2019 ANNUAL REPORT
AND FORM 10-K
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WE’RE WRITING THE NEXT CHAPTER IN OUR
COMPANY’S 116-YEAR HISTORY – AND I’M CONFIDENT
THE STORY WILL BE ONE OF THE BEST YET.
Lynn J. Good
Chair, President and
Chief Executive Officer
LYNN J. GOOD
Chair, President and
Chief Executive Officer
Ready for what’s
Dear Shareholder:
Today, the speed and depth of transformation in our industry
are inspiring. In this environment, our ability to develop new
solutions provides great opportunities to bring more value to
our customers and the communities we serve.
While the pace can feel unrelenting at times – not only for
us, but for those we serve – we’re embracing this shift with
conviction and optimism as we reimagine our business.
In 2019, we met our financial targets through our focus
on execution, made important progress on our long-term
strategy and demonstrated agility in how we operate. We also
announced our new, bold vision for net-zero carbon emissions
by 2050 – built on a diverse mix of resources, including
carbon-free nuclear and the expansion of our natural gas and
renewables portfolios.
Since our founding, Duke Energy has maintained a proud
legacy of meeting the changing needs of our customers
and communities. So as we – the 29,000 employees of
Duke Energy – work together to write the next chapter in our
history, I’m confident in our ability to deliver the right results.
2019 is clear proof that Duke Energy is stronger and better
prepared to shape our future.
1 | 2019 DUKE ENERGY ANNUAL REPORT
Delivering Results the Right Way
Consistent financial results earn the trust of
our investors – and in 2019, we delivered on
our commitments.
Our adjusted earnings per share (EPS) were $5.06
for the year – above the midpoint of our original
guidance range. Strong growth in our electric,
natural gas and commercial renewables businesses
remained the financial engine for our company. Our
cost discipline and flexibility supported our strategy
as we focused on long-term growth. And 2020 will
be the 94th consecutive year we will pay quarterly
cash dividends on our common stock, which we
increased by 2 percent in 2019.
However, uncertainty in the regulatory environment
in the Carolinas and the impact of the permitting
and litigation delays for the Atlantic Coast Pipeline
(ACP) weighed on our stock in 2019. Our total
shareholder return of 10.3 percent underperformed
both the Philadelphia Utility Index and the average
for our regulated peers.
In response, we took aggressive actions.
2 | 2019 DUKE ENERGY ANNUAL REPORT
This February, we
announced our new 2020
adjusted EPS target of
$5.25 and guidance range
of $5.05 to $5.45. It
solidifies and extends our
commitment to deliver a
long-term growth rate at 4
to 6 percent through 2024.
In the Carolinas, we reached a
settlement with the North Carolina
Department of Environmental
Quality and several community
groups on a plan to permanently
close ash basins in the state.
The settlement lowers the
previously estimated closure
costs by approximately $1.5
billion, resolves environmental
litigation, and ensures that people,
communities and the environment
are well-protected.
With respect to ACP, we
continued to advance this project
despite legal challenges that
halted major construction. The
U.S. solicitor general, along with
18 state attorneys general and
other stakeholders, joined our
appeal to the U.S. Supreme Court
on the project’s ability to cross the
Appalachian Trail. The Supreme
Court heard oral arguments this
past February and is expected to
issue its ruling in second quarter
of 2020. We believe the law and
facts remain on our side as we
move toward a final resolution
to restart construction later in
the year.
We also took steps to strengthen
our balance sheet – which is
vital to financing our growth
strategy while providing flexibility
to maintain our credit profile. In
November, we priced $2.5 billion
in incremental common equity
that will settle in December
2020. We also issued $2
billion in preferred stock in 2019.
In addition, we closed our minority
stake sale of our Commercial
Renewables portfolio to John
Hancock and issued additional
green bonds in North Carolina and
Florida – bringing our total clean
energy offerings to $2.3 billion
since 2018.
Importantly, ratings agencies
acknowledged our efforts.
In November, S&P resolved
its negative outlook following
the $2.5 billion common
equity offering.
This February, we announced our
new 2020 adjusted EPS target
of $5.25 and guidance range
of $5.05 to $5.45. It solidifies
and extends our commitment to
deliver a long-term growth rate
at 4 to 6 percent through 2024.
And because of growing demand
for infrastructure investments,
we increased our capital plan by
12 percent to $56 billion – with
more than 90 percent to be spent
in our regulated electric and
gas businesses, driving strong
earnings base growth.
Our results in 2019 show that
the foundation of our business is
strong. With important legal and
regulatory decisions approaching
in 2020, we are committed to
producing outstanding operating
results for our customers and
investors while delivering growth
in earnings and dividends in
a low-risk, predictable and
transparent way. That’s our
promise to you.
3 | 2019 DUKE ENERGY ANNUAL REPORT
Executing Our Strategy
Our industry is in a period of transformation, and
our strategy will continue to guide how we invest
to meet the changing needs of our customers
and communities while maintaining flexibility and
creating shareholder value. Our commitment to
deliver outstanding customer service and value by
investing in our grid, cleaner energy and natural gas
infrastructure is moving us forward.
Transforming the Customer Experience
investments to meet the needs of our customers,
striving to provide the personalized service they
expect today.
We improved how we communicate with customers
on their terms, including proactive payment
confirmation, energy usage alerts, and timely safety
and outage information during storms. In addition,
we launched an interactive outage map. Now,
customers can get updates in real time and better
understand restoration efforts.
Our strategy begins and ends with the customer.
This past year, we continued to direct our
We made it easier for customers to access their
payment history and usage data, and pay their bill
4 | 2019 DUKE ENERGY ANNUAL REPORT
We saw improvement
across almost all our
territories as measured
by J.D. Power’s Customer
Service Index for residential
service customers.
We also earned a 25
percent increase on
our internal customer
satisfaction metrics.
online – including the launch of
our new mobile app. And we
made progress upgrading our
customer information system.
This platform, called Customer
Connect, will give us the ability to
provide enhanced communications
and solutions. This includes an
improved bill format for customers
in the first half of 2020. Customer
Connect remains on track to be
fully implemented by 2022.
Yet, we are not relying solely
on technology to create better
relationships. We look for every
opportunity to engage face to
face with customers through
community events, town halls
and pop-up office locations.
In addition, our employees
review customer feedback each
month to identify improvement
opportunities and develop local
plans for our communities.
Our focus on customers shows in
our customer satisfaction metrics.
In 2019, we saw improvement
across almost all our territories
as measured by J.D. Power’s
Customer Service Index for
residential service customers.
We also earned a 25 percent
increase on our internal customer
satisfaction metrics.
In 2020 and beyond, we’ll build
on this progress as we work to
delight customers, deepening our
relationships and giving them a
best-in-class experience.
Generating
Cleaner Energy
Around the world, countries,
companies and communities
are adding their voice to the
conversation on how to achieve a
lower-carbon future.
5 | 2019 DUKE ENERGY ANNUAL REPORT
I’m proud to say we have long
been an important contributor
to that discussion. Since 2005,
we have reduced our carbon
emissions 39 percent, which
exceeds the goals of the former
Clean Power Plan and the
2025 U.S. commitment to the
Paris Agreement.
Over the past year, we took that
commitment even further.
In 2019, we refreshed our climate
strategy and accelerated our
goals as we now plan to reduce
our carbon emissions from
electricity generation by at least
50 percent from 2005 levels by
2030 and to achieve net-zero
emissions by 2050.
It will take a thoughtful,
disciplined approach to attain
these ambitious goals. We need
a diverse set of resources –
including increased investments in
renewables, storage, natural gas
and energy efficiency, in addition
to the retirement of coal plants –
to achieve our 2030 goal.
To reach our 2050 target, we
are advocates for investments
in research and development
and new technologies – such as
enhanced storage, carbon capture,
advanced nuclear and new,
carbon-free solutions that don’t
exist yet at scale.
And we cannot overstate the
importance of nuclear. In the
Carolinas, our nuclear plants
account for nearly half of our
generation. Currently, we’re
pursuing subsequent license
renewal for our entire nuclear fleet.
This will enable us to operate our
plants for an additional 20 years.
We recognize the importance
of accelerating the path to net-
zero carbon emissions and
look forward to working with
stakeholders in each of our states
to turn these goals into reality.
As we do, our current investments
to generate cleaner energy align
with our goal for 2030 and
beyond.
We achieved substantial
completion of our 560-megawatt
Asheville combined-cycle natural
gas plant and retired two coal-fired
units at the site – all part of our
Western Carolinas Modernization
project. The Asheville plant is
our third combined-cycle plant
to come online in the past two
years. Natural gas plays an
important role in lowering our
carbon emissions and effectively
integrating renewable
energy resources.
Renewables remain a critical part
of our strategy. We added more
than 2,500 megawatts of solar
capacity to our grid over the past
four years, including significant
growth in North Carolina that
helped keep the state second in
the nation for solar capacity.
In 2019, we were awarded
approximately 190 megawatts
of utility-scale solar under North
Carolina House Bill 589. Most
of the projects will come online
by mid-2021. The number of
customers who installed or
received a rebate under our $62
million, multiyear rebate program
in North Carolina increased
by nearly 1,700 – bringing the
total to 3,600 rebates. We also
launched our Green Source
Advantage program, helping
large customers meet their
sustainability goals.
6 | 2019 DUKE ENERGY ANNUAL REPORT
In Florida, our Lake Placid and
Trenton solar power plants
came online, bringing nearly
120 megawatts to customers.
In addition, we announced
other solar and battery projects,
continuing our progress to
add 700 megawatts of solar
generation through 2022 while
projecting to more than double
our solar investments in the state
by 2028.
Our Commercial Renewables
business continues to grow as we
announced approximately 1,500
megawatts in new projects, which
will be placed into service by the
end of 2020. This included our
largest solar facility to date, the
150-megawatt North Rosamond
solar project in California, which
began operation in June. As well,
our 200-megawatt Mesteño
Windpower project in Texas
began commercial operations
in December, producing enough
energy to power about 60,000
average homes.
We have been on a successful
mission for more than a decade
to lower our carbon emissions.
For the 14th consecutive year,
our company was included in
the Dow Jones Sustainability
Index, and in 2020, we plan to
release our second climate report.
Our work in 2019 continues our
momentum to ensure a cleaner
energy future for those we have
the privilege to serve.
Modernizing the
Power Grid
With more than 300,000 line
miles, our transmission and
distribution network is the
largest in the nation. It connects
We prevented more
than 610,000 extended
power outages and saved
customers approximately
62 million outage minutes.
EV chargers including residential,
fleet, public transit and highway
fast charging.
The security of our grid remains
paramount. In 2019, we
continued to upgrade equipment
and install protective devices
to meet higher standards and
increase protection against
physical and cyber security
threats. This work also helps to
enable new technologies and
support renewable solutions.
We continued our targeted
undergrounding effort, identifying
the most outage-prone power
lines on our system and moving
those lines underground.
Evolving customer expectations
demand a modernized grid, and
our investments are designed
to meet their changing needs in
2020 and beyond.
Expanding Natural
Gas Infrastructure
Natural gas remains central to
our transition to a lower-carbon
future. But delivering the benefits
to customers will take an
extensive, resilient natural gas
transmission and distribution
network. That’s why we’re making
significant investments in this
critical infrastructure.
To help Piedmont Natural Gas
better serve its growing customer
base, we are moving ahead with
several projects, including the
construction of our $300 million
Robeson liquid natural gas (LNG)
facility in North Carolina. This will
provide natural gas during peak
usage days, protecting customers
against price spikes and volatility.
commerce and communities
to affordable, reliable and
increasingly clean power.
With the rising demand for
new technologies, services and
capabilities, we continued to
modernize our grid to enhance
resiliency and support the future
needs of our customers.
Smart meters remain a critical link
to give customers more access
to information that helps them
save energy and money. This past
year, we installed more than 2
million smart meters, with more
than 80 percent of our customers
currently having the benefit of
this technology. We completed
deployments in Indiana and the
western Carolinas and made
significant progress in the eastern
Carolinas and Florida. We are on
track to be fully deployed in all our
jurisdictions by year-end 2021.
We expanded our self-optimizing
grid capabilities – allowing the
grid to automatically detect
outages and reroute power to
restore customers faster. As a
result, in 2019 we prevented
more than 610,000 extended
power outages and saved
customers approximately 62
million outage minutes.
Electrification is an important
part of our strategy and
contributor to a lower-carbon
future. We are investing in this
infrastructure to spur electric
vehicle (EV) adoption. In Florida,
we’re installing 530 EV charging
stations, and in North Carolina,
we’ve proposed a pilot that would
support the installation of 2,000
EV chargers. Across our service
territories, we plan to support
the deployment of nearly 7,500
7 | 2019 DUKE ENERGY ANNUAL REPORT
Engaging Stakeholders
To deliver results for our
customers, we need constructive
regulatory policy, which requires
collaboration and strong
stakeholder support.
We made progress in 2019 as we
brought people together – through
forums, local advisory councils
and one-on-one meetings – to find
public policy solutions that allow
us to better serve customers and
build the cleaner energy future
they deserve. We continually seek
common ground and continue to
approach these conversations with
an open mind.
You can see the results of
our engagement across our
service areas.
In North Carolina, the passage
of Senate Bill (SB) 559
enables the North Carolina
Utilities Commission (NCUC)
to approve storm cost
securitization, allowing utilities
to issue bonds to finance storm
recovery. This tool could save
customers on storm costs and
support our balance sheet. While
we were disappointed the bill did
not include proposed regulatory
reforms, we’re encouraged they
will be a part of the broader
dialogue in the state’s Clean
Energy Plan stakeholder process
in 2020.
Florida SB 796 also passed last
year, authorizing grid resiliency
investments to protect against
extreme weather events. The bill
provides timely rider recovery,
and we plan to file our first storm
protection plan in 2020.
In the Midwest, we received
approval from the Ohio Power
Siting Board to construct the 14-
mile Ohio Central Corridor Pipeline
project. This is the result of a
multiyear stakeholder process and
is a milestone for Cincinnati and
the region as we invest in critical
infrastructure improvements to
better serve customers. We will
begin construction in late 2020.
In addition, we continue pursuing
innovative technologies, such
as renewable natural gas and
compressed natural gas initiatives.
We’ve also invested $300 million
in pipeline integrity projects,
demonstrating leadership in
emissions reductions and safety
improvements.
As I discussed earlier, the
ACP project is a necessary
infrastructure investment, bringing
low-cost natural gas to eastern
North Carolina. In addition to the
appeal to the U.S. Supreme Court,
we continue to work diligently with
the U.S. Fish and Wildlife Service
on the Biological Opinion and
Incidental Take Statement – two
of the project’s federal permits
held up by the Fourth Circuit. We
expect the permits to be reissued
by midyear. Taking these timelines
into account, we are planning for
mechanical completion of the
project in late 2021, with full in-
service in the first half of 2022.
We remain committed to
this project and the benefits
the expansion of natural gas
infrastructure brings to
our customers and the
Carolinas region.
8 | 2019 DUKE ENERGY ANNUAL REPORT
In 2019, we filed several rate
cases. Piedmont Natural Gas
submitted its first base rate case
in North Carolina since 2013. In
October, the NCUC approved our
settlement with the Public Staff
and industry groups, maintaining
timely cost recovery mechanisms
and demonstrating constructive
regulatory environments.
In North Carolina, both our
electric utilities are seeking
recovery for investments in cleaner
generation and improvements to
our infrastructure. And in Indiana,
we filed our first rate case in
16 years for investments to
support that state’s growing
customer base.
The right outcomes come from
collaboration, and we’ll continue
to engage stakeholders to meet
our customers’ energy needs.
Turning Change into
Opportunity
Our strategy of providing
outstanding service that our
customers value rests on
a foundation of operational
excellence, stakeholder
engagement and business
transformation.
In 2018, we launched our
Lighthouse initiative – an
enterprisewide program to
find new ways to use digital
capabilities and transform
how we operate our business
while delivering cost savings for
customers. In early 2019, we
established an Innovation Center
at Optimist Hall in Charlotte. We
have nearly 400 people at this
facility dedicated to developing
new products and services. In less
than a year, the team has more
than 20 applications in the field,
supporting our customers and
enabling our workforce.
Early results like these are very
encouraging. The desire to reap
the benefits of changing how
we work is being embraced by
people throughout our business,
from frontline supervisors to
senior leadership. I look forward
to reporting on our progress in
the years ahead as we continue
transforming how we operate our
business and serve our customers.
We established an
Innovation Center at
Optimist Hall in Charlotte.
We have nearly 400 people
at this facility dedicated to
developing new products
and services. In less than
a year, the team has more
than 20 applications in
the field, supporting our
customers and enabling
our workforce.
9 | 2019 DUKE ENERGY ANNUAL REPORT
Results Built on Operational Excellence
Our commitment to operational excellence remains
foundational to our success.
This focus always starts with safety – of our assets,
our people, our communities and the environment.
Once again, our employees delivered industry-
leading results in 2019. We reduced the number of
injuries and environmental events last year – and
remain focused on making improvements that move
us toward event-free operations.
Building on our success, our generation fleet
produced another solid year. Our nuclear fleet –
the largest regulated fleet in the United States –
continued providing safe, reliable and carbon-free
power to our customers in the Carolinas. The fleet’s
capacity factor was 95.3 percent in 2019 – the
21st consecutive year our fleet’s capacity factor was
above 90 percent.
Our Edwardsport integrated gasification combined-
cycle facility set records for generation and gasifier
availability. We also made progress on dual-fuel
projects at our Belews Creek and Marshall steam
plants, which will allow the plants to use either
natural gas or coal.
10 | 2019 DUKE ENERGY ANNUAL REPORT
And our electric distribution
system performed well in 2019
– with grid reliability metrics
improving 15 percent year
over year.
We also continued our legacy of
delivering for customers when
they needed us most. The 2019
Atlantic hurricane season was the
fourth consecutive year that we
have seen above-average storm
activity. In response to Hurricane
Dorian – a Category 5 storm
with an unpredictable path – we
mobilized nearly 8,000 resources
in Florida and more than 10,000
resources in the Carolinas as we
braced for the storm. While we
avoided the worst of Dorian, it still
caused nearly 300,000 outages
in our service territories.
Our team’s preparation enabled us
to restore more than 95 percent
of the outages within 24 hours.
Our ability to effectively manage
all facets of storm response is a
testament to our team’s extensive
preparation, coordination and
on-the-ground leadership. Notably
in 2019, Duke Energy earned
EEI’s Emergency Recovery Award
for our power restoration efforts
after Winter Storm Diego hit in
December 2018. This recognition
was our 22nd EEI award since
1998.
Duke Energy has a tradition
of safe, reliable operations,
and 2019 proved that our
focus on operational excellence
remains strong.
Our electric distribution
system performed well –
with grid reliability metrics
improving 15 percent year
over year.
11 | 2019 DUKE ENERGY ANNUAL REPORT
Supporting Our Communities
The health of our company is intrinsically linked to
the communities we serve, and it is imperative that
we give back – creating jobs, fostering innovation
and providing support.
Economic development is one of the ways we do
that – recruiting new companies to invest and create
jobs in collaboration with state and local economic
development agencies. In 2019, Duke Energy
helped attract $7.1 billion in capital investment and
create over 15,000 jobs. And I’m proud to say that
for the 15th consecutive year, we were named to
Site Selection magazine’s annual list of “Top Utilities
in Economic Development.”
Duke Energy employees remain ambassadors for our
company and continue our proud tradition of giving.
In 2019, our employees and retirees volunteered
over 136,000 hours. They also pledged more
than $5.2 million to 4,400 organizations through
the Power of Giving. Now in its second year, this
campaign gives our employees a powerful platform
to contribute to the nonprofit of their choice and
receive a company match from the Duke Energy
12 | 2019 DUKE ENERGY ANNUAL REPORT
Foundation. With the Foundation
match, our employees invested
nearly $10 million into our
communities.
In addition, our Foundation
remained active in supporting
causes and organizations across
our service territories, donating
more than $30 million in 2019.
We provided funding to help
communities in Florida prepare
for future weather events and
to equip Ohio students with the
skills needed for careers in the
energy sector. In Indiana and
North Carolina, we provided grant
funding to help the fight against
the opioid epidemic. And we’re
working with local organizations
on affordable housing and access
to medical care in the Carolinas.
It is important for us to help
address the needs of the
communities where our customers
and employees live and work.
Our success in supporting our
communities requires a more agile
and diverse workforce. This past
year, we continued our efforts to
attract employees who embody
these tenets. We also invested
in education and workforce
development programs –
including reskilling, upskilling and
redeployment of existing workers
– to build a pipeline of skilled
workers to meet our evolving
business needs.
Duke Energy is not alone in
feeling the impact of change.
Our communities are feeling
the same effects – from a
changing economy to workforce
demands – and we stand ready
to support them.
Our journey continues but I’m
proud of our progress. We were
once again listed by Forbes
as one of America’s Best
Employers and as one of Fortune’s
Most Admired Companies, now
for the third consecutive year. In
addition, we earned top marks
in the 2020 Corporate Equality
Index – highlighting our focus on
diversity and inclusion.
Our Foundation remained
active in supporting causes
and organizations across
our service territories,
donating more than
$30 million.
13 | 2019 DUKE ENERGY ANNUAL REPORT
Ready for What’s Next
As we look ahead to the energy landscape of the future,
it’s clear that markets and technologies will continue to
change. Laws and regulations will evolve. And the expectations
of our customers and communities will only increase in the
years ahead.
We are confident in our ability to shape that future because
we have adapted and changed for more than a century.
Every era has its challenges and, once again, our workforce
continues to rise to the occasion. In 2019, we made significant
progress executing our strategy and transforming our business.
Our employees’ dedication to our customers and continuous
improvement is what produced the results we are so proud of
as a company.
As we look to the next decade, our focus remains on
execution – because that is what will distinguish us over the
long term. The strategy is clear: We’re transforming for our
customers and investing in cleaner energy, the grid and the
natural gas infrastructure needed to bring more value to
them. We’re adapting our business, becoming more efficient,
more competitive and better prepared to meet tomorrow’s
energy needs.
To our shareholders, thank you for your continued investment
in Duke Energy. We’re writing the next chapter in our
company’s 116-year history – and I’m confident the story
will be one of the best yet.
Lynn J. Good
Chair, President and Chief Executive Officer
14 | 2019 DUKE ENERGY ANNUAL REPORT
Our Financial Highlightsa
(In millions, except per share amounts)
Operating Results
Total operating revenues
2019
2018
2017
$25,079
$24,521
$23,565
Income from continuing operations
$3,578
$2,625
$3,070
Net income
Net income available to Duke Energy Corporation
common stockholders
Cash Flow Datab
$3,571
$2,644
$3,064
$3,707
$2,666
$3,059
Net cash provided by operating activities
$8,209
$7,186
$6,624
Common Stock Data
Shares of common stock outstanding
Year-end
Weighted average – basic and diluted
Reported basic and diluted earnings per share (GAAP)
Adjusted basic and diluted earnings per share (non-GAAP)
Dividends declared per share
733
729
$5.06
$5.06
$3.75
727
708
$3.76
$4.72
$3.64
Dividends declared on Series A preferred stock per depositary share
$1.03
__
700
700
$4.36
$4.57
$3.49
__
Balance Sheet Data
Total assets
$158,838
$145,392
$137,914
Long-term debt including capital leases, less current maturities
$54,985
$51,123
$49,035
Total Duke Energy Corporation stockholders’ equity
$46,822
$43,817
$41,739
Earnings per share
(in dollars)
Reported Diluted
Adjusted Diluted
Dividends declared
per share (in dollars)
Capital and investment
expenditures (dollars in billions)
4.36
4.57
4.72
3.76
5.06
5.06
3.49
3.64
3.75
11.4
9.8
8.5
2017
2018
2019
2017
2018
2019
2017
2018
2019
a Significant transactions reflected in the results above include: (i) growth in Commercial Renewables from new tax equity solar projects placed in service in 2019 (see Note 1 to
the Consolidated Financial Statements, “Summary of Significant Accounting Policies”) and (ii) regulatory and legislative charges related to Duke Energy Progress and Duke Energy
Carolinas North Carolina rate case orders and impairment charges in 2018 (see Notes 4, 12 and 13 to the Consolidated Financial Statements, “Regulatory Matters,” “Goodwill and
Intangible Assets” and “Investments in Unconsolidated Affiliates”).
bThe 2017 cash flow data has been recast to reflect the impact of adopting a new accounting standard effective January 1, 2018.
15 | 2019 DUKE ENERGY ANNUAL REPORT
Duke Energy at a Glance
Electric Utilities and Infrastructure
Generation Diversity (percent owned capacity)1
Natural Gas Customer Diversity
Gas Utilities and Infrastructure conducts natural gas distribution
operations primarily through the regulated public utilities of
Piedmont Natural Gas and Duke Energy Ohio.
Natural Gas Operations (throughput)2
Generated (net output gigawatt-hours (GWh))2
Customer Diversity (in billed GWh sales)2
Regulated natural gas transmission and distribution services to
approximately 1.6 million customers in the Carolinas, Tennessee,
southwestern Ohio and Northern Kentucky
Maintains more than 33,700 miles of natural gas transmission
and distribution pipelines and 27,200 miles of natural gas
service pipelines
Commercial Renewables
Generation Diversity (percent owned capacity)1,3
Electric Utilities and Infrastructure conducts operations primarily
through the regulated public utilities of Duke Energy Carolinas,
Duke Energy Progress, Duke Energy Florida, Duke Energy Indiana
and Duke Energy Ohio.
Electric Operations
Owns approximately 51,144 megawatts (MW) of
generating capacity
Service area covers about 91,459 square miles with an
estimated population of 25 million
Service to approximately 7.8 million residential, commercial
and industrial customers
280,024 miles of distribution lines and a 31,312-mile
transmission system
1 As of December 31, 2019. | 2 For the year ended December 31, 2019.
3 Contains projects included in tax equity structures where investors have differing
interests in the projects’ economic attributes (100 percent of the tax equity projects’
capacity is included).
Commercial Renewables primarily acquires, develops, builds
and operates wind and solar renewable generation throughout
the continental U.S. The portfolio includes nonregulated renewable
energy and energy storage businesses.
Commercial Renewables’ renewable energy includes utility-scale
wind and solar generation assets, distributed solar generation
assets, distributed fuel cell assets and a battery storage project,
which total 2,282 MW across 19 states from 22 wind facilities,
126 solar projects, 11 fuel cell locations and one battery storage
facility. The power produced from renewable generation is primarily
sold through long-term contracts to utilities, electric cooperatives,
municipalities and corporate customers.
As part of its growth strategy, Commercial Renewables has
expanded its investment portfolio through the addition of
distributed solar companies and projects, energy storage systems
and energy management solutions specifically tailored to
commercial businesses.
16 | 2019 DUKE ENERGY ANNUAL REPORT
42% Natural Gas/Fuel Oil 33% Coal 18% Nuclear 7% Hydro and Solar 36% Natural Gas/Fuel Oil 35% Nuclear 27% Coal 2% Hydro and Solar 34% Residential 30% General Services 20% Industrial 16% Wholesale/Other 51% Power Gen 18% General Services 15% Residential 9% Industrial 7% Other 64% Wind 35% Solar 1% Storage/Fuel Cell DUKE ENERGY
CORPORATION
2019
Form 10-K
261933_DUKE_10KP1.indd 1
3/3/14 1:17 PM
(Mark One)
Commission
file number
1-32853
Commission
file number
1-4928
1-15929
1-3382
1-3274
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal period ended December 31, 2019 or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Registrant, State of Incorporation or Organization, Address of
Principal Executive Offices and Telephone Number
DUKE ENERGY CORPORATION
(a Delaware corporation) 550 South Tryon Street
Charlotte, North Carolina 28202-1803 704-382-3853
IRS Employer
Identification No.
20-2777218
Registrant, State of Incorporation or Organization, Address
of Principal Executive Offices, Telephone Number and
IRS Employer Identification Number
DUKE ENERGY CAROLINAS, LLC
(a North Carolina limited liability company)
526 South Church Street
Charlotte, North Carolina 28202-1803
704-382-3853
56-0205520
PROGRESS ENERGY, INC.
(a North Carolina corporation)
410 South Wilmington Street
Raleigh, North Carolina 27601-1748
704-382-3853
56-2155481
DUKE ENERGY PROGRESS, LLC
(a North Carolina limited liability company)
410 South Wilmington Street
Raleigh, North Carolina 27601-1748
704-382-3853
56-0165465
DUKE ENERGY FLORIDA, LLC
(a Florida limited liability company)
299 First Avenue North
St. Petersburg, Florida 33701
704-382-3853
59-0247770
Commission
file number
1-1232
1-3543
1-6196
Registrant, State of Incorporation or Organization, Address
of Principal Executive Offices, Telephone Number and
IRS Employer Identification Number
DUKE ENERGY OHIO, INC.
(an Ohio corporation)
139 East Fourth Street
Cincinnati, Ohio 45202
704-382-3853
31-0240030
DUKE ENERGY INDIANA, LLC
(an Indiana limited liability company)
1000 East Main Street
Plainfield, Indiana 46168
704-382-3853
35-0594457
PIEDMONT NATURAL GAS COMPANY, INC.
(a North Carolina corporation)
4720 Piedmont Row Drive
Charlotte, North Carolina 28210
704-364-3120
56-0556998
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Registrant
Duke Energy Corporation (Duke Energy)
Duke Energy
Duke Energy
Duke Energy
Title of each class
Common Stock, $0.001 par value
5.125% Junior Subordinated Debentures due January 15, 2073
5.625% Junior Subordinated Debentures due September 15, 2078
Depositary Shares, each representing a 1/1,000th
interest in a share of 5.75% Series A Cumulative
Redeemable Perpetual Preferred Stock, par value
$0.001 per share
Trading symbols
DUK
DUKH
DUKB
DUK PR A
Name of each exchange on which registered
New York Stock Exchange LLC
New York Stock Exchange LLC
New York Stock Exchange LLC
New York Stock Exchange LLC
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
Duke Energy
Duke Energy Carolinas, LLC (Duke Energy Carolinas)
Progress Energy, Inc. (Progress Energy)
Duke Energy Progress, LLC (Duke Energy Progress)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes No (Response applicable to all registrants.)
Duke Energy Florida, LLC (Duke Energy Florida)
Duke Energy Ohio, Inc. (Duke Energy Ohio)
Duke Energy Indiana, LLC (Duke Energy Indiana)
Piedmont Natural Gas Company, Inc. (Piedmont)
No
No
No
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
No
No
No
Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrants have submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No
Indicate by check mark whether Duke Energy is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of
“large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.: Large accelerated filer 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 each of Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont is a large accelerated filer,
accelerated filer, non-accelerated filer, smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and
“emerging growth company” in Rule 12b-2 of the Exchange Act.: Large accelerated filer Accelerated filer 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 each of the registrants is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
Estimated aggregate market value of the common equity held by nonaffiliates of Duke Energy at June 30, 2019.
Number of shares of Common Stock, $0.001 par value, outstanding at January 31, 2020.
$64,230,558,771
733,321,965
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Duke Energy definitive proxy statement for the 2020 Annual Meeting of the Shareholders or an amendment to this Annual Report are incorporated by reference into PART III, Items 10, 11 and 13 hereof.
This combined Form 10-K is filed separately by eight registrants: Duke Energy, Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont
(collectively the Duke Energy Registrants). Information contained herein relating to any individual registrant is filed by such registrant solely on its own behalf. Each registrant makes no representation
as to information relating exclusively to the other registrants.
Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont meet the conditions set forth in General Instructions I(1)(a) and
(b) of Form 10-K and are, therefore, filing this Form 10-K with the reduced disclosure format specified in General Instructions I(2) of Form 10-K.
TABLE OF CONTENTS
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2019
Item
Page
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
GLOSSARY OF TERMS
PART I.
1.
BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DUKE ENERGY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BUSINESS SEGMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EMPLOYEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EXECUTIVE OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ENVIRONMENTAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DUKE ENERGY CAROLINAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PROGRESS ENERGY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DUKE ENERGY PROGRESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DUKE ENERGY FLORIDA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DUKE ENERGY OHIO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DUKE ENERGY INDIANA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PIEDMONT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1A. RISK FACTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1B. UNRESOLVED STAFF COMMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.
3.
4.
PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MINE SAFETY DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART II.
5.
6.
7.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES . . . . . . . . . . . . . . . . .
SELECTED FINANCIAL DATA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK . . . . . . . . .
5
5
5
5
14
14
15
15
15
15
15
16
16
16
16
23
23
27
27
28
29
29
57
58
8.
9.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . . . . . . . . . . . . .
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211
9A. CONTROLS AND PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211
PART III.
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE . . . . . . . . . . . 213
11.
12.
13.
EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. . . . . . . . . . . . . . . . . 213
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND
DIRECTOR INDEPENDENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213
14. PRINCIPAL ACCOUNTING FEES AND SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . 214
PART IV.
15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. . . . . . . . . . . . . . . . . . . . . . . . 215
EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-1
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-27
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 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 United States 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;
• The ability to obtain adequate insurance at acceptable costs;
• Employee workforce factors, including the potential inability to attract and retain key
personnel;
• The ability of subsidiaries to pay dividends or distributions to Duke Energy Corporation
holding company (the Parent);
• The performance of projects undertaken by our nonregulated businesses and the
success of efforts to invest in and develop new opportunities;
• The effect of accounting pronouncements issued periodically by accounting standard-
setting bodies;
• The impact of United States tax legislation to our financial condition, results of
operations or cash flows and our credit ratings;
• The impacts from potential impairments of goodwill or equity method investment carrying
values; and
• The ability to implement our business strategy, including enhancing existing technology systems.
Additional risks and uncertainties are identified and discussed in the Duke Energy
Registrants’ reports filed with the SEC and available at the SEC’s website at sec.gov. In light
of these risks, uncertainties and assumptions, the events described in the forward-looking
statements might not occur or might occur to a different extent or at a different time than
described. Forward-looking statements speak only as of the date they are made and the Duke
Energy Registrants expressly disclaim an obligation to publicly update or revise any forward-
looking statements, whether as a result of new information, future events or otherwise.
Glossary of Terms
The following terms or acronyms used in this Form 10-K are defined below:
Term or Acronym
Definition
Term or Acronym
Definition
2013 Settlement . . . . . . . . . . . . . . Revised and Restated Stipulation and
DEFR . . . . . . . . . . . . . . . . . . . . . . . Duke Energy Florida Receivables, LLC
Settlement Agreement approved in
November 2013 among Duke Energy Florida,
the Florida Office of Public Counsel and other
customer advocates
2017 Settlement . . . . . . . . . . . . . . Second Revised and Restated Settlement
Agreement in 2017 among Duke Energy
Florida, the Florida Office of Public Counsel
and other customer advocates, which
replaces and supplants the 2013 Settlement
ACE . . . . . . . . . . . . . . . . . . . . . . . . Affordable Clean Energy
ACP . . . . . . . . . . . . . . . . . . . . . . . . Atlantic Coast Pipeline, LLC, a limited liability
company owned by Dominion, Duke Energy
and Southern Company Gas
Deloitte . . . . . . . . . . . . . . . . . . . . . Deloitte & Touche LLP, and the member
firms of Deloitte Touche Tohmatsu and their
respective affiliates
DEPR. . . . . . . . . . . . . . . . . . . . . . . Duke Energy Progress Receivables, LLC
DERF . . . . . . . . . . . . . . . . . . . . . . . Duke Energy Receivables Finance Company,
LLC
DETM. . . . . . . . . . . . . . . . . . . . . . . Duke Energy Trading and Marketing, LLC
DOE . . . . . . . . . . . . . . . . . . . . . . . . U.S. Department of Energy
Dominion. . . . . . . . . . . . . . . . . . . . Dominion Energy, Inc.
DRIP . . . . . . . . . . . . . . . . . . . . . . . Dividend Reinvestment Program
Dth . . . . . . . . . . . . . . . . . . . . . . . . Dekatherms
ACP pipeline . . . . . . . . . . . . . . . . . The approximately 600-mile proposed
interstate natural gas pipeline
Duke Energy. . . . . . . . . . . . . . . . . . Duke Energy Corporation (collectively with its
subsidiaries)
AFUDC. . . . . . . . . . . . . . . . . . . . . . Allowance for funds used during construction
Duke Energy Carolinas. . . . . . . . . . Duke Energy Carolinas, LLC
AFS . . . . . . . . . . . . . . . . . . . . . . . . Available for Sale
ALJ . . . . . . . . . . . . . . . . . . . . . . . . Administrative Law Judge
Duke Energy Florida . . . . . . . . . . . . Duke Energy Florida, LLC
Duke Energy Indiana . . . . . . . . . . . Duke Energy Indiana, LLC
AMI . . . . . . . . . . . . . . . . . . . . . . . . Advanced Metering Infrastructure
Duke Energy Kentucky . . . . . . . . . . Duke Energy Kentucky, Inc.
AMT. . . . . . . . . . . . . . . . . . . . . . . . Alternative Minimum Tax
AOCI . . . . . . . . . . . . . . . . . . . . . . . Accumulated Other Comprehensive Income
(Loss)
ARO. . . . . . . . . . . . . . . . . . . . . . . . Asset Retirement Obligation
ATM. . . . . . . . . . . . . . . . . . . . . . . . At-the-market
Audit Committee . . . . . . . . . . . . . . Audit Committee of the Board of Directors
Beckjord . . . . . . . . . . . . . . . . . . . . Beckjord Generating Station
Belews Creek. . . . . . . . . . . . . . . . . Belews Creek Steam Station
Bison. . . . . . . . . . . . . . . . . . . . . . . Bison Insurance Company Limited
Board of Directors . . . . . . . . . . . . . Duke Energy Board of Directors
Brunswick . . . . . . . . . . . . . . . . . . . Brunswick Nuclear Plant
Cardinal. . . . . . . . . . . . . . . . . . . . . Cardinal Pipeline Company, LLC
Catawba . . . . . . . . . . . . . . . . . . . . Catawba Nuclear Station
CC . . . . . . . . . . . . . . . . . . . . . . . . . Combined Cycle
CCR. . . . . . . . . . . . . . . . . . . . . . . . Coal Combustion Residuals
Cinergy . . . . . . . . . . . . . . . . . . . . . Cinergy Corp. (collectively with its
subsidiaries)
Citrus County CC . . . . . . . . . . . . . . Citrus County Combined Cycle Facility
CO2 . . . . . . . . . . . . . . . . . . . . . . . . Carbon Dioxide
Coal Ash Act . . . . . . . . . . . . . . . . . North Carolina Coal Ash Management Act of
2014
the Company . . . . . . . . . . . . . . . . . Duke Energy Corporation and its subsidiaries
Constitution. . . . . . . . . . . . . . . . . . Constitution Pipeline Company, LLC
CPCN. . . . . . . . . . . . . . . . . . . . . . . Certificate of Public Convenience and
Necessity
CRC. . . . . . . . . . . . . . . . . . . . . . . . Cinergy Receivables Company LLC
Crystal River Unit 3 . . . . . . . . . . . . Crystal River Unit 3 Nuclear Plant
CWA . . . . . . . . . . . . . . . . . . . . . . . Clean Water Act
DATC . . . . . . . . . . . . . . . . . . . . . . . Duke-American Transmission Co.
D.C. Circuit Court. . . . . . . . . . . . . . U.S. Court of Appeals for the District of
Columbia
Duke Energy Ohio. . . . . . . . . . . . . . Duke Energy Ohio, Inc.
Duke Energy Progress . . . . . . . . . . Duke Energy Progress, LLC
Duke Energy Registrants . . . . . . . . Duke Energy, Duke Energy Carolinas, Progress
Energy, Duke Energy Progress, Duke Energy
Florida, Duke Energy Ohio, Duke Energy
Indiana and Piedmont
East Bend . . . . . . . . . . . . . . . . . . . East Bend Generating Station
EE . . . . . . . . . . . . . . . . . . . . . . . . . Energy efficiency
EPA . . . . . . . . . . . . . . . . . . . . . . . . U.S. Environmental Protection Agency
EPC . . . . . . . . . . . . . . . . . . . . . . . . Engineering, Procurement and Construction
agreement
EPS . . . . . . . . . . . . . . . . . . . . . . . . Earnings Per Share
ETR . . . . . . . . . . . . . . . . . . . . . . . . Effective tax rate
Exchange Act. . . . . . . . . . . . . . . . . Securities Exchange Act of 1934
FASB . . . . . . . . . . . . . . . . . . . . . . . Financial Accounting Standards Board
FERC . . . . . . . . . . . . . . . . . . . . . . . Federal Energy Regulatory Commission
FES . . . . . . . . . . . . . . . . . . . . . . . . FirstEnergy Solutions Corp.
Form S-3. . . . . . . . . . . . . . . . . . . . Registration statement
FPSC . . . . . . . . . . . . . . . . . . . . . . . Florida Public Service Commission
FTR . . . . . . . . . . . . . . . . . . . . . . . . Financial transmission rights
Fluor . . . . . . . . . . . . . . . . . . . . . . . Fluor Enterprises, Inc.
FV-NI . . . . . . . . . . . . . . . . . . . . . . . Fair value through net income
GAAP . . . . . . . . . . . . . . . . . . . . . . . Generally Accepted Accounting Principles in
the United States
GAAP Reported EPS . . . . . . . . . . . . Diluted EPS Available to Duke Energy
Corporation common stockholders
GHG. . . . . . . . . . . . . . . . . . . . . . . . Greenhouse Gas
GWh . . . . . . . . . . . . . . . . . . . . . . . Gigawatt-hours
Hardy Storage . . . . . . . . . . . . . . . . Hardy Storage Company, LLC
Harris . . . . . . . . . . . . . . . . . . . . . . Shearon Harris Nuclear Plant
HLBV . . . . . . . . . . . . . . . . . . . . . . . Hypothetical Liquidation at Book Value
Term or Acronym
Definition
Term or Acronym
Definition
IGCC . . . . . . . . . . . . . . . . . . . . . . . Integrated Gasification Combined Cycle
Piedmont . . . . . . . . . . . . . . . . . . . . Piedmont Natural Gas Company, Inc.
IMPA . . . . . . . . . . . . . . . . . . . . . . . Indiana Municipal Power Agency
Pine Needle . . . . . . . . . . . . . . . . . . Pine Needle LNG Company, LLC
IMR . . . . . . . . . . . . . . . . . . . . . . . . Integrity Management Rider
Pioneer . . . . . . . . . . . . . . . . . . . . . Pioneer Transmission, LLC
IRP . . . . . . . . . . . . . . . . . . . . . . . . Integrated Resource Plans
PJM . . . . . . . . . . . . . . . . . . . . . . . . PJM Interconnection, LLC
IRS . . . . . . . . . . . . . . . . . . . . . . . . Internal Revenue Service
PMPA. . . . . . . . . . . . . . . . . . . . . . . Piedmont Municipal Power Agency
ISO . . . . . . . . . . . . . . . . . . . . . . . . Independent System Operator
PPA . . . . . . . . . . . . . . . . . . . . . . . . Purchase Power Agreement
ITC. . . . . . . . . . . . . . . . . . . . . . . . . Investment Tax Credit
Progress Energy. . . . . . . . . . . . . . . Progress Energy, Inc.
IURC . . . . . . . . . . . . . . . . . . . . . . . Indiana Utility Regulatory Commission
PSCSC. . . . . . . . . . . . . . . . . . . . . . Public Service Commission of South Carolina
Investment Trusts . . . . . . . . . . . . . Grantor trusts of Duke Energy Progress,
PTC . . . . . . . . . . . . . . . . . . . . . . . . Production Tax Credits
Duke Energy Florida and Duke Energy Indiana
KO Transmission . . . . . . . . . . . . . . KO Transmission Company
KPSC . . . . . . . . . . . . . . . . . . . . . . . Kentucky Public Service Commission
LIBOR . . . . . . . . . . . . . . . . . . . . . . London Interbank Offered Rate
LLC . . . . . . . . . . . . . . . . . . . . . . . . Limited Liability Company
McGuire. . . . . . . . . . . . . . . . . . . . . McGuire Nuclear Station
MGP . . . . . . . . . . . . . . . . . . . . . . . Manufactured gas plant
PUCO. . . . . . . . . . . . . . . . . . . . . . . Public Utilities Commission of Ohio
PURPA. . . . . . . . . . . . . . . . . . . . . . Public Utility Regulatory Policies Act of 1978
QF . . . . . . . . . . . . . . . . . . . . . . . . . Qualifying Facility
RCA . . . . . . . . . . . . . . . . . . . . . . . . Revolving Credit Agreement
RFP . . . . . . . . . . . . . . . . . . . . . . . . Requests for Proposal
REC . . . . . . . . . . . . . . . . . . . . . . . . Renewable Energy Certificate
REC Solar . . . . . . . . . . . . . . . . . . . REC Solar Corp.
MISO . . . . . . . . . . . . . . . . . . . . . . . Midcontinent Independent System Operator, Inc.
MMBtu . . . . . . . . . . . . . . . . . . . . . Million British Thermal Unit
Relative TSR . . . . . . . . . . . . . . . . . TSR of Duke Energy stock relative to a
predefined peer group
MTBE. . . . . . . . . . . . . . . . . . . . . . . Methyl tertiary butyl ether
Robinson . . . . . . . . . . . . . . . . . . . . Robinson Nuclear Plant
MTEP. . . . . . . . . . . . . . . . . . . . . . . MISO Transmission Expansion Planning
RSU. . . . . . . . . . . . . . . . . . . . . . . . Restricted Stock Unit
MW . . . . . . . . . . . . . . . . . . . . . . . . Megawatt
MWh . . . . . . . . . . . . . . . . . . . . . . . Megawatt-hour
NCDEQ . . . . . . . . . . . . . . . . . . . . . North Carolina Department of Environmental
Quality
NCEMC . . . . . . . . . . . . . . . . . . . . . North Carolina Electric Membership Corporation
NCEMPA . . . . . . . . . . . . . . . . . . . . North Carolina Eastern Municipal Power Agency
NCUC . . . . . . . . . . . . . . . . . . . . . . North Carolina Utilities Commission
NDTF . . . . . . . . . . . . . . . . . . . . . . . Nuclear decommissioning trust funds
New Source Review . . . . . . . . . . . . Clean Air Act program that requires industrial
facilities to install modern pollution control
equipment when they are built or when making
a change that increases emissions significantly
NMC . . . . . . . . . . . . . . . . . . . . . . . National Methanol Company
NOL . . . . . . . . . . . . . . . . . . . . . . . . Net operating loss
NOx . . . . . . . . . . . . . . . . . . . . . . . . Nitrogen oxide
NPNS. . . . . . . . . . . . . . . . . . . . . . . Normal purchase/normal sale
NRC. . . . . . . . . . . . . . . . . . . . . . . . U.S. Nuclear Regulatory Commission
NYSE . . . . . . . . . . . . . . . . . . . . . . . New York Stock Exchange
Oconee . . . . . . . . . . . . . . . . . . . . . Oconee Nuclear Station
OPEB. . . . . . . . . . . . . . . . . . . . . . . Other Post-Retirement Benefit Obligations
OPEB Assets . . . . . . . . . . . . . . . . . Other post-retirement plan assets are
comprised of the Retirement Plan of Piedmont
401(h) Medical Plan, and the following VEBA
Trusts: Duke Energy Corporation Employee
Benefits Trust, Piedmont Natural Gas Company
501(c)(9) Trust for Retired Bargaining Unit
Employees and the Piedmont Natural Gas
Company 501(c)(9) Trust for Retired
Non-Bargaining Unit Employees
ORS . . . . . . . . . . . . . . . . . . . . . . . . Office of Regulatory Staff
OTTI. . . . . . . . . . . . . . . . . . . . . . . . Other-than-temporary impairment
OVEC . . . . . . . . . . . . . . . . . . . . . . . Ohio Valley Electric Corporation
the Parent . . . . . . . . . . . . . . . . . . . Duke Energy Corporation holding company
PGA . . . . . . . . . . . . . . . . . . . . . . . . Purchased Gas Adjustments
PHMSA . . . . . . . . . . . . . . . . . . . . . Pipeline and Hazardous Materials Safety
Administration
RTO . . . . . . . . . . . . . . . . . . . . . . . . Regional Transmission Organization
Sabal Trail . . . . . . . . . . . . . . . . . . . Sabal Trail Transmission, LLC
SAFSTOR . . . . . . . . . . . . . . . . . . . . A method of decommissioning in which a
nuclear facility is placed and maintained in a
condition that allows the facility to be safely
stored and subsequently decontaminated to
levels that permit release for unrestricted use
SEC . . . . . . . . . . . . . . . . . . . . . . . . Securities and Exchange Commission
SELC . . . . . . . . . . . . . . . . . . . . . . . Southern Environmental Law Center
Segment Income . . . . . . . . . . . . . . Income from continuing operations net of
income attributable to noncontrolling interests
and preferred stock dividends
SO2 . . . . . . . . . . . . . . . . . . . . . . . . Sulfur dioxide
Spectra Capital . . . . . . . . . . . . . . . Spectra Energy Capital, LLC
S&P . . . . . . . . . . . . . . . . . . . . . . . . Standard & Poor’s Rating Services
State utility commissions. . . . . . . . NCUC, PSCSC, FPSC, PUCO, IURC, KPSC and
TPUC (Collectively)
State electric utility commissions. . . NCUC, PSCSC, FPSC, PUCO, IURC and KPSC
(Collectively)
State gas utility commissions . . . . NCUC, PSCSC, PUCO, TPUC and KPSC
(Collectively)
Subsidiary Registrants. . . . . . . . . . Duke Energy Carolinas, Progress Energy, Duke
Energy Progress, Duke Energy Florida, Duke
Energy Ohio, Duke Energy Indiana and Piedmont
Sutton . . . . . . . . . . . . . . . . . . . . . . L.V. Sutton Combined Cycle Plant
the Tax Act. . . . . . . . . . . . . . . . . . . Tax Cuts and Jobs Act
TPUC . . . . . . . . . . . . . . . . . . . . . . . Tennessee Public Utility Commission
TSR . . . . . . . . . . . . . . . . . . . . . . . . Total shareholder return
U.S. . . . . . . . . . . . . . . . . . . . . . . . . United States
VEBA . . . . . . . . . . . . . . . . . . . . . . . Voluntary Employees’ Beneficiary Association
VIE. . . . . . . . . . . . . . . . . . . . . . . . . Variable Interest Entity
WACC . . . . . . . . . . . . . . . . . . . . . . Weighted Average Cost of Capital
WNA . . . . . . . . . . . . . . . . . . . . . . . Weather normalization adjustment
W.S. Lee CC . . . . . . . . . . . . . . . . . . William States Lee Combined Cycle Facility
WVPA. . . . . . . . . . . . . . . . . . . . . . . Wabash Valley Power Association, Inc.
service territory is approximately 91,000 square miles across six states with a
total estimated population of 25 million people. The operations include electricity
sold wholesale to municipalities, electric cooperative utilities and other
load-serving entities. Electric Utilities and Infrastructure is also a joint owner in
certain electric transmission projects. Electric Utilities and Infrastructure has
a 50% ownership interest in DATC, a partnership with American Transmission
Company, formed to design, build and operate transmission infrastructure.
DATC owns 72% of the transmission service rights to Path 15, an 84-mile
transmission line in central California. Electric Utilities and Infrastructure also
has a 50% ownership interest in Pioneer which builds, owns and operates
electric transmission facilities in North America. The following map shows the
service territory for Electric Utilities and Infrastructure as of December 31, 2019.
ITEM 1. BUSINESS
DUKE ENERGY
General
Duke Energy was incorporated on May 3, 2005, and is an energy company
headquartered in Charlotte, North Carolina, subject to regulation by the FERC
and other regulatory agencies listed below. Duke Energy operates in the U.S.
primarily through its direct and indirect subsidiaries. Certain Duke Energy
subsidiaries are also Subsidiary Registrants, including Duke Energy Carolinas,
Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy
Ohio, Duke Energy Indiana and Piedmont. When discussing Duke Energy’s
consolidated financial information, it necessarily includes the results of its
separate Subsidiary Registrants, which along with Duke Energy, are collectively
referred to as the Duke Energy Registrants.
The Duke Energy Registrants electronically file reports with the SEC,
including Annual Reports on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, proxy statements and amendments to such reports.
The SEC maintains an internet site that contains reports, proxy and
information statements and other information regarding issuers that file
electronically with the SEC at sec.gov. Additionally, information about the Duke
Energy Registrants, including reports filed with the SEC, is available through
Duke Energy’s website at duke-energy.com. Such reports are accessible at no
charge and are made available as soon as reasonably practicable after such
material is filed with or furnished to the SEC.
Business Segments
Duke Energy’s segment structure includes three reportable business
segments: Electric Utilities and Infrastructure, Gas Utilities and Infrastructure
and Commercial Renewables. The remainder of Duke Energy’s operations is
presented as Other. Duke Energy’s chief operating decision-maker routinely
reviews financial information about each of these business segments in
deciding how to allocate resources and evaluate the performance of the
business. For additional information on each of these business segments,
including financial and geographic information, see Note 3 to the Consolidated
Financial Statements, “Business Segments.” The following sections describe the
business and operations of each of Duke Energy’s business segments, as well
as Other.
ELECTRIC UTILITIES AND INFRASTRUCTURE
Electric Utilities and Infrastructure conducts operations primarily
through the regulated public utilities of Duke Energy Carolinas, Duke Energy
Progress, Duke Energy Florida, Duke Energy Indiana and Duke Energy Ohio.
Electric Utilities and Infrastructure provides retail electric service through the
generation, transmission, distribution and sale of electricity to approximately
7.8 million customers within the Southeast and Midwest regions of the U.S. The
5
PART I The electric operations and investments in projects are subject to the rules and regulations of the FERC, the NRC, the NCUC, the PSCSC, the FPSC, the IURC, the
PUCO and the KPSC.
The following table represents the distribution of billed sales by customer class for the year ended December 31, 2019.
Residential
General service
Industrial
Total retail sales
Wholesale and other sales
Total sales
Duke
Energy
Carolinas
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
32%
33%
24%
89%
11%
27%
23%
15%
65%
35%
49%
37%
7%
93%
7%
37%
38%
23%
98%
2%
29%
26%
32%
87%
13%
100%
100%
100%
100%
100%
The number of residential and general service customers within the
Electric Utilities and Infrastructure service territory is expected to increase over
time. While economic conditions within the service territory remain strong,
sales growth continues to be influenced by adoption of energy efficiencies and
self-generation. Residential sales for 2019 compared to 2018 declined. The
continued adoption of more efficient structures and appliances is expected to
continue to drive average usage per customer lower over time. However, the
continued adoption of more efficient housing and appliances is expected to
have a negative impact on average usage per residential customer over time.
In Ohio, Electric Utilities and Infrastructure conducts competitive auctions
for electricity supply. The cost of energy purchased through these auctions is
recovered from retail customers. Electric Utilities and Infrastructure earns retail
margin in Ohio on the transmission and distribution of electricity, but not on the
cost of the underlying energy.
Competition in the regulated electric distribution business is primarily
from the development and deployment of alternative energy sources including
on-site generation from industrial customers and distributed generation, such
as private solar, at residential, general service and/or industrial customer sites.
Seasonality and the Impact of Weather
Wholesale
Revenues and costs are influenced by seasonal weather patterns. Peak
sales of electricity occur during the summer and winter months, which results
in higher revenue and cash flows during these periods. By contrast, lower sales
of electricity occur during the spring and fall, allowing for scheduled plant
maintenance. Residential and general service customers are more impacted by
weather than industrial customers. Estimated weather impacts are based on
actual current period weather compared to normal weather conditions. Normal
weather conditions are defined as the long-term average of actual historical
weather conditions.
The estimated impact of weather on earnings is based on the temperature
variances from a normal condition and customers’ historic usage patterns.
The methodology used to estimate the impact of weather does not consider all
variables that may impact customer response to weather conditions such as
humidity in the summer or wind chill in the winter. The precision of this estimate
may also be impacted by applying long-term weather trends to shorter-term
periods.
Heating-degree days measure the variation in weather based on
the extent the average daily temperature falls below a base temperature.
Cooling-degree days measure the variation in weather based on the extent the
average daily temperature rises above the base temperature. Each degree of
temperature below the base temperature counts as one heating-degree day
and each degree of temperature above the base temperature counts as one
cooling-degree day.
Competition
Retail
Electric Utilities and Infrastructure’s businesses operate as the sole
supplier of electricity within their service territories, with the exception of Ohio,
which has a competitive electricity supply market for generation service. Electric
Utilities and Infrastructure owns and operates facilities necessary to generate,
transmit, distribute and sell electricity. Services are priced by state commission
approved rates designed to include the costs of providing these services and
a reasonable return on invested capital. This regulatory policy is intended to
provide safe and reliable electricity at fair prices.
Duke Energy competes with other utilities and merchant generators for
bulk power sales, sales to municipalities and cooperatives and wholesale
transactions under primarily cost-based contracts approved by FERC. The
principal factors in competing for these sales are availability of capacity and
power, reliability of service and price. Prices are influenced primarily by market
conditions and fuel costs.
Increased competition in the wholesale electric utility industry and
the availability of transmission access could affect Electric Utilities and
Infrastructure’s load forecasts, plans for power supply and wholesale energy
sales and related revenues. Wholesale energy sales will be impacted by the
extent to which additional generation is available to sell to the wholesale market
and the ability of Electric Utilities and Infrastructure to attract new customers
and to retain existing customers.
Energy Capacity and Resources
Electric Utilities and Infrastructure owns approximately 51,144 MW of
generation capacity. For additional information on owned generation facilities,
see Item 2, “Properties.”
Energy and capacity are also supplied through contracts with other
generators and purchased on the open market. Factors that could cause
Electric Utilities and Infrastructure to purchase power for its customers may
include, but are not limited to, generating plant outages, extreme weather
conditions, generation reliability, demand growth and price. Electric Utilities
and Infrastructure has interconnections and arrangements with its neighboring
utilities to facilitate planning, emergency assistance, sale and purchase of
capacity and energy and reliability of power supply.
Electric Utilities and Infrastructure’s generation portfolio is a balanced mix
of energy resources having different operating characteristics and fuel sources
designed to provide energy at the lowest possible cost to meet its obligation to
serve retail customers. All options, including owned generation resources and
purchased power opportunities, are continually evaluated on a real-time basis
to select and dispatch the lowest-cost resources available to meet system load
requirements.
6
PART I Sources of Electricity
Electric Utilities and Infrastructure relies principally on natural gas, nuclear fuel and coal for its generation of electricity. The following table lists sources of
electricity and fuel costs for the three years ended December 31, 2019.
Natural gas and oil(a)
Nuclear(a)
Coal(a)
All fuels (cost-based on weighted average)(a)
Hydroelectric and solar(b)
Total generation
Purchased power and net interchange
Total sources of energy
Cost of Delivered Fuel per Net
Kilowatt-hour Generated (Cents)
2019
2.96
0.60
3.08
2.14
2018
3.57
0.50
2.82
2.29
2017
2.85
0.69
2.72
2.04
Generation by Source
2019
29.2%
28.6%
21.6%
79.4%
1.2%
80.6%
19.4%
2018
26.2%
26.0%
24.4%
76.6%
1.3%
77.9%
22.1%
2017
23.6%
27.8%
27.4%
78.8%
0.7%
79.5%
20.5%
100.0%
100.0%
100.0%
(a) Statistics related to all fuels reflect Electric Utilities and Infrastructure’s ownership interest in jointly owned generation facilities.
(b) Generating figures are net of output required to replenish pumped storage facilities during off-peak periods.
Natural Gas and Fuel Oil
Natural gas and fuel oil supply, transportation and storage for Electric
Utilities and Infrastructure’s generation fleet is purchased under standard
industry agreements from various suppliers, including Piedmont. Natural gas
supply agreements typically provide for a percentage of forecasted burns
being procured over time, with varied expiration dates. Electric Utilities and
Infrastructure believes it has access to an adequate supply of natural gas and
fuel oil for the reasonably foreseeable future.
Electric Utilities and Infrastructure has certain dual-fuel generating
facilities that can operate utilizing both natural gas and fuel oil. The cost of
Electric Utilities and Infrastructure’s natural gas and fuel oil is fixed price
or determined by published market prices as reported in certain industry
publications, plus any transportation and freight costs. Duke Energy Carolinas,
Duke Energy Progress, Duke Energy Florida and Duke Energy Indiana use
derivative instruments to manage a portion of their exposure to price
fluctuations for natural gas. For Duke Energy Florida, there is currently an
agreed to moratorium with the FPSC on future hedging of natural gas prices.
Electric Utilities and Infrastructure has firm interstate and intrastate
natural gas transportation agreements and storage agreements in place
to support generation needed for load requirements. Electric Utilities and
Infrastructure may purchase additional shorter-term natural gas transportation
and utilize natural gas interruptible transportation agreements to support
generation needed for load requirements. The Electric Utilities and Infrastructure
natural gas plants are served by various supply zones and multiple pipelines.
Nuclear
The industrial processes for producing nuclear generating fuel generally
involve the mining and milling of uranium ore to produce uranium concentrates
and services to convert, enrich and fabricate fuel assemblies.
Electric Utilities and Infrastructure has contracted for uranium materials
and services to fuel its nuclear reactors. Uranium concentrates, conversion
services and enrichment services are primarily met through a diversified portfolio
of long-term supply contracts. The contracts are diversified by supplier, country
of origin and pricing. Electric Utilities and Infrastructure staggers its contracting
so that its portfolio of long-term contracts covers the majority of its fuel
requirements in the near term and decreasing portions of its fuel requirements
over time thereafter. Near-term requirements not met by long-term supply
contracts have been and are expected to be fulfilled with spot market purchases.
Due to the technical complexities of changing suppliers of fuel fabrication
services, Electric Utilities and Infrastructure generally sources these services to a
single domestic supplier on a plant-by-plant basis using multiyear contracts.
Electric Utilities and Infrastructure has entered into fuel contracts that
cover 100% of its uranium concentrates, conversion services and enrichment
services requirements through at least 2020 and cover fabrication services
requirements for these plants through at least 2027. For future requirements not
already covered under long-term contracts, Electric Utilities and Infrastructure
believes it will be able to renew contracts as they expire or enter into similar
contractual arrangements with other suppliers of nuclear fuel materials and
services.
Coal
Electric Utilities and Infrastructure meets its coal demand through a
portfolio of long-term purchase contracts and short-term spot market purchase
agreements. Large amounts of coal are purchased under long-term contracts
with mining operators who mine both underground and at the surface.
Electric Utilities and Infrastructure uses spot market purchases to meet coal
requirements not met by long-term contracts. Expiration dates for its long-term
contracts, which have various price adjustment provisions and market
reopeners, range from 2020 to 2022 for Duke Energy Carolinas and Duke Energy
Progress, 2020 to 2021 for Duke Energy Florida and Duke Energy Ohio and 2020
to 2025 for Duke Energy Indiana. Electric Utilities and Infrastructure expects
to renew these contracts or enter into similar contracts with other suppliers
as existing contracts expire, though prices will fluctuate over time as coal
markets change. Electric Utilities and Infrastructure has an adequate supply
of coal under contract to meet its hedging guidelines regarding projected future
consumption. As a result of volatility in natural gas prices and the associated
impacts on coal-fired dispatch within the generation fleet, coal inventories will
continue to fluctuate. Electric Utilities and Infrastructure continues to actively
manage its portfolio and has worked with suppliers to obtain increased flexibility
in its coal contracts.
Coal purchased for the Carolinas is primarily produced from mines in
Central Appalachia, Northern Appalachia and the Illinois Basin. Coal purchased
for Florida is primarily produced from mines in Colorado and the Illinois Basin.
Coal purchased for Kentucky is produced from mines along the Ohio River in
Illinois, Ohio, West Virginia and Pennsylvania. Coal purchased for Indiana is
primarily produced in Indiana and Illinois. The current average sulfur content
of coal purchased by Electric Utilities and Infrastructure is between 1.5%
and 2% for Duke Energy Carolinas and Duke Energy Progress, between 2%
and 3% for Duke Energy Florida, between 2.5% and 3% for Duke Energy Ohio
and between 1.5% and 3% for Duke Energy Indiana. Electric Utilities and
Infrastructure’s environmental controls, in combination with the use of SO2
emission allowances, enable Electric Utilities and Infrastructure to satisfy
current SO2 emission limitations for its existing facilities.
7
PART I Purchased Power
Electric Utilities and Infrastructure purchases a portion of its capacity
and system requirements through purchase obligations, leases and purchase
capacity contracts. Electric Utilities and Infrastructure believes it can obtain
The following table summarizes purchased power for the previous three years:
adequate purchased power capacity to meet future system load needs. However,
during periods of high demand, the price and availability of purchased power
may be significantly affected.
Purchase obligations and leases (in millions of MWh)(a)
Purchase capacity under contract (in MW)(b)
(a) Represents approximately 14% for 2019 and 7% for 2018 and 2017 of total system requirements.
(b) For 2019, 2018 and 2017 these agreements include approximately 412 MW of firm capacity under contract by Duke Energy Florida with QFs.
2019
34.8
4,238
2018
21.3
4,025
2017
17.7
4,028
Inventory
Electric Utilities and Infrastructure must maintain an adequate stock
of fuel and materials and supplies in order to ensure continuous operation of
generating facilities and reliable delivery to customers. As of December 31, 2019,
the inventory balance for Electric Utilities and Infrastructure was approximately
$3 billion. For additional information on inventory, see Note 1 to the Consolidated
Financial Statements, “Summary of Significant Accounting Policies.”
Ash Basin Management
During 2015, EPA issued regulations related to the management of CCR
from power plants. These regulations classify CCR as nonhazardous waste
under the Resource Conservation and Recovery Act (RCRA) and apply to
electric generating sites with new and existing landfills and new and existing
surface impoundments and establishes requirements regarding landfill design,
structural integrity design and assessment criteria for surface impoundments,
groundwater monitoring, protection and remedial procedures and other
operational and reporting procedures for the disposal and management of CCR.
In addition to the federal regulations, CCR landfills and surface impoundments
(ash basins or impoundments) will continue to be regulated by existing state
laws, regulations and permits, including the Coal Ash Act in North Carolina.
Electric Utilities and Infrastructure has and will periodically submit to
applicable authorities required site-specific coal ash impoundment remediation
or closure plans. These plans and all associated permits must be approved before
any work can begin. Closure activities began in 2015 at the four sites specified as
high priority by the Coal Ash Act and at the W.S. Lee Steam Station site in South
Carolina in connection with other legal requirements. Excavation at these sites
involves movement of CCR materials to off-site locations for use as structural fill,
to appropriate engineered off-site or on-site lined landfills or conversion of the ash
for beneficial use. Duke Energy has completed excavation of coal ash regulated by
the Coal Ash Act at three of the four high-priority sites. At other sites, planning and
closure methods have been studied and factored into the estimated retirement and
management costs, and closure activities have commenced.
The Coal Ash Act leaves the decision on cost recovery determinations
related to closure of coal ash surface impoundments to the normal ratemaking
processes before utility regulatory commissions. Duke Energy Carolinas and
Duke Energy Progress have included compliance costs associated with the
EPA CCR rule and the Coal Ash Act in their respective rate case filings. During
2017, Duke Energy Carolinas’ and Duke Energy Progress’ wholesale contracts
were amended to include the recovery of expenditures related to AROs for the
closure of coal ash basins. The amended contracts have retail disallowance
parity or provisions limiting challenges to CCR cost recovery actions at
FERC. FERC approved the amended wholesale rate schedules in 2017. For
additional information on the ash basins and recovery, see Item 7, “Other
Matters” and Notes 4, 5 and 10 to the Consolidated Financial Statements,
“Regulatory Matters,” “Commitments and Contingencies” and “Asset Retirement
Obligations,” respectively.
Nuclear Matters
Duke Energy owns, wholly or partially, 11 operating nuclear reactors
located at six operating stations. The Crystal River Unit 3 permanently ceased
operation in February 2013. Nuclear insurance includes: nuclear liability
coverage; property damage coverage; nuclear accident decontamination and
premature decommissioning coverage; and accidental outage coverage for
losses in the event of a major accidental outage. Joint owners reimburse Duke
Energy for certain expenses associated with nuclear insurance in accordance
with joint owner agreements. The Price-Anderson Act requires plant owners to
provide for public nuclear liability claims resulting from nuclear incidents to the
maximum total financial protection liability, which is approximately $13.9 billion.
For additional information on nuclear insurance see Note 5 to the Consolidated
Financial Statements, “Commitments and Contingencies.”
Duke Energy has a significant future financial commitment to dispose of
spent nuclear fuel and decommission and decontaminate each plant safely. The
NCUC, PSCSC and FPSC require Duke Energy to update their cost estimates for
decommissioning their nuclear plants every five years.
The following table summarizes the fair value of NDTF investments and the most recent site-specific nuclear decommissioning cost studies. Decommissioning
costs are stated in 2018 or 2019 dollars, depending on the year of the cost study, and include costs to decommission plant components not subject to radioactive
contamination.
(in millions)
Duke Energy
Duke Energy Carolinas(b)(c)
Duke Energy Progress(d)
Duke Energy Florida(e)
NDTF(a)
$
December 31, 2019
8,140
4,359
3,047
734
$
December 31, 2018
6,720
3,558
2,503
659
$
Decommissioning
Costs(a)
9,152
4,365
4,181
606
Year of
Cost Study
2018 and 2019
2018
2019
2019
(a) Amounts for Progress Energy equal the sum of Duke Energy Progress and Duke Energy Florida.
(b) Decommissioning cost for Duke Energy Carolinas reflects its ownership interest in jointly owned reactors. Other joint owners are responsible for decommissioning costs related to their interest in the reactors.
(c) Duke Energy Carolinas’ site-specific nuclear decommissioning cost study completed in 2018 was filed with the NCUC and PSCSC in 2019. A new funding study was also completed and filed with the NCUC and PSCSC in 2019.
(d) Duke Energy Progress’ site-specific nuclear decommissioning cost study, which was completed in 2019, is expected to be filed with the NCUC and PSCSC during the first quarter of 2020. Duke Energy Progress is expected to
file an updated funding study with NCUC and PSCSC in the third quarter of 2020.
(e) During 2019, Duke Energy Florida reached an agreement to transfer decommissioning work for Crystal River Unit 3 to a third party. The agreement requires regulatory approval from the NRC and the FPSC.
8
PART I The NCUC, PSCSC, FPSC and FERC have allowed Electric Utilities and
Infrastructure to recover estimated decommissioning costs through retail and
wholesale rates over the expected remaining service periods of their nuclear
stations. Electric Utilities and Infrastructure believes the decommissioning costs
being recovered through rates, when coupled with the existing fund balances
and expected fund earnings, will be sufficient to provide for the cost of future
decommissioning. For additional information, see Note 10 to the Consolidated
Financial Statements, “Asset Retirement Obligations.”
The Nuclear Waste Policy Act of 1982 (as amended) provides the framework
for development by the federal government of interim storage and permanent
disposal facilities for high-level radioactive waste materials. The government has
not yet developed a storage facility or disposal capacity, so Electric Utilities and
Infrastructure will continue to store spent fuel on its reactor sites.
Under federal law, the DOE is responsible for the selection and
construction of a facility for the permanent disposal of spent nuclear fuel
and high-level radioactive waste. The DOE terminated the project to license
and develop a geologic repository at Yucca Mountain, Nevada in 2010, and is
currently taking no action to fulfill its responsibilities to dispose of spent fuel.
Until the DOE begins to accept the spent nuclear fuel, Duke Energy
Carolinas, Duke Energy Progress and Duke Energy Florida will continue to safely
manage their spent nuclear fuel. Under current regulatory guidelines, Harris
has sufficient storage capacity in its spent fuel pools through the expiration
of its renewed operating license. With certain modifications and approvals by
the NRC to expand the on-site dry cask storage facilities, spent nuclear fuel
dry storage facilities will be sufficient to provide storage space of spent fuel
through the expiration of the operating licenses, including any license renewals,
for Brunswick, Catawba, McGuire, Oconee and Robinson. Crystal River Unit 3
ceased operation in 2013 and was placed in a SAFSTOR condition in January
2018. As of January 2018, all spent fuel at Crystal River Unit 3 has been
transferred from the spent fuel pool to dry storage at an on-site independent
spent fuel storage installation.
The nuclear power industry faces uncertainties with respect to the cost
and long-term availability of disposal sites for spent nuclear fuel and other
radioactive waste, compliance with changing regulatory requirements, capital
outlays for modifications and new plant construction.
Electric Utilities and Infrastructure is subject to the jurisdiction of the NRC
for the design, construction and operation of its nuclear generating facilities.
The following table includes the current year of expiration of nuclear operating
licenses for nuclear stations in operation. During 2019, Duke Energy announced
its intention to seek 20-year operating license renewals for each of the reactors
it operates in Duke Energy Carolinas and Duke Energy Progress.
The NRC has acknowledged permanent cessation of operation and
permanent removal of fuel from the reactor vessel at Crystal River Unit 3.
Therefore, the license no longer authorizes operation of the reactor. For
additional information on nuclear decommissioning activity, see Notes 4 and
10 to the Consolidated Financial Statements, “Regulatory Matters” and “Asset
Retirement Obligations,” respectively.
Regulation
State
The state electric utility commissions approve rates for Duke Energy’s
retail electric service within their respective states. The state electric utility
commissions, to varying degrees, have authority over the construction and
operation of Electric Utilities and Infrastructure’s generating facilities. CPCNs
issued by the state electric utility commissions, as applicable, authorize Electric
Utilities and Infrastructure to construct and operate its electric facilities and
to sell electricity to retail and wholesale customers. Prior approval from the
relevant state electric utility commission is required for the entities within
Electric Utilities and Infrastructure to issue securities. The underlying concept
of utility ratemaking is to set rates at a level that allows the utility to collect
revenues equal to its cost of providing service plus earn a reasonable rate of
return on its invested capital, including equity.
In addition to rates approved in base rate cases, each of the state electric
utility commissions allow recovery of certain costs through various cost-recovery
clauses to the extent the respective commission determines in periodic hearings
that such costs, including any past over or under-recovered costs, are prudent.
Fuel, fuel-related costs and certain purchased power costs are eligible
for recovery by Electric Utilities and Infrastructure. Electric Utilities and
Infrastructure uses coal, hydroelectric, natural gas, oil, renewable generation
and nuclear fuel to generate electricity, thereby maintaining a diverse fuel mix
that helps mitigate the impact of cost increases in any one fuel. Due to the
associated regulatory treatment and the method allowed for recovery, changes
in fuel costs from year to year have no material impact on operating results of
Electric Utilities and Infrastructure, unless a commission finds a portion of such
costs to have been imprudent. However, delays between the expenditure for fuel
costs and recovery from customers can adversely impact the timing of cash
flows of Electric Utilities and Infrastructure.
Unit
Duke Energy Carolinas
Catawba Units 1 and 2
McGuire Unit 1
McGuire Unit 2
Oconee Units 1 and 2
Oconee Unit 3
Duke Energy Progress
Brunswick Unit 1
Brunswick Unit 2
Harris
Robinson
Year of Expiration
2043
2041
2043
2033
2034
2036
2034
2046
2030
9
PART I The table below reflects significant electric rate case applications approved and effective in the past three years or applications currently pending approval.
Approved Rate Cases:
Duke Energy Carolinas 2018 South Carolina Rate Case
Duke Energy Progress 2018 South Carolina Rate Case
Duke Energy Ohio 2017 Ohio Electric Rate Case
Duke Energy Carolinas 2017 North Carolina Rate Case
Duke Energy Kentucky 2017 Kentucky Electric Rate Case
Duke Energy Progress 2017 North Carolina Rate Case
Duke Energy Progress 2016 South Carolina Rate Case
Pending Rate Cases:
Duke Energy Carolinas 2019 North Carolina Rate Case
Duke Energy Progress 2019 North Carolina Rate Case
Duke Energy Kentucky 2019 Kentucky Electric Rate Case
Duke Energy Indiana 2019 Indiana Rate Case
Annual
Increase
(Decrease)
(in millions)
Regulatory
Body
Return on
Equity
Equity
Component of
Capital Structure
Effective Date
PSCSC
PSCSC
PUCO
NCUC
KPSC
NCUC
PSCSC
NCUC
NCUC
KPSC
IURC
$
$
45
29
(19)
(73)
8
151
(a)
291
464
46
(b)
9.5%
9.5%
9.84%
9.9%
9.725%
9.9%
10.1%
10.3%
10.3%
9.8%
10.4%
53%
53%
50.75%
52%
49%
52%
53%
53%
53%
48.2%
53%
6/1/2019
6/1/2019
1/2/2019
8/1/2018
5/1/2018
3/16/2018
1/1/2017
8/1/2020
9/1/2020
Q2 2020
mid 2020
(a) An increase of approximately $38 million in revenues was effective January 1, 2017, and an additional increase of approximately $19 million in revenues was effective January 1, 2018.
(b) Requests an increase of annualized retail revenues of $352 million beginning in July 2020, and an additional $44 million beginning in April 2021, which include the impacts of the Utility Receipt Tax.
the service areas are comprised of numerous cities, towns and communities. In
Tennessee, the service area is the metropolitan area of Nashville. The following
map shows the service territory and investments in operating and proposed
midstream properties for Gas Utilities and Infrastructure as of December 31, 2019.
For more information on rate matters and other regulatory proceedings,
see Note 4 to the Consolidated Financial Statements, “Regulatory Matters.”
Federal
The FERC approves Electric Utilities and Infrastructure’s cost-based
rates for electric sales to certain power and transmission wholesale customers.
Regulations of FERC and the state electric utility commissions govern access to
regulated electric and other data by nonregulated entities and services provided
between regulated and nonregulated energy affiliates. These regulations affect
the activities of nonregulated affiliates with Electric Utilities and Infrastructure.
RTOs. PJM and MISO are the ISOs and FERC-approved RTOs for the
regions in which Duke Energy Ohio and Duke Energy Indiana operate. PJM and
MISO operate energy, capacity and other markets, and control the day-to-day
operations of bulk power systems through central dispatch.
Duke Energy Ohio is a member of PJM and Duke Energy Indiana is a
member of MISO. Transmission owners in these RTOs have turned over control
of their transmission facilities and their transmission systems are currently
under the dispatch control of the RTOs. Transmission service is provided on
a regionwide, open-access basis using the transmission facilities of the RTO
members at rates based on the costs of transmission service.
Environmental. Electric Utilities and Infrastructure is subject to the
jurisdiction of the EPA and state and local environmental agencies. For a
discussion of environmental regulation, see “Environmental Matters” in this
section. See the “Other Matters” section of Management’s Discussion and
Analysis for a discussion about potential Global Climate Change legislation
and other EPA regulations under development and the potential impacts such
legislation and regulation could have on Duke Energy’s operations.
GAS UTILITIES AND INFRASTRUCTURE
Gas Utilities and Infrastructure conducts natural gas operations primarily
through the regulated public utilities of Piedmont, Duke Energy Ohio and Duke
Energy Kentucky. The natural gas operations are subject to the rules and
regulations of the NCUC, PSCSC, PUCO, KPSC, TPUC, PHMSA and the FERC. Gas
Utilities and Infrastructure serves residential, commercial, industrial and power
generation natural gas customers, including customers served by municipalities
who are wholesale customers. Gas Utilities and Infrastructure has over 1.6 million
customers, including 1.1 million customers located in North Carolina, South
Carolina and Tennessee, and an additional 535,000 customers located within
southwestern Ohio and northern Kentucky. In the Carolinas, Ohio and Kentucky,
10
PART I The number of residential, commercial and industrial customers within
the Gas Utilities and Infrastructure service territory is expected to increase
over time. Average usage per residential customer is expected to remain flat or
decline for the foreseeable future; however, decoupled rates in North Carolina
and various rate design mechanisms in other jurisdictions partially mitigate the
impact of the declining usage per customer on overall profitability.
Gas Utilities and Infrastructure also owns, operates and has investments
in various pipeline transmission and natural gas storage facilities.
Natural Gas for Retail Distribution
Gas Utilities and Infrastructure is responsible for the distribution of
natural gas to retail customers in its North Carolina, South Carolina, Tennessee,
Ohio and Kentucky service territories. Gas Utilities and Infrastructure’s natural
gas procurement strategy is to contract primarily with major and independent
producers and marketers for natural gas supply. It also purchases a diverse
portfolio of transportation and storage service from interstate pipelines. This
strategy allows Gas Utilities and Infrastructure to assure reliable natural gas
supply and transportation for its firm customers during peak winter conditions.
When firm pipeline services or contracted natural gas supplies are temporarily
not needed due to market demand fluctuations, Gas Utilities and Infrastructure
may release these services and supplies in the secondary market under
FERC-approved capacity release provisions or make wholesale secondary
market sales. In 2019, firm supply purchase commitment agreements provided
100% of the natural gas supply for both Piedmont and Duke Energy Ohio.
Impact of Weather
Gas Utilities and Infrastructure revenues are generally protected
from the impact of weather fluctuations due to the regulatory mechanisms
that are available in most service territories. In North Carolina, margin
decoupling provides protection from both weather and other usage variations
like conservation for residential and commercial customer classes. Margin
decoupling provides a set revenue per customer independent of actual usage.
In South Carolina, Tennessee and Kentucky, weather normalization adjusts
revenues either up or down depending on how much warmer or colder than
normal a given month has been. Weather normalization adjustments occur
from November through March in South Carolina, from October through April
in Tennessee and from November through April in Kentucky. Duke Energy Ohio
collects most of its non-fuel revenue through a fixed monthly charge that
is not impacted by usage fluctuations that result from weather changes or
conservation.
Competition
Gas Utilities and Infrastructure’s businesses operate as the sole provider
of natural gas service within their retail service territories. Gas Utilities
and Infrastructure owns and operates facilities necessary to transport and
distribute natural gas. Gas Utilities and Infrastructure earns retail margin on
the transmission and distribution of natural gas and not on the cost of the
underlying commodity. Services are priced by state commission approved rates
designed to include the costs of providing these services and a reasonable
return on invested capital. This regulatory policy is intended to provide safe
and reliable natural gas service at fair prices.
In residential, commercial and industrial customer markets, natural
gas distribution operations compete with other companies that supply energy,
primarily electric companies, propane and fuel oil dealers, renewable energy
providers and coal companies in relation to sources of energy for electric power
plants, as well as nuclear energy. A significant competitive factor is price. Gas
Utilities and Infrastructure’s primary product competition is with electricity
for heating, water heating and cooking. Increases in the price of natural gas
or decreases in the price of other energy sources could negatively impact
competitive position by decreasing the price benefits of natural gas to the
consumer. In the case of industrial customers, such as manufacturing plants,
adverse economic or market conditions, including higher natural gas costs, could
cause these customers to suspend business operations or to use alternative
sources of energy in favor of energy sources with lower per-unit costs.
Higher natural gas costs or decreases in the price of other energy sources
may allow competition from alternative energy sources for applications that
have traditionally used natural gas, encouraging some customers to move
away from natural gas-fired equipment to equipment fueled by other energy
sources. Competition between natural gas and other forms of energy is also
based on efficiency, performance, reliability, safety and other non-price factors.
Technological improvements in other energy sources and events that impair
the public perception of the non-price attributes of natural gas could erode
our competitive advantage. These factors in turn could decrease the demand
for natural gas, impair our ability to attract new customers and cause existing
customers to switch to other forms of energy or to bypass our systems in favor
of alternative competitive sources. This could result in slow or no customer
growth and could cause customers to reduce or cease using our product,
thereby reducing our ability to make capital expenditures and otherwise grow
our business, adversely affecting our earnings.
Pipeline and Storage Investments
Duke Energy, through its Gas Utilities and Infrastructure segment, is a
47% equity member of ACP, which plans to build and own the proposed ACP
pipeline, an approximately 600-mile interstate natural gas pipeline, regulated
by FERC. The ACP pipeline is intended to transport diverse natural gas supplies
into southeastern markets. Duke Energy Carolinas, Duke Energy Progress and
Piedmont, among others, will be customers of ACP. ACP expects mechanical
completion of the full project in late 2021 with in-service likely in the first
half of 2022. Abnormal weather, work delays (including delays due to judicial
or regulatory action) and other conditions may 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 in light of their existing contractual and legal obligations.
Gas Utilities and Infrastructure also has a 7.5% equity ownership interest
in Sabal Trail. Sabal Trail is a joint venture that owns the Sabal Trail Natural Gas
Pipeline (Sabal Trail pipeline) to transport natural gas to Florida, regulated by
FERC. The Sabal Trail phase one mainline was placed into service in July 2017
and traverses Alabama, Georgia and Florida. The remaining lateral line to the
Duke Energy Florida’s Citrus County CC was placed into service in March 2018.
In May 2019, construction activities began as planned on Phase II of Sabal
Trail. Phase II will add approximately 200,000 Dth of capacity to the Sabal Trail
pipeline and is expected to achieve in-service in May 2020.
Gas Utilities and Infrastructure had a 24% equity ownership interest in
Constitution, an interstate pipeline development company formed to develop,
construct, own and operate a 124-mile natural gas pipeline and related
facilities, regulated by FERC. Constitution was slated to transport natural
gas supplies from the Marcellus supply region in northern Pennsylvania to
major northeastern markets. As of February 5, 2020, the Constitution partners
formally resolved to initiate the dissolution of Constitution, and to terminate the
Constitution Pipeline project.
Duke Energy, through its Gas Utilities and Infrastructure segment, has a
21.49% equity ownership interest in Cardinal, an intrastate pipeline located in
North Carolina regulated by the NCUC, a 45% equity ownership in Pine Needle,
an interstate liquefied natural gas storage facility located in North Carolina and
a 50% equity ownership interest in Hardy Storage, an underground interstate
natural gas storage facility located in Hardy and Hampshire counties in West
Virginia. Pine Needle and Hardy Storage are regulated by FERC.
KO Transmission, a wholly owned subsidiary of Duke Energy Ohio, is an
interstate pipeline company engaged in the business of transporting natural
gas and is subject to the rules and regulations of FERC. KO Transmission’s
90-mile pipeline supplies natural gas to Duke Energy Ohio and interconnects
with the Columbia Gulf Transmission pipeline and Tennessee Gas Pipeline.
An approximately 70-mile portion of KO Transmission’s pipeline facilities is
co-owned by Columbia Gas Transmission Corporation.
11
PART I See Notes 4, 13 and 18 to the Consolidated Financial Statements,
“Regulatory Matters,” “Investments in Unconsolidated Affiliates” and “Variable
Interest Entities,” respectively, for further information on Duke Energy’s pipeline
investments.
Inventory
Gas Utilities and Infrastructure must maintain adequate natural gas
inventory in order to provide reliable delivery to customers. As of December 31,
2019, the inventory balance for Gas Utilities and Infrastructure was $111
million. For more information on inventory, see Note 1 to the Consolidated
Financial Statements, “Summary of Significant Accounting Policies.”
Regulation
State
The state gas utility commissions approve rates for Duke Energy’s
retail natural gas service within their respective states. The state gas utility
commissions, to varying degrees, have authority over the construction and
operation of Gas Utilities and Infrastructure’s natural gas distribution facilities.
CPCNs issued by the state gas utility commissions or other government
agencies, as applicable, authorize Gas Utilities and Infrastructure to construct
and operate its natural gas distribution facilities and to sell natural gas to retail
and wholesale customers. Prior approval from the relevant state gas utility
commission is required for Gas Utilities and Infrastructure to issue securities.
The underlying concept of utility ratemaking is to set rates at a level that
allows the utility to collect revenues equal to its cost of providing service plus a
reasonable rate of return on its invested capital, including equity.
In addition to amounts collected from customers through approved base
rates, each of the state gas utility commissions allow recovery of certain costs
through various cost-recovery clauses to the extent the respective commission
determines in periodic hearings that such costs, including any past over- or
under-recovered costs, are prudent.
Natural gas costs are eligible for recovery by Gas Utilities and
Infrastructure. Due to the associated regulatory treatment and the method
allowed for recovery, changes in natural gas costs from year to year have no
material impact on operating results of Gas Utilities and Infrastructure, unless
a commission finds a portion of such costs to have not been prudent. However,
delays between the expenditure for natural gas and recovery from customers
can adversely impact the timing of cash flows of Gas Utilities and Infrastructure.
The following table summarizes certain components underlying recently approved and effective base rates or rate stabilization filings in the last three years.
Approved Rate Cases:
Piedmont 2017 South Carolina Rate Stabilization Adjustment Filing
Piedmont 2018 South Carolina Rate Stabilization Adjustment Filing
Piedmont 2019 South Carolina Rate Stabilization Adjustment Filing
Duke Energy Kentucky 2018 Natural Gas Base Rate Case
Piedmont 2019 North Carolina Natural Gas Base Rate Case
Annual
Increase
(Decrease)
(in millions)
$
6
(14)
6
7
$
109
Return on
Equity
Equity
Component of
Capital Structure
10.2%
10.2%
9.9%
9.7%
9.7%
53.0%
53.0%
55.4%
50.8%
52.0%
Effective Date
November 2017
November 2018
November 2019
April 2019
November 2019
Gas Utilities and Infrastructure has IMR mechanisms in North Carolina and Tennessee designed to separately track and recover certain costs associated with
capital investments incurred to comply with federal pipeline safety and integrity programs, as well as additional state safety and integrity requirements in Tennessee.
The following table summarizes information related to recently approved or pending IMR filings.
(in millions)
Piedmont 2019 IMR Filing – North Carolina
Pending Filing:
Piedmont 2019 IMR Filing – Tennessee
Cumulative
Investment
$
109
Annual
Revenues
Effective
Date
$
11.4
December 2019
Expected
Effective Date
$ 296.6
$
28.1
mid 2020
For more information on rate matters and other regulatory proceedings,
• Regulations of the EPA relate to the environment including proposed air
see Note 4 to the Consolidated Financial Statements, “Regulatory Matters.”
emissions regulations that would expand to include emissions of methane.
Federal
Gas Utilities and Infrastructure is subject to various federal regulations,
including regulations that are particular to the natural gas industry. These
federal regulations include but are not limited to the following:
• Regulations of the FERC affect the certification and siting of new
interstate natural gas pipeline projects, the purchase and sale of,
the prices paid for, and the terms and conditions of service for the
interstate transportation and storage of natural gas.
• Regulations of the PHMSA affect the design, construction, operation,
maintenance, integrity, safety and security of natural gas distribution
and transmission systems.
Regulations of the FERC and the state gas utility commissions govern
access to regulated natural gas and other data by nonregulated entities and
services provided between regulated and nonregulated energy affiliates. These
regulations affect the activities of nonregulated affiliates with Gas Utilities and
Infrastructure.
Environmental
Gas Utilities and Infrastructure is subject to the jurisdiction of the EPA
and state and local environmental agencies. For a discussion of environmental
regulation, see “Environmental Matters” in this section. See “Other Matters”
section of Management’s Discussion and Analysis for a discussion about
potential Global Climate Change legislation and other EPA regulations under
development and the potential impacts such legislation and regulation could
have on Duke Energy’s operations.
12
PART I COMMERCIAL RENEWABLES
Commercial Renewables primarily acquires, develops, builds, operates
and owns wind and solar renewable generation throughout the continental
U.S. The portfolio includes nonregulated renewable energy and energy storage
businesses. 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, See Note 2 to the Consolidated Financial Statements,
“Acquisitions and Dispositions,” for additional information.
Commercial Renewables’ renewable energy includes utility-scale wind
and solar generation assets, distributed solar generation assets, distributed fuel
cell assets and a battery storage project, which total 2,282 MW across 19 states
from 22 wind facilities, 126 solar projects, 11 fuel cell locations and one battery
storage facility. Revenues are primarily generated by selling the power produced
from renewable generation through long-term contracts to utilities, electric
cooperatives, municipalities and corporate customers. In most instances,
these customers have obligations under state-mandated renewable energy
portfolio standards or similar state or local renewable energy goals. Energy and
renewable energy credits generated by wind and solar projects are generally
sold at contractual prices. The following map shows the locations of renewable
generation facilities of which Commercial Renewables has an ownership interest
as of December 31, 2019.
Solar and Wind
As eligible projects are placed in service, Commercial Renewables
recognizes either PTCs as power is generated by wind projects over 10 years or
ITCs when the renewable solar, fuel cells or wind project achieves commercial
availability. ITCs are recognized over the useful life of the asset as a reduction
to depreciation expense. Benefits of the tax basis adjustment due to the ITC
are recognized in income in the year of commercial availability. The ITC is being
phased down from the current 2019 rate of 30% to a permanent 10% rate if
construction begins after 2021. The PTC is being phased out and wind turbines
will earn 10 years of PTCs at phased-out rates if construction began in 2017
through 2020.
As part of its growth strategy, Commercial Renewables has expanded its
investment portfolio through the addition of distributed solar companies and
projects, energy storage systems and energy management solutions specifically
tailored to commercial businesses. These investments include REC Solar,
a California-based provider of solar installations for retail, manufacturing,
agriculture, technology, government and nonprofit customers across the U.S.
and Phoenix Energy Technologies Inc., a California-based provider of enterprise
energy management and information software to commercial businesses.
Commercial Renewables has entered into agreements for certain
of its generating assets that are held by LLCs whose members include a
noncontrolling tax equity investor. The allocation of tax attributes and cash
flows to the tax equity investor are governed by the provisions of the LLC
agreements. The GAAP earnings allocations to the tax equity investors can
result in variability in earnings to Duke Energy. As part of its growth strategy,
Commercial Renewables expects to enter into these arrangements for future
generating assets.
For additional information on Commercial Renewables’ generation
facilities, see Item 2, “Properties.”
Market Environment and Competition
Commercial Renewables primarily competes for wholesale contracts for
the generation and sale of electricity from generation assets it either develops
or acquires and owns. The market price of commodities and services, along
with the quality and reliability of services provided, drive competition in the
wholesale energy business. The number and type of competitors may vary
based on location, generation type and project size. Commercial Renewables’
main competitors include other nonregulated generators and wholesale power
providers.
Sources of Electricity
Commercial Renewables relies on wind, solar, fuel cells and battery
resources for its generation of electric energy.
13
PART I Regulation
Commercial Renewables is subject to regulation at the federal level,
primarily from the FERC. Regulations of the FERC govern access to regulated
market information by nonregulated entities and services provided between
regulated and nonregulated utilities.
OTHER
The remainder of Duke Energy’s operations is presented as Other. While
it is not a business segment, Other primarily includes interest expense on
holding company debt, unallocated corporate costs including costs to achieve
strategic acquisitions, amounts related to certain companywide initiatives and
contributions made to the Duke Energy Foundation. Other also includes Bison
and an investment in NMC.
The Duke Energy Foundation is a nonprofit organization funded by Duke
Energy shareholders that makes charitable contributions to selected nonprofits
and government subdivisions.
Bison, a wholly owned subsidiary of Duke Energy, is a captive insurance
company with the principal activity of providing Duke Energy subsidiaries with
Information about Our Executive Officers
indemnification for financial losses primarily related to property, workers’
compensation and general liability.
Duke Energy owns a 17.5% equity interest in NMC. The joint venture
company has production facilities in Jubail, Saudi Arabia, where it manufactures
certain petrochemicals and plastics. The company annually produces
approximately 1 million metric tons each of MTBE and methanol and has the
capacity to produce 50,000 metric tons of polyacetal. The main feedstocks to
produce these products are natural gas and butane. Duke Energy records the
investment activity of NMC using the equity method of accounting and retains
25% of NMC’s board of directors’ representation and voting rights.
Employees
On December 31, 2019, Duke Energy had a total of 28,793 employees
on its payroll. The total includes 5,399 employees who are represented by
labor unions under various collective bargaining agreements that generally
cover wages, benefits, working practices, and other terms and conditions of
employment.
The following table sets forth the individuals who currently serve as executive officers. Executive officers serve until their successors are duly elected or appointed.
Name
Lynn J. Good
Steven K. Young
Melissa H. Anderson
Douglas F Esamann
Kodwo Ghartey-Tagoe
Dwight L. Jacobs
Dhiaa M. Jamil
Julia S. Janson
Brian D. Savoy
Henry K. Sideris
Age(a)
Current and Recent Positions Held
60
61
55
62
56
54
63
54
44
49
Chairman, President and Chief Executive Officer. Ms. Good was elected as Chairman of the Board, effective January 1, 2016, and assumed
her position as President and Chief Executive Officer in July 2013. Prior to that, she served as Executive Vice President and Chief Financial
Officer since 2009.
Executive Vice President and Chief Financial Officer. Mr. Young assumed his current position in August 2013. Prior to that, he served as
Vice President, Chief Accounting Officer and Controller, assuming the role of Chief Accounting Officer in July 2012 and the role of Controller in
December 2006.
Executive Vice President and Chief Human Resources Officer. Ms. Anderson assumed her position in January 2015 and had responsibility for
the Administration services organization from May 2016 until October 2019. Prior to joining Duke Energy, she served as Senior Vice President of
Human Resources at Domtar Inc. since 2010.
Executive Vice President, Energy Solutions and President, Midwest/Florida Regions and Natural Gas Business. Mr. Esamann assumed
his current position in October 2019, was Executive Vice President, Energy Solutions and President, Midwest and Florida Regions since
September 2016 and was Executive Vice President and President, Midwest and Florida Regions since June 2015. Prior to that, he served as
President, Duke Energy Indiana since November 2010.
Executive Vice President and Chief Legal Officer. Mr. Ghartey-Tagoe assumed the position of Executive Vice President and Chief Legal Officer in
October 2019 after serving as President, South Carolina since 2017. Mr. Ghartey-Tagoe joined Duke Energy in 2002 and has held numerous management
positions in Duke Energy’s Legal Department, including Duke Energy's Senior Vice President of State and Federal Regulatory Legal Support.
Senior Vice President, Chief Accounting Officer, Tax and Controller. Mr. Jacobs has served as Senior Vice President, Chief Accounting
Officer, Tax and Controller since January 1, 2019. Prior to that, he served as Senior Vice President, Chief Accounting Officer and Controller since
June 1, 2018. Prior to that, he served as Senior Vice President, Financial Planning & Analysis since February 2016 and as Chief Risk Officer
since July 2014. Prior to his role as Chief Risk Officer, Mr. Jacobs served as Vice President, Rates & Regulatory Strategy since May 2010.
Executive Vice President and Chief Operating Officer. Mr. Jamil assumed the role of Chief Operating Officer in May 2016. Prior to his current
position, he held the title Executive Vice President and President, Regulated Generation and Transmission since June 2015. Prior to that, he
served as Executive Vice President and President, Regulated Generation since August 2014. He served as Executive Vice President and President
of Duke Energy Nuclear from March 2013 to August 2014, and was Chief Nuclear Officer from February 2008 to February 2013.
Executive Vice President, External Affairs and President, Carolinas Region. Ms. Janson has held the position of Executive Vice President,
External Affairs and President, Carolinas Region since October 2019. Prior to that, she held the position of Executive Vice President, External
Affairs and Chief Legal Officer since November 2018. She originally assumed the position of Executive Vice President, Chief Legal Officer and
Corporate Secretary in December 2012, and then assumed the responsibilities for External Affairs in February 2016.
Senior Vice President, Chief Transformation and Administrative Officer. Mr. Savoy assumed his current position in October 2019. Prior to
that, he served as Senior Vice President, Business Transformation and Technology since May 2016; Senior Vice President, Controller and Chief
Accounting Officer from September 2013 to May 2016; Director, Forecasting and Analysis from 2009 to September 2013; and Vice President and
Controller of the Commercial Power segment from 2006 to 2009.
Senior Vice President, Customer Experience and Services. Mr. Sideris assumed his current position in October 2019. Prior to that, he served
as Senior Vice President and Chief Distribution Officer since June 2018; State President, Florida from January 2017 to June 2018; Senior Vice
President of Environmental Health and Safety from August 2014 to January 2017; and Vice President of Power Generations for the Company's
Fossil/Hydro Operations in the western portions of North Carolina and South Carolina from July 2012 to August 2014.
(a) The ages of the officers provided are as of December 31, 2019.
14
PART I There are no family relationships between any of the executive officers,
nor any arrangement or understanding between any executive officer and any
other person involved in officer selection.
position. However, if and when such statutes and regulations become effective,
the Duke Energy Registrants will seek appropriate regulatory recovery of costs to
comply within its regulated operations.
Environmental Matters
DUKE ENERGY CAROLINAS
The Duke Energy Registrants are subject to federal, state and local laws
and regulations with regard to air and water quality, hazardous and solid waste
disposal and other environmental matters. Environmental laws and regulations
affecting the Duke Energy Registrants include, but are not limited to:
• The Clean Air Act, as well as state laws and regulations impacting
air emissions, including State Implementation Plans related to
existing and new national ambient air quality standards for ozone and
particulate matter. Owners and/or operators of air emission sources
are responsible for obtaining permits and for annual compliance and
reporting.
• The CWA, which requires permits for facilities that discharge
wastewaters into navigable waters.
• The Comprehensive Environmental Response, Compensation and
Liability Act, which can require any individual or entity that currently
owns or in the past owned or operated a disposal site, as well as
transporters or generators of hazardous substances sent to a disposal
site, to share in remediation costs.
• The National Environmental Policy Act, which requires federal agencies
to consider potential environmental impacts in their permitting and
licensing decisions, including siting approvals.
• Coal Ash Act, as amended, which establishes requirements regarding
the use and closure of existing ash basins, the disposal of ash at active
coal plants and the handling of surface water and groundwater impacts
from ash basins in North Carolina.
• The Solid Waste Disposal Act, as amended by the RCRA, which
creates a framework for the proper management of hazardous and
nonhazardous solid waste; classifies CCR as nonhazardous waste; and
establishes standards for landfill and surface impoundment placement,
design, operation and closure, groundwater monitoring, corrective
action, and post-closure care.
• The Toxic Substances Control Act , which gives EPA the authority to
require reporting, recordkeeping and testing requirements, and to place
restrictions relating to chemical substances and/or mixtures, including
polychlorinated biphenyls.
• The ACE rule, which will require states to develop CO2 reduction plans
based on efficiency (heat rate) improvements at coal-fired power plants.
For more information on environmental matters, see Notes 5
and 9 to the Consolidated Financial Statements, “Commitments and
Contingencies – Environmental” and “Asset Retirement Obligations,”
respectively, and the “Other Matters” section of Management’s Discussion
and Analysis. Except as otherwise described in these sections, costs to comply
with current federal, state and local provisions regulating the discharge of
materials into the environment or other potential costs related to protecting
the environment are incorporated into the routine cost structure of our various
business segments and are not expected to have a material adverse effect
on the competitive position, consolidated results of operations, cash flows
or financial position of the Duke Energy Registrants.
