2020 ANNUAL REPORT AND FORM 10-K
ENERGY
FOR A BETTER TOMORROW
LYNN J. GOOD
Chair, President and
Chief Executive Officer
DEAR SHAREHOLDER:
At Duke Energy, our purpose is to power
the lives of our customers and the vitality
of our communities. In 2020, we did
just that – overcoming the challenges of
extreme weather, a pandemic, social unrest
and uncertain economic conditions.
Our teammates responded and we surpassed
expectations by any measure – maintaining
strong safety, operational, reliability and customer
satisfaction metrics while accelerating our
clean energy transition. We also took significant
steps to eliminate uncertainties, laying a solid
foundation for future growth while delivering on
our financial commitments to our shareholders.
We are ready to look toward the future,
unencumbered by issues of the past, with a
clear vision of where our company is headed.
1 | 2020 DUKE ENERGY ANNUAL REPORT / LETTER FROM LYNN GOOD
RISING TO THE
CHALLENGES OF 2020
The Pandemic
COVID-19 had a profound impact on our
communities and its effects will be felt for years.
As businesses and families adjusted to the stay-
at-home orders, we responded by supporting our
customers, communities and employees while
ensuring the financial health of the company.
We were one of the first utilities to proactively
waive certain fees and suspend disconnections
in all jurisdictions for customers who were unable
to pay their bills, ensuring they would not go
without power due to financial hardships. Later in
the year, we took a gradual approach to returning
to standard billing and payment practices and
worked with customers to offer customized,
interest-free payment arrangements and connect
them with local assistance, and funding.
Our company and Foundation donated more than
$8 million to COVID-19 relief efforts, including
funds to support hunger relief, local health and
human services, educational initiatives, public
utility assistance and small businesses.
Time and again, we were there for our customers
when they needed us most.
However, nothing was more important than
the health and safety of our employees. Almost
overnight, we transitioned approximately 18,000
employees to remote work. We put protocols in
place to keep our frontline employees safe,
including voluntary testing, staggered shifts,
enhanced cleaning and personal protective
equipment standards. And we recognized the
importance of our employees’ overall well-being,
providing financial and dependent care support as
well as emotional support resources and programs.
2 | 2020 DUKE ENERGY ANNUAL REPORT / LETTER FROM LYNN GOOD
Given the turmoil in the overall
economy, job and financial
security were also top of mind
for employees. I’m proud that we
were able to avoid across-the-
board salary reductions or layoffs.
As the pandemic disrupted financial
markets, we took immediate action
to ensure our financial stability. We
shored up our liquidity position by
entering into low-cost loans with
our banking partners. As businesses
shut down and industrial customers
paused production, our overall
retail load declined approximately
2 percent compared to 2019.
In response, we developed an
aggressive, $450 million mitigation
plan, showcasing our agility.
Many of the cost mitigation plans
will serve us into 2021 as we
expect electric load to return to
pre-pandemic levels in 2022.
The Atlantic Coast Pipeline
In 2014, we announced the Atlantic
Coast Pipeline (ACP) project to
help meet the rapidly growing
energy needs of our customers,
drive economic development and
create thousands of jobs. Despite
a tremendous effort by so many
within the company and the strong
support in our communities, in
July we announced our decision
to cancel the project, together
with our partner and the majority
owner, Dominion Energy.
This was extremely difficult as ACP
was a key part of our plan to bring
cleaner, low-cost natural gas to North
Carolina and the Southeast. But as legal
challenges continued to delay the project
and nearly doubled its original cost,
we believed canceling it was the best
decision for our customers and investors.
We will continue to identify opportunities
to strengthen our infrastructure to benefit
customer growth and maintain reliability.
Social Justice and
Racial Equity
2020 renewed and accelerated our
focus on social justice and racial equality.
To support organizations addressing
these issues, our Foundation donated
more than $2 million. We also held
more than 500 Pathways to Inclusion
conversation sessions within our
company, listening to each other,
helping many discover the depth of the
problems we face and learning how
we can work to strengthen inclusion in
our company. These sessions helped
inform our company’s action plans
to drive more diversity, equity and
inclusion in our workforce, leadership,
supply chain and communities.
This is only the start. As a company,
we have an opportunity to champion
change, to embrace the voices of our
employees and communities – and
do our part to promote progress.
3 | 2020 DUKE ENERGY ANNUAL REPORT / LETTER FROM LYNN GOOD
ADVANCING OUR CLEAN
ENERGY TRANSFORMATION
We did more than overcome the challenges that
2020 presented. We learned from them while also
accelerating our clean energy transformation.
Path to Net-Zero
In October, we held our inaugural Environmental,
Social and Governance (ESG) Day for investors,
laying out the blueprint for our clean energy
transformation. ESG is an important area of
focus for Duke Energy and our stakeholders,
and this event gave us a platform to highlight
the extraordinary progress we’ve made and
demonstrate our promise of more to come.
We have a clear destination: achieve net-
zero carbon emissions by 2050. Since
2005, we’ve reduced our carbon emissions
by over 40 percent and stand as a national
leader in low-carbon intensity.
On our path to net-zero, we’re overseeing the
largest coal retirement program in our industry.
We plan to retire all coal-only units by 2030 in the
Carolinas. In Indiana, we’re accelerating the closure
of coal plants – shortening average retirement dates
by 40 percent – adding to the 1,100 megawatts
of coal we have retired in that region since 2010.
4 | 2020 DUKE ENERGY ANNUAL REPORT / LETTER FROM LYNN GOOD
Transforming Our Fleet
As we shift away from coal, we will
continue to invest significantly in
renewables. Today, we have more
than 8 gigawatts of renewable
energy contracted, owned or
operated. By 2025, we plan to
roughly double that figure and, by
2030, triple our current renewable
capacity for our regulated utilities.
In 2050, the largest source of
energy in our regulated utilities
will come from renewable energy
resources, representing about
40 percent of our capacity.
Last year, we connected nearly
350 megawatts of solar power in
our North Carolina regulated utilities.
In Florida, we’re investing nearly
$1 billion in solar projects – bringing
700 megawatts of solar online
through 2022. And, we received
approval for our $1 billion Clean
Energy Connection shared solar
program in Florida, which will
add another 750 megawatts
of solar by the end of 2024.
In our Commercial Renewables
business, three new utility-scale
projects came online last year,
totaling more than 460 megawatts.
Currently, we own or operate
nearly 4 gigawatts in Commercial
Renewables of the company’s
total 8.8 gigawatts of renewable
energy. By the end of 2021, our
Commercial Renewables portfolio
will grow to about 4.7 gigawatts.
To complement our renewables
growth, we’re expanding our
energy storage portfolio. During the
next five years, we have plans for
$600 million in new battery storage
investment across our regulated
businesses. That includes deploying
50 megawatts of batteries totaling
$100 million in Florida, including
our first battery storage installation
in the state later this year. We
brought our 9-megawatt Asheville
storage project online in 2020 – the
largest battery system in North
Carolina. In addition, our Bad Creek
and Jocassee pumped-storage hydro
facilities represent more than
2,200 megawatts of storage
capacity. We have a project
underway to add more megawatts
to Bad Creek, and by 2023,
we will have added about 280
megawatts to the station.
We expect storage investment to
accelerate over this decade and
beyond – and presently project more
than 13,000 megawatts of energy
storage on our system by 2050.
But we cannot maintain affordability
and reliability without carbon-free
nuclear. The 11 nuclear units that
we operate provide more than 50
percent of the power we generate in
the Carolinas. Nuclear remains the
workhorse of our system – and we’re
pursing subsequent license renewals
for our entire fleet to ensure it serves
the region for decades to come.
5 | 2020 DUKE ENERGY ANNUAL REPORT
As we transition our fleet,
we continue to see the need
for dispatchable resources to
ensure that the lights come on
when our customers flip the
switch. This is where natural
gas plays an important role.
In April, our 560-megawatt
Asheville Combined Cycle Station
– the most efficient natural gas
plant in the Carolinas – became
fully operational, allowing us to
retire a two-unit coal plant at
the Asheville site. We also made
progress on the construction of
our $300 million Robeson natural
gas storage facility in North
Carolina, which will be important
for reliability and resiliency during
extreme weather events.
We recognize the importance of
environmental stewardship in
our gas business and have been
aggressively working to lower
methane emissions. In October,
we announced our pledge to
reduce methane emissions to
net-zero by 2030 for our natural
gas distribution companies. We
also announced a partnership with
SustainRNG to harness renewable
natural gas on dairy farms, and
through our membership in ONE
Future, we’re engaged in decreasing
methane emissions across the
entire natural gas supply chain.
Modernizing Our
Infrastructure
Our generation transition relies
upon modernizing and enhancing
our energy grid – the largest
in the nation.
We are making grid improvements
in our states, including a 10-year
storm protection plan approved
last fall in Florida and a three-
year grid improvement plan in
North Carolina. In addition, we
have ongoing infrastructure plans
in our South Carolina, Ohio and
Kentucky service territories, and
continue executing our $1.4 billion
transmission and distribution
modernization plan in Indiana. Each
of these investments are designed
to increase reliability, strengthen
the grid and support our work to
enable a cleaner energy future.
We continue to install smart
meters – more than 8.5 million
so far – providing customers
with more information about
their energy use while helping
us improve outage detection and
restoration. By the end of 2021,
nearly all of our customers will
be served by smart meters.
6 | 2020 DUKE ENERGY ANNUAL REPORT / LETTER FROM LYNN GOOD
We’re also advancing self-healing
technology, which automatically
detects outages and reroutes power
to other lines to restore service more
quickly and efficiently. This past
year, the technology helped to avoid
nearly 800,000 extended customer
outages and save more than 1.8
million hours of lost outage time.
We have an important role in
lowering carbon emissions across
the economy – and electrification
is an important way that we
can contribute. To help spur
electric vehicle adoption, charging
infrastructure must be expanded and
more accessible. We are accelerating
this expansion through several pilot
programs. In Florida, our pilot is
off the ground with more than 570
charging stations already installed.
We also received approvals in North
Carolina and South Carolina and
have a proposal pending in Ohio.
We also pledged to reduce
emissions from our own fleet by
electrifying all of our light-duty
vehicles by 2030 and 50 percent of
our medium-duty, heavy-duty and
off-road vehicles with electric, hybrid
electric or carbon-free alternatives.
Spurring Innovation
Reaching our ambitious net-zero
target will require new technologies
on our system. We need zero-
emitting load-following resources
(ZELFRs) that are low carbon or
carbon-free and can respond to
dynamic changes in both customer
demand and renewable generation.
That’s why we are acting now –
investing in research, development
and advocacy for these technologies.
In December, we announced a
partnership with Siemens Energy
and Clemson University to study
the use of hydrogen for energy
storage and as a low- or no-
carbon fuel source. We also have
a partnership with TerraPower and
GE Hitachi on its advanced non-
light water reactor. In addition,
we’re actively participating in the
Electric Power Research Institute
and the Gas Technology Institute’s
Low-Carbon Research Initiative to
help accelerate the development
of promising technologies.
We have an opportunity as a
nation to invest in research and
development in this decade
to ensure we have scalable,
cost-effective technologies
needed by 2035 and to meet
our long-term goals.
7 | 2020 DUKE ENERGY ANNUAL REPORT / LETTER FROM LYNN GOOD
FOCUSED ON
THE FUNDAMENTALS
Underpinning our progress is doing the day-
in, day-out hard work of running America’s
premier energy company at the highest level.
Customer-Focused
The needs of our customers remain, and will
always remain, at the heart of our strategy. Our
internal customer satisfaction metrics exceeded
our targets by almost 15 percent and reached
record highs in 2020 – largely due to the care
and flexibility we showed our customers.
After disconnections were suspended, we
worked closely with customers to enroll them in
extended payment plans to meet their unique needs.
In total, we sent nearly 1.1 million proactive offers
to customers in arrears and set up nearly 700,000
deferred payment arrangements. We will continue
to help customers as they recover from the pandemic.
In 2020, we made a number of improvements
to enhance our customers’ experience, including
a new bill format, proactive notifications, more
customer-friendly policies, and enhanced digital
capabilities. We also made progress on our new
customer information system, Customer Connect.
The system will launch in April 2021 in our
Duke Energy Carolinas utility, allowing us to bring
new services and enhancements to our customers.
It will be deployed for Duke Energy Progress and
Duke Energy Florida customers later in 2021.
Delivering value to our customers is always
at the forefront for us as we undertake
this historic transformation.
8 | 2020 DUKE ENERGY ANNUAL REPORT / LETTER FROM LYNN GOOD
Safety and Operations
Safety remains one of our most
important core values. That
commitment has never wavered,
even in a turbulent year.
We led our industry in safety
performance for five years in a
row – based on measures by the
Edison Electric Institute (EEI). We
anticipate 2020 will be the sixth
consecutive year of “Best in Class”
as evaluated amongst our peers. Our
Total Incident Case Rate – the OSHA
standard for tracking employee
injuries – has declined every year for
nearly a decade. We also continue
to meet our internal targets for
environmental performance.
I am proud of the safety culture we
have built at Duke Energy – and
the importance our teammates
place on this fundamental
pillar of our business.
Our generation fleet met the
challenges of operating during a
pandemic head-on. Our nuclear
fleet – which remains the largest
regulated fleet – continued to
provide our customers in the
Carolinas carbon-free power. The
capacity factor of our fleet was
94.42 percent in 2020, which
marks the 22nd consecutive year of
a capacity factor above 90 percent.
Our Regulated & Renewable Energy
organization maintained strong
reliability as we transform our
fleet. That includes the accelerated
planned retirement of three coal
units at our Allen Steam Station.
In addition, our employees safely
completed more than 150 refueling
and maintenance outages across
our Nuclear and Regulated &
Renewable Energy organizations and
managed our hydro and ash basin
operations during 11 high-water
events. And their focus on operational
excellence led to a 75 percent
improvement in customer minutes
of interruption and a 9 percent
improvement in major event days.
Despite an extremely active hurricane
season in 2020, compounded by the
global pandemic, our storm response
was unimpeded as we put procedures
in place to keep our response teams
safe. This included temperature
checks, cleaning protocols, nurse
stations and newly configured base
camps as we responded to two
hurricanes, Isaias and Zeta, and one
tropical storm, Eta.
In all, nearly 15,000 teammates were
on the front lines, restoring more
than 1.5 million outages from these
storms. Our self-healing technologies
also performed well, preventing more
than 61,000 customer outages and
nearly 280,000 hours of outage
time. We also sent crews to the
Gulf of Mexico, as this region was
hit particularly hard from a record-
setting Atlantic hurricane season.
Safety and operational excellence
will always be foundational to
our success at Duke Energy.
9 | 2020 DUKE ENERGY ANNUAL REPORT / LETTER FROM LYNN GOOD
In Kentucky, the commission
approved our rate case, including
our Green Source Advantage
Program that allows commercial
and industrial customers more
access to renewables. In Indiana,
we received an order in our first
base rate request in 16 years. We
also participated in the 21st Century
Energy Policy Task Force, examining
how best to move the state toward
cleaner energy while maintaining
affordability and reliability.
We reached a constructive
settlement in our Piedmont
Natural Gas rate case with the
Tennessee Attorney General’s
Consumer Advocate division in
early 2021, allowing us to recover
needed infrastructure investments
to serve our growing customer
base in and around Nashville.
Our ability to deliver on our clean
energy transformation is only
possible with the help and support
of stakeholders putting their trust
in us over the years. We are at a
pivotal moment in time and thank
them for challenging us, being
willing to have hard conversations,
pushing us to innovate and
improve. This is how we will
deliver the results expected of us.
Regulatory
We maintained our commitment
to stakeholder engagement and
collaboration as we engaged
regulators and policymakers
in our jurisdictions.
We developed innovative Integrated
Resource Plans (IRPs) in the
Carolinas, outlining comprehensive
proposals and offering six potential
pathways to meet key carbon
reduction milestones over the
next 15 years while balancing
affordability for customers. And
for the past year, we’ve been
working with stakeholder groups
to help shape North Carolina’s
Clean Energy Plan, with a common
goal of reaching net-zero carbon
emissions in a way that best serves
our customers and our state. This
complements the efforts underway
on regulatory reform, including
the introduction of more efficient
cost recovery mechanisms.
We conducted rate cases for our
two utilities in North Carolina as
we sought recovery for important
clean energy and infrastructure
investments. In addition, we
worked with solar developers in the
Carolinas to fundamentally change
the interconnection process in North
Carolina and design a breakthrough
net-metering framework in South
Carolina, pending approval.
10 | 2020 DUKE ENERGY ANNUAL REPORT / LETTER FROM LYNN GOOD
BUILDING MOMENTUM
FOR 2021 AND BEYOND
In 2020, we adapted and learned new ways of working
that will benefit us in the years ahead. And that momentum
has continued in 2021.
In January of this year, we filed a milestone settlement, alongside
the North Carolina Attorney General, North Carolina Public Staff
and Sierra Club, to end the debate around coal ash cost recovery.
If approved, it will provide immediate and long-term cost benefits
for customers over the next decade, resolving all the remaining
major issues on coal ash management in North Carolina.
The same month, we secured a minority investment in
Duke Energy Indiana from GIC, a global investment firm with
significant experience investing in U.S. infrastructure companies.
This investment will generate $2.05 billion in proceeds to fund
our clean energy investments and grid enhancement projects.
The premium valuation is an effective way for us to raise capital,
displacing the need to issue common stock through 2025.
We also collaborated with business and consumer groups in
Florida, including the Office of Public Counsel, to establish
a new three-year rate plan settlement for Duke Energy
Florida. This will allow us to invest nearly $5 billion in grid
modernization and emerging technologies and give our investors
and customers predictability as we deliver results in the state.
If approved by the Florida Public Service Commission, the
settlement agreement will become effective January 1, 2022.
These transactions, along with our significant cost mitigation
efforts, bolstered our growth potential. We introduced our
2021 guidance range of $5.00 to $5.30, with a midpoint
of $5.15, and increased our long-term EPS growth rate to
5 to 7 percent through 2025. In addition, we increased
our five-year capital expenditure plan to $59 billion.
Duke Energy is a stronger, more agile company today because
of our unwavering commitment to those who count on us.
We’ve addressed headwinds to create more clarity and
we’re charting a new, exciting course for our company.
11 | 2020 DUKE ENERGY ANNUAL REPORT / LETTER FROM LYNN GOOD
Last year, we proved the strength and resolve of
our company and our people – delivering strong
financial results, reliable energy and compassion
to our customers in the face of a global pandemic.
As we look ahead, Duke Energy stands at an
inflection point as we begin a new era for our
company – marked by a clear vision for the
future. We’re poised for success and growth
in ways that we have not seen before as we
accelerated our path forward with constructive
regulatory outcomes that provide valuable
clarity for our customers and investors – and a
compelling clean energy vision to guide the way.
I am very proud of our results and excited
about what lies ahead for Duke Energy.
Lynn J. Good
Chair, President and Chief Executive Officer
12 | 2020 DUKE ENERGY ANNUAL REPORT / LETTER FROM LYNN GOOD
ENERGY FOR A BETTER TOMORROW Our Financial Highlightsa
(In millions, except per share amounts)
Operating Results
Total operating revenues
Income from continuing operations
Net income
Net income available to Duke Energy Corporation
common stockholders
Cash Flow Data
2020
2019
2018
$23,868
$25,079
$24,521
$1,075
$1,082
$1,270
$3,578
$3,571
$3,707
$2,625
$2,644
$2,666
Net cash provided by operating activities
$8,856
$8,209
$7,186
Common Stock Data
Shares of common stock outstanding
Year-end
Weighted average – basic
Weighted average – diluted
Reported basic and diluted earnings per share (GAAP)
Adjusted basic and diluted earnings per share (non-GAAP)
Dividends declared per share
Dividends declared on Series A preferred stock per depositary share
769
737
738
$1.72
$5.12
$3.82
$1.44
733
729
729
$5.06
$5.06
$3.75
$1.03
Dividends declared on Series B preferred stock per share
$49.29
__
727
708
708
$3.76
$4.72
$3.64
__
__
Balance Sheet Data
Total assets
$162,388
$158,838
$145,392
Long-term debt including finance leases, less current maturities
$55,625
$54,985
$51,123
Total Duke Energy Corporation stockholders’ equity
$47,964
$46,822
$43,817
Earnings per share
(in dollars)
Reported Diluted
Adjusted Diluted
Dividends declared
per share (in dollars)
Capital and investment
expenditures (dollars in billions)
5.06
5.06
5.12
3.64
3.75
3.82
9.8
11.4
10.3
4.72
3.76
1.72
2018
2019
2020
2018
2019
2020
2018
2019
2020
a Significant transactions reflected in the results above include: (i) the cancellation of the Atlantic Coast Pipeline in 2020, (ii) regulatory charges related to the Duke Energy Carolinas and Duke Energy Progress
North Carolina coal ash settlement in 2020, (iii) the reversal of 2018 severance costs due to the partial settlement of the Duke Energy Carolinas and Duke Energy Progress 2019 North Carolina rate cases in
2020, (iv) growth in Commercial Renewables from tax equity projects placed in service in 2020 and 2019 and (v) regulatory and legislative charges related to Duke Energy Progress and Duke Energy Carolinas
North Carolina rate case orders and impairment charges in 2020 and 2018. For further information refer to Notes 1, 3, 11 and 12 to the Consolidated Financial Statements, “Summary of Significant Accounting
Policies,” “Regulatory Matters,” “Goodwill and Intangible Assets” and “Investments in Unconsolidated Affiliates.”
13 | 2020 DUKE ENERGY ANNUAL REPORT
42
33
17
8
39
37
22
2
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
51
18
15
9
7
52
46
3
¡ 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 34,200 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 50,807 megawatts (MW) of
generating capacity
¡ Service area covers about 91,000 square miles with an
estimated population of 25 million
¡ Service to approximately 7.9 million residential, commercial
and industrial customers
¡ 282,400 miles of distribution lines and a
31,300-mile transmission system
1 As of December 31, 2020. | 2 For the year ended December 31, 2020.
3 Contains projects included in tax equity structures where investors have differing
interests in the projects’ economic attributes (100% 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 2,763 MW across 21 states from 21 wind facilities,
150 solar projects, 70 fuel cell locations and two battery storage
facilities. 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.
14 | 2020 DUKE ENERGY ANNUAL REPORT
42% Natural Gas/Fuel Oil 33% Coal 17% Nuclear 8% Hydro and Renewable 39% Natural Gas/Fuel Oil 37% Nuclear 22% Coal 2% Hydro and Renewable 34% Residential 30% General Services 19% Industrial 17% Wholesale/Other 51% Power Gen 18% General Services 15% Residential 9% Industrial 7% Other52% Wind 46% Solar 2% Fuel Cell/Storage DUKE ENERGY
CORPORATION
Cautionary Statement
Regarding Forward-Looking
Information
Non-GAAP Financial
Measures
2020
Form 10-K
CAUTIONARY NOTE 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. For details on the uncertainties that may cause
our actual future results to be materially different than those expressed in our
forward-looking statements, see our Form 10-K for the year ended December 31,
2020, and Quarterly Reports on Form 10-Q 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. Duke Energy
expressly disclaims an obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events, or otherwise.
NON-GAAP MEASURES
Adjusted Earnings per Share (EPS)
Duke Energy’s 2020 Annual Report references adjusted EPS for the
year-to-date periods ended December 31, 2020, 2019 and 2018 of $5.12, $5.06
and $4.72, respectively.
The non-GAAP financial measure, adjusted EPS, represents basic EPS
available to Duke Energy Corporation common stockholders (GAAP reported EPS),
adjusted for the per share impact of special items. As discussed below, special
items represent certain charges and credits, which management believes are
not indicative of Duke Energy’s ongoing performance. Management believes
the presentation of adjusted EPS provides useful information to investors,
as it provides them with an additional relevant comparison of Duke Energy’s
performance across periods. Management uses this non-GAAP financial measure
for planning and forecasting and for reporting financial results to the Duke Energy
Board of Directors, employees, stockholders, analysts and investors. Adjusted
EPS is also used as a basis for employee incentive bonuses. The most directly
comparable GAAP measure for adjusted EPS is reported basic EPS available to
Duke Energy Corporation common stockholders.
Special items included in the periods presented include the following items,
which management believes do not reflect ongoing costs:
• Gas Pipeline Investments represents costs related to the cancellation of
the ACP pipeline and additional exit costs related to Constitution.
• Regulatory and Legislative Impacts in 2020 represents charges related
to Duke Energy Carolinas and Duke Energy Progress CCR settlement
agreement and the partial settlements in the 2019 North Carolina rate
cases. In 2018, the 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.
• Severance in 2020 represents the reversal of 2018 costs, which were deferred
as a result of a partial settlement in the Duke Energy Carolinas and the Duke
Energy Progress 2019 North Carolina rate cases. In 2018, severance charges
relate to companywide initiatives, excluding merger integration, to standardize
processes and systems, leverage technology and workforce optimization.
• 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.
• Sale of Retired Plant represents the loss associated with selling Beckjord,
a nonregulated generating facility in Ohio.
• Costs to Achieve Mergers represents charges that result from strategic
acquisitions.
• Impacts of the Tax Act represents amounts recognized related to the Tax Act.
Duke Energy’s adjusted EPS may not be comparable to a similarly titled
measure of another company because other entities may not calculate the
measure in the same manner.
The following is a reconciliation of reported EPS to adjusted EPS for 2020, 2019 and 2018:
(per share)
Reported EPS
Adjustments to Reported:
Gas Pipeline Investments
Regulatory and Legislative Impacts
Severance
Impairment Charges
Sale of Retired Plant
Costs to Achieve Mergers
Impacts of the Tax Act
Discontinued Operations
Adjusted EPS
Adjusted EPS Guidance
Duke Energy’s 2020 Annual Report references Duke Energy’s forecasted
2021 adjusted EPS guidance range of $5.00 to $5.30 per share. The materials
also reference a preliminary estimate of the 2021 adjusted EPS midpoint of
approximately $5.15. In addition, the materials reference the long-term range of
annual growth of 5 to 7 percent through 2025 off the midpoint of 2021 adjusted
EPS guidance range of $5.15. The forecasted adjusted EPS is a non-GAAP financial
Years Ended December 31,
2020
1.72
2.32
1.19
(0.10)
—
—
—
—
(0.01)
5.12
$
$
2019
5.06
—
—
—
(0.01)
—
—
—
0.01
5.06
$
$
$
$
2018
3.76
—
0.29
0.21
0.25
0.12
0.09
0.03
(0.03)
4.72
measure as it represents basic EPS available to Duke Energy Corporation common
stockholders (GAAP reported EPS), adjusted for the per share impact of special
items (as discussed under Adjusted EPS). Due to the forward-looking nature of this
non-GAAP financial measure for future periods, information to reconcile it to the
most directly comparable GAAP financial measure is not available at this time, as
management is unable to project all special items for future periods, such as legal
settlements, the impact of regulatory orders or asset impairments.
(Mark One)
Commission
file number
1-32853
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, 2020 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
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
1-1232
1-3543
1-6196
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
Title of each class
Duke Energy Corporation (Duke Energy)
Duke Energy
Duke Energy
Duke Energy
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 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 the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under
Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7252(b)) by the registered public accounting firm that prepared or issued its audit report.
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, 2020.
Number of shares of Common Stock, $0.001 par value, outstanding at January 31, 2021.
$58,688,204,289
768,663,580
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Duke Energy definitive proxy statement for the 2021 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, 2020
Item
Page
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
5
5
5
5
14
16
16
16
16
17
17
17
24
24
28
28
29
30
30
56
57
GLOSSARY OF TERMS
PART I.
1.
BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DUKE ENERGY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BUSINESS SEGMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 . . . . . . . . .
8.
9.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . . . . . . . . . . . . .
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218
9A. CONTROLS AND PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218
PART III.
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE . . . . . . . . . . . 220
11.
12.
13.
EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. . . . . . . . . . . . . . . . . 220
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND
DIRECTOR INDEPENDENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220
14. PRINCIPAL ACCOUNTING FEES AND SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . 221
PART IV.
• 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;
• Changing customer expectations and demands including heightened emphasis on
environmental, social and governance concerns;
• 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;
• 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
15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. . . . . . . . . . . . . . . . . . . . . . . . 222
personnel;
EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-1
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-28
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:
• The impact of the COVID-19 pandemic;
• 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 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 Settlement
DEFR . . . . . . . . . . . . . . . . . . . . . . . Duke Energy Florida Receivables, LLC
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
DOE . . . . . . . . . . . . . . . . . . . . . . . . U.S. Department of Energy
Dominion. . . . . . . . . . . . . . . . . . . . Dominion Energy, Inc.
Dth . . . . . . . . . . . . . . . . . . . . . . . . Dekatherms
Duke Energy. . . . . . . . . . . . . . . . . . Duke Energy Corporation (collectively with its
subsidiaries)
ACP pipeline . . . . . . . . . . . . . . . . . The approximately 600-mile canceled
Duke Energy Carolinas. . . . . . . . . . Duke Energy Carolinas, LLC
interstate natural gas pipeline
Duke Energy Florida . . . . . . . . . . . . Duke Energy Florida, LLC
AFUDC. . . . . . . . . . . . . . . . . . . . . . Allowance for funds used during construction
Duke Energy Indiana . . . . . . . . . . . Duke Energy Indiana, LLC
AFS . . . . . . . . . . . . . . . . . . . . . . . . Available for Sale
Duke Energy Kentucky . . . . . . . . . . Duke Energy Kentucky, Inc.
AMI . . . . . . . . . . . . . . . . . . . . . . . . Advanced Metering Infrastructure
Duke Energy Ohio. . . . . . . . . . . . . . Duke Energy Ohio, Inc.
AMT. . . . . . . . . . . . . . . . . . . . . . . . Alternative Minimum Tax
Duke Energy Progress . . . . . . . . . . Duke Energy Progress, LLC
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
CT . . . . . . . . . . . . . . . . . . . . . . . . . Combustion Turbine
CWA . . . . . . . . . . . . . . . . . . . . . . . Clean Water Act
DATC . . . . . . . . . . . . . . . . . . . . . . . Duke-American Transmission Company, LLC
D.C. Circuit Court. . . . . . . . . . . . . . U.S. Court of Appeals for the District of
Columbia
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
FV-NI . . . . . . . . . . . . . . . . . . . . . . . Fair value through net income
GAAP . . . . . . . . . . . . . . . . . . . . . . . Generally Accepted Accounting Principles in
the United States
GAAP Reported EPS . . . . . . . . . . . . Basic EPS Available to Duke Energy
Corporation common stockholders
GHG. . . . . . . . . . . . . . . . . . . . . . . . Greenhouse Gas
GIC . . . . . . . . . . . . . . . . . . . . . . . . GIC Private Limited
GWh . . . . . . . . . . . . . . . . . . . . . . . Gigawatt-hour
Hardy Storage . . . . . . . . . . . . . . . . Hardy Storage Company, LLC
Harris . . . . . . . . . . . . . . . . . . . . . . Shearon Harris Nuclear Plant
HLBV . . . . . . . . . . . . . . . . . . . . . . . Hypothetical Liquidation at Book Value
IGCC . . . . . . . . . . . . . . . . . . . . . . . Integrated Gasification Combined Cycle
IMPA . . . . . . . . . . . . . . . . . . . . . . . Indiana Municipal Power Agency
Term or Acronym
Definition
Term or Acronym
Definition
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
PISCC . . . . . . . . . . . . . . . . . . . . . . Post-in-service carrying costs
ITC. . . . . . . . . . . . . . . . . . . . . . . . . Investment Tax Credit
PPA . . . . . . . . . . . . . . . . . . . . . . . . Purchase Power Agreement
IURC . . . . . . . . . . . . . . . . . . . . . . . Indiana Utility Regulatory Commission
Progress Energy. . . . . . . . . . . . . . . Progress Energy, Inc.
Investment Trusts . . . . . . . . . . . . . Grantor trusts of Duke Energy Progress, Duke
PSCSC. . . . . . . . . . . . . . . . . . . . . . Public Service Commission of South Carolina
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
PTC . . . . . . . . . . . . . . . . . . . . . . . . Production Tax Credits
PUCO. . . . . . . . . . . . . . . . . . . . . . . Public Utilities Commission of Ohio
PURPA. . . . . . . . . . . . . . . . . . . . . . Public Utility Regulatory Policies Act of 1978
QF . . . . . . . . . . . . . . . . . . . . . . . . . Qualifying Facility
REC . . . . . . . . . . . . . . . . . . . . . . . . Renewable Energy Certificate
Relative TSR . . . . . . . . . . . . . . . . . TSR of Duke Energy stock relative to a
predefined peer group
MISO . . . . . . . . . . . . . . . . . . . . . . . Midcontinent Independent System Operator, Inc.
Robinson . . . . . . . . . . . . . . . . . . . . Robinson Nuclear Plant
MMBtu . . . . . . . . . . . . . . . . . . . . . Million British Thermal Unit
ROU. . . . . . . . . . . . . . . . . . . . . . . . Right-of-use
MTBE. . . . . . . . . . . . . . . . . . . . . . . Methyl tertiary butyl ether
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
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
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
Piedmont . . . . . . . . . . . . . . . . . . . . Piedmont Natural Gas Company, Inc.
Pine Needle . . . . . . . . . . . . . . . . . . Pine Needle LNG Company, LLC
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
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
VIE. . . . . . . . . . . . . . . . . . . . . . . . . Variable Interest Entity
WACC . . . . . . . . . . . . . . . . . . . . . . Weighted Average Cost of Capital
W.S. Lee CC . . . . . . . . . . . . . . . . . . William States Lee Combined Cycle Facility
WVPA. . . . . . . . . . . . . . . . . . . . . . . Wabash Valley Power Association, Inc.
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, 2020.
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 2 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 7.9 million
customers within the Southeast and Midwest regions of the U.S. The service
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 GWh billed sales by customer class for the year ended December 31, 2020.
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
33%
33%
23%
89%
11%
27%
22%
16%
65%
35%
51%
35%
7%
93%
7%
38%
37%
23%
98%
2%
30%
25%
31%
86%
14%
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. Sales growth is expected within the service territory but continues to be
influenced by adoption of energy efficiencies and self-generation. Residential
sales increased in 2020 compared to 2019 due to customer growth and the
stay-at-home orders as a result of the COVID-19 pandemic. Meanwhile, sales
for general service and industrial customers decreased in 2020 due to the
impacts of the COVID-19 pandemic. These trends in residential, general service
and industrial sales may continue in the short term but are not expected to
be permanent. It is still expected that the continued adoption of more efficient
housing and appliances will have a negative impact on average usage per
residential customer over time.
Seasonality and the Impact of Weather
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.
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.
Wholesale
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 50,807 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, 2020.
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)
2020
2.55
0.58
2.99
1.91
2019
2.96
0.60
3.08
2.14
2018
3.57
0.50
2.82
2.29
Generation by Source
2020
31.3 %
29.6 %
18.1 %
79.0 %
1.9 %
80.9 %
19.1 %
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 %
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 source 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 and conversion services through at
least 2021, 100% of its enrichment services through at least 2022, and 100%
of its 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 may have various price adjustment provisions and market
reopeners, range from 2021 to 2023 for Duke Energy Carolinas and Duke
Energy Progress and 2021 to 2025 for Duke Energy Indiana. Expiration dates
for Duke Energy Florida and Duke Energy Ohio are in 2021. 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 risk management
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 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. There are adequate domestic coal reserves to
serve Electric Utilities and Infrastructure’s coal generation needs through end
of life. 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, and between 2.5% and 3% for Duke Energy Florida,
Duke Energy Ohio and Duke Energy Indiana. Electric Utilities and Infrastructure’s
environmental controls, in combination with the use of sulfur dioxide (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 13% of total system requirements for 2020, 14% for 2019 and 7% for 2018.
(b) For 2020, 2019 and 2018, these agreements include approximately 412 MW of firm capacity under contract by Duke Energy Florida with QFs.
2020
32.7
4,716
2019
34.8
4,238
2018
21.3
4,025
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, 2020,
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, such as the Coal Ash Management 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. Closure plans and all associated permits will receive necessary
approvals before any work can begin. Closure activities have begun in all of
Duke Energy’s jurisdictions. Excavation began in 2015 at the four sites specified
as high priority by the NC Coal Ash Management 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 for reuse in an approved beneficial application. Duke Energy has
completed excavation of coal ash at three of the four high-priority NC sites. At
other sites where CCR management is required, planning and closure methods
have been studied and factored into the estimated retirement and management
costs, and closure activities have commenced.
The EPA CCR rule and the NC Coal Ash Management Act leave 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’s electric utilities have included compliance
costs associated with federal and state requirements in their respective rate
proceedings. In January 2021, Duke Energy Carolinas and Duke Energy Progress
reached a settlement agreement on recovery of coal ash costs, which is subject
to review and approval of the NCUC. 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 3, 4 and 9 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 $13.8 billion.
For additional information on nuclear insurance, see Note 4 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, 2020
9,114
4,977
3,500
637
$
December 31, 2019
8,140
4,359
3,047
734
$
Decommissioning
Costs(a)
9,105
4,365
4,181
559
Year of
Cost Study
2018 or 2019
2018
2019
N/A
(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 was filed with the NCUC and PSCSC in March 2020. Duke Energy Progress also completed a funding study, which was 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 and decommissioning costs are based on the agreement with this third party rather than a
cost study. Regulatory approval was received from the NRC and the FPSC in April 2020 and August 2020, respectively. See Note 3 for more information.
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 9 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. During 2020, the NRC and the FPSC approved an
agreement to transfer ownership of spent fuel for Crystal River Unit 3 to a third
party. See Note 3 for more information.
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 3 and
9 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 Indiana 2019 Indiana Rate Case(a)
Duke Energy Kentucky 2019 Kentucky Electric Rate Case
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
Pending Rate Cases:
Duke Energy Carolinas 2019 North Carolina Rate Case(b)
Duke Energy Progress 2019 North Carolina Rate Case(b)
Annual
Increase
(Decrease)
(in millions)
Regulatory
Body
Return on
Equity
Equity
Component of
Capital Structure
Effective Date
IURC
KPSC
PSCSC
PSCSC
PUCO
NCUC
KPSC
NCUC
NCUC
NCUC
$
146
24
45
29
(19)
(73)
8
151
$
291
464
9.7%
9.25%
9.5%
9.5%
9.84%
9.9%
9.725%
9.9%
10.3%
10.3%
53%
48.23%
53%
53%
50.75%
52%
49%
52%
53%
53%
7/30/2020
5/1/2020
6/1/2019
6/1/2019
1/2/2019
8/1/2018
5/1/2018
3/16/2018
8/1/2020
9/1/2020
(a) Step 1 rates are approximately 75% of the total and became effective July 30, 2020. Step 2 rates are approximately 25% of the total rate case increase and will be implemented in mid-2021. Amounts exclude the Utility
Receipt Tax amounts.
(b) Partial Settlements were reached on July 31, 2020, which are subject to approval by the NCUC. Components of the partial settlements included a return of equity of 9.6% and a capital structure of 52% equity. These temporary
rates went into effect August 24, 2020, for Duke Energy Carolinas and September 1, 2020, for Duke Energy Progress. A settlement was also reached, subject to approval by the NCUC, on coal ash cost recovery in January of 2021.
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 541,000 customers located within
southwestern Ohio and northern Kentucky. In the Carolinas, Ohio and Kentucky,
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 pipelines for Gas
Utilities and Infrastructure as of December 31, 2020.
Additionally, in January 2021, Duke Energy Florida filed a settlement
agreement with the FPSC that, if approved, will allow annual increases to its
base rates at an agreed upon return on equity (“ROE”) band and includes a
base rate stay-out provision through 2024, among other provisions. For more
information on rate matters and other regulatory proceedings, see Note 3 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
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 2020, 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
11
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, 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 I 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. Phase II of Sabal Trail went into service
in May 2020, adding approximately 200,000 Dth of capacity to the Sabal
Trail pipeline.
Gas Utilities and Infrastructure has a 47% equity ownership interest
in ACP, which planned to build the ACP pipeline, an approximately 600-mile
interstate natural gas pipeline. The ACP pipeline was intended to transport
diverse natural gas supplies into southeastern markets and would be regulated
by FERC. Dominion Energy owns 53% of ACP and was contracted to construct
and operate the ACP pipeline upon completion. On July 5, 2020, Dominion
announced a sale of substantially all of its gas transmission and storage
segment assets, which were critical to the ACP pipeline. Further, permitting
delays and legal challenges had materially affected the timing and cost of the
pipeline. As a result, Duke Energy determined that they would no longer invest
in the construction of the ACP pipeline. For the year ended December 31, 2020,
Duke Energy recorded $2.1 billion of costs related to ACP.
Gas Utilities and Infrastructure has 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 Company (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.
PART I See Notes 3, 12 and 17 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,
2020, the inventory balance for Gas Utilities and Infrastructure was $82 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 been imprudent. 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
Piedmont 2020 South Carolina Rate Stabilization Adjustment Filing
Duke Energy Kentucky 2018 Natural Gas Base Rate Case
Piedmont 2019 North Carolina Natural Gas Base Rate Case
Piedmont 2020 Tennessee Natural Gas Base Rate Case
Annual
Increase
(Decrease)
(in millions)
$
6
(14)
6
7
7
109
16
Return
on
Equity
Equity
Component of
Capital Structure
10.2%
10.2%
9.9%
9.8%
9.7%
9.7%
9.8%
53.0%
53.0%
55.4%
52.3%
50.8%
52.0%
50.5%
Effective Date
November 2017
November 2018
November 2019
November 2020
April 2019
November 2019
January 2021
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. The following table summarizes information related to the recently approved IMR filing.
(in millions)
Piedmont 2020 IMR Filing – North Carolina
In Piedmont’s Tennessee rate case settled in February 2021, the Company
included projected IMR investment through December 31, 2021, in its rate base.
The recovery of integrity investment was requested in the rate case and not
through the Tennessee IMR mechanism.
For more information on rate matters and other regulatory proceedings,
see Note 3 to the Consolidated Financial Statements, “Regulatory Matters.”
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.
12
Cumulative
Investment
$
307
Annual
Revenues
Effective
Date
$
30
December 2020
• Regulations of the EPA relate to the environment including proposed
air emissions regulations that would expand to include emissions of
methane.
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.
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.
Commercial Renewables’ renewable energy includes utility-scale wind
and solar generation assets, distributed solar generation assets, distributed
fuel cell assets and battery storage projects, which total 2,763 MW across
21 states from 21 wind facilities, 150 solar projects, 70 fuel cell locations and
two battery storage facilities. 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, 2020.
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 or fuel cell 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 for
solar and fuel cells is being phased down from a rate of 30% for projects that
began construction before 2020 to a permanent 10% rate for solar and no
ITC available for fuel cells if construction begins after 2023. The PTC is being
phased out and wind turbines will earn 10 years of PTCs at phased-out rates if
construction begins in 2017 through 2021.
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 a result of the application of the HLBV method
in allocating income or loss to the owners. 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.
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.
13
PART I 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
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.
Human Capital Management
Governance
Our employees are critical to the success of our company. Our Human
Resources organization is responsible for our human capital management
strategy, which includes recruiting and hiring, onboarding and training, diversity
and inclusion, workforce planning, talent and succession planning, performance
management and employee development. Key areas of focus include fostering
a high-performance and inclusive culture built on strong leadership and highly
engaged and diverse employees, building a pipeline of skilled workers and
ensuring knowledge transfer as employees retire.
Our Board of Directors provides oversight on certain human capital
management matters, primarily through the Compensation and People
Development Committee, which is responsible for reviewing strategies and
policies related to human capital management, including with respect to matters
such as diversity and inclusion, employee engagement and talent development.
The Compensation and People Development Committee also receives updates
on employee engagement surveys and action plans.
Employees
On December 31, 2020, Duke Energy had a total of 27,535 full-time,
part-time and temporary employees, the overwhelming majority of which were
full-time employees. The total includes 5,165 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.
Compensation
The company seeks to attract and retain an appropriately qualified
workforce and leverages Duke Energy’s leadership imperatives to foster a
culture focused on customers, innovation, and highly engaged employees.
Our compensation program is designed to link pay to performance with the
goal of attracting and retaining talented employees, rewarding individual
performance, encouraging long-term commitment to our business, and aligning
the interests of our management team with those of key stakeholders, including
shareholders and customers. In addition to competitive base pay, we provide
eligible employees with compensation and benefits under a variety of plans and
programs, including with respect to health care benefits, retirement savings,
pension, health savings and flexible spending accounts, wellness, family leaves,
employee assistance, as well as other benefits including a charitable matching
program. We supplement our pay for performance program with a number of
compensation policies that are aligned with the long-term interests of Duke
Energy and our shareholders, including a short-term incentive plan and a
long-term incentive plan for eligible employees.
Diversity and Inclusion
Duke Energy is committed to continuing to build a diverse workforce that
reflects the communities we serve while strengthening a culture of inclusion
where employees and customers feel respected and valued. Our Enterprise
Diversity and Inclusion Advisory Council, which is chaired by our Chief Operating
Officer, is responsible for reviewing our diversity and inclusion initiatives for
continuous improvement, as well as helping to develop actionable outcomes
and results. We have established aspirational goals with respect to diversity and
inclusion, and we regularly report our progress toward achieving those goals.
Our aspirational goals include achieving a workforce representation of at least
25% female and 20% racial and ethnic diversity. As of December 31, 2020,
our workforce consisted of approximately 23% female and 18% racial and
ethnic diversity.
The company also has a number of Employee Resource Groups (ERGs),
which are networks of employees formed around a common dimension of
diversity whose goals and objectives align with the company’s goals and
objectives. These groups focus on employee professional development and
networking, community outreach, cultural awareness, recruiting and retention.
They also serve as a resource to the company for advocacy and community
outreach and improving customer service through innovation. ERG-sponsored
forums include networking events, mentoring, scholarship banquets for
aspiring college students, and workshops on topics such as time management,
stress reduction, career planning and work-life balance. Our ERGs are open to
all employees.
Among other efforts, the company has developed partnerships with
community organizations, community colleges and historically black colleges
and universities to support our strategy of building a diverse and highly skilled
talent pipeline.
Operational Excellence
The foundation for our growth and success is our continued focus on
operational excellence, the leading indicator of which is safety. As such, the
safety of our workforce remains our top priority. The company closely monitors
the Total Incident Case Rate (TICR), which is a metric based on strict OSHA
definitions that measures the number of occupational injuries and illnesses per
100 employees. This objective emphasizes our focus on achieving an event-free
and injury-free workplace. As an indication of our commitment to safety, we
include safety metrics in both the short-term and long-term incentive plans
based on the TICR for employees. Our employees delivered strong safety results
in 2020, consistent with our industry-leading performance levels from 2016
through 2019.
COVID-19 Response
Safety continued to be of paramount importance during the COVID-19
pandemic and included executing on robust business continuity plans that
helped ensure critical functions continued to operate under a broad range of
circumstances while maintaining a safe work environment. Actions included the
following:
• Engaged our environmental, health and safety experts to develop new
safety protocols for thousands of essential workers
• Quickly transitioned thousands of employees to virtual status
14
PART I • Added bandwidth for our information technology systems, reviewed
inventory in supply chain, implemented a series of surveys to get
employee input, and provided ongoing communications to keep them
informed as conditions evolved
• Created a cross-functional COVID-19 case management team to track
and disposition positive cases, ensure appropriate contact tracing and
compliance with quarantine and safe return to work requirements
• Ensured power plants and electricity and natural gas delivery facilities
were staffed, helping safeguard dependable service to customers
• Implemented stringent preventive measures in alignment with the
Centers for Disease Control and Prevention’s (CDC) guidance to help
keep employees and customers safe and help ensure we had adequate
resources to maintain reliability
Information about Our Executive Officers
The company also provided additional benefits to support our workforce
throughout the pandemic, including:
• 60 hours of additional personal time off to employees who experienced
a disruption in dependent care due to school, daycare or other
dependent care issues
• A $1,500 stipend to assist with unplanned expenses resulting from
costs related to COVID-19 to employees at a certain pay threshold
• Donated more than $550,000 to the Relief4Employees program, which
is a fund that employees can draw upon for short-term financial help
during times of personal need
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
Douglas F Esamann
Age(a)
Current and Recent Positions Held
61
62
63
Chair, President and Chief Executive Officer. Ms. Good has served as Chair, President and Chief Executive Officer of Duke Energy since
January 1, 2016, and was Vice Chairman, President and Chief Executive Officer of Duke Energy from July 2013 through December 2015. 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, 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.
Kodwo Ghartey-Tagoe
57
Dwight L. Jacobs
Dhiaa M. Jamil
Julia S. Janson
Brian D. Savoy
Harry K. Sideris
55
64
56
45
50
Executive Vice President, Chief Legal Officer and Corporate Secretary. Mr. Ghartey-Tagoe assumed the position of Executive Vice President,
Chief Legal Officer and Corporate Secretary in May 2020. He was appointed 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 January 31, 2021.
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.
Environmental Matters
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
15
PART I 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 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.
For more information on environmental matters, see Notes 4 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 more information on certain 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 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.
DUKE ENERGY CAROLINAS
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 2 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 2 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 2 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 1.9 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 2 to the Consolidated Financial Statements, “Business Segments.”
DUKE ENERGY OHIO
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 880,000 residential, commercial
and industrial customers and provides transmission and distribution services
for natural gas to approximately 545,000 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.
16
PART I 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 2 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 2 to the Consolidated Financial Statements, “Business Segments.”
PIEDMONT
Piedmont is a regulated public utility primarily engaged in the distribution
of natural gas to over 1.1 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 2 to the Consolidated
Financial Statements, “Business Segments.”
ITEM 1A. RISK FACTORS
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,
achieving net-zero carbon emissions by 2050, modernizing the regulatory
construct and digital transformation, is subject to business, regulatory,
economic and competitive uncertainties and contingencies, and required
advancements in technology to achieve net-zero carbon emissions by 2050,
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.
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.
17
PART I 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 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.
New state legislation, including the North Carolina Clean Energy Plan, could
impose carbon reduction goals that are more aggressive than the company’s
plans. These regulations may require the Duke Energy Registrants to make
additional capital expenditures and increase operating and maintenance costs.
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, and increasing activism, 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’ electric and natural gas
operations, their suppliers and customers. Regulatory changes could 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, and could also
affect demand for energy conservation and renewable products, which could
impact our electric and natural gas businesses.
OPERATIONAL RISKS
The Duke Energy Registrants’ operations have been and may be affected
by COVID-19 in ways listed below and in ways the registrants cannot
predict at this time.
