indiana determined it would not bid at negative prices in order to balance customer needs against BCWF's need to run. BCWF contends Duke Energy Indiana must bid at the lowest negative price to ensure dispatch, while Duke Energy Indiana contends it is not obligated to bid at any particular price, that it cannot ensure dispatch with any bid and that it has reasonably balanced the parties' interests. On July 6, 2015, the U.S. District Court for the Southern District of Indiana entered judgment against BCWFtrial court's ruling on all claims. BCWF appealed the decision and on December 9, 2016, the appeals court ruled in favor of BCWF. On June 30, 2017, the parties finalized a settlement agreement. Terms of the settlement included Duke Energy Indiana paying $29 million for back damages. Additionally, the parties agreed on the method by which the contract will be bid into the market in the future. Duke Energy Indiana recorded an obligation and a regulatory asset related to the settlement amount in fourth quarter 2016. The settlement amount was paid in June 2017.April 10, 2018.
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-related reserves and the exit obligation related to the termination of an EPC contract discussed above. Reserves are classified on the Condensed Consolidated Balance Sheets in Other within Other Noncurrent Liabilities and Accounts payable and Other within Current Liabilities. The reasonably possible range of loss in excess of recorded reserves is not material, other than as described above. |
| | | | | | | |
| (in millions) | June 30, 2018 |
| | December 31, 2017 |
|
| Reserves for Legal Matters | | | |
| Duke Energy | $ | 68 |
| | $ | 88 |
|
| Duke Energy Carolinas | 15 |
| | 30 |
|
| Progress Energy | 52 |
| | 55 |
|
| Duke Energy Progress | 11 |
| | 13 |
|
| Duke Energy Florida | 25 |
| | 24 |
|
| Piedmont | 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)
The table below presents recorded reserves based on management’s best estimate of probable loss for legal matters, excluding asbestos-related reserves and the exit obligation discussed above related to the termination of an EPC contract. Reserves are classified on the Condensed Consolidated Balance Sheets in Other within Other Noncurrent Liabilities and Accounts payable and Other within Current Liabilities. The reasonably possible range of loss in excess of recorded reserves is not material, other than as described above. |
| | | | | | | |
| (in millions) | June 30, 2017 |
| | December 31, 2016 |
|
| Reserves for Legal Matters | | | |
| Duke Energy | $ | 82 |
| | $ | 98 |
|
| Duke Energy Carolinas | 23 |
| | 23 |
|
| Progress Energy | 57 |
| | 59 |
|
| Duke Energy Progress | 12 |
| | 14 |
|
| Duke Energy Florida | 28 |
| | 28 |
|
| Duke Energy Ohio | — |
| | 4 |
|
| Piedmont | 2 |
| | 2 |
|
OTHER COMMITMENTS AND CONTINGENCIES
General
As part of their normal business, the Duke Energy Registrants are party to various financial guarantees, performance guarantees and other contractual commitments to extend guarantees of credit and other assistance to various subsidiaries, investees and other third parties. These guarantees involve elements of performance and credit risk, which are not fully recognized on the Condensed Consolidated Balance Sheets and have 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.
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.
6.5. DEBT AND CREDIT FACILITIES
SUMMARY OF SIGNIFICANT DEBT ISSUANCES
The following table summarizes significant debt issuances (in millions). Refer to the "Available Credit Facilities" section below regarding amounts issued under the Three Year Revolver and the Piedmont Term Loan facilities. |
| | | | | | | | | | | | | | | | | | | |
| | | | | Six Months Ended June 30, 2017 |
| | | | | | | Duke |
| | Duke |
| | Duke |
|
| | Maturity | Interest |
| | Duke |
| | Energy |
| | Energy |
| | Energy |
|
| Issuance Date | Date | Rate |
| | Energy |
| | (Parent) |
| | Florida |
| | Ohio |
|
| Unsecured Debt | | | | | | | | | | |
April 2017(a) | April 2025 | 3.364 | % | | $ | 420 |
| | $ | 420 |
| | $ | — |
| | $ | — |
|
June 2017(b) | June 2020 | 2.100 | % | | 330 |
| | 330 |
| | — |
| | — |
|
| Secured Debt | | | | | | | | | | |
February 2017(c) | June 2034 | 4.120 | % | | 587 |
| | — |
| | — |
| | — |
|
| First Mortgage Bonds | | | | | | | | | | |
January 2017(d) | January 2020 | 1.850 | % | | 250 |
| | — |
| | 250 |
| | — |
|
January 2017(d) | January 2027 | 3.200 | % | | 650 |
| | — |
| | 650 |
| | — |
|
March 2017(e) | June 2046 | 3.700 | % |
| 100 |
|
| — |
| | — |
| | 100 |
|
| Total issuances | | | | $ | 2,337 |
| | $ | 750 |
| | $ | 900 |
|
| $ | 100 |
|
|
| | | | | | | | | | | | | | | | | | | |
| | | | | Six Months Ended June 30, 2018 |
| | | | | | | Duke |
| | Duke |
| | Duke |
|
| | Maturity | Interest |
| | Duke |
| | Energy |
| | Energy |
| | Energy |
|
| Issuance Date | Date | Rate |
| | Energy |
| | (Parent) |
| | Carolinas |
| | Florida |
|
| Unsecured Debt | | | | | | | | | | |
March 2018(a) | April 2025 | 3.950 | % | | $ | 250 |
| | $ | 250 |
| | $ | — |
| | $ | — |
|
May 2018(b) | May 2021 | 2.830 | % | | 500 |
| | 500 |
| | — |
| | — |
|
| First Mortgage Bonds | | | | | | | | | | |
March 2018(c) | March 2023 | 3.050 | % | | 500 |
| | — |
| | 500 |
| | — |
|
March 2018(c) | March 2048 | 3.950 | % | | 500 |
| | — |
| | 500 |
| | — |
|
June 2018(d) | July 2028 | 3.800 | % |
| 600 |
|
|
|
| | — |
| | 600 |
|
June 2018(d) | July 2048 | 4.200 | % |
| 400 |
|
| — |
| | — |
| | 400 |
|
| Total issuances | | | | $ | 2,750 |
| | $ | 750 |
|
| $ | 1,000 |
|
| $ | 1,000 |
|
| |
| (a) | Proceeds were usedDebt issued to refinance $400 million of unsecured debt at maturity and to repay a portion of outstanding commercial paper.pay down short-term debt. |
| |
| (b) | Debt issued to repaypay down short-term debt. Debt issuance has a portion of outstanding commercial paper.floating interest rate. |
| |
| (c) | Portfolio financing of four TexasDebt issued to repay at maturity a $300 million first mortgage bond due April 2018, pay down intercompany short-term debt and Oklahoma wind facilities. Secured by substantially all of the assets of these wind facilities and nonrecourse to Duke Energy. Proceeds were used to reimburse Duke Energy for a portion of previously funded construction expenditures.general corporate purposes. |
| |
| (d) | Debt issued to fund capital expenditures for ongoing construction and capital maintenance, to repay at maturity a $250 million aggregate principal amountportion of bonds due September 2017intercompany short-term debt under money-pool borrowing arrangement and for general corporate purposes. |
| |
(e) | Proceeds were used to fund capital expenditures for ongoing construction, capital maintenance and for general corporate purposes. |
CURRENT MATURITIES OF LONG-TERM DEBT
The following table shows the significant components of Current Maturities of Long-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 |
| | June 30, 2018 |
|
| Unsecured Debt | | | | | |
| Piedmont | December 2018 | | 2.796 | % | (b) | $ | 250 |
|
| Progress Energy | March 2019 | | 7.050 | % | | 450 |
|
| First Mortgage Bonds | | | | | |
| Duke Energy Carolinas | November 2018 | | 7.000 | % | | 500 |
|
| Duke Energy Progress | January 2019 | | 5.300 | % | | 600 |
|
| Duke Energy Ohio | April 2019 | | 5.450 | % | | 450 |
|
Other(a) | | | | | 602 |
|
| Current maturities of long-term debt | | | | | $ | 2,852 |
|
(a) Includes capital lease obligations, amortizing debt and small bullet maturities.
(b) Debt issuance has a floating interest rate.
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)
CURRENT MATURITIES OF LONG-TERM DEBT
The following table shows the significant components of Current Maturities of Long-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 |
| | June 30, 2017 |
|
| Unsecured Debt | | | | | |
| Duke Energy (Parent) | August 2017 | | 1.625 | % | | $ | 700 |
|
| Piedmont | September 2017 | | 8.510 | % | | 35 |
|
| Duke Energy (Parent) | June 2018 | | 6.250 | % | | 250 |
|
| Duke Energy (Parent) | June 2018 | | 2.100 | % | | 500 |
|
| First Mortgage Bonds | | | | | |
| Duke Energy Florida | September 2017 | | 5.800 | % | | 250 |
|
| Duke Energy Progress | November 2017 | | 1.372 | % | | 200 |
|
| Duke Energy Carolinas | January 2018 | | 5.250 | % | | 400 |
|
| Duke Energy Carolinas | April 2018 | | 5.100 | % | | 300 |
|
| Duke Energy Florida | June 2018 | | 5.650 | % | | 500 |
|
Other(a) | | | | | 337 |
|
| Current maturities of long-term debt | | | | | $ | 3,472 |
|
(a) Includes capital lease obligations, amortizing debt and small bullet maturities.
AVAILABLE CREDIT FACILITIES
Master Credit Facility
In March 2017,January 2018, Duke Energy amended its Master Credit Facility to increase its capacity from $7.5 billion to $8 billion, and to extendextended the termination date of the facilitysubstantially all of its existing $8 billion Master Credit Facility capacity from January 30, 2020,March 16, 2022, to March 16, 2022. The amendment also added Piedmont as a borrower within2023. In May 2018, Duke Energy completed the extension process with 100 percent of all commitments to the Master Credit Facility. Piedmont's separate $850 million credit facility was terminated in connection with the amendment. With the amendment, theFacility extending to March 16, 2023. 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. | | | | June 30, 2017 | June 30, 2018 |
| |
|
| | 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 |
| | Piedmont |
| Energy |
| | (Parent) |
| | Carolinas |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Facility size(a) | $ | 8,000 |
| | $ | 3,150 |
| | $ | 1,350 |
| | $ | 1,250 |
| | $ | 700 |
| | $ | 450 |
| | $ | 600 |
| | $ | 500 |
| $ | 8,000 |
| | $ | 2,650 |
| | $ | 1,750 |
| | $ | 1,250 |
| | $ | 800 |
| | $ | 450 |
| | $ | 600 |
| | $ | 500 |
|
| Reduction to backstop issuances | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial paper(b) | (3,115 | ) | | (1,392 | ) | | (732 | ) | | (661 | ) | | — |
| | (45 | ) | | (150 | ) | | (135 | ) | (3,004 | ) | | (1,087 | ) | | (856 | ) | | (556 | ) | | — |
| | (189 | ) | | (316 | ) | | — |
|
| Outstanding letters of credit | (68 | ) | | (59 | ) | | (4 | ) | | (2 | ) | | (1 | ) | | — |
| | — |
| | (2 | ) | (57 | ) | | (49 | ) | | (4 | ) | | (2 | ) | | — |
| | — |
| | — |
| | (2 | ) |
| Tax-exempt bonds | (81 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (81 | ) | | — |
| (81 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (81 | ) | | — |
|
| Coal ash set-aside | (500 | ) | | — |
| | (250 | ) | | (250 | ) | | — |
| | — |
| | — |
| | — |
| (500 | ) | | — |
| | (250 | ) | | (250 | ) | | — |
| | — |
| | — |
| | — |
|
| Available capacity under the Master Credit Facility | $ | 4,236 |
|
| $ | 1,699 |
|
| $ | 364 |
|
| $ | 337 |
|
| $ | 699 |
|
| $ | 405 |
|
| $ | 369 |
| | $ | 363 |
| $ | 4,358 |
|
| $ | 1,514 |
|
| $ | 640 |
|
| $ | 442 |
|
| $ | 800 |
|
| $ | 261 |
|
| $ | 203 |
| | $ | 498 |
|
| |
| (a) | Represents the sublimit of each borrower. |
| |
| (b) | Duke Energy issued $625 million of commercial paper and loaned the proceeds through the money pool to Duke Energy Carolinas, Duke Energy Progress, Duke Energy Ohio and Duke Energy Indiana. The balances are classified as Long-Term Debt Payable to Affiliated Companies on the Condensed Consolidated Balance Sheets. |
Three YearThree-Year Revolving Credit Facility
In June 2017, Duke Energy (Parent) entered intohas a three-year $1.0 billion revolving credit facility (the Three Year Revolver). Borrowings through June 2020. As of June 30, 2018, $500 million has been drawn under this facility willthe Three Year Revolver. This balance is classified as Long-Term Debt on Duke Energy's Condensed Consolidated Balance Sheets. Any undrawn commitments can be used for general corporate purposes.drawn, and borrowings can be prepaid, at any time throughout the term of the facility. The terms and conditions of the Three Year Revolver are generally consistent with those governing Duke Energy's Master Credit Facility.
6. ASSET RETIREMENT OBLIGATIONS
The Duke Energy Registrants record AROs when there is 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. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2018 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Decommissioning of Nuclear Power Facilities(a) | $ | 5,319 |
| | $ | 2,002 |
| | $ | 3,158 |
| | $ | 2,621 |
| | $ | 536 |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Closure of Ash Impoundments | 4,843 |
| | 1,761 |
| | 2,202 |
| | 2,178 |
| | 24 |
| | 44 |
| | 836 |
| | — |
|
| Other | 307 |
| | 56 |
| | 78 |
| | 36 |
| | 42 |
| | 45 |
| | 20 |
| | 15 |
|
| Total ARO | $ | 10,469 |
| | $ | 3,819 |
| | $ | 5,438 |
| | $ | 4,835 |
| | $ | 602 |
| | $ | 89 |
| | $ | 856 |
| | $ | 15 |
|
| Less: current portion | 716 |
| | 227 |
| | 386 |
| | 381 |
| | 5 |
| | 5 |
| | 98 |
| | — |
|
| Total noncurrent ARO | $ | 9,753 |
|
| $ | 3,592 |
|
| $ | 5,052 |
|
| $ | 4,454 |
|
| $ | 597 |
|
| $ | 84 |
|
| $ | 758 |
| | $ | 15 |
|
(a) Duke Energy amount includes purchase accounting adjustments related to the merger with Progress Energy.
ARO Liability Rollforward
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)
AsActual closure costs incurred could be materially different from current estimates that form the basis of June 30, 2017, $270 million has been drawn under the Three Year Revolver. This balance is classified as Long-Term Debt onrecorded AROs. The following table presents the change in liability associated with AROs for the Duke Energy Registrants. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Balance at December 31, 2017(a) | $ | 10,175 |
| | $ | 3,610 |
| | $ | 5,414 |
| | $ | 4,673 |
| | $ | 742 |
| | $ | 84 |
| | $ | 781 |
| | $ | 15 |
|
Accretion expense(b) | 212 |
| | 89 |
| | 113 |
| | 97 |
| | 16 |
| | 2 |
| | 14 |
| | — |
|
Liabilities settled(c) | (245 | ) | | (114 | ) | | (108 | ) | | (89 | ) | | (19 | ) | | (2 | ) | | (21 | ) | | — |
|
| Liabilities incurred in the current year | 8 |
| | 8 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Revisions in estimates of cash flows(d) | 319 |
| | 226 |
| | 19 |
| | 154 |
| | (137 | ) | | 5 |
| | 82 |
| | — |
|
| Balance at June 30, 2018 | $ | 10,469 |
| | $ | 3,819 |
| | $ | 5,438 |
| | $ | 4,835 |
| | $ | 602 |
| | $ | 89 |
| | $ | 856 |
| | $ | 15 |
|
| |
| (a) | Primarily relates to decommissioning nuclear power facilities, closure of ash impoundments, asbestos removal, closure of landfills at fossil generation facilities, retirement of natural gas mains and removal of renewable energy generation assets. |
| |
| (b) | For the six months ended June 30, 2018, substantially all accretion expense relates to Duke Energy's regulated electric operations and has been deferred in accordance with regulatory accounting treatment. |
| |
| (c) | Primarily relates to ash impoundment closures and nuclear decommissioning of Crystal River Unit 3. |
| |
| (d) | Primarily relates to increases in groundwater monitoring estimates for closure of ash impoundments and a reduction for nuclear decommissioning at Crystal River Unit 3 compared to original estimates. |
Asset retirement costs associated with the AROs for operating plants and retired plants are included in Net property, plant and equipment and Regulatory assets within Other Noncurrent Assets, respectively, on the Condensed Consolidated Balance Sheets. Any undrawn commitments can be drawn, and borrowings can be prepaid, at any time throughout the term of the facility. The terms and conditions of the Three Year Revolver are generally consistent with those governing Duke Energy's Master Credit Facility.
Piedmont Term Loan Facility
In June 2017, Piedmont entered into an 18-month term loan facility with commitments totaling $250 million (the Piedmont Term Loan). Borrowings under the facility will be used for general corporate purposes.
As of June 30, 2017, $125 million has been drawn under the Piedmont Term Loan. This balance is classified as Long-Term Debt on Piedmont's Condensed Consolidated Balance Sheets. The remaining $125 million can be drawn in one additional borrowing, which must occur within 90 days of the closing date of the facility. Piedmont anticipates borrowing the remaining $125 million in the third quarter of 2017. The terms and conditions of the Piedmont Term Loan are generally consistent with those governing Duke Energy's Master Credit Facility.
7. GOODWILL AND INTANGIBLE ASSETS
GOODWILL
Duke Energy
The following table presents the goodwill by reportable operating segment included on Duke Energy's Condensed Consolidated Balance Sheets at June 30, 20172018, and December 31, 2016.2017. | | | | Electric Utilities |
| | Gas Utilities |
| | Commercial |
| | | Electric Utilities |
| | Gas Utilities |
| | Commercial |
| | |
| (in millions) | and Infrastructure |
| | and Infrastructure |
| | Renewables |
| | Total |
| and Infrastructure |
| | and Infrastructure |
| | Renewables |
| | Total |
|
| Goodwill | $ | 17,379 |
| | $ | 1,924 |
| | $ | 122 |
| | $ | 19,425 |
| |
| Goodwill balance | | $ | 17,379 |
| | $ | 1,924 |
| | $ | 122 |
| | $ | 19,425 |
|
| Accumulated impairment charges | | — |
| | — |
| | (29 | ) | | (29 | ) |
| Goodwill, adjusted for accumulated impairment charges | | $ | 17,379 |
| | $ | 1,924 |
| | $ | 93 |
| | $ | 19,396 |
|
Duke Energy Ohio
Duke Energy Ohio's Goodwill balance of $920 million, allocated $596 million to Electric Utilities and Infrastructure and $324 million to Gas Utilities and Infrastructure, is presented net of accumulated impairment charges of $216 million on the Condensed Consolidated Balance Sheets at June 30, 20172018, and December 31, 2016.2017.
Progress Energy
Progress Energy's Goodwill is included in the Electric Utilities and Infrastructure operating segment and there are no accumulated impairment charges.
Piedmont
Piedmont's Goodwill is included in the Gas Utilities and Infrastructure operating segment and there are no accumulated impairment charges. Effective November 1, 2016, Piedmont's fiscal year was changed from October 31 to December 31. Effective with this change, Piedmont changed the date of their annual impairment testing of goodwill from October 31 to August 31 to align with the other 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 – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
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 on the Condensed Consolidated Statements of Operations and Comprehensive Income are presented in the following table. | | | | Three Months Ended June 30, | | Six Months Ended June 30, | Three Months Ended June 30, | | Six Months Ended June 30, |
| (in millions) | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
| 2018 |
| | 2017 |
| | 2018 |
| | 2017 |
|
| Duke Energy Carolinas | | | | | | | | | | | | | | |
Corporate governance and shared service expenses(a) | $ | 178 |
| | $ | 199 |
| | $ | 377 |
| | $ | 416 |
| $ | 213 |
| | $ | 218 |
| | $ | 433 |
| | $ | 439 |
|
Indemnification coverages(b) | 6 |
| | 5 |
| | 12 |
| | 11 |
| 5 |
| | 6 |
| | 11 |
| | 12 |
|
JDA revenue(c) | 17 |
| | 2 |
| | 33 |
| | 11 |
| 19 |
| | 17 |
| | 53 |
| | 33 |
|
JDA expense(c) | 21 |
| | 50 |
| | 52 |
| | 91 |
| 19 |
| | 21 |
| | 73 |
| | 52 |
|
Intercompany natural gas purchases(d) | 1 |
| | — |
| | 2 |
| | — |
| 4 |
| | 1 |
| | 8 |
| | 2 |
|
| Progress Energy | | | | | | | | | | | | | | |
Corporate governance and shared service expenses(a) | $ | 173 |
| | $ | 160 |
| | $ | 342 |
| | $ | 334 |
| $ | 206 |
| | $ | 178 |
| | $ | 397 |
| | $ | 348 |
|
Indemnification coverages(b) | 9 |
| | 9 |
| | 19 |
| | 17 |
| 9 |
| | 9 |
| | 17 |
| | 19 |
|
JDA revenue(c) | 21 |
| | 50 |
| | 52 |
| | 91 |
| 19 |
| | 21 |
| | 73 |
| | 52 |
|
JDA expense(c) | 17 |
| | 2 |
| | 33 |
| | 11 |
| 19 |
| | 17 |
| | 53 |
| | 33 |
|
Intercompany natural gas purchases(d) | 19 |
| | — |
| | 38 |
| | — |
| 19 |
| | 19 |
| | 38 |
| | 38 |
|
| Duke Energy Progress | | | | | | | | | | | | | | |
Corporate governance and shared service expenses(a) | $ | 102 |
| | $ | 89 |
| | $ | 205 |
| | $ | 189 |
| $ | 126 |
| | $ | 109 |
| | $ | 244 |
| | $ | 209 |
|
Indemnification coverages(b) | 3 |
| | 4 |
| | 7 |
| | 7 |
| 3 |
| | 3 |
| | 6 |
| | 7 |
|
JDA revenue(c) | 21 |
| | 50 |
| | 52 |
| | 91 |
| 19 |
| | 21 |
| | 73 |
| | 52 |
|
JDA expense(c) | 17 |
| | 2 |
| | 33 |
| | 11 |
| 19 |
| | 17 |
| | 53 |
| | 33 |
|
Intercompany natural gas purchases(d) | 19 |
| | — |
| | 38 |
| | — |
| 19 |
| | 19 |
| | 38 |
| | 38 |
|
| Duke Energy Florida | | | | | | | | | | | | | | |
Corporate governance and shared service expenses(a) | $ | 71 |
| | $ | 71 |
| | $ | 137 |
| | $ | 145 |
| $ | 80 |
| | $ | 69 |
| | $ | 153 |
| | $ | 139 |
|
Indemnification coverages(b) | 6 |
| | 5 |
| | 12 |
| | 10 |
| 6 |
| | 6 |
| | 11 |
| | 12 |
|
| Duke Energy Ohio | | | | | | | | | | | | | | |
Corporate governance and shared service expenses(a) | $ | 84 |
| | $ | 87 |
| | $ | 174 |
| | $ | 172 |
| $ | 90 |
| | $ | 93 |
| | $ | 179 |
| | $ | 185 |
|
Indemnification coverages(b) | 1 |
| | 1 |
| | 2 |
| | 2 |
| 1 |
| | 1 |
| | 2 |
| | 2 |
|
| Duke Energy Indiana | | | | | | | | | | | | | | |
Corporate governance and shared service expenses(a) | $ | 87 |
| | $ | 89 |
| | $ | 177 |
| | $ | 183 |
| $ | 96 |
| | $ | 92 |
| | $ | 197 |
| | $ | 187 |
|
Indemnification coverages(b) | 2 |
| | 2 |
| | 4 |
| | 4 |
| 2 |
| | 2 |
| | 4 |
| | 4 |
|
| Piedmont | | | | | | | | | | | | | | |
Corporate governance and shared service expenses(a) | $ | 8 |
| | $ | — |
| | $ | 14 |
| | $ | — |
| $ | 40 |
| | $ | 9 |
| | $ | 76 |
| | $ | 14 |
|
Indemnification coverages(b) | — |
| | — |
| | 1 |
| | — |
| — |
| | — |
| | 1 |
| | 1 |
|
Intercompany natural gas sales(d) | 20 |
| | — |
| | 40 |
| | — |
| 23 |
| | 20 |
| | 46 |
| | 40 |
|
| |
| (a) | The Subsidiary Registrants are charged their proportionate share of corporate governance and other shared services costs, primarily related to human resources, employee benefits, information technology, legal and accounting fees, as well as other third-party costs. These amounts are primarily recorded in Operation, maintenance and other on the Condensed Consolidated Statements of Operations and Comprehensive Income. |
| |
| (b) | The Subsidiary Registrants incur expenses related to certain indemnification coverages through Bison, Duke Energy’s wholly owned captive insurance subsidiary. These expenses are recorded in Operation, maintenance and other on the Condensed Consolidated Statements of Operations and Comprehensive Income. |
| |
| (c) | Duke Energy Carolinas and Duke Energy Progress participate in a Joint Dispatch Agreement (JDA), which allows the collective dispatch of power plants between the service territories to reduce customer rates. Revenues from the sale of power and expenses from the purchase of power underpursuant to the JDA are recorded in Operating Revenues and Fuel used in electric generation and purchased power, respectively, on the Condensed Consolidated Statements of Operations and Comprehensive Income. |
| |
| (d) | Piedmont provides long-termlong–term natural gas delivery service to certain Duke Energy Carolinas and Duke Energy Progress'Progress natural gas-firedgas–fired generation facilities. Piedmont records the sales in Regulated natural gasOperating revenues, and Duke Energy Carolinas and Duke Energy Progress record the related purchases inas a component of Fuel used in electric generation and purchased power on their respective Condensed Consolidated Statements of Operations and Comprehensive Income. The amountsThese intercompany revenues and expenses are not eliminated in accordance with rate-based accounting regulations. For the three and six months ended June 30, 2016, which was prior to the Piedmont acquisition, Piedmont recorded $19 million and $38 million, respectively, of natural gas sales with Duke Energy Progress and $1 million and 2 million, respectively, with Duke Energy Carolinas.consolidation. |
In addition to the amounts presented above, the Subsidiary Registrants have other affiliate transactions, including rental of office space, participation in a money pool arrangement, other operational transactions and their proportionate share of certain charged expenses. These transactions of the Subsidiary Registrants were not material for the three and six months ended June 30, 2018, and 2017.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
In addition to the amounts presented above, the Subsidiary Registrants have other affiliate transactions, including rental of office space, participation in a money pool arrangement, other operational transactions and their proportionate share of certain charged expenses. See Note 6 to the Consolidated Financial Statements in the Annual Report on Form 10-K for the year ended December 31, 2016, for more information regarding the money pool. These transactions of the Subsidiary Registrants were not material for the three and six months ended June 30, 2017 and 2016.
As discussed in Note 12, certain trade receivables have been sold by Duke Energy Ohio and Duke Energy Indiana to CRC,Cinergy Receivables Company LLC (CRC), an affiliate formed by aindirect subsidiary of Duke Energy. The proceeds obtained from the sales of receivables are largely cash but also include a subordinated note from the affiliateCRC for a portion of the purchase price.
Equity Method Investments
Piedmont has related party transactions as a customer of its equity method investments in natural gas storage and transportation facilities. The following table presents expenses for the three and six months ended June 30, 20172018, and 2016,2017, which are included in Cost of natural gas on Piedmont's Condensed Consolidated StatementStatements of Operations and Comprehensive Income. | | | | | Three Months Ended June 30, | | Six Months Ended June 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| (in millions) | Type of expense | 2017 | 2016 | | 2017 | 2016 | Type of expense | 2018 | 2017 | | 2018 | 2017 |
| Cardinal | Transportation Costs | $ | 2 |
| $ | 2 |
| | $ | 4 |
| $ | 4 |
| Transportation Costs | $ | 1 |
| $ | 2 |
| | $ | 3 |
| $ | 4 |
|
| Pine Needle | Gas Storage Costs | 2 |
| 2 |
| | 4 |
| 5 |
| Natural Gas Storage Costs | 2 |
| 2 |
| | 4 |
| 4 |
|
| Hardy Storage | Gas Storage Costs | 3 |
| 3 |
| | 5 |
| 5 |
| Natural Gas Storage Costs | 3 |
| 3 |
| | 5 |
| 5 |
|
| Total | | $ | 7 |
| $ | 7 |
| | $ | 13 |
| $ | 14 |
| | $ | 6 |
| $ | 7 |
| | $ | 12 |
| $ | 13 |
|
Piedmont had accounts payable to its equity method investments of $2 million at June 30, 2017,2018, and December 31, 2016,2017, related to these transactions. These amounts are included in Accounts payable on the Condensed Consolidated Balance Sheets.
Intercompany Income Taxes
Duke Energy and the Subsidiary Registrants file a consolidated federal income tax return and other state and jurisdictional returns. The Subsidiary Registrants have a tax sharing agreement with Duke Energy for the allocation of consolidated tax liabilities and benefits. Income taxes recorded represent amounts the Subsidiary Registrants would incur as separate C-Corporations. The following table includes the balance of intercompany income tax receivables and payables for the Subsidiary Registrants. | | | | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
| | 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 |
| Piedmont |
| Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Piedmont |
|
| June 30, 2017 | | |
| June 30, 2018 | | |
| Intercompany income tax receivable | $ | — |
| $ | 102 |
| $ | 35 |
| $ | — |
| $ | 19 |
| $ | 25 |
| $ | 56 |
| $ | — |
| $ | 273 |
| $ | — |
| $ | 140 |
| $ | — |
| $ | — |
| $ | 12 |
|
| Intercompany income tax payable | 20 |
| — |
| — |
| 3 |
| — |
| — |
| — |
| 22 |
| — |
| 24 |
| — |
| 3 |
| 14 |
| — |
|
| | | |
| December 31, 2016 | | |
| December 31, 2017 | | |
| Intercompany income tax receivable | $ | 1 |
| $ | — |
| $ | — |
| $ | 37 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 168 |
| $ | — |
| $ | 44 |
| $ | 22 |
| $ | — |
| $ | 7 |
|
| Intercompany income tax payable | — |
| 37 |
| 90 |
| — |
| 1 |
| 3 |
| 38 |
| 44 |
| — |
| 21 |
| — |
| — |
| 35 |
| — |
|
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 natural gas supply contracts to provide diversification, reliability and natural gas cost benefits to theirits 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 or Treasury locks may be executed to lock in components of current market interest rates. These instruments are later terminated prior to or upon the issuance of the corresponding debt.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Cash Flow Hedges
For a derivative designated as hedging the exposure to variable cash flows of a future transaction, referred to as a cash flow hedge, the effective portion of the derivative's gain or loss is initially reported as a component of other comprehensive income and subsequently reclassified into earnings once the future transaction impacts earnings. Amounts for interest rate contracts are reclassified to earnings as interest expense over the term of the related debt. Gains and losses reclassified out of AOCI for the three and six months ended June 30, 2018 and 2017 were not material. Duke Energy's interest rate derivatives designated as hedges include interest rate swaps used to hedge existing debt within the Commercial Renewables business.
In July and August 2017, Duke Energy entered into $200 million notional amount of Treasury locks that were designated as hedges of debt anticipated to be issued in 2017.
Undesignated Contracts
Undesignated contracts primarily include contracts not designated as a hedge because they are accounted for under regulatory accounting andor contracts that do not qualify for hedge accounting.
Duke Energy’s interest rate swaps for its regulated operations employ regulatory accounting. With regulatory accounting, the mark-to-market gains or losses on the swaps are deferred as regulatory liabilities or regulatory assets, respectively. Regulatory assets and liabilities are amortized consistent with the treatment of the related costs in the ratemaking process. The accrual of interest on the swaps is recorded as Interest Expense.
As of June 30, 2016,Expense on the Duke Energy entered into $1.4 billion of forward-starting interest rate swaps to manage interest rate exposure related to the Piedmont acquisition financing. The swaps did not qualify for hedge accounting and were marked-to-market, with any gains or losses included within earnings. For the three and six months ended June 30, 2016, unrealized losses on the swaps of $75 million and $168 million, respectively, were included within Interest Expense on Duke Energy'sRegistrant's Condensed Consolidated Statements of Operations. The swaps were unwound in August 2016 in conjunction with the acquisition financing. See Note 2 for additional information related to the Piedmont acquisition.Operations and Comprehensive Income.
The following table shows notional amounts of outstanding derivatives related to interest rate risk. | | | | June 30, 2017 | June 30, 2018 |
| | | | 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) | $ | 703 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| $ | 411 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Undesignated contracts | 927 |
| | 400 |
| | 500 |
| | 250 |
| | 250 |
| | 27 |
| 1,527 |
| | 400 |
| | 900 |
| | 650 |
| | 250 |
| | 27 |
|
| Total notional amount | $ | 1,630 |
|
| $ | 400 |
|
| $ | 500 |
|
| $ | 250 |
|
| $ | 250 |
|
| $ | 27 |
| $ | 1,938 |
|
| $ | 400 |
|
| $ | 900 |
|
| $ | 650 |
|
| $ | 250 |
|
| $ | 27 |
|
| | | | December 31, 2016 | December 31, 2017 |
| | | | 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) | $ | 750 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| $ | 660 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Undesignated contracts | 927 |
| | 400 |
| | 500 |
| | 250 |
| | 250 |
| | 27 |
| 927 |
| | 400 |
| | 500 |
| | 250 |
| | 250 |
| | 27 |
|
| Total notional amount | $ | 1,677 |
| | $ | 400 |
| | $ | 500 |
| | $ | 250 |
| | $ | 250 |
| | $ | 27 |
| $ | 1,587 |
| | $ | 400 |
| | $ | 500 |
| | $ | 250 |
| | $ | 250 |
| | $ | 27 |
|
| |
| (a) | Duke Energy includes amounts related to consolidated VIEs of $703 million and $750$611 million as of June 30, 20172018, and $660 million as of December 31, 2016, respectively.2017. |
COMMODITY PRICE RISK
The Duke Energy Registrants are exposed to the impact of changes in the prices of electricity purchased and sold in bulk power markets and coal and natural gas purchases, including Piedmont's natural gas supply contracts. Exposure to commodity price risk is influenced by a number of factors including the term of contracts, the liquidity of markets and delivery locations. For the Subsidiary Registrants, bulk power electricity and coal and natural gas purchases flow through fuel adjustment clauses, formula basedformula-based contracts or other cost sharingcost-sharing mechanisms. Differences between the costs included in rates and the incurred costs, including undesignated derivative contracts, are largely deferred as regulatory assets or regulatory liabilities. Piedmont policies allow for the use of financial instruments to hedge commodity price risks. The strategy and objective of these hedging programs are to use the financial instruments to reduce natural gas costs volatility for customers.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Volumes
The tables below include volumes of outstanding commodity derivatives. Amounts disclosed represent the absolute value of notional volumes of commodity contracts excluding NPNS. The Duke Energy Registrants have netted contractual amounts where offsetting purchase and sale contracts exist with identical delivery locations and times of delivery. Where all commodity positions are perfectly offset, no quantities are shown. | | | | June 30, 2017 | June 30, 2018 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | |
| | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Indiana |
| | Piedmont |
| Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Indiana |
| | Piedmont |
|
| Electricity (gigawatt-hours) | 178 |
| | — |
| | — |
| | — |
| | — |
| | 178 |
| | — |
| 54 |
| | — |
| | — |
| | — |
| | — |
| | 54 |
| | — |
|
| Natural gas (millions of dekatherms) | 791 |
| | 92 |
| | 202 |
| | 106 |
| | 96 |
| | 2 |
| | 495 |
| 756 |
| | 116 |
| | 171 |
| | 152 |
| | 19 |
| | 3 |
| | 466 |
|
| | | | December 31, 2016 | December 31, 2017 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | |
| | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Indiana |
| | Piedmont |
| Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Indiana |
| | Piedmont |
|
| Electricity (gigawatt-hours) | 147 |
| | — |
| | — |
| | — |
| | — |
| | 147 |
| | — |
| 34 |
| | — |
| | — |
| | — |
| | — |
| | 34 |
| | — |
|
| Natural gas (millions of dekatherms) | 890 |
| | 91 |
| | 269 |
| | 118 |
| | 151 |
| | 1 |
| | 529 |
| 770 |
| | 105 |
| | 183 |
| | 133 |
| | 50 |
| | 2 |
| | 480 |
|
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 ON THE CONDENSED CONSOLIDATED BALANCE SHEETS
The following tables show the fair value and balance sheet location of derivative instruments. Although derivatives subject to master netting arrangements are netted on the Condensed Consolidated Balance Sheets, the fair values presented below are shown gross and cash collateral on the derivatives has not been netted against the fair values shown. | | | Derivative Assets | | June 30, 2017 | | June 30, 2018 |
| | | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | | | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | | | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
| | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Commodity Contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Current | | $ | 76 |
| | $ | 7 |
| | $ | 11 |
| | $ | 7 |
| | $ | 4 |
| | $ | 3 |
| | $ | 54 |
| | $ | 2 |
| | $ | 62 |
| | $ | 3 |
| | $ | 4 |
| | $ | 3 |
| | $ | 1 |
| | $ | 9 |
| | $ | 45 |
| | $ | 2 |
|
| Noncurrent | | 3 |
| | 1 |
| | 2 |
| | 1 |
| | 1 |
| | — |
| | — |
| | — |
| | 2 |
| | — |
| | 1 |
| | 1 |
| | — |
| | — |
| | — |
| | — |
|
| Total Derivative Assets – Commodity Contracts | | $ | 79 |
| | $ | 8 |
| | $ | 13 |
| | $ | 8 |
| | $ | 5 |
| | $ | 3 |
| | $ | 54 |
| | $ | 2 |
| | $ | 64 |
| | $ | 3 |
| | $ | 5 |
| | $ | 4 |
| | $ | 1 |
| | $ | 9 |
| | $ | 45 |
| | $ | 2 |
|
| Interest Rate Contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Designated as Hedging Instruments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Current | | | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Noncurrent | | $ | 14 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | 5 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Current | | 2 |
| | — |
| | 2 |
| | — |
| | 1 |
| | — |
| | — |
| | — |
| | 1 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Noncurrent | | | 16 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Total Derivative Assets – Interest Rate Contracts | | $ | 16 |
| | $ | — |
| | $ | 2 |
| | $ | — |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 23 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Total Derivative Assets | | $ | 95 |
|
| $ | 8 |
|
| $ | 15 |
|
| $ | 8 |
|
| $ | 6 |
|
| $ | 3 |
|
| $ | 54 |
| | $ | 2 |
| | $ | 87 |
|
| $ | 3 |
|
| $ | 5 |
|
| $ | 4 |
|
| $ | 1 |
|
| $ | 9 |
|
| $ | 45 |
| | $ | 2 |
|
| | | Derivative Liabilities | | June 30, 2017 | | June 30, 2018 |
| | | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | | | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | | | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
| | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Commodity Contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Current | | $ | 40 |
| | $ | 1 |
| | $ | 21 |
| | $ | 2 |
| | $ | 19 |
| | $ | — |
| | $ | — |
| | $ | 18 |
| | $ | 23 |
| | $ | 8 |
| | $ | 3 |
| | $ | 3 |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | 10 |
|
| Noncurrent | | 140 |
| | 3 |
| | 10 |
| | 3 |
| | 1 |
| | — |
| | — |
| | 127 |
| | 166 |
| | 10 |
| | 17 |
| | 7 |
| | — |
| | — |
| | — |
| | 140 |
|
| Total Derivative Liabilities – Commodity Contracts | | $ | 180 |
| | $ | 4 |
| | $ | 31 |
| | $ | 5 |
| | $ | 20 |
| | $ | — |
| | $ | — |
| | $ | 145 |
| | $ | 189 |
| | $ | 18 |
| | $ | 20 |
| | $ | 10 |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | 150 |
|
| Interest Rate Contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Designated as Hedging Instruments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Current | | $ | 6 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 3 |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Noncurrent | | 9 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 1 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Current | | 23 |
| | 22 |
| | — |
| | — |
| | — |
| | 1 |
| | — |
| | — |
| | 6 |
| | — |
| | 5 |
| | 2 |
| | 3 |
| | — |
| | — |
| | — |
|
| Noncurrent | | 9 |
| | — |
| | 4 |
| | 3 |
| | — |
| | 4 |
| | — |
| | — |
| | 14 |
| | — |
| | 10 |
| | 9 |
| | 1 |
| | 4 |
| | — |
| | — |
|
| Total Derivative Liabilities – Interest Rate Contracts | | $ | 47 |
| | $ | 22 |
| | $ | 4 |
| | $ | 3 |
| | $ | — |
| | $ | 5 |
| | $ | — |
| | $ | — |
| | $ | 24 |
| | $ | 1 |
| | $ | 15 |
| | $ | 11 |
| | $ | 4 |
| | $ | 4 |
| | $ | — |
| | $ | — |
|
| Total Derivative Liabilities | | $ | 227 |
|
| $ | 26 |
|
| $ | 35 |
|
| $ | 8 |
|
| $ | 20 |
|
| $ | 5 |
|
| $ | — |
| | $ | 145 |
| | $ | 213 |
|
| $ | 19 |
|
| $ | 35 |
|
| $ | 21 |
|
| $ | 5 |
|
| $ | 4 |
|
| $ | — |
| | $ | 150 |
|
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 | | December 31, 2016 | | December 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 |
| | Piedmont |
| | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Commodity Contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Current | | $ | 108 |
| | $ | 23 |
| | $ | 61 |
| | $ | 35 |
| | $ | 26 |
| | $ | 4 |
| | $ | 16 |
| | $ | 3 |
| | $ | 34 |
| | $ | 2 |
| | $ | 2 |
| | $ | 1 |
| | $ | 1 |
| | $ | 1 |
| | $ | 27 |
| | $ | 2 |
|
| Noncurrent | | 32 |
| | 10 |
| | 21 |
| | 10 |
| | 11 |
| | 1 |
| | — |
| | — |
| | 1 |
| | — |
| | 1 |
| | 1 |
| | — |
| | — |
| | — |
| | — |
|
| Total Derivative Assets – Commodity Contracts | | $ | 140 |
| | $ | 33 |
| | $ | 82 |
| | $ | 45 |
| | $ | 37 |
| | $ | 5 |
| | $ | 16 |
| | $ | 3 |
| | $ | 35 |
| | $ | 2 |
| | $ | 3 |
| | $ | 2 |
| | $ | 1 |
| | $ | 1 |
| | $ | 27 |
| | $ | 2 |
|
| Interest Rate Contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Designated as Hedging Instruments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Current | | | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Noncurrent | | $ | 19 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | 15 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | | |
| Current | | 3 |
| | — |
| | 3 |
| | 1 |
| | 2 |
| | — |
| | — |
| | — |
| |
| Total Derivative Assets – Interest Rate Contracts | | $ | 22 |
| | $ | — |
| | $ | 3 |
| | $ | 1 |
| | $ | 2 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 16 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Total Derivative Assets | | $ | 162 |
| | $ | 33 |
| | $ | 85 |
| | $ | 46 |
| | $ | 39 |
| | $ | 5 |
| | $ | 16 |
| | $ | 3 |
| | $ | 51 |
| | $ | 2 |
| | $ | 3 |
| | $ | 2 |
| | $ | 1 |
| | $ | 1 |
| | $ | 27 |
| | $ | 2 |
|
| | | Derivative Liabilities | | December 31, 2016 | | December 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 |
| | Piedmont |
| | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Commodity Contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Current | | $ | 43 |
| | $ | — |
| | $ | 12 |
| | $ | — |
| | $ | 12 |
| | $ | — |
| | $ | 2 |
| | $ | 35 |
| | $ | 36 |
| | $ | 6 |
| | $ | 18 |
| | $ | 8 |
| | $ | 10 |
| | $ | — |
| | $ | — |
| | $ | 11 |
|
| Noncurrent | | 166 |
| | 1 |
| | 7 |
| | 1 |
| | — |
| | — |
| | — |
| | 152 |
| | 146 |
| | 4 |
| | 10 |
| | 4 |
| | — |
| | — |
| | — |
| | 131 |
|
| Total Derivative Liabilities – Commodity Contracts | | $ | 209 |
| | $ | 1 |
| | $ | 19 |
| | $ | 1 |
| | $ | 12 |
| | $ | — |
| | $ | 2 |
| | $ | 187 |
| | $ | 182 |
| | $ | 10 |
| | $ | 28 |
| | $ | 12 |
| | $ | 10 |
| | $ | — |
| | $ | — |
| | $ | 142 |
|
| Interest Rate Contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Designated as Hedging Instruments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Current | | $ | 8 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 29 |
| | $ | 25 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Noncurrent | | 8 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 6 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | — |
| | | | | | | | | | | | | | | | |
| Current | | 1 |
| | — |
| | — |
| | — |
| | — |
| | 1 |
| | — |
| | — |
| | 1 |
| | — |
| | 1 |
| | — |
| | — |
| | 1 |
| | — |
| | — |
|
| Noncurrent | | 26 |
| | 15 |
| | 6 |
| | 6 |
| | — |
| | 5 |
| | — |
| | — |
| | 12 |
| | — |
| | 7 |
| | 6 |
| | 2 |
| | 4 |
| | — |
| | — |
|
| Total Derivative Liabilities – Interest Rate Contracts | | $ | 43 |
| | $ | 15 |
| | $ | 6 |
| | $ | 6 |
| | $ | — |
| | $ | 6 |
| | $ | — |
| | $ | — |
| | $ | 48 |
| | $ | 25 |
| | $ | 8 |
| | $ | 6 |
| | $ | 2 |
| | $ | 5 |
| | $ | — |
| | $ | — |
|
| Total Derivative Liabilities | | $ | 252 |
| | $ | 16 |
| | $ | 25 |
| | $ | 7 |
| | $ | 12 |
| | $ | 6 |
| | $ | 2 |
| | $ | 187 |
| | $ | 230 |
| | $ | 35 |
| | $ | 36 |
| | $ | 18 |
| | $ | 12 |
| | $ | 5 |
| | $ | — |
| | $ | 142 |
|
OFFSETTING ASSETS AND LIABILITIES
The following tables present the line items on the Condensed Consolidated Balance Sheets where derivatives are reported. Substantially all of Duke Energy's outstanding derivative contracts are subject to enforceable master netting arrangements. The Grossgross amounts offset in the tables below show the effect of these netting arrangements on financial position, and include collateral posted to offset the net position. The amounts shown are calculated by counterparty. Accounts receivable or accounts payable may also be available to offset exposures in the event of bankruptcy. These amounts are not included in the tables below.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
| | | Derivative Assets | | June 30, 2017 | | June 30, 2018 |
| | | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | | | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | | | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
| | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Current | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 78 |
| | $ | 7 |
| | $ | 13 |
| | $ | 7 |
| | $ | 5 |
| | $ | 3 |
| | $ | 54 |
| | $ | 2 |
| | $ | 64 |
| | $ | 3 |
| | $ | 4 |
| | $ | 3 |
| | $ | 1 |
| | $ | 9 |
| | $ | 45 |
| | $ | 2 |
|
| Gross amounts offset | | (3 | ) | | — |
| | (4 | ) | | — |
| | (3 | ) | | — |
| | — |
| | — |
| | (4 | ) | | (2 | ) | | (2 | ) | | (2 | ) | | — |
| | — |
| | — |
| | — |
|
| Net amounts presented in Current Assets: Other | | $ | 75 |
| | $ | 7 |
| | $ | 9 |
| | $ | 7 |
| | $ | 2 |
| | $ | 3 |
| | $ | 54 |
| | $ | 2 |
| | $ | 60 |
| | $ | 1 |
| | $ | 2 |
| | $ | 1 |
| | $ | 1 |
| | $ | 9 |
| | $ | 45 |
| | $ | 2 |
|
| Noncurrent | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 17 |
| | $ | 1 |
| | $ | 2 |
| | $ | 1 |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 23 |
| | $ | — |
| | $ | 1 |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Gross amounts offset | | (1 | ) | | — |
| | (1 | ) | | — |
| | (1 | ) | | — |
| | — |
| | — |
| | (1 | ) | | — |
| | (1 | ) | | (1 | ) | | — |
| | — |
| | — |
| | — |
|
| Net amounts presented in Other Noncurrent Assets: Other | | $ | 16 |
| | $ | 1 |
| | $ | 1 |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 22 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| | | Derivative Liabilities | | June 30, 2017 | | June 30, 2018 |
| | | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | | | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | | | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
| | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Current | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 69 |
| | $ | 23 |
| | $ | 21 |
| | $ | 2 |
| | $ | 19 |
| | $ | 1 |
| | $ | — |
| | $ | 18 |
| | $ | 32 |
| | $ | 9 |
| | $ | 8 |
| | $ | 5 |
| | $ | 4 |
| | $ | — |
| | $ | — |
| | $ | 10 |
|
| Gross amounts offset | | (4 | ) | | (1 | ) | | (4 | ) | | (1 | ) | | (3 | ) | | — |
| | — |
| | — |
| | (4 | ) | | (2 | ) | | (2 | ) | | (2 | ) | | — |
| | — |
| | — |
| | — |
|
| Net amounts presented in Current Liabilities: Other | | $ | 65 |
| | $ | 22 |
| | $ | 17 |
| | $ | 1 |
| | $ | 16 |
| | $ | 1 |
| | $ | — |
| | $ | 18 |
| | $ | 28 |
| | $ | 7 |
| | $ | 6 |
| | $ | 3 |
| | $ | 4 |
| | $ | — |
| | $ | — |
| | $ | 10 |
|
| Noncurrent | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 158 |
| | $ | 3 |
| | $ | 14 |
| | $ | 6 |
| | $ | 1 |
| | $ | 4 |
| | $ | — |
| | $ | 127 |
| | $ | 181 |
| | $ | 10 |
| | $ | 27 |
| | $ | 16 |
| | $ | 1 |
| | $ | 4 |
| | $ | — |
| | $ | 140 |
|
| Gross amounts offset | | (2 | ) | | (1 | ) | | (1 | ) | | (1 | ) | | (1 | ) | | — |
| | — |
| | — |
| | (2 | ) | | (1 | ) | | (1 | ) | | (1 | ) | | — |
| | — |
| | — |
| | — |
|
| Net amounts presented in Other Noncurrent Liabilities: Other | | $ | 156 |
| | $ | 2 |
| | $ | 13 |
| | $ | 5 |
| | $ | — |
| | $ | 4 |
| | $ | — |
| | $ | 127 |
| | $ | 179 |
| | $ | 9 |
| | $ | 26 |
| | $ | 15 |
| | $ | 1 |
| | $ | 4 |
| | $ | — |
| | $ | 140 |
|
| | | Derivative Assets | | December 31, 2016 | | December 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 |
| | Piedmont |
| | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Current | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 111 |
| | $ | 23 |
| | $ | 64 |
| | $ | 36 |
| | $ | 28 |
| | $ | 4 |
| | $ | 16 |
| | $ | 3 |
| | $ | 35 |
| | $ | 2 |
| | $ | 2 |
| | $ | 1 |
| | $ | 1 |
| | $ | 1 |
| | $ | 27 |
| | $ | 2 |
|
| Gross amounts offset | | (11 | ) | | — |
| | (11 | ) | | — |
| | (11 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Net amounts presented in Current Assets: Other | | $ | 100 |
| | $ | 23 |
| | $ | 53 |
| | $ | 36 |
| | $ | 17 |
| | $ | 4 |
| | $ | 16 |
| | $ | 3 |
| | $ | 35 |
| | $ | 2 |
| | $ | 2 |
| | $ | 1 |
| | $ | 1 |
| | $ | 1 |
| | $ | 27 |
| | $ | 2 |
|
| Noncurrent | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 51 |
| | $ | 10 |
| | $ | 21 |
| | $ | 10 |
| | $ | 11 |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | 16 |
| | $ | — |
| | $ | 1 |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Gross amounts offset | | (2 | ) | | (1 | ) | | (1 | ) | | (1 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Net amounts presented in Other Noncurrent Assets: Other | | $ | 49 |
| | $ | 9 |
| | $ | 20 |
| | $ | 9 |
| | $ | 11 |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | 16 |
| | $ | — |
| | $ | 1 |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
| | | Derivative Liabilities | | December 31, 2016 | | December 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 |
| | Piedmont |
| | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Current | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 52 |
| | $ | — |
| | $ | 12 |
| | $ | — |
| | $ | 12 |
| | $ | 1 |
| | $ | 2 |
| | $ | 35 |
| | $ | 66 |
| | $ | 31 |
| | $ | 19 |
| | $ | 8 |
| | $ | 10 |
| | $ | 1 |
| | $ | — |
| | $ | 11 |
|
| Gross amounts offset | | (11 | ) | | — |
| | (11 | ) | | — |
| | (11 | ) | | — |
| | — |
| | — |
| | (3 | ) | | (2 | ) | | (2 | ) | | (2 | ) | | — |
| | — |
| | — |
| | — |
|
| Net amounts presented in Current Liabilities: Other | | $ | 41 |
| | $ | — |
| | $ | 1 |
| | $ | — |
| | $ | 1 |
| | $ | 1 |
| | $ | 2 |
| | $ | 35 |
| | $ | 63 |
| | $ | 29 |
| | $ | 17 |
| | $ | 6 |
| | $ | 10 |
| | $ | 1 |
| | $ | — |
| | $ | 11 |
|
| Noncurrent | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 200 |
| | $ | 16 |
| | $ | 13 |
| | $ | 7 |
| | $ | — |
| | $ | 5 |
| | $ | — |
| | $ | 152 |
| | $ | 164 |
| | $ | 4 |
| | $ | 17 |
| | $ | 10 |
| | $ | 2 |
| | $ | 4 |
| | $ | — |
| | $ | 131 |
|
| Gross amounts offset | | (2 | ) | | (1 | ) | | (1 | ) | | (1 | ) | | — |
| | — |
| | — |
| | — |
| | (1 | ) | | — |
| | (1 | ) | | (1 | ) | | — |
| | — |
| | — |
| | — |
|
| Net amounts presented in Other Noncurrent Liabilities: Other | | $ | 198 |
| | $ | 15 |
| | $ | 12 |
| | $ | 6 |
| | $ | — |
| | $ | 5 |
| | $ | — |
| | $ | 152 |
| | $ | 163 |
| | $ | 4 |
| | $ | 16 |
| | $ | 9 |
| | $ | 2 |
| | $ | 4 |
| | $ | — |
| | $ | 131 |
|
OBJECTIVE CREDIT CONTINGENT FEATURES
Certain derivative contracts contain objective credit contingent features. These features include the requirement to post cash collateral or letters of credit if specific events occur, such as a credit rating downgrade below investment grade. The following tables show information with respect to derivative contracts that are in a net liability position and contain objective credit-risk-related payment provisions. Amounts for Duke Energy Ohio, Duke Energy Indiana and Piedmont were not material. | | | | June 30, 2017 | June 30, 2018 |
| | | | 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 | $ | 51 |
| | $ | 25 |
| | $ | 26 |
| | $ | 7 |
| | $ | 19 |
| $ | 36 |
| | $ | 16 |
| | $ | 20 |
| | $ | 19 |
| | $ | 1 |
|
| Fair value of collateral already posted | — |
| | — |
| | — |
| | — |
| | — |
| — |
| | — |
| | — |
| | — |
| | — |
|
| Additional cash collateral or letters of credit in the event credit-risk-related contingent features were triggered | 51 |
| | 25 |
| | 26 |
| | 7 |
| | 19 |
| 36 |
| | 16 |
| | 20 |
| | 19 |
| | 1 |
|
| | | | December 31, 2016 | December 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 | $ | 34 |
| | $ | 16 |
| | $ | 18 |
| | $ | 6 |
| | $ | 12 |
| $ | 59 |
| | $ | 35 |
| | $ | 25 |
| | $ | 15 |
| | $ | 10 |
|
| Fair value of collateral already posted | — |
| | — |
| | — |
| | — |
| | — |
| — |
| | — |
| | — |
| | — |
| | — |
|
| Additional cash collateral or letters of credit in the event credit-risk-related contingent features were triggered | 34 |
| | 16 |
| | 18 |
| | 6 |
| | 12 |
| 59 |
| | 35 |
| | 25 |
| | 15 |
| | 10 |
|
The Duke Energy Registrants have elected to offset cash collateral and fair values of derivatives. For amounts to be netted, the derivative and cash collateral must be executed with the same counterparty under the same master netting arrangement. 10. INVESTMENTS IN DEBT AND EQUITY SECURITIES
The Duke Energy Registrants classify theirEnergy’s investments in debt and equity securities as either trading or available-for-sale.