The “Other Matters” section of Management’s Discussion and Analysis
includes an estimate of future capital expenditures required to comply with
environmental regulations and a discussion of Global Climate Change including
the potential impact of current and future legislation related to GHG emissions
on the Duke Energy Registrants’ operations. Recently passed and potential
future environmental statutes and regulations could have a significant impact
on the Duke Energy Registrants’ results of operations, cash flows or financial
15
Duke Energy Carolinas is a regulated public utility primarily engaged in
the generation, transmission, distribution and sale of electricity in portions of
North Carolina and South Carolina. Duke Energy Carolinas’ service area covers
approximately 24,000 square miles and supplies electric service to 2.7 million
residential, commercial and industrial customers. For information about Duke
Energy Carolinas’ generating facilities, see Item 2, “Properties.” Duke Energy
Carolinas is subject to the regulatory provisions of the NCUC, PSCSC, NRC
and FERC.
Substantially all of Duke Energy Carolinas’ operations are regulated
and qualify for regulatory accounting. Duke Energy Carolinas operates one
reportable business segment, Electric Utilities and Infrastructure. For additional
information regarding this business segment, including financial information,
see Note 3 to the Consolidated Financial Statements, “Business Segments.”
PROGRESS ENERGY
Progress Energy is a public utility holding company primarily engaged in
the regulated electric utility business and is subject to regulation by the FERC.
Progress Energy conducts operations through its wholly owned subsidiaries,
Duke Energy Progress and Duke Energy Florida. When discussing Progress
Energy’s financial information, it necessarily includes the results of Duke Energy
Progress and Duke Energy Florida.
Substantially all of Progress Energy’s operations are regulated and qualify
for regulatory accounting. Progress Energy operates one reportable business
segment, Electric Utilities and Infrastructure. For additional information
regarding this business segment, including financial information, see Note 3 to
the Consolidated Financial Statements, “Business Segments.”
DUKE ENERGY PROGRESS
Duke Energy Progress is a regulated public utility primarily engaged in
the generation, transmission, distribution and sale of electricity in portions
of North Carolina and South Carolina. Duke Energy Progress’ service area
covers approximately 29,000 square miles and supplies electric service to
approximately 1.6 million residential, commercial and industrial customers.
For information about Duke Energy Progress’ generating facilities, see Item 2,
“Properties.” Duke Energy Progress is subject to the regulatory provisions of the
NCUC, PSCSC, NRC and FERC.
Substantially all of Duke Energy Progress’ operations are regulated
and qualify for regulatory accounting. Duke Energy Progress operates one
reportable business segment, Electric Utilities and Infrastructure. For additional
information regarding this business segment, including financial information,
see Note 3 to the Consolidated Financial Statements, “Business Segments.”
DUKE ENERGY FLORIDA
Duke Energy Florida is a regulated public utility primarily engaged in
the generation, transmission, distribution and sale of electricity in portions of
Florida. Duke Energy Florida’s service area covers approximately 13,000 square
miles and supplies electric service to approximately 1.8 million residential,
commercial and industrial customers. For information about Duke Energy
Florida’s generating facilities, see Item 2, “Properties.” Duke Energy Florida is
subject to the regulatory provisions of the FPSC, NRC and FERC.
Substantially all of Duke Energy Florida’s operations are regulated
and qualify for regulatory accounting. Duke Energy Florida operates one
reportable business segment, Electric Utilities and Infrastructure. For additional
information regarding this business segment, including financial information,
see Note 3 to the Consolidated Financial Statements, “Business Segments.”
PART I DUKE ENERGY OHIO
ITEM 1A. RISK FACTORS
Duke Energy Ohio is a regulated public utility primarily engaged in the
transmission and distribution of electricity in portions of Ohio and Kentucky,
in the generation and sale of electricity in portions of Kentucky and the
transportation and sale of natural gas in portions of Ohio and Kentucky. Duke
Energy Ohio also conducts competitive auctions for retail electricity supply in
Ohio whereby recovery of the energy price is from retail customers. Operations
in Kentucky are conducted through its wholly owned subsidiary, Duke Energy
Kentucky. References herein to Duke Energy Ohio include Duke Energy Ohio and
its subsidiaries, unless otherwise noted. Duke Energy Ohio is subject to the
regulatory provisions of the PUCO, KPSC, PHMSA and FERC.
Duke Energy Ohio’s service area covers approximately 3,000 square miles
and supplies electric service to approximately 870,000 residential, commercial
and industrial customers and provides transmission and distribution services
for natural gas to approximately 542,000 customers. For information about Duke
Energy Ohio’s generating facilities, see Item 2, “Properties.”
KO Transmission, a wholly owned subsidiary of Duke Energy Ohio, is an
interstate pipeline company engaged in the business of transporting natural
gas and is subject to the rules and regulations of FERC. KO Transmission’s
90-mile pipeline supplies natural gas to Duke Energy Ohio and interconnects
with the Columbia Gulf Transmission pipeline and Tennessee Gas Pipeline.
An approximately 70-mile portion of KO Transmission’s pipeline facilities is
co-owned by Columbia Gas Transmission Corporation.
Substantially all of Duke Energy Ohio’s operations are regulated and
qualify for regulatory accounting. Duke Energy Ohio has two reportable
segments, Electric Utilities and Infrastructure and Gas Utilities and
Infrastructure. For additional information on these business segments, including
financial information, see Note 3 to the Consolidated Financial Statements,
“Business Segments.”
DUKE ENERGY INDIANA
Duke Energy Indiana is a regulated public utility primarily engaged in
the generation, transmission, distribution and sale of electricity in portions of
Indiana. Duke Energy Indiana’s service area covers 23,000 square miles and
supplies electric service to 850,000 residential, commercial and industrial
customers. For information about Duke Energy Indiana’s generating facilities,
see Item 2, “Properties.” Duke Energy Indiana is subject to the regulatory
provisions of the IURC and FERC.
Substantially all of Duke Energy Indiana’s operations are regulated
and qualify for regulatory accounting. Duke Energy Indiana operates one
reportable business segment, Electric Utilities and Infrastructure. For additional
information regarding this business segment, including financial information,
see Note 3 to the Consolidated Financial Statements, “Business Segments.”
PIEDMONT
Piedmont is a regulated public utility primarily engaged in the distribution
of natural gas to over 1 million residential, commercial, industrial and power
generation customers in portions of North Carolina, South Carolina and
Tennessee, including customers served by municipalities who are wholesale
customers. For information about Piedmont’s natural gas distribution facilities,
see Item 2, “Properties.” Piedmont is subject to the regulatory provisions of the
NCUC, PSCSC, TPUC, PHMSA and FERC.
Substantially all of Piedmont’s operations are regulated and qualify for
regulatory accounting. Piedmont operates one reportable business segment, Gas
Utilities and Infrastructure. For additional information regarding this business
segment, including financial information, see Note 3 to the Consolidated
Financial Statements, “Business Segments.”
In addition to other disclosures within this Form 10-K, including
“Management’s Discussion and Analysis of Financial Condition and Results
of Operations – Matters Impacting Future Results” for each registrant in
Item 7, and other documents filed with the SEC from time to time, the following
factors should be considered in evaluating Duke Energy and its subsidiaries.
Such factors could affect actual results of operations and cause results to
differ substantially from those currently expected or sought. Unless otherwise
indicated, risk factors discussed below generally relate to risks associated with
all of the Duke Energy Registrants. Risks identified at the Subsidiary Registrant
level are generally applicable to Duke Energy.
BUSINESS STRATEGY RISKS
Duke Energy’s future results could be adversely affected if it is unable to
implement its business strategy.
Duke Energy’s results of operations depend, in significant part, on the
extent to which it can implement its business strategy successfully. Duke
Energy’s strategy, which includes transforming the customer experience,
modernizing the energy grid, generating cleaner energy and working to achieve
net-zero carbon emissions by 2050, expanding the natural gas infrastructure,
modernizing the regulatory construct and digital transformation, is subject to
business, economic and competitive uncertainties and contingencies, many of
which are beyond its control. As a consequence, Duke Energy may not be able
to fully implement or realize the anticipated results of its strategy.
REGULATORY, LEGISLATIVE AND LEGAL RISKS
The Duke Energy Registrants’ regulated utility revenues, earnings and
results are dependent on state legislation and regulation that affect
electric generation, electric and natural gas transmission, distribution and
related activities, which may limit their ability to recover costs.
The Duke Energy Registrants’ regulated electric and natural gas utility
businesses are regulated on a cost-of-service/rate-of-return basis subject to
statutes and regulatory commission rules and procedures of North Carolina,
South Carolina, Florida, Ohio, Tennessee, Indiana and Kentucky. If the Duke
Energy Registrants’ regulated utility earnings exceed the returns established
by the state utility commissions, retail electric and natural gas rates may
be subject to review and possible reduction by the commissions, which may
decrease the Duke Energy Registrants’ earnings. Additionally, if regulatory
bodies do not allow recovery of costs incurred in providing service, or do not do
so on a timely basis, the Duke Energy Registrants’ earnings could be negatively
impacted.
If legislative and regulatory structures were to evolve in such a way that
the Duke Energy Registrants’ exclusive rights to serve their regulated customers
were eroded, their earnings could be negatively impacted. Federal and state
regulations, laws and other efforts designed to promote and expand the use
of EE 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 and an increase in customer net energy
metering, which allows customers with private solar to receive bill credits for
surplus power at the full retail amount. Over time, customer adoption of these
technologies and increased EE could result in excess generation resources as
well as stranded costs if Duke Energy is not able to fully recover the costs and
investment in generation.
16
PART I State regulators have approved various mechanisms to stabilize natural
gas utility margins, including margin decoupling in North Carolina and rate
stabilization in South Carolina. State regulators have approved other margin
stabilizing mechanisms that, for example, allow for recovery of margin losses
associated with negotiated transactions designed to retain large volume
customers that could use alternative fuels or that may otherwise directly access
natural gas supply through their own connection to an interstate pipeline. If
regulators decided to discontinue the Duke Energy Registrants’ use of tariff
mechanisms, it would negatively impact results of operations, financial position
and cash flows. In addition, regulatory authorities also review whether natural
gas costs are prudently incurred and can disallow the recovery of a portion
of natural gas costs that the Duke Energy Registrants seek to recover from
customers, which would adversely impact earnings.
The rates that the Duke Energy Registrants’ regulated utility businesses
are allowed to charge are established by state utility commissions in rate
case proceedings, which may limit their ability to recover costs and earn
an appropriate return on investment.
The rates that the Duke Energy Registrants’ regulated utility business are
allowed to charge significantly influences the results of operations, financial
position and cash flows of the Duke Energy Registrants. The regulation of the
rates that the regulated utility businesses charge customers is determined,
in large part, by state utility commissions in rate case proceedings. Negative
decisions made by these regulators, or by any court on appeal of a rate
case proceeding, could have a material adverse effect on the Duke Energy
Registrants’ results of operations, financial position or cash flows and affect the
ability of the Duke Energy Registrants to recover costs and an appropriate return
on the significant infrastructure investments being made.
Deregulation or restructuring in the electric industry may result in
increased competition and unrecovered costs that could adversely affect
the Duke Energy Registrants’ results of operations, financial position or
cash flows and their utility businesses.
Increased competition resulting from deregulation or restructuring
legislation could have a significant adverse impact on the Duke Energy
Registrants’ results of operations, financial position or cash flows. If the
retail jurisdictions served by the Duke Energy Registrants become subject to
deregulation, the impairment of assets, loss of retail customers, lower profit
margins or increased costs of capital, and recovery of stranded costs could have
a significant adverse financial impact on the Duke Energy Registrants. Stranded
costs primarily include the generation assets of the Duke Energy Registrants
whose value in a competitive marketplace may be less than their current book
value, as well as above-market purchased power commitments from QFs from
whom the Duke Energy Registrants are legally obligated to purchase energy
at an avoided cost rate under PURPA. The Duke Energy Registrants cannot
predict the extent and timing of entry by additional competitors into the electric
markets. The Duke Energy Registrants cannot predict if or when they will be
subject to changes in legislation or regulation, nor can they predict the impact of
these changes on their results of operations, financial position or cash flows.
The Duke Energy Registrants’ businesses are subject to extensive federal
regulation and a wide variety of laws and governmental policies, including
taxes, that may change over time in ways that affect operations and costs.
The Duke Energy Registrants are subject to regulations under a wide
variety of U.S. federal and state regulations and policies, including by FERC,
NRC, EPA and various other federal agencies as well as the North American
Electric Reliability Corporation. Regulation affects almost every aspect of the
Duke Energy Registrants’ businesses, including, among other things, their ability
to: take fundamental business management actions; determine the terms and
rates of transmission and distribution services; make acquisitions; issue equity
17
or debt securities; engage in transactions with other subsidiaries and affiliates;
and pay dividends upstream to the Duke Energy Registrants. Changes to federal
regulations are continuous and ongoing. There can be no assurance that laws,
regulations and policies will not be changed in ways that result in material
modifications of business models and objectives or affect returns on investment
by restricting activities and products, subjecting them to escalating costs,
causing delays, or prohibiting them outright.
The Duke Energy Registrants are subject to numerous environmental
laws and regulations requiring significant capital expenditures that can
increase the cost of operations, and which may impact or limit business
plans, or cause exposure to environmental liabilities.
The Duke Energy Registrants are subject to numerous environmental laws
and regulations affecting many aspects of their present and future operations,
including CCRs, air emissions, water quality, wastewater discharges, solid
waste and hazardous waste. These laws and regulations can result in
increased capital, operating and other costs. These laws and regulations
generally require the Duke Energy Registrants to obtain and comply with a wide
variety of environmental licenses, permits, inspections and other approvals.
Compliance with environmental laws and regulations can require significant
expenditures, including expenditures for cleanup costs and damages arising
from contaminated properties. Failure to comply with environmental regulations
may result in the imposition of fines, penalties and injunctive measures
affecting operating assets. The steps the Duke Energy Registrants could be
required to take to ensure their facilities are in compliance could be prohibitively
expensive. As a result, the Duke Energy Registrants may be required to shut
down or alter the operation of their facilities, which may cause the Duke Energy
Registrants to incur losses. Further, the Duke Energy Registrants may not be
successful in recovering capital and operating costs incurred to comply with
new environmental regulations through existing regulatory rate structures
and their contracts with customers. Also, the Duke Energy Registrants may
not be able to obtain or maintain from time to time all required environmental
regulatory approvals for their operating assets or development projects. Delays
in obtaining any required environmental regulatory approvals, failure to obtain
and comply with them or changes in environmental laws or regulations to more
stringent compliance levels could result in additional costs of operation for
existing facilities or development of new facilities being prevented, delayed or
subject to additional costs. Although it is not expected that the costs to comply
with current environmental regulations will have a material adverse effect on
the Duke Energy Registrants’ results of operations, financial position and cash
flows due to regulatory cost recovery, the Duke Energy Registrants are at risk
that the costs of complying with environmental regulations in the future will
have such an effect.
The EPA has enacted or proposed federal regulations governing the
management of cooling water intake structures, wastewater and CO2 emissions.
These regulations may require the Duke Energy Registrants to make additional
capital expenditures and increase operating and maintenance costs.
Duke Energy Carolinas and Duke Energy Progress are subject to the
terms of probation set out in judgments of the U.S. District Court for the Eastern
District of North Carolina on May 14, 2015. The judgments are based on events
and activities that took place prior to 2015. The terms of probation require the
companies to comply with certain environmental regulatory obligations related
to coal ash and subject the two companies to oversight by a Court Appointed
Monitor. If Duke Energy Carolinas or Duke Energy Progress failed to comply with
certain coal ash-related environmental laws and regulations or otherwise violated
the terms of probation, it could result in the imposition of additional penalties,
including the revocation of probation and re-prosecution of the underlying
violations. Although it is not expected that the companies will violate the terms of
probation or that additional material penalties would occur, a significant violation
of probation could have a material adverse effect on the Duke Energy Registrants’
reputation, results of operations, financial position and cash flows.
PART I The Duke Energy Registrants’ operations, capital expenditures and
financial results may be affected by regulatory changes related to the
impacts of global climate change.
There is continued concern, both nationally and internationally, about
climate change. The EPA and state regulators may adopt and implement
regulations to restrict emissions of GHGs to address global climate change.
Increased regulation of GHG emissions could impose significant additional costs
on the Duke Energy Registrants’ operations, their suppliers and customers.
Regulatory changes could also result in generation facilities to be retired early
and result in stranded costs if Duke Energy is not able to fully recover the costs
and investment in generation.
OPERATIONAL RISKS
The Duke Energy Registrants’ results of operations may be negatively
affected by overall market, economic and other conditions that are beyond
their control.
Sustained downturns or sluggishness in the economy generally affect the
markets in which the Duke Energy Registrants operate and negatively influence
operations. Declines in demand for electricity or natural gas as a result of
economic downturns in the Duke Energy Registrants’ regulated service territories
will reduce overall sales and lessen cash flows, especially as industrial
customers reduce production and, therefore, consumption of electricity and the
use of natural gas. Although the Duke Energy Registrants’ regulated electric
and natural gas businesses are subject to regulated allowable rates of return
and recovery of certain costs, such as fuel and purchased natural gas costs,
under periodic adjustment clauses, overall declines in electricity or natural gas
sold as a result of economic downturn or recession could reduce revenues and
cash flows, thereby diminishing results of operations. Additionally, prolonged
economic downturns that negatively impact the Duke Energy Registrants’ results
of operations and cash flows could result in future material impairment charges
to write-down the carrying value of certain assets, including goodwill, to their
respective fair values.
The Duke Energy Registrants also sell electricity into the spot market or
other competitive power markets on a contractual basis. With respect to such
transactions, the Duke Energy Registrants are not guaranteed any rate of return
on their capital investments through mandated rates, and revenues and results
of operations are likely to depend, in large part, upon prevailing market prices.
These market prices may fluctuate substantially over relatively short periods
of time and could reduce the Duke Energy Registrants’ revenues and margins,
thereby diminishing results of operations.
Factors that could impact sales volumes, generation of electricity and
market prices at which the Duke Energy Registrants are able to sell electricity
and natural gas are as follows:
• weather conditions, including abnormally mild winter or summer
weather that cause lower energy or natural gas usage for heating
or cooling purposes, as applicable, and periods of low rainfall that
decrease the ability to operate facilities in an economical manner;
• supply of and demand for energy commodities;
• transmission or transportation constraints or inefficiencies that impact
nonregulated energy operations;
• availability of competitively priced alternative energy sources, which
are preferred by some customers over electricity produced from coal,
nuclear or natural gas plants, and customer usage of energy-efficient
equipment that reduces energy demand;
• natural gas, crude oil and refined products production levels and prices;
• ability to procure satisfactory levels of inventory, such as coal, natural
gas and uranium; and
• capacity and transmission service into, or out of, the Duke Energy
Registrants’ markets.
Natural disasters or operational accidents may adversely affect the Duke
Energy Registrants’ operating results.
Natural disasters or other operational accidents within the company
or industry (such as forest fires, earthquakes, hurricanes or natural gas
transmission pipeline explosions) could have direct or indirect impacts to
the Duke Energy Registrants or to key contractors and suppliers. Further, the
generation of electricity and the transportation and storage of natural gas
involve inherent operating risks that may result in accidents involving serious
injury or loss of life, environmental damage or property damage. Such events
could impact the Duke Energy Registrants through changes to policies, laws
and regulations whose compliance costs have a significant impact on the Duke
Energy Registrants’ results of operations, financial position and cash flows.
In addition, if a serious operational accident were to occur, existing insurance
policies may not cover all of the potential exposures or the actual amount of
loss incurred. Any losses not covered by insurance, or any increases in the cost
of applicable insurance as a result of such accident, could have a material
adverse effect on the results of operations, financial position, cash flows and
reputation of the Duke Energy Registrants.
The reputation and financial condition of the Duke Energy Registrants
could be negatively impacted due to their obligations to comply with
federal and state regulations, laws, and other legal requirements that
govern the operations, assessments, storage, closure, remediation,
disposal and monitoring relating to CCR, the high costs and new
rate impacts associated with implementing these new CCR-related
requirements and the strategies and methods necessary to implement
these requirements in compliance with these legal obligations.
As a result of electricity produced for decades at coal-fired power plants,
the Duke Energy Registrants manage large amounts of CCR that are primarily
stored in dry storage within landfills or combined with water in other surface
impoundments, all in compliance with applicable regulatory requirements. A
CCR-related operational incident could have a material adverse impact on the
reputation and results of operations, financial position and cash flows of the
Duke Energy Registrants.
During 2015, EPA regulations were enacted related to the management
of CCR from power plants. These regulations classify CCR as nonhazardous
waste under the RCRA and apply to electric generating sites with new
and existing landfills and, new and existing surface impoundments, and
establish requirements regarding landfill design, structural integrity design
and assessment criteria for surface impoundments, groundwater monitoring,
protection and remedial procedures and other operational and reporting
procedures for the disposal and management of CCR. In addition to the
federal regulations, CCR landfills and surface impoundments will continue
to be regulated by existing state laws, regulations and permits, as well as
additional legal requirements that may be imposed in the future, such as the
settlement reached with the NCDEQ to excavate seven of the nine remaining
coal ash basins in North Carolina, and partially excavate the remaining two.
These federal and state laws, regulations and other legal requirements may
require or result in additional expenditures, including increased operating and
maintenance costs, which could affect the results of operations, financial
position and cash flows of the Duke Energy Registrants. The Duke Energy
Registrants will continue to seek full cost recovery for expenditures through the
normal ratemaking process with state and federal utility commissions, who
18
PART I permit recovery in rates of necessary and prudently incurred costs associated
with the Duke Energy Registrants’ regulated operations, and through other
wholesale contracts with terms that contemplate recovery of such costs,
although there is no guarantee of full cost recovery. In addition, the timing for
and amount of recovery of such costs could have a material adverse impact on
Duke Energy’s cash flows.
The Duke Energy Registrants have recognized significant AROs related to
these CCR-related requirements. Closure activities began in 2015 at the four
sites specified as high-priority by the Coal Ash Act and at the W.S. Lee Steam
Station site in South Carolina in connection with other legal requirements.
Excavation at these sites involves movement of CCR materials to off-site
locations for use as structural fill, to appropriate engineered off-site or on-site
lined landfills or conversion of the ash for beneficial use. Duke Energy has
completed excavation of coal ash regulated by the Coal Ash Act at three of the
four high priority sites. At other sites, planning and closure methods have been
studied and factored into the estimated retirement and management costs,
and closure activities have commenced. As the closure and CCR management
work progresses and final closure plans and corrective action measures are
developed and approved at each site, the scope and complexity of work and the
amount of CCR material could be greater than estimates and could, therefore,
materially increase compliance expenditures and rate impacts.
The Duke Energy Registrants’ results of operations, financial position and
cash flows may be negatively affected by a lack of growth or slower growth
in the number of customers, or decline in customer demand or number of
customers.
Growth in customer accounts and growth of customer usage each directly
influence demand for electricity and natural gas and the need for additional
power generation and delivery facilities. Customer growth and customer
usage are affected by several factors outside the control of the Duke Energy
Registrants, such as mandated EE measures, demand-side management goals,
distributed generation resources and economic and demographic conditions,
such as population changes, job and income growth, housing starts, new
business formation and the overall level of economic activity.
Certain regulatory and legislative bodies have introduced or are
considering requirements and/or incentives to reduce energy consumption
by certain dates. Additionally, technological advances driven by federal laws
mandating new levels of EE in end-use electric devices or other improvements
in or applications of technology could lead to declines in per capita energy
consumption.
Advances in distributed generation technologies that produce power,
including fuel cells, microturbines, wind turbines and solar cells, may reduce
the cost of alternative methods of producing power to a level competitive with
central power station electric production utilized by the Duke Energy Registrants.
Some or all of these factors could result in a lack of growth or decline in
customer demand for electricity or number of customers and may cause the
failure of the Duke Energy Registrants to fully realize anticipated benefits from
significant capital investments and expenditures, which could have a material
adverse effect on their results of operations, financial position and cash flows.
Furthermore, the Duke Energy Registrants currently have EE riders in place
to recover the cost of EE programs in North Carolina, South Carolina, Florida,
Indiana, Ohio and Kentucky. Should the Duke Energy Registrants be required
to invest in conservation measures that result in reduced sales from effective
conservation, regulatory lag in adjusting rates for the impact of these measures
could have a negative financial impact.
The Duke Energy Registrants’ operating results may fluctuate on a
seasonal and quarterly basis and can be negatively affected by changes
in weather conditions and severe weather, including extreme weather
conditions associated with climate change.
Electric power generation and natural gas distribution are generally
seasonal businesses. In most parts of the U.S., the demand for power peaks
during the warmer summer months, with market prices also typically peaking at
that time. In other areas, demand for power peaks during the winter. Demand for
natural gas peaks during the winter months. Further, extreme weather conditions
such as hurricanes, droughts, heat waves, winter storms and severe weather
associated with climate change could cause these seasonal fluctuations to be
more pronounced. As a result, the overall operating results of the Duke Energy
Registrants’ businesses may fluctuate substantially on a seasonal and quarterly
basis and thus make period-to-period comparison less relevant.
Sustained severe drought conditions could impact generation by
hydroelectric plants, as well as fossil and nuclear plant operations, as these
facilities use water for cooling purposes and for the operation of environmental
compliance equipment. Furthermore, destruction caused by severe weather
events, such as hurricanes, tornadoes, severe thunderstorms, snow and ice
storms, can result in lost operating revenues due to outages, property damage,
including downed transmission and distribution lines, and additional and
unexpected expenses to mitigate storm damage. The cost of storm restoration
efforts may not be fully recoverable through the regulatory process.
The Duke Energy Registrants’ sales may decrease if they are unable to gain
adequate, reliable and affordable access to transmission assets.
The Duke Energy Registrants depend on transmission and distribution
facilities owned and operated by utilities and other energy companies to deliver
electricity sold to the wholesale market. The FERC’s power transmission
regulations require wholesale electric transmission services to be offered on
an open-access, non-discriminatory basis. If transmission is disrupted, or if
transmission capacity is inadequate, the Duke Energy Registrants’ ability to sell
and deliver products may be hindered.
The different regional power markets have changing regulatory structures,
which could affect growth and performance in these regions. In addition, the
ISOs who oversee the transmission systems in regional power markets have
imposed in the past, and may impose in the future, price limitations and other
mechanisms to address volatility in the power markets. These types of price
limitations and other mechanisms may adversely impact the profitability of the
Duke Energy Registrants’ wholesale power marketing business.
Duke Energy may be unable to complete necessary or desirable pipeline
expansion or infrastructure development or maintenance projects, which
may prevent the Duke Energy Registrants from expanding the natural gas
business.
In order to serve current or new natural gas customers or expand the
service to existing customers, the Duke Energy Registrants need to maintain,
expand or upgrade distribution, transmission and/or storage infrastructure,
including laying new pipeline and building compressor stations. Duke Energy
Registrants have made significant investments in pipeline development projects,
which are being operated and constructed by third-party joint venture partners.
The Duke Energy Registrants must rely on their third-party joint venture
partners for proper construction management of the projects and are dependent
upon contractors for the successful and timely completion of the projects.
In addition, various factors, such as the inability to obtain required approval
from local, state and/or federal regulatory and governmental bodies, public
opposition to projects, adverse litigation rulings, inability to obtain adequate
financing, competition for labor and materials, construction delays, cost
overruns and the inability to negotiate acceptable agreements relating to rights
of way, construction or other material development components, may prevent or
delay the completion of projects or materially increase the cost of such projects,
which could have a material adverse effect on the results of operations and
financial position of Duke Energy.
19
PART I The availability of adequate interstate pipeline transportation capacity and
natural gas supply may decrease.
basis threat requirements. These increased costs could include additional
physical plant security and security personnel or additional capability following
a terrorist incident.
The Duke Energy Registrants purchase almost all of their natural gas
supply from interstate sources that must be transported to the applicable
service territories. Interstate pipeline companies transport the natural gas to
the Duke Energy Registrants’ systems under firm service agreements that are
designed to meet the requirements of their core markets. A significant disruption
to interstate pipelines capacity or reduction in natural gas supply due to events
including, but not limited to, operational failures or disruptions, hurricanes,
tornadoes, floods, freeze off of natural gas wells, terrorist or cyberattacks or
other acts of war or legislative or regulatory actions or requirements, including
remediation related to integrity inspections, could reduce the normal interstate
supply of natural gas and thereby reduce earnings. Moreover, if additional
natural gas infrastructure, including, but not limited to, exploration and drilling
rigs and platforms, processing and gathering systems, off-shore pipelines,
interstate pipelines and storage, cannot be built at a pace that meets demand,
then growth opportunities could be limited.
Fluctuations in commodity prices or availability may adversely affect
various aspects of the Duke Energy Registrants’ operations as well as their
results of operations, financial position and cash flows.
The Duke Energy Registrants are exposed to the effects of market
fluctuations in the price of natural gas, coal, fuel oil, nuclear fuel, electricity
and other energy-related commodities as a result of their ownership of
energy-related assets. Fuel costs are recovered primarily through cost-recovery
clauses, subject to the approval of state utility commissions.
Additionally, the Duke Energy Registrants are exposed to risk that
counterparties will not be able to fulfill their obligations. Disruption in the
delivery of fuel, including disruptions as a result of, among other things,
transportation delays, weather, labor relations, force majeure events or
environmental regulations affecting any of these fuel suppliers, could limit the
Duke Energy Registrants’ ability to operate their facilities. Should counterparties
fail to perform, the Duke Energy Registrants might be forced to replace the
underlying commitment at prevailing market prices possibly resulting in losses
in addition to the amounts, if any, already paid to the counterparties.
Certain of the Duke Energy Registrants’ hedge agreements may result in
the receipt of, or posting of, collateral with counterparties, depending on the
daily market-based calculation of financial exposure of the derivative positions.
Fluctuations in commodity prices that lead to the return of collateral received
and/or the posting of collateral with counterparties could negatively impact
liquidity. Downgrades in the Duke Energy Registrants’ credit ratings could lead
to additional collateral posting requirements. The Duke Energy Registrants
continually monitor derivative positions in relation to market price activity.
Potential terrorist activities, or military or other actions, could adversely
affect the Duke Energy Registrants’ businesses.
The continued threat of terrorism and the impact of retaliatory military
and other action by the U.S. and its allies may lead to increased political,
economic and financial market instability and volatility in prices for natural
gas and oil, which may have material adverse effects in ways the Duke Energy
Registrants cannot predict at this time. In addition, future acts of terrorism and
possible reprisals as a consequence of action by the U.S. and its allies could
be directed against companies operating in the U.S. Information technology
systems, transmission and distribution and generation facilities such as nuclear
plants could be potential targets of terrorist activities or harmful activities
by individuals or groups that could have a material adverse effect on Duke
Energy Registrants’ businesses. In particular, the Duke Energy Registrants
may experience increased capital and operating costs to implement increased
security for their information technology systems, transmission and distribution
and generation facilities, including nuclear power plants under the NRC’s design
The failure of Duke Energy information technology systems, or the failure
to enhance existing information technology systems and implement
new technology, could adversely affect the Duke Energy Registrants’
businesses.
Duke Energy’s operations are dependent upon the proper functioning of its
internal systems, including the information technology systems that support our
underlying business processes. Any significant failure or malfunction of such
information technology systems may result in disruptions of our operations. In
the ordinary course of business, we rely on information technology systems,
including the internet and third-party hosted services, to support a variety
of business processes and activities and to store sensitive data, including
(i) intellectual property, (ii) proprietary business information, (iii) personally
identifiable information of our customers, employees, retirees and shareholders
and (iv) data with respect to invoicing and the collection of payments,
accounting, procurement, and supply chain activities. Our information
technology systems are dependent upon global communications and cloud
service providers, as well as their respective vendors, many of whom have at
some point experienced significant system failures and outages in the past
and may experience such failures and outages in the future. These providers’
systems are susceptible to cybersecurity and data breaches, outages from fire,
floods, power loss, telecommunications failures, break-ins and similar events.
Failure to prevent or mitigate data loss from system failures or outages could
materially affect the results of operations, financial position and cash flows of
the Duke Energy Registrants.
In addition to maintaining our current information technology systems,
Duke Energy believes the digital transformation of its business is key to
driving internal efficiencies as well as providing additional capabilities
to customers. Duke Energy’s information technology systems are critical to
cost-effective, reliable daily operations and our ability to effectively serve our
customers. We expect our customers to continue to demand more sophisticated
technology-driven solutions and we must enhance or replace our information
technology systems in response. This involves significant development and
implementation costs to keep pace with changing technologies and customer
demand. If we fail to successfully implement critical technology, or if it does not
provide the anticipated benefits or meet customer demands, such failure could
materially adversely affect our business strategy as well as impact the results
of operations, financial position and cash flows of the Duke Energy Registrants.
Cyberattacks and data security breaches could adversely affect the Duke
Energy Registrants’ businesses.
Cybersecurity risks have increased in recent years as a result of the
proliferation of new technologies and the increased sophistication, magnitude
and frequency of cyberattacks and data security breaches. Duke Energy relies
on the continued operation of sophisticated digital information technology
systems and network infrastructure, which are part of an interconnected
regional grid. Additionally, connectivity to the internet continues to increase
through grid modernization and other operational excellence initiatives. Because
of the critical nature of the infrastructure, increased connectivity to the internet
and technology systems’ inherent vulnerability to disability or failures due
to hacking, viruses, acts of war or terrorism or other types of data security
breaches, the Duke Energy Registrants face a heightened risk of cyberattack
from foreign or domestic sources and have been subject, and will likely continue
to be subject, to attempts to gain unauthorized access to information and/or
information systems or to disrupt utility operations through computer viruses
and phishing attempts either directly or indirectly through its material vendors
or related third parties. In the event of a significant cybersecurity breach on
either the Duke Energy Registrants or with one of our material vendors or related
20
PART I third parties, the Duke Energy Registrants could (i) have business operations
disrupted, including the disruption of the operation of our assets and the power
grid, theft of confidential company, employee, retiree, shareholder, vendor or
customer information, and general business systems and process interruption
or compromise, including preventing the Duke Energy Registrants from servicing
customers, collecting revenues or the recording, processing and/or reporting
financial information correctly, (ii) experience substantial loss of revenues,
repair and restoration costs, penalties and costs for lack of compliance with
relevant regulations, implementation costs for additional security measures to
avert future cyberattacks and other financial loss and (iii) be subject to increased
regulation, litigation and reputational damage. While Duke Energy maintains
insurance relating to cybersecurity events, such insurance is subject to a number
of exclusions and may be insufficient to offset any losses, costs or damage
experienced. Also, the market for cybersecurity insurance is relatively new and
coverage available for cybersecurity events is evolving as the industry matures.
The Duke Energy Registrants are subject to standards enacted by the
North American Electric Reliability Corporation and enforced by FERC regarding
protection of the physical and cyber security of critical infrastructure assets
required for operating North America’s bulk electric system. The Duke Energy
Registrants are also subject to regulations set by the Nuclear Regulatory
Commission regarding the protection of digital computer and communication
systems and networks required for the operation of nuclear power plants.
While the Duke Energy Registrants believe they are in compliance with such
standards and regulations, the Duke Energy Registrants have from time to time
been, and may in the future be, found to be in violation of such standards and
regulations. In addition, compliance with or changes in the applicable standards
and regulations may subject the Duke Energy Registrants to higher operating
costs and/or increased capital expenditures as well as substantial fines for
non-compliance.
Failure to attract and retain an appropriately qualified workforce could
unfavorably impact the Duke Energy Registrants’ results of operations.
Certain events, such as an aging workforce, mismatch of skill set or
complement to future needs, or unavailability of contract resources may lead
to operating challenges and increased costs. The challenges include lack
of resources, loss of knowledge base and the lengthy time required for skill
development. In this case, costs, including costs for contractors to replace
employees, productivity costs and safety costs, may increase. Failure to hire and
adequately train replacement employees, including the transfer of significant
internal historical knowledge and expertise to new employees, or future
availability and cost of contract labor may adversely affect the ability to manage
and operate the business, especially considering the workforce needs associated
with nuclear generation facilities and new skills required to operate a modernized,
technology-enabled power grid. If the Duke Energy Registrants are unable to
successfully attract and retain an appropriately qualified workforce, their results
of operations, financial position and cash flows could be negatively affected.
Duke Energy Ohio’s and Duke Energy Indiana’s membership in an RTO
presents risks that could have a material adverse effect on their results of
operations, financial position and cash flows.
The rules governing the various regional power markets may change,
which could affect Duke Energy Ohio’s and Duke Energy Indiana’s costs and/or
revenues. To the degree Duke Energy Ohio and Duke Energy Indiana incur
significant additional fees and increased costs to participate in an RTO, their
results of operations may be impacted. Duke Energy Ohio and Duke Energy
Indiana may be allocated a portion of the cost of transmission facilities built
by others due to changes in RTO transmission rate design. Duke Energy Ohio
and Duke Energy Indiana may be required to expand their transmission system
according to decisions made by an RTO rather than their own internal planning
process. In addition, RTOs have been developing rules associated with the
allocation and methodology of assigning costs associated with improved
transmission reliability, reduced transmission congestion and firm transmission
rights that may have a financial impact on the results of operations, financial
position and cash flows of Duke Energy Ohio and Duke Energy Indiana.
As members of an RTO, Duke Energy Ohio and Duke Energy Indiana are
subject to certain additional risks, including those associated with the allocation
among RTO members, of losses caused by unreimbursed defaults of other
participants in the RTO markets and those associated with complaint cases filed
against an RTO that may seek refunds of revenues previously earned by RTO
members.
The Duke Energy Registrants may not recover costs incurred to begin
construction on projects that are canceled.
Duke Energy’s long-term strategy requires the construction of new
projects, either wholly owned or partially owned, which involve a number of
risks, including construction delays, nonperformance by equipment and other
third-party suppliers, and increases in equipment and labor costs. To limit the
risks of these construction projects, the Duke Energy Registrants enter into
equipment purchase orders and construction contracts and incur engineering
and design service costs in advance of receiving necessary regulatory approvals
and/or siting or environmental permits. If any of these projects are canceled for
any reason, including failure to receive necessary regulatory approvals and/or
siting or environmental permits, significant cancellation penalties under the
equipment purchase orders and construction contracts could occur. In addition,
if any construction work or investments have been recorded as an asset, an
impairment may need to be recorded in the event the project is canceled.
The Duke Energy Registrants are subject to risks associated with their
ability to obtain adequate insurance at acceptable costs.
The financial condition of some insurance companies, actual or
threatened physical or cyber attacks, and natural disasters, among other things,
could have disruptive effects on insurance markets. The availability of insurance
covering risks that the Duke Energy Registrants and their respective competitors
typically insure against may decrease, and the insurance that the Duke Energy
Registrants are able to obtain may have higher deductibles, higher premiums,
and more restrictive policy terms. Further, the insurance policies may not cover
all of the potential exposures or the actual amount of loss incurred. Any losses
not covered by insurance, or any increases in the cost of applicable insurance,
could adversely affect the results of operations, financial position or cash flows
of the affected Duke Energy Registrant.
NUCLEAR GENERATION RISKS
Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida
may incur substantial costs and liabilities due to their ownership and
operation of nuclear generating facilities.
Ownership interests in and operation of nuclear stations by Duke Energy
Carolinas, Duke Energy Progress and Duke Energy Florida subject them to various
risks. These risks include, among other things: the potential harmful effects on
the environment and human health resulting from the current or past operation
of nuclear facilities and the storage, handling and disposal of radioactive
materials; limitations on the amounts and types of insurance commercially
available to cover losses that might arise in connection with nuclear operations;
and uncertainties with respect to the technological and financial aspects of
decommissioning nuclear plants at the end of their licensed lives.
Ownership and operation of nuclear generation facilities requires
compliance with licensing and safety-related requirements imposed by the NRC.
In the event of non-compliance, the NRC may increase regulatory oversight,
impose fines or shut down a unit depending upon its assessment of the severity
of the situation. Revised security and safety requirements promulgated by
21
PART I the NRC, which could be prompted by, among other things, events within or
outside of the control of Duke Energy Carolinas, Duke Energy Progress and Duke
Energy Florida, such as a serious nuclear incident at a facility owned by a third
party, could necessitate substantial capital and other expenditures, as well as
assessments to cover third-party losses. In addition, if a serious nuclear incident
were to occur, it could have a material adverse effect on the results of operations,
financial position, cash flows and reputation of the Duke Energy Registrants.
LIQUIDITY, CAPITAL REQUIREMENTS AND COMMON STOCK RISKS
The Duke Energy Registrants rely on access to short-term borrowings and
longer-term debt and equity markets to finance their capital requirements
and support their liquidity needs. Access to those markets can be
adversely affected by a number of conditions, many of which are beyond
the Duke Energy Registrants’ control.
The Duke Energy Registrants’ businesses are significantly financed
through issuances of debt and equity. The maturity and repayment profile of
debt used to finance investments often does not correlate to cash flows from
their assets. Accordingly, as a source of liquidity for capital requirements not
satisfied by the cash flows from their operations and to fund investments
originally financed through debt instruments with disparate maturities, the
Duke Energy Registrants rely on access to short-term money markets as well as
longer-term capital markets. The Subsidiary Registrants also rely on access to
short-term intercompany borrowings. If the Duke Energy Registrants are not able
to access debt or equity at competitive rates or at all, the ability to finance their
operations and implement their strategy and business plan as scheduled could
be adversely affected. An inability to access debt and equity may limit the Duke
Energy Registrants’ ability to pursue improvements or acquisitions that they
may otherwise rely on for future growth.
Market disruptions may increase the cost of borrowing or adversely affect
the ability to access one or more financial markets. Such disruptions could
include: economic downturns, the bankruptcy of an unrelated energy company,
unfavorable capital market conditions, market prices for electricity and natural
gas, actual or threatened terrorist attacks, or the overall health of the energy
industry. The availability of credit under Duke Energy’s Master Credit Facility
depends upon the ability of the banks providing commitments under the facility
to provide funds when their obligations to do so arise. Systematic risk of the
banking system and the financial markets could prevent a bank from meeting its
obligations under the facility agreement.
Duke Energy maintains a revolving credit facility to provide backup for its
commercial paper program and letters of credit to support variable rate demand
tax-exempt bonds that may be put to the Duke Energy Registrant issuer at
the option of the holder. The facility includes borrowing sublimits for the Duke
Energy Registrants, each of whom is a party to the credit facility, and financial
covenants that limit the amount of debt that can be outstanding as a percentage
of the total capital for the specific entity. Failure to maintain these covenants at
a particular entity could preclude Duke Energy from issuing commercial paper or
the Duke Energy Registrants from issuing letters of credit or borrowing under the
Master Credit Facility.
The Duke Energy Registrants must meet credit quality standards and
there is no assurance they will maintain investment grade credit ratings.
If the Duke Energy Registrants are unable to maintain investment grade
credit ratings, they would be required under credit agreements to provide
collateral in the form of letters of credit or cash, which may materially
adversely affect their liquidity.
Each of the Duke Energy Registrants’ senior long-term debt issuances is
currently rated investment grade by various rating agencies. The Duke Energy
Registrants cannot ensure their senior long-term debt will be rated investment
grade in the future.
22
If the rating agencies were to rate the Duke Energy Registrants below
investment grade, borrowing costs would increase, perhaps significantly.
In addition, the potential pool of investors and funding sources would likely
decrease. Further, if the short-term debt rating were to fall, access to the
commercial paper market could be significantly limited.
A downgrade below investment grade could also require the posting of
additional collateral in the form of letters of credit or cash under various credit,
commodity and capacity agreements and trigger termination clauses in some
interest rate derivative agreements, which would require cash payments. All
of these events would likely reduce the Duke Energy Registrants’ liquidity and
profitability and could have a material effect on their results of operations,
financial position and cash flows.
Non-compliance with debt covenants or conditions could adversely affect
the Duke Energy Registrants’ ability to execute future borrowings.
The Duke Energy Registrants’ debt and credit agreements contain
various financial and other covenants. Failure to meet those covenants
beyond applicable grace periods could result in accelerated due dates and/or
termination of the agreements.
Market performance and other changes may decrease the value of the
NDTF investments of Duke Energy Carolinas, Duke Energy Progress and
Duke Energy Florida, which then could require significant additional
funding.
Ownership and operation of nuclear generation facilities also requires the
maintenance of funded trusts that are intended to pay for the decommissioning
costs of the respective nuclear power plants. The performance of the capital
markets affects the values of the assets held in trust to satisfy these future
obligations. Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida
have significant obligations in this area and hold significant assets in these trusts.
These assets are subject to market fluctuations and will yield uncertain returns,
which may fall below projected rates of return. Although a number of factors
impact funding requirements, a decline in the market value of the assets may
increase the funding requirements of the obligations for decommissioning nuclear
plants. If Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida
are unable to successfully manage their NDTF assets, their results of operations,
financial position and cash flows could be negatively affected.
Poor investment performance of the Duke Energy pension plan holdings
and other factors impacting pension plan costs could unfavorably impact
the Duke Energy Registrants’ liquidity and results of operations.
The costs of providing non-contributory defined benefit pension plans
are dependent upon a number of factors, such as the rates of return on plan
assets, discount rates, the level of interest rates used to measure the required
minimum funding levels of the plans, future government regulation and required
or voluntary contributions made to the plans. The Subsidiary Registrants
are allocated their proportionate share of the cost and obligations related to
these plans. Without sustained growth in the pension investments over time
to increase the value of plan assets and, depending upon the other factors
impacting costs as listed above, Duke Energy could be required to fund its
plans with significant amounts of cash. Such cash funding obligations, and the
Subsidiary Registrants’ proportionate share of such cash funding obligations,
could have a material impact on the Duke Energy Registrants’ results of
operations, financial position and cash flows.
PART I Duke Energy is a holding company and depends on the cash flows from its
subsidiaries to meet its financial obligations.
Because Duke Energy is a holding company with no operations or cash
flows of its own, its ability to meet its financial obligations, including making
interest and principal payments on outstanding indebtedness and to pay
dividends on its common stock, is primarily dependent on the net income
and cash flows of its subsidiaries and the ability of those subsidiaries to pay
upstream dividends or to repay borrowed funds. Prior to funding Duke Energy, its
subsidiaries have regulatory restrictions and financial obligations that must be
satisfied. These subsidiaries are separate legal entities and have no obligation
to provide Duke Energy with funds. In addition, Duke Energy may provide capital
contributions or debt financing to its subsidiaries under certain circumstances,
which would reduce the funds available to meet its financial obligations,
including making interest and principal payments on outstanding indebtedness
and to pay dividends on Duke Energy’s common stock.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
ELECTRIC UTILITIES AND INFRASTRUCTURE
The following table provides information related to the Electric Utilities and Infrastructure’s generation stations as of December 31, 2019. The MW displayed in
the table below are based on summer capacity. Ownership interest in all facilities is 100% unless otherwise indicated.
Facility
Duke Energy Carolinas
Oconee
McGuire
Catawba(a)
Belews Creek
Marshall
J.E. Rogers
Lincoln CT
Allen
Rockingham CT
W.S. Lee CC(b)
Buck CC
Dan River CC
Mill Creek CT
W.S. Lee
W.S. Lee CT
Clemson CHP
Bad Creek
Jocassee
Cowans Ford
Keowee
Other small facilities (19 plants)
Distributed generation
Total Duke Energy Carolinas
Plant Type
Primary Fuel
Location
Owned MW
Capacity
Nuclear
Nuclear
Nuclear
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Hydro
Hydro
Hydro
Hydro
Hydro
Renewable
Uranium
Uranium
Uranium
Coal
Coal
Coal
Gas/Oil
Coal
Gas/Oil
Gas
Gas
Gas
Gas/Oil
Gas
Gas/Oil
Gas
Water
Water
Water
Water
Water
Solar
SC
NC
SC
NC
NC
NC
NC
NC
NC
NC
NC
NC
SC
SC
SC
SC
SC
SC
NC
SC
NC/SC
NC
2,554
2,316
445
2,220
2,058
1,388
1,193
1,098
825
686
668
662
563
170
84
13
1,360
780
324
152
603
30
20,192
23
PART I
Facility
Duke Energy Progress
Brunswick
Harris
Robinson
Roxboro
Smith CC
H.F. Lee CC
Wayne County CT
Smith CT
Mayo
Darlington CT
L.V. Sutton CC
Asheville
Asheville CT
Asheville CC
Weatherspoon CT
L.V. Sutton CT (Black Start)
Blewett CT
Walters
Other small facilities (3 plants)
Distributed generation
Total Duke Energy Progress
Duke Energy Florida
Hines CC
Citrus County CC
Crystal River
Bartow CC
Anclote
Intercession City CT
Osprey CC
DeBary CT
Tiger Bay CC
Bayboro CT
Bartow CT
Suwannee River CT
Avon Park CT
University of Florida CoGen CT
Distributed generation
Total Duke Energy Florida
Duke Energy Ohio
East Bend
Woodsdale CT
Total Duke Energy Ohio
Duke Energy Indiana
Gibson(c)
Cayuga(d)
Edwardsport
Madison CT
Wheatland CT
Vermillion CT(e)
Gallagher
Noblesville CC
Henry County CT
Cayuga CT
Markland
Distributed generation
Camp Atterbury Battery
Total Duke Energy Indiana
Plant Type
Primary Fuel
Location
Owned MW
Capacity
Nuclear
Nuclear
Nuclear
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Hydro
Hydro
Renewable
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Renewable
Uranium
Uranium
Uranium
Coal
Gas/Oil
Gas/Oil
Gas/Oil
Gas/Oil
Coal
Gas/Oil
Gas/Oil
Coal
Gas/Oil
Gas/Oil
Gas/Oil
Gas/Oil
Oil
Water
Water
Solar
Gas/Oil
Gas
Coal
Gas/Oil
Gas
Gas/Oil
Gas/Oil
Gas/Oil
Gas/Oil
Oil
Gas/Oil
Gas
Gas/Oil
Gas
Solar
Fossil
Fossil
Coal
Gas/Propane
Coal
Coal/Oil
Coal
Gas
Gas
Gas
Coal
Gas/Oil
Gas/Oil
Gas/Oil
Water
Solar
Storage
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Hydro
Renewable
Renewable
24
NC
NC
SC
NC
NC
NC
NC
NC
NC
SC
NC
NC
NC
NC
NC
NC
NC
NC
NC
NC
FL
FL
FL
FL
FL
FL
FL
FL
FL
FL
FL
FL
FL
FL
FL
KY
OH
IN
IN
IN
OH
IN
IN
IN
IN
IN
IN
IN
IN
IN
1,870
964
741
2,439
1,085
888
857
772
727
613
607
344
320
237
124
78
52
112
115
49
12,994
2,054
1,610
1,422
1,169
1,013
951
583
559
200
171
168
149
48
43
119
10,259
600
476
1,076
2,822
1,005
595
566
450
360
280
264
129
86
51
11
4
6,623
PART I
Totals by Type
Total Electric Utilities
Totals By Plant Type
Nuclear
Fossil
Hydro
Renewable
Total Electric Utilities
Owned MW
Capacity
51,144
8,890
38,544
3,497
213
51,144
Jointly owned with North Carolina Municipal Power Agency Number 1, NCEMC and PMPA. Duke Energy Carolinas’ ownership is 19.25% of the facility.
Jointly owned with NCEMC. Duke Energy Carolinas’ ownership is 87.27% of the facility.
(a)
(b)
(c) Duke Energy Indiana owns and operates Gibson Station Units 1 through 4 and is a joint owner of unit 5 with WVPA and IMPA. Duke Energy Indiana operates unit 5 and owns 50.05%.
(d)
(e)
Includes Cayuga Internal Combustion.
Jointly owned with WVPA. Duke Energy Indiana’s ownership is 62.50% of the facility.
The following table provides information related to Electric Utilities and Infrastructure’s electric transmission and distribution properties as of December 31, 2019.
Electric Transmission Lines
Miles of 500 to 525 kilovolt (kV)
Miles of 345 kV
Miles of 230 kV
Miles of 100 to 161 kV
Miles of 13 to 69 kV
Total conductor miles of electric transmission lines
Electric Distribution Lines
Miles of overhead lines
Miles of underground line
Total conductor miles of electric distribution lines
Number of electric transmission and distribution substations
Duke
Energy
Carolinas
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Duke
Energy
1,036
1,135
8,349
12,441
8,351
31,312
576
—
2,658
6,846
2,988
292
—
3,399
2,563
12
168
—
1,638
891
2,200
—
410
—
724
612
13,068
6,266
4,897
1,746
173,800
106,300
66,600
39,500
46,500
30,700
25,200
20,900
13,300
6,100
280,100
106,100
77,200
46,100
19,400
3,316
1,491
512
496
314
—
725
654
1,417
2,539
5,335
22,200
9,100
31,300
503
Substantially all of Electric Utilities and Infrastructure’s electric plant in service is mortgaged under indentures relating to Duke Energy Carolinas’, Duke Energy
Progress’, Duke Energy Florida’s, Duke Energy Ohio’s and Duke Energy Indiana’s various series of First Mortgage Bonds.
GAS UTILITIES AND INFRASTRUCTURE
Gas Utilities and Infrastructure owns transmission pipelines and distribution mains that are generally underground, located near public streets and highways,
or on property owned by others for which Duke Energy Ohio and Piedmont have obtained the necessary legal rights to place and operate facilities on such property
located within the Gas Utilities and Infrastructure service territories. The following table provides information related to Gas Utilities and Infrastructure’s natural gas
distribution.
Miles of natural gas distribution and transmission pipelines
Miles of natural gas service lines
Duke
Energy
Ohio Piedmont
7,300
6,300
26,400
20,900
Duke
Energy
33,700
27,200
25
PART I
COMMERCIAL RENEWABLES
The following table provides information related to Commercial Renewables’ electric generation facilities as of December 31, 2019. The MW displayed in the
table below are based on nameplate capacity.
Plant Type
Primary Fuel
Location
Owned MW
Capacity
Ownership
Interest (%)
Facility
Commercial Renewables – Wind
Los Vientos (five sites)
Mesteno(a)
Sweetwater IV
Frontier
Top of the World
Notrees
Mesquite Creek
Campbell Hill
Ironwood
Sweetwater V
North Allegheny
Laurel Hill
Cimarron II
Ocotillo
Kit Carson
Silver Sage
Happy Jack
Shirley
Total Renewables – Wind
Commercial Renewables – Solar
North Rosamond(a)
Lapetus(a)
Conetoe II
Seville I & II
Rio Bravo I & II
Wildwood I & II
Kelford
Dogwood
Halifax Airport
Pasquotank
Shawboro
Caprock
Creswell Alligood
Pumpjack
Longboat
Shoreham(a)
Washington White Post
Whitakers
Highlander I & II
Other small solar(a)
Total Renewables – Solar
Renewable
Renewable
Renewable
Renewable
Renewable
Renewable
Renewable
Renewable
Renewable
Renewable
Renewable
Renewable
Renewable
Renewable
Renewable
Renewable
Renewable
Renewable
Renewable
Renewable
Renewable
Renewable
Renewable
Renewable
Renewable
Renewable
Renewable
Renewable
Renewable
Renewable
Renewable
Renewable
Renewable
Renewable
Renewable
Renewable
Renewable
Renewable
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Solar
Solar
Solar
Solar
Solar
Solar
Solar
Solar
Solar
Solar
Solar
Solar
Solar
Solar
Solar
Solar
Solar
Solar
Solar
Solar
TX
TX
TX
OK
WY
TX
TX
WY
KS
TX
PA
PA
KS
TX
CO
WY
WY
WI
CA
TX
NC
CA
CA
CA
NC
NC
NC
NC
NC
NM
NC
CA
CA
NY
NC
NC
CA
Various
51%
100%
47%
51%
51%
51%
26%
51%
26%
47%
51%
51%
26%
51%
51%
51%
51%
51%
100%
100%
100%
67%
67%
67%
100%
100%
100%
100%
100%
67%
100%
67%
67%
51%
100%
100%
51%
Various
100%
51%
465
202
113
103
102
78
55
50
44
38
36
35
33
30
26
21
15
10
1,456
150
100
80
34
27
23
22
20
20
20
20
17
14
13
13
13
12
12
11
177
798
10
10
18
18
2,282
Commercial Renewables – Fuel Cells
2018 ESA Portfolio(a)
Total Renewables – Fuel Cells
Commercial Renewables – Energy Storage
Notrees Battery Storage
Total Renewables – Energy Storage
Total Commercial Renewables
Renewable
Fuel Cell
Various
Renewable
Storage
TX
(a) Certain projects, including projects within Other small solar, are in tax-equity structures where investors have differing interests in the project’s economic attributes. 100% of the tax-equity project’s capacity is included in the
table above.
26
PART I OTHER
Duke Energy owns approximately 8 million square feet and leases approximately 2 million square feet of corporate, regional and district office space spread
throughout its service territories.
ITEM 3. LEGAL PROCEEDINGS
For information regarding legal proceedings, including regulatory and environmental matters, see Note 4, “Regulatory Matters,” and Note 5, “Commitments and
Contingencies,” to the Consolidated Financial Statements.
MTBE Litigation
On December 15, 2017, the state of Maryland filed suit in Baltimore City Circuit Court against Duke Energy Merchants and other defendants alleging
contamination of state waters by MTBE leaking from gasoline storage tanks. MTBE is a gasoline additive intended to increase the oxygen levels in gasoline and make
it burn cleaner. The case was removed from Baltimore City Circuit Court to federal District Court. Initial motions to dismiss filed by the defendants were denied by the
court on September 4, 2019. The defendants have filed answers and will pursue summary judgment after the completion of discovery. Duke Energy cannot predict the
outcome of this matter.
ITEM 4. MINE SAFETY DISCLOSURES
This is not applicable for any of the Duke Energy Registrants.
27
PART I ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
The common stock of Duke Energy is listed and traded on the NYSE (ticker symbol DUK). As of January 31, 2020, there were 140,942 Duke Energy common
stockholders of record. For information on dividends, see the “Dividend Payments” section of Management’s Discussion and Analysis.
There is no market for the common equity securities of the Subsidiary Registrants, all of which are directly or indirectly owned by Duke Energy.
Securities Authorized for Issuance Under Equity Compensation Plans
See Item 12 of Part III within this Annual Report for information regarding Securities Authorized for Issuance Under Equity Compensation Plans.
Issuer Purchases of Equity Securities for Fourth Quarter 2019
There were no repurchases of equity securities during the fourth quarter of 2019.
Stock Performance Graph
The following performance graph compares the cumulative TSR from Duke Energy Corporation common stock, as compared with the Standard & Poor’s 500
Stock Index (S&P 500) and the Philadelphia Utility Index for the past five years. The graph assumes an initial investment of $100 on December 31, 2014, in Duke
Energy common stock, in the S&P 500 and in the Philadelphia Utility Index and that all dividends were reinvested. The stockholder return shown below for the
five-year historical period may not be indicative of future performance.
$250
$200
$150
$100
$50
$0
2014
2015
2016
2017
2018
2019
Duke Energy Corporation
Philadelphia Utility Index
S&P 500
NYSE CEO Certification
Duke Energy has filed the certification of its Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 as
exhibits to this Annual Report on Form 10-K for the year ended December 31, 2019.
28
PART II ITEM 6. SELECTED FINANCIAL DATA
The following table provides selected financial data for the years of 2015 through 2019. See also Item 7.
(in millions, except per share amounts)
2019
2018
2017
2016
2015
Statements of Operations(a)
Total operating revenues
Operating income
Income from continuing operations
(Loss) Income from discontinued operations, net of tax
Net income
Net income available to Duke Energy Corporation common stockholders
Common Stock Data
Income from continuing operations available to Duke Energy Corporation common stockholders
Basic and diluted
(Loss) Income from discontinued operations attributable to Duke Energy Corporation common stockholders
Basic and diluted
Net income available to Duke Energy Corporation common stockholders
Basic and diluted
Dividends declared per share of common stock
Balance Sheets
Total assets
Long-term debt including finance leases, less current maturities
$ 25,079
5,709
3,578
(7)
3,571
3,707
$ 24,521
4,685
2,625
19
2,644
2,666
$ 23,565
5,625
3,070
(6)
3,064
3,059
$ 22,743
5,202
2,578
(408)
2,170
2,152
$
$
$
5.07
(0.01)
5.06
3.75
$
$
$
3.73
0.03
3.76
3.64
$
$
$
4.37
(0.01)
4.36
3.49
$
$
$
3.71
(0.60)
3.11
3.36
$
$
$
$
22,371
4,974
2,654
177
2,831
2,816
3.80
0.25
4.05
3.24
$ 158,838
54,985
$ 145,392
51,123
$ 137,914
49,035
$ 132,761
45,576
$ 121,156
36,842
(a) Significant transactions reflected in the results above include: (i) growth in Commercial Renewables from new tax equity solar projects placed in service in 2019 (see Note 1 to the Consolidated Financial Statements,
“Summary of Significant Accounting Policies”); (ii) regulatory and legislative charges related to Duke Energy Progress and Duke Energy Carolinas North Carolina rate case orders and impairment charges in 2018 (see Notes 4,
12 and 13 to the Consolidated Financial Statements, “Regulatory Matters,” “Goodwill and Intangible Assets” and “Investments in Unconsolidated Affiliates”); (iii) the sale of the International Disposal Group in 2016, including
a loss on sale recorded within discontinued operations; and (iv) the acquisition of Piedmont in 2016, including losses on interest rate swaps related to the acquisition financing.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management’s Discussion and Analysis includes financial information
prepared in accordance with GAAP in the U.S., as well as certain non-GAAP
financial measures such as adjusted earnings and adjusted 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. The
non-GAAP financial measures should be viewed as a supplement to, and
not a substitute for, financial measures presented in accordance with GAAP.
Non-GAAP measures as presented herein may not be comparable to similarly
titled measures used by other companies.
The following combined Management’s Discussion and Analysis of
Financial Condition and Results of Operations is separately filed by Duke Energy
Corporation and its subsidiaries. Duke Energy Carolinas, LLC, Progress Energy,
Inc., Duke Energy Progress, LLC, Duke Energy Florida, LLC, Duke Energy Ohio,
Inc., Duke Energy Indiana, LLC and Piedmont Natural Gas Company, Inc..
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.
Management’s Discussion and Analysis should be read in conjunction
with the Consolidated Financial Statements and Notes for the years ended
December 31, 2019, 2018 and 2017.
See “Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations,” in Duke Energy’s Annual Report on
Form 10-K for the year ended December 31, 2018, filed with the SEC on
February 28, 2019, for a discussion of variance drivers for the year ended
December 31, 2018, as compared to December 31, 2017.
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.
Executive Overview
At Duke Energy the fundamentals of our business are strong and allow
us to deliver growth in earnings and dividends in a low-risk, predictable and
transparent way. In 2019, we met our near-term financial commitments and
positioned the company for sustainable long-term growth. We are focused on
a business portfolio that will deliver a reliable dividend with 4% to 6% EPS
growth through 2024. This growth is supported by our capital plan, timely
cost-recovery mechanisms in most jurisdictions and our ability to manage our
cost structure. The strength of our balance sheet is of vital importance to the
cost-effective financing of our growth strategy, and in 2019 we continued to
strengthen it by issuing $2 billion of preferred equity and $2.5 billion of common
stock through a forward sales agreement which is expected to settle on or prior
to December 31, 2020.
29
PART II
Financial Results
Annual Earnings (in millions)
Annual Earnings Per Diluted Share
Net Income Available to Duke Energy Corporation
common stockholders (GAAP)
Net Income Available to Duke Energy Corporation common
stockholders per diluted share (GAAP)
Adjusted Earnings (a)
Adjusted Diluted Earnings Per Share (a)
$3,707
$3,706
$3,339
$2,666
$4.72
$5.06
$5.06
$3.76
2018
2019
2018
2019
(a) See Results of Operations below for Duke Energy’s definition of adjusted earnings and adjusted diluted EPS as well as a reconciliation of this non-GAAP financial measure to net income available to Duke Energy and net
income available to Duke Energy per diluted share.
Duke Energy’s 2019 Net Income Available to Duke Energy Corporation
(GAAP Reported Earnings) were impacted by: favorable rate case and rider
recovery outcomes, net of regulatory lag, and ongoing cost management efforts
in Electric Utilities and Infrastructure; improved margins and increased ACP
investment in Gas Utilities and Infrastructure; and growth in project investments
in Commercial Renewables. See “Results of Operations” below for a detailed
discussion of the consolidated results of operations and a detailed discussion
of financial results for each of Duke Energy’s reportable business segments,
as well as Other where financing costs increased in 2019 to fund segment
operations and other liquidity needs.
2019 Areas of Focus and Accomplishments
Operational Excellence, Safety and Reliability. The reliable and
safe operation of our power plants, electric distribution system and natural
gas infrastructure in our communities is foundational to our customers, our
financial results and our credibility with stakeholders. Our regulated generation
fleet performance was strong throughout the year. All of our nuclear sites have
achieved the industry’s highest distinction rating. Our electric distribution
system performed well throughout the year, with outage durations down when
adjusted for storms. The safety of our workforce is a core value. Our employees
delivered strong safety results in 2019, and we are at or near the top of our
industry.
Storm Response and System Restoration. The 2019 Atlantic hurricane
season was the fourth consecutive year of above-average damaging storms.
Our ability to effectively handle all facets of the 2019 storm response efforts
is a testament to our team’s extensive preparation and coordination, applying
lessons learned from previous storms, and to on-the-ground management
throughout the restoration efforts. Notably in 2019 Duke Energy earned EEI’s
Emergency Recovery Award, our 22nd EEI award since 1998 and a strong
affirmation of the work of our employees to support customers when they need
us most.
Customer Satisfaction. Duke Energy continues to transform the customer
experience through our use of customer data to better inform operational priorities
and performance levels. This data-driven approach allows us to identify the
investments that are the most important to the customer experience. In 2019,
we instituted billing and payment-related communications and options, and we
continue to enhance outage-related communications to customers.
Constructive Regulatory and Legislative Outcomes. One of our
long-term strategic goals is to achieve modernized regulatory constructs in our
jurisdictions. Modernized constructs provide benefits, which include improved
earnings and cash flows through more timely recovery of investments, as well
as stable pricing for customers. In 2019, Duke Energy, North Carolina regulators
and environmentalists reached an agreement to permanently close all remaining
coal ash basins in North Carolina. This agreement reduces the cost to close our
coal ash basins for our Carolinas customers in comparison to the initial NCDEQ
closure order. In 2019 we achieved constructive rate case outcomes driving
earnings growth through rate base increases in South Carolina (electric), North
Carolina (natural gas), Ohio (electric distribution) and Kentucky (natural gas). In
addition, we have a multiyear rate plan in Florida and grid investment riders in
the Midwest which enable more timely cost recovery and earnings growth.
Digital Transformation. Duke Energy has a demonstrated track record
of driving efficiencies and productivity into the business. We continue to
leverage new technology, digital tools and data analytics across the business in
response to a transforming landscape. In 2019, we created a team dedicated
to developing applications and other solutions to deliver productivity gains and
improvements to the customer experience.
Modernizing the Power Grid. Our grid improvement programs continue
to be a key component of our growth strategy. Modernization of the electric
grid, including smart meters, storm hardening, self-healing and targeted
undergrounding helps to ensure the system is better prepared for severe
weather, improves the system’s reliability and flexibility, and provides better
information and services for customers. In 2019, 79% of our jurisdictions were
equipped with smart meters and we remain on track to be fully deployed across
all regions by 2021. We continue to expand our self-optimizing grid capabilities,
and in 2019 that saved over a half million customer interruptions.
Generating Cleaner Energy. Overall, we have lowered our carbon
emissions by 39% since 2005, consistent with our new goal to reduce carbon
emissions by at least 50% by 2030 and to achieve net-zero carbon emissions
by 2050. Our commitment for 2030 includes retiring plants, operating our
existing carbon-free resources and investing in natural gas infrastructure,
renewables and our energy delivery system. As we look beyond 2030, we will
need additional tools to continue our progress. We will work actively to advocate
for research and development of carbon-free, dispatchable resources. That
includes longer-term energy storage, advanced nuclear technologies, carbon
capture and zero-carbon fuels.
30
PART II Expanding the Natural Gas Platform. We continue to pursue
natural gas infrastructure investments. While the judicial and administrative
challenges to date have been substantial, we are committed to the
construction of the ACP pipeline to bring low-cost gas supply and economic
development opportunities to the Southeast U.S. Construction is underway
on a liquefied natural gas facility in Robeson County, North Carolina, on
property Piedmont owns. This investment will help Piedmont provide a
reliable gas supply to customers during peak usage periods and protect
customers from price volatility when there is a higher-than-normal demand
for natural gas.
Dividend Growth. In 2019, Duke Energy continued to grow the dividend
payment to shareholders. 2019 represented the 93rd consecutive year Duke
Energy paid a cash dividend on its common stock.
Duke Energy Objectives – 2020 and Beyond
Duke Energy will continue to deliver exceptional value to customers,
be an integral part of the communities in which we do business and provide
attractive returns to investors. We have an achievable, long-term strategy
in place, and it is producing tangible results, yet the industry in which we
operate is becoming more and more dynamic. We are adjusting, where
necessary, and accelerating our focus in key areas to ensure the company is
well positioned to be successful for many decades into the future. As we look
ahead to 2020, our plans include:
• Continuing to place the customer at the center of all that we do which
includes providing customized products and solutions
• Strengthening our relationships with all our vast stakeholders in the
communities in which we operate and invest
• Generating cleaner energy and working to achieve net-zero carbon
emissions by 2050
• Maintaining the safety of our communities and employees
• Modernizing and strengthening the energy grid
• Expanding the natural gas infrastructure
• Deploying digital tools across our business
Results of Operations
Non-GAAP Measures
Management evaluates financial performance in part based on non-GAAP
financial measures, including adjusted earnings and adjusted diluted EPS.
These items represent income from continuing operations available to Duke
Energy common stockholders in dollar and per-share amounts, adjusted for
the dollar and per-share impact of special items. As discussed below, special
items include certain charges and credits, which management believes are
not indicative of Duke Energy’s ongoing performance. Management believes
the presentation of adjusted earnings and adjusted diluted EPS provides
useful information to investors, as it provides them with an additional relevant
comparison of Duke Energy’s performance across periods.
Management uses these non-GAAP financial measures for planning
and forecasting, and for reporting financial results to the Board of Directors,
employees, stockholders, analysts and investors. Adjusted diluted EPS is also
used as a basis for employee incentive bonuses. The most directly comparable
GAAP measures for adjusted earnings and adjusted diluted EPS are GAAP
Reported Earnings and Diluted EPS Available to Duke Energy Corporation
common stockholders (GAAP Reported EPS), respectively.
Special items included in the periods presented include the following,
which management believes do not reflect ongoing costs:
• Impairment Charges in 2019 represents a reduction of a prior year
impairment at Citrus County CC and an OTTI on the remaining
investment in Constitution. For 2018, it represents an impairment at
Citrus County CC, a goodwill impairment at Commercial Renewables
and an OTTI of an investment in Constitution.
• Costs to Achieve Mergers represents charges that result from strategic
acquisitions.
• Regulatory and Legislative Impacts in 2018 represents charges related
to the Duke Energy Progress and Duke Energy Carolinas North Carolina
rate case orders and the repeal of the South Carolina Base Load Review
Act.
• Sale of Retired Plant represents the loss associated with selling
Beckjord, a nonregulated generating facility in Ohio.
• Impacts of the Tax Act represents amounts recognized related to the
Tax Act.
• Severance Charges relate to companywide initiatives, excluding merger
integration, to standardize processes and systems, leverage technology
and workforce optimization.
Duke Energy’s adjusted earnings and adjusted diluted EPS may not be
comparable to similarly titled measures of another company because other
companies may not calculate the measures in the same manner.
31
PART II Reconciliation of GAAP Reported Amounts to Adjusted Amounts
The following table presents a reconciliation of adjusted earnings and adjusted diluted EPS to the most directly comparable GAAP measures.
(in millions, except per share amounts)
GAAP Reported Earnings/EPS
Adjustments to Reported:
Impairment Charges(a)
Costs to Achieve Piedmont Merger(b)
Regulatory and Legislative Impacts(c)
Sale of Retired Plant(d)
Impacts of the Tax Act(e)
Severance Charges(f)
Discontinued Operations
Adjusted Earnings/Adjusted Diluted EPS
Years Ended December 31,
2019
2018
Earnings
$ 3,707
(8)
—
—
—
—
—
7
$ 3,706
EPS
$ 5.06
(0.01)
—
—
—
—
—
0.01
$ 5.06
Earnings
$ 2,666
179
65
202
82
20
144
(19)
$ 3,339
EPS
3.76
$
0.25
0.09
0.29
0.12
0.03
0.21
(0.03)
4.72
$
(a) Net of tax expense of $3 million in 2019. Net of tax benefit of $27 million and Noncontrolling Interests of $2 million in 2018.
(b) Net of tax benefit of $19 million.
(c) Net of tax benefit of $63 million.
(d) Net of $25 million tax benefit.
(e) The Tax Act reduced the corporate income tax rate from 35% to 21%, effective January 1, 2018. As the tax change was enacted in 2017, Duke Energy was required to remeasure its existing deferred tax assets and
liabilities at the lower rate at December 31, 2017. For Duke Energy’s regulated operations, where the reduction in the net accumulated deferred income tax liability is expected to be returned to customers in future rates, the
remeasurement has been deferred as a regulatory liability. This amount represents a true up of existing regulatory liabilities related to the Tax Act. See Note 24 to the Consolidated Financial Statements, “Income Taxes” for
more information.
(f) Net of tax benefit of $43 million.
Year Ended December 31, 2019, as compared to 2018
SEGMENT RESULTS
GAAP Reported EPS was $5.06 for the year ended December 31, 2019,
compared to $3.76 for the year ended December 31, 2018. The increase in
GAAP Reported earnings was primarily due to current year favorable rate case
and rider recovery outcomes, an adjustment related to income tax recognition
for equity method investments, growth in Commercial Renewables from new
solar farms commencing commercial operations and prior year regulatory and
legislative impacts, impairments, severance, loss on sale of a retired plant
and costs to achieve merger. This favorability was partially offset by higher
depreciation and higher financing costs in the current year. The equity method
investment adjustment was immaterial and relates to prior years.
As discussed and shown in the table above, management also evaluates
financial performance based on adjusted diluted EPS. Duke Energy’s adjusted
diluted EPS was $5.06 for the year ended December 31, 2019, compared to
$4.72 for the year ended December 31, 2018.
The remaining information presented in this discussion of results of
operations is on a GAAP basis. Management evaluates segment performance
based on segment income. Segment income is defined as income from
continuing operations net of income attributable to noncontrolling interests and
preferred stock dividends. Segment income includes intercompany revenues and
expenses that are eliminated in the Consolidated Financial Statements.
Duke Energy’s segment structure includes the following segments: Electric
Utilities and Infrastructure, Gas Utilities and Infrastructure and Commercial
Renewables. The remainder of Duke Energy’s operations is presented as Other.
See Note 3 to the Consolidated Financial Statements, “Business Segments,” for
additional information on Duke Energy’s segment structure.
32
PART II Electric Utilities and Infrastructure
(in millions)
Operating Revenues
Operating Expenses
Fuel used in electric generation and purchased power
Operations, maintenance and other
Depreciation and amortization
Property and other taxes
Impairment charges
Total operating expenses
Gains on Sales of Other Assets and Other, net
Operating Income
Other Income and Expenses, net
Interest Expense
Income Before Income Taxes
Income Tax Expense
Segment Income
Duke Energy Carolinas GWh sales
Duke Energy Progress GWh sales
Duke Energy Florida GWh sales
Duke Energy Ohio GWh sales
Duke Energy Indiana GWh sales
Total Electric Utilities and Infrastructure GWh sales
Net proportional MW capacity in operation
Years Ended December 31,
2019
$ 22,831
6,904
5,497
3,951
1,175
(8)
17,519
1
5,313
353
1,345
4,321
785
3,536
89,920
68,356
42,173
24,729
31,886
257,064
50,070
$
2018
$ 22,273
6,917
5,631
3,523
1,134
309
17,514
8
4,767
378
1,288
3,857
799
$ 3,058
92,280
69,331
41,559
25,329
34,229
262,728
49,684
Variance
$
558
(13)
(134)
428
41
(317)
5
(7)
546
(25)
57
464
(14)
478
(2,360)
(975)
614
(600)
(2,343)
(5,664)
386
$
Year Ended December 31, 2019, as compared to 2018
Electric Utilities and Infrastructure’s results were impacted by positive
contributions from the Duke Energy Carolinas and Duke Energy Progress North
Carolina and South Carolina rate cases and Duke Energy Florida’s base rate
adjustments due to the Citrus County CC being placed in service. 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 $603 million increase in retail pricing primarily due to the Duke
Energy Carolinas and Duke Energy Progress North Carolina and South
Carolina rate cases and Duke Energy Florida’s base rate adjustments
related to Citrus County CC being placed in service.
Partially offset by:
• a $45 million decrease in weather-normal retail sales volumes.
Operating Expenses. The variance was driven primarily by:
• a $428 million increase in depreciation and amortization expense
primarily due to additional plant in service and new depreciation rates
associated with the Duke Energy Carolinas and Duke Energy Progress
North Carolina and South Carolina rate cases and Duke Energy Florida’s
Citrus County CC being placed in service; and
• a $41 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 and Duke Energy Ohio.
Partially offset by:
• a $317 million decrease in impairment charges primarily due to the
impacts associated with the Duke Energy Carolinas and Duke Energy
Progress North Carolina rate cases as well as impairment impacts
related to Duke Energy Florida’s Citrus County CC; and
• a $134 million decrease in operation, maintenance and other expense
primarily due to lower payroll and benefit costs resulting from prior year
workforce reductions and lower storm costs at Duke Energy Progress
and Duke Energy Carolinas in the current year.
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 an increase in the amortization of excess deferred taxes, mostly offset by an
increase in pretax income. The ETRs for the years ended December 31, 2019,
and 2018, were 18.2% and 20.7%, respectively. The decrease in the ETR was
primarily due to an increase in the amortization of excess deferred taxes.
Matters Impacting Future Electric Utilities and Infrastructure Results
On December 31, 2019, Duke Energy Carolinas and Duke Energy Progress
entered into a settlement agreement with NCDEQ 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. An order from regulatory
authorities disallowing recovery of costs related to closure of these ash basins
could have an adverse impact on Electric Utilities and Infrastructure’s results
of operations, financial position and cash flows. See Notes 4 and 5 to the
Consolidated Financial Statements, “Regulatory Matters” and “Commitments
and Contingencies,” respectively, for additional information.
33
PART II On May 21, 2019, Duke Energy Carolinas and Duke Energy Progress
received orders from the PSCSC granting the companies’ requests for retail
rate increases but denying recovery of certain coal ash costs. Duke Energy
Carolinas and Duke Energy Progress filed notices of appeals with the South
Carolina Supreme Court on November 15, 2019. Appellant briefs are due on
March 2, 2020, and Appellee response briefs are due on May 15, 2020. 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 4 to the Consolidated Financial Statements, “Regulatory
Matters,” 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 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 4 to the 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 4 to the Consolidated Financial Statements, “Regulatory
Matters,” for additional information.
On April 17, 2015, the EPA published in the Federal Register a rule to
regulate the disposal of CCR from electric utilities as solid waste. Duke Energy
Indiana has interpreted the rule to identify the coal ash basin sites impacted
and has assessed the amounts of coal ash subject to the rule and a method of
compliance. Duke Energy Indiana’s interpretation of the requirements of the CCR
rule is subject to potential legal challenges and further regulatory approvals,
which could result in additional ash basin closure requirements, higher costs
of compliance and greater AROs. Additionally, Duke Energy Indiana has retired
facilities that are not subject to the CCR rule. Duke Energy Indiana may incur
costs at these facilities to comply with environmental regulations or to mitigate
risks associated with on-site storage of coal ash. An order from regulatory
authorities disallowing recovery of costs related to closure of ash basins
could have an adverse impact on Duke Energy Indiana’s results of operations,
financial position and cash flows.
Within this Item 7, see Liquidity and Capital Resources for discussion of
risks associated with the Tax Act.
Gas Utilities and Infrastructure
(in millions)
Operating Revenues
Operating Expenses
Cost of natural gas
Operation, maintenance and other
Depreciation and amortization
Property and other taxes
Total operating expenses
Operating Income
Other Income and Expenses, net
Interest Expense
Income Before Income Taxes
Income Tax Expense
Segment Income
Piedmont Local Distribution Company (LDC) throughput (Dth)
Duke Energy Midwest LDC throughput (MCF)
Year Ended December 31, 2019, as compared to 2018
Gas Utilities and Infrastructure’s results were primarily impacted by
higher equity earnings at ACP, the 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 primarily by:
• a $70 million decrease due to lower natural gas costs passed through
to customers; and
• a $13 million decrease due to rider revenues related to MGP and
Accelerated Main Replacement Program.
34
Years Ended December 31,
2019
$
1,866
2018
$ 1,881
Variance
$
(15)
627
446
256
106
1,435
431
140
117
454
22
432
$
697
421
245
107
1,470
411
47
106
352
78
274
$
(70)
25
11
(1)
(35)
20
93
11
102
(56)
158
$
511,243,774
89,025,972
557,145,128
90,604,833
(45,901,354)
(1,578,861)
Partially offset by:
• a $37 million increase due to North Carolina and Kentucky base rate
case increases;
• a $19 million increase due to North Carolina and Tennessee IMR
increases; and
• an $11 million increase due to NCUC approval related to tax reform
accounting from fixed rate contracts.
PART II Operating Expenses. The variance was driven primarily by:
Matters Impacting Future Gas Utilities and Infrastructure Results
• a $70 million decrease in the cost of natural gas due to lower natural
gas prices.
Partially offset by:
• a $25 million increase in operation, maintenance and other expense
primarily due to increased labor, benefits and information technology
costs; and
• an $11 million increase in depreciation and amortization expense due to
additional plant in service.
Other Income and Expenses, net. The increase was primarily due to
higher equity earnings at ACP as a result of higher cumulative project spending
and a higher OTTI recorded on the Constitution investment in the prior 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, partially offset by an increase in pretax income. The equity method
investment adjustment was immaterial and relates to prior years. The ETRs
for the years ended December 31, 2019, and 2018, were 4.8% and 22.2%,
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.
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 also impacted the
cost for the project. Project cost is approximately $8 billion, excluding financing
costs. This estimate is based on the current facts available around construction
costs and timelines, and is subject to future changes as those facts develop.
Abnormal weather, work delays (including delays due to judicial or regulatory
action) and other conditions may 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 4 and 18 to the
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. Duke Energy
Ohio has filed 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 on Gas Utilities and Infrastructure’s results of
operations, financial position and cash flows. See Note 4 to the Consolidated
Financial Statements, “Regulatory Matters,” for additional information.
Within this Item 7, see Liquidity and Capital Resources for discussion of
risks associated with the Tax Act.
Commercial Renewables
(in millions)
Operating Revenues
Operating Expenses
Operation, maintenance and other
Depreciation and amortization
Property and other taxes
Impairment charges
Total operating expenses
Losses on Sales of Other Assets and Other, net
Operating Loss
Other Income and Expenses, net
Interest Expense
Loss Before Income Taxes
Income Tax Benefit
Less: Loss Attributable to Noncontrolling Interests
Segment Income
Renewable plant production, GWh
Net proportional MW capacity in operation(a)
Years Ended December 31,
2019
$
487
2018
$
477
Variance
$
10
297
168
23
—
488
(3)
(4)
5
95
(94)
(115)
(177)
198
8,574
3,485
$
304
155
25
93
577
(1)
(101)
23
88
(166)
(147)
(28)
9
8,522
2,991
$
(7)
13
(2)
(93)
(89)
(2)
97
(18)
7
72
32
(149)
189
52
494
$
(a) Certain projects are included in tax-equity structures where investors have differing interests in the project’s economic attributes. In the table above, 100% of the tax-equity project’s capacity is included.
35
PART II Year Ended December 31, 2019, as compared to 2018
Commercial Renewables’ results were favorable primarily due to new tax
equity solar projects in the current year and a prior year goodwill impairment
charge. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The increase was primarily due to new solar
projects placed in service and higher irradiance.
Operating Expenses. The decrease was primarily due to a goodwill
impairment charge in the prior year, partially offset by increased depreciation
due to new solar projects placed in service.
Other Income and Expenses, net. The decrease was primarily due to
income from the FES settlement agreement in the prior year.
Income Tax Benefit. The decrease in the tax benefit was primarily driven
by taxes associated with Duke Energy’s interest in tax equity solar projects
recorded during 2019 and a reduction in PTCs generated.
Loss Attributable to Noncontrolling Interests. The variance was
primarily due to an increase in solar projects with tax equity investors. HLBV
accounting was utilized, resulting in allocation of losses to the noncontrolling
interest partners. See Note 1 to the Consolidated Financial Statements,
“Summary of Significant Accounting Policies” for more information.
Matters Impacting Future Commercial Renewables Results
Commercial Renewables continues to experience growth with tax equity
projects; however, the future expiration of federal tax incentives could result in
adverse impacts to future results of operations, financial position and cash flows.
During 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 11 to the Consolidated
Financial Statements, “Property, Plant and Equipment,” for additional
information.
Within this Item 7, see Liquidity and Capital Resources for discussion of
risks associated with the Tax Act.
Other
(in millions)
Operating Revenues
Operating Expenses
Losses on Sales of Other Assets and Other, net
Operating Loss
Other Income and Expenses, net
Interest Expense
Loss Before Income Taxes
Income Tax Benefit
Less: Net Income Attributable to Noncontrolling Interests
Less: Preferred Dividends
Net Loss
Years Ended December 31,
2019
95
117
(2)
(24)
145
705
(584)
(173)
—
41
(452)
$
$
2018
89
380
(96)
(387)
73
657
(971)
(282)
5
—
(694)
$
$
Variance
$
$
6
(263)
94
363
72
48
387
109
(5)
41
242
Year Ended December 31, 2019, as compared to 2018
The variance was driven by the prior year severance charges related to a
corporate initiative, prior year loss on sale of the retired Beckjord station, and
the absence in the current year of costs related to the Piedmont acquisition,
offset by obligations to the Duke Energy Foundation in 2019. The following is a
detailed discussion of the variance drivers by line item.
Operating Expenses. The variance was primarily due to prior year
severance charges related to a corporate initiative as well as costs associated
with the Piedmont acquisition, partially offset by obligations to the Duke Energy
Foundation in 2019.
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
and Bison investment income.
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 decrease in the tax benefit was primarily driven
by a decrease in pretax losses.
Preferred Dividends. The variance was driven by the declarations of
preferred stock dividend on preferred stock issued in 2019.
Matters Impacting Future Other Results
Within this Item 7, see Liquidity and Capital Resources for discussion of
risks associated with the Tax Act.
SUBSIDIARY REGISTRANTS
Basis of Presentation
The results of operations and variance discussion for the Subsidiary Registrants is presented in a reduced disclosure format in accordance with General
Instruction (I)(2)(a) of Form 10-K.
36
PART II DUKE ENERGY CAROLINAS
Results of Operations
(in millions)
Operating Revenues
Operating Expenses
Fuel used in electric generation and purchased power
Operation, maintenance and other
Depreciation and amortization
Property and other taxes
Impairment charges
Total operating expenses
Losses on Sales of Other Assets and Other, net
Operating Income
Other Income and Expenses, net
Interest Expense
Income Before Income Taxes
Income Tax Expense
Net Income
Years Ended December 31,
2019
$ 7,395
2018
$ 7,300
Variance
$
95
1,804
1,868
1,388
292
17
5,369
—
2,026
151
463
1,714
311
1,821
2,130
1,201
295
192
5,639
(1)
1,660
153
439
1,374
303
(17)
(262)
187
(3)
(175)
(270)
1
366
(2)
24
340
8
$ 1,403
$ 1,071
$
332
The following table shows the percent changes in GWh sales and average number of customers for Duke Energy Carolinas. The below percentages for retail
customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities, public and private
utilities and power marketers. Amounts are not weather-normalized.
Increase (Decrease) over prior year
Residential sales
General service sales
Industrial sales
Wholesale power sales
Joint dispatch sales
Total sales
Average number of customers
2019
(2.9)%
(0.1)%
(1.9)%
(13.6)%
4.7%
(2.6)%
2.1%
2018
11.7%
4.5%
(0.3)%
12.5%
23.1%
5.7%
1.5%
Year Ended December 31, 2019, as compared to 2018
Partially offset by:
Operating Revenues. The variance was driven primarily by:
• a $178 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.
Partially offset by:
• a $41 million decrease in rider revenues primarily due to excess
deferred taxes, partially offset by EE programs and a decrement rider
relating to nuclear decommissioning that ended in the prior year;
• a $14 million decrease in weather-normal retail sales volumes; and
• a $7 million decrease in retail sales, net of fuel revenues, due to
unfavorable weather in the current year.
Operating Expenses. The variance was driven primarily by:
• a $262 million decrease in operation, maintenance and other expense
primarily due to decreased labor and storm restoration costs; and
• a $175 million decrease in impairment charges primarily due to
impacts of the prior year North Carolina rate order, the repeal of the
South Carolina Base Load Review Act and charges related to coal ash
costs in South Carolina.
37
• a $187 million increase in depreciation and amortization expense
primarily due to additional plant in service, 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.
Interest Expense. The variance was primarily due to higher debt
outstanding in the current year.
Matters Impacting Future Results
On December 31, 2019, Duke Energy Carolinas entered into a settlement
agreement with NCDEQ and certain community groups under which Duke Energy
Carolinas agreed to excavate five of the six remaining coal ash basins in North
Carolina with ash moved to on-site lined landfills. At the one remaining basin,
uncapped basin ash will be excavated and moved to lined landfills. An order
from regulatory authorities disallowing recovery of costs related to closure of
these ash basins could have an adverse impact on Duke Energy Carolinas’
results of operations, financial position and cash flows. See Notes 4 and 5 to the
Consolidated Financial Statements, “Regulatory Matters” and “Commitments
and Contingencies,” respectively, for additional information.
PART II 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 4 to the 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 filed a notice of appeal with the South
Carolina Supreme Court on November 15, 2019. Appellant briefs are due on
March 2, 2020, and Appellee response briefs are due on May 15, 2020. 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 4 to the Consolidated Financial Statements, “Regulatory Matters,” 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 4 to the Consolidated
Financial Statements, “Regulatory Matters,” for additional information.
Within this Item 7, see Liquidity and Capital Resources for discussion
of risks associated with the Tax Act.
PROGRESS ENERGY
Results of Operations
(in millions)
Operating Revenues
Operating Expenses
Fuel used in electric generation and purchased power
Operation, maintenance and other
Depreciation and amortization
Property and other taxes
Impairment charges
Total operating expenses
Gains on Sales of Other Assets and Other, net
Operating Income
Other Income and Expenses, net
Interest Expense
Income Before Income Taxes
Income Tax Expense
Net Income
Less: Net Income Attributable to Noncontrolling Interests
Net Income Attributable to Parent
Years Ended December 31,
2019
$ 11,202
2018
$ 10,728
Variance
$
474
4,024
2,495
1,845
561
(24)
8,901
—
2,301
141
862
1,580
253
1,327
—
3,976
2,613
1,619
529
87
8,824
24
1,928
165
842
1,251
218
1,033
6
48
(118)
226
32
(111)
77
(24)
373
(24)
20
329
35
294
(6)
$
1,327
$ 1,027
$
300
Year Ended December 31, 2019, as compared to 2018
Operating Revenues. The variance was driven primarily by:
• a $21 million increase in other revenues primarily due to increased
transmission revenues and nonregulated products and services
revenues at Duke Energy Florida.
• a $366 million increase in retail pricing primarily due to the impacts of
the prior year North Carolina rate case and current year South Carolina
rate case at Duke Energy Progress, Duke Energy Florida’s base rate
adjustments related to Citrus County CC being placed in service and
annual increases from the 2017 Settlement Agreement;
• a $70 million increase in wholesale power revenues, net of fuel,
primarily due to coal ash cost recovery in the current year at Duke
Energy Progress and increased demand at Duke Energy Florida;
• a $42 million increase in fuel revenues primarily related to increased
fuel cost recovery due to extreme weather in the prior year at Duke
Energy Progress, partially offset by a decrease in fuel and capacity
rates billed to retail customers at Duke Energy Florida;
• a $22 million increase in retail sales, net of fuel revenues, due to
favorable weather in the current year at Duke Energy Florida; and
38
Partially offset by:
• a $47 million decrease in retail rider revenues primarily related to
decreased revenue requirements in the current year; and
• a $14 million decrease in weather-normal retail sales volumes at Duke
Energy Florida.
Operating Expenses. The variance was driven primarily by:
• a $226 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;
PART II • a $48 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, partially offset by lower purchased
power and lower fuel costs, net of deferrals, at Duke Energy Florida; and
• a $32 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 at Duke Energy Progress and higher property
taxes for additional plant in service at Duke Energy Florida.
Partially offset by:
• a $118 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 $111 million decrease in impairment charges primarily due to prior
year impacts associated with the North Carolina rate case at Duke
Energy Progress as well as the impairment of 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 AFUDC debt
return ending in the fourth quarter of 2018 on the Citrus County CC at Duke
Energy Florida.
Income Tax Expense. The increase in tax expense was primarily due to
an increase in pretax income, partially offset by an increase in the amortization
of excess deferred taxes and a Tax Act adjustment in the prior year related to
excess deferred taxes.
Matters Impacting Future Results
On December 31, 2019, Duke Energy Progress entered into a settlement
agreement with NCDEQ and certain community groups under which Duke Energy
Progress agreed to excavate two of the three remaining coal ash basins in
North Carolina with ash moved to on-site lined landfills. At the one remaining
basin, uncapped basin ash will be excavated and moved to lined landfills. An
order from regulatory authorities disallowing recovery of costs related to closure
of these ash basins could have an adverse impact on Duke Energy Progress’
results of operations, financial position and cash flows. See Notes 4 and 5 to the
Consolidated Financial Statements, “Regulatory Matters” and “Commitments
and Contingencies,” respectively, for additional information.
Duke Energy 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 4 to the 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 filed a notice of appeal with the South Carolina
Supreme Court on November 15, 2019. Appellant briefs are due on March 2, 2020,
and Appellee response briefs are due on May 15, 2020. 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 4 to the Consolidated
Financial Statements, “Regulatory Matters,” 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 4 to the Consolidated Financial Statements, “Regulatory
Matters,” for additional information.
Within this Item 7, see Liquidity and Capital Resources for discussion of
risks associated with the Tax Act.
DUKE ENERGY PROGRESS
Results of Operations
(in millions)
Operating Revenues
Operating Expenses
Fuel used in electric generation and purchased power
Operation, maintenance and other
Depreciation and amortization
Property and other taxes
Impairment charges
Total operating expenses
Gains on Sales of Other Assets and Other, net
Operating Income
Other Income and Expenses, net
Interest Expense
Income Before Income Taxes
Income Tax Expense
Net Income
Years Ended December 31,
2019
$ 5,957
2018
$ 5,699
Variance
$
258
2,012
1,446
1,143
176
12
4,789
—
1,168
100
306
962
157
805
$
1,892
1,578
991
155
33
4,649
9
1,059
87
319
827
160
667
$
120
(132)
152
21
(21)
140
(9)
109
13
(13)
135
(3)
$
138
39
PART II The following table shows the percent changes in GWh sales and average number of customers for Duke Energy Progress. The below percentages for retail
customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities, public and private
utilities and power marketers. Amounts are not weather-normalized.
Increase (Decrease) over prior year
Residential sales
General service sales
Industrial sales
Wholesale power sales
Joint dispatch sales
Total sales
Average number of customers
2019
(4.0)%
(1.6)%
0.6%
(1.5)%
(0.8)%
(1.4)%
1.3%
2018
9.9%
2.3%
0.8%
4.6%
2.1%
3.8%
1.5%
Year Ended December 31, 2019, as compared to 2018
Operating Revenues. The variance was driven primarily by:
• a $110 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;
• a $101 million increase in fuel revenues primarily related to increased
fuel cost recovery due to extreme weather in the prior year; and
• a $54 million increase in wholesale power revenues, net of fuel,
primarily due to coal ash cost recovery in the current year.
Partially Offset by:
• a $21 million decrease primarily due to the return of excess deferred
incomes taxes created by the reduction in the corporate income tax
rate, partially offset by an increase in rider revenues related to EE
programs.
Operating Expenses. The variance was driven primarily by:
• a $152 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 $120 million increase 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 $21 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 $132 million decrease in operation, maintenance and other expense
primarily due to lower storm costs in current year, reduced outage costs
and lower employee benefit costs; and
• a $21 million decrease in impairment charges primarily due to prior
year impacts associated with the North Carolina rate case.
Other Income and Expenses, net. The variance was driven primarily by
life insurance proceeds.
Interest Expense. The variance was driven primarily by lower interest
rates on outstanding debt.
Matters Impacting Future Results
On December 31, 2019, Duke Energy Progress entered into a settlement
agreement with NCDEQ and certain community groups under which Duke Energy
Progress agreed to excavate two of the three remaining coal ash basins in
North Carolina with ash moved to on-site lined landfills. At the one remaining
basin, uncapped basin ash will be excavated and moved to lined landfills. An
order from regulatory authorities disallowing recovery of costs related to closure
of these ash basins could have an adverse impact on Duke Energy Progress’
results of operations, financial position and cash flows. See Notes 4 and 5 to the
Consolidated Financial Statements, “Regulatory Matters” and “Commitments
and Contingencies,” respectively, for additional information.
Duke Energy 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 4
to the 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 filed a notice of appeal with the South Carolina
Supreme Court on November 15, 2019. Appellant briefs are due on March 2,
2020, and Appellee response briefs are due on May 15, 2020. 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 4 to the Consolidated Financial Statements, “Regulatory Matters,” 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 4 to the Consolidated Financial Statements, “Regulatory Matters,” for
additional information.
Within this Item 7, see Liquidity and Capital Resources for discussion of
risks associated with the Tax Act.
40
PART II DUKE ENERGY FLORIDA
Results of Operations
(in millions)
Operating Revenues
Operating Expenses
Fuel used in electric generation and purchased power
Operation, maintenance and other
Depreciation and amortization
Property and other taxes
Impairment charges
Total operating expenses
Gains on Sales of Other Assets and Other, net
Operating Income
Other Income and Expenses, net
Interest Expense
Income Before Income Taxes
Income Tax Expense
Net Income
Years Ended December 31,
2019
$ 5,231
2018
$ 5,021
Variance
$
210
2,012
1,034
702
392
(36)
4,104
—
1,127
48
328
847
155
692
$
2,085
1,025
628
374
54
4,166
1
856
86
287
655
101
554
$
(73)
9
74
18
(90)
(62)
(1)
271
(38)
41
192
54
$
138
The following table shows the percent changes in GWh sales and average number of customers for Duke Energy Florida. The below percentages for retail
customer classes represent billed sales only. Wholesale power sales include both billed and unbilled sales. Total sales includes billed and unbilled retail sales and
wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized.
Increase (Decrease) over prior year
Residential sales
General service sales
Industrial sales
Wholesale power sales
Total sales
Average number of customers
2019
0.7%
0.3%
(4.6)%
28.8%
1.5%
1.6%
2018
4.3%
1.9%
(0.4)%
5.2%
2.4%
1.5%
Year Ended December 31, 2019, as compared to 2018
Operating Revenues. The variance was driven primarily by:
• a $256 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 $22 million increase in retail sales, net of fuel revenues, due to
favorable weather in the current year;
• a $21 million increase in other revenues primarily due to increased
transmission revenues and nonregulated products and services
revenues; and
• a $16 million increase in wholesale power revenues, net of fuel,
primarily due to increased demand.
Partially offset by:
• a $59 million decrease in fuel and capacity revenues primarily due to a
decrease in fuel and capacity rates billed to retail customers;
• a $33 million decrease in retail rider revenues primarily related to
decreased revenue requirements in the current year; and
• a $14 million decrease in weather-normal retail sales volumes.
Operating Expenses. The variance was driven primarily by:
• a $90 million decrease in impairment charges primarily due to a prior
year impairment at Citrus County CC and a reduction of the impairment
in the current year; and
• a $73 million decrease in fuel used in electric generation and
purchased power primarily due to lower purchased power and lower
fuel costs, net of deferrals.
Partially offset by:
• a $74 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;
• an $18 million increase in property and other taxes primarily due to
higher property taxes from additional plant in service; and
• a $9 million increase in operation, maintenance and other expense
primarily due to increased vegetation management costs and
deregulation initiative costs, partially offset by lower severance
charges.
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.
41
PART II 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.
Income Tax Expense. The increase in tax expense was primarily due to
an increase in pretax income in the current year.
Matters Impacting Future Results
On October 10, 2018, Hurricane Michael made landfall on Florida’s
Panhandle as a Category 5 hurricane, the most powerful storm to hit the Florida
Panhandle in recorded history. The storm caused significant damage within the
service territory of Duke Energy Florida, 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 4
to the Consolidated Financial Statements, “Regulatory Matters,” for additional
information.
Within this Item 7, see Liquidity and Capital Resources for discussion of
risks associated with the Tax Act.
DUKE ENERGY OHIO
Results of Operations
(in millions)
Operating Revenues
Regulated electric
Regulated natural gas
Nonregulated electric and other
Total operating revenues
Operating Expenses
Fuel used in electric generation and purchased power – regulated
Cost of natural gas
Operation, maintenance and other
Depreciation and amortization
Property and other taxes
Total operating expenses
Losses on Sales of Other Assets and Other, net
Operating Income
Other Income and Expenses, net
Interest Expense
Income from Continuing Operations Before Income Taxes
Income Tax Expense from Continuing Operations
Income from Continuing Operations
Loss from Discontinued Operations, net of tax
Net Income
2019
$ 1,456
484
—
1,940
388
95
520
265
308
1,576
—
364
24
109
279
40
239
(1)
238
$
Years Ended December 31,
2018
Variance
$ 1,450
506
1
1,957
412
113
480
268
290
1,563
(106)
288
23
92
219
43
176
—
176
$
$
$
6
(22)
(1)
(17)
(24)
(18)
40
(3)
18
13
106
76
1
17
60
(3)
63
(1)
62
The following table shows the percent changes in GWh sales of electricity, MCF of natural gas delivered and average number of electric and natural gas
customers for Duke Energy Ohio. The below percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and
wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized.
Increase (Decrease) over prior year
Residential sales
General service sales
Industrial sales
Wholesale electric power sales
Other natural gas sales
Total sales
Average number of customers
2019
(3.9)%
(1.9)%
(2.1)%
(4.9)%
n/a
(2.4)%
0.7%
Electric
Natural Gas
2018
12.2%
3.3%
1.0%
(46.6)%
n/a
2.8%
0.8%
2019
(3.7)%
(1.2)%
(0.4)%
n/a
0.7%
(1.7)%
0.7%
2018
18.0%
15.4%
8.1%
n/a
0.7%
11.9%
0.9%
42
PART II Year Ended December 31, 2019, as compared to 2018
Operating Revenues. The variance was driven primarily by:
• an $18 million increase in property and other taxes primarily due to
additional plant in service, partially offset by a negotiated reassessment
of property values and property tax true ups for prior periods.
