XML 57 R17.htm IDEA: XBRL DOCUMENT v3.20.2
Derivatives and Hedging
6 Months Ended
Jun. 30, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives and Hedging DERIVATIVES AND HEDGING
The Duke Energy Registrants use commodity and interest rate contracts to manage commodity price risk and interest rate risk. The primary use of commodity derivatives is to hedge the generation portfolio against changes in the prices of electricity and natural gas. Piedmont enters into natural gas supply contracts to provide diversification, reliability and natural gas cost benefits to its customers. Interest rate derivatives are used to manage interest rate risk associated with borrowings.
All derivative instruments not identified as NPNS are recorded at fair value as assets or liabilities on the Condensed Consolidated Balance Sheets. Cash collateral related to derivative instruments executed under master netting arrangements is offset against the collateralized derivatives on the Condensed Consolidated Balance Sheets. The cash impacts of settled derivatives are recorded as operating activities on the Condensed Consolidated Statements of Cash Flows.
INTEREST RATE RISK
The Duke Energy Registrants are exposed to changes in interest rates as a result of their issuance or anticipated issuance of variable-rate and fixed-rate debt and commercial paper. Interest rate risk is managed by limiting variable-rate exposures to a percentage of total debt and by monitoring changes in interest rates. To manage risk associated with changes in interest rates, the Duke Energy Registrants may enter into interest rate swaps, U.S. Treasury lock agreements and other financial contracts. In anticipation of certain fixed-rate debt issuances, a series of forward-starting interest rate swaps or Treasury locks may be executed to lock in components of current market interest rates. These instruments are later terminated prior to or upon the issuance of the corresponding debt.
Cash Flow Hedges
For a derivative designated as hedging the exposure to variable cash flows of a future transaction, referred to as a cash flow hedge, the effective portion of the derivative's gain or loss is initially reported as a component of other comprehensive income and subsequently reclassified into earnings once the future transaction impacts earnings. Amounts for interest rate contracts are reclassified to earnings as interest expense over the term of the related debt. Gains and losses reclassified out of accumulated other comprehensive income (loss) for the three and six months ended June 30, 2020, and 2019, were not material. Duke Energy's interest rate derivatives designated as hedges include interest rate swaps used to hedge existing debt within the Commercial Renewables business and forward-starting interest rate swaps not accounted for under regulatory accounting.
Undesignated Contracts
Undesignated contracts primarily include contracts not designated as a hedge because they are accounted for under regulatory accounting or contracts that do not qualify for hedge accounting.
Duke Energy’s interest rate swaps for its regulated operations employ regulatory accounting. With regulatory accounting, the mark-to-market gains or losses on the swaps are deferred as regulatory liabilities or regulatory assets, respectively. Regulatory assets and liabilities are amortized consistent with the treatment of the related costs in the ratemaking process. The accrual of interest on the swaps is recorded as Interest Expense on the Duke Energy Registrant's Condensed Consolidated Statements of Operations and Comprehensive Income.
The following table shows notional amounts of outstanding derivatives related to interest rate risk.
 
June 30, 2020
 
 
 
Duke

 
 
 
Duke

 
Duke

 
Duke

 
Duke

 
Energy

 
Progress

 
Energy

 
Energy

 
Energy

(in millions)
Energy

 
Carolinas

 
Energy

 
Progress

 
Florida

 
Ohio

Cash flow hedges
$
650

 
$

 
$

 
$

 
$

 
$

Undesignated contracts
1,477

 
400

 
1,050

 
1,050

 

 
27

Total notional amount(a)
$
2,127


$
400


$
1,050


$
1,050


$


$
27

 
December 31, 2019
 
 
 
Duke

 
 
