0001326160 duk:DukeEnergyProgressMember us-gaap:LineOfCreditMember 2019-09-30ProgressEnergyMember duk:ElectricUtilitiesandInfrastructureMember 2019-12-31 0001326160 duk:DukeEnergyCarolinasMemberDukeEnergyOhioMember duk:OtherRevenuesMemberCommercialMember us-gaap:NaturalGasUsRegulatedMember duk:ElectricUtilitiesandInfrastructureMember 2019-07-01 2019-09-30GasUtilitiesandInfrastructureMember 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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☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended SeptemberJune 30, 20192020
OR
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☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _________to_________
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Commission file number | Registrant, State of Incorporation or Organization, Address of Principal Executive Offices and Telephone Number | IRS Employer Identification Number |
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1-32853 | DUKE ENERGY CORPORATION | 20-2777218
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(a Delaware corporation)
550 South Tryon Street
Charlotte, North Carolina 28202-1803
704-382-3853
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1-4928
| DUKE ENERGY CAROLINAS, LLC
| 56-0205520 |
(a North Carolina limited liability company)
526 South Church Street
Charlotte, North Carolina 28202-1803
704-382-3853
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1-15929
| PROGRESS ENERGY, INC.
| 56-2155481
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(a North Carolina corporation)
410 South Wilmington Street
Raleigh, North Carolina 27601-1748
704-382-3853
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1-3382
| DUKE ENERGY PROGRESS, LLC
| 56-0165465
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(a North Carolina limited liability company)
410 South Wilmington Street
Raleigh, North Carolina 27601-1748
704-382-3853
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1-3274
| DUKE ENERGY FLORIDA, LLC
| 59-0247770
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(a Florida limited liability company)
299 First Avenue North
St. Petersburg, Florida 33701
704-382-3853
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1-1232
| DUKE ENERGY OHIO, INC.
| 31-0240030
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(an Ohio corporation)
139 East Fourth Street
Cincinnati, Ohio 45202
704-382-3853
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1-3543
| DUKE ENERGY INDIANA, LLC
| 35-0594457
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(an Indiana limited liability company)
1000 East Main Street
Plainfield, Indiana 46168
704-382-3853
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1-6196
| PIEDMONT NATURAL GAS COMPANY, INC.
| 56-0556998
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(a North Carolina corporation)
4720 Piedmont Row Drive
Charlotte, North Carolina 28210
704-364-3120
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of each exchange on
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Registrant | Title of each class Trading symbols which registered |
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Duke Energy | Common Stock, $0.001 par value DUK New York Stock Exchange LLC |
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Duke Energy | 5.125% Junior Subordinated Debentures due DUKH New York Stock Exchange LLC |
January 15, 2073
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Duke Energy | 5.625% Junior Subordinated Debentures due DUKB New York Stock Exchange LLC |
September 15, 2078
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Duke Energy | Depositary Shares, each representing a 1/1,000th DUK PR A New York Stock Exchange LLC |
interest in a share of 5.75% Series A Cumulative
Redeemable Perpetual Preferred Stock, par value
$0.001 per share
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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Duke Energy Corporation (Duke Energy) | Yes | ☒ | No | ☐ | | Duke Energy Florida, LLC (Duke Energy Florida) | Yes | ☒ | No | ☐ |
Duke Energy Carolinas, LLC (Duke Energy Carolinas) | Yes | ☒ | No | ☐ | | Duke Energy Ohio, Inc. (Duke Energy Ohio) | Yes | ☒ | No | ☐ |
Progress Energy, Inc. (Progress Energy) | Yes | ☒ | No | ☐ | | Duke Energy Indiana, LLC (Duke Energy Indiana) | Yes | ☒ | No | ☐ |
Duke Energy Progress, LLC (Duke Energy Progress) | Yes | ☒ | No | ☐ | | Piedmont Natural Gas Company, Inc. (Piedmont) | Yes | ☒ | No | ☐ |
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
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Duke Energy | Yes | ☒ | No | ☐ | | Duke Energy Florida | Yes | ☒ | No | ☐ |
Duke Energy Carolinas | Yes | ☒ | No | ☐ | | Duke Energy Ohio | Yes | ☒ | No | ☐ |
Progress Energy | Yes | ☒ | No | ☐ | | Duke Energy Indiana | Yes | ☒ | No | ☐ |
Duke Energy Progress | Yes | ☒ | No | ☐ | | Piedmont | Yes | ☒ | No | ☐ |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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Duke Energy | Large accelerated filer | ☒ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | Smaller reporting company | ☐ | Emerging growth company | ☐ |
Duke Energy Carolinas | Large accelerated filer | ☐ | Accelerated filer | ☐ | Non-accelerated filer | ☒ | Smaller reporting company | ☐ | Emerging growth company | ☐ |
Progress Energy | Large accelerated filer | ☐ | Accelerated filer | ☐ | Non-accelerated filer | ☒ | Smaller reporting company | ☐ | Emerging growth company | ☐ |
Duke Energy Progress | Large accelerated filer | ☐ | Accelerated filer | ☐ | Non-accelerated filer | ☒ | Smaller reporting company | ☐ | Emerging growth company | ☐ |
Duke Energy Florida | Large accelerated filer | ☐ | Accelerated filer | ☐ | Non-accelerated filer | ☒ | Smaller reporting company | ☐ | Emerging growth company | ☐ |
Duke Energy Ohio | Large accelerated filer | ☐ | Accelerated filer | ☐ | Non-accelerated filer | ☒ | Smaller reporting company | ☐ | Emerging growth company | ☐ |
Duke Energy Indiana | Large accelerated filer | ☐ | Accelerated filer | ☐ | Non-accelerated filer | ☒ | Smaller reporting company | ☐ | Emerging growth company | ☐ |
Piedmont | Large accelerated filer | ☐ | Accelerated filer | ☐ | Non-accelerated filer | ☒ | Smaller reporting company | ☐ | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
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Duke Energy | Yes | ☐ | No | ☒ | | Duke Energy Florida | Yes | ☐ | No | ☒ |
Duke Energy Carolinas | Yes | ☐ | No | ☒ | | Duke Energy Ohio | Yes | ☐ | No | ☒ |
Progress Energy | Yes | ☐ | No | ☒ | | Duke Energy Indiana | Yes | ☐ | No | ☒ |
Duke Energy Progress | Yes | ☐ | No | ☒ | | Piedmont | Yes | ☐ | No | ☒ |
Number of shares of common stock outstanding at OctoberJuly 31, 2019:2020:
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Registrant | Description | Shares |
Duke Energy | Common stock, $0.001 par value | 729,032,868735,432,137 |
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 – LeasesDebt and Credit Facilities | |
| Note 6 – Goodwill | |
| Note 67 – Debt and Credit FacilitiesRelated Party Transactions | |
| Note 7 – Asset Retirement Obligations | |
| Note 8 – GoodwillDerivatives and Hedging | |
| Note 9 – Related Party Transactions | |
| Note 10 – Derivatives and Hedging | |
| Note 11 – Investments in Debt and Equity Securities | |
| Note 10 – Fair Value Measurements | |
| Note 11 – Variable Interest Entities | |
| Note 12 – Fair Value MeasurementsRevenue | |
| Note 13 – Variable Interest EntitiesStockholders' Equity | |
| Note 14 – RevenueEmployee Benefit Plans | |
| Note 15 – Stockholders' EquityIncome Taxes | |
| 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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◦ | The impact of the COVID-19 pandemic; |
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◦ | State, federal and foreign legislative and regulatory initiatives, including costs of compliance with existing and future environmental requirements, including those related to climate change, as well as rulings that affect cost and investment recovery or have an impact on rate structures or market prices; |
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◦ | The extent and timing of costs and liabilities to comply with federal and state laws, regulations and legal requirements related to coal ash remediation, including amounts for required closure of certain ash impoundments, are uncertain and difficult to estimate; |
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◦ | The ability to recover eligible costs, including amounts associated with coal ash impoundment retirement obligations and costs related to significant weather events, and to earn an adequate return on investment through rate case proceedings and the regulatory process; |
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◦ | The costs of decommissioning 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 United States electric grid or generating resources; |
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◦ | The ability to obtain the necessary permits and approvals and to complete necessary or desirable pipeline expansion or infrastructure projects in our natural gas business; |
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◦ | Operational interruptions to our natural gas distribution and transmission activities; |
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◦ | The availability of adequate interstate pipeline transportation capacity and natural gas supply; |
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◦ | The impact on facilities and business from a terrorist attack, cybersecurity threats, data security breaches, operational accidents, information technology failures or other catastrophic events, such as fires, explosions, pandemic health events or other similar occurrences; |
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◦ | The inherent risks associated with the operation of nuclear facilities, including environmental, health, safety, regulatory and financial risks, including the financial stability of third-party service providers; |
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◦ | The timing and extent of changes in commodity prices and interest rates and the ability to recover such costs through the regulatory process, where appropriate, and their impact on liquidity positions and the value of underlying assets; |
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◦ | The results of financing efforts, including the ability to obtain financing on favorable terms, which can be affected by various factors, including credit ratings, interest rate fluctuations, compliance with debt covenants and conditions and general market and economic conditions; |
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◦ | Credit ratings of the Duke Energy Registrants may be different from what is expected; |
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◦ | Declines in the market prices of equity and fixed-income securities and resultant cash funding requirements for defined benefit pension plans, other post-retirement benefit plans and nuclear decommissioning trust funds; |
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◦ | Construction and development risks associated with the completion of the Duke Energy Registrants’ capital investment projects, including risks related to financing, obtaining and complying with terms of permits, meeting construction budgets and schedules and satisfying operating and environmental performance standards, as well as the ability to recover costs from customers in a timely manner, or at all; |
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◦ | Changes in rules for regional transmission organizations, including changes in rate designs and new and evolving capacity markets, and risks related to obligations created by the default of other participants; |
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◦ | The ability to control operation and maintenance costs; |
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◦ | The level of creditworthiness of counterparties to transactions; |
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◦ | The ability to obtain adequate insurance at acceptable costs; |
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◦ | Employee workforce factors, including the potential inability to attract and retain key personnel; |
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FORWARD-LOOKING STATEMENTS | |
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.
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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 United States tax legislation to our financial condition, results of operations or cash flows and our credit ratings; |
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◦ | The impacts from potential impairments of goodwill or equity method investment carrying values; and |
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◦ | The ability to implement our business strategy, including enhancing existing technology systems. |
Additional risks and uncertainties are identified and discussed in the Duke Energy Registrants' reports filed with the SEC and available at the SEC's website at sec.gov. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than described. Forward-looking statements speak only as of the date they are made and the Duke Energy Registrants expressly disclaim an obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Glossary of Terms
The following terms or acronyms used in this Form 10-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 representatives |
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2017 Settlement | Second Revised and Restated Settlement Agreement in 2017 among Duke Energy Florida, the Florida OPC and other customer representatives, which replaces and supplants the 2013 Settlement |
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ACP | Atlantic Coast Pipeline, LLC, a limited liability company owned by Dominion Energy, Inc., and Duke Energy and Southern Company Gas |
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ACP pipeline | The approximately 600-mile proposedcanceled interstate natural gas pipeline |
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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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CECL | Current expected credit loss |
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CC | Combined Cycle |
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CCR | Coal Combustion Residuals |
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Citrus County CCCARES Act | Citrus County Combined Cycle FacilityCoronavirus Aid, Relief and Economic Security Act |
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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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CPCNCOVID-19 | Certificate of Public Convenience and Necessity |
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CPRE | Competitive Procurement of Renewable EnergyCoronavirus Disease 2019 |
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CRC | Cinergy Receivables Company, LLC |
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Crystal River Unit 3 | Crystal River Unit 3 Nuclear Plant |
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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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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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GLOSSARY OF TERMS | |
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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 (Loss) | Net Income Attributable(Loss) Available to Duke Energy Corporation Common Stockholders |
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GAAP Reported EPSEarnings (Loss) Per Share | Diluted EPS AttributableBasic Earnings (Loss) Per Share Available 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 StationLLC | William States Lee III Nuclear StationLimited Liability Company |
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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 |
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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 |
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Pioneer | Pioneer Transmission, LLC |
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PJM | PJM Interconnection, LLC |
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PMPA | Piedmont Municipal Power Agency |
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PPA | Purchase Power Agreement |
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Progress Energy | Progress Energy, Inc. |
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PSCSC | Public Service Commission of South Carolina |
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PUCO | Public Utilities Commission of Ohio |
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REC | Renewable Energy Certificate |
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ROU assets | Right-of-use assets |
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RRBA | Roanoke River Basin Association |
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SELC | Southern Environmental Law Center |
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S&P | Standard & Poor's Rating Services |
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Subsidiary Registrants | Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont |
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the Tax Act | Tax Cuts and Jobs Act |
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TPUC | Tennessee Public Utility Commission |
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U.S. | United States |
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VIE | Variable Interest Entity |
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WACC | Weighted Average Cost of Capital |
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WNA | Weather normalization adjustment |
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W.S. Lee CC | William States Lee Combined Cycle Facility |
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ITEM 1. FINANCIAL STATEMENTS
DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
| | | Three Months Ended | | Nine Months Ended | Three Months Ended | | Six Months Ended |
| September 30, | | September 30, | June 30, | | June 30, |
(in millions, except per-share amounts) | 2019 |
| | 2018 |
| | 2019 |
| | 2018 |
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(in millions, except per share amounts) | | 2020 |
| | 2019 |
| | 2020 |
| | 2019 |
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Operating Revenues | | | | | | | | | | | | | | |
Regulated electric | $ | 6,515 |
| | $ | 6,216 |
| | $ | 17,223 |
| | $ | 16,678 |
| $ | 4,963 |
| | $ | 5,423 |
| | $ | 10,087 |
| | $ | 10,708 |
|
Regulated natural gas | 223 |
| | 230 |
| | 1,231 |
| | 1,221 |
| 263 |
| | 280 |
| | 901 |
| | 1,008 |
|
Nonregulated electric and other | 202 |
| | 182 |
| | 522 |
| | 507 |
| 195 |
| | 170 |
| | 382 |
| | 320 |
|
Total operating revenues | 6,940 |
| | 6,628 |
| | 18,976 |
| | 18,406 |
| 5,421 |
| | 5,873 |
| | 11,370 |
| | 12,036 |
|
Operating Expenses | | | | |
| |
| | | | |
| |
|
Fuel used in electric generation and purchased power | 1,978 |
| | 1,931 |
| | 5,228 |
| | 5,181 |
| 1,349 |
| | 1,641 |
| | 2,796 |
| | 3,250 |
|
Cost of natural gas | 48 |
| | 58 |
| | 451 |
| | 460 |
| 59 |
| | 76 |
| | 258 |
| | 403 |
|
Operation, maintenance and other | 1,484 |
| | 1,584 |
| | 4,337 |
| | 4,592 |
| 1,353 |
| | 1,434 |
| | 2,692 |
| | 2,853 |
|
Depreciation and amortization | 1,186 |
| | 1,039 |
| | 3,364 |
| | 2,979 |
| 1,150 |
| | 1,089 |
| | 2,280 |
| | 2,178 |
|
Property and other taxes | 335 |
| | 323 |
| | 1,012 |
| | 954 |
| 334 |
| | 334 |
| | 679 |
| | 677 |
|
Impairment charges | (20 | ) | | 124 |
| | (16 | ) | | 339 |
| 6 |
| | 4 |
| | 8 |
| | 4 |
|
Total operating expenses | 5,011 |
| | 5,059 |
| | 14,376 |
| | 14,505 |
| 4,251 |
| | 4,578 |
| | 8,713 |
| | 9,365 |
|
Gains (Losses) on Sales of Other Assets and Other, net | — |
| | 10 |
| | — |
| | (87 | ) | |
Gains on Sales of Other Assets and Other, net | | 7 |
| | 3 |
| | 8 |
| | — |
|
Operating Income | 1,929 |
| | 1,579 |
| | 4,600 |
| | 3,814 |
| 1,177 |
| | 1,298 |
| | 2,665 |
| | 2,671 |
|
Other Income and Expenses | | | | |
|
| |
|
| | | | |
|
| |
|
|
Equity in earnings of unconsolidated affiliates | 50 |
| | 37 |
| | 137 |
| | 49 |
| |
Equity in (losses) earnings of unconsolidated affiliates | | (1,968 | ) | | 44 |
| | (1,924 | ) | | 87 |
|
Other income and expenses, net | 104 |
| | 131 |
| | 308 |
| | 327 |
| 137 |
| | 89 |
| | 183 |
| | 204 |
|
Total other income and expenses | 154 |
| | 168 |
| | 445 |
| | 376 |
| (1,831 | ) | | 133 |
| | (1,741 | ) | | 291 |
|
Interest Expense | 572 |
| | 517 |
| | 1,657 |
| | 1,550 |
| 554 |
| | 542 |
| | 1,105 |
| | 1,085 |
|
Income From Continuing Operations Before Income Taxes | 1,511 |
| | 1,230 |
| | 3,388 |
| | 2,640 |
| |
Income Tax Expense From Continuing Operations | 188 |
| | 168 |
| | 424 |
| | 449 |
| |
Income From Continuing Operations | 1,323 |
| | 1,062 |
| | 2,964 |
| | 2,191 |
| |
Income (Loss) From Discontinued Operations, net of tax | — |
| | 4 |
| | — |
| | (1 | ) | |
Net Income | 1,323 |
| | 1,066 |
| | 2,964 |
| | 2,190 |
| |
Less: Net Loss Attributable to Noncontrolling Interests | (19 | ) | | (16 | ) | | (110 | ) | | (12 | ) | |
(Loss) Income Before Income Taxes | | (1,208 | ) | | 889 |
| | (181 | ) | | 1,877 |
|
Income Tax (Benefit) Expense | | (316 | ) | | 141 |
| | (179 | ) | | 236 |
|
Net (Loss) Income | | (892 | ) | | 748 |
| | (2 | ) | | 1,641 |
|
Add: Net Loss Attributable to Noncontrolling Interests | | 90 |
| | 84 |
| | 138 |
| | 91 |
|
Net (Loss) Income Attributable to Duke Energy Corporation | | (802 | ) | | 832 |
| | 136 |
| | 1,732 |
|
Less: Preferred Dividends | 15 |
| | — |
| | 27 |
| | — |
| 15 |
| | 12 |
| | 54 |
| | 12 |
|
Net Income Attributable to Duke Energy Corporation | $ | 1,327 |
| | $ | 1,082 |
| | $ | 3,047 |
| | $ | 2,202 |
| |
Net (Loss) Income Available to Duke Energy Corporation Common Stockholders | | $ | (817 | ) | | $ | 820 |
| | $ | 82 |
| | $ | 1,720 |
|
| | | | | | | | | | | | | | |
Earnings Per Share – Basic and Diluted | | | | | | | | |
Income from continuing operations attributable to Duke Energy Corporation common stockholders | | | | | | | | |
Basic | $ | 1.82 |
| | $ | 1.51 |
| | $ | 4.18 |
| | $ | 3.12 |
| |
Diluted | $ | 1.82 |
| | $ | 1.51 |
| | $ | 4.18 |
| | $ | 3.11 |
| |
Income (Loss) from discontinued operations attributable to Duke Energy Corporation common stockholders | | | | | | | | |
Earnings (Loss) Per Share – Basic and Diluted | | | | | | | | |
Net (loss) income available to Duke Energy Corporation common stockholders | | | | | | | | |
Basic and Diluted | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| $ | (1.13 | ) | | $ | 1.12 |
| | $ | 0.11 |
| | $ | 2.36 |
|
Net income attributable to Duke Energy Corporation common stockholders | | | | | | | | |
Basic | $ | 1.82 |
| | $ | 1.51 |
| | $ | 4.18 |
| | $ | 3.12 |
| |
Diluted | $ | 1.82 |
| | $ | 1.51 |
| | $ | 4.18 |
| | $ | 3.11 |
| |
Weighted average shares outstanding | | | | | | | | | | | | | | |
Basic | 729 |
| | 713 |
| | 728 |
| | 705 |
| 735 |
| | 728 |
| | 734 |
| | 728 |
|
Diluted | 729 |
| | 714 |
| | 728 |
| | 706 |
| 735 |
| | 728 |
| | 735 |
| | 728 |
|
See Notes to Condensed Consolidated Financial Statements
9
DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
|
| | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, |
(in millions) | 2019 |
| | 2018 |
| | 2019 |
| | 2018 |
|
Net Income | $ | 1,323 |
| | $ | 1,066 |
| | $ | 2,964 |
| | $ | 2,190 |
|
Other Comprehensive (Loss) Income, net of tax | | | | | | | |
Pension and OPEB adjustments | (2 | ) | | 1 |
| | 1 |
| | 3 |
|
Net unrealized (losses) gains on cash flow hedges | (16 | ) | | (3 | ) | | (62 | ) | | 10 |
|
Reclassification into earnings from cash flow hedges | 1 |
| | 6 |
| | 4 |
| | 5 |
|
Unrealized gains (losses) on available-for-sale securities | 2 |
| | — |
| | 10 |
| | (5 | ) |
Other Comprehensive (Loss) Income, net of tax | (15 | ) | | 4 |
| | (47 | ) | | 13 |
|
Comprehensive Income | 1,308 |
| | 1,070 |
| | 2,917 |
| | 2,203 |
|
Less: Comprehensive Loss Attributable to Noncontrolling Interests | (19 | ) | | (16 | ) | | (110 | ) | | (12 | ) |
Less: Preferred Dividends | 15 |
| | — |
| | 27 |
| | — |
|
Comprehensive Income Attributable to Duke Energy Corporation | $ | 1,312 |
| | $ | 1,086 |
| | $ | 3,000 |
| | $ | 2,215 |
|
|
| | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, | | June 30, |
(in millions) | 2020 |
| | 2019 |
| | 2020 |
| | 2019 |
|
Net (Loss) Income | $ | (892 | ) | | $ | 748 |
| | $ | (2 | ) | | $ | 1,641 |
|
Other Comprehensive Loss, net of tax(a) | | | | | | | |
Pension and OPEB adjustments | (1 | ) | | 3 |
| | — |
| | 3 |
|
Net unrealized gains (losses) on cash flow hedges | 5 |
| | (29 | ) | | (76 | ) | | (46 | ) |
Reclassification into earnings from cash flow hedges | 2 |
| | 2 |
| | 4 |
| | 3 |
|
Unrealized gains on available-for-sale securities | 6 |
| | 4 |
| | 7 |
| | 8 |
|
Other Comprehensive Income (Loss), net of tax | 12 |
| | (20 | ) | | (65 | ) | | (32 | ) |
Comprehensive (Loss) Income | (880 | ) | | 728 |
| | (67 | ) | | 1,609 |
|
Add: Comprehensive Loss Attributable to Noncontrolling Interests | 88 |
| | 84 |
| | 150 |
| | 91 |
|
Comprehensive (Loss) Income Attributable to Duke Energy | (792 | ) | | 812 |
| | 83 |
| | 1,700 |
|
Less: Preferred Dividends | 15 |
| | 12 |
| | 54 |
| | 12 |
|
Comprehensive (Loss) Income Available to Duke Energy Corporation Common Stockholders | $ | (807 | ) | | $ | 800 |
| | $ | 29 |
| | $ | 1,688 |
|
| |
(a) | Net of income tax impacts of approximately $20 million and $10 million for the six months ended June 30, 2020, and 2019, respectively. All other periods presented include immaterial income tax impacts. |
See Notes to Condensed Consolidated Financial Statements
10
DUKE ENERGY CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
| | (in millions) | September 30, 2019 | | December 31, 2018 | June 30, 2020 |
| | December 31, 2019 |
|
ASSETS | | | | | | |
Current Assets | | | | | | |
Cash and cash equivalents | $ | 379 |
| | $ | 442 |
| $ | 341 |
| | $ | 311 |
|
Receivables (net of allowance for doubtful accounts of $20 at 2019 and $16 at 2018) | 755 |
| | 962 |
| |
Receivables of VIEs (net of allowance for doubtful accounts of $53 at 2019 and $55 at 2018) | 2,322 |
| | 2,172 |
| |
Receivables (net of allowance for doubtful accounts of $23 at 2020 and $22 at 2019) | | 753 |
| | 1,066 |
|
Receivables of VIEs (net of allowance for doubtful accounts of $79 at 2020 and $54 at 2019) | | 2,049 |
| | 1,994 |
|
Inventory | 3,107 |
| | 3,084 |
| 3,289 |
| | 3,232 |
|
Regulatory assets (includes $52 at 2019 and 2018 related to VIEs) | 1,723 |
| | 2,005 |
| |
Other (includes $188 at 2019 and $162 at 2018 related to VIEs) | 1,333 |
| | 1,049 |
| |
Regulatory assets (includes $53 at 2020 and $52 at 2019 related to VIEs) | | 1,774 |
| | 1,796 |
|
Other (includes $260 at 2020 and $242 at 2019 related to VIEs) | | 1,031 |
| | 764 |
|
Total current assets | 9,619 |
| | 9,714 |
| 9,237 |
| | 9,163 |
|
Property, Plant and Equipment | | | | | | |
Cost | 143,794 |
| | 134,458 |
| 151,592 |
| | 147,654 |
|
Accumulated depreciation and amortization | (45,149 | ) | | (43,126 | ) | (47,295 | ) | | (45,773 | ) |
Generation facilities to be retired, net | 267 |
| | 362 |
| 28 |
| | 246 |
|
Net property, plant and equipment | 98,912 |
| | 91,694 |
| 104,325 |
| | 102,127 |
|
Other Noncurrent Assets | | | | | | |
Goodwill | 19,303 |
| | 19,303 |
| 19,303 |
| | 19,303 |
|
Regulatory assets (includes $1,002 at 2019 and $1,041 at 2018 related to VIEs) | 13,916 |
| | 13,617 |
| |
Regulatory assets (includes $969 at 2020 and $989 at 2019 related to VIEs) | | 13,285 |
| | 13,222 |
|
Nuclear decommissioning trust funds | 7,695 |
| | 6,720 |
| 8,000 |
| | 8,140 |
|
Operating lease right-of-use assets, net | 1,703 |
| | — |
| 1,580 |
| | 1,658 |
|
Investments in equity method unconsolidated affiliates | 1,864 |
| | 1,409 |
| 861 |
| | 1,936 |
|
Other (includes $63 at 2019 and $261 at 2018 related to VIEs) | 2,905 |
| | 2,935 |
| |
Other (includes $85 at 2020 and $110 at 2019 related to VIEs) | | 3,458 |
| | 3,289 |
|
Total other noncurrent assets | 47,386 |
| | 43,984 |
| 46,487 |
| | 47,548 |
|
Total Assets | $ | 155,917 |
| | $ | 145,392 |
| $ | 160,049 |
| | $ | 158,838 |
|
LIABILITIES AND EQUITY | | | | | | |
Current Liabilities | | | | | | |
Accounts payable | $ | 2,946 |
| | $ | 3,487 |
| $ | 2,398 |
| | $ | 3,487 |
|
Notes payable and commercial paper | 2,469 |
| | 3,410 |
| 4,785 |
| | 3,135 |
|
Taxes accrued | 712 |
| | 577 |
| 657 |
| | 392 |
|
Interest accrued | 559 |
| | 559 |
| 569 |
| | 565 |
|
Current maturities of long-term debt (includes $231 at 2019 and $227 at 2018 related to VIEs) | 3,096 |
| | 3,406 |
| |
Current maturities of long-term debt (includes $462 at 2020 and $216 at 2019 related to VIEs) | | 3,756 |
| | 3,141 |
|
Asset retirement obligations | 861 |
| | 919 |
| 729 |
| | 881 |
|
Regulatory liabilities | 673 |
| | 598 |
| 898 |
| | 784 |
|
Other | 2,074 |
| | 2,085 |
| 2,898 |
| | 2,367 |
|
Total current liabilities | 13,390 |
| | 15,041 |
| 16,690 |
| | 14,752 |
|
Long-Term Debt (includes $4,060 at 2019 and $3,998 at 2018 related to VIEs) | 54,818 |
| | 51,123 |
| |
Long-Term Debt (includes $3,643 at 2020 and $3,997 at 2019 related to VIEs) | | 56,143 |
| | 54,985 |
|
Other Noncurrent Liabilities | | | | | | |
Deferred income taxes | 8,776 |
| | 7,806 |
| 8,979 |
| | 8,878 |
|
Asset retirement obligations | 11,740 |
| | 9,548 |
| 12,539 |
| | 12,437 |
|
Regulatory liabilities | 15,202 |
| | 14,834 |
| 14,553 |
| | 15,264 |
|
Operating lease liabilities | 1,456 |
| | — |
| 1,377 |
| | 1,432 |
|
Accrued pension and other post-retirement benefit costs | 900 |
| | 988 |
| 911 |
| | 934 |
|
Investment tax credits | 579 |
| | 568 |
| 683 |
| | 624 |
|
Other (includes $218 at 2019 and $212 at 2018 related to VIEs) | 1,649 |
| | 1,650 |
| |
Other (includes $251 at 2020 and $228 at 2019 related to VIEs) | | 1,563 |
| | 1,581 |
|
Total other noncurrent liabilities | 40,302 |
| | 35,394 |
| 40,605 |
| | 41,150 |
|
Commitments and Contingencies |
|
| |
|
|
|
| |
|
|
Equity | | | | | | |
Preferred stock, Series A, $0.001 par value, 40 million depositary shares authorized and outstanding at 2019 | 973 |
| | — |
| |
Preferred stock, Series B, $0.001 par value, 1 million shares authorized and outstanding at 2019 | 990 |
| | — |
| |
Common stock, $0.001 par value, 2 billion shares authorized; 729 million shares outstanding at 2019 and 727 million shares outstanding at 2018 | 1 |
| | 1 |
| |
Preferred stock, Series A, $0.001 par value, 40 million depositary shares authorized and outstanding at 2020 and 2019 | | 973 |
| | 973 |
|
Preferred stock, Series B, $0.001 par value, 1 million shares authorized and outstanding at 2020 and 2019 | | 989 |
| | 989 |
|
Common stock, $0.001 par value, 2 billion shares authorized; 735 million shares outstanding at 2020 and 733 million shares outstanding at 2019 | | 1 |
| | 1 |
|
Additional paid-in capital | 40,488 |
| | 40,795 |
| 40,997 |
| | 40,881 |
|
Retained earnings | 4,139 |
| | 3,113 |
| 2,707 |
| | 4,108 |
|
Accumulated other comprehensive loss | (153 | ) | | (92 | ) | (183 | ) | | (130 | ) |
Total Duke Energy Corporation stockholders' equity | 46,438 |
| | 43,817 |
| 45,484 |
| | 46,822 |
|
Noncontrolling interests | 969 |
| | 17 |
| 1,127 |
| | 1,129 |
|
Total equity | 47,407 |
| | 43,834 |
| 46,611 |
| | 47,951 |
|
Total Liabilities and Equity | $ | 155,917 |
| | $ | 145,392 |
| $ | 160,049 |
| | $ | 158,838 |
|
See Notes to Condensed Consolidated Financial Statements
11
DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | Nine Months Ended | Six Months Ended |
| September 30, | June 30, |
(in millions) | 2019 |
| | 2018 |
| 2020 |
| | 2019 |
|
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | |
Net income | $ | 2,964 |
| | $ | 2,190 |
| |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | |
Net (loss) income | | $ | (2 | ) | �� | $ | 1,641 |
|
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | | | | |
Depreciation, amortization and accretion (including amortization of nuclear fuel) | 3,831 |
| | 3,447 |
| 2,651 |
| | 2,483 |
|
Equity in losses (earnings) of unconsolidated affiliates | | 1,924 |
| | (87 | ) |
Equity component of AFUDC | (99 | ) | | (175 | ) | (76 | ) | | (67 | ) |
Losses on sales of other assets | — |
| | 87 |
| |
Gains on sales of other assets | | (8 | ) | | — |
|
Impairment charges | (16 | ) | | 339 |
| 8 |
| | 4 |
|
Deferred income taxes | 736 |
| | 1,099 |
| 105 |
| | 527 |
|
Equity in earnings of unconsolidated affiliates | (137 | ) | | (49 | ) | |
Accrued pension and other post-retirement benefit costs | 13 |
| | 46 |
| |
Contributions to qualified pension plans | (77 | ) | | (141 | ) | |
Payments for asset retirement obligations | (582 | ) | | (389 | ) | (287 | ) | | (336 | ) |
Payment for disposal of other assets | — |
| | (105 | ) | |
Other rate case adjustments | — |
| | 37 |
| |
Provision for rate refunds | 61 |
| | 375 |
| (12 | ) | | 57 |
|
(Increase) decrease in | | | | | | |
Net realized and unrealized mark-to-market and hedging transactions | (4 | ) | | 15 |
| (24 | ) | | (11 | ) |
Receivables | 62 |
| | (288 | ) | 281 |
| | 304 |
|
Inventory | (3 | ) | | 104 |
| (56 | ) | | (110 | ) |
Other current assets | (134 | ) | | (648 | ) | (124 | ) | | (265 | ) |
Increase (decrease) in | | | | | | |
Accounts payable | (538 | ) | | 389 |
| (638 | ) | | (700 | ) |
Taxes accrued | 125 |
| | 122 |
| 273 |
| | (56 | ) |
Other current liabilities | (198 | ) | | (180 | ) | (344 | ) | | (378 | ) |
Other assets | (264 | ) | | (585 | ) | (193 | ) | | (1 | ) |
Other liabilities | (103 | ) | | (23 | ) | (121 | ) | | 51 |
|
Net cash provided by operating activities | 5,637 |
| | 5,667 |
| 3,357 |
| | 3,056 |
|
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | |
Capital expenditures | (8,084 | ) | | (6,752 | ) | (5,103 | ) | | (5,465 | ) |
Contributions to equity method investments | (264 | ) | | (298 | ) | (164 | ) | | (162 | ) |
Purchases of debt and equity securities | (3,105 | ) | | (2,763 | ) | (3,818 | ) | | (2,316 | ) |
Proceeds from sales and maturities of debt and equity securities | 3,092 |
| | 2,718 |
| 3,755 |
| | 2,302 |
|
Other | (272 | ) | | (175 | ) | (141 | ) | | (147 | ) |
Net cash used in investing activities | (8,633 | ) | | (7,270 | ) | (5,471 | ) | | (5,788 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | |
Proceeds from the: | | | | | | |
Issuance of long-term debt | 6,131 |
| | 4,110 |
| 3,788 |
| | 4,622 |
|
Issuance of preferred stock | 1,963 |
| | — |
| — |
| | 973 |
|
Issuance of common stock | 41 |
| | 834 |
| 57 |
| | 27 |
|
Payments for the redemption of long-term debt | (2,737 | ) | | (2,278 | ) | (1,951 | ) | | (2,155 | ) |
Proceeds from the issuance of short-term debt with original maturities greater than 90 days | 339 |
| | 243 |
| 1,866 |
| | 240 |
|
Payments for the redemption of short-term debt with original maturities greater than 90 days | (479 | ) | | (207 | ) | (113 | ) | | (299 | ) |
Notes payable and commercial paper | (879 | ) | | 638 |
| (129 | ) | | 383 |
|
Contributions from noncontrolling interests | 615 |
| | — |
| 163 |
| | 193 |
|
Dividends paid | (1,990 | ) | | (1,835 | ) | (1,391 | ) | | (1,312 | ) |
Other | (17 | ) | | 42 |
| (108 | ) | | (50 | ) |
Net cash provided by financing activities | 2,987 |
| | 1,547 |
| 2,182 |
| | 2,622 |
|
Net decrease in cash, cash equivalents and restricted cash | (9 | ) | | (56 | ) | |
Net increase (decrease) in cash, cash equivalents and restricted cash | | 68 |
| | (110 | ) |
Cash, cash equivalents and restricted cash at beginning of period | 591 |
| | 505 |
| 573 |
| | 591 |
|
Cash, cash equivalents and restricted cash at end of period | $ | 582 |
| | $ | 449 |
| $ | 641 |
| | $ | 481 |
|
Supplemental Disclosures: | | | | | | |
Significant non-cash transactions: | | | | | | |
Accrued capital expenditures | $ | 1,073 |
| | $ | 1,016 |
| $ | 945 |
| | $ | 917 |
|
Non-cash dividends | 81 |
| | 79 |
| 54 |
| | 54 |
|
See Notes to Condensed Consolidated Financial Statements
12
DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
| | | Three Months Ended September 30, 2018 and 2019 | Three Months Ended June 30, 2019 and 2020 |
| | | | Accumulated Other Comprehensive | | | | | Accumulated Other Comprehensive | |
| | | | (Loss) Income | | | | | (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 |
| |
| Preferred |
| 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) | Stock |
| Shares |
| Stock |
| Capital |
| Earnings |
| Hedges |
| Securities |
| Adjustments |
| Equity |
| Interests |
| Equity |
| Stock |
| Shares |
| Stock |
| Capital |
| Earnings |
| Hedges |
| Securities |
| Adjustments |
| Equity |
| Interests |
| Equity |
|
Balance at June 30, 2018 | $ | — |
| 712 |
| $ | 1 |
| $ | 39,682 |
| $ | 2,894 |
| $ | 2 |
| $ | (5 | ) | $ | (67 | ) | $ | 42,507 |
| $ | 8 |
| $ | 42,515 |
| |
Balance at March 31, 2019 | | $ | 974 |
| 728 |
| $ | 1 |
| $ | 40,823 |
| $ | 3,360 |
| $ | (36 | ) | $ | — |
| $ | (92 | ) | $ | 45,030 |
| $ | 15 |
| $ | 45,045 |
|
Net income (loss) | — |
| — |
| — |
| — |
| 1,082 |
| — |
| — |
| — |
| 1,082 |
| (16 | ) | 1,066 |
| — |
| — |
| — |
| — |
| 820 |
| — |
| — |
| — |
| 820 |
| (84 | ) | 736 |
|
Other comprehensive income | — |
| — |
| — |
| — |
| — |
| 3 |
| — |
| 1 |
| 4 |
| — |
| 4 |
| |
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 | — |
| 1 |
| — |
| 65 |
| — |
| — |
| — |
| — |
| 65 |
| — |
| 65 |
| — |
| — |
| — |
| 61 |
| — |
| — |
| — |
| — |
| 61 |
| — |
| 61 |
|
Common stock dividends | — |
| — |
| — |
| — |
| (663 | ) | — |
| — |
| — |
| (663 | ) | — |
| (663 | ) | — |
| — |
| — |
| — |
| (678 | ) | — |
| — |
| — |
| (678 | ) | — |
| (678 | ) |
Contribution from noncontrolling interest in subsidiaries(a) | | — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 193 |
| 193 |
|
Distributions to noncontrolling interest in subsidiaries | | — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| (1 | ) | (1 | ) |
Other | — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 26 |
| 26 |
| — |
| — |
| — |
| 1 |
| — |
| — |
| — |
| — |
| 1 |
| (4 | ) | (3 | ) |
Balance at September 30, 2018 | $ | — |
| 713 |
| $ | 1 |
| $ | 39,747 |
| $ | 3,313 |
| $ | 5 |
| $ | (5 | ) | $ | (66 | ) | $ | 42,995 |
| $ | 18 |
| $ | 43,013 |
| |
Balance at June 30, 2019 | | $ | 973 |
| 728 |
| $ | 1 |
| $ | 40,885 |
| $ | 3,502 |
| $ | (63 | ) | $ | 4 |
| $ | (89 | ) | $ | 45,213 |
| $ | 119 |
| $ | 45,332 |
|
| | | | | | |
Balance at June 30, 2019 | $ | 973 |
| 728 |
| $ | 1 |
| $ | 40,885 |
| $ | 3,502 |
| $ | (63 | ) | $ | 4 |
| $ | (89 | ) | $ | 45,213 |
| $ | 119 |
| $ | 45,332 |
| |
Balance at March 31, 2020 | | $ | 1,962 |
| 735 |
| $ | 1 |
| $ | 40,930 |
| $ | 4,221 |
| $ | (116 | ) | $ | 4 |
| $ | (81 | ) | $ | 46,921 |
| $ | 1,162 |
| $ | 48,083 |
|
Net income (loss) | — |
| — |
| — |
| — |
| 1,327 |
| — |
| — |
| — |
| 1,327 |
| (19 | ) | 1,308 |
| — |
| — |
| — |
| — |
| (817 | ) | — |
| — |
| — |
| (817 | ) | (90 | ) | (907 | ) |
Other comprehensive (loss) income | — |
| — |
| — |
| — |
| — |
| (15 | ) | 2 |
| (2 | ) | (15 | ) | — |
| (15 | ) | — |
| — |
| — |
| — |
| — |
| 5 |
| 6 |
| (1 | ) | 10 |
| 2 |
| 12 |
|
Preferred stock, Series B, issuances, net of issuance costs(c) | 990 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 990 |
| — |
| 990 |
| |
Common stock issuances, including dividend reinvestment and employee benefits | — |
| 1 |
| — |
| 69 |
| — |
| — |
| — |
| — |
| 69 |
| — |
| 69 |
| — |
| — |
| — |
| 66 |
| — |
| — |
| — |
| — |
| 66 |
| — |
| 66 |
|
Common stock dividends | — |
| — |
| — |
| — |
| (690 | ) | — |
| — |
| — |
| (690 | ) | — |
| (690 | ) | — |
| — |
| — |
| — |
| (696 | ) | — |
| — |
| — |
| (696 | ) | — |
| (696 | ) |
Sale of noncontrolling interest(d) | — |
| — |
| — |
| (465 | ) | — |
| 10 |
| — |
| — |
| (455 | ) | 863 |
| 408 |
| |
Contribution from noncontrolling interest in subsidiaries(e) | — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 7 |
| 7 |
| |
Contribution from noncontrolling interest in subsidiaries(a) | | — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 60 |
| 60 |
|
Distributions to noncontrolling interest in subsidiaries | | — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| (7 | ) | (7 | ) |
Other | — |
| — |
| — |
| (1 | ) | — |
| — |
| — |
| — |
| (1 | ) | (1 | ) | (2 | ) | — |
| — |
| — |
| 1 |
| (1 | ) | — |
| — |
| — |
| — |
| — |
| — |
|
Balance at September 30, 2019 | $ | 1,963 |
| 729 |
| $ | 1 |
| $ | 40,488 |
| $ | 4,139 |
| $ | (68 | ) | $ | 6 |
| $ | (91 | ) | $ | 46,438 |
| $ | 969 |
| $ | 47,407 |
| |
Balance at June 30, 2020 | | $ | 1,962 |
| 735 |
| $ | 1 |
| $ | 40,997 |
| $ | 2,707 |
| $ | (111 | ) | $ | 10 |
| $ | (82 | ) | $ | 45,484 |
| $ | 1,127 |
| $ | 46,611 |
|
See Notes to Condensed Consolidated Financial Statements
13
DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
| | | Nine Months Ended September 30, 2018 and 2019 | Six Months Ended June 30, 2019 and 2020 |
| | | | Accumulated Other Comprehensive | | | | | Accumulated Other Comprehensive | |
| | | | (Loss) Income | | | | | (Loss) Income | |
| | | | Net Unrealized |
| | Total |
| | | | | Net Unrealized |
| | Total |
| |
| | | | Net Gains |
| (Losses) Gains |
| | Duke Energy |
| | | | | Net |
| (Losses) Gains |
| | Duke Energy |
| |
| | Common |
| | Additional |
| | (Losses) on |
| on Available- |
| Pension and |
| Corporation |
| | | Common |
| | Additional |
| | Losses on |
| on Available- |
| Pension and |
| Corporation |
| |
| Preferred |
| 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) | Stock |
| 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, 2017 | $ | — |
| 700 |
| $ | 1 |
| $ | 38,792 |
| $ | 3,013 |
| $ | (10 | ) | $ | 12 |
| $ | (69 | ) | $ | 41,739 |
| $ | (2 | ) | $ | 41,737 |
| |
Net income (loss) | — |
| — |
| — |
| — |
| 2,202 |
| — |
| — |
| — |
| 2,202 |
| (12 | ) | 2,190 |
| |
Other comprehensive income (loss) | — |
| — |
| — |
| — |
| — |
| 15 |
| (5 | ) | 3 |
| 13 |
| — |
| 13 |
| |
Common stock issuances, including dividend reinvestment and employee benefits | — |
| 13 |
| — |
| 955 |
| — |
| — |
| — |
| — |
| 955 |
| — |
| 955 |
| |
Common stock dividends | — |
| — |
| — |
| — |
| (1,914 | ) | — |
| — |
| — |
| (1,914 | ) | — |
| (1,914 | ) | |
Distributions to noncontrolling interest in subsidiaries | — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| (1 | ) | (1 | ) | |
Other(a) | — |
| — |
| — |
| — |
| 12 |
| — |
| (12 | ) | — |
| — |
| 33 |
| 33 |
| |
Balance at September 30, 2018 | $ | — |
| 713 |
| $ | 1 |
| $ | 39,747 |
| $ | 3,313 |
| $ | 5 |
| $ | (5 | ) | $ | (66 | ) | $ | 42,995 |
| $ | 18 |
| $ | 43,013 |
| |
| | | | |
Balance at December 31, 2018 | $ | — |
| 727 |
| $ | 1 |
| $ | 40,795 |
| $ | 3,113 |
| $ | (14 | ) | $ | (3 | ) | $ | (75 | ) | $ | 43,817 |
| $ | 17 |
| $ | 43,834 |
| $ | — |
| 727 |
| $ | 1 |
| $ | 40,795 |
| $ | 3,113 |
| $ | (14 | ) | $ | (3 | ) | $ | (75 | ) | $ | 43,817 |
| $ | 17 |
| $ | 43,834 |
|
Net income (loss) | — |
| — |
| — |
| — |
| 3,047 |
| — |
| — |
| — |
| 3,047 |
| (110 | ) | 2,937 |
| — |
| — |
| — |
| — |
| 1,720 |
| — |
| — |
| — |
| 1,720 |
| (91 | ) | 1,629 |
|
Other comprehensive (loss) income | — |
| — |
| — |
| — |
| — |
| (58 | ) | 10 |
| 1 |
| (47 | ) | — |
| (47 | ) | — |
| — |
| — |
| — |
| — |
| (43 | ) | 8 |
| 3 |
| (32 | ) | — |
| (32 | ) |
Preferred stock, Series A, issuances, net of issuance costs(b) | 973 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 973 |
| — |
| 973 |
| 973 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 973 |
| — |
| 973 |
|
Preferred stock, Series B, issuances, net of issuance costs(c) | 990 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 990 |
| — |
| 990 |
| |
Common stock issuances, including dividend reinvestment and employee benefits | — |
| 2 |
| — |
| 158 |
| — |
| — |
| — |
| — |
| 158 |
| — |
| 158 |
| — |
| 1 |
| — |
| 89 |
| — |
| — |
| — |
| — |
| 89 |
| — |
| 89 |
|
Common stock dividends | — |
| — |
| — |
| — |
| (2,044 | ) | — |
| — |
| — |
| (2,044 | ) | — |
| (2,044 | ) | — |
| — |
| — |
| — |
| (1,354 | ) | — |
| — |
| — |
| (1,354 | ) | — |
| (1,354 | ) |
Sale of noncontrolling interest(d) | — |
| — |
| — |
| (465 | ) | — |
| 10 |
| — |
| — |
| (455 | ) | 863 |
| 408 |
| |
Contributions from noncontrolling interest in subsidiaries(e) | — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 200 |
| 200 |
| |
Contributions from noncontrolling interest in subsidiaries(a) | | — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 193 |
| 193 |
|
Distributions to noncontrolling interest in subsidiaries | — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| (1 | ) | (1 | ) | — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| (1 | ) | (1 | ) |
Other(f) | — |
| — |
| — |
| — |
| 23 |
| (6 | ) | (1 | ) | (17 | ) | (1 | ) | — |
| (1 | ) | |
Balance at September 30, 2019 | $ | 1,963 |
| 729 |
| $ | 1 |
| $ | 40,488 |
| $ | 4,139 |
| $ | (68 | ) | $ | 6 |
| $ | (91 | ) | $ | 46,438 |
| $ | 969 |
| $ | 47,407 |
| |
Other(c) | | — |
| — |
| — |
| 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 |
|
| | | | |
Balance at December 31, 2019 | | $ | 1,962 |
| 733 |
| $ | 1 |
| $ | 40,881 |
| $ | 4,108 |
| $ | (51 | ) | $ | 3 |
| $ | (82 | ) | $ | 46,822 |
| $ | 1,129 |
| $ | 47,951 |
|
Net income (loss) | | — |
| — |
| — |
| — |
| 82 |
| — |
| — |
| — |
| 82 |
| (138 | ) | (56 | ) |
Other comprehensive (loss) income | | — |
| — |
| — |
| — |
| — |
| (60 | ) | 7 |
| — |
| (53 | ) | (12 | ) | (65 | ) |
Common stock issuances, including dividend reinvestment and employee benefits | | — |
| 2 |
| — |
| 116 |
| — |
| — |
| — |
| — |
| 116 |
| — |
| 116 |
|
Common stock dividends | | — |
| — |
| — |
| — |
| (1,391 | ) | — |
| — |
| — |
| (1,391 | ) | — |
| (1,391 | ) |
Contributions from noncontrolling interest in subsidiaries(a) | | — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 163 |
| 163 |
|
Distributions to noncontrolling interest in subsidiaries | | — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| (14 | ) | (14 | ) |
Other(d) | | — |
| — |
| — |
| — |
| (92 | ) | — |
| — |
| — |
| (92 | ) | (1 | ) | (93 | ) |
Balance at June 30, 2020 | | $ | 1,962 |
| 735 |
| $ | 1 |
| $ | 40,997 |
| $ | 2,707 |
| $ | (111 | ) | $ | 10 |
| $ | (82 | ) | $ | 45,484 |
| $ | 1,127 |
| $ | 46,611 |
|
| |
(a) | AmountsRelates to tax equity financing activity in Retained Earnings and Accumulated Other Comprehensive (Loss) Income represent a cumulative-effect adjustment due to implementation of a new accounting standard related to Financial Instruments Classification and Measurement.the Commercial Renewables segment. |
| |
(b) | Duke Energy issued 40 million depositary shares of preferred stock, series A, in the first quarter of 2019.Series A. |
| |
(c) | Duke Energy issued 1 million shares of preferred stock, series B, in the third quarter of 2019. |
| |
(d) | See Note 2 for additional discussion of the transaction. |
| |
(e) | Relates to tax equity financing activity in the Commercial Renewables segment. See Note 1 for additional discussion. |
| |
(f) | 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.
| |
(d) | Amounts in Retained earnings primarily represent impacts due to implementation of a new accounting standard related to Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.Current Estimated Credit Losses. See Note 1 for additional discussion. |
See Notes to Condensed Consolidated Financial Statements
14
DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
| | | Three Months Ended | | Nine Months Ended | Three Months Ended | | Six Months Ended |
| September 30, | | September 30, | June 30, | | June 30, |
(in millions) | 2019 |
| | 2018 |
| | 2019 |
| | 2018 |
| 2020 |
| | 2019 |
| | 2020 |
| | 2019 |
|
Operating Revenues | $ | 2,162 |
| | $ | 2,090 |
| | $ | 5,619 |
| | $ | 5,525 |
| $ | 1,610 |
| | $ | 1,713 |
| | $ | 3,358 |
| | $ | 3,457 |
|
Operating Expenses | | | | | | | | | | | | | | |
Fuel used in electric generation and purchased power | 504 |
| | 490 |
| | 1,371 |
| | 1,370 |
| 376 |
| | 395 |
| | 829 |
| | 867 |
|
Operation, maintenance and other | 443 |
| | 514 |
| | 1,324 |
| | 1,464 |
| 430 |
| | 441 |
| | 816 |
| | 881 |
|
Depreciation and amortization | 350 |
| | 305 |
| | 1,013 |
| | 866 |
| 375 |
| | 346 |
| | 718 |
| | 663 |
|
Property and other taxes | 66 |
| | 67 |
| | 221 |
| | 214 |
| 75 |
| | 75 |
| | 156 |
| | 155 |
|
Impairment charges | 6 |
| | 1 |
| | 11 |
| | 191 |
| — |
| | 5 |
| | 2 |
| | 5 |
|
Total operating expenses | 1,369 |
| | 1,377 |
| | 3,940 |
| | 4,105 |
| 1,256 |
| | 1,262 |
| | 2,521 |
| | 2,571 |
|
Losses on Sales of Other Assets and Other, net | — |
| | — |
| | — |
| | (1 | ) | (1 | ) | | — |
| | — |
| | — |
|
Operating Income | 793 |
| | 713 |
| | 1,679 |
| | 1,419 |
| 353 |
| | 451 |
| | 837 |
| | 886 |
|
Other Income and Expenses, net | 34 |
| | 34 |
| | 106 |
| | 108 |
| 43 |
| | 41 |
| | 86 |
| | 72 |
|
Interest Expense | 119 |
| | 106 |
| | 346 |
| | 323 |
| 125 |
| | 117 |
| | 248 |
| | 227 |
|
Income Before Income Taxes | 708 |
| | 641 |
| | 1,439 |
| | 1,204 |
| 271 |
| | 375 |
| | 675 |
| | 731 |
|
Income Tax Expense | 118 |
| | 145 |
| | 255 |
| | 268 |
| 37 |
| | 74 |
| | 102 |
| | 137 |
|
Net Income | $ | 590 |
| | $ | 496 |
| | $ | 1,184 |
| | $ | 936 |
| |
Other Comprehensive Income, net of tax | | | | | | | | |
Reclassification into earnings from cash flow hedges | — |
| | — |
| | — |
| | 1 |
| |
Comprehensive Income | $ | 590 |
| | $ | 496 |
| | $ | 1,184 |
| | $ | 937 |
| |
Net Income and Comprehensive Income | | $ | 234 |
| | $ | 301 |
| | $ | 573 |
| | $ | 594 |
|
See Notes to Condensed Consolidated Financial Statements
15
DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Balance Sheets
(Unaudited)
| | (in millions) | September 30, 2019 |
| | December 31, 2018 |
| June 30, 2020 |
| | December 31, 2019 |
|
ASSETS | | | | | | |
Current Assets | | | | | | |
Cash and cash equivalents | $ | 23 |
| | $ | 33 |
| $ | 24 |
| | $ | 18 |
|
Receivables (net of allowance for doubtful accounts of $2 at 2019 and 2018) | 234 |
| | 219 |
| |
Receivables of VIEs (net of allowance for doubtful accounts of $7 at 2019 and 2018) | 775 |
| | 699 |
| |
Receivables (net of allowance for doubtful accounts of $1 at 2020 and $3 at 2019) | | 255 |
| | 324 |
|
Receivables of VIEs (net of allowance for doubtful accounts of $13 at 2020 and $7 at 2019) | | 675 |
| | 642 |
|
Receivables from affiliated companies | 108 |
| | 182 |
| 78 |
| | 114 |
|
Inventory | 943 |
| | 948 |
| 1,080 |
| | 996 |
|
Regulatory assets | 573 |
| | 520 |
| 490 |
| | 550 |
|
Other | 19 |
| | 72 |
| 19 |
| | 21 |
|
Total current assets | 2,675 |
| | 2,673 |
| 2,621 |
| | 2,665 |
|
Property, Plant and Equipment | | | | | | |
Cost | 47,815 |
| | 44,741 |
| 50,068 |
| | 48,922 |
|
Accumulated depreciation and amortization | (16,359 | ) | | (15,496 | ) | (17,098 | ) | | (16,525 | ) |
Net property, plant and equipment | 31,456 |
| | 29,245 |
| 32,970 |
| | 32,397 |
|
Other Noncurrent Assets | | | | | | |
Regulatory assets | 3,587 |
| | 3,457 |
| 3,440 |
| | 3,360 |
|
Nuclear decommissioning trust funds | 4,104 |
| | 3,558 |
| 4,265 |
| | 4,359 |
|
Operating lease right-of-use assets, net | 135 |
| | — |
| 125 |
| | 123 |
|
Other | 1,061 |
| | 1,027 |
| 1,158 |
| | 1,149 |
|
Total other noncurrent assets | 8,887 |
| | 8,042 |
| 8,988 |
| | 8,991 |
|
Total Assets | $ | 43,018 |
| | $ | 39,960 |
| $ | 44,579 |
| | $ | 44,053 |
|
LIABILITIES AND EQUITY | | | | | | |
Current Liabilities | | | | | | |
Accounts payable | $ | 644 |
| | $ | 988 |
| $ | 615 |
| | $ | 954 |
|
Accounts payable to affiliated companies | 174 |
| | 230 |
| 147 |
| | 210 |
|
Notes payable to affiliated companies | 49 |
| | 439 |
| 131 |
| | 29 |
|
Taxes accrued | 262 |
| | 171 |
| 166 |
| | 46 |
|
Interest accrued | 138 |
| | 102 |
| 127 |
| | 115 |
|
Current maturities of long-term debt | 457 |
| | 6 |
| 508 |
| | 458 |
|
Asset retirement obligations | 214 |
| | 290 |
| 194 |
| | 206 |
|
Regulatory liabilities | 197 |
| | 199 |
| 293 |
| | 255 |
|
Other | 545 |
| | 571 |
| 488 |
| | 611 |
|
Total current liabilities | 2,680 |
|
| 2,996 |
| 2,669 |
|
| 2,884 |
|
Long-Term Debt | 11,001 |
| | 10,633 |
| 11,713 |
| | 11,142 |
|
Long-Term Debt Payable to Affiliated Companies | 300 |
| | 300 |
| 300 |
| | 300 |
|
Other Noncurrent Liabilities | | | | | | |
Deferred income taxes | 3,853 |
| | 3,689 |
| 4,004 |
| | 3,921 |
|
Asset retirement obligations | 5,184 |
| | 3,659 |
| 5,566 |
| | 5,528 |
|
Regulatory liabilities | 6,364 |
| | 5,999 |
| 6,232 |
| | 6,423 |
|
Operating lease liabilities | 108 |
| | — |
| 106 |
| | 102 |
|
Accrued pension and other post-retirement benefit costs | 88 |
| | 99 |
| 77 |
| | 84 |
|
Investment tax credits | 232 |
| | 231 |
| 229 |
| | 231 |
|
Other | 617 |
| | 671 |
| 611 |
| | 627 |
|
Total other noncurrent liabilities | 16,446 |
| | 14,348 |
| 16,825 |
| | 16,916 |
|
Commitments and Contingencies |
|
| |
|
|
|
| |
|
|
Equity | | | | | | |
Member's equity | 12,598 |
| | 11,689 |
| 13,079 |
| | 12,818 |
|
Accumulated other comprehensive loss | (7 | ) | | (6 | ) | (7 | ) | | (7 | ) |
Total equity | 12,591 |
| | 11,683 |
| 13,072 |
| | 12,811 |
|
Total Liabilities and Equity | $ | 43,018 |
| | $ | 39,960 |
| $ | 44,579 |
| | $ | 44,053 |
|
See Notes to Condensed Consolidated Financial Statements
16
DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | Nine Months Ended | Six Months Ended |
| September 30, | June 30, |
(in millions) | 2019 |
| | 2018 |
| 2020 |
| | 2019 |
|
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | |
Net income | $ | 1,184 |
| | $ | 936 |
| $ | 573 |
| | $ | 594 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | |
Depreciation and amortization (including amortization of nuclear fuel) | 1,227 |
| | 1,084 |
| 854 |
| | 804 |
|
Equity component of AFUDC | (29 | ) | | (57 | ) | (29 | ) | | (21 | ) |
Losses on sales of other assets | — |
| | 1 |
| |
Impairment charges | 11 |
| | 191 |
| 2 |
| | 5 |
|
Deferred income taxes | 96 |
| | 266 |
| 31 |
| | 54 |
|
Accrued pension and other post-retirement benefit costs | (5 | ) | | 3 |
| |
Contributions to qualified pension plans | (7 | ) | | (46 | ) | |
Payments for asset retirement obligations | (234 | ) | | (174 | ) | (86 | ) | | (131 | ) |
Provision for rate refunds | 34 |
| | 163 |
| 2 |
| | 35 |
|
(Increase) decrease in | | | | | | |
Net realized and unrealized mark-to-market and hedging transactions | (7 | ) | | 2 |
| — |
| | (8 | ) |
Receivables | (80 | ) | | (154 | ) | 40 |
| | 83 |
|
Receivables from affiliated companies | 74 |
| | (63 | ) | 36 |
| | 81 |
|
Inventory | 5 |
| | (11 | ) | (84 | ) | | (77 | ) |
Other current assets | (117 | ) | | (54 | ) | 170 |
| | (133 | ) |
Increase (decrease) in | | | | | | |
Accounts payable | (284 | ) | | 69 |
| (249 | ) | | (282 | ) |
Accounts payable to affiliated companies | (56 | ) | | (67 | ) | (63 | ) | | (41 | ) |
Taxes accrued | 91 |
| | (47 | ) | 120 |
| | 38 |
|
Other current liabilities | 44 |
| | (129 | ) | (134 | ) | | (71 | ) |
Other assets | 2 |
| | 18 |
| (83 | ) | | 87 |
|
Other liabilities | (43 | ) | | (47 | ) | (35 | ) | | (18 | ) |
Net cash provided by operating activities | 1,906 |
| | 1,884 |
| 1,065 |
| | 999 |
|
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | |
Capital expenditures | (1,984 | ) | | (2,006 | ) | (1,271 | ) | | (1,357 | ) |
Purchases of debt and equity securities | (1,658 | ) | | (1,386 | ) | (1,017 | ) | | (1,114 | ) |
Proceeds from sales and maturities of debt and equity securities | 1,658 |
| | 1,386 |
| 1,017 |
| | 1,114 |
|
Other | (80 | ) | | (103 | ) | (73 | ) | | (46 | ) |
Net cash used in investing activities | (2,064 | ) | | (2,109 | ) | (1,344 | ) | | (1,403 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | |
Proceeds from the issuance of long-term debt | 819 |
| | 991 |
| 938 |
| | 25 |
|
Payments for the redemption of long-term debt | (5 | ) | | (704 | ) | (454 | ) | | (3 | ) |
Notes payable to affiliated companies | (390 | ) | | 700 |
| 102 |
| | 365 |
|
Distributions to parent | (275 | ) | | (750 | ) | (300 | ) | | — |
|
Other | (1 | ) | | (1 | ) | (1 | ) | | (1 | ) |
Net cash provided by financing activities | 148 |
| | 236 |
| 285 |
| | 386 |
|
Net (decrease) increase in cash and cash equivalents | (10 | ) | | 11 |
| |
Net increase (decrease) in cash and cash equivalents | | 6 |
| | (18 | ) |
Cash and cash equivalents at beginning of period | 33 |
| | 16 |
| 18 |
| | 33 |
|
Cash and cash equivalents at end of period | $ | 23 |
| | $ | 27 |
| $ | 24 |
| | $ | 15 |
|
Supplemental Disclosures: | | | | | | |
Significant non-cash transactions: | | | | | | |
Accrued capital expenditures | $ | 261 |
| | $ | 299 |
| $ | 256 |
| | $ | 252 |
|
See Notes to Condensed Consolidated Financial Statements
17
DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
| | | Three Months Ended September 30, 2018 and 2019 | Three Months Ended June 30, 2019 and 2020 |
| | | Accumulated Other | | | | | Accumulated Other | | |
| | | Comprehensive | | | | | Comprehensive | | |
| | | Loss | | | | | Loss | | |
| Member's |
| | Net Income (Losses) on |
| | Total |
| Member's |
| | Net Losses on |
| | Total |
|
(in millions) | Equity |
| | Cash Flow Hedges |
| | Equity |
| Equity |
| | Cash Flow Hedges |
| | Equity |
|
Balance at June 30, 2018 | $ | 11,308 |
| | $ | (6 | ) | | $ | 11,302 |
| |
Balance at March 31, 2019 | | $ | 11,982 |
| | $ | (7 | ) | | $ | 11,975 |
|
Net income | 496 |
| | — |
| | 496 |
| 301 |
| | — |
| | 301 |
|
Distributions to parent | (250 | ) | | — |
| | (250 | ) | |
Balance at September 30, 2018 | $ | 11,554 |
| | $ | (6 | ) | | $ | 11,548 |
| |
Balance at June 30, 2019 | | $ | 12,283 |
| | $ | (7 | ) | | $ | 12,276 |
|
| | | | | | | | | | |
Balance at June 30, 2019 | $ | 12,283 |
| | $ | (7 | ) | | $ | 12,276 |
| |
Balance at March 31, 2020 | | $ | 12,844 |
| | $ | (7 | ) | | $ | 12,837 |
|
Net income | 590 |
| | — |
| | 590 |
| 234 |
| | — |
| | 234 |
|
Distributions to parent | (275 | ) | | — |
| | (275 | ) | |
Balance at September 30, 2019 | $ | 12,598 |
| | $ | (7 | ) | | $ | 12,591 |
| |
Other | | 1 |
| | — |
| | 1 |
|
Balance at June 30, 2020 | | $ | 13,079 |
| | $ | (7 | ) | | $ | 13,072 |
|
| | | | | | | | | | |
| Nine Months Ended September 30, 2018 and 2019 | Six Months Ended June 30, 2019 and 2020 |
| | | Accumulated Other | | | | | Accumulated Other | | |
| | | Comprehensive | | | | | Comprehensive | | |
| | | Loss | | | | | Loss | | |
| Member's |
| | Net Income (Losses) on |
| | Total |
| Member's |
| | Net Losses on |
| | Total |
|
(in millions) | Equity |
| | Cash Flow Hedges |
| | Equity |
| Equity |
| | Cash Flow Hedges |
| | Equity |
|
Balance at December 31, 2017 | $ | 11,368 |
| | $ | (7 | ) | | $ | 11,361 |
| |
Net income | 936 |
| | — |
| | 936 |
| |
Other comprehensive income | — |
| | 1 |
| | 1 |
| |
Distributions to parent | (750 | ) | | — |
| | (750 | ) | |
Balance at September 30, 2018 | $ | 11,554 |
| | $ | (6 | ) | | $ | 11,548 |
| |
| | | | | | |
Balance at December 31, 2018 | $ | 11,689 |
| | $ | (6 | ) | | $ | 11,683 |
| $ | 11,689 |
| | $ | (6 | ) | | $ | 11,683 |
|
Net income | 1,184 |
| | — |
| | 1,184 |
| 594 |
| | — |
| | 594 |
|
Other | | — |
| | (1 | ) | | (1 | ) |
Balance at June 30, 2019 | | $ | 12,283 |
| | $ | (7 | ) | | $ | 12,276 |
|
| | | | | | |
Balance at December 31, 2019 | | $ | 12,818 |
| | $ | (7 | ) | | $ | 12,811 |
|
Net income | | 573 |
| | — |
| | 573 |
|
Distributions to parent | (275 | ) | | — |
| | (275 | ) | (300 | ) | | — |
| | (300 | ) |
Other | — |
| | (1 | ) | | (1 | ) | |
Balance at September 30, 2019 | $ | 12,598 |
| | $ | (7 | ) | | $ | 12,591 |
| |
Other(a) | | (12 | ) | | — |
| | (12 | ) |
Balance at June 30, 2020 | | $ | 13,079 |
| | $ | (7 | ) | | $ | 13,072 |
|
| |
(a) | Amounts primarily represent impacts due to implementation of a new accounting standard related to Current Estimated Credit Losses. See Note 1 for additional discussion. |
See Notes to Condensed Consolidated Financial Statements
18
PROGRESS ENERGY, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
| | | Three Months Ended | | Nine Months Ended | Three Months Ended | | Six Months Ended |
| September 30, | | September 30, | June 30, | | June 30, |
(in millions) | 2019 |
| | 2018 |
| | 2019 |
| | 2018 |
| 2020 |
| | 2019 |
| | 2020 |
| | 2019 |
|
Operating Revenues | $ | 3,242 |
| | $ | 3,045 |
| | $ | 8,558 |
| | $ | 8,119 |
| $ | 2,498 |
| | $ | 2,744 |
| | $ | 4,920 |
| | $ | 5,316 |
|
Operating Expenses | | | | | | | | | | | | | | |
Fuel used in electric generation and purchased power | 1,187 |
| | 1,148 |
| | 3,100 |
| | 3,019 |
| 777 |
| | 988 |
| | 1,540 |
| | 1,913 |
|
Operation, maintenance and other | 640 |
| | 680 |
| | 1,813 |
| | 1,913 |
| 589 |
| | 606 |
| | 1,143 |
| | 1,173 |
|
Depreciation and amortization | 496 |
| | 419 |
| | 1,377 |
| | 1,183 |
| 432 |
| | 426 |
| | 884 |
| | 881 |
|
Property and other taxes | 159 |
| | 145 |
| | 439 |
| | 399 |
| 137 |
| | 143 |
| | 272 |
| | 280 |
|
Impairment charges | (25 | ) | | 1 |
| | (25 | ) | | 34 |
| |
Total operating expenses | 2,457 |
| | 2,393 |
| | 6,704 |
| | 6,548 |
| 1,935 |
| | 2,163 |
| | 3,839 |
| | 4,247 |
|
Gains on Sales of Other Assets and Other, net | 1 |
| | 11 |
| | — |
| | 23 |
| |
Gains (Losses) on Sales of Other Assets and Other, net | | 7 |
| | (1 | ) | | 6 |
| | (1 | ) |
Operating Income | 786 |
| | 663 |
| | 1,854 |
| | 1,594 |
| 570 |
| | 580 |
| | 1,087 |
| | 1,068 |
|
Other Income and Expenses, net | 41 |
| | 51 |
| | 106 |
| | 128 |
| 33 |
| | 34 |
| | 65 |
| | 65 |
|
Interest Expense | 212 |
| | 214 |
| | 650 |
| | 626 |
| 199 |
| | 219 |
| | 405 |
| | 438 |
|
Income Before Income Taxes | 615 |
| | 500 |
| | 1,310 |
| | 1,096 |
| 404 |
| | 395 |
| | 747 |
| | 695 |
|
Income Tax Expense | 94 |
| | 94 |
| | 212 |
| | 186 |
| 60 |
| | 66 |
| | 120 |
| | 118 |
|
Net Income | 521 |
| | 406 |
| | 1,098 |
| | 910 |
| 344 |
| | 329 |
| | 627 |
| | 577 |
|
Less: Net Income Attributable to Noncontrolling Interests | — |
| | 2 |
| | — |
| | 6 |
| — |
| | 1 |
| | — |
| | — |
|
Net Income Attributable to Parent | $ | 521 |
| | $ | 404 |
| | $ | 1,098 |
| | $ | 904 |
| $ | 344 |
| | $ | 328 |
| | $ | 627 |
| | $ | 577 |
|
| | | | | | | | | | | | | | |
Net Income | $ | 521 |
| | $ | 406 |
| | $ | 1,098 |
| | $ | 910 |
| $ | 344 |
| | $ | 329 |
| | $ | 627 |
| | $ | 577 |
|
Other Comprehensive Income, net of tax | | | | | | | | | | | | | | |
Pension and OPEB adjustments | — |
| | — |
| | 2 |
| | 2 |
| 1 |
| | 1 |
| | 1 |
| | 2 |
|
Net unrealized gains on cash flow hedges | 1 |
| | 2 |
| | 4 |
| | 5 |
| 1 |
| | 1 |
| | 2 |
| | 3 |
|
Unrealized gains (losses) on available-for-sale securities | 1 |
| | — |
| | 2 |
| | (1 | ) | |
Unrealized (losses) gains on available-for-sale securities | | (1 | ) | | 1 |
| | — |
| | 1 |
|
Other Comprehensive Income, net of tax | 2 |
|
| 2 |
|
| 8 |
|
| 6 |
| 1 |
|
| 3 |
|
| 3 |
|
| 6 |
|
Comprehensive Income | 523 |
| | 408 |
| | 1,106 |
| | 916 |
| 345 |
| | 332 |
| | 630 |
| | 583 |
|
Less: Comprehensive Income Attributable to Noncontrolling Interests | — |
| | 2 |
| | — |
| | 6 |
| — |
| | 1 |
| | — |
| | — |
|
Comprehensive Income Attributable to Parent | $ | 523 |
|
| $ | 406 |
|
| $ | 1,106 |
|
| $ | 910 |
| $ | 345 |
|
| $ | 331 |
|
| $ | 630 |
|
| $ | 583 |
|
See Notes to Condensed Consolidated Financial Statements
19
PROGRESS ENERGY, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
| | (in millions) | September 30, 2019 |
| | December 31, 2018 |
| June 30, 2020 |
| | December 31, 2019 |
|
ASSETS | | | | | | |
Current Assets | | | | | | |
Cash and cash equivalents | $ | 82 |
| | $ | 67 |
| $ | 78 |
| | $ | 48 |
|
Receivables (net of allowance for doubtful accounts of $6 at 2019 and $5 at 2018) | 181 |
| | 220 |
| |
Receivables of VIEs (net of allowance for doubtful accounts of $8 at 2019 and 2018) | 1,042 |
| | 909 |
| |
Receivables (net of allowance for doubtful accounts of $9 at 2020 and $7 at 2019) | | 153 |
| | 220 |
|
Receivables of VIEs (net of allowance for doubtful accounts of $20 at 2020 and $9 at 2019) | | 920 |
| | 830 |
|
Receivables from affiliated companies | 33 |
| | 168 |
| 42 |
| | 76 |
|
Notes receivable from affiliated companies | | — |
| | 164 |
|
Inventory | 1,434 |
| | 1,459 |
| 1,466 |
| | 1,423 |
|
Regulatory assets (includes $52 at 2019 and 2018 related to VIEs) | 881 |
| | 1,137 |
| |
Other (includes $16 at 2019 and $39 at 2018 related to VIEs) | 242 |
| | 125 |
| |
Regulatory assets (includes $53 at 2020 and $52 at 2019 related to VIEs) | | 957 |
| | 946 |
|
Other (includes $32 at 2020 and $39 at 2019 related to VIEs) | | 145 |
| | 210 |
|
Total current assets | 3,895 |
| | 4,085 |
| 3,761 |
| | 3,917 |
|
Property, Plant and Equipment | | | | | | |
Cost | 53,491 |
| | 50,260 |
| 56,420 |
| | 55,070 |
|
Accumulated depreciation and amortization | (16,917 | ) | | (16,398 | ) | (17,704 | ) | | (17,159 | ) |
Generation facilities to be retired, net | 267 |
| | 362 |
| 28 |
| | 246 |
|
Net property, plant and equipment | 36,841 |
| | 34,224 |
| 38,744 |
| | 38,157 |
|
Other Noncurrent Assets | | | | | | |
Goodwill | 3,655 |
| | 3,655 |
| 3,655 |
| | 3,655 |
|
Regulatory assets (includes $1,002 at 2019 and $1,041 at 2018 related to VIEs) | 6,733 |
| | 6,564 |
| |
Regulatory assets (includes $969 at 2020 and $989 at 2019 related to VIEs) | | 6,308 |
| | 6,346 |
|
Nuclear decommissioning trust funds | 3,590 |
| | 3,162 |
| 3,734 |
| | 3,782 |
|
Operating lease right-of-use assets, net | 814 |
| | — |
| 737 |
| | 788 |
|
Other | 989 |
| | 974 |
| 1,164 |
| | 1,049 |
|
Total other noncurrent assets | 15,781 |
| | 14,355 |
| 15,598 |
| | 15,620 |
|
Total Assets | $ | 56,517 |
| | $ | 52,664 |
| $ | 58,103 |
| | $ | 57,694 |
|
LIABILITIES AND EQUITY | | | | | | |
Current Liabilities | | | | | | |
Accounts payable | $ | 1,095 |
| | $ | 1,172 |
| $ | 675 |
| | $ | 1,104 |
|
Accounts payable to affiliated companies | 354 |
| | 360 |
| 222 |
| | 310 |
|
Notes payable to affiliated companies | 1,789 |
| | 1,235 |
| 2,373 |
| | 1,821 |
|
Taxes accrued | 271 |
| | 109 |
| 201 |
| | 46 |
|
Interest accrued | 212 |
| | 246 |
| 213 |
| | 228 |
|
Current maturities of long-term debt (includes $54 at 2019 and $53 at 2018 related to VIEs) | 1,276 |
| | 1,672 |
| |
Current maturities of long-term debt (includes $304 at 2020 and $54 at 2019 related to VIEs) | | 1,829 |
| | 1,577 |
|
Asset retirement obligations | 478 |
| | 514 |
| 357 |
| | 485 |
|
Regulatory liabilities | 296 |
| | 280 |
| 388 |
| | 330 |
|
Other | 850 |
| | 821 |
| 847 |
| | 902 |
|
Total current liabilities | 6,621 |
| | 6,409 |
| 7,105 |
| | 6,803 |
|
Long-Term Debt (includes $1,631 at 2019 and $1,636 at 2018 related to VIEs) | 17,693 |
| | 17,089 |
| |
Long-Term Debt (includes $1,361 at 2020 and $1,632 at 2019 related to VIEs) | | 17,625 |
| | 17,907 |
|
Long-Term Debt Payable to Affiliated Companies | 150 |
| | 150 |
| 150 |
| | 150 |
|
Other Noncurrent Liabilities | | | | | | |
Deferred income taxes | 4,389 |
| | 3,941 |
| 4,560 |
| | 4,462 |
|
Asset retirement obligations | 5,610 |
| | 4,897 |
| 6,038 |
| | 5,986 |
|
Regulatory liabilities | 5,165 |
| | 5,049 |
| 4,813 |
| | 5,225 |
|
Operating lease liabilities | 710 |
| | — |
| 662 |
| | 697 |
|
Accrued pension and other post-retirement benefit costs | 455 |
| | 521 |
| 480 |
| | 488 |
|
Other | 361 |
| | 351 |
| 449 |
| | 383 |
|
Total other noncurrent liabilities | 16,690 |
| | 14,759 |
| 17,002 |
| | 17,241 |
|
Commitments and Contingencies |
| |
|
| |
|
Equity | | | | | | |
Common stock, $0.01 par value, 100 shares authorized and outstanding at 2019 and 2018 | — |
| | — |
| |
Common Stock, $0.01 par value, 100 shares authorized and outstanding at 2020 and 2019 | | — |
| | — |
|
Additional paid-in capital | 9,143 |
| | 9,143 |
| 9,143 |
| | 9,143 |
|
Retained earnings | 6,236 |
| | 5,131 |
| 7,090 |
| | 6,465 |
|
Accumulated other comprehensive loss | (19 | ) | | (20 | ) | (15 | ) | | (18 | ) |
Total Progress Energy, Inc. stockholders' equity | 15,360 |
| | 14,254 |
| 16,218 |
| | 15,590 |
|
Noncontrolling interests | 3 |
| | 3 |
| 3 |
| | 3 |
|
Total equity | 15,363 |
| | 14,257 |
| 16,221 |
| | 15,593 |
|
Total Liabilities and Equity | $ | 56,517 |
| | $ | 52,664 |
| $ | 58,103 |
| | $ | 57,694 |
|
See Notes to Condensed Consolidated Financial Statements
20
PROGRESS ENERGY, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | Nine Months Ended | Six Months Ended |
| September 30, | June 30, |
(in millions) | 2019 |
| | 2018 |
| 2020 |
| | 2019 |
|
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | |
Net income | $ | 1,098 |
| | $ | 910 |
| $ | 627 |
| | $ | 577 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | |
Depreciation, amortization and accretion (including amortization of nuclear fuel) | 1,649 |
| | 1,458 |
| 1,118 |
| | 1,061 |
|
Equity component of AFUDC | (48 | ) | | (80 | ) | (24 | ) | | (31 | ) |
Gains on sales of other assets | — |
| | (23 | ) | |
Impairment charges | (25 | ) | | 34 |
| |
(Gains) Losses on sales of other assets | | (6 | ) | | 1 |
|
Deferred income taxes | 342 |
| | 342 |
| 94 |
| | 126 |
|
Accrued pension and other post-retirement benefit costs | 14 |
| | 18 |
| |
Contributions to qualified pension plans | (57 | ) | | (45 | ) | |
Payments for asset retirement obligations | (309 | ) | | (164 | ) | (173 | ) | | (183 | ) |
Other rate case adjustments | — |
| | 37 |
| |
Provision for rate refunds | 13 |
| | 101 |
| 2 |
| | 10 |
|
(Increase) decrease in | | | | | | |
Net realized and unrealized mark-to-market and hedging transactions | 9 |
| | 14 |
| (22 | ) | | (1 | ) |
Receivables | (128 | ) | | (316 | ) | (15 | ) | | (42 | ) |
Receivables from affiliated companies | 135 |
| | 16 |
| 34 |
| | 119 |
|
Inventory | 45 |
| | 119 |
| (42 | ) | | (26 | ) |
Other current assets | 79 |
| | (156 | ) | 102 |
| | 114 |
|
Increase (decrease) in | | | | | | |
Accounts payable | (64 | ) | | 427 |
| (238 | ) | | (196 | ) |
Accounts payable to affiliated companies | (6 | ) | | 76 |
| (88 | ) | | (125 | ) |
Taxes accrued | 150 |
| | 143 |
| 155 |
| | 82 |
|
Other current liabilities | (96 | ) | | (28 | ) | (64 | ) | | (162 | ) |
Other assets | (281 | ) | | (668 | ) | (51 | ) | | (82 | ) |
Other liabilities | (90 | ) | | (34 | ) | (97 | ) | | 24 |
|
Net cash provided by operating activities | 2,430 |
| | 2,181 |
| 1,312 |
| | 1,266 |
|
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | |
Capital expenditures | (2,866 | ) | | (2,689 | ) | (1,812 | ) | | (1,988 | ) |
Purchases of debt and equity securities | (1,304 | ) | | (1,216 | ) | (2,602 | ) | | (1,094 | ) |
Proceeds from sales and maturities of debt and equity securities | 1,300 |
| | 1,225 |
| 2,588 |
| | 1,089 |
|
Net proceeds from the sales of other assets | — |
| | 20 |
| |
Notes receivable from affiliated companies | — |
| | (205 | ) | 164 |
| | — |
|
Other | (130 | ) | | (142 | ) | (81 | ) | | (59 | ) |
Net cash used in investing activities | (3,000 | ) | | (3,007 | ) | (1,743 | ) | | (2,052 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | |
Proceeds from the issuance of long-term debt | 1,295 |
| | 1,785 |
| 514 |
| | 1,295 |
|
Payments for the redemption of long-term debt | (1,263 | ) | | (719 | ) | (550 | ) | | (1,188 | ) |
Notes payable to affiliated companies | 554 |
| | (11 | ) | 552 |
| | 685 |
|
Dividends to parent | — |
| | (250 | ) | |
Other | 8 |
| | (3 | ) | — |
| | 2 |
|
Net cash provided by financing activities | 594 |
| | 802 |
| 516 |
| | 794 |
|
Net increase (decrease) in cash, cash equivalents and restricted cash | 24 |
| | (24 | ) | |
Net increase in cash, cash equivalents and restricted cash | | 85 |
| | 8 |
|
Cash, cash equivalents and restricted cash at beginning of period | 112 |
| | 87 |
| 126 |
| | 112 |
|
Cash, cash equivalents and restricted cash at end of period | $ | 136 |
| | $ | 63 |
| $ | 211 |
| | $ | 120 |
|
Supplemental Disclosures: | | | | | | |
Significant non-cash transactions: | | | | | | |
Accrued capital expenditures | $ | 400 |
| | $ | 441 |
| $ | 287 |
| | $ | 278 |
|
See Notes to Condensed Consolidated Financial Statements
21
PROGRESS ENERGY, INC.