• a $45 million decrease in fuel related revenues primarily due to a
decrease in price;
Partially offset by:
• a $31 million decrease in rider revenues primarily due to the cessation
of the Smart Grid Rider in 2018 and the Tax Cut and Jobs Act Rider
beginning in 2019, partially offset by new riders implemented in
conjunction with rate cases including the Price Stabilization Rider,
Electric Service Reliability Rider and the Environmental Surcharge
Mechanism;
• a $15 million decrease in FTR rider revenues; and
• a $12 million decrease in electric and natural gas retail sales, net of
fuel revenues, due to unfavorable weather in the current year.
Partially offset by:
• a $71 million increase in retail pricing primarily due to rate case
impacts; and
• an $18 million increase in PJM point-to-point transmission revenues
due to an increase in the Network Integration Transmission Service rate
primarily due to additional plant in service.
Operating Expenses. The variance was driven primarily by:
• a $40 million increase in operations, maintenance and other expense
primarily due to the FERC approved settlement refund of certain
transmission costs previously billed by PJM recorded in 2018 and
increased PJM transmission expansion fees; and
• a $24 million decrease in fuel used in electric generation and purchased
power expense due to the prior year outage at East Bend Station and
the deferral of OVEC related purchased power costs; and
• an $18 million decrease in the cost of natural gas primarily due to lower
costs passed through to customers, as a result of a lower natural gas
prices.
Losses on Sales of Other Assets and Other, net. The increase was
driven by the loss on the prior year sale of Beckjord.
Interest Expense. The variance was primarily due to higher debt
outstanding in the current year.
Matters Impacting Future Results
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. Duke Energy
Ohio has filed 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 on Duke Energy Ohio’s results of operations,
financial position and cash flows. See Note 4 to the Consolidated Financial
Statements, “Regulatory Matters,” for additional information.
Within this Item 7, see Liquidity and Capital Resources for discussion of
risks associated with the Tax Act.
DUKE ENERGY INDIANA
Results of Operations
(in millions)
Operating Revenues
Operating Expenses
Fuel used in electric generation and purchased power
Operation, maintenance and other
Depreciation and amortization
Property and other taxes
Impairment charges
Total operating expenses
Operating Income
Other Income and Expenses, net
Interest Expense
Income Before Income Taxes
Income Tax Expense
Net Income
2019
$ 3,004
935
790
525
69
—
2,319
685
41
156
570
134
436
$
Years Ended December 31,
2018
$ 3,059
Variance
$
(55)
1,000
788
520
78
30
2,416
643
45
167
521
128
393
$
(65)
2
5
(9)
(30)
(97)
42
(4)
(11)
49
6
43
$
43
PART II The following table shows the percent changes in GWh sales and average number of customers for Duke Energy Indiana. The below percentages for retail
customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities, public and private
utilities and power marketers. Amounts are not weather-normalized.
Increase (Decrease) over prior year
Residential sales
General service sales
Industrial sales
Wholesale power sales
Total sales
Average number of customers
2019
(3.9)%
(2.2)%
(2.6)%
(27.7)%
(6.8)%
1.2%
2018
12.5%
2.8%
0.5%
(0.9)%
3.3%
1.3%
Year Ended December 31, 2019, as compared to 2018
Matters Impacting Future Results
Operating Revenues. The variance was driven primarily by:
• a $21 million decrease in wholesale power revenues primarily due to
the expiration of a contract with a wholesale customer;
• a $16 million decrease in other transmission FTR revenues due to lower
congestion; and
• a $14 million decrease in weather-normal retail sales volume.
Operating Expenses. The variance was driven primarily by:
• a $65 million decrease in fuel used in electric generation and purchased
power expense primarily due to lower coal and natural gas costs,
partially offset by higher purchase power fuel clause, higher amortization
of deferred fuel costs and higher deferred MISO charges; and
• a $30 million decrease in impairments primarily due to the prior year
Edwardsport IGCC settlement agreement.
On April 17, 2015, the EPA published in the Federal Register a rule to
regulate the disposal of CCR from electric utilities as solid waste. Duke Energy
Indiana has interpreted the rule to identify the coal ash basin sites impacted
and has assessed the amounts of coal ash subject to the rule and a method of
compliance. Duke Energy Indiana’s interpretation of the requirements of the CCR
rule is subject to potential legal challenges and further regulatory approvals,
which could result in additional ash basin closure requirements, higher costs
of compliance and greater AROs. Additionally, Duke Energy Indiana has retired
facilities that are not subject to the CCR rule. Duke Energy Indiana may incur
costs at these facilities to comply with environmental regulations or to mitigate
risks associated with on-site storage of coal ash. An order from regulatory
authorities disallowing recovery of costs related to closure of ash basins
could have an adverse impact on Duke Energy Indiana’s results of operations,
financial position and cash flows.
Duke Energy Indiana filed a general rate case with the IURC on July 2,
2019, its first general rate case in Indiana in 16 years. The outcome of this
rate case could materially impact Duke Energy Indiana’s results of operations,
financial position and cash flows. See Note 4 to the Consolidated Financial
Statements, “Regulatory Matters,” for additional information.
Within this Item 7, see Liquidity and Capital Resources for discussion of
risks associated with the Tax Act.
PIEDMONT
Results of Operations
(in millions)
Operating Revenues
Operating Expenses
Cost of natural gas
Operation, maintenance and other
Depreciation and amortization
Property and other taxes
Total operating expenses
Operating Income
Equity in earnings of unconsolidated affiliates
Other income and expenses, net
Total other income and expenses
Interest Expense
Income Before Income Taxes
Income Tax Expense
Net Income
Years Ended December 31,
2019
$ 1,381
2018
$ 1,375
Variance
$
6
532
328
172
45
1,077
304
8
20
28
87
245
43
202
$
584
357
159
49
1,149
226
7
14
21
81
166
37
129
$
(52)
(29)
13
(4)
(72)
78
1
6
7
6
79
6
73
$
44
PART II The following table shows the percent changes in Dth delivered and average number of customers. The percentages for all throughput deliveries represent billed
and unbilled sales. Amounts are not weather-normalized.
Increase (Decrease) over prior year
Residential deliveries
Commercial deliveries
Industrial deliveries
Power generation deliveries
For resale
Total throughput deliveries
Secondary market volumes
Average number of customers
2019
(8.0)%
(4.6)%
1.7%
(11.8)%
4.8%
(8.2)%
(0.5)%
1.4%
2018
23.6%
14.9%
4.2%
23.6%
17.0%
19.0%
(8.1)%
1.6%
Piedmont’s throughput was 511,243,774 Dth and 557,145,128 Dth for
the years ended December 31, 2019, and 2018, respectively. Due to the margin
decoupling mechanism in North Carolina, 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.
challenges, earnings assumptions on pension and other benefit fund
investments and anticipated recovery of costs, especially through regulated
operations.
Management discusses these policies, estimates and assumptions with
senior members of management on a regular basis and provides periodic
updates on management decisions to the Audit Committee. Management
believes the areas described below require significant judgment in the
application of accounting policy or in making estimates and assumptions that
are inherently uncertain and that may change in subsequent periods.
For further information, see Note 1 to the Consolidated Financial
Statements, “Summary of Significant Accounting Policies.”
Year Ended December 31, 2019, as compared to 2018
Operating Revenues. The variance was driven primarily by:
• a $24 million increase due to North Carolina base rate case increases;
• a $19 million increase due to North Carolina and Tennessee IMR
increases; and
• an $11 million increase due to NCUC approval related to tax reform
accounting from fixed rate contracts.
Partially offset by:
• a $52 million decrease due to lower natural gas costs passed through
to customers.
Operating Expenses. The variance was driven primarily by:
Regulated Operations Accounting
Substantially all of Duke Energy’s regulated operations meet the criteria
for application of regulated operations accounting treatment. As a result, Duke
Energy is required to record assets and liabilities that would not be recorded
for nonregulated entities. Regulatory assets generally represent incurred costs
that have been deferred because such costs are probable of future recovery in
customer rates. Regulatory liabilities are recorded when it is probable that a
regulator will require Duke Energy to make refunds to customers or reduce rates
to customers for previous collections or deferred revenue for costs that have yet
to be incurred.
Management continually assesses whether recorded regulatory assets are
probable of future recovery by considering factors such as:
• applicable regulatory environment changes;
• historical regulatory treatment for similar costs in Duke Energy’s
• a $52 million decrease in cost of natural gas due to lower natural gas
jurisdictions;
prices; and
• a $29 million decrease in operation, maintenance and other expense
due to lower information technology outside services and labor costs.
• litigation of rate orders;
• recent rate orders to other regulated entities;
Partially offset by:
on equity; and
• levels of actual return on equity compared to approved rates of return
• a $13 million increase in depreciation and amortization expense due to
• the status of any pending or potential deregulation legislation.
additional plant in service.
Matters Impacting Future Results
Within this Item 7, see Liquidity and Capital Resources for discussion of
risks associated with the Tax Act.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Preparation of financial statements requires the application of accounting
policies, judgments, assumptions and estimates that can significantly affect
the reported results of operations, cash flows or the amounts of assets and
liabilities recognized in the financial statements. Judgments made include
the likelihood of success of particular projects, possible legal and regulatory
45
If future recovery of costs ceases to be probable, asset write-offs would
be recognized in operating income. Additionally, regulatory agencies can provide
flexibility in the manner and timing of the depreciation of property, plant and
equipment, recognition of asset retirement costs and amortization of regulatory
assets, or may disallow recovery of all or a portion of certain assets.
As required by regulated operations accounting rules, significant judgment
can be required to determine if an otherwise recognizable incurred cost qualifies
to be deferred for future recovery as a regulatory asset. Significant judgment can
also be required to determine if revenues previously recognized are for entity
specific costs that are no longer expected to be incurred or have not yet been
incurred and are therefore a regulatory liability.
PART II Goodwill Impairment Assessments
Duke Energy performed its annual goodwill impairment tests for all
reporting units as of August 31, 2019. Additionally, Duke Energy monitors all
relevant events and circumstances during the year to determine if an interim
impairment test is required. Such events and circumstances include an
adverse regulatory outcome, declining financial performance and deterioration
of industry or market conditions. As of August 31, 2019, all of the reporting
units’ estimated fair value of equity substantially exceeded the carrying value of
equity. The fair values of the reporting units were calculated using a weighted
combination of the income approach, which estimates fair value based on
discounted cash flows, and the market approach, which estimates fair value
based on market comparables within the utility and energy industries.
Estimated future cash flows under the income approach are based on
Duke Energy’s internal business plan. Significant assumptions used are growth
rates, future rates of return expected to result from ongoing rate regulation and
discount rates. Management determines the appropriate discount rate for each
of its reporting units based on the WACC for each individual reporting unit. The
WACC takes into account both the after-tax cost of debt and cost of equity. A
major component of the cost of equity is the current risk-free rate on 20-year
U.S. Treasury bonds. In the 2019 impairment tests, Duke Energy considered
implied WACCs for certain peer companies in determining the appropriate WACC
rates to use in its analysis. As each reporting unit has a different risk profile
based on the nature of its operations, including factors such as regulation, the
WACC for each reporting unit may differ. Accordingly, the WACCs were adjusted,
as appropriate, to account for company specific risk premiums. The discount
rates used for calculating the fair values as of August 31, 2019, for each of
Duke Energy’s reporting units ranged from 5.2% to 5.9%. The underlying
assumptions and estimates are made as of a point in time. Subsequent
changes, particularly changes in the discount rates, authorized regulated rates
of return or growth rates inherent in management’s estimates of future cash
flows, could result in future impairment charges.
One of the most significant assumptions utilized in determining the fair
value of reporting units under the market approach is implied market multiples
for certain peer companies. Management selects comparable peers based
on each peer’s primary business mix, operations, and market capitalization
compared to the applicable reporting unit and calculates implied market
multiples based on available projected earnings guidance and peer company
market values as of August 31.
Duke Energy primarily operates in environments that are rate-regulated.
In such environments, revenue requirements are adjusted periodically by
regulators based on factors including levels of costs, sales volumes and costs
of capital. Accordingly, Duke Energy’s regulated utilities operate to some degree
with a buffer from the direct effects, positive or negative, of significant swings in
market or economic conditions. However, significant changes in discount rates
over a prolonged period may have a material impact on the fair value of equity.
For further information, see Note 12 to the Consolidated Financial
Statements, “Goodwill and Intangible Assets.”
Asset Retirement Obligations
AROs are recognized for legal obligations associated with the retirement of
property, plant and equipment at the present value of the projected liability in the
period in which it is incurred, if a reasonable estimate of fair value can be made.
The present value of the initial obligation and subsequent updates are
based on discounted cash flows, which include estimates regarding timing of
future cash flows, selection of discount rates and cost escalation rates, among
other factors. These estimates are subject to change.
Obligations for nuclear decommissioning are based on site-specific cost
studies. Duke Energy Carolinas and Duke Energy Progress assume prompt
dismantlement of the nuclear facilities after operations are ceased. During
2019, Duke Energy Florida, entered into an agreement for the accelerated
decommissioning of the Crystal River Unit 3 nuclear power station. Closing
of this agreement is contingent upon approval of the NRC and FPSC. The
retirement obligations for the decommissioning of Crystal River Unit 3 nuclear
power station are measured using probability weightings of an obligation based
on accelerated decommissioning from 2020 continuing through 2027 and an
obligation based on the unit in SAFSTOR, with decommissioning beginning in
2067 and ending in 2074. Duke Energy Carolinas, Duke Energy Progress and
Duke Energy Florida also assume that spent fuel will be stored on-site until such
time that it can be transferred to a yet to be built DOE facility.
Obligations for closure of ash basins are based upon discounted cash flows
of estimated costs for site-specific plans. During 2019, Duke Energy reached
a settlement agreement with the NCDEQ and SELC to excavate 7 and partially
excavate 2 of the remaining ash basins in Duke Energy Carolinas and Duke Energy
Progress service territories. In 2019, Duke Energy Carolinas and Duke Energy
Progress remeasured their obligations to reflect the results of the settlement.
For further information, see Notes 4, 5 and 10 to the Consolidated
Financial Statements, “Regulatory Matters,” “Commitments and Contingencies”
and “Asset Retirement Obligations.”
Long-Lived Asset Impairment Assessments, Excluding Regulated
Operations
Duke Energy evaluates property, plant and equipment for impairment
when events or changes in circumstances (such as a significant change in
cash flow projections or the determination that it is more likely than not that an
asset or asset group will be sold) indicate the carrying value of such assets may
not be recoverable. The determination of whether an impairment has occurred
is based on an estimate of undiscounted future cash flows attributable to the
assets, as compared with their carrying value.
Performing an impairment evaluation involves a significant degree of
estimation and judgment in areas such as identifying circumstances that
indicate an impairment may exist, identifying and grouping affected assets and
developing the undiscounted future cash flows. If an impairment has occurred,
the amount of the impairment recognized is determined by estimating the fair
value and recording a loss if the carrying value is greater than the fair value.
Additionally, determining fair value requires probability weighting future cash
flows to reflect expectations about possible variations in their amounts or timing
and the selection of an appropriate discount rate. Although cash flow estimates
are based on relevant information available at the time the estimates are made,
estimates of future cash flows are, by nature, highly uncertain and may vary
significantly from actual results.
When determining whether an asset or asset group has been impaired,
management groups assets at the lowest level that has discrete cash flows.
During 2019, Duke Energy sold a minority interest in a portion of certain
Commercial Renewable assets. Following the sale, Duke Energy evaluated
recoverability of the assets included in the sale as the fair value of consideration
received for the portfolio was less than the carrying value of the assets. It
was determined the assets were all recoverable. Additionally, Duke Energy
evaluated recoverability of certain renewable merchant plants during 2019 due
to declining market pricing and declining long-term forecasted energy prices.
It was determined the assets were all recoverable as the carrying value of the
assets approximated the aggregate estimated future cash flows.
For further information, see Notes 3 and 11 to the Consolidated Financial
Statements, “Business Segments” and “Property, Plant and Equipment.”
Equity Method Investments
Equity method investments are assessed for impairment when conditions
exist that indicate that the fair value of the investment is less than book value.
If the decline in value is considered to be other-than-temporary, an impairment
charge is recorded and the investment is written down to its estimated fair
value, which establishes a new cost basis in the investment.
Events or changes in circumstances are monitored that may indicate,
in management’s judgment, the carrying value of such investments may have
experienced an other-than-temporary decline in value. The fair value of equity
method investments is generally estimated using an income approach where
46
PART II in assumptions can result in different expense and reported asset or liability
amounts and future actual experience can differ from the assumptions. Duke
Energy believes the most critical assumptions for pension and other post-
retirement benefits are:
• the expected long-term rate of return on plan assets;
• the assumed discount rate applied to future projected benefit
payments; and
• the heath care cost trend rate.
Duke Energy elects to amortize net actuarial gain or loss amounts that are
in excess of 10% of the greater of the market-related value of plan assets or
the plan’s projected benefit obligation, into net pension or other post-retirement
benefit expense over the average remaining service period of active participants
expected to benefit under the plan. If all or almost all of a plan’s participants
are inactive, the average remaining life expectancy of the inactive participants
is used instead of average remaining service period. Prior service cost or credit,
which represents an increase or decrease in a plan’s pension benefit obligation
resulting from plan amendment, is amortized on a straight-line basis over the
average expected remaining service period of active participants expected to
benefit under the plan. If all or almost all of a plan’s participants are inactive,
the average remaining life expectancy of the inactive participants is used
instead of average remaining service period.
As of December 31, 2019, Duke Energy assumes pension and other
post-retirement plan assets will generate a long-term rate of return of 6.85%.
The expected long-term rate of return was developed using a weighted
average calculation of expected returns based primarily on future expected
returns across asset classes considering the use of active asset managers,
where applicable. The asset allocation targets were set after considering the
investment objective and the risk profile. Equity securities are held for their
higher expected returns. Debt securities are primarily held to hedge the qualified
pension liability. Real assets, return-seeking fixed income, hedge funds and
other global securities are held for diversification. Investments within asset
classes are diversified to achieve broad market participation and reduce the
impact of individual managers on investments.
Duke Energy discounted its future U.S. pension and other post-retirement
obligations using a rate of 3.3% as of December 31, 2019. Discount rates used
to measure benefit plan obligations for financial reporting purposes reflect
rates at which pension benefits could be effectively settled. As of December
31, 2019, Duke Energy determined its discount rate for U.S. pension and
other post-retirement obligations using a bond selection-settlement portfolio
approach. This approach develops a discount rate by selecting a portfolio of
high quality corporate bonds that generate sufficient cash flow to provide for
projected benefit payments of the plan. The selected bond portfolio is derived
from a universe of non-callable corporate bonds rated Aa quality or higher. After
the bond portfolio is selected, a single interest rate is determined that equates
the present value of the plan’s projected benefit payments discounted at this
rate with the market value of the bonds selected.
Future changes in plan asset returns, assumed discount rates and
various other factors related to the participants in Duke Energy’s pension
and post-retirement plans will impact future pension expense and liabilities.
Duke Energy cannot predict with certainty what these factors will be in the future.
The following table presents the approximate effect on Duke Energy’s 2019 pretax
pension expense, pretax other post-retirement expense, pension obligation and
other post-retirement benefit obligation if a 0.25% change in rates were to occur.
significant judgments and assumptions include expected future cash flows, the
appropriate discount rate, and probability weighted-scenarios, if applicable.
In certain instances, a market approach may also be used to estimate the fair
value of the equity method investment.
Events or changes in circumstances that may be indicative of an other-
than-temporary decline in value will vary by investment, but may include:
• Significant delays in or failure to complete significant growth projects
of investees;
• Adverse regulatory actions expected to substantially reduce the
investee’s product demand or profitability;
• Expected financial performance significantly worse than anticipated
when initially invested;
• Prolonged period the fair value is below carrying value;
• A significant or sustained decline in the market value of an investee;
• Lower than expected cash distributions from investees;
• Significant asset impairments or operating losses recognized by
investees; and
• Loss of significant customers or suppliers with no immediate prospects
for replacement.
ACP
As of December 31, 2019, the carrying value of the equity method
investment in ACP is $1.2 billion, and Duke Energy’s maximum exposure to loss
for its guarantee of the ACP revolving credit facility is $827 million. During 2018
and 2019, ACP received several adverse court rulings as described in Note 4 to
the Consolidated Financial Statements, “Regulatory Matters.” As a result, Duke
Energy evaluated this investment for impairment and determined that fair value
approximated carrying value and therefore no impairment was necessary.
Duke Energy estimated the fair value of its investment in ACP using an
income approach that primarily considered probability-weighted scenarios of
discounted future net cash flows based on the most recent estimate of total
construction costs and revenues. These scenarios included assumptions of
various court decisions and the impact those decisions may have on the timing
and extent of investment, including scenarios assuming the full resolution
of permitting issues in addition to a scenario where the project does not
proceed. Certain scenarios within the analysis included growth expectations
from additional compression or other expansion opportunities and reopeners
for pricing. An after-tax discount rate of 5.9% was used in the analysis. The
discount rate was derived using a market participant approach with an adjusted
risk premium for the underlying investment. Higher probabilities were generally
assigned to those scenarios where court approvals were received and the project
moves forward reflecting interim rates at prices subject to the reopeners. A low
probability was assigned to the scenario where the project does not proceed.
Judgments and assumptions are inherent in our estimates of future cash
flows, discount rates, growth assumptions, and the likelihood of various scenarios.
It is reasonably possible that future unfavorable developments, such as a reduced
likelihood of success with court approvals, increased estimates of construction
costs, material increases in the discount rate, important feedback on customer
price increases or further significant delays, could result in a future impairment.
For further information on ACP, see Notes 4 and 13 to the Consolidated
Financial Statements, “Regulatory Matters” and “Investments in Unconsolidated
Affiliates”.
Pension and Other Post-Retirement Benefits
The calculation of pension expense, other post-retirement benefit expense
and net pension and other post-retirement assets or liabilities require the use
of assumptions and election of permissible accounting alternatives. Changes
47
PART II (in millions)
Effect on 2019 pretax pension and other post-retirement expense
Expected long-term rate of return
Discount rate
Effect on pension and other post-retirement benefit obligation at December 31, 2019
Discount rate
Qualified and Non-
Qualified Pension Plans
Other Post-Retirement Plans
0.25%
(0.25)%
0.25%
(0.25)%
$ (21)
(9)
$ 21
9
(197)
201
$ (1)
—
(14)
$
1
(1)
14
Duke Energy’s other post-retirement plan uses a health care cost trend rate covering both pre- and post-age 65 retired plan participants, which is comprised
of a medical care cost trend rate, which reflects the near- and long-term expectation of increases in medical costs, and a prescription drug cost trend rate, which
reflects the near- and long-term expectation of increases in prescription drug costs. As of December 31, 2019, the health care cost trend rate was 6.0%, trending
down to 4.75% by 2026. These plans are closed to new employees.
For further information, see Note 23 to the Consolidated Financial Statements, “Employee Benefit Plans.”
LIQUIDITY AND CAPITAL RESOURCES
Sources and Uses of Cash
Duke Energy relies primarily upon cash flows from operations, debt and
equity issuances and its existing cash and cash equivalents to fund its liquidity
and capital requirements. Duke Energy’s capital requirements arise primarily
from capital and investment expenditures, repaying long-term debt and paying
dividends to shareholders.
Among other provisions, the Tax Act lowered the corporate federal income
tax rate from 35% to 21% and eliminated bonus depreciation for regulated
utilities. For Duke Energy’s regulated operations, the reduction in federal
income taxes will result in lower regulated customer rates. However, due to
its existing NOL position and other tax credits, Duke Energy does not expect to
be a significant federal cash tax payer through at least 2027. As a result, any
reduction in customer rates could cause a material reduction in consolidated
cash flows from operations in the short term. Over time, the reduction in
deferred tax liabilities resulting from the Tax Act will increase Duke Energy’s
regulated rate base investments and customer rates. Impacts of Tax Act to Duke
Energy’s cash flows and credit metrics are subject to the regulatory actions
of its state commissions, of which a substantial amount remain uncertain
through ongoing rate case activity, and the FERC. See Note 4 to the Consolidated
Financial Statements, “Regulatory Matters,” for additional information.
The Subsidiary Registrants generally maintain minimal cash balances and
use short-term borrowings to meet their working capital needs and other cash
requirements. The Subsidiary Registrants, excluding Progress Energy, support
their short-term borrowing needs through participation with Duke Energy and
certain of its other subsidiaries in a money pool arrangement. The companies with
short-term funds may provide short-term loans to affiliates participating under
this arrangement. See Note 7 to the Consolidated Financial Statements, “Debt and
Credit Facilities,” for additional discussion of the money pool arrangement.
Duke Energy and the Subsidiary Registrants, excluding Progress Energy,
may also use short-term debt, including commercial paper and the money
pool, as a bridge to long-term debt financings. The levels of borrowing may
vary significantly over the course of the year due to the timing of long-term
debt financings and the impact of fluctuations in cash flows from operations.
From time to time, Duke Energy’s current liabilities exceed current assets
resulting from the use of short-term debt as a funding source to meet scheduled
maturities of long-term debt, as well as cash needs, which can fluctuate due to
the seasonality of its businesses.
Equity Issuance
In order to strengthen its balance sheet and credit metrics and bolster
cash flows, in November 2019, Duke Energy entered into forward sales
agreements for $2.5 billion of common stock equity expected to be settled in late
48
2020. Duke Energy plans to issue $500 million of common stock equity per year
through at least 2022 through the DRIP and ATM programs. Additionally, Duke
Energy will utilize other instruments as needed. See Note 20 to the Consolidated
Financial Statements, “Stockholders’ Equity,” for further information regarding
Duke Energy’s equity issuances in 2019.
Credit Facilities and Registration Statements
See Note 7 to the Consolidated Financial Statements, “Debt and Credit
Facilities,” for further information regarding credit facilities and shelf registration
statements available to Duke Energy and the Duke Energy Registrants.
CAPITAL EXPENDITURES
Duke Energy continues to focus on reducing risk and positioning its
business for future success and will invest principally in its strongest business
sectors. Duke Energy’s projected capital and investment expenditures, including
AFUDC debt and capitalized interest, for the next three fiscal years are included
in the table below.
(in millions)
New generation
Regulated renewables
Environmental
Nuclear fuel
Major nuclear
Customer additions
Grid modernization and other transmission and
distribution projects
Maintenance and other
Total Electric Utilities and Infrastructure
Gas Utilities and Infrastructure
2020
2021
2022
$
115
515
975
465
405
630
3,345
2,275
8,725
2,275
$
230
450
725
410
285
630
3,845
1,925
8,500
1,950
$
475
410
750
415
175
620
4,380
2,050
9,275
1,150
Commercial Renewables and Other
Total projected capital and investment expenditures
825
$ 11,825
875
$ 11,325
725
$11,150
DEBT MATURITIES
See Note 7 to the Consolidated Financial Statements, “Debt and Credit
Facilities,” for further information regarding significant components of Current
Maturities of Long-Term Debt on the Consolidated Balance Sheets.
PART II DIVIDEND PAYMENTS
In 2019, Duke Energy paid quarterly cash dividends for the 93rd
consecutive year and expects to continue its policy of paying regular cash
dividends in the future. There is no assurance as to the amount of future
dividends because they depend on future earnings, capital requirements,
financial condition and are subject to the discretion of the Board of Directors.
Duke Energy targets a dividend payout ratio of between 65% and 75%,
based upon adjusted diluted EPS, and expects this trend to continue through
2024. In 2019 and 2018, Duke Energy increased the dividend by approximately
2% and 4%, respectively, and the company remains committed to continued
growth of the dividend.
Dividend and Other Funding Restrictions of Duke Energy Subsidiaries
As discussed in Note 4 to the Consolidated Financial Statements,
“Regulatory Matters,” Duke Energy’s wholly owned public utility operating
companies have restrictions on the amount of funds that can be transferred
to Duke Energy through dividends, advances or loans as a result of conditions
imposed by various regulators in conjunction with merger transactions. Duke
Energy Progress and Duke Energy Florida also have restrictions imposed by
their first mortgage bond indentures and Articles of Incorporation, which in
certain circumstances, limit their ability to make cash dividends or distributions
on common stock. Additionally, certain other Duke Energy subsidiaries have
other restrictions, such as minimum working capital and tangible net worth
requirements pursuant to debt and other agreements that limit the amount
of funds that can be transferred to Duke Energy. At December 31, 2019, the
amount of restricted net assets of wholly owned subsidiaries of Duke Energy
that may not be distributed to Duke Energy in the form of a loan or dividend does
not exceed a material amount of Duke Energy’s net assets. Duke Energy does
not have any legal or other restrictions on paying common stock dividends to
shareholders out of its consolidated equity accounts. Although these restrictions
cap the amount of funding the various operating subsidiaries can provide
to Duke Energy, management does not believe these restrictions will have a
significant impact on Duke Energy’s ability to access cash to meet its payment
of dividends on common stock and other future funding obligations.
CASH FLOWS FROM OPERATING ACTIVITIES
Cash flows from operations of Electric Utilities and Infrastructure and Gas
Utilities and Infrastructure are primarily driven by sales of electricity and natural
gas, respectively, and costs of operations. These cash flows from operations
are relatively stable and comprise a substantial portion of Duke Energy’s
operating cash flows. Weather conditions, working capital and commodity price
fluctuations and unanticipated expenses including unplanned plant outages,
storms, legal costs and related settlements can affect the timing and level of
cash flows from operations.
Duke Energy believes it has sufficient liquidity resources through the
commercial paper markets, and ultimately, the Master Credit Facility, to support
these operations. Cash flows from operations are subject to a number of other
factors, including, but not limited to, regulatory constraints, economic trends
and market volatility (see Item 1A, “Risk Factors,” for additional information).
At December 31, 2019, Duke Energy had cash and cash equivalents and
short-term investments of $311 million.
DEBT ISSUANCES
Depending on availability based on the issuing entity, the credit rating of
the issuing entity, and market conditions, the Subsidiary Registrants prefer to
issue first mortgage bonds and secured debt, followed by unsecured debt. This
preference is the result of generally higher credit ratings for first mortgage bonds
and secured debt, which typically result in lower interest costs. Duke Energy
Corporation primarily issues unsecured debt.
In 2020, Duke Energy anticipates issuing additional debt of $5.2 billion,
primarily for the purpose of funding capital expenditures and debt maturities.
See to Note 7 to the Consolidated Financial Statements, “Debt and Credit
Facilities,” for further information regarding significant debt issuances in 2019.
Duke Energy’s capitalization is balanced between debt and equity as
shown in the table below.
Equity
Debt
Projected 2020
Actual 2019
Actual 2018
45%
55%
44%
56%
43%
57%
Restrictive Debt Covenants
Duke Energy’s debt and credit agreements contain various financial and
other covenants. Duke Energy’s Master Credit Facility contains a covenant
requiring the debt-to-total capitalization ratio to not exceed 65% for each
borrower, excluding Piedmont, and 70% for Piedmont. Failure to meet those
covenants beyond applicable grace periods could result in accelerated due dates
and/or termination of the agreements or sublimits thereto. As of December
31, 2019, each of the Duke Energy Registrants was in compliance with all
covenants related to their debt agreements. In addition, some credit agreements
may allow for acceleration of payments or termination of the agreements due to
nonpayment, or acceleration of other significant indebtedness of the borrower or
some of its subsidiaries. None of the debt or credit agreements contain material
adverse change clauses.
Credit Ratings
Moody’s Investors Service, Inc. and S&P provide credit ratings for
various Duke Energy Registrants. In January 2020, Fitch Ratings, Inc. publicly
announced plans to withdraw the ratings on Duke Energy Corporation on or
about February 20, 2020. The following table includes Duke Energy and certain
subsidiaries’ credit ratings and ratings outlook as of February 2020.
Duke Energy Corporation
Issuer Credit Rating
Senior Unsecured Debt
Commercial Paper
Duke Energy Carolinas
Senior Secured Debt
Senior Unsecured Debt
Progress Energy
Senior Unsecured Debt
Duke Energy Progress
Senior Secured Debt
Duke Energy Florida
Senior Secured Debt
Senior Unsecured Debt
Duke Energy Ohio
Senior Secured Debt
Senior Unsecured Debt
Duke Energy Indiana
Senior Secured Debt
Senior Unsecured Debt
Duke Energy Kentucky
Senior Unsecured Debt
Piedmont Natural Gas
Senior Unsecured
Moody’s
Stable
Baa1
Baa1
P-2
Stable
Aa2
A1
Stable
Baa1
Stable
Aa3
Stable
A1
A3
Stable
A2
Baa1
Stable
Aa3
A2
Stable
Baa1
Stable
A3
S&P
Stable
A-
BBB+
A-2
Stable
A
A-
Stable
BBB+
Stable
A
Stable
A
A-
Stable
A
A-
Stable
A
A-
Stable
A-
Stable
A-
Credit ratings are intended to provide credit lenders a framework for
comparing the credit quality of securities and are not a recommendation to buy,
sell or hold. The Duke Energy Registrants’ credit ratings are dependent on the
rating agencies’ assessments of their ability to meet their debt principal and
interest obligations when they come due. If, as a result of market conditions
or other factors, the Duke Energy Registrants are unable to maintain current
balance sheet strength, or if earnings and cash flow outlook materially
deteriorates, credit ratings could be negatively impacted.
49
PART II Cash Flow Information
The following table summarizes Duke Energy’s cash flows for the two most recently completed fiscal years.
(in millions)
Cash flows provided by (used in):
Operating activities
Investing activities
Financing activities
Net (decrease) increase in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of period
Cash, cash equivalents and restricted cash at end of period
OPERATING CASH FLOWS
Years Ended December 31,
2019
2018
$
8,209
$
7,186
(11,957)
3,730
(10,060)
2,960
(18)
591
573
$
$
86
505
591
The following table summarizes key components of Duke Energy’s operating cash flows for the two most recently completed fiscal years.
(in millions)
Net income
Non-cash adjustments to net income
Contributions to qualified pension plans
Payments for AROs
Payment for disposal of other assets
Refund of AMT credit carryforwards
Working capital
Net cash provided by operating activities
$
Years Ended December 31,
$
2019
3,571
5,761
(77)
(746)
—
573
$
2018
2,644
6,447
(141)
(533)
(105)
—
(873)
(1,126)
Variance
927
(686)
64
(213)
105
573
253
$
8,209
$
7,186
$
1,023
The variance was driven primarily by:
• a $241 million increase in net income after adjustment for non-cash
items primarily due to increases in revenues as a result of rate
increases in the current year, partially offset by decreases in current
year non-cash adjustments;
• a $573 million refund of AMT credit carryforwards;
• a $253 million decrease in cash outflows from working capital primarily
due to fluctuations in accounts receivable balances, including a prior
year increase for AMT refunds, and prior year increases in regulatory
assets related to fuel costs, partially offset by fluctuations in inventory
levels and current year decreases in property tax and severance
accruals; and
• a $105 million payment in the prior year for disposal of Beckjord.
Partially offset by:
• a $213 million increase in payments for AROs.
INVESTING CASH FLOWS
The following table summarizes key components of Duke Energy’s investing cash flows for the two most recently completed fiscal years.
(in millions)
Capital, investment and acquisition expenditures, net of return of investment capital
Debt and equity securities, net
Other investing items
Net cash used in investing activities
The primary use of cash related to investing activities is capital,
investment and acquisition expenditures, net of return of investment capital
detailed by reportable business segment in the following table. The increase
includes expenditures related to line improvements in the Electric Utilities and
Infrastructure segment and pipeline construction and improvement in the Gas
Utilities and Infrastructure segment, as well as increased investment in the
Commercial Renewables segment.
Years Ended December 31,
2019
2018
Variance
$ (11,435)
$
(9,668) $
(1,767)
(5)
(517)
(15)
(377)
10
(140)
$ (11,957)
$ (10,060) $
(1,897)
Years Ended December 31,
2019
2018 Variance
(in millions)
Electric Utilities and Infrastructure
$ 8,258
$ 8,086
$
Gas Utilities and Infrastructure
Commercial Renewables
Other
Total capital, investment and acquisition
1,533
1,423
221
1,133
193
256
172
400
1,230
(35)
expenditures, net of return of investment capital
$ 11,435
$ 9,668
$ 1,767
50
PART II FINANCING CASH FLOWS
The following table summarizes key components of Duke Energy’s financing cash flows for the two most recently completed fiscal years.
Years Ended December 31,
(in millions)
Issuance of common stock
Issuance of preferred stock
Issuances of long-term debt, net
Notes payable and commercial paper
Dividends paid
Contributions from noncontrolling interests
Other financing items
Net cash provided by financing activities
2019
$
384
$
1,962
3,615
(380)
(2,668)
843
(26)
2018
1,838
—
2,393
1,171
(2,471)
41
(12)
$
3,730
$
2,960
$
Variance
$
(1,454)
1,962
1,222
(1,551)
(197)
802
(14)
770
The variance was driven primarily by:
Partially offset by:
• a $1,962 million increase in proceeds from the issuance of preferred
• a $1,454 million decrease in proceeds from the issuance of common
stock;
stock; and
• a $1,222 million net increase in proceeds from issuances of long-term
debt primarily due to timing of issuances and redemptions of long-term
debt; and
• an $802 million increase in contributions from noncontrolling interests,
including $415 million related to the sale of a noncontrolling interest in
the Commercial Renewables segment.
Off-Balance Sheet Arrangements
Duke Energy and certain of its subsidiaries enter into guarantee
arrangements in the normal course of business to facilitate commercial
transactions with third parties. These arrangements include performance
guarantees, standby letters of credit, debt guarantees, surety bonds and
indemnifications.
Most of the guarantee arrangements entered into by Duke Energy enhance
the credit standing of certain subsidiaries, non-consolidated entities or less
than wholly owned entities, enabling them to conduct business. As such, these
guarantee arrangements involve elements of performance and credit risk, which
are not always included on the Consolidated Balance Sheets. The possibility
of Duke Energy, either on its own or on behalf of Spectra Capital through
indemnification agreements entered into as part of the January 2, 2007, spin-off
of Spectra Energy Corp, having to honor its contingencies is largely dependent
upon the future operations of the subsidiaries, investees and other third parties,
or the occurrence of certain future events.
Duke Energy performs ongoing assessments of its respective guarantee
obligations to determine whether any liabilities have been incurred as a result of
potential increased non-performance risk by third parties for which Duke Energy
• a $1,551 million decrease in net borrowings from notes payable
and commercial paper primarily due to the use of proceeds from the
preferred stock issuance and increased long-term debt issuances used
to pay down outstanding commercial paper.
has issued guarantees. See Note 8 to the Consolidated Financial Statements,
“Guarantees and Indemnifications,” for further details of the guarantee
arrangements. Issuance of these guarantee arrangements is not required for the
majority of Duke Energy’s operations. Thus, if Duke Energy discontinued issuing
these guarantees, there would not be a material impact to the consolidated
results of operations, cash flows or financial position.
In November 2019, Duke Energy executed equity forward sales
agreements. Settlement of the forward sales agreements are expected to occur
on or prior to December 31, 2020. See Note 20 to the Consolidated Financial
Statements, “Stockholders’ Equity” for further details on the equity forward
sales agreements.
Other than the guarantee arrangements discussed above, the equity
forward sales agreements and off-balance sheet debt related to non-
consolidated VIEs, Duke Energy does not have any material off-balance sheet
financing entities or structures. For additional information, see Note 18 to the
Consolidated Financial Statements, “Variable Interest Entities”.
51
PART II Contractual Obligations
Duke Energy enters into contracts that require payment of cash at certain specified periods, based on certain specified minimum quantities and prices. The
following table summarizes Duke Energy’s contractual cash obligations as of December 31, 2019.
(in millions)
Long-term debt(a)
Interest payments on long-term debt(b)
Finance leases(c)
Operating leases(c)
Purchase obligations:(d)
Fuel and purchased power(e)(f)
Other purchase obligations(g)
Nuclear decommissioning trust annual funding(h)
Land easements(i)
Total contractual cash obligations(j)(k)
Payments Due By Period
Less than
1 year
(2020)
3,021
2,163
181
268
4,124
4,836
24
9
14,626
$
$
2-3 years
(2021 &
2022)
9,135
3,986
359
417
5,390
322
62
18
19,689
$
$
4-5 years
(2023 &
2024)
4,870
3,516
296
367
3,798
76
62
20
13,005
$
$
More than
5 years
(2025 &
beyond)
39,148
24,323
823
984
$
12,938
222
458
170
79,066
$
$
Total
56,174
33,988
1,659
2,036
26,250
5,456
606
217
$ 126,386
(a) See Note 7 to the Consolidated Financial Statements, “Debt and Credit Facilities.”
(b)
(c) See Note 6 to the Consolidated Financial Statements, “Leases.” Amounts in the table above include the interest component of finance leases based on the interest rates stated in the lease agreements and exclude certain
Interest payments on variable rate debt instruments were calculated using December 31, 2019, interest rates and holding them constant for the life of the instruments.
related executory costs. Amounts exclude contingent lease obligations.
(d) Current liabilities, except for current maturities of long-term debt, and purchase obligations reflected on the Consolidated Balance Sheets have been excluded from the above table.
(e)
Includes firm capacity payments that provide Duke Energy with uninterrupted firm access to electricity transmission capacity and natural gas transportation contracts, as well as undesignated contracts and contracts that
qualify as NPNS. For contracts where the price paid is based on an index, the amount is based on market prices at December 31, 2019, or the best projections of the index. For certain of these amounts, Duke Energy may
settle on a net cash basis since Duke Energy has entered into payment netting arrangements with counterparties that permit Duke Energy to offset receivables and payables with such counterparties.
(f) Amounts exclude obligations under the OVEC PPA. See Note 18 to the Consolidated Financial Statements, “Variable Interest Entities,” for additional information.
(g)
Includes contracts for software, telephone, data and consulting or advisory services. Amount also includes contractual obligations for EPC costs for new generation plants, wind and solar facilities, plant refurbishments,
maintenance and day-to-day contract work and commitments to buy certain products. Amount excludes certain open purchase orders for services that are provided on demand for which the timing of the purchase cannot be
determined.
(h) Related to future annual funding obligations to NDTF through nuclear power stations’ relicensing dates. See Note 10 to the Consolidated Financial Statements, “Asset Retirement Obligations.”
(i) Related to Commercial Renewables wind facilities.
(j) Unrecognized tax benefits of $126 million are not reflected in this table as Duke Energy cannot predict when open income tax years will close with completed examinations. See Note 24 to the Consolidated Financial
Statements, “Income Taxes.”
(k) The table above excludes reserves for litigation, environmental remediation, asbestos-related injuries and damages claims and self-insurance claims (see Note 5 to the Consolidated Financial Statements, “Commitments
and Contingencies”) because Duke Energy is uncertain as to the timing and amount of cash payments that will be required. Additionally, the table above excludes annual insurance premiums that are necessary to operate the
business, including nuclear insurance (see Note 5 to the Consolidated Financial Statements, “Commitments and Contingencies”), funding of pension and other post-retirement benefit plans (see Note 23 to the Consolidated
Financial Statements, “Employee Benefit Plans”), AROs, including ash management expenditures (see Note 10 to the Consolidated Financial Statements, “Asset Retirement Obligations”) and regulatory liabilities (see Note 4
to the Consolidated Financial Statements, “Regulatory Matters”) because the amount and timing of the cash payments are uncertain. Also excluded are Deferred Income Taxes and ITCs recorded on the Consolidated Balance
Sheets since cash payments for income taxes are determined based primarily on taxable income for each discrete fiscal year.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Risk Management Policies
The Enterprise Risk Management policy framework at Duke Energy
includes strategy, operational, project execution and financial or transaction
related risks. Enterprise Risk Management includes market risk as part of the
financial and transaction related risks in its framework.
Duke Energy is exposed to market risks associated with commodity prices,
interest rates and equity prices. Duke Energy has established comprehensive
risk management policies to monitor and manage these market risks. Duke
Energy’s Chief Executive Officer and Chief Financial Officer are responsible for
the overall approval of market risk management policies and the delegation
of approval and authorization levels. The Finance and Risk Management
Committee of the Board of Directors receives periodic updates from the Chief
Risk Officer and other members of management on market risk positions,
corporate exposures and overall risk management activities. The Chief Risk
Officer is responsible for the overall governance of managing commodity price
risk, including monitoring exposure limits.
The following disclosures about market risk contain forward-looking
statements that involve estimates, projections, goals, forecasts, assumptions,
risks and uncertainties that could cause actual results or outcomes to differ
materially from those expressed in the forward-looking statements. See
Item 1A, “Risk Factors,” and “Cautionary Statement Regarding Forward-Looking
Information” for a discussion of the factors that may impact any such forward-
looking statements made herein.
Commodity Price Risk
Duke Energy is exposed to the impact of market fluctuations in the prices
of electricity, coal, natural gas and other energy-related products marketed and
purchased as a result of its ownership of energy-related assets. Duke Energy’s
exposure to these fluctuations is primarily limited by the cost-based regulation
of its regulated operations as these operations are typically allowed to recover
substantially all of these costs through various cost-recovery clauses, including
fuel clauses, formula-based contracts, or other cost-sharing mechanisms.
While there may be a delay in timing between when these costs are incurred and
when they are recovered through rates, changes from year to year generally do
not have a material impact on operating results of these regulated operations.
Within Duke Energy’s Commercial Renewables segment, the company has
limited exposure to market price fluctuations in prices of energy-related
products as a result of its ownership of renewable assets.
Price risk represents the potential risk of loss from adverse changes in the
market price of electricity or other energy commodities. Duke Energy’s exposure
to commodity price risk is influenced by a number of factors, including contract
52
PART II size, length, market liquidity, location and unique or specific contract terms.
Duke Energy employs established policies and procedures to manage risks
associated with these market fluctuations, which may include using various
commodity derivatives, such as swaps, futures, forwards and options. For
additional information, see Note 15 to the Consolidated Financial Statements,
“Derivatives and Hedging.”
Hedging Strategies
Duke Energy closely monitors risks associated with commodity price
changes on its future operations and, where appropriate, uses various
commodity instruments such as electricity, coal and natural gas forward
contracts and options to mitigate the effect of such fluctuations on operations.
Duke Energy’s primary use of energy commodity derivatives is to hedge
against exposure to the prices of power, fuel for generation and natural gas
for customers. Additionally, Duke Energy’s Commercial Renewables business
may enter into short-term or long-term hedge agreements to manage price risk
associated with project output.
The majority of instruments used to manage Duke Energy’s commodity
price exposure are either not designated as hedges or do not qualify for hedge
accounting. These instruments are referred to as undesignated contracts.
Mark-to-market changes for undesignated contracts entered into by regulated
businesses are reflected as regulatory assets or liabilities on the Consolidated
Balance Sheets. Undesignated contracts entered into by unregulated businesses
are marked-to-market each period, with changes in the fair value of the
derivative instruments reflected in earnings.
Duke Energy may also enter into other contracts that qualify for the NPNS
exception. When a contract meets the criteria to qualify as NPNS, Duke Energy
applies such exception. Income recognition and realization related to NPNS
contracts generally coincide with the physical delivery of the commodity. For
contracts qualifying for the NPNS exception, no recognition of the contract’s fair
value in the Consolidated Financial Statements is required until settlement of
the contract as long as the transaction remains probable of occurring.
Generation Portfolio Risks
The Duke Energy Registrants optimize the value of their generation
portfolios, which include generation assets, fuel and emission allowances.
Modeled forecasts of future generation output and fuel requirements are based
on forward power and fuel markets. The component pieces of the portfolio
are bought and sold based on models and forecasts of generation in order to
manage the economic value of the portfolio in accordance with the strategies of
the business units.
For the Electric Utilities and Infrastructure segment, the generation
portfolio not utilized to serve retail operations or committed load is subject
to commodity price fluctuations. However, the impact on the Consolidated
Statements of Operations is partially offset by mechanisms in these regulated
jurisdictions that result in the sharing of net profits from these activities with
retail customers.
Interest Rate Risk
Duke Energy is exposed to risk resulting from changes in interest rates
as a result of its issuance or anticipated issuance of variable and fixed-rate
debt and commercial paper. Duke Energy manages interest rate exposure by
limiting variable-rate exposures to a percentage of total debt and by monitoring
the effects of market changes in interest rates. Duke Energy also enters into
financial derivative instruments, which may include instruments such as, but
not limited to, interest rate swaps, swaptions and U.S. Treasury lock agreements
to manage and mitigate interest rate risk exposure. See Notes 1, 7, 15 and 17
to the Consolidated Financial Statements, “Summary of Significant Accounting
Policies,” “Debt and Credit Facilities,” “Derivatives and Hedging,” and “Fair
Value Measurements.”
Duke Energy had $8.6 billion of unhedged long- and short-term floating
interest rate exposure at December 31, 2019. The impact of a 100-basis point
change in interest rates on pretax income is approximately $86 million at
December 31, 2019. This amount was estimated by considering the impact of
the hypothetical interest rates on variable-rate securities outstanding, adjusted
for interest rate hedges as of December 31, 2019.
Certain Duke Energy Registrants have variable-rate debt and manage
interest rate risk by entering into financial contracts including interest rate
swaps. See Notes 7 and 15 to the Consolidated Financial Statements,
“Debt and Credit Facilities” and “Derivatives and Hedging.” Such financial
arrangements generally are indexed based upon LIBOR, which is expected to be
phased out by the end of 2021. The Secured Overnight Financing Rate (SOFR)
has been identified by regulators and industry participants as the preferred
successor rate for U.S. dollar-based LIBOR at that time. Impacted financial
arrangements extending beyond 2021 may require contractual amendment or
termination and renegotiation to fully adapt to a post-LIBOR environment, and
there may be uncertainty regarding the effectiveness of any such alternative
index methodologies. Alternative index provisions are being assessed and
incorporated into new financial arrangements that extend beyond 2021.
Additionally, the progress of the phaseout is being monitored, including proposed
transition relief from the FASB.
Credit Risk
Credit risk represents the loss that the Duke Energy Registrants would
incur if a counterparty fails to perform under its contractual obligations. Where
exposed to credit risk, the Duke Energy Registrants analyze the counterparty’s
financial condition prior to entering into an agreement and monitor exposure
on an ongoing basis. The Duke Energy Registrants establish credit limits where
appropriate in the context of contractual arrangements and monitor such limits.
To reduce credit exposure, the Duke Energy Registrants seek to include
netting provisions with counterparties, which permit the offset of receivables
and payables with such counterparties. The Duke Energy Registrants also
frequently use master agreements with credit support annexes to further
mitigate certain credit exposures. The master agreements provide for a
counterparty to post cash or letters of credit to the exposed party for exposure
in excess of an established threshold. The threshold amount represents a
negotiated unsecured credit limit for each party to the agreement, determined in
accordance with the Duke Energy Registrants’ internal corporate credit practices
and standards. Collateral agreements generally also provide that the failure to
post collateral when required is sufficient cause to terminate transactions and
liquidate all positions.
The Duke Energy Registrants also obtain cash, letters of credit, or
surety bonds from certain counterparties to provide credit support outside of
collateral agreements, where appropriate, based on a financial analysis of the
counterparty and the regulatory or contractual terms and conditions applicable
to each transaction. See Note 15 to the Consolidated Financial Statements,
“Derivatives and Hedging,” for additional information regarding credit risk
related to derivative instruments.
The Duke Energy Registrants’ principal counterparties for its electric and
natural gas businesses are RTOs, distribution companies, municipalities, electric
cooperatives and utilities located throughout the U.S. Exposure to these entities
consists primarily of amounts due to Duke Energy Registrants for delivered
electricity. Additionally, there may be potential risks associated with remarketing
of energy and capacity in the event of default by wholesale power customers.
The Duke Energy Registrants have concentrations of receivables from certain of
such entities that may affect the Duke Energy Registrants’ credit risk.
The Duke Energy Registrants are also subject to credit risk from
transactions with their suppliers that involve prepayments or milestone
payments in conjunction with outsourcing arrangements, major construction
projects and certain commodity purchases. The Duke Energy Registrants’ credit
exposure to such suppliers may take the form of increased costs or project
delays in the event of non-performance. The Duke Energy Registrants’ frequently
require guarantees or letters of credit from suppliers to mitigate this credit risk.
53
PART II Credit risk associated with the Duke Energy Registrants’ service to
residential, commercial and industrial customers is generally limited to
outstanding accounts receivable. The Duke Energy Registrants mitigate this
credit risk by requiring tariff customers to provide a cash deposit, letter of credit
or surety bond until a satisfactory payment history is established, subject to
the rules and regulations in effect in each retail jurisdiction at which time the
deposit is typically refunded. Charge-offs for retail customers have historically
been insignificant to the operations of the Duke Energy Registrants and are
typically recovered through retail rates. Management continually monitors
customer charge-offs and payment patterns to ensure the adequacy of bad
debt reserves. Duke Energy Ohio and Duke Energy Indiana sell certain of
their accounts receivable and related collections through CRC, a Duke Energy
consolidated VIE. Losses on collection are first absorbed by the equity of CRC
and next by the subordinated retained interests held by Duke Energy Ohio, Duke
Energy Kentucky and Duke Energy Indiana. See Note 18 to the Consolidated
Financial Statements, “Variable Interest Entities.” Duke Energy also provides
certain non-tariff services, primarily to large commercial and industrial
customers in which incurred costs are intended to be recovered from the
individual customer and therefore are not subject to rate recovery in the event of
customer default. Customer credit worthiness is assessed prior to entering into
these transactions.
Duke Energy’s Commercial Renewables segment enters into long-term
agreements with certain creditworthy buyers that may not include the right to
call for collateral in the event of a credit rating downgrade. Credit concentration
exists to certain counterparties on these agreements, including entities that
could be subject to wildfire liability. Additionally, Commercial Renewables may
invest in projects for which buyers are below investment grade, although such
buyers are required to post negotiated amounts of credit support. Also, power
sales agreements and/or hedges of project output are generally for an initial
term that does not cover the entire life of the asset. As a result, Commercial
Renewables is exposed to market price risk and credit risk related to these
agreements.
Duke Energy Carolinas has third-party insurance to cover certain
losses related to asbestos-related injuries and damages above an aggregate
self-insured retention. See Note 5 to the Consolidated Financial Statements,
“Commitments and Contingencies” for information on asbestos-related injuries
and damages claims.
The Duke Energy Registrants also have credit risk exposure through
issuance of performance and financial guarantees, letters of credit and surety
bonds on behalf of less than wholly owned entities and third parties. Where
the Duke Energy Registrants have issued these guarantees, it is possible that
they could be required to perform under these guarantee obligations in the
event the obligor under the guarantee fails to perform. Where the Duke Energy
Registrants have issued guarantees related to assets or operations that have
been disposed of via sale, they attempt to secure indemnification from the buyer
against all future performance obligations under the guarantees. See Note 8 to
the Consolidated Financial Statements, “Guarantees and Indemnifications,” for
further information on guarantees issued by the Duke Energy Registrants.
Based on the Duke Energy Registrants’ policies for managing credit risk,
their exposures and their credit and other reserves, the Duke Energy Registrants
do not currently anticipate a materially adverse effect on their consolidated
financial position or results of operations as a result of non-performance by any
counterparty.
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.
Marketable Securities Price Risk
As described further in Note 16 to the Consolidated Financial Statements,
“Investments in Debt and Equity Securities,” Duke Energy invests in debt
and equity securities as part of various investment portfolios to fund certain
obligations. The vast majority of investments in equity securities are within the
NDTF and assets of the various pension and other post-retirement benefit plans.
Pension Plan Assets
Duke Energy maintains investments to facilitate funding the costs of
providing non-contributory defined benefit retirement and other post-retirement
benefit plans. These investments are exposed to price fluctuations in equity
markets and changes in interest rates. The equity securities held in these
pension plans are diversified to achieve broad market participation and
reduce the impact of any single investment, sector or geographic region. Duke
Energy has established asset allocation targets for its pension plan holdings,
which take into consideration the investment objectives and the risk profile
with respect to the trust in which the assets are held. See Note 23 to the
Consolidated Financial Statements, “Employee Benefit Plans,” for additional
information regarding investment strategy of pension plan assets.
A significant decline in the value of plan asset holdings could require Duke
Energy to increase funding of its pension plans in future periods, which could
adversely affect cash flows in those periods. Additionally, a decline in the fair
value of plan assets, absent additional cash contributions to the plan, could
increase the amount of pension cost required to be recorded in future periods,
which could adversely affect Duke Energy’s results of operations in those
periods.
Nuclear Decommissioning Trust Funds
As required by the NRC, NCUC, PSCSC and FPSC, subsidiaries of Duke
Energy maintain trust funds to fund the costs of nuclear decommissioning. As
of December 31, 2019, these funds were invested primarily in domestic and
international equity securities, debt securities, cash and cash equivalents and
short-term investments. Per the NRC, Internal Revenue Code, NCUC, PSCSC
and FPSC requirements, these funds may be used only for activities related to
nuclear decommissioning. These investments are exposed to price fluctuations
in equity markets and changes in interest rates. Duke Energy actively monitors
its portfolios by benchmarking the performance of its investments against
certain indices and by maintaining, and periodically reviewing, target allocation
percentages for various asset classes.
Accounting for nuclear decommissioning recognizes that costs are
recovered through retail and wholesale rates; therefore, fluctuations in
investment prices do not materially affect the Consolidated Statements of
Operations, as changes in the fair value of these investments are primarily
deferred as regulatory assets or regulatory liabilities pursuant to Orders by the
NCUC, PSCSC, FPSC and FERC. Earnings or losses of the fund will ultimately
impact the amount of costs recovered through retail and wholesale rates.
See Note 10 to the Consolidated Financial Statements, “Asset Retirement
Obligations,” for additional information regarding nuclear decommissioning
costs. See Note 16 to the Consolidated Financial Statements, “Investments in
Debt and Equity Securities,” for additional information regarding NDTF assets.
The following sections outline various proposed and recently enacted
legislation and regulations that may impact the Duke Energy Registrants. Refer
to Note 4 to the Consolidated Financial Statements, “Regulatory Matters,” for
further information regarding potential plant retirements and regulatory filings
related to the Duke Energy Registrants.
54
PART II Coal Combustion Residuals
Coal Ash Management Act of 2014
In April 2015, EPA published a rule to regulate the disposal of CCR
from electric utilities as solid waste. The federal regulation classifies CCR as
nonhazardous waste and allows for beneficial use of CCR with some restrictions.
The regulation applies to all new and existing landfills, new and existing surface
impoundments receiving CCR and existing surface impoundments located at
stations generating electricity (regardless of fuel source), which were no longer
receiving CCR but contained liquids as of the effective date of the rule. The rule
establishes requirements regarding landfill design, structural integrity design
and assessment criteria for surface impoundments, groundwater monitoring,
protection and remedial procedures and other operational and reporting
procedures to ensure the safe disposal and management of CCR. Various
industry and environmental parties appealed EPA’s CCR rule in the D.C. Circuit
Court. On April 18, 2016, EPA filed a motion with the federal court to settle five
issues raised in litigation. On June 14, 2016, the court approved the motion
with respect to all of those issues. Duke Energy does not expect a material
impact from the settlement or that it will result in additional ARO adjustments.
On September 13, 2017, EPA responded to a petition by the Utility Solid Waste
Activities Group that the agency would reconsider certain provisions of the final
rule, and asked the D.C. Circuit Court to suspend the litigation. The D.C. Circuit
Court denied EPA’s petition to suspend the litigation and oral argument was held
on November 20, 2017. On August 21, 2018, the D.C. Circuit issued its decision
in the CCR rule litigation denying relief for industry petitioners’ remaining claims
and ruling in favor of environmental petitioners on a number of their challenges,
including the regulation of inactive CCR surface impoundments at retired plants
and the continued operation of unlined impoundments.
On March 15, 2018, EPA published proposed amendments to the federal
CCR rule, including revisions that were required as part of the CCR litigation
settlement, as well as changes that the agency considered warranted due
to the passage of the Water Infrastructure Improvements for the Nation Act,
which provides statutory authority for state and federal CCR permit programs.
On July 17, 2018, EPA issued a rule (Phase 1, Part 1) finalizing certain, but
not all, elements included in the agency’s March 15, 2018, proposal. The final
rule revises certain closure deadlines and groundwater protection standards
in the CCR rule. It does not change the primary requirements for groundwater
monitoring, corrective action, inspections and maintenance, and closure, and
thus does not materially affect Duke Energy’s coal ash basin closure plans or
compliance obligations under the CCR rule. On October 22, 2018, a coalition
of environmental groups filed a petition for review in the D.C. Circuit Court
challenging EPA’s final Phase 1, Part 1 revisions to the CCR rule. On March 13,
2019, the D.C. Circuit Court issued an order in the Phase 1, Part 1 litigation
granting EPA’s motion to remand the rule without vacatur. EPA is currently
conducting multiple notice-and-comment rulemakings to implement the court’s
decision on remand.
In addition to the requirements of the federal CCR rule, CCR landfills
and surface impoundments will continue to be regulated by most states. Cost
recovery for future expenditures will be pursued through the normal ratemaking
process with federal and state utility commissions and via wholesale contracts,
which permit recovery of necessary and prudently incurred costs associated
with Duke Energy’s regulated operations. For more information, see Notes 4 and
10 to the Consolidated Financial Statements, “Regulatory Matters” and “Asset
Retirement Obligations,” respectively.
AROs recorded on the Duke Energy Carolinas and Duke Energy Progress
Consolidated Balance Sheets at December 31, 2019, and December 31, 2018,
include the legal obligation for closure of coal ash basins and the disposal
of related ash as a result of the Coal Ash Act, the EPA CCR rule and other
agreements. The Coal Ash Act includes a variance procedure for compliance
deadlines and other issues surrounding the management of CCR and CCR
surface impoundments and prohibits cost recovery in customer rates for
unlawful discharge of ash impoundment waters occurring after January 1, 2014.
The Coal Ash Act leaves the decision on cost recovery determinations related to
closure of ash impoundments to the normal ratemaking processes before utility
regulatory commissions.
Consistent with the requirements of the Coal Ash Act, Duke Energy
previously submitted comprehensive site assessments and groundwater
corrective plans to NCDEQ. In addition, on December 31, 2019, Duke Energy
submitted updated groundwater corrective action plans and site-specific coal
ash impoundment closure plans to NCDEQ.
On April 1, 2019, NCDEQ issued a closure determination requiring Duke
Energy Carolinas and Duke Energy Progress to excavate all remaining coal ash
impoundments at the Allen, Belews Creek, Rogers, Marshall, Mayo and Roxboro
facilities in North Carolina. On April 26, 2019, Duke Energy Carolinas and
Duke Energy Progress filed Petitions for Contested Case Hearings in the Office
of Administrative Hearings to challenge NCDEQ’s April 1 Order. On December
31, 2019, Duke Energy Carolinas and Duke Energy Progress entered into a
settlement agreement with NCDEQ and certain community groups under which
Duke Energy Carolinas and Duke Energy Progress agreed to excavate seven of
the nine remaining coal ash basins at these sites with ash moved to on-site
lined landfills, including two at Allen, one at Belews Creek, one at Mayo, one
at Roxboro, and two at Rogers. At the two remaining basins at Marshall and
Roxboro, uncapped basin ash will be excavated and moved to lined landfills.
Those portions of the basins at Marshall and Roxboro, which were previously
filled with ash and on which permitted facilities were constructed, will not
be disturbed and will be closed pursuant to other state regulations. For more
information, see Note 5, “Commitments and Contingencies,” to the Consolidated
Financial Statements.
Following NCDEQ’s April 1 Order, Duke Energy estimated the incremental
undiscounted cost to close the nine remaining impoundments by excavation
would be approximately $4 billion to $5 billion, potentially increasing the total
estimated costs to permanently close all ash basins in North Carolina and South
Carolina to $9.5 billion to $10.5 billion. The settlement lowers the estimated
total undiscounted cost to close the nine remaining basins by excavation by
approximately $1.5 billion as compared to Duke Energy’s original estimate that
followed the order. As a result, the estimated total cost to permanently close all
ash basins in North Carolina and South Carolina is now approximately $8 billion
to $9 billion, of which approximately $2.3 billion has been spent through 2019.
The majority of the remaining spend is expected to occur over the next 15-20
years. Duke Energy intends to seek recovery of all costs through the ratemaking
process consistent with previous proceedings.
In 2019, Duke Energy 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.
For further information on ash basins and recovery, see Notes 4 and 10
to the Consolidated Financial Statements, “Regulatory Matters” and “Asset
Retirement Obligations,” respectively.
55
PART II Estimated Cost and Impacts of Rulemakings
Duke Energy will incur capital expenditures to comply with the
environmental regulations and rules discussed above. The following table, as
of December 31, 2019, provides five-year estimated costs, excluding AFUDC,
of new control equipment that may need to be installed on existing power
plants primarily to comply with the Coal Ash Act requirements for conversion
to dry disposal of bottom ash and fly ash, CWA 316(b) and Effluent Limitations
Guidelines through December 31, 2024. The table excludes ash basin closure
costs recorded in Asset retirement obligations on the Consolidated Balance
Sheets. For more information related to AROs, see Note 10 to the Consolidated
Financial Statements.
(in millions)
Duke Energy
Duke Energy Carolinas
Progress Energy
Duke Energy Progress
Duke Energy Florida
Duke Energy Ohio
Duke Energy Indiana
$
Five-Year Estimated Costs
280
135
90
60
30
5
50
The Duke Energy Registrants also expect to incur increased fuel,
purchased power, operation and maintenance and other expenses, in
addition to costs for replacement generation for potential coal-fired power
plant retirements, as a result of these regulations. Actual compliance costs
incurred may be materially different from these estimates due to reasons
such as the timing and requirements of EPA regulations and the resolution of
legal challenges to the rules. The Duke Energy Registrants intend to seek rate
recovery of necessary and prudently incurred costs associated with regulated
operations to comply with these regulations.
Other Environmental Regulations
The Duke Energy Registrants are also subject to various federal, state and
local laws regarding air and water quality, hazardous and solid waste disposal
and other environmental matters, including the following:
• Clean Water Act
• Steam Effluent Limitation Guidelines
• Cross-State Air Pollution Rule
• Clean Power Plan/ACE Rule
Duke Energy continues to comply with enacted environmental statutes
and regulations even as certain of these regulations are in various stages of
clarification, revision or legal challenge. The Duke Energy Registrants cannot
predict the outcome of these matters.
Section 126 Petitions
On November 16, 2016, the state of Maryland filed a petition with EPA
under Section 126 of the Clean Air Act alleging that 19 power plants, including
two plants (three units) that Duke Energy Registrants own and operate,
contribute to violations of EPA’s National Ambient Air Quality Standards (NAAQS)
for ozone in the state of Maryland. On March 12, 2018, the state of New York
filed a petition with EPA, also under Section 126 of the Clean Air Act alleging
that over 60 power plants, including six that Duke Energy Registrants own and
operate, contribute to violations of EPA’s ozone NAAQS in the state of New York.
Both Maryland and New York sought EPA orders requiring the states in which the
named power plants operate impose more stringent NOx emission limitations
on the plants. On October 5, 2018, EPA denied the Maryland petition. That same
day, Maryland appealed EPA’s denial, On October 18, 2019, EPA denied the New
York petition, and New York appealed that decision on October 29, 2019. Both
56
appeals are before the D.C. Circuit Court. The impact of these petitions could
be more stringent requirements for the operation of NOx emission controls at
these plants. The Duke Energy Registrants cannot predict the outcome of these
matters.
Global Climate Change
On September 17, 2019, Duke Energy announced an updated climate
strategy with a new goal of net-zero carbon emissions from electric generation
by 2050. Timelines and initiatives, as well as implementation of new
technologies, will vary in each state in which the company operates and will
involve collaboration with regulators, customers and other stakeholders.
The Duke Energy Registrants’ GHG emissions consist primarily of CO2
and result primarily from operating a fleet of coal-fired and natural gas-fired
power plants. In 2019, the Duke Energy Registrants’ power plants emitted
approximately 93 million tons of CO2. Future levels of CO2 emissions will be
influenced by variables that include fuel prices, market prices, compliance with
new or existing regulations, economic conditions that affect electricity demand
and the technologies deployed to generate the electricity necessary to meet the
customer demand.
The Duke Energy Registrants have taken actions that have resulted in a
reduction of CO2 emissions over time. Actions have included the retirement of
47 coal-fired Electric Generating Units with a combined generating capacity of
5,425 MW. Much of that capacity has been replaced with state-of-the-art highly
efficient natural gas-fired generation that produces far fewer CO2 emissions
per unit of electricity generated. Duke Energy also has made investments
to expand its portfolio of wind and solar projects, increase EE offerings and
invest in its zero-CO2 emissions hydropower and nuclear plants. These efforts
have diversified its system and significantly reduced CO2 emissions. Between
2005 and 2019, the Duke Energy Registrants have collectively lowered the CO2
emissions from their electricity generation by 39%, which potentially lowers
the exposure to any future mandatory CO2 emission reduction requirements
or carbon tax, whether as a result of federal legislation, EPA regulation,
state regulation or other as yet unknown emission reduction requirement.
Duke Energy will continue to explore the use of currently available and
commercially demonstrated technology to reduce CO2 emissions, including
EE, wind, solar, storage and nuclear. Duke Energy will adjust to evolving and
innovative technologies in a way that balances the reliability and affordability
that customers expect. Under any future scenario involving mandatory CO2
limitations, the Duke Energy Registrants would plan to seek recovery of their
compliance costs through appropriate regulatory mechanisms.
The Duke Energy Registrants recognize certain groups associate severe
weather events with increasing levels of GHGs in the atmosphere and forecast
the possibility these weather events could have a material impact on future
results of operations should they occur more frequently and with greater
severity. However, the uncertain nature of potential changes in extreme weather
events (such as increased frequency, duration and severity), the long period
of time over which any potential changes might take place and the inability
to predict potential changes with any degree of accuracy, make estimating
any potential future financial risk to the Duke Energy Registrants’ operations
impossible.
The Duke Energy Registrants annually, biennially or triennially prepare
lengthy, forward-looking IRPs. These detailed, highly technical plans are based
on the company’s thorough analysis of numerous factors that can impact the
cost of producing and delivering electricity that influence long-term resource
planning decisions. The IRP process helps to evaluate a range of options, taking
into account forecasts of future electricity demand, fuel prices, transmission
improvements, new generating capacity, integration of renewables, energy
storage, EE and demand response initiatives. The IRP process also helps
evaluate potential environmental and regulatory scenarios to better mitigate
policy and economic risks. The IRPs we file with regulators look out 10 to
20 years depending on the jurisdiction.
PART II For a number of years, the Duke Energy Registrants have included a price
on CO2 emissions in their IRP planning process to account for the potential
regulation of CO2 emissions. Incorporating a price on CO2 emissions in the
IRPs allows for the evaluation of existing and future resource needs against
potential climate change policy risk in the absence of policy certainty. One
of the challenges with using a CO2 price, especially in the absence of a clear
and certain policy, is determining the appropriate price to use. To address this
uncertainty and ensure the company remains agile, the Duke Energy Registrants
typically use a range of potential CO2 prices to reflect a range of potential policy
outcomes.
The Duke Energy Registrants routinely take steps to reduce the potential
impact of severe weather events on their electric distribution systems by
modernizing the electric grid through smart meters, storm hardening, self-
healing and targeted undergrounding and applying lessons learned from
previous storms to restoration efforts. The Duke Energy Registrants’ electric
generating facilities are designed to withstand extreme weather events without
significant damage. The Duke Energy Registrants maintain an inventory of coal
and oil on-site to mitigate the effects of any potential short-term disruption in
fuel supply so they can continue to provide customers with an uninterrupted
supply of electricity.
State Legislation
of costs related to the competitive bidding process through the fuel clause and
a competitive procurement rider.
In accordance with the provisions of HB 589, total procurement was
changed based upon how much generation with no economic dispatch or
curtailment occurs over the procurement period. Most of this type of generation
is solar procured under PURPA. Based upon the current forecasted amount of
such generation that will occur over procurement period, Duke Energy estimates
the total under HB 589 competitive procurement will be approximately 1,500 to
2,000 MW.
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 bids are due by March 9, 2020; the current target date for
execution of the contracts is the fourth quarter of 2020.
In various states, legislation is being considered to allow third-party sales
of electricity. Deregulation or restructuring in the electric industry may result
in increased competition and unrecovered costs. The Duke Energy Registrants
cannot predict the outcome of these initiatives.
In July 2017, the North Carolina General Assembly passed House Bill
589, and it was subsequently signed into law by the governor. The law includes,
among other things, overall reform of the application of PURPA for new solar
projects in the state, a requirement for the utility to procure approximately 2,600
MW of renewable energy through a competitive bidding process and recovery
New Accounting Standards
See Note 1 to the Consolidated Financial Statements, “Summary
of Significant Accounting Policies,” for a discussion of the impact of new
accounting standards.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See “Management’s Discussion and Analysis of Results of Operations and Financial Condition – Quantitative and Qualitative Disclosures About Market Risk.”
57
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Duke Energy
Report of Independent Registered Public Accounting Firm ..........................................
Consolidated Statements of Operations .....................................................................
Consolidated Statements of Comprehensive Income ..................................................
Consolidated Balance Sheets .....................................................................................
Consolidated Statements of Cash Flows ....................................................................
Consolidated Statements of Changes in Equity...........................................................
Duke Energy Carolinas
Report of Independent Registered Public Accounting Firm ..........................................
Consolidated Statements of Operations and Comprehensive Income ..........................
Consolidated Balance Sheets .....................................................................................
Consolidated Statements of Cash Flows ....................................................................
Consolidated Statements of Changes in Equity...........................................................
Progress Energy
Report of Independent Registered Public Accounting Firm ..........................................
Consolidated Statements of Operations and Comprehensive Income ..........................
Consolidated Balance Sheets .....................................................................................
Consolidated Statements of Cash Flows ....................................................................
Consolidated Statements of Changes in Equity...........................................................
Duke Energy Progress
Report of Independent Registered Public Accounting Firm ..........................................
Consolidated Statements of Operations and Comprehensive Income ..........................
Consolidated Balance Sheets .....................................................................................
Consolidated Statements of Cash Flows ....................................................................
Consolidated Statements of Changes in Equity...........................................................
Duke Energy Florida
Report of Independent Registered Public Accounting Firm ..........................................
Consolidated Statements of Operations and Comprehensive Income ..........................
Consolidated Balance Sheets .....................................................................................
Consolidated Statements of Cash Flows ....................................................................
Consolidated Statements of Changes in Equity...........................................................
Duke Energy Ohio
Report of Independent Registered Public Accounting Firm ..........................................
Consolidated Statements of Operations and Comprehensive Income ..........................
Consolidated Balance Sheets .....................................................................................
Consolidated Statements of Cash Flows ....................................................................
Consolidated Statements of Changes in Equity...........................................................
59
61
62
63
65
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
Duke Energy Indiana
Report of Independent Registered Public Accounting Firm ..........................................
Consolidated Statements of Operations and Comprehensive Income ..........................
Consolidated Balance Sheets .....................................................................................
Consolidated Statements of Cash Flows ....................................................................
Consolidated Statements of Changes in Equity...........................................................
Piedmont
Report of Independent Registered Public Accounting Firm ..........................................
Consolidated Statements of Operations and Comprehensive Income ..........................
Consolidated Balance Sheets .....................................................................................
Consolidated Statements of Cash Flows ....................................................................
Consolidated Statements of Changes in Equity...........................................................
Combined Notes to Consolidated Financial Statements
Note 1 – Summary of Significant Accounting Policies .................................................
Note 2 – Acquisitions and Dispositions ......................................................................
Note 3 – Business Segments .....................................................................................
Note 4 – Regulatory Matters ......................................................................................
Note 5 – Commitments and Contingencies ................................................................
Note 6 – Leases ........................................................................................................
Note 7 – Debt and Credit Facilities ............................................................................
Note 8 – Guarantees and Indemnifications ................................................................
Note 9 – Joint Ownership of Generating and Transmission Facilities...........................
Note 10 – Asset Retirement Obligations .....................................................................
Note 11 – Property, Plant and Equipment ..................................................................
Note 12 – Goodwill and Intangible Assets ..................................................................
Note 13 – Investments in Unconsolidated Affiliates ...................................................
Note 14 – Related Party Transactions ........................................................................
Note 15 – Derivatives and Hedging ............................................................................
Note 16 – Investments in Debt and Equity Securities .................................................
Note 17 – Fair Value Measurements ..........................................................................
Note 18 – Variable Interest Entities ............................................................................
Note 19 – Revenue ....................................................................................................
Note 20 – Stockholders' Equity ..................................................................................
Note 21 – Severance .................................................................................................
Note 22 – Stock-Based Compensation.......................................................................
Note 23 – Employee Benefit Plans .............................................................................
Note 24 – Income Taxes.............................................................................................
Note 25 – Other Income and Expenses, Net ...............................................................
Note 26 – Subsequent Events ....................................................................................
Note 27 – Quarterly Financial Data (Unaudited).........................................................
93
94
95
96
97
98
99
100
101
102
103
110
111
115
134
139
143
148
149
149
152
154
156
157
158
162
169
174
178
182
184
184
186
200
207
207
208
58
PART II REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of
Duke Energy Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Duke Energy Corporation and subsidiaries (the “Company”) as of December 31, 2019 and
2018, the related consolidated statements of operations, comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended
December 31, 2019, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in
the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal
control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission and our report dated February 20, 2020, expressed an unqualified opinion on the Company’s internal control
over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial
statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to
assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that
our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or
required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved
our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial
statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the
accounts or disclosures to which they relate.
Investment in Unconsolidated Affiliates - Equity Method Investments - Refer to Notes 4 and 13 to the financial statements.
Critical Audit Matter Description
Investments in affiliates that are not controlled by the Company but over which the Company has significant influence are accounted for using the equity
method of accounting. Equity method investments are assessed for impairment whenever events or changes in circumstances indicate that the carrying amount of the
investment may not be recoverable. If the decline in value is considered to be other than temporary, the investment is written down to its estimated fair value, which
establishes a new cost basis in the investment.
At December 31, 2019, the carrying value of the equity method investment in Atlantic Coast Pipeline, LLC (ACP) was $1.2 billion. ACP has received several
adverse court rulings, and as a result, the Company evaluated this investment for impairment. The Company has determined that fair value approximates carrying
value and, therefore, concluded the investment is not impaired. The Company used probability-weighted outcome scenarios of discounted future cash flows to
estimate the fair value of the investment. The use of probability-weighted, discounted cash flows requires management to make significant estimates regarding the
likelihood of various scenarios, the key assumptions including total construction cost and revenues, and the discount rate utilized to determine the fair value estimate.
Changes in these assumptions could have a significant impact on the fair value estimate, which is used to determine the amount of any impairment.
We identified the impairment evaluation of ACP as a critical audit matter because of the significant estimates and assumptions management makes related to
the probability-weighted, discounted cash flows. The audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to the
likelihood of various scenarios, the key assumptions including total construction cost and revenues, and the discount rate required a high degree of auditor judgement
and an increased extent of effort, including the need to involve our fair value specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the discounted, probability-weighted forecasts of future cash flows and determination of the fair value of the ACP equity method
investment, included the following, among others:
• We tested the effectiveness of controls over the accounting for the ACP equity method investment, including those over the development of the fair value
estimate.
59
PART II • We evaluated the likelihood of the various outcomes used by management to develop the probability-weighted scenarios of future cash flows by:
◦ Obtaining letters and making inquiries from the ACP’s internal and external legal counsel regarding likely outcomes of future court rulings
◦ Reading information included in the Company’s and the project manager’s press releases, regulatory filings and orders, legal briefs and orders, and analyst
and industry reports
◦ Reading internal communications to management and the Board of Directors
◦ Comparing the various scenarios to scenarios previously developed by management
• We evaluated the reasonableness of the key assumptions used to develop the scenarios of future cash flows by comparing key assumptions to:
◦ Internal communications and schedules to management and the Board of Directors
◦ Information included in the Company’s and the project manager’s press releases, regulatory filings and related orders
◦ Industry reports and external transaction data
◦ Executed contracts and invoices
• With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology and (2) discount rate used to develop the
fair value estimate by:
◦ Determining the appropriateness of the valuation methodology by comparing management’s methodology to generally accepted valuation practice
◦ Testing the mathematical accuracy of the fair value estimate
◦ Testing the source information underlying the determination of the discount rate
◦ Developing a range of independent estimates of the discount rate and comparing those to the discount rate selected by management
Regulatory Matters - Impact of Rate Regulation on the Financial Statements - Refer to Notes 1, 4, and 10 to the financial statements.
Critical Audit Matter Description
The Company is subject to regulation by federal and state utility regulatory agencies (the “Commissions”), which have jurisdiction with respect to the rates
of the Company’s electric and natural gas distribution companies. Management has determined it meets the criteria for the application of regulated operations
accounting in preparing its financial statements under accounting principles generally accepted in the United States of America. Significant judgment can be required
to determine if otherwise recognizable incurred costs qualify to be presented as a regulatory asset and deferred because such costs are probable of future recovery in
customer rates. As of December 31, 2019, the Company has $15 billion recorded as regulatory assets.
We identified the impact of rate regulation as a critical audit matter due to the significant judgments made by management, including assumptions regarding the
outcome of future decisions by the Commissions, to support its assertions on the likelihood of future recovery for deferred costs. As such, auditing these judgments
required specialized knowledge of accounting for rate regulation due to its inherent complexities, a high degree of auditor judgment, and an increased extent of effort.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the recovery of regulatory assets included the following, among others:
• We tested the effectiveness of management’s controls over the evaluation of the likelihood of the recovery in future rates of regulatory assets and the
monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates.
• We evaluated the Company’s disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments.
• We read relevant regulatory orders issued by the Commissions, regulatory statutes, interpretations, procedural memorandums, filings made by interveners,
and other publicly available information to assess the likelihood of recovery in future rates based on precedence of the Commission’s treatment of
similar costs under similar circumstances. We evaluated the external information and compared to management’s recorded regulatory asset balances for
completeness.
• For regulatory matters in process, we inspected the Company’s and intervenors’ filings with the Commissions that may impact the Company’s future rates,
for any evidence that might contradict management’s assertions.
• We performed audit procedures on the incurred costs requested for recovery to confirm their completeness and accuracy.
• We obtained an analysis from management and letters from internal and external legal counsel, as appropriate, regarding probability of recovery for regulatory
assets not yet addressed in a regulatory order to assess management’s assertion that amounts are probable of recovery.
/s/Deloitte & Touche LLP
Charlotte, North Carolina
February 20, 2020
We have served as the Company’s auditor since 1947.
60
PART II DUKE ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
Operating Revenues
Regulated electric
Regulated natural gas
Nonregulated electric and other
Total operating revenues
Operating Expenses
Fuel used in electric generation and purchased power
Cost of natural gas
Operation, maintenance and other
Depreciation and amortization
Property and other taxes
Impairment charges
Total operating expenses
(Losses) Gains on Sales of Other Assets and Other, net
Operating Income
Other Income and Expenses
Equity in earnings of unconsolidated affiliates
Other income and expenses, net
Total other income and expenses
Interest Expense
Income From Continuing Operations Before Income Taxes
Income Tax Expense From Continuing Operations
Income From Continuing Operations
(Loss) Income From Discontinued Operations, net of tax
Net Income
Less: Net (Loss) Income Attributable to Noncontrolling Interests
Net Income Attributable to Duke Energy Corporation
Less: Preferred Dividends
Years Ended December 31,
2019
2018
2017
$22,615
1,759
705
$22,097
1,773
651
$21,177
1,734
654
25,079
24,521
23,565
6,826
627
6,066
4,548
1,307
(8)
6,831
697
6,463
4,074
1,280
402
6,350
632
5,944
3,527
1,233
282
19,366
19,747
17,968
(4)
5,709
162
430
592
2,204
4,097
519
3,578
(7)
3,571
(177)
3,748
41
(89)
4,685
83
399
482
2,094
3,073
448
2,625
19
2,644
(22)
2,666
—
28
5,625
119
508
627
1,986
4,266
1,196
3,070
(6)
3,064
5
3,059
—
Net Income Available to Duke Energy Corporation Common Stockholders
$ 3,707
$ 2,666
$ 3,059
Earnings Per Share – Basic and Diluted
Income from continuing operations available to Duke Energy Corporation common stockholders
Basic and Diluted
(Loss) Income from discontinued operations attributable to Duke Energy Corporation common stockholders
Basic and Diluted
Net income available to Duke Energy Corporation common stockholders
Basic and Diluted
Weighted average shares outstanding
Basic and Diluted
See Notes to Consolidated Financial Statements
$
5.07
$ (0.01)
$
5.06
$
$
$
3.73
$
4.37
0.03
$ (0.01)
3.76
$
4.36
729
708
700
61
PART II DUKE ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
Net Income
Other Comprehensive (Loss) Income, net of tax(a)
Pension and OPEB adjustments
Net unrealized (losses) gains on cash flow hedges
Reclassification into earnings from cash flow hedges
Unrealized gains (losses) on available-for-sale securities
Other Comprehensive (Loss) Income, net of tax
Comprehensive Income
Less: Comprehensive (Loss) Income Attributable to Noncontrolling Interests
Comprehensive Income Attributable to Duke Energy Corporation
Less: Preferred Dividends
Years Ended December 31,
2019
2018
2017
$3,571
$2,644
$3,064
9
(47)
6
8
(24)
3,547
(177)
3,724
41
(6)
(10)
6
(3)
(13)
2,631
(22)
2,653
—
3
2
8
13
26
3,090
5
3,085
—
Comprehensive Income Available to Duke Energy Corporation Common Stockholders
$3,683
$2,653
$ 3,085
(a) Tax impacts are insignificant for all periods presented.
See Notes to Consolidated Financial Statements
62
PART II DUKE ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
(in millions)
ASSETS
Current Assets
Cash and cash equivalents
Receivables (net of allowance for doubtful accounts of $22 at 2019 and $16 at 2018)
Receivables of VIEs (net of allowance for doubtful accounts of $54 at 2019 and $55 at 2018)
Inventory
Regulatory assets (includes $52 at 2019 and 2018 related to VIEs)
Other (includes $242 at 2019 and $162 at 2018 related to VIEs)
Total current assets
Property, Plant and Equipment
Cost
Accumulated depreciation and amortization
Generation facilities to be retired, net
Net property, plant and equipment
Other Noncurrent Assets
Goodwill
Regulatory assets (includes $989 at 2019 and $1,041 at 2018 related to VIEs)
Nuclear decommissioning trust funds
Operating lease right-of-use assets, net
Investments in equity method unconsolidated affiliates
Other (includes $110 at 2019 and $261 at 2018 related to VIEs)
Total other noncurrent assets
Total Assets
See Notes to Consolidated Financial Statements
December 31,
2019
2018
$
311
1,066
1,994
3,232
1,796
764
9,163
$
442
962
2,172
3,084
2,005
1,049
9,714
147,654
(45,773)
246
134,458
(43,126)
362
102,127
91,694
19,303
13,222
8,140
1,658
1,936
3,289
47,548
19,303
13,617
6,720
—
1,409
2,935
43,984
$158,838
$ 145,392
63
PART II DUKE ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS – (Continued)
(in millions)
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable
Notes payable and commercial paper
Taxes accrued
Interest accrued
Current maturities of long-term debt (includes $216 at 2019 and $227 at 2018 related to VIEs)
Asset retirement obligations
Regulatory liabilities
Other
Total current liabilities
Long-Term Debt (includes $3,997 at 2019 and $3,998 at 2018 related to VIEs)
Other Noncurrent Liabilities
Deferred income taxes
Asset retirement obligations
Regulatory liabilities
Operating lease liabilities
Accrued pension and other post-retirement benefit costs
Investment tax credits
Other (includes $228 at 2019 and $212 at 2018 related to VIEs)
Total other noncurrent liabilities
Commitments and Contingencies
Equity
Preferred stock, Series A, $0.001 par value, 40 million depositary shares authorized and outstanding at 2019
Preferred stock, Series B, $0.001 par value, 1 million shares authorized and outstanding at 2019
Common stock, $0.001 par value, 2 billion shares authorized; 733 million shares outstanding at 2019 and 727 million shares outstanding at 2018
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Total Duke Energy Corporation stockholders’ equity
Noncontrolling interests
Total equity
Total Liabilities and Equity
See Notes to Consolidated Financial Statements
December 31,
2019
2018
$
3,487
3,135
392
565
3,141
881
784
2,367
14,752
54,985
8,878
12,437
15,264
1,432
934
624
1,581
41,150
973
989
1
40,881
4,108
(130)
46,822
1,129
47,951
$
3,487
3,410
577
559
3,406
919
598
2,085
15,041
51,123
7,806
9,548
14,834
—
988
568
1,650
35,394
—
—
1
40,795
3,113
(92)
43,817
17
43,834
$158,838
$145,392
64
PART II DUKE ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion (including amortization of nuclear fuel)
Equity component of AFUDC
Losses (Gains) on sales of other assets
Impairment charges
Deferred income taxes
Equity in earnings of unconsolidated affiliates
Accrued pension and other post-retirement benefit costs
Contributions to qualified pension plans
Payments for asset retirement obligations
Payment for the disposal of other assets
Provision for rate refunds
Refund of AMT credit carryforwards
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions
Receivables
Inventory
Other current assets
Increase (decrease) in
Accounts payable
Taxes accrued
Other current liabilities
Other assets
Other liabilities
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures
Contributions to equity method investments
Return of investment capital
Purchases of debt and equity securities
Proceeds from sales and maturities of debt and equity securities
Other
Net cash used in investing activities
Years Ended December 31,
2019
2018
2017
$ 3,571
$ 2,644
$ 3,064
5,176
(139)
4
(8)
806
(162)
24
(77)
(746)
—
60
573
(48)
78
(122)
10
(164)
(224)
172
(520)
(55)
4,696
(221)
88
402
1,079
(83)
61
(141)
(533)
(105)
425
—
22
(345)
156
(721)
479
23
270
(971)
(39)
4,046
(237)
(33)
282
1,433
(119)
8
(19)
(571)
—
—
—
18
(83)
268
(400)
(204)
149
(482)
(436)
(60)
8,209
7,186
6,624
(11,122)
(324)
11
(3,348)
3,343
(517)
(9,389)
(416)
137
(3,762)
3,747
(377)
(11,957)
(10,060)
(8,052)
(414)
281
(4,071)
4,098
(284)
(8,442)
See Notes to Consolidated Financial Statements
65
PART II DUKE ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS – (Continued)
(in millions)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the:
Issuance of long-term debt
Issuance of preferred stock
Issuance of common stock
Payments for the redemption of long-term debt
Proceeds from the issuance of short-term debt with original maturities greater than 90 days
Payments for the redemption of short-term debt with original maturities greater than 90 days
Notes payable and commercial paper
Contributions from noncontrolling interests
Dividends paid
Other
Net cash provided by financing activities
Net (decrease) increase in cash, cash equivalents, and restricted cash
Cash, cash equivalents, and restricted cash at beginning of period
Cash, cash equivalents, and restricted cash at end of period
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized
Cash (received from) paid for income taxes
Significant non-cash transactions:
Accrued capital expenditures
Non-cash dividends
See Notes to Consolidated Financial Statements
Years Ended December 31,
2019
2018
2017
$ 7,091
1,962
384
(3,476)
397
(479)
(298)
843
(2,668)
(26)
$ 5,299
—
1,838
(2,906)
472
(282)
981
41
(2,471)
(12)
$ 6,909
—
—
(2,316)
319
(272)
(409)
—
(2,450)
1
3,730
2,960
1,782
(18)
591
$
573
$
86
505
591
(36)
541
$
505
$ 2,195
(651)
$ 2,086
(266)
$ 1,963
4
1,356
108
1,112
107
1,032
—
66
PART II DUKE ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Duke Energy Corporation Stockholders’
Accumulated Other Comprehensive
Income (Loss)
Preferred
Stock
Common
Stock
Shares
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Net
Losses on
Cash Flow
Hedges
Net Unrealized
Gains (Losses)
on Available-
for-Sale-
Securities
Pension and
OPEB
Adjustments
Total
Duke Energy
Corporation
Stockholders’
Equity
Noncontrolling
Interests
Total
Equity
700 $
1
$ 38,741
$ 2,384
$ (20)
$
(1)
$
(72)
$ 41,033
$
8
$ 41,041
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(in millions)
Balance at December 31, 2016
Net income
Other comprehensive income
Common stock issuances,
including dividend reinvest-
ment and employee benefits
Common stock dividends
Distributions to noncontrolling
interest in subsidiaries
Other(a)
Balance at December 31, 2017
Net income
Other comprehensive loss
Common stock issuances,
including dividend reinvest-
ment and employee benefits
Common stock dividends
Distributions to noncontrolling
interest in subsidiaries
Other(b)
Balance at December 31, 2018
Net income
Other comprehensive (loss)
income
Preferred stock, Series A,
issuances, net of issuance
costs(c)
Preferred stock, Series B,
issuances, net of issuance
costs(d)
Common stock issuances,
including dividend reinvest-
ment and employee benefits
Common stock dividends
Sale of noncontrolling interest(e)
Contribution from noncontrolling
interest
Distributions to noncontrolling
interests in subsidiaries
Other(f)
—
—
—
—
—
—
—
—
—
—
—
—
— 3,059
—
—
51
—
— (2,450)
—
—
—
20
—
10
—
—
—
—
700 $
1
$ 38,792
$ 3,013
$ (10)
$
—
—
27
—
—
—
—
—
—
—
—
—
— 2,666
—
—
2,003
—
— (2,578)
—
—
—
12
—
(4)
—
—
—
—
727 $
1
$ 40,795
$ 3,113
$ (14)
$
—
—
—
—
973
—
—
989
—
—
—
—
—
—
—
6
—
—
—
—
—
—
—
—
—
—
—
— 3,707
—
—
—
—
—
—
552
—
— (2,735)
—
(466)
—
—
—
—
—
23
—
(41)
—
—
—
—
10
—
—
(6)
—
13
—
—
—
—
12
—
(3)
—
—
—
(12)
(3)
—
8
—
—
—
—
—
—
—
(2)
—
3
—
—
—
—
3,059
26
51
(2,450)
—
20
5
—
3,064
26
—
51
— (2,450)
(2)
(13)
(2)
7
$
(69)
$ 41,739
$
(2) $ 41,737
—
(6)
—
—
—
—
2,666
(13)
2,003
(2,578)
—
—
(22)
—
2,644
(13)
— 2,003
— (2,578)
(1)
42
(1)
42
$
(75)
$ 43,817
$
17
$ 43,834
—
9
—
—
—
—
—
—
—
(16)
3,707
(177)
3,530
(24)
—
(24)
973
989
552
(2,735)
(456)
—
—
(1)
—
973
—
989
—
552
— (2,735)
407
863
428
428
(4)
2
(4)
1
Balance at December 31, 2019
1,962
733 $
1
$ 40,881 $ 4,108
$ (51)
$
3
$
(82)
$ 46,822
$ 1,129 $ 47,951
(a) Retained Earnings relates to a cumulative-effect adjustment due to implementation of a new accounting standard related to stock-based compensation and the associated income taxes. See Note 1 to the Consolidated
Financial Statements for additional information. Noncontrolling Interests relates to the purchase of remaining interest in REC Solar.
(b) Amounts in Retained Earnings and AOCI represent a cumulative-effect adjustment due to implementation of a new accounting standard related to Financial Instruments Classification and Measurement. See Note 1 for more
information. Amount in Noncontrolling Interests primarily relates to tax equity financing activity in the Commercial Renewables segment.
(c) Duke Energy issued 40 million depositary shares of preferred stock, series A, in the first quarter of 2019.
(d) Duke Energy issued 1 million shares of preferred stock, series B, in the third quarter of 2019.
(e) See Note 3 for additional discussion of the transaction.
(f) Amounts in Retained Earnings and AOCI primarily represent impacts to accumulated other comprehensive income due to implementation of a new accounting standard related to Reclassification of Certain Tax Effects from
Accumulated Other Comprehensive Income.
See Notes to Consolidated Financial Statements
67
PART II REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholder and the Board of
Directors of Duke Energy Carolinas, LLC
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Duke Energy Carolinas, LLC and subsidiaries (the “Company”) as of December 31, 2019
and 2018, the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows, for each of the three years in the period
ended December 31, 2019, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in
all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial
statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over
financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we
express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the
overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/Deloitte & Touche LLP
Charlotte, North Carolina
February 20, 2020
We have served as the Company’s auditor since 1947.
68
PART II DUKE ENERGY CAROLINAS, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(in millions)
Operating Revenues
Operating Expenses
Fuel used in electric generation and purchased power
Operation, maintenance and other
Depreciation and amortization
Property and other taxes
Impairment charges
Total operating expenses
(Losses) Gains on Sales of Other Assets and Other, net
Operating Income
Other Income and Expenses, net
Interest Expense
Income Before Income Taxes
Income Tax Expense
Net Income
Other Comprehensive Income, net of tax
Reclassification into earnings from cash flow hedges
Other Comprehensive Income, net of tax
Comprehensive Income
Years Ended December 31,
2019
2018
2017
$ 7,395
$ 7,300
$ 7,302
1,804
1,868
1,388
292
17
5,369
—
2,026
151
463
1,714
311
1,821
2,130
1,201
295
192
5,639
(1)
1,660
153
439
1,374
303
1,822
2,021
1,090
281
—
5,214
1
2,089
199
422
1,866
652
$ 1,403
$ 1,071
$ 1,214
—
—
1
1
2
2
$ 1,403
$ 1,072
$ 1,216
See Notes to Consolidated Financial Statements
69
PART II DUKE ENERGY CAROLINAS, LLC
CONSOLIDATED BALANCE SHEETS
(in millions)
ASSETS
Current Assets
Cash and cash equivalents
Receivables (net of allowance for doubtful accounts of $3 at 2019 and $2 at 2018)
Receivables of VIEs (net of allowance for doubtful accounts of $7 at 2019 and 2018)
Receivables from affiliated companies
Inventory
Regulatory assets
Other
Total current assets
Property, Plant and Equipment
Cost
Accumulated depreciation and amortization
Net property, plant and equipment
Other Noncurrent Assets
Regulatory assets
Nuclear decommissioning trust funds
Operating lease right-of-use assets, net
Other
Total other noncurrent assets
Total Assets
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable
Accounts payable to affiliated companies
Notes payable to affiliated companies
Taxes accrued
Interest accrued
Current maturities of long-term debt
Asset retirement obligations
Regulatory liabilities
Other
Total current liabilities
Long-Term Debt
Long-Term Debt Payable to Affiliated Companies
Other Noncurrent Liabilities
Deferred income taxes
Asset retirement obligations
Regulatory liabilities
Operating lease liabilities
Accrued pension and other post-retirement benefit costs
Investment tax credits
Other
Total other noncurrent liabilities
Commitments and Contingencies
Equity
Member’s equity
Accumulated other comprehensive loss
Total equity
Total Liabilities and Equity
See Notes to Consolidated Financial Statements
70
December 31,
2019
2018
$
18
324
642
114
996
550
21
$
33
219
699
182
948
520
72
2,665
2,673
48,922
(16,525)
44,741
(15,496)
32,397
29,245
3,360
4,359
123
1,149
8,991
3,457
3,558
—
1,027
8,042
$ 44,053
$ 39,960
$
954
210
29
46
115
458
206
255
611
2,884
11,142
300
3,921
5,528
6,423
102
84
231
627
$
988
230
439
171
102
6
290
199
571
2,996
10,633
300
3,689
3,659
5,999
—
99
231
671
16,916
14,348
12,818
(7)
12,811
11,689
(6)
11,683
$ 44,053
$ 39,960
PART II DUKE ENERGY CAROLINAS, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including amortization of nuclear fuel)
Equity component of AFUDC
Losses (Gains) on sales of other assets
Impairment charges
Deferred income taxes
Accrued pension and other post-retirement benefit costs
Contributions to qualified pension plans
Payments for asset retirement obligations
Provision for rate refunds
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions
Receivables
Receivables from affiliated companies
Inventory
Other current assets
Increase (decrease) in
Accounts payable
Accounts payable to affiliated companies
Taxes accrued
Other current liabilities
Other assets
Other liabilities
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures
Purchases of debt and equity securities
Proceeds from sales and maturities of debt and equity securities
Notes receivable from affiliated companies
Other
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt
Payments for the redemption of long-term debt
Notes payable to affiliated companies
Distributions to parent
Other
Net cash provided by (used in) financing activities
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized
Cash paid for income taxes
Significant non-cash transactions:
Accrued capital expenditures
See Notes to Consolidated Financial Statements
71
Years Ended December 31,
2019
2018
2017
$ 1,403
$ 1,071
$ 1,214
1,671
(42)
—
17
133
(5)
(7)
(278)
36
(8)
(21)
68
(48)
(73)
(50)
(20)
(127)
127
(31)
(36)
1,487
(73)
1
192
305
4
(46)
(230)
182
2
(86)
(87)
25
(161)
168
21
(65)
89
(179)
(90)
1,409
(106)
(1)
—
410
(4)
—
(271)
—
9
(9)
68
78
7
23
(38)
86
(161)
(49)
(31)
2,709
2,530
2,634
(2,714)
(1,658)
1,658
—
(204)
(2,918)
886
(6)
(410)
(275)
(1)
194
(15)
33
18
433
122
347
$
$
(2,706)
(1,810)
1,810
—
(147)
(2,853)
1,983
(1,205)
335
(750)
(23)
340
17
16
33
452
89
302
$
$
(2,524)
(2,124)
2,128
66
(109)
(2,563)
569
(116)
104
(625)
(1)
(69)
2
14
16
398
193
315
$
$
PART II DUKE ENERGY CAROLINAS, LLC
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in millions)
Balance at December 31, 2016
Net income
Other comprehensive income
Distributions to parent
Other
Balance at December 31, 2017
Net income
Other comprehensive income
Distributions to parent
Balance at December 31, 2018
Net income
Distributions to parent
Other
Balance at December 31, 2019
See Notes to Consolidated Financial Statements
Accumulated Other
Comprehensive
Loss
Net Gains
(Losses) on
Cash Flow
Hedges
Total
Equity
$
(9)
$10,772
—
2
—
—
1,214
2
(625)
(2)
Member’s
Equity
$ 10,781
1,214
—
(625)
(2)
$ 11,368
$
(7)
$11,361
1,071
—
(750)
—
1
—
1,071
1
(750)
$ 11,689
$
(6)
$11,683
1,403
(275)
1
—
—
(1)
1,403
(275)
—
$ 12,818
$
(7)
$12,811
72
PART II REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholder and the Board of
Directors of Progress Energy, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Progress Energy, Inc. and subsidiaries (the “Company”) as of December 31, 2019 and 2018,
the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended
December 31, 2019, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in
the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial
statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over
financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we
express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the
overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/Deloitte & Touche LLP
Charlotte, North Carolina
February 20, 2020
We have served as the Company’s auditor since 1930.