TRADING SECURITIES
Piedmont's investments in debt and equity securities held in rabbi trusts associated with certain deferred compensation plans are classified as trading securities. The fair value of these investments was $2 million and $5 million as of June 30, 2017 and December 31, 2016, respectively.
AVAILABLE-FOR-SALE (AFS) SECURITIES
All other investments in debt and equity securities are classified as AFS.
Duke Energy’s available-for-sale securities are primarily comprised of investments held in (i) the nuclear decommissioning trust fund (NDTF) 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. The Duke Energy Registrants classify investments in debt securities as available-for-sale (AFS) and investments in equity securities as fair value through net income (FV-NI).
For investments in debt securities classified as AFS, the unrealized gains and losses are included in other comprehensive income until realized, at which time, they are reported through net income. For investments in equity securities classified as FV-NI, both realized and unrealized gains and losses are reported through net income. Substantially all of Duke Energy’s investments in debt and equity securities qualify for regulatory accounting, and accordingly, all associated realized and unrealized gains and losses on these investments are deferred as a regulatory asset or liability.
Duke Energy classifies all otherthe majority of investments in debt and equity securities as long term, unless otherwise noted.
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 impairments (OTTIs)OTTIs and are recognized immediately.
Investments within the Investment Trusts generally qualify forimmediately and deferred to regulatory accounting, and accordingly realized and unrealized gains and losses are deferred as a regulatory asset or liability.
Substantially all amounts of the Duke Energy Registrants' gross unrealized holding losses as of June 30, 2017 and December 31, 2016, are considered OTTIs on investments within Investment Trusts that have been recognized immediately as a regulatory asset.accounts where appropriate.
Other AFS Securities
Unrealized gains and losses on all other AFS securities are included in other comprehensive income until realized, unless it is determined the carrying value of an investment is other-than-temporarily impaired. 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 OTTI exists, the unrealized credit loss is included in earnings. There were no material credit losses as of June 30, 20172018, and December 31, 2016.2017.
Other Investments amounts are recorded in Other within Other Noncurrent Assets on the Condensed Consolidated Balance Sheets.
DUKE ENERGY
The following table presents the estimated fair value of investments in AFS securities.debt and equity securities; equity investments are classified as FV-NI and debt investments are classified as AFS. | | | | June 30, 2017 | | December 31, 2016 | June 30, 2018(a) | | December 31, 2017 |
| | Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | | Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | |
| | Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized |
| | Unrealized |
| | Estimated |
| Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized |
| | Unrealized |
| | Estimated |
|
| | Holding |
| | Holding |
| | Fair |
| | Holding |
| | Holding |
| | Fair |
| Holding |
| | Holding |
| | Fair |
| | Holding |
| | Holding |
| | Fair |
|
| (in millions) | Gains |
| | Losses |
| | Value |
| | Gains |
| | Losses |
| | Value |
| Gains |
| | Losses |
| | Value |
| | Gains |
| | Losses |
| | Value |
|
| NDTF | | | | | | | | | | | | | | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 116 |
| | $ | — |
| | $ | — |
| | $ | 111 |
| $ | — |
| | $ | — |
| | $ | 116 |
| | $ | — |
| | $ | — |
| | $ | 115 |
|
| Equity securities | 2,373 |
| | 29 |
| | 4,422 |
| | 2,092 |
| | 54 |
| | 4,106 |
| 2,837 |
| | 40 |
| | 4,988 |
| | 2,805 |
| | 27 |
| | 4,914 |
|
| Corporate debt securities | 15 |
| | 2 |
| | 611 |
| | 10 |
| | 8 |
| | 528 |
| 5 |
| | 12 |
| | 560 |
| | 17 |
| | 2 |
| | 570 |
|
| Municipal bonds | 4 |
| | 3 |
| | 340 |
| | 3 |
| | 10 |
| | 331 |
| 2 |
| | 4 |
| | 341 |
| | 4 |
| | 3 |
| | 344 |
|
| U.S. government bonds | 12 |
| | 6 |
| | 961 |
| | 10 |
| | 8 |
| | 984 |
| 7 |
| | 20 |
| | 991 |
| | 11 |
| | 7 |
| | 1,027 |
|
| Other debt securities | — |
| | 1 |
| | 142 |
| | — |
| | 3 |
| | 124 |
| — |
| | 3 |
| | 128 |
| | — |
| | 1 |
| | 118 |
|
| Total NDTF | $ | 2,404 |
| | $ | 41 |
| | $ | 6,592 |
| | $ | 2,115 |
| | $ | 83 |
| | $ | 6,184 |
| |
| Total NDTF Investments | | $ | 2,851 |
| | $ | 79 |
| | $ | 7,124 |
| | $ | 2,837 |
| | $ | 40 |
| | $ | 7,088 |
|
| Other Investments | | | | | | | | | | | | | | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 15 |
| | $ | — |
| | $ | — |
| | $ | 25 |
| $ | — |
| | $ | — |
| | $ | 15 |
| | $ | — |
| | $ | — |
| | $ | 15 |
|
| Equity securities | 47 |
| | — |
| | 110 |
| | 38 |
| | — |
| | 104 |
| 46 |
| | — |
| | 109 |
| | 59 |
| | — |
| | 123 |
|
| Corporate debt securities | 1 |
| | — |
| | 63 |
| | 1 |
| | 1 |
| | 66 |
| — |
| | 1 |
| | 68 |
| | 1 |
| | — |
| | 57 |
|
| Municipal bonds | 3 |
| | 1 |
| | 82 |
| | 2 |
| | 1 |
| | 82 |
| 1 |
| | 1 |
| | 87 |
| | 2 |
| | 1 |
| | 83 |
|
| U.S. government bonds | — |
| | — |
| | 49 |
| | — |
| | 1 |
| | 51 |
| — |
| | 1 |
| | 52 |
| | — |
| | — |
| | 41 |
|
| Other debt securities | — |
| | — |
| | 36 |
| | — |
| | 2 |
| | 42 |
| — |
| | 1 |
| | 45 |
| | — |
| | 1 |
| | 44 |
|
| Total Other Investments | $ | 51 |
| | $ | 1 |
| | $ | 355 |
| | $ | 41 |
| | $ | 5 |
| | $ | 370 |
| $ | 47 |
| | $ | 4 |
| | $ | 376 |
| | $ | 62 |
| | $ | 2 |
| | $ | 363 |
|
| Total Investments | $ | 2,455 |
| | $ | 42 |
| | $ | 6,947 |
| | $ | 2,156 |
| | $ | 88 |
| | $ | 6,554 |
| $ | 2,898 |
| | $ | 83 |
| | $ | 7,500 |
| | $ | 2,899 |
| | $ | 42 |
| | $ | 7,451 |
|
| |
| (a) | Where regulatory accounting is applied, realized and unrealized gains and losses are deferred as regulatory assets or liabilities, and there is no impact to net income or other comprehensive income until the gain or loss is amortized or collected. |
The table below summarizes the maturity date for debt securities. | | | (in millions) | June 30, 2017 |
| June 30, 2018 |
|
| Due in one year or less | $ | 86 |
| $ | 89 |
|
| Due after one through five years | 631 |
| 518 |
|
| Due after five through 10 years | 503 |
| 543 |
|
| Due after 10 years | 1,064 |
| 1,122 |
|
| Total | $ | 2,284 |
| $ | 2,272 |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the three and six months endedJune 30, 2018, and from sales of AFS securities for the three and six months ended June 30, 2017, were as follows. | | | | Three Months Ended | | Six Months Ended | | | | | |
| | June 30, | | June 30, | Three Months Ended | | Six Months Ended |
| (in millions) | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
| June 30, 2018 | | June 30, 2018 |
| FV-NI: | | | | |
| Realized gains | $ | 40 |
| | $ | 64 |
| | $ | 133 |
| | $ | 118 |
| $ | 47 |
| | $ | 66 |
|
| Realized losses | 37 |
| | 42 |
| | 99 |
| | 92 |
| 31 |
| | 44 |
|
| AFS: | | | | |
| Realized gains | | 5 |
| | 10 |
|
| Realized losses | | 12 |
| | 25 |
|
|
| | | | | | | |
| | Three Months Ended | | Six Months Ended |
| (in millions) | June 30, 2017 | | June 30, 2017 |
| Realized gains | $ | 40 |
| | $ | 133 |
|
| Realized losses | 37 |
| | 99 |
|
DUKE ENERGY CAROLINAS
The following table presents the estimated fair value of investments in AFS securities.debt and equity securities; equity investments are classified as FV-NI and debt investments are classified as AFS. | | | | June 30, 2017 | | December 31, 2016 | June 30, 2018(a) | | December 31, 2017 |
| | Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | | Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | |
| | Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized |
| | Unrealized |
| | Estimated |
| Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized |
| | Unrealized |
| | Estimated |
|
| | Holding |
| | Holding |
| | Fair |
| | Holding |
| | Holding |
| | Fair |
| Holding |
| | Holding |
| | Fair |
| | Holding |
| | Holding |
| | Fair |
|
| (in millions) | Gains |
| | Losses |
| | Value |
| | Gains |
| | Losses |
| | Value |
| Gains |
| | Losses |
| | Value |
| | Gains |
| | Losses |
| | Value |
|
| NDTF | | | | | | | | | | | | | | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 33 |
| | $ | — |
| | $ | — |
| | $ | 18 |
| $ | — |
| | $ | — |
| | $ | 32 |
| | $ | — |
| | $ | — |
| | $ | 32 |
|
| Equity securities | 1,299 |
| | 14 |
| | 2,441 |
| | 1,157 |
| | 28 |
| | 2,245 |
| 1,544 |
| | 23 |
| | 2,732 |
| | 1,531 |
| | 12 |
| | 2,692 |
|
| Corporate debt securities | 9 |
| | 2 |
| | 407 |
| | 5 |
| | 6 |
| | 354 |
| 2 |
| | 8 |
| | 347 |
| | 9 |
| | 2 |
| | 359 |
|
| Municipal bonds | 1 |
| | 1 |
| | 60 |
| | 1 |
| | 2 |
| | 67 |
| 1 |
| | 1 |
| | 72 |
| | — |
| | 1 |
| | 60 |
|
| U.S. government bonds | 3 |
| | 3 |
| | 417 |
| | 2 |
| | 5 |
| | 458 |
| 2 |
| | 12 |
| | 474 |
| | 3 |
| | 4 |
| | 503 |
|
| Other debt securities | — |
| | 1 |
| | 132 |
| | — |
| | 3 |
| | 116 |
| — |
| | 3 |
| | 124 |
| | — |
| | 1 |
| | 112 |
|
| Total NDTF | $ | 1,312 |
| | $ | 21 |
|
| $ | 3,490 |
| | $ | 1,165 |
| | $ | 44 |
| | $ | 3,258 |
| |
| Other Investments | | | | | | | | | | | | |
| Other debt securities | — |
| | — |
| | — |
| | — |
| | 1 |
| | 3 |
| |
| Total Investments | $ | 1,312 |
| | $ | 21 |
| | $ | 3,490 |
| | $ | 1,165 |
| | $ | 45 |
| | $ | 3,261 |
| |
| Total NDTF Investments | | $ | 1,549 |
| | $ | 47 |
|
| $ | 3,781 |
| | $ | 1,543 |
| | $ | 20 |
| | $ | 3,758 |
|
| |
| (a) | Where regulatory accounting is applied, realized and unrealized gains and losses are deferred as regulatory assets or liabilities, and there is no impact to net income or other comprehensive income until the gain or loss is amortized or collected. |
The table below summarizes the maturity date for debt securities. |
| | | |
| (in millions) | June 30, 2017 |
|
| Due in one year or less | $ | 4 |
|
| Due after one through five years | 224 |
|
| Due after five through 10 years | 245 |
|
| Due after 10 years | 543 |
|
| Total | $ | 1,016 |
|
Realized gains and losses, which were determined on a specific identification basis, from sales of AFS securities were as follows. |
| | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended |
| | June 30, | | June 30, |
| (in millions) | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
|
| Realized gains | $ | 24 |
| | $ | 33 |
| | $ | 90 |
| | $ | 67 |
|
| Realized losses | 23 |
| | 19 |
| | 63 |
| | 56 |
|
|
| | | |
| (in millions) | June 30, 2018 |
|
| Due in one year or less | $ | 12 |
|
| Due after one through five years | 163 |
|
| Due after five through 10 years | 286 |
|
| Due after 10 years | 556 |
|
| Total | $ | 1,017 |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the three and six months ended June 30, 2018, and from sales of AFS securities for the three and six months ended June 30, 2017, were as follows. |
| | | | | | | |
| | Three Months Ended | | Six Months Ended |
| (in millions) | June 30, 2018 | | June 30, 2018 |
| FV-NI: | | | |
| Realized gains | $ | 26 |
| | $ | 36 |
|
| Realized losses | 17 |
| | 22 |
|
| AFS: | | | |
| Realized gains | 4 |
| | 9 |
|
| Realized losses | 8 |
| | 18 |
|
|
| | | | | | | |
| | Three Months Ended | | Six Months Ended |
| (in millions) | June 30, 2017 | | June 30, 2017 |
| Realized gains | $ | 24 |
| | $ | 90 |
|
| Realized losses | 23 |
| | 63 |
|
PROGRESS ENERGY
The following table presents the estimated fair value of investments in AFS securities.debt and equity securities; equity investments are classified as FV-NI and debt investments are classified as AFS. | | | | June 30, 2017 | | December 31, 2016 | June 30, 2018(a) | | December 31, 2017 |
| | Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | | Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | |
| | Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized |
| | Unrealized |
| | Estimated |
| Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized |
| | Unrealized |
| | Estimated |
|
| | Holding |
| | Holding |
| | Fair |
| | Holding |
| | Holding |
| | Fair |
| Holding |
| | Holding |
| | Fair |
| | Holding |
| | Holding |
| | Fair |
|
| (in millions) | Gains |
| | Losses |
| | Value |
| | Gains |
| | Losses |
| | Value |
| Gains |
| | Losses |
| | Value |
| | Gains |
| | Losses |
| | Value |
|
| NDTF | | | | | | | | | | | | | | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 83 |
| | $ | — |
| | $ | — |
| | $ | 93 |
| $ | — |
| | $ | — |
| | $ | 84 |
| | $ | — |
| | $ | — |
| | $ | 83 |
|
| Equity securities | 1,074 |
| | 15 |
| | 1,981 |
| | 935 |
| | 26 |
| | 1,861 |
| 1,293 |
| | 17 |
| | 2,256 |
| | 1,274 |
| | 15 |
| | 2,222 |
|
| Corporate debt securities | 6 |
| | — |
| | 204 |
| | 5 |
| | 2 |
| | 174 |
| 3 |
| | 4 |
| | 213 |
| | 8 |
| | — |
| | 211 |
|
| Municipal bonds | 3 |
| | 2 |
| | 280 |
| | 2 |
| | 8 |
| | 264 |
| 1 |
| | 3 |
| | 269 |
| | 4 |
| | 2 |
| | 284 |
|
| U.S. government bonds | 9 |
| | 3 |
| | 544 |
| | 8 |
| | 3 |
| | 526 |
| 5 |
| | 8 |
| | 517 |
| | 8 |
| | 3 |
| | 524 |
|
| Other debt securities | — |
| | — |
| | 10 |
| | — |
| | — |
| | 8 |
| — |
| | — |
| | 4 |
| | — |
| | — |
| | 6 |
|
| Total NDTF | $ | 1,092 |
| | $ | 20 |
| | $ | 3,102 |
| | $ | 950 |
| | $ | 39 |
| | $ | 2,926 |
| |
| Total NDTF Investments | | $ | 1,302 |
| | $ | 32 |
| | $ | 3,343 |
| | $ | 1,294 |
| | $ | 20 |
| | $ | 3,330 |
|
| Other Investments | | | | | | | | | | | | | | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 12 |
| | $ | — |
| | $ | — |
| | $ | 21 |
| $ | — |
| | $ | — |
| | $ | 11 |
| | $ | — |
| | $ | — |
| | $ | 12 |
|
| Municipal bonds | 3 |
| | — |
| | 47 |
| | 2 |
| | — |
| | 44 |
| 1 |
| | — |
| | 47 |
| | 2 |
| | — |
| | 47 |
|
| Total Other Investments | $ | 3 |
| | $ | — |
| | $ | 59 |
| | $ | 2 |
| | $ | — |
| | $ | 65 |
| $ | 1 |
| | $ | — |
| | $ | 58 |
| | $ | 2 |
| | $ | — |
| | $ | 59 |
|
| Total Investments | $ | 1,095 |
| | $ | 20 |
| | $ | 3,161 |
| | $ | 952 |
| | $ | 39 |
| | $ | 2,991 |
| $ | 1,303 |
| | $ | 32 |
| | $ | 3,401 |
| | $ | 1,296 |
| | $ | 20 |
| | $ | 3,389 |
|
| |
| (a) | Where regulatory accounting is applied, realized and unrealized gains and losses are deferred as regulatory assets or liabilities, and there is no impact to net income or other comprehensive income until the gain or loss is amortized or collected. |
The table below summarizes the maturity date for debt securities. |
| | | |
| (in millions) | June 30, 2017 |
|
| Due in one year or less | $ | 72 |
|
| Due after one through five years | 347 |
|
| Due after five through 10 years | 196 |
|
| Due after 10 years | 470 |
|
| Total | $ | 1,085 |
|
Realized gains and losses, which were determined on a specific identification basis, from sales of AFS securities were as follows. |
| | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended |
| | June 30, | | June 30, |
| (in millions) | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
|
| Realized gains | $ | 15 |
| | $ | 31 |
| | $ | 42 |
| | $ | 50 |
|
| Realized losses | 14 |
| | 23 |
| | 35 |
| | 36 |
|
|
| | | |
| (in millions) | June 30, 2018 |
|
| Due in one year or less | $ | 69 |
|
| Due after one through five years | 286 |
|
| Due after five through 10 years | 207 |
|
| Due after 10 years | 488 |
|
| Total | $ | 1,050 |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the three and six months endedJune 30, 2018, and from sales of AFS securities for the three and six months ended June 30, 2017, were as follows. |
| | | | | | | |
| | Three Months Ended | Six Months Ended |
| (in millions) | June 30, 2018 | | June 30, 2018 |
| FV-NI: | | | |
| Realized gains | $ | 21 |
| | $ | 30 |
|
| Realized losses | 14 |
| | 22 |
|
| AFS: | | | |
| Realized gains | 1 |
| | 1 |
|
| Realized losses | 4 |
| | 7 |
|
|
| | | | | | | |
| | Three Months Ended | | Six Months Ended |
| (in millions) | June 30, 2017 | | June 30, 2017 |
| Realized gains | $ | 15 |
| | $ | 42 |
|
| Realized losses | 14 |
| | 35 |
|
DUKE ENERGY PROGRESS
The following table presents the estimated fair value of investments in AFS securities.debt and equity securities; equity investments are classified as FV-NI and debt investments are classified as AFS. | | | | June 30, 2017 | | December 31, 2016 | June 30, 2018(a) | | December 31, 2017 |
| | Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | | Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | |
| | Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized |
| | Unrealized |
| | Estimated |
| Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized |
| | Unrealized |
| | Estimated |
|
| | Holding |
| | Holding |
| | Fair |
| | Holding |
| | Holding |
| | Fair |
| Holding |
| | Holding |
| | Fair |
| | Holding |
| | Holding |
| | Fair |
|
| (in millions) | Gains |
| | Losses |
| | Value |
| | Gains |
| | Losses |
| | Value |
| Gains |
| | Losses |
| | Value |
| | Gains |
| | Losses |
| | Value |
|
| NDTF | | | | | | | | | | | | | | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 31 |
| | $ | — |
| | $ | — |
| | $ | 45 |
| $ | — |
| | $ | — |
| | $ | 46 |
| | $ | — |
| | $ | — |
| | $ | 50 |
|
| Equity securities | 816 |
| | 12 |
| | 1,607 |
| | 704 |
| | 21 |
| | 1,505 |
| 995 |
| | 13 |
| | 1,819 |
| | 980 |
| | 12 |
| | 1,795 |
|
| Corporate debt securities | 5 |
| | — |
| | 142 |
| | 4 |
| | 1 |
| | 120 |
| 2 |
| | 3 |
| | 153 |
| | 6 |
| | — |
| | 149 |
|
| Municipal bonds | 3 |
| | 2 |
| | 279 |
| | 2 |
| | 8 |
| | 263 |
| 1 |
| | 3 |
| | 268 |
| | 4 |
| | 2 |
| | 283 |
|
| U.S. government bonds | 6 |
| | 2 |
| | 314 |
| | 5 |
| | 2 |
| | 275 |
| 4 |
| | 6 |
| | 339 |
| | 5 |
| | 2 |
| | 310 |
|
| Other debt securities | — |
| | — |
| | 6 |
| | — |
| | — |
| | 5 |
| — |
| | — |
| | 2 |
| | — |
| | — |
| | 4 |
|
| Total NDTF | $ | 830 |
| | $ | 16 |
| | $ | 2,379 |
| | $ | 715 |
| | $ | 32 |
| | $ | 2,213 |
| |
| Total NDTF Investments | | $ | 1,002 |
| | $ | 25 |
| | $ | 2,627 |
| | $ | 995 |
| | $ | 16 |
| | $ | 2,591 |
|
| Other Investments | | | | | | | | | | | | | | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | 1 |
| $ | — |
| | $ | — |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | 1 |
|
| Total Other Investments | | $ | — |
| | $ | — |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | 1 |
|
| Total Investments | $ | 830 |
| | $ | 16 |
| | $ | 2,380 |
| | $ | 715 |
| | $ | 32 |
| | $ | 2,214 |
| $ | 1,002 |
| | $ | 25 |
| | $ | 2,628 |
| | $ | 995 |
| | $ | 16 |
| | $ | 2,592 |
|
| |
| (a) | Where regulatory accounting is applied, realized and unrealized gains and losses are deferred as regulatory assets or liabilities, and there is no impact to net income or other comprehensive income until the gain or loss is amortized or collected. |
The table below summarizes the maturity date for debt securities. |
| | | |
| (in millions) | June 30, 2017 |
|
| Due in one year or less | $ | 18 |
|
| Due after one through five years | 220 |
|
| Due after five through 10 years | 144 |
|
| Due after 10 years | 359 |
|
| Total | $ | 741 |
|
Realized gains and losses, which were determined on a specific identification basis, from sales of AFS securities were as follows. |
| | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended |
| | June 30, | | June 30, |
| (in millions) | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
|
| Realized gains | $ | 11 |
| | $ | 27 |
| | $ | 35 |
| | $ | 42 |
|
| Realized losses | 11 |
| | 20 |
| | 30 |
| | 31 |
|
|
| | | |
| (in millions) | June 30, 2018 |
|
| Due in one year or less | $ | 24 |
|
| Due after one through five years | 214 |
|
| Due after five through 10 years | 150 |
|
| Due after 10 years | 374 |
|
| Total | $ | 762 |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the three and six months endedJune 30, 2018, and from sales of AFS securities for the three and six months ended June 30, 2017, were as follows. |
| | | | | | | |
| | Three Months Ended | Six Months Ended |
| (in millions) | June 30, 2018 | | June 30, 2018 |
| FV-NI: | | | |
| Realized gains | $ | 17 |
| | $ | 25 |
|
| Realized losses | 12 |
| | 20 |
|
| AFS: | | | |
| Realized gains | 1 |
| | 1 |
|
| Realized losses | 3 |
| | 5 |
|
|
| | | | | | | |
| | Three Months Ended | | Six Months Ended |
| (in millions) | June 30, 2017 | | June 30, 2017 |
| Realized gains | $ | 11 |
| | $ | 35 |
|
| Realized losses | 11 |
| | 30 |
|
DUKE ENERGY FLORIDA
The following table presents the estimated fair value of investments in AFS securities.debt and equity securities; equity investments are classified as FV-NI and debt investments are classified as AFS. | | | | June 30, 2017 | | December 31, 2016 | June 30, 2018(a) | | December 31, 2017 |
| | Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | | Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | |
| | Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized |
| | Unrealized |
| | Estimated |
| Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized |
| | Unrealized |
| | Estimated |
|
| | Holding |
| | Holding |
| | Fair |
| | Holding |
| | Holding |
| | Fair |
| Holding |
| | Holding |
| | Fair |
| | Holding |
| | Holding |
| | Fair |
|
| (in millions) | Gains |
| | Losses |
| | Value |
| | Gains |
| | Losses |
| | Value |
| Gains |
| | Losses |
| | Value |
| | Gains |
| | Losses |
| | Value |
|
| NDTF | | | | | | | | | | | | | | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 52 |
| | $ | — |
| | $ | — |
| | $ | 48 |
| $ | — |
| | $ | — |
| | $ | 38 |
| | $ | — |
| | $ | — |
| | $ | 33 |
|
| Equity securities | 258 |
| | 3 |
| | 374 |
| | 231 |
| | 5 |
| | 356 |
| 298 |
| | 4 |
| | 437 |
| | 294 |
| | 3 |
| | 427 |
|
| Corporate debt securities | 1 |
| | — |
| | 62 |
| | 1 |
| | 1 |
| | 54 |
| 1 |
| | 1 |
| | 60 |
| | 2 |
| | — |
| | 62 |
|
| Municipal bonds | — |
| | — |
| | 1 |
| | — |
| | — |
| | 1 |
| — |
| | — |
| | 1 |
| | — |
| | — |
| | 1 |
|
| U.S. government bonds | 3 |
| | 1 |
| | 230 |
| | 3 |
| | 1 |
| | 251 |
| 1 |
| | 2 |
| | 178 |
| | 3 |
| | 1 |
| | 214 |
|
| Other debt securities | — |
| | — |
| | 4 |
| | — |
| | — |
| | 3 |
| — |
| | — |
| | 2 |
| | — |
| | — |
| | 2 |
|
Total NDTF(a) | $ | 262 |
| | $ | 4 |
| | $ | 723 |
| | $ | 235 |
| | $ | 7 |
| | $ | 713 |
| |
Total NDTF Investments(b) | | $ | 300 |
| | $ | 7 |
| | $ | 716 |
| | $ | 299 |
| | $ | 4 |
| | $ | 739 |
|
| Other Investments | | | | | | | | | | | | | | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | 4 |
| $ | — |
| | $ | — |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | 1 |
|
| Municipal bonds | 3 |
| | — |
| | 47 |
| | 2 |
| | — |
| | 44 |
| 1 |
| | — |
| | 47 |
| | 2 |
| | — |
| | 47 |
|
| Total Other Investments | $ | 3 |
| | $ | — |
| | $ | 48 |
| | $ | 2 |
| | $ | — |
| | $ | 48 |
| $ | 1 |
| | $ | — |
| | $ | 48 |
| | $ | 2 |
| | $ | — |
| | $ | 48 |
|
| Total Investments | $ | 265 |
| | $ | 4 |
| | $ | 771 |
| | $ | 237 |
| | $ | 7 |
| | $ | 761 |
| $ | 301 |
| | $ | 7 |
| | $ | 764 |
| | $ | 301 |
| | $ | 4 |
| | $ | 787 |
|
| |
| (a) | Where regulatory accounting is applied, realized and unrealized gains and losses are deferred as regulatory assets or liabilities, and there is no impact to net income or other comprehensive income until the gain or loss is amortized or collected. |
| |
| (b) | During the six months ended June 30, 2017,2018, Duke Energy Florida continued to receive reimbursements from the NDTF for costs related to ongoing decommissioning activity of the Crystal River Unit 3 nuclear plant. |
The table below summarizes the maturity date for debt securities. |
| | | |
| (in millions) | June 30, 2017 |
|
| Due in one year or less | $ | 54 |
|
| Due after one through five years | 127 |
|
| Due after five through 10 years | 52 |
|
| Due after 10 years | 111 |
|
| Total | $ | 344 |
|
Realized gains and losses, which were determined on a specific identification basis, from sales of AFS securities were as follows. |
| | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended |
| | June 30, | | June 30, |
| (in millions) | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
|
| Realized gains | $ | 4 |
| | $ | 4 |
| | $ | 7 |
| | $ | 8 |
|
| Realized losses | 3 |
| | 3 |
| | 5 |
| | 5 |
|
|
| | | |
| (in millions) | June 30, 2018 |
|
| Due in one year or less | $ | 45 |
|
| Due after one through five years | 72 |
|
| Due after five through 10 years | 57 |
|
| Due after 10 years | 114 |
|
| Total | $ | 288 |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the three and six months endedJune 30, 2018, and from sales of AFS securities for the three and six months ended June 30, 2017, were as follows. |
| | | | | | | |
| | Three Months Ended | Six Months Ended |
| (in millions) | June 30, 2018 | | June 30, 2018 |
| FV-NI: | | | |
| Realized gains | $ | 4 |
| | $ | 5 |
|
| Realized losses | 2 |
| | 2 |
|
| AFS: | | | |
| Realized gains | — |
| | — |
|
| Realized losses | 1 |
| | 2 |
|
|
| | | | | | | |
| | Three Months Ended | Six Months Ended |
| (in millions) | June 30, 2017 | | June 30, 2017 |
| Realized gains | $ | 4 |
| | $ | 7 |
|
| Realized losses | 3 |
| | 5 |
|
DUKE ENERGY INDIANA
The following table presents the estimated fair value of investments in AFS securities.debt and equity securities; equity investments are measured at FV-NI and debt investments are classified as AFS. | | | | June 30, 2017 | | December 31, 2016 | June 30, 2018(a) | | December 31, 2017 |
| | Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | | Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | |
| | Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized |
| | Unrealized |
| | Estimated |
| Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized |
| | Unrealized |
| | Estimated |
|
| | Holding |
| | Holding |
| | Fair |
| | Holding |
| | Holding |
| | Fair |
| Holding |
| | Holding |
| | Fair |
| | Holding |
| | Holding |
| | Fair |
|
| (in millions) | Gains |
| | Losses |
| | Value |
| | Gains |
| | Losses |
| | Value |
| Gains |
| | Losses |
| | Value |
| | Gains |
| | Losses |
| | Value |
|
| Investments | | | | | | | | | | | | | | | | | | | | | | |
| Equity securities | $ | 40 |
| | $ | — |
| | $ | 87 |
| | $ | 33 |
| | $ | — |
| | $ | 79 |
| $ | 36 |
| | $ | — |
| | $ | 74 |
| | $ | 49 |
| | $ | — |
| | $ | 97 |
|
| Corporate debt securities | — |
| | — |
| | 3 |
| | — |
| | — |
| | 2 |
| — |
| | — |
| | 8 |
| | — |
| | — |
| | 3 |
|
| Municipal bonds | — |
| | 1 |
| | 27 |
| | — |
| | 1 |
| | 28 |
| — |
| | 1 |
| | 33 |
| | — |
| | 1 |
| | 28 |
|
| U.S. government bonds | — |
| | — |
| | 1 |
| | — |
| | — |
| | 1 |
| |
| Total Investments | $ | 40 |
| | $ | 1 |
| | $ | 118 |
| | $ | 33 |
| | $ | 1 |
| | $ | 110 |
| $ | 36 |
| | $ | 1 |
| | $ | 115 |
| | $ | 49 |
| | $ | 1 |
| | $ | 128 |
|
| |
| (a) | Realized and unrealized gains and losses where regulatory accounting is applied are deferred as regulatory assets or liabilities, and there is no impact to net income or other comprehensive income until the gain or loss is amortized or collected. |
The table below summarizes the maturity date for debt securities. | | | (in millions) | June 30, 2017 |
| June 30, 2018 |
|
| Due in one year or less | $ | 3 |
| $ | 3 |
|
| Due after one through five years | 14 |
| 20 |
|
| Due after five through 10 years | 8 |
| 4 |
|
| Due after 10 years | 6 |
| 14 |
|
| Total | $ | 31 |
| $ | 41 |
|
Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities were insignificantfor the three and six months ended June 30, 2018, and from sales of AFS securities for the three and six months ended June 30, 2017, and 2016.were insignificant.
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.
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)
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 and (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 that includes unobservable inputs for more than an insignificant portion of the valuation. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value. Level 3 measurements may include longer-term instruments that extend into periods in which observable inputs are not available.
Not Categorized – Certain investments are not categorized within the Fair Value hierarchy. These investments are measured at fair value using the net asset value (NAV) per share practical expedient. The NAV is derived based on the fair valueinvestment cost, less any impairment, plus or minus changes resulting from observable price changes for an identical or similar investment of the underlying investments but may not be readily redeemable at that fair value.same issuer.
Fair value accounting guidance permits entities to elect to measure certain financial instruments that are not required to be accounted for at fair value, such as equity method investments or the company’s own debt, at fair value. The Duke Energy Registrants have not elected to record any of these items at fair value.
Transfers between levels represent assets or liabilities that were previously (i) categorized at a higher level for which the inputs to the estimate became less observable or (ii) classified at a lower level for which the inputs became more observable during the period. The Duke Energy Registrant’s policy is to recognize transfers between levels of the fair value hierarchy at the end of the period. There were no transfers between levels during the three and six months ended June 30, 20172018, and 2016.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
2017.
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 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 natural gas supply contracts, are primarily valued using internally developed discounted cash flow models that incorporate forward price, adjustments for liquidity (bid-ask spread) and credit or non-performance risk (after reflecting credit enhancements 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 that utilize observable inputs for similar instruments and are classified as Level 2. Inputs include forward interest rate curves, notional amounts, interest rates and credit quality of the counterparties.