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2019 and 2020 |
| | | | | Accumulated Other Comprehensive (Loss) Income | | | | | | |
| | | | | Net Gains |
| | Net Unrealized |
| | | | Total Progress |
| | | | |
| Additional |
| | | | (Losses) on |
| | Gains (Losses) on |
| | Pension and |
| | Energy, Inc. |
| | | | |
| Paid-in |
| | Retained |
| | Cash Flow |
| | Available-for- |
| | OPEB |
| | Stockholders' |
| | Noncontrolling |
| | Total |
|
(in millions) | Capital |
| | Earnings |
| | Hedges |
| | Sale Securities |
| | Adjustments |
| | Equity |
| | Interests |
| | Equity |
|
Balance at March 31, 2019 | $ | 9,143 |
| | $ | 5,386 |
| | $ | (14 | ) | | $ | (1 | ) | | $ | (8 | ) | | $ | 14,506 |
| | $ | 2 |
| | $ | 14,508 |
|
Net income | — |
| | 328 |
| | — |
| | — |
| | — |
| | 328 |
| | 1 |
| | 329 |
|
Other comprehensive income | — |
| | — |
| | 1 |
| | 1 |
| | 1 |
| | 3 |
| | — |
| | 3 |
|
Other | — |
| | 1 |
| | — |
| | — |
| | (1 | ) | | — |
| | (1 | ) | | (1 | ) |
Balance at June 30, 2019 | $ | 9,143 |
| | $ | 5,715 |
| | $ | (13 | ) | | $ | — |
| | $ | (8 | ) | | $ | 14,837 |
| | $ | 2 |
| | $ | 14,839 |
|
| | | | | | | | | | | | | | | |
Balance at March 31, 2020 | $ | 9,143 |
| | $ | 6,747 |
| | $ | (9 | ) | | $ | — |
| | $ | (7 | ) | | $ | 15,874 |
| | $ | 3 |
| | $ | 15,877 |
|
Net income | — |
| | 344 |
| | — |
| | — |
| | — |
| | 344 |
| | — |
| | 344 |
|
Other comprehensive income | — |
| | — |
| | 1 |
| | (1 | ) | | 1 |
| | 1 |
| | — |
| | 1 |
|
Distributions to noncontrolling interests | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (1 | ) | | (1 | ) |
Other | — |
| | (1 | ) | | — |
| | — |
| | — |
| | (1 | ) | | 1 |
| | — |
|
Balance at June 30, 2020 | $ | 9,143 |
| | $ | 7,090 |
| | $ | (8 | ) | | $ | (1 | ) | | $ | (6 | ) | | $ | 16,218 |
| | $ | 3 |
| | $ | 16,221 |
|
| | | | | | | | | | | | | | | |
| Six Months Ended June 30, 2019 and 2020 |
| | | | | Accumulated Other Comprehensive Loss | | | | | | |
| | | | | Net Gains |
| | Net Unrealized |
| | | | Total Progress |
| | | | |
| Additional |
| | | | (Losses) on |
| | 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, 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(a) | — |
| | 7 |
| | (4 | ) | | — |
| | (3 | ) | | — |
| | (1 | ) | | (1 | ) |
Balance at June 30, 2019 | $ | 9,143 |
|
| $ | 5,715 |
|
| $ | (13 | ) |
| $ | — |
|
| $ | (8 | ) | | $ | 14,837 |
|
| $ | 2 |
|
| $ | 14,839 |
|
| | | | | | | | | | | | | | | |
Balance at December 31, 2019 | $ | 9,143 |
| | $ | 6,465 |
| | $ | (10 | ) | | $ | (1 | ) | | $ | (7 | ) | | $ | 15,590 |
| | $ | 3 |
| | $ | 15,593 |
|
Net income | — |
| | 627 |
| | — |
| | — |
| | — |
| | 627 |
| | — |
| | 627 |
|
Other comprehensive income | — |
| | — |
| | 2 |
| | — |
| | 1 |
| | 3 |
| | — |
| | 3 |
|
Distributions to noncontrolling interests | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (1 | ) | | (1 | ) |
Other | — |
| | (2 | ) | | — |
| | — |
| | — |
| | (2 | ) | | 1 |
| | (1 | ) |
Balance at June 30, 2020 | $ | 9,143 |
|
| $ | 7,090 |
|
| $ | (8 | ) |
| $ | (1 | ) |
| $ | (6 | ) | | $ | 16,218 |
|
| $ | 3 |
|
| $ | 16,221 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2018 and 2019 |
| | | | | Accumulated Other Comprehensive (Loss) Income | | | | | | |
| | | | | Net Gains |
| | Net Unrealized |
| | | | Total Progress |
| | | | |
| Additional |
| | | | (Losses) on |
| | Gains (Losses) on |
| | Pension and |
| | Energy, Inc. |
| | | | |
| Paid-in |
| | Retained |
| | Cash Flow |
| | Available-for- |
| | OPEB |
| | Stockholders' |
| | Noncontrolling |
| | Total |
|
(in millions) | Capital |
| | Earnings |
| | Hedges |
| | Sale Securities |
| | Adjustments |
| | Equity |
| | Interests |
| | Equity |
|
Balance at June 30, 2018 | $ | 9,143 |
| | $ | 4,855 |
| | $ | (15 | ) | | $ | (1 | ) | | $ | (10 | ) | | $ | 13,972 |
| | $ | — |
| | $ | 13,972 |
|
Net income | — |
| | 404 |
| | — |
| | — |
| | — |
| | 404 |
| | 2 |
| | 406 |
|
Other comprehensive income | — |
| | — |
| | 2 |
| | — |
| | — |
| | 2 |
| | — |
| | 2 |
|
Dividends to parent | — |
| | (250 | ) | | — |
| | — |
| | — |
| | (250 | ) | | — |
| | (250 | ) |
Balance at September 30, 2018 | $ | 9,143 |
| | $ | 5,009 |
| | $ | (13 | ) | | $ | (1 | ) | | $ | (10 | ) | | $ | 14,128 |
| | $ | 2 |
| | $ | 14,130 |
|
| | | | | | | | | | | | | | | |
Balance at June 30, 2019 | $ | 9,143 |
| | $ | 5,715 |
| | $ | (13 | ) | | $ | — |
| | $ | (8 | ) | | $ | 14,837 |
| | $ | 2 |
| | $ | 14,839 |
|
Net income | — |
| | 521 |
| | — |
| | — |
| | — |
| | 521 |
| | — |
| | 521 |
|
Other comprehensive income | — |
| | — |
| | 1 |
| | 1 |
| | — |
| | 2 |
| | — |
| | 2 |
|
Other | — |
| | — |
| | — |
| | (1 | ) | | 1 |
| | — |
| | 1 |
| | 1 |
|
Balance at September 30, 2019 | $ | 9,143 |
| | $ | 6,236 |
| | $ | (12 | ) | | $ | — |
| | $ | (7 | ) | | $ | 15,360 |
| | $ | 3 |
| | $ | 15,363 |
|
| | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2018 and 2019 |
| | | | | Accumulated Other Comprehensive (Loss) Income | | | | | | |
| | | | | Net Gains |
| | Net Unrealized |
| | | | Total Progress |
| | | | |
| Additional |
| | | | (Losses) on |
| | Gains (Losses) on |
| | Pension and |
| | Energy, Inc. |
| | | | |
| Paid-in |
| | Retained |
| | Cash Flow |
| | Available-for- |
| | OPEB |
| | Stockholders' |
| | Noncontrolling |
| | Total |
|
| Capital |
| | Earnings |
| | Hedges |
| | Sale Securities |
| | Adjustments |
| | Equity |
| | Interests |
| | Equity |
|
Balance at December 31, 2017 | $ | 9,143 |
| | $ | 4,350 |
| | $ | (18 | ) | | $ | 5 |
| | $ | (12 | ) | | $ | 13,468 |
| | $ | (3 | ) | | $ | 13,465 |
|
Net income | — |
| | 904 |
| | — |
| | — |
| | — |
| | 904 |
| | 6 |
| | 910 |
|
Other comprehensive income (loss) | — |
| | — |
| | 5 |
| | (1 | ) | | 2 |
| | 6 |
| | — |
| | 6 |
|
Distributions to noncontrolling interests | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (1 | ) | | (1 | ) |
Dividends to parent | — |
| | (250 | ) | | — |
| | — |
| | — |
| | (250 | ) | | — |
| | (250 | ) |
Other(a) | — |
| | 5 |
| | — |
| | (5 | ) | | — |
| | — |
| | — |
| | — |
|
Balance at September 30, 2018 | $ | 9,143 |
|
| $ | 5,009 |
|
| $ | (13 | ) |
| $ | (1 | ) |
| $ | (10 | ) | | $ | 14,128 |
|
| $ | 2 |
|
| $ | 14,130 |
|
| | | | | | | | | | | | | | | |
Balance at December 31, 2018 | $ | 9,143 |
| | $ | 5,131 |
| | $ | (12 | ) | | $ | (1 | ) | | $ | (7 | ) | | $ | 14,254 |
| | $ | 3 |
| | $ | 14,257 |
|
Net income | — |
| | 1,098 |
| | — |
| | — |
| | — |
| | 1,098 |
| | — |
| | 1,098 |
|
Other comprehensive income | — |
| | — |
| | 4 |
| | 2 |
| | 2 |
| | 8 |
| | — |
| | 8 |
|
Other(b) | — |
| | 7 |
| | (4 | ) | | (1 | ) | | (2 | ) | | — |
| | — |
| | — |
|
Balance at September 30, 2019 | $ | 9,143 |
|
| $ | 6,236 |
|
| $ | (12 | ) |
| $ | — |
|
| $ | (7 | ) | | $ | 15,360 |
|
| $ | 3 |
|
| $ | 15,363 |
|
| |
(a) | Amounts in Retained Earnings and Accumulated Other Comprehensive (Loss) Income represent a cumulative-effect adjustment due to implementation of a new accounting standard related to Financial Instruments Classification and Measurement. |
| |
(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 | | Nine Months Ended | Three Months Ended | | Six Months Ended |
| September 30, | | September 30, | June 30, | | June 30, |
(in millions) | 2019 |
| | 2018 |
| | 2019 |
| | 2018 |
| 2020 |
| | 2019 |
| | 2020 |
| | 2019 |
|
Operating Revenues | $ | 1,688 |
| | $ | 1,582 |
| | $ | 4,559 |
| | $ | 4,333 |
| $ | 1,243 |
| | $ | 1,387 |
| | $ | 2,581 |
| | $ | 2,871 |
|
Operating Expenses | | | | | | | | | | | | | | |
Fuel used in electric generation and purchased power | 577 |
| | 535 |
| | 1,571 |
| | 1,452 |
| 395 |
| | 479 |
| | 800 |
| | 994 |
|
Operation, maintenance and other | 378 |
| | 431 |
| | 1,070 |
| | 1,187 |
| 317 |
| | 357 |
| | 622 |
| | 692 |
|
Depreciation and amortization | 314 |
| | 253 |
| | 855 |
| | 723 |
| 257 |
| | 251 |
| | 544 |
| | 541 |
|
Property and other taxes | 46 |
| | 40 |
| | 131 |
| | 115 |
| 44 |
| | 41 |
| | 91 |
| | 85 |
|
Impairment charges | — |
| | — |
| | — |
| | 33 |
| |
Total operating expenses | 1,315 |
| | 1,259 |
| | 3,627 |
| | 3,510 |
| 1,013 |
| | 1,128 |
| | 2,057 |
| | 2,312 |
|
Gains on Sales of Other Assets and Other, net | — |
| | 7 |
| | — |
| | 9 |
| 6 |
| | — |
| | 5 |
| | — |
|
Operating Income | 373 |
| | 330 |
| | 932 |
| | 832 |
| 236 |
| | 259 |
| | 529 |
| | 559 |
|
Other Income and Expenses, net | 27 |
| | 24 |
| | 75 |
| | 61 |
| 19 |
| | 24 |
| | 41 |
| | 48 |
|
Interest Expense | 74 |
| | 82 |
| | 232 |
| | 241 |
| 68 |
| | 81 |
| | 137 |
| | 158 |
|
Income Before Income Taxes | 326 |
| | 272 |
| | 775 |
| | 652 |
| 187 |
| | 202 |
| | 433 |
| | 449 |
|
Income Tax Expense | 48 |
| | 56 |
| | 125 |
| | 120 |
| 26 |
| | 33 |
| | 68 |
| | 77 |
|
Net Income and Comprehensive Income | $ | 278 |
| | $ | 216 |
| | $ | 650 |
| | $ | 532 |
| $ | 161 |
| | $ | 169 |
| | $ | 365 |
| | $ | 372 |
|
See Notes to Condensed Consolidated Financial Statements
23
DUKE ENERGY PROGRESS, LLC
Condensed Consolidated Balance Sheets
(Unaudited)
| | (in millions) | September 30, 2019 |
| | December 31, 2018 |
| June 30, 2020 |
| | December 31, 2019 |
|
ASSETS | | | | | | |
Current Assets | | | | �� | | |
Cash and cash equivalents | $ | 49 |
| | $ | 23 |
| $ | 51 |
| | $ | 22 |
|
Receivables (net of allowance for doubtful accounts of $2 at 2019 and 2018) | 75 |
| | 75 |
| |
Receivables of VIEs (net of allowance for doubtful accounts of $5 at 2019 and 2018) | 564 |
| | 547 |
| |
Receivables (net of allowance for doubtful accounts of $4 at 2020 and $3 at 2019) | | 77 |
| | 123 |
|
Receivables of VIEs (net of allowance for doubtful accounts of $10 at 2020 and $5 at 2019) | | 451 |
| | 489 |
|
Receivables from affiliated companies | 34 |
| | 23 |
| 42 |
| | 52 |
|
Inventory | 939 |
| | 954 |
| 980 |
| | 934 |
|
Regulatory assets | 515 |
| | 703 |
| 526 |
| | 526 |
|
Other | 95 |
| | 62 |
| 37 |
| | 60 |
|
Total current assets | 2,271 |
| | 2,387 |
| 2,164 |
| | 2,206 |
|
Property, Plant and Equipment | | | | | | |
Cost | 33,594 |
| | 31,459 |
| 35,120 |
| | 34,603 |
|
Accumulated depreciation and amortization | (11,761 | ) | | (11,423 | ) | (12,303 | ) | | (11,915 | ) |
Generation facilities to be retired, net | 267 |
| | 362 |
| 28 |
| | 246 |
|
Net property, plant and equipment | 22,100 |
| | 20,398 |
| 22,845 |
| | 22,934 |
|
Other Noncurrent Assets | | | | | | |
Regulatory assets | 4,363 |
| | 4,111 |
| 4,448 |
| | 4,152 |
|
Nuclear decommissioning trust funds | 2,872 |
| | 2,503 |
| 3,023 |
| | 3,047 |
|
Operating lease right-of-use assets, net | 397 |
| | — |
| 367 |
| | 387 |
|
Other | 595 |
| | 612 |
| 688 |
| | 651 |
|
Total other noncurrent assets | 8,227 |
| | 7,226 |
| 8,526 |
| | 8,237 |
|
Total Assets | $ | 32,598 |
| | $ | 30,011 |
| $ | 33,535 |
| | $ | 33,377 |
|
LIABILITIES AND EQUITY | | | | | | |
Current Liabilities | | | | | | |
Accounts payable | $ | 550 |
| | $ | 660 |
| $ | 287 |
| | $ | 629 |
|
Accounts payable to affiliated companies | 198 |
| | 278 |
| 153 |
| | 203 |
|
Notes payable to affiliated companies | 79 |
| | 294 |
| 257 |
| | 66 |
|
Taxes accrued | 101 |
| | 53 |
| 88 |
| | 17 |
|
Interest accrued | 89 |
| | 116 |
| 102 |
| | 110 |
|
Current maturities of long-term debt | 306 |
| | 603 |
| 1,006 |
| | 1,006 |
|
Asset retirement obligations | 476 |
| | 509 |
| 357 |
| | 485 |
|
Regulatory liabilities | 210 |
| | 178 |
| 306 |
| | 236 |
|
Other | 416 |
| | 408 |
| 468 |
| | 478 |
|
Total current liabilities | 2,425 |
| | 3,099 |
| 3,024 |
| | 3,230 |
|
Long-Term Debt | 8,593 |
| | 7,451 |
| 7,907 |
| | 7,902 |
|
Long-Term Debt Payable to Affiliated Companies | 150 |
| | 150 |
| 150 |
| | 150 |
|
Other Noncurrent Liabilities | | | | | | |
Deferred income taxes | 2,316 |
| | 2,119 |
| 2,485 |
| | 2,388 |
|
Asset retirement obligations | 5,038 |
| | 4,311 |
| 5,457 |
| | 5,408 |
|
Regulatory liabilities | 4,152 |
| | 3,955 |
| 4,087 |
| | 4,232 |
|
Operating lease liabilities | 360 |
| | — |
| 339 |
| | 354 |
|
Accrued pension and other post-retirement benefit costs | 230 |
| | 237 |
| 237 |
| | 238 |
|
Investment tax credits | 138 |
| | 142 |
| 134 |
| | 137 |
|
Other | 105 |
| | 106 |
| 105 |
| | 92 |
|
Total other noncurrent liabilities | 12,339 |
| | 10,870 |
| 12,844 |
| | 12,849 |
|
Commitments and Contingencies |
| |
|
| |
|
Equity | | | | | | |
Member's Equity | 9,091 |
| | 8,441 |
| 9,610 |
| | 9,246 |
|
Total Liabilities and Equity | $ | 32,598 |
| | $ | 30,011 |
| $ | 33,535 |
| | $ | 33,377 |
|
See Notes to Condensed Consolidated Financial Statements
24
DUKE ENERGY PROGRESS, LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | Nine Months Ended | Six Months Ended |
| September 30, | June 30, |
(in millions) | 2019 |
| | 2018 |
| 2020 |
| | 2019 |
|
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | |
Net income | $ | 650 |
| | $ | 532 |
| $ | 365 |
| | $ | 372 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | |
Depreciation and amortization (including amortization of nuclear fuel) | 996 |
| | 869 |
| 635 |
| | 634 |
|
Equity component of AFUDC | (44 | ) | | (41 | ) | (19 | ) | | (28 | ) |
Gains on sales of other assets | — |
| | (9 | ) | (6 | ) | | — |
|
Impairment charges | — |
| | 33 |
| |
Deferred income taxes | 144 |
| | 187 |
| 60 |
| | 26 |
|
Accrued pension and other post-retirement benefit costs | 2 |
| | 11 |
| |
Contributions to qualified pension plans | (4 | ) | | (25 | ) | |
Payments for asset retirement obligations | (288 | ) | | (133 | ) | (164 | ) | | (166 | ) |
Other rate case adjustments | — |
| | 37 |
| |
Provision for rate refunds | 13 |
| | 101 |
| 2 |
| | 10 |
|
(Increase) decrease in | | | | | | |
Net realized and unrealized mark-to-market and hedging transactions | (4 | ) | | 3 |
| (5 | ) | | (5 | ) |
Receivables | (9 | ) | | (154 | ) | 96 |
| | 58 |
|
Receivables from affiliated companies | (11 | ) | | (3 | ) | 10 |
| | (17 | ) |
Inventory | 15 |
| | 62 |
| (46 | ) | | (26 | ) |
Other current assets | 65 |
| | (239 | ) | 87 |
| | 115 |
|
Increase (decrease) in | | | | | | |
Accounts payable | (54 | ) | | 325 |
| (260 | ) | | (223 | ) |
Accounts payable to affiliated companies | (80 | ) | | 73 |
| (50 | ) | | (96 | ) |
Taxes accrued | 37 |
| | 28 |
| 71 |
| | 53 |
|
Other current liabilities | (17 | ) | | (27 | ) | (16 | ) | | (74 | ) |
Other assets | (197 | ) | | (358 | ) | (86 | ) | | (3 | ) |
Other liabilities | 33 |
| | 11 |
| (5 | ) | | 25 |
|
Net cash provided by operating activities | 1,247 |
| | 1,283 |
| 669 |
| | 655 |
|
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | |
Capital expenditures | (1,592 | ) | | (1,526 | ) | (795 | ) | | (1,115 | ) |
Purchases of debt and equity securities | (656 | ) | | (831 | ) | (569 | ) | | (473 | ) |
Proceeds from sales and maturities of debt and equity securities | 632 |
| | 807 |
| 548 |
| | 458 |
|
Net proceeds from the sales of other assets | — |
| | 20 |
| |
Notes receivable from affiliated companies | — |
| | (52 | ) | |
Other | (56 | ) | | (82 | ) | (21 | ) | | (20 | ) |
Net cash used in investing activities | (1,672 | ) | | (1,664 | ) | (837 | ) | | (1,150 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | |
Proceeds from the issuance of long-term debt | 1,270 |
| | 796 |
| 20 |
| | 1,270 |
|
Payments for the redemption of long-term debt | (603 | ) | | (2 | ) | (13 | ) | | (602 | ) |
Notes payable to affiliated companies | (215 | ) | | (240 | ) | 191 |
| | (167 | ) |
Distributions to parent | — |
| | (175 | ) | |
Other | (1 | ) | | (1 | ) | (1 | ) | | (1 | ) |
Net cash provided by financing activities | 451 |
| | 378 |
| 197 |
| | 500 |
|
Net increase (decrease) in cash and cash equivalents | 26 |
| | (3 | ) | |
Net increase in cash and cash equivalents | | 29 |
| | 5 |
|
Cash and cash equivalents at beginning of period | 23 |
| | 20 |
| 22 |
| | 23 |
|
Cash and cash equivalents at end of period | $ | 49 |
| | $ | 17 |
| $ | 51 |
| | $ | 28 |
|
Supplemental Disclosures: | | | | | | |
Significant non-cash transactions: | | | | | | |
Accrued capital expenditures | $ | 182 |
| | $ | 261 |
| $ | 95 |
| | $ | 112 |
|
See Notes to Condensed Consolidated Financial Statements
25
DUKE ENERGY PROGRESS, LLC
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
| | | Three Months Ended | Three Months Ended |
| September 30, 2018 and 2019 | June 30, 2019 and 2020 |
| Member's | Member's |
(in millions) | Equity | Equity |
Balance at June 30, 2018 | $ | 8,265 |
| |
Balance at March 31, 2019 | | $ | 8,644 |
|
Net income | 216 |
| 169 |
|
Distributions to parent | (175 | ) | |
Balance at September 30, 2018 | $ | 8,306 |
| |
Balance at June 30, 2019 | | $ | 8,813 |
|
| | |
Balance at June 30, 2019 | $ | 8,813 |
| |
Balance at March 31, 2020 | | $ | 9,450 |
|
Net income | 278 |
| 161 |
|
Balance at September 30, 2019 | $ | 9,091 |
| |
Other | | (1 | ) |
Balance at June 30, 2020 | | $ | 9,610 |
|
| | |
| Nine Months Ended | Six Months Ended |
| September 30, 2018 and 2019 | June 30, 2019 and 2020 |
| Member's | Member's |
(in millions) | Equity | Equity |
Balance at December 31, 2017 | $ | 7,949 |
| |
Net income | 532 |
| |
Distributions to parent | (175 | ) | |
Balance at September 30, 2018 | $ | 8,306 |
| |
| | |
Balance at December 31, 2018 | $ | 8,441 |
| $ | 8,441 |
|
Net income | 650 |
| 372 |
|
Balance at September 30, 2019 | $ | 9,091 |
| |
Balance at June 30, 2019 | | $ | 8,813 |
|
| | |
Balance at December 31, 2019 | | $ | 9,246 |
|
Net income | | 365 |
|
Other | | (1 | ) |
Balance at June 30, 2020 | | $ | 9,610 |
|
See Notes to Condensed Consolidated Financial Statements
26
DUKE ENERGY FLORIDA, LLC
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
| | | Three Months Ended | | Nine Months Ended | Three Months Ended | | Six Months Ended |
| September 30, | | September 30, | June 30, | | June 30, |
(in millions) | 2019 |
| | 2018 |
| | 2019 |
| | 2018 |
| 2020 |
| | 2019 |
| | 2020 |
| | 2019 |
|
Operating Revenues | $ | 1,548 |
| | $ | 1,462 |
| | $ | 3,987 |
| | $ | 3,780 |
| $ | 1,250 |
| | $ | 1,353 |
| | $ | 2,330 |
| | $ | 2,439 |
|
Operating Expenses | | | | | | | | | | | | | | |
Fuel used in electric generation and purchased power | 610 |
| | 614 |
| | 1,529 |
| | 1,567 |
| 382 |
| | 509 |
| | 740 |
| | 919 |
|
Operation, maintenance and other | 256 |
| | 245 |
| | 730 |
| | 719 |
| 269 |
| | 244 |
| | 514 |
| | 474 |
|
Depreciation and amortization | 182 |
| | 166 |
| | 522 |
| | 460 |
| 175 |
| | 175 |
| | 340 |
| | 340 |
|
Property and other taxes | 113 |
| | 105 |
| | 309 |
| | 284 |
| 92 |
| | 103 |
| | 180 |
| | 196 |
|
Impairment charges | (25 | ) | | 1 |
| | (25 | ) | | 1 |
| |
Total operating expenses | 1,136 |
| | 1,131 |
| | 3,065 |
| | 3,031 |
| 918 |
| | 1,031 |
| | 1,774 |
| | 1,929 |
|
Gains on Sales of Other Assets and Other, net | 1 |
| | — |
| | — |
| | — |
| |
Losses on Sales of Other Assets and Other, net | | — |
| | (1 | ) | | — |
| | (1 | ) |
Operating Income | 413 |
| | 331 |
| | 922 |
| | 749 |
| 332 |
| | 321 |
| | 556 |
| | 509 |
|
Other Income and Expenses, net | 14 |
| | 28 |
| | 39 |
| | 75 |
| 15 |
| | 12 |
| | 25 |
| | 25 |
|
Interest Expense | 81 |
| | 73 |
| | 246 |
| | 210 |
| 80 |
| | 83 |
| | 164 |
| | 165 |
|
Income Before Income Taxes | 346 |
| | 286 |
| | 715 |
| | 614 |
| 267 |
| | 250 |
| | 417 |
| | 369 |
|
Income Tax Expense | 57 |
| | 43 |
| | 129 |
| | 100 |
| 51 |
| | 49 |
| | 81 |
| | 72 |
|
Net Income | $ | 289 |
| | $ | 243 |
| | $ | 586 |
| | $ | 514 |
| $ | 216 |
| | $ | 201 |
| | $ | 336 |
| | $ | 297 |
|
Other Comprehensive Income (Loss), net of tax |
| |
| |
|
| |
|
| |
Unrealized gains (losses) on available-for-sale securities | 1 |
| | — |
| | 2 |
| | (1 | ) | |
Other Comprehensive Income, net of tax | |
| |
| |
|
| |
|
|
Unrealized (losses) gains on available-for-sale securities | | (1 | ) | | — |
| | — |
| | 1 |
|
Comprehensive Income | $ | 290 |
| | $ | 243 |
| | $ | 588 |
|
| $ | 513 |
| $ | 215 |
| | $ | 201 |
| | $ | 336 |
|
| $ | 298 |
|
See Notes to Condensed Consolidated Financial Statements
27
DUKE ENERGY FLORIDA, LLC
Condensed Consolidated Balance Sheets
(Unaudited)
| | (in millions) | September 30, 2019 |
| | December 31, 2018 |
| June 30, 2020 |
| | December 31, 2019 |
|
ASSETS | | | | | | |
Current Assets | | | | | | |
Cash and cash equivalents | $ | 24 |
| | $ | 36 |
| $ | 20 |
| | $ | 17 |
|
Receivables (net of allowance for doubtful accounts of $3 at 2019 and 2018) | 104 |
| | 143 |
| |
Receivables of VIEs (net of allowance for doubtful accounts of $3 at 2019 and 2018) | 478 |
| | 362 |
| |
Receivables (net of allowance for doubtful accounts of $5 at 2020 and $3 at 2019) | | 72 |
| | 96 |
|
Receivables of VIEs (net of allowance for doubtful accounts of $9 at 2020 and $4 at 2019) | | 469 |
| | 341 |
|
Receivables from affiliated companies | 1 |
| | 28 |
| 2 |
| | — |
|
Notes receivable from affiliated companies | | — |
| | 173 |
|
Inventory | 495 |
| | 504 |
| 486 |
| | 489 |
|
Regulatory assets (includes $52 at 2019 and 2018 related to VIEs) | 367 |
| | 434 |
| |
Other (includes $16 at 2019 and $39 at 2018 related to VIEs) | 42 |
| | 46 |
| |
Regulatory assets (includes $53 at 2020 and $52 at 2019 related to VIEs) | | 432 |
| | 419 |
|
Other (includes $32 at 2020 and $39 at 2019 related to VIEs) | | 44 |
| | 58 |
|
Total current assets | 1,511 |
| | 1,553 |
| 1,525 |
| | 1,593 |
|
Property, Plant and Equipment | | | | | | |
Cost | 19,887 |
| | 18,792 |
| 21,290 |
| | 20,457 |
|
Accumulated depreciation and amortization | (5,148 | ) | | (4,968 | ) | (5,394 | ) | | (5,236 | ) |
Net property, plant and equipment | 14,739 |
| | 13,824 |
| 15,896 |
| | 15,221 |
|
Other Noncurrent Assets | | | | | | |
Regulatory assets (includes $1,002 at 2019 and $1,041 at 2018 related to VIEs) | 2,370 |
| | 2,454 |
| |
Regulatory assets (includes $969 at 2020 and $989 at 2019 related to VIEs) | | 1,860 |
| | 2,194 |
|
Nuclear decommissioning trust funds | 718 |
| | 659 |
| 711 |
| | 734 |
|
Operating lease right-of-use assets, net | 417 |
| | — |
| 370 |
| | 401 |
|
Other | 307 |
| | 311 |
| 327 |
| | 311 |
|
Total other noncurrent assets | 3,812 |
| | 3,424 |
| 3,268 |
| | 3,640 |
|
Total Assets | $ | 20,062 |
| | $ | 18,801 |
| $ | 20,689 |
| | $ | 20,454 |
|
LIABILITIES AND EQUITY | | | | | | |
Current Liabilities | | | | | | |
Accounts payable | $ | 542 |
| | $ | 511 |
| $ | 388 |
| | $ | 474 |
|
Accounts payable to affiliated companies | 158 |
| | 91 |
| 80 |
| | 131 |
|
Notes payable to affiliated companies | 356 |
| | 108 |
| 232 |
| | — |
|
Taxes accrued | 175 |
| | 74 |
| 177 |
| | 43 |
|
Interest accrued | 72 |
| | 75 |
| 67 |
| | 75 |
|
Current maturities of long-term debt (includes $54 at 2019 and $53 at 2018 related to VIEs) | 621 |
| | 270 |
| |
Asset retirement obligations | 2 |
| | 5 |
| |
Current maturities of long-term debt (includes $304 at 2020 and $54 at 2019 related to VIEs) | | 323 |
| | 571 |
|
Regulatory liabilities | 87 |
| | 102 |
| 82 |
| | 94 |
|
Other | 423 |
| | 406 |
| 372 |
| | 415 |
|
Total current liabilities | 2,436 |
| | 1,642 |
| 1,721 |
| | 1,803 |
|
Long-Term Debt (includes $1,306 at 2019 and $1,336 at 2018 related to VIEs) | 6,511 |
| | 7,051 |
| |
Long-Term Debt (includes $1,028 at 2020 and $1,307 at 2019 related to VIEs) | | 7,628 |
| | 7,416 |
|
Other Noncurrent Liabilities | | | | | | |
Deferred income taxes | 2,199 |
| | 1,986 |
| 2,181 |
| | 2,179 |
|
Asset retirement obligations | 572 |
| | 586 |
| 581 |
| | 578 |
|
Regulatory liabilities | 1,013 |
| | 1,094 |
| 726 |
| | 993 |
|
Operating lease liabilities | 350 |
| | — |
| 323 |
| | 343 |
|
Accrued pension and other post-retirement benefit costs | 196 |
| | 254 |
| 211 |
| | 218 |
|
Other | 102 |
| | 93 |
| 194 |
| | 136 |
|
Total other noncurrent liabilities | 4,432 |
| | 4,013 |
| 4,216 |
| | 4,447 |
|
Commitments and Contingencies |
| |
|
| |
|
Equity | | | | | | |
Member's equity | 6,683 |
| | 6,097 |
| 7,125 |
| | 6,789 |
|
Accumulated other comprehensive loss | — |
| | (2 | ) | (1 | ) | | (1 | ) |
Total equity | 6,683 |
| | 6,095 |
| 7,124 |
| | 6,788 |
|
Total Liabilities and Equity | $ | 20,062 |
| | $ | 18,801 |
| $ | 20,689 |
| | $ | 20,454 |
|
See Notes to Condensed Consolidated Financial Statements
28
DUKE ENERGY FLORIDA, LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | Nine Months Ended | Six Months Ended |
| September 30, | June 30, |
(in millions) | 2019 |
| | 2018 |
| 2020 |
| | 2019 |
|
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | |
Net income | $ | 586 |
| | $ | 514 |
| $ | 336 |
| | $ | 297 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | |
Depreciation, amortization and accretion | 647 |
| | 581 |
| 478 |
| | 423 |
|
Equity component of AFUDC | (4 | ) | | (40 | ) | (6 | ) | | (2 | ) |
Impairment charges | (25 | ) | | 1 |
| |
Losses on sales of other assets | | — |
| | 1 |
|
Deferred income taxes | 164 |
| | 169 |
| 37 |
| | 82 |
|
Accrued pension and other post-retirement benefit costs | 8 |
| | 4 |
| |
Contributions to qualified pension plans | (53 | ) | | (20 | ) | |
Payments for asset retirement obligations | (21 | ) | | (31 | ) | (9 | ) | | (17 | ) |
(Increase) decrease in | | | | | | |
Net realized and unrealized mark-to-market and hedging transactions | 9 |
| | 7 |
| (20 | ) | | 2 |
|
Receivables | (119 | ) | | (163 | ) | (110 | ) | | (101 | ) |
Receivables from affiliated companies | 27 |
| | (18 | ) | (2 | ) | | 10 |
|
Inventory | 29 |
| | 57 |
| 4 |
| | 1 |
|
Other current assets | 100 |
| | 51 |
| (11 | ) | | 8 |
|
Increase (decrease) in | | | | | | |
Accounts payable | (11 | ) | | 101 |
| 23 |
| | 27 |
|
Accounts payable to affiliated companies | 67 |
| | 9 |
| (51 | ) | | (29 | ) |
Taxes accrued | 101 |
| | 198 |
| 134 |
| | 74 |
|
Other current liabilities | (77 | ) | | 1 |
| (50 | ) | | (80 | ) |
Other assets | (81 | ) | | (308 | ) | 37 |
| | (77 | ) |
Other liabilities | (127 | ) | | (58 | ) | (91 | ) | | (8 | ) |
Net cash provided by operating activities | 1,220 |
| | 1,055 |
| 699 |
| | 611 |
|
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | |
Capital expenditures | (1,274 | ) | | (1,162 | ) | (1,016 | ) | | (873 | ) |
Purchases of debt and equity securities | (648 | ) | | (385 | ) | (2,033 | ) | | (621 | ) |
Proceeds from sales and maturities of debt and equity securities | 668 |
| | 418 |
| 2,040 |
| | 631 |
|
Notes receivable from affiliated companies | — |
| | (80 | ) | 173 |
| | — |
|
Other | (73 | ) | | (61 | ) | (60 | ) | | (37 | ) |
Net cash used in investing activities | (1,327 | ) | | (1,270 | ) | (896 | ) | | (900 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | |
Proceeds from the issuance of long-term debt | 25 |
| | 989 |
| 495 |
| | 25 |
|
Payments for the redemption of long-term debt | (210 | ) | | (717 | ) | (537 | ) | | (136 | ) |
Notes payable to affiliated companies | 248 |
| | — |
| 232 |
| | 369 |
|
Distributions to parent | — |
| | (75 | ) | |
Other | 9 |
| | (1 | ) | 2 |
| | 3 |
|
Net cash provided by financing activities | 72 |
| | 196 |
| 192 |
| | 261 |
|
Net decrease in cash, cash equivalents and restricted cash | (35 | ) | | (19 | ) | (5 | ) | | (28 | ) |
Cash, cash equivalents and restricted cash at beginning of period | 75 |
| | 53 |
| 56 |
| | 75 |
|
Cash, cash equivalents and restricted cash at end of period | $ | 40 |
| | $ | 34 |
| $ | 51 |
| | $ | 47 |
|
Supplemental Disclosures: | | | | | | |
Significant non-cash transactions: | | | | | | |
Accrued capital expenditures | $ | 218 |
| | $ | 180 |
| $ | 192 |
| | $ | 166 |
|
See Notes to Condensed Consolidated Financial Statements
29
DUKE ENERGY FLORIDA, LLC
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
| | | Three Months Ended September 30, 2018 and 2019 | Three Months Ended June 30, 2019 and 2020 |
| | | 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 June 30, 2018 | $ | 5,890 |
| | $ | (2 | ) | | $ | 5,888 |
| |
Balance at March 31, 2019 | | $ | 6,193 |
| | $ | (1 | ) | | $ | 6,192 |
|
Net income | 243 |
| | — |
| | 243 |
| 201 |
| | — |
| | 201 |
|
Distributions to parent | (75 | ) | | — |
| | (75 | ) | |
Balance at September 30, 2018 | $ | 6,058 |
| | $ | (2 | ) | | $ | 6,056 |
| |
Balance at June 30, 2019 | | $ | 6,394 |
| | $ | (1 | ) | | $ | 6,393 |
|
| | | | | | | | | | |
Balance at June 30, 2019 | $ | 6,394 |
| | $ | (1 | ) | | $ | 6,393 |
| |
Balance at March 31, 2020 | | $ | 6,909 |
| | $ | — |
| | $ | 6,909 |
|
Net income | 289 |
| | — |
| | 289 |
| 216 |
| | — |
| | 216 |
|
Other comprehensive income | — |
| | 1 |
| | 1 |
| — |
| | (1 | ) | | (1 | ) |
Balance at September 30, 2019 | $ | 6,683 |
| | $ | — |
| | $ | 6,683 |
| |
Balance at June 30, 2020 | | $ | 7,125 |
| | $ | (1 | ) | | $ | 7,124 |
|
| | | | | | | | | | |
| Nine Months Ended September 30, 2018 and 2019 | Six Months Ended June 30, 2019 and 2020 |
| | | Accumulated | | | | | Accumulated | | |
| | | Other | | | | | Other | | |
| | | Comprehensive | | | | | Comprehensive | | |
| | | Income (Loss) | | | | | Income (Loss) | | |
| | | Net Unrealized |
| | | | | Net Unrealized |
| | |
| | | Gains (Losses) on |
| | | | | Gains 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, 2017 | $ | 5,614 |
| | $ | 4 |
| | $ | 5,618 |
| |
Net income | 514 |
| | — |
| | 514 |
| |
Other comprehensive loss | — |
| | (1 | ) | | (1 | ) | |
Distributions to parent | (75 | ) | | — |
| | (75 | ) | |
Other(a) | 5 |
| | (5 | ) | | — |
| |
Balance at September 30, 2018 | $ | 6,058 |
| | $ | (2 | ) | | $ | 6,056 |
| |
| | | | | | |
Balance at December 31, 2018 | $ | 6,097 |
| | $ | (2 | ) | | $ | 6,095 |
| $ | 6,097 |
| | $ | (2 | ) | | $ | 6,095 |
|
Net income | 586 |
| | — |
| | 586 |
| 297 |
| | — |
| | 297 |
|
Other comprehensive income | — |
| | 2 |
| | 2 |
| — |
| | 1 |
| | 1 |
|
Balance at September 30, 2019 | $ | 6,683 |
| | $ | — |
| | $ | 6,683 |
| |
Balance at June 30, 2019 | | $ | 6,394 |
| | $ | (1 | ) | | $ | 6,393 |
|
| | | | | | |
Balance at December 31, 2019 | | $ | 6,789 |
| | $ | (1 | ) | | $ | 6,788 |
|
Net income | | 336 |
| | — |
| | 336 |
|
Balance at June 30, 2020 | | $ | 7,125 |
| | $ | (1 | ) | | $ | 7,124 |
|
| |
(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 Notes to Condensed Consolidated Financial Statements
30
DUKE ENERGY OHIO, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
| | | Three Months Ended | | Nine Months Ended | Three Months Ended | | Six Months Ended |
| September 30, | | September 30, | June 30, | | June 30, |
(in millions) | 2019 |
| | 2018 |
| | 2019 |
|
| 2018 |
| 2020 |
| | 2019 |
| | 2020 |
|
| 2019 |
|
Operating Revenues | | | | | | | | | | | | | | |
Regulated electric | $ | 408 |
| | $ | 373 |
| | $ | 1,099 |
| | $ | 1,055 |
| $ | 330 |
| | $ | 336 |
| | $ | 676 |
| | $ | 691 |
|
Regulated natural gas | 81 |
| | 84 |
| | 354 |
| | 361 |
| 93 |
| | 97 |
| | 245 |
| | 273 |
|
Nonregulated electric and other | — |
| | 12 |
| | — |
| | 36 |
| |
Total operating revenues | 489 |
| | 469 |
| | 1,453 |
| | 1,452 |
| 423 |
| | 433 |
| | 921 |
| | 964 |
|
Operating Expenses | | | | | | | | | | | | | | |
Fuel used in electric generation and purchased power – regulated | 114 |
| | 99 |
| | 293 |
| | 284 |
| |
Fuel used in electric generation and purchased power – nonregulated | — |
| | 14 |
| | — |
| | 43 |
| |
Fuel used in electric generation and purchased power | | 77 |
| | 86 |
| | 164 |
| | 179 |
|
Cost of natural gas | 4 |
| | 4 |
| | 68 |
| | 73 |
| 6 |
| | 10 |
| | 43 |
| | 64 |
|
Operation, maintenance and other | 123 |
| | 76 |
| | 378 |
| | 337 |
| 95 |
| | 123 |
| | 218 |
| | 255 |
|
Depreciation and amortization | 69 |
| | 64 |
| | 199 |
| | 196 |
| 68 |
| | 66 |
| | 136 |
| | 130 |
|
Property and other taxes | 71 |
| | 73 |
| | 229 |
| | 218 |
| 78 |
| | 74 |
| | 161 |
| | 158 |
|
Total operating expenses | 381 |
| | 330 |
| | 1,167 |
| | 1,151 |
| 324 |
| | 359 |
| | 722 |
| | 786 |
|
Losses on Sales of Other Assets and Other, net | — |
| | — |
| | — |
| | (106 | ) | |
Operating Income | 108 |
| | 139 |
| | 286 |
| | 195 |
| 99 |
| | 74 |
| | 199 |
| | 178 |
|
Other Income and Expenses, net | 4 |
| | 3 |
| | 19 |
| | 17 |
| 4 |
| | 6 |
| | 7 |
| | 15 |
|
Interest Expense | 27 |
| | 23 |
| | 81 |
| | 68 |
| 25 |
| | 24 |
| | 49 |
| | 54 |
|
Income Before Income Taxes | 85 |
| | 119 |
| | 224 |
| | 144 |
| 78 |
| | 56 |
| | 157 |
| | 139 |
|
Income Tax Expense | 11 |
| | 19 |
| | 34 |
| | 23 |
| 12 |
| | 9 |
| | 26 |
| | 23 |
|
Net Income and Comprehensive Income | $ | 74 |
| | $ | 100 |
| | $ | 190 |
| | $ | 121 |
| $ | 66 |
| | $ | 47 |
| | $ | 131 |
| | $ | 116 |
|
See Notes to Condensed Consolidated Financial Statements
31
DUKE ENERGY OHIO, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
| | (in millions) | September 30, 2019 |
| | December 31, 2018 |
| June 30, 2020 |
| | December 31, 2019 |
|
ASSETS | | | | | | |
Current Assets | | | | | | |
Cash and cash equivalents | $ | 11 |
| | $ | 21 |
| $ | 8 |
| | $ | 17 |
|
Receivables (net of allowance for doubtful accounts of $4 at 2019 and $2 at 2018) | 81 |
| | 102 |
| |
Receivables (net of allowance for doubtful accounts of $5 at 2020 and $4 at 2019) | | 83 |
| | 84 |
|
Receivables from affiliated companies | 63 |
| | 114 |
| 47 |
| | 92 |
|
Notes receivable from affiliated companies | 74 |
| | — |
| 35 |
| | — |
|
Inventory | 128 |
| | 126 |
| 129 |
| | 135 |
|
Regulatory assets | 47 |
| | 33 |
| 32 |
| | 49 |
|
Other | 28 |
| | 24 |
| 14 |
| | 21 |
|
Total current assets | 432 |
| | 420 |
| 348 |
| | 398 |
|
Property, Plant and Equipment | | | | | | |
Cost | 9,993 |
| | 9,360 |
| 10,591 |
| | 10,241 |
|
Accumulated depreciation and amortization | (2,785 | ) | | (2,717 | ) | (2,923 | ) | | (2,843 | ) |
Net property, plant and equipment | 7,208 |
| | 6,643 |
| 7,668 |
| | 7,398 |
|
Other Noncurrent Assets | | | | | | |
Goodwill | 920 |
| | 920 |
| 920 |
| | 920 |
|
Regulatory assets | 553 |
| | 531 |
| 593 |
| | 549 |
|
Operating lease right-of-use assets, net | 22 |
| | — |
| 21 |
| | 21 |
|
Other | 48 |
| | 41 |
| 59 |
| | 52 |
|
Total other noncurrent assets | 1,543 |
| | 1,492 |
| 1,593 |
| | 1,542 |
|
Total Assets | $ | 9,183 |
| | $ | 8,555 |
| $ | 9,609 |
| | $ | 9,338 |
|
LIABILITIES AND EQUITY | | | | | | |
Current Liabilities | | | | | | |
Accounts payable | $ | 266 |
| | $ | 316 |
| $ | 249 |
| | $ | 288 |
|
Accounts payable to affiliated companies | 69 |
| | 78 |
| 58 |
| | 68 |
|
Notes payable to affiliated companies | 167 |
| | 274 |
| 79 |
| | 312 |
|
Taxes accrued | 162 |
| | 202 |
| 210 |
| | 219 |
|
Interest accrued | 29 |
| | 22 |
| 31 |
| | 30 |
|
Current maturities of long-term debt | 100 |
| | 551 |
| |
Asset retirement obligations | 3 |
| | 6 |
| 5 |
| | 1 |
|
Regulatory liabilities | 64 |
| | 57 |
| 69 |
| | 64 |
|
Other | 74 |
| | 74 |
| 71 |
| | 75 |
|
Total current liabilities | 934 |
| | 1,580 |
| 772 |
| | 1,057 |
|
Long-Term Debt | 2,594 |
| | 1,589 |
| 2,994 |
| | 2,594 |
|
Long-Term Debt Payable to Affiliated Companies | 25 |
| | 25 |
| 25 |
| | 25 |
|
Other Noncurrent Liabilities | | | | | | |
Deferred income taxes | 901 |
| | 817 |
| 958 |
| | 922 |
|
Asset retirement obligations | 82 |
| | 87 |
| 77 |
| | 79 |
|
Regulatory liabilities | 793 |
| | 840 |
| 751 |
| | 763 |
|
Operating lease liabilities | 21 |
| | — |
| 20 |
| | 21 |
|
Accrued pension and other post-retirement benefit costs | 103 |
| | 79 |
| 102 |
| | 100 |
|
Other | 95 |
| | 93 |
| 96 |
| | 94 |
|
Total other noncurrent liabilities | 1,995 |
| | 1,916 |
| 2,004 |
| | 1,979 |
|
Commitments and Contingencies | | | | | | |
Equity | | | | | | |
Common stock, $8.50 par value, 120 million shares authorized; 90 million shares outstanding at 2019 and 2018 | 762 |
| | 762 |
| |
Common Stock, $8.50 par value, 120 million shares authorized; 90 million shares outstanding at 2020 and 2019 | | 762 |
| | 762 |
|
Additional paid-in capital | 2,776 |
| | 2,776 |
| 2,776 |
| | 2,776 |
|
Retained Earnings (Accumulated deficit) | 97 |
| | (93 | ) | |
Retained earnings | | 276 |
| | 145 |
|
Total equity | 3,635 |
| | 3,445 |
| 3,814 |
| | 3,683 |
|
Total Liabilities and Equity | $ | 9,183 |
| | $ | 8,555 |
| $ | 9,609 |
| | $ | 9,338 |
|
See Notes to Condensed Consolidated Financial Statements
32
DUKE ENERGY OHIO, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | Nine Months Ended | Six Months Ended |
| September 30, | June 30, |
(in millions) | 2019 |
| | 2018 |
| 2020 |
| | 2019 |
|
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | |
Net income | $ | 190 |
| | $ | 121 |
| $ | 131 |
| | $ | 116 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | |
Depreciation and amortization | 202 |
| | 199 |
| 138 |
| | 132 |
|
Equity component of AFUDC | (9 | ) | | (10 | ) | (2 | ) | | (7 | ) |
Losses on sales of other assets | — |
| | 106 |
| |
Deferred income taxes | 68 |
| | 9 |
| 24 |
| | 45 |
|
Accrued pension and other post-retirement benefit costs | 1 |
| | 3 |
| |
Contributions to qualified pension plans | (2 | ) | | — |
| |
Payments for asset retirement obligations | (7 | ) | | (3 | ) | — |
| | (5 | ) |
Provision for rate refunds | 5 |
| | 23 |
| 6 |
| | 3 |
|
(Increase) decrease in | | | | | | |
Receivables | 24 |
| | (44 | ) | 2 |
| | 24 |
|
Receivables from affiliated companies | 51 |
| | 62 |
| 45 |
| | 64 |
|
Inventory | (2 | ) | | (2 | ) | 6 |
| | 2 |
|
Other current assets | (15 | ) | | 12 |
| 8 |
| | (13 | ) |
Increase (decrease) in | | | | | | |
Accounts payable | (40 | ) | | (47 | ) | (22 | ) | | (44 | ) |
Accounts payable to affiliated companies | (9 | ) | | (8 | ) | (10 | ) | | — |
|
Taxes accrued | (40 | ) | | (31 | ) | (9 | ) | | (67 | ) |
Other current liabilities | (4 | ) | | 19 |
| 2 |
| | 2 |
|
Other assets | (10 | ) | | 3 |
| (24 | ) | | (18 | ) |
Other liabilities | (25 | ) | | (17 | ) | (3 | ) | | (15 | ) |
Net cash provided by operating activities | 378 |
| | 395 |
| 292 |
| | 219 |
|
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | |
Capital expenditures | (714 | ) | | (588 | ) | (403 | ) | | (473 | ) |
Notes receivable from affiliated companies | (74 | ) | | 14 |
| (35 | ) | | — |
|
Other | (45 | ) | | (62 | ) | (27 | ) | | (31 | ) |
Net cash used in investing activities | (833 | ) | | (636 | ) | (465 | ) | | (504 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | |
Proceeds from the issuance of long-term debt | 1,003 |
| | — |
| 397 |
| | 794 |
|
Payments for the redemption of long-term debt | (451 | ) | | (3 | ) | — |
| | (451 | ) |
Notes payable to affiliated companies | (107 | ) | | 239 |
| (233 | ) | | (71 | ) |
Net cash provided by financing activities | 445 |
| | 236 |
| 164 |
| | 272 |
|
Net decrease in cash and cash equivalents | (10 | ) | | (5 | ) | (9 | ) | | (13 | ) |
Cash and cash equivalents at beginning of period | 21 |
| | 12 |
| 17 |
| | 21 |
|
Cash and cash equivalents at end of period | $ | 11 |
| | $ | 7 |
| $ | 8 |
| | $ | 8 |
|
Supplemental Disclosures: | | | | | | |
Significant non-cash transactions: | | | | | | |
Accrued capital expenditures | $ | 100 |
| | $ | 83 |
| $ | 94 |
| | $ | 93 |
|
Non-cash equity contribution from parent | — |
| | 106 |
| |
See Notes to Condensed Consolidated Financial Statements
33
DUKE ENERGY OHIO, INC.
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
| | | Three Months Ended September 30, 2018 and 2019 | Three Months Ended June 30, 2019 and 2020 |
| | | Additional |
| | Retained |
| | | | | Additional |
| | Retained |
| | |
| Common |
| | Paid-in |
| | Earnings |
| | Total |
| Common |
| | Paid-in |
| | Earnings |
| | Total |
|
(in millions) | Stock |
| | Capital |
| | (Deficit) |
| | Equity |
| Stock |
| | Capital |
| | (Deficit) |
| | Equity |
|
Balance at June 30, 2018 | $ | 762 |
| | $ | 2,776 |
| | $ | (248 | ) | | $ | 3,290 |
| |
Balance at March 31, 2019 | | $ | 762 |
| | $ | 2,776 |
| | $ | (24 | ) | | $ | 3,514 |
|
Net income | — |
| | — |
| | 100 |
| | 100 |
| — |
| | — |
| | 47 |
| | 47 |
|
Balance at September 30, 2018 | $ | 762 |
| | $ | 2,776 |
| | $ | (148 | ) | | $ | 3,390 |
| |
Balance at June 30, 2019 | | $ | 762 |
| | $ | 2,776 |
| | $ | 23 |
| | $ | 3,561 |
|
| | | | | | | | | | | | | | |
Balance at June 30, 2019 | $ | 762 |
| | $ | 2,776 |
| | $ | 23 |
| | $ | 3,561 |
| |
Balance at March 31, 2020 | | $ | 762 |
| | $ | 2,776 |
| | $ | 210 |
| | $ | 3,748 |
|
Net income | — |
| | — |
| | 74 |
| | 74 |
| — |
| | — |
| | 66 |
| | 66 |
|
Balance at September 30, 2019 | $ | 762 |
| | $ | 2,776 |
| | $ | 97 |
| | $ | 3,635 |
| |
Balance at June 30, 2020 | | $ | 762 |
| | $ | 2,776 |
| | $ | 276 |
| | $ | 3,814 |
|
| | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2018 and 2019 | Six Months Ended June 30, 2019 and 2020 |
| | | Additional |
| | Retained |
| | | | | Additional |
| | Retained |
| | |
| Common |
| | Paid-in |
| | Earnings |
| | Total |
| Common |
| | Paid-in |
| | Earnings |
| | Total |
|
(in millions) | Stock |
| | Capital |
| | (Deficit) |
| | Equity |
| Stock |
| | Capital |
| | (Deficit) |
| | Equity |
|
Balance at December 31, 2017 | $ | 762 |
| | $ | 2,670 |
| | $ | (269 | ) | | $ | 3,163 |
| |
Net income | — |
| | — |
| | 121 |
| | 121 |
| |
Contribution from parent(a) | — |
| | 106 |
| | — |
| | 106 |
| |
Balance at September 30, 2018 | $ | 762 |
| | $ | 2,776 |
| | $ | (148 | ) | | $ | 3,390 |
| |
| | | | | | | | |
Balance at December 31, 2018 | $ | 762 |
| | $ | 2,776 |
| | $ | (93 | ) | | $ | 3,445 |
| $ | 762 |
| | $ | 2,776 |
| | $ | (93 | ) | | $ | 3,445 |
|
Net income | — |
| | — |
| | 190 |
| | 190 |
| — |
| | — |
| | 116 |
| | 116 |
|
Balance at September 30, 2019 | $ | 762 |
|
| $ | 2,776 |
|
| $ | 97 |
|
| $ | 3,635 |
| |
Balance at June 30, 2019 | | $ | 762 |
| | $ | 2,776 |
| | $ | 23 |
| | $ | 3,561 |
|
| | | | | | | | |
Balance at December 31, 2019 | | $ | 762 |
| | $ | 2,776 |
| | $ | 145 |
| | $ | 3,683 |
|
Net income | | — |
| | — |
| | 131 |
| | 131 |
|
Balance at June 30, 2020 | | $ | 762 |
|
| $ | 2,776 |
|
| $ | 276 |
|
| $ | 3,814 |
|
| |
(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 | | Nine Months Ended | Three Months Ended | | Six Months Ended |
| September 30, | | September 30, | June 30, | | June 30, |
(in millions) | 2019 |
| | 2018 |
| | 2019 |
| | 2018 |
| 2020 |
| | 2019 |
| | 2020 |
| | 2019 |
|
Operating Revenues | $ | 807 |
| | $ | 819 |
| | $ | 2,289 |
| | $ | 2,288 |
| $ | 617 |
| | $ | 714 |
| | $ | 1,309 |
| | $ | 1,482 |
|
Operating Expenses | | | | | | | | | | | | | | |
Fuel used in electric generation and purchased power | 234 |
| | 272 |
| | 720 |
| | 730 |
| 161 |
| | 229 |
| | 355 |
| | 486 |
|
Operation, maintenance and other | 192 |
| | 198 |
| | 569 |
| | 576 |
| 171 |
| | 188 |
| | 357 |
| | 377 |
|
Depreciation and amortization | 130 |
| | 130 |
| | 393 |
| | 386 |
| 134 |
| | 132 |
| | 266 |
| | 263 |
|
Property and other taxes | 16 |
| | 16 |
| | 55 |
| | 56 |
| 20 |
| | 20 |
| | 42 |
| | 39 |
|
Impairment charges | — |
| | 30 |
| | — |
| | 30 |
| |
Total operating expenses | 572 |
| | 646 |
| | 1,737 |
| | 1,778 |
| 486 |
| | 569 |
| | 1,020 |
| | 1,165 |
|
Gains on Sales of Other Assets and Other, net | | — |
|
| 3 |
| | — |
| | — |
|
Operating Income | 235 |
| | 173 |
|
| 552 |
|
| 510 |
| 131 |
| | 148 |
|
| 289 |
|
| 317 |
|
Other Income and Expenses, net | 8 |
| | 23 |
| | 35 |
| | 36 |
| 9 |
| | 8 |
| | 19 |
| | 27 |
|
Interest Expense | 40 |
| | 42 |
| | 111 |
| | 125 |
| 42 |
| | 28 |
| | 85 |
| | 71 |
|
Income Before Income Taxes | 203 |
| | 154 |
|
| 476 |
|
| 421 |
| 98 |
| | 128 |
|
| 223 |
|
| 273 |
|
Income Tax Expense | 47 |
| | 35 |
| | 113 |
| | 104 |
| 17 |
| | 31 |
| | 43 |
| | 66 |
|
Net Income and Comprehensive Income | $ | 156 |
| | $ | 119 |
|
| $ | 363 |
|
| $ | 317 |
| $ | 81 |
| | $ | 97 |
|
| $ | 180 |
|
| $ | 207 |
|
See Notes to Condensed Consolidated Financial Statements
35
DUKE ENERGY INDIANA, LLC
Condensed Consolidated Balance Sheets
(Unaudited)
| | (in millions) | September 30, 2019 |
| | December 31, 2018 |
| June 30, 2020 |
| | December 31, 2019 |
|
ASSETS | | | | | | |
Current Assets | | | | | | |
Cash and cash equivalents | $ | 20 |
| | $ | 24 |
| $ | 16 |
| | $ | 25 |
|
Receivables (net of allowance for doubtful accounts of $3 at 2019 and $2 at 2018) | 56 |
| | 52 |
| |
Receivables (net of allowance for doubtful accounts of $3 at 2020 and 2019) | | 44 |
| | 60 |
|
Receivables from affiliated companies | 85 |
| | 122 |
| 59 |
| | 79 |
|
Notes receivable from affiliated companies | 213 |
| | — |
| 425 |
| | — |
|
Inventory | 478 |
| | 422 |
| 489 |
| | 517 |
|
Regulatory assets | 91 |
| | 175 |
| 90 |
| | 90 |
|
Other | 29 |
| | 35 |
| 45 |
| | 60 |
|
Total current assets | 972 |
| | 830 |
| 1,168 |
| | 831 |
|
Property, Plant and Equipment | | | | | | |
Cost | 16,137 |
| | 15,443 |
| 16,736 |
| | 16,305 |
|
Accumulated depreciation and amortization | (5,200 | ) | | (4,914 | ) | (5,472 | ) | | (5,233 | ) |
Net property, plant and equipment | 10,937 |
| | 10,529 |
| 11,264 |
| | 11,072 |
|
Other Noncurrent Assets | | | | | | |
Regulatory assets | 1,088 |
| | 982 |
| 1,113 |
| | 1,082 |
|
Operating lease right-of-use assets, net | 58 |
| | — |
| 56 |
| | 57 |
|
Other | 211 |
| | 194 |
| 251 |
| | 234 |
|
Total other noncurrent assets | 1,357 |
| | 1,176 |
| 1,420 |
| | 1,373 |
|
Total Assets | $ | 13,266 |
| | $ | 12,535 |
| $ | 13,852 |
| | $ | 13,276 |
|
LIABILITIES AND EQUITY | | | | | | |
Current Liabilities | | | | | | |
Accounts payable | $ | 196 |
| | $ | 200 |
| $ | 204 |
| | $ | 201 |
|
Accounts payable to affiliated companies | 74 |
| | 83 |
| 74 |
| | 87 |
|
Notes payable to affiliated companies | — |
| | 167 |
| — |
| | 30 |
|
Taxes accrued | 29 |
| | 43 |
| 46 |
| | 49 |
|
Interest accrued | 54 |
| | 58 |
| 64 |
| | 58 |
|
Current maturities of long-term debt | 651 |
| | 63 |
| 503 |
| | 503 |
|
Asset retirement obligations | 165 |
| | 109 |
| 172 |
| | 189 |
|
Regulatory liabilities | 39 |
| | 25 |
| 51 |
| | 55 |
|
Other | 107 |
| | 107 |
| 104 |
| | 112 |
|
Total current liabilities | 1,315 |
| | 855 |
| 1,218 |
| | 1,284 |
|
Long-Term Debt | 3,407 |
| | 3,569 |
| 3,950 |
| | 3,404 |
|
Long-Term Debt Payable to Affiliated Companies | 150 |
| | 150 |
| 150 |
| | 150 |
|
Other Noncurrent Liabilities | | | | | | |
Deferred income taxes | 1,119 |
| | 1,009 |
| 1,195 |
| | 1,150 |
|
Asset retirement obligations | 659 |
| | 613 |
| 643 |
| | 643 |
|
Regulatory liabilities | 1,684 |
| | 1,722 |
| 1,655 |
| | 1,685 |
|
Operating lease liabilities | 55 |
| | — |
| 54 |
| | 55 |
|
Accrued pension and other post-retirement benefit costs | 157 |
| | 115 |
| 150 |
| | 148 |
|
Investment tax credits | 161 |
| | 147 |
| 170 |
| | 164 |
|
Other | 57 |
| | 16 |
| 12 |
| | 18 |
|
Total other noncurrent liabilities | 3,892 |
| | 3,622 |
| 3,879 |
| | 3,863 |
|
Commitments and Contingencies | | | | | | |
Equity | | | | | | |
Member's Equity | 4,502 |
| | 4,339 |
| 4,655 |
| | 4,575 |
|
Total Liabilities and Equity | $ | 13,266 |
| | $ | 12,535 |
| $ | 13,852 |
| | $ | 13,276 |
|
See Notes to Condensed Consolidated Financial Statements
36
DUKE ENERGY INDIANA, LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | Nine Months Ended | Six Months Ended |
| September 30, | June 30, |
(in millions) | 2019 |
| | 2018 |
| 2020 |
| | 2019 |
|
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | |
Net income | $ | 363 |
| | $ | 317 |
| $ | 180 |
| | $ | 207 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | |
Depreciation, amortization and accretion | 395 |
| | 388 |
| 267 |
| | 265 |
|
Equity component of AFUDC | (13 | ) | | (28 | ) | (12 | ) | | (9 | ) |
Impairment charges | — |
| | 30 |
| |
Deferred income taxes | 108 |
| | 94 |
| 38 |
| | 60 |
|
Accrued pension and other post-retirement benefit costs | 3 |
| | 5 |
| |
Contributions to qualified pension plans | (2 | ) | | (8 | ) | |
Payments for asset retirement obligations | (31 | ) | | (49 | ) | (28 | ) | | (17 | ) |
Provision for rate refunds | — |
| | 58 |
| |
(Increase) decrease in | | | | | | |
Receivables | 1 |
| | 1 |
| 19 |
| | 5 |
|
Receivables from affiliated companies | 37 |
| | 27 |
| 20 |
| | 39 |
|
Inventory | (56 | ) | | 16 |
| 28 |
| | (41 | ) |
Other current assets | 91 |
| | (59 | ) | 13 |
| | 48 |
|
Increase (decrease) in | | | | | | |
Accounts payable | 1 |
| | 28 |
| 22 |
| | 26 |
|
Accounts payable to affiliated companies | (9 | ) | | (6 | ) | (13 | ) | | (17 | ) |
Taxes accrued | (14 | ) | | (51 | ) | 4 |
| | (18 | ) |
Other current liabilities | (12 | ) | | 6 |
| (22 | ) | | (13 | ) |
Other assets | (73 | ) | | 29 |
| (29 | ) | | (33 | ) |
Other liabilities | 62 |
| | (13 | ) | (6 | ) | | 15 |
|
Net cash provided by operating activities | 851 |
| | 785 |
| 481 |
| | 517 |
|
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | |
Capital expenditures | (663 | ) | | (619 | ) | (456 | ) | | (443 | ) |
Purchases of debt and equity securities | (19 | ) | | (42 | ) | (14 | ) | | (14 | ) |
Proceeds from sales and maturities of debt and equity securities | 15 |
| | 18 |
| 7 |
| | 11 |
|
Notes receivable from affiliated companies | (213 | ) | | — |
| (425 | ) | | — |
|
Other | (33 | ) | | 3 |
| (16 | ) | | (21 | ) |
Net cash used in investing activities | (913 | ) | | (640 | ) | (904 | ) | | (467 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | |
Proceeds from the issuance of long-term debt | 485 |
| | — |
| 544 |
| | — |
|
Payments for the redemption of long-term debt | (60 | ) | | (1 | ) | — |
| | (60 | ) |
Notes payable to affiliated companies | (167 | ) | | 40 |
| (30 | ) | | (2 | ) |
Distributions to parent | (200 | ) | | (175 | ) | (100 | ) | | — |
|
Other | — |
| | (1 | ) | |
Net cash provided by (used in) financing activities | 58 |
| | (137 | ) | 414 |
| | (62 | ) |
Net (decrease) increase in cash and cash equivalents | (4 | ) |
| 8 |
| |
Net decrease in cash and cash equivalents | | (9 | ) |
| (12 | ) |
Cash and cash equivalents at beginning of period | 24 |
| | 9 |
| 25 |
| | 24 |
|
Cash and cash equivalents at end of period | $ | 20 |
| | $ | 17 |
| $ | 16 |
| | $ | 12 |
|
Supplemental Disclosures: | | | | | | |
Significant non-cash transactions: | | | | | | |
Accrued capital expenditures | $ | 82 |
| | $ | 71 |
| $ | 83 |
| | $ | 84 |
|
See Notes to Condensed Consolidated Financial Statements
37
DUKE ENERGY INDIANA, LLC
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
| | | | Three Months Ended | | Three Months Ended |
| | September 30, 2018 and 2019 | | June 30, 2019 and 2020 |
| | Member's | | Member's |
(in millions) | | Equity | | Equity |
Balance at June 30, 2018 | | $ | 4,244 |
| |
Balance at March 31, 2019 | | | $ | 4,449 |
|
Net income | | | 97 |
|
Balance at June 30, 2019 | | | $ | 4,546 |
|
| | | |
Balance at March 31, 2020 | | | $ | 4,674 |
|
Net income | | 119 |
| | 81 |
|
Distributions to parent | | (100 | ) | | (100 | ) |
Balance at September 30, 2018 | | $ | 4,263 |
| |
| | | |
Balance at June 30, 2019 | | $ | 4,546 |
| |
Net income | | 156 |
| |
Distributions to parent | | (200 | ) | |
Balance at September 30, 2019 | | $ | 4,502 |
| |
Balance at June 30, 2020 | | | $ | 4,655 |
|
| | | | |
| | Nine Months Ended | | Six Months Ended |
| | September 30, 2018 and 2019 | | June 30, 2019 and 2020 |
| | Member's | | Member's |
(in millions) | | Equity | | Equity |
Balance at December 31, 2017 | | $ | 4,121 |
| |
Balance at December 31, 2018 | | | $ | 4,339 |
|
Net income | | | 207 |
|
Balance at June 30, 2019 | | | $ | 4,546 |
|
| | | |
Balance at December 31, 2019 | | | $ | 4,575 |
|
Net income | | 317 |
| | 180 |
|
Distributions to parent | | (175 | ) | | (100 | ) |
Balance at September 30, 2018 |
| $ | 4,263 |
| |
| | | |
Balance at December 31, 2018 | | $ | 4,339 |
| |
Net income | | 363 |
| |
Distributions to parent | | (200 | ) | |
Balance at September 30, 2019 |
| $ | 4,502 |
| |
Balance at June 30, 2020 | | | $ | 4,655 |
|
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 | | Nine Months Ended | Three Months Ended | | Six Months Ended |
| September 30, | | September 30, | June 30, | | June 30, |
(in millions) | 2019 |
| | 2018 |
| | 2019 |
| | 2018 |
| 2020 |
| | 2019 |
| | 2020 |
| | 2019 |
|
Operating Revenues | $ | 168 |
| | $ | 172 |
| | $ | 956 |
| | $ | 940 |
| $ | 197 |
| | $ | 209 |
| | $ | 709 |
| | $ | 788 |
|
Operating Expenses | | | | | | | | | | | | | | |
Cost of natural gas | 46 |
| | 54 |
| | 384 |
| | 387 |
| 53 |
| | 65 |
| | 215 |
| | 338 |
|
Operation, maintenance and other | 78 |
| | 85 |
| | 241 |
| | 252 |
| 79 |
| | 83 |
| | 159 |
| | 163 |
|
Depreciation and amortization | 43 |
| | 40 |
| | 127 |
| | 118 |
| 43 |
| | 42 |
| | 88 |
| | 84 |
|
Property and other taxes | 14 |
| | 12 |
| | 39 |
| | 36 |
| 12 |
| | 13 |
| | 24 |
| | 25 |
|
Total operating expenses | 181 |
| | 191 |
| | 791 |
| | 793 |
| 187 |
| | 203 |
| | 486 |
| | 610 |
|
Operating (Loss) Income | (13 | ) | | (19 | ) | | 165 |
| | 147 |
| |
Operating Income | | 10 |
| | 6 |
| | 223 |
| | 178 |
|
Other Income and Expenses, net | 7 |
| | 6 |
| | 19 |
| | 15 |
| 16 |
| | 6 |
| | 28 |
| | 12 |
|
Interest Expense | 22 |
| | 19 |
| | 65 |
| | 60 |
| 33 |
| | 21 |
| | 60 |
| | 43 |
|
(Loss) Income Before Income Taxes | (28 | ) | | (32 | ) | | 119 |
| | 102 |
| (7 | ) | | (9 | ) | | 191 |
| | 147 |
|
Income Tax (Benefit) Expense | (10 | ) | | (11 | ) | | 22 |
| | 21 |
| (9 | ) | | (2 | ) | | 11 |
| | 32 |
|
Net (Loss) Income and Comprehensive (Loss) Income | $ | (18 | ) | | $ | (21 | ) | | $ | 97 |
| | $ | 81 |
| |
Net Income (Loss) and Comprehensive Income (Loss) | | $ | 2 |
| | $ | (7 | ) | | $ | 180 |
| | $ | 115 |
|
See Notes to Condensed Consolidated Financial Statements
39
PIEDMONT NATURAL GAS COMPANY, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
| | (in millions) | September 30, 2019 |
| | December 31, 2018 |
| June 30, 2020 |
| | December 31, 2019 |
|
ASSETS | | | | | | |
Current Assets | | | | | | |
Receivables (net of allowance for doubtful accounts of $5 at 2019 and $2 at 2018) | $ | 78 |
| | $ | 266 |
| |
Receivables (net of allowance for doubtful accounts of $6 at 2020 and 2019) | | $ | 102 |
| | $ | 241 |
|
Receivables from affiliated companies | 10 |
| | 22 |
| 14 |
| | 10 |
|
Inventory | 47 |
| | 70 |
| 29 |
| | 72 |
|
Regulatory assets | 48 |
| | 54 |
| 118 |
| | 73 |
|
Other | 122 |
| | 19 |
| 54 |
| | 28 |
|
Total current assets | 305 |
| | 431 |
| 317 |
| | 424 |
|
Property, Plant and Equipment | | | | | | |
Cost | 8,234 |
| | 7,486 |
| 8,701 |
| | 8,446 |
|
Accumulated depreciation and amortization | (1,652 | ) | | (1,575 | ) | (1,715 | ) | | (1,681 | ) |
Net property, plant and equipment | 6,582 |
| | 5,911 |
| 6,986 |
| | 6,765 |
|
Other Noncurrent Assets | | | | | | |
Goodwill | 49 |
| | 49 |
| 49 |
| | 49 |
|
Regulatory assets | 306 |
| | 303 |
| 280 |
| | 290 |
|
Operating lease right-of-use assets, net | 25 |
| | — |
| 22 |
| | 24 |
|
Investments in equity method unconsolidated affiliates | 82 |
| | 64 |
| 85 |
| | 83 |
|
Other | 42 |
| | 52 |
| 278 |
| | 121 |
|
Total other noncurrent assets | 504 |
| | 468 |
| 714 |
| | 567 |
|
Total Assets | $ | 7,391 |
| | $ | 6,810 |
| $ | 8,017 |
| | $ | 7,756 |
|
LIABILITIES AND EQUITY | | | | | | |
Current Liabilities | | | | | | |
Accounts payable | $ | 140 |
| | $ | 203 |
| $ | 138 |
| | $ | 215 |
|
Accounts payable to affiliated companies | 50 |
| | 38 |
| 36 |
| | 3 |
|
Notes payable to affiliated companies | 262 |
| | 198 |
| 200 |
| | 476 |
|
Taxes accrued | 33 |
| | 84 |
| 28 |
| | 24 |
|
Interest accrued | 32 |
| | 31 |
| 34 |
| | 33 |
|
Current maturities of long-term debt | — |
| | 350 |
| 160 |
| | — |
|
Regulatory liabilities | 77 |
| | 37 |
| 97 |
| | 81 |
|
Other | 63 |
| | 58 |
| 56 |
| | 67 |
|
Total current liabilities | 657 |
| | 999 |
| 749 |
| | 899 |
|
Long-Term Debt | 2,384 |
| | 1,788 |
| 2,619 |
| | 2,384 |
|
Other Noncurrent Liabilities | | | | | | |
Deferred income taxes | 663 |
| | 551 |
| 763 |
| | 708 |
|
Asset retirement obligations | 20 |
| | 19 |
| 17 |
| | 17 |
|
Regulatory liabilities | 1,154 |
| | 1,181 |
| 1,078 |
| | 1,131 |
|
Operating lease liabilities | 24 |
| | — |
| 21 |
| | 23 |
|
Accrued pension and other post-retirement benefit costs | 6 |
| | 4 |
| 7 |
| | 3 |
|
Other | 145 |
| | 177 |
| 141 |
| | 148 |
|
Total other noncurrent liabilities | 2,012 |
| | 1,932 |
| 2,027 |
| | 2,030 |
|
Commitments and Contingencies |
| |
|
| |
|
Equity | | | | | | |
Common stock, no par value: 100 shares authorized and outstanding at 2019 and 2018 | 1,310 |
| | 1,160 |
| |
Common stock, no par value: 100 shares authorized and outstanding at 2020 and 2019 | | 1,310 |
| | 1,310 |
|
Retained earnings | 1,028 |
| | 931 |
| 1,312 |
| | 1,133 |
|
Total equity | 2,338 |
| | 2,091 |
| 2,622 |
| | 2,443 |
|
Total Liabilities and Equity | $ | 7,391 |
| | $ | 6,810 |
| $ | 8,017 |
| | $ | 7,756 |
|
See Notes to Condensed Consolidated Financial Statements
40
PIEDMONT NATURAL GAS COMPANY, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | Nine Months Ended | Six Months Ended |
| September 30, | June 30, |
(in millions) | 2019 |
| | 2018 |
| 2020 |
| | 2019 |
|
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | |
Net income | $ | 97 |
| | $ | 81 |
| $ | 180 |
| | $ | 115 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | |
Depreciation and amortization | 129 |
| | 120 |
| 89 |
| | 85 |
|
Equity component of AFUDC | | (9 | ) | | — |
|
Deferred income taxes | 110 |
| | 2 |
| 17 |
| | 40 |
|
Equity in earnings from unconsolidated affiliates | (6 | ) | | (6 | ) | (4 | ) | | (4 | ) |
Accrued pension and other post-retirement benefit costs | (7 | ) | | (3 | ) | |
Contributions to qualified pension plans | (1 | ) | | — |
| |
Provision for rate refunds | 9 |
| | 31 |
| (24 | ) | | 9 |
|
(Increase) decrease in | | | | | | |
Receivables | 192 |
| | 192 |
| 154 |
| | 168 |
|
Receivables from affiliated companies | 12 |
| | (3 | ) | (4 | ) | | 5 |
|
Inventory | 23 |
| | 16 |
| 42 |
| | 37 |
|
Other current assets | (95 | ) | | 58 |
| (69 | ) | | (17 | ) |
Increase (decrease) in | | | | | | |
Accounts payable | (93 | ) | | (48 | ) | (68 | ) | | (70 | ) |
Accounts payable to affiliated companies | 12 |
| | 14 |
| 33 |
| | 14 |
|
Taxes accrued | (51 | ) | | 11 |
| 5 |
| | (61 | ) |
Other current liabilities | (6 | ) | | 8 |
| (4 | ) | | 10 |
|
Other assets | (4 | ) | | (4 | ) | (13 | ) | | (9 | ) |
Other liabilities | (4 | ) | | (5 | ) | 7 |
| | (2 | ) |
Net cash provided by operating activities | 317 |
| | 464 |
| 332 |
| | 320 |
|
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | |
Capital expenditures | (751 | ) | | (497 | ) | (438 | ) | | (480 | ) |
Contributions to equity method investments | (16 | ) | | — |
| — |
| | (16 | ) |
Notes receivable from affiliated companies | — |
| | (11 | ) | — |
| | (16 | ) |
Other | (10 | ) | | (5 | ) | (11 | ) | | (6 | ) |
Net cash used in investing activities | (777 | ) | | (513 | ) | (449 | ) | | (518 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | |
Proceeds from the issuance of long-term debt | 596 |
| | 100 |
| 394 |
| | 596 |
|
Payments for the redemption of long-term debt | (350 | ) | | — |
| — |
| | (350 | ) |
Notes payable to affiliated companies | 64 |
| | (364 | ) | (277 | ) | | (198 | ) |
Capital contributions from parent | 150 |
| | 300 |
| — |
| | 150 |
|
Net cash provided by financing activities | 460 |
| | 36 |
| 117 |
| | 198 |
|
Net decrease in cash and cash equivalents | — |
| | (13 | ) | |
Net increase in cash and cash equivalents | | — |
| | — |
|
Cash and cash equivalents at beginning of period | — |
| | 19 |
| — |
| | — |
|
Cash and cash equivalents at end of period | $ | — |
| | $ | 6 |
| $ | — |
| | $ | — |
|
Supplemental Disclosures: | | | | | | |
Significant non-cash transactions: | | | | | | |
Accrued capital expenditures | $ | 121 |
| | $ | 89 |
| $ | 98 |
| | $ | 115 |
|
See Notes to Condensed Consolidated Financial Statements
41
PIEDMONT NATURAL GAS COMPANY, INC.