73
PART II PROGRESS ENERGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(in millions)
Operating Revenues
Operating Expenses
Fuel used in electric generation and purchased power
Operation, maintenance and other
Depreciation and amortization
Property and other taxes
Impairment charges
Total operating expenses
Gains on Sales of Other Assets and Other, net
Operating Income
Other Income and Expenses, net
Interest Expense
Income Before Income Taxes
Income Tax Expense
Net Income
Less: Net Income Attributable to Noncontrolling Interests
Net Income Attributable to Parent
Net Income
Other Comprehensive Income, net of tax
Pension and OPEB adjustments
Net unrealized gain on cash flow hedges
Unrealized gains (losses) on available-for-sale securities
Other Comprehensive Income, net of tax
Comprehensive Income
Less: Comprehensive Income Attributable to Noncontrolling Interests
Comprehensive Income Attributable to Parent
See Notes to Consolidated Financial Statements
Years Ended December 31,
2019
2018
2017
$11,202
$10,728
$ 9,783
4,024
2,495
1,845
561
(24)
8,901
—
2,301
141
862
1,580
253
1,327
—
3,976
2,613
1,619
529
87
8,824
24
1,928
165
842
1,251
218
1,033
6
3,417
2,301
1,285
503
156
7,662
26
2,147
209
824
1,532
264
1,268
10
$ 1,327
$ 1,027
$ 1,258
$ 1,327
$ 1,033
$ 1,268
2
5
1
8
5
6
(1)
10
1,335
—
1,043
6
4
5
4
13
1,281
10
$ 1,335
$ 1,037
$ 1,271
74
PART II PROGRESS ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
(in millions)
ASSETS
Current Assets
Cash and cash equivalents
Receivables (net of allowance for doubtful accounts of $7 at 2019 and $5 at 2018)
Receivables of VIEs (net of allowance for doubtful accounts of $9 at 2019 and $8 at 2018)
Receivables from affiliated companies
Notes receivable from affiliated companies
Inventory
Regulatory assets (includes $52 at 2019 and 2018 related to VIEs)
Other (includes $39 at 2019 and 2018 related to VIEs)
Total current assets
Property, Plant and Equipment
Cost
Accumulated depreciation and amortization
Generation facilities to be retired, net
Net property, plant and equipment
Other Noncurrent Assets
Goodwill
Regulatory assets (includes $989 at 2019 and $1,041 at 2018 related to VIEs)
Nuclear decommissioning trust funds
Operating lease right-of-use assets, net
Other
Total other noncurrent assets
Total Assets
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable
Accounts payable to affiliated companies
Notes payable to affiliated companies
Taxes accrued
Interest accrued
Current maturities of long-term debt (includes $54 at 2019 and $53 at 2018 related to VIEs)
Asset retirement obligations
Regulatory liabilities
Other
Total current liabilities
Long-Term Debt (includes $1,632 at 2019 and $1,636 at 2018 related to VIEs)
Long-Term Debt Payable to Affiliated Companies
Other Noncurrent Liabilities
Deferred income taxes
Asset retirement obligations
Regulatory liabilities
Operating lease liabilities
Accrued pension and other post-retirement benefit costs
Other
Total other noncurrent liabilities
Commitments and Contingencies
Equity
Common stock, $0.01 par value, 100 shares authorized and outstanding at 2019 and 2018
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Total Progress Energy, Inc. stockholder’s equity
Noncontrolling interests
Total equity
Total Liabilities and Equity
See Notes to Consolidated Financial Statements
75
December 31,
2019
2018
$
48
220
830
76
164
1,423
946
210
3,917
55,070
(17,159)
246
38,157
3,655
6,346
3,782
788
1,049
$
67
220
909
168
—
1,459
1,137
125
4,085
50,260
(16,398)
362
34,224
3,655
6,564
3,162
—
974
15,620
14,355
$ 57,694
$ 52,664
$
1,104
310
1,821
46
228
1,577
485
330
902
6,803
17,907
150
4,462
5,986
5,225
697
488
383
$
1,172
360
1,235
109
246
1,672
514
280
821
6,409
17,089
150
3,941
4,897
5,049
—
521
351
17,241
14,759
—
9,143
6,465
(18)
—
9,143
5,131
(20)
15,590
14,254
3
3
15,593
14,257
$ 57,694
$ 52,664
PART II PROGRESS ENERGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion (including amortization of nuclear fuel)
Equity component of AFUDC
Gains on sales of other assets
Impairment charges
Deferred income taxes
Accrued pension and other post-retirement benefit costs
Contributions to qualified pension plans
Payments for asset retirement obligations
Provision for rate refunds
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions
Receivables
Receivables from affiliated companies
Inventory
Other current assets
Increase (decrease) in
Accounts payable
Accounts payable to affiliated companies
Taxes accrued
Other current liabilities
Other assets
Other liabilities
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures
Purchases of debt and equity securities
Proceeds from sales and maturities of debt and equity securities
Notes receivable from affiliated companies
Other
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt
Payments for the redemption of long-term debt
Notes payable to affiliated companies
Dividends to parent
Other
Net cash provided by financing activities
Net increase (decrease) in cash, cash equivalents, and restricted cash
Cash, cash equivalents, and restricted cash at beginning of period
Cash, cash equivalents, and restricted cash at end of period
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized
Cash received from income taxes
Significant non-cash transactions:
Accrued capital expenditures
Equitization of certain notes payable to affiliates
Dividend to parent related to a legal entity restructuring
See Notes to Consolidated Financial Statements
76
Years Ended December 31,
2019
2018
2017
$ 1,327
$ 1,033
$ 1,268
2,207
(66)
—
(24)
433
20
(57)
(412)
15
(34)
47
81
62
184
(4)
(50)
(74)
25
(336)
(135)
1,987
(104)
(24)
87
358
24
(45)
(230)
122
18
(207)
(137)
121
(12)
217
109
8
129
(876)
(34)
1,516
(92)
(28)
156
703
(28)
—
(248)
—
—
(89)
71
125
(397)
(260)
(97)
17
(166)
(300)
(98)
3,209
2,544
2,053
(3,952)
(1,511)
1,504
(164)
(190)
(4,313)
2,187
(1,667)
586
—
12
1,118
14
112
126
892
(79)
447
—
—
$
$
(3,854)
(1,753)
1,769
240
(162)
(3,760)
1,833
(771)
430
(250)
(1)
1,241
25
87
112
798
(348)
478
—
—
$
$
(3,152)
(1,806)
1,824
(160)
(59)
(3,353)
2,118
(813)
100
(124)
(4)
1,277
(23)
110
87
773
(146)
391
1,047
547
$
$
PART II PROGRESS ENERGY, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in millions)
Accumulated Other Comprehensive Income (Loss)
Additional
Paid-in
Capital
Retained
Earnings
Net Gains
(Losses) on
Cash Flow
Hedges
Net Unrealized
Gains (Losses)
on Available-for-
Sale Securities
Pension and
OPEB
Adjustments
Total Progress
Energy, Inc.
Stockholder’s
Equity
Noncontrolling
Interests
Total
Equity
Balance at December 31, 2016
$ 8,094
$ 3,764
$
(23)
$
1
$ (16)
$ 11,820
$ (13)
$ 11,807
Net income
Other comprehensive income
Dividends to parent(a)
Equitization of certain notes payable to affiliates
Other
—
—
—
1,047
2
1,258
—
(672)
—
—
—
5
—
—
—
—
4
—
—
—
—
4
—
—
—
Balance at December 31, 2017
$ 9,143
$ 4,350
$
(18)
$
5
$ (12)
Net income
Other comprehensive income (loss)
Distributions to noncontrolling interests
Dividends to parent
Other(b)
—
—
—
—
—
1,027
—
—
(250)
4
—
6
—
—
—
—
(1)
—
—
(5)
—
5
—
—
—
1,258
13
(672)
1,047
2
$ 13,468
1,027
10
—
(250)
(1)
10
—
—
—
—
1,268
13
(672)
1,047
2
$ (3)
$ 13,465
6
—
(1)
—
1
1,033
10
(1)
(250)
—
Balance at December 31, 2018
$ 9,143
$ 5,131
$
(12)
$ (1)
$
(7)
$ 14,254
$
3
$ 14,257
Net income
Other comprehensive income
Other(c)
—
—
—
1,327
—
7
—
5
(3)
—
1
(1)
—
2
(2)
1,327
8
1
—
—
—
1,327
8
1
Balance at December 31, 2019
$ 9,143
$ 6,465
$
(10)
$ (1)
$
(7)
$ 15,590
$
3
$ 15,593
Includes a $547 million non-cash dividend related to a legal entity restructuring.
(a)
(b) Amounts in Retained Earnings and AOCI represent a cumulative-effect adjustment due to implementation of a new accounting standard related to Financial Instruments Classification and Measurement. See Note 1 for more
information.
(c) Amounts in Retained Earnings and AOCI primarily represent impacts to accumulated other comprehensive income due to implementation of a new accounting standard related to Reclassification of Certain Tax Effects from
Accumulated Other Comprehensive Income.
See Notes to Consolidated Financial Statements
77
PART II REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholder and the Board of
Directors of Duke Energy Progress, LLC
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Duke Energy Progress, LLC and subsidiaries (the “Company”) as of December 31, 2019
and 2018, the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows, for each of the three years in the period
ended December 31, 2019, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in
all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial
statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over
financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we
express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the
overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/Deloitte & Touche LLP
Charlotte, North Carolina
February 20, 2020
We have served as the Company’s auditor since 1930.
78
PART II DUKE ENERGY PROGRESS, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(in millions)
Operating Revenues
Operating Expenses
Fuel used in electric generation and purchased power
Operation, maintenance and other
Depreciation and amortization
Property and other taxes
Impairment charges
Total operating expenses
Gains on Sales of Other Assets and Other, net
Operating Income
Other Income and Expenses, net
Interest Expense
Income Before Income Taxes
Income Tax Expense
Net Income and Comprehensive Income
See Notes to Consolidated Financial Statements
Years Ended December 31,
2019
2018
2017
$ 5,957
$ 5,699
$5,129
2,012
1,446
1,143
176
12
4,789
—
1,168
100
306
962
157
1,892
1,578
991
155
33
4,649
9
1,059
87
319
827
160
1,609
1,439
725
156
19
3,948
4
1,185
115
293
1,007
292
$ 805
$
667
$ 715
79
PART II DUKE ENERGY PROGRESS, LLC
CONSOLIDATED BALANCE SHEETS
(in millions)
ASSETS
Current Assets
Cash and cash equivalents
Receivables (net of allowance for doubtful accounts of $3 at 2019 and $2 at 2018)
Receivables of VIEs (net of allowance for doubtful accounts of $5 at 2019 and 2018)
Receivables from affiliated companies
Inventory
Regulatory assets
Other
Total current assets
Property, Plant and Equipment
Cost
Accumulated depreciation and amortization
Generation facilities to be retired, net
Net property, plant and equipment
Other Noncurrent Assets
Regulatory assets
Nuclear decommissioning trust funds
Operating lease right-of-use assets, net
Other
Total other noncurrent assets
Total Assets
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable
Accounts payable to affiliated companies
Notes payable to affiliated companies
Taxes accrued
Interest accrued
Current maturities of long-term debt
Asset retirement obligations
Regulatory liabilities
Other
Total current liabilities
Long-Term Debt
Long-Term Debt Payable to Affiliated Companies
Other Noncurrent Liabilities
Deferred income taxes
Asset retirement obligations
Regulatory liabilities
Operating lease liabilities
Accrued pension and other post-retirement benefit costs
Investment tax credits
Other
Total other noncurrent liabilities
Commitments and Contingencies
Equity
Member’s Equity
Total Liabilities and Equity
See Notes to Consolidated Financial Statements
80
December 31,
2019
2018
$
22
123
489
52
934
526
60
$
23
75
547
23
954
703
62
2,206
2,387
34,603
(11,915)
246
31,459
(11,423)
362
22,934
20,398
4,152
3,047
387
651
8,237
4,111
2,503
—
612
7,226
$33,377
$30,011
$
629
203
66
17
110
1,006
485
236
478
3,230
7,902
150
2,388
5,408
4,232
354
238
137
92
$
660
278
294
53
116
603
509
178
408
3,099
7,451
150
2,119
4,311
3,955
—
237
142
106
12,849
10,870
9,246
8,441
$33,377
$30,011
PART II DUKE ENERGY PROGRESS, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including amortization of nuclear fuel)
Equity component of AFUDC
Gains on sales of other assets
Impairment charges
Deferred income taxes
Accrued pension and other post-retirement benefit costs
Contributions to qualified pension plans
Payments for asset retirement obligations
Provisions for rate refunds
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions
Receivables
Receivables from affiliated companies
Inventory
Other current assets
Increase (decrease) in
Accounts payable
Accounts payable to affiliated companies
Taxes accrued
Other current liabilities
Other assets
Other liabilities
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures
Purchases of debt and equity securities
Proceeds from sales and maturities of debt and equity securities
Notes receivable from affiliated companies
Other
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt
Payments for the redemption of long-term debt
Notes payable to affiliated companies
Distributions to parent
Other
Net cash provided by financing activities
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized
Cash (received from) paid for income taxes
Significant non-cash transactions:
Accrued capital expenditures
See Notes to Consolidated Financial Statements
81
Years Ended December 31,
2019
2018
2017
$
805
$
667
$
715
1,329
(60)
—
12
197
4
(3)
(390)
12
(6)
21
(29)
20
101
32
(75)
(46)
68
(198)
29
1,183
(57)
(9)
33
236
15
(25)
(195)
122
5
(107)
(20)
63
(201)
219
99
(11)
46
(447)
12
936
(47)
(5)
19
384
(20)
—
(192)
—
(4)
(58)
2
59
(75)
(230)
(48)
(39)
(131)
(53)
(18)
1,823
1,628
1,195
(2,108)
(842)
810
—
(119)
(2,259)
1,269
(605)
(228)
—
(1)
435
(1)
23
22
331
(30)
175
$
$
(2,220)
(1,236)
1,206
—
(95)
(2,345)
845
(3)
54
(175)
(1)
720
3
20
23
303
(112)
220
$
$
(1,715)
(1,249)
1,207
165
(51)
(1,643)
812
(470)
240
(124)
(1)
457
9
11
20
291
59
191
$
$
PART II DUKE ENERGY PROGRESS, LLC
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in millions)
Balance at December 31, 2016
Net income
Distribution to parent
Balance at December 31, 2017
Net income
Distribution to parent
Balance at December 31, 2018
Net income
Balance at December 31, 2019
See Notes to Consolidated Financial Statements
Member’s
Equity
$ 7,358
715
(124)
$ 7,949
667
(175)
$ 8,441
805
$ 9,246
82
PART II REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholder and the Board of
Directors of Duke Energy Florida, LLC
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Duke Energy Florida, LLC and subsidiaries (the “Company”) as of December 31, 2019 and
2018, the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows, for each of the three years in the period
ended December 31, 2019, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in
all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial
statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over
financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we
express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the
overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/Deloitte & Touche LLP
Charlotte, North Carolina
February 20, 2020
We have served as the Company’s auditor since 2001.
83
PART II DUKE ENERGY FLORIDA, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(in millions)
Operating Revenues
Operating Expenses
Fuel used in electric generation and purchased power
Operation, maintenance and other
Depreciation and amortization
Property and other taxes
Impairment charges
Total operating expenses
Gains on Sales of Other Assets and Other, net
Operating Income
Other Income and Expenses, net
Interest Expense
Income Before Income Taxes
Income Tax Expense
Net Income
Other Comprehensive Income (Loss), net of tax
Unrealized gains (losses) on available-for-sale securities
Other Comprehensive Income (Loss), net of tax
Comprehensive Income
Years Ended December 31,
2019
2018
2017
$ 5,231
$ 5,021
$ 4,646
2,012
1,034
702
392
(36)
4,104
—
1,127
48
328
847
155
692
1
1
$
2,085
1,025
628
374
54
4,166
1
856
86
287
655
101
554
(1)
(1)
1,808
853
560
347
138
3,706
1
941
96
279
758
46
712
3
3
$
$
$
693
$
553
$
715
See Notes to Consolidated Financial Statements
84
PART II DUKE ENERGY FLORIDA, LLC
CONSOLIDATED BALANCE SHEETS
(in millions)
ASSETS
Current Assets
Cash and cash equivalents
Receivables (net of allowance for doubtful accounts of $3 at 2019 and 2018)
Receivables of VIEs (net of allowance for doubtful accounts of $4 at 2019 and $3 at 2018)
Receivables from affiliated companies
Notes receivable from affiliated companies
Inventory
Regulatory assets (includes $52 at 2019 and 2018 related to VIEs)
Other (includes $39 at 2019 and 2018 related to VIEs)
Total current assets
Property, Plant and Equipment
Cost
Accumulated depreciation and amortization
Net property, plant and equipment
Other Noncurrent Assets
Regulatory assets (includes $989 at 2019 and $1,041 at 2018 related to VIEs)
Nuclear decommissioning trust funds
Operating lease right-of-use assets, net
Other
Total other noncurrent assets
Total Assets
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable
Accounts payable to affiliated companies
Notes payable to affiliated companies
Taxes accrued
Interest accrued
Current maturities of long-term debt (includes $54 at 2019 and $53 at 2018 related to VIEs)
Asset retirement obligations
Regulatory liabilities
Other
Total current liabilities
Long-Term Debt (includes $1,307 at 2019 and $1,336 at 2018 related to VIEs)
Other Noncurrent Liabilities
Deferred income taxes
Asset retirement obligations
Regulatory liabilities
Operating lease liabilities
Accrued pension and other post-retirement benefit costs
Other
Total other noncurrent liabilities
Commitments and Contingencies
Equity
Member’s equity
Accumulated other comprehensive loss
Total equity
Total Liabilities and Equity
See Notes to Consolidated Financial Statements
85
December 31,
2019
2018
$
17
96
341
—
173
489
419
58
$
36
143
362
28
—
504
434
46
1,593
1,553
20,457
(5,236)
15,221
18,792
(4,968)
13,824
2,194
734
401
311
3,640
2,454
659
—
311
3,424
$ 20,454
$ 18,801
$
474
131
—
43
75
571
—
94
415
1,803
7,416
2,179
578
993
343
218
136
4,447
$
511
91
108
74
75
270
5
102
406
1,642
7,051
1,986
586
1,094
—
254
93
4,013
6,789
(1)
6,788
6,097
(2)
6,095
$ 20,454
$ 18,801
PART II DUKE ENERGY FLORIDA, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion
Equity component of AFUDC
Gains on sales of other assets
Impairment charges
Deferred income taxes
Accrued pension and other post-retirement benefit costs
Contributions to qualified pension plans
Payments for asset retirement obligations
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions
Receivables
Receivables from affiliated companies
Inventory
Other current assets
Increase (decrease) in
Accounts payable
Accounts payable to affiliated companies
Taxes accrued
Other current liabilities
Other assets
Other liabilities
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures
Purchases of debt and equity securities
Proceeds from sales and maturities of debt and equity securities
Notes receivable from affiliated companies
Other
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt
Payments for the redemption of long-term debt
Notes payable to affiliated companies
Distribution to parent
Other
Net cash provided by financing activities
Net (decrease) increase in cash, cash equivalents, and restricted cash
Cash, cash equivalents, and restricted cash at beginning of period
Cash, cash equivalents, and restricted cash at end of period
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized
Cash paid for (received from) income taxes
Significant non-cash transactions:
Accrued capital expenditures
See Notes to Consolidated Financial Statements
86
Years Ended December 31,
2019
2018
2017
$
692
$
554
$
712
869
(6)
—
(36)
180
11
(53)
(22)
(33)
26
17
42
156
(36)
40
(31)
(36)
(135)
(167)
793
(47)
(1)
54
159
5
(20)
(35)
7
(100)
(26)
58
59
(1)
17
40
82
(428)
(61)
570
(45)
(1)
138
245
(13)
—
(56)
5
(38)
—
66
(138)
(32)
(51)
1
(37)
(229)
(82)
1,478
1,109
1,015
(1,844)
(669)
695
(173)
(67)
(2,058)
918
(262)
(108)
—
13
561
(19)
75
56
332
1
272
$
$
(1,634)
(517)
563
313
(65)
(1,340)
988
(769)
108
(75)
1
253
22
53
75
270
(120)
258
$
$
(1,437)
(557)
617
(313)
(7)
(1,697)
1,306
(342)
(297)
—
(1)
666
(16)
69
53
274
(197)
199
$
$
PART II DUKE ENERGY FLORIDA, LLC
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in millions)
Balance at December 31, 2016
Net income
Other comprehensive income
Other
Balance at December 31, 2017
Net income
Other comprehensive loss
Distribution to parent
Other(a)
Balance at December 31, 2018
Net income
Other comprehensive income
Balance at December 31, 2019
Member’s
Equity
$
4,899
712
—
3
$
5,614
554
—
(75)
4
6,097
692
—
6,789
$
$
Accumulated Other
Comprehensive
Income (Loss)
Net Unrealized
Gains (Losses) on
Available-for-
Sale Securities
Total
Equity
$ 4,900
712
3
3
$ 5,618
554
(1)
(75)
(1)
1
—
3
—
4
—
(1)
—
(5)
(2)
$ 6,095
—
1
692
1
(1)
$ 6,788
$
$
$
$
(a) Amounts represent a cumulative-effect adjustment due to implementation of a new accounting standard related to Financial Instruments Classification and Measurement. See Note 1 for more information.
See Notes to Consolidated Financial Statements
87
PART II REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholder and the Board of
Directors of Duke Energy Ohio, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Duke Energy Ohio, Inc. and subsidiaries (the “Company”) as of December 31, 2019 and
2018, the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows, for each of the three years in the period
ended December 31, 2019, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all
material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial
statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over
financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we
express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the
overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/Deloitte & Touche LLP
Charlotte, North Carolina
February 20, 2020
We have served as the Company’s auditor since 2002.
88
PART II DUKE ENERGY OHIO, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(in millions)
Operating Revenues
Regulated electric
Regulated natural gas
Nonregulated electric and other
Total operating revenues
Operating Expenses
Fuel used in electric generation and purchased power – regulated
Fuel used in electric generation and purchased power – nonregulated
Cost of natural gas
Operation, maintenance and other
Depreciation and amortization
Property and other taxes
Impairment charges
Total operating expenses
(Losses) Gains on Sales of Other Assets and Other, net
Operating Income
Other Income and Expenses, net
Interest Expense
Income From Continuing Operations Before Income Taxes
Income Tax Expense From Continuing Operations
Income From Continuing Operations
Loss From Discontinued Operations, net of tax
Net Income and Comprehensive Income
Years Ended December 31,
2019
2018
2017
$ 1,456
484
—
1,940
$ 1,450
506
1
1,957
$ 1,373
508
42
1,923
388
—
95
520
265
308
—
1,576
—
364
24
109
279
40
239
(1)
412
—
113
480
268
290
—
1,563
(106)
288
23
92
219
43
176
—
369
58
107
530
261
278
1
1,604
1
320
23
91
252
59
193
(1)
$ 238
$
176
$
192
See Notes to Consolidated Financial Statements
89
PART II DUKE ENERGY OHIO, INC.
CONSOLIDATED BALANCE SHEETS
(in millions)
ASSETS
Current Assets
Cash and cash equivalents
Receivables (net of allowance for doubtful accounts of $4 at 2019 and $2 at 2018)
Receivables from affiliated companies
Inventory
Regulatory assets
Other
Total current assets
Property, Plant and Equipment
Cost
Accumulated depreciation and amortization
Net property, plant and equipment
Other Noncurrent Assets
Goodwill
Regulatory assets
Operating lease right-of-use assets, net
Other
Total other noncurrent assets
Total Assets
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable
Accounts payable to affiliated companies
Notes payable to affiliated companies
Taxes accrued
Interest accrued
Current maturities of long-term debt
Asset retirement obligations
Regulatory liabilities
Other
Total current liabilities
Long-Term Debt
Long-Term Debt Payable to Affiliated Companies
Other Noncurrent Liabilities
Deferred income taxes
Asset retirement obligations
Regulatory liabilities
Operating lease liabilities
Accrued pension and other post-retirement benefit costs
Other
Total other noncurrent liabilities
Commitments and Contingencies
Equity
Common stock, $8.50 par value, 120 million shares authorized; 90 million shares outstanding at 2019 and 2018
Additional paid-in capital
Retained earnings (Accumulated deficit)
Total equity
Total Liabilities and Equity
See Notes to Consolidated Financial Statements
90
December 31,
2019
2018
$
17
84
92
135
49
21
398
$
21
102
114
126
33
24
420
10,241
(2,843)
7,398
9,360
(2,717)
6,643
920
549
21
52
920
531
—
41
1,542
1,492
$ 9,338
$ 8,555
$
288
68
312
219
30
—
1
64
75
1,057
2,594
25
922
79
763
21
100
94
$
316
78
274
202
22
551
6
57
74
1,580
1,589
25
817
87
840
—
79
93
1,979
1,916
762
2,776
145
3,683
762
2,776
(93)
3,445
$ 9,338
$ 8,555
PART II DUKE ENERGY OHIO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion
Equity component of AFUDC
Losses (Gains) on sales of other assets
Impairment charges
Deferred income taxes
Accrued pension and other post-retirement benefit costs
Contributions to qualified pension plans
Payments for asset retirement obligations
Provision for rate refunds
(Increase) decrease in
Receivables
Receivables from affiliated companies
Inventory
Other current assets
Increase (decrease) in
Accounts payable
Accounts payable to affiliated companies
Taxes accrued
Other current liabilities
Other assets
Other liabilities
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures
Notes receivable from affiliated companies
Other
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt
Payments for the redemption of long-term debt
Notes payable to affiliated companies
Dividends to parent
Other
Net cash provided by financing activities
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized
Cash received from income taxes
Significant non-cash transactions:
Accrued capital expenditures
Non-cash equity contribution from parent
See Notes to Consolidated Financial Statements
91
Years Ended December 31,
2019
2018
2017
$
238
$
176
$
192
269
(13)
—
—
81
2
(2)
(8)
7
20
22
(9)
(5)
(17)
(10)
17
1
(22)
(45)
526
(952)
—
(68)
(1,020)
1,003
(551)
38
—
—
490
(4)
21
17
97
(37)
109
—
$
$
271
(11)
106
—
25
3
—
(3)
24
(33)
19
7
16
(19)
16
12
14
(26)
(27)
570
(827)
14
(89)
(902)
99
(3)
245
—
—
341
9
12
21
87
(6)
95
106
$
$
265
(11)
(1)
1
90
2
(4)
(7)
—
2
(4)
6
(22)
12
(1)
11
(19)
(28)
(5)
479
(686)
80
(41)
(647)
182
(2)
13
(25)
(1)
167
(1)
13
12
85
(8)
82
—
$
$
PART II DUKE ENERGY OHIO, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in millions)
Balance at December 31, 2016
Net income
Dividends to parent
Balance at December 31, 2017
Net income
Contribution from parent
Balance at December 31, 2018
Net income
Balance at December 31, 2019
See Notes to Consolidated Financial Statements
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
(Deficit)
Total
Equity
$
762
$
2,695
$
(461)
$ 2,996
—
—
—
(25)
192
—
192
(25)
$
762
$
2,670
$
(269)
$ 3,163
—
—
762
—
762
$
$
—
106
2,776
—
2,776
$
$
176
—
(93)
238
145
$
$
176
106
$ 3,445
238
$ 3,683
92
PART II REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholder and the Board of
Directors of Duke Energy Indiana, LLC
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Duke Energy Indiana, LLC and subsidiaries (the “Company”) as of December 31, 2019
and 2018, the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows, for each of the three years in the period
ended December 31, 2019, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in
all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial
statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over
financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we
express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the
overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/Deloitte & Touche LLP
Charlotte, North Carolina
February 20, 2020
We have served as the Company’s auditor since 2002.
93
PART II DUKE ENERGY INDIANA, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(in millions)
Operating Revenues
Operating Expenses
Fuel used in electric generation and purchased power
Operation, maintenance and other
Depreciation and amortization
Property and other taxes
Impairment charges
Total operating expenses
Operating Income
Other Income and Expenses, net
Interest Expense
Income Before Income Taxes
Income Tax Expense
Net Income and Comprehensive Income
See Notes to Consolidated Financial Statements
Years Ended December 31,
2019
2018
2017
$ 3,004
$ 3,059
$ 3,047
935
790
525
69
—
2,319
685
41
156
570
134
436
$
1,000
788
520
78
30
2,416
643
45
167
521
128
393
$
966
743
458
76
18
2,261
786
47
178
655
301
354
$
94
PART II DUKE ENERGY INDIANA, LLC
CONSOLIDATED BALANCE SHEETS
(in millions)
ASSETS
Current Assets
Cash and cash equivalents
Receivables (net of allowance for doubtful accounts of $3 at 2019 and $2 at 2018)
Receivables from affiliated companies
Inventory
Regulatory assets
Other
Total current assets
Property, Plant and Equipment
Cost
Accumulated depreciation and amortization
Net property, plant and equipment
Other Noncurrent Assets
Regulatory assets
Operating lease right-of-use assets, net
Other
Total other noncurrent assets
Total Assets
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable
Accounts payable to affiliated companies
Notes payable to affiliated companies
Taxes accrued
Interest accrued
Current maturities of long-term debt
Asset retirement obligations
Regulatory liabilities
Other
Total current liabilities
Long-Term Debt
Long-Term Debt Payable to Affiliated Companies
Other Noncurrent Liabilities
Deferred income taxes
Asset retirement obligations
Regulatory liabilities
Operating lease liabilities
Accrued pension and other post-retirement benefit costs
Investment tax credits
Other
Total other noncurrent liabilities
Commitments and Contingencies
Equity
Member’s Equity
Total Liabilities and Equity
See Notes to Consolidated Financial Statements
95
December 31,
2019
2018
$
25
60
79
517
90
60
831
$
24
52
122
422
175
35
830
16,305
(5,233)
11,072
1,082
57
234
1,373
15,443
(4,914)
10,529
982
—
194
1,176
$ 13,276
$ 12,535
$
201
87
30
49
58
503
189
55
112
1,284
3,404
150
1,150
643
1,685
55
148
164
18
3,863
$
200
83
167
43
58
63
109
25
107
855
3,569
150
1,009
613
1,722
—
115
147
16
3,622
4,575
4,339
$ 13,276
$ 12,535
PART II DUKE ENERGY INDIANA, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, and accretion
Equity component of AFUDC
Impairment charges
Deferred income taxes
Accrued pension and other post-retirement benefit costs
Contributions to qualified pension plans
Payments for asset retirement obligations
Provision for rate refunds
(Increase) decrease in
Receivables
Receivables from affiliated companies
Inventory
Other current assets
Increase (decrease) in
Accounts payable
Accounts payable to affiliated companies
Taxes accrued
Other current liabilities
Other assets
Other liabilities
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures
Purchases of debt and equity securities
Proceeds from sales and maturities of debt and equity securities
Notes receivable from affiliated companies
Other
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt
Payments for the redemption of long-term debt
Notes payable to affiliated companies
Distributions to parent
Other
Net cash used in financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized
Cash (received from) paid for income taxes
Significant non-cash transactions:
Accrued capital expenditures
See Notes to Consolidated Financial Statements
96
Years Ended December 31,
2019
2018
2017
$ 436
$ 393
$ 354
531
(18)
—
156
6
(2)
(48)
—
(8)
41
(95)
76
(10)
4
(25)
15
(71)
9
524
(32)
30
95
7
(8)
(69)
53
7
3
28
(25)
37
5
(52)
14
29
(33)
462
(28)
18
152
2
—
(45)
—
59
(11)
54
28
(86)
4
64
(10)
(28)
(20)
997
1,006
969
(876)
(26)
20
—
(49)
(931)
485
(213)
(137)
(200)
—
(65)
(832)
(48)
44
—
18
(818)
—
(3)
6
(175)
(1)
(173)
1
24
25
$
15
9
24
$
(840)
(20)
7
86
(65)
(832)
—
(5)
161
(300)
(1)
(145)
(8)
17
$
9
$ 150
(6)
$ 162
75
$ 179
117
102
88
125
PART II DUKE ENERGY INDIANA, LLC
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in millions)
Balance at December 31, 2016
Net income
Distributions to parent
Balance at December 31, 2017
Net income
Distributions to parent
Balance at December 31, 2018
Net income
Distributions to parent
Balance at December 31, 2019
See Notes to Consolidated Financial Statements
Member’s
Equity
$
4,067
354
(300)
$
4,121
393
(175)
$
4,339
436
(200)
$
4,575
97
PART II REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholder and the Board of Directors of
Piedmont Natural Gas Company, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Piedmont Natural Gas Company, Inc. and subsidiaries (the “Company”) as of December 31,
2019 and 2018, the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows, for each of the three years in the
period ended December 31, 2019, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly,
in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial
statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over
financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we
express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the
overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/Deloitte & Touche LLP
Charlotte, North Carolina
February 20, 2020
We have served as the Company’s auditor since 1951.
98
PART II PIEDMONT NATURAL GAS COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(in millions)
Operating Revenues
Regulated natural gas
Nonregulated natural gas and other
Total operating revenues
Operating Expenses
Cost of natural gas
Operation, maintenance and other
Depreciation and amortization
Property and other taxes
Impairment charges
Total operating expenses
Operating Income
Equity in earnings (losses) of unconsolidated affiliates
Other income and expense, net
Total other income and expenses
Interest Expense
Income Before Income Taxes
Income Tax Expense
Net Income and Comprehensive Income
Years Ended December 31,
2019
2018
2017
$ 1,369
12
$ 1,365
10
$ 1,319
9
1,381
1,375
1,328
532
328
172
45
—
584
357
159
49
—
524
304
148
48
7
1,077
1,149
1,031
304
8
20
28
87
245
43
202
$
226
7
14
21
81
166
37
129
$
297
(6)
(11)
(17)
79
201
62
139
$
See Notes to Consolidated Financial Statements
99
PART II PIEDMONT NATURAL GAS COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(in millions)
ASSETS
Current Assets
Receivables (net of allowance for doubtful accounts of $6 at 2019 and $2 at 2018)
Receivables from affiliated companies
Inventory
Regulatory assets
Other
Total current assets
Property, Plant and Equipment
Cost
Accumulated depreciation and amortization
Net property, plant and equipment
Other Noncurrent Assets
Goodwill
Regulatory assets
Operating lease right-of-use assets, net
Investments in equity method unconsolidated affiliates
Other
Total other noncurrent assets
Total Assets
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable
Accounts payable to affiliated companies
Notes payable to affiliated companies
Taxes accrued
Interest accrued
Current maturities of long-term debt
Regulatory liabilities
Other
Total current liabilities
Long-Term Debt
Other Noncurrent Liabilities
Deferred income taxes
Asset retirement obligations
Regulatory liabilities
Operating lease liabilities
Accrued pension and other post-retirement benefit costs
Other
Total other noncurrent liabilities
Commitments and Contingencies
Equity
Common stock, no par value: 100 shares authorized and outstanding at 2019 and 2018
Retained earnings
Total equity
Total Liabilities and Equity
See Notes to Consolidated Financial Statements
100
December 31,
2019
2018
$
241
10
72
73
28
424
$
266
22
70
54
19
431
8,446
(1,681)
6,765
7,486
(1,575)
5,911
49
290
24
83
121
567
49
303
—
64
52
468
$ 7,756
$ 6,810
$
215
3
476
24
33
—
81
67
899
$
203
38
198
84
31
350
37
58
999
2,384
1,788
708
17
1,131
23
3
148
2,030
1,310
1,133
2,443
551
19
1,181
—
4
177
1,932
1,160
931
2,091
$ 7,756
$ 6,810
PART II PIEDMONT NATURAL GAS COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Impairment charges
Deferred income taxes
Equity in (earnings) losses from unconsolidated affiliates
Accrued pension and other post-retirement benefit costs
Contributions to qualified pension plans
Provision for rate refunds
(Increase) decrease in
Receivables
Receivables from affiliated companies
Inventory
Other current assets
Increase (decrease) in
Accounts payable
Accounts payable to affiliated companies
Taxes accrued
Other current liabilities
Other assets
Other liabilities
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures
Contributions to equity method investments
Other
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt
Payments for the redemption of long-term debt
Notes payable and commercial paper
Notes payable to affiliated companies
Capital contribution from parent
Other
Net cash provided by financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized
Cash received from income taxes
Significant non-cash transactions:
Accrued capital expenditures
Transfer of ownership interest of certain equity method investees to parent
See Notes to Consolidated Financial Statements
101
Years Ended December 31,
2019
2018
2017
$
202
$
129
$
139
174
—
136
(8)
(9)
(1)
2
28
12
(2)
(25)
(7)
(35)
(60)
1
9
(8)
409
(1,053)
(16)
(14)
(1,083)
596
(350)
—
278
150
—
674
—
—
161
—
(31)
(7)
(4)
—
43
7
(15)
(4)
71
15
25
65
21
6
(4)
478
(721)
—
(10)
(731)
100
—
—
(166)
300
—
234
(19)
19
$
$
$ —
$ —
$
84
(31)
109
—
$
79
(16)
96
—
151
7
154
6
23
(11)
—
(40)
—
—
(20)
(13)
5
(48)
(9)
7
(2)
349
(585)
(12)
(6)
(603)
250
(35)
(330)
364
—
(1)
248
(6)
25
19
78
(12)
34
149
PART II PIEDMONT NATURAL GAS COMPANY, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in millions)
Balance at December 31, 2016
Net income
Transfer of ownership interest of certain equity method investees to parent
Balance at December 31, 2017
Net income
Contribution from parent
Balance at December 31, 2018
Net income
Contribution from parent
Balance at December 31, 2019
See Notes to Consolidated Financial Statements
Common
Stock
$
860
Retained
Earnings
$
812
$
—
—
860
—
300
$ 1,160
—
150
$
$
139
(149)
802
129
—
931
202
—
Total
Equity
$ 1,672
139
(149)
$ 1,662
129
300
$ 2,091
202
150
$ 1,310
$ 1,133
$ 2,443
102
PART II DUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC •
DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Consolidated Financial Statements
For the Years Ended December 31, 2019, 2018 and 2017
Index to Combined Notes To Consolidated Financial Statements
The notes to the consolidated financial statements are a combined presentation. The following table indicates the registrants to which the notes apply.
Applicable Notes
Registrant
Duke Energy
Duke Energy Carolinas
Progress Energy
Duke Energy Progress
Duke Energy Florida
Duke Energy Ohio
Duke Energy Indiana
Piedmont
8
•
1
•
•
•
•
•
•
•
•
2
•
•
3
•
•
•
•
•
•
•
•
4
•
•
•
•
•
•
•
•
5
•
•
•
•
•
•
•
•
6
•
•
•
•
•
•
•
•
7
•
•
•
•
•
•
•
•
9
•
•
•
10
11
12
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
13
•
•
14
15
16
17
18
19
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
20
•
21
22
23
24
25
26
27
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Tables within the notes may not sum across due to (i) Progress Energy’s consolidation of Duke Energy Progress, Duke Energy Florida and other subsidiaries that
are not registrants and (ii) subsidiaries that are not registrants but included in the consolidated Duke Energy balances.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS AND BASIS OF CONSOLIDATION
Duke Energy is an energy company headquartered in Charlotte,
North Carolina, subject to regulation by the FERC and other regulatory agencies
listed below. Duke Energy operates in the U.S. primarily through its direct and
indirect subsidiaries. Certain Duke Energy subsidiaries are also subsidiary
registrants, including Duke Energy Carolinas; Progress Energy; Duke Energy
Progress; Duke Energy Florida; Duke Energy Ohio; Duke Energy Indiana and
Piedmont. When discussing Duke Energy’s consolidated financial information,
it necessarily includes the results of its separate Subsidiary Registrants,
which along with Duke Energy, are collectively referred to as the Duke Energy
Registrants.
The information in these combined notes relates to each of the Duke
Energy Registrants as noted in the Index to Combined Notes to Consolidated
Financial Statements. However, none of the Subsidiary Registrants make any
representation as to information related solely to Duke Energy or the Subsidiary
Registrants of Duke Energy other than itself.
These Consolidated Financial Statements include, after eliminating
intercompany transactions and balances, the accounts of the Duke Energy
Registrants and subsidiaries or VIEs where the respective Duke Energy
Registrants have control. See Note 18 for additional information on VIEs. These
Consolidated Financial Statements also reflect the Duke Energy Registrants’
proportionate share of certain jointly owned generation and transmission
facilities. See Note 9 for additional information on joint ownership. Substantially
all of the Subsidiary Registrants’ operations qualify for regulatory accounting.
Duke Energy Carolinas is a regulated public utility primarily engaged in
the generation, transmission, distribution and sale of electricity in portions of
North Carolina and South Carolina. Duke Energy Carolinas is subject to the
regulatory provisions of the NCUC, PSCSC, NRC and FERC.
Progress Energy is a public utility holding company, which conducts
operations through its wholly owned subsidiaries, Duke Energy Progress and
Duke Energy Florida. Progress Energy is subject to regulation by FERC and other
regulatory agencies listed below.
Duke Energy Progress is a regulated public utility primarily engaged in
the generation, transmission, distribution and sale of electricity in portions
of North Carolina and South Carolina. Duke Energy Progress is subject to the
regulatory provisions of the NCUC, PSCSC, NRC and FERC.
Duke Energy Florida is a regulated public utility primarily engaged in
the generation, transmission, distribution and sale of electricity in portions of
Florida. Duke Energy Florida is subject to the regulatory provisions of the FPSC,
NRC and FERC.
Duke Energy Ohio is a regulated public utility primarily engaged in the
transmission and distribution of electricity in portions of Ohio and Kentucky, the
generation and sale of electricity in portions of Kentucky and the transportation
and sale of natural gas in portions of Ohio and Kentucky. Duke Energy Ohio
conducts competitive auctions for retail electricity supply in Ohio whereby
the energy price is recovered from retail customers and recorded in Operating
Revenues on the Consolidated Statements of Operations and Comprehensive
Income. Operations in Kentucky are conducted through its wholly owned
subsidiary, Duke Energy Kentucky. References herein to Duke Energy Ohio
collectively include Duke Energy Ohio and its subsidiaries, unless otherwise
noted. Duke Energy Ohio is subject to the regulatory provisions of the PUCO,
KPSC and FERC.
Duke Energy Indiana is a regulated public utility primarily engaged in
the generation, transmission, distribution and sale of electricity in portions of
Indiana. Duke Energy Indiana is subject to the regulatory provisions of the IURC
and FERC.
Piedmont is a regulated public utility primarily engaged in the distribution
of natural gas in portions of North Carolina, South Carolina and Tennessee.
Piedmont is subject to the regulatory provisions of the NCUC, PSCSC, TPUC
and FERC.
Certain prior year amounts have been reclassified to conform to the
current year presentation.
103
PART II Other Current Assets and Liabilities
The following table provides a description of amounts included in Other
within Current Assets or Current Liabilities that exceed 5% of total Current
Assets or Current Liabilities on the Duke Energy Registrants’ Consolidated
Balance Sheets at either December 31, 2019, or 2018.
(in millions)
Location
2019
2018
December 31,
Duke Energy
Taxes receivable
Accrued compensation
Duke Energy Carolinas
Accrued compensation
Other accrued liabilities
Progress Energy
Customer deposits
Duke Energy Florida
Customer deposits
Other accrued liabilities
Duke Energy Indiana
Income taxes receivable
Customer deposits
Current Assets
Current Liabilities
Current Liabilities
Current Liabilities
Current Liabilities
Current Liabilities
Current Liabilities
Current Assets
Current Liabilities
Discontinued Operations
$
$
$
$
$
357
862
271
147
354
209
89
44
49
$
$
$
$
$
729
793
251
55
345
208
85
9
47
Duke Energy has elected to present cash flows of discontinued operations
combined with cash flows of continuing operations. Unless otherwise noted,
the notes to these consolidated financial statements exclude amounts related
to discontinued operations for all periods presented. See Note 2 for additional
information.
Amounts Attributable to Controlling Interests
For the years ended December 31, 2019, 2018 and 2017, the Income
(Loss) From Discontinued Operations, net of tax on Duke Energy’s Consolidated
Statements of Operations is entirely attributable to controlling interest.
Noncontrolling Interest
Duke Energy maintains a controlling financial interest in certain less-than
wholly owned non-regulated subsidiaries. As a result, Duke Energy consolidates
these subsidiaries and presents the third-party investors’ portion of Duke
Energy’s net income (loss), net assets and comprehensive income (loss) as
noncontrolling interest. Noncontrolling interest is included as a component of
equity on the Consolidated Balance Sheet.
Several operating agreements of Duke Energy’s subsidiaries with
noncontrolling interest are subject to allocations of tax attributes and cash flows
in accordance with contractual agreements that vary throughout the lives of
the subsidiaries. Therefore, Duke Energy and the other investors’ (the owners)
interests in the subsidiaries are not fixed, and the subsidiaries apply the HLBV
method in allocating income or loss and other comprehensive income or loss
(all measured on a pretax basis) to the owners. The HLBV method measures
the amounts that each owner would hypothetically claim at each balance sheet
reporting date, including tax benefits realized by the owners, upon a hypothetical
liquidation of the subsidiary at the net book value of its underlying assets.
The change in the amount that each owner would hypothetically receive at the
reporting date compared to the amount it would have received on the previous
reporting date represents the amount of income or loss allocated to each owner
for the reporting period. During 2019, Duke Energy received $428 million for
the sale of noncontrolling interests to tax equity members subject to the HLBV
method for projects totaling 718 MW in nameplate capacity. Duke Energy
allocated approximately $165 million of losses to noncontrolling tax equity
members utilizing the HLBV method for the year ended December 31, 2019.
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
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.
SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
In preparing financial statements that conform to GAAP, the Duke Energy
Registrants must make estimates and assumptions that affect the reported
amounts of assets and liabilities, the reported amounts of revenues and
expenses and the disclosure of contingent assets and liabilities at the date of
the financial statements. Actual results could differ from those estimates.
Regulatory Accounting
The majority of the Duke Energy Registrants’ operations are subject
to price regulation for the sale of electricity and natural gas by state utility
commissions or FERC. When prices are set on the basis of specific costs
of the regulated operations and an effective franchise is in place such that
sufficient natural gas or electric services can be sold to recover those costs,
the Duke Energy Registrants apply regulatory accounting. Regulatory accounting
changes the timing of the recognition of costs or revenues relative to a company
that does not apply regulatory accounting. As a result, regulatory assets and
regulatory liabilities are recognized on the Consolidated Balance Sheets.
Regulatory assets and liabilities are amortized consistent with the treatment of
the related cost in the ratemaking process. See Note 4 for further information.
Regulatory accounting rules also require recognition of a disallowance
(also called “impairment”) loss if it becomes probable that part of the cost of a
plant under construction (or a recently completed plant or an abandoned plant)
will be disallowed for ratemaking purposes and a reasonable estimate of the
amount of the disallowance can be made. For example, if a cost cap is set for
a plant still under construction, the amount of the disallowance is a result of a
judgment as to the ultimate cost of the plant. These disallowances can require
judgments on allowed future rate recovery.
When it becomes probable that regulated generation, transmission or
distribution assets will be abandoned, the cost of the asset is removed from
plant in service. The value that may be retained as a regulatory asset on the
balance sheet for the abandoned property is dependent upon amounts that
may be recovered through regulated rates, including any return. As such,
an impairment charge could be partially or fully offset by the establishment
of a regulatory asset if rate recovery is probable. The impairment charge
for a disallowance of costs for regulated plants under construction, recently
completed or abandoned is based on discounted cash flows.
104
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued)
The Duke Energy Registrants utilize cost-tracking mechanisms, commonly
Cash, Cash Equivalents and Restricted Cash
referred to as fuel adjustment clauses or PGA clauses. These clauses allow
for the recovery of fuel and fuel-related costs, portions of purchased power,
natural gas costs and hedging costs through surcharges on customer rates. The
difference between the costs incurred and the surcharge revenues is recorded
either as an adjustment to Operating Revenues, Operating Expenses – Fuel
used in electric generation or Operating Expenses – Cost of natural gas on the
Consolidated Statements of Operations, with an off-setting impact on regulatory
assets or liabilities.
All highly liquid investments with maturities of three months or less at
the date of acquisition are considered cash equivalents. Duke Energy, Progress
Energy and Duke Energy Florida have restricted cash balances related primarily
to collateral assets, escrow deposits and VIEs. See Note 18 for additional
information. Restricted cash amounts are included in Other within Current
Assets and Other Noncurrent Assets on the Consolidated Balance Sheets.
The following table presents the components of cash, cash equivalents and
restricted cash included in the Consolidated Balance Sheets.
Current Assets
Cash and cash equivalents
Other
Other Noncurrent Assets
Other
December 31, 2019
December 31, 2018
Duke
Energy
Progress
Energy
$
311
222
40
$
48
39
39
Duke
Energy
Florida
$
17
39
—
Duke
Energy
Progress
Energy
$ 442
141
$ 67
39
8
6
Total cash, cash equivalents and restricted cash
$
573
$
126
$
56
$ 591
$ 112
Duke
Energy
Florida
$
$
36
39
—
75
Inventory
Inventory related to regulated operations is valued at historical cost. Inventory related to nonregulated operations is valued at the lower of cost or market.
Inventory is charged to expense or capitalized to property, plant and equipment when issued, primarily using the average cost method. Excess or obsolete inventory is
written-down to the lower of cost or net realizable value. Once inventory has been written-down, it creates a new cost basis for the inventory that is not subsequently
written-up. Provisions for inventory write-offs were not material at December 31, 2019, and 2018, respectively. The components of inventory are presented in the
tables below.
(in millions)
Materials and supplies
Coal
Natural gas, oil and other
Total inventory
(in millions)
Materials and supplies
Coal
Natural gas, oil and other
Total inventory
December 31, 2019
Duke
Energy
$ 2,297
586
349
Duke
Energy
Carolinas
$
768
187
41
Progress
Energy
$ 1,038
186
199
Duke
Energy
Progress
$
686
138
110
Duke
Energy
Florida
$ 351
48
90
Duke
Energy
Ohio
$
79
15
41
Duke
Energy
Indiana
$ 318
198
1
$
$ 3,232
$
996
$ 1,423
$
934
$ 489
$ 135
$ 517
$
Piedmont
5
—
67
72
December 31, 2018
Duke
Energy
$ 2,238
491
355
$ 3,084
Duke
Energy
Carolinas
$
731
175
42
$
948
Progress
Energy
$ 1,049
192
218
$ 1,459
Duke
Energy
Progress
$
734
106
114
$
954
Duke
Energy
Florida
$ 315
86
103
$ 504
Duke
Energy
Ohio
$ 84
14
28
$ 126
Duke
Energy
Indiana
$ 312
109
1
$
$ 422
$
Piedmont
2
—
68
70
105
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued)
Investments in Debt and Equity Securities
The Duke Energy Registrants classify investments in equity securities as
FV-NI and investments in debt securities as AFS. Both categories are recorded
at fair value on the Consolidated Balance Sheets. Realized and unrealized gains
and losses on securities classified as FV-NI are reported through net income.
Unrealized gains and losses for debt securities classified as AFS are included
in AOCI until realized, except OTTIs that are included in earnings immediately.
At the time gains and losses for debt securities are realized, they are reported
through net income. For certain investments of regulated operations, such as
substantially all of the NDTF, realized and unrealized gains and losses (including
any OTTIs) on debt securities are recorded as a regulatory asset or liability. The
credit loss portion of debt securities of nonregulated operations are included
in earnings. Investments in debt and equity securities are classified as either
current or noncurrent based on management’s intent and ability to sell these
securities, taking into consideration current market liquidity. See Note 16 for
further information.
Goodwill
Duke Energy, Progress Energy, Duke Energy Ohio and Piedmont perform
annual goodwill impairment tests as of August 31 each year at the reporting unit
level, which is determined to be a business segment or one level below. Duke
Energy, Progress Energy, Duke Energy Ohio and Piedmont update these tests
between annual tests if events or circumstances occur that would more likely
than not reduce the fair value of a reporting unit below its carrying value. See
Note 12 for further information.
Intangible Assets
Intangible assets are included in Other in Other Noncurrent Assets on the
Consolidated Balance Sheets. Generally, intangible assets are amortized using
an amortization method that reflects the pattern in which the economic benefits
of the intangible asset are consumed or on a straight-line basis if that pattern is
not readily determinable. Amortization of intangibles is reflected in Depreciation
and amortization on the Consolidated Statements of Operations. Intangible
assets are subject to impairment testing and if impaired, the carrying value is
accordingly reduced.
Emission allowances permit the holder of the allowance to emit certain
gaseous byproducts of fossil fuel combustion, including SO2 and NOX.
Allowances are issued by the EPA at zero cost and may also be bought and sold
via third-party transactions. Allowances allocated to or acquired by the Duke
Energy Registrants are held primarily for consumption. Carrying amounts for
emission allowances are based on the cost to acquire the allowances. Emission
allowances are expensed to Fuel used in electric generation and purchased
power on the Consolidated Statements of Operations.
RECs are used to measure compliance with renewable energy standards
and are held primarily for consumption. See Note 12 for further information.
weighted. If the carrying value of the long-lived asset is not recoverable
based on these estimated future undiscounted cash flows, the carrying value
of the asset is written-down to its then-current estimated fair value and an
impairment charge is recognized.
The Duke Energy Registrants assess fair value of long-lived assets using
various methods, including recent comparable third-party sales, internally
developed discounted cash flow analysis and analysis from outside advisors.
Triggering events to reassess cash flows may include, but are not limited
to, significant changes in commodity prices, the condition of an asset or
management’s interest in selling the asset.
Equity Method Investment Impairments
Investments in affiliates that are not controlled by Duke Energy, but over
which it has significant influence, are accounted for using the equity method.
Equity method investments are assessed for impairment whenever events or
changes in circumstances indicate that the carrying amount of the investment
may not be recoverable. If the decline in value is considered to be other than
temporary, the investment is written down to its estimated fair value, which
establishes a new cost basis in the investment.
Impairment assessments use a discounted cash flow income approach
and include consideration of the severity and duration of any decline in the fair
value of the investments. The estimated cash flows may be based on alternative
expected outcomes that are probability weighted. Key inputs that involve
estimates and significant management judgment include cash flow projections,
selection of a discount rate, probability weighting of potential outcomes, and
whether any decline in value is considered temporary.
Property, Plant and Equipment
Property, plant and equipment are stated at the lower of depreciated
historical cost net of any disallowances or fair value, if impaired. The Duke
Energy Registrants capitalize all construction-related direct labor and material
costs, as well as indirect construction costs such as general engineering, taxes
and financing costs. See “Allowance for Funds Used During Construction and
Interest Capitalized” for information on capitalized financing costs. Costs of
renewals and betterments that extend the useful life of property, plant and
equipment are also capitalized. The cost of repairs, replacements and major
maintenance projects, which do not extend the useful life or increase the
expected output of the asset, are expensed as incurred. Depreciation is generally
computed over the estimated useful life of the asset using the composite
straight-line method. Depreciation studies are conducted periodically to update
composite rates and are approved by state utility commissions and/or the FERC
when required. The composite weighted average depreciation rates, excluding
nuclear fuel, are included in the table that follows.
Long-Lived Asset Impairments
The Duke Energy Registrants evaluate long-lived assets, excluding
goodwill, for impairment when circumstances indicate the carrying value of
those assets may not be recoverable. An impairment exists when a long-lived
asset’s carrying value exceeds the estimated undiscounted cash flows expected
to result from the use and eventual disposition of the asset. The estimated
cash flows may be based on alternative expected outcomes that are probability
Duke Energy
Duke Energy Carolinas
Progress Energy
Duke Energy Progress
Duke Energy Florida
Duke Energy Ohio
Duke Energy Indiana
Piedmont
106
Years Ended December 31,
2019
3.1 %
2.8 %
3.1 %
3.1 %
3.1 %
2.6 %
3.3 %
2.4 %
2018
3.0%
2.8%
2.9%
2.9%
3.0%
2.8%
3.3%
2.5%
2017
2.8%
2.8%
2.6%
2.6%
2.8%
2.8%
3.0%
2.3%
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) In general, when the Duke Energy Registrants retire regulated property,
plant and equipment, the original cost plus the cost of retirement, less salvage
value and any depreciation already recognized, is charged to accumulated
depreciation. However, when it becomes probable the asset will be retired
substantially in advance of its original expected useful life or is abandoned,
the cost of the asset and the corresponding accumulated depreciation is
recognized as a separate asset. If the asset is still in operation, the net amount
is classified as Generation facilities to be retired, net on the Consolidated
Balance Sheets. If the asset is no longer operating, the net amount is classified
in Regulatory assets on the Consolidated Balance Sheets if deemed recoverable
(see discussion of long-lived asset impairments above). The carrying value of
the asset is based on historical cost if the Duke Energy Registrants are allowed
to recover the remaining net book value and a return equal to at least the
incremental borrowing rate. If not, an impairment is recognized to the extent
the net book value of the asset exceeds the present value of future revenues
discounted at the incremental borrowing rate.
When the Duke Energy Registrants sell entire regulated operating units,
or retire or sell nonregulated properties, the original cost and accumulated
depreciation and amortization balances are removed from Property, Plant and
Equipment on the Consolidated Balance Sheets. Any gain or loss is recorded
in earnings, unless otherwise required by the applicable regulatory body. See
Note 11 for additional information.
Nuclear Fuel
Nuclear fuel is classified as Property, Plant and Equipment on the
Consolidated Balance Sheets.
Nuclear fuel in the front-end fuel processing phase is considered work
in progress and not amortized until placed in service. Amortization of nuclear
fuel is included within Fuel used in electric generation and purchased power on
the Consolidated Statements of Operations. Amortization is recorded using the
units-of-production method.
Allowance for Funds Used During Construction and Interest Capitalized
For regulated operations, the debt and equity costs of financing the
construction of property, plant and equipment are reflected as AFUDC and
capitalized as a component of the cost of property, plant and equipment. AFUDC
equity is reported on the Consolidated Statements of Operations as non-cash
income in Other income and expenses, net. AFUDC debt is reported as a
non-cash offset to Interest Expense. After construction is completed, the Duke
Energy Registrants are permitted to recover these costs through their inclusion
in rate base and the corresponding subsequent depreciation or amortization of
those regulated assets.
AFUDC equity, a permanent difference for income taxes, reduces the ETR
when capitalized and increases the ETR when depreciated or amortized. See
Note 24 for additional information.
For nonregulated operations, interest is capitalized during the
construction phase with an offsetting non-cash credit to Interest Expense on the
Consolidated Statements of Operations.
Asset Retirement Obligations
AROs are recognized for legal obligations associated with the retirement
of property, plant and equipment. Substantially all AROs are related to regulated
operations. When recording an ARO, the present value of the projected liability
is recognized in the period in which it is incurred, if a reasonable estimate of
fair value can be made. The liability is accreted over time. For operating plants,
the present value of the liability is added to the cost of the associated asset and
depreciated over the remaining life of the asset. For retired plants, the present
value of the liability is recorded as a regulatory asset unless determined not to
be probable of recovery.
The present value of the initial obligation and subsequent updates are
based on discounted cash flows, which include estimates regarding timing of
future cash flows, selection of discount rates and cost escalation rates, among
other factors. These estimates are subject to change. Depreciation expense is
adjusted prospectively for any changes to the carrying amount of the associated
asset. The Duke Energy Registrants receive amounts to fund the cost of the
ARO for regulated operations through a combination of regulated revenues and
earnings on the NDTF. As a result, amounts recovered in regulated revenues,
earnings on the NDTF, accretion expense and depreciation of the associated
asset are netted and deferred as a regulatory asset or liability.
Obligations for nuclear decommissioning are based on site-specific
cost studies. Duke Energy Carolinas and Duke Energy Progress assume
prompt dismantlement of the nuclear facilities after operations are ceased.
In 2019, Duke Energy Florida entered into an agreement for the accelerated
decommissioning of Crystal River Unit 3. See Note 4 for more information. Duke
Energy Carolinas, Duke Energy Progress and Duke Energy Florida also assume
that spent fuel will be stored on-site until such time that it can be transferred to
a yet to be built DOE facility.
Obligations for closure of ash basins are based upon discounted cash
flows of estimated costs for site-specific plans, if known, or probability
weightings of the potential closure methods if the closure plans are under
development and multiple closure options are being considered and evaluated
on a site-by-site basis. See Note 10 for additional information.
Revenue Recognition
Duke Energy recognizes revenue as customers obtain control of promised
goods and services in an amount that reflects consideration expected in
exchange for those goods or services. Generally, the delivery of electricity
and natural gas results in the transfer of control to customers at the time the
commodity is delivered and the amount of revenue recognized is equal to the
amount billed to each customer, including estimated volumes delivered when
billings have not yet occurred. See Note 19 for further information.
Derivatives and Hedging
Derivative and non-derivative instruments may be used in connection
with commodity price and interest rate activities, including swaps, futures,
forwards and options. All derivative instruments, except those that qualify for
the NPNS exception, are recorded on the Consolidated Balance Sheets at fair
value. Qualifying derivative instruments may be designated as either cash
flow hedges or fair value hedges. Other derivative instruments (undesignated
contracts) either have not been designated or do not qualify as hedges. The
effective portion of the change in the fair value of cash flow hedges is recorded
in AOCI. The effective portion of the change in the fair value of a fair value hedge
is offset in net income by changes in the hedged item. For activity subject to
regulatory accounting, gains and losses on derivative contracts are reflected as
regulatory assets or liabilities and not as other comprehensive income or current
period income. As a result, changes in fair value of these derivatives have no
immediate earnings impact.
Formal documentation, including transaction type and risk management
strategy, is maintained for all contracts accounted for as a hedge. At inception
and at least every three months thereafter, the hedge contract is assessed to
see if it is highly effective in offsetting changes in cash flows or fair values of
hedged items.
See Note 15 for further information.
107
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) Captive Insurance Reserves
Pension and Other Post-Retirement Benefit Plans
Duke Energy has captive insurance subsidiaries that provide coverage,
Duke Energy maintains qualified, non-qualified and other post-retirement
on an indemnity basis, to the Subsidiary Registrants as well as certain
third parties, on a limited basis, for financial losses, primarily related to
property, workers’ compensation and general liability. Liabilities include
provisions for estimated losses incurred but not reported (IBNR), as well as
estimated provisions for known claims. IBNR reserve estimates are primarily
based upon historical loss experience, industry data and other actuarial
assumptions. Reserve estimates are adjusted in future periods as actual losses
differ from experience.
Duke Energy, through its captive insurance entities, also has reinsurance
coverage with third parties for certain losses above a per occurrence and/or
aggregate retention. Receivables for reinsurance coverage are recognized when
realization is deemed probable.
Unamortized Debt Premium, Discount and Expense
Premiums, discounts and expenses incurred with the issuance of
outstanding long-term debt are amortized over the term of the debt issue. The
gain or loss on extinguishment associated with refinancing higher-cost debt
obligations in the regulated operations is amortized over the remaining life of
the original instrument. Amortization expense is recorded as Interest Expense
in the Consolidated Statements of Operations and is reflected as Depreciation,
amortization and accretion within Net cash provided by operating activities on
the Consolidated Statements of Cash Flows.
Premiums, discounts and expenses are presented as an adjustment to
the carrying value of the debt amount and included in Long-Term Debt on the
Consolidated Balance Sheets presented.
Preferred Stock
Preferred stock is reviewed to determine the appropriate balance sheet
classification and embedded features, such as call options, are evaluated to
determine if they should be bifurcated and accounted for separately. Costs
directly related to the issuance of preferred stock is recorded as a reduction of
the proceeds received. The liability for the dividend is recognized when declared.
The accumulated dividends on the cumulative preferred stock is recognized to
net income available to Duke Energy Corporation in the EPS calculation. See
Note 20 for further information.
Loss Contingencies and Environmental Liabilities
Contingent losses are recorded when it is probable a loss has occurred
and can be reasonably estimated. When a range of the probable loss exists and
no amount within the range is a better estimate than any other amount, the
minimum amount in the range is recorded. Unless otherwise required by GAAP,
legal fees are expensed as incurred.
Environmental liabilities are recorded on an undiscounted basis when
environmental remediation or other liabilities become probable and can be
reasonably estimated. Environmental expenditures related to past operations
that do not generate current or future revenues are expensed. Environmental
expenditures related to operations that generate current or future revenues are
expensed or capitalized, as appropriate. Certain environmental expenditures
receive regulatory accounting treatment and are recorded as regulatory assets.
See Notes 4 and 5 for further information.
benefit plans. Eligible employees of the Subsidiary Registrants participate in
the respective qualified, non-qualified and other post-retirement benefit plans
and the Subsidiary Registrants are allocated their proportionate share of benefit
costs. See Note 23 for further information, including significant accounting
policies associated with these plans.
Severance and Special Termination Benefits
Duke Energy has severance plans under which in general, the longer a
terminated employee worked prior to termination the greater the amount of
severance benefits. A liability for involuntary severance is recorded once an
involuntary severance plan is committed to by management if involuntary
severances are probable and can be reasonably estimated. For involuntary
severance benefits incremental to its ongoing severance plan benefits, the fair
value of the obligation is expensed at the communication date if there are no
future service requirements or over the required future service period. Duke
Energy also offers special termination benefits under voluntary severance
programs. Special termination benefits are recorded immediately upon employee
acceptance absent a significant retention period. Otherwise, the cost is recorded
over the remaining service period. Employee acceptance of voluntary severance
benefits is determined by management based on the facts and circumstances of
the benefits being offered. See Note 21 for further information.
Guarantees
If necessary, liabilities are recognized at the time of issuance or material
modification of a guarantee for the estimated fair value of the obligation it
assumes. Fair value is estimated using a probability-weighted approach. The
obligation is reduced over the term of the guarantee or related contract in a
systematic and rational method as risk is reduced. Any additional contingent
loss for guarantee contracts subsequent to the initial recognition of a liability
is accounted for and recognized at the time a loss is probable and can be
reasonably estimated. See Note 8 for further information.
Stock-Based Compensation
Stock-based compensation represents costs related to stock-based
awards granted to employees and Board of Directors members. Duke Energy
recognizes stock-based compensation based upon the estimated fair value of
awards, net of estimated forfeitures at the date of issuance. The recognition
period for these costs begins at either the applicable service inception date or
grant date and continues throughout the requisite service period. Compensation
cost is recognized as expense or capitalized as a component of property, plant
and equipment. See Note 22 for further information.
Income Taxes
Duke Energy and its subsidiaries file a consolidated federal income
tax return and other state and foreign jurisdictional returns. The Subsidiary
Registrants are parties to a tax-sharing agreement with Duke Energy. Income
taxes recorded represent amounts the Subsidiary Registrants would incur as
separate C-Corporations. Deferred income taxes have been provided for temporary
differences between GAAP and tax bases of assets and liabilities because the
differences create taxable or tax-deductible amounts for future periods. ITCs
associated with regulated operations are deferred and amortized as a reduction of
income tax expense over the estimated useful lives of the related properties.
108
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) Accumulated deferred income taxes are valued using the enacted tax rate
expected to apply to taxable income in the periods in which the deferred tax
asset or liability is expected to be settled or realized. In the event of a change in
tax rates, deferred tax assets and liabilities are remeasured as of the enactment
date of the new rate. To the extent that the change in the value of the deferred
tax represents an obligation to customers, the impact of the remeasurement is
deferred to a regulatory liability. Remaining impacts are recorded in income from
continuing operations. If Duke Energy’s estimate of the tax effect of reversing
temporary differences is not reflective of actual outcomes, is modified to reflect
new developments or interpretations of the tax law, revised to incorporate
new accounting principles, or changes in the expected timing or manner of the
reversal then Duke Energy’s results of operations could be impacted.
Tax-related interest and penalties are recorded in Interest Expense and
Other Income and Expenses, net in the Consolidated Statements of Operations.
See Note 24 for further information.
Accounting for Renewable Energy Tax Credits
When Duke Energy receives ITCs on wind or solar facilities, it reduces
the basis of the property recorded on the Consolidated Balance Sheets by the
amount of the ITC and, therefore, the ITC benefit is ultimately recognized in the
statement of operations through reduced depreciation expense. Additionally,
certain tax credits and government grants result in an initial tax depreciable
base in excess of the book carrying value by an amount equal to one half of the
ITC. Deferred tax benefits are recorded as a reduction to income tax expense in
the period that the basis difference is created.
Duke Energy receives PTCs on wind facilities that are recognized as
electricity is produced.
Excise Taxes
Certain excise taxes levied by state or local governments are required to
be paid even if not collected from the customer. These taxes are recognized on
a gross basis. Taxes for which Duke operates merely as a collection agent for
the state and local government are accounted for on a net basis. Excise taxes
accounted for on a gross basis within both Operating Revenues and Property
and other taxes in the Consolidated Statements of Operations were as follows.
(in millions)
Duke Energy
Duke Energy Carolinas
Progress Energy
Duke Energy Progress
Duke Energy Florida
Duke Energy Ohio
Duke Energy Indiana
Piedmont
Years Ended December 31,
2019
2018
$ 421
39
256
21
235
101
23
2
$ 405
35
241
19
222
105
22
2
2017
$ 376
36
220
19
201
98
20
2
Dividend Restrictions and Unappropriated Retained Earnings
Duke Energy does not have any legal, regulatory or other restrictions on
paying common stock dividends to shareholders. However, as further described
in Note 4, Duke Energy Carolinas, Duke Energy Progress, Duke Energy Ohio, Duke
Energy Indiana and Piedmont have restrictions on paying dividends or otherwise
advancing funds to Duke Energy due to conditions established by regulators
in conjunction with merger transaction approvals. At December 31, 2019, and
2018, an insignificant amount of Duke Energy’s consolidated Retained earnings
balance represents undistributed earnings of equity method investments.
NEW ACCOUNTING STANDARDS
Except as noted below, the new accounting standards adopted for 2019,
2018 and 2017 had no material impact on the presentation or results of
operations, cash flows or financial position of the Duke Energy Registrants.
Leases. In February 2016, the FASB issued revised accounting guidance
for leases. The core principle of this guidance is that a lessee should recognize
the assets and liabilities that arise from leases on the balance sheet. This
resulted in a material impact on the presentation for the statement of financial
position of the Duke Energy Registrants for the period ended December 31,
2019, and an immaterial impact to the Duke Energy Registrants’ results of
operations and cash flows for the year ended December 31, 2019.
Duke Energy elected the modified retrospective method of adoption
effective January 1, 2019. Under the modified retrospective method of adoption,
prior year reported results are not restated. For adoption, Duke Energy elected to
apply the following practical expedients:
Practical Expedient
Description
Package of transition practical expedients (for leases commenced prior to adoption date
and must be adopted as a package)
Short-term lease expedient (elect by class of underlying asset)
Lease and non-lease components (elect by class of underlying asset)
Hindsight expedient (when determining lease term)
Existing and expired land easements not previously accounted for as leases
Comparative reporting requirements for initial adoption
Lessor expedient (elect by class of underlying asset)
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.
Elect as an accounting policy to not apply the recognition requirements to short-term
leases by asset class.
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.
Elect to use hindsight to determine the lease term.
Elect to not evaluate existing or expired easements under the new guidance and carry
forward current accounting treatment.
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.
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).
109
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) Duke Energy evaluated the financial statement impact of adopting the
standard and monitored industry implementation issues. Under agreements
considered leases, where Duke Energy is the lessee, for the use of certain
aircraft, space on communication towers, industrial equipment, fleet vehicles,
fuel transportation (barges and railcars), land, office space and PPAs are now
recognized on the balance sheet. The Duke Energy Registrants did not have
a material change to the financial statements from the adoption of the new
standard for contracts where it is the lessor. See Note 6 for further information.
The following new accounting standard has been issued but not yet
adopted by the Duke Energy Registrants as of December 31, 2019.
Credit Losses. In June 2016, the FASB issued new accounting guidance
for credit losses. This guidance establishes a new impairment model
applicable to certain financial assets, including trade and other receivables,
net investments in leases, and debt securities classified as held-for-sale
investments. The model also applies to financial guarantees.
For Duke Energy, the guidance is effective for interim and annual periods
beginning January 1, 2020. This guidance will be applied using a modified
retrospective approach. Under the modified retrospective approach of adoption,
prior year reported results are not restated and a cumulative-effect adjustment
is recorded to retained earnings at January 1, 2020.
Upon adoption, Duke Energy will recognize an allowance for credit losses
based on management’s estimate of losses expected to be incurred over the
lives of certain assets or guarantees. Duke Energy expects the impacts of this
standard to be driven by the reserve for credit losses on financial guarantees,
trade and other receivables, and insurance receivables. Duke Energy does not
intend to adopt any practical expedients.
Duke Energy currently expects to record a reserve for credit losses as shown in approximate amounts in the table below:
(in millions)
Total pretax impact to Retained Earnings
December 31, 2019
Duke
Energy
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida Piedmont
$
120
$
16
$
2
$
1
$
1
$
1
In addition to the reserve for credit losses, Duke Energy expects additional disclosures on management’s evaluation of credit risks inherent in financial assets
and how management monitors credit quality, changes in expected credit losses, and the appropriateness of the allowance for credit losses on a forward-looking
basis. Duke Energy also expects additional disclosures around credit losses for new investments in leases, loan commitments, and other financial instruments.
2. ACQUISITIONS AND DISPOSITIONS
ACQUISITIONS
The Duke Energy Registrants consolidate assets and liabilities from
acquisitions as of the purchase date and include earnings from acquisitions in
consolidated earnings after the purchase date.
2016 Acquisition of Piedmont Natural Gas
On October 3, 2016, Duke Energy acquired all outstanding common
stock of Piedmont for a total cash purchase price of $5 billion and assumed
Piedmont’s existing long-term debt, which had a fair value of approximately
$2 billion at the time of the acquisition. The acquisition provides a foundation
for Duke Energy to establish a broader, long-term strategic natural gas
infrastructure platform to complement its existing natural gas pipeline
investments and regulated natural gas business in the Midwest. In connection
with the closing of the acquisition, Piedmont became a wholly owned subsidiary
of Duke Energy.
Accounting Charges Related to the Acquisition
Duke Energy incurred pretax transaction and integration costs
associated with the acquisition of $84 million and $103 million for the years
ended December 31, 2018, and 2017, respectively. Amounts recorded on
the Consolidated Statements of Operations in 2018 and 2017 were primarily
system integration costs of $78 million and $71 million, respectively, related to
combining the various operational and financial systems of Duke Energy and
Piedmont, including a one-time software impairment resulting from planned
accounting system and process integration in 2017. A $7 million charge was
recorded within Impairment Charges, with the remaining $64 million recorded
within Operation, maintenance and other in 2017.
The majority of transition and integration activities were completed by the
end of 2018.
DISPOSITIONS
On April 24, 2019, Duke Energy executed an agreement to sell a minority
interest in a portion of certain renewable assets within the Commercial
Renewables segment. 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 Consolidated Statements of Operations.
The difference between the consideration received and the carrying value of the
noncontrolling interest claim on net assets is $466 million, net of a tax benefit of
$8 million, and was recorded in equity.
110
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) 3. BUSINESS SEGMENTS
Reportable segments are determined based on information used by
the chief operating decision-maker in deciding how to allocate resources and
evaluate the performance of the business. Duke Energy evaluates segment
performance based on segment income. Segment income is defined as income
from continuing operations net of income attributable to noncontrolling interests.
Segment income, as discussed below, includes intercompany revenues and
expenses that are eliminated on the Consolidated Financial Statements. Certain
governance costs are allocated to each segment. In addition, direct interest
expense and income taxes are included in segment income.
Products and services are sold between affiliate companies and
reportable segments of Duke Energy at cost. Segment assets as presented in the
tables that follow exclude all intercompany assets.
Duke Energy
Duke Energy’s segment structure includes the following segments: Electric
Utilities and Infrastructure, Gas Utilities and Infrastructure and Commercial
Renewables.
The Electric Utilities and Infrastructure segment includes Duke
Energy’s regulated electric utilities in the Carolinas, Florida and the Midwest.
The regulated electric utilities conduct operations through the Subsidiary
Registrants that are substantially all regulated and, accordingly, qualify for
regulatory accounting treatment. Electric Utilities and Infrastructure also
includes Duke Energy’s electric transmission infrastructure investments.
The Gas Utilities and Infrastructure segment includes Piedmont, Duke
Energy’s natural gas local distribution companies in Ohio and Kentucky, and
Duke Energy’s natural gas storage and midstream pipeline investments. Gas
Utilities and Infrastructure’s operations are substantially all regulated and,
accordingly, qualify for regulatory accounting treatment.
The Commercial Renewables segment is primarily comprised of
nonregulated utility-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. See Note 2 for
additional information on the minority interest sale.
The remainder of Duke Energy’s operations is presented as Other, which
is primarily comprised of interest expense on holding company debt, unallocated
corporate costs and Duke Energy’s wholly owned captive insurance company,
Bison. Other also includes Duke Energy’s interest in NMC. See Note 13 for
additional information on the investment in NMC.
Business segment information is presented in the following tables. Segment assets presented exclude intercompany assets.
(in millions)
Unaffiliated Revenues
Intersegment Revenues
Total Revenues
Interest Expense
Depreciation and amortization
Equity in earnings (losses) of unconsolidated affiliates
Income tax expense (benefit)
Segment income (loss)(a)(b)
Add back noncontrolling interest(c)
Add back preferred stock dividend
Loss from discontinued operations, net of tax
Net income
Capital investments expenditures and acquisitions
Segment assets
Year Ended December 31, 2019
Electric
Utilities and
Infrastructure
Gas
Utilities and
Infrastructure
Commercial
Renewables
$ 22,798
33
$ 22,831
$
1,345
3,951
9
785
3,536
$ 1,770
96
$ 1,866
$
117
256
114
22
432
$
$
$
487
—
487
95
168
(4)
(115)
198
Total
Reportable
Segments
$ 25,055
129
$ 25,184
$
1,557
4,375
119
692
4,166
$
$
24
71
95
$ 705
178
43
(173)
(452)
Other
Eliminations
Total
$ — $ 25,079
—
(200)
$ (200) $ 25,079
$
(58) $
(5)
—
—
—
2,204
4,548
162
519
3,714
(177)
41
(7)
3,571
$
$ — $ 11,446
188
158,838
$
8,263
135,561
$ 1,539
13,921
$ 1,423
6,020
$ 11,225
$ 221
155,502
3,148
(a) Electric Utilities and Infrastructure includes a $27 million reduction of a prior year impairment at Citrus County CC related to the plant’s cost cap. See Note 4 for additional information.
(b) Gas Utilities and Infrastructure includes an after-tax impairment charge of $19 million for the remaining investment in Constitution. See Note 13 for additional information.
(c)
Includes the allocation of losses to noncontrolling tax equity members. See Note 1 for additional information.
111
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) (in millions)
Unaffiliated Revenues
Intersegment Revenues
Total Revenues
Interest Expense
Depreciation and amortization
Equity in earnings (losses) of unconsolidated affiliates
Income tax expense (benefit)(a)
Segment income (loss)(b)(c)(d)(e)
Add back noncontrolling interest component
Loss from discontinued operations, net of tax
Net income
Capital investments expenditures and acquisitions
Segment assets
Year Ended December 31, 2018
Electric
Utilities and
Infrastructure
Gas
Utilities and
Infrastructure
Commercial
Renewables
$ 22,242
31
$ 22,273
$
1,288
3,523
5
799
3,058
$ 1,783
98
$ 1,881
$
106
245
27
78
274
$
$
$
477
—
477
88
155
(1)
(147)
9
Total
Reportable
Segments
$ 24,502
129
$ 24,631
$
1,482
3,923
31
730
3,341
$
$
$
19
70
89
657
152
52
(282)
(694)
$
8,086
125,364
$ 1,133
12,361
$
193
4,204
$
9,412
141,929
$
256
3,275
Other
Eliminations
Total
$ — $ 24,521
—
(199)
$ (199) $ 24,521
$
(45) $
(1)
—
—
—
$
$ — $
188
2,094
4,074
83
448
2,647
(22)
19
2,644
9,668
145,392
(a) All segments include adjustments to the December 31, 2017, estimate of the income tax effects of the Tax Act. Electric Utilities and Infrastructure includes a $24 million expense, Gas Utilities and Infrastructure includes a
$1 million expense, Commercial Renewables includes a $3 million benefit and Other includes a $2 million benefit. See Note 24 for additional information.
(b) Electric Utilities and Infrastructure includes after-tax regulatory and legislative impairment charges of $202 million related to rate case orders, settlements or other actions of regulators or legislative bodies and an after-tax
impairment charge of $46 million related to the Citrus County CC at Duke Energy Florida. See Note 4 for additional information.
(c) Gas Utilities and Infrastructure includes an after-tax impairment charge of $42 million for the investment in Constitution. See Note 13 for additional information.
(d) Commercial Renewables includes an impairment charge of $91 million, net of $2 million Noncontrolling interests, related to goodwill. See Note 12 for additional information.
(e) Other includes $65 million of after-tax costs to achieve the Piedmont merger, $144 million of after-tax severance charges related to a companywide initiative and an $82 million after-tax loss on the sale of Beckjord described
below. For additional information, see Note 2 for the Piedmont Merger and Note 21 for severance charges.
In February 2018, Duke Energy sold Beckjord, a nonregulated facility retired during 2014, and recorded a pretax loss of $106 million within (Losses) Gains on
Sales of Other Assets and Other, net and $1 million within Operation, maintenance and other on Duke Energy’s Consolidated Statements of Operations for the year
ended December 31, 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.
(in millions)
Unaffiliated Revenues
Intersegment Revenues
Total Revenues
Interest Expense
Depreciation and amortization
Equity in earnings (losses) of unconsolidated affiliates
Income tax expense (benefit)(a)
Segment income (loss)(b)(c)(d)
Add back noncontrolling interest component
Loss from discontinued operations, net of tax
Net income
Capital investments expenditures and acquisitions
Segment assets
Year Ended December 31, 2017
Electric
Utilities and
Infrastructure
Gas
Utilities and
Infrastructure
Commercial
Renewables
$ 21,300
31
$ 21,331
$
1,240
3,010
5
1,355
3,210
$ 1,743
93
$ 1,836
$
105
231
62
116
319
$
$
$
460
—
460
87
155
(5)
(628)
441
Total
Reportable
Segments
$ 23,503
124
$ 23,627
$
1,432
3,396
62
843
3,970
$
$
$
62
76
138
574
131
57
353
(905)
$
7,024
119,423
$
907
11,462
$
92
4,156
$
8,023
135,041
$
175
2,685
Other
Eliminations
Total
$ — $ 23,565
—
(200)
$ (200) $ 23,565
$
(20) $
—
—
—
—
$
$ — $
188
1,986
3,527
119
1,196
3,065
5
(6)
3,064
8,198
137,914
(a) All segments include impacts of the Tax Act. Electric Utilities and Infrastructure includes a $231 million benefit, Gas Utilities and Infrastructure includes a $26 million benefit, Commercial Renewables includes a $442 million
benefit and Other includes charges of $597 million.
(b) Electric Utilities and Infrastructure includes after-tax regulatory settlement charges of $98 million.
(c) Commercial Renewables includes after-tax impairment charges of $74 million related to certain wind projects and the Energy Management Solutions reporting unit. See Notes 11 and 12 for additional information.
(d) Other includes $64 million of after-tax costs to achieve the Piedmont merger. See Note 2 for additional information.
112
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) Geographical Information
Substantially all assets and revenues from continuing operations are within the U.S.
Major Customers
For the year ended December 31, 2019, revenues from one customer of Duke Energy Progress are $635 million. Duke Energy Progress has one reportable
segment, Electric Utilities and Infrastructure. No other Subsidiary Registrant has an individual customer representing more than 10% of its revenues.
Products and Services
The following table summarizes revenues of the reportable segments by type.
(in millions)
2019
Electric Utilities and Infrastructure
Gas Utilities and Infrastructure
Commercial Renewables
Total Reportable Segments
2018
Electric Utilities and Infrastructure
Gas Utilities and Infrastructure
Commercial Renewables
Total Reportable Segments
2017
Electric Utilities and Infrastructure
Gas Utilities and Infrastructure
Commercial Renewables
Total Reportable Segments
Duke Energy Ohio
Retail
Electric
Wholesale
Electric
Retail
Natural Gas
Other
Total
Revenues
$ 19,745
—
—
$ 19,745
$ 19,013
—
—
$ 19,013
$ 18,177
—
—
$ 18,177
$
$
$
$
$
$
2,231
—
389
2,620
2,345
—
375
2,720
2,104
—
375
2,479
$
$
$
$
$
$
—
1,782
—
1,782
—
1,817
—
1,817
—
1,732
—
1,732
$
855
84
98
$ 1,037
$
915
64
102
$ 1,081
$ 1,050
104
85
$ 1,239
$ 22,831
1,866
487
$ 25,184
$ 22,273
1,881
477
$ 24,631
$ 21,331
1,836
460
$ 23,627
Duke Energy Ohio has two reportable segments, Electric Utilities and Infrastructure and Gas Utilities and Infrastructure.
Electric Utilities and Infrastructure transmits and distributes electricity in portions of Ohio and generates, distributes and sells electricity in portions of Northern
Kentucky. Gas Utilities and Infrastructure transports and sells natural gas in portions of Ohio and Northern Kentucky. Both reportable segments conduct operations
primarily through Duke Energy Ohio and its wholly owned subsidiary, Duke Energy Kentucky.
The remainder of Duke Energy Ohio’s operations is presented as Other. In December 2018, the PUCO approved an order which allows the recovery or credit
of revenues and expenses related to Duke Energy Ohio’s contractual arrangement to buy power from OVEC power plants. Due to the change in regulatory treatment
of these amounts, OVEC revenues and expenses are now reflected in the Electric Utilities and Infrastructure segment. Previously, OVEC revenues and expense
were included in Other. These amounts are deemed immaterial for Duke Energy Ohio. Therefore, no prior period amounts were restated. See Note 4 for additional
information on the PUCO order.
113
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) All Duke Energy Ohio assets and revenues from continuing operations are within the U.S.
Year Ended December 31, 2019
(in millions)
Total revenues
Interest expense
Depreciation and amortization
Income tax expense (benefit)
Segment income (loss)/Net income
Loss from discontinued operations, net of tax
Net income
Capital expenditures
Segment assets
(in millions)
Total revenues
Interest expense
Depreciation and amortization
Income tax expense (benefit)
Segment income (loss)/Net income(a)
Capital expenditures
Segment assets
(a) Other includes the loss on the sale of Beckjord, see discussion above.
(in millions)
Total revenues
Interest expense
Depreciation and amortization
Income tax expense (benefit)
Segment income (loss)
Loss from discontinued operations, net of tax
Net income
Capital expenditures
Segment assets
Electric
Utilities and
Infrastructure
$ 1,456
$
80
182
20
159
$
680
6,188
Gas
Utilities and
Infrastructure
Total
Reportable
Segments
$
$
484
29
83
21
85
$
272
3,116
$
$
$
Other
$ —
$ —
—
(1)
(5)
1,940
109
265
41
244
952
9,304
$ —
34
Eliminations
Total
$ — $ 1,940
$ — $
—
—
—
109
265
40
239
(1)
238
952
— 9,338
$
$ — $
Year Ended December 31, 2018
Electric
Utilities and
Infrastructure
Gas
Utilities and
Infrastructure
Total
Reportable
Segments
$ 1,450
$
$
67
183
47
186
655
5,643
$
$
$
506
24
85
24
93
172
2,874
$
$
$
1,956
91
268
71
279
827
8,517
Other
$
1
$
1
—
(28)
(103)
$ —
38
Eliminations
Total
$ — $ 1,957
$ — $
—
—
—
$ — $
92
268
43
176
827
— 8,555
Year Ended December 31, 2017
Gas
Utilities and
Infrastructure
Total
Reportable
Segments
$
$
508
28
83
39
85
$
195
2,758
$
$
$
Other
$ 42
$
1
—
(20)
(30)
1,881
90
261
79
223
686
7,824
$ —
66
Eliminations
Total
$ — $ 1,923
$ — $
—
—
—
$
$ — $
(15)
91
261
59
193
(1)
192
686
7,875
Electric
Utilities and
Infrastructure
$ 1,373
$
62
178
40
138
$
491
5,066
114
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) 4. REGULATORY MATTERS
REGULATORY ASSETS AND LIABILITIES
The Duke Energy Registrants record regulatory assets and liabilities that result from the ratemaking process. See Note 1 for further information.
The following tables present the regulatory assets and liabilities recorded on the Consolidated Balance Sheets of Duke Energy and Progress Energy. See separate
tables below for balances by individual registrant.
(in millions)
Regulatory Assets
AROs – coal ash
AROs – nuclear and other
Accrued pension and OPEB
Storm cost deferrals
Nuclear asset securitized balance, net
Debt fair value adjustment
Deferred fuel and purchased power
Deferred asset – Lee and Harris COLA
Hedge costs deferrals
Demand side management (DSM)/Energy Efficiency (EE)
Advanced metering infrastructure (AMI)
Retired generation facilities
Post-in-service carrying costs (PISCC) and deferred operating expenses
Vacation accrual
Derivatives – natural gas supply contracts
Nuclear deferral
Manufactured gas plant (MGP)
Deferred pipeline integrity costs
NCEMPA deferrals
East Bend deferrals
Transmission expansion obligation
Amounts due from customers
Grid modernization
Other
Total regulatory assets
Less: current portion
Total noncurrent regulatory assets
Regulatory Liabilities
Net regulatory liability related to income taxes
Costs of removal
AROs – nuclear and other
Accrued pension and OPEB
Amounts to be refunded to customers
Deferred fuel and purchased power
Other
Total regulatory liabilities
Less: current portion
Total noncurrent regulatory liabilities
115
Duke Energy
Progress Energy
December 31,
December 31,
2019
2018
2019
2018
$ 4,084
739
2,391
1,399
1,042
1,019
528
388
356
343
338
331
329
214
117
107
102
79
72
44
36
36
28
896
15,018
1,796
$ 4,255
772
2,654
1,117
1,093
1,099
838
426
204
449
367
402
320
213
141
133
99
65
50
47
39
24
31
784
15,622
2,005
$1,843
668
897
1,214
1,042
—
305
38
129
241
114
266
33
41
—
40
—
—
72
—
—
—
—
349
7,292
$ 2,061
601
1,074
953
1,093
—
600
43
74
256
127
324
36
41
—
46
—
—
50
—
—
—
—
322
7,701
946
1,137
$13,222
$13,617
$6,346
$ 6,564
$ 7,872
5,756
1,100
176
34
1
1,109
16,048
$ 8,058
5,421
538
301
34
16
1,064
15,432
$2,595
2,561
—
—
—
1
398
5,555
$ 2,710
2,135
—
149
—
16
319
5,329
784
598
330
280
$15,264
$14,834
$5,225
$ 5,049
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) Descriptions of regulatory assets and liabilities summarized in the tables
above and below follow. See tables below for recovery and amortization periods
at the separate registrants.
AROs – coal ash. Represents deferred depreciation and accretion related
to the legal obligation to close ash basins. The costs are deferred until recovery
treatment has been determined. See Notes 1 and 10 for additional information.
AROs – nuclear and other. Represents regulatory assets or liabilities,
including deferred depreciation and accretion, related to legal obligations
associated with the future retirement of property, plant and equipment,
excluding amounts related to coal ash. The AROs relate primarily to
decommissioning nuclear power facilities. The amounts also include certain
deferred gains and losses on NDTF investments. See Notes 1 and 10 for
additional information.
Accrued pension and OPEB. Accrued pension and OPEB represent
regulatory assets and liabilities related to each of the Duke Energy Registrants’
respective shares of unrecognized actuarial gains and losses and unrecognized
prior service cost and credit attributable to Duke Energy’s pension plans and
OPEB plans. The regulatory asset or liability is amortized with the recognition
of actuarial gains and losses and prior service cost and credit to net periodic
benefit costs for pension and OPEB plans. The accrued pension and OPEB
regulatory assets are expected to be recovered primarily over the average
remaining service periods or life expectancies of employees covered by the
benefit plans. See Note 23 for additional detail.
Storm cost deferrals. Represents deferred incremental costs incurred
related to major weather-related events.
Nuclear asset securitized balance, net. Represents the balance
associated with Crystal River Unit 3 retirement approved for recovery by the
FPSC on September 15, 2015, and the upfront financing costs securitized in
2016 with issuance of the associated bonds. The regulatory asset balance is net
of the AFUDC equity portion.
Debt fair value adjustment. Purchase accounting adjustments recorded
to state the carrying value of Progress Energy and Piedmont at fair value in
connection with the 2012 and 2016 mergers, respectively. Amount is amortized
over the life of the related debt.
Deferred fuel and purchased power. Represents certain energy-
related costs that are recoverable or refundable as approved by the applicable
regulatory body.
Deferred asset – Lee and Harris COLA. Represents deferred costs
incurred for the canceled Lee and Harris nuclear projects.
Hedge costs and other deferrals. Amounts relate to unrealized gains
and losses on derivatives recorded as a regulatory asset or liability, respectively,
until the contracts are settled.
DSM/EE. Deferred costs related to various DSM and EE programs
recoverable through various mechanisms.
AMI. Represents deferred costs related to the installation of AMI meters
and remaining net book value of non-AMI meters to be replaced at Duke Energy
Carolinas, net book value of existing meters at Duke Energy Florida, Duke Energy
Progress and Duke Energy Ohio and expected future recovery of net book value
of electromechanical meters that have been replaced with AMI meters at Duke
Energy Indiana.
Retired generation facilities. Represents amounts to be recovered for
facilities that have been retired and are probable of recovery.
Post-in-service carrying costs (PISCC) and deferred operating
expenses. Represents deferred depreciation and operating expenses as well as
carrying costs on the portion of capital expenditures placed in service but not yet
reflected in retail rates as plant in service.
Vacation accrual. Represents vacation entitlement, which is generally
recovered in the following year.
Derivatives – natural gas supply contracts. Represents costs for
certain long-dated, fixed quantity forward gas supply contracts, which are
recoverable through PGA clauses.
Nuclear deferral. Includes amounts related to levelizing nuclear plant
outage costs, which allows for the recognition of nuclear outage expenses over
the refueling cycle rather than when the outage occurs, resulting in the deferral
of operations and maintenance costs associated with refueling.
MGP. Represents remediation costs incurred at former MGP sites and
the deferral of costs to be incurred at Duke Energy Ohio’s East End and West
End sites.
Deferred pipeline integrity costs. Represents pipeline integrity
management costs in compliance with federal regulations recovered through a
rider mechanism.
NCEMPA deferrals. Represents retail allocated cost deferrals and returns
associated with the additional ownership interest in assets acquired from
NCEMPA in 2015.
East Bend deferrals. Represents both deferred operating expenses and
deferred depreciation as well as carrying costs on the portion of East Bend
that was acquired from Dayton Power and Light and that had been previously
operated as a jointly owned facility.
Transmission expansion obligation. Represents transmission
expansion obligations related to Duke Energy Ohio’s withdrawal from MISO.
Amounts due from customers. Relates primarily to margin decoupling
and IMR recovery mechanisms.
Grid modernization. Amounts represent deferred depreciation
and operating expenses as well as carrying costs on the portion of capital
expenditures placed in service but not yet reflected in retail rates as plant
in service.
Net regulatory liability related to income taxes. Amounts for all
registrants include regulatory liabilities related primarily to impacts from the Tax
Act. See Note 24 for additional information. Amounts have no immediate impact
on rate base as regulatory assets are offset by deferred tax liabilities.
Costs of removal. Represents funds received from customers to cover
the future removal of property, plant and equipment from retired or abandoned
sites as property is retired. Also includes certain deferred gains on NDTF
investments.
Amounts to be refunded to customers. Represents required rate
reductions to retail customers by the applicable regulatory body.
RESTRICTIONS ON THE ABILITY OF CERTAIN SUBSIDIARIES TO MAKE
DIVIDENDS, ADVANCES AND LOANS TO DUKE ENERGY
As a condition to the approval of merger transactions, the NCUC, PSCSC,
PUCO, KPSC and IURC imposed conditions on the ability of Duke Energy
Carolinas, Duke Energy Progress, Duke Energy Ohio, Duke Energy Kentucky,
Duke Energy Indiana and Piedmont to transfer funds to Duke Energy through
loans or advances, as well as restricted amounts available to pay dividends to
Duke Energy. Certain subsidiaries may transfer funds to the Parent by obtaining
approval of the respective state regulatory commissions. These conditions
imposed restrictions on the ability of the public utility subsidiaries to pay cash
dividends as discussed below.
116
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) Duke Energy Progress and Duke Energy Florida also have restrictions
RATE-RELATED INFORMATION
imposed by their first mortgage bond indentures, which in certain
circumstances, limit their ability to make cash dividends or distributions on
common stock. Amounts restricted as a result of these provisions were not
material at December 31, 2019.
Additionally, certain other subsidiaries of Duke Energy have restrictions
on their ability to dividend, loan or advance funds to Duke Energy due to specific
legal or regulatory restrictions, including, but not limited to, minimum working
capital and tangible net worth requirements.
The restrictions discussed below were not a material amount of Duke
Energy’s and Progress Energy’s net assets at December 31, 2019.
Duke Energy Carolinas
Duke Energy Carolinas must limit cumulative distributions subsequent to
mergers to (i) the amount of retained earnings on the day prior to the closing of
the mergers, plus (ii) any future earnings recorded.
Duke Energy Progress
Duke Energy Progress must limit cumulative distributions subsequent to
the mergers between Duke Energy and Progress Energy and Duke Energy and
Piedmont to (i) the amount of retained earnings on the day prior to the closing of
the respective mergers, plus (ii) any future earnings recorded.
Duke Energy Ohio
Duke Energy Ohio will not declare and pay dividends out of capital or
unearned surplus without the prior authorization of the PUCO. Duke Energy Ohio
received FERC and PUCO approval to pay dividends from its equity accounts
that are reflective of the amount that it would have in its retained earnings
account had push-down accounting for the Cinergy merger not been applied to
Duke Energy Ohio’s balance sheet. The conditions include a commitment from
Duke Energy Ohio that equity, adjusted to remove the impacts of push-down
accounting, will not fall below 30% of total capital.
Duke Energy Kentucky is required to pay dividends solely out of retained
earnings and to maintain a minimum of 35% equity in its capital structure.
Duke Energy Indiana
Duke Energy Indiana must limit cumulative distributions subsequent
to the merger between Duke Energy and Cinergy to (i) the amount of retained
earnings on the day prior to the closing of the merger, plus (ii) any future
earnings recorded. In addition, Duke Energy Indiana will not declare and pay
dividends out of capital or unearned surplus without prior authorization of
the IURC.
Piedmont
Piedmont must limit cumulative distributions subsequent to the
acquisition of Piedmont by Duke Energy to (i) the amount of retained earnings on
the day prior to the closing of the merger, plus (ii) any future earnings recorded.
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
Deferral Filings
On December 21, 2018, Duke Energy Carolinas and Duke Energy Progress
filed with the NCUC petitions for approval to defer the incremental costs
incurred in connection with the response to Hurricane Florence, Hurricane
Michael and Winter Storm Diego to a regulatory asset for recovery in the next
base rate case. The NCUC issued an order requesting comments on the deferral
positions. On March 5, 2019, the North Carolina Public Staff (Public Staff) filed
comments. On April 2, 2019, Duke Energy Carolinas and Duke Energy Progress
filed reply comments, which included revised estimates of approximately
$553 million in incremental operation and maintenance expenses ($171 million
and $382 million for 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 that the NCUC
consolidate its pending deferral request with its general rate case filed on that
date. On October 30, 2019, Duke Energy Progress requested that the NCUC
consolidate its pending deferral request with its general rate case filed on
that date. Duke Energy Carolinas and Duke Energy Progress cannot predict
the outcome of these matters. Duke Energy Progress filed a deferral request
for these storms with the PSCSC on January 11, 2019, which also included
a request for the continuation of prior deferrals requested for ice storms and
Hurricane Matthew, and on January 30, 2019, the PSCSC issued a directive
approving the deferral request, followed by an order issued on February 21,
2019. On March 15, 2019, Duke Energy Progress filed a request with FERC
requesting permission to defer transmission-related storm costs that would be
charged to wholesale transmission customers through Duke Energy Progress’
Open Access Transmission Tariff (OATT) and to recover those costs from
wholesale transmission customers over a three-year recovery period. FERC
accepted the filing on May 14, 2019, which allows Duke Energy Progress to
proceed with the proposed cost deferral and recovery.
117
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) Duke Energy Carolinas
Regulatory Assets and Liabilities
The following tables present the regulatory assets and liabilities recorded on Duke Energy Carolinas’ Consolidated Balance Sheets.
(in millions)
Regulatory Assets(a)
AROs – coal ash
Accrued pension and OPEB
Storm cost deferrals
Deferred fuel and purchased power
Deferred asset – Lee COLA
Hedge costs deferrals(c)
DSM/EE
AMI
Retired generation facilities(c)
PISCC(c)
Vacation accrual
Nuclear deferral
Other
Total regulatory assets
Less: current portion
Total noncurrent regulatory assets
Regulatory Liabilities(a)
Net regulatory liability related to income taxes(d)
Costs of removal(c)
AROs – nuclear and other
Accrued pension and OPEB
Other
Total regulatory liabilities
Less: current portion
Total noncurrent regulatory liabilities
December 31,
Earns/Pays
a Return
Recovery/Refund
Period Ends
2018
2019
$ 1,696
477
178
222
350
198
100
166
16
33
80
67
327
3,910
$ 1,725
581
160
196
383
101
169
176
21
34
78
87
266
3,977
550
520
$ 3,360
$ 3,457
$ 3,060
1,936
1,100
39
543
6,678
$ 3,082
1,968
538
38
572
6,198
255
199
$ 6,423
$ 5,999
(i)
Yes
(f)
Yes
(h)
Yes
Yes
Yes
(e)
Yes
(b)
(j)
(b)
2021
(b)
2041
(h)
(b)
2023
(b)
2020
2021
(b)
(b)
(g)
(b)
(j)
(b)
Included in rate base.
