0001326160 duk:ProgressEnergyMember duk:ClosureofAshBasinsMember 2019-06-30 0001326160 duk:ResidentialMember us-gaap:NaturalGasUsRegulatedMember duk:GasUtilitiesandInfrastructureMember 2019-04-01 2019-06-30
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, 20182019
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
_________________________________to_________
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| Commission file number | Registrant, State of Incorporation or Organization, Address of Principal Executive Offices and Telephone Number | IRS Employer Identification No.Number |
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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 |
1-32853DUKE ENERGY CORPORATION20-2777218 (a Delaware corporation)
550 South Tryon Street
Charlotte, North Carolina28202-1803
704-382-3853
Registrant, State of Incorporation Registrant, State of Incorporation
or Organization, Address of or Organization, Address of
Principal Executive Offices, Telephone Principal Executive Offices, Telephone
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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 |
| |
| file number | Identification Number file number Identification Number |
1-4928DUKE ENERGY CAROLINAS, LLC1-3274DUKE ENERGY FLORIDA, LLC
(a North Carolina limited liability company) (a Florida limited liability company)
526 South Church Street299 First Avenue North
Charlotte, North Carolina28202-1803St. Petersburg, Florida33701
704-382-3853704-382-3853
56-020552059-0247770
1-15929PROGRESS ENERGY, INC.1-1232DUKE ENERGY OHIO, INC.
(a North Carolina corporation) (an Ohio corporation)
410 South Wilmington Street139 East Fourth Street
Raleigh, North Carolina27601-1748Cincinnati, Ohio45202
704-382-3853704-382-3853
56-215548131-0240030
1-3382DUKE ENERGY PROGRESS, LLC1-3543DUKE ENERGY INDIANA, LLC
(a North Carolina limited liability company) (an Indiana limited liability company)
410 South Wilmington Street1000 East Main Street
Raleigh, North Carolina27601-1748Plainfield, Indiana46168
704-382-3853704-382-3853
56-016546535-0594457
1-6196PIEDMONT NATURAL GAS COMPANY, INC.
(a North Carolina corporation)
4720 Piedmont Row Drive
Charlotte, North Carolina28210
704-364-3120
56-0556998
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of each exchange on
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
|
1-15929Registrant | PROGRESS ENERGY, INC.
(a North Carolina corporation)
410 South Wilmington Street
Raleigh, North Carolina 27601-1748
704-382-3853
56-2155481Title of each classTrading symbolswhich registered
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| 1-1232 | DUKE ENERGY OHIO, INC.
(an Ohio corporation)
139 East Fourth Street
Cincinnati, Ohio 45202
704-382-3853
31-0240030
|
1-3382Duke Energy | DUKE ENERGY PROGRESS,Common Stock, $0.001 par valueDUKNew York Stock Exchange 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
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1-6196Duke Energy | PIEDMONT NATURAL GAS COMPANY, INC.5.125% Junior Subordinated Debentures due DUKHNew York Stock Exchange LLC
(a North Carolina corporation)
4720 Piedmont Row Drive
Charlotte, North Carolina 28210
704-364-3120
56-0556998
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January 15, 2073
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| Duke Energy | 5.625% Junior Subordinated Debentures due DUKBNew York Stock Exchange LLC |
September 15, 2078
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| Duke Energy | Depositary Shares, each representing a 1/1,000th DUK PR ANew York Stock Exchange LLC |
interest in a share of 5.75% Series A Cumulative
Redeemable Perpetual Preferred Stock, par value
$0.001 per share
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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| Duke Energy Corporation (Duke Energy) | Yesx | ☒ | No¨ | ☐ | | 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).
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| 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.
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| Duke Energy | Large accelerated filerx | ☒ | Accelerated filer¨ | ☐ | Non-accelerated filer¨ | ☐ | Smaller reporting company¨ | ☐ | Emerging Growth Company ¨growth company | ☐ |
| Duke Energy Carolinas | Large accelerated filer¨ | ☐ | Accelerated filer¨ | ☐ | Non-accelerated filerx | ☒ | Smaller reporting company¨ | ☐ | Emerging Growth Company ¨growth company | ☐ |
| Progress Energy | Large accelerated filer¨ | ☐ | Accelerated filer¨ | ☐ | Non-accelerated filerx | ☒ | Smaller reporting company¨ | ☐ | Emerging Growth Company ¨growth company | ☐ |
| Duke Energy Progress | Large accelerated filer¨ | ☐ | Accelerated filer¨ | ☐ | Non-accelerated filerx | ☒ | Smaller reporting company¨ | ☐ | Emerging Growth Company ¨growth company | ☐ |
| Duke Energy Florida | Large accelerated filer¨ | ☐ | Accelerated filer¨ | ☐ | Non-accelerated filerx | ☒ | Smaller reporting company¨ | ☐ | Emerging Growth Company ¨growth company | ☐ |
| Duke Energy Ohio | Large accelerated filer¨ | ☐ | Accelerated filer¨ | ☐ | Non-accelerated filerx | ☒ | Smaller reporting company¨ | ☐ | Emerging Growth Company ¨growth company | ☐ |
| Duke Energy Indiana | Large accelerated filer¨ | ☐ | Accelerated filer¨ | ☐ | Non-accelerated filerx | ☒ | Smaller reporting company¨ | ☐ | Emerging Growth Company ¨growth company | ☐ |
| Piedmont | Large accelerated filer¨ | ☐ | Accelerated filer¨ | ☐ | Non-accelerated filerx | ☒ | Smaller reporting company¨ | ☐ | Emerging Growth Company ¨growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
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| Duke Energy | Yes¨ | ☐ | Nox | ☒ | | 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, 2018:2019:
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| Registrant | Description | Shares |
| Duke Energy | Common stock, $0.001 par value | 712,354,724728,601,060 |
This combined Form 10-Q is filed separately by eight registrants: Duke Energy, Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont (collectively the Duke Energy Registrants). Information contained herein relating to any individual registrant is filed by such registrant solely on its own behalf. Each registrant makes no representation as to information relating exclusively to the other registrants.
Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont meet the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and are therefore filing this form with the reduced disclosure format specified in General Instructions H(2) of Form 10-Q.
TABLE OF CONTENTS
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| PART I. FINANCIAL INFORMATION |
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| | Piedmont Natural Gas Company, Inc. Financial Statements | |
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| | Note 1 – Organization and Basis of Presentation | |
| | Note 2 – Business Segments | |
| | Note 3 – Regulatory Matters | |
| | Note 4 – Commitments and Contingencies | |
| | Note 5 – Debt and Credit Facilities | |
| Note 6 – Asset Retirement ObligationsLeases | |
| | Note 6 – Debt and Credit Facilities | |
| Note 7 – GoodwillAsset Retirement Obligations | |
| | Note 8 – Related Party TransactionsGoodwill | |
| | Note 9 – Derivatives and Hedging | |
| Note 10 – Investments in Debt and Equity SecuritiesRelated Party Transactions | |
| | Note 10 – Derivatives and Hedging | |
| Note 11 – Fair Value MeasurementsInvestments in Debt and Equity Securities | |
| | Note 12 – Variable Interest EntitiesFair Value Measurements | |
| | Note 13 – RevenueVariable Interest Entities | |
| | Note 14 – Common StockRevenue | |
| | Note 15 – Stock-Based CompensationStockholders' Equity | |
| | 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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| FORWARD LOOKING STATEMENTS | |
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This document includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are based on management’s beliefs and assumptions and can often be identified by terms and phrases that include “anticipate,” “believe,” “intend,” “estimate,” “expect,” “continue,” “should,” “could,” “may,” “plan,” “project,” “predict,” “will,” “potential,” “forecast,” “target,” “guidance,” “outlook” or other similar terminology. Various factors may cause actual results to be materially different than the suggested outcomes within forward-looking statements; accordingly, there is no assurance that such results will be realized. These factors include, but are not limited to:
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 obtain the necessary permits and approvals and 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, operational accidents, information technology failures or other catastrophic events, such as fires, explosions, pandemic health events or other similar occurrences;
The inherent risks associated with the operation of nuclear facilities, including environmental, health, safety, regulatory and financial risks, including the financial stability of third-party service providers;
The timing and extent of changes in commodity prices and interest rates and the ability to recover such costs through the regulatory process, where appropriate, and their impact on liquidity positions and the value of underlying assets;
The results of financing efforts, including the ability to obtain financing on favorable terms, which can be affected by various factors, including credit ratings, interest rate fluctuations, compliance with debt covenants and conditions and general market and economic conditions;
Credit ratings of the Duke Energy Registrants may be different from what is expected;
Declines in the market prices of equity and fixed-income securities and resultant cash funding requirements for defined benefit pension plans, other post-retirement benefit plans and nuclear decommissioning trust funds;
Construction and development risks associated with the completion of the Duke Energy Registrants’ capital investment projects, including risks related to financing, obtaining and complying with terms of permits, meeting construction budgets and schedules and satisfying operating and environmental performance standards, as well as the ability to recover costs from customers in a timely manner, or at all;
Changes in rules for regional transmission organizations, including changes in rate designs and new and evolving capacity markets, and risks related to obligations created by the default of other participants;
The ability to control operation and maintenance costs;
The level of creditworthiness of counterparties to transactions;
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);
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◦FORWARD LOOKING STATEMENTS | State, federal and foreign legislative and regulatory initiatives, including costs of compliance with existing and future environmental requirements, including those related to climate change, as well as rulings that affect cost and investment recovery or have an impact on rate structures or market prices; |
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◦ | The extent and timing of costs and liabilities to comply with federal and state laws, regulations and legal requirements related to coal ash remediation, including amounts for required closure of certain ash impoundments, are uncertain and difficult to estimate; |
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◦ | The ability to recover eligible costs, including amounts associated with coal ash impoundment retirement obligations and costs related to significant weather events, and to earn an adequate return on investment through rate case proceedings and the regulatory process; |
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◦ | The costs of decommissioning Crystal River Unit 3 and other nuclear facilities could prove to be more extensive than amounts estimated and all costs may not be fully recoverable through the regulatory process; |
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◦ | Costs and effects of legal and administrative proceedings, settlements, investigations and claims; |
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◦ | Industrial, commercial and residential growth or decline in service territories or customer bases resulting from sustained downturns of the economy and the economic health of our service territories or variations in customer usage patterns, including energy efficiency efforts and use of alternative energy sources, such as self-generation and distributed generation technologies; |
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◦ | Federal and state regulations, laws and other efforts designed to promote and expand the use of energy efficiency measures and distributed generation technologies, such as private solar and battery storage, in Duke Energy service territories could result in customers leaving the electric distribution system, excess generation resources as well as stranded costs; |
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◦ | Advancements in technology; |
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◦ | Additional competition in electric and natural gas markets and continued industry consolidation; |
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◦ | The influence of weather and other natural phenomena on operations, including the economic, operational and other effects of severe storms, hurricanes, droughts, earthquakes and tornadoes, including extreme weather associated with climate change; |
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◦ | The ability to successfully operate electric generating facilities and deliver electricity to customers including direct or indirect effects to the company resulting from an incident that affects the U.S. electric grid or generating resources; |
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◦ | The ability to complete necessary or desirable pipeline expansion or infrastructure projects in our natural gas business; |
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◦ | Operational interruptions to our natural gas distribution and transmission activities; |
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◦ | The availability of adequate interstate pipeline transportation capacity and natural gas supply; |
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◦ | The impact on facilities and business from a terrorist attack, cybersecurity threats, data security breaches and other catastrophic events, such as fires, explosions, pandemic health events or other similar occurrences; |
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◦ | The inherent risks associated with the operation of nuclear facilities, including environmental, health, safety, regulatory and financial risks, including the financial stability of third-party service providers; |
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◦ | The timing and extent of changes in commodity prices and interest rates and the ability to recover such costs through the regulatory process, where appropriate, and their impact on liquidity positions and the value of underlying assets; |
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◦ | The results of financing efforts, including the ability to obtain financing on favorable terms, which can be affected by various factors, including credit ratings, interest rate fluctuations, compliance with debt covenants and conditions and general market and economic conditions; |
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◦ | Credit ratings of the Duke Energy Registrants may be different from what is expected; |
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◦ | Declines in the market prices of equity and fixed-income securities and resultant cash funding requirements for defined benefit pension plans, other post-retirement benefit plans and nuclear decommissioning trust funds; |
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◦ | Construction and development risks associated with the completion of the Duke Energy Registrants’ capital investment projects, including risks related to financing, obtaining and complying with terms of permits, meeting construction budgets and schedules and satisfying operating and environmental performance standards, as well as the ability to recover costs from customers in a timely manner, or at all; |
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◦ | Changes in rules for regional transmission organizations, including changes in rate designs and new and evolving capacity markets, and risks related to obligations created by the default of other participants; |
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◦ | The ability to control operation and maintenance costs; |
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◦ | The level of creditworthiness of counterparties to transactions; |
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◦ | Employee workforce factors, including the potential inability to attract and retain key personnel; |
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◦ | The ability of subsidiaries to pay dividends or distributions to Duke Energy Corporation holding company (the Parent); |
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◦ | The performance of projects undertaken by our nonregulated businesses and the success of efforts to invest in and develop new opportunities; |
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◦ | The effect of accounting pronouncements issued periodically by accounting standard-setting bodies; |
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◦ | The impact of new U.S. tax legislation to our financial condition, results of operations or cash flows and our credit ratings; |
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◦ | The impacts from potential impairments of goodwill or equity method investment carrying values; and |
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◦ | The ability to implement our business strategy. |
The performance of projects undertaken by our nonregulated businesses and the success of efforts to invest in and develop new opportunities;
The effect of accounting pronouncements issued periodically by accounting standard-setting bodies;
The impact of U.S. tax legislation to our financial condition, results of operations or cash flows and our credit ratings;
The impacts from potential impairments of goodwill or equity method investment carrying values; and
The ability to implement our business strategy, including enhancing existing technology systems.
Additional risks and uncertainties are identified and discussed in the Duke Energy Registrants' reports filed with the SEC and available at the SEC's website at 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
Glossary of Terms
The following terms or acronyms used in this Form 10-Q are defined below:
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| Term or Acronym | Definition |
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| 2013 Settlement | Revised and Restated Stipulation and Settlement Agreement approved in November 2013 among Duke Energy Florida, the Florida OPC and other customer advocates |
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| 2017 Settlement | Second Revised and Restated Settlement Agreement in 2017 among Duke Energy Florida, the Florida OPC and other customer advocates, which replaces and supplants the 2013 Settlement |
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| ACP | Atlantic Coast Pipeline, LLC, a limited liability company owned by Dominion, Duke Energy and Southern Company Gas |
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| ACP pipeline | The approximately 600-mile proposed interstate natural gas pipeline |
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| AFS | Available for Sale |
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| AFUDC | Allowance for funds used during construction |
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| the Agents | Wells Fargo Securities, LLC, Citigroup Global Market Inc., J.P. Morgan Securities, LLC |
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| ALJ | Administrative Law Judge |
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| AMI | Advanced Metering Infrastructure |
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| AMT | Alternative Minimum Tax |
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| AOCI | Accumulated Other Comprehensive Income (Loss) |
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| ARO | Asset retirement obligations |
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| ATM | At-the-market |
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| Beckjord | Beckjord Generating Station |
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| Belews Creek | Belews Creek Steam Station |
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| Bison | Bison Insurance Company Limited |
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| Cardinal | Cardinal Pipeline Company, LLC |
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| CC | Combined Cycle |
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| CCR | Coal Combustion Residuals |
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| Citrus County CC | Citrus County Combined Cycle Facility |
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| Coal Ash Act | North Carolina Coal Ash Management Act of 2014 |
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| the Company | Duke Energy Corporation and its subsidiaries |
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| Constitution | Constitution Pipeline Company, LLC |
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| CPCN | Certificate of Public Convenience and Necessity |
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| CPRE | Competitive Procurement of Renewable Energy |
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| CRC | Cinergy Receivables Company LLC |
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| Crystal River Unit 3 | Crystal River Unit 3 Nuclear Plant |
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| CWA | Clean Water Act |
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| D.C. Circuit Court | U.S. Court of Appeals for the District of Columbia Circuit |
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| DEFPF | Duke Energy Florida Project Finance, LLC |
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| DEFR | Duke Energy Florida Receivables, LLC |
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| DEPR | Duke Energy Progress Receivables, LLC |
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| DERF | Duke Energy Receivables Finance Company, LLC |
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| DRIP | Dividend Reinvestment Program |
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| Duke Energy | Duke Energy Corporation (collectively with its subsidiaries) |
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| Duke Energy Ohio | Duke Energy Ohio, Inc. |
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| Duke Energy Progress | Duke Energy Progress, LLC |
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| Duke Energy Carolinas | Duke Energy Carolinas, LLC |
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| Duke Energy Florida | Duke Energy Florida, LLC |
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| Duke Energy Indiana | Duke Energy Indiana, LLC |
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| Duke Energy Kentucky | Duke Energy Kentucky, Inc. |
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| Duke Energy Registrants | Duke Energy, Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont |
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| the EDA | Equity Distribution Agreement |
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| EDIT | Excess deferred income tax |
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| EPA | U.S. Environmental Protection Agency |
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| EPC | Engineering, Procurement and Construction agreement |
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| EPS | Earnings Per Share |
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| ESP | Electric Security Plan |
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| ETR | Effective tax rate |
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| Exchange Act | Securities Exchange Act of 1934 |
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| FASB | Financial Accounting Standards Board |
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| FERC | Federal Energy Regulatory Commission |
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| FES | FirstEnergy Solutions Corp. |
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| Fitch | Fitch Ratings, Inc. |
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| Fluor | Fluor Enterprises, Inc. |
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| FPSC | Florida Public Service Commission |
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| FTR | Financial transmission rights |
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| FV-NI | Fair value through net income |
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| GAAP | Generally accepted accounting principles in the U.S. |
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| GAAP Reported Earnings | Net Income Attributable to Duke Energy Corporation |
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| GAAP Reported EPS | Diluted EPS Attributable to Duke Energy Corporation common stockholders |
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| GWh | Gigawatt-hours |
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| Hardy Storage | Hardy Storage Company, LLC |
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| HLBV | Hypothetical Liquidation at Book Value |
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| ICPA | Inter-Company Power Agreement |
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| IGCC | Integrated Gasification Combined Cycle |
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| IMR | Integrity Management Rider |
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| IRP | Integrated Resource Plan |
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| IRS | Internal Revenue Service |
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| Investment Trusts | NDTF investments and grantor trusts of Duke Energy Progress, Duke Energy Florida and Duke Energy Indiana |
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| IURC | Indiana Utility Regulatory Commission |
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| JDA | Joint Dispatch Agreement |
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| KPSC | Kentucky Public Service Commission |
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| Lee Nuclear Station | William States Lee III Nuclear Station |
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| MGP | Manufactured gas plant |
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| MISO | Midcontinent Independent System Operator, Inc. |
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| MMBtu | Million British Thermal Unit |
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| Moody's | Moody's Investors Service, Inc. |
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| MW | Megawatt |
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| MWh | Megawatt-hour |
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| NAV | Net asset value |
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| NCDEQ | North Carolina Department of Environmental Quality (formerly the North Carolina Department of Environment and Natural Resources) |
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| NCUC | North Carolina Utilities Commission |
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| NDTF | Nuclear decommissioning trust funds |
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| NMC | National Methanol Company |
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| NPDES | National Pollutant Discharge Elimination System |
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| NPNS | Normal purchase/normal sale |
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| NRC | U.S. Nuclear Regulatory Commission |
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| OPEB | Other Post-Retirement Benefit Obligations |
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| ORS | South Carolina Office of Regulatory Staff |
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| OTTI | Other-than-temporary impairment |
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| OVEC | Ohio Valley Electric Corporation |
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| Piedmont | Piedmont Natural Gas Company, Inc. |
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| Piedmont Term Loan | Term loan facility with commitments totaling $350M entered in June 2017 |
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| Pine Needle | Pine Needle LNG Company, LLC |
| |
| Pioneer | Pioneer Transmission, LLC |
| |
| PJM | PJM Interconnection, LLC |
| |
| PMPA | Piedmont Municipal Power Agency |
| |
| PPAs | Purchase Power Agreements |
| |
| Progress Energy | Progress Energy, Inc. |
| |
| PSCSC | Public Service Commission of South Carolina |
| |
| PUCO | Public Utilities Commission of Ohio |
| |
| REC | Renewable Energy Certificate |
| |
| REC Solar | REC Solar Corp. |
| |
| ROU assets | Right-of-use assets |
| |
| RRBA | Roanoke River Basin Association |
| |
| SELC | Southern Environmental Law Center |
| |
| S&P | Standard & Poor's Rating Services |
| |
| Subsidiary Registrants | Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont |
| |
| the Tax Act | Tax Cuts and Jobs Act |
| |
| TPUC | Tennessee Public Utility Commission |
| |
| U.S. | United States |
| |
| VIE | Variable Interest Entity |
| |
| WACC | Weighted Average Cost of Capital |
| |
| WNA | Weather normalization adjustment |
| |
| W.S. Lee CC | William States Lee Combined Cycle Facility |
| |
ITEM 1. FINANCIAL STATEMENTS
DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
| | | | Three Months Ended | | Six Months Ended | Three Months Ended | | Six Months Ended |
| | June 30, | | June 30, | June 30, | | June 30, |
| (in millions, except per-share amounts) | 2018 |
| | 2017 |
| | 2018 |
| | 2017 |
| 2019 |
| | 2018 |
| | 2019 |
| | 2018 |
|
| Operating Revenues | | | | | | | | | | | | | | |
| Regulated electric | $ | 5,178 |
| | $ | 5,118 |
| | $ | 10,462 |
| | $ | 10,031 |
| $ | 5,423 |
| | $ | 5,178 |
| | $ | 10,708 |
| | $ | 10,462 |
|
| Regulated natural gas | 291 |
| | 275 |
| | 991 |
| | 921 |
| 280 |
| | 291 |
| | 1,008 |
| | 991 |
|
| Nonregulated electric and other | 174 |
| | 162 |
| | 325 |
| | 332 |
| 170 |
| | 174 |
| | 320 |
| | 325 |
|
| Total operating revenues | 5,643 |
| | 5,555 |
| | 11,778 |
| | 11,284 |
| 5,873 |
| | 5,643 |
| | 12,036 |
| | 11,778 |
|
| Operating Expenses | | | | |
| |
| | | | |
| |
|
| Fuel used in electric generation and purchased power | 1,574 |
| | 1,541 |
| | 3,250 |
| | 2,990 |
| 1,641 |
| | 1,574 |
| | 3,250 |
| | 3,250 |
|
| Cost of natural gas | 89 |
| | 76 |
| | 402 |
| | 334 |
| 76 |
| | 89 |
| | 403 |
| | 402 |
|
| Operation, maintenance and other | 1,544 |
| | 1,441 |
| | 3,008 |
| | 2,909 |
| 1,434 |
| | 1,544 |
| | 2,853 |
| | 3,008 |
|
| Depreciation and amortization | 973 |
| | 835 |
| | 1,940 |
| | 1,694 |
| 1,089 |
| | 973 |
| | 2,178 |
| | 1,940 |
|
| Property and other taxes | 315 |
| | 307 |
| | 631 |
| | 611 |
| 334 |
| | 315 |
| | 677 |
| | 631 |
|
| Impairment charges | 172 |
| | 9 |
| | 215 |
| | 9 |
| 4 |
| | 172 |
| | 4 |
| | 215 |
|
| Total operating expenses | 4,667 |
| | 4,209 |
| | 9,446 |
| | 8,547 |
| 4,578 |
| | 4,667 |
| | 9,365 |
| | 9,446 |
|
| Gains (Losses) on Sales of Other Assets and Other, net | 3 |
| | 7 |
| | (97 | ) | | 18 |
| 3 |
| | 3 |
| | — |
| | (97 | ) |
| Operating Income | 979 |
| | 1,353 |
| | 2,235 |
| | 2,755 |
| 1,298 |
| | 979 |
| | 2,671 |
| | 2,235 |
|
| Other Income and Expenses | | | | |
|
| |
|
| | | | |
|
| |
|
|
| Equity in earnings of unconsolidated affiliates | 36 |
| | 36 |
| | 12 |
| | 65 |
| 44 |
| | 36 |
| | 87 |
| | 12 |
|
| Other income and expenses, net | 110 |
| | 115 |
| | 196 |
| | 236 |
| 89 |
| | 110 |
| | 204 |
| | 196 |
|
| Total other income and expenses | 146 |
| | 151 |
| | 208 |
| | 301 |
| 133 |
| | 146 |
| | 291 |
| | 208 |
|
| Interest Expense | 518 |
| | 486 |
| | 1,033 |
| | 977 |
| 542 |
| | 518 |
| | 1,085 |
| | 1,033 |
|
| Income From Continuing Operations Before Income Taxes | 607 |
| | 1,018 |
| | 1,410 |
| | 2,079 |
| 889 |
| | 607 |
| | 1,877 |
| | 1,410 |
|
| Income Tax Expense From Continuing Operations | 100 |
| | 327 |
| | 281 |
| | 671 |
| 141 |
| | 100 |
| | 236 |
| | 281 |
|
| Income From Continuing Operations | 507 |
| | 691 |
| | 1,129 |
| | 1,408 |
| 748 |
| | 507 |
| | 1,641 |
| | 1,129 |
|
| Loss From Discontinued Operations, net of tax | (5 | ) | | (2 | ) | | (5 | ) | | (2 | ) | — |
| | (5 | ) | | — |
| | (5 | ) |
| Net Income | 502 |
| | 689 |
| | 1,124 |
| | 1,406 |
| 748 |
| | 502 |
| | 1,641 |
| | 1,124 |
|
| Less: Net Income Attributable to Noncontrolling Interests | 2 |
| | 3 |
| | 4 |
| | 4 |
| |
| Less: Net (Loss) Income Attributable to Noncontrolling Interests | | (84 | ) | | 2 |
| | (91 | ) | | 4 |
|
| Less: Preferred Dividends | | 12 |
| | — |
| | 12 |
| | — |
|
| Net Income Attributable to Duke Energy Corporation | $ | 500 |
| | $ | 686 |
| | $ | 1,120 |
| | $ | 1,402 |
| $ | 820 |
| | $ | 500 |
| | $ | 1,720 |
| | $ | 1,120 |
|
| | | | | | | | | | | | | | | |
| 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 |
| |
| Basic and Diluted | | $ | 1.12 |
| | $ | 0.72 |
| | $ | 2.36 |
| | $ | 1.60 |
|
| Loss from discontinued operations attributable to Duke Energy Corporation common stockholders | | | | | | | | | | | | | | |
| Basic | $ | (0.01 | ) | | $ | — |
| | $ | (0.01 | ) | | $ | — |
| |
| Diluted | $ | (0.01 | ) | | $ | — |
| | $ | (0.01 | ) | | $ | — |
| |
| Basic and 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 |
| |
| Basic and Diluted | | $ | 1.12 |
| | $ | 0.71 |
| | $ | 2.36 |
| | $ | 1.59 |
|
| Weighted average shares outstanding | | | | | | | | | | | | | | |
| Basic | 703 |
| | 700 |
| | 702 |
| | 700 |
| 728 |
| | 703 |
| | 728 |
| | 702 |
|
| Diluted | 704 |
| | 700 |
| | 702 |
| | 700 |
| 728 |
| | 704 |
| | 728 |
| | 702 |
|
See Notes to Condensed Consolidated Financial Statements
9
DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
|
| | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended |
| | June 30, | | June 30, |
| (in millions) | 2019 |
| | 2018 |
| | 2019 |
| | 2018 |
|
| Net Income | $ | 748 |
| | $ | 502 |
| | $ | 1,641 |
| | $ | 1,124 |
|
| Other Comprehensive (Loss) Income, net of tax | | | | | | | |
| Pension and OPEB adjustments | 3 |
| | 1 |
| | 3 |
| | 2 |
|
| Net unrealized (losses) gains on cash flow hedges | (29 | ) | | 1 |
| | (46 | ) | | 13 |
|
| Reclassification into earnings from cash flow hedges | 2 |
| | (2 | ) | | 3 |
| | (1 | ) |
| Unrealized gains (losses) on available-for-sale securities | 4 |
| | (2 | ) | | 8 |
| | (5 | ) |
| Other Comprehensive (Loss) Income, net of tax | (20 | ) | | (2 | ) | | (32 | ) | | 9 |
|
| Comprehensive Income | 728 |
| | 500 |
| | 1,609 |
| | 1,133 |
|
| Less: Comprehensive (Loss) Income Attributable to Noncontrolling Interests | (84 | ) | | 2 |
| | (91 | ) | | 4 |
|
| Less: Preferred Dividends | 12 |
| | — |
| | 12 |
| | — |
|
| Comprehensive Income Attributable to Duke Energy Corporation | $ | 800 |
| | $ | 498 |
| | $ | 1,688 |
| | $ | 1,129 |
|
See Notes to Condensed Consolidated Financial Statements
10
|
| | | | | | | | | | | | | | | |
| | 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 | June 30, 2019 | | December 31, 2018 |
| ASSETS | | | | | | |
| Current Assets | | | | | | |
| Cash and cash equivalents | $ | 304 |
| | $ | 358 |
| $ | 336 |
| | $ | 442 |
|
| 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 |
| |
| Receivables (net of allowance for doubtful accounts of $16 at 2019 and 2018) | | 646 |
| | 962 |
|
| Receivables of VIEs (net of allowance for doubtful accounts of $55 at 2019 and 2018) | | 2,153 |
| | 2,172 |
|
| Inventory | 3,177 |
| | 3,250 |
| 3,189 |
| | 3,084 |
|
| Regulatory assets (includes $51 at 2018 and 2017 related to VIEs) | 1,741 |
| | 1,437 |
| |
| Other | 437 |
| | 634 |
| |
| Regulatory assets (includes $52 at 2019 and 2018 related to VIEs) | | 1,918 |
| | 2,005 |
|
| Other (includes $140 at 2019 and $162 at 2018 related to VIEs) | | 1,267 |
| | 1,049 |
|
| Total current assets | 8,476 |
| | 8,453 |
| 9,509 |
| | 9,714 |
|
| Property, Plant and Equipment | | | | | | |
| Cost | 130,616 |
| | 127,507 |
| 141,363 |
| | 134,458 |
|
| Accumulated depreciation and amortization | (42,499 | ) | | (41,537 | ) | (44,482 | ) | | (43,126 | ) |
| Generation facilities to be retired, net | 378 |
| | 421 |
| 317 |
| | 362 |
|
| Net property, plant and equipment | 88,495 |
| | 86,391 |
| 97,198 |
| | 91,694 |
|
| Other Noncurrent Assets | | | | | | |
| Goodwill | 19,396 |
| | 19,396 |
| 19,303 |
| | 19,303 |
|
| Regulatory assets (includes $1,071 at 2018 and $1,091 at 2017 related to VIEs) | 12,505 |
| | 12,442 |
| |
| Regulatory assets (includes $1,019 at 2019 and $1,041 at 2018 related to VIEs) | | 13,393 |
| | 13,617 |
|
| Nuclear decommissioning trust funds | 7,132 |
| | 7,097 |
| 7,621 |
| | 6,720 |
|
| Operating lease right-of-use assets, net | | 1,735 |
| | — |
|
| Investments in equity method unconsolidated affiliates | 1,168 |
| | 1,175 |
| 1,715 |
| | 1,409 |
|
| Other | 3,087 |
| | 2,960 |
| |
| Other (includes $289 at 2019 and $261 at 2018 related to VIEs) | | 2,975 |
| | 2,935 |
|
| Total other noncurrent assets | 43,288 |
| | 43,070 |
| 46,742 |
| | 43,984 |
|
| Total Assets | $ | 140,259 |
| | $ | 137,914 |
| $ | 153,449 |
| | $ | 145,392 |
|
| LIABILITIES AND EQUITY | | | | | | |
| Current Liabilities | | | | | | |
| Accounts payable | $ | 2,686 |
| | $ | 3,043 |
| $ | 2,512 |
| | $ | 3,487 |
|
| Notes payable and commercial paper | 3,329 |
| | 2,163 |
| 3,793 |
| | 3,410 |
|
| Taxes accrued | 494 |
| | 551 |
| 521 |
| | 577 |
|
| Interest accrued | 530 |
| | 525 |
| 564 |
| | 559 |
|
| Current maturities of long-term debt (includes $229 at 2018 and $225 at 2017 related to VIEs) | 2,852 |
| | 3,244 |
| |
| Current maturities of long-term debt (includes $232 at 2019 and $227 at 2018 related to VIEs) | | 2,698 |
| | 3,406 |
|
| Asset retirement obligations | 716 |
| | 689 |
| 739 |
| | 919 |
|
| Regulatory liabilities | 485 |
| | 402 |
| 600 |
| | 598 |
|
| Other | 1,699 |
| | 1,865 |
| 2,020 |
| | 2,085 |
|
| Total current liabilities | 12,791 |
| | 12,482 |
| 13,447 |
| | 15,041 |
|
| Long-Term Debt (includes $4,179 at 2018 and $4,306 at 2017 related to VIEs) | 49,863 |
| | 49,035 |
| |
| Long-Term Debt (includes $4,070 at 2019 and $3,998 at 2018 related to VIEs) | | 54,342 |
| | 51,123 |
|
| Other Noncurrent Liabilities | | | | | | |
| Deferred income taxes | 6,977 |
| | 6,621 |
| 8,532 |
| | 7,806 |
|
| Asset retirement obligations | 9,753 |
| | 9,486 |
| 11,889 |
| | 9,548 |
|
| Regulatory liabilities | 15,355 |
| | 15,330 |
| 15,294 |
| | 14,834 |
|
| Operating lease liabilities | | 1,502 |
| | — |
|
| Accrued pension and other post-retirement benefit costs | 1,014 |
| | 1,103 |
| 959 |
| | 988 |
|
| Investment tax credits | 534 |
| | 539 |
| 569 |
| | 568 |
|
| Other | 1,457 |
| | 1,581 |
| |
| Other (includes $222 at 2019 and $212 at 2018 related to VIEs) | | 1,583 |
| | 1,650 |
|
| Total other noncurrent liabilities | 35,090 |
| | 34,660 |
| 40,328 |
| | 35,394 |
|
| 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 |
| |
| Preferred stock, $0.001 par value, 40 million depositary shares authorized and outstanding at 2019 | | 973 |
| | — |
|
| Common stock, $0.001 par value, 2 billion shares authorized; 728 million shares outstanding at 2019 and 727 million shares outstanding at 2018 | | 1 |
| | 1 |
|
| Additional paid-in capital | 39,682 |
| | 38,792 |
| 40,885 |
| | 40,795 |
|
| Retained earnings | 2,894 |
| | 3,013 |
| 3,502 |
| | 3,113 |
|
| Accumulated other comprehensive loss | (70 | ) | | (67 | ) | (148 | ) | | (92 | ) |
| Total Duke Energy Corporation stockholders' equity | 42,507 |
| | 41,739 |
| 45,213 |
| | 43,817 |
|
| Noncontrolling interests | 8 |
| | (2 | ) | 119 |
| | 17 |
|
| Total equity | 42,515 |
| | 41,737 |
| 45,332 |
| | 43,834 |
|
| Total Liabilities and Equity | $ | 140,259 |
| | $ | 137,914 |
| $ | 153,449 |
| | $ | 145,392 |
|
See Notes to Condensed Consolidated Financial Statements
11
DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | | Six Months Ended | Six Months Ended |
| | June 30, | June 30, |
| (in millions) | 2018 |
| | 2017 |
| 2019 |
| | 2018 |
|
| CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | |
| Net income | $ | 1,124 |
| | $ | 1,406 |
| $ | 1,641 |
| | $ | 1,124 |
|
| 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 |
| 2,483 |
| | 2,250 |
|
| Equity component of AFUDC | (106 | ) | | (125 | ) | (67 | ) | | (106 | ) |
| Losses (gains) on sales of other assets | 97 |
| | (20 | ) | |
| Losses on sales of other assets | | — |
| | 97 |
|
| Impairment charges | 215 |
| | 9 |
| 4 |
| | 215 |
|
| Deferred income taxes | 289 |
| | 669 |
| 527 |
| | 289 |
|
| Equity in earnings of unconsolidated affiliates | (12 | ) | | (65 | ) | (87 | ) | | (12 | ) |
| Accrued pension and other post-retirement benefit costs | 31 |
| | 13 |
| 4 |
| | 31 |
|
| Contributions to qualified pension plans | (141 | ) | | — |
| — |
| | (141 | ) |
| Payments for asset retirement obligations | (245 | ) | | (272 | ) | (336 | ) | | (245 | ) |
| Payment for disposal of other assets | (105 | ) | | — |
| — |
| | (105 | ) |
| Other rate case adjustments | 37 |
| | — |
| — |
| | 37 |
|
| Provision for rate refunds | 281 |
| | — |
| 57 |
| | 281 |
|
| (Increase) decrease in | | | | | | |
| Net realized and unrealized mark-to-market and hedging transactions | 7 |
| | (12 | ) | (11 | ) | | 7 |
|
| Receivables | (27 | ) | | 293 |
| 304 |
| | (27 | ) |
| Inventory | 70 |
| | 153 |
| (110 | ) | | 70 |
|
| Other current assets | 21 |
| | (168 | ) | (265 | ) | | 21 |
|
| Increase (decrease) in | | | | | | |
| Accounts payable | (142 | ) | | (505 | ) | (700 | ) | | (142 | ) |
| Taxes accrued | (58 | ) | | 41 |
| (56 | ) | | (58 | ) |
| Other current liabilities | (214 | ) | | (531 | ) | (378 | ) | | (214 | ) |
| Other assets | (112 | ) | | (37 | ) | 7 |
| | (112 | ) |
| Other liabilities | 42 |
| | (2 | ) | 39 |
| | 42 |
|
| Net cash provided by operating activities | 3,302 |
| | 2,800 |
| 3,056 |
| | 3,302 |
|
| CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | |
| Capital expenditures | (4,375 | ) | | (3,931 | ) | (5,465 | ) | | (4,375 | ) |
| Contributions to equity method investments | (140 | ) | | (287 | ) | (162 | ) | | (140 | ) |
| Purchases of debt and equity securities | (1,908 | ) | | (2,412 | ) | (2,316 | ) | | (1,908 | ) |
| Proceeds from sales and maturities of debt and equity securities | 1,866 |
| | 2,439 |
| 2,302 |
| | 1,866 |
|
| Other | (88 | ) | | (153 | ) | (147 | ) | | (88 | ) |
| Net cash used in investing activities | (4,645 | ) | | (4,344 | ) | (5,788 | ) | | (4,645 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | |
| Proceeds from the: | | | | | | |
| Issuance of long-term debt | 2,727 |
| | 2,734 |
| 4,622 |
| | 2,727 |
|
| Issuance of preferred stock | | 973 |
| | — |
|
| Issuance of common stock | 820 |
| | — |
| 27 |
| | 820 |
|
| Payments for the redemption of long-term debt | (2,190 | ) | | (1,009 | ) | (2,155 | ) | | (2,190 | ) |
| Proceeds from the issuance of short-term debt with original maturities greater than 90 days | 201 |
| | 230 |
| 240 |
| | 201 |
|
| Payments for the redemption of short-term debt with original maturities greater than 90 days | (160 | ) | | (32 | ) | (299 | ) | | (160 | ) |
| Notes payable and commercial paper | 1,090 |
| | 783 |
| 383 |
| | 1,090 |
|
| Dividends paid | (1,199 | ) | | (1,200 | ) | (1,312 | ) | | (1,199 | ) |
| Other | (24 | ) | | (32 | ) | 143 |
| | (24 | ) |
| Net cash provided by financing activities | 1,265 |
| | 1,474 |
| 2,622 |
| | 1,265 |
|
| Net decrease in cash, cash equivalents and restricted cash | (78 | ) | | (70 | ) | (110 | ) | | (78 | ) |
| Cash, cash equivalents and restricted cash at beginning of period | 505 |
| | 541 |
| 591 |
| | 505 |
|
| Cash, cash equivalents and restricted cash at end of period | $ | 427 |
| | $ | 471 |
| $ | 481 |
| | $ | 427 |
|
| Supplemental Disclosures: | | | | | | |
| Significant non-cash transactions: | | | | | | |
| Accrued capital expenditures | $ | 978 |
| | $ | 589 |
| $ | 917 |
| | $ | 978 |
|
| Non-cash dividends | 52 |
| | — |
| 54 |
| | 52 |
|
See Notes to Condensed Consolidated Financial Statements
12
DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
| | | | Three Months Ended June 30, 2018 and 2019 |
| | | | | | | | | | | | | | | | | | | | | | | | Accumulated Other Comprehensive | |
| | | | | | | | | | Accumulated Other Comprehensive Income (Loss) | | | | | | | | | | (Loss) Income | |
| | | | | | | | | | | | Net Unrealized |
| | | | Total |
| | | | | | | | Net Unrealized |
| | Total |
| |
| | | | | | | | | | Net Gains |
| | (Losses) Gains |
| | | | Duke Energy |
| | | | | | | | Net Gains |
| (Losses) Gains |
| | Duke Energy |
| |
| | Common |
| | | | Additional |
| | | | (Losses) on |
| | on Available- |
| | Pension and |
| | Corporation |
| | | | | | Common |
| | Additional |
| | (Losses) on |
| on Available- |
| Pension and |
| Corporation |
| |
| | Stock |
| | Common |
| | Paid-in |
| | Retained |
| | Cash Flow |
| | for-Sale- |
| | OPEB |
| | Stockholders' |
| | Noncontrolling |
| | Total |
| Preferred |
| 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 |
| Stock |
| 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 |
| |
| Balance at March 31, 2018 | | $ | — |
| 701 |
| $ | 1 |
| $ | 38,839 |
| $ | 3,021 |
| $ | 3 |
| $ | (4 | ) | $ | (68 | ) | $ | 41,792 |
| $ | 6 |
| $ | 41,798 |
|
| Net income | — |
| | — |
| | — |
| | 1,402 |
| | — |
| | — |
| | — |
| | 1,402 |
| | 4 |
| | 1,406 |
| — |
| — |
| — |
| — |
| 500 |
| — |
| — |
| — |
| 500 |
| 2 |
| 502 |
|
| Other comprehensive income | — |
| | — |
| | — |
| | — |
| | 1 |
| | 8 |
| | 2 |
| | 11 |
| | — |
| | 11 |
| |
| Other comprehensive (loss) income | | — |
| — |
| — |
| — |
| — |
| (1 | ) | (2 | ) | 1 |
| (2 | ) | — |
| (2 | ) |
| Common stock issuances, including dividend reinvestment and employee benefits | — |
| | — |
| | 17 |
| | — |
| | — |
| | — |
| | — |
| | 17 |
| | — |
| | 17 |
| — |
| 11 |
| — |
| 843 |
| — |
| — |
| — |
| — |
| 843 |
| — |
| 843 |
|
| Common stock dividends | — |
| | — |
| | — |
| | (1,200 | ) | | — |
| | — |
| | — |
| | (1,200 | ) | | — |
| | (1,200 | ) | — |
| — |
| — |
| — |
| (626 | ) | — |
| — |
| — |
| (626 | ) | — |
| (626 | ) |
| 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 |
| |
| Other | | — |
| — |
| — |
| — |
| (1 | ) | — |
| 1 |
| — |
| — |
| — |
| — |
|
| Balance at June 30, 2018 | | $ | — |
| 712 |
| $ | 1 |
| $ | 39,682 |
| $ | 2,894 |
| $ | 2 |
| $ | (5 | ) | $ | (67 | ) | $ | 42,507 |
| $ | 8 |
| $ | 42,515 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| 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 |
| |
| Balance at March 31, 2019 | | $ | 974 |
| 728 |
| $ | 1 |
| $ | 40,823 |
| $ | 3,360 |
| $ | (36 | ) | $ | — |
| $ | (92 | ) | $ | 45,030 |
| $ | 15 |
| $ | 45,045 |
|
| Net income (loss) | | — |
| — |
| — |
| — |
| 820 |
| — |
| — |
| — |
| 820 |
| (84 | ) | 736 |
|
| Other comprehensive (loss) income | | — |
| — |
| — |
| — |
| — |
| (27 | ) | 4 |
| 3 |
| (20 | ) | — |
| (20 | ) |
| Preferred stock issuances, net of issuance costs | | (1 | ) | — |
| — |
| — |
| — |
| — |
| — |
| — |
| (1 | ) | — |
| (1 | ) |
| Common stock issuances, including dividend reinvestment and employee benefits | 12 |
| | — |
| | 890 |
| | — |
| | — |
| | — |
| | — |
| | 890 |
| | — |
| | 890 |
| — |
| — |
| — |
| 61 |
| — |
| — |
| — |
| — |
| 61 |
| — |
| 61 |
|
| Common stock dividends | — |
| | — |
| | — |
| | (1,251 | ) | | — |
| | — |
| | — |
| | (1,251 | ) | | — |
| | (1,251 | ) | — |
| — |
| — |
| — |
| (678 | ) | — |
| — |
| — |
| (678 | ) | — |
| (678 | ) |
Contribution from noncontrolling interest in subsidiaries(c) | | — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 193 |
| 193 |
|
| Distributions to noncontrolling interest in subsidiaries | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (1 | ) | | (1 | ) | — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| (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 |
| |
| Other | | — |
| — |
| — |
| 1 |
| — |
| — |
| — |
| — |
| 1 |
| (4 | ) | (3 | ) |
| Balance at June 30, 2019 | | $ | 973 |
| 728 |
| $ | 1 |
| $ | 40,885 |
| $ | 3,502 |
| $ | (63 | ) | $ | 4 |
| $ | (89 | ) | $ | 45,213 |
| $ | 119 |
| $ | 45,332 |
|
See Notes to Condensed Consolidated Financial Statements
13
DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2018 and 2019 |
| | | | | | | Accumulated Other Comprehensive | | | |
| | | | | | | (Loss) Income | | | |
| | | | | | | | Net Unrealized |
| | Total |
| | |
| | | | | | | Net Gains |
| (Losses) Gains |
| | Duke Energy |
| | |
| | | Common |
| | Additional |
| | (Losses) on |
| on Available- |
| Pension and |
| Corporation |
| | |
| | Preferred |
| Stock |
| Common |
| Paid-in |
| Retained |
| Cash Flow |
| for-Sale- |
| OPEB |
| Stockholders' |
| Noncontrolling |
| Total |
|
| (in millions) | Stock |
| Shares |
| Stock |
| Capital |
| Earnings |
| Hedges |
| Securities |
| Adjustments |
| Equity |
| Interests |
| Equity |
|
| Balance at 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(a) | — |
| — |
| — |
| — |
| 12 |
| — |
| (12 | ) | — |
| — |
| 7 |
| 7 |
|
| Balance at June 30, 2018 | $ | — |
| 712 |
| $ | 1 |
| $ | 39,682 |
| $ | 2,894 |
| $ | 2 |
| $ | (5 | ) | $ | (67 | ) | $ | 42,507 |
| $ | 8 |
| $ | 42,515 |
|
| | | | | | | | | | | | |
| Balance at December 31, 2018 | $ | — |
| 727 |
| $ | 1 |
| $ | 40,795 |
| $ | 3,113 |
| $ | (14 | ) | $ | (3 | ) | $ | (75 | ) | $ | 43,817 |
| $ | 17 |
| $ | 43,834 |
|
| Net income (loss) | — |
| — |
| — |
| — |
| 1,720 |
| — |
| — |
| — |
| 1,720 |
| (91 | ) | 1,629 |
|
| Other comprehensive (loss) income | — |
| — |
| — |
| — |
| — |
| (43 | ) | 8 |
| 3 |
| (32 | ) | — |
| (32 | ) |
Preferred stock issuances, net of issuance costs(b) | 973 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 973 |
| — |
| 973 |
|
| Common stock issuances, including dividend reinvestment and employee benefits | — |
| 1 |
| — |
| 89 |
| — |
| — |
| — |
| — |
| 89 |
| — |
| 89 |
|
| Common stock dividends | — |
| — |
| — |
| — |
| (1,354 | ) | — |
| — |
| — |
| (1,354 | ) | — |
| (1,354 | ) |
Contributions from noncontrolling interest in subsidiaries(c) | — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 193 |
| 193 |
|
| Distributions to noncontrolling interest in subsidiaries | — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| (1 | ) | (1 | ) |
Other(d) | — |
| — |
| — |
| 1 |
| 23 |
| (6 | ) | (1 | ) | (17 | ) | — |
| 1 |
| 1 |
|
| Balance at June 30, 2019 | $ | 973 |
| 728 |
| $ | 1 |
| $ | 40,885 |
| $ | 3,502 |
| $ | (63 | ) | $ | 4 |
| $ | (89 | ) | $ | 45,213 |
| $ | 119 |
| $ | 45,332 |
|
| |
| (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(Loss) Income 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. |
| |
| (b) | Duke Energy issued 40 million depositary shares of preferred stock in the first quarter of 2019. |
| |
| (c) | Relates to tax equity financing activity in the Commercial Renewables segment. |
| |
| (d) | Amounts in Retained Earnings and Accumulated Other Comprehensive (Loss) Income primarily represent impacts to accumulated other comprehensive income due to implementation of a new accounting standard related to Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. |
See Notes to Condensed Consolidated Financial Statements
14
DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
| | | | 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 |
| 2019 |
| | 2018 |
| | 2019 |
| | 2018 |
|
| Operating Revenues | $ | 1,672 |
| | $ | 1,729 |
| | $ | 3,435 |
| | $ | 3,445 |
| $ | 1,713 |
| | $ | 1,672 |
| | $ | 3,457 |
| | $ | 3,435 |
|
| Operating Expenses | | | | | | | | | | | | | | |
| Fuel used in electric generation and purchased power | 407 |
| | 435 |
| | 880 |
| | 863 |
| 395 |
| | 407 |
| | 867 |
| | 880 |
|
| Operation, maintenance and other | 499 |
| | 483 |
| | 950 |
| | 978 |
| 441 |
| | 499 |
| | 881 |
| | 950 |
|
| Depreciation and amortization | 289 |
| | 269 |
| | 561 |
| | 523 |
| 346 |
| | 289 |
| | 663 |
| | 561 |
|
| Property and other taxes | 75 |
| | 71 |
| | 147 |
| | 139 |
| 75 |
| | 75 |
| | 155 |
| | 147 |
|
| Impairment charges | 177 |
| | — |
| | 190 |
| | — |
| 5 |
| | 177 |
| | 5 |
| | 190 |
|
| Total operating expenses | 1,447 |
| | 1,258 |
| | 2,728 |
| | 2,503 |
| 1,262 |
| | 1,447 |
| | 2,571 |
| | 2,728 |
|
| Losses on Sales of Other Assets and Other, net | (1 | ) | | — |
| | (1 | ) | | — |
| — |
| | (1 | ) | | — |
| | (1 | ) |
| Operating Income | 224 |
| | 471 |
| | 706 |
| | 942 |
| 451 |
| | 224 |
| | 886 |
| | 706 |
|
| Other Income and Expenses, net | 35 |
| | 50 |
| | 74 |
| | 100 |
| 41 |
| | 35 |
| | 72 |
| | 74 |
|
| Interest Expense | 110 |
| | 103 |
| | 217 |
| | 206 |
| 117 |
| | 110 |
| | 227 |
| | 217 |
|
| Income Before Income Taxes | 149 |
| | 418 |
| | 563 |
| | 836 |
| 375 |
| | 149 |
| | 731 |
| | 563 |
|
| Income Tax Expense | 32 |
| | 145 |
| | 123 |
| | 293 |
| 74 |
| | 32 |
| | 137 |
| | 123 |
|
| Net Income | $ | 117 |
| | $ | 273 |
| | $ | 440 |
| | $ | 543 |
| $ | 301 |
| | $ | 117 |
| | $ | 594 |
| | $ | 440 |
|
| Other Comprehensive Income, net of tax | | | | | | | | | | | | | | |
| Reclassification into earnings from cash flow hedges | — |
| | 1 |
| | 1 |
| | 1 |
| — |
| | — |
| | — |
| | 1 |
|
| Comprehensive Income | $ | 117 |
| | $ | 274 |
| | $ | 441 |
| | $ | 544 |
| $ | 301 |
| | $ | 117 |
| | $ | 594 |
| | $ | 441 |
|
See Notes to Condensed Consolidated Financial Statements
15
DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Balance Sheets
(Unaudited)
| | | (in millions) | June 30, 2018 |
| | December 31, 2017 |
| June 30, 2019 |
| | December 31, 2018 |
|
| ASSETS | | | | | | |
| Current Assets | | | | | | |
| Cash and cash equivalents | $ | 16 |
| | $ | 16 |
| $ | 15 |
| | $ | 33 |
|
| 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 (net of allowance for doubtful accounts of $2 at 2019 and 2018) | | 164 |
| | 219 |
|
| Receivables of VIEs (net of allowance for doubtful accounts of $7 at 2019 and 2018) | | 671 |
| | 699 |
|
| Receivables from affiliated companies | 117 |
| | 95 |
| 101 |
| | 182 |
|
| Inventory | 984 |
| | 971 |
| 1,025 |
| | 948 |
|
| Regulatory assets | 420 |
| | 299 |
| 605 |
| | 520 |
|
| Other | 21 |
| | 19 |
| 17 |
| | 72 |
|
| Total current assets | 2,434 |
| | 2,240 |
| 2,598 |
| | 2,673 |
|
| Property, Plant and Equipment | | | | | | |
| Cost | 43,429 |
| | 42,939 |
| 47,249 |
| | 44,741 |
|
| Accumulated depreciation and amortization | (15,248 | ) | | (15,063 | ) | (16,047 | ) | | (15,496 | ) |
| Net property, plant and equipment | 28,181 |
| | 27,876 |
| 31,202 |
| | 29,245 |
|
| Other Noncurrent Assets | | | | | | |
| Regulatory assets | 3,234 |
| | 2,853 |
| 3,392 |
| | 3,457 |
|
| Nuclear decommissioning trust funds | 3,790 |
| | 3,772 |
| 4,059 |
| | 3,558 |
|
| Operating lease right-of-use assets, net | | 141 |
| | — |
|
| Other | 1,036 |
| | 979 |
| 1,085 |
| | 1,027 |
|
| Total other noncurrent assets | 8,060 |
| | 7,604 |
| 8,677 |
| | 8,042 |
|
| Total Assets | $ | 38,675 |
| | $ | 37,720 |
| $ | 42,477 |
| | $ | 39,960 |
|
| LIABILITIES AND EQUITY | | | | | | |
| Current Liabilities | | | | | | |
| Accounts payable | $ | 809 |
| | $ | 842 |
| $ | 640 |
| | $ | 988 |
|
| Accounts payable to affiliated companies | 158 |
| | 209 |
| 189 |
| | 230 |
|
| Notes payable to affiliated companies | 740 |
| | 104 |
| 804 |
| | 439 |
|
| Taxes accrued | 158 |
| | 234 |
| 209 |
| | 171 |
|
| Interest accrued | 109 |
| | 108 |
| 106 |
| | 102 |
|
| Current maturities of long-term debt | 505 |
| | 1,205 |
| 456 |
| | 6 |
|
| Asset retirement obligations | 227 |
| | 337 |
| 203 |
| | 290 |
|
| Regulatory liabilities | 131 |
| | 126 |
| 191 |
| | 199 |
|
| Other | 412 |
| | 486 |
| 499 |
| | 571 |
|
| Total current liabilities | 3,249 |
|
| 3,651 |
| 3,297 |
|
| 2,996 |
|
| Long-Term Debt | 9,589 |
| | 8,598 |
| 10,208 |
| | 10,633 |
|
| Long-Term Debt Payable to Affiliated Companies | 300 |
| | 300 |
| 300 |
| | 300 |
|
| Other Noncurrent Liabilities | | | | | | |
| Deferred income taxes | 3,507 |
| | 3,413 |
| 3,779 |
| | 3,689 |
|
| Asset retirement obligations | 3,592 |
| | 3,273 |
| 5,139 |
| | 3,659 |
|
| Regulatory liabilities | 6,292 |
| | 6,231 |
| 6,392 |
| | 5,999 |
|
| Operating lease liabilities | | 117 |
| | — |
|
| Accrued pension and other post-retirement benefit costs | 99 |
| | 95 |
| 90 |
| | 99 |
|
| Investment tax credits | 230 |
| | 232 |
| 234 |
| | 231 |
|
| Other | 515 |
| | 566 |
| 645 |
| | 671 |
|
| Total other noncurrent liabilities | 14,235 |
| | 13,810 |
| 16,396 |
| | 14,348 |
|
| Commitments and Contingencies |
|
| |
|
|
|
| |
|
|
| Equity | | | | | | |
| Member's equity | 11,308 |
| | 11,368 |
| 12,283 |
| | 11,689 |
|
| Accumulated other comprehensive loss | (6 | ) | | (7 | ) | (7 | ) | | (6 | ) |
| Total equity | 11,302 |
| | 11,361 |
| 12,276 |
| | 11,683 |
|
| Total Liabilities and Equity | $ | 38,675 |
| | $ | 37,720 |
| $ | 42,477 |
| | $ | 39,960 |
|
See Notes to Condensed Consolidated Financial Statements
16
DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | | Six Months Ended | Six Months Ended |
| | June 30, | June 30, |
| (in millions) | 2018 |
| | 2017 |
| 2019 |
| | 2018 |
|
| CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | |
| Net income | $ | 440 |
| | $ | 543 |
| $ | 594 |
| | $ | 440 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | |
| Depreciation and amortization (including amortization of nuclear fuel) | 707 |
| | 688 |
| 804 |
| | 707 |
|
| Equity component of AFUDC | (39 | ) | | (59 | ) | (21 | ) | | (39 | ) |
| Losses on sales of other assets | 1 |
| | — |
| — |
| | 1 |
|
| Impairment charges | 190 |
| | — |
| 5 |
| | 190 |
|
| Deferred income taxes | 90 |
| | 283 |
| 54 |
| | 90 |
|
| Accrued pension and other post-retirement benefit costs | 2 |
| | — |
| (4 | ) | | 2 |
|
| Contributions to qualified pension plans | (46 | ) | | — |
| — |
| | (46 | ) |
| Payments for asset retirement obligations | (114 | ) | | (123 | ) | (131 | ) | | (114 | ) |
| Provision for rate refunds | 121 |
| | — |
| 35 |
| | 121 |
|
| (Increase) decrease in | | | | | | |
| Net realized and unrealized mark-to-market and hedging transactions | 8 |
| | 24 |
| (8 | ) | | 8 |
|
| Receivables | (33 | ) | | 36 |
| 83 |
| | (33 | ) |
| Receivables from affiliated companies | (22 | ) | | 78 |
| 81 |
| | (22 | ) |
| Inventory | (16 | ) | | (14 | ) | (77 | ) | | (16 | ) |
| Other current assets | (33 | ) | | (21 | ) | (133 | ) | | (33 | ) |
| Increase (decrease) in | | | | | | |
| Accounts payable | (59 | ) | | (125 | ) | (282 | ) | | (59 | ) |
| Accounts payable to affiliated companies | (51 | ) | | (120 | ) | (41 | ) | | (51 | ) |
| Taxes accrued | (78 | ) | | 19 |
| 38 |
| | (78 | ) |
| Other current liabilities | (123 | ) | | (140 | ) | (71 | ) | | (123 | ) |
| Other assets | (6 | ) | | (44 | ) | 91 |
| | (6 | ) |
| Other liabilities | (29 | ) | | (15 | ) | (18 | ) | | (29 | ) |
| Net cash provided by operating activities | 910 |
| | 1,010 |
| 999 |
| | 910 |
|
| CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | |
| Capital expenditures | (1,270 | ) | | (1,092 | ) | (1,357 | ) | | (1,270 | ) |
| Purchases of debt and equity securities | (976 | ) | | (1,225 | ) | (1,114 | ) | | (976 | ) |
| Proceeds from sales and maturities of debt and equity securities | 976 |
| | 1,228 |
| 1,114 |
| | 976 |
|
| Notes receivable from affiliated companies | — |
| | 66 |
| |
| Other | (64 | ) | | (29 | ) | (46 | ) | | (64 | ) |
| Net cash used in investing activities | (1,334 | ) | | (1,052 | ) | (1,403 | ) | | (1,334 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | |
| Proceeds from the issuance of long-term debt | 991 |
| | — |
| 25 |
| | 991 |
|
| Payments for the redemption of long-term debt | (702 | ) | | (114 | ) | (3 | ) | | (702 | ) |
| Notes payable to affiliated companies | 636 |
| | 534 |
| 365 |
| | 636 |
|
| Distributions to parent | (500 | ) | | (375 | ) | — |
| | (500 | ) |
| Other | (1 | ) | | (1 | ) | (1 | ) | | (1 | ) |
| Net cash provided by financing activities | 424 |
| | 44 |
| 386 |
| | 424 |
|
| Net increase in cash and cash equivalents | — |
| | 2 |
| |
| Net decrease in cash and cash equivalents | | (18 | ) | | — |
|
| Cash and cash equivalents at beginning of period | 16 |
| | 14 |
| 33 |
| | 16 |
|
| Cash and cash equivalents at end of period | $ | 16 |
| | $ | 16 |
| $ | 15 |
| | $ | 16 |
|
| Supplemental Disclosures: | | | | | | |
| Significant non-cash transactions: | | | | | | |
| Accrued capital expenditures | $ | 343 |
| | $ | 200 |
| $ | 252 |
| | $ | 343 |
|
See Notes to Condensed Consolidated Financial Statements
17
DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
| | | | | | | | | Three Months Ended June 30, 2018 and 2019 |
| | | | Accumulated Other | | | | | Accumulated Other | | |
| | | | Comprehensive | | | | | Comprehensive | | |
| | | | Loss | | | | | Loss | | |
| | | | Net Losses on |
| | | | | Net Losses on |
| | |
| | Member's |
| | Cash Flow |
| | Total |
| Member's |
| | Cash Flow |
| | Total |
|
| (in millions) | Equity |
| | Hedges |
| | Equity |
| Equity |
| | Hedges |
| | Equity |
|
| Balance at December 31, 2016 | $ | 10,781 |
| | $ | (9 | ) | | $ | 10,772 |
| |
| Balance at March 31, 2018 | | $ | 11,441 |
| | $ | (6 | ) | | $ | 11,435 |
|
| Net income | 543 |
| | — |
| | 543 |
| 117 |
| | — |
| | 117 |
|
| Other comprehensive income | — |
| | 1 |
| | 1 |
| |
| Distributions to parent | (375 | ) | | — |
| | (375 | ) | (250 | ) | | — |
| | (250 | ) |
| Other | (2 | ) | | — |
| | (2 | ) | |
| Balance at June 30, 2017 | $ | 10,947 |
| | $ | (8 | ) | | $ | 10,939 |
| |
| Balance at June 30, 2018 | | $ | 11,308 |
| | $ | (6 | ) | | $ | 11,302 |
|
| | | | | | | | | | | |
| Balance at March 31, 2019 | | $ | 11,982 |
| | $ | (7 | ) | | $ | 11,975 |
|
| Net income | | 301 |
| | — |
| | 301 |
|
| Balance at June 30, 2019 | | $ | 12,283 |
| | $ | (7 | ) | | $ | 12,276 |
|
| | | | | | | |
| | | Six Months Ended June 30, 2018 and 2019 |
| | | | | Accumulated Other | | |
| | | | | Comprehensive | | |
| | | | | Loss | | |
| | | | | Net Losses on |
| | |
| | | Member's |
| | Cash Flow |
| | Total |
|
| (in millions) | | Equity |
| | Hedges |
| | Equity |
|
| Balance at December 31, 2017 | $ | 11,368 |
| | $ | (7 | ) | | $ | 11,361 |
| $ | 11,368 |
| | $ | (7 | ) | | $ | 11,361 |
|
| Net income | 440 |
| | — |
| | 440 |
| 440 |
| | — |
| | 440 |
|
| Other comprehensive income | — |
| | 1 |
| | 1 |
| — |
| | 1 |
| | 1 |
|
| Distributions to parent | (500 | ) | | — |
| | (500 | ) | (500 | ) | | — |
| | (500 | ) |
| Balance at June 30, 2018 | $ | 11,308 |
| | $ | (6 | ) | | $ | 11,302 |
| $ | 11,308 |
| | $ | (6 | ) | | $ | 11,302 |
|
| | | | | | | |
| Balance at December 31, 2018 | | $ | 11,689 |
| | $ | (6 | ) | | $ | 11,683 |
|
| Net income | | 594 |
| | — |
| | 594 |
|
| Other | | — |
| | (1 | ) | | (1 | ) |
| Balance at June 30, 2019 | | $ | 12,283 |
| | $ | (7 | ) | | $ | 12,276 |
|
See Notes to Condensed Consolidated Financial Statements
18
PROGRESS ENERGY, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
| | | | 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 |
| 2019 |
| | 2018 |
| | 2019 |
| | 2018 |
|
| Operating Revenues | $ | 2,498 |
| | $ | 2,392 |
| | $ | 5,074 |
| | $ | 4,571 |
| $ | 2,744 |
| | $ | 2,498 |
| | $ | 5,316 |
| | $ | 5,074 |
|
| Operating Expenses | | | | | | | | | | | | | | |
| Fuel used in electric generation and purchased power | 895 |
| | 831 |
| | 1,871 |
| | 1,557 |
| 988 |
| | 895 |
| | 1,913 |
| | 1,871 |
|
| Operation, maintenance and other | 610 |
| | 549 |
| | 1,233 |
| | 1,109 |
| 606 |
| | 610 |
| | 1,173 |
| | 1,233 |
|
| Depreciation and amortization | 380 |
| | 311 |
| | 764 |
| | 624 |
| 426 |
| | 380 |
| | 881 |
| | 764 |
|
| Property and other taxes | 131 |
| | 129 |
| | 254 |
| | 246 |
| 143 |
| | 131 |
| | 280 |
| | 254 |
|
| Impairment charges | 4 |
| | 2 |
| | 33 |
| | 2 |
| — |
| | 4 |
| | — |
| | 33 |
|
| Total operating expenses | 2,020 |
| | 1,822 |
| | 4,155 |
| | 3,538 |
| 2,163 |
| | 2,020 |
| | 4,247 |
| | 4,155 |
|
| Gains on Sales of Other Assets and Other, net | 6 |
| | 6 |
| | 12 |
| | 14 |
| |
| (Losses) Gains on Sales of Other Assets and Other, net | | (1 | ) | | 6 |
| | (1 | ) | | 12 |
|
| Operating Income | 484 |
| | 576 |
| | 931 |
| | 1,047 |
| 580 |
| | 484 |
| | 1,068 |
| | 931 |
|
| Other Income and Expenses, net | 42 |
| | 36 |
| | 77 |
| | 76 |
| 34 |
| | 42 |
| | 65 |
| | 77 |
|
| Interest Expense | 203 |
| | 196 |
| | 412 |
| | 402 |
| 219 |
| | 203 |
| | 438 |
| | 412 |
|
| Income Before Income Taxes | 323 |
| | 416 |
| | 596 |
| | 721 |
| 395 |
| | 323 |
| | 695 |
| | 596 |
|
| Income Tax Expense | 56 |
| | 139 |
| | 92 |
| | 243 |
| 66 |
| | 56 |
| | 118 |
| | 92 |
|
| Net Income | 267 |
| | 277 |
| | 504 |
| | 478 |
| 329 |
| | 267 |
| | 577 |
| | 504 |
|
| Less: Net Income Attributable to Noncontrolling Interests | 2 |
| | 3 |
| | 4 |
| | 5 |
| 1 |
| | 2 |
| | — |
| | 4 |
|
| Net Income Attributable to Parent | $ | 265 |
| | $ | 274 |
| | $ | 500 |
| | $ | 473 |
| $ | 328 |
| | $ | 265 |
| | $ | 577 |
| | $ | 500 |
|
| | | | | | | | | | | | | | | |
| Net Income | $ | 267 |
| | $ | 277 |
| | $ | 504 |
| | $ | 478 |
| $ | 329 |
| | $ | 267 |
| | $ | 577 |
| | $ | 504 |
|
| Other Comprehensive Income, net of tax | | | | | | | | | | | | | | |
| Pension and OPEB adjustments | 2 |
| | 1 |
| | 2 |
| | 2 |
| 1 |
| | 2 |
| | 2 |
| | 2 |
|
| Net unrealized gains on cash flow hedges | 1 |
| | 5 |
| | 3 |
| | 6 |
| 1 |
| | 1 |
| | 3 |
| | 3 |
|
| Unrealized (losses) gains on available-for-sale securities | (1 | ) | | 1 |
| | (1 | ) | | 2 |
| |
| Unrealized gains (losses) on available-for-sale securities | | 1 |
| | (1 | ) | | 1 |
| | (1 | ) |
| Other Comprehensive Income, net of tax | 2 |
|
| 7 |
|
| 4 |
|
| 10 |
| 3 |
|
| 2 |
|
| 6 |
|
| 4 |
|
| Comprehensive Income | 269 |
| | 284 |
| | 508 |
| | 488 |
| 332 |
| | 269 |
| | 583 |
| | 508 |
|
| Less: Comprehensive Income Attributable to Noncontrolling Interests | 2 |
| | 3 |
| | 4 |
| | 5 |
| 1 |
| | 2 |
| | — |
| | 4 |
|
| Comprehensive Income Attributable to Parent | $ | 267 |
|
| $ | 281 |
|
| $ | 504 |
|
| $ | 483 |
| $ | 331 |
|
| $ | 267 |
|
| $ | 583 |
|
| $ | 504 |
|
See Notes to Condensed Consolidated Financial Statements
19
PROGRESS ENERGY, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
| | | (in millions) | June 30, 2018 |
| | December 31, 2017 |
| June 30, 2019 |
| | December 31, 2018 |
|
| ASSETS | | | | | | |
| Current Assets | | | | | | |
| Cash and cash equivalents | $ | 37 |
| | $ | 40 |
| $ | 51 |
| | $ | 67 |
|
| 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 (net of allowance for doubtful accounts of $6 at 2019 and $5 at 2018) | | 139 |
| | 220 |
|
| Receivables of VIEs (net of allowance for doubtful accounts of $8 at 2019 and 2018) | | 998 |
| | 909 |
|
| Receivables from affiliated companies | 3 |
| | 31 |
| 49 |
| | 168 |
|
| Notes receivable from affiliated companies | 309 |
| | 240 |
| |
| Inventory | 1,521 |
| | 1,592 |
| 1,480 |
| | 1,459 |
|
| Regulatory assets (includes $51 at 2018 and 2017 related to VIEs) | 970 |
| | 741 |
| |
| Other | 356 |
| | 334 |
| |
| Regulatory assets (includes $52 at 2019 and 2018 related to VIEs) | | 1,024 |
| | 1,137 |
|
| Other (includes $31 at 2019 and $39 at 2018 related to VIEs) | | 107 |
| | 125 |
|
| Total current assets | 4,295 |
| | 3,881 |
| 3,848 |
| | 4,085 |
|
| Property, Plant and Equipment | | | | | | |
| Cost | 48,896 |
| | 47,323 |
| 52,758 |
| | 50,260 |
|
| Accumulated depreciation and amortization | (16,380 | ) | | (15,857 | ) | (16,808 | ) | | (16,398 | ) |
| Generation facilities to be retired, net | 378 |
| | 421 |
| 317 |
| | 362 |
|
| Net property, plant and equipment | 32,894 |
| | 31,887 |
| 36,267 |
| | 34,224 |
|
| Other Noncurrent Assets | | | | | | |
| Goodwill | 3,655 |
| | 3,655 |
| 3,655 |
| | 3,655 |
|
| Regulatory assets (includes $1,071 at 2018 and $1,091 at 2017 related to VIEs) | 5,736 |
| | 6,010 |
| |
| Regulatory assets (includes $1,019 at 2019 and $1,041 at 2018 related to VIEs) | | 6,423 |
| | 6,564 |
|
| Nuclear decommissioning trust funds | 3,342 |
| | 3,324 |
| 3,562 |
| | 3,162 |
|
| Operating lease right-of-use assets, net | | 839 |
| | — |
|
| Other | 992 |
| | 931 |
| 982 |
| | 974 |
|
| Total other noncurrent assets | 13,725 |
| | 13,920 |
| 15,461 |
| | 14,355 |
|
| Total Assets | $ | 50,914 |
| | $ | 49,688 |
| $ | 55,576 |
| | $ | 52,664 |
|
| LIABILITIES AND EQUITY | | | | | | |
| Current Liabilities | | | | | | |
| Accounts payable | $ | 816 |
| | $ | 1,006 |
| $ | 720 |
| | $ | 1,172 |
|
| Accounts payable to affiliated companies | 232 |
| | 251 |
| 235 |
| | 360 |
|
| Notes payable to affiliated companies | 1,152 |
| | 805 |
| 1,920 |
| | 1,235 |
|
| Taxes accrued | 181 |
| | 101 |
| 191 |
| | 109 |
|
| Interest accrued | 211 |
| | 212 |
| 226 |
| | 246 |
|
| Current maturities of long-term debt (includes $53 at 2018 and 2017 related to VIEs) | 1,321 |
| | 771 |
| |
| Current maturities of long-term debt (includes $54 at 2019 and $53 at 2018 related to VIEs) | | 1,026 |
| | 1,672 |
|
| Asset retirement obligations | 386 |
| | 295 |
| 416 |
| | 514 |
|
| Regulatory liabilities | 233 |
| | 213 |
| 250 |
| | 280 |
|
| Other | 711 |
| | 729 |
| 863 |
| | 821 |
|
| Total current liabilities | 5,243 |
| | 4,383 |
| 5,847 |
| | 6,409 |
|
| Long-Term Debt (includes $1,660 at 2018 and $1,689 at 2017 related to VIEs) | 16,723 |
| | 16,916 |
| |
| Long-Term Debt (includes $1,657 at 2019 and $1,636 at 2018 related to VIEs) | | 18,023 |
| | 17,089 |
|
| Long-Term Debt Payable to Affiliated Companies | 150 |
| | 150 |
| 150 |
| | 150 |
|
| Other Noncurrent Liabilities | | | | | | |
| Deferred income taxes | 3,806 |
| | 3,502 |
| 4,141 |
| | 3,941 |
|
| Asset retirement obligations | 5,052 |
| | 5,119 |
| 5,777 |
| | 4,897 |
|
| Regulatory liabilities | 5,193 |
| | 5,306 |
| 5,191 |
| | 5,049 |
|
| Operating lease liabilities | | 747 |
| | — |
|
| Accrued pension and other post-retirement benefit costs | 519 |
| | 545 |
| 509 |
| | 521 |
|
| Other | 256 |
| | 302 |
| 352 |
| | 351 |
|
| Total other noncurrent liabilities | 14,826 |
| | 14,774 |
| 16,717 |
| | 14,759 |
|
| Commitments and Contingencies |
| |
|
| |
|
| Equity | | | | | | |
| Common stock, $0.01 par value, 100 shares authorized and outstanding at 2018 and 2017 | — |
| | — |
| |
| Common stock, $0.01 par value, 100 shares authorized and outstanding at 2019 and 2018 | | — |
| | — |
|
| Additional paid-in capital | 9,143 |
| | 9,143 |
| 9,143 |
| | 9,143 |
|
| Retained earnings | 4,855 |
| | 4,350 |
| 5,715 |
| | 5,131 |
|
| Accumulated other comprehensive loss | (26 | ) | | (25 | ) | (21 | ) | | (20 | ) |
| Total Progress Energy, Inc. stockholders' equity | 13,972 |
| | 13,468 |
| 14,837 |
| | 14,254 |
|
| Noncontrolling interests | — |
| | (3 | ) | 2 |
| | 3 |
|
| Total equity | 13,972 |
| | 13,465 |
| 14,839 |
| | 14,257 |
|
| Total Liabilities and Equity | $ | 50,914 |
| | $ | 49,688 |
| $ | 55,576 |
| | $ | 52,664 |
|
See Notes to Condensed Consolidated Financial Statements
20
PROGRESS ENERGY, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | | Six Months Ended | Six Months Ended |
| | June 30, | June 30, |
| (in millions) | 2018 |
| | 2017 |
| 2019 |
| | 2018 |
|
| CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | |
| Net income | $ | 504 |
| | $ | 478 |
| $ | 577 |
| | $ | 504 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | |
| Depreciation, amortization and accretion (including amortization of nuclear fuel) | 945 |
| | 733 |
| 1,061 |
| | 945 |
|
| Equity component of AFUDC | (52 | ) | | (48 | ) | (31 | ) | | (52 | ) |
| Gains on sales of other assets | (12 | ) | | (15 | ) | |
| Losses (gains) on sales of other assets | | 1 |
| | (12 | ) |
| Impairment charges | 33 |
| | 2 |
| — |
| | 33 |
|
| Deferred income taxes | 240 |
| | 412 |
| 126 |
| | 240 |
|
| Accrued pension and other post-retirement benefit costs | 12 |
| | (5 | ) | 8 |
| | 12 |
|
| Contributions to qualified pension plans | (45 | ) | | — |
| — |
| | (45 | ) |
| Payments for asset retirement obligations | (108 | ) | | (128 | ) | (183 | ) | | (108 | ) |
| Other rate case adjustments | 37 |
| | — |
| — |
| | 37 |
|
| Provision for rate refunds | 65 |
| | — |
| 10 |
| | 65 |
|
| (Increase) decrease in | | | | | | |
| Net realized and unrealized mark-to-market and hedging transactions | 14 |
| | — |
| (1 | ) | | 14 |
|
| Receivables | (196 | ) | | (64 | ) | (42 | ) | | (196 | ) |
| Receivables from affiliated companies | 28 |
| | 99 |
| 119 |
| | 28 |
|
| Inventory | 71 |
| | 95 |
| (26 | ) | | 71 |
|
| Other current assets | (214 | ) | | (220 | ) | 114 |
| | (214 | ) |
| Increase (decrease) in | | | | | | |
| Accounts payable | 15 |
| | (211 | ) | (196 | ) | | 15 |
|
| Accounts payable to affiliated companies | (19 | ) | | (140 | ) | (125 | ) | | (19 | ) |
| Taxes accrued | 80 |
| | 81 |
| 82 |
| | 80 |
|
| Other current liabilities | (58 | ) | | (148 | ) | (162 | ) | | (58 | ) |
| Other assets | (186 | ) | | (69 | ) | (83 | ) | | (186 | ) |
| Other liabilities | 4 |
| | (18 | ) | 17 |
| | 4 |
|
| Net cash provided by operating activities | 1,158 |
| | 834 |
| 1,266 |
| | 1,158 |
|
| CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | |
| Capital expenditures | (1,727 | ) | | (1,733 | ) | (1,988 | ) | | (1,727 | ) |
| Purchases of debt and equity securities | (812 | ) | | (1,108 | ) | (1,094 | ) | | (812 | ) |
| Proceeds from sales and maturities of debt and equity securities | 820 |
| | 1,123 |
| 1,089 |
| | 820 |
|
| Notes receivable from affiliated companies | (69 | ) | | (60 | ) | — |
| | (69 | ) |
| Other | (81 | ) | | (22 | ) | (59 | ) | | (81 | ) |
| Net cash used in investing activities | (1,869 | ) | | (1,800 | ) | (2,052 | ) | | (1,869 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | |
| Proceeds from the issuance of long-term debt | 989 |
| | 923 |
| 1,295 |
| | 989 |
|
| Payments for the redemption of long-term debt | (635 | ) | | (326 | ) | (1,188 | ) | | (635 | ) |
| Notes payable to affiliated companies | 347 |
| | 341 |
| 685 |
| | 347 |
|
| Other | (3 | ) | | (3 | ) | 2 |
| | (3 | ) |
| Net cash provided by financing activities | 698 |
| | 935 |
| 794 |
| | 698 |
|
| Net decrease in cash, cash equivalents and restricted cash | (13 | ) | | (31 | ) | |
| Net increase (decrease) in cash, cash equivalents and restricted cash | | 8 |
| | (13 | ) |
| Cash, cash equivalents and restricted cash at beginning of period | 87 |
| | 110 |
| 112 |
| | 87 |
|
| Cash, cash equivalents and restricted cash at end of period | $ | 74 |
| | $ | 79 |
| $ | 120 |
| | $ | 74 |
|
| Supplemental Disclosures: | | | | | | |
| Significant non-cash transactions: | | | | | | |
| Accrued capital expenditures | $ | 366 |
| | $ | 174 |
| $ | 278 |
| | $ | 366 |
|
See Notes to Condensed Consolidated Financial Statements
21
PROGRESS ENERGY, INC.