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
| | | Three Months Ended September 30, 2018 and 2019 | Three Months Ended June 30, 2019 and 2020 |
| Common |
| | Retained |
| | Total |
| Common |
| | Retained |
| | Total |
|
(in millions) | Stock |
| | Earnings |
| | Equity |
| Stock |
| | Earnings |
| | Equity |
|
Balance at June 30, 2018 | $ | 1,160 |
| | $ | 904 |
| | $ | 2,064 |
| |
Balance at March 31, 2019 | | $ | 1,160 |
| | $ | 1,053 |
| | $ | 2,213 |
|
Net loss | — |
| | (21 | ) | | (21 | ) | — |
| | (7 | ) | | (7 | ) |
Balance at September 30, 2018 | $ | 1,160 |
| | $ | 883 |
| | $ | 2,043 |
| |
Contribution from parent | | 150 |
| | — |
| | 150 |
|
Balance at June 30, 2019 | | $ | 1,310 |
| | $ | 1,046 |
| | $ | 2,356 |
|
| | | | | | | | | | |
Balance at June 30, 2019 | $ | 1,310 |
| | $ | 1,046 |
| | $ | 2,356 |
| |
Net loss | — |
| | (18 | ) | | (18 | ) | |
Balance at September 30, 2019 | $ | 1,310 |
| | $ | 1,028 |
| | $ | 2,338 |
| |
Balance at March 31, 2020 | | $ | 1,310 |
| | $ | 1,310 |
| | $ | 2,620 |
|
Net income | | — |
| | 2 |
| | 2 |
|
Balance at June 30, 2020 | | $ | 1,310 |
| | $ | 1,312 |
| | $ | 2,622 |
|
| | | | | | | | | | |
| Nine Months Ended September 30, 2018 and 2019 | Six Months Ended June 30, 2019 and 2020 |
| Common |
| | Retained |
| | Total |
| Common |
| | Retained |
| | Total |
|
(in millions) | Stock |
| | Earnings |
| | Equity |
| Stock |
| | Earnings |
| | Equity |
|
Balance at December 31, 2017 | $ | 860 |
| | $ | 802 |
| | $ | 1,662 |
| |
Net income | — |
| | 81 |
| | 81 |
| |
Contribution from parent | 300 |
| | — |
| | 300 |
| |
Balance at September 30, 2018 | $ | 1,160 |
| | $ | 883 |
| | $ | 2,043 |
| |
| | | | | | |
Balance at December 31, 2018 | $ | 1,160 |
| | $ | 931 |
| | $ | 2,091 |
| $ | 1,160 |
| | $ | 931 |
| | $ | 2,091 |
|
Net income | — |
| | 97 |
| | 97 |
| — |
| | 115 |
| | 115 |
|
Contribution from parent | 150 |
| | — |
| | 150 |
| 150 |
| | — |
| | 150 |
|
Balance at September 30, 2019 | $ | 1,310 |
| | $ | 1,028 |
| | $ | 2,338 |
| |
Balance at June 30, 2019 | | $ | 1,310 |
| | $ | 1,046 |
| | $ | 2,356 |
|
| | | | | | |
Balance at December 31, 2019 | | $ | 1,310 |
| | $ | 1,133 |
| | $ | 2,443 |
|
Net income | | — |
| | 180 |
| | 180 |
|
Other | | — |
| | (1 | ) | | (1 | ) |
Balance at June 30, 2020 | | $ | 1,310 |
| | $ | 1,312 |
| | $ | 2,622 |
|
See Notes to Condensed Consolidated Financial Statements
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 Statements that follow are a combined presentation. The following list indicates the registrants to which the footnotes apply. | | | Applicable Notes | Applicable Notes |
Registrant | 1 | | 2 | | 3 | | 4 | | 5 | | 6 | | 7 | | 8 | | 9 | | 10 | | 11 | | 12 | | 13 | | 14 | | 15 | | 16 | | 17 | | 18 | 1 | | 2 | | 3 | | 4 | | 5 | | 6 | | 7 | | 8 | | 9 | | 10 | | 11 | | 12 | | 13 | | 14 | | 15 | | 16 |
Duke Energy | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • |
Duke Energy Carolinas | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • |
Progress Energy | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • |
Duke Energy Progress | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • |
Duke Energy Florida | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • |
Duke Energy Ohio | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • |
Duke Energy Indiana | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • |
Piedmont | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • |
Tables within the notes may not sum across due to (i) Progress Energy's consolidation of Duke Energy Progress, Duke Energy Florida and other subsidiaries that are not registrants and (ii) subsidiaries that are not registrants but included in the consolidated Duke Energy balances.
1. ORGANIZATION AND BASIS OF PRESENTATION
BASIS OF PRESENTATION
These Condensed Consolidated Financial Statements have been prepared in accordance with 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 for annual financial statements and should be read in conjunction with the Consolidated Financial Statements in the Duke Energy Registrants’ combined Annual Report on Form 10-K for the year ended December 31, 2018.2019.
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.
BASIS OF CONSOLIDATION
These Condensed Consolidated Financial Statements include, after eliminating intercompany transactions and balances, the accounts of the Duke Energy Registrants and subsidiaries or VIEs where the respective Duke Energy Registrants have control. See Note 1311 for additional information on VIEs. These Condensed Consolidated Financial Statements also reflect the Duke Energy Registrants’ proportionate share of certain jointly owned generation and transmission facilities.
COVID-19
The COVID-19 pandemic is having a significant impact on global health and economic environments. In March 2020, the World Health Organization declared COVID-19 a global pandemic, and President Trump proclaimed that the COVID-19 outbreak in the United States constitutes a national emergency. The extent to which the COVID-19 pandemic will impact the Duke Energy Registrants during 2020 and beyond is uncertain, and the Duke Energy Registrants are monitoring developments closely. The company incurred approximately $34 million and $40 million of incremental COVID-19 costs for the three and six months ended June 30, 2020, respectively, included in Operation, maintenance and other on the Condensed Consolidated Statements of Operations. These costs were primarily bad debt expense, personal protective equipment and cleaning supplies. Further the company experienced approximately another $25 million of waived late payment fees for the three and six months ended June 30, 2020. See Notes 3, 5, 11, 12 and 15 for additional information as well as steps taken to mitigate the impacts to our business and customers from the COVID-19 pandemic.
OTHER CURRENT ASSETS
Included in Other within Current Assets on the Piedmont Condensed Consolidated Balance Sheets are income taxes receivable of $22 million and $14 million as of June 30, 2020, and December 31, 2019, respectively, and prepaid assets of $19 million and $3 million as of June 30, 2020, and December 31, 2019, respectively. The income taxes receivable relates to increases of net operating losses for Piedmont and intercompany tax settlements. The prepaid assets relate to natural gas storage injections and inventory transfers classified as prepaid assets until winter season when the gas is moved to Inventory on the Piedmont Condensed Consolidated Balance Sheets under certain agreements.
|
| |
FINANCIAL STATEMENTS | ORGANIZATION AND BASIS OF PRESENTATION |
OTHER CURRENT LIABILITIES
During the second quarter of 2020, Duke Energy recorded a current liability related to the abandonment of ACP within Current Liabilities in the Gas Utilities and Infrastructure segment. The liability represents Duke Energy's obligation to fund ACP's obligations of outstanding debt and satisfy ARO requirements to restore construction sites. As a result, Liabilities associated with unconsolidated affiliates is $920 million, and exceeds 5% of Total current liabilities on the Duke Energy Condensed Consolidated Balance Sheets as of June 30, 2020. See Notes 3, 4 and 11 for further information.
NONCONTROLLING INTEREST
Duke Energy maintains a controlling financial interest in certain less-thanless than wholly owned non-regulatednonregulated 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 HLBVHypothetical Liquidation at Book Value (HLBV) method in allocating book profitincome or loss and other comprehensive income or loss (all measured on a pretax basis) to the owners. The HLBV method measures the amounts that each owner would hypothetically claim at each balance sheet reporting date, including tax benefits realized by the owners over the IRS recapture period, upon a hypothetical liquidation of the subsidiary at the net book value of its underlying assets. The change in the amount that each owner would hypothetically receive at the reporting date compared to the amount it would have received on the previous reporting date represents the amount of profitincome or loss allocated to each owner for the reporting period. Duke Energy’s North Rosamond solar farm commenced commercial operations resulting inThe following table presents cash received for the allocationsale of noncontrolling interest to tax equity members and allocated losses to the noncontrolling tax equity members of $12 million and $86 millionutilizing the HLBV method for the three and ninesix months ended SeptemberJune 30, 2019, respectively, utilizing the HLBV method.2020, and 2019. |
| | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
(in millions) | June 30, 2020 | | June 30, 2019 | | June 30, 2020 | | June 30, 2019 |
Cash received for the sale of noncontrolling interest to tax equity members | $ | 60 |
| | $ | 187 |
| | $ | 163 |
| | $ | 193 |
|
Allocated losses to noncontrolling tax equity members utilizing the HLBV method | 79 |
| | 83 |
| | 128 |
| | 90 |
|
|
| |
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.
During the third quarter of 2019, Duke Energy completed a sale of a minority interest in a portion of certain renewable assets to John Hancock. John Hancock's ownership interest in the assets represents a noncontrolling interest. See Note 2 for additional information on the sale.
OTHER CURRENT ASSETS
Included in Other within Current Assets on the Piedmont Condensed Consolidated Balance Sheets are income taxes receivable of $90 million and $11 million as of September 30, 2019, and December 31, 2018, respectively, and prepaid assets of $30 million and $5 million as of September 30, 2019, and December 31, 2018, respectively. The income taxes receivable relates to increased projected NOL utilization for Piedmont as well as intercompany tax settlements. The prepaid assets relate to replenishment of depleted natural gas supply as required by natural gas supply asset management contracts.
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Duke Energy, Progress Energy and Duke Energy Florida have restricted cash balances related primarily to collateral assets, escrow deposits and VIEs. See Note 13Notes 9 and 11 for additional information. Restricted cash amounts are included in Other within Current Assets and Other Noncurrent Assets on the Condensed Consolidated Balance Sheets. The following table presents the components of cash, cash equivalents and restricted cash included in the Condensed Consolidated Balance Sheets. | | | September 30, 2019 | | December 31, 2018 | June 30, 2020 | | December 31, 2019 |
| | Duke |
| | | Duke |
| | Duke |
| | | Duke |
|
| Duke |
| Progress |
| Energy |
| | Duke |
| Progress |
| Energy |
| Duke |
| Progress |
| Energy |
| | Duke |
| Progress |
| Energy |
|
| Energy |
| Energy |
| Florida |
| | Energy |
| Energy |
| Florida |
| Energy |
| Energy |
| Florida |
| | Energy |
| Energy |
| Florida |
|
Current Assets | | | | | | |
Cash and cash equivalents | $ | 379 |
| $ | 82 |
| $ | 24 |
| | $ | 442 |
| $ | 67 |
| $ | 36 |
| $ | 341 |
| $ | 78 |
| $ | 20 |
| | $ | 311 |
| $ | 48 |
| $ | 17 |
|
Other | 163 |
| 16 |
| 16 |
| | 141 |
| 39 |
| 39 |
| 193 |
| 31 |
| 31 |
| | 222 |
| 39 |
| 39 |
|
Other Noncurrent Assets | | | | | | |
Other | 40 |
| 38 |
| — |
| | 8 |
| 6 |
| — |
| 107 |
| 102 |
| — |
| | 40 |
| 39 |
| — |
|
Total cash, cash equivalents and restricted cash | $ | 582 |
| $ | 136 |
| $ | 40 |
| | $ | 591 |
| $ | 112 |
| $ | 75 |
| $ | 641 |
| $ | 211 |
| $ | 51 |
| | $ | 573 |
| $ | 126 |
| $ | 56 |
|
INVENTORY
Provisions for inventory write-offs were not material at September 30, 2019, and December 31, 2018. The components of inventory are presented in the tables below. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2019 |
| | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
(in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Materials and supplies | $ | 2,284 |
| | $ | 749 |
| | $ | 1,056 |
| | $ | 710 |
| | $ | 346 |
| | $ | 75 |
| | $ | 325 |
| | $ | 4 |
|
Coal | 490 |
| | 153 |
| | 172 |
| | 118 |
| | 54 |
| | 12 |
| | 152 |
| | — |
|
Natural gas, oil and other fuel | 333 |
| | 41 |
| | 206 |
| | 111 |
| | 95 |
| | 41 |
| | 1 |
| | 43 |
|
Total inventory | $ | 3,107 |
| | $ | 943 |
| | $ | 1,434 |
| | $ | 939 |
| | $ | 495 |
| | $ | 128 |
| | $ | 478 |
| | $ | 47 |
|
44 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2018 |
| | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
(in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Materials and supplies | $ | 2,238 |
| | $ | 731 |
| | $ | 1,049 |
| | $ | 734 |
| | $ | 315 |
| | $ | 84 |
| | $ | 312 |
| | $ | 2 |
|
Coal | 491 |
| | 175 |
| | 192 |
| | 106 |
| | 86 |
| | 14 |
| | 109 |
| | — |
|
Natural gas, oil and other fuel | 355 |
| | 42 |
| | 218 |
| | 114 |
| | 103 |
| | 28 |
| | 1 |
| | 68 |
|
Total inventory | $ | 3,084 |
| | $ | 948 |
| | $ | 1,459 |
| | $ | 954 |
| | $ | 504 |
| | $ | 126 |
| | $ | 422 |
| | $ | 70 |
|
NEW ACCOUNTING STANDARDS
Except as noted below, the new accounting standards adopted for 2018 and 2019 had no material impact on the presentation or results of operations, cash flows or financial position of the Duke Energy Registrants.
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FINANCIAL STATEMENTS | ORGANIZATION AND BASIS OF PRESENTATION |
INVENTORY
Leases. In February 2016,Provisions for inventory write-offs were not material at June 30, 2020, and December 31, 2019. The components of inventory are presented in the FASB issued revisedtables below. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2020 |
| | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
(in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Materials and supplies | $ | 2,220 |
| | $ | 769 |
| | $ | 1,014 |
| | $ | 682 |
| | $ | 333 |
| | $ | 83 |
| | $ | 254 |
| | $ | 5 |
|
Coal | 776 |
| | 271 |
| | 257 |
| | 189 |
| | 68 |
| | 13 |
| | 234 |
| | — |
|
Natural gas, oil and other fuel | 293 |
| | 40 |
| | 195 |
| | 109 |
| | 85 |
| | 33 |
| | 1 |
| | 24 |
|
Total inventory | $ | 3,289 |
| | $ | 1,080 |
| | $ | 1,466 |
| | $ | 980 |
| | $ | 486 |
| | $ | 129 |
| | $ | 489 |
| | $ | 29 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2019 |
| | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
(in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Materials and supplies | $ | 2,297 |
| | $ | 768 |
| | $ | 1,038 |
| | $ | 686 |
| | $ | 351 |
| | $ | 79 |
| | $ | 318 |
| | $ | 5 |
|
Coal | 586 |
| | 187 |
| | 186 |
| | 138 |
| | 48 |
| | 15 |
| | 198 |
| | — |
|
Natural gas, oil and other fuel | 349 |
| | 41 |
| | 199 |
| | 110 |
| | 90 |
| | 41 |
| | 1 |
| | 67 |
|
Total inventory | $ | 3,232 |
| | $ | 996 |
| | $ | 1,423 |
| | $ | 934 |
| | $ | 489 |
| | $ | 135 |
| | $ | 517 |
| | $ | 72 |
|
NEW ACCOUNTING STANDARDS
The following new 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. This resulted in a material impact on the presentation for the statement of financial position ofstandard was adopted by the Duke Energy Registrants in 2020.
Current Expected Credit Losses. In June 2016, the Financial Accounting Standards Board (FASB) issued new accounting guidance for the period ended September 30, 2019, and an immaterial impact to thecredit losses. Duke Energy Registrants' results of operationsadopted the new accounting guidance for the three and nine months ended September 30, 2019, and cash flows for the nine months ended September 30, 2019.
Duke Energy electedcredit losses effective January 1, 2020, using the modified retrospective method of adoption, effective January 1, 2019. Under the modified retrospective methodwhich does not require restatement of adoption, prior year reported results are not restated. For adoption,results. Duke Energy has elected to apply the followingdid not adopt any practical 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 the 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). |
expedients.Duke Energy evaluatedrecognizes allowances for credit losses based on management's estimate of losses expected to be incurred over the financial statement impactlives of adoptingcertain assets or guarantees. Management monitors credit quality, changes in expected credit losses and the standard and monitored industry implementation issues. Under agreements considered leases, where appropriateness of the allowance for credit losses on a forward-looking basis. Management reviews the risk of loss periodically as part of the existing assessment of collectability of receivables.
Duke Energy isreviews the lessee, for the usecredit quality of certain aircraft, space on communication towers, industrial equipment, fleet vehicles, fuel transportation (bargesits counterparties as part of its regular risk management process and railcars), land, office spacerequires credit enhancements, such as deposits or letters of credit, as appropriate and PPAs are now recognized on the balance sheet. The as allowed by regulators.
Duke Energy Registrants did not have a material changerecorded cumulative effects of changes in accounting principles related to the financial statements from the adoption of the new credit loss standard, for contracts where it isallowances for credit losses of trade and other receivables, insurance receivables and financial guarantees. These amounts are included in the lessor.Condensed Consolidated Balance Sheets in Receivables, Receivables of VIEs, Other Noncurrent Assets and Other Noncurrent Liabilities. See Note 5Notes 4 and 12 for furthermore information.
Duke Energy recorded an adjustment for the cumulative effect of a change in accounting principle due to the adoption of this standard on January 1, 2020, as shown in the table below: |
| | | | | | | | | | | | | | | | | | | | | | | |
| January 1, 2020 |
| | | Duke |
| | | | Duke |
| | Duke |
| | |
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | |
(in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Piedmont |
|
Total pretax impact to Retained Earnings | $ | 120 |
| | $ | 16 |
| | $ | 2 |
| | $ | 1 |
| | $ | 1 |
| | $ | 1 |
|
The following new accounting standard has been issued but not yet adopted by the Duke Energy Registrants as of SeptemberJune 30, 2019.2020.
Credit Losses.Reference Rate Reform. In June 2016,March 2020, the FASB issued new accounting guidance for credit losses.reference rate reform. This guidance establishesis elective and provides expedients to facilitate financial reporting for the new CECL impairment model applicable to certain financial assets, including tradeanticipated transition away from the London Inter-bank Offered Rate (LIBOR) and other receivables, net investments in leases, and debt securities classified as held-for-sale investments.interbank reference rates by the end of 2021. The model also applies to financial guarantees.optional expedients are effective for modification of existing contracts or new arrangements executed between March 12, 2020, through December 31, 2022.
For
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FINANCIAL STATEMENTS | ORGANIZATION AND BASIS OF PRESENTATION |
Duke Energy this guidance is effective for interimhas variable-rate debt and annual periods beginning January 1, 2020. This guidance will be applied usingmanages interest rate risk by entering into financial contracts including interest rate swaps that are generally indexed to LIBOR. Impacted financial arrangements extending beyond 2021 may require contractual amendment or termination to fully adapt to a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of January 1, 2020. The updated guidance requires Duke Energy to establish an allowance for credit losses based on management's estimate of losses expected to be incurred over the life of the asset or guarantee.post-LIBOR environment. Duke Energy is currentlyassessing these financial arrangements and is evaluating the use of optional expedients outlined in the new accounting guidance. Alternative index provisions are also being assessed and incorporated into new financial arrangements that extend beyond 2021. The full outcome of the transition away from LIBOR cannot be determined at this time, but is not expected to have a material impact of adopting this standard.on the financial statements.
2. BUSINESS SEGMENTS
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 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.
The Commercial Renewables segment is primarily comprised of nonregulated utility-scale wind and solar generation assets located throughout the U.S. On April 24, 2019, Duke Energy executed an agreement to sell a minority interest in a portion of certain renewable assets. The sale closed on September 6, 2019, and resulted in pretax proceeds to Duke Energy of $415 million. The portion of Duke Energy’s commercial renewables energy portfolio sold includes 49% of 37 operating wind, solar and battery storage assets and 33% of 11 operating solar assets across the U.S. Duke Energy retained control of these assets, and, therefore, no gain or loss was recognized on the Condensed Consolidated Statements of Operations. The difference between the fair value of the consideration received and the carrying value of the noncontrolling interest claim on net assets of $465 million, net of a tax benefit of $8 million, was recorded in equity.
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| |
FINANCIAL STATEMENTS | BUSINESS SEGMENTS |
During 2019,In 2020, Duke Energy evaluated recoverability of the wind and solar generation assets included in the minority interest sale as a result of the portfolio fair value of consideration received being less than the carrying value of the assets and determined the assets were all recoverable. Additionally, in 2019, Duke Energy evaluated recoverability of its renewable merchant plants principallyplant located in the Electric Reliability Council of Texas West market due to declining market pricing and declining long-term forecasted energy prices, primarily driven by lower forecasted natural gas prices. Duke Energy determined that the assets wereasset was not impaired because the carrying value of $160$155 million approximates the aggregate estimated future cash flows and therefore further testing was not required. A continued decline in energy market pricing would likely result in a future impairment. Duke Energy retained 51% ownership interest in this facility following the 2019 transaction to sell a minority interest in certain renewable assets.
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, Duke Energy’s wholly owned captive insurance company, Bison, and Duke Energy's interest in NMC.National Methanol Company.
Business segment information is presented in the following tables. Segment assets presented exclude intercompany assets. | | | Three Months Ended September 30, 2019 | Three Months Ended June 30, 2020 |
| Electric |
| | Gas |
| | | | Total |
| | | | | | | Electric |
| | Gas |
| | | | Total |
| | | | | | |
| Utilities and |
| | Utilities and |
| | Commercial |
| | Reportable |
| | | | | | | Utilities and |
| | Utilities and |
| | Commercial |
| | Reportable |
| | | | | | |
(in millions) | Infrastructure |
| | Infrastructure |
| | Renewables |
| | Segments |
| | Other |
| | Eliminations |
| | Total |
| Infrastructure |
| | Infrastructure |
| | Renewables |
| | Segments |
| | Other |
| | Eliminations |
| | Total |
|
Unaffiliated revenues | $ | 6,569 |
| | $ | 225 |
| | $ | 138 |
| | $ | 6,932 |
| | $ | 8 |
| | $ | — |
| | $ | 6,940 |
| $ | 5,026 |
| | $ | 265 |
| | $ | 123 |
| | $ | 5,414 |
| | $ | 7 |
| | $ | — |
| | $ | 5,421 |
|
Intersegment revenues | 8 |
| | 24 |
| | — |
| | 32 |
| | 17 |
| | (49 | ) | | — |
| 8 |
| | 24 |
| | — |
| | 32 |
| | 19 |
| | (51 | ) | | — |
|
Total revenues | $ | 6,577 |
| | $ | 249 |
| | $ | 138 |
| | $ | 6,964 |
| | $ | 25 |
| | $ | (49 | ) | | $ | 6,940 |
| $ | 5,034 |
| | $ | 289 |
| | $ | 123 |
| | $ | 5,446 |
| | $ | 26 |
| | $ | (51 | ) | | $ | 5,421 |
|
Segment income (loss)(a) | $ | 1,385 |
| | $ | 26 |
| | $ | 40 |
| | $ | 1,451 |
| | $ | (124 | ) | | $ | — |
| | $ | 1,327 |
| $ | 753 |
| | $ | (1,576 | ) | | $ | 90 |
| | $ | (733 | ) | | $ | (84 | ) | | $ | — |
| | $ | (817 | ) |
Add back noncontrolling interests(b) | | | | | | | | | | | | | (19 | ) | |
Add back preferred stock dividend | | | | | | | | | | | | | 15 |
| |
Net income | | | | | | | | | | | | | $ | 1,323 |
| |
Less: Noncontrolling interests(c) | | | | | | | | | | | | | | 90 |
|
Add: Preferred stock dividend | | | | | | | | | | | | | | 15 |
|
Net Loss | | | | | | | | | | | | | | $ | (892 | ) |
Segment assets | $ | 133,296 |
| | $ | 13,424 |
| | $ | 5,278 |
| | $ | 151,998 |
| | $ | 3,734 |
| | $ | 185 |
| | $ | 155,917 |
| $ | 136,724 |
| | $ | 13,072 |
| | $ | 6,386 |
| | $ | 156,182 |
| | $ | 3,874 |
| | $ | (7 | ) | | $ | 160,049 |
|
| | | Three Months Ended September 30, 2018 | Three Months Ended June 30, 2019 |
| Electric |
| | Gas |
| | | | Total |
| | | | | | | Electric |
| | Gas |
| | | | Total |
| | | | | | |
| Utilities and |
| | Utilities and |
| | Commercial |
| | Reportable |
| | | | | | | Utilities and |
| | Utilities and |
| | Commercial |
| | Reportable |
| | | | | | |
(in millions) | Infrastructure |
| | Infrastructure |
| | Renewables |
| | Segments |
| | Other |
| | Eliminations |
| | Total |
| Infrastructure |
| | Infrastructure |
| | Renewables |
| | Segments |
| | Other |
| | Eliminations |
| | Total |
|
Unaffiliated revenues | $ | 6,253 |
| | $ | 232 |
| | $ | 127 |
| | $ | 6,612 |
| | $ | 16 |
| | $ | — |
| | $ | 6,628 |
| $ | 5,467 |
| | $ | 282 |
| | $ | 118 |
| | $ | 5,867 |
| | $ | 6 |
| | $ | — |
| | $ | 5,873 |
|
Intersegment revenues | 7 |
| | 24 |
| | — |
| | 31 |
| | 18 |
| | (49 | ) | | — |
| 8 |
| | 24 |
| | — |
| | 32 |
| | 19 |
| | (51 | ) | | — |
|
Total revenues | $ | 6,260 |
| | $ | 256 |
| | $ | 127 |
| | $ | 6,643 |
| | $ | 34 |
| | $ | (49 | ) | | $ | 6,628 |
| $ | 5,475 |
| | $ | 306 |
| | $ | 118 |
| | $ | 5,899 |
| | $ | 25 |
| | $ | (51 | ) | | $ | 5,873 |
|
Segment income (loss)(e) | $ | 1,167 |
| | $ | 17 |
| | $ | (62 | ) | | $ | 1,122 |
| | $ | (44 | ) | | $ | — |
| | $ | 1,078 |
| $ | 809 |
| | $ | 40 |
| | $ | 86 |
| | $ | 935 |
| | $ | (115 | ) | | $ | — |
| | $ | 820 |
|
Add back noncontrolling interests | | | | | | | | | | | | | (16 | ) | |
Loss from discontinued operations, net of tax | | | | | | | | | | | | | 4 |
| |
Net income | | | | | | | | | | | | | $ | 1,066 |
| |
Less: Noncontrolling interests(c) | | | | | | | | | | | | | | 84 |
|
Add: Preferred stock dividend | | | | | | | | | | | | | | 12 |
|
Net Income | | | | | | | | | | | | | | $ | 748 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2019 |
| Electric |
| | Gas |
| | | | Total |
| | | | | | |
| Utilities and |
| | Utilities and |
| | Commercial |
| | Reportable |
| | | | | | |
(in millions) | Infrastructure |
| | Infrastructure |
| | Renewables |
| | Segments |
| | Other |
| | Eliminations |
| | Total |
|
Unaffiliated revenues | $ | 17,357 |
| | $ | 1,239 |
| | $ | 362 |
| | $ | 18,958 |
| | $ | 18 |
| | $ | — |
| | $ | 18,976 |
|
Intersegment revenues | 24 |
| | 72 |
| | — |
| | 96 |
| | 53 |
| | (149 | ) | | — |
|
Total revenues | $ | 17,381 |
| | $ | 1,311 |
| | $ | 362 |
| | $ | 19,054 |
| | $ | 71 |
| | $ | (149 | ) | | $ | 18,976 |
|
Segment income (loss)(a) | $ | 2,944 |
| | $ | 292 |
| | $ | 139 |
| | $ | 3,375 |
| | $ | (328 | ) | | $ | — |
| | $ | 3,047 |
|
Add back noncontrolling interests(b) | | | | | | | | | | | | | (110 | ) |
Add back preferred stock dividend | | | | | | | | | | | | | 27 |
|
Net income | | | | | | | | | | | | | $ | 2,964 |
|
|
| |
FINANCIAL STATEMENTS | BUSINESS SEGMENTS |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, 2020 |
| Electric |
| | Gas |
| | | | Total |
| | | | | | |
| Utilities and |
| | Utilities and |
| | Commercial |
| | Reportable |
| | | | | | |
(in millions) | Infrastructure |
| | Infrastructure |
| | Renewables |
| | Segments |
| | Other |
| | Eliminations |
| | Total |
|
Unaffiliated revenues | $ | 10,200 |
| | $ | 905 |
| | $ | 252 |
| | $ | 11,357 |
| | $ | 13 |
| | $ | — |
| | $ | 11,370 |
|
Intersegment revenues | 17 |
| | 48 |
| | — |
| | 65 |
| | 36 |
| | (101 | ) | | — |
|
Total revenues | $ | 10,217 |
| | $ | 953 |
| | $ | 252 |
| | $ | 11,422 |
| | $ | 49 |
| | $ | (101 | ) | | $ | 11,370 |
|
Segment income (loss)(a)(b) | $ | 1,458 |
| | $ | (1,327 | ) | | $ | 147 |
| | $ | 278 |
| | $ | (196 | ) | | $ | — |
| | $ | 82 |
|
Less: Noncontrolling interests(c) | | | | | | | | | | | | | 138 |
|
Add: Preferred stock dividend | | | | | | | | | | | | | 54 |
|
Net Loss | | | | | | | | | | | | | $ | (2 | ) |
| | | Nine Months Ended September 30, 2018 | Six Months Ended June 30, 2019 |
| Electric |
| | Gas |
| | | | Total |
| | | | | | | Electric |
| | Gas |
| | | | Total |
| | | | | | |
| Utilities and |
| | Utilities and |
| | Commercial |
| | Reportable |
| | | | | | | Utilities and |
| | Utilities and |
| | Commercial |
| | Reportable |
| | | | | | |
(in millions) | Infrastructure |
| | Infrastructure |
| | Renewables |
| | Segments |
| | Other |
| | Eliminations |
| | Total |
| Infrastructure |
| | Infrastructure |
| | Renewables |
| | Segments |
| | Other |
| | Eliminations |
| | Total |
|
Unaffiliated revenues | $ | 16,783 |
| | $ | 1,229 |
| | $ | 347 |
| | $ | 18,359 |
| | $ | 47 |
| | $ | — |
| | $ | 18,406 |
| $ | 10,788 |
| | $ | 1,014 |
| | $ | 224 |
| | $ | 12,026 |
| | $ | 10 |
| | $ | — |
| | $ | 12,036 |
|
Intersegment revenues | 23 |
| | 72 |
| | — |
| | 95 |
| | 54 |
| | (149 | ) | | — |
| 16 |
| | 48 |
| | — |
| | 64 |
| | 36 |
| | (100 | ) | | — |
|
Total revenues | $ | 16,806 |
| | $ | 1,301 |
| | $ | 347 |
| | $ | 18,454 |
| | $ | 101 |
| | $ | (149 | ) | | $ | 18,406 |
| $ | 10,804 |
| | $ | 1,062 |
| | $ | 224 |
| | $ | 12,090 |
| | $ | 46 |
| | $ | (100 | ) | | $ | 12,036 |
|
Segment income (loss)(h) | $ | 2,492 |
| | $ | 161 |
| | $ | (4 | ) | | $ | 2,649 |
| | $ | (446 | ) | | $ | — |
| | $ | 2,203 |
| $ | 1,559 |
| | $ | 266 |
| | $ | 99 |
| | $ | 1,924 |
| | $ | (204 | ) | | $ | — |
| | $ | 1,720 |
|
Add back noncontrolling interests | | | | | | | | | | | | | (12 | ) | |
Loss from discontinued operations, net of tax | | | | | | | | | | | | | (1 | ) | |
Net income | | | | | | | | | | | | | $ | 2,190 |
| |
Less: Noncontrolling interests(c) | | | | | | | | | | | | | | 91 |
|
Add: Preferred stock dividend | | | | | | | | | | | | | | 12 |
|
Net Income | | | | | | | | | | | | | | $ | 1,641 |
|
| |
(a) | ElectricGas Utilities and Infrastructure includes a reduction$2.0 billion of a prior year impairment at Citrus County CCpretax costs related to the plant's cost cap.abandonment of its ACP investment recorded within Equity in (losses) earnings of unconsolidated affiliates on the Condensed Consolidated Statements of Operations. See Notes 1, 3 and Note 11 for additional information. |
| |
(b) | Other includes a $98 million reversal, included in Operations, maintenance and other on the Condensed Consolidated Statements of Operations, of 2018 severance costs due to the partial settlement of the Duke Energy Carolina's 2019 North Carolina rate case. See Note 3 for additional information. |
| |
(b)(c) | Includes the allocation of losses to noncontrolling tax equity members. See Note 1 for additional information. |
| |
(c) | All segments include adjustments of prior year tax estimates related to the Tax Act. |
| |
(d) | Commercial Renewables includes an impairment charge related to goodwill. |
| |
(e) | Other includes costs to achieve the Piedmont acquisition. |
| |
(f) | Electric Utilities and Infrastructure includes regulatory and legislative charges related to rate case orders, settlements or other actions of regulators or legislative bodies. See Note 3 for additional information. |
| |
(g) | Gas Utilities and Infrastructure includes an impairment of the investment in Constitution. See Note 3 for additional information. |
| |
(h) | Other includes the loss on the sale of Beckjord described below and a valuation allowance recorded against the 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 nine months ended September 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 2 reportable segments, Electric Utilities and Infrastructure and Gas Utilities and Infrastructure. The remainder of Duke Energy Ohio's operations is presented as Other.
| | | Three Months Ended September 30, 2019 | Three Months Ended June 30, 2020 |
| Electric |
| | Gas |
| | Total |
| | | | | | | Electric |
| | Gas |
| | Total |
| | | | | | |
| Utilities and |
| | Utilities and |
| | Reportable |
| | | | | | | Utilities and |
| | Utilities and |
| | Reportable |
| | | | | | |
(in millions) | Infrastructure |
| | Infrastructure |
| | Segments |
| | Other |
| | Eliminations |
| | Total |
| Infrastructure |
| | Infrastructure |
| | Segments |
| | Other |
| | Eliminations |
| | Total |
|
Total revenues | $ | 408 |
| | $ | 81 |
| | $ | 489 |
| | $ | — |
| | $ | — |
| | $ | 489 |
| $ | 330 |
| | $ | 93 |
| | $ | 423 |
| | $ | — |
| | $ | — |
| | $ | 423 |
|
Segment income/Net (loss) income | $ | 62 |
| | $ | 13 |
| | $ | 75 |
| | $ | (1 | ) | | $ | — |
| | $ | 74 |
| $ | 44 |
| | $ | 23 |
| | $ | 67 |
| | $ | (1 | ) | | $ | — |
| | $ | 66 |
|
Segment assets | $ | 6,107 |
| | $ | 3,049 |
| | $ | 9,156 |
| | $ | 30 |
| | $ | (3 | ) | | $ | 9,183 |
| $ | 6,378 |
| | $ | 3,213 |
| | $ | 9,591 |
| | $ | 26 |
| | $ | (8 | ) | | $ | 9,609 |
|
| | | Three Months Ended September 30, 2018 | 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 |
| | Total |
| Infrastructure |
| | Infrastructure |
| | Segments |
| | Other |
| | Total |
|
Total revenues | $ | 373 |
| | $ | 84 |
| | $ | 457 |
| | $ | 12 |
| | $ | 469 |
| $ | 336 |
| | $ | 97 |
| | $ | 433 |
| | $ | — |
| | $ | 433 |
|
Segment income/Net income | $ | 85 |
| | $ | 12 |
| | $ | 97 |
| | $ | 3 |
| | $ | 100 |
| |
Segment income/Net (loss) income | | $ | 31 |
| | $ | 17 |
| | $ | 48 |
| | $ | (1 | ) | | $ | 47 |
|
|
| | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2019 |
| Electric |
| | Gas |
| | Total |
| | | | |
| Utilities and |
| | Utilities and |
| | Reportable |
| | | | |
(in millions) | Infrastructure |
| | Infrastructure |
| | Segments |
| | Other |
| | Total |
|
Total revenues | $ | 1,099 |
| | $ | 354 |
| | $ | 1,453 |
| | $ | — |
| | $ | 1,453 |
|
Segment income/Net (loss) income | $ | 129 |
| | $ | 65 |
| | $ | 194 |
| | $ | (4 | ) | | $ | 190 |
|
|
| |
FINANCIAL STATEMENTS | BUSINESS SEGMENTS |
| | | Nine Months Ended September 30, 2018 | Six Months Ended June 30, 2020 |
| Electric |
| | Gas |
| | Total |
| | | | | Electric |
| | Gas |
| | Total |
| | | | |
| Utilities and |
| | Utilities and |
| | Reportable |
| | | | | Utilities and |
| | Utilities and |
| | Reportable |
| | | | |
(in millions) | Infrastructure |
| | Infrastructure |
| | Segments |
| | Other |
| | Total |
| Infrastructure |
| | Infrastructure |
| | Segments |
| | Other |
| | Total |
|
Total revenues | $ | 1,055 |
| | $ | 361 |
| | $ | 1,416 |
| | $ | 36 |
| | $ | 1,452 |
| $ | 676 |
| | $ | 245 |
| | $ | 921 |
| | $ | — |
| | $ | 921 |
|
Segment income/Net (loss) income(a) | $ | 157 |
| | $ | 64 |
| | $ | 221 |
| | $ | (100 | ) | | $ | 121 |
| $ | 74 |
| | $ | 59 |
| | $ | 133 |
| | $ | (2 | ) | | $ | 131 |
|
(a) Other includes the loss on the sale of Beckjord described above. |
| | | | | | | | | | | | | | | | | | | |
| 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 |
|
3. REGULATORY MATTERS
RATE-RELATED INFORMATION
The NCUC, PSCSC, FPSC, IURC, PUCO, TPUC and KPSC approve rates for retail electric and natural gas services within their states. The FERC approves rates for electric sales to wholesale customers served under cost-based rates (excluding Ohio and Indiana), as well as sales of transmission service. The FERC also regulates certification and siting of new interstate natural gas pipeline projects.
Duke Energy Carolinas and Duke Energy Progress
Hurricane Florence, Hurricane Michael and Winter Storm Diego DeferralCOVID-19 Filings
North Carolina
On December 21, 2018,March 10, 2020, Governor Roy Cooper issued Executive Order No. 116 declaring a state of emergency due to the COVID-19 pandemic. On March 19, 2020, the NCUC issued an order directing that utilities under its jurisdiction suspend disconnections for nonpayment of utility bills during the state of emergency (as defined by Executive Order No. 116) and allow for customers to enter into payment arrangements to pay off arrearages accumulated during the state of emergency after the end of the state of emergency. Additionally, to help mitigate the financial impacts of the COVID-19 pandemic on their customers, on March 19, 2020, Duke Energy Carolinas and Duke Energy Progress filed a request with the NCUC petitionsseeking authorization to waive: (1) any late payment charges incurred by a residential or nonresidential customer, effective March 21, 2020; (2) the application of fees for approvalchecks returned for insufficient funds for residential and nonresidential customers; (3) the reconnection charge when a residential or nonresidential customer seeks to deferhave service restored for those customers whose service was recently disconnected for nonpayment and to work with customers regarding the incremental costs incurred in connectionother requirements to restore service, including re-establishment of credit; and (4) the fees and charges associated with the responseuse of credit cards or debit cards to Hurricane Florence, Hurricane Michael and Winter Storm Diegopay residential electric utility bills, effective March 21, 2020. The NCUC granted the companies’ request on March 20, 2020.
On March 31, 2020, the governor issued Executive Order No. 124, which, in addition to a regulatory asset for recoveryrequiring the steps in the next base rate case. The NCUC order noted above, stated that nothing in Executive Order No. 124 shall relieve a customer of its obligation to pay bills for receipt of utility services provided. Executive Order No. 124 remains in effect for 60 days unless otherwise rescinded or replaced with a superseding Executive Order. On May 30, 2020, the governor issued an order requesting comments on the deferral positions. Executive Order No. 142, which extended effective period for Executive Order No. 124 to July 29, 2020. Executive Order No. 142 was not extended.
On March 5, 2019, the North Carolina Public Staff (Public Staff) filed comments. On April 2, 2019,July 10, 2020, Duke Energy Carolinas and Duke Energy Progress filed reply comments, which included revised estimatesa petition with the NCUC for clarification regarding when they may begin working with customers on establishing payment arrangements for arrears accumulated since March 13, 2020. On July 29, 2020, the NCUC issued its Order Lifting Disconnection Moratorium and Allowing Collection of approximately $553 million in incremental operationArrearages Pursuant to Special Repayment Plans. The order contained the following: 1) public utilities may resume customer disconnections due to nonpayment for bills first rendered on or after September 1, 2020, after appropriate notice; 2) the late fee moratorium will continue through the end of the state of emergency or until further order of the commission; 3) Duke Energy utilities may reinstate fees for checks returned for insufficient funds as well as transaction fees for use of credit cards or debit cards for bills first rendered on or after September 1, 2020; and maintenance expenses ($171 million4) no sooner than September 1, 2020, the collection of past-due or delinquent accounts accrued up to and $382 million for including August 31, 2020, may proceed subject to conditions.
Duke Energy Carolinas and 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). On September 30, 2019, Duke Energy Carolinas requested thatfiled a joint petition on August 7, 2020, with the NCUC consolidate its pendingfor deferral request with its general rate case filed on that date. On October 30, 2019, Duke Energy Progress requested thattreatment of incremental costs and waived customer fees due to the NCUC consolidate its pending deferral request with its general rate case filed on that date.COVID-19 pandemic. Duke Energy Carolinas and Duke Energy Progress cannot predict the outcome of these matters.this matter.
South Carolina
On March 13, 2020, Governor Henry McMaster issued Executive Order No. 2020-08 declaring a state of emergency due to the COVID-19 pandemic. The governor also issued a letter on March 14, 2020, to the ORS Executive Director regarding the suspension of disconnection of essential utility services for nonpayment. On March 18, 2020, the PSCSC issued an order approving such waivers, and also approved waivers for regulations related to late fees and reconnect fees. The PSCSC's order also required utilities to track the financial impacts of actions taken pursuant to such waivers for possible reporting to the PSCSC.
|
| |
FINANCIAL STATEMENTS | REGULATORY MATTERS |
On April 30, 2020, the ORS requested the PSCSC grant a waiver of the applicable regulations to allow customers the flexibility to obtain deferred payment plans longer than six months for past-due amounts. On May 5, 2020, Duke Energy Carolinas and Duke Energy Progress filed responsive comments stating that while utility bills will remain due, Duke Energy Carolinas and Duke Energy Progress do not plan to immediately reinstitute disconnection upon the expiration of the state of emergency and intend to work through a potential grace period as economic recovery begins. Duke Energy Carolinas and Duke Energy Progress also concurred with the observation of the ORS that reduced usage is impacting the fixed-cost recovery and revenue assumptions included in rates. Those costs include not only ongoing operational and financing costs necessary to serve customers, but also the borrowings necessary to support extended payment arrangements that will be an important part of emerging from the COVID-19 pandemic. Duke Energy Carolinas and Duke Energy Progress will continue to track such costs, lost revenues and potential cost savings for future evaluation by the PSCSC.
Additionally, on May 8, 2020, the ORS filed a motion for the PSCSC to solicit comments from utilities and interested stakeholders regarding measures to be taken to mitigate impacts of COVID-19 on utility customers and require recordkeeping. In a detailed motion, the ORS specifically asked the PSCSC to: (1) solicit input from utilities regarding the temporary mitigation measures to address COVID-19; (2) request utilities to inform the PSCSC of the plans utilities have to return to normalized operations; (3) require utilities to track revenue impacts, incremental costs and savings related to COVID-19 and file the findings with the PSCSC on a quarterly basis; and (4) include any other matters that the PSCSC believes should be addressed. On May 14, 2020, the PSCSC adopted the ORS' motion.
On May 13, 2020, the ORS filed a letter with the PSCSC that included a request from Governor McMaster that utilities proceed with developing and implementing plans for phasing in normal business operations. On May 14, 2020, the PSCSC conditionally vacated the regulation waivers regarding termination of service and suspension of disconnect fees. Prior to termination, utilities are to refer past-due customers to local organizations for assistance and/or deferred payment arrangements. Duke Energy Carolinas and Duke Energy Progress filed a deferral request for these stormsreport on June 30, 2020, as required by PSCSC order, reporting revenue impact, costs and savings related to COVID-19 to date. Duke Energy Carolinas and Duke Energy Progress are evaluating a filing with the PSCSC on January 11, 2019, which also included a request for deferral treatment of incremental costs and waived customer fees due to the continuation of prior deferrals requested for ice stormsCOVID-19 pandemic. Duke Energy Carolinas 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 acceptedcannot predict the filing on May 14, 2019, which allows Duke Energy Progress to proceed with the proposed cost deferral and recovery.outcome of this matter.
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% increase in annual base revenues. The request for rate increase was driven by capital investments subsequent to the previous base rate case, including the W.S. Lee CC, grid improvement projects, AMI, investments in customer service technologies, costs of complying with CCR regulations and the Coal Ash Act and recovery of costs related to licensing and development of the Lee Nuclear Station.
million. On February 28, 2018, Duke Energy Carolinas and the North Carolina Public Staff (Public Staff) filed an Agreement and Stipulation of Partial Settlement resolving certain portions of the proceeding. Terms of the settlement included a return on equity of 9.9% and a capital structure of 52% equity and 48% 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 22, 2018, the NCUC issued an order approving the Stipulation of Partial Settlement and requiring a revenue reduction. As a result of the order, Duke Energy Carolinas recorded a pretax charge of approximately $150 million to Impairment charges and Operation, maintenance and other on the Condensed Consolidated Statements of Operations. The charge was primarily related to the denial of a return on the Lee Nuclear Project and the assessment of a $70 million management penalty by reducing the annual recovery of deferred coal ash 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 were effective on August 1, 2018.
|
| |
FINANCIAL STATEMENTS | REGULATORY MATTERS |
On July 20, 2018, theThe 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 alsoother parties separately 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, which contends the commission’s June 22, 2018, order should be reversed and remanded, as it is affected by errors of law, and is unsupported by substantial evidence with regard to the commission’s failure to consider substantial evidence of coal ash related environmental violations.Court. 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 wasAppellant briefs were filed on April 26, 2019. The Appellee response briefs were filed on September 25, 2019. Oral arguments before the North Carolina Supreme Court were held on March 11, 2020. Duke Energy Carolinas cannot predict the outcome of this matter.
2019 North Carolina Rate Case
On September 30, 2019, Duke Energy Carolinas filed an application with the NCUC for a net rate increase for retail customers of approximately $291 million, which representsrepresented an approximate 6% increase in annual base revenues. The gross rate case revenue increase request iswas $445 million, which iswas offset by an EDIT rider of $154 million to return to customers North Carolina and federal EDIT resulting from recent reductions in corporate tax rates. The request for a rate increase iswas driven by major capital investments subsequent to the previous base rate case, coal ash pond closure costs, accelerated coal plant depreciation and deferred 2018 storm costs. Duke Energy Carolinas requestsrequested rates be effective no later than August 1, 2020. The NCUC established a procedural schedule with an evidentiary hearing to begin on March 23, 2020. On March 16, 2020, in consideration of public health and safety as a result of the COVID-19 pandemic, Duke Energy Carolinas filed a motion with the NCUC seeking a suspension of the procedural schedule in the rate case, including issuing discovery requests, and postponement of the evidentiary hearing for 60 days. Also on March 16, 2020, the NCUC issued an Order Postponing Hearing and Addressing Procedural Matters, which postponed the evidentiary hearing until further order by the commission.
On March 25, 2020, Duke Energy Carolinas and the Public Staff filed an Agreement and Stipulation of Partial Settlement, which is subject to review and approval of the NCUC, resolving certain issues in the base rate proceeding. Major components of the settlement included:
Removal of deferred storm costs from the rate case;
Filing a petition seeking to securitize the deferred storm costs within 120 days of a commission order in this rate case regarding the reasonableness and prudency of the storm costs;
Agreement of certain assumptions to demonstrate the quantifiable benefits to customers of a securitization financing; and
Agreement on certain accounting matters, including recovery of employee incentives, severance, aviation costs and executive compensation.
|
| |
FINANCIAL STATEMENTS | REGULATORY MATTERS |
On May 6, 2020, Duke Energy Carolinas, Duke Energy Progress and the Public Staff filed a joint motion requesting that the NCUC issue an order scheduling one consolidated evidentiary hearing to consider the companies’ applications for net rate increases. On June 17, 2020, the NCUC issued an order adopting procedures for the expert witness hearings to take place in three phases: 1) a hearing on issues common to both rate cases conducted remotely; 2) a hearing on Duke Energy Carolinas specific rate case issues conducted in person, followed immediately by; 3) a hearing on Duke Energy Progress specific rate case issues conducted in person. On July 24, 2020, Duke Energy Carolinas filed its request for approval of its notice to customers required to implement temporary rates. On July 27, 2020, Duke Energy Carolinas filed a joint motion with Duke Energy Progress and the Public Staff notifying the commission that the parties reached a joint partial settlement with the Public Staff and requesting a postponement of the evidentiary hearing until August 24, 2020. The NCUC granted the joint motion on July 27, 2020. Also on July 27, 2020, Duke Energy Carolinas filed a letter stating that it intended to update its temporary rates calculation to reflect the terms of the partial settlement.
On July 31, 2020, Duke Energy Carolinas and the Public Staff filed a Second Agreement and Stipulation of Partial Settlement (Second Partial Settlement), which is subject to review and approval of the NCUC, resolving certain remaining issues in the base rate proceeding. Major components of the Second Partial Settlement included:
A return on equity of 9.6% and a capital structure of 52% equity and 48% debt;
Agreement on amortization over a five-year period for unprotected federal EDIT flowbacks to customers;
Agreement on the inclusion of plant in service and other revenue requirement updates through May 31, 2020, subject to Public Staff review. Annual revenue requirement associated with the May 31 update is estimated at $45 million; and
Settlement on certain grid deferral projects of $0.8 billion and agreement to withdraw Duke Energy Carolinas' request for deferral of remaining grid projects of $0.5 billion.
The remaining items to be litigated at hearing include recovery of deferred coal ash compliance costs that are subject to asset retirement obligation accounting, implementation of new depreciation rates and amortization of the hydro station sale. As a result of the additional settlement terms, the NCUC ordered the Duke Energy Carolinas and Duke Energy Progress remote, consolidated evidentiary hearing to be delayed until August 24, 2020.
On August 4, 2020, Duke Energy Carolinas, filed an amended motion for approval of its amended notice to customers, seeking to exercise its statutory right to implement temporary rates subject to refund on or after August 24, 2020. The revenue requirement to be recovered, subject to refund, through the temporary rates is based on and consistent with the base rate component of the Second Partial Settlement with the Public Staff and excludes the items to be litigated noted above. Duke Energy Carolinas will not begin the amortization or implementation of these items until a final order is issued in the rate case and new base rates are implemented. These items will also be excluded when determining whether a refund of amounts collected through these temporary rates is needed. In addition, Duke Energy Carolinas also seeks authorization to place a temporary decrement EDIT Rider into effect, concurrent with the temporary base rate change. The temporary rate changes are not final rates and remain subject to the NCUC's determination of the just and reasonable rates to be charged by Duke Energy Carolinas on a permanent basis. The NCUC approved the August 4, 2020 amended temporary rates motion on August 6, 2020.
Duke Energy Carolinas expects the NCUC to issue an order on its net rate increase by the end of the year. 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% 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%. 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).
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 resolving the ORS’s motion. The Stipulation provided that costs incurred for the GIP after January 1, 2019, will be deferred with a return, subject to evaluation in a future rate proceeding, and 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.million.
After hearings in March 2019, the PSCSC issued an order on May 21, 2019, which included a return on equity of 9.5% and a capital structure of 53% equity and 47% 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%;
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% to be returned over a five-year period.
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As a result of the order, revised customer rates were effective June 1, 2019. On May 31, 2019, Duke Energy Carolinas filed a Petition for Rehearing or Reconsideration of that order contending substantial rights of Duke Energy Carolinas were prejudiced by unlawful, arbitrary and capricious rulings by the 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. An order detailing the commission's decision in the Directive was issued on October 18, 2019. Duke Energy Carolinas intends to filefiled a notice of appeal within 30 dayson November 15, 2019, with the Supreme Court of the date of the order withSouth Carolina. On November 20, 2019, the South Carolina Energy Users Committee filed a Notice of Appeal and the ORS filed a Notice of Cross Appeal with the Supreme Court.Court of South Carolina. On February 12, 2020, Duke Energy Carolinas and the ORS filed a joint motion to extend briefing schedule deadlines, which was approved by the Supreme Court of South Carolina on February 20, 2020. On March 10, 2020, the ORS filed a consent motion requesting withdrawal of their appeal, which was granted by the Supreme Court of South Carolina on April 30, 2020. Initial briefs were filed on April 21, 2020, which included the South Carolina Energy User's Committee brief arguing that the PSCSC erred in allowing Duke Energy Carolinas' recovery of costs related to the Lee Nuclear Station. Response briefs were filed on July 6, 2020, and reply briefs are due on August 11, 2020. Based on legal analysis and Duke Energy Carolinas' intention to file such anthe filing of the appeal, 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, PMPA filed a complaint with FERC alleging that Duke Energy Carolinas misapplied the formula rate under the PPA between the parties by including in its rates amortization expense associated with regulatory assets and recorded in a certain account without FERC approval. On February 15, 2018, FERC issued an order ruling in favor of PMPA and ordered Duke Energy Carolinas to refund to PMPA all amounts improperly collected under the PPA. Duke Energy Carolinas has issued to PMPA and similarly situated wholesale customers refunds of approximately $25 million. FERC also set the matter for settlement and hearing. PMPA and other customers filed a protest to Duke Energy Carolinas' refund report claiming that the refunds are inadequate in that (1) Duke Energy Carolinas invoked the limitations periods in the contracts to limit the time period for which the refunds were paid and the customers disagree that this limitation applies, and (2) Duke Energy Carolinas refunded only amounts recovered through a certain account and the customers have asserted that the order applies to all regulatory assets. On July 3, 2018, FERC issued an order accepting Duke Energy Carolinas' refund report and ruling that these two claims are outside the scope of FERC's February order. The settlement agreements and revised formula rates for all parties to the proceeding were filed on December 28, 2018. On April 2, 2019, FERC issued an order approving the settlement agreement as filed. Since then, Duke Energy Carolinas has implemented the terms of the settlement in rates with all wholesale customers, including non-intervening customers. On July 25, 2019, Duke Energy Carolinas received FERC approval for the accounting treatment requested for certain assets included in the settlement agreements. This is the final approval needed from FERC and 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 was subject to approval from FERC for the four FERC-licensed plants, as well as other state regulatory agencies and was contingent upon regulatory approval from the NCUC and PSCSC to defer the total estimated loss on the sale of approximately $40 million. On July 5, 2018, Duke Energy Carolinas filed with NCUC for approval of the sale of the five hydro plants to Northbrook, to transfer the CPCNs for the four North Carolina hydro plants and to establish a regulatory asset for the North Carolina retail portion of the difference between sales proceeds and net book value. On June 5, 2019, the NCUC issued an order approving the transfer of the hydro plants from Duke Energy Carolinas to Northbrook, granting deferral accounting and denying the Public Staff's motion for reconsideration.
On August 28, 2018, Duke Energy Carolinas filed 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 ORS provided a letter to the commission stating its position on the application and on September 18, 2018, Duke Energy Carolinas requested this matter be carried over to allow Duke Energy Carolinas time to discuss certain accounting issues with the ORS. 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 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 occurred on August 16, 2019. A regulatory asset was established for approximately $32 million, which represents the total deferral amount for North Carolina and South Carolina retail. The North Carolina retail portion will be amortized pursuant to an order from the NCUC. Duke Energy Carolinas will purchase all the capacity and energy generated by these facilities at the avoided cost for five years through power purchase agreements.
Duke Energy 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% increase in annual base revenues. Subsequent to the filing, Duke Energy Progresswas subsequently adjusted the requested amount to $420 million, representing an approximate 13% increase. The request for rate increase was 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.
million. On November 22, 2017, Duke Energy Progress and the Public Staff filed an Agreement and Stipulation of Partial Settlement resolving certain portions of the proceeding. Terms of the settlement included a return on equity of 9.9% and a capital structure of 52% equity and 48% debt. On February 23, 2018, the NCUC issued an order approving the stipulation.
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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. Revised customer rates became effective on March 16, 2018.
On May 15, 2018, the Public Staff, the North Carolina Attorney General and the Sierra Club filed a Noticenotes of Cross Appealappeal to the North Carolina Supreme Court from the NCUC's February 23, 2018, Order. The Public Staff contends the NCUC’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. The North Carolina Attorney General and Sierra Club also filed Notices of Appeal to the North Carolina Supreme Court from the February 23, 2018, Order. Court.
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 Duke Energy Carolinas appeals and enter an order adopting the parties’ proposed briefing schedule as set out in the filing. Appellant’s brief wasAppellant briefs were filed on April 26, 2019. The Appellee response briefs were filed on September 25, 2019. Oral arguments before the North Carolina Supreme Court were held on March 11, 2020. Duke Energy Progress cannot predict the outcome of this matter.
2019 North Carolina Rate Case
On October 30, 2019, Duke Energy Progress filed an application with the NCUC for a net rate increase for retail customers of approximately $464 million, which representsrepresented an approximate 12.3% increase in annual base revenues. The gross rate case revenue increase request iswas $586 million, which iswas offset by riders of $122 million, primarily an EDIT rider of $120 million to return to customers North Carolina and federal EDIT resulting from recent reductions in corporate tax rates. The request for rate increase iswas driven by major capital investments subsequent to the previous base rate case, coal ash pond closure costs, accelerated coal plant depreciation and deferred 2018 storm costs. Duke Energy Progress seeks to defer and recover incremental Hurricane Dorian storm costs in this proceeding and requests rates be effective no later than September 1, 2020. As a result of the COVID-19 pandemic, on March 24, 2020, the NCUC suspended the procedural schedule and postponed the previously scheduled evidentiary hearing on this matter indefinitely. On April 7, 2020, the NCUC issued an order partially resuming the procedural schedule requiring intervenors to file direct testimony on April 13, 2020. Public Staff filed supplemental direct testimony on April 23, 2020. Duke Energy Progress filed rebuttal testimony on May 4, 2020.
On June 2, 2020, Duke Energy Progress and the Public Staff filed an Agreement and Stipulation of Partial Settlement, which is subject to review and approval of the NCUC, resolving certain issues in the base rate proceeding. Major components of the settlement included:
Removal of deferred storm costs from the rate case;
Filing a petition seeking to securitize the deferred storm costs within 120 days of a commission order in this rate case regarding the reasonableness and prudency of the storm costs;
Agreement of certain assumptions to demonstrate the quantifiable benefits to customers of a securitization financing;
Agreement that the Asheville CC project is complete and in service and agreement on the amount to be included in rate base; and
Agreement on certain accounting matters, including recovery of employee incentives, severance, aviation costs and executive compensation.
On May 6, 2020, Duke Energy Progress, Duke Energy Carolinas and the Public Staff filed a joint motion requesting that the NCUC issue an order scheduling one consolidated evidentiary hearing to consider the companies’ applications for net rate increases. On June 17, 2020, the NCUC issued an order adopting procedures for the expert witness hearings to take place in three phases: 1) a hearing on issues common to both rate cases conducted remotely; 2) a hearing on Duke Energy Carolinas specific rate case issues conducted in person, followed immediately by; 3) a hearing on Duke Energy Progress specific rate case issues conducted in person. On July 27, 2020, Duke Energy Progress filed a joint motion with Duke Energy Carolinas and the Public Staff notifying the commission that the parties reached a joint partial settlement with the Public Staff and requesting a postponement of the evidentiary hearing until August 24, 2020. The NCUC granted the joint motion on July 27, 2020.
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On July 31, 2020, Duke Energy Progress and the Public Staff filed a Second Agreement and Stipulation of Partial Settlement (Second Partial Settlement), which is subject to review and approval of the NCUC, resolving certain remaining issues in the base rate proceeding. Major components of the Second Partial Settlement included:
A return on equity of 9.6% and a capital structure of 52% equity and 48% debt;
Agreement on amortization over a five-year period for unprotected federal EDIT flowbacks to customers;
Agreement on the inclusion of plant in service and other revenue requirement updates through May 31, 2020, subject to Public Staff review. Annual revenue requirement associated with the May 31 update is estimated at $25 million; and
Settlement on certain grid deferral projects of $0.5 billion and agreement to withdraw Duke Energy Progress' request for deferral of remaining grid projects of $0.5 billion.
The remaining items to be litigated at hearing include recovery of deferred coal ash compliance costs that are subject to asset retirement obligation accounting and implementation of new depreciation rates. As a result of the additional settlement terms, the NCUC ordered the Duke Energy Progress and Duke Energy Carolinas remote, consolidated evidentiary hearing to be delayed until August 24, 2020.
On August 7, 2020, Duke Energy Progress filed a motion for approval of notice required to implement temporary rates, seeking to exercise its statutory right to implement temporary rates subject to refund on or after September 1, 2020. The revenue requirement to be recovered subject to refund through the temporary rates is based on and consistent with the terms of the base rate component of the settlement agreements with the Public Staff and excludes items to be litigated noted above. Duke Energy Progress will not begin the amortization or implementation of these items until a final determination is issued in the rate case and new base rates are implemented. These items will also be excluded when determining whether a refund of amounts collected through these temporary rates is needed. In addition, Duke Energy Progress also seeks authorization to place a temporary decrement EDIT Rider into effect, concurrent with the temporary base rate change. The temporary rate changes are not final rates and remain subject to the NCUC's determination of the just and reasonable rates to be charged by Duke Energy Progress on a permanent basis.
Duke Energy Progress expects the NCUC to issue an order on its net rate increase by the end of the year. Duke Energy Progress cannot predict the outcome of this matter.
Hurricane Dorian
Hurricane Dorian reached the Carolinas in September 2019 as a Category 2 hurricane making landfall within Duke Energy Progress’ service territory. Approximately 270,000 North Carolina customers and 30,000 South Carolina customers were impacted by the slow-moving storm that brought high winds, tornadoes and heavy rain. With storm-response mobilization occurring in preparation for the storm and the assistance of mutual aid partners, full restoration was accomplished within four days for all customers able to receive service. Total estimated incremental operation and maintenance expenses incurred to repair and restore the system are approximately $208$165 million with an additional $10$4 million in capital investments made for restoration efforts. Approximately $182$139 million and $179 million of the operation and maintenance expenses are deferred in Regulatory assets within Other Noncurrent Assets on the Condensed Consolidated Balance Sheets as of SeptemberJune 30, 2019. The balance2020, and December 31, 2019, respectively. A request for an accounting order to defer incremental storm costs associated with Hurricane Dorian was included in Duke Energy Progress' October 30, 2019, general rate case filing with the NCUC. Terms of the June 2, 2020, Agreement and Stipulation of Partial Settlement removed incremental storm costs from the general rate case. A petition seeking to securitize these costs will be filed within 120 days of an NCUC order in the general rate case. Duke Energy Progress cannot predict the outcome of this matter.
On February 7, 2020, a petition was filed with the PSCSC in the 2019 storm deferrals docket requesting deferral of approximately $22 million in operation and maintenance expenses are included in Operation, maintenanceto an existing storm deferral balance previously approved by the PSCSC. The PSCSC voted to approve the request on March 4, 2020, and otherissued a final order on April 7, 2020. On July 1, 2020, Duke Energy Progress filed a supplemental true up reducing the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2019.actual costs to $17 million.
2018 South Carolina Rate Case
On November 8, 2018, Duke Energy Progress filed an application with the PSCSC for a rate increase for retail customers of approximately $59 million, which represents an approximate 10.3% increase in annual base revenues. The request for rate increase was driven by capital investments and environmental compliance progress made by Duke Energy Progress since its previous rate case, including the further implementation of Duke 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%. 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 Carolinas executed a Stipulation resolving the ORS’s motion, and Duke Energy Progress agreed to the Stipulation, as did other parties in the rate case. The Stipulation provides that costs incurred for the GIP after January 1, 2019, 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.million.
After hearings in April 2019, the PSCSC issued an order on May 21, 2019, which included a return on equity of 9.5% and a capital structure of 53% equity and 47% debt. The order also included the following material components:
Approval of recovery of $4 million of coal ash costs over a five-year period with a return at Duke Energy Progress' WACC;
Denial of recovery of $65 million of certain coal ash costs deemed to be related to the Coal Ash Act and incremental to the federal CCR rule;
Approval of a $17 million decrease to base rates to reflect the change in ongoing tax expense, primarily the reduction in the federal income tax rate from 35% to 21%;
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Approval of a $12 million decrease through the EDIT Tax Savings Rider resulting from the federal tax rate change and deferred revenues since January 2018 related to the change, to be returned in accordance with ARAM for protected EDIT, over a 20-year period for unprotected EDIT associated with Property, Plant and Equipment, over a five-year period for unprotected EDIT not associated with Property, Plant and Equipment and over a three-year period for the deferred revenues; and
Approval of a $12 million increase due to the expiration of EDIT related to reductions in the North Carolina state income tax rate from 6.9% to 2.5%.
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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. An order detailing the commission's decision in the Directive was issued on October 18, 2019. Duke Energy Progress intends to filefiled a notice of appeal within 30 days of the date of the orderon November 15, 2019, with the Supreme Court of South Carolina. The ORS filed a Notice of Cross Appeal on November 20, 2019. On February 12, 2020, Duke Energy Progress and the ORS filed a joint motion to extend briefing schedule deadlines, which was approved by the Supreme Court of South Carolina on February 20, 2020. On March 10, 2020, the ORS filed a consent motion requesting withdrawal of their appeal, which was granted by the Supreme Court.Court of South Carolina on April 30, 2020. Initial briefs were filed on April 21, 2020. Response briefs were filed on July 6, 2020, and reply briefs are due on August 11, 2020. Based on legal analysis and Duke Energy Progress' intention to file such anthe filing of the appeal, 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 ofretired the existing376-MW Asheville coal-fired plant on January 29, 2020, at which time the constructionnet book value, including associated ash basin closure costs, of two 280‑MW combined-cycle natural gas plants having dual-fuel capability, with$214 million was transferred from Generation facilities to be retired, net to Regulatory assets within Current Assets and Other Noncurrent Assets on the option to build a third natural gas simpleCondensed Consolidated Balance Sheets.
On December 27, 2019, Asheville Combined Cycle Unit 5 Combustion Turbine and Unit 6 Steam Turbine Generator and the common systems that serve combined 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.units went into commercial operation. Duke Energy Progress workedplaced the Unit 7 Combustion Turbine into commercial operation in simple-cycle mode on January 15, 2020. The Unit 8 Steam Turbine Generator went into commercial operation on April 5, 2020. On June 2, 2020, Duke Energy Progress filed a request with the local natural gas distribution company to upgrade and leasePSCSC for an existing natural gas pipeline to serveaccounting order for the natural gasdeferral of post-in-service costs incurred in connection with the addition of the Asheville combined cycle generating plant. The lease forpetition requested the new pipeline became effective on March 2, 2019.
On March 28, 2016, the NCUC issuedPSCSC issue an accounting order approving a CPCN for the new combined-cycle natural gas plants, but is requiringauthorizing Duke Energy Progress to refile for CPCN approval fordefer post-in-service costs including the contingent simple cycle unit.Asheville combined cycle’s depreciation expense, property taxes, incremental O&M and carrying costs at WACC of approximately $8 million annually. On March 28, 2019, Duke Energy Progress filed an annual progress report forJune 17, 2020, the construction ofPSCSC voted to approve the combined-cycle plants with the NCUC, with an estimated cost of $893 million. Site preparation activities for the combined-cycle plants are completepetition and construction of these plants began in 2017, with an expected in-service date in late 2019.issued its final order on July 6, 2020.
On October 8, 2018, Duke Energy Progress filed an application with the NCUC for a CPCN to construct the Hot Springs Microgrid Solar and Battery Storage Facility. On March 22, 2019, Duke Energy Progress and the Public Staff filed a Joint Proposed Order. OnFacility, which was approved with certain conditions on May 10, 2019, the NCUC issued an Order Granting Certificate of Public Convenience and Necessity with Conditions.2019.