Other fair value considerations
See Note 2 related to the acquisition of Piedmont in 2016. See Note 11 in Duke Energy's Annual Report on Form 10-K10-K/A for the year ended December 31, 2016,2017, for a discussion of the valuation of goodwill and intangible 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 – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
DUKE ENERGY
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets. Derivative amounts in the tables below for all Duke Energy Registrants exclude cash collateral, which is disclosed in Note 9. See Note 10 for additional information related to investments by major security type for the Duke Energy Registrants. |
| | | | | | | | | | | | | | | |
| | June 30, 2017 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 |
| Not categorized |
|
| NDTF equity securities | $ | 4,422 |
| $ | 4,345 |
| $ | — |
| $ | — |
| $ | 77 |
|
| NDTF debt securities | 2,170 |
| 593 |
| 1,577 |
| — |
| — |
|
| Other trading and AFS equity securities | 112 |
| 112 |
| — |
| — |
| — |
|
| Other trading and AFS debt securities | 245 |
| 63 |
| 182 |
| — |
| — |
|
| Derivative assets | 95 |
| 4 |
| 37 |
| 54 |
| — |
|
| Total assets | 7,044 |
| 5,117 |
| 1,796 |
| 54 |
| 77 |
|
| Derivative liabilities | (227 | ) | (1 | ) | (81 | ) | (145 | ) | — |
|
| Net assets (liabilities) | $ | 6,817 |
| $ | 5,116 |
| $ | 1,715 |
| $ | (91 | ) | $ | 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)
|
| | | | | | | | | | | | | | | |
| | June 30, 2018 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 |
| Not Categorized |
|
| NDTF equity securities | $ | 4,988 |
| $ | 4,918 |
| $ | — |
| $ | — |
| $ | 70 |
|
| NDTF debt securities | 2,136 |
| 578 |
| 1,558 |
| — |
| — |
|
| Other equity securities | 109 |
| 109 |
| — |
| — |
| — |
|
| Other debt securities | 267 |
| 68 |
| 199 |
| — |
| — |
|
| Derivative assets | 87 |
| 3 |
| 31 |
| 53 |
| — |
|
| Total assets | 7,587 |
| 5,676 |
| 1,788 |
| 53 |
| 70 |
|
| Derivative liabilities | (213 | ) | (1 | ) | (62 | ) | (150 | ) | — |
|
| Net assets (liabilities) | $ | 7,374 |
| $ | 5,675 |
| $ | 1,726 |
| $ | (97 | ) | $ | 70 |
|
| | | | December 31, 2016 | December 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 |
|
| NDTF equity securities | $ | 4,106 |
| $ | 4,029 |
| $ | — |
| $ | — |
| $ | 77 |
| $ | 4,914 |
| $ | 4,840 |
| $ | — |
| $ | — |
| $ | 74 |
|
| NDTF debt securities | 2,078 |
| 632 |
| 1,446 |
| — |
| — |
| 2,174 |
| 635 |
| 1,539 |
| — |
| — |
|
| Other trading and AFS equity securities | 104 |
| 104 |
| — |
| — |
| — |
| |
| Other trading and AFS debt securities | 266 |
| 75 |
| 186 |
| 5 |
| — |
| |
| Other equity securities | | 123 |
| 123 |
| — |
| — |
| — |
|
| Other debt securities | | 241 |
| 57 |
| 184 |
| — |
| — |
|
| Derivative assets | 162 |
| 5 |
| 136 |
| 21 |
| — |
| 51 |
| 3 |
| 20 |
| 28 |
| — |
|
| Total assets | 6,716 |
| 4,845 |
| 1,768 |
| 26 |
| 77 |
| 7,503 |
| 5,658 |
| 1,743 |
| 28 |
| 74 |
|
| Derivative liabilities | (252 | ) | (2 | ) | (63 | ) | (187 | ) | — |
| (230 | ) | (2 | ) | (86 | ) | (142 | ) | — |
|
| Net assets (liabilities) | $ | 6,464 |
| $ | 4,843 |
| $ | 1,705 |
| $ | (161 | ) | $ | 77 |
| $ | 7,273 |
| $ | 5,656 |
| $ | 1,657 |
| $ | (114 | ) | $ | 74 |
|
The following tables provide reconciliations of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements. Amounts included in earnings for derivatives are primarily included in Cost of natural gas on the Duke Energy Registrants' Condensed Consolidated Statements of Operations and Comprehensive Income. Amounts included in changes of net assets on the Duke Energy Registrants' Condensed Consolidated Balance Sheets are included in regulatory assets or liabilities. All derivative assets and liabilities are presented on a net basis. |
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, 2017 | | Three Months Ended June 30, 2016 |
| (in millions) | Investments |
| | Derivatives (net) |
| | Total |
| | Investments |
| | Derivatives (net) |
| | Total |
|
| Balance at beginning of period | $ | 5 |
| | $ | (135 | ) | | $ | (130 | ) | | $ | 4 |
| | $ | 2 |
| | $ | 6 |
|
| Total pretax realized or unrealized gains included in comprehensive income | 1 |
| | — |
| | 1 |
| | — |
| | — |
| | — |
|
| Purchases, sales, issuances and settlements: | | | | |
|
| | | | | | |
| Purchases | — |
| | 55 |
| | 55 |
| | — |
| | 34 |
| | 34 |
|
| Sales | (6 | ) | | — |
| | (6 | ) | | — |
| | — |
| | — |
|
| Settlements | — |
| | (9 | ) | | (9 | ) | | — |
| | (6 | ) | | (6 | ) |
| Total (losses) gains included on the Condensed Consolidated Balance Sheet | — |
| | (2 | ) | | (2 | ) | | — |
| | 4 |
| | 4 |
|
| Balance at end of period | $ | — |
| | $ | (91 | ) | | $ | (91 | ) | | $ | 4 |
| | $ | 34 |
| | $ | 38 |
|
| | | | Six Months Ended June 30, 2017 | | Six Months Ended June 30, 2016 | Three Months Ended June 30, 2018 | | Three Months Ended June 30, 2017 |
| (in millions) | Investments |
| | Derivatives (net) |
| | Total |
| | Investments |
| | Derivatives (net) |
| | Total |
| Investments |
| | Derivatives (net) |
| | Total |
| | Investments |
| | Derivatives (net) |
| | Total |
|
| Balance at beginning of period | $ | 5 |
| | $ | (166 | ) | | $ | (161 | ) | | $ | 5 |
| | $ | 10 |
| | $ | 15 |
| $ | — |
| | $ | (124 | ) | | $ | (124 | ) | | $ | 5 |
| | $ | (135 | ) | | $ | (130 | ) |
| Total pretax realized or unrealized gains included in comprehensive income | 1 |
| | — |
| | 1 |
| | — |
| | — |
| | — |
| — |
| | — |
| | — |
| | 1 |
| | — |
| | 1 |
|
| Purchases, sales, issuances and settlements: | | | | | | | | | | | | | | | | — |
| | | | | | |
| Purchases | — |
| | 55 |
| | 55 |
| | — |
| | 34 |
| | 34 |
| — |
| | 56 |
| | 56 |
| | — |
| | 55 |
| | 55 |
|
| Sales | (6 | ) | | — |
| | (6 | ) | | (1 | ) | | — |
| | (1 | ) | — |
| | — |
| | — |
| | (6 | ) | | — |
| | (6 | ) |
| Settlements | — |
| | (18 | ) | | (18 | ) | | — |
| | (13 | ) | | (13 | ) | — |
| | (15 | ) | | (15 | ) | | — |
| | (9 | ) | | (9 | ) |
| Total gains included on the Condensed Consolidated Balance Sheet | — |
| | 38 |
| | 38 |
| | — |
| | 3 |
| | 3 |
| |
| Total losses included on the Condensed Consolidated Balance Sheet | | — |
| | (14 | ) | | (14 | ) | | — |
| | (2 | ) | | (2 | ) |
| Balance at end of period | $ | — |
| | $ | (91 | ) | | $ | (91 | ) | | $ | 4 |
| | $ | 34 |
| | $ | 38 |
| $ | — |
| | $ | (97 | ) | | $ | (97 | ) | | $ | — |
| | $ | (91 | ) | | $ | (91 | ) |
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)
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2018 | | Six Months Ended June 30, 2017 |
| (in millions) | Investments |
| | Derivatives (net) |
| | Total |
| | Investments |
| | Derivatives (net) |
| | Total |
|
| Balance at beginning of period | $ | — |
| | $ | (114 | ) | | $ | (114 | ) | | $ | 5 |
| | $ | (166 | ) | | $ | (161 | ) |
| Total pretax realized or unrealized gains included in comprehensive income | — |
| | — |
| | — |
| | 1 |
| | — |
| | 1 |
|
| Purchases, sales, issuances and settlements: | | | | | | | | | | | |
| Purchases | — |
| | 56 |
| | 56 |
| | — |
| | 55 |
| | 55 |
|
| Sales | — |
| | — |
| | — |
| | (6 | ) | | — |
| | (6 | ) |
| Settlements | — |
| | (29 | ) | | (29 | ) | | — |
| | (18 | ) | | (18 | ) |
| Total (losses) gains included on the Condensed Consolidated Balance Sheet | — |
| | (10 | ) | | (10 | ) | | — |
| | 38 |
| | 38 |
|
| Balance at end of period | $ | — |
| | $ | (97 | ) | | $ | (97 | ) | | $ | — |
| | $ | (91 | ) | | $ | (91 | ) |
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. |
| | | | | | | | | | | | |
| | June 30, 2018 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| Not Categorized |
|
| NDTF equity securities | $ | 2,732 |
| $ | 2,662 |
| $ | — |
| $ | 70 |
|
| NDTF debt securities | 1,049 |
| 164 |
| 885 |
| — |
|
| Derivative assets | 3 |
| — |
| 3 |
| — |
|
| Total assets | 3,784 |
| 2,826 |
| 888 |
| 70 |
|
| Derivative liabilities | (19 | ) | — |
| (19 | ) | — |
|
| Net assets | $ | 3,765 |
| $ | 2,826 |
| $ | 869 |
| $ | 70 |
|
|
| | | | | | | | | | | | |
| | December 31, 2017 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| Not Categorized |
|
| NDTF equity securities | $ | 2,692 |
| $ | 2,618 |
| $ | — |
| $ | 74 |
|
| NDTF debt securities | 1,066 |
| 204 |
| 862 |
| — |
|
| Derivative assets | 2 |
| — |
| 2 |
| — |
|
| Total assets | 3,760 |
| 2,822 |
| 864 |
| 74 |
|
| Derivative liabilities | (35 | ) | (1 | ) | (34 | ) | — |
|
| Net assets | $ | 3,725 |
| $ | 2,821 |
| $ | 830 |
| $ | 74 |
|
The following table provides a reconciliation of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements. |
| | | | | | | | | | | | | | | |
| | Investments |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| (in millions) | 2018 |
| | 2017 |
| | 2018 |
| | 2017 |
|
| Balance at beginning of period | $ | — |
| | $ | 3 |
| | $ | — |
| | $ | 3 |
|
| Total pretax realized or unrealized gains included in comprehensive income | — |
| | 1 |
| | — |
| | 1 |
|
| Purchases, sales, issuances and settlements: | | | | | | | |
| Sales | — |
| | (4 | ) | | — |
| | (4 | ) |
| Balance at end of period | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
PROGRESS ENERGY
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets. |
| | | | | | | | | |
| | June 30, 2018 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
|
| NDTF equity securities | $ | 2,256 |
| $ | 2,256 |
| $ | — |
|
| NDTF debt securities | 1,087 |
| 414 |
| 673 |
|
| Other debt securities | 58 |
| 11 |
| 47 |
|
| Derivative assets | 5 |
| — |
| 5 |
|
| Total assets | 3,406 |
| 2,681 |
| 725 |
|
| Derivative liabilities | (35 | ) | — |
| (35 | ) |
| Net assets | $ | 3,371 |
| $ | 2,681 |
| $ | 690 |
|
|
| | | | | | | | | |
| | December 31, 2017 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
|
| NDTF equity securities | $ | 2,222 |
| $ | 2,222 |
| $ | — |
|
| NDTF debt securities | 1,108 |
| 431 |
| 677 |
|
| Other debt securities | 59 |
| 12 |
| 47 |
|
| Derivative assets | 3 |
| 1 |
| 2 |
|
| Total assets | 3,392 |
| 2,666 |
| 726 |
|
| Derivative liabilities | (36 | ) | (1 | ) | (35 | ) |
| Net assets | $ | 3,356 |
| $ | 2,665 |
| $ | 691 |
|
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. |
| | | | | | | | | |
| | June 30, 2018 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
|
| NDTF equity securities | $ | 1,819 |
| $ | 1,819 |
| $ | — |
|
| NDTF debt securities | 808 |
| 255 |
| 553 |
|
| Other debt securities | 1 |
| 1 |
| — |
|
| Derivative assets | 4 |
| 1 |
| 3 |
|
| Total assets | 2,632 |
| 2,076 |
| 556 |
|
| Derivative liabilities | (21 | ) | — |
| (21 | ) |
| Net assets | $ | 2,611 |
| $ | 2,076 |
| $ | 535 |
|
|
| | | | | | | | | |
| | December 31, 2017 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
|
| NDTF equity securities | $ | 1,795 |
| $ | 1,795 |
| $ | — |
|
| NDTF debt securities | 796 |
| 243 |
| 553 |
|
| Other debt securities | 1 |
| 1 |
| — |
|
| Derivative assets | 2 |
| 1 |
| 1 |
|
| Total assets | 2,594 |
| 2,040 |
| 554 |
|
| Derivative liabilities | (18 | ) | (1 | ) | (17 | ) |
| Net assets | $ | 2,576 |
| $ | 2,039 |
| $ | 537 |
|
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
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets. |
| | | | | | | | | | | | | | | |
| | June 30, 2017 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 |
| Not categorized |
|
| NDTF equity securities | $ | 2,441 |
| $ | 2,364 |
| $ | — |
| $ | — |
| $ | 77 |
|
| NDTF debt securities | 1,049 |
| 141 |
| 908 |
| — |
| — |
|
| Derivative assets | 8 |
| — |
| 8 |
| — |
| — |
|
| Total assets | 3,498 |
| 2,505 |
| 916 |
| — |
| 77 |
|
| Derivative liabilities | (26 | ) | — |
| (26 | ) | — |
| — |
|
| Net assets | $ | 3,472 |
| $ | 2,505 |
| $ | 890 |
| $ | — |
| $ | 77 |
|
|
| | | | | | | | | | | | | | | |
| | December 31, 2016 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 |
| Not categorized |
|
| NDTF equity securities | $ | 2,245 |
| $ | 2,168 |
| $ | — |
| $ | — |
| $ | 77 |
|
| NDTF debt securities | 1,013 |
| 178 |
| 835 |
| — |
| — |
|
| Other AFS debt securities | 3 |
| — |
| — |
| 3 |
| — |
|
| Derivative assets | 33 |
| — |
| 33 |
| — |
| — |
|
| Total assets | 3,294 |
| 2,346 |
| 868 |
| 3 |
| 77 |
|
| Derivative liabilities | (16 | ) | — |
| (16 | ) | — |
| — |
|
| Net assets | $ | 3,278 |
| $ | 2,346 |
| $ | 852 |
| $ | 3 |
| $ | 77 |
|
The following table provides a reconciliation of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements. |
| | | | | | | | | | | | | |
| | Investments |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| (in millions) | 2017 | 2016 | | 2017 | 2016 |
| Balance at beginning of period | 3 |
| $ | 3 |
| | $ | 3 |
| 3 |
|
| Total pretax realized or unrealized gains included in comprehensive income | 1 |
| — |
| | 1 |
| — |
|
| Purchases, sales, issuances and settlements: | | | | | |
| Sales | (4 | ) | — |
| | (4 | ) | — |
|
| Balance at end of period | $ | — |
| $ | 3 |
| | $ | — |
| $ | 3 |
|
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. |
| | | | | | | | | | | | | | | | | | | |
| | June 30, 2017 | | December 31, 2016 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| | Total Fair Value |
| Level 1 |
| Level 2 |
|
| NDTF equity securities | $ | 1,981 |
| $ | 1,981 |
| $ | — |
| | $ | 1,861 |
| $ | 1,861 |
| $ | — |
|
| NDTF debt securities | 1,121 |
| 452 |
| 669 |
| | 1,065 |
| 454 |
| 611 |
|
| Other AFS debt securities | 59 |
| 12 |
| 47 |
| | 65 |
| 21 |
| 44 |
|
| Derivative assets | 15 |
| — |
| 15 |
| | 85 |
| — |
| 85 |
|
| Total assets | 3,176 |
| 2,445 |
| 731 |
| | 3,076 |
| 2,336 |
| 740 |
|
| Derivative liabilities | (35 | ) | — |
| (35 | ) | | (25 | ) | — |
| (25 | ) |
| Net assets | $ | 3,141 |
| $ | 2,445 |
| $ | 696 |
| | $ | 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)
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. |
| | | | | | | | | | | | | | | | | | | |
| | June 30, 2017 | | December 31, 2016 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| | Total Fair Value |
| Level 1 |
| Level 2 |
|
| NDTF equity securities | $ | 1,607 |
| $ | 1,607 |
| $ | — |
| | $ | 1,505 |
| $ | 1,505 |
| $ | — |
|
| NDTF debt securities and other | 772 |
| 226 |
| 546 |
| | 708 |
| 207 |
| 501 |
|
| Other AFS debt securities and other | 1 |
| 1 |
| — |
| | 1 |
| 1 |
| — |
|
| Derivative assets | 8 |
| — |
| 8 |
| | 46 |
| — |
| 46 |
|
| Total assets | 2,388 |
| 1,834 |
| 554 |
| | 2,260 |
| 1,713 |
| 547 |
|
| Derivative liabilities | (8 | ) | — |
| (8 | ) | | (7 | ) | — |
| (7 | ) |
| Net assets | $ | 2,380 |
| $ | 1,834 |
| $ | 546 |
| | $ | 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. | | | | June 30, 2017 | | December 31, 2016 | June 30, 2018 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| | Total Fair Value |
| Level 1 |
| Level 2 |
| Total Fair Value |
| Level 1 |
| Level 2 |
|
| NDTF equity securities | $ | 374 |
| $ | 374 |
| $ | — |
| | $ | 356 |
| $ | 356 |
| $ | — |
| $ | 437 |
| $ | 437 |
| $ | — |
|
| NDTF debt securities and other | 349 |
| 226 |
| 123 |
| | 357 |
| 247 |
| 110 |
| |
| Other AFS debt securities and other | 48 |
| 1 |
| 47 |
| | 48 |
| 4 |
| 44 |
| |
| NDTF debt securities | | 279 |
| 159 |
| 120 |
|
| Other debt securities | | 48 |
| 1 |
| 47 |
|
| Derivative assets | 6 |
| — |
| 6 |
| | 39 |
| — |
| 39 |
| 1 |
| — |
| 1 |
|
| Total assets | 777 |
| 601 |
| 176 |
| | 800 |
| 607 |
| 193 |
| 765 |
| 597 |
| 168 |
|
| Derivative liabilities | (20 | ) | — |
| (20 | ) | | (12 | ) | — |
| (12 | ) | (5 | ) | — |
| (5 | ) |
| Net assets | $ | 757 |
| $ | 601 |
| $ | 156 |
| | $ | 788 |
| $ | 607 |
| $ | 181 |
| $ | 760 |
| $ | 597 |
| $ | 163 |
|
|
| | | | | | | | | |
| | December 31, 2017 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
|
| NDTF equity securities | $ | 427 |
| $ | 427 |
| $ | — |
|
| NDTF debt securities | 312 |
| 188 |
| 124 |
|
| Other debt securities | 48 |
| 1 |
| 47 |
|
| Derivative assets | 1 |
| — |
| 1 |
|
| Total assets | 788 |
| 616 |
| 172 |
|
| Derivative liabilities | (12 | ) | — |
| (12 | ) |
| Net assets | $ | 776 |
| $ | 616 |
| $ | 160 |
|
DUKE ENERGY OHIO
The following tables providetable provides recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets. | | | | June 30, 2017 | | December 31, 2016 | June 30, 2018 | | December 31, 2017 |
| (in millions) | Total Fair Value |
| Level 2 |
| Level 3 |
| | Total Fair Value |
| Level 2 |
| Level 3 |
| Total Fair Value |
| Level 2 |
| Level 3 |
| | Total Fair Value |
| Level 2 |
| Level 3 |
|
| Derivative assets | $ | 3 |
| $ | — |
| $ | 3 |
| | $ | 5 |
| $ | — |
| $ | 5 |
| $ | 9 |
| $ | — |
| $ | 9 |
| | $ | 1 |
| $ | — |
| $ | 1 |
|
| Derivative liabilities | (5 | ) | (5 | ) | — |
| | (6 | ) | (6 | ) | — |
| (4 | ) | (4 | ) | — |
| | (5 | ) | (5 | ) | — |
|
| Net (liabilities) assets | $ | (2 | ) | $ | (5 | ) | $ | 3 |
| | $ | (1 | ) | $ | (6 | ) | $ | 5 |
| |
| Net assets (liabilities) | | $ | 5 |
| $ | (4 | ) | $ | 9 |
| | $ | (4 | ) | $ | (5 | ) | $ | 1 |
|
The following table provides a reconciliation of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements. | | | | Derivatives (net) | Derivatives (net) |
| | Three Months Ended June 30, | | Six Months Ended June 30, | Three Months Ended June 30, | | Six Months Ended June 30, |
| (in millions) | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
| 2018 |
| | 2017 |
| | 2018 |
| | 2017 |
|
| Balance at beginning of period | $ | 1 |
| | $ | — |
| | $ | 5 |
| | $ | 3 |
| $ | 1 |
| | $ | 1 |
| | $ | 1 |
| | $ | 5 |
|
| Purchases, sales, issuances and settlements: | | | | | | | | | | | | | | |
| Purchases | 3 |
| | 5 |
| | 3 |
| | 5 |
| 7 |
| | 3 |
| | 7 |
| | 3 |
|
| Settlements | (1 | ) | | — |
| | (2 | ) | | (2 | ) | (1 | ) | | (1 | ) | | (1 | ) | | (2 | ) |
| Total losses included on the Condensed Consolidated Balance Sheet | — |
| | — |
| | (3 | ) | | (1 | ) | |
| Total gains (losses) included on the Condensed Consolidated Balance Sheet | | 2 |
| | — |
| | 2 |
| | (3 | ) |
| Balance at end of period | $ | 3 |
| | $ | 5 |
| | $ | 3 |
| | $ | 5 |
| $ | 9 |
| | $ | 3 |
| | $ | 9 |
| | $ | 3 |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
DUKE ENERGY INDIANA
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets. |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2017 | | December 31, 2016 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 |
| | Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 |
|
| Other AFS equity securities | $ | 87 |
| $ | 87 |
| $ | — |
| $ | — |
| | $ | 79 |
| $ | 79 |
| $ | — |
| $ | — |
|
| Other AFS debt securities and other | 31 |
| — |
| 31 |
| — |
| | 31 |
| — |
| 31 |
| — |
|
| Derivative assets | 54 |
| 3 |
| — |
| 51 |
| | 16 |
| — |
| — |
| 16 |
|
| Total assets | 172 |
| 90 |
| 31 |
| 51 |
| | 126 |
| 79 |
| 31 |
| 16 |
|
| Derivative liabilities | — |
| — |
| — |
| — |
| | (2 | ) | (2 | ) | — |
| — |
|
| Net assets | $ | 172 |
| $ | 90 |
| $ | 31 |
| $ | 51 |
| | $ | 124 |
| $ | 77 |
| $ | 31 |
| $ | 16 |
|
|
| | | | | | | | | | | | |
| | June 30, 2018 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 |
|
| Other equity securities | $ | 74 |
| $ | 74 |
| $ | — |
| $ | — |
|
| Other debt securities | 41 |
| — |
| 41 |
| — |
|
| Derivative assets | 45 |
| 1 |
| — |
| 44 |
|
| Total assets | $ | 160 |
| $ | 75 |
| $ | 41 |
| $ | 44 |
|
|
| | | | | | | | | | | | |
| | December 31, 2017 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 |
|
| Other equity securities | $ | 97 |
| $ | 97 |
| $ | — |
| $ | — |
|
| Other debt securities | 31 |
| — |
| 31 |
| — |
|
| Derivative assets | 27 |
| — |
| — |
| 27 |
|
| Total assets | $ | 155 |
| $ | 97 |
| $ | 31 |
| $ | 27 |
|
The following table provides a reconciliation of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements. | | | | Derivatives (net) | Derivatives (net) |
| | Three Months Ended June 30, | | Six Months Ended June 30, | Three Months Ended June 30, | | Six Months Ended June 30, |
| (in millions) | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
| 2018 |
| | 2017 |
| | 2018 |
| | 2017 |
|
| Balance at beginning of period | $ | 9 |
| | $ | 2 |
| | $ | 16 |
| | $ | 7 |
| $ | 7 |
| | $ | 9 |
| | $ | 27 |
| | $ | 16 |
|
| Purchases, sales, issuances and settlements: |
| | | | | | |
| | | | | | |
| Purchases | 52 |
| | 29 |
| | 52 |
| | 29 |
| 49 |
| | 52 |
| | 49 |
| | 52 |
|
| Settlements | (9 | ) | | (6 | ) | | (16 | ) | | (11 | ) | (14 | ) | | (9 | ) | | (28 | ) | | (16 | ) |
| Total (losses) gains included on the Condensed Consolidated Balance Sheet | (1 | ) | | 4 |
| | (1 | ) | | 4 |
| |
| Total gains (losses) included on the Condensed Consolidated Balance Sheet | | 2 |
| | (1 | ) | | (4 | ) | | (1 | ) |
| Balance at end of period | $ | 51 |
| | $ | 29 |
| | $ | 51 |
| | $ | 29 |
| $ | 44 |
| | $ | 51 |
| | $ | 44 |
| | $ | 51 |
|
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. | | | | June 30, 2017 | | December 31, 2016 | June 30, 2018 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 3 |
| | Total Fair Value |
| Level 1 |
| Level 3 |
| Total Fair Value |
| Level 1 |
| Level 3 |
|
| Other trading equity securities | 2 |
| 2 |
| — |
| | $ | 4 |
| $ | 4 |
| $ | — |
| |
| Other trading debt securities | — |
| — |
| — |
| | 1 |
| 1 |
| — |
| |
| Derivative assets | 2 |
| 2 |
| — |
| | 3 |
| 3 |
| — |
| $ | 2 |
| $ | 2 |
| $ | — |
|
| Total assets | 4 |
| 4 |
| — |
| | 8 |
| 8 |
| — |
| |
| Derivative liabilities | (145 | ) | — |
| (145 | ) | | (187 | ) | — |
| (187 | ) | (150 | ) | — |
| (150 | ) |
| Net (liabilities) assets | $ | (141 | ) | $ | 4 |
| $ | (145 | ) | | $ | (179 | ) | $ | 8 |
| $ | (187 | ) | $ | (148 | ) | $ | 2 |
| $ | (150 | ) |
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 June 30, | | Six Months Ended June 30, |
| (in millions) | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
|
| Balance at beginning of period | $ | (145 | ) | | $ | (126 | ) | | $ | (187 | ) | | $ | (149 | ) |
| Total (losses) gains and settlements | — |
| | (64 | ) | | 42 |
| | (41 | ) |
| Balance at end of period | $ | (145 | ) | | $ | (190 | ) | | $ | (145 | ) | | $ | (190 | ) |
|
| | | | | | | | | |
| | December 31, 2017 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 3 |
|
| Other debt securities | $ | 1 |
| $ | 1 |
| $ | — |
|
| Derivative assets | 2 |
| 2 |
| — |
|
| Total assets | 3 |
| 3 |
| — |
|
| Derivative liabilities | (142 | ) | — |
| (142 | ) |
| Net (liabilities) assets | $ | (139 | ) | $ | 3 |
| $ | (142 | ) |
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 June 30, | | Six Months Ended June 30, |
| (in millions) | 2018 |
| | 2017 |
| | 2018 |
| | 2017 |
|
| Balance at beginning of period | $ | (132 | ) | | $ | (145 | ) | | $ | (142 | ) | | $ | (187 | ) |
| Total (losses) gains and settlements | (18 | ) | | — |
| | (8 | ) | | 42 |
|
| Balance at end of period | $ | (150 | ) | | $ | (145 | ) | | $ | (150 | ) | | $ | (145 | ) |
QUANTITATIVE INFORMATION ABOUT UNOBSERVABLE INPUTS
The following table includestables include quantitative information about the Duke Energy Registrants' derivatives classified as Level 3. | | | | June 30, 2017 | June 30, 2018 |
| | Fair Value | | | | | Fair Value | | | | |
| Investment Type | (in millions) | Valuation Technique | Unobservable Input | Range | (in millions) | Valuation Technique | Unobservable Input | Range |
| Duke Energy Ohio | |
| | | | | |
| | | | |
| Financial Transmission Rights (FTRs) | $ | 3 |
| RTO auction pricing | FTR price – per megawatt-hour (MWh) | $ | (5.24 | ) | - | $ | 1.82 |
| $ | 9 |
| RTO auction pricing | FTR price – per megawatt-hour (MWh) | $ | 0.67 |
| - | $ | 3.32 |
|
| Duke Energy Indiana | |
| | | | | |
| | | | |
| FTRs | 51 |
| RTO auction pricing | FTR price – per MWh | (1.65 | ) | - | 6.66 |
| 44 |
| RTO auction pricing | FTR price – per MWh | (2.31 | ) | - | 11.01 |
|
| Piedmont | | | | | | | | | | |
| Natural gas contracts | (145 | ) | Discounted cash flow | Forward natural gas curves – price per million British thermal unit (MMBtu) | 2.21 |
| - | 3.78 |
| (150 | ) | Discounted cash flow | Forward natural gas curves – price per million British thermal unit (MMBtu) | 1.88 |
| - | 3.42 |
|
| Duke Energy | | | | | | | | | | |
| Total Level 3 derivatives | $ | (91 | ) | | | | | $ | (97 | ) | | | | |
| | | | December 31, 2016 | December 31, 2017 |
| | Fair Value | | | | | Fair Value | | | | |
| Investment Type | (in millions) | Valuation Technique | Unobservable Input | Range | (in millions) | Valuation Technique | Unobservable Input | Range |
| Duke Energy Ohio | |
| | | | | |
| | | | |
| FTRs | $ | 5 |
| RTO auction pricing | FTR price – per MWh | $ | 0.77 |
| - | $ | 3.52 |
| $ | 1 |
| RTO auction pricing | FTR price – per MWh | $ | 0.07 |
| - | $ | 1.41 |
|
| Duke Energy Indiana | |
| | | | | |
| | | | |
| FTRs | 16 |
| RTO auction pricing | FTR price – per MWh | (0.83 | ) | - | 9.32 |
| 27 |
| RTO auction pricing | FTR price – per MWh | (0.77 | ) | - | 7.44 |
|
| Piedmont | | | | | | | | | | |
| Natural gas contracts | (187 | ) | Discounted cash flow | Forward natural gas curves – price per MMBtu | 2.31 |
| - | 4.18 |
| (142 | ) | Discounted cash flow | Forward natural gas curves – price per MMBtu | 2.10 |
| - | 2.88 |
|
| Duke Energy | | | | | | | | | | |
| Total Level 3 derivatives | $ | (166 | ) | | | | | $ | (114 | ) | | | | |
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
OTHER 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. | | | | June 30, 2017 | | December 31, 2016 | June 30, 2018 | | December 31, 2017 |
| (in millions) | Book Value |
| | Fair Value |
| | Book Value |
| | Fair Value |
| Book Value |
| | Fair Value |
| | Book Value |
| | Fair Value |
|
Duke Energy | $ | 49,515 |
| | $ | 51,947 |
| | $ | 47,895 |
| | $ | 49,161 |
| $ | 52,715 |
| | $ | 52,676 |
| | $ | 52,279 |
| | $ | 55,331 |
|
| Duke Energy Carolinas | 9,524 |
| | 10,657 |
| | 9,603 |
| | 10,494 |
| 10,394 |
| | 11,028 |
| | 10,103 |
| | 11,372 |
|
| Progress Energy | 18,145 |
| | 20,101 |
| | 17,541 |
| | 19,107 |
| 18,194 |
| | 19,357 |
| | 17,837 |
| | 20,000 |
|
| Duke Energy Progress | 6,760 |
| | 7,266 |
| | 7,011 |
| | 7,357 |
| 7,358 |
| | 7,527 |
| | 7,357 |
| | 7,992 |
|
| Duke Energy Florida | 6,979 |
| | 7,753 |
| | 6,125 |
| | 6,728 |
| 7,452 |
| | 7,945 |
| | 7,095 |
| | 7,953 |
|
| Duke Energy Ohio | 1,977 |
| | 2,155 |
| | 1,884 |
| | 2,020 |
| 2,066 |
| | 2,162 |
| | 2,067 |
| | 2,249 |
|
| Duke Energy Indiana | 3,784 |
| | 4,379 |
| | 3,786 |
| | 4,260 |
| 3,782 |
| | 4,223 |
| | 3,783 |
| | 4,464 |
|
| Piedmont | 1,946 |
| | 2,107 |
| | 1,821 |
| | 1,933 |
| 2,037 |
| | 2,087 |
| | 2,037 |
| | 2,209 |
|
| |
| (a) | Book value of long-term debt includes $1.7 billion as of June 30, 2018, and December 31, 2017, of unamortized debt discount and premium, net in purchase accounting adjustments related to the mergers with Progress Energy and Piedmont that are excluded from fair value of long-term debt. |
At both June 30, 20172018, and December 31, 2016,2017, fair value of cash and cash equivalents, accounts and notes receivable, accounts payable, notes payable and commercial paper, and nonrecourse notes payable of VIEs are not materially different from their carrying amounts because of the short-term nature of these instruments and/or because the stated rates approximate market rates.
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,re-evaluation, such as a significant change in an entity’s assets or activities. A qualitative analysis of control determines the party that consolidates a VIE. This assessment is based on (i) what party has the power to direct the activities of the VIE that most significantly impact its economic performance and (ii) what party has rights to receive benefits or is obligated to absorb losses that could potentially be significant to the VIE. The analysis of the party that consolidates a VIE is a continual reassessment.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
CONSOLIDATED VIEs
The obligations of the consolidated VIEs discussed in the following paragraphs are nonrecourse to the Duke Energy registrants. 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 six months ended June 30,��2017 2018, and the year ended December 31, 2016,2017, 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.
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.
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 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 and associated restricted receivables described above. | | | | Duke Energy | Duke Energy |
| | | | Duke Energy |
| | Duke Energy |
| | Duke Energy |
| | | Duke Energy |
| | Duke Energy |
| | Duke Energy |
|
| | | | Carolinas |
| | Progress |
| | Florida |
| | | Carolinas |
| | Progress |
| | Florida |
|
| (in millions) | CRC |
| | DERF |
| | DEPR |
| | DEFR |
| CRC |
| | DERF |
| | DEPR |
| | DEFR |
|
| Expiration date | December 2018 |
| | December 2018 |
| | February 2019 |
| | April 2019 |
| December 2020 |
| | December 2020 |
| | February 2021 |
| | April 2021 |
|
| Credit facility amount | $ | 325 |
| | $ | 425 |
| | $ | 300 |
| | $ | 225 |
| $ | 325 |
| | $ | 450 |
| | $ | 300 |
| | $ | 225 |
|
| Amounts borrowed at June 30, 2017 | 325 |
| | 425 |
| | 297 |
| | 225 |
| |
| Amounts borrowed at December 31, 2016 | 325 |
| | 425 |
| | 300 |
| | 225 |
| |
| Amounts borrowed at June 30, 2018 | | 325 |
| | 450 |
| | 300 |
| | 225 |
|
| Amounts borrowed at December 31, 2017 | | 325 |
| | 450 |
| | 300 |
| | 225 |
|
| Restricted Receivables at June 30, 2018 | | 498 |
| | 704 |
| | 568 |
| | 394 |
|
| Restricted Receivables at December 31, 2017 | | 545 |
| | 640 |
| | 459 |
| | 317 |
|
Nuclear Asset-Recovery Bonds – DEFPF
Duke 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.
DEFPF is considered a VIE primarily because the equity capitalization is insufficient to support its operations. Duke Energy Florida has the power to direct the significant activities of the VIE as described above, and therefore Duke Energy Florida is considered the primary beneficiary and consolidates DEFPF.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
The following table summarizes the impact of DEFPF on Duke Energy Florida's Condensed Consolidated Balance Sheets. | | | (in millions) | June 30, 2017 |
| December 31, 2016 |
| June 30, 2018 |
| December 31, 2017 |
|
| Receivables of VIEs | $ | 5 |
| $ | 6 |
| $ | 7 |
| $ | 4 |
|
| Current Assets: Regulatory assets | 52 |
| 50 |
| |
| Regulatory Assets: Current | | 51 |
| 51 |
|
| Current Assets: Other | 33 |
| 53 |
| 31 |
| 40 |
|
| Other Noncurrent Assets: Regulatory assets | 1,121 |
| 1,142 |
| 1,071 |
| 1,091 |
|
| Current Liabilities: Other | 10 |
| 17 |
| 10 |
| 10 |
|
| Current maturities of long-term debt | 55 |
| 62 |
| 53 |
| 53 |
|
| Long-Term Debt | 1,189 |
| 1,217 |
| 1,136 |
| 1,164 |
|
Commercial Renewables
Certain of Duke Energy’s renewable energy facilities are VIEs due to Duke Energy issuing guarantees for debt service and operations and maintenance reserves in support of debt financings. Assets are restricted and cannot be pledged as collateral or sold to third parties without prior approval of debt holders. The activities that most significantly impact the economic performance of these renewable energy facilities were decisions associated with siting, negotiating 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) | June 30, 2017 |
| December 31, 2016 |
|
| Current Assets: Other | $ | 293 |
| $ | 223 |
|
| Property, plant and equipment, cost | 3,695 |
| 3,419 |
|
| Accumulated depreciation and amortization | (518 | ) | (453 | ) |
| Current maturities of long-term debt | 157 |
| 198 |
|
| Long-Term Debt | 1,557 |
| 1,097 |
|
| Deferred income taxes | 300 |
| 275 |
|
| Other Noncurrent Liabilities: Other | 249 |
| 252 |
|
NON-CONSOLIDATED VIEs
The following tables summarize the impact of non-consolidated VIEs on the Condensed Consolidated Balance Sheets. |
| | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2017 |
| | Duke Energy | | Duke |
| | Duke |
|
| | Pipeline |
| | Commercial |
| | Other |
| | | | Energy |
| | Energy |
|
| (in millions) | Investments |
| | Renewables |
| | VIEs |
| | Total |
| | Ohio |
| | Indiana |
|
| Receivables from affiliated companies | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 44 |
| | $ | 72 |
|
| Investments in equity method unconsolidated affiliates | 800 |
| | 176 |
| | 92 |
| | 1,068 |
| | — |
| | — |
|
| Other noncurrent assets | 12 |
| | — |
| | — |
| | 12 |
| | — |
| | — |
|
| Total assets | $ | 812 |
| | $ | 176 |
| | $ | 92 |
| | $ | 1,080 |
| | $ | 44 |
| | $ | 72 |
|
| Other current liabilities | 10 |
| | — |
| | — |
| | 10 |
| | — |
| | — |
|
| Other noncurrent liabilities | — |
| | — |
| | 13 |
| | 13 |
| | — |
| | — |
|
| Total liabilities | $ | 10 |
| | $ | — |
| | $ | 13 |
| | $ | 23 |
| | $ | — |
| | $ | — |
|
| Net assets | $ | 802 |
| | $ | 176 |
| | $ | 79 |
| | $ | 1,057 |
| | $ | 44 |
| | $ | 72 |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
The table below presents material balances reported on Duke Energy's Condensed Consolidated Balance Sheets related to renewables VIEs. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2016 |
| | Duke Energy | | Duke |
| | Duke |
| | |
| | Pipeline |
| | Commercial |
| | Other |
| | | | Energy |
| | Energy |
| | |
| (in millions) | Investments |
| | Renewables |
| | VIEs |
| | Total |
| | Ohio |
| | Indiana |
| | Piedmont(a) |
|
| Receivables from affiliated companies | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 82 |
| | $ | 101 |
| | $ | — |
|
| Investments in equity method unconsolidated affiliates | 487 |
| | 174 |
| | 90 |
| | 751 |
| | — |
| | — |
| | 139 |
|
| Other noncurrent assets | 12 |
| | — |
| | — |
| | 12 |
| | — |
| | — |
| | — |
|
| Total assets | $ | 499 |
| | $ | 174 |
| | $ | 90 |
| | $ | 763 |
| | $ | 82 |
| | $ | 101 |
| | $ | 139 |
|
| Other current liabilities | — |
| | — |
| | 3 |
| | 3 |
| | — |
| | — |
| | — |
|
| Other noncurrent liabilities | — |
| | — |
| | 13 |
| | 13 |
| | — |
| | — |
| | 4 |
|
| Total liabilities | $ | — |
| | $ | — |
| | $ | 16 |
| | $ | 16 |
| | $ | — |
| | $ | — |
| | 4 |
|
| Net assets | $ | 499 |
| | $ | 174 |
| | $ | 74 |
| | $ | 747 |
| | $ | 82 |
| | $ | 101 |
| | $ | 135 |
|
|
| | | | | | |
| (in millions) | June 30, 2018 |
| December 31, 2017 |
|
| Current Assets: Other | $ | 168 |
| $ | 174 |
|
| Property, plant and equipment, cost | 4,017 |
| 3,923 |
|
| Accumulated depreciation and amortization | (661 | ) | (591 | ) |
| Other Noncurrent Assets: Other | 256 |
| 50 |
|
| Current maturities of long-term debt | 175 |
| 170 |
|
| Long-Term Debt | 1,605 |
| 1,700 |
|
| Other Noncurrent Liabilities: Deferred income taxes | — |
| (148 | ) |
| Other Noncurrent Liabilities: Other | 228 |
| 241 |
|
NON-CONSOLIDATED VIEs
The following tables summarize the impact of non-consolidated VIEs on the Condensed Consolidated Balance Sheets. |
| | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2018 |
| | Duke Energy | | Duke |
| | Duke |
|
| | Pipeline |
| | Commercial |
| | Other |
| | | | Energy |
| | Energy |
|
| (in millions) | Investments(a) |
| | Renewables |
| | VIEs |
| | Total |
| | Ohio |
| | Indiana |
|
| Receivables from affiliated companies | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 58 |
| | $ | 87 |
|
| Investments in equity method unconsolidated affiliates | 566 |
| | 192 |
| | 45 |
| | 803 |
| | — |
| | — |
|
| Total assets | $ | 566 |
| | $ | 192 |
| | $ | 45 |
| | $ | 803 |
| | $ | 58 |
| | $ | 87 |
|
| Taxes accrued | 1 |
| | — |
| | — |
| | 1 |
| | — |
| | — |
|
| Other current liabilities | — |
| | — |
| | 4 |
| | 4 |
| | — |
| | — |
|
| Deferred income taxes | 10 |
| | — |
| | — |
| | 10 |
| | — |
| | — |
|
| Other noncurrent liabilities | — |
| | — |
| | 11 |
| | 11 |
| | — |
| | — |
|
| Total liabilities | $ | 11 |
| | $ | — |
| | $ | 15 |
| | $ | 26 |
| | $ | — |
| | $ | — |
|
| Net assets | $ | 555 |
| | $ | 192 |
| | $ | 30 |
| | $ | 777 |
| | $ | 58 |
| | $ | 87 |
|
| |
| (a) | In April 2017, Piedmont transferred its non-consolidated VIE investments to a wholly owned subsidiary of Duke Energy. See "Pipeline Investments" sectionPipeline Investments table below for additional detail.further details regarding Investments in equity method unconsolidated affiliates. |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2017 |
| | Duke Energy | | Duke |
| | Duke |
|
| | Pipeline |
| | Commercial |
| | Other |
| | | | Energy |
| | Energy |
|
| (in millions) | Investments |
| | Renewables |
| | VIEs |
| | Total |
| | Ohio |
| | Indiana |
|
| Receivables from affiliated companies | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 87 |
| | $ | 106 |
|
| Investments in equity method unconsolidated affiliates | 697 |
| | 180 |
| | 42 |
| | 919 |
| | — |
| | — |
|
| Other noncurrent assets | 17 |
| | — |
| | — |
| | 17 |
| | — |
| | — |
|
| Total assets | $ | 714 |
| | $ | 180 |
| | $ | 42 |
| | $ | 936 |
| | $ | 87 |
| | $ | 106 |
|
| Taxes accrued | (29 | ) | | — |
| | — |
| | (29 | ) | | — |
| | — |
|
| Other current liabilities | — |
| | — |
| | 4 |
| | 4 |
| | — |
| | — |
|
| Deferred income taxes | 42 |
| | — |
| | — |
| | 42 |
| | — |
| | — |
|
| Other noncurrent liabilities | — |
| | — |
| | 12 |
| | 12 |
| | — |
| | — |
|
| Total liabilities | $ | 13 |
|
| $ | — |
|
| $ | 16 |
|
| $ | 29 |
|
| $ | — |
|
| $ | — |
|
| Net assets | $ | 701 |
| | $ | 180 |
| | $ | 26 |
| | $ | 907 |
| | $ | 87 |
| | $ | 106 |
|
The Duke Energy Registrants are not aware of any situations where the maximum exposure to loss significantly exceeds the carrying values shown above except for the power purchase agreement with OVEC, which is discussed below, and various guarantees, some of which are reflected in the table above as Other noncurrent liabilities. For more information on various guarantees, refer to Note 54.
