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Fair Value Measurements
 9 Months Ended
Sep. 30, 2020
Fair Value Disclosures [Abstract]  
Fair Value Measurements FAIR VALUE MEASUREMENTS
Fair value is the exchange price to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. The fair value definition focuses on an exit price versus the acquisition cost. Fair value measurements use market data or assumptions market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs may be readily observable, corroborated by market data or generally unobservable. Valuation techniques maximize the use of observable inputs and minimize use of unobservable inputs. A midmarket pricing convention (the midpoint price between bid and ask prices) is permitted for use as a practical expedient.
Fair value measurements are classified in three levels based on the fair value hierarchy as defined by GAAP. Certain investments are not categorized within the fair value hierarchy. These investments are measured at fair value using the net asset value (NAV) per share practical expedient. The NAV is derived based on the investment cost, less any impairment, plus or minus changes resulting from observable price changes for an identical or similar investment of the same issuer.
Fair value accounting guidance permits entities to elect to measure certain financial instruments that are not required to be accounted for at fair value, such as equity method investments or the company’s own debt, at fair value. The Duke Energy Registrants have not elected to record any of these items at fair value.
Valuation methods of the primary fair value measurements disclosed below are as follows.
Investments in equity securities
The majority of investments in equity securities are valued using Level 1 measurements. Investments in equity securities are typically valued at the closing price in the principal active market as of the last business day of the quarter. Principal active markets for equity prices include published exchanges such as the New York Stock Exchange and Nasdaq Stock Market. Foreign equity prices are translated from their trading currency using the currency exchange rate in effect at the close of the principal active market. There was no after-hours market activity that was required to be reflected in the reported fair value measurements.
Investments in debt securities
Most investments in debt securities are valued using Level 2 measurements because the valuations use interest rate curves and credit spreads applied to the terms of the debt instrument (maturity and coupon interest rate) and consider the counterparty credit rating. If the market for a particular fixed-income security is relatively inactive or illiquid, the measurement is Level 3.
Commodity derivatives
Commodity derivatives with clearinghouses are classified as Level 1. If forward price curves are not observable for the full term of the contract and the unobservable period had more than an insignificant impact on the valuation, the commodity derivative is classified as Level 3. In isolation, increases (decreases) in natural gas forward prices result in favorable (unfavorable) fair value adjustments for natural gas purchase contracts; and increases (decreases) in electricity forward prices result in unfavorable (favorable) fair value adjustments for electricity sales contracts. Duke Energy regularly evaluates and validates pricing inputs used to estimate the fair value of natural gas commodity contracts by a market participant price verification procedure. This procedure provides a comparison of internal forward commodity curves to market participant generated curves.
Interest rate derivatives
Most over-the-counter interest rate contract derivatives are valued using financial models that utilize observable inputs for similar instruments and are classified as Level 2. Inputs include forward interest rate curves, notional amounts, interest rates and credit quality of the counterparties.
Other fair value considerations
See Note 12 in Duke Energy's Annual Report on Form 10-K for the year ended December 31, 2019, 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 Condensed Consolidated Balance Sheets. Derivative amounts in the tables below for all Duke Energy Registrants exclude cash collateral, which is disclosed in Note 9. See Note 10 for additional information related to investments by major security type for the Duke Energy Registrants.
 
September 30, 2020
(in millions)
Total Fair Value

Level 1

Level 2

Level 3

Not Categorized

NDTF cash and cash equivalents
$
687

$
687

$
—

$
—

$
—

NDTF equity securities
5,459

5,413

—

—

46

NDTF debt securities
2,224

363

1,861

—

—

Other equity securities
126

126

—

—

—

Other debt securities
308

18

290

—

—

Other cash and cash equivalents
110

110

—

—

—

Derivative assets
86

5

71

10

—

Total assets
9,000

6,722

2,222

10

46

Derivative liabilities
(359
)
(1
)
(145
)
(213
)
—

Net assets (liabilities)
$
8,641

$
6,721

$
2,077

$
(203
)
$
46

 
December 31, 2019
(in millions)
Total Fair Value

Level 1

Level 2

Level 3

Not Categorized

NDTF cash and cash equivalents
$
101

$
101

$
—

$
—

$
—

NDTF equity securities
5,684

5,633

—

—

51

NDTF debt securities
2,368

725

1,643

—

—

Other equity securities
122

122

—

—

—

Other debt securities
258

39

219

—

—

Other cash and cash equivalents
52

52

—

—

—

Derivative assets
25

3

7

15

—

Total assets
8,610

6,675

1,869

15

51

NDTF equity security contracts
(23
)
—

(23
)
—

—

Derivative liabilities
(277
)
(15
)
(145
)
(117
)
—

Net assets (liabilities)
$
8,310

$
6,660

$
1,701

$
(102
)
$
51


The following tables provide reconciliations of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements.
 