The carrying value of the 376-MW Asheville coal-fired plant, including associated ash basin closure costs, of $234 million and $327 million is included in Generation facilitiesA hearing to be retired, net on Duke Energy Progress' Condensed Consolidated Balance Sheets as of September 30, 2019, and December 31, 2018, respectively. Duke Energy Progress' request for a regulatory asset at the time of retirement with amortization over a 10-year period was approved byupdate the NCUC on February 23, 2018.the status of the project was held on March 5, 2020. Construction began in May 2020 with commercial operation expected to begin in December 2020.
FERC Return on Equity Complaint
On October 11, 2019, North Carolina Eastern Municipal Power Agency (Power Agency)(NCEMPA) filed a complaint at the FERC against Duke Energy Progress pursuant to Section 206 of the Federal Power Act (FPA). The complaint alleges that the return on equity component in the formula rate contained withinDuke Energy Progress provides NCEMPA with service under the Full Requirements Power Purchase Agreement (FRPPA). The complaint alleges that the 11% stated return on equity (ROE) component contained in the FRPPA’s demand formula rate is unjust and unreasonable. The FRPPA’s return on equity is 11% as applied toOn July 16, 2020, the Production Capacity RateFERC set this matter for the full requirements service provided by Duke Energy Progress. The complaint does not definitively proposehearing and settlement judge procedures and established a replacement return on equity. Under FPA Section 206, the earliest refund effective date of October 11, 2019. In its order setting the matter for settlement, the FERC allowed for variation to the base transmission-related ROE methodology developed in Order No. 569-A, through the introduction of “specific facts and circumstances” involving the parties to this case. It is Duke Energy Progress’ view that, FERC can establish is the datein consideration of the filingspecific facts and circumstances of risks under the provisions of the complaint. The complaint could raise risks acrossFRPPA, the Duke Energy Progress wholesale business because, depending on how FERC treats Power Agency’s complaint, other parties may come forward with similar complaints.stated 11% ROE applied to NCEMPA’s metered billing demand is just and reasonable. Duke Energy Progress cannot predict the outcome of this matter.
Duke Energy Florida
COVID-19 Filings
On March 1, 2020, Governor Ron DeSantis issued Executive Order No. 20-51 directing the State Health Officer of Florida to declare a public health emergency in Florida related to the COVID-19 pandemic. The governor then issued a second Executive Order No. 20-52 on March 9, 2020, in which he declared a state of emergency in Florida and directed the Director of the Division of Emergency Management to implement the state’s Comprehensive Emergency Management Plan. The governor issued additional Executive Orders – Nos. 2020-68, 2020-69, 2020-71, 2020-72 and 2020-83 – in response to the ongoing health care emergency that, among other things, suspended the in-person public meeting requirements for state agencies and local governments and directed the state surgeon general to issue public health advisories to limit potential exposure to COVID-19, advising against gatherings of 10 or more persons. On March 19, 2020, Duke Energy Florida filed a request to modify its tariff to allow it to waive late fees for customers, and on April 6, 2020, the FPSC issued an order approving the request. Duke Energy Florida had already voluntarily waived reconnect fees and credit card fees, and is not disconnecting customers for nonpayment. On April 2, 2020, Duke Energy Florida filed a petition with the FPSC to accelerate a $78 million fuel cost refund to customers in the month of May 2020. Typically, the refund would be made over the course of 2021. The FPSC approved the petition on April 28, 2020.
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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 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 Hurricane 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. On May 31, 2018, Duke Energy Florida filed a petition for approval of actual storm restoration costs and associated recovery process related to Hurricane Irma and Hurricane Nate. The petition sought 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. On August 20, 2018, the FPSC approved Duke Energy Florida's unopposed Motion for Continuance filed August 17, 2018, to allow for an evidentiary hearing in this matter. On January 28, 2019, Duke Energy Florida made a supplemental filing to reduce the total storm cost recovery from $510 million to $508 million. 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 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 September 30, 2019, and December 31, 2018, Duke Energy Florida's Condensed Consolidated Balance Sheets included approximately $80 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 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 restored service to approximately 72,000 customers. Total estimated incremental operation and maintenance and capital costs are $360 million. Approximately $85 million and $35 million of the costs are included in Net property, plant and equipment on the Condensed Consolidated Balance Sheets as of September 30, 2019, and December 31, 2018, respectively. Approximately $220 million and $165 million of costs are included in Regulatory assets within Other Noncurrent Assets on the Condensed Consolidated Balance Sheets as of September 30, 2019, and December 31, 2018, respectively, representing recoverable costs under the FPSC’s storm rule and Duke Energy Florida's OATT formula rates.
Duke Energy Florida filed a petition with the FPSC on April 30, 2019, to recover the$223 million of estimated retail portion of incremental storm restoration costs for Hurricane Michael. The estimated recovery amount is approximately $221 million. On June 11, 2019,Michael, consistent with the provisions in the 2017 Settlement, and the FPSC approved the petition for recovery of incremental storm restoration costs related to Hurricane Michael.on June 11, 2019. The FPSC also approved the stipulation Duke Energy Florida filed, which will allowallowing Duke Energy Florida to use the tax savings resulting from the Tax Act to recover these storm costs in lieu of implementing a storm surcharge. Approved storm costs are currently expected to be fully recovered by approximately year-end 2021. On November 22, 2019, Duke Energy Florida expects to file actual costsfiled a petition for approval withof actual retail recoverable storm restoration costs related to Hurricane Michael in the FPSCamount of $191 million plus interest. On May 19, 2020, Duke Energy Florida filed a supplemental true up reducing the actual retail recoverable storm restoration costs related to Hurricane Michael by approximately $3 million, resulting in 2019.a total request to recover $188 million actual retail recoverable storm restoration costs, plus interest. An Order Establishing Procedure was issued on January 30, 2020, and hearings are scheduled to begin September 15, 2020. Approximately $163 million and $204 million of these costs are included in Regulatory assets within Current Assets and Other Noncurrent Assets on the Condensed Consolidated Balance Sheets as of June 30, 2020, and December 31, 2019, respectively. Duke Energy Florida cannot predict the outcome of this matter.
Hurricane Dorian
In September 2019, Duke Energy Florida’s service territory was threatened by Hurricane Dorian with landfall as a possible Category 5 hurricane. For several days, various forecasts and models predicted significant impact to Duke Energy Florida’s service territory; accordingly, Duke Energy Florida incurredfiled a petition with the FPSC on December 19, 2019, to recover $169 million of estimated retail incremental storm restoration costs to secure necessary resourcesfor Hurricane Dorian, consistent with the provisions in the 2017 Settlement and the FPSC approved the petition on February 24, 2020. Approved storm costs are currently expected to be prepared for that potential impact. Although Hurricane Dorian never made landfallrecovered over a 12-month period with rates effective in Florida, affects were still felt,March 2020 and outages did occur. Preparations were required so that, if Hurricane Dorian had made landfallsubject to true up. The final actual amount will be filed later in 2020 and impacts had been more severe, Duke Energy Florida would have been preparedthe FPSC will hold a hearing to restore its customers’ power in a timely fashion.
Total current estimateddetermine the final amount of incremental costs are approximately $153 million. Thesecosts. Approximately $95 million and $167 million of these costs are included in Regulatory assets within Current Assets and Other Noncurrent Assets on the Condensed Consolidated Balance Sheets as of SeptemberJune 30, 2020, and December 31, 2019, respectively, representing recoverable costs under the FPSC’s storm rule and Duke Energy Florida's OATT formula rates. Duke Energy Florida anticipates filing a petition withcannot predict the outcome of this matter.
Clean Energy Connection
On July 1, 2020, Duke Energy Florida petitioned the FPSC for approval of a voluntary solar program. The program consists of 10 new solar generating facilities with combined capacity of approximately 750 MW. The program allows participants to recover these costs, consistentsupport cost effective solar development in Florida. Participants will pay a subscription fee based on per kilowatt-subscriptions and receive a credit on their bill based on the generation associated with their portion of the provisionssolar portfolio. The estimated cost of the 10 new solar generation facilities is approximately $1 billion over the next four years, and this investment will be included in base rates offset by the revenue from the subscription fees. The credits will be included for recovery in the 2017 Settlement.fuel cost recovery clause. Duke Energy Florida 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.
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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.
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 NRCU.S. Nuclear Regulatory Commission (NRC), which was received on April 1, 2020, 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. The FPSC held the hearing on July 7-9, 2020, and is expected to vote on the petition at its August 18 Agenda Conference. Duke Energy Florida cannot predict the outcome of this matter.
Citrus County CCStorm Protection Plan
Construction of the 1,640-MW combined-cycle natural gas plant in Citrus County, Florida, began in October 2015 with an estimated cost of $1.5 billion, including AFUDC. Both units came on-line in the fourth quarter of 2018. The ultimate cost of the facility was estimated to be $1.6 billion, andOn April 10, 2020, Duke Energy Florida recorded Impairment charges on Duke Energy’s Consolidated Statements of Operations of $60 million infiled its initial Storm Protection Plan (SPP) with the fourth quarter of 2018FPSC. The SPP outlines storm protection programs over a 10-year planning period intended to enhance the existing infrastructure for the overrun. In September 2019,purpose of reducing restoration costs and reducing outage times associated with extreme weather conditions therefore improving overall service reliability. The FPSC will hold a hearing to determine whether to approve, deny, or approve the SPP with modifications beginning on August 10, 2020. On July 31, 2020, Duke Energy Florida recordedentered into a $25 million reduction to a prior-year impairment due to a decreasesettlement with certain intervenors in support of this filing. Duke Energy Florida cannot predict the cost estimateoutcome of the Citrus County CC, primarily related to the settlement agreement with Fluor, the EPC contractor. See Note 4 for additional information.this matter.
Duke Energy Ohio
Duke Energy Ohio COVID-19 Filing
In response to the COVID-19 pandemic, on March 9, 2020, Governor Mike DeWine issued Executive Order No. 2020-01D declaring a state of emergency in the state of Ohio. The PUCO issued an order directing utilities to cease disconnections for nonpayment and waive late payment and reconnection fees and to minimize direct customer contact. The PUCO also directed utilities to maintain flexible payment plans and tariff interpretations to assist customers during this crisis and to seek any regulatory waivers, if necessary. In response, Duke Energy Ohio has ceased all disconnections except for safety-related concerns and is waiving late payment and reconnection fees. On March 19, 2020, Duke Energy Ohio filed its compliance plan with the PUCO and sought waiver of several regulations to minimize direct customer contact. On May 4, 2020, Duke Energy Ohio filed a motion to suspend payment rules to enable proactive outreach to residential customers offering additional options for managing their utility bills. PUCO found the proposal to address the state of emergency and the accompanying waivers reasonable and directed Duke Energy Ohio to work with the PUCO Staff on a comprehensive plan for resumption of activities and operations, to be filed 45 days before resumption of activities. The transition plan was filed on June 26, 2020, and approved by the PUCO on July 29, 2020.
On April 16, 2020, Duke Energy Ohio filed an application for a Reasonable Arrangement to temporarily lower the minimum bill for demand-metered commercial and industrial customers. On June 17, 2020, the PUCO denied Duke Energy Ohio's application for a reasonable arrangement and ordered the Duke Energy Ohio to work with the PUCO Staff on payment arrangements for impacted nonresidential customers.
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On May 11, 2020, Duke Energy Ohio filed with the PUCO a request seeking deferral of incremental costs incurred, as well as specific miscellaneous lost revenues using existing bad debts and uncollectible riders already in place for both electric and natural gas operations. Duke Energy Ohio would subsequently file for rider recovery at a later date. On June 17, 2020, the PUCO approved Duke Energy Ohio’s deferral application. The commission denied the accrual of carrying costs and ordered Duke Energy Ohio to also track potential savings experienced as a result of COVID-19.
Duke Energy Kentucky COVID-19
In response to the COVID-19 pandemic, on March 6, 2020, Governor Andy Beshear issued Executive Order No. 2020-215 declaring a state of emergency in the commonwealth of Kentucky. The KPSC issued an order directing utilities to cease disconnections for nonpayment and waive late payment. The KPSC also directed utilities to maintain flexible payment plans and tariff interpretations to assist customers during this crisis and to seek any regulatory waivers if necessary. In response, Duke Energy Kentucky has ceased all disconnections except for safety-related concerns and is waiving late payment and reconnection fees. On June 23, 2020, the KPSC issued data requests to all jurisdictional utilities seeking information on customer bill impacts, arrearages, bad debt and incremental costs and savings due to COVID-19. Responses were filed on July 21, 2020. Duke Energy Kentucky cannot predict the outcome of this matter.
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 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. Thethat 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 proposedapproved 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. On September 13, 2019, and September 16, 2019, Interstate Gas Supply/Retail Supply Association and the Ohio Consumers' Counsel (OCC), respectively, filed appeals to the Ohio Supreme Court of Ohio claiming the PUCO’s order was in error because it approved unsupported charges to competitive suppliers and cost subsidies shopping customers pay for non-shopping customers.error. On September 16, 2019,March 13, 2020, the OfficeSupreme Court of Ohio dismissed OCC's appeal. On April 22, 2020, the Supreme Court of Ohio dismissed all remaining appeals of the Ohio Consumers' Counsel (OCC) filed an appeal challengingPUCO's December 19, 2018 order approving the PUCO’s approval of OVEC recovery through Duke Energy Ohio's Price Stability Rider (Rider PSR) alleging the FPA pre-empts the commission’s jurisdiction and that the record does not support finding that Rider PSR results in a limitation on shopping. On October 11, 2019, the OCC filed its Third Application for Rehearing arguing the PUCO erred in finding OCC’s Second Application for Rehearing as improper. Duke Energy Ohio filed its Memorandum Contra on October 21, 2019. Duke Energy Ohio cannot predict the outcome of this matter.
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stipulation. The case has been resolved.
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%. 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% and 10.24%. 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% based upon a capital structure of 50.75% equity and 49.25% 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 Power Future Initiatives Rider (formerly PowerForward RiderRider) 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. On September 13, 2019, and September 16, 2019, Interstate Gas Supply/Retail Supply Association and the OCC, respectively, filed appeals to the Ohio Supreme Court of Ohio claiming the PUCO’s order was in error because it approved unsupported charges to competitive suppliers and cost subsidies shopping customers pay for non-shopping customers.error. On September 16, 2019,March 13, 2020, the OCC filed an appeal challengingSupreme Court of Ohio dismissed OCC's appeal. On April 22, 2020, the PUCO’s approvalSupreme Court of OVEC recovery through Rider PSR allegingOhio dismissed all remaining appeals of the FPA pre-emptsPUCO's December 19, 2018 order approving the commission’s jurisdiction and that the record does not support finding that Rider PSR results in a limitation on shopping. On October 11, 2019, the OCC filed its Third Application for Rehearing arguing the PUCO erred in finding OCC’s Second Application for Rehearing as improper. Duke Energy Ohio filed its Memorandum Contra on October 21, 2019. Duke Energy Ohio cannot predict the outcome of this matter.stipulation. The case has been resolved.
Ohio Valley Electric Corporation
On March 31, 2017, Duke Energy Ohio filed for approval to adjust its existing 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. On September 13, 2019, and September 16, 2019, Interstate Gas Supply/Retail Supply Association and the OCC filed appeals to the Ohio Supreme Court of Ohio claiming the PUCO’s order was in error because it approved unsupported charges to competitive suppliers and cost subsidies shopping customers pay for non-shopping customers.error. On September 16, 2019,March 13, 2020, the OCC filed an appeal challengingSupreme Court of Ohio dismissed OCC's appeal. On April 22, 2020, the PUCO’s approvalSupreme Court of OVEC recovery through Rider PSR allegingOhio dismissed all remaining appeals of the FPA pre-emptsPUCO's December 19, 2018 order approving the commission’s jurisdiction and that the record does not support finding that Rider PSR results in a limitation on shopping. On October 11, 2019, the OCC filed its Third Application for Rehearing arguing the PUCO erred in finding OCC’s Second Application for Rehearing as improper. Duke Energy Ohio filed its Memorandum Contra on October 21, 2019. Duke Energy Ohio cannot predict the outcome of this matter.stipulation. The case has been resolved.
On July 23, 2019, an Ohio billHouse Bill 6 (HB6) was signed into law that will bebecame effective January 1, 2020. Among other things, the bill allows for funding of two nuclear generating facilities located in Northern Ohio through a charge on utility bills owned by Energy Harbor (f/k/a FirstEnergy Solutions), repeal of energy efficiency mandates, and recovery of prudently incurred costs, net of any revenues, for Ohio investor-owned utilities that are participants under the OVEC power agreement. The 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 – In July 2020, legislation to repeal HB 6 has been proposed in both the Ohio
On July 25, 2018, House and Senate. Duke Energy Ohio filed an application to establish a new rider to implementcannot predict the benefitsoutcome of the Tax Act for electric distribution customers. The new rider will flow through to customers the benefit of the lower statutory federal tax rate from 35% to 21% since January 1, 2018, all future benefits of the lower tax rates and a full refund of deferred income taxes collected at the higher tax rates in prior years. Deferred income taxes subject to normalization rules will be refunded consistent with federal law and deferred income taxes not subject to normalization rules will be refunded over a 10-year period. 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 ratemaking 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.this matter.
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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% since January 1, 2018, all future benefits of the lower tax rates and a full refund of deferred income taxes collected at the higher tax rates in prior years. Deferred income taxes subject to normalization rules will be refunded consistent with federal law and deferred income taxes not subject to normalization rules will be refunded over a 10-year period. The PUCO established a procedural schedule and testimony was filed on July 31, 2019. An evidentiary hearing occurred on August 7, 2019. Initial briefs were filed on September 11, 2019. Reply briefs were filed on September 25, 2019. 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. On April 10, 2019,February 26, 2020, the PUCO issued an Entryorder directing utilities to wind down their demand-side management programs by September 30, 2020, and to terminate the programs by December 31, 2020, in response to changes in Ohio law that eliminated Ohio's energy efficiency mandates. On March 27, 2020, Duke Energy Ohio filed an Application for Rehearing seeking clarification on Rehearing denying the final true up and reconciliation process after 2020. On April 22, 2020, the PUCO granted rehearing applications.for further consideration.
On June 15, 2016,8, 2020, Duke Energy Ohio filed an application for approval ofto implement a three-yearvoluntary energy efficiency and peak demand reductionprogram portfolio to commence on January 1, 2021. The application proposes a mechanism for recovery 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 allprogram costs, lost margins and a cap on shared savings incentive mechanism similar to those previously approved by the PUCO. On June 17, 2020, the PUCO, on its own motion, struck Duke Energy Ohio’s proposal to include a shared savings mechanism in its plan finding such incentives are not permissible or supportable under Ohio law. On June 26, 2020, Duke Energy Ohio has offeredwithdrew 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 OCC's application for rehearing of the PUCO order granting Duke Energy Ohio's waiver request; however, a decision on Duke Energy Ohio's application for rehearing remains pending. Duke Energy Ohio cannot predict the outcome of this matter.
2014 Electric Security Plan
On May 30, 2018, the PUCO approved an extension of Duke Energy Ohio’s then-current ESP, including all terms and conditions thereof, excluding an extension of Duke Energy Ohio’s Rider DCI. Following rehearing, on July 25, 2018, the PUCO granted the request and allowed a continuing cap on recovery under Rider DCI. The orders were upheld on rehearing requested by the Ohio Manufacturers' Association (OMA) and OCC. The time period for parties to file for rehearing or appeal has expired.
In 2018, the OMA and OCC filed separate 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 Rider PSR as a placeholder and its Rider DCI to recover incremental revenue requirement for distribution capital since Duke Energy Ohio’s last base rate case. The Ohio Supreme Court issued an order on March 13, 2019, for the appellants to show cause why the appeals should not be dismissed as moot in light of the commission’s approval of Duke Energy Ohio’s current 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 dismissed the appeals as moot on May 8, 2019.application.
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. Duke Energy Ohio currently estimates the pipeline development costs and construction activities will range from $163 million to $245 million in direct costs (excluding overheads and AFUDC). On January 20, 2017, Duke Energy Ohio filed an amended application with and that construction of the Ohio Power Siting Board (OPSB) for approval of one of two proposed routes. A public hearing was held on June 15, 2017. In April 2018, Duke Energy Ohio filed a motion with OPSBpipeline extension is expected to establish a procedural schedule and filed supplemental information supporting its application. On December 18, 2018,be completed before the OPSB established a procedural schedule that included a local public hearing on March 21, 2019.2021/2022 winter season. An evidentiary hearing began on April 9, 2019,for a Certificate of Environmental Compatibility and Public Need concluded on April 11, 2019. Briefs were filed on May 13, 2019, and reply briefs were filed on June 10, 2019. IfOn November 21, 2019, the OPSB approved constructionDuke Energy Ohio's application subject to 41 conditions on construction. Applications for rehearing were filed by several stakeholders on December 23, 2019, arguing that the OPSB approval was incorrect. On February 20, 2020, the OPSB denied the rehearing requests. On April 15, 2020, Joint Appellants filed a notice of appeal at the Supreme Court of Ohio of the pipeline extension is expected to be completed before the 2021/2022 winter season.OPSB’s decision approving Duke Energy Ohio’s Central Corridor application. On June 4, 2020, the OPSB filed a motion to dismiss claims raised by one of the Joint Appellants and to suspend the briefing schedule while the court considers the motion to dismiss. On August 5, 2020, the Supreme Court of Ohio expectsdismissed one of the Joint Appellants from the appeal and established a decision by the end of 2019.new briefing schedule, with appellants' briefs due in 20 days. Duke Energy Ohio cannot predict the outcome of this matter.
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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 two2 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 has collected approximately $55 million in environmental remediation costs between 2009 through 2012 through a separate rider, Rider MGP, which is currently suspended. Duke Energy Ohio has made annual applications with the PUCO to recover its incremental remediation costs consistent with the PUCO’s directive in Duke Energy Ohio’s 2012 natural gas 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 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. Additionally, staff recommended that any discussion pertaining to Duke Energy Ohio's recovery of ongoing MGP costs should be directly tied to or netted against insurance proceeds collected by Duke Energy Ohio. The PUCO has established a procedural schedule with anAn evidentiary hearing to commenceconcluded on November 18,21, 2019. Initial briefs were filed on January 17, 2020, and reply briefs were filed on February 14, 2020. Duke Energy Ohio cannot predict the outcome of this matter.
On March 31, 2020, Duke Energy Ohio filed its annual application to recover incremental remediation expense for the calendar year 2019 seeking recovery of approximately $39 million in remediation costs incurred during 2019. On July 23, 2020, the staff recommended a disallowance of approximately $4 million for work the staff believes occurred in areas not authorized for recovery. Additionally, the staff recommended insurance proceeds, net of litigation costs and attorney fees, should be reimbursed to customers and not be held by Duke Energy Ohio until all investigation and remediation is complete. 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 the deferral of 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. On September 13, 2019, intervenor comments were filed opposing Duke Energy Ohio's request for continuation of existing deferral authority and on October 2, 2019, Duke Energy Ohio filed reply comments. Duke Energy Ohio cannot predict the outcome of this matter.
Duke Energy Kentucky Natural Gas Base Rate Case
On August 31, 2018, Duke Energy Kentucky filed an application with the KPSC requesting an increase in natural gas base rates of approximately $11 million, an approximate 11.1% average increase across all customer classes. The increase was net of approximately $5 million in annual savings as a result of the Tax Act. The drivers for this case were capital invested since Duke Energy Kentucky’s last rate case in 2009. Duke Energy Kentucky also sought implementation of a Weather Normalization Adjustment Mechanism, amortization of regulatory assets and to implement the impacts of the Tax Act, prospectively. 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 $7 million increase in natural gas base revenue, a return on equity of 9.7% and approval of the proposed Weather Normalization Mechanism. A hearing was held on February 5, 2019. The commission issued its order approving the settlement without material modification on March 27, 2019. Revised customer rates were effective April 1, 2019.56
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FINANCIAL STATEMENTS | REGULATORY MATTERS |
Duke Energy Kentucky Electric Base Rate Case
On September 3, 2019, Duke Energy Kentucky filed a rate case with the KPSC requesting an increase in electric base rates of approximately $46 million, which represents an approximate 12.5% increase across all customer classes. The request for rate increase is driven by increased investment in utility plant since the last electric base rate case in 2017.million. On January 31, 2020, Duke Energy Kentucky seeksfiled rebuttal testimony updating its rate increase calculations to implementapproximately $44 million. Hearings concluded on February 20, 2020, and briefing was completed March 20, 2020. On April 27, 2020, the KPSC issued its decision approving a Storm Deferral Mechanism that will enable$24 million increase for Duke Energy Kentucky to defer actual costs incurred forwith a 9.25% return on equity. The KPSC denied Duke Energy Kentucky’s major storms that are over or under amounts in base rates. In response to large customers’ desire to have access to renewable resources,storm deferral mechanism and EV and battery storage pilots. The KPSC approved Duke Energy Kentucky’s Green Source Advantage tariff. New customer rates were effective on May 1, 2020. On May 18, 2020, Duke Energy Kentucky is proposing a Green Source Advantage tariff designedfiled its motion for those large customers that wish to investrehearing and on June 4, 2020, the motion was granted in renewable energy resources to meet sustainability goals.part and denied in part by the KPSC. On August 6, 2020, Duke Energy Kentucky is proposing an electric vehicle (EV) infrastructure pilotsubmitted a letter to the commission submitting the case for decision without hearing. On August 6, 2020, the Kentucky Attorney General also filed a letter requesting to submit the rehearing case for decision without hearing. The Attorney General’s letter also stated that the commission’s reduction to the company’s forecasted capital in its initial order was overstated and modest incentives to assist customersshould be corrected, resulting in investing in EV technologies. Additionally, Duke Energy Kentucky is proposing to build an approximate 5.5 MW distribution battery energy storage system to be attached to Duke Energy Kentucky’s distribution system providing frequency regulation and enhanced reliability to Kentucky customers. The commission issued a procedural schedule with two rounds of discovery and opportunities for intervenor and rebuttal testimony.Duke Energy Kentucky anticipates that rates will go into effect$5 million increase in the second quarter of 2020.company’s revenue requirement. Duke Energy Kentucky cannot predict the outcome of this matter.
Duke Energy Indiana
COVID-19
In response to the COVID-19 pandemic, on March 6, 2020, Governor Eric Holcomb issued Executive Order No. 20-02, which by law expired in 30 days unless extended, declaring a public health disaster emergency in the state of Indiana. Subsequently, the governor issued Executive Orders Nos. 20-17, 20-25, 20-30 and 20-34, each renewing the public health disaster emergency declaration for an additional 30 days, which is currently extended through September 2, 2020. All other Executive Orders issued since March 6, 2020, (Nos. 20-04 – 20-16) were renewed for the same 30-day period, provided they were supplements to Executive Order No. 20-02. Executive Order No. 20-05 was issued on March 19, 2020, requiring utilities in the state to suspend disconnections of utility service. Duke Energy Indiana had already voluntarily suspended all disconnections and is waiving late payment fees and check return fees. The utility is also waiving credit card fees for residential customers.
On May 8, 2020, Duke Energy Indiana, along with other Indiana utilities, filed a request with the IURC for approval of deferral treatment for costs and revenue reductions associated with the COVID-19 pandemic. The utilities requested initial deferral approval in July 2020, with individual subdockets for each utility to be established for consideration of utility-specific cost and revenue impacts, cost recovery timing and customer payment plans. On June 29, 2020, the IURC issued an order in Phase 1 wherein it extended the disconnection moratorium for jurisdictional utilities until August 14, 2020, along with requiring six month payment arrangements, waiver of late fees, reconnection fees, convenience fees and deposits. The IURC permitted jurisdictional utilities to use regulatory accounting for any impacts associated with the prohibition on utility disconnections, waiver or exclusion of certain utility fees (i.e., late fees, convenience fees, deposits, and reconnection fees), the use of expanded payment arrangements to aid customers, and for COVID-19 related uncollectible and incremental bad debt expense. The IURC did not permit recovery of lost revenues due to load reduction or carrying costs. In Phase 2 filings, individual utilities may choose to request regulatory accounting for other COVID-19 related operation and maintenance costs wherein evidence of the impact of any costs or offsetting savings can be presented and considered in an evidentiary hearing. Duke Energy Indiana cannot predict the outcome of this matter.
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. The request forrebuttal case, filed on December 4, 2019, updated the requested revenue requirement to result in a 15.6% or $396 million average retail rate increase, is driven by strategic investments to generate cleaner electricity, improve reliabilityincluding the impacts of the Utility Receipts Tax. Hearings concluded on February 7, 2020. On June 29, 2020, the IURC issued the order in the rate case approving a revenue increase of $146 million before certain adjustments and serveratemaking refinements. The order provided for an overall cost of capital of 5.7% based on a growing customer base. The request is premised upon9.7% return on equity and a 53% equity component of the capital structure, and approved Duke Energy IndianaIndiana’s requested forecasted rate base of $10.2 billion as of December 31, 2018, and adjusted for projected changes through December 31, 2020. On September 9, 2019,2020, including the Edwardsport IGCC Plant. The IURC reduced Duke Energy Indiana revised its revenueIndiana’s request from $395by slightly more than $200 million, to $393 million and filed updated testimonywhen accounting for the Retail Rate Case. The updated filing reflectsutility receipts tax and other adjustments. Approximately 50% of the reduction is due to a clarificationprospective change in depreciation and use of regulatory asset for the presentation of Utility Receipts Tax, a $2 million reduction inend-of-life inventory at retired generating plants, approximately 20% is due to the revenue requirement for revenues that will remain in riders and changes to allocation of revenue requirements within rate classes. The Utility Receipts Tax is currently embedded in base rates and rider rates. The proposed treatment is to include the Utility Receipts Tax as a line itemapproved 9.7% return on the customer bill rather than included in rates. The request is an approximate 15% increase in retail revenuesequity versus requested 10.4% and approximately 17% when including estimated Utility Receipts Tax. Hearings are expected20% is related to commence in early 2020, withmiscellaneous earnings neutral adjustments. The rates to bewere effective by mid-2020.July 30, 2020. Several groups filed notices of appeal of the IURC order on July 29, 2020. Duke Energy Indiana cannot predict the outcome of this matter.
2020 Indiana Coal Ash Recovery Case
In Duke Energy Indiana’s rate case, the IURC approved coal ash basin closure costs expended through 2018 including financing costs as a regulatory asset and included in rate base. The IURC opened a subdocket to deal with the post-2018 coal ash related expenditures. Duke Energy Indiana filed testimony on April 15, 2020, in the coal ash subdocket requesting recovery for the post-2018 coal ash basin closure costs for plans that have been approved by the Indiana Department of Environmental Management as well as continuing deferral, with carrying costs, on the balance. An evidentiary hearing is scheduled to begin on September 14, 2020, and an order is expected in the first quarter of 2021. Duke Energy Indiana cannot predict the outcome of this matter.
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FINANCIAL STATEMENTS | REGULATORY MATTERS |
FERC Transmission ReturnPiedmont
COVID-19 Filings
North Carolina
On March 10, 2020, Governor Roy Cooper issued Executive Order No. 116 declaring a state of emergency due to the COVID-19 pandemic. On March 19, 2020, the NCUC issued on Equity Complaint
Customer groups haveorder directing that utilities under its jurisdiction suspend disconnections for nonpayment of utility bills during the state of emergency (as defined by Executive Order No. 116) and allow for customers to enter into payment arrangements to pay off arrearages accumulated during the state of emergency after the end of the state of emergency. Additionally, to help mitigate the financial impacts of the COVID-19 pandemic on their customers, on March 19, 2020, Piedmont filed a request with the FERC complaints against MISONCUC seeking authorization to waive: (1) any late payment charges incurred by a residential or nonresidential customer, effective March 21, 2020; (2) the application of fees for checks returned for insufficient funds for residential and its transmission-owning members,nonresidential customers; (3) the reconnection charge when a residential or nonresidential customer seeks to have service restored for those customers whose service was recently disconnected for nonpayment and to work with customers regarding the other requirements to restore service, including Duke Energy Indiana, alleging, among other things, thatre-establishment of credit; and (4) the current base ratefees and charges associated with the use of returncredit cards or debit cards to pay residential electric utility bills, effective March 21, 2020. The NCUC granted Piedmont’s request on equity earned by MISO transmission owners of 12.38% is unjust and unreasonable. The complaints claim, among other things, thatMarch 20, 2020.
On March 31, 2020, the current base rate of return on equity earned by MISO transmission owners should be reducedgovernor issued Executive Order No. 124, which, in addition to 8.67%. On January 5, 2015,requiring the FERC issued an order accepting the MISO transmission owners' adder of 0.5% 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 reasonablesteps in the pending return on equity complaints.NCUC order noted above, stated that nothing in Executive Order No. 124 shall relieve a customer of its obligation to pay bills for receipt of utility services provided. Executive Order No. 124 remains in effect for 60 days unless otherwise rescinded or replaced with a superseding Executive Order. On December 22, 2015,May 30, 2020, the presiding FERC ALJ in the first complaintgovernor issued an Initial Decision inExecutive Order No. 142, which the base rate of return on equityextended effective period for Executive Order No. 124 to July 29, 2020. Executive Order No. 142 was set at 10.32%. 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 9.7%. The Initial Decision in the second complaint is pending FERC review. On April 14, 2017, the D.C. Circuit Court, in Emera Maine v. FERC, reversed and remanded certain aspects of the methodology employed by FERC to establish rates of return on equity. On October 16, 2018, FERC issued an order in response to the Emera remand proceeding proposing a new method for determining whether an existing return on equity is unjust and unreasonable, and a new process for determining a just and reasonable return on equity. On November 14, 2018, FERC directed parties to the MISO complaints to file briefs on how the new process for determining return on equity proposed in the Emera proceeding should be applied to the complaints involving the MISO transmission owners’ return on equity. Initial briefs were filed on February 13, 2019, and reply briefs 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.
Edwardsport Integrated Gasification Combined Cycle Plantextended.
On September 20, 2018, Duke Energy Indiana, the Indiana Office of Utility Consumer Counselor, the Duke Industrial Group and Nucor Steel – Indiana entered into a settlement agreement to resolve IGCC ratemaking issues for calendar years 2018 and 2019. The agreement will remain in effect until new rates are established in Duke Energy Indiana's next base rate case, which was filed on July 2, 2019, with rates to be effective in mid-2020. An evidentiary hearing was held in December 2018, and on June 5, 2019, the IURC issued an order approving the 2018 Settlement Agreement.
Piedmont
North Carolina Integrity Management Rider Filing
On October 31, 2019,10, 2020, Piedmont filed a petition underwith the IMR mechanismNCUC for clarification regarding when they may begin working with customers on establishing payment arrangements for arrears accumulated since March 13, 2020. On July 29, 2020, the NCUC issued its Order Lifting Disconnection Moratorium and Allowing Collection of Arrearages Pursuant to collect an additional $11 million in annual revenues effective DecemberSpecial Repayment Plans. The order contained the following: 1) public utilities may resume customer disconnections due to nonpayment for bills first rendered on or after September 1, 2019, based2020, after appropriate notice; 2) the late fee moratorium will continue through the end of the state of emergency or until further order of the commission; 3) Duke Energy utilities may reinstate fees for checks returned for insufficient funds as well as transaction fees for use of credit cards or debit cards for bills first rendered on or after September 1, 2020; and 4) no sooner than September 1, 2020, the eligible capital investments closedcollection of past due or delinquent accounts accrued up to integrity and safety projects between July 1, 2019, and September 30, 2019.including August 31, 2020, may proceed subject to conditions. Piedmont cannot predict the outcome of this matter.
South Carolina
On March 13, 2020, Governor Henry McMaster issued Executive Order No. 2020-08 declaring a state of emergency due to the COVID-19 pandemic. The governor also issued a letter on March 14, 2020, to the ORS Executive Director regarding the suspension of disconnection of essential utility services for nonpayment. On March 18, 2020, the PSCSC issued an order approving such waivers, and also approved waivers for regulations related to late fees and reconnect fees. The PSCSC's order also required utilities to track the financial impacts of actions taken pursuant to such waivers for possible reporting to the PSCSC.
On April 30, 2019,2020, the ORS requested the PSCSC grant a waiver of the applicable regulations to allow customers the flexibility to obtain deferred payment plans longer than six months for past-due amounts. On May 5, 2020, Piedmont filed responsive comments stating that while utility bills will remain due, Piedmont does not plan to immediately reinstitute disconnection upon the expiration of the state of emergency and intends to work through a potential grace period as economic recovery begins. Piedmont also concurred with the observation of the ORS that reduced usage is impacting the fixed-cost recovery and revenue assumptions included in rates. Those costs include not only ongoing operational and financing costs necessary to serve customers, but also the borrowings necessary to support extended payment arrangements that will be an important part of emerging from the COVID-19 pandemic. Piedmont will continue to track such costs, lost revenues and potential cost savings for future evaluation by the PSCSC.
Additionally, on May 8, 2020, the ORS filed a motion for the PSCSC to solicit comments from utilities and interested stakeholders regarding measures to be taken to mitigate impacts of COVID-19 on utility customers and require recordkeeping. In a detailed motion, the ORS specifically asked the PSCSC to: (1) solicit input from utilities regarding the temporary mitigation measures to address COVID-19; (2) request utilities to inform the PSCSC of the plans utilities have to return to normalized operations; (3) require utilities to track revenue impacts, incremental costs and savings related to COVID-19 and file the findings with the PSCSC on a quarterly basis; and (4) include any other matters that the PSCSC believes should be addressed. On May 14, 2020, the PSCSC adopted the ORS' motion.
On May 13, 2020, the ORS filed a letter with the PSCSC that included a request from Governor McMaster that utilities proceed with developing and implementing plans for phasing in normal business operations. On May 14, 2020, the PSCSC conditionally vacated the regulation waivers regarding termination of service and suspension of disconnect fees. Prior to termination, utilities are to refer past-due customers to local organizations for assistance and/or deferred payment arrangements. Piedmont filed a petition under the IMR mechanism to update rates, basedreport on the eligible capital investments closed to integrity and safety projects over the six-month period ending March 31, 2019. The NCUC approved the petition on May 29, 2019, and rates became effective June 1, 2019. The effect of the update was an increase to annual revenues of approximately $9 million.
Tennessee Integrity Management Rider Filing
In November 2018, Piedmont filed a petition with the TPUC under the IMR mechanism to collect an additional $3 million in annual revenues, effective January 2019, based on the eligible capital investments closed to integrity and safety projects over the 12-month period ending October 31, 2018. A hearing on 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 application 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% increase in retail revenues. The request for rate increase is driven by significant infrastructure upgrade investments (plant additions) since the last general rate case through June 30, 2019, offset2020, as required by savings that customers will begin receiving due to federalPSCSC order, reporting revenue impact, costs and state tax reform. Approximately half of the plant additions being included in rate base are categories of plant investment not covered under the IMR mechanism, which was originally approved as part of the 2013 North Carolina Rate Case.
On August 13, 2019, Piedmont, the Public Staff, and two groups representing industrial customers filed an Agreement and Stipulation Settlement resolving issues in the base rate proceeding, which included a return on equity of 9.7% and a capital structure of 52% equity and 48% debt. The North Carolina Attorney General's Office did not support the settlement. Other major components of the Stipulation included:
An annual increase in revenues of $109 million before consideration of riders associated with federal and state tax reform;
A decrease through a rider mechanism of $23 million per year to return unprotected federal EDIT over a five-year period and deferred revenuessavings related to COVID-19 to date. Piedmont cannot predict the federal rate reductionoutcome of $37 million to be returned over one year;this matter.
A decrease through a rider mechanism of $21 million per year related to reductions in the North Carolina state income tax rate to be returned over a three-year period;
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• | An overall cap on net revenue increase of $83 million. This will impact Piedmont beginning November 1, 2022 only if the company does not file another general rate case in the interim;
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Continuation of the IMR mechanism; and58
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FINANCIAL STATEMENTS | REGULATORY MATTERS |
EstablishmentTennessee
On March 12, 2020, Governor Bill Lee issued Executive Order No. 14 declaring a state of emergency due to the COVID-19 pandemic. In an effort to help mitigate the financial impacts of the COVID-19 pandemic on their customers, on March 20, 2020, Piedmont filed a new Distribution Integrity Management Program (DIMP) deferral mechanismrequest with the TPUC seeking authorization to waive, effective March 21, 2020: (1) any late payment charges incurred by a residential or nonresidential customer; (2) the application of fees for average annual pretax operationschecks returned for insufficient funds for residential and maintenance expensesnonresidential customers; and (3) the reconnection charge when a residential or nonresidential customer seeks to have service restored for those customers whose service was recently disconnected for nonpayment and to work with customers regarding the other requirements to restore service, including re-establishment of credit. The TPUC granted Piedmont’s request by Order issued March 31,2020. The Order also stated that customers were not relieved of their obligation to pay for utility services received.
2020 Tennessee Rate Case
On July 2, 2020, Piedmont filed an application with the TPUC, its first general rate case in Tennessee in nine years, for a rate increase for retail customers of approximately $11 million.
$30 million, which represents an approximate 15% increase in annual revenues. The rate increase is driven by significant infrastructure upgrade investments since its previous rate case. Approximately half of the plant additions being added to rate base are categories of capital investment not covered under the IMR mechanism, which was approved in 2013. An evidentiary hearing began on August 19, 2019. On October 31, 2019, the NCUC approved the Stipulationis expected to be scheduled for fall 2020, and thea decision and revised customer rates wereare expected to become effective NovemberJanuary 1, 2019.2021. Piedmont cannot predict the outcome of this matter.
OTHER REGULATORY MATTERS
Atlantic Coast Pipeline, LLC
On September 2, 2014, Duke Energy, Dominion Energy, Inc. (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 iswas designed to meet, in part, the needs identified by Duke Energy Carolinas, Duke Energy Progress and Piedmont. Dominion will bewould have been responsible for building and operating the ACP pipeline and holds a leading ownership percentage in ACP of 48%.53%, following the purchase in March 2020 of Southern Company Gas' 5% ownership interest. Duke Energy owns a 47% interest, which is accounted for as an equity method investment through its Gas Utilities and Infrastructure segment. Southern Company Gas maintains a 5% interest. See Note 13
On April 15, 2020, the United States District Court for additional information related to Duke Energy's ownership interest. Duke Energy Carolinas, Duke Energy Progress and Piedmont, among others, will be customersthe District of Montana granted partial summary judgment in favor of the pipeline. Purchases will be made under several 20-year supply contracts, subject to state regulatory approval.
In 2018, the FERC issued a series of Notices to Proceed, which authorized the project to begin certain construction-related activities along the pipeline route, including supply header and compressors. On May 11, 2018, and October 19, 2018, FERC issued Notices to Proceed allowing full construction activitiesplaintiffs in all areas of West Virginia except in the Monongahela National Forest. On July 24, 2018, FERC issued a Notice to Proceed allowing full construction activities along the project route in North Carolina. On October 19, 2018, the conditions to effectiveness of the Virginia 401 water quality certification were satisfied and, 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. Due to legal challenges not directly related to the request for a Notice to Proceed in Virginia, this request is still pending.
ACP is the subject of 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’sNorthern Plains Resource Council v. U.S. Army Corps of Engineers (USACE) 404 permit,(Northern Plains), vacating USACE’s Nationwide Permit 12 (NWP 12) and remanding it to USACE for consultation under the project's air permit for a compressor station at Buckingham, Virginia,Endangered Species Act (ESA) of 1973. In Northern Plains, the FERC Environmental Impact Statement ordercourt ruled that NWP 12 was unlawful because USACE did not consult under the ESA with the U.S. Fish and Wildlife Service and/or National Marine Fisheries Service prior to NWP 12’s reissuance in 2017. Because NWP 12 has been vacated and its application enjoined, USACE currently has suspended verification of any new or pending applications under NWP 12 until further court action clarifies 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 bysituation.
On May 28, 2020, the U.S. Court of Appeals for the FourthNinth Circuit (Fourth Circuit) andissued a ruling that limited the same court'sNWP 12 vacatur to energy infrastructure projects. In July 26, 2019, vacatur of the project's BiOp and ITS (which stay and subsequent vacatur 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 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 to2020, the Supreme Court of the United States on June 25, 2019, regardingissued an order allowing other new oil and gas pipeline projects to use the Appalachian TrailNWP 12 process pending appeal to the U.S. Court of Appeals for the Ninth Circuit; however, that did not decrease the uncertainty associated with an eventual ruling. Together, these rulings indicated that the timeline to reinstate the necessary water crossing permits for ACP would likely cause further delays and certiorari was granted on October 4, 2019. A ruling is expected incost increases.
On July 5, 2020, Dominion announced a sale of substantially all of its gas transmission and storage segment assets, operations core to the second quarter of 2020. ACP is also evaluating possible legislative remedies to this issue.pipeline project.
In anticipationAs a result of the Fourth Circuit's vacatur ofuncertainty created by the BiOp and ITS, ACP andNWP 12 rulings, 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.
Given the legal challenges described above and ongoing discussions with customers, ACP expects mechanical completion of the full project in late 2021 with in-service likely in the first half of 2022.
The delays resulting from the legal challenges described above have impactedpotential impact on the cost and schedule for the project. Project cost estimates are $7.3 billionproject, the ongoing legal challenges and the risk of additional legal challenges and delays through the construction period and Dominion’s decision to $7.8 billion, excluding financing costs. Given the statussell substantially all of current discussions with FWS regarding a new BiOpits gas transmission and ITS, as well as discussions with contractors regarding efficiencies which may be realized going forward, these estimates are under review and subject to upward pressure. Abnormal weather, work delays (including delays due to judicial or regulatory action) and other conditions may also result in cost or schedule modifications, a suspension of AFUDC for ACP and/or impairment charges potentially material tostorage segment assets, Duke Energy's cash flows, financial positionBoard of Directors and results of operations.
Duke Energy’s investmentmanagement decided that it was not prudent to continue to invest in ACP was $1.1 billion at September 30, 2019.the project. On July 5, 2020, Duke Energy evaluated this investment for impairment at September 30, 2019, and determined that fair value approximated carrying value and therefore no impairment was necessary. Duke Energy also has a guarantee agreement supporting its shareDominion announced the cancellation of the ACP revolving credit facility. Duke Energy’s maximum exposure to loss under the terms of the guarantee is $802 million, which represents 47% of the outstanding borrowings under the credit facility as of September 30, 2019. See Note 13 for additional information.pipeline.
Constitution Pipeline Company, LLC
Duke Energy owns a 24% 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% 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, Duke Energy recorded a pretax charge to earnings of approximately $2.0 billion for the three months and six months ended June 30, 2020, within Equity in (losses) earnings of unconsolidated affiliates on the Duke Energy Condensed Consolidated Statements of Operations. The tax benefit associated with this abandonment was $374 million and is recorded in Income Tax (Benefit) Expense on the Duke Energy Condensed Consolidated Statements of Operations. Additional charges of less than $100 million are expected to be recorded within the next 12 months as ACP incurs obligations to exit operations.
As part of the permitting delays and project uncertainty, total anticipated contributions bypretax charge to earnings of approximately $2.0 billion, Duke Energy can no longer be reasonably estimated. Since April 2016, withestablished a $920 million current liability related to the actionsabandonment of ACP within Current Liabilities in the New York State DepartmentGas Utilities and Infrastructure segment. The liability represents Duke Energy's obligation of Environmental Conservation (NYSDEC), Constitution stoppedapproximately $860 million to fund ACP's outstanding debt and approximately $60 million to satisfy ARO requirements to restore construction sites.
See Notes 1, 4 and discontinued capitalization of future development costs until the project's uncertainty is resolved.11 for additional information regarding this transaction.
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FINANCIAL STATEMENTS | REGULATORY MATTERS |
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 challenging the legality and appropriateness of the NYSDEC’s decision, culminating in an appeal to the Supreme Court of the United States, which appeal was denied on April 30, 2018. In addition, in October 2017, Constitution filed a petition for declaratory order requesting FERC to find that, by not acting on Constitution's application within a reasonable period of time as required by statute, the NYSDEC waived its rights to issue a Section 401 water quality certification. Constitution's petition was denied on January 11, 2018.
On January 25, 2019, the D.C. Circuit Court 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 for a declaratory order, on April 1, 2019, Constitution filed a new 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 August 28, 2019, FERC issued an order declaring that NYSDEC had in fact waived its water quality certification authority. On September 27, 2019, NYSDEC and numerous intervenors filed requests for rehearing of FERC’s August 28, 2019, waiver determination.
Constitution is currently unable to approximate an in-service date for the project due to the NYSDEC's denial of the water quality certification. The Constitution partners remain committed to the project and are evaluating next steps to move the project forward. On June 25, 2018, Constitution filed with FERC a Request for Extension of Time until December 2, 2020, for construction of the project. On November 5, 2018, FERC issued an Order Granting Extension of Time.
During the nine months ended September 30, 2018, Duke Energy recorded an OTTI of $55 million within Equity in earnings of unconsolidated affiliates on Duke Energy's Condensed Consolidated Statements of Income. The charge represented 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 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 13 for additional information related to ownership interest and carrying value of the investment.
Potential Coal Plant Retirements
The Subsidiary Registrants periodically file IRPsintegrated resource plans (IRPs) with their state regulatory commissions. The IRPs provide a view of forecasted energy needs over a long term (10 to 20 years) and options being considered to meet those needs. IRPs filed by the Subsidiary Registrants included planning assumptions to potentially retire certain coal-fired generating facilities in North Carolina and Indiana earlier than their current estimated useful lives. Duke Energy continues to evaluate the potential need to retire these coal-fired generating facilities earlier than the current estimated useful lives and plans to seek regulatory recovery for amounts that would not be otherwise recovered when any of these assets are retired.
The table below contains the net carrying value of generating facilities planned for retirement or included in recent IRPs as evaluated for potential retirement. Dollar amounts in the table below are included in Net property, plant and equipment on the Condensed Consolidated Balance Sheets as of SeptemberJune 30, 2019,2020, 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 |
| | $ | 154 |
| 585 |
| | $ | 145 |
|
Duke Energy Indiana | | | | | | |
Gallagher Units 2 and 4(b) | 280 |
| | 116 |
| 280 |
| | 116 |
|
Gibson Units 1-5(c) | 3,132 |
| | 1,949 |
| 3,132 |
| | 1,690 |
|
Cayuga Units 1-2(c) | 1,005 |
| | 974 |
| 1,005 |
| | 953 |
|
Total Duke Energy | 5,002 |
| | $ | 3,193 |
| 5,002 |
| | $ | 2,904 |
|
| |
(a) | Duke Energy Carolinas will retire Allen Steam Station Unitsunits 1 through 3 by December 31, 2024, as part of the resolution of a lawsuit involving alleged New Source Review violations. |
| |
(b) | Duke Energy Indiana committed to either retire or stop burning coal at Gallagher Unitsunits 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, includesincluded proposed depreciation rates reflecting retirement dates from 2026 to 2038. These updated retirement dates were approved by the IURC as part of the rate case order issued on June 29, 2020. |
Duke Energy continues to evaluate the potential need to retire generating facilities earlier than the current estimated useful lives, and plans to seek regulatory recovery, as necessary, for amounts that would not be otherwise recovered when any of these assets are retired. However, such recovery, including recovery of carrying costs on remaining book values, could be subject to future approvals and therefore cannot be assured.
Duke Energy Carolinas and Duke Energy Progress are evaluating the potential for coal-fired generating unit retirements with a net carrying value of approximately $732$693 million and $1.2 billion, respectively, included in Net property, plant and equipment on the Condensed Consolidated Balance Sheets as of SeptemberJune 30, 2019.
Refer to the "Western Carolinas Modernization Plan" discussion above for details of Duke Energy Progress' planned retirements.2020.
|
| |
FINANCIAL STATEMENTS | COMMITMENTS AND CONTINGENCIES |
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 Duke Energy Registrants.
Remediation Activities
In addition to 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.
|
| |
FINANCIAL STATEMENTS | COMMITMENTS AND CONTINGENCIES |
The following tables containtable contains information regarding reserves for probable and estimable costs related to the various environmental sites. These reserves are recorded in Accounts Payable within Current Liabilities and Other within Other Noncurrent Liabilities on the Condensed Consolidated Balance Sheets. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 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 | 30 |
| | 4 |
| | 9 |
| | 3 |
| | 5 |
| | 10 |
| | — |
| | 6 |
|
Cash reductions | (35 | ) | | (4 | ) | | (3 | ) | | (2 | ) | | (1 | ) | | (28 | ) | | — |
| | — |
|
Balance at end of period | $ | 72 |
| | $ | 11 |
| | $ | 17 |
| | $ | 5 |
| | $ | 10 |
| | $ | 30 |
| | $ | 5 |
| | $ | 8 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 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 | 7 |
| | 3 |
| | 2 |
| | 3 |
| | (1 | ) | | 3 |
| | 1 |
| | — |
|
Cash reductions | (20 | ) | | (2 | ) | | (5 | ) | | (1 | ) | | (4 | ) | | (12 | ) | | (1 | ) | | — |
|
Balance at end of period | $ | 68 |
| | $ | 11 |
| | $ | 12 |
| | $ | 5 |
| | $ | 7 |
| | $ | 38 |
| | $ | 5 |
| | $ | 2 |
|
|
| | | | | | |
(in millions) | June 30, 2020 | December 31, 2019 |
Reserves for Environmental Remediation | | |
Duke Energy | $ | 55 |
| $ | 58 |
|
Duke Energy Carolinas | 10 |
| 11 |
|
Progress Energy | 14 |
| 16 |
|
Duke Energy Progress | 5 |
| 4 |
|
Duke Energy Florida | 8 |
| 9 |
|
Duke Energy Ohio | 19 |
| 19 |
|
Duke Energy Indiana | 5 |
| 4 |
|
Piedmont | 7 |
| 8 |
|
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 | $ | 49 |
| $ | 59 |
|
Duke Energy Carolinas | 11 |
| 11 |
|
Duke Energy Ohio | 31 |
| 42 |
|
Piedmont | 2 |
| |
|
| |
FINANCIAL STATEMENTS | COMMITMENTS AND CONTINGENCIES |
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. Duke Energy has filed a petition with the North Carolina Superior Court seeking review of this order. The lawsuit will proceed on the remaining issues, including whether the NCDEQ's decision was arbitrary and capricious. On September 24, 2019, NCDEQ filed a Motion for Partial Summary Judgment on the issue of whether Duke Energy had notice that NCDEQ was going to make a closure determination on April 1, 2019. On October 28, 2019, the court entered an order granting NCDEQ’s Partial Motion for Summary Judgment. Duke Energy has until November 27, 2019 to file an appeal of that decision. The trial is expected to occur in June 2020. 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 SuperiorBusiness 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,In February and March 2020, the court granted an extension of stay, until September 15, 2019, to allowheard arguments on numerous cross motions filed by the parties to discuss potential resolution. As no resolution was reached,seek legal determinations concerning several insurance related defenses raised by the insurance providers. On June 5, 2020, the court issued four rulings in favor of Duke Energy's legal positions in the coal ash recovery litigation proceedings. Due to COVID-19, the court has resumed with fact discovery. Theissued a new scheduling order and the trial is now scheduled for February 2021.January 2022. Duke Energy Carolinas and Duke Energy Progress cannot predict the outcome of this matter.
NCDEQ State Enforcement Actions
In the first quarter of 2013, the SELC sent notices of intent to sue Duke Energy Carolinas and Duke Energy Progress related to alleged CWA violations from coal ash basins at two of their coal-fired power plants in North Carolina. The NCDEQ filed enforcement actions against Duke Energy Carolinas and Duke Energy Progress alleging violations of water discharge permits and North Carolina groundwater standards. The cases have been consolidated and are being heard before a single judge 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 7 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 7 plants. On March 15, 2017, Duke Energy Carolinas and Duke Energy Progress filed a Notice of Appeal with the North Carolina Court of Appeals to challenge the trial court’s order. The parties were unable to reach an agreement at mediation in April 2017 and submitted briefs to the trial court on remaining issues to be tried. On August 1, 2018, the Court of Appeals dismissed the appeal and the matter is proceeding before the trial court. The court decided to stay any activity in the case and has been holding periodic status conferences while NCDEQ works through the Coal Ash Act process and the ongoing appeal of the April 1 closure decision. Duke Energy Carolinas and Duke Energy Progress cannot predict the outcome of this matter.
Federal Citizens Suits
On June 13, 2016, the RRBA filed a federal citizen suit in the Middle District of North Carolina alleging unpermitted discharges to surface water and groundwater violations at the Mayo Plant. On August 19, 2016, Duke Energy Progress filed a Motion to Dismiss. On April 26, 2017, the court entered an order dismissing four of the claims in the federal citizen suit. Two claims relating to alleged violations of NPDES permit provisions survived the motion to dismiss, and Duke Energy Progress filed its response on May 10, 2017. Duke Energy Progress and RRBA each filed motions for summary judgment on March 23, 2018. The court has not yet ruled on these motions.
On May 16, 2017, RRBA filed a federal citizen suit in the U.S. District Court for the Middle District of North Carolina, which asserts two claims relating to alleged violations of NPDES permit provisions at the Roxboro Plant and one claim relating to the use of nearby water bodies. Duke Energy Progress and RRBA each filed motions for summary judgment on April 17, 2018, and the court has not yet ruled on these motions.
On May 8, 2018, on motion from Duke Energy Progress, the court ordered trial in both of the above matters to be consolidated. On April 5, 2019, Duke Energy Progress filed a motion to stay the case following the NCDEQ’s April 1 Order. On August 2, 2019, the court ordered that this case is stayed and shall remain stayed pending further order from the court.
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| |
FINANCIAL STATEMENTS | COMMITMENTS AND CONTINGENCIES |
On December 5, 2017, various parties filed a federal citizen suit in the U.S. District Court for the Middle District of North Carolina for alleged violations at Duke Energy Carolinas' Belews Creek under the CWA. Duke Energy Carolinas' answer to the complaint was filed on August 27, 2018. On October 10, 2018, Duke Energy Carolinas filed Motions to Dismiss for lack of standing, Motion for Judgment on the Pleadings and Motion to Stay Discovery. On January 9, 2019, the court entered an order denying Duke Energy Carolinas' motion to stay discovery. There has been no ruling on the other pending motions. On April 5, 2019, Duke Energy Carolinas filed a motion to stay the case following the NCDEQ’s April 1 Order. On August 2, 2019, the court ordered that this case is stayed and shall remain stayed pending further order from the court.
Duke Energy Carolinas and Duke Energy Progress cannot predict the outcome of these matters.
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 SeptemberJune 30, 2019,2020, there were 121118 asserted claims for non-malignant cases with cumulative relief sought of up to $32$27 million, and 4059 asserted claims for malignant cases with cumulative relief sought of up to $13$20 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 $592$590 million at SeptemberJune 30, 2019,2020, and $630$604 million at December 31, 2018.2019. 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 Duke Energy Carolinas' best estimate for current and future asbestos claims through 20382039 and are recorded on an undiscounted basis. In light of the uncertainties inherent in a longer-term forecast, management does not believe they can reasonably estimate the indemnity and medical costs that might be incurred after 20382039 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-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 $747 million in excess of the self-insured retention. Receivables for insurance recoveries were $722$742 million at SeptemberJune 30, 2019,2020, and $739 million at December 31, 2018.2019. 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.
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| |
FINANCIAL STATEMENTS | COMMITMENTS AND CONTINGENCIES |
Duke Energy Progress and Duke Energy Florida
Spent Nuclear Fuel Matters
On June 18, 2018, Duke Energy Progress and Duke Energy Florida sued the U.S. in the U.S. Court of Federal 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 in the amount of $100 million and $203 million for Duke Energy Progress and Duke Energy Florida, respectively. Discovery is ongoing and a trial is expected to occur in 2020.2021.
Duke Energy Florida
Fluor Contract LitigationPower Purchase Dispute Arbitration
Duke Energy Florida, on behalf of its customers, entered into a power purchase contract for the purchase of firm capacity and energy from a qualified facility. Duke Energy Florida determined the qualified facility did not perform in accordance with the power purchase contract, and Duke Energy Florida terminated the power purchase contract. The qualified facility counterparty filed a confidential American Arbitration Association (AAA) arbitration demand, challenging the termination of the power purchase contract and seeking damages. Duke Energy Florida denies liability and is vigorously defending the arbitration claim. The final arbitration hearing is scheduled for December 2020. Duke Energy Florida cannot predict the outcome of this matter.
Duke Energy Indiana
Coal Ash Basin Closure Plan Appeal
On January 29, 2019, Fluor27, 2020, Hoosier Environmental Council filed a breachPetition for Administrative Review with the Indiana Office of contract lawsuit inEnvironmental Adjudication (the court) challenging the U.S. District Court for the Middle DistrictIndiana Department of Florida againstEnvironmental Management’s December 10, 2019, partial approval of Duke Energy Florida related to an EPC agreement for the combined-cycle natural gas plant in Citrus County, Florida. Fluor filed an amended complaint on February 13, 2019. Fluor’s multicount complaint sought civil, statutory and contractual remedies related toIndiana’s ash pond closure plan. On March 11, 2020, Duke Energy Florida’s $67 million drawIndiana filed a Motion to Dismiss. On May 5, 2020, the court entered an order denying that motion. The parties are engaged in early 2019, on Fluor’s letter of creditdiscovery and offset of invoiced amounts.a hearing is scheduled for February 22, 2021. Duke Energy Florida moved to dismiss all countsIndiana cannot predict the outcome of Fluor's amended complaint, and on April 16, 2019, the court dismissed Fluor's complaint without prejudice. On April 26, 2019, Fluor filed a second amended complaint.this matter.
On August 1, 2019, Duke Energy Florida and Fluor reached a settlement to resolve the pending litigation and other outstanding issues related to completing the Citrus County CC. Pursuant to the terms of the settlement, Fluor filed a notice of voluntary dismissal, and on August 27, 2019, the court dismissed the case with prejudice. As a result of the settlement with Fluor, Duke Energy Florida recorded a $25 million reduction to a prior-year impairment within Impairment charges on Duke Energy's Condensed Consolidated Statements of Operations in the third quarter of 2019.
Other Litigation and Legal Proceedings
The Duke Energy Registrants are involved in other legal, tax and regulatory proceedings arising in the ordinary course of business, some of which involve significant amounts. The Duke Energy Registrants believe the final disposition of these proceedings will not have a material effect on their results of operations, cash flows or financial position.
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| |
FINANCIAL STATEMENTS | COMMITMENTS AND CONTINGENCIES |
The table below presents recorded reserves based on management’s best estimate of probable loss for legal matters, excluding asbestos-related reserves discussed above. Reserves are classified on the Condensed Consolidated Balance Sheets in Other within Other Noncurrent Liabilities and Other within Current Liabilities. The reasonably possible range of loss in excess of recorded reserves is not material, other than as described above. | | (in millions) | September 30, 2019 |
| | December 31, 2018 |
| June 30, 2020 |
| | December 31, 2019 |
|
Reserves for Legal Matters | | | | | | |
Duke Energy | $ | 62 |
| | $ | 65 |
| $ | 60 |
| | $ | 62 |
|
Duke Energy Carolinas | 8 |
| | 9 |
| 3 |
| | 2 |
|
Progress Energy | 52 |
| | 54 |
| 52 |
| | 55 |
|
Duke Energy Progress | 13 |
| | 12 |
| 9 |
| | 12 |
|
Duke Energy Florida | 22 |
| | 24 |
| 23 |
| | 22 |
|
Piedmont | 1 |
| | 1 |
| 1 |
| | 1 |
|
OTHER COMMITMENTS AND CONTINGENCIES
General
As part of their normal business, the Duke Energy Registrants are party to various financial guarantees, performance guarantees and other contractual commitments to extend guarantees of credit and other assistance to various subsidiaries, investees and other third parties. These guarantees involve elements of performance and credit risk, which are not fully recognized on the Condensed Consolidated Balance Sheets and have unlimiteduncapped maximum potential payments. However, the Duke Energy Registrants do not believe these guarantees will have a material effect on their results of operations, cash flows or financial position.
In addition, the Duke Energy Registrants enter into various fixed-price, noncancelable commitments to purchase or sell power or natural gas, take-or-pay arrangements, transportation, or throughput agreements and other contracts that may or may not be recognized on their respective Condensed Consolidated Balance Sheets. Some of these arrangements may be recognized at fair value on their respective Condensed Consolidated Balance Sheets if such contracts meet the definition of a derivative and the 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.
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FINANCIAL STATEMENTS | COMMITMENTS AND CONTINGENCIES |
As described in Note 1, Duke Energy adopted the
revised accountingnew guidance for
Leasescredit losses effective January 1, 2019,2020, using the modified retrospective method of adoption, which does not require restatement of prior year reported results. AdoptionThe reserve for credit losses for insurance receivables based on 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,is $15 million for 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, whichas of June 30, 2020. Insurance receivables are classified as finance and operating leases.
Duke Energy has certain lease agreements, which include variable lease payments that areevaluated based on the usagerisk of an asset. These variable lease payments are not includeddefault and the historical losses, current conditions and expected conditions around collectability. Management evaluates the risk of default annually based on payment history, credit rating and changes in the measurementrisk of default from credit agencies.
As of June 30, 2020, Duke Energy recognized $860 million related to the ROU assets or operating leaseguarantees of ACP's outstanding debt of which $95 million was previously recognized due the adoption of new guidance for credit losses effective January 1, 2020. This reserve is included within Other current liabilities on the Condensed Consolidated Financial Statements.
Certain Duke Energy lease agreements include optionsBalance Sheets. See Notes 1, 3 and 11 for renewal and early termination.more information. The intent to renew a lease varies dependingremaining reserve for credit losses for financial guarantees of $4 million as of June 30, 2020, is included within Other noncurrent liabilities on the lease typeDuke Energy's Condensed Consolidated Balance Sheets. Management considers financial guarantees for evaluation under this standard based on the anticipated amount outstanding at the time of default. The reserve for credit losses is based on the evaluation of the contingent components of financial guarantees. Management evaluates the risk of default, exposure and asset. Renewal options that are reasonably certain to be exercised are includedlength of time remaining 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 accountedperiod 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 $69 million and $205 million for the three and nine months ended September 30, 2019, respectively. As of September 30, 2019, renewable energy projects owned by Duke Energy and accounted for as operating leases had a cost basis of $3,347 million and accumulated depreciation of $692 million. These assets are principally classified as nonregulated electric generation and transmission assets.each contract.
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| |
FINANCIAL STATEMENTS | LEASES |
The following tables present the components of lease expense. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 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) | $ | 75 |
| | $ | 13 |
| | $ | 39 |
| | $ | 16 |
| | $ | 23 |
| | $ | 3 |
| | $ | 5 |
| | $ | 1 |
|
Short-term lease expense(a) | 2 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 1 |
| | — |
|
Variable lease expense(a) | 27 |
| | 6 |
| | 22 |
| | 21 |
| | 1 |
| | — |
| | — |
| | — |
|
Finance lease expense | | | | | | | | | | | | | | | |
Amortization of leased assets(b) | 28 |
| | 2 |
| | 9 |
| | 1 |
| | 8 |
| | — |
| | — |
| | — |
|
Interest on lease liabilities(c) | 7 |
| | 3 |
| | 12 |
| | 10 |
| | 2 |
| | — |
| | — |
| | — |
|
Total finance lease expense | 35 |
| | 5 |
| | 21 |
| | 11 |
| | 10 |
| | — |
| | — |
| | — |
|
Total lease expense | $ | 139 |
| | $ | 24 |
| | $ | 82 |
| | $ | 48 |
| | $ | 34 |
| | $ | 3 |
| | $ | 6 |
| | $ | 1 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 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) | $ | 220 |
| | $ | 36 |
| | $ | 121 |
| | $ | 52 |
| | $ | 69 |
| | $ | 9 |
| | $ | 15 |
| | $ | 4 |
|
Short-term lease expense(a) | 15 |
| | 4 |
| | 7 |
| | 3 |
| | 4 |
| | 1 |
| | 2 |
| | — |
|
Variable lease expense(a) | 48 |
| | 18 |
| | 29 |
| | 24 |
| | 5 |
| | — |
| | — |
| | — |
|
Finance lease expense | | | | | | | | | | | | | | | |
Amortization of leased assets(b) | 84 |
| | 4 |
| | 17 |
| | 3 |
| | 14 |
| | 1 |
| | — |
| | — |
|
Interest on lease liabilities(c) | 44 |
| | 10 |
| | 31 |
| | 24 |
| | 7 |
| | — |
| | 1 |
| | — |
|
Total finance lease expense | 128 |
| | 14 |
| | 48 |
| | 27 |
| | 21 |
| | 1 |
| | 1 |
| | — |
|
Total lease expense | $ | 411 |
| | $ | 72 |
| | $ | 205 |
| | $ | 106 |
| | $ | 99 |
| | $ | 11 |
| | $ | 18 |
| | $ | 4 |
|
| |
(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 September 30, |
| | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
(in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
2020 | $ | 278 |
| | $ | 32 |
| | $ | 129 |
| | $ | 51 |
| | $ | 78 |
| | $ | 2 |
| | $ | 6 |
| | $ | 5 |
|
2021 | 220 |
| | 20 |
| | 100 |
| | 45 |
| | 55 |
| | 2 |
| | 4 |
| | 5 |
|
2022 | 201 |
| | 19 |
| | 95 |
| | 40 |
| | 55 |
| | 2 |
| | 4 |
| | 5 |
|
2023 | 192 |
| | 18 |
| | 95 |
| | 41 |
| | 54 |
| | 2 |
| | 4 |
| | 5 |
|
2024 | 179 |
| | 14 |
| | 95 |
| | 41 |
| | 54 |
| | 2 |
| | 4 |
| | 5 |
|
Thereafter | 1,008 |
| | 60 |
| | 480 |
| | 291 |
| | 189 |
| | 22 |
| | 63 |
| | 6 |
|
Total operating lease payments | 2,078 |
| | 163 |
| | 994 |
| | 509 |
| | 485 |
| | 32 |
| | 85 |
| | 31 |
|
Less: present value discount | (410 | ) | | (28 | ) | | (185 | ) | | (113 | ) | | (72 | ) | | (10 | ) | | (27 | ) | | (3 | ) |
Total operating lease liabilities(a) | $ | 1,668 |
| | $ | 135 |
| | $ | 809 |
| | $ | 396 |
| | $ | 413 |
| | $ | 22 |
| | $ | 58 |
| | $ | 28 |
|
| |
(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 noncancelable 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 September 30, |
| | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
|
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
|
(in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Indiana |
|
2020 | $ | 179 |
| | $ | 19 |
| | $ | 69 |
| | $ | 44 |
| | $ | 25 |
| | $ | 1 |
|
2021 | 184 |
| | 16 |
| | 69 |
| | 44 |
| | 25 |
| | 1 |
|
2022 | 177 |
| | 14 |
| | 69 |
| | 44 |
| | 25 |
| | 1 |
|
2023 | 173 |
| | 14 |
| | 69 |
| | 44 |
| | 25 |
| | 1 |
|
2024 | 149 |
| | 14 |
| | 57 |
| | 44 |
| | 13 |
| | 1 |
|
Thereafter | 827 |
| | 189 |
| | 552 |
| | 539 |
| | 13 |
| | 27 |
|
Total finance lease payments | 1,689 |
| | 266 |
| | 885 |
| | 759 |
| | 126 |
| | 32 |
|
Less: amounts representing interest | (699 | ) | | (160 | ) | | (477 | ) | | (451 | ) | | (26 | ) | | (22 | ) |
Total finance lease liabilities | $ | 990 |
| | $ | 106 |
| | $ | 408 |
| | $ | 308 |
| | $ | 100 |
| | $ | 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. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 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 | $ | 1,703 |
| | $ | 135 |
| | $ | 814 |
| | $ | 397 |
| | $ | 417 |
| | $ | 22 |
| | $ | 58 |
| | $ | 25 |
|
Finance | Net property, plant and equipment | 952 |
| | 125 |
| | 448 |
| | 309 |
| | 139 |
| | — |
| | 10 |
| | — |
|
Total lease assets | | $ | 2,655 |
| | $ | 260 |
| | $ | 1,262 |
| | $ | 706 |
| | $ | 556 |
| | $ | 22 |
| | $ | 68 |
| | $ | 25 |
|
Liabilities | | | | | | | | | | | | | | | | |
Current | | | | | | | | | | | | | | | | |
Operating | Other current liabilities | $ | 212 |
| | $ | 27 |
| | $ | 99 |
| | $ | 36 |
| | $ | 63 |
| | $ | 1 |
| | $ | 3 |
| | $ | 4 |
|
Finance | Current maturities of long-term debt | 117 |
| | 6 |
| | 23 |
| | 6 |
| | 17 |
| | — |
| | — |
| | — |
|
Noncurrent | | | | | | | | | | | | | | | | |
Operating | Operating lease liabilities | 1,456 |
| | 108 |
| | 710 |
| | 360 |
| | 350 |
| | 21 |
| | 55 |
| | 24 |
|
Finance | Long-Term Debt | 873 |
| | 100 |
| | 385 |
| | 302 |
| | 83 |
| | — |
| | 10 |
| | — |
|
Total lease liabilities | | $ | 2,658 |
| | $ | 241 |
| | $ | 1,217 |
| | $ | 704 |
| | $ | 513 |
| | $ | 22 |
| | $ | 68 |
| | $ | 28 |
|
|
| |
FINANCIAL STATEMENTS | LEASES |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 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 | $ | 221 |
| | $ | 26 |
| | $ | 104 |
| | $ | 43 |
| | $ | 61 |
| | $ | 1 |
| | $ | 5 |
| | $ | 6 |
|
Operating cash flows from finance leases | 44 |
| | 10 |
| | 31 |
| | 24 |
| | 7 |
| | — |
| | 1 |
| | — |
|
Financing cash flows from finance leases | 84 |
| | 4 |
| | 17 |
| | 3 |
| | 14 |
| | 1 |
| | — |
| | — |
|
| | | | | | | | | | | | | | | |
Lease assets obtained in exchange for new lease liabilities (non-cash) | | | | | | | | | | | | | | | |
Operating(b) | $ | 147 |
| | $ | 44 |
| | $ | 30 |
| | $ | 30 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 1 |
|
Finance | 175 |
| | — |
| | 175 |
| | 175 |
| | — |
| | — |
| | — |
| | — |
|
| |
(a) | No amounts were classified as investing cash flows from operating leases for the nine months ended September 30, 2019. |
| |
(b) | Does not include ROU assets recorded as a result of the adoption of the new lease standard. |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| September 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 |
| | 8 |
| | 18 |
| | 18 |
| | 6 |
|
Finance leases | 13 |
| | 18 |
| | 16 |
| | 18 |
| | 11 |
| | — |
| | 27 |
| | — |
|
Weighted-average discount rate(a) | | | | | | | | | | | | | | | |
Operating leases | 3.9 | % | | 3.5 | % | | 3.8 | % | | 3.9 | % | | 3.8 | % | | 4.3 | % | | 4.1 | % | | 3.6 | % |
Finance leases | 8.0 | % | | 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 |
6.5. DEBT AND CREDIT FACILITIES
SUMMARY OF SIGNIFICANT DEBT ISSUANCES
The following table summarizes significant debt issuances (in millions). |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Six Months Ended June 30, 2020 |
| | | | | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| Maturity | | Interest |
| | Duke |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
Issuance Date | Date | | Rate |
| | Energy |
| | (Parent) |
| | Carolinas |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Unsecured Debt | | | | | | | | | | | | | | | | | |
May 2020(a) | Jun 2030 | | 2.450 | % | | $ | 500 |
| | $ | 500 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
May 2020(b) | Jun 2050 | | 3.350 | % | | 400 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 400 |
|
First Mortgage Bonds | | | | | | | | | | | | | | | | |
January 2020(c) | Feb 2030 | | 2.450 | % | | 500 |
| | — |
| | 500 |
| | — |
| | — |
| | — |
| | — |
|
January 2020(c) | Aug 2049 | | 3.200 | % | | 400 |
| | — |
| | 400 |
| | — |
| | — |
| | — |
| | — |
|
March 2020(d) | Apr 2050 | | 2.750 | % | | 550 |
| | — |
| | — |
| | — |
| | — |
| | 550 |
| | — |
|
May 2020(b) | Jun 2030 | | 2.125 | % | | 400 |
| | — |
| | — |
| | — |
| | 400 |
| | — |
| | — |
|
June 2020(b) | Jun 2030 | | 1.750 | % | | 500 |
| | — |
| | — |
| | 500 |
| | — |
| | — |
| | — |
|
Total issuances | | | | | $ | 3,250 |
| | $ | 500 |
|
| $ | 900 |
|
| $ | 500 |
|
| $ | 400 |
|
| $ | 550 |
| | $ | 400 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Nine Months Ended September 30, 2019 |
| | | | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| Maturity | Interest |
| | Duke |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
Issuance Date | Date | Rate |
| | Energy |
| | (Parent) |
| | Carolinas |
| | Progress |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Unsecured Debt | | | | | | | | | | | | | | | | |
March 2019(a) | March 2022 | 2.788 | % | (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 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
July 2019(g) | July 2049 | 4.320 | % | | 40 |
| | — |
| | — |
| | — |
| | 40 |
| | — |
| | — |
|
September 2019(g) | October 2025 | 3.230 | % | | 95 |
| | — |
| | — |
| | — |
| | 95 |
| | — |
| | — |
|
September 2019(g) | October 2029 | 3.560 | % | | 75 |
| | — |
| | — |
| | — |
| | 75 |
| | — |
| | — |
|
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 |
| | — |
| | — |
| | — |
|
August 2019(a) | August 2029 | 2.450 | % | | 450 |
| | — |
| | 450 |
| | — |
| | — |
| | — |
| | — |
|
August 2019(a) | August 2049 | 3.200 | % | | 350 |
| | — |
| | 350 |
| | — |
| | — |
| | — |
| | — |
|
September 2019(f) | October 2049 | 3.250 | % | | 500 |
| | — |
| | — |
| | — |
| | — |
| | 500 |
| | — |
|
Total issuances | | | | $ | 5,310 |
| | $ | 1,800 |
|
| $ | 800 |
|
| $ | 600 |
| | $ | 1,010 |
|
| $ | 500 |
| | $ | 600 |
|
| |
(a) | Debt issued to pay down short-term debtrepay $500 million borrowing made under Duke Energy (Parent) revolving credit facility in March 2020, and for general corporate purposes. |
| |
(b) | Debt issuance has a floating interest rate.issued to repay short-term debt and for general corporate purposes. |
| |
(c) | Debt issued to repay at maturity $450 million first mortgage bonds due April 2019, pay down short-term debtJune 2020 and for general corporate purposes. |
| |
(d) | Debt issued to fund eligible green energy projects in the Carolinas. |
| |
(e) | Debt issuedrepay at maturity $500 million first mortgage bonds due July 2020 and to repay in full the outstanding $350 million Piedmont unsecured term loan due September 2019, pay down short-term debt and for general corporate purposes. debt. |
| |
(f) | Debt issued to retire $150 million of pollution control bonds, pay down short-term debt and for general corporate purposes. |
| |
(g) | Debt issued to repay at maturity $100 million debentures due October 2019, pay down short-term debt and for general corporate purposes. |
|
| |
FINANCIAL STATEMENTS | DEBT AND CREDIT FACILITIES |
CURRENT MATURITIES OF LONG-TERM DEBT
The following table shows the significant components of Current Maturities of Long-Term Debt on the Condensed Consolidated Balance Sheets. The Duke Energy Registrants currently anticipate satisfying these obligations with cash on hand and proceeds from additional borrowings. | | (in millions) | Maturity Date | | Interest Rate |
| | September 30, 2019 |
| Maturity Date | | Interest Rate |
| | June 30, 2020 |
|
Unsecured Debt | | | | | | | | |
Duke Energy Kentucky | October 2019 | | 4.650 | % | | $ | 100 |
| |
Progress Energy | December 2019 | | 4.875 | % | | 350 |
| |
Duke Energy Progress | | December 2020 | | 0.986 | % | (a) | $ | 700 |
|
Progress Energy, Inc | | January 2021 | | 4.400 | % | | 500 |
|
Duke Energy (Parent) | June 2020 | | 2.100 | % | | 330 |
| May 2021 | | 0.924 | % | (a) | 500 |
|
Piedmont | | June 2021 | | 4.240 | % | | 160 |
|
Secured Debt | | | | | |
Duke Energy Florida | | April 2021 | | 1.384 | % | (a) | 250 |
|
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 |
| |
Duke Energy Indiana | July 2020 | | 3.750 | % | | 500 |
| July 2020 | | 3.750 | % | | 500 |
|
Duke Energy Progress | September 2020 | | 2.282 | % | (a) | 300 |
| September 2020 | | 0.498 | % | (a) | 300 |
|
Duke Energy Carolinas | | June 2021 | | 3.900 | % | | 500 |
|
Other(b) | | | | 566 |
| | | | 346 |
|
Current maturities of long-term debt | | | | $ | 3,096 |
| | | | $ | 3,756 |
|
(a) Debt issuance has a floating interest rate.