The COVID-19 pandemic has impacted the Duke Energy Registrants’
business strategy, results of operations, financial position and cash flows, albeit
not materially as of this filing date, from specific activities listed below:
• Decreased demand for electricity and natural gas;
• Delays in rate cases and other legal proceedings;
• An inability to obtain labor or equipment necessary for the construction
of generation projects or pipeline expansion;
• The health and availability of our critical personnel and their ability to
perform business functions; and
• Actions of state utility commissions or federal or state governments
to allow customers to suspend or delay payment of bills related to the
provision of electric or natural gas services.
18
PART I Furthermore, due to the unpredictability of the COVID-19 pandemic’s
• natural gas, crude oil and refined products production levels and prices;
ongoing impact on global health and economic stability, the Duke Energy
Registrants expect that the activities listed below could negatively impact their
business strategy, results of operations, financial position and cash flows:
• An inability to procure satisfactory levels of fuels or other necessary
equipment to continue production of electricity and delivery of natural
gas;
• An inability to maintain information technology systems and protections
from cyberattack;
• An inability to obtain financing in volatile financial markets;
• Additional federal regulation tied to stimulus and other aid packages;
and
• Impairment charges, which could include real estate as options for
working remotely are evaluated and goodwill.
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;
• 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
19
PART I normal ratemaking process with state and federal utility commissions, who
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 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 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 future results may be impacted by changing
customer expectations and demands including heightened emphasis on
environmental, social and governance concerns.
Duke Energy’s outcomes are influenced by the expectations of our
customers and stakeholders. Those expectations are based on the core
fundamentals of reliability and affordability but are also increasingly focused
on our ability to meet rapidly changing demands for new and varied products,
services and offerings. Additionally, the risks of global climate change continues
to shape our customers’ sustainability goals and energy needs. Failure to meet
those expectations or to adequately address the risks and external pressures
from regulators, investors and other stakeholders may impact favorable
outcomes in future rate cases and the results of operations for the Duke Energy
Registrants.
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, flooding, 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.
20
PART I The availability of adequate interstate pipeline transportation capacity and
natural gas supply may decrease.
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, offshore 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,
bankruptcies, 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.
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
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.
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.
21
PART I The Duke Energy Registrants may not recover costs incurred to begin
construction on projects that are canceled.
LIQUIDITY, CAPITAL REQUIREMENTS AND COMMON STOCK RISKS
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 cyberattacks, 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
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.
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.
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
22
PART I 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.
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,
23
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.
GENERAL RISKS
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.
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 basis threat requirements.
These increased costs could include additional physical plant security and
security personnel or additional capability following a terrorist incident.
PART I 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.
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, 2020. 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 Combustion Turbine (CT)
Allen
Rockingham CT
W.S. Lee Combined Cycle (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/Gas
Coal/Gas
Coal/Gas
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
SC
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
1,440
780
324
152
603
38
20,280
24
PART I
Facility
Duke Energy Progress
Brunswick
Harris
Robinson
Roxboro
Smith CC
H.F. Lee CC
Wayne County CT
Smith CT
Mayo
L.V. Sutton CC
Asheville CC
Asheville CT
Darlington CT
Weatherspoon CT
L.V. Sutton CT (Black Start)
Blewett CT
Walters
Other small facilities (3)
Distributed generation
Asheville – Rock Hill Battery
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
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
Nabb Battery
Crane 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
Hydro
Hydro
Renewable
Renewable
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
Gas/Oil
Gas/Oil
Gas/Oil
Gas/Oil
Oil
Water
Water
Solar
Storage
Gas/Oil
Gas
Coal
Gas/Oil
Gas
Gas/Oil
Gas/Oil
Gas/Oil
Gas/Oil
Oil
Gas/Oil
Gas
Gas
Solar
Fossil
Fossil
Coal
Gas/Propane
Coal
Coal/Oil
Coal
Gas
Gas
Gas
Coal
Gas/Oil
Gas/Oil
Gas/Oil
Water
Solar
Storage
Storage
Storage
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Hydro
Renewable
Renewable
Renewable
Renewable
25
NC
NC
SC
NC
NC
NC
NC
NC
NC
NC
NC
NC
SC
NC
NC
NC
NC
NC
NC
NC
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
IN
IN
1,870
964
759
2,439
1,085
888
857
772
727
607
474
320
234
124
78
52
112
115
49
7
12,533
2,054
1,610
1,422
1,169
1,013
951
583
559
200
171
168
149
43
195
10,287
600
476
1,076
2,822
1,005
595
566
450
360
280
264
129
86
51
11
4
4
4
6,631
PART I
Totals by Type
Total Electric Utilities
Totals by Plant Type
Nuclear
Fossil
Hydro
Renewable
Total Electric Utilities
Owned MW
Capacity
50,807
8,908
38,010
3,577
312
50,807
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 62.5% of the facility.
The following table provides information related to Electric Utilities and Infrastructure’s electric transmission and distribution properties as of December 31, 2020.
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
Duke
Energy
1,100
1,100
8,400
12,400
8,300
Duke
Energy
Carolinas
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
600
—
2,700
6,800
3,000
300
—
3,400
2,600
—
200
—
1,600
900
2,200
—
400
—
700
600
—
700
700
1,400
2,500
5,300
Total conductor miles of electric transmission lines
31,300
13,100
6,300
4,900
1,700
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
173,500
108,900
66,600
40,400
46,400
31,800
25,100
21,100
13,300
6,200
22,100
9,400
282,400
107,000
78,200
46,200
19,500
31,500
3,200
1,400
500
500
300
500
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
7,400
6,300
26,800
20,900
Duke
Energy
34,200
27,200
26
PART I
COMMERCIAL RENEWABLES
The following table provides information related to Commercial Renewables’ electric generation facilities as of December 31, 2020. 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
Kit Carson
Silver Sage
Happy Jack
Shirley
Total Renewables – Wind
Commercial Renewables – Solar
Holstein(a)
Rambler(a)
North Rosamond(a)
Lapetus(a)
Conetoe II
Palmer(a)
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
Renewable
Renewable
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
Solar
Solar
Solar
TX
TX
TX
OK
WY
TX
TX
WY
KS
TX
PA
PA
KS
CO
WY
WY
WI
TX
TX
CA
TX
NC
CO
CA
CA
CA
NC
NC
NC
NC
NC
NM
NC
CA
CA
NY
NC
NC
CA
Various
Various
TX
OH
465
202
113
103
102
78
54
50
44
38
36
35
34
26
21
15
10
1,426
200
200
150
100
80
60
34
27
23
22
20
20
20
20
17
14
13
13
13
12
12
11
193
1,274
43
43
18
2
20
51%
100%
47%
51%
51%
51%
26%
51%
26%
47%
51%
51%
26%
51%
51%
51%
51%
100%
100%
100%
100%
100%
100%
67%
67%
67%
100%
100%
100%
100%
100%
67%
100%
67%
67%
51%
100%
100%
51%
Various
100%
51%
100%
Commercial Renewables – Fuel Cells(a)
Total Renewables – Fuel Cells
Commercial Renewables – Energy Storage
Notrees Battery Storage
Beckjord Battery Storage
Total Renewables – Energy Storage
Renewable
Fuel Cell
Renewable
Renewable
Storage
Storage
27
PART I Totals by Type
Wind
Solar
Fuel Cells
Energy Storage
Total Commercial Renewables(b)
Owned MW
Capacity
1,426
1,274
43
20
2,763
(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.
(b) Net proportion of MW capacity in operation is 3,937, which represents the amount managed or owned by Duke Energy.
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 3, “Regulatory Matters,” and Note 4, “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, and the matter is now in discovery. On December 18, 2020, the plaintiff and defendants selected 50 focus sites, none of which have any
ties to Duke Energy Merchants, and discovery is likely to be specific to those sites. 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.
28
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, 2021, there were 136,857 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. See Note 1,
“Summary of Significant Accounting Policies,” to the Consolidated Financial Statements for information on the 2021 sale of a minority interest in Duke Energy Indiana.
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 2020
There were no repurchases of equity securities during the fourth quarter of 2020.
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, 2015, 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
2015
2016
2017
2018
2019
2020
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, 2020.
29
PART I ITEM 6. SELECTED FINANCIAL DATA
This is not applicable for any of the Duke Energy Registrants.
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, 2020, 2019 and 2018.
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, 2019, filed with the SEC on February
20, 2020, for a discussion of variance drivers for the year ended December 31,
2019, as compared to December 31, 2018.
Financial Results
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 2020, we met our near-term financial commitments and
continued to provide safe and reliable service while managing the impacts of the
COVID-19 pandemic.
In early 2021, we continued to position the company for sustainable
long-term growth, executing an important coal ash settlement agreement in
North Carolina and announcing the $2 billion sale of a minority interest in Duke
Energy Indiana, providing a source of efficient capital at an attractive valuation.
We remain focused on a business portfolio that will deliver a reliable and
growing dividend with 2020 representing the 94th consecutive year Duke Energy
paid a cash dividend on its common stock. With these recent announcements,
we also increased our long-term adjusted EPS growth rate to 5% to 7% through
2025. This growth is supported by our $59 billion capital plan from 2021 to
2025, clean energy investments that benefit our customers, timely cost-recovery
mechanisms in most jurisdictions and our ability to effectively manage our
cost structure.
Annual Earnings (in millions)
Annual Earnings Per Share
Net Income Available to Duke Energy Corporation
common stockholders (GAAP)
Net Income Available to Duke Energy Corporation common
stockholders per basic share (GAAP)
Adjusted Earnings (a)
Adjusted Earnings Per Share (a)
$3,707
$3,706
$3,771
$5.06
$5.06
$5.12
$1,270
$1.72
2019
2020
2019
2020
(a) See Results of Operations below for Duke Energy’s definition of adjusted earnings and adjusted 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 basic share.
30
PART II Duke Energy’s 2020 Net Income Available to Duke Energy Corporation
(GAAP Reported Earnings) were impacted by: regulatory settlements related to
coal ash cost recovery in Electric Utilities and Infrastructure; the cancellation
of the ACP pipeline 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.
2020 Areas of Focus and Accomplishments
Clean Energy Transformation. Our industry has been undergoing an
incredible transformation and 2020 was a milestone year for our company
where we articulated a clear vision for the future and outlined investments to
achieve a clean energy future for our customers. We continue to transform the
customer experience by generating cleaner energy, modernizing the energy grid,
and expanding natural gas infrastructure.
Generating Cleaner Energy
In October 2020, we held our first-ever Environmental, Social, and
Governance (ESG) Day for investors, successfully outlining our climate strategy
and highlighting our strong progress to date in reducing carbon (a greater than
40% reduction from 2005) and our commitment to do more (at least 50%
reduction by 2030 and net-zero by 2050). In the Carolinas, we participated in
extensive stakeholder processes focused on carbon reduction and regulatory
reform and filed comprehensive IRP consistent with that strategy. Our planned
coal retirements and transition to cleaner energy sources in the Carolinas are
some of the largest in the industry. We also committed to an all-electric light-
duty fleet and 50% of all medium- and heavy-duty vehicles by 2030 – a pledge
that also leads our industry. Our commitment for 2030 includes retiring plants,
operating our existing carbon-free resources and investing in renewables, our
energy delivery system, and natural gas infrastructure. 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-duration energy storage, advanced nuclear technologies,
carbon capture and zero-carbon fuels.
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 2020, 98% of our jurisdictions were equipped with smart meters and we
remain on track to be fully deployed across all regions by the end of this year.
We continue to expand our self-optimizing grid capabilities, and in 2020, smart,
self-healing technologies helped to avoid more than 800,000 extended customer
outages across our six-state electric service area, saving customers more than
1.8 million hours of lost outage time. Duke Energy also has a demonstrated
track record of driving efficiencies and productivity into the business and we
continue to leverage new technology, digital tools and data analytics across the
business in response to a transforming landscape.
Expanding Natural Gas Infrastructure
In July 2020, Duke Energy and Dominion announced the cancellation of
the ACP pipeline. Litigation risks and delays presented too much uncertainty
on our ability to economically complete the project on schedule to meet our
customers’ needs. Additionally, Dominion reached a decision to exit their natural
gas transmission business, further impeding our ability to consider ongoing
investment in the project. The Company remains committed to pursuing natural
gas infrastructure investments and continues to explore additional resources
in eastern North Carolina for the Piedmont system and securing more transport
capacity to support power generation. Construction is expected to be completed
this year 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.
In the fall of 2020, recognizing the continued importance of natural gas to our
plans, we announced a net-zero methane emission goal by 2030 related to our
gas distribution business, as well as our commitment to lead on reduction of
upstream methane emissions through work with our natural gas supply chain.
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 2020, we conducted the bulk of proceedings related to our North
Carolina rate cases for both Duke Energy Carolinas and Duke Energy Progress
and achieved a partial settlement with the North Carolina Public Staff and ten
other intervening parties. In January 2021, Duke Energy Carolinas and Duke
Energy Progress reached an important settlement agreement, which subject to
NCUC approval, resolves historical coal ash prudence and cost recovery issues
and provides clarity on coal ash cost recovery for the next decade. In 2020, we
also achieved constructive rate case outcomes in Indiana (our first rate base
request in 15 years) and Kentucky (electric). We have a multiyear rate plan in
Florida and in January 2021 reached a constructive settlement agreement with
key consumer groups, subject to FPSC approval, to bring additional certainty to
rates through 2024, In addition, grid investment riders in the Midwest enable
more timely cost recovery and earnings growth.
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. Our work has been recognized by our customers with external
measures showing Duke Energy is improving customer satisfaction at a rate
greater than the utility industry. Additionally, in 2020, we surpassed our internal
target that measures customer satisfaction by approximately 14%.
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
and nuclear sites had strong performance throughout the year and our electric
distribution system performed well. The safety of our workforce is a core value. Our
employees delivered strong safety results in 2020, and we are at or near the top of
our industry. Additionally, the 2020 Atlantic hurricane season was incredibly active
and marked the fifth consecutive year of above-average damaging storms. Our
ability to effectively handle all facets of the 2020 storm response efforts, including
navigating COVID-19 protocols, 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.
Leading Through COVID-19. COVID-19 impacted all that we
accomplished in 2020 and demonstrated our resiliency and agility:
• As the pandemic spread, stay-at-home orders coupled with
recessionary economic conditions caused overall retail electric sales to
decline by approximately 2%. To offset this challenge, as well as mild
weather and other COVID-related costs, we successfully achieved the
high end of our goal of $400 million to $450 million of broad-based
O&M reductions and other mitigating actions. The Company’s results
were within its adjusted EPS guidance range and we expect to sustain
approximately $200 million of the 2020 O&M cost mitigation into 2021
forward.
31
PART II • Duke Energy kept electricity and gas flowing while voluntarily making
significant accommodations for our customers. We led the way in our
sector nationally, suspending all nonpay disconnects in all jurisdictions
and waiving late payment fees and other fees until the national state of
emergency was lifted. In the fall, we began returning to normal business
practices, ensuring diligent communication with our customers and
providing flexible payment arrangements.
• We ensured the physical safety of our workers and provided support
for our employees. As cases spiked nationally, we deployed COVID-19
safety protocols for our front-line essential workers and moved 18,000
colleagues to remote work. Our COVID-19 Case Management Team
managed exposures of our workforce and IT ensured our networks could
handle the remote work while strengthening cyber protection. Under
our COVID-19 protocols, our front-line employees completed 150 fossil
and nuclear outages, executed large major projects, restored service
from storms and hurricanes, and managed high-water events. Overall,
our operations continued, and our team completed their work with
excellence.
Duke Energy Objectives – 2021 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 2021, 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 and net zero methane emissions by 2030
• Modernizing and strengthening a green-enabled energy grid
• Expanding our natural gas infrastructure
• Maintaining the safety of our communities and employees
• Deploying digital tools across our business
Matters Impacting Future Results
The matters discussed herein could materially impact the future operating
results, financial condition and cash flows of the Duke Energy Registrants and
Business Segments.
Regulatory Matters
Coal Ash Costs
As a result of the NCDEQ settlement on December 31, 2019, 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. The majority of spend is expected to
occur over the next 15-20 years. In January 2021, Duke Energy Carolinas and
Duke Energy Progress reached a settlement agreement on recovery of coal
ash costs as outlined in Note 3, “Regulatory Matters,” which is subject to
review and approval of the NCUC. The company agreed not to seek recovery
of approximately $1 billion of deferred coal ash expenditures and Duke Energy
Carolinas and Duke Energy Progress took a charge of approximately $500 million
each.
In 2019, Duke Energy Carolinas and Duke Energy Progress received
orders from the PSCSC denying recovery of certain coal ash costs. Duke
Energy Carolinas and Duke Energy Progress have appealed these decisions to
the South Carolina Supreme Court and those appeals are pending. An order
from regulatory or judicial authorities that rejects our proposed settlement or
disallows recovery of costs related to closure of these ash basins could have an
adverse impact on future results.
Duke Energy Indiana has interpreted the CCR 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. In 2020, the Hoosier Environmental
Council filed a petition challenging the Indiana Department of Environmental
Management’s partial approval of Duke Energy Indiana’s ash pond closure
plans. Interpretation of the requirements of the CCR rule is subject to further
legal challenges and 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.
Storm Costs
Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida’s
service territories were impacted by several named storms in 2018. Hurricane
Florence, Hurricane Michael and Winter Storm Diego caused flooding, extensive
damage and widespread power outages to the service territories of Duke Energy
Carolinas and Duke Energy Progress. Duke Energy Florida’s service territory
was also impacted by Hurricane Michael, a Category 5 hurricane and the most
powerful storm to hit the Florida Panhandle in recorded history. In September
2019, Hurricane Dorian impacted Duke Energy Progress and Duke Energy
Florida’s service territories. In 2020, Duke Energy Carolinas and Duke Energy
Progress reached partial settlements in the 2019 North Carolina rates cases by
filing a petition to securitize deferred storm costs, which is subject to review and
approval of the NCUC. In January 2021, Duke Energy Florida filed a settlement
agreement with the FPSC, which if approved, allows recovery of the remaining
storm cost balance for hurricanes Michael and Dorian. An order from regulatory
authorities disallowing the deferral and future recovery of storm restoration
costs could have an adverse impact.
Grid Improvement Costs
Duke Energy Carolinas received an order from the NCUC in 2018, which
denied the Grid Rider Stipulation and deferral treatment of grid improvement
costs. Duke Energy Carolinas and Duke Energy Progress have petitioned for
deferral of future grid improvement costs in their 2019 rate cases. Partial
settlements filed with the NCUC in July 2020 included the allowance for deferral
for certain grid projects placed in service from June 2020 through December
2022. There could be adverse impacts if grid improvement costs are not
ultimately approved for recovery and/or deferral treatment.
Rate Cases
In 2019, Duke Energy Carolinas and Duke Energy Progress filed general
rate cases with the NCUC. Several partial settlement agreements have been
filed with the NCUC and are awaiting approval. The outcome of these rate cases
could have a material impact.
32
PART II MGP
The PUCO has issued an order authorizing recovery of MGP costs at
certain sites in Ohio with a deadline to complete the MGP environmental
investigation and remediation work prior to December 31, 2016. This deadline
was subsequently extended to December 31, 2019. Duke Energy Ohio has filed
for a request for extension of the deadline. A hearing on that request has not
been scheduled. Disallowance of costs incurred, failure to complete the work by
the deadline or failure to obtain an extension from the PUCO could result in an
adverse impact.
For additional information, see Note 3 to the Consolidated Financial
Statements, “Regulatory Matters.”
Sale of Minority Interest in Duke Energy Indiana
In January 2021, Duke Energy entered into a definitive agreement
providing for the sale of a 19.9% minority interest in Duke Energy Indiana with
an affiliate of GIC, Singapore’s sovereign wealth fund. The sale is subject to
the satisfaction of certain customary conditions described in the investment
agreement, including receipt of the approval of the FERC and completion of
review by the Committee on Foreign Investments in the United States. Failure to
obtain related approvals or satisfy the conditions in the investment agreement
could result in the termination of the transaction and could result in an adverse
impact. For additional information, see Note 1 to the Consolidated Financial
Statements, “Summary of Significant Accounting Policies.”
Commercial Renewables
Duke Energy continues to monitor recoverability of renewable merchant
plants located in the Electric Reliability Council of Texas West market and PJM,
due to declining market pricing and declining long-term forecasted energy
prices, primarily driven by lower forecasted natural gas prices. Based on the
most recent recoverability test, the carrying value approximated the aggregate
estimated future undiscounted cash flows for the assets under review. A
continued decline in energy market pricing would likely result in a future
impairment. Impairment of these assets could result in adverse impacts. For
additional information, see Note 10 to the Consolidated Financial Statements,
“Property, Plant and Equipment.”
In February 2021, a severe winter storm impacted certain Commercial
Renewables assets in Texas. Extreme weather conditions limited the ability for
these solar and wind facilities to generate and sell electricity into the Electric
Reliability Council of Texas market. Both lost revenues and higher than expected
purchased power costs are expected to negatively impact the operating results
of these generating units. The estimated financial impact of the storm is
expected to have a material impact on the Commercial Renewables segment’s
2021 operating results. See Note 25 to the Consolidated Financial Statements,
“Subsequent Events.”
COVID-19
Duke Energy cannot predict the extent to which the COVID-19 pandemic
will impact its results of operations, financial position and cash flows in the
future. Duke Energy will continue to actively monitor the impacts of COVID-19
including the economic slowdown caused by business closures or by reduced
operations of businesses and governmental agencies. The pandemic and
resultant economic slowdown continues to cause an increase in certain costs,
such as bad debt, and a reduction in the demand for energy. Duke Energy
has mitigation plans in place to partially offset these impacts, and the ability
to execute these plans is critical to preserving future financial results. The
Company is in the process of reviewing the long-term real estate strategy due
to a potential change of in-office work policies after the COVID-19 pandemic.
The plan may result in a reduction of physical work space which could
create accounting impacts starting in 2021. Accounting impacts may include
reassessments of lease terms and lease modifications which could result
in termination penalties, as well as, asset impairments on property, plant
and equipment. See Item 1A. Risk Factors for discussion of risks associated
with COVID-19 and Liquidity and Capital Resources within this section for a
discussion of liquidity impacts of COVID-19.
Within this Item 7, see Liquidity and Capital Resources for a discussion on
risks associated with the Tax Act.
Results of Operations
Non-GAAP Measures
Management evaluates financial performance in part based on non-GAAP
financial measures, including adjusted earnings and adjusted 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 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 EPS is also used as
a basis for employee incentive bonuses. The most directly comparable GAAP
measures for adjusted earnings and adjusted EPS are GAAP Reported Earnings
and 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:
• Gas Pipeline Investments represents costs related to the cancellation of
the ACP pipeline and additional exit costs related to Constitution.
• Regulatory Settlements represents charges related to Duke Energy
Carolinas’ and Duke Energy Progress’ CCR Settlement Agreement and
the partial settlements in the 2019 North Carolina rate cases.
• Severance represents the reversal of 2018 costs, which were deferred
as a result of a partial settlement in the Duke Energy Carolinas and the
Duke Energy Progress 2019 North Carolina rate cases.
• Impairment Charges represents a reduction of a prior year impairment
at Citrus County CC and an OTTI on the remaining investment in
Constitution.
Duke Energy’s adjusted earnings and adjusted EPS may not be
comparable to similarly titled measures of another company because other
companies may not calculate the measures in the same manner.
33
PART II Reconciliation of GAAP Reported Amounts to Adjusted Amounts
The following table presents a reconciliation of adjusted earnings and adjusted EPS to the most directly comparable GAAP measures.
(in millions, except per share amounts)
GAAP Reported Earnings/EPS
Adjustments to Reported:
Gas Pipeline Investments(a)
Regulatory Settlements(b)
Severance(c)
Impairment Charges(d)
Discontinued Operations
Adjusted Earnings/Adjusted EPS
(a) Net of tax benefit of $399 million.
(b) Net of tax benefit of $263 million.
(c) Net of tax expense of $23 million.
(d) Net of tax expense of $3 million.
Years Ended December 31,
2020
2019
Earnings
$ 1,270
1,711
872
(75)
—
(7)
$ 3,771
EPS
$ 1.72
2.32
1.19
(0.10)
—
(0.01)
$ 5.12
Earnings
$ 3,707
—
—
—
(8)
7
$ 3,706
EPS
$ 5.06
—
—
—
(0.01)
0.01
$ 5.06
Year Ended December 31, 2020, as compared to 2019
SEGMENT RESULTS
GAAP Reported EPS was $1.72 for the year ended December 31, 2020,
compared to $5.06 for the year ended December 31, 2019. The decrease in
GAAP Reported Earnings/EPS was primarily due to the cancellation of the ACP
pipeline and the CCR Settlement Agreement filed with the NCUC.
As discussed and shown in the table above, management also evaluates
financial performance based on adjusted EPS. Duke Energy’s adjusted EPS was
$5.12 for the year ended December 31, 2020, compared to $5.06 for the year
ended December 31, 2019. The increase in Adjusted Earnings/Adjusted EPS
was primarily due to positive rate case contributions, growth in wholesale, lower
operations and maintenance expense in response to the pandemic and growth
in Commercial Renewables, partially offset by higher depreciation expense from
a growing asset base, impacts of the pandemic, mild weather and the loss of
ACP earnings.
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 2 to the Consolidated Financial Statements, “Business Segments,” for
additional information on Duke Energy’s segment structure.
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,
2020
$ 21,720
6,128
5,391
4,068
1,188
971
17,746
11
3,985
344
1,320
3,009
340
2,669
84,574
65,240
42,490
23,484
30,528
246,316
50,419
$
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
Variance
$ (1,111)
(776)
(106)
117
13
979
227
10
(1,328)
(9)
(25)
(1,312)
(445)
(867)
(5,346)
(3,116)
317
(1,245)
(1,358)
(10,748)
349
$
34
PART II Year Ended December 31, 2020, as compared to 2019
Electric Utilities and Infrastructure’s variance is primarily due to
impairment charges and revenue reductions related to the CCR settlement
agreement filed with the NCUC to resolve coal ash cost recovery issues,
unfavorable weather and lower volumes driven by impacts from the COVID-19
pandemic, partially offset by base rate adjustments in various jurisdictions. The
following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The variance was driven primarily by:
• an $826 million decrease in fuel revenues driven by lower sales
volumes as well as an accelerated refund of fuel costs at Duke Energy
Florida in response to the COVID-19 pandemic;
• a $237 million decrease in wholesale revenue primarily driven by the
CCR Settlement Agreement filed with the NCUC in January 2021 and
decreased volumes;
• a $207 million decrease in retail sales, net of fuel revenues, due to
unfavorable weather;
• a $130 million decrease in rider revenues from EE programs;
• a $44 million decrease in nuclear cost recovery rider revenue due to
recovery of the Crystal River 3 uprate regulatory asset in 2019 at Duke
Energy Florida; and
• a $17 million decrease in weather-normal retail sale volumes driven
by lower nonresidential customer demand due to impacts from the
COVID-19 pandemic.
Partially offset by:
• a $214 million increase due to higher pricing from the Indiana retail rate
case, net of rider revenues;
• a $92 million increase in retail pricing due to Duke Energy Florida’s
base rate adjustments related to annual increases from the 2017
Settlement Agreement and the Solar Base Rate Adjustment; and
• a $32 million increase due to higher pricing from South Carolina retail
rate cases, net of a return of EDIT to customers.
Operating Expenses. The variance was driven primarily by:
• a $979 million increase in impairment charges primarily driven by the
CCR Settlement Agreement filed with the NCUC in January 2021;
• a $117 million increase in depreciation and amortization expense
primarily due to additional plant in service and new depreciation rates
from the Indiana retail rate cases; and
• a $13 million increase in property and other taxes primarily due to prior
year property tax reassessments.
Partially offset by:
• a $776 million decrease in fuel used in electric generation and
purchased power primarily due to lower generation demand and lower
fuel and natural gas costs; and
• a $106 million decrease in operation, maintenance and other expense
primarily driven by cost mitigation efforts.
Interest Expense. The variance was primarily due to lower interest rates
on outstanding debt.
Income Tax Expense. The ETRs for the years ended December 31, 2020,
and 2019, were 11.3% and 18.2%, respectively. The decrease in the ETR was
primarily due to an increase in the amortization of excess deferred taxes.
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
Impairment charges
Total operating expenses
Operating Income
Other Income and Expenses
Equity in (losses) earnings of unconsolidated affiliates
Other Income and Expenses, net
Total other income and expenses
Interest Expense
(Loss) Income Before Income Taxes
Income Tax (Benefit) Expense
Segment (Loss) Income
Years Ended December 31,
2020
$
1,748
2019
$ 1,866
Variance
$ (118)
460
430
258
112
7
1,267
481
(2,017)
56
(1,961)
135
(1,615)
(349)
$ (1,266)
627
446
256
106
—
1,435
431
114
26
140
117
454
22
432
$
(167)
(16)
2
6
7
(168)
50
(2,131)
30
(2,101)
18
(2,069)
(371)
$ (1,698)
Piedmont Local Distribution Company (LDC) throughput (Dth)
Duke Energy Midwest LDC throughput (MCF)
490,071,039
84,160,162
511,243,774
89,025,972
(21,172,735)
(4,865,810)
35
PART II Year Ended December 31, 2020, as compared to 2019
Gas Utilities and Infrastructure’s results were impacted primarily by the
cancellation of the ACP pipeline. The following is a detailed discussion of the
variance drivers by line item.
Operating Revenues. The variance was driven primarily by:
• a $167 million decrease due to lower natural gas costs passed through to
customers, lower volumes, and decreased off-system sales natural gas costs; and
• a $47 million decrease due to return of EDIT to customers.
Partially offset by:
• an $87 million increase due to North Carolina base rate case increases.
Operating Expenses. The variance was driven primarily by:
• a $167 million decrease in cost of natural gas due to lower natural gas
prices, lower volumes and decreased off-system sales natural gas costs.
Equity in (losses) earnings of unconsolidated affiliates. The variance
was driven primarily by the cancellation of the ACP pipeline.
Other Income and Expenses, net. The variance was driven primarily by AFUDC
equity and other income related to Belews Creek and Marshall Power Generation contracts.
Income Tax (Benefit) Expense. The increase in tax benefit was primarily
due to a decrease in pretax income driven by the impact of the cancellation of
the ACP pipeline. The ETRs for the years ended December 31, 2020, and 2019,
were 21.6% and 4.8%, respectively. The increase in the ETR was primarily due
to an adjustment, recorded in the first quarter of 2019, related to the income
tax recognition for equity method investments. The equity method investment
adjustment was immaterial and relates to prior years.
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
Add: Loss Attributable to Noncontrolling Interests
Segment Income
Renewable plant production, GWh
Net proportional MW capacity in operation(a)
Years Ended December 31,
2020
$
502
2019
$
487
Variance
$
15
285
199
27
6
517
(1)
(16)
7
66
(75)
(65)
296
286
10,204
3,937
$
297
168
23
—
488
(3)
(4)
5
95
(94)
(115)
177
198
8,574
3,485
$
(12)
31
4
6
29
2
(12)
2
(29)
19
50
119
88
1,630
452
$
(a) Certain projects are included in tax-equity structures where investors have differing interests in the project’s economic attributes. Amounts shown represent 100% of the tax-equity project’s capacity.
Year Ended December 31, 2020, as compared to 2019
Commercial Renewables’ results were favorable primarily due to growth
Interest Expense. The decrease was primarily driven by non-qualifying
of new project investments. Since December 31, 2019, Commercial Renewables
has placed in service approximately 500 MW of capacity.
The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The variance was primarily driven by a $39 million
increase associated with the growth of new projects placed in service, partially
offset by a $24 million decrease primarily within the distributed energy
portfolios for lower engineering and construction activities related to delays from
COVID-19.
Operating Expenses. The variance was primarily driven by a $52 million
increase in operating expenses due to the growth of new projects placed
in service. This was partially offset by a $24 million decrease in operating
expenses within the distributed energy portfolios for lower engineering and
construction costs related to delays from COVID-19.
hedge activity in the prior year, higher capitalized interest in the current
year for solar and wind projects in development and lower outstanding debt
balances.
Income Tax Benefit. The decrease in the tax benefit was primarily driven
by an increase in taxes associated with tax equity investments and a decrease
in PTCs generated.
Loss Attributable to Noncontrolling Interests. The increase was
driven primarily by the growth of new projects financed by tax equity.
36
PART II Other
(in millions)
Operating Revenues
Operating Expenses
Losses on Sales of Other Assets and Other, net
Operating Income (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,
2020
97
12
—
85
92
657
(480)
(162)
1
107
(426)
$
$
2019
95
117
(2)
(24)
145
705
(584)
(173)
—
41
(452)
$
$
Variance
$
$
2
(105)
2
109
(53)
(48)
104
11
1
66
26
Year Ended December 31, 2020, as compared to 2019
The variance was primarily driven by a reversal of corporate allocated
severance costs, obligations to the Duke Energy Foundation in 2019, and lower
state income tax expense, partially offset by lower returns on investments,
higher loss experience related to captive insurance claims, the declaration of
preferred stock dividends, and lower earnings on the NMC investment. The
following is a detailed discussion of the variance drivers by line item.
Operating Expenses. The decrease was primarily due to the deferral of
2018 corporate allocated severance costs due to the Duke Energy Carolinas and
Duke Energy Progress partial settlements in the 2019 North Carolina retail rate
case and obligations to the Duke Energy Foundation in 2019, partially offset by
higher loss experience related to captive insurance claims and higher franchise
tax expense.
Other Income and Expenses, net. The variance was primarily due to
lower returns on investments that fund certain employee benefit obligations and
lower earnings on the NMC investment primarily due to lower pricing.
Interest Expense. The variance was primarily due to lower outstanding
short-term debt and lower interest rates.
Income Tax Benefit. The decrease in the tax benefit was primarily driven
by a decrease in pretax losses, partially offset by an increase in state income
tax benefits. The ETRs for the years ended December 31, 2020, and 2019, were
33.8% and 29.6%, respectively. The increase in the ETR was primarily due to
an increase in state income tax benefits in 2020, in relation to pretax losses.
Preferred Dividends. The variance was driven by the declaration of
preferred stock dividends on preferred stock issued in late 2019.
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.
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
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,
2020
$ 7,015
2019
$ 7,395
Variance
$ (380)
1,682
1,743
1,462
299
476
5,662
1
1,354
177
487
1,044
88
956
$
1,804
1,868
1,388
292
17
5,369
—
2,026
151
463
1,714
311
(122)
(125)
74
7
459
293
1
(672)
26
24
(670)
(223)
$ 1,403
$ (447)
37
PART II 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
2020
(3.1)%
(6.7)%
(8.0)%
(2.0)%
(46.0)%
(5.9)%
1.9 %
2019
(2.9)%
(0.1)%
(1.9)%
(13.6)%
4.7 %
(2.6)%
2.1 %
Year Ended December 31, 2020, as compared to 2019
Operating Revenues. The variance was driven primarily by:
• a $151 million decrease in fuel revenues due to lower prices and retail
sales volumes;
• a $149 million decrease in retail sales due to unfavorable weather in
the current year;
• a $73 million decrease in rider revenues primarily due to EE programs;
and
• a $50 million decrease in wholesale revenue primarily driven by the
CCR Settlement Agreement filed with the NCUC in January 2021.
Partially offset by:
• a $25 million increase due to higher pricing from the South Carolina
retail rate case, net of a return of EDIT to customers; and
• a $22 million increase in weather-normal retail sales volumes.
• a $74 million increase in depreciation and amortization expense
primarily due to additional plant in service and new depreciation rates
associated with the South Carolina rate case.
Partially offset by:
• a $125 million decrease in operation, maintenance and other expense
primarily driven by the deferral of 2018 severance costs due to the
partial settlement agreement between Duke Energy Carolinas and
the Public Staff of the NCUC related to the 2019 North Carolina retail
rate case, and cost mitigation efforts, partially offset by higher storm
restoration costs; and
• a $122 million decrease in fuel used in electric generation and
purchased power primarily due to lower retail sales volumes, net of a
prior period true up.
Other Income and Expenses, net. The variance was primarily due to
higher AFUDC equity in the current year.
Interest Expense. The variance was primarily due to higher debt
Operating Expenses. The variance was driven primarily by:
outstanding in the current year.
• a $459 million increase in impairment charges primarily driven by the
CCR Settlement Agreement filed with the NCUC in January 2021; and
Income Tax Expense. The decrease in tax expense was primarily due
to a decrease in pretax income and an increase in the amortization of excess
deferred taxes.
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,
2020
$ 10,627
2019
$ 11,202
Variance
$
(575)
3,479
2,479
1,818
545
495
8,816
9
1,820
129
790
1,159
113
1,046
1
4,024
2,495
1,845
561
(24)
8,901
—
2,301
141
862
1,580
253
1,327
—
$
1,045
$
1,327
$
38
(545)
(16)
(27)
(16)
519
(85)
9
(481)
(12)
(72)
(421)
(140)
(281)
1
(282)
PART II Year Ended December 31, 2020, as compared to 2019
Operating Expenses. The variance was driven primarily by:
Operating Revenues. The variance was driven primarily by:
• a $545 million decrease in fuel used in electric generation and
• a $567 million decrease in fuel revenues driven by lower sales
volumes as well as an accelerated refund of fuel costs in response to
the COVID-19 pandemic at Duke Energy Florida and lower fuel prices,
volumes and native load transfer sales in the current year at Duke
Energy Progress;
• a $169 million decrease in wholesale revenue primarily driven by the
Duke Energy Progress’ CCR Settlement Agreement filed with the NCUC
in January 2021 and decreased volumes at Duke Energy Progress,
partially offset by increased demand at Duke Energy Florida;
• a $55 million decrease in rider revenues primarily due to the Crystal
River 3 uprate regulatory asset being fully recovered in 2019 at Duke
Energy Florida;
• a $31 million decrease in retail sales, net of fuel revenues, due to
unfavorable weather at Duke Energy Progress, partially offset by
favorable weather in the current year at Duke Energy Florida; and
• a $17 million decrease in weather-normal retail sales volumes.
Partially offset by:
• a $147 million increase in storm revenues due to Hurricane Dorian
collections at Duke Energy Florida;
• a $92 million increase in retail pricing due to base rate adjustments
related to annual increases from the 2017 Settlement Agreement and
the Solar Base Rate Adjustment at Duke Energy Florida; and
• a $16 million increase due to higher pricing from the South Carolina
retail rate case, net of a return of EDIT to customers at Duke Energy
Progress.
purchased power primarily due to lower demand and changes in
generation mix at Duke Energy Progress and lower demand and fuel
costs at Duke Energy Florida;
• a $27 million decrease in depreciation and amortization expense
primarily driven by a decrease in coal ash amortization, partially offset
by a higher depreciable base and impacts from North Carolina and the
South Carolina rate cases at Duke Energy Progress;
• a $16 million decrease in operation, maintenance and other expense
at Duke Energy Progress primarily driven by the deferral of 2018
severance costs due to the partial settlement agreement between Duke
Energy Progress and the Public Staff of the NCUC related to the 2019
North Carolina retail rate case, reduced outage costs and other cost
mitigation efforts, partially offset by storm cost amortizations at Duke
Energy Florida; and
• a $16 million decrease in property and other taxes driven primarily
by lower gross receipts taxes due to decreased fuel revenues at Duke
Energy Florida.
Partially offset by:
• a $519 million increase in impairment charges primarily driven by the
Duke Energy Progress’ CCR Settlement Agreement filed with the NCUC
in January 2021, and the prior year’s impairment reduction related to
Citrus County CC at Duke Energy Florida.
Interest Expense. The variance was driven primarily by lower interest
rates on outstanding debt at Duke Energy Progress.
Income Tax Expense. The decrease in tax expense was primarily due
to a decrease in pretax income and an increase in the amortization of excess
deferred taxes at Duke Energy Progress, partially offset by an increase in pretax
income and a decrease in the amortization of excess deferred taxes at Duke
Energy Florida.
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 (Benefit) Expense
Net Income
Years Ended December 31,
2020
$ 5,422
2019
$ 5,957
Variance
$ (535)
1,743
1,332
1,116
167
499
4,857
8
573
75
269
379
(36)
2,012
1,446
1,143
176
12
4,789
—
1,168
100
306
962
157
(269)
(114)
(27)
(9)
487
68
8
(595)
(25)
(37)
(583)
(193)
$
415
$
805
$ (390)
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
2020
(3.2)%
(7.4)%
(3.9)%
(9.1)%
9.9 %
(4.6)%
1.8 %
2019
(4.0)%
(1.6)%
0.6 %
(1.5)%
(0.8)%
(1.4)%
1.3 %
Year Ended December 31, 2020, as compared to 2019
Operating Revenues. The variance was driven primarily by:
• a $272 million decrease in fuel cost recovery driven by lower fuel
prices and volumes as well as less native load transfer sales in the
current year;
• a $180 million decrease in wholesale revenue primarily driven by the
CCR Settlement Agreement filed with the NCUC in January 2021, and
decreased volumes, partially offset by increased capacity rates;
• a $77 million decrease in retail sales due to unfavorable weather; and
• a $10 million decrease in weather-normal retail sales volumes.
Partially offset by:
Partially Offset by:
• a $269 million decrease in fuel used in electric generation and
purchased power primarily due to lower demand and changes in
generation mix;
• a $114 million decrease in operation, maintenance and other expense
primarily driven by the deferral of 2018 severance costs due to the
partial settlement agreement between Duke Energy Progress and the
Public Staff of the NCUC related to the 2019 North Carolina retail rate
case, reduced outage costs and other costs mitigation efforts; and
• a $27 million decrease in depreciation and amortization expense primarily
driven by a decrease in coal ash amortization, partially offset by a higher
depreciable base and impacts from the South Carolina rate cases.
Other Income and Expenses, net. The variance was primarily due to
• a $16 million increase due to higher pricing from the South Carolina
lower AFUDC equity in the current year.
retail rate case, net of a return of EDIT to customers.
Interest Expense. The variance was driven primarily by lower interest
Operating Expenses. The variance was driven primarily by:
rates on outstanding debt.
• a $487 million increase in impairment charges primarily driven by the
CCR Settlement Agreement filed with the NCUC in January 2021.
Income Tax (Benefit) Expense. The decrease in tax expense was
primarily due to a decrease in pretax income and an increase in the amortization
of excess deferred taxes.
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,
2020
$ 5,188
2019
$ 5,231
Variance
$
(43)
1,737
1,131
702
381
(4)
3,947
1
1,242
53
326
969
198
771
$
2,012
1,034
702
392
(36)
4,104
—
1,127
48
328
847
155
692
$
(275)
97
—
(11)
32
(157)
1
115
5
(2)
122
43
79
$
40
PART II 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
2020
3.3 %
(5.3)%
6.2 %
(1.7)%
0.8 %
1.8 %
2019
0.7 %
0.3 %
(4.6)%
28.8 %
1.5 %
1.6 %
Year Ended December 31, 2020, as compared to 2019
Operating Revenues. The variance was driven primarily by:
• a $295 million decrease in fuel revenues driven by lower sales volumes
as well as an accelerated refund of fuel costs to customers in response
to the COVID-19 pandemic;
offset by lower late payment and service charge revenues due to a
moratorium during the COVID-19 pandemic; and
• an $11 million increase in wholesale power revenues, net of fuel,
primarily due to increased capacity charges.
Operating Expenses. The variance was driven primarily by:
• a $55 million decrease in rider revenues primarily due to full recovery of
the Crystal River 3 uprate regulatory asset in 2019; and
• a $275 million decrease in fuel used in electric generation and
purchased power primarily due to lower fuel costs; and
• a $7 million decrease in weather-normal retail sales volumes.
Partially offset by:
• a $147 million increase in storm revenues due to recovery of Hurricane
Dorian costs;
• a $92 million increase in retail pricing due to base rate adjustments
related to annual increases from the 2017 Settlement Agreement and
the Solar Base Rate Adjustment;
• a $46 million increase in retail sales, net of fuel revenues, due to
favorable weather in the current year;
• an $18 million increase in other revenues primarily due to increased
transmission revenues and lighting equipment rentals, partially
• an $11 million decrease in property and other taxes driven by lower
gross receipts taxes due to decreased fuel revenues.
Partially offset by:
• a $97 million increase in operation, maintenance and other expense
primarily due to storm cost amortizations; and
• a $32 million increase in impairment charges primarily due to the prior
year’s impairment reduction related to Citrus County CC.
Income Tax Expense. The increase in tax expense was primarily due
to an increase in pretax income and a decrease in the amortization of excess
deferred taxes.
DUKE ENERGY OHIO
Results of Operations
(in millions)
Operating Revenues
Regulated electric
Regulated natural gas
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
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
Years Ended December 31,
2020
2019
Variance
$ 1,405
453
1,858
339
73
463
278
324
1,477
381
16
102
295
43
252
—
252
$
$ 1,456
484
1,940
388
95
520
265
308
1,576
364
24
109
279
40
239
(1)
238
$
$
$
(51)
(31)
(82)
(49)
(22)
(57)
13
16
(99)
17
(8)
(7)
16
3
13
1
14
41
PART II 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
Year Ended December 31, 2020, as compared to 2019
Operating Revenues. The variance was driven primarily by:
• a $61 million decrease in fuel related revenues primarily due to lower
prices and decreased volumes;
• a $22 million decrease in retail revenue riders, primarily due to lower EE
program revenues, volume impacts of the Distribution Decoupling rider,
suspension of the MGP rider and higher taxes returned to customers
via the Tax Cuts and Job Acts rider, partially offset by an increase in the
Distribution Capital Investment rider due to increased capital investment;
• a $15 million decrease in revenues due to unfavorable weather in the
current year;
• an $11 million decrease in other revenues due to lower OVEC sales into PJM;
• a $5 million decrease in bulk power marketing sales, and
• a $4 million decrease in weather-normal sales volumes.
Partially offset by:
• a $23 million increase in retail pricing primarily due to rate case
impacts in Kentucky; and
2020
(1.9)%
(7.7)%
(6.6)%
(21.3)%
n/a
(5.0)%
1.3 %
Electric
Natural Gas
2019
(3.9)%
(1.9)%
(2.1)%
(4.9)%
n/a
(2.4)%
0.7 %
2020
(5.7)%
(8.4)%
(4.1)%
n/a
(2.2)%
(5.5)%
1.1 %
2019
(3.7)%
(1.2)%
(0.4)%
n/a
0.7 %
(1.7)%
0.7 %
• an $18 million increase in PJM transmission revenues as a result of
increased capital spend.
Operating Expenses. The variance was driven primarily by:
• a $71 million decrease in fuel expense, primarily driven by lower fuel
prices, decreased volumes and lower OVEC costs; and
• a $57 million decrease in operations, maintenance and other expense
primarily due to a new customer program and other deferrals, the
timing of EE programs and outage costs, lower employee benefit
expenses and lower vegetation and pole maintenance costs.
Partially offset by:
• a $16 million increase in property and other taxes primarily due to
higher property taxes due to increased plant in service, partially offset
by lower franchise and other taxes; and
• a $13 million increase in depreciation and amortization primarily driven
by an increase in distribution plant, partially offset by lower amortization
due to the suspension of the MGP rider in Ohio and environmental
surcharge mechanism amortization of deferred coal ash pond ARO.
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
Total operating expenses
Operating Income
Other Income and Expenses, net
Interest Expense
Income Before Income Taxes
Income Tax Expense
Net Income
Years Ended December 31,
2020
$ 2,795
2019
$ 3,004
Variance
$ (209)
767
762
569
81
2,179
616
37
161
492
84
$
408
$
935
790
525
69
2,319
685
41
156
570
134
436
(168)
(28)
44
12
(140)
(69)
(4)
5
(78)
(50)
(28)
$
42
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
2020
(2.7)%
(7.0)%
(7.6)%
3.8 %
(4.3)%
1.4 %
2019
(3.9)%
(2.2)%
(2.6)%
(27.7)%
(6.8)%
1.2 %
Year Ended December 31, 2020, as compared to 2019
Operating Revenues. The variance was driven primarily by:
• a $193 million decrease in rider revenues primarily due to lower sales
volumes and credit adjustment rider refunds;
• a $179 million decrease in fuel revenues primarily due to lower fuel
cost recovery driven by customer demand and fuel prices;
• a $20 million decrease in weather-normal retail sales volumes driven
by lower nonresidential customer demand;
• a $16 million decrease in retail sales due to unfavorable weather in the
current year; and
• a $10 million decrease in wholesale revenues primarily related to the
true up of wholesale transmission revenues and lower rates in the
current year.
Operating Expenses. The variance was driven primarily by:
• a $168 million decrease in fuel used in electric generation and
purchased power expense primarily due to lower purchased power
expense, lower amortization of deferred fuel costs and lower coal and
natural gas costs; and
• a $28 million decrease in operation, maintenance and other primarily
due to lower storm restoration costs, training costs, employee related
costs and a new customer program deferral.
Partially offset by:
• a $44 million increase in depreciation and amortization primarily due
to a change in depreciation rates from the Indiana retail rate case and
additional plant in service; and
• a $12 million increase in property and other taxes primarily due to
additional plant in service and property tax true ups for prior periods.
Partially offset by:
• a $214 million increase primarily due to higher pricing from the Indiana
retail rate case, net of certain rider revenues.
Income Tax Expense. The decrease in income tax expense was primarily
due to an increase in the amortization of excess deferred taxes and a decrease
in pretax income.
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
Impairment charges
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,
2020
$ 1,297
2019
$ 1,381
Variance
$
(84)
386
322
180
53
7
948
349
9
51
60
118
291
18
273
$
532
328
172
45
—
1,077
304
8
20
28
87
245
43
202
$
(146)
(6)
8
8
7
(129)
45
1
31
32
31
46
(25)
71
$
43
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
2020
(3.5)%
(9.1)%
(2.9)%
(3.7)%
(9.7)%
(4.1)%
(9.1)%
2.3 %
2019
(8.0)%
(4.6)%
1.7 %
(11.8)%
4.8 %
(8.2)%
(0.5)%
1.4 %
The margin decoupling mechanism adjusts for variations in residential
and commercial use per customer, including those due to weather and
conservation. The weather normalization adjustment 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.
Year Ended December 31, 2020, as compared to 2019
Operating Revenues. The variance was driven primarily by:
• a $146 million decrease due to lower natural gas costs passed through
to customers, lower volumes, and decreased off-system sales natural
gas costs;
• a $47 million decrease due to return of EDIT to customers; and
• a $7 million decrease due to NCUC approval related to tax reform
accounting from fixed-rate contracts in the prior year.
Partially offset by:
• an $87 million increase due to North Carolina base rate case increases;
Income Tax Expense. The decrease in income tax expense was primarily
due to an increase in the amortization of excess deferred taxes and an increase
in AFUDC Equity, partially offset by an increase in pretax income.
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 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.”
• a $20 million increase due to North Carolina IMR increases; and
Regulated Operations Accounting
• an $18 million increase due to addition of Belews Creek and Marshall
Power Generation capacity contracts.