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
| | | | | | | | | | | | | | | | | | | Three Months Ended June 30, 2018 and 2019 |
| | | | | | Accumulated Other Comprehensive Income (Loss) | | | | | | | | | | | Accumulated Other Comprehensive (Loss) Income | | | | | | |
| | | | | | | | Net Unrealized |
| | | | Total Progress |
| | | | | | | | | | | Net Unrealized |
| | | | Total Progress |
| | | | |
| | Additional |
| | | | Net Losses on |
| | Gains (losses) on |
| | Pension and |
| | Energy, Inc. |
| | | | | Additional |
| | | | Net Losses on |
| | Gains (Losses) on |
| | Pension and |
| | Energy, Inc. |
| | | | |
| | Paid-in |
| | Retained |
| | Cash Flow |
| | Available-for- |
| | OPEB |
| | Stockholders' |
| | Noncontrolling |
| | Total |
| Paid-in |
| | Retained |
| | Cash Flow |
| | Available-for- |
| | OPEB |
| | Stockholders' |
| | Noncontrolling |
| | Total |
|
| (in millions) | Capital |
| | Earnings |
| | Hedges |
| | Sale Securities |
| | Adjustments |
| | Equity |
| | Interests |
| | Equity |
| 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 |
| |
| Balance at March 31, 2018 | | $ | 9,142 |
| | $ | 4,591 |
| | $ | (16 | ) | | $ | (1 | ) | | $ | (12 | ) | | $ | 13,704 |
| | $ | (1 | ) | | $ | 13,703 |
|
| Net income | | — |
| | 265 |
| | — |
| | — |
| | — |
| | 265 |
| | 2 |
| | 267 |
|
| Other comprehensive income (loss) | | — |
| | — |
| | 1 |
| | (1 | ) | | 2 |
| | 2 |
| | — |
| | 2 |
|
| Distributions to noncontrolling interests | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (1 | ) | | (1 | ) |
Other(a) | | 1 |
| | (1 | ) | | — |
| | 1 |
| | — |
| | 1 |
| | — |
| | 1 |
|
| Balance at June 30, 2018 | | $ | 9,143 |
| | $ | 4,855 |
| | $ | (15 | ) | | $ | (1 | ) | | $ | (10 | ) | | $ | 13,972 |
| | $ | — |
| | $ | 13,972 |
|
| | | | | | | | | | | | | | | | | |
| Balance at March 31, 2019 | | $ | 9,143 |
| | $ | 5,386 |
| | $ | (14 | ) | | $ | (1 | ) | | $ | (8 | ) | | $ | 14,506 |
| | $ | 2 |
| | $ | 14,508 |
|
| Net income | — |
| | 473 |
| | — |
| | — |
| | — |
| | 473 |
| | 5 |
| | 478 |
| — |
| | 328 |
| | — |
| | — |
| | — |
| | 328 |
| | 1 |
| | 329 |
|
| Other comprehensive income | — |
| | — |
| | 6 |
| | 2 |
| | 2 |
| | 10 |
| | — |
| | 10 |
| — |
| | — |
| | 1 |
| | 1 |
| | 1 |
| | 3 |
| | — |
| | 3 |
|
| Other | 2 |
| | — |
| | — |
| | — |
| | — |
| | 2 |
| | — |
| | 2 |
| — |
| | 1 |
| | — |
| | — |
| | (1 | ) | | — |
| | (1 | ) | | (1 | ) |
| Balance at June 30, 2017 | $ | 8,096 |
|
| $ | 4,237 |
|
| $ | (17 | ) |
| $ | 3 |
|
| $ | (14 | ) | | $ | 12,305 |
|
| $ | (8 | ) |
| $ | 12,297 |
| |
| Balance at June 30, 2019 | | $ | 9,143 |
| | $ | 5,715 |
| | $ | (13 | ) | | $ | — |
| | $ | (8 | ) | | $ | 14,837 |
| | $ | 2 |
| | $ | 14,839 |
|
| | | | | | | | | | | | | | | | | |
| | | Six Months Ended June 30, 2018 and 2019 |
| | | | | | | Accumulated Other Comprehensive (Loss) Income | | | | | | |
| | | | | | | | | 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 |
|
| | | | | | | | | | | | | | | | | Capital |
| | Earnings |
| | Hedges |
| | Sale Securities |
| | Adjustments |
| | Equity |
| | Interests |
| | Equity |
|
| Balance at December 31, 2017 | $ | 9,143 |
| | $ | 4,350 |
| | $ | (18 | ) | | $ | 5 |
| | $ | (12 | ) | | $ | 13,468 |
| | $ | (3 | ) | | $ | 13,465 |
| $ | 9,143 |
| | $ | 4,350 |
| | $ | (18 | ) | | $ | 5 |
| | $ | (12 | ) | | $ | 13,468 |
| | $ | (3 | ) | | $ | 13,465 |
|
| Net income | — |
| | 500 |
| | — |
| | — |
| | — |
| | 500 |
| | 4 |
| | 504 |
| — |
| | 500 |
| | — |
| | — |
| | — |
| | 500 |
| | 4 |
| | 504 |
|
| Other comprehensive income (loss) | — |
| | — |
| | 3 |
| | (1 | ) | | 2 |
| | 4 |
| | — |
| | 4 |
| — |
| | — |
| | 3 |
| | (1 | ) | | 2 |
| | 4 |
| | — |
| | 4 |
|
| Distributions to noncontrolling interests | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (1 | ) | | (1 | ) | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (1 | ) | | (1 | ) |
Other(a) | — |
| | 5 |
| | — |
| | (5 | ) | | — |
| | — |
| | — |
| | — |
| — |
| | 5 |
| | — |
| | (5 | ) | | — |
| | — |
| | — |
| | — |
|
| Balance at June 30, 2018 | $ | 9,143 |
|
| $ | 4,855 |
|
| $ | (15 | ) |
| $ | (1 | ) |
| $ | (10 | ) | | $ | 13,972 |
|
| $ | — |
|
| $ | 13,972 |
| $ | 9,143 |
|
| $ | 4,855 |
|
| $ | (15 | ) |
| $ | (1 | ) |
| $ | (10 | ) | | $ | 13,972 |
|
| $ | — |
|
| $ | 13,972 |
|
| | | | | | | | | | | | | | | | | |
| Balance at December 31, 2018 | | $ | 9,143 |
| | $ | 5,131 |
| | $ | (12 | ) | | $ | (1 | ) | | $ | (7 | ) | | $ | 14,254 |
| | $ | 3 |
| | $ | 14,257 |
|
| Net income | | — |
| | 577 |
| | — |
| | — |
| | — |
| | 577 |
| | — |
| | 577 |
|
| Other comprehensive income | | — |
| | — |
| | 3 |
| | 1 |
| | 2 |
| | 6 |
| | — |
| | 6 |
|
Other(b) | | — |
| | 7 |
| | (4 | ) | | — |
| | (3 | ) | | — |
| | (1 | ) | | (1 | ) |
| Balance at June 30, 2019 | | $ | 9,143 |
|
| $ | 5,715 |
|
| $ | (13 | ) |
| $ | — |
|
| $ | (8 | ) | | $ | 14,837 |
|
| $ | 2 |
|
| $ | 14,839 |
|
| |
| (a) | Amounts in Retained Earnings and Accumulated Other Comprehensive Loss(Loss) Income 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. |
| |
| (b) | Amounts in Retained Earnings and Accumulated Other Comprehensive (Loss) Income primarily represent impacts to accumulated other comprehensive income due to implementation of a new accounting standard related to Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. |
See Notes to Condensed Consolidated Financial Statements
22
DUKE ENERGY PROGRESS, LLC
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
| | | | 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 |
| 2019 |
| | 2018 |
| | 2019 |
| | 2018 |
|
| Operating Revenues | $ | 1,291 |
| | $ | 1,199 |
| | $ | 2,751 |
| | $ | 2,418 |
| $ | 1,387 |
| | $ | 1,291 |
| | $ | 2,871 |
| | $ | 2,751 |
|
| Operating Expenses | | | | | | | | | | | | | | |
| Fuel used in electric generation and purchased power | 408 |
| | 375 |
| | 917 |
| | 739 |
| 479 |
| | 408 |
| | 994 |
| | 917 |
|
| Operation, maintenance and other | 375 |
| | 342 |
| | 756 |
| | 704 |
| 357 |
| | 375 |
| | 692 |
| | 756 |
|
| Depreciation and amortization | 235 |
| | 173 |
| | 470 |
| | 354 |
| 251 |
| | 235 |
| | 541 |
| | 470 |
|
| Property and other taxes | 40 |
| | 40 |
| | 75 |
| | 80 |
| 41 |
| | 40 |
| | 85 |
| | 75 |
|
| Impairment charges | 1 |
| | — |
| | 33 |
| | — |
| — |
| | 1 |
| | — |
| | 33 |
|
| Total operating expenses | 1,059 |
| | 930 |
| | 2,251 |
| | 1,877 |
| 1,128 |
| | 1,059 |
| | 2,312 |
| | 2,251 |
|
| Gains on Sales of Other Assets and Other, net | 1 |
| | 1 |
| | 2 |
| | 3 |
| — |
| | 1 |
| | — |
| | 2 |
|
| Operating Income | 233 |
| | 270 |
| | 502 |
| | 544 |
| 259 |
| | 233 |
| | 559 |
| | 502 |
|
| Other Income and Expenses, net | 19 |
| | 26 |
| | 37 |
| | 57 |
| 24 |
| | 19 |
| | 48 |
| | 37 |
|
| Interest Expense | 78 |
| | 70 |
| | 159 |
| | 152 |
| 81 |
| | 78 |
| | 158 |
| | 159 |
|
| Income Before Income Taxes | 174 |
| | 226 |
| | 380 |
| | 449 |
| 202 |
| | 174 |
| | 449 |
| | 380 |
|
| Income Tax Expense | 35 |
| | 72 |
| | 64 |
| | 148 |
| 33 |
| | 35 |
| | 77 |
| | 64 |
|
| Net Income and Comprehensive Income | $ | 139 |
| | $ | 154 |
| | $ | 316 |
| | $ | 301 |
| $ | 169 |
| | $ | 139 |
| | $ | 372 |
| | $ | 316 |
|
See Notes to Condensed Consolidated Financial Statements
23
DUKE ENERGY PROGRESS, LLC
Condensed Consolidated Balance Sheets
(Unaudited)
| | | (in millions) | June 30, 2018 |
| | December 31, 2017 |
| June 30, 2019 |
| | December 31, 2018 |
|
| ASSETS | | | | | | |
| Current Assets | | | | | | |
| Cash and cash equivalents | $ | 18 |
| | $ | 20 |
| $ | 28 |
| | $ | 23 |
|
| 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 (net of allowance for doubtful accounts of $2 at 2019 and 2018) | | 53 |
| | 75 |
|
| Receivables of VIEs (net of allowance for doubtful accounts of $5 at 2019 and 2018) | | 518 |
| | 547 |
|
| Receivables from affiliated companies | 1 |
| | 3 |
| 40 |
| | 23 |
|
| Inventory | 976 |
| | 1,017 |
| 980 |
| | 954 |
|
| Regulatory assets | 532 |
| | 352 |
| 572 |
| | 703 |
|
| Other | 33 |
| | 97 |
| 34 |
| | 62 |
|
| Total current assets | 2,178 |
| | 2,004 |
| 2,225 |
| | 2,387 |
|
| Property, Plant and Equipment | | | | | | |
| Cost | 30,535 |
| | 29,583 |
| 33,288 |
| | 31,459 |
|
| Accumulated depreciation and amortization | (11,296 | ) | | (10,903 | ) | (11,728 | ) | | (11,423 | ) |
| Generation facilities to be retired, net | 378 |
| | 421 |
| 317 |
| | 362 |
|
| Net property, plant and equipment | 19,617 |
| | 19,101 |
| 21,877 |
| | 20,398 |
|
| Other Noncurrent Assets | | | | | | |
| Regulatory assets | 3,573 |
| | 3,507 |
| 4,124 |
| | 4,111 |
|
| Nuclear decommissioning trust funds | 2,627 |
| | 2,588 |
| 2,833 |
| | 2,503 |
|
| Operating lease right-of-use assets, net | | 407 |
| | — |
|
| Other | 635 |
| | 599 |
| 586 |
| | 612 |
|
| Total other noncurrent assets | 6,835 |
| | 6,694 |
| 7,950 |
| | 7,226 |
|
| Total Assets | $ | 28,630 |
| | $ | 27,799 |
| $ | 32,052 |
| | $ | 30,011 |
|
| LIABILITIES AND EQUITY | | | | | | |
| Current Liabilities | | | | | | |
| Accounts payable | $ | 375 |
| | $ | 402 |
| $ | 315 |
| | $ | 660 |
|
| Accounts payable to affiliated companies | 175 |
| | 179 |
| 182 |
| | 278 |
|
| Notes payable to affiliated companies | 540 |
| | 240 |
| 127 |
| | 294 |
|
| Taxes accrued | 90 |
| | 64 |
| 106 |
| | 53 |
|
| Interest accrued | 103 |
| | 102 |
| 110 |
| | 116 |
|
| Current maturities of long-term debt | 603 |
| | 3 |
| 6 |
| | 603 |
|
| Asset retirement obligations | 381 |
| | 295 |
| 413 |
| | 509 |
|
| Regulatory liabilities | 157 |
| | 139 |
| 167 |
| | 178 |
|
| Other | 344 |
| | 376 |
| 395 |
| | 408 |
|
| Total current liabilities | 2,768 |
| | 1,800 |
| 1,821 |
| | 3,099 |
|
| Long-Term Debt | 6,605 |
| | 7,204 |
| 8,893 |
| | 7,451 |
|
| Long-Term Debt Payable to Affiliated Companies | 150 |
| | 150 |
| 150 |
| | 150 |
|
| Other Noncurrent Liabilities | | | | | | |
| Deferred income taxes | 1,957 |
| | 1,883 |
| 2,181 |
| | 2,119 |
|
| Asset retirement obligations | 4,454 |
| | 4,378 |
| 5,203 |
| | 4,311 |
|
| Regulatory liabilities | 3,998 |
| | 3,999 |
| 4,150 |
| | 3,955 |
|
| Operating lease liabilities | | 377 |
| | — |
|
| Accrued pension and other post-retirement benefit costs | 243 |
| | 248 |
| 232 |
| | 237 |
|
| Investment tax credits | 142 |
| | 143 |
| 141 |
| | 142 |
|
| Other | 48 |
| | 45 |
| 91 |
| | 106 |
|
| Total other noncurrent liabilities | 10,842 |
| | 10,696 |
| 12,375 |
| | 10,870 |
|
| Commitments and Contingencies |
| |
|
| |
|
| Equity | | | | | | |
| Member's Equity | 8,265 |
| | 7,949 |
| 8,813 |
| | 8,441 |
|
| Total Liabilities and Equity | $ | 28,630 |
| | $ | 27,799 |
| $ | 32,052 |
| | $ | 30,011 |
|
See Notes to Condensed Consolidated Financial Statements
24
DUKE ENERGY PROGRESS, LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | | Six Months Ended | Six Months Ended |
| | June 30, | June 30, |
| (in millions) | 2018 |
| | 2017 |
| 2019 |
| | 2018 |
|
| CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | |
| Net income | $ | 316 |
| | $ | 301 |
| $ | 372 |
| | $ | 316 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | |
| Depreciation and amortization (including amortization of nuclear fuel) | 565 |
| | 453 |
| 634 |
| | 565 |
|
| Equity component of AFUDC | (26 | ) | | (26 | ) | (28 | ) | | (26 | ) |
| Gains on sales of other assets | (2 | ) | | (4 | ) | — |
| | (2 | ) |
| Impairment charges | 33 |
| | — |
| — |
| | 33 |
|
| Deferred income taxes | 53 |
| | 224 |
| 26 |
| | 53 |
|
| Accrued pension and other post-retirement benefit costs | 7 |
| | (10 | ) | 1 |
| | 7 |
|
| Contributions to qualified pension plans | (25 | ) | | — |
| — |
| | (25 | ) |
| Payments for asset retirement obligations | (89 | ) | | (101 | ) | (166 | ) | | (89 | ) |
| Other rate case adjustments | 37 |
| | — |
| — |
| | 37 |
|
| Provision for rate refunds | 65 |
| | — |
| 10 |
| | 65 |
|
| (Increase) decrease in | | | | | | |
| Net realized and unrealized mark-to-market and hedging transactions | 6 |
| | (3 | ) | (5 | ) | | 6 |
|
| Receivables | (104 | ) | | 3 |
| 58 |
| | (104 | ) |
| Receivables from affiliated companies | 2 |
| | — |
| (17 | ) | | 2 |
|
| Inventory | 41 |
| | 23 |
| (26 | ) | | 41 |
|
| Other current assets | (111 | ) | | (50 | ) | 115 |
| | (111 | ) |
| Increase (decrease) in | | | | | | |
| Accounts payable | (17 | ) | | (218 | ) | (223 | ) | | (17 | ) |
| Accounts payable to affiliated companies | (4 | ) | | (58 | ) | (96 | ) | | (4 | ) |
| Taxes accrued | 26 |
| | (43 | ) | 53 |
| | 26 |
|
| Other current liabilities | (38 | ) | | (111 | ) | (74 | ) | | (38 | ) |
| Other assets | 10 |
| | (37 | ) | — |
| | 10 |
|
| Other liabilities | 13 |
| | (9 | ) | 21 |
| | 13 |
|
| Net cash provided by operating activities | 758 |
| | 334 |
| 655 |
| | 758 |
|
| CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | |
| Capital expenditures | (996 | ) | | (840 | ) | (1,115 | ) | | (996 | ) |
| Purchases of debt and equity securities | (573 | ) | | (819 | ) | (473 | ) | | (573 | ) |
| Proceeds from sales and maturities of debt and equity securities | 556 |
| | 805 |
| 458 |
| | 556 |
|
| Notes receivable from affiliated companies | — |
| | 165 |
| |
| Other | (45 | ) | | (22 | ) | (20 | ) | | (45 | ) |
| Net cash used in investing activities | (1,058 | ) | | (711 | ) | (1,150 | ) | | (1,058 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | |
| Proceeds from the issuance of long-term debt | — |
| | 15 |
| 1,270 |
| | — |
|
| Payments for the redemption of long-term debt | — |
| | (269 | ) | (602 | ) | | — |
|
| Notes payable to affiliated companies | 300 |
| | 633 |
| (167 | ) | | 300 |
|
| Other | (2 | ) | | (1 | ) | (1 | ) | | (2 | ) |
| Net cash provided by financing activities | 298 |
| | 378 |
| 500 |
| | 298 |
|
| Net (decrease) increase in cash and cash equivalents | (2 | ) | | 1 |
| |
| Net increase (decrease) in cash and cash equivalents | | 5 |
| | (2 | ) |
| Cash and cash equivalents at beginning of period | 20 |
| | 11 |
| 23 |
| | 20 |
|
| Cash and cash equivalents at end of period | $ | 18 |
| | $ | 12 |
| $ | 28 |
| | $ | 18 |
|
| Supplemental Disclosures: | | | | | | |
| Significant non-cash transactions: | | | | | | |
| Accrued capital expenditures | $ | 172 |
| | $ | 52 |
| $ | 112 |
| | $ | 172 |
|
See Notes to Condensed Consolidated Financial Statements
25
DUKE ENERGY PROGRESS, LLC
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
| | | | Three Months Ended |
| | | | June 30, 2018 and 2019 |
| | Member's | Member's |
| (in millions) | Equity | Equity |
| Balance at December 31, 2016 | $ | 7,358 |
| |
| Balance at March 31, 2018 | | $ | 8,126 |
|
| Net income | 301 |
| 139 |
|
| Balance at June 30, 2017 | $ | 7,659 |
| |
| Balance at June 30, 2018 | | $ | 8,265 |
|
| | | |
| Balance at March 31, 2019 | | $ | 8,644 |
|
| Net income | | 169 |
|
| Balance at June 30, 2019 | | $ | 8,813 |
|
| | | |
| | | Six Months Ended |
| | | June 30, 2018 and 2019 |
| | | Member's |
| (in millions) | | Equity |
| Balance at December 31, 2017 | $ | 7,949 |
| $ | 7,949 |
|
| Net income | 316 |
| 316 |
|
| Balance at June 30, 2018 | $ | 8,265 |
| $ | 8,265 |
|
| | | |
| Balance at December 31, 2018 | | $ | 8,441 |
|
| Net income | | 372 |
|
| Balance at June 30, 2019 | | $ | 8,813 |
|
See Notes to Condensed Consolidated Financial Statements
26
DUKE ENERGY FLORIDA, LLC
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
| | | | 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 |
| 2019 |
| | 2018 |
| | 2019 |
| | 2018 |
|
| Operating Revenues | $ | 1,203 |
| | $ | 1,191 |
| | $ | 2,318 |
| | $ | 2,150 |
| $ | 1,353 |
| | $ | 1,203 |
| | $ | 2,439 |
| | $ | 2,318 |
|
| Operating Expenses | | | | | | | | | | | | | | |
| Fuel used in electric generation and purchased power | 486 |
| | 455 |
| | 953 |
| | 817 |
| 509 |
| | 486 |
| | 919 |
| | 953 |
|
| Operation, maintenance and other | 237 |
| | 208 |
| | 474 |
| | 403 |
| 244 |
| | 237 |
| | 474 |
| | 474 |
|
| Depreciation and amortization | 144 |
| | 137 |
| | 294 |
| | 269 |
| 175 |
| | 144 |
| | 340 |
| | 294 |
|
| Property and other taxes | 91 |
| | 89 |
| | 179 |
| | 166 |
| 103 |
| | 91 |
| | 196 |
| | 179 |
|
| Impairment charges | — |
| | 1 |
| | — |
| | 2 |
| |
| Total operating expenses | 958 |
| | 890 |
| | 1,900 |
| | 1,657 |
| 1,031 |
| | 958 |
| | 1,929 |
| | 1,900 |
|
| Losses on Sales of Other Assets and Other, net | | (1 | ) | | — |
| | (1 | ) | | — |
|
| Operating Income | 245 |
| | 301 |
| | 418 |
| | 493 |
| 321 |
| | 245 |
| | 509 |
| | 418 |
|
| Other Income and Expenses, net | 26 |
| | 19 |
| | 47 |
| | 39 |
| 12 |
| | 26 |
| | 25 |
| | 47 |
|
| Interest Expense | 66 |
| | 70 |
| | 137 |
| | 140 |
| 83 |
| | 66 |
| | 165 |
| | 137 |
|
| Income Before Income Taxes | 205 |
| | 250 |
| | 328 |
| | 392 |
| 250 |
| | 205 |
| | 369 |
| | 328 |
|
| Income Tax Expense | 37 |
| | 92 |
| | 57 |
| | 144 |
| 49 |
| | 37 |
| | 72 |
| | 57 |
|
| Net Income | $ | 168 |
| | $ | 158 |
| | $ | 271 |
| | $ | 248 |
| $ | 201 |
| | $ | 168 |
| | $ | 297 |
| | $ | 271 |
|
| Other Comprehensive (Loss) Income, net of tax |
| |
| |
|
| |
|
| |
| Other Comprehensive Income (Loss), net of tax | |
| |
| |
|
| |
|
|
| Unrealized (losses) gains on available-for-sale securities | (1 | ) | | 1 |
| | (1 | ) | | 2 |
| — |
| | (1 | ) | | 1 |
| | (1 | ) |
| Comprehensive Income | $ | 167 |
| | $ | 159 |
| | $ | 270 |
|
| $ | 250 |
| $ | 201 |
| | $ | 167 |
| | $ | 298 |
|
| $ | 270 |
|
See Notes to Condensed Consolidated Financial Statements
27
DUKE ENERGY FLORIDA, LLC
Condensed Consolidated Balance Sheets
(Unaudited)
| | | (in millions) | June 30, 2018 |
| | December 31, 2017 |
| June 30, 2019 |
| | December 31, 2018 |
|
| ASSETS | | | | | | |
| Current Assets | | | | | | |
| Cash and cash equivalents | $ | 14 |
| | $ | 13 |
| $ | 16 |
| | $ | 36 |
|
| 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 (net of allowance for doubtful accounts of $3 at 2019 and 2018) | | 84 |
| | 143 |
|
| Receivables of VIEs (net of allowance for doubtful accounts of $3 at 2019 and 2018) | | 480 |
| | 362 |
|
| Receivables from affiliated companies | 6 |
| | 2 |
| 18 |
| | 28 |
|
| Notes receivable from affiliated companies | 423 |
| | 313 |
| |
| Inventory | 546 |
| | 574 |
| 499 |
| | 504 |
|
| 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 |
| |
| Regulatory assets (includes $52 at 2019 and 2018 related to VIEs) | | 452 |
| | 434 |
|
| Other (includes $31 at 2019 and $39 at 2018 related to VIEs) | | 46 |
| | 46 |
|
| Total current assets | 2,089 |
| | 1,763 |
| 1,595 |
| | 1,553 |
|
| Property, Plant and Equipment | | | | | | |
| Cost | 18,353 |
| | 17,730 |
| 19,461 |
| | 18,792 |
|
| Accumulated depreciation and amortization | (5,079 | ) | | (4,947 | ) | (5,073 | ) | | (4,968 | ) |
| Net property, plant and equipment | 13,274 |
| | 12,783 |
| 14,388 |
| | 13,824 |
|
| Other Noncurrent Assets | | | | | | |
| Regulatory assets (includes $1,071 at 2018 and $1,091 at 2017 related to VIEs) | 2,163 |
| | 2,503 |
| |
| Regulatory assets (includes $1,019 at 2019 and $1,041 at 2018 related to VIEs) | | 2,299 |
| | 2,454 |
|
| Nuclear decommissioning trust funds | 715 |
| | 736 |
| 729 |
| | 659 |
|
| Operating lease right-of-use assets, net | | 432 |
| | — |
|
| Other | 307 |
| | 284 |
| 311 |
| | 311 |
|
| Total other noncurrent assets | 3,185 |
| | 3,523 |
| 3,771 |
| | 3,424 |
|
| Total Assets | $ | 18,548 |
| | $ | 18,069 |
| $ | 19,754 |
| | $ | 18,801 |
|
| LIABILITIES AND EQUITY | | | | | | |
| Current Liabilities | | | | | | |
| Accounts payable | $ | 440 |
| | $ | 602 |
| $ | 403 |
| | $ | 511 |
|
| Accounts payable to affiliated companies | 63 |
| | 74 |
| 62 |
| | 91 |
|
| Notes payable to affiliated companies | | 477 |
| | 108 |
|
| Taxes accrued | 115 |
| | 34 |
| 148 |
| | 74 |
|
| Interest accrued | 53 |
| | 56 |
| 70 |
| | 75 |
|
| Current maturities of long-term debt (includes $53 at 2018 and 2017 related to VIEs) | 269 |
| | 768 |
| |
| Current maturities of long-term debt (includes $54 at 2019 and $53 at 2018 related to VIEs) | | 671 |
| | 270 |
|
| Asset retirement obligations | 5 |
| | — |
| 3 |
| | 5 |
|
| Regulatory liabilities | 76 |
| | 74 |
| 83 |
| | 102 |
|
| Other | 357 |
| | 334 |
| 461 |
| | 406 |
|
| Total current liabilities | 1,378 |
| | 1,942 |
| 2,378 |
| | 1,642 |
|
| Long-Term Debt (includes $1,361 at 2018 and $1,389 at 2017 related to VIEs) | 7,183 |
| | 6,327 |
| |
| Long-Term Debt (includes $1,332 at 2019 and $1,336 at 2018 related to VIEs) | | 6,542 |
| | 7,051 |
|
| Other Noncurrent Liabilities | | | | | | |
| Deferred income taxes | 2,007 |
| | 1,761 |
| 2,105 |
| | 1,986 |
|
| Asset retirement obligations | 597 |
| | 742 |
| 574 |
| | 586 |
|
| Regulatory liabilities | 1,194 |
| | 1,307 |
| 1,040 |
| | 1,094 |
|
| Operating lease liabilities | | 370 |
| | — |
|
| Accrued pension and other post-retirement benefit costs | 243 |
| | 264 |
| 248 |
| | 254 |
|
| Other | 58 |
| | 108 |
| 104 |
| | 93 |
|
| Total other noncurrent liabilities | 4,099 |
| | 4,182 |
| 4,441 |
| | 4,013 |
|
| Commitments and Contingencies |
| |
|
| |
|
| Equity | | | | | | |
| Member's equity | 5,890 |
| | 5,614 |
| 6,394 |
| | 6,097 |
|
| Accumulated other comprehensive (loss) income | (2 | ) | | 4 |
| |
| Accumulated other comprehensive loss | | (1 | ) | | (2 | ) |
| Total equity | 5,888 |
| | 5,618 |
| 6,393 |
| | 6,095 |
|
| Total Liabilities and Equity | $ | 18,548 |
| | $ | 18,069 |
| $ | 19,754 |
| | $ | 18,801 |
|
See Notes to Condensed Consolidated Financial Statements
28
DUKE ENERGY FLORIDA, LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | | Six Months Ended | Six Months Ended |
| | June 30, | June 30, |
| (in millions) | 2018 |
| | 2017 |
| 2019 |
| | 2018 |
|
| CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | |
| Net income | $ | 271 |
| | $ | 248 |
| $ | 297 |
| | $ | 271 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | |
| Depreciation, amortization and accretion | 374 |
| | 274 |
| 423 |
| | 374 |
|
| Equity component of AFUDC | (26 | ) | | (22 | ) | (2 | ) | | (26 | ) |
| Impairment charges | — |
| | 2 |
| |
| Losses on sales of other assets | | 1 |
| | — |
|
| Deferred income taxes | 206 |
| | 186 |
| 82 |
| | 206 |
|
| Accrued pension and other post-retirement benefit costs | 3 |
| | 2 |
| 5 |
| | 3 |
|
| Contributions to qualified pension plans | (20 | ) | | — |
| — |
| | (20 | ) |
| Payments for asset retirement obligations | (19 | ) | | (27 | ) | (17 | ) | | (19 | ) |
| (Increase) decrease in | | | | | | |
| Net realized and unrealized mark-to-market and hedging transactions | 6 |
| | 2 |
| 2 |
| | 6 |
|
| Receivables | (92 | ) | | (65 | ) | (101 | ) | | (92 | ) |
| Receivables from affiliated companies | (4 | ) | | — |
| 10 |
| | (4 | ) |
| Inventory | 28 |
| | 72 |
| 1 |
| | 28 |
|
| Other current assets | (114 | ) | | (67 | ) | 8 |
| | (114 | ) |
| Increase (decrease) in | | | | | | |
| Accounts payable | 34 |
| | 7 |
| 27 |
| | 34 |
|
| Accounts payable to affiliated companies | (11 | ) | | (83 | ) | (29 | ) | | (11 | ) |
| Taxes accrued | 81 |
| | 78 |
| 74 |
| | 81 |
|
| Other current liabilities | (21 | ) | | (57 | ) | (80 | ) | | (21 | ) |
| Other assets | (196 | ) | | (32 | ) | (81 | ) | | (196 | ) |
| Other liabilities | (10 | ) | | (5 | ) | (9 | ) | | (10 | ) |
| Net cash provided by operating activities | 490 |
| | 513 |
| 611 |
| | 490 |
|
| CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | |
| Capital expenditures | (731 | ) | | (893 | ) | (873 | ) | | (731 | ) |
| Purchases of debt and equity securities | (239 | ) | | (289 | ) | (621 | ) | | (239 | ) |
| Proceeds from sales and maturities of debt and equity securities | 264 |
| | 318 |
| 631 |
| | 264 |
|
| Notes receivable from affiliated companies | (110 | ) | | (230 | ) | — |
| | (110 | ) |
| Other | (35 | ) | | — |
| (37 | ) | | (35 | ) |
| Net cash used in investing activities | (851 | ) | | (1,094 | ) | (900 | ) | | (851 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | |
| Proceeds from the issuance of long-term debt | 989 |
| | 908 |
| 25 |
| | 989 |
|
| Payments for the redemption of long-term debt | (635 | ) | | (57 | ) | (136 | ) | | (635 | ) |
| Notes payable to affiliated companies | — |
| | (297 | ) | 369 |
| | — |
|
| Other | (1 | ) | | (1 | ) | 3 |
| | (1 | ) |
| Net cash provided by financing activities | 353 |
| | 553 |
| 261 |
| | 353 |
|
| Net decrease in cash, cash equivalents and restricted cash | (8 | ) | | (28 | ) | (28 | ) | | (8 | ) |
| Cash, cash equivalents and restricted cash at beginning of period | 53 |
| | 69 |
| 75 |
| | 53 |
|
| Cash, cash equivalents and restricted cash at end of period | $ | 45 |
| | $ | 41 |
| $ | 47 |
| | $ | 45 |
|
| Supplemental Disclosures: | | | | | | |
| Significant non-cash transactions: | | | | | | |
| Accrued capital expenditures | $ | 194 |
| | $ | 122 |
| $ | 166 |
| | $ | 194 |
|
See Notes to Condensed Consolidated Financial Statements
29
DUKE ENERGY FLORIDA, LLC
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
| | | | | | | | | Three Months Ended June 30, 2018 and 2019 |
| | | | Accumulated | | | | | Accumulated | | |
| | | | Other | | | | | Other | | |
| | | | Comprehensive | | | | | Comprehensive | | |
| | | | Income (Loss) | | | | | Income (Loss) | | |
| | | | Net Unrealized |
| | | | | Net Unrealized |
| | |
| | | | Gains (Losses) on |
| | | | | Gains (Losses) on |
| | |
| | Member's |
| | Available-for-Sale |
| | Total |
| Member's |
| | Available-for-Sale |
| | Total |
|
| (in millions) | Equity |
| | Securities |
| | Equity |
| Equity |
| | Securities |
| | Equity |
|
| Balance at December 31, 2016 | $ | 4,899 |
| | $ | 1 |
| | $ | 4,900 |
| |
| Balance at March 31, 2018 | | $ | 5,723 |
| | $ | (2 | ) | | $ | 5,721 |
|
| Net income | 248 |
| | — |
| | 248 |
| 168 |
| | — |
| | 168 |
|
| Other comprehensive income | — |
| | 2 |
| | 2 |
| |
| Other | 2 |
| | — |
| | 2 |
| |
| Balance at June 30, 2017 | $ | 5,149 |
| | $ | 3 |
| | $ | 5,152 |
| |
| Other comprehensive loss | | — |
| | (1 | ) | | (1 | ) |
Other(a) | | (1 | ) | | 1 |
| | — |
|
| Balance at June 30, 2018 | | $ | 5,890 |
| | $ | (2 | ) | | $ | 5,888 |
|
| | | | | | | | | | | |
| Balance at March 31, 2019 | | $ | 6,193 |
| | $ | (1 | ) | | $ | 6,192 |
|
| Net income | | 201 |
| | — |
| | 201 |
|
| Balance at June 30, 2019 | | $ | 6,394 |
| | $ | (1 | ) | | $ | 6,393 |
|
| | | | | | | |
| | | Six Months Ended June 30, 2018 and 2019 |
| | | | | 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, 2017 | $ | 5,614 |
| | $ | 4 |
| | $ | 5,618 |
| $ | 5,614 |
| | $ | 4 |
| | $ | 5,618 |
|
| Net income | 271 |
| | — |
| | 271 |
| 271 |
| | — |
| | 271 |
|
| Other comprehensive loss | — |
| | (1 | ) | | (1 | ) | — |
| | (1 | ) | | (1 | ) |
Other(a) | 5 |
| | (5 | ) | | — |
| 5 |
| | (5 | ) | | — |
|
| Balance at June 30, 2018 | $ | 5,890 |
| | $ | (2 | ) | | $ | 5,888 |
| $ | 5,890 |
| | $ | (2 | ) | | $ | 5,888 |
|
| | | | | | | |
| Balance at December 31, 2018 | | $ | 6,097 |
| | $ | (2 | ) | | $ | 6,095 |
|
| Net income | | 297 |
| | — |
| | 297 |
|
| Other comprehensive income | | — |
| | 1 |
| | 1 |
|
| Balance at June 30, 2019 | | $ | 6,394 |
| | $ | (1 | ) | | $ | 6,393 |
|
| |
| (a) | Amounts in Member's Equity and Accumulated Other Comprehensive Income (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. |
See Notes to Condensed Consolidated Financial Statements
30
DUKE ENERGY OHIO, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
| | | | 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 |
| 2019 |
| | 2018 |
| | 2019 |
|
| 2018 |
|
| Operating Revenues | | | | | | | | | | | | | | |
| Regulated electric | $ | 346 |
| | $ | 328 |
| | $ | 682 |
| | $ | 665 |
| $ | 336 |
| | $ | 346 |
| | $ | 691 |
| | $ | 682 |
|
| Regulated natural gas | 103 |
| | 100 |
| | 277 |
| | 270 |
| 97 |
| | 103 |
| | 273 |
| | 277 |
|
| Nonregulated electric and other | 10 |
| | 9 |
| | 24 |
| | 20 |
| — |
| | 10 |
| | — |
| | 24 |
|
| Total operating revenues | 459 |
| | 437 |
| | 983 |
| | 955 |
| 433 |
| | 459 |
| | 964 |
| | 983 |
|
| Operating Expenses | | | | | | | | | | | | | | |
| Fuel used in electric generation and purchased power – regulated | 93 |
| | 86 |
| | 185 |
| | 183 |
| 86 |
| | 93 |
| | 179 |
| | 185 |
|
| Fuel used in electric generation and purchased power – nonregulated | 14 |
| | 14 |
| | 29 |
| | 29 |
| — |
| | 14 |
| | — |
| | 29 |
|
| Cost of natural gas | 15 |
| | 10 |
| | 69 |
| | 64 |
| 10 |
| | 15 |
| | 64 |
| | 69 |
|
| Operation, maintenance and other | 130 |
| | 132 |
| | 261 |
| | 263 |
| 123 |
| | 130 |
| | 255 |
| | 261 |
|
| Depreciation and amortization | 62 |
| | 63 |
| | 132 |
| | 130 |
| 66 |
| | 62 |
| | 130 |
| | 132 |
|
| Property and other taxes | 68 |
| | 67 |
| | 145 |
| | 139 |
| 74 |
| | 68 |
| | 158 |
| | 145 |
|
| Impairment charges | — |
| | 1 |
| | — |
| | 1 |
| |
| Total operating expenses | 382 |
| | 373 |
| | 821 |
| | 809 |
| 359 |
| | 382 |
| | 786 |
| | 821 |
|
| Loss on Sales of Other Assets and Other, net | — |
| | — |
| | (106 | ) | | — |
| |
| Losses on Sales of Other Assets and Other, net | | — |
| | — |
| | — |
| | (106 | ) |
| Operating Income | 77 |
| | 64 |
| | 56 |
| | 146 |
| 74 |
| | 77 |
| | 178 |
| | 56 |
|
| Other Income and Expenses, net | 8 |
| | 5 |
| | 14 |
| | 10 |
| 6 |
| | 8 |
| | 15 |
| | 14 |
|
| Interest Expense | 23 |
| | 23 |
| | 45 |
| | 45 |
| 24 |
| | 23 |
| | 54 |
| | 45 |
|
| Income Before Income Taxes | 62 |
| | 46 |
| | 25 |
| | 111 |
| 56 |
| | 62 |
| | 139 |
| | 25 |
|
| Income Tax Expense | 16 |
| | 16 |
| | 4 |
| | 39 |
| 9 |
| | 16 |
| | 23 |
| | 4 |
|
| Net Income and Comprehensive Income | $ | 46 |
| | $ | 30 |
| | $ | 21 |
| | $ | 72 |
| $ | 47 |
| | $ | 46 |
| | $ | 116 |
| | $ | 21 |
|
See Notes to Condensed Consolidated Financial Statements
31
DUKE ENERGY OHIO, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
| | | (in millions) | June 30, 2018 |
| | December 31, 2017 |
| June 30, 2019 |
| | December 31, 2018 |
|
| ASSETS | | | | | | |
| Current Assets | | | | | | |
| Cash and cash equivalents | $ | 7 |
| | $ | 12 |
| $ | 8 |
| | $ | 21 |
|
| Receivables (net of allowance for doubtful accounts of $3 at 2018 and 2017) | 87 |
| | 68 |
| |
| Receivables (net of allowance for doubtful accounts of $3 at 2019 and $2 at 2018) | | 80 |
| | 102 |
|
| Receivables from affiliated companies | 71 |
| | 133 |
| 50 |
| | 114 |
|
| Notes receivable from affiliated companies | — |
| | 14 |
| |
| Inventory | 124 |
| | 133 |
| 124 |
| | 126 |
|
| Regulatory assets | 46 |
| | 49 |
| 47 |
| | 33 |
|
| Other | 30 |
| | 39 |
| 32 |
| | 24 |
|
| Total current assets | 365 |
| | 448 |
| 341 |
| | 420 |
|
| Property, Plant and Equipment | | | | | | |
| Cost | 9,024 |
| | 8,732 |
| 9,776 |
| | 9,360 |
|
| Accumulated depreciation and amortization | (2,696 | ) | | (2,691 | ) | (2,761 | ) | | (2,717 | ) |
| Net property, plant and equipment | 6,328 |
| | 6,041 |
| 7,015 |
| | 6,643 |
|
| Other Noncurrent Assets | | | | | | |
| Goodwill | 920 |
| | 920 |
| 920 |
| | 920 |
|
| Regulatory assets | 425 |
| | 445 |
| 545 |
| | 531 |
|
| Operating lease right-of-use assets, net | | 22 |
| | — |
|
| Other | 63 |
| | 21 |
| 46 |
| | 41 |
|
| Total other noncurrent assets | 1,408 |
| | 1,386 |
| 1,533 |
| | 1,492 |
|
| Total Assets | $ | 8,101 |
| | $ | 7,875 |
| $ | 8,889 |
| | $ | 8,555 |
|
| LIABILITIES AND EQUITY | | | | | | |
| Current Liabilities | | | | | | |
| Accounts payable | $ | 267 |
| | $ | 313 |
| $ | 257 |
| | $ | 316 |
|
| Accounts payable to affiliated companies | 47 |
| | 62 |
| 78 |
| | 78 |
|
| Notes payable to affiliated companies | 219 |
| | 29 |
| 203 |
| | 274 |
|
| Taxes accrued | 127 |
| | 190 |
| 135 |
| | 202 |
|
| Interest accrued | 21 |
| | 21 |
| 31 |
| | 22 |
|
| Current maturities of long-term debt | 452 |
| | 3 |
| 100 |
| | 551 |
|
| Asset retirement obligations | 5 |
| | 3 |
| 6 |
| | 6 |
|
| Regulatory liabilities | 51 |
| | 36 |
| 67 |
| | 57 |
|
| Other | 71 |
| | 71 |
| 76 |
| | 74 |
|
| Total current liabilities | 1,260 |
| | 728 |
| 953 |
| | 1,580 |
|
| Long-Term Debt | 1,589 |
| | 2,039 |
| 2,384 |
| | 1,589 |
|
| Long-Term Debt Payable to Affiliated Companies | 25 |
| | 25 |
| 25 |
| | 25 |
|
| Other Noncurrent Liabilities | | | | | | |
| Deferred income taxes | 778 |
| | 781 |
| 872 |
| | 817 |
|
| Asset retirement obligations | 84 |
| | 81 |
| 83 |
| | 87 |
|
| Regulatory liabilities | 896 |
| | 891 |
| 802 |
| | 840 |
|
| Operating lease liabilities | | 21 |
| | — |
|
| Accrued pension and other post-retirement benefit costs | 83 |
| | 59 |
| 94 |
| | 79 |
|
| Other | 96 |
| | 108 |
| 94 |
| | 93 |
|
| Total other noncurrent liabilities | 1,937 |
| | 1,920 |
| 1,966 |
| | 1,916 |
|
| Commitments and Contingencies | | | | | | |
| Equity | | | | | | |
| Common stock, $8.50 par value, 120 million shares authorized; 90 million shares outstanding at 2018 and 2017 | 762 |
| | 762 |
| |
| Common stock, $8.50 par value, 120 million shares authorized; 90 million shares outstanding at 2019 and 2018 | | 762 |
| | 762 |
|
| Additional paid-in capital | 2,776 |
| | 2,670 |
| 2,776 |
| | 2,776 |
|
| Accumulated deficit | (248 | ) | | (269 | ) | |
| Retained Earnings (Accumulated deficit) | | 23 |
| | (93 | ) |
| Total equity | 3,290 |
| | 3,163 |
| 3,561 |
| | 3,445 |
|
| Total Liabilities and Equity | $ | 8,101 |
| | $ | 7,875 |
| $ | 8,889 |
| | $ | 8,555 |
|
See Notes to Condensed Consolidated Financial Statements
32
DUKE ENERGY OHIO, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | | Six Months Ended | Six Months Ended |
| | June 30, | June 30, |
| (in millions) | 2018 |
| | 2017 |
| 2019 |
| | 2018 |
|
| CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | |
| Net income | $ | 21 |
| | $ | 72 |
| $ | 116 |
| | $ | 21 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | |
| Depreciation and amortization | 134 |
| | 132 |
| 132 |
| | 134 |
|
| Equity component of AFUDC | (8 | ) | | (5 | ) | (7 | ) | | (8 | ) |
| Losses on sales of other assets | 106 |
| | — |
| — |
| | 106 |
|
| Impairment charges | — |
| | 1 |
| |
| Deferred income taxes | (2 | ) | | 64 |
| 45 |
| | (2 | ) |
| Accrued pension and other post-retirement benefit costs | 2 |
| | 2 |
| — |
| | 2 |
|
| Payments for asset retirement obligations | (2 | ) | | (3 | ) | (5 | ) | | (2 | ) |
| Provision for rate refunds | 19 |
| | — |
| 3 |
| | 19 |
|
| (Increase) decrease in | | | | | | |
| Receivables | (7 | ) | | 11 |
| 24 |
| | (7 | ) |
| Receivables from affiliated companies | 62 |
| | 55 |
| 64 |
| | 62 |
|
| Inventory | 9 |
| | 6 |
| 2 |
| | 9 |
|
| Other current assets | 24 |
| | (11 | ) | (13 | ) | | 24 |
|
| Increase (decrease) in | | | | | | |
| Accounts payable | (34 | ) | | (4 | ) | (44 | ) | | (34 | ) |
| Accounts payable to affiliated companies | (15 | ) | | (16 | ) | — |
| | (15 | ) |
| Taxes accrued | (63 | ) | | (79 | ) | (67 | ) | | (63 | ) |
| Other current liabilities | 8 |
| | (15 | ) | 2 |
| | 8 |
|
| Other assets | (7 | ) | | (12 | ) | (18 | ) | | (7 | ) |
| Other liabilities | (18 | ) | | (8 | ) | (15 | ) | | (18 | ) |
| Net cash provided by operating activities | 229 |
| | 190 |
| 219 |
| | 229 |
|
| CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | |
| Capital expenditures | (392 | ) | | (286 | ) | (473 | ) | | (392 | ) |
| Cost of removal, net of salvage | (43 | ) | | (13 | ) | |
| Notes receivable from affiliated companies | 14 |
| | 31 |
| — |
| | 14 |
|
| Other | | (31 | ) | | (43 | ) |
| Net cash used in investing activities | (421 | ) | | (268 | ) | (504 | ) | | (421 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | |
| Proceeds from the issuance of long-term debt | — |
| | 93 |
| 794 |
| | — |
|
| Payments for the redemption of long-term debt | (3 | ) | | (1 | ) | (451 | ) | | (3 | ) |
| Notes payable to affiliated companies | 190 |
| | 8 |
| (71 | ) | | 190 |
|
| Dividends to parent | — |
| | (25 | ) | |
| Other | — |
| | (1 | ) | |
| Net cash provided by financing activities | 187 |
| | 74 |
| 272 |
| | 187 |
|
| Net decrease in cash and cash equivalents | (5 | ) | | (4 | ) | (13 | ) | | (5 | ) |
| Cash and cash equivalents at beginning of period | 12 |
| | 13 |
| 21 |
| | 12 |
|
| Cash and cash equivalents at end of period | $ | 7 |
| | $ | 9 |
| $ | 8 |
| | $ | 7 |
|
| Supplemental Disclosures: | | | | | | |
| Significant non-cash transactions: | | | | | | |
| Accrued capital expenditures | $ | 70 |
| | $ | 59 |
| $ | 93 |
| | $ | 70 |
|
| Non-cash equity contribution from parent | 106 |
| | — |
| — |
| | 106 |
|
See Notes to Condensed Consolidated Financial Statements
33
DUKE ENERGY OHIO, INC.