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 these 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 – (Unaudited) – (Continued)
The table below presents theDuke Energy's ownership interest and investment balances in these joint ventures. | | | | Duke Energy | | | | | | |
| | | | VIE Investment Amount (in millions) | | | VIE Investment Amount (in millions) |
| | Ownership | | June 30, | | December 31, | Ownership | | June 30, | | December 31, |
| Entity Name | Interest | | 2017 | | 2016 | Interest | | 2018 | | 2017 |
| ACP | 47 | % | | $ | 507 |
| | $ | 265 |
| 47 | % | | $ | 541 |
| | $ | 397 |
|
| Sabal Trail | 7.5 | % | | 211 |
| | 140 |
| |
| Constitution | 24 | % | | 82 |
| | 82 |
| |
Sabal Trail(a) | | 7.5 | % | | — |
| | 219 |
|
Constitution(b) | | 24 | % | | 25 |
| | 81 |
|
| Total | | | $ | 800 |
| | $ | 487 |
| | | $ | 566 |
| | $ | 697 |
|
| |
| (a) | At December 31, 2017, Sabal Trail was considered a VIE due to having insufficient equity to finance their own activities without subordinated financial support. However, Sabal Trail is now a fully operational, well capitalized entity. As a result, Sabal Trail has sufficient equity to finance its own activities, and therefore, is no longer considered a VIE. Duke Energy's investment in Sabal Trail was $110 million at June 30, 2018. |
| |
| (b) | During the six months ended June 30, 2018, Duke Energy recorded an OTTI of $55 million related to Constitution within Equity in (losses) earnings of unconsolidated affiliates on Duke Energy's Condensed Consolidated Statements of Income. See Note 3 for additional information. |
At December 31, 2016, Piedmont hadIn 2017, ACP executed a 7 percent ownership interest in ACP and$3.4 billion revolving credit facility with a 24 percent ownership interest in Constitution. In April 2017, Piedmont transferred its ownership interests in ACP and Constitution to a wholly owned subsidiarystated maturity date of October 2021. Duke Energy at book value.entered into a guarantee agreement to support its share of the ACP revolving credit facility. Duke Energy's maximum exposure to loss under the terms of the guarantee is $412 million, which represents 47 percent of the outstanding borrowings under the credit facility as of June 30, 2018.
Commercial Renewables
Duke Energy has investments in various renewable energy project entities. Some of these entities are VIEs due to Duke Energy issuing guarantees for debt service and operations and maintenance reserves in support of debt financings. Duke Energy does not consolidate these VIEs because power to direct and control key activities is shared jointly by Duke 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 to finance their own activities without subordinated financial support. The activities that most significantly impact DATC's economic performance are 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, American Transmission Company, LLC, therefore Duke Energy does not consolidate DATC.
Duke Energy holds a 50 percent equity interest in Pioneer Transmission, LLC (Pioneer). Pioneer is considered a VIE due to having insufficient equity to finance theirits own activities without subordinated financial support. The activities that most significantly impact Pioneer's economic performance are decisions related to the development of new transmission facilities. The power to direct these activities is jointly and equally shared by Duke Energy and the other joint venture partner, American Electric Power,Power; therefore, Duke Energy does not consolidate Pioneer.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
OVEC
Duke Energy Ohio’s 9 percent ownership interest in OVEC is considered a non-consolidated VIE due to OVEC having insufficient equity to finance theirits activities without subordinated financial support. 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 based on their power participation ratio. The value of the ICPA is subject to variability due to fluctuation in power prices and changes in OVEC's cost of business, includingbusiness. On March 31, 2018, FirstEnergy Solutions (FES), a subsidiary of FirstEnergy and an ICPA counterparty with a power participation ratio of 4.85 percent, filed for Chapter 11 bankruptcy which could increase costs associated with its 2,256 MW of coal-fired generation capacity. Deterioration in the credit quality, or bankruptcy of one or more partiesallocated to the ICPA could increasecounterparties. Duke Energy Ohio cannot predict the costsimpact of OVEC.the bankruptcy filing on its OVEC interests. In addition, certain proposed environmental rulemaking could result in future increased OVEC 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 OTTI has occurred.
Key assumptions used in estimating fair value are detailed in the following table. |
| | | | | | | | | | | |
| | Duke Energy Ohio | | Duke Energy Indiana |
| | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
|
| Anticipated credit loss ratio | 0.5 | % | | 0.5 | % | | 0.3 | % | | 0.3 | % |
| Discount rate | 1.9 | % | | 1.5 | % | | 1.9 | % | | 1.5 | % |
| Receivable turnover rate | 13.4 | % | | 13.3 | % | | 10.7 | % | | 10.6 | % |
The following table shows the gross and net receivables sold. |
| | | | | | | | | | | | | | | |
| | Duke Energy Ohio | | Duke Energy Indiana |
| (in millions) | June 30, 2017 |
| | December 31, 2016 |
| | June 30, 2017 |
| | December 31, 2016 |
|
| Receivables sold | $ | 210 |
| | $ | 267 |
| | $ | 299 |
| | $ | 306 |
|
| Less: Retained interests | 44 |
| | 82 |
| | 72 |
| | 101 |
|
| Net receivables sold | $ | 166 |
| | $ | 185 |
| | $ | 227 |
| | $ | 205 |
|
The following table shows sales and cash flows related to receivables sold. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Duke Energy Ohio | | Duke Energy Indiana |
| | Three Months Ended | | Six Months Ended | | Three Months Ended | | Six Months Ended |
| | June 30, | | June 30, | | June 30, | | June 30, |
| (in millions) | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
|
| Sales | | | | | | | | | | | | | | | |
| Receivables sold | $ | 421 |
| | $ | 429 |
| | $ | 954 |
| | $ | 961 |
| | $ | 663 |
| | $ | 623 |
| | $ | 1,327 |
| | $ | 1,258 |
|
| Loss recognized on sale | 3 |
| | 2 |
| | 5 |
| | 5 |
| | 3 |
| | 2 |
| | 6 |
| | 5 |
|
| Cash flows | | | | | | | | | | | | | | | |
| Cash proceeds from receivables sold | $ | 428 |
| | $ | 427 |
| | $ | 987 |
| | $ | 964 |
| | $ | 658 |
| | $ | 612 |
| | $ | 1,351 |
| | $ | 1,255 |
|
| Collection fees received | — |
| | — |
| | — |
| | — |
| | 1 |
| | 1 |
| | 1 |
| | 1 |
|
| Return received on retained interests | 1 |
| | — |
| | 2 |
| | 1 |
| | 1 |
| | 1 |
| | 3 |
| | 2 |
|
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.
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)
Key assumptions used in estimating fair value are detailed in the following table. |
| | | | | | | | | | | |
| | Duke Energy Ohio | | Duke Energy Indiana |
| | 2018 |
| | 2017 |
| | 2018 |
| | 2017 |
|
| Anticipated credit loss ratio | 0.5 | % | | 0.5 | % | | 0.3 | % | | 0.3 | % |
| Discount rate | 2.8 | % | | 2.1 | % | | 2.8 | % | | 2.1 | % |
| Receivable turnover rate | 13.6 | % | | 13.5 | % | | 10.8 | % | | 10.7 | % |
The following table shows the gross and net receivables sold. |
| | | | | | | | | | | | | | | |
| | Duke Energy Ohio | | Duke Energy Indiana |
| (in millions) | June 30, 2018 |
| | December 31, 2017 |
| | June 30, 2018 |
| | December 31, 2017 |
|
| Receivables sold | $ | 227 |
| | $ | 273 |
| | $ | 312 |
| | $ | 312 |
|
| Less: Retained interests | 58 |
| | 87 |
| | 87 |
| | 106 |
|
| Net receivables sold | $ | 169 |
| | $ | 186 |
| | $ | 225 |
| | $ | 206 |
|
The following table shows sales and cash flows related to receivables sold. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Duke Energy Ohio | | Duke Energy Indiana |
| | Three Months Ended | | Six Months Ended | | Three Months Ended | | Six Months Ended |
| | June 30, | | June 30, | | June 30, | | June 30, |
| (in millions) | 2018 |
| | 2017 |
| | 2018 |
| | 2017 |
| | 2018 |
| | 2017 |
| | 2018 |
| | 2017 |
|
| Sales | | | | | | | | | | | | | | | |
| Receivables sold | $ | 461 |
| | $ | 421 |
| | $ | 1,028 |
| | $ | 954 |
| | $ | 692 |
| | $ | 663 |
| | $ | 1,386 |
| | $ | 1,327 |
|
| Loss recognized on sale | 3 |
| | 3 |
| | 6 |
| | 5 |
| | 4 |
| | 3 |
| | 7 |
| | 6 |
|
| Cash flows | | | | | | | | | | | | | | | |
| Cash proceeds from receivables sold | $ | 465 |
| | $ | 428 |
| | $ | 1,050 |
| | $ | 987 |
| | $ | 686 |
| | $ | 658 |
| | $ | 1,397 |
| | $ | 1,351 |
|
| Collection fees received | 1 |
| | — |
| | 1 |
| | — |
| | 1 |
| | 1 |
| | 1 |
| | 1 |
|
| Return received on retained interests | 1 |
| | 1 |
| | 3 |
| | 2 |
| | 2 |
| | 1 |
| | 4 |
| | 3 |
|
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.
13. REVENUE
As described in Note 1, Duke Energy adopted Revenue from Contracts with Customers effective January 1, 2018, using the modified retrospective method of adoption, which does not require restatement of prior year reported results. No cumulative effect adjustment was recorded as the vast majority of Duke Energy’s revenues are at-will and without a defined contractual term. Additionally, comparative disclosures for 2018 operating results with the previous revenue recognition rules are not applicable as Duke Energy’s revenue recognition has not materially changed as a result of the new standard.
Duke Energy recognizes revenue consistent with amounts billed under tariff offerings or at contractually agreed upon rates based on actual physical delivery of electric or natural gas service, including estimated volumes delivered when billings have not yet occurred. As such, the majority of Duke Energy’s revenues have fixed pricing based on the contractual terms of the published tariffs, with variability in expected cash flows attributable to the customer’s volumetric demand and ultimate quantities of energy or natural gas supplied and used during the billing period. The stand-alone selling price of related sales are designed to support recovery of prudently incurred costs and an appropriate return on invested assets and are primarily governed by published tariff rates or contractual agreements approved by relevant regulatory bodies. As described in Note 1, certain excise taxes and franchise fees levied by state or local governments are required to be paid even if not collected from the customer. These taxes are recognized on a gross basis as part of revenues. Duke Energy elects to account for all other taxes net of revenues.
Performance obligations are satisfied over time as energy or natural gas is delivered and consumed with billings generally occurring monthly and related payments due within 30 days, depending on regulatory requirements. In no event does the timing between payment and delivery of the goods and services exceed one year. Using this output method for revenue recognition provides a faithful depiction of the transfer of electric and natural gas service as customers obtain control of the commodity and benefit from its use at delivery. Additionally, Duke Energy has an enforceable right to consideration for energy or natural gas delivered at any discrete point in time, and will recognize revenue at an amount that reflects the consideration to which Duke Energy is entitled for the energy or natural gas delivered.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
As described above, the majority of Duke Energy’s tariff revenues are at-will and, as such, related contracts with customers have an expected duration of one year or less and will not have future performance obligations for disclosure. Additionally, other long-term revenue streams, including wholesale contracts, generally provide services that are part of a single performance obligation, the delivery of electricity or natural gas. As such, other than material fixed consideration under long-term contracts, related disclosures for future performance obligations are also not applicable.
Duke Energy earns substantially all of its revenues through its reportable segments, Electric Utilities and Infrastructure, Gas Utilities and Infrastructure and Commercial Renewables.
Electric Utilities and Infrastructure
Electric Utilities and Infrastructure earns the majority of its revenues through retail and wholesale electric service through the generation, transmission, distribution and sale of electricity. Duke Energy generally provides retail and wholesale electric service customers with their full electric load requirements or with supplemental load requirements when the customer has other sources of electricity.
Retail electric service is generally marketed throughout Duke Energy's electric service territory through standard service offers. The standard service offers are through tariffs determined by regulators in Duke Energy's regulated service territory. Each tariff, which is assigned to customers based on customer class, has multiple components such as an energy charge, a demand charge, a basic facilities charge and applicable riders. Duke Energy considers each of these components to be aggregated into a single performance obligation for providing electric service, or in the case of distribution only customers in Duke Energy Ohio, for delivering electricity. Electricity is considered a single performance obligation satisfied over time consistent with the series guidance and is provided and consumed over the billing period (generally one month). Retail electric service is typically provided to at-will customers that can cancel service at any time, without a substantive penalty. Additionally, Duke Energy adheres to applicable regulatory requirements in each jurisdiction to ensure the collectability of amounts billed and appropriate mitigating procedures are followed when necessary. As such, revenue from contracts with customers for such contracts is equivalent to the electricity supplied and billed in that period (including unbilled estimates).
Wholesale electric service is generally provided under long-term contracts using cost-based pricing. FERC regulates costs that may be recovered from customers and the amount of return companies are permitted to earn. Wholesale contracts include both energy and demand charges. For full requirements contracts, Duke Energy considers both charges as a single performance obligation for providing integrated electric service. For contracts where energy and demand charges are considered separate performance obligations, energy and demand are each a distinct performance obligation under the series guidance and are satisfied as energy is delivered and stand-ready service is provided on a monthly basis. This service represents consumption over the billing period and revenue is recognized consistent with billings and unbilled estimates, which generally occur monthly. Contractual amounts owed are typically trued up annually based upon incurred costs in accordance with FERC published filings and the specific customer’s actual peak demand. Estimates of variable consideration related to potential additional billings or refunds owed are updated quarterly.
The majority of wholesale revenues are full requirements contracts where the customers purchase the substantial majority of their energy needs and do not have a fixed quantity of contractually required energy or capacity. As such, related forecasted revenues are considered optional purchases. Supplemental requirements contracts that include contracted blocks of energy and capacity at contractually fixed prices have the following estimated remaining performance obligations: |
| | | | | | | | | | | | | | | | | | | | | |
| | Remaining Performance Obligations |
| (in millions) | 2018 |
| 2019 |
| 2020 |
| 2021 |
| 2022 |
| Thereafter |
| Total |
|
| Progress Energy | $ | 47 |
| $ | 112 |
| $ | 121 |
| $ | 80 |
| $ | 82 |
| $ | 81 |
| $ | 523 |
|
| Duke Energy Progress | 4 |
| 9 |
| 9 |
| 9 |
| 9 |
| 18 |
| 58 |
|
| Duke Energy Florida | 43 |
| 103 |
| 112 |
| 71 |
| 73 |
| 63 |
| 465 |
|
| Duke Energy Indiana | 4 |
| 9 |
| 10 |
| 5 |
| — |
| — |
| 28 |
|
Revenues for block sales are recognized monthly as energy is delivered and stand-ready service is provided, consistent with invoiced amounts and unbilled estimates.
Gas Utilities and Infrastructure
Gas Utilities and Infrastructure earns its revenue through retail and wholesale natural gas service through the transportation, distribution and sale of natural gas. Duke Energy generally provides retail and wholesale natural gas service customers with all natural gas load requirements. Additionally, while natural gas can be stored, substantially all natural gas provided by Duke Energy is consumed by customers simultaneously with receipt of delivery.
Retail natural gas service is marketed throughout Duke Energy's natural gas service territory using published tariff rates. The tariff rates are established by regulators in Duke Energy's service territories. Each tariff, which is assigned to customers based on customer class, have multiple components, such as a commodity charge, demand charge, customer or monthly charge and transportation costs. Duke Energy considers each of these components to be aggregated into a single performance obligation for providing natural gas service. For contracts where Duke Energy provides all of the customer’s natural gas needs, the delivery of natural gas is considered a single performance obligation satisfied over time, and revenue is recognized monthly based on billings and unbilled estimates as service is provided and the commodity is consumed over the billing period. Additionally, natural gas service is typically at-will and customers can cancel service at any time, without a substantive penalty. Duke Energy also adheres to applicable regulatory requirements to ensure the collectability of amounts billed and receivable and appropriate mitigating procedures are followed when necessary.
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)
Certain long-term individually negotiated contracts exist to provide natural gas service. These contracts are regulated and approved by state commissions. The negotiated contracts have multiple components, including a natural gas and a demand charge, similar to retail natural gas contracts. Duke Energy considers each of these components to be a single performance obligation for providing natural gas service. This service represents consumption over the billing period, generally one month.
Fixed capacity payments under long-term contracts for the Gas segment include minimum margin contracts and supply arrangements with municipalities and power generation facilities. Revenues for related sales are recognized monthly as natural gas is delivered and stand-ready service is provided, consistent with invoiced amounts and unbilled estimates. Estimated remaining performance obligations are as follows:
|
| | | | | | | | | | | | | | | | | | | | | |
| | Remaining Performance Obligations |
| (in millions) | 2018 |
| 2019 |
| 2020 |
| 2021 |
| 2022 |
| Thereafter |
| Total |
|
| Piedmont | $ | 36 |
| $ | 71 |
| $ | 69 |
| $ | 65 |
| $ | 64 |
| $ | 462 |
| $ | 767 |
|
Commercial Renewables
Commercial Renewables earns the majority of its revenues through long-term PPAs and generally sells all of its wind and solar facility output, electricity and Renewable Energy Credits (RECs) to customers. The majority of these PPAs have historically been accounted for as leases. For PPAs that are not accounted for as leases, the delivery of electricity and the delivery of RECs are considered separate performance obligations.
The delivery of electricity is a performance obligation satisfied over time and represents generation and consumption of the electricity over the billing period, generally one month. The delivery of RECs is a performance obligation satisfied at a point in time and represents delivery of each REC generated by the wind or solar facility. The majority of self-generated RECs are bundled with energy in Duke Energy’s contracts and, as such, related revenues are recognized as energy is generated and delivered as that pattern is consistent with Duke Energy’s performance. Commercial Renewables recognizes revenue based on the energy generated and billed for the period, generally one month, at contractual rates (including unbilled estimates) according to the invoice practical expedient. Amounts are typically due within 30 days of invoice.
Other
The remainder of Duke Energy’s operations is presented as Other, which does not include material revenues 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)
Disaggregated Revenues
For the Electric and Gas segments, revenue by customer class is most meaningful to Duke Energy as each respective customer class collectively represents unique customer expectations of service, generally has different energy and demand requirements, and operates under tailored, regulatory approved pricing structures. Additionally, each customer class is impacted differently by weather and a variety of economic factors including the level of population growth, economic investment, employment levels, and regulatory activities in each of Duke Energy’s jurisdictions. As such, analyzing revenues disaggregated by customer class allows Duke Energy to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. For the Commercial Renewables segment, the majority of revenues from contracts with customers are from selling all of the unit-contingent output at contractually defined pricing under long-term PPAs with consistent expectations regarding the timing and certainty of cash flows. Disaggregated revenues are presented as follows: |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, 2018 |
| | | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
| |
| (in millions) | Duke |
| Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
| |
| By market or type of customer | Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Piedmont |
|
| Electric Utilities and Infrastructure | | | | | | | | |
| Residential | $ | 2,185 |
| $ | 659 |
| $ | 1,099 |
| $ | 452 |
| $ | 648 |
| $ | 181 |
| $ | 245 |
| $ | — |
|
| General | 1,481 |
| 501 |
| 678 |
| 300 |
| 377 |
| 110 |
| 188 |
| — |
|
| Industrial | 736 |
| 286 |
| 224 |
| 159 |
| 66 |
| 33 |
| 192 |
| — |
|
| Wholesale | 515 |
| 115 |
| 322 |
| 287 |
| 34 |
| 2 |
| 77 |
| — |
|
| Other revenues | 194 |
| 85 |
| 96 |
| 47 |
| 50 |
| 23 |
| 20 |
| — |
|
| Total Electric Utilities and Infrastructure revenue from contracts with customers | $ | 5,111 |
| $ | 1,646 |
| $ | 2,419 |
| $ | 1,245 |
| $ | 1,175 |
| $ | 349 |
| $ | 722 |
| $ | — |
|
| | | | | | | | | |
| Gas Utilities and Infrastructure | | | | | | | | |
| Residential | $ | 153 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 66 |
| $ | — |
| $ | 87 |
|
| Commercial | 87 |
| — |
| — |
| — |
| — |
| 28 |
| — |
| 59 |
|
| Industrial | 31 |
| — |
| — |
| — |
| — |
| 3 |
| — |
| 28 |
|
| Power Generation | — |
| — |
| — |
| — |
| — |
| — |
| — |
| 14 |
|
| Other revenues | 23 |
| — |
| — |
| — |
| — |
| 6 |
| — |
| 17 |
|
| Total Gas Utilities and Infrastructure revenue from contracts with customers | $ | 294 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 103 |
| $ | — |
| $ | 205 |
|
| | | | | | | | | |
Commercial Renewables
| | | | | | | | |
| Revenue from contracts with customers | $ | 47 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
|
| | | | | | | | | |
Other
| | | | | | | | |
| Revenue from contracts with customers | $ | 15 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 10 |
| $ | — |
| $ | — |
|
| | | | | | | | | |
| Total revenue from contracts with customers | $ | 5,467 |
| $ | 1,646 |
| $ | 2,419 |
| $ | 1,245 |
| $ | 1,175 |
| $ | 462 |
| $ | 722 |
| $ | 205 |
|
| | | | | | | | | |
Other revenue sources (a) | $ | 176 |
| $ | 26 |
| $ | 79 |
| $ | 46 |
| $ | 28 |
| $ | (3 | ) | $ | 16 |
| $ | 10 |
|
| Total revenues | $ | 5,643 |
| $ | 1,672 |
| $ | 2,498 |
| $ | 1,291 |
| $ | 1,203 |
| $ | 459 |
| $ | 738 |
| $ | 215 |
|
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)
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2018 |
| | | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
| |
| (in millions) | Duke |
| Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
| |
| By market or type of customer | Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Piedmont |
|
| Electric Utilities and Infrastructure | | | | | | | | |
| Residential | $ | 4,535 |
| $ | 1,440 |
| $ | 2,211 |
| $ | 968 |
| $ | 1,243 |
| $ | 361 |
| $ | 523 |
| $ | — |
|
| General | 2,856 |
| 973 |
| 1,309 |
| 599 |
| 710 |
| 206 |
| 366 |
| — |
|
| Industrial | 1,400 |
| 541 |
| 432 |
| 304 |
| 128 |
| 63 |
| 365 |
| — |
|
| Wholesale | 1,148 |
| 234 |
| 768 |
| 684 |
| 84 |
| 2 |
| 145 |
| — |
|
| Other revenues | 333 |
| 152 |
| 225 |
| 132 |
| 93 |
| 37 |
| 37 |
| — |
|
| Total Electric Utilities and Infrastructure revenue from contracts with customers | $ | 10,272 |
| $ | 3,340 |
| $ | 4,945 |
| $ | 2,687 |
| $ | 2,258 |
| $ | 669 |
| $ | 1,436 |
| $ | — |
|
| | | | | | | | | |
| Gas Utilities and Infrastructure | | | | | | | | |
| Residential | $ | 566 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 177 |
| $ | — |
| $ | 389 |
|
| Commercial | 288 |
| — |
| — |
| — |
| — |
| 77 |
| — |
| 211 |
|
| Industrial | 79 |
| — |
| — |
| — |
| — |
| 10 |
| — |
| 69 |
|
| Power Generation | — |
| — |
| — |
| — |
| — |
| — |
| — |
| 27 |
|
| Other revenues | 78 |
| — |
| — |
| — |
| — |
| 12 |
| — |
| 66 |
|
| Total Gas Utilities and Infrastructure revenue from contracts with customers | $ | 1,011 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 276 |
| $ | — |
| $ | 762 |
|
| | | | | | | | | |
| Commercial Renewables | | | | | | | | |
| Revenue from contracts with customers | $ | 80 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
|
| | | | | | | | | |
| Other | | | | | | | | |
| Revenue from contracts with customers | $ | 31 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 24 |
| $ | — |
| $ | — |
|
| | | | | | | | | |
| Total Revenue from contracts with customers | $ | 11,394 |
| $ | 3,340 |
| $ | 4,945 |
| $ | 2,687 |
| $ | 2,258 |
| $ | 969 |
| $ | 1,436 |
| $ | 762 |
|
| | | | | | | | | |
Other revenue sources(a) | $ | 384 |
| $ | 95 |
| $ | 129 |
| $ | 64 |
| $ | 60 |
| $ | 14 |
| $ | 33 |
| $ | 6 |
|
| Total revenues | $ | 11,778 |
| $ | 3,435 |
| $ | 5,074 |
| $ | 2,751 |
| $ | 2,318 |
| $ | 983 |
| $ | 1,469 |
| $ | 768 |
|
| |
| (a) | Other revenue sources include revenues from leases, derivatives and alternative revenue programs that are not considered revenues from contracts with customers. Alternative revenue programs in certain jurisdictions include regulatory mechanisms that periodically adjust for over or under collection of related revenues. |
IMPACT OF WEATHER AND THE TIMING OF BILLING PERIODS
Revenues and costs are influenced by seasonal weather patterns. Peak sales of electricity occur during the summer and winter months, which results in higher revenue and cash flows during these periods. By contrast, lower sales of electricity occur during the spring and fall, allowing for scheduled plant maintenance. Residential and general service customers are more impacted by weather than industrial customers. Estimated weather impacts are based on actual current period weather compared to normal weather conditions. Normal weather conditions are defined as the long-term average of actual historical weather conditions. Heating-degree days measure the variation in weather based on the extent the average daily temperature falls below a base temperature. Cooling-degree days measure the variation in weather based on the extent the average daily temperature rises above the base temperature. Each degree of temperature below the base temperature counts as one heating-degree day and each degree of temperature above the base temperature counts as one cooling-degree day.
The estimated impact of weather on earnings for Electric Utilities and Infrastructure is based on the temperature variances from a normal condition and customers' historic usage patterns. The methodology used to estimate the impact of weather does not consider all variables that may impact customer response to weather conditions, such as humidity in the summer or wind chill in the winter. The precision of this estimate may also be impacted by applying long-term weather trends to shorter-term periods.
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)
Gas Utilities and Infrastructure's costs and revenues are influenced by seasonal patterns due to peak natural gas sales occurring during the winter months as a result of space heating requirements. Residential customers are the most impacted by weather. There are certain regulatory mechanisms for the North Carolina, South Carolina, Tennessee and Ohio service territories that normalize the margins collected from certain customer classes during the winter. In North Carolina, rate design provides protection from both weather and other usage variations such as conservation, while South Carolina and Tennessee revenues are adjusted solely based on weather. Ohio primarily employs a fixed charge each month regardless of the season and usage.
UNBILLED REVENUE
Unbilled revenues are recognized by applying customer billing rates to the estimated volumes of energy or natural gas delivered but not yet billed. Unbilled revenues can vary significantly from period to period as a result of seasonality, weather, customer usage patterns, customer mix, average price in effect for customer classes, timing of rendering customer bills and meter reading schedules, and the impact of weather normalization or margin decoupling mechanisms.
Unbilled revenues are included within Receivables and Receivables of VIEs on the Condensed Consolidated Balance Sheets as shown in the following table. |
| | | | | | | |
| (in millions) | June 30, 2018 |
| | December 31, 2017 |
|
| Duke Energy | $ | 876 |
| | $ | 944 |
|
| Duke Energy Carolinas | 315 |
| | 342 |
|
| Progress Energy | 298 |
| | 228 |
|
| Duke Energy Progress | 190 |
| | 143 |
|
| Duke Energy Florida | 107 |
| | 85 |
|
| Duke Energy Ohio | 2 |
| | 4 |
|
| Duke Energy Indiana | 30 |
| | 21 |
|
| Piedmont | 5 |
| | 86 |
|
Additionally, Duke Energy Ohio and Duke Energy Indiana sell, on a revolving basis, nearly all of their retail accounts receivable, including receivables for unbilled revenues, to an affiliate, CRC and accounts for the transfers of receivables as sales. Accordingly, the receivables sold are not reflected on the Condensed Consolidated Balance Sheets of Duke Energy Ohio and Duke Energy Indiana. See Note 12 for further information. These receivables for unbilled revenues are shown in the table below.
|
| | | | | | | |
| (in millions) | June 30, 2018 |
| | December 31, 2017 |
|
| Duke Energy Ohio | $ | 73 |
| | $ | 104 |
|
| Duke Energy Indiana | 123 |
| | 132 |
|
14. COMMON STOCK
Basic Earnings Per Share (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 weighted average number of common shares 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 shares outstanding during the period. Diluted EPS reflects the potential dilution that could occur if securities or other agreements to issue common stock, such as stock options and equity forward sale agreements, were exercised or settled. Duke Energy’s participating securities are restricted stock units that are entitled to dividends declared on Duke Energy common stock during the restricted stock unit’s vesting periods.
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 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 June 30, | | Six Months Ended June 30, | Three Months Ended June 30, | | Six Months Ended June 30, |
| (in millions, except per-share amounts) | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
| 2018 |
| | 2017 |
| | 2018 |
| | 2017 |
|
| Income from continuing operations attributable to Duke Energy common stockholders excluding impact of participating securities | $ | 687 |
| | $ | 621 |
| | $ | 1,402 |
| | $ | 1,195 |
| $ | 504 |
| | $ | 687 |
| | $ | 1,123 |
| | $ | 1,402 |
|
| Weighted average shares outstanding – basic | 700 |
| | 689 |
| | 700 |
| | 689 |
| 703 |
| | 700 |
| | 702 |
| | 700 |
|
| Equity Forwards | — |
| | 1 |
| | — |
| | — |
| 1 |
| | — |
| | — |
| | — |
|
| Weighted average shares outstanding – diluted | 700 | | 690 | | 700 | | 689 | 704 | | 700 | | 702 | | 700 |
| Earnings per share from continuing operations attributable to Duke Energy common stockholders | | | | | | | | | | | | | | |
| Basic | $ | 0.98 |
| | $ | 0.90 |
| | $ | 2.00 |
| | $ | 1.73 |
| $ | 0.72 |
| | $ | 0.98 |
| | $ | 1.60 |
| | $ | 2.00 |
|
| Diluted | $ | 0.98 |
| | $ | 0.90 |
| | $ | 2.00 |
| | $ | 1.73 |
| $ | 0.72 |
| | $ | 0.98 |
| | $ | 1.60 |
| | $ | 2.00 |
|
Potentially dilutive items excluded from the calculation(a) | 2 |
| | 2 |
| | 2 | | 2 | 2 |
| | 2 |
| | 2 | | 2 |
| Dividends declared per common share | $ | 0.855 |
| | $ | 0.825 |
| | $ | 1.71 |
| | $ | 1.65 |
| $ | 0.89 |
| | $ | 0.855 |
| | $ | 1.78 |
| | $ | 1.71 |
|
| |
| (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
On February 20, 2018, Duke Energy filed a prospectus supplement and executed an Equity Distribution Agreement (the EDA) under which it may sell up to $1 billion of its common stock through an at-the-market (ATM) offering program, including an equity forward sales component. The EDA was entered into with Wells Fargo Securities, LLC, Citigroup Global Markets Inc., and J.P. Morgan Securities LLC (the Agents). Under the terms of the EDA, Duke Energy may issue and sell, through any of the Agents, shares of common stock through September 23, 2019. In March 2016,June 2018, Duke Energy marketed an equity offering of 10.6two separate tranches, each for 1.3 million shares, of common stock. In lieuThe first tranche was marketed with Wells Fargo Bank at an initial forward price of issuing equity$72.02 per share and the second tranche was marketed with Citibank at the timean initial forward price of the offering, Duke Energy entered into$78.71 per share through equity forward sale agreements with Barclays (the Equity Forwards).transactions under the ATM program. The Equity Forwards requiredrequire Duke Energy to either physically settle the transactions by issuing 10.62.6 million shares in exchange for net proceeds at the then-applicable forward sale price specified by the agreements or net settle in whole or in part through the delivery or receipt of cash or shares. AsThe settlement alternative is at Duke Energy's election.
Separately, in March 2018, Duke Energy marketed an equity offering of 21.3 million shares of common stock through an Underwriting Agreement with Credit Suisse Securities (USA) LLC, J.P. Morgan Securities LLC, Barclays Capital Inc. and Goldman Sachs & Co. LLC, as representatives of several underwriters, Credit Suisse Capital LLC and J.P. Morgan Securities LLC as Forward Sellers, and Credit Suisse Capital LLC and JPMorgan Chase National Bank Associate, acting as forward purchasers. In connection with the offering, Duke Energy entered into equity forward sale agreements with Credit Suisse Securities (USA) LLC as Agent for Credit Suisse Capital LLC and J.P. Morgan Chase Bank, National Association. The sale price was $75 per share less certain net adjustments for an initial forward price of $74.07 per share. The Equity Forwards require Duke Energy to either physically settle the transactions by issuing 21.3 million shares in exchange for net proceeds at the then-applicable forward sale price specified by the agreements , or net settle in whole or in part through the delivery or receipt of cash or shares. The settlement alternative is at Duke Energy's election. In June 2018, Duke Energy physically settled one-half of the equity forwards by delivering approximately 10.6 million shares of common stock in exchange for net cash proceeds of approximately $781 million.
For contracts that have not been settled, no amounts have or will be recorded in Duke Energy's Condensed Consolidated Financial Statements with respect to the equity or ATM offerings until settlements of the Equity Forwards occur, which is expected by December 31, 2018. If Duke Energy had elected to net share settle these contracts as of June 30, 2016,2018, Duke Energy would have been required to deliver 0.9 million shares. The initial forward sale price will be subject to adjustment on a daily basis based on a floating interest rate factor and will decrease by other fixed amounts specified in the relevant forward sale agreement. Until settlement of the Equity Forwards, earnings per share dilution resulting from the agreements, wasif any, will be determined under the treasury stock method.
Share dilution occurs when the average market price of Duke Energy physically settledEnergy's stock is higher than the Equity Forwards in full in October 2016 following the close of the Piedmont acquisition. See Note 2 for additional information related to the Piedmont acquisition.average forward sales price.
14.15. STOCK-BASED COMPENSATION
For employee awards, equity classified stock-based compensation cost is measured at the service inception date or the grant date, based on the estimated achievement of certain performance metrics or the fair value of the award, and is recognized as expense or capitalized as a component of property, plant and equipment over the requisite service period.
Pretax stock-based compensation costs, the tax benefit associated with stock-based compensation expense and stock-based compensation costs capitalized are included in the following table. |
| | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended |
| | June 30, | | June 30, |
| (in millions) | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
|
| Restricted stock unit awards | $ | 12 |
| | $ | 10 |
| | $ | 20 |
| | $ | 17 |
|
| Performance awards | 6 |
| | 5 |
| | 13 |
| | 10 |
|
| Pretax stock-based compensation cost | $ | 18 |
| | $ | 15 |
| | $ | 33 |
| | $ | 27 |
|
| Tax benefit associated with stock-based compensation expense | $ | 7 |
| | $ | 5 |
| | $ | 12 |
| | $ | 9 |
|
| Stock-based compensation costs capitalized | — |
| | 1 |
| | 1 |
| | 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)
PriorThe following table presents information related to Duke Energy acquiring Piedmont, Piedmont had an incentive compensation plan for eligible officers and other participants. Piedmont's total pretax stock-based compensation costs were approximately $2 million and $3 million for the three and six months ended June 30, 2016, respectively. The tax benefit associated with Piedmont's stock Energy's stock–based compensation expense for the three and six months ended June 30, 2016, was immaterial.compensation. |
| | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended |
| | June 30, | | June 30, |
| (in millions) | 2018 |
| | 2017 |
| | 2018 |
| | 2017 |
|
| Restricted stock unit awards | $ | 12 |
| | $ | 12 |
| | $ | 22 |
| | $ | 20 |
|
| Performance awards | 7 |
| | 6 |
| | 14 |
| | 13 |
|
| Pretax stock-based compensation cost | $ | 19 |
| | $ | 18 |
| | $ | 36 |
| | $ | 33 |
|
| Stock-based compensation cost capitalized | $ | 1 |
| | $ | — |
| | $ | 2 |
| | $ | 1 |
|
| Stock-based compensation expense | $ | 18 |
| | $ | 18 |
| | $ | 34 |
| | $ | 32 |
|
| Tax benefit associated with stock-based compensation expense | $ | 4 |
| | $ | 7 |
| | $ | 8 |
| | $ | 12 |
|
15.16. 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. 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 presents contributions made by the Duke Energy did not make any contributionsRegistrants to its U.S.their qualified defined benefit pension plans during the six months ended June 30, 2017 and 2016.2018. |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
|
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
|
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Indiana |
|
| Contributions | $ | 141 |
| | $ | 46 |
| | $ | 45 |
| | $ | 25 |
| | $ | 20 |
| | $ | 8 |
|
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 ofdid not make any contributions to its qualified defined benefit pension plans during 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 8. six months ended June 30, 2017.
Duke Energy uses a December 31 measurement date for its defined benefit retirement plan assets and obligations.
Components of Net Periodic Benefit Costs
The tables below present total net periodic benefit costs prior to capitalization of amounts reflected as Net property, plant and equipment on the Condensed Consolidated Balance Sheets. Only the service cost component of net periodic benefit costs is eligible to be capitalized. The remaining non-capitalized portions of net periodic benefit costs are classified as either: (1) service cost, which is recorded in Operations, maintenance and other on the Condensed Consolidated Statements of Operations; or as (2) components of non-service cost, which is recorded in Other income and expenses, net on the Condensed Consolidated Statements of Operations. See Note 1 for further information on impacts of the retirement benefits accounting standard adopted by Duke Energy on January 1, 2018.