Operating Expenses. The variance was driven primarily by:
• a $146 million decrease in cost of natural gas due to lower natural gas
prices, lower volumes, and decreased off-system sales natural gas costs.
Partially offset by:
• an $8 million increase in depreciation and amortization due to
additional plant in service and higher depreciation rates, partially
offset by Belews Creek and Marshall Power Generation contracts and
amortization of EDIT interest expense; and
• an $8 million increase in property and other taxes due to prior year
property tax true ups.
Other Income and Expenses, net. The variance was driven primarily
by AFUDC equity and other income related to Belews Creek and Marshall Power
Generation contracts.
Interest Expense. The variance was driven primarily by interest on
tax reform related deferrals being returned to customers and higher debt
outstanding in the current year.
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
jurisdictions;
• litigation of rate orders;
• recent rate orders to other regulated entities;
• levels of actual return on equity compared to approved rates of return
on equity; and
• the status of any pending or potential deregulation legislation.
44
PART II If future recovery of costs ceases to be probable, asset write-offs would
Asset Retirement Obligations
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.
Goodwill Impairment Assessments
Duke Energy performed its annual goodwill impairment tests for all
reporting units as of August 31, 2020. 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, 2020, 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 2020 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, 2020, for each of
Duke Energy’s reporting units ranged from 5.2% to 5.7%. 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 11 to the Consolidated Financial
Statements, “Goodwill and Intangible Assets.”
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 2020,
Duke Energy Florida, closed an agreement for the accelerated decommissioning
of the Crystal River Unit 3 nuclear power station after receiving approval from
the NRC and FPSC. The retirement obligations for the decommissioning of
Crystal River Unit 3 nuclear power station are measured based on accelerated
decommissioning from 2020 continuing through 2027. 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 2020, the Hoosier
Environmental Council filed a Petition for Administrative Review with the Indiana
Office of Environmental Adjudication challenging the Indiana Department of
Environmental Management’s partial approval of Duke Energy Indiana’s ash pond
closure plan. Due to these challenges, in 2020, Duke Energy Indiana remeasured
and increased the closure estimates for certain coal ash impoundments.
For further information, see Notes 3, 4 and 9 to the Consolidated Financial
Statements, “Regulatory Matters,” “Commitments and Contingencies” and “Asset
Retirement Obligations.”
Long-Lived Asset Impairment Assessments, Excluding Regulated
Operations, and Equity Method Investments
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.
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 when conditions exist that
indicate that the fair value of the investment is less than book value. It 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.
45
PART II During 2020, Duke Energy evaluated recoverability of certain renewable
merchant plants due to declining market pricing and declining long-term
forecasted energy prices, primarily driven by lower forecasted natural gas
prices, capital cost of new renewables and increase renewable penetration. It
was determined the assets were all recoverable as the carrying value of the
assets approximated or exceeded the aggregate estimated future cash flows.
For further information, see Notes 2, 10 and 12 to the Consolidated
Financial Statements, “Business Segments,” “Property, Plant and Equipment”
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
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 and
the assumed discount rate applied to future projected benefit payments.
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, 2020, Duke Energy assumes pension and other
post-retirement plan assets will generate a long-term rate of return of 6.50%.
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 2.60% as of December 31, 2020. 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,
2020, 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 2020 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.
(in millions)
Effect on 2020 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, 2020:
Discount rate
Qualified and Non-
Qualified Pension Plans
Other Post-Retirement Plans
0.25%
(0.25)%
0.25%
(0.25)%
$ (21)
(9)
$ 21
9
(208)
213
$ (1)
—
(13)
$
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, 2020, the health care cost trend rate was 6.25%, trending
down to 4.75% by 2028. These plans are closed to new employees.
For further information, see Note 22 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 taxpayer through at least 2029. 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 the Tax Act
to Duke Energy’s cash flows and credit metrics are subject to the regulatory
actions of its state commissions and the FERC. See Note 3 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
46
PART II 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 6 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.
During March 2020, in response to market volatility and the ongoing
economic uncertainty related to COVID-19, Duke Energy took several actions to
enhance the company’s liquidity position including:
• Duke Energy drew down the remaining $500 million of availability
under the existing $1 billion Three-Year Revolving Credit Facility. That
additional borrowing was subsequently repaid during the second
quarter of 2020; and
• Duke Energy entered into and borrowed the full amount under a
$1.5 billion, 364-day Term Loan Credit Agreement. The Term Loan
Credit Agreement contained a provision for additional borrowing
capacity of $500 million. Duke Energy exercised the provision
and borrowed an additional $188 million, for a total borrowing of
approximately $1.7 billion. By November 2020, Duke Energy repaid the
entire borrowing under the 364-day Term Loan.
Following March 2020, access to credit and equity markets has
normalized. In addition to the March 2020 financings to address the company’s
liquidity position, for the year ended December 31, 2020, Duke Energy issued
approximately $5.6 billion in debt and raised approximately $2.9 billion of
common equity through equity forward agreements and the company’s dividend
reinvestment and ATM programs. A portion of the proceeds from the equity
forward settlements will be used to fully repay Duke Energy’s portion of the ACP
construction loan of approximately $860 million. Despite the recovery in capital
markets, Duke Energy continues to monitor access to credit and equity markets
amid the ongoing economic uncertainty related to COVID-19.
In addition to actions taken by the company, the CARES Act, enacted
in March 2020, as an emergency economic stimulus package in response to
the COVID-19 pandemic, included provisions providing relief to entities with
remaining AMT credit refund allowances. Through the CARES Act, Duke Energy
accelerated remaining AMT credit refund allowances and claimed a refund
in full for any AMT credit carryforwards. As a result, in the third quarter of
2020, Duke Energy received $572 million related to AMT credit carryforwards
and $19 million of interest income. See Note 23 to the Consolidated Financial
Statements, “Income Taxes,” for additional information.
As of December 31, 2020, Duke Energy had approximately $259 million
of cash on hand, $5.6 billion available under its $8 billion Master Credit Facility
and $500 million available under the $1 billion Three-Year Revolving Credit
Facility. Duke Energy expects to have sufficient liquidity in the form of cash on
hand, cash from operations and available credit capacity to support its funding
needs. Refer to Notes 6 and 19 to the Consolidated Financial Statements, “Debt
and Credit Facilities” and “Stockholders’ Equity,” respectively, for information
regarding Duke Energy’s debt and equity issuances, debt maturities and
available credit facilities including the Master Credit Facility.
Credit Facilities and Registration Statements
See Note 6 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.
47
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
2021
2022
2023
$
60
$
20
$
85
755
600
380
205
560
710
820
400
270
555
5,025
2,650
4,840
2,750
10,450
10,175
1,275
1,150
665
795
425
280
565
3,460
2,200
8,450
1,250
Commercial Renewables and Other
Total projected capital and investment expenditures
775
$ 10,475
1,075
$ 12,800
750
$12,075
DEBT MATURITIES
See Note 6 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.
DIVIDEND PAYMENTS
In 2020, Duke Energy paid quarterly cash dividends for the 94th
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 EPS, and expects this trend to continue through 2025. Duke
Energy increased the dividend by approximately 2% annually in both 2020 and
2019, and the company remains committed to continued growth of the dividend.
Dividend and Other Funding Restrictions of Duke Energy Subsidiaries
As discussed in Note 3 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, 2020, 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.
PART II 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.
As part of Duke Energy’s continued effort to improve its cash flows
from operations and liquidity, Duke Energy works with vendors to improve
terms and conditions, including the extension of payment terms. To support
this effort, Duke Energy established a supply chain finance program (the
“program”) in 2020, under which suppliers, at their sole discretion, may sell
their receivables from Duke Energy to the participating financial institution. The
financial institution administers the program. Duke Energy does not issue any
guarantees with respect to the program and does not participate in negotiations
between suppliers and the financial institution. Duke Energy does not have an
economic interest in the supplier’s decision to participate in the program and
receives no interest, fees or other benefit from the financial institution based
on supplier participation in the program. Suppliers’ decisions on which invoices
are sold do not impact Duke Energy’s payment terms, which are based on
commercial terms negotiated between Duke Energy and the supplier regardless
of program participation. A significant deterioration in the credit quality of Duke
Energy, economic downturn or changes in the financial markets could limit the
financial institutions willingness to participate in the program. Duke Energy
does not believe such risk would have a material impact on our cash flows from
operations or liquidity, as substantially all our payments are made outside the
program.
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).
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 2021, Duke Energy anticipates issuing additional securities of $8 billion
through debt capital markets. Additionally, Duke Energy may utilize other
instruments, including equity-content securities, such as preferred stock.
Proceeds will primarily be for the purpose of funding capital expenditures
and debt maturities. See to Note 6 to the Consolidated Financial Statements,
“Debt and Credit Facilities,” for further information regarding significant debt
issuances in 2020.
Duke Energy’s capitalization is balanced between debt and equity as
shown in the table below.
Equity
Debt
Projected 2021
Actual 2020
Actual 2019
44 %
56 %
44%
56%
44 %
56 %
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,
2020, 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. During January 2021, S&P downgraded the
issuer credit rating for Duke Energy (Parent) and all of its subsidiaries senior
unsecured debt, excluding Progress Energy, from A- to BBB+. Additionally,
S&P downgraded the credit rating for Duke Energy (Parent) and Progress
Energy senior unsecured debt from BBB+ to BBB. As part of the credit rating
report, S&P affirmed their credit rating on senior secured debt for Duke Energy
Carolinas, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio and
Duke Energy Indiana, while also affirming the short-term and commercial
paper credit ratings. These actions followed a December 2020, report by S&P
to revise the credit rating outlook from stable to negative for Duke Energy and
all its subsidiaries. As a result of the downgrade, credit rating outlooks returned
to stable. Additionally, during October 2020, Moody’s revised their credit rating
outlook for Duke Energy (Parent), Duke Energy Carolinas and Duke Energy
Progress from stable to negative and in February 2021, revised the credit rating
outlook for these same registrants to review for downgrade. The following table
includes Duke Energy and certain subsidiaries’ credit ratings and ratings outlook
as of February 2021.
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
Senior Unsecured 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
Review for Downgrade
Baa1
Baa1
P-2
Review for Downgrade
Aa2
A1
Stable
Baa1
Review for Downgrade
Aa3
A2
Stable
A1
A3
Stable
A2
Baa1
Stable
Aa3
A2
Stable
Baa1
Stable
A3
S&P
Stable
BBB+
BBB
A-2
Stable
A
BBB+
Stable
BBB
Stable
A
BBB+
Stable
A
BBB+
Stable
A
BBB+
Stable
A
BBB+
Stable
BBB+
Stable
BBB+
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.
48
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 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,
2020
2019
$
8,856
$
8,209
(10,604)
1,731
(11,957)
3,730
(17)
573
556
$
$
(18)
591
573
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
Payments for AROs
Refund of AMT credit carryforwards
Working capital
Net cash provided by operating activities
Years Ended December 31,
2020
2019
Variance
$
1,082
$
3,571
$
(2,489)
8,343
5,737
2,606
(610)
572
(531)
(746)
573
(926)
$
8,856
$
8,209
$
136
(1)
395
647
The variance was driven primarily by:
• a $117 million increase in net income after adjustment for non-cash
items primarily due to increases in current year non-cash adjustments,
partially offset by decreases in revenues due to lower sales volumes,
accelerated refund of fuel costs at Duke Energy Florida in response to
the COVID-19 pandemic and lower wholesale revenue driven by the
CCR Settlement Agreement;
• a $395 million decrease in cash outflows from working capital primarily
due to fluctuations in inventory levels, accounts payable levels and
lower income taxes paid in the current year; and
• a $136 million decrease 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
Years Ended December 31,
2020
2019
Variance
$ (10,144)
$ (11,435) $
1,291
(62)
(398)
(5)
(517)
(57)
119
$ (10,604)
$ (11,957) $
1,353
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 decrease relates primarily to decreases in capital expenditures due to lower overall investments in the Electric
Utilities and Infrastructure, Gas Utilities and Infrastructure and Commercial Renewables segments.
(in millions)
Electric Utilities and Infrastructure
Gas Utilities and Infrastructure
Commercial Renewables
Other
Total capital, investment and acquisition expenditures, net of return of investment capital
49
Years Ended December 31,
2020
2019
Variance
$
7,629
$
8,258 $
1,309
1,075
264
1,533
1,423
221
(629)
(224)
(348)
43
$ 10,277
$
11,435 $
(1,158)
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.
(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
Years Ended December 31,
2020
2019
Variance
$
2,745
$
384
$
2,361
—
1,824
(319)
(2,812)
426
(133)
1,962
3,615
(380)
(2,668)
843
(26)
(1,962)
(1,791)
61
(144)
(417)
(107)
$
1,731
$
3,730
$
(1,999)
The variance was driven primarily by:
Partially offset by:
• a $1,962 million decrease in proceeds from the issuance of preferred
• a $2,361 million increase in proceeds from the issuance of common
stock;
stock, primarily from the settlement of equity forwards.
• a $1,791 million net decrease in proceeds from issuances of long-term
debt primarily due to timing of issuances and redemptions of long-term
debt; and
• a $417 million decrease in contributions from noncontrolling interests,
primarily due to $415 million related to the sale of a noncontrolling
interest in the Commercial Renewables segment in 2019.
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 nonperformance risk by third parties for which Duke Energy
has issued guarantees. See Note 7 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.
Other than the guarantee arrangements discussed above 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 17 to the Consolidated Financial Statements, “Variable
Interest Entities.”
50
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, 2020.
(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
(2021)
4,110
2,099
186
229
3,489
8,850
20
12
18,995
$
$
2-3 years
(2022 &
2023)
8,011
3,898
347
414
4,248
974
40
24
17,956
$
$
4-5 years
(2024 &
2025)
4,408
3,577
170
348
2,998
52
40
24
11,617
$
$
More than
5 years
(2026 &
beyond)
41,605
24,284
762
870
$
5,856
40
263
340
74,020
$
$
Total
58,134
33,858
1,465
1,861
16,591
9,916
363
400
$ 122,588
(a) See Note 6 to the Consolidated Financial Statements, “Debt and Credit Facilities.”
(b)
(c) See Note 5 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, 2020, 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, 2020, 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 17 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 9 to the Consolidated Financial Statements, “Asset Retirement Obligations.”
(i) Related to Commercial Renewables wind facilities.
(j) Unrecognized tax benefits of $125 million are not reflected in this table as Duke Energy cannot predict when open income tax years will close with completed examinations. See Note 23 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 4 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 4 to the Consolidated Financial Statements, “Commitments and Contingencies”), funding of pension and other post-retirement benefit plans (see Note 22 to the Consolidated
Financial Statements, “Employee Benefit Plans”), AROs, including ash management expenditures (see Note 9 to the Consolidated Financial Statements, “Asset Retirement Obligations”) and regulatory liabilities (see Note 3
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
51
PART II
size, length, market liquidity, market conditions, 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 14 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 nonregulated
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, 6, 14 and 16 to the Consolidated
Financial Statements, “Summary of Significant Accounting Policies,” “Debt and
Credit Facilities,” “Derivatives and Hedging,” and “Fair Value Measurements.”
Duke Energy had $7.6 billion of unhedged long- and short-term floating
interest rate exposure at December 31, 2020. The impact of a 100-basis point
change in interest rates on pretax income is approximately $76 million at
December 31, 2020. 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, 2020.
Certain Duke Energy Registrants have variable-rate debt and manage
interest rate risk by entering into financial contracts including interest rate
swaps. See Notes 6 and 14 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 14 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 nonperformance. The Duke Energy Registrants’ frequently
require guarantees or letters of credit from suppliers to mitigate this credit risk.
52
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, payment patterns and the impact of current economic
conditions on customers’ ability to pay their outstanding balance to ensure the
adequacy of bad debt reserves.
In response to the COVID-19 pandemic, in March 2020, the Duke Energy
Registrants announced a suspension of disconnections for nonpayment to
be effective throughout the national emergency. While disconnections have
resumed, the company continues to offer flexible options to customers struggling
with the pandemic and the economic fallout, including extended payment
arrangements to satisfy delinquent balances. In addition, the Duke Energy
Registrants are monitoring the effects of the resultant economic slowdown on
counterparties’ abilities to perform under their contractual obligations. The
Duke Energy Registrants have observed a significant increase in utility account
arrears, which were roughly double historical levels as of December 31, 2020.
There is an expectation of an increase in charge-offs in the future. See Notes 1,
3 and 18 to the Consolidated Financial Statements, “Summary of Significant
Accounting Policies,” “Regulatory Matters” and “Revenue,” respectively, for
more information. 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 17 to the Consolidated
Financial Statements, “Variable Interest Entities.”
The Duke Energy Registrants provide certain non-tariff services, primarily
to large commercial and industrial customers in which incurred costs, including
invested capital, are intended to be recovered from the individual customer
and therefore are not subject to rate recovery in the event of customer default.
Customer creditworthiness is assessed prior to entering into these transactions.
Credit concentration related to these transactions exists for certain of these
customers.
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 4 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 7 to
53
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 nonperformance by any
counterparty.
Marketable Securities Price Risk
As described further in Note 15 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 22 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, 2020, 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 funds will
ultimately impact the amount of costs recovered through retail and wholesale
rates. See Note 9 to the Consolidated Financial Statements, “Asset Retirement
Obligations,” for additional information regarding nuclear decommissioning
costs. See Note 15 to the Consolidated Financial Statements, “Investments in
Debt and Equity Securities,” for additional information regarding NDTF assets.
PART II OTHER MATTERS
Environmental Regulations
Coal Ash Management Act of 2014
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.
On May 14, 2020, the five-year probation period following the Dan
River coal ash spill ended. The court-appointed monitor confirmed in U.S.
District Court for the Eastern District of North Carolina that Duke Energy met or
exceeded every obligation throughout the process. Separately, in a final report to
the EPA, it was noted that the company made significant enhancements to its
Ethics and Compliance Program and its environmental compliance programs.
The following sections outline various proposed and recently enacted
legislation and regulations that may impact the Duke Energy Registrants. Refer
to Note 3 to the Consolidated Financial Statements, “Regulatory Matters,” for
further information regarding potential plant retirements and regulatory filings
related to the Duke Energy Registrants.
Coal Combustion Residuals
In April 2015, 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.
On July 17, 2018, EPA issued a final rule (Phase 1, Part 1) revising
certain closure deadlines and groundwater protection standards in the CCR
rule. The rule 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 U.S. Court of Appeals
for the District of Columbia (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. To date, EPA has finalized two notice-and-comment
rulemakings to implement the court’s decision on remand. The “Part A” rule,
which was promulgated on August 28, 2020, establishes an April 11, 2021
deadline to cease placement of CCR and non-CCR waste streams into unlined
ash basins and initiate closure, and the “Part B” rule, which was promulgated
on November 12, 2020, establishes procedures to allow facilities to request
approval to operate an existing CCR surface impoundment with an alternate
liner. A future rulemaking is expected to address legacy impoundments. Duke
Energy does not expect these rulemakings to have a material impact in light of
its progress in closing CCR units across the enterprise.
In addition to the requirements of the federal CCR rule, CCR landfills and
surface impoundments will continue to be regulated by the 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 3 and 9 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, 2020, and December 31, 2019,
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.
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 approximately $8 billion to
$9 billion of which approximately $2.8 billion has been spent through 2020.
The majority of the remaining spend is expected to occur over the next
15 to 20 years.
Duke Energy has completed excavation of all coal ash at the Riverbend,
Dan River and Sutton plants.
For further information on ash basins and recovery, see Notes 3 and 9
to the Consolidated Financial Statements, “Regulatory Matters” and “Asset
Retirement Obligations,” respectively.
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:
• CWA
• Steam Effluent Limitation Guidelines
• Cross-State Air Pollution Rule
54
PART II 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 five 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 nitrogen oxide 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. On May 19, 2020, the U.S. Court of Appeals for the D.C. Circuit
issued its decision, finding, with one exception, that EPA reasonably denied
the Maryland petition. The court remanded one issue to EPA regarding target
sources lacking catalytic controls. All of the Duke Energy units targeted have
selective catalytic reduction, so the decision is favorable for these units.
A different panel of the same court heard oral argument in New York’s
appeal of EPA’s denial of its Section 126 Petition on May 7, 2020, and on July 14,
2020, the panel issued its decision remanding the Petition to EPA for further
review. The Duke Energy Registrants cannot predict the outcome of this matter.
North Carolina Clean Energy Plan (NCCEP)
On October 29, 2018, Governor Roy Cooper signed an executive order
calling for a 40% reduction in statewide greenhouse gas emissions by 2025.
The order tasked the NCDEQ with developing a clean energy plan for North
Carolina. In October 2019, the NCDEQ published its plan, which includes the
reduction of electric power sector greenhouse gas emissions by 70% below
2005 levels by 2030 and attainment of carbon neutrality by 2050, fostering
long-term energy affordability and price stability for North Carolina’s residents
and businesses by modernizing regulatory and planning processes, and
acceleration of clean energy innovation to create economic opportunities for
both rural and urban areas. Duke Energy Carolinas and Duke Energy Progress
are significant stakeholders in this process. The magnitude and timing of
investment in response to the NCCEP will depend on the speed of adoption
and consensus developed by other stakeholders on how best to successfully
transition to this clean energy future while establishing a regulatory model that
incentivizes business decisions that benefit both the utilities and the public. The
Duke Energy Registrants cannot predict the outcome of this matter.
Global Climate Change
On September 17, 2019, Duke Energy announced an updated climate
strategy with new goals of at least 50% reduction in carbon emissions from
electric generation by 2030 and net-zero carbon emissions from electric
generation by 2050. On October 9, 2020, Duke Energy announced a new goal to
achieve net-zero methane emissions from its natural gas distribution system by
2030. 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. Future levels of CO2 emissions will be influenced by variables
that include economic conditions that affect electricity demand, fuel prices,
market prices, compliance with new or existing regulations and the technologies
deployed to generate the electricity necessary to meet 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
51 coal-fired electric generating units with a combined generating capacity of
6,539 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
ensure continued operations of its zero-CO2 emissions hydropower and nuclear
plants. These efforts have diversified its system and significantly reduced
CO2 emissions. Between 2005 and 2020, the Duke Energy Registrants have
collectively lowered the CO2 emissions from their electricity generation by more
than 40%, 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, carbon capture, utilization and
sequestration, the use of hydrogen and other low-carbon fuels and advanced
nuclear. Duke Energy will adjust to evolving and innovative technologies in a way
that balances the reliability and affordability that meet regulatory requirements
and customer demands. 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 that scientists 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 with
any certainty any potential future financial risk to the Duke Energy Registrants’
operations difficult.
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 stakeholder input as well as 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.
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 transmission and
distribution systems and natural gas facilities. The steps include 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
and natural gas facilities are designed to withstand extreme weather events
without significant damage. The Duke Energy Registrants maintain inventories of
coal, oil and liquified natural gas 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 and/or natural gas.
55
PART II State Legislation
In 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 renewable energy
through a competitive bidding process administered by an independent third
party and recovery of costs related to the competitive bidding process through
a competitive procurement rider. The process used was approved by the NCUC
to select projects that would deliver the lowest cost of renewable energy for
customers.
In accordance with the provisions of House Bill 589, Duke Energy
estimates the total competitive procurement will be approximately 1,185 to
1,385 MW. Duke Energy will own or purchase at least 1,185 MW of energy
from renewable energy projects under the North Carolina’s CPRE program. Two
tranches of the CPRE process have been completed with contracts executed
for winning proposals. Five Duke Energy projects, totaling about 190 MW,
were selected during the first tranche and none were selected during the
second tranche. Two of the Duke Energy winning projects achieved commercial
operation in December 2020 and the remaining three will be online by the third
quarter 2021. The need for a third tranche of CPRE will be determined prior to
November 2021.
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.
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.”
56
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...........................................................
58
60
61
62
64
66
67
69
70
71
72
73
75
76
77
78
79
81
82
83
84
85
87
88
89
90
91
93
94
95
96
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 – Business Segments .....................................................................................
Note 3 – Regulatory Matters ......................................................................................
Note 4 – Commitments and Contingencies ................................................................
Note 5 – Leases ........................................................................................................
Note 6 – Debt and Credit Facilities ............................................................................
Note 7 – Guarantees and Indemnifications ................................................................
Note 8 – Joint Ownership of Generating and Transmission Facilities...........................
Note 9 – Asset Retirement Obligations .......................................................................
Note 10 – Property, Plant and Equipment ..................................................................
Note 11 – Goodwill and Intangible Assets ..................................................................
Note 12 – Investments in Unconsolidated Affiliates ...................................................
Note 13 – Related Party Transactions ........................................................................
Note 14 – Derivatives and Hedging ............................................................................
Note 15 – Investments in Debt and Equity Securities .................................................
Note 16 – Fair Value Measurements ..........................................................................
Note 17 – Variable Interest Entities ............................................................................
Note 18 – Revenue ....................................................................................................
Note 19 – Stockholders' Equity ..................................................................................
Note 20 – Severance .................................................................................................
Note 21 – Stock-Based Compensation.......................................................................
Note 22 – Employee Benefit Plans .............................................................................
Note 23 – Income Taxes.............................................................................................
Note 24 – Other Income and Expenses, Net ...............................................................
Note 25 – Subsequent Events ....................................................................................
97
99
100
101
102
103
105
106
107
108
109
117
121
142
147
151
157
158
158
161
163
164
166
167
172
177
183
187
192
194
195
196
210
217
217
57
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, 2020 and
2019, 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, 2020, 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, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in
the period ended December 31, 2020, 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, 2020, 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 25, 2021, 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 Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or
required to be communicated to the audit committee and that (1) relates 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 matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
Regulatory Matters — Impact of Rate Regulation on the Financial Statements — Refer to Notes 1, 3, and 9 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, 2020, the Company has approximately $14 billion recorded as regulatory assets.
The Company’s rates are subject to regulatory rate-setting processes and annual earnings oversight. Rates charged to customers are determined and approved
in regulatory proceedings based on an analysis of the Company’s costs to provide utility service and a return on the Company’s investment in the utility business.
Regulatory decisions can have an impact on the recovery of costs, the rate of return earned on investment and the timing and amount of assets to be recovered by
rates. The regulation of rates is premised on the full recovery of prudently incurred costs and a reasonable rate of return on invested capital. As discussed in Note 3,
regulatory proceedings in recent years in North Carolina and South Carolina have focused on the recoverability of asset retirement obligations specific to coal ash. As
a result, assessing the potential outcomes of future regulatory orders in North Carolina and South Carolina requires significant management judgment.
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.
58
PART II 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 precedents of the Commissions’ treatment of similar
costs under similar circumstances. We evaluated the external information and compared it 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 evaluated the reasonableness of management’s judgments regarding the recoverability of regulatory asset balances by performing the following:
◦ We inquired of management regarding changes in regulatory orders and regulatory asset balances during the year.
◦ We evaluated the reasonableness of such changes based on our knowledge of commission-approved amortization, expected incurred costs, and recently
approved regulatory orders, as applicable.
◦ We utilized trend analyses to evaluate the historical consistency of regulatory asset balances.
◦ We compared the recorded regulatory asset balance to an independently developed expectation of the corresponding balance.
• We obtained an analysis from management and letters from internal legal counsel for asset retirement obligations specific to coal ash costs, regarding
probability of recovery for deferred costs not yet addressed in a regulatory order to assess management’s assertion that amounts are probable of recovery.
• We obtained representation from management asserting that regulatory assets recorded on the financial statements are probable of recovery.
/s/ Deloitte & Touche LLP
Charlotte, North Carolina
February 25, 2021
We have served as the Company’s auditor since 1947.
59
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
Gains (Losses) on Sales of Other Assets and Other, net
Operating Income
Other Income and Expenses
Equity in (losses) 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 (Benefit) Expense From Continuing Operations
Income From Continuing Operations
Income (Loss) From Discontinued Operations, net of tax
Net Income
Add: Net Loss Attributable to Noncontrolling Interests
Net Income Attributable to Duke Energy Corporation
Less: Preferred Dividends
Years Ended December 31,
2020
2019
2018
$ 21,461
1,642
765
$22,615
1,759
705
$22,097
1,773
651
23,868
25,079
24,521
6,051
460
5,788
4,705
1,337
984
6,826
627
6,066
4,548
1,307
(8)
6,831
697
6,463
4,074
1,280
402
19,325
19,366
19,747
10
4,553
(2,005)
453
(1,552)
2,162
839
(236)
1,075
7
1,082
295
1,377
107
(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
—
Net Income Available to Duke Energy Corporation Common Stockholders
$ 1,270
$ 3,707
$ 2,666
Earnings Per Share – Basic and Diluted
Income from continuing operations available to Duke Energy Corporation common stockholders
Basic and Diluted
Income (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
Weighted average shares outstanding
Basic
Diluted
See Notes to Consolidated Financial Statements
$
$
$
1.71
$
5.07
0.01
$ (0.01)
1.72
$
5.06
$
$
$
737
738
729
729
3.73
0.03
3.76
708
708
60
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 on cash flow hedges
Reclassification into earnings from cash flow hedges
Unrealized gains (losses) on available-for-sale securities
Other Comprehensive Loss, net of tax
Comprehensive Income
Add: Comprehensive Loss Attributable to Noncontrolling Interests
Comprehensive Income Attributable to Duke Energy Corporation
Less: Preferred Dividends
Years Ended December 31,
2020
2019
2018
$1,082
$3,571
$2,644
6
(138)
11
3
(118)
964
306
1,270
107
9
(47)
6
8
(24)
3,547
177
3,724
41
(6)
(10)
6
(3)
(13)
2,631
22
2,653
—
Comprehensive Income Available to Duke Energy Corporation Common Stockholders
$1,163
$3,683
$ 2,653
(a) Net of income tax impacts of approximately $35 million for the year ended December 31, 2020. Tax impacts are immaterial for other periods presented.
See Notes to Consolidated Financial Statements
61
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 $29 at 2020 and $22 at 2019)
Receivables of VIEs (net of allowance for doubtful accounts of $117 at 2020 and $54 at 2019)
Inventory
Regulatory assets (includes $53 at 2020 and $52 at 2019 related to VIEs)
Other (includes $296 at 2020 and $242 at 2019 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 $937 at 2020 and $989 at 2019 related to VIEs)
Nuclear decommissioning trust funds
Operating lease right-of-use assets, net
Investments in equity method unconsolidated affiliates
Other (includes $81 at 2020 and $110 at 2019 related to VIEs)
Total other noncurrent assets
Total Assets
See Notes to Consolidated Financial Statements
December 31,
2020
2019
$
259
1,009
2,144
3,167
1,641
462
8,682
$
311
1,066
1,994
3,232
1,796
764
9,163
155,580
(48,827)
29
147,654
(45,773)
246
106,782
102,127
19,303
12,421
9,114
1,524
961
3,601
46,924
19,303
13,222
8,140
1,658
1,936
3,289
47,548
$162,388
$ 158,838
62
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 $472 at 2020 and $216 at 2019 related to VIEs)
Asset retirement obligations
Regulatory liabilities
Other
Total current liabilities
Long-Term Debt (includes $3,535 at 2020 and $3,997 at 2019 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 $316 at 2020 and $228 at 2019 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 2020 and 2019
Preferred stock, Series B, $0.001 par value, 1 million shares authorized and outstanding at 2020 and 2019
Common stock, $0.001 par value, 2 billion shares authorized; 769 million shares outstanding at 2020 and 733 million shares outstanding at 2019
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,
2020
2019
$
3,144
2,873
482
537
4,238
718
1,377
2,936
16,305
55,625
9,244
12,286
15,029
1,340
969
687
1,719
41,274
973
989
1
43,767
2,471
(237)
47,964
1,220
49,184
$
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
$162,388
$158,838
63
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 in losses (earnings) of unconsolidated affiliates
Equity component of AFUDC
(Gains) Losses on sales of other assets
Impairment charges
Deferred income taxes
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,
2020
2019
2018
$ 1,082
$ 3,571
$ 2,644
5,486
2,005
(154)
(10)
984
54
(610)
—
(22)
572
63
(56)
66
205
(21)
117
(65)
(398)
(442)
5,176
(162)
(139)
4
(8)
806
(746)
—
60
573
(48)
78
(122)
10
(164)
(224)
172
(559)
(69)
8,856
8,209
(9,907)
(370)
133
(8,011)
7,949
(398)
(11,122)
(324)
11
(3,348)
3,343
(517)
4,696
(83)
(221)
88
402
1,079
(533)
(105)
425
—
22
(345)
156
(721)
479
23
270
(1,062)
(28)
7,186
(9,389)
(416)
137
(3,762)
3,747
(377)
See Notes to Consolidated Financial Statements
(10,604)
(11,957)
(10,060)
64
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 income taxes
Significant non-cash transactions:
Accrued capital expenditures
Non-cash dividends
See Notes to Consolidated Financial Statements
Years Ended December 31,
2020
2019
2018
$ 6,330
—
2,745
(4,506)
3,009
(2,147)
(1,181)
426
(2,812)
(133)
$ 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)
1,731
3,730
2,960
(17)
573
(18)
591
$
556
$
573
$
86
505
591
$ 2,186
(585)
$ 2,195
(651)
$ 2,086
(266)
1,116
110
1,356
108
1,112
107
65
PART II DUKE ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Duke Energy Corporation Stockholders’
Accumulated Other Comprehensive
Income (Loss)
(in millions)
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
Total
Duke Energy
Corporation
Stockholders’
Equity
Pension and
OPEB
Adjustments
Noncontrolling
Interests
Total
Equity
Balance at December 31, 2017 $ —
700 $
1
$ 38,792 $ 3,013
$ (10)
$
12
$
(69)
$ 41,739
$
(2) $ 41,737
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(a)
—
—
—
—
—
—
—
—
27
—
—
—
—
—
—
—
—
—
—
—
2,666
—
2,003
—
—
(2,578)
—
—
—
12
—
(4)
—
—
—
—
Balance at December 31, 2018 $ —
727 $
1
$ 40,795 $ 3,113
$ (14)
$
Net income
Other comprehensive (loss)
Income
Preferred stock, Series A,
issuances, net of issuance
costs(b)
Preferred stock, Series B, issu-
—
—
973
ances, net of issuance costs(b)
989
Common stock issuances,
including dividend reinvest-
ment and employee benefits
Common stock dividends
Sale of noncontrolling interest(c)
Contribution from noncontrolling
interest(f)
Distributions to noncontrolling
interest in subsidiaries
Other(d)
—
—
—
—
—
—
—
—
—
—
6
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3,707
—
—
—
—
—
—
552
—
(466)
—
(2,735)
—
—
—
—
—
—
23
—
(41)
—
—
—
—
10
—
—
(6)
Balance at December 31, 2019 $ 1,962
733 $
1
$ 40,881 $ 4,108
$ (51)
$
Net income
Other comprehensive (loss)
income
Common stock issuances,
including dividend reinvest-
ment and employee benefits
Common stock dividends
Contribution from noncontrolling
interest, net of transaction
costs(f)
Distributions to noncontrolling
interests in subsidiaries
Other(e)
—
—
—
—
—
—
—
—
—
36
—
—
—
—
—
—
—
—
—
—
—
—
1,270
—
—
—
(116)
2,902
—
—
(2,815)
(17)
—
1
—
—
(92)
—
—
—
—
—
—
(3)
—
—
—
(12)
(3)
—
8
—
—
—
—
—
—
—
(2)
3
—
3
—
—
—
—
—
$
$
—
(6)
—
—
—
—
(75)
—
9
—
—
—
—
—
—
—
(16)
(82)
—
6
—
—
—
—
—
2,666
(13)
2,003
(2,578)
—
—
(22)
—
2,644
(13)
—
—
(1)
42
2,003
(2,578)
(1)
42
$ 43,817
$
17 $ 43,834
3,707
(177)
3,530
(24)
973
989
552
(2,735)
(456)
—
—
(1)
—
(24)
—
—
973
989
—
—
863
552
(2,735)
407
428
428
(4)
2
(4)
1
$ 46,822
$ 1,129 $ 47,951
1,270
(107)
2,902
(2,815)
(17)
—
(91)
(295)
975
(11)
(118)
—
—
2,902
(2,815)
426
409
(30)
1
(30)
(90)
Balance at December 31, 2020 $ 1,962
769 $
1
$ 43,767 $ 2,471
$ (167)
$
6
$
(76)
$ 47,964
$ 1,220 $ 49,184
(a) 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.
(b) Duke Energy issued 40 million depositary shares of preferred stock, Series A, in the first quarter of 2019 and 1 million shares of preferred stock, Series B, in the third quarter of 2019.
(c) See Note 1 for additional discussion of the transaction.
(d) 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.
(e) Amounts in Retained earnings primarily represent impacts due to implementation of a new accounting standard related to Current Estimated Credit Losses. See Note 1 for additional discussion.
(f) Relates to tax equity financing activity in the Commercial Renewables segment.
See Notes to Consolidated Financial Statements
66
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, 2020
and 2019, 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, 2020, 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, 2020 and 2019, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 2020, 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.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or
required to be communicated to the audit committee and that (1) relates 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 matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
Regulatory Matters — Impact of Rate Regulation on the Financial Statements — Refer to Notes 1, 3, and 9 to the financial statements.
Critical Audit Matter Description
The Company is subject to rate regulation by the North Carolina Utilities Commission and by the South Carolina Public Service Commission (collectively the
“Commissions”), which have jurisdiction with respect to the electric rates of the Company. 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, 2020, the Company has approximately $3.5 billion recorded as regulatory assets.
The Company’s rates are subject to regulatory rate-setting processes and annual earnings oversight. Rates charged to customers are determined and approved
in regulatory proceedings based on an analysis of the Company’s costs to provide utility service and a return on the Company’s investment in the utility business.
Regulatory decisions can have an impact on the recovery of costs, the rate of return earned on investment and the timing and amount of assets to be recovered by
rates. The regulation of rates is premised on the full recovery of prudently incurred costs and a reasonable rate of return on invested capital. As discussed in Note 3,
regulatory proceedings in recent years in North Carolina and South Carolina have focused on the recoverability of asset retirement obligations specific to coal ash. As
a result, assessing the potential outcomes of future regulatory orders in North Carolina and South Carolina requires significant management judgment.
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.
67
PART II 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 precedents of the Commissions’ treatment of similar
costs under similar circumstances. We evaluated the external information and compared it 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 evaluated the reasonableness of management’s judgments regarding the recoverability of regulatory asset balances by performing the following:
˚ We inquired of management regarding changes in regulatory orders and regulatory asset balances during the year.
˚ We evaluated the reasonableness of such changes based on our knowledge of commission-approved amortization, expected incurred costs, and recently
approved regulatory orders, as applicable.
˚ We utilized trend analyses to evaluate the historical consistency of regulatory asset balances.
˚ We compared the recorded regulatory asset balance to an independently developed expectation of the corresponding balance.
• We obtained an analysis from management and letters from internal legal counsel for asset retirement obligations specific to coal ash costs, regarding
probability of recovery for deferred costs not yet addressed in a regulatory order to assess management’s assertion that amounts are probable of recovery.
• We obtained representation from management asserting that regulatory assets recorded on the financial statements are probable of recovery.
/s/ Deloitte & Touche LLP
Charlotte, North Carolina
February 25, 2021
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
Gains (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
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,
2020
2019
2018
$ 7,015
$ 7,395
$ 7,300
1,682
1,743
1,462
299
476
5,662
1
1,354
177
487
1,044
88
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
$ 956
$ 1,403
$ 1,071
—
—
—
—
1
1
$ 956
$ 1,403
$ 1,072
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 $1 at 2020 and $3 at 2019)
Receivables of VIEs (net of allowance for doubtful accounts of $22 at 2020 and $7 at 2019)
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,
2020
2019
$
21
247
696
124
1,010
473
20
2,591
$
18
324
642
114
996
550
21
2,665
50,640
(17,453)
48,922
(16,525)
33,187
32,397
2,996
4,977
110
1,187
9,270
3,360
4,359
123
1,149
8,991
$ 45,048
$ 44,053
$ 1,000
199
506
76
117
506
264
473
546
3,687
11,412
300
3,842
5,086
6,535
97
73
236
626
$
954
210
29
46
115
458
206
255
611
2,884
11,142
300
3,921
5,528
6,423
102
84
231
627
16,495
16,916
13,161
(7)
13,154
12,818
(7)
12,811
$ 45,048
$ 44,053
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
(Gains) Losses on sales of other assets
Impairment charges
Deferred income taxes
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
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 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 paid for income taxes
Significant non-cash transactions:
Accrued capital expenditures
See Notes to Consolidated Financial Statements
71
Years Ended December 31,
2020
2019
2018
$
956
$ 1,403
$ 1,071
1,731
(62)
(1)
476
(260)
(162)
(5)
(4)
52
(10)
(14)
209
55
(11)
30
(56)
(101)
(47)
1,671
(42)
—
17
133
(278)
36
(8)
(21)
68
(48)
(73)
(50)
(20)
(127)
127
(42)
(37)
1,487
(73)
1
192
305
(230)
182
2
(86)
(87)
25
(161)
168
21
(65)
89
(221)
(90)
2,776
2,709
2,530
(2,669)
(1,602)
1,602
(164)
(2,833)
(2,714)
(1,658)
1,658
(204)
(2,918)
998
(813)
477
(600)
(2)
60
3
18
21
481
321
365
$
$
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
$
$
PART II DUKE ENERGY CAROLINAS, LLC
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in millions)
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
Net income
Distributions to parent
Other(a)
Balance at December 31, 2020
(a) Amounts primarily represent impacts due to implementation of a new accounting standard related to Credit Losses. See Note 1 for additional discussion.
See Notes to Consolidated Financial Statements
Accumulated Other
Comprehensive
Loss
Net Gains
(Losses) on
Cash Flow
Hedges
Total
Equity
$
(7)
$11,361
—
1
—
1,071
1
(750)
$
(6)
$11,683
—
—
(1)
1,403
(275)
—
$
(7)
$12,811
—
—
—
956
(600)
(13)
Member’s
Equity
$11,368
1,071
—
(750)
$11,689
1,403
(275)
1
$12,818
956
(600)
(13)
$13,161
$
(7)
$13,154
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, 2020 and 2019,
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, 2020, 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, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in
the period ended December 31, 2020, 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.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or
required to be communicated to the audit committee and that (1) relates 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 matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
Regulatory Matters — Impact of Rate Regulation on the Financial Statements — Refer to Notes 1, 3, and 9 to the financial statements.
Critical Audit Matter Description
The Company is subject to rate regulation by the North Carolina Utilities Commission, South Carolina Public Service Commission and Florida Public Service
Commission (collectively the “Commissions”), which have jurisdiction with respect to the electric rates of the Company. 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, 2020, the Company has approximately $6.5 billion recorded as regulatory assets.
The Company’s rates are subject to regulatory rate-setting processes and annual earnings oversight. Rates charged to customers are determined and approved
in regulatory proceedings based on an analysis of the Company’s costs to provide utility service and a return on the Company’s investment in the utility business.
Regulatory decisions can have an impact on the recovery of costs, the rate of return earned on investment and the timing and amount of assets to be recovered by
rates. The regulation of rates is premised on the full recovery of prudently incurred costs and a reasonable rate of return on invested capital. As discussed in Note 3,
regulatory proceedings in recent years in North Carolina and South Carolina have focused on the recoverability of asset retirement obligations specific to coal ash. As
a result, assessing the potential outcomes of future regulatory orders in North Carolina and South Carolina requires significant management judgment.
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.
73
PART II 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 precedents of the Commissions’ treatment of similar
costs under similar circumstances. We evaluated the external information and compared it 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 evaluated the reasonableness of management’s judgments regarding the recoverability of regulatory asset balances by performing the following:
˚ We inquired of management regarding changes in regulatory orders and regulatory asset balances during the year.
˚ We evaluated the reasonableness of such changes based on our knowledge of commission-approved amortization, expected incurred costs, and recently
approved regulatory orders, as applicable.
˚ We utilized trend analyses to evaluate the historical consistency of regulatory asset balances.
˚ We compared the recorded regulatory asset balance to an independently developed expectation of the corresponding balance.
• We obtained an analysis from management and letters from internal legal counsel for asset retirement obligations specific to coal ash costs, regarding
probability of recovery for deferred costs not yet addressed in a regulatory order to assess management’s assertion that amounts are probable of recovery.
• We obtained representation from management asserting that regulatory assets recorded on the financial statements are probable of recovery.
/s/ Deloitte & Touche LLP
Charlotte, North Carolina
February 25, 2021
We have served as the Company’s auditor since 1930.
74
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 (losses) gains 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,
2020
2019
2018
$10,627
$11,202
$10,728
3,479
2,479
1,818
545
495
8,816
9
1,820
129
790
1,159
113
1,046
1
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
$ 1,045
$ 1,327
$ 1,027
$ 1,046
$ 1,327
$ 1,033
(1)
5
(1)
3
2
5
1
8
1,049
1
1,335
—
5
6
(1)
10
1,043
6
$ 1,048
$ 1,335
$ 1,037
75
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 $8 at 2020 and $7 at 2019)
Receivables of VIEs (net of allowance for doubtful accounts of $29 at 2020 and $9 at 2019)
Receivables from affiliated companies
Notes receivable from affiliated companies
Inventory
Regulatory assets (includes $53 at 2020 and $52 at 2019 related to VIEs)
Other (includes $39 at 2020 and 2019 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 $937 at 2020 and $989 at 2019 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 $305 at 2020 and $54 at 2019 related to VIEs)
Asset retirement obligations
Regulatory liabilities
Other
Total current liabilities
Long-Term Debt (includes $1,252 at 2020 and $1,632 at 2019 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 2020 and 2019
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
76
December 31,
2020
2019
$
59
228
901
157
—
1,375
758
109
3,587
57,892
(18,368)
29
39,553
3,655
5,775
4,137
690
1,227
$
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
15,484
15,620
$ 58,624
$ 57,694
$
919
289
2,969
121
202
1,426
283
640
793
7,642
17,688
150
4,396
5,866
5,051
623
505
462
$
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
16,903
17,241
—
9,143
7,109
(15)
—
9,143
6,465
(18)
16,237
15,590
4
3
16,241
15,593
$ 58,624
$ 57,694
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
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 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
77
Years Ended December 31,
2020
2019
2018
$ 1,046
$ 1,327
$ 1,033
2,327
(42)
(9)
495
(197)
(384)
2
(9)
(69)
(81)
49
223
(62)
(21)
75
139
(128)
(177)
2,207
(66)
—
(24)
433
(412)
15
(34)
47
81
62
184
(4)
(50)
(74)
25
(341)
(167)
1,987
(104)
(24)
87
358
(230)
122
18
(207)
(137)
121
(12)
217
109
8
129
(896)
(35)
3,177
3,209
2,544
(3,488)
(5,998)
6,010
164
(160)
(3,472)
1,791
(2,157)
1,148
(400)
(13)
369
74
126
200
819
149
363
$
$
(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
$
$
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, 2017
$ 9,143
$ 4,350
$
(18)
$
5
$ (12)
$ 13,468
$ (3)
$ 13,465
Net income
Other comprehensive income (loss)
Distributions to noncontrolling interests
Dividends to parent
Other(a)
—
—
—
—
—
1,027
—
—
(250)
4
Balance at December 31, 2018
$ 9,143
$ 5,131
$
Net income
Other comprehensive income
Other(b)
—
—
—
1,327
—
7
—
6
—
—
—
(12)
—
5
(3)
Net income
Other comprehensive income (loss)
Dividends to parent
Other
—
—
—
—
1,045
—
(400)
(1)
Balance at December 31, 2020
$ 9,143
$ 7,109
$
—
5
—
—
(5)
—
(1)
—
—
(5)
—
5
—
—
—
$ (1)
$
(7)
—
1
(1)
—
(1)
—
—
—
2
(2)
(7)
—
(1)
—
—
1,027
10
—
(250)
(1)
$ 14,254
1,327
8
1
6
—
(1)
—
1
1,033
10
(1)
(250)
—
$
3
$ 14,257
—
—
—
1,327
8
1
$ 15,590
$
3
$ 15,593
1,045
3
(400)
(1)
1
—
—
—
1,046
3
(400)
(1)
$ (2)
$
(8)
$ 16,237
$
4
$ 16,241
Balance at December 31, 2019
$ 9,143
$ 6,465
$
(10)
$ (1)
$
(a) 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.
(b) 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
78
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, 2020
and 2019, 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, 2020, 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, 2020 and 2019, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 2020, 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.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or
required to be communicated to the audit committee and that (1) relates 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 matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
Regulatory Matters — Impact of Rate Regulation on the Financial Statements — Refer to Notes 1, 3, and 9 to the financial statements.
Critical Audit Matter Description
The Company is subject to rate regulation by the North Carolina Utilities Commission and by the South Carolina Public Service Commission (collectively the
“Commissions”), which have jurisdiction with respect to the electric rates of the Company. 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, 2020, the Company has approximately $4.5 billion recorded as regulatory assets.
The Company’s rates are subject to regulatory rate-setting processes and annual earnings oversight. Rates charged to customers are determined and approved
in regulatory proceedings based on an analysis of the Company’s costs to provide utility service and a return on the Company’s investment in the utility business.
Regulatory decisions can have an impact on the recovery of costs, the rate of return earned on investment and the timing and amount of assets to be recovered by rates.
The regulation of rates is premised on the full recovery of prudently incurred costs and a reasonable rate of return on invested capital. As discussed in Note 3, regulatory
proceedings in recent years in North Carolina and South Carolina have focused on the recoverability of asset retirement obligations specific to coal ash. As a result,
assessing the potential outcomes of future regulatory orders in North Carolina and South Carolina requires significant management judgment.
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.
79
PART II 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 precedents of the Commissions’ treatment of similar
costs under similar circumstances. We evaluated the external information and compared it 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 evaluated the reasonableness of management’s judgments regarding the recoverability of regulatory asset balances by performing the following:
˚ We inquired of management regarding changes in regulatory orders and regulatory asset balances during the year.
˚ We evaluated the reasonableness of such changes based on our knowledge of commission-approved amortization, expected incurred costs, and recently
approved regulatory orders, as applicable.
˚ We utilized trend analyses to evaluate the historical consistency of regulatory asset balances.
˚ We compared the recorded regulatory asset balance to an independently developed expectation of the corresponding balance.
• We obtained an analysis from management and letters from internal legal counsel for asset retirement obligations specific to coal ash costs, regarding
probability of recovery for deferred costs not yet addressed in a regulatory order to assess management’s assertion that amounts are probable of recovery.
• We obtained representation from management asserting that regulatory assets recorded on the financial statements are probable of recovery.
/s/ Deloitte & Touche LLP
Charlotte, North Carolina
February 25, 2021
We have served as the Company’s auditor since 1930.