Includes regulatory liabilities related to the change in the federal tax rate as a result of the Tax Act and the change in the North Carolina tax rate, both discussed in Note 24.
(a) Regulatory assets and liabilities are excluded from rate base unless otherwise noted.
(b) The expected recovery or refund period varies or has not been determined.
(c)
(d)
(e) Earns a return on outstanding balance in North Carolina.
(f) Pays interest on over-recovered costs in North Carolina. Includes certain purchased power costs in North Carolina and South Carolina and costs of distributed energy in South Carolina.
(g) Recovered over the life of the associated assets.
Includes incentives on DSM/EE investments and is recovered through an annual rider mechanism.
(h)
(i)
Earns a debt and equity return on coal ash expenditures for North Carolina and South Carolina retail customers as permitted by various regulatory orders.
(j) Recovered primarily over the average remaining service periods or life expectancies of employees covered by the benefit plans. See Note 23 for additional detail.
118
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) 2017 North Carolina Rate Case
2019 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 William States Lee III Nuclear Station.
On February 28, 2018, Duke Energy Carolinas 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. 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 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 June 22, 2018, order, Duke Energy Carolinas recorded
a pretax charge of approximately $150 million to Impairment charges and
Operation, maintenance and other on the Consolidated Statements of
Operations. The charge 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.
On July 20, 2018, the North Carolina Attorney General filed a Notice of
Appeal to the North Carolina Supreme Court from the June 22, 2018, Order
Accepting Stipulation, Deciding Contested Issues and Requiring Revenue
Reduction issued by the NCUC. The Attorney General contends the commission’s
order should be reversed and remanded, as it is in excess of the commission’s
statutory authority; affected by errors of law; unsupported by competent,
material and substantial evidence in view of the entire record as submitted;
and arbitrary or capricious. The Sierra Club, North Carolina Sustainable
Energy Association, North Carolina Justice Center, North Carolina Housing
Coalition, Natural Resource Defense Council and Southern Alliance for Clean
Energy also filed Notices of Appeal to the North Carolina Supreme Court. On
August 8, 2018, the Public Staff filed a Notice of Cross Appeal to the North
Carolina Supreme Court, 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.
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 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 are scheduled for March 11, 2020.
Duke Energy Carolinas cannot predict the outcome of this matter.
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 represents an approximate 6% increase in annual base
revenues. The gross rate case revenue increase request is $445 million, which
is 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 rate increase is 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 requests
rates be effective no later than August 1, 2020. The NCUC has established a
procedural schedule with an evidentiary hearing to commence on March 23,
2020. 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, would
be deferred with a return, subject to evaluation in a future rate proceeding. The
Stipulation was approved by the PSCSC on June 19, 2019. On December 16,
2019, Duke Energy Carolinas and Duke Energy Progress filed a Joint Petition
to Establish an Informational Docket for Review and Consideration of Grid
Improvement Plans through which Duke Energy Carolinas and Duke Energy
Progress would provide interested stakeholders information on the companies’
grid activities. The PSCSC requested parties comment on procedural matters by
January 31; accordingly, various groups filed comments, none of which opposed
an informational docket. Duke Energy Carolinas cannot predict the outcome of
this matter.
119
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) 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.
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 filed a notice of appeal on
November 15, 2019, with the South Carolina Supreme Court. 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 South Carolina Supreme Court.
On January 8, 2020, Duke Energy Carolinas and the ORS filed a joint motion
to extend briefing schedule deadlines. Appellant briefs are due on March 2,
2020, and Appellee response briefs are due on May 15, 2020. On February 12,
2020, Duke Energy Carolinas and the ORS filed a joint motion to extend briefing
deadlines by 30 days. Based on legal analysis and the 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
the 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 its 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.
120
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) 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 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 December 27, 2018, 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
Regulatory Assets and Liabilities
The following tables present the regulatory assets and liabilities recorded on Duke Energy Progress’ Consolidated Balance Sheets.
(in millions)
Regulatory Assets(a)
AROs – coal ash
AROs – nuclear and other
Accrued pension and OPEB
Storm cost deferrals(d)
Deferred fuel and purchased power
Deferred asset – Harris COLA
Hedge costs deferrals
DSM/EE(e)
AMI
Retired generation facilities
PISCC and deferred operating expenses
Vacation accrual
Nuclear deferral
NCEMPA deferrals
Other
Total regulatory assets
Less: current portion
Total noncurrent regulatory assets
Regulatory Liabilities(a)
Net regulatory liability related to income taxes(l)
Costs of removal
Accrued pension and OPEB
Other
Total regulatory liabilities
Less: current portion
Total noncurrent regulatory liabilities
December 31,
Earns/Pays
a Return
Recovery/Refund
Period Ends
2018
2019
$ 1,834
509
423
801
266
38
85
216
61
83
33
41
40
72
176
4,678
526
$ 2,051
429
542
571
397
43
54
235
67
105
36
41
46
50
147
4,814
703
$ 4,152
$ 4,111
$ 1,802
2,294
—
372
4,468
$ 1,863
1,878
93
299
4,133
236
178
$ 4,232
$ 3,955
(h)
Yes
(f)
(i)
Yes
Yes
(g)
Yes
(b)
(c)
(k)
(b)
2021
(b)
(i)
(b)
(b)
2054
2020
2021
2042
(b)
(b)
(j)
(k)
(b)
Included in rate base.
(a) Regulatory assets and liabilities are excluded from rate base unless otherwise noted.
(b) The expected recovery or refund period varies or has not been determined.
(c) Recovery period for costs related to nuclear facilities runs through the decommissioning period of each unit.
(d) South Carolina storm costs are included in rate base.
(e)
(f) Pays interest on over-recovered costs in North Carolina. Includes certain purchased power costs in North Carolina and South Carolina and costs of distributed energy in South Carolina.
(g) South Carolina retail allocated costs are earning a return.
(h) Earns a debt and equity return on coal ash expenditures for North Carolina and South Carolina retail customers as permitted by various regulatory orders.
(i)
(j) Recovered over the life of the associated assets.
(k) Recovered primarily over the average remaining service periods or life expectancies of employees covered by the benefit plans. See Note 23 for additional detail.
(l)
Includes regulatory liabilities related to the change in the federal tax rate as a result of the Tax Act and the change in the North Carolina tax rate, both discussed in Note 23.
Includes incentives on DSM/EE investments and is recovered through an annual rider mechanism.
121
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) 2017 North Carolina Rate Case
Hurricane Dorian
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 Progress 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.
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.
The order also impacted certain amounts that were similarly recorded on
Duke Energy Carolinas’ 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 Consolidated Statements of Operations. Revised customer rates became
effective on March 16, 2018.
On May 15, 2018, the Public Staff filed a Notice of Cross Appeal 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. 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 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 are scheduled for 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 represents an approximate 12.3% increase in annual base revenues.
The gross rate case revenue increase request is $586 million, which is 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 is 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. The NCUC has established a procedural schedule with an
evidentiary hearing to commence on May 4, 2020. Duke Energy Progress cannot
predict the outcome of this matter.
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 $205 million with
an additional $4 million in capital investments made for restoration efforts.
Approximately $179 million of the operation and maintenance expenses
are deferred in Regulatory assets within Other Noncurrent Assets on the
Consolidated Balance Sheets as of December 31, 2019. The balance of
operation and maintenance expenses are included in Operation, maintenance
and other on the Consolidated Statements of Operations for the year ended
December 31, 2019. 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. Duke Energy
Progress cannot predict the outcome of this matter.
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, would be deferred with a return,
with all costs subject to evaluation in a future rate proceeding. The Stipulation
was approved by the PSCSC on June 19, 2019. On December 16, 2019, Duke
Energy Progress and Duke Energy Carolinas filed a Joint Petition to Establish an
122
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) Informational Docket for Review and Consideration of Grid Improvement Plans
through which Duke Energy Progress and Duke Energy Carolinas would provide
interested stakeholders information on the companies’ grid activities. The PSCSC
requested parties comment on procedural matters by January 31; accordingly,
various groups filed comments, none of which opposed an informational docket.
Duke Energy Progress cannot predict the outcome of this matter.
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%;
• 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%.
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 filed a notice of appeal on
November 15, 2019, with the South Carolina Supreme Court. The ORS filed a
Notice of Cross Appeal on November 20, 2019. On January 8, 2020, Duke Energy
Progress and the ORS filed a joint motion to extend briefing schedule deadlines.
Appellant briefs are due on March 2, 2020, and Appellee response briefs are
on May 15, 2020. On February 12, 2020, Duke Energy Progress and the ORS
filed a joint motion to extend briefing deadlines by 30 days. Based on legal
analysis and the 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 of the existing
Asheville coal-fired plant, the construction of two 280 MW combined-cycle
natural gas plants having dual-fuel capability, with the option to build a third
natural gas simple cycle unit in 2023 based upon the outcome of initiatives to
reduce the region’s power demand. The plan also included upgrades to existing
transmission lines and substations, installation of solar generation and a pilot
battery storage project. Duke Energy Progress worked with the local natural gas
distribution company to upgrade and lease an existing natural gas pipeline to
serve the natural gas plant. The lease for the new pipeline became effective on
March 2, 2019.
On March 28, 2016, the NCUC issued an order approving a CPCN for the
new combined-cycle natural gas plants, but is requiring Duke Energy Progress
to refile for CPCN approval for the contingent simple cycle unit. On March 28,
2019, Duke Energy Progress filed an annual progress report for the construction
of the combined-cycle plants with the NCUC, with an estimated cost of
$893 million.
On December 27, 2019, Asheville Combined Cycle Power Block 1 and the
common systems that serve both combined cycle units went into commercial
operation. Power Block 1 consists of the Unit 5 Combustion Turbine and Unit 6
Steam Turbine Generator (which together form the first combined cycle unit
approved in the CPCN Order). Power Block 2 consists of the Unit 7 Combustion
Turbine and Unit 8 Steam Turbine Generator (which together form the second
combined cycle unit approved in the CPCN Order). Duke Energy Progress
placed the Unit 7 Combustion Turbine portion of Power Block 2 into commercial
operation in simple-cycle mode on January 15, 2020. Duke Energy Progress
currently expects to place the Unit 8 Steam Turbine Generator into commercial
operation in the first quarter of 2020, after final testing has been completed.
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. On May 10, 2019, the NCUC issued an Order
Granting Certificate of Public Convenience and Necessity with Conditions. On
November 19, 2019, Duke Energy Progress filed a semiannual progress report
for its Hot Springs Microgrid Solar and Battery Storage Facility. As required by
an NCUC order issued December 6, 2019, an updated progress report was filed
on January 15, 2020. Construction is expected to begin in March 2020 with
commercial operation expected to begin in September 2020.
The carrying value of the 376-MW Asheville coal-fired plant, including
associated ash basin closure costs, of $214 million and $327 million is
included in Generation facilities to be retired, net on Duke Energy Progress’
Consolidated Balance Sheets as of December 31, 2019, and 2018, respectively.
Duke Energy Progress’ request for a regulatory asset at the time of retirement
with amortization over a 10-year period was approved by the NCUC on
February 23, 2018. Duke Energy Progress retired the Asheville coal-fired plant
on January 29, 2020.
FERC Return on Equity Complaint
On October 11, 2019, NCEMPA filed a complaint at 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 within the Full Requirements Power Purchase Agreement (FRPPA) is
unjust and unreasonable. The FRPPA’s return on equity is 11% as applied to
the Production Capacity Rate for the full requirements service provided by Duke
Energy Progress. The complaint does not definitively propose a replacement
return on equity. Under FPA Section 206, the earliest refund effective date that
FERC can establish is the date of the filing of the complaint. The complaint
could raise risks across the Duke Energy Progress wholesale business because,
depending on how FERC treats NCEMPA’s complaint, other parties may come
forward with similar complaints. Duke Energy Progress cannot predict the
outcome of this matter.
123
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) Duke Energy Florida
Regulatory Assets and Liabilities
The following tables present the regulatory assets and liabilities recorded on Duke Energy Florida’s Consolidated Balance Sheets.
(in millions)
Regulatory Assets(a)
AROs – coal ash(c)
AROs – nuclear and other(c)
Accrued pension and OPEB(c)
Storm cost deferrals(c)
Nuclear asset securitized balance, net
Deferred fuel and purchased power
Hedge costs deferrals
DSM/EE(c)
AMI(c)
Retired generation facilities(c)
Other
Total regulatory assets
Less: current portion
Total noncurrent regulatory assets
Regulatory Liabilities(a)
Net regulatory liability related to income taxes(c)
Costs of removal(c)
Accrued pension and OPEB
Deferred fuel and purchased power(c)
Other
Total regulatory liabilities
Less: current portion
Total noncurrent regulatory liabilities
December 31,
Earns/Pays
a Return
Recovery/Refund
Period Ends
2018
$
2019
9
159
474
413
1,042
39
44
25
53
183
172
2,613
419
$
10
172
532
382
1,093
203
20
21
60
219
176
2,888
434
$ 2,194
$ 2,454
$
793
267
—
1
26
1,087
94
$
847
257
56
16
20
1,196
102
$
993
$ 1,094
(b)
(b)
(g)
2021
2036
2021
2038
2024
2032
(b)
(b)
(b)
(b)
(g)
2021
(b)
Yes
(e)
(f)
Yes
Yes
Yes
(d)
(d)
Yes
(f)
(d)
Included in rate base.
(a) Regulatory assets and liabilities are excluded from rate base unless otherwise noted.
(b) The expected recovery or refund period varies or has not been determined.
(c)
(d) Certain costs earn/pay a return.
(e) Earns a debt return/interest once collections begin.
(f)
(g) Recovered primarily over the average remaining service periods or life expectancies of employees covered by the benefit plans. See Note 23 for additional detail.
Earns commercial paper rate.
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 December 31, 2019, and December 31, 2018, Duke Energy
Florida’s Consolidated Balance Sheets included approximately $43 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.
124
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) 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 $311 million. Approximately $107 million and $35 million of
the costs are included in Net property, plant and equipment on the Consolidated
Balance Sheets as of December 31, 2019, and December 31, 2018,
respectively. Approximately $204 million and $165 million of costs are included
in Regulatory assets within Current Assets and Other Noncurrent Assets on
the Consolidated Balance Sheets as of December 31, 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 retail portion of incremental storm restoration costs for Hurricane
Michael. On June 11, 2019, the FPSC approved the petition for recovery of
incremental storm restoration costs related to Hurricane Michael. The FPSC
also approved the stipulation Duke Energy Florida filed, which will allow Duke
Energy Florida to use the tax savings resulting from the Tax Act 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 filed a petition for approval of
actual retail recoverable storm restoration costs related to Hurricane Michael in
the amount of $191 million plus interest. An Order Establishing Procedure was
issued on January 30, 2020, and hearings are scheduled to begin September 15,
2020. 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 incurred costs to
secure necessary resources to be prepared for that potential impact. Although
Hurricane Dorian never made landfall in Florida, its effects were still felt, and
outages did occur. Preparations were required so that, if Hurricane Dorian had
made landfall and impacts had been more severe, Duke Energy Florida would
have been prepared to restore its customers’ power in a timely fashion.
Total current estimated incremental costs are approximately $167 million.
These costs are included in Regulatory assets within Current Assets and Other
Noncurrent Assets on the Consolidated Balance Sheets as of December 31,
2019, representing recoverable costs under the FPSC’s storm rule and Duke
Energy Florida’s OATT formula rates. On December 19, 2019, Duke Energy
Florida filed a petition with the FPSC to recover the estimated retail portion of
these costs, consistent with the provisions in the 2017 Settlement. The request
seeks recovery over a 12-month period beginning in March 2020. The final
actual amount will be filed later in 2020 and a hearing will be held at the FPSC
to determine the final amount of incremental costs. 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.
Citrus County CC
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, and Duke Energy
Florida recorded Impairment charges on Duke Energy’s Consolidated Statements of
Operations of $60 million in the fourth quarter of 2018 for the overrun. In the year
ended December 31, 2019, Duke Energy Florida recorded a $36 million reduction
to the prior-year impairment due to a decrease in the cost estimate of the Citrus
County CC, primarily related to the settlement agreement with Fluor, the EPC
contractor. This adjustment reduced the estimated cost of the facility to $1.5 billion.
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, and were placed
into service in December 2019 with rates taking effect in January 2020. The
DeBary Project has a projected annual revenue requirement of $11 million and a
projected in-service date in the first half 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.
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PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) Crystal River Unit 3 Accelerated Decommissioning Filing
On May 29, 2019, Duke Energy Florida entered into a Decommissioning
Services Agreement for the accelerated decommissioning of the Crystal
River Unit 3 nuclear power station located in Citrus County, Florida, with ADP
CR3, LLC and ADP SF1, LLC, each of which is a wholly owned subsidiary of
Accelerated Decommissioning Partners, LLC, a joint venture between NorthStar
Group Services, Inc. and Orano USA LLC. Closing of this agreement is contingent
upon the approval of the NRC and FPSC. If approved, the decommissioning will
Duke Energy Ohio
Regulatory Assets and Liabilities
be accelerated starting in 2020 and continuing through 2027, rather than the
expected time frame under SAFSTOR of starting in 2067 and ending in 2074.
Duke Energy Florida expects that the assets of the Nuclear Decommissioning
Trust Fund will be sufficient to cover the contract price. On July 10, 2019, Duke
Energy Florida petitioned the FPSC for approval of the agreement. Duke Energy
Florida cannot predict the outcome of this matter.
The following tables present the regulatory assets and liabilities recorded on Duke Energy Ohio’s Consolidated Balance Sheets.
(in millions)
Regulatory Assets(a)
AROs – coal ash
Accrued pension and OPEB
Storm cost deferrals
Deferred fuel and purchased power
Hedge costs deferrals
DSM/EE
AMI
PISCC and deferred operating expenses(c)
Vacation accrual
MGP
Deferred pipeline integrity costs
East Bend deferrals
Transmission expansion obligation
Grid modernization
Other
Total regulatory assets
Less: current portion
Total noncurrent regulatory assets
Regulatory Liabilities(a)
Net regulatory liability related to income taxes
Costs of removal
Accrued pension and OPEB
Other
Total regulatory liabilities
Less: current portion
Total noncurrent regulatory liabilities
December 31,
2019
Earns/Pays
a Return
Recovery/Refund
Period Ends
2018
(b)
(g)
2023
2020
(b)
(e)
(b)
2083
2020
(b)
(b)
(b)
(e)
(b) (c)
(b)
(b)
(d)
(g)
(b)
Yes
(f)
Yes
Yes
Yes
Yes
$
$
$
16
155
7
1
6
2
40
17
5
102
17
44
40
28
118
598
49
549
654
86
16
71
827
64
$
$
$
20
146
4
2
5
10
46
17
5
99
14
47
43
31
75
564
33
531
678
126
18
75
897
57
$
763
$
840
Included in rate base.
(a) Regulatory assets and liabilities are excluded from rate base unless otherwise noted.
(b) The expected recovery or refund period varies or has not been determined.
(c)
(d) Recovery over the life of the associated assets.
(e) Recovered via a rider mechanism.
(f)
(g) Recovered primarily over the average remaining service periods or life expectancies of employees covered by the benefit plans. See Note 23 for additional detail.
Includes incentives on DSM/EE investments.
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PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) 2017 Electric Security Plan Filing
On June 1, 2017, Duke Energy Ohio filed with the PUCO a request for
a standard service offer in the form of an Electric Security Plan (ESP). On
February 15, 2018, the procedural schedule was suspended to facilitate ongoing
settlement discussions. On April 13, 2018, Duke Energy Ohio filed a Motion
to consolidate this proceeding with several other cases pending before the
PUCO, including, but not limited to, its Electric Base Rate Case. Additionally,
on April 13, 2018, Duke Energy Ohio, along with certain intervenors, filed a
Stipulation and Recommendation (Stipulation) with the PUCO resolving certain
issues in this proceeding. The term of the ESP would be from June 1, 2018,
to May 31, 2025, and included continuation of market-based customer rates
through competitive procurement processes for generation, continuation and
expansion of existing rider mechanisms and proposed new rider mechanisms
relating to regulatory mandates, costs incurred to enhance the customer
experience and transform the grid and a service reliability rider for vegetation
management. The Stipulation established a regulatory model for the next
seven years via the approval of the ESP and continued the current model for
procuring supply for non-shopping customers, including recovery mechanisms.
On December 19, 2018, the PUCO approved the Stipulation without material
modification. Several parties, including the OCC, 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 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. The PUCO denied OCC’s Third Application for Rehearing as a matter of
law. On September 13, 2019, Interstate Gas Supply/Retail Supply Association
filed appeals to the Ohio Supreme Court 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.
On September 16, 2019, the OCC filed an appeal challenging the PUCO’s
approval of OVEC recovery through 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. Appellant briefs were filed on January 6,
2020. Appellee briefs will be due March 16, 2020. Duke Energy Ohio cannot
predict the outcome of this matter.
Electric Base Rate Case
Duke Energy Ohio filed with the PUCO an electric distribution base rate
case application and supporting testimony in March 2017. Duke Energy Ohio
requested an estimated annual increase of approximately $15 million and a
return on equity of 10.4%. 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 PowerForward Rider to recover costs incurred to
enhance the customer experience and further transform the grid (operation and
maintenance and capital). In addition to the changes in revenue attributable
to the Stipulation, Duke Energy Ohio’s capital-related riders, including the
Distribution Capital Investments Rider, began to reflect the lower federal
income tax rate associated with the Tax Act with updates to customers’ bills
beginning April 1, 2018. This change reduced electric revenue by approximately
$20 million on an annualized basis. On December 19, 2018, the PUCO approved
the Stipulation without material modification. New base rates were implemented
effective January 2, 2019. Several parties including the OCC 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 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. The PUCO denied OCC’s Third Application for Rehearing as
a matter of law. On September 13, 2019, Interstate Gas Supply/Retail Supply
Association filed appeals to the Ohio Supreme Court 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.
On September 16, 2019, the OCC filed an appeal challenging the PUCO’s
approval of OVEC recovery through 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. Appellant briefs were filed on January 6,
2020. Appellee briefs will be due March 16, 2020. Duke Energy Ohio cannot
predict the outcome of this matter.
Ohio Valley Electric Corporation
On March 31, 2017, Duke Energy Ohio filed for approval to adjust
its existing 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, including the OCC, 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 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. The PUCO denied OCC’s Third Application for Rehearing as
a matter of law. On September 13, 2019, Interstate Gas Supply/Retail Supply
Association filed appeals to the Ohio Supreme Court 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.
On September 16, 2019, the OCC filed an appeal challenging the PUCO’s
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PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) approval of OVEC recovery through 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. Appellant briefs were filed on January 6,
2020. Appellee briefs will be due March 16, 2020. Duke Energy Ohio cannot
predict the outcome of this matter.
On July 23, 2019, an Ohio bill was signed into law that became effective
January 1, 2020. Among other things, the bill allows for recovery of prudently
incurred costs, net of any revenues, for Ohio investor-owned utilities that are
participants under the OVEC power agreement. The recovery shall be through
a non-bypassable rider that is to replace any existing recovery mechanism
approved by the PUCO and will remain in place through 2030. The amounts
recoverable from customers will be subject to an annual cap, with incremental
costs that exceed such cap eligible for deferral and recovery subject to review.
See Note 18 for additional discussion of Duke Energy Ohio’s ownership interest
in OVEC.
Tax Act – Ohio
On July 25, 2018, Duke Energy Ohio filed an application to establish
a new rider to implement the benefits of the Tax Act for electric distribution
customers. 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.
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, the PUCO issued an Entry on Rehearing
denying the rehearing applications.
On June 15, 2016, Duke Energy Ohio filed an application for approval of a
three-year energy efficiency and peak demand reduction portfolio of programs.
A stipulation and modified stipulation were filed on December 22, 2016, and
January 27, 2017, respectively. Under the terms of the stipulations, which
included support for deferral authority of all costs and a cap on shared savings
incentives, Duke Energy Ohio has offered its energy efficiency and peak demand
reduction programs throughout 2017. On February 3, 2017, Duke Energy Ohio
filed for deferral authority of its costs incurred in 2017 in respect of its proposed
energy efficiency and peak demand reduction portfolio. On September 27, 2017,
the PUCO issued an order approving a modified stipulation. The modifications
impose an annual cap of approximately $38 million on program costs and
shared savings incentives combined, but allowed for Duke Energy Ohio to file for
a waiver of costs in excess of the cap in 2017. The PUCO approved the waiver
request for 2017 up to a total cost of $56 million. On November 21, 2017, the
PUCO granted Duke Energy Ohio’s and intervenor’s applications for rehearing
of the September 27, 2017, order. On January 10, 2018, the PUCO denied
the 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. On October 15, 2019, the Ohio Supreme Court
issued an Opinion regarding a similar cap on energy efficiency imposed by the
PUCO on Ohio Edison Company finding the PUCO lacked statutory authority
to impose a cap on cost recovery. On December 9, 2019, and in response to
recent changes to Ohio Law, the OCC filed a motion to eliminate shared savings
from Duke Energy Ohio’s energy efficiency calculation beginning in 2020. Duke
Energy Ohio filed a memorandum contra and a notice of additional authority
on December 16, 2019, arguing OCC’s interpretation is incorrect and that the
commission should amend its September 27, 2017 order to comply with recent
precedent. 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 Distribution Capital Investment Rider.
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
128
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) 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.
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 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 OPSB to establish a procedural schedule
and filed supplemental information supporting its application. On December 18,
2018, the OPSB established a procedural schedule that included a local public
hearing on March 21, 2019. An evidentiary hearing began on April 9, 2019, and
concluded on April 11, 2019. Briefs were filed on May 13, 2019, and reply briefs
were filed on June 10, 2019. On November 21, 2019, the OPSB approved Duke
Energy Ohio’s application subject to 41 conditions on construction. Applications
for rehearing were filed by several stakeholders on December 23, 2019, arguing
that the OPSB approval was incorrect. Duke Energy Ohio filed a memorandum
contra on January 2, 2020. On January 17, 2020, the OPSB granted rehearing
for the purpose of further consideration. Construction of the pipeline extension
is expected to be completed before the 2021/2022 winter season. Duke Energy
Ohio cannot predict the outcome of this matter.
2012 Natural Gas Rate Case/MGP Cost Recovery
As part of its 2012 natural gas base rate case, Duke Energy Ohio has
approval to defer and recover costs related to environmental remediation at
two sites (East End and West End) that housed former MGP operations. Duke
Energy Ohio has made annual applications for recovery of these deferred costs.
Duke Energy Ohio 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. An evidentiary
hearing began on November 18, 2019, and concluded November 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.
The 2012 PUCO order also contained conditional deadlines for completing
the MGP environmental investigation and remediation costs at the MGP sites.
Subsequent to the order, the deadline was extended to December 31, 2019. On
May 10, 2019, Duke Energy Ohio filed an application requesting a continuation
of its existing deferral authority for MGP remediation and investigation that
must occur after December 31, 2019. 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.
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. Duke Energy Kentucky seeks
to implement a Storm Deferral Mechanism that will enable Duke Energy
Kentucky to defer actual costs incurred for major storms that are over or under
amounts in base rates. In response to large customers’ desire to have access
to renewable resources, Duke Energy Kentucky is proposing a Green Source
Advantage tariff designed for those large customers that wish to invest in
renewable energy resources to meet sustainability goals. Duke Energy Kentucky
is proposing an electric vehicle (EV) infrastructure pilot and modest incentives
to assist customers in investing in EV technologies. Additionally, Duke Energy
Kentucky is proposing to build an approximate 3.4 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. The Kentucky
Attorney General filed its testimony recommending an increase of approximately
$26 million. On January 31, 2020, Duke Energy Kentucky filed rebuttal testimony
updating its rate increase calculations to approximately $44 million. Hearings
began on February 19, 2020. Duke Energy Kentucky anticipates that rates will go
into effect in the second quarter of 2020. Duke Energy Kentucky cannot predict
the outcome of this matter.
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PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) Regional Transmission Organization Realignment
Duke Energy Ohio, including Duke Energy Kentucky, transferred control
of its transmission assets from MISO to PJM, effective December 31, 2011.
The PUCO approved a settlement related to Duke Energy Ohio’s recovery of
certain costs of the RTO realignment via a non-bypassable rider. Duke Energy
Ohio is allowed to recover all MISO Transmission Expansion Planning (MTEP)
costs directly or indirectly charged to Ohio customers. The KPSC also approved
a request to effect the RTO realignment, subject to a commitment not to seek
(in millions)
Duke Energy Ohio
Duke Energy Indiana
Regulatory Assets and Liabilities
double recovery in a future rate case of the transmission expansion fees that
may be charged by MISO and PJM in the same period or overlapping periods.
The following table provides a reconciliation of the beginning and ending
balance of Duke Energy Ohio’s recorded liability for its exit obligation and
share of MTEP costs recorded in Other within Current Liabilities and Other
Noncurrent Liabilities on the Consolidated Balance Sheets. The retail portions
of MTEP costs billed by MISO are recovered by Duke Energy Ohio through a
non-bypassable rider. As of December 31, 2019, and 2018, $40 million and
$43 million, respectively, are recorded in Regulatory assets on Duke Energy
Ohio’s Consolidated Balance Sheets.
December 31, 2018
Provisions/
Adjustments
Cash
Reductions
December 31, 2019
$ 58
$ —
$ (4)
$ 54
The following tables present the regulatory assets and liabilities recorded on Duke Energy Indiana’s Consolidated Balance Sheets.
(in millions)
Regulatory Assets(a)
AROs – coal ash
Accrued pension and OPEB
Deferred fuel and purchased power
Hedge costs deferrals
DSM/EE
AMI(c)
Retired generation facilities(c)
PISCC and deferred operating expenses(c)
Vacation accrual
Other
Total regulatory assets
Less: current portion
Total noncurrent regulatory assets
Regulatory Liabilities(a)
Net regulatory liability related to income taxes
Costs of removal
Accrued pension and OPEB
Amounts to be refunded to customers
Other
Total regulatory liabilities
Less: current portion
Total noncurrent regulatory liabilities
Earns/Pays
a Return
Recovery/Refund
Period Ends
2018
December 31,
$
$
2019
529
243
—
23
—
18
49
246
12
52
1,172
90
$ 1,082
$
(e)
Yes
Yes
Yes
450
222
40
24
14
18
57
233
11
88
1,157
175
982
$ 1,008
599
90
—
43
1,740
$ 1,009
628
67
1
42
1,747
55
25
$ 1,685
$ 1,722
(b)
(f)
2020
(b)
(e)
(b)
2026
(b)
2020
(b)
(b)
(d)
(f)
2020
(b)
Included in rate base.
(a) Regulatory assets and liabilities are excluded from rate base unless otherwise noted.
(b) The expected recovery or refund period varies or has not been determined.
(c)
(d) Refunded over the life of the associated assets.
(e)
(f) Recovered primarily over the average remaining service periods or life expectancies of employees covered by the benefit plans. See Note 23 for additional detail.
Includes incentives on DSM/EE investments and is recovered through a tracker mechanism over a two-year period.
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PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) 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 for rate increase
is driven by strategic investments to generate cleaner electricity, improve
reliability and serve a growing customer base. The request is premised upon a
Duke Energy Indiana rate base of $10.2 billion as of December 31, 2018, and
adjusted for projected changes through December 31, 2020. On September 9,
2019, Duke Energy Indiana revised its revenue request from $395 million
to $393 million and filed updated testimony for the Retail Rate Case. The
updated filing reflects a clarification in the presentation of Utility Receipts Tax,
a $2 million reduction in 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 item on the
customer bill rather than included in rates. The request is an approximate 15%
increase in retail revenues and approximately 17% when including estimated
Utility Receipts Tax. The rebuttal case, filed on December 4, 2019, updated the
requested revenue requirement to result in a 15.6% or $396 million average
retail rate increase, including the impacts of the Utility Receipts Tax. The
commission determined to take two issues out of the rate case and place them
in separate subdocket proceedings due to the complexity of the rate case. The
commission moved the request for electric transportation pilot and future coal
ash recovery issues to separate subdockets. Coal ash expenditures prior to
2019 are still included in the rate case. Hearings concluded on February 7, 2020
and rates are expected to be effective by mid-2020. Duke Energy Indiana cannot
predict the outcome of these matters.
Edwardsport IGCC Plant
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
Regulatory Assets and Liabilities
The following tables present the regulatory assets and liabilities recorded on Piedmont’s Consolidated Balance Sheets.
(in millions)
Regulatory Assets(a)
AROs – nuclear and other
Accrued pension and OPEB(c)
Vacation accrual
Derivatives – natural gas supply contracts(e)
Deferred pipeline integrity costs(c)
Amounts due from customers
Other
Total regulatory assets
Less: current portion
Total noncurrent regulatory assets
Regulatory Liabilities(a)
Net regulatory liability related to income taxes
Costs of removal
Accrued pension and OPEB(c)
Amounts to be refunded to customers
Other
Total regulatory liabilities
Less: current portion
Total noncurrent regulatory liabilities
December 31,
2019
Earns/Pays
a Return
Recovery/Refund
Period Ends
2018
(d)
(f)
(b)
(b)
(b)
(b)
(d)
(f)
(b)
(b)
$
$
$
16
90
12
117
62
36
30
363
73
290
555
574
3
34
46
1,212
81
Yes
Yes
Yes
Yes
Yes
$
$
$
19
99
12
141
51
24
11
357
54
303
579
564
1
33
41
1,218
37
$ 1,131
$ 1,181
Included in rate base.
(a) Regulatory assets and liabilities are excluded from rate base unless otherwise noted.
(b) The expected recovery or refund period varies or has not been determined.
(c)
(d) Recovery over the life of the associated assets.
(e) Balance will fluctuate with changes in the market. Current contracts extend into 2031.
(f) Recovered primarily over the average remaining service periods or life expectancies of employees covered by the benefit plans. See Note 23 for additional detail.
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PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) North Carolina Integrity Management Rider Filing
• Continuation of the IMR mechanism; and
On April 30, 2019, Piedmont filed a petition under the IMR mechanism
to update rates, based 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. These revenues, along with eligible spending for the
three months ended June 30, 2019, were subsequently included in base rates
effective November 1, 2019, as part of the 2019 North Carolina Rate Case.
On October 31, 2019, Piedmont filed a petition under the IMR mechanism
to update rates, based on the eligible capital investments closed to integrity and
safety projects over the three-month period ending September 30, 2019. The
NCUC approved the petition on December 3, 2019, and rates became effective
December 1, 2019. The effect of the update was an increase to annual revenues
of approximately $11 million.
Tennessee Integrity Management Rider Filing
In November 2019, Piedmont filed a petition with the TPUC under the
IMR mechanism to collect an additional $4 million in annual revenues, effective
January 2020, based on the eligible capital spending on integrity and safety
projects over the 12-month period ending October 31, 2019. A procedural
schedule has not yet been set for this matter. Piedmont cannot predict the
outcome of this matter.
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 was driven by
significant infrastructure upgrade investments (plant additions) since the last
general rate case through June 30, 2019, offset by savings that customers will
begin receiving due to federal 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 revenues
related to the federal rate reduction of $37 million to be returned over
one year;
• 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;
• 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;
• Establishment of a new deferral mechanism for certain Distribution
Integrity Management Program (DIMP) operations and maintenance
expenses incurred effective November 1, 2019, and thereafter.
An evidentiary hearing began on August 19, 2019. On October 31, 2019,
the NCUC approved the Stipulation and the revised customer rates were
effective November 1, 2019.
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 is designed to meet,
in part, the needs identified by Duke Energy Carolinas, Duke Energy Progress
and Piedmont. Dominion will be responsible for building and operating the ACP
pipeline and holds a leading ownership percentage in ACP of 48%. 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 Notes 13 and 18 for additional information
related to Duke Energy’s ownership interest. Duke Energy Carolinas, Duke
Energy Progress and Piedmont, among others, will be customers of the pipeline.
Purchases will be made under several 20-year supply contracts, subject to state
regulatory approval.
In 2018, the FERC issued a series of Notices to Proceed, which authorized
the project to begin certain construction-related activities along the pipeline
route, including supply header and compressors. On May 11, 2018, and
October 19, 2018, FERC issued Notices to Proceed allowing full construction
activities in all areas of West Virginia except in the Monongahela National Forest.
On July 24, 2018, FERC issued a Notice to Proceed allowing full construction
activities along the project route in North Carolina. On October 19, 2018, the
conditions to effectiveness of the Virginia 401 water quality certification were
satisfied 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’s U.S. Army Corps of Engineers (USACE) 404 permit, the
project’s air permit for a compressor station at Buckingham, Virginia, the
FERC Environmental Impact Statement order and the FERC order approving
the Certificate of Public Convenience and Necessity. Each of these challenges
alleges non-compliance on the part of federal and state permitting authorities
and adverse ecological consequences if the project is permitted to proceed.
Since December 2018, notable developments in these challenges include a stay
in December 2018 issued by the U.S. Court of Appeals for the Fourth Circuit
(Fourth Circuit) and the same court’s 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
132
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) District 404 verification, the Fourth Circuit’s remand to the National Park
Service of ACP’s Blue Ridge Parkway right-of-way and the most recent vacatur
of the air permit for a compressor station at Buckingham, Virginia. ACP is
vigorously defending these challenges and coordinating with the federal and
state authorities which are the direct parties to the challenges. The Solicitor
General of the United States and ACP filed petitions for certiorari to the Supreme
Court of the United States on June 25, 2019, regarding the Appalachian Trail
crossing and certiorari was granted on October 4, 2019. The Supreme Court
hearing is scheduled for February 24, 2020, and a ruling is expected in the
second quarter of 2020. ACP is also evaluating possible legislative and other
remedies to this issue.
In anticipation of the Fourth Circuit’s vacatur of the BiOp and ITS, ACP
and the FWS commenced work in mid-May of 2019 to set the basis for a
reissued BiOp and ITS. On February 10, 2020, FERC issued a letter to FWS
requesting the re-initiation of formal consultation in support of reissuing the
BiOp and ITS. ACP continues coordinating and working with FWS and other
parties in preparation for a reissuance of the BiOp and ITS.
ACP triggered the Adverse Government Actions (AGA) clause of its
agreements with its customers in December 2019. Formal negotiations have
commenced regarding pricing and construction timing, among other items, and
are expected to be finalized in the first quarter of 2020. The results of these
negotiations will directly impact the expected future cash flows of this project.
Given the 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 the legal challenges described above have
also impacted the cost for the project. Project cost is approximately $8 billion,
excluding financing costs. This estimate is based on the current facts available
around construction costs and timelines, and is subject to future changes as
those facts develop. Abnormal weather, work delays (including delays due to
judicial or regulatory action) and other conditions may 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.
Duke Energy’s investment in ACP was $1.2 billion at December 31,
2019. Duke Energy evaluated this investment for impairment at December 31,
2019, and determined that fair value approximated carrying value and therefore
no impairment was necessary. Duke Energy also has a guarantee agreement
supporting its share of the ACP revolving credit facility. Duke Energy’s maximum
exposure to loss under the terms of the guarantee is $827 million, which
represents 47% of the outstanding borrowings under the credit facility as of
December 31, 2019. See Note 13 for additional information.
Constitution Pipeline Company, LLC
Duke Energy owned a 24% ownership interest in Constitution, which is
accounted for as an equity method investment. Constitution was 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 was to be constructed and operated by Williams Partners L.P., which
had a 41% ownership share. The remaining interest was held by Cabot Oil
and Gas Corporation and WGL Holdings, Inc. In December 2014, Constitution
received approval from the FERC to construct and operate the proposed
pipeline. However, since April 2016, Constitution had stopped construction and
discontinued capitalization of future development costs due to permitting delays
and adverse rulings by regulatory agencies and courts.
In late 2019, Constitution determined that its principal shipper would not
agree to an amended precedent agreement. Without such an amendment, the
project would no longer be viable and, as of February 5, 2020, the Constitution
partners formally resolved to initiate the dissolution of Constitution, and to
terminate the Constitution Pipeline project. In the fourth quarter of 2019, Duke
Energy recorded an OTTI of $25 million related to Constitution within Equity in
earnings of unconsolidated affiliates on Duke Energy’s Consolidated Statements
of Income, resulting in the full write-down of Duke Energy’s investment
in Constitution. See Notes 13 and 18 for additional information related to
ownership interest and carrying value of the investment.
Potential Coal Plant Retirements
The Subsidiary Registrants periodically file 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 Consolidated Balance Sheets as of December 31, 2019, and exclude
capitalized asset retirement costs.
Duke Energy Carolinas
Allen Steam Station Units 1-3(a)
Duke Energy Indiana
Gallagher Units 2 and 4(b)
Gibson Units 1-5(c)
Cayuga Units 1-2(c)
Total Duke Energy
Capacity
(in MW)
Remaining Net
Book Value
(in millions)
$
585
$
152
280
3,132
1,005
$ 5,002
114
1,697
974
$ 2,937
(a) Duke Energy Carolinas will retire Allen Steam Station Units 1 through 3 by December 31, 2024, as part of the resolution of a lawsuit involving alleged New Source Review violations.
(b) Duke Energy Indiana committed to either retire or stop burning coal at Gallagher Units 2 and 4 by December 31, 2022, as part of the 2016 settlement of Edwardsport IGCC matters.
(c) On July 1, 2019, Duke Energy Indiana filed its 2018 IRP with the IURC. The 2018 IRP included scenarios evaluating the potential retirement of coal-fired generating units at Gibson and Cayuga. The rate case filed July 2, 2019,
includes proposed depreciation rates reflecting retirement dates from 2026 to 2038.
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PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) 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 $721 million and $1.2 billion, respectively, included in Net
property, plant and equipment on the Consolidated Balance Sheets as of
December 31, 2019.
Refer to the “Western Carolinas Modernization Plan” discussion above for
details of Duke Energy Progress’ planned retirements.
5. COMMITMENTS AND CONTINGENCIES
INSURANCE
General Insurance
The Duke Energy Registrants have insurance and reinsurance coverage
either directly or through indemnification from Duke Energy’s captive insurance
company, Bison, and its affiliates, consistent with companies engaged in
similar commercial operations with similar type properties. The Duke Energy
Registrants’ coverage includes (i) commercial general liability coverage for
liabilities arising to third parties for bodily injury and property damage; (ii)
workers’ compensation; (iii) automobile liability coverage; and (iv) property
coverage for all real and personal property damage. Real and personal property
damage coverage excludes electric transmission and distribution lines, but
includes damages arising from boiler and machinery breakdowns, earthquakes,
flood damage and extra expense, but not outage or replacement power
coverage. All coverage is subject to certain deductibles or retentions, sublimits,
exclusions, terms and conditions common for companies with similar types of
operations. The Duke Energy Registrants self-insure their electric transmission
and distribution lines against loss due to storm damage and other natural
disasters. As discussed further in Note 4, Duke Energy Florida maintains a
storm damage reserve and has a regulatory mechanism to recover the cost of
named storms on an expedited basis.
The cost of the Duke Energy Registrants’ coverage can fluctuate from year
to year reflecting claims history and conditions of the insurance and reinsurance
markets.
In the event of a loss, terms and amounts of insurance and reinsurance
available might not be adequate to cover claims and other expenses incurred.
Uninsured losses and other expenses, to the extent not recovered by other
sources, could have a material effect on the Duke Energy Registrants’ results of
operations, cash flows or financial position. Each company is responsible to the
extent losses may be excluded or exceed limits of the coverage available.
Nuclear Insurance
Duke Energy Carolinas owns and operates McGuire and Oconee and
operates and has a partial ownership interest in Catawba. McGuire and
Catawba each have two reactors. Oconee has three reactors. The other joint
owners of Catawba reimburse Duke Energy Carolinas for certain expenses
associated with nuclear insurance per the Catawba joint owner agreements.
Duke Energy Progress owns and operates Robinson, Brunswick and Harris.
Robinson and Harris each have one reactor. Brunswick has two reactors.
Duke Energy Florida owns Crystal River Unit 3, which permanently ceased
operation in 2013 and reached a SAFSTOR condition in January 2018 after the
successful transfer of all used nuclear fuel assemblies to an on-site dry cask
storage facility.
In the event of a loss, terms and amounts of insurance available might not
be adequate to cover property damage and other expenses incurred. Uninsured
losses and other expenses, to the extent not recovered by other sources, could
134
have a material effect on Duke Energy Carolinas’, Duke Energy Progress’ and
Duke Energy Florida’s results of operations, cash flows or financial position.
Each company is responsible to the extent losses may be excluded or exceed
limits of the coverage available.
Nuclear Liability Coverage
The Price-Anderson Act requires owners of nuclear reactors to provide for
public nuclear liability protection per nuclear incident up to a maximum total
financial protection liability. The maximum total financial protection liability,
which is approximately $13.9 billion, is subject to change every five years for
inflation and for the number of licensed reactors. Total nuclear liability coverage
consists of a combination of private primary nuclear liability insurance coverage
and a mandatory industry risk-sharing program to provide for excess nuclear
liability coverage above the maximum reasonably available private primary
coverage. The U.S. Congress could impose revenue-raising measures on the
nuclear industry to pay claims.
Primary Liability Insurance
Duke Energy Carolinas and Duke Energy Progress have purchased the
maximum reasonably available private primary nuclear liability insurance as
required by law, which is $450 million per station. Duke Energy Florida has
purchased $100 million primary nuclear liability insurance in compliance with
the law.
Excess Liability Program
This program provides $13.5 billion of coverage per incident through
the Price-Anderson Act’s mandatory industrywide excess secondary financial
protection program of risk pooling. This amount is the product of potential
cumulative retrospective premium assessments of $138 million times the
current 98 licensed commercial nuclear reactors in the U.S. Under this program,
licensees could be assessed retrospective premiums to compensate for public
nuclear liability damages in the event of a nuclear incident at any licensed
facility in the U.S. Retrospective premiums may be assessed at a rate not
to exceed $20.5 million per year per licensed reactor for each incident. The
assessment may be subject to state premium taxes.
Nuclear Property and Accidental Outage Coverage
Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida
are members of Nuclear Electric Insurance Limited (NEIL), an industry mutual
insurance company, which provides property damage, nuclear accident
decontamination and premature decommissioning insurance for each station
for losses resulting from damage to its nuclear plants, either due to accidents
or acts of terrorism. Additionally, NEIL provides accidental outage coverage for
losses in the event of a major accidental outage at an insured nuclear station.
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) Pursuant to regulations of the NRC, each company’s property damage
insurance policies provide that all proceeds from such insurance be applied,
first, to place the plant in a safe and stable condition after a qualifying accident
and second, to decontaminate the plant before any proceeds can be used for
decommissioning, plant repair or restoration.
Losses resulting from acts of terrorism are covered as common
occurrences, such that if terrorist acts occur against one or more commercial
nuclear power plants insured by NEIL within a 12-month period, they would be
treated as one event and the owners of the plants where the act occurred would
share one full limit of liability. The full limit of liability is currently $3.2 billion.
NEIL sublimits the total aggregate for all of their policies for non-nuclear
terrorist events to approximately $1.8 billion.
Each nuclear facility has accident property damage, nuclear accident
decontamination and premature decommissioning liability insurance from NEIL
with limits of $1.5 billion, except for Crystal River Unit 3. Crystal River Unit 3’s limit
is $50 million and is on an actual cash value basis. All nuclear facilities except
for Catawba and Crystal River Unit 3 also share an additional $1.25 billion
nuclear accident insurance limit above their dedicated underlying limit. This
shared additional excess limit is not subject to reinstatement in the event of
a loss. Catawba has a dedicated $1.25 billion of additional nuclear accident
insurance limit above its dedicated underlying limit. Catawba and Oconee also
have an additional $750 million of non-nuclear accident property damage limit. All
coverages are subject to sublimits and significant deductibles.
NEIL’s Accidental Outage policy provides some coverage, similar to
business interruption, for losses in the event of a major accident property
damage outage of a nuclear unit. Coverage is provided on a weekly limit basis
after a significant waiting period deductible and at 100% of the applicable
weekly limits for 52 weeks and 80% of the applicable weekly limits for up to
the next 110 weeks. Coverage is provided until these applicable weekly periods
are met, where the accidental outage policy limit will not exceed $490 million
for McGuire and Catawba, $462 million for Brunswick and Harris, $406 million
for Oconee and $364 million for Robinson. NEIL sublimits the accidental outage
recovery up to the first 104 weeks of coverage not to exceed $328 million
from non-nuclear accidental property damage. Coverage amounts decrease
in the event more than one unit at a station is out of service due to a common
accident. All coverages are subject to sublimits and significant deductibles.
Potential Retroactive Premium Assessments
In the event of NEIL losses, NEIL’s board of directors may assess
member companies’ retroactive premiums of amounts up to 10 times their
annual premiums for up to six years after a loss. NEIL has never exercised this
assessment. The maximum aggregate annual retrospective premium obligations
for Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida are
$155 million, $94 million and $1 million, respectively. Duke Energy Carolinas’
maximum assessment amount includes 100% of potential obligations to NEIL
for jointly owned reactors. Duke Energy Carolinas would seek reimbursement
from the joint owners for their portion of these assessment amounts.
ENVIRONMENTAL
The Duke Energy Registrants are subject to federal, state and local laws
regarding air and water quality, hazardous and solid waste disposal, coal ash
and other environmental matters. These laws can be changed from time to
time, imposing new obligations on the Duke Energy Registrants. The following
environmental matters impact all of the Duke Energy Registrants.
Remediation Activities
In addition to the ARO recorded as a result of various environmental
regulations, discussed in Note 10, the Duke Energy Registrants are responsible
for environmental remediation at various sites. These include certain properties
that are part of ongoing operations and sites formerly owned or used by Duke
Energy entities. These sites are in various stages of investigation, remediation
and monitoring. Managed in conjunction with relevant federal, state and
local agencies, remediation activities vary based upon site conditions and
location, remediation requirements, complexity and sharing of responsibility.
If remediation activities involve joint and several liability provisions, strict
liability, or cost recovery or contribution actions, the Duke Energy Registrants
could potentially be held responsible for environmental impacts caused by
other potentially responsible parties and may also benefit from insurance
policies or contractual indemnities that cover some or all cleanup costs.
Liabilities are recorded when losses become probable and are reasonably
estimable. The total costs that may be incurred cannot be estimated because
the extent of environmental impact, allocation among potentially responsible
parties, remediation alternatives and/or regulatory decisions have not yet been
determined at all sites. Additional costs associated with remediation activities
are likely to be incurred in the future and could be significant. Costs are typically
expensed as Operation, maintenance and other in the Consolidated Statements
of Operations unless regulatory recovery of the costs is deemed probable.
The following tables contain information regarding reserves for probable and estimable costs related to the various environmental sites. These reserves are
recorded in Accounts payable within Current Liabilities and Other within Other Noncurrent Liabilities on the Consolidated Balance Sheets.
(in millions)
Balance at December 31, 2016
Provisions/adjustments
Cash reductions
Balance at December 31, 2017
Provisions/adjustments
Cash reductions
Balance at December 31, 2018
Provisions/adjustments
Cash reductions
Balance at December 31, 2019
Duke
Energy
Carolinas
$ 10
3
(3)
10
3
(2)
11
6
(6)
Duke
Energy
$ 98
8
(25)
81
26
(30)
77
33
(52)
Progress
Energy
$ 18
3
(6)
15
2
(6)
11
9
(4)
Duke
Energy
Progress
$
3
2
(2)
3
3
(2)
4
2
(2)
Duke
Energy
Florida
$ 14
2
(4)
12
(2)
(4)
6
5
(2)
Duke
Energy
Ohio
Duke
Energy
Indiana
$ 59
3
(15)
47
21
(20)
48
11
(40)
$ 10
(4)
(1)
5
1
(1)
5
—
(1)
Piedmont
$
1
1
—
2
1
(1)
2
7
(1)
$ 58
$ 11
$ 16
$ 4
$
9
$ 19
$ 4
$
8
135
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) 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.
other issues, the appropriate insurance allocation methods, the trigger of the
applicable coverages and several coverage defenses raised by the insurance
providers. Trial is scheduled for February 2021. Duke Energy Carolinas and Duke
Energy Progress cannot predict the outcome of this matter.
(in millions)
Duke Energy
Duke Energy Carolinas
Duke Energy Ohio
Piedmont
LITIGATION
$
59
11
42
2
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. The Coal Ash Act allowed a range of
closure options for low risk rated basins. 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 December 31, 2019, the parties executed a settlement agreement
resolving the closure method for each of these sites. Duke Energy Carolinas
and Duke Energy Progress agreed to excavate seven of the nine remaining coal
ash basins at these sites with ash moved to on-site lined landfills, including
two at Allen, one at Belews Creek, one at Mayo, one at Roxboro, and two at
Rogers. At the two remaining basins at Marshall and Roxboro, uncapped basin
ash will be excavated and moved to lined landfills. Those portions of the basins
at Marshall and Roxboro, which were previously filled with ash and on which
permitted facilities were constructed, will not be disturbed and will be closed
pursuant to other state regulations. On February 5, 2020, the North Carolina
Superior court entered a consent order, after which this litigation was dismissed
on February 11, 2020.
Coal Ash Insurance Coverage Litigation
In March 2017, Duke Energy Carolinas and Duke Energy Progress filed
a civil action in the North Carolina Superior Court against various insurance
providers. The lawsuit seeks payment for coal ash-related liabilities covered
by third-party liability insurance policies. The insurance policies were issued
between 1971 and 1986 and provide third-party liability insurance for
property damage. The civil action seeks damages for breach of contract and
indemnification for costs arising from the Coal Ash Act and the EPA CCR rule
at 15 coal-fired plants in North Carolina and South Carolina. Despite a stay of
the litigation from May 2019 through September 2019 to allow the parties to
discuss potential resolution, no resolution was reached, and litigation resumed.
In February and March 2020, the Court will hear arguments on numerous cross
motions filed by the parties to seek legal determinations concerning, among
136
NCDEQ State Enforcement Actions
In the first quarter of 2013, SELC sent notices of intent to sue Duke Energy
Carolinas and Duke Energy Progress related to alleged CWA violations from coal
ash basins at two coal-fired power plants in North Carolina. The NCDEQ filed
enforcement 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 the remaining coal-fired
power plants in North Carolina, alleging violations of the CWA and violations
of the North Carolina groundwater standards. Both of these cases have been
assigned to the judge handling the enforcement actions discussed above. SELC
is representing several environmental groups who have been permitted to
intervene in these cases.
The court issued orders in 2016 granting Motions for Partial Summary
Judgment for seven of the 14 North Carolina plants with coal ash basins
named in the enforcement actions. On February 13, 2017, the court issued
an order denying motions for partial summary judgment brought by both the
environmental groups and Duke Energy Carolinas and Duke Energy Progress for
the remaining seven plants. On March 15, 2017, Duke Energy Carolinas and
Duke Energy Progress filed a Notice of Appeal with the North Carolina Court of
Appeals to challenge the trial court’s order. The parties were unable to reach an
agreement at mediation in April 2017 and submitted briefs to the trial court on
remaining issues to be tried. On August 1, 2018, the Court of Appeals dismissed
the appeal.
Pursuant to the terms of the December 31, 2019, settlement agreement,
discussed above, between Duke Energy Carolinas, Duke Energy Progress,
NCDEQ and the community groups represented by the SELC, this litigation was
dismissed on February 5, 2020, upon entry of the consent order in the North
Carolina Superior Court.
Federal Citizens Suits
On June 13, 2016, Roanoke River Basin Association (RRBA) filed a
federal citizen suit in the Middle District of North Carolina alleging unpermitted
discharges to surface water and groundwater violations at the Mayo Plant. On
August 19, 2016, Duke Energy Progress filed a Motion to Dismiss. On April 26,
2017, the court entered an order dismissing four of the claims in the federal
citizen suit. Two claims relating to alleged violations of National Pollution
Discharge Elimination System (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.
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.
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.
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) On December 5, 2017, various parties filed a federal citizen suit in the
Duke Energy Progress and Duke Energy Florida
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.
On December 31, 2019, Duke Energy Carolinas, Duke Energy Progress,
the NCDEQ and various community groups including RRBA entered into a
comprehensive settlement that, among other things, resolves the method of
closure at the Mayo, Roxboro and Belews Creek ash basins. On February 5,
2020, the North Carolina Superior Court entered a consent order confirming
the terms of the settlement agreement, upon which RRBA filed stipulations on
February 11, 2020 voluntarily dismissing all three of these federal citizen suits
with prejudice.
Duke Energy Carolinas
Asbestos-related Injuries and Damages Claims
Duke Energy Carolinas has experienced numerous claims for
indemnification and medical cost reimbursement related to asbestos exposure.
These claims relate to damages for bodily injuries alleged to have arisen from
exposure to or use of asbestos in connection with construction and maintenance
activities conducted on its electric generation plants prior to 1985. As of
December 31, 2019, there were 123 asserted claims for non-malignant cases
with the cumulative relief sought of up to $32 million and 49 asserted claims for
malignant cases with the cumulative relief sought of up to $16 million. Based on
Duke Energy Carolinas’ experience, it is expected that the ultimate resolution of
most of these claims likely will be less than the amount claimed.
Duke Energy Carolinas has recognized asbestos-related reserves of
$604 million and $630 million at December 31, 2019, and 2018, respectively.
These reserves are classified in Other within Other Noncurrent Liabilities and
Other within Current Liabilities on the Consolidated Balance Sheets. These
reserves are based upon Duke Energy Carolinas’ best estimate for current and
future asbestos claims through 2039 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 2039 related to such potential claims.
It is possible Duke Energy Carolinas may incur asbestos liabilities in excess of
the recorded reserves.
Duke Energy Carolinas has third-party insurance to cover certain losses
related to asbestos-related injuries and damages above an aggregate self-
insured retention. Duke Energy Carolinas’ cumulative payments began to exceed
the self-insurance retention in 2008. Future payments up to the policy limit will
be reimbursed by the third-party insurance carrier. The insurance policy limit
for potential future insurance recoveries indemnification and medical cost claim
payments is $747 million in excess of the self-insured retention. Receivables for
insurance recoveries were $742 million and $739 million at December 31, 2019,
and 2018, respectively. These amounts are classified in Other within Other
Noncurrent Assets and Receivables within Current Assets on the 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.
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
early 2021.
Duke Energy Florida
Fluor Contract Litigation
On January 29, 2019, Fluor filed a breach of contract lawsuit in the U.S.
District Court for the Middle District of Florida against Duke Energy Florida
related to an EPC agreement for the CC natural gas plant in Citrus County,
Florida. Fluor filed an amended complaint on February 13, 2019. Fluor’s
multicount complaint seeks civil, statutory and contractual remedies related to
Duke Energy Florida’s $67 million draw in early 2019, on Fluor’s letter of credit
and offset of invoiced amounts. Duke Energy Florida moved to dismiss all counts
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.
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 $36 million reduction to a prior-year impairment within Impairment
charges on Duke Energy’s Consolidated Statements of Operations in 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.
The table below presents recorded reserves based on management’s best
estimate of probable loss for legal matters, excluding asbestos-related reserves.
Reserves are classified on the Consolidated Balance Sheets in Other within
Other Noncurrent Liabilities and Other within Current Liabilities. The reasonably
possible range of loss in excess of recorded reserves is not material, other than
as described above.
(in millions)
Reserves for Legal Matters
Duke Energy
Duke Energy Carolinas
Progress Energy
Duke Energy Progress
Duke Energy Florida
Piedmont
137
December 31,
2019
2018
$ 62
2
55
12
22
1
$ 65
9
54
12
24
1
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) OTHER COMMITMENTS AND CONTINGENCIES
General
Purchase Obligations
Purchased Power
As part of their normal business, the Duke Energy Registrants are party
to various financial guarantees, performance guarantees and other contractual
commitments to extend guarantees of credit and other assistance to various
subsidiaries, investees and other third parties. These guarantees involve
elements of performance and credit risk, which are not fully recognized on the
Consolidated Balance Sheets and have uncapped maximum potential payments.
See Note 8 for more information.
Duke Energy Progress, Duke Energy Florida and Duke Energy Ohio have
ongoing purchased power contracts, including renewable energy contracts, with
other utilities, wholesale marketers, co-generators and qualified facilities. These
purchased power contracts generally provide for capacity and energy payments.
In addition, Duke Energy Progress and Duke Energy Florida have various
contracts to secure transmission rights.
The following table presents executory purchased power contracts with
terms exceeding one year, excluding contracts classified as leases.
(in millions)
Duke Energy Progress(a)
Duke Energy Florida(b)
Duke Energy Ohio(c)(d)
Minimum Purchase Amount at December 31, 2019
Contract
Expiration
2021-2032
2021-2025
2021-2022
$
2020
46
374
132
$
2021
66
356
107
$
2022
63
354
32
$
2023
55
374
—
2024
Thereafter
$
56
262
—
$
123
91
—
$
Total
409
1,811
271
The following table presents future unconditional purchase obligations
under natural gas supply and capacity contracts as of December 31, 2019.
(in millions)
Duke Energy
Duke Energy Ohio
Piedmont
2020
2021
2022
2023
2024
Thereafter
Total
$
297
280
225
129
118
714
$ 1,763
$ 39
33
14
3
—
—
$ 89
$
258
247
211
126
118
714
$ 1,674
(a) Contracts represent either 100% of net plant output or vary.
(b) Contracts represent between 81% and 100% of net plant output.
(c) Contracts represent between 1% and 9% of net plant output.
(d) Excludes PPA with OVEC. See Note 18 for additional information.
Gas Supply and Capacity Contracts
Duke Energy Ohio and Piedmont routinely enter into long-term natural
gas supply commodity and capacity commitments and other agreements that
commit future cash flows to acquire services needed in their businesses. These
commitments include pipeline and storage capacity contracts and natural
gas supply contracts to provide service to customers. Costs arising from the
natural gas supply commodity and capacity commitments, while significant, are
pass-through costs to customers and are generally fully recoverable through
the fuel adjustment or PGA procedures and prudence reviews in North Carolina
and South Carolina and under the Tennessee Incentive Plan in Tennessee.
In the Midwest, these costs are recovered via the Gas Cost Recovery Rate in
Ohio or the Gas Cost Adjustment Clause in Kentucky. The time periods for fixed
payments under pipeline and storage capacity contracts are up to 15 years. The
time periods for fixed payments under natural gas supply contracts are up to six
years. The time period for the natural gas supply purchase commitments is up
to 11 years.
Certain storage and pipeline capacity contracts require the payment of
demand charges that are based on rates approved by the FERC in order to
maintain rights to access the natural gas storage or pipeline capacity on a
firm basis during the contract term. The demand charges that are incurred in
each period are recognized in the Consolidated Statements of Operations and
Comprehensive Income as part of natural gas purchases and are included in
Cost of natural gas.
138
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) 6. LEASES
As described in Note 1, Duke Energy adopted the revised accounting guidance for Leases effective January 1, 2019, using the modified retrospective method of
adoption, which does not require restatement of prior year reported results. Adoption of the new standard resulted in the recording of ROU assets and operating lease
liabilities as follows:
(in millions)
ROU assets
Operating lease liabilities – current
Operating lease liabilities – noncurrent
As of January 1, 2019
Duke
Energy
$ 1,750
205
1,504
Duke
Energy
Carolinas
$ 153
28
127
Progress
Energy
$ 863
96
766
Duke
Energy
Progress
$ 407
35
371
Duke
Energy
Florida
$ 456
61
395
Duke
Energy
Ohio
$ 23
1
22
Duke
Energy
Indiana
$ 61
4
58
Piedmont
$ 26
4
25
As part of its operations, Duke Energy leases certain aircraft, space on
communication towers, industrial equipment, fleet vehicles, fuel transportation
(barges and railcars), land and office space under various terms and expiration
dates. Additionally, Duke Energy Carolinas, Duke Energy Progress and Duke
Energy Indiana have finance leases related to firm natural gas pipeline
transportation capacity. Duke Energy Progress and Duke Energy Florida have
entered into certain PPAs, which are classified as finance and operating leases.
Duke Energy has certain lease agreements, which include variable
lease payments that are based on the usage of an asset. These variable lease
payments are not included in the measurement of the ROU assets or operating
lease liabilities on the Consolidated Financial Statements.
Certain Duke Energy lease agreements include options for renewal and
early termination. The intent to renew a lease varies depending on the lease
type and asset. Renewal options that are reasonably certain to be exercised are
included in the lease measurements. The decision to terminate a lease early
is dependent on various economic factors. No termination options have been
included in any of the lease measurements.
Duke Energy Carolinas entered into a sale-leaseback arrangement in
December 2019, to construct and occupy an office tower. The lease agreement
was evaluated as a sale-leaseback of real estate and it was determined that
the transaction did not qualify for sale-leaseback accounting. As a result, the
transaction is being accounted for as a financing. For this transaction, Duke
Energy Carolinas will continue to record the real estate on the Consolidated
Balance Sheets within Property, Plant and Equipment as if it were the legal
owner and will continue to recognize depreciation expense over the estimated
useful life. In addition, a liability will be recorded for the failed sale-leaseback
obligation within Long-Term Debt on the Consolidated Balance Sheets, with the
The following table presents the components of lease expense.
monthly lease payments commencing after the construction phase being split
between interest expense and principal pay down of the debt.
Duke Energy operates various renewable energy projects and sells
the generated output to utilities, electric cooperatives, municipalities and
commercial and industrial customers through long-term PPAs. In certain
situations, these PPAs and the associated renewable energy projects qualify
as operating leases. Rental income from these leases is accounted for as
Nonregulated electric and other revenues in the Consolidated Statements
of Operations. There are no minimum lease payments as all payments are
contingent based on actual electricity generated by the renewable energy
projects. Contingent lease payments were $264 million, $268 million and
$262 million for the years ended December 31, 2019, 2018, and 2017,
respectively. Renewable energy projects owned by Duke Energy and accounted
for as operating leases had a cost basis of $3,349 million and $3,358 million
and accumulated depreciation of $721 million and $602 million at December
31, 2019, and 2018, respectively. These assets are principally classified as
nonregulated electric generation and transmission assets.
Piedmont has an agreement with Duke Energy Carolinas for the
construction and transportation of natural gas pipelines to supply its natural
gas plant needs. Piedmont accounts for this pipeline lateral contract as a lessor
and sales-type lease since the present value of the sum of the lease payments
equals the fair value of the asset. As of December 31, 2019, the pipeline lateral
assets owned by Piedmont had a current net investment basis of $4 million and
a long-term net investment basis of $70 million. These assets are classified
in Other, within Current Assets and Other Noncurrent Assets, respectively, on
Piedmont’s Consolidated Balance Sheets. Duke Energy Carolinas accounts for
the contract as a finance lease. The activity for this contract is eliminated in
consolidation at Duke Energy.
(in millions)
Operating lease expense(a)
Short-term lease expense(a)
Variable lease expense(a)
Finance lease expense
Amortization of leased assets(b)
Interest on lease liabilities(c)
Total finance lease expense
Total lease expense
Year Ended December 31, 2019
Duke
Energy
$ 292
16
47
111
61
172
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
$ 47
5
22
6
15
21
$
161
9
22
21
42
63
$ 69
4
16
5
33
38
Duke
Energy
Florida
$ 92
5
6
16
9
25
Duke
Energy
Ohio
$ 11
1
—
1
—
1
Duke
Energy
Indiana
$ 20
2
1
—
1
1
Piedmont
$ 5
—
1
—
—
—
$ 527
$ 95
$
255
$127
$128
$ 13
$ 24
$ 6
(a)
(b)
(c)
Included in Operations, maintenance and other or, for barges and railcars, Fuel used in electric generation and purchased power on the Consolidated Statements of Operations.
Included in Depreciation and amortization on the Consolidated Statements of Operations.
Included in Interest Expense on the Consolidated Statements of Operations.
139
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued)
The following table presents rental expense for operating leases, as reported under the former lease standard. These amounts are included in Operation,
maintenance and other and Fuel used in electric generation and purchased power on the Consolidated Statements of Operations.
(in millions)
Duke Energy
Duke Energy Carolinas
Progress Energy
Duke Energy Progress
Duke Energy Florida
Duke Energy Ohio
Duke Energy Indiana
Piedmont
Years Ended December 31,
$
2018
268
49
143
75
68
13
21
11
2017
$ 241
44
130
75
55
15
23
7
The following table presents operating lease maturities and a reconciliation of the undiscounted cash flows to operating lease liabilities.
(in millions)
2020
2021
2022
2023
2024
Thereafter
Total operating lease payments
Less: present value discount
Total operating lease liabilities(a)
December 31, 2019
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
$ 31
19
19
17
13
57
156
(27)
$ 123
99
95
95
95
462
969
(177)
$ 51
44
40
41
41
283
500
(109)
Duke
Energy
Florida
$ 72
55
55
54
54
179
469
(68)
Duke
Energy
$
268
216
201
191
176
984
2,036
(396)
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
$ 2
2
2
2
2
21
31
(9)
$
5
4
4
4
4
64
85
(27)
$ 5
5
5
5
5
5
30
(3)
$ 1,640
$ 129
$ 792
$ 391
$ 401
$ 22
$ 58
$ 27
(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 former lease standard.
(in millions)
2019
2020
2021
2022
2023
Thereafter
Total
December 31, 2018
Duke
Energy
$
239
219
186
170
160
1,017
$ 1,991
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana Piedmont
$ 33
29
19
19
17
68
$ 185
$
97
90
79
76
77
455
$ 874
$ 49
46
37
34
35
314
$ 515
$ 48
44
42
42
42
141
$ 359
$ 2
2
2
2
2
23
$ 33
$
6
5
4
4
5
66
$ 90
$ 5
5
5
5
6
11
$ 37
140
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) The following table presents finance lease maturities and a reconciliation of the undiscounted cash flows to finance lease liabilities.
(in millions)
2020
2021
2022
2023
2024
Thereafter
Total finance lease payments
Less: amounts representing interest
Total finance lease liabilities
December 31, 2019
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Indiana
$ 28
23
23
23
23
314
434
(255)
$ 69
69
69
69
55
539
870
(465)
$ 44
44
44
44
44
528
748
(441)
$ 25
25
25
25
11
11
122
(24)
$ 1
1
1
1
1
27
32
(22)
Duke
Energy
$
181
186
173
175
121
823
1,659
(690)
$
969
$ 179
$ 405
$ 307
$ 98
$ 10
The following table presents future minimum lease payments under finance leases, as reported under the former lease standard.
(in millions)
2019
2020
2021
2022
2023
Thereafter
Minimum annual payments
Less: amount representing interest
Total
December 31, 2018
$
Duke
Energy
170
174
177
165
165
577
1,428
(487)
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
$
20
20
15
15
15
204
289
(180)
$
45
46
45
45
45
230
456
(205)
$ 20
21
20
21
21
209
312
(175)
$ 25
25
25
24
24
21
144
(30)
$ 2
—
—
—
—
—
2
—
$
1
1
1
1
1
27
32
(22)
$
941
$
109
$ 251
$ 137
$ 114
$ 2
$ 10
The following tables contain additional information related to leases.
Classification
Operating lease ROU assets, net
Net property, plant and equipment
Duke
Energy
$ 1,658
926
$ 2,584
Duke
Energy
Carolinas
$ 123
198
$ 321
Progress
Energy
$
788
443
$ 1,231
Other current liabilities
Current maturities of long-term debt
$
208
119
$ 27
7
$
95
24
Operating lease liabilities
Long-Term Debt
1,432
850
102
172
697
381
December 31, 2019
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana Piedmont
$ 387
308
$ 695
$ 37
6
354
301
$ 401
135
$ 536
$ 58
18
343
80
$ 21
—
$ 21
$
1
—
21
—
$ 57
7
$ 64
$
3
—
55
10
$ 24
—
$ 24
$ 4
—
23
—
$ 2,609
$ 308
$ 1,197
$ 698
$ 499
$ 22
$ 68
$ 27
(in millions)
Assets
Operating
Finance
Total lease assets
Liabilities
Current
Operating
Finance
Noncurrent
Operating
Finance
Total lease liabilities
141
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) (in millions)
Cash paid for amounts included in the measurement
of lease liabilities(a)
Operating cash flows from operating leases
Operating cash flows from finance leases
Financing cash flows from finance leases
Lease assets obtained in exchange for new lease
liabilities (non-cash)
Operating(b)
Finance
Year Ended December 31, 2019
Duke
Energy
Carolinas
Duke
Energy
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana Piedmont
$
$
285
61
111
194
251
$ 34
15
6
$ 44
76
$
$
131
42
21
30
175
$ 53
33
5
$ 30
175
$ 78
9
16
$ —
—
$
2
—
1
$ —
—
$ 7
1
—
$
7
—
—
$ — $
—
1
—
(a) No amounts were classified as investing cash flows from operating leases for the year ended December 31, 2019.
(b) Does not include ROU assets recorded as a result of the adoption of the new lease standard.
Weighted average remaining lease term (years)
Operating leases
Finance leases
Weighted average discount rate(a)
Operating leases
Finance leases
Duke
Energy
Carolinas
Duke
Energy
Progress
Energy
December 31, 2019
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana Piedmont
11
13
3.9%
8.1%
9
19
10
16
12
18
3.5%
11.8%
3.8%
11.9%
3.9%
12.4%
8
11
3.8%
8.3%
17
—
4.2%
—%
18
26
6
—
4.1%
11.9%
3.6%
—%
(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.
142
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) 7. DEBT AND CREDIT FACILITIES
SUMMARY OF DEBT AND RELATED TERMS
The following tables summarize outstanding debt.
December 31, 2019
(in millions)
Unsecured debt, maturing 2020-2078
Secured debt, maturing 2020-2052
First mortgage bonds, maturing 2020-2049(a)
Finance leases, maturing 2022-2051(b)
Tax-exempt bonds, maturing 2022-2041(c)
Notes payable and commercial paper(d)
Money pool/intercompany borrowings
Fair value hedge carrying value adjustment
Unamortized debt discount and premium, net(e)
Unamortized debt issuance costs(f)
Weighted
Average
Interest Rate
4.02%
3.30%
4.13%
6.60%
2.90%
1.98%
Duke
Energy
$ 22,477
4,537
27,977
969
730
3,588
—
5
1,294
(316)
Total debt
3.92%
$ 61,261
Short-term notes payable and commercial paper
Short-term money pool/intercompany borrowings
Current maturities of long-term debt(g)
Total long-term debt(g)
(3,135)
—
(3,141)
$ 54,985
Duke
Energy
Carolinas
$ 1,150
544
9,557
179
243
—
329
5
(23)
(55)
$ 11,929
—
(29)
(458)
$ 11,442
Progress
Energy
$ 3,650
1,722
13,800
405
48
—
1,970
—
(29)
(111)
$ 21,455
—
(1,821)
(1,577)
$ 18,057
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
$ 1,110
—
1,449
—
77
—
337
—
(30)
(12)
Duke
Energy
Indiana
$
405
—
3,169
10
362
—
180
—
(19)
(20)
Piedmont
$ 2,399
—
—
—
—
—
476
—
(2)
(13)
$
350
1,387
6,225
98
—
—
—
—
(11)
(62)
$ 7,987
$ 2,931
$ 4,087
$ 2,860
—
—
(571)
$ 7,416
—
(312)
—
$ 2,619
—
(30)
(503)
$ 3,554
—
(476)
—
$ 2,384
$
700
335
7,575
307
48
—
216
—
(17)
(40)
$ 9,124
—
(66)
(1,006)
$ 8,052
(a) Substantially all electric utility property is mortgaged under mortgage bond indentures.
(b) Duke Energy includes $44 million and $419 million of finance lease purchase accounting adjustments related to Duke Energy Progress and Duke Energy Florida, respectively, related to PPAs that are not accounted for as
finance leases in their respective financial statements because of grandfathering provisions in GAAP.
(c) Substantially all tax-exempt bonds are secured by first mortgage bonds, letters of credit or the Master Credit Facility.
(d)
Includes $625 million classified as Long-Term Debt on the Consolidated Balance Sheets due to the existence of long-term credit facilities that backstop these commercial paper balances, along with Duke Energy’s ability and
intent to refinance these balances on a long-term basis. The weighted average days to maturity for Duke Energy’s commercial paper program was 14 days.
(e) Duke Energy includes $1,275 million and $137 million in purchase accounting adjustments related to Progress Energy and Piedmont, respectively.
(f) Duke Energy includes $37 million in purchase accounting adjustments primarily related to the merger with Progress Energy.
(g) Refer to Note 18 for additional information on amounts from consolidated VIEs.
143
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued)
December 31, 2018
Duke
Energy
Progress
Duke
Energy
Florida
(in millions)
Unsecured debt, maturing 2019-2078
Secured debt, maturing 2020-2037
First mortgage bonds, maturing 2019-2048(a)
Finance leases, maturing 2019-2051(b)
Tax-exempt bonds, maturing 2019-2041(c)
Notes payable and commercial paper(d)
Money pool/intercompany borrowings
Fair value hedge carrying value adjustment
Unamortized debt discount and premium, net(e)
Unamortized debt issuance costs(f)
Weighted
Average
Interest Rate
4.26%
3.69%
4.32%
5.06%
3.40%
2.73%
Duke
Energy
$ 20,955
4,297
25,628
941
941
4,035
—
5
1,434
(297)
Total debt
4.13%
$ 57,939
Short-term notes payable and commercial paper
Short-term money pool/intercompany borrowings
Current maturities of long-term debt(g)
Total long-term debt(g)
(3,410)
—
(3,406)
$ 51,123
Duke
Energy
Carolinas
$ 1,150
450
8,759
109
243
—
739
5
(23)
(54)
$11,378
—
(439)
(6)
$10,933
Progress
Energy
$ 3,800
1,703
13,100
251
48
—
1,385
—
(29)
(112)
$ 20,146
—
(1,235)
(1,672)
$ 17,239
Duke
Energy
Ohio
$ 1,000
—
1,099
2
77
—
299
—
(31)
(7)
Duke
Energy
Indiana Piedmont
$
408
—
2,670
10
572
—
317
—
(8)
(20)
$ 2,150
—
—
—
—
—
198
—
(1)
(11)
$
350
1,403
5,526
114
—
—
108
—
(11)
(61)
$ 7,429
$ 2,439
$ 3,949
$ 2,336
—
(108)
(270)
$ 7,051
—
(274)
(551)
$ 1,614
—
(167)
(63)
$ 3,719
—
(198)
(350)
$ 1,788
$
50
300
7,574
137
48
—
444
—
(15)
(40)
$ 8,498
—
(294)
(603)
$ 7,601
(a) Substantially all electric utility property is mortgaged under mortgage bond indentures.
(b) Duke Energy includes $63 million and $531 million of finance lease purchase accounting adjustments related to Duke Energy Progress and Duke Energy Florida, respectively, related to PPAs that are not accounted for as
finance leases in their respective financial statements because of grandfathering provisions in GAAP.
(c) Substantially all tax-exempt bonds are secured by first mortgage bonds, letters of credit or the Master Credit Facility.
(d)
Includes $625 million that was classified as Long-Term Debt on the Consolidated Balance Sheets due to the existence of long-term credit facilities that backstop these commercial paper balances, along with Duke Energy’s
ability and intent to refinance these balances on a long-term basis. The weighted average days to maturity for Duke Energy’s commercial paper programs was 16 days.
(e) Duke Energy includes $1,380 million and $156 million in purchase accounting adjustments related to Progress Energy and Piedmont, respectively.
(f) Duke Energy includes $41 million in purchase accounting adjustments primarily related to the merger with Progress Energy.
(g) Refer to Note 18 for additional information on amounts from consolidated VIEs.
CURRENT MATURITIES OF LONG-TERM DEBT
The following table shows the significant components of Current maturities of Long-Term Debt on the Consolidated Balance Sheets. The Duke Energy Registrants
currently anticipate satisfying these obligations with cash on hand and proceeds from additional borrowings.
(in millions)
Unsecured Debt
Duke Energy (Parent)
Duke Energy Progress
First Mortgage Bonds
Duke Energy Florida
Duke Energy Florida
Duke Energy Carolinas
Duke Energy Indiana
Duke Energy Progress
Other(b)
Current maturities of long-term debt
(a) Debt has a floating interest rate.
(b)
Includes finance lease obligations, amortizing debt and small bullet maturities.
Maturity Date
Interest Rate
December 31, 2019
June 2020
December 2020
January 2020
April 2020
June 2020
July 2020
September 2020
2.100%
2.510%(a)
1.850%
4.550%
4.300%
3.750%
2.065%(a)
$
330
700
250
250
450
500
300
361
$ 3,141
144
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued)
Maturities and Call Options
The following table shows the annual maturities of long-term debt for the next five years and thereafter. Amounts presented exclude short-term notes payable,
commercial paper and money pool borrowings and debt issuance costs for the Subsidiary Registrants.
(in millions)
2020
2021
2022
2023
2024
Thereafter
Total long-term debt, including current maturities
December 31, 2019
Duke
Energy(a)
$ 3,141
5,053
4,334
3,112
1,965
39,542
$ 57,147
Duke
Energy
Carolinas
$
458
504
830
1,006
306
8,875
Progress
Energy
$ 1,578
2,257
1,048
398
227
14,267
$11,979
$ 19,775
Duke
Energy
Progress
$ 1,006
932
508
319
160
6,190
$ 9,115
Duke
Energy
Florida
$
572
825
90
79
67
6,427
Duke
Energy
Ohio
Duke
Energy
Indiana
$ — $
50
—
325
25
2,261
503
70
94
3
154
3,272
$ 8,060
$ 2,661
$ 4,096
Piedmont
$ —
160
—
45
40
2,155
$ 2,400
(a) Excludes $1,448 million in purchase accounting adjustments related to the Progress Energy merger and the Piedmont acquisition.
The Duke Energy Registrants have the ability under certain debt facilities to call and repay the obligation prior to its scheduled maturity. Therefore, the actual
timing of future cash repayments could be materially different than as presented above.
Short-Term Obligations Classified as Long-Term Debt
Tax-exempt bonds that may be put to the Duke Energy Registrants at the option of the holder and certain commercial paper issuances and money pool borrowings
are classified as Long-Term Debt on the Consolidated Balance Sheets. These tax-exempt bonds, commercial paper issuances and money pool borrowings, which are
short-term obligations by nature, are classified as long-term due to Duke Energy’s intent and ability to utilize such borrowings as long-term financing. As Duke Energy’s
Master Credit Facility and other bilateral letter of credit agreements have non-cancelable terms in excess of one year as of the balance sheet date, Duke Energy has the
ability to refinance these short-term obligations on a long-term basis. The following tables show short-term obligations classified as long-term debt.
(in millions)
Tax-exempt bonds
Commercial paper(a)
Total
(in millions)
Tax-exempt bonds
Commercial paper(a)
Total
(a) Progress Energy amounts are equal to Duke Energy Progress amounts.
Duke
Energy
$ 312
625
$ 937
Duke
Energy
$ 312
625
$ 937
Duke
Energy
Carolinas
$ —
300
$ 300
Duke
Energy
Carolinas
$ —
300
$ 300
December 31, 2019
Duke
Energy
Progress
$ —
150
$ 150
December 31, 2018
Duke
Energy
Progress
$ —
150
$ 150
Duke
Energy
Ohio
$ 27
25
$ 52
Duke
Energy
Ohio
$ 27
25
$ 52
Duke
Energy
Indiana
$ 285
150
$ 435
Duke
Energy
Indiana
$ 285
150
$ 435
145
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) Summary of Significant Debt Issuances
The following tables summarize significant debt issuances (in millions).
Issuance Date
Maturity Date
Interest Rate
Unsecured Debt
March 2019(a)
March 2019(a)
May 2019(e)
June 2019(a)
June 2019(a)
July 2019(g)
September 2019(g)
September 2019(g)
November 2019(h)
First Mortgage Bonds
January 2019(c)
January 2019(c)
March 2019(d)
August 2019(a)
August 2019(a)
September 2019(f)
November 2019(i)
Total issuances
Mar 2022
Mar 2022
Jun 2029
Jun 2029
Jun 2049
Jul 2049
Oct 2025
Oct 2029
Nov 2021
Feb 2029
Feb 2049
Mar 2029
Aug 2029
Aug 2049
Oct 2049
Dec 2029
2.538%(b)
3.227%
3.500%
3.400%
4.200%
4.320%
3.230%
3.560%
2.167%(b)
3.650%
4.300%
3.450%
2.450%
3.200%
3.250%
2.500%
Year Ended December 31, 2019
Duke
Energy
(Parent)
Duke
Energy
Carolinas
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
$ 300
300
—
600
600
—
—
—
—
—
—
—
—
—
—
—
$ —
—
—
—
—
—
—
—
—
—
—
—
450
350
—
—
$ —
—
—
—
—
—
—
—
—
—
—
600
—
—
—
—
$ — $ —
—
—
—
—
40
95
75
—
—
—
—
—
—
—
—
200
—
—
—
—
—
—
700
400
400
—
—
—
—
—
$ —
—
—
—
—
—
—
—
—
—
—
—
—
—
500
—
$ —
—
600
—
—
—
—
—
—
—
—
—
—
—
—
—
Duke
Energy
$ 300
300
600
600
600
40
95
75
200
400
400
600
450
350
500
700
$ 6,210
$ 1,800
$ 800
$ 600
$ 900
$ 1,010
$ 500
$ 600
(a) Debt issued to pay down short-term debt and for general corporate purposes.
(b) Debt issuance has a floating interest rate.
(c) Debt issued to repay at maturity $450 million first mortgage bonds due April 2019, pay down short-term debt and for general corporate purposes.
(d) Debt issued to fund eligible green energy projects in the Carolinas.
(e) Debt issued to repay in full the outstanding $350 million Piedmont unsecured term loan due September 2019, pay down short-term debt and for general corporate purposes.
(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.
(h) Debt issued to fund storm restoration costs and for general corporate purposes.
(i) Debt issued to reimburse the payment of existing and new Eligible Green Expenditures in Florida.
In January 2020, Duke Energy Carolinas closed and funded $900 million of first mortgage bonds of which $500 million carry a fixed interest rate of 2.45% and
mature February 2030 and $400 million carry a fixed interest rate of 3.20% and mature August 2049. The proceeds will be used to repay at maturity $450 million,
4.30% debentures maturing June 2020, and for general corporate purposes.
146
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) Issuance Date
Unsecured Debt
March 2018(a)
May 2018(b)
September 2018(c)
First Mortgage Bonds
March 2018(d)
March 2018(d)
June 2018(e)
June 2018(e)
August 2018(f)
August 2018(f)
November 2018(g)
November 2018(g)
Total issuances
Maturity Date
Interest Rate
Duke
Energy
April 2025
May 2021
September 2078
March 2023
March 2048
July 2028
July 2048
September 2023
September 2028
May 2022
November 2028
3.950%
3.114%
5.625%
3.050%
3.950%
3.800%
4.200%
3.375%
3.700%
3.350%
3.950%
$
250
500
500
500
500
600
400
300
500
350
650
Year Ended December 31, 2018
Duke
Energy
(Parent)
$ 250
500
500
—
—
—
—
—
—
—
—
Duke
Energy
Carolinas
Duke
Energy
Progress
$ —
—
—
500
500
—
—
—
—
350
650
$ —
—
—
—
—
—
—
300
500
—
—
Duke
Energy
Florida
$ —
—
—
—
—
600
400
—
—
—
—
$ 5,050
$ 1,250
$ 2,000
$ 800
$ 1,000
(a) Debt issued to pay down short-term debt.
(b) Debt issued to pay down short-term debt. Debt issuance has a floating debt rate.
(c) Callable after September 2023 at par. Junior subordinated hybrid debt issued to pay down short-term debt and for general corporate purposes.
(d) Debt issued to repay at maturity a $300 million first mortgage bond due April 2018, pay down intercompany short-term debt and for general corporate purposes.
(e) Debt issued to repay a portion of intercompany short-term debt under the money pool borrowing arrangement and for general corporate purposes.
(f) Debt issued to repay short-term debt and for general corporate purposes.
(g) Debt issued to fund eligible green energy projects, including zero-carbon solar and energy storage, in the Carolinas.
Available Credit Facilities
In March 2019, Duke Energy amended its existing $8 billion Master
Credit Facility to extend the termination date to March 2024. The Duke Energy
Registrants, excluding Progress Energy, 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 these credit facilities.
(in millions)
Facility size(a)
Reduction to backstop issuances
Commercial paper(b)
Outstanding letters of credit
Tax-exempt bonds
Coal ash set-aside
Available capacity
Duke
Energy
$ 8,000
(2,537)
(50)
(81)
(500)
$ 4,832
Duke
Energy
(Parent)
$ 2,650
(1,119)
(42)
—
—
$ 1,489
Duke
Energy
Carolinas
$ 1,500
(325)
(4)
—
(250)
921
$
December 31, 2019
Duke
Energy
Progress
$ 1,250
(207)
(2)
—
(250)
791
$
Duke
Energy
Florida
$ 800
—
—
—
—
$ 800
Duke
Energy
Ohio
$ 600
(296)
—
—
—
$ 304
Duke
Energy
Indiana
$ 600
(176)
—
(81)
—
$ 343
Piedmont
$ 600
(414)
(2)
—
—
$ 184
(a) Represents the sublimit of each borrower.
(b) Duke Energy issued $625 million of commercial paper and loaned the proceeds through the money pool to Duke Energy Carolinas, Duke Energy Progress, Duke Energy Ohio and Duke Energy Indiana. The balances are classified
as Long-Term Debt Payable to Affiliated Companies in the Consolidated Balance Sheets.
147
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued)
Three-Year Revolving Credit Facility
Duke Energy (Parent) has a $1 billion revolving credit facility. The facility
had an initial termination date of June 2020, but in May 2019, Duke Energy
extended the termination date of the facility to May 2022. Borrowings under this
facility will be used for general corporate purposes. As of December 31, 2019,
$500 million has been drawn under this facility. This balance is classified as
Long-term debt on Duke Energy’s Consolidated Balance Sheets. Any undrawn
commitments can be drawn, and borrowings can be prepaid, at any time
throughout the term of the facility. The terms and conditions of the facility are
generally consistent with those governing Duke Energy’s Master Credit Facility.
Duke Energy Progress Term Loan Facility
In December 2018, Duke Energy Progress entered into a two-year term
loan facility with commitments totaling $700 million. Borrowings under the
facility were used to pay storm-related costs, pay down commercial paper
and to partially finance an upcoming bond maturity. As of December 31, 2019,
the entire $700 million has been drawn under the term loan. This balance is
classified as Current maturities of long-term debt on Duke Energy Progress’
Consolidated Balance Sheets.
Piedmont Term Loan Facility
obligations of Duke Energy and are reflected as Notes payable and commercial
paper on Duke Energy’s Consolidated Balance Sheets.
Money Pool
The Subsidiary Registrants, excluding Progress Energy, are eligible to
receive support for their short-term borrowing needs through participation
with Duke Energy and certain of its subsidiaries in a money pool arrangement.
Under this arrangement, those companies with short-term funds may provide
short-term loans to affiliates participating in this arrangement. The money
pool is structured such that the Subsidiary Registrants, excluding Progress
Energy, separately manage their cash needs and working capital requirements.
Accordingly, there is no net settlement of receivables and payables between
money pool participants. Duke Energy (Parent), may loan funds to its
participating subsidiaries, but may not borrow funds through the money pool.
Accordingly, as the money pool activity is between Duke Energy and its wholly
owned subsidiaries, all money pool balances are eliminated within Duke
Energy’s Consolidated Balance Sheets.
Money pool receivable balances are reflected within Notes receivable
from affiliated companies on the Subsidiary Registrants’ Consolidated Balance
Sheets. Money pool payable balances are reflected within either Notes payable
to affiliated companies or Long-Term Debt Payable to Affiliated Companies on
the Subsidiary Registrants’ Consolidated Balance Sheets.
In May 2019, the $350 million Piedmont term loan was paid off in full with
proceeds from the $600 million Piedmont debt offering.
Restrictive Debt Covenants
Other Debt Matters
In September 2019, Duke Energy filed a Form S-3 with the SEC. Under
this Form S-3, which is uncapped, the Duke Energy Registrants, excluding
Progress Energy, may issue debt and other securities in the future at amounts,
prices and with terms to be determined at the time of future offerings. The
registration statement was filed to replace a similar prior filing upon expiration
of its three-year term and also allows for the issuance of common and preferred
stock by Duke Energy. The expired Form S-3 was amended in March 2019, to
allow Duke Energy to issue preferred stock.
Duke Energy has an effective Form S-3 with the SEC to sell up to $3 billion
of variable denomination floating-rate demand notes, called PremierNotes.
The Form S-3 states that no more than $1.5 billion of the notes will be
outstanding at any particular time. The notes are offered on a continuous basis
and bear interest at a floating rate per annum determined by the Duke Energy
PremierNotes Committee, or its designee, on a weekly basis. The interest rate
payable on notes held by an investor may vary based on the principal amount
of the investment. The notes have no stated maturity date, are non-transferable
and may be redeemed in whole or in part by Duke Energy or at the investor’s
option at any time. The balance as of December 31, 2019, and 2018, was
$1,049 million and $1,010 million, respectively. The notes are short-term debt
8. GUARANTEES AND INDEMNIFICATIONS
The Duke Energy Registrants’ debt and credit agreements contain various
financial and other covenants. Duke Energy’s Master Credit Facility contains a
covenant requiring the debt-to-total capitalization ratio not to exceed 65% for
each borrower, excluding Piedmont, and 70% for Piedmont. Failure to meet those
covenants beyond applicable grace periods could result in accelerated due dates
and/or termination of the agreements. As of December 31, 2019, each of the
Duke Energy Registrants was in compliance with all covenants related to their
debt agreements. In addition, some credit agreements may allow for acceleration
of payments or termination of the agreements due to nonpayment, or acceleration
of other significant indebtedness of the borrower or some of its subsidiaries. None
of the debt or credit agreements contain material adverse change clauses.
Other Loans
As of December 31, 2019, and 2018, Duke Energy had loans outstanding
of $777 million, including $36 million at Duke Energy Progress and $741 million,
including $37 million at Duke Energy Progress, respectively, against the cash
surrender value of life insurance policies it owns on the lives of its executives.
The amounts outstanding were carried as a reduction of the related cash
surrender value that is included in Other within Other Noncurrent Assets on the
Consolidated Balance Sheets.
Duke Energy has various financial and performance guarantees and
indemnifications with non-consolidated entities, which are issued in the normal
course of business. As discussed below, these contracts include performance
guarantees, standby letters of credit, debt guarantees and indemnifications.
Duke Energy enters into these arrangements to facilitate commercial
transactions with third parties by enhancing the value of the transaction to the
third party. At December 31, 2019, Duke Energy does not believe conditions are
likely for significant performance under these guarantees. To the extent liabilities
are incurred as a result of the activities covered by the guarantees, such
liabilities are included on the accompanying Consolidated Balance Sheets.
On January 2, 2007, Duke Energy completed the spin-off of its previously
wholly-owned natural gas businesses to shareholders. Guarantees issued by
Duke Energy or its affiliates, or assigned to Duke Energy prior to the spin-off,
remained with Duke Energy subsequent to the spin-off. Guarantees issued
by Spectra Capital or its affiliates prior to the spin-off remained with Spectra
Capital subsequent to the spin-off, except for guarantees that were later
148
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) assigned to Duke Energy. Duke Energy has indemnified Spectra Capital against
any losses incurred under certain of the guarantee obligations that remain
with Spectra Capital. At December 31, 2019, the maximum potential amount
of future payments associated with these guarantees were $65 million, the
majority of which expires by 2028.
In October 2017, ACP executed a $3.4 billion revolving credit facility with
a stated maturity date of October 2021. Duke Energy entered into a guarantee
agreement to support its share of the ACP revolving credit facility. Duke Energy’s
maximum exposure to loss under the terms of the guarantee is $827 million
as of December 31, 2019. This amount represents 47% of the outstanding
borrowings under the credit facility.
In addition to the Spectra Capital and ACP revolving credit facility
guarantees above, Duke Energy has issued performance guarantees to
customers and other third parties that guarantee the payment and performance
of other parties, including certain non-wholly owned entities, as well as
guarantees of debt of certain non-consolidated entities. If such entities were
to default on payments or performance, Duke Energy would be required under
the guarantees to make payments on the obligations of these entities. The
maximum potential amount of future payments required under these guarantees
as of December 31, 2019, was $128 million, of which, $114 million expire
between 2020 and 2030, with the remaining performance guarantees having
no contractual expiration. Additionally, certain guarantees have uncapped
maximum potential payments; however, Duke Energy does not believe these
guarantees will have a material effect on its results of operations, cash flows or
financial position.
Duke Energy uses bank-issued standby letters of credit to secure the
performance of wholly owned and non-wholly owned entities to a third party
or customer. Under these arrangements, Duke Energy has payment obligations
to the issuing bank that are triggered by a draw by the third party or customer
due to the failure of the wholly owned or non-wholly owned entity to perform
according to the terms of its underlying contract. At December 31, 2019, Duke
Energy had issued a total of $634 million in letters of credit, which expire
between 2020 and 2022. The unused amount under these letters of credit
was $81 million.
Duke Energy recognized $23 million as of December 31, 2019, and 2018,
primarily in Other within Other Noncurrent Liabilities on the Consolidated
Balance Sheets, for the guarantees discussed above. As current estimates
change, additional losses related to guarantees and indemnifications to
third parties, which could be material, may be recorded by the Duke Energy
Registrants in the future.
9. JOINT OWNERSHIP OF GENERATING AND TRANSMISSION FACILITIES
The Duke Energy Registrants maintain ownership interests in certain
jointly owned generating and transmission facilities. The Duke Energy
Registrants are entitled to a share of the generating capacity and output of
each unit equal to their respective ownership interests. The Duke Energy
Registrants pay their ownership share of additional construction costs, fuel
inventory purchases and operating expenses. The Duke Energy Registrants
share of revenues and operating costs of the jointly owned facilities is
included within the corresponding line in the Consolidated Statements of
Operations. Each participant in the jointly owned facilities must provide its
own financing.
The following table presents the Duke Energy Registrants’ interest of jointly owned plant or facilities and amounts included on the Consolidated Balance Sheets.
All facilities are operated by the Duke Energy Registrants and are included in the Electric Utilities and Infrastructure segment.
(in millions except for ownership interest)
Duke Energy Carolinas
Catawba (units 1 and 2)(a)
W.S. Lee CC(b)
Duke Energy Indiana
Gibson (unit 5)(c)
Vermillion(d)
Transmission and local facilities(c)
(a)
(b)
(c)
(d)
Jointly owned with North Carolina Municipal Power Agency Number 1, NCEMC and PMPA.
Jointly owned with NCEMC.
Jointly owned with WVPA and IMPA.
Jointly owned with WVPA.
10. ASSET RETIREMENT OBLIGATIONS
Duke Energy records an ARO when it has a legal obligation to incur
retirement costs associated with the retirement of a long-lived asset and the
obligation can be reasonably estimated. Certain assets of the Duke Energy
Registrants have an indeterminate life, such as transmission and distribution
facilities, and thus the fair value of the retirement obligation is not reasonably
estimable. A liability for these AROs will be recorded when a fair value is
determinable.
December 31, 2019
Ownership
Interest
Property, Plant
and Equipment
Accumulated
Depreciation
Construction Work in
Progress
19.25%
87.27%
50.05%
62.50%
Various
$ 1,011
609
410
172
5,421
$ 510
32
183
119
1,436
$ 21
1
3
—
172
The Duke Energy Registrants’ regulated operations accrue costs of
removal for property that does not have an associated legal retirement
obligation based on regulatory orders from state commissions. These costs
of removal are recorded as a regulatory liability in accordance with regulatory
accounting treatment. The Duke Energy Registrants do not accrue the estimated
cost of removal for any nonregulated assets. See Note 4 for the estimated cost
of removal for assets without an associated legal retirement obligation, which
are included in Regulatory liabilities on the Consolidated Balance Sheets.
149
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) The following table presents the AROs recorded on the Consolidated Balance Sheets.
(in millions)
Decommissioning of nuclear power facilities(a)
Closure of ash impoundments
Other
Total asset retirement obligation
Less: current portion
Total noncurrent asset retirement obligation
Duke
Energy
$ 6,633
6,333
352
$ 13,318
881
$ 12,437
Duke
Energy
Carolinas
$ 2,551
3,118
65
$ 5,734
206
$ 5,528
Progress
Energy
$ 4,028
2,368
75
$ 6,471
485
$ 5,986
December 31, 2019
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
$ 3,499
2,352
42
$ 5,893
485
$ 5,408
$ 529
16
33
$ 578
—
$ 578
$ —
41
39
$ 80
1
$ 79
$ —
805
27
$ 832
189
$ 643
Piedmont
$ —
—
17
$ 17
—
$ 17
(a) Duke Energy amount includes purchase accounting adjustments related to the merger with Progress Energy.
Nuclear Decommissioning Liability
AROs related to nuclear decommissioning are based on site-specific
cost studies. The NCUC, PSCSC and FPSC require updated cost estimates for
decommissioning nuclear plants every five years.
The following table summarizes information about the most recent
site-specific nuclear decommissioning cost studies. Decommissioning costs
are stated in 2018 or 2019 dollars, depending on the year of the cost study,
and include costs to decommission plant components not subject to radioactive
contamination.
(in millions)
Duke Energy
Duke Energy Carolinas(b)(c)
Duke Energy Progress(d)
Duke Energy Florida(e)
Annual Funding
Requirement(a)
Decommissioning
Costs(a)
Year of Cost
Study
$ 24
—
24
—
$
9,152
4,365
4,181
606
2018 and 2019
2018
2019
2019
(a) Amounts for Progress Energy equal the sum of Duke Energy Progress and Duke Energy Florida.
(b) Decommissioning cost for Duke Energy Carolinas reflects its ownership interest in jointly owned reactors.
Other joint owners are responsible for decommissioning costs related to their interest in the reactors.
(c) Duke Energy Carolinas’ site-specific nuclear decommissioning cost study completed in 2018 was filed
with the NCUC and PSCSC in 2019. A new funding study was also completed and filed with the NCUC
and PSCSC in 2019.
(d) Duke Energy Progress’ site-specific nuclear decommissioning cost study completed in 2019 is expected
to be filed with the NCUC and PSCSC during the first quarter 2020. Duke Energy Progress will also
complete a new funding study, which will be completed and filed with the NCUC and PSCSC in July 2020.
(e) During 2019, Duke Energy Florida reached an agreement to transfer decommissioning work for Crystal
River Unit 3 to a third party. The agreement requires regulatory approval from the NRC and the FPSC.
See Note 4 for more information.
Nuclear Decommissioning Trust Funds
Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida
each maintain NDTFs that are intended to pay for the decommissioning costs
of their respective nuclear power plants. The NDTF investments are managed
and invested in accordance with applicable requirements of various regulatory
bodies including the NRC, FERC, NCUC, PSCSC, FPSC and the IRS.