 
Duke

 
Duke

 
Duke

 
Duke

 
Energy

 
Progress

 
Energy

 
Energy

 
Energy

(in millions)
Energy

 
Carolinas

 
Energy

 
Progress

 
Florida

 
Ohio

Cash flow hedges
$
993

 
$

 
$

 
$

 
$

 
$

Undesignated contracts
1,277

 
450

 
800

 
250

 
550

 
27

Total notional amount(a)
$
2,270

 
$
450

 
$
800

 
$
250

 
$
550

 
$
27


(a)
Duke Energy includes amounts related to consolidated VIEs of $650 million in cash flow hedges as of June 30, 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 coal and natural gas purchases, including Piedmont's natural gas supply contracts. Exposure to commodity price risk is influenced by a number of factors including the term of contracts, the liquidity of markets and delivery locations. For the Subsidiary Registrants, bulk power electricity and coal and natural gas purchases flow through fuel adjustment clauses, formula-based contracts or other cost-sharing mechanisms. Differences between the costs included in rates and the incurred costs, including undesignated derivative contracts, are largely deferred as regulatory assets or regulatory liabilities. Piedmont policies allow for the use of financial instruments to hedge commodity price risks. The strategy and objective of these hedging programs are to use the financial instruments to reduce natural gas costs volatility for customers.
Volumes
The tables below include volumes of outstanding commodity derivatives. Amounts disclosed represent the absolute value of notional volumes of commodity contracts excluding NPNS. The Duke Energy Registrants have netted contractual amounts where offsetting purchase and sale contracts exist with identical delivery locations and times of delivery. Where all commodity positions are perfectly offset, no quantities are shown.
 
June 30, 2020
 
 
 
Duke

 
 
 
Duke

 
Duke

 
Duke

 
 
 
Duke

 
Energy

 
Progress

 
Energy

 
Energy

 
Energy

 
 
 
Energy

 
Carolinas

 
Energy

 
Progress

 
Ohio

 
Indiana

 
Piedmont

Electricity (GWh)
28,179

 

 

 

 
4,405

 
23,774

 

Natural gas (millions of dekatherms)
707

 
147

 
165

 
165

 

 
4

 
391

 
December 31, 2019
 
 
 
Duke

 
 
 
Duke

 
Duke

 
Duke

 
 
 
Duke

 
Energy

 
Progress

 
Energy

 
Energy

 
Energy

 
 
 
Energy

 
Carolinas

 
Energy

 
Progress

 
Ohio

 
Indiana

 
Piedmont

Electricity (GWh)
15,858

 

 

 

 
1,887

 
13,971

 

Natural gas (millions of dekatherms)
704

 
130

 
160

 
160

 

 
3

 
411


U.S. EQUITY SECURITIES RISK
In May 2019, Duke Energy Florida entered into a Decommissioning Services Agreement for the accelerated decommissioning of Crystal River Unit 3 with ADP CR3, LLC and ADP SF1, LLC. See Note 3 for additional information on the accelerated decommissioning. Duke Energy Florida executed U.S. equity option collars within the NDTF in May 2019, to preserve the U.S. equity portfolio value in the Duke Energy Florida NDTF in the event the accelerated decommissioning is approved. The Duke Energy Florida NDTF liquidated the options in April 2020, and received proceeds of approximately $7 million.
LOCATION AND FAIR VALUE OF DERIVATIVE ASSETS AND LIABILITIES RECOGNIZED ON THE CONDENSED CONSOLIDATED BALANCE SHEETS
The following tables show the fair value and balance sheet location of derivative instruments. Although derivatives subject to master netting arrangements are netted on the Condensed Consolidated Balance Sheets, the fair values presented below are shown gross and cash collateral on the derivatives has not been netted against the fair values shown.
Derivative Assets
 
June 30, 2020
 
 
 
 
Duke

 
 
 
Duke

 
Duke

 
Duke

 
Duke

 
 
 
 
Duke

 
Energy

 
Progress

 
Energy

 
Energy

 
Energy

 
Energy

 
 
(in millions)
 
Energy

 
Carolinas

 
Energy

 
Progress

 
Florida

 
Ohio

 
Indiana

 
Piedmont

Commodity Contracts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Not Designated as Hedging Instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current
 
$
20

 
$
2

 
$
1

 
$
1

 
$

 
$
3

 
$
10

 
$
4

Noncurrent
 
7

 
5

 
2

 
2

 

 

 

 

Total Derivative Assets – Commodity Contracts
 
$
27

 
$
7

 
$
3

 
$
3

 
$

 
$
3

 
$
10

 
$
4

Interest Rate Contracts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Not Designated as Hedging Instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current
 