80
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 (Benefit) Expense
Net Income and Comprehensive Income
See Notes to Consolidated Financial Statements
Years Ended December 31,
2020
2019
2018
$ 5,422
$ 5,957
$5,699
1,743
1,332
1,116
167
499
4,857
8
573
75
269
379
(36)
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
$ 415
$
805
$ 667
81
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 $4 at 2020 and $3 at 2019)
Receivables of VIEs (net of allowance for doubtful accounts of $19 at 2020 and $5 at 2019)
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
82
December 31,
2020
2019
$
39
132
500
50
911
492
60
$
22
123
489
52
934
526
60
2,184
2,206
35,759
(12,801)
29
34,603
(11,915)
246
22,987
22,934
3,976
3,500
346
740
8,562
4,152
3,047
387
651
8,237
$33,733
$33,377
$
454
215
295
85
99
603
283
530
411
2,975
8,505
150
2,298
5,352
4,394
323
242
132
102
$
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
12,843
12,849
9,260
9,246
$33,733
$33,377
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
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
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 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 paid for (received from) income taxes
Significant non-cash transactions:
Accrued capital expenditures
See Notes to Consolidated Financial Statements
83
Years Ended December 31,
2020
2019
2018
$
415
$
805
$
667
1,299
(29)
(8)
499
(234)
(304)
2
1
(4)
2
23
98
(127)
12
68
157
(207)
3
1,329
(60)
—
12
197
(390)
12
(6)
21
(29)
20
101
32
(75)
(46)
68
(205)
37
1,183
(57)
(9)
33
236
(195)
122
5
(107)
(20)
63
(201)
219
99
(11)
46
(465)
20
1,666
1,823
1,628
(1,581)
(1,555)
1,516
(57)
(1,677)
1,296
(1,085)
229
(400)
(12)
28
17
22
39
301
123
149
$
$
(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
$
$
PART II
DUKE ENERGY PROGRESS, LLC
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in millions)
Balance at December 31, 2017
Net income
Distribution to parent
Balance at December 31, 2018
Net income
Balance at December 31, 2019
Net income
Distribution to parent
Other
Balance at December 31, 2020
See Notes to Consolidated Financial Statements
Member’s
Equity
$ 7,949
667
(175)
$ 8,441
805
$ 9,246
415
(400)
(1)
$ 9,260
84
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, 2020 and
2019, 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, 2020, 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, 2020 and 2019, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 2020, 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.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or
required to be communicated to the audit committee and that (1) relates 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 matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
Regulatory Matters — Impact of Rate Regulation on the Financial Statements — Refer to Notes 1 and 3 to the financial statements.
Critical Audit Matter Description
The Company is subject to rate regulation by the Florida Public Service Commission (the “Commission”), which has jurisdiction with respect to the electric rates
of the Company. 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, 2020, the Company
has approximately $2.1 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 Commission; to support its assertions on the likelihood of future recovery for deferred costs. Given that management’s accounting
judgments are based on assumptions about the outcome of future decisions by the Commission, auditing these judgments required specialized knowledge of accounting
for rate regulation and the ratemaking process due to its inherent complexities.
85
PART II 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 Commission, 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 precedents of the Commission’s treatment of similar
costs under similar circumstances. We evaluated the external information and compared it to management’s recorded regulatory asset balances for
completeness.
• For regulatory matters in process, we inspected the Company’s and intervenors’ filings with the Commission, including the settlement agreement filed with
the Commission subsequent to December 31, 2020, that may impact the Company’s future rates, for any evidence that might contradict management’s
assertions.
• We evaluated the reasonableness of management’s judgments regarding the recoverability of regulatory asset balances by performing the following:
˚ We inquired of management regarding changes in regulatory orders and regulatory asset balances during the year.
˚ We evaluated the reasonableness of such changes based on our knowledge of commission-approved amortization, expected incurred costs, and recently
approved regulatory orders, as applicable.
˚ We utilized trend analyses to evaluate the historical consistency of regulatory asset balances.
˚ We compared the recorded regulatory asset balance to an independently developed expectation of the corresponding balance.
• We obtained representation from management asserting that regulatory assets recorded on the financial statements are probable of recovery.
/s/ Deloitte & Touche LLP
Charlotte, North Carolina
February 25, 2021
We have served as the Company’s auditor since 2001.
86
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 (losses) gains on available-for-sale securities
Other Comprehensive (Loss) Income, net of tax
Comprehensive Income
Years Ended December 31,
2020
2019
2018
$ 5,188
$ 5,231
$ 5,021
1,737
1,131
702
381
(4)
2,012
1,034
702
392
(36)
3,947
4,104
1
1,242
53
326
969
198
—
1,127
48
328
847
155
2,085
1,025
628
374
54
4,166
1
856
86
287
655
101
$
771
$
692
$
554
(1)
(1)
1
1
(1)
(1)
$
770
$
693
$
553
See Notes to Consolidated Financial Statements
87
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 $4 at 2020 and $3 at 2019)
Receivables of VIEs (net of allowance for doubtful accounts of $10 at 2020 and $4 at 2019)
Receivables from affiliated companies
Notes receivable from affiliated companies
Inventory
Regulatory assets (includes $53 at 2020 and $52 at 2019 related to VIEs)
Other (includes $39 at 2020 and 2019 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 $937 at 2020 and $989 at 2019 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 $305 at 2020 and $54 at 2019 related to VIEs)
Regulatory liabilities
Other
Total current liabilities
Long-Term Debt (includes $1,002 at 2020 and $1,307 at 2019 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
88
December 31,
2020
2019
$
11
94
401
3
—
464
265
41
$
17
96
341
—
173
489
419
58
1,279
1,593
22,123
(5,560)
16,563
1,799
637
344
335
3,115
20,457
(5,236)
15,221
2,194
734
401
311
3,640
$ 20,957
$ 20,454
$
465
85
196
82
69
823
110
374
2,204
7,092
2,191
514
658
300
231
209
4,103
7,560
(2)
7,558
$
474
131
—
43
75
571
94
415
1,803
7,416
2,179
578
993
343
218
136
4,447
6,789
(1)
6,788
$ 20,957
$ 20,454
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
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
89
Years Ended December 31,
2020
2019
2018
$
771
$
692
$
554
1,019
(12)
(1)
(4)
27
(80)
(14)
(64)
(3)
26
40
66
(46)
39
(7)
85
(181)
869
(6)
—
(36)
180
(22)
(33)
26
17
42
156
(36)
40
(31)
(36)
(131)
(213)
793
(47)
(1)
54
159
(35)
7
(100)
(26)
58
59
(1)
17
40
82
(429)
(75)
1,661
1,478
1,109
(1,907)
(4,443)
4,495
173
(103)
(1,785)
495
(572)
196
—
(1)
118
(6)
56
50
321
138
214
$
$
(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
$
$
PART II
DUKE ENERGY FLORIDA, LLC
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in millions)
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
Net income
Other comprehensive loss
Balance at December 31, 2020
Accumulated Other
Comprehensive
Income (Loss)
Net Unrealized
Gains (Losses) on
Available-for-
Sale Securities
Total
Equity
Member’s
Equity
$
5,614
$
4
$ 5,618
554
—
(75)
4
$
6,097
692
—
6,789
771
—
7,560
$
$
—
(1)
—
(5)
554
(1)
(75)
(1)
(2)
$ 6,095
—
1
692
1
(1)
$ 6,788
—
(1)
(2)
771
(1)
$ 7,558
$
$
$
(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
90
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, 2020 and
2019, 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, 2020, 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, 2020 and 2019, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 2020, 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.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or
required to be communicated to the audit committee and that (1) relates 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 matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
Regulatory Matters — Impact of Rate Regulation on the Financial Statements — Refer to Notes 1 and 3 to the financial statements.
Critical Audit Matter Description
The Company is subject to rate regulation by the Public Utilities Commission of Ohio and by the Kentucky Public Service Commission (collectively the
“Commissions”), which have jurisdiction with respect to the electric and gas rates of the Company. 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, 2020, the Company has approximately $650 million 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. Given that management’s accounting
judgments are based on assumptions about the outcome of future decisions by the Commissions, auditing these judgments required specialized knowledge of
accounting for rate regulation and the ratemaking process due to its inherent complexities.
91
PART II 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 precedents of the Commissions’ treatment of similar
costs under similar circumstances. We evaluated the external information and compared it 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 evaluated the reasonableness of management’s judgments regarding the recoverability of regulatory asset balances by performing the following:
˚ We inquired of management regarding changes in regulatory orders and regulatory asset balances during the year.
˚ We evaluated the reasonableness of such changes based on our knowledge of commission-approved amortization, expected incurred costs, and recently
approved regulatory orders, as applicable.
˚ We utilized trend analyses to evaluate the historical consistency of regulatory asset balances.
˚ We compared the recorded regulatory asset balance to an independently developed expectation of the corresponding balance.
• We obtained representation from management asserting that regulatory assets recorded on the financial statements are probable of recovery.
/s/ Deloitte & Touche LLP
Charlotte, North Carolina
February 25, 2021
We have served as the Company’s auditor since 2002.
92
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
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 and Comprehensive Income
See Notes to Consolidated Financial Statements
Years Ended December 31,
2020
2019
2018
$ 1,405
453
—
$ 1,456
484
—
$ 1,450
506
1
1,858
1,940
1,957
339
73
463
278
324
388
95
520
265
308
1,477
1,576
—
381
16
102
295
43
252
—
—
364
24
109
279
40
239
(1)
412
113
480
268
290
1,563
(106)
288
23
92
219
43
176
—
$ 252
$
238
$
176
93
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 2020 and $4 at 2019)
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 2020 and 2019
Additional paid-in capital
Retained earnings
Total equity
Total Liabilities and Equity
See Notes to Consolidated Financial Statements
94
December 31,
2020
2019
$
14
98
102
110
39
31
394
$
17
84
92
135
49
21
398
11,022
(3,013)
8,009
10,241
(2,843)
7,398
920
610
20
72
920
549
21
52
1,622
1,542
$ 10,025
$ 9,338
$
279
68
169
247
31
50
3
65
70
982
3,014
25
981
108
748
20
113
99
$
288
68
312
219
30
—
1
64
75
1,057
2,594
25
922
79
763
21
100
94
2,069
1,979
762
2,776
397
3,935
762
2,776
145
3,683
$ 10,025
$ 9,338
PART II
Years Ended December 31,
2020
2019
2018
$
252
$
238
$
176
283
(7)
—
31
(2)
14
(13)
9
25
(18)
2
—
30
3
(32)
(2)
575
(834)
(19)
(48)
(901)
467
—
(144)
323
(3)
17
14
97
—
104
—
$
$
269
(13)
—
81
(8)
7
20
22
(9)
(5)
(17)
(10)
17
1
(26)
(41)
526
(952)
—
(68)
(1,020)
1,003
(551)
38
490
(4)
21
17
97
(37)
109
—
$
$
271
(11)
106
25
(3)
24
(33)
19
7
16
(19)
16
12
14
(24)
(26)
570
(827)
14
(89)
(902)
99
(3)
245
341
9
12
21
87
(6)
95
106
$
$
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 on sales of other assets
Deferred income taxes
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
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
95
PART II
DUKE ENERGY OHIO, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in millions)
Balance at December 31, 2017
Net income
Contribution from parent
Balance at December 31, 2018
Net income
Balance at December 31, 2019
Net income
Balance at December 31, 2020
See Notes to Consolidated Financial Statements
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
(Deficit)
Total
Equity
$
762
$
2,670
$
(269)
$ 3,163
—
—
762
—
762
—
762
$
$
$
—
106
2,776
—
2,776
—
2,776
$
$
$
176
—
(93)
238
145
252
397
$
$
$
176
106
$ 3,445
238
$ 3,683
252
$ 3,935
96
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, 2020
and 2019, 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, 2020, 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, 2020 and 2019, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 2020, 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.
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.
Regulatory Matters — Impact of Rate Regulation on the Financial Statements — Refer to Notes 1 and 3 to the financial statements.
Critical Audit Matter Description
The Company is subject to rate regulation by the Indiana Utility Regulatory Commission (the “Commission”), which has jurisdiction with respect to the electric
rates of the Company. 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, 2020, the
Company has approximately $1.3 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 Commission; to support its assertions on the likelihood of future recovery for deferred costs. Given that management’s accounting
judgments are based on assumptions about the outcome of future decisions by the Commission, auditing these judgments required specialized knowledge of accounting
for rate regulation and the ratemaking process due to its inherent complexities.
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.
97
PART II • We read relevant regulatory orders issued by the Commission, 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 precedents of the Commission’s treatment of similar
costs under similar circumstances. We evaluated the external information and compared it to management’s recorded regulatory asset balances for
completeness.
• For regulatory matters in process, we inspected the Company’s and intervenors’ filings with the Commission, that may impact the Company’s future rates,
for any evidence that might contradict management’s assertions.
• We evaluated the reasonableness of management’s judgments regarding the recoverability of regulatory asset balances by performing the following:
˚ We inquired of management regarding changes in regulatory orders and regulatory asset balances during the year.
˚ We evaluated the reasonableness of such changes based on our knowledge of commission-approved amortization, expected incurred costs, and recently
approved regulatory orders, as applicable.
˚ We utilized trend analyses to evaluate the historical consistency of regulatory asset balances.
˚ We compared the recorded regulatory asset balance to an independently developed expectation of the corresponding balance.
• We obtained representation from management asserting that regulatory assets recorded on the financial statements are probable of recovery.
Duke Energy Indiana Coal Ash Asset Retirement Obligations – Refer to Notes 3, 4, and 9 to the financial statements
Critical Audit Matter Description
Duke Energy Indiana has asset retirement obligations associated with coal ash impoundments at operating and retired coal generation facilities. These legal
obligations are the result of Indiana state and federal regulations. There is significant judgment in determining the assumptions used in estimating the closure costs
for each site since Duke Energy Indiana does not have approved closure plans for certain sites. Potential changes to the projected closure costs for each site as well
as probability weightings for the cash flows associated with the different potential closure methods (“probability weightings”) creates estimation uncertainty. The
liability for coal ash asset retirement obligations at Duke Energy Indiana was $1,140 million at December 31, 2020.
We identified the asset retirement obligations associated with coal ash impoundments at Duke Energy Indiana as a critical audit matter because of the
significant management estimates and assumptions, including projected closure costs as well as the different potential closure methods. The audit procedures
to evaluate the reasonableness of management’s estimates and assumptions related to potential changes to the projected closure costs for each site as well as
probability weightings for the cash flows associated with the different potential closure methods required a high degree of auditor judgment and an increased extent of
effort, including the need to involve our environmental specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the underlying estimated closure costs for coal ash asset retirement obligations at Duke Energy Indiana included the following,
among others:
• We tested the effectiveness of controls over management’s coal ash asset retirement obligation estimate, including those over management’s determination
of the estimated closure costs and probability weightings.
• We evaluated management’s ability to accurately estimate future closure costs by comparing actual closure costs to management’s historical estimates.
• We tested the mathematical accuracy of management’s coal ash asset retirement obligation calculations, including the application of probability weightings.
• We made inquiries of internal and external legal counsel regarding the status of the legal matters associated with the probability weightings.
• We inspected the opinions from internal and external legal counsel supporting the probability weightings.
• We inspected the Company’s filings with and orders from the Indiana Department of Environmental Management, for evidence that might contradict
management’s assertions regarding the estimated closure costs and probability weightings.
• With the assistance of our environmental specialists, we evaluated the reasonableness of management’s estimated closure costs by comparing the costs to
actual costs incurred at comparable coal ash impoundments, underlying contracts, and publicly available industry cost data, as applicable.
/s/ Deloitte & Touche LLP
Charlotte, North Carolina
February 25, 2021
We have served as the Company’s auditor since 2002.
98
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,
2020
2019
2018
$ 2,795
$ 3,004
$ 3,059
767
762
569
81
—
935
790
525
69
—
2,179
2,319
616
37
161
492
84
$
408
$
685
41
156
570
134
436
1,000
788
520
78
30
2,416
643
45
167
521
128
393
$
99
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 2020 and $3 at 2019)
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
100
December 31,
2020
2019
$
7
55
112
473
125
37
809
17,382
(5,661)
11,721
1,203
55
253
1,511
$
25
60
79
517
90
60
831
16,305
(5,233)
11,072
1,082
57
234
1,373
$ 14,041
$ 13,276
$
188
88
131
62
51
70
168
111
83
952
3,871
150
1,228
1,008
1,627
53
171
168
30
4,285
$
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
4,783
4,575
$ 14,041
$ 13,276
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
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 (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 (received from) income taxes
Significant non-cash transactions:
Accrued capital expenditures
See Notes to Consolidated Financial Statements
101
Years Ended December 31,
2020
2019
2018
$ 408
$ 436
$ 393
572
(23)
—
29
(63)
—
8
—
44
(3)
(12)
1
13
6
(68)
26
938
(888)
(37)
22
(33)
48
(888)
544
(513)
101
(200)
—
(68)
(18)
25
$
7
$
531
(18)
—
156
(48)
—
(8)
41
(95)
76
(10)
4
(25)
15
(74)
16
524
(32)
30
95
(69)
53
7
3
28
(25)
37
5
(52)
14
26
(31)
997
1,006
(876)
(26)
20
—
(49)
(931)
485
(213)
(137)
(200)
—
(65)
1
24
25
(832)
(48)
44
—
18
(818)
—
(3)
6
(175)
(1)
(173)
15
9
24
$
$ 164
36
$ 150
(6)
$ 162
75
101
102
88
PART II
DUKE ENERGY INDIANA, LLC
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in millions)
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
Net income
Distributions to parent
Balance at December 31, 2020
See Notes to Consolidated Financial Statements
Member’s
Equity
$
4,121
393
(175)
$
4,339
436
(200)
$
4,575
408
(200)
$
4,783
102
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,
2020 and 2019, 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, 2020, 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, 2020 and 2019, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2020, 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.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or
required to be communicated to the audit committee and that (1) relates 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 matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
Regulatory Matters — Impact of Rate Regulation on the Financial Statements — Refer to Notes 1 and 3 to the financial statements.
Critical Audit Matter Description
The Company is subject to rate regulation by the North Carolina Utilities Commission, the Public Service Commission of South Carolina, and the Tennessee Public
Utility Commission (collectively the “Commissions”), which have jurisdiction with respect to the gas rates of the Company. 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, 2020, the Company has approximately $450 million 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. Given that management’s accounting
judgments are based on assumptions about the outcome of future decisions by the Commissions, auditing these judgments required specialized knowledge of
accounting for rate regulation and the ratemaking process due to its inherent complexities.
103
PART II 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 precedents of the Commissions’ treatment of similar
costs under similar circumstances. We evaluated the external information and compared it 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 evaluated the reasonableness of management’s judgments regarding the recoverability of regulatory asset balances by performing the following:
˚ We inquired of management regarding changes in regulatory orders and regulatory asset balances during the year.
˚ We evaluated the reasonableness of such changes based on our knowledge of commission-approved amortization, expected incurred costs, and recently
approved regulatory orders, as applicable.
˚ We utilized trend analyses to evaluate the historical consistency of regulatory asset balances.
˚ We compared the recorded regulatory asset balance to an independently developed expectation of the corresponding balance.
• We obtained representation from management asserting that regulatory assets recorded on the financial statements are probable of recovery.
/s/ Deloitte & Touche LLP
Charlotte, North Carolina
February 25, 2021
We have served as the Company’s auditor since 1951.
104
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 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,
2020
2019
2018
$ 1,286
11
$ 1,369
12
$ 1,365
10
1,297
1,381
1,375
386
322
180
53
7
948
349
9
51
60
118
291
18
273
$
532
328
172
45
—
584
357
159
49
—
1,077
1,149
304
8
20
28
87
245
43
202
$
226
7
14
21
81
166
37
129
$
See Notes to Consolidated Financial Statements
105
PART II
PIEDMONT NATURAL GAS COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(in millions)
ASSETS
Current Assets
Receivables (net of allowance for doubtful accounts of $12 at 2020 and $6 at 2019)
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, 0 par value: 100 shares authorized and outstanding at 2020 and 2019
Retained earnings
Total equity
Total Liabilities and Equity
See Notes to Consolidated Financial Statements
106
December 31,
2020
2019
$
250
10
68
153
20
501
$
241
10
72
73
28
424
9,134
(1,749)
7,385
8,446
(1,681)
6,765
49
302
20
88
270
729
49
290
24
83
121
567
$ 8,615
$ 7,756
$
230
79
530
23
34
160
88
69
1,213
2,620
821
20
1,044
19
8
155
2,067
1,310
1,405
2,715
$
215
3
476
24
33
—
81
67
899
2,384
708
17
1,131
23
3
148
2,030
1,310
1,133
2,443
$ 8,615
$ 7,756
PART II Years Ended December 31,
2020
2019
2018
$
273
$
202
$
129
182
(19)
7
53
(9)
(33)
10
—
3
(66)
16
76
3
(11)
(11)
7
481
(901)
—
(28)
(929)
394
—
54
—
448
—
—
174
—
—
136
(8)
2
28
12
(2)
(25)
(7)
(35)
(60)
1
1
(10)
409
(1,053)
(16)
(14)
(1,083)
596
(350)
278
150
674
—
—
161
—
—
(31)
(7)
43
7
(15)
(4)
71
15
25
65
21
3
(5)
478
(721)
—
(10)
(731)
100
—
(166)
300
234
(19)
19
$ —
$ —
$ —
$
115
(36)
106
$
84
(31)
109
$
79
(16)
96
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
Equity component of AFUDC
Impairment charges
Deferred income taxes
Equity in (earnings) losses from unconsolidated affiliates
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 to affiliated companies
Capital contribution from parent
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
See Notes to Consolidated Financial Statements
107
PART II PIEDMONT NATURAL GAS COMPANY, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in millions)
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
Net income
Other
Balance at December 31, 2020
See Notes to Consolidated Financial Statements
Common
Stock
Retained
Earnings
$
860
—
300
$ 1,160
—
150
$
$
802
129
—
931
202
—
Total
Equity
$ 1,662
129
300
$ 2,091
202
150
$ 1,310
$ 1,133
$ 2,443
—
—
273
(1)
273
(1)
$ 1,310
$ 1,405
$ 2,715
108
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, 2020, 2019 and 2018
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.
Registrant
Duke Energy
Duke Energy Carolinas
Progress Energy
Duke Energy Progress
Duke Energy Florida
Duke Energy Ohio
Duke Energy Indiana
Piedmont
Applicable Notes
1
•
•
•
•
•
•
•
•
2
•
•
•
•
•
•
•
•
3
•
•
•
•
•
•
•
•
4
•
•
•
•
•
•
•
•
5
•
•
•
•
•
•
•
•
6
•
•
•
•
•
•
•
•
7
•
8
•
•
•
9
•
•
•
•
•
•
•
•
10
11
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
12
•
•
13
14
15
16
17
18
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
19
•
20
21
22
23
24
25
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
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 17 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 8 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.
COVID-19
The COVID-19 pandemic is having a significant impact on global health
and economic environments. In March 2020, the World Health Organization
declared COVID-19 a global pandemic, and the federal government proclaimed
that the COVID-19 outbreak in the United States constitutes a national
emergency. The Duke Energy Registrants are monitoring developments closely
and responding appropriately. The company incurred approximately $112 million
of incremental COVID-19 costs before deferral for the year ended December 31,
2020, included in Operation, maintenance and other on the Consolidated
109
PART II
Statements of Operations. Further, the company waived approximately
$64 million of late payment fees for the year ended December 31, 2020.
The company has deferred approximately $76 million of the incremental costs,
which were primarily bad debt expense, personal protective equipment and
cleaning supplies, and a cost component of late payment fees. See Notes 3, 6,
17, 18 and 23 for additional information as well as steps taken to mitigate the
impacts to our business and customers from the COVID-19 pandemic.
Other Current Assets 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, 2020, or 2019.
(in millions)
Location
Duke Energy
Other accrued liabilities
Accrued compensation
Duke Energy Carolinas
Accrued compensation
Other accrued liabilities
Progress Energy
Customer deposits
Duke Energy Florida
Customer deposits
Duke Energy Ohio
Gas Storage
Duke Energy Indiana
Income taxes receivable
Current Liabilities
Current Liabilities
Current Liabilities
Current Liabilities
Current Liabilities
Current Liabilities
Current Assets
Current Assets
Discontinued Operations
December 31,
2020
1,455
662
213
178
347
203
21
9
$
$
$
$
$
$
2019
604
862
271
147
354
209
—
44
$
$
$
$
$
$
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. For the years ended
December 31, 2020, 2019 and 2018, the Income (Loss) From Discontinued
Operations, net of tax on Duke Energy’s Consolidated Statements of Operations
is entirely attributable to controlling interest.
(in millions)
Noncontrolling Interest Capital Contributions
Cash received for the sale of noncontrolling interest to tax equity members
Cash received for the sale of noncontrolling interest to pro rata share members
Total Noncontrolling Interest Capital Contributions
Noncontrolling Interest Allocation of Income
Allocated losses to noncontrolling tax equity members utilizing the HLBV method
Allocated losses to noncontrolling members based on pro rata shares of ownership
Total Noncontrolling Interest Allocated Losses
110
Noncontrolling Interest
Duke Energy maintains a controlling financial interest in certain less than
wholly owned nonregulated 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, most of which is
over the IRS recapture period, upon a hypothetical liquidation of the subsidiary
at the net book value of its underlying assets. The change in the amount that
each owner would hypothetically receive at the reporting date compared to the
amount it would have received on the previous reporting date represents the
amount of income or loss allocated to each owner for the reporting period.
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 within the Commercial
Renewables Segment for 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 tax benefit of $8 million, and was recorded to equity.
The following table presents cash received for the sale of noncontrolling
interest and allocated losses to noncontrolling interest for the years ended
December 31, 2020, and 2019.
December 31,
2020
2019
$
$
$
$
426
—
426
271
24
295
$
$
$
$
428
415
843
165
12
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)
2021 Sale of Minority Interest in Duke Energy Indiana
In January 2021, Duke Energy entered into a definitive agreement
providing for the sale of a 19.9% minority interest in Duke Energy Indiana
with an affiliate of GIC, Singapore’s sovereign wealth fund and an experienced
investor in U.S. infrastructure. To facilitate the transaction, Duke Energy will
issue and sell membership interests in Duke Energy Indiana Holdco, LLC.
a newly created holding company that will own 100% of the issued and
outstanding membership interests in Duke Energy Indiana. The transaction
will be completed following two closings for an aggregate purchase price of
approximately $2 billion. The first closing is expected to be completed in the
second quarter of 2021 and Duke Energy will issue and sell 11.1% of the
membership interests in exchange for 50% of the purchase price. Under the
terms of the agreement, Duke Energy has the discretion to determine the timing
of the second closing, but it will occur no later than January 2023. At the second
closing, Duke Energy will issue and sell additional membership interests such
that GIC will own 19.9% of the membership interests for the remaining 50% of
the purchase price. Duke Energy will continue to operate and retain control of
Duke Energy Indiana and, therefore, no gain or loss is expected to be recognized
in the Consolidated Statements of Operations. Additionally, the transaction will
be reflected within Duke Energy Corporations’ stockholders’ equity as a sale of a
noncontrolling interest.
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.
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. Regulatory assets are reviewed for
recoverability each reporting period. If a regulatory asset is no longer deemed
probable of recovery, the deferred cost is charged to earnings. See Note 3 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.
The Duke Energy Registrants utilize cost-tracking mechanisms, commonly
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.
Cash, Cash Equivalents and Restricted Cash
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 17 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, 2020
December 31, 2019
Duke
Energy
Progress
Energy
$
259
194
103
$
59
39
102
Duke
Energy
Florida
$
11
39
—
Duke
Energy
Progress
Energy
$ 311
222
$ 48
39
40
39
Total cash, cash equivalents and restricted cash
$
556
$
200
$
50
$ 573
$ 126
111
Duke
Energy
Florida
$
$
17
39
—
56
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)
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, 2020, and 2019, 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, 2020
Duke
Energy
$ 2,312
561
294
Duke
Energy
Carolinas
$
785
186
39
Progress
Energy
$
999
193
183
Duke
Energy
Progress
$
673
131
107
$ 3,167
$ 1,010
$ 1,375
$
911
Duke
Energy
Florida
$ 325
63
76
$ 464
December 31, 2019
Duke
Energy
$ 2,297
586
349
$ 3,232
Duke
Energy
Carolinas
$
768
187
41
Progress
Energy
$ 1,038
186
199
Duke
Energy
Progress
$
686
138
110
$
996
$ 1,423
$
934
Duke
Energy
Florida
$ 351
48
90
$ 489
Duke
Energy
Ohio
$
78
16
16
$ 110
Duke
Energy
Ohio
$ 79
15
41
$ 135
Duke
Energy
Indiana
$ 307
165
1
$ 473
Piedmont
$ 12
—
56
$ 68
Duke
Energy
Indiana
$
$ 318
198
1
$ 517
$
Piedmont
5
—
67
72
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, unless it is determined the carrying value of an investment has a credit
loss. For certain investments of regulated operations, such as substantially all of
the NDTF, realized and unrealized gains and losses (including any credit losses) 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 15 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 11 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.
RECs are used to measure compliance with renewable energy
standards and are held primarily for consumption. See Note 11 for further
information.
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
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.
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) 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.
Duke Energy
Duke Energy Carolinas
Progress Energy
Duke Energy Progress
Duke Energy Florida
Duke Energy Ohio
Duke Energy Indiana
Piedmont
Years Ended December 31,
2020
3.0 %
2.8 %
3.2 %
3.1 %
3.3 %
2.9 %
3.5 %
2.3 %
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 %
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
113
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 10 for additional information.
Leases
Duke Energy determines if an arrangement is a lease at contract inception
based on whether the arrangement involves the use of a physically distinct
identified asset and whether Duke Energy has the right to obtain substantially
all of the economic benefits from the use of the asset throughout the period as
well as the right to direct the use of the asset. As a policy election, Duke Energy
does not evaluate arrangements with initial contract terms of less than one year
as leases.
Operating leases are included in Operating lease ROU assets, net, Other
current liabilities and Operating lease liabilities on the Consolidated Balance Sheets.
Finance leases are included in Property, plant and equipment, Current maturities of
long-term debt and Long-Term Debt on the Consolidated Balance Sheets.
For lessee and lessor arrangements, Duke Energy has elected a policy to
not separate lease and non-lease components for all asset classes. For lessor
arrangements, lease and non-lease components are only combined under one
arrangement and accounted for under the lease accounting framework if the
non-lease components are not the predominant component of the arrangement
and the lease component would be classified as an operating lease.
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 23 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.
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) 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.
Accounts Payable
During 2020, Duke Energy established a supply chain finance program
(the “program”) with a global financial institution. The program is voluntary and
allows Duke Energy suppliers, at their sole discretion, to sell their receivables
from Duke Energy to the financial institution at a rate that leverages Duke
Energy’s credit rating and, which may result in favorable terms compared to the
rate available to the supplier on their own credit rating. Suppliers participating
in the program, determine at their sole discretion which invoices they will sell
to the financial institution. Suppliers’ decisions on which invoices are sold do
not impact Duke Energy’s payment terms, which are based on commercial
terms negotiated between Duke Energy and the supplier regardless of program
participation. The commercial terms negotiated between Duke Energy and its
suppliers are consistent regardless of whether the supplier elects to participate
in the program. Duke Energy does not issue any guarantees with respect to the
program and does not participate in negotiations between suppliers and the
financial institution. Duke Energy does not have an economic interest in the
supplier’s decision to participate in the program and receives no interest, fees
or other benefit from the financial institution based on supplier participation in
the program.
At December 31, 2020, $15 million, $1 million and $14 million of the
outstanding Accounts payable balance for Duke Energy, Duke Energy Ohio and
Piedmont, respectively, was sold to the financial institution by our suppliers.
Suppliers invoices sold to the financial institution under the program totaled
$45 million, $9 million and $36 million for the year ended December 31,
2020, for Duke Energy, Duke Energy Ohio and Piedmont, respectively. All
activity related to amounts due to suppliers who elected to participate in the
program are included within Net cash provided by operating activities on the
Consolidated Statements of Cash Flows.
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 18 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 14 for further information.
Captive Insurance Reserves
Duke Energy has captive insurance subsidiaries that provide coverage,
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.
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) 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 19 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 3 and 4 for further information.
Pension and Other Post-Retirement Benefit Plans
Duke Energy maintains qualified, non-qualified and other post-retirement
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 22 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 20 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. Duke Energy recognizes
a liability for the best estimate of its loss due to the nonperformance of the
guaranteed party. This liability is recognized at the inception of a guarantee and
is updated periodically. See Note 7 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 21 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. For ITCs associated with nonregulated operations see
“Accounting for Renewable Energy Tax Credits.”
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. Duke Energy’s results of operations could be impacted if
the 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 a reversal.
Tax-related interest and penalties are recorded in Interest Expense and
Other Income and Expenses, net in the Consolidated Statements of Operations.
See Note 23 for further information.
Accounting for Renewable Energy Tax Credits
When Duke Energy receives ITCs on wind or solar facilities associated with
its nonregulated operations, 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.
When Duke Energy receives ITCs on wind or solar facilities associated
with its regulated operations, the ITC is deferred and amortized as a reduction of
income tax expense over the estimated useful lives of the related properties.
Duke Energy receives PTCs on wind facilities that are recognized as electricity
is produced and records related amounts as a reduction of income tax expense.
115
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) 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 Energy 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,
2020
2019
2018
$ 415
43
249
26
223
96
25
2
$ 421
39
256
21
235
101
23
2
$ 405
35
241
19
222
105
22
2
Dividend Restrictions and Unappropriated Retained Earnings
Duke Energy does not have any current legal, regulatory or other
restrictions on paying common stock dividends to shareholders. However,
if Duke Energy were to defer dividend payments on the preferred stock, the
declaration of common stock dividends would be prohibited. See Note 19 for
more information. Additionally, as further described in Note 3, 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, 2020, and 2019, an
insignificant amount of Duke Energy’s consolidated Retained earnings balance
represents undistributed earnings of equity method investments.
New Accounting Standards
The following new accounting standard was adopted by Duke Energy
Registrants in 2020.
Credit Losses. In June 2016, the FASB issued new accounting guidance
for credit losses. Duke Energy adopted the new accounting guidance for credit
losses effective January 1, 2020, using the modified retrospective method of
adoption, which does not require restatement of prior year results. Duke Energy
did not adopt any practical expedients.
Duke Energy recognizes allowances for credit losses based on
management’s estimate of losses expected to be incurred over the lives of
certain assets or guarantees. Management monitors credit quality, changes
in expected credit losses and the appropriateness of the allowance for credit
losses on a forward-looking basis. Management reviews the risk of loss
periodically as part of the existing assessment of collectability of receivables.
Duke Energy reviews the credit quality of its counterparties as part of its
regular risk management process and requires credit enhancements, such as
deposits or letters of credit, as appropriate and as allowed by regulators.
Duke Energy recorded cumulative effects of changes in accounting
principles related to the adoption of new credit loss standard, for allowances
and credit losses of trade and other receivables, insurance receivables
and financial guarantees. These amounts are included in the Condensed
Consolidated Balance Sheets in Receivables, Receivables of VIEs, Other
Noncurrent Assets and Other Noncurrent Liabilities. See Notes 7 and 18 for
more information.
Duke Energy recorded an adjustment for the cumulative effect of a change in accounting principle due to the adoption of this standard on January 1, 2020, as
shown in the table below:
(in millions)
Total pretax impact to Retained Earnings
The following new accounting standard has been issued but not yet
adopted by the Duke Energy Registrants as of December 31, 2020.
Reference Rate Reform. In March 2020, the FASB issued new
accounting guidance for reference rate reform. This guidance is elective and
provides expedients to facilitate financial reporting for the anticipated transition
away from the London Inter-bank Offered Rate (LIBOR) and other interbank
reference rates by the end of 2021. The optional expedients are effective for
modification of existing contracts or new arrangements executed between March
12, 2020, through December 31, 2022.
December 31, 2020
Duke
Energy
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida Piedmont
$
120
$
16
$
2
$
1
$
1
$
1
Duke Energy has variable-rate debt and manages interest rate risk by
entering into financial contracts including interest rate swaps that are generally
indexed to LIBOR. Impacted financial arrangements extending beyond 2021 may
require contractual amendment or termination to fully adapt to a post-LIBOR
environment. Duke Energy is assessing these financial arrangements and
is evaluating the use of optional expedients outlined in the new accounting
guidance. Alternative index provisions are also being assessed and incorporated
into new financial arrangements that extend beyond 2021. The full outcome of
the transition away from LIBOR cannot be determined at this time, but is not
expected to have a material impact on the financial statements.
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) 2. 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
and preferred stock dividends. 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.
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 12 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)(c)
Less noncontrolling interest
Add back preferred stock dividend
Income from discontinued operations, net of tax
Net income
Capital investments expenditures and acquisitions
Segment assets
Year Ended December 31, 2020
Electric
Utilities and
Infrastructure
Gas
Utilities and
Infrastructure
Commercial
Renewables
$ 21,687
33
$ 21,720
$
1,320
4,068
(1)
340
2,669
$ 1,653
95
$ 1,748
$
135
258
(2,017)
(349)
(1,266)
$
$
$
502
—
502
66
199
—
(65)
286
Total
Reportable
Segments
$ 23,842
128
$ 23,970
$
1,521
4,525
(2,018)
(74)
1,689
$
$
26
71
97
$ 657
209
13
(162)
(426)
Other
Eliminations
Total
$ — $ 23,868
—
(199)
$ (199) $ 23,868
$
(16) $
(29)
—
—
—
2,162
4,705
(2,005)
(236)
1,263
295
107
7
1,082
$
$ — $ 10,421
—
162,388
$
7,629
138,225
$ 1,309
13,849
$ 1,219
6,716
$ 10,157
$ 264
158,790
3,598
(a) Electric Utilities and Infrastructure includes $948 million of Impairment charges and a reversal of $152 million included in Regulated electric operating revenue related to the CCR Settlement Agreement filed with the
NCUC. Additionally, Electric Utilities and Infrastructure includes $19 million of Impairment charges related to the Clemson University Combined Heat and Power Plant, $5 million of Impairment charges related to the gas
pipeline assets and $16 million of shareholder contributions within Operations, maintenance and other related to Duke Energy Carolinas’ and Duke Energy Progress’ 2019 North Carolina rate cases. See Note 3 for additional
information.
(b) Gas Utilities and Infrastructure includes $2.1 billion recorded within Equity in (losses) earnings of unconsolidated affiliates and $7 million of Impairment charges related to gas pipeline investments. See Notes 3 and 12 for
additional information.
(c) Other includes a $98 million reversal of 2018 severance costs due to a partial settlement in the Duke Energy Carolinas’ 2019 North Carolina rate case. See Note 3 and 20 for additional information.
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) (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)
Less noncontrolling interest
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
158,838
188
$ — $ 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
Other
Eliminations
Total
(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 3 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 12 for additional information.
$
8,263
135,561
$ 1,539
13,921
$ 1,423
6,020
$ 11,225
155,502
$
221
3,148
(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)
Less noncontrolling interest
Income 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
(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 23 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 3 for additional information.
(c) Gas Utilities and Infrastructure includes an after-tax impairment charge of $42 million for the investment in Constitution. See Note 12 for additional information.
(d) Commercial Renewables includes an impairment charge of $91 million, net of $2 million Noncontrolling interests, related to goodwill. See Note 11 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 1 for the Piedmont merger and Note 20 for severance charges.
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) In February 2018, Duke Energy sold Beckjord, a nonregulated facility retired during 2014, and recorded a pretax loss of $106 million within Gains (Losses) on
Sales of Other Assets and Other, net and $1 million within Operation, maintenance and other on Duke Energy’s 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.
Geographical Information
Substantially all assets and revenues from continuing operations are within the U.S.
Major Customers
For the year ended December 31, 2020, revenues from one customer of Duke Energy Progress are $553 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)
2020
Electric Utilities and Infrastructure
Gas Utilities and Infrastructure
Commercial Renewables
Total Reportable Segments
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
Duke Energy Ohio
Retail
Electric
Wholesale
Electric
Retail
Natural Gas
Other
Total
Revenues
$ 18,898
—
—
$ 18,898
$ 19,745
—
—
$ 19,745
$ 19,013
—
—
$ 19,013
$
$
$
$
$
$
1,878
—
434
2,312
2,231
—
389
2,620
2,345
—
375
2,720
$
$
$
$
$
$
—
1,691
—
1,691
—
1,782
—
1,782
—
1,817
—
1,817
$
944
57
68
$ 1,069
$
855
84
98
$ 1,037
$
915
64
102
$ 1,081
$ 21,720
1,748
502
$ 23,970
$ 22,831
1,866
487
$ 25,184
$ 22,273
1,881
477
$ 24,631
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.
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) All Duke Energy Ohio assets and revenues from continuing operations are within the U.S.
(in millions)
Total revenues
Interest expense
Depreciation and amortization
Income tax expense (benefit)
Segment income (loss)/Net income
Capital expenditures
Segment assets
(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
Year Ended December 31, 2020
Electric
Utilities and
Infrastructure
Gas
Utilities and
Infrastructure
Total
Reportable
Segments
$ 1,405
$
$
85
200
19
162
548
6,615
$
$
$
453
17
78
26
96
286
3,380
$
$
$
1,858
102
278
45
258
834
9,995
Other
$ —
$ —
—
(2)
(6)
$ —
32
Eliminations
Total
$ —
$ 1,858
$ —
—
—
—
$ —
(2)
$
$
102
278
43
252
834
10,025
Year Ended December 31, 2019
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
$
$ — $
(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.
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
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) 3. 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
Retired generation facilities
Post-in-service carrying costs (PISCC) and deferred operating expenses
Deferred asset – Lee and Harris COLA
Hedge costs deferrals
Advanced metering infrastructure (AMI)
Demand side management (DSM)/Energy Efficiency (EE)
Vacation accrual
Deferred fuel and purchased power
COR settlement
NCEMPA deferrals
Nuclear deferral
Derivatives – natural gas supply contracts
CEP deferral
Amounts due from customers
Qualifying facility contract buyouts
Customer connect project
Manufactured gas plant (MGP)
ABSAT, coal ash basin closure
Deferred pipeline integrity costs
Deferred severance charges
Incremental COVID-19 expenses
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
Provision for rate refunds
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
121
Duke Energy
Progress Energy
December 31,
December 31,
2020
2019
2020
2019
$ 3,408
754
2,317
1,102
991
950
417
402
356
351
311
288
221
213
128
124
123
122
117
110
107
105
104
98
92
86
76
589
14,062
1,641
$ 4,084
739
2,391
1,399
1,042
1,019
331
329
388
356
338
343
214
528
133
72
107
117
76
36
121
65
102
65
79
—
—
544
15,018
1,796
$1,357
685
875
893
991
—
363
51
32
148
102
241
42
162
33
124
35
—
—
—
107
55
—
27
—
29
23
158
6,533
$ 1,843
668
897
1,214
1,042
—
266
33
38
129
114
241
41
305
35
72
40
—
—
—
121
37
—
15
—
—
—
141
7,292
758
946
$12,421
$13,222
$5,775
$ 6,346
$ 7,368
5,883
1,512
344
177
51
18
1,053
$ 7,872
5,756
1,100
370
176
34
1
739
$2,411
2,666
—
123
—
—
—
491
$ 2,595
2,561
—
123
—
—
1
275
16,406
16,048
5,691
5,555
1,377
784
640
330
$15,029
$15,264
$5,051
$ 5,225
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 9 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 9 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 22 for additional detail.
COR settlement. Represents approved COR settlements that are being
amortized over the average remaining lives, at the time of approval, of the
associated assets.
NCEMPA deferrals. Represents retail allocated cost deferrals and returns
associated with the additional ownership interest in assets acquired from
NCEMPA in 2015.
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.
Derivatives – natural gas supply contracts. Represents costs for
certain long-dated, fixed quantity forward gas supply contracts, which are
recoverable through PGA clauses.
CEP deferral. Represents deferred depreciation, PISCC and deferred
property tax for Duke Energy Ohio Gas capital assets for the Capital Expenditure
Program (CEP).
Amounts due from customers. Relates primarily to margin decoupling
and IMR recovery mechanisms.
Qualifying facility contract buyouts. Represents termination payments
for regulatory recovery through the capacity clause.
Customer connect project. Represents incremental operating expenses
and carrying costs on deferred amounts related to the deployment of the new
customer information system known as the Customer Connect Project.
Storm cost deferrals. Represents deferred incremental costs incurred
MGP. Represents remediation costs incurred at former MGP sites and the
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.
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.
Deferred asset – Lee and Harris COLA. Represents deferred costs
incurred for the canceled Lee and Harris nuclear projects.
Hedge costs deferrals. Amounts relate to unrealized gains and losses
on derivatives recorded as a regulatory asset or liability, respectively, until the
contracts are settled.
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 future recovery of net book value
of electromechanical meters that have been replaced with AMI meters at Duke
Energy Indiana.
DSM/EE. Deferred costs related to various DSM and EE programs
recoverable through various mechanisms.
Vacation accrual. Represents vacation entitlement, which is generally
recovered in the following year.
Deferred fuel and purchased power. Represents certain energy-
related costs that are recoverable or refundable as approved by the applicable
regulatory body.
deferral of costs to be incurred at Duke Energy Ohio’s East End and West End
sites.
ABSAT, coal ash basin closure. Represents deferred depreciation and
returns associated with Ash Basin Strategic Action Team (ABSAT) capital assets
related to converting the ash handling system from wet to dry.
Deferred pipeline integrity costs. Represents pipeline integrity
management costs in compliance with federal regulations recovered through a
rider mechanism.
Deferred severance charges. Represents costs incurred for employees
separation from Duke Energy.
Incremental COVID-19 expenses. Represents incremental costs
related to ensuring continuity and quality of service in a safe manner during the
COVID-19 pandemic.
Net regulatory liability related to income taxes. Amounts for all
registrants include regulatory liabilities related primarily to impacts from the Tax
Act. See Note 23 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.
Provisions for rate refunds. Represents estimated amounts due to
customers based on recording interim rates subject to refund.
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
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) 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.
Duke Energy Progress and Duke Energy Florida also have restrictions
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, 2020.
Duke Energy Indiana has certain dividend restrictions as a result of the
agreement entered in January 2021 to sell a minority interest to GIC. Duke
Energy Indiana will not declare a dividend prior to the first closing, which is
expected to be completed in the second quarter of 2021, and will declare
dividends between the first closing and the second closing, which is required
to be completed no later than January 2023, in accordance with the sale
agreement. See additional information in Note 1.
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, 2020.
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.
123
RATE-RELATED INFORMATION
The NCUC, PSCSC, FPSC, IURC, PUCO, TPUC and KPSC approve rates for
retail electric and natural gas services within their states. The FERC approves
rates for electric sales to wholesale customers served under cost-based
rates (excluding Ohio and Indiana), as well as sales of transmission service.
The FERC also regulates certification and siting of new interstate natural gas
pipeline projects.
Duke Energy Carolinas and Duke Energy Progress
2021 Coal Ash Settlement
On January 22, 2021, Duke Energy Carolinas and Duke Energy Progress
entered into the Coal Combustion Residuals Settlement Agreement (the “CCR
Settlement Agreement”) with the North Carolina Public Staff (Public Staff), the
North Carolina Attorney General’s Office and the Sierra Club (collectively, the
“Settling Parties”), which was filed with the NCUC on January 25, 2021. The
CCR Settlement Agreement resolves all coal ash prudence and cost recovery
issues in connection with 2019 rate cases filed by Duke Energy Carolinas and
Duke Energy Progress with the NCUC, as well as the equitable sharing issue
on remand from the 2017 Duke Energy Carolinas and Duke Energy Progress
North Carolina rate cases as a result of the December 11, 2020, North Carolina
Supreme Court opinion. The settlement also provides clarity on coal ash cost
recovery in North Carolina for Duke Energy Carolinas and Duke Energy Progress
through January 2030 and February 2030 (the “Term”), respectively.
Duke Energy Carolinas and Duke Energy Progress agreed not to
seek recovery of approximately $1 billion of systemwide deferred coal ash
expenditures, but will retain the ability to earn a debt and equity return during
the amortization period, which shall be five years in the pending 2019 North
Carolina rate cases and will be set by the NCUC in future rate case proceedings.
The equity return and the amortization period on deferred coal ash costs under
the 2017 Duke Energy Carolinas and Duke Energy Progress North Carolina rate
cases will remain unaffected. The equity return on deferred coal ash costs under
the 2019 North Carolina rate cases and future rate cases in North Carolina will
be set at 150 basis points lower than the authorized return on equity then in
effect, with a capital structure composed of 48% debt and 52% equity. Duke
Energy Carolinas and Duke Energy Progress retain the ability to earn a full
WACC return during the deferral period, which is the period from when costs are
incurred until they are recovered in rates.
The Settling Parties agreed that execution by Duke Energy Carolinas and
Duke Energy Progress of a settlement agreement between themselves and
the NCDEQ dated December 31, 2019, (the “DEQ Settlement”) and the coal
ash management plans included therein or subsequently approved by DEQ
are reasonable and prudent. The Settling Parties retain the right to challenge
the reasonableness and prudence of actions taken by Duke Energy Carolinas
and Duke Energy Progress and costs incurred to implement the scope of work
agreed upon in the DEQ Settlement, after February 1, 2020, and March 1,
2020, for Duke Energy Carolinas and Duke Energy Progress, respectively. The
Settling Parties further agreed to waive rights through the Term to challenge
the reasonableness or prudence of Duke Energy Carolinas’ and Duke Energy
Progress’ historical coal ash management practices, and to waive the right to
assert any arguments that future coal ash costs, including financing costs, shall
be shared between either company and customers through equitable sharing or
any other rate base or return adjustment that shares the revenue requirement
burden of coal ash costs not otherwise disallowed due to imprudence.
The Settling Parties agreed to a sharing arrangement for future coal ash
insurance litigation proceeds between Duke Energy Carolinas and Duke Energy
Progress and North Carolina customers, if achieved.
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 settlement is subject to the review and approval of the NCUC. The
Settling Parties requested an expedited review by the NCUC and anticipate an
order on the pending 2019 North Carolina rate cases for Duke Energy Carolinas
and Duke Energy Progress by the second quarter of 2021. On January 29, 2021,
Duke Energy Carolinas and Duke Energy Progress filed joint motions with the
Settling Parties seeking approval of the CCR Settlement Agreement, along with
supporting testimony and exhibits from Duke Energy Carolinas and Duke Energy
Progress. On February 5, 2021, the Public Staff filed testimony and exhibits
supporting the CCR Settlement Agreement.