(b) Includes finance lease obligations, amortizing debt and small bullet maturities.
AVAILABLE CREDIT FACILITIES
Master Credit Facility
In March 2019,2020, Duke Energy amended its existing $8 billion Master Credit Facility to extend the termination date to March 2024.2025. 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.these credit facilities. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2019 |
|
|
| | Duke |
| | Duke |
| | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| Duke |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
(in millions) | Energy |
| | (Parent) |
| | Carolinas |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Facility size(a) | $ | 8,000 |
| | $ | 2,650 |
| | $ | 1,750 |
| | $ | 1,250 |
| | $ | 800 |
| | $ | 450 |
| | $ | 600 |
| | $ | 500 |
|
Reduction to backstop issuances | | | | | | | | | | | | | | | |
Commercial paper(b) | (1,971 | ) | | (627 | ) | | (338 | ) | | (211 | ) | | (277 | ) | | (164 | ) | | (150 | ) | | (204 | ) |
Outstanding letters of credit | (51 | ) | | (43 | ) | | (4 | ) | | (2 | ) | | — |
| | — |
| | — |
| | (2 | ) |
Tax-exempt bonds | (81 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (81 | ) | | — |
|
Coal ash set-aside | (500 | ) | | — |
| | (250 | ) | | (250 | ) | | — |
| | — |
| | — |
| | — |
|
Available capacity under the Master Credit Facility | $ | 5,397 |
|
| $ | 1,980 |
|
| $ | 1,158 |
|
| $ | 787 |
|
| $ | 523 |
|
| $ | 286 |
|
| $ | 369 |
| | $ | 294 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2020 |
|
|
| | Duke |
| | Duke |
| | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| Duke |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
(in millions) | Energy |
| | (Parent) |
| | Carolinas |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Facility size(a) | $ | 8,000 |
| | $ | 2,650 |
| | $ | 1,500 |
| | $ | 1,250 |
| | $ | 800 |
| | $ | 600 |
| | $ | 600 |
| | $ | 600 |
|
Reduction to backstop issuances | | | | | | | | | | | | | | | |
Commercial paper(b) | (2,480 | ) | | (1,248 | ) | | (389 | ) | | (323 | ) | | (156 | ) | | (79 | ) | | (150 | ) | | (135 | ) |
Outstanding letters of credit | (47 | ) | | (40 | ) | | (3 | ) | | (2 | ) | | — |
| | — |
| | — |
| | (2 | ) |
Tax-exempt bonds | (81 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (81 | ) | | — |
|
Available capacity under the Master Credit Facility | $ | 5,392 |
|
| $ | 1,362 |
|
| $ | 1,108 |
|
| $ | 925 |
|
| $ | 644 |
|
| $ | 521 |
|
| $ | 369 |
| | $ | 463 |
|
| |
(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. |
Term Loan Facility
In response to market volatility and ongoing liquidity impacts from COVID-19, in March 2020, Duke Energy (Parent) entered into a $1.5 billion, 364-day Term Loan Credit Agreement, borrowing the full $1.5 billion available on March 19, 2020. The term loan contains a provision for increasing the amount available for borrowing by up to $500 million. Duke Energy (Parent) exercised this provision on March 27, 2020, borrowing an additional $188 million. Proceeds were used to reduce outstanding commercial paper and for general corporate purposes. Refer to Note 1 for additional information on the COVID-19 pandemic.
|
| |
FINANCIAL STATEMENTS | DEBT AND CREDIT FACILITIES |
| | | September 30, 2019 | June 30, 2020 |
(in millions) | Facility size |
| | Amount drawn |
| Facility size |
| | Amount drawn |
|
Duke Energy (Parent) Three-Year Revolving Credit Facility(a) | $ | 1,000 |
| | $ | 500 |
| $ | 1,000 |
| | $ | 500 |
|
Duke Energy Progress Term Loan Facility | 700 |
| | 700 |
| 700 |
| | 700 |
|
| |
(a) | In May 2019,March 2020, Duke Energy (Parent) extendeddrew down the termination date toremaining $500 million. In May 2022.2020, Duke Energy (Parent) repaid $500 million with proceeds of May 2020 unsecured debt issuance. |
In May 2019, the $350 million Piedmont term loan was paid off in full with proceeds from the $600 million Piedmont debt offering.
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. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2019 |
| | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
(in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Decommissioning of nuclear power facilities(a) | $ | 5,789 |
| | $ | 2,435 |
| | $ | 3,295 |
| | $ | 2,769 |
| | $ | 526 |
| | $ | — |
| | $ | — |
| | $ | — |
|
Closure of ash impoundments | 6,486 |
| | 2,917 |
| | 2,722 |
| | 2,707 |
| | 15 |
| | 43 |
| | 804 |
| | — |
|
Other | 326 |
| | 46 |
| | 71 |
| | 38 |
| | 33 |
| | 42 |
| | 20 |
| | 20 |
|
Total ARO | $ | 12,601 |
| | $ | 5,398 |
| | $ | 6,088 |
| | $ | 5,514 |
| | $ | 574 |
| | $ | 85 |
| | $ | 824 |
| | $ | 20 |
|
Less: current portion | 861 |
| | 214 |
| | 478 |
| | 476 |
| | 2 |
| | 3 |
| | 165 |
| | — |
|
Total noncurrent ARO | $ | 11,740 |
|
| $ | 5,184 |
|
| $ | 5,610 |
|
| $ | 5,038 |
|
| $ | 572 |
|
| $ | 82 |
|
| $ | 659 |
| | $ | 20 |
|
(a) Duke Energy amount includes purchase accounting adjustments related to the merger with Progress Energy.
ARO Liability Rollforward
The following table presents the change in liability associated with AROs for the Duke Energy Registrants. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
(in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Balance at December 31, 2018(a) | $ | 10,467 |
| | $ | 3,949 |
| | $ | 5,411 |
| | $ | 4,820 |
| | $ | 591 |
| | $ | 93 |
| | $ | 722 |
| | $ | 19 |
|
Accretion expense(b) | 377 |
| | 173 |
| | 190 |
| | 171 |
| | 19 |
| | 3 |
| | 21 |
| | 1 |
|
Liabilities settled(c) | (691 | ) | | (276 | ) | | (375 | ) | | (341 | ) | | (34 | ) | | (9 | ) | | (32 | ) | | — |
|
Revisions in estimates of cash flows(d) | 2,448 |
| | 1,552 |
| | 862 |
| | 864 |
| | (2 | ) | | (2 | ) | | 113 |
| | — |
|
Balance at September 30, 2019 | $ | 12,601 |
| | $ | 5,398 |
| | $ | 6,088 |
| | $ | 5,514 |
| | $ | 574 |
| | $ | 85 |
| | $ | 824 |
| | $ | 20 |
|
| |
(a) | Primarily relates to decommissioning nuclear power facilities, closure of ash impoundments, asbestos removal, closure of landfills at fossil generation facilities, retirement of natural gas mains and removal of renewable energy generation assets. |
| |
(b) | For the nine months ended September 30, 2019, substantially all accretion expense relates to Duke Energy's regulated operations and has been deferred in accordance with regulatory accounting treatment. |
| |
(c) | Primarily relates to ash impoundment closures. |
| |
(d) | Primarily relates to increases in closure estimates for certain ash impoundments as a result of the NCDEQ's April 1 Order. See Note 4 for 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.
|
| |
FINANCIAL STATEMENTS | ASSET RETIREMENT OBLIGATIONS |
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) | September 30, 2019 | | December 31, 2018 |
Duke Energy | $ | 6,403 |
| | $ | 5,579 |
|
Duke Energy Carolinas | 3,614 |
| | 3,133 |
|
Duke Energy Progress | 2,789 |
| | 2,446 |
|
8.6. GOODWILL
Duke Energy
The following table presents the goodwill by reportable segment included on Duke Energy's Condensed Consolidated Balance Sheets at SeptemberJune 30, 2019,2020, and December 31, 2018.2019. |
| | | | | | | | | | | | | | | |
| 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 |
|
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 SeptemberJune 30, 2019,2020, and December 31, 2018.2019.
Progress Energy
Progress Energy's Goodwill is included in the Electric Utilities and Infrastructure segment and there are 0 accumulated impairment charges.
Piedmont
Piedmont's Goodwill is included in the Gas Utilities and Infrastructure segment and there are 0 accumulated impairment charges.
Impairment Testing
Duke Energy, Progress Energy, Duke Energy Ohio and Piedmont are required to perform an annual goodwill impairment test as of the same date each year and, accordingly, perform their annual impairment testing of goodwill as of August 31. Duke Energy, Progress Energy, Duke Energy Ohio and Piedmont update their test between annual tests if events or circumstances occur that would more likely than not reduce the fair value of a reporting unit below its carrying value. As the fair value for Duke Energy, Progress Energy, Duke Energy Ohio and Piedmont exceeded their respective carrying values at the date of the annual impairment analysis, no goodwill impairment charges were recorded in the third quarter of 2019.65
|
| |
FINANCIAL STATEMENTS | RELATED PARTY TRANSACTIONS |
9.7. RELATED PARTY TRANSACTIONS
The Subsidiary Registrants engage in related party transactions in accordance with applicable state and federal commission regulations. Refer to the Condensed Consolidated Balance Sheets of the Subsidiary Registrants for balances due to or due from related parties. Material amounts related to transactions with related parties included on the Condensed Consolidated Statements of Operations and Comprehensive Income are presented in the following table. | | | Three Months Ended September 30, | | Nine Months Ended September 30, | Three Months Ended June 30, | | Six Months Ended June 30, |
(in millions) | 2019 |
| | 2018 |
| | 2019 |
| | 2018 |
| 2020 |
| | 2019 |
| | 2020 |
| | 2019 |
|
Duke Energy Carolinas | | | | | | | | | | | | | | |
Corporate governance and shared service expenses(a) | $ | 197 |
| | $ | 214 |
| | $ | 606 |
| | $ | 647 |
| $ | 196 |
| | $ | 197 |
| | $ | 330 |
| | $ | 409 |
|
Indemnification coverages(b) | 5 |
| | 6 |
| | 15 |
| | 17 |
| 5 |
| | 5 |
| | 10 |
| | 10 |
|
JDA revenue(c) | 12 |
| | 13 |
| | 52 |
| | 66 |
| |
Joint Dispatch Agreement (JDA) revenue(c) | | 3 |
| | 17 |
| | 10 |
| | 40 |
|
JDA expense(c) | 32 |
| | 61 |
| | 145 |
| | 134 |
| 20 |
| | 20 |
| | 44 |
| | 113 |
|
Intercompany natural gas purchases(d) | — |
| | 3 |
| | 7 |
| | 11 |
| 10 |
| | 3 |
| | 16 |
| | 7 |
|
Progress Energy | | | | | | | | | | | | | | |
Corporate governance and shared service expenses(a) | $ | 194 |
| | $ | 216 |
| | $ | 553 |
| | $ | 613 |
| $ | 189 |
| | $ | 183 |
| | $ | 335 |
| | $ | 359 |
|
Indemnification coverages(b) | 8 |
| | 8 |
| | 27 |
| | 25 |
| 9 |
| | 10 |
| | 18 |
| | 19 |
|
JDA revenue(c) | 32 |
| | 61 |
| | 145 |
| | 134 |
| 20 |
| | 20 |
| | 44 |
| | 113 |
|
JDA expense(c) | 12 |
| | 13 |
| | 52 |
| | 66 |
| 3 |
| | 17 |
| | 10 |
| | 40 |
|
Intercompany natural gas purchases(d) | 19 |
| | 20 |
| | 57 |
| | 58 |
| 19 |
| | 19 |
| | 38 |
| | 38 |
|
Duke Energy Progress | | | | | | | | | | | | | | |
Corporate governance and shared service expenses(a) | $ | 114 |
| | $ | 138 |
| | $ | 328 |
| | $ | 382 |
| $ | 113 |
| | $ | 108 |
| | $ | 188 |
| | $ | 214 |
|
Indemnification coverages(b) | 3 |
| | 3 |
| | 11 |
| | 9 |
| 5 |
| | 4 |
| | 9 |
| | 8 |
|
JDA revenue(c) | 32 |
| | 61 |
| | 145 |
| | 134 |
| 20 |
| | 20 |
| | 44 |
| | 113 |
|
JDA expense(c) | 12 |
| | 13 |
| | 52 |
| | 66 |
| 3 |
| | 17 |
| | 10 |
| | 40 |
|
Intercompany natural gas purchases(d) | 19 |
| | 20 |
| | 57 |
| | 58 |
| 19 |
| | 19 |
| | 38 |
| | 38 |
|
Duke Energy Florida | | | | | | | | | | | | | | |
Corporate governance and shared service expenses(a) | $ | 80 |
| | $ | 78 |
| | $ | 225 |
| | $ | 231 |
| $ | 76 |
| | $ | 75 |
| | $ | 147 |
| | $ | 145 |
|
Indemnification coverages(b) | 5 |
| | 5 |
| | 16 |
| | 16 |
| 4 |
| | 6 |
| | 9 |
| | 11 |
|
Duke Energy Ohio | | | | | | | | | | | | | | |
Corporate governance and shared service expenses(a) | $ | 90 |
| | $ | 85 |
| | $ | 258 |
| | $ | 264 |
| $ | 77 |
| | $ | 83 |
| | $ | 161 |
| | $ | 168 |
|
Indemnification coverages(b) | 1 |
| | 1 |
| | 3 |
| | 3 |
| 1 |
| | 1 |
| | 2 |
| | 2 |
|
Duke Energy Indiana | | | | | | | | | | | | | | |
Corporate governance and shared service expenses(a) | $ | 109 |
| | $ | 105 |
| | $ | 299 |
| | $ | 302 |
| $ | 92 |
| | $ | 93 |
| | $ | 198 |
| | $ | 190 |
|
Indemnification coverages(b) | 2 |
| | 2 |
| | 5 |
| | 6 |
| 2 |
| | 1 |
| | 4 |
| | 3 |
|
Piedmont | | | | | | | | | | | | | | |
Corporate governance and shared service expenses(a) | $ | 33 |
| | $ | 39 |
| | $ | 102 |
| | $ | 115 |
| $ | 37 |
| | $ | 37 |
| | $ | 71 |
| | $ | 69 |
|
Indemnification coverages(b) | 1 |
| | 1 |
| | 2 |
| | 2 |
| — |
| | — |
| | 1 |
| | 1 |
|
Intercompany natural gas sales(d) | 19 |
| | 23 |
| | 64 |
| | 69 |
| 29 |
| | 22 |
| | 54 |
| | 45 |
|
Natural gas storage and transportation costs(e) | 6 |
| | 6 |
| | 17 |
| | 18 |
| 6 |
| | 6 |
| | 12 |
| | 11 |
|
| |
(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 JDA, which allows the collective dispatch of power plants between the service territories to reduce customer rates. Revenues from the sale of power and expenses from the purchase of power pursuant to the JDA are recorded in Operating Revenues and Fuel used in electric generation and purchased power, respectively, on the Condensed Consolidated Statements of Operations and Comprehensive Income. |
| |
(d) | Piedmont provides long-term natural gas delivery service to certain Duke Energy Carolinas and Duke Energy Progress natural gas-fired generation facilities. Piedmont records the sales in Operating revenues, and Duke Energy Carolinas and Duke Energy Progress record the related purchases as a component of Fuel used in electric generation and purchased power on their respective Condensed Consolidated Statements of Operations and Comprehensive Income. |
| |
(e) | Piedmont has related party transactions as a customer of its equity method investments in Pine Needle LNG Company, LLC, Hardy Storage Company, LLC and Cardinal Pipeline Company, LLC natural gas storage and transportation facilities. These expenses are included in Cost of natural gas on Piedmont's Condensed Consolidated Statements of Operations and Comprehensive Income. |
|
| |
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, such as pipeline lease arrangements, and their proportionate share of certain charged expenses. These transactions of the Subsidiary Registrants are incurred in the ordinary course of business and are eliminated in consolidation.
As discussed in Note 1311, certain trade receivables have been sold by Duke Energy Ohio and Duke Energy Indiana to CRC, an affiliate formed by a subsidiary of Duke Energy. The proceeds obtained from the sales of receivables are largely cash but do include a subordinated note from CRC for a portion of the purchase price.
Intercompany Income Taxes
Duke Energy and the Subsidiary Registrants file a consolidated federal income tax return and other state and jurisdictional returns. The Subsidiary Registrants have a tax sharing agreement with Duke Energy for the allocation of consolidated tax liabilities and benefits. Income taxes recorded represent amounts the Subsidiary Registrants would incur as separate C-Corporations. The following table includes the balance of intercompany income tax receivables and payables for the Subsidiary Registrants. | | | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
| | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
| |
| Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
| | Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
| |
(in millions) | Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Piedmont |
| Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Piedmont |
|
September 30, 2019 | | |
June 30, 2020 | | |
Intercompany income tax receivable | $ | — |
| $ | 178 |
| $ | 60 |
| $ | 10 |
| $ | 14 |
| $ | 3 |
| $ | 85 |
| $ | — |
| $ | 63 |
| $ | — |
| $ | — |
| $ | — |
| $ | 10 |
| $ | 23 |
|
Intercompany income tax payable | 71 |
| — |
| — |
| — |
| — |
| — |
| — |
| 19 |
| — |
| 7 |
| 51 |
| 1 |
| — |
| — |
|
| | |
December 31, 2018 | | |
December 31, 2019 | | |
Intercompany income tax receivable | $ | 52 |
| $ | 47 |
| $ | 29 |
| $ | — |
| $ | — |
| $ | 8 |
| $ | ��� |
| $ | — |
| $ | 125 |
| $ | 28 |
| $ | — |
| $ | 9 |
| $ | 28 |
| $ | 13 |
|
Intercompany income tax payable | — |
| — |
| — |
| 16 |
| 3 |
| — |
| 45 |
| 5 |
| — |
| — |
| 2 |
| — |
| — |
| — |
|
10.8. DERIVATIVES AND HEDGING
The Duke Energy Registrants use commodity and interest rate contracts to manage commodity price risk and interest rate risk. The primary use of commodity derivatives is to hedge the generation portfolio against changes in the prices of electricity and natural gas. Piedmont enters into natural gas supply contracts to provide diversification, reliability and natural gas cost benefits to its customers. Interest rate derivatives are used to manage interest rate risk associated with borrowings.
All derivative instruments not identified as NPNS are recorded at fair value as assets or liabilities on the 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.
Cash Flow Hedges
For a derivative designated as hedging the exposure to variable cash flows of a future transaction, referred to as a cash flow hedge, the effective portion of the derivative's gain or loss is initially reported as a component of other comprehensive income and subsequently reclassified into earnings once the future transaction impacts earnings. Amounts for interest rate contracts are reclassified to earnings as interest expense over the term of the related debt. Gains and losses reclassified out of AOCIaccumulated other comprehensive income (loss) for the three and ninesix months ended SeptemberJune 30, 2019,2020, and 2018,2019, were not material. Duke Energy's interest rate derivatives designated as hedges include interest rate swaps used to hedge existing debt within the Commercial Renewables 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. | | | September 30, 2019 | June 30, 2020 |
| | | 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 | $ | 1,031 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| $ | 650 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Undesignated contracts | 1,577 |
| | 450 |
| | 1,100 |
| | 250 |
| | 850 |
| | 27 |
| 1,477 |
| | 400 |
| | 1,050 |
| | 1,050 |
| | — |
| | 27 |
|
Total notional amount(a) | $ | 2,608 |
|
| $ | 450 |
|
| $ | 1,100 |
|
| $ | 250 |
|
| $ | 850 |
|
| $ | 27 |
| $ | 2,127 |
|
| $ | 400 |
|
| $ | 1,050 |
|
| $ | 1,050 |
|
| $ | — |
|
| $ | 27 |
|
| | | December 31, 2018 | December 31, 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 | $ | 923 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| $ | 993 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Undesignated contracts | 1,721 |
| | 300 |
| | 1,200 |
| | 650 |
| | 550 |
| | 27 |
| 1,277 |
| | 450 |
| | 800 |
| | 250 |
| | 550 |
| | 27 |
|
Total notional amount(a) | $ | 2,644 |
| | $ | 300 |
| | $ | 1,200 |
| | $ | 650 |
| | $ | 550 |
| | $ | 27 |
| $ | 2,270 |
| | $ | 450 |
| | $ | 800 |
| | $ | 250 |
| | $ | 550 |
| | $ | 27 |
|
| |
(a) | Duke Energy includes amounts related to consolidated VIEs of $731$650 million in cash flow hedges as of SeptemberJune 30, 2019,2020, and $422$693 million in cash flow hedges and $194 million in undesignated contracts as of December 31, 2018.2019. |
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.
Volumes
The tables below include volumes of outstanding commodity derivatives. Amounts disclosed represent the absolute value of notional volumes of commodity contracts excluding NPNS. The Duke Energy Registrants have netted contractual amounts where offsetting purchase and sale contracts exist with identical delivery locations and times of delivery. Where all commodity positions are perfectly offset, no quantities are shown. | | | September 30, 2019 | June 30, 2020 |
| | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | |
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | |
| Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
| Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Electricity (GWh) | 25,658 |
| | — |
| | — |
| | — |
| | — |
| | 2,774 |
| | 22,884 |
| | — |
| 28,179 |
| | — |
| | — |
| | — |
| | 4,405 |
| | 23,774 |
| | — |
|
Natural gas (millions of dekatherms) | 729 |
| | 130 |
| | 175 |
| | 175 |
| | — |
| | — |
| | 4 |
| | 420 |
| 707 |
| | 147 |
| | 165 |
| | 165 |
| | — |
| | 4 |
| | 391 |
|
| | | December 31, 2018 | December 31, 2019 |
| | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | |
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | |
| Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
| Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Electricity (GWh) | 15,286 |
| | — |
| | — |
| | — |
| | — |
| | 1,786 |
| | 13,500 |
| | — |
| 15,858 |
| | — |
| | — |
| | — |
| | 1,887 |
| | 13,971 |
| | — |
|
Natural gas (millions of dekatherms) | 739 |
| | 121 |
| | 169 |
| | 166 |
| | 3 |
| | — |
| | 1 |
| | 448 |
| 704 |
| | 130 |
| | 160 |
| | 160 |
| | — |
| | 3 |
| | 411 |
|
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. See Note 3 for additional information on the accelerated decommissioning. 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 September 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 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 onliquidated the options are deferred as regulatory liabilities or regulatory assets, respectively.in April 2020, and received proceeds of approximately $7 million.
|
| |
FINANCIAL STATEMENTS | DERIVATIVES AND HEDGING |
LOCATION AND FAIR VALUE OF DERIVATIVE ASSETS AND LIABILITIES RECOGNIZED ON THE CONDENSED CONSOLIDATED BALANCE SHEETS
The following tables show the fair value and balance sheet location of derivative instruments. Although derivatives subject to master netting arrangements are netted on the Condensed Consolidated Balance Sheets, the fair values presented below are shown gross and cash collateral on the derivatives has not been netted against the fair values shown. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Derivative Assets | | September 30, 2019 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
(in millions) | | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Commodity Contracts | | | | | | | | | | | | | | | | |
Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
Current | | $ | 23 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 5 |
| | $ | 16 |
| | $ | 2 |
|
Total Derivative Assets – Commodity Contracts | | $ | 23 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 5 |
| | $ | 16 |
| | $ | 2 |
|
Interest Rate Contracts | | | | | | | | | | | | | | | | |
Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
Current | | $ | 3 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Total Derivative Assets – Interest Rate Contracts | | $ | 3 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Equity Securities Contracts | | | | | | | | | | | | | | | | |
Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
Current | | 5 |
| | — |
| | 5 |
| | — |
| | 5 |
| | — |
| | — |
| | — |
|
Total Derivative Assets – Equity Securities Contracts | | $ | 5 |
| | $ | — |
| | $ | 5 |
| | $ | — |
| | $ | 5 |
| | $ | — |
| | $ | — |
| | $ | — |
|
Total Derivative Assets | | $ | 31 |
|
| $ | — |
|
| $ | 5 |
|
| $ | — |
|
| $ | 5 |
|
| $ | 5 |
|
| $ | 16 |
| | $ | 2 |
|
| | Derivative Liabilities | | September 30, 2019 | |
Derivative Assets | | | June 30, 2020 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | | | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | | | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
(in millions) | | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
| | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Commodity Contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Current | | $ | 66 |
| | $ | 33 |
| | $ | 24 |
| | $ | 24 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 9 |
| | $ | 20 |
| | $ | 2 |
| | $ | 1 |
| | $ | 1 |
| | $ | — |
| | $ | 3 |
| | $ | 10 |
| | $ | 4 |
|
Noncurrent | | 147 |
| | 12 |
| | 34 |
| | 18 |
| | — |
| | — |
| | — |
| | 102 |
| | 7 |
| | 5 |
| | 2 |
| | 2 |
| | — |
| | — |
| | — |
| | — |
|
Total Derivative Liabilities – Commodity Contracts | | $ | 213 |
| | $ | 45 |
| | $ | 58 |
| | $ | 42 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 111 |
| |
Total Derivative Assets – Commodity Contracts | | | $ | 27 |
| | $ | 7 |
| | $ | 3 |
| | $ | 3 |
| | $ | — |
| | $ | 3 |
| | $ | 10 |
| | $ | 4 |
|
Interest Rate Contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Designated as Hedging Instruments | | | | | | | | | | | | | | | | | |
Current | | $ | 2 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| |
Noncurrent | | 56 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| |
Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Current | | 64 |
| | 22 |
| | 42 |
| | 1 |
| | 41 |
| | 1 |
| | — |
| | — |
| | $ | 3 |
| | $ | — |
| | $ | 3 |
| | $ | 3 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Noncurrent | | 8 |
| | — |
| | 3 |
| | — |
| | 3 |
| | 5 |
| | — |
| | — |
| | 2 |
| | — |
| | 2 |
| | 2 |
| | — |
| | — |
| | — |
| | — |
|
Total Derivative Liabilities – Interest Rate Contracts | | $ | 130 |
| | $ | 22 |
| | $ | 45 |
| | $ | 1 |
| | $ | 44 |
| | $ | 6 |
| | $ | — |
| | $ | — |
| |
Equity Securities Contracts | | | | | | | | | | | | | | | | | |
Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | | |
Current | | 10 |
| | — |
| | 10 |
| | — |
| | 10 |
| | — |
| | — |
| | — |
| |
Total Derivative Liabilities – Equity Securities Contracts | | $ | 10 |
| | $ | — |
| | $ | 10 |
| | $ | — |
| | $ | 10 |
| | $ | — |
| | $ | — |
| | $ | — |
| |
Total Derivative Liabilities | | $ | 353 |
|
| $ | 67 |
|
| $ | 113 |
|
| $ | 43 |
|
| $ | 54 |
|
| $ | 6 |
|
| $ | — |
| | $ | 111 |
| |
Total Derivative Assets – Interest Rate Contracts | | | $ | 5 |
| | $ | — |
| | $ | 5 |
| | $ | 5 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Total Derivative Assets | | | $ | 32 |
|
| $ | 7 |
|
| $ | 8 |
|
| $ | 8 |
|
| $ | — |
|
| $ | 3 |
|
| $ | 10 |
| | $ | 4 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Derivative Liabilities | | June 30, 2020 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
(in millions) | | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Commodity Contracts | | | | | | | | | | | | | | | | |
Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
Current | | $ | 55 |
| | $ | 29 |
| | $ | 17 |
| | $ | 17 |
| | $ | — |
| | $ | — |
| | $ | 1 |
| | $ | 7 |
|
Noncurrent | | 138 |
| | 8 |
| | 32 |
| | 16 |
| | — |
| | — |
| | — |
| | 98 |
|
Total Derivative Liabilities – Commodity Contracts | | $ | 193 |
| | $ | 37 |
| | $ | 49 |
| | $ | 33 |
| | $ | — |
| | $ | — |
| | $ | 1 |
| | $ | 105 |
|
Interest Rate Contracts | | | | | | | | | | | | | | | | |
Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
Current | | $ | 14 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Noncurrent | | 56 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
Current | | 68 |
| | 20 |
| | 48 |
| | 48 |
| | — |
| | 1 |
| | — |
| | — |
|
Noncurrent | | 30 |
| | — |
| | 24 |
| | 24 |
| | — |
| | 6 |
| | — |
| | — |
|
Total Derivative Liabilities – Interest Rate Contracts | | $ | 168 |
| | $ | 20 |
| | $ | 72 |
| | $ | 72 |
| | $ | — |
| | $ | 7 |
| | $ | — |
| | $ | — |
|
Total Derivative Liabilities | | $ | 361 |
|
| $ | 57 |
|
| $ | 121 |
|
| $ | 105 |
|
| $ | — |
|
| $ | 7 |
|
| $ | 1 |
| | $ | 105 |
|
|
| |
FINANCIAL STATEMENTS | DERIVATIVES AND HEDGING |
| | Derivative Assets | | December 31, 2018 | | December 31, 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 | | $ | 35 |
| | $ | 2 |
| | $ | 2 |
| | $ | 2 |
| | $ | — |
| | $ | 6 |
| | $ | 23 |
| | $ | 3 |
| | $ | 17 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 3 |
| | $ | 13 |
| | $ | 1 |
|
Noncurrent | | 4 |
| | 1 |
| | 2 |
| | 2 |
| | — |
| | — |
| | — |
| | — |
| | 1 |
| | — |
| | — |
| | — |
| | — |
| | 1 |
| | — |
| | — |
|
Total Derivative Assets – Commodity Contracts | | $ | 39 |
| | $ | 3 |
| | $ | 4 |
| | $ | 4 |
| | $ | — |
| | $ | 6 |
| | $ | 23 |
| | $ | 3 |
| | $ | 18 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 4 |
| | $ | 13 |
| | $ | 1 |
|
Interest Rate Contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Designated as Hedging Instruments | | | | | | | | | | | | | | | | | |
Current | | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| |
Noncurrent | | 3 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| |
Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Current | | 2 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 6 |
| | — |
| | 6 |
| | — |
| | 6 |
| | — |
| | — |
| | — |
|
Noncurrent | | 12 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| |
Total Derivative Assets – Interest Rate Contracts | | $ | 18 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 6 |
| | $ | — |
| | $ | 6 |
| | $ | — |
| | $ | 6 |
| | $ | — |
| | $ | — |
| | $ | — |
|
Equity Securities Contracts | | | | | | | | | | | | | | | | | |
Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | | |
Current | | | 1 |
| | — |
| | 1 |
| | — |
| | 1 |
| | — |
| | — |
| | — |
|
Total Derivative Assets – Equity Securities Contracts | | | $ | 1 |
| | $ | — |
| | $ | 1 |
| | $ | — |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
|
Total Derivative Assets | | $ | 57 |
| | $ | 3 |
| | $ | 4 |
| | $ | 4 |
| | $ | — |
| | $ | 6 |
| | $ | 23 |
| | $ | 3 |
| | $ | 25 |
| | $ | — |
| | $ | 7 |
| | $ | — |
| | $ | 7 |
| | $ | 4 |
| | $ | 13 |
| | $ | 1 |
|
| | Derivative Liabilities | | December 31, 2018 | | December 31, 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 | | $ | 33 |
| | $ | 14 |
| | $ | 10 |
| | $ | 5 |
| | $ | 6 |
| | $ | — |
| | $ | — |
| | $ | 8 |
| | $ | 67 |
| | $ | 33 |
| | $ | 26 |
| | $ | 26 |
| | $ | — |
| | $ | — |
| | $ | 1 |
| | $ | 7 |
|
Noncurrent | | 158 |
| | 10 |
| | 15 |
| | 6 |
| | — |
| | — |
| | — |
| | 133 |
| | 156 |
| | 10 |
| | 37 |
| | 22 |
| | — |
| | — |
| | — |
| | 110 |
|
Total Derivative Liabilities – Commodity Contracts | | $ | 191 |
| | $ | 24 |
| | $ | 25 |
| | $ | 11 |
| | $ | 6 |
| | $ | — |
| | $ | — |
| | $ | 141 |
| | $ | 223 |
| | $ | 43 |
| | $ | 63 |
| | $ | 48 |
| | $ | — |
| | $ | — |
| | $ | 1 |
| | $ | 117 |
|
Interest Rate Contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Designated as Hedging Instruments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Current | | $ | 12 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 19 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Noncurrent | | 6 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 21 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Current | | 23 |
| | 9 |
| | 13 |
| | 11 |
| | 2 |
| | 1 |
| | — |
| | — |
| | 8 |
| | 6 |
| | 1 |
| | 1 |
| | — |
| | 1 |
| | — |
| | — |
|
Noncurrent | | 10 |
| | — |
| | 6 |
| | 5 |
| | 1 |
| | 4 |
| | — |
| | — |
| | 5 |
| | — |
| | — |
| | — |
| | — |
| | 5 |
| | — |
| | — |
|
Total Derivative Liabilities – Interest Rate Contracts | | $ | 51 |
| | $ | 9 |
| | $ | 19 |
| | $ | 16 |
| | $ | 3 |
| | $ | 5 |
| | $ | — |
| | $ | — |
| | $ | 53 |
| | $ | 6 |
| | $ | 1 |
| | $ | 1 |
| | $ | — |
| | $ | 6 |
| | $ | — |
| | $ | — |
|
Equity Securities Contracts | | | | | | | | | | | | | | | | | |
Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | | |
Current | | | 24 |
| | — |
| | 24 |
| | — |
| | 24 |
| | — |
| | — |
| | — |
|
Total Derivative Liabilities – Equity Securities Contracts | | | $ | 24 |
| | $ | — |
| | $ | 24 |
| | $ | — |
| | $ | 24 |
| | $ | — |
| | $ | — |
| | $ | — |
|
Total Derivative Liabilities | | $ | 242 |
| | $ | 33 |
| | $ | 44 |
| | $ | 27 |
| | $ | 9 |
| | $ | 5 |
| | $ | — |
| | $ | 141 |
| | $ | 300 |
| | $ | 49 |
| | $ | 88 |
| | $ | 49 |
| | $ | 24 |
| | $ | 6 |
| | $ | 1 |
| | $ | 117 |
|
|
| |
FINANCIAL STATEMENTS | DERIVATIVES AND HEDGING |
OFFSETTING ASSETS AND LIABILITIES
The following tables present the line items on the Condensed Consolidated Balance Sheets where derivatives are reported. Substantially all of Duke Energy's outstanding derivative contracts are subject to enforceable master netting arrangements. The gross amounts offset in the tables below show the effect of these netting arrangements on financial position, and include collateral posted to offset the net position. The amounts shown are calculated by counterparty. Accounts receivable or accounts payable may also be available to offset exposures in the event of bankruptcy. These amounts are not included in the tables below. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Derivative Assets | | September 30, 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 | | $ | 31 |
| | $ | — |
| | $ | 5 |
| | $ | — |
| | $ | 5 |
| | $ | 5 |
| | $ | 16 |
| | $ | 2 |
|
Gross amounts offset | | (5 | ) | | — |
| | (5 | ) | | — |
| | (5 | ) | | — |
| | — |
| | — |
|
Net amounts presented in Current Assets: Other | | $ | 26 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 5 |
| | $ | 16 |
| | $ | 2 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Derivative Liabilities | | September 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 | | $ | 142 |
| | $ | 55 |
| | $ | 76 |
| | $ | 25 |
| | $ | 51 |
| | $ | 1 |
| | $ | — |
| | $ | 9 |
|
Gross amounts offset | | (10 | ) | | — |
| | (10 | ) | | — |
| | (10 | ) | | — |
| | — |
| | — |
|
Net amounts presented in Current Liabilities: Other | | $ | 132 |
| | $ | 55 |
| | $ | 66 |
| | $ | 25 |
| | $ | 41 |
| | $ | 1 |
| | $ | — |
| | $ | 9 |
|
Noncurrent | | | | | | | | | | | | | | | | |
Gross amounts recognized | | $ | 211 |
| | $ | 12 |
| | $ | 37 |
| | $ | 18 |
| | $ | 3 |
| | $ | 5 |
| | $ | — |
| | $ | 102 |
|
Gross amounts offset | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Net amounts presented in Other Noncurrent Liabilities: Other | | $ | 211 |
| | $ | 12 |
| | $ | 37 |
| | $ | 18 |
| | $ | 3 |
| | $ | 5 |
| | $ | — |
| | $ | 102 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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 | |
Derivative Assets | | | June 30, 2020 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | | | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | | | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
(in millions) | | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
| | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Current | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Gross amounts recognized | | $ | 68 |
| | $ | 23 |
| | $ | 23 |
| | $ | 16 |
| | $ | 8 |
| | $ | 1 |
| | $ | — |
| | $ | 8 |
| | $ | 23 |
| | $ | 2 |
| | $ | 4 |
| | $ | 4 |
| | $ | — |
| | $ | 3 |
| | $ | 10 |
| | $ | 4 |
|
Gross amounts offset | | (4 | ) | | (2 | ) | | (2 | ) | | (2 | ) | | — |
| | — |
| | — |
| | — |
| | (3 | ) | | (2 | ) | | (1 | ) | | (1 | ) | | — |
| | — |
| | — |
| | — |
|
Net amounts presented in Current Liabilities: Other | | $ | 64 |
| | $ | 21 |
| | $ | 21 |
| | $ | 14 |
| | $ | 8 |
| | $ | 1 |
| | $ | — |
| | $ | 8 |
| |
Net amounts presented in Current Assets: Other | | | $ | 20 |
| | $ | — |
| | $ | 3 |
| | $ | 3 |
| | $ | — |
| | $ | 3 |
| | $ | 10 |
| | $ | 4 |
|
Noncurrent | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Gross amounts recognized | | $ | 174 |
| | $ | 10 |
| | $ | 21 |
| | $ | 11 |
| | $ | 1 |
| | $ | 4 |
| | $ | — |
| | $ | 133 |
| | $ | 9 |
| | $ | 5 |
| | $ | 4 |
| | $ | 4 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Gross amounts offset | | (3 | ) | | (1 | ) | | (2 | ) | | (2 | ) | | — |
| | — |
| | — |
| | — |
| | (4 | ) | | (2 | ) | | (2 | ) | | (2 | ) | | — |
| | — |
| | — |
| | — |
|
Net amounts presented in Other Noncurrent Liabilities: Other | | $ | 171 |
| | $ | 9 |
| | $ | 19 |
| | $ | 9 |
| | $ | 1 |
| | $ | 4 |
| | $ | — |
| | $ | 133 |
| |
Net amounts presented in Other Noncurrent Assets: Other | | | $ | 5 |
| | $ | 3 |
| | $ | 2 |
| | $ | 2 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Derivative Liabilities | | June 30, 2020 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
(in millions) | | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Current | | | | | | | | | | | | | | | | |
Gross amounts recognized | | $ | 137 |
| | $ | 49 |
| | $ | 65 |
| | $ | 65 |
| | $ | — |
| | $ | 1 |
| | $ | 1 |
| | $ | 7 |
|
Gross amounts offset | | (3 | ) | | (2 | ) | | (1 | ) | | (1 | ) | | — |
| | — |
| | — |
| | — |
|
Net amounts presented in Current Liabilities: Other | | $ | 134 |
| | $ | 47 |
| | $ | 64 |
| | $ | 64 |
| | $ | — |
| | $ | 1 |
| | $ | 1 |
| | $ | 7 |
|
Noncurrent | | | | | | | | | | | | | | | | |
Gross amounts recognized | | $ | 224 |
| | $ | 8 |
| | $ | 56 |
| | $ | 40 |
| | $ | — |
| | $ | 6 |
| | $ | — |
| | $ | 98 |
|
Gross amounts offset | | (4 | ) | | (2 | ) | | (2 | ) | | (2 | ) | | — |
| | — |
| | — |
| | — |
|
Net amounts presented in Other Noncurrent Liabilities: Other | | $ | 220 |
| | $ | 6 |
| | $ | 54 |
| | $ | 38 |
| | $ | — |
| | $ | 6 |
| | $ | — |
| | $ | 98 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Derivative Assets | | December 31, 2019 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
(in millions) | | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Current | | | | | | | | | | | | | | | | |
Gross amounts recognized | | $ | 24 |
| | $ | — |
| | $ | 7 |
| | $ | — |
| | $ | 7 |
| | $ | 3 |
| | $ | 13 |
| | $ | 1 |
|
Gross amounts offset | | (1 | ) | | — |
| | (1 | ) | | — |
| | (1 | ) | | — |
| | — |
| | — |
|
Net amounts presented in Current Assets: Other | | $ | 23 |
| | $ | — |
| | $ | 6 |
| | $ | — |
| | $ | 6 |
| | $ | 3 |
| | $ | 13 |
| | $ | 1 |
|
Noncurrent | | | | | | | | | | | | | | | | |
Gross amounts recognized | | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 1 |
| | $ | — |
| | $ | — |
|
Gross amounts offset | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Net amounts presented in Other Noncurrent Assets: Other | | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 1 |
| | $ | — |
| | $ | — |
|
|
| |
FINANCIAL STATEMENTS | DERIVATIVES AND HEDGING |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Derivative Liabilities | | December 31, 2019 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
(in millions) | | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Current | | | | | | | | | | | | | | | | |
Gross amounts recognized | | $ | 118 |
| | $ | 39 |
| | $ | 51 |
| | $ | 27 |
| | $ | 24 |
| | $ | 1 |
| | $ | 1 |
| | $ | 7 |
|
Gross amounts offset | | (24 | ) | | — |
| | (24 | ) | | — |
| | (24 | ) | | — |
| | — |
| | — |
|
Net amounts presented in Current Liabilities: Other | | $ | 94 |
| | $ | 39 |
| | $ | 27 |
| | $ | 27 |
| | $ | — |
| | $ | 1 |
| | $ | 1 |
| | $ | 7 |
|
Noncurrent | | | | | | | | | | | | | | | | |
Gross amounts recognized | | $ | 182 |
| | $ | 10 |
| | $ | 37 |
| | $ | 22 |
| | $ | — |
| | $ | 5 |
| | $ | — |
| | $ | 110 |
|
Gross amounts offset | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Net amounts presented in Other Noncurrent Liabilities: Other | | $ | 182 |
| | $ | 10 |
| | $ | 37 |
| | $ | 22 |
| | $ | — |
| | $ | 5 |
| | $ | — |
| | $ | 110 |
|
OBJECTIVE CREDIT CONTINGENT FEATURES
Certain derivative contracts contain objective credit contingent features. These features include the requirement to post cash collateral or letters of credit if specific events occur, such as a credit rating downgrade below investment grade. The following tables show information with respect to derivative contracts that are in a net liability position and contain objective credit-risk-related payment provisions. | | | September 30, 2019 | June 30, 2020 |
| | | Duke |
| | | | Duke |
| | | Duke |
| | | | Duke |
|
| Duke |
| | Energy |
| | Progress |
| | Energy |
| Duke |
| | Energy |
| | Progress |
| | Energy |
|
(in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| Energy |
| | Carolinas |
| | Energy |
| | Progress |
|
Aggregate fair value of derivatives in a net liability position | $ | 82 |
| | $ | 40 |
| | $ | 42 |
| | $ | 42 |
| $ | 63 |
| | $ | 29 |
| | $ | 34 |
| | $ | 34 |
|
Fair value of collateral already posted | — |
| | — |
| | — |
| | — |
| — |
| | — |
| | — |
| | — |
|
Additional cash collateral or letters of credit in the event credit-risk-related contingent features were triggered | 82 |
| | 40 |
| | 42 |
| | 42 |
| 63 |
| | 29 |
| | 34 |
| | 34 |
|
| | | December 31, 2018 | December 31, 2019 |
| | | Duke |
| | | | Duke |
| | | Duke |
| | | | Duke |
|
| Duke |
| | Energy |
| | Progress |
| | Energy |
| Duke |
| | Energy |
| | Progress |
| | Energy |
|
(in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| Energy |
| | Carolinas |
| | Energy |
| | Progress |
|
Aggregate fair value of derivatives in a net liability position | $ | 44 |
| | $ | 19 |
| | $ | 25 |
| | $ | 25 |
| $ | 79 |
| | $ | 35 |
| | $ | 44 |
| | $ | 44 |
|
Fair value of collateral already posted | — |
| | — |
| | — |
| | — |
| — |
| | — |
| | — |
| | — |
|
Additional cash collateral or letters of credit in the event credit-risk-related contingent features were triggered | 44 |
| | 19 |
| | 25 |
| | 25 |
| 79 |
| | 35 |
| | 44 |
| | 44 |
|
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.
11.9. INVESTMENTS IN DEBT AND EQUITY SECURITIES
Duke Energy’s investments in debt and equity securities are primarily comprised of investments held in (i) the NDTF at Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida, (ii) the grantor trusts at Duke Energy Progress, Duke Energy Florida and Duke Energy Indiana related to OPEB plans and (iii) Bison. The Duke Energy Registrants classify investments in debt securities as AFS and investments in equity securities as FV-NI.fair value through net income (FV-NI).
For investments in debt securities classified as AFS, the unrealized gains and losses are included in other comprehensive income until realized, at which time they are reported through net income. For investments in equity securities classified as FV-NI, both realized and unrealized gains and losses are reported through net income. Substantially all of Duke Energy’s investments in debt and equity securities qualify for regulatory accounting, and accordingly, all associated realized and unrealized gains and losses on these investments are deferred as a regulatory asset or liability.
Duke Energy classifies the majority of investments in debt and equity securities as long term, unless otherwise noted.
Investment Trusts
The investments within the Investment Trusts are managed by independent investment managers with discretion to buy, sell and invest pursuant to the objectives set forth by the investment manager agreements and trust agreements. The Duke Energy Registrants have limited oversight of the day-to-day management of these investments. As a result, the ability to hold investments in unrealized loss positions is outside the control of the Duke Energy Registrants. Accordingly, all unrealized losses associated with debt securities within the Investment Trusts are 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.has a credit loss. The Duke Energy Registrants analyze all investment holdings each reporting period to determine whether a decline in fair value should be considered other-than-temporary.is related to a credit loss. If an OTTIa credit loss exists, the unrealized credit loss is included in earnings. There were no material credit losses as of SeptemberJune 30, 2019,2020, and December 31, 2018.2019.
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. | | | September 30, 2019 | | December 31, 2018 | June 30, 2020 | | December 31, 2019 |
| 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 | $ | — |
| | $ | — |
| | $ | 114 |
| | $ | — |
| | $ | — |
| | $ | 88 |
| $ | — |
| | $ | — |
| | $ | 731 |
| | $ | — |
| | $ | — |
| | $ | 101 |
|
Equity securities | 3,118 |
| | 63 |
| | 5,222 |
| | 2,402 |
| | 95 |
| | 4,475 |
| 3,034 |
| | 92 |
| | 5,039 |
| | 3,523 |
| | 55 |
| | 5,661 |
|
Corporate debt securities | 40 |
| | 1 |
| | 633 |
| | 4 |
| | 13 |
| | 566 |
| 66 |
| | 2 |
| | 806 |
| | 37 |
| | 1 |
| | 603 |
|
Municipal bonds | 14 |
| | — |
| | 370 |
| | 1 |
| | 4 |
| | 353 |
| 18 |
| | 1 |
| | 417 |
| | 13 |
| | — |
| | 368 |
|
U.S. government bonds | 39 |
| | — |
| | 1,217 |
| | 14 |
| | 12 |
| | 1,076 |
| 62 |
| | — |
| | 813 |
| | 33 |
| | 1 |
| | 1,256 |
|
Other debt securities | 4 |
| | — |
| | 142 |
| | — |
| | 2 |
| | 148 |
| 9 |
| | 1 |
| | 194 |
| | 3 |
| | — |
| | 141 |
|
Total NDTF Investments | $ | 3,215 |
| | $ | 64 |
| | $ | 7,698 |
| | $ | 2,421 |
| | $ | 126 |
| | $ | 6,706 |
| $ | 3,189 |
| | $ | 96 |
| | $ | 8,000 |
| | $ | 3,609 |
| | $ | 57 |
| | $ | 8,130 |
|
Other Investments | | | | | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 53 |
| | $ | — |
| | $ | — |
| | $ | 22 |
| $ | — |
| | $ | — |
| | $ | 113 |
| | $ | — |
| | $ | — |
| | $ | 52 |
|
Equity securities | 48 |
| | — |
| | 112 |
| | 36 |
| | 1 |
| | 99 |
| 51 |
| | — |
| | 116 |
| | 57 |
| | — |
| | 122 |
|
Corporate debt securities | 2 |
| | — |
| | 72 |
| | — |
| | 2 |
| | 60 |
| 8 |
| | — |
| | 125 |
| | 3 |
| | — |
| | 67 |
|
Municipal bonds | 5 |
| | — |
| | 94 |
| | — |
| | 1 |
| | 85 |
| 5 |
| | 1 |
| | 103 |
| | 4 |
| | — |
| | 94 |
|
U.S. government bonds | 3 |
| | — |
| | 40 |
| | 1 |
| | — |
| | 45 |
| 3 |
| | — |
| | 40 |
| | 2 |
| | — |
| | 41 |
|
Other debt securities | 1 |
| | — |
| | 65 |
| | — |
| | 1 |
| | 58 |
| 1 |
| | 1 |
| | 34 |
| | — |
| | — |
| | 56 |
|
Total Other Investments | $ | 59 |
| | $ | — |
| | $ | 436 |
| | $ | 37 |
| | $ | 5 |
| | $ | 369 |
| $ | 68 |
| | $ | 2 |
| | $ | 531 |
| | $ | 66 |
| | $ | — |
| | $ | 432 |
|
Total Investments | $ | 3,274 |
| | $ | 64 |
| | $ | 8,134 |
| | $ | 2,458 |
| | $ | 131 |
| | $ | 7,075 |
| $ | 3,257 |
| | $ | 98 |
| | $ | 8,531 |
| | $ | 3,675 |
| | $ | 57 |
| | $ | 8,562 |
|
Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the three and ninesix months ended SeptemberJune 30, 2019,2020, and 2018,2019, were as follows. | | | Three Months Ended | | Nine Months Ended | Three Months Ended | | Six Months Ended |
(in millions) | September 30, 2019 | | September 30, 2018 | | September 30, 2019 | | September 30, 2018 | June 30, 2020 | | June 30, 2019 | | June 30, 2020 | | June 30, 2019 |
FV-NI: | | | | | | | | | | | | | | |
Realized gains | $ | 60 |
| | $ | 19 |
| | $ | 161 |
| | $ | 85 |
| $ | 302 |
| | $ | 66 |
| | $ | 325 |
| | $ | 101 |
|
Realized losses | 43 |
| | 16 |
| | 136 |
| | 60 |
| 67 |
| | 63 |
| | 132 |
| | 93 |
|
AFS: | | | | | | | | | | | | | | |
Realized gains | 53 |
| | 4 |
| | 110 |
| | 14 |
| 27 |
| | 47 |
| | 47 |
| | 57 |
|
Realized losses | 36 |
| | 7 |
| | 83 |
| | 32 |
| 13 |
| | 36 |
| | 19 |
| | 47 |
|
|
| |
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. | | | September 30, 2019 | | December 31, 2018 | June 30, 2020 | | December 31, 2019 |
| 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 | $ | — |
| | $ | — |
| | $ | 36 |
| | $ | — |
| | $ | — |
| | $ | 29 |
| $ | — |
| | $ | — |
| | $ | 30 |
| | $ | — |
| | $ | — |
| | $ | 21 |
|
Equity securities | 1,680 |
| | 15 |
| | 2,901 |
| | 1,309 |
| | 54 |
| | 2,484 |
| 1,796 |
| | 47 |
| | 2,989 |
| | 1,914 |
| | 8 |
| | 3,154 |
|
Corporate debt securities | 24 |
| | 1 |
| | 409 |
| | 2 |
| | 9 |
| | 341 |
| 41 |
| | 2 |
| | 519 |
| | 21 |
| | 1 |
| | 361 |
|
Municipal bonds | 4 |
| | — |
| | 96 |
| | — |
| | 1 |
| | 81 |
| 6 |
| | — |
| | 133 |
| | 3 |
| | — |
| | 96 |
|
U.S. government bonds | 19 |
| | — |
| | 517 |
| | 5 |
| | 8 |
| | 475 |
| 30 |
| | — |
| | 399 |
| | 16 |
| | 1 |
| | 578 |
|
Other debt securities | 4 |
| | — |
| | 137 |
| | — |
| | 2 |
| | 143 |
| 7 |
| | 1 |
| | 188 |
| | 3 |
| | — |
| | 137 |
|
Total NDTF Investments | $ | 1,731 |
| | $ | 16 |
|
| $ | 4,096 |
| | $ | 1,316 |
| | $ | 74 |
| | $ | 3,553 |
| $ | 1,880 |
| | $ | 50 |
|
| $ | 4,258 |
| | $ | 1,957 |
| | $ | 10 |
| | $ | 4,347 |
|
Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the three and ninesix months ended SeptemberJune 30, 2019,2020, and 2018,2019, were as follows. | | | Three Months Ended | | Nine Months Ended | Three Months Ended | | Six Months Ended |
(in millions) | September 30, 2019 | | September 30, 2018 | | September 30, 2019 | | September 30, 2018 | June 30, 2020 | | June 30, 2019 | | June 30, 2020 | | June 30, 2019 |
FV-NI: | | | | | | | | | | | | | | |
Realized gains | $ | 34 |
| | $ | 11 |
| | $ | 101 |
| | $ | 47 |
| $ | 27 |
| | $ | 44 |
| | $ | 36 |
| | $ | 67 |
|
Realized losses | 26 |
| | 8 |
| | 95 |
| | 30 |
| 25 |
| | 48 |
| | 70 |
| | 69 |
|
AFS: | | | | | | | | | | | | | | |
Realized gains | 21 |
| | 4 |
| | 46 |
| | 13 |
| 18 |
| | 16 |
| | 30 |
| | 25 |
|
Realized losses | 13 |
| | 6 |
| | 34 |
| | 24 |
| 8 |
| | 11 |
| | 13 |
| | 21 |
|
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. | | | September 30, 2019 | | December 31, 2018 | June 30, 2020 | | December 31, 2019 |
| 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 | $ | — |
| | $ | — |
| | $ | 78 |
| | $ | — |
| | $ | — |
| | $ | 59 |
| $ | — |
| | $ | — |
| | $ | 701 |
| | $ | — |
| | $ | — |
| | $ | 80 |
|
Equity securities | 1,438 |
| | 48 |
| | 2,321 |
| | 1,093 |
| | 41 |
| | 1,991 |
| 1,238 |
| | 45 |
| | 2,050 |
| | 1,609 |
| | 47 |
| | 2,507 |
|
Corporate debt securities | 16 |
| | — |
| | 224 |
| | 2 |
| | 4 |
| | 225 |
| 25 |
| | — |
| | 287 |
| | 16 |
| | — |
| | 242 |
|
Municipal bonds | 10 |
| | — |
| | 274 |
| | 1 |
| | 3 |
| | 272 |
| 12 |
| | 1 |
| | 284 |
| | 10 |
| | — |
| | 272 |
|
U.S. government bonds | 20 |
| | — |
| | 700 |
| | 9 |
| | 4 |
| | 601 |
| 32 |
| | — |
| | 414 |
| | 17 |
| | — |
| | 678 |
|
Other debt securities | — |
| | — |
| | 5 |
| | — |
| | — |
| | 5 |
| 2 |
| | — |
| | 6 |
| | — |
| | — |
| | 4 |
|
Total NDTF Investments | $ | 1,484 |
| | $ | 48 |
| | $ | 3,602 |
| | $ | 1,105 |
| | $ | 52 |
| | $ | 3,153 |
| $ | 1,309 |
| | $ | 46 |
| | $ | 3,742 |
| | $ | 1,652 |
| | $ | 47 |
| | $ | 3,783 |
|
Other Investments | | | | | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 49 |
| | $ | — |
| | $ | — |
| | $ | 17 |
| $ | — |
| | $ | — |
| | $ | 108 |
| | $ | — |
| | $ | — |
| | $ | 49 |
|
Municipal bonds | 4 |
| | — |
| | 52 |
| | — |
| | — |
| | 47 |
| 4 |
| | — |
| | 52 |
| | 3 |
| | — |
| | 51 |
|
Total Other Investments | $ | 4 |
| | $ | — |
| | $ | 101 |
| | $ | — |
| | $ | — |
| | $ | 64 |
| $ | 4 |
| | $ | — |
| | $ | 160 |
| | $ | 3 |
| | $ | — |
| | $ | 100 |
|
Total Investments | $ | 1,488 |
| | $ | 48 |
| | $ | 3,703 |
| | $ | 1,105 |
| | $ | 52 |
| | $ | 3,217 |
| $ | 1,313 |
| | $ | 46 |
| | $ | 3,902 |
| | $ | 1,655 |
| | $ | 47 |
| | $ | 3,883 |
|
|
| |
FINANCIAL STATEMENTS | INVESTMENTS IN DEBT AND EQUITY SECURITIES |
Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the three and ninesix months ended SeptemberJune 30, 2019,2020, and 2018,2019, were as follows. | | | Three Months Ended | Nine Months Ended | Three Months Ended | Six Months Ended |
(in millions) | September 30, 2019 | | September 30, 2018 | | September 30, 2019 | | September 30, 2018 | June 30, 2020 | | June 30, 2019 | | June 30, 2020 | | June 30, 2019 |
FV-NI: | | | | | | | | | | | | | | |
Realized gains | $ | 26 |
| | $ | 8 |
| | $ | 60 |
| | $ | 38 |
| $ | 275 |
| | $ | 22 |
| | $ | 289 |
| | $ | 34 |
|
Realized losses | 17 |
| | 8 |
| | 41 |
| | 30 |
| 42 |
| | 15 |
| | 62 |
| | 24 |
|
AFS: | | | | | | | | | | | | | | |
Realized gains | 31 |
| | — |
| | 62 |
| | 1 |
| 6 |
| | 30 |
| | 11 |
| | 31 |
|
Realized losses | 23 |
| | 1 |
| | 49 |
| | 8 |
| 4 |
| | 25 |
| | 5 |
| | 26 |
|
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. | | | September 30, 2019 | | December 31, 2018 | June 30, 2020 | | December 31, 2019 |
| Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | | Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | |
| Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized |
| | Unrealized |
| | Estimated |
| Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized |
| | Unrealized |
| | Estimated |
|
| Holding |
| | Holding |
| | Fair |
| | Holding |
| | Holding |
| | Fair |
| Holding |
| | Holding |
| | Fair |
| | Holding |
| | Holding |
| | Fair |
|
(in millions) | Gains |
| | Losses |
| | Value |
| | Gains |
| | Losses |
| | Value |
| Gains |
| | Losses |
| | Value |
| | Gains |
| | Losses |
| | Value |
|
NDTF | | | | | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 52 |
| | $ | — |
| | $ | — |
| | $ | 46 |
| $ | — |
| | $ | — |
| | $ | 63 |
| | $ | — |
| | $ | — |
| | $ | 53 |
|
Equity securities | 1,107 |
| | 30 |
| | 1,907 |
| | 833 |
| | 30 |
| | 1,588 |
| 1,176 |
| | 45 |
| | 1,977 |
| | 1,258 |
| | 21 |
| | 2,077 |
|
Corporate debt securities | 16 |
| | — |
| | 224 |
| | 2 |
| | 3 |
| | 171 |
| 25 |
| | — |
| | 287 |
| | 16 |
| | — |
| | 242 |
|
Municipal bonds | 10 |
| | — |
| | 274 |
| | 1 |
| | 3 |
| | 271 |
| 12 |
| | 1 |
| | 284 |
| | 10 |
| | — |
| | 272 |
|
U.S. government bonds | 19 |
| | — |
| | 420 |
| | 6 |
| | 3 |
| | 415 |
| 32 |
| | — |
| | 414 |
| | 16 |
| | — |
| | 403 |
|
Other debt securities | — |
| | — |
| | 5 |
| | — |
| | — |
| | 3 |
| 2 |
| | — |
| | 6 |
| | — |
| | — |
| | 4 |
|
Total NDTF Investments | $ | 1,152 |
| | $ | 30 |
| | $ | 2,882 |
| | $ | 842 |
| | $ | 39 |
| | $ | 2,494 |
| $ | 1,247 |
| | $ | 46 |
| | $ | 3,031 |
| | $ | 1,300 |
| | $ | 21 |
| | $ | 3,051 |
|
Other Investments | | | | | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 2 |
| | $ | — |
| | $ | — |
| | $ | 6 |
| $ | — |
| | $ | — |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | 2 |
|
Total Other Investments | $ | — |
| | $ | — |
| | $ | 2 |
| | $ | — |
| | $ | — |
| | $ | 6 |
| $ | — |
| | $ | — |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | 2 |
|
Total Investments | $ | 1,152 |
| | $ | 30 |
| | $ | 2,884 |
| | $ | 842 |
| | $ | 39 |
| | $ | 2,500 |
| $ | 1,247 |
| | $ | 46 |
| | $ | 3,032 |
| | $ | 1,300 |
| | $ | 21 |
| | $ | 3,053 |
|
Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the three and ninesix months ended SeptemberJune 30, 2019,2020, and 2018,2019, were as follows. | | | Three Months Ended | Nine Months Ended | Three Months Ended | Six Months Ended |
(in millions) | September 30, 2019 | | September 30, 2018 | | September 30, 2019 | | September 30, 2018 | June 30, 2020 | | June 30, 2019 | | June 30, 2020 | | June 30, 2019 |
FV-NI: | | | | | | | | | | | | | | |
Realized gains | $ | 10 |
| | $ | 7 |
| | $ | 27 |
| | $ | 32 |
| $ | 26 |
| | $ | 7 |
| | $ | 40 |
| | $ | 17 |
|
Realized losses | 9 |
| | 7 |
| | 24 |
| | 27 |
| 27 |
| | 7 |
| | 47 |
| | 15 |
|
AFS: | | | | | | | | | | | | | | |
Realized gains | 2 |
| | — |
| | 4 |
| | 1 |
| 6 |
| | 1 |
| | 11 |
| | 2 |
|
Realized losses | — |
| | 1 |
| | 2 |
| | 6 |
| 4 |
| | 1 |
| | 5 |
| | 2 |
|
|
| |
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. | | | September 30, 2019 | | December 31, 2018 | June 30, 2020 | | December 31, 2019 |
| 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 | $ | — |
| | $ | — |
| | $ | 26 |
| | $ | — |
| | $ | — |
| | $ | 13 |
| $ | — |
| | $ | — |
| | $ | 638 |
| | $ | — |
| | $ | — |
| | $ | 27 |
|
Equity securities | 331 |
| | 18 |
| | 414 |
| | 260 |
| | 11 |
| | 403 |
| 62 |
| | — |
| | 73 |
| | 351 |
| | 26 |
| | 430 |
|
Corporate debt securities | — |
| | — |
| | — |
| | — |
| | 1 |
| | 54 |
| |
Municipal bonds | — |
| | — |
| | — |
| | — |
| | — |
| | 1 |
| |
U.S. government bonds | 1 |
| | — |
| | 280 |
| | 3 |
| | 1 |
| | 186 |
| — |
| | — |
| | — |
| | 1 |
| | — |
| | 275 |
|
Other debt securities | — |
| | — |
| | — |
| | — |
| | — |
| | 2 |
| |
Total NDTF Investments(a) | $ | 332 |
| | $ | 18 |
| | $ | 720 |
| | $ | 263 |
| | $ | 13 |
| | $ | 659 |
| $ | 62 |
| | $ | — |
| | $ | 711 |
| | $ | 352 |
| | $ | 26 |
| | $ | 732 |
|
Other Investments | | | | | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 4 |
| | $ | — |
| | $ | — |
| | $ | 1 |
| $ | — |
| | $ | — |
| | $ | 2 |
| | $ | — |
| | $ | — |
| | $ | 4 |
|
Municipal bonds | 4 |
| | — |
| | 52 |
| | — |
| | — |
| | 47 |
| 4 |
| | — |
| | 52 |
| | 3 |
| | — |
| | 51 |
|
Total Other Investments | $ | 4 |
| | $ | — |
| | $ | 56 |
| | $ | — |
| | $ | — |
| | $ | 48 |
| $ | 4 |
| | $ | — |
| | $ | 54 |
| | $ | 3 |
| | $ | — |
| | $ | 55 |
|
Total Investments | $ | 336 |
| | $ | 18 |
| | $ | 776 |
| | $ | 263 |
| | $ | 13 |
| | $ | 707 |
| $ | 66 |
| | $ | — |
| | $ | 765 |
| | $ | 355 |
| | $ | 26 |
| | $ | 787 |
|
| |
(a) | During the ninesix months ended SeptemberJune 30, 2019,2020, Duke Energy Florida continued to receive reimbursements from the NDTF for costs related to ongoing decommissioning activity of Crystal River Unit 3. |
Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the three and ninesix months ended SeptemberJune 30, 2019,2020, and 2018,2019, were as follows. | | | Three Months Ended | Nine Months Ended | Three Months Ended | Six Months Ended |
(in millions) | September 30, 2019 | | September 30, 2018 | | September 30, 2019 | | September 30, 2018 | June 30, 2020 | | June 30, 2019 | | June 30, 2020 | | June 30, 2019 |
FV-NI: | | | | | | | | | | | | | | |
Realized gains | $ | 16 |
| | $ | 1 |
| | $ | 33 |
| | $ | 6 |
| $ | 249 |
| | $ | 15 |
| | $ | 249 |
| | $ | 17 |
|
Realized losses | 8 |
| | 1 |
| | 17 |
| | 3 |
| 15 |
| | 8 |
| | 15 |
| | 9 |
|
AFS: | | | | | | | | | | | | | | |
Realized gains | 29 |
| | — |
| | 58 |
| | — |
| — |
| | 29 |
| | — |
| | 29 |
|
Realized losses | 23 |
| | — |
| | 47 |
| | 2 |
| — |
| | 24 |
| | — |
| | 24 |
|
DUKE ENERGY INDIANA
The following table presents the estimated fair value of investments in debt and equity securities; equity investments are measured at FV-NI and debt investments are classified as AFS. | | | September 30, 2019 | | December 31, 2018 | June 30, 2020 | | December 31, 2019 |
| Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | | Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | |
| Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized |
| | Unrealized |
| | Estimated |
| Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized |
| | Unrealized |
| | Estimated |
|
| Holding |
| | Holding |
| | Fair |
| | Holding |
| | Holding |
| | Fair |
| Holding |
| | Holding |
| | Fair |
| | Holding |
| | Holding |
| | Fair |
|
(in millions) | Gains |
| | Losses |
| | Value |
| | Gains |
| | Losses |
| | Value |
| Gains |
| | Losses |
| | Value |
| | Gains |
| | Losses |
| | Value |
|
Investments | | | | | | | | | | | | | | | | | | | | | | |
Equity securities | $ | 37 |
| | $ | — |
| | $ | 74 |
| | $ | 29 |
| | $ | — |
| | $ | 67 |
| $ | 39 |
| | $ | — |
| | $ | 77 |
| | $ | 43 |
| | $ | — |
| | $ | 81 |
|
Corporate debt securities | — |
| | — |
| | 6 |
| | — |
| | — |
| | 8 |
| — |
| | — |
| | 3 |
| | — |
| | — |
| | 6 |
|
Municipal bonds | 1 |
| | — |
| | 36 |
| | — |
| | 1 |
| | 33 |
| 1 |
| | 1 |
| | 39 |
| | 1 |
| | — |
| | 36 |
|
U.S. government bonds | — |
| | — |
| | 1 |
| | — |
| | — |
| | — |
| — |
| | — |
| | 3 |
| | — |
| | — |
| | 2 |
|
Total Investments | $ | 38 |
| | $ | — |
| | $ | 117 |
| | $ | 29 |
| | $ | 1 |
| | $ | 108 |
| $ | 40 |
| | $ | 1 |
| | $ | 122 |
| | $ | 44 |
| | $ | — |
| | $ | 125 |
|
Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the three and ninesix months ended SeptemberJune 30, 2020, and 2019, and 2018, were insignificant.immaterial.
|
| |
FINANCIAL STATEMENTS | INVESTMENTS IN DEBT AND EQUITY SECURITIES |
DEBT SECURITY MATURITIES
The table below summarizes the maturity date for debt securities.
| | | September 30, 2019 | June 30, 2020 |
| | | 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 |
| | Indiana |
| Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Indiana |
|
Due in one year or less | $ | 400 |
| | $ | 65 |
| | $ | 328 |
| | $ | 48 |
| | $ | 280 |
| | $ | 4 |
| $ | 63 |
| | $ | 19 |
| | $ | 30 |
| | $ | 28 |
| | $ | 2 |
| | $ | 3 |
|
Due after one through five years | 524 |
| | 220 |
| | 253 |
| | 243 |
| | 10 |
| | 15 |
| 563 |
| | 254 |
| | 244 |
| | 235 |
| | 9 |
| | 15 |
|
Due after five through 10 years | 450 |
| | 187 |
| | 209 |
| | 201 |
| | 8 |
| | 5 |
| 587 |
| | 270 |
| | 226 |
| | 219 |
| | 7 |
| | 9 |
|
Due after 10 years | 1,259 |
| | 687 |
| | 465 |
| | 431 |
| | 34 |
| | 19 |
| 1,319 |
| | 696 |
| | 543 |
| | 509 |
| | 34 |
| | 18 |
|
Total | $ | 2,633 |
|
| $ | 1,159 |
|
| $ | 1,255 |
|
| $ | 923 |
|
| $ | 332 |
|
| $ | 43 |
| $ | 2,532 |
|
| $ | 1,239 |
|
| $ | 1,043 |
|
| $ | 991 |
|
| $ | 52 |
|
| $ | 45 |
|
12.10. FAIR VALUE MEASUREMENTS
Fair value is the exchange price to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. The fair value definition focuses on an exit price versus the acquisition cost. Fair value measurements use market data or assumptions market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs may be readily observable, corroborated by market data or generally unobservable. Valuation techniques maximize the use of observable inputs and minimize use of unobservable inputs. A midmarket pricing convention (the midpoint price between bid and ask prices) is permitted for use as a practical expedient.