$
3

 
$

 
$
3

 
$
3

 
$

 
$

 
$

 
$

Noncurrent
 
2

 

 
2

 
2

 

 

 

 

Total Derivative Assets – Interest Rate Contracts
 
$
5

 
$

 
$
5

 
$
5

 
$

 
$

 
$

 
$

Total Derivative Assets
 
$
32


$
7


$
8


$
8


$


$
3


$
10

 
$
4

Derivative Liabilities
 
June 30, 2020
 
 
 
 
Duke

 
 
 
Duke

 
Duke

 
Duke

 
Duke

 
 
 
 
Duke

 
Energy

 
Progress

 
Energy

 
Energy

 
Energy

 
Energy

 
 
(in millions)
 
Energy

 
Carolinas

 
Energy

 
Progress

 
Florida

 
Ohio

 
Indiana

 
Piedmont

Commodity Contracts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Not Designated as Hedging Instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current
 
$
55

 
$
29

 
$
17

 
$
17

 
$

 
$

 
$
1

 
$
7

Noncurrent
 
138

 
8

 
32

 
16

 

 

 

 
98

Total Derivative Liabilities – Commodity Contracts
 
$
193

 
$
37

 
$
49

 
$
33

 
$

 
$

 
$
1

 
$
105

Interest Rate Contracts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Designated as Hedging Instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current
 
$
14

 
$

 
$

 
$

 
$

 
$

 
$

 
$

Noncurrent
 
56

 

 

 

 

 

 

 

Not Designated as Hedging Instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current
 
68

 
20

 
48

 
48

 

 
1

 

 

Noncurrent
 
30

 

 
24

 
24

 

 
6

 

 

Total Derivative Liabilities – Interest Rate Contracts
 
$
168

 
$
20

 
$
72

 
$
72

 
$

 
$
7

 
$

 
$

Total Derivative Liabilities
 
$
361


$
57


$
121


$
105


$


$
7


$
1

 
$
105


Derivative Assets
 
December 31, 2019
 
 
 
 
Duke

 
 
 
Duke

 
Duke

 
Duke

 
Duke

 
 
 
 
Duke

 
Energy

 
Progress

 
Energy

 
Energy

 
Energy

 
Energy

 
 
(in millions)
 
Energy

 
Carolinas

 
Energy

 
Progress

 
Florida

 
Ohio

 
Indiana

 
Piedmont

Commodity Contracts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Not Designated as Hedging Instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current
 
$
17

 
$

 
$

 
$

 
$

 
$
3

 
$
13

 
$
1

Noncurrent
 
1

 

 

 

 

 
1

 

 

Total Derivative Assets – Commodity Contracts
 
$
18

 
$

 
$

 
$

 
$

 
$
4

 
$
13

 
$
1

Interest Rate Contracts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Not Designated as Hedging Instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current
 
6

 

 
6

 

 
6

 

 

 

Total Derivative Assets – Interest Rate Contracts
 
$
6

 
$

 
$
6

 
$

 
$
6

 
$

 
$

 
$

Equity Securities Contracts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Not Designated as Hedging Instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current
 
1

 

 
1

 

 
1

 

 

 

Total Derivative Assets – Equity Securities Contracts
 
$
1

 
$

 
$
1

 
$

 
$
1

 
$

 
$

 
$

Total Derivative Assets
 
$
25

 
$

 
$
7

 
$

 
$
7

 
$
4

 
$
13

 
$
1

Derivative Liabilities
 
December 31, 2019
 
 
 
 
Duke

 
 
 
Duke

 
Duke

 
Duke

 
Duke

 
 
 
 
Duke

 
Energy

 
Progress

 
Energy

 
Energy

 
Energy

 
Energy

 
 
(in millions)
 
Energy

 
Carolinas

 
Energy

 
Progress

 
Florida

 
Ohio

 
Indiana

 
Piedmont

Commodity Contracts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Not Designated as Hedging Instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current
 