Derivatives (net)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(in millions)
2020

 
2019

 
2020

 
2019

Balance at beginning of period
$
(92
)
 
$
(79
)
 
$
(102
)
 
$
(113
)
Total pretax realized or unrealized gains included in comprehensive income
(102
)
 
—

 
(102
)
 
—

Purchases, sales, issuances and settlements:
 
 
 
 
 
 
 
Purchases
—

 
—

 
14

 
38

Settlements
(3
)
 
(9
)
 
(18
)
 
(32
)
Total (losses) gains included on the Condensed Consolidated Balance Sheet
(6
)
 
(2
)
 
5

 
17

Balance at end of period
$
(203
)
 
$
(90
)
 
$
(203
)
 
$
(90
)

DUKE ENERGY CAROLINAS
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets.
 
September 30, 2020
(in millions)
Total Fair Value

Level 1

Level 2

Not Categorized

NDTF cash and cash equivalents
$
42

$
42

$
—

$
—

NDTF equity securities
3,229

3,183

—

46

NDTF debt securities
1,232

131

1,101

—

Derivative assets
38

—

38

—

Total assets
4,541

3,356

1,139

46

Derivative liabilities
(33
)
—

(33
)
—

Net assets
$
4,508

$
3,356

$
1,106

$
46

 
December 31, 2019
(in millions)
Total Fair Value

Level 1

Level 2

Not Categorized

NDTF cash and cash equivalents
$
21

$
21

$
—

$
—

NDTF equity securities
3,154

3,103

—

51

NDTF debt securities
1,172

206

966

—

Total assets
4,347

3,330

966

51

Derivative liabilities
(49
)
—

(49
)
—

Net assets
$
4,298

$
3,330

$
917

$
51


PROGRESS ENERGY
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets.
 
September 30, 2020
 
December 31, 2019
(in millions)
Total Fair Value

Level 1

Level 2

 
Total Fair Value

Level 1

Level 2

NDTF cash and cash equivalents
$
645

$
645

$
—

 
$
80

$
80

$
—

NDTF equity securities
2,230

2,230

—

 
2,530

2,530

—

NDTF debt securities
992

232

760

 
1,196

519

677

Other debt securities
53

—

53

 
51

—

51

Other cash and cash equivalents
107

107

—

 
49

49

—

Derivative assets
33

—

33

 
7

—

7

Total assets
4,060

3,214

846

 
3,913

3,178

735

NDTF equity security contracts
—

—

—

 
(23
)
—

(23
)
Derivative liabilities
(36
)
—

(36
)
 
(65
)
—

(65
)
Net assets
$
4,024

$
3,214

$
810

 
$
3,825

$
3,178

$
647


DUKE ENERGY PROGRESS
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets.
 
September 30, 2020
 
December 31, 2019
(in millions)
Total Fair Value

Level 1

Level 2

 
Total Fair Value

Level 1

Level 2

NTDF cash and cash equivalents
$
57

$
57

$
—

 
$
53

$
53

$
—

NDTF equity securities
2,150

2,150

—

 
2,077

2,077

—

NDTF debt securities
992

232

760

 
921

244

677

Other cash and cash equivalents
1

1

—

 
2

2

—

Derivative assets
33

—

33

 
—

—

—

Total assets
3,233

2,440

793

 
3,053

2,376

677

Derivative liabilities
(20
)
—

(20
)
 
(49
)
—

(49
)
Net assets
$
3,213

$
2,440

$
773

 
$
3,004

$
2,376

$
628


DUKE ENERGY FLORIDA
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets.
 
September 30, 2020
 
December 31, 2019
(in millions)
Total Fair Value

Level 1

Level 2

 
Total Fair Value

Level 1

Level 2

NDTF cash and cash equivalents
$
588

$
588

$
—

 
$
27

$
27

$
—

NDTF equity securities
80

80

—

 
453

453

—

NDTF debt securities
—

—

—

 
275

275

—

Other debt securities
53

—

53

 
51

—

51

Other cash and cash equivalents
2

2

—

 
4

4

—

Derivative assets
—

—

—

 
7

—

7

Total assets
723

670

53

 
817

759

58

NDTF equity security contracts
—

—

—

 
(23
)
—

(23
)
Derivative liabilities
—

—

—

 
(1
)
—

(1
)
Net assets
$
723

$
670

$
53

 
$
793

$
759

$
34


DUKE ENERGY OHIO
The recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets were not material at September 30, 2020, and December 31, 2019.
DUKE ENERGY INDIANA
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets.
 
September 30, 2020
 
December 31, 2019
(in millions)
Total Fair Value

Level 1

Level 2

Level 3

 
Total Fair Value

Level 1

Level 2

Level 3

Other equity securities
$
84

$
84

$
—

$
—

 
$
81

$
81

$
—

$
—

Other debt securities
45

—

45

—

 
44

—

44

—

Other cash and cash equivalents
1

1

—

—

 
—

—

—

—

Derivative assets
8

—

—

8

 
13

2

—

11

Total assets
$
138

$
85

$
45

$
8

 
$
138

$
83

$
44

$
11

Derivative liabilities
—

—

—

—

 
(1
)
(1
)
—

—

Net assets
$
138

$
85

$
45

$
8

 
$
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.
 