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
|
| | | | | | | | | | | | | | | |
| | Three Months Ended June 30, 2018 and 2019 |
| | | | Additional |
| | Retained |
| | |
| | Common |
| | Paid-in |
| | Earnings |
| | Total |
|
| (in millions) | Stock |
| | Capital |
| | (Deficit) |
| | Equity |
|
| Balance at March 31, 2018 | $ | 762 |
| | $ | 2,670 |
| | $ | (294 | ) | | $ | 3,138 |
|
| Net income | — |
| | — |
| | 46 |
| | 46 |
|
Contribution from parent(a) | — |
| | 106 |
| | — |
| | 106 |
|
| Balance at June 30, 2018 | $ | 762 |
| | $ | 2,776 |
| | $ | (248 | ) | | $ | 3,290 |
|
| | | | | | | | |
| Balance at March 31, 2019 | $ | 762 |
| | $ | 2,776 |
| | $ | (24 | ) | | $ | 3,514 |
|
| Net income | — |
| | — |
| | 47 |
| | 47 |
|
| Balance at June 30, 2019 | $ | 762 |
| | $ | 2,776 |
| | $ | 23 |
| | $ | 3,561 |
|
| | | | | | | | |
| | Six Months Ended June 30, 2018 and 2019 |
| | | | Additional |
| | Retained |
| | |
| | Common |
| | Paid-in |
| | Earnings |
| | Total |
|
| (in millions) | Stock |
| | Capital |
| | (Deficit) |
| | Equity |
|
| 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 |
|
| | | | | | | | |
| Balance at December 31, 2018 | $ | 762 |
| | $ | 2,776 |
| | $ | (93 | ) | | $ | 3,445 |
|
| Net income | — |
| | — |
| | 116 |
| | 116 |
|
| Balance at June 30, 2019 | $ | 762 |
|
| $ | 2,776 |
|
| $ | 23 |
|
| $ | 3,561 |
|
|
| | | | | | | | | | | | | | | |
| | | | 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 Ohio to its parent. |
See Notes to Condensed Consolidated Financial Statements
34
DUKE ENERGY INDIANA, LLC
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
| | | | 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 |
| 2019 |
| | 2018 |
| | 2019 |
| | 2018 |
|
| Operating Revenues | $ | 738 |
| | $ | 742 |
| | $ | 1,469 |
| | $ | 1,500 |
| $ | 714 |
| | $ | 738 |
| | $ | 1,482 |
| | $ | 1,469 |
|
| Operating Expenses | | | | | | | | | | | | | | |
| Fuel used in electric generation and purchased power | 226 |
| | 234 |
| | 458 |
| | 485 |
| 229 |
| | 226 |
| | 486 |
| | 458 |
|
| Operation, maintenance and other | 197 |
| | 194 |
| | 378 |
| | 369 |
| 188 |
| | 197 |
| | 377 |
| | 378 |
|
| Depreciation and amortization | 126 |
| | 91 |
| | 256 |
| | 216 |
| 132 |
| | 126 |
| | 263 |
| | 256 |
|
| Property and other taxes | 20 |
| | 15 |
| | 40 |
| | 37 |
| 20 |
| | 20 |
| | 39 |
| | 40 |
|
| Total operating expenses | 569 |
| | 534 |
| | 1,132 |
| | 1,107 |
| 569 |
| | 569 |
| | 1,165 |
| | 1,132 |
|
| Gains on Sales of Other Assets and Other, net | | 3 |
|
| — |
| | — |
| | — |
|
| Operating Income | 169 |
| | 208 |
|
| 337 |
|
| 393 |
| 148 |
| | 169 |
|
| 317 |
|
| 337 |
|
| Other Income and Expenses, net | 6 |
| | 11 |
| | 13 |
| | 20 |
| 8 |
| | 6 |
| | 27 |
| | 13 |
|
| Interest Expense | 43 |
| | 44 |
| | 83 |
| | 88 |
| 28 |
| | 43 |
| | 71 |
| | 83 |
|
| Income Before Income Taxes | 132 |
| | 175 |
|
| 267 |
|
| 325 |
| 128 |
| | 132 |
|
| 273 |
|
| 267 |
|
| Income Tax Expense | 34 |
| | 69 |
| | 69 |
| | 128 |
| 31 |
| | 34 |
| | 66 |
| | 69 |
|
| Net Income and Comprehensive Income | $ | 98 |
| | $ | 106 |
|
| $ | 198 |
|
| $ | 197 |
| $ | 97 |
| | $ | 98 |
|
| $ | 207 |
|
| $ | 198 |
|
See Notes to Condensed Consolidated Financial Statements
35
DUKE ENERGY INDIANA, LLC
Condensed Consolidated Balance Sheets
(Unaudited)
| | | (in millions) | June 30, 2018 |
| | December 31, 2017 |
| June 30, 2019 |
| | December 31, 2018 |
|
| ASSETS | | | | | | |
| Current Assets | | | | | | |
| Cash and cash equivalents | $ | 24 |
| | $ | 9 |
| $ | 12 |
| | $ | 24 |
|
| Receivables (net of allowance for doubtful accounts of $2 at 2018 and 2017) | 54 |
| | 57 |
| |
| Receivables (net of allowance for doubtful accounts of $3 at 2019 and $2 at 2018) | | 49 |
| | 52 |
|
| Receivables from affiliated companies | 89 |
| | 125 |
| 83 |
| | 122 |
|
| Inventory | 470 |
| | 450 |
| 463 |
| | 422 |
|
| Regulatory assets | 191 |
| | 165 |
| 130 |
| | 175 |
|
| Other | 52 |
| | 30 |
| 42 |
| | 35 |
|
| Total current assets | 880 |
| | 836 |
| 779 |
| | 830 |
|
| Property, Plant and Equipment | | | | | | |
| Cost | 15,213 |
| | 14,948 |
| 15,831 |
| | 15,443 |
|
| Accumulated depreciation and amortization | (4,767 | ) | | (4,662 | ) | (5,104 | ) | | (4,914 | ) |
| Net property, plant and equipment | 10,446 |
| | 10,286 |
| 10,727 |
| | 10,529 |
|
| Other Noncurrent Assets | | | | | | |
| Regulatory assets | 1,021 |
| | 978 |
| 1,038 |
| | 982 |
|
| Operating lease right-of-use assets, net | | 60 |
| | — |
|
| Other | 224 |
| | 189 |
| 203 |
| | 194 |
|
| Total other noncurrent assets | 1,245 |
| | 1,167 |
| 1,301 |
| | 1,176 |
|
| Total Assets | $ | 12,571 |
| | $ | 12,289 |
| $ | 12,807 |
| | $ | 12,535 |
|
| LIABILITIES AND EQUITY | | | | | | |
| Current Liabilities | | | | | | |
| Accounts payable | $ | 171 |
| | $ | 196 |
| $ | 224 |
| | $ | 200 |
|
| Accounts payable to affiliated companies | 58 |
| | 78 |
| 66 |
| | 83 |
|
| Notes payable to affiliated companies | 221 |
| | 161 |
| 165 |
| | 167 |
|
| Taxes accrued | 54 |
| | 95 |
| 25 |
| | 43 |
|
| Interest accrued | 59 |
| | 57 |
| 59 |
| | 58 |
|
| Current maturities of long-term debt | 62 |
| | 3 |
| 3 |
| | 63 |
|
| Asset retirement obligations | 98 |
| | 54 |
| 115 |
| | 109 |
|
| Regulatory liabilities | 19 |
| | 24 |
| 24 |
| | 25 |
|
| Other | 123 |
| | 104 |
| 120 |
| | 107 |
|
| Total current liabilities | 865 |
| | 772 |
| 801 |
| | 855 |
|
| Long-Term Debt | 3,570 |
| | 3,630 |
| 3,570 |
| | 3,569 |
|
| Long-Term Debt Payable to Affiliated Companies | 150 |
| | 150 |
| 150 |
| | 150 |
|
| Other Noncurrent Liabilities | | | | | | |
| Deferred income taxes | 957 |
| | 925 |
| 1,084 |
| | 1,009 |
|
| Asset retirement obligations | 758 |
| | 727 |
| 604 |
| | 613 |
|
| Regulatory liabilities | 1,755 |
| | 1,723 |
| 1,693 |
| | 1,722 |
|
| Operating lease liabilities | | 56 |
| | — |
|
| Accrued pension and other post-retirement benefit costs | 111 |
| | 76 |
| 142 |
| | 115 |
|
| Investment tax credits | 147 |
| | 147 |
| 147 |
| | 147 |
|
| Other | 14 |
| | 18 |
| 14 |
| | 16 |
|
| Total other noncurrent liabilities | 3,742 |
| | 3,616 |
| 3,740 |
| | 3,622 |
|
| Commitments and Contingencies | | | | | | |
| Equity | | | | | | |
| Member's Equity | 4,244 |
| | 4,121 |
| 4,546 |
| | 4,339 |
|
| Total Liabilities and Equity | $ | 12,571 |
| | $ | 12,289 |
| $ | 12,807 |
| | $ | 12,535 |
|
See Notes to Condensed Consolidated Financial Statements
36
DUKE ENERGY INDIANA, LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | | Six Months Ended | Six Months Ended |
| | June 30, | June 30, |
| (in millions) | 2018 |
| | 2017 |
| 2019 |
| | 2018 |
|
| CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | |
| Net income | $ | 198 |
| | $ | 197 |
| $ | 207 |
| | $ | 198 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | |
| Depreciation, amortization and accretion | 258 |
| | 218 |
| 265 |
| | 258 |
|
| Equity component of AFUDC | (7 | ) | | (12 | ) | (9 | ) | | (7 | ) |
| Deferred income taxes | 36 |
| | 131 |
| 60 |
| | 36 |
|
| Accrued pension and other post-retirement benefit costs | 3 |
| | 3 |
| 2 |
| | 3 |
|
| Contributions to qualified pension plans | (8 | ) | | — |
| — |
| | (8 | ) |
| Payments for asset retirement obligations | (21 | ) | | (17 | ) | (17 | ) | | (21 | ) |
| Provision for rate refunds | 49 |
| | — |
| — |
| | 49 |
|
| (Increase) decrease in | | | | | | |
| Net realized and unrealized mark-to-market and hedging transactions | — |
| | 1 |
| |
| Receivables | 2 |
| | 73 |
| 5 |
| | 2 |
|
| Receivables from affiliated companies | 36 |
| | 27 |
| 39 |
| | 36 |
|
| Inventory | (20 | ) | | 34 |
| (41 | ) | | (20 | ) |
| Other current assets | (35 | ) | | (15 | ) | 48 |
| | (35 | ) |
| Increase (decrease) in | | | | | | |
| Accounts payable | 33 |
| | (68 | ) | 26 |
| | 33 |
|
| Accounts payable to affiliated companies | (19 | ) | | (24 | ) | (17 | ) | | (19 | ) |
| Taxes accrued | (41 | ) | | (3 | ) | (18 | ) | | (41 | ) |
| Other current liabilities | 3 |
| | (11 | ) | (13 | ) | | 3 |
|
| Other assets | 20 |
| | (13 | ) | (34 | ) | | 20 |
|
| Other liabilities | (21 | ) | | (9 | ) | 14 |
| | (21 | ) |
| Net cash provided by operating activities | 466 |
| | 512 |
| 517 |
| | 466 |
|
| CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | |
| Capital expenditures | (416 | ) | | (397 | ) | (443 | ) | | (416 | ) |
| Purchases of debt and equity securities | (34 | ) | | (10 | ) | (14 | ) | | (34 | ) |
| Proceeds from sales and maturities of debt and equity securities | 13 |
| | 4 |
| 11 |
| | 13 |
|
| Notes receivable from affiliated companies | — |
| | 67 |
| |
| Other | 2 |
| | (23 | ) | (21 | ) | | 2 |
|
| Net cash used in investing activities | (435 | ) | | (359 | ) | (467 | ) | | (435 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | |
| Payments for the redemption of long-term debt | — |
| | (2 | ) | (60 | ) | | — |
|
| Notes payable to affiliated companies | 60 |
| | — |
| (2 | ) | | 60 |
|
| Distributions to parent | (75 | ) | | (150 | ) | — |
| | (75 | ) |
| Other | (1 | ) | | (1 | ) | — |
| | (1 | ) |
| Net cash used in financing activities | (16 | ) | | (153 | ) | (62 | ) | | (16 | ) |
| Net increase in cash and cash equivalents | 15 |
|
| — |
| |
| Net (decrease) increase in cash and cash equivalents | | (12 | ) |
| 15 |
|
| Cash and cash equivalents at beginning of period | 9 |
| | 17 |
| 24 |
| | 9 |
|
| Cash and cash equivalents at end of period | $ | 24 |
| | $ | 17 |
| $ | 12 |
| | $ | 24 |
|
| Supplemental Disclosures: | | | | | | |
| Significant non-cash transactions: | | | | | | |
| Accrued capital expenditures | $ | 62 |
| | $ | 81 |
| $ | 84 |
| | $ | 62 |
|
See Notes to Condensed Consolidated Financial Statements
37
DUKE ENERGY INDIANA, LLC
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
| | | | | Three Months Ended |
| | | | | June 30, 2018 and 2019 |
| | | Member's |
| | Member's |
| (in millions) | | Equity |
| | Equity |
| Balance at December 31, 2016 | | $ | 4,067 |
| |
| Balance at March 31, 2018 | | | $ | 4,221 |
|
| Net income | | 197 |
| | 98 |
|
| Distributions to parent | | (150 | ) | | (75 | ) |
| Balance at June 30, 2017 |
| $ | 4,114 |
| |
| Balance at June 30, 2018 | | | $ | 4,244 |
|
| | | | | |
| Balance at March 31, 2019 | | | $ | 4,449 |
|
| Net income | | | 97 |
|
| Balance at June 30, 2019 | | | $ | 4,546 |
|
| | | | |
| | | | Six Months Ended |
| | | | June 30, 2018 and 2019 |
| | | | Member's |
| (in millions) | | | Equity |
| Balance at December 31, 2017 | | $ | 4,121 |
| | $ | 4,121 |
|
| Net income | | 198 |
| | 198 |
|
| Distributions to parent | | (75 | ) | | (75 | ) |
| Balance at June 30, 2018 |
| $ | 4,244 |
|
| $ | 4,244 |
|
| | | | |
| Balance at December 31, 2018 | | | $ | 4,339 |
|
| Net income | | | 207 |
|
| Balance at June 30, 2019 | |
| $ | 4,546 |
|
See Notes to Condensed Consolidated Financial Statements
38
PIEDMONT NATURAL GAS COMPANY, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
| | | | Three Months Ended | | Six Months Ended | Three Months Ended | | Six Months Ended |
| | June 30, | | June 30, | June 30, | | June 30, |
| | 2018 |
| | 2017 |
| | 2018 |
| | 2017 |
| |
| (in millions) | | 2019 |
| | 2018 |
| | 2019 |
| | 2018 |
|
| Operating Revenues | $ | 215 |
| | $ | 201 |
| | $ | 768 |
| | $ | 701 |
| $ | 209 |
| | $ | 215 |
| | $ | 788 |
| | $ | 768 |
|
| Operating Expenses | | | | | | | | | | | | | | |
| Cost of natural gas | 74 |
| | 65 |
| | 333 |
| | 270 |
| 65 |
| | 74 |
| | 338 |
| | 333 |
|
| Operation, maintenance and other | 85 |
| | 76 |
| | 167 |
| | 153 |
| 83 |
| | 85 |
| | 163 |
| | 167 |
|
| Depreciation and amortization | 39 |
| | 36 |
| | 78 |
| | 71 |
| 42 |
| | 39 |
| | 84 |
| | 78 |
|
| Property and other taxes | 12 |
| | 12 |
| | 24 |
| | 25 |
| 13 |
| | 12 |
| | 25 |
| | 24 |
|
| Impairment charges | — |
| | 7 |
| | — |
| | 7 |
| |
| Total operating expenses | 210 |
| | 196 |
| | 602 |
| | 526 |
| 203 |
| | 210 |
| | 610 |
| | 602 |
|
| Operating Income | 5 |
| | 5 |
| | 166 |
| | 175 |
| 6 |
| | 5 |
| | 178 |
| | 166 |
|
| 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 |
| |
| Other Income and Expenses, net | | 6 |
| | 4 |
| | 12 |
| | 9 |
|
| Interest Expense | 20 |
| | 19 |
| | 41 |
| | 39 |
| 21 |
| | 20 |
| | 43 |
| | 41 |
|
| (Loss) Income Before Income Taxes | (11 | ) | | (13 | ) | | 134 |
| | 140 |
| (9 | ) | | (11 | ) | | 147 |
| | 134 |
|
| Income Tax (Benefit) Expense | (3 | ) | | (5 | ) | | 32 |
| | 53 |
| (2 | ) | | (3 | ) | | 32 |
| | 32 |
|
| Net (Loss) Income and Comprehensive (Loss) Income | $ | (8 | ) | | $ | (8 | ) | | $ | 102 |
| | $ | 87 |
| $ | (7 | ) | | $ | (8 | ) | | $ | 115 |
| | $ | 102 |
|
See Notes to Condensed Consolidated Financial Statements
39
PIEDMONT NATURAL GAS COMPANY, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
| | | (in millions) | June 30, 2018 |
| | December 31, 2017 |
| June 30, 2019 |
| | December 31, 2018 |
|
| 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 (net of allowance for doubtful accounts of $2 at 2019 and 2018) | | $ | 100 |
| | $ | 266 |
|
| Receivables from affiliated companies | 11 |
| | 7 |
| 17 |
| | 22 |
|
| Notes receivable from affiliated companies | 77 |
| | — |
| 16 |
| | — |
|
| Inventory | 38 |
| | 66 |
| 33 |
| | 70 |
|
| Regulatory assets | 35 |
| | 95 |
| 30 |
| | 54 |
|
| Other | 36 |
| | 52 |
| 57 |
| | 19 |
|
| Total current assets | 314 |
| | 514 |
| 253 |
| | 431 |
|
| Property, Plant and Equipment | | | | | | |
| Cost | 7,089 |
| | 6,725 |
| 7,966 |
| | 7,486 |
|
| Accumulated depreciation and amortization | (1,533 | ) | | (1,479 | ) | (1,620 | ) | | (1,575 | ) |
| Net property, plant and equipment | 5,556 |
| | 5,246 |
| 6,346 |
| | 5,911 |
|
| Other Noncurrent Assets | | | | | | |
| Goodwill | 49 |
| | 49 |
| 49 |
| | 49 |
|
| Regulatory assets | 297 |
| | 283 |
| 280 |
| | 303 |
|
| Operating lease right-of-use assets, net | | 26 |
| | — |
|
| Investments in equity method unconsolidated affiliates | 62 |
| | 61 |
| 81 |
| | 64 |
|
| Other | 65 |
| | 65 |
| 60 |
| | 52 |
|
| Total other noncurrent assets | 473 |
| | 458 |
| 496 |
| | 468 |
|
| Total Assets | $ | 6,343 |
| | $ | 6,218 |
| $ | 7,095 |
| | $ | 6,810 |
|
| LIABILITIES AND EQUITY | | | | | | |
| Current Liabilities | | | | | | |
| Accounts payable | $ | 133 |
| | $ | 125 |
| $ | 156 |
| | $ | 203 |
|
| Accounts payable to affiliated companies | 1 |
| | 13 |
| 52 |
| | 38 |
|
| Notes payable to affiliated companies | — |
| | 364 |
| — |
| | 198 |
|
| Taxes accrued | 23 |
| | 19 |
| 23 |
| | 84 |
|
| Interest accrued | 31 |
| | 31 |
| 33 |
| | 31 |
|
| Current maturities of long-term debt | 250 |
| | 250 |
| — |
| | 350 |
|
| Regulatory liabilities | 51 |
| | 3 |
| 67 |
| | 37 |
|
| Other | 53 |
| | 69 |
| 62 |
| | 58 |
|
| Total current liabilities | 542 |
| | 874 |
| 393 |
| | 999 |
|
| Long-Term Debt | 1,787 |
| | 1,787 |
| 2,384 |
| | 1,788 |
|
| Other Noncurrent Liabilities | | | | | | |
| Deferred income taxes | 569 |
| | 564 |
| 593 |
| | 551 |
|
| Asset retirement obligations | 15 |
| | 15 |
| 19 |
| | 19 |
|
| Regulatory liabilities | 1,183 |
| | 1,141 |
| 1,174 |
| | 1,181 |
|
| Operating lease liabilities | | 25 |
| | — |
|
| Accrued pension and other post-retirement benefit costs | 3 |
| | 5 |
| 6 |
| | 4 |
|
| Other | 180 |
| | 170 |
| 145 |
| | 177 |
|
| Total other noncurrent liabilities | 1,950 |
| | 1,895 |
| 1,962 |
| | 1,932 |
|
| Commitments and Contingencies |
| |
|
| |
|
| Equity | | | | | | |
| Common stock, no par value: 100 shares authorized and outstanding at 2018 and 2017 | 1,160 |
| | 860 |
| |
| Common stock, no par value: 100 shares authorized and outstanding at 2019 and 2018 | | 1,310 |
| | 1,160 |
|
| Retained earnings | 904 |
| | 802 |
| 1,046 |
| | 931 |
|
| Total equity | 2,064 |
| | 1,662 |
| 2,356 |
| | 2,091 |
|
| Total Liabilities and Equity | $ | 6,343 |
| | $ | 6,218 |
| $ | 7,095 |
| | $ | 6,810 |
|
See Notes to Condensed Consolidated Financial Statements
40
PIEDMONT NATURAL GAS COMPANY, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | | Six Months Ended | Six Months Ended |
| | June 30, | June 30, |
| (in millions) | 2018 |
| | 2017 |
| 2019 |
| | 2018 |
|
| CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | |
| Net income | $ | 102 |
| | $ | 87 |
| $ | 115 |
| | $ | 102 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | |
| Depreciation and amortization | 79 |
| | 74 |
| 85 |
| | 79 |
|
| Impairment charges | — |
| | 7 |
| |
| Deferred income taxes | 4 |
| | 100 |
| 40 |
| | 4 |
|
| Equity in earnings from unconsolidated affiliates | (3 | ) | | (5 | ) | (4 | ) | | (3 | ) |
| Accrued pension and other post-retirement benefit costs | (2 | ) | | 6 |
| (5 | ) | | (2 | ) |
| Provision for rate refunds | 27 |
| | — |
| 9 |
| | 27 |
|
| (Increase) decrease in | | | | | | |
| Net realized and unrealized mark-to-market and hedging transactions | — |
| | (39 | ) | |
| Receivables | 166 |
| | 155 |
| 168 |
| | 166 |
|
| Receivables from affiliated companies | (4 | ) | | (1 | ) | 5 |
| | (4 | ) |
| Inventory | 28 |
| | 28 |
| 37 |
| | 28 |
|
| Other current assets | 74 |
| | (64 | ) | (17 | ) | | 74 |
|
| Increase (decrease) in | | | | | | |
| Accounts payable | (32 | ) | | (44 | ) | (70 | ) | | (32 | ) |
| Accounts payable to affiliated companies | (12 | ) | | 42 |
| 14 |
| | (12 | ) |
| Taxes accrued | 4 |
| | (46 | ) | (61 | ) | | 4 |
|
| Other current liabilities | 28 |
| | (23 | ) | 10 |
| | 28 |
|
| Other assets | 2 |
| | 28 |
| (5 | ) | | 2 |
|
| Other liabilities | (2 | ) | | (6 | ) | (1 | ) | | (2 | ) |
| Net cash provided by operating activities | 459 |
| | 299 |
| 320 |
| | 459 |
|
| CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | |
| Capital expenditures | (327 | ) | | (260 | ) | (480 | ) | | (327 | ) |
| Contributions to equity method investments | — |
| | (12 | ) | (16 | ) | | — |
|
| Notes receivable from affiliated companies | (77 | ) | | — |
| (16 | ) | | (77 | ) |
| Other | (2 | ) | | 1 |
| (6 | ) | | (2 | ) |
| Net cash used in investing activities | (406 | ) | | (271 | ) | (518 | ) | | (406 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | |
| Proceeds from the issuance of long-term debt | — |
| | 125 |
| 596 |
| | — |
|
| Notes payable and commercial paper | — |
| | (330 | ) | |
| Payments for the redemption of long-term debt | | (350 | ) | | — |
|
| Notes payable to affiliated companies | (364 | ) | | 167 |
| (198 | ) | | (364 | ) |
| Capital contributions from parent | 300 |
| | — |
| 150 |
| | 300 |
|
| Other | — |
| | (1 | ) | |
| Net cash used in financing activities | (64 | ) | | (39 | ) | |
| Net cash provided by (used in) financing activities | | 198 |
| | (64 | ) |
| Net decrease in cash and cash equivalents | (11 | ) | | (11 | ) | — |
| | (11 | ) |
| Cash and cash equivalents at beginning of period | 19 |
| | 25 |
| — |
| | 19 |
|
| Cash and cash equivalents at end of period | $ | 8 |
| | $ | 14 |
| $ | — |
| | $ | 8 |
|
| Supplemental Disclosures: | | | | | | |
| Significant non-cash transactions: | | | | | | |
| Accrued capital expenditures | $ | 73 |
| | $ | 45 |
| $ | 115 |
| | $ | 73 |
|
| Transfer of ownership interest of certain equity method investees to parent | — |
| | 149 |
| |
See Notes to Condensed Consolidated Financial Statements
41
PIEDMONT NATURAL GAS COMPANY, INC.
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
| | | | | | | | | Three Months Ended June 30, 2018 and 2019 |
| | Common |
| | Retained |
| | Total |
| Common |
| | Retained |
| | Total |
|
| (in millions) | Stock |
| | Earnings |
| | Equity |
| 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 March 31, 2018 | | $ | 860 |
| | $ | 912 |
| | $ | 1,772 |
|
| Net loss | | — |
| | (8 | ) | | (8 | ) |
| Contribution from parent | | 300 |
| | — |
| | 300 |
|
| Balance at June 30, 2018 | | $ | 1,160 |
| | $ | 904 |
| | $ | 2,064 |
|
| | | | | | | | | | | |
| Balance at March 31, 2019 | | $ | 1,160 |
| | $ | 1,053 |
| | $ | 2,213 |
|
| Net loss | | — |
| | (7 | ) | | (7 | ) |
| Contribution from parent | | 150 |
| | — |
| | 150 |
|
| Balance at June 30, 2019 | | $ | 1,310 |
| | $ | 1,046 |
| | $ | 2,356 |
|
| | | | | | | |
| | | Six Months Ended June 30, 2018 and 2019 |
| | | Common |
| | Retained |
| | Total |
|
| (in millions) | | Stock |
| | Earnings |
| | Equity |
|
| Balance at December 31, 2017 | $ | 860 |
| | $ | 802 |
| | $ | 1,662 |
| $ | 860 |
| | $ | 802 |
| | $ | 1,662 |
|
| Net income | — |
| | 102 |
| | 102 |
| — |
| | 102 |
| | 102 |
|
| Contribution from parent | 300 |
| | — |
| | 300 |
| 300 |
| | — |
| | 300 |
|
| Balance at June 30, 2018 | $ | 1,160 |
| | $ | 904 |
| | $ | 2,064 |
| $ | 1,160 |
| | $ | 904 |
| | $ | 2,064 |
|
| | | | | | | |
| Balance at December 31, 2018 | | $ | 1,160 |
| | $ | 931 |
| | $ | 2,091 |
|
| Net income | | — |
| | 115 |
| | 115 |
|
| Contribution from parent | | 150 |
| | — |
| | 150 |
|
| Balance at June 30, 2019 | | $ | 1,310 |
| | $ | 1,046 |
| | $ | 2,356 |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
CombinedSee Notes to Condensed Consolidated Financial Statements– (Unaudited)
42
|
| |
| FINANCIAL STATEMENTS | ORGANIZATION AND BASIS OF PRESENTATION |
Index to Combined Notes to Condensed Consolidated Financial Statements
The unaudited notes to the condensed consolidated financial statementsCondensed Consolidated Financial Statements that follow are a combined presentation. The following list indicates the registrants to which the footnotes apply. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Applicable Notes |
| Registrant | 1 | | 2 | | 3 | | 4 | | 5 | | 6 | | 7 | | 8 | | 9 | | 10 | | 11 | | 12 | | 13 | | 14 | | 15 | | 16 | | 17 | | 18 |
| Duke Energy Corporation | • | | • | | • | | • | | • | | • | | • | | | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • |
| Duke Energy Carolinas, LLC | • | | • | | • | | • | | • | | • | | | | • | | • | | • | | • | | • | | • | | | | | | • | | • | | • |
| Progress Energy, Inc. | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | | | | | • | | • | | • |
| Duke Energy Progress, LLC | • | | • | | • | | • | | • | | • | | | | • | | • | | • | | • | | • | | • | | | | | | • | | • | | • |
| Duke Energy Florida, LLC | • | | • | | • | | • | | • | | • | | | | • | | • | | • | | • | | • | | • | | | | | | • | | • | | • |
| Duke Energy Ohio, Inc. | • | | • | | • | | • | | • | | • | | • | | • | | • | | | | • | | • | | • | | | | | | • | | • | | • |
| Duke Energy Indiana, LLC | • | | • | | • | | • | | • | | • | | | | • | | • | | • | | • | | • | | • | | | | | | • | | • | | • |
| Piedmont Natural Gas Company, Inc. | • | | • | | • | | • | | • | | • | | • | | • | | • | | | | • | | | | • | | | | | | • | | • | | • |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Applicable Notes |
| Registrant | 1 | | 2 | | 3 | | 4 | | 5 | | 6 | | 7 | | 8 | | 9 | | 10 | | 11 | | 12 | | 13 | | 14 | | 15 | | 16 | | 17 | | 18 |
| Duke Energy | • | | • | | • | | • | | • | | • | | • | | • | | | | • | | • | | • | | • | | • | | • | | • | | • | | • |
| Duke Energy Carolinas | • | | • | | • | | • | | • | | • | | • | | | | • | | • | | • | | • | | • | | • | | | | • | | • | | • |
| Progress Energy | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | | | • | | • | | • |
| Duke Energy Progress | • | | • | | • | | • | | • | | • | | • | | | | • | | • | | • | | • | | • | | • | | | | • | | • | | • |
| Duke Energy Florida | • | | • | | • | | • | | • | | • | | • | | | | • | | • | | • | | • | | • | | • | | | | • | | • | | • |
| Duke Energy Ohio | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | | | • | | • | | • | | | | • | | • | | • |
| Duke Energy Indiana | • | | • | | • | | • | | • | | • | | • | | | | • | | • | | • | | • | | • | | • | | | | • | | • | | • |
| Piedmont | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | | | • | | | | • | | | | • | | • | | • |
Tables within the notes may not sum across due to (i) Progress Energy's consolidation of Duke Energy Progress, Duke Energy Florida and other subsidiaries that are not registrants and (ii) subsidiaries that are not registrants but included in the consolidated Duke Energy balances.
1. 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.
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.
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 (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.GAAP for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, these Condensed Consolidated Financial Statements do not include all information and notes required by GAAP in the U.S. for annual financial statements. Since the interim Condensed Consolidated Financial Statements and Notes do not include all information and notes required by GAAP in the U.S. for annual financial statements the Condensed Consolidated Financial Statements and other information included in this quarterly report should be read in conjunction with the Consolidated Financial Statements and Notes in the Duke Energy Registrants’ combined Annual Report on Form 10-K/A10-K for the year ended December 31, 2017.2018.
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 toBASIS OF CONSOLIDATION
These Condensed Consolidated Financial Statements include, after eliminating intercompany transactions and balances, the current year presentation.
REVENUE
accounts of the Duke Energy recognizes revenue as customers obtain control of promised goodsRegistrants and services in an amount that reflects consideration expected in exchange for those goodssubsidiaries or services. Generally,VIEs where the delivery of electricity and natural gas results in the transfer of control to customers at the time the commodity is delivered and the amount of revenue recognized is equal to the amount billed to each customer, including estimated volumes delivered when billingsrespective Duke Energy Registrants have not yet occurred.control. See Note 13 for further information.additional information on VIEs. These Condensed Consolidated Financial Statements also reflect the Duke Energy Registrants’ proportionate share of certain jointly owned generation and transmission facilities.
NONCONTROLLING INTEREST
Duke Energy maintains a controlling financial interest in certain less-than wholly owned non-regulated subsidiaries. As a result, Duke Energy consolidates these subsidiaries and presents the third-party investors' portion of Duke Energy's net income (loss), net assets and comprehensive income (loss) as noncontrolling interest. Noncontrolling interest is included as a component of equity on the Condensed Consolidated Balance Sheet.
Several operating agreements of Duke Energy's subsidiaries with noncontrolling interest are subject to allocations of earnings, tax attributes and cash flows in accordance with contractual agreements that vary throughout the lives of the subsidiaries. Therefore, Duke Energy and the other investors' (the owners) interests in the subsidiaries are not fixed, and the subsidiaries apply the HLBV method in allocating book profit or loss and other comprehensive income or loss (all measured on a pretax basis) to the owners. The HLBV method measures the amounts that each owner would hypothetically claim at each balance sheet reporting date, including tax benefits realized by the owners, upon a hypothetical liquidation of the subsidiary at the net book value of its underlying assets. The change in the amount that each owner would hypothetically receive at the reporting date compared to the amount it would have received on the previous reporting date represents the amount of profit or loss allocated to each owner for the reporting period. During the second quarter of 2019, Duke Energy’s North Rosamond solar farm commenced commercial operations resulting in the allocation of losses to the noncontrolling tax equity members of $74 million utilizing the HLBV method.
|
| |
| FINANCIAL STATEMENTS | ORGANIZATION AND BASIS OF PRESENTATION |
Other operating agreements of Duke Energy's subsidiaries with noncontrolling interest allocate profit and loss based on their pro rata shares of the ownership interest in the respective subsidiary. Therefore, Duke Energy allocates net income or loss and other comprehensive income or loss of these subsidiaries to the owners based on their pro rata shares.
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Duke Energy, Progress Energy and Duke Energy Florida have restricted cash balances related primarily to collateral assets, escrow deposits and variable interest entities (VIEs).VIEs. See Note 1213 for additional information. Restricted cash amounts are included in Other within Current Assets and Other Noncurrent Assets.Assets on the Condensed Consolidated Balance Sheets. The following table presents the components of cash, cash equivalents and restricted cash included in the Condensed Consolidated Balance Sheets. |
| | | | | | | | | | | | | | | | | | | |
| | June 30, 2019 | | December 31, 2018 |
| | | | Duke |
| | | | Duke |
|
| | Duke |
| Progress |
| Energy |
| | Duke |
| Progress |
| Energy |
|
| | Energy |
| Energy |
| Florida |
| | Energy |
| Energy |
| Florida |
|
| Current Assets | | | | | | | |
| Cash and cash equivalents | $ | 336 |
| $ | 51 |
| $ | 16 |
| | $ | 442 |
| $ | 67 |
| $ | 36 |
|
| Other | 106 |
| 31 |
| 31 |
| | 141 |
| 39 |
| 39 |
|
| Other Noncurrent Assets | | | | | | | |
| Other | 39 |
| 38 |
| — |
| | 8 |
| 6 |
| — |
|
| Total cash, cash equivalents and restricted cash | $ | 481 |
| $ | 120 |
| $ | 47 |
| | $ | 591 |
| $ | 112 |
| $ | 75 |
|
|
| | | | | | | | | | | | | | | | | | | |
| | 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)
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, 2018,2019, and December 31, 2017.2018. The components of inventory are presented in the tables below. | | | | June 30, 2018 | June 30, 2019 |
| | | | 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 | $ | 2,293 |
| | $ | 769 |
| | $ | 1,085 |
| | $ | 757 |
| | $ | 328 |
| | $ | 84 |
| | $ | 313 |
| | $ | 2 |
| $ | 2,252 |
| | $ | 749 |
| | $ | 1,036 |
| | $ | 709 |
| | $ | 327 |
| | $ | 76 |
| | $ | 323 |
| | $ | 3 |
|
| Coal | 562 |
| | 173 |
| | 218 |
| | 109 |
| | 109 |
| | 15 |
| | 155 |
| | — |
| 624 |
| | 235 |
| | 234 |
| | 160 |
| | 74 |
| | 17 |
| | 139 |
| | — |
|
| Natural gas, oil and other fuel | 322 |
| | 42 |
| | 218 |
| | 110 |
| | 109 |
| | 25 |
| | 2 |
| | 36 |
| 313 |
| | 41 |
| | 210 |
| | 111 |
| | 98 |
| | 31 |
| | 1 |
| | 30 |
|
| Total inventory | $ | 3,177 |
| | $ | 984 |
| | $ | 1,521 |
| | $ | 976 |
| | $ | 546 |
| | $ | 124 |
| | $ | 470 |
| | $ | 38 |
| $ | 3,189 |
| | $ | 1,025 |
| | $ | 1,480 |
| | $ | 980 |
| | $ | 499 |
| | $ | 124 |
| | $ | 463 |
| | $ | 33 |
|
| | | | December 31, 2017 | December 31, 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 | $ | 2,293 |
| | $ | 744 |
| | $ | 1,118 |
| | $ | 774 |
| | $ | 343 |
| | $ | 82 |
| | $ | 309 |
| | $ | 2 |
| $ | 2,238 |
| | $ | 731 |
| | $ | 1,049 |
| | $ | 734 |
| | $ | 315 |
| | $ | 84 |
| | $ | 312 |
| | $ | 2 |
|
| Coal | 603 |
| | 192 |
| | 255 |
| | 139 |
| | 116 |
| | 17 |
| | 139 |
| | — |
| 491 |
| | 175 |
| | 192 |
| | 106 |
| | 86 |
| | 14 |
| | 109 |
| | — |
|
| Natural gas, oil and other fuel | 354 |
| | 35 |
| | 219 |
| | 104 |
| | 115 |
| | 34 |
| | 2 |
| | 64 |
| 355 |
| | 42 |
| | 218 |
| | 114 |
| | 103 |
| | 28 |
| | 1 |
| | 68 |
|
| Total inventory | $ | 3,250 |
| | $ | 971 |
| | $ | 1,592 |
| | $ | 1,017 |
| | $ | 574 |
| | $ | 133 |
| | $ | 450 |
| | $ | 66 |
| $ | 3,084 |
| | $ | 948 |
| | $ | 1,459 |
| | $ | 954 |
| | $ | 504 |
| | $ | 126 |
| | $ | 422 |
| | $ | 70 |
|
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.
Excise taxes accounted for on a gross basis within both Operating revenues and Property and other taxes on the Condensed Consolidated Statements of Operations were as follows. |
| | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| (in millions) | 2018 |
| | 2017 |
| | 2018 |
| | 2017 |
|
| Duke Energy | $ | 95 |
|
| $ | 91 |
|
| $ | 194 |
|
| $ | 182 |
|
| Duke Energy Carolinas | 9 |
| | 9 |
| | 17 |
| | 18 |
|
| Progress Energy | 56 |
| | 55 |
| | 110 |
| | 101 |
|
| Duke Energy Progress | 5 |
| | 4 |
| | 10 |
| | 9 |
|
| Duke Energy Florida | 51 |
| | 51 |
| | 100 |
| | 92 |
|
| Duke Energy Ohio | 25 |
| | 23 |
| | 55 |
| | 51 |
|
| Duke Energy Indiana | 5 |
| | 3 |
| | 11 |
| | 10 |
|
| Piedmont | — |
| | 1 |
| | 1 |
| | 2 |
|
NEW ACCOUNTING STANDARDS
TheExcept as noted below, the new accounting standards adopted for 2018 and 20172019 had no material impact on the presentation or results of operations, cash flows or financial position of the Duke Energy Registrants. While immaterial, adoption of the following accounting standards had the most significant impact on the Duke Energy results of operations, cash flows and financial position for the six months ended June 30, 2018.
Revenue from Contracts with Customers. In May 2014, the Financial 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 expected in exchange for those goods or services. The amendments also required 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. The majority of Duke Energy’s revenue is in scope of the new guidance. Other revenue arrangements, such as alternative revenue programs and certain purchase power agreements (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 elected the modified retrospective method of adoption effective January 1, 2018. Under the modified retrospective method of adoption, prior year reported results are not restated. Adoption of this standard did not result in a material change in the timing or pattern of revenue recognition and a cumulative-effect adjustment was not recorded at January 1, 2018. Duke Energy utilized certain practical expedients including applying this guidance to open contracts at the date of adoption, expensing costs to obtain a contract where the amortization period of the asset would have been one year or less, ignoring the effects of a significant financing when the period between transfer of the good or service and payment is one year or less and recognizing revenues for certain contracts under the invoice practical expedient, which allows revenue recognition to be consistent with invoiced amounts (including 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 reviewed published positions on specific industry issues to evaluate the impact, if any, on Duke Energy’s specific contracts and conclusions.
Duke Energy applied the available practical expedient to portfolios of tariffs and contracts with similar characteristics. The vast majority of sales, including energy provided to retail customers, are from tariff offerings that provide natural gas or electricity without a defined contractual term ("at-will"). In most circumstances, revenue from contracts with customers is equivalent to the electricity or natural gas supplied and billed in that period (including 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 adopting the standard are additional disclosures around the nature, amount, timing and uncertainty of revenues and cash flows arising from contracts with customers. See Note 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 included within the scope of the new 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 regulated operations. The resulting adjustment of unrealized gains and losses in AOCI to retained earnings was immaterial. The primary impact to Duke Energy as a result of implementing this guidance is adding disclosure requirements to present separately the financial assets and financial liabilities by measurement category and form of financial asset. See Notes 10 and 11 for further information.
Statement of Cash Flows. In November 2016, the FASB issued revised accounting guidance to reduce diversity in practice for the presentation and classification of restricted cash on the Condensed Consolidated Statements of Cash Flows. Under the updated guidance, restricted cash and restricted cash equivalents are included within beginning-of-period and end-of-period cash and cash equivalents on the Condensed Consolidated Statements of Cash Flows. Duke Energy adopted this guidance on January 1, 2018. The guidance has been applied using a retrospective transition method to each period presented. The adoption by Duke Energy of the revised guidance resulted in a change to the amount of Cash, cash equivalents and restricted cash explained when reconciling the beginning-of-period and end-of-period total amounts shown on the Condensed Consolidated Statements of Cash Flows. In addition, a reconciliation has been provided of Cash, cash 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 reflected 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 Statements 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.
Retirement Benefits. In March 2017, the FASB issued revised accounting guidance for the presentation of net periodic costs related to benefit plans. Previous guidance required the aggregation of all the components of net periodic 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 capitalized to Inventory or Property, Plant and Equipment. This represents a change from previous guidance, which permitted all components of net periodic costs to be eligible for capitalization.
Duke Energy adopted this guidance on January 1, 2018. Under previous guidance, Duke 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 utilized the practical expedient for retrospective presentation. The change in components of net periodic costs eligible for capitalization is applicable prospectively. Since Duke Energy’s service cost component is greater than the total net periodic costs, the change results in increased capitalization of net periodic costs, higher Operation, maintenance and other and higher Other income and expenses. The resulting prospective impact to Duke Energy is an immaterial increase in Net Income. See Note 15 for 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)
For 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 years ended December 31, 2017, 2016 and 2015, respectively. There was no change to Net Income for these prior periods.
The following new Accounting Standards Updates (ASUs) have been issued, but have not yet been adopted by Duke Energy, as of June 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 that arise from leases on the balance sheet.
For This resulted in a material impact on the presentation for the statement of financial position of the Duke Energy this guidance isRegistrants for the period ended June 30, 2019, and an immaterial impact to the Duke Energy Registrants' results of operations for the three and six months ended June 30, 2019, and cash flows for the six months ended June 30, 2019.
|
| |
| FINANCIAL STATEMENTS | ORGANIZATION AND BASIS OF PRESENTATION |
Duke Energy elected the modified retrospective method of adoption effective for interim and annual periods beginning January 1, 2019. The guidance will be applied using aUnder the modified retrospective approach.method of adoption, prior year reported results are not restated. For adoption, Duke Energy expectshas elected to elect certain ofapply the following practical expedients upon adoption:expedients:
|
| |
| 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 842the new requirements 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 evaluatingevaluated the financial statement impact of adopting thisthe standard and is continuing to monitormonitored industry implementation issues, including pipeline laterals and renewable energy PPAs.issues. Under agreements considered leases, where Duke Energy expects an increase in assetsis the lessee, for the use of certain aircraft, space on communication towers, industrial equipment, fleet vehicles, fuel transportation (barges and liabilitiesrailcars), land, office space and PPAs are now recognized on itsthe balance sheet along withsheet. The Duke Energy Registrants did not have a material change to the addition of required disclosures of key lease information. However,financial statements from the ultimate impactadoption of the new standard hasfor contracts where it is the lessor. See Note 5 for further information.
No new accounting standards, issued but not yet been determined. System enhancements, including additional processes and controls, will be requiredadopted, are expected to facilitatehave a material impact on the identification, tracking and reporting of potential leases based upon requirements of the new lease standard. Duke Energy has begun the implementationRegistrants as of a third-party software tool to help with the adoption and ongoing accounting under the new standard.June 30, 2019.
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
Duke Energy's segment structure includes the following segments: Electric Utilities and Infrastructure, Gas Utilities and Infrastructure and Commercial Renewables.
The Electric Utilities and Infrastructure segment primarily 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.
The Commercial Renewables segment is primarily comprised of nonregulated utility scaleutility-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 On April 24, 2019, Duke Energy executed an agreement to sell a minority interest in a portion of certain renewable assets. The portion of Duke Energy’s commercial renewables energy portfolio to be sold includes 49 percent of 37 operating wind, solar and battery storage assets and 33 percent of 11 operating solar assets across the U.S. The sale will result in pretax proceeds to Duke Energy of $415 million. Duke Energy will retain control of these assets, and, therefore, no gain or loss is expected to be recognized on the Condensed Consolidated Financial Statements – (Unaudited) – (Continued)of Operations upon closing of the transaction. The sale is subject to customary closing conditions, including approvals from the FERC, the Public Utility Commission of Texas and the Committee on Foreign Investment in the U.S. Duke Energy received FERC approval on July 26, 2019. The transaction is expected to close in the second half of 2019.
During the three months ended June 30, 2019, Duke Energy evaluated recoverability of its renewable merchant plants principally located in the Electric Reliability Council of Texas West market due to declining market pricing and declining long-term forecasted energy and capacity prices, primarily driven by lower forecasted natural gas prices. Duke Energy determined that the assets were not impaired because the carrying value of $160 million approximates the aggregate estimated future cash flows and further testing was not required. A continued decline in pricing would likely result in a future impairment.
The remainder of Duke Energy’s operations is presented as Other, which is primarily comprised of interest expense on holding company debt, unallocated corporate costs, and Duke Energy’s wholly owned captive insurance company, Bison, Insurance Company Limited (Bison). Other also includesand Duke Energy's 17.5 percent interest in National Methanol Company (NMC), a large regional producer of methyl tertiary butyl ether located in Saudi Arabia. The investment in NMC is accounted for under the equity method of accounting.NMC.
|
| |
| FINANCIAL STATEMENTS | BUSINESS SEGMENTS |
Business segment information is presented in the following tables. Segment assets presented exclude intercompany assets. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, 2019 |
| | Electric |
| | Gas |
| | | | Total |
| | | | | | |
| | Utilities and |
| | Utilities and |
| | Commercial |
| | Reportable |
| | | | | | |
| (in millions) | Infrastructure |
| | Infrastructure |
| | Renewables |
| | Segments |
| | Other |
| | Eliminations |
| | Total |
|
| Unaffiliated revenues | $ | 5,467 |
| | $ | 282 |
| | $ | 118 |
| | $ | 5,867 |
| | $ | 6 |
| | $ | — |
| | $ | 5,873 |
|
| Intersegment revenues | 8 |
| | 24 |
| | — |
| | 32 |
| | 19 |
| | (51 | ) | | — |
|
| Total revenues | $ | 5,475 |
| | $ | 306 |
| | $ | 118 |
| | $ | 5,899 |
| | $ | 25 |
| | $ | (51 | ) | | $ | 5,873 |
|
| Segment income (loss) | $ | 809 |
| | $ | 40 |
| | $ | 86 |
| | $ | 935 |
| | $ | (115 | ) | | $ | — |
| | $ | 820 |
|
Add back noncontrolling interests(a) | | | | | | | | | | | | | (84 | ) |
| Add back preferred stock dividend | | | | | | | | | | | | | 12 |
|
| Net income | | | | | | | | | | | | | $ | 748 |
|
| Segment assets | $ | 131,640 |
| | $ | 12,943 |
| | $ | 4,870 |
| | $ | 149,453 |
| | $ | 3,815 |
| | $ | 181 |
| | $ | 153,449 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three 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 | $ | 5,215 |
| | $ | 294 |
| | $ | 119 |
| | $ | 5,628 |
| | $ | 15 |
| | $ | — |
| | $ | 5,643 |
|
| Intersegment revenues | 8 |
| | 24 |
| | — |
| | 32 |
| | 17 |
| | (49 | ) | | — |
|
| Total revenues | $ | 5,223 |
| | $ | 318 |
| | $ | 119 |
| | $ | 5,660 |
| | $ | 32 |
| | $ | (49 | ) | | $ | 5,643 |
|
Segment income (loss)(a)(b) | $ | 575 |
| | $ | 28 |
| | $ | 38 |
| | $ | 641 |
| | $ | (136 | ) | | $ | — |
| | $ | 505 |
|
| Add back noncontrolling interests | | | | | | | | | | | | | 2 |
|
| Loss from discontinued operations, net of tax | | | | | | | | | | | | | (5 | ) |
| Net income | | | | | | | | | | | | | $ | 502 |
|
| Segment assets | $ | 121,947 |
| | $ | 11,437 |
| | $ | 4,233 |
| | $ | 137,617 |
| | $ | 2,461 |
| | $ | 181 |
| | $ | 140,259 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, 2018 |
| | Electric |
| | Gas |
| | | | Total |
| | | | | | |
| | Utilities and |
| | Utilities and |
| | Commercial |
| | Reportable |
| | | | | | |
| (in millions) | Infrastructure |
| | Infrastructure |
| | Renewables |
| | Segments |
| | Other |
| | Eliminations |
| | Total |
|
| Unaffiliated revenues | $ | 5,215 |
| | $ | 294 |
| | $ | 119 |
| | $ | 5,628 |
| | $ | 15 |
| | $ | — |
| | $ | 5,643 |
|
| Intersegment revenues | 8 |
| | 24 |
| | — |
| | 32 |
| | 17 |
| | (49 | ) | | — |
|
| Total revenues | $ | 5,223 |
| | $ | 318 |
| | $ | 119 |
| | $ | 5,660 |
| | $ | 32 |
| | $ | (49 | ) | | $ | 5,643 |
|
Segment income (loss)(b)(c) | $ | 575 |
| | $ | 28 |
| | $ | 38 |
| | $ | 641 |
| | $ | (136 | ) | | $ | — |
| | $ | 505 |
|
| Add back noncontrolling interests | | | | | | | | | | | | | 2 |
|
| Loss from discontinued operations, net of tax | | | | | | | | | | | | | (5 | ) |
| Net income | | | | | | | | | | | | | $ | 502 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 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, 2019 |
| | Electric |
| | Gas |
| | | | Total |
| | | | | | |
| | Utilities and |
| | Utilities and |
| | Commercial |
| | Reportable |
| | | | | | |
| (in millions) | Infrastructure |
| | Infrastructure |
| | Renewables |
| | Segments |
| | Other |
| | Eliminations |
| | Total |
|
| Unaffiliated revenues | $ | 10,788 |
| | $ | 1,014 |
| | $ | 224 |
| | $ | 12,026 |
| | $ | 10 |
| | $ | — |
| | $ | 12,036 |
|
| Intersegment revenues | 16 |
| | 48 |
| | — |
| | 64 |
| | 36 |
| | (100 | ) | | — |
|
| Total revenues | $ | 10,804 |
| | $ | 1,062 |
| | $ | 224 |
| | $ | 12,090 |
| | $ | 46 |
| | $ | (100 | ) | | $ | 12,036 |
|
| Segment income (loss) | $ | 1,559 |
| | $ | 266 |
| | $ | 99 |
| | $ | 1,924 |
| | $ | (204 | ) | | $ | — |
| | $ | 1,720 |
|
Add back noncontrolling interests(a) | | | | | | | | | | | | | (91 | ) |
| Add back preferred stock dividend | | | | | | | | | | | | | 12 |
|
| Net income | | | | | | | | | | | | | $ | 1,641 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2018 |
| | Electric |
| | Gas |
| | | | Total |
| | | | | | |
| | Utilities and |
| | Utilities and |
| | Commercial |
| | Reportable |
| | | | | | |
| (in millions) | Infrastructure |
| | Infrastructure |
| | Renewables |
| | Segments |
| | Other |
| | Eliminations |
| | Total |
|
| 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)(b)(c)(d)(e) | $ | 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 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 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)(b) | $ | 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 |
|
|
| |
| FINANCIAL STATEMENTS | BUSINESS SEGMENTS |
| |
| (a) | Includes the allocation of losses to noncontrolling tax equity members. See Note 1 for additional information. |
| |
| (b) | 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)(c) | Other includes costs to achieve the Piedmont acquisition. |
| |
(c)(d) | Gas Utilities and Infrastructure includes an impairment of the investment in Constitution Pipeline Company, LLC (Constitution).Constitution. See Note 3 for additional information. |
| |
(d)(e) | 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.AMT credits. |
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 Northern Kentucky. Gas Utilities and Infrastructure transports and sells natural gas in portions of Ohio and Northern Kentucky. Both 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 | Three Months Ended June 30, 2019 |
| | Electric |
| | Gas |
| | Total |
| | | | | Electric |
| | Gas |
| | Total |
| | | | |
| | Utilities and |
| | Utilities and |
| | Reportable |
| | | | | Utilities and |
| | Utilities and |
| | Reportable |
| | | | |
| (in millions) | Infrastructure |
| | Infrastructure |
| | Segments |
| | Other |
| | Consolidated |
| Infrastructure |
| | Infrastructure |
| | Segments |
| | Other |
| | Total |
|
| Total revenues | $ | 329 |
| | $ | 100 |
| | $ | 429 |
| | $ | 8 |
| | $ | 437 |
| $ | 336 |
| | $ | 97 |
| | $ | 433 |
| | $ | — |
| | $ | 433 |
|
| Segment income (loss)/Net income | 22 |
| | 17 |
| | 39 |
| | (9 | ) | | 30 |
| |
| Segment income/Net (loss) income | | $ | 31 |
| | $ | 17 |
| | $ | 48 |
| | $ | (1 | ) | | $ | 47 |
|
| Segment assets | | $ | 5,914 |
| | $ | 2,948 |
| | $ | 8,862 |
| | $ | 27 |
| | $ | 8,889 |
|
|
| | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, 2018 |
| | Electric |
| | Gas |
| | Total |
| | | | |
| | Utilities and |
| | Utilities and |
| | Reportable |
| | | | |
| (in millions) | Infrastructure |
| | Infrastructure |
| | Segments |
| | Other |
| | Total |
|
| Total revenues | $ | 346 |
| | $ | 103 |
| | $ | 449 |
| | $ | 10 |
| | $ | 459 |
|
| Segment income/Net (loss) income | $ | 39 |
| | $ | 18 |
| | $ | 57 |
| | $ | (11 | ) | | $ | 46 |
|
|
| | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2019 |
| | Electric |
| | Gas |
| | Total |
| | | | |
| | Utilities and |
| | Utilities and |
| | Reportable |
| | | | |
| (in millions) | Infrastructure |
| | Infrastructure |
| | Segments |
| | Other |
| | Total |
|
| Total revenues | $ | 691 |
| | $ | 273 |
| | $ | 964 |
| | $ | — |
| | $ | 964 |
|
| Segment income/Net (loss) income | $ | 67 |
| | $ | 52 |
| | $ | 119 |
| | $ | (3 | ) | | $ | 116 |
|
|
| | | | | | | | | | | | | | | | | | | |
| | 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)
| | | | Six Months Ended June 30, 2017 | Six Months Ended June 30, 2018 |
| | Electric |
| | Gas |
| | Total |
| | | | | Electric |
| | Gas |
| | Total |
| | | | |
| | Utilities and |
| | Utilities and |
| | Reportable |
| | | | | Utilities and |
| | Utilities and |
| | Reportable |
| | | | |
| (in millions) | Infrastructure |
| | Infrastructure |
| | Segments |
| | Other |
| | Consolidated |
| Infrastructure |
| | Infrastructure |
| | Segments |
| | Other |
| | Total |
|
| Total revenues | $ | 665 |
| | $ | 270 |
| | $ | 935 |
| | $ | 20 |
| | $ | 955 |
| $ | 682 |
| | $ | 277 |
| | $ | 959 |
| | $ | 24 |
| | $ | 983 |
|
| Segment income (loss)/Net income | 46 |
| | 42 |
| | 88 |
| | (16 | ) | | 72 |
| |
Segment income/Net (loss) income(a) | | $ | 72 |
| | $ | 52 |
| | $ | 124 |
| | $ | (103 | ) | | $ | 21 |
|
(a) Other includes the loss on the sale of Beckjord.Beckjord described above.
3. REGULATORY MATTERS
RATE-RELATED INFORMATION
The NCUC, PSCSC, FPSC, IURC, PUCO, TPUC and KPSC approve rates for retail electric and natural gas services within their states. The FERC approves rates for electric sales to wholesale customers served under cost-based rates (excluding Ohio and Indiana), as well as sales of transmission service. The FERC also regulates certification and siting of new interstate natural gas pipeline projects.
|
| |
| FINANCIAL STATEMENTS | REGULATORY MATTERS |
Duke Energy Carolinas and Duke Energy Progress
Ash Basin Closure CostsHurricane Florence, Hurricane Michael and Winter Storm Diego Deferral – North CarolinaFilings
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. The NCUC has consolidated Duke Energy Carolinas' and Duke Energy Progress’ coal ash deferral requests into their respective general rate case dockets for decision. See "2017 North Carolina Rate Case" sections below for additional discussion.
Power/Forward Deferral – South Carolina
On June 22,21, 2018, Duke Energy Carolinas and Duke Energy Progress filed a joint petition with the PSCSC seeking an accounting order authorizing deferral of certainNCUC petitions for approval to defer the incremental costs incurred in connection with grid reliability, resiliencythe response to Hurricane Florence, Hurricane Michael and modernization work that is being performed underWinter Storm Diego to a regulatory asset for recovery in the companies’ Power/Forward initiative.next base rate case. The NCUC issued an order requesting comments on the deferral positions. On July 25, 2018,March 5, 2019, the PSCSC ordered that the matter be setNorth Carolina Public Staff (Public Staff) filed comments. On April 2, 2019, Duke Energy Carolinas and Duke Energy Progress filed reply comments, which included revised estimates of approximately $553 million in incremental operation and maintenance expenses ($171 million and $382 million for filed commentsDuke Energy Carolinas and oral argument upon request of the Office of Regulatory Staff. A procedural schedule has not yet been issued.Duke Energy Progress, respectively) and approximately $96 million in capital costs ($20 million and $76 million for Duke Energy Carolinas and Duke Energy Progress, respectively). Duke Energy Carolinas and Duke Energy Progress cannot predict the outcome of this matter. Duke Energy Progress filed a similar request with the PSCSC on January 11, 2019, which also included a request for the continuation of prior deferrals requested for ice storms and Hurricane Matthew, and on January 30, 2019, the PSCSC issued a directive approving the deferral request, followed by an order issued on February 21, 2019. On March 15, 2019, Duke Energy Progress filed a request with FERC requesting permission to defer transmission-related storm costs that would be charged to wholesale transmission customers through Duke Energy Progress' Open Access Transmission Tariff (OATT) and to recover those costs from wholesale transmission customers over a three-year recovery period. FERC accepted the filing on May 14, 2019, which allows Duke Energy Progress to proceed with the proposed cost deferral and recovery.
Duke Energy Carolinas
2017 North Carolina Rate Case
On August 25, 2017, Duke Energy Carolinas filed an application with the NCUC for a rate increase for retail customers of approximately $647 million, which represented an approximate 13.6 percent increase in annual base revenues. The rate increase was driven by capital investments subsequent to the previous base rate case, including the William StatesW.S. Lee Combined Cycle Facility discussed below,CC, grid improvement projects, advanced metering infrastructure (AMI),AMI, investments in customer service technologies, costs of complying with coal combustion residuals (CCR)CCR regulations and the North Carolina Coal Ash Management Act of 2014 (Coal Ash Act) and recovery of costs related to licensing and development of the William States Lee III Nuclear Station (Lee Nuclear Station) discussed below.Station.
On February 28, 2018, Duke Energy Carolinas 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, Duke Energy Carolinas recorded a pretax charge of approximately $4 million in the first quarter of 2018 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)
On June 22, 2018, the NCUC issued an order approving the Stipulation of Partial Settlement and requiring a revenue reduction. The order also included the following material components not covered in the Stipulation:
Recovery of $554 million of deferred coal ash basin closure costs over a five-year period with a return at Duke Energy Carolinas' 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,order, Duke Energy Carolinas recorded a pretax charge of approximately $150 million in the second quarter of 2018 to Impairment charges and Operation, maintenance and other on the Condensed Consolidated Statements of Operations. The charge iswas primarily related to the denial of a return on the Lee Nuclear Project and for previously recognized return impactedthe assessment of a $70 million management penalty by reducing the annual recovery of deferred coal ash management penalty described above.costs by $14 million per year over a five-year recovery period. On July 27, 2018, NCUC approved Duke Energy Carolinas' compliance filing. As a result, revised customer rates will becomewere 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. On August 8, 2018, the Public Staff filed a Notice of Cross Appeal to the North Carolina Supreme Court, fromwhich contends the commission’s June 22, 2018, Order Acceptingorder should be reversed and remanded, as it is affected by errors of law, and is unsupported by substantial evidence with regard to the commission’s failure to consider substantial evidence of coal ash related environmental violations. On November 29, 2018, the North Carolina Attorney General's Office filed a motion with the North Carolina Supreme Court requesting the court consolidate the Duke Energy Carolinas and Duke Energy Progress appeals and enter an order adopting the parties’ proposed briefing schedule as set out in the filing. On November 29, 2018, the North Carolina Supreme Court adopted a schedule for briefing set forth in the motion to consolidate the Duke Energy Carolinas and Duke Energy Progress appeals. Appellant’s brief was filed on April 26, 2019. The Appellee response briefs are due on September 25, 2019. Duke Energy Carolinas cannot predict the outcome of this matter.
2018 South Carolina Rate Case
On November 8, 2018, Duke Energy Carolinas filed an application with the PSCSC for a rate increase for retail customers of approximately $168 million, which represents an approximate 10.0 percent increase in retail revenues. The request for rate increase was driven by capital investments and environmental compliance progress made by Duke Energy Carolinas since its previous rate case, including the further implementation of Duke Energy Carolinas’ generation modernization program, which consists of retiring, replacing and upgrading generation plants, investments in customer service technologies and continued investments in base work to maintain its transmission and distribution systems. The request included net tax benefits resulting from the Tax Act of $66 million to reflect the change in ongoing tax expense, primarily from the reduction in the federal income tax rate from 35 to 21 percent. The request also included $46 million to return EDIT resulting from the federal tax rate change and deferred revenues since January 2018 related to the change and benefits of $17 million from a reduction in North Carolina state income taxes allocable to South Carolina (EDIT Rider).
|
| |
| FINANCIAL STATEMENTS | REGULATORY MATTERS |
Duke Energy Carolinas also requested approval of its proposed Grid Improvement Plan (GIP), adjustments to its Prepaid Advantage Program and a variety of accounting orders related to ongoing costs for environmental compliance, including recovery over a five-year period of $242 million of deferred coal ash related compliance costs, grid investments between rate changes, incremental depreciation expense, a result of new depreciation rates from the depreciation study approved in the 2017 North Carolina Rate Case above, and the balance of development costs associated with the cancellation of the Lee Nuclear Project. Finally, Duke Energy Carolinas sought approval to establish a reserve and accrual for end-of-life nuclear costs for nuclear fuel and materials and supplies. On March 8, 2019, the ORS moved to establish a new and separate hearing docket to review and consider the GIP proposed by Duke Energy Carolinas. Subsequently, on March 12, 2019, the ORS and Duke Energy Carolinas executed a Stipulation Deciding Contested Issuesresolving the ORS’s motion. The Stipulation provides that costs incurred after January 1, 2019, for the GIP will be deferred with a return, subject to evaluation in a future rate proceeding, and Requiring Revenue Reduction.that Duke Energy Carolinas will refile for consideration of the GIP in a new docket for resolution by January 1, 2020. The Stipulation was approved by the PSCSC on June 19, 2019.
After hearings in March 2019, the PSCSC issued an order on May 21, 2019, which included a return on equity of 9.5 percent and a capital structure of 53 percent equity and 47 percent debt. The order also included the following material components:
Approval of cancellation of the Lee Nuclear Project, with Duke Energy Carolinas maintaining the Combined Operating License;
Approval of recovery of $125 million (South Carolina retail portion) of Lee Nuclear Project development costs (including AFUDC through December 2017) over a 12-year period, but denial of a return on the deferred balance of costs;
Approval of recovery of $96 million of coal ash costs over a five-year period with a return at Duke Energy Carolinas' WACC;
Denial of recovery of $115 million of certain coal ash costs deemed to be related to the Coal Ash Act and incremental to the federal CCR rule;
Approval of a $66 million decrease to base rates to reflect the change in ongoing tax expense, primarily the reduction in the federal income tax rate from 35 to 21 percent;
Approval of a $45 million decrease through the EDIT Rider to return EDIT resulting from the federal tax rate change and deferred revenues since January 2018 related to the change, to be returned in accordance with the Average Rate Assumption Method (ARAM) for protected EDIT, over a 20-year period for unprotected EDIT associated with Property, Plant and Equipment, over a five-year period for unprotected EDIT not associated with Property, Plant and Equipment and over a five-year period for the deferred revenues; and
Approval of a $17 million decrease through the EDIT Rider related to reductions in the North Carolina state income tax rate from 6.9 to 2.5 percent to be returned over a five-year period.
As a result of the May 21, 2019 order, revised customer rates were effective June 1, 2019. On May 31, 2019, Duke Energy Carolinas filed a Petition for Rehearing or Reconsideration of that order contending substantial rights of Duke Energy Carolinas were prejudiced by unlawful, arbitrary and capricious rulings by the commission on certain issues presented in the proceeding. On June 19, 2019, the PSCSC issued a Directive denying Duke Energy Carolinas' request to rehear or reconsider the commission's rulings on certain issues presented in the proceeding including coal ash remediation and disposal costs, return on equity and the recovery of a return on deferred operation and maintenance expenses. Duke Energy Carolinas awaits the order on reconsideration detailing the commission's decision. Based upon legal analysis and Duke Energy Carolinas' intention to file a notice of appeal with the South Carolina Supreme Court within 30 days of receipt of the order, Duke Energy Carolinas has not recorded an adjustment for its deferred coal ash costs. Duke Energy Carolinas cannot predict the outcome of this matter.
FERC Formula Rate Matter
On July 31, 2017, Piedmont Municipal Power Agency (PMPA)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 two claims are outside the scope of FERC's February order. The settlement agreements and revised formula rates for all parties to the proceeding were filed on December 28, 2018. On April 2, 2019, FERC issued an order approving the settlement agreement as filed. Since then, Duke Energy Carolinas cannot predicthas implemented the outcometerms of this matter.
William States Lee Combined Cycle Facility
the settlement in rates with all wholesale customers, including non-intervening customers. On April 9, 2014, the PSCSC grantedJuly 25, 2019, Duke Energy Carolinas and North Carolina Electric Membership Corporation (NCEMC) a Certificate of Environmental Compatibility and Public Convenience and Necessityreceived FERC approval 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 allowanceaccounting treatment requested 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 becertain assets 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 tosettlement agreements. This is 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 NCUCfinal approval needed from FERC 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.concludes this proceeding.
Sale of Hydroelectric (Hydro) Plants
In May 2018, Duke Energy Carolinas entered an agreement for the sale of five hydro plants with a combined 18.7-MW generation capacity in the Western Carolinas region to Northbrook Energy. The completion of the transaction is subject to approval from FERC for the four FERC-licensed plants, as well as other state regulatory agencies and is contingent upon regulatory approval from the NCUC and PSCSC to defer the total estimated loss on the sale of approximately $40 million. On July 5, 2018, Duke Energy Carolinas filed with NCUC for approval of the sale of the five hydro plants to Northbrook, to transfer the Certificates of Public Convenience and NecessityCPCNs for the four North Carolina hydro plants and to establish a regulatory asset for the North Carolina retail portion of the difference between sales proceeds and net book value. On June 5, 2019, the NCUC issued an order approving the transfer of the hydro plants from Duke Energy Carolinas will also file with PSCSC requesting recoveryto Northbrook, granting deferral accounting and denying the Public Staff's motion for the total estimated loss. If commission approval is not received,reconsideration.
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On August 28, 2018, Duke Energy Carolinas can cancelfiled with PSCSC an Application for Approval of Transfer and Sale of Hydroelectric Generation Facilities, Acceptance for Filing of a Power Purchase Agreement and an Accounting Order to Establish a Regulatory Asset. On September 10, 2018, the sales agreementORS provided a letter to the commission stating its position on the application and retainon September 18, 2018, Duke Energy Carolinas requested this matter be carried over to allow Duke Energy Carolinas time to discuss certain accounting issues with the ORS. At their June 26, 2019, agenda meeting, the PSCSC voted to approve the transfer and sale subject to the recommendation of the ORS that the issuance of an Accounting Order will not preclude the ORS, the commission or any other party from addressing the reasonableness of these costs, any return sought and including any carrying costs in the next rate case.
On August 9, 2018, Duke Energy Carolinas and Northbrook filed a joint Application for Transfer of Licenses with the FERC. On December 27, 2018, the FERC issued its Order Approving Transfer of Licenses (“Order”) for the four FERC-licensed hydro facilities. If commission approval is received,plants. On January 18, 2019, Duke Energy Carolinas and Northbrook Carolina Hydro II, LLC requested a six-month extension of time to comply with the requirement of the Order that Northbrook submit to FERC certified copies of all instruments of conveyance and signed acceptance sheets within 60 days of the date of the Order. On February 14, 2019, FERC issued an order granting extensions until August 26, 2019, to comply with the requirements of the December 27, 2018 Order.
The closing is expected to occur during the first quarter ofin 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 iswas driven by capital investments subsequent to the previous base rate case, costs of complying with CCR regulations and the Coal Ash Act, costs relating to storm recovery, investments in customer service technologies and recovery of costs associated with renewable purchased power.
On December 16, 2016, Duke Energy Progress filed a petition with the NCUC requesting an accounting order to defer certain costs incurred in connection with response to Hurricane Matthew and other significant storms in 2016. The final estimate of incremental operation and maintenance and capital costs of $116 million was filed with the NCUC in September 2017. On July 10, 2017, the NCUC consolidated Duke Energy Progress' storm deferral request into the Duke Energy Progress rate case docket for decision.
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 NCUC's February 23, 2018, Order Accepting Stipulation, Deciding Contested Issues and Granting Partial Rate Increase issued by the NCUC.Order. The Public Staff contendcontends the commission’sNCUC’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 IssuesOrder. On November 29, 2018, the North Carolina Attorney General's Office filed a motion with the North Carolina Supreme Court requesting the court consolidate the Duke Energy Progress and Granting partial Rate Increase.Duke Energy Carolinas appeals and enter an order adopting the parties’ proposed briefing schedule as set out in the filing. Appellant’s brief was filed on April 26, 2019. The Appellee response briefs are due on September 25, 2019. Duke Energy Progress cannot predict the outcome of this matter.
2018 South Carolina Rate Case
In December 2016,On November 8, 2018, Duke Energy Progress filed an application with the PSCSC approvedfor a rate increase for retail customers of approximately $59 million, which represents an approximate 10.3 percent increase in annual base revenues. The rate increase is driven by capital investments and environmental compliance progress made by Duke Energy Progress since its previous rate case, settlement agreement amongincluding the Officefurther implementation of Regulatory Staff, intervenorsDuke Energy Progress’ generation modernization program, which consists of retiring, replacing and upgrading generation plants, investments in customer service technologies and continued investments in base work to maintain its transmission and distribution systems. The request included a decrease resulting from the Tax Act of $17 million to reflect the change in ongoing tax expense, primarily the reduction in the federal income tax rate from 35 to 21 percent. The request also included $10 million to return EDIT resulting from the federal tax rate change and deferred revenues since January 2018 related to the change (EDIT Rider) and a $12 million increase due to the expiration of EDITs related to reductions in North Carolina state income taxes allocable to South Carolina.
Duke Energy Progress also requested approval of its proposed GIP, approval of a Prepaid Advantage Program and a variety of accounting orders related to ongoing costs for environmental compliance, including recovery over a five-year period of $51 million of deferred coal ash related compliance costs, AMI deployment, grid investments between rate changes and regulatory asset treatment related to the retirement of a generating plant located in Asheville, North Carolina. Finally, Duke Energy Progress sought approval to establish a reserve and accrual for end-of-life nuclear costs for materials and supplies and nuclear fuel. On March 8, 2019, the ORS moved to establish a new and separate hearing docket to review and consider the GIP proposed by Duke Energy Progress. Subsequently, on March 12, 2019, the ORS and Duke Energy Progress. Terms ofCarolinas executed a Stipulation resolving 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,ORS’s motion, and an additional increase of approximately $18.5 million in revenues was effective January 1, 2018. Duke Energy Progress amortized approximately $18.5 million fromagreed to the cost of removal reserveStipulation, as did other parties 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 alsoStipulation provides that costs incurred after January 1, 2019, for the GIP will be deferred with a return, with all costs subject to evaluation in a future rate proceeding, and that Duke Energy Progress will refile for consideration of the GIP in a new docket for resolution by January 1, 2020. The Stipulation was approved by the PSCSC on June 19, 2019.
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After hearings in April 2019, the PSCSC issued an order on May 21, 2019, which included a return on equity of 9.5 percent and a capital structure of 53 percent equity and 47 percent debt. The order also included the following material components:
Approval of recovery of $4 million of coal ash costs over a five-year period with a return at Duke Energy Progress' WACC;
Denial of recovery of $65 million of certain coal ash costs deemed to be related to the Coal Ash Act and incremental to the federal CCR rule;
Approval of a $17 million decrease to base rates to reflect the change in ongoing tax expense, primarily the reduction in the federal income tax rate from 35 to 21 percent;
Approval of a $12 million decrease through the EDIT Tax Savings Rider resulting from the federal tax rate change and deferred revenues since January 2018 related to the change, to be returned in accordance with ARAM for protected EDIT, over a 20-year period for unprotected EDIT associated with Property, Plant and Equipment, over a five-year period for unprotected EDIT not seek anassociated with Property, Plant and Equipment and over a three-year period for the deferred revenues; and
Approval of a $12 million increase due to the expiration of EDIT related to reductions in the North Carolina state income tax rate from 6.9 to 2.5 percent.
As a result of the order, revised customer rates were effective June 1, 2019. On May 31, 2019, Duke Energy Progress filed a Petition for Rehearing or Reconsideration of that order contending substantial rights of Duke Energy Progress were prejudiced by unlawful, arbitrary and capricious rulings by the commission on certain issues presented in the proceeding. On June 19, 2019, the PSCSC issued a Directive denying Duke Energy Progress' request to rehear or reconsider the commission's rulings on certain issues presented in the proceeding including coal ash remediation and disposal costs, return on equity and the recovery of a return on deferred operation and maintenance expenses, but allowing additional litigation-related costs. As a result of the Directive allowing litigation-related costs, customer rates were revised effective July 1, 2019. Duke Energy Progress awaits the order on reconsideration detailing the commission's decision. Based upon legal analysis and Duke Energy Progress' intention to file a notice of appeal with the South Carolina to occur prior to 2019, with limited exceptions.Supreme Court within 30 days of receipt of the order, Duke Energy Progress has not recorded an adjustment for its deferred coal ash costs. Duke Energy Progress cannot predict the outcome of this matter.
Western Carolinas Modernization Plan
On November 4, 2015, Duke Energy Progress announced a Western Carolinas Modernization Plan, which included retirement of the existing Asheville coal-fired plant, the construction of two 280‑MW combined-cycle natural gas plants having dual-fuel capability, with the option to build a third natural gas simple cycle unit in 2023 based upon the outcome of initiatives to reduce the region's power demand. The plan also included upgrades to existing transmission lines and substations, installation of solar generation and a pilot battery storage project. These investments will be made within the next seven years. Duke Energy Progress is also workingworked with the local natural gas distribution company to upgrade an existing natural gas pipeline to serve the natural gas plant. The lease became effective on March 2, 2019.
On March 28, 2016, the NCUC issued an order approving a Certificate of Public Convenience and Necessity (CPCN)CPCN for the new combined-cycle natural gas plants, but denying the CPCN for the contingent simple cycle unit without prejudice to Duke Energy Progress to refile for approval in the future. On March 28, 2018,2019, Duke Energy Progress filed an annual progress report for the construction of the combined-cycle plants with the NCUC, with an estimated cost of $893 million. Site preparation activities for the combined-cycle plants are complete and construction of these plants began in 2017, with an expected in-service date in late 2019.
On October 8, 2018, Duke Energy Progress plansfiled an application with the NCUC for a CPCN to file for future approvals related toconstruct the proposed solar generationHot Springs Microgrid Solar and pilot battery storage project.Battery Storage Facility. On March 22, 2019, Duke Energy Progress and the Public Staff filed a Joint Proposed Order. On May 10, 2019, the NCUC issued an Order Granting Certificate of Public Convenience and Necessity with Conditions.
The carrying value of the 376-MW Asheville coal-fired plant, including associated ash basin closure costs, of $344$284 million and $385$327 million is included in Generation facilities to be retired, net on Duke Energy Progress' Condensed Consolidated Balance Sheets as of June 30, 2018,2019, and December 31, 2017,2018, 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, 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)
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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
Storm Restoration Cost Recovery
In September 2017, Duke Energy Florida’s service territory suffered significant damage from Hurricane Irma, resulting in approximately 1.31 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 hurricanesHurricane Irma and Hurricane 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 HurricanesHurricane Irma and Hurricane Nate. The petition is seekingsought 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. TheOn August 20, 2018, the FPSC approved Duke Energy Florida's unopposed Motion for Continuance filed August 17, 2018, to allow for an evidentiary hearing in this matter is scheduled formatter. On January 28, 2019, Duke Energy Florida made a supplemental filing to reduce the weektotal storm cost recovery from $510 million to $508 million. On April 3, 2019, the FPSC issued an Order abating all remaining filing dates. On April 9, 2019, Duke Energy Florida filed an unopposed motion to approve a settlement agreement resolving all outstanding issues in this docket. On June 13, 2019, the FPSC issued its order approving the settlement agreement. The Storm Cost Settlement Agreement obligates Duke Energy Florida to capitalize $18 million of October 15, 2018.storm costs and remove $6 million of operating and maintenance expense, thereby reducing the requested storm cost recovery amount by $24 million. Duke Energy Florida will also implement process changes with respect to storm cost restoration. At June 30, 2019, and December 31, 2018, Duke Energy Florida's Condensed Consolidated Balance Sheets included approximately $295$118 million and $217 million, respectively, of recoverable costs under the FPSC's storm rule in Regulatory assets within Current Assets and Other Noncurrent Assets related to storm recovery.recovery for Hurricane Irma and Hurricane Nate.
In October 2018, Duke Energy Florida’s service territory suffered damage when Hurricane Michael made landfall as a Category 5 hurricane with maximum sustained winds of 160 mph. The storm caused catastrophic damage from wind and storm surge, particularly from Panama City Beach to Mexico Beach, resulting in widespread outages and significant damage to transmission and distribution facilities across the central Florida Panhandle. In response to Hurricane Michael, Duke Energy Florida cannot predictrestored service to approximately 72,000 customers. Total current estimated incremental operation and maintenance and capital costs are $360 million. Approximately $82 million and $35 million of the outcomecosts are included in Net property, plant and equipment on the Condensed Consolidated Balance Sheets as of this matter.
Tax Act
Pursuant toJune 30, 2019, and December 31, 2018, respectively. Approximately $225 million and $165 million of costs are included in Regulatory assets within Other Noncurrent Assets on the Condensed Consolidated Balance Sheets as of June 30, 2019, and December 31, 2018, respectively, representing recoverable costs under the FPSC’s storm rule and Duke Energy Florida's 2017 Revised and Restated Settlement Agreement, on May 31,OATT formula rates. Additional costs could be incurred in 2019 related to this fourth quarter 2018 storm.