Fair value measurements are classified in three levels based on the fair value hierarchy as defined by GAAP. Certain investments are not categorized within the fair value hierarchy. These investments are measured at fair value using the NAVnet asset value (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 0 transfers between levels during the nine months ended September 30, 2019, and 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 1112 in Duke Energy's Annual Report on Form 10-K for the year ended December 31, 2018,2019, for a discussion of the valuation of goodwill and intangible assets.
|
| |
FINANCIAL STATEMENTS | FAIR VALUE MEASUREMENTS |
DUKE ENERGY
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets. Derivative amounts in the tables below for all Duke Energy Registrants exclude cash collateral, which is disclosed in Note 10.8. See Note 119 for additional information related to investments by major security type for the Duke Energy Registrants. | | | September 30, 2019 | June 30, 2020 |
(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 cash and cash equivalents | | $ | 731 |
| $ | 731 |
| $ | — |
| $ | — |
| $ | — |
|
NDTF equity securities | $ | 5,222 |
| $ | 5,168 |
| $ | — |
| $ | — |
| $ | 54 |
| 5,039 |
| 4,991 |
| — |
| — |
| 48 |
|
NDTF debt securities | 2,476 |
| 804 |
| 1,672 |
| — |
| — |
| 2,230 |
| 336 |
| 1,894 |
| — |
| — |
|
Other equity securities | 112 |
| 112 |
| — |
| — |
| — |
| 116 |
| 116 |
| — |
| — |
| — |
|
Other debt securities | 324 |
| 92 |
| 232 |
| — |
| — |
| 302 |
| 36 |
| 266 |
| — |
| — |
|
Other cash and cash equivalents | | 113 |
| 113 |
| — |
| — |
| — |
|
Derivative assets | 31 |
| 2 |
| 8 |
| 21 |
| — |
| 32 |
| 4 |
| 15 |
| 13 |
| — |
|
Total assets | 8,165 |
| 6,178 |
| 1,912 |
| 21 |
| 54 |
| 8,563 |
| 6,327 |
| 2,175 |
| 13 |
| 48 |
|
Derivative liabilities | (353 | ) | (25 | ) | (217 | ) | (111 | ) | — |
| (361 | ) | (1 | ) | (255 | ) | (105 | ) | — |
|
Net assets (liabilities) | $ | 7,812 |
| $ | 6,153 |
| $ | 1,695 |
| $ | (90 | ) | $ | 54 |
| $ | 8,202 |
| $ | 6,326 |
| $ | 1,920 |
| $ | (92 | ) | $ | 48 |
|
| | | December 31, 2018 | December 31, 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 cash and cash equivalents | | $ | 101 |
| $ | 101 |
| $ | — |
| $ | — |
| $ | — |
|
NDTF equity securities | $ | 4,475 |
| $ | 4,410 |
| $ | — |
| $ | — |
| $ | 65 |
| 5,684 |
| 5,633 |
| — |
| — |
| 51 |
|
NDTF debt securities | 2,231 |
| 576 |
| 1,655 |
| — |
| — |
| 2,368 |
| 725 |
| 1,643 |
| — |
| — |
|
Other equity securities | 99 |
| 99 |
| — |
| — |
| — |
| 122 |
| 122 |
| — |
| — |
| — |
|
Other debt securities | 270 |
| 67 |
| 203 |
| — |
| — |
| 258 |
| 39 |
| 219 |
| — |
| — |
|
Other cash and cash equivalents | | 52 |
| 52 |
| — |
| — |
| — |
|
Derivative assets | 57 |
| 4 |
| 25 |
| 28 |
| — |
| 25 |
| 3 |
| 7 |
| 15 |
| — |
|
Total assets | 7,132 |
| 5,156 |
| 1,883 |
| 28 |
| 65 |
| 8,610 |
| 6,675 |
| 1,869 |
| 15 |
| 51 |
|
NDTF equity security contracts | | (23 | ) | — |
| (23 | ) | — |
| — |
|
Derivative liabilities | (242 | ) | (11 | ) | (90 | ) | (141 | ) | — |
| (277 | ) | (15 | ) | (145 | ) | (117 | ) | — |
|
Net assets (liabilities) | $ | 6,890 |
| $ | 5,145 |
| $ | 1,793 |
| $ | (113 | ) | $ | 65 |
| $ | 8,310 |
| $ | 6,660 |
| $ | 1,701 |
| $ | (102 | ) | $ | 51 |
|
The following tables provide reconciliations of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements. | | | Derivatives (net) | Derivatives (net) |
| Three Months Ended September 30, | | Nine Months Ended September 30, | Three Months Ended June 30, | | Six Months Ended June 30, |
(in millions) | 2019 |
| | 2018 |
| | 2019 |
| | 2018 |
| 2020 |
| | 2019 |
| | 2020 |
| | 2019 |
|
Balance at beginning of period | $ | (79 | ) | | $ | (97 | ) | | $ | (113 | ) | | $ | (114 | ) | $ | (88 | ) | | $ | (115 | ) | | $ | (102 | ) | | $ | (113 | ) |
Purchases, sales, issuances and settlements: | | | | | | | | | | | | | | |
Purchases | — |
| | — |
| | 38 |
| | 56 |
| 14 |
| | 38 |
| | 14 |
| | 38 |
|
Settlements | (9 | ) | | (14 | ) | | (32 | ) | | (43 | ) | (6 | ) | | (11 | ) | | (15 | ) | | (23 | ) |
Total (losses) gains included on the Condensed Consolidated Balance Sheet | (2 | ) | | (5 | ) | | 17 |
| | (15 | ) | (12 | ) | | 9 |
| | 11 |
| | 19 |
|
Balance at end of period | $ | (90 | ) | | $ | (116 | ) | | $ | (90 | ) | | $ | (116 | ) | $ | (92 | ) | | $ | (79 | ) | | $ | (92 | ) | | $ | (79 | ) |
|
| |
FINANCIAL STATEMENTS | FAIR VALUE MEASUREMENTS |
DUKE ENERGY CAROLINAS
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets. | | | September 30, 2019 | June 30, 2020 |
(in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| Not Categorized |
| Total Fair Value |
| Level 1 |
| Level 2 |
| Not Categorized |
|
NDTF cash and cash equivalents | | $ | 30 |
| $ | 30 |
| $ | — |
| $ | — |
|
NDTF equity securities | $ | 2,901 |
| $ | 2,847 |
| $ | — |
| $ | 54 |
| 2,989 |
| 2,941 |
| — |
| 48 |
|
NDTF debt securities | 1,195 |
| 189 |
| 1,006 |
| — |
| 1,239 |
| 125 |
| 1,114 |
| — |
|
Derivative assets | | 7 |
| — |
| 7 |
| — |
|
Total assets | 4,096 |
| 3,036 |
| 1,006 |
| 54 |
| 4,265 |
| 3,096 |
| 1,121 |
| 48 |
|
Derivative liabilities | (67 | ) | — |
| (67 | ) | — |
| (57 | ) | — |
| (57 | ) | — |
|
Net assets | $ | 4,029 |
| $ | 3,036 |
| $ | 939 |
| $ | 54 |
| $ | 4,208 |
| $ | 3,096 |
| $ | 1,064 |
| $ | 48 |
|
| | | December 31, 2018 | December 31, 2019 |
(in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| Not Categorized |
| Total Fair Value |
| Level 1 |
| Level 2 |
| Not Categorized |
|
NDTF cash and cash equivalents | | $ | 21 |
| $ | 21 |
| $ | — |
| $ | — |
|
NDTF equity securities | $ | 2,484 |
| $ | 2,419 |
| $ | — |
| $ | 65 |
| 3,154 |
| 3,103 |
| — |
| 51 |
|
NDTF debt securities | 1,069 |
| 149 |
| 920 |
| — |
| 1,172 |
| 206 |
| 966 |
| — |
|
Derivative assets | 3 |
| — |
| 3 |
| — |
| |
Total assets | 3,556 |
| 2,568 |
| 923 |
| 65 |
| 4,347 |
| 3,330 |
| 966 |
| 51 |
|
Derivative liabilities | (33 | ) | — |
| (33 | ) | — |
| (49 | ) | — |
| (49 | ) | — |
|
Net assets | $ | 3,523 |
| $ | 2,568 |
| $ | 890 |
| $ | 65 |
| $ | 4,298 |
| $ | 3,330 |
| $ | 917 |
| $ | 51 |
|
PROGRESS ENERGY
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets. | | | September 30, 2019 | | December 31, 2018 | June 30, 2020 | | December 31, 2019 |
(in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| | Total Fair Value |
| Level 1 |
| Level 2 |
| Total Fair Value |
| Level 1 |
| Level 2 |
| | Total Fair Value |
| Level 1 |
| Level 2 |
|
NDTF cash and cash equivalents | | $ | 701 |
| $ | 701 |
| $ | — |
| | $ | 80 |
| $ | 80 |
| $ | — |
|
NDTF equity securities | $ | 2,321 |
| $ | 2,321 |
| $ | — |
| | $ | 1,991 |
| $ | 1,991 |
| $ | — |
| 2,050 |
| 2,050 |
| — |
| | 2,530 |
| 2,530 |
| — |
|
NDTF debt securities | 1,281 |
| 615 |
| 666 |
| | 1,162 |
| 427 |
| 735 |
| 991 |
| 211 |
| 780 |
| | 1,196 |
| 519 |
| 677 |
|
Other debt securities | 101 |
| 49 |
| 52 |
| | 64 |
| 17 |
| 47 |
| 52 |
| — |
| 52 |
| | 51 |
| — |
| 51 |
|
Other cash and cash equivalents | | 108 |
| 108 |
| — |
| | 49 |
| 49 |
| — |
|
Derivative assets | 5 |
| — |
| 5 |
| | 4 |
| — |
| 4 |
| 8 |
| — |
| 8 |
| | 7 |
| — |
| 7 |
|
Total assets | 3,708 |
| 2,985 |
| 723 |
| | 3,221 |
| 2,435 |
| 786 |
| 3,910 |
| 3,070 |
| 840 |
| | 3,913 |
| 3,178 |
| 735 |
|
NDTF equity security contracts | | — |
| — |
| — |
| | (23 | ) | — |
| (23 | ) |
Derivative liabilities | (113 | ) | — |
| (113 | ) | | (44 | ) | — |
| (44 | ) | (121 | ) | — |
| (121 | ) | | (65 | ) | — |
| (65 | ) |
Net assets | $ | 3,595 |
| $ | 2,985 |
| $ | 610 |
| | $ | 3,177 |
| $ | 2,435 |
| $ | 742 |
| $ | 3,789 |
| $ | 3,070 |
| $ | 719 |
| | $ | 3,825 |
| $ | 3,178 |
| $ | 647 |
|
|
| |
FINANCIAL STATEMENTS | FAIR VALUE MEASUREMENTS |
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. | | | September 30, 2019 | | December 31, 2018 | June 30, 2020 | | December 31, 2019 |
(in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| | Total Fair Value |
| Level 1 |
| Level 2 |
| Total Fair Value |
| Level 1 |
| Level 2 |
| | Total Fair Value |
| Level 1 |
| Level 2 |
|
NTDF cash and cash equivalents | | $ | 63 |
| $ | 63 |
| $ | — |
| | $ | 53 |
| $ | 53 |
| $ | — |
|
NDTF equity securities | $ | 1,907 |
| $ | 1,907 |
| $ | — |
| | $ | 1,588 |
| $ | 1,588 |
| $ | — |
| 1,977 |
| 1,977 |
| — |
| | 2,077 |
| 2,077 |
| — |
|
NDTF debt securities | 975 |
| 309 |
| 666 |
| | 906 |
| 294 |
| 612 |
| 991 |
| 211 |
| 780 |
| | 921 |
| 244 |
| 677 |
|
Other debt securities | 2 |
| 2 |
| — |
| | 6 |
| 6 |
| — |
| |
Other cash and cash equivalents | | 1 |
| 1 |
| — |
| | 2 |
| 2 |
| — |
|
Derivative assets | — |
| — |
| — |
| | 4 |
| — |
| 4 |
| 8 |
| — |
| 8 |
| | — |
| — |
| — |
|
Total assets | 2,884 |
| 2,218 |
| 666 |
| | 2,504 |
| 1,888 |
| 616 |
| 3,040 |
| 2,252 |
| 788 |
| | 3,053 |
| 2,376 |
| 677 |
|
Derivative liabilities | (43 | ) | — |
| (43 | ) | | (27 | ) | — |
| (27 | ) | (105 | ) | — |
| (105 | ) | | (49 | ) | — |
| (49 | ) |
Net assets | $ | 2,841 |
| $ | 2,218 |
| $ | 623 |
| | $ | 2,477 |
| $ | 1,888 |
| $ | 589 |
| $ | 2,935 |
| $ | 2,252 |
| $ | 683 |
| | $ | 3,004 |
| $ | 2,376 |
| $ | 628 |
|
|
| |
FINANCIAL STATEMENTS | FAIR VALUE MEASUREMENTS |
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. | | | September 30, 2019 | | December 31, 2018 | June 30, 2020 | | December 31, 2019 |
(in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| | Total Fair Value |
| Level 1 |
| Level 2 |
| Total Fair Value |
| Level 1 |
| Level 2 |
| | Total Fair Value |
| Level 1 |
| Level 2 |
|
NDTF cash and cash equivalents | | $ | 638 |
| $ | 638 |
| $ | — |
| | $ | 27 |
| $ | 27 |
| $ | — |
|
NDTF equity securities | $ | 414 |
| $ | 414 |
| $ | — |
| | $ | 403 |
| $ | 403 |
| $ | — |
| 73 |
| 73 |
| — |
| | 453 |
| 453 |
| — |
|
NDTF debt securities | 306 |
| 306 |
| — |
| | 256 |
| 133 |
| 123 |
| — |
| — |
| — |
| | 275 |
| 275 |
| — |
|
Other debt securities | 56 |
| 4 |
| 52 |
| | 48 |
| 1 |
| 47 |
| 52 |
| — |
| 52 |
| | 51 |
| — |
| 51 |
|
Other cash and cash equivalents | | 2 |
| 2 |
| — |
| | 4 |
| 4 |
| — |
|
Derivative assets | 5 |
| — |
| 5 |
| | — |
| — |
| — |
| — |
| — |
| — |
| | 7 |
| — |
| 7 |
|
Total assets | 781 |
| 724 |
| 57 |
| | 707 |
| 537 |
| 170 |
| 765 |
| 713 |
| 52 |
| | 817 |
| 759 |
| 58 |
|
NDTF equity security contracts | | — |
| — |
| — |
| | (23 | ) | — |
| (23 | ) |
Derivative liabilities | (54 | ) | — |
| (54 | ) | | (9 | ) | — |
| (9 | ) | — |
| — |
| — |
| | (1 | ) | — |
| (1 | ) |
Net assets | $ | 727 |
| $ | 724 |
| $ | 3 |
| | $ | 698 |
| $ | 537 |
| $ | 161 |
| $ | 765 |
| $ | 713 |
| $ | 52 |
| | $ | 793 |
| $ | 759 |
| $ | 34 |
|
DUKE ENERGY OHIO
The recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets were not material at SeptemberJune 30, 2019,2020, and December 31, 20182019.
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. | | | September 30, 2019 | | December 31, 2018 | June 30, 2020 | | December 31, 2019 |
(in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 |
| | Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 |
| 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 |
| $ | — |
| $ | — |
| $ | 77 |
| $ | 77 |
| $ | — |
| $ | — |
| | $ | 81 |
| $ | 81 |
| $ | — |
| $ | — |
|
Other debt securities | 43 |
| — |
| 43 |
| — |
| | 41 |
| — |
| 41 |
| — |
| 45 |
| — |
| 45 |
| — |
| | 44 |
| — |
| 44 |
| — |
|
Derivative assets | 16 |
| — |
| — |
| 16 |
| | 23 |
| 1 |
| — |
| 22 |
| 10 |
| — |
| — |
| 10 |
| | 13 |
| 2 |
| — |
| 11 |
|
Total assets | $ | 133 |
| $ | 74 |
| $ | 43 |
| $ | 16 |
| | $ | 131 |
| $ | 68 |
| $ | 41 |
| $ | 22 |
| $ | 132 |
| $ | 77 |
| $ | 45 |
| $ | 10 |
| | $ | 138 |
| $ | 83 |
| $ | 44 |
| $ | 11 |
|
Derivative liabilities | | (1 | ) | (1 | ) | — |
| — |
| | (1 | ) | (1 | ) | — |
| — |
|
Net assets | | $ | 131 |
| $ | 76 |
| $ | 45 |
| $ | 10 |
| | $ | 137 |
| $ | 82 |
| $ | 44 |
| $ | 11 |
|
|
| |
FINANCIAL STATEMENTS | FAIR VALUE MEASUREMENTS |
The following table provides a reconciliation of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements. |
| | | | | | | | | | | | | | | |
| Derivatives (net) |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(in millions) | 2020 |
| | 2019 |
| | 2020 |
| | 2019 |
|
Balance at beginning of period | $ | 2 |
| | $ | 5 |
| | $ | 11 |
| | $ | 22 |
|
Purchases, sales, issuances and settlements: |
| | | | | | |
Purchases | 10 |
| | 29 |
| | 10 |
| | 29 |
|
Settlements | (4 | ) | | (9 | ) | | (10 | ) | | (19 | ) |
Total gains (losses) included on the Condensed Consolidated Balance Sheet | 2 |
| | 3 |
| | (1 | ) | | (4 | ) |
Balance at end of period | $ | 10 |
| | $ | 28 |
| | $ | 10 |
| | $ | 28 |
|
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, 2020 | | December 31, 2019 |
(in millions) | Total Fair Value |
| Level 1 |
| Level 3 |
| | Total Fair Value |
| Level 1 |
| Level 3 |
|
Derivative assets | $ | 4 |
| $ | 4 |
| $ | — |
| | $ | 1 |
| $ | 1 |
| $ | — |
|
Derivative liabilities | (105 | ) | — |
| (105 | ) | | (117 | ) | — |
| (117 | ) |
Net (liabilities) assets | $ | (101 | ) | $ | 4 |
| $ | (105 | ) | | $ | (116 | ) | $ | 1 |
| $ | (117 | ) |
The following table provides a reconciliation of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements. |
| | | | | | | | | | | | | | | |
| Derivatives (net) |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
(in millions) | 2019 |
| | 2018 |
| | 2019 |
| | 2018 |
|
Balance at beginning of period | $ | 28 |
| | $ | 44 |
| | $ | 22 |
| | $ | 27 |
|
Purchases, sales, issuances and settlements: |
| | | | | | |
Purchases | — |
| | — |
| | 29 |
| | 49 |
|
Settlements | (7 | ) | | (13 | ) | | (26 | ) | | (41 | ) |
Total losses included on the Condensed Consolidated Balance Sheet | (5 | ) | | (2 | ) | | (9 | ) | | (6 | ) |
Balance at end of period | $ | 16 |
| | $ | 29 |
| | $ | 16 |
| | $ | 29 |
|
|
| | | | | | | | | | | | | | | |
| Derivatives (net) |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(in millions) | 2020 |
| | 2019 |
| | 2020 |
| | 2019 |
|
Balance at beginning of period | $ | (91 | ) | | $ | (121 | ) | | $ | (117 | ) | | $ | (141 | ) |
Total gains and settlements | (14 | ) | | 7 |
| | 12 |
| | 27 |
|
Balance at end of period | $ | (105 | ) | | $ | (114 | ) | | $ | (105 | ) | | $ | (114 | ) |
|
| |
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. |
| | | | | | | | | | | | | | | | | | | |
| September 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 | (111 | ) | — |
| (111 | ) | | (141 | ) | — |
| (141 | ) |
Net (liabilities) assets | $ | (109 | ) | $ | 2 |
| $ | (111 | ) | | $ | (138 | ) | $ | 3 |
| $ | (141 | ) |
The following table provides a reconciliation of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements. |
| | | | | | | | | | | | | | | |
| Derivatives (net) |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
(in millions) | 2019 |
| | 2018 |
| | 2019 |
| | 2018 |
|
Balance at beginning of period | $ | (114 | ) | | $ | (150 | ) | | $ | (141 | ) | | $ | (142 | ) |
Total gains (losses) and settlements | 3 |
| | (3 | ) | | 30 |
| | (11 | ) |
Balance at end of period | $ | (111 | ) | | $ | (153 | ) | | $ | (111 | ) | | $ | (153 | ) |
QUANTITATIVE INFORMATION ABOUT UNOBSERVABLE INPUTS
The following tables include quantitative information about the Duke Energy Registrants' derivatives classified as Level 3. | | | | | | | | | | | | | | | June 30, 2020 |
| September 30, 2019 | | | | | | Weighted |
| Fair Value | | | | | Fair Value | | | | | Average |
Investment Type | (in millions) | Valuation Technique | Unobservable Input | Range | (in millions) | Valuation Technique | Unobservable Input | Range | Range |
Duke Energy Ohio | |
| | | | | |
| | | | |
FTRs | $ | 5 |
| RTO auction pricing | FTR price – per MWh | $ | 0.57 |
| - | $ | 3.38 |
| $ | 3 |
| RTO auction pricing | FTR price – per MWh | $ | 0.23 |
| - | $ | 1.45 |
| $ | 0.69 |
|
Duke Energy Indiana | |
| | | | | |
| | | | |
FTRs | 16 |
| RTO auction pricing | FTR price – per MWh | (0.52 | ) | - | 6.85 |
| 10 |
| RTO auction pricing | FTR price – per MWh | (1.03 | ) | - | 6.19 |
| 0.71 |
|
Piedmont | | | | | | | | | | |
Natural gas contracts | (111 | ) | Discounted cash flow | Forward natural gas curves – price per MMBtu | 1.85 |
| - | 2.99 |
| (105 | ) | Discounted cash flow | Forward natural gas curves – price per MMBtu | 1.73 |
| - | 2.39 |
| 2.01 |
|
Duke Energy | | | | | | | | | | |
Total Level 3 derivatives | $ | (90 | ) | | | | | $ | (92 | ) | | | | |
| | | | | | | | | | | | | | | December 31, 2019 |
| December 31, 2018 | | | | | | Weighted |
| Fair Value | | | | | Fair Value | | | | | Average |
Investment Type | (in millions) | Valuation Technique | Unobservable Input | Range | (in millions) | Valuation Technique | Unobservable Input | Range | Range |
Duke Energy Ohio | |
| | | | | |
| | | | |
FTRs | $ | 6 |
| RTO auction pricing | FTR price – per MWh | $ | 1.19 |
| - | $ | 4.59 |
| $ | 4 |
| RTO auction pricing | FTR price – per MWh | $ | 0.59 |
| - | $ | 3.47 |
| $ | 2.07 |
|
Duke Energy Indiana | |
| | | | | |
| | | | |
FTRs | 22 |
| RTO auction pricing | FTR price – per MWh | (2.07 | ) | - | 8.27 |
| 11 |
| RTO auction pricing | FTR price – per MWh | (0.66 | ) | - | 9.24 |
| 1.15 |
|
Piedmont | | | | | | | | | | |
Natural gas contracts | (141 | ) | Discounted cash flow | Forward natural gas curves – price per MMBtu | 1.87 |
| - | 2.95 |
| (117 | ) | Discounted cash flow | Forward natural gas curves – price per MMBtu | 1.59 |
| - | 2.46 |
| 1.91 |
|
Duke Energy | | | | | | | | | | |
Total Level 3 derivatives | $ | (113 | ) | | | | | $ | (102 | ) | | | | |
|
| |
FINANCIAL STATEMENTS | FAIR VALUE MEASUREMENTS |
OTHER FAIR VALUE DISCLOSURES
The fair value and book value of long-term debt, including current maturities, is summarized in the following table. Estimates determined are not necessarily indicative of amounts that could have been settled in current markets. Fair value of long-term debt uses Level 2 measurements. | | | September 30, 2019 | | December 31, 2018 | June 30, 2020 | | December 31, 2019 |
(in millions) | Book Value |
| | Fair Value |
| | Book Value |
| | Fair Value |
| Book Value |
| | Fair Value |
| | Book Value |
| | Fair Value |
|
Duke Energy(a) | $ | 57,914 |
| | $ | 63,276 |
| | $ | 54,529 |
| | $ | 54,534 |
| $ | 59,899 |
| | $ | 68,428 |
| | $ | 58,126 |
| | $ | 63,062 |
|
Duke Energy Carolinas | 11,758 |
| | 13,462 |
| | 10,939 |
| | 11,471 |
| 12,521 |
| | 15,046 |
| | 11,900 |
| | 13,516 |
|
Progress Energy | 19,119 |
| | 21,952 |
| | 18,911 |
| | 19,885 |
| 19,604 |
| | 23,476 |
| | 19,634 |
| | 22,291 |
|
Duke Energy Progress | 9,049 |
| | 9,995 |
| | 8,204 |
| | 8,300 |
| 9,063 |
| | 10,506 |
| | 9,058 |
| | 9,934 |
|
Duke Energy Florida | 7,132 |
| | 8,356 |
| | 7,321 |
| | 7,742 |
| 7,951 |
| | 9,655 |
| | 7,987 |
| | 9,131 |
|
Duke Energy Ohio | 2,719 |
| | 3,096 |
| | 2,165 |
| | 2,239 |
| 3,019 |
| | 3,551 |
| | 2,619 |
| | 2,964 |
|
Duke Energy Indiana | 4,208 |
| | 5,018 |
| | 3,782 |
| | 4,158 |
| 4,603 |
| | 5,617 |
| | 4,057 |
| | 4,800 |
|
Piedmont | 2,384 |
| | 2,664 |
| | 2,138 |
| | 2,180 |
| 2,779 |
| | 3,289 |
| | 2,384 |
| | 2,642 |
|
| |
(a) | Book value of long-term debt includes $1.4 billion at June 30, 2020, and $1.5 billion as of September 30, 2019, and $1.6 billion as ofat December 31, 2018,2019, of unamortized debt discount and premium, net inof purchase accounting adjustments related to the mergers with Progress Energy and Piedmont that are excluded from fair value of long-term debt. |
At both SeptemberJune 30, 2019,2020, and December 31, 2018,2019, fair value of cash and cash equivalents, accounts and notes receivable, accounts payable, notes payable and commercial paper and nonrecourse notes payable of VIEs are not materially different from their carrying amounts because of the short-term nature of these instruments and/or because the stated rates approximate market rates.
13.
|
| |
FINANCIAL STATEMENTS | VARIABLE INTEREST ENTITIES |
11. VARIABLE INTEREST ENTITIES
CONSOLIDATED VIEs
The obligations of the consolidated VIEs discussed in the following paragraphs are nonrecourse to the Duke Energy registrants.Registrants. The registrants have no requirement to provide liquidity to, purchase assets of or guarantee performance of these VIEs unless noted in the following paragraphs.
NaN financial support was provided to any of the consolidated VIEs during the ninesix months ended SeptemberJune 30, 2019,2020, and the year ended December 31, 2018,2019, or is expected to be provided in the future that was not previously contractually required.
Receivables Financing – DERF / DEPR / DERF/DEPR/DEFR
DERF, DEPR and DEFR are bankruptcy remote, special purpose subsidiaries of Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida, respectively. DERF, DEPR and DEFR are wholly owned limited liability companiesLLCs with separate legal existence from their parent companies, and their assets are not generally available to creditors of their parent companies. On a revolving basis, DERF, DEPR and DEFR buy certain accounts receivable arising from the sale of electricity and related services from their parent companies.
DERF, DEPR and DEFR borrow amounts under credit facilities to buy these receivables. Borrowing availability from the credit facilities is limited to the amount of qualified receivables purchased.purchased which generally exclude receivables past due more than a predetermined number of days and reserves for expected past-due balances. The sole source of funds to satisfy the related debt obligations is cash collections from the receivables. Amounts borrowed under the credit facilities for DERF and DEPR are reflected on the Condensed Consolidated Balance Sheets as Long-Term Debt. Amounts borrowed under the credit facilities for DEFR are reflected on the Condensed Consolidated Balance Sheets as Current maturities of long-term debt.
Due to the COVID-19 pandemic, as described in Note 1, the Duke Energy Registrants suspended customer disconnections for nonpayment. The full impact of COVID-19 and the Duke Energy Registrant’s related response on customers’ ability to pay for service is uncertain. However, the level of past-due receivables at Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida have increased significantly during the COVID-19 pandemic, and it is reasonably possible eventual write-offs of customer receivables may increase over current estimates. In the second quarter of 2020, DERF, DEPR and DEFR executed amendments to their credit facilities to manage the impact of past-due receivables resulting from the suspension of customer disconnections from COVID-19. See Note 3 for information about COVID-19 filings with state utility commissions.
The most significant activity that impacts the economic performance of DERF, DEPR and DEFR are the decisions made to manage delinquent receivables. Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida are considered the primary beneficiaries and consolidate DERF, DEPR and DEFR, respectively, as they make those decisions.
Receivables Financing – CRC
CRC is a bankruptcy remote, special purpose entity indirectly owned by Duke Energy. On a revolving basis, CRC buys certain accounts receivable arising from the sale of electricity, natural gas and related services from Duke Energy Ohio and Duke Energy Indiana. CRC borrows amounts under a credit facility to buy the receivables from Duke Energy Ohio and Duke Energy Indiana. Borrowing availability from the credit facility is limited to the amount of qualified receivables sold to CRC.CRC which generally exclude receivables past due more than a predetermined number of days and reserves for expected past-due balances. The sole source of funds to satisfy the related debt obligation is cash collections from the receivables. Amounts borrowed under the credit facility are reflected on Duke Energy's Condensed Consolidated Balance Sheets as Long-Term Debt.
The proceeds Duke Energy Ohio and Duke Energy Indiana receive from the sale of receivables to CRC are approximately 75% cash and 25% in the form of a subordinated note from CRC. The subordinated note is a retained interest in the receivables sold. Depending on collection experience, additional equity infusions to CRC may be required by Duke Energy to maintain a minimum equity balance of $3 million.
Due to the COVID-19 pandemic, as described in Note 1, the Duke Energy Registrants suspended customer disconnections for nonpayment. The full impact of COVID-19 and the Duke Energy Registrant’s related response on customers’ ability to pay for service is uncertain. However, the level of past-due receivables at Duke Energy Ohio and Duke Energy Indiana have increased significantly during the COVID-19 pandemic, and it is reasonably possible eventual write-offs of customer receivables may increase over current estimates. In July of 2020, CRC executed an amendment to its credit facility to manage the impact of past-due receivables resulting from the suspension of customer disconnections from COVID-19. See Note 3 for information about COVID-19 filings with state utility commissions.
CRC is considered a VIE because (i) equity capitalization is insufficient to support its operations, (ii) power to direct the activities that most significantly impact the economic performance of the entity areis not performedheld by the equity holder and (iii) deficiencies in net worth of CRC are funded by Duke Energy. The most significant activities that impact the economic performance of CRC are decisions made to manage delinquent receivables. Duke Energy is considered the primary beneficiary and consolidates CRC as it makes these decisions. Neither Duke Energy Ohio nor Duke Energy Indiana consolidate CRC.
|
| |
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 September 30, 2019 | 350 |
| | 475 |
| | 325 |
| | 250 |
|
Amounts borrowed at December 31, 2018 | 325 |
| | 450 |
| | 300 |
| | 225 |
|
Restricted Receivables at September 30, 2019 | 505 |
| | 775 |
| | 564 |
| | 471 |
|
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 | February 2023 |
| | December 2022 |
| | April 2023 |
| | April 2021 |
|
Credit facility amount | $ | 350 |
| | $ | 475 |
| | $ | 350 |
| | $ | 250 |
|
Amounts borrowed at June 30, 2020 | 350 |
| | 475 |
| | 333 |
| | 250 |
|
Amounts borrowed at December 31, 2019 | 350 |
| | 474 |
| | 325 |
| | 250 |
|
Restricted Receivables at June 30, 2020 | 454 |
| | 675 |
| | 451 |
| | 463 |
|
Restricted Receivables at December 31, 2019 | 522 |
| | 642 |
| | 489 |
| | 336 |
|
Nuclear Asset-Recovery Bonds – DEFPF
DEFPF is a bankruptcy remote, wholly owned special purpose subsidiary of Duke Energy Florida. DEFPF was formed in 2016 for the sole purpose of issuing nuclear asset-recovery bonds to finance Duke Energy Florida's unrecovered regulatory asset related to Crystal River Unit 3.
In 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) | September 30, 2019 |
| December 31, 2018 |
| June 30, 2020 |
| December 31, 2019 |
|
Receivables of VIEs | $ | 7 |
| $ | 5 |
| $ | 6 |
| $ | 5 |
|
Regulatory Assets: Current | 52 |
| 52 |
| 53 |
| 52 |
|
Current Assets: Other | 16 |
| 39 |
| 32 |
| 39 |
|
Other Noncurrent Assets: Regulatory assets | 1,002 |
| 1,041 |
| 969 |
| 989 |
|
Current Liabilities: Other | 2 |
| 10 |
| 10 |
| 10 |
|
Current maturities of long-term debt | 54 |
| 53 |
| 54 |
| 54 |
|
Long-Term Debt | 1,056 |
| 1,111 |
| 1,028 |
| 1,057 |
|
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 systemsrenewable assets eligible for tax credits. The activities that most significantly impacted the economic performance of these renewable energy facilities were decisions associated with siting, negotiating PPAs and EPCEngineering, Procurement and Construction agreements, and decisions associated with ongoing operations and maintenance-related activities. Duke Energy is considered the primary beneficiary and consolidates the entities as it is responsible for all of these decisions.
The table below presents material balances reported on Duke Energy's Condensed Consolidated Balance Sheets related to Commercial Renewables VIEs. | | (in millions) | September 30, 2019 |
| December 31, 2018 |
| June 30, 2020 |
| December 31, 2019 |
|
Current Assets: Other | $ | 172 |
| $ | 123 |
| $ | 228 |
| $ | 203 |
|
Property, Plant and Equipment: Cost | 5,160 |
| 4,007 |
| 6,198 |
| 5,747 |
|
Accumulated depreciation and amortization | (996 | ) | (698 | ) | (1,145 | ) | (1,041 | ) |
Other Noncurrent Assets: Other | 63 |
| 261 |
| 75 |
| 106 |
|
Current maturities of long-term debt | 177 |
| 174 |
| 158 |
| 162 |
|
Long-Term Debt | 1,604 |
| 1,587 |
| 1,457 |
| 1,541 |
|
Other Noncurrent Liabilities: Asset retirement obligations | 125 |
| 106 |
| |
Other Noncurrent Liabilities: AROs | | 144 |
| 127 |
|
Other Noncurrent Liabilities: Other | 218 |
| 212 |
| 251 |
| 228 |
|
|
| |
FINANCIAL STATEMENTS | VARIABLE INTEREST ENTITIES |
NON-CONSOLIDATED VIEs
The following tables summarize the impact of non-consolidated VIEs on the Condensed Consolidated Balance Sheets. | | | September 30, 2019 | June 30, 2020 |
| Duke Energy | | Duke |
| | Duke |
| Duke Energy | | Duke |
| | Duke |
|
| Pipeline |
| | Commercial |
| | Other |
| | | | Energy |
| | Energy |
| Pipeline |
| | Commercial |
| | Other |
| | | | Energy |
| | Energy |
|
(in millions) | Investments |
| | Renewables |
| | VIEs |
| | Total |
| | Ohio |
| | Indiana |
| Investments |
| | Renewables |
| | VIEs |
| | Total |
| | Ohio |
| | Indiana |
|
Receivables from affiliated companies | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 48 |
| | $ | 76 |
| $ | — |
| | $ | (1 | ) | | $ | — |
| | $ | (1 | ) | | $ | 34 |
| | $ | 49 |
|
Investments in equity method unconsolidated affiliates | 1,152 |
| | 235 |
| | 55 |
| | 1,442 |
| | — |
| | — |
| — |
| | 413 |
| | 1 |
| | 414 |
| | — |
| | — |
|
Deferred tax asset | | 439 |
| | — |
| | — |
| | 439 |
| | — |
| | — |
|
Total assets | $ | 1,152 |
| | $ | 235 |
| | $ | 55 |
| | $ | 1,442 |
| | $ | 48 |
| | $ | 76 |
| $ | 439 |
| | $ | 412 |
| | $ | 1 |
| | $ | 852 |
| | $ | 34 |
| | $ | 49 |
|
Taxes accrued | (2 | ) | | — |
| | — |
| | (2 | ) | | — |
| | — |
| 9 |
| | — |
| | — |
| | 9 |
| | — |
| | — |
|
Other current liabilities | — |
| | — |
| | 3 |
| | 3 |
| | — |
| | — |
| 920 |
| | — |
| | 4 |
| | 924 |
| | — |
| | — |
|
Deferred income taxes | 57 |
| | — |
| | — |
| | 57 |
| | — |
| | — |
| |
Other noncurrent liabilities | — |
| | — |
| | 11 |
| | 11 |
| | — |
| | — |
| — |
| | — |
| | 10 |
| | 10 |
| | — |
| | — |
|
Total liabilities | $ | 55 |
| | $ | — |
| | $ | 14 |
| | $ | 69 |
| | $ | — |
| | $ | — |
| $ | 929 |
| | $ | — |
| | $ | 14 |
| | $ | 943 |
| | $ | — |
| | $ | — |
|
Net assets | $ | 1,097 |
| | $ | 235 |
| | $ | 41 |
| | $ | 1,373 |
| | $ | 48 |
| | $ | 76 |
| |
Net (liabilities) assets | | $ | (490 | ) | | $ | 412 |
| | $ | (13 | ) | | $ | (91 | ) | | $ | 34 |
| | $ | 49 |
|
| | | December 31, 2018 | December 31, 2019 |
| Duke Energy | | Duke |
| | Duke |
| Duke Energy | | Duke |
| | Duke |
|
| Pipeline |
| | Commercial |
| | Other |
| | | | Energy |
| | Energy |
| Pipeline |
| | Commercial |
| | Other |
| | | | Energy |
| | Energy |
|
(in millions) | Investments |
| | Renewables |
| | VIEs |
| | Total |
| | Ohio |
| | Indiana |
| Investments |
| | Renewables |
| | VIEs |
| | Total |
| | Ohio |
| | Indiana |
|
Receivables from affiliated companies | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 93 |
| | $ | 118 |
| $ | — |
| | $ | (1 | ) | | $ | — |
| | $ | (1 | ) | | $ | 64 |
| | $ | 77 |
|
Investments in equity method unconsolidated affiliates | 822 |
| | 190 |
| | 48 |
| | 1,060 |
| | — |
| | — |
| 1,179 |
| | 300 |
| | — |
| | 1,479 |
| | — |
| | — |
|
Total assets | $ | 822 |
| | $ | 190 |
| | $ | 48 |
| | $ | 1,060 |
| | $ | 93 |
| | $ | 118 |
| $ | 1,179 |
| | $ | 299 |
| | $ | — |
| | $ | 1,478 |
| | $ | 64 |
| | $ | 77 |
|
Taxes accrued | (1 | ) | | — |
| | — |
| | (1 | ) | | — |
| | — |
| (1 | ) | | — |
| | — |
| | (1 | ) | | — |
| | — |
|
Other current liabilities | — |
| | — |
| | 4 |
| | 4 |
| | — |
| | — |
| — |
| | — |
| | 4 |
| | 4 |
| | — |
| | — |
|
Deferred income taxes | 21 |
| | — |
| | — |
| | 21 |
| | — |
| | — |
| 59 |
| | — |
| | — |
| | 59 |
| | — |
| | — |
|
Other noncurrent liabilities | — |
| | — |
| | 12 |
| | 12 |
| | — |
| | — |
| — |
| | — |
| | 11 |
| | 11 |
| | — |
| | — |
|
Total liabilities | $ | 20 |
|
| $ | — |
|
| $ | 16 |
|
| $ | 36 |
|
| $ | — |
|
| $ | — |
| $ | 58 |
|
| $ | — |
|
| $ | 15 |
|
| $ | 73 |
|
| $ | — |
|
| $ | — |
|
Net assets | $ | 802 |
| | $ | 190 |
| | $ | 32 |
| | $ | 1,024 |
| | $ | 93 |
| | $ | 118 |
| |
Net assets (liabilities) | | $ | 1,121 |
| | $ | 299 |
| | $ | (15 | ) | | $ | 1,405 |
| | $ | 64 |
| | $ | 77 |
|
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 PPA with OVEC, which is discussed below, and various guarantees, including Duke Energy's guarantee agreement to support its sharefuture exit costs associated with the abandonment of the investment in ACP, revolving credit facility. Duke Energy's maximum exposure to loss under the terms of the guarantee is $802 million, which represents 47% of the outstanding borrowings under the credit facility as of September 30, 2019. For more information on various guarantees, refer to Note 4.discussed below.
Pipeline Investments
Duke Energy has investments in various joint ventures withto construct and operate pipeline projects currently under construction.projects. These entities are considered VIEs due to having insufficient equity to finance their own activities without subordinated financial support. Duke Energy does not have the power to direct the activities that most significantly impact the economic performance, the obligation to absorb losses or the right to receive benefits of these VIEs and therefore does not consolidate these entities.
On July 5, 2020, Duke Energy determined that it would no longer invest in the construction of the ACP pipeline. See Notes 1, 3 and 4 for further information regarding this transaction.
For the three and six months ended June 30, 2020, the ACP investment is considered a significant subsidiary because its income exceeds 20% of Duke Energy’s income. The table below presents Duke Energy's ownership interest and investment balances in these joint ventures.unaudited summarized financial information for ACP. |
| | | | | | | | | | |
| | | VIE Investment Amount (in millions) |
| Ownership | | September 30, | | December 31, |
Entity Name | Interest | | 2019 | | 2018 |
ACP(a) | 47 | % | | $ | 1,127 |
| | $ | 797 |
|
Constitution | 24 | % | | 25 |
| | 25 |
|
Total | | | $ | 1,152 |
| | $ | 822 |
|
|
| | | | | | | | | | | | |
| Three Months Ended June 30, | Six Months Ended June 30, |
(in millions) | 2020 |
| 2019 |
| 2020 |
| 2019 |
|
Net (Loss) Income | $ | (4,414 | ) | $ | 61 |
| $ | (4,342 | ) | $ | 114 |
|
| |
(a) | Duke Energy evaluated this investment for impairment as of September 30, 2019, and December 31, 2018, and determined that fair value approximated carrying value and therefore no impairment was necessary. |
|
| |
FINANCIAL STATEMENTS | VARIABLE INTEREST ENTITIES |
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 | | 2020 | | 2019 |
ACP(a) | 47 | % | | $ | (920 | ) | | $ | 1,179 |
|
Constitution(b) | 24 | % | | — |
| | — |
|
Total | | | $ | (920 | ) | | $ | 1,179 |
|
| |
(a) | During the quarter ended June 30, 2020, Duke Energy abandoned its investment in ACP as described above. The current liability related to the abandonment of ACP represents Duke Energy's obligation to fund ACP's obligations. See Notes 1, 3 and 4 for more information. |
| |
(b) | During the year ended December 31, 2019, Duke Energy recorded an other-than-temporary impairment related to Constitution. This charge resulted in the full write-down of Duke Energy's investment in Constitution. |
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.
PioneerOther
In 2019, Duke Energy holdsacquired a 50% equity interestmajority ownership in Pioneer. Duringa portfolio of distributed fuel cell projects from Bloom Energy Corporation. Duke Energy is not the nine months ended September 30, 2019, Pioneer was considered a VIE due to having insufficient equity to finance its own activities without subordinated financial support. On October 1, 2019, Pioneer closed on a private placement debt offering that gave Pioneer sufficient equity to finance its own activitiesprimary beneficiary of the assets within the portfolio and therefore, is no longer considered a VIE. Duke Energy's investmentdoes not consolidate the assets in Pioneer was $55 million at September 30, 2019.the portfolio.
OVEC
Duke Energy Ohio’s 9% ownership interest in OVEC is considered a non-consolidated VIE due to OVEC having insufficient equity to finance its activities without subordinated financial support. The activities that most significantly impact OVEC's economic performance include fuel strategy and supply activities and decisions associated with ongoing operations and maintenance-related activities. Duke Energy Ohio does not have the unilateral power to direct these activities, and therefore, does not consolidate OVEC.
As a counterparty to an ICPA,Inter-Company Power Agreement (ICPA), Duke Energy Ohio has a contractual arrangement to receive entitlements to capacity and energy from OVEC’s power plants through June 2040 commensurate with its power participation ratio, which is equivalent to Duke Energy Ohio's ownership interest. Costs, including fuel, operating expenses, fixed costs, debt amortization and interest expense, are allocated to counterparties to the ICPA based on their power participation ratio. The value of the ICPA is subject to variability due to fluctuation in power prices and changes in OVEC's cost of business. On March 31, 2018, FES,FirstEnergy Solutions Corp (FES), a subsidiary of FirstEnergy Corp. and an ICPA counterparty with a power participation ratio of 4.85%, 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. In July 2020, legislation was proposed to repeal HB 6. Duke Energy cannot predict the outcome in this matter. See Note 3 for additional information.
CRC
See discussion under Consolidated VIEs for additional information related to CRC.
Amounts included in Receivables from affiliated companies in the above table for Duke Energy Ohio and Duke Energy Indiana reflect their retained interest in receivables sold to CRC. These subordinated notes held by Duke Energy Ohio and Duke Energy Indiana are stated at fair value.
The following table shows the gross and net receivables sold. | | | Duke Energy Ohio | | Duke Energy Indiana | Duke Energy Ohio | | Duke Energy Indiana |
(in millions) | September 30, 2019 |
| | December 31, 2018 |
| | September 30, 2019 |
| | December 31, 2018 |
| June 30, 2020 |
| | December 31, 2019 |
| | June 30, 2020 |
| | December 31, 2019 |
|
Receivables sold | $ | 217 |
| | $ | 269 |
| | $ | 326 |
| | $ | 336 |
| $ | 221 |
| | $ | 253 |
| | $ | 280 |
| | $ | 307 |
|
Less: Retained interests | 48 |
| | 93 |
| | 76 |
| | 118 |
| 34 |
| | 64 |
| | 49 |
| | 77 |
|
Net receivables sold | $ | 169 |
| | $ | 176 |
| | $ | 250 |
| | $ | 218 |
| $ | 187 |
| | $ | 189 |
| | $ | 231 |
| | $ | 230 |
|
|
| |
FINANCIAL STATEMENTS | VARIABLE INTEREST ENTITIES |
The following table shows sales and cash flows related to receivables sold. | | | Duke Energy Ohio | | Duke Energy Indiana | Duke Energy Ohio | | Duke Energy Indiana |
| Three Months Ended | | Nine Months Ended | | Three Months Ended | | Nine Months Ended | Three Months Ended | | Six Months Ended | | Three Months Ended | | Six Months Ended |
| September 30, | | September 30, | | September 30, | | September 30, | June 30, | | June 30, | | June 30, | | June 30, |
(in millions) | 2019 |
| | 2018 |
| | 2019 |
| | 2018 |
| | 2019 |
| | 2018 |
| | 2019 |
| | 2018 |
| 2020 |
| | 2019 |
| | 2020 |
| | 2019 |
| | 2020 |
| | 2019 |
| | 2020 |
| | 2019 |
|
Sales | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Receivables sold | $ | 479 |
| | $ | 450 |
| | $ | 1,483 |
| | $ | 1,478 |
| | $ | 762 |
| | $ | 754 |
| | $ | 2,172 |
| | $ | 2,140 |
| $ | 429 |
| | $ | 429 |
| | $ | 966 |
| | $ | 1,004 |
| | $ | 583 |
| | $ | 676 |
| | $ | 1,230 |
| | $ | 1,410 |
|
Loss recognized on sale | 4 |
| | 4 |
| | 11 |
| | 10 |
| | 4 |
| | 5 |
| | 13 |
| | 12 |
| 2 |
| | 3 |
| | 6 |
| | 7 |
| | 2 |
| | 4 |
| | 6 |
| | 9 |
|
Cash flows | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash proceeds from receivables sold | $ | 471 |
| | $ | 449 |
| | $ | 1,516 |
| | $ | 1,499 |
| | $ | 762 |
| | $ | 743 |
| | $ | 2,200 |
| | $ | 2,140 |
| $ | 431 |
| | $ | 448 |
| | $ | 990 |
| | $ | 1,045 |
| | $ | 580 |
| | $ | 680 |
| | $ | 1,252 |
| | $ | 1,438 |
|
Collection fees received | — |
| | — |
| | 1 |
| | 1 |
| | — |
| | — |
| | 1 |
| | 1 |
| |
Return received on retained interests | 1 |
| | 2 |
| | 5 |
| | 5 |
| | 2 |
| | 3 |
| | 7 |
| | 7 |
| — |
| | 2 |
| | 2 |
| | 4 |
| | 1 |
| | 2 |
| | 3 |
| | 5 |
|
Cash flows from sales of receivables are reflected within Cash Flows From Operating Activities on Duke Energy Ohio’s and Duke Energy Indiana’s Condensed Consolidated Statements of Cash Flows.
|
| |
FINANCIAL STATEMENTS | REVENUE |
14.12. 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.
The majority of wholesale revenues are full requirements contracts where the customers purchase the substantial majority of their energy needs and do not have a fixed quantity of contractually required energy or capacity. As such, related forecasted revenues are considered optional purchases. Supplemental requirements contracts that include contracted blocks of energy and capacity at contractually fixed prices have the following estimated remaining performance obligations: | | | Remaining Performance Obligations | Remaining Performance Obligations |
(in millions) | 2019 |
| 2020 |
| 2021 |
| 2022 |
| 2023 |
| Thereafter |
| Total |
| 2020 |
| 2021 |
| 2022 |
| 2023 |
| 2024 |
| Thereafter |
| Total |
|
Progress Energy | $ | 31 |
| $ | 121 |
| $ | 86 |
| $ | 81 |
| $ | 38 |
| $ | 41 |
| $ | 398 |
| $ | 58 |
| $ | 92 |
| $ | 94 |
| $ | 44 |
| $ | 45 |
| $ | 58 |
| $ | 391 |
|
Duke Energy Progress | 2 |
| 8 |
| 8 |
| 8 |
| 8 |
| 8 |
| 42 |
| 4 |
| 8 |
| 8 |
| 8 |
| 8 |
| — |
| 36 |
|
Duke Energy Florida | 29 |
| 113 |
| 78 |
| 73 |
| 30 |
| 33 |
| 356 |
| 54 |
| 84 |
| 86 |
| 36 |
| 37 |
| 58 |
| 355 |
|
Duke Energy Indiana | 2 |
| 10 |
| 5 |
| — |
| — |
| — |
| 17 |
| 5 |
| 5 |
| — |
| — |
| — |
| — |
| 10 |
|
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 revenues through retail and wholesale natural gas service through the transportation, distribution and sale of natural gas. Duke Energy generally provides retail and wholesale natural gas service customers with all natural gas load requirements. Additionally, while natural gas can be stored, substantially all natural gas provided by Duke Energy is consumed by customers simultaneously with receipt of delivery.
Fixed capacityFixed-capacity payments under long-term contracts for the Gas Utilities and Infrastructure segment include minimum margin contracts and supply arrangements with municipalities and power generation facilities. Revenues for related sales are recognized monthly as natural gas is delivered and stand-ready service is provided, consistent with invoiced amounts and unbilled estimates. Estimated remaining performance obligations are as follows:
| | | Remaining Performance Obligations | Remaining Performance Obligations |
(in millions) | 2019 |
| 2020 |
| 2021 |
| 2022 |
| 2023 |
| Thereafter |
| Total |
| 2020 |
| 2021 |
| 2022 |
| 2023 |
| 2024 |
| Thereafter |
| Total |
|
Piedmont | $ | 17 |
| $ | 69 |
| $ | 64 |
| $ | 64 |
| $ | 61 |
| $ | 430 |
| $ | 705 |
| $ | 34 |
| $ | 65 |
| $ | 64 |
| $ | 61 |
| $ | 58 |
| $ | 376 |
| $ | 658 |
|
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 RECsRenewable Energy Certificates (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.
Other
The remainder of Duke Energy’s operations is presented as Other, which does not include material revenues from contracts with customers.87
|
| |
FINANCIAL STATEMENTS | REVENUE |
Other
The remainder of Duke Energy’s operations is presented as Other, which does not include material revenues from contracts with customers.
Disaggregated Revenues
Disaggregated revenues are presented as follows: | | | Three Months Ended September 30, 2019 | Three Months Ended June 30, 2020 |
| | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
| | | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
| |
(in millions) | Duke |
| Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
| | Duke |
| Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
| |
By market or type of customer | Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Piedmont |
| Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Piedmont |
|
Electric Utilities and Infrastructure | | |
Residential | $ | 2,923 |
| $ | 892 |
| $ | 1,522 |
| $ | 625 |
| $ | 897 |
| $ | 215 |
| $ | 294 |
| $ | — |
| $ | 2,249 |
| $ | 677 |
| $ | 1,173 |
| $ | 460 |
| $ | 713 |
| $ | 169 |
| $ | 231 |
| $ | — |
|
General | 1,885 |
| 687 |
| 843 |
| 399 |
| 444 |
| 127 |
| 225 |
| — |
| 1,379 |
| 507 |
| 611 |
| 298 |
| 313 |
| 103 |
| 161 |
| — |
|
Industrial | 869 |
| 372 |
| 255 |
| 189 |
| 66 |
| 40 |
| 204 |
| — |
| 658 |
| 260 |
| 212 |
| 154 |
| 58 |
| 33 |
| 152 |
| — |
|
Wholesale | 617 |
| 113 |
| 429 |
| 368 |
| 61 |
| 13 |
| 63 |
| — |
| 435 |
| 101 |
| 285 |
| 240 |
| 45 |
| 5 |
| 44 |
| — |
|
Other revenues | 198 |
| 76 |
| 118 |
| 70 |
| 48 |
| 18 |
| 22 |
| — |
| 284 |
| 62 |
| 191 |
| 70 |
| 121 |
| 19 |
| 25 |
| — |
|
Total Electric Utilities and Infrastructure revenue from contracts with customers | $ | 6,492 |
| $ | 2,140 |
| $ | 3,167 |
| $ | 1,651 |
| $ | 1,516 |
| $ | 413 |
| $ | 808 |
| $ | — |
| $ | 5,005 |
| $ | 1,607 |
| $ | 2,472 |
| $ | 1,222 |
| $ | 1,250 |
| $ | 329 |
| $ | 613 |
| $ | — |
|
| | |
Gas Utilities and Infrastructure | | |
Residential | $ | 113 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 53 |
| $ | — |
| $ | 59 |
| $ | 157 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 62 |
| $ | — |
| $ | 96 |
|
Commercial | 68 |
| — |
| — |
| — |
| — |
| 21 |
| — |
| 47 |
| 75 |
| — |
| — |
| — |
| — |
| 23 |
| — |
| 52 |
|
Industrial | 26 |
| — |
| — |
| — |
| — |
| 4 |
| — |
| 25 |
| 27 |
| — |
| — |
| — |
| — |
| 3 |
| — |
| 22 |
|
Power Generation | — |
| — |
| — |
| — |
| — |
| — |
| — |
| 13 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 6 |
|
Other revenues | 16 |
| — |
| — |
| — |
| — |
| 3 |
| — |
| 13 |
| 12 |
| — |
| — |
| — |
| — |
| 3 |
| — |
| 11 |
|
Total Gas Utilities and Infrastructure revenue from contracts with customers | $ | 223 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 81 |
| $ | — |
| $ | 157 |
| $ | 271 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 91 |
| $ | — |
| $ | 187 |
|
| | |
Commercial Renewables | | |
Revenue from contracts with customers | $ | 69 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 55 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
|
| | |
Other | | |
Revenue from contracts with customers | $ | 8 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 7 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
|
Total revenue from contracts with customers | $ | 6,792 |
| $ | 2,140 |
| $ | 3,167 |
| $ | 1,651 |
| $ | 1,516 |
| $ | 494 |
| $ | 808 |
| $ | 157 |
| $ | 5,338 |
| $ | 1,607 |
| $ | 2,472 |
| $ | 1,222 |
| $ | 1,250 |
| $ | 420 |
| $ | 613 |
| $ | 187 |
|
| | |
Other revenue sources(a) | $ | 148 |
| $ | 22 |
| $ | 75 |
| $ | 37 |
| $ | 32 |
| $ | (5 | ) | $ | (1 | ) | $ | 11 |
| $ | 83 |
| $ | 3 |
| $ | 26 |
| $ | 21 |
| $ | — |
| $ | 3 |
| $ | 4 |
| $ | 10 |
|
Total revenues | $ | 6,940 |
| $ | 2,162 |
| $ | 3,242 |
| $ | 1,688 |
| $ | 1,548 |
| $ | 489 |
| $ | 807 |
| $ | 168 |
| $ | 5,421 |
| $ | 1,610 |
| $ | 2,498 |
| $ | 1,243 |
| $ | 1,250 |
| $ | 423 |
| $ | 617 |
| $ | 197 |
|
| |
(a) | Other revenue sources include revenues from leases, derivatives and alternative revenue programs that are not considered revenues from contracts with customers. Alternative revenue programs in certain jurisdictions include regulatory mechanisms that periodically adjust for over or under collection of related revenues. |
|
| |
FINANCIAL STATEMENTS | REVENUE |
| | | Three Months Ended September 30, 2018 | Three Months Ended June 30, 2019 |
| | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
| | | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
| |
(in millions) | Duke |
| Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
| | Duke |
| Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
| |
By market or type of customer | Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Piedmont |
| Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Piedmont |
|
Electric Utilities and Infrastructure | | |
Residential | $ | 2,729 |
| $ | 823 |
| $ | 1,425 |
| $ | 572 |
| $ | 853 |
| $ | 203 |
| $ | 279 |
| $ | — |
| $ | 2,304 |
| $ | 679 |
| $ | 1,243 |
| $ | 496 |
| $ | 747 |
| $ | 159 |
| $ | 225 |
| $ | — |
|
General | 1,763 |
| 635 |
| 800 |
| 373 |
| 427 |
| 112 |
| 218 |
| — |
| 1,584 |
| 531 |
| 750 |
| 339 |
| 411 |
| 105 |
| 197 |
| — |
|
Industrial | 835 |
| 352 |
| 246 |
| 177 |
| 69 |
| 33 |
| 202 |
| — |
| 759 |
| 289 |
| 231 |
| 164 |
| 67 |
| 36 |
| 201 |
| — |
|
Wholesale | 589 |
| 132 |
| 372 |
| 335 |
| 37 |
| 3 |
| 81 |
| — |
| 527 |
| 109 |
| 351 |
| 309 |
| 42 |
| 9 |
| 59 |
| — |
|
Other revenues | 225 |
| 109 |
| 134 |
| 90 |
| 44 |
| 20 |
| 29 |
| — |
| 187 |
| 68 |
| 99 |
| 44 |
| 55 |
| 25 |
| 27 |
| — |
|
Total Electric Utilities and Infrastructure revenue from contracts with customers | $ | 6,141 |
| $ | 2,051 |
| $ | 2,977 |
| $ | 1,547 |
| $ | 1,430 |
| $ | 371 |
| $ | 809 |
| $ | — |
| $ | 5,361 |
| $ | 1,676 |
| $ | 2,674 |
| $ | 1,352 |
| $ | 1,322 |
| $ | 334 |
| $ | 709 |
| $ | — |
|
| | |
Gas Utilities and Infrastructure | | |
Residential | $ | 116 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 59 |
| $ | — |
| $ | 57 |
| $ | 146 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 64 |
| $ | — |
| $ | 82 |
|
Commercial | 66 |
| — |
| — |
| — |
| — |
| 20 |
| — |
| 46 |
| 85 |
| — |
| — |
| — |
| — |
| 26 |
| — |
| 59 |
|
Industrial | 28 |
| — |
| — |
| — |
| — |
| 3 |
| — |
| 24 |
| 29 |
| — |
| — |
| — |
| — |
| 3 |
| — |
| 24 |
|
Power Generation | — |
| — |
| — |
| — |
| — |
| — |
| — |
| 13 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 13 |
|
Other revenues | 23 |
| — |
| — |
| — |
| — |
| 1 |
| — |
| 22 |
| 22 |
| — |
| — |
| — |
| — |
| 2 |
| — |
| 19 |
|
Total Gas Utilities and Infrastructure revenue from contracts with customers | $ | 233 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 83 |
| $ | — |
| $ | 162 |
| $ | 282 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 95 |
| $ | — |
| $ | 197 |
|
| | |
Commercial Renewables | | |
Revenue from contracts with customers | $ | 61 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 46 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
|
| | |
Other | | |
Revenue from contracts with customers | $ | 16 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 12 |
| $ | — |
| $ | — |
| $ | 6 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
|
Total revenue from contracts with customers | $ | 6,451 |
| $ | 2,051 |
| $ | 2,977 |
| $ | 1,547 |
| $ | 1,430 |
| $ | 466 |
| $ | 809 |
| $ | 162 |
| $ | 5,695 |
| $ | 1,676 |
| $ | 2,674 |
| $ | 1,352 |
| $ | 1,322 |
| $ | 429 |
| $ | 709 |
| $ | 197 |
|
| | |
Other revenue sources(a) | $ | 177 |
| $ | 39 |
| $ | 68 |
| $ | 35 |
| $ | 32 |
| $ | 3 |
| $ | 10 |
| $ | 10 |
| $ | 178 |
| $ | 37 |
| $ | 70 |
| $ | 35 |
| $ | 31 |
| $ | 4 |
| $ | 5 |
| $ | 12 |
|
Total revenues | $ | 6,628 |
| $ | 2,090 |
| $ | 3,045 |
| $ | 1,582 |
| $ | 1,462 |
| $ | 469 |
| $ | 819 |
| $ | 172 |
| $ | 5,873 |
| $ | 1,713 |
| $ | 2,744 |
| $ | 1,387 |
| $ | 1,353 |
| $ | 433 |
| $ | 714 |
| $ | 209 |
|
| |
(a) | Other revenue sources include revenues from leases, derivatives and alternative revenue programs that are not considered revenues from contracts with customers. Alternative revenue programs in certain jurisdictions include regulatory mechanisms that periodically adjust for over or under collection of related revenues. |
|
| |
FINANCIAL STATEMENTS | REVENUE |
| | | Nine Months Ended September 30, 2019 | Six Months Ended June 30, 2020 |
| | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
| | | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
| |
(in millions) | Duke |
| Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
| | Duke |
| Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
| |
By market or type of customer | Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Piedmont |
| Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Piedmont |
|
Electric Utilities and Infrastructure | | |
Residential | $ | 7,597 |
| $ | 2,331 |
| $ | 3,879 |
| $ | 1,657 |
| $ | 2,222 |
| $ | 563 |
| $ | 825 |
| $ | — |
| $ | 4,515 |
| $ | 1,433 |
| $ | 2,242 |
| $ | 962 |
| $ | 1,280 |
| $ | 345 |
| $ | 496 |
| $ | — |
|
General | 4,896 |
| 1,714 |
| 2,225 |
| 1,044 |
| 1,181 |
| 335 |
| 619 |
| — |
| 2,887 |
| 1,056 |
| 1,275 |
| 617 |
| 658 |
| 217 |
| 342 |
| — |
|
Industrial | 2,339 |
| 927 |
| 708 |
| 514 |
| 194 |
| 109 |
| 595 |
| — |
| 1,351 |
| 529 |
| 428 |
| 308 |
| 120 |
| 68 |
| 327 |
| — |
|
Wholesale | 1,685 |
| 341 |
| 1,133 |
| 992 |
| 141 |
| 36 |
| 176 |
| — |
| 932 |
| 215 |
| 606 |
| 519 |
| 87 |
| 12 |
| 99 |
| — |
|
Other revenues | 557 |
| 222 |
| 389 |
| 239 |
| 150 |
| 59 |
| 66 |
| — |
| 475 |
| 122 |
| 309 |
| 133 |
| 176 |
| 39 |
| 41 |
| — |
|
Total Electric Utilities and Infrastructure revenue from contracts with customers | $ | 17,074 |
| $ | 5,535 |
| $ | 8,334 |
| $ | 4,446 |
| $ | 3,888 |
| $ | 1,102 |
| $ | 2,281 |
| $ | — |
| $ | 10,160 |
| $ | 3,355 |
| $ | 4,860 |
| $ | 2,539 |
| $ | 2,321 |
| $ | 681 |
| $ | 1,305 |
| $ | — |
|
| | |
Gas Utilities and Infrastructure | | |
Residential | $ | 673 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 229 |
| $ | — |
| $ | 443 |
| $ | 519 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 159 |
| $ | — |
| $ | 360 |
|
Commercial | 359 |
| — |
| — |
| — |
| — |
| 96 |
| — |
| 263 |
| 244 |
| — |
| — |
| — |
| — |
| 66 |
| — |
| 178 |
|
Industrial | 103 |
| — |
| — |
| — |
| — |
| 14 |
| — |
| 91 |
| 68 |
| — |
| — |
| — |
| — |
| 9 |
| — |
| 58 |
|
Power Generation | — |
| — |
| — |
| — |
| — |
| — |
| — |
| 39 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 17 |
|
Other revenues | 101 |
| — |
| — |
| — |
| — |
| 13 |
| — |
| 88 |
| 42 |
| — |
| — |
| — |
| — |
| 9 |
| — |
| 35 |
|
Total Gas Utilities and Infrastructure revenue from contracts with customers | $ | 1,236 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 352 |
| $ | — |
| $ | 924 |
| $ | 873 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 243 |
| $ | — |
| $ | 648 |
|
| | |
Commercial Renewables | | |
Revenue from contracts with customers | $ | 157 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 113 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
|
| | |
Other | | |
Revenue from contracts with customers | $ | 18 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 13 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
|
Total Revenue from contracts with customers | $ | 18,485 |
| $ | 5,535 |
| $ | 8,334 |
| $ | 4,446 |
| $ | 3,888 |
| $ | 1,454 |
| $ | 2,281 |
| $ | 924 |
| $ | 11,159 |
| $ | 3,355 |
| $ | 4,860 |
| $ | 2,539 |
| $ | 2,321 |
| $ | 924 |
| $ | 1,305 |
| $ | 648 |
|
| | |
Other revenue sources(a) | $ | 491 |
| $ | 84 |
| $ | 224 |
| $ | 113 |
| $ | 99 |
| $ | (1 | ) | $ | 8 |
| $ | 32 |
| $ | 211 |
| $ | 3 |
| $ | 60 |
| $ | 42 |
| $ | 9 |
| $ | (3 | ) | $ | 4 |
| $ | 61 |
|
Total revenues | $ | 18,976 |
| $ | 5,619 |
| $ | 8,558 |
| $ | 4,559 |
| $ | 3,987 |
| $ | 1,453 |
| $ | 2,289 |
| $ | 956 |
| $ | 11,370 |
| $ | 3,358 |
| $ | 4,920 |
| $ | 2,581 |
| $ | 2,330 |
| $ | 921 |
| $ | 1,309 |
| $ | 709 |
|
| |
(a) | Other revenue sources include revenues from leases, derivatives and alternative revenue programs that are not considered revenues from contracts with customers. Alternative revenue programs in certain jurisdictions include regulatory mechanisms that periodically adjust for over or under collection of related revenues. |
|
| |
FINANCIAL STATEMENTS | REVENUE |
| | | Nine Months Ended September 30, 2018 | Six Months Ended June 30, 2019 |
| | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
| | | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
| |
(in millions) | Duke |
| Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
| | Duke |
| Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
| |
By market or type of customer | Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Piedmont |
| Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Piedmont |
|
Electric Utilities and Infrastructure | | |
Residential | $ | 7,264 |
| $ | 2,263 |
| $ | 3,636 |
| $ | 1,540 |
| $ | 2,096 |
| $ | 564 |
| $ | 802 |
| $ | — |
| $ | 4,674 |
| $ | 1,439 |
| $ | 2,357 |
| $ | 1,032 |
| $ | 1,325 |
| $ | 348 |
| $ | 531 |
| $ | — |
|
General | 4,619 |
| 1,608 |
| 2,109 |
| 972 |
| 1,137 |
| 318 |
| 584 |
| — |
| 3,011 |
| 1,027 |
| 1,382 |
| 645 |
| 737 |
| 208 |
| 394 |
| — |
|
Industrial | 2,235 |
| 893 |
| 678 |
| 481 |
| 197 |
| 96 |
| 567 |
| — |
| 1,470 |
| 555 |
| 453 |
| 325 |
| 128 |
| 69 |
| 391 |
| — |
|
Wholesale | 1,737 |
| 366 |
| 1,140 |
| 1,019 |
| 121 |
| 5 |
| 226 |
| — |
| 1,068 |
| 228 |
| 704 |
| 624 |
| 80 |
| 23 |
| 113 |
| — |
|
Other revenues | 558 |
| 261 |
| 359 |
| 222 |
| 137 |
| 57 |
| 66 |
| — |
| 359 |
| 146 |
| 271 |
| 169 |
| 102 |
| 41 |
| 44 |
| — |
|
Total Electric Utilities and Infrastructure revenue from contracts with customers | $ | 16,413 |
| $ | 5,391 |
| $ | 7,922 |
| $ | 4,234 |
| $ | 3,688 |
| $ | 1,040 |
| $ | 2,245 |
| $ | — |
| $ | 10,582 |
| $ | 3,395 |
| $ | 5,167 |
| $ | 2,795 |
| $ | 2,372 |
| $ | 689 |
| $ | 1,473 |
| $ | — |
|
| | |
Gas Utilities and Infrastructure | | |
Residential | $ | 682 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 236 |
| $ | — |
| $ | 446 |
| $ | 560 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 176 |
| $ | — |
| $ | 384 |
|
Commercial | 354 |
| — |
| — |
| — |
| — |
| 97 |
| — |
| 257 |
| 291 |
| — |
| — |
| — |
| — |
| 75 |
| — |
| 216 |
|
Industrial | 107 |
| — |
| — |
| — |
| — |
| 13 |
| — |
| 93 |
| 77 |
| — |
| — |
| — |
| — |
| 10 |
| — |
| 66 |
|
Power Generation | — |
| — |
| — |
| — |
| — |
| — |
| — |
| 40 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 26 |
|
Other revenues | 101 |
| — |
| — |
| — |
| — |
| 13 |
| — |
| 88 |
| 85 |
| — |
| — |
| — |
| — |
| 10 |
| — |
| 75 |
|
Total Gas Utilities and Infrastructure revenue from contracts with customers | $ | 1,244 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 359 |
| $ | — |
| $ | 924 |
| $ | 1,013 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 271 |
| $ | — |
| $ | 767 |
|
| | |
Commercial Renewables | | |
Revenue from contracts with customers | $ | 141 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 88 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
|
| | |
Other | | |
Revenue from contracts with customers | $ | 47 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 36 |
| $ | — |
| $ | — |
| $ | 10 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
|
Total Revenue from contracts with customers | $ | 17,845 |
| $ | 5,391 |
| $ | 7,922 |
| $ | 4,234 |
| $ | 3,688 |
| $ | 1,435 |
| $ | 2,245 |
| $ | 924 |
| $ | 11,693 |
| $ | 3,395 |
| $ | 5,167 |
| $ | 2,795 |
| $ | 2,372 |
| $ | 960 |
| $ | 1,473 |
| $ | 767 |
|
| | |
Other revenue sources(a) | $ | 561 |
| $ | 134 |
| $ | 197 |
| $ | 99 |
| $ | 92 |
| $ | 17 |
| $ | 43 |
| $ | 16 |
| $ | 343 |
| $ | 62 |
| $ | 149 |
| $ | 76 |
| $ | 67 |
| $ | 4 |
| $ | 9 |
| $ | 21 |
|
Total revenues | $ | 18,406 |
| $ | 5,525 |
| $ | 8,119 |
| $ | 4,333 |
| $ | 3,780 |
| $ | 1,452 |
| $ | 2,288 |
| $ | 940 |
| $ | 12,036 |
| $ | 3,457 |
| $ | 5,316 |
| $ | 2,871 |
| $ | 2,439 |
| $ | 964 |
| $ | 1,482 |
| $ | 788 |
|
| |
(a) | Other revenue sources include revenues from leases, derivatives and alternative revenue programs that are not considered revenues from contracts with customers. Alternative revenue programs in certain jurisdictions include regulatory mechanisms that periodically adjust for over or under collection of related revenues. |
|
| |
FINANCIAL STATEMENTS | REVENUE |
As described in Note 1, Duke Energy adopted the new guidance for credit losses effective January 1, 2020, using the modified retrospective method of adoption, which does not require restatement of prior year reported results. The following table presents the reserve for credit losses for trade and other receivables based on adoption of the new standard. |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2020 |
| | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
| |
| Duke |
| Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
| |
(in millions) | Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Piedmont |
|
Balance at March 31, 2020 | $ | 89 |
| $ | 11 |
| $ | 20 |
| $ | 9 |
| $ | 11 |
| $ | 5 |
| $ | 3 |
| $ | 9 |
|
Write-Offs | (9 | ) | (3 | ) | (3 | ) | (3 | ) | — |
| — |
| — |
| (4 | ) |
Credit Loss Expense | 15 |
| 6 |
| 12 |
| 8 |
| 3 |
| — |
| — |
| 1 |
|
Other Adjustments | 7 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
|
Balance at June 30, 2020 | $ | 102 |
| $ | 14 |
| $ | 29 |
| $ | 14 |
| $ | 14 |
| $ | 5 |
| $ | 3 |
| $ | 6 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, 2020 |
| | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
| |
| Duke |
| Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
| |
(in millions) | Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Piedmont |
|
Balance at December 31, 2019 | $ | 76 |
| $ | 10 |
| $ | 16 |
| $ | 8 |
| $ | 7 |
| $ | 4 |
| $ | 3 |
| $ | 6 |
|
Cumulative Change in Accounting Principle | 5 |
| 1 |
| 2 |
| 1 |
| 1 |
| — |
| — |
| 1 |
|
Write-Offs | (19 | ) | (6 | ) | (7 | ) | (5 | ) | (2 | ) | — |
| — |
| (5 | ) |
Credit Loss Expense | 33 |
| 9 |
| 18 |
| 10 |
| 8 |
| 1 |
| — |
| 4 |
|
Other Adjustments | 7 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
|
Balance at June 30, 2020 | $ | 102 |
| $ | 14 |
| $ | 29 |
| $ | 14 |
| $ | 14 |
| $ | 5 |
| $ | 3 |
| $ | 6 |
|
Trade and other receivables are evaluated based on an estimate of the risk of loss over the life of the receivable and current and historical conditions using supportable assumptions. Management evaluates the risk of loss for trade and other receivables by comparing the historical write-off amounts to total revenue over a specified period. Historical loss rates are adjusted due to the impact of current conditions, including the impacts of COVID-19, as well as forecasted conditions over a reasonable time period. The calculated write-off rate can be applied to the receivable balance for which an established reserve does not already exist. Management reviews the assumptions and risk of loss periodically for trade and other receivables. Due to the COVID-19 pandemic, as described in Note 1, the Duke Energy Registrants suspended customer disconnections for nonpayment. The specific actions taken by each Duke Energy Registrant are described in Note 3. The impact of COVID-19 and Duke Energy’s related response on customers’ ability to pay for service is uncertain, and it is reasonably possible eventual write-offs of customer receivables may increase over current estimates.
The aging of trade receivables is presented in the table below. Duke Energy considers receivables greater than 30 days outstanding past due. |
| | | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2020 |
| | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
| |
| Duke |
| Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
| |
(in millions) | Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Piedmont |
|
Unbilled Receivables | $ | 829 |
| $ | 332 |
| $ | 274 |
| $ | 137 |
| $ | 137 |
| $ | 1 |
| $ | 7 |
| $ | 6 |
|
0-30 days | 1,624 |
| 470 |
| 685 |
| 336 |
| 344 |
| 48 |
| 28 |
| 73 |
|
30-60 days | 152 |
| 49 |
| 56 |
| 28 |
| 28 |
| 6 |
| 1 |
| 6 |
|
60-90 days | 90 |
| 29 |
| 34 |
| 17 |
| 17 |
| 4 |
| 1 |
| 5 |
|
90+ days | 209 |
| 64 |
| 53 |
| 24 |
| 29 |
| 29 |
| 10 |
| 18 |
|
Trade and Other Receivables | $ | 2,904 |
| $ | 944 |
| $ | 1,102 |
| $ | 542 |
| $ | 555 |
| $ | 88 |
| $ | 47 |
| $ | 108 |
|
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.
|
| |
FINANCIAL STATEMENTS | REVENUE |
Unbilled revenues are included within Receivables and Receivables of VIEs on the Condensed Consolidated Balance Sheets as shown in the following table. | | (in millions) | September 30, 2019 |
| | December 31, 2018 |
| June 30, 2020 |
| | December 31, 2019 |
|
Duke Energy | $ | 831 |
| | $ | 896 |
| $ | 829 |
| | $ | 843 |
|
Duke Energy Carolinas | 312 |
| | 313 |
| 332 |
| | 298 |
|
Progress Energy | 265 |
| | 244 |
| 274 |
| | 217 |
|
Duke Energy Progress | 141 |
| | 148 |
| 137 |
| | 122 |
|
Duke Energy Florida | 124 |
| | 96 |
| 137 |
| | 95 |
|
Duke Energy Ohio | 2 |
| | 2 |
| 1 |
| | 1 |
|
Duke Energy Indiana | 19 |
| | 23 |
| 7 |
| | 16 |
|
Piedmont | 2 |
| | 73 |
| 6 |
| | 78 |
|
|
| |
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 account 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 1311 for further information. These receivables for unbilled revenues are shown in the table below.
| | (in millions) | September 30, 2019 |
| | December 31, 2018 |
| June 30, 2020 |
| | December 31, 2019 |
|
Duke Energy Ohio | $ | 74 |
| | $ | 86 |
| $ | 68 |
| | $ | 82 |
|
Duke Energy Indiana | 124 |
| | 128 |
| 106 |
| | 115 |
|
15.13. STOCKHOLDERS' EQUITY
Basic EPS is computed by dividing net income attributableavailable to Duke Energy common stockholders, as adjusted for distributed and undistributed earnings allocated to participating securities, by the weighted average number of common shares outstanding during the period. Diluted EPS is computed by dividing net income attributableavailable to Duke Energy common stockholders, as adjusted for distributed and undistributed earnings allocated to participating securities, by the diluted weighted average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution that could occur if securities or other agreements to issue common stock, such as stock options and equity forward sale agreements, were exercised or settled. Duke Energy’s participating securities are restricted stock units that are entitled to dividends declared on Duke Energy common stock during the restricted stock unit’s vesting periods. Dividends declared on preferred stock are recorded on the income statementCondensed Consolidated Statements of Operations as a reduction of net income to arrive at net income attributableavailable to Duke Energy common stockholders. Dividends accumulated on preferred stock are a reductionan adjustment to net income used in the calculation of basic and diluted EPS.