Use of the NDTF investments is restricted to nuclear decommissioning
activities including license termination, spent fuel and site restoration.
The license termination and spent fuel obligations relate to contaminated
decommissioning and are recorded as AROs. The site restoration obligation
relates to non-contaminated decommissioning and is recorded to cost of
removal within Regulatory liabilities on the Consolidated Balance Sheets.
150
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 17 for additional information related to the fair value of the
Duke Energy Registrants’ NDTFs.
(in millions)
Duke Energy
Duke Energy Carolinas
Duke Energy Progress
Nuclear Operating Licenses
December 31,
2019
$ 6,766
3,837
2,929
2018
$ 5,579
3,133
2,446
Operating licenses for nuclear units are potentially subject to extension.
The following table includes the current expiration of nuclear operating licenses.
Unit
Duke Energy Carolinas
Catawba Units 1 and 2
McGuire Unit 1
McGuire Unit 2
Oconee Units 1 and 2
Oconee Unit 3
Duke Energy Progress
Brunswick Unit 1
Brunswick Unit 2
Harris
Robinson
Year of Expiration
2043
2041
2043
2033
2034
2036
2034
2046
2030
The NRC has acknowledged permanent cessation of operation
and permanent removal of fuel from the reactor vessel at Crystal River
Unit 3. Therefore, the license no longer authorizes operation of the reactor.
In 2019, Duke Energy Florida entered into an agreement for the accelerated
decommissioning of Crystal River Unit 3. The agreement is subject to the
approval of the NRC and FPSC. See Note 4 for more information.
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) Closure of Ash Impoundments
The Duke Energy Registrants are subject to state and federal regulations
covering the closure of coal ash impoundments, including the EPA CCR rule
and the Coal Ash Act, and other agreements. AROs recorded on the Duke
Energy Registrants’ Consolidated Balance Sheets include the legal obligation for
closure of coal ash basins and the disposal of related ash as a result of these
regulations and agreements.
The ARO amount recorded on the Consolidated Balance Sheets is based
upon estimated closure costs for impacted ash impoundments. The amount
recorded represents the discounted cash flows for estimated closure costs
based upon specific closure plans. Actual costs to be incurred will be dependent
upon factors that vary from site to site. The most significant factors are the
method and time frame of closure at the individual sites. Closure methods
considered include removing the water from ash basins, consolidating material
as necessary and capping the ash with a synthetic barrier, excavating and
relocating the ash to a lined structural fill or lined landfill or recycling the ash for
concrete or some other beneficial use. The ultimate method and timetable for
closure will be in compliance with standards set by federal and state regulations
and other agreements. The ARO amount will be adjusted as additional
information is gained through the closure and post-closure process, including
acceptance and approval of compliance approaches, which may change
management assumptions, and may result in a material change to the balance.
See ARO Liability Rollforward section below for information on revisions made to
the coal ash liability during 2019 and 2018.
Asset retirement costs associated with the AROs for operating plants and
retired plants are included in Net property, plant and equipment and Regulatory
assets, respectively, on the Consolidated Balance Sheets. See Note 4 for
additional information on Regulatory assets related to AROs.
Cost recovery for future expenditures will be pursued through the normal
ratemaking process with federal and state utility commissions, which permit
recovery of necessary and prudently incurred costs associated with Duke
Energy’s regulated operations. See Note 4 for additional information on recovery
of coal ash costs.
ARO Liability Rollforward
The following tables present changes in the liability associated with AROs.
(in millions)
Duke
Energy
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
Balance at December 31, 2017
$ 10,175
$ 3,610
$ 5,414
$ 4,673
$
742
$
84
$ 781
$
15
Accretion expense(a)
Liabilities settled(b)
Liabilities incurred in the current year(c)
Revisions in estimates of cash flows
Balance at December 31, 2018
Accretion expense(a)
Liabilities settled(b)
Liabilities incurred in the current year
Revisions in estimates of cash flows(d)
Balance at December 31, 2019
427
(638)
39
464
179
(281)
8
433
225
(272)
5
39
196
(227)
—
178
10,467
3,949
5,411
4,820
508
(895)
25
3,213
235
(329)
18
252
(499)
7
1,861
1,300
$ 13,318
$ 5,734
$ 6,471
227
(460)
—
1,306
$ 5,893
29
(45)
5
(140)
591
25
(39)
7
(6)
$
578
$
4
(5)
—
10
93
3
(12)
—
(4)
80
29
(79)
25
(34)
722
28
(54)
—
136
1
—
—
3
19
1
—
—
(3)
$ 832
$
17
(a) Substantially all accretion expense for the years ended December 31, 2019, and 2018, relates to Duke Energy’s regulated operations and has been deferred in accordance with regulatory accounting treatment.
(b) Amounts primarily relate to ash impoundment closures and nuclear decommissioning of Crystal River Unit 3.
(c) Amounts primarily relate to AROs recorded as a result of state agency closure requirements at Duke Energy Indiana.
(d) Amounts primarily relate to increases in closure estimates for certain ash impoundments as a result of the NCDEQ’s April 1 Order and the related settlement agreement dated December 31, 2019. See Note 5 for more
information. The amount recorded in the fourth quarter of 2019 for coal ash closures as a result of the settlement was not material.
151
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) 11. PROPERTY, PLANT AND EQUIPMENT
The following tables summarize the property, plant and equipment for Duke Energy and its subsidiary registrants.
(in millions)
Land
Plant – Regulated
Electric generation, distribution and transmission
Natural gas transmission and distribution
Other buildings and improvements
Plant – Nonregulated
Electric generation, distribution and transmission
Other buildings and improvements
Nuclear fuel
Equipment
Construction in process
Other
Total property, plant and equipment(a)(e)
Total accumulated depreciation – regulated(b)(c)
Total accumulated depreciation – nonregulated(d)(e)
Generation facilities to be retired, net
December 31, 2019
Estimated
Useful Life
(Years)
Duke
Energy
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
$
2,091
$
520
$
884
$
449
$
435
$
150
$
117
$
388
15-100
4-73
23-90
5-30
25-35
3-25
2-40
111,739
9,839
1,810
5,103
488
3,253
2,313
6,102
4,916
147,654
(43,419)
(2,354)
246
42,723
—
714
48,142
—
401
—
—
1,891
546
1,389
1,139
48,922
(16,525)
—
—
—
—
1,362
665
2,149
1,467
55,070
(17,159)
—
246
30,018
—
162
—
—
1,362
452
1,114
1,046
34,603
(11,915)
—
246
18,124
—
239
—
—
—
213
1,035
411
20,457
(5,236)
—
—
5,838
2,892
269
—
—
—
319
504
269
10,241
(2,843)
—
—
15,032
—
278
—
—
—
205
381
292
16,305
(5,233)
—
—
—
6,947
148
—
—
—
128
531
304
8,446
(1,681)
—
—
Total net property, plant and equipment
$102,127
$ 32,397
$ 38,157
$
22,934
$15,221
$ 7,398
$11,072
$ 6,765
(a)
(b)
(c)
(d)
(e)
Includes finance leases of $952 million, $211 million, $443 million, $308 million, $135 million and $10 million at Duke Energy, Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida and Duke
Energy Indiana, respectively, primarily within Plant – Regulated. The Progress Energy, Duke Energy Progress and Duke Energy Florida amounts are net of $143 million, $17 million and $126 million, respectively, of accumulated
amortization of finance leases.
Includes $1,807 million, $1,082 million, $725 million and $725 million of accumulated amortization of nuclear fuel at Duke Energy, Duke Energy Carolinas, Progress Energy and Duke Energy Progress, respectively.
Includes accumulated amortization of finance leases of $6 million, $13 million and $3 million at Duke Energy, Duke Energy Carolinas and Duke Energy Indiana, respectively.
Includes accumulated amortization of finance leases of $20 million at Duke Energy.
Includes gross property, plant and equipment cost of consolidated VIEs of $5,747 million and accumulated depreciation of consolidated VIEs of $1,041 million at Duke Energy.
During the year ended December 31, 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 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 were not impaired because the
carrying value of $160 million approximates the aggregate estimated future
cash flows. A continued decline in energy market pricing would likely result in a
future impairment.
152
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) (in millions)
Land
Plant – Regulated
Electric generation, distribution and transmission
Natural gas transmission and distribution
Other buildings and improvements
Plant – Nonregulated
Electric generation, distribution and transmission
Other buildings and improvements
Nuclear fuel
Equipment
Construction in process
Other
Total property, plant and equipment(a)(d)
Total accumulated depreciation – regulated(b)(c)(d)
Total accumulated depreciation – nonregulated(c)(d)
Generation facilities to be retired, net
December 31, 2018
Estimated
Useful Life
(Years)
Duke
Energy
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
$
2,072
$
472
$
868
$
445
$
423
$
136
$
116
$
448
15-100
12-80
24-90
5-30
25-35
3-55
3-40
100,706
8,808
1,966
4,410
494
3,460
2,141
5,726
4,675
134,458
(41,079)
(2,047)
362
38,468
—
681
—
—
1,898
467
1,678
1,077
44,741
(15,496)
—
—
42,760
—
636
—
—
1,562
565
2,515
1,354
50,260
(16,398)
—
362
26,147
—
295
—
—
1,562
399
1,659
952
31,459
(11,423)
—
362
16,613
—
341
—
—
—
166
856
393
18,792
(4,968)
—
—
5,182
2,719
270
—
—
—
384
412
257
9,360
(2,717)
—
—
14,292
—
253
—
—
—
178
325
279
15,443
(4,914)
—
—
—
6,089
126
—
—
—
141
382
300
7,486
(1,575)
—
—
Total net property, plant and equipment
$ 91,694
$ 29,245
$ 34,224
$
20,398
$13,824
$ 6,643
$10,529
$ 5,911
(a)
(b)
(c)
(d)
Includes finance leases of $1,237 million, $135 million, $257 million, $137 million, $120 million, $73 million and $35 million at Duke Energy, Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy
Florida, Duke Energy Ohio and Duke Energy Indiana, respectively, primarily within Plant – Regulated. The Progress Energy, Duke Energy Progress and Duke Energy Florida amounts are net of $131 million, $14 million and $117
million, respectively, of accumulated amortization of finance leases.
Includes $1,947 million, $1,087 million, $860 million and $860 million of accumulated amortization of nuclear fuel at Duke Energy, Duke Energy Carolinas, Progress Energy and Duke Energy Progress, respectively.
Includes accumulated amortization of finance leases of $61 million, $12 million, $20 million and $10 million at Duke Energy, Duke Energy Carolinas, Duke Energy Ohio and Duke Energy Indiana, respectively.
Includes gross property, plant and equipment cost of consolidated VIEs of $4,007 million and accumulated depreciation of consolidated VIEs of $698 million at Duke Energy.
During the year ended December 31, 2017, Duke Energy recorded a
pretax impairment charge of $69 million on a wholly owned non-contracted
wind project. The impairment was recorded within Impairment charges on Duke
Energy’s Consolidated Statements of Operations. $58 million of the impairment
related to property, plant and equipment and $11 million of the impairment
related to a net intangible asset. The charge represents the excess carrying
value over the estimated fair value of the project, which was based on a Level 3
Fair Value measurement that was determined from the income approach using
discounted cash flows. The impairment was primarily due to the non-contracted
wind project being located in a market that has experienced continued declining
market pricing during 2017 and declining long-term forecasted energy and
capacity prices, driven by low natural gas prices, additional renewable
generation placed in service and lack of significant load growth.
The following tables present capitalized interest, which includes the debt component of AFUDC.
(in millions)
Duke Energy
Duke Energy Carolinas
Progress Energy
Duke Energy Progress
Duke Energy Florida
Duke Energy Ohio
Duke Energy Indiana
Piedmont
Years Ended December 31,
2019
$159
30
31
28
3
22
26
26
2018
$ 161
35
51
26
25
17
27
17
2017
$128
45
45
21
24
10
9
12
153
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) 12. GOODWILL AND INTANGIBLE ASSETS
GOODWILL
Duke Energy
The following table presents goodwill by reportable segment for Duke Energy included on Duke Energy’s Consolidated Balance Sheets at December 31, 2019,
and 2018.
(in millions)
Goodwill Balance at
December 31, 2018
Accumulated impairment
charges(a)
Goodwill balance at
December 31, 2018, adjusted
for accumulated impairment
charges
Goodwill Balance at
December 31, 2019
Accumulated impairment
charges(a)
Goodwill balance at
December 31, 2019, adjusted
for accumulated impairment
charges
Electric
Utilities and
Infrastructure
Gas
Utilities and
Infrastructure
Commercial
Renewables
Total
$
17,379 $
1,924 $
122
$ 19,425
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 Consolidated Balance Sheets at December 31, 2019, and 2018.
—
—
(122)
(122 )
Progress Energy
Progress Energy’s Goodwill is included in the Electric Utilities and
Infrastructure segment and there are no accumulated impairment charges.
$
$
17,379 $
1,924 $ — $ 19,303
Piedmont
17,379 $
1,924 $
122
$ 19,425
Piedmont’s Goodwill is included in the Gas Utilities and Infrastructure
segment and there are no accumulated impairment charges.
—
—
(122)
(122)
$
17,379 $
1,924 $ — $ 19,303
(a) Duke Energy evaluated the recoverability of goodwill during 2018 and 2017 and recorded impairment
charges of $93 million and $29 million, respectively, related to the Commercial Renewables reporting
unit included in Impairment charges on Duke Energy’s Consolidated Statements of Operations. The fair
value of the reporting unit was determined based on the income approach and market approach in 2018
and 2017, respectively. See “Goodwill Impairment Testing” below for the results of the 2019 goodwill
impairment test.
Goodwill Impairment Testing
Duke Energy, Progress Energy, Duke Energy Ohio and Piedmont are required
to perform an annual goodwill impairment test as of the same date each year
and, accordingly, perform their annual impairment testing of goodwill as of
August 31. Duke Energy, Progress Energy, Duke Energy Ohio and Piedmont update
their test between annual tests if events or circumstances occur that would
more likely than not reduce the fair value of a reporting unit below its carrying
value. 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 2019.
Intangible Assets
The following tables show the carrying amount and accumulated amortization of intangible assets included in Other within Other Noncurrent Assets on the
Consolidated Balance Sheets of the Duke Energy Registrants at December 31, 2019, and 2018.
(in millions)
Emission allowances
Renewable energy certificates
Natural gas, coal and power contracts
Renewable operating and development projects
Other
Total gross carrying amounts
Accumulated amortization – natural gas, coal and power contracts
Accumulated amortization – renewable operating and development projects
Accumulated amortization – other
Total accumulated amortization
Total intangible assets, net
Duke
Energy
Carolinas
Duke
Energy
Progress
Energy
December 31, 2019
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
$ —
1
—
—
—
1
—
—
—
—
1
Duke
Energy
Indiana
Piedmont
$ 12
—
24
—
—
36
(21)
—
—
(21)
$ —
—
—
—
—
—
—
—
—
—
$ 15
$ —
$
5
118
—
—
—
123
—
—
—
—
$
2
118
—
—
—
120
—
—
—
—
$ 3
—
—
—
—
3
—
—
—
—
$123
$ 120
$ 3
$
$
18
172
24
89
2
305
(21)
(34)
(1)
(56)
$ —
53
—
—
—
53
—
—
—
—
53
$
249
$
154
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) Duke
Energy
Carolinas
Duke
Energy
Progress
Energy
December 31, 2018
Duke
Energy
Progress
Duke
Energy
Florida
$
18
168
24
84
6
300
(20)
(29)
(5)
(54)
$ —
46
—
—
—
46
—
—
—
—
46
$
5
120
—
—
—
125
—
—
—
—
$
2
120
—
—
—
122
—
—
—
—
$ 3
—
—
—
—
3
—
—
—
—
$ 125
$ 122
$ 3
$
Duke
Energy
Ohio
$ —
2
—
—
—
2
—
—
—
—
2
Duke
Energy
Indiana
Piedmont
$ 12
—
24
—
—
36
(20)
—
—
(20)
$ —
—
—
—
3
3
—
—
(3)
(3)
$ 16
$ —
(in millions)
Emission allowances
Renewable energy certificates
Natural gas, coal and power contracts
Renewable operating and development projects
Other
Total gross carrying amounts
Accumulated amortization – natural gas, coal and power contracts
Accumulated amortization – renewable operating and development projects
Accumulated amortization – other
Total accumulated amortization
Total intangible assets, net
$
246
$
See Note 11 for information related to 2017 impairment charge.
Amortization Expense
Amortization expense amounts for natural gas, coal and power contracts, renewable operating projects and other intangible assets are immaterial for the years
ended December 31, 2019, 2018 and 2017, and are expected to be immaterial for the next five years as of December 31, 2019.
155
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) 13. INVESTMENTS IN UNCONSOLIDATED AFFILIATES
EQUITY METHOD INVESTMENTS
Investments in affiliates that are not controlled by Duke Energy, but over which it has significant influence, are accounted for using the equity method.
The following table presents Duke Energy’s investments in unconsolidated affiliates accounted for under the equity method, as well as the respective equity in
earnings, by segment.
(in millions)
Electric Utilities and Infrastructure
Gas Utilities and Infrastructure
Commercial Renewables
Other
Total
Years Ended December 31,
2019
2018
2017
Investments
Equity in earnings
Investments
Equity in earnings
Investments
Equity in earnings
$ 122
1,388
314
112
$ 1,936
$
9
114
(4)
43
$162
$
97
1,003
201
108
$
1,409
$
$
6
27
(1)
51
83
$
89
763
190
133
$
5
62
(5)
57
$ 1,175
$ 119
During the years ended December 31, 2019, 2018 and 2017, Duke Energy
received distributions from equity investments of $55 million, $108 million and
$13 million, respectively, which are included in Other assets within Cash Flows
from Operating Activities on the Consolidated Statements of Cash Flows. During
the years ended December 31, 2019, 2018 and 2017, Duke Energy received
distributions from equity investments of $11 million, $137 million and $281 million,
respectively, which are included in Return of investment capital within Cash Flows
from Investing Activities on the Consolidated Statements of Cash Flows.
In October 2017, Duke Energy entered into a guarantee agreement to support
its share of the ACP revolving credit facility. See Note 8 for additional information.
As a result of the financing, ACP returned capital of $265 million to Duke Energy.
During 2018 and 2019, ACP received several adverse court rulings as
described in Note 4. As a result, Duke Energy evaluated this investment for
impairment and determined that fair value approximated carrying value and
therefore no impairment was necessary.
For regulatory matters and other information on the ACP, Sabal Trail and
During the years ended December 31, 2019, 2018 and 2017, Piedmont
Constitution investments, see Notes 4 and 18.
received distributions from equity investments of $1 million, $1 million and
$4 million, respectively, which are included in Other assets within Cash Flows
from Operating Activities and $4 million, $3 million and $2 million, respectively,
which are included within Cash Flows from Investing Activities on the
Consolidated Statements of Cash Flows.
Significant investments in affiliates accounted for under the equity
method are discussed below.
Electric Utilities and Infrastructure
Duke Energy owns a 50% interest in DATC and in Pioneer, which build,
own and operate electric transmission facilities in North America.
Commercial Renewables
DS Cornerstone, LLC, which owns wind farm projects in the U.S. was part
of a sale of minority interest in a certain portion of renewable assets to John
Hancock in 2019. See Note 2 for more information on the sale. Prior to the sale,
Duke Energy had a 50% interest in DS Cornerstone, LLC. After the sale, Duke
Energy has a 26% interest in the investment.
In 2019, Duke Energy acquired a majority ownership in a portfolio of
distributed fuel cell projects from Bloom Energy Corporation. Duke Energy is
not the primary beneficiary of the assets within the portfolio and does not
consolidate the assets in the portfolio.
Gas Utilities and Infrastructure
Impairment of Equity Method Investments
The table below outlines Duke Energy’s ownership interests in natural gas
pipeline companies and natural gas storage facilities.
Entity Name
Pipeline Investments
ACP
Sabal Trail
Constitution
Cardinal(a)
Storage Facilities
Pine Needle(a)
Hardy Storage(a)
Total Investments(b)
Investment Amount (in millions)
Ownership
Interest
December 31,
2019
December 31,
2018
47%
7.5%
24%
21.49%
45%
50%
$
$
1,179
121
—
9
28
51
1,388
$
$
797
112(c)
25
10
13
46
1,003
(a) Piedmont owns the Cardinal, Pine Needle and Hardy Storage investments.
(b) Duke Energy includes purchase accounting adjustments related to Piedmont.
(c) Sabal Trail returned capital of $112 million during the year ended December 31, 2018.
156
Duke Energy recorded OTTIs of the Constitution investment within
Equity in earnings of unconsolidated affiliates on Duke Energy’s Consolidated
Statements of Operations of $25 million and $55 million for the years ended
December 31, 2019, and 2018, respectively. The current year charge resulted
in the full write-down of Duke Energy’s investment in Constitution. The
impairments were primarily due to the continued delay in resolving project
uncertainty through the courts and regulatory bodies, as well as recent pricing
concerns between the customers and owners. For additional information on
the Constitution investment, see Note 4.
Other
Duke Energy owns a 17.5% indirect interest in NMC, which owns and
operates a methanol and MTBE business in Jubail, Saudi Arabia. Duke Energy’s
economic ownership interest decreased from 25% to 17.5% with the successful
startup of NMC’s polyacetal production facility in 2017. Duke Energy retains
25% of the board representation and voting rights of NMC.
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) 14. RELATED PARTY TRANSACTIONS
The Subsidiary Registrants engage in related party transactions in
accordance with the applicable state and federal commission regulations. Refer
to the Consolidated Balance Sheets of the Subsidiary Registrants for balances
due to or due from related parties. Material amounts related to transactions
with related parties included in the Consolidated Statements of Operations and
Comprehensive Income are presented in the following table.
(in millions)
Duke Energy Carolinas
Corporate governance and shared service expenses(a)
Indemnification coverages(b)
Joint Dispatch Agreement (JDA) revenue(c)
JDA expense(c)
Intercompany natural gas purchases(d)
Progress Energy
Corporate governance and shared service expenses(a)
Indemnification coverages(b)
JDA revenue(c)
JDA expense(c)
Intercompany natural gas purchases(d)
Duke Energy Progress
Corporate governance and shared service expenses(a)
Indemnification coverages(b)
JDA revenue(c)
JDA expense(c)
Intercompany natural gas purchases(d)
Duke Energy Florida
Corporate governance and shared service expenses(a)
Indemnification coverages(b)
Duke Energy Ohio
Corporate governance and shared service expenses(a)
Indemnification coverages(b)
Duke Energy Indiana
Corporate governance and shared service expenses(a)
Indemnification coverages(b)
Intercompany Income Taxes
Years Ended December 31,
2019
2018
2017
$ 841 $ 985 $ 858
23
49
145
9
20
60
186
15
22
84
207
15
$ 778 $ 906 $ 736
38
145
49
77
37
186
60
76
34
207
84
78
$ 462 $ 577 $ 438
15
145
49
77
15
186
60
76
13
207
84
78
$ 316 $ 329 $ 298
23
22
21
$ 354 $ 374 $ 363
5
4
5
$ 412 $ 405 $ 370
8
7
7
(in millions)
Piedmont
Corporate governance and shared service expenses(a)
Indemnification coverages(b)
Intercompany natural gas sales(d)
Natural gas storage and transportation costs(e)
Years Ended December 31,
2019
2018
2017
$ 138 $ 170 $
3
91
23
2
93
25
50
2
86
25
(a) The Subsidiary Registrants are charged their proportionate share of corporate governance and other shared
services costs, primarily related to human resources, employee benefits, information technology, legal and
accounting fees, as well as other third-party costs. These amounts are primarily recorded in Operation,
maintenance and other on the Consolidated Statements of Operations and Comprehensive Income.
(b) The Subsidiary Registrants incur expenses related to certain indemnification coverages through Bison,
Duke Energy’s wholly owned captive insurance subsidiary. These expenses are recorded in Operation,
maintenance and other on the Consolidated Statements of Operations and Comprehensive Income.
(c) Duke Energy Carolinas and Duke Energy Progress participate in a JDA, which allows the collective dispatch
of power plants between the service territories to reduce customer rates. Revenues from the sale of power
and expenses from the purchase of power pursuant to the JDA are recorded in Operating Revenues and
Fuel used in electric generation and purchased power, respectively, on the Consolidated Statements of
Operations and Comprehensive Income.
(d) Piedmont provides long-term natural gas delivery service to certain Duke Energy Carolinas and Duke
Energy Progress natural gas-fired generation facilities. Piedmont records the sales in Operating Revenues,
and Duke Energy Carolinas and Duke Energy Progress record the related purchases as a component of
Fuel used in electric generation and purchased power on their respective Consolidated Statements of
Operations and Comprehensive Income. These intercompany revenues and expenses are eliminated in
consolidation.
(e) Piedmont has related party transactions as a customer of its equity method investments in Pine Needle,
Hardy Storage, and Cardinal natural gas storage and transportation facilities. These expenses are included
in Cost of natural gas on Piedmont’s Consolidated Statements of Operations and Comprehensive Income.
In addition to the amounts presented above, the Subsidiary Registrants
have other affiliate transactions, including rental of office space, participation
in a money pool arrangement, other operational transactions and their
proportionate share of certain charged expenses. See Note 7 for more
information regarding money pool. These transactions of the Subsidiary
Registrants are incurred in the ordinary course of business and are eliminated
in consolidation.
As discussed in Note 18, 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.
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.
(in millions)
December 31, 2019
Intercompany income tax receivable
Intercompany income tax payable
December 31, 2018
Intercompany income tax receivable
Intercompany income tax payable
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
$ —
5
$
52
—
$125
—
$ 47
—
$ 28
—
$ —
2
$
9
—
$ 29
—
$ —
16
$ —
3
$ 28
—
$
8
—
$ 13
—
$ —
45
157
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) 15. DERIVATIVES AND HEDGING
The Duke Energy Registrants use commodity and interest rate contracts
to manage commodity price risk and interest rate risk. The primary use of
commodity derivatives is to hedge the generation portfolio against changes in
the prices of electricity and natural gas. Piedmont enters into natural gas supply
contracts to provide diversification, reliability and natural gas cost benefits to
its customers. Interest rate derivatives are used to manage interest rate risk
associated with borrowings.
All derivative instruments not identified as NPNS are recorded at fair
value as assets or liabilities on the Consolidated Balance Sheets. Cash
collateral related to derivative instruments executed under master netting
arrangements is offset against the collateralized derivatives on the Consolidated
Balance Sheets. The cash impacts of settled derivatives are recorded as
operating activities on the Consolidated Statements of Cash Flows.
Cash Flow Hedges
For a derivative designated as hedging the exposure to variable cash
flows of a future transaction, referred to as a cash flow hedge, the effective
portion of the derivative’s gain or loss is initially reported as a component of
other comprehensive income and subsequently reclassified into earnings once
the future transaction impacts earnings. Amounts for interest rate contracts are
reclassified to earnings as interest expense over the term of the related debt.
Gains and losses reclassified out of AOCI for the years ended December 31,
2019, 2018 and 2017 were not material. Duke Energy’s interest rate derivatives
designated as hedges include interest rate swaps used to hedge existing debt
within the Commercial Renewables business and forward-starting interest rate
swaps not accounted for under regulatory accounting.
INTEREST RATE RISK
Undesignated Contracts
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.
Undesignated contracts primarily include contracts not designated as a
hedge because they are accounted for under regulatory accounting or contracts
that do not qualify for hedge accounting.
Duke Energy’s interest rate swaps for its regulated operations employ
regulatory accounting. With regulatory accounting, the mark-to-market gains or
losses on the swaps are deferred as regulatory liabilities or regulatory assets,
respectively. Regulatory assets and liabilities are amortized consistent with the
treatment of the related costs in the ratemaking process. The accrual of interest
on the swaps is recorded as Interest Expense on the Duke Energy Registrant’s
Consolidated Statements of Operations and Comprehensive Income.
The following tables show notional amounts of outstanding derivatives related to interest rate risk.
(in millions)
Cash flow hedges
Undesignated contracts
Total notional amount(a)
(in millions)
Cash flow hedges(a)
Undesignated contracts
Total notional amount
Duke
Energy
993
1,277
2,270
Duke
Energy
923
1,721
2,644
$
$
$
$
Duke Energy
Carolinas
$
$
—
450
450
Duke Energy
Carolinas
$
$
—
300
300
December 31, 2019
Progress
Energy
Duke Energy
Progress
Duke Energy
Florida
Duke Energy
Ohio
—
800
800
$
$
—
250
250
$
$
—
550
550
$ —
27
$
27
December 31, 2018
Progress
Energy
Duke Energy
Progress
Duke Energy
Florida
Duke Energy
Ohio
—
1,200
1,200
$
$
—
650
650
$
$
—
550
550
$ —
27
$
27
$
$
$
$
(a) Duke Energy includes amounts related to consolidated VIEs of $693 million in cash flow hedges as of December 31, 2019, and $422 million in cash flow hedges and $194 million in undesignated contracts as of December 31, 2018.
COMMODITY PRICE RISK
The Duke Energy Registrants are exposed to the impact of changes in
the prices of electricity purchased and sold in bulk power markets and coal
and natural gas purchases, including Piedmont’s natural gas supply contracts.
Exposure to commodity price risk is influenced by a number of factors including
the term of contracts, the liquidity of markets and delivery locations. For
the Subsidiary Registrants, bulk power electricity and coal and natural gas
purchases flow through fuel adjustment clauses, formula based contracts or
other cost sharing mechanisms. Differences between the costs included in rates
and the incurred costs, including undesignated derivative contracts, are largely
deferred as regulatory assets or regulatory liabilities. Piedmont policies allow for
the use of financial instruments to hedge commodity price risks. The strategy
and objective of these hedging programs are to use the financial instruments to
reduce gas cost volatility for customers.
158
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued)
Volumes
The tables below include volumes of outstanding commodity derivatives. Amounts disclosed represent the absolute value of notional volumes of commodity
contracts excluding NPNS. The Duke Energy Registrants have netted contractual amounts where offsetting purchase and sale contracts exist with identical delivery
locations and times of delivery. Where all commodity positions are perfectly offset, no quantities are shown.
December 31, 2019
Duke Energy
Carolinas
Progress
Energy
Duke Energy
Progress
Duke Energy
Florida
Duke Energy
Ohio
Duke Energy
Indiana
—
130
—
160
—
160
—
—
1,887
—
13,971
3
December 31, 2018
Duke Energy
Carolinas
Progress
Energy
Duke Energy
Progress
Duke Energy
Florida
Duke Energy
Ohio
Duke Energy
Indiana
—
121
—
169
—
166
—
3
1,786
—
13,500
1
Duke
Energy
15,858
704
Duke
Energy
15,286
739
Piedmont
—
411
Piedmont
—
448
Electricity (GWh)
Natural gas (millions of Dth)
Electricity (GWh)
Natural gas (millions of Dth)
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 4 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 December 31, 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 on the options are deferred as regulatory
liabilities or regulatory assets, respectively.
LOCATION AND FAIR VALUE OF DERIVATIVE ASSETS AND LIABILITIES RECOGNIZED IN THE CONSOLIDATED BALANCE SHEETS
The following tables show the fair value and balance sheet location of derivative instruments. Although derivatives subject to master netting arrangements are
netted on the Consolidated Balance Sheets, the fair values presented below are shown gross and cash collateral on the derivatives has not been netted against the
fair values shown.
Derivative Assets
(in millions)
Commodity Contracts
Not Designated as Hedging Instruments
Current
Noncurrent
Total Derivative Assets – Commodity Contracts
Interest Rate Contracts
Not Designated as Hedging Instruments
Current
Total Derivative Assets – Interest Rate Contracts
Equity Securities Contracts
Not Designated as Hedging Instruments
Current
Total Derivative Assets – Equity Securities Contracts
Total Derivative Assets
Duke
Energy
Duke Energy
Carolinas
Progress
Energy
Duke Energy
Progress
Duke Energy
Florida
Duke Energy
Ohio
Duke Energy
Indiana
Piedmont
December 31, 2019
$ —
—
$ —
$ —
$ —
—
$ —
$ —
$ —
—
$ —
$
$
$
$
6
6
1
1
7
$
$
3
1
4
$ —
$ —
—
$ —
4
$
$
$
13
—
13
$ —
$ —
—
$ —
13
$
$
$
1
—
1
$ —
$ —
—
$ —
1
$
$ 17
1
$ 18
$
$
6
6
1
$
1
$ 25
$ —
—
$ —
$
$
$
$
6
6
1
1
7
$ —
—
$ —
$ —
$ —
—
$ —
$ —
159
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) Derivative Liabilities
(in millions)
Commodity Contracts
Not Designated as Hedging Instruments
Current
Noncurrent
Total Derivative Liabilities – Commodity Contracts
Interest Rate Contracts
Designated as Hedging Instruments
Current
Noncurrent
Not Designated as Hedging Instruments
Current
Noncurrent
Total Derivative Liabilities – Interest Rate Contracts
Equity Securities Contracts
Not Designated as Hedging Instruments
Current
Total Derivative Liabilities – Equity Security Contracts
Total Derivative Liabilities
Derivative Assets
(in millions)
Commodity Contracts
Not Designated as Hedging Instruments
Current
Noncurrent
Total Derivative Assets – Commodity Contracts
Interest Rate Contracts
Designated as Hedging Instruments
Current
Noncurrent
Not Designated as Hedging Instruments
Current
Noncurrent
Total Derivative Assets – Interest Rate Contracts
Total Derivative Assets
Duke
Energy
Duke Energy
Carolinas
Progress
Energy
December 31, 2019
Duke Energy
Florida
Duke Energy
Progress
Duke Energy
Ohio
Duke Energy
Indiana
Piedmont
$ 67
156
$ 223
$ 19
21
8
5
$ 53
24
$ 24
$ 300
$
$
33
10
43
$ —
—
6
—
6
$
—
$ —
49
$
$ 26
37
$ 63
$ —
—
1
—
1
$
24
$ 24
$ 88
$ 26
22
$ 48
$ —
—
1
—
1
$
—
$ —
$ 49
$ —
—
$ —
$ —
—
—
—
$ —
24
$ 24
$ 24
$ —
—
$ —
$ —
—
1
5
6
$
—
$ —
6
$
$
$
1
—
1
$ —
—
—
—
$ —
—
$ —
1
$
$
7
110
$ 117
$ —
—
—
—
$ —
—
$ —
$ 117
Duke
Energy
Duke Energy
Carolinas
Progress
Energy
December 31, 2018
Duke Energy
Florida
Duke Energy
Progress
Duke Energy
Ohio
Duke Energy
Indiana
Piedmont
$ 35
4
$ 39
$
1
3
2
12
$ 18
$ 57
$
$
2
1
3
$ —
—
—
—
$ —
3
$
$
$
2
2
4
$ —
—
—
—
$ —
4
$
$
$
2
2
4
$ —
—
—
—
$ —
4
$
$ —
—
$ —
$ —
—
—
—
$ —
$ —
$
$
6
—
6
$ —
—
—
—
$ —
6
$
$
$
23
—
23
$ —
—
—
—
$ —
23
$
$
$
3
—
3
$ —
—
—
—
$ —
3
$
Derivative Liabilities
December 31, 2018
(in millions)
Commodity Contracts
Not Designated as Hedging Instruments
Current
Noncurrent
Total Derivative Liabilities – Commodity Contracts
Interest Rate Contracts
Designated as Hedging Instruments
Current
Noncurrent
Not Designated as Hedging Instruments
Current
Noncurrent
Total Derivative Liabilities – Interest Rate Contracts
Total Derivative Liabilities
Duke
Energy
Duke Energy
Carolinas
Progress
Energy
Duke Energy
Progress
Duke Energy
Florida
Duke Energy
Ohio
Duke Energy
Indiana
Piedmont
$
33
158
$ 191
$
12
6
23
10
$
51
$ 242
$
$
14
10
24
$ —
—
9
—
9
33
$
$
$
$
10
15
25
$ —
—
13
6
19
44
$
$
160
$
$
5
6
11
$ —
—
11
5
16
27
$
$
$
$
6
—
6
$ —
—
2
1
3
9
$
$
$ —
—
$ —
$ —
—
1
4
5
5
$
$
$ —
—
$ —
$ —
—
—
—
$ —
$ —
$
8
133
$ 141
$ —
—
—
—
$ —
$ 141
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) OFFSETTING ASSETS AND LIABILITIES
The following tables present the line items on the Consolidated Balance Sheets where derivatives are reported. Substantially all of Duke Energy’s outstanding
derivative contracts are subject to enforceable master netting arrangements. The gross amounts offset in the tables below show the effect of these netting
arrangements on financial position and include collateral posted to offset the net position. The amounts shown are calculated by counterparty. Accounts receivable or
accounts payable may also be available to offset exposures in the event of bankruptcy. These amounts are not included in the tables below.
Derivative Assets
(in millions)
Duke
Energy
Duke Energy
Carolinas
Progress
Energy
Duke Energy
Progress
Duke Energy
Florida
Duke Energy
Ohio
Duke Energy
Indiana
Piedmont
December 31, 2019
Current
Gross amounts recognized
Gross amounts offset
Net amounts presented in Current Assets: Other
Noncurrent
Gross amounts recognized
Gross amounts offset
Net amounts presented in Other Noncurrent Assets: Other
$ 24
(1)
$ 23
$
$
1
—
1
$ —
—
$ —
$ —
—
$ —
$
$
7
(1)
6
$ —
—
$ —
$ —
—
$ —
$ —
—
$ —
$
$
7
(1)
6
$ —
—
$ —
$
$
$
$
3
—
3
1
—
1
$ 13
—
$ 13
$ —
—
$ —
$
$
1
—
1
$ —
—
$ —
Derivative Liabilities
(in millions)
Duke
Energy
Duke Energy
Carolinas
Progress
Energy
Duke Energy
Progress
Duke Energy
Florida
Duke Energy
Ohio
Duke Energy
Indiana
Piedmont
December 31, 2019
Current
Gross amounts recognized
Gross amounts offset
Net amounts presented in Current Liabilities: Other
Noncurrent
Gross amounts recognized
Gross amounts offset
$ 118
(24)
$ 94
$ 182
—
Net amounts presented in Other Noncurrent Liabilities: Other
$ 182
$ 39
—
$ 39
$ 10
—
$ 10
$ 51
(24)
$ 27
$ 37
—
$ 37
$ 27
—
$ 27
$ 22
—
$ 22
$ 24
(24)
$ —
$ —
—
$ —
$
$
$
$
1
—
1
5
—
5
$
$
1
—
1
$ —
—
$ —
$
$
7
—
7
$ 110
—
$ 110
Derivative Assets
(in millions)
Duke
Energy
Duke Energy
Carolinas
Progress
Energy
Duke Energy
Progress
Duke Energy
Florida
Duke Energy
Ohio
Duke Energy
Indiana
Piedmont
December 31, 2018
Current
Gross amounts recognized
Gross amounts offset
Net amounts presented in Current Assets: Other
Noncurrent
Gross amounts recognized
Gross amounts offset
Net amounts presented in Other Noncurrent Assets: Other
$
$
$
$
38
(3)
35
19
(3)
16
$
2
(2)
$ —
$
1
(1)
$ —
$
2
(2)
$ —
$
2
(2)
$ —
$
2
(2)
$ —
$
2
(2)
$ —
$ —
—
$ —
$ —
—
$ —
$
$
6
—
6
$ —
—
$ —
$
$
23
—
23
$ —
—
$ —
$
$
3
—
3
$ —
—
$ —
Derivative Liabilities
(in millions)
Duke
Energy
Duke Energy
Carolinas
Progress
Energy
Duke Energy
Progress
Duke Energy
Florida
Duke Energy
Ohio
Duke Energy
Indiana
Piedmont
December 31, 2018
Current
Gross amounts recognized
Gross amounts offset
Net amounts presented in Current Liabilities: Other
Noncurrent
Gross amounts recognized
Gross amounts offset
$
$
68
(4)
64
$ 174
(3)
Net amounts presented in Other Noncurrent Liabilities: Other
$ 171
$
$
$
$
23
(2)
21
10
(1)
9
$
$
$
$
23
(2)
21
21
(2)
19
161
$
$
$
$
16
(2)
14
11
(2)
9
$
$
$
$
8
—
8
1
—
1
$
$
$
$
1
—
1
4
—
4
$ —
—
$ —
$ —
—
$ —
$
$
8
—
8
$ 133
—
$ 133
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) 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.
(in millions)
Aggregate fair value of derivatives in a net liability position
Fair value of collateral already posted
Additional cash collateral or letters of credit in the event credit-risk-related contingent features were triggered
(in millions)
Aggregate fair value of derivatives in a net liability position
Fair value of collateral already posted
Additional cash collateral or letters of credit in the event credit-risk-related contingent features were triggered
December 31, 2019
Duke
Energy
Duke Energy
Carolinas
Progress
Energy
Duke Energy
Progress
$
$
79
—
79
$
35
—
35
$
44
—
44
44
—
44
December 31, 2018
Duke
Energy
Duke Energy
Carolinas
Progress
Energy
Duke Energy
Progress
$
$
44
—
44
$
19
—
19
$
25
—
25
25
—
25
The Duke Energy Registrants have elected to offset cash collateral and fair values of derivatives. For amounts to be netted, the derivative and cash collateral
must be executed with the same counterparty under the same master netting arrangement.
16.
INVESTMENTS IN DEBT AND EQUITY SECURITIES
Duke Energy’s investments in debt and equity securities are primarily
comprised of investments held in (i) the NDTF at Duke Energy Carolinas, Duke
Energy Progress and Duke Energy Florida, (ii) the grantor trusts at Duke Energy
Progress, Duke Energy Florida and Duke Energy Indiana related to OPEB plans
and (iii) Bison. The Duke Energy Registrants classify investments in debt
securities as AFS and investments in equity securities as FV-NI.
For investments in debt securities classified as AFS, the unrealized gains
and losses are included in other comprehensive income until realized, at which
time, they are reported though 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.
162
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) Investment Trusts
Other AFS Securities
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 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.
Unrealized gains and losses on all other AFS securities are included in
other comprehensive income until realized, unless it is determined the carrying
value of an investment is other-than-temporarily impaired. The Duke Energy
Registrants analyze all investment holdings each reporting period to determine
whether a decline in fair value should be considered other-than-temporary. If
an OTTI exists, the unrealized credit loss is included in earnings. There were no
material credit losses as of December 31, 2019, and 2018.
Other Investments amounts are recorded in Other within Other Noncurrent
Assets on the 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.
December 31, 2019
December 31, 2018
Gross Unrealized
Holding Gains
Gross Unrealized
Holding Losses
Estimated
Fair Value
Gross Unrealized
Holding Gains
Gross Unrealized
Holding Losses
Estimated
Fair Value
(in millions)
NDTF
Cash and cash equivalents
Equity securities
Corporate debt securities
Municipal bonds
U.S. government bonds
Other debt securities
Total NDTF Investments
Other Investments
Cash and cash equivalents
Equity securities
Corporate debt securities
Municipal bonds
U.S. government bonds
Other debt securities
Total Other Investments
Total Investments
$ —
3,523
37
13
33
3
$
3,609
$ —
57
3
4
2
—
$
$
66
3,675
The table below summarizes the maturity date for debt securities.
(in millions)
Due in one year or less
Due after one through five years
Due after five through 10 years
Due after 10 years
Total
$
101
5,661
603
368
1,256
141
$ 8,130
$
$
52
122
67
94
41
56
432
$ 8,562
$ —
2,402
4
1
14
—
$ 2,421
$ —
36
—
—
1
—
$
37
$ 2,458
$ —
95
13
4
12
2
$ 126
$ —
1
2
1
—
1
$
5
$ 131
$
88
4,475
566
353
1,076
148
$ 6,706
$
22
99
60
85
45
58
$
369
$ 7,075
December 31, 2019
$
372
550
452
1,252
$ 2,626
$ —
55
1
—
1
—
$
57
$ —
—
—
—
—
—
$ —
$
57
163
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the years ended December 31,
2019, and 2018, and from sales of AFS securities for the year ended December 31, 2017, were as follows.
(in millions)
FV-NI:
Realized gains
Realized losses
AFS:
Realized gains
Realized losses
(in millions)
Realized gains
Realized losses
DUKE ENERGY CAROLINAS
Years Ended December 31,
2019
2018
$
172
151
94
67
$ 168
126
22
51
Year Ended December 31,
2017
$ 202
160
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.
(in millions)
NDTF
Cash and cash equivalents
Equity securities
Corporate debt securities
Municipal bonds
U.S. government bonds
Other debt securities
Total NDTF Investments
December 31, 2019
December 31, 2018
Gross Unrealized
Holding Gains
Gross Unrealized
Holding Losses
Estimated
Fair Value
Gross Unrealized
Holding Gains
Gross Unrealized
Holding Losses
Estimated
Fair Value
$
$
—
1,914
21
3
16
3
1,957
$
$
—
8
1
—
1
—
10
$
$
21
3,154
361
96
578
137
4,347
$
$
—
1,309
2
—
5
—
1,316
$
$
— $
54
9
1
8
2
74
$
29
2,484
341
81
475
143
3,553
The table below summarizes the maturity date for debt securities.
(in millions)
Due in one year or less
Due after one through five years
Due after five through 10 years
Due after 10 years
Total
December 31, 2019
$
51
253
181
687
$ 1,172
164
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the years ended December 31,
2019, and 2018, and from sales of AFS securities for the year ended December 31, 2017, were as follows.
(in millions)
FV-NI:
Realized gains
Realized losses
AFS:
Realized gains
Realized losses
(in millions)
Realized gains
Realized losses
PROGRESS ENERGY
Years Ended December 31,
2019
2018
$
113
107
55
38
$
89
73
19
35
Year Ended December 31,
2017
$ 135
103
The following table presents the estimated fair value of investments in debt and equity securities; equity investments are classified as FV-NI and debt
investments are classified as AFS.
December 31, 2019
December 31, 2018
Gross Unrealized
Holding Gains
Gross Unrealized
Holding Losses
Estimated
Fair Value
Gross Unrealized
Holding Gains
Gross Unrealized
Holding Losses
Estimated
Fair Value
(in millions)
NDTF
Cash and cash equivalents
Equity securities
Corporate debt securities
Municipal bonds
U.S. government bonds
Other debt securities
Total NDTF Investments
Other Investments
Cash and cash equivalents
Municipal bonds
Total Other Investments
Total Investments
$
$
$
$
$
—
1,609
16
10
17
—
1,652
—
3
3
1,655
$ —
47
—
—
—
—
$
47
$ —
—
$ —
$
47
$
$
$
$
$
80
2,507
242
272
678
4
3,783
49
51
100
3,883
$
$
$
$
$
—
1,093
2
1
9
—
1,105
—
—
—
1,105
$ —
41
4
3
4
—
$
52
$ —
—
$ —
$
52
$
$
$
$
$
59
1,991
225
272
601
5
3,153
17
47
64
3,217
December 31, 2019
$
311
256
211
469
$ 1,247
The table below summarizes the maturity date for debt securities.
(in millions)
Due in one year or less
Due after one through five years
Due after five through 10 years
Due after 10 years
Total
165
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the years ended December 31,
2019, and 2018, and from sales of AFS securities for the year ended December 31, 2017, were as follows.
(in millions)
FV-NI:
Realized gains
Realized losses
AFS:
Realized gains
Realized losses
(in millions)
Realized gains
Realized losses
DUKE ENERGY PROGRESS
Years Ended December 31,
2019
2018
$
59
44
36
29
$
79
53
3
15
Year Ended December 31,
$
2017
65
56
The following table presents the estimated fair value of investments in debt and equity securities; equity investments are classified as FV-NI and debt
investments are classified as AFS.
December 31, 2019
December 31, 2018
Gross Unrealized
Holding Gains
Gross Unrealized
Holding Losses
Estimated
Fair Value
Gross Unrealized
Holding Gains
Gross Unrealized
Holding Losses
Estimated
Fair Value
(in millions)
NDTF
Cash and cash equivalents
Equity securities
Corporate debt securities
Municipal bonds
U.S. government bonds
Other debt securities
Total NDTF Investments
Other Investments
Cash and cash equivalents
Total Other Investments
Total Investments
$
$
$
$
$
—
1,258
16
10
16
—
1,300
—
—
1,300
$
$
$
$
$
—
21
—
—
—
—
21
—
—
21
$
$
$
$
$
53
2,077
242
272
403
4
3,051
2
2
3,053
$
$
$
$
$
—
833
2
1
6
—
842
—
—
842
$
$
$
$
$
— $
30
3
3
3
—
39
$
— $
— $
39
$
46
1,588
171
271
415
3
2,494
6
6
2,500
December 31, 2019
$
34
247
204
436
$ 921
The table below summarizes the maturity date for debt securities.
(in millions)
Due in one year or less
Due after one through five years
Due after five through 10 years
Due after 10 years
Total
166
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the years ended December 31, 2019,
and 2018, and from sales of AFS securities for the year ended December 31, 2017, were as follows.
(in millions)
FV-NI:
Realized gains
Realized losses
AFS:
Realized gains
Realized losses
(in millions)
Realized gains
Realized losses
DUKE ENERGY FLORIDA
Years Ended December 31,
2019
2018
$
38
33
7
5
$
68
48
2
10
Year Ended December 31,
$
2017
54
48
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.
(in millions)
NDTF
Cash and cash equivalents
Equity securities
Corporate debt securities
Municipal bonds
U.S. government bonds
Other debt securities
Total NDTF Investments(a)
Other Investments
Cash and cash equivalents
Municipal bonds
Total Other Investments
Total Investments
December 31, 2019
December 31, 2018
Gross Unrealized
Holding Gains
Gross Unrealized
Holding Losses
Estimated
Fair Value
Gross Unrealized
Holding Gains
Gross Unrealized
Holding Losses
Estimated
Fair Value
$
$
$
$
$
—
351
—
—
1
—
352
—
3
3
355
$ —
26
—
—
—
—
$
26
$ —
—
$ —
$
26
$
$
$
$
$
27
430
—
—
275
—
732
4
51
55
787
$
$
$
$
$
—
260
—
—
3
—
263
—
—
—
263
$ —
11
1
—
1
—
$
13
$ —
—
$ —
$
13
$
$
$
$
$
13
403
54
1
186
2
659
1
47
48
707
(a) During the year ended December 31, 2019, Duke Energy Florida continued to receive reimbursements from the NDTF for costs related to ongoing decommissioning activity of the Crystal River Unit 3.
The table below summarizes the maturity date for debt securities.
(in millions)
Due in one year or less
Due after one through five years
Due after five through 10 years
Due after 10 years
Total
December 31, 2019
$ 277
9
7
33
$ 326
167
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the years ended December 31, 2019,
and 2018, and from sales of AFS securities for the year ended December 31, 2017, were as follows.
(in millions)
FV-NI:
Realized gains
Realized losses
AFS:
Realized gains
Realized losses
(in millions)
Realized gains
Realized losses
DUKE ENERGY INDIANA
Years Ended December 31,
2019
2018
$
21
11
29
24
$
11
5
1
5
Year Ended December 31,
$
2017
11
8
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.
(in millions)
Investments
Equity securities
Corporate debt securities
Municipal bonds
U.S. government bonds
Total Investments
December 31, 2019
December 31, 2018
Gross Unrealized
Holding Gains
Gross Unrealized
Holding Losses
Estimated
Fair Value
Gross Unrealized
Holding Gains
Gross Unrealized
Holding Losses
Estimated
Fair Value
$
$
43
—
1
—
44
$
$
— $
—
—
—
— $
81
6
36
2
125
$
$
29
—
—
—
29
$
$
—
—
1
—
1
$
$
67
8
33
—
108
The table below summarizes the maturity date for debt securities.
(in millions)
Due in one year or less
Due after one through five years
Due after five through 10 years
Due after 10 years
Total
December 31, 2019
$ 4
16
7
17
$44
Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the year ended December 31,
2019, and 2018, and from sales of AFS securities for the year ended December 31, 2017, were insignificant.
168
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) 17. 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 NAV per share practical expedient. The net asset value is derived
based on the investment cost, less any impairment, plus or minus changes
resulting from observable price changes for an identical or similar investment of
the same issuer.
Fair value accounting guidance permits entities to elect to measure
certain financial instruments that are not required to be accounted for at fair
value, such as equity method investments or the company’s own debt, at fair
value. The Duke Energy Registrants have not elected to record any of these
items at fair value.
Valuation methods of the primary fair value measurements disclosed
below are as follows.
Investments in equity securities
The majority of investments in equity securities are valued using Level
1 measurements. Investments in equity securities are typically valued at the
closing price in the principal active market as of the last business day of the
quarter. Principal active markets for equity prices include published exchanges
such as the NYSE and Nasdaq Stock Market. Foreign equity prices are translated
from their trading currency using the currency exchange rate in effect at the
close of the principal active market. There was no after-hours market activity
that was required to be reflected in the reported fair value measurements.
DUKE ENERGY
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. If
forward price curves are not observable for the full term of the contract and the
unobservable period had more than an insignificant impact on the valuation, the
commodity derivative is classified as Level 3. In isolation, increases (decreases)
in natural gas forward prices result in favorable (unfavorable) fair value
adjustments for natural gas purchase contracts; and increases (decreases) in
electricity forward prices result in unfavorable (favorable) fair value adjustments
for electricity sales contracts. Duke Energy regularly evaluates and validates
pricing inputs used to estimate the fair value of natural gas commodity contracts
by a market participant price verification procedure. This procedure provides
a comparison of internal forward commodity curves to market participant
generated curves.
Interest rate derivatives
Most over-the-counter interest rate contract derivatives are valued using
financial models that utilize observable inputs for similar instruments and
are classified as Level 2. Inputs include forward interest rate curves, notional
amounts, interest rates and credit quality of the counterparties.
Other fair value considerations
See Note 12 for a discussion of the valuation of goodwill and intangible
assets.
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Consolidated Balance Sheets.
Derivative amounts in the tables below for all Duke Energy Registrants exclude cash collateral, which is disclosed in Note 15. See Note 16 for additional information
related to investments by major security type for the Duke Energy Registrants.
(in millions)
NDTF equity securities
NDTF debt securities
Other equity securities
Other debt securities
Derivative assets
Total assets
NDTF equity security contracts
Derivative liabilities
Net assets (liabilities)
December 31, 2019
Total Fair Value
Level 1
Level 2
Level 3
Not Categorized
$ 5,684
2,469
122
310
25
8,610
(23)
(277)
$ 5,633
826
122
91
3
6,675
$ —
1,643
—
219
7
1,869
—
(15)
(23)
(145)
$ —
—
—
—
15
15
—
(117)
$ 8,310
$ 6,660
$ 1,701
$ (102)
$ 51
—
—
—
—
51
—
—
$ 51
169
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) (in millions)
NDTF equity securities
NDTF debt securities
Other equity securities
Other debt securities
Derivative assets
Total assets
Derivative liabilities
Net assets (liabilities)
December 31, 2018
Total Fair Value
Level 1
Level 2
Level 3
Not Categorized
$ 4,475
2,231
99
270
57
7,132
(242)
$ 4,410
576
99
67
4
$ —
1,655
—
203
25
5,156
(11)
1,883
(90)
$ —
—
—
—
28
28
(141)
$
65
—
—
—
—
65
—
$ 6,890
$ 5,145
$ 1,793
$ (113)
$
65
The following table provides reconciliations of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements.
(in millions)
Balance at beginning of period
Purchases, sales, issuances and settlements:
Purchases
Settlements
Total gains included on the Consolidated Balance Sheet
Balance at end of period
DUKE ENERGY CAROLINAS
December 31, 2019
December 31, 2018
Derivatives (net)
Derivatives (net)
$ (113)
$ (114)
37
(44)
18
57
(57)
1
$ (102)
$ (113)
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Consolidated Balance Sheets.
(in millions)
NDTF equity securities
NDTF debt securities
Total assets
Derivative liabilities
Net assets
(in millions)
NDTF equity securities
NDTF debt securities
Derivative assets
Total assets
Derivative liabilities
Net assets
December 31, 2019
Total Fair Value
Level 1
Level 2
Not Categorized
$ 3,154
1,193
4,347
$ 3,103
227
3,330
$ —
966
966
(49)
—
(49)
$ 4,298
$ 3,330
$ 917
$
$
51
—
51
—
51
December 31, 2018
Total Fair Value
Level 1
Level 2
Not Categorized
$ 2,484
1,069
3
3,556
(33)
$ 2,419
149
—
2,568
—
$ —
920
3
923
(33)
$ 3,523
$ 2,568
$ 890
$ 65
—
—
65
—
$ 65
170
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) PROGRESS ENERGY
The following table provides recorded balances for assets and liabilities measured at fair value on a recurring basis on the Consolidated Balance Sheets.
(in millions)
NDTF equity securities
NDTF debt securities
Other debt securities
Derivative assets
Total assets
NDTF equity security contracts
Derivative liabilities
Net assets
DUKE ENERGY PROGRESS
December 31, 2019
December 31, 2018
Total Fair Value
Level 1
Level 2
Total Fair Value
Level 1
Level 2
$ 2,530
1,276
100
7
3,913
(23)
(65)
$ 2,530
599
49
—
3,178
—
—
$ —
677
51
7
735
(23)
(65)
$ 1,991
1,162
64
4
3,221
—
(44)
$ 1,991
427
17
—
2,435
—
—
$ —
735
47
4
786
—
(44)
$ 3,825
$ 3,178
$ 647
$ 3,177
$ 2,435
$ 742
The following table provides recorded balances for assets and liabilities measured at fair value on a recurring basis on the Consolidated Balance Sheets.
(in millions)
NDTF equity securities
NDTF debt securities
Other debt securities
Derivative assets
Total assets
Derivative liabilities
Net assets
DUKE ENERGY FLORIDA
December 31, 2019
December 31, 2018
Total Fair Value
Level 1
Level 2
Total Fair Value
Level 1
Level 2
$ 2,077
974
2
—
3,053
(49)
$ 2,077
297
2
—
2,376
—
$ —
677
—
—
677
(49)
$ 1,588
906
6
4
2,504
(27)
$ 1,588
294
6
—
1,888
—
$ —
612
—
4
616
(27)
$ 3,004
$ 2,376
$ 628
$ 2,477
$ 1,888
$ 589
The following table provides recorded balances for assets and liabilities measured at fair value on a recurring basis on the Consolidated Balance Sheets.
(in millions)
NDTF equity securities
NDTF debt securities
Other debt securities
Derivative assets
Total assets
NDTF equity security contracts
Derivative liabilities
Net assets
December 31, 2019
December 31, 2018
Total Fair Value
Level 1
Level 2
Total Fair Value
Level 1
Level 2
$
453
302
55
7
817
(23)
(1)
$
453
302
4
—
759
—
—
$ —
—
51
7
58
(23)
(1)
$
403
256
48
—
707
—
(9)
$
403
133
1
—
537
—
—
$ —
123
47
—
170
—
(9)
$
793
$
759
$
34
$
698
$
537
$ 161
171
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) DUKE ENERGY OHIO
The recorded balances for assets and liabilities measured at fair value on a recurring basis on the Consolidated Balance Sheets were not material at
December 31, 2019, and 2018.
DUKE ENERGY INDIANA
The following table provides recorded balances for assets and liabilities measured at fair value on a recurring basis on the Consolidated Balance Sheets.
(in millions)
Other equity securities
Other debt securities
Derivative assets
Total assets
Derivative liabilities
Total assets
December 31, 2019
December 31, 2018
Total Fair Value
Level 1 Level 2 Level 3
Total Fair Value
Level 1 Level 2 Level 3
$ 81
$ 81
$ — $ —
$ 67
$ 67
$ — $ —
44
13
138
(1)
44
—
—
2
83
44
(1) —
—
11
11
—
41
23
131
—
—
1
68
—
41
—
41
—
—
22
22
—
$ 137
$ 82
$ 44
$ 11
$ 131
$ 68
$ 41
$ 22
The following table provides a reconciliation of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements.
(in millions)
Balance at beginning of period
Purchases, sales, issuances and settlements:
Purchases
Settlements
Total losses included on the Consolidated Balance Sheet
Balance at end of period
PIEDMONT
Derivatives (net)
Years Ended December 31,
2019
$ 22
28
(36)
(3)
2018
$ 27
50
(53)
(2)
$ 11
$ 22
The following table provides recorded balances for assets and liabilities measured at fair value on a recurring basis on the Consolidated Balance Sheets.
(in millions)
Derivative assets
Derivative liabilities
Net (liabilities) assets
December 31, 2019
December 31, 2018
Total Fair Value Level 1 Level 3
Total Fair Value
Level 1 Level 3
$
1
(117)
$ (116)
$
$
1 $ —
— (117)
1 $ (117)
$
3
(141)
$ (138)
$
$
3
$ —
— (141)
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.
(in millions)
Balance at beginning of period
Total gains and settlements
Balance at end of period
172
Derivatives (net)
Years Ended December 31,
2019
2018
$(141)
$ (142)
24
1
$(117)
$ (141)
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) QUANTITATIVE INFORMATION ABOUT UNOBSERVABLE INPUTS
The following tables include quantitative information about the Duke Energy Registrants’ derivatives classified as Level 3.
Investment Type
Duke Energy Ohio
FTRs
Duke Energy Indiana
FTRs
Piedmont
Natural gas contracts
Duke Energy
Total Level 3 derivatives
Investment Type
Duke Energy Ohio
FTRs
Duke Energy Indiana
FTRs
Piedmont
Natural gas contracts
Duke Energy
Total Level 3 derivatives
Fair Value
(in millions)
Valuation Technique
Unobservable Input
Range
Weighted
Average
Range
December 31, 2019
$
4
RTO auction pricing
FTR price – per MWh
$ 0.59 — $ 3.47
$
2.07
11
RTO auction pricing
FTR price – per MWh
(0.66) — 9.24
(117)
Discounted cash flow
Forward natural gas curves – price per MMBtu
1.59 — 2.46
1.15
1.91
$ (102)
Fair Value
(in millions)
December 31, 2018
Valuation Technique
Unobservable Input
Range
$
6
RTO auction pricing
FTR price – per MWh
22
RTO auction pricing
FTR price – per MWh
$ 1.19 — $ 4.59
(2.07) — 8.27
(141)
Discounted cash flow
Forward natural gas curves – price per MMBtu
1.87 — 2.95
$ (113)
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.
(in millions)
Duke Energy(a)
Duke Energy Carolinas
Progress Energy
Duke Energy Progress
Duke Energy Florida
Duke Energy Ohio
Duke Energy Indiana
Piedmont
December 31, 2019
December 31, 2018
Book Value
Fair Value
Book Value
Fair Value
$ 58,126
11,900
19,634
9,058
7,987
2,619
4,057
2,384
$ 63,062
13,516
22,291
9,934
9,131
2,964
4,800
2,642
$ 54,529
10,939
18,911
8,204
7,321
2,165
3,782
2,138
$ 54,534
11,471
19,885
8,300
7,742
2,239
4,158
2,180
(a) Book value of long-term debt includes $1.5 billion as of December 31, 2019, and $1.6 billion as of December 31, 2018, of unamortized debt discount and premium, net in purchase accounting adjustments related to the
mergers with Progress Energy and Piedmont that are excluded from fair value of long-term debt.
At both December 31, 2019, and December 31, 2018, fair value of cash and cash equivalents, accounts and notes receivable, accounts payable, notes payable
and commercial paper, and nonrecourse notes payable of VIEs are not materially different from their carrying amounts because of the short-term nature of these
instruments and/or because the stated rates approximate market rates.
173
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) 18. VARIABLE INTEREST ENTITIES
A VIE is an entity that is evaluated for consolidation using more than
a simple analysis of voting control. The analysis to determine whether an
entity is a VIE considers contracts with an entity, credit support for an entity,
the adequacy of the equity investment of an entity and the relationship of
voting power to the amount of equity invested in an entity. This analysis is
performed either upon the creation of a legal entity or upon the occurrence of
an event requiring reevaluation, such as a significant change in an entity’s
assets or activities. A qualitative analysis of control determines the party that
consolidates a VIE. This assessment is based on (i) what party has the power
to direct the activities of the VIE that most significantly impact its economic
performance and (ii) what party has rights to receive benefits or is obligated to
absorb losses that could potentially be significant to the VIE. The analysis of the
party that consolidates a VIE is a continual reassessment.
CONSOLIDATED VIEs
The obligations of the consolidated VIEs discussed in the following
paragraphs are nonrecourse to the Duke Energy Registrants. The registrants
have no requirement to provide liquidity to, purchase assets of or guarantee
performance of these VIEs unless noted in the following paragraphs.
No financial support was provided to any of the consolidated VIEs during
the years ended December 31, 2019, 2018, and 2017, or is expected to be
provided in the future, that was not previously contractually required.
Receivables Financing – DERF/DEPR/DEFR
DERF, DEPR and DEFR are bankruptcy remote, special purpose
subsidiaries of Duke Energy Carolinas, Duke Energy Progress and Duke Energy
Florida, respectively. DERF, DEPR and DEFR are wholly owned LLCs with
separate legal existence from their parent companies, and their assets are not
generally available to creditors of their parent companies. On a revolving basis,
DERF, DEPR and DEFR buy certain accounts receivable arising from the sale of
electricity and related services from their parent companies.
DERF, DEPR and DEFR borrow amounts under credit facilities to buy these
receivables. Borrowing availability from the credit facilities is limited to the
Receivables Financing – Credit Facilities
amount of qualified receivables purchased. The sole source of funds to satisfy
the related debt obligations is cash collections from the receivables. Amounts
borrowed under the credit facilities are reflected on the Consolidated Balance
Sheets as Long-Term Debt.
The most significant activity that impacts the economic performance
of DERF, DEPR and DEFR are the decisions made to manage delinquent
receivables. Duke Energy Carolinas, Duke Energy Progress and Duke Energy
Florida are considered the primary beneficiaries and consolidate DERF, DEPR
and DEFR, respectively, as they make those decisions.
Receivables Financing – CRC
CRC is a bankruptcy remote, special purpose entity indirectly owned by
Duke Energy. On a revolving basis, CRC buys certain accounts receivable arising
from the sale of electricity, natural gas and related services from Duke Energy
Ohio and Duke Energy Indiana. CRC borrows amounts under a credit facility to
buy the receivables from Duke Energy Ohio and Duke Energy Indiana. Borrowing
availability from the credit facility is limited to the amount of qualified receivables
sold to CRC. The sole source of funds to satisfy the related debt obligation is cash
collections from the receivables. Amounts borrowed under the credit facility are
reflected on Duke Energy’s Consolidated Balance Sheets as Long-Term Debt.
The proceeds Duke Energy Ohio and Duke Energy Indiana receive from the
sale of receivables to CRC are approximately 75% cash and 25% in the form of
a subordinated note from CRC. The subordinated note is a retained interest in the
receivables sold. Depending on collection experience, additional equity infusions
to CRC may be required by Duke Energy to maintain a minimum equity balance
of $3 million.
CRC is considered a VIE because (i) equity capitalization is insufficient to
support its operations, (ii) power to direct the activities that most significantly
impact the economic performance of the entity is not held by the equity holder
and (iii) deficiencies in net worth of CRC are funded by Duke Energy. The most
significant activities that impact the economic performance of CRC are decisions
made to manage delinquent receivables. Duke Energy is considered the primary
beneficiary and consolidates CRC as it makes these decisions. Neither Duke
Energy Ohio nor Duke Energy Indiana consolidate CRC.
The following table summarizes the amounts and expiration dates of the credit facilities and associated restricted receivables described above.
(in millions)
Expiration date
Credit facility amount
Amounts borrowed at December 31, 2019
Amounts borrowed at December 31, 2018
Restricted Receivables at December 31, 2019
Restricted Receivables at December 31, 2018
Duke Energy
Duke Energy
Carolinas
Duke Energy
Progress
Duke Energy
Florida
CRC
DERF
DEPR
February 2023 December 2022
$ 475
474
450
642
699
$ 350
350
325
522
564
February 2021
$ 325
325
300
489
547
DEFR
April 2021
$ 250
250
225
336
357
174
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) Nuclear Asset-Recovery Bonds – Duke Energy Florida Project Finance, LLC (DEFPF)
DEFPF is a bankruptcy remote, wholly owned special purpose subsidiary of Duke Energy Florida. DEFPF was formed in 2016 for the sole purpose of issuing
nuclear asset-recovery bonds to finance Duke Energy Florida’s unrecovered regulatory asset related to Crystal River Unit 3.
In 2016, DEFPF issued senior secured bonds and used the proceeds to acquire nuclear asset-recovery property from Duke Energy Florida. The nuclear
asset-recovery property acquired includes the right to impose, bill, collect and adjust a non-bypassable nuclear asset-recovery charge from all Duke Energy Florida
retail customers until the bonds are paid in full and all financing costs have been recovered. The nuclear asset-recovery bonds are secured by the nuclear
asset-recovery property and cash collections from the nuclear asset-recovery charges are the sole source of funds to satisfy the debt obligation. The bondholders
have no recourse to Duke Energy Florida.
DEFPF is considered a VIE primarily because the equity capitalization is insufficient to support its operations. Duke Energy Florida has the power to direct the
significant activities of the VIE as described above and therefore Duke Energy Florida is considered the primary beneficiary and consolidates DEFPF.
The following table summarizes the impact of DEFPF on Duke Energy Florida’s Consolidated Balance Sheets.
(in millions)
Receivables of VIEs
Regulatory Assets: Current
Current Assets: Other
Other Noncurrent Assets: Regulatory assets
Current Liabilities: Other
Current maturities of long-term debt
Long-Term Debt
Commercial Renewables
December 31, 2019
December 31, 2018
$
5
52
39
989
10
54
1,057
$
5
52
39
1,041
10
53
1,111
Certain of Duke Energy’s renewable energy facilities are VIEs due to Duke Energy issuing guarantees for debt service and operations and maintenance reserves
in support of debt financings. Assets are restricted and cannot be pledged as collateral or sold to third parties without prior approval of debt holders. Additionally,
Duke Energy has VIEs associated with tax equity arrangements entered into with third-party investors in order to finance the cost of renewable assets eligible for
tax credits. The activities that most significantly impacted the economic performance of these renewable energy facilities were decisions associated with siting,
negotiating PPAs and EPC agreements, and decisions associated with ongoing operations and maintenance-related activities. Duke Energy is considered the primary
beneficiary and consolidates the entities as it is responsible for all of these decisions.
The table below presents material balances reported on Duke Energy’s Consolidated Balance Sheets related to Commercial Renewables VIEs.
(in millions)
Current Assets: Other
Property, Plant and Equipment: Cost
Accumulated depreciation and amortization
Other Noncurrent Assets: Other
Current maturities of long-term debt
Long-Term Debt
Other Noncurrent Liabilities: AROs
Other Noncurrent Liabilities: Other
December 31, 2019
December 31, 2018
$
203
5,747
(1,041)
106
162
1,541
127
228
$
123
4,007
(698)
261
174
1,587
106
212
175
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) NON-CONSOLIDATED VIEs
The following tables summarize the impact of non-consolidated VIEs on the Consolidated Balance Sheets.
(in millions)
Receivables from affiliated companies
Investments in equity method unconsolidated affiliates
Total assets
Taxes accrued
Other current liabilities
Deferred income taxes
Other noncurrent liabilities
Total liabilities
Net assets (liabilities)
December 31, 2019
Duke Energy
Pipeline
Investments
Commercial
Renewables
Other
VIEs(a)
Total
Duke
Energy
Ohio
Duke
Energy
Indiana
$ —
1,179
$1,179
(1)
—
59
—
58
$
$1,121
$
(1) $ — $
(1 ) $ 64
300
—
1,479
$ 299
$ — $ 1,478
$
$
77
—
77
—
—
—
—
—
$ 64
—
—
—
—
—
4
—
11
$ 15
$
(1)
4
59
11
73
—
—
—
—
$ —
$ 299
$ — $ —
$ (15 ) $ 1,405
$ 64
$
77
(a) Duke Energy holds a 50% equity interest in Pioneer. As of December 31, 2018, Pioneer was considered a VIE due to having insufficient equity to finance its own activities without subordinated financial support. In October 2019, Pioneer
closed on a private placement debt offering that gave Pioneer sufficient equity to finance its own activities and, therefore, is no longer considered a VIE. Duke Energy’s investment in Pioneer was $57 million at December 31, 2019.
(in millions)
Receivables from affiliated companies
Investments in equity method unconsolidated affiliates
Total assets
Taxes accrued
Other current liabilities
Deferred income taxes
Other noncurrent liabilities
Total liabilities
Net assets
December 31, 2018
Duke Energy
Pipeline
Investments
Commercial
Renewables
Other
VIEs
Total
$ —
822
$ 822
(1)
—
21
—
$ 20
$ 802
$ —
190
$ 190
—
—
—
—
$ —
$ 190
$ — $ —
48
1,060
$ 48
$ 1,060
(1)
4
21
12
36
$
—
4
—
12
$ 16
$ 32
Duke
Energy
Ohio
$ 93
—
$ 93
—
—
—
—
Duke
Energy
Indiana
$
$
118
—
118
—
—
—
—
$ — $ —
$ 1,024
$ 93
$
118
The Duke Energy Registrants are not aware of any situations where the
The table below presents Duke Energy’s ownership interest and
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 share
of the ACP revolving credit facility. Duke Energy’s maximum exposure to loss
under the terms of the guarantee is $827 million, which represents 47% of the
outstanding borrowings under the credit facility as of December 31, 2019. For
more information on various guarantees, refer to Note 8.
Pipeline Investments
Duke Energy has investments in various joint ventures with pipeline
projects currently under construction. These entities are considered VIEs due to
having insufficient equity to finance their own activities without subordinated
financial support. Duke Energy does not have the power to direct the activities
that most significantly impact the economic performance, the obligation to
absorb losses or the right to receive benefits of these VIEs and therefore does
not consolidate these entities.
176
investment balances in these joint ventures.
Entity Name
ACP(a)
Constitution(b)
Total
VIE Investment Amount (in millions)
Ownership
Interest
December 31,
2019
December 31,
2018
47% $
24%
$
1,179
—
1,179
$
$
797
25
822
(a) Duke Energy evaluated this investment for impairment as of December 31, 2019, and 2018, and
determined that fair value approximated carrying value and therefore no impairment was necessary.
(b) During the years ended December 31, 2019, and 2018, Duke Energy recorded an OTTI of $25 million and
$55 million, respectively, related to Constitution within Equity in earnings of unconsolidated affiliates on
Duke Energy’s Consolidated Statements of Income. The current year charge resulted in the full write-
down of Duke Energy’s investment in Constitution. See Notes 4 and 13 for additional information.
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) 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. In
2019, Duke Energy acquired a majority ownership in a portfolio of distributed
fuel cell projects from Bloom Energy Corporation. Duke Energy is not the primary
beneficiary of the assets within the portfolio and does not consolidate the assets
in 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 Inter-Company Power Agreement (ICPA), Duke
Energy Ohio has a contractual arrangement to receive entitlements to capacity
and energy from OVEC’s power plants through June 2040 commensurate with its
power participation ratio, which is equivalent to Duke Energy Ohio’s ownership
interest. Costs, including fuel, operating expenses, fixed costs, debt amortization
and interest expense, are allocated to counterparties to the ICPA based on their
power participation ratio. The value of the ICPA is subject to variability due to
fluctuation in power prices and changes in OVEC’s cost of business. On March
31, 2018, FES, a subsidiary of FirstEnergy 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.
See Note 4 for additional information.
CRC
See discussion under Consolidated VIEs for additional information related
to CRC.
Amounts included in Receivables from affiliated companies in the above
table for Duke Energy Ohio and Duke Energy Indiana reflect their retained
interest in receivables sold to CRC. These subordinated notes held by Duke
Energy Ohio and Duke Energy Indiana are stated at fair value. Carrying values of
retained interests are determined by allocating carrying value of the receivables
between assets sold and interests retained based on relative fair value. The
allocated bases of the subordinated notes are not materially different than
their face value because (i) the receivables generally turnover in less than
two months, (ii) credit losses are reasonably predictable due to the broad
customer base and lack of significant concentration and (iii) the equity in CRC
is subordinate to all retained interests and thus would absorb losses first.
The hypothetical effect on fair value of the retained interests assuming both a
10% and a 20% unfavorable variation in credit losses or discount rates is not
material due to the short turnover of receivables and historically low credit loss
history. Interest accrues to Duke Energy Ohio and Duke Energy Indiana on the
retained interests using the acceptable yield method. This method generally
approximates the stated rate on the notes since the allocated basis and the
face value are nearly equivalent. An impairment charge is recorded against
the carrying value of both retained interests and purchased beneficial interest
whenever it is determined that an OTTI has occurred.
Key assumptions used in estimating fair value are detailed in the following table.
Anticipated credit loss ratio
Discount rate
Receivable turnover rate
The following table shows the gross and net receivables sold.
(in millions)
Receivables sold
Less: Retained interests
Net receivables sold
Duke Energy Ohio
Duke Energy Indiana
2019
0.6%
3.3%
13.4%
2018
0.5%
3.0%
13.5%
2019
0.3%
3.3%
11.5%
2018
0.3%
3.0%
11.0%
Duke Energy Ohio
Duke Energy Indiana
December 31,
December 31,
2019
$ 253
64
$ 189
2018
$ 269
93
$ 176
2019
$ 307
77
$ 230
2018
336
118
218
$
$
177
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) The following table shows sales and cash flows related to receivables sold.
(in millions)
Sales
Receivables sold
Loss recognized on sale
Cash flows
Cash proceeds from receivables sold
Collection fees received
Return received on retained interests
Duke Energy Ohio
Duke Energy Indiana
Years Ended December 31,
Years Ended December 31,
2019
2018
2017
2019
2018
2017
$1,979
14
1,993
1
6
$1,987
13
1,967
1
6
$1,879
10
1,865
1
3
$2,837
17
$ 2,842
16
$ 2,711
12
2,860
1
9
2,815
1
9
2,694
1
7
Cash flows from sales of receivables are reflected within Cash Flows
From Operating Activities on Duke Energy Ohio’s and Duke Energy Indiana’s
Consolidated Statements of Cash Flows.
Collection fees received in connection with servicing transferred accounts
receivable are included in Operation, maintenance and other on Duke Energy
Ohio’s and Duke Energy Indiana’s Consolidated Statements of Operations
and Comprehensive Income. The loss recognized on sales of receivables is
calculated monthly by multiplying receivables sold during the month by the
required discount. The required discount is derived monthly utilizing a
three-year weighted average formula that considers charge-off history, late
charge history and turnover history on the sold receivables, as well as a
component for the time value of money. The discount rate, or component for the
time value of money, is the prior month-end LIBOR plus a fixed rate of 1.00%.
19. REVENUE
Duke Energy recognizes revenue consistent with amounts billed under
tariff offerings or at contractually agreed upon rates based on actual physical
delivery of electric or natural gas service, including estimated volumes delivered
when billings have not yet occurred. As such, the majority of Duke Energy’s
revenues have fixed pricing based on the contractual terms of the published
tariffs, with variability in expected cash flows attributable to the customer’s
volumetric demand and ultimate quantities of energy or natural gas supplied
and used during the billing period. The stand-alone selling price of related sales
are designed to support recovery of prudently incurred costs and an appropriate
return on invested assets and are primarily governed by published tariff rates
or contractual agreements approved by relevant regulatory bodies. As described
in Note 1, certain excise taxes and franchise fees levied by state or local
governments are required to be paid even if not collected from the customer.
These taxes are recognized on a gross basis as part of revenues. Duke Energy
elects to account for all other taxes net of revenues.
Performance obligations are satisfied over time as energy or natural gas
is delivered and consumed with billings generally occurring monthly and related
payments due within 30 days, depending on regulatory requirements. In no
event does the timing between payment and delivery of the goods and services
exceed one year. Using this output method for revenue recognition provides a
faithful depiction of the transfer of electric and natural gas service as customers
obtain control of the commodity and benefit from its use at delivery. Additionally,
Duke Energy has an enforceable right to consideration for energy or natural gas
delivered at any discrete point in time and will recognize revenue at an amount
that reflects the consideration to which Duke Energy is entitled for the energy or
natural gas delivered.
As described above, the majority of Duke Energy’s tariff revenues are
at-will and, as such, related contracts with customers have an expected
duration of one year or less and will not have future performance obligations for
disclosure. Additionally, other long-term revenue streams, including wholesale
contracts, generally provide services that are part of a single performance
obligation, the delivery of electricity or natural gas. As such, other than material
fixed consideration under long-term contracts, related disclosures for future
performance obligations are also not applicable.
Duke Energy earns substantially all of its revenues through its reportable
segments, Electric Utilities and Infrastructure, Gas Utilities and Infrastructure
and Commercial Renewables.
Electric Utilities and Infrastructure
Electric Utilities and Infrastructure earns the majority of its revenues
through retail and wholesale electric service through the generation,
transmission, distribution and sale of electricity. Duke Energy generally provides
retail and wholesale electric service customers with their full electric load
requirements or with supplemental load requirements when the customer has
other sources of electricity.
Retail electric service is generally marketed throughout Duke Energy’s
electric service territory through standard service offers. The standard service
offers are through tariffs determined by regulators in Duke Energy’s regulated
service territory. Each tariff, which is assigned to customers based on customer
class, has multiple components such as an energy charge, a demand charge,
a basic facilities charge and applicable riders. Duke Energy considers each
of these components to be aggregated into a single performance obligation
for providing electric service, or in the case of distribution only customers in
Duke Energy Ohio, for delivering electricity. Electricity is considered a single
performance obligation satisfied over time consistent with the series guidance
and is provided and consumed over the billing period, generally one month.
Retail electric service is typically provided to at-will customers who can cancel
service at any time, without a substantive penalty. Additionally, Duke Energy
adheres to applicable regulatory requirements in each jurisdiction to ensure
the collectability of amounts billed and appropriate mitigating procedures are
followed when necessary. As such, revenue from contracts with customers for
178
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) such contracts is equivalent to the electricity supplied and billed in that period
(including unbilled estimates).
Wholesale electric service is generally provided under long-term
contracts using cost-based pricing. FERC regulates costs that may be
recovered from customers and the amount of return companies are permitted
to earn. Wholesale contracts include both energy and demand charges. For
full requirements contracts, Duke Energy considers both charges as a single
performance obligation for providing integrated electric service. For contracts
where energy and demand charges are considered separate performance
obligations, energy and demand are each a distinct performance obligation
under the series guidance and are satisfied as energy is delivered and
stand-ready service is provided on a monthly basis. This service represents
consumption over the billing period and revenue is recognized consistent with
billings and unbilled estimates, which generally occur monthly. Contractual
amounts owed are typically trued up annually based upon incurred costs in
accordance with FERC published filings and the specific customer’s actual
peak demand. Estimates of variable consideration related to potential additional
billings or refunds owed are updated quarterly.
The majority of wholesale revenues are full requirements contracts where
the customers purchase the substantial majority of their energy needs and do
not have a fixed quantity of contractually required energy or capacity. As such,
related forecasted revenues are considered optional purchases. Supplemental
requirements contracts that include contracted blocks of energy and capacity at
contractually fixed prices have the following estimated remaining performance
obligations:
(in millions)
Progress Energy
Duke Energy Progress
Duke Energy Florida
Duke Energy Indiana
Remaining Performance Obligations
2020
$ 121
8
113
10
2021
2022
2023
2024
Thereafter
$
92
8
84
5
$
87
8
79
—
$
44
8
36
—
$
45
8
37
—
$
58
—
58
—
Total
$ 447
40
407
15
Revenues for block sales are recognized monthly as energy is delivered
and stand-ready service is provided, consistent with invoiced amounts and
unbilled estimates.
Gas Utilities and Infrastructure
Gas Utilities and Infrastructure earns its revenue through retail and
wholesale natural gas service through the transportation, distribution and sale
of natural gas. Duke Energy generally provides retail and wholesale natural gas
service customers with all natural gas load requirements. Additionally, while
natural gas can be stored, substantially all natural gas provided by Duke Energy
is consumed by customers simultaneously with receipt of delivery.
Retail natural gas service is marketed throughout Duke Energy’s natural
gas service territory using published tariff rates. The tariff rates are established
by regulators in Duke Energy’s service territories. Each tariff, which is assigned
to customers based on customer class, have multiple components, such
as a commodity charge, demand charge, customer or monthly charge and
transportation costs. Duke Energy considers each of these components to
be aggregated into a single performance obligation for providing natural gas
service. For contracts where Duke Energy provides all of the customer’s natural
gas needs, the delivery of natural gas is considered a single performance
obligation satisfied over time, and revenue is recognized monthly based on
billings and unbilled estimates as service is provided and the commodity is
consumed over the billing period. Additionally, natural gas service is typically
at-will and customers can cancel service at any time, without a substantive
penalty. Duke Energy also adheres to applicable regulatory requirements to
ensure the collectability of amounts billed and receivable and appropriate
mitigating procedures are followed when necessary.
Certain long-term individually negotiated contracts exist to provide natural
gas service. These contracts are regulated and approved by state commissions.
The negotiated contracts have multiple components, including a natural gas and
a demand charge, similar to retail natural gas contracts. Duke Energy considers
each of these components to be a single performance obligation for providing
natural gas service. This service represents consumption over the billing period,
generally one month.
Fixed capacity payments under long-term contracts for the Gas Utilities
and Infrastructure segment include minimum margin contracts and supply
arrangements with municipalities and power generation facilities. Revenues
for related sales are recognized monthly as natural gas is delivered and
stand-ready service is provided, consistent with invoiced amounts and unbilled
estimates. Estimated remaining performance obligations are as follows:
(in millions)
Piedmont
Remaining Performance Obligations
2020
$
69
2021
$
64
2022
$
64
2023
$
61
2024
Thereafter
$
58
$
372
Total
$ 688
179
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) Commercial Renewables
Commercial Renewables earns the majority of its revenues through
long-term PPAs and generally sells all of its wind and solar facility output,
electricity and RECs to customers. The majority of these PPAs have historically
been accounted for as leases. For PPAs that are not accounted for as leases,
the delivery of electricity and the delivery of RECs are considered separate
performance obligations.
The delivery of electricity is a performance obligation satisfied over time
and represents generation and consumption of the electricity over the billing
period, generally one month. The delivery of RECs is a performance obligation
satisfied at a point in time and represents delivery of each REC generated by
the wind or solar facility. The majority of self-generated RECs are bundled
with energy in Duke Energy’s contracts and, as such, related revenues are
recognized as energy is generated and delivered as that pattern is consistent
with Duke Energy’s performance. Commercial Renewables recognizes revenue
based on the energy generated and billed for the period, generally one month,
at contractual rates (including unbilled estimates) according to the invoice
practical expedient. Amounts are typically due within 30 days of invoice.
Commercial Renewables also earns revenues from installation of
distributed solar generation resources, which is primarily composed of EPC
projects to deliver functioning solar power systems, generally completed
within two to 12 months from commencement of construction. The installation
of distributed solar generation resources is a performance obligation that is
satisfied over time. Revenue from fixed-price EPC contracts is recognized using
the input method as work is performed based on the estimated ratio of incurred
costs to estimated total costs.
Other
The remainder of Duke Energy’s operations is presented as Other, which
does not include material revenues from contracts with customers.
Disaggregated Revenues
For the Electric and Gas Utility and Infrastructure segments, revenue by
customer class is most meaningful to Duke Energy as each respective customer
class collectively represents unique customer expectations of service, generally
has different energy and demand requirements, and operates under tailored,
regulatory approved pricing structures. Additionally, each customer class is
impacted differently by weather and a variety of economic factors including
the level of population growth, economic investment, employment levels, and
regulatory activities in each of Duke Energy’s jurisdictions. As such, analyzing
revenues disaggregated by customer class allows Duke Energy to understand
the nature, amount, timing and uncertainty of revenue and cash flows arising
from contracts with customers. For the Commercial Renewables segment, the
majority of revenues from contracts with customers are from selling all of the
unit-contingent output at contractually defined pricing under long-term PPAs
with consistent expectations regarding the timing and certainty of cash flows.
Disaggregated revenues are presented as follows:
(in millions)
By market or type of customer
Electric Utilities and Infrastructure
Residential
General
Industrial
Wholesale
Other revenues
Total Electric Utilities and Infrastructure revenue from
contracts with customers
Gas Utilities and Infrastructure
Residential
Commercial
Industrial
Power Generation
Other revenues
Total Gas Utilities and Infrastructure revenue from
contracts with customers
Commercial Renewables
Revenue from contracts with customers
Other
Revenue from contracts with customers
Total revenue from contracts with customers
Other revenue sources(a)
Total revenues
Year Ended December 31, 2019
Duke
Energy
$ 9,863
6,431
3,071
2,212
770
Duke
Energy
Carolinas
$ 3,044
2,244
1,215
462
276
Progress
Energy
$ 4,998
2,935
934
1,468
548
Duke
Energy
Progress
$2,144
1,368
675
1,281
317
Duke
Energy
Florida
$ 2,854
1,567
259
187
231
Duke
Energy
Ohio
$ 733
451
147
46
80
Duke
Energy
Indiana
$1,087
802
774
235
89
Piedmont
$ —
—
—
—
—
$ 22,347
$ 7,241
$ 10,883
$5,785
$ 5,098
$ 1,457
$2,987
$ —
$
976
508
141
—
129
$ —
—
—
—
—
$ —
—
—
—
—
$ —
—
—
—
—
$ —
—
—
—
—
$ 315
130
19
—
19
$ —
—
—
—
—
$ 661
378
122
51
110
$ 1,754
$ —
$ —
$ —
$ —
$ 483
$ —
$1,322
$
223
$ —
$ —
$ —
$ —
$ —
$ —
$ —
$
24
$ 24,348
731
$
$ 25,079
$ —
$ 7,241
$ 154
$ 7,395
$ —
$ 10,883
319
$
$ 11,202
$ —
$5,785
$ 172
$5,957
$ —
$ 5,098
$ 133
$ 5,231
$ —
$ 1,940
$ —
$ 1,940
$ —
$2,987
17
$
$3,004
$ —
$1,322
59
$
$1,381
(a) Other revenue sources include revenues from leases, derivatives and alternative revenue programs that are not considered revenues from contracts with customers. Alternative revenue programs in certain jurisdictions
include regulatory mechanisms that periodically adjust for over or under collection of related revenues.
180
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) (in millions)
By market or type of customer
Electric Utilities and Infrastructure
Residential
General
Industrial
Wholesale
Other revenues
Total Electric Utilities and Infrastructure revenue from
contracts with customers
Gas Utilities and Infrastructure
Residential
Commercial
Industrial
Power Generation
Other revenues
Total Gas Utilities and Infrastructure revenue from
contracts with customers
Commercial Renewables
Revenue from contracts with customers
Other
Revenue from contracts with customers
Total revenue from contracts with customers
Other revenue sources(a)
Total revenues
Year Ended December 31, 2018
Duke
Energy
$ 9,587
6,127
2,974
2,324
717
Duke
Energy
Carolinas
$ 2,981
2,119
1,180
508
320
Progress
Energy
$ 4,785
2,809
904
1,462
502
Duke
Energy
Progress
$2,019
1,280
642
1,303
320
Duke
Energy
Florida
$ 2,766
1,529
262
159
182
Duke
Energy
Ohio
$
743
422
131
57
73
Duke
Energy
Indiana
$1,076
778
760
298
91
Piedmont
$ —
—
—
—
—
$ 21,729
$ 7,108
$ 10,462
$5,564
$ 4,898
$ 1,426
$3,003
$ —
$ 1,000
514
147
—
139
$ —
—
—
—
—
$ —
—
—
—
—
$ —
—
—
—
—
$ —
—
—
—
—
$
331
135
18
—
19
$ —
—
—
—
—
$ 669
378
128
54
120
$ 1,800
$ —
$ —
$ —
$ —
$
503
$ —
$1,349
$
209
$ —
$ —
$ —
$ —
$ —
$ —
$ —
$
19
$ 23,757
764
$
$ 24,521
$ —
$ 7,108
192
$
$ 7,300
$ —
$ 10,462
266
$
$ 10,728
$ —
$5,564
$ 135
$5,699
$ —
$ 4,898
123
$
$ 5,021
$
1
$ 1,930
27
$
$ 1,957
$ —
$3,003
56
$
$3,059
$ —
$1,349
26
$
$1,375
(a) Other revenue sources include revenues from leases, derivatives and alternative revenue programs that are not considered revenues from contracts with customers. Alternative revenue programs in certain jurisdictions
include regulatory mechanisms that periodically adjust for over or under collection of related revenues.
IMPACT OF WEATHER AND THE TIMING OF BILLING PERIODS
Revenues and costs are influenced by seasonal weather patterns. Peak
sales of electricity occur during the summer and winter months, which results
in higher revenue and cash flows during these periods. By contrast, lower sales
of electricity occur during the spring and fall, allowing for scheduled plant
maintenance. Residential and general service customers are more impacted
by weather than industrial customers. Estimated weather impacts are based
on actual current period weather compared to normal weather conditions.
Normal weather conditions are defined as the long-term average of actual
historical weather conditions. Heating degree days measure the variation in
weather based on the extent the average daily temperature falls below a base
temperature. Cooling degree days measure the variation in weather based on
the extent the average daily temperature rises above the base temperature.
Each degree of temperature below the base temperature counts as one heating
degree day and each degree of temperature above the base temperature counts
as one cooling degree day.
The estimated impact of weather on earnings for Electric Utilities and
Infrastructure is based on the temperature variances from a normal condition
and customers’ historic usage patterns. The methodology used to estimate the
impact of weather does not consider all variables that may impact customer
response to weather conditions, such as humidity in the summer or wind chill
in the winter. The precision of this estimate may also be impacted by applying
long-term weather trends to shorter-term periods.
Gas Utilities and Infrastructure’s costs and revenues are influenced by
seasonal patterns due to peak natural gas sales occurring during the winter
months as a result of space heating requirements. Residential customers are
the most impacted by weather. There are certain regulatory mechanisms for the
North Carolina, South Carolina, Tennessee, Ohio and Kentucky service territories
that normalize the margins collected from certain customer classes during the
winter. In North Carolina, rate design provides protection from both weather and
other usage variations such as conservation, while South Carolina, Tennessee
and Kentucky revenues are adjusted solely based on weather. Ohio primarily
employs a fixed charge each month regardless of the season and usage.
UNBILLED REVENUE
Unbilled revenues are recognized by applying customer billing rates to the
estimated volumes of energy or natural gas delivered but not yet billed. Unbilled
revenues can vary significantly from period to period as a result of seasonality,
weather, customer usage patterns, customer mix, average price in effect
for customer classes, timing of rendering customer bills and meter reading
schedules, and the impact of weather normalization or margin decoupling
mechanisms.
181
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) Unbilled revenues are included within Receivables and Receivables of VIEs on the Consolidated Balance Sheets as shown in the following table.
(in millions)
Duke Energy
Duke Energy Carolinas
Progress Energy
Duke Energy Progress
Duke Energy Florida
Duke Energy Ohio
Duke Energy Indiana
Piedmont
December 31,
2019
$ 843
298
217
122
95
1
16
78
$
2018
896
313
244
148
96
2
23
73
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 Consolidated Balance
Sheets of Duke Energy Ohio and Duke Energy Indiana. See Note 18 for further information. These receivables for unbilled revenues are shown in the table below.
(in millions)
Duke Energy Ohio
Duke Energy Indiana
20. STOCKHOLDERS’ EQUITY
December 31,
$
2019
82
115
$
2018
86
128
Basic EPS is computed by dividing net income available 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 available 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 RSUs that are entitled to dividends declared on Duke
Energy common stock during the RSUs vesting periods. Dividends declared
on preferred stock are recorded on the Consolidated Statements of Operations
as a reduction of net income to arrive at net income available to Duke Energy
common stockholders. Dividends accumulated on preferred stock are a
reduction 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.
(in millions, except per share amounts)
Income from continuing operations available to Duke Energy common stockholders excluding impact of participating securities and including
accumulated preferred stock dividends
Weighted average common shares outstanding – basic and diluted
EPS from continuing operations available to Duke Energy common stockholders
Basic and diluted
Potentially dilutive items excluded from the calculation(a)
Dividends declared per common share
Dividends declared on Series A preferred stock per depositary share
Years Ended December 31,
2019
2018
2017
$3,694
729
$ 5.07
2
$ 3.75
$ 1.03
$2,642
708
$ 3.73
2
$ 3.64
$ —
$ 3,059
700
$ 4.37
2
$ 3.49
$ —
(a) Performance stock awards were not included in the dilutive securities calculation because the performance measures related to the awards had not been met.
Common Stock
In February 2018, Duke Energy filed a prospectus supplement and executed
an Equity Distribution Agreement (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. Under the terms of the EDA, Duke Energy was allowed to issue
and sell shares of common stock. The existing ATM offering program expired in
September 2019.
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.
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
182
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) 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.
In March and April 2019, Duke Energy marketed two separate tranches,
each for 1.1 million shares, of common stock through equity forward transactions
under the ATM program. The first tranche had an initial forward price of
$89.83 per share and the second tranche had an initial forward price of
$88.82 per share. In May and June 2019, a third tranche of 1.6 million shares
of common stock was marketed and had an initial forward price of $86.23. The
equity forwards required Duke Energy to either physically settle the transaction
by issuing shares in exchange for net proceeds at the then-applicable forward
sale price specified by the agreements or net settle in whole or in part through
the delivery or receipt of cash or shares. The settlement alternative was at Duke
Energy’s election. In December 2019, Duke Energy physically settled the equity
forwards by delivering 3.8 million shares of common stock in exchange for net
cash proceeds of approximately $331 million.
In November 2019, Duke Energy filed a prospectus supplement and
executed an EDA under which it may sell up to $1.5 billion of its common
stock through a new 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 September 2022.
In November 2019, Duke Energy marketed an equity offering of
28.75 million shares of common stock through an Underwriting Agreement.
In connection with the offering, Duke Energy entered into equity forward sales
agreements with an initial forward price of $85.99 per share. The equity forward
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 agreement, or net settle in whole or in part through
the delivery or receipt of cash or shares. The settlement alternatives are at Duke
Energy’s election. Settlement of the forward sales agreements are expected to
occur on or prior to December 31, 2020. If Duke Energy had elected to net share
settle these contracts as of December 31, 2019, Duke Energy would have been
required to deliver 1.6 million shares.
For the years ended December 31, 2019, and 2018, Duke Energy issued
1.8 million and 2.2 million shares, respectively, through its DRIP with an increase
in additional paid-in capital of approximately $160 million and $174 million,
respectively.
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 $989 million after issuance costs with proceeds being used
to pay down short-term debt, repay at maturity $500 million senior notes due
September 2019, and for general corporate purposes. The preferred stock
has a $1,000 liquidation preference per share and earns dividends on a
cumulative basis at an initial rate of 4.875% per annum. Dividends are payable
semiannually in arrears on the 16th day of March and September, 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 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 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
183
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) • structurally subordinated to existing and future indebtedness and other
liabilities of Duke Energy’s subsidiaries and future preferred stock of
subsidiaries.
Holders of Series A and Series B Preferred Stock have no voting rights with
respect to matters that generally require the approval of voting stockholders. The
limited voting rights of holders of Series A and Series B Preferred Stock include
the right to vote as a single class, respectively, on certain matters that may affect
the preference or special rights of the preferred stock, except in the instance that
Duke Energy elects to defer the payment of dividends for a total of six quarterly
full dividend periods for Series A Preferred Stock or three semiannual full dividend
periods for Series B Preferred Stock. If dividends are deferred for a cumulative
total of six quarterly full dividend periods for Series A Preferred Stock or three
semiannual full dividend periods for Series B Preferred Stock, whether or not for
consecutive dividend periods, holders of the respective preferred stock have the
right to elect two additional Board members to the Board of Directors.
21. SEVERANCE
During 2018, Duke Energy reviewed its operations and identified
opportunities for improvement to better serve its customers. This operational
review included the company’s workforce strategy and staffing levels to ensure
the company was staffed with the right skillsets and number of teammates to
execute the long-term vision for Duke Energy. As such, Duke Energy extended
voluntary and involuntary severance benefits to certain employees in specific
areas as a part of workforce planning and digital transformation efforts.
The following table presents the direct and allocated severance and
related charges accrued for approximately 140 employees in 2019, 1,900
employees in 2018 and 100 employees in 2017 by the Duke Energy Registrants
within Operation, maintenance and other on the Consolidated Statements of
Operations.
(in millions)
Year Ended December 31, 2019
Year Ended December 31, 2018
Year Ended December 31, 2017
Duke
Energy
Carolinas
8
$
102
Progress
Energy
$ 6
69
Duke
Energy
Progress
3
$
52
2
2
1
Duke
Energy
$ 16
187
15
Duke
Energy
Florida
3
$
17
1
Duke
Energy
Ohio
$ —
6
—
Duke
Energy
Indiana
1
$
7
1
Piedmont
$ 1
2
9
The table below presents the severance liability for past and ongoing severance plans including the plans described above.
(in millions)
Balance at December 31, 2018
Provision/Adjustments
Cash Reductions
Balance at December 31, 2019
Duke
Energy
Carolinas
$ 100
4
Progress
Energy
$ 51
11
Duke
Energy
Progress
$ 41
2
(93)
$ 11
(49)
$ 13
(37)
$
6
Duke
Energy
$ 205
24
(188)
$ 41
Duke
Energy
Florida
9
$
10
(12)
$
7
Duke
Energy
Ohio
2
$
1
(2)
$
1
Duke
Energy
Indiana
2
$
1
(1)
$
2
Piedmont
$ —
—
—
$ —
22. STOCK-BASED COMPENSATION
The Duke Energy Corporation 2015 Long-Term Incentive Plan (the 2015
Plan) provides for the grant of stock-based compensation awards to employees
and outside directors. The 2015 Plan reserves 10 million shares of common stock
for issuance. Duke Energy has historically issued new shares upon exercising or
vesting of share-based awards. However, Duke Energy may use a combination of
new share issuances and open market repurchases for share-based awards that
are exercised or vest in the future. Duke Energy has not determined with certainty
the amount of such new share issuances or open market repurchases.
The following table summarizes the total expense recognized by the Duke
Energy Registrants, net of tax, for stock-based compensation.
(in millions)
Duke Energy
Duke Energy Carolinas
Progress Energy
Duke Energy Progress
Duke Energy Florida
Duke Energy Ohio
Duke Energy Indiana
Piedmont
Years Ended December 31,
2019
$ 65
24
24
15
9
5
6
3
2018
$ 56
20
21
13
8
4
5
3
2017
$ 43
15
16
10
6
3
4
3
184
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) Duke Energy’s pretax stock-based compensation costs, the tax benefit
associated with stock-based compensation expense and stock-based
compensation costs capitalized are included in the following table.