Duke Energy Florida filed a petition with the FPSC on April 30, 2019, to recover the retail portion of incremental storm restoration costs for Hurricane Michael. The estimated recovery amount is approximately $221 million. On June 11, 2019, the FPSC approved the petition for recovery of incremental storm restoration costs related to Hurricane Michael. The FPSC also approved the stipulation Duke Energy Florida filed, which will allow Duke Energy Florida to use the tax savings resulting from the Tax Act which included annual tax savingsto recover these storm costs in lieu of $84 million and annual amortization of excess deferred taxes of $67 millionimplementing a storm surcharge. Approved storm costs are currently expected to be fully recovered by approximately year-end 2021. Duke Energy Florida expects to file actual costs for a total of $151 million. The pretax revenue requirement impact is $201 million, of which $50 million will be offsetapproval with accelerated depreciation of Crystal River 4 and 5 coal units and $151 million will be offset by Hurricane Irma storm cost recovery as explainedthe FPSC 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 October 2, 2014, the FPSC granted Duke Energy Florida a Determination of Need for the construction of a 1,640-MW combined-cycle natural gas plant in Citrus County, Florida. 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 requirements associated with the new facility. The annual retail revenue requirement is approximately $200 million. On July 10, 2018, the FPSC voted to approve Duke Energy Florida's request to include the revenue requirements for the new Citrus County combined-cycle units in base rates. The rate increase for the first unit is expected to take place in November 2018 and the rate increase for the second unit is expected to take place in January 2019. The plant will receive natural gas from the 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, 2025. Terms of the ESP include continuation of market-based customer rates through competitive procurement processes for generation, continuation and expansion of existing rider mechanisms and proposed new rider mechanisms relating to regulatory mandates, costs incurred to enhance the customer experience and transform the grid and a service reliability rider for vegetation management. 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)
Electric 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 September 26, 2017, the PUCO staff filed a report recommending a revenue decrease between approximately $18 million and $29 million and a return on equity between 9.22 percent and 10.24 percent. On 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 this proceeding. Major components of the 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 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 two new riders including the Enhanced Service Reliability Rider to recover vegetation management costs not included in base rates, up to $10 million per year (operation and maintenance only) and the 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 review and approval of the PUCO. An evidentiary hearing to review the Stipulation and other issues in the cases will conclude on August 6, 2018. In addition to the changes in revenue attributable to the Stipulation, Duke Energy Ohio’s capital-related riders, including the Distribution Capital Investments Rider, began to reflect the lower federal income tax rate associated with the Tax Act with updates to customers’ bills beginning April 1, 2018. This change reduces electric revenue by approximately $20 million on an annualized basis. Duke Energy Ohio cannot predict the outcome of this matter.
Ohio Valley Electric Corporation
On March 31, 2017, Duke Energy Ohio filed for approval to adjust its existing price stabilization rider (Rider PSR), which is currently set at zero dollars, to pass through net costs related to its contractual entitlement to capacity and energy from the generating assets owned by OVEC. 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 matter.
Tax Act
Pursuant to Duke Energy Florida's 2017 Settlement, on May 31, 2018, Duke Energy Florida filed a petition related to the Tax Act, which included revenue requirement impacts of annual tax savings of $134 million and estimated annual amortization of EDIT of $67 million for a total of $201 million. Of this amount, $50 million would be offset by accelerated depreciation of Crystal River 4 and 5 coal units and an estimated $151 million would be offset by Hurricane Irma storm cost recovery as explained in the Storm Restoration Cost Recovery section above. On December 27, 2018, Duke Energy Florida filed actual EDIT balances and amortization based on its 2017 filed tax return. This increased the revenue requirement impact of the amortization of EDIT by $4 million, from $67 million to $71 million, which increased the total storm amortization from $151 million to $155 million. On January 8, 2019, the FPSC approved a joint motion by Duke Energy Florida and the Office of Public Counsel resolving all stipulated positions. As part of that stipulation, Duke Energy Florida agreed to seek a Private Letter Ruling (PLR) from the IRS on its treatment of cost of removal (COR) as mostly protected by tax normalization rules. If the IRS rules that COR is not protected by tax normalization rules, then Duke Energy Florida will make a final adjustment to the amortization of EDIT and an adjustment to the storm recovery amount retroactive to January 2018. The IRS has communicated that it will not issue individual PLRs on the treatment of COR. Rather, the IRS is drafting a notice that will request comments on a number of issues, including COR, and the IRS plans to issue industrywide guidance on those issues. Duke Energy Florida cannot predict the outcome of this matter.
Solar Base Rate Adjustment
On July 31, 2018, Duke Energy Florida petitioned the FPSC to include in base rates the revenue requirements for its first two solar generation projects, the Hamilton Project and the Columbia Project, as authorized by the 2017 Settlement. The Hamilton Project, which was placed into service on December 22, 2018, has an annual retail revenue requirement of $15 million. At its October 30, 2018, Agenda Conference, the FPSC approved the rate increase related to the Hamilton Project to go into effect beginning with the first billing cycle in January 2019 under its file and suspend authority, and revised customer rates became effective in January 2019. The Columbia Project has a projected annual revenue requirement of $14 million and a projected in-service date in early 2020; the associated rate increase would take place with the first month’s billing cycle after the Columbia Project goes into service. On April 2, 2019, the commission approved both solar projects as filed.
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On March 25, 2019, Duke Energy Florida petitioned the FPSC to include in base rates the revenue requirements for its next wave of solar generation projects, the Trenton, Lake Placid and DeBary Solar Projects, as authorized by the 2017 Settlement. The annual retail revenue requirement for the Trenton and Lake Placid Projects is $13 million and $8 million, respectively, with projected in-service dates in the fourth quarter of 2019. The DeBary Project has a projected annual revenue requirement of $11 million and a projected in-service date in the first quarter of 2020. The associated rate increase would take place with the first month’s billing cycle after each solar generation project goes into service. On July 22, 2019, the FPSC issued an order approving Duke Energy Florida's request.
Crystal River Unit 3 Accelerated Decommissioning Filing
On May 29, 2019, Duke Energy Florida entered into a Decommissioning Services Agreement for the accelerated decommissioning of the Crystal River Unit 3 nuclear power station located in Citrus County, Florida, with ADP CR3, LLC and ADP SF1, LLC, each of which is a wholly owned subsidiary of Accelerated Decommissioning Partners, LLC, a joint venture between NorthStar Group Services, Inc. and Orano USA LLC. Closing of this Agreement is contingent upon the approval of the NRC and FPSC. If approved, the decommissioning will be accelerated starting in 2020 and continuing through 2027, rather than the expected time frame under SAFSTOR of starting in 2067 and ending in 2074. Duke Energy Florida expects that the assets of the Nuclear Decommissioning Trust Fund will be sufficient to cover the contract price. On July 10, 2019, Duke Energy Florida petitioned the FPSC for approval of the Agreement. Duke Energy Florida cannot predict the outcome of this matter.
Duke Energy Ohio
2017 Electric Security Plan
On June 1, 2017, Duke Energy Ohio filed with the PUCO a request for a standard service offer in the form of an ESP. On February 15, 2018, the procedural schedule was suspended to facilitate ongoing settlement discussions. On April 13, 2018, Duke Energy Ohio filed a Motion to consolidate this proceeding with several other cases pending before the PUCO, including, but not limited to, its Electric Base Rate Case. Additionally, on April 13, 2018, Duke Energy Ohio, along with certain intervenors, filed a Stipulation and Recommendation (Stipulation) with the PUCO resolving certain issues in this proceeding. The term of the ESP would be from June 1, 2018, to May 31, 2025, and included continuation of market-based customer rates through competitive procurement processes for generation, continuation and expansion of existing rider mechanisms and proposed new rider mechanisms relating to regulatory mandates, costs incurred to enhance the customer experience and transform the grid and a service reliability rider for vegetation management. The Stipulation established a regulatory model for the next seven years via the approval of the ESP and continued the current model for procuring supply for non-shopping customers, including recovery mechanisms. On December 19, 2018, the PUCO approved the Stipulation without material modification. Several parties filed applications for rehearing. On February 6, 2019, the PUCO granted the parties rehearing. The PUCO issued its Second Entry on Rehearing on July 17, 2019, upholding its December 19, 2018 order and denying all assignments of error raised by the non-stipulating parties. The parties have the ability to appeal to the Ohio Supreme Court within 60 days of the July entry. Duke Energy Ohio cannot predict the outcome of this matter.
Electric 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 requested an estimated annual increase of approximately $15 million and a return on equity of 10.4 percent. The application also included requests to continue certain current riders and establish new riders. On September 26, 2017, the PUCO staff filed a report recommending a revenue decrease between approximately $18 million and $29 million and a return on equity between 9.22 percent and 10.24 percent. On April 13, 2018, Duke Energy Ohio filed a Motion to consolidate this proceeding with several other cases pending before the PUCO. On April 13, 2018, Duke Energy Ohio, along with certain intervenors, filed the Stipulation with the PUCO resolving numerous issues including those in this base rate proceeding. Major components of the Stipulation related to the base distribution rate case included a $19 million decrease in annual base distribution revenue with a return on equity unchanged from the current rate of 9.84 percent based upon a capital structure of 50.75 percent equity and 49.25 percent debt. Upon approval of new rates, Duke Energy Ohio's rider for recovering its initial SmartGrid implementation ended as these costs would be recovered through base rates. The Stipulation also renewed 14 existing riders, some of which were included in the company's ESP, and added two new riders including the Enhanced Service Reliability Rider to recover vegetation management costs not included in base rates, up to $10 million per year (operation and maintenance only) and the PowerForward Rider to recover costs incurred to enhance the customer experience and further transform the grid (operation and maintenance and capital). In addition to the changes in revenue attributable to the Stipulation, Duke Energy Ohio’s capital-related riders, including the Distribution Capital Investments Rider, began to reflect the lower federal income tax rate associated with the Tax Act with updates to customers’ bills beginning April 1, 2018. This change reduced electric revenue by approximately $20 million on an annualized basis. On December 19, 2018, the PUCO approved the Stipulation without material modification. New base rates were implemented effective January 2, 2019. Several parties filed applications for rehearing. On February 6, 2019, the PUCO granted the parties rehearing. The PUCO issued its Second Entry on Rehearing on July 17, 2019, upholding its December 19, 2018 order and denying all assignments of error raised by the non-stipulating parties. The parties have the ability to appeal to the Ohio Supreme Court within 60 days of the July entry. Duke Energy Ohio cannot predict the outcome of this matter.
Ohio Valley Electric Corporation
On March 31, 2017, Duke Energy Ohio filed for approval to adjust its existing price stabilization rider (Rider PSR) to pass through net costs related to its contractual entitlement to capacity and energy from the generating assets owned by OVEC. Duke Energy Ohio sought deferral authority for net costs incurred from April 1, 2017, until the new rates under Rider PSR were put into effect. On April 13, 2018, Duke Energy Ohio filed a Motion to consolidate this proceeding with several other cases currently pending before the PUCO. Also, on April 13, 2018, Duke Energy Ohio, along with certain intervenors, filed a Stipulation with the PUCO resolving numerous issues including those related to Rider PSR. The Stipulation activated Rider PSR for recovery of net costs incurred from January 1, 2018, through May 2025. On December 19, 2018, the PUCO approved the Stipulation without material modification. The PSR rider became effective April 1, 2019. Several parties filed applications for rehearing. On February 6, 2019, the PUCO granted the parties rehearing. The PUCO issued its Second Entry on Rehearing on July 17, 2019, upholding its December 19, 2018 order and denying all assignments of error raised by the non-stipulating parties. The parties have the ability to appeal to the Ohio Supreme Court within 60 days of the July entry. Duke Energy Ohio cannot predict the outcome of this matter.
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On July 23, 2019, an Ohio bill was signed into law that will be effective January 1, 2020. Among other things, the bill allows for recovery of prudently incurred costs, net of any revenues, for Ohio Investor-owned utilities that are participants under the OVEC power agreement. The recovery shall be through a non-bypassable rider that is to replace any existing recovery mechanism approved by the PUCO and will remain in place through 2030. The amounts recoverable from customers will be subject to an annual cap, with incremental costs that exceed such cap eligible for deferral and recovery subject to review. See Note 13 for additional discussion of Duke Energy Ohio's ownership interest in OVEC.
Tax Act – Ohio
On July 25, 2018, Duke Energy Ohio filed an application to establish a new rider to implement the benefits of the Tax Act for electric distribution customers. Duke Energy Ohio requested commission approval to implement the rider effective October 1, 2018, as a credit to all distribution customers based upon a percent reduction to Duke Energy Ohio’s distribution rates. The new rider will flow through to customers the benefit of the lower statutory federal tax rate from 35 to 21 percent since January 1, 2018, all future benefits of the lower tax rates and a full refund of deferred income taxes collected at the higher tax rates in prior years. Deferred income taxes subject to normalization rules will be refunded consistent with federal law and deferred income taxes not subject to normalization rules will be refunded over a 10-year period. Duke Energy Ohio's transmission rates reflect lower federal income tax but guidance from FERC on amortization of both protected and unprotected transmission-related EDITs is still pending. On October 24, 2018, the PUCO issued a Finding and Order that, among other things, directed all utilities over which the commission has rate-making authority to file an application to pass the benefits of the Tax Act to customers by January 1, 2019, unless otherwise exempted or directed by the PUCO. Duke Energy Ohio's July 25, 2018, filing for electric distribution operations is consistent with the commission's October 24, 2018, Finding and Order and no further action is needed. On February 20, 2019, the PUCO approved the application without material modification. Rates became effective March 1, 2019.
On December 21, 2018, Duke Energy Ohio filed an application to change its base rates and establish a new rider to implement the benefits of the Tax Act for natural gas customers. Duke Energy Ohio requested commission approval to implement the changes and rider effective April 1, 2019. The new rider will flow through to customers the benefit of the lower statutory federal tax rate from 35 to 21 percent since January 1, 2018, all future benefits of the lower tax rates and a full refund of deferred income taxes collected at the higher tax rates in prior years. Deferred income taxes subject to normalization rules will be refunded consistent with federal law and deferred income taxes not subject to normalization rules will be refunded over a 10-year period. The PUCO established a procedural schedule and testimony was filed on July 31, 2019. An order is expected before the fourth quarter of 2018 butevidentiary hearing will take place on August 7, 2019. Duke Energy Ohio cannot predict the outcome of this matter.
Energy Efficiency Cost Recovery
On March 28, 2014, Duke Energy Ohio filed an application for recovery of program costs, lost distribution revenue and performance incentives related to its energy efficiency and peak demand reduction programs. These programs are undertaken to comply with environmental mandates set forth in Ohio law. The PUCO approved Duke Energy Ohio’s application but found that Duke Energy Ohio was not permitted to use banked energy savings from previous years in order to calculate the amount of allowed incentive. This conclusion represented a change to the cost recovery mechanism that had been agreed upon by intervenors and approved by the PUCO in previous cases. The PUCO granted the applications for rehearing filed by Duke Energy Ohio and an intervenor. On January 6, 2016, Duke Energy Ohio and the PUCO Staff entered into a stipulation, pending the PUCO's approval, to resolve issues related to performance incentives and the PUCO Staff audit of 2013 costs, among other issues. In December 2015, based upon the stipulation, Duke Energy Ohio re-established approximately $20 million of the revenues that had been previously reversed. On October 26, 2016, the PUCO issued an order approving the stipulation without modification. In December 2016, the PUCO granted the intervenors request for rehearing for the purpose of further review. Duke Energy Ohio cannot predictOn April 10, 2019, the outcome of this matter.PUCO issued an Entry on Rehearing denying the rehearing applications.
On June 15, 2016, Duke Energy Ohio filed an application for approval of a three-year energy efficiency and peak demand reduction portfolio of programs. A stipulation and modified stipulation were filed on December 22, 2016, and 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 modified stipulation. The modifications impose an annual cap of approximately $38 million on program costs and shared savings incentives combined, but allowed for Duke Energy Ohio to file for a waiver of costs in excess of the cap in 2017. The PUCO approved the waiver request for 2017 up to a total cost of $56 million. On November 21, 2017, the PUCO granted Duke Energy Ohio's and intervenor's applications for rehearing of the September 27, 2017, order. On January 10, 2018, the PUCO denied the Ohio Consumers' Counsel’s application for rehearing of the PUCO order granting Duke Energy Ohio's waiver request.request; however, a decision on Duke Energy Ohio's application for rehearing remains pending. 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,On May 30, 2018, the PUCO modified and approved an extension of Duke Energy Ohio's proposedOhio’s then-current ESP, with a three-year termincluding all terms and conditions thereof, excluding an effective dateextension 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 forOhio’s Rider DCI. Following rehearing, requesting the PUCO to modify or amend certain aspects of the order. On May 28, 2015,on July 25, 2018, the PUCO granted all applicationsthe request and allowed a continuing cap on recovery under Rider DCI. The orders were upheld on rehearing requested by OMA and OCC. The time period for parties to file for rehearing filed in the case for future consideration. On March 21,or appeal has expired.
In 2018, the PUCO issued an order denying Duke Energy Ohio's issues on rehearing. On April 20, 2018, Duke Energy OhioOMA and OCC 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 appealseparate appeals of PUCO's approval of Duke Energy Ohio’s ESP with the Ohio Supreme Court, challenging PUCO's approval of Duke Energy Ohio’s Price Stability Rider as a placeholder and its Distribution Capital Investment Rider (DCI)DCI to recover incremental revenue requirement for distribution capital since Duke Energy Ohio’s last base rate case. On July 16, 2018,The Ohio Supreme Court issued an order on March 13, 2019, for the Officeappellants to show cause why the appeals should not be dismissed as moot in light of Consumers' Counsel filed its own appealthe commission’s approval of Duke Energy Ohio’s ESP withcurrent ESP. The OCC and OMA made the requested filings on March 20, 2019, and Duke Energy Ohio filed its response on March 27, 2019. Subsequent to OCC and OMA making the requested filings, the Ohio Supreme Court raising similar issues to that ofdismissed the OMA. Duke Energy Ohio cannot predict the outcome of this matter.appeals as moot on May 8, 2019.
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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. TheDuke Energy Ohio currently estimates the pipeline is expecteddevelopment costs and construction activities will range from $163 million to cost approximately $112$245 million excluding AFUDC.in direct costs (excluding overheads and 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. On December 18, 2018, the OPSB established a procedural schedule that included a local public hearing on March 21, 2019. An evidentiary hearing began on April 9, 2019, and concluded on April 11, 2019. Briefs were filed on May 13, 2019, and reply briefs were filed on June 10, 2019. If approved, construction of the pipeline extension is expected to be completed before the 2020/20212021/2022 winter season. Duke Energy Ohio expects a decision by the end of 2019. Duke Energy Ohio cannot predict the outcome of this matter.
2012 Natural Gas Rate Case/MGP Cost Recovery
As part of its 2012 natural gas base rate case, Duke Energy Ohio has approval to defer and recover costs related to environmental remediation at two sites (East End and West End) that housed former MGP operations. Duke Energy Ohio has made annual applications for recovery of these deferred costs. Duke Energy Ohio is currently recovering approximately $55 million in environmental remediation costs between 2009 through 2012 through a separate rider, Rider MGP. Duke Energy Ohio has made annual applications with the PUCO to recover its incremental remediation costs consistent with the PUCO’s directive in Duke Energy Ohio’s 2012 natural gas rate case. To date, the PUCO has not ruled on Duke Energy Ohio’s annual applications for the calendar years 2013 through 2017. On September 28, 2018, the staff of the PUCO issued a report recommending a disallowance of approximately $12 million of the $26 million in MGP remediation costs incurred between 2013 through 2017 that staff believes are not eligible for recovery. Staff interprets the PUCO’s 2012 Order granting Duke Energy Ohio recovery of MGP remediation as limiting the recovery to work directly on the East End and West End sites. On October 30, 2018, Duke Energy Ohio filed reply comments objecting to the staff’s recommendations and explaining, among other things, the obligation Duke Energy Ohio has under Ohio law to remediate all areas impacted by the former MGPs and not just physical property that housed the former plants and equipment. To date, the PUCO has not issued a procedural schedule and has not ruled on Duke Energy Ohio’s applications. On March 29, 2019, Duke Energy Ohio filed its annual application to recover incremental remediation expense for the calendar year 2018 seeking recovery of approximately $20 million in remediation costs. On July 12, 2019, the staff recommended a disallowance of approximately $11 million for work that staff believes occurred in areas not authorized for recovery. Duke Energy Ohio cannot predict the outcome of this matter.
The 2012 PUCO order also contained conditional deadlines for completing the MGP environmental investigation and remediation costs at the MGP sites. Subsequent to the order, the deadline was extended to December 31, 2019. On May 10, 2019, Duke Energy Ohio filed an application requesting a continuation of its existing deferral authority for MGP remediation and investigation that must occur after December 31, 2019. Duke Energy Ohio cannot predict the outcome of this matter.
Duke Energy Kentucky ElectricNatural Gas Base Rate Case
On September 1, 2017,August 31, 2018, Duke Energy Kentucky filed a rate casean application with the KPSC requesting an increase in electricnatural gas base rates of approximately $49$11 million, which represents an approximate 1511.1 percent average increase onacross all customer classes. The increase was net of approximately $5 million in annual savings as a result of the average customer bill. Subsequent to the filing,Tax Act. The drivers for this case are capital invested since Duke Energy Kentucky’s last rate case in 2009. Duke Energy Kentucky adjustedalso sought implementation of a Weather Normalization Adjustment Mechanism, amortization of regulatory assets and to implement the requested amount to $30.1 million, in part to reflect the benefitsimpacts of the Tax Act, representingprospectively. On January 30, 2019, Duke Energy Kentucky entered into a settlement agreement with the Attorney General of Kentucky, the only intervenor in the case. The settlement provided for 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$7 million increase in natural gas base rates withrevenue, a return on equity at 9.725of 9.7 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 componentapproval of the revenue requirement and refunding protected excess deferred income taxes (EDIT) under allowable normalization rules and unprotected EDIT over 10 years.proposed Weather Normalization Mechanism. A hearing was held on February 5, 2019. The commission issued its Order denied requests to implement riders for certain transmission costs and distribution capital investments. approving the settlement without material modification on March 27, 2019. Revised customer rates were effective April 1, 2019.
Duke Energy Kentucky implemented new base rates on MayElectric Base Rate Case
On August 1, 2018. On May 3, 2018,2019, Duke Energy Kentucky filed an application for rehearing on certain aspects of the order; on May 23, 2018,a notice with the KPSC grantedof its intent to file a rehearing. Duke Energy Kentucky cannot predictgeneral electric rate case application no earlier than 30 days from the outcome of this matter.notice submittal date.
Duke Energy Indiana
2019 Indiana Rate Case
On July 2, 2019, Duke Energy Indiana filed a general rate case with the IURC, its first general rate case in Indiana in 16 years, for a rate increase for retail customers of approximately $395 million, which represents an approximate 15 percent increase in retail revenues. The rate increase is driven by strategic investments to generate cleaner electricity, improve reliability and serve a growing customer base. The request is premised upon a Duke Energy Indiana rate base of $10.2 billion as of December 31, 2018, and adjusted for projected changes through December 31, 2020. Hearings are expected to commence in early 2020, with rates to be effective by mid-2020. Duke Energy Indiana cannot predict the outcome of this matter.
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FERC Transmission Return on Equity Complaint
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, 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.D.C. Circuit 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 affectOn October 16, 2018, FERC issued an order in response to the outcome ofEmera remand proceeding proposing a new method for determining whether an existing return on equity is unjust and unreasonable, and a new process for determining a just and reasonable return on equity. On November 14, 2018, FERC directed parties to the MISO complaints to file briefs on how the new process for determining return on equity proposed in the Emera proceeding should be applied to the complaints against Duke Energy Indiana.involving the MISO transmission owners’ return on equity. Initial briefs were filed on February 13, 2019, and reply briefs were filed April 10, 2019. Duke Energy Indiana currently believes these matters will not have a material impact on its results of operations, cash flows and financial position.
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.
Edwardsport Integrated Gasification Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Benton County Wind Farm DisputeCycle Plant
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 27,20, 2018, Duke Energy Indiana, the Indiana Office of Utility Consumer Counselor, the IndianaDuke Industrial Group and Nucor Steel – Indiana filed testimony consistent with their Stipulationentered into a settlement agreement to resolve IGCC ratemaking issues for calendar years 2018 and Settlement Agreement (Settlement Agreement)2019. The agreement will remain in the federal tax act proceeding with the IURC. The Settlement Agreement outlines howeffect until new rates are established in 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 taxIndiana's next base rate from 35 percent to 21 percent as they arecase, which was filed in 2018;
Baseon July 2, 2019, with rates to reflect the changebe effective 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.mid-2020. An evidentiary hearing was held in December 2018, and on July 13, 2018. Duke Energy Indiana cannot predictJune 5, 2019, the outcome of this matter.IURC issued an Order approving the 2018 Settlement Agreement.
Piedmont
South Carolina Rate Stabilization Adjustment Filing
In June 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, 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 Filing
In May 2018,On April 30, 2019, Piedmont filed and the NCUC approved, a petition under the Integrity Management Rider (IMR)IMR mechanism to update rates, effective June 2018, based on the eligible capital investments closed to integrity and safety projects over the six-month period ending March 31, 2018,2019. The NCUC approved the petition on May 29, 2019, and the decrease in the corporate federal income tax raterates became effective JanuaryJune 1, 2018.2019. The combined effect of the update was a reductionan increase to annual revenues of approximately $5.7$9 million.
Tennessee Integrity Management Rider Filing
In November 2017,2018, Piedmont filed a petition with the TPUC under the IMR mechanism to collect an additional $3.3$3 million in annual revenues, effective January 2018,2019, based on the eligible capital investments forclosed to integrity and safety projects throughover the 12-month period ending October 31, 2017. In January 2018,2018. A hearing on the matter was held on March 11, 2019. On May 20, 2019, the TPUC approved Piedmont's IMR application as filed and revised customer rates were effective June 1, 2019.
2019 North Carolina Rate Case
On April 1, 2019, Piedmont filed an amended computationapplication with the NCUC, its first general rate case in North Carolina in six years, for a rate increase for retail customers of approximately $83 million, which represents an approximate 9 percent increase in retail revenues. The rate increase is driven by significant infrastructure upgrade investments (plant additions) since the last general rate case, offset by savings that customers will begin receiving due to federal and state tax reform. Approximately half of the plant additions being rolled into rate base are categories of plant investment not covered under the IMR mechanism, revisingwhich was originally approved as part of the proposed increase in annual revenues2013 North Carolina Rate Case. An evidentiary hearing is scheduled to approximately $0.4 million basedbegin on August 19, 2019, and a decision and revised customer rates are expected by the decrease inend of 2019. Piedmont cannot predict the corporate federal income tax rate effective January 1, 2018. A hearing onoutcome of this matter was held on April 9, 2018. In May 2018, the TPUC approved Piedmont's request as proposed for the 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)
matter.
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 buildbe responsible for building and operateoperating 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 1213 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.
|
| |
| FINANCIAL STATEMENTS | REGULATORY MATTERS |
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, and October 19, 2018, FERC issued a NoticeNotices to Proceed allowing full construction activities in specifiedall areas of West Virginia and onexcept in the Monongahela National Forest. On July 24, 2018, FERC issued a Notice to Proceed allowing full construction activities along the project route in North Carolina. A conditionalOn October 19, 2018, the conditions to effectiveness of the Virginia 401 water quality certification has been issuedwere satisfied. Immediately following receipt of the Virginia 401 certification, ACP filed a request for FERC to issue a Notice to Proceed with full construction activities in Virginia. We appreciate the professional and collaborative process by the Virginia Water Control Board,permitting agencies designed to ensure that this critical energy infrastructure project will meet the stringent environmental standards required by law 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.regulation.
ACP is the subject of numerous challenges in state and federal courts and agencies, including, among others, challenges of the project’s biological opinion (BiOp) and 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 project's air permit for a compressor station at Buckingham, Virginia, 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. Since December 2018, notable developments in these challenges include a stay in December 2018 issued by the U.S. Court of Appeals for the Fourth Circuit (Fourth Circuit) and the same court's ultimate vacatur of the project's BiOp and ITS (which stay has halted most project construction activity), a Fourth Circuit decision vacating the project's permits to cross the Monongahela and George Washington National Forests and the Appalachian Trail, the Fourth Circuit's remand to USACE of ACP's Huntington District 404 verification and the Fourth Circuit’s remand to the National Park Service of the ACP’s Blue Ridge Parkway right-of-way. ACP is vigorously defending these challenges and coordinating with the federal and state authorities which are the direct parties to the challenges. The Solicitor General of the United States and ACP filed petitions for certiorari to the Supreme Court of the United States on June 25, 2019, regarding the Appalachian Trail crossing and anticipate a decision in October 2019 from the Supreme Court of the United States as to whether it will hear the case. ACP is also evaluating possible legislative remedies to this issue. On May 15, 2018,July 26, 2019, the Fourth U.S. Circuit Court of Appeals vacatedissued an order vacating ACP's BiOp and ITS, finding that the U.S. Fish and Wildlife Services’ ITSService (FWS) had reached arbitrary conclusions in issuing the vacated BiOp and ITS. In anticipation of such an order by the Fourth Circuit, ACP and the FWS commenced work in mid-May of 2019 to set the basis for a reissued BiOp and ITS. ACP continues coordinating and working with FWS and other parties in preparation for a reissuance of the BiOp and ITS.
The delays resulting from the legal challenges described above have impacted the cost and schedule for the project. As a result, project stating that the ITS failedcost estimates have increased 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$7.0 billion to $6.5$7.8 billion, excluding financing costs. Project construction activities, schedule and final costs are still subjectACP expects to uncertaintyachieve a late 2020 in-service date for key segments of the project, while it expects the remainder to extend into 2021. Abnormal weather, work delays (including delays due to potential additional permitting delays, construction productivityjudicial or regulatory action) and other conditions and risks, which couldmay result in potential higher project costs and a potential delaycost or schedule modifications in the targeted in-service date, which is late 2019.
Sabal Trail Transmission, LLC
On May 4, 2015, Duke Energy acquired a 7.5 percent ownership interest in Sabal Trail, which is accounted for as an equity method investment, from Spectra Energy Partners, LP, a master limited partnership, formed by Enbridge Inc. (formerly Spectra Energy Corp.). Spectra Energy Partners, LP holds a 50 percent ownership interest in Sabal Trail and NextEra Energy has a 42.5 percent ownership interest. Sabal Trail is a joint venture to construct a 515-mile natural gas pipeline (Sabal Trail pipeline) to transport natural gas to Florida. Total estimated project costs are approximately $3.2 billion. The Sabal Trail pipeline traverses Alabama, Georgia and Florida. The primary customers of the Sabal Trail pipeline, Duke Energy Florida and 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 October 12, 2017, Sabal Trail filed a request with FERC to place in service a lateral line to Duke Energy Florida's Citrus County Combined Cycle Facility. This request is required to support commissioning and testing activities at the facility. On March 16, 2018, FERC approved the Citrus lateral and it was placed in service.
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 (D.C. Circuit Court of Appeals). On August 22, 2017, the appeals court ruled against FERC in the case for failing to include enough information on the impact of greenhouse-gas emissions carried by the pipeline, vacated the CPCN order and remanded the case to FERC. In response to the August 2017 court decision, the FERC issued a draft Supplemental Environmental Impact Statement (SEIS) on September 27, 2017. On October 6, 2017, FERC and a group of industry intervenors, including Sabal Trail and Duke Energy Florida, filed separate petitions with the D.C. Circuit Court of Appeals requesting rehearing regarding the court's decision to vacate the CPCN order. On January 31, 2018, the D.C. Circuit Court of Appeals denied the requests for rehearing. On February 2, 2018, Sabal Trail filed a request with FERC for expedited issuance of its order on remand and reissuance of the CPCN. In the alternative, the pipeline requested that FERC issue a temporary emergency CPCN to allow for continued operations. On February 5, 2018, FERC issued the final SEIS. On February 6, 2018, FERC and the intervenors in this case each filed motions for stay with the D.C. Circuit Court to stay the court's mandate. On March 7, 2018, the D.C. Circuit Court of Appeals granted FERC and Sabal Trail’s stay request. On March 14, 2018, FERC issued its final order on remand, which recertified the project. Requests for rehearing of the FERC order on remand are still pending.future.
Constitution Pipeline Company, LLC
Duke Energy owns a 24 percent ownership interest in Constitution, which is accounted for as an equity method investment. Constitution is a natural gas pipeline project slated to transport natural gas supplies from the Marcellus supply region in northern Pennsylvania to major northeastern markets. The pipeline will be constructed and operated by Williams Partners L.P., which has a 41 percent ownership share. The remaining interest is held by Cabot Oil and Gas Corporation and WGL Holdings, Inc. Before the permitting delays discussed below, Duke Energy's total anticipated contributions were approximately $229 million. As a result of the permitting delays and project uncertainty, total anticipated contributions by Duke Energy can no longer be reasonably estimated. Since April 2016, with the actions of the New York State Department of Environmental Conservation (NYSDEC), Constitution stopped construction and discontinued capitalization of future development costs until the project's uncertainty is resolved.
In December 2014, Constitution received approval from the FERC to construct and operate the proposed pipeline. However, on April 22, 2016, the NYSDEC denied Constitution’s application for a necessary water quality certification for the New York portion of the Constitution pipeline. Constitution filed a series of legal actions in the U.S. Court of Appeals for the Second Circuit (U.S. Court of Appeals) challenging the legality and appropriateness of the NYSDEC’s decision, and on August 18, 2017, the petition was deniedculminating in part and dismissed in part. In September 2017, Constitution filed a petition for a rehearing of portions of the decision unrelatedan appeal to the water quality certification, which was denied by the U.S. Court of Appeals. In January 2018, Constitution petitioned the Supreme Court of the United States, to review the U.S. Court of Appeals decision, andwhich appeal was denied on April 30, 2018, the Supreme Court denied Constitution's petition.2018. In addition, 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. Thisstatute, which petition was baseddenied on precedent established by another pipeline’s successful petition with FERC following a District of ColumbiaJanuary 11, 2018.
On January 25, 2019, the D.C. Circuit Court ruling. On January 11,rendered a decision in Hoopa Valley Tribe v. FERC that withdrawal and resubmission of an application for a Section 401 water quality certification constituted a waiver by the relevant state agency when such withdrawals and resubmissions were intended to extend the one-year limit on accepting or rejecting such an application. As Constitution had made similar arguments in its 2018 petition to FERC denied Constitution's petition. In February 2018,for a declaratory order, on April 1, 2019, Constitution filed a rehearing requestnew petition for declaratory order requesting FERC find a waiver on the part of NYSDEC in accordance with the D.C. Circuit Court’s newly established precedent. On May 1, 2019, Constitution filed its response to supplemental pleadings filed by NYSDEC and others in this proceeding. A 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. response is expected later this year.
Constitution is currently unable to approximate an in-service date for the project due to the NYSDEC's denial of the water quality certification. The Constitution partners remain committed to the project and are evaluating next steps to move the project forward. On June 25, 2018, Constitution filed with FERC a Request for Extension of Time until December 2, 2020, for construction of the project. Duke Energy cannot predict the outcomeOn November 5, 2018, FERC issued an Order Granting Extension of this matter.Time.
During the six months ended June 30, 2018, Duke Energy recorded an other-than-temporary impairment (OTTI)OTTI of $55 million within Equity in earnings of unconsolidated affiliates on Duke Energy's Condensed Consolidated Statements of Operations.Income. The charge representsrepresented the excess carrying value over the estimated fair value of the project, which was based on a Level 3 Fair Value measurement that was determined from the income approach using discounted cash flows. The impairment was primarily due to the recent actions taken by the courts and regulators to uphold the NYSDEC's denial of the certification and uncertainty associated with the remaining legal and regulatory challenges.
See Note 1213 for additional information related to ownership interest and carrying value of the investment.
|
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| FINANCIAL STATEMENTS | REGULATORY MATTERS |
Potential Coal Plant Retirements
The Subsidiary Registrants periodically file Integrated Resource Plans (IRP)IRPs with their state regulatory commissions. The IRPs provide a view of forecasted energy needs over a long term (10 to 20 years) and options being considered to meet those needs. Recent IRPs filed by the Subsidiary Registrants included planning assumptions to potentially retire certain coal-fired generating facilities in FloridaNorth Carolina and Indiana earlier than their current estimated useful lives. Duke Energy continues to evaluate the potential need to retire these coal-fired generating facilities earlier than the current estimated useful lives primarily because facilities doand plans to seek regulatory recovery for amounts that would not have the requisite emission control equipment to meet EPA regulations recently approved or proposed.be otherwise recovered when any of these assets are retired.
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 contains the net carrying value of generating facilities planned for retirement or included in recent IRPs as evaluated for potential retirement due to a lack of requisite environmental control equipment.retirement. Dollar amounts in the table below are included in Net property, plant and equipment on the Condensed Consolidated Balance Sheets as of June 30, 2018,2019, and exclude capitalized asset retirement costs. | | | | | | Remaining Net |
| | | Remaining Net |
|
| | Capacity |
| | Book Value |
| Capacity |
| | Book Value |
|
| | (in MW) |
| | (in millions) |
| (in MW) |
| | (in millions) |
|
| Duke Energy Carolinas | | | | | | |
Allen Steam Station Units 1-3(a) | 585 |
| | $ | 160 |
| 585 |
| | 156 |
|
| 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 |
| |
Gallagher Units 2 and 4(b) | | 280 |
| | 118 |
|
Gibson Units 1-5(c) | | 3,132 |
| | 1,960 |
|
Cayuga Units 1-2(c) | | 1,005 |
| | 983 |
|
| Total Duke Energy | 1,738 |
| | $ | 387 |
| 5,002 |
| | $ | 3,217 |
|
| |
| (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 2016 settlement of Edwardsport IGCC matters. |
| |
| (c) | On July 1, 2019, Duke Energy Indiana filed its 2018 IRP with the IURC. The 2018 IRP included scenarios evaluating the potential retirement of coal-fired generating units at Gibson and Cayuga. The rate case filed July 2, 2019, includes proposed depreciation rates reflecting retirement dates from 2026 to 2038. |
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, coal ash and other environmental matters. These regulations can be changed from time to time, imposing new obligations on the Duke Energy Registrants. The following environmental matters impact all of the Duke Energy Registrants.
Remediation Activities
In addition to asset retirement obligations (ARO)AROs recorded as a result of various environmental regulations, the Duke Energy Registrants are responsible for environmental remediation at various sites. These include certain properties that are part of ongoing operations and sites formerly owned or used by Duke Energy entities. These sites are in various stages of investigation, remediation and monitoring. Managed in conjunction with relevant federal, state and local agencies, remediation activities vary based upon site conditions and location, remediation requirements, complexity and sharing of responsibility. If remediation activities involve joint and several liability provisions, strict liability, or cost recovery or contribution actions, the Duke Energy Registrants could potentially be held responsible for environmental impacts caused by other potentially responsible parties and may also benefit from insurance policies or contractual indemnities that cover some or all cleanup costs. Liabilities are recorded when losses become probable and are reasonably estimable. The total costs that may be incurred cannot be estimated because the extent of environmental impact, allocation among potentially responsible parties, remediation alternatives and/or regulatory decisions have not yet been determined at all sites. Additional costs associated with remediation activities are likely to be incurred in the future and could be significant. Costs are typically expensed as Operation, maintenance and other on the Condensed Consolidated Statements of Operations unless regulatory recovery of the costs is deemed probable.
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)
|
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| FINANCIAL STATEMENTS | COMMITMENTS AND CONTINGENCIES |
The following tables contain information regarding reserves for probable and estimable costs related to the various environmental sites. These reserves are recorded in Accounts Payable within Current Liabilities and Other within Other Noncurrent Liabilities on the 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 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2019 |
| | | | 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 | $ | 77 |
| | $ | 11 |
| | $ | 11 |
| | $ | 4 |
| | $ | 6 |
| | $ | 48 |
| | $ | 5 |
| | $ | 2 |
|
| Provisions/adjustments | 9 |
| | 4 |
| | 3 |
| | 2 |
| | 1 |
| | 2 |
| | — |
| | — |
|
| Cash reductions | (22 | ) | | (3 | ) | | (1 | ) | | (1 | ) | | — |
| | (18 | ) | | — |
| | — |
|
| Balance at end of period | $ | 64 |
| | $ | 12 |
| | $ | 13 |
| | $ | 5 |
| | $ | 7 |
| | $ | 32 |
| | $ | 5 |
| | $ | 2 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 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 |
|
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 | $ | 51 |
|
| Duke Energy Carolinas | 12 |
|
| Duke Energy Ohio | 29 |
|
| Piedmont | 2 |
|
|
| | | |
| (in millions) | |
| Duke Energy | $ | 55 |
|
| Duke Energy Carolinas | 16 |
|
| Duke Energy Ohio | 30 |
|
| Piedmont | 2 |
|
LITIGATION
Duke Energy Carolinas and Duke Energy Progress
NCDEQ Closure Litigation
The Coal Ash Act requires CCR surface impoundments in North Carolina to be closed, with the closure method and timing based on a risk ranking classification determined by legislation or state regulators. The NCDEQ previously classified the impoundments at Allen, Belews Creek, Rogers, Marshall, Mayo and Roxboro as low risk and Duke Energy expected to close those sites through a combination of a cap system and a groundwater monitoring system. However, on April 1, 2019, NCDEQ issued a closure determination (NCDEQ's April 1 Order) requiring Duke Energy Carolinas and Duke Energy Progress to excavate all remaining coal ash impoundments at these facilities. On April 26, 2019, Duke Energy Carolinas and Duke Energy Progress filed Petitions for Contested Case Hearings in the Office of Administrative Hearings to challenge NCDEQ's April 1 Order. On May 9, 2019, NCDEQ issued a supplemental order requiring that closure plans be submitted on December 31, 2019, but providing that the corrective action plans are not due until March 31, 2020. Duke Energy Carolinas and Duke Energy Progress filed amended petitions on May 24, 2019, incorporating the May 9, 2019 order.
On June 14, 2019, NCDEQ filed a motion to dismiss several claims in Duke Energy Carolinas' and Duke Energy Progress' appeals. On August 2, 2019, the court entered an order granting NCDEQ's motion to dismiss several of the claims. The lawsuit will proceed on the remaining issues, including whether the NCDEQ's decision was arbitrary and capricious. Duke Energy Carolinas and Duke Energy Progress cannot predict the outcome of this matter.
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-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. On May 14, 2019, the court granted an extension of stay, until September 15, 2019, to allow the parties to discuss potential resolution. If the case is not fully resolved at that time, litigation will resume. The parties are engaged in discovery.trial is now scheduled for February 2021. Duke Energy Carolinas and Duke Energy Progress cannot predict the outcome of this matter.
|
| |
| FINANCIAL STATEMENTS | COMMITMENTS AND CONTINGENCIES |
NCDEQ State Enforcement Actions
In the first quarter of 2013, the Southern Environmental Law Center (SELC)SELC sent notices of intent to sue Duke Energy Carolinas and Duke Energy Progress related to alleged Clean Water Act (CWA)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 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 for Partial Summary Judgment for seven of the 14 North Carolina plants named in the enforcement actions. On February 13, 2017, the court issued an order denying motions for partial summary judgment brought by both the environmental groups and Duke Energy Carolinas and Duke Energy Progress for the remaining seven plants. On March 15, 2017, Duke Energy Carolinas and Duke Energy Progress filed a Notice of Appeal with the North Carolina Court of Appeals to challenge the trial court’s order. The parties were unable to reach an agreement at mediation in April 2017. The parties2017 and submitted briefs to the trial court on remaining issues to be tried and a ruling is pending.tried. On August 22, 2017,1, 2018, the Court of Appeals dismissed the appeal and the matter is proceeding before the trial court. In light of the NCDEQ's April 1 Order, on April 29, 2019, the court decided to stay any activity in the case until August 2019, at which time the court will hold another status conference. Duke Energy Carolinas and Duke Energy Progress filed a Petition for Discretionary Review, requestingcannot predict 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.outcome of this matter.
Federal Citizens Suits
On June 13, 2016, the Roanoke River Basin Association (RRBA)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)NPDES permit provisions survived the motion to dismiss, and Duke Energy Progress filed its response on May 10, 2017. Duke Energy Progress and RRBA each filed motions for summary judgment on March 23, 2018. The court has not yet ruled on these motions.
On May 16, 2017, RRBA filed a federal citizen suit in the U.S. District Court for the Middle District of North Carolina, which asserts two claims relating to alleged violations of NPDES permit provisions at the Roxboro plantPlant and one claim relating to the use of nearby water bodies. Duke Energy Progress and RRBA each filed motions for summary judgment on April 17, 2018.2018, and the court has not yet ruled on these motions.
On May 8, 2018, on motion from Duke Energy Progress, the Courtcourt ordered trial in both of the above matters to be consolidated and has set a trial date for December 3, 2018.
consolidated. 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.April 5, 2019, Duke Energy Progress filed a motion to dismiss, which was granted bystay the court on March 30, 2018. RRBA had untilcase following the NCDEQ’s April 30, 2018, to file an appeal to the Fourth Circuit but did not do so.
1 Order. On August 2, 2017, RRBA filed a federal citizen suit in the U.S. District Court for the Middle District of North Carolina challenging the closure plans at the Roxboro Plant under the EPA CCR Rule. Duke Energy Progress filed a motion to dismiss on October 2, 2017, which was granted by2019, the court on May 29, 2018. RRBA had until June 28, 2018, to file an appeal toordered that this case is stayed and shall remain stayed pending further order from the Fourth Circuit but did not do so.court.
On December 6,5, 2017, various parties filed a federal citizen suit in the U.S. District Court for the Middle District of North Carolina for alleged violations at Duke Energy Carolinas' Belews Creek Steam Station (Belews Creek) under the CWA. Duke Energy Carolinas' answer to the complaint was filed on August 27, 2018. On October 10, 2018, Duke Energy Carolinas filed Motions to Dismiss for lack of standing, Motion for Judgment on the Pleadings and Motion to Stay Discovery. On January 9, 2019, the court entered an order denying Duke Energy Carolinas' motion to stay discovery. There has been no ruling on the other pending motions. On April 5, 2019, Duke Energy Carolinas filed a motion to dismiss on February 5, 2018.
Itstay the case following the NCDEQ’s April 1 Order. On August 2, 2019, the court ordered that this case is not possible to predict whether Duke Energy Carolinas or Duke Energy Progress will incur any liability or to estimate the damages, if any, they might incur in connection with these matters.
Groundwater Contamination Claims
Beginning in May 2015, a number of residents living in the vicinity of the North Carolina facilities with ash basins received lettersstayed and shall remain stayed pending further order from the NCDEQ advising them not to drink water from the private wells on their land tested by the NCDEQ as the samples were found to have certain substances at levels higher than the criteria set by the North Carolina Department of Health and Human Services (DHHS). Results of Comprehensive Site Assessments testing performed by Duke Energy under the Coal Ash Act have been consistent with historical data provided to state regulators over many years. The DHHS and NCDEQ sent follow-up letters on October 15, 2015, to residents near coal ash basins who had their wells tested, stating that private well samplings at a considerable distance from coal ash basins, as well as some municipal water supplies, contain similar levels of vanadium and hexavalent chromium, which led investigators to believe these constituents are naturally occurring. In March 2016, DHHS rescinded the advisories.court.
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 dayscannot predict the outcome of mediation discussions that ended at an impasse. On January 6, 2017, Duke Energy Carolinas and Duke Energy Progress received the plaintiffs' notice of their intent to file suits should the matter not settle. The NCDEQ preliminarily approved Duke Energy’s permanent water solution plans on January 13, 2017, and as a result shortly thereafter, Duke Energy issued a press release, providing additional details regarding the homeowner compensation package. This package consists of three components: (i) a $5,000 goodwill payment to each eligible well owner to support the transition to a new water supply, (ii) where a public water supply is available and selected by the eligible well owner, a stipend to cover 25 years of water bills and (iii) the Property Value Protection Plan. The Property Value Protection Plan is a program offered by Duke Energy designed to guarantee eligible plant neighbors the fair market value of their residential property should they decide to sell their property during the time that the plan is offered. Duke Energy Carolinas and Duke Energy Progress have recognized reserves of $10 million and $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.matters.
It is not possible to estimate the maximum exposure of loss, if any, that may occur in connection with future claims that 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, 2018,2019, there were 120145 asserted claims for non-malignant cases with cumulative relief sought of up to $29$38 million, and 4750 asserted claims for malignant cases with cumulative relief sought of up to $12$16 million. Based on Duke Energy Carolinas’ experience, it is expected that the ultimate resolution of most of these claims likely will be less than the amount claimed.
Duke Energy Carolinas has recognized asbestos-related reserves of $466$607 million at June 30, 2018,2019, and $489$630 million at December 31, 2017.2018. These reserves are classified in Other within Other Noncurrent Liabilities and Other within Current Liabilities on the Condensed Consolidated Balance Sheets. These reserves are based upon the minimum amount of the range of lossDuke Energy Carolinas' best estimate for current and future asbestos claims through 2037,2038 and are recorded on an undiscounted basis and incorporate anticipated inflation.basis. In light of the uncertainties inherent in a longer-term forecast, management does not believe they can reasonably estimate the indemnity and medical costs that might be incurred after 20372038 related to such potential claims. It is possible Duke Energy Carolinas may incur asbestos liabilities in excess of the recorded reserves.
Duke Energy Carolinas has third-party insurance to cover certain losses related to asbestos-related injuries and damages above an aggregate self-insured retention. Duke Energy Carolinas’ cumulative payments began to exceed the self-insuranceself-insured retention in 2008. Future payments up to the policy limit will be reimbursed by the third-party insurance carrier. The insurance policy limit for potential future insurance recoveries indemnification and medical cost claim payments is $797$764 million in excess of the self-insured retention. Receivables for insurance recoveries were $585$739 million at June 30, 2018,2019, and December 31, 2017.2018. These amounts are classified in Other within Other Noncurrent Assets and Receivables within Current Assets on the Condensed Consolidated Balance Sheets. Duke Energy Carolinas is not aware of any uncertainties regarding the legal sufficiency of insurance claims. Duke Energy Carolinas believes the insurance recovery asset is probable of recovery as the insurance carrier continues to have a strong financial strength rating.
|
| |
| FINANCIAL STATEMENTS | COMMITMENTS AND CONTINGENCIES |
Duke Energy Progress and Duke Energy Florida
Spent Nuclear Fuel Matters
On October 16, 2014,June 18, 2018, Duke Energy Progress and Duke Energy Florida sued the U.S. in the U.S. Court of Federal Claims.Claims for damages incurred for the period 2014 through 2018. The lawsuit claimed the Department of Energy breached a contract in failing to accept spent nuclear fuel under the Nuclear Waste Policy Act of 1982 and asserted damages for the cost of on-site storage.storage in the amount of $100 million and $203 million for Duke Energy Progress and Duke Energy Florida, asserted damages for the period January 1, 2011, through December 31, 2013, of $48 millionrespectively. Discovery is ongoing and $25 million, respectively. On November 17, 2017, the Court awarded Duke Energy Progress and Duke Energy Florida $48 million and $21 million, respectively, subjecta trial is expected to appeal. No appeals were filed and Duke Energy Progress and Duke Energy Florida recognized the recoveriesoccur 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)
2020.
Duke Energy Florida
Class Action LawsuitFluor Contract Litigation
On February 22, 2016,January 29, 2019, Fluor filed a breach of contract lawsuit was filed in the U.S. District Court for the SouthernMiddle District of Florida on behalf of a putative class of Duke Energy Florida and FP&L’s customers in Florida. The suit alleges the state of Florida’s nuclear power plant cost recovery statutes (NCRS) are unconstitutional and pre-empted by federal law. Plaintiffs claim they are entitled to repayment of all money paid by customers of Duke Energy Florida and FP&L as a result of the NCRS, as well as an injunction against any future charges under those statutes. The constitutionality of the NCRS has been challenged unsuccessfully in a number of prior cases on alternative grounds. Duke Energy Florida and FP&L filed motions to dismiss the complaint on May 5, 2016. On September 21, 2016, the Court granted the motions to dismiss with prejudice. Plaintiffs filed a motion for reconsideration, which was denied. On January 4, 2017, plaintiffs filed a notice of appeal to the Eleventh Circuit U.S. Court of Appeals (Eleventh Circuit). On July 11, 2018, the Eleventh Circuit affirmed the U.S. District Court's dismissal of the lawsuit. Plaintiffs have until October 9, 2018, to file a petition for certiorari with the U.S. Supreme Court.
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 Engineering, 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 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 Courtrelated to an EPC agreement for the Western Districtcombined-cycle natural gas plant in Citrus County, Florida. Fluor filed an amended complaint on February 13, 2019. Fluor’s multicount complaint seeks civil, statutory and contractual remedies related to Duke Energy Florida’s $67 million draw in early 2019, on Fluor’s letter of Pennsylvania alleging damages under the same EPC contract in excesscredit and offset 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 would proceed in the Western District of North Carolina.
On July 11, 2016,invoiced amounts. Duke Energy Florida moved to dismiss all counts of Fluor's amended complaint, and Westinghouse filed separate Motions for Summary Judgment. On September 29, 2016,on April 16, 2019, the court issued its ruling, granting Westinghousedismissed Fluor's complaint without prejudice. On April 26, 2019, Fluor filed a $30 million termination fee claim and dismissing Duke Energy Florida's $54 million refund claim. Westinghouse's claim for termination costs continued to trial. Following a trial on the matter, the court issued an order in December 2016 denying Westinghouse’s claim for termination costs and reaffirming its earlier ruling in favor of Westinghouse on the $30 million termination fee. Judgment was entered againstsecond amended complaint. Duke Energy Florida in the amount of approximately $34 million, which includes prejudgment interest. Westinghouse appealed the trial court's order to the U.S. Court of Appeals for the Fourth Circuit (Fourth Circuit) and Duke Energy Florida cross-appealed.
On March 29, 2017, Westinghouse filed Chapter 11 bankruptcy in the Southern District of New York, which automatically stayed the appeal. On May 23, 2017, the bankruptcy court entered an order lifting the stay with respect to the appeal. 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 dismissed the appeal.
MGP Cost Recovery Action
On December 30, 2011, Duke Energy Florida filed a lawsuit against FirstEnergy Corp. (FirstEnergy)is attempting to recover investigation and remediationfrom Fluor $110 million in additional costs incurred by Duke Energy Florida in connection with the restoration of two former MGP sites in Florida.
On August 1, 2019, Duke Energy Florida alleged that FirstEnergy, asand Fluor reached a settlement to resolve the successorpending litigation and other outstanding issues related to Associated Gas & Electric Co., owes past and future contribution and response costscompleting the Citrus County combined-cycle plant. The terms of up to $43 million for the investigation and remediation of MGP sites. On December 6, 2016, the trial court entered judgment againstsettlement will not have a material impact on Duke Energy Florida in the case. In January 2017, Duke Energy Florida appealed the decision to the U.S. CourtFlorida's results of Appeals for the Sixth Circuit, which affirmed the trial court's ruling on April 10, 2018.operations, cash flows or financial position.
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, 2019 |
| | December 31, 2018 |
|
| Reserves for Legal Matters | | | |
| Duke Energy | $ | 64 |
| | $ | 65 |
|
| Duke Energy Carolinas | 7 |
| | 9 |
|
| Progress Energy | 55 |
| | 54 |
|
| Duke Energy Progress | 14 |
| | 12 |
|
| Duke Energy Florida | 24 |
| | 24 |
|
| Piedmont | 1 |
| | 1 |
|
|
| | | | | | | |
| (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)
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)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.
|
| |
| FINANCIAL STATEMENTS | LEASES |
5. LEASES
As described in Note 1, Duke Energy adopted the revised accounting guidance for Leaseseffective January 1, 2019, using the modified retrospective method of adoption, which does not require restatement of prior year reported results. Adoption of the new standard resulted in the recording of ROU assets and operating lease liabilities as follows: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of January 1, 2019 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| ROU assets | $ | 1,750 |
| | $ | 153 |
| | $ | 863 |
| | $ | 407 |
| | $ | 456 |
| | $ | 23 |
| | $ | 61 |
| | $ | 26 |
|
| Operating lease liabilities – current | 205 |
| | 28 |
| | 96 |
| | 35 |
| | 61 |
| | 1 |
| | 4 |
| | 4 |
|
| Operating lease liabilities – noncurrent | 1,504 |
| | 127 |
| | 766 |
| | 371 |
| | 395 |
| | 22 |
| | 58 |
| | 25 |
|
As part of its operations, Duke Energy leases certain aircraft, space on communication towers, industrial equipment, fleet vehicles, fuel transportation (barges and railcars), land and office space under various terms and expiration dates. Additionally, Duke Energy Carolinas, Duke Energy Progress and Duke Energy Indiana have finance leases related to firm natural gas pipeline transportation capacity. Duke Energy Progress and Duke Energy Florida have entered into certain PPAs, which are classified as finance and operating leases.
Duke Energy has certain lease agreements, which include variable lease payments that are based on the usage of an asset. These variable lease payments are not included in the measurement of the ROU assets or operating lease liabilities on the Condensed Consolidated Financial Statements.
Certain Duke Energy lease agreements include options for renewal and early termination. The intent to renew a lease varies depending on the lease type and asset. Renewal options that are reasonably certain to be exercised are included in the lease measurements. The decision to terminate a lease early is dependent on various economic factors. No termination options have been included in any of the lease measurements.
Duke Energy operates various renewable energy projects and sells the generated output to utilities, electric cooperatives, municipalities and commercial and industrial customers through long-term PPAs. In certain situations, these PPAs and the associated renewable energy projects qualify as operating leases. Rental income from these leases is accounted for as Nonregulated electric and other revenues in the Condensed Consolidated Statements of Operations. There are no minimum lease payments as all payments are contingent based on actual electricity generated by the renewable energy projects. Contingent lease payments were $72 million and $136 million for the three and six months ended June 30, 2019, respectively. As of June 30, 2019, renewable energy projects owned by Duke Energy and accounted for as operating leases had a cost basis of $3,344 million and accumulated depreciation of $661 million. These assets are principally classified as nonregulated electric generation and transmission assets.
|
| |
| FINANCIAL STATEMENTS | LEASES |
The following table presents the components of lease expense. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, 2019 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Operating lease expense(a) | $ | 73 |
| | $ | 11 |
| | $ | 40 |
| | $ | 17 |
| | $ | 23 |
| | $ | 3 |
| | $ | 5 |
| | $ | 2 |
|
Short-term lease expense(a) | 6 |
| | 2 |
| | 4 |
| | 2 |
| | 2 |
| | 1 |
| | — |
| | — |
|
Variable lease expense(a) | 10 |
| | 4 |
| | 5 |
| | 2 |
| | 3 |
| | — |
| | — |
| | — |
|
| Finance lease expense | | | | | | | | | | | | | | | |
Amortization of leased assets(b) | 29 |
| | 1 |
| | 5 |
| | 1 |
| | 4 |
| | 1 |
| | — |
| | — |
|
Interest on lease liabilities(c) | 20 |
| | 3 |
| | 13 |
| | 10 |
| | 3 |
| | — |
| | 1 |
| | — |
|
| Total finance lease expense | 49 |
| | 4 |
| | 18 |
| | 11 |
| | 7 |
| | 1 |
| | 1 |
| | — |
|
| Total lease expense | $ | 138 |
| | $ | 21 |
| | $ | 67 |
| | $ | 32 |
| | $ | 35 |
| | $ | 5 |
| | $ | 6 |
| | $ | 2 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2019 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Operating lease expense(a) | $ | 145 |
| | $ | 23 |
| | $ | 82 |
| | $ | 36 |
| | $ | 46 |
| | $ | 6 |
| | $ | 10 |
| | $ | 3 |
|
Short-term lease expense(a) | 13 |
| | 4 |
| | 7 |
| | 3 |
| | 4 |
| | 1 |
| | 1 |
| | — |
|
Variable lease expense(a) | 21 |
| | 12 |
| | 7 |
| | 3 |
| | 4 |
| | — |
| | — |
| | — |
|
| Finance lease expense | | | | | | | | | | | | | | | |
Amortization of leased assets(b) | 56 |
| | 2 |
| | 8 |
| | 2 |
| | 6 |
| | 1 |
| | — |
| | — |
|
Interest on lease liabilities(c) | 37 |
| | 7 |
| | 19 |
| | 14 |
| | 5 |
| | — |
| | 1 |
| | — |
|
| Total finance lease expense | 93 |
| | 9 |
| | 27 |
| | 16 |
| | 11 |
| | 1 |
| | 1 |
| | — |
|
| Total lease expense | $ | 272 |
| | $ | 48 |
| | $ | 123 |
| | $ | 58 |
| | $ | 65 |
| | $ | 8 |
| | $ | 12 |
| | $ | 3 |
|
| |
| (a) | Included in Operations, maintenance and other or, for barges and railcars, Fuel used in electric generation and purchased power on the Condensed Consolidated Statements of Operations. |
| |
| (b) | Included in Depreciation and amortization on the Condensed Consolidated Statements of Operations. |
| |
| (c) | Included in Interest Expense on the Condensed Consolidated Statements of Operations. |
The following table presents rental expense for operating leases, as reported under the old lease standard. These amounts are included in Operation, maintenance and other and Fuel used in electric generation and purchased power on the Condensed Consolidated Statements of Operations. |
| | | |
| (in millions) | Year Ended December 31, 2018 |
| Duke Energy | $ | 268 |
|
| Duke Energy Carolinas | 49 |
|
| Progress Energy | 143 |
|
| Duke Energy Progress | 75 |
|
| Duke Energy Florida | 68 |
|
| Duke Energy Ohio | 13 |
|
| Duke Energy Indiana | 21 |
|
| Piedmont | 11 |
|
|
| |
| FINANCIAL STATEMENTS | LEASES |
The following table presents operating lease maturities and a reconciliation of the undiscounted cash flows to operating lease liabilities. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Twelve Months Ended June 30, |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| 2020 | $ | 279 |
| | $ | 33 |
| | $ | 129 |
| | $ | 51 |
| | $ | 78 |
| | $ | 2 |
| | $ | 6 |
| | $ | 5 |
|
| 2021 | 239 |
| | 28 |
| | 112 |
| | 52 |
| | 60 |
| | 2 |
| | 5 |
| | 5 |
|
| 2022 | 199 |
| | 19 |
| | 94 |
| | 40 |
| | 54 |
| | 2 |
| | 4 |
| | 5 |
|
| 2023 | 190 |
| | 18 |
| | 95 |
| | 40 |
| | 55 |
| | 2 |
| | 4 |
| | 5 |
|
| 2024 | 178 |
| | 15 |
| | 96 |
| | 41 |
| | 55 |
| | 2 |
| | 4 |
| | 5 |
|
| Thereafter | 1,055 |
| | 61 |
| | 513 |
| | 306 |
| | 207 |
| | 22 |
| | 65 |
| | 7 |
|
| Total operating lease payments | 2,140 |
| | 174 |
| | 1,039 |
| | 530 |
| | 509 |
| | 32 |
| | 88 |
| | 32 |
|
| Less: present value discount | (425 | ) | | (30 | ) | | (192 | ) | | (117 | ) | | (75 | ) | | (10 | ) | | (28 | ) | | (3 | ) |
Total operating lease liabilities(a) | $ | 1,715 |
| | $ | 144 |
| | $ | 847 |
| | $ | 413 |
| | $ | 434 |
| | $ | 22 |
| | $ | 60 |
| | $ | 29 |
|
| |
| (a) | Certain operating lease payments include renewal options that are reasonably certain to be exercised. |
The following table presents future minimum lease payments under operating leases, which at inception had a non-cancelable term of more than one year, as reported under the old lease standard. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2018 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| 2019 | $ | 239 |
| | $ | 33 |
| | $ | 97 |
| | $ | 49 |
| | $ | 48 |
| | $ | 2 |
| | $ | 6 |
| | $ | 5 |
|
| 2020 | 219 |
| | 29 |
| | 90 |
| | 46 |
| | 44 |
| | 2 |
| | 5 |
| | 5 |
|
| 2021 | 186 |
| | 19 |
| | 79 |
| | 37 |
| | 42 |
| | 2 |
| | 4 |
| | 5 |
|
| 2022 | 170 |
| | 19 |
| | 76 |
| | 34 |
| | 42 |
| | 2 |
| | 4 |
| | 5 |
|
| 2023 | 160 |
| | 17 |
| | 77 |
| | 35 |
| | 42 |
| | 2 |
| | 5 |
| | 6 |
|
| Thereafter | 1,017 |
| | 68 |
| | 455 |
| | 314 |
| | 141 |
| | 23 |
| | 66 |
| | 11 |
|
| Total | $ | 1,991 |
| | $ | 185 |
| | $ | 874 |
| | $ | 515 |
| | $ | 359 |
| | $ | 33 |
| | $ | 90 |
| | $ | 37 |
|
The following table presents finance lease maturities and a reconciliation of the undiscounted cash flows to finance lease liabilities. |
| | | | | | | | | | | | | | | | | | | | | | | |
| | Twelve Months Ended June 30, |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
|
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
|
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Indiana |
|
| 2020 | $ | 177 |
| | $ | 19 |
| | $ | 69 |
| | $ | 44 |
| | $ | 25 |
| | $ | 1 |
|
| 2021 | 183 |
| | 17 |
| | 69 |
| | 44 |
| | 25 |
| | 1 |
|
| 2022 | 180 |
| | 14 |
| | 69 |
| | 44 |
| | 25 |
| | 1 |
|
| 2023 | 171 |
| | 14 |
| | 69 |
| | 44 |
| | 25 |
| | 1 |
|
| 2024 | 172 |
| | 14 |
| | 64 |
| | 44 |
| | 20 |
| | 1 |
|
| Thereafter | 847 |
| | 191 |
| | 560 |
| | 547 |
| | 13 |
| | 28 |
|
| Total finance lease payments | 1,730 |
| | 269 |
| | 900 |
| | 767 |
| | 133 |
| | 33 |
|
| Less: amounts representing interest | (708 | ) | | (162 | ) | | (483 | ) | | (457 | ) | | (26 | ) | | (23 | ) |
| Total finance lease liabilities | $ | 1,022 |
| | $ | 107 |
| | $ | 417 |
| | $ | 310 |
| | $ | 107 |
| | $ | 10 |
|
|
| |
| FINANCIAL STATEMENTS | LEASES |
The following table presents future minimum lease payments under finance leases, as reported under the old lease standard. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2018 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
|
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
|
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
|
| 2019 | $ | 170 |
| | $ | 20 |
| | $ | 45 |
| | $ | 20 |
| | $ | 25 |
| | $ | 2 |
| | $ | 1 |
|
| 2020 | 174 |
| | 20 |
| | 46 |
| | 21 |
| | 25 |
| | — |
| | 1 |
|
| 2021 | 177 |
| | 15 |
| | 45 |
| | 20 |
| | 25 |
| | — |
| | 1 |
|
| 2022 | 165 |
| | 15 |
| | 45 |
| | 21 |
| | 24 |
| | — |
| | 1 |
|
| 2023 | 165 |
| | 15 |
| | 45 |
| | 21 |
| | 24 |
| | — |
| | 1 |
|
| Thereafter | 577 |
| | 204 |
| | 230 |
| | 209 |
| | 21 |
| | — |
| | 27 |
|
| Minimum annual payments | 1,428 |
| | 289 |
| | 456 |
| | 312 |
| | 144 |
| | 2 |
| | 32 |
|
| Less: amount representing interest | (487 | ) | | (180 | ) | | (205 | ) | | (175 | ) | | (30 | ) | | — |
| | (22 | ) |
| Total | $ | 941 |
| | $ | 109 |
| | $ | 251 |
| | $ | 137 |
| | $ | 114 |
| | $ | 2 |
| | $ | 10 |
|
The following tables contain additional information related to leases. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | June 30, 2019 |
| | | | | | | | | | | | | | | | | |
| | | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | Classification | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Assets | | | | | | | | | | | | | | | | |
| Operating | Operating lease ROU assets, net | $ | 1,735 |
| | $ | 141 |
| | $ | 839 |
| | $ | 407 |
| | $ | 432 |
| | $ | 22 |
| | $ | 60 |
| | $ | 26 |
|
| Finance | Net property, plant and equipment | 1,013 |
| | 122 |
| | 423 |
| | 309 |
| | 114 |
| | — |
| | 10 |
| | — |
|
| Total lease assets | | $ | 2,748 |
| | $ | 263 |
| | $ | 1,262 |
| | $ | 716 |
| | $ | 546 |
| | $ | 22 |
| | $ | 70 |
| | $ | 26 |
|
| Liabilities | | | | | | | | | | | | | | | | |
| Current | | | | | | | | | | | | | | | | |
| Operating | Other current liabilities | $ | 213 |
| | $ | 27 |
| | $ | 100 |
| | $ | 36 |
| | $ | 64 |
| | $ | 1 |
| | $ | 4 |
| | $ | 4 |
|
| Finance | Current maturities of long-term debt | 115 |
| | 6 |
| | 23 |
| | 6 |
| | 17 |
| | — |
| | — |
| | — |
|
| Noncurrent | | | | | | | | | | | | | | | | |
| Operating | Operating lease liabilities | 1,502 |
| | 117 |
| | 747 |
| | 377 |
| | 370 |
| | 21 |
| | 56 |
| | 25 |
|
| Finance | Long-Term Debt | 907 |
| | 101 |
| | 394 |
| | 304 |
| | 90 |
| | — |
| | 10 |
| | — |
|
| Total lease liabilities | | $ | 2,737 |
| | $ | 251 |
| | $ | 1,264 |
| | $ | 723 |
| | $ | 541 |
| | $ | 22 |
| | $ | 70 |
| | $ | 29 |
|
|
| |
| FINANCIAL STATEMENTS | LEASES |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2019 |
| | | | | | | | | | | | | | | | |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Cash paid for amounts included in the measurement of lease liabilities(a) | | | | | | | | | | | | | | | |
| Operating cash flows from operating leases | $ | 136 |
| | $ | 15 |
| | $ | 60 |
| | $ | 23 |
| | $ | 37 |
| | $ | 1 |
| | $ | 3 |
| | $ | 5 |
|
| Operating cash flows from finance leases | 37 |
| | 7 |
| | 19 |
| | 14 |
| | 5 |
| | — |
| | 1 |
| | — |
|
| Financing cash flows from finance leases | 56 |
| | 2 |
| | 8 |
| | 2 |
| | 6 |
| | 1 |
| | — |
| | — |
|
| | | | | | | | | | | | | | | | |
| Lease assets obtained in exchange for new lease liabilities (non-cash) | | | | | | | | | | | | | | | |
Operating(b) | $ | 78 |
| | $ | 2 |
| | $ | 30 |
| | $ | 30 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 1 |
|
| Finance | 175 |
| | — |
| | 175 |
| | 175 |
| | — |
| | — |
| | — |
| | — |
|
| |
| (a) | No amounts were classified as investing cash flows from operating leases for the six months ended June 30, 2019. |
| |
| (b) | Does not include ROU assets recorded as a result of the adoption of the new lease standard. |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2019 |
| | | | | | | | | | | | | | | | |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Weighted-average remaining lease term (years) | | | | | | | | | | | | | | | |
| Operating leases | 11 |
| | 9 |
| | 10 |
| | 12 |
| | 9 |
| | 18 |
| | 19 |
| | 6 |
|
| Finance leases | 16 |
| | 19 |
| | 17 |
| | 18 |
| | 12 |
| | — |
| | 27 |
| | — |
|
Weighted-average discount rate(a) | | | | | | | | | | | | | | | |
| Operating leases | 3.9 | % | | 3.7 | % | | 3.8 | % | | 3.8 | % | | 3.7 | % | | 4.2 | % | | 4.1 | % | | 3.6 | % |
| Finance leases | 7.9 | % | | 12.9 | % | | 11.8 | % | | 12.4 | % | | 8.3 | % | | — | % | | 11.9 | % | | — | % |
| |
| (a) | The discount rate is calculated using the rate implicit in a lease if it is readily determinable. Generally, the rate used by the lessor is not provided to Duke Energy and in these cases the incremental borrowing rate is used. Duke Energy will typically use its fully collateralized incremental borrowing rate as of the commencement date to calculate and record the lease. The incremental borrowing rate is influenced by the lessee’s credit rating and lease term and as such may differ for individual leases, embedded leases or portfolios of leased assets. |
|
| |
| FINANCIAL STATEMENTS | DEBT AND CREDIT FACILITIES |
6. DEBT AND CREDIT FACILITIES
SUMMARY OF SIGNIFICANT DEBT ISSUANCES
The following table summarizes significant debt issuances (in millions). |
| | | | | | | | | | | | | | | | | | | |
| | | | | 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 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Six Months Ended June 30, 2019 | |
| | | | | | | Duke |
| | Duke |
| | Duke |
| | |
| | Maturity | Interest |
| | Duke |
| | Energy |
| | Energy |
| | Energy |
| | |
| Issuance Date | Date | Rate |
| | Energy |
| | (Parent) |
| | Progress |
| | Ohio |
| | Piedmont |
|
| Unsecured Debt | | | | | | | | | | | | |
March 2019(a) | March 2022 | 3.251 | % | (b) | $ | 300 |
| | $ | 300 |
| | $ | — |
| | $ | — |
| | $ | — |
|
March 2019(a) | March 2022 | 3.227 | % | | 300 |
| | 300 |
| | — |
| | — |
| | — |
|
May 2019(e) | June 2029 | 3.500 | % | | 600 |
| | — |
| | — |
| | — |
| | 600 |
|
June 2019(a) | June 2029 | 3.400 | % | | 600 |
| | 600 |
| | — |
| | — |
| | — |
|
June 2019(a) | June 2049 | 4.200 | % | | 600 |
| | 600 |
| | — |
| | — |
| | — |
|
| First Mortgage Bonds | | | | | | | | | | | | |
January 2019(c) | February 2029 | 3.650 | % | | 400 |
| | — |
| | — |
| | 400 |
| | — |
|
January 2019(c) | February 2049 | 4.300 | % | | 400 |
| | — |
| | — |
| | 400 |
| | — |
|
March 2019(d) | March 2029 | 3.450 | % |
| 600 |
|
| — |
| | 600 |
| | — |
| | — |
|
| Total issuances | | | | $ | 3,800 |
| | $ | 1,800 |
|
| $ | 600 |
| | $ | 800 |
|
| $ | 600 |
|
| |
| (a) | Debt issued to pay down short-term debt.debt and for general corporate purposes. |
| |
| (b) | Debt issued to pay down short-term debt. Debt issuance has a floating interest rate. |
| |
| (c) | Debt issued to repay at maturity a $300$450 million first mortgage bondbonds due April 2018,2019, pay down intercompany short-term debt and for general corporate purposes. |
| |
| (d) | Debt issued to fund eligible green energy projects in the Carolinas. |
| |
| (e) | Debt issued to repay a portion of intercompanyin full the outstanding $350 million Piedmont unsecured term loan due September 2019, pay down short-term debt under money-pool borrowing arrangement and for general corporate purposes. |
In June 2019, Duke Energy Kentucky priced $210 million of unsecured debentures of which $95 million carry a fixed interest rate of 3.23 percent and mature October 2025, $75 million carry a fixed interest rate of 3.56 percent and mature October 2029, and $40 million carry a fixed interest rate of 4.32 percent and mature July 2049. The $40 million tranche closed and funded in July 2019, and the remaining tranches are expected to close in September 2019 upon receipt of necessary regulatory approvals. The proceeds will be used to refinance Duke Energy Kentucky's $100 million, 4.65 percent debentures maturing October 2019, to pay down short-term intercompany debt 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, 2019 |
|
| Unsecured Debt | | | | | |
| Duke Energy (Parent) | September 2019 | | 5.050 | % | | $ | 500 |
|
| Duke Energy Kentucky | October 2019 | | 4.650 | % | | 100 |
|
| Progress Energy | December 2019 | | 4.875 | % | | 350 |
|
| Duke Energy (Parent) | June 2020 | | 2.100 | % | | 330 |
|
| First Mortgage Bonds | | | | | |
| Duke Energy Florida | January 2020 | | 1.850 | % | | 250 |
|
| Duke Energy Florida | April 2020 | | 4.550 | % | | 250 |
|
| Duke Energy Carolinas | June 2020 | | 4.300 | % | | 450 |
|
Other(a) | | | | | 468 |
|
| Current maturities of long-term debt | | | | | $ | 2,698 |
|
|
| | | | | | | | |
| (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 capitalfinance 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)
|
| |
| FINANCIAL STATEMENTS | DEBT AND CREDIT FACILITIES |
AVAILABLE CREDIT FACILITIES
Master Credit Facility
In January 2018,March 2019, Duke Energy extended the termination date of substantially all ofamended its existing $8 billion Master Credit Facility capacity from March 16, 2022,to extend the termination date to March 16, 2023. In May 2018, Duke Energy completed the extension process with 100 percent of all commitments to the Master Credit Facility extending to March 16, 2023.2024. 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, 2018 | June 30, 2019 |
| |
|
| | 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 |
| | $ | 2,650 |
| | $ | 1,750 |
| | $ | 1,250 |
| | $ | 800 |
| | $ | 450 |
| | $ | 600 |
| | $ | 500 |
| $ | 8,000 |
| | $ | 2,650 |
| | $ | 1,750 |
| | $ | 1,250 |
| | $ | 800 |
| | $ | 450 |
| | $ | 600 |
| | $ | 500 |
|
| Reduction to backstop issuances | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial paper(b) | (3,004 | ) | | (1,087 | ) | | (856 | ) | | (556 | ) | | — |
| | (189 | ) | | (316 | ) | | — |
| (3,420 | ) | | (1,009 | ) | | (1,099 | ) | | (276 | ) | | (474 | ) | | (236 | ) | | (326 | ) | | — |
|
| Outstanding letters of credit | (57 | ) | | (49 | ) | | (4 | ) | | (2 | ) | | — |
| | — |
| | — |
| | (2 | ) | (53 | ) | | (45 | ) | | (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 | $ | 4,358 |
|
| $ | 1,514 |
|
| $ | 640 |
|
| $ | 442 |
|
| $ | 800 |
|
| $ | 261 |
|
| $ | 203 |
| | $ | 498 |
| $ | 3,946 |
|
| $ | 1,596 |
|
| $ | 397 |
|
| $ | 722 |
|
| $ | 326 |
|
| $ | 214 |
|
| $ | 193 |
| | $ | 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-Year RevolvingOther Credit FacilityFacilitiesDuke Energy (Parent) has a $1.0 billion revolving credit facility (the Three Year Revolver) through June 2020. As of June 30, 2018, $500 |
| | | | | | | |
| | June 30, 2019 |
| (in millions) | Facility size |
| | Amount drawn |
|
Duke Energy (Parent) Three-Year Revolving Credit Facility(a) | $ | 1,000 |
| | $ | 500 |
|
Duke Energy Progress Term Loan Facility(b) | 700 |
| | 700 |
|
| |
| (a) | In May 2019, Duke Energy (Parent) extended the termination date to May 2022. |
| |
| (b) | $650 million was drawn under the term loan in January and February 2019. |
In May 2019, the $350 million has been drawn under Piedmont term loan was paid off in full with proceeds from the Three Year Revolver. This balance is classified as Long-Term Debt on Duke Energy's 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.$600 million Piedmont debt offering.