Pension and other post-retirement benefit costs presented in the tables below for the Subsidiary Registrants are amounts allocated from Duke Energy for the employees of the respective Subsidiary Registrants. The Condensed Consolidated Statements of Operations of the Subsidiary Registrants also include allocated net periodic benefit costs for their proportionate share of pension and post-retirement benefit costs related to employees of the Duke Energy shared services affiliate. However, in the tables below these amounts are only presented in the Duke Energy column. For additional information on the corporate governance and shared service expenses allocated from the Duke Energy shared service affiliate, see Note 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 – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
QUALIFIED PENSION PLANS
The following tables include the components of net periodic pension costs for qualified pension plans. | | | | Three Months Ended June 30, 2017 | Three Months Ended June 30, 2018 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
| Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Service cost | $ | 40 |
| | $ | 12 |
| | $ | 12 |
| | $ | 6 |
| | $ | 5 |
| | $ | 1 |
| | $ | 2 |
| | $ | 3 |
| $ | 45 |
| | $ | 15 |
| | $ | 13 |
| | $ | 8 |
| | $ | 6 |
| | $ | 1 |
| | $ | 3 |
| | $ | 2 |
|
| Interest cost on projected benefit obligation | 82 |
| | 20 |
| | 25 |
| | 12 |
| | 13 |
| | 5 |
| | 7 |
| | 3 |
| 75 |
| | 18 |
| | 22 |
| | 10 |
| | 12 |
| | 4 |
| | 6 |
| | 3 |
|
| Expected return on plan assets | (136 | ) | | (36 | ) | | (43 | ) | | (21 | ) | | (21 | ) | | (7 | ) | | (11 | ) | | (6 | ) | (140 | ) | | (37 | ) | | (43 | ) | | (21 | ) | | (23 | ) | | (7 | ) | | (11 | ) | | (6 | ) |
| Amortization of actuarial loss | 36 |
| | 8 |
| | 14 |
| | 6 |
| | 7 |
| | 1 |
| | 3 |
| | 3 |
| 33 |
| | 7 |
| | 11 |
| | 5 |
| | 6 |
| | 1 |
| | 2 |
| | 3 |
|
| Amortization of prior service credit | (6 | ) | | (2 | ) | | (1 | ) | | — |
| | — |
| | — |
| | — |
| | (1 | ) | (8 | ) | | (2 | ) | | (1 | ) | | (1 | ) | | (1 | ) | | — |
| | — |
| | (3 | ) |
| Other | 2 |
| | — |
| | 1 |
| | 1 |
| | — |
| | — |
| | — |
| | 1 |
| |
| Net periodic pension costs | $ | 18 |
| | $ | 2 |
| | $ | 8 |
| | $ | 4 |
| | $ | 4 |
| | $ | — |
| | $ | 1 |
| | $ | 3 |
| $ | 5 |
| | $ | 1 |
| | $ | 2 |
| | $ | 1 |
| | $ | — |
| | $ | (1 | ) | | $ | — |
| | $ | (1 | ) |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, 2016 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Service cost | $ | 37 |
| | $ | 12 |
| | $ | 10 |
| | $ | 6 |
| | $ | 5 |
| | $ | 1 |
| | $ | 2 |
| | $ | 2 |
|
| Interest cost on projected benefit obligation | 83 |
| | 22 |
| | 27 |
| | 13 |
| | 14 |
| | 5 |
| | 7 |
| | 3 |
|
| Expected return on plan assets | (129 | ) | | (36 | ) | | (42 | ) | | (20 | ) | | (21 | ) | | (7 | ) | | (11 | ) | | (6 | ) |
| Amortization of actuarial loss | 33 |
| | 8 |
| | 13 |
| | 5 |
| | 7 |
| | 1 |
| | 3 |
| | 2 |
|
| Amortization of prior service credit | (4 | ) | | (2 | ) | | (1 | ) | | (1 | ) | | — |
| | — |
| | — |
| | (1 | ) |
| Other | 1 |
| | — |
| | — |
| | 1 |
| | — |
| | — |
| | — |
| | — |
|
| Net periodic pension costs | $ | 21 |
| | $ | 4 |
| | $ | 7 |
| | $ | 4 |
| | $ | 5 |
| | $ | — |
| | $ | 1 |
| | $ | — |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2017 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Service cost | $ | 80 |
| | $ | 24 |
| | $ | 24 |
| | $ | 12 |
| | $ | 10 |
| | $ | 2 |
| | $ | 4 |
| | $ | 6 |
|
| Interest cost on projected benefit obligation | 164 |
| | 40 |
| | 50 |
| | 24 |
| | 26 |
| | 10 |
| | 14 |
| | 6 |
|
| Expected return on plan assets | (272 | ) | | (71 | ) | | (86 | ) | | (42 | ) | | (42 | ) | | (14 | ) | | (22 | ) | | (12 | ) |
| Amortization of actuarial loss | 72 |
| | 16 |
| | 28 |
| | 12 |
| | 14 |
| | 2 |
| | 6 |
| | 6 |
|
| Amortization of prior service credit | (12 | ) | | (4 | ) | | (2 | ) | | — |
| | — |
| | — |
| | — |
| | (2 | ) |
| Other | 4 |
| | — |
| | 2 |
| | 1 |
| | — |
| | — |
| | — |
| | 1 |
|
| Net periodic pension costs | $ | 36 |
| | $ | 5 |
| | $ | 16 |
| | $ | 7 |
| | $ | 8 |
| | $ | — |
| | $ | 2 |
| | $ | 5 |
|
| | | | Six Months Ended June 30, 2016 | Three Months Ended June 30, 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 |
| | Piedmont |
| Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Service cost | $ | 73 |
| | $ | 24 |
| | $ | 21 |
| | $ | 12 |
| | $ | 10 |
| | $ | 2 |
| | $ | 4 |
| | $ | 5 |
| $ | 40 |
| | $ | 12 |
| | $ | 12 |
| | $ | 6 |
| | $ | 5 |
| | $ | 1 |
| | $ | 2 |
| | $ | 3 |
|
| Interest cost on projected benefit obligation | 166 |
| | 43 |
| | 53 |
| | 25 |
| | 28 |
| | 10 |
| | 14 |
| | 5 |
| 82 |
| | 20 |
| | 25 |
| | 12 |
| | 13 |
| | 5 |
| | 7 |
| | 3 |
|
| Expected return on plan assets | (258 | ) | | (71 | ) | | (84 | ) | | (41 | ) | | (42 | ) | | (14 | ) | | (21 | ) | | (12 | ) | (136 | ) | | (36 | ) | | (43 | ) | | (21 | ) | | (21 | ) | | (7 | ) | | (11 | ) | | (6 | ) |
| Amortization of actuarial loss | 66 |
| | 16 |
| | 27 |
| | 11 |
| | 14 |
| | 2 |
| | 6 |
| | 4 |
| 36 |
| | 8 |
| | 14 |
| | 6 |
| | 7 |
| | 1 |
| | 3 |
| | 3 |
|
| Amortization of prior service credit | (8 | ) | | (4 | ) | | (2 | ) | | (1 | ) | | — |
| | — |
| | — |
| | (1 | ) | (6 | ) | | (2 | ) | | (1 | ) | | — |
| | — |
| | — |
| | — |
| | (1 | ) |
| Other | 4 |
| | 1 |
| | 1 |
| | 1 |
| | — |
| | — |
| | — |
| | — |
| 2 |
| | — |
| | 1 |
| | 1 |
| | — |
| | — |
| | — |
| | 1 |
|
| Net periodic pension costs | $ | 43 |
| | $ | 9 |
| | $ | 16 |
| | $ | 7 |
| | $ | 10 |
| | $ | — |
| | $ | 3 |
| | $ | 1 |
| $ | 18 |
| | $ | 2 |
| | $ | 8 |
| | $ | 4 |
| | $ | 4 |
| | $ | — |
| | $ | 1 |
| | $ | 3 |
|
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)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2018 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke | | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | Energy | | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Service cost | $ | 90 |
| | $ | 30 |
| | $ | 26 |
| | $ | 15 |
| | $ | 11 |
| | $ | 2 |
| | $ | 5 |
| | $ | 4 |
|
| Interest cost on projected benefit obligation | 150 |
| | 36 |
| | 46 |
| | 21 |
| | 25 |
| | 9 |
| | 12 |
| | 6 |
|
| Expected return on plan assets | (280 | ) | | (74 | ) | | (88 | ) | | (42 | ) | | (46 | ) | | (14 | ) | | (21 | ) | | (12 | ) |
| Amortization of actuarial loss | 66 |
| | 14 |
| | 22 |
| | 10 |
| | 12 |
| | 2 |
| | 4 |
| | 6 |
|
| Amortization of prior service credit | (16 | ) | | (4 | ) | | (2 | ) | | (1 | ) | | (1 | ) | | — |
| | — |
| | (6 | ) |
| Net periodic pension costs | $ | 10 |
| | $ | 2 |
| | $ | 4 |
| | $ | 3 |
| | $ | 1 |
| | $ | (1 | ) | | $ | — |
| | $ | (2 | ) |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2017 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Service cost | $ | 80 |
| | $ | 24 |
| | $ | 24 |
| | $ | 12 |
| | $ | 10 |
| | $ | 2 |
| | $ | 4 |
| | $ | 6 |
|
| Interest cost on projected benefit obligation | 164 |
| | 40 |
| | 50 |
| | 24 |
| | 26 |
| | 10 |
| | 14 |
| | 6 |
|
| Expected return on plan assets | (272 | ) | | (71 | ) | | (86 | ) | | (42 | ) | | (42 | ) | | (14 | ) | | (22 | ) | | (12 | ) |
| Amortization of actuarial loss | 72 |
| | 16 |
| | 28 |
| | 12 |
| | 14 |
| | 2 |
| | 6 |
| | 6 |
|
| Amortization of prior service credit | (12 | ) | | (4 | ) | | (2 | ) | | — |
| | — |
| | — |
| | — |
| | (2 | ) |
| Other | 4 |
| | — |
| | 2 |
| | 1 |
| | — |
| | — |
| | — |
| | 1 |
|
| Net periodic pension costs | $ | 36 |
| | $ | 5 |
| | $ | 16 |
| | $ | 7 |
| | $ | 8 |
| | $ | — |
| | $ | 2 |
| | $ | 5 |
|
NON-QUALIFIED PENSION PLANS
The following tables include the components of net periodic pension costs for non-qualified pension plans for registrants with non-qualified pension costs. |
| | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, 2017 |
| | | | Duke |
| | | | Duke |
| | Duke |
|
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
|
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
|
| Service cost | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Interest cost on projected benefit obligation | 3 |
| | 1 |
| | 1 |
| | — |
| | — |
|
| Amortization of actuarial loss | 2 |
| | — |
| | 1 |
| | — |
| | — |
|
| Net periodic pension costs | $ | 5 |
| | $ | 1 |
| | $ | 2 |
| | $ | — |
| | $ | — |
|
|
| | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 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 | 3 |
| | 1 |
| | 1 |
| | 1 |
| | 1 |
|
| Amortization of actuarial loss | 2 |
| | — |
| | — |
| | — |
| | — |
|
| Net periodic pension costs | $ | 6 |
| | $ | 1 |
| | $ | 1 |
| | $ | 1 |
| | $ | 1 |
|
|
| | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2017 |
| | | | Duke |
| | | | Duke |
| | Duke |
|
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
|
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
|
| Service cost | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Interest cost on projected benefit obligation | 6 |
| | 1 |
| | 2 |
| | 1 |
| | 1 |
|
| Amortization of actuarial loss | 4 |
| | — |
| | 2 |
| | — |
| | — |
|
| Net periodic pension costs | $ | 10 |
| | $ | 1 |
| | $ | 4 |
| | $ | 1 |
| | $ | 1 |
|
|
| | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 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 | 7 |
| | 1 |
| | 2 |
| | 1 |
| | 1 |
|
| Amortization of actuarial loss | 4 |
| | — |
| | 1 |
| | — |
| | — |
|
| Net periodic pension costs | $ | 12 |
| | $ | 1 |
| | $ | 3 |
| | $ | 1 |
| | $ | 1 |
|
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)
|
| | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, 2018 |
| | | | Duke |
| | | | Duke |
| | Duke |
|
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
|
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
|
| Service cost | $ | 1 |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Interest cost on projected benefit obligation | 3 |
| | — |
| | 1 |
| | 1 |
| | 1 |
|
| Amortization of actuarial loss | 2 |
| | — |
| | — |
| | — |
| | — |
|
| Amortization of prior service credit | (1 | ) | | — |
| | — |
| | — |
| | — |
|
| Net periodic pension costs | $ | 5 |
| | $ | 1 |
| | $ | 1 |
| | $ | 1 |
| | $ | 1 |
|
|
| | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, 2017 |
| | | | Duke |
| | | | Duke |
| | Duke |
|
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
|
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
|
| Interest cost on projected benefit obligation | $ | 3 |
| | $ | 1 |
| | $ | 1 |
| | $ | — |
| | $ | — |
|
| Amortization of actuarial loss | 2 |
| | — |
| | 1 |
| | — |
| | — |
|
| Net periodic pension costs | $ | 5 |
| | $ | 1 |
| | $ | 2 |
| | $ | — |
| | $ | — |
|
|
| | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2018 |
| | | | Duke |
| | | | Duke |
| | Duke |
|
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
|
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
|
| Service cost | $ | 1 |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Interest cost on projected benefit obligation | 6 |
| | — |
| | 2 |
| | 1 |
| | 1 |
|
| Amortization of actuarial loss | 4 |
| | — |
| | — |
| | — |
| | — |
|
| Amortization of prior service (credit) cost | (1 | ) | | — |
| | 1 |
| | — |
| | — |
|
| Net periodic pension costs | $ | 10 |
| | $ | 1 |
| | $ | 3 |
| | $ | 1 |
| | $ | 1 |
|
|
| | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2017 |
| | | | Duke |
| | | | Duke |
| | Duke |
|
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
|
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
|
| Interest cost on projected benefit obligation | $ | 6 |
| | $ | 1 |
| | $ | 2 |
| | $ | 1 |
| | $ | 1 |
|
| Amortization of actuarial loss | 4 |
| | — |
| | 2 |
| | — |
| | — |
|
| Net periodic pension costs | $ | 10 |
| | $ | 1 |
| | $ | 4 |
| | $ | 1 |
| | $ | 1 |
|
OTHER POST-RETIREMENT BENEFIT PLANS
Duke Energy provides, and the Subsidiary Registrants participate in, somecertain health care and life insurance benefits for retired employees on a contributory and non-contributory basis.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
The following tables include the components of net periodic other post-retirement benefit costs. | | | | Three Months Ended June 30, 2017 | Three Months Ended June 30, 2018 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
| Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Service cost | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| $ | 2 |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Interest cost on accumulated post-retirement benefit obligation | 9 |
| | 2 |
| | 3 |
| | 2 |
| | 2 |
| | — |
| | — |
| | — |
| 7 |
| | 1 |
| | 2 |
| | 2 |
| | 2 |
| | 1 |
| | 1 |
| | — |
|
| Expected return on plan assets | (4 | ) | | (2 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| (4 | ) | | (2 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Amortization of actuarial loss (gain) | 2 |
| | (1 | ) | | 5 |
| | 3 |
| | 2 |
| | (1 | ) | | — |
| | — |
| |
| Amortization of actuarial loss | | 2 |
| | 1 |
| | 1 |
| | — |
| | — |
| | — |
| | 1 |
| | — |
|
| Amortization of prior service credit | (29 | ) | | (2 | ) | | (21 | ) | | (13 | ) | | (7 | ) | | — |
| | — |
| | — |
| (5 | ) | | (1 | ) | | (2 | ) | | — |
| | (2 | ) | | — |
| | — |
| | (1 | ) |
| Net periodic other post-retirement benefit costs | $ | (21 | ) | | $ | (3 | ) | | $ | (13 | ) | | $ | (8 | ) | | $ | (3 | ) | | $ | (1 | ) | | $ | — |
| | $ | — |
| $ | 2 |
| | $ | — |
| | $ | 1 |
| | $ | 2 |
| | $ | — |
| | $ | 1 |
| | $ | 2 |
| | $ | (1 | ) |
| | | | Three Months Ended June 30, 2016 | Three Months Ended June 30, 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 |
| | Piedmont |
| Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Service cost | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Interest cost on accumulated post-retirement benefit obligation | 9 |
| | 2 |
| | 3 |
| | 2 |
| | 1 |
| | 1 |
| | 1 |
| | — |
| 9 |
| | 2 |
| | 3 |
| | 2 |
| | 2 |
| | — |
| | — |
| | — |
|
| Expected return on plan assets | (4 | ) | | (2 | ) | | — |
| | — |
| | — |
| | — |
| | (1 | ) | | — |
| (4 | ) | | (2 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Amortization of actuarial loss (gain) | 2 |
| | (1 | ) | | 6 |
| | 3 |
| | 3 |
| | (1 | ) | | — |
| | — |
| 2 |
| | (1 | ) | | 5 |
| | 3 |
| | 2 |
| | (1 | ) | | — |
| | — |
|
| Amortization of prior service credit | (36 | ) | | (3 | ) | | (25 | ) | | (17 | ) | | (9 | ) | | — |
| | — |
| | — |
| (29 | ) | | (2 | ) | | (21 | ) | | (13 | ) | | (7 | ) | | — |
| | — |
| | — |
|
| Net periodic other post-retirement benefit costs | $ | (28 | ) | | $ | (4 | ) | | $ | (16 | ) | | $ | (12 | ) | �� | $ | (5 | ) | | $ | — |
| | $ | — |
| | $ | — |
| $ | (21 | ) | | $ | (3 | ) | | $ | (13 | ) | | $ | (8 | ) | | $ | (3 | ) | | $ | (1 | ) | | $ | — |
| | $ | — |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2017 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Service cost | $ | 2 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Interest cost on accumulated post-retirement benefit obligation | 18 |
| | 4 |
| | 7 |
| | 4 |
| | 4 |
| | — |
| | — |
| | — |
|
| Expected return on plan assets | (7 | ) | | (4 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Amortization of actuarial loss (gain) | 4 |
| | (2 | ) | | 10 |
| | 6 |
| | 4 |
| | (1 | ) | | — |
| | — |
|
| Amortization of prior service credit | (58 | ) | | (4 | ) | | (42 | ) | | (27 | ) | | (15 | ) | | — |
| | — |
| | — |
|
| Net periodic other post-retirement benefit costs | $ | (41 | ) | | $ | (6 | ) | | $ | (25 | ) | | $ | (17 | ) | | $ | (7 | ) | | $ | (1 | ) | | $ | — |
| | $ | — |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2016 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Service cost | $ | 2 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Interest cost on accumulated post-retirement benefit obligation | 17 |
| | 4 |
| | 7 |
| | 4 |
| | 3 |
| | 1 |
| | 2 |
| | 1 |
|
| Expected return on plan assets | (7 | ) | | (4 | ) | | — |
| | — |
| | — |
| | — |
| | (1 | ) | | (1 | ) |
| Amortization of actuarial loss (gain) | 3 |
| | (2 | ) | | 11 |
| | 6 |
| | 5 |
| | (1 | ) | | (1 | ) | | — |
|
| Amortization of prior service credit | (71 | ) | | (6 | ) | | (51 | ) | | (34 | ) | | (18 | ) | | — |
| | — |
| | — |
|
| Net periodic other post-retirement benefit costs | $ | (56 | ) | | $ | (8 | ) | | $ | (33 | ) | | $ | (24 | ) | | $ | (10 | ) | | $ | — |
| | $ | — |
| | $ | — |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2018 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Service cost | $ | 3 |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Interest cost on accumulated post-retirement benefit obligation | 14 |
| | 3 |
| | 6 |
| | 3 |
| | 3 |
| | 1 |
| | 2 |
| | — |
|
| Expected return on plan assets | (6 | ) | | (4 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Amortization of actuarial loss | 3 |
| | 1 |
| | 1 |
| | — |
| | — |
| | — |
| | 2 |
| | — |
|
| Amortization of prior service credit | (10 | ) | | (2 | ) | | (4 | ) | | — |
| | (3 | ) | | — |
| | — |
| | (1 | ) |
| Net periodic other post-retirement benefit costs | $ | 4 |
| | $ | (1 | ) | | $ | 3 |
| | $ | 3 |
| | $ | — |
| | $ | 1 |
| | $ | 4 |
| | $ | (1 | ) |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2017 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Service cost | $ | 2 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Interest cost on accumulated post-retirement benefit obligation | 18 |
| | 4 |
| | 7 |
| | 4 |
| | 4 |
| | — |
| | — |
| | — |
|
| Expected return on plan assets | (7 | ) | | (4 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Amortization of actuarial loss (gain) | 4 |
| | (2 | ) | | 10 |
| | 6 |
| | 4 |
| | (1 | ) | | — |
| | — |
|
| Amortization of prior service credit | (58 | ) | | (4 | ) | | (42 | ) | | (27 | ) | | (15 | ) | | — |
| | — |
| | — |
|
| Net periodic other post-retirement benefit costs | $ | (41 | ) | | $ | (6 | ) | | $ | (25 | ) | | $ | (17 | ) | | $ | (7 | ) | | $ | (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)
EMPLOYEE SAVINGS PLAN
Duke Energy sponsors, and the Subsidiary Registrants participate in, an employee savings plan that covers substantially all employees. The following table includes employer contributions made by Duke Energy and expensed by the Subsidiary Registrants. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Three Months Ended June 30, | | | | | | | | | | | | | | | |
| 2018 | $ | 48 |
| | $ | 15 |
| | $ | 13 |
| | $ | 9 |
| | $ | 4 |
| | $ | 1 |
| | $ | 2 |
| | $ | 2 |
|
| 2017 | 39 |
| | 13 |
| | 12 |
| | 8 |
| | 4 |
| | 1 |
| | 2 |
| | 1 |
|
| Six Months Ended June 30, | | | | | | | | | | | | |
| 2018 | $ | 118 |
| | $ | 38 |
| | $ | 32 |
| | $ | 22 |
| | $ | 10 |
| | $ | 2 |
| | $ | 5 |
| | $ | 6 |
|
| 2017 | 104 |
| | 35 |
| | 30 |
| | 21 |
| | 9 |
| | 2 |
| | 5 |
| | 3 |
|
17. INCOME TAXES
Tax Act
On December 22, 2017, President Trump signed the Tax Act into law. Among other provisions, the Tax Act lowered the corporate federal income tax rate from 35 percent to 21 percent, limits interest deductions outside of regulated utility operations, requires the normalization of excess deferred taxes associated with property under the average rate assumption method as a prerequisite to qualifying for accelerated depreciation and repealed the federal manufacturing deduction. The Tax Act also repealed the corporate alternative minimum tax (AMT) and stipulates a refund of 50 percent of remaining AMT credit carryforwards (to the extent the credits exceed regular tax for the year) for tax years 2018, 2019 and 2020 with all remaining AMT credits to be refunded in tax year 2021.
At this time, AMT credits that are treated as refundable under the Tax Act are among the certain refundable tax credits that are subject to sequestration. In the first quarter of 2018, the company revised the December 31, 2017, estimate of the income tax effects of the Tax Act and recorded a $76 million valuation allowance against these AMT credits based on additional interpretative guidance from the Internal Revenue Service related to the Tax Act. See Note 22 to the Consolidated Financial Statements in the Annual Report on Form 10-K/A for the year ended December 31, 2017, for information on the U.S. Securities and Exchange Commission staff's guidance on accounting for the Tax Act (Staff Accounting Bulletin No. 118 (SAB 118), Income Tax Accounting Implications of the Tax Cuts and Jobs Act).
No provisional adjustments to the estimate of the income tax effects of the Tax Act were recorded for the three months ended June 30, 2018 in accordance with SAB 118.
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 | | Six Months Ended |
| | June 30, | | June 30, |
| | 2018 |
| | 2017 |
| | 2018 |
| | 2017 |
|
| Duke Energy | 16.5 | % | | 32.1 | % | | 19.9 | % | | 32.3 | % |
| Duke Energy Carolinas | 21.5 | % | | 34.7 | % | | 21.8 | % | | 35.0 | % |
| Progress Energy | 17.3 | % | | 33.4 | % | | 15.4 | % | | 33.7 | % |
| Duke Energy Progress | 20.1 | % | | 31.9 | % | | 16.8 | % | | 33.0 | % |
| Duke Energy Florida | 18.0 | % | | 36.8 | % | | 17.4 | % | | 36.7 | % |
| Duke Energy Ohio | 25.8 | % | | 34.8 | % | | 16.0 | % | | 35.1 | % |
| Duke Energy Indiana | 25.8 | % | | 39.4 | % | | 25.8 | % | | 39.4 | % |
| Piedmont | 27.3 | % | | 38.5 | % | | 23.9 | % | | 37.9 | % |
The decrease in the effective tax rate (ETR) for Duke Energy and the Subsidiary Registrants for the three months ended June 30, 2018, is primarily due to the lower statutory federal corporate tax rate under the Tax Act. The decrease in the ETR for Duke Energy and the Subsidiary Registrants for the six months ended June 30, 2018, is primarily due to the lower statutory federal corporate tax rate under the Tax Act and the amortization of federal and state excess deferred taxes, partially offset by a valuation allowance against AMT credits discussed above.
The decrease in the ETR for Duke Energy Carolinas for the three and six months ended June 30, 2018, is primarily due to the lower statutory federal corporate tax rate under the Tax Act and the amortization of state excess deferred taxes.
The decrease in the ETR for Progress Energy for the three and six months ended June 30, 2018, is primarily due to the lower statutory federal corporate tax rate under the Tax Act and the amortization of federal and state excess deferred taxes.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
DEFINED CONTRIBUTION RETIREMENT PLANS
EMPLOYEE SAVINGS PLANS
Duke Energy sponsors, and the Subsidiary Registrants participate in, employee savings plans that cover substantially all U.S. employees. The following table presents employer contributions made by Duke Energy and expensed by the Subsidiary Registrants. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Three Months Ended June 30, | | | | | | | | | | | | | | | |
| 2017 | $ | 39 |
| | $ | 13 |
| | $ | 12 |
| | $ | 8 |
| | $ | 4 |
| | $ | 1 |
| | $ | 2 |
| | $ | 1 |
|
| 2016 | 39 |
| | 13 |
| | 12 |
| | 8 |
| | 4 |
| | 1 |
| | 2 |
| | 1 |
|
| Six Months Ended June 30, | | | | | | | | | | | | |
| 2017 | $ | 104 |
| | $ | 35 |
| | $ | 30 |
| | $ | 21 |
| | $ | 9 |
| | $ | 2 |
| | $ | 5 |
| | $ | 3 |
|
| 2016 | 91 |
| | 31 |
| | 27 |
| | 19 |
| | 8 |
| | 2 |
| | 4 |
| | 3 |
|
MONEY PURCHASE PENSION PLAN
Duke Energy provides, and Piedmont participates in, the Money Purchase Pension (MPP) plan, which is a defined contribution pension plan that allows certain employees to direct investments and assume risk of investment returns. In January 2017, a $2 million contribution was made to the MPP plan.
16. INCOME TAXES
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 | | Six Months Ended |
| | June 30, | | June 30, |
| | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
|
| Duke Energy | 32.1 | % | | 28.8 | % | | 32.3 | % | | 29.6 | % |
| Duke Energy Carolinas | 34.7 | % | | 35.1 | % | | 35.0 | % | | 34.6 | % |
| Progress Energy | 33.4 | % | | 36.0 | % | | 33.7 | % | | 36.3 | % |
| Duke Energy Progress | 31.9 | % | | 35.5 | % | | 33.0 | % | | 35.4 | % |
| Duke Energy Florida | 36.8 | % | | 37.6 | % | | 36.7 | % | | 37.7 | % |
| Duke Energy Ohio | 34.8 | % | | 34.3 | % | | 35.1 | % | | 29.2 | % |
| Duke Energy Indiana | 39.4 | % | | 36.1 | % | | 39.4 | % | | 33.1 | % |
| Piedmont | 38.5 | % | | 40.0 | % | | 37.9 | % | | 38.0 | % |
The increase in the effective tax rate (ETR) for Duke Energy for the three and six months ended June 30, 2017, is primarily due to favorable impacts in the prior year of finalizing federal tax audits and unfavorable tax levelization in the current year, partially offset by higher production tax credits related to wind projects placed in service.
The decrease in the ETR for Progress Energy for the three and six months ended June 30, 2017, is primarily due to lower North Carolina corporate tax rates.
The decrease in the ETR for Duke Energy Progress for the three months ended June 30, 2018, is primarily due to the lower statutory federal tax rate under the Tax Act. The decrease in the ETR for Duke Energy Progress for the six months ended June 30, 2018, is primarily due to the lower statutory federal tax rate under the Tax Act and the amortization of state excess deferred taxes.
The decrease in the ETR for Duke Energy Florida for the three and six months ended June 30, 2017,2018, is primarily due to the lower North Carolinastatutory federal corporate tax rates.rate under the Tax Act and the amortization of federal excess deferred taxes.
The increasedecrease in the ETR for Duke Energy Ohio for the three months ended June 30, 2018, is primarily due to the lower statutory federal tax rate under the Tax Act. The decrease in the ETR for Duke Energy Ohio for the six months ended June 30, 2017,2018, is primarily due to the lower statutory federal tax rate under the Tax Act and an immaterial out of period adjustmentincrease in the prior year related to deferred tax balances associated with property, plant and equipment.AFUDC equity.
The increasedecrease in the ETR for Duke Energy Indiana for the three months ended June 30, 2017, is primarily due to favorable state tax credits recorded in the prior year. The increase in the ETR for Duke Energy Indiana for theand six months ended June 30, 2017,2018, is primarily due to an immaterial out of period adjustment in the prior year related to deferredlower statutory federal corporate tax balances associated with property, plant and equipment.rate under the Tax Act.
The decrease in the ETR for Piedmont for the three months ended June 30, 2017, is primarily due to lower North Carolina corporate tax rates.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
TAXES 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 six months ended June 30, 2016. Due2018, is primarily due to the classification oflower statutory federal corporate tax rate under the International Disposal Group as discontinued operations, income tax amounts related to the International Disposal Group's foreign earnings are presented within (Loss) Income from Discontinued Operations, net of tax on the Condensed Consolidated Statements of Operations. See Note 2 for additional information related to the sale of the International Disposal Group.Tax Act.
17.18. SUBSEQUENT EVENTS
For information on additional subsequent events related to regulatory matters and commitments and contingencies and derivatives and hedging see Notes 3 and 4, 5 and 9.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), 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, Duke Energy Indiana and Piedmont. When discussing Duke Energy’s consolidated financial information, it necessarily includes the results of the Subsidiary Registrants, which, along with Duke Energy, are collectively referred to as the Duke Energy Registrants. Piedmont's results of operations are included in Duke Energy's results for the three and six months ended June 30, 2017, but not for the three and six months ended June 30, 2016, as Piedmont's earnings are only included in Duke Energy's consolidated results subsequent to the acquisition date. See below for additional information regarding the acquisition.
Management’s Discussion and Analysis should be read in conjunction with the Condensed Consolidated Financial Statements and Notes for the six months ended June 30, 2017,2018, and with Duke Energy’s Annual Report on Form 10-K10-K/A for the year ended December 31, 2016, Piedmont's Annual Report on Form 10-K for the year ended October 31, 2016, and the transition report filed by Piedmont on Form 10-Q (Form 10-QT) as of December 31, 2016, for the transition period from November 1, 2016 to December 31, 2016.2017.
Executive Overview
Acquisition of Piedmont Natural GasRegulatory Activity
On October 3, 2016,In 2018, Duke Energy completed the acquisition of Piedmont for a total cash purchase price of $5.0 billion and assumed Piedmont's existing long-term debt, which had a fair value of approximately $2.0 billion at the time of the acquisition. The acquisition provides a foundation for Duke Energy to establish a broader, long-term strategic natural gas infrastructure platform to complement its existing natural gas pipeline investments and regulated natural gas businessadvanced regulatory activity underway in the Midwest.multiple jurisdictions, as follows:
Duke Energy incurred pretax nonrecurring transactionCarolinas received an order on its rate case from the North Carolina Utilities Commission (NCUC) on June 22, 2018. Major components of the order included: a return on equity of 9.9 percent, recovery of past coal ash remediation costs, recovery of Lee Nuclear Project development costs, and integrationpartial clarity on the treatment of federal taxes. On July 27, 2018, the NCUC approved Duke Energy Carolinas' compliance filing. As a result, revised customer rates will become effective on August 1, 2018.
Duke Energy Progress received an order on its rate case from the NCUC on February 23, 2018. Some of the major components of the order are: a return on equity of 9.9 percent; recovery of past coal ash remediation costs; recovery of deferred storm costs from 2016; and new rates in effect mid-March 2018.
Duke Energy Carolinas and Duke Energy Progress filed a joint petition with the Public Service Commission of South Carolina (PSCSC) seeking an order to defer certain costs associated with grid reliability, resiliency, and modernization work that is being performed under the Power/Forward initiative. Duke Energy Carolinas also petitioned the PSCSC seeking an order to defer certain costs associated with the acquisitionWilliam States Lee Combined Cycle Facility, the new billing and customer information system and the addition of $30the Carolinas West Primary Distribution Control Center. Duke Energy Progress also petitioned the PSCSC seeking an order to adopt the new depreciation rates and to defer certain costs associated with the deployment of advanced metering infrastructure, the new billing and customer information system and the costs incurred in connection with the excess return of certain state taxes from North Carolina. These petitions were approved on July 25, 2018.
Duke Energy Florida filed a petition with the Florida Public Service Commission (FPSC) on May 31, 2018, related to approximately $200 million of customer savings associated with the Federal Tax Cuts and $46Jobs Act (Tax Act). The tax savings will offset accelerated depreciation of Crystal River Units 4 and 5 and Hurricane Irma storm cost recovery. The petition is subject to review and approval by the FPSC.
Duke Energy Ohio along with the Public Utilities Commission of Ohio (PUCO) Staff and certain intervenors filed a Stipulation and Recommendation (Stipulation) with PUCO on April 13, 2018, and the evidentiary hearing will conclude on August 6, 2018. The Stipulation, subject to approval by the PUCO, is in connection with Duke Energy Ohio's rate case and other regulatory matters.
On July 25, 2018, Duke Energy Ohio filed an application to establish a new rider to implement the benefits of the Tax Act for electric distribution customers. If approved, the new rider will flow through to customers the benefit of the lower statutory federal tax rate since January 1, 2018, all future benefits of the lower tax rates and a full refund of deferred income taxes collected at the higher tax rates in prior years. Deferred income taxes subject to normalization rules will be refunded consistent with federal law and deferred income taxes not subject to normalization rules will be refunded over a 10-year period. An order is expected before the end of the year.
Duke Energy Kentucky received an order on its rate case from the Kentucky Public Service Commission on April 13, 2018. The order granted an annual revenue increase of $21 million, forincorporating customer benefits from the threeTax Act as well as rider recovery of environmental costs, including coal ash. Duke Energy Kentucky implemented new base rates on May 1, 2018.
On June 27, 2018, Duke Energy Indiana, the Indiana Office of Utility Consumers Counselor and six months ended June 30, 2017, respectively,others filed testimony consistent with their Stipulation and $90 million and $191 million for the three and six months ended June 30, 2016, respectively. Acquisition-related costsSettlement Agreement in the prior year were principally duefederal tax proceedings with the Indiana Utility Regulatory Commission (IURC). Major components include riders to unrealized losses on forward-starting interestreflect the lower federal tax rate swaps relatedas they are filed in 2018, base rates to reflect the acquisition financing of $75 millionlower federal tax rate upon approval, but no later than September 1, 2018, and $168 milliona timeline for returning federal excess deferred income taxes to customers. The settlement is subject to review and approval by the three and six months ended June 30, 2016, respectively. For additional information on the swaps seeIURC.
See Note 93 to the Condensed Consolidated Financial Statements, "Derivatives and Hedging."
Duke Energy expects to incur system integration and other acquisition-related transition costs, primarily through 2018, that are necessary to achieve certain anticipated cost savings, efficiencies and other benefits. See Note 2 to the Condensed Consolidated Financial Statements, "Acquisitions and Dispositions,""Regulatory Matters" for additional information regarding the transaction.information.
Sale of International Energy
In December 2016, Duke Energy sold its Latin American generation businesses (International Disposal Group) in two separate transactions for a combined enterprise value of $2.4 billion. Duke Energy sold its Brazilian business to China Three Gorges for approximately $1.2 billion, including the assumption of debt, and its remaining Central and South American businesses toPART I Squared Capital in a deal also valued at approximately $1.2 billion, including the assumption of debt. The transactions generated cash proceeds of $1.9 billion, excluding transaction costs, which were primarily used to reduce Duke Energy holding company debt. Existing favorable tax attributes resulted in no immediate U.S. federal-level cash tax impacts.
In conjunction with the advancements of marketing efforts during the second quarter of 2016, Duke Energy performed recoverability tests of the long-lived asset groups of International Energy. As a result, Duke Energy determined the carrying value of certain assets in Central America was not fully recoverable and recorded a pretax impairment charge of $194 million. The charge represents the excess carrying value over the estimated fair value of the assets.
Due to the transactions, results of the International Disposal Group, including the impairment described above, are classified as discontinued operations. See Note 2 to the Condensed Consolidated Financial Statements, "Acquisitions and Dispositions" for additional information.
Results of Operations
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.
Management evaluates financial performance in part based on non-GAAP financial measures, including adjusted earnings and adjusted diluted earnings per share (EPS). Adjusted earnings and adjusted diluted EPS represent income from continuing operations attributable to Duke Energy, adjusted for the dollar and per shareper-share impact of special items. As discussed below, special items represent certain charges and credits, which management believes are not indicative of Duke Energy's ongoing performance.
Management believes the presentation of adjusted earnings and adjusted diluted EPS provides useful information to investors, as it provides them with an additional relevant comparison of Duke Energy’s performance across periods. Management uses these non-GAAP financial measures for planning and forecasting and for reporting financial results to the Duke Energy Board of Directors, employees, stockholders, analysts and investors. Adjusted diluted EPS is also used as a basis for employee incentive bonuses. The most directly comparable GAAP measures for adjusted earnings and adjusted diluted EPS are Net Income Attributable to Duke Energy Corporation (GAAP Reported Earnings) and Diluted EPS Attributable to Duke Energy Corporation common stockholders (GAAP Reported EPS), respectively.
Special items included in the periods presented include the following items, which management believes do not reflect ongoing costs:
Costs to Achieve MergersPiedmont Merger represent charges that result from strategic acquisitions.the Piedmont acquisition.
Cost Savings InitiativesRegulatory and Legislative Impacts represent severance charges related to companywide initiatives, excluding merger integration, to standardize processes and systems, leverage technology and workforce optimization.rate case orders, settlements or other actions of regulators or legislative bodies.
Adjusted earnings also include operating resultsSale of Retired Plant represents the loss associated with selling Beckjord Generating Station (Beckjord), a nonregulated generating facility in Ohio.
Impairment of Equity Method Investment represents an other-than-temporary impairment (OTTI) of an investment in Constitution Pipeline Company, LLC (Constitution).
Impacts of the International Disposal Group, which have been classified as discontinued operations. Management believes inclusion ofTax Act represents an alternative minimum tax (AMT) valuation allowance recognized related to the operating results of the Disposal Group within adjusted earnings and adjusted diluted EPS results in a better reflection of Duke Energy's financial performance during the period.Tax Act.
Three Months Ended June 30, 20172018, as compared to June 30, 20162017
GAAP Reported EPS was $0.71 for the second quarter of 2018 compared to $0.98 for the second quarter of 2017 compared to $0.74 for the second quarter of 2016.2017. The increasedecrease in GAAP Reported EPS was primarily driven by the prior year impairment chargedue to regulatory and legislative charges related to certain assetsthe Duke Energy Carolinas North Carolina rate case order and the repeal of the South Carolina Base Load Review Act, increased operations and maintenance expense primarily from higher storm costs, higher depreciation and amortization expense from growth in Central America recorded within Lossrate base, and increased interest expense due to higher outstanding debt and lower tax shield on holding company interest as a result of the Tax Act. These drivers were partially offset by favorable weather and positive net margin contributions from Discontinued Operations.the Duke Energy Progress North Carolina rate case order.
As discussed above, management also evaluates financial performance based on adjusted diluted EPS. Duke Energy’s second quarter 20172018 adjusted diluted EPS was $1.01$0.93 compared to $1.07$1.01 for the second quarter of 2016. 2017. The decrease in adjusted earnings was primarily due to increased operations and maintenance expense primarily from higher storm costs, higher depreciation and amortization expense from growth in rate base, and increased interest expense due to higher outstanding debt and lower tax shield on holding company interest as a result of the Tax Act. These drivers were partially offset by favorable weather and positive net margin contributions from the Duke Energy Progress North Carolina rate case order.
The following table reconciles non-GAAP measures, including adjusted diluted EPS, to their most directly comparable GAAP measures. | | | | Three Months Ended June 30, | Three Months Ended June 30, |
| | 2017 | | 2016 | 2018 | | 2017 |
| (in millions, except per-share amounts) | Earnings | | EPS | | Earnings | | EPS | Earnings | | EPS | | Earnings | | EPS |
| GAAP Reported Earnings/GAAP Reported EPS | $ | 686 |
| | $ | 0.98 |
| | $ | 509 |
| | $ | 0.74 |
| $ | 500 |
| | $ | 0.71 |
| | $ | 686 |
| | $ | 0.98 |
|
| Adjustments: | | | | | | | | | | | | | | |
Costs to Achieve Mergers(a) | 19 |
| | 0.03 |
| | 69 |
| | 0.10 |
| |
Cost Savings Initiatives(b) | — |
| | — |
| | 15 |
| | 0.02 |
| |
Regulatory and Legislative Impacts(a) | | 136 |
| | 0.19 |
| | — |
| | — |
|
Costs to Achieve Piedmont Merger(b) | | 15 |
| | 0.02 |
| | 19 |
| | 0.03 |
|
Discontinued Operations(c) | 2 |
| | — |
| | 146 |
| | 0.21 |
| 5 |
| | 0.01 |
| | 2 |
| | — |
|
| Adjusted Earnings/Adjusted Diluted EPS | $ | 707 |
| | $ | 1.01 |
| | $ | 739 |
| | $ | 1.07 |
| $ | 656 |
| | $ | 0.93 |
| | $ | 707 |
| | $ | 1.01 |
|
| |
| (a) | Net of $43 million tax of $11 million in 2017 and $42 million in 2016.benefit. |
| |
| (b) | Net of $5 million tax of $9benefit in 2018 and $11 million tax benefit in 2016. |
| |
(c) | The 2016 amount is net of tax of $49 million and primarily represents an impairment charge related to certain assets in Central America that were sold in 2016.2017. |
The decrease in adjusted earnings for the three months ended June 30, 2017, compared to the same period in 2016, was primarily due to:
Lower regulated electric revenues due to less favorable weather in the current year;PART I
The prior year operating results of the International Disposal Group, which was sold in December 2016; and
Higher financing costs, primarily due to the Piedmont acquisition.
Partially offset by:
Higher regulated electric revenues from increased pricing and riders driven by new rates in Duke Energy Progress South Carolina, base rate adjustments in Florida, and energy efficiency rider revenues in North Carolina;
Additional earnings from investments in the Atlantic Coast Pipeline (ACP) and Sabal Trail natural gas pipelines; and
Improved resources and new wind projects placed in service at Commercial Renewables.
Six Months Ended June 30, 20172018, as compared to June 30, 20162017
Duke Energy's GAAP Reported EPS was $1.59 for the six months ended June 30, 2018, compared to $2.00 for the six months ended June 30, 2017, compared to $1.74 for the six months ended June 30, 2016.2017. The increasedecrease in GAAP Reported EPS was driven by regulatory activity and additional investments at the electric utilities, the inclusion of Piedmont's earnings in the current year and losses in the prior year on interest rate swapslegislative charges related to the Piedmont acquisition financing;Duke Energy Carolinas North Carolina rate case order and the repeal of the South Carolina Base Load Review Act, higher depreciation and amortization expense from growth in rate base, and increased interest expense due to higher outstanding debt and lower tax shield on holding company interest as a result of the Tax Act. These drivers were partially offset by unfavorablefavorable weather inand positive net margin contributions from the current year.Duke Energy Progress North Carolina rate case order.
As discussed above, management also evaluates financial performance based on adjusted diluted EPS. Duke Energy’sEnergy's adjusted diluted EPS for the six months ended June 30, 2017,2018, was $2.05$2.22 compared to $2.20$2.05 for the six months ended June 30, 2016. 2017. The increase in adjusted earnings for the six months ended June 30, 2018, compared to the same period in 2017, was primarily due to favorable weather at Electric Utilities and Infrastructure.
The following table reconciles non-GAAP measures, including adjusted diluted EPS, to their most directly comparable GAAP measures.
| | | | Six Months Ended June 30, | Six Months Ended June 30, |
| | 2017 | | 2016 | 2018 | | 2017 |
| (in millions, except per-share amounts) | Earnings | | EPS | | Earnings | | EPS | Earnings | | EPS | | Earnings | | EPS |
| GAAP Reported Earnings/GAAP Reported EPS | $ | 1,402 |
| | $ | 2.00 |
| | $ | 1,203 |
| | $ | 1.74 |
| $ | 1,120 |
| | $ | 1.59 |
| | $ | 1,402 |
| | $ | 2.00 |
|
| Adjustments: | | | | | | | | | | | | | | |
Costs to Achieve Mergers(a) | 29 |
| | 0.05 |
| | 143 |
| | 0.21 |
| |
Cost Savings Initiatives(b) | — |
| | — |
| | 27 |
| | 0.04 |
| |
Discontinued Operations(c) | 2 |
| | — |
| | 143 |
| | 0.21 |
| |
Regulatory and Legislative Impacts(a) | | 202 |
| | 0.29 |
| | — |
| | — |
|
Sale of Retired Plant(b) | | 82 |
| | 0.12 |
| | — |
| | — |
|
| Impacts of the Tax Act (AMT valuation allowance) | | 76 |
| | 0.11 |
| | — |
| | — |
|
Impairment of Equity Method Investment(c) | | 42 |
| | 0.06 |
| | — |
| | — |
|
Costs to Achieve Piedmont Merger(d) | | 28 |
| | 0.04 |
| | 29 |
| | 0.05 |
|
| Discontinued Operations | | 5 |
| | 0.01 |
| | 2 |
| | — |
|
| Adjusted Earnings/Adjusted Diluted EPS | $ | 1,433 |
| | $ | 2.05 |
| | $ | 1,516 |
| | $ | 2.20 |
| $ | 1,555 |
| | $ | 2.22 |
| | $ | 1,433 |
| | $ | 2.05 |
|
| |
| (a) | Net of $63 million tax of $17 million in 2017 and $88 million in 2016.benefit. |
| |
| (b) | Net of $25 million tax of $17 million in 2016.benefit. |
| |
| (c) | The 2016 amount is netNet of $13 million tax benefit. |
| |
| (d) | Net of $49$9 million tax benefit in 2018 and primarily represents an impairment charge related to certain assets$17 million tax benefit in Central America that were sold in 2016.2017. |
The decrease in adjusted earnings for the six months ended June 30, 2017, compared to the same period in 2016, was primarily due to:
Lower regulated electric revenues due to unfavorable weather in the current year; and
The prior year operating results of the International Disposal Group, which was sold in December 2016. The 2016 operating results included a benefit from the revaluation of deferred income taxes. See Note 16 to the Condensed Consolidated Financial Statements, "Income Taxes," for additional information.
Partially offset by:
Higher regulated electric revenues from increased pricing and riders driven by new rates in Duke Energy Progress South Carolina, base rate adjustments in Florida, and energy efficiency rider revenues in North Carolina, as well as growth in weather-normal retail volumes;
Lower operations and maintenance expense, net of amounts recoverable in rates, at Electric Utilities and Infrastructure resulting from ongoing cost efficiency efforts and significant storm costs in the prior year; and
Piedmont's earnings contribution, net of financing costs, due to the acquisition on October 3, 2016.
SEGMENT RESULTS
The remaining information presented in this discussion of results of operations is on a GAAP basis. Management evaluates segment performance based on segment income. Segment income is defined as income from continuing operations net of income attributable to noncontrolling interests. Segment income includes intercompany revenues and expenses that are eliminated onin 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 includeincludes the following segments: Electric Utilities and Infrastructure, Gas Utilities and Infrastructure and Commercial Renewables. The remainder of Duke Energy’s operations is presented as Other. Prior period information has been recast to conform to the current segment structure. See Note 2 to the Condensed Consolidated Financial Statements, "Acquisitions and Dispositions," for further information on the Piedmont acquisition and International Energy sale and Note 3, “Business Segments,” for additional information on Duke Energy’s segments.segment structure.
Tax Act
On December 22, 2017, President Trump signed the Tax Act into law. Among other provisions, the Tax Act lowered the corporate federal income tax rate from 35 percent to 21 percent, limits interest deductions outside of regulated utility operations, requires the normalization of excess deferred taxes associated with property under the average rate assumption method as a prerequisite to qualifying for accelerated depreciation and repealed the federal manufacturing deduction. The Tax Act also repealed the corporate AMT and stipulates a refund of 50 percent of remaining AMT credit carryforwards (to the extent the credits exceed regular tax for the year) for tax years 2018, 2019 and 2020 with all remaining AMT credits to be refunded in tax year 2021. The Tax Act also could be amended or subject to technical correction, which could change the financial impacts that were recorded since December 31, 2017, or are expected to be recorded in future periods. The Federal Energy Regulatory Commission (FERC) and state utility commissions will determine the regulatory treatment of the impacts of the Tax Act for the Subsidiary Registrants. Duke Energy's segments’ future results of operations, financial condition and cash flows could be adversely impacted by the Tax Act, subsequent amendments or corrections, or the actions of the FERC, state utility commissions or credit rating agencies related to the Tax Act. Duke Energy is addressing the rate treatment of the Tax Act by each state utility commission in which the Subsidiary Registrants operate. In January 2018, the Subsidiary Registrants began deferring the estimated ongoing impacts of the Tax Act that are expected to be returned to customers. See Note 17 to the Condensed Consolidated Financial Statements, “Income Taxes,” for additional information on the Tax Act.