As a result of the CCR Settlement Agreement, Duke Energy Carolinas and
Duke Energy Progress recorded a pretax charge of approximately $454 million
and $494 million, respectively, in the fourth quarter of 2020 to Impairment
charges and a reversal of approximately $50 million and $102 million,
respectively, to Regulated electric operating revenues on the respective
Consolidated Statements of Operations.
COVID-19 Filings
North Carolina
On March 10, 2020, Governor Roy Cooper declared a state of emergency
due to the COVID-19 pandemic. On March 19, 2020, the NCUC issued an
order directing that utilities under its jurisdiction suspend disconnections
for nonpayment of utility bills during the state of emergency and allow
for customers to enter into payment arrangements to pay off arrearages
accumulated during the state of emergency after the end of the state of
emergency. Additionally, to help mitigate the financial impacts of the COVID-19
pandemic on their customers, on March 19, 2020, Duke Energy Carolinas and
Duke Energy Progress filed a request with the NCUC seeking authorization to
waive: (1) any late payment charges incurred by a residential or nonresidential
customer, effective March 21, 2020; (2) the application of fees for checks
returned for insufficient funds for residential and nonresidential customers;
(3) the reconnection charge when a residential or nonresidential customer
seeks to have service restored for those customers whose service was recently
disconnected for nonpayment and to work with customers regarding the other
requirements to restore service, including re-establishment of credit; and (4)
the fees and charges associated with the use of credit cards or debit cards to
pay residential electric utility bills, effective March 21, 2020. The NCUC granted
the companies’ request on March 20, 2020.
On July 29, 2020, the NCUC issued its Order Lifting Disconnection
Moratorium and Allowing Collection of Arrearages Pursuant to Special
Repayment Plans. The order contained the following: (1) public utilities may
resume customer disconnections due to nonpayment for bills first rendered on
or after September 1, 2020, after appropriate notice; (2) the late fee moratorium
will continue through the end of the state of emergency or until further order
of the Commission; (3) Duke Energy utilities may reinstate fees for checks
returned for insufficient funds as well as transaction fees for use of credit cards
or debit cards for bills first rendered on or after September 1, 2020; and (4)
no sooner than September 1, 2020, the collection of past-due or delinquent
accounts accrued up to and including August 31, 2020, may proceed subject to
conditions. Duke Energy Carolinas and Duke Energy Progress resumed normal
billing practices as of October 1, 2020, with the exception of the billing of late
payment charges. Customers were notified of the resumption of normal billing
practices, the option of deferred payment arrangements and where to find
assistance, if necessary. Service disconnections for nonpayment for residential
customers resumed on November 2, 2020.
Duke Energy Carolinas and Duke Energy Progress filed a joint petition on
August 7, 2020, with the NCUC for deferral treatment of incremental costs and
waived customer fees due to the COVID-19 pandemic. Comments on the joint
petition were filed on November 5, 2020, and reply comments were filed on
November 30, 2020. Duke Energy Carolinas and Duke Energy Progress cannot
predict the outcome of this matter.
South Carolina
On March 13, 2020, Governor Henry McMaster declared a state of
emergency due to the COVID-19 pandemic. The governor also issued a letter
on March 14, 2020, to the ORS Executive Director regarding the suspension of
disconnection of essential utility services for nonpayment. On March 18, 2020,
the PSCSC issued an order approving such waivers, and also approved waivers
for regulations related to late fees and reconnect fees. The PSCSC’s order also
required utilities to track the financial impacts of actions taken pursuant to such
waivers for possible reporting to the PSCSC.
On May 13, 2020, the ORS filed a letter with the PSCSC that included
a request from Governor McMaster that utilities proceed with developing and
implementing plans for phasing in normal business operations. On May 14, 2020,
the PSCSC conditionally vacated the regulation waivers regarding termination of
service and suspension of disconnect fees. Prior to termination, utilities are to
refer past-due customers to local organizations for assistance and/or deferred
payment arrangements. Duke Energy Carolinas and Duke Energy Progress filed a
report on June 30, 2020, as required by PSCSC order, reporting revenue impact,
costs and savings related to COVID-19 to date. On August 14, 2020, Duke Energy
Carolinas and Duke Energy Progress filed a joint petition with the PSCSC for
approval of an accounting order to defer incremental COVID-19 related costs
incurred through June 30, 2020, and for the ongoing months during the duration
of the COVID-19 pandemic. The deferral request did not include lost revenues.
Updates on cost impacts were filed on September 30, 2020, and included
financial impacts through the end of August 2020. On October 16, 2020, the ORS
requested the PSCSC delay taking formal action on the deferral request until
the ORS and any intervenors complete discovery. The PSCSC issued an order on
October 21, 2020, to grant additional time to complete discovery until January
20, 2021, and to establish a procedural schedule. Updates on cost impacts were
filed on December 30, 2020, and included financial impacts through November
30, 2020. On January 15, 2021, ORS requested the PSCSC suspend the dates
for the ORS report and public hearing. The ORS conferred with the companies
regarding the status of the docket, and the parties mutually agreed that recently
enacted federal laws addressing COVID-19 aid and recovery should be studied
before further action is taken in this docket. On January 27, 2021, the PSCSC
voted to grant the ORS request to suspend the virtual public hearing. ORS is to
file its report on or before March 29, 2021.
On August 17, 2020, Duke Energy Carolinas and Duke Energy Progress
filed an update on their planned return to normal operations during the
COVID-19 pandemic. Normal billing practices resumed in South Carolina as
of October 1, 2020, and service disconnections for nonpayment resumed on
October 12, 2020. Customers were notified of the resumption of normal billing
practices, the option of payment arrangements and where to find assistance, if
necessary. Duke Energy Carolinas and Duke Energy Progress cannot predict the
outcome of this matter.
2020 North Carolina Storm Securitization Filings
On October 26, 2020, Duke Energy Carolinas and Duke Energy Progress
filed a joint petition with the NCUC, as agreed to in partial settlements reached
in the 2019 North Carolina Rate Cases for Duke Energy Carolinas and Duke
Energy Progress, seeking authorization for the financing of the costs of each
utility’s storm recovery activities required as a result of Hurricane Florence,
Hurricane Michael, Hurricane Dorian and Winter Storm Diego. Specifically,
Duke Energy Carolinas and Duke Energy Progress requested that the NCUC find
that their storm recovery costs and related financing costs are appropriately
financed by debt secured by storm recovery property, and that the Commission
issue financing orders by which each utility may accomplish such financing
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) using a securitization structure. On January 27, 2021, Duke Energy Carolinas,
Duke Energy Progress and the Public Staff filed an Agreement and Stipulation
of Partial Settlement, which is subject to review and approval of the NCUC,
resolving certain accounting issues, including agreement to support an
18- to 20-year bond period. The total revenue requirement over a proposed
20-year bond period for the storm recovery charges is approximately $287
million for Duke Energy Carolinas and $920 million for Duke Energy Progress.
A remote evidentiary hearing ended on January 29, 2021, and on February 1,
2021, the NCUC granted a motion by Duke Energy Carolinas and Duke Energy
Progress for a temporary 30-day waiver of the 135-day time frame for the NCUC
to issue orders on the joint petition, extending the deadline for the NCUC to issue
an order to no later than April 9, 2021. Duke Energy Carolinas and Duke Energy
Progress cannot predict the outcome of this matter.
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(c)
Storm cost deferrals
Retired generation facilities(c)
PISCC(c)
Deferred asset – Lee COLA
Hedge costs deferrals(c)
AMI
DSM/EE
Vacation accrual
Deferred fuel and purchased power
COR settlement
Nuclear deferral
Customer connect project
ABSAT, coal ash basin closure
Deferred severance charges
Incremental COVID-19 expenses
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
Provision for rate refunds(c)
Accrued pension and OPEB(c)
Deferred fuel and purchased power
Other
Total regulatory liabilities
Less: current portion
Total noncurrent regulatory liabilities
December 31,
2020
Earns/Pays
a Return
Recovery/Refund
Period Ends
2019
(b)
(i)
(b)
2023
(b)
(b)
2041
(b)
(g)
2021
2022
(b)
2022
(b)
(b)
2022
(b)
(b)
(b)
(f)
(b)
(i)
2020
(b)
(h)
Yes
Yes
Yes
Yes
Yes
Yes
(g)
(e)
Yes
Yes
Yes
Yes
Yes
Yes
Yes
(e)
$ 1,414
427
205
11
32
324
174
154
46
84
42
95
88
50
71
57
31
164
3,469
473
$ 1,696
477
178
16
33
350
198
166
100
80
222
98
67
28
50
—
—
151
3,910
550
$ 2,996
$ 3,360
$ 2,874
1,975
1,512
170
32
18
427
7,008
$ 3,060
1,936
1,100
175
39
—
368
6,678
473
255
$ 6,535
$ 6,423
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 23. Portions are 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)
(e) 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.
(f) Recovered over the life of the associated assets.
(g)
(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) Recovered primarily over the average remaining service periods or life expectancies of employees covered by the benefit plans. See Note 22 for additional detail.
Includes incentives on DSM/EE investments and is recovered through an annual rider mechanism.
125
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
On August 25, 2017, Duke Energy Carolinas filed an application with the
NCUC for a rate increase for retail customers of approximately $647 million.
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. 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 cost of service penalty
by reducing the annual recovery of deferred coal ash costs by $14 million per
year over a five-year recovery period.
The North Carolina Attorney General and other parties separately filed
Notices of Appeal to the North Carolina Supreme Court. The North Carolina
Supreme Court consolidated the Duke Energy Carolinas and Duke Energy
Progress appeals. On December 11, 2020, the North Carolina Supreme Court
issued an opinion on the consolidated appeals of the 2018 Duke Energy
Carolinas and Duke Energy Progress rate case orders which affirmed, in part,
and reversed and remanded, in part, the NCUC’s decisions. In the Opinion,
the court upheld the NCUC’s decision to include coal ash costs in the cost of
service, as well as the NCUC’s discretion to allow a return on the unamortized
balance of coal ash costs. The court also remanded to the NCUC a single issue
to consider the assessment of support for the Public Staff’s equitable sharing
argument. In response to a NCUC order seeking comments on the proposed
procedure on remand, on January 11, 2021, Duke Energy Carolinas, Duke
Energy Progress, the Public Staff, the North Carolina Attorney General, Sierra
Club and Carolina Industrial Group for Fair Utility Rates II and III filed joint
comments proposing that the NCUC not hold additional evidentiary hearings,
but instead rely upon existing records in the 2017 North Carolina rate cases, or
in the alternative the records in the 2019 North Carolina rate cases, in deciding
the issue on remand. On January 22, 2021, Duke Energy Carolinas and Duke
Energy Progress entered into the CCR Settlement Agreement with the Settling
Parties, which was filed with the NCUC on January 25, 2021. For information
on a proposed settlement pending before the NCUC, see “2021 Coal Ash
Settlement.” Duke Energy Carolinas cannot predict the outcome of this matter.
2019 North Carolina Rate Case
On September 30, 2019, Duke Energy Carolinas filed an application
with the NCUC for a net rate increase for retail customers of approximately
$291 million, which represented an approximate 6% increase in annual base
revenues. The gross rate case revenue increase request was $445 million,
which was offset by an EDIT rider of $154 million to return to customers North
Carolina and federal EDIT resulting from recent reductions in corporate tax
rates. The request for a rate increase was 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 requested rates be effective no later than August 1, 2020.
The NCUC established a procedural schedule with an evidentiary hearing to
begin on March 23, 2020. On March 16, 2020, in consideration of public health
and safety as a result of the COVID-19 pandemic, Duke Energy Carolinas filed
a motion with the NCUC seeking a suspension of the procedural schedule in
the rate case, including issuing discovery requests, and postponement of the
evidentiary hearing for 60 days. Also on March 16, 2020, the NCUC issued an
Order Postponing Hearing and Addressing Procedural Matters, which postponed
the evidentiary hearing until further order by the Commission.
On March 25, 2020, Duke Energy Carolinas and the Public Staff filed an
Agreement and Stipulation of Partial Settlement, which is subject to review and
approval of the NCUC, resolving certain issues in the base rate proceeding.
Major components of the settlement included:
• Removal of deferred storm costs from the rate case;
• Filing a petition seeking to securitize the deferred storm costs within
120 days of a commission order in this rate case regarding the
reasonableness and prudency of the storm costs;
• Agreement of certain assumptions to demonstrate the quantifiable
benefits to customers of a securitization financing; and
• Agreement on certain accounting matters, including recovery of
employee incentives, severance, aviation costs and executive
compensation.
On May 6, 2020, Duke Energy Carolinas, Duke Energy Progress and
the Public Staff filed a joint motion requesting that the NCUC issue an order
scheduling one consolidated evidentiary hearing to consider the companies’
applications for net rate increases. On June 17, 2020, the NCUC issued an
order adopting procedures for the expert witness hearings to take place in
three phases: (1) a hearing on issues common to both rate cases conducted
remotely; (2) a hearing on Duke Energy Carolinas specific rate case issues,
followed immediately by; (3) a hearing on Duke Energy Progress specific rate
case issues. On July 24, 2020, Duke Energy Carolinas filed its request for
approval of its notice to customers required to implement temporary rates.
On July 27, 2020, Duke Energy Carolinas filed a joint motion with Duke Energy
Progress and the Public Staff notifying the Commission that the parties reached
a joint partial settlement with the Public Staff. Also, on July 27, 2020, Duke
Energy Carolinas filed a letter stating that it intended to update its temporary
rates calculation to reflect the terms of the partial settlement.
On July 31, 2020, Duke Energy Carolinas and the Public Staff filed
a Second Agreement and Stipulation of Partial Settlement (Second Partial
Settlement), which is subject to review and approval of the NCUC, resolving
certain remaining issues in the base rate proceeding. Major components of the
Second Partial Settlement included:
• A return on equity of 9.6% and a capital structure of 52% equity and
48% debt;
• Agreement on amortization over a five-year period for unprotected
federal EDIT flowbacks to customers;
• Agreement on the inclusion of plant in service and other revenue
requirement updates through May 31, 2020, subject to Public Staff
review. Annual revenue requirement associated with the May 31
update is estimated at $45 million; and
• Settlement to allow the deferral of costs for certain grid projects placed
in service between June 1, 2020, and December 31, 2022, totaling
$0.8 billion.
126
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 remaining items litigated at hearing included recovery of deferred
coal ash compliance costs that are subject to asset retirement obligation
accounting, implementation of new depreciation rates and the amortization
period of the loss on the hydro station sale.
On August 4, 2020, Duke Energy Carolinas filed an amended motion
for approval of its amended notice to customers, seeking to exercise its
statutory right to implement temporary rates subject to refund on or after
August 24, 2020. The revenue requirement to be recovered, subject to
refund, through the temporary rates is based on and consistent with the
base rate component of the Second Partial Settlement with the Public Staff
and excludes the items to be litigated noted above. Duke Energy Carolinas
will not begin the amortization or implementation of these items until a final
order is issued in the rate case and new base rates are implemented. These
items will also be excluded when determining whether a refund of amounts
collected through these temporary rates is needed. In addition, Duke Energy
Carolinas also seeks authorization to place a temporary decrement EDIT
Rider into effect, concurrent with the temporary base rate change. The
temporary rate changes are not final rates and remain subject to the NCUC’s
determination of the just and reasonable rates to be charged by Duke Energy
Carolinas on a permanent basis. The NCUC approved the August 4, 2020
amended temporary rates motion on August 6, 2020, and temporary rates
went into effect on August 24, 2020.
The Duke Energy Carolinas evidentiary hearing concluded on
September 18, 2020, and post-hearing filings were made with the NCUC
from all parties by November 4, 2020. On January 22, 2021, Duke Energy
Carolinas and Duke Energy Progress entered into the CCR Settlement
Agreement with the Settling Parties, which was filed with the NCUC on
January 25, 2021. Duke Energy Carolinas expects the NCUC to issue an
order on its net rate increase by the second quarter of 2021. For information
on a proposed settlement pending before the NCUC, see “2021 Coal Ash
Settlement.” 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.
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 PSCSC 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 Supreme Court of South Carolina.
On November 20, 2019, the South Carolina Energy Users Committee filed
a Notice of Appeal and the ORS filed a Notice of Cross Appeal with the
Supreme Court of South Carolina. On February 12, 2020, Duke Energy
Carolinas and the ORS filed a joint motion to extend briefing schedule
deadlines, which was approved by the Supreme Court of South Carolina
on February 20, 2020. On March 10, 2020, the ORS filed a consent motion
requesting withdrawal of their appeal, which was granted by the Supreme
Court of South Carolina on April 30, 2020. Initial briefs were filed on April
21, 2020, which included the South Carolina Energy User’s Committee brief
arguing that the PSCSC erred in allowing Duke Energy Carolinas’ recovery of
costs related to the Lee Nuclear Station. Response briefs were filed on July
6, 2020, and reply briefs were filed on August 11, 2020. Oral arguments
have not yet been scheduled by the Supreme Court of South Carolina. Based
on legal analysis and the filing of the appeal, Duke Energy Carolinas has not
recorded an adjustment for its deferred coal ash costs in this matter. Duke
Energy Carolinas cannot predict the outcome of this matter.
127
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
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)
Retired generation facilities
PISCC and deferred operating expenses
Deferred asset – Harris COLA
Hedge costs deferrals
AMI
DSM/EE(e)
Vacation accrual
Deferred fuel and purchased power
COR settlement
NCEMPA deferrals
Nuclear deferral
Customer connect project
ABSAT, coal ash basin closure
Deferred severance charges
Incremental COVID-19 expenses
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
Provision for rate refunds
Other
Total regulatory liabilities
Less: current portion
Total noncurrent regulatory liabilities
December 31,
2020
Earns/Pays
a Return
Recovery/Refund
Period Ends
2019
(b)
(c)
(k)
(b)
(b)
2054
(b)
(b)
(b)
(i)
2021
2022
(e)
2042
2022
(b)
(b)
2022
(b)
(b)
(b)
(j)
(b)
(h)
Yes
Yes
Yes
Yes
(i)
(f)
Yes
(g)
Yes
Yes
Yes
Yes
Yes
$ 1,347
683
393
785
189
51
32
89
57
224
42
158
33
124
35
25
27
29
23
122
4,468
$ 1,834
509
423
801
83
33
38
85
61
216
41
266
35
72
40
17
15
—
—
109
4,678
492
526
$ 3,976
$ 4,152
$ 1,662
2,666
123
473
4,924
$ 1,802
2,294
123
249
4,468
530
236
$ 4,394
$ 4,232
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 22 for additional detail.
(l)
Includes incentives on DSM/EE investments and is recovered through an annual rider mechanism.
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. Portions are included in rate base.
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)
2017 North Carolina Rate Case
On June 1, 2017, Duke Energy Progress filed an application with the
NCUC for a rate increase for retail customers of approximately $477 million,
which was subsequently adjusted to $420 million. On November 22, 2017,
Duke Energy Progress and the Public Staff filed an Agreement and Stipulation
of Partial Settlement resolving certain portions of the proceeding. Terms of
the settlement included a return on equity of 9.9% and a capital structure of
52% equity and 48% debt. On February 23, 2018, the NCUC issued an order
approving the stipulation. 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. The Public Staff, the
North Carolina Attorney General and the Sierra Club filed notices of appeal to the
North Carolina Supreme Court.
The North Carolina Supreme Court consolidated the Duke Energy Carolinas
and Duke Energy Progress appeals. On December 11, 2020, the North Carolina
Supreme Court issued an opinion on the consolidated appeals of the 2018 Duke
Energy Carolinas and Duke Energy Progress rate case orders which affirmed, in
part, and reversed and remanded, in part, the NCUC’s decisions. In the Opinion,
the court upheld the NCUC’s decision to include coal ash costs in the cost of
service, as well as the NCUC’s discretion to allow a return on the unamortized
balance of coal ash costs. The court also remanded to the NCUC a single issue
to consider the assessment of support for the Public Staff’s equitable sharing
argument. In response to a NCUC order seeking comments on the proposed
procedure on remand, on January 11, 2021, Duke Energy Carolinas, Duke Energy
Progress, the Public Staff, the North Carolina Attorney General, Sierra Club and
Carolina Industrial Group for Fair Utility Rates II and III filed joint comments
proposing that the NCUC not hold additional evidentiary hearings, but instead
rely upon existing records in the 2017 North Carolina rate cases or in the
alternative the records in the 2019 North Carolina rate cases, in deciding the
issue on remand. On January 22, 2021, Duke Energy Progress and Duke Energy
Carolinas entered into the CCR Settlement Agreement with the Settling Parties,
which was filed with the NCUC on January 25, 2021. For information on the
proposed settlement pending before the NCUC, see “2021 Coal Ash Settlement.”
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 represented an approximate 12.3% increase in annual base revenues.
The gross rate case revenue increase request was $586 million, which was
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 was driven by major capital
investments subsequent to the previous base rate case, coal ash pond closure
costs, accelerated coal plant depreciation and deferred 2018 storm costs. Duke
Energy Progress seeks to defer and recover incremental Hurricane Dorian storm
costs in this proceeding and requests rates be effective no later than September
1, 2020. As a result of the COVID-19 pandemic, on March 24, 2020, the NCUC
suspended the procedural schedule and postponed the previously scheduled
evidentiary hearing on this matter indefinitely. On April 7, 2020, the NCUC
issued an order partially resuming the procedural schedule requiring intervenors
to file direct testimony on April 13, 2020. Public Staff filed supplemental direct
testimony on April 23, 2020. Duke Energy Progress filed rebuttal testimony on
May 4, 2020.
On June 2, 2020, Duke Energy Progress and the Public Staff filed an
Agreement and Stipulation of Partial Settlement, which is subject to review and
approval of the NCUC, resolving certain issues in the base rate proceeding.
Major components of the settlement included:
• Removal of deferred storm costs from the rate case;
• Filing a petition seeking to securitize the deferred storm costs within
120 days of a commission order in this rate case regarding the
reasonableness and prudency of the storm costs;
• Agreement of certain assumptions to demonstrate the quantifiable
benefits to customers of a securitization financing;
• Agreement that the Asheville CC project is complete and in service and
agreement on the amount to be included in rate base; and
• Agreement on certain accounting matters, including recovery of
employee incentives, severance, aviation costs and executive
compensation.
On May 6, 2020, Duke Energy Progress, Duke Energy Carolinas and
the Public Staff filed a joint motion requesting that the NCUC issue an order
scheduling one consolidated evidentiary hearing to consider the companies’
applications for net rate increases. On June 17, 2020, the NCUC issued an
order adopting procedures for the expert witness hearings to take place in three
phases: (1) a hearing on issues common to both rate cases conducted remotely;
(2) a hearing on Duke Energy Carolinas specific rate case issues, followed
immediately by; (3) a hearing on Duke Energy Progress specific rate case
issues. On July 27, 2020, Duke Energy Progress filed a joint motion with Duke
Energy Carolinas and the Public Staff notifying the Commission that the parties
reached a joint partial settlement with the Public Staff.
On July 31, 2020, Duke Energy Progress and the Public Staff filed a
Second Agreement and Stipulation of Partial Settlement (Second Partial
Settlement), which is subject to review and approval of the NCUC, resolving
certain remaining issues in the base rate proceeding. Major components of the
Second Partial Settlement included:
• A return on equity of 9.6% and a capital structure of 52% equity and
48% debt;
• Agreement on amortization over a five-year period for unprotected
federal EDIT flowbacks to customers;
• Agreement on the inclusion of plant in service and other revenue
requirement updates through May 31, 2020, subject to Public Staff
review. Annual revenue requirement associated with the May 31 update
is estimated at $25 million; and
• Settlement to allow the deferral of costs for certain grid projects
placed in service between June 1, 2020, and December 31, 2022, of
$0.5 billion.
The remaining items litigated at hearing included recovery of deferred coal
ash compliance costs that are subject to asset retirement obligation accounting
and implementation of new depreciation rates.
On August 7, 2020, Duke Energy Progress filed a motion for approval of
notice required to implement temporary rates, seeking to exercise its statutory
right to implement temporary rates subject to refund on or after September 1,
2020. The revenue requirement to be recovered subject to refund through the
temporary rates is based on and consistent with the terms of the base rate
129
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) component of the settlement agreements with the Public Staff and excludes
items to be litigated noted above. Duke Energy Progress will not begin the
amortization or implementation of these items until a final determination is
issued in the rate case and new base rates are implemented. These items will
also be excluded when determining whether a refund of amounts collected
through these temporary rates is needed. In addition, Duke Energy Progress
also seeks authorization to place a temporary decrement EDIT Rider into effect,
concurrent with the temporary base rate change. The temporary rate changes
are not final rates and remain subject to the NCUC’s determination of the just
and reasonable rates to be charged by Duke Energy Progress on a permanent
basis. The NCUC approved the August 7, 2020 temporary rates motion on
August 11, 2020, and temporary rates went into effect on September 1, 2020.
The Duke Energy Progress evidentiary hearing concluded on October 6,
2020, and post-hearing filings were filed with the NCUC from all parties by
December 4, 2020. On January 22, 2021, Duke Energy Progress and Duke
Energy Carolinas entered into the CCR Settlement Agreement with the Settling
Parties, which was filed with the NCUC on January 25, 2021. Duke Energy
Progress expects the NCUC to issue an order on its net rate increase by the
second quarter of 2021. For information on a proposed settlement pending
before the NCUC, see “2021 Coal Ash Settlement.” Duke Energy Progress cannot
predict the outcome of this matter.
Hurricane Dorian
Hurricane Dorian reached the Carolinas in September 2019 as a
Category 2 hurricane making landfall within Duke Energy Progress’ service
territory. Total estimated incremental operation and maintenance expenses
incurred to repair and restore the system are approximately $168 million with
an additional $4 million in capital investments made for restoration efforts.
Approximately $145 million and $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, 2020, and December 31,
2019, respectively. A request for an accounting order to defer incremental storm
costs associated with Hurricane Dorian was included in Duke Energy Progress’
October 30, 2019, general rate case filing with the NCUC. Terms of the June 2,
2020, Agreement and Stipulation of Partial Settlement removed incremental
storm costs from the general rate case. A petition seeking to securitize these
costs, along with costs from Hurricane Florence, Hurricane Michael and Winter
Storm Diego, was filed on October 26, 2020, with the NCUC. For information on
the securitization filing, see “2020 North Carolina Storm Securitization Filings.”
Duke Energy Progress cannot predict the outcome of this matter.
On February 7, 2020, a petition was filed with the PSCSC in the 2019
storm deferrals docket requesting deferral of approximately $22 million in
operation and maintenance expenses to an existing storm deferral balance
previously approved by the PSCSC. The PSCSC voted to approve the request on
March 4, 2020, and issued a final order on April 7, 2020. On July 1, 2020, Duke
Energy Progress filed a supplemental true up reducing the actual costs to $17
million.
2018 South Carolina Rate Case
On November 8, 2018, Duke Energy Progress filed an application with the
PSCSC for a rate increase for retail customers of approximately $59 million.
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
PSCSC 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 Supreme Court of South Carolina. The ORS filed a Notice
of Cross Appeal on November 20, 2019. On February 12, 2020, Duke Energy
Progress and the ORS filed a joint motion to extend briefing schedule deadlines,
which was approved by the Supreme Court of South Carolina on February
20, 2020. On March 10, 2020, the ORS filed a consent motion requesting
withdrawal of their appeal, which was granted by the Supreme Court of South
Carolina on April 30, 2020. Initial briefs were filed on April 21, 2020. Response
briefs were filed on July 6, 2020, and reply briefs were filed on August 11, 2020.
Oral arguments have not yet been scheduled by the Supreme Court of South
Carolina. Based on legal analysis and the filing of the appeal, Duke Energy
Progress has not recorded an adjustment for its deferred coal ash costs in this
matter. Duke Energy Progress cannot predict the outcome of this matter.
Western Carolinas Modernization Plan
Duke Energy Progress retired the 376-MW Asheville coal-fired plant on
January 29, 2020, at which time the net book value, including associated ash
basin closure costs, of $214 million was transferred from Generation facilities to
be retired, net to Regulatory assets within Current Assets and Other Noncurrent
Assets on the Consolidated Balance Sheets.
On December 27, 2019, Asheville Combined Cycle Unit 5 Combustion
Turbine and Unit 6 Steam Turbine Generator and the common systems that
130
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) serve combined cycle units went into commercial operation. Duke Energy
Progress placed the Unit 7 Combustion Turbine into commercial operation in
simple-cycle mode on January 15, 2020. The Unit 8 Steam Turbine Generator
went into commercial operation on April 5, 2020. On June 2, 2020, Duke Energy
Progress filed a request with the PSCSC for an accounting order for the deferral
of post-in-service costs incurred in connection with the addition of the Asheville
combined-cycle generating plant. The petition requested the PSCSC issue an
accounting order authorizing Duke Energy Progress to defer post-in-service
costs including the Asheville combined-cycle’s depreciation expense, property
taxes, incremental operations and maintenance expenses and carrying costs at
WACC of approximately $8 million annually. On June 17, 2020, the PSCSC voted
to approve the petition and issued its final order on July 6, 2020.
On October 8, 2018, Duke Energy Progress filed an application with the
NCUC for a CPCN to construct the Hot Springs Microgrid Solar and Battery
Storage Facility, which was approved with certain conditions on May 10, 2019.
A hearing to update the NCUC on the status of the project was held on March 5,
2020. Construction began in May 2020 with commercial operation expected to
begin in October 2021.
On July 27, 2020, Duke Energy Progress filed an application with the
NCUC for a CPCN to construct the Woodfin Solar Facility, a 5-MW solar
generating facility to be constructed on a closed landfill in Buncombe County.
The expert hearing was held on November 18, 2020. Duke Energy Progress
cannot predict the outcome of this matter.
FERC Return on Equity Complaints
On October 11, 2019, NCEMPA filed a complaint at the FERC against Duke
Energy Progress pursuant to Section 206 of the Federal Power Act (FPA), alleging
that the 11% stated return on equity (ROE) component contained in the demand
formula rate in the Full Requirements Power Purchase Agreement (FRPPA)
between NCEMPA and Duke Energy Progress is unjust and unreasonable.
On July 16, 2020, the FERC set this matter for hearing and settlement judge
procedures and established a refund effective date of October 11, 2019. In its
order setting the matter for settlement, the FERC allowed for the consideration
of variations to the base transmission-related ROE methodology developed in its
Order No. 569-A, through the introduction of “specific facts and circumstances”
involving issues specific to the case. It is Duke Energy Progress’ view that,
in consideration of the specific facts and circumstances of risks under the
provisions of the FRPPA, the stated 11% ROE is just and reasonable. The
parties are currently in FERC settlement procedures. Duke Energy Progress
cannot predict the outcome of this matter.
On October 16, 2020, NCEMC filed a complaint at the FERC against Duke
Energy Progress pursuant to Section 206 of the FPA, alleging that the 11%
stated ROE component in the demand formula rate in the Power Supply and
Coordination Agreement between NCEMC and Duke Energy Progress is unjust
and unreasonable. Under FPA Section 206, the earliest refund effective date that
the FERC can establish is the date of the filing of the complaint. Duke Energy
Progress responded to the complaint on November 20, 2020, demonstrating that
the 11% ROE is just and reasonable for the service provided. The parties have
filed additional pleadings. The FERC has not issued an order, and there is no
deadline for the FERC to act. Duke Energy Progress cannot predict the outcome
of this matter.
131
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
Retired generation facilities(c)
Hedge costs deferrals
AMI(c)
DSM/EE(c)
Deferred fuel and purchased power
Qualifying facility contract buyouts
Customer connect project
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)
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
2019
$
2020
10
2
482
108
991
174
59
45
17
4
107
30
35
2,064
265
$
9
159
474
413
1,042
183
44
53
25
39
121
20
31
2,613
419
$ 1,799
$ 2,194
$
749
—
—
19
768
110
$
793
267
1
26
1,087
94
$
658
$
993
Yes
Yes
(e)
Yes
Yes
Yes
Yes
(f)
Yes
(d)
(d)
(f)
(d)
(b)
(b)
(g)
(b)
2036
(b)
2038
2032
2025
2022
2034
2037
(b)
(b)
(b)
(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) 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 22 for additional detail.
Earns commercial paper rate.
COVID-19 Filings
In March 2020, Governor Ron DeSantis directed the State Health Officer of
Florida to declare a public health emergency in Florida related to the COVID-19
pandemic. The governor also issued an Executive Order on March 9, 2020, in
which he declared a state of emergency in Florida and directed the Director of
the Division of Emergency Management to implement the state’s Comprehensive
Emergency Management Plan. On March 19, 2020, Duke Energy Florida filed a
request to modify its tariff to allow it to waive late fees for customers, and on
April 6, 2020, the FPSC issued an order approving the request. Duke Energy
Florida had already voluntarily waived reconnect fees and credit card fees and
ceased disconnecting customers for nonpayment. On April 2, 2020, Duke Energy
Florida filed a petition with the FPSC to accelerate a $78 million fuel cost refund
to customers in the month of May 2020. Typically, the refund would be made
over the course of 2021. The FPSC approved the petition on April 28, 2020. Duke
Energy Florida resumed normal billing practices as of August 24, 2020, with
the exception of the billing of late payment charges. Customers were notified
of the resumption of normal billing practices, the option of deferred payment
arrangements and where to find assistance, if necessary. Service disconnections
for nonpayment for residential customers resumed on October 5, 2020.
2021 Settlement Agreement
On January 14, 2021, Duke Energy Florida filed a Settlement Agreement
(the “Settlement”) with the FPSC. The parties to the Settlement include Duke
Energy Florida, the Office of Public Counsel (OPC), the Florida Industrial Power
Users Group, White Springs Agricultural Chemicals, Inc. d/b/a PCS Phosphate
and NUCOR Steel Florida, Inc. (collectively, the “Parties”).
Pursuant to the Settlement, the Parties agreed to a base rate stay-out
provision that expires year-end 2024; however, Duke Energy Florida is allowed
an increase to its base rates of an incremental $67 million in 2022, $49 million
in 2023 and $79 million in 2024, subject to adjustment in the event of tax
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)
reform during the years 2021, 2022 and 2023. The Parties also agreed to a
return on equity (“ROE”) band of 8.85% to 10.85% with a midpoint of 9.85%
based on a capital structure of 53% equity and 47% debt. The ROE band can be
increased by 25 basis points if the average 30-year U.S. Treasury rate increases
50 basis points or more over a six-month period in which case the midpoint
ROE would rise from 9.85% to 10.10%. Duke Energy Florida will also be able to
retain the DOE award of $173 million for spent nuclear fuel, which is expected
to be received in 2022, in order to mitigate customer rates over the term of
the Settlement. In return, Duke Energy Florida will be able to recognize the
$173 million into earnings from 2022 through 2024.
In addition to these terms, the Settlement contains provisions related
to the accelerated depreciation of Crystal River Units 4-5, the approval of
approximately $1 billion in future investments in new cost effective solar power,
the implementation of a new Electric Vehicle Charging Station Program and
the deferral and recovery of costs in connection with the implementation of
Duke Energy Florida’s Vision Florida program, which explores various emerging
non-carbon emitting generation technology, distributed technologies and
resiliency projects, among other things. The Settlement also resolves remaining
unrecovered storm costs for hurricanes Dorian and Michael.
The Settlement is subject to the review and approval of the FPSC, which
may occur in the second quarter of 2021. If the FPSC approves the Settlement,
the new rates will be effective January 1, 2022, with subsequent base rate
increases effective January 1, 2023, and January 1, 2024. Duke Energy Florida
cannot predict the outcome of this matter.
Storm Restoration Cost Recovery
Duke Energy Florida filed a petition with the FPSC on April 30, 2019, to
recover $223 million of estimated retail incremental storm restoration costs
for Hurricane Michael, consistent with the provisions in the 2017 Settlement,
and the FPSC approved the petition on June 11, 2019. The FPSC also approved
allowing 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. On May 19,
2020, Duke Energy Florida filed a supplemental true up reducing the actual
retail recoverable storm restoration costs related to Hurricane Michael by
approximately $3 million, resulting in a total request to recover $188 million
actual retail recoverable storm restoration costs, plus interest. On November
12, 2020, Duke Energy Florida and OPC requested a 90 day abatement to
engage in discussions to narrow the issues being litigated. The Prehearing
Officer approved this request on November 16, 2020, and ordered Duke Energy
Florida and OPC to update the commission on their discussions by February 12,
2021. Approximately $80 million and $204 million of these costs are included
in Regulatory assets within Current Assets and Other Noncurrent Assets on
the Consolidated Balance Sheets as of December 31, 2020, and December 31,
2019, respectively.
Duke Energy Florida filed a petition with the FPSC on December 19, 2019,
to recover $169 million of estimated retail incremental storm restoration costs
for Hurricane Dorian, consistent with the provisions in the 2017 Settlement
and the FPSC approved the petition on February 24, 2020. Approximately
$167 million of 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. The amount at December 31,
2020 was immaterial. The final actual amount of $145 million was filed on
September 30, 2020. Pursuant to the 2021 Settlement Agreement filed for FPSC
approval on January 14, 2021, all matters regarding storm cost recovery relating
to hurricanes Michael and Dorian have been resolved.
Clean Energy Connection
On July 1, 2020, Duke Energy Florida petitioned the FPSC for approval of a
voluntary solar program. The program consists of 10 new solar generating facilities
with combined capacity of approximately 750 MW. The program allows participants
to support cost-effective solar development in Florida by paying a subscription fee
based on per kilowatt-subscriptions and receiving a credit on their bill based on the
actual generation associated with their portion of the solar portfolio. The estimated
cost of the 10 new solar generation facilities is approximately $1 billion over the
next four years, and this investment will be included in base rates offset by the
revenue from the subscription fees. The credits will be included for recovery in the
fuel cost recovery clause. A remote hearing was held on November 17, 2020, and
post-hearing briefs were filed with the FPSC from all parties by December 9, 2020.
The FPSC voted to approve the program on January 5, 2021, and issued its written
order on January 26, 2021.
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 Crystal River Unit 3
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 (ADP), a joint venture between NorthStar Group Services, Inc. and Orano
USA LLC. The agreement will allow for completion of the decommissioning of
Crystal River Unit 3 by 2027, rather than 2074 as originally planned. Duke
Energy Florida will also sell and assign the spent nuclear fuel, storage canisters,
high-level waste and existing dry spent fuel storage installation and certain
related assets, together with certain associated liabilities and obligations to
ADP SF1, LLC. Duke Energy Florida expects that the assets of the Nuclear
Decommissioning Trust Fund as of December 31, 2020, will be sufficient to
cover the contract price. The U.S. Nuclear Regulatory Commission approved
the transaction on April 1, 2020, and the FPSC issued an order approving the
transaction on August 27, 2020. The transaction closed on October 1, 2020.
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 online 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.
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) Duke Energy Ohio
Regulatory Assets and Liabilities
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
PISCC and deferred operating expenses(c)
Hedge costs deferrals
AMI
DSM/EE
Vacation accrual
Deferred fuel and purchased power
CEP deferral
MGP
Deferred pipeline integrity costs
Other
Total regulatory assets
Less: current portion
Total noncurrent regulatory assets
Regulatory Liabilities(a)
Net regulatory liability related to income taxes
Costs of removal
Provision for rate refunds
Accrued pension and OPEB
Other
Total regulatory liabilities
Less: current portion
Total noncurrent regulatory liabilities
December 31,
2020
Earns/Pays
a Return
Recovery/Refund
Period Ends
2019
(b)
(g)
2023
2083
(b)
(b)
(e)
2021
2021
(b)
(b)
(b)
(b)
(b)
(d)
(b)
(g)
(b)
Yes
Yes
(f)
Yes
Yes
$
$
$
22
149
4
16
7
36
1
6
—
117
104
21
166
649
39
610
628
68
45
17
55
813
65
$
$
$
16
155
7
17
6
40
2
5
1
76
102
17
154
598
49
549
654
86
31
16
40
827
64
$
748
$
763
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 22 for additional detail.
Includes incentives on DSM/EE investments.
134
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 COVID-19 Filings
2017 Electric Security Plan Filing
In response to the COVID-19 pandemic, on March 9, 2020, Governor Mike
DeWine declared a state of emergency in the state of Ohio. The PUCO issued
an order directing utilities to cease disconnections for nonpayment and waive
late payment and reconnection fees and to minimize direct customer contact.
The PUCO also directed utilities to maintain flexible payment plans and tariff
interpretations to assist customers during this crisis and to seek any regulatory
waivers, if necessary. In response, Duke Energy Ohio ceased all disconnections
except for safety-related concerns and waived late payment and reconnection
fees. On March 19, 2020, Duke Energy Ohio filed its compliance plan with the
PUCO and sought waiver of several regulations to minimize direct customer
contact. On May 4, 2020, Duke Energy Ohio filed a motion to suspend payment
rules to enable proactive outreach to residential customers offering additional
options for managing their utility bills. PUCO found the proposal to address the
state of emergency and the accompanying waivers reasonable and directed
Duke Energy Ohio to work with the PUCO Staff on a comprehensive plan for
resumption of activities and operations, to be filed 45 days before resumption
of activities. The transition plan to resume normal operations to pre-COVID-19
levels was filed on June 26, 2020, and approved by the PUCO on July 29,
2020. Pursuant to the transition plan, suspended work and activities resumed
beginning August 10, 2020, and disconnections resumed on September 8, 2020,
for nonresidential customers and October 5, 2020, for residential customers.
On April 16, 2020, Duke Energy Ohio filed an application for a Reasonable
Arrangement to temporarily lower the minimum bill for demand-metered
commercial and industrial customers. On June 17, 2020, the PUCO denied
Duke Energy Ohio’s application for a reasonable arrangement and ordered Duke
Energy Ohio to work with the PUCO Staff on payment arrangements for impacted
nonresidential customers.
On May 11, 2020, Duke Energy Ohio filed with the PUCO a request seeking
deferral of incremental costs incurred, as well as specific miscellaneous lost
revenues using existing uncollectible riders already in place for both electric
and natural gas operations. Duke Energy Ohio would subsequently file for rider
recovery at a later date. On June 17, 2020, the PUCO approved Duke Energy
Ohio’s deferral application. The Commission denied the accrual of carrying costs
and ordered Duke Energy Ohio to also track potential savings experienced as a
result of COVID-19.
Duke Energy Kentucky COVID-19
In response to the COVID-19 pandemic, on March 6, 2020, Governor Andy
Beshear declared a state of emergency in the commonwealth of Kentucky. The
KPSC issued an order directing utilities to cease disconnections for nonpayment
and waive late payment fees. The KPSC also directed utilities to maintain
flexible payment plans and tariff interpretations to assist customers during
this crisis and to seek any regulatory waivers, if necessary. In response, Duke
Energy Kentucky ceased all disconnections except for safety-related concerns
and waived late payment and reconnection fees. On September 21, 2020, the
KPSC issued an order ending the disconnection moratorium for residential and
nonresidential customers effective no earlier than October 20, 2020. Utilities
are required to offer residential customers a default payment plan for any
arrearages accumulated through the October 2020 billing cycle. Assessment of
late payment charges for nonresidential customers resumed beginning October
20, 2020, and resumed for residential customers after December 31, 2020.
Duke Energy Kentucky is following the order, as clarified on September 30, 2020,
by the KPSC.
On June 1, 2017, Duke Energy Ohio filed with the PUCO a request for a
standard service offer in the form of an ESP. On April 13, 2018, Duke Energy
Ohio, along with certain intervenors, filed a Stipulation and Recommendation
(Stipulation) with the PUCO resolving that 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 approved new
rider mechanisms relating to costs incurred to enhance the customer experience
and transform the grid and a service reliability rider for vegetation management.
On September 13, 2019, and September 16, 2019, Interstate Gas Supply/Retail
Supply Association and the Ohio Consumers’ Counsel (OCC), respectively, filed
appeals to the Supreme Court of Ohio claiming the PUCO’s order was in error.
On March 13, 2020, the Supreme Court of Ohio dismissed OCC’s appeal. On
April 22, 2020, the Supreme Court of Ohio dismissed all remaining appeals of
the PUCO’s December 19, 2018 order approving the Stipulation. The case has
been resolved.
Electric Base Rate Case
Duke Energy Ohio filed with the PUCO an electric distribution base
rate case application and supporting testimony in March 2017. Duke Energy
Ohio requested an estimated annual increase of approximately $15 million
and a return on equity of 10.4%. On April 13, 2018, Duke Energy Ohio, along
with certain intervenors, filed the Stipulation with the PUCO including 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 Duke Energy Ohio’s ESP,
and added two new riders including the Enhanced Service Reliability Rider
to recover vegetation management costs not included in base rates, up to
$10 million per year (operation and maintenance only) and the Power Future
Initiatives Rider (formerly PowerForward 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. On September 13, 2019, and September 16, 2019,
Interstate Gas Supply/Retail Supply Association and the OCC, respectively, filed
appeals to the Supreme Court of Ohio claiming the PUCO’s order was in error.
On March 13, 2020, the Supreme Court of Ohio dismissed the OCC’s appeal. On
April 22, 2020, the Supreme Court of Ohio dismissed all remaining appeals of
the PUCO’s December 19, 2018 order approving the Stipulation. The case has
been resolved.
Ohio Valley Electric Corporation
On March 31, 2017, Duke Energy Ohio filed for approval to adjust
its existing Rider PSR to pass through net costs related to its contractual
entitlement to capacity and energy from the generating assets owned by OVEC.
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) 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, 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. On September 13, 2019, and September 16, 2019,
Interstate Gas Supply/Retail Supply Association and the OCC filed appeals
to the Supreme Court of Ohio claiming the PUCO’s order was in error.
On March 13, 2020, the Supreme Court of Ohio dismissed OCC’s appeal.
On April 22, 2020, the Supreme Court of Ohio dismissed all remaining appeals
of the PUCO’s December 19, 2018 order approving the Stipulation. The case has
been resolved.
On July 23, 2019, House Bill 6 (HB 6) was signed into law that became
effective January 1, 2020. Among other things, the bill allows for funding
through a rider mechanism referred to as the Clean Air Fund (Rider CAF), of two
nuclear generating facilities located in Northern Ohio owned by Energy Harbor
(f/k/a FirstEnergy Solutions), repeal of energy efficiency mandates and recovery
of prudently incurred costs, net of any revenues, for Ohio investor-owned
utilities that are participants under the OVEC power agreement. The recovery is
through a non-bypassable rider that replaced any existing recovery mechanism
approved by the PUCO and will remain in place through 2030. As such, Duke
Energy Ohio created the Legacy Generation Rider (Rider LGR) that replaced
Rider PSR effective January 1, 2020. The amounts recoverable from customers
are subject to an annual cap, with incremental costs that exceed such cap
eligible for deferral and recovery subject to review. See Note 17 for additional
discussion of Duke Energy Ohio’s ownership interest in OVEC. In July 2020,
legislation to repeal HB 6 was proposed in both the Ohio House and Senate, with
subsequent hearings to receive witness testimony. On December 21, 2020, the
Franklin County Circuit Court issued an injunction against the PUCO’s Order that
approved the nuclear plant funding through Rider CAF set to become effective
on January 1, 2021. On December 28, 2020, in a separate proceeding, the Ohio
Supreme Court, ordered a temporary stay on the implementation of Rider CAF.
Duke Energy Ohio is not impacted by any changes in Rider CAF. The General
Assembly’s session ended without addressing HB 6. Duke Energy Ohio cannot
predict the outcome of this matter.
Tax Act – Ohio
On December 21, 2018, Duke Energy Ohio filed an application to change
its base rate tariffs 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 February 26, 2020, the PUCO issued an order directing utilities to
wind down their demand-side management programs by September 30, 2020,
and to terminate the programs by December 31, 2020, in response to changes
in Ohio law that eliminated Ohio’s energy efficiency mandates. On March 27,
2020, Duke Energy Ohio filed an Application for Rehearing seeking clarification
on the final true up and reconciliation process after 2020. On April 22, 2020,
the PUCO granted rehearing for further consideration. The PUCO issued two
orders on November 18, 2020, on the application for rehearing. The first order
was a Third Entry on Rehearing on the Duke Energy Ohio portfolio holding the
cost cap previously imposed was unlawful, a shared savings cap of $8 million
pretax should be imposed and lost distribution revenues could not be recovered
after December 31, 2020. The second order directs all utilities set the rider
to zero effective January 1, 2021, and to file a separate application for final
reconciliation of all energy efficiency costs prior to December 31, 2020. On
December 18, 2020, Duke Energy Ohio filed an application for rehearing.
On January 13, 2021, the application for rehearing was granted for further
consideration. Duke Energy Ohio cannot predict the outcome of this matter.
On October 9, 2020, Duke Energy Ohio filed an application to implement
a voluntary efficiency program portfolio to commence on January 1, 2021. The
application proposes a mechanism for recovery of program costs and a benefit
associated with avoided transmission and distribution costs. The application
remains under review. As of January 1, 2021, Duke Energy Ohio suspended its
energy efficiency programs due to changes in Ohio law. Duke Energy Ohio cannot
predict the outcome of this matter.
Natural Gas Pipeline Extension
Duke Energy Ohio is proposing to install a new natural gas pipeline (the
Central Corridor Project) in its Ohio service territory to increase system reliability
and enable the retirement of older infrastructure. 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) and that construction of the pipeline extension is expected to
be completed before the 2021/2022 winter season. An evidentiary hearing
for a Certificate of Environmental Compatibility and Public Need concluded
on April 11, 2019. On November 21, 2019, the Ohio Power Siting Board
(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. On
February 20, 2020, the OPSB denied the rehearing requests. On April 15, 2020,
Joint Appellants filed a notice of appeal at the Supreme Court of Ohio of the
OPSB’s decision approving Duke Energy Ohio’s Central Corridor application.
On June 4, 2020, the OPSB filed a motion to dismiss claims raised by one of the
Joint Appellants and on August 5, 2020, the Supreme Court of Ohio dismissed
one of the Joint Appellants from the appeal. Joint Appellants filed their merit
briefs on August 26, 2020. Appellee briefs were filed October 15, 2020.
Appellants’ briefs were filed on November 24, 2020. On September 22, 2020,
Duke Energy Ohio filed an application with the OPSB for approval to amend the
certificated pipeline route due to changes in the route negotiated with property
owners and municipalities. The staff report was filed on December 21, 2020,
recommending approval subject to three conditions that reaffirm previous
conditions, and provide guidance regarding local permitting and construction
supervision. On December 23, 2020, Duke Energy Ohio filed a letter indicating
136
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) its acceptance of these conditions if required by the OPSB. On January 21,
2021, the OPSB approved the amended filing with the recommended conditions.