6.
|
| |
| FINANCIAL STATEMENTS | ASSET RETIREMENT OBLIGATIONS |
7. 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. Actual closure costs incurred could be materially different from current estimates that form the basis of the recorded AROs.
The following table presents the AROs recorded on the Condensed Consolidated Balance Sheets. | | | | June 30, 2018 | June 30, 2019 |
| | | | 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 |
|
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 |
| | — |
| |
Decommissioning of nuclear power facilities(a) | | $ | 5,807 |
| | $ | 2,401 |
| | $ | 3,265 |
| | $ | 2,739 |
| | $ | 526 |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Closure of ash impoundments | | 6,498 |
| | 2,894 |
| | 2,858 |
| | 2,839 |
| | 19 |
| | 47 |
| | 699 |
| | — |
|
| Other | 307 |
| | 56 |
| | 78 |
| | 36 |
| | 42 |
| | 45 |
| | 20 |
| | 15 |
| 323 |
| | 47 |
| | 70 |
| | 38 |
| | 32 |
| | 42 |
| | 20 |
| | 19 |
|
| Total ARO | $ | 10,469 |
| | $ | 3,819 |
| | $ | 5,438 |
| | $ | 4,835 |
| | $ | 602 |
| | $ | 89 |
| | $ | 856 |
| | $ | 15 |
| $ | 12,628 |
| | $ | 5,342 |
| | $ | 6,193 |
| | $ | 5,616 |
| | $ | 577 |
| | $ | 89 |
| | $ | 719 |
| | $ | 19 |
|
| Less: current portion | 716 |
| | 227 |
| | 386 |
| | 381 |
| | 5 |
| | 5 |
| | 98 |
| | — |
| 739 |
| | 203 |
| | 416 |
| | 413 |
| | 3 |
| | 6 |
| | 115 |
| | — |
|
| Total noncurrent ARO | $ | 9,753 |
|
| $ | 3,592 |
|
| $ | 5,052 |
|
| $ | 4,454 |
|
| $ | 597 |
|
| $ | 84 |
|
| $ | 758 |
| | $ | 15 |
| $ | 11,889 |
|
| $ | 5,139 |
|
| $ | 5,777 |
|
| $ | 5,203 |
|
| $ | 574 |
|
| $ | 83 |
|
| $ | 604 |
| | $ | 19 |
|
(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)
Actual closure costs incurred could be materially different from current estimates that form the basis of the recorded AROs. The following table presents the change in liability associated with AROs for the Duke Energy Registrants. | | | | | | 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 |
|
Balance at December 31, 2017(a) | $ | 10,175 |
| | $ | 3,610 |
| | $ | 5,414 |
| | $ | 4,673 |
| | $ | 742 |
| | $ | 84 |
| | $ | 781 |
| | $ | 15 |
| |
Balance at December 31, 2018(a) | | $ | 10,467 |
| | $ | 3,949 |
| | $ | 5,411 |
| | $ | 4,820 |
| | $ | 591 |
| | $ | 93 |
| | $ | 722 |
| | $ | 19 |
|
Accretion expense(b) | 212 |
| | 89 |
| | 113 |
| | 97 |
| | 16 |
| | 2 |
| | 14 |
| | — |
| 245 |
| | 111 |
| | 124 |
| | 111 |
| | 13 |
| | 2 |
| | 14 |
| | — |
|
Liabilities settled(c) | (245 | ) | | (114 | ) | | (108 | ) | | (89 | ) | | (19 | ) | | (2 | ) | | (21 | ) | | — |
| (404 | ) | | (155 | ) | | (225 | ) | | (197 | ) | | (28 | ) | | (6 | ) | | (17 | ) | | — |
|
| Liabilities incurred in the current year | 8 |
| | 8 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| |
Revisions in estimates of cash flows(d) | 319 |
| | 226 |
| | 19 |
| | 154 |
| | (137 | ) | | 5 |
| | 82 |
| | — |
| 2,320 |
| | 1,437 |
| | 883 |
| | 882 |
| | 1 |
| | — |
| | — |
| | — |
|
| Balance at June 30, 2018 | $ | 10,469 |
| | $ | 3,819 |
| | $ | 5,438 |
| | $ | 4,835 |
| | $ | 602 |
| | $ | 89 |
| | $ | 856 |
| | $ | 15 |
| |
| Balance at June 30, 2019 | | $ | 12,628 |
| | $ | 5,342 |
| | $ | 6,193 |
| | $ | 5,616 |
| | $ | 577 |
| | $ | 89 |
| | $ | 719 |
| | $ | 19 |
|
| |
| (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, 2018,2019, 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.closures. |
| |
| (d) | Primarily relatesRelates to increases in groundwater monitoringclosure estimates for closure ofcertain ash impoundments andas a reductionresult of the NCDEQ's April 1 Order. See Note 4 for nuclear decommissioning at Crystal River Unit 3 compared to original estimates.more information. The incremental amount recorded represents the discounted cash flows for estimated closure costs based upon the probability weightings of the potential closure methods as evaluated on a site-by-site basis. |
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.
Nuclear Decommissioning Trust Funds
Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida each maintain NDTFs that are intended to pay for the decommissioning costs of their respective nuclear power plants. The following table presents the fair value of NDTF assets legally restricted for purposes of settling AROs associated with nuclear decommissioning. Duke Energy Florida is actively decommissioning Crystal River Unit 3 and was granted an exemption from the NRC, which allows for use of the NDTF for all aspects of nuclear decommissioning. The entire balance of Duke Energy Florida's NDTF may be applied toward license termination, spent fuel and site restoration costs incurred to decommission Crystal River Unit 3 and is excluded from the table below. See Note 12 for additional information related to the fair value of the Duke Energy Registrants' NDTFs.
|
| | | | | | | |
| (in millions) | June 30, 2019 | | December 31, 2018 |
| Duke Energy | $ | 6,327 |
| | $ | 5,579 |
|
| Duke Energy Carolinas | 3,574 |
| | 3,133 |
|
| Duke Energy Progress | 2,753 |
| | 2,446 |
|
7.
|
| |
| FINANCIAL STATEMENTS | GOODWILL |
8. 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, 2018,2019, and December 31, 2017.2018. |
| | | | | | | | | | | | | | | |
| | Electric Utilities |
| | Gas Utilities |
| | Commercial |
| | |
| (in millions) | and Infrastructure |
| | and Infrastructure |
| | Renewables |
| | Total |
|
| Goodwill balance | $ | 17,379 |
| | $ | 1,924 |
| | $ | 122 |
| | $ | 19,425 |
|
| Accumulated impairment charges | — |
| | — |
| | (122 | ) | | (122 | ) |
| Goodwill, adjusted for accumulated impairment charges | $ | 17,379 |
| | $ | 1,924 |
| | $ | — |
| | $ | 19,303 |
|
|
| | | | | | | | | | | | | | | |
| | Electric Utilities |
| | Gas Utilities |
| | Commercial |
| | |
| (in millions) | and Infrastructure |
| | and Infrastructure |
| | Renewables |
| | Total |
|
| Goodwill balance | $ | 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, 2018,2019, and December 31, 2017.2018.
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.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
|
| |
| FINANCIAL STATEMENTS | RELATED PARTY TRANSACTIONS |
8.
9. 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) | 2018 |
| | 2017 |
| | 2018 |
| | 2017 |
| 2019 |
| | 2018 |
| | 2019 |
| | 2018 |
|
| Duke Energy Carolinas | | | | | | | | | | | | | | |
Corporate governance and shared service expenses(a) | $ | 213 |
| | $ | 218 |
| | $ | 433 |
| | $ | 439 |
| $ | 197 |
| | $ | 213 |
| | $ | 409 |
| | $ | 433 |
|
Indemnification coverages(b) | 5 |
| | 6 |
| | 11 |
| | 12 |
| 5 |
| | 5 |
| | 10 |
| | 11 |
|
JDA revenue(c) | 19 |
| | 17 |
| | 53 |
| | 33 |
| 17 |
| | 19 |
| | 40 |
| | 53 |
|
JDA expense(c) | 19 |
| | 21 |
| | 73 |
| | 52 |
| 20 |
| | 19 |
| | 113 |
| | 73 |
|
Intercompany natural gas purchases(d) | 4 |
| | 1 |
| | 8 |
| | 2 |
| 3 |
| | 4 |
| | 7 |
| | 8 |
|
| Progress Energy | | | | | | | | | | | | | | |
Corporate governance and shared service expenses(a) | $ | 206 |
| | $ | 178 |
| | $ | 397 |
| | $ | 348 |
| $ | 183 |
| | $ | 206 |
| | $ | 359 |
| | $ | 397 |
|
Indemnification coverages(b) | 9 |
| | 9 |
| | 17 |
| | 19 |
| 10 |
| | 9 |
| | 19 |
| | 17 |
|
JDA revenue(c) | 19 |
| | 21 |
| | 73 |
| | 52 |
| 20 |
| | 19 |
| | 113 |
| | 73 |
|
JDA expense(c) | 19 |
| | 17 |
| | 53 |
| | 33 |
| 17 |
| | 19 |
| | 40 |
| | 53 |
|
Intercompany natural gas purchases(d) | 19 |
| | 19 |
| | 38 |
| | 38 |
| 19 |
| | 19 |
| | 38 |
| | 38 |
|
| Duke Energy Progress | | | | | | | | | | | | | | |
Corporate governance and shared service expenses(a) | $ | 126 |
| | $ | 109 |
| | $ | 244 |
| | $ | 209 |
| $ | 108 |
| | $ | 126 |
| | $ | 214 |
| | $ | 244 |
|
Indemnification coverages(b) | 3 |
| | 3 |
| | 6 |
| | 7 |
| 4 |
| | 3 |
| | 8 |
| | 6 |
|
JDA revenue(c) | 19 |
| | 21 |
| | 73 |
| | 52 |
| 20 |
| | 19 |
| | 113 |
| | 73 |
|
JDA expense(c) | 19 |
| | 17 |
| | 53 |
| | 33 |
| 17 |
| | 19 |
| | 40 |
| | 53 |
|
Intercompany natural gas purchases(d) | 19 |
| | 19 |
| | 38 |
| | 38 |
| 19 |
| | 19 |
| | 38 |
| | 38 |
|
| Duke Energy Florida | | | | | | | | | | | | | | |
Corporate governance and shared service expenses(a) | $ | 80 |
| | $ | 69 |
| | $ | 153 |
| | $ | 139 |
| $ | 75 |
| | $ | 80 |
| | $ | 145 |
| | $ | 153 |
|
Indemnification coverages(b) | 6 |
| | 6 |
| | 11 |
| | 12 |
| 6 |
| | 6 |
| | 11 |
| | 11 |
|
| Duke Energy Ohio | | | | | | | | | | | | | | |
Corporate governance and shared service expenses(a) | $ | 90 |
| | $ | 93 |
| | $ | 179 |
| | $ | 185 |
| $ | 83 |
| | $ | 90 |
| | $ | 168 |
| | $ | 179 |
|
Indemnification coverages(b) | 1 |
| | 1 |
| | 2 |
| | 2 |
| 1 |
| | 1 |
| | 2 |
| | 2 |
|
| Duke Energy Indiana | | | | | | | | | | | | | | |
Corporate governance and shared service expenses(a) | $ | 96 |
| | $ | 92 |
| | $ | 197 |
| | $ | 187 |
| $ | 93 |
| | $ | 96 |
| | $ | 190 |
| | $ | 197 |
|
Indemnification coverages(b) | 2 |
| | 2 |
| | 4 |
| | 4 |
| 1 |
| | 2 |
| | 3 |
| | 4 |
|
| Piedmont | | | | | | | | | | | | | | |
Corporate governance and shared service expenses(a) | $ | 40 |
| | $ | 9 |
| | $ | 76 |
| | $ | 14 |
| $ | 37 |
| | $ | 40 |
| | $ | 69 |
| | $ | 76 |
|
Indemnification coverages(b) | — |
| | — |
| | 1 |
| | 1 |
| — |
| | — |
| | 1 |
| | 1 |
|
Intercompany natural gas sales(d) | 23 |
| | 20 |
| | 46 |
| | 40 |
| 22 |
| | 23 |
| | 45 |
| | 46 |
|
Natural gas storage and transportation costs(e) | | 6 |
| | 6 |
| | 11 |
| | 12 |
|
| |
| (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),JDA, which allows the collective dispatch of power plants between the service territories to reduce customer rates. Revenues from the sale of power and expenses from the purchase of power pursuant to the JDA are recorded in Operating Revenues and Fuel used in electric generation and purchased power, respectively, on the Condensed Consolidated Statements of Operations and Comprehensive Income. |
| |
| (d) | Piedmont provides long–termlong-term natural gas delivery service to certain Duke Energy Carolinas and Duke Energy Progress natural gas–firedgas-fired generation facilities. Piedmont records the sales in Operating revenues, and Duke Energy Carolinas and Duke Energy Progress record the related purchases as a component of Fuel used in electric generation and purchased power on their respective Condensed Consolidated Statements of Operations and Comprehensive Income. |
| |
| (e) | Piedmont has related party transactions as a customer of its equity method investments in Pine Needle, Hardy Storage, and Cardinal natural gas storage and transportation facilities. These intercompany revenues and expenses are eliminatedincluded in consolidation.Cost of natural gas on Piedmont's Condensed Consolidated Statements of Operations and Comprehensive Income. |
|
| |
| FINANCIAL STATEMENTS | RELATED PARTY TRANSACTIONS |
In addition to the amounts presented above, the Subsidiary Registrants have other affiliate transactions, including rental of office space, participation in a money pool arrangement, other operational transactions and their proportionate share of certain charged expenses. These transactions of the Subsidiary Registrants were not material forare incurred in the threeordinary course of business and six months ended June 30, 2018, and 2017.are eliminated in consolidation.
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 discussed in Note 1213, certain trade receivables have been sold by Duke Energy Ohio and Duke Energy Indiana to Cinergy Receivables Company LLC (CRC),CRC, an indirectaffiliate formed by a subsidiary of Duke Energy. The proceeds obtained from the sales of receivables are largely cash but alsodo include a subordinated note from CRC 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, 2018, and 2017, which are included in Cost of natural gas on Piedmont's Condensed Consolidated Statements of Operations and Comprehensive Income. |
| | | | | | | | | | | | | | |
| | | Three Months Ended June 30, | | Six Months Ended June 30, |
| (in millions) | Type of expense | 2018 | 2017 | | 2018 | 2017 |
| Cardinal | Transportation Costs | $ | 1 |
| $ | 2 |
| | $ | 3 |
| $ | 4 |
|
| Pine Needle | Natural Gas Storage Costs | 2 |
| 2 |
| | 4 |
| 4 |
|
| Hardy Storage | Natural Gas Storage Costs | 3 |
| 3 |
| | 5 |
| 5 |
|
| Total | | $ | 6 |
| $ | 7 |
| | $ | 12 |
| $ | 13 |
|
Piedmont had accounts payable to its equity method investments of $2 million at June 30, 2018, and December 31, 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 |
| |
| | Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
| |
| (in millions) | Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Piedmont |
|
| June 30, 2019 | | | | | | | |
| Intercompany income tax receivable | $ | — |
| $ | 25 |
| $ | — |
| $ | — |
| $ | 15 |
| $ | — |
| $ | 26 |
|
| Intercompany income tax payable | 76 |
| — |
| 41 |
| 19 |
| — |
| 1 |
| — |
|
| | | | | | | | |
| December 31, 2018 | | | | | | | |
| Intercompany income tax receivable | $ | 52 |
| $ | 47 |
| $ | 29 |
| $ | — |
| $ | — |
| $ | 8 |
| $ | — |
|
| Intercompany income tax payable | — |
| — |
| — |
| 16 |
| 3 |
| — |
| 45 |
|
|
| | | | | | | | | | | | | | | | | | | | | |
| | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
| |
| | Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
| |
| (in millions) | Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Piedmont |
|
| June 30, 2018 | | | | | | | |
| Intercompany income tax receivable | $ | — |
| $ | 273 |
| $ | — |
| $ | 140 |
| $ | — |
| $ | — |
| $ | 12 |
|
| Intercompany income tax payable | 22 |
| — |
| 24 |
| — |
| 3 |
| 14 |
| — |
|
| | | | | | | | |
| December 31, 2017 | | | | | | | |
| Intercompany income tax receivable | $ | — |
| $ | 168 |
| $ | — |
| $ | 44 |
| $ | 22 |
| $ | — |
| $ | 7 |
|
| Intercompany income tax payable | 44 |
| — |
| 21 |
| — |
| — |
| 35 |
| — |
|
9.10. DERIVATIVES AND HEDGING
The Duke Energy Registrants use commodity and interest rate contracts to manage commodity price risk and interest rate risk. The primary use of commodity derivatives is to hedge the generation portfolio against changes in the prices of electricity and natural gas. Piedmont enters into natural gas supply contracts to provide diversification, reliability and natural gas cost benefits to its customers. Interest rate swapsderivatives are used to manage interest rate risk associated with borrowings.
All derivative instruments not identified as NPNS are recorded at fair value as assets or liabilities on the Condensed Consolidated Balance Sheets. Cash collateral related to derivative instruments executed under master netting arrangements is offset against the collateralized derivatives on the Condensed Consolidated Balance Sheets. The cash impacts of settled derivatives are recorded as operating activities on the Condensed Consolidated Statements of Cash Flows.
INTEREST RATE RISK
The Duke Energy Registrants are exposed to changes in interest rates as a result of their issuance or anticipated issuance of variable-rate and fixed-rate debt and commercial paper. Interest rate risk is managed by limiting variable-rate exposures to a percentage of total debt and by monitoring changes in interest rates. To manage risk associated with changes in interest rates, the Duke Energy Registrants may enter into interest rate swaps, U.S. Treasury lock agreements and other financial contracts. In anticipation of certain fixed-rate debt issuances, a series of forward-starting interest rate swaps or Treasury locks may be executed to lock in components of current market interest rates. These instruments are later terminated prior to or upon the issuance of the corresponding debt.
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, 20182019, and 20172018, 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.business and forward-starting interest rate swaps not accounted for under regulatory accounting.
Undesignated Contracts
Undesignated contracts primarily include contracts not designated as a hedge because they are accounted for under regulatory accounting or contracts that do not qualify for hedge accounting.
Duke Energy’s interest rate swaps for its regulated operations employ regulatory accounting. With regulatory accounting, the mark-to-market gains or losses on the swaps are deferred as regulatory liabilities or regulatory assets, respectively. Regulatory assets and liabilities are amortized consistent with the treatment of the related costs in the ratemaking process. The accrual of interest on the swaps is recorded as Interest Expense on the Duke Energy Registrant's Condensed Consolidated Statements of Operations and Comprehensive Income.
|
| |
| FINANCIAL STATEMENTS | DERIVATIVES AND HEDGING |
The following table shows notional amounts of outstanding derivatives related to interest rate risk. | | | | June 30, 2018 | June 30, 2019 |
| | | | 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) | $ | 411 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| $ | 959 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Undesignated contracts | 1,527 |
| | 400 |
| | 900 |
| | 650 |
| | 250 |
| | 27 |
| 1,427 |
| | 600 |
| | 800 |
| | 250 |
| | 550 |
| | 27 |
|
Total notional amount | $ | 1,938 |
|
| $ | 400 |
|
| $ | 900 |
|
| $ | 650 |
|
| $ | 250 |
|
| $ | 27 |
| $ | 2,386 |
|
| $ | 600 |
|
| $ | 800 |
|
| $ | 250 |
|
| $ | 550 |
|
| $ | 27 |
|
| | | | December 31, 2017 | December 31, 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) | $ | 660 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| $ | 923 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Undesignated contracts | 927 |
| | 400 |
| | 500 |
| | 250 |
| | 250 |
| | 27 |
| 1,721 |
| | 300 |
| | 1,200 |
| | 650 |
| | 550 |
| | 27 |
|
Total notional amount | $ | 1,587 |
| | $ | 400 |
| | $ | 500 |
| | $ | 250 |
| | $ | 250 |
| | $ | 27 |
| $ | 2,644 |
| | $ | 300 |
| | $ | 1,200 |
| | $ | 650 |
| | $ | 550 |
| | $ | 27 |
|
| |
| (a) | Duke Energy includes amounts related to consolidated VIEs of $611$659 million in cash flow hedges as of June 30, 2018,2019, and $660$422 million in cash flow hedges and $194 million in undesignated contracts as of December 31, 2017.2018. |
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-based contracts or other cost-sharing mechanisms. Differences between the costs included in rates and the incurred costs, including undesignated derivative contracts, are largely deferred as regulatory assets or regulatory liabilities. Piedmont policies allow for the use of financial instruments to hedge commodity price risks. The strategy and objective of these hedging programs are to use the financial instruments to reduce natural gas costs volatility for customers.
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, 2018 | June 30, 2019 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Indiana |
| | Piedmont |
| Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Electricity (gigawatt-hours) | 54 |
| | — |
| | — |
| | — |
| | — |
| | 54 |
| | — |
| |
| Electricity (GWh) | | 33,135 |
| | — |
| | — |
| | — |
| | — |
| | 3,514 |
| | 29,621 |
| | — |
|
| Natural gas (millions of dekatherms) | 756 |
| | 116 |
| | 171 |
| | 152 |
| | 19 |
| | 3 |
| | 466 |
| 740 |
| | 133 |
| | 173 |
| | 173 |
| | — |
| | — |
| | 4 |
| | 430 |
|
| | | | December 31, 2017 | December 31, 2018 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Indiana |
| | Piedmont |
| Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Electricity (gigawatt-hours) | 34 |
| | — |
| | — |
| | — |
| | — |
| | 34 |
| | — |
| |
| Electricity (GWh) | | 15,286 |
| | — |
| | — |
| | — |
| | — |
| | 1,786 |
| | 13,500 |
| | — |
|
| Natural gas (millions of dekatherms) | 770 |
| | 105 |
| | 183 |
| | 133 |
| | 50 |
| | 2 |
| | 480 |
| 739 |
| | 121 |
| | 169 |
| | 166 |
| | 3 |
| | — |
| | 1 |
| | 448 |
|
U.S. EQUITY SECURITIES RISK
In May 2019, Duke Energy Florida entered into a Decommissioning Services Agreement for the accelerated decommissioning of Crystal River Unit 3 with ADP CR3, LLC and ADP SF1, LLC. The accelerated decommissioning of Crystal River Unit 3 is subject to the approval of the NRC and the FPSC. Duke Energy Florida executed U.S. equity option collars within the NDTF in May 2019 to preserve the U.S. equity portfolio value in the Duke Energy Florida NDTF in the event the accelerated decommissioning is approved. These option collars were executed as a purchase of a put option and the sale of a call option on certain U.S. equity index funds. The put and call options create a collar to guarantee a minimum and maximum investment value for the Duke Energy Florida NDTF U.S. equity portfolio. The put and call options were entered into at zero-cost, with the price to purchase the puts offset entirely by the funds received to sell the calls. As of June 30, 2019, the aggregate notional amount of both the put and call options was 305,000 units in U.S. equity security index funds. The derivative balances associated with these equity options are immaterial as of June 30, 2019. The options are not designated as hedging instruments. Substantially all of Duke Energy Florida’s NDTF qualifies for regulatory accounting. With regulatory accounting, the mark-to-market gains or losses on the options are deferred as regulatory liabilities or regulatory assets, respectively.
|
| |
| FINANCIAL STATEMENTS | DERIVATIVES AND HEDGING |
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
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, 2018 | | June 30, 2019 |
| | | | | 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 | | $ | 62 |
| | $ | 3 |
| | $ | 4 |
| | $ | 3 |
| | $ | 1 |
| | $ | 9 |
| | $ | 45 |
| | $ | 2 |
| | $ | 37 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 7 |
| | $ | 29 |
| | $ | 2 |
|
| Noncurrent | | 2 |
| | — |
| | 1 |
| | 1 |
| | — |
| | — |
| | — |
| | — |
| |
| Total Derivative Assets – Commodity Contracts | | $ | 64 |
| | $ | 3 |
| | $ | 5 |
| | $ | 4 |
| | $ | 1 |
| | $ | 9 |
| | $ | 45 |
| | $ | 2 |
| | $ | 37 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 7 |
| | $ | 29 |
| | $ | 2 |
|
| Interest Rate Contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Designated as Hedging Instruments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Current | | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| |
| Noncurrent | | 5 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| |
| Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | | |
| Current | | 1 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| |
| Noncurrent | | 16 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 1 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Total Derivative Assets – Interest Rate Contracts | | $ | 23 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Total Derivative Assets | | $ | 87 |
|
| $ | 3 |
|
| $ | 5 |
|
| $ | 4 |
|
| $ | 1 |
|
| $ | 9 |
|
| $ | 45 |
| | $ | 2 |
| | $ | 38 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 7 |
|
| $ | 29 |
| | $ | 2 |
|
| | | Derivative Liabilities | | June 30, 2018 | | June 30, 2019 |
| | | | | 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 | | $ | 23 |
| | $ | 8 |
| | $ | 3 |
| | $ | 3 |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | 10 |
| | $ | 64 |
| | $ | 31 |
| | $ | 24 |
| | $ | 24 |
| | $ | — |
| | $ | — |
| | $ | 2 |
| | $ | 7 |
|
| Noncurrent | | 166 |
| | 10 |
| | 17 |
| | 7 |
| | — |
| | — |
| | — |
| | 140 |
| | 140 |
| | 8 |
| | 24 |
| | 9 |
| | — |
| | — |
| | — |
| | 107 |
|
| Total Derivative Liabilities – Commodity Contracts | | $ | 189 |
| | $ | 18 |
| | $ | 20 |
| | $ | 10 |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | 150 |
| | $ | 204 |
| | $ | 39 |
| | $ | 48 |
| | $ | 33 |
| | $ | — |
| | $ | — |
| | $ | 2 |
| | $ | 114 |
|
| Interest Rate Contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Designated as Hedging Instruments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Current | | $ | 3 |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 4 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Noncurrent | | 1 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 32 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Current | | 6 |
| | — |
| | 5 |
| | 2 |
| | 3 |
| | — |
| | — |
| | — |
| | 86 |
| | 54 |
| | 31 |
| | 2 |
| | 29 |
| | 1 |
| | — |
| | — |
|
| Noncurrent | | 14 |
| | — |
| | 10 |
| | 9 |
| | 1 |
| | 4 |
| | — |
| | — |
| | 16 |
| | — |
| | 11 |
| | — |
| | 10 |
| | 5 |
| | — |
| | — |
|
| Total Derivative Liabilities – Interest Rate Contracts | | $ | 24 |
| | $ | 1 |
| | $ | 15 |
| | $ | 11 |
| | $ | 4 |
| | $ | 4 |
| | $ | — |
| | $ | — |
| | $ | 138 |
| | $ | 54 |
| | $ | 42 |
| | $ | 2 |
| | $ | 39 |
| | $ | 6 |
| | $ | — |
| | $ | — |
|
| Total Derivative Liabilities | | $ | 213 |
|
| $ | 19 |
|
| $ | 35 |
|
| $ | 21 |
|
| $ | 5 |
|
| $ | 4 |
|
| $ | — |
| | $ | 150 |
| | $ | 342 |
|
| $ | 93 |
|
| $ | 90 |
|
| $ | 35 |
|
| $ | 39 |
|
| $ | 6 |
|
| $ | 2 |
| | $ | 114 |
|
|
| |
| FINANCIAL STATEMENTS | DERIVATIVES AND HEDGING |
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
| | | Derivative Assets | | December 31, 2017 | | December 31, 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 | | $ | 34 |
| | $ | 2 |
| | $ | 2 |
| | $ | 1 |
| | $ | 1 |
| | $ | 1 |
| | $ | 27 |
| | $ | 2 |
| | $ | 35 |
| | $ | 2 |
| | $ | 2 |
| | $ | 2 |
| | $ | — |
| | $ | 6 |
| | $ | 23 |
| | $ | 3 |
|
| Noncurrent | | 1 |
| | — |
| | 1 |
| | 1 |
| | — |
| | — |
| | — |
| | — |
| | 4 |
| | 1 |
| | 2 |
| | 2 |
| | — |
| | — |
| | — |
| | — |
|
| Total Derivative Assets – Commodity Contracts | | $ | 35 |
| | $ | 2 |
| | $ | 3 |
| | $ | 2 |
| | $ | 1 |
| | $ | 1 |
| | $ | 27 |
| | $ | 2 |
| | $ | 39 |
| | $ | 3 |
| | $ | 4 |
| | $ | 4 |
| | $ | — |
| | $ | 6 |
| | $ | 23 |
| | $ | 3 |
|
| Interest Rate Contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Designated as Hedging Instruments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Current | | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Noncurrent | | 15 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 3 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | | |
| Current | | | 2 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Noncurrent | | | 12 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Total Derivative Assets – Interest Rate Contracts | | $ | 16 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 18 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Total Derivative Assets | | $ | 51 |
| | $ | 2 |
| | $ | 3 |
| | $ | 2 |
| | $ | 1 |
| | $ | 1 |
| | $ | 27 |
| | $ | 2 |
| | $ | 57 |
| | $ | 3 |
| | $ | 4 |
| | $ | 4 |
| | $ | — |
| | $ | 6 |
| | $ | 23 |
| | $ | 3 |
|
| | | Derivative Liabilities | | December 31, 2017 | | December 31, 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 | | $ | 36 |
| | $ | 6 |
| | $ | 18 |
| | $ | 8 |
| | $ | 10 |
| | $ | — |
| | $ | — |
| | $ | 11 |
| | $ | 33 |
| | $ | 14 |
| | $ | 10 |
| | $ | 5 |
| | $ | 6 |
| | $ | — |
| | $ | — |
| | $ | 8 |
|
| Noncurrent | | 146 |
| | 4 |
| | 10 |
| | 4 |
| | — |
| | — |
| | — |
| | 131 |
| | 158 |
| | 10 |
| | 15 |
| | 6 |
| | — |
| | — |
| | — |
| | 133 |
|
| Total Derivative Liabilities – Commodity Contracts | | $ | 182 |
| | $ | 10 |
| | $ | 28 |
| | $ | 12 |
| | $ | 10 |
| | $ | — |
| | $ | — |
| | $ | 142 |
| | $ | 191 |
| | $ | 24 |
| | $ | 25 |
| | $ | 11 |
| | $ | 6 |
| | $ | — |
| | $ | — |
| | $ | 141 |
|
| Interest Rate Contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Designated as Hedging Instruments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Current | | $ | 29 |
| | $ | 25 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 12 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Noncurrent | | 6 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 6 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Current | | 1 |
| | — |
| | 1 |
| | — |
| | — |
| | 1 |
| | — |
| | — |
| | 23 |
| | 9 |
| | 13 |
| | 11 |
| | 2 |
| | 1 |
| | — |
| | — |
|
| Noncurrent | | 12 |
| | — |
| | 7 |
| | 6 |
| | 2 |
| | 4 |
| | — |
| | — |
| | 10 |
| | — |
| | 6 |
| | 5 |
| | 1 |
| | 4 |
| | — |
| | — |
|
| Total Derivative Liabilities – Interest Rate Contracts | | $ | 48 |
| | $ | 25 |
| | $ | 8 |
| | $ | 6 |
| | $ | 2 |
| | $ | 5 |
| | $ | — |
| | $ | — |
| | $ | 51 |
| | $ | 9 |
| | $ | 19 |
| | $ | 16 |
| | $ | 3 |
| | $ | 5 |
| | $ | — |
| | $ | — |
|
| Total Derivative Liabilities | | $ | 230 |
| | $ | 35 |
| | $ | 36 |
| | $ | 18 |
| | $ | 12 |
| | $ | 5 |
| | $ | — |
| | $ | 142 |
| | $ | 242 |
| | $ | 33 |
| | $ | 44 |
| | $ | 27 |
| | $ | 9 |
| | $ | 5 |
| | $ | — |
| | $ | 141 |
|
OFFSETTING ASSETS AND LIABILITIES
The following tables present the line items on the Condensed Consolidated Balance Sheets where derivatives are reported. Substantially all of Duke Energy's outstanding derivative contracts are subject to enforceable master netting arrangements. The gross amounts offset in the tables below show the effect of these netting arrangements on financial position, and include collateral posted to offset the net position. The amounts shown are calculated by counterparty. Accounts receivable or accounts payable may also be available to offset exposures in the event of bankruptcy. These amounts are not included in the tables below.
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, 2018 |
| | | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Current | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 64 |
| | $ | 3 |
| | $ | 4 |
| | $ | 3 |
| | $ | 1 |
| | $ | 9 |
| | $ | 45 |
| | $ | 2 |
|
| Gross amounts offset | | (4 | ) | | (2 | ) | | (2 | ) | | (2 | ) | | — |
| | — |
| | — |
| | — |
|
| Net amounts presented in Current Assets: Other | | $ | 60 |
| | $ | 1 |
| | $ | 2 |
| | $ | 1 |
| | $ | 1 |
| | $ | 9 |
| | $ | 45 |
| | $ | 2 |
|
| Noncurrent | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 23 |
| | $ | — |
| | $ | 1 |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Gross amounts offset | | (1 | ) | | — |
| | (1 | ) | | (1 | ) | | — |
| | — |
| | — |
| | — |
|
| Net amounts presented in Other Noncurrent Assets: Other | | $ | 22 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Derivative Liabilities | | 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 |
|
| Current | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 32 |
| | $ | 9 |
| | $ | 8 |
| | $ | 5 |
| | $ | 4 |
| | $ | — |
| | $ | — |
| | $ | 10 |
|
| Gross amounts offset | | (4 | ) | | (2 | ) | | (2 | ) | | (2 | ) | | — |
| | — |
| | — |
| | — |
|
| Net amounts presented in Current Liabilities: Other | | $ | 28 |
| | $ | 7 |
| | $ | 6 |
| | $ | 3 |
| | $ | 4 |
| | $ | — |
| | $ | — |
| | $ | 10 |
|
| Noncurrent | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 181 |
| | $ | 10 |
| | $ | 27 |
| | $ | 16 |
| | $ | 1 |
| | $ | 4 |
| | $ | — |
| | $ | 140 |
|
| Gross amounts offset | | (2 | ) | | (1 | ) | | (1 | ) | | (1 | ) | | — |
| | — |
| | — |
| | — |
|
| Net amounts presented in Other Noncurrent Liabilities: Other | | $ | 179 |
| | $ | 9 |
| | $ | 26 |
| | $ | 15 |
| | $ | 1 |
| | $ | 4 |
| | $ | — |
| | $ | 140 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Derivative Assets | | December 31, 2017 |
| | | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Current | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 35 |
| | $ | 2 |
| | $ | 2 |
| | $ | 1 |
| | $ | 1 |
| | $ | 1 |
| | $ | 27 |
| | $ | 2 |
|
| Gross amounts offset | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Net amounts presented in Current Assets: Other | | $ | 35 |
| | $ | 2 |
| | $ | 2 |
| | $ | 1 |
| | $ | 1 |
| | $ | 1 |
| | $ | 27 |
| | $ | 2 |
|
| Noncurrent | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 16 |
| | $ | — |
| | $ | 1 |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Gross amounts offset | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Net amounts presented in Other Noncurrent Assets: Other | | $ | 16 |
| | $ | — |
| | $ | 1 |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
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, 2017 |
| | | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Current | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 66 |
| | $ | 31 |
| | $ | 19 |
| | $ | 8 |
| | $ | 10 |
| | $ | 1 |
| | $ | — |
| | $ | 11 |
|
| Gross amounts offset | | (3 | ) | | (2 | ) | | (2 | ) | | (2 | ) | | — |
| | — |
| | — |
| | — |
|
| Net amounts presented in Current Liabilities: Other | | $ | 63 |
| | $ | 29 |
| | $ | 17 |
| | $ | 6 |
| | $ | 10 |
| | $ | 1 |
| | $ | — |
| | $ | 11 |
|
| Noncurrent | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 164 |
| | $ | 4 |
| | $ | 17 |
| | $ | 10 |
| | $ | 2 |
| | $ | 4 |
| | $ | — |
| | $ | 131 |
|
| Gross amounts offset | | (1 | ) | | — |
| | (1 | ) | | (1 | ) | | — |
| | — |
| | — |
| | — |
|
| Net amounts presented in Other Noncurrent Liabilities: Other | | $ | 163 |
| | $ | 4 |
| | $ | 16 |
| | $ | 9 |
| | $ | 2 |
| | $ | 4 |
| | $ | — |
| | $ | 131 |
|
|
| |
| FINANCIAL STATEMENTS | DERIVATIVES AND HEDGING |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Derivative Assets | | June 30, 2019 |
| | | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Current | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 37 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 7 |
| | $ | 29 |
| | $ | 2 |
|
| Gross amounts offset | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Net amounts presented in Current Assets: Other | | $ | 37 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 7 |
| | $ | 29 |
| | $ | 2 |
|
| Noncurrent | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Gross amounts offset | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Net amounts presented in Other Noncurrent Assets: Other | | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Derivative Liabilities | | June 30, 2019 |
| | | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Current | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 154 |
| | $ | 85 |
| | $ | 55 |
| | $ | 26 |
| | $ | 29 |
| | $ | 1 |
| | $ | 2 |
| | $ | 7 |
|
| Gross amounts offset | | (1 | ) | | — |
| | (1 | ) | | (1 | ) | | — |
| | — |
| | — |
| | — |
|
| Net amounts presented in Current Liabilities: Other | | $ | 153 |
| | $ | 85 |
| | $ | 54 |
| | $ | 25 |
| | $ | 29 |
| | $ | 1 |
| | $ | 2 |
| | $ | 7 |
|
| Noncurrent | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 188 |
| | $ | 8 |
| | $ | 35 |
| | $ | 9 |
| | $ | 10 |
| | $ | 5 |
| | $ | — |
| | $ | 107 |
|
| Gross amounts offset | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Net amounts presented in Other Noncurrent Liabilities: Other | | $ | 188 |
| | $ | 8 |
| | $ | 35 |
| | $ | 9 |
| | $ | 10 |
| | $ | 5 |
| | $ | — |
| | $ | 107 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Derivative Assets | | December 31, 2018 |
| | | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Current | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 38 |
| | $ | 2 |
| | $ | 2 |
| | $ | 2 |
| | $ | — |
| | $ | 6 |
| | $ | 23 |
| | $ | 3 |
|
| Gross amounts offset | | (3 | ) | | (2 | ) | | (2 | ) | | (2 | ) | | — |
| | — |
| | — |
| | — |
|
| Net amounts presented in Current Assets: Other | | $ | 35 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 6 |
| | $ | 23 |
| | $ | 3 |
|
| Noncurrent | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 19 |
| | $ | 1 |
| | $ | 2 |
| | $ | 2 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Gross amounts offset | | (3 | ) | | (1 | ) | | (2 | ) | | (2 | ) | | — |
| | — |
| | — |
| | — |
|
| Net amounts presented in Other Noncurrent Assets: Other | | $ | 16 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
|
| |
| FINANCIAL STATEMENTS | DERIVATIVES AND HEDGING |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Derivative Liabilities | | December 31, 2018 |
| | | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Current | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 68 |
| | $ | 23 |
| | $ | 23 |
| | $ | 16 |
| | $ | 8 |
| | $ | 1 |
| | $ | — |
| | $ | 8 |
|
| Gross amounts offset | | (4 | ) | | (2 | ) | | (2 | ) | | (2 | ) | | — |
| | — |
| | — |
| | — |
|
| Net amounts presented in Current Liabilities: Other | | $ | 64 |
| | $ | 21 |
| | $ | 21 |
| | $ | 14 |
| | $ | 8 |
| | $ | 1 |
| | $ | — |
| | $ | 8 |
|
| Noncurrent | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 174 |
| | $ | 10 |
| | $ | 21 |
| | $ | 11 |
| | $ | 1 |
| | $ | 4 |
| | $ | — |
| | $ | 133 |
|
| Gross amounts offset | | (3 | ) | | (1 | ) | | (2 | ) | | (2 | ) | | — |
| | — |
| | — |
| | — |
|
| Net amounts presented in Other Noncurrent Liabilities: Other | | $ | 171 |
| | $ | 9 |
| | $ | 19 |
| | $ | 9 |
| | $ | 1 |
| | $ | 4 |
| | $ | — |
| | $ | 133 |
|
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. | | | | June 30, 2018 | June 30, 2019 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | | Duke |
| | | | Duke |
|
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| Duke |
| | Energy |
| | Progress |
| | Energy |
|
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| Energy |
| | Carolinas |
| | Energy |
| | Progress |
|
| Aggregate fair value of derivatives in a net liability position | $ | 36 |
| | $ | 16 |
| | $ | 20 |
| | $ | 19 |
| | $ | 1 |
| $ | 67 |
| | $ | 34 |
| | $ | 33 |
| | $ | 33 |
|
| Fair value of collateral already posted | — |
| | — |
| | — |
| | — |
| | — |
| — |
| | — |
| | — |
| | — |
|
| Additional cash collateral or letters of credit in the event credit-risk-related contingent features were triggered | 36 |
| | 16 |
| | 20 |
| | 19 |
| | 1 |
| 67 |
| | 34 |
| | 33 |
| | 33 |
|
| | | | December 31, 2017 | December 31, 2018 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | | Duke |
| | | | Duke |
|
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| Duke |
| | Energy |
| | Progress |
| | Energy |
|
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| Energy |
| | Carolinas |
| | Energy |
| | Progress |
|
| Aggregate fair value of derivatives in a net liability position | $ | 59 |
| | $ | 35 |
| | $ | 25 |
| | $ | 15 |
| | $ | 10 |
| $ | 44 |
| | $ | 19 |
| | $ | 25 |
| | $ | 25 |
|
| Fair value of collateral already posted | — |
| | — |
| | — |
| | — |
| | — |
| — |
| | — |
| | — |
| | — |
|
| Additional cash collateral or letters of credit in the event credit-risk-related contingent features were triggered | 59 |
| | 35 |
| | 25 |
| | 15 |
| | 10 |
| 44 |
| | 19 |
| | 25 |
| | 25 |
|
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.
10.11.INVESTMENTS IN DEBT AND EQUITY SECURITIES
Duke Energy’s investments in debt and equity securities are primarily comprised of investments held in (i) the nuclear decommissioning trust fund (NDTF)NDTF at Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida, (ii) the grantor trusts at Duke Energy Progress, Duke Energy Florida and Duke Energy Indiana related to Other Post-Retirement Benefit Obligations (OPEB)OPEB plans and (iii) Bison. The Duke Energy Registrants classify investments in debt securities as available-for-sale (AFS)AFS and investments in equity securities as fair value through net income (FV-NI).FV-NI.
For investments in debt securities classified as AFS, the unrealized gains and losses are included in other comprehensive income until realized, at which time, they are reported through net income. For investments in equity securities classified as FV-NI, both realized and unrealized gains and losses are reported through net income. Substantially all of Duke Energy’s investments in debt and equity securities qualify for regulatory accounting, and accordingly, all associated realized and unrealized gains and losses on these investments are deferred as a regulatory asset or liability.
Duke Energy classifies the majority of investments in debt and equity securities as long term, unless otherwise noted.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Investment Trusts
The investments within the NDTF investments and the Duke Energy Progress, Duke Energy Florida and Duke Energy Indiana grantor trusts (Investment Trusts)Investment Trusts are managed by independent investment managers with discretion to buy, sell and invest pursuant to the objectives set forth by the trust agreements. The Duke Energy Registrants have limited oversight of the day-to-day management of these investments. As a result, the ability to hold investments in unrealized loss positions is outside the control of the Duke Energy Registrants. Accordingly, all unrealized losses associated with debt securities within the Investment Trusts are considered OTTIs and are recognized immediately and deferred to regulatory accounts where appropriate.
|
| |
| FINANCIAL STATEMENTS | INVESTMENTS IN DEBT AND EQUITY SECURITIES |
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, 2018,2019, and December 31, 2017.2018.
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 debt and equity securities; equity investments are classified as FV-NI and debt investments are classified as AFS. |
| | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2019 | | December 31, 2018 |
| | Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | |
| | Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized |
| | Unrealized |
| | Estimated |
|
| | Holding |
| | Holding |
| | Fair |
| | Holding |
| | Holding |
| | Fair |
|
| (in millions) | Gains |
| | Losses |
| | Value |
| | Gains |
| | Losses |
| | Value |
|
| NDTF | | | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 114 |
| | $ | — |
| | $ | — |
| | $ | 88 |
|
| Equity securities | 3,076 |
| | 36 |
| | 5,178 |
| | 2,402 |
| | 95 |
| | 4,475 |
|
| Corporate debt securities | 30 |
| | 1 |
| | 571 |
| | 4 |
| | 13 |
| | 566 |
|
| Municipal bonds | 10 |
| | — |
| | 318 |
| | 1 |
| | 4 |
| | 353 |
|
| U.S. government bonds | 34 |
| | 1 |
| | 1,270 |
| | 14 |
| | 12 |
| | 1,076 |
|
| Other debt securities | 3 |
| | 1 |
| | 152 |
| | — |
| | 2 |
| | 148 |
|
| Total NDTF Investments | $ | 3,153 |
| | $ | 39 |
| | $ | 7,603 |
| | $ | 2,421 |
| | $ | 126 |
| | $ | 6,706 |
|
| Other Investments | | | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 49 |
| | $ | — |
| | $ | — |
| | $ | 22 |
|
| Equity securities | 49 |
| | — |
| | 112 |
| | 36 |
| | 1 |
| | 99 |
|
| Corporate debt securities | 2 |
| | — |
| | 60 |
| | — |
| | 2 |
| | 60 |
|
| Municipal bonds | 3 |
| | 1 |
| | 90 |
| | — |
| | 1 |
| | 85 |
|
| U.S. government bonds | 2 |
| | — |
| | 51 |
| | 1 |
| | — |
| | 45 |
|
| Other debt securities | — |
| | — |
| | 65 |
| | — |
| | 1 |
| | 58 |
|
| Total Other Investments | $ | 56 |
| | $ | 1 |
| | $ | 427 |
| | $ | 37 |
| | $ | 5 |
| | $ | 369 |
|
| Total Investments | $ | 3,209 |
| | $ | 40 |
| | $ | 8,030 |
| | $ | 2,458 |
| | $ | 131 |
| | $ | 7,075 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2018(a) | | December 31, 2017 |
| | Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | |
| | Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized |
| | Unrealized |
| | Estimated |
|
| | Holding |
| | Holding |
| | Fair |
| | Holding |
| | Holding |
| | Fair |
|
| (in millions) | Gains |
| | Losses |
| | Value |
| | Gains |
| | Losses |
| | Value |
|
| NDTF | | | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 116 |
| | $ | — |
| | $ | — |
| | $ | 115 |
|
| Equity securities | 2,837 |
| | 40 |
| | 4,988 |
| | 2,805 |
| | 27 |
| | 4,914 |
|
| Corporate debt securities | 5 |
| | 12 |
| | 560 |
| | 17 |
| | 2 |
| | 570 |
|
| Municipal bonds | 2 |
| | 4 |
| | 341 |
| | 4 |
| | 3 |
| | 344 |
|
| U.S. government bonds | 7 |
| | 20 |
| | 991 |
| | 11 |
| | 7 |
| | 1,027 |
|
| Other debt securities | — |
| | 3 |
| | 128 |
| | — |
| | 1 |
| | 118 |
|
| Total NDTF Investments | $ | 2,851 |
| | $ | 79 |
| | $ | 7,124 |
| | $ | 2,837 |
| | $ | 40 |
| | $ | 7,088 |
|
| Other Investments | | | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 15 |
| | $ | — |
| | $ | — |
| | $ | 15 |
|
| Equity securities | 46 |
| | — |
| | 109 |
| | 59 |
| | — |
| | 123 |
|
| Corporate debt securities | — |
| | 1 |
| | 68 |
| | 1 |
| | — |
| | 57 |
|
| Municipal bonds | 1 |
| | 1 |
| | 87 |
| | 2 |
| | 1 |
| | 83 |
|
| U.S. government bonds | — |
| | 1 |
| | 52 |
| | — |
| | — |
| | 41 |
|
| Other debt securities | — |
| | 1 |
| | 45 |
| | — |
| | 1 |
| | 44 |
|
| Total Other Investments | $ | 47 |
| | $ | 4 |
| | $ | 376 |
| | $ | 62 |
| | $ | 2 |
| | $ | 363 |
|
| Total Investments | $ | 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, 2018 |
|
| Due in one year or less | $ | 89 |
|
| Due after one through five years | 518 |
|
| Due after five through 10 years | 543 |
|
| Due after 10 years | 1,122 |
|
| Total | $ | 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, 2018,2019, and from sales of AFS securities for the three and six months ended June 30, 2017,2018, were as follows. |
| | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended |
| (in millions) | June 30, 2019 | | June 30, 2018 | | June 30, 2019 | | June 30, 2018 |
| FV-NI: | | | | | | | |
| Realized gains | $ | 66 |
| | $ | 47 |
| | $ | 101 |
| | $ | 66 |
|
| Realized losses | 63 |
| | 31 |
| | 93 |
| | 44 |
|
| AFS: | | | | | | | |
| Realized gains | 47 |
| | 5 |
| | 57 |
| | 10 |
|
| Realized losses | 36 |
| | 12 |
| | 47 |
| | 25 |
|
|
| | | | | | | |
| | Three Months Ended | | Six Months Ended |
| (in millions) | June 30, 2018 | | June 30, 2018 |
| FV-NI: | | | |
| Realized gains | $ | 47 |
| | $ | 66 |
|
| Realized losses | 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 |
|
|
| |
| FINANCIAL STATEMENTS | INVESTMENTS IN DEBT AND EQUITY SECURITIES |
DUKE ENERGY CAROLINAS
The following table presents the estimated fair value of investments in debt and equity securities; equity investments are classified as FV-NI and debt investments are classified as AFS. |
| | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2019 | | December 31, 2018 |
| | Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | |
| | Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized |
| | Unrealized |
| | Estimated |
|
| | Holding |
| | Holding |
| | Fair |
| | Holding |
| | Holding |
| | Fair |
|
| (in millions) | Gains |
| | Losses |
| | Value |
| | Gains |
| | Losses |
| | Value |
|
| NDTF | | | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 41 |
| | $ | — |
| | $ | — |
| | $ | 29 |
|
| Equity securities | 1,671 |
| | 9 |
| | 2,883 |
| | 1,309 |
| | 54 |
| | 2,484 |
|
| Corporate debt securities | 18 |
| | 1 |
| | 360 |
| | 2 |
| | 9 |
| | 341 |
|
| Municipal bonds | 2 |
| | — |
| | 63 |
| | — |
| | 1 |
| | 81 |
|
| U.S. government bonds | 17 |
| | 1 |
| | 556 |
| | 5 |
| | 8 |
| | 475 |
|
| Other debt securities | 3 |
| | 1 |
| | 141 |
| | — |
| | 2 |
| | 143 |
|
| Total NDTF Investments | $ | 1,711 |
| | $ | 12 |
|
| $ | 4,044 |
| | $ | 1,316 |
| | $ | 74 |
| | $ | 3,553 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2018(a) | | December 31, 2017 |
| | Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | |
| | Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized |
| | Unrealized |
| | Estimated |
|
| | Holding |
| | Holding |
| | Fair |
| | Holding |
| | Holding |
| | Fair |
|
| (in millions) | Gains |
| | Losses |
| | Value |
| | Gains |
| | Losses |
| | Value |
|
| NDTF | | | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 32 |
| | $ | — |
| | $ | — |
| | $ | 32 |
|
| Equity securities | 1,544 |
| | 23 |
| | 2,732 |
| | 1,531 |
| | 12 |
| | 2,692 |
|
| Corporate debt securities | 2 |
| | 8 |
| | 347 |
| | 9 |
| | 2 |
| | 359 |
|
| Municipal bonds | 1 |
| | 1 |
| | 72 |
| | — |
| | 1 |
| | 60 |
|
| U.S. government bonds | 2 |
| | 12 |
| | 474 |
| | 3 |
| | 4 |
| | 503 |
|
| Other debt securities | — |
| | 3 |
| | 124 |
| | — |
| | 1 |
| | 112 |
|
| 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, 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, 2018,2019, and from sales of AFS securities for the three and six months ended June 30, 2017,2018, were as follows. |
| | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended |
| (in millions) | June 30, 2019 | | June 30, 2018 | | June 30, 2019 | | June 30, 2018 |
| FV-NI: | | | | | | | |
| Realized gains | $ | 44 |
| | $ | 26 |
| | $ | 67 |
| | $ | 36 |
|
| Realized losses | 48 |
| | 17 |
| | 69 |
| | 22 |
|
| AFS: | | | | | | | |
| Realized gains | 16 |
| | 4 |
| | 25 |
| | 9 |
|
| Realized losses | 11 |
| | 8 |
| | 21 |
| | 18 |
|
|
| | | | | | | |
| | 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 debt and equity securities; equity investments are classified as FV-NI and debt investments are classified as AFS. |
| | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2019 | | December 31, 2018 |
| | Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | |
| | Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized |
| | Unrealized |
| | Estimated |
|
| | Holding |
| | Holding |
| | Fair |
| | Holding |
| | Holding |
| | Fair |
|
| (in millions) | Gains |
| | Losses |
| | Value |
| | Gains |
| | Losses |
| | Value |
|
| NDTF | | | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 73 |
| | $ | — |
| | $ | — |
| | $ | 59 |
|
| Equity securities | 1,405 |
| | 27 |
| | 2,295 |
| | 1,093 |
| | 41 |
| | 1,991 |
|
| Corporate debt securities | 12 |
| | — |
| | 211 |
| | 2 |
| | 4 |
| | 225 |
|
| Municipal bonds | 8 |
| | — |
| | 255 |
| | 1 |
| | 3 |
| | 272 |
|
| U.S. government bonds | 17 |
| | — |
| | 714 |
| | 9 |
| | 4 |
| | 601 |
|
| Other debt securities | — |
| | — |
| | 11 |
| | — |
| | — |
| | 5 |
|
| Total NDTF Investments | $ | 1,442 |
| | $ | 27 |
| | $ | 3,559 |
| | $ | 1,105 |
| | $ | 52 |
| | $ | 3,153 |
|
| Other Investments | | | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 47 |
| | $ | — |
| | $ | — |
| | $ | 17 |
|
| Municipal bonds | 3 |
| | — |
| | 50 |
| | — |
| | — |
| | 47 |
|
| Total Other Investments | $ | 3 |
| | $ | — |
| | $ | 97 |
| | $ | — |
| | $ | — |
| | $ | 64 |
|
| Total Investments | $ | 1,445 |
| | $ | 27 |
| | $ | 3,656 |
| | $ | 1,105 |
| | $ | 52 |
| | $ | 3,217 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2018(a) | | December 31, 2017 |
| | Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | |
| | Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized |
| | Unrealized |
| | Estimated |
|
| | Holding |
| | Holding |
| | Fair |
| | Holding |
| | Holding |
| | Fair |
|
| (in millions) | Gains |
| | Losses |
| | Value |
| | Gains |
| | Losses |
| | Value |
|
| NDTF | | | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 84 |
| | $ | — |
| | $ | — |
| | $ | 83 |
|
| Equity securities | 1,293 |
| | 17 |
| | 2,256 |
| | 1,274 |
| | 15 |
| | 2,222 |
|
| Corporate debt securities | 3 |
| | 4 |
| | 213 |
| | 8 |
| | — |
| | 211 |
|
| Municipal bonds | 1 |
| | 3 |
| | 269 |
| | 4 |
| | 2 |
| | 284 |
|
| U.S. government bonds | 5 |
| | 8 |
| | 517 |
| | 8 |
| | 3 |
| | 524 |
|
| Other debt securities | — |
| | — |
| | 4 |
| | — |
| | — |
| | 6 |
|
| Total NDTF Investments | $ | 1,302 |
| | $ | 32 |
| | $ | 3,343 |
| | $ | 1,294 |
| | $ | 20 |
| | $ | 3,330 |
|
| Other Investments | | | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 11 |
| | $ | — |
| | $ | — |
| | $ | 12 |
|
| Municipal bonds | 1 |
| | — |
| | 47 |
| | 2 |
| | — |
| | 47 |
|
| Total Other Investments | $ | 1 |
| | $ | — |
| | $ | 58 |
| | $ | 2 |
| | $ | — |
| | $ | 59 |
|
| Total Investments | $ | 1,303 |
| | $ | 32 |
| | $ | 3,401 |
| | $ | 1,296 |
| | $ | 20 |
| | $ | 3,389 |
|
|
| |
(a)FINANCIAL STATEMENTS | 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.