Electric Utilities and Infrastructure | | | | Three Months Ended June 30, | | Six Months Ended June 30, | Three Months Ended June 30, | | Six Months Ended June 30, |
| (in millions) | 2017 |
| | 2016 |
| | Variance |
| | 2017 |
| | 2016 |
| | Variance |
| 2018 |
| | 2017 |
| | Variance |
| | 2018 |
| | 2017 |
| | Variance |
|
| Operating Revenues | $ | 5,158 |
| | $ | 5,001 |
| | $ | 157 |
| | $ | 10,105 |
| | $ | 10,090 |
| | $ | 15 |
| $ | 5,223 |
| | $ | 5,158 |
| | $ | 65 |
| | $ | 10,546 |
| | $ | 10,105 |
| | $ | 441 |
|
| Operating Expenses | | | | | | | | | | | | | | | | | | | | | | |
| Fuel used in electric generation and purchased power | 1,549 |
| | 1,509 |
| | 40 |
| | 3,003 |
| | 3,086 |
| | (83 | ) | 1,582 |
| | 1,549 |
| | 33 |
| | 3,267 |
| | 3,003 |
| | 264 |
|
| Operation, maintenance and other | 1,265 |
| | 1,230 |
| | 35 |
| | 2,536 |
| | 2,528 |
| | 8 |
| 1,395 |
| | 1,299 |
| | 96 |
| | 2,720 |
| | 2,603 |
| | 117 |
|
| Depreciation and amortization | 714 |
| | 701 |
| | 13 |
| | 1,451 |
| | 1,410 |
| | 41 |
| 838 |
| | 714 |
| | 124 |
| | 1,673 |
| | 1,451 |
| | 222 |
|
| Property and other taxes | 270 |
| | 263 |
| | 7 |
| | 531 |
| | 525 |
| | 6 |
| 279 |
| | 270 |
| | 9 |
| | 553 |
| | 531 |
| | 22 |
|
| Impairment charges | 2 |
| | 1 |
| | 1 |
| | 2 |
| | 3 |
| | (1 | ) | 172 |
| | 2 |
| | 170 |
| | 215 |
| | 2 |
| | 213 |
|
| Total operating expenses | 3,800 |
| | 3,704 |
| | 96 |
| | 7,523 |
| | 7,552 |
| | (29 | ) | 4,266 |
| | 3,834 |
| | 432 |
| | 8,428 |
| | 7,590 |
| | 838 |
|
| Gains on Sales of Other Assets and Other, net | 1 |
| | 1 |
| | — |
| | 4 |
| | 2 |
| | 2 |
| — |
| | 1 |
| | (1 | ) | | 1 |
| | 4 |
| | (3 | ) |
| Operating Income | 1,359 |
| | 1,298 |
| | 61 |
| | 2,586 |
| | 2,540 |
| | 46 |
| 957 |
| | 1,325 |
| | (368 | ) | | 2,119 |
| | 2,519 |
| | (400 | ) |
| Other Income and Expenses | 76 |
| | 77 |
| | (1 | ) | | 155 |
| | 140 |
| | 15 |
| 91 |
| | 110 |
| | (19 | ) | | 179 |
| | 222 |
| | (43 | ) |
| Interest Expense | 305 |
| | 272 |
| | 33 |
| | 620 |
| | 542 |
| | 78 |
| 316 |
| | 305 |
| | 11 |
| | 633 |
| | 620 |
| | 13 |
|
| Income Before Income Taxes | 1,130 |
| | 1,103 |
| | 27 |
| | 2,121 |
| | 2,138 |
| | (17 | ) | 732 |
| | 1,130 |
| | (398 | ) | | 1,665 |
| | 2,121 |
| | (456 | ) |
| Income Tax Expense | 401 |
| | 399 |
| | 2 |
| | 757 |
| | 770 |
| | (13 | ) | 157 |
| | 401 |
| | (244 | ) | | 340 |
| | 757 |
| | (417 | ) |
| Segment Income | $ | 729 |
| | $ | 704 |
| | $ | 25 |
| | $ | 1,364 |
| | $ | 1,368 |
| | $ | (4 | ) | $ | 575 |
| | $ | 729 |
| | $ | (154 | ) | | $ | 1,325 |
| | $ | 1,364 |
| | $ | (39 | ) |
| | | | | | | | | | | |
|
| | | | | | | | | | |
|
|
| Duke Energy Carolinas Gigawatt-hours (GWh) sales | 21,243 |
| | 20,757 |
| | 486 |
| | 42,024 |
| | 42,382 |
| | (358 | ) | |
| Duke Energy Carolinas gigawatt-hours (GWh) sales | | 22,272 |
| | 21,243 |
| | 1,029 |
| | 44,899 |
| | 42,024 |
| | 2,875 |
|
| Duke Energy Progress GWh sales | 15,562 |
| | 16,829 |
| | (1,267 | ) | | 31,199 |
| | 33,978 |
| | (2,779 | ) | 15,896 |
| | 15,562 |
| | 334 |
| | 33,122 |
| | 31,199 |
| | 1,923 |
|
| Duke Energy Florida GWh sales | 10,740 |
| | 10,646 |
| | 94 |
| | 19,045 |
| | 19,102 |
| | (57 | ) | 10,304 |
| | 10,740 |
| | (436 | ) | | 19,423 |
| | 19,045 |
| | 378 |
|
| Duke Energy Ohio GWh sales | 5,901 |
| | 5,796 |
| | 105 |
| | 11,960 |
| | 11,903 |
| | 57 |
| 6,147 |
| | 5,901 |
| | 246 |
| | 12,219 |
| | 11,960 |
| | 259 |
|
| Duke Energy Indiana GWh sales | 7,972 |
| | 8,157 |
| | (185 | ) | | 16,180 |
| | 17,551 |
| | (1,371 | ) | 8,301 |
| | 7,972 |
| | 329 |
| | 16,786 |
| | 16,180 |
| | 606 |
|
| Total Electric Utilities and Infrastructure GWh sales | 61,418 |
| | 62,185 |
| | (767 | ) | | 120,408 |
| | 124,916 |
| | (4,508 | ) | 62,920 |
| | 61,418 |
| | 1,502 |
| | 126,449 |
| | 120,408 |
| | 6,041 |
|
| Net proportional Megawatt (MW) capacity in operation | | | | |
|
| | 48,877 |
| | 49,620 |
| | (743 | ) | |
| Net proportional megawatt (MW) capacity in operation | | | | | |
|
| | 49,297 |
| | 48,877 |
| | 420 |
|
Three Months Ended June 30, 20172018, as Compared to June 30, 20162017
Electric Utilities and Infrastructure’s growthresults were impacted by charges related to the Duke Energy Carolinas North Carolina rate case order, higher operation and maintenance expenses and increased depreciation and amortization, partially offset by favorable weather compared to the prior year and a positive net contribution from the Duke Energy Progress North Carolina rate case. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The variance was driven byprimarily by:
an $82 million increase in fuel related revenues due to higher sales volumes and increases in fuel rates billed to customers;
an $81 million increase in retail sales, net of fuel revenues, fromdue to favorable weather in the current year; and
a $43 million increase in retail pricing primarily due to the Duke Energy Progress North Carolina rate case.
Partially offset by:
a $127 million decrease due to revenues subject to refund to customers associated with the lower statutory federal corporate tax rate under the Tax Act; and riders, as well as higher
a $5 million decrease in weather-normal retail sales volumes,volumes.
Operating Expenses. The variance was driven primarily by:
a $170 million increase in impairment charges primarily due to the impacts associated with the Duke Energy Carolinas North Carolina rate case;
a $124 million increase in depreciation and amortization expense primarily due to higher amortization of deferred coal ash costs, additional plant in service and new depreciation rates per the Duke Energy Progress North Carolina rate case;
a $96 million increase in operation, maintenance and other expense primarily due to higher operational costs that are recoverable in rates and higher storm costs and amortizations; and
a $33 million increase in fuel used in electric generation and purchased power primarily due to higher sales and higher deferred fuel expenses.
Other Income and Expenses. The decrease was primarily due to lower allowance for funds used during construction (AFUDC) equity and a decrease in recognition of post in-service equity returns for projects that had been completed prior to being reflected in customer rates at Duke Energy Carolinas and lower income from non-service components of employee benefit costs in the current year at Duke Energy Progress. For additional information on employee benefit costs, see Note 16 to the Condensed Consolidated Financial Statements, "Employee Benefit Plans."
Income Tax Expense. The variance was primarily due to the lower statutory federal corporate tax rate under the Tax Act and a decrease in pretax income. The effective tax rates (ETRs) for the three months ended June 30, 2018, and 2017 were 21.4 percent and 35.5 percent, respectively. The decrease in the ETR was primarily due to the lower statutory federal corporate tax rate under the Tax Act and the amortization of excess deferred taxes. For additional information, see Note 17 to the Condensed Consolidated Financial Statements, "Income Taxes."
Six Months Ended June 30, 2018, as Compared to June 30, 2017
Electric Utilities and Infrastructure’s results were impacted by charges related to the Duke Energy Carolinas and Duke Energy Progress North Carolina rate case orders and higher depreciation and amortization, partially offset by less favorable weather.weather compared to the prior year and a positive net contribution from the Duke Energy Progress North Carolina rate case. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The variance was driven primarily by:
a $147$307 million increase in riderfuel related revenues related to energy efficiency programs, Duke Energy Florida's nuclear asset securitization revenues, Midwest transmission and distribution revenues, and Duke Energy Indiana's clean coal equipment, as well as increased retail pricing due to Duke Energy Florida's base rate adjustments for the Osprey acquisitionhigher sales volumes and Hines Chillers, and the Duke Energy Progress South Carolina rate case;increases in fuel rates billed to customers;
a $32$255 million increase in weather-normal sales volumes to retail customers in the current year; and
an $11 million increase in transmission and other miscellaneous revenues.
Partially offset by:
a $61 million decrease in retail sales, net of fuel revenues, due to less favorable weather in the current year.year;
a $73 million increase in retail pricing primarily due to the Duke Energy Progress North Carolina rate case and Duke Energy Florida base rate adjustments for the Osprey acquisition and the completion of the Hines Energy Complex Chiller Uprate Project;
a $24 million increase in weather-normal retail sales volumes; and
a $23 million increase in wholesale power revenues, net of sharing and fuel, primarily due to recovery of coal ash costs at Duke Energy Carolinas and Duke Energy Progress, partially offset by customer refunds in the current year related to a FERC order on a complaint filed by the Piedmont Municipal Power Agency (PMPA) at Duke Energy Carolinas.
Partially offset by:
a $258 million decrease due to revenues subject to refund to customers associated with the lower statutory federal corporate tax rate under the Tax Act.
Operating Expenses. The variance was driven primarily by:
a $40$264 million increase in fuel expense, includingused in electric generation and purchased power, primarily due to higher costs at fossil plants;sales and higher deferred fuel expenses;
a $35 million increase in operations and maintenance (O&M) expense primarily due to higher operational costs that are recoverable in rates; and
a $13$222 million increase in depreciation and amortization expense primarily due to higher amortization of deferred coal ash costs, additional plant in service.service and new depreciation rates per the Duke Energy Progress North Carolina rate case;
a $213 million increase in impairment charges primarily due to the impacts associated with the Duke Energy Carolinas and Duke Energy Progress North Carolina rate cases; and
a $117 million increase in operation, maintenance and other expense primarily due to impacts associated with the Duke Energy Progress North Carolina rate case and higher storm cost amortization.
Interest Expense.Other Income and Expenses. The increasedecrease was primarily due to higher debt outstandinglower AFUDC equity and lower income from non-service components of employee benefit costs in the current year to fund growth, as well asat Duke Energy Florida's Crystal River Unit 3 (CR3) regulatory asset debt return ending in June 2016 upon securitization.Progress. For additional information on employee benefit costs, see Note 16 to the Condensed Consolidated Financial Statements, "Employee Benefit Plans."
Income Tax Expense. The variance was primarily due to an increase in pretax income, partially offset bythe lower North Carolinastatutory federal corporate tax rates. The effective tax rates forrate under the three months ended June 30, 2017Tax Act and 2016 were 35.5 percent and 36.2 percent, respectively.
Six Months Ended June 30, 2017 as Compared to June 30, 2016
Electric Utilities and Infrastructure’s results were impacted by unfavorable weather in the first half of the year, partially offset by higher pricing and riders and O&M efficiencies. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The variance was driven primarily by:
a $256 million increase in rider revenues related to energy efficiency programs, Duke Energy Florida's nuclear asset securitization revenues, Midwest transmission and distribution revenues, and Duke Energy Indiana's clean coal equipment, as well as increased retail pricing due to Duke Energy Florida's base rate adjustments for the Osprey acquisition and Hines Chillers, and the Duke Energy Progress South Carolina rate case;
a $43 million increase in weather-normal sales volumes to retail customers in the current year;
a $21 million increase in transmission and other miscellaneous revenues; and
a $6 million increase in wholesale power revenues, net of sharing and fuel.
Partially offset by:
a $220 million decrease in retail sales, net of fuel revenues, due to unfavorable weather in the current year; and
a $94 million decrease in fuel revenues due to lower retail sales volumes, partially offset by higher fuel prices included in rates.
Operating Expenses. The variance was driven primarily by:
an $83 million decrease in fuel expense, including purchased power, primarily due to lower retail sales volumes, partially offset by higher fuel prices.
Partially offset by:
a $41 million increase in depreciation and amortization expense primarily due to additional plant in service; and
an $8 million increase in operations and maintenance expense primarily due to higher operational costs that are recoverable in rates, partially offset by lower storm restoration costs and O&M efficiencies, including decreased labor costs.
Other Income and Expenses. The increase 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, and Duke Energy Florida's CR3 regulatory asset debt return ending in June 2016 upon securitization.
Income Tax Expense. The variance was primarily due to a decrease in pretax income and lower North Carolina corporate tax rates.income. The effective tax ratesETRs for the six months ended June 30, 2018, and 2017 were 20.4 percent and 2016 were 35.7 percent, respectively. The decrease in the ETR was primarily due to the lower statutory federal corporate tax rate under the Tax Act and 36.0 percent, respectively.the amortization of excess deferred taxes.
Matters Impacting Future Electric Utilities and Infrastructure Results
An order from regulatory authorities disallowing recovery of costs related to closure of ash impoundments could have an adverse impact on Electric 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) 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 governorenacted on July 14, 2016. Electric Utilities and Infrastructure's estimated asset retirement obligations (AROs) related to the closure of North Carolina ash impoundments are based upon the mandated closure method or a probability weighting of potential closure methods for the impoundments that may be reassessed to low risk. As the final risk ranking classifications in North Carolina are delineated, final closure plans and corrective action measures are developed and approved for each site, the closure work progresses and the closure method scope and remedial methods are determined, the complexity of work and the amount of coal combustion material could be different than originally estimated and, therefore, could materially impact Electric Utilities and Infrastructure's results of operations, financial position. See Note 9 in Duke Energy's Annual Report on Form 10-K for the year ended December 31, 2016, "Asset Retirement Obligations," for additional information.position and cash flows.
Duke Energy is a party to multiple lawsuits and could be subject to fines and other penalties related to operations at certain North Carolina facilities with ash basins. In addition, the orders issued in the Duke Energy Carolinas and Duke Energy Progress North Carolinas rate cases supporting recovery of past coal ash remediation costs have been appealed by various parties. The outcome of these appeals, lawsuits and potential fines and penalties could have an adverse impact on Electric Utilities and Infrastructure's financial position, results of operations, financial position and cash flows. See Notes 3 and 4 to the Condensed Consolidated Financial Statements, "Regulatory Matters" and “Commitments and Contingencies,” respectively, for additional information.
On June 22, 2018 Duke Energy Carolinas received an order from the NCUC, which denied the Grid Rider Stipulation and deferral treatment of Power/Forward costs. Duke Energy Carolinas may petition for deferral of grid modernization costs outside of a general rate case proceeding if it can show financial hardship or a stipulation that includes greater consensus among intervening parties on costs being classified as grid modernization. While Duke Energy Progress did not request recovery of these costs in its most recent case with the NCUC, Duke Energy Progress may request recovery of certain grid modernization costs in future regulatory proceedings. Electric Utilities and Infrastructure's results of operations, financial position and cash flows could be adversely impacted if grid modernization costs are not ultimately approved for recovery and/or deferral treatment. See Note 3 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
On June 30, 2017, CertainTeed Gypsum NC, Inc. (CertainTeed) filed a declaratory judgment action against Duke Energy Progress in the North Carolina Business Court relating to a gypsum supply agreement. In its complaint, CertainTeed sought an order from the court declaring that the minimum amount of gypsum Duke Energy Progress must provide to CertainTeed under the supply agreement is 50,000 tons per month through 2029. The trial for this matter concluded on July 16, 2018. If Duke Energy Progress does not prevail, it will have to either purchase additional gypsum on the open market to fulfill its contractual obligation through 2029 or pay some amount of liquidated damages that could have an adverse impact on Electric Utilities and Infrastructure's results of operations, financial position and cash flows. See Note 54 to the Condensed Consolidated Financial Statements, “Commitments and Contingencies,” for additional information.
In the fourth quarter of 2016, Hurricane Matthew caused historic flooding, extensive damage and widespread power outages within the
Duke Energy Progress service territory. Duke Energy Progress filed a petition withFlorida is constructing the North Carolina Utilities Commission (NCUC) requesting an accounting order1,640-MW combined-cycle natural gas plant in Citrus County, Florida, and expects it to defer incremental operationbe commercially available in 2018. Failure to complete the construction and maintenance and capitalachieve commercial operations by the end of 2018 or actual costs incurred in response to Hurricane Matthew and other significant 2016 storms. Current estimated incremental costs are approximately $116 million. The NCUC will address this request in Duke Energy Progress' currently pending rate case. A final order from the NCUC that disallows the deferral and future recovery of all or a significant portionexcess of the incremental storm restoration costs incurredestimated amount not collected from customers could result in an adversematerially impact on Electric Utilities and Infrastructure's financial position, results of operations, financial position and cash flows. See Note 43 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
On February 6, 2018, the FPSC approved a stipulation that would apply tax savings resulting from the Tax Act toward storm costs effective January 2018 in lieu of implementing a storm surcharge. On May 31, 2018, Duke Energy Progress hasFlorida filed for recovery of the storm costs. Storm costs are currently expected to be fully recovered by approximately mid-2021. The evidentiary hearing in this storm cost matter is scheduled for the week of October 15, 2018. An order disallowing recovery of these costs could have an adverse impact on Electric Utilities and Infrastructure's results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
On March 2, 2017, Duke Energy Carolinas intendsOhio filed an electric distribution base rate application with the PUCO to file rate cases in North Carolina in 2017 to recover costsaddress recovery of complying with Coal Combustion Residuals (CCR) regulations and the Coal Ash Act, as well as costs ofelectric distribution system capital investments in generation, transmission and distribution systems and any increase in expenditures subsequent to previous rate cases. Duke Energy Progress filed a general rate case with the NCUC on June 1, 2017. On July 25, 2017, Duke Energy Carolinas filed notice with the NCUC that it intends to file a general rate case on or about August 25, 2017. In March 2017,April 13, 2018, Duke Energy Ohio filed ana Stipulation with the PUCO to resolve issues in the electric distribution base rate case application and supporting testimony.other regulatory matters. If approved by PUCO, the Stipulation would allow for Duke Energy Ohio to recover gains and losses incurred on and after January 1, 2018, related to OVEC, through the Price Stabilization Rider. Hearings will conclude on August 6, 2018. Electric Utilities and Infrastructure's earningsresults of operations, financial position and cash flows could be adversely impacted if these rate increases are delayed orthe Stipulation is denied by the NCUC or Public Utility CommissionPUCO. See Note 3 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
See "Item 7. Management's Discussion and Analysis of Ohio (PUCO).Financial Condition and Results of Operations," in the Duke Energy Registrants' Annual Reports on Form 10-K/A for the year ended December 31, 2017, for discussion of risks associated with the Tax Act.
Gas Utilities and Infrastructure |
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| (in millions) | 2017 |
| | 2016 |
| | Variance |
| | 2017 |
| | 2016 |
| | Variance |
|
| Operating Revenues | $ | 301 |
| | $ | 99 |
| | $ | 202 |
| | $ | 971 |
| | $ | 269 |
| | $ | 702 |
|
| Operating Expenses | | | | | | | | | | | |
| Cost of natural gas | 76 |
| | 9 |
| | 67 |
| | 334 |
| | 58 |
| | 276 |
|
| Operation, maintenance and other | 93 |
| | 28 |
| | 65 |
| | 198 |
| | 60 |
| | 138 |
|
| Depreciation and amortization | 57 |
| | 20 |
| | 37 |
| | 114 |
| | 40 |
| | 74 |
|
| Property and other taxes | 26 |
| | 14 |
| | 12 |
| | 56 |
| | 32 |
| | 24 |
|
| Total operating expenses | 252 |
| | 71 |
| | 181 |
| | 702 |
| | 190 |
| | 512 |
|
| Operating Income | 49 |
| | 28 |
| | 21 |
| | 269 |
| | 79 |
| | 190 |
|
| Other Income and Expenses | 20 |
| | 3 |
| | 17 |
| | 38 |
| | 6 |
| | 32 |
|
| Interest Expense | 26 |
| | 6 |
| | 20 |
| | 52 |
| | 13 |
| | 39 |
|
| Income Before Income Taxes | 43 |
| | 25 |
| | 18 |
| | 255 |
| | 72 |
| | 183 |
|
| Income Tax Expense | 16 |
| | 9 |
| | 7 |
| | 95 |
| | 24 |
| | 71 |
|
| Segment Income | $ | 27 |
| | $ | 16 |
| | $ | 11 |
| | $ | 160 |
| | $ | 48 |
| | $ | 112 |
|
| | | | | | | | | | | | |
Piedmont LDC throughput (dekatherms) (a) | 94,013,754 |
| | — |
| | 94,013,754 |
| | 227,290,541 |
| | — |
| | 227,290,541 |
|
| Duke Energy Midwest LDC throughput (Mcf) | 12,204,767 |
| | 12,714,127 |
| | (509,360 | ) | | 43,035,766 |
| | 47,455,646 |
| | (4,419,880 | ) |
(a) Includes throughput subsequent to Duke Energy's acquisition of Piedmont on October 3, 2016. |
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| (in millions) | 2018 |
| | 2017 |
| | Variance |
| | 2018 |
| | 2017 |
| | Variance |
|
| Operating Revenues | $ | 318 |
| | $ | 301 |
| | $ | 17 |
| | $ | 1,045 |
| | $ | 971 |
| | $ | 74 |
|
| Operating Expenses | | | | | | | | | | | |
| Cost of natural gas | 89 |
| | 76 |
| | 13 |
| | 402 |
| | 334 |
| | 68 |
|
| Operation, maintenance and other | 103 |
| | 94 |
| | 9 |
| | 211 |
| | 199 |
| | 12 |
|
| Depreciation and amortization | 60 |
| | 57 |
| | 3 |
| | 121 |
| | 114 |
| | 7 |
|
| Property and other taxes | 26 |
| | 26 |
| | — |
| | 57 |
| | 56 |
| | 1 |
|
| Total operating expenses | 278 |
| | 253 |
| | 25 |
| | 791 |
| | 703 |
| | 88 |
|
| Operating Income | 40 |
| | 48 |
| | (8 | ) | | 254 |
| | 268 |
| | (14 | ) |
| Other Income and Expenses | 22 |
| | 21 |
| | 1 |
| | (13 | ) | | 39 |
| | (52 | ) |
| Interest Expense | 26 |
| | 26 |
| | — |
| | 53 |
| | 52 |
| | 1 |
|
| Income Before Income Taxes | 36 |
| | 43 |
| | (7 | ) | | 188 |
| | 255 |
| | (67 | ) |
| Income Tax Expense | 8 |
| | 16 |
| | (8 | ) | | 44 |
| | 95 |
| | (51 | ) |
| Segment Income | $ | 28 |
| | $ | 27 |
| | $ | 1 |
| | $ | 144 |
| | $ | 160 |
| | $ | (16 | ) |
| | | | | | | |
|
| | | | |
| Piedmont local distribution company (LDC) throughput (dekatherms) | 116,839,962 |
| | 94,013,754 |
| | 22,826,208 |
| | 271,741,341 |
| | 227,290,541 |
| | 44,450,800 |
|
| Duke Energy Midwest LDC throughput (Mcf) | 15,615,050 |
| | 12,204,767 |
| | 3,410,283 |
| | 52,741,115 |
| | 43,035,766 |
| | 9,705,349 |
|
Three Months Ended June 30, 20172018, as Compared to June 30, 20162017
Gas Utilities and Infrastructure’s higher results were primarily impacted by favorable weather and volumes, price adjustments and customer growth; offset by unfavorable operations, maintenance and other. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues.The variance was driven by:
a $13 million increase due to higher natural gas costs passed through to customers from higher volumes sold and higher natural gas prices;
a $9 million increase primarily due to residential and commercial customer revenue, net of natural gas costs passed through to customers, due to customer growth and Integrity Management Rider (IMR) rate adjustments at Piedmont; and
a $3 million increase primarily due to favorable weather in the current year and higher volumes in the Midwest.
Partially offset by:
a $9 million decrease due to revenues subject to refund to customers associated with the lower statutory federal corporate tax rate under the Tax Act.
Operating Expenses.The variance was driven by:
a $13 million increase in cost of natural gas due to higher volumes sold and higher natural gas prices;
a $9 million increase in operations, maintenance and other primarily due to increased investmentsgas operations and regulated utilities expenses; and
a $3 million increase in depreciation and amortization due to additional plant-in-service.
Income Tax Expense. The variance was primarily due to the ACP and Sabal Trail midstream gas pipelines. Piedmont's earnings included in Gas Utilities and Infrastructure's results were $1 millionlower statutory federal corporate tax rate under the Tax Act. The ETRs for the three months ended June 30, 2017. All variances are related2018, and 2017 were 22.2 percent and 37.2 percent, respectively. The decrease in the ETR was primarily due to the inclusionlower statutory corporate tax rate under the Tax Act. For additional information, see Note 17 to the Condensed Consolidated Financial Statements, "Income Taxes."
Six Months Ended June 30, 2018, as Compared to June 30, 2017
Gas Utilities and Infrastructure’s results were primarily impacted by the OTTI recorded on the Constitution investment. The following is a detailed discussion of Piedmont's resultsthe variance drivers by line item.
Operating Revenues.The variance was driven by:
a $68 million increase due to higher natural gas costs passed through to customers due to higher volumes sold and higher natural gas prices;
a $31 million increase primarily due to residential and commercial customer revenue, net of natural gas costs passed through to customers, due to customer growth, IMR rate adjustments and new power generation customers at Piedmont; and
a $10 million increase primarily due to favorable weather in the current year and higher volumes sold in the Midwest.
Partially offset by:
a $38 million decrease due to revenues subject to refund to customers associated with the lower statutory federal corporate tax rate under the Tax Act.
Operating Expenses.The variance was driven by:
a $68 million increase in cost of natural gas primarily due to higher volumes sold and higher natural gas prices;
a $12 million increase in operations, as maintenance and other primarily due to increased regulated utilities and gas operations expenses; and
a result of Duke Energy's acquisition of Piedmont on October 3, 2016, except for the following:$7 million increase in depreciation and amortization due to additional plant-in-service.
Other Income and Expenses. The variancedecrease was driven primarily by increased investments in the ACP and Sabal Trail midstream gas pipelines.
Six Months Ended June 30, 2017 as Compared to June 30, 2016
Gas Utilities and Infrastructure’s higher results were almost entirely due to the inclusion of Piedmont's earningsOTTI recorded for the investment in Constitution in the current year as a result of Duke Energy's acquisition of Piedmont on October 3, 2016. Piedmont's earnings included in Gas Utilities and Infrastructure's results were $100 millionyear.
Income Tax Expense. The variance was primarily due to the lower statutory federal corporate tax rate under the Tax Act. The ETRs for the six months ended June 30, 2017. All variances are related2018, and 2017 were 23.4 percent and 37.3 percent, respectively. The decrease in the ETR was primarily due to the inclusion of Piedmont's results of operations, except forlower statutory federal corporate tax rate under the following:Tax Act. For additional information, see Note 17 to the Condensed Consolidated Financial Statements, "Income Taxes."
Other Income and Expenses. The variance was driven primarily by increased investments in the ACP and Sabal Trail midstream gas pipelines.Matters Impacting Future Gas Utilities and Infrastructure Results
Gas Utilities and Infrastructure has a 2447 percent ownership interest in ConstitutionAtlantic Coast Pipeline, Company, LLC (Constitution)(ACP), awhich is building an approximately 600-mile interstate natural gas pipeline project slatedintended to transport diverse natural gas supplies into southeastern markets. Affected states (West Virginia, Virginia and North Carolina) have issued certain necessary permits; the project remains subject to major northeastern markets. On April 22, 2016,other pending federal and state approvals, which will allow full construction activities to begin. In early 2018, the New York State DepartmentFERC issued series of Environmental Conservation denied Constitution’s applicationPartial Notices to Proceed, which authorized the project to begin limited construction-related activities along the pipeline route. The project has a targeted in-service date of late 2019. Due to delays in obtaining the required permits to commence construction and the conditions imposed upon the project by the permits, ACP's project manager estimates the project pipeline development costs will range from $6.0 billion to $6.5 billion, excluding financing costs. Project construction activities, schedule and final costs are still subject to uncertainty due to potential additional permitting delays, construction productivity and other conditions and risks that could result in potential higher project costs, a potential delay in the targeted in-service date and potential impairment charges. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
Rapidly rising interest rates without timely or adequate updates to the regulated allowed return on equity or failure to achieve the anticipated benefits of the Piedmont merger, including cost savings and growth targets, could significantly impact the estimated fair value of reporting units in Gas Utilities and Infrastructure. In the event of a necessary water quality certificationsignificant decline in the estimated fair value of the reporting units, goodwill impairment charges could be recorded. The carrying value of goodwill within Gas Utilities and Infrastructure was approximately $1,924 million at June 30, 2018.
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy Registrants' Annual Reports on Form 10-K/A for the New York portionyear ended December 31, 2017, for discussion of risks associated with 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.Tax Act.
| | | | Three Months Ended June 30, | | Six Months Ended June 30, | Three Months Ended June 30, | | Six Months Ended June 30, |
| (in millions) | 2017 |
| | 2016 |
| | Variance |
| | 2017 |
| | 2016 |
| | Variance |
| 2018 |
| | 2017 |
| | Variance |
| | 2018 |
| | 2017 |
| | Variance |
|
| Operating Revenues | $ | 110 |
| | $ | 112 |
| | $ | (2 | ) | | $ | 238 |
| | $ | 226 |
| | $ | 12 |
| $ | 119 |
| | $ | 110 |
| | $ | 9 |
| | $ | 220 |
| | $ | 238 |
| | $ | (18 | ) |
| Operating Expenses | | | | | | | | | | | | | | | | | | | | | | |
| Operation, maintenance and other | 58 |
| | 82 |
| | (24 | ) | | 135 |
| | 155 |
| | (20 | ) | 69 |
| | 58 |
| | 11 |
| | 124 |
| | 136 |
| | (12 | ) |
| Depreciation and amortization | 38 |
| | 32 |
| | 6 |
| | 77 |
| | 62 |
| | 15 |
| 38 |
| | 38 |
| | — |
| | 76 |
| | 77 |
| | (1 | ) |
| Property and other taxes | 8 |
| | 6 |
| | 2 |
| | 17 |
| | 12 |
| | 5 |
| 6 |
| | 8 |
| | (2 | ) | | 13 |
| | 17 |
| | (4 | ) |
| Total operating expenses | 104 |
| | 120 |
| | (16 | ) | | 229 |
| | 229 |
| | — |
| 113 |
| | 104 |
| | 9 |
| | 213 |
| | 230 |
| | (17 | ) |
| Gains on Sales of Other Assets and Other, net | 2 |
| | 1 |
| | 1 |
| | 4 |
| | 2 |
| | 2 |
| — |
| | 2 |
| | (2 | ) | | — |
| | 4 |
| | (4 | ) |
| Operating Income (Loss) | 8 |
| | (7 | ) | | 15 |
| | 13 |
| | (1 | ) | | 14 |
| |
| Operating Income | | 6 |
| | 8 |
| | (2 | ) | | 7 |
| | 12 |
| | (5 | ) |
| Other Income and Expenses | (1 | ) | | — |
| | (1 | ) | | (2 | ) | | (2 | ) | | — |
| 18 |
| | (1 | ) | | 19 |
| | 20 |
| | (1 | ) | | 21 |
|
| Interest Expense | 23 |
| | 12 |
| | 11 |
| | 42 |
| | 23 |
| | 19 |
| 23 |
| | 23 |
| | — |
| | 45 |
| | 42 |
| | 3 |
|
| Loss Before Income Taxes | (16 | ) | | (19 | ) | | 3 |
| | (31 | ) | | (26 | ) | | (5 | ) | |
| Income (Loss) Before Income Taxes | | 1 |
| | (16 | ) | | 17 |
| | (18 | ) | | (31 | ) | | 13 |
|
| Income Tax Benefit | (42 | ) | | (29 | ) | | (13 | ) | | (81 | ) | | (62 | ) | | (19 | ) | (36 | ) | | (42 | ) | | 6 |
| | (75 | ) | | (81 | ) | | 6 |
|
| Less: Loss Attributable to Noncontrolling Interests | — |
| | (1 | ) | | 1 |
| | (1 | ) | | (1 | ) | | — |
| (1 | ) | | — |
| | (1 | ) | | (1 | ) | | (1 | ) | | — |
|
| Segment Income | $ | 26 |
|
| $ | 11 |
| | $ | 15 |
| | $ | 51 |
| | $ | 37 |
| | $ | 14 |
| $ | 38 |
|
| $ | 26 |
| | $ | 12 |
| | $ | 58 |
| | $ | 51 |
| | $ | 7 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Renewable plant production, GWh | 2,231 |
| | 1,758 |
| | 473 |
| | 4,516 |
| | 3,818 |
| | 698 |
| 2,471 |
| | 2,231 |
| | 240 |
| | 4,651 |
| | 4,516 |
| | 135 |
|
| Net proportional MW capacity in operation | | | | |
|
| | 2,908 |
| | 1,978 |
| | 930 |
| | | | |
|
| | 2,951 |
| | 2,908 |
| | 43 |
|
Three Months Ended June 30, 20172018, as Compared to June 30, 20162017
Commercial Renewables' results were favorably impacted by improved wind resourcesthe bankruptcy court approval of the North Allegheny Windfarm (NAW) and FirstEnergy Solutions (FES) settlement agreement. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The increase in revenues was primarily due to an increase in the number of engineering, procurement and construction (EPC) agreements at REC Solar, a California-based provider of solar installations owned by Duke Energy.
Operating Expenses. The increase in operation, maintenance and other was primarily due to an increase in the number of EPC agreements at REC Solar and higher production tax credits (PTCs) from new wind facilities placedsolar development spending in service at the endcurrent year.
Other Income and Expenses. The increase in other income and expenses was primarily due to the bankruptcy court approved NAW and FES settlement agreement, which allowed retention of 2016, partially offsetpreviously collected cash collateral under the purchase power agreements (PPAs) and mark-to-market gains on interest rate swaps.
Income Tax Benefit. The variance was primarily due to a decrease in pretax losses.
Six Months Ended June 30, 2018, as Compared to June 30, 2017
Commercial Renewables' results were favorably impacted by lower investment tax credits (ITCs).the bankruptcy court approval of the NAW and FES settlement agreement. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The decrease was primarily due to lower revenuesa reduction in the number of EPC agreements from Duke Energy's REC Solar investment, partially offset by higher revenues from improved wind and solar resources and new wind facilities placed in service.Solar.
Operating Expenses. The decrease was primarily due to lower operations and maintenance expense from a reduction in the number of EPC agreements at REC Solar and lower property taxes due to non-recurring property tax payments made in the prior year, partially offset by higher operating expenses relatedsolar development spending in the current year.
Other Income and Expenses. The increase in other income was primarily due to new wind projects placed in service.the bankruptcy court approved NAW and FES settlement agreement, which allowed retention of previously collected cash collateral under the PPAs and mark-to-market gains on interest rate swaps.
Interest Expense. The increasevariance was driven primarily bydue to higher debt outstanding as a result of new project financings and less capitalized interest due to fewer projects under construction.financings.
Income Tax Benefit. The variance was primarily due to higher PTCs related to wind projects placeda decrease in service, partially offset by lower ITCs due to lower solar investments in the current year.pretax losses.
Six Months Ended June 30, 2017 as Compared to June 30, 2016
Commercial Renewables' results were impacted by improved resources and higher PTCs from new wind facilities placed in service at the end of 2016, partially offset by lower ITCs. The following is a detailed discussion of the variance drivers by line item.Operating Revenues. The increase was primarily due to higher revenue from new wind facilities placed in service, partially offset by lower revenues from Duke Energy's REC Solar investment.
Operating Expenses. Lower operations and maintenance expense at REC Solar was offset by higher operating expenses related to new wind projects placed in service.
Interest Expense. The variance was driven primarily by new project financings and less capitalized interest due to fewer projects under construction.
Income Tax Benefit.The variance was primarily due to higher PTCs related to wind projects placed in service, partially offset by lower ITCs due to lower solar investments in the current year.
Matters Impacting Future Commercial Renewables ResultsResults
Changes or variability in assumptions used in calculating the fair value of the Commercial Renewables reporting units for goodwill testing purposes, including but not limited to legislative actions related to tax credit extensions, long-term growth rates and discount rates could significantly impact the estimated fair value of the Commercial Renewables reporting units. In the event of a significant decline in the estimated fair value of the Commercial Renewables reporting units, goodwill or other asset impairment charges could be recorded. The carrying value of goodwill within Commercial Renewables was approximately $122$93 million at June 30, 2017.2018.
Persistently low market pricing for wind resources, primarily in the Electric Reliability Council of Texas West market and PJM Interconnection, LLC (PJM) west and the future expiration of tax incentives including ITCsinvestment tax credits and PTCsproduction tax credits could result in adverse impacts to the future results of operations, financial position and cash flows of Commercial Renewables.
Deterioration in credit quality resulting in bankruptcy of an offtaker of power from contracted wind or solar assets could result in adverse impacts to the future results of operations, financial position and cash flows of Commercial Renewables. On March 31, 2018, FES, a subsidiary of FirstEnergy and counterparty to two PPAs with NAW, filed for Chapter 11 bankruptcy. On June 18, 2018, The United States Bankruptcy Court’s Northern District of Ohio Eastern Division approved the Stipulation between FES and NAW. The Stipulation resulted in, among other items, the termination of the two PPAs between FES and NAW, as a result, NAW is subject to market pricing in the PJM west market.
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy Registrants' Annual Reports on Form 10-K/A for the year ended December 31, 2017, for discussion of risks associated with the Tax Act.
| | | | Three Months Ended June 30, | | Six Months Ended June 30, | Three Months Ended June 30, | | Six Months Ended June 30, |
| (in millions) | 2017 |
| | 2016 |
| | Variance |
| | 2017 |
| | 2016 |
| | Variance |
| 2018 |
| | 2017 |
| | Variance |
| | 2018 |
| | 2017 |
| | Variance |
|
| Operating Revenues | $ | 35 |
| | $ | 30 |
| | $ | 5 |
| | $ | 68 |
| | $ | 59 |
| | $ | 9 |
| $ | 32 |
| | $ | 35 |
| | $ | (3 | ) | | $ | 67 |
| | $ | 68 |
| | $ | (1 | ) |
| Operating Expenses | | | | | | | | | | | | | | | | | | | | | | |
| Fuel used in electric generation and purchased power | 14 |
| | 12 |
| | 2 |
| | 29 |
| | 23 |
| | 6 |
| 15 |
| | 14 |
| | 1 |
| | 29 |
| | 29 |
| | — |
|
| Operation, maintenance and other | 18 |
| | 39 |
| | (21 | ) | | 26 |
| | 75 |
| | (49 | ) | 3 |
| | 19 |
| | (16 | ) | | 6 |
| | 27 |
| | (21 | ) |
| Depreciation and amortization | 26 |
| | 37 |
| | (11 | ) | | 52 |
| | 71 |
| | (19 | ) | 37 |
| | 26 |
| | 11 |
| | 70 |
| | 52 |
| | 18 |
|
| Property and other taxes | 4 |
| | 8 |
| | (4 | ) | | 7 |
| | 17 |
| | (10 | ) | 4 |
| | 4 |
| | — |
| | 8 |
| | 7 |
| | 1 |
|
| Impairment charges | 7 |
| | — |
| | 7 |
| | 7 |
| | 2 |
| | 5 |
| — |
| | 7 |
| | (7 | ) | | — |
| | 7 |
| | (7 | ) |
| Total operating expenses | 69 |
| | 96 |
| | (27 | ) | | 121 |
| | 188 |
| | (67 | ) | 59 |
| | 70 |
| | (11 | ) | | 113 |
| | 122 |
| | (9 | ) |
| Gains on Sales of Other Assets and Other, net | 6 |
| | 6 |
| | — |
| | 11 |
| | 11 |
| | — |
| |
| Gains (Loss) on Sales of Other Assets and Other, net | | 2 |
| | 6 |
| | (4 | ) | | (99 | ) | | 11 |
| | (110 | ) |
| Operating Loss | (28 | ) | | (60 | ) | | 32 |
| | (42 | ) | | (118 | ) | | 76 |
| (25 | ) | | (29 | ) | | 4 |
| | (145 | ) | | (43 | ) | | (102 | ) |
| Other Income and Expenses | 28 |
| | 19 |
| | 9 |
| | 49 |
| | 36 |
| | 13 |
| |
| Other Income and Expenses, net | | 27 |
| | 29 |
| | (2 | ) | | 41 |
| | 50 |
| | (9 | ) |
| Interest Expense | 139 |
| | 191 |
| | (52 | ) | | 273 |
| | 396 |
| | (123 | ) | 164 |
| | 139 |
| | 25 |
| | 321 |
| | 273 |
| | 48 |
|
| Loss Before Income Taxes | (139 | ) | | (232 | ) | | 93 |
| | (266 | ) | | (478 | ) | | 212 |
| (162 | ) | | (139 | ) | | (23 | ) | | (425 | ) | | (266 | ) | | (159 | ) |
| Income Tax Benefit | (48 | ) | | (126 | ) | | 78 |
| | (100 | ) | | (227 | ) | | 127 |
| (28 | ) | | (48 | ) | | 20 |
| | (27 | ) | | (100 | ) | | 73 |
|
| Less: Income Attributable to Noncontrolling Interests | 3 |
| | 1 |
| | 2 |
| | 5 |
| | 4 |
| | 1 |
| 2 |
| | 3 |
| | (1 | ) | | 4 |
| | 5 |
| | (1 | ) |
| Net Expense | $ | (94 | ) | | $ | (107 | ) | | $ | 13 |
| | $ | (171 | ) | | $ | (255 | ) | | $ | 84 |
| |
| Net Loss | | $ | (136 | ) | | $ | (94 | ) | | $ | (42 | ) | | $ | (402 | ) | | $ | (171 | ) | | $ | (231 | ) |
Three Months Ended June 30, 20172018, as Compared to June 30, 20162017
Other's results were impactedhigher net loss was driven by lowerincreased interest expense related to the Piedmont acquisition financing and decreased severance expenses.lower income tax benefit. The following is a detailed discussion of the variance drivers by line item.
Operating Expenses.Interest Expense. The decreasevariance was primarily due to prior year severance expenses related to cost savings initiatives.
Other Income and Expenses. Thean increase was driven byin long-term debt as well as higher earnings from National Methanol Company (NMC).
Interest Expense. The decrease was primarily due to Piedmont pre-acquisition financing costs in the prior year, including $75 million of unrealized losses on forward-startingshort-term interest rate swaps, partially offset by interest costs on $3.75 billion of debt issued in August 2016 to fund the acquisition. For additional information see Notes 2 and 9 to the Condensed Consolidated Financial Statements, "Acquisitions and Dispositions" and "Derivatives and Hedging," respectively.rates.
Income Tax Benefit. The variance was primarily due to a decreasethe lower statutory corporate federal income tax rate under the Tax Act, partially offset by an increase in pretax losses and a lower effective tax rate duelosses. For additional information, see Note 17 to favorable impacts in the prior year of finalizing federal tax audits. The effective tax rates for the three months ended June 30, 2017 and 2016 were 34.5 percent and 54.3 percent, respectively.Condensed Consolidated Financial Statements, "Income Taxes."
Six Months Ended June 30, 20172018, as Compared to June 30, 20162017
Other's results were impactedhigher net loss was driven by lowerthe loss on sale of the retired Beckjord station, higher interest expense related to the Piedmont acquisition financing and decreased severance expenses.lower income tax benefit. The following is a detailed discussion of the variance drivers by line item.
Operating Expenses.Gains (Loss) on Sales of Other Assets and Other, net. The decreasevariance was primarily due to prior year severance expensesdriven by the loss on sale of the retired Beckjord station, a nonregulated facility retired during 2014, including the transfer of coal ash basins and other real property and indemnification from any and all potential future claims related to cost savings initiatives.
Other Income and Expenses. The increase was primarily driven by higher earnings from NMC.the property, whether arising under environmental laws or otherwise.
Interest Expense. The decreasevariance was primarily due to Piedmont pre-acquisition financing costsan increase in the prior year, including $168 million of unrealized losses on forward-startinglong-term debt, as well as higher short-term interest rate swaps, partially offset by interest costs on $3.75 billion of debt issued in August 2016 to fund the acquisition. For additional information see Notes 2 and 9 to the Condensed Consolidated Financial Statements, "Acquisitions and Dispositions" and "Derivatives and Hedging," respectively.rates.
Income Tax Benefit. The variance was primarily due to a decreasethe valuation allowance against AMT credits and the lower statutory corporate federal income tax rate under the Tax Act, partially offset by an increase in pretax losses and a lower effective tax rate duelosses. For additional information, see Note 17 to favorable impacts in the prior year of finalizing federal tax audits. The effective tax rates for the six months ended June 30, 2017 and 2016 were 37.6 percent and 47.5 percent, respectively.Condensed Consolidated Financial Statements, "Income Taxes."
Matters Impacting Future Other Results
Included in Other is Duke Energy Ohio's 9 percent ownership interest in the Ohio Valley Electric Corporation (OVEC), which owns 2,256 MW of coal-fired generation capacity. As a counterparty to an inter-company power agreement (ICPA), Duke Energy Ohio has a contractual arrangement to receive entitlements to capacity and energy from OVEC’s power plants through June 2040 commensurate with its power participation ratio, which is equivalent to Duke Energy Ohio's ownership interest. Costs, including fuel, operating expenses, fixed costs, debt amortization and interest expense, are allocated to counterparties to the ICPA, including Duke Energy Ohio, based on their power participation ratio. The value of the ICPA is subject to variability due to fluctuations in power prices and changes in OVEC’s costs of business. Deterioration in the credit quality orOn March 31, 2018, FES, a subsidiary of FirstEnergy and an ICPA counterparty with a power participation ratio of 4.85 percent, filed for Chapter 11 bankruptcy, of one or more parties
which could increase costs allocated to the ICPA could increasecounterparties. Duke Energy cannot predict the costsimpact of OVEC.the bankruptcy filing on its OVEC interests. In addition, certain proposed environmental rulemaking costs could result in future increased OVEC cost allocations.