On January 27, 2021, the Ohio Supreme Court set oral argument for March 31,
2021. Duke Energy Ohio cannot predict the outcome of this matter.
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 collected approximately $55 million in environmental remediation costs
incurred between 2009 through 2012 through 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 base rate case. To date, the PUCO has
not ruled on Duke Energy Ohio’s annual applications for the calendar years 2013
through 2019. 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. 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
concluded on 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.
On March 31, 2020, Duke Energy Ohio filed its annual application to recover
incremental remediation expense for the calendar year 2019 seeking recovery of
approximately $39 million in remediation costs incurred during 2019. On July 23,
2020, the staff recommended a disallowance of approximately $4 million for work
the staff believes occurred in areas not authorized for recovery. Additionally, the
staff recommended insurance proceeds, net of litigation costs and attorney fees,
should be reimbursed to customers and not be held by Duke Energy Ohio until all
investigation and remediation is complete. Duke Energy Ohio filed comments in
response to the staff report on August 21, 2020, and intervenor comments were
filed on November 9, 2020. Duke Energy Ohio cannot predict the outcome of this
matter.
The 2012 PUCO order also contained conditional deadlines for completing
the MGP environmental remediation and the deferral of remediation costs at the
MGP sites. Subsequent to the order, the deadline was extended to December 31,
2019. On May 10, 2019, Duke Energy Ohio filed an application requesting a
continuation of its existing deferral authority for MGP remediation that must occur
after December 31, 2019. On July 12, 2019, staff recommended the Commission
deny the deferral authority request. 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 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.
On January 31, 2020, Duke Energy Kentucky filed rebuttal testimony updating
its rate increase request to approximately $44 million. Hearings concluded on
February 20, 2020, and briefing was completed March 20, 2020. On April 27,
2020, the KPSC issued its decision approving a $24 million increase for Duke
Energy Kentucky with a 9.25% return on equity. The KPSC denied Duke Energy
Kentucky’s major storm deferral mechanism and EV and battery storage pilots.
The KPSC approved Duke Energy Kentucky’s Green Source Advantage tariff. New
customer rates were effective on May 1, 2020. On May 18, 2020, Duke Energy
Kentucky filed its motion for rehearing and on June 4, 2020, the motion was
granted in part and denied in part by the KPSC. On October 16, 2020, the KPSC
issued an Order on Rehearing authorizing an additional $4 million increase in
revenue requirement bringing the total authorized revenue requirement increase
to $28 million. Revised customer rates took effect in November 2020. The case
has been resolved.
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
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, 2020, and 2019, $37 million and $40 million, respectively, are recorded in
Regulatory assets on Duke Energy Ohio’s Consolidated Balance Sheets.
(in millions)
Duke Energy Ohio
December 31, 2019
Provisions/
Adjustments
Cash
Reductions
December 31, 2020
$ 54
$
(1)
$ (3)
$ 50
137
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 Indiana
Regulatory Assets and Liabilities
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
Retired generation facilities(c)
PISCC and deferred operating expenses(c)
Hedge costs deferrals
AMI
Vacation accrual
Deferred fuel and purchased power
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
December 31,
Earns/Pays
a Return
Recovery/Refund
Period Ends
2019
$
2020
615
245
43
303
22
19
12
9
60
1,328
125
Yes
Yes
Yes
$
529
243
49
246
23
18
12
—
52
1,172
90
$ 1,203
$ 1,082
$
956
599
100
17
66
1,738
111
$ 1,008
599
90
—
43
1,740
55
$ 1,627
$ 1,685
(b)
(e)
2030
(b)
(b)
2031
2021
2021
(b)
(b)
(d)
(e)
(b)
(b)
(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) Recovered primarily over the average remaining service periods or life expectancies of employees covered by the benefit plans. See Note 22 for additional detail.
Included in rate base.
COVID-19 Filing
In response to the COVID-19 pandemic, on March 6, 2020, Governor Eric
Holcomb declared a public health disaster emergency in the state of Indiana,
which is currently still in effect. At that time, Duke Energy Indiana had already
voluntarily suspended all disconnections and waived late payment fees and
check return fees. The utility also waived credit card fees for residential
customers. The Executive Order requiring utilities in the state to suspend
disconnection of utility service expired July 1, 2020.
On May 8, 2020, Duke Energy Indiana, along with other Indiana utilities,
filed a request with the IURC for approval of deferral treatment for costs and
revenue reductions associated with the COVID-19 pandemic. The utilities
requested initial deferral approval in July 2020, with individual subdockets
for each utility to be established for consideration of utility-specific cost
and revenue impacts, cost recovery timing and customer payment plans.
On June 29, 2020, the IURC issued an order in Phase 1 wherein it extended
the disconnection moratorium for jurisdictional utilities until August 14,
2020, along with requiring six-month payment arrangements, waiver of late
fees, reconnection fees, convenience fees and deposits. The IURC permitted
jurisdictional utilities to use regulatory accounting for any impacts associated
with the prohibition on utility disconnections, waiver or exclusion of certain
138
utility fees (i.e., late fees, convenience fees, deposits, and reconnection fees),
the use of expanded payment arrangements to aid customers, and for COVID-19
related uncollectible and incremental bad debt expense. The IURC did not permit
recovery of lost revenues due to load reduction or carrying costs. In Phase 2
filings, individual utilities may choose to request regulatory accounting for other
COVID-19 related operation and maintenance costs wherein evidence of the
impact of any costs or offsetting savings can be presented and considered in an
evidentiary hearing. On August 12, 2020, the IURC issued a supplemental order
extending the requirement for six-month payment arrangements and waiver of
certain customer fees for another 60 days but did not extend the disconnect
moratorium. As such, Duke Energy Indiana resumed service disconnections
for nonpayment in mid-September 2020. Normal billing practices resumed in
mid-October 2020, except that Duke Energy Indiana has committed to provide
extended payment arrangements into 2021 and to waive credit card and pay
station fees for residential customers through the end of 2020. Customers were
notified of the resumption of normal billing practices, the option of deferred
payment arrangements and where to find assistance, if necessary. Duke Energy
Indiana cannot predict the outcome of this matter.
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 for a rate increase for retail customers of approximately $395 million.
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. Hearings concluded on
February 7, 2020. On June 29, 2020, the IURC issued the order in the rate case
approving a revenue increase of $146 million before certain adjustments and
ratemaking refinements. The order provided for an overall cost of capital of
5.7% based on a 9.7% return on equity and a 53% equity component of the
capital structure, and approved Duke Energy Indiana’s requested forecasted
rate base of $10.2 billion as of December 31, 2020, including the Edwardsport
Integrated Gasification Combined Cycle (IGCC) Plant. The IURC reduced Duke
Energy Indiana’s request by slightly more than $200 million, when accounting
for the utility receipts tax and other adjustments. Approximately 50% of the
reduction is due to a prospective change in depreciation and use of regulatory
asset for the end-of-life inventory at retired generating plants, approximately
20% is due to the approved 9.7% return on equity versus requested 10.4% and
approximately 20% is related to miscellaneous earnings neutral adjustments.
Step one rates are estimated to be approximately 75% of the total and became
effective on July 30, 2020. Step two rates are estimated to be the remaining
25% of the total rate increase and will be implemented in mid-2021. Several
groups filed notices of appeal of the IURC order on July 29, 2020. Appellate
briefs were filed on October 14, 2020, focusing on three issues: wholesale sales
allocations, coal ash basin cost recovery and the Edwardsport IGCC operating
and maintenance expense level approved. The appeal was fully briefed in
January 2021, and a decision is expected in the first or second quarter of 2021.
Duke Energy Indiana cannot predict the outcome of this matter.
2020 Indiana Coal Ash Recovery Case
In Duke Energy Indiana’s rate case, the IURC approved coal ash basin
closure costs expended through 2018 including financing costs as a regulatory
asset and included in rate base. The IURC opened a subdocket to deal with the
post-2018 coal ash related expenditures. Duke Energy Indiana filed testimony on
April 15, 2020, in the coal ash subdocket requesting recovery for the post-2018
coal ash basin closure costs for plans that have been approved by the Indiana
Department of Environmental Management as well as continuing deferral, with
carrying costs, on the balance. An evidentiary hearing was held on September
14, 2020, and the parties have agreed on a delayed briefing schedule that
allows for the Indiana Rate Case appeal to proceed. Briefing will be completed
by mid-May 2021. Duke Energy Indiana cannot predict the outcome of this
matter.
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)
Amounts due from customers
Deferred pipeline integrity costs(c)
Other
Total regulatory assets
Less: current portion
Total noncurrent regulatory assets
Regulatory Liabilities(a)
Net regulatory liability related to income taxes
Costs of removal
Provision for rate refunds
Accrued pension and OPEB(c)
Amounts to be refunded to customers
Other
Total regulatory liabilities
Less: current portion
Total noncurrent regulatory liabilities
December 31,
2020
Earns/Pays
a Return
Recovery/Refund
Period Ends
2019
(d)
(f)
2021
(b)
2023
(b)
(b)
(d)
(f)
(b)
(b)
$
$
$
20
88
12
122
110
71
32
455
153
302
499
575
6
3
34
15
1,132
88
$
$
$
16
90
12
117
36
62
30
363
73
290
555
574
41
3
34
5
1,212
81
Yes
Yes
Yes
$ 1,044
$ 1,131
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 22 for additional detail.
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) COVID-19 Filings
North Carolina
On March 10, 2020, Governor Roy Cooper declared a state of emergency
due to the COVID-19 pandemic. On March 19, 2020, the NCUC issued on
order directing that utilities under its jurisdiction suspend disconnections
for nonpayment of utility bills during the state of emergency and allow
for customers to enter into payment arrangements to pay off arrearages
accumulated during the state of emergency after the end of the state of
emergency. Additionally, to help mitigate the financial impacts of the COVID-19
pandemic on their customers, on March 19, 2020, Piedmont filed a request with
the NCUC seeking authorization to waive: (1) any late payment charges incurred
by a residential or nonresidential customer, effective March 21, 2020; (2) the
application of fees for checks returned for insufficient funds for residential and
nonresidential customers; (3) the reconnection charge when a residential or
nonresidential customer seeks to have service restored for those customers
whose service was recently disconnected for nonpayment and to work with
customers regarding the other requirements to restore service, including re-
establishment of credit; and (4) the fees and charges associated with the use
of credit cards or debit cards to pay residential electric utility bills, effective
March 21, 2020. The NCUC granted Piedmont’s request on March 20, 2020.
On July 29, 2020, the NCUC issued its Order Lifting Disconnection
Moratorium and Allowing Collection of Arrearages Pursuant to Special
Repayment Plans. The order contained the following: (1) public utilities may
resume customer disconnections due to nonpayment for bills first rendered on
or after September 1, 2020, after appropriate notice; (2) the late fee moratorium
will continue through the end of the state of emergency or until further order
of the commission; (3) Duke Energy utilities may reinstate fees for checks
returned for insufficient funds as well as transaction fees for use of credit cards
or debit cards for bills first rendered on or after September 1, 2020; and (4)
no sooner than September 1, 2020, the collection of past-due or delinquent
accounts accrued up to and including August 31, 2020, may proceed subject to
conditions.
Normal billing practices resumed as of October 1, 2020, with the
exception of billing of late payment charges. Service disconnections for
nonpayment resumed on November 4, 2020. Customers were notified of the
resumption of normal billing practices, the option of payment arrangements and
where to find assistance, if necessary. The NCUC’s moratorium for the billing
of late payment charges is still in effect until further order from the NCUC.
Piedmont cannot predict the outcome of this matter.
and/or deferred payment arrangements. Piedmont filed a report on June 30,
2020, as required by PSCSC order, reporting revenue impact, costs and savings
related to COVID-19 to date. Updates on cost impacts were filed on September
30, 2020, and on December 31, 2020, and included financial impacts through
the end of August 2020, and the end of November 2020, respectively.
On September 30, 2020, Piedmont filed an update on its planned return
to normal operations during the COVID-19 pandemic. Normal billing practices
resumed as of October 1, 2020, and service disconnections for nonpayment
resumed on November 4, 2020. Customers were notified of the resumption of
normal billing practices, the option of payment arrangements and where to find
assistance, if necessary.
Tennessee
On March 12, 2020, Governor Bill Lee declared a state of emergency due
to the COVID-19 pandemic. In an effort to help mitigate the financial impacts of
the COVID-19 pandemic on their customers, on March 20, 2020, Piedmont filed
a request with the TPUC seeking authorization to waive, effective March 21,
2020: (1) any late payment charges incurred by a residential or nonresidential
customer; (2) the application of fees for checks returned for insufficient funds
for residential and nonresidential customers; and (3) the reconnection charge
when a residential or nonresidential customer seeks to have service restored
for those customers whose service was recently disconnected for nonpayment
and to work with customers regarding the other requirements to restore service,
including re-establishment of credit. The TPUC granted Piedmont’s request by
Order issued March 31,2020. The Order also stated that customers were not
relieved of their obligation to pay for utility services received.
The TPUC held its regularly scheduled Commission Conference
electronically on August 10, 2020, and on September 16, 2020, issued an
Order Lifting Suspension of Disconnections of Service for Lack of Payment
with Conditions, effective August 29, 2020. The conditions relate to required
customer communications, payment plan options for past-due amounts
and ongoing reporting to the TPUC. Potential recovery of costs related to
the COVID-19 pandemic may be considered in future, individual docketed
proceedings.
On October 15, 2020, Piedmont filed a report on its planned return to
normal operations during the COVID-19 pandemic. Normal billing practices
resumed as of October 1, 2020, and service disconnections for nonpayment
resumed on November 4, 2020. Customers were notified of the resumption of
normal billing practices, the option of payment arrangements and where to find
assistance, if necessary.
South Carolina
2020 Tennessee Rate Case
On March 13, 2020, Governor Henry McMaster declared a state of
emergency due to the COVID-19 pandemic. The governor also issued a letter
on March 14, 2020, to the ORS Executive Director regarding the suspension of
disconnection of essential utility services for nonpayment. On March 18, 2020,
the PSCSC issued an order approving such waivers, and also approved waivers
for regulations related to late fees and reconnect fees. The PSCSC’s order also
required utilities to track the financial impacts of actions taken pursuant to such
waivers for possible reporting to the PSCSC.
On May 13, 2020, the ORS filed a letter with the PSCSC that included
a request from Governor McMaster that utilities proceed with developing and
implementing plans for phasing in normal business operations. On May 14,
2020, the PSCSC conditionally vacated the regulation waivers regarding
termination of service and suspension of disconnect fees. Prior to termination,
utilities are to refer past-due customers to local organizations for assistance
On July 2, 2020, Piedmont filed an application with the TPUC, its first
general rate case in Tennessee in nine years, for a rate increase for retail
customers of approximately $30 million, which represents an approximate
15% increase in annual revenues. The rate increase is driven by significant
infrastructure upgrade investments since its previous rate case. Approximately
half of the plant additions being added to rate base are categories of capital
investment not covered under the IMR mechanism, which was approved in
2013. Piedmont amended its requested increase to approximately $26 million
in December 2020. As authorized under Tennessee law, Piedmont implemented
interim rates on January 2, 2021, at the level requested in its adjusted request.
A settlement reached with the Tennessee Consumer Advocate in mid-January
was filed with the TPUC on February 2, 2021. The settlement results in an
increase of revenues of approximately $16 million and a ROE of 9.8%. At a
hearing on February 16, 2021, the TPUC voted to accept the settlement, with
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) new rates effective January 2, 2021. Piedmont must refund customers the
difference between bills previously rendered under interim rates and such bills if
rendered under approved rates, plus interest.
2021 North Carolina Rate Case
On February 19, 2021, Piedmont filed notice with the NCUC of its
intent to file a general rate case on or about March 22, 2021. Piedmont’s last
general rate case in North Carolina was filed in April 2019, with rates effective
November 2019.
2019 North Carolina Rate Case
On April 1, 2019, Piedmont filed an application with the NCUC, its
first general rate case in North Carolina in six years. 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. 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;
• Continuation of the IMR mechanism; and
• Establishment of a new deferral mechanism for certain Distribution
Integrity Management Program (DIMP) operations and maintenance
expenses incurred effective November 1, 2019, and thereafter.
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
Atlantic Coast Pipeline (ACP pipeline) was planned to be an approximately
600-mile interstate natural gas pipeline running from West Virginia to North
Carolina. Duke Energy indirectly owns a 47% interest, which is accounted for
as an equity method investment through its Gas Utilities and Infrastructure
segment.
On April 15, 2020, the United States District Court for the District of
Montana granted partial summary judgment in favor of the plaintiffs in Northern
Plains Resource Council v. U.S. Army Corps of Engineers (USACE) (Northern
Plains), vacating USACE’s Nationwide Permit 12 (NWP 12) and remanding it
to USACE for consultation under the Endangered Species Act (ESA) of 1973. In
Northern Plains, the court ruled that NWP 12 was unlawful because USACE did
not consult under the ESA with the U.S. Fish and Wildlife Service and/or National
Marine Fisheries Service prior to NWP 12’s reissuance in 2017. Because
NWP 12 has been vacated and its application enjoined, USACE currently has
suspended verification of any new or pending applications under NWP 12 until
further court action clarifies the situation.
On May 28, 2020, the U.S. Court of Appeals for the Ninth Circuit issued a
ruling that limited the NWP 12 vacatur to energy infrastructure projects. In July
2020, the Supreme Court of the United States issued an order allowing other
new oil and gas pipeline projects to use the NWP 12 process pending appeal to
the U.S. Court of Appeals for the Ninth Circuit; however, that did not decrease
the uncertainty associated with an eventual ruling. Together, these rulings
indicated that the timeline to reinstate the necessary water crossing permits for
ACP would likely cause further delays and cost increases.
On July 5, 2020, Dominion Energy, Inc. announced a sale of substantially
all of its gas transmission and storage segment assets, operations core to the
ACP pipeline project.
As a result of the uncertainty created by the NWP 12 rulings, the potential
impact on the cost and schedule for the project, the ongoing legal challenges
and the risk of additional legal challenges and delays through the construction
period and Dominion’s decision to sell substantially all of its gas transmission
and storage segment assets, Duke Energy’s Board of Directors and management
decided that it was not prudent to continue to invest in the project. On July
5, 2020, Duke Energy and Dominion announced the cancellation of the ACP
pipeline project.
As a result, Duke Energy recorded pretax charges to earnings of
approximately $2.1 billion for the year ended December 31, 2020, within
Equity in (losses) earnings of unconsolidated affiliates on the Duke Energy
Consolidated Statements of Operations. The tax benefit associated with this
cancellation was $393 million and is recorded in Income Tax Expense (Benefit)
Expense on the Duke Energy Consolidated Statements of Operations. Additional
charges of less than $20 million are expected to be recorded within the next
three years as ACP incurs obligations to exit operations.
As part of the pretax charges to earnings of approximately $2.1 billion,
Duke Energy has liabilities related to the cancellation of the ACP pipeline
project of $928 million and $8 million within Other Current Liabilities and
Other Noncurrent Liabilities, respectively, in the Gas Utilities and Infrastructure
segment. The liability represents Duke Energy’s obligation of approximately
$860 million to fund ACP’s outstanding debt and $76 million to satisfy
remaining ARO requirements to restore construction sites.
See Notes 7 and 12 for additional information regarding this transaction.
Potential Coal Plant Retirements
The Subsidiary Registrants periodically file integrated resource plans
(IRPs) with their state regulatory commissions. The IRPs provide a view of
forecasted energy needs over a long term (10 to 20 years) and options being
considered to meet those needs. IRPs filed by the Subsidiary Registrants
included planning assumptions to potentially retire certain coal-fired generating
facilities in North Carolina and Indiana earlier than their current estimated
useful lives. Duke Energy continues to evaluate the potential need to retire these
coal-fired generating facilities earlier than the current estimated useful lives
and plans to seek regulatory recovery for amounts that would not be otherwise
recovered when any of these assets are retired.
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) 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, 2020, and exclude
capitalized asset retirement costs.
Duke Energy Carolinas
Allen Steam Station Units 1-3(a)
Allen Steam Station Units 4-5(b)
Cliffside Unit 5(b)
Duke Energy Progress
Mayo Unit 1(b)
Roxboro Units 3-4(b)
Duke Energy Florida
Crystal River Units 4-5(c)
Duke Energy Indiana
Gallagher Units 2 and 4(d)
Gibson Units 1-5(e)
Cayuga Units 1-2(e)
Total Duke Energy
Capacity
(in MW)
Remaining Net
Book Value
(in millions)
604
526
546
746
1,409
1,430
280
2,845
1,005
9,391
$
113
338
350
676
484
1,696
102
1,866
777
$ 6,402
(a) As part of the 2015 resolution of a lawsuit involving alleged New Source Review violations, Duke Energy Carolinas must retire Allen Steam Station Units 1 through 3 by December 31, 2024. The long-term energy options
considered in the IRP could result in retirement of these units earlier than their current estimated useful lives. Unit 3 with a capacity of 270 MW and a net book value of $26 million at December 31, 2020, is expected to be
retired in March 2021.
(b) These units are included in the IRP filed by Duke Energy Carolinas and Duke Energy Progress in North Carolina and South Carolina on September 1, 2020. The long-term energy options considered in the IRP could result in
retirement of these units earlier than their current estimated useful lives. In 2019, Duke Energy Carolinas and Duke Energy Progress filed North Carolina rate cases that included depreciation studies that accelerate end-of-life
dates for these plants. A decision by NCUC is expected by the end of the first quarter 2021.
(c) On January 14, 2021, Duke Energy Florida filed a settlement agreement with the FPSC, which proposed depreciation rates reflecting retirement dates for Duke Energy Florida’s last two coal-fired generating facilities, Crystal
River Units 4-5, eight years ahead of schedule in 2034 rather than in 2042, in support of Duke Energy’s carbon reduction goals. A request for the FPSC to hold a hearing has been made and a decision by the FPSC is expected
in the second quarter 2021.
(d) 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. In February 2021, upon approval by MISO of
a new retirement date, Duke Energy Indiana determined it would modify the retirement date to June 1, 2021.
(e) 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, included proposed depreciation rates reflecting retirement dates from 2026 to 2038. The depreciation rates reflecting these updated retirement dates were approved by the IURC as part of the rate case order issued on
June 29, 2020.
4. 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 3, Duke Energy Florida maintains a
142
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.
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 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
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 $13.8 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
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, $434 million for Harris, $420 million for Brunswick,
$392 million for Oconee and $336 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.
This program provides $13.3 billion of coverage per incident through the
Potential Retroactive Premium Assessments
Price-Anderson Act’s mandatory industry-wide 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 97 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.
Pursuant to regulations of the NRC, each company’s property damage
insurance policies provide that all proceeds from such insurance be applied,
143
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
$156 million, $93 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.
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) Remediation Activities
LITIGATION
Duke Energy Carolinas and Duke Energy Progress
Coal Ash Insurance Coverage Litigation
In March 2017, Duke Energy Carolinas and Duke Energy Progress filed
a civil action in the North Carolina Business 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. Fact discovery has
been completed. The parties filed dispositive pretrial motions relating to key
legal issues on December 4, 2020. Hearings on these motions are scheduled to
begin on February 24, 2021, and trial is scheduled for January 24, 2022. Duke
Energy Carolinas and Duke Energy Progress cannot predict the outcome of this
matter.
Duke Energy Carolinas
NTE Carolinas II, LLC Litigation
In November 2017, Duke Energy Carolinas entered into a standard FERC
large generator interconnection agreement (LGIA) with NTE Carolinas II, LLC
(NTE), a company that proposed to build a combined-cycle natural gas plant
in Rockingham County, North Carolina. On September 6, 2019, Duke Energy
Carolinas filed a lawsuit in Mecklenburg County Superior Court against NTE for
breach of contract and alleging that NTE’s failure to pay benchmark payments
for Duke Energy Carolinas’ transmission system upgrades required under the
interconnection agreement constituted a termination of the interconnection
agreement. Duke Energy Carolinas is seeking a monetary judgment against
NTE because NTE failed to make multiple milestone payments. The lawsuit
was moved to federal court in North Carolina. NTE filed a motion to dismiss
Duke Energy Carolinas’ complaint and brought counterclaims alleging anti-
competitive conduct and violations of state and federal statutes. Duke Energy
Carolinas filed a motion to dismiss NTE’s counterclaims.
On May 21, 2020, in response to a NTE petition challenging Duke Energy
Carolina’s termination of the LGIA, FERC issued a ruling (i) that it has exclusive
jurisdiction to determine whether a transmission provider may terminate a
LGIA, (ii) FERC approval is required to terminate a conforming LGIA if objected
to by the interconnection customer, and (iii) Duke Energy may not announce the
termination of a conforming LGIA unless FERC has approved the termination.
On August 17, 2020, the court denied both NTE’s and Duke Energy
Carolinas’ Motion to Dismiss. The parties are in active discovery and trial is
scheduled for June 20, 2022. Duke Energy Carolinas cannot predict the outcome
of this matter.
In addition to the ARO recorded as a result of various environmental
regulations, discussed in Note 9, 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 Other within Other Noncurrent Liabilities on the Consolidated
Balance Sheets.
(in millions)
December 31, 2020 December 31, 2019
Reserves for Environmental Remediation
Duke Energy
Duke Energy Carolinas
Progress Energy
Duke Energy Progress
Duke Energy Florida
Duke Energy Ohio
Duke Energy Indiana
Piedmont
$
75
19
19
6
12
22
6
10
$
58
11
16
4
9
19
4
8
Additional losses in excess of recorded reserves that could be incurred for
the stages of investigation, remediation and monitoring for environmental sites
that have been evaluated at this time are not material except as presented in
the table below.
(in millions)
Duke Energy
Duke Energy Carolinas
Duke Energy Ohio
Piedmont
$
25
12
4
2
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) Asbestos-related Injuries and Damages Claims
Duke Energy Florida
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, 2020, there were 145 asserted claims for non-malignant cases
with the cumulative relief sought of up to $39 million and 56 asserted claims for
malignant cases with the cumulative relief sought of up to $20 million. Based on
Duke Energy Carolinas’ experience, it is expected that the ultimate resolution of
most of these claims likely will be less than the amount claimed.
Duke Energy Carolinas has recognized asbestos-related reserves of $572
million and $604 million at December 31, 2020, and 2019, 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 2040 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 2040 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 $714 million in excess of the self-insured retention. Receivables for
insurance recoveries were $704 million and $742 million at December 31, 2020,
and 2019, 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.
As described in Note 1, Duke Energy adopted the new guidance for credit
losses effective January 1, 2020, using the modified retrospective method of
adoption, which does not require restatement of prior year reported results.
The reserve for credit losses for insurance receivables for the asbestos-related
injuries and damages based on adoption of the new standard is $15 million
for Duke Energy and Duke Energy Carolinas as of December 31, 2020. The
insurance receivable is evaluated based on the risk of default and the historical
losses, current conditions and expected conditions around collectability.
Management evaluates the risk of default annually based on payment history,
credit rating and changes in the risk of default from credit agencies.
Duke Energy Progress and Duke Energy Florida
Spent Nuclear Fuel Matters
On June 18, 2018, Duke Energy Progress and Duke Energy Florida sued
the U.S. in the U.S. Court of Federal Claims for damages incurred for the period
2014 through 2018. The lawsuit claimed the Department of Energy breached a
contract in failing to accept spent nuclear fuel under the Nuclear Waste Policy Act
of 1982 and asserted damages for the cost of on-site storage in the amount of
$100 million and $200 million for Duke Energy Progress and Duke Energy Florida,
respectively. Discovery is ongoing and a trial is expected to occur in 2021.
Power Purchase Dispute Arbitration
Duke Energy Florida, on behalf of its customers, entered into a PPA for
the purchase of firm capacity and energy from a qualifying facility under the
Public Utilities Regulatory Policies Act of 1978. Duke Energy Florida determined
the qualifying facility did not perform in accordance with the PPA, and Duke
Energy Florida terminated the PPA. The qualifying facility counterparty filed
a confidential American Arbitration Association (AAA) arbitration demand,
challenging the termination of the PPA and seeking damages. Duke Energy
Florida denies liability and is vigorously defending the arbitration claim.
The final arbitration hearing occurred during the week of December 7,
2020. An arbitral award has not yet been issued. Duke Energy Florida cannot
predict the outcome of this matter.
Duke Energy Indiana
Coal Ash Basin Closure Plan Appeal
On January 27, 2020, Hoosier Environmental Council filed a Petition for
Administrative Review with the Indiana Office of Environmental Adjudication
(the court) challenging the Indiana Department of Environmental Management’s
December 10, 2019, partial approval of Duke Energy Indiana’s ash pond closure
plan. On March 11, 2020, Duke Energy Indiana filed a Motion to Dismiss. On
May 5, 2020, the court denied the motion. The parties have completed discovery
and will now prepare to file dispositive motions. Summary judgment briefing will
be completed by March 30, 2021. If these claims survive dispositive motions, a
hearing is scheduled for April 26, 2021. Duke Energy Indiana cannot predict the
outcome of this matter. See Note 9 for additional information.
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.
December 31,
2020
2019
$ 68
2
61
13
28
1
$ 62
2
55
12
22
1
(in millions)
Reserves for Legal Matters
Duke Energy
Duke Energy Carolinas
Progress Energy
Duke Energy Progress
Duke Energy Florida
Piedmont
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) 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 7 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.
Minimum Purchase Amount at December 31, 2020
Contract
Expiration
2025-2032
2023-2025
2022
$
2021
66
335
130
$
2022
73
354
55
$
2023
66
374
—
$
2024
67
262
—
2025
Thereafter
$
69
91
—
$
69
—
—
$
Total
410
1,416
185
The following table presents future unconditional purchase obligations
under natural gas supply and capacity contracts as of December 31, 2020.
(in millions)
Duke Energy
Duke Energy Ohio
Piedmont
2021
2022
2023
2024
2025
Thereafter
Total
$
311
270
197
139
125
662
$ 1,704
$ 41
28
20
17
14
60
$ 180
$
270
242
177
122
111
602
$ 1,524
(in millions)
Duke Energy Progress(a)
Duke Energy Florida(b)
Duke Energy Ohio(c)(d)
(a) Contracts represent either 100% of net plant output or vary.
(b) Contracts represent 100% of net plant output.
(c) Contracts represent between 1% and 11% of net plant output.
(d) Excludes PPA with OVEC. See Note 17 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.
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) 5. LEASES
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
monthly lease payments commencing after the construction phase being split
between interest expense and principal pay down of the debt.
The following tables present the components of lease expense.
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 $275 million, $264 million and
$268 million for the years ended December 31, 2020, 2019, and 2018,
respectively. Renewable energy projects owned by Duke Energy and accounted
for as operating leases had a cost basis of $3,335 million and $3,349 million
and accumulated depreciation of $848 million and $721 million at December
31, 2020, and 2019, respectively. These assets are principally classified as
nonregulated electric generation and transmission assets.
Piedmont has certain agreements with Duke Energy Carolinas for the
construction and transportation of natural gas pipelines to supply its natural
gas plant needs. Piedmont accounts for these pipeline lateral contracts as
sales-type leases since the present value of the sum of the lease payments
equals the fair value of the assets. These pipeline lateral assets owned by
Piedmont had a current net investment basis of $2 million and $4 million as of
December 31, 2020, and 2019, respectively, and a long-term net investment
basis of $205 million and $70 million as of December 31, 2020, and 2019,
respectively. 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 contracts as finance leases. The
activity for these contracts 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, 2020
Duke
Energy
$ 283
4
30
119
61
180
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
$ 53
—
13
8
30
38
$
162
2
13
24
44
68
$ 72
1
5
6
37
43
Duke
Energy
Florida
$ 90
1
8
18
7
25
Duke
Energy
Ohio
$ 11
—
—
—
—
—
Duke
Energy
Indiana
$ 19
1
1
1
—
1
Piedmont
$ 7
—
1
—
—
—
$ 497
$104
$
245
$121
$124
$ 11
$ 22
$ 8
(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.
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)
(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.
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
Year Ended December 31,
$
2018
268
49
143
75
68
13
21
11
The following table presents operating lease maturities and a reconciliation of the undiscounted cash flows to operating lease liabilities.
(in millions)
2021
2022
2023
2024
2025
Thereafter
Total operating lease payments
Less: present value discount
Total operating lease liabilities(a)
December 31, 2020
Duke
Energy
$
229
212
202
186
162
870
1,861
(344)
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
$ 24
22
20
14
10
51
141
(24)
$
99
95
95
95
85
376
845
(149)
$ 44
40
41
41
31
252
449
(95)
$ 55
55
54
54
54
124
396
(54)
$ 2
2
2
2
2
20
30
(9)
$
5
4
4
4
4
59
80
(24)
$ 5
5
5
5
5
—
25
(2)
$ 1,517
$ 117
$ 696
$ 354
$ 342
$ 21
$ 56
$ 23
(a) Certain operating lease payments include renewal options that are reasonably certain to be exercised.
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)
The following table presents finance lease maturities and a reconciliation of the undiscounted cash flows to finance lease liabilities.
(in millions)
2021
2022
2023
2024
2025
Thereafter
Total finance lease payments
Less: amounts representing interest
Total finance lease liabilities
The following tables contain additional information related to leases.
December 31, 2020
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Indiana
$ 38
38
38
38
38
502
692
(398)
$
68
68
68
52
48
481
785
(408)
$ 43
43
43
43
43
475
690
(394)
$ 25
25
25
9
5
6
95
(14)
$
1
1
1
1
1
26
31
(21)
Duke
Energy
$
186
173
174
119
51
762
1,465
(620)
$
845
$ 294
$ 377
$ 296
$ 81
$ 10
Duke
Energy
Carolinas
Progress
Energy
December 31, 2020
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana Piedmont
(in millions)
Assets
Operating
Finance
Total lease assets
Liabilities
Current
Operating
Finance
Noncurrent
Operating
Finance
Total lease liabilities
(in millions)
Assets
Operating
Finance
Total lease assets
Liabilities
Current
Operating
Finance
Noncurrent
Operating
Finance
Total lease liabilities
Classification
Operating lease ROU assets, net
Net property, plant and equipment
Duke
Energy
$ 1,524
797
$ 2,321
$ 110
312
$ 422
$
690
416
$ 1,106
$ 346
297
$ 643
$ 344
119
$ 463
Other current liabilities
Current maturities of long-term debt
$
177
129
$ 20
5
$
73
26
$ 31
7
$ 42
19
Operating lease liabilities
Long-Term Debt
1,340
716
97
289
623
351
323
289
300
62
$ 20
—
$ 20
$
1
—
20
—
$ 55
7
$ 62
$ 20
—
$ 20
$
3
—
$ 4
—
53
10
19
—
$ 2,362
$ 411
$ 1,073
$ 650
$ 423
$ 21
$ 66
$ 23
Duke
Energy
Carolinas
Progress
Energy
December 31, 2019
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana Piedmont
Classification
Operating lease ROU assets, net
Net property, plant and equipment
Duke
Energy
$ 1,658
926
$ 2,584
$ 123
198
$ 321
$
788
443
$ 1,231
$ 387
308
$ 695
$ 401
135
$ 536
Other current liabilities
Current maturities of long-term debt
$
208
119
$ 27
7
$
95
24
$ 37
6
$ 58
18
Operating lease liabilities
Long-Term Debt
1,432
850
102
172
697
381
354
301
343
80
$ 21
—
$ 21
$
1
—
21
—
$ 57
7
$ 64
$ 24
—
$ 24
$
3
—
$ 4
—
55
10
23
—
$ 2,609
$ 308
$ 1,197
$ 698
$ 499
$ 22
$ 68
$ 27
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) (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, 2020
Duke
Energy
Carolinas
Duke
Energy
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana Piedmont
$
$
271
61
119
116
125
$ 31
30
8
$
124
44
24
$ 52
37
6
$ 72
7
18
$ 17
125
$ —
—
$ —
—
$ —
—
$
2
—
—
$ —
—
$ 6
—
1
$
5
—
—
$ 1
—
$ —
—
(a) No amounts were classified as investing cash flows from operating leases for the year ended December 31, 2020.
(b) Does not include ROU assets recorded as a result of the adoption of the new lease standard.
(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
$ 78
9
16
$ 30
175
$ —
—
$
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, 2020
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana Piedmont
10
13
9
19
10
15
12
17
3.8 %
8.4 %
3.4 %
11.6 %
3.8 %
11.9 %
3.9 %
12.4 %
8
11
3.8 %
8.2 %
17
—
4.2 %
— %
18
25
4.2 %
11.9 %
5
—
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.
150
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) 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
9
19
10
16
12
18
3.9 %
8.1 %
3.5 %
11.8 %
3.8 %
11.9 %
3.9 %
12.4 %
8
11
3.8 %
8.3 %
17
—
4.2 %
— %
18
26
4.1 %
11.9 %
6
—
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.
6. DEBT AND CREDIT FACILITIES
Summary of Debt and Related Terms
The following tables summarize outstanding debt.
December 31, 2020
(in millions)
Unsecured debt, maturing 2021-2078
Secured debt, maturing 2021-2052
First mortgage bonds, maturing 2021-2050(a)
Finance leases, maturing 2022-2051(b)
Tax-exempt bonds, maturing 2027-2041(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
3.71 %
2.67 %
4.00 %
6.96 %
0.75 %
0.51 %
Duke
Energy
$ 23,669
4,270
29,177
845
477
3,407
—
4
1,217
(330)
Total debt
3.62 %
$ 62,736
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)
(2,873)
—
(4,238)
$ 55,625
Duke
Energy
Carolinas
$ 1,150
543
10,008
294
—
—
806
4
(20)
(62)
$ 12,723
—
(506)
(506)
$ 11,711
Progress
Energy
$ 3,150
1,584
14,100
377
48
—
3,119
—
(31)
(113)
$ 22,234
—
(2,969)
(1,426)
$ 17,839
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
$ 1,180
—
1,850
—
77
—
194
—
(29)
(14)
Duke
Energy
Indiana
$
403
—
3,219
10
352
—
281
—
(18)
(25)
Piedmont
$ 2,800
—
—
—
—
—
530
—
(5)
(15)
$
350
1,332
6,225
81
—
—
196
—
(11)
(62)
$ 8,111
$ 3,258
$ 4,222
$ 3,310
—
(196)
(823)
$ 7,092
—
(169)
(50)
$ 3,039
—
(131)
(70)
$ 4,021
—
(530)
(160)
$ 2,620
$
700
252
7,875
296
48
—
445
—
(19)
(44)
$ 9,553
—
(295)
(603)
$ 8,655
(a) Substantially all electric utility property is mortgaged under mortgage bond indentures.
(b) Duke Energy includes $24 million and $341 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 23 days.
(e) Duke Energy includes $1,196 million and $117 million in purchase accounting adjustments related to Progress Energy and Piedmont, respectively.
(f) Duke Energy includes $33 million in purchase accounting adjustments primarily related to the merger with Progress Energy.
(g) Refer to Note 17 for additional information on amounts from consolidated VIEs.
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)
December 31, 2019
Duke
Energy
Progress
Duke
Energy
Florida
(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
Ohio
$ 1,110
—
1,449
—
77
—
337
—
(30)
(12)
Duke
Energy
Indiana Piedmont
$
405
—
3,169
10
362
—
180
—
(19)
(20)
$ 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 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 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 17 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(a)
Duke Energy (Parent)
Piedmont
Duke Energy (Parent)
Duke Energy (Parent)
Duke Energy Florida
Secured Debt
Duke Energy Florida
First Mortgage Bonds
Duke Energy Carolinas
Duke Energy Florida
Duke Energy Progress
Duke Energy Progress
Other(c)
Current maturities of long-term debt
(a) During October 2020, Progress Energy early retired $500 million of unsecured debt with an original maturity of January 15, 2021.
(b) Debt has a floating interest rate.
(c)
Includes finance lease obligations, amortizing debt and small bullet maturities.
152
Maturity Date
Interest Rate
December 31, 2020
May 2021
June 2021
September 2021
September 2021
November 2021
0.721 %(b)
4.240 %
3.550 %
1.800 %
0.482 %(b)
April 2021
0.972 %(b)
June 2021
August 2021
September 2021
September 2021
3.900 %
3.100 %
3.000 %
8.625 %
$
500
160
500
750
200
250
500
300
500
100
478
$ 4,238
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)
2021
2022
2023
2024
2025
Thereafter
Total long-term debt, including current maturities
December 31, 2020
Duke
Energy(a)
$ 4,238
4,905
3,356
1,344
3,153
41,983
$ 58,979
Duke
Energy
Carolinas
$
506
721
1,008
9
310
9,745
Progress
Energy
$ 1,426
1,736
638
76
725
14,802
Duke
Energy
Progress
$
603
1,208
561
10
661
6,274
Duke
Energy
Florida
$
823
78
77
66
64
6,878
Duke
Energy
Ohio
$
50
—
325
—
270
2,486
Duke
Energy
Indiana
$
70
84
3
4
154
3,818
Piedmont
$
160
—
45
40
205
2,350
$12,299
$ 19,403
$ 9,317
$ 7,986
$ 3,131
$ 4,133
$ 2,800
(a) Excludes $1,346 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, 2020
Duke
Energy
Progress
$ —
150
$ 150
December 31, 2019
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
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) Summary of Significant Debt Issuances
The following tables summarize significant debt issuances (in millions).
Issuance Date
Maturity Date
Interest Rate
Unsecured Debt
May 2020(a)
May 2020(b)
August 2020(c)
September 2020(e)
September 2020(e)
First Mortgage Bonds
January 2020(f)
January 2020(f)
March 2020(g)
May 2020(b)
June 2020(b)
August 2020(h)
Total issuances
Jun 2030
Jun 2050
Feb 2022
Sep 2025
Jun 2030
Feb 2030
Aug 2049
Apr 2050
Jun 2030
Jun 2030
Aug 2050
2.450 %
3.350 %
0.400 %(d)
0.900 %
2.450 %
2.450 %
3.200 %
2.750 %
2.125 %
1.750 %
2.500 %
Duke
Energy
$ 500
400
700
650
350
500
400
550
400
500
600
Duke
Energy
(Parent)
$ 500
—
—
650
350
—
—
—
—
—
—
Year Ended December 31, 2020
Duke
Energy
Carolinas
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
$ —
—
—
—
—
500
400
—
—
—
—
$ —
—
700
—
—
—
—
—
—
—
600
$ —
—
—
—
—
—
—
—
—
500
—
$ —
—
—
—
—
—
—
—
400
—
—
$ —
—
—
—
—
—
—
550
—
—
—
$ —
400
—
—
—
—
—
—
—
—
—
$ 5,550
$ 1,500
$ 900
$ 1,300
$ 500
$
400
$ 550
$ 400
(a) Debt issued to repay $500 million borrowing made under Duke Energy (Parent) revolving credit facility in March 2020, and for general corporate purposes.
(b) Debt issued to repay short-term debt and for general corporate purposes.
(c) Debt issued to repay $700 million term loan due December 2020.
(d) Debt issuance has a floating interest rate.
(e) Debt issued to repay a portion of outstanding commercial paper, to repay a portion of Duke Energy (Parent)’s outstanding $1.7 billion term loan due March 2021 and for general corporate purposes.
(f) Debt issued to repay at maturity $450 million first mortgage bonds due June 2020 and for general corporate purposes.
(g) Debt issued to repay at maturity $500 million first mortgage bonds due July 2020 and to pay down short-term debt.
(h) Debt issued to repay at maturity $300 million first mortgage bonds due September 2020 and for general corporate purposes.
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) 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
—
—
—
—
$ —
—
—
—
—
—
—
—
200
—
—
—
—
—
—
700
$ —
—
—
—
—
40
95
75
—
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.
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) AVAILABLE CREDIT FACILITIES
Master Credit Facility
In March 2020, Duke Energy amended its existing $8 billion Master
Credit Facility to extend the termination date to March 2025. 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.
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
Available capacity
December 31, 2020
Duke
Energy
Duke
Energy
(Parent)
Duke
Energy
Carolinas
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
$ 8,000
$ 2,650
$ 1,475
$ 1,250
$ 800
$ 625
$ 600
$ 600
(2,239)
(40)
(81)
$ 5,640
—
(34)
—
$ 2,616
(736)
(4)
—
735
$
(407)
(2)
—
841
$
(179)
—
—
$ 621
(176)
—
—
$ 449
(257)
—
(81)
$ 262
(484)
—
—
$ 116
(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.
Term Loan Facility
In response to market volatility and ongoing liquidity impacts from
COVID-19, in March 2020, Duke Energy (Parent) entered into a $1.5 billion,
364-day Term Loan Credit Agreement, borrowing the full $1.5 billion available on
March 19, 2020. The term loan contained a provision for increasing the amount
available for borrowing by up to $500 million. Duke Energy (Parent) exercised this
provision on March 27, 2020, borrowing an additional $188 million. Proceeds were
used to reduce outstanding commercial paper and for general corporate purposes.
The loan was repaid by Duke Energy (Parent) as of December 31, 2020. Refer to
Note 1 for additional information on the COVID-19 pandemic.
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, 2020,
$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. During the first quarter of 2020, an additional
$500 million was drawn under this facility to manage liquidity impacts from
COVID-19. The additional $500 million was paid down during the second quarter
of 2020. 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
156
to partially finance an upcoming bond maturity. As of December 31, 2019, the
entire $700 million had been drawn under the term loan and was classified as
Current maturities of long-term debt on Duke Energy Progress’ Consolidated
Balance Sheets. In August 2020, Duke Energy Progress repaid its $700 million
two-year term loan facility.
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, including preferred stock,
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.
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, 2020, and 2019, was
$1,168 million and $1,049 million, respectively. The notes are short-term debt
obligations of Duke Energy and are reflected as Notes payable and commercial
paper on Duke Energy’s Consolidated Balance Sheets.
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)
Money Pool
Restrictive Debt Covenants
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.
7. GUARANTEES AND INDEMNIFICATIONS
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, 2020, Duke Energy does not believe conditions are
likely for significant performance under these guarantees, except for ACP as
described below. 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
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, 2020, the maximum potential amount
of future payments associated with these guarantees were $56 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. In July
2020, ACP reduced the size of the credit facility to $1.9 billion. Duke Energy’s
maximum exposure to loss under the terms of the guarantee is $860 million
as of December 31, 2020. This amount represents 47% of the outstanding
borrowings under the credit facility.
Duke Energy recognized the $860 million within Other Current Liabilities
on the Consolidated Balance Sheets at December 31, 2020, of which $95 million
was previously recognized due the adoption of new guidance for credit losses
effective January 1, 2020. See Notes 3 and 12 for more information. The
remaining reserve for credit losses for financial guarantees of $4 million at
December 31, 2020, is included within Other Noncurrent Liabilities on the
157
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, 2020, 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, 2020, and 2019, Duke Energy had loans outstanding
of $817 million, including $35 million at Duke Energy Progress and $777 million,
including $36 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’s Consolidated Balance Sheets. Management considers financial
guarantees for evaluation under this standard based on the anticipated amount
outstanding at the time of default. The reserve for credit losses is based on the
evaluation of the contingent components of financial guarantees. Management
evaluates the risk of default, exposure and length of time remaining in the period
for each contract.
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, 2020, was $56 million of which $53 million expire between 2021
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, 2020, Duke
Energy had issued a total of $566 million in letters of credit, which expire
between 2021 and 2023. The unused amount under these letters of credit was
$76 million.
Duke Energy recognized $11 million and $23 million as of December 31,
2020, and 2019, respectively, 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.
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) 8. 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.
9. 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, 2020
Ownership
Interest
Property, Plant
and Equipment
Accumulated
Depreciation
Construction Work in
Progress
19.25 %
87.27 %
50.05 %
62.50 %
Various
$ 1,017
632
447
174
5,817
$ 518
49
199
101
1,508
$ 23
1
4
1
150
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 3 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.
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
December 31, 2020
Duke
Energy
$ 6,845
5,778
381
$ 13,004
718
$ 12,286
Duke
Energy
Carolinas
$ 2,695
2,597
58
$ 5,350
264
Progress
Energy
$ 4,101
1,973
75
$ 6,149
283
$ 5,086
$ 5,866
Duke
Energy
Progress
$ 3,642
1,950
43
$ 5,635
283
$ 5,352
Duke
Energy
Florida
Duke
Energy
Ohio
$ 459
23
32
$ 514
—
$ 514
$ —
67
44
$111
3
$108
Duke
Energy
Indiana
$ —
1,140
36
$ 1,176
168
$ 1,008
Piedmont
$ —
—
20
$ 20
—
$ 20
(a) Duke Energy amount includes purchase accounting adjustments related to the merger with Progress Energy.
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)
Nuclear Decommissioning Liability
Nuclear Operating Licenses
AROs related to nuclear decommissioning are based on site-specific
Operating licenses for nuclear units are potentially subject to extension.
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)
$ 27
—
27
—
$
9,105
4,365
4,181
559
Year of Cost
Study
2018 or 2019
2018
2019
N/A
(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 was filed
with the NCUC and PSCSC in March 2020. Duke Energy Progress also completed a funding study, which
was 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 and decommissioning costs are based on the agreement with this third party
rather than a cost study. Regulatory approval was received from the NRC and the FPSC in April 2020 and
August 2020, respectively. See Note 3 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.
The following table presents the fair value of NDTF assets
legally restricted for purposes of settling AROs associated with nuclear
decommissioning. Duke Energy Florida entered into an agreement with a third
party to decommission 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 16 for additional information related to the fair value of the
Duke Energy Registrants’ NDTFs.
(in millions)
Duke Energy
Duke Energy Carolinas
Duke Energy Progress
December 31,
2020
$ 7,726
4,381
3,345
2019
$ 6,766
3,837
2,929
159
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. During 2019, Duke Energy Florida
entered into an agreement for the accelerated decommissioning of Crystal River
Unit 3. Regulatory approval was received from the NRC and the FPSC in April 2020
and August 2020, respectively. See Note 3 for more information.
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 2020 and 2019.
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 3 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 3 for additional information on recovery of coal ash costs.
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) 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
Balance at December 31, 2018
$ 10,467
$ 3,949
$ 5,411
$ 4,820
$
591
$
508
(895)
25
3,213
13,318
542
(724)
22
(154)
235
(329)
18
1,861
5,734
258
(198)
—
(444)
252
(499)
7
1,300
6,471
246
(451)
5
(122)
227
(460)
—
1,306
5,893
225
(358)
—
(125)
25
(39)
7
(6)
578
21
(93)
5
3
Duke
Energy
Indiana
$
722
Piedmont
$
19
28
(54)
—
136
832
33
(74)
—
385
1
—
—
(3)
17
1
—
—
2
93
3
(12)
—
(4)
80
4
(2)
—
29
Accretion expense(a)
Liabilities settled(b)
Liabilities incurred in the current year
Revisions in estimates of cash flows(c)
Balance at December 31, 2019
Accretion expense(a)
Liabilities settled(b)
Liabilities incurred in the current year
Revisions in estimates of cash flows(d)
Balance at December 31, 2020
$ 13,004
$ 5,350
$ 6,149
$ 5,635
$
514
$
111
$ 1,176
$
20
(a) Substantially all accretion expense for the years ended December 31, 2020, and 2019, 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.