INVESTMENTS IN DEBT AND EQUITY SECURITIES |
The table below summarizes the maturity date for debt securities.
|
| | | |
| (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, 2018,2019, and from sales of AFS securities for the three and six months ended June 30, 2017,2018, 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 | Three Months Ended | Six Months Ended |
| (in millions) | June 30, 2017 | | June 30, 2017 | June 30, 2019 | | June 30, 2018 | | June 30, 2019 | | June 30, 2018 |
| FV-NI: | | | | | | | | |
| Realized gains | $ | 15 |
| | $ | 42 |
| $ | 22 |
| | $ | 21 |
| | $ | 34 |
| | $ | 30 |
|
| Realized losses | 14 |
| | 35 |
| 15 |
| | 14 |
| | 24 |
| | 22 |
|
| AFS: | | | | | | | | |
| Realized gains | | 30 |
| | 1 |
| | 31 |
| | 1 |
|
| Realized losses | | 25 |
| | 4 |
| | 26 |
| | 7 |
|
DUKE ENERGY PROGRESS
The following table presents the estimated fair value of investments in debt and equity securities; equity investments are classified as FV-NI and debt investments are classified as AFS. |
| | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2019 | | December 31, 2018 |
| | Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | |
| | Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized |
| | Unrealized |
| | Estimated |
|
| | Holding |
| | Holding |
| | Fair |
| | Holding |
| | Holding |
| | Fair |
|
| (in millions) | Gains |
| | Losses |
| | Value |
| | Gains |
| | Losses |
| | Value |
|
| NDTF | | | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 42 |
| | $ | — |
| | $ | — |
| | $ | 46 |
|
| Equity securities | 1,092 |
| | 24 |
| | 1,886 |
| | 833 |
| | 30 |
| | 1,588 |
|
| Corporate debt securities | 12 |
| | — |
| | 211 |
| | 2 |
| | 3 |
| | 171 |
|
| Municipal bonds | 8 |
| | — |
| | 255 |
| | 1 |
| | 3 |
| | 271 |
|
| U.S. government bonds | 16 |
| | — |
| | 429 |
| | 6 |
| | 3 |
| | 415 |
|
| Other debt securities | — |
| | — |
| | 11 |
| | — |
| | — |
| | 3 |
|
| Total NDTF Investments | $ | 1,128 |
| | $ | 24 |
| | $ | 2,834 |
| | $ | 842 |
| | $ | 39 |
| | $ | 2,494 |
|
| Other Investments | | | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 2 |
| | $ | — |
| | $ | — |
| | $ | 6 |
|
| Total Other Investments | $ | — |
| | $ | — |
| | $ | 2 |
| | $ | — |
| | $ | — |
| | $ | 6 |
|
| Total Investments | $ | 1,128 |
| | $ | 24 |
| | $ | 2,836 |
| | $ | 842 |
| | $ | 39 |
| | $ | 2,500 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2018(a) | | December 31, 2017 |
| | Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | |
| | Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized |
| | Unrealized |
| | Estimated |
|
| | Holding |
| | Holding |
| | Fair |
| | Holding |
| | Holding |
| | Fair |
|
| (in millions) | Gains |
| | Losses |
| | Value |
| | Gains |
| | Losses |
| | Value |
|
| NDTF | | | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 46 |
| | $ | — |
| | $ | — |
| | $ | 50 |
|
| Equity securities | 995 |
| | 13 |
| | 1,819 |
| | 980 |
| | 12 |
| | 1,795 |
|
| Corporate debt securities | 2 |
| | 3 |
| | 153 |
| | 6 |
| | — |
| | 149 |
|
| Municipal bonds | 1 |
| | 3 |
| | 268 |
| | 4 |
| | 2 |
| | 283 |
|
| U.S. government bonds | 4 |
| | 6 |
| | 339 |
| | 5 |
| | 2 |
| | 310 |
|
| Other debt securities | — |
| | — |
| | 2 |
| | — |
| | — |
| | 4 |
|
| Total NDTF Investments | $ | 1,002 |
| | $ | 25 |
| | $ | 2,627 |
| | $ | 995 |
| | $ | 16 |
| | $ | 2,591 |
|
| Other Investments | | | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | 1 |
|
| Total Other Investments | $ | — |
| | $ | — |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | 1 |
|
| Total Investments | $ | 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, 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, 2018,2019, and from sales of AFS securities for the three and six months ended June 30, 2017,2018, were as follows. |
| | | | | | | | | | | | | | | |
| | Three Months Ended | Six Months Ended |
| (in millions) | June 30, 2019 | | June 30, 2018 | | June 30, 2019 | | June 30, 2018 |
| FV-NI: | | | | | | | |
| Realized gains | $ | 7 |
| | $ | 17 |
| | $ | 17 |
| | $ | 25 |
|
| Realized losses | 7 |
| | 12 |
| | 15 |
| | 20 |
|
| AFS: | | | | | | | |
| Realized gains | 1 |
| | 1 |
| | 2 |
| | 1 |
|
| Realized losses | 1 |
| | 3 |
| | 2 |
| | 5 |
|
|
| | | | | | | |
| | 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 |
|
|
| |
| FINANCIAL STATEMENTS | INVESTMENTS IN DEBT AND EQUITY SECURITIES |
DUKE ENERGY FLORIDA
The following table presents the estimated fair value of investments in debt and equity securities; equity investments are classified as FV-NI and debt investments are classified as AFS. | | | | June 30, 2018(a) | | December 31, 2017 | June 30, 2019 | | December 31, 2018 |
| | 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 | $ | — |
| | $ | — |
| | $ | 38 |
| | $ | — |
| | $ | — |
| | $ | 33 |
| $ | — |
| | $ | — |
| | $ | 31 |
| | $ | — |
| | $ | — |
| | $ | 13 |
|
| Equity securities | 298 |
| | 4 |
| | 437 |
| | 294 |
| | 3 |
| | 427 |
| 313 |
| | 3 |
| | 409 |
| | 260 |
| | 11 |
| | 403 |
|
| Corporate debt securities | 1 |
| | 1 |
| | 60 |
| | 2 |
| | — |
| | 62 |
| — |
| | — |
| | — |
| | — |
| | 1 |
| | 54 |
|
| Municipal bonds | — |
| | — |
| | 1 |
| | — |
| | — |
| | 1 |
| — |
| | — |
| | — |
| | — |
| | — |
| | 1 |
|
| U.S. government bonds | 1 |
| | 2 |
| | 178 |
| | 3 |
| | 1 |
| | 214 |
| 1 |
| | — |
| | 285 |
| | 3 |
| | 1 |
| | 186 |
|
| Other debt securities | — |
| | — |
| | 2 |
| | — |
| | — |
| | 2 |
| — |
| | — |
| | — |
| | — |
| | — |
| | 2 |
|
Total NDTF Investments(b)(a) | $ | 300 |
| | $ | 7 |
| | $ | 716 |
| | $ | 299 |
| | $ | 4 |
| | $ | 739 |
| $ | 314 |
| | $ | 3 |
| | $ | 725 |
| | $ | 263 |
| | $ | 13 |
| | $ | 659 |
|
| Other Investments | | | | | | | | | | | | | | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | 1 |
| $ | — |
| | $ | — |
| | $ | 2 |
| | $ | — |
| | $ | — |
| | $ | 1 |
|
| Municipal bonds | 1 |
| | — |
| | 47 |
| | 2 |
| | — |
| | 47 |
| 3 |
| | — |
| | 50 |
| | — |
| | — |
| | 47 |
|
| Total Other Investments | $ | 1 |
| | $ | — |
| | $ | 48 |
| | $ | 2 |
| | $ | — |
| | $ | 48 |
| $ | 3 |
| | $ | — |
| | $ | 52 |
| | $ | — |
| | $ | — |
| | $ | 48 |
|
| Total Investments | $ | 301 |
| | $ | 7 |
| | $ | 764 |
| | $ | 301 |
| | $ | 4 |
| | $ | 787 |
| $ | 317 |
| | $ | 3 |
| | $ | 777 |
| | $ | 263 |
| | $ | 13 |
| | $ | 707 |
|
| |
| (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, 2018,2019, 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.3. |
The table below summarizes the maturity date for debt securities. |
| | | |
| (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, 2018,2019, and from sales of AFS securities for the three and six months ended June 30, 2017,2018, were as follows. |
| | | | | | | | | | | | | | | |
| | Three Months Ended | Six Months Ended |
| (in millions) | June 30, 2019 | | June 30, 2018 | | June 30, 2019 | | June 30, 2018 |
| FV-NI: | | | | | | | |
| Realized gains | $ | 15 |
| | $ | 4 |
| | $ | 17 |
| | $ | 5 |
|
| Realized losses | 8 |
| | 2 |
| | 9 |
| | 2 |
|
| AFS: | | | | | | | |
| Realized gains | 29 |
| | — |
| | 29 |
| | — |
|
| Realized losses | 24 |
| | 1 |
| | 24 |
| | 2 |
|
|
| | | | | | | |
| | 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 debt and equity securities; equity investments are measured at FV-NI and debt investments are classified as AFS. |
| | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2019 | | December 31, 2018 |
| | Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | |
| | Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized |
| | Unrealized |
| | Estimated |
|
| | Holding |
| | Holding |
| | Fair |
| | Holding |
| | Holding |
| | Fair |
|
| (in millions) | Gains |
| | Losses |
| | Value |
| | Gains |
| | Losses |
| | Value |
|
| Investments | | | | | | | | | | | |
| Equity securities | $ | 37 |
| | $ | — |
| | $ | 74 |
| | $ | 29 |
| | $ | — |
| | $ | 67 |
|
| Corporate debt securities | — |
| | — |
| | 7 |
| | — |
| | — |
| | 8 |
|
| Municipal bonds | — |
| | 1 |
| | 34 |
| | — |
| | 1 |
| | 33 |
|
| U.S. government bonds | — |
| | — |
| | 1 |
| | — |
| | — |
| | — |
|
| Total Investments | $ | 37 |
| | $ | 1 |
| | $ | 116 |
| | $ | 29 |
| | $ | 1 |
| | $ | 108 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2018(a) | | December 31, 2017 |
| | Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | |
| | Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized |
| | Unrealized |
| | Estimated |
|
| | Holding |
| | Holding |
| | Fair |
| | Holding |
| | Holding |
| | Fair |
|
| (in millions) | Gains |
| | Losses |
| | Value |
| | Gains |
| | Losses |
| | Value |
|
| Investments | | | | | | | | | | | |
| Equity securities | $ | 36 |
| | $ | — |
| | $ | 74 |
| | $ | 49 |
| | $ | — |
| | $ | 97 |
|
| Corporate debt securities | — |
| | — |
| | 8 |
| | — |
| | — |
| | 3 |
|
| Municipal bonds | — |
| | 1 |
| | 33 |
| | — |
| | 1 |
| | 28 |
|
| Total Investments | $ | 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, 2018 |
|
| Due in one year or less | $ | 3 |
|
| Due after one through five years | 20 |
|
| Due after five through 10 years | 4 |
|
| Due after 10 years | 14 |
|
| Total | $ | 41 |
|
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, 2018,2019, and from sales of AFS securities for the three and six months ended June 30, 2017,2018, were insignificant.
|
| |
| FINANCIAL STATEMENTS | INVESTMENTS IN DEBT AND EQUITY SECURITIES |
DEBT SECURITY MATURITIES
The table below summarizes the maturity date for debt securities.
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2019 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
|
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
|
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Indiana |
|
| Due in one year or less | $ | 365 |
| | $ | 43 |
| | $ | 315 |
| | $ | 29 |
| | $ | 286 |
| | $ | 4 |
|
| Due after one through five years | 527 |
| | 213 |
| | 265 |
| | 257 |
| | 8 |
| | 15 |
|
| Due after five through 10 years | 499 |
| | 242 |
| | 203 |
| | 192 |
| | 11 |
| | 4 |
|
| Due after 10 years | 1,186 |
| | 622 |
| | 458 |
| | 428 |
| | 30 |
| | 19 |
|
| Total | $ | 2,577 |
|
| $ | 1,120 |
|
| $ | 1,241 |
|
| $ | 906 |
|
| $ | 335 |
|
| $ | 42 |
|
11.12. 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) inputs other than quoted market prices that are observable for the asset or liability, suchhierarchy as interest rate curves and yield curves observable at commonly quoted intervals, volatilities and credit spreads. A Level 2 measurement cannot have more than an insignificant portion of its valuation based on unobservable inputs. Instruments in this category include non-exchange-traded derivatives, such as over-the-counter forwards, swaps and options; certain marketable debt securities; and financial instruments traded in less-than-active markets.
Level 3 – Any fair value measurement that includes unobservable inputs for more than an insignificant portion of the valuation. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value. Level 3 measurements may include longer-term instruments that extend into periods in which observable inputs are not available.
Not Categorized –defined by GAAP. Certain investments are not categorized within the Fair Valuefair value hierarchy. These investments are measured at fair value using the net asset value (NAV)NAV per share practical expedient. The NAV is derived based on the investment cost, less any impairment, plus or minus changes resulting from observable price changes for an identical or similar investment of the same issuer.
Fair value accounting guidance permits entities to elect to measure certain financial instruments that are not required to be accounted for at fair value, such as equity method investments or the company’s own debt, at fair value. The Duke Energy Registrants have not elected to record any of these items at fair value.
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, 2018,2019, and 2017.2018.
Valuation methods of the primary fair value measurements disclosed below are as follows.
Investments in equity securities
The majority of investments in equity securities are valued using Level 1 measurements. Investments in equity securities are typically valued at the closing price in the principal active market as of the last business day of the quarter. Principal active markets for equity prices include published exchanges such as the New York Stock Exchange 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.
|
| |
| FINANCIAL STATEMENTS | FAIR VALUE MEASUREMENTS |
Interest rate derivatives
Most over-the-counter interest rate contract derivatives are valued using financial models that utilize observable inputs for similar instruments and are classified as Level 2. Inputs include forward interest rate curves, notional amounts, interest rates and credit quality of the counterparties.
Other fair value considerations
See Note 11 in Duke Energy's Annual Report on Form 10-K/A10-K for the year ended December 31, 2017,2018, 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 9.10. See Note 1011 for additional information related to investments by major security type for the Duke Energy Registrants. | | | | June 30, 2018 | June 30, 2019 |
| (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 | $ | 4,988 |
| $ | 4,918 |
| $ | — |
| $ | — |
| $ | 70 |
| $ | 5,178 |
| $ | 5,119 |
| $ | — |
| $ | — |
| $ | 59 |
|
| NDTF debt securities | 2,136 |
| 578 |
| 1,558 |
| — |
| — |
| 2,425 |
| 870 |
| 1,555 |
| — |
| — |
|
| Other equity securities | 109 |
| 109 |
| — |
| — |
| — |
| 112 |
| 112 |
| — |
| — |
| — |
|
| Other debt securities | 267 |
| 68 |
| 199 |
| — |
| — |
| 315 |
| 99 |
| 216 |
| — |
| — |
|
| Derivative assets | 87 |
| 3 |
| 31 |
| 53 |
| — |
| 38 |
| 3 |
| — |
| 35 |
| — |
|
| Total assets | 7,587 |
| 5,676 |
| 1,788 |
| 53 |
| 70 |
| 8,068 |
| 6,203 |
| 1,771 |
| 35 |
| 59 |
|
| Derivative liabilities | (213 | ) | (1 | ) | (62 | ) | (150 | ) | — |
| (342 | ) | (12 | ) | (216 | ) | (114 | ) | — |
|
| Net assets (liabilities) | $ | 7,374 |
| $ | 5,675 |
| $ | 1,726 |
| $ | (97 | ) | $ | 70 |
| $ | 7,726 |
| $ | 6,191 |
| $ | 1,555 |
| $ | (79 | ) | $ | 59 |
|
|
| | | | | | | | | | | | | | | |
| | December 31, 2018 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 |
| Not Categorized |
|
| NDTF equity securities | $ | 4,475 |
| $ | 4,410 |
| $ | — |
| $ | — |
| $ | 65 |
|
| NDTF debt securities | 2,231 |
| 576 |
| 1,655 |
| — |
| — |
|
| Other equity securities | 99 |
| 99 |
| — |
| — |
| — |
|
| Other debt securities | 270 |
| 67 |
| 203 |
| — |
| — |
|
| Derivative assets | 57 |
| 4 |
| 25 |
| 28 |
| — |
|
| Total assets | 7,132 |
| 5,156 |
| 1,883 |
| 28 |
| 65 |
|
| Derivative liabilities | (242 | ) | (11 | ) | (90 | ) | (141 | ) | — |
|
| Net assets (liabilities) | $ | 6,890 |
| $ | 5,145 |
| $ | 1,793 |
| $ | (113 | ) | $ | 65 |
|
|
| | | | | | | | | | | | | | | |
| | December 31, 2017 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 |
| Not Categorized |
|
| NDTF equity securities | $ | 4,914 |
| $ | 4,840 |
| $ | — |
| $ | — |
| $ | 74 |
|
| NDTF debt securities | 2,174 |
| 635 |
| 1,539 |
| — |
| — |
|
| Other equity securities | 123 |
| 123 |
| — |
| — |
| — |
|
| Other debt securities | 241 |
| 57 |
| 184 |
| — |
| — |
|
| Derivative assets | 51 |
| 3 |
| 20 |
| 28 |
| — |
|
| Total assets | 7,503 |
| 5,658 |
| 1,743 |
| 28 |
| 74 |
|
| Derivative liabilities | (230 | ) | (2 | ) | (86 | ) | (142 | ) | — |
|
| Net assets (liabilities) | $ | 7,273 |
| $ | 5,656 |
| $ | 1,657 |
| $ | (114 | ) | $ | 74 |
|
The following tables 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. |
| | | | | | | | | | | | | | | |
| | Derivatives (net) |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| (in millions) | 2019 |
| | 2018 |
| | 2019 |
| | 2018 |
|
| Balance at beginning of period | $ | (115 | ) | | $ | (124 | ) | | $ | (113 | ) | | $ | (114 | ) |
| Purchases, sales, issuances and settlements: | | | | | | | |
| Purchases | 38 |
| | 56 |
| | 38 |
| | 56 |
|
| Settlements | (11 | ) | | (15 | ) | | (23 | ) | | (29 | ) |
| Total gains (losses) included on the Condensed Consolidated Balance Sheet | 9 |
| | (14 | ) | | 19 |
| | (10 | ) |
| Balance at end of period | $ | (79 | ) | | $ | (97 | ) | | $ | (79 | ) | | $ | (97 | ) |
|
| |
| FINANCIAL STATEMENTS | FAIR VALUE MEASUREMENTS |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, 2018 | | Three Months Ended June 30, 2017 |
| (in millions) | Investments |
| | Derivatives (net) |
| | Total |
| | Investments |
| | Derivatives (net) |
| | Total |
|
| Balance at beginning of period | $ | — |
| | $ | (124 | ) | | $ | (124 | ) | | $ | 5 |
| | $ | (135 | ) | | $ | (130 | ) |
| 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 | — |
| | (15 | ) | | (15 | ) | | — |
| | (9 | ) | | (9 | ) |
| Total losses included on the Condensed Consolidated Balance Sheet | — |
| | (14 | ) | | (14 | ) | | — |
| | (2 | ) | | (2 | ) |
| Balance at end of period | $ | — |
| | $ | (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 | June 30, 2019 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| Not Categorized |
| Total Fair Value |
| Level 1 |
| Level 2 |
| Not Categorized |
|
| NDTF equity securities | $ | 2,732 |
| $ | 2,662 |
| $ | — |
| $ | 70 |
| $ | 2,883 |
| $ | 2,824 |
| $ | — |
| $ | 59 |
|
| NDTF debt securities | 1,049 |
| 164 |
| 885 |
| — |
| 1,161 |
| 250 |
| 911 |
| — |
|
| Derivative assets | 3 |
| — |
| 3 |
| — |
| |
| Total assets | 3,784 |
| 2,826 |
| 888 |
| 70 |
| 4,044 |
| 3,074 |
| 911 |
| 59 |
|
| Derivative liabilities | (19 | ) | — |
| (19 | ) | — |
| (93 | ) | — |
| (93 | ) | — |
|
| Net assets | $ | 3,765 |
| $ | 2,826 |
| $ | 869 |
| $ | 70 |
| $ | 3,951 |
| $ | 3,074 |
| $ | 818 |
| $ | 59 |
|
|
| | | | | | | | | | | | |
| | December 31, 2018 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| Not Categorized |
|
| NDTF equity securities | $ | 2,484 |
| $ | 2,419 |
| $ | — |
| $ | 65 |
|
| NDTF debt securities | 1,069 |
| 149 |
| 920 |
| — |
|
| Derivative assets | 3 |
| — |
| 3 |
| — |
|
| Total assets | 3,556 |
| 2,568 |
| 923 |
| 65 |
|
| Derivative liabilities | (33 | ) | — |
| (33 | ) | — |
|
| Net assets | $ | 3,523 |
| $ | 2,568 |
| $ | 890 |
| $ | 65 |
|
|
| | | | | | | | | | | | |
| | 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, 2019 | | December 31, 2018 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| | Total Fair Value |
| Level 1 |
| Level 2 |
|
| NDTF equity securities | $ | 2,295 |
| $ | 2,295 |
| $ | — |
| | $ | 1,991 |
| $ | 1,991 |
| $ | — |
|
| NDTF debt securities | 1,264 |
| 620 |
| 644 |
| | 1,162 |
| 427 |
| 735 |
|
| Other debt securities | 97 |
| 47 |
| 50 |
| | 64 |
| 17 |
| 47 |
|
| Derivative assets | — |
| — |
| — |
| | 4 |
| — |
| 4 |
|
| Total assets | 3,656 |
| 2,962 |
| 694 |
| | 3,221 |
| 2,435 |
| 786 |
|
| Derivative liabilities | (90 | ) | — |
| (90 | ) | | (44 | ) | — |
| (44 | ) |
| Net assets | $ | 3,566 |
| $ | 2,962 |
| $ | 604 |
| | $ | 3,177 |
| $ | 2,435 |
| $ | 742 |
|
|
| | | | | | | | | |
| | 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 | June 30, 2019 | | December 31, 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 | $ | 1,819 |
| $ | 1,819 |
| $ | — |
| $ | 1,886 |
| $ | 1,886 |
| $ | — |
| | $ | 1,588 |
| $ | 1,588 |
| $ | — |
|
| NDTF debt securities | 808 |
| 255 |
| 553 |
| 948 |
| 304 |
| 644 |
| | 906 |
| 294 |
| 612 |
|
| Other debt securities | 1 |
| 1 |
| — |
| 2 |
| 2 |
| — |
| | 6 |
| 6 |
| — |
|
| Derivative assets | 4 |
| 1 |
| 3 |
| — |
| — |
| — |
| | 4 |
| — |
| 4 |
|
| Total assets | 2,632 |
| 2,076 |
| 556 |
| 2,836 |
| 2,192 |
| 644 |
| | 2,504 |
| 1,888 |
| 616 |
|
| Derivative liabilities | (21 | ) | — |
| (21 | ) | (35 | ) | — |
| (35 | ) | | (27 | ) | — |
| (27 | ) |
| Net assets | $ | 2,611 |
| $ | 2,076 |
| $ | 535 |
| $ | 2,801 |
| $ | 2,192 |
| $ | 609 |
| | $ | 2,477 |
| $ | 1,888 |
| $ | 589 |
|
|
| | | | | | | | | |
| | 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 |
|
|
| |
| FINANCIAL STATEMENTS | FAIR VALUE MEASUREMENTS |
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
DUKE ENERGY FLORIDA
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets. |
| | | | | | | | | | | | | | | | | | | |
| | June 30, 2019 | | December 31, 2018 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| | Total Fair Value |
| Level 1 |
| Level 2 |
|
| NDTF equity securities | $ | 409 |
| $ | 409 |
| $ | — |
| | $ | 403 |
| $ | 403 |
| $ | — |
|
| NDTF debt securities | 316 |
| 316 |
| — |
| | 256 |
| 133 |
| 123 |
|
| Other debt securities | 52 |
| 2 |
| 50 |
| | 48 |
| 1 |
| 47 |
|
| Total assets | 777 |
| 727 |
| 50 |
| | 707 |
| 537 |
| 170 |
|
| Derivative liabilities | (39 | ) | — |
| (39 | ) | | (9 | ) | — |
| (9 | ) |
| Net assets | $ | 738 |
| $ | 727 |
| $ | 11 |
| | $ | 698 |
| $ | 537 |
| $ | 161 |
|
|
| | | | | | | | | |
| | June 30, 2018 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
|
| NDTF equity securities | $ | 437 |
| $ | 437 |
| $ | — |
|
| NDTF debt securities | 279 |
| 159 |
| 120 |
|
| Other debt securities | 48 |
| 1 |
| 47 |
|
| Derivative assets | 1 |
| — |
| 1 |
|
| Total assets | 765 |
| 597 |
| 168 |
|
| Derivative liabilities | (5 | ) | — |
| (5 | ) |
| Net assets | $ | 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 table provides recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets. |
| | | | | | | | | | | | | | | | | | | |
| | June 30, 2018 | | December 31, 2017 |
| (in millions) | Total Fair Value |
| Level 2 |
| Level 3 |
| | Total Fair Value |
| Level 2 |
| Level 3 |
|
| Derivative assets | $ | 9 |
| $ | — |
| $ | 9 |
| | $ | 1 |
| $ | — |
| $ | 1 |
|
| Derivative liabilities | (4 | ) | (4 | ) | — |
| | (5 | ) | (5 | ) | — |
|
| Net assets (liabilities) | $ | 5 |
| $ | (4 | ) | $ | 9 |
| | $ | (4 | ) | $ | (5 | ) | $ | 1 |
|
The following table provides a reconciliation of beginningSheets were not material at June 30, 2019, 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 | $ | 1 |
| | $ | 1 |
| | $ | 1 |
| | $ | 5 |
|
| Purchases, sales, issuances and settlements: | | | | | | | |
| Purchases | 7 |
| | 3 |
| | 7 |
| | 3 |
|
| Settlements | (1 | ) | | (1 | ) | | (1 | ) | | (2 | ) |
| Total gains (losses) included on the Condensed Consolidated Balance Sheet | 2 |
| | — |
| | 2 |
| | (3 | ) |
| Balance at end of period | $ | 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)
December 31, 2018.
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, 2019 | | December 31, 2018 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 |
| | Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 |
|
| Other equity securities | $ | 74 |
| $ | 74 |
| $ | — |
| $ | — |
| | $ | 67 |
| $ | 67 |
| $ | — |
| $ | — |
|
| Other debt securities | 42 |
| — |
| 42 |
| — |
| | 41 |
| — |
| 41 |
| — |
|
| Derivative assets | 29 |
| 1 |
| — |
| 28 |
| | 23 |
| 1 |
| — |
| 22 |
|
| Total assets | $ | 145 |
| $ | 75 |
| $ | 42 |
| $ | 28 |
| | $ | 131 |
| $ | 68 |
| $ | 41 |
| $ | 22 |
|
| Derivative liabilities | (2 | ) | (2 | ) | — |
| — |
| | — |
| — |
| — |
| — |
|
| Net assets | $ | 143 |
| $ | 73 |
| $ | 42 |
| $ | 28 |
| | $ | 131 |
| $ | 68 |
| $ | 41 |
| $ | 22 |
|
|
| | | | | | | | | | | | |
| | 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) | 2018 |
| | 2017 |
| | 2018 |
| | 2017 |
| 2019 |
| | 2018 |
| | 2019 |
| | 2018 |
|
| Balance at beginning of period | $ | 7 |
| | $ | 9 |
| | $ | 27 |
| | $ | 16 |
| $ | 5 |
| | $ | 7 |
| | $ | 22 |
| | $ | 27 |
|
| Purchases, sales, issuances and settlements: |
| | | | | | |
| | | | | | |
| Purchases | 49 |
| | 52 |
| | 49 |
| | 52 |
| 29 |
| | 49 |
| | 29 |
| | 49 |
|
| Settlements | (14 | ) | | (9 | ) | | (28 | ) | | (16 | ) | (9 | ) | | (14 | ) | | (19 | ) | | (28 | ) |
| Total gains (losses) included on the Condensed Consolidated Balance Sheet | 2 |
| | (1 | ) | | (4 | ) | | (1 | ) | 3 |
| | 2 |
| | (4 | ) | | (4 | ) |
| Balance at end of period | $ | 44 |
| | $ | 51 |
| | $ | 44 |
| | $ | 51 |
| $ | 28 |
| | $ | 44 |
| | $ | 28 |
| | $ | 44 |
|
|
| |
| FINANCIAL STATEMENTS | FAIR VALUE MEASUREMENTS |
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, 2019 | | December 31, 2018 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 3 |
| | Total Fair Value |
| Level 1 |
| Level 3 |
|
| Derivative assets | $ | 2 |
| $ | 2 |
| $ | — |
| | $ | 3 |
| 3 |
| — |
|
| Derivative liabilities | (114 | ) | — |
| (114 | ) | | (141 | ) | — |
| (141 | ) |
| Net (liabilities) assets | $ | (112 | ) | $ | 2 |
| $ | (114 | ) | | $ | (138 | ) | $ | 3 |
| $ | (141 | ) |
|
| | | | | | | | | |
| | June 30, 2018 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 3 |
|
| Derivative assets | $ | 2 |
| $ | 2 |
| $ | — |
|
| Derivative liabilities | (150 | ) | — |
| (150 | ) |
| Net (liabilities) assets | $ | (148 | ) | $ | 2 |
| $ | (150 | ) |
|
| | | | | | | | | |
| | 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) | Derivatives (net) |
| | Three Months Ended June 30, | | Six Months Ended June 30, | Three Months Ended June 30, | | Six Months Ended June 30, |
| (in millions) | 2018 |
| | 2017 |
| | 2018 |
| | 2017 |
| 2019 |
| | 2018 |
| | 2019 |
| | 2018 |
|
| Balance at beginning of period | $ | (132 | ) | | $ | (145 | ) | | $ | (142 | ) | | $ | (187 | ) | $ | (121 | ) | | $ | (132 | ) | | $ | (141 | ) | | $ | (142 | ) |
| Total (losses) gains and settlements | (18 | ) | | — |
| | (8 | ) | | 42 |
| |
| Total gains (losses) and settlements | | 7 |
| | (18 | ) | | 27 |
| | (8 | ) |
| Balance at end of period | $ | (150 | ) | | $ | (145 | ) | | $ | (150 | ) | | $ | (145 | ) | $ | (114 | ) | | $ | (150 | ) | | $ | (114 | ) | | $ | (150 | ) |
QUANTITATIVE INFORMATION ABOUT UNOBSERVABLE INPUTS
The following tables include quantitative information about the Duke Energy Registrants' derivatives classified as Level 3. | | | | June 30, 2018 | June 30, 2019 |
| | 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) | $ | 9 |
| RTO auction pricing | FTR price – per megawatt-hour (MWh) | $ | 0.67 |
| - | $ | 3.32 |
| |
| FTRs | | $ | 7 |
| RTO auction pricing | FTR price – per MWh | $ | 0.36 |
| - | $ | 3.13 |
|
| Duke Energy Indiana | |
| | | | | |
| | | | |
| FTRs | 44 |
| RTO auction pricing | FTR price – per MWh | (2.31 | ) | - | 11.01 |
| 28 |
| RTO auction pricing | FTR price – per MWh | (0.59 | ) | - | 7.61 |
|
| Piedmont | | | | | | | | | | |
| Natural gas contracts | (150 | ) | Discounted cash flow | Forward natural gas curves – price per million British thermal unit (MMBtu) | 1.88 |
| - | 3.42 |
| (114 | ) | Discounted cash flow | Forward natural gas curves – price per MMBtu | 1.96 |
| - | 3.21 |
|
| Duke Energy | | | | | | | | | | |
| Total Level 3 derivatives | $ | (97 | ) | | | | | $ | (79 | ) | | | | |
| | | | December 31, 2017 | December 31, 2018 |
| | Fair Value | | | | | Fair Value | | | | |
| Investment Type | (in millions) | Valuation Technique | Unobservable Input | Range | (in millions) | Valuation Technique | Unobservable Input | Range |
| Duke Energy Ohio | |
| | | | | |
| | | | |
| FTRs | $ | 1 |
| RTO auction pricing | FTR price – per MWh | $ | 0.07 |
| - | $ | 1.41 |
| $ | 6 |
| RTO auction pricing | FTR price – per MWh | $ | 1.19 |
| - | $ | 4.59 |
|
| Duke Energy Indiana | |
| | | | | |
| | | | |
| FTRs | 27 |
| RTO auction pricing | FTR price – per MWh | (0.77 | ) | - | 7.44 |
| 22 |
| RTO auction pricing | FTR price – per MWh | (2.07 | ) | - | 8.27 |
|
| Piedmont | | | | | | | | | | |
| Natural gas contracts | (142 | ) | Discounted cash flow | Forward natural gas curves – price per MMBtu | 2.10 |
| - | 2.88 |
| (141 | ) | Discounted cash flow | Forward natural gas curves – price per MMBtu | 1.87 |
| - | 2.95 |
|
| Duke Energy | | | | | | | | | | |
| Total Level 3 derivatives | $ | (114 | ) | | | | | $ | (113 | ) | | | | |
|
| |
| FINANCIAL STATEMENTS | FAIR VALUE MEASUREMENTS |
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, 2019 | | December 31, 2018 |
| (in millions) | Book Value |
| | Fair Value |
| | Book Value |
| | Fair Value |
|
Duke Energy(a) | $ | 57,040 |
| | $ | 60,667 |
| | $ | 54,529 |
| | $ | 54,534 |
|
| Duke Energy Carolinas | 10,964 |
| | 12,300 |
| | 10,939 |
| | 11,471 |
|
| Progress Energy | 19,199 |
| | 21,408 |
| | 18,911 |
| | 19,885 |
|
| Duke Energy Progress | 9,049 |
| | 9,707 |
| | 8,204 |
| | 8,300 |
|
| Duke Energy Florida | 7,213 |
| | 8,173 |
| | 7,321 |
| | 7,742 |
|
| Duke Energy Ohio | 2,509 |
| | 2,779 |
| | 2,165 |
| | 2,239 |
|
| Duke Energy Indiana | 3,723 |
| | 4,363 |
| | 3,782 |
| | 4,158 |
|
| Piedmont | 2,384 |
| | 2,576 |
| | 2,138 |
| | 2,180 |
|
|
| | | | | | | | | | | | | | | |
| | June 30, 2018 | | December 31, 2017 |
| (in millions) | Book Value |
| | Fair Value |
| | Book Value |
| | Fair Value |
|
Duke Energy(a) | $ | 52,715 |
| | $ | 52,676 |
| | $ | 52,279 |
| | $ | 55,331 |
|
| Duke Energy Carolinas | 10,394 |
| | 11,028 |
| | 10,103 |
| | 11,372 |
|
| Progress Energy | 18,194 |
| | 19,357 |
| | 17,837 |
| | 20,000 |
|
| Duke Energy Progress | 7,358 |
| | 7,527 |
| | 7,357 |
| | 7,992 |
|
| Duke Energy Florida | 7,452 |
| | 7,945 |
| | 7,095 |
| | 7,953 |
|
| Duke Energy Ohio | 2,066 |
| | 2,162 |
| | 2,067 |
| | 2,249 |
|
| Duke Energy Indiana | 3,782 |
| | 4,223 |
| | 3,783 |
| | 4,464 |
|
| Piedmont | 2,037 |
| | 2,087 |
| | 2,037 |
| | 2,209 |
|
| |
| (a) | Book value of long-term debt includes $1.7$1.5 billion as of June 30, 2018,2019, and $1.6 billion as of December 31, 2017,2018, 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, 2018,2019, and December 31, 2017,2018, 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.
12.13. VARIABLE INTEREST ENTITIES
A VIE is an entity that is evaluated for consolidation using more than a simple analysis of voting control. The analysis to determine whether an entity is a VIE considers contracts with an entity, credit support for an entity, the adequacy of the equity investment of an entity and the relationship of voting power to the amount of equity invested in an entity. This analysis is performed either upon the creation of a legal entity or upon the occurrence of an event requiring re-evaluation, such as a significant change in an entity’s assets or activities. A qualitative analysis of control determines the party that consolidates a VIE. This assessment is based on (i) what party has the power to direct the activities of the VIE that most significantly impact its economic performance and (ii) what party has rights to receive benefits or is obligated to absorb losses that could potentially be significant to the VIE. The analysis of the party that consolidates a VIE is a continual reassessment.
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, 2018,2019, and the year ended December 31, 2017,2018, 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)DERF, DEPR and Duke Energy Florida Receivables, LLC (DEFR)DEFR are bankruptcy remote, special purpose subsidiaries of Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida, respectively. DERF, DEPR and DEFR are wholly owned limited liability 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 are considered primary beneficiaries and consolidate DERF, DEPR and DEFR, respectively, as they make those decisions.
Receivables Financing – CRC
CRC is a bankruptcy remote, special purpose entity indirectly owned by Duke Energy. On a revolving basis, CRC buys certain accounts receivable arising from the sale of electricity, natural gas and related services from Duke Energy Ohio and Duke Energy Indiana. CRC borrows amounts under a credit facility to buy the receivables from Duke Energy Ohio and Duke Energy Indiana. Borrowing availability from the credit facility is limited to the amount of qualified receivables sold to CRC. 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 typicallyapproximately 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 is considered the primary beneficiary and consolidates CRC as it makes these decisions. Neither Duke Energy Ohio nor Duke Energy Indiana consolidate CRC.
|
| |
| FINANCIAL STATEMENTS | VARIABLE INTEREST ENTITIES |
Receivables Financing – Credit Facilities
The following table summarizes the amounts and expiration dates of the credit facilities and associated restricted receivables described above. |
| | | | | | | | | | | | | | | |
| | Duke Energy |
| | | | Duke Energy |
| | Duke Energy |
| | Duke Energy |
|
| | | | Carolinas |
| | Progress |
| | Florida |
|
| (in millions) | CRC |
| | DERF |
| | DEPR |
| | DEFR |
|
| Expiration date | December 2020 |
| | December 2020 |
| | February 2021 |
| | April 2021 |
|
| Credit facility amount | $ | 350 |
| | $ | 475 |
| | $ | 325 |
| | $ | 250 |
|
| Amounts borrowed at June 30, 2019 | 328 |
| | 475 |
| | 325 |
| | 250 |
|
| Amounts borrowed at December 31, 2018 | 325 |
| | 450 |
| | 300 |
| | 225 |
|
| Restricted Receivables at June 30, 2019 | 484 |
| | 671 |
| | 518 |
| | 472 |
|
| Restricted Receivables at December 31, 2018 | 564 |
| | 699 |
| | 547 |
| | 357 |
|
|
| | | | | | | | | | | | | | | |
| | Duke Energy |
| | | | Duke Energy |
| | Duke Energy |
| | Duke Energy |
|
| | | | Carolinas |
| | Progress |
| | Florida |
|
| (in millions) | CRC |
| | DERF |
| | DEPR |
| | DEFR |
|
| Expiration date | December 2020 |
| | December 2020 |
| | February 2021 |
| | April 2021 |
|
| Credit facility amount | $ | 325 |
| | $ | 450 |
| | $ | 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)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 senior secured bonds and used the proceeds to acquire nuclear asset-recovery property from Duke Energy Florida. The nuclear asset-recovery property acquired includes the right to impose, bill, collect and adjust a non-bypassable nuclear asset-recovery charge from all Duke Energy Florida retail customers until the bonds are paid in full and all financing costs have been recovered. The nuclear asset-recovery bonds are secured by the nuclear asset-recovery property, and cash collections from the nuclear asset-recovery charges are the sole source of funds to satisfy the debt obligation. The bondholders have no recourse to Duke Energy Florida.
DEFPF is considered a VIE primarily because the equity capitalization is insufficient to support its operations. Duke Energy Florida has the power to direct the significant activities of the VIE as described above, and therefore Duke Energy Florida is considered the primary beneficiary and consolidates DEFPF.
The following table summarizes the impact of DEFPF on Duke Energy Florida's Condensed Consolidated Balance Sheets. |
| | | | | | |
| (in millions) | June 30, 2019 |
| December 31, 2018 |
|
| Receivables of VIEs | $ | 8 |
| $ | 5 |
|
| Regulatory Assets: Current | 52 |
| 52 |
|
| Current Assets: Other | 31 |
| 39 |
|
| Other Noncurrent Assets: Regulatory assets | 1,019 |
| 1,041 |
|
| Current Liabilities: Other | 10 |
| 10 |
|
| Current maturities of long-term debt | 54 |
| 53 |
|
| Long-Term Debt | 1,082 |
| 1,111 |
|
|
| | | | | | |
| (in millions) | June 30, 2018 |
| December 31, 2017 |
|
| Receivables of VIEs | $ | 7 |
| $ | 4 |
|
| Regulatory Assets: Current | 51 |
| 51 |
|
| Current Assets: Other | 31 |
| 40 |
|
| Other Noncurrent Assets: Regulatory assets | 1,071 |
| 1,091 |
|
| Current Liabilities: Other | 10 |
| 10 |
|
| Current maturities of long-term debt | 53 |
| 53 |
|
| Long-Term Debt | 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. Additionally, Duke Energy has VIEs associated with tax equity arrangements entered into with third-party investors in order to finance the cost of solar energy systems eligible for tax credits. The activities that most significantly impactimpacted the economic performance of these renewable energy facilities were decisions associated with siting, negotiating PPAs engineering, procurement and constructionEPC agreements, and decisions associated with ongoing operations and maintenance-related activities. Duke Energy is considered the primary beneficiary and consolidates the entities as it is responsible for all of these decisions.
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. |
| | | | | | |
| (in millions) | June 30, 2019 |
| December 31, 2018 |
|
| Current Assets: Other | $ | 109 |
| $ | 123 |
|
| Property, plant and equipment, cost | 4,419 |
| 4,007 |
|
| Accumulated depreciation and amortization | (769 | ) | (698 | ) |
| Other Noncurrent Assets: Other | 289 |
| 261 |
|
| Current maturities of long-term debt | 178 |
| 174 |
|
| Long-Term Debt | 1,610 |
| 1,587 |
|
| Other Noncurrent Liabilities: Asset Retirement Obligations | 108 |
| 106 |
|
| Other Noncurrent Liabilities: Other | 222 |
| 212 |
|
|
| | | | | | |
| (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 |
|
|
| |
| FINANCIAL STATEMENTS | VARIABLE INTEREST ENTITIES |
NON-CONSOLIDATED VIEs
The following tables summarize the impact of non-consolidated VIEs on the Condensed Consolidated Balance Sheets. |
| | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2019 |
| | Duke Energy | | Duke |
| | Duke |
|
| | Pipeline |
| | Commercial |
| | Other |
| | | | Energy |
| | Energy |
|
| (in millions) | Investments |
| | Renewables |
| | VIEs |
| | Total |
| | Ohio |
| | Indiana |
|
| Receivables from affiliated companies | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 45 |
| | $ | 81 |
|
| Investments in equity method unconsolidated affiliates | 1,066 |
| | 187 |
| | 52 |
| | 1,305 |
| | — |
| | — |
|
| Total assets | $ | 1,066 |
| | $ | 187 |
| | $ | 52 |
| | $ | 1,305 |
| | $ | 45 |
| | $ | 81 |
|
| Taxes accrued | (2 | ) | | — |
| | — |
| | (2 | ) | | — |
| | — |
|
| Other current liabilities | — |
| | — |
| | 4 |
| | 4 |
| | — |
| | — |
|
| Deferred income taxes | 48 |
| | — |
| | — |
| | 48 |
| | — |
| | — |
|
| Other noncurrent liabilities | — |
| | — |
| | 11 |
| | 11 |
| | — |
| | — |
|
| Total liabilities | $ | 46 |
| | $ | — |
| | $ | 15 |
| | $ | 61 |
| | $ | — |
| | $ | — |
|
| Net assets | $ | 1,020 |
| | $ | 187 |
| | $ | 37 |
| | $ | 1,244 |
| | $ | 45 |
| | $ | 81 |
|
| | | | June 30, 2018 | December 31, 2018 |
| | Duke Energy | | Duke |
| | Duke |
| Duke Energy | | Duke |
| | Duke |
|
| | Pipeline |
| | Commercial |
| | Other |
| | | | Energy |
| | Energy |
| Pipeline |
| | Commercial |
| | Other |
| | | | Energy |
| | Energy |
|
| (in millions) | Investments(a) |
| | Renewables |
| | VIEs |
| | Total |
| | Ohio |
| | Indiana |
| Investments |
| | Renewables |
| | VIEs |
| | Total |
| | Ohio |
| | Indiana |
|
| Receivables from affiliated companies | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 58 |
| | $ | 87 |
| $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 93 |
| | $ | 118 |
|
| Investments in equity method unconsolidated affiliates | 566 |
| | 192 |
| | 45 |
| | 803 |
| | — |
| | — |
| 822 |
| | 190 |
| | 48 |
| | 1,060 |
| | — |
| | — |
|
| Total assets | $ | 566 |
| | $ | 192 |
| | $ | 45 |
| | $ | 803 |
| | $ | 58 |
| | $ | 87 |
| $ | 822 |
| | $ | 190 |
| | $ | 48 |
| | $ | 1,060 |
| | $ | 93 |
| | $ | 118 |
|
| Taxes accrued | 1 |
| | — |
| | — |
| | 1 |
| | — |
| | — |
| (1 | ) | | — |
| | — |
| | (1 | ) | | — |
| | — |
|
| Other current liabilities | — |
| | — |
| | 4 |
| | 4 |
| | — |
| | — |
| — |
| | — |
| | 4 |
| | 4 |
| | — |
| | — |
|
| Deferred income taxes | 10 |
| | — |
| | — |
| | 10 |
| | — |
| | — |
| 21 |
| | — |
| | — |
| | 21 |
| | — |
| | — |
|
| Other noncurrent liabilities | — |
| | — |
| | 11 |
| | 11 |
| | — |
| | — |
| — |
| | — |
| | 12 |
| | 12 |
| | — |
| | — |
|
| Total liabilities | $ | 11 |
| | $ | — |
| | $ | 15 |
| | $ | 26 |
| | $ | — |
| | $ | — |
| $ | 20 |
|
| $ | — |
|
| $ | 16 |
|
| $ | 36 |
|
| $ | — |
|
| $ | — |
|
| Net assets | $ | 555 |
| | $ | 192 |
| | $ | 30 |
| | $ | 777 |
| | $ | 58 |
| | $ | 87 |
| $ | 802 |
| | $ | 190 |
| | $ | 32 |
| | $ | 1,024 |
| | $ | 93 |
| | $ | 118 |
|
| |
(a) | See Pipeline Investments table below for 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, someincluding Duke Energy's 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 $790 million, which are reflected inrepresents 47 percent of the table aboveoutstanding borrowings under the credit facility as Other noncurrent liabilities.of June 30, 2019. For more information on various guarantees, refer to Note 4.
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 Duke Energy's ownership interest and investment balances in these joint ventures. |
| | | | | | | | | | |
| | | | VIE Investment Amount (in millions) |
| | Ownership | | June 30, | | December 31, |
| Entity Name | Interest | | 2019 | | 2018 |
ACP(a) | 47 | % | | $ | 1,041 |
| | $ | 797 |
|
| Constitution | 24 | % | | 25 |
| | 25 |
|
| Total | | | $ | 1,066 |
| | $ | 822 |
|
|
| | | | | | | | | | |
| | | | VIE Investment Amount (in millions) |
| | Ownership | | June 30, | | December 31, |
| Entity Name | Interest | | 2018 | | 2017 |
| ACP | 47 | % | | $ | 541 |
| | $ | 397 |
|
Sabal Trail(a) | 7.5 | % | | — |
| | 219 |
|
Constitution(b) | 24 | % | | 25 |
| | 81 |
|
| Total | | | $ | 566 |
| | $ | 697 |
|
| |
| (a) | AtDuke Energy evaluated this investment for impairment as of June 30, 2019, and 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,2018, and determined that fair value approximated carrying value and therefore is no longer considered a VIE. Duke Energy's investment in Sabal Trailimpairment was $110 million at June 30, 2018.necessary. |
|
| |
(b)FINANCIAL STATEMENTS | 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.VARIABLE INTEREST ENTITIES |
In 2017, ACP executed a $3.4 billion revolving credit facility with a stated maturity date of October 2021. Duke Energy entered into a guarantee agreement to support its share of the ACP revolving credit facility. 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 VIEsPioneer
Duke Energy holds a 50 percent equity interest in Pioneer Transmission, LLC (Pioneer).Pioneer. Pioneer is considered a VIE due to having insufficient equity to finance its 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; therefore, Duke Energy does not consolidate Pioneer.
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 its activities without subordinated financial support. The activities that most significantly impact OVEC's economic performance include fuel strategy and supply activities and decisions associated with ongoing operations and maintenance-related activities. Duke Energy Ohio does not have the unilateral power to direct these activities, and therefore, does not consolidate OVEC.
As a counterparty to an inter-company power agreement (ICPA),ICPA, Duke Energy Ohio has a contractual arrangement to receive entitlements to capacity and energy from OVEC’s power plants through June 2040 commensurate with its power participation ratio, which is equivalent to Duke Energy Ohio's ownership interest. Costs, including fuel, operating expenses, fixed costs, debt amortization and interest expense, are allocated to counterparties to the ICPA based on their power participation ratio. The value of the ICPA is subject to variability due to fluctuation in power prices and changes in OVEC's cost of business. On March 31, 2018, FirstEnergy Solutions (FES),FES, a subsidiary of FirstEnergy and an ICPA counterparty with a power participation ratio of 4.85 percent, filed for Chapter 11 bankruptcy, which could increase costs allocated to the counterparties. On July 31, 2018, the bankruptcy court rejected the FES ICPA, which means OVEC is an unsecured creditor in the FES bankruptcy proceeding. Duke Energy Ohio cannot predict the impact of the bankruptcy filing on its OVEC interests. In addition, certain proposed environmental rulemaking could result in future increased OVEC cost allocations.
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.
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, 2019 |
| | December 31, 2018 |
| | June 30, 2019 |
| | December 31, 2018 |
|
| Receivables sold | $ | 210 |
| | $ | 269 |
| | $ | 314 |
| | $ | 336 |
|
| Less: Retained interests | 45 |
| | 93 |
| | 81 |
| | 118 |
|
| Net receivables sold | $ | 165 |
| | $ | 176 |
| | $ | 233 |
| | $ | 218 |
|
|
| | | | | | | | | | | | | | | |
| | 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) | 2019 |
| | 2018 |
| | 2019 |
| | 2018 |
| | 2019 |
| | 2018 |
| | 2019 |
| | 2018 |
|
| Sales | | | | | | | | | | | | | | | |
| Receivables sold | $ | 429 |
| | $ | 461 |
| | $ | 1,004 |
| | $ | 1,028 |
| | $ | 676 |
| | $ | 692 |
| | $ | 1,410 |
| | $ | 1,386 |
|
| Loss recognized on sale | 3 |
| | 3 |
| | 7 |
| | 6 |
| | 4 |
| | 4 |
| | 9 |
| | 7 |
|
| Cash flows | | | | | | | | | | | | | | | |
| Cash proceeds from receivables sold | $ | 448 |
| | $ | 465 |
| | $ | 1,045 |
| | $ | 1,050 |
| | $ | 680 |
| | $ | 686 |
| | $ | 1,438 |
| | $ | 1,397 |
|
| Collection fees received | 1 |
| | 1 |
| | 1 |
| | 1 |
| | 1 |
| | 1 |
| | 1 |
| | 1 |
|
| Return received on retained interests | 2 |
| | 1 |
| | 4 |
| | 3 |
| | 2 |
| | 2 |
| | 5 |
| | 4 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 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)
|
| |
| FINANCIAL STATEMENTS | REVENUE |
As described above, the majority of Duke Energy’s tariff revenues are at-will and, as such, related contracts with customers have an expected duration of one year or less and will not have future performance obligations for disclosure. Additionally, other long-term revenue streams, including wholesale contracts, generally provide services that are part of a single performance obligation, the delivery of electricity or natural gas. As such, other than material fixed consideration under long-term contracts, related disclosures for future performance obligations are also not applicable.
14. REVENUE
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) | 2019 |
| 2020 |
| 2021 |
| 2022 |
| 2023 |
| Thereafter |
| Total |
|
| Progress Energy | $ | 63 |
| $ | 121 |
| $ | 87 |
| $ | 82 |
| $ | 39 |
| $ | 42 |
| $ | 434 |
|
| Duke Energy Progress | 4 |
| 9 |
| 9 |
| 9 |
| 9 |
| 9 |
| 49 |
|
| Duke Energy Florida | 59 |
| 112 |
| 78 |
| 73 |
| 30 |
| 33 |
| 385 |
|
| Duke Energy Indiana | 5 |
| 10 |
| 5 |
| — |
| — |
| — |
| 20 |
|
|
| | | | | | | | | | | | | | | | | | | | | |
| | 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 revenuerevenues 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 Utilities and Infrastructure segment include minimum margin contracts and supply arrangements with municipalities and power generation facilities. Revenues for related sales are recognized monthly as natural gas is delivered and stand-ready service is provided, consistent with invoiced amounts and unbilled estimates. Estimated remaining performance obligations are as follows:
|
| | | | | | | | | | | | | | | | | | | | | |
| | Remaining Performance Obligations |
| (in millions) | 2019 |
| 2020 |
| 2021 |
| 2022 |
| 2023 |
| Thereafter |
| Total |
|
| Piedmont | $ | 34 |
| $ | 69 |
| $ | 65 |
| $ | 64 |
| $ | 61 |
| $ | 432 |
| $ | 725 |
|
|
| | | | | | | | | | | | | | | | | | | | | |
| | 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)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.
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
|
| |
| FINANCIAL STATEMENTS | REVENUE |
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 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, 2019 |
| | | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
| |
| (in millions) | Duke |
| Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
| |
| By market or type of customer | Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Piedmont |
|
| Electric Utilities and Infrastructure | | | | | | | | |
| Residential | $ | 2,304 |
| $ | 679 |
| $ | 1,243 |
| $ | 496 |
| $ | 747 |
| $ | 159 |
| $ | 225 |
| $ | — |
|
| General | 1,584 |
| 531 |
| 750 |
| 339 |
| 411 |
| 105 |
| 197 |
| — |
|
| Industrial | 759 |
| 289 |
| 231 |
| 164 |
| 67 |
| 36 |
| 201 |
| — |
|
| Wholesale | 527 |
| 109 |
| 351 |
| 309 |
| 42 |
| 9 |
| 59 |
| — |
|
| Other revenues | 187 |
| 68 |
| 99 |
| 44 |
| 55 |
| 25 |
| 27 |
| — |
|
| Total Electric Utilities and Infrastructure revenue from contracts with customers | $ | 5,361 |
| $ | 1,676 |
| $ | 2,674 |
| $ | 1,352 |
| $ | 1,322 |
| $ | 334 |
| $ | 709 |
| $ | — |
|
| | | | | | | | | |
| Gas Utilities and Infrastructure | | | | | | | | |
| Residential | $ | 146 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 64 |
| $ | — |
| $ | 82 |
|
| Commercial | 85 |
| — |
| — |
| — |
| — |
| 26 |
| — |
| 59 |
|
| Industrial | 29 |
| — |
| — |
| — |
| — |
| 3 |
| — |
| 24 |
|
| Power Generation | — |
| — |
| — |
| — |
| — |
| — |
| — |
| 13 |
|
| Other revenues | 22 |
| — |
| — |
| — |
| — |
| 2 |
| — |
| 19 |
|
| Total Gas Utilities and Infrastructure revenue from contracts with customers | $ | 282 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 95 |
| $ | — |
| $ | 197 |
|
| | | | | | | | | |
| Commercial Renewables | | | | | | | | |
| Revenue from contracts with customers | $ | 46 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
|
| | | | | | | | | |
| Other | | | | | | | | |
| Revenue from contracts with customers | $ | 6 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
|
| Total revenue from contracts with customers | $ | 5,695 |
| $ | 1,676 |
| $ | 2,674 |
| $ | 1,352 |
| $ | 1,322 |
| $ | 429 |
| $ | 709 |
| $ | 197 |
|
| | | | | | | | | |
Other revenue sources(a) | $ | 178 |
| $ | 37 |
| $ | 70 |
| $ | 35 |
| $ | 31 |
| $ | 4 |
| $ | 5 |
| $ | 12 |
|
| Total revenues | $ | 5,873 |
| $ | 1,713 |
| $ | 2,744 |
| $ | 1,387 |
| $ | 1,353 |
| $ | 433 |
| $ | 714 |
| $ | 209 |
|
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 |
|
|
| |
| FINANCIAL STATEMENTS | REVENUE |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | 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 |
|
| |
| (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)
|
| |
| FINANCIAL STATEMENTS | REVENUE |
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.
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2019 |
| | | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
| |
| (in millions) | Duke |
| Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
| |
| By market or type of customer | Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Piedmont |
|
| Electric Utilities and Infrastructure | | | | | | | | |
| Residential | $ | 4,674 |
| $ | 1,439 |
| $ | 2,357 |
| $ | 1,032 |
| $ | 1,325 |
| $ | 348 |
| $ | 531 |
| $ | — |
|
| General | 3,011 |
| 1,027 |
| 1,382 |
| 645 |
| 737 |
| 208 |
| 394 |
| — |
|
| Industrial | 1,470 |
| 555 |
| 453 |
| 325 |
| 128 |
| 69 |
| 391 |
| — |
|
| Wholesale | 1,068 |
| 228 |
| 704 |
| 624 |
| 80 |
| 23 |
| 113 |
| — |
|
| Other revenues | 359 |
| 146 |
| 271 |
| 169 |
| 102 |
| 41 |
| 44 |
| — |
|
| Total Electric Utilities and Infrastructure revenue from contracts with customers | $ | 10,582 |
| $ | 3,395 |
| $ | 5,167 |
| $ | 2,795 |
| $ | 2,372 |
| $ | 689 |
| $ | 1,473 |
| $ | — |
|
| | | | | | | | | |
| Gas Utilities and Infrastructure | | | | | | | | |
| Residential | $ | 560 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 176 |
| $ | — |
| $ | 384 |
|
| Commercial | 291 |
| — |
| — |
| — |
| — |
| 75 |
| — |
| 216 |
|
| Industrial | 77 |
| — |
| — |
| — |
| — |
| 10 |
| — |
| 66 |
|
| Power Generation | — |
| — |
| — |
| — |
| — |
| — |
| — |
| 26 |
|
| Other revenues | 85 |
| — |
| — |
| — |
| — |
| 10 |
| — |
| 75 |
|
| Total Gas Utilities and Infrastructure revenue from contracts with customers | $ | 1,013 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 271 |
| $ | — |
| $ | 767 |
|
| | | | | | | | | |
| Commercial Renewables | | | | | | | | |
| Revenue from contracts with customers | $ | 88 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
|
| | | | | | | | | |
| Other | | | | | | | | |
| Revenue from contracts with customers | $ | 10 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
|
| Total Revenue from contracts with customers | $ | 11,693 |
| $ | 3,395 |
| $ | 5,167 |
| $ | 2,795 |
| $ | 2,372 |
| $ | 960 |
| $ | 1,473 |
| $ | 767 |
|
| | | | | | | | | |
Other revenue sources(a) | $ | 343 |
| $ | 62 |
| $ | 149 |
| $ | 76 |
| $ | 67 |
| $ | 4 |
| $ | 9 |
| $ | 21 |
|
| Total revenues | $ | 12,036 |
| $ | 3,457 |
| $ | 5,316 |
| $ | 2,871 |
| $ | 2,439 |
| $ | 964 |
| $ | 1,482 |
| $ | 788 |
|
|
| |
| FINANCIAL STATEMENTS | REVENUE |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | 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. |
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, 2019 |
| | December 31, 2018 |
|
| Duke Energy | $ | 790 |
| | $ | 896 |
|
| Duke Energy Carolinas | 288 |
| | 313 |
|
| Progress Energy | 270 |
| | 244 |
|
| Duke Energy Progress | 148 |
| | 148 |
|
| Duke Energy Florida | 122 |
| | 96 |
|
| Duke Energy Ohio | 1 |
| | 2 |
|
| Duke Energy Indiana | 14 |
| | 23 |
|
| Piedmont | 4 |
| | 73 |
|
|
| | | | | | | |
| (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 |
|
|
| |
| FINANCIAL STATEMENTS | REVENUE |
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 accountsaccount 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 1213 for further information. These receivables for unbilled revenues are shown in the table below.
|
| | | | | | | |
| (in millions) | June 30, 2019 |
| | December 31, 2018 |
|
| Duke Energy Ohio | $ | 65 |
| | $ | 86 |
|
| Duke Energy Indiana | 116 |
| | 128 |
|
|
| | | | | | | |
| (in millions) | June 30, 2018 |
| | December 31, 2017 |
|
| Duke Energy Ohio | $ | 73 |
| | $ | 104 |
|
| Duke Energy Indiana | 123 |
| | 132 |
|
14. COMMON STOCK15. STOCKHOLDERS' EQUITY
Basic Earnings Per Share (EPS)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 ofand common shares outstanding.and preferred share dividends declared. | | | | 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) | 2018 |
| | 2017 |
| | 2018 |
| | 2017 |
| 2019 |
| | 2018 |
| | 2019 |
| | 2018 |
|
| Income from continuing operations attributable to Duke Energy common stockholders excluding impact of participating securities | $ | 504 |
| | $ | 687 |
| | $ | 1,123 |
| | $ | 1,402 |
| $ | 819 |
| | $ | 504 |
| | $ | 1,718 |
| | $ | 1,123 |
|
| Weighted average shares outstanding – basic | 703 |
| | 700 |
| | 702 |
| | 700 |
| |
| | | | | | | | | |
| Weighted average common shares outstanding – basic | | 728 |
| | 703 |
| | 728 |
| | 702 |
|
| Equity Forwards | 1 |
| | — |
| | — |
| | — |
| — |
| | 1 |
| | — |
| | — |
|
| Weighted average shares outstanding – diluted | 704 | | 700 | | 702 | | 700 | |
| Earnings per share from continuing operations attributable to Duke Energy common stockholders | | | | | | | | |
| Basic | $ | 0.72 |
| | $ | 0.98 |
| | $ | 1.60 |
| | $ | 2.00 |
| |
| Diluted | $ | 0.72 |
| | $ | 0.98 |
| | $ | 1.60 |
| | $ | 2.00 |
| |
| Weighted average common shares outstanding – diluted | | 728 |
| | 704 |
| | 728 |
| | 702 |
|
| EPS from continuing operations attributable to Duke Energy common stockholders | | | | | | | | |
| Basic and Diluted | | $ | 1.12 |
| | $ | 0.72 |
| | $ | 2.36 |
| | $ | 1.60 |
|
Potentially dilutive items excluded from the calculation(a) | 2 |
| | 2 |
| | 2 | | 2 | 2 |
| | 2 |
| | 2 |
| | 2 |
|
| Dividends declared per common share | $ | 0.89 |
| | $ | 0.855 |
| | $ | 1.78 |
| | $ | 1.71 |
| $ | 0.928 |
| | $ | 0.89 |
| | $ | 1.855 |
| | $ | 1.78 |
|
| Dividends declared on preferred stock per depositary share | | $ | 0.307 |
| | $ | — |
| | $ | 0.307 |
| | $ | — |
|
| |
| (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 ForwardsCommon Stock
On February 20, 2018, Duke Energy filed a prospectus supplement and executed an Equity Distribution Agreement (the EDA)EDA under which it may sell up to $1 billion of its common stock through an at-the-market (ATM)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).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 June 2018, Duke Energy marketed two separate tranches, each for 1.3 million shares, of common stock. The first tranche was marketed with Wells Fargo Bank at an initial forward price of $72.02 per share and the second tranche was marketed with Citibank at an initial forward price of $78.71 per sharestock through equity forward transactions under the ATM program. In December 2018, Duke Energy physically settled these equity forwards by delivering 2.6 million shares of common stock in exchange for net proceeds of approximately $195 million.
Separately, in March 2018, Duke Energy marketed an equity offering of 21.3 million shares of common stock through an Underwriting Agreement. In connection with the offering, Duke Energy entered into equity forward sale agreements. The Equity Forwards requireequity forwards required Duke Energy to either physically settle the transactions by issuing 2.621.3 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. 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. In December 2018, Duke Energy physically settled the remaining equity forward by delivering 10.6 million shares of common stock in exchange for net cash proceeds of approximately $766 million.
In 2018, Duke Energy also issued 2.2 million shares through its DRIP with an increase in additional paid-in capital of approximately $174 million. For the six months ended June 30, 2019, Duke Energy issued 0.9 million shares through its DRIP with an increase in additional paid-in capital of approximately $80 million.
|
| |
| FINANCIAL STATEMENTS | STOCKHOLDERS' EQUITY |
In March and April 2019, Duke Energy marketed two separate tranches, each for 1.1 million shares, of common stock through equity forward transactions under the ATM program. The first tranche had an initial forward price of $89.83 per share and the second tranche had an initial forward price of $88.82 per share. In May and June 2019, a third tranche of 1.6 million shares of common stock was marketed and had an initial forward price of $86.23. The equity forwards require Duke Energy to either physically settle the transaction by issuing 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.
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 No amounts have or will be recorded in Duke Energy's Condensed Consolidated Financial Statements with respect to the equity orthese ATM offerings until settlements of the Equity Forwardsequity forwards occur, which is expected by December 31, 2018. If Duke Energy had elected to net share settle these contracts as of June 30, 2018, Duke Energy would have been required to deliver 0.9 million shares.2019. 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.agreements. Until settlement of the Equity Forwards, earnings per shareequity forwards, EPS dilution resulting from the agreements, if any, will be determined under the treasury stock method. Share dilution occurs when
Preferred Stock
On March 29, 2019, Duke Energy completed the average marketissuance of 40 million depositary shares, each representing 1/1,000th share of its Series A Cumulative Redeemable Perpetual Preferred Stock, at a price of $25 per depositary share. The transaction resulted in net proceeds of $973 million after issuance costs and the proceeds are being used for general corporate purposes and to reduce short-term debt. The preferred stock has a $25 liquidation preference per depositary share and earns dividends on a cumulative basis at a rate of 5.75 percent per annum. Dividends are payable quarterly in arrears on the 16th day of March, June, September and December, and began on June 16, 2019. Dividends issued on its preferred stock are subject to approval by the Duke Energy Board of Directors. However, the deferral of dividend payments on the preferred stock prohibits the declaration of common stock dividends. Dividends declared on preferred stock will be recorded on the income statement as a reduction of net income to arrive at net income attributable to Duke Energy common stockholders. Dividends accumulated on preferred stock will be a reduction to net income used in the calculation of basic and diluted EPS.
The Series A Preferred Stock ranks, with respect to dividends and distributions upon liquidation or dissolution:
senior to Common Stock and to each other class or series of capital stock established after the original issue date of the Series A Preferred Stock that is expressly made subordinated to the Series A Preferred Stock;
on a parity with any class or series of capital stock established after the original issue date of the Series A Preferred Stock that is not expressly made senior or subordinated to the Series A Preferred Stock;
junior to any class or series of capital stock established after the original issue date of the Series A Preferred Stock that is expressly made senior to the Series A Preferred Stock;
junior to all of existing and future indebtedness (including indebtedness outstanding under Duke Energy's credit facilities, unsecured senior notes, junior subordinated debentures and commercial paper) and other liabilities with respect to assets available to satisfy claims against Duke Energy; and
structurally subordinated to existing and future indebtedness and other liabilities of Duke Energy's subsidiaries and future preferred stock of subsidiaries.
The preferred stock has no maturity or mandatory redemption date, is higher than the average forward sales price.
15. STOCK-BASED COMPENSATION
For employee awards, equity classified stock-based compensation cost is measurednot redeemable at the service inception date or the grant date, based on the estimated achievement of certain performance metrics or the fair valueoption of the award,holders and includes separate call options. The first call option allows Duke Energy to call the preferred stock at a redemption price of $25.50 per depositary share prior to June 15, 2024, in whole but not in part, at any time within 120 days after a ratings event where a rating agency amends, clarifies or changes the criteria it uses to assign equity credit for securities such as the preferred stock. The second call option allows Duke Energy to call the preferred stock, in whole or in part, at any time, on or after June 15, 2024, at a redemption price of $25 per depositary share. Duke Energy is recognized as expense or capitalizedalso required to redeem all accumulated and unpaid dividends if either call option is exercised.
Holders of the preferred stock have no voting rights with respect to matters that generally require the approval of voting stockholders. The limited voting rights of holders of preferred stock include the right to vote as a componentsingle class on certain matters that may affect the preference or special rights of property, plant and equipment over the requisite service 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 Notespreferred stock, except in the instance that Duke Energy elects to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
The following table presents information relateddefer the payment of dividends for a total of six quarterly full dividend periods. If dividends are deferred for a cumulative total of six quarterly full dividend periods, whether or not for consecutive dividend periods, holders of the preferred stock have the right to elect two additional Board members to the Duke Energy's stock–based 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 |
|
16. EMPLOYEE BENEFIT PLANS
DEFINED BENEFIT RETIREMENT PLANS
Duke Energy maintains,and certain subsidiaries maintain, and the Subsidiary Registrants participate in, qualified and non-qualified, non-contributory defined benefit retirement plans. Duke Energy’sEnergy's policy is to fund amounts on an actuarial basis to provide assets sufficient to meet benefit payments to be paid to plan participants. The following table presents contributions made by the Duke Energy Registrants to their qualified defined benefit pension plans during the six months ended June 30, 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 |
|
Duke Energy did not make any contributions to its qualified defined benefit pension plans during the six months ended June 30, 2017.
Duke Energy uses a December 31 measurement date for its qualified non-contributory defined benefit retirement plan assets and obligations.
Components However, because Duke Energy believes it is probable in 2019 that total lump-sum benefit payments will exceed the settlement threshold, which is defined as the sum of Net Periodic Benefit Costs
The tables below present totalthe service cost and interest cost on projected benefit obligation components of net periodic benefitpension costs, prior to capitalizationDuke Energy remeasured the plan assets and plan obligations associated with one of amounts reflectedits qualified pension plans as Net property, plant and equipmentof June 30, 2019. The discount rate used for the remeasurement was 3.5 percent. The cash balance interest crediting rate was 4.0 percent. All other assumptions used for the remeasurement were consistent with the measurement as of December 31, 2018. As a result, Duke Energy recognized a remeasurement gain of $18 million, which is recorded in Other within Other Noncurrent Assets on the Condensed Consolidated Balance Sheets. OnlySheets as of June 30, 2019. The remeasurement gain, which represents an increase in funded status, reflects an increase of $275 million in the service cost componentfair value of net periodicplan assets and an increase of $257 million in the projected benefit costs is eligible to be capitalized. The remaining non-capitalized portionsobligation.
|
| |
| FINANCIAL STATEMENTS | EMPLOYEE BENEFIT PLANS |
As the result of net periodic benefit costs are classifiedsettlement accounting, Duke Energy recognized a settlement charge of $69 million, primarily as either: (1) service cost, which is recorded in Operations, maintenance and othera regulatory asset within Other Noncurrent Assets on the Condensed Consolidated StatementsBalance Sheets as of Operations; or as (2) components of non-service cost, which isJune 30, 2019 (an immaterial amount was recorded in Other income and expenses, net onwithin the Condensed Consolidated StatementsStatement of Operations. See Note 1 for further information on impacts of the retirement benefits accounting standard adoptedOperations). Settlement charges recognized 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 fromwere $43 million for Duke Energy Carolinas, $16 million 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,Progress, $3 million for Duke Energy Florida, $3 million for Duke Energy Indiana, $1 million for Duke Energy Ohio and $3 million for Piedmont. The settlement charge reflects the recognition of a pro-rata portion of previously unrecognized actuarial losses, equal to the percentage of reduction 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 allocatedprojected benefit obligation resulting from the Duke Energy shared service affiliate, see Note 8.total lump-sum benefits payments as of June 30, 2019.