(in millions)
RSU awards
Performance awards
Pretax stock-based compensation cost
Stock-based compensation costs capitalized
Stock-based compensation expense
Tax benefit associated with stock-based compensation expense
Years Ended December 31,
2019
$ 44
45
$ 89
5
$ 84
$ 19
2018
$ 43
35
$ 78
5
$ 73
$ 17
2017
$ 41
27
$ 68
4
$ 64
$ 25
RESTRICTED STOCK UNIT AWARDS
RSU awards generally vest over periods from immediate to three years.
Fair value amounts are based on the market price of Duke Energy’s common
stock on the grant date. The following table includes information related to
RSU awards.
Performance awards contain performance conditions and a market
condition. The performance conditions are based on Duke Energy’s cumulative
adjusted EPS and total incident case rate (total incident case rate is one of our
key employee safety metrics). The market condition is based on TSR of Duke
Energy relative to a predefined peer group.
Relative TSR is valued using a path-dependent model that incorporates
expected relative TSR into the fair value determination of Duke Energy’s
performance-based share awards. The model uses three-year historical
volatilities and correlations for all companies in the predefined peer group,
including Duke Energy, to simulate Duke Energy’s relative TSR as of the end
of the performance period. For each simulation, Duke Energy’s relative TSR
associated with the simulated stock price at the end of the performance period
plus expected dividends within the period results in a value per share for the
award portfolio. The average of these simulations is the expected portfolio value
per share. Actual life to date results of Duke Energy’s relative TSR for each
grant are incorporated within the model. For performance awards granted in
2019, the model used a risk-free interest rate of 2.5%, which reflects the yield
on three-year Treasury bonds as of the grant date, and an expected volatility of
14.8% based on Duke Energy’s historical volatility over three years using daily
stock prices.
Years Ended December 31,
The following table includes information related to stock-based
Shares granted (in thousands)
Fair value (in millions)
performance awards.
2019
571
$ 51
2018
649
$ 49
2017
583
$ 47
The following table summarizes information about RSU awards
outstanding.
Shares granted assuming target performance (in thousands)
Fair value (in millions)
Years Ended December 31,
2019
320
$ 27
2018
372
$ 27
2017
461
$ 37
The following table summarizes information about stock-based
performance awards outstanding and assumes payout at the target level.
Weighted Average
Grant Date Fair
Value
(per share)
Shares
(in thousands)
Outstanding at December 31, 2018
Granted
Vested
Forfeited
Outstanding at December 31, 2019
Stock-based performance awards expected to vest
1,117
320
(310)
(18)
1,109
1,080
$ 77
86
75
81
80
80
The total grant date fair value of shares vested during the years ended
December 31, 2019, and 2018, was $23 million and $13 million, respectively.
No performance awards vested during the year ended December 31, 2017. At
December 31, 2019, Duke Energy had $27 million of unrecognized compensation
cost, which is expected to be recognized over a weighted average period of
22 months.
Outstanding at December 31, 2018
Granted
Vested
Forfeited
Outstanding at December 31, 2019
RSU awards expected to vest
Weighted Average
Grant Date Fair
Value
(per share)
Shares
(in thousands)
1,153
571
(631)
(83)
1,010
951
$ 77
89
77
82
83
83
The total grant date fair value of shares vested during the years ended
December 31, 2019, 2018 and 2017, was $49 million, $43 million and
$42 million, respectively. At December 31, 2019, Duke Energy had $30 million
of unrecognized compensation cost, which is expected to be recognized over
a weighted average period of 23 months. Prior to Duke Energy’s acquisition
of Piedmont, Piedmont had an incentive compensation plan that had a series
of three-year performance and RSU awards for eligible officers and other
participants. The 2016-2018 performance award cycle was approved subsequent
to the Agreement and Plan of Merger between Duke Energy and Piedmont and was
converted into a Duke Energy RSU award at the consummation of the acquisition.
PERFORMANCE AWARDS
Stock-based performance awards generally vest after three years if
performance targets are met. The actual number of shares issued will range
from zero to 200% of target shares, depending on the level of performance
achieved.
185
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) 23. EMPLOYEE BENEFIT PLANS
DEFINED BENEFIT RETIREMENT PLANS
Duke Energy and certain subsidiaries maintain, and the Subsidiary
Registrants participate in, qualified, non-contributory defined benefit retirement
plans. The Duke Energy plans cover most employees using a cash balance
formula. Under a cash balance formula, a plan participant accumulates a
retirement benefit consisting of pay credits based upon a percentage of current
eligible earnings, age or age and years of service and interest credits. Certain
employees are eligible for benefits that use a final average earnings formula.
Under these final average earnings formulas, a plan participant accumulates
a retirement benefit equal to the sum of percentages of their (i) highest three-
year, four-year, or five-year average earnings, (ii) highest three-year, four-year,
or five-year average earnings in excess of covered compensation per year of
participation (maximum of 35 years) or (iii) highest three-year average earnings
times years of participation in excess of 35 years. Duke Energy also maintains,
and the Subsidiary Registrants participate in, non-qualified, non-contributory
defined benefit retirement plans that cover certain executives. The qualified
and non-qualified, non-contributory defined benefit plans are closed to new
participants.
Duke Energy approved plan amendments to restructure its qualified
non-contributory defined benefit retirement plans, effective January 1, 2018.
The restructuring involved (i) the spin-off of the majority of inactive participants
from two plans into a separate inactive plan and (ii) the merger of the active
participant portions of such plans, along with a pension plan acquired as part
of the Piedmont transaction, into a single active plan. Benefits offered to the
plan participants remain unchanged except that the Piedmont plan’s final
average earnings formula was frozen as of December 31, 2017, and affected
participants were moved into the active plan’s cash balance formula. Actuarial
gains and losses associated with the Inactive Plan will be amortized over the
remaining life expectancy of the inactive participants. The longer amortization
period lowered Duke Energy’s 2018 pretax qualified pension plan expense by
approximately $33 million.
Duke Energy uses a December 31 measurement date for its defined
benefit retirement plan assets and obligations.
As a result of the application of settlement accounting due to total
lump-sum benefit payments exceeding the settlement threshold (defined as
the sum of the service cost and interest cost on projected benefit obligation
components of net periodic pension costs) for one of its qualified pension
plans, Duke Energy recognized settlement charges of $94 million, primarily as
a regulatory asset within Other Noncurrent Assets on the Consolidated Balance
Sheets as of December 31, 2019 (an immaterial amount was recorded in Other
income and expenses, net within the Consolidated Statement of Operations).
Settlement charges recognized by the Subsidiary Registrants as of
December 31, 2019, which represent amounts allocated by Duke Energy
for employees of the Subsidiary Registrants and allocated charges for their
proportionate share of settlement charges for employees of Duke Energy’s
shared services affiliate, were $53 million for Duke Energy Carolinas,
$26 million for Progress Energy, $20 million for Duke Energy Progress, $6 million
for Duke Energy Florida, $4 million for Duke Energy Indiana, $2 million for Duke
Energy Ohio and $8 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 benefit payments
as of December 31, 2019. Settlement charges recognized as a regulatory
asset within Other Noncurrent Assets on the Consolidated Balance Sheets are
amortized over the average remaining service period for participants in the
plan. Amortization of settlement charges is disclosed in the tables below as a
component of net periodic pension costs.
Net periodic benefit costs disclosed in the tables below represent the cost
of the respective benefit plan for the periods presented prior to capitalization of
amounts reflected as Net property, plant and equipment, on the Consolidated
Balance Sheets. Only the service cost component of net periodic benefit
costs is eligible to be capitalized. The remaining non-capitalized portions of
net periodic benefit costs are classified as either: (1) service cost, which is
recorded in Operations, maintenance and other on the Consolidated Statements
of Operations; or as (2) components of non-service cost, which is recorded in
Other income and expenses, net, on the Consolidated Statements of Operations.
Amounts presented in the tables below for the Subsidiary Registrants represent
the amounts of pension and other post-retirement benefit cost allocated by
Duke Energy for employees of the Subsidiary Registrants. Additionally, the
Consolidated Statements of Operations of the Subsidiary Registrants also
include allocated net periodic benefit costs for their proportionate share of
pension and post-retirement benefit cost for employees of Duke Energy’s
shared services affiliate that provide support to the Subsidiary Registrants.
However, in the tables below, these amounts are only presented within the Duke
Energy column (except for amortization of settlement charges). These allocated
amounts are included in the governance and shared service costs discussed in
Note 14.
Duke Energy’s policy is to fund amounts on an actuarial basis to provide
assets sufficient to meet benefit payments to be paid to plan participants. Duke
Energy does not anticipate making any contributions in 2020. The following table
includes information related to the Duke Energy Registrants’ contributions to its
qualified defined benefit pension plans.
(in millions)
Contributions Made:
2019
2018
2017
Duke
Energy
Duke Energy
Carolinas
Progress
Energy
Duke Energy
Progress
Duke Energy
Florida
Duke Energy
Ohio
$ 77
141
19
$
7
46
—
$ 57
45
—
$
4
25
—
$ 53
20
—
$ 2
—
4
Duke
Energy
Indiana
$ 2
8
—
Piedmont
$
1
—
11
186
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) QUALIFIED PENSION PLANS
Components of Net Periodic Pension Costs
Year Ended December 31, 2019
(in millions)
Service cost
Interest cost on projected benefit obligation
Expected return on plan assets
Amortization of actuarial loss
Amortization of prior service credit
Amortization of settlement charges
Net periodic pension costs(a)(b)
Duke
Energy
Duke Energy
Carolinas
Progress
Energy
Duke Energy
Progress
Duke Energy
Florida
Duke Energy
Ohio
$ 158
317
(567)
108
(32)
6
$ (10)
$ 49
75
(147)
24
(8)
2
(5)
$
$
$
46
100
(178)
39
(3)
1
5
$ 26
45
(88)
15
(2)
1
$ (3)
$ 20
54
(89)
24
(1)
—
8
$
$
4
18
(28)
4
—
2
$ —
Year Ended December 31, 2018
(in millions)
Service cost
Interest cost on projected benefit obligation
Expected return on plan assets
Amortization of actuarial loss
Amortization of prior service credit
Net periodic pension costs(a)(b)
Duke
Energy
Duke Energy
Carolinas
Progress
Energy
Duke Energy
Progress
Duke Energy
Florida
Duke Energy
Ohio
$ 182
299
(559)
132
(32)
$ 22
$ 58
72
(147)
29
(8)
4
$
$
$
51
94
(178)
44
(3)
8
$ 29
43
(85)
21
(2)
6
$
$ 22
50
(91)
23
(1)
3
$
$
5
17
(28)
5
—
$ (1)
Year Ended December 31, 2017
(in millions)
Service cost
Interest cost on projected benefit obligation
Expected return on plan assets
Amortization of actuarial loss
Amortization of prior service credit
Settlement charge
Other
Net periodic pension costs(a)(b)
Duke
Energy
Duke Energy
Carolinas
Progress
Energy
Duke Energy
Progress
Duke Energy
Florida
Duke Energy
Ohio
$ 159
328
(545)
146
(24)
12
8
$ 84
$ 48
79
(142)
31
(8)
—
2
$ 10
$
$
45
100
(167)
52
(3)
—
2
29
$ 26
47
(82)
23
(2)
—
1
$ 13
$ 19
53
(85)
29
(1)
—
1
$ 16
$
4
18
(27)
5
(1)
—
—
$ (1)
Duke
Energy
Indiana
$
9
26
(43)
8
(2)
—
$ (2)
Duke
Energy
Indiana
$ 11
23
(42)
10
(2)
$ —
Duke
Energy
Indiana
$
$
9
26
(42)
12
(2)
—
1
4
Piedmont
$ 5
10
(22)
8
(9)
—
$ (8)
Piedmont
7
$
11
(22)
11
(10)
$ (3)
Piedmont
$ 10
14
(24)
11
(2)
12
1
$ 22
(a) Duke Energy amounts exclude $4 million, $5 million and $7 million for the years ended December 2019, 2018 and 2017, respectively, of regulatory asset amortization resulting from purchase accounting adjustments
associated with Duke Energy’s merger with Cinergy in April 2006.
(b) Duke Energy Ohio amounts exclude $2 million, $2 million and $3 million for the years ended December 2019, 2018 and 2017, respectively, of regulatory asset amortization resulting from purchase accounting adjustments
associated with Duke Energy’s merger with Cinergy in April 2006.
187
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) Amounts Recognized in Accumulated Other Comprehensive Income and Regulatory Assets
(in millions)
Regulatory assets, net increase (decrease)
Accumulated other comprehensive loss (income)
Deferred income tax expense (benefit)
Amortization of prior year service credit
Amortization of prior year actuarial losses
Net amount recognized in accumulated other
comprehensive income
(in millions)
Regulatory assets, net increase
Accumulated other comprehensive (income) loss
Deferred income tax expense
Prior year service credit arising during the year
Amortization of prior year actuarial losses
Net amount recognized in accumulated other
comprehensive income
Duke Energy
Carolinas
Year Ended December 31, 2019
Duke Energy Duke Energy
Florida
Progress
Progress
Energy
Duke Energy
Ohio
Duke Energy
Indiana
Piedmont
$ (156)
$ (79)
$ (59)
$ (20)
$ 12
$ 22
$ —
—
—
—
1
—
(2)
—
—
—
(1)
—
3
—
—
—
—
—
—
—
—
—
Duke
Energy
$ (212)
$
20
1
(15)
$
6
$ —
$ (1)
$ —
$
2
$ —
$ —
$ —
Year Ended December 31, 2018
Duke Energy Duke Energy
Florida
Progress
Progress
Energy
Duke Energy
Ohio
Duke Energy
Indiana
Piedmont
Duke
Energy
$ 298
$
(2)
1
10
Duke Energy
Carolinas
$ 170
$ —
—
—
$ 40
$
1
—
(4)
$ 31
$ —
—
—
$
9
$ —
—
—
$ —
$
9
$ —
$ (3)
$ —
Reconciliation of Funded Status to Net Amount Recognized
(in millions)
Change in Projected Benefit Obligation
Obligation at prior measurement date
Service cost
Interest cost
Actuarial loss
Transfers
Benefits paid
Obligation at measurement date
Accumulated Benefit Obligation at measurement date
Change in Fair Value of Plan Assets
Plan assets at prior measurement date
Employer contributions
Actual return on plan assets
Benefits paid
Transfers
Plan assets at measurement date
Funded status of plan
Year Ended December 31, 2019
Duke
Energy
$ 7,869
150
317
716
—
(731)
$ 8,321
Duke
Energy
Carolinas
$ 1,954
47
75
101
11
(265)
$ 1,923
Progress
Energy
$ 2,433
43
100
223
—
(191)
$ 2,608
Duke
Energy
Progress
$ 1,125
25
45
87
—
(112)
$ 1,170
Duke
Energy
Florida
$ 1,295
18
54
135
—
(78)
$ 1,424
$ 8,262
$ 1,923
$ 2,578
$ 1,170
$ 1,392
$ 8,233
77
1,331
(731)
—
$ 8,910
$
589
$ 2,168
7
342
(265)
11
$ 2,263
$
340
$ 2,606
57
426
(191)
—
$ 2,898
$
290
$ 1,268
4
204
(112)
—
$ 1,364
$
194
$ 1,322
53
218
(78)
—
$ 1,515
$
91
188
$ 10
$ —
—
—
$ —
Duke
Energy
Ohio
$ 435
4
18
54
—
(30)
$ 481
$ 471
$ 405
2
66
(30)
—
$ 443
$ (38)
$ 30
$
8
$ —
—
—
$ —
—
—
$ —
$ —
Duke
Energy
Indiana
Piedmont
$ 618
8
26
87
—
(46)
$ 693
$ 686
$ 611
2
100
(46)
—
$ 667
$ (26)
$ 264
5
10
33
—
(20)
$ 292
$ 292
$ 305
1
49
(20)
—
$ 335
$
43
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) Year Ended December 31, 2018
Duke
Energy
$ 8,448
174
299
(485)
—
(567)
$ 7,869
Duke
Energy
Carolinas
$ 2,029
56
72
(44)
—
(159)
$ 1,954
Progress
Energy
$ 2,637
49
94
(204)
—
(143)
$ 2,433
Duke
Energy
Progress
$ 1,211
28
43
(87)
—
(70)
$ 1,125
Duke
Energy
Florida
$ 1,410
21
50
(114)
—
(72)
$ 1,295
$ 7,818
$ 1,954
$ 2,404
$ 1,125
$ 1,265
$ 9,003
141
(344)
(567)
—
$ 8,233
$
364
$ 2,372
46
(91)
(159)
—
$ 2,168
$
214
$ 2,814
45
(110)
(143)
—
$ 2,606
$
173
$ 1,366
25
(53)
(70)
—
$ 1,268
$
143
$ 1,429
20
(55)
(72)
—
$ 1,322
$
27
Duke
Energy
Ohio
$ 479
5
17
(29)
—
(37)
$ 435
$ 425
$ 458
—
(16)
(37)
—
$ 405
$ (30)
Duke
Energy
Indiana
Piedmont
$ 669
10
23
(29)
—
(55)
$ 618
$ 614
$ 684
8
(26)
(55)
—
$ 611
$
(7)
$ 313
7
11
(18)
(16)
(33)
$ 264
$ 264
$ 368
—
(14)
(33)
(16)
$ 305
$
41
(in millions)
Change in Projected Benefit Obligation
Obligation at prior measurement date
Service cost
Interest cost
Actuarial gain
Transfers
Benefits paid
Obligation at measurement date
Accumulated Benefit Obligation at measurement date
Change in Fair Value of Plan Assets
Plan assets at prior measurement date
Employer contributions
Actual return on plan assets
Benefits paid
Transfers
Plan assets at measurement date
Funded status of plan
Amounts Recognized in the Consolidated Balance Sheets
(in millions)
Prefunded pension(a)
Noncurrent pension liability(b)
Net asset (liability) recognized
Regulatory assets
Accumulated other comprehensive (income) loss
Deferred income tax benefit
Prior service credit
Net actuarial loss
Net amounts recognized in accumulated other comprehensive loss
Amounts to be recognized in net periodic pension costs
in the next year
Unrecognized net actuarial loss
Unrecognized prior service credit
Duke
Energy
$
$
$
621
32
589
$ 1,972
$
$
$
(23)
(3)
111
85
135
(32)
December 31, 2019
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
$ 340
$ —
$ 340
$ 420
$ —
—
—
$ —
$ 322
$ 32
$ 290
$ 717
$
$
(1)
—
3
2
$ 194
$ —
$ 194
$ 313
$ —
—
—
$ —
Duke
Energy
Florida
$ 123
$ 32
$ 91
$ 404
$ (1)
—
3
2
$
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
$ 38
$ 76
$ (38)
$ 112
$ —
—
—
$ —
$
$
57
83
$ (26)
$ 204
$ —
—
—
$ —
$ 43
$ —
$ 43
$ 81
$ —
—
—
$ —
$
29
(8)
$ 43
(3)
$
19
(2)
$ 24
(1)
$
7
(1)
$
10
(2)
$
9
(9)
189
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) (in millions)
Prefunded pension(a)
Noncurrent pension liability(b)
Net asset recognized
Regulatory assets
Accumulated other comprehensive (income) loss
Deferred income tax benefit
Prior service credit
Net actuarial loss
Net amounts recognized in accumulated other comprehensive loss
Amounts to be recognized in net periodic pension costs
in the next year
Unrecognized net actuarial loss
Unrecognized prior service credit
Duke
Energy
$
$
$
433
69
364
$ 2,184
$
$
$
$
(43)
(4)
126
79
97
(32)
Duke
Energy
Carolinas
Progress
Energy
December 31, 2018
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
$ 214
$ —
$ 214
$ 576
$ —
—
—
$ —
$ 242
$ 69
$ 173
$ 796
$
$
(2)
—
5
3
$ 143
$ —
$ 143
$ 372
$ —
—
—
$ —
$ 96
$ 69
$ 27
$ 424
$ —
—
—
$ —
$ 24
$ 54
$ (30)
$ 100
$ —
—
—
$ —
$
$
$
39
46
(7)
$ 182
$ —
—
—
$ —
$ 41
$ —
$ 41
$ 81
$ —
—
—
$ —
$
$
22
(8)
$ 37
(3)
$
$
$
13
(2)
$ 24
(1)
$
$
3
$ —
$
$
5
(2)
$
7
$ (9)
(a)
(b)
Included in Other within Other Noncurrent Assets on the Consolidated Balance Sheets.
Included in Accrued pension and other post-retirement benefit costs on the Consolidated Balance Sheets.
Information for Plans with Accumulated Benefit Obligation in Excess of Plan Assets
(in millions)
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
(in millions)
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
December 31, 2019
Duke
Energy
Ohio
$
155
146
79
Duke
Energy
Ohio
$
123
115
69
Duke
Energy
Indiana
$ 260
252
177
Duke
Energy
Indiana
$ 203
199
159
December 31, 2018
Duke
Energy
Progress
Energy
$
679
651
610
$ 679
651
610
Duke
Energy
Florida
$ 679
651
610
Assumptions Used for Pension Benefits Accounting
The discount rate used to determine the current year pension obligation and following year’s pension expense is based on a bond selection-settlement portfolio
approach. This approach develops a discount rate by selecting a portfolio of high quality corporate bonds that generate sufficient cash flow to provide for projected
benefit payments of the plan. The selected bond portfolio is derived from a universe of non-callable corporate bonds rated Aa quality or higher. After the bond portfolio
is selected, a single interest rate is determined that equates the present value of the plan’s projected benefit payments discounted at this rate with the market value
of the bonds selected.
The average remaining service period for participants in active plans and life expectancy of participants in inactive plans is 12 years for Duke Energy, Duke
Energy Carolinas, Progress Energy and Duke Energy Florida, 13 years for Duke Energy Progress, Duke Energy Indiana and Duke Energy Ohio, and 9 years for Piedmont.
190
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) The following tables present the assumptions or range of assumptions used for pension benefit accounting.
Benefit Obligations
Discount rate
Salary increase
Net Periodic Benefit Cost
Discount rate
Salary increase
Expected long-term rate of return on plan assets
Expected Benefit Payments
(in millions)
Years ending December 31,
2020
2021
2022
2023
2024
2025-2029
NON-QUALIFIED PENSION PLANS
2019
December 31,
2018
2017
3.30%
3.50% – 4.00%
4.30%
3.50% – 4.00%
3.60%
3.50% – 4.00%
4.30%
3.50% – 4.00%
6.85%
3.60%
3.50% – 4.00%
6.50%
4.10%
4.00% – 4.50%
6.50% – 6.75%
Duke
Energy
$ 643
653
649
649
638
2,851
Duke
Energy
Carolinas
$ 167
171
177
174
168
714
Progress
Energy
$ 169
178
176
182
184
871
Duke
Energy
Progress
$
89
95
92
95
96
419
Duke
Energy
Florida
$ 79
82
84
86
87
448
Duke
Energy
Ohio
$ 37
37
37
36
35
156
Duke
Energy
Indiana
$ 50
50
49
48
48
220
Piedmont
$ 28
24
22
21
20
87
The accumulated benefit obligation, which equals the projected benefit obligation for non-qualified pension plans, was $318 million for Duke Energy, $15 million
for Duke Energy Carolinas, $110 million for Progress Energy, $32 million for Duke Energy Progress, $45 million for Duke Energy Florida, $4 million for Duke Energy
Ohio, $3 million for Duke Energy Indiana and $4 million for Piedmont as of December 31, 2019.
Employer contributions, which equal benefits paid for non-qualified pension plans, were $25 million for Duke Energy, $2 million for Duke Energy Carolinas,
$9 million for Progress Energy, $3 million for Duke Energy Progress and $3 million for Duke Energy Florida for the year ended December 31, 2019. Employer
contributions were not material for Duke Energy Ohio, Duke Energy Indiana or Piedmont for the year ended December 31, 2019.
Net periodic pension costs for non-qualified pension plans were not material for the years ended December 31, 2019, 2018 or 2017.
OTHER POST-RETIREMENT BENEFIT PLANS
Duke Energy provides, and the Subsidiary Registrants participate in, some health care and life insurance benefits for retired employees on a contributory and
non-contributory basis. Employees are eligible for these benefits if they have met age and service requirements at retirement, as defined in the plans. The health care
benefits include medical, dental and prescription drug coverage and are subject to certain limitations, such as deductibles and copayments.
Duke Energy did not make any pre-funding contributions to its other post-retirement benefit plans during the years ended December 31, 2019, 2018 or 2017.
191
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) Components of Net Periodic Other Post-Retirement Benefit Costs
(in millions)
Service cost
Interest cost on accumulated post-retirement benefit
obligation
Expected return on plan assets
Amortization of actuarial loss
Amortization of prior service credit
Net periodic post-retirement benefit costs(a)(b)
(in millions)
Service cost
Interest cost on accumulated post-retirement benefit
obligation
Expected return on plan assets
Amortization of actuarial loss
Amortization of prior service credit
Net periodic post-retirement benefit costs(a)(b)
(in millions)
Service cost
Interest cost on accumulated post-retirement benefit
obligation
Expected return on plan assets
Amortization of actuarial loss (gain)
Amortization of prior service credit
Curtailment credit(c)
Net periodic post-retirement benefit costs(a)(b)
Duke
Energy
$
4
30
(12)
4
(19)
7
$
Duke
Energy
$
6
28
(13)
6
(19)
8
$
Duke
Energy
$
4
34
(14)
10
(115)
(30)
$ (111)
Duke
Energy
Carolinas
$
1
7
(7)
2
(5)
(2)
$
Duke
Energy
Carolinas
$
1
7
(8)
3
(5)
(2)
$
Duke
Energy
Carolinas
$
1
8
(8)
(2)
(10)
(4)
$ (15)
Year Ended December 31, 2019
Progress
Energy
$
1
12
—
1
(8)
6
$
Duke
Energy
Progress
$ —
7
—
—
(1)
6
$
Duke
Energy
Florida
$
1
5
—
1
(7)
$ —
Year Ended December 31, 2018
Progress
Energy
$
1
12
—
1
(8)
6
$
Duke
Energy
Progress
$ —
6
—
1
(1)
6
$
Duke
Energy
Florida
$
1
6
—
—
(7)
$ —
Year Ended December 31, 2017
Progress
Energy
$ —
13
—
21
(84)
(16)
(66)
$
Duke
Energy
Progress
$ —
7
—
12
(54)
—
$ (35)
Duke
Energy
Florida
$ —
6
—
9
(30)
(16)
$ (31)
Duke
Energy
Ohio
$ —
1
—
—
(1)
$ —
Duke
Energy
Ohio
$
1
1
—
—
(1)
1
$
Duke
Energy
Ohio
$ —
1
—
(2)
—
(2)
$ (3)
Duke
Energy
Indiana
$
1
3
—
4
(1)
7
$
Duke
Energy
Indiana
$
1
3
—
4
(1)
7
$
Duke
Energy
Indiana
$ —
3
(1)
(1)
(1)
(2)
$ (2)
Piedmont
$ —
1
(1)
—
(2)
$ (2)
Piedmont
$
1
1
(2)
—
(2)
$ (2)
Piedmont
$
1
1
(2)
1
—
—
1
$
(a) Duke Energy amounts exclude $6 million, $7 million and $7 million for the years ended December 2019, 2018 and 2017, respectively, of regulatory asset amortization resulting from purchase accounting adjustments
associated with Duke Energy’s merger with Cinergy in April 2006.
(b) Duke Energy Ohio amounts exclude $2 million, $2 million and $2 million for the years ended December 2019, 2018 and 2017, respectively, of regulatory asset amortization resulting from purchase accounting adjustments
associated with Duke Energy’s merger with Cinergy in April 2006.
(c) Curtailment credit resulted from a reduction in average future service of plan participants due to a plan amendment.
192
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) Amounts Recognized in Accumulated Other Comprehensive Income and Regulatory Assets and Liabilities
(in millions)
Regulatory assets, net increase (decrease)
Regulatory liabilities, net increase (decrease)
Accumulated other comprehensive (income) loss
Deferred income tax benefit
Amortization of prior year actuarial gain
Net amount recognized in accumulated other
comprehensive income
(in millions)
Regulatory assets, net increase (decrease)
Regulatory liabilities, net increase (decrease)
Accumulated other comprehensive (income) loss
Deferred income tax benefit
Amortization of prior year prior service credit
Net amount recognized in accumulated other
comprehensive income
Duke
Energy
$ (127)
$ (152)
$ —
(4)
$
(4)
Duke
Energy
$ 137
$ 154
$
(1)
1
$ —
Duke
Energy
Carolinas
$ —
1
$
$ —
—
$ —
Duke
Energy
Carolinas
$ —
$ (6)
$ —
—
$ —
Duke
Energy
Ohio
$ —
$ (1)
$ —
—
$ —
Duke
Energy
Ohio
$ —
2
$
$ —
—
$ —
Duke
Energy
Indiana
$ (5)
$ (4)
$ —
—
Piedmont
$ —
3
$
$ —
—
$ —
$ —
Duke
Energy
Indiana
$ (5)
3
$
$ —
—
Piedmont
$
4
$ —
$ —
—
$ —
$ —
Year Ended December 31, 2019
Duke
Energy
Florida
Duke
Energy
Progress
Progress
Energy
$ (127)
$ (149)
$ —
—
$ —
$ (82)
$ (93)
$ —
—
$ —
$ (45)
$ (56)
$ —
—
$ —
Year Ended December 31, 2018
Duke
Energy
Florida
Duke
Energy
Progress
Progress
Energy
$ 133
$ 149
$ —
—
$ —
$ 84
$ 93
$ —
—
$ —
$ 49
$ 56
$ —
—
$ —
193
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) Funded status of plan
$ (503)
$ (20)
$ (59)
Reconciliation of Funded Status to Accrued Other Post-Retirement Benefit Costs
Year Ended December 31, 2019
Duke
Energy
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
$
$
$
$
728
4
30
16
28
—
(83)
723
195
32
(83)
60
16
220
Duke
Energy
$ 813
6
28
18
(51)
—
(86)
(in millions)
Change in Projected Benefit Obligation
Accumulated post-retirement benefit obligation
at prior measurement date
Service cost
Interest cost
Plan participants’ contributions
Actuarial losses
Transfers
Benefits paid
Accumulated post-retirement benefit
obligation at measurement date
Change in Fair Value of Plan Assets
Plan assets at prior measurement date
Actual return on plan assets
Benefits paid
Employer contributions
Plan participants’ contributions
Plan assets at measurement date
(in millions)
Change in Projected Benefit Obligation
Accumulated post-retirement benefit obligation
at prior measurement date
Service cost
Interest cost
Plan participants’ contributions
Actuarial losses (gains)
Transfers
Benefits paid
Accumulated post-retirement benefit
obligation at measurement date
Change in Fair Value of Plan Assets
Plan assets at prior measurement date
Actual return on plan assets
Benefits paid
Employer contributions (reimbursements)
Plan participants’ contributions
Plan assets at measurement date
Funded status of plan
$ 174
1
7
3
9
—
(19)
$
303
1
12
6
13
—
(32)
$ 166
—
7
3
9
—
(17)
$ 137
1
5
2
5
—
(15)
$ 29
—
1
1
1
—
(3)
$ 175
$
303
$ 168
$ 135
$ 29
$ 115
20
(19)
11
3
$ 130
$ (45)
$ —
(1)
(32)
26
6
(1)
$
$ (304)
$ —
—
(17)
13
3
(1)
$
$ (169)
$ —
—
(15)
13
2
$ —
$ (135)
$
$
8
1
(3)
2
1
9
$
$
$
$
67
1
3
2
2
—
(11)
64
5
—
(11)
9
2
5
Year Ended December 31, 2018
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
$ 189
1
7
3
(8)
—
(18)
$
342
1
12
6
(23)
—
(35)
$ 184
—
6
4
(9)
—
(19)
$ 156
1
6
3
(13)
—
(16)
$ 30
1
1
1
(2)
—
(2)
$ 78
1
3
2
(5)
—
(12)
$ 728
$ 174
$
303
$ 166
$ 137
$ 29
$ 67
$ 225
(8)
(86)
46
18
$ 195
$ (533)
$ 133
(5)
(18)
2
3
$ 115
$ (59)
$ —
—
(35)
29
6
$ —
$ (303)
$ —
—
(19)
15
4
$ —
$ (166)
$ —
—
(16)
13
3
$ —
$ (137)
$
7
—
(2)
2
1
$
8
$ (21)
$ 11
—
(12)
4
2
$
5
$ (62)
194
$ 30
—
1
—
—
—
(1)
$ 30
$ 29
6
(1)
—
—
$ 34
$
4
$
$
$
$
$
32
1
1
—
(1)
(1)
(2)
30
31
(1)
(2)
1
—
29
(1)
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) Amounts Recognized in the Consolidated Balance Sheets
(in millions)
Current post-retirement liability(a)
Noncurrent post-retirement liability(b)
Total accrued post-retirement liability
Regulatory assets
Regulatory liabilities
Accumulated other comprehensive (income) loss
Deferred income tax expense
Prior service credit
Net actuarial gain
Net amounts recognized in accumulated
other comprehensive income
Amounts to be recognized in net periodic pension
expense in the next year
Unrecognized net actuarial loss
Unrecognized prior service credit
(in millions)
Current post-retirement liability(a)
Noncurrent post-retirement liability(b)
Total accrued post-retirement liability
Regulatory assets
Regulatory liabilities
Accumulated other comprehensive (income) loss
Deferred income tax expense
Prior service credit
Net actuarial gain
Net amounts recognized in accumulated
other comprehensive income
Amounts to be recognized in net periodic pension
expense in the next year
Unrecognized net actuarial loss (gain)
Unrecognized prior service credit
December 31, 2019
Duke
Energy
$
9
494
$ 503
$ 135
$ 149
$
3
(2)
(13)
Duke
Energy
Carolinas
$ —
45
45
$
$ —
$
39
$ —
—
—
Progress
Energy
$
5
299
$ 304
$ 135
$ —
$ —
—
—
Duke
Energy
Progress
$
3
166
$ 169
$
82
$ —
$ —
—
—
Duke
Energy
Florida
$
2
133
$ 135
$
53
$ —
$ —
—
—
Duke
Energy
Ohio
$
1
19
$ 20
$ —
$ 17
$ —
—
—
Duke
Energy
Indiana
$ —
59
59
$
$
$
36
63
$ —
—
—
Piedmont
$ —
(4)
(4)
$
$ —
$
3
$ —
—
—
$ (12)
$ —
$ —
$ —
$ —
$ —
$ —
$ —
$
5
(14)
$
3
(4)
$
1
(3)
$ —
$
(1)
1
(2 )
$ —
$ —
$ —
(1)
(1)
(2)
December 31, 2018
Duke
Energy
$
8
525
$ 533
$ 262
$ 301
$
3
(2)
(9)
Duke
Energy
Carolinas
$ —
59
59
$
$ —
$
38
$ —
—
—
Progress
Energy
$
5
298
$ 303
$ 262
$ 149
$ —
—
—
Duke
Energy
Progress
$
3
163
$ 166
$ 164
$
93
$ —
—
—
Duke
Energy
Florida
$
2
135
$ 137
$
$
98
56
$ —
—
—
Duke
Energy
Ohio
$
2
19
$ 21
$ —
$ 18
$ —
—
—
Duke
Energy
Indiana
$ —
62
62
$
$
$
41
67
$ —
—
—
Piedmont
$ —
1
1
$
$ —
$ —
$ —
—
—
$
(8)
$ —
$ —
$ —
$ —
$ —
$ —
$ —
$
4
(19)
$
2
(5)
$
1
(7)
$ —
$ —
$ —
$ —
$ —
(1)
(6 )
(1)
(1)
(2)
(a)
(b)
Included in Other within Current Liabilities on the Consolidated Balance Sheets.
Included in Accrued pension and other post-retirement benefit costs on the Consolidated Balance Sheets.
Assumptions Used for Other Post-Retirement Benefits Accounting
The discount rate used to determine the current year other post-retirement benefits obligation and following year’s other post-retirement benefits expense is
based on a bond selection-settlement portfolio approach. This approach develops a discount rate by selecting a portfolio of high quality corporate bonds that generate
sufficient cash flow to provide for projected benefit payments of the plan. The selected bond portfolio is derived from a universe of non-callable corporate bonds rated
Aa quality or higher. After the bond portfolio is selected, a single interest rate is determined that equates the present value of the plan’s projected benefit payments
discounted at this rate with the market value of the bonds selected.
195
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) The average remaining service period of active covered employees is eight years for Duke Energy and Duke Energy Carolinas, seven years for Progress Energy,
Duke Energy Florida, and Duke Energy Ohio, and six years for Duke Energy Progress, Duke Energy Indiana, and Piedmont.
The following tables present the assumptions used for other post-retirement benefits accounting.
Benefit Obligations
Discount rate
Net Periodic Benefit Cost
Discount rate
Expected long-term rate of return on plan assets
Assumed tax rate
Assumed Health Care Cost Trend Rate
Health care cost trend rate assumed for next year
Rate to which the cost trend is assumed to decline (the ultimate trend rate)
Year that rate reaches ultimate trend
Sensitivity to Changes in Assumed Health Care Cost Trend Rates
December 31,
2019
2018
2017
3.30%
4.30%
3.60%
4.30%
6.85%
23%
3.60%
6.50%
35%
4.10%
6.50%
35%
December 31,
2019
6.00%
4.75%
2026
2018
6.50%
4.75%
2024
(in millions)
1-Percentage Point Increase
Effect on total service and interest costs
Effect on post-retirement benefit obligation
1-Percentage Point Decrease
Effect on total service and interest costs
Effect on post-retirement benefit obligation
Expected Benefit Payments
(in millions)
Years ending December 31,
2020
2021
2022
2023
2024
2025-2029
Year Ended December 31, 2019
Duke
Energy
$
1
22
(1)
(20)
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
$ —
5
$
—
(5)
1
9
(1)
(8)
$
1
5
(1 )
(4 )
Duke
Energy
Florida
$ —
4
—
(4)
Duke
Energy
Ohio
$ —
1
—
(1)
Duke
Energy
Indiana
$ —
2
—
(2)
Piedmont
$ —
1
—
(1)
Duke
Energy
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
$ 76
70
66
63
59
246
$18
17
16
15
15
60
$ 29
28
27
25
24
101
$16
15
14
14
13
55
$13
13
12
12
11
46
$ 4
3
3
3
3
11
$ 8
7
7
6
6
23
$ 2
2
2
2
2
11
196
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) PLAN ASSETS
Description and Allocations
Duke Energy Master Retirement Trust
Assets for both the qualified pension and other post-retirement benefits
are maintained in the Duke Energy Master Retirement Trust. Approximately 98%
of the Duke Energy Master Retirement Trust assets were allocated to qualified
pension plans and approximately 2% were allocated to other post-retirement
plans (comprised of 401(h) accounts), as of December 31, 2019, and 2018. The
investment objective of the Duke Energy Master Retirement Trust is to invest in
a diverse portfolio of assets that is expected to generate positive surplus return
over time (i.e. asset growth greater than liability growth) subject to a prudent
level of portfolio risk, for the purpose of enhancing the security of benefits for
plan participants.
As of December 31, 2019, Duke Energy assumes pension and other
post-retirement plan assets will generate a long-term rate of return of 6.85%.
The expected long-term rate of return was developed using a weighted
average calculation of expected returns based primarily on future expected
returns across asset classes considering the use of active asset managers,
where applicable. The asset allocation targets were set after considering the
investment objective and the risk profile. Equity securities are held for their
higher expected returns. Debt securities are primarily held to hedge the qualified
pension plan liability. Real assets, return seeking fixed income, hedge funds
and other global securities are held for diversification. Investments within asset
classes are diversified to achieve broad market participation and reduce the
impact of individual managers or investments.
Effective January 1, 2019, the target asset allocation for the Duke Energy
Retirement Master Trust is 58% liability hedging assets and 42% return-seeking
assets. Duke Energy periodically reviews its asset allocation targets, and over
time, as the funded status of the benefit plans increase, the level of asset
risk relative to plan liabilities may be reduced to better manage Duke Energy’s
benefit plan liabilities and reduce funded status volatility.
The Duke Energy Master Retirement Trust is authorized to engage in the
lending of certain plan assets. Securities lending is an investment management
enhancement that utilizes certain existing securities of the Duke Energy Master
Retirement Trust to earn additional income. Securities lending involves the
loaning of securities to approved parties. In return for the loaned securities, the
Duke Energy Master Retirement Trust receives collateral in the form of cash and
securities as a safeguard against possible default of any borrower on the return
of the loan under terms that permit the Duke Energy Master Retirement Trust
to sell the securities. The Duke Energy Master Retirement Trust mitigates credit
risk associated with securities lending arrangements by monitoring the fair
value of the securities loaned, with additional collateral obtained or refunded
as necessary. The fair value of securities on loan was approximately $351
million and $154 million at December 31, 2019, and 2018, respectively. Cash
and securities obtained as collateral exceeded the fair value of the securities
loaned at December 31, 2019, and 2018, respectively. Securities lending income
earned by the Duke Energy Master Retirement Trust was immaterial for the years
ended December 31, 2019, 2018 and 2017, respectively.
Qualified pension and other post-retirement benefits for the Subsidiary
Registrants are derived from the Duke Energy Master Retirement Trust, as such,
each are allocated their proportionate share of the assets discussed below.
The following table includes the target asset allocations by asset class at December 31, 2019, and the actual asset allocations for the Duke Energy Master
Retirement Trust.
U.S. equity securities
Global equity securities
Global private equity securities
Debt securities
Return seeking debt securities
Hedge funds
Real estate and cash
Other global securities
Total
Other post-retirement assets
Target
Allocation
—%
28%
1%
58%
4%
3%
6%
—%
100%
Actual Allocation at December 31,
2019
—%
27%
1%
57%
5%
3%
7%
—%
100%
2018
11%
18%
2%
63%
—%
2%
2%
2%
100%
Duke Energy’s other post-retirement assets are comprised of VEBA trusts and 401(h) accounts held within the Duke Energy Master Retirement Trust. Duke
Energy’s investment objective is to achieve sufficient returns, subject to a prudent level of portfolio risk, for the purpose of promoting the security of plan benefits for
participants.
The following table presents target and actual asset allocations for the VEBA trusts at December 31, 2019.
U.S. equity securities
Non-U.S. equity securities
Real estate
Debt securities
Cash
Total
Target
Allocation
33%
7%
2%
45%
13%
100%
Actual Allocation at December 31,
2019
35%
9%
2%
37%
17%
100%
2018
43%
8%
2%
40%
7%
100%
197
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued)
Fair Value Measurements
Investments in real estate limited partnerships
Duke Energy classifies recurring and non-recurring fair value
measurements based on the fair value hierarchy as discussed in Note 17.
Valuation methods of the primary fair value measurements disclosed
below are as follows:
Investments in equity securities
Investments in equity securities are typically valued at the closing price in
the principal active market as of the last business day of the reporting period.
Principal active markets for equity prices include published exchanges such
as NASDAQ and NYSE. Foreign equity prices are translated from their trading
currency using the currency exchange rate in effect at the close of the principal
active market. Prices have not been adjusted to reflect after-hours market
activity. The majority of investments in equity securities are valued using
Level 1 measurements. When the price of an institutional commingled fund is
unpublished, it is not categorized in the fair value hierarchy, even though the
funds are readily available at the fair value.
Investments in corporate debt securities and U.S. government securities
Most debt investments are valued based on a calculation using interest
rate curves and credit spreads applied to the terms of the debt instrument
(maturity and coupon interest rate) and consider the counterparty credit rating.
Most debt valuations are Level 2 measurements. If the market for a particular
fixed-income security is relatively inactive or illiquid, the measurement is
Level 3. U.S. Treasury debt is typically Level 2.
Investments in short-term investment funds
Investments in short-term investment funds are valued at the net asset
value of units held at year end and are readily redeemable at the measurement
date. Investments in short-term investment funds with published prices
are valued as Level 1. Investments in short-term investment funds with
unpublished prices are valued as Level 2.
Duke Energy Master Retirement Trust
Investments in real estate limited partnerships are valued by the trustee
at each valuation date (monthly). As part of the trustee’s valuation process,
properties are externally appraised generally on an annual basis, conducted
by reputable, independent appraisal firms, and signed by appraisers that are
members of the Appraisal Institute, with the professional designation MAI. Fair
value is defined as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the
measurement date. There are three valuation techniques that can be used to
value investments in real estate assets: the market, income or cost approach.
The appropriateness of each valuation technique depends on the type of
asset or business being valued. In addition, the trustee may cause additional
appraisals to be performed as warranted by specific asset or market conditions.
Property valuations and the salient valuation-sensitive assumptions of each
direct investment property are reviewed by the trustee quarterly and values
are adjusted if there has been a significant change in circumstances related to
the investment property since the last valuation. Value adjustments for interim
capital expenditures are only recognized to the extent that the valuation process
acknowledges a corresponding increase in fair value. An independent firm is
hired to review and approve quarterly direct real estate valuations. Key inputs
and assumptions used to determine fair value includes among others, rental
revenue and expense amounts and related revenue and expense growth rates,
terminal capitalization rates and discount rates. Development investments
are valued using cost incurred to date as a primary input until substantive
progress is achieved in terms of mitigating construction and leasing risk at
which point a discounted cash flow approach is more heavily weighted. Key
inputs and assumptions in addition to those noted above used to determine
the fair value of development investments include construction costs and the
status of construction completion and leasing. Investments in real estate limited
partnerships are valued at net asset value of units held at year end and are not
readily redeemable at the measurement date. Investments in real estate limited
partnerships are not categorized within the fair value hierarchy.
The following tables provide the fair value measurement amounts for the Duke Energy Master Retirement Trust qualified pension and other post-retirement assets.
(in millions)
Equity securities
Corporate debt securities
Short-term investment funds
Partnership interests
Hedge funds
Real estate limited partnerships
U.S. government securities
Guaranteed investment contracts
Governments bonds – foreign
Cash
Net pending transactions and other investments
Total assets(a)
December 31, 2019
Total Fair Value
$2,730
3,999
545
104
206
—
1,231
11
78
75
Level 1
$2,712
—
455
—
—
—
—
—
—
75
Level 2
$ —
3,999
90
—
—
—
1,231
—
78
—
Level 3
$ —
—
—
—
—
—
—
11
—
—
Not
Categorized(b)
18
$
—
—
104
206
—
—
—
—
—
46
(43)
89
—
—
$9,025
$3,199
$5,487
$ 11
$
328
(a) Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana, and Piedmont were allocated approximately 26%, 31%, 15%, 17%, 5%, 7%, and 4%,
respectively, of the Duke Energy Master Retirement Trust at December 31, 2019. Accordingly, all amounts included in the table above are allocable to the Subsidiary Registrants using these percentages.
(b) Certain investments that are measured at fair value using the net asset value per share practical expedient have not been categorized in the fair value hierarchy.
198
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued)
(in millions)
Equity securities
Corporate debt securities
Short-term investment funds
Partnership interests
Hedge funds
Real estate limited partnerships
U.S. government securities
Guaranteed investment contracts
Governments bonds – foreign
Cash
Net pending transactions and other investments
Total assets(a)
December 31, 2018
Total Fair Value
$2,373
4,054
363
120
226
144
961
27
30
28
(2)
Level 1
$1,751
—
279
—
—
—
—
—
—
28
(6)
Level 2
$ —
4,054
84
—
—
—
961
—
30
—
4
Level 3
$ —
—
—
—
—
—
—
27
—
—
—
Not
Categorized(b)
622
$
—
—
120
226
144
—
—
—
—
—
$8,324
$2,052
$5,133
$ 27
$ 1,112
(a) Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana, and Piedmont were allocated approximately 27%, 31%, 15%, 16%, 5%, 7%, and 4%,
respectively, of the Duke Energy Master Retirement Trust and Piedmont’s Pension assets at December 31, 2018. Accordingly, all amounts included in the table above are allocable to the Subsidiary Registrants using these
percentages.
(b) Certain investments that are measured at fair value using the net asset value per share practical expedient have not been categorized in the fair value hierarchy.
The following table provides a reconciliation of beginning and ending balances of Duke Energy Master Retirement Trust qualified pension and other post-retirement
assets at fair value on a recurring basis where the determination of fair value includes significant unobservable inputs (Level 3).
(in millions)
Balance at January 1
Sales
Total gains and other, net
Transfer of Level 3 assets to other classifications
Balance at December 31
Other post-retirement assets
The following tables provide the fair value measurement amounts for VEBA trust assets.
2019
$ 27
(18)
2
—
$ 11
2018
$ 28
(1)
—
—
$ 27
(in millions)
Cash and cash equivalents
Real estate
Equity securities
Debt securities
Total assets
(in millions)
Cash and cash equivalents
Real estate
Equity securities
Debt securities
Total assets
199
$
$
December 31, 2019
Total Fair Value Level 2
9
9
1
1
22
22
18
18
$ 50
50
$
$
$
December 31, 2018
Total Fair Value Level 2
3
3
1
1
25
25
20
20
$ 49
49
$
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued)
EMPLOYEE SAVINGS PLANS
Retirement Savings Plan
Duke Energy or its affiliates sponsor, and the Subsidiary Registrants
participate in, employee savings plans that cover substantially all U.S. employees.
Most employees participate in a matching contribution formula where Duke
Energy provides a matching contribution generally equal to 100% of employee
before-tax and Roth 401(k) contributions of up to 6% of eligible pay per pay
period. Dividends on Duke Energy shares held by the savings plans are charged
to retained earnings when declared and shares held in the plans are considered
outstanding in the calculation of basic and diluted EPS.
For new and rehired employees who are not eligible to participate in Duke
Energy’s defined benefit plans, an additional employer contribution of 4% of
eligible pay per pay period, which is subject to a three-year vesting schedule, is
provided to the employee’s savings plan account. Certain Piedmont employees
whose participation in a prior Piedmont defined benefit plan (that was frozen as
of December 31, 2017) are eligible for employer transition credit contributions
of 3% to 5% of eligible pay per period, for each pay period during the three-year
period ending December 31, 2020.
The following table includes pretax employer matching contributions made by Duke Energy and expensed by the Subsidiary Registrants.
Duke
Energy
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
$214
213
179
$66
68
61
$58
58
53
$38
40
37
$20
19
16
$5
4
3
$ 11
10
9
Piedmont
$ 13
12
7
(in millions)
Years ended December 31,
2019
2018
2017
24.
INCOME TAXES
Tax Act
On December 22, 2017, President Trump signed the Tax Act into law.
Among other provisions, the Tax Act lowered the corporate federal income tax
rate from 35% to 21%, limits interest deductions outside of regulated utility
operations, requires the normalization of excess deferred taxes associated
with property under the average rate assumption method as a prerequisite to
qualifying for accelerated depreciation and repealed the federal manufacturing
deduction. The Tax Act also repealed the corporate AMT and stipulates a refund
of 50% of remaining AMT credit carryforwards (to the extent the credits exceed
regular tax for the year) for tax years 2018, 2019, and 2020, with all remaining
AMT credits to be refunded in tax year 2021.
On December 22, 2017, the SEC staff issued Staff Accounting Bulletin
(SAB) 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act,
which provides guidance on accounting for the Tax Act’s impact. SAB 118
provides a measurement period, which in no case should extend beyond one
year from the Tax Act enactment date, during which a company acting in good
faith may complete the accounting for the impacts of the Tax Act under ASC
Topic 740. In accordance with SAB 118, a company must reflect the income tax
effects of the Tax Act in the reporting period in which the accounting under ASC
Topic 740 is complete. To the extent that a company’s accounting for certain
income tax effects of the Tax Act is incomplete, a company can determine a
reasonable estimate for those effects and record a provisional estimate in the
financial statements in the first reporting period in which a reasonable estimate
can be determined.
As of December 31, 2018, the accounting for the effects of the Tax Act
was complete. During the year ended December 31, 2018, Duke Energy recorded
the following measurement period adjustments in accordance with SAB 118:
• Additional tax expense of $23 million related to the completion of
the analysis of Duke Energy’s existing regulatory liability related to
deferred taxes;
• A $10 million tax benefit for the remeasurement of deferred tax
assets and deferred tax liabilities primarily related to the guidance on
200
bonus depreciation issued by the IRS in August 2018, affecting the
computation of the Company’s 2017 Federal income tax liability;
• Additional tax expense of $7 million related to the portion of the deferred
tax asset as of December 31, 2017, that represents nondeductible
long-term incentives under the Tax Act’s limitation on the deductibility
of executive compensation; and
• During the fourth quarter of 2018, the Company released the $76 million
valuation allowance that it recorded in the first quarter of 2018 as a
result of additional guidance published by the IRS that stated refundable
AMT credits would not be subject to sequestration.
• The majority of Duke Energy’s operations are regulated and it is
expected that the Subsidiary Registrants will ultimately pass on the
savings associated with the amount representing the remeasurement of
deferred tax balances related to regulated operations to customers. For
Duke Energy’s regulated operations, where the reduction is expected to
be returned to customers in future rates, the remeasurement has been
deferred as a regulatory liability. During 2018, Duke Energy recorded
an additional regulatory liability of $83 million, representing the
revaluation of those deferred tax balances. The Subsidiary Registrants
continue to respond to requests from regulators in various jurisdictions
to determine the timing and magnitude of savings they will pass on to
customers.
In addition, during 2018, Duke Energy reclassified $573 million of AMT
credit carryforwards from noncurrent deferred tax liabilities to a current federal
income tax receivable. In 2019, Duke Energy received a refund of $573 million
related to AMT credit carryforwards based on the filing of Duke Energy’s 2018
income tax return in 2019 and reclassified $286 million of AMT credits from
noncurrent deferred tax liabilities to a current federal income tax receivable.
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) Income Tax Expense
Components of Income Tax Expense
(in millions)
Current income taxes
Federal
State
Foreign
Total current income taxes
Deferred income taxes
Federal
State
Total deferred income taxes(a)
ITC amortization
Income tax expense from continuing operations
Tax benefit from discontinued operations
Total income tax expense included in Consolidated
Statements of Operations
Duke
Energy
$ (299)
10
2
(287)
855
(38)
817
(11)
519
(2)
Duke
Energy
Carolinas
$
164
13
—
177
175
(37)
138
(4)
311
—
Progress
Energy
$ (173)
(7)
—
(180)
422
17
439
(6)
253
—
Year Ended December 31, 2019
Duke
Energy
Progress
Duke
Energy
Florida
$ (36)
(3)
—
(39)
220
(18)
202
(6)
157
—
$
(43)
18
—
(25)
153
27
180
—
155
—
Duke
Energy
Ohio
$ (41)
(1)
—
(42)
77
5
82
—
40
—
Duke
Energy
Indiana
$ (23)
1
—
(22)
128
28
156
—
134
—
Piedmont
$ (92)
(1)
—
(93)
133
3
136
—
43
—
$
517
$
311
$ 253
$ 157
$
155
$ 40
$ 134
$ 43
(a) Total deferred income taxes includes the generation of tax credit carryforwards of $8 million at Duke Energy Carolinas. In addition, total deferred income taxes includes utilization of NOL carryforwards and tax credit
carryforwards of $243 million at Progress Energy, $35 million at Duke Energy Progress, $152 million at Duke Energy Florida, $25 million at Duke Energy Ohio, $60 million at Duke Energy Indiana, $90 million at Piedmont and
$775 million at Duke Energy.
(in millions)
Current income taxes
Federal
State
Foreign
Total current income taxes
Deferred income taxes
Federal
State
Total deferred income taxes(a)(b)
ITC amortization
Income tax expense from continuing operations
Tax benefit from discontinued operations
Total income tax expense included in Consolidated
Statements of Operations
Duke
Energy
$ (647)
(11)
3
(655)
1,064
49
1,113
(10)
448
(26)
Duke
Energy
Carolinas
$
(8)
6
—
(2)
299
11
310
(5)
303
—
Progress
Energy
$ (135)
(5)
—
(140)
341
20
361
(3)
218
—
Year Ended December 31, 2018
Duke
Energy
Progress
Duke
Energy
Florida
$ (71)
(5)
—
(76)
256
(17)
239
(3)
160
—
$
(49)
(10)
—
(59)
115
45
160
—
101
—
Duke
Energy
Ohio
$ 20
(1)
—
19
21
3
24
—
43
—
Duke
Energy
Indiana
Piedmont
$ 29
3
—
32
74
22
96
—
128
—
$ 67
1
—
68
(36)
5
(31)
—
37
—
$
422
$
303
$ 218
$ 160
$
101
$ 43
$ 128
$ 37
(a)
Includes benefits of NOL carryforwards and tax credit carryforwards of $22 million at Duke Energy Carolinas, $293 million at Progress Energy, $59 million at Duke Energy Progress, $219 million at Duke Energy Florida,
$17 million at Duke Energy Ohio, $21 million at Duke Energy Indiana and $39 million at Piedmont. In addition, total deferred income taxes includes utilization of NOL carryforwards and tax credit carryforwards of $18 million at
Duke Energy.
(b) For the year ended December 31, 2018, the Company has revised the December 31, 2017, estimates of the income tax effects of the Tax Act, in accordance with SAB 118. See the Statutory Rate Reconciliation section below
for additional information on the Tax Act’s impact on income tax expense.
201
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued)
(in millions)
Current income taxes
Federal
State
Foreign
Total current income taxes
Deferred income taxes
Federal
State
Total deferred income taxes(a)(b)
ITC amortization
Income tax expense from continuing operations
Tax benefit from discontinued operations
Total income tax expense included in Consolidated
Statements of Operations
Year Ended December 31, 2017
Duke
Energy
$ (247)
4
3
(240)
1,344
102
1,446
(10)
1,196
(6)
Duke
Energy
Carolinas
$
221
20
—
241
381
35
416
(5)
652
—
Progress
Energy
$ (436)
(5)
—
(441)
664
44
708
(3)
264
—
Duke
Energy
Progress
$ (95)
2
—
(93)
378
10
388
(3)
292
—
Duke
Energy
Florida
$ (188)
(11)
—
(199)
194
51
245
—
46
—
Duke
Energy
Ohio
$ (37)
2
—
(35)
99
(4)
95
(1)
59
—
Duke
Energy
Indiana
Piedmont
$ 128
21
—
149
138
14
152
—
301
—
$ (90)
(3)
—
(93)
147
8
155
—
62
—
$ 1,190
$
652
$ 264
$ 292
$
46
$ 59
$ 301
$ 62
(a)
Includes utilization of NOL carryforwards and tax credit carryforwards of $428 million at Duke Energy, $74 million at Progress Energy, $36 million at Duke Energy Florida, $17 million at Duke Energy Ohio, $42 million at Duke
Energy Indiana and $79 million at Piedmont. In addition, total deferred income taxes includes benefits of NOL carryforwards and tax credit carryforwards of $10 million at Duke Energy Carolinas and $1 million at Duke Energy
Progress.
(b) As a result of the Tax Act, Duke Energy’s deferred tax assets and liabilities were revalued as of December 31, 2017. See the Statutory Rate Reconciliation section below for additional information on the Tax Act’s impact on
income tax expense.
Duke Energy Income from Continuing Operations before Income Taxes
(in millions)
Domestic(a)
Foreign
Income from continuing operations before income taxes
Years Ended December 31,
2019
$ 4,053
44
$ 4,097
2018
$ 3,018
55
$ 3,073
2017
$ 4,207
59
$ 4,266
(a)
Includes a $16 million expense in 2017 related to the Tax Act impact on equity earnings included within Equity in earnings of unconsolidated affiliates on the Consolidated Statement of Operations.
Statutory Rate Reconciliation
The following tables present a reconciliation of income tax expense at the U.S. federal statutory tax rate to the actual tax expense from continuing operations.
(in millions)
Duke
Energy
Duke
Energy
Carolinas
Income tax expense, computed at the statutory rate of 21%
State income tax, net of federal income tax effect
Amortization of excess deferred income tax
AFUDC equity income
AFUDC equity depreciation
Renewable energy PTCs
Other tax credits
Tax true up
Other items, net
$
860
(22)
(121)
(52)
34
(120)
(23)
(64)
27
$
360
(19)
(29)
(9)
19
—
(11)
(9)
9
Income tax expense from continuing operations
$
519
$
311
Year Ended December 31, 2019
Progress
Energy
$ 332
8
(64)
(14)
10
—
(9)
(8)
(2)
$ 253
Duke
Energy
Progress
Duke
Energy
Florida
$ 202
(17)
(10)
(13)
5
—
(7)
(3)
—
$ 157
$ 178
35
(54)
(1)
5
—
(2)
(5)
(1)
$ 155
Duke
Energy
Ohio
$ 59
3
(12)
(3)
1
—
(1)
(7)
—
$ 40
Duke
Energy
Indiana
$ 120
22
(6)
(3)
4
—
(1)
(1)
(1)
$ 134
Piedmont
$ 51
2
(10)
—
—
—
(1)
—
1
$ 43
Effective tax rate
12.7%
18.1%
16.0%
16.3%
18.3%
14.3%
23.5%
17.6%
202
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued)
(in millions)
Duke
Energy
Duke
Energy
Carolinas
Income tax expense, computed at the statutory rate of 21%
State income tax, net of federal income tax effect
Amortization of excess deferred income tax
AFUDC equity income
AFUDC equity depreciation
Renewable energy PTCs
Other tax credits
Tax Act(a)
Other items, net
$
645
30
(61)
(42)
31
(129)
(28)
20
(18)
$
288
14
—
(15)
18
—
(7)
1
4
Income tax expense from continuing operations
$
448
$
303
Year Ended December 31, 2018
Progress
Energy
$ 263
13
(55)
(22)
9
—
(13)
25
(2)
$ 218
Duke
Energy
Progress
Duke
Energy
Florida
$ 174
(17)
(1)
(12)
5
—
(5)
19
(3)
$ 160
$ 137
28
(54)
(10)
4
—
(8)
—
4
$ 101
Duke
Energy
Ohio
$ 46
2
(3)
(2)
1
—
(1)
2
(2)
$ 43
Duke
Energy
Indiana
$ 109
20
(2)
(2)
4
—
(1)
—
—
$ 128
Piedmont
$ 35
4
—
—
—
—
(3)
—
1
$ 37
Effective tax rate
14.6%
22.1%
17.4%
19.3%
15.4%
19.6%
24.6%
22.3%
(a) For the year ended December 31, 2018, the Company revised the December 31, 2017 estimates of the income tax effects of the Tax Act, in accordance with SAB 118. Amounts primarily include but are not limited to items that
are excluded for ratemaking purposes related certain wholesale fixed rate contracts, remeasurement of nonregulated net deferred tax liabilities, Federal NOLs, and valuation allowance on foreign tax credits.
(in millions)
Income tax expense, computed at the statutory rate of 35%
State income tax, net of federal income tax effect
AFUDC equity income
Renewable energy PTCs
Tax Act(a)
Tax true up
Other items, net
Income tax expense from continuing operations
Year Ended December 31, 2017
Duke
Energy
$ 1,493
69
(81)
(132)
(112)
(52)
11
$ 1,196
Duke
Energy
Carolinas
$
653
36
(37)
—
15
(24)
9
$
652
Progress
Energy
$ 536
25
(32)
—
(246)
(19)
—
$ 264
Duke
Energy
Progress
$ 353
8
(17)
—
(40)
(13)
1
$ 292
Duke
Energy
Florida
$ 265
26
(16)
—
(226)
(7)
4
$ 46
Duke
Energy
Ohio
$ 88
(1)
(4)
—
(23)
(5)
4
$ 59
Duke
Energy
Indiana
$ 229
23
(8)
—
55
(6)
8
$ 301
Piedmont
$ 70
3
—
—
(12)
—
1
$ 62
Effective tax rate
28.0%
34.9%
17.2%
29.0%
6.1%
23.4%
46.0%
30.8%
(a) Amounts primarily include but are not limited to items that are excluded for ratemaking purposes related to abandoned or impaired assets, certain wholesale fixed rate contracts, remeasurement of nonregulated net deferred
tax liabilities, Federal NOLs, and valuation allowance on foreign tax credits.
Valuation allowances have been established for certain state NOL carryforwards and state income tax credits that reduce deferred tax assets to an amount that
will be realized on a more-likely-than-not basis. The net change in the total valuation allowance is included in State income tax, net of federal income tax effect, in the
above tables.
Valuation allowances have been established for foreign tax credits that reduce deferred tax assets to an amount that will be realized on a more-likely-than-not
basis. The net change in the total valuation allowance is included in Tax Act in the above tables.
203
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued)
DEFERRED TAXES
Net Deferred Income Tax Liability Components
(in millions)
Deferred credits and other liabilities
Lease obligations
Pension, post-retirement and other employee benefits
Progress Energy merger purchase accounting adjustments(a)
Tax credits and NOL carryforwards
Regulatory liabilities and deferred credits
Investments and other assets
Other
Valuation allowance
Total deferred income tax assets
Investments and other assets
Accelerated depreciation rates
Regulatory assets and deferred debits, net
Total deferred income tax liabilities
December 31, 2019
$
Duke
Energy
125
462
303
389
3,925
—
—
97
(587)
4,714
(1,664)
(10,813)
(1,115)
(13,592)
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
$
24
72
(5)
—
262
—
—
5
—
358
$
25
193
88
—
486
—
—
8
—
800
$
49
92
38
—
176
—
—
3
—
358
(981)
(3,254)
(44)
(4,279)
(577)
(3,798)
(887)
(5,262)
(390)
(1,918)
(438)
(2,746)
Duke
Energy
Florida
$ —
102
44
—
253
—
—
2
—
401
(190)
(1,913)
(477)
(2,580)
Duke
Energy
Ohio
Duke
Energy
Indiana
$
14
5
17
—
16
36
10
8
—
106
—
(1,028)
—
(1,028)
$
5
17
27
—
176
52
—
1
—
278
(12)
(1,416)
—
(1,428)
$
Piedmont
22
6
(3)
—
19
42
2
6
—
94
—
(802)
—
(802)
Net deferred income tax liabilities
$ (8,878)
$(3,921)
$(4,462)
$(2,388)
$(2,179)
$ (922)
$(1,150)
$ (708)
(a) Primarily related to finance lease obligations and debt fair value adjustments.
The following table presents the expiration of tax credits and NOL carryforwards.
(in millions)
General Business Credits
AMT credits
Federal NOL carryforwards(a)(f)
Capital loss carryforward(e)
State carryforwards and credits(b)(f)
Foreign NOL carryforwards(c)
Foreign Tax Credits(d)
Charitable contribution carryforwards
Total tax credits and NOL carryforwards
(a) A valuation allowance of $4 million has been recorded on the Federal NOL carryforwards, as presented in the Net Deferred Income Tax Liability Components table.
(b) A valuation allowance of $97 million has been recorded on the state NOL and credit carryforwards, as presented in the Net Deferred Income Tax Liability Components table.
(c) A valuation allowance of $12 million has been recorded on the foreign NOL carryforwards, as presented in the Net Deferred Income Tax Liability Components table.
(d) A valuation allowance of $387 million has been recorded on the foreign tax credits, as presented in the Net Deferred Income Tax Liability Components table.
(e) A valuation allowance of $87 million has been recorded on the Federal capital loss carryforward, as presented in the Net Deferred Income Tax Liability Components table.
Indefinite carryforward for Federal NOLs, and NOLs for states that have adopted the Tax Act’s NOL provisions, generated in tax years beginning after December 31, 2017.
(f)
December 31, 2019
Amount
$ 1,821
286
169
87
303
12
1,237
10
$ 3,925
Expiration Year
2039
2024 –
Refundable by 2021
2024 – Indefinite
2024
2020 – Indefinite
2037
2027 –
2027
2024 –
2024
2020 –
204
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued)
(in millions)
Deferred credits and other liabilities
Finance lease obligations
Pension, post-retirement and other employee benefits
Progress Energy merger purchase accounting adjustments(a)
Tax credits and NOL carryforwards
Regulatory liabilities and deferred credits
Investments and other assets
Other
Valuation allowance
Total deferred income tax assets
Investments and other assets
Accelerated depreciation rates
Regulatory assets and deferred debits, net
Other
Total deferred income tax liabilities
December 31, 2018
$
Duke
Energy
164
60
347
483
4,580
—
—
25
(484)
5,175
(1,317)
(10,124)
(1,540)
—
(12,981)
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
$
64
26
24
—
257
—
—
6
—
377
$
35
—
110
—
693
—
—
5
—
843
(795)
(3,207)
(64)
—
(4,066)
(430)
(3,369)
(985)
—
(4,784)
$
53
—
47
—
215
—
—
5
—
320
(272)
(1,735)
(432)
—
(2,439)
Duke
Energy
Florida
$ —
—
58
—
363
—
—
—
—
421
(163)
(1,670)
(574)
—
(2,407)
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
$
17
—
16
—
42
56
18
1
—
150
—
(967)
—
—
(967)
$
6
2
24
—
237
—
—
(1)
—
268
(5)
(1,081)
(191)
—
(1,277)
$
17
—
(1)
—
110
48
16
—
—
190
—
(733)
—
(8)
(741)
Net deferred income tax liabilities
$ (7,806)
$(3,689)
$(3,941)
$(2,119)
$(1,986)
$ (817)
$(1,009)
$ (551)
(a) Primarily related to finance lease obligations and debt fair value adjustments.
UNRECOGNIZED TAX BENEFITS
The following tables present changes to unrecognized tax benefits.
(in millions)
Unrecognized tax benefits – January 1
Unrecognized tax benefit increases
Gross decreases – tax positions in prior periods
Total changes
Unrecognized tax benefits – December 31
(in millions)
Unrecognized tax benefits – January 1
Unrecognized tax benefits increases (decreases)
Gross decreases – tax positions in prior periods
Gross increases – tax positions in prior periods
Decreases due to settlements
Total changes
Unrecognized tax benefits – December 31
Year Ended December 31, 2019
Duke
Energy
$ 24
105
(3)
102
$126
Duke
Energy
Carolinas
Progress
Energy
$ 6
2
—
2
$ 8
$ 9
1
(1)
—
$ 9
Duke
Energy
Progress
$
6
1
(1)
—
Duke
Energy
Florida
$
3
—
—
—
Duke
Energy
Ohio
$
1
—
—
—
Duke
Energy
Indiana
$
1
—
—
—
Piedmont
$
4
—
—
—
$
6
$
3
$
1
$
1
$
4
Year Ended December 31, 2018
Duke
Energy
$ 25
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
$
5
$ 5
$
5
Duke
Energy
Florida
$
5
Duke
Energy
Ohio
$
1
Duke
Energy
Indiana
$
1
Piedmont
$
3
(2)
7
(6)
(1)
(1)
2
—
1
—
4
—
4
—
1
—
1
(4)
2
—
(2)
—
—
—
—
—
—
—
—
—
1
—
1
$ 24
$
6
$ 9
$
6
$
3
$
1
$
1
$
4
205
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued)
(in millions)
Unrecognized tax benefits – January 1
Unrecognized tax benefits increases (decreases)
Gross increases – tax positions in prior periods
Gross decreases – tax positions in prior periods
Total changes
Unrecognized tax benefits – December 31
Year Ended December 31, 2017
Duke
Energy
$ 17
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
$
1
$ 2
$
2
Duke
Energy
Florida
$
4
Duke
Energy
Ohio
$
4
Duke
Energy
Indiana
$ —
12
(4)
8
4
—
4
3
—
3
3
—
3
1
—
1
1
(4)
(3)
1
—
1
Piedmont
$ —
3
—
3
$ 25
$
5
$ 5
$
5
$
5
$
1
$
1
$
3
The following table includes additional information regarding the Duke Energy Registrants’ unrecognized tax benefits at December 31, 2019. It is reasonably
possible that Duke Energy will reflect a $3 million decrease in unrecognized tax benefits within the next 12 months.
(in millions)
Amount that if recognized, would affect the effective tax rate or regulatory
liability(a)
December 31, 2019
Duke
Energy
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
$ 122
$ 8
$ 9
$ 6
$ 3
$ 1
$ 1
$ 4
(a) The Duke Energy Registrants are unable to estimate the specific amounts that would affect the effective tax rate versus the regulatory liability.
OTHER TAX MATTERS
The following tables include interest recognized in the Consolidated Statements of Operations and the Consolidated Balance Sheets.
(in millions)
Net interest income recognized related to income taxes
Interest receivable related to income taxes
Interest payable related to income taxes
(in millions)
Net interest income recognized related to income taxes
Interest payable related to income taxes
(in millions)
Net interest income recognized related to income taxes
Net interest expense recognized related to income taxes
Interest payable related to income taxes
Year Ended December 31, 2019
Duke
Energy
Progress
Energy
Duke
Energy
Progress
$
16
1
1
$
$
1
—
—
1
—
—
Piedmont
$ —
—
1
Year Ended December 31, 2018
Duke
Energy
Progress
Energy
Duke
Energy
Progress
$
2
3
$ — $ —
1
1
Year Ended December 31, 2017
Duke
Energy
$ —
—
5
Duke
Energy
Carolinas
$ —
2
25
Progress
Energy
$
1
—
1
Duke
Energy
Progress
$ —
—
1
Duke
Energy
Florida
$
1
—
—
Duke Energy and its subsidiaries are no longer subject to U.S. federal examination for years before 2016. With few exceptions, Duke Energy and its subsidiaries
are no longer subject to state, local or non-U.S. income tax examinations by tax authorities for years before 2016.
206
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued)
25. OTHER INCOME AND EXPENSES, NET
The components of Other income and expenses, net on the Consolidated Statements of Operations are as follows.
(in millions)
Interest income
AFUDC equity
Post in-service equity returns
Nonoperating income, other
Other income and expense, net
(in millions)
Interest income
AFUDC equity
Post in-service equity returns
Nonoperating income, other
Other income and expense, net
(in millions)
Interest income
AFUDC equity
Post in-service equity returns
Nonoperating income, other
Other income and expense, net
26. SUBSEQUENT EVENTS
Duke
Energy
$ 31
139
29
231
$430
Duke
Energy
$ 20
221
15
143
$ 399
Duke
Energy
$ 13
237
40
218
$ 508
Year Ended December 31, 2019
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
$
1
42
20
88
$151
$ 11
66
7
57
$ 141
$ —
60
7
33
$100
$ 11
6
—
31
$ 48
Year Ended December 31, 2018
Duke
Energy
Carolinas
$
1
73
9
70
Progress
Energy
$
18
104
5
38
Duke
Energy
Progress
Duke
Energy
Florida
$
1
57
5
24
$ 18
47
—
21
$ 86
$ 10
13
1
—
$ 24
Duke
Energy
Ohio
$
7
11
1
4
$ 10
18
—
13
$ 41
Duke
Energy
Indiana
$
9
32
—
4
Piedmont
$
1
—
—
19
$ 20
Piedmont
$
1
—
—
13
$ 153
$ 165
$ 87
$ 23
$ 45
$ 14
Year Ended December 31, 2017
Duke
Energy
Carolinas
$
2
106
28
63
$ 199
Progress
Energy
$
6
92
12
99
Duke
Energy
Progress
$
2
47
12
54
Duke
Energy
Florida
$
5
45
—
46
Duke
Energy
Ohio
$
6
11
—
6
Duke
Energy
Indiana
$
8
28
—
11
$ 209
$ 115
$ 96
$ 23
$ 47
Piedmont
$ —
—
—
(11)
$ (11)
For information on subsequent events related to the adoption of the new credit losses accounting standard, regulatory matters and debt and credit facilities, see Notes
1, 4 and 7, respectively.
207
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued)
27. QUARTERLY FINANCIAL DATA (UNAUDITED)
DUKE ENERGY
Quarterly EPS amounts may not sum to the full-year total due to changes
in the weighted average number of common shares outstanding and rounding.
(in millions, except per share data)
2019
Operating revenues
Operating income
Income from continuing operations
Loss from discontinued operations,
net of tax
Net income
Net income available to Duke Energy
Corporation common stockholders
Earnings per share:
Income from continuing operations
available to Duke Energy
Corporation common stockholders
Basic and diluted
Loss from discontinued operations
attributable to Duke Energy
Corporation common stockholders
Basic and diluted
Net income available to Duke Energy
Corporation common stockholders
Basic and diluted
2018
Operating revenues
Operating income
Income from continuing operations
(Loss) Income from discontinued
operations, net of tax
Net income
Net income attributable to Duke
Energy Corporation
Earnings per share:
Income from continuing operations
attributable to Duke Energy
Corporation common stockholders
Basic and diluted
(Loss) Income from discontinued
operations attributable to Duke
Energy Corporation common
stockholders
Basic and diluted
Net income attributable to Duke
Energy Corporation common
stockholders
Basic and diluted
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
$6,163
1,373
893
$5,873
1,298
748
$6,940
1,929
1,323
$6,103 $25,079
5,709
1,109
3,578
614
—
893
900
—
748
—
1,323
(7)
607
(7)
3,571
820
1,327
660
3,707
The following table includes unusual or infrequently occurring items in
each quarter during the two most recently completed fiscal years. All amounts
discussed below are pretax.
(in millions)
2019
Impairment Charges
(see Notes 4 and 13)
Total
2018
Costs to Achieve Piedmont Merger
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
$ — $ — $
$ — $ — $
25
25
$ (14) $
$ (14) $
11
11
(see Note 2)
$
(17) $
(20) $
(16) $
(31) $
(84)
Regulatory and Legislative Impacts
(see Note 4)
Sale of Retired Plant (see Note 3)
Impairment Charges
(see Notes 4, 12 and 13)
Severance Charges (see Note 21)
Impacts of the Tax Act (see Note 24)
(86)
(107)
(179)
—
—
—
— (265)
— (107)
(55)
—
(76)
—
—
—
(93)
(60)
— (187)
53
3
(208)
(187)
(20)
$ 1.24
$ 1.12
$ 1.82
$ 0.89 $
5.07
Total
$ (341) $ (199) $ (106) $ (225) $
(871)
$ — $ — $ — $ (0.01) $ (0.01)
$ 1.24
$ 1.12
$ 1.82
$ 0.88 $
5.06
$6,135
1,256
622
$5,643
979
507
$6,628
1,579
1,062
$6,115 $24,521
4,685
2,625
871
434
—
622
620
(5)
502
4
1,066
20
454
19
2,644
500
1,082
464
2,666
DUKE ENERGY CAROLINAS
(in millions)
2019
Operating revenues
Operating income
Net income
2018
Operating revenues
Operating income
Net income
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
$ 1,744 $ 1,713 $ 2,162 $ 1,776 $ 7,395
2,026
1,403
347
219
451
301
793
590
435
293
$ 1,763 $ 1,672 $ 2,090 $ 1,775 $ 7,300
1,660
1,071
241
135
713
496
224
117
482
323
The following table includes unusual or infrequently occurring items in
each quarter during 2018. There were no unusual or infrequently occurring items
for the year ended December 31, 2019. All amounts discussed below are pretax.
$ 0.88
$ 0.72
$ 1.51
$ 0.62 $
3.73
(in millions)
2018
Costs to Achieve Piedmont Merger
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
(see Note 2)
$
(4) $
(2) $
(2) $
(1) $
(9)
Regulatory and Legislative Impacts
(see Note 4)
Severance Charges (see Note 21)
Impacts of the Tax Act (see Note 24)
Total
(179)
—
—
(19)
—
—
(23) $ (181) $
— (198)
—
(102)
— (102)
(1) —
(1)
(3) $ (103) $ (310)
$
$ — $ (0.01) $ — $ 0.03 $
0.03
$ 0.88
$ 0.71
$ 1.51
$ 0.65 $
3.76
208
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued)
PROGRESS ENERGY
(in millions)
2019
Operating revenues
Operating income
Net income
Net income attributable to Parent
2018
Operating revenues
Operating income
Net income
Net income attributable to Parent
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
The following table includes unusual or infrequently occurring
items in each quarter during 2018. There were no unusual or infrequently
occurring items for the year ended December 31, 2019. All amounts
discussed below are pretax.
$ 2,572 $ 2,744 $ 3,242
786
521
521
488
248
249
580
329
328
$ 2,576 $ 2,498 $ 3,045
663
406
404
484
267
265
447
237
235
$ 2,644 $ 11,202
2,301
1,327
1,327
447
229
229
$ 2,609 $ 10,728
1,928
1,033
1,027
334
123
123
(in millions)
2018
Costs to Achieve Piedmont Merger
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
(see Note 2)
$
(2) $
(2) $
(1) $
(1) $
(6)
Regulatory and Legislative Impacts
(see Note 4)
Severance Charges (see Note 21)
Impacts of the Tax Act (see Note 24)
(67)
—
—
—
—
—
—
—
(4)
—
(52)
(15)
(67)
(52)
(19)
Total
$
(69) $
(2) $
(5) $
(68) $ (144)
The following table includes unusual or infrequently occurring items in
each quarter during the two most recently completed fiscal years. All amounts
discussed below are pretax.
DUKE ENERGY FLORIDA
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
$ — $ — $
$ — $ — $
25
25
$ 11
$ 11
$
$
36
36
(in millions)
2019
Impairment Charges (see Note 4)
Total
2018
Costs to Achieve Piedmont Merger
(see Note 2)
$ (4)
$
(3) $
(1)
$
(2) $ (10)
Regulatory and Legislative Impacts
(see Note 4)
Impairment Charges (see Note 4)
Severance Charges (see Note 21)
Impacts of the Tax Act (see Note 24)
(67)
—
—
(1)
—
—
—
—
Total
$(72)
$
(3) $
—
—
—
(5)
(6)
—
(60)
(69)
(19)
(67)
(60)
(69)
(25)
$(150) $ (231)
DUKE ENERGY PROGRESS
(in millions)
2019
Operating revenues
Operating income
Net income
2018
Operating revenues
Operating income
Net income
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
$ 1,484 $ 1,387 $ 1,688 $ 1,398 $ 5,957
1,168
805
259
169
236
155
373
278
300
203
$ 1,460 $ 1,291 $ 1,582 $ 1,366 $ 5,699
1,059
667
233
139
269
177
227
135
330
216
(in millions)
2019
Operating revenues
Operating income
Net income
2018
Operating revenues
Operating income
Net income
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
$ 1,086
188
96
$ 1,115
173
103
$ 1,353 $ 1,548 $ 1,244 $ 5,231
1,127
692
413
289
321
201
205
106
$ 1,203 $ 1,462 $ 1,241 $ 5,021
856
554
107
40
245
168
331
243
The following table includes unusual or infrequently occurring items in
each quarter during the two most recently completed fiscal years. All amounts
discussed below are pretax.
(in millions)
2019
Impairment Charges (see Note 4)
Total
2018
Costs to Achieve Piedmont Merger
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
$ — $ — $
$ — $ — $
25
25
$
$
11
11
$
$
36
36
(see Note 2)
$ (2)
$ (1) $ — $
(1)
$
Impairment Charges (see Note 4)
Severance Charges (see Note 21)
Impacts of the Tax Act (see Note 24)
—
—
—
—
—
—
—
—
(2)
(60)
(17)
2
(4)
(60)
(17)
—
Total
$ (2)
$ (1) $
(2) $ (76)
$ (81)
209
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) DUKE ENERGY OHIO
(in millions)
2019
Operating revenues
Operating income
Net income
2018
Operating revenues
Operating (loss) income
Net (loss) income
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
$
$
$
$
$ 531
104
69
$ 524
(21)
(25)
433
74
47
459
77
46
489
108
74
469
139
100
$
$
487 $ 1,940
364
78
238
48
505 $ 1,957
288
93
176
55
The following table includes unusual or infrequently occurring items in
each quarter during 2018. There were no unusual or infrequently occurring items
for the year ended December 31, 2019. All amounts discussed below are pretax.
(in millions)
2018
Costs to Achieve Piedmont Merger
(see Note 2)
Sale of Retired Plant (see Note 3)
Severance Charges (see Note 21)
Impacts of the Tax Act (see Note 24)
Total
DUKE ENERGY INDIANA
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
$
(3) $
(5) $ — $
(6) $
(14)
(107)
—
—
—
—
—
—
—
—
— (107)
(6)
(2)
(6)
(2)
$ (110) $
(5) $ — $
(14) $ (129)
The following table includes unusual or infrequently occurring items in
each quarter during 2018. There were no unusual or infrequently occurring items
for the year ended December 31, 2019. All amounts discussed below are pretax.
(in millions)
2018
Costs to Achieve Piedmont Merger
(see Note 2)
Severance Charges (see Note 21)
Total
PIEDMONT
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
$ — $ — $
(2) $ — $
—
—
—
$ — $ — $
(2) $
(7)
(7)
$
(2)
(7)
(9)
(in millions)
2019
Operating revenues
Operating income (loss)
Net income (loss)
2018
Operating revenues
Operating income (loss)
Net income (loss)
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
$ 579
172
122
$ 553
161
110
$ 209
6
(7)
$ 168
(13)
(18)
$ 425 $ 1,381
304
202
139
105
$ 215
5
(8)
$ 172
(19)
(21)
$ 435 $ 1,375
226
129
79
48
The following table includes unusual or infrequently occurring items in
each quarter during 2018. There were no unusual or infrequently occurring items
for the year ended December 31, 2019. All amounts discussed below are pretax.
(in millions)
2019
Operating revenues
Operating income
Net income
2018
Operating revenues
Operating income
Net income
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
(in millions)
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
2018
Costs to Achieve Piedmont Merger
(see Note 2)
Severance Charges (see Note 21)
Total
$
$
(6)
—
(6)
$ (9)
—
$ (9)
$ (11)
—
$ (11)
$ (22) $
(2)
$ (24) $
(48)
(2)
(50)
$ 768
169
110
$ 731
168
100
$ 714
148
97
$ 738
169
98
$ 807
235
156
$ 819
173
119
$ 715 $ 3,004
685
436
133
73
$ 771 $ 3,059
643
393
133
76
210
PART IIDUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, LLC • PIEDMONT NATURAL GAS COMPANY, INC.Combined Notes to Consolidated Financial Statements – (Continued) ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Management’s Annual Report on Internal Control Over Financial Reporting
Disclosure controls and procedures are controls and other procedures
that are designed to ensure that information required to be disclosed by the
Duke Energy Registrants in the reports they file or submit under the Exchange
Act is recorded, processed, summarized and reported, within the time periods
specified by the SEC rules and forms.
Disclosure controls and procedures include, without limitation, controls
and procedures designed to provide reasonable assurance that information
required to be disclosed by the Duke Energy Registrants in the reports they
file or submit under the Exchange Act is accumulated and communicated to
management, including the Chief Executive Officer and Chief Financial Officer,
as appropriate, to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of management,
including the Chief Executive Officer and Chief Financial Officer, the Duke Energy
Registrants have evaluated the effectiveness of their disclosure controls and
procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the
Exchange Act) as of December 31, 2019, and, based upon this evaluation, the
Chief Executive Officer and Chief Financial Officer have concluded that these
controls and procedures are effective in providing reasonable assurance of
compliance.
Changes in Internal Control Over Financial Reporting
Under the supervision and with the participation of management,
including the Chief Executive Officer and Chief Financial Officer, the Duke Energy
Registrants have evaluated changes in internal control over financial reporting
(as such term is defined in Rules 13a-15 and 15d-15 under the Exchange
Act) that occurred during the fiscal quarter ended December 31, 2019, and
have concluded no change has materially affected, or is reasonably likely to
materially affect, internal control over financial reporting.
The Duke Energy Registrants’ management is responsible for establishing
and maintaining an adequate system of internal control over financial reporting,
as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). The
Duke Energy Registrants’ internal control system was designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes, in accordance with
GAAP. Due to inherent limitations, internal control over financial reporting may
not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness of the internal control over financial reporting to future periods are
subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with policies and procedures may
deteriorate.
The Duke Energy Registrants’ management, including their Chief
Executive Officer and Chief Financial Officer, has conducted an evaluation of the
effectiveness of their internal control over financial reporting as of December 31,
2019, based on the framework in the Internal Control – Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on that evaluation, management concluded that its internal
controls over financial reporting were effective as of December 31, 2019.
Deloitte & Touche LLP, Duke Energy’s independent registered public
accounting firm, has issued an attestation report on the effectiveness of Duke
Energy’s internal control over financial reporting, which is included herein. This
report is not applicable to the Subsidiary Registrants as these companies are
not accelerated or large accelerated filers.
211
PART II REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of
Duke Energy Corporation
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Duke Energy Corporation and subsidiaries (the “Company”) as of December 31, 2019, based on
criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria
established in Internal Control - Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial
statements as of and for the year ended December 31, 2019, of the Company and our report dated February 20, 2020, expressed an unqualified opinion on those
financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility
is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial
reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions
and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance
with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with
the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
Charlotte, North Carolina
February 20, 2020
212
PART II ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information regarding Duke Energy’s Executive Officers is set forth in Part I, Item 1, “Business – Executive Officers of the Registrants,” in this Annual Report
on Form 10-K. Duke Energy will provide information that is responsive to the remainder of this Item 10 in its definitive proxy statement or in an amendment to this
Annual Report not later than 120 days after the end of the fiscal year covered by this Annual Report. That information is incorporated in this Item 10 by reference.
ITEM 11. EXECUTIVE COMPENSATION
Duke Energy will provide information that is responsive to this Item 11 in its definitive proxy statement or in an amendment to this Annual Report not later than
120 days after the end of the fiscal year covered by this Annual Report. That information is incorporated in this Item 11 by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Equity Compensation Plan Information
The following table shows information as of December 31, 2019, about securities to be issued upon exercise of outstanding options, warrants and rights under
Duke Energy’s equity compensation plans, along with the weighted average exercise price of the outstanding options, warrants and rights and the number of securities
remaining available for future issuance under the plans.
Plan Category
Equity compensation plans approved by security holders
Equity compensation plans not approved by security holders
Total
Number of securities
to be issued upon exercise
of outstanding options,
warrants and rights
(a)
Weighted average exercise
price of outstanding
options, warrants and rights
(b)(1)
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding securities
reflected in column (a))
(c)
3,528,022(2)
180,188(4)
3,708,210
n/a
n/a
n/a
5,248,541(3)
n/a(5)
5,248,541
(1) As of December 31, 2019, no options were outstanding under equity compensation plans.
(2)
Includes RSUs and performance shares (assuming the maximum payout level) granted under the Duke Energy Corporation 2015 Long-Term Incentive Plan, as well as shares that could be payable with respect to certain
compensation deferred under the Duke Energy Corporation Executive Savings Plan (Executive Savings Plan) or the Directors’ Savings Plan.
Includes shares remaining available for issuance pursuant to stock awards under the Duke Energy Corporation 2015 Long-Term Incentive Plan.
Includes shares that could be payable with respect to certain compensation deferred under the Executive Savings Plan or the Duke Energy Corporation Directors’ Savings Plan (Directors’ Savings Plan), each of which is a
non-qualified deferred compensation plan described in more detail below.
(3)
(4)
(5) The number of shares remaining available for future issuance under equity compensation plans not approved by security holders cannot be determined because it is based on the amount of future voluntary deferrals, if any,
under the Executive Savings Plan and the Directors’ Savings Plan.
Under the Executive Savings Plan, participants can elect to defer a portion
of their base salary and short-term incentive compensation. Participants also
receive a company matching contribution in excess of the contribution limits
prescribed by the Internal Revenue Code under the Duke Energy Retirement
Savings Plan, which is the 401(k) plan in which employees are generally
eligible to participate. In general, payments are made following termination of
employment or death in the form of a lump sum or installments, as selected
by the participant. Participants may direct the deemed investment of base
salary deferrals, short-term incentive compensation deferrals and matching
contributions among investment options available under the Duke Energy
Retirement Savings Plan, including the Duke Energy Common Stock Fund.
Participants may change their investment elections on a daily basis. Deferrals of
equity awards are credited with earnings and losses based on the performance
of the Duke Energy Common Stock Fund. The benefits payable under the plan
are unfunded and subject to the claims of Duke Energy’s creditors.
Under the Directors’ Savings Plan, outside directors may elect to defer
all or a portion of their annual compensation, generally consisting of retainers.
Deferred amounts are credited to an unfunded account, the balance of which is
adjusted for the performance of phantom investment options, including the Duke
Energy Common Stock Fund, as elected by the director, and generally are paid
when the director terminates his or her service from the Board of Directors.
Duke Energy will provide additional information that is responsive to this
Item 12 in its definitive proxy statement or in an amendment to this Annual
Report not later than 120 days after the end of the fiscal year covered by this
Annual Report. That information is incorporated in this Item 12 by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
Duke Energy will provide information that is responsive to this Item 13 in its definitive proxy statement or in an amendment to this Annual Report not later than
120 days after the end of the fiscal year covered by this Annual Report. That information is incorporated in this Item 13 by reference.
213
PART III ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Deloitte provided professional services to the Duke Energy Registrants. The following tables present the Deloitte fees for services rendered to the Duke Energy
Registrants during 2019 and 2018.
(in millions)
Types of Fees
Audit Fees(a)
Audit-Related Fees(b)
Tax Fees(c)
Total Fees
(in millions)
Types of Fees
Audit Fees(a)
Audit-Related Fees(b)
Tax Fees(c)
Total Fees
Year Ended December 31, 2019
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana Piedmont
$ 4.6
0.1
0.1
$ 4.8
$ 5.3
0.2
0.1
$ 5.6
$ 3.1
0.1
—
$ 3.2
$ 2.2
0.1
—
$ 2.3
$ 0.9
0.2
—
$ 1.1
$ 1.4
—
—
$ 1.4
$ 0.8
—
—
$ 0.8
Year Ended December 31, 2018
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana Piedmont
$ 5.0
—
0.2
$ 5.2
$ 5.5
0.1
0.2
$ 5.8
$ 3.3
—
0.1
$ 3.4
$ 2.2
0.1
0.1
$ 2.4
$ 0.9
—
—
$ 0.9
$ 1.4
—
0.1
$ 1.5
$ 0.8
—
0.1
$ 0.9
Duke
Energy
$ 13.5
0.6
0.2
$ 14.3
Duke
Energy
$ 14.0
0.4
0.6
$ 15.0
(a) Audit Fees are fees billed, or expected to be billed, by Deloitte for professional services for the financial statement audits, audit of the Duke Energy Registrants’ financial statements included in the Annual Report on Form
10-K, reviews of financial statements included in Quarterly Reports on Form 10-Q, and services associated with securities filings such as comfort letters and consents.
(b) Audit-Related Fees are fees billed, or expected to be billed, by Deloitte for assurance and related services that are reasonably related to the performance of an audit or review of financial statements, including statutory
reporting requirements.
(c) Tax Fees are fees billed by Deloitte for tax return assistance and preparation, tax examination assistance and professional services related to tax planning and tax strategy.
To safeguard the continued independence of the independent auditor, the
Audit Committee of Duke Energy adopted a policy that all services provided by
the independent auditor require preapproval by the Audit Committee. Pursuant
to the policy, certain audit services, audit-related services, tax services and
other services have been specifically preapproved up to fee limits. In the event
the cost of any of these services may exceed the fee limits, the Audit Committee
must specifically approve the service. All services performed in 2019 and 2018
by the independent accountant were approved by the Audit Committee pursuant
to the preapproval policy.
214
PART III ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Consolidated Financial Statements, Supplemental Financial Data and Supplemental Schedules included in Part II of this Annual Report are as follows:
Duke Energy Corporation
Consolidated Financial Statements
Consolidated Statements of Operations for the Years Ended December 31, 2019, 2018 and 2017
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2019, 2018 and 2017
Consolidated Balance Sheets as of December 31, 2019, and 2018
Consolidated Statements of Cash Flows for the Years Ended December 31, 2019, 2018 and 2017
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2019, 2018 and 2017
Notes to the Consolidated Financial Statements
Quarterly Financial Data, (unaudited, included in Note 27 to the Consolidated Financial Statements)
Report of Independent Registered Public Accounting Firm
All other schedules are omitted because they are not required, or because the required information is included in the Consolidated Financial Statements or Notes.
Duke Energy Carolinas, LLC
Consolidated Financial Statements
Consolidated Statements of Operations and Comprehensive Income for the Years Ended December 31, 2019, 2018 and 2017
Consolidated Balance Sheets as of December 31, 2019, and 2018
Consolidated Statements of Cash Flows for the Years Ended December 31, 2019, 2018 and 2017
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2019, 2018 and 2017
Notes to the Consolidated Financial Statements
Quarterly Financial Data, (unaudited, included in Note 27 to the Consolidated Financial Statements)
Report of Independent Registered Public Accounting Firm
All other schedules are omitted because they are not required, or because the required information is included in the Consolidated Financial Statements or Notes.
Progress Energy, Inc.
Consolidated Financial Statements
Consolidated Statements of Operations and Comprehensive Income for the Years Ended December 31, 2019, 2018 and 2017
Consolidated Balance Sheets as of December 31, 2019, and 2018
Consolidated Statements of Cash Flows for the Years Ended December 31, 2019, 2018 and 2017
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2019, 2018 and 2017
Notes to the Consolidated Financial Statements
Quarterly Financial Data, (unaudited, included in Note 27 to the Consolidated Financial Statements)
Report of Independent Registered Public Accounting Firm
All other schedules are omitted because they are not required, or because the required information is included in the Consolidated Financial Statements or Notes.
Duke Energy Progress, LLC
Consolidated Financial Statements
Consolidated Statements of Operations and Comprehensive Income for the Years Ended December 31, 2019, 2018 and 2017
Consolidated Balance Sheets as of December 31, 2019, and 2018
Consolidated Statements of Cash Flows for the Years Ended December 31, 2019, 2018 and 2017
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2019, 2018 and 2017
Notes to the Consolidated Financial Statements
Quarterly Financial Data, (unaudited, included in Note 27 to the Consolidated Financial Statements)
Report of Independent Registered Public Accounting Firm
All other schedules are omitted because they are not required, or because the required information is included in the Consolidated Financial Statements or Notes.
Duke Energy Florida, LLC
Consolidated Financial Statements
Consolidated Statements of Operations and Comprehensive Income for the Years Ended December 31, 2019, 2018 and 2017
Consolidated Balance Sheets as of December 31, 2019, and 2018
Consolidated Statements of Cash Flows for the Years Ended December 31, 2019, 2018 and 2017
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2019, 2018 and 2017
Notes to the Consolidated Financial Statements
Quarterly Financial Data, (unaudited, included in Note 27 to the Consolidated Financial Statements)
Report of Independent Registered Public Accounting Firm
All other schedules are omitted because they are not required, or because the required information is included in the Consolidated Financial Statements or Notes.
215
PART IV Duke Energy Ohio, Inc.
Consolidated Financial Statements
Consolidated Statements of Operations and Comprehensive Income for the Years Ended December 31, 2019, 2018 and 2017
Consolidated Balance Sheets as of December 31, 2019, and 2018
Consolidated Statements of Cash Flows for the Years Ended December 31, 2019, 2018 and 2017
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2019, 2018 and 2017
Notes to the Consolidated Financial Statements
Quarterly Financial Data, (unaudited, included in Note 27 to the Consolidated Financial Statements)
Report of Independent Registered Public Accounting Firm
All other schedules are omitted because they are not required, or because the required information is included in the Consolidated Financial Statements or Notes.
Duke Energy Indiana, LLC
Consolidated Financial Statements
Consolidated Statements of Operations and Comprehensive Income for the Years Ended December 31, 2019, 2018 and 2017
Consolidated Balance Sheets as of December 31, 2019, and 2018
Consolidated Statements of Cash Flows for the Years Ended December 31, 2019, 2018 and 2017
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2019, 2018 and 2017
Notes to the Consolidated Financial Statements
Quarterly Financial Data, (unaudited, included in Note 27 to the Consolidated Financial Statements)
Report of Independent Registered Public Accounting Firm
All other schedules are omitted because they are not required, or because the required information is included in the Consolidated Financial Statements or Notes.
Piedmont Natural Gas Company, Inc.
Consolidated Financial Statements
Consolidated Statements of Operations and Comprehensive Income for the Years Ended December 31, 2019, 2018 and 2017
Consolidated Balance Sheets as of December 31, 2019, and 2018
Consolidated Statements of Cash Flows for the Years Ended December 31, 2019, 2018 and 2017
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2019, 2018 and 2017
Notes to the Consolidated Financial Statements
Quarterly Financial Data, (unaudited, included in Note 27 to the Consolidated Financial Statements)
Report of Independent Registered Public Accounting Firm
All other schedules are omitted because they are not required, or because the required information is included in the Consolidated Financial Statements or Notes.
216
PART IV EXHIBIT INDEX
Exhibits filed herewithin 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 (***).
Exhibit
Number
2.1
2.2
3.1
3.2
3.3
3.3.1
3.4
3.4.1
3.5
3.5.1
3.5.2
3.5.3
3.5.4
3.6
Duke
Energy
Carolinas
Duke
Energy
X
X
X
X
Agreement and Plan of Merger between Duke Energy Corporation, Diamond
Acquisition Corporation and Progress Energy, Inc., dated as of January 8, 2011
(incorporated by reference to Exhibit 2.1 to Duke Energy Corporation’s Current
Report on Form 8-K filed on January 11, 2011, File No. 1-32853).
Agreement and Plan of Merger between Piedmont Natural Gas Company, Duke
Energy Corporation and Forest Subsidiary, Inc. (incorporated by reference to
Exhibit 2.1 to Duke Energy Corporation’s Current Report on Form 8-K filed on
October 26, 2015, File No. 1-32853).
Amended and Restated Certificate of Incorporation (incorporated by reference
to Exhibit 3.1 to Duke Energy Corporation’s Current Report on Form 8-K filed on
May 20, 2014, File No. 1-32853).
Amended and Restated By-Laws of Duke Energy Corporation (incorporated by
reference to Exhibit 3.1 to Duke Energy Corporation’s Current Report on Form
8-K filed on January 4, 2016, File No. 1-32853).
Articles of Organization including Articles of Conversion (incorporated by
reference to Exhibit 3.1 to Duke Energy Carolinas, LLC’s Current Report on Form
8-K filed on April 7, 2006, File No. 1-4928).
Amended Articles of Organization, effective October 1, 2006, (incorporated by
reference to Exhibit 3.1 to Duke Energy Carolinas, LLC’s Quarterly Report on
Form 10-Q for the quarter ended September 30, 2006, filed on November 13,
2006, File No. 1-4928).
Amended Articles of Incorporation of Duke Energy Ohio, Inc. (formerly The
Cincinnati Gas & Electric Company), effective October 23, 1996, (incorporated
by reference to Exhibit 3(a) to registrant’s Quarterly Report on Form 10-Q for
the quarter ended September 30, 1996, filed on November 13, 1996,
File No. 1-1232).
Amended Articles of Incorporation, effective September 19, 2006, (incorporated
by reference to Exhibit 3.1 to Duke Energy Ohio, Inc.’s (formerly The Cincinnati
Gas & Electric Company) Quarterly Report on Form 10-Q for the quarter ended
September 30, 2006, filed on November 17, 2006, File No. 1-1232).