(c) Amounts primarily relate to increases in closure estimates for certain ash impoundments as a result of the NCDEQ’s April 1, 2019, Order and the related settlement agreement dated December 31, 2019.
(d) Primarily relates to decreases due to revised basin closure cost estimates, partially offset by increases related to new closure plan approvals, post closure maintenance and beneficiation costs. Duke Energy Indiana
estimates also include the impacts of closure estimates for certain ash impoundments due to the impact of Hoosier Environmental Council’s petition filed with the court challenging the Indiana Department of Environmental
Management’s partial approval of Duke Energy Indiana’s ash pond closure plan. See Note 4 for more information on Hoosier Environmental Council’s petition. The incremental amount recorded represents the discounted cash
flows for estimated closure costs based upon the probability weightings of the potential closure methods as evaluated on a site-by-site basis.
160
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) 10. 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, 2020
Average
Remaining
Useful Life
(Years)
Duke
Energy
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
$
2,046
$
536 $
908
$
463
$
445
$
171
$
118
$
279
39
54
36
27
10
15
14
117,107
10,799
2,038
5,444
519
3,284
2,608
6,645
5,090
155,580
(46,216)
(2,611)
29
44,059
—
740
50,785
—
459
—
—
1,837
620
1,645
1,203
50,640
(17,453)
—
—
—
—
1,447
759
2,013
1,521
57,892
(18,368)
—
29
31,375
—
197
—
—
1,447
498
709
1,070
35,759
(12,801)
—
29
19,410
—
262
—
—
—
261
1,304
441
22,123
(5,560)
—
—
6,255
3,136
374
—
—
—
385
407
294
11,022
(3,013)
—
—
16,008
—
300
—
—
—
238
409
309
17,382
(5,661)
—
—
—
7,663
165
—
—
—
122
581
324
9,134
(1,749)
—
—
Total net property, plant and equipment
$106,782
$ 33,187 $ 39,553
$
22,987
$16,563
$ 8,009
$11,721
$ 7,385
(a)
(b)
(c)
(d)
(e)
Includes finance leases of $832 million, $335 million, $416 million, $297 million, $119 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 $141 million, $24 million and $117 million, respectively, of accumulated
amortization of finance leases.
Includes $1,832 million, $1,010 million, $822 million and $822 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 $12 million, $23 million and $3 million at Duke Energy, Duke Energy Carolinas and Duke Energy Indiana, respectively.
Includes accumulated amortization of finance leases of $23 million at Duke Energy.
Includes gross property, plant and equipment cost of consolidated VIEs of $6,394 million and accumulated depreciation of consolidated VIEs of $1,242 million at Duke Energy.
In 2020, Duke Energy evaluated recoverability of its renewable merchant
plants principally located in the Electric Reliability Council of Texas West market
and in the PJM 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 $210 million approximates the aggregate estimated future
undiscounted cash flows. A continued decline in energy market pricing would
likely result in a future impairment. Duke Energy retained 51% ownership
interest in these facilities following the 2019 transaction to sell a minority
interest in certain renewable assets. See Note 1 for further information.
161
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)(e)
Total accumulated depreciation – regulated(b)(c)
Total accumulated depreciation – nonregulated(d)(e)
Generation facilities to be retired, net
December 31, 2019
Average
Remaining
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
39
54
32
28
9
13
13
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.
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,
2020
$112
28
17
12
5
26
10
8
2019
2018
$ 159
30
31
28
3
22
26
26
$161
35
51
26
25
17
27
17
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)
11. 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, 2020, and 2019.
(in millions)
Goodwill Balance at
December 31, 2019
Accumulated impairment
charges
Goodwill balance at
December 31, 2019, adjusted
for accumulated impairment
charges
Goodwill Balance at
December 31, 2020
Accumulated impairment
charges
Goodwill balance at
December 31, 2020,
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, 2020, and 2019.
—
—
(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 2020 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 2020.
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, 2020, and 2019.
(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
Duke
Energy
Carolinas
Duke
Energy
Progress
Energy
December 31, 2020
Duke
Energy
Progress
Duke
Energy
Florida
$
8
196
24
107
20
355
(23)
(34)
(3)
(60)
$ —
65
—
—
—
65
—
—
—
—
$
5
130
—
—
—
135
—
—
—
—
$
2
130
—
—
—
132
—
—
—
—
$ 3
—
—
—
—
3
—
—
—
—
Total intangible assets, net
$
295
$
65
$135
$ 132
$ 3
$
163
Duke
Energy
Ohio
$ —
1
—
—
—
1
—
—
—
—
1
Duke
Energy
Indiana
Piedmont
$
2
—
24
—
—
26
(23)
—
—
(23)
$ —
—
—
—
—
—
—
—
—
—
$
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 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
Duke
Energy
Carolinas
Duke
Energy
Progress
Energy
December 31, 2019
Duke
Energy
Progress
Duke
Energy
Florida
$
18
172
24
89
2
305
(21)
(34)
(1)
(56)
$ —
53
—
—
—
53
—
—
—
—
53
$
5
118
—
—
—
123
—
—
—
—
$
2
118
—
—
—
120
—
—
—
—
$ 3
—
—
—
—
3
—
—
—
—
Duke
Energy
Ohio
$ —
1
—
—
—
1
—
—
—
—
1
Duke
Energy
Indiana
Piedmont
$ 12
—
24
—
—
36
(21)
—
—
(21)
$ —
—
—
—
—
—
—
—
—
—
$ 15
$ —
Total intangible assets, net
$
249
$
$ 123
$ 120
$ 3
$
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, 2020, 2019 and 2018, and are expected to be immaterial for the next five years as of December 31, 2020.
12. 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,
2020
2019
2018
Investments
Equity in earnings
Investments
Equity in earnings
Investments
Equity in earnings
$ 105
215
534
107
$ 961
$
(1)
(2,017)
—
13
$
122
1,388
314
112
$ (2,005)
$
1,936
$
9
114
(4)
43
$ 162
$
97
1,003
201
108
$ 1,409
$
6
27
(1)
51
$
83
During the years ended December 31, 2020, 2019 and 2018, Duke Energy
received distributions from equity investments of $37 million, $55 million and
$108 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, 2020, 2019 and 2018, Duke Energy received
distributions from equity investments of $133 million, $11 million and $137 million,
respectively, which are included in Return of investment capital within Cash Flows
from Investing Activities on the Consolidated Statements of Cash Flows.
During the years ended December 31, 2020, 2019 and 2018, Piedmont
received distributions from equity investments of $2 million, $1 million and
$1 million, respectively, which are included in Other assets within Cash Flows
from Operating Activities and $2 million, $4 million and $3 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 50% interests in both DATC and Pioneer, which build,
own and operate electric transmission facilities in North America.
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) Gas Utilities and Infrastructure
The table below outlines Duke Energy’s ownership interests in natural gas
pipeline companies and natural gas storage facilities.
across the U.S. Duke Energy is not the primary beneficiary of the distributed fuel
cell portfolio and does not consolidate these assets.
Other
Entity Name
Pipeline Investments(a)
ACP(b)
Sabal Trail
Cardinal(c)
Storage Facilities
Pine Needle(c)
Hardy Storage(c)
Other
Total Investments(d)
Investment Amount (in millions)
Ownership
Interest
December 31,
2020
2019
Duke Energy has a 17.5% indirect economic ownership interest and
25% board representation and voting rights interest in NMC, which owns and
operates a methanol and MTBE business in Jubail, Saudi Arabia.
47 %
7.5 %
21.49 %
45 %
50 %
29.68 %
$
$
—
120
9
27
56
3
215
$
$
1,179
121
9
28
51
—
1,388
Significant Subsidiaries
For the year ended December 31, 2020, Duke Energy’s investment in
ACP met the requirements of S-X Rule 4-08(g) to provide summarized financial
information. The following table provides summary information for ACP as
required under S-X Rule 1-02(bb) for the comparative periods in Duke Energy’s
consolidated balance sheets and consolidated statements of operations.
December 31,
$
2020
43 $
93
1,965
167
(1,996)
2019
17
4,091
37
1,760
2,311
Years Ended December 31,
2020
2019
2018
$ — $ — $ —
(6)
138
65
$ (2,121) $ 116 $
(4,612)
(4,512)
(5)
246
(a) Duke Energy recorded OTTIs of $25 million and $55 million within Equity in (losses) earnings of
unconsolidated affiliates on Duke Energy’s Consolidated Statements of Operations for the years ended
December 31, 2019, and 2018, respectively, to completely impair its 24% ownership interest in
Constitution.
(b)
In 2020, Duke Energy determined it would no longer continue its investment in the construction of the
ACP pipeline. See Notes 3 and 7 for further information.
(c) Piedmont owns the Cardinal, Pine Needle and Hardy Storage investments.
(d) Duke Energy includes purchase accounting adjustments related to Piedmont.
(in millions)
Current assets
Noncurrent assets
Current liabilities
Noncurrent liabilities
Membership interests
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 in 2019.
See Note 1 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.
As of December 31, 2020, Duke Energy completed its acquisition
of 70 distributed fuel cell projects from Bloom Energy Corporation, which
approximates 43 MW of capacity serving commercial and industrial customers
Net revenues
Operating loss
Net (loss) income
Net (loss) income attributable to Duke Energy
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) 13. 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,
2020
2019
2018
$ 753 $ 841 $ 985
22
84
207
15
20
25
114
15
20
60
186
15
$ 715 $ 778 $ 906
34
207
84
78
36
114
25
75
37
186
60
76
$ 420 $ 462 $ 577
13
207
84
78
17
114
25
75
15
186
60
76
$ 295 $ 316 $ 329
21
19
22
$ 326 $ 354 $ 374
5
4
4
$ 401 $ 412 $ 405
7
8
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,
2020
2019
2018
$ 140 $ 138 $ 170
2
93
25
3
90
23
3
91
23
(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 6 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 17, 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, 2020
Intercompany income tax receivable
Intercompany income tax payable
December 31, 2019
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
$ —
31
$ —
5
$ —
33
$ 125
—
$ —
46
$ —
35
$ —
2
$ 28
—
$ —
2
$
9
—
$
9
—
$ 28
—
$ 10
—
$ 13
—
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) 14. 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,
2020, 2019 and 2018, 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 segment 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
Undesignated contracts
Total notional amount(a)
Duke
Energy
632
1,177
1,809
Duke
Energy
993
1,277
2,270
$
$
$
$
Duke Energy
Carolinas
$
$
—
400
400
Duke Energy
Carolinas
$
$
—
450
450
December 31, 2020
Progress
Energy
Duke Energy
Progress
Duke Energy
Florida
Duke Energy
Ohio
—
750
750
$
$
—
750
750
$
$
—
—
—
$ —
27
$
27
December 31, 2019
Progress
Energy
Duke Energy
Progress
Duke Energy
Florida
Duke Energy
Ohio
—
800
800
$
$
—
250
250
$
$
—
550
550
$ —
27
$
27
$
$
$
$
(a) Duke Energy includes amounts related to consolidated VIEs of $632 million in cash flow hedges as of December 31, 2020, and $693 million in cash flow hedges as of December 31, 2019.
COMMODITY PRICE RISK
The Duke Energy Registrants are exposed to the impact of changes in
the prices of electricity purchased and sold in bulk power markets and 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. To manage risk
167
associated with commodity prices, the Duke Energy Registrants may enter into
long-term power purchase or sales contracts and long-term natural gas supply
agreements.
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)
Cash Flow Hedges
For derivatives designated as hedging the exposure to variable cash flows
of a future transaction, referred to as a cash flow hedge, 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. Gains and losses reclassified out of accumulated other comprehensive
income (loss) for the year ended December 31, 2020, 2019 and 2018, were not
material. Duke Energy’s commodity derivatives designated as hedges include
long-term electricity sales in the Commercial Renewables segment.
Undesignated Contracts
For the Subsidiary Registrants, bulk power electricity 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.
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.
Electricity (GWh)(a)
Natural gas (millions of Dth)
Electricity (GWh)
Natural gas (millions of Dth)
(a) Duke Energy includes 22,048 GWh that relates to cash flow hedges.
December 31, 2020
Duke Energy
Carolinas
Progress
Energy
Duke Energy
Progress
Duke Energy
Ohio
Duke Energy
Indiana
—
145
—
158
—
158
2,559
—
10,802
2
December 31, 2019
Duke Energy
Carolinas
Progress
Energy
Duke Energy
Progress
Duke Energy
Ohio
Duke Energy
Indiana
—
130
—
160
—
160
1,887
—
13,971
3
Duke
Energy
35,409
678
Duke
Energy
15,858
704
Piedmont
—
373
Piedmont
—
411
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
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, 2020
$ 30
13
$ 43
$ 18
$ 18
$ 61
$
$
14
6
20
$ —
$ —
20
$
$
9
6
$ 15
$ 18
$ 18
$ 33
$
9
6
$ 15
$ 18
$ 18
$ 33
$ —
—
$ —
$ —
$ —
$ —
$
$
1
—
1
$ —
$ —
1
$
$
$
6
—
6
$ —
$ —
6
$
$
$
1
—
1
$ —
$ —
1
$
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) Derivative Liabilities
(in millions)
Commodity Contracts
Designated as Hedging Instruments
Current
Noncurrent
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
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
December 31, 2020
Duke Energy
Florida
Duke Energy
Progress
Duke Energy
Ohio
Duke Energy
Indiana
Piedmont
$ 14
70
$ 30
137
$ 251
$ 15
48
5
5
$ 73
$ 324
$ —
—
$
$
13
3
16
$ —
—
4
—
4
20
$
$
$ —
—
$
2
27
$ 29
$ —
—
—
—
$ —
$ 29
$ —
—
$
2
12
$ 14
$ —
—
—
—
$ —
$ 14
$ —
—
$ —
—
$ —
$ —
—
—
—
$ —
$ —
$ —
—
$ —
—
$ —
$ —
—
1
5
6
6
$
$
$ —
—
$
$
1
—
1
$ —
—
—
—
$ —
1
$
$ —
—
$ 15
107
$ 122
$ —
—
—
—
$ —
$ 122
Duke
Energy
Duke Energy
Carolinas
Progress
Energy
December 31, 2019
Duke Energy
Florida
Duke Energy
Progress
Duke Energy
Ohio
Duke Energy
Indiana
Piedmont
$ 17
1
$ 18
6
6
$
$
1
1
$
$ 25
$ —
—
$ —
—
$ —
$ —
$ —
$ —
$ —
—
$ —
6
6
1
1
7
$
$
$
$
$ —
—
$ —
—
$ —
$ —
$ —
$ —
$ —
—
$ —
6
6
1
1
7
$
$
$
$
$
$
3
1
4
—
$ —
$ —
$ —
4
$
$
$
13
—
13
—
$ —
$ —
$ —
13
$
$
$
1
—
1
—
$ —
$ —
$ —
1
$
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) Derivative Liabilities
December 31, 2019
(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 Securities Contracts
Total Derivative Liabilities
OFFSETTING ASSETS AND LIABILITIES
Duke
Energy
Duke Energy
Carolinas
Progress
Energy
Duke Energy
Progress
Duke Energy
Florida
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
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, 2020
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
$ 48
(3)
$ 45
$ 13
(5)
$
8
$ 14
(2)
$ 12
$
$
6
(1)
5
$ 27
(2)
$ 25
$
$
6
(4)
2
$ 27
(2)
$ 25
$
$
6
(4)
2
$ —
—
$ —
$ —
—
$ —
$
$
1
—
1
$ —
—
$ —
$
$
6
—
6
$ —
—
$ —
$
$
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, 2020
Current
Gross amounts recognized
Gross amounts offset
Net amounts presented in Current Liabilities: Other
Noncurrent
Gross amounts recognized
Gross amounts offset
$ 64
(3)
$ 61
$ 260
(5)
Net amounts presented in Other Noncurrent Liabilities: Other
$ 255
$ 17
(2)
$ 15
$
$
3
(1)
2
$
2
(2)
$ —
$ 27
(4)
$ 23
$
2
(2)
$ —
$ 12
(4)
$
8
$ —
—
$ —
$ —
—
$ —
$
$
$
$
1
—
1
5
—
5
$
$
1
—
1
$ —
—
$ —
$ 15
—
$ 15
$ 107
—
$ 107
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) 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
OBJECTIVE CREDIT CONTINGENT FEATURES
$
$
$
$
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
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, 2020
Duke
Energy
Duke Energy
Carolinas
Progress
Energy
Duke Energy
Progress
$
$
24
—
24
$
9
—
9
$
14
—
14
14
—
14
December 31, 2019
Duke
Energy
Duke Energy
Carolinas
Progress
Energy
Duke Energy
Progress
$
$
79
—
79
$
35
—
35
$
44
—
44
44
—
44
The Duke Energy Registrants have elected to offset cash collateral and fair values of derivatives. For amounts to be netted, the derivative and cash collateral
must be executed with the same counterparty under the same master netting arrangement.
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) 15.
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 through net income. For investments in equity securities classified as FV-NI, both realized and unrealized gains and losses are reported through net
income. Substantially all of Duke Energy’s investments in debt and equity securities qualify for regulatory accounting, and accordingly, all associated realized and
unrealized gains and losses on these investments are deferred as a regulatory asset or liability.
Duke Energy classifies the majority of investments in debt and equity securities as long term, unless otherwise noted.
Investment Trusts
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 investment manager agreements
and trust agreements. The Duke Energy Registrants have limited oversight of
the day-to-day management of these investments. As a result, the ability to
hold investments in unrealized loss positions is outside the control of the Duke
Energy Registrants. Accordingly, all unrealized losses associated with debt
securities within the Investment Trusts are 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 has a credit loss. The Duke Energy Registrants analyze all
investment holdings each reporting period to determine whether a decline in fair
value is related to a credit loss. If a credit loss exists, the unrealized credit loss
is included in earnings. There were no material credit losses as of December 31,
2020, and 2019.
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.
(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
December 31, 2020
December 31, 2019
Gross Unrealized
Holding Gains
Gross Unrealized
Holding Losses
Estimated
Fair Value
Gross Unrealized
Holding Gains
Gross Unrealized
Holding Losses
Estimated
Fair Value
$
177
6,235
806
370
1,361
180
$ 9,129
$
$
127
146
110
86
42
47
558
$ 9,687
$ —
3,523
37
13
33
3
$ 3,609
$ —
57
3
4
2
—
$
66
$ 3,675
$ —
55
1
—
1
—
$ 57
$ —
—
—
—
—
—
$ —
$ 57
$
101
5,661
603
368
1,256
141
$ 8,130
$
$
52
122
67
94
41
56
432
$ 8,562
$ —
4,138
76
22
51
8
$
4,295
$ —
79
8
5
—
—
$
$
92
4,387
$ —
54
1
—
—
—
$
55
$ —
—
—
—
—
—
$ —
$
55
172
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 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, 2020
$
149
922
671
1,260
$ 3,002
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,
2020, 2019 and 2018, were as follows.
(in millions)
FV-NI:
Realized gains
Realized losses
AFS:
Realized gains
Realized losses
DUKE ENERGY CAROLINAS
Years Ended December 31,
2020
2019
2018
$
366
174
96
51
$
172
151
94
67
$ 168
126
22
51
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, 2020
December 31, 2019
Gross Unrealized
Holding Gains
Gross Unrealized
Holding Losses
Estimated
Fair Value
Gross Unrealized
Holding Gains
Gross Unrealized
Holding Losses
Estimated
Fair Value
$
$
—
2,442
49
6
25
7
2,529
$
$
—
23
1
—
—
—
24
$
$
30
3,685
510
91
475
174
4,965
$
$
—
1,914
21
3
16
3
1,957
$
$
— $
8
1
—
1
—
10
$
21
3,154
361
96
578
137
4,347
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, 2020
$
14
299
279
658
$ 1,250
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) 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,
2020, 2019 and 2018, were as follows.
(in millions)
FV-NI:
Realized gains
Realized losses
AFS:
Realized gains
Realized losses
PROGRESS ENERGY
Years Ended December 31,
2020
2019
2018
$
64
99
60
37
$
113
107
55
38
$
89
73
19
35
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, 2020
December 31, 2019
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
$
$
$
$
$
—
1,696
27
16
26
1
1,766
—
3
3
1,769
$ —
31
—
—
—
—
$
31
$ —
—
$ —
$
31
$
$
$
$
$
147
2,550
296
279
886
6
4,164
106
26
132
4,296
$
$
$
$
$
—
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
December 31, 2020
$
109
567
298
519
$ 1,493
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
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,
2020, 2019 and 2018, were as follows.
(in millions)
FV-NI:
Realized gains
Realized losses
AFS:
Realized gains
Realized losses
Years Ended December 31,
2020
2019
2018
$
302
75
24
13
$
59
44
36
29
$
79
53
3
15
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) — $
21
—
—
—
—
21
$
— $
— $
21
$
53
2,077
242
272
403
4
3,051
2
2
3,053
December 31, 2020
$
21
259
210
503
$ 993
DUKE ENERGY PROGRESS
The following table presents the estimated fair value of investments in debt and equity securities; equity investments are classified as FV-NI and debt
investments are classified as AFS.
December 31, 2020
December 31, 2019
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
$
$
$
$
$
—
1,617
27
16
26
1
1,687
—
—
1,687
$
$
$
$
$
—
31
—
—
—
—
31
—
—
31
$
$
$
$
$
76
2,459
296
279
412
6
3,528
1
1
3,529
$
$
$
$
$
—
1,258
16
10
16
—
1,300
—
—
1,300
$
$
$
$
$
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
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, 2020,
2019 and 2018, were as follows.
(in millions)
FV-NI:
Realized gains
Realized losses
AFS:
Realized gains
Realized losses
Years Ended December 31,
2020
2019
2018
$
52
59
24
13
$
38
33
7
5
$
68
48
2
10
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) DUKE ENERGY FLORIDA
The following table presents the estimated fair value of investments in debt and equity securities; equity investments are classified as FV-NI and debt
investments are classified as AFS.
(in millions)
NDTF
Cash and cash equivalents
Equity securities
U.S. government bonds
Total NDTF Investments(a)
Other Investments
Cash and cash equivalents
Municipal bonds
Total Other Investments
Total Investments
December 31, 2020
December 31, 2019
Gross Unrealized
Holding Gains
Gross Unrealized
Holding Losses
Estimated
Fair Value
Gross Unrealized
Holding Gains
Gross Unrealized
Holding Losses
Estimated
Fair Value
$
$
$
$
$
—
79
—
79
—
3
3
82
$ —
—
—
$ —
$ —
—
$ —
$ —
$
$
$
$
$
71
91
474
636
1
26
27
663
$
$
$
$
$
—
351
1
352
—
3
3
355
$ —
26
—
$
26
$ —
—
$ —
$
26
$
$
$
$
$
27
430
275
732
4
51
55
787
(a) During the years ended December 31, 2020, and 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, 2020
$
88
308
88
16
$ 500
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, 2020,
2019 and 2018, were as follows.
(in millions)
FV-NI:
Realized gains
Realized losses
AFS:
Realized gains
Realized losses
Years Ended December 31,
2020
2019
2018
$
250
16
—
—
$
21
11
29
24
$
11
5
1
5
176
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 INDIANA
The following table presents the estimated fair value of investments in debt and equity securities; equity investments are measured at FV-NI and debt
investments are classified as AFS.
(in millions)
Investments
Cash and cash equivalents
Equity securities
Corporate debt securities
Municipal bonds
U.S. government bonds
Total Investments
December 31, 2020
December 31, 2019
Gross Unrealized
Holding Gains
Gross Unrealized
Holding Losses
Estimated
Fair Value
Gross Unrealized
Holding Gains
Gross Unrealized
Holding Losses
Estimated
Fair Value
$
$
—
58
—
1
—
59
$ —
—
—
—
—
$ —
$
$
1
97
3
38
4
143
$
$
—
43
—
1
—
44
$ —
—
—
—
—
$ —
$
$
—
81
6
36
2
125
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, 2020
$
$
3
17
10
15
45
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,
2020, 2019 and 2018, were immaterial.
16. FAIR VALUE MEASUREMENTS
Investments in equity securities
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 net asset value 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.
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.
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.
Commodity derivatives with observable forward curves are classified as Level 2.
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,
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 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 11 for a discussion of the valuation of goodwill and intangible
assets.
DUKE ENERGY
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Consolidated Balance Sheets.
Derivative amounts in the tables below for all Duke Energy Registrants exclude cash collateral, which is disclosed in Note 14. See Note 15 for additional information
related to investments by major security type for the Duke Energy Registrants.
(in millions)
NDTF cash and cash equivalents
NDTF equity securities
NDTF debt securities
Other equity securities
Other debt securities
Other cash and cash equivalents
Derivative assets
Total assets
Derivative liabilities
Net assets (liabilities)
(in millions)
NDTF cash and cash equivalents
NDTF equity securities
NDTF debt securities
Other equity securities
Other debt securities
Other cash and cash equivalents
Derivative assets
Total assets
NDTF equity security contracts
Derivative liabilities
Net assets (liabilities)
December 31, 2020
Total Fair Value
Level 1
Level 2
Level 3
Not Categorized
$
177
6,235
2,717
146
285
127
61
9,748
(324)
$
177
6,189
874
146
37
127
1
7,551
—
$ —
—
1,843
—
248
—
53
2,144
(240)
$ —
—
—
—
—
—
7
7
(84)
$ 9,424
$ 7,551
$ 1,904
$ (77)
$ —
46
—
—
—
—
—
46
—
$ 46
December 31, 2019
Total Fair Value
Level 1
Level 2
Level 3
Not Categorized
$
101
5,684
2,368
122
258
52
25
8,610
(23)
(277)
$
101
5,633
725
122
39
52
3
6,675
—
(15)
$ —
—
1,643
—
219
—
7
1,869
(23)
(145)
$ —
—
—
—
—
—
15
15
—
(117)
$ —
51
—
—
—
—
—
51
—
—
$ 8,310
$ 6,660
$ 1,701
$ (102)
$
51
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) 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
Total pretax realized or unrealized losses included in comprehensive income
Purchases, sales, issuances and settlements:
Purchases
Settlements
Net transfers Out of Level 3(a)
Total (losses) gains included on the Consolidated Balance Sheet
Balance at end of period
(a) Transferred from Level 3 to Level 2 because observable market data became available.
DUKE ENERGY CAROLINAS
Derivatives (net)
Years Ended December 31,
2020
$ (102)
(84)
14
(19)
117
(3)
2019
$ (113)
—
37
(44)
—
18
$
(77)
$ (102)
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 cash and cash equivalents
NDTF equity securities
NDTF debt securities
Derivative assets
Total assets
Derivative liabilities
Net assets
(in millions)
NDTF cash and cash equivalents
NDTF equity securities
NDTF debt securities
Total assets
Derivative liabilities
Net assets
December 31, 2020
Total Fair Value
Level 1
Level 2
Not Categorized
$
30
$
30
$ —
$ —
3,685
1,250
20
4,985
(20)
3,639
192
—
3,861
—
—
1,058
20
1,078
(20)
$ 4,965
$ 3,861
$1,058
$
46
—
—
46
—
46
December 31, 2019
Total Fair Value
Level 1
Level 2
Not Categorized
$
21
3,154
1,172
4,347
(49)
$
21
3,103
206
3,330
—
$ —
—
966
966
(49)
$ 4,298
$ 3,330
$ 917
$ —
51
—
51
—
$ 51
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) 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 cash and cash equivalents
NDTF equity securities
NDTF debt securities
Other debt securities
Other cash and cash equivalents
Derivative assets
Total assets
NDTF equity security contracts
Derivative liabilities
Net assets
DUKE ENERGY PROGRESS
December 31, 2020
December 31, 2019
Total Fair Value
Level 1
Level 2
Total Fair Value
Level 1
Level 2
$
147
2,550
1,467
26
106
33
4,329
—
(29)
$
147
2,550
682
—
106
—
3,485
—
—
$ —
—
785
26
33
844
—
(29)
$
80
2,530
1,196
51
49
7
3,913
(23)
(65)
$
80
2,530
519
—
49
—
3,178
—
—
$ —
—
677
51
—
7
735
(23)
(65)
$ 4,300
$ 3,485
$ 815
$ 3,825
$ 3,178
$ 647
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 cash and cash equivalents
NDTF equity securities
NDTF debt securities
Other cash and cash equivalents
Derivative assets
Total assets
Derivative liabilities
Net assets
DUKE ENERGY FLORIDA
December 31, 2020
December 31, 2019
Total Fair Value
Level 1
Level 2
Total Fair Value
Level 1
Level 2
$
76
2,459
993
1
33
3,562
(14)
$
76
2,459
237
1
—
2,773
—
$ —
—
756
—
33
789
(14)
$
53
2,077
921
2
—
3,053
(49)
$
53
2,077
244
2
—
2,376
—
$ —
—
677
—
—
677
(49)
$ 3,548
$ 2,773
$ 775
$ 3,004
$ 2,376
$ 628
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 cash and cash equivalents
NDTF equity securities
NDTF debt securities
Other debt securities
Other cash and cash equivalents
Derivative assets
Total assets
NDTF equity security contracts
Derivative liabilities
Net assets
December 31, 2020
December 31, 2019
Total Fair Value
Level 1
Level 2
Total Fair Value
Level 1
Level 2
$
71
91
474
26
1
—
663
—
—
$
71
91
445
—
1
—
608
—
—
$ —
$
—
29
26
—
—
55
—
—
27
453
275
51
4
7
817
(23)
(1)
$
27
453
275
—
4
—
759
—
—
$ —
—
—
51
—
7
58
(23)
(1)
$
663
$
608
$
55
$
793
$
759
$
34
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) 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, 2020, and 2019.
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
Other cash equivalents
Derivative assets
Total assets
Derivative liabilities
Total assets
December 31, 2020
December 31, 2019
Total Fair Value
Level 1 Level 2 Level 3
Total Fair Value
Level 1 Level 2 Level 3
$ 97
$ 97
$ —
$ —
$ 81
$ 81
$ —
$ —
45
1
6
149
(1)
—
45
—
1
—
—
98
45
(1) —
—
—
6
6
—
44
—
13
138
(1)
—
44
—
—
—
2
83
44
(1) —
—
—
11
11
—
$ 148
$ 97
$ 45
$
6
$ 137
$ 82
$ 44
$ 11
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,
2020
$ 11
10
(13)
(2)
2019
$ 22
28
(36)
(3)
$ 6
$ 11
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, 2020
December 31, 2019
Total Fair Value Level 1 Level 2
Total Fair Value
Level 1 Level 3
$
1
(122)
$ (121)
$
$
1 $ —
(122)
—
1 $ (122)
$
1
(117)
$ (116)
$
$
1 $ —
(117)
—
1 $ (117)
The following table provides a reconciliation of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements.
(in millions)
Balance at beginning of period
Net transfers Out of Level 3(a)
Total gains and settlements
Balance at end of period
(a) Transferred from Level 3 to Level 2 because observable market data became available.
181
Derivatives (net)
Years Ended December 31,
2020
2019
$(117)
$ (141)
117
—
—
24
$ —
$ (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) QUANTITATIVE INFORMATION ABOUT UNOBSERVABLE INPUTS
The following tables include quantitative information about the Duke Energy Registrants’ derivatives classified as Level 3.
Fair Value
(in millions)
Valuation Technique
Unobservable Input
Range
Weighted
Average
Range
December 31, 2020
$ (84)
Discounted cash flow
Forward electricity curves – price per MWh
$ 14.68 — $ 151.84 $
28.84
1
6
RTO auction pricing
FTR price – per MWh
0.25 — 1.68
0.79
RTO auction pricing
FTR price – per MWh
(2.40) — 7.41
1.05
Investment Type
Duke Energy
Electricity contracts
Duke Energy Ohio
FTRs
Duke Energy Indiana
FTRs
Duke Energy
Total Level 3 derivatives
$ (77)
December 31, 2019
Fair Value
(in millions)
Valuation Technique
Unobservable Input
Range
Weighted
Average
Range
$
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)
Investment Type
Duke Energy Ohio
FTRs
Duke Energy Indiana
FTRs
Piedmont
Natural gas contracts
Duke Energy
Total Level 3 derivatives
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, 2020
December 31, 2019
Book Value
Fair Value
Book Value
Fair Value
$ 59,863
12,218
19,264
9,258
7,915
3,089
4,091
2,780
$ 69,292
14,917
23,470
10,862
9,756
3,650
5,204
3,306
$ 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
(a) Book value of long-term debt includes $1.3 billion as of December 31, 2020, and $1.5 billion as of December 31, 2019, 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, 2020, and December 31, 2019, fair value of cash and cash equivalents, accounts and notes receivable, accounts payable, notes payable
and commercial paper, and nonrecourse notes payable of VIEs are not materially different from their carrying amounts because of the short-term nature of these
instruments and/or because the stated rates approximate market rates.
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) 17. 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, 2020, 2019 and 2018, 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 amount of qualified receivables purchased, which generally exclude
receivables past due more than a predetermined number of days and reserves
for expected past-due balances. The sole source of funds to satisfy the related
debt obligations is cash collections from the receivables. Amounts borrowed
under the credit facilities for DERF and DEPR are reflected on the Consolidated
Balance Sheets as Long-Term Debt. Amounts borrowed under the credit facilities
for DEFR are reflected on the Consolidated Balance Sheets as Current maturities
of long-term debt.
Due to the COVID-19 pandemic, as described in Note 1, the Duke Energy
Registrants suspended customer disconnections for nonpayment. Since
taking action to suspend customer disconnections for nonpayment, certain
jurisdictions have now returned to normal operations and billing practices. The
full impact of COVID-19 and the Duke Energy Registrant’s related response on
customers’ ability to pay for service is uncertain. However, the level of past-due
receivables at Duke Energy Carolinas, Duke Energy Progress and Duke Energy
Florida have increased significantly during the COVID-19 pandemic, and it is
reasonably possible eventual write-offs of customer receivables may increase
over current estimates. In 2020, DERF, DEPR and DEFR executed amendments
183
to their credit facilities to manage the impact of past-due receivables resulting
from the suspension of customer disconnections from COVID-19. See Note 3 for
information about COVID-19 filings with state utility commissions.
The most significant activity that impacts the economic performance
of DERF, DEPR and DEFR are the decisions made to manage delinquent
receivables. Duke Energy Carolinas, Duke Energy Progress and Duke Energy
Florida are considered the primary beneficiaries and consolidate DERF, DEPR
and DEFR, respectively, as they make those decisions.
Receivables Financing – CRC
CRC is a bankruptcy remote, special purpose entity indirectly owned
by Duke Energy. On a revolving basis, CRC buys certain accounts receivable
arising from the sale of electricity, natural gas and related services from Duke
Energy Ohio and Duke Energy Indiana. CRC borrows amounts under a credit
facility to buy the receivables from Duke Energy Ohio and Duke Energy Indiana.
Borrowing availability from the credit facility is limited to the amount of qualified
receivables sold to CRC, which generally exclude receivables past due more than
a predetermined number of days and reserves for expected past-due balances.
The sole source of funds to satisfy the related debt obligation is cash collections
from the receivables. Amounts borrowed under the credit facility are reflected on
Duke Energy’s Consolidated Balance Sheets as Long-Term Debt.
The proceeds Duke Energy Ohio and Duke Energy Indiana receive from the
sale of receivables to CRC are approximately 75% cash and 25% in the form of
a subordinated note from CRC. The subordinated note is a retained interest in the
receivables sold. Depending on collection experience, additional equity infusions
to CRC may be required by Duke Energy to maintain a minimum equity balance
of $3 million.
Due to the COVID-19 pandemic, as described in Note 1, the Duke Energy
Registrants suspended customer disconnections for nonpayment. Since taking
action to suspend customer disconnections for nonpayment, certain jurisdictions
have now returned to normal operations and billing practices. The full impact
of COVID-19 and the Duke Energy Registrant’s related response on customers’
ability to pay for service is uncertain. However, the level of past-due receivables
at Duke Energy Ohio and Duke Energy Indiana have increased significantly during
the COVID-19 pandemic, and it is reasonably possible eventual write-offs of
customer receivables may increase over current estimates. In July of 2020, CRC
executed an amendment to its credit facility to manage the impact of past-due
receivables resulting from the suspension of customer disconnections from
COVID-19. See Note 3 for information about COVID-19 filings with state utility
commissions.
CRC is considered a VIE because (i) equity capitalization is insufficient to
support its operations, (ii) power to direct the activities that most significantly
impact the economic performance of the entity 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.
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) Receivables Financing – Credit Facilities
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, 2020
Amounts borrowed at December 31, 2019
Restricted Receivables at December 31, 2020
Restricted Receivables at December 31, 2019
Duke Energy
Duke Energy
Carolinas
Duke Energy
Progress
Duke Energy
Florida
CRC
DERF
February 2023 December 2022
$ 475
364
474
696
642
$ 350
350
350
547
522
DEPR
April 2023
$ 350
250
325
500
489
DEFR
April 2021
$ 250
250
250
397
336
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,
$
2020
4
53
39
937
10
55
1,002
$
2019
5
52
39
989
10
54
1,057
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.
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) 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
NON-CONSOLIDATED VIEs
The following tables summarize the impact of non-consolidated VIEs on the Consolidated Balance Sheets.
December 31,
$
2020
257
6,394
(1,242)
67
167
1,569
148
316
$
2019
203
5,747
(1,041)
106
162
1,541
127
228
(in millions)
Receivables from affiliated companies
Investments in equity method unconsolidated affiliates
Other noncurrent assets
Total assets
Other current liabilities
Other noncurrent liabilities
Total liabilities
Net assets (liabilities)
(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
The Duke Energy Registrants are not aware of any situations where the
maximum exposure to loss significantly exceeds the carrying values shown above
except for the PPA with OVEC, which is discussed below, and future exit costs
associated with the cancellation of the ACP pipeline, as discussed below.
December 31, 2020
Duke Energy
Pipeline
Investments
Commercial
Renewables
Total
Duke
Energy
Ohio
Duke
Energy
Indiana
$ —
$ —
$ —
$ 83
$
110
$
—
31
31
928
8
$ 936
$ (905)
530
—
$ 530
$
5
10
15
$
$ 515
$
$
530
31
561
933
18
951
—
—
—
—
$ 83
$
110
—
—
—
—
$ —
$ —
(390)
$ 83
$
110
December 31, 2019
Duke Energy
Pipeline
Investments
Commercial
Renewables
Total
$ —
1,179
$ 1,179
(1)
—
59
—
58
$
$
(1)
$
(1)
300
1,479
$ 299
$ 1,478
—
4
—
11
$
15
$
(1)
4
59
11
73
Duke
Energy
Ohio
$ 64
—
$ 64
—
—
—
—
Duke
Energy
Indiana
$
$
77
—
77
—
—
—
—
$ —
$ —
$ 1,121
$ 284
$ 1,405
$ 64
$
77
Pipeline Investments
Duke Energy has investments in various joint ventures to construct and
operate pipeline projects. These entities are considered VIEs due to having
insufficient equity to finance their own activities without subordinated financial
support. Duke Energy does not have the power to direct the activities that most
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) 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.
Duke Energy has a 47% ownership interest in ACP. In 2020, Duke Energy
determined that it would no longer invest in the construction of the ACP pipeline.
The current liability related to the cancellation of the ACP pipeline represents
Duke Energy’s continuing obligation to fund its share of ACP’s obligations. See
Notes 3, 7 and 12 for further information regarding this transaction.
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.
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.
In July 2020, legislation was proposed to repeal HB 6. Duke Energy cannot
predict the outcome of this matter. See Note 3 for additional information.
CRC
See discussion under Consolidated VIEs for additional information related
to CRC.
Amounts included in Receivables from affiliated companies in the above
table for Duke Energy Ohio and Duke Energy Indiana reflect their retained
interest in receivables sold to CRC. These subordinated notes held by Duke
Energy Ohio and Duke Energy Indiana are stated at fair value. 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
186
Duke Energy Ohio
Duke Energy Indiana
2020
0.5 %
1.6 %
13.4 %
2019
0.6 %
3.3 %
13.4 %
2020
0.3 %
1.6 %
11.3 %
2019
0.3 %
3.3 %
11.5 %
Duke Energy Ohio
Duke Energy Indiana
December 31,
December 31,
2020
$ 270
83
$ 187
2019
$ 253
64
$ 189
2020
$ 344
110
$ 234
2019
307
77
230
$
$
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,
2020
2019
2018
2020
2019
2018
$1,905
10
1,875
1
4
$1,979
14
$1,987
13
$2,631
12
$ 2,837
17
$ 2,842
16
1,993
1
6
1,967
1
6
2,586
1
5
2,860
1
9
2,815
1
9
Cash flows from sales of receivables are reflected within Cash Flows From
Operating Activities and Cash Flows from Investing 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%.
18. 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
such contracts is equivalent to the electricity supplied and billed in that period
(including unbilled estimates).
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)
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
$
2021
93
8
85
5
2022
$ 107
8
99
—
2023
2024
2025
Thereafter
$
44
8
36
7
$
45
8
37
12
$
7
—
7
12
$
51
—
51
24
Total
$ 347
32
315
60
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
2021
2022
2023
2024
2025
Thereafter
Total
$
65
$
64
$
61
$
59
$
58
$
319
$ 626
188
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, 2020
Duke
Energy
$ 9,806
6,194
2,859
1,864
914
Duke
Energy
Carolinas
$ 2,997
2,233
1,137
380
281
Progress
Energy
$ 5,017
2,779
901
1,228
596
Duke
Energy
Progress
$2,059
1,312
649
1,034
294
Duke
Energy
Florida
$ 2,958
1,467
252
194
302
Duke
Energy
Ohio
$ 726
442
137
32
82
Duke
Energy
Indiana
$1,064
740
683
224
72
Piedmont
$ —
—
—
—
—
$ 21,637
$ 7,028
$ 10,521
$5,348
$ 5,173
$ 1,419
$2,783
$ —
$
930
446
127
—
87
$ —
—
—
—
—
$ —
—
—
—
—
$ —
—
—
—
—
$ —
—
—
—
—
$ 300
117
17
—
17
$ —
—
—
—
—
$ 630
329
110
34
70
$ 1,590
$ —
$ —
$ —
$ —
$ 451
$ —
$1,173
$
227
$ —
$ —
$ —
$ —
$ —
$ —
$ —
$
26
$ 23,480
388
$
$ 23,868
$ —
$ 7,028
(13)
$
$ 7,015
$ —
$ 10,521
106
$
$ 10,627
$ —
$5,348
74
$
$5,422
$ —
$ 5,173
15
$
$ 5,188
$ —
$ 1,870
$ (12)
$ 1,858
$ —
$2,783
12
$
$2,795
$ —
$1,173
$ 124
$1,297
(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.
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)
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.
(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.
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) As described in Note 1, Duke Energy adopted the new guidance for credit losses effective January 1, 2020, using the modified retrospective method of adoption,
which does not require restatement of prior year reported results. The following table presents the reserve for credit losses for trade and other receivables based on
adoption of the new standard.
(in millions)
Balance at December 31, 2019
Cumulative Change in Accounting Principle
Write-Offs
Credit Loss Expense
Other Adjustments
$
Duke
Energy
76
5
(58)
75
48
Balance at December 31, 2020
$
146
Year Ended December 31, 2020
Duke
Energy
Carolinas
$
$
10
1
(13)
13
12
23
Progress
Energy
$
$
16
2
(23)
29
13
37
Duke
Energy
Progress
$
$
8
1
(8)
9
13
23
Duke
Energy
Florida
$
$
7
1
(14)
20
—
14
Duke
Energy
Ohio
$
$
4
—
—
—
—
4
Duke
Energy
Indiana
$
$
3
—
—
—
—
3
Piedmont
$
$
6
1
(6)
11
—
12
Trade and other receivables are evaluated based on an estimate of the
risk of loss over the life of the receivable and current and historical conditions
using supportable assumptions. Management evaluates the risk of loss for
trade and other receivables by comparing the historical write-off amounts to
total revenue over a specified period. Historical loss rates are adjusted due to
the impact of current conditions, including the impacts of COVID-19, as well as
forecasted conditions over a reasonable time period. The calculated write-off
rate can be applied to the receivable balance for which an established reserve
does not already exist. Management reviews the assumptions and risk of loss
periodically for trade and other receivables. Due to the COVID-19 pandemic, as
described in Note 1, certain jurisdictions have resumed standard billing and
credit practices, disconnections for nonpayment and late payment charges, all
of which were previously suspended in the first quarter of 2020. The specific
actions taken by each Duke Energy Registrant are described in Note 3 and the
impact of COVID-19 on certain receivables financing entities are described
in Note 17. The impact of COVID-19 and Duke Energy’s related response on
customers’ ability to pay for service is uncertain, and it is reasonably possible
eventual write-offs of customer receivables may increase over current
estimates.
The aging of trade receivables is presented in the table below. Duke Energy considers receivables greater than 30 days outstanding past due.
(in millions)
Unbilled Receivables
0-30 days
30-60 days
60-90 days
90+ days
Deferred Payment Arrangements(a)
Trade and Other Receivables
$
Duke
Energy
969
1,789
185
22
119
215
$ 3,299
Duke
Energy
Carolinas
$ 328
445
80
1
16
96
$ 966
December 31, 2020
Progress
Energy
$
283
707
54
10
32
80
$ 1,166
Duke
Energy
Progress
$ 167
398
25
4
9
52
$ 655
Duke
Energy
Florida
$ 116
307
29
6
23
28
$ 509
Duke
Energy
Ohio
Duke
Energy
Indiana
$
$
2
60
8
2
30
—
$ 102
$
16
26
3
1
12
—
58
Piedmont
$
86
149
8
3
9
7
$ 262
(a) Due to certain customer financial hardships created by the COVID-19 pandemic and resulting stay-at-home orders, Duke Energy permitted customers to defer payment of past-due amounts through an installment payment
plan over a period of several months.
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.
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) 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.
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,
2020
$ 969
328
283
167
116
2
16
86
$
2019
843
298
217
122
95
1
16
78
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 17 for further information. These receivables for unbilled revenues are shown in the table below.
(in millions)
Duke Energy Ohio
Duke Energy Indiana
19. STOCKHOLDERS’ EQUITY
December 31,
$
2020
87
134
$
2019
82
115
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 and accumulated preferred dividends, 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 and accumulated preferred dividends, 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 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 an adjustment to net income
used in the calculation of basic and diluted EPS.
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) 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)
Net Income available to Duke Energy common stockholders
Less: Income (Loss) from discontinued operations
Accumulated preferred stock dividends adjustment
Less: Impact of participating securities
Income from continuing operations available to Duke Energy common stockholders
Weighted average common shares outstanding – basic
Equity forwards
Weighted average common shares outstanding – 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
Dividends declared on Series B preferred stock per share
Years Ended December 31,
2020
$ 1,270
7
1
2
$ 1,262
737
1
738
$
1.71
2
$
3.82
$ 1.437
$ 49.292
2019
$3,707
(7)
(15)
5
$3,694
729
—
729
$ 5.07
2
$ 3.75
$ 1.03
$ —
2018
$ 2,666
19
—
5
$ 2,642
708
—
708
$ 3.73
2
$ 3.64
$ —
$ —
(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 November 2019, Duke Energy filed a prospectus supplement and
executed an Equity Distribution Agreement (EDA) under which it may sell up to
$1.5 billion of its common stock through 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.
Separately, 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. In March 2020,
Duke Energy marketed approximately 940,000 shares of common stock through
an equity forward transaction under the ATM with an initial forward price of
$89.76 per share. In May 2020, Duke Energy marketed approximately 903,000
shares of common stock through an equity forward transaction under the ATM
with an initial forward price of $82.44 per share. In August 2020, Duke Energy
marketed approximately 936,000 shares of common stock through an equity
forward transaction under the ATM with an initial forward price of $79.52
per share.
In December 2020, Duke Energy physically settled the equity forwards by
delivering 32 million shares of common stock in exchange for net cash proceeds
of approximately $2.6 billion.
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, and began
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.
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) The Series A and Series B Preferred Stock rank, with respect to dividends
and distributions upon liquidation or dissolution:
liabilities with respect to assets available to satisfy claims against Duke
Energy; and
• 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
• 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.
20. SEVERANCE
During 2020, as a result of partial settlements between Duke Energy
Carolinas, Duke Energy Progress and the Public Staff, Duke Energy Carolinas
and Duke Energy Progress deferred as Regulatory assets on the Consolidated
Balance Sheets, approximately $65 million and $33 million, respectively,
of previously recorded severance charges within Operation, maintenance
and other on the Consolidated Statements of Operations. These severance
charges were previously recorded during 2018, as 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 skill sets
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. See Note 3 for more information.
The following table presents the direct and allocated severance and
related charges accrued for approximately 30 employees in 2020, 140
employees in 2019, and 1,900 employees in 2018, by the Duke Energy
Registrants within Operation, maintenance and other on the Consolidated
Statements of Operations.
(in millions)
Year Ended December 31, 2020(a)(b)
Year Ended December 31, 2019
Year Ended December 31, 2018
Duke
Energy
Carolinas
Duke
Energy
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
$ (85)
$ (58)
$ (28)
$ (31)
$ 3
$ —
$ —
16
187
8
102
6
69
3
52
3
17
—
6
1
7
Piedmont
$ —
1
2
(a)
(b)
Includes unamortized deferred severance charges of approximately $(86) million, $(57) million, $(29) million and $(29) million for Duke Energy, Duke Energy Carolinas, Progress Energy and Duke Energy Progress, respectively.
Includes adjustments associated with 2018 severance charges of approximately $(6) million, $(2) million, $(3) million and $(2) million for Duke Energy, Duke Energy Carolinas, Progress Energy and Duke Energy Progress,
respectively.
The table below presents the severance liability for past and ongoing severance plans including the plans described above.
(in millions)
Balance at December 31, 2019
Provision/Adjustments
Cash Reductions
Balance at December 31, 2020
Duke
Energy
Carolinas
Duke
Energy
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
$ 41
1
(31)
$ 11
$ 11
—
(9)
$ 2
$ 13
—
(10)
$ 3
$ 6
(2)
(3)
$ 1
$ 7
2
(7)
$ 2
$ 1
(1)
—
$—
$ 2
—
(1)
$ 1
Piedmont
$ —
—
—
$ —
194
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) 21. STOCK-BASED COMPENSATION
The Duke Energy Corporation 2015 Long-Term Incentive Plan (the 2015
The total grant date fair value of shares vested during the years ended
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,
2020
$ 61
22
23
15
9
4
6
3
2019
$ 65
24
24
15
9
5
6
3
$
2018
56
20
21
13
8
4
5
3
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)
Years Ended December 31,
2020
2019
2018
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
$46
38
$84
5
$79
$18
$ 44
45
$ 89
5
$ 84
$ 19
$ 43
35
$ 78
5
$ 73
$ 17
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.