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, 2018 | Three Months Ended June 30, 2019 |
| | | | 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 | $ | 45 |
| | $ | 15 |
| | $ | 13 |
| | $ | 8 |
| | $ | 6 |
| | $ | 1 |
| | $ | 3 |
| | $ | 2 |
| $ | 37 |
| | $ | 12 |
| | $ | 10 |
| | $ | 6 |
| | $ | 6 |
| | $ | 1 |
| | $ | 2 |
| | $ | 2 |
|
| Interest cost on projected benefit obligation | 75 |
| | 18 |
| | 22 |
| | 10 |
| | 12 |
| | 4 |
| | 6 |
| | 3 |
| 82 |
| | 21 |
| | 26 |
| | 12 |
| | 13 |
| | 4 |
| | 7 |
| | 3 |
|
| Expected return on plan assets | (140 | ) | | (37 | ) | | (43 | ) | | (21 | ) | | (23 | ) | | (7 | ) | | (11 | ) | | (6 | ) | (143 | ) | | (37 | ) | | (45 | ) | | (21 | ) | | (22 | ) | | (6 | ) | | (10 | ) | | (6 | ) |
| Amortization of actuarial loss | 33 |
| | 7 |
| | 11 |
| | 5 |
| | 6 |
| | 1 |
| | 2 |
| | 3 |
| 25 |
| | 5 |
| | 9 |
| | 3 |
| | 6 |
| | — |
| | 1 |
| | 1 |
|
| Amortization of prior service credit | (8 | ) | | (2 | ) | | (1 | ) | | (1 | ) | | (1 | ) | | — |
| | — |
| | (3 | ) | (8 | ) | | (2 | ) | | — |
| | (1 | ) | | (1 | ) | | — |
| | (1 | ) | | (2 | ) |
| Net periodic pension costs | $ | 5 |
| | $ | 1 |
| | $ | 2 |
| | $ | 1 |
| | $ | — |
| | $ | (1 | ) | | $ | — |
| | $ | (1 | ) | $ | (7 | ) | | $ | (1 | ) | | $ | — |
| | $ | (1 | ) | | $ | 2 |
| | $ | (1 | ) | | $ | (1 | ) | | $ | (2 | ) |
| | | | 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 | ) |
| | | | Six Months Ended June 30, 2018 | Six Months Ended June 30, 2019 |
| | | | 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 | $ | 90 |
| | $ | 30 |
| | $ | 26 |
| | $ | 15 |
| | $ | 11 |
| | $ | 2 |
| | $ | 5 |
| | $ | 4 |
| $ | 74 |
| | $ | 24 |
| | $ | 21 |
| | $ | 12 |
| | $ | 10 |
| | $ | 2 |
| | $ | 4 |
| | $ | 3 |
|
| Interest cost on projected benefit obligation | 150 |
| | 36 |
| | 46 |
| | 21 |
| | 25 |
| | 9 |
| | 12 |
| | 6 |
| 165 |
| | 41 |
| | 52 |
| | 24 |
| | 27 |
| | 9 |
| | 13 |
| | 6 |
|
| Expected return on plan assets | (280 | ) | | (74 | ) | | (88 | ) | | (42 | ) | | (46 | ) | | (14 | ) | | (21 | ) | | (12 | ) | (286 | ) | | (75 | ) | | (89 | ) | | (44 | ) | | (44 | ) | | (14 | ) | | (21 | ) | | (11 | ) |
| Amortization of actuarial loss | 66 |
| | 14 |
| | 22 |
| | 10 |
| | 12 |
| | 2 |
| | 4 |
| | 6 |
| 49 |
| | 11 |
| | 18 |
| | 6 |
| | 12 |
| | 1 |
| | 3 |
| | 3 |
|
| Amortization of prior service credit | (16 | ) | | (4 | ) | | (2 | ) | | (1 | ) | | (1 | ) | | — |
| | — |
| | (6 | ) | (16 | ) | | (4 | ) | | (1 | ) | | (1 | ) | | (1 | ) | | — |
| | (1 | ) | | (5 | ) |
| Net periodic pension costs | $ | 10 |
| | $ | 2 |
| | $ | 4 |
| | $ | 3 |
| | $ | 1 |
| | $ | (1 | ) | | $ | — |
| | $ | (2 | ) | $ | (14 | ) | | $ | (3 | ) | | $ | 1 |
| | $ | (3 | ) | | $ | 4 |
| | $ | (2 | ) | | $ | (2 | ) | | $ | (4 | ) |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 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 |
|
|
| |
| FINANCIAL STATEMENTS | EMPLOYEE BENEFIT PLANS |
NON-QUALIFIED PENSION PLANS
The following tables include the components of netNet periodic pension costs for non-qualified pension plans were not material for registrants with non-qualified pension costs.
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)
|
| | | | | | | | | | | | | | | | | | | |
| | 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 |
|
the three and six months ended June 30, 2019, and 2018. OTHER POST-RETIREMENT BENEFIT PLANS
Duke Energy provides,Net periodic costs for OPEB plans were not material for the three and the Subsidiary Registrants participate in, certain health caresix months ended June 30, 2019, 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, 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 | $ | 2 |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Interest cost on accumulated post-retirement benefit obligation | 7 |
| | 1 |
| | 2 |
| | 2 |
| | 2 |
| | 1 |
| | 1 |
| | — |
|
| Expected return on plan assets | (4 | ) | | (2 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Amortization of actuarial loss | 2 |
| | 1 |
| | 1 |
| | — |
| | — |
| | — |
| | 1 |
| | — |
|
| Amortization of prior service credit | (5 | ) | | (1 | ) | | (2 | ) | | — |
| | (2 | ) | | — |
| | — |
| | (1 | ) |
| Net periodic other post-retirement benefit costs | $ | 2 |
| | $ | — |
| | $ | 1 |
| | $ | 2 |
| | $ | — |
| | $ | 1 |
| | $ | 2 |
| | $ | (1 | ) |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three 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 | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Interest cost on accumulated post-retirement benefit obligation | 9 |
| | 2 |
| | 3 |
| | 2 |
| | 2 |
| | — |
| | — |
| | — |
|
| Expected return on plan assets | (4 | ) | | (2 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Amortization of actuarial loss (gain) | 2 |
| | (1 | ) | | 5 |
| | 3 |
| | 2 |
| | (1 | ) | | — |
| | — |
|
| Amortization of prior service credit | (29 | ) | | (2 | ) | | (21 | ) | | (13 | ) | | (7 | ) | | — |
| | — |
| | — |
|
| Net periodic other post-retirement benefit costs | $ | (21 | ) | | $ | (3 | ) | | $ | (13 | ) | | $ | (8 | ) | | $ | (3 | ) | | $ | (1 | ) | | $ | — |
| | $ | — |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 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 ratesETRs 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, |
| | 2019 |
| | 2018 |
| | 2019 |
| | 2018 |
|
| Duke Energy | 15.9 | % | | 16.5 | % | | 12.6 | % | | 19.9 | % |
| Duke Energy Carolinas | 19.7 | % | | 21.5 | % | | 18.7 | % | | 21.8 | % |
| Progress Energy | 16.7 | % | | 17.3 | % | | 17.0 | % | | 15.4 | % |
| Duke Energy Progress | 16.3 | % | | 20.1 | % | | 17.1 | % | | 16.8 | % |
| Duke Energy Florida | 19.6 | % | | 18.0 | % | | 19.5 | % | | 17.4 | % |
| Duke Energy Ohio | 16.1 | % | | 25.8 | % | | 16.5 | % | | 16.0 | % |
| Duke Energy Indiana | 24.2 | % | | 25.8 | % | | 24.2 | % | | 25.8 | % |
| Piedmont | 22.2 | % | | 27.3 | % | | 21.8 | % | | 23.9 | % |
|
| | | | | | | | | | | |
| | 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, 2018,2019, is primarily due to a one-time valuation allowance charge in the lower statutory federal corporateprior year, an adjustment related to the income tax rate underrecognition for equity method investments recorded in the Tax Actfirst quarter of 2019 and an increase in the amortization of federal and state excess deferred taxes, partially offset by a valuation allowance against AMT credits discussed above.taxes. The equity method investment adjustment was immaterial and relates to prior years.
The decrease in the ETR for Duke Energy Carolinas for the three and six months ended June 30, 2018,2019, is primarily due to the lower statutory federal corporate tax rate under the Tax Act andan increase in the amortization of state excess deferred taxes.
The decreaseincrease in the ETR for Progress Energy for the three and six months ended June 30, 2018,2019, is primarily due to a decrease in AFUDC equity in 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)
current year.
The decrease in the ETR for Duke Energy Progress for the three months ended June 30, 2018,2019, is primarily due to the lower statutory federal tax rate under the Tax Act. The decreasean increase 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 decreaseincrease in the ETR for Duke Energy Florida for the three and six months ended June 30, 2018,2019, is primarily due to a decrease in AFUDC equity in the lower statutory federal corporate tax rate under the Tax Act and the amortization of federal excess deferred taxes.current year.
The decrease in the ETR for Duke Energy Ohio for the three months ended June 30, 2018,2019, 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, 2018, is primarily due to the lower statutory federal tax rate under the Tax Act and an increase in AFUDC equity.the amortization of excess deferred taxes.
The decrease in the ETR for Duke Energy Indiana for the three and six months ended June 30, 2018,2019, is primarily due to an increase in the lower statutory federal corporate tax rate under the Tax Act.amortization of excess deferred taxes.
The decrease in the ETR for Piedmont for the three andmonths ended June 30, 2019, is primarily due to lower state tax rates. The decrease in the ETR for the six months ended June 30, 2018,2019, is primarily due to an increase in the lower statutory federal corporate tax rate under the Tax Act.amortization of excess deferred taxes.
18. SUBSEQUENT EVENTS
For information on subsequent events related to the Commercial Renewables segment, regulatory matters, and commitments and contingencies and debt, see Notes 2, 3, 4 and 4,6, 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).Piedmont. However, none of the registrants make any representation as to information related solely to Duke Energy or the Subsidiary Registrants of Duke Energy other than itself.
DUKE ENERGY
Duke Energy is an energy company headquartered in Charlotte, North Carolina. Duke Energy operates in the United States (U.S.)U.S. primarily through its wholly owned subsidiaries, Duke Energy Carolinas, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont. When discussing Duke Energy’s consolidated financial information, it necessarily includes the results of the Subsidiary Registrants, which, along with Duke Energy, are collectively referred to as the Duke Energy Registrants.
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, 2018,2019, and with Duke Energy’s Annual Report on Form 10-K/A10-K for the year ended December 31, 2017.2018.
Executive Overview
Regulatory Activity
In 2018,2019, Duke Energy advanced regulatory activity underway in multiple jurisdictions as follows:
New base rates were implemented in the Duke Energy Ohio Electric Base Rate Case on January 2, 2019.
On January 11, 2019, Duke Energy Progress filed a request with the PSCSC, which included a request for the continuation of prior deferrals requested for ice storms and hurricanes Florence, Michael and Matthew. The request was approved on January 30, 2019.
On January 30, 2019, Duke Energy Kentucky entered into a settlement agreement with the Attorney General of Kentucky related to the Natural Gas Base Rate Case. The settlement provides for an approximate $7 million increase in natural gas base revenue and approval of the proposed WNA mechanism. The KPSC issued its Order approving the settlement without material modification on March 27, 2019.
On April 1, 2019, Piedmont filed an application with the NCUC, its first general rate case in North Carolina in six years. Piedmont expects new rates arising from this proceeding to take effect by the end of 2019.
On May 21, 2019, Duke Energy Carolinas 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 partial 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 caseorders 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;PSCSC and newrevised customer rates in effect mid-March 2018.
became effective June 1, 2019. On May 31, 2019, Duke Energy Carolinas and Duke Energy Progress filed a joint petition withPetitions for Rehearing or Reconsideration regarding certain coal ash costs and return on equity, among other items, and await 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 underorders on reconsideration detailing the Power/Forward initiative.commission's decision. Once the orders are received, Duke Energy Carolinas also petitioned the PSCSC seeking an order to defer certain costs associated with the William States Lee Combined Cycle Facility, the new billing and customer information system and the addition of the Carolinas West Primary Distribution Control Center. Duke Energy Progress also petitionedhave 30 days to file a notice of appeal with the PSCSC seeking an orderSouth Carolina Supreme Court.
On June 11, 2019, the FPSC approved the petition to adopt the new depreciation ratesrecover incremental storm restoration costs for Hurricane Michael 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 Jobs Act (Tax Act). Theapply 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, incorporating customer benefitsresulting from the Tax Act as well as ridertoward storm costs in lieu of implementing a storm surcharge. On June 13, 2019, the FPSC issued its order approving the settlement agreement for storm cost recovery of environmentalrelated to hurricanes Irma and Nate. Storm costs including coal ash. Duke Energy Kentucky implemented new base rates on May 1, 2018.are currently expected to be fully recovered by approximately year-end 2021.
On June 27, 2018,July 2, 2019, Duke Energy Indiana the Indiana Office of Utility Consumers Counselor and others filed testimony consistent with their Stipulation and Settlement Agreement in the federal tax proceedingsa general rate case with the IURC, its first general rate case in Indiana Utility Regulatory Commission (IURC). Major components include ridersin 16 years. Hearings are expected to reflect the lower federal tax rate as they are filedcommence in 2018, baselate 2019 or early 2020, with rates to reflect the lower federal tax rate upon approval, but no later than September 1, 2018, and a timeline for returning federal excess deferred income taxes to customers. The settlement is subject to review and approval by the IURC.be effective in mid-2020.
See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters" 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)GAAP in the U.S., as well as certain non-GAAP financial measures.measures such as adjusted earnings and adjusted EPS discussed below. Generally, a non-GAAP financial measure is a numerical measure of financial performance, financial position or cash flows that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP financial measures should be viewed as a supplement to, and not a substitute for, financial measures presented in accordance with GAAP. Non-GAAP measures presented may not be comparable to similarly titled measures used by other companies because other companies may not calculate the measures in the same manner.
Management evaluates financial performance in part based on non-GAAP financial measures, including adjusted earnings and adjusted diluted earnings per share (EPS).EPS. Adjusted earnings and adjusted diluted EPS represent income from continuing operations attributable to Duke Energy common stockholders in dollar and per-share amounts, adjusted for the dollar and per-share impact of special items. As discussed below, special items represent certain charges and credits, which management believes are not indicative of Duke Energy's ongoing performance.
Management believes the presentation of adjusted earnings and adjusted diluted EPS provides useful information to investors, as it provides them with an additional relevant comparison of Duke Energy’s performance across periods. Management uses these non-GAAP financial measures for planning and forecasting and for reporting financial results to the Duke Energy Board of Directors, employees, stockholders, analysts and investors. Adjusted diluted EPS is also used as a basis for employee incentive bonuses. The most directly comparable GAAP measures for adjusted earnings and adjusted diluted EPS are Net Income Attributable to Duke Energy Corporation (GAAPGAAP Reported Earnings)Earnings and DilutedGAAP Reported EPS, Attributable to Duke Energy Corporation common stockholders (GAAP Reported EPS), respectively.
Special items included in the 2018 periods presented below include the following items, which management believes do not reflect ongoing costs:items:
Costs to Achieve Piedmont Merger representrepresents charges that resultresulted from the Piedmont acquisition.
Regulatory and Legislative Impacts representrepresents charges related to rate case orders, settlements or other actions of regulators or legislative bodies.
Sale 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)OTTI of an investment in Constitution Pipeline Company, LLC (Constitution).Constitution.
Impacts of the Tax Act represents an alternative minimum tax (AMT)AMT valuation allowance recognized related to the Tax Act.
Three Months Ended June 30, 2018,2019, as compared to June 30, 20172018
GAAP Reported EPS was $1.12 for the second quarter of 2019 compared to $0.71 for the second quarter of 2018 compared to $0.98 for the second quarter of 2017.2018. The decreaseincrease in GAAP Reported EPS was primarily due to positive rate case impacts, lower operating expenses and the allocation of losses to noncontrolling tax equity members resulting from the North Rosamond solar farm commencing commercial operations, as well as prior year regulatory and legislative charges related to the 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 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.impacts.
As discussed above, management also evaluates financial performance based on adjusted diluted EPS. Duke Energy’s second quarter 2018 adjusted diluted EPS was $0.93 compared to $1.01 for the second quarter of 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, |
| | 2018 | | 2017 | 2019 | | 2018 |
| (in millions, except per-share amounts) | Earnings | | EPS | | Earnings | | EPS | Earnings | | EPS | | Earnings | | EPS |
| GAAP Reported Earnings/GAAP Reported EPS | $ | 500 |
| | $ | 0.71 |
| | $ | 686 |
| | $ | 0.98 |
| $ | 820 |
| | $ | 1.12 |
| | $ | 500 |
| | $ | 0.71 |
|
| Adjustments: | | | | | | | | | | | | | | |
Regulatory and Legislative Impacts(a) | 136 |
| | 0.19 |
| | — |
| | — |
| |
Costs to Achieve Piedmont Merger(b) | 15 |
| | 0.02 |
| | 19 |
| | 0.03 |
| |
Costs to Achieve Piedmont Merger(a) | | — |
| | — |
| | 15 |
| | 0.02 |
|
Regulatory and Legislative Impacts(b) | | — |
| | — |
| | 136 |
| | 0.19 |
|
| Discontinued Operations | 5 |
| | 0.01 |
| | 2 |
| | — |
| — |
| | — |
| | 5 |
| | 0.01 |
|
| Adjusted Earnings/Adjusted Diluted EPS | $ | 656 |
| | $ | 0.93 |
| | $ | 707 |
| | $ | 1.01 |
| $ | 820 |
| | $ | 1.12 |
| | $ | 656 |
| | $ | 0.93 |
|
| |
| (a) | Net of $43$5 million tax benefit. |
| |
| (b) | Net of $5$43 million tax benefit in 2018 and $11 million tax benefit in 2017.benefit. |
Six Months Ended June 30, 2018,2019, as compared to June 30, 20172018
Duke Energy's GAAP Reported EPS was $2.36 for the six months ended June 30, 2019, compared to $1.59 for the six months ended June 30, 2018, compared to $2.00 for the six months ended June 30, 2017.2018. The decreaseincrease in GAAP Reported EPS was driven byprimarily due to positive rate case impacts, the allocation of losses to noncontrolling tax equity members resulting from the North Rosamond solar farm commencing commercial operations, and an adjustment related to income tax recognition for equity method investments, as well as prior year regulatory and legislative impacts, impairments charges, related to the Duke Energy Carolinas North Carolina rate case orderan AMT valuation allowance and the repeala loss on sale of the South Carolina Base Load Review Act,a retired plant. This was partially offset by higher depreciation and amortization expenseshare dilution 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.equity issuances.
As discussed above, management also evaluates financial performance based on adjusted diluted EPS. Duke Energy's adjusted diluted EPS for the six months ended June 30, 2018, was $2.22 compared to $2.05 for the six months ended June 30, 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, |
| | 2018 | | 2017 | 2019 | | 2018 |
| (in millions, except per-share amounts) | Earnings | | EPS | | Earnings | | EPS | Earnings | | EPS | | Earnings | | EPS |
| GAAP Reported Earnings/GAAP Reported EPS | $ | 1,120 |
| | $ | 1.59 |
| | $ | 1,402 |
| | $ | 2.00 |
| $ | 1,720 |
| | $ | 2.36 |
| | $ | 1,120 |
| | $ | 1.59 |
|
| Adjustments: | | | | | | | | | | | | | | |
Regulatory and Legislative Impacts(a) | 202 |
| | 0.29 |
| | — |
| | — |
| |
Sale of Retired Plant(b) | 82 |
| | 0.12 |
| | — |
| | — |
| |
Costs to Achieve Piedmont Merger(a) | | — |
| | — |
| | 28 |
| | 0.04 |
|
Regulatory and Legislative Impacts(b) | | — |
| | — |
| | 202 |
| | 0.29 |
|
Sale of Retired Plant(c) | | — |
| | — |
| | 82 |
| | 0.12 |
|
Impairment of Equity Method Investment(c)(d) | | — |
| | — |
| | 42 |
| | 0.06 |
|
| Impacts of the Tax Act (AMT valuation allowance) | 76 |
| | 0.11 |
| | — |
| | — |
| — |
| | — |
| | 76 |
| | 0.11 |
|
Impairment of Equity Method Investment(c)(d) | 42 |
| | 0.06 |
| | — |
| | — |
| |
Costs to Achieve Piedmont Merger(d) | 28 |
| | 0.04 |
| | 29 |
| | 0.05 |
| |
| Discontinued Operations | 5 |
| | 0.01 |
| | 2 |
| | — |
| — |
| | — |
| | 5 |
| | 0.01 |
|
| Adjusted Earnings/Adjusted Diluted EPS | $ | 1,555 |
| | $ | 2.22 |
| | $ | 1,433 |
| | $ | 2.05 |
| $ | 1,720 |
| | $ | 2.36 |
| | $ | 1,555 |
| | $ | 2.22 |
|
| |
| (a) | Net of $9 million tax benefit. |
| |
| (b) | Net of $63 million tax benefit. |
| |
(b)(c) | Net of $25 million tax benefit. |
| |
(c)(d) | Net of $13 million tax benefit. |
| |
(d) | Net of $9 million tax benefit in 2018 and $17 million tax benefit in 2017. |
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 in the Condensed Consolidated Financial Statements.
Duke Energy's segment structure includes the following segments: Electric Utilities and Infrastructure, Gas Utilities and Infrastructure and Commercial Renewables. The remainder of Duke Energy’s operations is presented as Other. See Note 2 to the Condensed Consolidated Financial Statements, “Business Segments,” for additional information on Duke Energy’s segment structure.
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.
|
| |
| MD&A | SEGMENT RESULTS - ELECTRIC UTILITIES AND INFRASTRUCTURE |
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) | 2018 |
| | 2017 |
| | Variance |
| | 2018 |
| | 2017 |
| | Variance |
| 2019 |
| | 2018 |
| | Variance |
| | 2019 |
| | 2018 |
| | Variance |
|
| Operating Revenues | $ | 5,223 |
| | $ | 5,158 |
| | $ | 65 |
| | $ | 10,546 |
| | $ | 10,105 |
| | $ | 441 |
| $ | 5,475 |
| | $ | 5,223 |
| | $ | 252 |
| | $ | 10,804 |
| | $ | 10,546 |
| | $ | 258 |
|
| Operating Expenses | | | | | | | | | | | | | | | | | | | | | | |
| Fuel used in electric generation and purchased power | 1,582 |
| | 1,549 |
| | 33 |
| | 3,267 |
| | 3,003 |
| | 264 |
| 1,662 |
| | 1,582 |
| | 80 |
| | 3,292 |
| | 3,267 |
| | 25 |
|
| Operation, maintenance and other | 1,395 |
| | 1,299 |
| | 96 |
| | 2,720 |
| | 2,603 |
| | 117 |
| 1,318 |
| | 1,395 |
| | (77 | ) | | 2,600 |
| | 2,720 |
| | (120 | ) |
| Depreciation and amortization | 838 |
| | 714 |
| | 124 |
| | 1,673 |
| | 1,451 |
| | 222 |
| 951 |
| | 838 |
| | 113 |
| | 1,898 |
| | 1,673 |
| | 225 |
|
| Property and other taxes | 279 |
| | 270 |
| | 9 |
| | 553 |
| | 531 |
| | 22 |
| 297 |
| | 279 |
| | 18 |
| | 598 |
| | 553 |
| | 45 |
|
| Impairment charges | 172 |
| | 2 |
| | 170 |
| | 215 |
| | 2 |
| | 213 |
| 4 |
| | 172 |
| | (168 | ) | | 4 |
| | 215 |
| | (211 | ) |
| Total operating expenses | 4,266 |
| | 3,834 |
| | 432 |
| | 8,428 |
| | 7,590 |
| | 838 |
| 4,232 |
| | 4,266 |
| | (34 | ) | | 8,392 |
| | 8,428 |
| | (36 | ) |
| Gains on Sales of Other Assets and Other, net | — |
| | 1 |
| | (1 | ) | | 1 |
| | 4 |
| | (3 | ) | 3 |
| | — |
| | 3 |
| | — |
| | 1 |
| | (1 | ) |
| Operating Income | 957 |
| | 1,325 |
| | (368 | ) | | 2,119 |
| | 2,519 |
| | (400 | ) | 1,246 |
| | 957 |
| | 289 |
| | 2,412 |
| | 2,119 |
| | 293 |
|
| Other Income and Expenses | 91 |
| | 110 |
| | (19 | ) | | 179 |
| | 222 |
| | (43 | ) | |
| Other Income and Expenses, net | | 89 |
| | 91 |
| | (2 | ) | | 180 |
| | 179 |
| | 1 |
|
| Interest Expense | 316 |
| | 305 |
| | 11 |
| | 633 |
| | 620 |
| | 13 |
| 330 |
| | 316 |
| | 14 |
| | 668 |
| | 633 |
| | 35 |
|
| Income Before Income Taxes | 732 |
| | 1,130 |
| | (398 | ) | | 1,665 |
| | 2,121 |
| | (456 | ) | 1,005 |
| | 732 |
| | 273 |
| | 1,924 |
| | 1,665 |
| | 259 |
|
| Income Tax Expense | 157 |
| | 401 |
| | (244 | ) | | 340 |
| | 757 |
| | (417 | ) | 196 |
| | 157 |
| | 39 |
| | 365 |
| | 340 |
| | 25 |
|
| Segment Income | $ | 575 |
| | $ | 729 |
| | $ | (154 | ) | | $ | 1,325 |
| | $ | 1,364 |
| | $ | (39 | ) | $ | 809 |
| | $ | 575 |
| | $ | 234 |
| | $ | 1,559 |
| | $ | 1,325 |
| | $ | 234 |
|
| | | | | | | | | | | |
|
| | | | | | | | | | |
|
|
| Duke Energy Carolinas gigawatt-hours (GWh) sales | 22,272 |
| | 21,243 |
| | 1,029 |
| | 44,899 |
| | 42,024 |
| | 2,875 |
| |
| Duke Energy Carolinas GWh sales | | 21,604 |
| | 22,272 |
| | (668 | ) | | 43,432 |
| | 44,899 |
| | (1,467 | ) |
| Duke Energy Progress GWh sales | 15,896 |
| | 15,562 |
| | 334 |
| | 33,122 |
| | 31,199 |
| | 1,923 |
| 16,222 |
| | 15,896 |
| | 326 |
| | 32,570 |
| | 33,122 |
| | (552 | ) |
| Duke Energy Florida GWh sales | 10,304 |
| | 10,740 |
| | (436 | ) | | 19,423 |
| | 19,045 |
| | 378 |
| 11,151 |
| | 10,304 |
| | 847 |
| | 19,472 |
| | 19,423 |
| | 49 |
|
| Duke Energy Ohio GWh sales | 6,147 |
| | 5,901 |
| | 246 |
| | 12,219 |
| | 11,960 |
| | 259 |
| 5,660 |
| | 6,147 |
| | (487 | ) | | 11,824 |
| | 12,219 |
| | (395 | ) |
| Duke Energy Indiana GWh sales | 8,301 |
| | 7,972 |
| | 329 |
| | 16,786 |
| | 16,180 |
| | 606 |
| 7,437 |
| | 8,301 |
| | (864 | ) | | 15,470 |
| | 16,786 |
| | (1,316 | ) |
| Total Electric Utilities and Infrastructure GWh sales | 62,920 |
| | 61,418 |
| | 1,502 |
| | 126,449 |
| | 120,408 |
| | 6,041 |
| 62,074 |
| | 62,920 |
| | (846 | ) | | 122,768 |
| | 126,449 |
| | (3,681 | ) |
| Net proportional megawatt (MW) capacity in operation | | | | |
|
| | 49,297 |
| | 48,877 |
| | 420 |
| |
| Net proportional MW capacity in operation | | | | | |
|
| | 49,725 |
| | 49,297 |
| | 428 |
|
Three Months Ended June 30, 2018,2019, as Comparedcompared to June 30, 20172018
Electric Utilities and Infrastructure’s results were impacted by charges related toa positive contribution from the 2018 Duke Energy Carolinas North Carolina rate case, order, higherDuke Energy Florida's base rate adjustments due to the Citrus County CC being placed in service, favorable weather-normal retail sales volumes and lower operation, maintenance and maintenance expenses and increased depreciation and amortization, partiallyother expense.
These drivers were offset by favorableunfavorable weather compared toin the priorcurrent year, higher depreciation from a growing asset base, higher interest expense and a positive net contribution from the Duke Energy Progress North Carolina rate case.higher income tax expense. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The variance was driven primarily 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, due to favorable weather in the current year; and
a $43$155 million increase in retail pricing primarily due to the prior year Duke Energy ProgressCarolinas North Carolina rate case.
Partially offset by:case and Duke Energy Florida's base rate adjustments related to Citrus County CC being placed in service;
a $127$66 million decrease due to revenues subject to refund to customers associated with the lower statutory federal corporate tax rate under the Tax Act;increase in fuel related revenues; and
a $5$19 million decreaseincrease in weather-normal retail sales volumes.
Operating Expenses. The variance was driven primarily by:
a $170$168 million increasedecrease in impairment charges primarily due to the impacts associated with the prior year Duke Energy Carolinas North Carolina rate case; and
a $124$77 million decrease in operation, maintenance and other expense primarily due to lower payroll and benefit costs resulting from prior year workforce reductions.
Partially offset by:
a $113 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 perassociated with the prior year Duke Energy ProgressCarolinas North Carolina rate case;case and Duke Energy Florida's Citrus County CC being placed in service;
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 $33an $80 million increase in fuel used in electric generation and purchased power primarily due to an increase in the North Carolina Renewable Energy and Energy Efficiency Portfolio Standard requirement from the prior year at Duke Energy Progress; and
an $18 million increase in property and other taxes primarily due to higher sales and higher deferred fuel expenses.property taxes for additional plant in service at Duke Energy Florida.
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| MD&A | SEGMENT RESULTS - ELECTRIC UTILITIES AND INFRASTRUCTURE |
Other
Interest Expense. The variance was driven primarily by higher debt outstanding in the current year and AFUDC debt return ending in the fourth quarter of 2018 on the Citrus County CC at Duke Energy Florida.
Income and Expenses.Tax Expense. The decreaseincrease in tax expense was primarily due to lower allowance for funds used during construction (AFUDC) equity and a decreasean increase 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 lowerpretax income from non-service components of employee benefit costspartially offset by an increase 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.amortization of excess deferred taxes. 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)ETRs for the three months ended June 30, 2019, and 2018, and 2017 were 21.419.5 percent and 35.521.4 percent, respectively. The decrease in the ETR was primarily due to the lower statutory federal corporate tax rate under the Tax Act andan increase in the amortization of excess deferred taxes. For additional information, see Note 17 totaxes partially offset by a decrease in AFUDC equity in the Condensed Consolidated Financial Statements, "Income Taxes."current year.
Six Months Ended June 30, 2018,2019, as Comparedcompared to June 30, 20172018
Electric Utilities and Infrastructure’s results were impacted by charges related toa positive contribution from the 2018 Duke Energy Carolinas and Duke Energy Progress North Carolina rate case orderscases, Duke Energy Florida's base rate adjustments due to the Citrus County CC being placed in service and lower operation, maintenance and other expense.
These drivers were offset by unfavorable weather in the current year, higher depreciation from a growing asset base, higher interest expense and higher 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.income tax expense. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The variance was driven primarily by:
a $307$330 million increase in retail pricing primarily due to the prior year Duke Energy Carolinas and Duke Energy Progress North Carolina rate cases and Duke Energy Florida's base rate adjustments related to Citrus County CC being placed in service; and
a $34 million increase in fuel related revenues due to higher sales volumes and increases in fuel rates billed to customers;revenues.
Partially offset by:
a $255$76 million increasedecrease in retail sales, net of fuel revenues, due to favorableunfavorable weather in the current year; and
a $73$35 million increasedecrease in retail pricingrider revenues primarily due to excess deferred taxes and energy efficiency programs, partially offset by a decrement rider relating to nuclear decommissioning that ended in the prior year at Duke Energy Carolinas.
Operating Expenses. The variance was driven primarily by:
a $211 million decrease in impairment charges primarily due to the Duke Energy Progress North Carolina rate case and Duke Energy Florida base rate adjustments forimpacts associated with 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 atprior year Duke Energy Carolinas and Duke Energy Progress partially offset by customer refundsNorth Carolina rate cases; and
a $120 million decrease in the currentoperation, maintenance and other expense primarily due to lower payroll and benefit costs resulting from prior year related to a FERC order on a complaint filed by the Piedmont Municipal Power Agency (PMPA) at Duke Energy Carolinas.workforce reductions.
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 $264 million increase in fuel used in electric generation and purchased power, due to higher sales and higher deferred fuel expenses;
a $222$225 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 $213 million increase in impairment charges primarily due to the impacts associated with the prior year Duke Energy Carolinas and Duke Energy Progress North Carolina rate cases;cases and Duke Energy Florida's Citrus County CC being placed in service;
a $45 million increase in property and other taxes primarily due to higher property taxes for additional plant in service at Duke Energy Florida and a favorable sales and use tax credit in the prior year at Duke Energy Progress; and
a $117$25 million increase in operation, maintenancefuel used in electric generation and other expensepurchased power primarily due to impacts associated withan increase in the North Carolina Renewable Energy and Energy Efficiency Portfolio Standard requirement from the prior year at Duke Energy Progress North Carolina rate caseProgress.
Interest Expense. The variance was driven primarily by higher debt outstanding in the current year and higher storm cost amortization.AFUDC debt return ending in the fourth quarter of 2018 on the Citrus County CC at Duke Energy Florida.
Other Income and Expenses. Tax Expense.The decreaseincrease in tax expense was primarily due to lower AFUDC equity and loweran increase in pretax income from non-service components of employee benefit costspartially offset by an increase 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.amortization of excess deferred taxes. The ETRs for the six months ended June 30, 2019, and 2018, and 2017 were 20.419.0 percent and 35.720.4 percent, respectively. The decrease in the ETR was primarily due to the lower statutory federal corporate tax rate under the Tax Act andan increase in the amortization of excess deferred taxes.taxes partially offset by a decrease in AFUDC equity in the current year.
Matters Impacting Future Electric Utilities and Infrastructure Results
On May 21, 2019, Duke Energy Carolinas and Duke Energy Progress received orders from the PSCSC granting the companies’ requests for retail rate increases but denying recovery of certain coal ash costs. On May 31, 2019, Duke Energy Carolinas and Duke Energy Progress filed Petitions for Rehearing or Reconsideration and await the order on reconsideration detailing the commission's decision. Once the orders are received, Duke Energy Carolinas and Duke Energy Progress have 30 days to file a notice of appeal with the South Carolina Supreme Court. Electric Utilities and Infrastructure's results of operations, financial position and cash flows could be adversely impacted if coal ash costs are not ultimately approved for recovery. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
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| MD&A | SEGMENT RESULTS - ELECTRIC UTILITIES AND INFRASTRUCTURE |
On May 18, 2016, the North Carolina Department of Environmental Quality (NCDEQ)NCDEQ issued proposed risk classifications for all coal ash surface impoundments in North Carolina. All ash impoundments not previously designated as high priority by the North Carolina Coal Ash Management Act of 2014 (Coal Ash Act) were designated as intermediate risk. Certain impoundments classified as intermediate risk, however, may be reassessed in the futurewere eligible for reassessment as low risk pursuant to legislation enacted on July 14, 2016. Electric UtilitiesOn November 14, 2018, NCDEQ issued final low-risk classifications for these impoundments, indicating that Duke Energy Carolinas and Infrastructure's estimated asset retirement obligations (AROs) relatedDuke Energy Progress have satisfied the permanent replacement water supply and certain dam improvement requirements set out in the Coal Ash Management Act. On April 1, 2019, NCDEQ issued a closure determination requiring Duke Energy Carolinas and Duke Energy Progress to the closure of North Carolinaexcavate all remaining coal 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,even though they had been deemed low risk. On April 26, 2019, Duke Energy Carolinas and Duke Energy Progress filed a Petition for Contested Case Hearings in the Office of Administrative Hearings to challenge NCDEQ's April 1 Order. Duke Energy Carolinas and Duke Energy Progress intend to seek recovery of all costs through the ratemaking process consistent with previous proceedings. As the final closure plans and corrective action measures are developed and approved for each site, the closure work progresses and the closure method scope and remedial action methods are determined, the complexity of work and the amount of coal combustion material could be different than originally estimated and, therefore, could materially impact Electric Utilities and Infrastructure's results of operations, financial position and cash flows.
See Note 4 to the Condensed Consolidated Financial Statements, "Commitments and Contingencies," for additional information.
Duke Energy is a party to multiple lawsuits and could be subject to fines and other penalties related to operations at certain North Carolina facilities with ash basins. In addition, the orders issued in the Duke Energy Carolinas and Duke Energy Progress North CarolinasCarolina 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 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/Forwardgrid improvement costs. Duke Energy Carolinas may petition for deferral of grid modernization costs outside of a general rate case proceeding if it can show financial hardship or a stipulation that includes greater consensus among intervening parties on costs being classified as grid modernization. While Duke Energy Progress did not request recovery of these costs in its most recent case with the NCUC, Duke Energy Progress may request recovery of certain grid modernization costs in future regulatory proceedings. Electric Utilities and Infrastructure's results of operations, financial position and cash flows could be adversely impacted if grid modernization costs are not ultimately approved for recovery and/or deferral treatment. See Note 3 to
During the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
On June 30, 2017, CertainTeed Gypsum NC, Inc. (CertainTeed) filed a declaratory judgment action againstlast half of 2018, Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida’s service territories were impacted by several named storms. Hurricane Florence, Hurricane Michael and Winter Storm Diego caused flooding, extensive damage and widespread power outages to the service territories of Duke Energy Carolinas and Duke Energy Progress. Duke Energy Florida’s service territory was also impacted by Hurricane Michael, a Category 5 hurricane and the most powerful storm to hit the Florida Panhandle in recorded history. A significant portion of the North Carolina Business Court relatingincremental operation and maintenance expenses related to a gypsum supply agreement. In its complaint, CertainTeed sought an order from the court declaring that the minimum amount of gypsumthese storms have been deferred. On December 21, 2018, Duke Energy Carolinas and Duke Energy Progress must providefiled with the NCUC petitions for approval to CertainTeed underdefer the supply agreement is 50,000 tons per month through 2029. The trialincremental storm costs incurred to a regulatory asset for this matter concluded on July 16, 2018. If Duke Energy Progress does not prevail, it will have to either purchase additional gypsum onrecovery in 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 4 to the Condensed Consolidated Financial Statements, “Commitments and Contingencies,” for additional information.
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 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.
next base rate case. On February 6, 2018,June 11, 2019, 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 filedFlorida's petition for recovery of theincremental storm costs. Stormrestoration costs are currently expectedrelated 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.Hurricane Michael. An order from regulatory authorities disallowing the deferral and future recovery of thesestorm restoration 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"Regulatory Matters,”" for additional information.
On March 2, 2017, Duke Energy OhioIndiana filed an electric distribution basea general rate applicationcase 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 Stipulation with the PUCO to resolve issues in the electric distribution baseIURC on July 2, 2019, its first general 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 Price Stabilization Rider. Hearings will conclude on August 6, 2018.in Indiana in 16 years. The outcome of this rate case could materially impact Electric Utilities and Infrastructure's results of operations, financial position and cash flows could be adversely impacted if the Stipulation is denied by the PUCO.flows. See Note 3 to the Condensed Consolidated Financial Statements, “Regulatory"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/A10-K for the year ended December 31, 2017,2018, for discussion of risks associated with the Tax Act.
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| MD&A | SEGMENT RESULTS - GAS UTILITIES AND INFRASTRUCTURE |
Gas Utilities and Infrastructure | | | | Three Months Ended June 30, | | Six Months Ended June 30, | Three Months Ended June 30, | | Six Months Ended June 30, |
| (in millions) | 2018 |
| | 2017 |
| | Variance |
| | 2018 |
| | 2017 |
| | Variance |
| 2019 |
| | 2018 |
| | Variance |
| | 2019 |
| | 2018 |
| | Variance |
|
| Operating Revenues | $ | 318 |
| | $ | 301 |
| | $ | 17 |
| | $ | 1,045 |
| | $ | 971 |
| | $ | 74 |
| $ | 306 |
| | $ | 318 |
| | $ | (12 | ) | | $ | 1,062 |
| | $ | 1,045 |
| | $ | 17 |
|
| Operating Expenses | | | | | | | | | | | | | | | | | | | | | | |
| Cost of natural gas | 89 |
| | 76 |
| | 13 |
| | 402 |
| | 334 |
| | 68 |
| 76 |
| | 89 |
| | (13 | ) | | 403 |
| | 402 |
| | 1 |
|
| Operation, maintenance and other | 103 |
| | 94 |
| | 9 |
| | 211 |
| | 199 |
| | 12 |
| 107 |
| | 103 |
| | 4 |
| | 217 |
| | 211 |
| | 6 |
|
| Depreciation and amortization | 60 |
| | 57 |
| | 3 |
| | 121 |
| | 114 |
| | 7 |
| 63 |
| | 60 |
| | 3 |
| | 128 |
| | 121 |
| | 7 |
|
| Property and other taxes | 26 |
| | 26 |
| | — |
| | 57 |
| | 56 |
| | 1 |
| 27 |
| | 26 |
| | 1 |
| | 60 |
| | 57 |
| | 3 |
|
| Total operating expenses | 278 |
| | 253 |
| | 25 |
| | 791 |
| | 703 |
| | 88 |
| 273 |
| | 278 |
| | (5 | ) | | 808 |
| | 791 |
| | 17 |
|
| Operating Income | 40 |
| | 48 |
| | (8 | ) | | 254 |
| | 268 |
| | (14 | ) | 33 |
| | 40 |
| | (7 | ) | | 254 |
| | 254 |
| | — |
|
| Other Income and Expenses | 22 |
| | 21 |
| | 1 |
| | (13 | ) | | 39 |
| | (52 | ) | |
| Other Income and Expenses, net | | 37 |
| | 22 |
| | 15 |
| | 77 |
| | (13 | ) | | 90 |
|
| Interest Expense | 26 |
| | 26 |
| | — |
| | 53 |
| | 52 |
| | 1 |
| 27 |
| | 26 |
| | 1 |
| | 57 |
| | 53 |
| | 4 |
|
| Income Before Income Taxes | 36 |
| | 43 |
| | (7 | ) | | 188 |
| | 255 |
| | (67 | ) | 43 |
| | 36 |
| | 7 |
| | 274 |
| | 188 |
| | 86 |
|
| Income Tax Expense | 8 |
| | 16 |
| | (8 | ) | | 44 |
| | 95 |
| | (51 | ) | 3 |
| | 8 |
| | (5 | ) | | 8 |
| | 44 |
| | (36 | ) |
| Segment Income | $ | 28 |
| | $ | 27 |
| | $ | 1 |
| | $ | 144 |
| | $ | 160 |
| | $ | (16 | ) | $ | 40 |
| | $ | 28 |
| | $ | 12 |
| | $ | 266 |
| | $ | 144 |
| | $ | 122 |
|
| | | | | | | |
|
| | | | | | | | | | |
|
| | | | |
| 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 |
| |
| Piedmont LDC throughput (dekatherms) | | 104,684,733 |
| | 116,839,962 |
| | (12,155,229 | ) | | 256,350,657 |
| | 271,741,341 |
| | (15,390,684 | ) |
| Duke Energy Midwest LDC throughput (Mcf) | 15,615,050 |
| | 12,204,767 |
| | 3,410,283 |
| | 52,741,115 |
| | 43,035,766 |
| | 9,705,349 |
| 13,742,907 |
| | 15,615,050 |
| | (1,872,143 | ) | | 52,281,179 |
| | 52,741,115 |
| | (459,936 | ) |
Three Months Ended June 30, 2018,2019, as Comparedcompared to June 30, 20172018
Gas Utilities and Infrastructure’s results were primarily impacted by favorable weather and volumes, price adjustments and customer growth; offset by unfavorable operations, maintenance and other.higher equity earnings from ACP. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues.The variance was driven by:
an $11 million decrease at Piedmont primarily due to lower residential sales volumes due to unfavorable weather in the current year and a reduction of rates in South Carolina; and
a $13$6 million increasedecrease in the Midwest primarily due to higherlower natural gas costs passed through to customers from higher volumes sold and higher natural gas prices;unfavorable weather in the current year.
Partially offset by:
a $9$4 million increase primarily due to residentialNorth Carolina and commercial customer revenue, netTennessee IMR increases.
Operating Expenses.The variance was driven by:
a $13 million decrease in cost 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 yearlower volumes sold at Piedmont and higher volumeslower natural gas prices 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$4 million increase in cost of natural gasoperation, maintenance and other expense primarily due to higher volumes soldemployee benefit expenses and higher natural gas prices;
a $9 million increase in operations, maintenance and other primarily due to increased gas operations and regulated utilities expenses;information technology outside services at Piedmont; and
a $3 million increase in depreciation and amortization expense primarily due to additional plant-in-service.plant in service.
Other Income and Expenses, net. The variance was driven by higher equity earnings from ACP in the current year.
Income Tax Expense. The variancedecrease in tax expense was primarily due to the lower statutory federal corporate tax rate under the Tax Act.current year AFUDC equity, partially offset by an increase in pretax income. The ETRs for the three months ended June 30, 2019, and 2018, and 2017 were 22.27.0 percent and 37.222.2 percent, respectively. The decrease in the ETR was primarily due to the lower statutory corporate tax rate under the Tax Act. For additional information, see Note 17 to the Condensed Consolidated Financial Statements, "Income Taxes."current year AFUDC equity.
Six Months Ended June 30, 2018,2019, as Comparedcompared to June 30, 20172018
Gas Utilities and Infrastructure’s results were primarily impacted by the prior year OTTI recorded on the Constitution investment.investment and a 2019 adjustment related to the income tax recognition for equity method investments. The equity method investment adjustment was immaterial and relates to prior years. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues.The variance was driven by:
an $11 million increase primarily due to North Carolina and Tennessee IMR increases;
a $68$9 million increase primarily due to higher natural gas prices associated with off-system sales; and
an $8 million increase primarily due to NCUC approval related to tax reform accounting from fixed rate contracts.
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| MD&A | SEGMENT RESULTS - GAS UTILITIES AND INFRASTRUCTURE |
Partially offset by:
a $6 million decrease primarily due to a reduction of rates in South Carolina;
a $4 million decrease due to lower natural gas costs passed through to customers in the Midwest, due to higher volumes sold and higherlower natural gas prices; and
a $31$2 million increase primarilydecrease 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 favorableunfavorable weather in the current year and higher volumes sold infor 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, maintenance and other primarily due to increased regulated utilities and gas operations expenses; and
•a $7 million increase in depreciation and amortization expense primarily due to additional plant-in-service.plant in service;
a $6 million increase in operation, maintenance and other expense primarily due to information technology outside services and higher gas operations labor costs;
a $5 million increase in cost of natural gas at Piedmont primarily due to the impact of higher natural gas prices on off-system sales and unbilled revenue; and
a $3 million increase in property and other taxes primarily due to higher property tax expense related to additional plant in service.
Partially offset by:
a $4 million decrease in cost of natural gas sold in the Midwest primarily due to lower natural gas prices.
Other Income and Expenses. Expenses, net. The decreaseincrease was primarily due to the prior year OTTI recorded foron the Constitution investment in Constitutionand higher earnings from ACP in the current year.
Interest Expense. The variance was driven by higher debt outstanding in the current year and higher interest expense due to customers as a result of tax reform deferrals, partially offset by favorable AFUDC debt interest.
Income Tax Expense.The variancedecrease in tax expense was primarily due to an adjustment related to the lower statutory federal corporateincome tax rate under the Tax Act.recognition for equity method investments and current year AFUDC equity, partially offset by an increase in pretax income. The equity method investment adjustment was immaterial and relates to prior years. The ETRs for the six months ended June 30, 2019, and 2018, and 2017 were 23.42.9 percent and 37.323.4 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 17an adjustment related to the Condensed Consolidated Financial Statements, "Income Taxes."income tax recognition for equity method investments that was recorded during the first quarter of 2019 and current year AFUDC equity. The equity method investment adjustment was immaterial and relates to prior years.
Matters Impacting Future Gas Utilities and Infrastructure Results
Gas Utilities and Infrastructure has a 47 percent ownership interest in Atlantic Coast Pipeline, LLC (ACP),ACP, which is building an approximately 600-mile interstate natural gas pipeline intended to transport diverse natural gas supplies into southeastern markets. Affected states (West Virginia, Virginia and North Carolina) have issued certain necessary permits; the project remains subject to other pending federal and state approvals, which will allow full construction activities to begin. In early 2018, the FERC issued a series of Partial Notices to Proceed, which authorized the project to begin limitedcertain construction-related activities along the pipeline route. The project hasProject cost estimates are a targeted in-service daterange 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$7.0 billion to $6.5$7.8 billion, excluding financing costs. ACP expects to achieve a late 2020 in-service date for key segments of the project, while it expects the remainder to extend into 2021. Project construction activities, schedule and final costs are still subject to uncertainty due to potential additional permittingabnormal weather, work delays construction productivity(including delays due to judicial or regulatory action) and other conditions and risks that could result in potential higher project costs, a potential delay in the targeted in-service datedates, permanent or temporary suspension of AFUDC and potential impairment charges. ACP and Duke Energy will continue to consider their options with respect to the foregoing in light of their existing contractual and legal obligations. See Notes 3 and 13 to the Condensed Consolidated Financial Statements, "Regulatory Matters" and "Variable Interest Entities," respectively, for additional information.
On November 13, 2013, the PUCO issued an order authorizing recovery of MGP costs at certain sites in Ohio with a deadline to complete the MGP environmental investigation and remediation work prior to December 31, 2016. This deadline was subsequently extended to December 31, 2019. Disallowance of costs incurred, failure to complete the work by the deadline or failure to obtain an extension from the PUCO could result in an adverse impact on Gas 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.
Piedmont filed a general rate case with the NCUC on April 1, 2019, its first general rate case in North Carolina in six years. The outcome of this rate case could materially impact Gas 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.
Rapidly rising interest rates without timely or adequate updates to the regulated allowed return on equity or failure to achieve the anticipated benefits of the Piedmont merger, including cost savings and growth targets, could significantly impact the estimated fair value of reporting units in Gas Utilities and Infrastructure. In the event of a significant decline in the estimated fair value of the reporting units, goodwill impairment charges could be recorded. The carrying value of goodwill within Gas Utilities and Infrastructure was approximately $1,924 million at 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/A10-K for the year ended December 31, 2017,2018, for discussion of risks associated with the Tax Act.
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| (in millions) | 2018 |
| | 2017 |
| | Variance |
| | 2018 |
| | 2017 |
| | Variance |
|
| Operating Revenues | $ | 119 |
| | $ | 110 |
| | $ | 9 |
| | $ | 220 |
| | $ | 238 |
| | $ | (18 | ) |
| Operating Expenses | | | | | | | | | | | |
| Operation, maintenance and other | 69 |
| | 58 |
| | 11 |
| | 124 |
| | 136 |
| | (12 | ) |
| Depreciation and amortization | 38 |
| | 38 |
| | — |
| | 76 |
| | 77 |
| | (1 | ) |
| Property and other taxes | 6 |
| | 8 |
| | (2 | ) | | 13 |
| | 17 |
| | (4 | ) |
| Total operating expenses | 113 |
| | 104 |
| | 9 |
| | 213 |
| | 230 |
| | (17 | ) |
| Gains on Sales of Other Assets and Other, net | — |
| | 2 |
| | (2 | ) | | — |
| | 4 |
| | (4 | ) |
| Operating Income | 6 |
| | 8 |
| | (2 | ) | | 7 |
| | 12 |
| | (5 | ) |
| Other Income and Expenses | 18 |
| | (1 | ) | | 19 |
| | 20 |
| | (1 | ) | | 21 |
|
| Interest Expense | 23 |
| | 23 |
| | — |
| | 45 |
| | 42 |
| | 3 |
|
| Income (Loss) Before Income Taxes | 1 |
| | (16 | ) | | 17 |
| | (18 | ) | | (31 | ) | | 13 |
|
| Income Tax Benefit | (36 | ) | | (42 | ) | | 6 |
| | (75 | ) | | (81 | ) | | 6 |
|
| Less: Loss Attributable to Noncontrolling Interests | (1 | ) | | — |
| | (1 | ) | | (1 | ) | | (1 | ) | | — |
|
| Segment Income | $ | 38 |
|
| $ | 26 |
| | $ | 12 |
| | $ | 58 |
| | $ | 51 |
| | $ | 7 |
|
| | | | | | | | | | | | |
| Renewable plant production, GWh | 2,471 |
| | 2,231 |
| | 240 |
| | 4,651 |
| | 4,516 |
| | 135 |
|
| Net proportional MW capacity in operation | | | | |
|
| | 2,951 |
| | 2,908 |
| | 43 |
|
|
| |
| MD&A | SEGMENT RESULTS - COMMERCIAL RENEWABLES |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| (in millions) | 2019 |
| | 2018 |
| | Variance |
| | 2019 |
| | 2018 |
| | Variance |
|
| Operating Revenues | $ | 118 |
| | $ | 119 |
| | $ | (1 | ) | | $ | 224 |
| | $ | 220 |
| | $ | 4 |
|
| Operating Expenses | | | | | | | | | | | |
| Operation, maintenance and other | 64 |
| | 69 |
| | (5 | ) | | 130 |
| | 124 |
| | 6 |
|
| Depreciation and amortization | 40 |
| | 38 |
| | 2 |
| | 80 |
| | 76 |
| | 4 |
|
| Property and other taxes | 6 |
| | 6 |
| | — |
| | 12 |
| | 13 |
| | (1 | ) |
| Total operating expenses | 110 |
| | 113 |
| | (3 | ) | | 222 |
| | 213 |
| | 9 |
|
| Operating Income | 8 |
| | 6 |
| | 2 |
| | 2 |
| | 7 |
| | (5 | ) |
| Other Income and Expenses, net | (8 | ) | | 18 |
| | (26 | ) | | (10 | ) | | 20 |
| | (30 | ) |
| Interest Expense | 22 |
| | 23 |
| | (1 | ) | | 43 |
| | 45 |
| | (2 | ) |
| (Loss) Income Before Income Taxes | (22 | ) | | 1 |
| | (23 | ) | | (51 | ) | | (18 | ) | | (33 | ) |
| Income Tax Benefit | (24 | ) | | (36 | ) | | 12 |
| | (59 | ) | | (75 | ) | | 16 |
|
| Less: Loss Attributable to Noncontrolling Interests | (84 | ) | | (1 | ) | | (83 | ) | | (91 | ) | | (1 | ) | | (90 | ) |
| Segment Income | $ | 86 |
|
| $ | 38 |
| | $ | 48 |
| | $ | 99 |
| | $ | 58 |
| | $ | 41 |
|
| | | | | | | | | | | | |
| Renewable plant production, GWh | 2,314 |
| | 2,471 |
| | (157 | ) | | 4,382 |
| | 4,651 |
| | (269 | ) |
Net proportional MW capacity in operation(a) | | | | |
|
| | 3,157 |
| | 2,951 |
| | 206 |
|
| |
| (a) | Certain projects are included in tax equity structures where investors have differing interests in the project's economic attributes. One hundred percent of the tax equity project's capacity is included in the table above. |
Three Months Ended June 30, 2018,2019, as Comparedcompared to June 30, 20172018
Commercial Renewables' results were favorably impacted by the bankruptcy court approval of the North Allegheny Windfarm (NAW) and FirstEnergy Solutions (FES) settlement agreement.results from tax equity solar projects, partially offset by mark-to-market losses. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues.Other Income and Expenses, net. The increase in revenuesdecrease was primarily due to an increasemark-to-market losses 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 solar development spendingportfolio in the current year compared to mark-to-market gains and income from the North Allegheny Wind, LLC and FES settlement agreement in the prior year.
Other Income Tax Benefit. The decrease in the tax benefit was primarily driven by taxes associated with Duke Energy's interest in a tax equity solar project recorded in the second quarter of 2019 and Expenses.a reduction in production tax credits generated.
Loss Attributable to Noncontrolling Interests. The increase in other income and expenses was primarily due to the bankruptcy court approved NAW and FES settlement agreement, which allowed retention of previously collected cash collateral under the 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.new tax equity solar projects entered into during 2019.
Six Months Ended June 30, 2018,2019, as Comparedcompared to June 30, 20172018
Commercial Renewables' results were favorably impacted by results from tax equity solar projects, partially offset by mark-to-market losses in the bankruptcy court approval of the NAW and FES settlement agreement.solar portfolio. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues.Other Income and Expenses, net. The decrease was primarily due to mark-to-market losses in the solar portfolio in the current year compared to mark-to-market gains and income from the North Allegheny Wind, LLC and FES settlement agreement in the prior year.
Income Tax Benefit. The decrease in the tax benefit was primarily driven by taxes associated with Duke Energy's interest in a tax equity solar project recorded in the second quarter of 2019 and a reduction in the number of EPC agreements from REC Solar.production tax credits generated.
Operating Expenses. The decrease was primarily dueLoss Attributable 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 solar development spending in the current year.
Other Income and Expenses.Noncontrolling Interests. The increase in other income was primarily due to 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 variance was primarily due to higher debt outstanding as a result of new project financings.
Income Tax Benefit.The variance was primarily due to a decrease in pretax losses.tax equity solar projects entered into during 2019.
Matters Impacting Future Commercial Renewables ResultsResults
Changes or variability in assumptions used in calculatingDuring 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 $93 million atthree months ended June 30, 2018.
Persistently low market pricing for wind resources, primarily2019, Duke Energy evaluated recoverability of its renewable merchant plants principally in the Electric Reliability Council of Texas West market, due to declining market pricing and PJM Interconnection, LLC (PJM) westdeclining long-term forecasted energy and capacity prices, primarily driven by lower forecasted natural gas prices. These assets were not impaired; however, a continued decline in pricing would likely result in a future impairment. The carrying value of $160 million for one large wind project in West Texas approximates the aggregate estimated future expirationcash flows from the asset. Impairment of tax incentives including investment tax credits and production tax creditsthese assets could result in adverse impacts to the future results of operations, financial position and cash flows of Commercial Renewables.
DeteriorationOn April 24, 2019, Duke Energy executed an agreement to sell a minority interest in credit quality resulting in bankruptcya portion of an offtakercertain renewable assets. The portion of power from contractedDuke Energy’s commercial renewables energy portfolio to be sold includes 49 percent of 37 operating wind, orsolar and battery storage assets and 33 percent of 11 operating solar assets couldacross the U.S. Duke Energy Renewable Services, an operations and maintenance business for third-party customers, and REC Solar are not included in the potential transaction. The sale will result in adverse impactspretax proceeds to Duke Energy of $415 million. Duke Energy will retain control of these assets, and, therefore, no gain or loss is expected to be recognized in the future resultsCondensed Consolidated Statements 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 terminationOperations upon closing of the two PPAs between FEStransaction. Duke Energy will also retain the majority of the remaining tax benefits from the projects. Duke Energy will continue to develop projects, grow its portfolio and NAW, as a result, NAWmanage its renewables assets. The sale is subject to market pricingcustomary closing conditions, including approvals from the FERC, the Public Utility Commission of Texas and the Committee on Foreign Investment in the PJM west market.U.S. The transaction is expected to close in the second half of 2019.
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| MD&A | SEGMENT RESULTS - COMMERCIAL RENEWABLES |
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/A10-K for the year ended December 31, 2017,2018, for discussion of risks associated with the Tax Act.
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| (in millions) | 2018 |
| | 2017 |
| | Variance |
| | 2018 |
| | 2017 |
| | Variance |
|
| Operating Revenues | $ | 32 |
| | $ | 35 |
| | $ | (3 | ) | | $ | 67 |
| | $ | 68 |
| | $ | (1 | ) |
| Operating Expenses | | | | | | | | | | | |
| Fuel used in electric generation and purchased power | 15 |
| | 14 |
| | 1 |
| | 29 |
| | 29 |
| | — |
|
| Operation, maintenance and other | 3 |
| | 19 |
| | (16 | ) | | 6 |
| | 27 |
| | (21 | ) |
| Depreciation and amortization | 37 |
| | 26 |
| | 11 |
| | 70 |
| | 52 |
| | 18 |
|
| Property and other taxes | 4 |
| | 4 |
| | — |
| | 8 |
| | 7 |
| | 1 |
|
| Impairment charges | — |
| | 7 |
| | (7 | ) | | — |
| | 7 |
| | (7 | ) |
| Total operating expenses | 59 |
| | 70 |
| | (11 | ) | | 113 |
| | 122 |
| | (9 | ) |
| Gains (Loss) on Sales of Other Assets and Other, net | 2 |
| | 6 |
| | (4 | ) | | (99 | ) | | 11 |
| | (110 | ) |
| Operating Loss | (25 | ) | | (29 | ) | | 4 |
| | (145 | ) | | (43 | ) | | (102 | ) |
| Other Income and Expenses, net | 27 |
| | 29 |
| | (2 | ) | | 41 |
| | 50 |
| | (9 | ) |
| Interest Expense | 164 |
| | 139 |
| | 25 |
| | 321 |
| | 273 |
| | 48 |
|
| Loss Before Income Taxes | (162 | ) | | (139 | ) | | (23 | ) | | (425 | ) | | (266 | ) | | (159 | ) |
| Income Tax Benefit | (28 | ) | | (48 | ) | | 20 |
| | (27 | ) | | (100 | ) | | 73 |
|
| Less: Income Attributable to Noncontrolling Interests | 2 |
| | 3 |
| | (1 | ) | | 4 |
| | 5 |
| | (1 | ) |
| Net Loss | $ | (136 | ) | | $ | (94 | ) | | $ | (42 | ) | | $ | (402 | ) | | $ | (171 | ) | | $ | (231 | ) |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| (in millions) | 2019 |
| | 2018 |
| | Variance |
| | 2019 |
| | 2018 |
| | Variance |
|
| Operating Revenues | $ | 25 |
| | $ | 32 |
| | $ | (7 | ) | | $ | 46 |
| | $ | 67 |
| | $ | (21 | ) |
| Operating Expenses | 11 |
| | 59 |
| | (48 | ) | | 39 |
| | 113 |
| | (74 | ) |
| Gains (Losses) on Sales of Other Assets and Other, net | — |
| | 2 |
| | (2 | ) | | — |
| | (99 | ) | | 99 |
|
| Operating Income (Loss) | 14 |
| | (25 | ) | | 39 |
| | 7 |
| | (145 | ) | | 152 |
|
| Other Income and Expenses, net | 30 |
| | 27 |
| | 3 |
| | 74 |
| | 41 |
| | 33 |
|
| Interest Expense | 180 |
| | 164 |
| | 16 |
| | 351 |
| | 321 |
| | 30 |
|
| Loss Before Income Taxes | (136 | ) | | (162 | ) | | 26 |
| | (270 | ) | | (425 | ) | | 155 |
|
| Income Tax Benefit | (33 | ) | | (28 | ) | | (5 | ) | | (78 | ) | | (27 | ) | | (51 | ) |
| Less: Net Income Attributable to Noncontrolling Interests | — |
| | 2 |
| | (2 | ) | | — |
| | 4 |
| | (4 | ) |
| Less: Preferred Dividends | 12 |
| | — |
| | 12 |
| | 12 |
| | — |
| | 12 |
|
| Net Loss | $ | (115 | ) |
| $ | (136 | ) | | $ | 21 |
| | $ | (204 | ) | | $ | (402 | ) | | $ | 198 |
|
Three Months Ended June 30, 2018,2019, as Comparedcompared to June 30, 20172018
Other's higher net lossThe variance was driven by increasedthe absence in the current year of costs related to the Piedmont acquisition and OVEC fuel expense, offset by higher interest expense. The following is a detailed discussion of the variance drivers by line item.
Operating Expenses. The decrease was primarily due to costs related to the Piedmont acquisition and OVEC fuel expense in the prior year.
Interest Expense. The variance was primarily due to higher short-term interest rates and higher outstanding debt in the current year.
Income Tax Benefit. The increase in the tax benefit was primarily driven by a prior year state rate change and tax levelization, partially offset by a decrease in pretax losses.
Preferred Dividends. The variance was driven by the declaration of the preferred stock dividend on preferred stock issued in 2019.
Six Months Ended June 30, 2019, as compared to June 30, 2018
The variance was driven by the prior year loss on sale of the retired Beckjord station and lower income tax benefit.taxes due to a 2018 adjustment to record a valuation allowance. The following is a detailed discussion of the variance drivers by line item.
Interest Expense. Operating Revenues. Lower operating revenues were due to amounts in the prior year related to Duke Energy Ohio’s entitlement of capacity and energy from OVEC’s power plants. In the current year, the revenues and expenses for OVEC are reflected in the Electric Utilities and Infrastructure segment due to the 2018 PUCO Order that approved Duke Energy to recover or credit amounts through Rider PSR. These amounts are deemed immaterial. Therefore, the prior period amounts were not restated.
Operating Expenses. The variancedecrease was primarily due to an increasecosts associated with the Piedmont acquisition and OVEC fuel expense in long-term debt as well as higher short-term interest rates.the prior year.
Income Tax Benefit.Gains (Losses) on Sales of Other Assets and Other, net. The variance was primarily due to the lower statutory corporate federal income tax rate under the Tax Act, partially offset by an increase in pretax losses. 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
Other's higher net loss was driven by the prior year loss on sale of the retired Beckjord station, higher interest expense and lower income tax benefit. The following is a detailed discussion of the variance drivers by line item.
Gains (Loss) on Sales of Other Assets and Other, net. The variance was driven by the loss on sale of the retired Beckjord station, a nonregulated facility retired during 2014, including the transfer of coal ash basins and other real property and indemnification from any and all potential future claims related to the property, whether arising under environmental laws or otherwise.
Interest Expense. Other Income and Expenses, net. The variance was primarily due to an increase in long-term debt, as well as higher short-term interest rates.returns on investments that fund certain employee benefit obligations.
Income Tax Benefit.Interest Expense. The variance was primarily due to higher short-term interest rates and higher outstanding debt in the current year.
Income Tax Benefit. The increase in the tax benefit was primarily driven by a prior year valuation allowance against AMT credits and the lower statutory corporate federal income tax rate under the Tax Act, partially offset by an increasea decrease in pretax losses. For additional information, see Note 17 to
Preferred Dividends. The variance was driven by the Condensed Consolidated Financial Statements, "Income Taxes."declaration of the preferred stock dividend on preferred stock issued in 2019.
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. On March 31, 2018, FES, a subsidiary of FirstEnergy and an ICPA counterparty with a power participation ratio of 4.85 percent, filed for Chapter 11 bankruptcy,
|
| |
| MD&A | DUKE ENERGY CAROLINAS |
which could increase costs allocated to the counterparties. Duke Energy cannot predict the impact of 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. On April 13, 2018, Duke Energy Ohio filed a Stipulation with the PUCO to resolve issues in the electric 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 Price Stabilization Rider and, as a result, Duke Energy Ohio may move its ownership interest to the Electric Utilities and Infrastructure segment. Hearings will conclude on August 6, 2018. 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 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, 2018,2019, and 20172018, and the Annual Report on Form 10-K/A10-K for the year ended December 31, 2017.2018.
| | | | Six Months Ended June 30, | Six Months Ended June 30, |
| (in millions) | 2018 |
| | 2017 |
| | Variance |
| 2019 |
| | 2018 |
| | Variance |
|
| Operating Revenues | $ | 3,435 |
| | $ | 3,445 |
| | $ | (10 | ) | $ | 3,457 |
| | $ | 3,435 |
| | $ | 22 |
|
| Operating Expenses | | | | | | | | | | |
| Fuel used in electric generation and purchased power | 880 |
| | 863 |
| | 17 |
| 867 |
| | 880 |
| | (13 | ) |
| Operation, maintenance and other | 950 |
| | 978 |
| | (28 | ) | 881 |
| | 950 |
| | (69 | ) |
| Depreciation and amortization | 561 |
| | 523 |
| | 38 |
| 663 |
| | 561 |
| | 102 |
|
| Property and other taxes | 147 |
| | 139 |
| | 8 |
| 155 |
| | 147 |
| | 8 |
|
| Impairment charges | 190 |
| | — |
| | 190 |
| 5 |
| | 190 |
| | (185 | ) |
| Total operating expenses | 2,728 |
| | 2,503 |
| | 225 |
| 2,571 |
| | 2,728 |
| | (157 | ) |
| Losses on Sales of Other Assets and Other, net | (1 | ) | | — |
| | (1 | ) | — |
| | (1 | ) | | 1 |
|
| Operating Income | 706 |
| | 942 |
| | (236 | ) | 886 |
| | 706 |
| | 180 |
|
| Other Income and Expenses, net | 74 |
| | 100 |
| | (26 | ) | 72 |
| | 74 |
| | (2 | ) |
| Interest Expense | 217 |
| | 206 |
| | 11 |
| 227 |
| | 217 |
| | 10 |
|
| Income Before Income Taxes | 563 |
| | 836 |
| | (273 | ) | 731 |
| | 563 |
| | 168 |
|
| Income Tax Expense | 123 |
| | 293 |
| | (170 | ) | 137 |
| | 123 |
| | 14 |
|
| Net Income | $ | 440 |
| | $ | 543 |
| | $ | (103 | ) | $ | 594 |
| | $ | 440 |
| | $ | 154 |
|
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 | 20182019 |
|
| Residential sales | 14.9(4.7 | )% |
| General service sales | 4.5(1.0 | )% |
| Industrial sales | (1.21.6 | )% |
| Wholesale power sales | 14.7(15.7 | )% |
| Joint dispatch sales | 3.913.0 | % |
| Total sales | 6.8(3.3 | )% |
| Average number of customers | 1.52.1 | % |
Six Months Ended June 30, 2018,2019, as Comparedcompared to June 30, 20172018
Operating Revenues.The variance was driven primarily by:
a $122$106 million decreaseincrease in retail salespricing due to revenues subject to refund to customers associated with the lower statutory federal corporate taximpacts of the prior year North Carolina rate under the Tax Act;
a $47 million decrease in rider revenues primarily related to energy efficiency programs;case and
an $11 million decrease in wholesale power revenues, net of sharing and fuel, primarily due to wholesale customer refunds in the current year related to a FERC order on a complaint filed by the PMPA, partially offset by higher revenues related to recovery of coal ash costs.
South Carolina rate case.
Partially offset by:
a $126$44 million increasedecrease in retail sales, net of fuel revenues, due to favorableunfavorable weather in the current year; and
a $29$35 million increasedecrease in fuel relatedrider revenues primarily due to higher sales;excess deferred taxes and energy efficiency programs, partially offset by a decrement rider relating to nuclear decommissioning that ended in the prior year.
a $23 million increase in weather-normal retail sales volumes.
Operating Expenses. The variance was driven primarily by:
a $190$185 million increasedecrease in impairment charges primarily due to the impacts of the prior year 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 used in electric generation and purchased power primarily due to higher sales.
Partially offset by:
a $28$69 million decrease in operation, maintenance and other expense primarily due to lower energy efficiency programdecreased labor costs, partially offset by higher distribution maintenance costs and higher storm restoration costs.
Other IncomePartially offset by:
a $102 million increase in depreciation and Expenses. The variance wasamortization expense primarily due to lower AFUDC equityadditional plant in service, new depreciation rates associated with the prior year North Carolina rate case and a decrease in recognitionhigher amortization of post in-service equity returns for projects that were completeddeferred coal ash costs associated with the prior to being reflected in customer rates.year North Carolina rate case.
Interest Expense.Expense. The variance was primarily due to higher debt outstanding.outstanding in the current year.