The following table presents Duke Energy’s basic and diluted EPS calculations, the weighted average number of common shares outstanding and common and preferred share dividends declared. |
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
(in millions, except per-share amounts) | 2019 |
| | 2018 |
| | 2019 |
| | 2018 |
|
Income from continuing operations attributable to Duke Energy common stockholders excluding impact of participating securities | $ | 1,324 |
| | $ | 1,077 |
| | $ | 3,041 |
| | $ | 2,199 |
|
| | | | | | | |
Weighted average common shares outstanding – basic | 729 |
| | 713 |
| | 728 |
| | 705 |
|
Equity Forwards | — |
| | 1 |
| | — |
| | 1 |
|
Weighted average common shares outstanding – diluted | 729 |
| | 714 |
| | 728 |
| | 706 |
|
EPS from continuing operations attributable to Duke Energy common stockholders | | | | | | | |
Basic | $ | 1.82 |
| | $ | 1.51 |
| | $ | 4.18 |
| | $ | 3.12 |
|
Diluted | $ | 1.82 |
| | $ | 1.51 |
| | $ | 4.18 |
| | $ | 3.11 |
|
Potentially dilutive items excluded from the calculation(a) | 2 |
| | 2 |
| | 2 |
| | 2 |
|
Dividends declared per common share | $ | 0.945 |
| | $ | 0.9275 |
| | $ | 2.800 |
| | $ | 2.7075 |
|
Dividends declared on Series A preferred stock per depositary share | $ | 0.359 |
| | $ | — |
| | $ | 0.667 |
| | $ | — |
|
|
| | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(in millions, except per share amounts) | 2020 |
| | 2019 |
| | 2020 |
| | 2019 |
|
Net (loss) income available to Duke Energy common stockholders excluding impact of participating securities | $ | (817 | ) | | $ | 819 |
| | $ | 82 |
| | $ | 1,718 |
|
Accumulated preferred stock dividends | (12 | ) | | — |
| | — |
| | — |
|
Net (loss) income available to Duke Energy common stockholders excluding impact of participating securities and including accumulated preferred stock dividends | $ | (829 | ) | | $ | 819 |
| | $ | 82 |
| | $ | 1,718 |
|
| | | | | | | |
Weighted average common shares outstanding – basic | 735 |
| | 728 |
| | 734 |
| | 728 |
|
Equity forwards | — |
| | — |
| | 1 |
| | — |
|
Weighted average common shares outstanding – diluted | 735 |
| | 728 |
| | 735 |
| | 728 |
|
Earnings (Loss) Per Share available to Duke Energy common stockholders | | | | | | | |
Basic and diluted | $ | (1.13 | ) | | $ | 1.12 |
| | $ | 0.11 |
| | $ | 2.36 |
|
Potentially dilutive items excluded from the calculation(a) | 2 |
| | 2 |
| | 2 |
| | 2 |
|
Dividends declared per common share | $ | 0.945 |
| | $ | 0.928 |
| | $ | 1.890 |
| | $ | 1.855 |
|
Dividends declared on Series A preferred stock per depositary share(b) | $ | 0.359 |
| | $ | 0.307 |
| | $ | 0.719 |
| | $ | 0.307 |
|
Dividends declared on Series B preferred stock per share(c) | $ | — |
| | $ | — |
| | $ | 24.917 |
| | $ | — |
|
| |
(a) | Performance stock awards were not included in the dilutive securities calculation because the performance measures related to the awards had not been met. |
| |
(b) | 5.75% Series A Cumulative Redeemable Perpetual Preferred Stock dividends are payable quarterly in arrears on the 16th day of March, June, September and December. The preferred stock has a $25 liquidation preference per depositary share. |
| |
(c) | 4.875% Series B Fixed-Rate Reset Cumulative Redeemable Perpetual Preferred Stock dividends are payable semiannually in arrears on the 16th day of March and September. The preferred stock has a $1,000 liquidation preference per share. |
Common Stock
On February 20, 2018, Duke Energy filed a prospectus supplement and executed an EDA under which it may sell up to $1 billion of its common stock through an ATM offering program, including an equity forward sales component. The EDA was entered into with the Agents. Under the terms of the EDA, Duke Energy was allowed to issue and sell, through any of the Agents, shares of common stock. The existing ATM offering program expired on September 23, 2019. Duke Energy expects to reestablish an ATM offering program during November 2019.93
In June 2018, Duke Energy marketed two separate tranches, each for 1.3 million shares, of common stock 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 required 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. 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.
|
| |
FINANCIAL STATEMENTS | STOCKHOLDERS' EQUITY |
Common Stock
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 nine months ended September 30,November 2019, Duke Energy issued 1.4 millionfiled a prospectus supplement and executed an Equity Distribution Agreement (EDA) under which it may sell up to $1.5 billion of its common stock through an at-the-market (ATM) offering program, including an equity forward sales component. Under the terms of the EDA, Duke Energy may issue and sell shares of common stock through its DRIPSeptember 2022. In March 2020, Duke Energy marketed approximately 940,000 shares of common stock through an equity forward transaction under the ATM with an increaseinitial forward price of $89.76 per share. In May 2020, Duke Energy marketed approximately 903,000 shares of common stock through an equity forward transaction under the ATM with an initial forward price of $82.44 per share.
Separately, in additional paid-in capital of approximately $120 million.
In March and AprilNovember 2019, Duke Energy marketed two separate tranches, each for 1.1an equity offering of 28.75 million shares of common stock through an Underwriting Agreement. In connection with the offering, Duke Energy entered into an equity forward transactions under the ATM program. The first tranche hadsales agreement with an initial forward price of $89.83$85.99 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 forwardsforward sales agreements 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 agreementsagreement, or net settle in whole or in part through the delivery or receipt of cash or shares. The settlement alternative isalternatives are at Duke Energy's election. No amounts have or will be recorded in Duke Energy's Condensed Consolidated Financial Statements with respect to these ATM offerings until settlementsSettlement of the equity forwardsforward sales agreements are expected to occur which is expected byon or prior to December 31, 2019. The initial forward sale price will be subject to adjustment based on a floating interest rate factor and other fixed amounts specified in the relevant forward sale agreements.2020. Until settlement of the equity forwards, EPS dilution resulting from the agreements, if any, will be determined under the treasury stock method.
Preferred Stock
On March 29, 2019, Duke Energy completed the issuance 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 with proceeds used for general corporate purposes and to reduce short-term debt. The preferred stock has a $25 liquidation preference per depositary share and earns dividends on a cumulative basis at a rate of 5.75% per annum. Dividends are payable quarterly in arrears on the 16th day of March, June, September and December, and began on June 16, 2019.
The Series A Preferred Stock has no maturity or mandatory redemption date, is not redeemable at the option of the holders and includes separate call options. The first call option allows Duke Energy to call the Series A Preferred Stock at a redemption price of $25.50 per depositary share prior to June 15, 2024, in whole but not in part, at any time within 120 days after a ratings event where a rating agency amends, clarifies or 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 also required to redeem all accumulated and unpaid dividends if either call option is exercised.
On September 12, 2019, Duke Energy completed the issuance of 1 million shares of its Series B Fixed-Rate Reset Cumulative Redeemable Perpetual Preferred Stock, at a price of $1,000 per share. The transaction resulted in net proceeds of $990 million after issuance costs with proceeds being used to pay down short-term debt, repay at maturity $500 million senior notes due September 2019 and for general corporate purposes. The preferred stock has a $1,000 liquidation preference per share and earns dividends on a cumulative basis at an initial rate of 4.875% per annum. Dividends are payable semiannual in arrears on the 16th day of March and September, beginning on March 16, 2020. On September 16, 2024, the First Call Date, and any fifth anniversary of the First Call Date (each a Reset Date),the dividend rate will reset based on the then current five-year U.S. treasury rate plus a spread of 3.388%.
The Series B Preferred Stock has no maturity or mandatory redemption date, is not redeemable at the option of the holders and includes separate call options. The first call option allows Duke Energy to call the Series B Preferred Stock at a redemption price of $1,020 per share, in whole but not in part, at any time within 120 days after a ratings event. The second call option allows Duke Energy to call the preferred stock, in whole or in part, on the First Call Date or any subsequent Reset Date at a redemption price in cash equal to $1,000 per share. Duke Energy is also required to redeem all accumulated and unpaid dividends if either call option is exercised.
Dividends issued on its Series A and Series B 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.
The Series A and Series B Preferred Stock rank, with respect to dividends and distributions upon liquidation or dissolution:
senior to Common Stock and to each other class or series of capital stock established after the original issue date of the Series A and Series B Preferred Stock that is expressly made subordinated to the Series A and Series B Preferred Stock;
on a parity with any class or series of capital stock established after the original issue date of the Series A and Series B Preferred Stock that is not expressly made senior or subordinated to the Series A or Series B Preferred Stock;
junior to any class or series of capital stock established after the original issue date of the Series A and Series B Preferred Stock that is expressly made senior to the Series A or Series B Preferred Stock;
junior to all of 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.
|
| |
FINANCIAL STATEMENTS | STOCKHOLDERS' EQUITY |
Holders of Series A and Series B Preferred Stock have no voting rights with respect to matters that generally require the approval of voting stockholders. The limited voting rights of holders of Series A or Series B Preferred Stock include the right to vote as a single class, respectively, on certain matters that may affect the preference or special rights of the preferred stock, except in the instance that Duke Energy elects to defer the payment of dividends for a total of six quarterly full dividend periods for Series A Preferred Stock or three semiannual full dividend periods for Series B Preferred Stock. If dividends are deferred for a cumulative total of six quarterly full dividend periods for Series A Preferred Stock or three semiannual full dividend periods for Series B Preferred Stock, whether or not for consecutive dividend periods, holders of the respective preferred stock have the right to elect two additional Board members to the Duke Energy Board of Directors.
16.14. EMPLOYEE BENEFIT PLANS
DEFINED BENEFIT RETIREMENT PLANS
Duke Energy and certain subsidiaries maintain, and the Subsidiary Registrants participate in, qualified and non-qualified, non-contributory defined benefit retirement plans. Duke Energy's policy is to fund amounts on an actuarial basis to provide assets sufficient to meet benefit payments to be paid to plan participants.
QUALIFIED PENSION PLANS
The following table includes information related totables include the Duke Energy Registrants' contributions to its qualified defined benefit pension plans.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2019 |
| | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
(in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Contributions made | $ | 77 |
| | $ | 7 |
| | $ | 57 |
| | $ | 4 |
| | $ | 53 |
| | $ | 2 |
| | $ | 2 |
| | $ | 1 |
|
Duke Energy uses a December 31 measurement date for its qualified non-contributory defined benefit retirement plan assets and obligations. However, because Duke Energy believed it was probable in 2019 that total lump-sum benefit payments would exceed the settlement threshold, which is defined as the sum of the service cost and interest cost on projected benefit obligation components of net periodic pension costs
Duke Energy remeasured the plan assets and plan obligations associated with one of itsfor qualified pension
plans as of June 30, 2019, and September 30, 2019, (total lump-sum benefit payments exceeded the settlement threshold as of September 30, 2019). The discount rate used for the remeasurements was 3.5% and 3.2% as of June 30, 2019, and September 30, 2019, respectively. The cash balance interest crediting rate was 4.0% as of June 30, 2019, and September 30, 2019. All other assumptions used for the June 30, 2019, and September 30, 2019, remeasurements were consistent with the measurement as of December 31, 2018.plans.As a result of the June 30, 2019, remeasurement, Duke Energy recognized a remeasurement gain of $18 million, which was recorded in Other within Other Noncurrent Assets on the Condensed Consolidated Balance Sheets as of June 30, 2019. The remeasurement gain, which represents an increase in funded status, reflects an increase of $275 million in the fair value of plan assets and an increase of $257 million in the projected benefit obligation. As a result of the September 30, 2019, remeasurement, Duke Energy recognized a remeasurement loss of $136 million, which was recorded in Other within Other Noncurrent Assets on the Condensed Consolidated Balance Sheets as of September 30, 2019. The remeasurement loss, which represents a decrease in funded status, reflects a decrease of $10 million in the fair value of plan assets and an increase of $126 million in the projected benefit obligation. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2020 |
| | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
(in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Service cost | $ | 42 |
| | $ | 14 |
| | $ | 12 |
| | $ | 8 |
| | $ | 6 |
| | $ | 1 |
| | $ | 2 |
| | $ | 2 |
|
Interest cost on projected benefit obligation | 68 |
| | 15 |
| | 22 |
| | 9 |
| | 11 |
| | 4 |
| | 5 |
| | 3 |
|
Expected return on plan assets | (143 | ) | | (36 | ) | | (47 | ) | | (22 | ) | | (26 | ) | | (7 | ) | | (10 | ) | | (6 | ) |
Amortization of actuarial loss | 30 |
| | 7 |
| | 9 |
| | 4 |
| | 5 |
| | 1 |
| | 3 |
| | 3 |
|
Amortization of prior service credit | (8 | ) | | (2 | ) | | (1 | ) | | (1 | ) | | (1 | ) | | — |
| | (1 | ) | | (3 | ) |
Amortization of settlement charges | 3 |
| | 1 |
| | — |
| | 1 |
| | — |
| | — |
| | — |
| | — |
|
Net periodic pension costs | $ | (8 | ) | | $ | (1 | ) | | $ | (5 | ) | | $ | (1 | ) | | $ | (5 | ) | | $ | (1 | ) | | $ | (1 | ) | | $ | (1 | ) |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 |
|
Service cost | $ | 37 |
| | $ | 12 |
| | $ | 10 |
| | $ | 6 |
| | $ | 6 |
| | $ | 1 |
| | $ | 2 |
| | $ | 2 |
|
Interest cost on projected benefit obligation | 82 |
| | 21 |
| | 26 |
| | 12 |
| | 13 |
| | 4 |
| | 7 |
| | 3 |
|
Expected return on plan assets | (143 | ) | | (37 | ) | | (45 | ) | | (21 | ) | | (22 | ) | | (6 | ) | | (10 | ) | | (6 | ) |
Amortization of actuarial loss | 25 |
| | 5 |
| | 9 |
| | 3 |
| | 6 |
| | — |
| | 1 |
| | 1 |
|
Amortization of prior service credit | (8 | ) | | (2 | ) | | — |
| | (1 | ) | | (1 | ) | | — |
| | (1 | ) | | (2 | ) |
Net periodic pension costs | $ | (7 | ) | | $ | (1 | ) | | $ | — |
| | $ | (1 | ) | | $ | 2 |
| | $ | (1 | ) | | $ | (1 | ) | | $ | (2 | ) |
As the result of settlement accounting, Duke Energy recognized settlement charges of $69 million and $16 million, primarily as a regulatory asset within Other Noncurrent Assets on the Condensed Consolidated Balance Sheets as of June 30, 2019, and September 30, 2019, respectively (an immaterial amount was recorded in Other income and expenses, net within the Condensed Consolidated Statement of Operations). Settlement charges recognized by the Subsidiary Registrants as of June 30, 2019, were $43 million for Duke Energy Carolinas, $16 million for Duke Energy Progress, $3 million for Duke Energy Florida, $3 million for Duke Energy Indiana, $1 million for Duke Energy Ohio and $3 million for Piedmont. Settlement charges recognized by the Subsidiary Registrants as of September 30, 2019 were $6 million for Duke Energy Carolinas, $3 million for Duke Energy Progress, $2 million for Duke Energy Florida, $1 million for Duke Energy Indiana and $3 million for Piedmont. The settlement charges reflect the recognition of a pro
-rata portion of previously unrecognized actuarial losses, equal to the percentage of reduction in the projected benefit obligation resulting from total lump-sum benefits payments as of September 30, 2019.
|
| |
FINANCIAL STATEMENTS | EMPLOYEE BENEFIT PLANS |
QUALIFIED PENSION PLANS
The following tables include the components of net periodic pension costs for qualified pension plans. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2019 |
| | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
(in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Service cost | $ | 42 |
| | $ | 13 |
| | $ | 13 |
| | $ | 7 |
| | $ | 5 |
| | $ | 1 |
| | $ | 2 |
| | $ | 1 |
|
Interest cost on projected benefit obligation | 77 |
| | 17 |
| | 24 |
| | 10 |
| | 14 |
| | 5 |
| | 6 |
| | 2 |
|
Expected return on plan assets | (140 | ) | | (36 | ) | | (45 | ) | | (22 | ) | | (22 | ) | | (7 | ) | | (11 | ) | | (5 | ) |
Amortization of actuarial loss | 28 |
| | 6 |
| | 10 |
| | 4 |
| | 6 |
| | 2 |
| | 3 |
| | 2 |
|
Amortization of prior service credit | (8 | ) | | (2 | ) | | (1 | ) | | — |
| | — |
| | — |
| | — |
| | (2 | ) |
Net periodic pension costs | $ | (1 | ) | | $ | (2 | ) | | $ | 1 |
| | $ | (1 | ) | | $ | 3 |
| | $ | 1 |
| | $ | — |
| | $ | (2 | ) |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 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 | $ | 47 |
| | $ | 15 |
| | $ | 13 |
| | $ | 7 |
| | $ | 5 |
| | $ | 2 |
| | $ | 2 |
| | $ | 2 |
|
Interest cost on projected benefit obligation | 74 |
| | 18 |
| | 24 |
| | 10 |
| | 13 |
| | 4 |
| | 6 |
| | 3 |
|
Expected return on plan assets | (140 | ) | | (37 | ) | | (45 | ) | | (21 | ) | | (23 | ) | | (7 | ) | | (10 | ) | | (6 | ) |
Amortization of actuarial loss | 33 |
| | 7 |
| | 11 |
| | 6 |
| | 6 |
| | 1 |
| | 2 |
| | 3 |
|
Amortization of prior service credit | (8 | ) | | (2 | ) | | (1 | ) | | — |
| | — |
| | — |
| | — |
| | (3 | ) |
Net periodic pension costs | $ | 6 |
| | $ | 1 |
| | $ | 2 |
| | $ | 2 |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | (1 | ) |
| | | Nine Months Ended September 30, 2019 | Six Months Ended June 30, 2020 |
| | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
(in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
| Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Service cost | $ | 116 |
| | $ | 37 |
| | $ | 34 |
| | $ | 19 |
| | $ | 15 |
| | $ | 3 |
| | $ | 6 |
| | $ | 4 |
| $ | 83 |
| | $ | 26 |
| | $ | 24 |
| | $ | 14 |
| | $ | 11 |
| | $ | 2 |
| | $ | 4 |
| | $ | 3 |
|
Interest cost on projected benefit obligation | 242 |
| | 58 |
| | 76 |
| | 34 |
| | 41 |
| | 14 |
| | 19 |
| | 8 |
| 135 |
| | 31 |
| | 43 |
| | 19 |
| | 23 |
| | 8 |
| | 11 |
| | 5 |
|
Expected return on plan assets | (426 | ) | | (111 | ) | | (134 | ) | | (66 | ) | | (66 | ) | | (21 | ) | | (32 | ) | | (16 | ) | (286 | ) | | (72 | ) | | (95 | ) | | (44 | ) | | (51 | ) | | (14 | ) | | (21 | ) | | (11 | ) |
Amortization of actuarial loss | 77 |
| | 17 |
| | 28 |
| | 10 |
| | 18 |
| | 3 |
| | 6 |
| | 5 |
| 64 |
| | 14 |
| | 20 |
| | 9 |
| | 11 |
| | 3 |
| | 6 |
| | 5 |
|
Amortization of prior service credit | (24 | ) | | (6 | ) | | (2 | ) | | (1 | ) | | (1 | ) | | — |
| | (1 | ) | | (7 | ) | (16 | ) | | (4 | ) | | (2 | ) | | (1 | ) | | (1 | ) | | — |
| | (1 | ) | | (5 | ) |
Amortization of settlement charges | | 5 |
| | 2 |
| | 1 |
| | 1 |
| | — |
| | — |
| | — |
| | — |
|
Net periodic pension costs | $ | (15 | ) | | $ | (5 | ) | | $ | 2 |
| | $ | (4 | ) | | $ | 7 |
| | $ | (1 | ) | | $ | (2 | ) | | $ | (6 | ) | $ | (15 | ) | | $ | (3 | ) | | $ | (9 | ) | | $ | (2 | ) | | $ | (7 | ) | | $ | (1 | ) | | $ | (1 | ) | | $ | (3 | ) |
| | | Nine Months Ended September 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 | $ | 137 |
| | $ | 45 |
| | $ | 39 |
| | $ | 22 |
| | $ | 16 |
| | $ | 4 |
| | $ | 7 |
| | $ | 6 |
| $ | 74 |
| | $ | 24 |
| | $ | 21 |
| | $ | 12 |
| | $ | 10 |
| | $ | 2 |
| | $ | 4 |
| | $ | 3 |
|
Interest cost on projected benefit obligation | 224 |
| | 54 |
| | 70 |
| | 31 |
| | 38 |
| | 13 |
| | 18 |
| | 9 |
| 165 |
| | 41 |
| | 52 |
| | 24 |
| | 27 |
| | 9 |
| | 13 |
| | 6 |
|
Expected return on plan assets | (420 | ) | | (111 | ) | | (133 | ) | | (63 | ) | | (69 | ) | | (21 | ) | | (31 | ) | | (18 | ) | (286 | ) | | (75 | ) | | (89 | ) | | (44 | ) | | (44 | ) | | (14 | ) | | (21 | ) | | (11 | ) |
Amortization of actuarial loss | 99 |
| | 21 |
| | 33 |
| | 16 |
| | 18 |
| | 3 |
| | 6 |
| | 9 |
| 49 |
| | 11 |
| | 18 |
| | 6 |
| | 12 |
| | 1 |
| | 3 |
| | 3 |
|
Amortization of prior service credit | (24 | ) | | (6 | ) | | (3 | ) | | (1 | ) | | (1 | ) | | — |
| | — |
| | (9 | ) | (16 | ) | | (4 | ) | | (1 | ) | | (1 | ) | | (1 | ) | | — |
| | (1 | ) | | (5 | ) |
Net periodic pension costs | $ | 16 |
| | $ | 3 |
| | $ | 6 |
| | $ | 5 |
| | $ | 2 |
| | $ | (1 | ) | | $ | — |
| | $ | (3 | ) | $ | (14 | ) | | $ | (3 | ) | | $ | 1 |
| | $ | (3 | ) | | $ | 4 |
| | $ | (2 | ) | | $ | (2 | ) | | $ | (4 | ) |
NON-QUALIFIED PENSION PLANS
Net periodic pension costs for non-qualified pension plans were not material for the three and ninesix months ended SeptemberJune 30, 2019,2020, and 2018.2019.
OTHER POST-RETIREMENT BENEFIT PLANS
Net periodic costs for OPEB plans were not material for the three and ninesix months ended SeptemberJune 30, 2019,2020, and 2018.2019.
|
| |
FINANCIAL STATEMENTS | INCOME TAXES |
17.15. INCOME TAXES
EFFECTIVE TAX RATES
The ETRs from continuing operations for each of the Duke Energy Registrants are included in the following table. | | | Three Months Ended | | Nine Months Ended | Three Months Ended | | Six Months Ended |
| September 30, | | September 30, | June 30, | | June 30, |
| 2019 |
| | 2018 |
| | 2019 |
| | 2018 |
| 2020 |
| | 2019 |
| | 2020 |
| | 2019 |
|
Duke Energy | 12.4 | % | | 13.7 | % | | 12.5 | % | | 17.0 | % | 26.2 | % | | 15.9 | % | | 98.9 | % | | 12.6 | % |
Duke Energy Carolinas | 16.7 | % | | 22.6 | % | | 17.7 | % | | 22.3 | % | 13.7 | % | | 19.7 | % | | 15.1 | % | | 18.7 | % |
Progress Energy | 15.3 | % | | 18.8 | % | | 16.2 | % | | 17.0 | % | 14.9 | % | | 16.7 | % | | 16.1 | % | | 17.0 | % |
Duke Energy Progress | 14.7 | % | | 20.6 | % | | 16.1 | % | | 18.4 | % | 13.9 | % | | 16.3 | % | | 15.7 | % | | 17.1 | % |
Duke Energy Florida | 16.5 | % | | 15.0 | % | | 18.0 | % | | 16.3 | % | 19.1 | % | | 19.6 | % | | 19.4 | % | | 19.5 | % |
Duke Energy Ohio | 12.9 | % | | 16.0 | % | | 15.2 | % | | 16.0 | % | 15.4 | % | | 16.1 | % | | 16.6 | % | | 16.5 | % |
Duke Energy Indiana | 23.2 | % | | 22.7 | % | | 23.7 | % | | 24.7 | % | 17.3 | % | | 24.2 | % | | 19.3 | % | | 24.2 | % |
Piedmont | 35.7 | % | | 34.4 | % | | 18.5 | % | | 20.6 | % | 128.6 | % | | 22.2 | % | | 5.8 | % | | 21.8 | % |
The increase in the ETR for Duke Energy for the three and six months ended June 30, 2020, was primarily due to the impact of an abandonment of the ACP investment and an increase in the amortization of excess deferred taxes.
The decrease in the ETR for Duke Energy Carolinas for the three months ended SeptemberJune 30, 2019,2020, was primarily due to an increase in the amortization of excess deferred taxes and certain favorable tax credits.
The decrease in the ETR for Duke Energy Carolinas for the six months ended June 30, 2020, was primarily due to an increase in the amortization of excess deferred taxes.
The decrease in the ETR for Progress Energy for the three months ended June 30, 2020, was primarily due to an increase in the amortization of excess deferred taxes.
|
| |
FINANCIAL STATEMENTS | INCOME TAXES |
The decrease in the ETR for Duke Energy Progress for the three and six months ended June 30, 2020, was primarily due to an increase in the amortization of excess deferred taxes.
The decrease in the ETR for Duke Energy for the nine months ended September 30, 2019, was primarily due to a one-time valuation allowance charge in the prior year, an adjustment related to the income tax recognition for equity method investments recorded in the first quarter of 2019 and an increase in the amortization of excess deferred taxes. The equity method investment adjustment was immaterial and relates to prior years.
The decrease in the ETR for Duke Energy CarolinasIndiana for the three and ninesix months ended SeptemberJune 30, 2019, was primarily due to an increase in the amortization of excess deferred taxes.
The decrease in the ETR for Progress Energy for the three months ended September 30, 2019, was primarily due to an increase in the amortization of excess deferred taxes and favorable tax return true ups partially offset by a decrease in AFUDC equity in the current year.
The decrease in the ETR for Duke Energy Progress for the three and nine months ended September 30, 2019, was primarily due to an increase in the amortization of excess deferred taxes and favorable tax return true ups.
The increase in the ETR for Duke Energy Florida for the three and nine months ended September 30, 2019, was primarily due to a decrease in AFUDC equity in the current year.
The decrease in the ETR for Duke Energy Ohio for the three months ended September 30, 2019,2020, was primarily due to an increase in the amortization of excess deferred taxes.
The increase in the ETR in relation to pretax losses, for Piedmont for the three months ended SeptemberJune 30, 2019,2020, was primarily due to an increase in AFUDC Equity, in relation to pretax losses.
The decrease in the ETR for Piedmont for the six months ended June 30, 2020, was primarily due to an increase in the amortization of excess deferred taxes and partially offset by a decrease in favorable tax return true ups. The decrease in the ETR for the nine months ended September 30, 2019, was primarily due to an increase in the amortization of excess deferred taxes and partially offset by a decrease in favorable tax return true ups.AFUDC equity.
OTHER TAX MATTERS
On October 23, 2019, Duke Energy receivedMarch 27, 2020, the CARES Act was enacted. The CARES Act is an emergency economic stimulus package in response to the COVID-19 pandemic. Among other provisions, the CARES Act accelerates the remaining AMT credit refund allowances resulting in taxpayers being able to immediately claim a refund of $573 millionin full for any AMT credit carryforwards. As a result, the remaining AMT credit carryforwards were reclassified in the first quarter 2020 to a current receivable included in Other within Current Assets on the Condensed Consolidated Balance Sheets. The total income tax receivable related to AMT credit carryforwards based onis approximately $572 million as of June 30, 2020. The other provisions within the filing ofCARES Act do not materially impact Duke Energy's 2018 income tax return in 2019.accounting. See Note 1 for information on COVID-19.
18.16. SUBSEQUENT EVENTS
For information on subsequent events related to regulatory matters stockholders' equity and income taxes,variable interest entities, see Notes 3 15 and 17, respectively.11.
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 and Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and 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 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 ninesix months ended SeptemberJune 30, 2019,2020, and with Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2018.2019.
Executive Overview
Global Climate ChangeACP
On September 17, 2019,April 15, 2020, the United States District Court for the District of Montana granted partial summary judgment in favor of the plaintiffs in Northern Plains Resource Council v. U.S. Army Corps of Engineers (USACE) (Northern Plains), vacating USACE’s Nationwide Permit 12 (NWP 12) and remanding it to USACE for consultation under the Endangered Species Act (ESA) of 1973. In Northern Plains, the court ruled that NWP 12 was unlawful because USACE did not consult under the ESA with the U.S. Fish and Wildlife Service and/or National Marine Fisheries Service prior to NWP 12’s reissuance in 2017. Because NWP 12 has been vacated and its application enjoined, USACE currently has suspended verification of any new or pending applications under NWP 12 until further court action clarifies the situation.
On May 28, 2020, the U.S. Court of Appeals for the Ninth Circuit issued a ruling that limited the NWP 12 vacatur to energy infrastructure projects. In July 2020, the Supreme Court of the United States issued an order allowing other new oil and gas pipeline projects to use the NWP 12 process pending appeal to the U.S. Court of Appeals for the Ninth Circuit; however, that did not decrease the uncertainty associated with an eventual ruling. Together, these rulings indicated that the timeline to reinstate the necessary water crossing permits for ACP would likely cause further delays and cost increases.
On July 5, 2020, Dominion announced a sale of substantially all of its gas transmission and storage segment assets, operations core to the ACP pipeline project.
As a result of the uncertainty created by the NWP 12 rulings, the potential impact on the cost and schedule for the project, the ongoing legal challenges and risk of additional legal challenges throughout construction and Dominion’s decision to sell substantially all of its gas transmission and storage segment assets, Duke Energy's Board of Directors and management decided that it was not prudent to continue to invest in the project. On July 5, 2020, Duke Energy and Dominion announced the cancellation of the ACP pipeline.
As a result, Duke Energy recorded a pretax charge to earnings of approximately $2.0 billion for the three months and six months ended June 30, 2020, within Equity in (losses) earnings of unconsolidated affiliates on the Duke Energy Condensed Consolidated Statements of Operations. The tax benefit associated with this abandonment was $374 million and is recorded in Income Tax (Benefit) Expense on the Duke Energy Condensed Consolidated Statements of Operations. Additional charges of less than $100 million are expected to be recorded within the next 12 months as ACP incurs obligations to exit operations.
See Notes 3, 4, and 11 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” “Commitments and Contingencies,” and “Variable Interest Entities,” respectively, for additional information.
Even though the ACP pipeline was a critical infrastructure project for transporting natural gas into the Southeastern United States, natural gas still is an updated climate strategy with a new goalimportant fuel to help Duke Energy reach its carbon reduction goals of 50% by 2030 and net-zero carbon emissions from electric generation by 2050. Timelines2050 in a reliable and initiatives, as well as implementation of new technologies,cost effective manner. In addition, Duke Energy will varycontinue advancing its clean energy goals by investing in each state in which the company operatesrenewables, battery storage, energy efficiency programs and will involve collaboration with regulators, customersgrid projects.
Social Justice and other stakeholders.
Hurricane DorianRacial Equity
In the third quarter of 2019, Hurricane Dorian impacted approximately 270,000 North Carolina customersresponse to national events, in June and 30,000 South Carolina customers withinJuly 2020, the Duke Energy Progress service territory.Foundation pledged $1.75 million to nonprofit organizations committed to social justice and racial equity. This grant builds upon the company’s past efforts to support and encourage diversity, inclusion and equity in our company and communities. The company will continue to engage its employees, local organizations and leaders to understand how to be a part of the long-term solution to the social justice issues our communities and organizations face.
COVID-19
The COVID-19 pandemic is having a significant impact on global health and economic environments. Retail electric sales are down 6.5% for the quarter compared to the prior year due to the pandemic. This reduction however is not as steep as expected in our revised March 2020 forecast reflecting the potential economic impact of COVID-19 on 2020 results. The company also incurred approximately $40 million of incremental COVID-19 costs, primarily bad debt expense, personal protective equipment and cleaning supplies, and experienced another $25 million of waived late payment fees for the six months ended June 30, 2020. The Duke Energy Florida’sRegistrants are monitoring developments closely, have taken steps to mitigate the impacts to our business, and have a pandemic response plan in place to protect our employees, customers and communities. We expect to begin a sales rebound during the second half of 2020 and have cost mitigation plans.
Employees. The health of our employees is of paramount importance. Power plants and electricity and natural gas delivery facilities are staffed. Employees who are not involved with power generation, power delivery, customer service territory was also threatened by Hurricane Dorianor certain other functions have been performing their work duties remotely from home. Employees who need to interact with customers in person are following the Centers for Disease Control and therefore,Prevention’s safety guidelines, including social distancing and use of face masks. Operating procedure changes include additional cleaning and disinfection procedures at our facilities.
| |
• | Customers. The Duke Energy Subsidiary Registrants began, in the first quarter of 2020, a suspension of disconnections for nonpayment in order to give customers experiencing financial hardship extra time to make payments. This is expected to result in an increase in future charge-offs over historical levels. In addition, several Subsidiary Registrants are waiving late payment charges and other fees for credit cards and returned checks. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information. The COVID-19 pandemic and stay-at-home orders have impacted commercial and industrial customers, and many of them have suspended operations which is impacting the Duke Energy Registrants’ volumes. Several large industrial customers have begun to restart their businesses since initially closing in late March and April. |
Communities. The Duke Energy Florida also incurred costsFoundation announced approximately $6 million in donations and grants as of June 30, 2020, to be prepared for potential impact. Estimated restoration costs forsupport hunger relief, local health and human services nonprofits, and education initiatives across the Duke Energy are approximately $400 million.Registrants’ service territories.
| |
• | Balance Sheet Strength and Liquidity Assurance. See Notes 5 and 13 to the Condensed Consolidated Financial Statements, "Debt and Credit Facilities," and "Stockholders Equity," respectively, for additional information. During the six months ended June 30, 2020: |
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◦ | Duke Energy issued approximately $3.3 billion of debt. |
| |
◦ | Duke Energy entered into and borrowed approximately $1.7 billion under a 364-day Term Loan Credit Agreement. |
| |
◦ | Duke Energy drew down the remaining $500 million of availability under its existing $1 billion Three-Year Revolving Credit Facility. |
| |
◦ | Duke Energy issued $85 million of common stock through a forward sales agreement which is expected to settle on or prior to December 31, 2020. |
Policymaker actions. The CARES Act was signed by President Trump on March 27, 2020. Duke Energy Registrants will benefit from certain provisions such as the AMT acceleration and deferral of certain payroll taxes. See Note 15 to the Condensed Consolidated Financial Statements, “Income Taxes,” for additional information.
Rate Case and utility commission filings. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
Regulatory Activity
In 2019, Duke Energy advanced regulatory activity in multiple jurisdictions. The following rate cases are underway: | |
• | On July 31, 2020, Duke Energy Carolinas, Duke Energy Progress and the Public Staff filed a Second Agreement and Stipulation of Partial Settlement, which is subject to review and approval of the NCUC, resolving certain remaining issues in the 2019 base rate proceeding. As a result of the additional settlement terms, the NCUC ordered the remote evidentiary hearing to be delayed until August 24, 2020. Duke Energy Carolinas and Duke Energy Progress expect the NCUC to issue an order on each net rate increase by the end of the year. On August 4, 2020 and August 7, 2020, respectively, Duke Energy Carolinas and Duke Energy Progress filed a motion for approval of notice required to implement temporary rates, seeking to exercise its statutory right to implement temporary rates subject to refund. |
Duke Energy Carolinas and Duke Energy ProgressFlorida filed general rate casesa petition with the NCUCFPSC on September 30, 2019, and October 30, 2019, respectively, requesting rate increases go into effectApril 2, 2020, to accelerate a fuel cost refund to customers in the third quartermonth of May 2020. Typically, the refund would be made over the course of 2021. The FPSC approved the petition on April 28, 2020.
Duke Energy Kentucky filed an electric rate case with the KPSC on September 3, 2019. Hearings are expected to beginOn April 27, 2020, the KPSC issued its decision and new customer rates were effective on May 1, 2020. On May 18, 2020, Duke Energy Kentucky filed its motion for rehearing, and on June 4, 2020, the motion was granted in part and denied in part by the first quarter of 2020 with rates anticipated to go into effect in the second quarter of 2020.KPSC.
Duke Energy Indiana filed a general rate case with the IURC on July 2, 2019. Hearings are expected to begin in earlyThe IURC issued its order June 29, 2020, with rates to be effective mid-2020.
Additionally, asapproving a resultrevenue increase of regulatory orders or settlements, customerapproximately $146 million, before utility receipt taxes. Customer rates were impacted in 2019 as follows:
On October 31, 2019, Piedmont received an order from the NCUC and revised customer rates became effective on November 1, 2019.
In May 2019, Duke Energy Carolinas and Duke Energy Progress received orders from the PSCSC and revised customer rates became effective June 1, 2019. As a resultJuly 30, 2020. Several groups filed notices of appeal of the Directive allowing litigation-related costs, Duke Energy Progress customer rates were revised againIURC order on July 1, 2019.
Duke Energy Kentucky revised customer rates on April 1, 2019, following settlement on January 30, 2019, of its 2018 Natural Gas Base Rate Case.
At Duke Energy Florida, revised customer rates went into effect in January 2019 as a result of a July 2018 petition to the FPSC to include in base rates the revenue requirement for Duke Energy Florida’s first solar generation project, the Hamilton Project. The FPSC in July 2019, issued an order to allow Duke Energy Florida to include in base rates the revenue requirements for its next wave of three solar generation projects, with projected in-service dates ranging from the fourth quarter of 2019 to the first quarter of29, 2020.
See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters" for additional information.COVID-19 deferral requests
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◦ | Duke Energy Carolinas and Duke Energy Progress filed a joint petition with the NCUC for deferral treatment of incremental costs and waived customer fees due to the COVID-19 pandemic on August 7, 2020. Duke Energy Carolinas and Duke Energy Progress are evaluating a filing with the PSCSC for deferral treatment of incremental costs and waived customer fees due to the COVID-19 pandemic. |
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◦ | Duke Energy Ohio on May 11, 2020, filed with the PUCO a request seeking deferral of incremental costs incurred due to the COVID-19 pandemic, as well as specific miscellaneous lost revenues. The request seeks to use existing bad debts and uncollectible riders already in place for both electric and natural gas operations. Duke Energy Ohio would subsequently file for rider recovery at a later date. On June 17, 2020, the PUCO approved Duke Energy Ohio’s deferral application. |
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◦ | On May 8, 2020, Duke Energy Indiana, along with other Indiana utilities, filed a request with the IURC for approval of deferral treatment for costs associated with the COVID-19 pandemic. On June 29, 2020, the IURC issued its order permitting jurisdictional utilities to use regulatory accounting for any impacts associated with the prohibition on utility disconnections, waiver or exclusion of certain utility fees, the use of expanded payment arrangements to aid customers, and for COVID-19 related uncollectible and incremental bad debt expense. |
Results of Operations
Non-GAAP Measures
Management’s Discussion and Analysis includes financial information prepared in accordance with GAAP in the U.S., as well as certain non-GAAP financial measures such as adjusted earnings and adjusted EPS discussed below. Generally, a non-GAAP financial measure is a numerical measure of financial performance, financial position or cash flows that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP financial measures should be viewed as a supplement to, and not a substitute for, financial measures presented in accordance with GAAP. Non-GAAP measures presented may not be comparable to similarly titled measures used by other companies because other companies may not calculate the measures in the same manner.
Management evaluates financial performance in part based on non-GAAP financial measures, including adjusted earnings and adjusted diluted EPS. Adjusted earnings and adjusted diluted EPS represent income from continuing operations attributableavailable to Duke Energy Corporation common stockholders in dollar and per-shareper share amounts, adjusted for the dollar and per-shareper share impact of special items. As discussed below, special items represent certain charges and credits, which management believes are not indicative of Duke Energy's ongoing performance. The most directly comparable GAAP measures for adjusted earnings and adjusted diluted EPS are GAAP Reported Earnings (Loss) and GAAP Reported EPS,Earnings (Loss) Per Share, respectively.
Special items included in the periods presented below include the following:following, which management believes do not reflect ongoing costs:
Impairment ChargesACP represents a reduction of a prior year impairment at Citrus County CC, an OTTI of an investment in Constitution and a Commercial Renewables goodwill impairment.
Costs to Achieve Piedmont Merger represents charges that resulted from the Piedmont acquisition.
Regulatory and Legislative Impacts represents 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, a nonregulated generating facility in Ohio.
Impacts of the Tax Act represents an AMT valuation allowance recognized and a true up of prior year tax estimatescosts related to the Tax Act.abandonment of the ACP investment.
Severance represents the reversal of 2018 costs which were deferred as a result of the partial settlement in the Duke Energy Carolinas 2019 North Carolina rate case.
Three Months Ended SeptemberJune 30, 2019,2020, as compared to SeptemberJune 30, 20182019
GAAP Reported EPSreported loss per share was $1.82$(1.13) for the thirdsecond quarter of 20192020 compared to $1.51 forearnings per share of $1.12 in the thirdsecond quarter of 2018. The increase in2019. GAAP reported earnings wasdecreased primarily due to favorable weather, positive rate case impacts, and lower operating expensesthe abandonment of the investment in Electric Utilities and Infrastructure and a prior year goodwill impairment charge in Commercial Renewables; these items were partially offset by higher corporate interest expense.ACP.
As discussed above, management also evaluates financial performance based on adjusted diluted EPS. Duke Energy’s thirdsecond quarter 20192020 adjusted diluted EPS was $1.79$1.08 compared to $1.65$1.12 for the thirdsecond quarter of 2018.2019. The decrease in adjusted earnings was primarily due to unfavorable weather, lower volumes and higher depreciation expense, partially offset by lower operations and maintenance expense.
The following table reconciles non-GAAP measures, including adjusted diluted EPS, to their most directly comparable GAAP measures. |
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, |
| 2019 | | 2018 |
(in millions, except per-share amounts) | Earnings | | EPS | | Earnings | | EPS |
GAAP Reported Earnings/GAAP Reported EPS | $ | 1,327 |
| | $ | 1.82 |
| | $ | 1,082 |
| | $ | 1.51 |
|
Adjustments: | | | | | | | |
Impairment charges(a) | (19 | ) | | (0.03 | ) | | 91 |
| | 0.12 |
|
Costs to Achieve Piedmont Merger(b) | — |
| | — |
| | 13 |
| | 0.02 |
|
Impacts of the Tax Act(c) | — |
| | — |
| | (3 | ) | | — |
|
Discontinued Operations | — |
| | — |
| | (4 | ) | | — |
|
Adjusted Earnings/Adjusted Diluted EPS | $ | 1,308 |
| | $ | 1.79 |
| | $ | 1,179 |
| | $ | 1.65 |
|
|
| | | | | | | | | | | | | | | |
| Three Months Ended June 30, |
| 2020 | | 2019 |
(in millions, except per share amounts) | (Loss) Earnings | | (Loss) Earnings Per Share | | Earnings | | EPS |
GAAP Reported (Loss) Earnings/GAAP Reported (Loss) Earnings Per Share | $ | (817 | ) | | $ | (1.13 | ) | | $ | 820 |
| | $ | 1.12 |
|
Adjustments: | | | | | | | |
ACP(a) | 1,626 |
| | 2.21 |
| | — |
| | — |
|
Adjusted Earnings/Adjusted EPS | $ | 809 |
| | $ | 1.08 |
| | $ | 820 |
| | $ | 1.12 |
|
| |
(a) | Net of $6 million tax expense in 2019. Netbenefit of $2 million Noncontrolling Interests in 2018.$374 million. |
| |
(b) | Net of $3 million tax benefit. |
| |
(c) | Represents a true up of prior year tax estimates related to the Tax Act. |
NineSix Months Ended SeptemberJune 30, 2019,2020, as compared to SeptemberJune 30, 20182019
GAAP Reported EPS was $4.18$0.11 for the ninesix months ended SeptemberJune 30, 2019,2020, compared to $3.11$2.36 for the ninesix months ended SeptemberJune 30, 2018. The increase in2019. GAAP Reportedreported earnings wasdecreased primarily due to positive rate case impacts and lower operating expensesthe abandonment of the investment in Electric Utilities and Infrastructure, partially offset by higher depreciation and share dilution from equity issuances; the allocation of losses to noncontrolling tax equity members resulting primarily from the Commercial Renewables North Rosamond solar farm commencing commercial operations; an adjustment related to income tax recognition for equity method investments in Gas Utilities and Infrastructure; and prior year regulatory and legislative impacts, impairments charges, an AMT valuation allowance and a loss on sale of a retired plant.ACP.
As discussed above, management also evaluates financial performance based on adjusted diluted EPS. Duke Energy’s adjusted diluted EPS was $4.15$2.22 for the ninesix months ended SeptemberJune 30, 2019,2020, compared to $3.87$2.36 for the ninesix months ended SeptemberJune 30, 2018.2019. The decrease in adjusted earnings was primarily due to unfavorable weather, lower volumes, higher depreciation expense, higher financing costs and a prior year adjustment related to income tax recognition for equity method investments. This was partially offset by positive rate case impacts, growth in Commercial Renewables and lower operations and maintenance expense.
The following table reconciles non-GAAP measures, including adjusted diluted EPS, to their most directly comparable GAAP measures. |
| | | | | | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2019 | | 2018 |
(in millions, except per-share amounts) | Earnings | | EPS | | Earnings | | EPS |
GAAP Reported Earnings/GAAP Reported EPS | $ | 3,047 |
| | $ | 4.18 |
| | $ | 2,202 |
| | $ | 3.11 |
|
Adjustments: | | | | | | | |
Costs to Achieve Piedmont Merger(a) | — |
| | — |
| | 41 |
| | 0.06 |
|
Regulatory and Legislative Impacts(b) | — |
| | — |
| | 202 |
| | 0.29 |
|
Sale of Retired Plant(c) | — |
| | — |
| | 82 |
| | 0.12 |
|
Impairment Charges(d) | (19 | ) | | (0.03 | ) | | 133 |
| | 0.19 |
|
Impacts of the Tax Act(e) | — |
| | — |
| | 73 |
| | 0.10 |
|
Discontinued Operations | — |
| | — |
| | 1 |
| | — |
|
Adjusted Earnings/Adjusted Diluted EPS | $ | 3,028 |
| | $ | 4.15 |
| | $ | 2,734 |
| | $ | 3.87 |
|
|
| | | | | | | | | | | | | | | |
| Six Months Ended June 30, |
| 2020 | | 2019 |
(in millions, except per-share amounts) | Earnings | | EPS | | Earnings | | EPS |
GAAP Reported Earnings/GAAP Reported EPS | $ | 82 |
| | $ | 0.11 |
| | $ | 1,720 |
| | $ | 2.36 |
|
Adjustments: | | | | | | | |
ACP(a) | 1,626 |
| | 2.21 |
| | — |
| | — |
|
Severance(b) | (75 | ) | | (0.10 | ) | | — |
| | — |
|
Adjusted Earnings/Adjusted EPS | $ | 1,633 |
| | $ | 2.22 |
| | $ | 1,720 |
| | $ | 2.36 |
|
| |
(a) | Net of $12 million tax benefit.benefit of $374 million. |
| |
(b) | Net of $63 million tax benefit. |
| |
(c) | Net of $25 million tax benefit. |
| |
(d) | Net of $6 million tax expense in 2019. Net of $13 million tax benefit and $2 million Noncontrolling Interests in 2018. |
| |
(e) | Represents a recognition of AMT valuation allowance and true up of prior year tax estimates related to the Tax Act.$23 million. |
SEGMENT RESULTS
The remaining information presented in this discussion of results of operations is on a GAAP basis. Management evaluates segment performance based on segment income. Segment income is defined as income from continuing operations net of income attributable to noncontrolling interests and preferred stock dividends. Segment income includes intercompany revenues and expenses that are eliminated in the Condensed Consolidated Financial Statements.
Duke Energy's segment structure includes the following segments: Electric Utilities and Infrastructure, Gas Utilities and Infrastructure and Commercial Renewables. The remainder of Duke Energy’s operations is presented as Other. See Note 2 to the Condensed Consolidated Financial Statements, “Business Segments,” for additional information on Duke Energy’s segment structure.
Electric Utilities and Infrastructure | | | Three Months Ended September 30, | | Nine Months Ended September 30, | Three Months Ended June 30, | | Six Months Ended June 30, |
(in millions) | 2019 |
| | 2018 |
| | Variance |
| | 2019 |
| | 2018 |
| | Variance |
| 2020 |
| | 2019 |
| | Variance |
| | 2020 |
| | 2019 |
| | Variance |
|
Operating Revenues | $ | 6,577 |
| | $ | 6,260 |
| | $ | 317 |
| | $ | 17,381 |
| | $ | 16,806 |
| | $ | 575 |
| $ | 5,034 |
| | $ | 5,475 |
| | $ | (441 | ) | | $ | 10,217 |
| | $ | 10,804 |
| | $ | (587 | ) |
Operating Expenses | | | | | | | | | | | | | | | | | | | | | | |
Fuel used in electric generation and purchased power | 1,994 |
| | 1,935 |
| | 59 |
| | 5,286 |
| | 5,202 |
| | 84 |
| 1,367 |
| | 1,662 |
| | (295 | ) | | 2,834 |
| | 3,292 |
| | (458 | ) |
Operation, maintenance and other | 1,357 |
| | 1,431 |
| | (74 | ) | | 3,957 |
| | 4,151 |
| | (194 | ) | 1,240 |
| | 1,318 |
| | (78 | ) | | 2,565 |
| | 2,600 |
| | (35 | ) |
Depreciation and amortization | 1,026 |
| | 897 |
| | 129 |
| | 2,924 |
| | 2,570 |
| | 354 |
| 993 |
| | 951 |
| | 42 |
| | 1,970 |
| | 1,898 |
| | 72 |
|
Property and other taxes | 301 |
| | 289 |
| | 12 |
| | 899 |
| | 842 |
| | 57 |
| 296 |
| | 297 |
| | (1 | ) | | 599 |
| | 598 |
| | 1 |
|
Impairment charges | (20 | ) | | 31 |
| | (51 | ) | | (16 | ) | | 246 |
| | (262 | ) | 1 |
| | 4 |
| | (3 | ) | | 3 |
| | 4 |
| | (1 | ) |
Total operating expenses | 4,658 |
| | 4,583 |
| | 75 |
| | 13,050 |
| | 13,011 |
| | 39 |
| 3,897 |
| | 4,232 |
| | (335 | ) | | 7,971 |
| | 8,392 |
| | (421 | ) |
Gains on Sales of Other Assets and Other, net | — |
| | 8 |
| | (8 | ) | | — |
| | 9 |
| | (9 | ) | 7 |
| | 3 |
| | 4 |
| | 8 |
| | — |
| | 8 |
|
Operating Income | 1,919 |
| | 1,685 |
| | 234 |
| | 4,331 |
| | 3,804 |
| | 527 |
| 1,144 |
| | 1,246 |
| | (102 | ) | | 2,254 |
| | 2,412 |
| | (158 | ) |
Other Income and Expenses, net | 87 |
| | 107 |
| | (20 | ) | | 267 |
| | 286 |
| | (19 | ) | 89 |
| | 89 |
| | — |
| | 174 |
| | 180 |
| | (6 | ) |
Interest Expense | 336 |
| | 322 |
| | 14 |
| | 1,004 |
| | 955 |
| | 49 |
| 344 |
| | 330 |
| | 14 |
| | 683 |
| | 668 |
| | 15 |
|
Income Before Income Taxes | 1,670 |
| | 1,470 |
| | 200 |
| | 3,594 |
| | 3,135 |
| | 459 |
| 889 |
| | 1,005 |
| | (116 | ) | | 1,745 |
| | 1,924 |
| | (179 | ) |
Income Tax Expense | 285 |
| | 303 |
| | (18 | ) | | 650 |
| | 643 |
| | 7 |
| 136 |
| | 196 |
| | (60 | ) | | 287 |
| | 365 |
| | (78 | ) |
Segment Income | $ | 1,385 |
| | $ | 1,167 |
| | $ | 218 |
| | $ | 2,944 |
| | $ | 2,492 |
| | $ | 452 |
| $ | 753 |
| | $ | 809 |
| | $ | (56 | ) | | $ | 1,458 |
| | $ | 1,559 |
| | $ | (101 | ) |
| | | | | | | | | | |
|
| | | | | | | | | | |
|
|
Duke Energy Carolinas GWh sales | 25,587 |
| | 25,607 |
| | (20 | ) | | 69,019 |
| | 70,506 |
| | (1,487 | ) | 19,083 |
| | 21,604 |
| | (2,521 | ) | | 40,319 |
| | 43,432 |
| | (3,113 | ) |
Duke Energy Progress GWh sales | 19,502 |
| | 19,625 |
| | (123 | ) | | 52,072 |
| | 52,747 |
| | (675 | ) | 14,807 |
| | 16,222 |
| | (1,415 | ) | | 30,477 |
| | 32,570 |
| | (2,093 | ) |
Duke Energy Florida GWh sales | 12,996 |
| | 12,375 |
| | 621 |
| | 32,468 |
| | 31,798 |
| | 670 |
| 10,800 |
| | 11,301 |
| | (501 | ) | | 19,417 |
| | 19,622 |
| | (205 | ) |
Duke Energy Ohio GWh sales | 7,135 |
| | 6,964 |
| | 171 |
| | 18,959 |
| | 19,183 |
| | (224 | ) | 5,262 |
| | 5,660 |
| | (398 | ) | | 11,085 |
| | 11,824 |
| | (739 | ) |
Duke Energy Indiana GWh sales | 8,711 |
| | 9,114 |
| | (403 | ) | | 24,181 |
| | 25,900 |
| | (1,719 | ) | 6,773 |
| | 7,437 |
| | (664 | ) | | 14,379 |
| | 15,470 |
| | (1,091 | ) |
Total Electric Utilities and Infrastructure GWh sales | 73,931 |
| | 73,685 |
| | 246 |
| | 196,699 |
| | 200,134 |
| | (3,435 | ) | 56,725 |
| | 62,224 |
| | (5,499 | ) | | 115,677 |
| | 122,918 |
| | (7,241 | ) |
Net proportional MW capacity in operation | | | | |
|
| | 49,711 |
| | 48,757 |
| | 954 |
| | | | |
|
| | 50,364 |
| | 49,725 |
| | 639 |
|
Three Months Ended June 30, 2020, as compared to June 30, 2019
Electric Utilities and Infrastructure’s variance is due to unfavorable weather, lower weather-normal retail sale volumes driven by impacts from the COVID-19 pandemic and lower wholesale revenues, partially offset by higher revenues resulting from the South Carolina retail rate cases and Duke Energy Florida base and solar rate adjustments. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The variance was driven primarily by:
a $332 million decrease in fuel revenues driven by lower sales volumes as well as an accelerated refund of fuel costs at Duke Energy Florida in response to the COVID-19 pandemic;
|
| |
MD&A | SEGMENT RESULTS — ELECTRIC UTILITIES AND INFRASTRUCTURE |
a $79 million decrease in retail sales, net of fuel revenues, due to unfavorable weather compared to prior year;
a $47 million decrease in wholesale revenues, net of fuel, primarily due to higher recovery of coal ash cost in the prior year and lower capacity volumes at Duke Energy Progress; and
a $32 million decrease in weather-normal retail sale volumes due to lower nonresidential customer demand driven by impacts from the COVID-19 pandemic.
Partially offset by:
a $23 million increase in retail pricing due to Duke Energy Florida's base rate adjustments related to annual increases from the 2017 Settlement Agreement and the Solar Base Rate Adjustment; and
a $13 million increase due to higher pricing from South Carolina retail rate case, net of a return of EDIT to customers.
Operating Expenses. The variance was driven primarily by:
a $295 million decrease in fuel used in electric generation and purchased power primarily due to lower generation demand and lower fuel, coal, and natural gas costs; and
a $78 million decrease in operation, maintenance and other expense driven by lower employee benefit costs and lower outage costs.
Partially offset by:
a $42 million increase in depreciation and amortization expense primarily due to additional plant in service and impacts from the South Carolina retail rate cases.
Interest Expense. The variance was primarily due to higher outstanding debt in the current year and favorable debt return on deferred coal ash spend in the prior year.
Income Tax Expense. The decrease in tax expense was primarily due to a decrease in pretax income and an increase in the amortization of excess deferred taxes. The ETRs for the three months ended June 30, 2020, and June 30, 2019, were 15.3% and 19.5%. The decrease in the ETR was primarily due to an increase in the amortization of excess deferred taxes.
Six Months Ended June 30, 2020, as compared to June 30, 2019
Electric Utilities and Infrastructure’s variance is due to unfavorable weather, lower weather-normal retail sale volumes driven by impacts from the COVID-19 pandemic and lower wholesale revenues, partially offset by higher revenues resulting from the South Carolina retail rate cases and Duke Energy Florida base and solar rate adjustments. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The variance was driven primarily by:
a $482 million decrease in fuel revenues driven by lower sales volumes as well as an accelerated refund of fuel costs at Duke Energy Florida in response to the COVID-19 pandemic;
a $124 million decrease in retail sales, net of fuel revenues, due to unfavorable weather in the current year;
a $63 million decrease in wholesale revenues, net of fuel, primarily due to higher recovery of coal ash cost in the prior year and lower capacity volumes at Duke Energy Progress; and
a $15 million decrease in weather-normal retail sale volumes due to lower nonresidential customer demand driven by impacts from the COVID-19 pandemic.
Partially offset by:
a $39 million increase in retail pricing due to Duke Energy Florida's base rate adjustments related to annual increases from the 2017 Settlement Agreement and the Solar Base Rate Adjustment; and
a $32 million increase due to higher pricing from South Carolina retail rate case, net of a return of EDIT to customers.
Operating Expenses. The variance was driven primarily by:
a $458 million decrease in fuel used in electric generation and purchased power primarily due to lower generation demand and lower fuel, coal, and natural gas costs; and
a $35 million decrease in operation, maintenance and other expense primarily lower employee benefit costs and lower outage costs.
Partially offset by:
a $72 million increase in depreciation and amortization expense primarily due to additional plant in service and impacts from the South Carolina retail rate cases.
Interest Expense. The variance was primarily due to higher outstanding debt in the current year and favorable debt return on deferred coal ash spend in the prior year.
|
| |
MD&A | SEGMENT RESULTS — ELECTRIC UTILITIES AND INFRASTRUCTURE |
Three Months Ended September 30, 2019, as compared to September 30, 2018
Electric Utilities and Infrastructure’s results were impacted by a positive contribution from the Duke Energy Carolinas North and South Carolina rate cases, Duke Energy Florida's base rate adjustments due to the Citrus County CC being placed in service, favorable weather in the current year and lower operation, maintenance and other expense.
These drivers were partially offset by higher depreciation from a growing asset base and higher interest expense. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The variance was driven primarily by:
a $167 million increase in retail pricing primarily due to the Duke Energy Carolinas North and South Carolina rate cases and Duke Energy Florida's base rate adjustments related to Citrus County CC being placed in service;
an $88 million increase in retail sales, net of fuel revenues, due to favorable weather in the current year; and
a $51 million increase in fuel related revenues.
Operating Expenses. The variance was driven primarily by:
a $129 million increase in depreciation and amortization expense primarily due to additional plant in service and new depreciation rates associated with the prior year Duke Energy Carolinas and Duke Energy Progress North Carolina rate cases and Duke Energy Florida's Citrus County CC being placed in service;
a $59 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
a $12 million increase in property and other taxes primarily due to higher property taxes for additional plant in service at Duke Energy Florida.
Partially offset by:
a $74 million decrease in operation, maintenance and other expense primarily due to lower storm costs at Duke Energy Progress and Duke Energy Carolinas in the current year and lower payroll costs resulting from prior year workforce reductions; and
a $51 million decrease in impairment charges primarily due to a reduction of a prior year impairment at Duke Energy Florida's Citrus County CC and the prior year Edwardsport IGCC settlement at Duke Energy Indiana.
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.
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 Tax Expense. The decrease in tax expense was primarily due to a decrease in pretax income and an increase in the amortization of excess deferred taxes, partially offset by an increase in pretax income.taxes. The ETRs for the threesix months ended SeptemberJune 30, 2020, and 2019, were 16.4% and 2018, were 17.1% and 20.6%19.0%, respectively. The decrease in the ETR was primarily due to an increase in the amortization of excess deferred taxes.
NineGas Utilities and Infrastructure |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(in millions) | 2020 |
| | 2019 |
| | Variance |
| | 2020 |
| | 2019 |
| | Variance |
|
Operating Revenues | $ | 289 |
| | $ | 306 |
| | $ | (17 | ) | | $ | 953 |
| | $ | 1,062 |
| | $ | (109 | ) |
Operating Expenses | | | | | | | | | | | |
Cost of natural gas | 60 |
| | 76 |
| | (16 | ) | | 259 |
| | 403 |
| | (144 | ) |
Operation, maintenance and other | 99 |
| | 107 |
| | (8 | ) | | 209 |
| | 217 |
| | (8 | ) |
Depreciation and amortization | 62 |
| | 63 |
| | (1 | ) | | 128 |
| | 128 |
| | — |
|
Property and other taxes | 26 |
| | 27 |
| | (1 | ) | | 56 |
| | 60 |
| | (4 | ) |
Total operating expenses | 247 |
| | 273 |
| | (26 | ) | | 652 |
| | 808 |
| | (156 | ) |
Operating Income | 42 |
| | 33 |
| | 9 |
| | 301 |
| | 254 |
| | 47 |
|
Other Income and Expenses | | | | | | | | | | | |
Equity in (losses) earnings of unconsolidated affiliates | (1,970 | ) | | 31 |
| | (2,001 | ) | | (1,933 | ) | | 64 |
| | (1,997 | ) |
Other income and expenses, net | 14 |
| | 6 |
| | 8 |
| | 26 |
| | 13 |
| | 13 |
|
Total other income and expenses | (1,956 | ) | | 37 |
| | (1,993 | ) | | (1,907 | ) | | 77 |
| | (1,984 | ) |
Interest Expense | 37 |
| | 27 |
| | 10 |
| | 68 |
| | 57 |
| | 11 |
|
(Loss) Income Before Income Taxes | (1,951 | ) | | 43 |
| | (1,994 | ) | | (1,674 | ) | | 274 |
| | (1,948 | ) |
Income Tax (Benefit) Expense | (375 | ) | | 3 |
| | (378 | ) | | (347 | ) | | 8 |
| | (355 | ) |
Segment (Loss) Income | $ | (1,576 | ) | | $ | 40 |
| | $ | (1,616 | ) | | $ | (1,327 | ) | | $ | 266 |
| | $ | (1,593 | ) |
| | | | | | |
|
| | | | |
Piedmont LDC throughput (dekatherms) | 96,807,940 |
| | 104,684,733 |
| | (7,876,793 | ) | | 245,311,935 |
| | 256,347,474 |
| | (11,035,539 | ) |
Duke Energy Midwest LDC throughput (Mcf) | 15,106,407 |
| | 13,742,907 |
| | 1,363,500 |
| | 48,892,241 |
| | 52,281,179 |
| | (3,388,938 | ) |
Three Months Ended SeptemberJune 30, 2019,2020, as compared to SeptemberJune 30, 20182019
ElectricGas Utilities and Infrastructure’s results were impacted primarily by a positive contribution from the 2018 Duke Energy Carolinas and Duke Energy Progress North Carolina rate cases, Duke Energy Florida's base rate adjustments due toabandonment of the Citrus County CC being placedinvestment in service and lower operation, maintenance and other expense.
These drivers were partially offset by higher depreciation from a growing asset base and higher interest expense.ACP. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The variance was driven primarily by:
a $493$16 million decrease due to lower natural gas costs passed through to customers and decreased off-system sales natural gas costs; and
a $7 million decrease due to return of EDIT to customers.
Partially offset by:
a $7 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
an $85 million increase in fuel related revenues.case increases.
Operating Expenses. The variance was driven primarily by:
a $354 million increase in depreciation and amortization expense primarily due to additional plant in service and new depreciation rates associated with the prior year Duke Energy Carolinas and Duke Energy Progress North Carolina rate cases and Duke Energy Florida's Citrus County CC being placed in service;
an $84 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
a $57 million increase in property and other taxes primarily due to higher property taxes for additional plant in service at Duke Energy Florida and current year property tax reassessments at Duke Energy Progress.
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| |
MD&A | SEGMENT RESULTS — ELECTRIC UTILITIES AND INFRASTRUCTURE |
Partially offset by:
a $262$16 million decrease in impairment charges primarilycost of natural gas due to the impacts associated with the prior year Duke Energy Carolinaslower natural gas prices and Duke Energy Progress North Carolina rate cases;decreased off-system sales natural gas costs; and
a $194an $8 million decrease in operation, maintenance and other expense primarily due to lower payroll and benefitdeferral of previously expensed IT project costs resulting from prior year workforce reductions and lower storm costs at Duke Energy Progress and Duke Energy Carolinasemployee benefits costs.
Equity in the current year.
Other Income and Expenses, net.(losses) earnings of unconsolidated affiliates. The variance was driven primarily by AFUDC equity return ending on the Citrus County CCabandonment of the investment in the fourth quarter of 2018 at Duke Energy Florida.ACP.
Interest Expense.The variance was driven primarily by interest on the EDIT balance being returned to customers and higher debt outstanding in the current year, andoffset by lower AFUDC debt return ending in the fourth quarter of 2018 on the Citrus County CC at Duke Energy Florida.income.
Income Tax Expense.Benefit. The increasedecrease in tax expense was primarily due to an increasea decrease in pretax income mostly offsetdriven by the impact of an increase inabandonment of the amortization of excess deferred taxes.ACP investment. The ETRs for the ninethree months ended SeptemberJune 30, 2020, and 2019, were 19.2% and 2018, were 18.1% and 20.5%7%, respectively. The decreaseincrease in the ETR was primarily due to the impact of an increase inabandonment of the amortization of excess deferred taxes.ACP investment.
Matters Impacting Future ElectricSix Months Ended June 30, 2020, as compared to June 30, 2019
Gas Utilities and Infrastructure Results
On May 21, 2019, Duke Energy Carolinas and Duke Energy Progress received orders fromInfrastructure’s results were impacted primarily by the PSCSC granting the companies’ requests for retail rate increases but denying recoveryabandonment of certain coal ash costs. Duke Energy Carolinas and Duke Energy Progress intend to file notices of appeals with the South Carolina Supreme Court within 30 daysACP. The following is a detailed discussion of the order that was received on October 18, 2019. 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.variance drivers by line item.
On April 1, 2019, NCDEQ issued a closure determination requiring Duke Energy Carolinas and Duke Energy Progress to excavate all remaining coal ash impoundments in North Carolina, even though they had been deemed low risk by NCDEQ on November 14, 2018. 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 Carolina 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.102
On June 22, 2018, Duke Energy Carolinas received an order from the NCUC, which denied the Grid Rider Stipulation and deferral treatment of grid improvement costs. Duke Energy Carolinas and Duke Energy Progress have petitioned for deferral of future grid improvement costs in their 2019 rate cases. Electric Utilities and Infrastructure's results of operations, financial position and cash flows could be adversely impacted if grid improvement costs are not ultimately approved for recovery and/or deferral treatment.
During the last half of 2018, Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida’s service territories were impacted by several named storms. Hurricane Florence, Hurricane Michael and Winter Storm Diego caused flooding, extensive damage and widespread power outages to the service territories of Duke Energy Carolinas and Duke Energy Progress. Duke Energy Florida’s service territory was also impacted by Hurricane Michael, a Category 5 hurricane and the most powerful storm to hit the Florida Panhandle in recorded history. In September 2019, Hurricane Dorian impacted Duke Energy Progress and Duke Energy Florida's service territories. A significant portion of the incremental operation and maintenance expenses related to these storms has been deferred. An order from regulatory authorities disallowing the deferral and future recovery of storm restoration costs could have an adverse impact on Electric Utilities and Infrastructure's results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
In 2019, Duke Energy Indiana filed a general rate case with the IURC, and Duke Energy Carolinas and Duke Energy Progress filed general rate cases with the NCUC. The outcome of these rate cases 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.
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.
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MD&A | SEGMENT RESULTS — GAS UTILITIES AND INFRASTRUCTURE |
Gas Utilities and Infrastructure |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
(in millions) | 2019 |
| | 2018 |
| | Variance |
| | 2019 |
| | 2018 |
| | Variance |
|
Operating Revenues | $ | 249 |
| | $ | 256 |
| | $ | (7 | ) | | $ | 1,311 |
| | $ | 1,301 |
| | $ | 10 |
|
Operating Expenses | | | | | | | | | | | |
Cost of natural gas | 48 |
| | 58 |
| | (10 | ) | | 451 |
| | 460 |
| | (9 | ) |
Operation, maintenance and other | 108 |
| | 101 |
| | 7 |
| | 325 |
| | 312 |
| | 13 |
|
Depreciation and amortization | 64 |
| | 61 |
| | 3 |
| | 192 |
| | 182 |
| | 10 |
|
Property and other taxes | 24 |
| | 24 |
| | — |
| | 84 |
| | 81 |
| | 3 |
|
Total operating expenses | 244 |
| | 244 |
| | — |
| | 1,052 |
| | 1,035 |
| | 17 |
|
Operating Income | 5 |
| | 12 |
| | (7 | ) | | 259 |
| | 266 |
| | (7 | ) |
Other Income and Expenses, net | 42 |
| | 29 |
| | 13 |
| | 119 |
| | 16 |
| | 103 |
|
Interest Expense | 29 |
| | 25 |
| | 4 |
| | 86 |
| | 78 |
| | 8 |
|
Income Before Income Taxes | 18 |
| | 16 |
| | 2 |
| | 292 |
| | 204 |
| | 88 |
|
Income Tax (Benefit) Expense | (8 | ) | | (1 | ) | | (7 | ) | | — |
| | 43 |
| | (43 | ) |
Segment Income | $ | 26 |
| | $ | 17 |
| | $ | 9 |
| | $ | 292 |
| | $ | 161 |
| | $ | 131 |
|
| | | | | | |
|
| | | | |
Piedmont LDC throughput (dekatherms) | 121,378,484 |
| | 135,403,188 |
| | (14,024,704 | ) | | 377,729,141 |
| | 407,144,529 |
| | (29,415,388 | ) |
Duke Energy Midwest LDC throughput (Mcf) | 9,997,444 |
| | 9,370,743 |
| | 626,701 |
| | 62,278,623 |
| | 62,111,858 |
| | 166,765 |
|
Three Months Ended September 30, 2019, as compared to September 30, 2018
Gas Utilities and Infrastructure’s results were primarily impacted by tax benefits related to current year AFUDC equity and higher equity earnings from ACP. These drivers are partially offset by lower revenues. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The variance was driven primarily by:
a $10$144 million decrease primarily due to lower natural gas costs passed through to customers and lower volumesdecreased off-system sales natural gas costs; and
a $27 million decrease due to unfavorable weather.return of EDIT to customers.
Partially offset by:
a $3$60 million increase primarily due to North Carolina and Tennessee IMRbase rate case increases.
Operating Expenses. The drivers were:variance was driven primarily by:
a $10$144 million decrease in cost of natural gas primarily due to lower natural gas prices and decreased off-system sales natural gas costscosts; and lower natural gas prices.
Partially offset by:
a $7an $8 million increasedecrease in operation, maintenance and other expense primarily due to increased information technology outside servicesdeferral of previously expensed IT project costs and increased bad debt expense related to a Piedmont industrial customer; and
a $3 million increase in depreciation and amortization expense primarily due to additional plant in service.lower employee benefits costs.
Other Income and Expenses, net.Equity in (losses) earnings of unconsolidated affiliates. The variance was driven primarily by higher equity earnings from ACPthe abandonment of the investment in the current year.ACP.
Interest Expense. The variance was driven primarily by interest on the EDIT balance being returned to customers and higher debt outstanding in the current year, higher interest expense due to customers as a result of tax reform deferrals, and intercompany interest, partially offset by favorablelower AFUDC debt interest.income.
Income Tax (Benefit) Expense. Benefit. The decrease in tax expense was primarily due to a decrease in pretax income driven by the impact of an abandonment of the ACP investment. The ETRs for the six months ended June 30, 2020, and 2019, were 20.7% and 2.9%, respectively. The increase in the tax benefitETR was primarily due to current year AFUDC equity.
Nine Months Ended September 30,an adjustment, recorded in the first quarter of 2019, as compared to September 30, 2018
Gas Utilities and Infrastructure’s results were primarily impacted by the prior year OTTI recorded on the Constitution 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:
a $12 million increase primarily due to North Carolina and Tennessee IMR increases;
a $9 million increase primarily due to NCUC approval related to tax reform accounting from fixed rate contracts; and
a $4 million increase in pricing primarily in residential and commercial sectors in the Midwest.
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MD&A | SEGMENT RESULTS — GAS UTILITIES AND INFRASTRUCTURE |
Partially offset by:
an $8 million decrease due to lower natural gas costs passed through to customers and unfavorable weather in the Midwest, partially offset by higher natural gas prices associated with off-system sales at Piedmont; and
a $7 million decrease primarily due to a reduction of rates in South Carolina.
Operating Expenses.The variance was driven by:
a $13 million increase in operation, maintenance and other expense primarily due to information technology outside services, higher gas operations labor costs, and increased bad debt expense related to a Piedmont industrial customer; and
•a $10 million increase in depreciation and amortization expense primarily due to additional plant in service.
Partially offset by:
a $9 million decrease in cost of natural gas primarily due to lower natural gas prices in the Midwest and lower sales volumes partially offset by higher off-system sales natural gas costs at Piedmont.
Other Income and Expenses, net. The increase was primarily due to the prior year OTTI recorded on the Constitution investment and 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 decrease in tax expense was primarily due to an adjustment related to the income tax 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 nine months ended September 30, 2019, and 2018, were 0.0% and 21.1%, respectively. The decrease in the ETR was primarily due to an adjustment related to the 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% ownership interest in ACP, which is building an approximately 600-mile interstate natural gas pipeline intended to transport diverse natural gas supplies into southeastern markets. Affected states (West Virginia, Virginia and North Carolina) have issued certain necessary permits; the project remains subject to other pending federal and state approvals, which will allow full construction activities to begin. In 2018, FERC issued a series of Notices to Proceed, which authorized the project to begin certain construction-related activities along the pipeline route. Given legal challenges and ongoing discussions with customers, ACP expects mechanical completion of the full project in late 2021 with in-service likely in the first half of 2022. The delays resulting from legal challenges have impacted the cost and schedule for the project. Project cost estimates are $7.3 billion to $7.8 billion, excluding financing costs. Given the status of current discussions with FWS regarding a new BiOp and ITS, as well as discussions with contractors regarding efficiencies which may be realized going forward, these estimates are under review and subject to upward pressure. Abnormal weather, work delays (including delays due to judicial or regulatory action) and other conditions may also result in cost or schedule modifications, a suspension of AFUDC for ACP and/or impairment charges potentially material to Duke Energy's cash flows, financial position and results of operations. ACP and Duke Energy will continue to consider their options with respect to the foregoing given 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.
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.
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MD&A | SEGMENT RESULTS — COMMERCIAL RENEWABLES |
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | Three Months Ended June 30, | | Six Months Ended June 30, |
(in millions) | 2019 |
| | 2018 |
| | Variance |
| | 2019 |
| | 2018 |
| | Variance |
| 2020 |
| | 2019 |
| | Variance |
| | 2020 |
| | 2019 |
| | Variance |
|
Operating Revenues | $ | 138 |
| | $ | 127 |
| | $ | 11 |
| | $ | 362 |
| | $ | 347 |
| | $ | 15 |
| $ | 123 |
| | $ | 118 |
| | $ | 5 |
| | $ | 252 |
| | $ | 224 |
| | $ | 28 |
|
Operating Expenses | | | | | | | | | | | | | | | | | | | | | | |
Operation, maintenance and other | 81 |
| | 85 |
| | (4 | ) | | 211 |
| | 209 |
| | 2 |
| 63 |
| | 64 |
| | (1 | ) | | 132 |
| | 130 |
| | 2 |
|
Depreciation and amortization | 43 |
| | 40 |
| | 3 |
| | 123 |
| | 116 |
| | 7 |
| 48 |
| | 40 |
| | 8 |
| | 96 |
| | 80 |
| | 16 |
|
Property and other taxes | 6 |
| | 6 |
| | — |
| | 18 |
| | 19 |
| | (1 | ) | 8 |
| | 6 |
| | 2 |
| | 16 |
| | 12 |
| | 4 |
|
Impairment charges | — |
| | 93 |
| | (93 | ) | | — |
| | 93 |
| | (93 | ) | 6 |
| | — |
| | 6 |
| | 6 |
| | — |
| | 6 |
|
Total operating expenses | 130 |
| | 224 |
| | (94 | ) | | 352 |
| | 437 |
| | (85 | ) | 125 |
| | 110 |
| | 15 |
| | 250 |
| | 222 |
| | 28 |
|
Operating Income (Loss) | 8 |
| | (97 | ) | | 105 |
| | 10 |
| | (90 | ) | | 100 |
| |
Operating (Loss) Income | | (2 | ) | | 8 |
| | (10 | ) | | 2 |
| | 2 |
| | — |
|
Other Income and Expenses, net | 13 |
| | 2 |
| | 11 |
| | 3 |
| | 22 |
| | (19 | ) | 2 |
| | (8 | ) | | 10 |
| | 1 |
| | (10 | ) | | 11 |
|
Interest Expense | 35 |
| | 21 |
| | 14 |
| | 78 |
| | 66 |
| | 12 |
| 13 |
| | 22 |
| | (9 | ) | | 31 |
| | 43 |
| | (12 | ) |
Loss Before Income Taxes | (14 | ) | | (116 | ) | | 102 |
| | (65 | ) | | (134 | ) | | 69 |
| (13 | ) | | (22 | ) | | 9 |
| | (28 | ) | | (51 | ) | | 23 |
|
Income Tax Benefit | (35 | ) | | (37 | ) | | 2 |
| | (94 | ) | �� | (112 | ) | | 18 |
| (13 | ) | | (24 | ) | | 11 |
| | (37 | ) | | (59 | ) | | 22 |
|
Less: Loss Attributable to Noncontrolling Interests | (19 | ) | | (17 | ) | | (2 | ) | | (110 | ) | | (18 | ) | | (92 | ) | |
Segment Income (Loss) | $ | 40 |
|
| $ | (62 | ) | | $ | 102 |
| | $ | 139 |
| | $ | (4 | ) | | $ | 143 |
| |
Add: Loss Attributable to Noncontrolling Interests | | 90 |
| | 84 |
| | 6 |
| | 138 |
| | 91 |
| | 47 |
|
Segment Income | | $ | 90 |
|
| $ | 86 |
| | $ | 4 |
| | $ | 147 |
| | $ | 99 |
| | $ | 48 |
|
| | | | | | | | | | | | | | | | | | | | | | |
Renewable plant production, GWh | 2,146 |
| | 1,897 |
| | 249 |
| | 6,528 |
| | 6,548 |
| | (20 | ) | 2,660 |
| | 2,314 |
| | 346 |
| | 5,097 |
| | 4,382 |
| | 715 |
|
Net proportional MW capacity in operation(a) | | | | |
|
| | 3,162 |
| | 2,976 |
| | 186 |
| | | | |
|
| | 3,779 |
| | 3,157 |
| | 622 |
|
| |
(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 SeptemberJune 30, 2019,2020, as compared to SeptemberJune 30, 20182019
Commercial Renewables' results were favorable primarily due to higher revenues and prior year goodwill impairment charges.new investments in solar projects. During the second quarter of 2020, Commercial Renewables had over 250MW of capacity placed in service. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The increase was primarily due to favorable wind portfolio revenue due to favorable wind resource.new solar projects placed in service.