$
67

 
$
33

 
$
26

 
$
26

 
$

 
$

 
$
1

 
$
7

Noncurrent
 
156

 
10

 
37

 
22

 

 

 

 
110

Total Derivative Liabilities – Commodity Contracts
 
$
223

 
$
43

 
$
63

 
$
48

 
$

 
$

 
$
1

 
$
117

Interest Rate Contracts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Designated as Hedging Instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current
 
$
19

 
$

 
$

 
$

 
$

 
$

 
$

 
$

Noncurrent
 
21

 

 

 

 

 

 

 

Not Designated as Hedging Instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current
 
8

 
6

 
1

 
1

 

 
1

 

 

Noncurrent
 
5

 

 

 

 

 
5

 

 

Total Derivative Liabilities – Interest Rate Contracts
 
$
53

 
$
6

 
$
1

 
$
1

 
$

 
$
6

 
$

 
$

Equity Securities Contracts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Not Designated as Hedging Instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current
 
24

 

 
24

 

 
24

 

 

 

Total Derivative Liabilities – Equity Securities Contracts
 
$
24

 
$

 
$
24

 
$

 
$
24

 
$

 
$

 
$

Total Derivative Liabilities
 
$
300

 
$
49

 
$
88

 
$
49

 
$
24

 
$
6

 
$
1

 
$
117


OFFSETTING ASSETS AND LIABILITIES
The following tables present the line items on the Condensed Consolidated Balance Sheets where derivatives are reported. Substantially all of Duke Energy's outstanding derivative contracts are subject to enforceable master netting arrangements. The gross amounts offset in the tables below show the effect of these netting arrangements on financial position, and include collateral posted to offset the net position. The amounts shown are calculated by counterparty. Accounts receivable or accounts payable may also be available to offset exposures in the event of bankruptcy. These amounts are not included in the tables below.
Derivative Assets
 
June 30, 2020
 
 
 
 
Duke

 
 
 
Duke

 
Duke

 
Duke

 
Duke

 
 
 
 
Duke

 
Energy

 
Progress

 
Energy

 
Energy

 
Energy

 
Energy

 
 
(in millions)
 
Energy

 
Carolinas

 
Energy

 
Progress

 
Florida

 
Ohio

 
Indiana

 
Piedmont

Current
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross amounts recognized
 
$
23

 
$
2

 
$
4

 
$
4

 
$

 
$
3

 
$
10

 
$
4

Gross amounts offset
 
(3
)
 
(2
)
 
(1
)
 
(1
)
 

 

 

 

Net amounts presented in Current Assets: Other
 
$
20

 
$

 
$
3

 
$
3

 
$

 
$
3

 
$
10

 
$
4

Noncurrent
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross amounts recognized
 
$
9

 
$
5

 
$
4

 
$
4

 
$

 
$

 
$

 
$

Gross amounts offset
 
(4
)
 
(2
)
 
(2
)
 
(2
)
 

 

 

 

Net amounts presented in Other Noncurrent Assets: Other
 
$
5

 
$
3

 
$
2

 
$
2

 
$

 
$

 
$

 
$

Derivative Liabilities
 
June 30, 2020
 
 
 
 
Duke

 
 
 
Duke

 
Duke

 
Duke

 
Duke

 
 
 
 
Duke

 
Energy

 
Progress

 
Energy

 
Energy

 
Energy

 
Energy

 
 
(in millions)
 
Energy

 
Carolinas

 
Energy

 
Progress

 
Florida

 
Ohio

 
Indiana

 
Piedmont

Current
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross amounts recognized
 
$
137

 
$
49

 
$
65

 
$
65

 
$

 
$
1

 
$
1

 
$
7

Gross amounts offset
 
(3
)
 
(2
)
 
(1
)
 
(1
)
 

 

 

 

Net amounts presented in Current Liabilities: Other
 
$
134

 
$
47

 
$
64

 
$
64

 
$

 
$
1

 
$
1

 
$
7

Noncurrent
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross amounts recognized
 
$
224

 
$
8

 
$
56

 
$
40

 
$

 
$
6

 
$

 
$
98

Gross amounts offset
 
(4
)
 
(2
)
 