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| MD&A | DUKE ENERGY CAROLINAS |
Income Tax Expense. The varianceincrease in tax expense was primarily due to an increase in pretax income partially offset by an increase in the lower statutory federal corporate tax rate under the Tax Act.amortization of excess deferred taxes. The ETRs for the six months ended June 30, 2019, and 2018, and 2017 were 21.818.7 percent and 35.021.8 percent, respectively. The decrease in the ETR was primarily due to an increase in the lower statutory federal corporate tax rate under the Tax Act and levelization for annual amortization of state excess deferred taxes. For additional information, see
Matters Impacting Future Results
On May 21, 2019, the PSCSC issued an order granting Duke Energy Carolinas request for a retail rate increase but denying recovery of certain coal ash costs. On May 31, 2019, Duke Energy Carolinas filed a Petition for Rehearing or Reconsideration and awaits the order on reconsideration detailing the commission's decision. Once the order is received, Duke Energy Carolinas has 30 days to file a notice of appeal with the South Carolina Supreme Court. Duke Energy Carolinas' results of operations, financial position and cash flows could be adversely impacted if coal ash costs are not ultimately approved for recovery. See Note 173 to the Condensed Consolidated Financial Statements, "Income Taxes."Regulatory Matters,"
Matters Impacting Future Results 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 futurewere eligible for reassessment as low risk pursuant to legislation enacted on July 14, 2016. On November 14, 2018, NCDEQ issued final low-risk classifications for these impoundments, indicating that Duke Energy Carolinas' estimated AROs relatedCarolinas had satisfied the permanent replacement water supply and certain dam improvement requirements set out in the Coal Ash Management Act. On April 1, 2019, NCDEQ issued a closure determination requiring Duke Energy Carolinas to the closure of North Carolinaexcavate all remaining coal 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,Carolina. On April 26, 2019, Duke Energy Carolinas filed a Petition for Contested Case Hearings in the Office of Administrative Hearings to challenge NCDEQ's April 1 Order. Duke Energy Carolinas intends to seek recovery of all costs through the ratemaking process consistent with previous proceedings. As the final closure plans and corrective action measures are developed and approved for each site, the closure work progresses, and the closure method scope and remedial action methods are determined, the complexity of work and the amount of coal combustion material could be different than originally estimated and, therefore, could materially impact Duke Energy Carolinas' results of operations, financial position and cash flows. See Note 4 to the Condensed Consolidated Financial Statements, "Commitments and Contingencies," 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 Carolina rate case supporting recovery of past coal ash remediation costs has been appealed by various parties. The outcome of these appeals, lawsuits, fines and penalties could have an adverse impact on Duke Energy Carolinas’ results of operations, financial position and cash flows. See Notes 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/Forwardgrid improvement costs. Duke Energy Carolinas may petition for deferral of grid modernization costs outside of a general rate case proceeding if it can show financial hardship or a stipulation that includes greater consensus among intervening parties on costs being classified as grid modernization. Duke Energy Carolinas' results of operations, financial position and cash flows could be adversely impacted if grid modernization costs are not ultimately approved for recovery and/or deferral treatment.
During the last half of 2018, Duke Energy Carolinas’ service territory was impacted by several named storms. Hurricane Florence, Hurricane Michael and Winter Storm Diego caused flooding, extensive damage and widespread power outages in the service territory. A significant portion of the incremental operation and maintenance expenses related to these storms have been deferred. On December 21, 2018, Duke Energy Carolinas filed with the NCUC a petition for approval to defer the incremental storm costs incurred to a regulatory asset for recovery in the next base rate case. An order from regulatory authorities disallowing the deferral and future recovery of storm restoration costs could have an adverse impact on Duke Energy Carolinas' results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, “Regulatory"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’ 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.
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/A10-K for the year ended December 31, 2017,2018, for discussion of risks associated with the 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, 2018,2019, and 20172018, and the Annual Report on Form 10-K/A10-K for the year ended December 31, 2017.2018.
| | | | Six Months Ended June 30, | Six Months Ended June 30, |
| (in millions) | 2018 |
| | 2017 |
| | Variance |
| 2019 |
| | 2018 |
| | Variance |
|
| Operating Revenues | $ | 5,074 |
| | $ | 4,571 |
| | $ | 503 |
| $ | 5,316 |
| | $ | 5,074 |
| | $ | 242 |
|
| Operating Expenses | | | | | | | | | | |
| Fuel used in electric generation and purchased power | 1,871 |
| | 1,557 |
| | 314 |
| 1,913 |
| | 1,871 |
| | 42 |
|
| Operation, maintenance and other | 1,233 |
| | 1,109 |
| | 124 |
| 1,173 |
| | 1,233 |
| | (60 | ) |
| Depreciation and amortization | 764 |
| | 624 |
| | 140 |
| 881 |
| | 764 |
| | 117 |
|
| Property and other taxes | 254 |
| | 246 |
| | 8 |
| 280 |
| | 254 |
| | 26 |
|
| Impairment charges | 33 |
| | 2 |
| | 31 |
| — |
| | 33 |
| | (33 | ) |
| Total operating expenses | 4,155 |
| | 3,538 |
| | 617 |
| 4,247 |
| | 4,155 |
| | 92 |
|
| Gains on Sales of Other Assets and Other, net | 12 |
| | 14 |
| | (2 | ) | |
| (Losses) Gains on Sales of Other Assets and Other, net | | (1 | ) | | 12 |
| | (13 | ) |
| Operating Income | 931 |
| | 1,047 |
| | (116 | ) | 1,068 |
| | 931 |
| | 137 |
|
| Other Income and Expenses, net | 77 |
| | 76 |
| | 1 |
| 65 |
| | 77 |
| | (12 | ) |
| Interest Expense | 412 |
| | 402 |
| | 10 |
| 438 |
| | 412 |
| | 26 |
|
| Income Before Income Taxes | 596 |
| | 721 |
| | (125 | ) | 695 |
| | 596 |
| | 99 |
|
| Income Tax Expense | 92 |
| | 243 |
| | (151 | ) | 118 |
| | 92 |
| | 26 |
|
| Net Income | 504 |
| | 478 |
| | 26 |
| 577 |
| | 504 |
| | 73 |
|
| Less: Net Income Attributable to Noncontrolling Interests | 4 |
| | 5 |
| | (1 | ) | — |
| | 4 |
| | (4 | ) |
| Net Income Attributable to Parent | $ | 500 |
| | $ | 473 |
| | $ | 27 |
| $ | 577 |
| | $ | 500 |
| | $ | 77 |
|
Six Months Ended June 30, 2018,2019, as Comparedcompared to June 30, 20172018
Operating Revenues. The variance was driven primarily by:
a $335$193 million increase in retail pricing primarily due to the impacts of the prior year Duke Energy Progress North Carolina rate case, Duke Energy Florida's base rate adjustments related to Citrus County CC being placed in service and annual increases from the 2017 Settlement Agreement;
a $54 million increase in fuel revenues primarily related revenuesto increased fuel cost recovery due to higherextreme weather in the prior year at Duke Energy Progress;
a $17 million increase in weather-normal retail sales increasesvolumes at Duke Energy Florida;
a $12 million increase in transmission revenues related to the Fixed Bill program at Duke Energy Florida; and
an $11 million increase in rider revenues primarily related to energy efficiency programs at Duke Energy Progress.
Partially offset by:
a $22 million decrease in fuel and capacity revenues primarily due to a decrease in fuel and capacity rates billed to retail customers and increased demand at Duke Energy Florida;
an $86a $14 million increasedecrease in retail rider revenues at Duke Energy Progress primarily related to decreased revenue requirements in the current year; and
a $13 million decrease in retail sales, net of fuel revenues, due to favorableunfavorable weather in the current year;
a $54 million increase in retail pricing due to the impacts of the Duke Energy Progress North Carolina and South Carolina rate 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 $314$117 million increase in depreciation and amortization expense primarily due to higher amortization of deferred coal ash costs, new depreciation rates associated with the prior year Duke Energy Progress North Carolina rate case and Duke Energy Florida's base rate adjustments related to Citrus County CC being placed in service;
a $42 million increase in fuel used in electric generation and purchased power primarily due to higher sales, higher deferred fuelan increase in the North Carolina Renewable Energy and capacity expenses, and increased purchased power,Energy Efficiency Portfolio Standard requirement from prior year at Duke Energy Progress, partially offset by lower generation costspurchased power at Duke Energy Florida; and
a $140$26 million increase in depreciationproperty and amortizationother taxes 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 andproperty taxes for additional plant in service at Duke Energy Florida;Florida and a favorable sales and use tax credit in the prior year at Duke Energy Progress.
Partially offset by:
a $124$60 million increasedecrease in operation, maintenance and other expense primarily due to storm cost amortization at Duke Energy Florida andprior year impacts associated with the Duke Energy Progress North Carolina rate case and lower employee benefit expenses at Duke Energy Progress; and
a $31$33 million increasedecrease in impairment charges primarily due to theprior year impacts associated with the Duke Energy Progress North Carolina rate casecase.
Other Income and Expenses, net. The variance was driven primarily by AFUDC equity return ending on the Citrus County CC in the fourth quarter of 2018 at Duke Energy Florida, partially offset by life insurance proceeds at Duke Energy Progress.
Interest Expense. The variance was driven primarily by AFUDC debt return ending in the fourth quarter of 2018 on the Citrus County CC at Duke Energy Florida.
Income Tax Expense. The varianceincrease in tax expense was primarily due to an increase in pretax income and a decrease in AFUDC equity in the lower statutory federal corporate tax rate under the Tax Act.current year. The ETRs for the six months ended June 30, 2019, and 2018, and 2017 were 15.417.0 percent and 33.715.4 percent, respectively. The decreaseincrease in the ETR was primarily due to a decrease in AFUDC equity in the lower statutory federal corporate taxcurrent year.
Matters Impacting Future Results
On May 21, 2019, the PSCSC issued an order granting Duke Energy Progress' request for a retail rate underincrease but denying recovery of certain coal ash costs. On May 31, 2019, Duke Energy Progress filed a Petition for Rehearing or Reconsideration and awaits the Tax Actorder on reconsideration detailing the commission's decision. Once the order is received, Duke Energy Progress has 30 days to file a notice of appeal with the South Carolina Supreme Court. Progress Energy's results of operations, financial position and levelizationcash flows could be adversely impacted if coal ash costs are not ultimately approved for annual amortization of federal and state excess deferred taxes. For additional information, seerecovery. See Note 173 to the Condensed Consolidated Financial Statements, "Income Taxes."Regulatory Matters,"
Matters Impacting Future Results 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 futurewere eligible for reassessment as low risk pursuant to legislation enacted on July 14, 2016. On November 14, 2018, NCDEQ issued final low-risk classifications for these impoundments, indicating that Duke Energy Progress Energy's estimated AROs relatedhad satisfied the permanent replacement water supply and certain dam improvement requirements set out in the Coal Ash Management Act. On April 1, 2019, NCDEQ issued a closure determination requiring Duke Energy Progress to the closure of North Carolinaexcavate all remaining coal 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,Carolina. On April 26, 2019, Duke Energy Progress filed a Petition for Contested Case Hearings in the Office of Administrative Hearings to challenge NCDEQ's April 1 Order. Duke Energy Progress intends to seek recovery of all costs through the ratemaking process consistent with previous proceedings. As the final closure plans and corrective action measures are developed and approved for each site, the closure work progresses, and the closure method scope and remedial action methods are determined, the complexity of work and the amount of coal combustion material could be different than originally estimated and, therefore, could materially impact Progress Energy's results of operations, financial position and cash flows. See Note 4 to the Condensed Consolidated Financial Statements, "Commitments and Contingencies," for additional information.
Duke Energy Progress is a party to multiple lawsuits and subject to fines and other penalties related to operations at certain North Carolina facilities with ash basins. As noted above, the order issued in the Duke Energy Progress North CarolinasCarolina rate casescase supporting recovery of past coal ash remediation costs havehas been appealed by various parties. The outcome of these appeals, lawsuits, fines and penalties could have an adverse impact on Progress Energy’s results of operations, financial position and cash flows. See Notes 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/Forwardgrid improvement costs. The NCUC did allow Duke Energy Carolinas to petition for deferral of grid modernization costs outside of a general rate case proceeding if it can show financial hardship or a stipulation that includes greater consensus among intervening parties on costs being classified as grid modernization. While Duke Energy Progress did not request recovery of these costs in its most recent case with the NCUC, Duke Energy Progress may request recovery of certain grid modernization costs in future regulatory proceedings. If the NCUC were to rule similarly, Progress Energy's results of operations, financial position and cash flows could be adversely impacted if grid modernization costs are not ultimately approved for recovery and/or deferral treatment. See Note 3 to
During the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
On June 30, 2017, CertainTeed filed a declaratory judgment action againstlast half of 2018, Duke Energy Progress and Duke Energy Florida’s service territories were impacted by several named storms. Hurricane Florence, Hurricane Michael and Winter Storm Diego caused flooding, extensive damage and widespread power outages to the service territory of Duke Energy Progress. Duke Energy Florida’s service territory was also impacted by Hurricane Michael, a Category 5 hurricane and the most powerful storm to hit the Florida Panhandle in recorded history. A significant portion of the North Carolina Business Court relatingincremental operation and maintenance expenses related to a gypsum supply agreement. In its complaint, CertainTeed sought an order from the court declaring that the minimum amount of gypsumthese storms have been deferred. On December 21, 2018, Duke Energy Progress must providefiled with the NCUC a petition for approval to CertainTeed underdefer the supply agreement is 50,000 tons per month through 2029. The trialincremental storm costs incurred to a regulatory asset for this matter concluded on July 16, 2018. If Duke Energy Progress does not prevail, it will have to either purchase additional gypsum onrecovery in 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 4 to the Condensed Consolidated Financial Statements, “Commitments and Contingencies,” for additional information.
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 Energy's results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
next base rate case. On February 6, 2018,June 11, 2019, 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 filedFlorida's petition for recovery of theincremental storm costs. Stormrestoration costs are currently expectedrelated 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.Hurricane Michael. An order from regulatory authorities disallowing the deferral and future recovery of thesestorm restoration costs could have an adverse impact on Progress Energy's results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, “Regulatory"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/A10-K for the year ended December 31, 2017,2018, for discussion of risks associated with the 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, 2018,2019, and 20172018, and the Annual Report on Form 10-K/A10-K for the year ended December 31, 2017.2018.
| | | | Six Months Ended June 30, | Six Months Ended June 30, |
| (in millions) | 2018 |
| | 2017 |
| | Variance |
| 2019 |
| | 2018 |
| | Variance |
|
| Operating Revenues | $ | 2,751 |
| | $ | 2,418 |
| | $ | 333 |
| $ | 2,871 |
| | $ | 2,751 |
| | $ | 120 |
|
| Operating Expenses | | | | | | | | | | |
| Fuel used in electric generation and purchased power | 917 |
| | 739 |
| | 178 |
| 994 |
| | 917 |
| | 77 |
|
| Operation, maintenance and other | 756 |
| | 704 |
| | 52 |
| 692 |
| | 756 |
| | (64 | ) |
| Depreciation and amortization | 470 |
| | 354 |
| | 116 |
| 541 |
| | 470 |
| | 71 |
|
| Property and other taxes | 75 |
| | 80 |
| | (5 | ) | 85 |
| | 75 |
| | 10 |
|
| Impairment charges | 33 |
| | — |
| | 33 |
| — |
| | 33 |
| | (33 | ) |
| Total operating expenses | 2,251 |
| | 1,877 |
| | 374 |
| 2,312 |
| | 2,251 |
| | 61 |
|
| Gains on Sales of Other Assets and Other, net | 2 |
| | 3 |
| | (1 | ) | — |
| | 2 |
| | (2 | ) |
| Operating Income | 502 |
| | 544 |
| | (42 | ) | 559 |
| | 502 |
| | 57 |
|
| Other Income and Expenses, net | 37 |
| | 57 |
| | (20 | ) | 48 |
| | 37 |
| | 11 |
|
| Interest Expense | 159 |
| | 152 |
| | 7 |
| 158 |
| | 159 |
| | (1 | ) |
| Income Before Income Taxes | 380 |
| | 449 |
| | (69 | ) | 449 |
| | 380 |
| | 69 |
|
| Income Tax Expense | 64 |
| | 148 |
| | (84 | ) | 77 |
| | 64 |
| | 13 |
|
| Net Income | $ | 316 |
| | $ | 301 |
| | $ | 15 |
| $ | 372 |
| | $ | 316 |
| | $ | 56 |
|
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 | 20182019 |
|
| Residential sales | 14.3(7.6 | )% |
| General service sales | 3.2(3.3 | )% |
| Industrial sales | (0.30.7 | )% |
| Wholesale power sales | 10.9(5.0 | )% |
| Joint dispatch sales | (9.120.8 | )% |
| Total sales | 6.2(1.7 | )% |
| Average number of customers | 1.51.3 | % |
Six Months Ended June 30, 2018,2019, as Comparedcompared to June 30, 20172018
Operating Revenues. The variance was driven primarily by:
a $199 million increase in fuel related revenues due to higher retail sales and increases in fuel rates billed to customers;
a $62 million increase in retail sales, net of fuel revenues, due to favorable weather in the current year;
a $54$68 million increase in retail pricing due to the impacts of the prior year North Carolina rate case and the current year South Carolina rate cases;case;
a $50$54 million increase in wholesale powerfuel revenues net ofprimarily related to increased fuel primarilycost recovery due to recovery of coal ash costs;extreme weather in the prior year; and
a $29an $11 million increase in Joint Asset Agency Riderrider revenues primarily duerelated to the implementation of new base rates.energy efficiency programs.
Partially offset by:
a $65$13 million decrease in retail sales, net of fuel revenues, due to revenues subject to refund to customers associated withunfavorable weather in the lower statutory federal corporate tax rate under the Tax Act.current year.
Operating Expenses. The variance was driven primarily by:
a $178$77 million increase in fuel used in electric generation and purchased power primarily due to higher sales anda higher deferred fuel expenses;balance and an increase in the North Carolina Renewable Energy and Energy Efficiency Portfolio Standard requirement from prior year, partially offset by lower demand and changes in generation mix;
a $116$71 million increase in depreciation and amortization expense primarily due to higher amortization of deferred coal ash costs and new depreciation rates perassociated with the prior year North Carolina rate case, partially offset by the amortization credit for the North Carolina rate case;Renewable Energy and Energy Efficiency Portfolio Standard requirement increase from prior year; and
a $52$10 million increase in property and other taxes primarily due to a favorable sales and use tax credit in the prior year.
Partially offset by:
a $64 million decrease in operation, maintenance and other expense primarily due to higher operational costs that are recoverable in rates andprior year impacts associated with the North Carolina rate case;case and lower employee benefit and outage costs; and
a $33 million increasedecrease in impairment charges due to theprior year impacts associated with the North Carolina rate case.
Other Income and Expenses. Expenses, net. The variance was driven primarily driven by lower income from non-service components of employment benefit costs. For additional information on employee benefit costs, see Note 16 to the Condensed Consolidated Financial Statements, "Employee Benefit Plans."life insurance proceeds.
Income Tax Expense. The varianceincrease in tax expense was primarily due to the lower statutory federal corporate tax rate under the Tax Act.an increase in pretax income. The ETRs for the six months ended June 30, 2019, and 2018, were 17.1 percent and 2017 were 16.8 percent, respectively.
Matters Impacting Future Results
On May 21, 2019, the PSCSC issued an order granting Duke Energy Progress' request for a retail rate increase but denying recovery of certain coal ash costs. On May 31, 2019, Duke Energy Progress filed a Petition for Rehearing or Reconsideration and 33.0 percent, respectively. The decrease inawaits the ETR was primarily dueorder on reconsideration detailing the commission's decision. Once the order is received, Duke Energy Progress has 30 days to file a notice of appeal with the lower statutory federal corporate tax rate under the Tax ActSouth Carolina Supreme Court. Duke Energy Progress' results of operations, financial position and levelizationcash flows could be adversely impacted if coal ash costs are not ultimately approved for annual amortization of state excess deferred taxes. For additional information, seerecovery. See Note 173 to the Condensed Consolidated Financial Statements, "Income Taxes."Regulatory Matters,"
Matters Impacting Future Results 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 futurewere eligible for reassessment as low risk pursuant to legislation enacted on July 14, 2016. On November 14, 2018, NCDEQ issued final low-risk classifications for these impoundments, indicating that Duke Energy Progress' estimated AROs relatedProgress had satisfied the permanent replacement water supply and certain dam improvement requirements set out in the Coal Ash Management Act. On April 1, 2019, NCDEQ issued a closure determination requiring Duke Energy Progress to the closure of North Carolinaexcavate all remaining coal 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,Carolina. On April 26, 2019, Duke Energy Progress filed a Petition for Contested Case Hearings in the Office of Administrative Hearings to challenge NCDEQ's April 1 Order. Duke Energy Progress intends to seek recovery of all costs through the ratemaking process consistent with previous proceedings. As the final closure plans and corrective action measures are developed and approved for each site, the closure work progresses, and the closure method scope and remedial action methods are determined, the complexity of work and the amount of coal combustion material could be different than originally estimated and, therefore, could materially impact Duke Energy Progress' results of operations, financial position and cash flows. See Note 4 to the Condensed Consolidated Financial Statements, "Commitments and Contingencies," for additional information.
Duke Energy Progress is a party to multiple lawsuits and subject to fines and other penalties related to operations at certain North Carolina facilities with ash basins. As noted above, the order issued in the Duke Energy Progress North CarolinasCarolina rate casescase supporting recovery of past coal ash remediation costs havehas been appealed by various parties. The outcome of these appeals, lawsuits, fines and penalties could have an adverse impact on Duke Energy Progress’ results of operations, financial position and cash flows. See Notes 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/Forwardgrid improvement costs. The NCUC did allow Duke Energy Carolinas to petition for deferral of grid modernization costs outside of a general rate case proceeding if it can show financial hardship or a stipulation that includes greater consensus among intervening parties on costs being classified as grid modernization. While Duke Energy Progress did not request recovery of these costs in its most recent case with the NCUC, Duke Energy Progress may request recovery of certain grid modernization costs in future regulatory proceedings. If the NCUC were to rule similarly, Duke Energy Progress' results of operations, financial position and cash flows could be adversely impacted if grid modernization costs are not ultimately approved for recovery and/or deferral treatment. See Note 3
During the last half of 2018, Duke Energy Progress' service territory was impacted by several named storms. Hurricane Florence, Hurricane Michael and Winter Storm Diego caused flooding, extensive damage and widespread power outages in the service territory. A significant portion of the incremental operation and maintenance expenses related to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
these storms have been deferred. On June 30, 2017, CertainTeed filed a declaratory judgment action againstDecember 21, 2018, Duke Energy Progress filed with the NCUC a petition for approval to defer the incremental storm costs incurred to a regulatory asset for recovery in the North Carolina Business Court relating to a gypsum supply agreement. In its complaint, CertainTeed sought annext base rate case. An order from regulatory authorities disallowing the court declaring that the minimum amountdeferral and future recovery 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 thatstorm restoration costs could have an adverse impact on itsDuke Energy Progress' results of operations, financial position and cash flows. See Note 43 to the Condensed Consolidated Financial Statements, “Commitments and Contingencies,”"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/A10-K for the year ended December 31, 2017,2018, for discussion of risks associated with the 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, 2018,2019, and 20172018, and the Annual Report on Form 10-K/A10-K for the year ended December 31, 2017.2018.
| | | | Six Months Ended June 30, | Six Months Ended June 30, |
| (in millions) | 2018 |
| | 2017 |
| | Variance |
| 2019 |
| | 2018 |
| | Variance |
|
| Operating Revenues | $ | 2,318 |
| | $ | 2,150 |
| | $ | 168 |
| $ | 2,439 |
| | $ | 2,318 |
| | $ | 121 |
|
| Operating Expenses | | | | | | | | | | |
| Fuel used in electric generation and purchased power | 953 |
| | 817 |
| | 136 |
| 919 |
| | 953 |
| | (34 | ) |
| Operation, maintenance and other | 474 |
| | 403 |
| | 71 |
| 474 |
| | 474 |
| | — |
|
| Depreciation and amortization | 294 |
| | 269 |
| | 25 |
| 340 |
| | 294 |
| | 46 |
|
| Property and other taxes | 179 |
| | 166 |
| | 13 |
| 196 |
| | 179 |
| | 17 |
|
| Impairment charges | — |
| | 2 |
| | (2 | ) | |
| Total operating expenses | 1,900 |
| | 1,657 |
| | 243 |
| 1,929 |
| | 1,900 |
| | 29 |
|
| Losses on Sales of Other Assets and Other, net | | (1 | ) | | — |
| | (1 | ) |
| Operating Income | 418 |
| | 493 |
| | (75 | ) | 509 |
| | 418 |
| | 91 |
|
| Other Income and Expenses, net | 47 |
| | 39 |
| | 8 |
| 25 |
| | 47 |
| | (22 | ) |
| Interest Expense | 137 |
| | 140 |
| | (3 | ) | 165 |
| | 137 |
| | 28 |
|
| Income Before Income Taxes | 328 |
| | 392 |
| | (64 | ) | 369 |
| | 328 |
| | 41 |
|
| Income Tax Expense | 57 |
| | 144 |
| | (87 | ) | 72 |
| | 57 |
| | 15 |
|
| Net Income | $ | 271 |
| | $ | 248 |
| | $ | 23 |
| $ | 297 |
| | $ | 271 |
| | $ | 26 |
|
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 | 20182019 |
|
| Residential sales | 4.82.1 | % |
| General service sales | 1.2 | % |
| Industrial sales | (0.26.0 | )% |
| Wholesale and other | 13.95.9 | % |
| Total sales | 2.00.3 | % |
| Average number of customers | 1.5 | % |
Six Months Ended June 30, 2018,2019, as Comparedcompared to June 30, 20172018
Operating Revenues. The variance was driven primarily by:
a $136$125 million increase in retail pricing due to base rate adjustments related to Citrus County CC being placed in service and annual increases from the 2017 Settlement Agreement;
a $17 million increase in weather-normal retail sales volumes driven by residential growth; and
a $12 million increase in other revenues primarily due to increased transmission revenues related to the Fixed Bill program which began later in 2018 and non-regulated products and services revenues.
Partially offset by:
a $22 million decrease in fuel and capacity revenues primarily due to an increasea decrease in fuel and capacity rates billed to retail customers, as well as increased demand;customers; and
a $24$14 million increasedecrease in retail sales, net of fuelrider revenues dueprimarily related to favorable weatherdecreased revenue requirements in the current year.
Operating Expenses. The variance was driven primarily by:
a $136$46 million increase in depreciation and amortization expense primarily due to base rate adjustments related to Citrus County CC being placed in service, other additional plant in service and increases resulting from the 2018 Crystal River Unit 3 nuclear decommissioning cost study; and
a $17 million increase in property and other taxes primarily due to higher property taxes from additional plant in service.
Partially offset by:
a $34 million decrease in fuel used in electric generation and purchased power primarily due to lower purchased power, partially offset by higher deferred fuel and capacity expenses, increased purchased powerexpenses.
Other Income and increased demand, partially offsetExpenses, net. The variance was driven primarily by lower generation costs;AFUDC equity return ending on the Citrus County CC in the fourth quarter of 2018.
a $71 million increaseInterest Expense. The variance was driven primarily by AFUDC debt return ending on the Citrus County CC in operation, maintenancethe fourth quarter of 2018 and other expense primarily due to storm cost amortization;higher debt outstanding in the current year.
a $25 million increase in depreciation and amortization primarily due to accelerated depreciation of Crystal River Units 4 and 5 and additional plant in service, partially offset by decreased ARO depreciation due to the updated Crystal River Unit 3 nuclear decommissioning cost study; and
a $13 million increase in property and other taxes primarily due to higher revenue related taxes.
Income Tax Expense. The varianceincrease in tax expense was primarily due to an increase in pretax income and a decrease in AFUDC equity in the lower statutory federal corporate tax rate under the Tax Act.current year. The ETRs for the six months ended June 30, 2019, and 2018, and 2017 were 17.419.5 percent and 36.717.4 percent, respectively. The decreaseincrease in the ETR was primarily due to a decrease in AFUDC equity in the lower statutory federal corporate tax rate under the Tax Act and levelization for annual amortization of federal excess deferred taxes. For additional information, see Note 17 to the Condensed Consolidated Financial Statements, "Income Taxes."current year.
Matters Impacting Future Results
On October 10, 2018, Hurricane Michael made landfall on Florida's Panhandle as a Category 5 hurricane, the most powerful storm to hit the Florida Panhandle in recorded history. The storm caused significant damage within the service territory of Duke Energy Florida, is constructing the 1,640-MW combined-cycle natural gas plant in Citrus County, Florida, and expects itparticularly from Panama City Beach 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 impactMexico Beach. Duke Energy Florida’sFlorida has not completed the final accumulation of total estimated storm restoration costs incurred. On June 11, 2019, the FPSC approved Duke Energy Florida's petition for recovery of incremental storm restoration costs related to Hurricane Michael. An order from regulatory authorities disallowing the future recovery of storm restoration costs could have an adverse impact on Duke Energy Florida's financial position, results of operations 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 for the year ended December 31, 2018, 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, 2019, and 2018, and the Annual Report on Form 10-K for the year ended December 31, 2018.
|
| | | | | | | | | | | |
| | Six Months Ended June 30, |
| (in millions) | 2019 |
| | 2018 |
| | Variance |
|
| Operating Revenues | | | | | |
| Regulated electric | $ | 691 |
| | $ | 682 |
| | $ | 9 |
|
| Regulated natural gas | 273 |
| | 277 |
| | (4 | ) |
| Nonregulated electric and other | — |
| | 24 |
| | (24 | ) |
| Total operating revenues | 964 |
| | 983 |
| | (19 | ) |
| Operating Expenses | | | | | |
| Fuel used in electric generation and purchased power – regulated | 179 |
| | 185 |
| | (6 | ) |
| Fuel used in electric generation and purchased power – nonregulated | — |
| | 29 |
| | (29 | ) |
| Cost of natural gas | 64 |
| | 69 |
| | (5 | ) |
| Operation, maintenance and other | 255 |
| | 261 |
| | (6 | ) |
| Depreciation and amortization | 130 |
| | 132 |
| | (2 | ) |
| Property and other taxes | 158 |
| | 145 |
| | 13 |
|
| Total operating expenses | 786 |
| | 821 |
| | (35 | ) |
| Losses on Sales of Other Assets and Other, net | — |
| | (106 | ) | | 106 |
|
| Operating Income | 178 |
| | 56 |
| | 122 |
|
| Other Income and Expenses, net | 15 |
| | 14 |
| | 1 |
|
| Interest Expense | 54 |
| | 45 |
| | 9 |
|
| Income Before Income Taxes | 139 |
| | 25 |
| | 114 |
|
| Income Tax Expense | 23 |
| | 4 |
| | 19 |
|
| Net Income | $ | 116 |
| | $ | 21 |
| | $ | 95 |
|
The following table shows the percent changes in GWh sales of electricity, dekatherms of natural gas delivered and average number of electric and natural gas customers. The percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized. |
| | | | |
| | Electric | Natural Gas |
| Increase (Decrease) over prior year | 2019 |
| 2019 |
|
| Residential sales | (7.2 | )% | (1.4 | )% |
| General service sales | (3.5 | )% | 0.1 | % |
| Industrial sales | (2.1 | )% | (1.0 | )% |
| Wholesale electric power sales | 65.3 | % | n/a |
|
| Other natural gas sales | n/a |
| (1.1 | )% |
| Total sales | (3.2 | )% | (0.9 | )% |
| Average number of customers | 0.6 | % | 0.8 | % |
Six Months Ended June 30, 2019, as compared to June 30, 2018
Operating Revenues. The variance was driven primarily by:
a $25 million decrease in fuel related revenues primarily due to a decrease in sales volumes;
a $16 million decrease in rider revenues primarily related to the implementation of new base rates;
a $14 million decrease in retail sales, net of fuel revenues, due to unfavorable weather in the current year;
a $12 million decrease in FTR rider revenues; and
a $6 million decrease in OVEC revenues.
Partially offset by:
a $38 million increase in retail pricing primarily due to rate case impacts; and
a $12 million increase in point-to-point transmission revenues.
Operating Expenses. The variance was driven primarily by:
a $35 million decrease in fuel used in electric generation and purchased power expense due to the prior year outage at East Bend Station and the deferral of OVEC related purchased power costs.
Partially offset by:
a $13 million increase in property and other taxes primarily due to a higher tax base.
Other Income and Expenses, net. The variance was driven primarily by an increase in intercompany money pool interest income.
Losses on Sales of Other Assets and Other, net. The increase was driven by the loss on the prior year sale of Beckjord.
Interest Expense. The variance was driven primarily by higher debt outstanding in the current year.
Income Tax Expense. The increase in tax expense was primarily due to an increase in pretax income. The ETRs for the six months ended June 30, 2019, and 2018, were 16.5 percent and 16.0 percent, respectively.
Matters Impacting Future Results
On February 6, 2018,November 13, 2013, the FPSC approvedPUCO issued an order authorizing recovery of MGP costs at certain sites in Ohio with a stipulation that would apply tax savings resultingdeadline to complete the MGP environmental investigation and remediation work prior to December 31, 2016. This deadline was subsequently extended to December 31, 2019. Disallowance of costs incurred, failure to complete the work by the deadline or failure to obtain an extension from the Tax Act toward storm costs effective January 2018PUCO could result 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'sOhio’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/A10-K for the year ended December 31, 2017,2018, for discussion of risks associated with the Tax Act.
DUKE ENERGY OHIOINDIANA
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, 2018,2019, and 20172018, and the Annual Report on Form 10-K/A10-K for the year ended December 31, 2017.2018.
| | | | Six Months Ended June 30, | Six Months Ended June 30, |
| (in millions) | 2018 |
| | 2017 |
| | Variance |
| 2019 |
| | 2018 |
| | Variance |
|
| Operating Revenues | | | | | | $ | 1,482 |
| | $ | 1,469 |
| | $ | 13 |
|
| Regulated electric | $ | 682 |
| | $ | 665 |
| | $ | 17 |
| |
| Regulated natural gas | 277 |
| | 270 |
| | 7 |
| |
| Nonregulated electric and other | 24 |
| | 20 |
| | 4 |
| |
| Total operating revenues | 983 |
| | 955 |
| | 28 |
| |
| Operating Expenses | | | | | | | | | | |
| Fuel used in electric generation and purchased power – regulated | 185 |
| | 183 |
| | 2 |
| |
| Fuel used in electric generation and purchased power – nonregulated | 29 |
| | 29 |
| | — |
| |
| Cost of natural gas | 69 |
| | 64 |
| | 5 |
| |
| Fuel used in electric generation and purchased power | | 486 |
| | 458 |
| | 28 |
|
| Operation, maintenance and other | 261 |
| | 263 |
| | (2 | ) | 377 |
| | 378 |
| | (1 | ) |
| Depreciation and amortization | 132 |
| | 130 |
| | 2 |
| 263 |
| | 256 |
| | 7 |
|
| Property and other taxes | 145 |
| | 139 |
| | 6 |
| 39 |
| | 40 |
| | (1 | ) |
| Impairment charges | — |
| | 1 |
| | (1 | ) | |
| Total operating expenses | 821 |
| | 809 |
| | 12 |
| 1,165 |
| | 1,132 |
| | 33 |
|
| Loss on Sales of Other Assets and Other, net | (106 | ) | | — |
| | (106 | ) | |
| Operating Income | 56 |
| | 146 |
| | (90 | ) | 317 |
| | 337 |
| | (20 | ) |
| Other Income and Expenses, net | 14 |
| | 10 |
| | 4 |
| 27 |
| | 13 |
| | 14 |
|
| Interest Expense | 45 |
| | 45 |
| | — |
| 71 |
| | 83 |
| | (12 | ) |
| Income Before Income Taxes | 25 |
| | 111 |
| | (86 | ) | 273 |
| | 267 |
| | 6 |
|
| Income Tax Expense | 4 |
| | 39 |
| | (35 | ) | 66 |
| | 69 |
| | (3 | ) |
| Net Income | $ | 21 |
| | $ | 72 |
| | $ | (51 | ) | $ | 207 |
| | $ | 198 |
| | $ | 9 |
|
The following table shows the percent changes in GWh sales and average number of customers. The percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized. |
| | | | |
| | 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, 2018, as Compared to June 30, 2017
Operating Revenues. The variance was driven primarily by:
a $28 million increase in electric and natural gas retail sales, net of fuel revenues, due to favorable weather in the current 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 $7 million increase in fuel costs due to higher electric fuel prices and natural gas sales volumes; and
•a $6 million increase in property and other taxes primarily due to higher property taxes due to higher plant balances.
Other Income and Expenses. The variance was driven primarily by an increase in AFUDC equity due to higher base spending for transmission and fossil plants and an increase due to the impairment of meters in 2017.
Loss on Sales of Other Assets and Other, net. The decrease was driven by the loss on the sale of Beckjord, a nonregulated facility retired during 2014, including the transfer of coal ash basins and other real property and indemnification from any and all potential future claims related to the property, whether arising under environmental laws or otherwise.
Income Tax Expense. The variance was primarily due to a decrease in pretax income and the lower statutory federal corporate tax rate under the Tax Act. The ETRs for the six months ended June 30, 2018, and 2017 were 16.0 percent and 35.1 percent, respectively. The decrease in the ETR was primarily due to the lower statutory federal corporate tax rate under the Tax Act and an increase in AFUDC equity. For additional information, see Note 17 to the Condensed Consolidated Financial Statements, "Income Taxes."
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. On March 31, 2018, FES, a subsidiary of FirstEnergy and an ICPA counterparty with a power participation ratio of 4.85 percent, filed for Chapter 11 bankruptcy, which could increase costs allocated to the counterparties. Duke Energy Ohio cannot predict the impact of 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. On April 13, 2018, Duke Energy Ohio filed a Stipulation with the PUCO to resolve issues in the electric 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 Price Stabilization Rider. Hearings will conclude on August 6, 2018. Duke Energy Ohio's results of operations, financial position and cash flows could be adversely impacted if the Stipulation is denied by the PUCO. 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 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, 2018, and 2017 and the Annual Report on Form 10-K/A for the year ended December 31, 2017.
|
| | | | | | | | | | | |
| | Six Months Ended June 30, |
| (in millions) | 2018 |
| | 2017 |
| | Variance |
|
| Operating Revenues | $ | 1,469 |
| | $ | 1,500 |
| | $ | (31 | ) |
| Operating Expenses | | | | | |
| Fuel used in electric generation and purchased power | 458 |
| | 485 |
| | (27 | ) |
| Operation, maintenance and other | 378 |
| | 369 |
| | 9 |
|
| Depreciation and amortization | 256 |
| | 216 |
| | 40 |
|
| Property and other taxes | 40 |
| | 37 |
| | 3 |
|
| Total operating expenses | 1,132 |
| | 1,107 |
| | 25 |
|
| Operating Income | 337 |
| | 393 |
| | (56 | ) |
| Other Income and Expenses, net | 13 |
| | 20 |
| | (7 | ) |
| Interest Expense | 83 |
| | 88 |
| | (5 | ) |
| Income Before Income Taxes | 267 |
| | 325 |
| | (58 | ) |
| Income Tax Expense | 69 |
| | 128 |
| | (59 | ) |
| Net Income | $ | 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 | 20182019 |
|
| Residential sales | 15.8(6.3 | )% |
| General service sales | 2.2(1.7 | )% |
| Industrial sales | (0.61.6 | )% |
| Wholesale power sales | (1.033.1 | )% |
| Total sales | 3.7(7.8 | )% |
| Average number of customers | 1.11.3 | % |
Six Months Ended June 30, 2018,2019, as Comparedcompared to June 30, 20172018
Operating Revenues.The variance was driven primarily by:
a $56$25 million decrease 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 wholesale power revenues, net of fuel, primarily due to contracts that expired in the prior year; and
a $12 million decreaseincrease in fuel revenues primarily due to lower purchased power costs passed throughhigher fuel rates billed to customers, andpartially offset by lower financial transmission rights revenues.wholesale fuel revenues due to the expiration of a contract with a wholesale customer.
Partially offset by:
a $32$10 million increasedecrease in rate riderretail sales, net of fuel 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 favorableunfavorable weather in the current year.year; and
a $1 million decrease in weather-normal retail sales volumes.
Operating Expenses.The variance was driven primarily by:
a $40$28 million increase in depreciation and amortization 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 transmission costs, grid improvement and customer related costs.
Partially offset by:
a $27 million decrease in fuel used in electric generation and purchased power expense primarily due to lowerhigher amortization of deferred fuel costs and higher purchased power, partially offset by lower natural gas and fuel prices,coal costs; and
a $7 million increase in depreciation and amortization expense primarily due to the regulatory liability related to Edwardsport IGCC plant being fully amortized in the prior year.
Other Income and Expenses, net. The increase was primarily due to life insurance proceeds, a prior year deduction for customer refunds, legal fees and contributions related to the IGCC tax settlement and a prior year true up of executive deferred compensation.
Interest Expense. The variance was primarily due to recording a debt return on the cumulative balance of deferred coal ash spend based on probability of recovery. This adjustment was immaterial and primarily relates to prior years.
Income Tax Expense. The decrease in tax expense was primarily due to an increase in the amortization of excess deferred taxes, partially offset by an increase in internal generation.
Other Income and Expenses. The variance was driven primarily by lower AFUDC equity in the current year.
Income Tax Expense. The variance was primarily due to the lower statutory federal corporate tax rate under the Tax Act.pretax income. The ETRs for the six months ended June 30, 2019, and 2018, and 2017 were 25.824.2 percent and 39.425.8 percent, respectively. The decrease in the ETR was primarily due to an increase in 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."amortization of excess deferred 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 results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
Duke Energy Indiana’s costs forIndiana filed a general rate case with the Edwardsport IGCC plant are recovered from retail electric customers via a rider. Duke EnergyIURC on July 2, 2019, its first general rate case in Indiana files cost updates periodically with IURC.in 16 years. The outcome of this rate case could materially impact Duke Energy Indiana's results of operations, financial position and cash flows could be adversely impacted by actions offlows. See Note 3 to the IURC related to IGCC costs.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/A10-K for the year ended December 31, 2017,2018, 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, 20182019, and 20172018, and the Annual Report on Form 10-K/A10-K for the year ended December 31, 2017.2018.
| | | | Six Months Ended June 30, | Six Months Ended June 30, |
| (in millions) | 2018 |
| | 2017 |
| | Variance |
| 2019 |
| | 2018 |
| | Variance |
|
| Operating Revenues | $ | 768 |
| | $ | 701 |
| | $ | 67 |
| $ | 788 |
| | $ | 768 |
| | $ | 20 |
|
| Operating Expenses | | | | | | | | | | |
| Cost of natural gas | 333 |
| | 270 |
| | 63 |
| 338 |
| | 333 |
| | 5 |
|
| Operation, maintenance and other | 167 |
| | 153 |
| | 14 |
| 163 |
| | 167 |
| | (4 | ) |
| Depreciation and amortization | 78 |
| | 71 |
| | 7 |
| 84 |
| | 78 |
| | 6 |
|
| Property and other taxes | 24 |
| | 25 |
| | (1 | ) | 25 |
| | 24 |
| | 1 |
|
| Impairment charges | — |
| | 7 |
| | (7 | ) | |
| Total operating expenses | 602 |
| | 526 |
| | 76 |
| 610 |
| | 602 |
| | 8 |
|
| Operating Income | 166 |
| | 175 |
| | (9 | ) | 178 |
| | 166 |
| | 12 |
|
| Other Income and Expenses | | | | | | |
| Equity in earnings of unconsolidated affiliates | 3 |
| | 5 |
| | (2 | ) | |
| Other income and expenses, net | 6 |
| | (1 | ) | | 7 |
| |
| Total other income and expenses | 9 |
| | 4 |
| | 5 |
| |
| Other Income and Expenses, net | | 12 |
| | 9 |
| | 3 |
|
| Interest Expense | 41 |
| | 39 |
| | 2 |
| 43 |
| | 41 |
| | 2 |
|
| Income Before Income Taxes | 134 |
| | 140 |
| | (6 | ) | 147 |
| | 134 |
| | 13 |
|
| Income Tax Expense | 32 |
| | 53 |
| | (21 | ) | 32 |
| | 32 |
| | — |
|
| Net Income | $ | 102 |
| | $ | 87 |
| | $ | 15 |
| $ | 115 |
| | $ | 102 |
| | $ | 13 |
|
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 | 20182019 |
|
| Residential deliveries | 40.2(8.3 | )% |
| Commercial deliveries | 31.0(5.1 | )% |
| Industrial deliveries | 4.32.0 | % |
| Power generation deliveries | 18.8(7.9 | )% |
| For resale | 26.04.9 | % |
| Total throughput deliveries | 19.6(5.7 | )% |
| Secondary market volumes | (10.27.1 | )% |
| Average number of customers | 1.81.2 | % |
Due to the margin decoupling mechanism in North Carolina and weather normalization adjustment (WNA) mechanismsthe WNA 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 offsetoffsets the impact of weather on bills rendered, but do not ensure precise recovery of approved margin during periods when winter weather is significantly warmer or colder than normal.
Six Months Ended June 30, 2018,2019, as Comparedcompared to June 30, 20172018
Operating Revenues.The variance was driven primarily by:
an $11 million increase primarily due to North Carolina and Tennessee IMR increases;
a $63$9 million increase primarily due to higher natural gas costs passed through to customers due to higher volumes sold and higher natural gas prices;prices associated with increased off-system sales; and
a $31an $8 million increase primarily due to residential and commercial customer revenue, net of natural gas costs passed throughNCUC approval related to customers, customer growth, IMRtax reform accounting from fixed rate adjustments and new power generation customers.contracts.
Partially offset by:
a $27$6 million decrease primarily due to revenues subject to refund to customers associated with the lower statutory federal corporate tax rate under the Tax Act.a reduction of rates in South Carolina.
Operating Expenses.The variance was driven primarily by:
a $63$6 million increase in depreciation and amortization expense primarily due to additional plant in service; and
a $5 million increase in cost of natural gas primarily due to higher volumes sold andthe impact of higher natural gas prices;
a $14 million increase in operation, maintenanceprices on off-system sales and other primarily due to increased natural gas operations, shared services, corporate governance and costs to achieve merger expenses; and
a $7 million increase in depreciation and amortization due to additional plant in service.unbilled revenue.
Partially offset by:
a $7$4 million decrease in operations, maintenance and other expense primarily due to an impairmentlower labor costs and a portion of software recordedrent expense being charged to shared services in the priorcurrent year.
Income TaxInterest Expense.The variance was primarilydriven by higher debt outstanding in the current year and higher interest expense due to customers as a result of tax reform deferrals, partially offset by favorable AFUDC debt interest.
Matters Impacting Future Results
Piedmont filed a general rate case with the lower statutory federal corporate taxNCUC on April 1, 2019, its first general rate under the Tax Act.case in North Carolina in six years. The ETRs for the six months ended June 30, 2018,outcome of this rate case could materially impact Piedmont's results of operations, financial position and 2017 were 23.9 percent and 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, seecash flows. See Note 173 to the Condensed Consolidated Financial Statements, "Income Taxes."Regulatory Matters,"
Matters Impacting Future Results 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/A10-K for the year ended December 31, 2017,2018, 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 and equity issuances and its existing cash and cash equivalents to fund its liquidity and capital requirements. Duke Energy’s capital requirements arise primarily from capital and investment expenditures, repaying long-term debt and paying dividends to shareholders. See Duke Energy’s Annual Report on Form 10-K/A10-K for the year ended December 31, 2017,2018, for a summary and detailed discussion of projected primary sources and uses of cash for 20182019 to 2020.2021.
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 certainissued $3.8 billion of its other subsidiaries in a money pool arrangement. The companies with short-term funds may provide short-term loans to affiliates participatingdebt, drew $650 million under this arrangement.
the Duke Energy Progress Term Loan Facility and paid off in full the Subsidiary Registrants, excluding Progress Energy (Parent), may also use short-term debt, including commercial paper and$350 million Piedmont term loan during 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
six months ended June 30, 2019. 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 56 to the Condensed Consolidated Financial Statements, "Debt and Credit Facilities," for further information regarding Duke Energy's debt issuances, debt maturities and available credit facilities including the Master Credit Facility.
Shelf Registration
In September 2016,March 2019, Duke Energy filed a registration statement (Form S-3) withissued preferred stock for net proceeds of $973 million. In addition, for the U.S. Securities and Exchange Commission. Under this Form S-3, which is uncapped, thesix months ended June 30, 2019, 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 issuanceraised approximately $80 million of common stock by Duke Energy.
In January 2017, Duke Energy amendedequity through 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
DRIP. Refer to Note 515 to the CondensedConsolidated Financial Statements, "Debt and Credit Facilities,"Stockholders' Equity," 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-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, and 70 percent for Piedmont. Failure to meet those covenants beyond applicable grace periods could result in accelerated due dates and/or termination of the agreements or sublimits thereto. As of June 30, 2018, each of the Duke Energy Registrants was in compliance with all covenants related to their debt agreements. In addition, some credit agreements may allow for acceleration of payments or termination of the agreements due to nonpayment or acceleration of other significant indebtedness of the borrower or some of its subsidiaries. None of the debt or credit agreements contain material adverse change clauses.Energy's equity issuances.
Credit Ratings
Credit ratings are intended to provide credit lenders a framework for comparingIn May 2019, S&P revised 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.
Moody’s Investors Service, Inc. (Moody’s), Standard & Poor’s Rating Services and Fitch Ratings, Inc. provide credit ratings for various Duke Energy Registrants.
On August 1, 2018, Moody’s revised its ratings outlook for Duke Energy Corporation and Piedmont from negative to stable and forall other Duke Energy OhioRegistrants from positivestable to stable. Moody’s also revised itsnegative, principally due to concerns of weaker financial measures due to 2018 storms, uncertainty over coal ash remediation costs and recovery in the Carolinas, regulatory lag during a period of robust capital spending and delays related to the ACP pipeline. There have been no changes to the credit ratings as follows: Progressof any of the Duke Energy is upgraded from Baa2Registrants during 2019 by any of the rating agencies. Moody's and Fitch continue to Baa1; Piedmont is downgraded from A2 to A3.maintain a stable outlook on Duke Energy Corporation.
Cash Flow Information
The following table summarizes Duke Energy’s cash flows. | | | | | Six Months Ended | | Six Months Ended |
| | | June 30, | | June 30, |
| (in millions) | | 2018 |
| | 2017 |
| | 2019 |
| | 2018 |
|
| Cash flows provided by (used in): | | | | | | | | |
| Operating activities | | $ | 3,302 |
| | $ | 2,800 |
| | $ | 3,056 |
| | $ | 3,302 |
|
| Investing activities | | (4,645 | ) | | (4,344 | ) | | (5,788 | ) | | (4,645 | ) |
| Financing activities | | 1,265 |
| | 1,474 |
| | 2,622 |
| | 1,265 |
|
| Net decrease in cash, cash equivalents and restricted cash | | (78 | ) | | (70 | ) | | (110 | ) | | (78 | ) |
| Cash, cash equivalents and restricted cash at beginning of period | | 505 |
| | 541 |
| | 591 |
| | 505 |
|
| Cash, cash equivalents and restricted cash at end of period | | $ | 427 |
| | $ | 471 |
| | $ | 481 |
| | $ | 427 |
|
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) | | 2018 |
| | 2017 |
| | 2019 |
| | 2018 |
| | Variance |
|
| Net income | | $ | 1,124 |
| | $ | 1,406 |
| | $ | 1,641 |
| | $ | 1,124 |
| | $ | 517 |
|
| Non-cash adjustments to net income | | 3,082 |
| | 2,434 |
| | 2,921 |
| | 3,082 |
| | (161 | ) |
| Contributions to qualified pension plans | | (141 | ) | | — |
| | — |
| | (141 | ) | | 141 |
|
| Payments for asset retirement obligations | | (245 | ) | | (272 | ) | | (336 | ) | | (245 | ) | | (91 | ) |
| Payment for disposal of other assets | | (105 | ) | | — |
| | — |
| | (105 | ) | | 105 |
|
| Working capital | | (413 | ) | | (768 | ) | | (1,170 | ) | | (413 | ) | | (757 | ) |
| Net cash provided by operating activities | | $ | 3,302 |
| | $ | 2,800 |
| | $ | 3,056 |
| | $ | 3,302 |
| | $ | (246 | ) |
|
| |
| MD&A | LIQUIDITY AND CAPITAL RESOURCES |
The variance was primarily due to:
a $366$757 million increase in cash outflows from working capital primarily due to fluctuations in coal stock inventory, fluctuations of payables balances due primarily to storm costs and timing and increases in federal tax receivables, partially offset by fluctuations in accounts receivable balances due to higher receivables at December 31, 2018; and
a $91 million increase in payments for asset retirement obligations.
Partially offset by:
a $356 million increase in net income after adjustment for non-cash items due primarily due to favorable weatherincreases in revenues as a result of rate increases in the current period compared to the prior period and increased pricing; and
a $355 million decreaseyear, partially offset by decreases 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:current year non-cash adjustments;
a $141 million increasedecrease in contributions to qualified pension plans; and
a $105 million payment for disposal of Beckjord.Beckjord in the prior year.
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) | | 2018 |
| | 2017 |
| | 2019 |
| | 2018 |
| | Variance |
|
| Capital, investment and acquisition expenditures | | $ | (4,515 | ) | | $ | (4,218 | ) | | $ | (5,627 | ) | | $ | (4,515 | ) | | $ | (1,112 | ) |
| Other investing items | | (130 | ) | | (126 | ) | | (161 | ) | | (130 | ) | | (31 | ) |
| Net cash used in investing activities | | $ | (4,645 | ) | | $ | (4,344 | ) | | $ | (5,788 | ) | | $ | (4,645 | ) | | $ | (1,143 | ) |
The variance relates primarily to a $297 millionan increase in capital expenditures due to higher overall investments in regulated generation, natural gasthe Electric Utilities and commercial renewables.Infrastructure, Gas Utilities and Infrastructure and Commercial Renewables segments.
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) | | 2018 |
| | 2017 |
| | 2019 |
| | 2018 |
| | Variance |
|
| Issuances of long-term debt, net | | $ | 537 |
| | $ | 1,725 |
| | $ | 2,467 |
| | $ | 537 |
| | $ | 1,930 |
|
| Issuances of common stock | | 820 |
| | — |
| | 27 |
| | 820 |
| | (793 | ) |
| Issuances of preferred stock | | | 973 |
| | — |
| | 973 |
|
| Notes payable and commercial paper | | 1,131 |
| | 981 |
| | 324 |
| | 1,131 |
| | (807 | ) |
| Dividends paid | | (1,199 | ) | | (1,200 | ) | | (1,312 | ) | | (1,199 | ) | | (113 | ) |
| Other financing items | | (24 | ) | | (32 | ) | | 143 |
| | (24 | ) | | 167 |
|
| Net cash provided by financing activities | | $ | 1,265 |
| | $ | 1,474 |
| | $ | 2,622 |
| | $ | 1,265 |
| | $ | 1,357 |
|
The variance was primarily due to:
a $1,188$973 million decreaseincrease in proceeds from the issuance of preferred stock; and
a $1,930 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$807 million increasedecrease in net proceeds from issuances of notes payable and commercial paper primarily due to the use of proceeds from the preferred stock issuance and increased long-term debt issuances to pay down outstanding commercial paper; and
a $793 million decrease in proceeds from the issuance of common stock.
Summary of Significant Debt Issuances
Referstock due primarily to Note 5 to the Condensed Consolidated Financial Statements, "Debt and Credit Facilities," for further information regarding significant debt issuances.prior year issuances under equity forward agreements.
OTHER MATTERS
Environmental Regulations
The Duke Energy Registrants are subject to federal, state and local regulations regarding air and water quality, hazardous and solid waste disposal, coal ash and other environmental matters. These regulations can be changed from time to time and result in new obligations of the Duke Energy Registrants.
The following sections outline various proposed and recently enacted regulations that may impact the Duke Energy Registrants. Refer to Note 3 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. Various industry and environmental parties have appealed the EPA's CCR rule in the U.S. Court of Appeals for the District of Columbia (D.C. Circuit Court). On April 18, 2016, the EPA filed a motion with the federal court to settle five issues raised in litigation. On June 14, 2016, the court approved the motion with respect to all of those issues. Duke Energy does not expect a material impact from the settlement or that it will result in additional ARO adjustments. On September 13, 2017, EPA responded to a petition by the Utility Solid Waste Activities Group that the agency would reconsider certain provisions of the final rule, and asked the D.C. Circuit Court to suspend the litigation. The D.C. Circuit Court denied EPA’s petition to suspend the litigation and oral argument was held on November 20, 2017. The court has not issued an order in 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-K/A for the year ended December 31, 2017.
Coal Ash Management Act of 2014
Asset retirement obligationsOn March 26, 2019, NCDEQ granted Duke Energy’s application in part, extending by four months until December 1, 2019, the Coal Ash Act’s closure deadline applicable to the Sutton plant impoundments.
On April 1, 2019, NCDEQ issued a closure determination requiring Duke Energy Carolinas and Duke Energy Progress to excavate all remaining coal ash impoundments at the Allen, Belews Creek, Rogers, Marshall, Mayo and Roxboro facilities in North Carolina. With respect to the final six sites, which NCDEQ has ruled as low risk, science and engineering support a variety of closure methods including capping in place and hybrid cap-in-place as appropriate solutions that protect public health and the environment. On April 26, 2019, Duke Energy Carolinas and Duke Energy Progress filed Petitions for Contested Case Hearings in the Office of Administrative Hearings to challenge NCDEQ’s April 1 Order. For more information, see Note 4, "Commitments and Contingencies," to the Condensed Consolidated Financial Statements.
Duke Energy estimates the undiscounted, unadjusted cost to close the remaining impoundments by excavation, as outlined in the NCDEQ closure determination, will be approximately $4 billion to $5 billion more than the prior project cost estimate of $5.6 billion in the aggregate for the closure for all Duke Energy Carolinas and Duke Energy Progress impoundments. Excavation would likely extend beyond the required federal and state deadlines for impoundment closure. Duke Energy intends to seek recovery of all costs through the ratemaking process consistent with previous proceedings. AROs recorded on the Duke Energy Carolinas and Duke Energy Progress Condensed Consolidated Balance Sheets at June 30, 2018,2019, and December 31, 2017,2018, include the legal obligation for closure of coal ash basins and the disposal of related ash as a result of the Coal Ash Act, the EPA CCR rule and other agreements. The Coal Ash Act requires Duke Energy to undertake dam improvement projects and to provide access to a permanent alternative drinking water source to certain residents within a half-mile of coal ash basin compliance boundaries and to certain other potentially impacted residents. The legislation requires 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 sites are required to be closed 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 closure deadline would be extended to December 31, 2029, and could include closure through the combination of a cap system and a groundwater monitoring system.
Additionally, the Coal Ash Act requires the installation and operation of three large-scale coal ash beneficiation projects to produce reprocessed ash for use in the concrete industry. Duke Energy selected the Buck, H.F. Lee and Cape Fear plants for these projects. Closure at these sites is required to be completed no later than December 31, 2029.
The Coal Ash Act includes a variance procedure for compliance deadlines and other issues surrounding the management of CCR and CCR surface impoundments and prohibits cost recovery in customer rates for unlawful discharge of ash impoundment waters occurring after January 1, 2014. The Coal Ash Act leaves the decision on cost recovery determinations related to closure of ash impoundments to the normal ratemaking processes before utility regulatory commissions. Consistent with the requirements of the Coal Ash Act, Duke Energy 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, “Asset7, "Asset Retirement Obligations,” in Duke Energy’s Annual Report on Form 10-K/A for the year ended December 31, 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 2023 time frame. Petitions challenging the rule have been filed by several groups. Oral argument was held on September 14, 2017. On July 23, 2018, the U.S. Court of Appeals for the Second Circuit announced their decision to uphold the 316(b) rule. Duke Energy continues to work with the 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. As originally written, affected facilities were required to comply between 2018 and 2023, depending on the timing of Clean Water Act (CWA) discharge permits. Most of the steam electric generating facilities the Duke Energy Registrants own are affected sources. The Duke Energy Registrants are well-positioned to meet the majority of the requirements of the rule due to current efforts to convert to dry ash handling. Petitions challenging the rule have been filed by several groups. On March 16, 2015, Duke Energy Indiana filed its own legal challenge to the rule with the Seventh Circuit Court of Appeals specific to the ELG rule focused on the limits imposed on IGCC facilities (gasification wastewater). All challenges to the rule were consolidated in the Fifth Circuit Court of Appeals. On August 22, 2017, the Fifth Circuit Court of Appeals granted EPA’s Motion to Govern Further Proceedings, thereby severing and suspending the claims related to flue gas desulfurization wastewater, bottom ash transport water and gasification wastewater. Claims regarding gasification wastewater were stayed, pending the issuance of the variance to Duke Energy Indiana. 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 desulfurization 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, 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‑K/A for the year ended December 31, 2017. |
| | | |
| (in millions) | Estimated Cost |
|
| Duke Energy | $ | 910 |
|
| Duke Energy Carolinas | 420 |
|
| Progress Energy | 360 |
|
| Duke Energy Progress | 260 |
|
| Duke Energy Florida | 100 |
|
| Duke Energy Ohio | 70 |
|
| Duke Energy Indiana | 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 September 7, 2016, EPA finalized a revision to the Cross-State Air Pollution Rule (CSAPR); the revised rule is known as the CSAPR Update Rule. The CSAPR Update Rule reduces the CSAPR Phase 2 state ozone season NOX emission budgets for 22 eastern states, including Ohio, Kentucky and Indiana. In the final CSAPR Update Rule, the EPA removed Florida, South Carolina and North Carolina from the ozone season NOx program. Beginning in 2017, Duke Energy Registrants in these states will not be subject to any CSAPR ozone season NOx emission limitations. For the states that remain in the program, the reduced state ozone season NOx emission budgets took effect on May 1, 2017. In Kentucky and Indiana, where Duke Energy Registrants own and operate coal-fired electric generating units (EGUs) subject to the final rule requirements, near-term responses include changing unit dispatch to run certain generating units less frequently and/or purchasing NOx allowances from the trading market. Longer term, upgrading the performance of existing NOx controls is an option. The Indiana Utility Group and the Indiana Energy Association jointly filed a petition for reconsideration asking that the EPA correct errors it made in calculating the Indiana budget and increase the budget accordingly. EPA has yet to act on the petition. Numerous parties have filed petitions with the D.C. Circuit Court challenging various aspects of the CSAPR Update Rule. Final briefs in the case were due April 9, 2018. Oral argument is scheduled for 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 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. On August 10, 2017, the court ordered that the litigation be suspended indefinitely. The rule remains in effect pending the outcome of litigation and EPA’s review. EPA has not announced a schedule for completing its review. 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 to regulate CO2 emissions from existing fossil fuel-fired EGUs. The CPP established CO2 emission rates and mass cap goals that apply to existing fossil fuel-fired EGUs. Petitions challenging the rule were filed by numerous 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 order directing EPA to review the CPP and determine whether to suspend, revise or rescind the rule. On the same day, the DOJ filed a motion with the D.C. Circuit Court requesting that the court stay the litigation of the rule while it is reviewed by EPA. On April 28, 2017, the court issued an order to suspend the litigation for 60 days. On August 8, 2017, the court, on its own motion, extended the suspension of the litigation for an additional 60 days. On October 16, 2017, EPA issued a Notice of Proposed Rulemaking (NPR) to 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, EPA 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 to the OMB for review; after that review is completed, EPA will issue its proposal for public comment. Litigation of the CPP remains on hold in the D.C. Circuit Court and the February 2016 U.S. Supreme Court stay of the CPP remains in effect. The Duke Energy Registrants cannot predict the outcome of these matters.
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-K/A for the year ended December 31, 2017.
North Carolina Legislation
For other information on North Carolina legislation and the potential impacts on Duke Energy, see “Other Matters” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Duke Energy’s Annual Report on Form 10-K/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 project is expected to be completed in the summer of 2021 at a cost of $250 million. Construction will begin in the summer of 2019.
Nuclear Matters
For other information on nuclear matters and the potential impacts on Duke Energy, see “Other Matters” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Duke Energy’s Annual Report on Form 10-K/A for the year ended December 31, 2017.
New Accounting Standards
See Note 1" to the Condensed Consolidated Financial Statements, “OrganizationStatements.
Duke Energy has completed excavation of all coal ash at the Riverbend plant and Basiscoal ash regulated by the Coal Ash Act at the Dan River and Sutton plants.
North Carolina Competitive Procurement
Based on an independent evaluation process, Duke Energy will own or purchase a total of Presentation,”551 MW of renewable energy from projects under the North Carolina’s CPRE program. The process used was approved by the NCUC to select projects that would deliver the lowest cost renewable energy for customers. Five Duke Energy projects, totaling about 190 MW, were selected during the competitive bidding process. Duke Energy has completed the contracting process for the winning projects; there will be a discussionsecond tranche for CPRE that is scheduled to occur in the fourth quarter of the impact of new accounting standards.2019.
Off-Balance Sheet Arrangements
During the three and six months ended June 30, 2018,2019, there were no material changes to Duke Energy’s off-balance sheet arrangements. See Note 1213 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-K/A10-K for the year ended December 31, 2017.2018.
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, 2018,2019, there were no material changes in Duke Energy's contractual obligations. For an in-depth discussion of Duke Energy’s contractual obligations, see “Contractual Obligations” and “Quantitative and Qualitative Disclosures about Market Risk” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Duke Energy’s Annual Report on Form 10-K/A10-K for the year ended December 31, 2017.
Subsequent Events
See Note 18 to the Condensed Consolidated Financial Statements, “Subsequent Events,” for a discussion of subsequent events.2018.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
During the three and six months ended June 30, 2018,2019, there were no material changes to the Duke Energy Registrants' disclosures about market risk. For an in-depth discussion of the Duke Energy Registrants' market risks, see “Quantitative and Qualitative Disclosures about Market Risk” in Item 7 of the Annual Report on Form 10-K/A10-K 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) areis recorded, processed, summarized and reported, within the time periods specified by the U.S. Securities and Exchange CommissionSEC rules and forms.
Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by the Duke Energy Registrants in the reports they file or submit under the Exchange Act areis accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, the Duke Energy Registrants have evaluated the effectiveness of their disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2018,2019, and, based upon this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these controls and procedures are effective in providing reasonable assurance of compliance.
Changes in Internal Control over Financial Reporting
Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, the Duke Energy Registrants have evaluated changes in internal control over financial reporting (as such term is defined in Rules 13a-15(f)13a-15 and 15d-15(f)15d-15 under the Exchange Act) that occurred during the fiscal quarter ended June 30, 2018,2019, 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 3, "Regulatory Matters," and Note 4, "Commitments and Contingencies," to the Condensed Consolidated Financial Statements.
Methyl tertiary butyl ether (MTBE) Litigation
On June 19, 2014, For additional information, see Item 3, "Legal Proceedings," in Duke Energy's Annual Report on Form 10-K for 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 inyear ended December 2017 and dismissed in January31, 2018.
In December 2017, the state of Maryland filed a lawsuit in Baltimore City Circuit Court against Duke Energy Merchants and other defendants alleging contamination of its water supplies from MTBE. Duke Energy cannot predict the 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/A,10-K for the year ended December 31, 2018, which could materially affect the Duke Energy Registrants’ financial condition or future results.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
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 Companycompany agrees to furnish upon request to the Commissioncommission a copy of any omitted schedules or exhibits upon request on all items designated by a triple asterisk (***). |
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| Exhibit | | Duke | | Energy | | Progress | | Energy | | Energy | | Energy | | Energy | | |
| Number | | Energy | | Carolinas | | Energy | | Progress | | Florida | | Ohio | | Indiana | | Piedmont |
*4.1 | | X | | | | | | | | | | | | | | | X |
| 4.2 |
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*12 | | X | | | | | | | | | | | | | | |
| *10.1 | | | | | | | | | | | | | | | | X |
| 10.2 | $1,000,000,000 Credit Agreement, dated as of May 15, 2019, among Duke Energy Corporation, the Lenders party thereto, The Bank of Nova Scotia, as Administrative Agent, PNC Bank, 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 May 16, 2019, File No. 1-32853). | X | | | | | | | | | | | | | | |
| *10.3 | | | | | | | | | | 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 | | |
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| *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 |
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| *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 | | | | | | | | | | |
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| *32.2.4 | | | | | | | | X | | | | | | | | |
| *32.2.5 | | | | | | | | | | X | | | | | | |
| *32.2.6 | | | | | | | | | | | | X | | | | |
| *32.2.7 | | | | | | | | | | | | | | X | | |
| *32.2.8 | | | | | | | | | | | | | | | | X |
| *101.INS | XBRL Instance Document.Document (this does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document). | X | | X | | X | | X | | X | | X | | X | | X |
| *101.SCH | XBRL Taxonomy Extension Schema Document. | X | | X | | X | | X | | X | | X | | X | | X |
| *101.CAL | XBRL Taxonomy Calculation Linkbase Document. | X | | X | | X | | X | | X | | X | | X | | X |
| *101.LAB | XBRL Taxonomy Label Linkbase Document. | X | | X | | X | | X | | X | | X | | X | | X |
| *101.PRE | XBRL Taxonomy Presentation Linkbase Document. | X | | X | | X | | X | | X | | X | | X | | X |
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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 2, 20186, 2019 | /s/ STEVEN K. YOUNG |
| | | Steven K. Young
Executive Vice President and Chief Financial Officer (Principal Financial Officer)
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| Date: | August 2, 20186, 2019 | /s/ DWIGHT L. JACOBS |
| | | Dwight L. Jacobs
Senior Vice President, Chief Accounting Officer,
Tax and Controller
(Principal Accounting Officer) |