The retired Beckjord generating station (Beckjord),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. On April 13, 2018, Duke Energy Ohio filed a nonregulated facility retired during 2014, is not subjectStipulation with the PUCO to resolve issues in the U.S. Environmental Protection Agency (EPA) ruleelectric distribution base rate case and other regulatory matters. If approved by PUCO, the Stipulation would allow for Duke Energy Ohio to recover gains and losses incurred on and after January 1, 2018, related to OVEC, through the disposal of CCR from electric utilities. However, if costs are incurredPrice Stabilization Rider and, 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 commoditiesDuke Energy Ohio may result in a decline in earnings. Duke Energy's economicmove its 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 third quarter of 2017.
U.S. federal tax reform has become an important priority of Congress and the 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 FROM DISCONTINUED OPERATIONS, NET OF TAX
Three Months Ended June 30, 2017 as Compared to June 30, 2016
Discontinued Operations, Net of Tax. The variance was driven by a 2016 impairment charge related to certain assets in Central America that were sold in 2016, partially offset by the operating results of the International Disposal Group.Electric Utilities and Infrastructure segment. Hearings will conclude on August 6, 2018. See Note 23 to the Condensed Consolidated Financial Statements, "Acquisitions and Dispositions,"“Regulatory Matters” for additional information.
Six Months Ended June 30, 2017 as Compared to June 30, 2016
DiscontinuedSee "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, Net" in the Duke Energy Registrants' Annual Reports on Form 10-K/A for the year ended December 31, 2017, for discussion of Tax. The variance was driven by 2016 earnings fromrisks associated with the International Disposal Group, which was sold in December 2016, partially offset by an impairment charge related to certain assets in Central America that were sold in 2016. See Note 2 to the Condensed Consolidated Financial Statements, "Acquisitions and Dispositions," for additional information.Tax Act.
DUKE ENERGY CAROLINAS
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the six months ended June 30, 20172018, and 20162017 and the Annual Report on Form 10-K10-K/A for the year ended December 31, 2016.2017.
| | | | Six Months Ended June 30, | Six Months Ended June 30, |
| (in millions) | 2017 |
| | 2016 |
| | Variance |
| 2018 |
| | 2017 |
| | Variance |
|
| Operating Revenues | $ | 3,445 |
| | $ | 3,415 |
| | $ | 30 |
| $ | 3,435 |
| | $ | 3,445 |
| | $ | (10 | ) |
| Operating Expenses | | | | | | | | | | |
| Fuel used in electric generation and purchased power | 863 |
| | 810 |
| | 53 |
| 880 |
| | 863 |
| | 17 |
|
| Operation, maintenance and other | 951 |
| | 988 |
| | (37 | ) | 950 |
| | 978 |
| | (28 | ) |
| Depreciation and amortization | 523 |
| | 534 |
| | (11 | ) | 561 |
| | 523 |
| | 38 |
|
| Property and other taxes | 139 |
| | 138 |
| | 1 |
| 147 |
| | 139 |
| | 8 |
|
| Impairment charges | | 190 |
| | — |
| | 190 |
|
| Total operating expenses | 2,476 |
| | 2,470 |
| | 6 |
| 2,728 |
| | 2,503 |
| | 225 |
|
| Losses on Sales of Other Assets and Other, net | | (1 | ) | | — |
| | (1 | ) |
| Operating Income | 969 |
| | 945 |
| | 24 |
| 706 |
| | 942 |
| | (236 | ) |
| Other Income and Expenses | 73 |
| | 82 |
| | (9 | ) | |
| Other Income and Expenses, net | | 74 |
| | 100 |
| | (26 | ) |
| Interest Expense | 206 |
| | 214 |
| | (8 | ) | 217 |
| | 206 |
| | 11 |
|
| Income Before Income Taxes | 836 |
| | 813 |
| | 23 |
| 563 |
| | 836 |
| | (273 | ) |
| Income Tax Expense | 293 |
| | 281 |
| | 12 |
| 123 |
| | 293 |
| | (170 | ) |
| Net Income | $ | 543 |
| | $ | 532 |
| | $ | 11 |
| $ | 440 |
| | $ | 543 |
| | $ | (103 | ) |
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 | 20172018 |
|
| Residential sales | (4.114.9 | )% |
| General service sales | (0.54.5 | )% |
| Industrial sales | 0.1(1.2 | )% |
| Wholesale power sales | 5.514.7 | % |
| Joint dispatch sales | 181.63.9 | % |
| Total sales | (0.86.8 | )% |
| Average number of customers | 1.5 | % |
Six Months Ended June 30, 20172018, as Compared to June 30, 20162017
Operating Revenues. The variance was driven primarily by:
a $70$122 million increasedecrease in retail sales due to revenues subject to refund to customers associated with the lower statutory federal corporate tax rate under the Tax Act;
a $47 million decrease in rider revenues primarily related to energy efficiency programs;
a $67 million increase in fuel revenues primarily due to changes in generation mix;
a $16 million increase in weather-normal retail sales volumes, net of fuel revenues; and
a $5an $11 million increasedecrease in wholesale power revenues, net of sharing and fuel, primarily due to additional volumes for customers served under long-term contracts.wholesale customer refunds in the current year related to a FERC order on a complaint filed by the PMPA, partially offset by higher revenues related to recovery of coal ash costs.
Partially offset by:
a $132$126 million decreaseincrease in retail sales, net of fuel revenues, due to unfavorablefavorable weather in the current year.year;
a $29 million increase in fuel related revenues primarily due to higher sales; and
a $23 million increase in weather-normal retail sales volumes.
Operating Expenses.Expenses. The variance was driven primarily by:
a $53$190 million increase in impairment charges, primarily due to the impacts of the North Carolina rate order and charges related to coal ash costs in South Carolina;
a $38 million increase in depreciation and amortization primarily due to additional plant in service and higher amortization of deferred coal ash costs, partially offset by lower amortization of certain regulatory assets; and
a $17 million increase in fuel expenseused in electric generation and purchased power primarily due to changes in generation mix and higher costs at fossil plants, partially offset by lower retail sales.
Partially offset by:
a $37$28 million decrease in operationsoperation, maintenance and maintenanceother expense primarily due to lower expenses at generating plants, lower storm restoration costs, and lower severance expenses, partially offset by higher energy efficiency program costs and higher distribution maintenance expenses; and
an $11 million decrease in depreciation and amortization expense primarily due to lower amortization of certain regulatory assets, partially offset by higher depreciation due to additional plant in service.costs.
Other Income and Expenses. The variance was primarily due to lower AFUDC equity and a decrease in recognition of post in-service equity returns for projects that had beenwere completed prior to being reflected in customer rates.
Interest Expense. The variance was primarily due to higher debt outstanding.
Income Tax Expense. The variance was primarily due to an increase in pretax income and a favorable state resolution recorded in the prior year, partially offset by lower North Carolinastatutory federal corporate tax rates.rate under the Tax Act. The effective tax ratesETRs for the six months ended June 30, 2018, and 2017 were 21.8 percent and 2016 were 35.0 percent, respectively. The decrease in the ETR was primarily due to the lower statutory federal corporate tax rate under the Tax Act and 34.6 percent, respectively.
Matters Impacting Future Results
An order from regulatory authorities disallowing recoverylevelization for annual amortization 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. Seestate excess deferred taxes. For additional information, see Note 417 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,"Income Taxes." for additional information.
Matters Impacting Future Results
On May 18, 2016, the NCDEQ issued proposed risk classifications for all coal ash surface impoundments in North Carolina. All ash impoundments not previously designated as high priority by the Coal Ash Act were designated as intermediate risk. Certain impoundments classified as intermediate risk, however, may be reassessed in the future as low risk pursuant to legislation signed by the former North Carolina governorenacted on July 14, 2016. Duke Energy Carolinas' estimated AROs related to the closure of North Carolina ash impoundments are based upon the mandated closure method or a probability weighting of potential closure methods for the impoundments that may be reassessed to low risk. As the final risk ranking classifications in North Carolina are delineated, final closure plans and corrective action measures are developed and approved for each site, the closure work progresses, and the closure method scope and remedial action methods are determined, the complexity of work and the amount of coal combustion material could be different than originally estimated and, therefore, could materially impact Duke Energy Carolinas' results of operations, financial position.position and cash flows.
On June 22, 2018, Duke Energy Carolinas received an order from the NCUC, which denied the Grid Rider Stipulation and deferral treatment of Power/Forward costs. Duke Energy Carolinas may petition for deferral of grid modernization costs outside of a general rate case proceeding if it can show financial hardship or a stipulation that includes greater consensus among intervening parties on costs being classified as grid modernization. Duke Energy Carolinas' results of operations, financial position and cash flows could be adversely impacted if grid modernization costs are not ultimately approved for recovery and/or deferral treatment. See Note 9 in Duke Energy's Annual Report on Form 10-K for3 to the year ended December 31, 2016, "Asset Retirement Obligations,"Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
Duke Energy Carolinas is a party to multiple lawsuits and subject to fines and other penalties related to operations at certain North Carolina facilities with ash basins. In addition, the order issued in the Duke Energy Carolinas North Carolinas rate cases supporting recovery of past coal ash remediation costs have been appealed by various parties. The outcome of these appeals, lawsuits, fines and penalties could have an adverse impact on Duke Energy Carolinas’ financial position, results of operations, financial position and cash flows. See Note 5Notes 3 and 4 to the Condensed Consolidated Financial Statements, "Regulatory Matters" and “Commitments and Contingencies,” respectively, for additional information.
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy Carolinas filed noticeRegistrants' Annual Reports on Form 10-K/A for the year ended December 31, 2017, for discussion of risks associated with the NCUC that it intends to file a general rate case on or about August 25, 2017, to recover costs of complying with CCR regulations and the Coal Ash Act, as well as costs of capital investments in generation, transmission and distribution systems and any increase in expenditures subsequent to previous rate cases. Duke Energy Carolinas' earnings could be adversely impacted if the rate increase is delayed or denied by the NCUC.Tax Act.
PROGRESS ENERGY
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the six months ended June 30, 20172018, and 20162017 and the Annual Report on Form 10-K10-K/A for the year ended December 31, 2016.2017.
| | | | Six Months Ended June 30, | Six Months Ended June 30, |
| (in millions) | 2017 |
| | 2016 |
| | Variance |
| 2018 |
| | 2017 |
| | Variance |
|
| Operating Revenues | $ | 4,571 |
| | $ | 4,680 |
| | $ | (109 | ) | $ | 5,074 |
| | $ | 4,571 |
| | $ | 503 |
|
| Operating Expenses | | | | | | | | | | |
| Fuel used in electric generation and purchased power | 1,557 |
| | 1,712 |
| | (155 | ) | 1,871 |
| | 1,557 |
| | 314 |
|
| Operation, maintenance and other | 1,078 |
| | 1,117 |
| | (39 | ) | 1,233 |
| | 1,109 |
| | 124 |
|
| Depreciation and amortization | 624 |
| | 586 |
| | 38 |
| 764 |
| | 624 |
| | 140 |
|
| Property and other taxes | 246 |
| | 239 |
| | 7 |
| 254 |
| | 246 |
| | 8 |
|
| Impairment charges | 2 |
| | 3 |
| | (1 | ) | 33 |
| | 2 |
| | 31 |
|
| Total operating expenses | 3,507 |
| | 3,657 |
| | (150 | ) | 4,155 |
| | 3,538 |
| | 617 |
|
| Gains on Sales of Other Assets and Other, net | 14 |
| | 12 |
| | 2 |
| 12 |
| | 14 |
| | (2 | ) |
| Operating Income | 1,078 |
| | 1,035 |
| | 43 |
| 931 |
| | 1,047 |
| | (116 | ) |
| Other Income and Expenses | 45 |
| | 48 |
| | (3 | ) | |
| Other Income and Expenses, net | | 77 |
| | 76 |
| | 1 |
|
| Interest Expense | 402 |
| | 320 |
| | 82 |
| 412 |
| | 402 |
| | 10 |
|
| Income Before Income Taxes | 721 |
| | 763 |
| | (42 | ) | 596 |
| | 721 |
| | (125 | ) |
| Income Tax Expense | 243 |
| | 277 |
| | (34 | ) | 92 |
| | 243 |
| | (151 | ) |
| Net Income | 478 |
| | 486 |
| | (8 | ) | 504 |
| | 478 |
| | 26 |
|
| Less: Net Income Attributable to Noncontrolling Interests | 5 |
| | 5 |
| | — |
| 4 |
| | 5 |
| | (1 | ) |
| Net Income Attributable to Parent | $ | 473 |
| | $ | 481 |
| | $ | (8 | ) | $ | 500 |
| | $ | 473 |
| | $ | 27 |
|
Six Months Ended June 30, 20172018, as Compared to June 30, 20162017
Operating Revenues. The variance was driven primarily by:
a $168$335 million decreaseincrease in fuel related revenues driven by lower retaildue to higher sales, increases in fuel and changes in generation mixcapacity rates billed to customers, and increased demand at Duke Energy Progress, as well as decreased demand and capacity rates to retail customers at Duke Energy Florida, partially offset by Florida;
an increase in fuel rates to retail customers; and
a $72$86 million decreaseincrease in retail sales, net of fuel revenues, due to unfavorablefavorable weather in the current year.
Partially offset by:year;
a $67 million increase in rider revenues related to energy efficiency programs at Duke Energy Progress, as well as nuclear asset securitization beginning in July 2016 and extended uprate project revenues beginning in 2017 at Duke Energy Florida; and
a $41$54 million increase in retail pricing due to the base rate adjustment for the Osprey acquisition and the completionimpacts of the Hines Energy Complex Chiller Uprate Project, as well as the Duke Energy Progress North Carolina and South Carolina rate case.cases;
a $50 million increase in wholesale power revenues, net of fuel, primarily due to coal ash recovery in the current year at Duke Energy Progress; and
a $29 million increase in Joint Asset Agency Rider revenues primarily due to the implementation of new base rates.
Partially offset by:
a $65 million decrease in retail sales due to revenues subject to refund to customers associated with the lower statutory federal corporate tax rate under the Tax Act at Duke Energy Progress.
Operating Expenses. The variance was driven primarily by:
a $155$314 million decreaseincrease in fuel expenseused in electric generation and purchased power primarily due to lower retailhigher sales, and changes in generation mix at Duke Energy Progress, as well as decreased purchased power and lowerhigher deferred fuel and capacity expenses, and increased purchased power, partially offset by lower generation costs at Duke Energy Florida; and
a $39 million decrease in operations and maintenance expense due to lower storm restoration costs at Duke Energy Progress and lower planned outage costs at Duke Energy Florida.
Partially offset by:
a $38$140 million increase in depreciation and amortization expense primarily due to higher amortization of deferred coal ash costs and new depreciation rates per the North Carolina rate case at Duke Energy Progress, and accelerated depreciation of Crystal River Units 4 and 5 and additional plant in service at Duke Energy Florida;
a $124 million increase in operation, maintenance and nuclear regulatory assetother primarily due to storm cost amortization at Duke Energy Florida.Florida and impacts associated with the North Carolina rate case at Duke Energy Progress; and
Interest Expense. The variance wasa $31 million increase in impairment charges primarily due to higher debt outstanding, and lower debt returns driven by the CR3 regulatory asset debt return ending in June 2016 upon securitization.impacts associated with the North Carolina rate case at Duke Energy Progress.
Income Tax Expense. The variance was primarily due to a decrease in pretax income.the lower statutory federal corporate tax rate under the Tax Act. The effective tax ratesETRs for the six months ended June 30, 2018, and 2017 and 2016 were 33.715.4 percent and 36.333.7 percent, respectively. The decrease in the effective tax rateETR was primarily due to the lower North Carolinastatutory federal corporate tax rates.rate under the Tax Act and levelization for annual amortization of federal and state excess deferred taxes. For additional information, see Note 17 to the Condensed Consolidated Financial Statements, "Income Taxes."
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 governorenacted on July 14, 2016. Progress Energy's estimated AROs related to the closure of North Carolina ash impoundments are based upon the mandated closure method or a probability weighting of potential closure methods for the impoundments that may be reassessed to low risk. As the final risk ranking classifications in North Carolina are delineated, final closure plans and corrective action measures are developed and approved for each site, the closure work progresses, and the closure method scope and remedial action methods are determined, the complexity of work and the amount of coal combustion material could be different than originally estimated and, therefore, could materially impact Progress Energy's results of operations, financial position. See Note 9 in Duke Energy's Annual Report on Form 10-K for the year ended December 31, 2016, "Asset Retirement Obligations," for additional information.position and cash flows.
Duke Energy Progress is a party to multiple lawsuits and subject to fines and other penalties related to operations at certain North Carolina facilities with ash basins. As noted above, the order issued in the Duke Energy Progress North Carolinas rate cases supporting recovery of past coal ash remediation costs have been appealed by various parties. The outcome of these appeals, lawsuits, fines and penalties could have an adverse impact on Progress Energy’s financial position, results of operations, financial position and cash flows. See Notes 3 and 4 to the Condensed Consolidated Financial Statements, "Regulatory Matters" and “Commitments and Contingencies,” respectively, for additional information.
Duke Energy Carolinas received an order from the NCUC, which denied the Grid Rider Stipulation and deferral treatment of Power/Forward costs. The NCUC did allow Duke Energy Carolinas to petition for deferral of grid modernization costs outside of a general rate case proceeding if it can show financial hardship or a stipulation that includes greater consensus among intervening parties on costs being classified as grid modernization. While Duke Energy Progress did not request recovery of these costs in its most recent case with the NCUC, Duke Energy Progress may request recovery of certain grid modernization costs in future regulatory proceedings. If the NCUC were to rule similarly, Progress Energy's results of operations, financial position and cash flows could be adversely impacted if grid modernization costs are not ultimately approved for recovery and/or deferral treatment. See Note 3 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
On June 30, 2017, CertainTeed filed a declaratory judgment action against Duke Energy Progress in the North Carolina Business Court relating to a gypsum supply agreement. In its complaint, CertainTeed sought an order from the court declaring that the minimum amount of gypsum Duke Energy Progress must provide to CertainTeed under the supply agreement is 50,000 tons per month through 2029. The trial for this matter concluded on July 16, 2018. If Duke Energy Progress does not prevail, it will have to either purchase additional gypsum on the open market to fulfill its contractual obligation through 2029 or pay some amount of liquidated damages that could have an adverse impact on Progress Energy's results of operations, financial position and cash flows. See Note 54 to the Condensed Consolidated Financial Statements, “Commitments and Contingencies,” for additional information.
In the fourth quarter of 2016, Hurricane Matthew caused historic flooding, extensive damage and widespread power outages within the
Duke Energy Florida is constructing the 1,640-MW combined-cycle natural gas plant in Citrus County, Florida, and expects it to be commercially available in 2018. Failure to complete the construction and achieve commercial operations by the end of 2018 or actual costs in excess of the estimated amount not collected from customers could materially impact Progress service territory.Energy's results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
On February 6, 2018, the FPSC approved a stipulation that would apply tax savings resulting from the Tax Act toward storm costs effective January 2018 in lieu of implementing a storm surcharge. On May 31, 2018, Duke Energy ProgressFlorida filed a petition withfor recovery of 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 incrementalstorm costs. Storm costs are currently expected to be fully recovered by approximately $116 million.mid-2021. The NCUC will addressevidentiary hearing in this request in Duke Energy Progress's currently pending rate case. A finalstorm cost matter is scheduled for the week of October 15, 2018. An order from the NCUC that disallows the deferral and futuredisallowing recovery of all or a significant portion of the incremental storm restorationthese costs incurred could result inhave an adverse impact on Progress Energy's financial position, results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy Progress filed a general rate caseRegistrants' Annual Reports on Form 10-K/A for the year ended December 31, 2017, for discussion of risks associated with the NCUC on June 1, 2017. Duke Energy Progress will seek to recover costs of complying with CCR regulations and the Coal Ash Act, as well as costs of capital investments in generation, transmission and distribution systems and any increase in expenditures subsequent to previous rate cases. Progress Energy's earnings could be adversely impacted if the rate increase is delayed or denied by the NCUC.Tax Act.
DUKE ENERGY PROGRESS
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the six months ended June 30, 20172018, and 20162017 and the Annual Report on Form 10-K10-K/A for the year ended December 31, 2016.2017.
| | | | Six Months Ended June 30, | Six Months Ended June 30, |
| (in millions) | 2017 |
| | 2016 |
| | Variance |
| 2018 |
| | 2017 |
| | Variance |
|
| Operating Revenues | $ | 2,418 |
| | $ | 2,520 |
| | $ | (102 | ) | $ | 2,751 |
| | $ | 2,418 |
| | $ | 333 |
|
| Operating Expenses | | | | | | | | | | |
| Fuel used in electric generation and purchased power | 739 |
| | 872 |
| | (133 | ) | 917 |
| | 739 |
| | 178 |
|
| Operation, maintenance and other | 680 |
| | 707 |
| | (27 | ) | 756 |
| | 704 |
| | 52 |
|
| Depreciation and amortization | 354 |
| | 350 |
| | 4 |
| 470 |
| | 354 |
| | 116 |
|
| Property and other taxes | 80 |
| | 79 |
| | 1 |
| 75 |
| | 80 |
| | (5 | ) |
| Impairment charges | | 33 |
| | — |
| | 33 |
|
| Total operating expenses | 1,853 |
| | 2,008 |
| | (155 | ) | 2,251 |
| | 1,877 |
| | 374 |
|
| Gains on Sales of Other Assets and Other, net | 3 |
| | 1 |
| | 2 |
| 2 |
| | 3 |
| | (1 | ) |
| Operating Income | 568 |
| | 513 |
| | 55 |
| 502 |
| | 544 |
| | (42 | ) |
| Other Income and Expenses | 33 |
| | 29 |
| | 4 |
| |
| Other Income and Expenses, net | | 37 |
| | 57 |
| | (20 | ) |
| Interest Expense | 152 |
| | 127 |
| | 25 |
| 159 |
| | 152 |
| | 7 |
|
| Income Before Income Taxes | 449 |
| | 415 |
| | 34 |
| 380 |
| | 449 |
| | (69 | ) |
| Income Tax Expense | 148 |
| | 147 |
| | 1 |
| 64 |
| | 148 |
| | (84 | ) |
| Net Income and Comprehensive Income | $ | 301 |
| | $ | 268 |
| | $ | 33 |
| |
| Net Income | | $ | 316 |
| | $ | 301 |
| | $ | 15 |
|
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 | 20172018 |
|
| Residential sales | (3.014.3 | )% |
| General service sales | (0.93.2 | )% |
| Industrial sales | 2.1(0.3 | )% |
| Wholesale power sales | (17.910.9 | )% |
| Joint dispatch sales | (46.89.1 | )% |
| Total sales | (8.26.2 | )% |
| Average number of customers | 1.31.5 | % |
Six Months Ended June 30, 20172018, as Compared to June 30, 20162017
Operating Revenues. The variance was driven primarily by:
a $146$199 million decreaseincrease in fuel related revenues driven by lowerdue to higher retail sales and changesincreases in generation mix; andfuel rates billed to customers;
a $37$62 million decreaseincrease in retail sales, net of fuel revenues, due to unfavorablefavorable weather in the current year.
Partially offset by:year;
a $29$54 million increase in rider revenues relatedretail pricing due to energy efficiency programs;the impacts of the North Carolina and South Carolina rate cases;
a $28$50 million increase in wholesale power revenues, net of fuel, primarily due to higher peak demand;recovery of coal ash costs; and
an $18a $29 million increase in retail pricingJoint Asset Agency Rider revenues primarily due to the Duke Energy Progress South Carolinaimplementation of new base rates.
Partially offset by:
a $65 million decrease due to revenues subject to refund to customers associated with the lower statutory federal corporate tax rate case.under the Tax Act.
Operating Expenses. The variance was driven primarily by:
a $133$178 million decreaseincrease in fuel used in electric generation and purchased power primarily due to higher sales and higher deferred fuel expenses;
a $116 million increase in depreciation and amortization primarily due to higher amortization of deferred coal ash costs and new depreciation rates per the North Carolina rate case;
a $52 million increase in operation, maintenance and other expense primarily due to lower retail saleshigher operational costs that are recoverable in rates and changes in generation mix;impacts associated with the North Carolina rate case; and
a $27$33 million decreaseincrease in operations and maintenance expense primarilyimpairment charges due to lower storm restoration costs.the impacts associated with the North Carolina rate case.
Interest Expense.Other Income and Expenses. The increasevariance was primarily duedriven by lower income from non-service components of employment benefit costs. For additional information on employee benefit costs, see Note 16 to higher debt outstanding, as well as interest charges on North Carolina fuel overcollections.the Condensed Consolidated Financial Statements, "Employee Benefit Plans."
Income Tax Expense. The variance was primarily due to an increase in pretax income, partially offset by athe lower effectivestatutory federal corporate tax rate due to lower North Carolina corporate tax rates.under the Tax Act. The effective tax ratesETRs for the six months ended June 30, 2018, and 2017 were 16.8 percent and 2016 were 33.0 percent, respectively. The decrease in the ETR was primarily due to the lower statutory federal corporate tax rate under the Tax Act and 35.4 percent, respectively.
Matters Impacting Future Results
An order from regulatory authorities disallowing recoverylevelization for annual amortization 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. Seestate excess deferred taxes. For additional information, see Note 417 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,"Income Taxes." for additional information.
Matters Impacting Future Results
On May 18, 2016, the NCDEQ issued proposed risk classifications for all coal ash surface impoundments in North Carolina. All ash impoundments not previously designated as high priority by the Coal Ash Act were designated as intermediate risk. Certain impoundments classified as intermediate risk, however, may be reassessed in the future as low risk pursuant to legislation signed by the former North Carolina governorenacted on July 14, 2016. Duke Energy Progress' estimated AROs related to the closure of North Carolina ash impoundments are based upon the mandated closure method or a probability weighting of potential closure methods for the impoundments that may be reassessed to low risk. As the final risk ranking classifications in North Carolina are delineated, final closure plans and corrective action measures are developed and approved for each site, the closure work progresses, and the closure method scope and remedial action methods are determined, the complexity of work and the amount of coal combustion material could be different than originally estimated and, therefore, could materially impact Duke Energy Progress' results of operations, financial position. See Note 9 in Duke Energy's Annual Report on Form 10-K for the year ended December 31, 2016, "Asset Retirement Obligations," for additional information.position and cash flows.
Duke Energy Progress is a party to multiple lawsuits and subject to fines and other penalties related to operations at certain North Carolina facilities with ash basins. As noted above, the order issued in the Duke Energy Progress North Carolinas rate cases supporting recovery of past coal ash remediation costs have been appealed by various parties. The outcome of these appeals, lawsuits, fines and penalties could have an adverse impact on Duke Energy Progress’ financial position, results of operations, financial position and cash flows. See Notes 3 and 4 to the Condensed Consolidated Financial Statements, "Regulatory Matters" and “Commitments and Contingencies,” respectively, for additional information.
Duke Energy Carolinas received an order from the NCUC, which denied the Grid Rider Stipulation and deferral treatment of Power/Forward costs. The NCUC did allow Duke Energy Carolinas to petition for deferral of grid modernization costs outside of a general rate case proceeding if it can show financial hardship or a stipulation that includes greater consensus among intervening parties on costs being classified as grid modernization. While Duke Energy Progress did not request recovery of these costs in its most recent case with the NCUC, Duke Energy Progress may request recovery of certain grid modernization costs in future regulatory proceedings. If the NCUC were to rule similarly, Duke Energy Progress' results of operations, financial position and cash flows could be adversely impacted if grid modernization costs are not ultimately approved for recovery and/or deferral treatment. See Note 3 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
On June 30, 2017, CertainTeed filed a declaratory judgment action against Duke Energy Progress in the North Carolina Business Court relating to a gypsum supply agreement. In its complaint, CertainTeed sought an order from the court declaring that the minimum amount of gypsum Duke Energy Progress must provide to CertainTeed under the supply agreement is 50,000 tons per month through 2029. The trial for this matter concluded on July 16, 2018. If Duke Energy Progress does not prevail, it will have to either purchase additional gypsum on the open market to fulfill its contractual obligation through 2029 or pay some amount of liquidated damages that could have an adverse impact on its results of operations, financial position and cash flows. See Note 54 to the Condensed Consolidated Financial Statements, “Commitments and Contingencies,” for additional information.
In the fourth quarter
See "Item 7. Management's Discussion and Analysis of 2016, Hurricane Matthew caused historic flooding, extensive damageFinancial Condition and widespread power outages withinResults of Operations," in the Duke Energy Progress service territory. Duke Energy Progress filed a petitionRegistrants' Annual Reports on Form 10-K/A for the year ended December 31, 2017, for discussion of risks associated with the NCUC requesting an accounting order to defer incremental operation and maintenance and capital costs incurred in response to Hurricane Matthew and other significant 2016 storms. Current estimated incremental costs are approximately $116 million. The NCUC will address this request in Duke Energy Progress's currently pending rate case. A final order from the NCUC that disallows the deferral and future recovery of all or a significant portion of the incremental storm restoration costs incurred could result in an adverse impact on Duke Energy Progress' financial position, results of operations and cash flows.
Duke Energy Progress filed a general rate case with the NCUC on June 1, 2017. Duke Energy Progress will seek to recover costs of complying with CCR regulations and the Coal Ash Act, as well as costs of capital investments in generation, transmission and distribution systems and any increase in expenditures subsequent to previous rate cases. Duke Energy Progress' earnings could be adversely impacted if the rate increase is delayed or denied by the NCUC.Tax Act.
DUKE ENERGY FLORIDA
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the six months ended June 30, 20172018, and 20162017 and the Annual Report on Form 10-K10-K/A for the year ended December 31, 2016.2017.
| | | | Six Months Ended June 30, | Six Months Ended June 30, |
| (in millions) | 2017 |
| | 2016 |
| | Variance |
| 2018 |
| | 2017 |
| | Variance |
|
| Operating Revenues | $ | 2,150 |
| | $ | 2,157 |
| | $ | (7 | ) | $ | 2,318 |
| | $ | 2,150 |
| | $ | 168 |
|
| Operating Expenses | | | | | | | | | | |
| Fuel used in electric generation and purchased power | 817 |
| | 841 |
| | (24 | ) | 953 |
| | 817 |
| | 136 |
|
| Operation, maintenance and other | 394 |
| | 404 |
| | (10 | ) | 474 |
| | 403 |
| | 71 |
|
| Depreciation and amortization | 269 |
| | 236 |
| | 33 |
| 294 |
| | 269 |
| | 25 |
|
| Property and other taxes | 166 |
| | 160 |
| | 6 |
| 179 |
| | 166 |
| | 13 |
|
| Impairment charges | 2 |
| | 3 |
| | (1 | ) | — |
| | 2 |
| | (2 | ) |
| Total operating expenses | 1,648 |
| | 1,644 |
| | 4 |
| 1,900 |
| | 1,657 |
| | 243 |
|
| Operating Income | 502 |
| | 513 |
| | (11 | ) | 418 |
| | 493 |
| | (75 | ) |
| Other Income and Expenses | 30 |
| | 19 |
| | 11 |
| |
| Other Income and Expenses, net | | 47 |
| | 39 |
| | 8 |
|
| Interest Expense | 140 |
| | 81 |
| | 59 |
| 137 |
| | 140 |
| | (3 | ) |
| Income Before Income Taxes | 392 |
| | 451 |
| | (59 | ) | 328 |
| | 392 |
| | (64 | ) |
| Income Tax Expense | 144 |
| | 170 |
| | (26 | ) | 57 |
| | 144 |
| | (87 | ) |
| Net Income | $ | 248 |
| | $ | 281 |
| | $ | (33 | ) | $ | 271 |
| | $ | 248 |
| | $ | 23 |
|
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 | 20172018 |
|
| Residential sales | (3.14.8 | )% |
| General service sales | (0.11.2 | )% |
| Industrial sales | (1.40.2 | )% |
| Wholesale and other | 32.913.9 | % |
| Total sales | (0.32.0 | )% |
| Average number of customers | 1.5 | % |
Six Months Ended June 30, 20172018, as Compared to June 30, 20162017
Operating Revenues. The variance was driven primarily by:
a $35$136 million decreaseincrease in fuel and capacity revenues primarily due to an increase in fuel and capacity rates billed to retail customers, as well as increased demand; and
a $24 million increase in retail sales, net of fuel revenues, due to unfavorablefavorable weather in the current year;
a $30 million decrease in wholesale power revenues primarily due to contracts that expired in the prior year; and
a $22 million decrease in fuel and capacity revenues primarily due to a decrease in capacity rates to retail customers, partially offset by an increase in fuel rates to retail customers.
Partially offset by:
a $38 million increase in rider revenues primarily due to nuclear asset securitization beginning in July 2016 and extended power uprate project revenues beginning in 2017;
a $23 million increase in retail pricing due to the base rate adjustment for the Osprey acquisition and the completion of the Hines Energy Complex Chiller Uprate Project; and
a $20 million increase in weather-normal sales volumes to retail customers in the current year.
Operating Expenses. The variance was driven primarily by:
a $33$136 million increase in fuel used in electric generation and purchased power primarily due to higher deferred fuel and capacity expenses, increased purchased power and increased demand, partially offset by lower generation costs;
a $71 million increase in operation, maintenance and other expense primarily due to storm cost amortization;
a $25 million increase in depreciation and amortization expense primarily due to nuclear regulatory asset amortization, as well asaccelerated depreciation of Crystal River Units 4 and 5 and additional plant in service.
Partially offset by:
a $24 million decrease in fuel expense primarily due to decreased purchased power and lower deferred fuel and capacity costs,service, partially offset by higher generation costs;decreased ARO depreciation due to the updated Crystal River Unit 3 nuclear decommissioning cost study; and
a $10$13 million decreaseincrease in operationsproperty and maintenance expense primarily due to lower planned outage costs.
Other Income and 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.
Interest Expense. The variance wasother taxes primarily due to higher debt outstanding and lower debt returns driven by the CR3 regulatory asset debt return ending in June 2016 upon securitization.revenue related taxes.
Income Tax Expense. The variance was primarily due to a decrease in pretax income.the lower statutory federal corporate tax rate under the Tax Act. The effective tax ratesETRs for the six months ended June 30, 2018, and 2017 were 17.4 percent and 2016 were 36.7 percent, respectively. The decrease in the ETR was primarily due to the lower statutory federal corporate tax rate under the Tax Act and 37.7 percent, respectively.levelization for annual amortization of federal excess deferred taxes. For additional information, see Note 17 to the Condensed Consolidated Financial Statements, "Income Taxes."
Matters Impacting Future Results
Duke Energy Florida is constructing the 1,640-MW combined-cycle natural gas plant in Citrus County, Florida, and expects it to be commercially available in 2018. Failure to complete the construction and achieve commercial operations by the end of 2018 or actual costs in excess of the estimated amount not collected from customers could materially impact Duke Energy Florida’s results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
On February 6, 2018, the FPSC approved a stipulation that would apply tax savings resulting from the Tax Act toward storm costs effective January 2018 in lieu of implementing a storm surcharge. On May 31, 2018, Duke Energy Florida filed for recovery of the storm costs. Storm costs are currently expected to be fully recovered by approximately mid-2021. The evidentiary hearing in this storm cost matter is scheduled for the week of October 15, 2018. An order disallowing recovery of these costs could have an adverse impact on Duke Energy Florida's results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy Registrants' Annual Reports on Form 10-K/A for the year ended December 31, 2017, for discussion of risks associated with the Tax Act.
DUKE ENERGY OHIO
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the six months ended June 30, 20172018, and 20162017 and the Annual Report on Form 10-K10-K/A for the year ended December 31, 2016.2017.
| | | | Six Months Ended June 30, | Six Months Ended June 30, |
| (in millions) | 2017 |
| | 2016 |
| | Variance |
| 2018 |
| | 2017 |
| | Variance |
|
| Operating Revenues | | | | | | | | | | |
| Regulated electric | $ | 665 |
| | $ | 663 |
| | $ | 2 |
| $ | 682 |
| | $ | 665 |
| | $ | 17 |
|
| Regulated natural gas | 270 |
| | 269 |
| | 1 |
| 277 |
| | 270 |
| | 7 |
|
| Nonregulated electric and other | 20 |
| | 12 |
| | 8 |
| 24 |
| | 20 |
| | 4 |
|
| Total operating revenues | 955 |
| | 944 |
| | 11 |
| 983 |
| | 955 |
| | 28 |
|
| Operating Expenses | | | | | | | | | | |
| Fuel used in electric generation and purchased power – regulated | 183 |
| | 211 |
| | (28 | ) | 185 |
| | 183 |
| | 2 |
|
| Fuel used in electric generation and purchased power – nonregulated | 29 |
| | 23 |
| | 6 |
| 29 |
| | 29 |
| | — |
|
| Cost of natural gas | 64 |
| | 58 |
| | 6 |
| 69 |
| | 64 |
| | 5 |
|
| Operation, maintenance and other | 261 |
| | 241 |
| | 20 |
| 261 |
| | 263 |
| | (2 | ) |
| Depreciation and amortization | 130 |
| | 125 |
| | 5 |
| 132 |
| | 130 |
| | 2 |
|
| Property and other taxes | 139 |
| | 136 |
| | 3 |
| 145 |
| | 139 |
| | 6 |
|
| Impairment Charges | 1 |
| | — |
| | 1 |
| |
| Impairment charges | | — |
| | 1 |
| | (1 | ) |
| Total operating expenses | 807 |
| | 794 |
| | 13 |
| 821 |
| | 809 |
| | 12 |
|
| Gains on Sales of Other Assets and Other, net | — |
| | 1 |
| | (1 | ) | |
| Loss on Sales of Other Assets and Other, net | | (106 | ) | | — |
| | (106 | ) |
| Operating Income | 148 |
| | 151 |
| | (3 | ) | 56 |
| | 146 |
| | (90 | ) |
| Other Income and Expenses | 8 |
| | 3 |
| | 5 |
| |
| Other Income and Expenses, net | | 14 |
| | 10 |
| | 4 |
|
| Interest Expense | 45 |
| | 41 |
| | 4 |
| 45 |
| | 45 |
| | — |
|
| Income from Continuing Operations Before Income Taxes | 111 |
| | 113 |
| | (2 | ) | |
| Income Tax Expense from Continuing Operations | 39 |
| | 33 |
| | 6 |
| |
| Income from Continuing Operations | 72 |
| | 80 |
| | (8 | ) | |
| Income from Discontinued Operations, net of tax | — |
| | 2 |
| | (2 | ) | |
| Income Before Income Taxes | | 25 |
| | 111 |
| | (86 | ) |
| Income Tax Expense | | 4 |
| | 39 |
| | (35 | ) |
| Net Income | $ | 72 |
| | $ | 82 |
| | $ | (10 | ) | $ | 21 |
| | $ | 72 |
| | $ | (51 | ) |
The following table shows the percent changes in GWh sales and average number of customers. The percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized. |
| | |
Increase (Decrease) over prior year | 2017 |
|
Residential sales | (0.9 | )% |
General service sales | (1.1 | )% |
Industrial sales | 0.1 | % |
Wholesale power sales | 178.4 | % |
Total sales | 0.5 | % |
Average number of customers | 0.8 | % |
|
| | | | |
| | Electric | Natural Gas |
| Increase (Decrease) over prior year | 2018 |
| 2018 |
|
| Residential sales | 14.5 | % | 32.0 | % |
| General service sales | 3.0 | % | 29.2 | % |
| Industrial sales | (1.6 | )% | 15.3 | % |
| Wholesale electric power sales | (70.9 | )% | n/a |
|
| Other natural gas sales | n/a |
| 2.7 | % |
| Total sales | 2.2 | % | 22.6 | % |
| Average number of customers | 0.9 | % | 0.9 | % |
Six Months Ended June 30, 20172018, as Compared to June 30, 20162017
Operating Revenues. Revenues. The variance was driven primarily by:
a $24$28 million increase in rider revenues primarily due to energy efficiency programselectric and a rate increase for the distribution capital investment rider, partially offset by a decrease in the percentage of income payment plan rider due to a rate decrease;
a $10 million increase in PJM Interconnection, LLC (PJM) transmission revenues;
a $7 million increase in other revenues related to OVEC; and
a $5 million increase in Bulk Power Marketing (BPM) sales.
Partially offset by:
a $24 million decrease in fuel revenues primarily due to lower electric fuel prices and sales volumes, partially offset by higher costs passed through to natural gas customers due to higher natural gas prices; and
a $13 million decrease in electric retail sales, net of fuel revenues, due to unfavorablefavorable weather in the current year.year; and
a $13 million increase in financial transmission rights revenues.
Partially offset by:
a $19 million decrease in regulated revenues due to revenues subject to refund to customers associated with the lower statutory federal corporate tax rate under the Tax Act; and
•a $5 million decrease in bulk power marketing sales.
Operating Expenses. The variance was driven primarily by:
•a $20$7 million increase in operations and maintenance expensefuel costs due to higher energy efficiency program costselectric fuel prices and higher transmissionnatural gas sales volumes; and distribution operations costs;
•a $6 million increase in natural gas costsproperty and other taxes primarily due to higher gas prices;property taxes due to higher plant balances.
Other Income and
a $5 million Expenses. The variance was driven primarily by an increase in depreciation and amortization expenseAFUDC equity due to additional planthigher base spending for transmission and fossil plants and an increase due to the impairment of meters in service.2017.
Partially offset by:
a $28 millionLoss on Sales of Other Assets and Other, net. The decrease in fuel expensewas driven by lower sales volumesthe loss on the sale of Beckjord, a nonregulated facility retired during 2014, including the transfer of coal ash basins and lower electric fuel costs.other real property and indemnification from any and all potential future claims related to the property, whether arising under environmental laws or otherwise.
Income Tax Expense. The variance was primarily due to a higher effectivedecrease in pretax income and the lower statutory federal corporate tax rate partially offset by lower pretax income.under the Tax Act. The effective tax ratesETRs for the six months ended June 30, 2018, and 2017 and 2016 were 35.116.0 percent and 29.235.1 percent, respectively. The increasedecrease in the effective tax rateETR was primarily due to the lower statutory federal corporate tax rate under the Tax Act and an immaterial out of period adjustmentincrease in the prior year related to deferred tax balances associated with property, plant and equipment.
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. SeeAFUDC equity. For additional information, see Note 417 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,"Income Taxes." 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.Matters Impacting Future Results
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 orOn March 31, 2018, FES, a subsidiary of FirstEnergy and an ICPA counterparty with a power participation ratio of 4.85 percent, filed for Chapter 11 bankruptcy, of one or more partieswhich could increase costs allocated to the ICPA could increasecounterparties. Duke Energy Ohio cannot predict the costsimpact of OVEC.the bankruptcy filing on its OVEC interests. In addition, certain proposed environmental rulemaking costs could result in future increased OVEC 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 requestsOn April 13, 2018, Duke Energy Ohio filed a Stipulation with the PUCO to continue certain current ridersresolve issues in the electric distribution base rate case and establish new ridersother regulatory matters. If approved by PUCO, the Stipulation would allow for Duke Energy Ohio to recover gains and losses incurred on and after January 1, 2018, related to LED Outdoor Lighting Service and regulatory mandates.OVEC, through the Price Stabilization Rider. Hearings will conclude on August 6, 2018. Duke Energy Ohio's earningsresults of operations, financial position and cash flows could be adversely impacted if the rate case and requested riders are delayed orStipulation is denied by the PUCO. See Note 43 to the Condensed Consolidated Financial Statements, "Regulatory“Regulatory Matters,"” for additional information.
On August 2, 2017,See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy Kentucky filed noticeRegistrants' Annual Reports on Form 10-K/A for the year ended December 31, 2017, for discussion of risks associated with the Kentucky Public Service Commission (KPSC) that it intends to file a general rate case for its electric business on or about September 1, 2017, to recover costs of capital investments in generation, transmission and distribution systems and to recover other incremental expenses since its last rate case filed in 2006. Duke Energy Kentucky’s earnings could be adversely impacted if the rate increase is delayed or denied by the KPSC.Tax Act.