(2
)
 
(2
)
 

 

 

 

Net amounts presented in Other Noncurrent Liabilities: Other
 
$
220

 
$
6

 
$
54

 
$
38

 
$

 
$
6

 
$

 
$
98

Derivative Assets
 
December 31, 2019
 
 
 
 
Duke

 
 
 
Duke

 
Duke

 
Duke

 
Duke

 
 
 
 
Duke

 
Energy

 
Progress

 
Energy

 
Energy

 
Energy

 
Energy

 
 
(in millions)
 
Energy

 
Carolinas

 
Energy

 
Progress

 
Florida

 
Ohio

 
Indiana

 
Piedmont

Current
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross amounts recognized
 
$
24

 
$

 
$
7

 
$

 
$
7

 
$
3

 
$
13

 
$
1

Gross amounts offset
 
(1
)
 

 
(1
)
 

 
(1
)
 

 

 

Net amounts presented in Current Assets: Other
 
$
23

 
$

 
$
6

 
$

 
$
6

 
$
3

 
$
13

 
$
1

Noncurrent
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross amounts recognized
 
$
1

 
$

 
$

 
$

 
$

 
$
1

 
$

 
$

Gross amounts offset
 

 

 

 

 

 

 

 

Net amounts presented in Other Noncurrent Assets: Other
 
$
1

 
$

 
$

 
$

 
$

 
$
1

 
$

 
$


Derivative Liabilities
 
December 31, 2019
 
 
 
 
Duke

 
 
 
Duke

 
Duke

 
Duke

 
Duke

 
 
 
 
Duke

 
Energy

 
Progress

 
Energy

 
Energy

 
Energy

 
Energy

 
 
(in millions)
 
Energy

 
Carolinas

 
Energy

 
Progress

 
Florida

 
Ohio

 
Indiana

 
Piedmont

Current
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross amounts recognized
 
$
118

 
$
39

 
$
51

 
$
27

 
$
24

 
$
1

 
$
1

 
$
7

Gross amounts offset
 
(24
)
 

 
(24
)
 

 
(24
)
 

 

 

Net amounts presented in Current Liabilities: Other
 
$
94

 
$
39

 
$
27

 
$
27

 
$

 
$
1

 
$
1

 
$
7

Noncurrent
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross amounts recognized
 
$
182

 
$
10

 
$
37

 
$
22

 
$

 
$
5

 
$

 
$
110

Gross amounts offset
 

 

 

 

 

 

 

 

Net amounts presented in Other Noncurrent Liabilities: Other
 
$
182

 
$
10

 
$
37

 
$
22

 
$

 
$
5

 
$

 
$
110


OBJECTIVE CREDIT CONTINGENT FEATURES
Certain derivative contracts contain objective credit contingent features. These features include the requirement to post cash collateral or letters of credit if specific events occur, such as a credit rating downgrade below investment grade. The following tables show information with respect to derivative contracts that are in a net liability position and contain objective credit-risk-related payment provisions.
 
June 30, 2020
 
 
 
Duke

 
 
 
Duke

 
Duke

 
Energy

 
Progress

 
Energy

(in millions)
Energy

 
Carolinas

 
Energy

 
Progress

Aggregate fair value of derivatives in a net liability position
$
63

 
$
29

 
$
34

 
$
34

Fair value of collateral already posted

 

 

 

Additional cash collateral or letters of credit in the event credit-risk-related contingent features were triggered
63

 
29

 
34

 
34

 
December 31, 2019
 
 
 
Duke

 
 
 
Duke

 
Duke

 
Energy

 
Progress

 
Energy

(in millions)
Energy

 
Carolinas

 
Energy

 
Progress

Aggregate fair value of derivatives in a net liability position
$
79

 
$
35

 
$
44

 
$
44

Fair value of collateral already posted

 

 

 

Additional cash collateral or letters of credit in the event credit-risk-related contingent features were triggered
79

 
35

 
44

 
44


The Duke Energy Registrants have elected to offset cash collateral and fair values of derivatives. For amounts to be netted, the derivative and cash collateral must be executed with the same counterparty under the same master netting arrangement.