Certificate of Conversion of Duke Energy Indiana, LLC (incorporated by reference
to Exhibit 3.1 to registrant’s Current Report on Form 8-K filed on January 4,
2016, File No. 1-3543).
Articles of Entity Conversion of Duke Energy Indiana, LLC (incorporated by
reference to Exhibit 3.2 to registrant’s Current Report on Form 8-K filed on
January 4, 2016, File No. 1-3543).
Plan of Entity Conversion of Duke Energy Indiana, LLC (incorporated by
reference to Exhibit 3.3 to registrant’s Current Report on Form 8-K filed on
January 4, 2016, File No. 1-3543).
Articles of Organization of Duke Energy Indiana, LLC (incorporated by reference
to Exhibit 3.4 to registrant’s Current Report on Form 8-K filed on January 4,
2016, File No. 1-3543).
Limited Liability Company Operating Agreement of Duke Energy Indiana, LLC
(incorporated by reference to Exhibit 3.5 to registrant’s Current Report on Form
8-K filed on January 4, 2016, File No. 1-3543).
Limited Liability Company Operating Agreement of Duke Energy Carolinas,
LLC (incorporated by reference to Exhibit 3.2 to registrant’s Current Report on
Form 8-K filed on April 7, 2006, File No. 1-4928).
E-1
X
X
X
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
Progress
Energy
X
X
X
X
X
X
X
X
X
PART IV Exhibit
Number
3.7
3.8
3.8.1
3.8.2
3.9
3.9.1
3.9.2
3.9.3
3.10
3.10.1
3.10.2
3.10.3
3.11
3.11.1
3.12
Regulations of Duke Energy Ohio, Inc. (formerly The Cincinnati Gas & Electric
Company), effective July 23, 2003, (incorporated by reference to Exhibit 3.2 to
registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003,
filed on August 13, 2003, File No. 1-1232).
Articles of Organization including Articles of Conversion for Duke Energy
Progress, LLC (incorporated by reference to Exhibit 3.1 to registrant’s Current
Report on Form 8-K filed on August 4, 2015, File No. 1-3382).
Plan of Conversion of Duke Energy Progress, Inc. (incorporated by reference to
Exhibit 3.2 to registrant’s Current Report on Form 8-K filed on August 4, 2015,
File No. 1-3382).
Limited Liability Company Operating Agreement of Duke Energy Progress, LLC
(incorporated by reference to Exhibit 3.3 to registrant’s Current Report on Form
8-K filed on August 4, 2015, File No. 1-3382).
Amended and Restated Articles of Incorporation of Progress Energy, Inc.
(formerly CP&L Energy, Inc.), effective June 15, 2000, (incorporated by
reference to Exhibit 3(a)(1) to registrant’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2000, filed on August 14, 2000, File No. 1-3382).
Articles of Amendment to the Amended and Restated Articles of Incorporation of
Progress Energy, Inc. (formerly CP&L Energy, Inc.), effective December 4, 2000,
(incorporated by reference to Exhibit 3(b)(1) to registrant’s Annual Report on
Form 10-K for the year ended December 31, 2001, filed on March 28, 2002,
File No. 1-3382).
Articles of Amendment to the Amended and Restated Articles of Incorporation
of Progress Energy, Inc. (formerly CP&L Energy, Inc.), effective May 10, 2006,
(incorporated by reference to Exhibit 3(a) to registrant’s Quarterly Report on
Form 10-Q for the quarter ended June 30, 2006, filed on August 9, 2006,
File No. 1-15929).
By-Laws of Progress Energy, Inc. (formerly CP&L Energy, Inc.), effective May 10,
2006, (incorporated by reference to Exhibit 3(b) to registrant’s Quarterly Report
on Form 10-Q for the quarter ended June 30, 2006, filed on August 9, 2006,
File No. 1-15929).
Articles of Conversion for Duke Energy Florida, LLC (incorporated by reference to
Exhibit 3.4 to registrant’s Current Report on Form 8-K filed on August 4, 2015,
File No. 1-3274).
Articles of Organization for Duke Energy Florida, LLC (incorporated by reference
to Exhibit 3.5 to registrant’s Current Report on Form 8-K filed on August 4,
2015, File No. 1-3274).
Plan of Conversion of Duke Energy Florida, Inc. (incorporated by reference to
Exhibit 3.6 to registrant’s Current Report on Form 8-K filed on August 4, 2015,
File No. 1-3274).
Limited Liability Company Operating Agreement of Duke Energy Florida, LLC
(incorporated by reference to Exhibit 3.7 to registrant’s Current Report on
Form 8-K filed on August 4, 2015, File No. 1-3274).
Amended and Restated Articles of Incorporation of Piedmont Natural Gas
Company, Inc., dated as of October 3, 2016 (incorporated by reference to
Exhibit 3.1 to registrant’s Annual Report on Form 10-K for the fiscal year ended
October 31, 2016, filed on December 22, 2016, File No. 001-06196).
Bylaws of Piedmont Natural Gas Company, Inc., as amended and restated
effective October 3, 2016 (incorporated by reference to Exhibit 3.2 to
registrant’s Current Report on Form 8-K filed on October 3, 2016,
File No. 1-06196).
Duke
Energy
Carolinas
Duke
Energy
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
X
X
X
X
X
X
X
X
X
X
X
X
X
X
Certificate of Designations with respect to Series A Preferred Stock, dated
March 28, 2019 (incorporated by reference to Exhibit 3.1 to Registrant’s Current
Report on Form 8-K filed on March 29, 2019, File No. 1-32853).
X
E-2
PART IV Exhibit
Number
3.13
3.14
3.15
3.16
3.17
3.18
3.19
3.20
4.1
4.1.1
4.1.2
4.1.3
4.1.4
4.1.5
Duke
Energy
Carolinas
Duke
Energy
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
X
X
X
X
X
Certificate of Designation with respect to the Series B Preferred Stock, dated
September 11, 2019 (incorporated by reference to Exhibit 3.1 to registrant’s
Current Report on Form 8-K filed on September 12, 2019, File No. 1-32853).
Description of Registered Securities (incorporated by reference from the
registrant’s prospectus contained in Form S-3 filed on September 23,
2019, File No. 333-233896,under the headings “Description of Common
Stock,” “Description of Preferred Stock,” “Description of Depositary Shares,”
“Description of Stock Purchase Contracts and Stock Purchase Units,” and
“Description of Debt Securities”).
Description of Registered Securities (incorporated by reference from the
registrant’s prospectus contained in Form S-3 filed on September 23, 2019,
File No. 333-233896-01, under the heading “Description of Debt Securities”).
Description of Registered Securities (incorporated by reference from the
registrant’s prospectus contained in Form S-3 filed on September 23, 2019,
File No. 333-233896-02, under the headings “Description of First Mortgage
Bonds” and “Description of Debt Securities”).
Description of Registered Securities (incorporated by reference from the
registrant’s prospectus contained in Form S-3 filed on September 23, 2019,
File No. 333-233896-03, under the headings “Description of First Mortgage
Bonds” and “Description of Unsecured Debt Securities”).
Description of Registered Securities (incorporated by reference from the
registrant’s prospectus contained in Form S-3 filed on September 23, 2019,
File No. 333-233896-04, under the headings “Description of First Mortgage
Bonds” and “Description of Unsecured Debt Securities”).
Description of Registered Securities (incorporated by reference from the
registrant’s prospectus contained in Form S-3 filed on September 23, 2019,
File No. 333-233896-05, under the headings “Description of First Mortgage
Bonds” and “Description of Debt Securities”).
Description of Registered Securities (incorporated by reference from the
registrant’s prospectus contained in Form S-3 filed on September 23, 2019,
File No. 333-233896-06, under the headings “Description of First and
Refunding Mortgage Bonds,” “Description of Senior Notes,” and “Description
of Subordinate Notes”).
Indenture between Duke Energy Corporation and The Bank of New York Mellon
Trust Company, N.A., as Trustee, dated as of June 3, 2008, (incorporated by
reference to Exhibit 4.1 to Duke Energy Corporation’s Current Report on Form
8-K filed on June 16, 2008, File No. 1-32853).
First Supplemental Indenture, dated as of June 16, 2008, (incorporated by
reference to Exhibit 4.2 to Duke Energy Corporation’s Current Report on Form
8-K filed on June 16, 2008, File No. 1-32853).
Second Supplemental Indenture, dated as of January 26, 2009, (incorporated by
reference to Exhibit 4.1 to Duke Energy Corporation’s Current Report on
Form 8-K filed on January 26, 2009, File No. 1-32853).
Third Supplemental Indenture, dated as of August 28, 2009, (incorporated by
reference to Exhibit 4.1 to Duke Energy Corporation’s Current Report on Form
8-K filed on August 28, 2009, File No. 1-32853).
Fourth Supplemental Indenture, dated as of March 25, 2010, (incorporated by
reference to Exhibit 4.1 to Duke Energy Corporation’s Current Report on Form
8-K filed on March 25, 2010, File No. 1-32853).
Fifth Supplemental Indenture, dated as of August 25, 2011, (incorporated by
reference to Exhibit 4.1 to Duke Energy Corporation’s Current Report on Form
8-K filed on August 25, 2011, File No. 1-32853).
X
X
X
X
X
X
X
X
E-3
X
PART IV Exhibit
Number
4.1.6
4.1.7
4.1.8
4.1.9
4.1.10
4.1.11
4.1.12
4.1.13
4.1.14
4.1.15
4.1.16
4.1.17
4.1.18
4.1.19
4.1.20
4.1.21
4.1.22
Duke
Energy
Carolinas
Duke
Energy
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
Sixth Supplemental Indenture, dated as of November 17, 2011, (incorporated
by reference to Exhibit 4.1 to Duke Energy Corporation’s Current Report on Form
8-K filed on November 17, 2011, File No. 1-32853).
Seventh Supplemental Indenture, dated as of August 16, 2012, (incorporated
by reference to Exhibit 4.1 to Duke Energy Corporation’s Current Report on Form
8-K filed on August 16, 2012, File No. 1-32853).
Eighth Supplemental Indenture, dated as of January 14, 2013, (incorporated by
reference to Exhibit 2 to the Registration Statement of Form 8-A of the Company
filed on January 14, 2013, File No. 1-32853).
Ninth Supplemental Indenture, dated as of June 13, 2013, (incorporated by
reference to Exhibit 4.1 to Duke Energy Corporation’s Current Report on Form
8-K filed on June 13, 2013, File No. 1-32853).
Tenth Supplemental Indenture, dated as of October 11, 2013, (incorporated by
reference to Exhibit 4.1 to Duke Energy Corporation’s Current Report on Form
8-K filed on October 11, 2013, File No. 1-32853).
Eleventh Supplemental Indenture, dated as of April 4, 2014, (incorporated by
reference to Exhibit 4.1 to Duke Energy Corporation’s Current Report on Form
8-K filed on April 4, 2014, File No. 1-32853).
Twelfth Supplemental Indenture, dated as of November 19, 2015, (incorporated
by reference to Exhibit 4.2 to Duke Energy Corporation’s Current Report on Form
8-K filed on November 19, 2015, File No. 1-32853).
Thirteenth Supplemental Indenture, dated as of April 18, 2016, to the indenture
dated as of June 3, 2008, between Duke Energy Corporation and The Bank of
New York Mellon Trust Company, N.A., as Trustee (incorporated by reference to
Exhibit 4.1 to Duke Energy Corporation’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2016, filed on May 5, 2016, File No. 1-32853).
Fourteenth Supplemental Indenture, dated as of August 12, 2016, (incorporated
by reference to Exhibit 4.1 to registrant’s Current Report on Form 8-K filed on
August 12, 2016, File No. 1-32853).
Fifteenth Supplemental Indenture, dated as of April 11, 2017 (incorporated by
reference to Exhibit 4.2 to registrant’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2017 filed on May 9, 2017, File No. 1-32853).
Sixteenth Supplemental Indenture, dated as of June 13, 2017 (incorporated by
reference to Exhibit 4.1 to registrant’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2017 filed on August 3, 2017, File No. 1-32853).
Seventeenth Supplemental Indenture, dated as of August 10, 2017
(incorporated by reference to Exhibit 4.1 to registrant’s Current Report on
Form 8-K filed on August 10, 2017, File No. 1-32853).
Eighteenth Supplemental Indenture, dated as of March 29, 2018 (incorporated
by reference to Exhibit 4.2 to registrant’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2018 filed on May 10, 2018, File No. 1-32853).
Nineteenth Supplemental Indenture, dated as of May 16, 2018 (incorporated
by reference to Exhibit 4.1 to registrant’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2018 filed on August 2, 2018, File No. 1-32853).
Twentieth Supplemental Indenture (incorporated by reference to Exhibit 4.2 to
registrant’s Registration Statement on Form 8-A filed on September 17, 2018,
File No. 1-32853).
Twenty-First Supplemental Indenture (incorporated by reference to Exhibit 4.1
to Registrant’s Current Report on Form 8-K filed on March 11, 2019, File no.
1-32853).
Twenty-Second Supplemental Indenture, dated as of June 7, 2019 (incorporated
by reference to Exhibit 4.1 to registrant’s Current Report on Form 8-K filed on
June 7, 2019, File No. 1-32853).
E-4
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
PART IV Exhibit
Number
4.2
4.2.1
4.2.2
4.3
4.3.1
4.3.2
4.3.3
4.3.4
4.3.5
4.3.6
4.3.7
4.3.8
4.3.9
Senior Indenture between Duke Energy Carolinas, LLC and The Bank of
New York Mellon Trust Company, N.A., as successor trustee to JPMorgan
Chase Bank (formerly known as The Chase Manhattan Bank), dated as of
September 1, 1998, (incorporated by reference to Exhibit 4-D-1 to registrant’s
Post-Effective Amendment No. 2 to Registration Statement on Form S-3 filed on
April 7, 1999, File No. 333-14209).
Fifteenth Supplemental Indenture, dated as of April 3, 2006, (incorporated by
reference to Exhibit 4.4.1 to registrant’s Registration Statement on Form S-3
filed on October 3, 2007, File No. 333-146483-03).
Sixteenth Supplemental Indenture, dated as of June 5, 2007, (incorporated by
reference to Exhibit 4.1 registrant’s Current Report on Form 8-K filed on
June 6, 2007, File No. 1-4928).
First and Refunding Mortgage from Duke Energy Carolinas, LLC to The Bank
of New York Mellon Trust Company, N.A., successor trustee to Guaranty
Trust Company of New York, dated as of December 1, 1927, (incorporated by
reference to Exhibit 7(a) to registrant’s Form S-1, effective October 15, 1947,
File No. 2-7224).
Instrument of Resignation, Appointment and Acceptance among Duke Energy
Carolinas, LLC, JPMorgan Chase Bank, N.A., as Trustee, and The Bank of New
York Mellon Trust Company, N.A., as Successor Trustee, dated as of September
24, 2007, (incorporated by reference to Exhibit 4.6.1 to registrant’s Registration
Statement on Form S-3 filed on October 3, 2007, File No. 333-146483).
Ninth Supplemental Indenture, dated as of February 1, 1949, (incorporated by
reference to Exhibit 7(j) to registrant’s Form S-1 filed on February 3, 1949,
File No. 2-7808).
Twentieth Supplemental Indenture, dated as of June 15, 1964, (incorporated by
reference to Exhibit 4-B-20 to registrant’s Form S-1 filed on August 23, 1966,
File No. 2-25367).
Twenty-third Supplemental Indenture, dated as of February 1, 1968,
(incorporated by reference to Exhibit 2-B-26 to registrant’s Form S-9 filed on
January 21, 1969, File No. 2-31304).
Sixtieth Supplemental Indenture, dated as of March 1, 1990, (incorporated by
reference to Exhibit 4-B-61 to registrant’s Annual Report on Form 10-K for the
year ended December 31, 1990, File No.1-4928).
Sixty-third Supplemental Indenture, dated as of July 1, 1991, (incorporated by
reference to Exhibit 4-B-64 to registrant’s Registration Statement on Form S-3
filed on February 13, 1992, File No. 33-45501).
Eighty-fourth Supplemental Indenture, dated as of March 20, 2006,
(incorporated by reference to Exhibit 4.6.9 to registrant’s Registration Statement
on Form S-3 filed on October 3, 2007, File No. 333-146483-03).
Eighty-fifth Supplemental Indenture, dated as of January 10, 2008,
(incorporated by reference to Exhibit 4.1 to Duke Energy Carolinas, LLC’s
Current Report on Form 8-K filed on January 11, 2008, File No.1-4928).
Eighty-seventh Supplemental Indenture, dated as of April 14, 2008,
(incorporated by reference to Exhibit 4.1 to Duke Energy Carolinas, LLC’s
Current Report on Form 8-K filed on April 15, 2008, File No.1-4928).
4.3.10
4.3.11
Eighty-eighth Supplemental Indenture, dated as of November 17, 2008,
(incorporated by reference to Exhibit 4.1 to Duke Energy Carolinas, LLC’s
Current Report on Form 8-K filed on November 20, 2008, File No.1-4928).
Ninetieth Supplemental Indenture, dated as of November 19, 2009,
(incorporated by reference to Exhibit 4.1 to Duke Energy Carolinas, LLC’s
Current Report on Form 8-K filed on November 19, 2009, File No.1-4928).
E-5
Duke
Energy
Carolinas
Duke
Energy
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
PART IV Exhibit
Number
4.3.12
4.3.13
4.3.14
4.3.15
4.3.16
4.3.17
4.3.18
4.3.19
4.3.20
4.3.21
4.4
4.4.1
4.4.2
4.4.3
4.4.4
4.4.5
4.4.6
4.4.7
Ninety-first Supplemental Indenture, dated as of June 7, 2010, (incorporated by
reference to Exhibit 4.1 to Duke Energy Carolinas, LLC’s Current Report on Form
8-K filed on June 7, 2010, File No.1-4928).
Ninety-third Supplemental Indenture, dated as of May 19, 2011,
(incorporated by reference to Exhibit 4.1 to Duke Energy Carolinas, LLC’s
Current Report on Form 8-K filed on May 19, 2011, File No.1-4928).
Ninety-fourth Supplemental Indenture, dated as of December 8, 2011,
(incorporated by reference to Exhibit 4.1 to Duke Energy Carolinas, LLC’s
Current Report on Form 8-K filed on December 8, 2011, File No.1-4928).
Ninety-fifth Supplemental Indenture, dated as of September 21, 2012,
(incorporated by reference to Exhibit 4.1 to Duke Energy Carolinas, LLC’s
Current Report on Form 8-K filed on September 21, 2012, File No.1-4928).
Ninety-sixth Supplemental Indenture, dated as of March 12, 2015, between
Duke Energy Carolinas, LLC and The Bank of New York Mellon Trust Company,
N.A., as Trustee (incorporated by reference to Exhibit 4.1 to Duke Energy
Carolinas, LLC’s Current Report on Form 8-K filed on March 12, 2015,
File No. 1-4928).
Ninety-seventh Supplemental Indenture, dated as of March 11, 2016,
(incorporated by reference to Exhibit 4.1 to Duke Energy Carolinas, LLC’s
Current Report on Form 8-K filed on March 11, 2016, File No. 1-4928).
Ninety-eighth Supplemental Indenture, dated as of November 17, 2016,
(incorporated by reference to Exhibit 4.1 to Duke Energy Carolinas, LLC’s
Current Report on Form 8-K filed on November 17, 2016, File No. 1-4928).
Ninety-ninth Supplemental Indenture, dated as of November 14, 2017,
(incorporated by reference to Exhibit 4.1 to Duke Energy Carolinas, LLC Current
Report on Form 8-K filed on November 14, 2017, File No. 1-4928).
One Hundredth Supplemental Indenture, dated as of March 1, 2018
(incorporated by reference to Exhibit 4.1 to Registrant’s Current Report on Form
8-K filed on March 1, 2018, File No. 1-4928).
One-Hundred and Second Supplemental Indenture, dated as of August 14, 2019
(incorporated by reference to Exhibit 4.1 to registrant’s Current Report on Form
8-K filed on August 14, 2019, File No. 1-04928).
Mortgage and Deed of Trust between Duke Energy Progress, Inc. (formerly
Carolina Power & Light Company) and The Bank of New York Mellon (formerly
Irving Trust Company) and Frederick G. Herbst (Tina D. Gonzalez, successor), as
Trustees, dated as of May 1, 1940.
First through Fifth Supplemental Indentures thereto (incorporated by reference
to Exhibit 2(b), File No. 2-64189).
Sixth Supplemental Indenture dated April 1, 1960 (incorporated by reference to
Exhibit 2(b)-5, File No. 2-16210).
Seventh Supplemental Indenture dated November 1, 1961 (incorporated by
reference to Exhibit 2(b)-6, File No. 2-16210).
Eighth Supplemental Indenture dated July 1, 1964 (incorporated by reference to
Exhibit 4(b)-8, File No. 2-19118).
Ninth Supplemental Indenture dated April 1, 1966 (incorporated by reference to
Exhibit 4(b)-2, File No. 2-22439).
Tenth Supplemental Indenture dated October 1, 1967 (incorporated by reference
to Exhibit 4(b)-2, File No. 2-24624).
Eleventh Supplemental Indenture dated October 1, 1968 (incorporated by
reference to Exhibit 2(c), File No. 2-27297).
E-6
Duke
Energy
Carolinas
Duke
Energy
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
PART IV Exhibit
Number
4.4.8
4.4.9
4.4.10
4.4.11
4.4.12
4.4.13
4.4.14
4.4.15
4.4.16
4.4.17
4.4.18
4.4.19
4.4.20
4.4.21
4.4.22
4.4.23
4.4.24
4.4.25
4.4.26
4.4.27
4.4.28
4.4.29
4.4.30
4.4.31
Twelfth Supplemental Indenture dated January 1, 1970 (incorporated by
reference to Exhibit 2(c), File No. 2-30172).
Thirteenth Supplemental Indenture dated August 1, 1970 (incorporated by
reference to Exhibit 2(c), File No. 2-35694).
Fourteenth Supplemental Indenture dated January 1, 1971 (incorporated by
reference to Exhibit 2(c), File No. 2-37505).
Fifteenth Supplemental Indenture dated October 1, 1971 (incorporated by
reference to Exhibit 2(c), File No. 2-39002).
Sixteenth Supplemental Indenture dated May 1, 1972 (incorporated by
reference to Exhibit 2(c), File No. 2-41738).
Seventeenth Supplemental Indenture dated November 1, 1973 (incorporated by
reference to Exhibit 2(c), File No. 2-43439).
Eighteenth Supplemental Indenture dated (incorporated by reference to Exhibit
2(c), File No. 2-47751).
Nineteenth Supplemental Indenture dated May 1, 1974 (incorporated by
reference to Exhibit 2(c), File No. 2-49347).
Twentieth Supplemental Indenture dated December 1, 1974 (incorporated by
reference to Exhibit 2(c), File No. 2-53113).
Twenty-first Supplemental Indenture dated April 15, 1975 (incorporated by
reference to Exhibit 2(d), File No. 2-53113).
Twenty-second Supplemental Indenture dated October 1, 1977 (incorporated by
reference to Exhibit 2(c), File No. 2-59511).
Twenty-third Supplemental Indenture dated June 1, 1978 (incorporated by
reference to Exhibit 2(c), File No. 2-61611).
Twenty-fourth Supplemental Indenture dated May 15, 1979 (incorporated by
reference to Exhibit 2(d), File No. 2-64189).
Twenty-fifth Supplemental Indenture dated November 1, 1979 (incorporated by
reference to Exhibit 2(c), File No. 2-65514).
Twenty-sixth Supplemental Indenture dated November 1, 1979 (incorporated by
reference to Exhibit 2(c), File No. 2-66851).
Twenty-seventh Supplemental Indenture dated April 1, 1980 (incorporated by
reference to Exhibit 2 (d), File No. 2-66851).
Twenty-eighth Supplemental Indenture dated October 1, 1980 (incorporated by
reference to Exhibit 4(b)-1, File No. 2-81299).
Twenty-ninth Supplemental Indenture dated October 1, 1980 (incorporated by
reference to Exhibit 4(b)-2, File No. 2-81299).
Thirtieth Supplemental Indenture dated December 1, 1982 (incorporated by
reference to Exhibit 4(b)- 3, File No. 2-81299).
Thirty-first Supplemental Indenture dated March 15, 1983 (incorporated by
reference to Exhibit 4(c)-1, File No. 2-95505).
Thirty-second Supplemental Indenture dated March 15, 1983 (incorporated by
reference to Exhibit 4(c)-2, File No. 2-95505).
Thirty-third Supplemental Indenture dated December 1, 1983 (incorporated by
reference to Exhibit 4(c)-3, File No. 2-95505).
Thirty-fourth Supplemental Indenture dated December 15, 1983
(incorporated by reference to Exhibit 4(c)-4, File No. 2-95505).
Thirty-fifth Supplemental Indenture dated April 1, 1984 (incorporated by
reference to Exhibit 4(c)-5, File No. 2-95505).
E-7
Duke
Energy
Carolinas
Duke
Energy
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
PART IV Exhibit
Number
4.4.32
4.4.33
4.4.34
4.4.35
4.4.36
4.4.37
4.4.38
4.4.39
4.4.40
4.4.41
4.4.42
4.4.43
4.4.44
4.4.45
4.4.46
4.4.47
4.4.48
4.4.49
4.4.50
4.4.51
4.4.52
4.4.53
4.4.54
4.4.55
Thirty-sixth Supplemental Indenture dated June 1, 1984 (incorporated by
reference to Exhibit 4(c)-6, File No. 2-95505).
Thirty-seventh Supplemental Indenture dated June 1, 1984 (incorporated by
reference to Exhibit 4(c)-7, File No. 2-95505).
Thirty-eighth Supplemental Indenture dated June 1, 1984 (incorporated by
reference to Exhibit 4(c)- 8, File No. 2-95505).
Thirty-ninth Supplemental Indenture dated April 1, 1985 (incorporated by
reference to Exhibit 4(b), File No. 33-25560).
Fortieth Supplemental Indenture dated October 1, 1985 (incorporated by
reference to Exhibit 4(c), File No. 33-25560).
Forty-first Supplemental Indenture dated March 1, 1986 (incorporated by
reference to Exhibit 4(d), File No. 33-25560).
Forty-second Supplemental Indenture dated July 1, 1986 (incorporated by
reference to Exhibit 4(e), File No. 33-25560).
Forty-third Supplemental Indenture dated January 1, 1987 (incorporated by
reference to Exhibit 4(f), File No. 33-25560).
Forty-fourth Supplemental Indenture dated December 1, 1987 (incorporated by
reference to Exhibit 4(g), File No. 33-25560).
Forty-fifth supplemental Indenture dated September 1, 1988 (incorporated by
reference to Exhibit 4(h), File No. 33-25560).
Forty-sixth Supplemental Indenture dated April 1, 1989 (incorporated by
reference to Exhibit 4(b), File No. 33-33431).
Forty-seventh Supplemental Indenture dated August 1, 1989 (incorporated by
reference to Exhibit 4(c), File No. 33-33431).
Forty-eighth Supplemental Indenture dated November 15, 1990 (incorporated by
reference to Exhibit 4(b), File No. 33-38298).
Forty-ninth Supplemental Indenture dated November 15, 1990 (incorporated by
reference to Exhibit 4(c), File No. 33-38298).
Fiftieth Supplemental Indenture dated February 15, 1991 (incorporated by
reference to Exhibit 4(h), File No. 33-42869).
Fifty-first Supplemental Indenture dated April 1, 1991 (incorporated by
reference to Exhibit 4(i), File No. 33-42869).
Fifty-second Supplemental Indenture dated September 15, 1991(incorporated
by reference to Exhibit 4(e), File No. 33-48607).
Fifty-third Supplemental Indenture dated January 1, 1992 (incorporated by
reference to Exhibit 4(f), File No. 33-48607).
Fifty-fourth Supplemental Indenture dated April 15, 1992 (incorporated by
reference to Exhibit 4 (g), File No. 33-48607).
Fifty-fifth Supplemental Indenture dated July 1, 1992 (incorporated by
reference to Exhibit 4(e), File No. 33-55060).
Fifty-sixth Supplemental Indenture dated October 1, 1992 (incorporated by
reference to Exhibit 4(f), File No. 33-55060).
Fifty-seventh Supplemental Indenture dated February 1, 1993 (incorporated by
reference to Exhibit 4(e), File No. 33-60014).
Fifty-eighth Supplemental Indenture dated March 1, 1993 (incorporated by
reference to Exhibit 4(f), File No. 33-60014).
Fifty-ninth Supplemental Indenture dated July 1, 1993 (incorporated by
reference to Exhibit 4(a) to Post-Effective Amendment No. 1,
File No. 33-38349).
E-8
Duke
Energy
Carolinas
Duke
Energy
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
PART IV Duke
Energy
Carolinas
Duke
Energy
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
Exhibit
Number
4.4.56
4.4.57
4.4.58
4.4.59
4.4.60
4.4.61
4.4.62
4.4.63
4.4.64
4.4.65
4.4.66
4.4.67
4.4.68
4.4.69
4.4.70
4.4.71
Sixtieth Supplemental Indenture dated July 1, 1993 (incorporated by reference
to Exhibit 4(b) to Post-Effective Amendment No. 1, File No. 33-38349).
Sixty-first Supplemental Indenture dated August 15, 1993 (incorporated by
reference to Exhibit 4(e), File No. 33-50597).
Sixty-second Supplemental Indenture dated January 15, 1994 (incorporated
by reference to Exhibit 4 to Duke Energy Progress’ Current Report on Form 8-K
dated January 19, 1994, File No. 1-3382).
Sixty-third Supplemental Indenture dated May 1, 1994 (incorporated by
reference to Exhibit 4(f) for Duke Energy Progress’ Form S-3,
File No. 033-57835).
Sixty-fourth Supplemental Indenture dated August 15, 1997 (incorporated by
reference to Exhibit to Duke Energy Progress’ Current Report on Form 8-K
dated August 26, 1997, File No. 1-3382).
Sixty-fifth Supplemental Indenture dated April 1, 1998 (incorporated by
reference to Exhibit 4(b) for Duke Energy Progress’ Registration Statement on
Form S-3 filed December 18, 1998, File No. 333-69237).
Sixty-sixth Supplemental Indenture dated March 1, 1999 (incorporated by
reference to Exhibit 4(c) to Duke Energy Progress’ Current Report on Form 8-K
dated March 19, 1999, File No. 1-3382).
Form of Carolina Power & Light Company First Mortgage Bond, 6.80% Series
Due August 15, 2007 (incorporated by reference to Exhibit 4 to Duke Energy
Progress’ Form 10-Q for the period ended September 30, 1998,
File No. 1-3382).
Sixty-eighth Supplemental Indenture dated April 1, 2000 (incorporated by
reference to Exhibit No. 4(b) to Duke Energy Progress’ Current Report on Form
8-K dated April 20, 2000, File No. 1-3382).
Sixty-ninth Supplemental Indenture dated June 1, 2000 (incorporated by
reference to Exhibit No. 4b(2) to Duke Energy Progress’ Annual Report on
Form 10-K dated March 29, 2001, File No. 1-3382).
Seventieth Supplemental Indenture dated July 1, 2000 (incorporated by
reference to Exhibit 4b(3) to Duke Energy Progress’ Annual Report on Form 10-K
dated March 29, 2001, File No. 1-3382).
Seventy-first Supplemental Indenture dated February 1, 2002 (incorporated by
reference to Exhibit 4b(2) to Duke Energy Progress’ Annual Report on Form 10-K
dated March 28, 2002, File No. 1-3382 and 1-15929).
Seventy-second Supplemental Indenture, dated as of September 1, 2003,
(incorporated by reference to Exhibit 4 to Duke Energy Progress, Inc.’s (formerly
Carolina Power & Light Company (d/b/a Progress Energy Carolinas, Inc.))
Current Report on Form 8-K filed on September 12, 2003, File No. 1-3382).
Seventy-third Supplemental Indenture, dated as of March 1, 2005,
(incorporated by reference to Exhibit 4 to Duke Energy Progress, Inc.’s (formerly
Carolina Power & Light Company (d/b/a Progress Energy Carolinas, Inc.))
Current Report on Form 8-K filed on March 22, 2005, File No. 1-3382).
Seventy-fourth Supplemental Indenture, dated as of November 1, 2005,
(incorporated by reference to Exhibit 4 to Duke Energy Progress, Inc.’s (formerly
Carolina Power & Light Company (d/b/a Progress Energy Carolinas, Inc.))
Current Report on Form 8-K filed on November 30, 2005, File No. 1-3382).
Seventy-fifth Supplemental Indenture, dated as of March 1, 2008, (incorporated
by reference to Exhibit 4 to Duke Energy Progress, Inc.’s (formerly Carolina
Power & Light Company (d/b/a Progress Energy Carolinas, Inc.)) Current Report
on Form 8-K filed on March 13, 2008, File No. 1-3382).
E-9
PART IV Exhibit
Number
4.4.72
4.4.73
4.4.74
4.4.75
4.4.76
4.4.77
4.4.78
4.4.79
4.4.80
4.4.81
4.4.82
4.5
4.6
Seventy-sixth Supplemental Indenture, dated as of January 1, 2009,
(incorporated by reference to Exhibit 4 to Duke Energy Progress, Inc.’s (formerly
Carolina Power & Light Company (d/b/a Progress Energy Carolinas, Inc.))
Current Report on Form 8-K filed on January 15, 2009, File No. 1-3382).
Seventy-seventh Supplemental Indenture, dated as of June 18, 2009,
(incorporated by reference to Exhibit 4 to Duke Energy Progress, Inc.’s (formerly
Carolina Power & Light Company (d/b/a Progress Energy Carolinas, Inc.))
Current Report on Form 8-K filed on June 23, 2009, File No. 1-3382).
Seventy-eighth Supplemental Indenture, dated as of September 1, 2011,
(incorporated by reference to Exhibit 4 to Duke Energy Progress, Inc.’s (formerly
Carolina Power & Light Company (d/b/a Progress Energy Carolinas, Inc.))
Current Report on Form 8-K filed on September 15, 2011, File No. 1-3382).
Seventy-ninth Supplemental Indenture, dated as of May 1, 2012, (incorporated
by reference to Exhibit 4 to Duke Energy Progress, Inc.’s (formerly Carolina
Power & Light Company (d/b/a Progress Energy Carolinas, Inc.)) Current Report
on Form 8-K filed on May 18, 2012, File No. 1-3382).
Eightieth Supplemental Indenture, dated as of March 1, 2013, (incorporated by
reference to Exhibit 4.1 to Duke Energy Progress, Inc.’s (formerly Carolina Power
& Light Company (d/b/a Progress Energy Carolinas, Inc.)) Current Report on
Form 8-K filed on March 12, 2013, File No. 1-3382).
Eighty-second Supplemental Indenture, dated as of March 1, 2014, between the
Company and The Bank of New York Mellon (formerly Irving Trust Company) and
Tina D. Gonzalez (successor to Frederick G. Herbst) and forms of global notes
(incorporated by reference to Exhibit 4.1 to Duke Energy Progress, Inc.’s Current
Report on Form 8-K filed on March 6, 2014, File No. 1-3382).
Eighty-third Supplemental Indenture, dated as of November 1, 2014, between
the Company and The Bank of New York Mellon (formerly Irving Trust Company)
and Tina D. Gonzalez (successor to Frederick G. Herbst) and forms of global
notes (incorporated by reference to Exhibit 4.1 to Duke Energy Progress, Inc.’s
Current Report on Form 8-K filed on November 20, 2014, File No. 1-3382).
Eighty-fifth Supplemental Indenture, dated as of August 1, 2015, (incorporated
by reference to Exhibit 4.1 to Duke Energy Progress, LLC’s Current Report on
Form 8-K filed on August 13, 2015, File No. 1-3382).
Eighty-sixth Supplemental Indenture, dated as of September 1, 2016,
(incorporated by reference to Exhibit 4.1 to registrant’s Current Report on Form
8-K filed on September 16, 2016, File No. 1-15929).
Eighty-seventh Supplemental Indenture, dated as of September 1, 2017
(incorporated by reference to Exhibit 4.1 to registrant’s Current Report on Form
8-K filed on September 8, 2017, File No. 1-3382).
Eighty-Ninth Supplemental Indenture (incorporated by reference to Exhibit 4.1 to
Registrant’s Current Report on Form 8-K filed on March 7, 2019,
File no. 1-3382).
Indenture (for Debt Securities) between Duke Energy Progress, Inc. (formerly
Carolina Power & Light Company) and The Bank of New York Mellon (successor
in interest to The Chase Manhattan Bank), as Trustee (incorporated by reference
to Exhibit 4(a) to registrant’s Current Report on Form 8-K filed on
November 5, 1999, File No. 1-3382).
Indenture (for [Subordinated] Debt Securities) (open ended) (incorporated by
reference to Exhibit 4(a)(2) to Duke Energy Progress, Inc.’s (formerly Carolina
Power & Light Company (d/b/a Progress Energy Carolinas, Inc.)) Registration
Statement on Form S-3 filed on November 18, 2008, File No. 333-155418).
Duke
Energy
Carolinas
Duke
Energy
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
X
X
X
X
X
X
X
X
X
X
X
X
X
E-10
PART IV Exhibit
Number
4.7
4.7.1
4.7.2
4.7.3
4.7.4
4.7.5
4.7.6
4.7.7
4.7.8
4.7.9
4.7.10
4.7.11
4.7.12
Indenture (for First Mortgage Bonds) between Duke Energy Florida, Inc.
(formerly Florida Power Corporation) and The Bank of New York Mellon
(as successor to Guaranty Trust Company of New York and The Florida National
Bank of Jacksonville), as Trustee, dated as of January 1, 1944, (incorporated by
reference to Exhibit B-18 to registrant’s Form A-2, File No. 2-5293).
Seventh Supplemental Indenture (incorporated by reference to Exhibit 4(b) to
Duke Energy Florida, Inc.’s (formerly Florida Power Corporation) Registration
Statement on Form S-3 filed on September 27, 1991, File No. 33-16788).
Eighth Supplemental Indenture (incorporated by reference to Exhibit 4(c) to
Duke Energy Florida, Inc.’s (formerly Florida Power Corporation) Registration
Statement on Form S-3 filed on September 27, 1991, File No. 33-16788).
Sixteenth Supplemental Indenture (incorporated by reference to Exhibit 4(d) to
Duke Energy Florida, Inc.’s (formerly Florida Power Corporation) Registration
Statement on Form S-3 filed on September 27, 1991, File No. 33-16788).
Twenty-ninth Supplemental Indenture (incorporated by reference to Exhibit 4(c)
to Duke Energy Florida, Inc.’s (formerly Florida Power Corporation) Registration
Statement on Form S-3 filed on September 17, 1982, File No. 2-79832).
Thirty-eighth Supplemental Indenture, dated as of July 25, 1994, (incorporated
by reference to exhibit 4(f) to Duke Energy Florida, Inc.’s (formerly Florida Power
Corporation) Registration Statement on Form S-3 filed on August 29, 1994,
File No. 33-55273).
Forty-first Supplemental Indenture, dated as of February 1, 2003, (incorporated
by reference to Exhibit 4 to Duke Energy Florida, Inc.’s (formerly Duke Energy
Florida Power Corporation (d/b/a Progress Energy Florida, Inc.)) Current Report
on Form 8-K filed on February 21, 2003, File No. 1-3274).
Forty-second Supplemental Indenture, dated as of April 1, 2003, (incorporated
by reference to Exhibit 4 to Duke Energy Florida, Inc.’s (formerly Florida Power
Corporation (d/b/a Progress Energy Florida, Inc.)) Quarterly Report on Form
10-Q for the quarter ended June 30, 2003, filed on August 11, 2003,
File No. 1-3274).
Forty-third Supplemental Indenture, dated as of November 1, 2003,
(incorporated by reference to Exhibit 4 to Duke Energy Florida, Inc.’s (formerly
Florida Power Corporation (d/b/a Progress Energy Florida, Inc.)) Current Report
on Form 8-K filed on November 21, 2003, File No. 1-3274).
Forty-fourth Supplemental Indenture, dated as of August 1, 2004, (incorporated
by reference to Exhibit 4(m) to Duke Energy Florida, Inc.’s (formerly Florida
Power Corporation (d/b/a Progress Energy Florida, Inc.)) Annual Report on Form
10-K for the year ended December 31, 2004, filed on March 16, 2005,
File No. 1-3274).
Forty-sixth Supplemental Indenture, dated as of September 1, 2007,
(incorporated by reference to Exhibit 4 to Duke Energy Florida, Inc.’s (formerly
Florida Power Corporation (d/b/a Progress Energy Florida, Inc.)) Current Report
on Form 8-K filed on September 19, 2007, File No. 1-3274).
Forty-seventh Supplemental Indenture, dated as of December 1, 2007,
(incorporated by reference to Exhibit 4 to Duke Energy Florida, Inc.’s (formerly
Florida Power Corporation (d/b/a Progress Energy Florida, Inc.)) Current Report
on Form 8-K filed on December 13, 2007, File No. 1-3274).
Forty-eighth Supplemental Indenture, dated as of June 1, 2008, (incorporated
by reference to Exhibit 4 to Duke Energy Florida, Inc.’s (formerly Florida Power
Corporation (d/b/a Progress Energy Florida, Inc.)) Current Report on Form 8-K
filed on June 18, 2008, File No. 1-3274).
Duke
Energy
Carolinas
Duke
Energy
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
X
X
X
X
X
X
X
X
X
X
X
X
X
E-11
PART IV Exhibit
Number
4.7.13
4.7.14
4.7.15
4.7.16
4.7.17
4.7.18
4.8
4.8.1
4.8.2
4.9
4.10
4.10.1
4.10.2
Forty-ninth Supplemental Indenture, dated as of March 1, 2010, (incorporated
by reference to Exhibit 4 to Duke Energy Florida, Inc.’s (formerly Florida Power
Corporation (d/b/a Progress Energy Florida, Inc.)) Current Report on Form 8-K
filed on March 25, 2010, File No. 1-3274).
Fiftieth Supplemental Indenture, dated as of August 11, 2011, (incorporated
by reference to Exhibit 4 to Duke Energy Florida, Inc.’s (formerly Florida Power
Corporation (d/b/a Progress Energy Florida, Inc.)) Current Report on Form 8-K
filed on August 18, 2011, File No. 1-3274).
Fifty-first Supplemental Indenture, dated as of November 1, 2012, (incorporated
by reference to Exhibit 4.1 to Duke Energy Florida, Inc.’s (formerly Florida Power
Corporation (d/b/a Progress Energy Florida, Inc.)) Current Report on Form 8-K
filed on November 20, 2012, File No. 1-3274).
Fifty-third Supplemental Indenture, dated as of September 1, 2016,
(incorporated by reference to Exhibit 4.1 to registrant’s Current Report on Form
8-K filed on September 9, 2016, File No. 1-03274).
Fifty-fifth Supplemental Indenture, dated as of June 1, 2018, (incorporated by
reference to Exhibit 4.1 to Registrant’s Current Report on Form 8-K filed on
June 21, 2018, File No. 1-3274).
Fifty-Sixth Supplemental Indenture, dated as of November 1, 2019
(incorporated by reference to Exhibit 4.1 to Registrant’s Current Report on Form
8-K filed on November 26, 2019, File No. 1-3274).
Indenture (for Debt Securities) between Duke Energy Florida, Inc. (formerly
Florida Power Corporation (d/b/a Progress Energy Florida, Inc.)) and The Bank
of New York Mellon Trust Company, National Association (successor in interest
to J.P. Morgan Trust Company, National Association), as Trustee, dated as of
December 7, 2005, (incorporated by reference to Exhibit 4(a) to registrant’s
Current Report on Form 8-K filed on December 13, 2005, File No. 1-3274).
First Supplemental Indenture, dated as of December 12, 2017, (incorporated
by reference to Exhibit 4.1 to registrant’s Current Report on Form 8-K filed on
December 12, 2017, File No. 1-03274).
Second Supplemental Indenture, dated as of November 26, 2019 (incorporated
by reference to Exhibit 4.2 to registrant’s Current Report on Form 8-K filed on
November 26, 2019, File No. 1-3274).
Indenture (for [Subordinated] Debt Securities) (open ended) (incorporated by
reference to Exhibit 4(a)(2) Duke Energy Florida, Inc.’s (formerly Florida Power
Corporation (d/b/a Progress Energy Florida, Inc.)) Registration Statement on
Form S-3 filed on November 18, 2008, File No. 333-155418).
Original Indenture (Unsecured Debt Securities) between Duke Energy Ohio, Inc.
(formerly The Cincinnati Gas & Electric Company) and The Bank of New York
Mellon Trust Company, N.A., as Successor Trustee, dated as of May 15, 1995,
(incorporated by reference to Exhibit 3 to registrant’s Form 8-A filed on
July 27, 1995, File No. 1-1232).
First Supplemental Indenture, dated as of June 1, 1995, (incorporated by
reference to Exhibit 4 B to Duke Energy Ohio, Inc.’s (formerly The Cincinnati Gas
& Electric Company) Quarterly Report on Form 10-Q for the quarter ended
June 30, 1995, filed on August 11, 1995, File No. 1-1232).
Seventh Supplemental Indenture, dated as of June 15, 2003, (incorporated by
reference to Exhibit 4.1 to Duke Energy Ohio, Inc.’s (formerly The Cincinnati Gas
& Electric Company) Quarterly Report on Form 10-Q for the quarter ended
June 30, 2003, filed on August 13, 2003, File No. 1-1232).
Duke
Energy
Carolinas
Duke
Energy
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
X
X
X
X
X
X
X
X
X
X
X
X
X
E-12
PART IV Exhibit
Number
4.11
4.11.1
4.11.2
4.11.3
4.11.4
4.11.5
4.12
4.12.1
4.12.2
4.12.3
4.12.4
4.13
4.13.1
4.13.2
4.13.3
4.13.4
Duke
Energy
Carolinas
Duke
Energy
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
Original Indenture (First Mortgage Bonds) between Duke Energy Ohio, Inc.
(formerly The Cincinnati Gas & Electric Company) and The Bank of New York
Mellon Trust Company, N.A., as Successor Trustee, dated as of August 1, 1936,
(incorporated by reference to an exhibit to registrant’s Registration Statement
No. 2-2374).
Fortieth Supplemental Indenture, dated as of March 23, 2009, (incorporated by
reference to Exhibit 4.1 to Duke Energy Ohio, Inc.’s (formerly The Cincinnati Gas
& Electric Company) Current Report on Form 8-K filed on March 24, 2009,
File No. 1-1232).
Forty-second Supplemental Indenture, dated as of September 6, 2013,
(incorporated by reference to Exhibit 4.1 to Duke Energy Ohio, Inc.’s (formerly
The Cincinnati Gas & Electric Company) Current Report on Form 8-K filed on
September 6, 2013, File No. 1-1232).
Forty-fourth Supplemental Indenture, dated as of June 23, 2016, (incorporated
by reference to Exhibit 4.1 registrant’s Current Report on Form 8-K filed on
June 23, 2016, File No. 1-1232).
Forty-fifth Supplemental Indenture, dated as of March 27, 2017 (incorporated
by reference to Exhibit 4.1 to registrant’s Current Report on Form 8-K filed on
March 27,2017, File No. 1-01232).
Forty-sixth Supplemental Indenture, dated as of January 8, 2019, (incorporated
by reference to Exhibit 4.1 to registrant’s Current Report on Form 8-K filed on
January 8, 2019, File No. 1-1232).
Indenture between Duke Energy Indiana, LLC (formerly PSI Energy, Inc.) and
The Bank of New York Mellon Trust Company, N.A., as Successor Trustee,
dated as of November 15, 1996, (incorporated by reference to Exhibit 4(v) to
the Cinergy Corp. Form 10-K for the year ended December 31, 1996, filed on
March 27, 1997, File No. 1-11377).
Third Supplemental Indenture, dated as of March 15, 1998, (incorporated by
reference to Exhibit 4-w to Cinergy Corp.’s Annual Report on Form 10-K for the
year ended December 31, 1997, filed on March 27, 1998, File No. 1-11377).
Eighth Supplemental Indenture, dated as of September 23, 2003, (incorporated
by reference to Exhibit 4.2 to Duke Energy Indiana, LLC’s (formerly PSI Energy,
Inc.) Quarterly Report on Form 10-Q for the quarter ended September 30, 2003,
filed on November 13, 2003, File No. 1-3543).
Ninth Supplemental Indenture, dated as of October 21, 2005, (incorporated by
reference to Exhibit 4.7.3 to Duke Energy Indiana, LLC’s (formerly PSI Energy,
Inc.) Registration Statement on Form S-3 filed on September 29, 2010,
File No. 333-169633).
Tenth Supplemental Indenture, dated as of June 9, 2006, (incorporated by
reference to Exhibit 4.1 to Duke Energy Indiana, LLC’s (formerly PSI Energy, Inc.)
Current Report on Form 8-K filed on June 15, 2006, File No. 1-3543).
Original Indenture (First Mortgage Bonds) between Duke Energy Indiana,
LLC (formerly PSI Energy, Inc.) and Deutsche Bank National Trust Company,
as Successor Trustee, dated as of September 1, 1939, (filed as an exhibit in
File No. 70-258).
Tenth Supplemental Indenture, dated as of July 1, 1952, (filed as an exhibit in
File No. 2-9687).
Twenty-third Supplemental Indenture, dated as of January 1, 1977, (filed as an
exhibit in File No. 2-57828).
Twenty-fifth Supplemental Indenture, dated as of September 1, 1978, (filed as
an exhibit in File No. 2-62543).
Twenty-sixth Supplemental Indenture, dated as of September 1, 1978, (filed as
an exhibit in File No. 2-62543).
E-13
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
PART IV Exhibit
Number
4.13.5
4.13.6
4.13.7
4.13.8
4.13.9
4.13.10
4.13.11
4.13.12
4.13.13
4.13.14
4.13.15
4.13.16
4.13.17
4.13.18
4.13.19
4.13.20
Duke
Energy
Carolinas
Duke
Energy
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
Thirtieth Supplemental Indenture, dated as of August 1, 1980, (filed as an
exhibit in File No. 2-68562).
Thirty-fifth Supplemental Indenture, dated as of March 30, 1984, (filed as an
exhibit to registrant’s Annual Report on Form 10-K for the year ended
December 31, 1984, File No. 1-3543).
Forty-sixth Supplemental Indenture, dated as of June 1, 1990, (filed as an
exhibit to registrant’s Annual Report on Form 10-K for the year ended
December 31, 1991, File No. 1-3543).
Forty-seventh Supplemental Indenture, dated as of July 15, 1991, (filed as an
exhibit to registrant’s Annual Report on Form 10-K for the year ended
December 31, 1991, File No. 1-3543).
Forty-eighth Supplemental Indenture, dated as of July 15, 1992, (filed as an
exhibit to registrant’s Annual Report on Form 10-K for the year ended
December 31, 1992, File No. 1-3543).
Fifty-second Supplemental Indenture, dated as of April 30, 1999, (incorporated
by reference to Exhibit 4 to Duke Energy Indiana, LLC’s (formerly PSI Energy,
Inc.) Quarterly Report on Form 10-Q for the quarter ended March 31, 1999,
filed on May 13, 1999, File No. 1-3543).
Fifty-seventh Supplemental Indenture, dated as of August 21, 2008,
(incorporated by reference to Exhibit 4.1 to Duke Energy Indiana,
LLC’s (formerly PSI Energy, Inc.) Current Report Form 8-K filed on
August 21, 2008, File No. 1-3543).
Fifty-eighth Supplemental Indenture, dated as of December 19, 2008,
(incorporated by reference to Exhibit 4.8.12 to Duke Energy Indiana,
LLC’s (formerly PSI Energy, Inc.) Registration Statement on Form S-3 filed on
September 29, 2010, File No. 333-169633-02).
Fifty-ninth Supplemental Indenture, dated as of March 23, 2009, (incorporated
by reference to Exhibit 4.1 to Duke Energy Indiana, LLC’s (formerly PSI Energy,
Inc.) Current Report on Form 8-K filed on March 24, 2009, File No. 1-3543).
Sixtieth Supplemental Indenture, dated as of June 1, 2009, (incorporated by
reference to Exhibit 4.8.14 to Duke Energy Indiana, LLC’s (formerly PSI Energy,
Inc.) Registration Statement on Form S-3 filed on September 29, 2010,
File No. 333-169633-02).
Sixty-first Supplemental Indenture, dated as of October 1, 2009, (incorporated
by reference to Exhibit 4.8.15 to Duke Energy Indiana, LLC’s (formerly PSI
Energy, Inc.) Registration Statement on Form S-3 filed on September 29, 2010,
File No. 333-169633-02).
Sixty-second Supplemental Indenture, dated as of July 9, 2010, (incorporated by
reference to Exhibit 4.1 to Duke Energy Indiana, LLC’s (formerly PSI Energy, Inc.)
Current Report on Form 8-K filed on July 9, 2010, File No. 1-3543).
Sixty-third Supplemental Indenture, dated as of September 23, 2010,
(incorporated by reference to Exhibit 4.8.17 to Duke Energy Indiana,
LLC’s (formerly PSI Energy, Inc.) Registration Statement on Form S-3 filed on
September 29, 2010, File No. 333-169633-02).
Sixty-fourth Supplemental Indenture, dated as of December 1, 2011,
(incorporated by reference to Exhibit 4(d)(2)(xviii) to Duke Energy Indiana,
LLC’s (formerly PSI Energy, Inc.) Registration Statement on Form S-3 filed on
September 30, 2013, File No. 333-191462-03).
Sixty-fifth Supplemental Indenture, dated as of March 15, 2012, (incorporated
by reference to Exhibit 4.1 to Duke Energy Indiana, LLC’s (formerly PSI Energy,
Inc.) Current Report on Form 8-K filed on March 15, 2012, File No. 1-3543).
Sixty-sixth Supplemental Indenture, dated as of July 11, 2013, (incorporated by
reference to Exhibit 4.1 to Duke Energy Indiana, LLC’s (formerly PSI Energy, Inc.)
Current Report on Form 8-K filed on July 11, 2013, File No. 1-3543).
E-14
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
PART IV Exhibit
Number
4.13.21
Sixty-seventh Supplemental Indenture, dated as of January 1, 2016, between
Duke Energy Indiana, Inc. and Deutsche Bank National Trust Company, as
Trustee, supplementing and amending the Indenture of Mortgage or Deed
of Trust, dated September 1, 1939, between Duke Energy Indiana, Inc. and
Deutsche Bank National Trust Company, as Trustee (incorporated by reference
to Exhibit 4.2 to Duke Energy Indiana, LLC’s (formerly PSI Energy, Inc.) Quarterly
Report on Form 10-Q for the quarter ended March 31, 2016, filed on
May 5, 2016, File No. 1-3543).
4.13.22
4.13.23
Sixty-eighth Supplemental Indenture, dated as of May 12, 2016, (incorporated
by reference to Exhibit 4.1 to registrant’s Current Report on Form 8-K filed on
May 12, 2016, File No. 1-3543).
Sixty-Ninth Supplemental Indenture, dated as of September 27, 2019
(incorporated by reference to Exhibit 4.1 to registrant’s Current Report on Form
8-K filed on September 27, 2019, File No. 1-3543).
4.14
4.15
4.16
4.17
4.18
4.19
4.20
4.21
4.22
4.23
4.24
Repayment Agreement between Duke Energy Ohio, Inc. (formerly The Cincinnati
Gas & Electric Company) and The Dayton Power and Light Company, dated as of
December 23, 1992, (filed with registrant’s Annual Report on Form 10-K for the
year ended December 31, 1992, File No. 1-1232).
Unsecured Promissory Note between Duke Energy Indiana, LLC (formerly PSI
Energy, Inc.) and the Rural Utilities Service, dated as of October 14, 1998,
(incorporated by reference to Exhibit 4 to registrant’s Annual Report on Form
10-K for the year ended December 31, 1998, filed on March 8, 1999,
File No. 1-3543).
6.302% Subordinated Note between Duke Energy Indiana, LLC (formerly PSI
Energy, Inc.) and Cinergy Corp., dated as of February 5, 2003, (incorporated by
reference to Exhibit 4(yyy) to registrant’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2003, filed on May 12,2003, File No. 1-3543).
6.403% Subordinated Note between Duke Energy Indiana, LLC (formerly PSI
Energy, Inc.) and Cinergy Corp., dated as of February 5, 2003, (incorporated by
reference to Exhibit 4(zzz) to registrant’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2003, filed on May 12, 2003, File No. 1-3543).
Contingent Value Obligation Agreement between Progress Energy, Inc. (formerly
CP&L Energy, Inc.) and The Chase Manhattan Bank, as Trustee, dated as of
November 30, 2000, (incorporated by reference to Exhibit 4.1 to registrant’s
Current Report on Form 8-K filed on December 1, 2000, File No. 1-3382).
Form of 3.47% Series A Senior Notes due July 16, 2027 (incorporated by
reference to Exhibit 4.1 to registrant’s Current Report on Form 8-K filed on
March 29, 2012, File No. 1-06196).
Form of 3.57% Series B Senior Notes due July 16, 2027 (incorporated by
reference to Exhibit 4.2 to registrant’s Current Report on Form 8-K filed on
March 29, 2012, File No. 1-06196).
Form of 4.65% Senior Notes due 2043 (incorporated by reference to Exhibit 4.2
to registrant’s Current Report on Form 8-K filed on August 1, 2013,
File No. 1-06196).
Form of 4.10% Senior Notes due 2034 (incorporated by reference to Exhibit 4.2
to registrant’s Current Report on Form 8-K filed on September 18, 2014,
File No. 1-06196).
Form of 3.60% Senior Notes due 2025 (incorporated by reference to Exhibit 4.2
to registrant’s Current Report on Form 8-K filed on September 14, 2015,
File No. 1-06196).
Form of 3.64% Senior Notes due 2046 (incorporated by reference to Exhibit 4.2
to registrant’s Current Report on Form 8-K filed on July 28, 2016,
File No. 1-06196).
Duke
Energy
Carolinas
Duke
Energy
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
X
X
X
X
X
X
X
X
X
X
X
X
X
X
E-15
PART IV Exhibit
Number
4.25
4.26
4.26.1
4.26.2
4.26.3
4.26.4
4.26.5
4.26.6
4.26.7
4.27
4.28
4.29
4.30
4.31
4.32
Duke
Energy
Carolinas
Duke
Energy
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
Form of 4.24% Series B Senior Notes due June 6, 2021 (incorporated by
reference to Exhibit 4.2 to registrant’s Current Report on Form 8-K filed on
May 12, 2011, File No. 1-06196).
Indenture, dated as of April 1, 1993, between Piedmont and The Bank of
New York Mellon Trust Company, N.A. (as successor to Citibank, N.A.),
Trustee (incorporated by reference to Exhibit 4.1 to registrant’s Registration
Statement on Form S-3 filed on May 16, 1995, File No. 33-59369).
Second Supplemental Indenture, dated as of June 15, 2003, between Piedmont
and Citibank, N.A., Trustee (incorporated by reference to Exhibit 4.3 to
registrant’s Registration Statement on Form S-3 filed on June 19, 2003,
File No. 333-106268).
Fourth Supplemental Indenture, dated as of May 6, 2011, between Piedmont
Natural Gas Company, Inc. and The Bank of New York Mellon Trust Company,
N.A., as trustee (incorporated by reference to Exhibit 4.2 to registrant’s
Registration Statement on Form S-3-ASR filed on July 7, 2011,
File No. 333-175386).
Fifth Supplemental Indenture, dated August 1, 2013, between the Company and
The Bank of New York Mellon Trust Company, N.A. (incorporated by reference to
Exhibit 4.1 to registrant’s Current Report on Form 8-K filed on August 1, 2013,
File No. 1-06196).
Sixth Supplemental Indenture, dated September 18, 2014, between the
Company and The Bank of New York Mellon Trust Company, N.A. (incorporated
by reference to Exhibit 4.1 to registrant’s Current Report on Form 8-K filed on
September 18, 2014, File No. 1-06196).
Seventh Supplemental Indenture, dated September 14, 2015, between the
Company and The Bank of New York Mellon Trust Company, N.A. (incorporated
by reference to Exhibit 4.1 to registrant’s Current Report on Form 8-K filed on
September 14, 2015, File No. 1-06196).
Eighth Supplemental Indenture, dated July 28, 2016, between the Company and
The Bank of New York Mellon Trust Company, N.A. (incorporated by reference to
Exhibit 4.1 to registrant’s Current Report on Form 8-K filed on July 28, 2016,
File No. 1-06196).
Ninth Supplemental Indenture, dated as of May 24, 2019 (incorporated by
reference to Exhibit 4.1 to registrant’s Current Report on Form 8-K filed on
May 24, 2019, File No. 1-6196).
Medium-Term Note, Series A, dated as of October 6, 1993 (incorporated by
reference to Exhibit 4.8 to registrant’s Annual Report on Form 10-K for the
year ended October 31, 1993, File No. 1-06196).
Medium-Term Note, Series A, dated as of September 19, 1994 (incorporated by
reference to Exhibit 4.9 to registrant’s Annual Report on Form 10-K for the
year ended October 31, 1994, File No. 1-06196).
Form of 6% Medium-Term Note, Series E, dated as of December 19, 2003
(incorporated by reference to Exhibit 99.2 to registrant’s Current Report on Form
8-K filed on December 23, 2003, File No. 1-06196).
Form of Master Global Note (incorporated by reference to Exhibit 4.4 to
registrant’s Registration Statement on Form S-3 filed on April 30, 1997,
File No. 333-26161).
Pricing Supplement of Medium-Term Notes, Series B, dated October 3, 1995
(incorporated by reference to Exhibit 4.10 to registrant’s Annual Report on Form
10-K for the year ended October 31, 1995, File No. 1-06196).
Pricing Supplement of Medium-Term Notes, Series B, dated October 4, 1996
(incorporated by reference to Exhibit 4.11 to registrant’s Annual Report on Form
10-K for the year ended October 31, 1996, File No. 1-06196).
E-16
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
PART IV Exhibit
Number
4.33
4.34
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
Duke
Energy
Carolinas
Duke
Energy
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
X
X
X
X
X
X
X
X
X
X
Pricing Supplement of Medium-Term Notes, Series C, dated September 15, 1999
(incorporated by reference to Rule 424(b)(3) Pricing Supplement to Form S-3
Registration Statement Nos. 33-59369 and 333-26161).
Agreement of Resignation, Appointment and Acceptance dated as of
March 29, 2007, by and among Piedmont Natural Gas Company, Inc., Citibank,
N.A., and The Bank of New York Trust Company, N.A. (incorporated by reference
to Exhibit 4.1 to registrant’s Quarterly Report on Form 10-Q for the quarter
ended April 30, 2007, filed on June 8, 2007, File No. 1-06196).
Agreements with Piedmont Electric Membership Corporation, Rutherford Electric
Membership Corporation and Blue Ridge Electric Membership Corporation
(incorporated by reference to Exhibit 10.15 to Duke Energy Corporation’s
Quarterly Report on Form 10-Q for the quarter ended June 30, 2006, filed on
August 9, 2006, File No. 1-32853).
Asset Purchase Agreement between Saluda River Electric Cooperative, Inc.,
as Seller, and Duke Energy Carolinas, LLC, as Purchaser, dated as of
December 20, 2006, (incorporated by reference to Exhibit 10.1 to registrant’s
Current Report on Form 8-K filed on December 27, 2006, File No. 1-4928).
Settlement between Duke Energy Corporation, Duke Energy Carolinas, LLC
and the U.S. Department of Justice resolving Duke Energy’s used nuclear fuel
litigation against the U.S. Department of Energy, dated as of March 6, 2007,
(incorporated by reference to Item 8.01 to registrant’s Current Report on Form
8-K filed on March 12, 2007, File No. 1-4928).
Letter Agreement between Georgia Natural Gas Company and Piedmont Energy
Company dated February 12, 2016 (incorporated by reference to Exhibit 10.1 to
registrant’s Current Report on Form 8-K filed on February 18, 2016,
File No. 1-06196).
Assignment of Membership Interests dated as of October 3, 2016 between
Piedmont ACP Company, LLC and Dominion Atlantic Coast Pipeline,
LLC, (incorporated by reference to Exhibit 10.1 to registrant’s Current Report on
Form 8-K filed on October 7, 2016, File No. 1-06196).
Agreements between Piedmont Electric Membership Corporation, Rutherford
Electric Membership Corporation and Blue Ridge Electric Membership
Corporation (incorporated by reference to Exhibit 10.15 to Duke Energy
Corporation’s Quarterly Report on Form 10-Q for the quarter ended
June 30, 2006 filed on August 9, 2006, File No. 1-32853).
Conveyance and Assignment Agreement, dated as of October 3, 2016, by
and between Piedmont Energy Company and Georgia Natural Gas Company
(incorporated by reference to Exhibit 10.1 to registrant’s Current Report on Form
8-K filed on October 3, 2016, File No. 1-06196).
Engineering, Procurement and Construction Management Agreement between
Duke Energy Indiana, LLC (formerly PSI Energy, Inc.) and Bechtel Power
Corporation, dated as of December 15, 2008, (incorporated by reference to
Exhibit 10.16 to registrant’s Annual Report on Form 10-K for the year ended
December 31, 2008, filed on March 13, 2009, File No. 1-3543). (Portions of the
exhibit have been omitted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment pursuant to Rule
24b-2 under the Securities Exchange Act of 1934, as amended.)
Formation and Sale Agreement between Duke Ventures, LLC, Crescent
Resources, LLC, Morgan Stanley Real Estate Fund V U.S. L.P., Morgan Stanley
Real Estate Fund V Special U.S., L.P., Morgan Stanley Real Estate Investors
V U.S., L.P., MSP Real Estate Fund V, L.P., and Morgan Stanley Strategic
Investments, Inc., dated as of September 7, 2006, (incorporated by reference to
Exhibit 10.3 to Duke Energy Corporation’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2006, filed on November 9, 2006,
File No. 1-32853).
X
E-17
PART IV Exhibit
Number
10.10
10.11**
10.12
10.13**
10.14
10.14.1
10.14.2
10.14.3
Operating Agreement of Pioneer Transmission, LLC (incorporated by reference to
Exhibit 10.1 to Duke Energy Corporation’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2008, filed on November 7, 2008,
File No. 1-32853).
Amended and Restated Duke Energy Corporation Directors’ Saving Plan, dated
as of January 1, 2014, (incorporated by reference to Exhibit 10.32 to Duke
Energy Corporation’s Annual Report on Form 10-K for the year ended December
31, 2013, filed on February 28, 2014, File No. 1-32853).
Engineering, Procurement and Construction Management Agreement between
Duke Energy Indiana, LLC (formerly PSI Energy, Inc.) and Bechtel Power
Corporation, dated as of December 15, 2008, (incorporated by reference to Item
1.01 to registrant’s Current Report on Form 8-K filed on December 19, 2008,
File Nos. 1-32853 and 1-3543). (Portions of the exhibit have been omitted and
filed separately with the Securities and Exchange Commission pursuant to a
request for confidential treatment pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934, as amended.)
Duke Energy Corporation Executive Severance Plan (incorporated by reference to
Exhibit 10.1 to registrant’s Current Report on Form 8-K filed on
January 13, 2011, File No. 1-32853).
$6,000,000,000 Five-Year Credit Agreement between Duke Energy Corporation,
Duke Energy Carolinas, LLC, Duke Energy Ohio, Inc., Duke Energy Indiana,
LLC, Duke Energy Kentucky, Inc., Carolina Power and Light Company d/b/a Duke
Energy Progress, Inc. and Florida Power Corporation, d/b/a Duke Energy Florida,
Inc., as Borrowers, the lenders listed therein, Wells Fargo Bank, National
Association, as Administrative Agent, Bank of America, N.A. and The Royal Bank
of Scotland plc, as Co-Syndication Agents and Bank of China, New York Branch,
Barclays Bank PLC, Citibank, N.A., Credit Suisse AG, Cayman Islands Branch,
Industrial and Commercial Bank of China Limited, New York Branch, JPMorgan
Chase Bank, N.A. and UBS Securities LLC, as Co-Documentation Agents,
dated as of November 18, 2011, (incorporated by reference to Exhibit 10.1 to
registrant’s Current Report on Form 8-K filed on November 25, 2011,
File Nos. 1-32853, 1-4928, 1-1232 and 1-3543).
Amendment No. 1 and Consent between Duke Energy Corporation, Duke
Energy Carolinas, LLC, Duke Energy Ohio, Inc., Duke Energy Indiana, LLC, Duke
Energy Kentucky, Inc., Duke Energy Progress, Inc., Duke Energy Florida, Inc.,
and Wells Fargo Bank, National Association, dated as of December 18, 2013,
(incorporated by reference to Exhibit 10.1 to registrant’s Current Report on Form
8-K filed on December 23, 2013, File Nos. 1-32853, 1-4928, 1-3382, 1-3274,
1-1232 and 1-3543).
Amendment No. 2 and Consent between Duke Energy Corporation, Duke Energy
Carolinas, LLC, Duke Energy Ohio, Inc., Duke Energy Indiana, LLC, Duke
Energy Kentucky, Inc., Duke Energy Progress, Inc., and Duke Energy Florida, Inc.,
the Lenders party hereto, the issuing Lenders party hereto, Wells Fargo Bank,
National Association, as Administrative Agent and Swingline Lender, dated as
of January 30, 2015, (incorporated by reference to Exhibit 10.1 of registrant’s
Current Report on Form 8-K filed on February 5, 2015, File Nos. 1-32853,
1-4928, 1-1232, 1-3543, 1-3382 and 1-3274).
Amendment No. 3 and Consent, dated as of March 16, 2017, among the
registrants, the Lenders party thereto, the issuing Lenders party thereto, and
Wells Fargo Bank, National Association, as Administrative Agent and Swingline
Lender (incorporated by reference to Exhibit 10.1 to registrants’ Current Report
on Form 8-K filed on March 17, 2017, File Nos. 1-32853, 1-04928, 1-03382,
1-03274, 1-01232, 1-03543, 1-06196).
Duke
Energy
Carolinas
Duke
Energy
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
E-18
PART IV Duke
Energy
Carolinas
Duke
Energy
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
X
X
X
X
X
X
X
Exhibit
Number
10.14.4
Amendment No.4 and Consent, dated as of March 18, 2019, among Duke
Energy Corporation, Duke Energy Carolinas, LLC, Duke Energy Ohio, Inc., Duke
Energy Indiana, LLC, Duke Energy Kentucky, Inc., Duke Energy Progress,
LLC, Duke Energy Florida, LLC, and Piedmont Natural Gas Company, Inc.,
the Lenders party thereto, the Issuing Lenders party thereto, and Wells Fargo
Bank, National Association, as Administrative Agent and Swingline Lender
(incorporated by reference to Exhibit 10.1 to Registrants’ Current Report on
Form 8-K filed on March 21, 2019, File nos. 1-32853. 1-4928, 1-3382, 1-3274,
1-1232, 1-3543, 1-6196).
10.15**
Duke Energy Corporation 2010 Long-Term Incentive Plan (incorporated by
reference to Appendix A to registrant’s Form DEF 14A filed on
March 22, 2010, File No. 1-32853).
10.15.1** Amendment to Duke Energy Corporation 2010 Long-Term Incentive Plan
(incorporated by reference to Exhibit 10.3 to registrant’s Quarterly Report on
Form 10-Q for the quarter ended June 30, 2012, filed on August 8, 2012,
File No. 1-32853).
10.16**
Duke Energy Corporation 2015 Long-Term Incentive Plan (incorporated by
reference to Appendix C to registrant’s DEF 14A filed on March 26, 2015,
File No. 1-32853).
10.16.1** Amendment to Duke Energy Corporation 2015 Long-Term Incentive Plan
(incorporated by reference to Exhibit 10.16.1 to Duke Energy Corporation’s
Annual Report on Form 10-K for the year ended December 31, 2018, filed on
February 28, 2019, File No. 1-32853).
10.17**
10.18**
10.19**
10.20**
10.21**
10.22**
10.23**
10.24
Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit
10.4 to registrant’s Quarterly Report on Form 10-Q for the quarter ended March
31, 2017 filed on May 9, 2017, File No. 1-32853).
Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit
10.24 to Duke Energy Corporation’s Annual Report on Form 10-K for the year
ended December 31, 2017 filed on February 21, 2018, File No. 1-32853).
Performance-Based Retention Award Agreement (incorporated by reference to
Exhibit 10.2 to registrant’s Current Report on Form 10-Q for the quarter ended
March 31, 2017 filed on May 9, 2017, File No. 1-32853).
Performance Award Agreement (incorporated by reference to Exhibit 10.3 to
registrant’s Current Report on Form 10-Q for the quarter ended March 31, 2017
filed on May 9, 2017, File No. 1-32853).
Performance Award Agreement (incorporated by reference to Exhibit 10.27
to Duke Energy Corporation’s Annual Report on Form 10-K for the year ended
December 31, 2017 filed on February 21, 2018, File No. 1-32853).
Performance Share Award Agreement (incorporated by reference to Exhibit 10.2
to Duke Energy Corporation’s Current Report on Form 10-Q for the quarter ended
March 31, 2019 filed on May 9, 2019, File No. 1-32853).
Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit
10.3 to Duke Energy Corporation’s Current Report on Form 10-Q for the quarter
ended March 31, 2019 filed on May 9, 2019, File No. 1-32853).
Settlement Agreement between Duke Energy Corporation, the North Carolina
Utilities Commission Staff and the North Carolina Public Staff, dated as of
November 28, 2012, (incorporated by reference to Exhibit 10.1 to registrant’s
Current Report on Form 8-K filed on November 29, 2012, File No. 1-32853).
X
X
X
X
X
X
X
X
X
X
X
X
E-19
PART IV Exhibit
Number
10.25
10.26
10.27**
10.28**
10.29
10.30
10.31
10.32
Settlement Agreement between Duke Energy Corporation and the North Carolina
Attorney General, dated as of December 3, 2012, (incorporated by reference
Item 7.01 to registrant’s Current Report on Form 8-K filed on December 3,
2012, File No. 1-32853).
Settlement Agreement between Duke Energy Carolinas, LLC, Duke Energy
Progress, LLC, and The North Carolina Department of Environmental Quality,
dated as of December 31, 2019, (incorporated by reference to Exhibit 10.1 to
registrants’ Current Report on Form 8-K filed on January 2, 2020,
File Nos. 1-4928, 1-3382).
Form of Change-in-Control Agreement (incorporated by reference to Exhibit
10.58 to Duke Energy Corporation’s Annual Report on Form 10-K for the year
ended December 31, 2012, filed on March 1, 2013, File No. 1-32853).
Amended and Restated Duke Energy Corporation Executive Cash Balance Plan,
dated as of January 1, 2014, (incorporated by reference to Exhibit 10.52 to Duke
Energy Corporation’s Annual Report on Form 10-K for the year ended
December 31, 2013, filed on February 28, 2014, File No. 1-32852).
Purchase, Construction and Ownership Agreement, dated as of July 30, 1981,
between Duke Energy Progress, Inc. (formerly Carolina Power & Light Company)
and North Carolina Municipal Power Agency Number 3 and Exhibits, together
with resolution, dated as of December 16, 1981, changing name to North
Carolina Eastern Municipal Power Agency, amending letter, dated as of
February 18, 1982, and amendment, dated as of February 24, 1982,
(incorporated by reference to Exhibit 10(a) to registrant’s File No. 33-25560).
Operating and Fuel Agreement, dated as of July 30, 1981, between Duke Energy
Progress, Inc. (formerly Carolina Power & Light Company) and North Carolina
Municipal Power Agency Number 3 and Exhibits, together with resolution, dated
as of December 16, 1981, changing name to North Carolina Eastern Municipal
Power Agency, amending letters, dated as of August 21, 1981, and
December 15, 1981, and amendment, dated as of February 24, 1982,
(incorporated by reference to Exhibit 10(b) to registrant’s File No. 33-25560).
Power Coordination Agreement, dated as of July 30, 1981, between Duke Energy
Progress, Inc. (formerly Carolina Power & Light Company) and North Carolina
Municipal Power Agency Number 3 and Exhibits, together with resolution, dated
as of December 16, 1981, changing name to North Carolina Eastern Municipal
Power Agency and amending letter, dated as of January 29, 1982, (incorporated
by reference to Exhibit 10(c) to registrant’s File No. 33-25560).
Amendment, dated as of December 16, 1982, to Purchase, Construction
and Ownership Agreement, dated as of July 30, 1981, between Duke Energy
Progress, Inc. (formerly Carolina Power & Light Company) and North Carolina
Eastern Municipal Power Agency (incorporated by reference to Exhibit 10(d) to
registrant’s File No. 33-25560).
Duke
Energy
Carolinas
Duke
Energy
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
X
X
X
X
X
X
X
X
X
10.33**
Progress Energy, Inc. 2007 Equity Incentive Plan (incorporated by reference to
Exhibit C to registrant’s Form DEF 14A filed on March 30, 2007,
File No. 1-15929).
X
E-20
PART IV Duke
Energy
Carolinas
Duke
Energy
Progress
Energy
X
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
X
X
X
Exhibit
Number
10.34
10.35
Precedent and Related Agreements between Duke Energy Florida, Inc. (formerly
Florida Power Corporation d/b/a Progress Energy Florida, Inc. (“PEF”)), Southern
Natural Gas Company, Florida Gas Transmission Company (“FGT”), and BG LNG
Services, LLC (“BG”), including: a) Precedent Agreement between Southern
Natural Gas Company and PEF, dated as of December 2, 2004; b) Gas Sale
and Purchase Contract between BG and PEF, dated as of December 1, 2004; c)
Interim Firm Transportation Service Agreement by and between FGT and PEF,
dated as of December 2, 2004; d) Letter Agreement between FGT and PEF,
dated as of December 2, 2004, and Firm Transportation Service Agreement
between FGT and PEF to be entered into upon satisfaction of certain conditions
precedent; e) Discount Agreement between FGT and PEF, dated as of
December 2, 2004; f) Amendment to Gas Sale and Purchase Contract between
BG and PEF, dated as of January 28, 2005; and g) Letter Agreement between
FGT and PEF, dated as of January 31, 2005, (incorporated by reference to Exhibit
10.1 to registrant’s Current Report on Form 8-K/A filed on March 15, 2005,
File Nos. 1-15929 and 1-3274). (Portions of the exhibit have been omitted and
filed separately with the Securities and Exchange Commission pursuant to a
request for confidential treatment pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934, as amended.)
Engineering, Procurement and Construction Agreement between Duke Energy
Florida, Inc. (formerly Florida Power Corporation d/b/a/ Progress Energy Florida,
Inc.), as owner, and a consortium consisting of Westinghouse Electric Company
LLC and Stone & Webster, Inc., as contractor, for a two-unit AP1000 Nuclear
Power Plant, dated as of December 31, 2008, (incorporated by reference to
Exhibit 10.1 to registrant’s Current Report on Form 8-K filed on March 2, 2009,
File Nos. 1-15929 and 1-3274). (Portions of the exhibit have been omitted and
filed separately with the Securities and Exchange Commission pursuant to a
request for confidential treatment pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934, as amended.)
10.36**
Employment Agreement between Duke Energy Corporation and Lynn J. Good,
dated as of June 17, 2013, (incorporated by reference to Exhibit 10.1 to Duke
Energy Corporation’s Current Report on Form 8-K filed on June 18, 2013,
File No. 1-32853).
10.36.1** Amendment to Employment Agreement between Duke Energy Corporation and
Lynn J. Good, dated as of June 25, 2015, (incorporated by reference to Exhibit
10.1 to Duke Energy Corporation’s Current Report on Form 8-K filed on
June 29, 2015, File No. 1-32853).
10.37**
10.38**
10.39**
10.39.1
Duke Energy Corporation Executive Short-Term Incentive Plan, effective
February 25, 2013, (incorporated by reference to Exhibit 10.1 to Duke Energy
Corporation’s Current Report on Form 8-K filed on May 7, 2013,
File No. 1-32853).
Duke Energy Corporation 2017 Director Compensation Program Summary
(incorporated by reference to Exhibit 10.3 to Duke Energy Corporation’s
Quarterly Report on Form 10-Q for the quarter ended June 30, 2017 filed on
August 3, 2017, File No. 1-32853).
Amended and Restated Duke Energy Corporation Executive Savings Plan, dated
as of January 1, 2014, (incorporated by reference to Exhibit 10.82 to Duke
Energy Corporation’s Annual Report on Form 10-K for the year ended
December 31, 2013, filed on February 28, 2014, File No. 1-32853).
Amendment to Duke Energy Corporation Executive Savings Plan, effective as
of January 1, 2014 (incorporated by reference to Exhibit 10.1 to Duke Energy
Corporation’s Quarterly Report on Form 10-Q for the quarter ended
September 30, 2017, filed on November 3, 2017, File No. 1-32853).
X
X
X
X
X
X
E-21
PART IV Exhibit
Number
10.40
10.41
10.42
10.43
10.44
10.45
10.46
10.47
10.48**
10.49**
10.50**
Duke
Energy
Carolinas
Duke
Energy
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
X
X
Agreement between Duke Energy SAM, LLC, Duke Energy Ohio, Inc., Duke Energy
Commercial Enterprise, Inc. and Dynegy Resource I, LLC, dated as of
August 21, 2014, (incorporated by reference to Exhibit 10.61 to Duke Energy
Corporation’s Annual Report on Form 10-K for the year ended
December 31, 2014, filed on March 2, 2015, File No. 1-32853).
Asset Purchase Agreement between Duke Energy Progress, Inc. and North
Carolina Eastern Municipal Power Agency, dated as of September 5, 2014,
(incorporated by reference to Exhibit 10.62 to Duke Energy Corporation’s Annual
Report on Form 10-K for the year ended December 31, 2014, filed on
March 2, 2015, File No. 1-32853).
Change in Control Agreement between Duke Energy Corporation and Lloyd M.
Yates, dated as of April 30, 2014, (incorporated by reference to Exhibit 10.1 to
Duke Energy Corporation’s Current Report on Form 8-K filed on May 6, 2014,
File No. 1-32853).
Accelerated Stock Repurchase Program executed by Goldman, Sachs & Co., and
JPMorgan Chase Bank, N.A. on April 6, 2015, under an agreement with Duke
Energy Corporation (incorporated by reference to Exhibit 10.1 to Duke Energy
Corporation’s Current Report on Form 8-K filed on April 6, 2015,
File No. 1-32853).
Plea Agreement between Duke Energy Corporation and the Court of the Eastern
District of North Carolina in connection with the May 14, 2015, Dan River
Grand Jury Settlement (incorporated by reference to Exhibit 10.3 to Duke Energy
Corporation’s Quarterly Report on Form 10-Q for the quarter ended
June 30, 2015, filed on August 7, 2015, File No. 1-32853).
Plea Agreement between Duke Energy Corporation and the Court of the Eastern
District of North Carolina in connection with the May 14, 2015, Dan River
Grand Jury Settlement (incorporated by reference to Exhibit 10.4 to Duke Energy
Corporation’s Quarterly Report on Form 10-Q for the quarter ended
June 30, 2015, filed on August 7, 2015, File No. 1-32853).
Purchase and Sale Agreement by and among Duke Energy International Group
S.à.r.l., Duke Energy International Brazil Holdings S.à.r.l. and China Three Gorges
(Luxembourg) Energy S.à.r.l., dated as of October 10, 2016, (incorporated by
reference to Exhibit 2.1 to registrant’s Current Report on Form 8-K filed on
October 13, 2016, File No. 1-32853).
Purchase and Sale Agreement by and among Duke Energy Brazil Holdings
II, C.V., Duke Energy International Uruguay Investments SRL, Duke Energy
International Group S.à.r.l., Duke Energy International España Holdings SL,
Duke Energy International Investments No. 2 Ltd., ISQ Enerlam Aggregator, L.P.,
and Enerlam (UK) Holdings Ltd., dated as of October 10, 2016, (incorporated
by reference to Exhibit 2.2. to registrant’s Current Report on Form 8-K filed on
October 13, 2016, File No. 1-32853).
Amended and Restated Employment Agreement, dated May 25, 2012, between
Piedmont Natural Gas Company, Inc. and Franklin H. Yoho (incorporated by
reference to Exhibits 10.1 and 10.2 to Piedmont Natural Gas Company, Inc.’s
Quarterly Report on Form 10-Q for the quarter ended July 31, 2012, filed on
September 7, 2012, File No. 1-06196).
Severance Agreements with Thomas E. Skains and Franklin H. Yoho, dated
September 4, 2007, (incorporated by reference to Exhibits 10.2 and 10.2a to
Piedmont Natural Gas Company, Inc’s Quarterly Report on Form 10-Q for the
quarter ended July 31, 2007, filed on September 7, 2007, File No. 1-06196).
Piedmont Natural Gas Company, Inc. Incentive Compensation Plan
(incorporated by reference to Exhibit 10.64 to registrant’s Annual Report on
Form 10-K for the year ended December 31, 2016 filed on February 24, 2017,
File No. 1-32853).
X
X
X
X
X
X
X
X
X
X
X
E-22
PART IV Duke
Energy
Carolinas
Duke
Energy
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
X
X
X
X
X
X
X
X
X
X
X
Exhibit
Number
10.50.1** First Amendment to Piedmont Natural Gas Company, Inc. Incentive
Compensation Plan (incorporated by reference to Exhibit 4.2 to registrant’s
Registration Statement on Form S-8 filed on October 3, 2016,
File No. 1-32853).
10.51**
10.52**
10.53**
Waiver of Certain Rights to Terminate for Good Reason between Duke Energy
Corporation and Franklin H. Yoho (incorporated by reference to Exhibit 10.66 to
registrant’s Annual Report on Form 10-K for the year ended December 31, 2016
filed on February 24, 2017, File No. 1-32853).
Notice of Non-Renewal of Employment Agreement between Duke Energy
Corporation and Franklin H. Yoho (incorporated by reference to Exhibit 10.67 to
registrant’s Annual Report on Form 10-K for the year ended December 31, 2016
filed on February 24, 2017, File No. 1-32853).
Retention Award Agreement, dated as of October 24, 2015, between Duke
Energy Corporation and Franklin H. Yoho (incorporated by reference to Exhibit
10.68 to registrant’s Annual Report on Form 10-K for the year ended
December 31, 2016 filed on February 24, 2017, File No. 1-32853).
*10.54** Consulting Agreement, dated as of October 4, 2019, between Duke Energy
Corporation and Franklin H. Yoho.
10.55
10.56
10.57
10.58
10.58.1
10.58.2
$1,000,000,000 Credit Agreement, dated as of June 14, 2017, among Duke
Energy Corporation, the lenders listed therein, The Bank of Nova Scotia, as
Administrative Agent, PNC Bank, National Association, Sumitomo Mitsui
Banking Corporation and TD Bank, N.A., as C0-Syndication Agents, and Bank
of China, New York Branch, BNP Paribas, Santander Bank, N.A. and U.S. Bank
National Association, as Co-Documentation Agents (incorporated by reference
to Exhibit 10.1 to registrant’s Current Report on Form 8-K filed on
June 14, 2017, File No. 1-32853).
$1,000,000,000 Credit Agreement, dated as of May 15, 2019, among Duke
Energy Corporation, the Lenders party thereto, The Bank of Nova Scotia, as
Administrative Agent, PNC Bank, National Association, Sumitomo Mitsui
Banking Corporation and TD Bank, N.A., as Co-Syndication Agents, and Bank
of China, New York Branch, BNP Paribas, Santander Bank, N.A., and U.S. Bank,
National Association, as Co-Documentation Agents (incorporated by reference
to Exhibit 10.1 to registrant’s Current Report on Form 8-K filed on
May 16, 2019, File No. 1-32853).
Note Purchase Agreement, dated as of May 6, 2011, among Piedmont Natural
Gas Company, Inc. and the Purchasers party thereto (incorporated by reference
to Exhibit 10 to registrant’s Current Report on Form 8-K filed on May 12, 2011,
File No. 1-06196).
Amended and Restated Limited Liability Company Agreement of Constitution
Pipeline Company, LLC dated April 9, 2012, by and among Williams Partners
Operating LLC and Cabot Pipeline Holdings LLC (incorporated by reference to
Exhibit 10.1 to registrant’s Quarterly Report on Form 10-Q for the quarter ended
January 31, 2013, filed on March 6, 2013, File No. 1-06196).
First Amendment to Amended and Restated Limited Liability Company
Agreement of Constitution Pipeline Company, LLC, dated as of
November 9, 2012, by and among Constitution Pipeline Company, LLC, Williams
Partners Operating LLC, Cabot Pipeline Holdings LLC, and Piedmont Constitution
Pipeline Company, LLC (incorporated by reference to Exhibit 10.2 to registrant’s
Quarterly Report on Form 10-Q for the quarter ended January 31, 2013, filed on
March 6, 2013, File No. 1-06196).
Second Amendment to Amended and Restated Limited Liability Company
Agreement of Constitution Pipeline Company, LLC, dated as of May 29, 2013,
by and among Constitution Pipeline Company, LLC, Williams Partners Operating
LLC, Cabot Pipeline Holdings LLC, Piedmont Constitution Pipeline Company, LLC,
and Capitol Energy Ventures Corp. (incorporated by reference to Exhibit 99.1 to
registrant’s Current Report on Form 8-K filed on September 4, 2013,
File No. 1-06196).
E-23
PART IV Exhibit
Number
10.59
10.60
10.61
10.62
10.63
*10.64
*10.65
Second Amended and Restated Limited Liability Company Agreement of
SouthStar Energy Services LLC, dated as of September 1, 2013, by and between
Georgia Natural Gas Company and Piedmont Energy Company (incorporated by
reference to Exhibit 10.39 to registrant’s Annual Report on Form 10-K for the
year ended October 31, 2013, filed on December 23, 2013, File No. 1-06196).
Limited Liability Company Agreement of Atlantic Coast Pipeline, LLC, dated as
of September 2, 2014, by and between Dominion Atlantic Coast Pipeline, LLC,
Duke Energy ACP, LLC, Piedmont ACP Company, LLC, and Maple Enterprise
Holdings, Inc. (incorporated by reference to Exhibit 10.35 to registrant’s Annual
Report on Form 10-K for the year ended October 31, 2014, filed on
December 23, 2014, File No. 1-06196).
Engineering, Procurement and Construction Agreement between Duke Energy
Business Services, LLC, as agent for and on behalf of Piedmont Natural Gas
Company Inc. and Matrix Service, Inc., dated as of April 30, 2019 (incorporated
by reference to Exhibit 10.1 to registrant’s Quarterly Report on Form 10-Q for
the quarter ended June 30, 2019, filed on August 6, 2019, File No. 1-06196).
(Portions of the exhibit have been omitted for confidentiality.)
Decommissioning Services Agreement between Duke Energy Florida, LLC, and
ADP CR3, LLC, and ADP SF1, LLC (incorporated by reference to Exhibit 10.3 to
registrants’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2019,
Filed on August 6, 2019, File No. 2-5293). (Portions of the exhibit have been
omitted for confidentiality.)
Form of Forward Sale Agreement (incorporated by reference to Exhibit 10.1 to
registrant’s Current Report on Form 8-K filed on November 8, 2019,
File No. 1-32853).
Lease Agreement dated as of December 23, 2019, between the registrant and
CGA 525 South Tryon TIC 1, LLC, a Delaware limited liability company, CGA 525
South Tryon TIC 2, LLC, a Delaware limited liability company, and CK 525 South
Tryon TIC, LLC, a Delaware limited liability company.
Construction Agency Agreement dated as of December 23, 2019, between
the registrant and CGA 525 South Tryon TIC 1, LLC, a Delaware limited
liability company, CGA 525 South Tryon TIC 2, LLC, a Delaware limited liability
company, and CK 525 South Tryon TIC, LLC, a Delaware limited
liability company.
*21
List of Subsidiaries
*23.1.1
Consent of Independent Registered Public Accounting Firm.
*23.1.2
Consent of Independent Registered Public Accounting Firm.
*23.1.3
Consent of Independent Registered Public Accounting Firm.
*23.1.4
Consent of Independent Registered Public Accounting Firm.
*23.1.5
Consent of Independent Registered Public Accounting Firm.
*23.1.6
Consent of Independent Registered Public Accounting Firm.
*23.1.7
Consent of Independent Registered Public Accounting Firm.
*24.1
*24.2
*31.1.1
*31.1.2
Power of attorney authorizing Lynn J. Good and others to sign the Annual Report
on behalf of the registrant and certain of its directors and officers.
Certified copy of resolution of the Board of Directors of the registrant authorizing
power of attorney.
Certification of the Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Certification of the Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
E-24
Duke
Energy
Carolinas
Duke
Energy
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
PART IV Duke
Energy
Carolinas
Duke
Energy
Progress
Energy
X
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
Exhibit
Number
*31.1.3
*31.1.4
*31.1.5
*31.1.6
*31.1.7
*31.1.8
*31.2.1
*31.2.2
*31.2.3
*31.2.4
*31.2.5
*31.2.6
*31.2.7
*31.2.8
*32.1.1
*32.1.2
*32.1.3
*32.1.4
*32.1.5
*32.1.6
*32.1.7
*32.1.8
*32.2.1
*32.2.2
Certification of the Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Certification of the Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Certification of the Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Certification of the Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Certification of the Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Certification of the Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Certification of the Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
X
Certification of the Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Certification of the Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Certification of the Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Certification of the Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Certification of the Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Certification of the Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Certification of the Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
X
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
X
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
E-25
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
PART IV Duke
Energy
Carolinas
Duke
Energy
Progress
Energy
X
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
Exhibit
Number
*32.2.3
*32.2.4
*32.2.5
*32.2.6
*32.2.7
*32.2.8
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
*101.INS
XBRL Instance Document (this does not appear in the Interactive Data File
because it’s XBRL tags are embedded within the Inline XBRL document).
*101.SCH
XBRL Taxonomy Extension Schema Document
*101.CAL
XBRL Taxonomy Calculation Linkbase Document
*101.LAB
XBRL Taxonomy Label Linkbase Document
*101.PRE
XBRL Taxonomy Presentation Linkbase Document
*101.DEF
XBRL Taxonomy Definition Linkbase Document
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
The total amount of securities of each respective registrant or its subsidiaries authorized under any instrument with respect to long-term debt not filed as an exhibit
does not exceed 10% of the total assets of such registrant and its subsidiaries on a consolidated basis. Each registrant agrees, upon request of the SEC, to furnish
copies of any or all of such instruments to it.
E-26
PART IV SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed
on their behalf by the undersigned, thereunto duly authorized.
Date: February 20, 2020
DUKE ENERGY CORPORATION
(Registrant)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
By:
/s/ LYNN J. GOOD
Lynn J. Good
Chairman, President and Chief Executive Officer
(i)
/s/ LYNN J. GOOD
Lynn J. Good
Chairman, President and Chief Executive Officer (Principal Executive Officer and Director)
(ii)
/s/ STEVEN K. YOUNG
Steven K. Young
Executive Vice President and Chief Financial Officer (Principal Financial Officer)
(iii)
/s/ DWIGHT L. JACOBS
Dwight L. Jacobs
Senior Vice President, Chief Accounting Officer, Tax and Controller (Principal Accounting Officer)
(iv) Directors:
Michael G. Browning*
Annette K. Clayton*
William E. Kennard*
E. Marie McKee*
Theodore F. Craver, Jr.*
Charles W. Moorman IV*
Robert M. Davis*
Daniel R. DiMicco*
Marya M. Rose*
Carlos A. Saladrigas*
Nicholas C. Fanandakis*
Thomas E. Skains*
Lynn J. Good*
John T. Herron*
William E. Webster, Jr.*
Steven K. Young, by signing his name hereto, does hereby sign this document on behalf of the registrant and on behalf of each of the above-named persons
previously indicated by asterisk (*) pursuant to a power of attorney duly executed by the registrant and such persons, filed with the Securities and Exchange
Commission as an exhibit hereto.
By:
/s/ STEVEN K. YOUNG
Attorney-In-Fact
Date: February 20, 2020
E-27
PART IV
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: February 20, 2020
DUKE ENERGY CAROLINAS, LLC
(Registrant)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
By:
/s/ LYNN J. GOOD
Lynn J. Good
Chief Executive Officer
registrant and in the capacities and on the date indicated.
(i)
/s/ LYNN J. GOOD
Lynn J. Good
Chief Executive Officer (Principal Executive Officer)
(ii)
/s/ STEVEN K. YOUNG
Steven K. Young
Executive Vice President and Chief Financial Officer (Principal Financial Officer)
(iii)
/s/ DWIGHT L. JACOBS
Dwight L. Jacobs
Senior Vice President, Chief Accounting Officer, Tax and Controller (Principal Accounting Officer)
(iv) Directors:
/s/ LYNN J. GOOD
Lynn J. Good
/s/ DHIAA M. JAMIL
Dhiaa M. Jamil
/s/ JULIA S. JANSON
Julia S. Janson
Date: February 20, 2020
E-28
PART IV
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: February 20, 2020
PROGRESS ENERGY, INC.
(Registrant)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
By:
/s/ LYNN J. GOOD
Lynn J. Good
Chief Executive Officer
registrant and in the capacities and on the date indicated.
(i)
/s/ LYNN J. GOOD
Lynn J. Good
Chief Executive Officer (Principal Executive Officer)
(ii)
/s/ STEVEN K. YOUNG
Steven K. Young
Executive Vice President and Chief Financial Officer (Principal Financial Officer)
(iii)
/s/ DWIGHT L. JACOBS
Dwight L. Jacobs
Senior Vice President, Chief Accounting Officer, Tax and Controller (Principal Accounting Officer)
(iv) Directors:
/s/ KODWO GHARTEY-TAGOE
Kodwo Ghartey-Tagoe
/s/ LYNN J. GOOD
Lynn J. Good
Date: February 20, 2020
E-29
PART IV
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: February 20, 2020
DUKE ENERGY PROGRESS, LLC
(Registrant)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
By:
/s/ LYNN J. GOOD
Lynn J. Good
Chief Executive Officer
registrant and in the capacities and on the date indicated.
(i)
/s/ LYNN J. GOOD
Lynn J. Good
Chief Executive Officer (Principal Executive Officer)
(ii)
/s/ STEVEN K. YOUNG
Steven K. Young
Executive Vice President and Chief Financial Officer (Principal Financial Officer)
(iii)
/s/ DWIGHT L. JACOBS
Dwight L. Jacobs
Senior Vice President, Chief Accounting Officer, Tax and Controller (Principal Accounting Officer)
(iv) Directors:
/s/ DOUGLAS F ESAMANN
Douglas F Esamann
/s/ KODWO GHARTEY-TAGOE
Kodwo Ghartey-Tagoe
/s/ LYNN J. GOOD
Lynn J. Good
/s/ DHIAA M. JAMIL
Dhiaa M. Jamil
/s/ JULIA S. JANSON
Julia S. Janson
Date: February 20, 2020
E-30
PART IV
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: February 20, 2020
DUKE ENERGY FLORIDA, LLC
(Registrant)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
By:
/s/ LYNN J. GOOD
Lynn J. Good
Chief Executive Officer
registrant and in the capacities and on the date indicated.
(i)
/s/ LYNN J. GOOD
Lynn J. Good
Chief Executive Officer (Principal Executive Officer)
(ii)
/s/ STEVEN K. YOUNG
Steven K. Young
Executive Vice President and Chief Financial Officer (Principal Financial Officer)
(iii)
/s/ DWIGHT L. JACOBS
Dwight L. Jacobs
Senior Vice President, Chief Accounting Officer, Tax and Controller (Principal Accounting Officer)
(iv) Directors:
/s/ DOUGLAS F ESAMANN
Douglas F Esamann
/s/ KODWO GHARTEY-TAGOE
Kodwo Ghartey-Tagoe
/s/ LYNN J. GOOD
Lynn J. Good
/s/ DHIAA M. JAMIL
Dhiaa M. Jamil
/s/ JULIA S. JANSON
Julia S. Janson
Date: February 20, 2020
E-31
PART IV
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: February 20, 2020
DUKE ENERGY OHIO, INC.
(Registrant)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
By:
/s/ LYNN J. GOOD
Lynn J. Good
Chief Executive Officer
registrant and in the capacities and on the date indicated.
(i)
/s/ LYNN J. GOOD
Lynn J. Good
Chief Executive Officer (Principal Executive Officer)
(ii)
/s/ STEVEN K. YOUNG
Steven K. Young
Executive Vice President and Chief Financial Officer (Principal Financial Officer)
(iii)
/s/ DWIGHT L. JACOBS
Dwight L. Jacobs
Senior Vice President, Chief Accounting Officer, Tax and Controller (Principal Accounting Officer)
(iv) Directors:
/s/ DOUGLAS F ESAMANN
Douglas F Esamann
/s/ LYNN J. GOOD
Lynn J. Good
/s/ DHIAA M. JAMIL
Dhiaa M. Jamil
Date: February 20, 2020
E-32
PART IV
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: February 20, 2020
DUKE ENERGY INDIANA, LLC
(Registrant)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
By:
/s/ LYNN J. GOOD
Lynn J. Good
Chief Executive Officer
registrant and in the capacities and on the date indicated.
(i)
/s/ LYNN J. GOOD
Lynn J. Good
Chief Executive Officer (Principal Executive Officer)
(ii)
/s/ STEVEN K. YOUNG
Steven K. Young
Executive Vice President and Chief Financial Officer (Principal Financial Officer)
(iii)
/s/ DWIGHT L. JACOBS
Dwight L. Jacobs
Senior Vice President, Chief Accounting Officer, Tax and Controller (Principal Accounting Officer)
(iv) Directors:
/s/ DOUGLAS F ESAMANN
Douglas F Esamann
/s/ KELLEY A. KARN
Kelley A. Karn
/s/ STAN PINEGAR
Stan Pinegar
Date: February 20, 2020
E-33
PART IV
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: February 20, 2020
PIEDMONT NATURAL GAS COMPANY, INC.
(Registrant)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
By:
/s/ LYNN J. GOOD
Lynn J. Good
Chief Executive Officer
registrant and in the capacities and on the date indicated.
(i)
/s/ LYNN J. GOOD
Lynn J. Good
Chief Executive Officer (Principal Executive Officer)
(ii)
/s/ STEVEN K. YOUNG
Steven K. Young
Executive Vice President and Chief Financial Officer (Principal Financial Officer)
(iii)
/s/ DWIGHT L. JACOBS
Dwight L. Jacobs
Senior Vice President, Chief Accounting Officer, Tax and Controller (Principal Accounting Officer)
(iv) Directors:
/s/ DOUGLAS F ESAMANN
Douglas F Esamann
/s/ LYNN J. GOOD
Lynn J. Good
/s/ DHIAA M. JAMIL
Dhiaa M. Jamil
Date: February 20, 2020
E-34
PART IV
©2020 Duke Energy Corporation 193306 3/20