Operating Expenses. The decreaseincrease was primarily due to goodwillhigher depreciation and property tax expense as a result of new projects placed in service and an impairment chargescharge in the prior year.current year related to a non-contracted wind project.
Interest Expense.Other Income and Expenses, net. The increase was primarily due to mark-to-market losses in the solar portfolio in the currentprior year.
Nine Months Ended September 30, 2019, as compared to September 30, 2018
Commercial Renewables' results were favorable primarily due to higher revenues, new tax equity solar projects in the current year and prior year goodwill impairment charges, partially offset by mark-to-market losses in the solar portfolio in the current year and FES settlement agreement in the prior year. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues.Interest Expense. The increase was primarily due to favorable solar portfolio revenue due to new solar projects placed in service and higher irradiance.
Operating Expenses.The decrease was primarily due to goodwill impairment chargeshigher capitalized interest for solar and wind projects in the prior year.development.
Other Income and Expenses, net. The decrease was primarily due to income from the North Allegheny Wind, LLC and FES settlement agreement in the prior year.
Interest Expense. The increase was primarily due to mark-to-market losses in the solar portfolio in the current year.103
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 production tax credits generated.
Loss Attributable to Noncontrolling Interests. The increase was primarily due to the new tax equity solar projects entered into during 2019.
Matters Impacting Future Commercial Renewables Results
During 2019, Duke Energy evaluated recoverability of the wind and solar generation assets included in the minority interest sale as a result of the portfolio fair value of consideration received being less than the carrying value of the assets and determined the assets were all recoverable. Additionally, in 2019, 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 declining long-term forecasted energy prices, primarily driven by lower forecasted natural gas prices. These assets were not impaired; however, a continued decline in energy market pricing would likely result in a future impairment. Impairment of these assets could result in adverse impacts to the future results of operations, financial position and cash flows of Commercial Renewables. See Note 2 to the Condensed Consolidated Financial Statements, "Business Segments," for additional information.
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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,"Income Tax Benefit. The decrease in the Duke Energy Registrants' Annual Reports on Form 10-K for the year ended December 31, 2018, for discussion of riskstax benefit was primarily driven by a decrease in production tax credits generated and an increase in taxes associated with the Tax Act.new tax equity investments.
Loss Attributable to Noncontrolling Interests. The increase was primarily due to tax equity structures related to new renewable investments.
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| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
(in millions) | 2019 |
| | 2018 |
| | Variance |
| | 2019 |
| | 2018 |
| | Variance |
|
Operating Revenues | $ | 25 |
| | $ | 34 |
| | $ | (9 | ) | | $ | 71 |
| | $ | 101 |
| | $ | (30 | ) |
Operating Expenses | 27 |
| | 54 |
| | (27 | ) | | 66 |
| | 167 |
| | (101 | ) |
Gains (Losses) on Sales of Other Assets and Other, net | — |
| | 3 |
| | (3 | ) | | — |
| | (96 | ) | | 96 |
|
Operating (Loss) Income | (2 | ) | | (17 | ) | | 15 |
| | 5 |
| | (162 | ) | | 167 |
|
Other Income and Expenses, net | 24 |
| | 40 |
| | (16 | ) | | 98 |
| | 81 |
| | 17 |
|
Interest Expense | 185 |
| | 163 |
| | 22 |
| | 536 |
| | 484 |
| | 52 |
|
Loss Before Income Taxes | (163 | ) | | (140 | ) | | (23 | ) | | (433 | ) | | (565 | ) | | 132 |
|
Income Tax Benefit | (54 | ) | | (98 | ) | | 44 |
| | (132 | ) | | (125 | ) | | (7 | ) |
Less: Net Income Attributable to Noncontrolling Interests | — |
| | 2 |
| | (2 | ) | | — |
| | 6 |
| | (6 | ) |
Less: Preferred Dividends | 15 |
| | — |
| | 15 |
| | 27 |
| | — |
| | 27 |
|
Net Loss | $ | (124 | ) |
| $ | (44 | ) | | $ | (80 | ) | | $ | (328 | ) | | $ | (446 | ) | | $ | 118 |
|
ThreeSix Months Ended SeptemberJune 30, 2019,2020, as compared to SeptemberJune 30, 20182019
The variance was driven by lower income tax benefit, higher interest expense,Commercial Renewables' results were favorable primarily due to new investments in renewable projects and favorable wind revenue. Since the declarationsecond quarter of the preferred stock dividends, offset by the absence2019, Commercial Renewables has placed in the current yearservice over 700MW of costs related to the Piedmont acquisition.capacity.
The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The increase was primarily due to new projects placed in service and favorable wind portfolio revenue as a result of favorable market pricing and wind resource.
Operating Expenses. The increase was primarily due to higher depreciation and property tax expense as a result of new projects placed in service and an impairment charge in the current year related to a non-contracted wind project.
Other Income and Expenses, net. The increase was primarily due to mark-to-market losses in the solar portfolio in the prior year.
Interest Expense. The decrease was primarily due to higher capitalized interest for solar and wind projects in development.
Income Tax Benefit. The decrease in the tax benefit was primarily driven by an increase in taxes associated with new tax equity investments and a decrease in production tax credits generated.
Loss Attributable to Noncontrolling Interests. The increase was primarily due to tax equity structures related to new renewable investments.
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(in millions) | 2020 |
| | 2019 |
| | Variance |
| | 2020 |
| | 2019 |
| | Variance |
|
Operating Revenues | $ | 26 |
| | $ | 25 |
| | $ | 1 |
| | $ | 49 |
| | $ | 46 |
| | $ | 3 |
|
Operating Expenses | 37 |
| | 11 |
| | 26 |
| | (52 | ) | | 39 |
| | (91 | ) |
Operating (Loss) Income | (11 | ) | | 14 |
| | (25 | ) | | 101 |
| | 7 |
| | 94 |
|
Other Income and Expenses, net | 45 |
| | 30 |
| | 15 |
| | 12 |
| | 74 |
| | (62 | ) |
Interest Expense | 167 |
| | 180 |
| | (13 | ) | | 338 |
| | 351 |
| | (13 | ) |
Loss Before Income Taxes | (133 | ) | | (136 | ) | | 3 |
| | (225 | ) | | (270 | ) | | 45 |
|
Income Tax Benefit | (64 | ) | | (33 | ) | | (31 | ) | | (83 | ) | | (78 | ) | | (5 | ) |
Less: Preferred Dividends | 15 |
| | 12 |
| | 3 |
| | 54 |
| | 12 |
| | 42 |
|
Net Loss | $ | (84 | ) |
| $ | (115 | ) | | $ | 31 |
| | $ | (196 | ) | | $ | (204 | ) | | $ | 8 |
|
Three Months Ended June 30, 2020, as compared to June 30, 2019
The variance was primarily driven by lower state income tax expense. The following is a detailed discussion of the variance drivers by line item.
Operating Expenses. The increase was primarily driven by higher loss experience related to non-property captive insurance claims and higher expenses associated with certain employee benefit obligations.
Other Income and Expenses, net. The variance was primarily due to higher returns on investments that fund certain employee benefit obligations, partially offset by lower earnings on the NMC investment.
Interest Expense. The variance was primarily due to lower outstanding short-term debt and lower interest rates.
Income Tax Benefit. The increase in the tax benefit was primarily driven by lower state income tax expense. The ETRs for the three months ended June 30, 2020, and 2019 were 48.1% and 24.3%, respectively. The increase in the ETR was primarily due to lower state income tax expense.
Six Months Ended June 30, 2020, as compared to June 30, 2019
The variance was primarily driven by a reversal of corporate allocated severance costs, partially offset by lower returns on investments and the declaration of preferred stock dividends. The following is a detailed discussion of the variance drivers by line item.
Operating Expenses. The decrease was primarily due to the deferral of 2018 corporate allocated severance costs due to the partial settlement between Duke Energy Carolinas and the Public Staff of the NCUC related to the Piedmont acquisition and OVEC fuel expense in the prior year.2019 North Carolina retail rate case.
Other Income and Expenses, net. The variance was primarily due to lower returns on investments that fund certain employee benefit obligations, and lower earnings on the NMC investment.investment and lower interest income due to a tax true up in the prior year.
Interest Expense. The variance was primarily due to higherlower outstanding short-term debt in the current year.
Income Tax Benefit. The decrease in the tax benefit was primarily driven by favorable tax return true ups and tax levelization in the prior year, partially offset by an increase in pretax losses.lower interest rates.
Preferred Dividends. The variance was driven by the declaration of the preferred stock dividend on preferred stock issued in 2019.
Nine Months Ended September 30, 2019, as compared to September 30, 2018
The variance was driven by the prior year loss on sale of the retired Beckjord station, prior year valuation allowance against AMT credits, and absence in the current year of costs related to the Piedmont acquisition, offset by higher interest expense and the declarations of the preferred stock dividend. The following is a detailed discussion of the variance drivers by line item.
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 variance was primarily due to costs associated with the Piedmont acquisition and OVEC fuel expense in the prior year.
Gains (Losses) on Sales of Other Assets and Other, net. The variance was driven by the prior year loss on sale of the retired Beckjord station, including the transfer of coal ash basins and other real property and indemnification from all potential future claims related to the property, whether arising under environmental laws or otherwise.
Other Income and Expenses, net. The variance was primarily due to higher returns on investments that fund certain employee benefit obligations.
Interest Expense. The variance was primarily due to higher outstanding debt in the current year and higher short-term interest rates.
Income Tax Benefit. The increase in the tax benefit was primarily driven by a prior year valuation allowance against AMT credits, partially offset by a decrease in pretax losses.
Preferred Dividends. The variance was driven by the declarations of preferred stock dividenddividends on preferred stock issued in 2019.
|
| |
MD&A | DUKE ENERGY CAROLINAS |
DUKE ENERGY CAROLINAS
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the nine months ended September 30, 2019, and 2018, and the Annual Report on Form 10-K for the year ended December 31, 2018.
| | | Nine Months Ended September 30, | Six Months Ended June 30, |
(in millions) | 2019 |
| | 2018 |
| | Variance |
| 2020 |
| | 2019 |
| | Variance |
|
Operating Revenues | $ | 5,619 |
| | $ | 5,525 |
| | $ | 94 |
| $ | 3,358 |
| | $ | 3,457 |
| | $ | (99 | ) |
Operating Expenses | | | | | | | | | | |
Fuel used in electric generation and purchased power | 1,371 |
| | 1,370 |
| | 1 |
| 829 |
| | 867 |
| | (38 | ) |
Operation, maintenance and other | 1,324 |
| | 1,464 |
| | (140 | ) | 816 |
| | 881 |
| | (65 | ) |
Depreciation and amortization | 1,013 |
| | 866 |
| | 147 |
| 718 |
| | 663 |
| | 55 |
|
Property and other taxes | 221 |
| | 214 |
| | 7 |
| 156 |
| | 155 |
| | 1 |
|
Impairment charges | 11 |
| | 191 |
| | (180 | ) | 2 |
| | 5 |
| | (3 | ) |
Total operating expenses | 3,940 |
| | 4,105 |
| | (165 | ) | 2,521 |
| | 2,571 |
| | (50 | ) |
Losses on Sales of Other Assets and Other, net | — |
| | (1 | ) | | 1 |
| |
Operating Income | 1,679 |
| | 1,419 |
| | 260 |
| 837 |
| | 886 |
| | (49 | ) |
Other Income and Expenses, net | 106 |
| | 108 |
| | (2 | ) | 86 |
| | 72 |
| | 14 |
|
Interest Expense | 346 |
| | 323 |
| | 23 |
| 248 |
| | 227 |
| | 21 |
|
Income Before Income Taxes | 1,439 |
| | 1,204 |
| | 235 |
| 675 |
| | 731 |
| | (56 | ) |
Income Tax Expense | 255 |
| | 268 |
| | (13 | ) | 102 |
| | 137 |
| | (35 | ) |
Net Income | $ | 1,184 |
| | $ | 936 |
| | $ | 248 |
| $ | 573 |
| | $ | 594 |
| | $ | (21 | ) |
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 | 20192020 |
|
Residential sales | (3.25.0 | )% |
General service sales | (1.86.7 | )% |
Industrial sales | (4.19.6 | )% |
Wholesale power sales | (13.43.0 | )% |
Joint dispatch sales | 23.0(60.0 | )% |
Total sales | (2.17.2 | )% |
Average number of customers | 2.21.8 | % |
NineSix Months Ended SeptemberJune 30, 2019,2020, as compared to SeptemberJune 30, 20182019
Operating Revenues. The variance was driven primarily by:
a $151$77 million increase in retail pricing due to the impacts of the prior year North Carolina rate case and the current year South Carolina rate case; and
a $7 million increasedecrease in retail sales net ofdue to unfavorable weather in the current year; and
a $66 million decrease in fuel revenues due to favorable weather in the current year.lower prices and retail sales volumes.
Partially offset by:
a $47$37 million decrease in rider 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; and
a $24 million decreaseincrease in weather-normal retail sales volumes.volumes; and
a $17 million increase due to higher pricing from the South Carolina retail rate case, net of a return of EDIT to customers.
Operating Expenses. The variance was driven primarily by:
a $180 million decrease in impairment charges primarily due to impacts of the prior year North Carolina rate order and charges related to coal ash costs in South Carolina; and
| |
• | a $140$65 million decrease in operation, maintenance and other expense primarily driven by the deferral of 2018 severance costs due to decreased labor coststhe partial settlement agreement between Duke Energy Carolinas and the Public Staff of the NCUC related to the 2019 North Carolina retail rate case, partially offset by higher storm restoration costs in the prior year.costs; and |
a $38 million decrease in fuel used in electric generation and purchased power primarily due to lower retail sales volumes, net of a prior period true up.
Partially offset by:
a $147$55 million increase in depreciation and amortization expense primarily due to additional plant in service and new depreciation rates associated with the prior year North Carolina rate case and the current year South Carolina rate case and higher amortization of deferred coal ash costs associated with the prior year North Carolina rate case.
|
| |
MD&A | DUKE ENERGY CAROLINAS |
Other Income and Expenses, net. The variance was primarily due to higher AFUDC equity in the current year.
Interest Expense. The variance was primarily due to higher debt outstanding in the current year.
Income Tax Expense.The decrease in tax expense was primarily due to a decrease in pretax income and an increase in the amortization of excess deferred taxes and favorable tax return true ups, partially offset by an increase in pretax income.taxes.
Matters Impacting Future Results105
Duke Energy Carolinas filed a general rate case with the NCUC on September 30, 2019. The outcome of this rate case could materially impact Duke Energy Carolina's results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
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. Duke Energy Carolinas intends to file a notice of appeal with the South Carolina Supreme Court within 30 days of the order that was received on October 18, 2019. 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 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
On April 1, 2019, NCDEQ issued a closure determination requiring Duke Energy Carolinas to excavate all remaining coal ash impoundments in North Carolina, even though they had been deemed low risk by NCDEQ on November 14, 2018. 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 grid improvement costs. Duke Energy Carolinas has petitioned for deferral of future grid improvement costs in its 2019 rate case. Duke Energy Carolinas' results of operations, financial position and cash flows could be adversely impacted if grid improvement 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 has been deferred. 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 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.
PROGRESS ENERGY
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the nine months ended September 30, 2019, and 2018, and the Annual Report on Form 10-K for the year ended December 31, 2018.
| | | Nine Months Ended September 30, | Six Months Ended June 30, |
(in millions) | 2019 |
| | 2018 |
| | Variance |
| 2020 |
| | 2019 |
| | Variance |
|
Operating Revenues | $ | 8,558 |
| | $ | 8,119 |
| | $ | 439 |
| $ | 4,920 |
| | $ | 5,316 |
| | $ | (396 | ) |
Operating Expenses | | | | | | | | | | |
Fuel used in electric generation and purchased power | 3,100 |
| | 3,019 |
| | 81 |
| 1,540 |
| | 1,913 |
| | (373 | ) |
Operation, maintenance and other | 1,813 |
| | 1,913 |
| | (100 | ) | 1,143 |
| | 1,173 |
| | (30 | ) |
Depreciation and amortization | 1,377 |
| | 1,183 |
| | 194 |
| 884 |
| | 881 |
| | 3 |
|
Property and other taxes | 439 |
| | 399 |
| | 40 |
| 272 |
| | 280 |
| | (8 | ) |
Impairment charges | (25 | ) | | 34 |
| | (59 | ) | |
Total operating expenses | 6,704 |
| | 6,548 |
| | 156 |
| 3,839 |
| | 4,247 |
| | (408 | ) |
Gains on Sales of Other Assets and Other, net | — |
| | 23 |
| | (23 | ) | |
Gains (Losses) on Sales of Other Assets and Other, net | | 6 |
| | (1 | ) | | 7 |
|
Operating Income | 1,854 |
| | 1,594 |
| | 260 |
| 1,087 |
| | 1,068 |
| | 19 |
|
Other Income and Expenses, net | 106 |
| | 128 |
| | (22 | ) | 65 |
| | 65 |
| | — |
|
Interest Expense | 650 |
| | 626 |
| | 24 |
| 405 |
| | 438 |
| | (33 | ) |
Income Before Income Taxes | 1,310 |
| | 1,096 |
| | 214 |
| 747 |
| | 695 |
| | 52 |
|
Income Tax Expense | 212 |
| | 186 |
| | 26 |
| 120 |
| | 118 |
| | 2 |
|
Net Income | 1,098 |
| | 910 |
| | 188 |
| 627 |
| | 577 |
| | 50 |
|
Less: Net Income Attributable to Noncontrolling Interests | — |
| | 6 |
| | (6 | ) | |
Net Income Attributable to Parent | $ | 1,098 |
| | $ | 904 |
| | $ | 194 |
| |
NineSix Months Ended SeptemberJune 30, 2019,2020, as compared to SeptemberJune 30, 20182019
Operating Revenues. The variance was driven primarily by:
a $299$380 million increasedecrease in retail pricing primarily duefuel revenues driven by lower sales volumes as well as an accelerated refund of fuel costs in response to the impacts of the prior year North Carolina rate case and current year South Carolina rate caseCOVID-19 pandemic at Duke Energy Progress, Duke Energy Florida's base rate adjustments related to Citrus County CC being placed in serviceFlorida and annual increases from the 2017 Settlement Agreement;
a $76 million increase inlower fuel revenues primarily related to increased fuel cost recovery due to extreme weatherprices, volumes and native load transfer sales in the priorcurrent year at Duke Energy Progress, partially offset by a decrease in fuel and capacity rates billed to retail customers at Duke Energy Florida;Progress;
a $56$49 million increasedecrease in wholesale power revenues, net of fuel, primarily due to higher recovery of coal ash cost in the prior year and lower capacity volumes at Duke Energy Progress, partially offset by increased demand;demand at Duke Energy Florida;
a $17$44 million increasedecrease in retail sales, net of fuel revenues, due to unfavorable weather in the current year at Duke Energy Progress, partially offset by favorable weather in the current year at Duke Energy Florida;
a $32 million decrease in rider revenues primarily due to the Crystal River 3 uprate regulatory asset being fully recovered in 2019 at Duke Energy Florida; and
a $17$29 million decrease in weather-normal retail sales volume.
Partially offset by:
a $55 million increase in storm revenues due to Hurricane Dorian collections at Duke Energy Florida;
a $39 million increase in retail pricing due to base rate adjustments related to annual increases from the 2017 Settlement Agreement and the Solar Base Rate Adjustment at Duke Energy Florida;
a $15 million increase due to higher pricing from the South Carolina retail rate case, net of a return of EDIT to customers at Duke Energy Progress; and
a $12 million increase in other revenues primarily due to increased transmission revenues and non-regulated products and services revenues at Duke Energy Florida.
Partially offset by:
a $32 million decrease in retail rider revenues primarily related to decreased revenue requirements in the current year.
Operating Expenses. The variance was driven primarily by:
a $194$373 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;
an $81 million increasedecrease in fuel used in electric generation and purchased power primarily due to an increaselower demand and changes in the North Carolina Renewable Energy and Energy Efficiency Portfolio Standard requirement from the prior yeargeneration mix at Duke Energy Progress partially offset by lower purchased power and lower fuel costs netat Duke Energy Florida;
a $30 million decrease in operation, maintenance and other expense at Duke Energy Progress primarily driven by the deferral of deferrals,2018 severance costs due to the partial settlement agreement between Duke Energy Carolinas and the Public Staff of the NCUC related to the 2019 North Carolina retail rate case, reduced outage costs and energy efficiency program costs, partially offset by storm cost amortizations at Duke Energy Florida; and
a $40an $8 million increasedecrease in property and other taxes primarily due to current yearlower revenue related taxes as a result of the decreased fuel revenues, and lower accrued property tax reassessments and a favorable sales and use tax credit in the prior yeartaxes at Duke Energy Progress, and higher property taxes for additional plant in service at Duke Energy Florida.
Partially offset by:
a $100 million decrease in operation, maintenance and other expense primarily due to lower storm costs, reduced outage costs, and lower employee benefit costs, partially offset by increased vegetation management costs at Duke Energy Florida; and
a $59 million decrease in impairment charges primarily due to prior year impacts associated with the North Carolina rate case at Duke Energy Progress and a reduction of a prior year impairment at Duke Energy Florida's Citrus County CC.
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 AFUDClower interest rates on outstanding debt return ending in the fourth quarter of 2018 on the Citrus County CC at Duke Energy Florida.Progress.
Income Tax Expense. The increase in tax expense was primarily due to an increase pretax income, partially offset by an increase in the amortization of excess deferred taxes.
106
Matters Impacting Future Results
Duke Energy Progress filed a general rate case with the NCUC on October 30, 2019. The outcome of this rate case 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.
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. Duke Energy Progress intends to file a notice of appeal with the South Carolina Supreme Court within 30 days of the order that was received on October 18, 2019. Progress Energy'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.
On April 1, 2019, NCDEQ issued a closure determination requiring Duke Energy Progress to excavate all remaining coal ash impoundments in North Carolina, even though they had been deemed low risk by NCDEQ on November 14, 2018. 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 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 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 Progress has petitioned for deferral of future grid improvement costs in its 2019 rate case. Progress Energy's results of operations, financial position and cash flows could be adversely impacted if grid improvement costs are not ultimately approved for recovery and/or deferral treatment.
During the last half of 2018, Duke Energy Progress and Duke Energy Florida’s service territories were impacted by several named storms. Hurricane Florence, Hurricane Michael and Winter Storm Diego caused flooding, extensive damage and widespread power outages to the service territory of Duke Energy Progress. Duke Energy Florida’s service territory was also impacted by Hurricane Michael, a Category 5 hurricane and the most powerful storm to hit the Florida Panhandle in recorded history. In September 2019, Hurricane Dorian impacted Duke Energy Progress' and Duke Energy Florida's service territories. A significant portion of the incremental operation and maintenance expenses related to these storms has been deferred. An order from regulatory authorities disallowing the deferral and future recovery of storm restoration costs could have an adverse impact on Progress Energy's results of operations, financial position and cash flows. See Note 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 PROGRESS
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the nine months ended September 30, 2019, and 2018, and the Annual Report on Form 10-K for the year ended December 31, 2018.
| | | Nine Months Ended September 30, | Six Months Ended June 30, |
(in millions) | 2019 |
| | 2018 |
| | Variance |
| 2020 |
| | 2019 |
| | Variance |
|
Operating Revenues | $ | 4,559 |
| | $ | 4,333 |
| | $ | 226 |
| $ | 2,581 |
| | $ | 2,871 |
| | $ | (290 | ) |
Operating Expenses | | | | | | | | | | |
Fuel used in electric generation and purchased power | 1,571 |
| | 1,452 |
| | 119 |
| 800 |
| | 994 |
| | (194 | ) |
Operation, maintenance and other | 1,070 |
| | 1,187 |
| | (117 | ) | 622 |
| | 692 |
| | (70 | ) |
Depreciation and amortization | 855 |
| | 723 |
| | 132 |
| 544 |
| | 541 |
| | 3 |
|
Property and other taxes | 131 |
| | 115 |
| | 16 |
| 91 |
| | 85 |
| | 6 |
|
Impairment charges | — |
| | 33 |
| | (33 | ) | |
Total operating expenses | 3,627 |
| | 3,510 |
| | 117 |
| 2,057 |
| | 2,312 |
| | (255 | ) |
Gains on Sales of Other Assets and Other, net | — |
| | 9 |
| | (9 | ) | 5 |
| | — |
| | 5 |
|
Operating Income | 932 |
| | 832 |
| | 100 |
| 529 |
| | 559 |
| | (30 | ) |
Other Income and Expenses, net | 75 |
| | 61 |
| | 14 |
| 41 |
| | 48 |
| | (7 | ) |
Interest Expense | 232 |
| | 241 |
| | (9 | ) | 137 |
| | 158 |
| | (21 | ) |
Income Before Income Taxes | 775 |
| | 652 |
| | 123 |
| 433 |
| | 449 |
| | (16 | ) |
Income Tax Expense | 125 |
| | 120 |
| | 5 |
| 68 |
| | 77 |
| | (9 | ) |
Net Income | $ | 650 |
| | $ | 532 |
| | $ | 118 |
| $ | 365 |
| | $ | 372 |
| | $ | (7 | ) |
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 | 20192020 |
|
Residential sales | (4.16.0 | )% |
General service sales | (1.68.8 | )% |
Industrial sales | 1.6(4.8 | )% |
Wholesale power sales | (2.212.2 | )% |
Joint dispatch sales | (0.322.8 | )% |
Total sales | (1.36.4 | )% |
Average number of customers | 1.31.6 | % |
NineSix Months Ended SeptemberJune 30, 2019,2020, as compared to SeptemberJune 30, 20182019
Operating Revenues. The variance was driven primarily by:
a $101$185 million increasedecrease in fuel revenues primarily related to increased fuel cost recovery due to extreme weatherdriven by lower fuel prices and volumes as well as less native load transfer sales in the priorcurrent year;
a $91$61 million increase in retail pricing due to the impacts of the prior year North Carolina rate case and the current year South Carolina rate case; and
a $47 million increasedecrease in wholesale power revenues, net of fuel, primarily due to higher recovery of coal ash cost recoveryin the prior year and decreased volumes, partially offset by increased capacity rates;
a $60 million decrease in retail sales due to unfavorable weather in the current year; and
a $13 million decrease in weather-normal retail sales volumes in the current year.
Partially Offset by:
a $17$15 million decrease primarilyincrease due to higher pricing from the South Carolina retail rate case, net of a return of excess deferred incomes taxes created by the reduction in the corporate income tax rate, partially offset by increase in rider revenues relatedEDIT to energy efficiency programs.customers.
Operating Expenses. The variance was driven primarily by:
a $132$194 million increase in depreciation and amortization expense primarily due to higher amortization of deferred coal ash costs and new depreciation rates associated with the prior year North Carolina and current year South Carolina rate cases, partially offset by the amortization credit for the North Carolina Renewable Energy and Energy Efficiency Portfolio Standard requirement increase from prior year;
a $119 million increasedecrease in fuel used in electric generation and purchased power primarily due to a higher deferred fuel 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; and
a $16 million increase in property and other taxes primarily due to current year property tax reassessments and a favorable sales and use tax credit in the prior year.
Partially offset by:
a $117$70 million decrease in operation, maintenance and other expense primarily driven by the deferral of 2018 severance costs due to lower storm costs in current year,the partial settlement agreement between Duke Energy Carolinas and the Public Staff of the NCUC related to the 2019 North Carolina retail rate case, reduced outage costs and lower employee benefit costs; and
a $33 million decrease in impairment charges due to prior year impacts associated with the North Carolina rate case.energy efficiency program costs.
Other Income and Expenses, net.Interest Expense. The variance was driven primarily by life insurance proceeds.lower interest rates on outstanding debt.
Income Tax Expense. The increasedecrease in tax expense was primarily due to an increasea decrease in pretax income partially offset byand an increase in the amortization of excess deferred taxes.
Matters Impacting Future Results107
Duke Energy Progress filed a general rate case with the NCUC on October 30, 2019. The outcome of this rate case could materially impact Duke Energy Progress' results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
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. Duke Energy Progress intends to file a notice of appeal with the South Carolina Supreme Court within 30 days of the order that was received on October 18, 2019. Duke Energy Progress' 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.
On April 1, 2019, NCDEQ issued a closure determination requiring Duke Energy Progress to excavate all remaining coal ash impoundments in North Carolina, even though they had been deemed low risk by NCDEQ on November 14, 2018. 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 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 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 Progress has petitioned for deferral of future grid improvement costs in its 2019 rate case. Duke Energy Progress' results of operations, financial position and cash flows could be adversely impacted if grid improvement costs are not ultimately approved for recovery and/or deferral treatment.
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. In September 2019, Hurricane Dorian reached the Carolinas bringing high winds, tornadoes and heavy rain, impacting about 300,000 customers within the service territory. A significant portion of the incremental operation and maintenance expenses related to these storms has been deferred. An order from regulatory authorities disallowing the deferral and future recovery of storm restoration costs could have an adverse impact on Duke Energy Progress' results of operations, financial position and cash flows. See Note 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 FLORIDA
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the nine months ended September 30, 2019, and 2018, and the Annual Report on Form 10-K for the year ended December 31, 2018.
| | | Nine Months Ended September 30, | Six Months Ended June 30, |
(in millions) | 2019 |
| | 2018 |
| | Variance |
| 2020 |
| | 2019 |
| | Variance |
|
Operating Revenues | $ | 3,987 |
| | $ | 3,780 |
| | $ | 207 |
| $ | 2,330 |
| | $ | 2,439 |
| | $ | (109 | ) |
Operating Expenses | | | | | | | | | | |
Fuel used in electric generation and purchased power | 1,529 |
| | 1,567 |
| | (38 | ) | 740 |
| | 919 |
| | (179 | ) |
Operation, maintenance and other | 730 |
| | 719 |
| | 11 |
| 514 |
| | 474 |
| | 40 |
|
Depreciation and amortization | 522 |
| | 460 |
| | 62 |
| 340 |
| | 340 |
| | — |
|
Property and other taxes | 309 |
| | 284 |
| | 25 |
| 180 |
| | 196 |
| | (16 | ) |
Impairment charges | (25 | ) | | 1 |
| | (26 | ) | |
Total operating expenses | 3,065 |
| | 3,031 |
| | 34 |
| 1,774 |
| | 1,929 |
| | (155 | ) |
Losses on Sales of Other Assets and Other, net | | — |
| | (1 | ) | | 1 |
|
Operating Income | 922 |
| | 749 |
| | 173 |
| 556 |
| | 509 |
| | 47 |
|
Other Income and Expenses, net | 39 |
| | 75 |
| | (36 | ) | 25 |
| | 25 |
| | — |
|
Interest Expense | 246 |
| | 210 |
| | 36 |
| 164 |
| | 165 |
| | (1 | ) |
Income Before Income Taxes | 715 |
| | 614 |
| | 101 |
| 417 |
| | 369 |
| | 48 |
|
Income Tax Expense | 129 |
| | 100 |
| | 29 |
| 81 |
| | 72 |
| | 9 |
|
Net Income | $ | 586 |
| | $ | 514 |
| | $ | 72 |
| $ | 336 |
| | $ | 297 |
| | $ | 39 |
|
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 | 20192020 |
|
Residential sales | 2.21.2 | % |
General service sales | 1.0(6.6 | )% |
Industrial sales | (6.35.4 | )% |
Wholesale and other | 32.4(10.7 | )% |
Total sales | 2.1(1.0 | )% |
Average number of customers | 1.61.7 | % |
NineSix Months Ended SeptemberJune 30, 2019,2020, as compared to SeptemberJune 30, 20182019
Operating Revenues. The variance was driven primarily by:
a $208$195 million decrease in fuel revenues driven by lower sales volumes as well as an accelerated refund of fuel costs in response to the COVID-19 pandemic;
a $32 million decrease in rider revenues primarily due to full recovery of the Crystal River 3 uprate regulatory asset in 2019; and
a $16 million decrease in weather-normal retail sales volumes.
Partially offset by:
a $55 million increase in storm revenues due to Hurricane Dorian collections;
a $39 million increase in retail pricing due to base rate adjustments related to Citrus County CC being placed in service, annual increases from the 2017 Settlement Agreement and the Solar Base Rate Adjustment;
a $17$16 million increase in retail sales, net of fuel revenues, due to favorable weather in the current year;
a $17$12 million increase in other revenues primarily due to increased transmission revenues and non-regulated products and services revenues; and
a $9$12 million increase in wholesale power revenues, net of fuel, primarily due to increased demand.
Partially offset by:
a $25 million decrease in fuel and capacity revenues primarily due to a decrease in fuel and capacity rates billed to retail customers; and
a $22 million decrease in retail rider revenues primarily related to decreased revenue requirements in the current year.
Operating Expenses. The variance was driven primarily by:
a $62 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;
a $25 million increase in property and other taxes primarily due to higher property taxes from additional plant in service; and
an $11 million increase in operation, maintenance and other expense primarily due to increased vegetation management costs and Hurricane Dorian costs, partially offset by lower outage costs.
Partially offset by:
a $38$179 million decrease in fuel used in electric generation and purchased power primarily due to lower purchased power and lower fuel costs, net of deferrals;costs; and
a $26$16 million decrease in impairment chargesproperty and other taxes driven by lower gross receipts taxes due to decreased fuel revenues as well as lower accrued property taxes.
Partially offset by:
a $40 million increase in operation, maintenance and other expense primarily due to a reduction of a prior year impairment at Citrus County CC.
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.
Interest Expense. The variance was driven primarily by AFUDC debt return ending on the Citrus County CC in the fourth quarter of 2018 and higher debt outstanding in the current year.storm cost amortizations.
Income Tax Expense. The increase in tax expense was primarily due to an increase in pretax income.
Matters Impacting Future Results108
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, particularly from Panama City Beach to Mexico Beach. In September 2019, Duke Energy Florida’s service territory was threatened by Hurricane Dorian with landfall as a possible Category 5 hurricane and therefore Duke Energy Florida incurred costs to secure necessary resources to be prepared for that potential impact. A significant portion of the incremental operation and maintenance expenses related to these storms has been deferred. An order from regulatory authorities disallowing the future recovery of storm restoration costs could have an adverse impact on Duke Energy Florida's financial position, results of operations and cash flows. See Note 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 nine months ended September 30, 2019, and 2018, and the Annual Report on Form 10-K for the year ended December 31, 2018.
|
| | | | | | | | | | | |
| Nine Months Ended September 30, |
(in millions) | 2019 |
| | 2018 |
| | Variance |
|
Operating Revenues | | | | | |
Regulated electric | $ | 1,099 |
| | $ | 1,055 |
| | $ | 44 |
|
Regulated natural gas | 354 |
| | 361 |
| | (7 | ) |
Nonregulated electric and other | — |
| | 36 |
| | (36 | ) |
Total operating revenues | 1,453 |
| | 1,452 |
| | 1 |
|
Operating Expenses | | | | | |
Fuel used in electric generation and purchased power – regulated | 293 |
| | 284 |
| | 9 |
|
Fuel used in electric generation and purchased power – nonregulated | — |
| | 43 |
| | (43 | ) |
Cost of natural gas | 68 |
| | 73 |
| | (5 | ) |
Operation, maintenance and other | 378 |
| | 337 |
| | 41 |
|
Depreciation and amortization | 199 |
| | 196 |
| | 3 |
|
Property and other taxes | 229 |
| | 218 |
| | 11 |
|
Total operating expenses | 1,167 |
| | 1,151 |
| | 16 |
|
Losses on Sales of Other Assets and Other, net | — |
| | (106 | ) | | 106 |
|
Operating Income | 286 |
| | 195 |
| | 91 |
|
Other Income and Expenses, net | 19 |
| | 17 |
| | 2 |
|
Interest Expense | 81 |
| | 68 |
| | 13 |
|
Income Before Income Taxes | 224 |
| | 144 |
| | 80 |
|
Income Tax Expense | 34 |
| | 23 |
| | 11 |
|
Net Income | $ | 190 |
| | $ | 121 |
| | $ | 69 |
|
DUKE ENERGY OHIO
|
| | | | | | | | | | | |
| Six Months Ended June 30, |
(in millions) | 2020 |
| | 2019 |
| | Variance |
|
Operating Revenues | | | | | |
Regulated electric | $ | 676 |
| | $ | 691 |
| | $ | (15 | ) |
Regulated natural gas | 245 |
| | 273 |
| | (28 | ) |
Total operating revenues | 921 |
| | 964 |
| | (43 | ) |
Operating Expenses | | | | | |
Fuel used in electric generation and purchased power | 164 |
| | 179 |
| | (15 | ) |
Cost of natural gas | 43 |
| | 64 |
| | (21 | ) |
Operation, maintenance and other | 218 |
| | 255 |
| | (37 | ) |
Depreciation and amortization | 136 |
| | 130 |
| | 6 |
|
Property and other taxes | 161 |
| | 158 |
| | 3 |
|
Total operating expenses | 722 |
| | 786 |
| | (64 | ) |
Operating Income | 199 |
| | 178 |
| | 21 |
|
Other Income and Expenses, net | 7 |
| | 15 |
| | (8 | ) |
Interest Expense | 49 |
| | 54 |
| | (5 | ) |
Income Before Income Taxes | 157 |
| | 139 |
| | 18 |
|
Income Tax Expense | 26 |
| | 23 |
| | 3 |
|
Net Income | $ | 131 |
| | $ | 116 |
| | $ | 15 |
|
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 | Electric | Natural Gas |
Increase (Decrease) over prior year | 2019 |
| 2019 |
| 2020 |
| 2020 |
|
Residential sales | (4.7 | )% | (1.2 | )% | (2.3 | )% | (7.5 | )% |
General service sales | (2.6 | )% | 0.8 | % | (8.1 | )% | (10.1 | )% |
Industrial sales | (1.4 | )% | 1.9 | % | (8.0 | )% | (3.2 | )% |
Wholesale electric power sales | 46.8 | % | n/a |
| (52.0 | )% | n/a |
|
Other natural gas sales | n/a |
| 1.4 | % | n/a |
| (0.5 | )% |
Total sales | (1.2 | )% | 0.3 | % | (6.3 | )% | (6.5 | )% |
Average number of customers | 0.6 | % | 0.8 | % | 1.3 | % | 0.8 | % |
NineSix Months Ended SeptemberJune 30, 2019,2020, as compared to SeptemberJune 30, 20182019
Operating Revenues. The variance was driven primarily by:
a $52$34 million decrease in fuel related revenues primarily due to lower natural gas prices and decreased volumes;
an $8 million decrease in other revenues due to lower OVEC sales into PJM; and
a $6 million decrease in bulk power marketing sales.
Partially offset by:
a $10 million increase in retail pricing primarily due to rate case impacts; and
a $15 million increaseimpacts in point-to-point transmission revenues.
Partially offset by:
a $28 million decrease in fuel related revenues primarily due to a decrease in price;
a $15 million decrease in FTR rider revenues;
a $14 million decrease in rider revenues primarily related to the implementation of new base rates; and
a $9 million decrease in OVEC revenues.Kentucky.
Operating Expenses. The variance was driven primarily by:
a $41$36 million increasedecrease in fuel expense, primarily driven by lower natural gas prices and decreased volumes; and
a $37 million decrease in operations, maintenance and other expense primarily due to Customer Connect and Network Integration Transmission Services deferrals, the FERC approved settlement refundtiming of certain transmissionenergy efficiency programs and outage costs, previously billed by PJM recorded in 2018;lower employee benefit expenses and
an $11 million increase in property lower vegetation and other taxes primarily due to additional plant in service.pole maintenance costs.
Partially offset by:
a $34$6 million decreaseincrease in fuel useddepreciation and amortization primarily driven by an increase in electric generation and purchased power expensedistribution plant, partially offset by lower amortization due to the prior year outage at East Bend Stationsuspension of the MGP rider in Ohio.
Other Income and the deferral of OVEC related purchased power costs.
Losses on Sales of Other Assets and Other,Expenses, 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, partially offset by an increase in the amortization of excess deferred taxes.lower AFUDC equity and lower intercompany interest income.
Matters Impacting Future Results109
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 Duke Energy Ohio’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 for the year ended December 31, 2018, 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 nine months ended September 30, 2019, and 2018, and the Annual Report on Form 10-K for the year ended December 31, 2018.
| | | Nine Months Ended September 30, | Six Months Ended June 30, |
(in millions) | 2019 |
| | 2018 |
| | Variance |
| 2020 |
| | 2019 |
| | Variance |
|
Operating Revenues | $ | 2,289 |
| | $ | 2,288 |
| | $ | 1 |
| $ | 1,309 |
| | $ | 1,482 |
| | $ | (173 | ) |
Operating Expenses | | | | | | | | | | |
Fuel used in electric generation and purchased power | 720 |
| | 730 |
| | (10 | ) | 355 |
| | 486 |
| | (131 | ) |
Operation, maintenance and other | 569 |
| | 576 |
| | (7 | ) | 357 |
| | 377 |
| | (20 | ) |
Depreciation and amortization | 393 |
| | 386 |
| | 7 |
| 266 |
| | 263 |
| | 3 |
|
Property and other taxes | 55 |
| | 56 |
| | (1 | ) | 42 |
| | 39 |
| | 3 |
|
Impairment charges | — |
| | 30 |
| | (30 | ) | |
Total operating expenses | 1,737 |
| | 1,778 |
| | (41 | ) | 1,020 |
| | 1,165 |
| | (145 | ) |
Operating Income | 552 |
| | 510 |
| | 42 |
| 289 |
| | 317 |
| | (28 | ) |
Other Income and Expenses, net | 35 |
| | 36 |
| | (1 | ) | 19 |
| | 27 |
| | (8 | ) |
Interest Expense | 111 |
| | 125 |
| | (14 | ) | 85 |
| | 71 |
| | 14 |
|
Income Before Income Taxes | 476 |
| | 421 |
| | 55 |
| 223 |
| | 273 |
| | (50 | ) |
Income Tax Expense | 113 |
| | 104 |
| | 9 |
| 43 |
| | 66 |
| | (23 | ) |
Net Income | $ | 363 |
| | $ | 317 |
| | $ | 46 |
| $ | 180 |
| | $ | 207 |
| | $ | (27 | ) |
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 | 20192020 |
|
Residential sales | (4.93.5 | )% |
General service sales | (2.59.3 | )% |
Industrial sales | (2.39.8 | )% |
Wholesale power sales | (28.94.3 | )% |
Total sales | (6.67.1 | )% |
Average number of customers | 1.21.4 | % |
NineSix Months Ended SeptemberJune 30, 2019,2020, as compared to SeptemberJune 30, 20182019
Operating Revenues. The variance was driven primarily by:
a $25$118 million increasedecrease in fuel revenues primarily due to higher TDSIC rider revenues.lower fuel cost recovery driven by customer demand and fuel prices;
Partially offset by:a $20 million decrease in weather-normal retail sales volumes driven by lower nonresidential customer demand;
an $18 million decrease in wholesale powerrider revenues primarily duerelated to lower Edwardsport IGCC sales volumes; and
a $9 million decrease primarily related to the expirationtrue up of a contract with a wholesale customer; and
an $8 million decreaserevenues in weather-normal retail sales volumes.the current year.
Operating Expenses. The variance was driven primarily by:
a $30 million decrease in impairments primarily due to the prior year Edwardsport IGCC settlement; and
a $10$131 million decrease in fuel used in electric generation and purchased power expense primarily due to lower coal and natural gas costs, partially offset by higherlower amortization of deferred fuel costs and higher purchaselower purchased power fuel clause.expense; and
a $20 million decrease in operation, maintenance and other expense primarily due to lower outage expenses, storm restoration costs, training costs, employee related costs and the Customer Connect deferral.
Other Income and Expenses, net. The decrease was primarily due to life insurance proceeds received in the prior year.
Interest ExpenseExpense. . The variance was primarily due to recordinghigher fixed-rate debt outstanding in the current year and a favorable debt return, in the prior year, on the cumulative balance of deferred coal ash spend based on probability of recovery. This adjustment was immaterial and primarily relates to prior years.spend.
Income Tax ExpenseExpense. . The increasedecrease in income tax expense was primarily due to a decrease in pretax income and an increase in pretax income.the amortization of excess deferred taxes.
|
| |
MD&A | DUKE ENERGY INDIANAPIEDMONT |
PIEDMONT
|
| | | | | | | | | | | |
| Six Months Ended June 30, |
(in millions) | 2020 |
| | 2019 |
| | Variance |
|
Operating Revenues | $ | 709 |
| | $ | 788 |
| | $ | (79 | ) |
Operating Expenses | | | | | |
Cost of natural gas | 215 |
| | 338 |
| | (123 | ) |
Operation, maintenance and other | 159 |
| | 163 |
| | (4 | ) |
Depreciation and amortization | 88 |
| | 84 |
| | 4 |
|
Property and other taxes | 24 |
| | 25 |
| | (1 | ) |
Total operating expenses | 486 |
| | 610 |
| | (124 | ) |
Operating Income | 223 |
| | 178 |
| | 45 |
|
Other Income and Expenses, net | 28 |
| | 12 |
| | 16 |
|
Interest Expense | 60 |
| | 43 |
| | 17 |
|
Income Before Income Taxes | 191 |
| | 147 |
| | 44 |
|
Income Tax Expense | 11 |
| | 32 |
| | (21 | ) |
Net Income | $ | 180 |
| | $ | 115 |
| | $ | 65 |
|
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 | 2020 |
|
Residential deliveries | (4.6 | )% |
Commercial deliveries | (11.8 | )% |
Industrial deliveries | (3.3 | )% |
Power generation deliveries | (2.8 | )% |
For resale | (15.0 | )% |
Total throughput deliveries | (4.3 | )% |
Secondary market volumes | (17.7 | )% |
Average number of customers | 1.7 | % |
Due to the margin decoupling mechanism in North Carolina and the weather normalization adjustment (WNA) mechanisms in South Carolina and Tennessee and fixed-price contracts with most power generation customers, changes in throughput deliveries do not have a material impact on Piedmont's revenues or earnings. The margin decoupling mechanism adjusts for variations in residential and commercial use per customer, including those due to weather and conservation. The WNA mechanisms mostly offset the impact of weather on bills rendered, but do not ensure full recovery of approved margin during periods when winter weather is significantly warmer or colder than normal.
Six Months Ended June 30, 2020, as compared to June 30, 2019
Operating Revenues.The variance was driven primarily by:
a $123 million decrease due to lower natural gas costs passed through to customers and decreased off-system sales natural gas costs;
a $27 million decrease due to return of EDIT to customers; and
a $7 million decrease due to NCUC approval related to tax reform accounting from fixed-rate contracts in the prior year.
Partially offset by:
a $60 million increase due to North Carolina base rate case increases; and
a $15 million increase due to North Carolina IMR increases.
Operating Expenses.The variance was driven primarily by:
a $123 million decrease in cost of natural gas due to lower natural gas prices and decreased off-system sales natural gas costs.
Other Income and Expenses, net.The variance was driven primarily by AFUDC equity and intercompany interest related to Belews Creek and Marshall Power Generation contracts.
Interest Expense.The variance was driven primarily by interest on the EDIT balance being returned to customers and higher debt outstanding in the current year, partially offset by lower AFUDC debt income.
Income Tax Expense. The decrease in income tax expense was primarily due to an increase in the amortization of excess deferred taxes and an increase in AFUDC Equity, partially offset by an increase in pretax income.
|
| |
MD&A | MATTERS IMPACTING FUTURE RESULTS |
Matters Impacting Future Results
The matters discussed herein could materially impact the future operating results, financial condition and cash flows of the Duke Energy Registrants and Business Segments.
COVID-19
Duke Energy cannot predict the extent to which the COVID-19 pandemic will impact its results of operations, financial position and cash flows in the future. Duke Energy will continue to actively monitor the impacts of COVID-19 including the economic slowdown caused by business closures or by reduced operations of businesses and governmental agencies. The pandemic and resultant economic slowdown will adversely affect the company’s customers, suppliers and partners and could cause an increase in certain costs, such as bad debt, and a reduction in the demand for energy. It could also cause delays in construction for Commercial Renewables and availability of financing. The company also has various pending rate case proceedings that have been delayed. Duke Energy has cost mitigation plans in place to partially offset these impacts, and the ability to execute these plans is critical to preserving future financial results. Furthermore, the actions of federal, state or local authorities may impact our business operations in ways that we currently cannot anticipate. See Item 1A. Risk Factors for discussion of risks associated with COVID-19 and Liquidity and Capital Resources within this section for a discussion of liquidity impacts of COVID-19.
ACP
On April 17,July 5, 2020, Duke Energy and Dominion Energy determined that they would no longer invest in the construction of the Atlantic Coast Pipeline. Duke Energy has recorded $2.0 billion of pretax charges and expects additional charges of less than $100 million to be recorded when certain exit costs related to the project are incurred by ACP. Estimates used to calculate the loss could be revised and exit obligations which have not yet been incurred or recorded could have an adverse impact on future results. Furthermore, the loss of earnings from this project, including AFUDC, will lower Duke Energy's future expected results. See Notes 1, 3, 4 and 11 to the Condensed Consolidated Financial Statements, "Organization and Basis of Presentation," "Regulatory Matters," "Commitments and Contingencies," and "Variable Interest Entities," respectively, for additional information.
Regulatory Matters
On December 31, 2019, Duke Energy Carolinas and Duke Energy Progress entered into a settlement agreement with North Carolina Department of Environmental Quality and certain community groups under which Duke Energy Carolinas and Duke Energy Progress agreed to excavate seven of the nine remaining coal ash basins in North Carolina with ash moved to on-site lined landfills. At the two remaining basins, uncapped basin ash will be excavated and moved to lined landfills. Duke Energy Carolinas and Duke Energy Progress have also received orders from the PSCSC granting the companies’ requests for retail rate increases but denying recovery of certain coal ash costs. Duke Energy Carolinas and Duke Energy Progress have appealed these decisions to the South Carolina Supreme Court and those appeals are pending. Appeals of the 2017 North Carolina approved rate cases for Duke Energy Carolinas and Duke Energy Progress are still pending at the North Carolina Supreme Court. The North Carolina Attorney General and various intervenors primarily dispute the allowance of recovery of coal ash costs from customers, which was approved by the NCUC. An order from regulatory or judicial authorities disallowing recovery of costs related to closure of these ash basins could have an adverse impact on future results.
In 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 impact.
Duke Energy Indiana'sCarolinas, Duke Energy Progress and Duke Energy Florida’s service territories were impacted by several named storms in 2018. 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. In September 2019, Hurricane Dorian impacted Duke Energy Progress and Duke Energy Florida's service territories. A significant portion of the incremental operation and maintenance expenses related to these storms has been deferred. An order from regulatory authorities disallowing the deferral and future recovery of storm restoration costs could have an adverse impact.
Duke Energy Carolinas received an order from the NCUC in 2018, which denied the Grid Rider Stipulation and deferral treatment of grid improvement costs. Duke Energy Carolinas and Duke Energy Progress have petitioned for deferral of future grid improvement costs in their 2019 rate cases. There could be adverse impact if grid improvement costs are not ultimately approved for recovery and/or deferral treatment.
In 2019, Duke Energy Carolinas and Duke Energy Progress filed general rate cases with the NCUC. The outcome of these rate cases could have a material impact.
The PUCO has 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. Duke Energy Ohio has filed for a request for extension of the deadline. A hearing on that request has not been scheduled. Disallowance of costs incurred, failure to complete the work by the deadline or failure to obtain an extension from the PUCO could result in an adverse impact.
For additional information, see Note 3 to the Condensed Consolidated Financial Statements, “Regulatory Matters.”
Other Matters
Duke Energy continues to experience growth in Commercial Renewables with tax equity structures; however, the future expiration of federal tax incentives could result in adverse impacts to future results of operations, financial position and cash flows.
|
| |
MD&A | MATTERS IMPACTING FUTURE RESULTS |
Duke Energy Indiana filedcontinues to monitor recoverability of a general rate case withrenewable merchant plant located in the IURCElectric Reliability Council of Texas West market, due to declining market pricing and declining long-term forecasted energy prices, primarily driven by lower forecasted natural gas prices. Based on July 2, 2019, its first general rate casethe most recent recoverability test performed this quarter, the carrying value approximated the aggregate estimated future cash flows for this plant and therefore further testing was not required. A continued decline in Indianaenergy market pricing would likely result in 16 years. The outcomea future impairment. Impairment of this rate caseasset could materially impact Duke Energy Indiana's results of operations, financial position and cash flows. Seeresult in adverse impacts. For additional information, see Note 32 to the Condensed Consolidated Financial Statements, "Regulatory Matters,"Business Segments." 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, 2018,2019, 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 nine months ended September 30, 2019, and 2018, and the Annual Report on Form 10-K for the year ended December 31, 2018.
|
| | | | | | | | | | | |
| Nine Months Ended September 30, |
(in millions) | 2019 |
| | 2018 |
| | Variance |
|
Operating Revenues | $ | 956 |
| | $ | 940 |
| | $ | 16 |
|
Operating Expenses | | | | | |
Cost of natural gas | 384 |
| | 387 |
| | (3 | ) |
Operation, maintenance and other | 241 |
| | 252 |
| | (11 | ) |
Depreciation and amortization | 127 |
| | 118 |
| | 9 |
|
Property and other taxes | 39 |
| | 36 |
| | 3 |
|
Total operating expenses | 791 |
| | 793 |
| | (2 | ) |
Operating Income | 165 |
| | 147 |
| | 18 |
|
Other Income and Expenses, net | 19 |
| | 15 |
| | 4 |
|
Interest Expense | 65 |
| | 60 |
| | 5 |
|
Income Before Income Taxes | 119 |
| | 102 |
| | 17 |
|
Income Tax Expense | 22 |
| | 21 |
| | 1 |
|
Net Income | $ | 97 |
| | $ | 81 |
| | $ | 16 |
|
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 | 2019 |
|
Residential deliveries | (7.5 | )% |
Commercial deliveries | (4.2 | )% |
Industrial deliveries | 2.9 | % |
Power generation deliveries | (10.5 | )% |
For resale | 5.9 | % |
Total throughput deliveries | (7.2 | )% |
Secondary market volumes | 2.0 | % |
Average number of customers | 1.3 | % |
Due to the margin decoupling mechanism in North Carolina and the 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 mostly offsets 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.
Nine Months Ended September 30, 2019, as compared to September 30, 2018
Operating Revenues.The variance was driven primarily by:
a $12 million increase primarily due to North Carolina and Tennessee IMR increases; and
a $9 million increase primarily due to NCUC approval related to tax reform accounting from fixed rate contracts.
Partially offset by:
a $7 million decrease primarily due to a reduction of rates in South Carolina.
Operating Expenses.The variance was driven primarily by:
an $11 million decrease in operations, maintenance and other expense primarily due to lower labor and information technology outside services costs and a portion of rent expense being charged to shared services in the current year.
Partially offset by:
a $9 million increase in depreciation and amortization expense primarily due to additional plant in service.
Interest Expense. The variance was driven by higher debt outstanding in the current year, higher interest expense due to customers as a result of tax reform deferrals and intercompany interest, partially offset by favorable AFUDC debt interest.
Matters Impacting Future Results
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.
LIQUIDITY AND CAPITAL RESOURCES
Sources and Uses of Cash
Duke Energy relies primarily upon cash flows from operations, debt and equity issuances and its existing cash and cash equivalents to fund its liquidity and capital requirements. Duke Energy’s capital requirements arise primarily from capital and investment expenditures, repaying long-term debt and paying dividends to shareholders. See Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2018, for2019, included a summary and detailed discussion of projected primary sources and uses of cash for 20192020 to 2021.2022.
During March 2020, in response to market volatility and the ongoing economic uncertainty related to COVID-19, Duke Energy took several actions to enhance the company's liquidity position including:
Duke Energy drew down the remaining $500 million of availability under the existing $1 billion Three-Year Revolving Credit Facility, which was subsequently repaid during the second quarter of 2020; and
Duke Energy entered into and borrowed the full amount under a $1.5 billion, 364-day Term Loan Credit Agreement. The Term Loan Credit Agreement contains a provision for additional borrowing capacity of $500 million. Duke Energy exercised the provision and borrowed an additional $188 million, for a total borrowing of approximately $1.7 billion.
Following March 2020, access to credit and equity markets has normalized. In addition to the financings to address the company's liquidity position, for the six months ended June 30, 2020, Duke Energy issued $5.3approximately $3.3 billion in debt, raised $111 million of debt, drew $650common equity through its dividend reinvestment program, and paid down $500 million on the Three-Year Revolving Credit Facility. Despite the recovery in capital markets, Duke Energy continues to monitor access to credit and equity markets amid the ongoing economic uncertainty related to COVID-19.
As of June 30, 2020, Duke Energy had approximately $341 million of cash on hand, $5.4 billion available under its $8 billion Master Credit Facility and $500 million available under the $1 billion Three-Year Revolving Credit Facility. Duke Energy Progress Term Loan Facilityhas additional liquidity available totaling approximately $2.6 billion under outstanding equity forward agreements. Duke Energy expects to have sufficient liquidity in the form of cash on hand, cash from operations and paid off in full the $350 million Piedmont term loan during the nine months ended September 30, 2019.available credit capacity to support its funding needs. Duke Energy continues to monitor access to credit and equity markets. Refer to Note 6Notes 5 and 13 to the Condensed Consolidated Financial Statements, "Debt and Credit Facilities,Facilities" and "Stockholders' Equity," respectively, for information regarding Duke Energy's debt and equity issuances, debt maturities and available credit facilities including the Master Credit Facility.
In March 2019light of the COVID-19 pandemic and September 2019,cancellation of the ACP pipeline, Duke Energy issued preferred stock for net proceeds of $973 million and $990 million, respectively. In addition, for the nine months ended September 30, 2019, Duke Energy raised approximately $120 million of common equity through its DRIP. Refer to Note 15 to the CondensedConsolidated Financial Statements, "Stockholders' Equity," for information regarding Duke Energy's equity issuances.
In November 2019, Duke Energy announced plans to issue approximately $2.5 billion of incremental equity by the end of 2020. This equity would support Duke Energy's five-year growth plan by strengthening the balance sheet and allowing the Company to absorb a wide range of outcomes associated with ACP.
Credit Ratings
In May 2019, S&P revised the credit ratings outlook for Duke Energy Corporation and all other Duke Energy Registrants from stable to negative, 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 nocurrently does not expect significant changes to the credit ratings of any oftotal projected capital and investment expenditures provided in the Form 10-K for the year ended December 31, 2019. However, Duke Energy Registrants during 2019 by any of the rating agencies. Moody's and Fitchwill continue to maintain a stable outlookreassess capital projects depending on Duke Energy Corporation.the duration and severity of economic impacts caused by the pandemic.
Cash Flow Information
The following table summarizes Duke Energy’s cash flows. | | | | Nine Months Ended | | Six Months Ended |
| | September 30, | | June 30, |
(in millions) | | 2019 |
| | 2018 |
| | 2020 |
| | 2019 |
|
Cash flows provided by (used in): | | | | | | | | |
Operating activities | | $ | 5,637 |
| | $ | 5,667 |
| | $ | 3,357 |
| | $ | 3,056 |
|
Investing activities | | (8,633 | ) | | (7,270 | ) | | (5,471 | ) | | (5,788 | ) |
Financing activities | | 2,987 |
| | 1,547 |
| | 2,182 |
| | 2,622 |
|
Net decrease in cash, cash equivalents and restricted cash | | (9 | ) | | (56 | ) | |
Net increase (decrease) in cash, cash equivalents and restricted cash | | | 68 |
| | (110 | ) |
Cash, cash equivalents and restricted cash at beginning of period | | 591 |
| | 505 |
| | 573 |
| | 591 |
|
Cash, cash equivalents and restricted cash at end of period | | $ | 582 |
| | $ | 449 |
| | $ | 641 |
| | $ | 481 |
|
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MD&A | LIQUIDITY AND CAPITAL RESOURCES |
OPERATING CASH FLOWS
The following table summarizes key components of Duke Energy’s operating cash flows. | | | | Nine Months Ended | | Six Months Ended |
| | September 30, | | June 30, |
(in millions) | | 2019 |
| | 2018 |
| | Variance |
| | 2020 |
| | 2019 |
| | Variance |
|
Net income | | $ | 2,964 |
| | $ | 2,190 |
| | $ | 774 |
| |
Net (loss) income | | | $ | (2 | ) | | $ | 1,641 |
| | $ | (1,643 | ) |
Non-cash adjustments to net income | | 4,389 |
| | 5,206 |
| | (817 | ) | | 4,592 |
| | 2,917 |
| | 1,675 |
|
Contributions to qualified pension plans | | (77 | ) | | (141 | ) | | 64 |
| |
Payments for asset retirement obligations | | (582 | ) | | (389 | ) | | (193 | ) | | (287 | ) | | (336 | ) | | 49 |
|
Payment for disposal of other assets | | — |
| | (105 | ) | | 105 |
| |
Working capital | | (1,057 | ) | | (1,094 | ) | | 37 |
| | (946 | ) | | (1,166 | ) | | 220 |
|
Net cash provided by operating activities | | $ | 5,637 |
| | $ | 5,667 |
| | $ | (30 | ) | | $ | 3,357 |
| | $ | 3,056 |
| | $ | 301 |
|
The variance was primarily due to:
a $193 million increase into timing of payments for asset retirement obligations.
Partially offset by:
a $64 million decrease in contributions to qualified pension plans; and
a $105 million payment for disposal of Beckjordproperty taxes, higher Nuclear Electric Insurance Limited (NEIL) refunds in the priorcurrent year and lower storm costs in the current year.
INVESTING CASH FLOWS
The following table summarizes key components of Duke Energy’s investing cash flows. | | | | Nine Months Ended | | Six Months Ended |
| | September 30, | | June 30, |
(in millions) | | 2019 |
| | 2018 |
| | Variance |
| | 2020 |
| | 2019 |
| | Variance |
|
Capital, investment and acquisition expenditures | | $ | (8,348 | ) | | $ | (7,050 | ) | | $ | (1,298 | ) | | $ | (5,267 | ) | | $ | (5,627 | ) | | $ | 360 |
|
Other investing items | | (285 | ) | | (220 | ) | | (65 | ) | | (204 | ) | | (161 | ) | | (43 | ) |
Net cash used in investing activities | | $ | (8,633 | ) | | $ | (7,270 | ) | | $ | (1,363 | ) | | $ | (5,471 | ) | | $ | (5,788 | ) | | $ | 317 |
|
The variance relates primarily to an increase inlower capital expenditures due to higher overall investments in the Electric Utilities and Infrastructure, Gas Utilities and Infrastructure and Commercial Renewables segments.current year for plants now in service.
FINANCING CASH FLOWS
The following table summarizes key components of Duke Energy’s financing cash flows. | | | | Nine Months Ended | | Six Months Ended |
| | September 30, | | June 30, |
(in millions) | | 2019 |
| | 2018 |
| | Variance |
| | 2020 |
| | 2019 |
| | Variance |
|
Issuances of long-term debt, net | | $ | 3,394 |
| | $ | 1,832 |
| | $ | 1,562 |
| | $ | 1,837 |
| | $ | 2,467 |
| | $ | (630 | ) |
Issuances of common stock | | 41 |
| | 834 |
| | (793 | ) | | 57 |
| | 27 |
| | 30 |
|
Issuances of preferred stock | | 1,963 |
| | — |
| | 1,963 |
| | — |
| | 973 |
| | (973 | ) |
Notes payable and commercial paper | | (1,019 | ) | | 674 |
| | (1,693 | ) | |
Notes payable, commercial paper and other short-term borrowings | | | 1,624 |
| | 324 |
| | 1,300 |
|
Dividends paid | | (1,990 | ) | | (1,835 | ) | | (155 | ) | | (1,391 | ) | | (1,312 | ) | | (79 | ) |
Contributions from noncontrolling interests | | 615 |
| | — |
| | 615 |
| | 163 |
| | 193 |
| | (30 | ) |
Other financing items | | (17 | ) | | 42 |
| | (59 | ) | | (108 | ) | | (50 | ) | | (58 | ) |
Net cash provided by financing activities | | $ | 2,987 |
| | $ | 1,547 |
| | $ | 1,440 |
| | $ | 2,182 |
| | $ | 2,622 |
| | $ | (440 | ) |
The variance was primarily due to:
a $1,963 million$1.3 billion increase in net proceeds from issuances of notes payable and commercial paper primarily due to borrowings of $1.7 billion under the issuance of preferred stock;364-day Term Loan Credit Agreement.
Partially offset by:
| |
• | a $973 million decrease in proceeds from the issuance of preferred stock; and |
a $1,562$630 million increasedecrease in proceeds from net issuances of long-term debt primarily due to the timing of issuances and redemptions of long-term debt;
a $415 million increase related to the sale of a noncontrolling interest in the Commercial Renewables segment; and
a $200 million increase related to contributions from noncontrolling interests for tax equity financing activity in the Commercial Renewables segment.
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MD&A | LIQUIDITY AND CAPITAL RESOURCES |
Partially offset by:
a $1,693 million decrease 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 due primarily to prior year issuances under equity forward agreements.debt.
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. 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 Ash Management Act of 2014
On April 1, 2019, NCDEQ issued a closure determination requiringMay 14, 2020, the five-year probation period following the Dan River coal ash spill ended. The court appointed monitor confirmed in U.S. District Court for the Eastern District of North Carolina that Duke Energy Carolinasmet or exceeded every obligation throughout the process. Separately, in a final report to the EPA, it was noted that the company made significant enhancements to its Ethics and Compliance Program and its environmental compliance programs.
Section 126 Petitions
On November 16, 2016, the state of Maryland filed a petition with EPA under Section 126 of the Clean Air Act alleging that 19 power plants, including two plants (three units) that Duke Energy ProgressRegistrants own and operate, contribute to excavate all remaining coal ash impoundments atviolations of EPA’s National Ambient Air Quality Standards (NAAQS) for ozone in the Allen, Belews Creek, Rogers, Marshall, Mayo and Roxboro facilities in North Carolina. With respect tostate of Maryland. On March 12, 2018, the finalstate of New York filed a petition with EPA, also under Section 126 of the Clean Air Act alleging that over 60 power plants, including 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 CarolinasRegistrants own and Duke Energy Progress filed Petitions for Contested Case Hearingsoperate, contribute to violations of EPA’s ozone NAAQS in the Officestate of Administrative HearingsNew York. Both Maryland and New York sought EPA orders requiring the states in which the named power plants operate to challenge NCDEQ’s April 1 Order. Forimpose more information, see Note 4, "Commitmentsstringent NOx emission limitations on the plants. On October 5, 2018, EPA denied the Maryland petition. That same day, Maryland appealed EPA's denial. On October 18, 2019, EPA denied the New York petition, and Contingencies," toNew York appealed that decision on October 29, 2019. On May 19, 2020, 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 estimateU.S. Court of $5.6 billion in the aggregateAppeals for the closure for all Duke Energy Carolinas and Duke Energy Progress impoundments. Excavation would likely extend beyondD.C. Circuit issued its decision, finding, with one exception, that EPA reasonably denied the required federal and state deadlines for impoundment closure. Duke Energy intendsMaryland petition. The court remanded one issue to seek recoveryEPA regarding target sources lacking catalytic controls. All of all costs through the ratemaking process consistent with previous proceedings. AROs recorded on the Duke Energy Carolinasunits targeted have selective catalytic reduction so the decision is favorable for these units. A different panel of the same court heard oral argument in New York’s appeal of EPA’s denial of its Section 126 Petition on May 7, 2020, and on July 14, 2020, the panel issued its decision remanding the Petition to EPA for further review. The Duke Energy Progress Condensed Consolidated Balance Sheets at September 30, 2019, and December 31, 2018, includeRegistrants cannot predict the legal obligation for closureoutcome 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. For more information, see Note 7, "Asset Retirement Obligations," to the Condensed Consolidated Financial Statements.
Duke Energy has completed excavation of all coal ash at the Riverbend and Dan River plants and coal ash regulated by the Coal Ash Act at the Sutton plant.
North Carolina Competitive Procurement
Based on an independent evaluation process, Duke Energy will own or purchase a total of 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. A second tranche for CPRE opened in October 2019, and the current target date for completion of all tranche 2 contracts is August 2020.this matter.
Off-Balance Sheet Arrangements
During the three and ninesix months ended SeptemberJune 30, 2019,2020, there were no material changes to Duke Energy’s off-balance sheet arrangements. See Notes 1, 3, 4 and 11 to the Condensed Consolidated Financial Statements, "Organization and Basis of Presentation," "Regulatory Matters," "Commitments and Contingencies," and "Variable Interest Entities," respectively, for additional information on ACP. See Note 13 to the Condensed Consolidated Financial Statements, "Variable Interest Entities,"Stockholders' Equity," for a discussion of off-balance sheet arrangementsinformation regarding ACP.equity forward sales agreements. For additional information on Duke Energy’s off-balance sheet arrangements, see “Off-Balance Sheet Arrangements” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2018.2019.
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 ninesix months ended SeptemberJune 30, 2019,2020, there were no material changes in Duke Energy's contractual obligations. For an in-depth discussion of Duke Energy’s contractual obligations, see “Contractual Obligations” and “Quantitative and Qualitative Disclosures about Market Risk” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2018.2019.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
During the three and nine months ended September 30, 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 for the Duke Energy Registrants. During the three and six months ended June 30, 2020, there were no material changes to the Duke Energy Registrants' disclosures about market risk, other than as described below.
Credit Risk
In response to the COVID-19 pandemic, in March 2020, the Duke Energy Subsidiary Registrants announced a suspension of disconnections for nonpayment to be effective throughout the national emergency. This has resulted in an increase in charge-offs over historical levels. In addition, the Registrants are monitoring the effects of the resultant economic slowdown on counterparties’ abilities to perform under their contractual obligations.
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 Exchange Act is recorded, processed, summarized and reported, within the time periods specified by the SEC rules and forms.
Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by the Duke Energy Registrants in the reports they file or submit under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, the Duke Energy Registrants have evaluated the effectiveness of their disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of SeptemberJune 30, 2019,2020, 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.
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ITEM 4. | CONTROLS AND PROCEDURES |
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 and 15d-15 under the Exchange Act) that occurred during the fiscal quarter ended SeptemberJune 30, 2019,2020, and have concluded no change has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.
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. For additional information, see Item 3, "Legal Proceedings," in Duke Energy's Annual Report on Form 10-K for the year ended December 31, 2018.2019.
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this report, careful consideration should be given to the factors discussed in Part I, “Item 1A. Risk Factors” in the Duke Energy Registrants' Annual Report on Form 10-K for the year ended December 31, 2018,2019, which could materially affect the Duke Energy Registrants’ financial condition or future results. The information presented below updates, and should be read in conjunction with, the risk factors and information disclosed in the Annual Report on Form 10-K for the year ended December 31, 2019.
The Duke Energy Registrants’ operations have been and may be affected by COVID-19 in ways listed below and in ways the registrants cannot predict at this time.
The COVID-19 pandemic has begun to impact the Duke Energy Registrants' business strategy, results of operations, financial position and cash flows, albeit not materially as of this filing date, from specific activities listed below:
Decreased demand for electricity and natural gas;
Delays in rate cases and other legal proceedings;
The health and availability of our critical personnel and their ability to perform business functions; and
Actions of state utility commissions or federal or state governments to allow customers to suspend or delay payment of bills related to the provision of electric or gas services.
Furthermore, due to the unpredictability of the COVID-19 pandemic’s ongoing impact on global health and economic stability as of this filing date, the Duke Energy Registrants expect that the activities listed below could negatively impact their business strategy, results of operations, financial position and cash flows:
An inability to procure satisfactory levels of fuels or other necessary equipment to continue production of electricity and delivery of natural gas;
An inability to obtain labor or equipment necessary for the construction of generation projects or pipeline expansion;
An inability to maintain information technology systems and protections from cyberattack;
An inability to obtain financing in volatile financial markets;
Additional federal regulation tied to stimulus and other aid packages; and
Impairment charges, which could include real estate as options for working remotely are evaluated and goodwill.
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 company agrees to furnish upon request to the commission a copy of any omitted schedules or exhibits upon request on all items designated by a triple asterisk (***). |
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| | | | | Duke | | | | Duke | | Duke | | Duke | | Duke | | |
Exhibit | | Duke | | Energy | | Progress | | Energy | | Energy | | Energy | | Energy | | |
Number | | Energy | | Carolinas | | Energy | | Progress | | Florida | | Ohio | | Indiana | | Piedmont |
3.14.1 | | X | | | | | | | | | | | | | | |
4.14.2 | | | | X | | | | | | | | | | | X | | | | |
4.24.3 | | | | | | | | | | | | | | | | X |
4.4 | | | | | | | | | | X | | | | | | |
*31.1.1 | | X | | | | | | | | | | | | | | |
*31.1.2 | | | | X | | | | | | | | | | | | |
*31.1.3 | | | | | | X | | | | | | | | | | |
*31.1.4 | | | | | | | | X | | | | | | | | |
*31.1.5 | | | | | | | | | | X | | | | | | |
*31.1.6 | | | | | | | | | | | | X | | | | |
*31.1.7 | | | | | | | | | | | | | | X | | |
*31.1.8 | | | | | | | | | | | | | | | | X |
*31.2.1 | | X | | | | | | | | | | | | | | |
*31.2.2 | | | | X | | | | | | | | | | | | |
*31.2.3 | | | | | | X | | | | | | | | | | |
*31.2.4 | | | | | | | | X | | | | | | | | |
*31.2.5 | | | | | | | | | | X | | | | | | |
|
| | | | | | | | | | | | | | | | | |
*31.2.7 | | | | | | | | | | | | | | X | | |
*31.2.8 | | | | | | | | | | | | | | | | X |
*32.1.1 | | X | | | | | | | | | | | | | | |
*32.1.2 | | | | X | | | | | | | | | | | | |
*32.1.3 | | | | | | X | | | | | | | | | | |
*32.1.4 | | | | | | | | X | | | | | | | | |
*32.1.5 | | | | | | | | | | X | | | | | | |
*32.1.6 | | | | | | | | | | | | X | | | | |
*32.1.7 | | | | | | | | | | | | | | X | | |
*32.1.8 | | | | | | | | | | | | | | | | X |
*32.2.1 | | X | | | | | | | | | | | | | | |
*32.2.2 | | | | X | | | | | | | | | | | | |
*32.2.3 | | | | | | X | | | | | | | | | | |
*32.2.4 | | | | | | | | X | | | | | | | | |
*32.2.5 | | | | | | | | | | X | | | | | | |
*32.2.6 | | | | | | | | | | | | X | | | | |
*32.2.7 | | | | | | | | | | | | | | X | | |
*32.2.8 | | | | | | | | | | | | | | | | X |
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*101.INS | XBRL Instance Document (this does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document). | X | | X | | X | | X | | X | | X | | X | | X |
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*101.SCH | XBRL Taxonomy Extension Schema Document. | X | | X | | X | | X | | X | | X | | X | | X |
*101.CAL | XBRL Taxonomy Calculation Linkbase Document. | X | | X | | X | | X | | X | | X | | X | | X |
*101.LAB | XBRL Taxonomy Label Linkbase Document. | X | | X | | X | | X | | X | | X | | X | | X |
*101.PRE | XBRL Taxonomy Presentation Linkbase Document. | X | | X | | X | | X | | X | | X | | X | | X |
*101.DEF | XBRL Taxonomy Definition Linkbase Document. | X | | X | | X | | X | | X | | X | | X | | X |
*104 | Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101). | X | | X | | X | | X | | X | | X | | X | | X |
The total amount of securities of the registrant or its subsidiaries authorized under any instrument with respect to long-term debt not filed as an exhibit does not exceed 10% of the total assets of the registrant and its subsidiaries on a consolidated basis. The registrant agrees, upon request of the SEC, to furnish copies of any or all of such instruments to it.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized. |
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DUKE ENERGY CORPORATION DUKE ENERGY CAROLINAS, LLC PROGRESS ENERGY, INC. DUKE ENERGY PROGRESS, LLC DUKE ENERGY FLORIDA, LLC DUKE ENERGY OHIO, INC. DUKE ENERGY INDIANA, LLC PIEDMONT NATURAL GAS COMPANY, INC.
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Date: | November 8, 2019August 10, 2020 | /s/ STEVEN K. YOUNG |
| | Steven K. Young Executive Vice President and Chief Financial Officer (Principal Financial Officer)
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Date: | November 8, 2019August 10, 2020 | /s/ DWIGHT L. JACOBS |
| | Dwight L. Jacobs Senior Vice President, Chief Accounting Officer, Tax and Controller (Principal Accounting Officer) |