DUKE ENERGY INDIANA
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the six months ended June 30, 20172018, and 20162017 and the Annual Report on Form 10-K10-K/A for the year ended December 31, 2016.2017.
| | | | Six Months Ended June 30, | Six Months Ended June 30, |
| (in millions) | 2017 |
| | 2016 |
| | Variance |
| 2018 |
| | 2017 |
| | Variance |
|
| Operating Revenues | $ | 1,500 |
| | $ | 1,416 |
| | $ | 84 |
| $ | 1,469 |
| | $ | 1,500 |
| | $ | (31 | ) |
| Operating Expenses | | | | | | | | | | |
| Fuel used in electric generation and purchased power | 485 |
| | 448 |
| | 37 |
| 458 |
| | 485 |
| | (27 | ) |
| Operation, maintenance and other | 366 |
| | 351 |
| | 15 |
| 378 |
| | 369 |
| | 9 |
|
| Depreciation and amortization | 216 |
| | 222 |
| | (6 | ) | 256 |
| | 216 |
| | 40 |
|
| Property and other taxes | 37 |
| | 45 |
| | (8 | ) | 40 |
| | 37 |
| | 3 |
|
| Total operating expenses | 1,104 |
| | 1,066 |
| | 38 |
| 1,132 |
| | 1,107 |
| | 25 |
|
| Operating Income | 396 |
| | 350 |
| | 46 |
| 337 |
| | 393 |
| | (56 | ) |
| Other Income and Expenses | 17 |
| | 10 |
| | 7 |
| |
| Other Income and Expenses, net | | 13 |
| | 20 |
| | (7 | ) |
| Interest Expense | 88 |
| | 91 |
| | (3 | ) | 83 |
| | 88 |
| | (5 | ) |
| Income Before Income Taxes | 325 |
| | 269 |
| | 56 |
| 267 |
| | 325 |
| | (58 | ) |
| Income Tax Expense | 128 |
| | 89 |
| | 39 |
| 69 |
| | 128 |
| | (59 | ) |
| Net Income | $ | 197 |
| | $ | 180 |
| | $ | 17 |
| $ | 198 |
| | $ | 197 |
| | $ | 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 | 20172018 |
|
| Residential sales | (2.515.8 | )% |
| General service sales | (0.32.2 | )% |
| Industrial sales | 0.2(0.6 | )% |
| Wholesale power sales | (29.01.0 | )% |
| Total sales | (7.83.7 | )% |
| Average number of customers | 0.91.1 | % |
Six Months Ended June 30, 20172018, as Compared to June 30, 20162017
Operating Revenues. The variance was driven primarily by:
a $56 million increasedecrease due to revenues subject to refund to customers associated with the lower statutory federal corporate tax rate under the Tax Act;
a $15 million decrease in riderwholesale power revenues, relatednet of fuel, primarily due to Edwardsport Integrated Gasification Combined Cycle (IGCC) and energy efficiency programs;contracts that expired in the prior year; and
a $34$12 million increasedecrease in fuel revenues primarily due to higherlower purchased power costs passed through to customers and higherlower financial transmission right (FTR)rights revenues.
Partially offset by:
a $32 million increase in rate rider revenues primarily related to the Edwardsport Integrated Gasification Combined Cycle (IGCC) plant and the Transmission, Distribution and Storage System Improvement Charge rider; and
a $22 million increase in electric sales to retail customers due to favorable weather in the current year.
Operating Expenses. The variance was driven primarily by:
a $37$40 million increase in fueldepreciation and purchased poweramortization primarily due to additional plant in service and the deferral of certain asset retirement obligations in the prior year; and
a $9 million increase in operation, maintenance and other expense primarily due to higher purchased power volumestransmission costs, grid improvement and prices; and
a $15 million increase in operations and maintenance expense due to growth in energy efficiency programs and higher expenses at Edwardsport IGCC.customer related costs.
Partially offset by:
an $8a $27 million decrease in propertyfuel used in electric generation and other taxespurchased power primarily due to utilization of ITCs.lower purchased power and fuel prices, partially offset by an increase in internal generation.
Other Income and Expenses.The increasevariance was driven primarily driven by higherlower AFUDC equity.equity in the current year.
Income Tax Expense. The variance was primarily due to an increase in pretax income.the lower statutory federal corporate tax rate under the Tax Act. The effective tax ratesETRs for the six months ended June 30, 2018, and 2017 and 2016 were 39.425.8 percent and 33.139.4 percent, respectively. The increasedecrease in the effective tax rateETR was primarily due to an immaterial out of period adjustment in the prior year relatedlower statutory federal corporate tax rate under the Tax Act. For additional information, see Note 17 to deferred tax balances associated with property, plant and equipment.the Condensed Consolidated Financial Statements, "Income Taxes."
Matters Impacting Future Results
On April 17, 2015, the EPA published in the Federal Register a rule to regulate the disposal of CCR from electric utilities as solid waste. Duke Energy Indiana has interpreted the rule to identify the coal ash basin sites impacted and has assessed the amounts of coal ash subject to the rule and a method of compliance. Duke Energy Indiana's interpretation of the requirements of the CCR rule is subject to potential legal challenges and further regulatory approvals, which could result in additional ash basin closure requirements, higher costs of compliance and greater AROs. Additionally, Duke Energy Indiana has retired facilities that are not subject to the CCR rule. Duke Energy Indiana may incur costs at these facilities to comply with environmental regulations or to mitigate risks associated with on-site storage of coal ash. An order from regulatory authorities disallowing recovery of costs related to closure of ash basins could have an adverse impact on Duke Energy Indiana's financial position, results of operations, financial position and cash flows. See Note 43 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
The Indiana Utility Regulatory Commission (IURC) approvedDuke Energy Indiana’s costs for the Edwardsport IGCC plant are recovered from retail electric customers via a settlement agreement betweenrider. 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. The settlement agreement imposed afiles cost cap for retail recoverable operations and maintenance costs through 2017. An inability to manage operating costs in accordanceupdates periodically with caps imposed pursuant to the agreement could have an adverse impact onIURC. Duke Energy Indiana's financial position, results of operations, financial position and cash flows.flows could be adversely impacted by actions of the IURC related to IGCC costs.
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy Registrants' Annual Reports on Form 10-K/A for the year ended December 31, 2017, for discussion of risks associated with the Tax Act.
PIEDMONT
Management’s Discussion and Analysis should be read in conjunction with the Condensed Consolidated Financial Statements and Notes for the six months ended June 30, 2018 and 2017 Piedmont'sand the Annual Report on Form 10-K10-K/A 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, 2016.2017.
| | | | Six Months Ended June 30, | Six Months Ended June 30, |
| (in millions) | 2017 |
| | 2016 |
| | Variance |
| 2018 |
| | 2017 |
| | Variance |
|
| Operating Revenues | | | | | | $ | 768 |
| | $ | 701 |
| | $ | 67 |
|
| Regulated natural gas | $ | 696 |
| | $ | 660 |
| | $ | 36 |
| |
| Nonregulated natural gas and other | 5 |
| | 5 |
| | — |
| |
| Total operating revenues | 701 |
| | 665 |
| | 36 |
| |
| Operating Expenses | | | | | | | | | | |
| Cost of natural gas | 270 |
| | 247 |
| | 23 |
| 333 |
| | 270 |
| | 63 |
|
| Operation, maintenance and other | 153 |
| | 147 |
| | 6 |
| 167 |
| | 153 |
| | 14 |
|
| Depreciation and amortization | 71 |
| | 68 |
| | 3 |
| 78 |
| | 71 |
| | 7 |
|
| Property and other taxes | 25 |
| | 22 |
| | 3 |
| 24 |
| | 25 |
| | (1 | ) |
| Impairment charges | 7 |
| | — |
| | 7 |
| — |
| | 7 |
| | (7 | ) |
| Total operating expenses | 526 |
| | 484 |
| | 42 |
| 602 |
| | 526 |
| | 76 |
|
| Operating Income | 175 |
| | 181 |
| | (6 | ) | 166 |
| | 175 |
| | (9 | ) |
| Equity in Earnings of Unconsolidated Affiliates | 5 |
| | 23 |
| | (18 | ) | |
| Other Income and Expenses | | | | | | |
| Equity in earnings of unconsolidated affiliates | | 3 |
| | 5 |
| | (2 | ) |
| Other income and expenses, net | (1 | ) | | — |
| | (1 | ) | 6 |
| | (1 | ) | | 7 |
|
| Total other income and expenses | 4 |
| | 23 |
| | (19 | ) | 9 |
| | 4 |
| | 5 |
|
| Interest Expense | 39 |
| | 33 |
| | 6 |
| 41 |
| | 39 |
| | 2 |
|
| Income Before Income Taxes | 140 |
| | 171 |
| | (31 | ) | 134 |
| | 140 |
| | (6 | ) |
| Income Tax Expense | 53 |
| | 65 |
| | (12 | ) | 32 |
| | 53 |
| | (21 | ) |
| Net Income | $ | 87 |
| | $ | 106 |
| | $ | (19 | ) | $ | 102 |
| | $ | 87 |
| | $ | 15 |
|
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 | 20172018 |
|
| Residential deliveries | (21.940.2 | )% |
| Commercial deliveries | (17.231.0 | )% |
| Industrial deliveries | (5.04.3 | )% |
| Power generation deliveries | (13.118.8 | )% |
| For resale | (10.626.0 | )% |
| Total throughput deliveries | (13.019.6 | )% |
| Secondary market volumes | 2.5(10.2 | )% |
| Average number of customers | 1.61.8 | % |
Piedmont's throughput was 227,290,541 dekatherms and 261,343,238 dekatherms for the six months ended June 30, 2017 and 2016, respectively. Due to the margin decoupling mechanism in North Carolina and weather normalization adjustment (WNA) mechanisms in South Carolina and Tennessee, changes in throughput deliveries do not have a material impact on Piedmont's revenues or earnings. The margin decoupling mechanism adjusts for variations in residential and commercial use per customer, including those due to weather and conservation. The WNA mechanisms mostly offset the impact of weather on bills rendered, but do not ensure fullprecise recovery of approved margin during periods when winter weather is significantly warmer or colder than normal.
Six Months Ended June 30, 20172018, as Compared to June 30, 20162017
Operating Revenues. The variance was driven primarily by:
a $23$63 million increase due to higher natural gas costs passed through to customers primarily due to higher volumes sold and higher natural gas prices; and
a $13$31 million increase in revenuesprimarily due to residential and commercial customers,customer revenue, net of natural gas costs passed through to customers, primarilycustomer growth, IMR rate adjustments and new power generation customers.
Partially offset by:
a $27 million decrease due to Integrity Management Rider (IMR)revenues subject to refund to customers associated with the lower statutory federal corporate tax rate adjustments, customer growth and wholesale marketing revenue.under the Tax Act.
Operating Expenses. The variance was driven by:
a $23$63 million increase in costscost of natural gas primarily due to higher volumes sold and higher natural gas prices;
a $6$14 million increase in operationsoperation, maintenance and maintenance expenseother primarily due to higher severanceincreased natural gas operations, shared services, corporate governance and contract laborcosts to achieve merger expenses; and
a $7 million increase in depreciation and amortization due to additional plant in service.
Partially offset by:
a $7 million decrease due to an impairment of software resulting from planned accounting system and process integration in 2018.
Equity in Earnings of Unconsolidated Affiliates. The decrease was primarily due to equity earnings from the investment in SouthStar Energy Services, LLC (SouthStar)recorded 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 lower statutory federal corporate tax rate under the Tax Act. The effective tax ratesETRs for the six months ended June 30, 2018, and 2017 were 23.9 percent and 2016 were 37.9 percent, respectively. The decrease in the ETR was primarily due to the lower statutory federal corporate tax rate under the Tax Act. For additional information, see Note 17 to the Condensed Consolidated Financial Statements, "Income Taxes."
Matters Impacting Future Results
See "Item 7. Management's Discussion and 38.0 percent, respectively.Analysis of Financial Condition and Results of Operations," in the Duke Energy Registrants' Annual Reports on Form 10-K/A for the year ended December 31, 2017, for discussion of risks associated with the Tax Act.
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 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-K10-K/A for the year ended December 31, 2016,2017, for a summary and detailed discussion of projected primary sources and uses of cash for 20172018 to 2019.2020.
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 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.
Equity Issuance
Refer to Note 14 to the CondensedConsolidated Financial Statements, "Common Stock," for further information regarding Duke Energy's equity issuance.
CREDIT FACILITIES AND REGISTRATION STATEMENTS
Refer to Note 65 to the Condensed Consolidated Financial Statements, "Debt and Credit Facilities," for further information regarding Duke Energy's available credit facilities, including the Master Credit Facility.
Shelf Registration
In September 2016, Duke Energy filed a registration statement (Form S-3) with the U.S. Securities and Exchange Commission (SEC).Commission. Under this Form S-3, which is uncapped, the Duke Energy Registrants, excluding Progress Energy (Parent), may issue debt and other securities in the future at amounts, prices and with terms to be determined at the time of future offerings. The registration statement also allows for the issuance of common stock by Duke Energy.
In January 2017, Duke Energy amended its Form S-3 to add Piedmont as a registrant and included in the amendment a prospectus for Piedmont under which it may issue debt securities in the same manner as other Duke Energy Registrants.
DEBT MATURITIES
Refer to Note 65 to the Condensed Consolidated Financial Statements, "Debt and Credit Facilities," for further information regarding significant components of Current Maturities of Long-Term Debt on the Condensed Consolidated Balance Sheets.
CASH FLOWS FROM OPERATING ACTIVITIES
Cash flows from operations of Electric Utilities and Infrastructure and Gas Utilities and Infrastructure are primarily driven by sales of electricity and natural gas, respectively, and costs of operations. These cash flows from operations are relatively stable and comprise a substantial portion of Duke Energy’s operating cash flows. Weather conditions, working capital and commodity price fluctuations, and unanticipated expenses including unplanned plant outages, storms, legal costs and related settlements, and regulatory orders can affect the timing and level of cash flows from operations.
Duke Energy believes it has sufficient liquidity resources through the commercial paper markets, and ultimately the Master Credit and Revolving Facilities, to support these operations. Cash flows from operations are subject to a number of other factors, including but not limited to regulatory constraints, economic trends and market volatility (see “Item 1A. Risk Factors,” in the Duke Energy Registrants’ Annual Reports on Form 10-K10-K/A for the year ended December 31, 2017, for additional information).
Restrictive Debt Covenants
The Duke Energy Registrants’ debt and credit agreements contain various financial and other covenants. The Master Credit Facility contains a covenant requiring the debt-to-total capitalization ratio not to exceed 65 percent for all borrowers except Piedmont. The debt-to-total capitalization ratioPiedmont, and 70 percent for Piedmont is not to exceed 70 percent.Piedmont. Failure to meet those covenants beyond applicable grace periods could result in accelerated due dates and/or termination of the agreements.agreements or sublimits thereto. As of June 30, 2017,2018, each of the Duke Energy Registrants werewas in compliance with all covenants related to their debt agreements. In addition, some credit agreements may allow for acceleration of payments or termination of the agreements due to nonpayment or acceleration of other significant indebtedness of the borrower or some of its subsidiaries. None of the debt or credit agreements contain material adverse change clauses.
Credit Ratings
Credit ratings are intended to provide credit lenders a framework for 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 Moody’s Investors Service, Inc. (Moody’s) and, Standard & Poor’s Rating Services (S&P). In April 2017,and 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 various Duke Energy Corporation.Registrants.
In May 2017,On August 1, 2018, Moody’s changed their ratingrevised its ratings outlook for Duke Energy Corporation and Piedmont from negative to stable from negative and affirmedfor Duke Energy Corporation's credit ratings.Ohio from positive to stable. Moody’s also revised its ratings as follows: Progress Energy is upgraded from Baa2 to Baa1; Piedmont is downgraded from A2 to A3.
Cash Flow Information
The following table summarizes Duke Energy’s cash flows. | | | | | Six Months Ended | | Six Months Ended |
| | | June 30, | | June 30, |
| (in millions) | | 2017 |
| | 2016 |
| | 2018 |
| | 2017 |
|
| Cash flows provided by (used in): | | | | | | | | |
| Operating activities | | $ | 2,756 |
| | $ | 3,225 |
| | $ | 3,302 |
| | $ | 2,800 |
|
| Investing activities | | (4,324 | ) | | (3,608 | ) | | (4,645 | ) | | (4,344 | ) |
| Financing activities | | 1,474 |
| | 202 |
| | 1,265 |
| | 1,474 |
|
| Changes in cash and cash equivalents included in assets held for sale | | — |
| | 79 |
| |
| Net decrease in cash and cash equivalents | | (94 | ) | | (102 | ) | |
| Cash and cash equivalents at beginning of period | | 392 |
| | 383 |
| |
| Cash and cash equivalents at end of period | | $ | 298 |
| | $ | 281 |
| |
| Net decrease in cash, cash equivalents and restricted cash | | | (78 | ) | | (70 | ) |
| Cash, cash equivalents and restricted cash at beginning of period | | | 505 |
| | 541 |
|
| Cash, cash equivalents and restricted cash at end of period | | | $ | 427 |
| | $ | 471 |
|
OPERATING CASH FLOWS
The following table summarizes key components of Duke Energy’s operating cash flows. | | | | | Six Months Ended | | Six Months Ended |
| | | June 30, | | June 30, |
| (in millions) | | 2017 |
| | 2016 |
| | 2018 |
| | 2017 |
|
| Net income | | $ | 1,406 |
| | $ | 1,211 |
| | $ | 1,124 |
| | $ | 1,406 |
|
| Non-cash adjustments to net income | | 2,434 |
| | 2,231 |
| | 3,082 |
| | 2,434 |
|
| Contributions to qualified pension plans | | | (141 | ) | | — |
|
| Payments for asset retirement obligations | | (272 | ) | | (263 | ) | | (245 | ) | | (272 | ) |
| Payment for disposal of other assets | | | (105 | ) | | — |
|
| Working capital | | (812 | ) | | 46 |
| | (413 | ) | | (768 | ) |
| Net cash provided by operating activities | | $ | 2,756 |
| | $ | 3,225 |
| | $ | 3,302 |
| | $ | 2,800 |
|
The variance was primarily due to:
an $858 million decrease in cash flows from working capital due to the timing of the payment of accruals; increased taxes accrued resulting from an increased effective tax rate; warmer winter weather; and the absence of the International Disposal Group's operating cash flows.
Partially offset by:
a $398$366 million increase in net income after adjustment for non-cash adjustments,items primarily due to higher regulated electric revenues from increased pricing; lower operations and maintenance expense; and the additional Piedmont earnings contributionfavorable weather in the current year.period compared to the prior period and increased pricing; and
a $355 million decrease in cash outflows from working capital due primarily to timing of payment of accruals and tax refunds related to federal net operation loss carrybacks.
Partially offset by:
a $141 million increase in contributions to qualified pension plans; and
a $105 million payment for disposal of Beckjord.
INVESTING CASH FLOWS
The following table summarizes key components of Duke Energy’s investing cash flows. | | | | | Six Months Ended | | Six Months Ended |
| | | June 30, | | June 30, |
| (in millions) | | 2017 |
| | 2016 |
| | 2018 |
| | 2017 |
|
| Capital, investment and acquisition expenditures | | $ | (4,218 | ) | | $ | (3,529 | ) | | $ | (4,515 | ) | | $ | (4,218 | ) |
| Other investing items | | (106 | ) | | (79 | ) | | (130 | ) | | (126 | ) |
| Net cash used in investing activities | | $ | (4,324 | ) | | $ | (3,608 | ) | | $ | (4,645 | ) | | $ | (4,344 | ) |
The variance wasrelates primarily due to:
to a $689$297 million increase in capital investment and acquisition expenditures due to growthhigher overall investments in regulated generation, investments and natural gas infrastructure; partially offset by a reduction in Commercial Renewables capital expenditures.
and commercial renewables.
FINANCING CASH FLOWS
The following table summarizes key components of Duke Energy’s financing cash flows. | | | | | Six Months Ended | | Six Months Ended |
| | | June 30, | | June 30, |
| (in millions) | | 2017 |
| | 2016 |
| | 2018 |
| | 2017 |
|
| Issuances of long-term debt, net | | $ | 1,725 |
| | $ | 2,719 |
| | $ | 537 |
| | $ | 1,725 |
|
| Issuances of common stock | | | 820 |
| | — |
|
| Notes payable and commercial paper | | 981 |
| | (1,341 | ) | | 1,131 |
| | 981 |
|
| Dividends paid | | (1,200 | ) | | (1,140 | ) | | (1,199 | ) | | (1,200 | ) |
| Other financing items | | (32 | ) | | (36 | ) | | (24 | ) | | (32 | ) |
| Net cash provided by financing activities | | $ | 1,474 |
| | $ | 202 |
| | $ | 1,265 |
| | $ | 1,474 |
|
The variance was primarily due to:
a $2,322$1,188 million decrease in cash outflows for the net payments of notes payable and commercial paper primarily through the use of the proceeds from $1,294 million nuclear asset-recovery bonds issued at Duke Energy Florida in the prior year, further increased by the repayment of commercial paper at the end of 2016 with proceeds from the sale of the international business.
Partially offset by:
a $994 million decrease in issuances of long-term debt caused by the prior year $1,294 million nuclear asset-recovery bonds issued at Duke Energy Florida net of a $300 million increase in proceeds from net issuances of long-term debt primarily due to a prior year financing of $577 million in the Commercial Renewables segment and the timing of issuances and redemptions of long-term debt.
Partially offset by:
an $820 million increase in proceeds from the issuance of common stock.
Summary of Significant Debt Issuances
Refer to Note 65 to the Condensed Consolidated Financial Statements, "Debt and Credit Facilities," for further information regarding significant debt issuances.
OTHER MATTERS
Environmental Regulations
The Duke Energy Registrants are subject to federal, state and local regulations regarding air and water quality, hazardous and solid waste disposal and other environmental matters. These regulations can be changed from time to time and result in new obligations of the Duke Energy Registrants.
The following sections outline various proposed and recently enacted regulations that may impact the Duke Energy Registrants. Refer to Note 43 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for further information regarding potential plant retirements and regulatory filings related to the Duke Energy Registrants.
Coal Combustion Residuals
In April 2015, the EPA published a rule to regulate the disposal of CCR from electric utilities as solid waste. The federal regulation classifies CCR as nonhazardous waste and allows for beneficial use of CCR with some restrictions. The regulation applies to all new and existing landfills, new and existing surface impoundments receiving CCR and existing surface impoundments that are no longer receiving CCR but contain liquid located at stations currently generating electricity (regardless of fuel source). The rule establishes requirements regarding landfill design, structural integrity design and assessment criteria for surface impoundments, groundwater monitoring, protection and remedial procedures and other operational and reporting procedures to ensure the safe disposal and management of CCR. As a result of the EPA rule, Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Ohio and Duke Energy Indiana recorded additional ARO amounts during 2015. Various industry and environmental parties have appealed the EPA's CCR rule in the U.S. Court of Appeals for the District of Columbia (D.C. Circuit Court). On April 18, 2016, the EPA filed a motion with the federal court to settle five issues raised in litigation. On June 14, 2016, the court approved the motion with respect to all of those issues. Oral argument on the remaining issues has not been scheduled. Duke Energy does not expect a material impact from the settlement or that it will result in additional ARO adjustments. TheOn September 13, 2017, EPA responded to a petition by the Utility Solid Waste Activities Group filed a petition withthat the EPA seeking to have EPAagency would reconsider certain provisions of the final rule, extend remaining compliance deadlines and askasked the D.C. Circuit Court to holdsuspend the litigation. The D.C. Circuit Court denied EPA’s petition to suspend the litigation and oral argument was held on November 20, 2017. The court has not issued an order in abeyance.the matter. Duke Energy cannot predict the outcome of the litigation.
On March 15, 2018, EPA published proposed amendments to the federal CCR rule, including revisions that were required as part of a CCR litigation settlement, as well as changes that the agency considers warranted due to the passage of the Water Infrastructure Improvements for the Nation Act, which provides statutory authority for state and federal permit programs. On July 17, 2018, EPA issued a rule finalizing certain, but not all, elements included in the agency's March 15, 2018, proposal. The final rule revises certain closure deadlines and groundwater protection standards in the CCR rule. It does not change the primary requirements for groundwater monitoring, corrective action, inspections and maintenance, and closure, and thus does not materially affect Duke Energy’s coal ash basin closure plans or compliance obligations under the CCR rule.
In addition to the requirements of the federal CCR regulation, CCR landfills and surface impoundments will continue to be independently regulated by most states. Cost recovery for future expenditures will be pursued through the normal ratemaking process with federal and state utility commissions and via wholesale contracts, which permit recovery of necessary and prudently incurred costs associated with Duke Energy’s regulated operations. For more information, see Note 9, “Asset Retirement Obligations,” in Duke Energy’s Annual Report on Form 10-K10-K/A for the year ended December 31, 2016.
2017.
Coal Ash Management Act of 2014
Asset retirement obligations recorded on the Duke Energy Carolinas and Duke Energy Progress Condensed Consolidated Balance Sheets at June 30, 2017,2018, and December 31, 2016,2017, include the legal obligation for closure of coal ash basins and the disposal of related ash as a result of the Coal Ash Act, the EPA CCR rule and other agreements. On July 14, 2016, theThe Coal Ash Act was amended requiringrequires Duke Energy to undertake dam improvement projects and to provide access to a permanent alternative drinking water source to certain residents within a half milehalf-mile of coal ash basin compliance boundaries and to certain other potentially impacted residents. The legislation rankedrequires excavation of the Sutton, Riverbend and Dan River basins by August 1, 2019, and Asheville basins by August 1, 2022. Excavation at these sites may include a combination of transfer of coal ash to an engineered landfill or conversion for beneficial use. Basins at the H.F. Lee, Cape Fear and Weatherspoon stations as intermediate risk consistent with Duke Energy's previously announced plans to excavate those basins. These specific intermediate-risk basins require closure through excavation including a combination of transferring ash to an appropriate engineered landfill or conversion of the ash for beneficial use. Closure of these specific intermediate-risk basins issites are required to be completedclosed through excavation no later than August 1, 2028. Excavation at these sites can include conversion of the basin to a lined industrial landfill, transfer of ash to an engineered landfill or conversion for beneficial use. The remaining basins are required to be closed no later than December 31, 2024, through conversion to a lined industrial landfill, transfer to an engineered landfill or conversion for beneficial use, unless certain dam improvement projects and alternative drinking water source projects are completed by October 15, 2018. Upon satisfactory completion of these projects, the dam improvement projectsclosure deadline would be extended to December 31, 2029, and installationcould include closure through the combination of alternative drinking water sources by October 15, 2018, the legislation requires the NCDEQ to reclassify all remaining sites, excluding H.F. Lee, Cape Feara cap system and Weatherspoon, as low risk. In January 2017, NCDEQ issued preliminary approval of Duke Energy's plans for the alternative water sources.a groundwater monitoring system.
Additionally, the July 2016 legislationCoal Ash Act 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. Duke Energy selected the Buck, H.F. Lee and Cape Fear plants for these projects. Closure of basins at these sites with these beneficiation projects areis required to be completed no later than December 31, 2029. On October 5, 2016, Duke Energy announced Buck Steam Station as a first location for one of the beneficiation projects. On December 13, 2016, Duke Energy announced H.F. Lee as the second location. On June 30, 2017, Duke Energy announced the Cape Fear Plant as the third beneficiation location.
Provisions of theThe Coal Ash Act prohibitincludes a variance procedure for compliance deadlines and other issues surrounding the management of CCR and CCR surface impoundments and prohibits cost recovery in customer rates for unlawful discharge of ash impoundment waters occurring after January 1, 2014. The Coal Ash Act leaves the decision on cost recovery determinations related to closure of ash impoundments to the normal ratemaking processes before utility regulatory commissions. Consistent with the requirements of the Coal Ash Act, Duke Energy has submitted comprehensive site assessments and groundwater corrective plans to NCDEQ and will submit to NCDEQ site-specific coal ash impoundment closure plans in advance of closure. These plans and all associated permits must be approved by NCDEQ before closure work can begin.
For more information, see Note 9, “Asset Retirement Obligations,” in Duke Energy’s Annual Report on Form 10-K10-K/A for the year ended December 31, 2016.2017.
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 20222023 time frame. Petitions challenging the rule have been filed by several groups. It is unknown whenOral argument was held on September 14, 2017. On July 23, 2018, the courts will rule onU.S. Court of Appeals for the petitions. TheSecond Circuit announced their decision to uphold the 316(b) rule. Duke Energy Registrants cannot predictcontinues to work with the outcome of these matters.state environmental permitting agency to implement the rule.
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. AffectedAs originally written, affected facilities mustwere required to comply between 2018 and 2023, depending on the timing of new Clean Water Act (CWA) discharge 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-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.IGCC facilities (gasification wastewater). All challenges to the rule have beenwere consolidated in the Fifth Circuit Court of Appeals. On 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, 2017, however, on April 24,August 22, 2017, the Fifth Circuit Court of Appeals granted EPA's requestEPA’s Motion to stayGovern Further Proceedings, thereby severing and suspending the pending litigation on the ELG rule until August 12, 2017. By the end of the stay period, EPA intendsclaims related 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. On June 6, 2017, the EPA issued a proposed rule seeking comment on postponing the compliance deadlines for direct and indirect discharges of fly ash transport water,flue gas desulfurization wastewater, bottom ash transport water and gasification wastewater. Claims regarding gasification wastewater were stayed, pending the issuance of the variance to Duke Energy Indiana. Duke Energy Indiana’s federal court challenge to EPA’s Effluent Limitations Guidelines and Standards for the Steam Electric Power Generating Point Source Category remains in abeyance. After a long delay, EPA issued a variance for discharges at Edwardsport of wastewater associated with the gasification process. The variance will be incorporated by the state agency into a new wastewater discharge permit. Once the permit has issued and the time limit for a third-party challenge expires, Duke Energy Indiana will voluntarily dismiss the federal court challenge. The litigation will continue as to claims related to other waste streams.
Separate from the litigation, EPA finalized a rule on September 18, 2017, postponing the earliest applicability date for bottom ash transport water and flue gas desulfurization wastewater from 2018 to 2020 and retaining the end applicability date of 2023. Also, as part of the rule, EPA reiterated its intent to conduct a new rulemaking to review the effluent limitation guidelines for bottom ash transport water and flue gas mercury control wastewater and IGCC gasificationdesulfurization wastewater. EPA projects that a new rule on these two issues will be finalized by late 2020.
The Duke Energy Registrants cannot predict the outcome of these matters.
Estimated Cost and Impacts of Rulemakings
Duke Energy will incur capital expenditures to comply with the environmental regulations and rules discussed above. The following table provides five-year estimated costs, excluding AFUDC, of new control equipment that may need to be installed on existing power plants primarily to comply with the Coal Ash Act requirements for conversion to dry disposal of bottom ash and fly ash, CWA 316(b) and ELGs through December 31, 2021.2022. The table excludes ash basin closure costs recorded in Asset retirement obligations on the Condensed Consolidated Balance Sheets. For more information related to AROs, see Note 9, “Asset Retirement Obligations” in Duke Energy’s Annual Report on Form 10‑KK/A for the year ended December 31, 2016.2017. | | | (in millions) | Estimated Cost |
| Estimated Cost |
|
| Duke Energy | $ | 1,225 |
| $ | 910 |
|
| Duke Energy Carolinas | 530 |
| 420 |
|
| Progress Energy | 350 |
| 360 |
|
| Duke Energy Progress | 260 |
| 260 |
|
| Duke Energy Florida | 90 |
| 100 |
|
| Duke Energy Ohio | 125 |
| 70 |
|
| Duke Energy Indiana | 220 |
| 60 |
|
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, theSeptember 7, 2016, EPA proposedfinalized a rulerevision 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 finalizedrevised rule is known as the CSAPR Update Rule. The CSAPR Update Rule that reduces the CSAPR Phase 2 state ozone season NOX emission budgets for 22 eastern states, including Ohio, Kentucky and Indiana. In the final CSAPR Update Rule, the EPA removed Florida, South Carolina and North Carolina from the ozone season NOx program. Beginning in 2017, Duke Energy Registrants in these states will not be subject to any CSAPR ozone season NOx emission limitations. For the states that remain in the program, the reduced state ozone season NOx emission budgets took effect on May 1, 2017. In Kentucky and Indiana, where Duke Energy Registrants own and operate coal-fired electric generating units (EGUs) subject to the final rule requirements, 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. The Indiana Utility Group and the Indiana Energy Association jointly filed a petition for reconsideration asking that the EPA correct errors it made in calculating the Indiana budget and increase the budget accordingly. EPA has yet to act on the petition. Numerous parties have filed petitions with the D.C. Circuit Court challenging various aspects of the CSAPR Update Rule. BriefingFinal briefs in the case were due April 9, 2018. Oral argument is scheduled to begin on August 21, 2017. The date for oral argument has not been established.October 3, 2018. The Duke Energy Registrants cannot predict the outcome of these matters.
Carbon Pollution Standards for New, Modified and Reconstructed Power Plants
On October 23, 2015, the EPA published a final rule in the Federal Register establishing carbon dioxide (CO2) emissions limits for new, modified and reconstructed power plants. The requirements for new plants apply to plants that commenced construction after January 8, 2014. The EPA set an emissions standard for coal units of 1,400 pounds of CO2 per gross MWh, which would require the application of partial carbon capture and storage (CCS) technology for a coal unit to be able to meet the limit. Utility-scale CCS is not currently a demonstrated and commercially available technology for coal-fired EGUs, and therefore the final standard effectively prevents the development of new coal-fired generation. The EPA set a final standard of 1,000 pounds of CO2 per gross MWh for new natural gas combined-cycle units.
On March 28, 2017, President Trump signed an Executive Orderexecutive order directing EPA to review the rule and determine whether to suspend, revise or rescind it. On the same day, the Department of Justice (DOJ) filed a motion with the D.C. Circuit Court requesting that the court stay the litigation of the rule while it is reviewed by EPA. Subsequent to the DOJ motion, the D.C. Circuit Court canceled oral argument in the case, which had been scheduled for April 17, 2017.case. On April 28,August 10, 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 court has yet to issue an order.indefinitely. The rule remains in effect pending the outcome of litigation and EPA’s review. EPA has not announced a schedule for completing its review. On July 24, 2018, EPA reported to the court that it plans to send a proposed revised rule to the Office of Management and Budget (OMB) for review in August. The Duke Energy Registrants cannot predict the outcome of these matters but do not expect the impacts of the current final standards will be material to Duke Energy's financial position, results of operations or cash flows.
Clean Power Plan
On October 23, 2015, the EPA published in the Federal Register the final Clean Power Plan (CPP) rule that regulatesto regulate CO2 emissions from existing fossil fuel-fired EGUs. The CPP established CO2 emission rates and mass cap goals that apply to existing fossil fuel-fired EGUs. Petitions challenging the rule have beenwere filed by severalnumerous groups and on February 9, 2016, the Supreme Court issued a stay of the final CPP rule, halting implementation of the CPP until legal challenges are resolved. States in which the Duke Energy Registrants operate have suspended work on the CPP in response to the stay. Oral arguments before 10 of the 11 judges on the D.C. Circuit Court were heard on September 27, 2016. The court has not issued its opinion in the case.
On March 28, 2017, President Trump signed an Executive Orderexecutive order directing EPA to review the CPP and determine whether to suspend, revise or rescind the rule. On the same day, the DOJ filed a motion with the D.C. Circuit Court requesting that the court stay the litigation of the rule while it is reviewed by EPA. On April 28, 2017, the court issued an order to suspend the litigation for 60 days and directing partiesdays. On August 8, 2017, the court, on its own motion, extended the suspension of the litigation for an additional 60 days. On October 16, 2017, EPA issued a Notice of Proposed Rulemaking (NPR) to file supplemental briefs by May 15,repeal the CPP based on a change to EPA’s legal interpretation of the section of the Clean Air Act on which the CPP was based. The comment period on EPA's NPR ended April 26, 2018. On December 28, 2017, addressing whetherEPA issued an Advance Notice of Proposed Rulemaking (ANPRM) in which it sought public comment on various aspects of a potential CPP replacement rule. The comment period on the ANPRM ended February 26, 2018. On July 9, 2018, EPA sent a proposed CPP replacement rule should be remanded to the OMB for review; after that review is completed, EPA rather than be suspended. The court has yet towill issue an order. Neither the Executive Order nor the court's order change the current statusits proposal for public comment. Litigation of the CPP which is under a legalremains on hold byin the D.C. Circuit Court and the February 2016 U.S. Supreme Court. The EPA has not announced a schedule for completing its review.Court stay of the CPP remains in effect. The Duke Energy Registrants cannot predict the outcome of these matters.
Section 126 Petitions
On November 16, 2016, the state of Maryland filed a petition with EPA under Section 126 of the Clean Air Act alleging that 19 power plants, including two that Duke Energy Registrants own and operate, contribute to violations of EPA’s National Ambient Air Quality Standards (NAAQS) for ozone in the state of Maryland. On March 12, 2018, the state of New York filed a petition with EPA, also under Section 126 of the Clean Air Act alleging that over 60 power plants, including four that Duke Energy Registrants own and operate, contribute to violations of EPA’s ozone NAAQS in the state of New York. Both Maryland and New York seek EPA orders requiring the states in which the named power plants operate impose more stringent nitrogen oxide (NOx) emission limitations on the plants. On June 8, 2018, EPA proposed to deny the Maryland petition. EPA is under court order to take final action on the Maryland petition by September 15, 2018. The impact of these petitions could be more stringent requirements for the operation of NOx emission controls at these plants. The Duke Energy Registrants cannot predict the outcome of these matters.
Global Climate Change
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-K10-K/A for the year ended December 31, 2016.2017.
North Carolina Legislation
In July 2017, theFor other information on North Carolina General Assembly passed House Bill 589legislation and it was subsequently enacted into law by the Governor.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/A for the year ended December 31, 2017.
Liquefied Natural Gas Facility
Piedmont Natural Gas plans to build a liquefied natural gas facility in Robeson County, North Carolina. The law includes, among other things, overall reform of the application of the Public Utility Regulatory Policies Act of 1978 (PURPA) for new solar projectsproject is expected to be completed in the state,summer of 2021 at a requirement forcost of $250 million. Construction will begin in the utility to procure approximately 2,600 MWsummer of renewable energy through a competitive bidding process and recovery of costs related to the competitive bidding process through the fuel clause and a competitive procurement rider. Duke Energy is evaluating the impact of this law.2019.
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-K10-K/A for the year ended December 31, 2016.2017.
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 six months ended June 30, 2017,2018, there were no material changes to Duke Energy’s off-balance sheet arrangements. See Note 12 to the Condensed Consolidated Financial Statements, "Variable Interest Entities," for a discussion of off-balance sheet arrangements regarding ACP. For additional information on Duke Energy’s off-balance sheet arrangements, see “Off-Balance Sheet Arrangements” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Duke Energy’s Annual Report on Form 10-K10-K/A for the year ended December 31, 2016.2017.
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 six months ended June 30, 2017,2018, there were no material changes in Duke Energy’sEnergy'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-K10-K/A for the year ended December 31, 2016.2017.
Subsequent Events
See Note 1718 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 six months ended June 30, 2017,2018, there were no material changes to the Duke Energy Registrants' disclosures about market risk. For an in-depth discussion of the Duke Energy Registrants' market risks, see “Quantitative and Qualitative Disclosures about Market Risk” in Item 7 of the Annual Report on Form 10-K10-K/A for the 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 SECU.S. Securities and Exchange Commission 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 June 30, 2017,2018, 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 June 30, 2017,2018, 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, see Note 4,3, "Regulatory Matters," and Note 5,4, "Commitments and Contingencies," to the Condensed Consolidated Financial Statements. For additional information, see Item 3, "Legal Proceedings,"
Methyl tertiary butyl ether (MTBE) Litigation
On June 19, 2014, the Commonwealth of Pennsylvania filed suit against, among others, Duke Energy Merchants, alleging contamination of waters of the state by MTBE from leaking gasoline storage tanks. MTBE is a gasoline additive intended to increase the oxygen level in gasoline and make it burn cleaner. The lawsuit was moved to federal court and consolidated into an existing multidistrict litigation docket of pending MTBE cases. This suit was settled for an immaterial amount in December 2017 and dismissed in January 2018.
In December 2017, the state of Maryland filed a lawsuit in Baltimore City Circuit Court against Duke Energy’s Annual Report on Form 10-K forEnergy Merchants and other defendants alleging contamination of its water supplies from MTBE. Duke Energy cannot predict the year ended December 31, 2016.outcome of this matter.
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this report, careful consideration should be given to the factors discussed in Part I, “Item 1A. Risk Factors” in the Duke Energy Registrants' Annual Report on Form 10-K,10-K/A, which could materially affect the Duke Energy Registrants’ financial condition or future results.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
ISSUERPURCHASES OF EQUITY SECURITIES
There were no issuer purchases of equity securities during the second quarter of 2017.None.
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 (***). |
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| | | | | | Duke | | | | Duke | | Duke | | Duke | | Duke | | |
| Exhibit | | Duke | | Energy | | Progress | | Energy | | Energy | | Energy | | Energy | | |
| Number | | Energy | | Carolinas | | Energy | | Progress | | Florida | | Ohio | | Indiana | | Piedmont |
| *4.1 | Sixteenth | X | | | | | | | | | | | | | | |
10.1 | $1,000,000,000 Credit Agreement, dated as of June 14, 2017, among Duke Energy Corporation, the lenders listed therein, The Bank of Nova Scotia, as Administrative Agent, PNC Bank, National Association, Sumitomo Mitsui Banking Corporation and TD Bank, N.A., as Co-Syndication Agents, and Bank of China, New York Branch, BNP Paribas, Santander Bank, N.A. and U.S. Bank National Association, as Co-Documentation Agents (incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed on June 14, 2017, File No. 1-32853).May 16, 2018. | X | | | | | | | | | | | | | | |
10.24.2 | $250,000,000 Term Loan Credit Agreement,Fifty-Fifth Supplemental Indenture, dated as of June 14, 2017, among Piedmont Natural Gas Company, Inc., the lenders listed therein, U.S. Bank National Association, as Administrative Agent, Branch Banking and Trust Company and Regions Bank, as Co-Syndication Agents, and PNC Bank, National Association, as Documentation Agent (incorporated1, 2018, (incorporated by reference to Exhibit 10.14.1 to Registrant's Current Report on Form 8-K filed on June 14, 2017,21, 2018, File No. 1-32853)1-3274). | | | | | |
| | | | | | | | | X |
*10.3 | Duke Energy Corporation Director Compensation Program Summary | X | | | | | | | | | | | | | | |
| *12 | | X | | | | | | | | | | | | | | |
| *31.1.1 | | X | | | | | | | | | | | | | | |
| *31.1.2 | | | | X | | | | | | | | | | | | |
| *31.1.3 | | | | | | X | | | | | | | | | | |
| *31.1.4 | | | | | | | | X | | | | | | | | |
| *31.1.5 | | | | | | | | | | X | | | | | | |
| *31.1.6 | | | | | | | | | | | | X | | | | |
| *31.1.7 | | | | | | | | | | | | | | X | | |
| *31.1.8 | | | | | | | | | | | | | | | | X |
| *31.2.1 | | X | | | | | | | | | | | | | | |
| *31.2.2 | | | | X | | | | | | | | | | | | |
| *31.2.3 | | | | | | X | | | | | | | | | | |
| *31.2.4 | | | | | | | | X | | | | | | | | |
| *31.2.5 | | | | | | | | | | X | | | | | | |
| *31.2.6 | | | | | | | | | | | | X | | | | |
| *31.2.7 | | | | | | | | | | | | | | X | | |
| *31.2.8 | | | | | | | | | | | | | | | | 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 | | | | | | | | | | |
*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 | | X | | | | | | | | | | | | | | |
| *32.1.2 | | | | X | | | | | | | | | | | | |
| *32.1.3 | | | | | | X | | | | | | | | | | |
| *32.1.4 | | | | | | | | X | | | | | | | | |
| *32.1.5 | | | | | | | | | | X | | | | | | |
| *32.1.6 | | | | | | | | | | | | X | | | | |
| *32.1.7 | | | | | | | | | | | | | | X | | |
| *32.1.8 | | | | | | | | | | | | | | | | X |
| *32.2.1 | | X | | | | | | | | | | | | | | |
| *32.2.2 | | | | X | | | | | | | | | | | | |
| *32.2.3 | | | | | | X | | | | | | | | | | |
| *32.2.4 | | | | | | | | X | | | | | | | | |
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| | | | | | | | | | | | | | | | | |
| *32.2.5 | | | | | | | | | | X | | | | | | |
| *32.2.6 | | | | | | | | | | | | X | | | | |
| *32.2.7 | | | | | | | | | | | | | | X | | |
| *32.2.8 | | | | | | | | | | | | | | | | X |
| *101.INS | XBRL Instance Document. | X | | X | | X | | X | | X | | X | | X | | X |
| *101.SCH | XBRL Taxonomy Extension Schema Document. | X | | X | | X | | X | | X | | X | | X | | X |
| *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 |
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| *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: | August 3, 20172, 2018 | /s/ STEVEN K. YOUNG |
| | | Steven K. Young
Executive Vice President and Chief Financial Officer (Principal Financial Officer)
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| Date: | August 3, 20172, 2018 | /s/ WILLIAM E. CURRENS JR.DWIGHT L. JACOBS |
| | | William E. Currens Jr.Dwight L. Jacobs
Senior Vice President, Chief Accounting Officer
and Controller
(Principal Accounting Officer) |