Shares granted (in thousands)
Fair value (in millions)
Years Ended December 31,
2020
498
$ 50
2019
571
$ 51
2018
649
$ 49
The following table summarizes information about RSU awards outstanding.
Shares
(in thousands)
Weighted Average
Grant Date Fair Value
(per share)
Outstanding at December 31, 2019
Granted
Vested
Forfeited
Outstanding at December 31, 2020
RSU awards expected to vest
1,010
498
(532)
(37)
939
898
$
83
100
82
92
93
93
195
December 31, 2020, 2019 and 2018, was $43 million, $49 million and
$43 million, respectively. At December 31, 2020, Duke Energy had $31 million
of unrecognized compensation cost, which is expected to be recognized over a
weighted average period of 23 months.
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.
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 2020, the model used a risk-free
interest rate of 1.4%, which reflects the yield on three-year Treasury bonds as
of the grant date, and an expected volatility of 13.6% based on Duke Energy’s
historical volatility over three years using daily stock prices.
The following table includes information related to stock-based
performance awards.
Shares granted assuming target performance (in thousands)
Fair value (in millions)
Years Ended December 31,
2020
319
$ 34
2019
2018
320
372
$ 27
$ 27
The following table summarizes information about stock-based
performance awards outstanding and assumes payout at the target level.
Shares
(in thousands)
Weighted Average
Grant Date Fair Value
(per share)
Outstanding at December 31, 2019
Granted
Vested
Forfeited
Outstanding at December 31, 2020
Stock-based performance awards expected to vest
1,109
319
(448)
(18)
962
937
$
80
105
81
88
87
87
The total grant date fair value of shares vested during the years ended
December 31, 2020, and 2019, was $36 million and $23 million, respectively. At
December 31, 2020, Duke Energy had $23 million of unrecognized compensation cost,
which is expected to be recognized over a weighted average period of 21 months.
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)
22. 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 uses a December 31 measurement date for its defined
benefit retirement plan assets and obligations. Actuarial gains experienced
by the defined benefit retirement plans in remeasuring plan assets as of
December 31, 2020, and 2019, were attributable to actual investment
performance that exceeded expected investment performance. Actuarial
losses experienced by the defined benefit retirement plans in remeasuring plan
obligations as of December 31, 2020, and 2019, were primarily attributable to
the decrease in the discount rate used to measure plan 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 13.
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 2021. The following table
includes information related to the Duke Energy Registrants’ contributions to its
qualified defined benefit pension plans.
(in millions)
Contributions Made:
2020
2019
2018
Duke
Energy
Duke Energy
Carolinas
Progress
Energy
Duke Energy
Progress
Duke Energy
Florida
Duke Energy
Ohio
$ —
77
141
$—
7
46
$ —
57
45
$—
4
25
$ —
53
20
$—
2
—
Duke
Energy
Indiana
$—
2
8
Piedmont
$—
1
—
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) QUALIFIED PENSION PLANS
Components of Net Periodic Pension Costs
(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)
(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)
$
$
$
$
Year Ended December 31, 2020
Duke
Energy
Duke Energy
Carolinas
Progress
Energy
Duke Energy
Progress
Duke Energy
Florida
Duke Energy
Ohio
165
269
(572)
128
(32)
18
(24)
$
$
51
62
(145)
28
(8)
9
(3)
$
$
48
85
(190)
41
(3)
7
(12)
$
27
38
(87)
18
(2)
6
$ —
$
$
21
46
(101)
23
(1)
1
(11)
$
$
5
15
(28)
6
—
—
(2)
Duke
Energy
Indiana
$
9
22
(42)
12
(2)
1
$ —
Piedmont
$
$
6
9
(21)
9
(9)
1
(5)
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
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
$ —
$
$
9
26
(43)
8
(2)
—
(2)
$
$
5
10
(22)
8
(9)
—
(8)
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
Duke Energy
Indiana
Piedmont
$
$
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)
$ 11
23
(42)
10
(2)
$ —
$
7
11
(22)
11
(10)
$ (3)
(a) Duke Energy amounts exclude $4 million, $4 million and $5 million for the years ended December 2020, 2019 and 2018, 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 2020, 2019 and 2018, respectively, of regulatory asset amortization resulting from purchase accounting adjustments
associated with Duke Energy’s merger with Cinergy in April 2006.
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) 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 (decrease) increase
Accumulated other comprehensive (income) loss
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
Duke
Energy
Duke Energy
Carolinas
Progress
Energy
Duke Energy
Progress
Duke Energy
Florida
Duke Energy
Ohio
Duke Energy
Indiana
Piedmont
Year Ended December 31, 2020
$ (62)
$ (39)
$ (26)
$ (30)
$
2
1
(11)
$ —
—
—
$
1
—
(1)
$
(8)
$ —
$ —
$ —
—
—
$ —
$
$
4
1
—
(3)
$ —
—
—
$ (2)
$ —
$ —
—
—
$ —
$ —
—
—
$ —
$
(2)
$
5
$ (1)
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
$ (212)
$ (156)
$ (79)
$ (59)
$ (20)
$
20
1
(15)
$ —
—
—
$
1
—
(2)
$
6
$ —
$
(1)
$ —
—
—
$ —
$
(1)
—
3
$
2
$ 12
$ —
—
—
$ —
$ 22
$ —
—
—
$ —
$ —
$ —
—
—
$ —
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
Benefits paid – settlements
Obligation at measurement date
Accumulated 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
Benefits paid – settlements
Transfers
Plan assets at measurement date
Funded status of plan
Year Ended December 31, 2020
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
$ 1,923
49
62
83
8
(137)
—
$ 1,988
$ 1,989
$ 2,263
247
(137)
—
8
$ 2,381
393
$
$ 2,608
46
85
144
(8)
(160)
—
$ 2,715
$ 2,684
$ 2,898
319
(160)
—
(8)
$ 3,049
334
$
$ 1,170
26
38
50
(8)
(83)
—
$ 1,193
$ 1,194
$ 1,364
149
(83)
—
(8)
$ 1,422
229
$
$ 1,424
20
46
93
—
(76)
—
$ 1,507
$ 1,476
$ 1,515
166
(76)
—
—
$ 1,605
98
$
$ 481
4
15
21
15
(34)
—
$ 502
$ 493
$ 443
48
(34)
—
15
$ 472
$ (30)
$ 693
8
22
46
—
(49)
(5)
$ 715
$ 709
$ 667
71
(49)
(5)
—
$ 684
$ (31)
$ 292
5
9
14
—
(27)
—
$ 293
$ 294
$ 335
35
(27)
—
—
$ 343
50
$
Duke
Energy
$ 8,321
157
269
433
—
(541)
(5)
$ 8,634
$ 8,577
$ 8,910
973
(541)
(5)
—
$ 9,337
703
$
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)
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
Duke
Energy
Carolinas
7,869
150
317
716
—
(731)
8,321
$ 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
$
$
$
$
$
$
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
$
$
$
$
$
$
435
4
18
54
—
(30)
481
471
405
2
66
(30)
—
443
(38)
$ 618
8
26
87
—
(46)
$ 693
$ 264
5
10
33
—
(20)
$ 292
$ 686
$ 292
$ 611
2
100
(46)
—
$ 667
$
(26)
$ 305
1
49
(20)
—
$ 335
$
43
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
Duke
Energy
Carolinas
Progress
Energy
December 31, 2020
Duke
Energy
Progress
Duke
Energy
Florida
$ 393
$ —
$ 393
$ 381
$ —
—
—
$ —
$ 379
$ 45
$ 334
$ 691
$ —
—
2
2
$
$ 229
$ —
$ 229
$ 283
$ —
—
—
$ —
$ 143
$ 45
$ 98
$ 408
$ —
—
—
$ —
Duke
Energy
780
$
77
$
$
703
$ 1,910
$
$
(21)
(2)
100
77
Duke
Energy
Ohio
$ 58
$ 88
$ (30)
$ 110
$ —
—
—
$ —
Duke
Energy
Indiana
79
$
$ 110
$ (31)
$ 209
$ —
—
—
$ —
Piedmont
$ 50
$ —
$ 50
$ 80
$ —
—
—
$ —
199
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
621
$
32
$
$
589
$ 1,972
$
$
$
(23 )
(3)
111
85
135
(32)
Duke
Energy
Carolinas
Progress
Energy
December 31, 2019
Duke
Energy
Progress
Duke
Energy
Florida
$ 340
$ —
$ 340
$ 420
$ —
—
—
$ —
$ 322
$ 32
$ 290
$ 717
$
$
(1 )
—
3
2
$ 194
$ —
$ 194
$ 313
$ —
—
—
$ —
$ 123
$ 32
$ 91
$ 404
$
$
(1 )
—
3
2
Duke
Energy
Ohio
$ 38
$ 76
$ (38 )
$ 112
$ —
—
—
$ —
Duke
Energy
Indiana
57
$
$
83
$ (26 )
$ 204
$ —
—
—
$ —
Piedmont
$ 43
$ —
$ 43
$ 81
$ —
—
—
$ —
$
29
(8 )
$ 43
(3 )
$
19
(2 )
$ 24
(1 )
$
7
(1 )
$
10
(2 )
$
9
(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, 2020
Duke
Energy
Progress
Energy
$ 4,914
4,856
4,837
$ 828
796
783
Duke
Energy
Florida
$ 828
796
783
Duke
Energy
Ohio
$ 184
176
96
Duke
Energy
Indiana
$ 293
285
183
December 31, 2019
Duke
Energy
Ohio
$ 155
146
79
Duke
Energy
Indiana
$ 260
252
177
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 13 years for Duke Energy, Duke
Energy Indiana and Duke Energy Ohio, 14 years for Progress Energy, Duke Energy Progress and Duke Energy Florida, 12 years for Duke Energy Carolinas and nine years
for Piedmont.
200
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
Interest crediting rate
Salary increase
Net Periodic Benefit Cost
Discount rate
Interest crediting rate
Salary increase
Expected long-term rate of return on plan assets
Expected Benefit Payments
(in millions)
Years ending December 31,
2021
2022
2023
2024
2025
2025-2029
NON-QUALIFIED PENSION PLANS
2020
2.60%
4.00%
3.50% – 4.00%
3.30%
4.00%
3.50% – 4.00%
6.85%
December 31,
2019
3.30%
4.00%
3.50% – 4.00%
4.30%
4.00%
3.50% – 4.00%
6.85%
2018
4.30%
4.00%
3.50 % – 4.00%
3.60%
4.00%
3.50 % – 4.00%
6.50%
Duke
Energy
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
$ 667
$ 169
$ 177
$
650
655
644
617
2,745
170
174
168
163
677
176
181
184
181
846
94
92
95
96
93
399
$ 82
$ 40
$ 53
$ 29
83
85
87
88
443
39
38
37
35
154
51
49
49
47
217
25
22
21
19
83
The accumulated benefit obligation, which equals the projected benefit obligation for non-qualified pension plans, was $320 million for Duke Energy, $13 million
for Duke Energy Carolinas, $111 million for Progress Energy, $33 million for Duke Energy Progress, $45 million for Duke Energy Florida, $4 million for Duke Energy
Ohio, $2 million for Duke Energy Indiana and $4 million for Piedmont as of December 31, 2020.
Employer contributions, which equal benefits paid for non-qualified pension plans, were $23 million for Duke Energy, $2 million for Duke Energy Carolinas,
$8 million for Progress Energy, $3 million for Duke Energy Progress and $3 million for Duke Energy Florida for the year ended December 31, 2020. Employer
contributions were not material for Duke Energy Ohio, Duke Energy Indiana or Piedmont for the year ended December 31, 2020.
Net periodic pension costs for non-qualified pension plans were not material for the years ended December 31, 2020, 2019 or 2018.
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, 2020, 2019 or 2018.
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) 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
Amortization of prior service credit
Net periodic post-retirement benefit costs(a)(b)
Year Ended December 31, 2020
Duke
Energy
Carolinas
Progress
Energy
$
1
$
1
Duke
Energy
Progress
$ —
5
(8)
—
(4)
(6)
$
10
—
1
(3)
9
$
5
—
—
(1)
4
$
Duke
Energy
Florida
$ —
4
—
1
(2)
3
$
Year Ended December 31, 2019
Duke
Energy
Carolinas
Progress
Energy
$
1
$
1
Duke
Energy
Progress
$ —
7
(7)
2
(5)
(2)
$
12
—
1
(8)
6
$
7
—
—
(1)
6
$
Duke
Energy
Florida
$
1
5
—
1
(7)
$ —
Year Ended December 31, 2018
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
$
1
$
1
$ —
7
(8)
3
(5)
(2)
$
12
—
1
(8)
6
$
6
—
1
(1)
6
$
Duke
Energy
Florida
$
1
6
—
—
(7)
$ —
Duke
Energy
$
4
23
(13)
2
(14)
2
$
Duke
Energy
$
4
30
(12)
4
(19)
7
$
Duke
Energy
$
6
28
(13)
6
(19)
8
$
Duke
Energy
Ohio
$ —
1
—
—
(1)
$ —
Duke
Energy
Ohio
$ —
1
—
—
(1)
$ —
Duke
Energy
Ohio
$
1
1
—
—
(1)
1
$
Duke
Energy
Indiana
$
1
2
—
4
(1)
6
$
Duke
Energy
Indiana
$
1
3
—
4
(1)
7
$
Duke
Energy
Indiana
$
1
3
—
4
(1)
7
$
Piedmont
$ —
1
(2)
—
(2)
$ (3)
Piedmont
$ —
1
(1)
—
(2)
$ (2)
Piedmont
$
1
1
(2)
—
(2)
$ (2)
(a) Duke Energy amounts exclude $6 million, $6 million and $7 million for the years ended December 2020, 2019 and 2018, 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 $1 million, $2 million and $2 million for the years ended December 2020, 2019 and 2018, respectively, of regulatory asset amortization resulting from purchase accounting adjustments
associated with Duke Energy’s merger with Cinergy in April 2006.
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) 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 service credit
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 actuarial gain
Net amount recognized in accumulated other
comprehensive income
Year Ended December 31, 2020
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
$ —
(7)
$
$ —
—
$ —
$
9
$ —
$ —
—
$ —
$
6
$ —
$ —
—
$ —
$
3
$ —
$ —
—
$ —
Duke
Energy
$
9
$ (10)
$ —
1
$
1
Year Ended December 31, 2019
Duke
Energy
$ (127)
$ (152)
$ —
(4)
Duke
Energy
Carolinas
$ —
1
$
$ —
—
Progress
Energy
$
$
(127)
(149)
$ —
—
Duke
Energy
Progress
$
$
(82)
(93)
$ —
—
Duke
Energy
Florida
$ (45)
$ (56)
$ —
—
$
(4)
$ —
$ —
$ —
$ —
Duke
Energy
Ohio
$ —
$ —
$ —
—
$ —
Duke
Energy
Ohio
$ —
(1)
$
$ —
—
$ —
Duke
Energy
Indiana
$
$
(4)
(1)
$ —
—
$ —
Duke
Energy
Indiana
$
$
(5)
(4)
$ —
—
$ —
Piedmont
$ —
$ —
$ —
—
$ —
Piedmont
$ —
3
$
$ —
—
$ —
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) Reconciliation of Funded Status to Accrued Other Post-Retirement Benefit Costs
(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
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
Funded status of plan
(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
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
Funded status of plan
Year Ended December 31, 2020
Duke
Energy
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
$ 723
4
23
15
19
(75)
$ 175
1
5
3
8
(18)
$ 303
1
10
5
8
(28)
$ 168
—
5
3
5
(15)
$
135
—
4
2
2
(13)
$ 29
—
1
1
—
(4)
$
64
1
2
2
1
(9)
$ 30
—
1
—
1
(2)
$ 709
$ 174
$ 299
$ 166
$
130
$ 27
$
61
$ 30
$ 220
24
(75)
53
15
$ 237
$ (472)
$ 130
14
(18)
10
3
$ 139
$ (35)
$
(1)
—
(28)
23
5
(1)
$
$ (300)
$
(1)
—
(15)
11
3
(2)
$
$ (168)
$ —
—
(13)
10
2
(1)
$
$ (131)
$
9
—
(4)
3
1
9
$
$ (18)
$
5
1
(9)
8
2
7
$
$ (54)
$ 34
4
(2)
1
—
$ 37
7
$
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
$ (503)
$
$
$
$
$
174
1
7
3
9
(19)
175
115
20
(19)
11
3
130
(45)
$
$
$
$
$
$
303
1
12
6
13
(32)
$
166
—
7
3
9
(17)
$
137
1
5
2
5
(15)
303
$
168
$
135
$
29
—
1
1
1
(3)
29
8
1
(3)
2
1
9
$
$
$
$
$
67
1
3
2
2
(11)
64
5
—
(11)
9
2
5
(59)
$
$
$
$
$
30
—
1
—
—
(1)
30
29
6
(1)
—
—
34
4
— $
—
(15)
13
2
— $
(135)
$
(20)
— $
(1)
(32)
26
6
(1)
(304)
$
$
— $
—
(17)
13
3
(1)
(169)
$
$
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) Amounts Recognized in the Consolidated Balance Sheets
(in millions)
Prefunded post-retirement benefit
Current post-retirement liability(a)
Noncurrent post-retirement liability(b)
Net liability (asset) recognized
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
(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
December 31, 2020
Duke
Energy
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
$
$
$
$
$
8
9
471
472
144
139
3
(1)
(13)
$ —
—
35
$
35
$ —
32
$
$ —
—
—
$ —
6
294
$ 300
$ 144
$ —
$ —
—
—
$ —
4
164
168
$
$
88
$ —
$ —
—
—
Duke
Energy
Florida
$ —
2
129
$ 131
$
56
$ —
$ —
—
—
Duke
Energy
Ohio
$
1
2
17
$
18
$ —
17
$
$ —
—
—
Duke
Energy
Indiana
$ —
—
54
54
32
62
$
$
$
$ —
—
—
Piedmont
$
7
—
—
$
(7)
$ —
3
$
$ —
—
—
$
(11)
$ —
$ —
$ —
$ —
$ —
$ —
$ —
December 31, 2019
Duke
Energy
$
9
494
$ 503
$ 135
$ 149
$
3
(2)
(13)
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
$ —
45
$
45
$ —
39
$
$ —
—
—
$
5
299
$ 304
$ 135
$ —
$ —
—
—
$
3
163
166
$
82
$
$ —
$ —
—
—
Duke
Energy
Florida
$
2
133
$ 135
53
$
$ —
$ —
—
—
$
(12)
$ —
$ —
$ —
$ —
Duke
Energy
Ohio
$
1
19
$ 20
$ —
$ 17
$ —
—
—
$ —
Duke
Energy
Indiana
$ —
59
59
36
63
$
$
$
$ —
—
—
$ —
$
5
(14)
$
3
(4)
$
1
(3)
$ —
(1)
$
1
(2)
$ —
(1)
$ —
(1)
Piedmont
$ —
(4)
$
(4)
$ —
3
$
$ —
—
—
$ —
$ —
(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.
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) The average remaining service period of active covered employees is eight years for Duke Energy, seven years for Progress Energy, Duke Energy Florida and Duke
Energy Ohio and six years for Duke Energy Carolinas, 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
Expected Benefit Payments
December 31,
2020
2019
2018
2.60 %
3.30%
4.30%
3.30 %
6.85 %
23 %
4.30%
6.85%
23%
3.60%
6.50%
35%
December 31,
2020
6.25%
4.75%
2028
2019
6.00%
4.75%
2026
(in millions)
Years ending December 31,
2021
2022
2023
2024
2025
2026-2030
Duke
Energy
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
$ 73
$ 17
$ 28
$ 15
$ 12
$ 3
$ 8
$ 2
66
62
58
54
223
16
15
14
13
54
26
25
24
22
94
14
14
13
12
52
12
11
11
10
41
3
3
2
2
9
7
6
6
5
21
2
2
2
2
11
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) 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, 2020, and 2019. 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, 2020, Duke Energy assumes pension and other
post-retirement plan assets will generate a long-term rate of return of 6.5%.
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. Return seeking debt securities, 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, 2020, 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 $482
million and $351 million at December 31, 2020, and 2019, respectively. Cash
and securities obtained as collateral exceeded the fair value of the securities
loaned at December 31, 2020, and 2019, respectively. Securities lending income
earned by the Duke Energy Master Retirement Trust was immaterial for the years
ended December 31, 2020, 2019 and 2018, 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, 2020, and the actual asset allocations for the Duke Energy Master
Retirement Trust.
Global equity securities
Global private equity securities
Debt securities
Return seeking debt securities
Hedge funds
Real estate and cash
Total
Other post-retirement assets
Target
Allocation
28%
1%
58%
4%
3%
6%
100%
Actual Allocation at December 31,
2020
30%
1%
55%
5%
3%
6%
100%
2019
27%
1%
57%
5%
3%
7%
100%
Duke Energy’s other post-retirement assets are comprised of Voluntary Employees’ Beneficiary Association (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, 2020.
U.S. equity securities
Non-U.S. equity securities
Real estate
Debt securities
Cash
Total
Target
Allocation
30%
6%
2%
45%
17%
100%
Actual Allocation at December 31,
2020
36%
6%
2%
42%
14%
100%
2019
35%
9%
2%
37%
17%
100%
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) Fair Value Measurements
Investments in corporate debt securities and U.S. government securities
Duke Energy classifies recurring and non-recurring fair value
measurements based on the fair value hierarchy as discussed in Note 16.
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.
Duke Energy Master Retirement Trust
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.
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
U.S. government securities
Governments bonds – foreign
Cash
Net pending transactions and other investments
Total assets(a)
December 31, 2020
Total Fair Value
Level 1
Level 2
Level 3
Not
Categorized(b)
$3,202
4,162
397
97
198
1,164
73
98
88
$3,162
—
247
—
—
—
—
98
34
$ —
4,162
150
—
—
1,164
73
—
54
$9,479
$3,541
$5,603
$ —
—
—
—
—
—
—
—
—
$ —
$ 40
—
—
97
198
—
—
—
—
$ 335
(a) Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont were allocated approximately 26%, 32%, 15%, 17%, 5%, 7% and 4%, respectively,
of the Duke Energy Master Retirement Trust at December 31, 2020. 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.
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) (in millions)
Equity securities
Corporate debt securities
Short-term investment funds
Partnership interests
Hedge funds
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
Level 1
$2,730
3,999
545
104
206
1,231
11
78
75
46
$ 2,712
—
455
—
—
—
—
—
75
(43)
Level 2
$ —
3,999
90
—
—
1,231
—
78
—
89
$9,025
$ 3,199
$ 5,487
Not
Categorized(b)
Level 3
$ —
—
—
—
—
—
11
—
—
—
$ 11
$ 18
—
—
104
206
—
—
—
—
—
$ 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.
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.
(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
209
2020
$ 11
(12)
1
—
$ —
2019
$ 27
(18)
2
—
$ 11
December 31, 2020
Total Fair Value
$ 5
1
23
19
Level 2
$ 5
1
23
19
$48
$ 48
December 31, 2019
Total Fair Value
$ 9
1
22
18
Level 2
$ 9
1
22
18
$50
$50
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
$213
214
213
$67
66
68
$57
58
58
$38
38
40
$19
20
19
$5
5
4
$11
11
10
Piedmont
$13
13
12
(in millions)
Years ended December 31,
2020
2019
2018
23.
INCOME TAXES
Consolidated Appropriations Act
On December 27, 2020, President Trump signed the Consolidated
Appropriations Act (CAA) into law. In addition to the CAA providing funding for
government operations, it also provided tax provisions to assist with COVID-19 relief,
including extending certain expiring tax provisions. The Company has reviewed the
provisions of the CAA and has determined that there is no material impact on the
2020 financial statements as a result of the CAA being signed into law.
CARES Act
On March 27, 2020, the CARES Act was enacted. The CARES Act is an
emergency economic stimulus package in response to the COVID-19 pandemic.
Among other provisions, the CARES Act accelerates the remaining AMT credit
refund allowances resulting in taxpayers being able to immediately claim a refund
in full for any AMT credit carryforwards and deferral of certain 2020 payroll taxes.
In the third quarter of 2020, Duke Energy received $572 million related to these
AMT credit carryforwards and $19 million of interest income. In addition, the
Company has deferred approximately $117 million of payroll taxes, with 50%
payable by December 31, 2021, and the remaining 50% payable by December 31,
2022. The other provisions within the CARES Act do not materially impact Duke
Energy’s income tax accounting. See Note 1 for information on COVID-19.
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
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
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) 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.
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 (benefit) expense from continuing operations
Tax expense from discontinued operations
Total income tax (benefit) expense included in Consolidated
Statements of Operations
Year Ended December 31, 2020
Duke
Energy
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
$
(281)
(9)
1
(289)
155
(92)
63
(10)
(236)
2
$
$
314
35
—
349
(171)
(86)
(257)
(4)
88
—
280
29
—
309
(167)
(24)
(191)
(5)
113
—
$
181
17
—
198
(180)
(49)
(229)
(5)
(36)
—
$
148
24
—
172
1
25
26
—
198
—
$
10
1
—
11
30
2
32
—
43
—
$
48
7
—
55
12
17
29
—
84
—
$
(27)
(8)
—
(35)
60
(7)
53
—
18
—
$
(234)
$
88
$
113
$
(36)
$
198
$
43
$
84
$
18
(a) Total deferred income taxes includes the generation of NOL carryforwards and tax credit carryforwards of $20 million at Duke Energy Carolinas, $3 million at Duke Energy Progress, $8 million at Duke Energy Indiana, and $11 million
at Piedmont. In addition, total deferred income taxes includes utilization of NOL carryforwards and tax credit carryforwards of $39 million at Progress Energy, $30 million at Duke Energy Florida and $79 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)
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, 2019
Duke
Energy
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
$
(299)
10
2
(287)
855
(38)
817
(11)
519
(2)
$
$
164
13
—
177
175
(37)
138
(4)
311
—
(173)
(7)
—
(180)
422
17
439
(6)
253
—
$ (36)
(3)
—
(39)
220
(18)
202
(6)
157
—
$ (43)
18
—
(25)
$ (41)
(1)
—
(42)
$ (23)
1
—
(22)
$
153
27
180
—
155
—
77
5
82
—
40
—
128
28
156
—
134
—
(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.
211
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, 2018
Duke
Energy
Duke
Energy
Carolinas
$
(647)
(11)
3
(655)
1,064
49
1,113
(10)
448
(26)
$
(8)
6
—
(2)
299
11
310
(5)
303
—
Progress
Energy
$ (135)
(5)
—
(140)
341
20
361
(3)
218
—
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
$
(71)
(5)
—
(76)
256
(17)
239
(3)
160
—
$
(49)
(10)
—
(59)
115
45
160
—
101
—
$
$ 20
(1)
—
19
21
3
24
—
43
—
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.
Duke Energy Income from Continuing Operations before Income Taxes
(in millions)
Domestic
Foreign
Income from continuing operations before income taxes
Statutory Rate Reconciliation
Years Ended December 31,
2020
$ 826
13
$ 839
2019
$ 4,053
44
$ 4,097
2018
$3,018
55
$3,073
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)
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
Noncontrolling Interests
Renewable energy PTCs
Other tax credits
Tax true up
Other items, net
Income tax (benefit) expense from continuing operations
Year Ended December 31, 2020
Duke
Energy
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
$
176
(80)
(276)
(48)
103
62
(110)
(37)
(12)
(14)
$ (236)
$
$
219
(40)
(82)
(13)
19
—
—
(13)
(3)
1
88
$ 243
4
(118)
(9)
10
—
—
(16)
1
(2)
$ 113
$
80
(25)
(68)
(6)
5
—
—
(14)
(5)
(3)
$ (36)
$ 204
39
(49)
(3)
5
—
—
(2)
5
(1)
$ 198
$
$
62
2
(20)
(2)
1
—
—
(1)
—
1
43
$ 103
19
(36)
(4)
4
—
—
(3)
(1)
2
84
$
$
$
61
(12)
(21)
(10)
—
—
—
(2)
1
1
18
Effective tax rate
(28.1)%
8.4%
9.7%
(9.5)%
20.4%
14.6%
17.1%
6.2%
212
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)
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
Income tax expense from continuing operations
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
$ 860
(22)
(121)
(52)
34
(120)
(23)
(64)
27
$ 519
$ 360
(19)
(29)
(9)
19
—
(11)
(9)
9
$ 311
$ 332
8
(64)
(14)
10
—
(9)
(8)
(2)
$ 253
$ 202
(17)
(10)
(13)
5
—
(7)
(3)
—
$ 157
$ 178
35
(54)
(1)
5
—
(2)
(5)
(1)
$ 155
$ 59
3
(12)
(3)
1
—
(1)
(7)
—
$ 40
$ 120
22
(6)
(3)
4
—
(1)
(1)
(1)
$ 134
$ 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%
(in millions)
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
Income tax expense from continuing operations
Year Ended December 31, 2018
Duke
Energy
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
$ 645
30
(61)
(42)
31
(129)
(28)
20
(18)
$ 448
$ 288
14
—
(15)
18
—
(7)
1
4
$ 303
$ 263
13
(55)
(22)
9
—
(13)
25
(2)
$ 218
$ 174
(17)
(1)
(12)
5
—
(5)
19
(3)
$ 160
$ 137
28
(54)
(10)
4
—
(8)
—
4
$ 101
$ 46
2
(3)
(2)
1
—
(1)
2
(2)
$ 43
$ 109
20
(2)
(2)
4
—
(1)
—
—
$ 128
$
$
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.
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.
213
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
Duke
Energy
Duke
Energy
Carolinas
Progress
Energy
December 31, 2020
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
$
286
515
236
441
3,909
—
—
93
(586)
4,894
(2,267)
(10,729)
(1,142)
(14,138)
$
85
96
(30)
—
285
11
—
8
—
455
$
87
208
68
—
508
—
—
14
—
885
$
67
120
24
—
179
—
—
9
—
399
$
18
87
38
—
282
—
—
4
—
429
$
21
5
16
—
16
18
7
7
—
90
$
7
16
26
—
183
—
1
—
233
(1,127)
(3,170)
—
(4,297)
(669)
(3,868)
(744)
(5,281)
(507)
(1,778)
(412)
(2,697)
(164)
(2,124)
(332)
(2,620)
—
(1,071)
—
(1,071)
(14)
(1,433)
(14)
(1,461)
$
38
5
(5)
—
29
—
—
8
—
75
(48)
(844)
(4)
(896)
Net deferred income tax liabilities
$
(9,244)
$(3,842)
$(4,396)
$(2,298)
$(2,191)
$ (981)
$(1,228)
$ (821)
(a) Primarily related to lease obligations and debt fair value adjustments.
The following table presents the expiration of tax credits and NOL carryforwards.
(in millions)
General Business 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 attribute 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 $388 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 $85 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, 2020
Amount
$ 2,033
154
85
340
12
1,272
13
$ 3,909
Expiration Year
2024 — 2040
2024 — Indefinite
2024
2021 — Indefinite
2027 — 2037
2024 — 2027
2025
214
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
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
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
$
125
462
303
389
3,925
—
—
97
(587)
4,714
(1,664)
(10,813)
(1,115)
(13,592)
$
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
Piedmont
$
14
5
17
—
16
36
10
8
—
106
—
(1,028)
—
(1,028)
$
5
17
27
—
176
52
—
1
—
278
(12)
(1,416)
—
(1,428)
$
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.
UNRECOGNIZED TAX BENEFITS
The following tables present changes to unrecognized tax benefits.
(in millions)
Unrecognized tax benefits – January 1
Gross decreases – tax positions in prior periods
Gross increases – current period tax positions
Reduction due to lapse of statute of limitations
Total changes
Unrecognized tax benefits – December 31
(in millions)
Unrecognized tax benefits – January 1
Unrecognized tax benefits increases
Gross decreases – tax positions in prior periods
Total changes
Unrecognized tax benefits – December 31
Year Ended December 31, 2020
Duke
Energy
126
$
(2)
4
(3)
(1)
$
125
Duke
Energy
Carolinas
8
$
—
2
—
2
Progress
Energy
9
$
—
1
—
1
Duke
Energy
Progress
6
$
—
—
—
—
$
10
$
10
$
6
Duke
Energy
Florida
3
$
—
—
—
—
$
3
Year Ended December 31, 2019
Duke
Energy
24
$
105
(3)
102
$ 126
Duke
Energy
Carolinas
6
$
2
—
2
Progress
Energy
9
$
1
(1)
—
Duke
Energy
Progress
6
$
1
(1)
—
$
8
$
9
$
6
Duke
Energy
Florida
3
$
—
—
—
$
3
$
Duke
Energy
Ohio
1
—
—
—
—
$
1
$
Duke
Energy
Ohio
1
—
—
—
$
1
Duke
Energy
Indiana
1
$
—
—
—
—
$
1
Duke
Energy
Indiana
1
$
—
—
—
$
1
Piedmont
4
$
—
—
(3)
(3)
$
1
Piedmont
4
$
—
—
—
$
4
215
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 decreases – tax positions in prior periods
Gross increases – tax positions in prior periods
Decreases due to settlements
Total changes
Unrecognized tax benefits – December 31
Duke
Energy
$ 25
(2)
7
(6)
(1)
$ 24
$ 5
(1)
2
—
1
$ 6
Year Ended December 31, 2018
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
$ 5
$ 5
Duke
Energy
Florida
$ 5
Duke
Energy
Ohio
$ 1
Duke
Energy
Indiana
$
1
Piedmont
$
3
—
4
—
4
—
1
—
1
(4)
2
—
(2)
—
—
—
—
—
—
—
—
—
1
—
1
$ 9
$ 6
$ 3
$ 1
$
1
$
4
The following table includes additional information regarding the Duke Energy Registrants’ unrecognized tax benefits at December 31, 2020. Duke Energy
Registrants do not anticipate a material increase or 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)
Duke
Energy
Duke
Energy
Carolinas
Progress
Energy
December 31, 2020
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
$ 122
$ 10
$ 10
$
6
$
3
$
1
$
1
$
1
(a) The Duke Energy Registrants are unable to estimate the specific amounts that would affect the ETR versus the regulatory liability.
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.
216
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)
24. OTHER INCOME AND EXPENSES, NET
The components of Other income and expenses, net on the Consolidated Statements of Operations are as follows.
Year Ended December 31, 2020
Duke
Energy
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy Ohio
Duke
Energy
Indiana
$ 32
154
27
240
$453
$
4
62
17
94
$
8
42
8
71
$
2
29
8
36
$
6
12
—
35
$
4
7
1
4
$
6
23
1
7
$177
$ 129
$ 75
$ 53
$ 16
$ 37
Year Ended December 31, 2019
Duke
Energy
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy Ohio
Duke
Energy
Indiana
$ 31
139
29
231
$430
$
1
42
20
88
$ 151
$ 11
66
7
57
$ 141
$ —
60
7
33
$ 100
$ 11
6
—
31
$ 48
$ 10
13
1
—
$ 24
$ 10
18
—
13
$ 41
Piedmont
$ 17
19
—
15
$ 51
Piedmont
$
1
—
—
19
$ 20
Year Ended December 31, 2018
Duke
Energy
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy Ohio
$ 20
221
15
143
$ 399
$
1
73
9
70
$153
$ 18
104
5
38
$165
$
1
57
5
24
$ 87
$ 18
47
—
21
$ 86
$
7
11
1
4
Duke
Energy
Indiana
$
9
32
—
4
Piedmont
$
1
—
—
13
$ 23
$ 45
$ 14
(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
25. SUBSEQUENT EVENTS
For information on subsequent events related to the sale of a minority interest in Duke Energy Indiana and regulatory matters, see Notes 1 and 3, respectively.
In February 2021, a severe winter storm impacted certain Commercial Renewables assets in Texas. Extreme weather conditions limited the ability for these
solar and wind facilities to generate and sell electricity into the Electric Reliability Council of Texas market. The financial impact of the storm is estimated to be
between approximately $75 million and $100 million on a pre-tax basis.
217
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, 2020, and, based upon this evaluation, the
Chief Executive Officer and Chief Financial Officer have concluded that these
controls and procedures are effective in providing reasonable assurance of
compliance.
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, 2020, 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,
2020, 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, 2020.
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.
218
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, 2020, 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, 2020, 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, 2020, of the Company and our report dated February 25, 2021, 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 25, 2021
219
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 – Information about Our Executive Officers,” 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, 2020, 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)
3,256,542(2)
143,272(4)
3,399,814
n/a
n/a
n/a
4,450,675(3)
n/a(5)
4,450,675
(1) As of December 31, 2020, 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. Eligible participants may also earn pay credits based on age
and length of service on eligible earnings that exceed limited prescribed by the
Internal Revenue Code.
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 their accounts (with certain
exceptions) 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.
220
PART IIPART 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 2020 and 2019.
(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, 2020
Duke
Energy
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana Piedmont
$12.9
1.7
0.1
$14.7
$3.0
0.2
—
$3.2
$ 4.5
0.3
—
$ 4.8
$ 2.3
0.1
—
$ 2.4
$ 2.2
0.2
—
$ 2.4
$ 1.9
0.3
—
$ 2.2
$
$
1.7
0.1
—
1.8
$
$
1.3
—
—
1.3
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
Duke
Energy
$ 13.5
0.6
0.2
$ 14.3
(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 2020 and 2019
by the independent accountant were approved by the Audit Committee pursuant
to the preapproval policy.
221
PART IIPART III
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Consolidated Financial Statements 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, 2020, 2019 and 2018
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2020, 2019 and 2018
Consolidated Balance Sheets as of December 31, 2020, and 2019
Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2019 and 2018
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2020, 2019 and 2018
Notes 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, 2020, 2019 and 2018
Consolidated Balance Sheets as of December 31, 2020, and 2019
Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2019 and 2018
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2020, 2019 and 2018
Notes 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, 2020, 2019 and 2018
Consolidated Balance Sheets as of December 31, 2020, and 2019
Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2019 and 2018
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2020, 2019 and 2018
Notes 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, 2020, 2019 and 2018
Consolidated Balance Sheets as of December 31, 2020, and 2019
Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2019 and 2018
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2020, 2019 and 2018
Notes 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, 2020, 2019 and 2018
Consolidated Balance Sheets as of December 31, 2020, and 2019
Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2019 and 2018
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2020, 2019 and 2018
Notes 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.
222
PART IV Duke Energy Ohio, Inc.
Consolidated Financial Statements
Consolidated Statements of Operations and Comprehensive Income for the Years Ended December 31, 2020, 2019 and 2018
Consolidated Balance Sheets as of December 31, 2020, and 2019
Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2019 and 2018
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2020, 2019 and 2018
Notes 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, 2020, 2019 and 2018
Consolidated Balance Sheets as of December 31, 2020, and 2019
Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2019 and 2018
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2020, 2019 and 2018
Notes 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, 2020, 2019 and 2018
Consolidated Balance Sheets as of December 31, 2020, and 2019
Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2019 and 2018
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2020, 2019 and 2018
Notes 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.
223
PART IV EXHIBIT INDEX
Exhibits filed herewith 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 Duke Energy
Corporation 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
4.1.23
4.1.24
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
Duke
Energy
Carolinas
Duke
Energy
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
Twenty-third Supplemental Indenture, dated as of May 15, 2020 (incorporated
by reference to Exhibit 4.1 to registrant’s Current Report on Form 8-K filed on
May 15, 2020, File No. 1-32853).
Twenty-fourth Supplemental Indenture, dated as of September 11, 2020
(incorporated by reference to Exhibit 4.2 to registrant’s Current Report on Form
8-K filed on September 11, 2020, File No. 1-32853).
X
X
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).
E-5
X
X
X
X
X
X
X
X
X
X
X
X
X
PART IV
Exhibit
Number
4.3.10
4.3.11
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
4.3.22
4.3.23
4.4
4.4.1
4.4.2
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).
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).
One-Hundred and Third Supplemental Indenture, dated as of January 8, 2020
(incorporated by reference to Exhibit 4.2 to registrant’s Current Report on Form
8-K filed on January 8, 2020, File No. 1-4928).
One-Hundred and Fourth Supplemental Indenture, dated as of January 8, 2020
(incorporated by reference to Exhibit 4.3 to registrant’s Current Report on Form
8-K filed on January 8, 2020, File No. 1-4928).
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).
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
PART IV
Exhibit
Number
4.4.3
4.4.4
4.4.5
4.4.6
4.4.7
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
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).
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).
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
4.4.27
4.4.28
4.4.29
4.4.30
4.4.31
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
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).
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).
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 Exhibit
Number
4.4.51
4.4.52
4.4.53
4.4.54
4.4.55
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
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).
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
filed on 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 filed on 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 for the year ended December 31, 2000, filed on 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
for the year ended December 31, 2000, filed on 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
for the year ended December 31, 2001, filed on 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).
E-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
X
X
X
X
X
X
X
X
PART IV
Exhibit
Number
4.4.69
4.4.70
4.4.71
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
Duke
Energy
Carolinas
Duke
Energy
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
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).
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
Duke Energy Progress, Inc. 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
Duke Energy Progress, Inc. 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).
E-10
X
X
X
X
X
X
X
X
X
X
X
X
X
PART IV
Exhibit
Number
4.4.82
4.4.83
4.4.84
4.5
4.6
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
Duke
Energy
Carolinas
Duke
Energy
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
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).
Ninetieth Supplemental Indenture, dated as of August 1, 2020 (incorporated
by reference to Exhibit 4.1 to registrant’s Current Report on Form 8-K filed on
August 20, 2020, File No. 1-3382).
First Supplemental Indenture, dated as of August 1, 2020 (incorporated by
reference to Exhibit 4.2 to registrant’s Current Report on Form 8-K filed on
August 20, 2020, 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).
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).
E-11
X
X
X
X
X
X
X
X
X
X
X
X
X
X
PART IV
Exhibit
Number
4.7.9
4.7.10
4.7.11
4.7.12
4.7.13
4.7.14
4.7.15
4.7.16
4.7.17
4.7.18
4.7.19
4.8
4.8.1
4.8.2
Duke
Energy
Carolinas
Duke
Energy
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
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).
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).
Fifty-seventh Supplemental Indenture, dated as of June 1, 2020 (incorporated
by reference to Exhibit 4.1 to registrant’s Current Report on Form 8-K filed on
June 11, 2020, 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).
E-12
X
X
X
X
X
X
X
X
X
X
X
X
X
X
PART IV Exhibit
Number
4.9
4.10
4.10.1
4.10.2
4.11
4.11.1
4.11.2
4.11.3
4.11.4
4.11.5
4.11.6
4.12
4.12.1
4.12.2
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).
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).
Forty-seventh Supplemental Indenture, dated as of May 21, 2020 (incorporated
by reference to Exhibit 4.1 to registrant’s Current Report on Form 8-K filed on
May 21, 2020, 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).
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-13
PART IV Exhibit
Number
4.12.3
4.12.4
4.13
4.13.1
4.13.2
4.13.3
4.13.4
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
Duke
Energy
Carolinas
Duke
Energy
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
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).
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).
E-14
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
Exhibit
Number
4.13.15
4.13.16
4.13.17
4.13.18
4.13.19
4.13.20
4.13.21
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).
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
4.13.24
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).
Seventieth Supplemental Indenture, dated as of March 12, 2020 (incorporated
by reference to Exhibit 4.1 to registrant’s Current Report on Form 8-K filed on
March 12, 2020, File No. 1-3543).
4.14
4.15
4.16
4.17
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).
E-15
X
X
X
X
X
X
X
X
X
X
X
X
X
X
PART IV Exhibit
Number
4.18
4.19
4.20
4.21
4.22
4.23
4.24
4.25
4.26
4.26.1
4.26.2
4.26.3
4.26.4
4.26.5
4.26.6
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).
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).
Duke
Energy
Carolinas
Duke
Energy
Progress
Energy
X
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-16
PART IV Exhibit
Number
4.26.7
4.26.8
4.27
4.28
4.29
4.30
4.31
4.32
4.33
4.34
10.1
10.2
10.3
10.4
10.5
Duke
Energy
Carolinas
Duke
Energy
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
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).
Tenth Supplemental Indenture, dated as of May 21, 2020 (incorporated by
reference to Exhibit 4.1 to registrant’s Current Report on Form 8-K filed on
May 21, 2020, 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).
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).
E-17
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
Exhibit
Number
10.6
10.7
10.8
10.9
10.10
10.11**
10.12
10.13**
10.14
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).
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).
E-18
PART IV Exhibit
Number
10.14.1
10.14.2
10.14.3
10.14.4
10.14.5
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).
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).
Amendment No. 5 and Consent, dated as of March 16, 2020, among
registrants’, the Lenders party thereto, the Issuing Lenders party thereto,
and Wells Fargo Bank, N.A., 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, 2020, 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**
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).
E-19
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
X
X
X
X
X
X
X
X
X
X
X
PART IV Exhibit
Number
10.19**
10.20**
10.21**
10.22**
10.23**
10.24**
10.25
10.26
10.27
10.28
10.29**
10.30**
Performance-Based Retention Award Agreement (incorporated by reference to
Exhibit 10.2 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).
Performance Award Agreement (incorporated by reference to Exhibit 10.3 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).
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 Quarterly Report on Form 10-Q for the quarter
ended March 31, 2019, filed on May 9, 2019, File No. 1-32853).
Performance Award Agreement (incorporated by reference to Exhibit 10.4 to
Duke Energy Corporation’s Quarterly Report on Form 10-Q for the quarter ended
March 31, 2020, filed on May 12, 2020, File No. 1-32853).
Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit
10.3 to Duke Energy Corporation’s Quarterly 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).
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).
Duke Energy Carolinas Summary of Partial Settlement in North Carolina Rate
Case (incorporated by reference to Exhibit 99.1 to registrant’s Current Report on
Form 8-K filed on March 26, 2020, File Nos. 1-32853, 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).
10.30.1** Amended and Restated Duke Energy Corporation Executive Cash Balance Plan,
dated as of September 30, 2020 (incorporated by reference to Exhibit 10.1 to
registrant’s Current Report on Form 8-K filed on September 25, 2020,
File No. 1-32853).
10.31
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).
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
E-20
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
Exhibit
Number
10.32
10.33
10.34
10.35**
10.36
10.37
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).
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).
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.)
10.38**
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).
10.38.1** 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).
X
X
E-21
PART IV Duke
Energy
Carolinas
Duke
Energy
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
Exhibit
Number
10.39**
10.40**
10.41**
Duke Energy Corporation Executive Short-Term Incentive Plan, dated as of
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).
10.41.1** Amendment to Duke Energy Corporation Executive Savings Plan, dated
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).
10.41.2** Amendment to Duke Energy Corporation Executive Savings Plan, dated as of
October 1, 2020 (incorporated by reference to Exhibit 10.2 to Duke Energy
Corporation’s Current Report on Form 8-K filed on September 25, 2020,
File No. 1-32853).
10.42
10.43
10.44
10.45
10.46
10.47
10.48
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).
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).
E-22
X
X
X
X
X
X
X
X
X
X
X
X
X
X
PART IV Exhibit
Number
10.49**
10.50**
10.51**
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).
10.51.1** 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).
10.52**
10.53**
10.54**
10.55**
10.56
10.57
10.58
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).
Consulting Agreement, dated as of October 4, 2019, between Duke Energy
Corporation and Franklin H. Yoho (incorporated by reference to Exhibit 10.54 to
registrant’s Annual Report of Form 10-K for the year ended December 31, 2019,
filed on February 20, 2020, File No. 1-32853).
$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).
$1.5 billion 364-Day Term Loan Credit Agreement, dated as of March 19,
2020, among the registrant, as Borrower, certain Lenders from time to time
parties thereto, and PNC Bank, N.A., as Administrative Agent, and registrant’s
borrowing of the remaining $500 million under registrant’s existing $1 billion
revolving credit facility on March 17, 2020 (incorporated by reference to
Exhibit 10.1 to registrant’s Current Report on Form 8-K filed on March 19, 2020,
File No. 1-32853).
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
E-23
PART IV Exhibit
Number
10.58.1
10.59
10.60
10.60.1
10.60.2
10.61
10.62
10.63
10.64
10.65
Duke
Energy
Carolinas
Progress
Energy
Duke
Energy
Progress
Duke
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Piedmont
Duke
Energy
X
X
X
X
X
X
X
X
X
Joinder Agreement, dated as of March 27, 2020, by and among, the registrant,
each of the Incremental Lenders listed therein, and PNC Bank, N.A., as
Administrative Agent (incorporated by reference to Exhibit 10.2.1 to registrant’s
Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, filed on
May 12, 2020, 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).
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
registrant’s 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).
X
E-24
PART IV Exhibit
Number
10.66
10.67
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 (incorporated by reference
to Exhibit 10.64 to registrant’s Annual Report on Form 10-K for the year ended
December 31, 2019, filed on February 20, 2020, File No. 1-4928).
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
(incorporated by reference to Exhibit 10.65 to registrant’s Annual Report on
Form 10-K for the year ended December 31, 2019, filed on February 20, 2020,
File No. 1-4928).
*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
*31.1.3
*31.1.4
*31.1.5
*31.1.6
*31.1.7
*31.1.8
*31.2.1
*31.2.2
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.
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.
Certification of the Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
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
E-25
PART IV
Exhibit
Number
*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
*32.2.3
*32.2.4
*32.2.5
*32.2.6
*32.2.7
*32.2.8
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.
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
X
X
E-26
Duke
Energy
Carolinas
Duke
Energy
Progress
Energy
X
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
X
X
X
X
X
PART IV Exhibit
Number
*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
*104
Cover Page Interactive Data File (formatted in Inline XBRL and contained in
Exhibit 101).
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
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-27
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 25, 2021
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
Chair, President and Chief Executive Officer
(i)
/s/ LYNN J. GOOD
Lynn J. Good
Chair, 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*
Theodore F. Craver, Jr.*
Robert M. Davis*
Daniel R. DiMicco*
John T. Herron*
William E. Kennard*
E. Marie McKee*
Marya M. Rose*
Thomas E. Skains*
Nicholas C. Fanandakis*
William E. Webster, Jr.*
Lynn J. Good*
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 25, 2021
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 25, 2021
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 25, 2021
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 25, 2021
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 25, 2021
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 25, 2021
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 25, 2021
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 25, 2021
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 25, 2021
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 25, 2021
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 25, 2021
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 25, 2021
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 25, 2021
E-34
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 25, 2021
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 25, 2021
E-35
PART IV
©2021 Duke Energy Corporation 203196 3/21