Derivatives (net)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(in millions)
2020

 
2019

 
2020

 
2019

Balance at beginning of period
$
10

 
$
28

 
$
11

 
$
22

Purchases, sales, issuances and settlements:

 
 
 
 
 
 
Purchases
—

 
—

 
10

 
29

Settlements
(3
)
 
(7
)
 
(13
)
 
(26
)
Total gains (losses) included on the Condensed Consolidated Balance Sheet
1

 
(5
)
 
—

 
(9
)
Balance at end of period
$
8

 
$
16

 
$
8

 
$
16

PIEDMONT
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets.
 
September 30, 2020
 
December 31, 2019
(in millions)
Total Fair Value

Level 1

Level 3

 
Total Fair Value

Level 1

Level 3

Derivative assets
$
6

$
6

$
—

 
$
1

$
1

$
—

Derivative liabilities
(111
)
—

(111
)
 
(117
)
—

(117
)
Net (liabilities) assets
$
(105
)
$
6

$
(111
)
 
$
(116
)
$
1

$
(117
)

The following table provides a reconciliation of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements.
 
Derivatives (net)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(in millions)
2020

 
2019

 
2020

 
2019

Balance at beginning of period
$
(105
)
 
$
(114
)
 
$
(117
)
 
$
(141
)
Total (losses) gains and settlements
(6
)
 
3

 
6

 
30

Balance at end of period
$
(111
)
 
$
(111
)
 
$
(111
)
 
$
(111
)
QUANTITATIVE INFORMATION ABOUT UNOBSERVABLE INPUTS
The following tables include quantitative information about the Duke Energy Registrants' derivatives classified as Level 3.
 
September 30, 2020
 
 
 
 
 
 
 
Weighted
 
Fair Value
 
 
 
 
 
Average
Investment Type
(in millions)
Valuation Technique
Unobservable Input
Range
Range
Duke Energy
 
 
 
 
 
 
 
Electricity contracts
$
(102
)
RTO forward pricing
Forward electricity curves – price per MWh
$
14.92

-
$
151.18

$
29.63

Duke Energy Ohio
 

 
 
 
 
 
 
FTRs
2

RTO auction pricing
FTR price – per MWh
—

-
1.90

0.64

Duke Energy Indiana
 

 
 
 
 
 
 
FTRs
8

RTO auction pricing
FTR price – per MWh
(1.03
)
-
6.10

0.74

Piedmont
 
 
 
 
 
 
 
Natural gas contracts
(111
)
Discounted cash flow
Forward natural gas curves – price per MMBtu
1.81

-
2.50

2.11

Duke Energy
 
 
 
 
 
 
 
Total Level 3 derivatives
$
(203
)
 
 
 
 
 
 
 
December 31, 2019
 
 
 
 
 
 
 
Weighted
 
Fair Value
 
 
 
 
 
Average
Investment Type
(in millions)
Valuation Technique
Unobservable Input
Range
Range
Duke Energy Ohio
 

 
 
 
 
 
 
FTRs
$
4

RTO auction pricing
FTR price – per MWh
$
0.59

-
$
3.47

$
2.07

Duke Energy Indiana
 

 
 
 
 
 
 
FTRs
11

RTO auction pricing
FTR price – per MWh
(0.66
)
-
9.24

1.15

Piedmont
 
 
 
 
 
 
 
Natural gas contracts
(117
)
Discounted cash flow
Forward natural gas curves – price per MMBtu
1.59

-
2.46

1.91

Duke Energy
 
 
 
 
 
 
 
Total Level 3 derivatives
$
(102
)
 
 
 
 
 
 

OTHER FAIR VALUE DISCLOSURES
The fair value and book value of long-term debt, including current maturities, is summarized in the following table. Estimates determined are not necessarily indicative of amounts that could have been settled in current markets. Fair value of long-term debt uses Level 2 measurements.
 
September 30, 2020
 
December 31, 2019
(in millions)
Book Value

 
Fair Value

 
Book Value

 
Fair Value

Duke Energy(a)
$
60,718

 
$
69,503

 
$
58,126

 
$
63,062

Duke Energy Carolinas
12,548

 
15,165

 
11,900

 
13,516

Progress Energy
19,865

 
23,825

 
19,634

 
22,291

Duke Energy Progress
9,358

 
10,808

 
9,058

 
9,934

Duke Energy Florida
7,917

 
9,684

 
7,987

 
9,131

Duke Energy Ohio
3,089

 
3,619

 
2,619

 
2,964

Duke Energy Indiana
4,104

 
5,140

 
4,057

 
4,800

Piedmont
2,780

 
3,276

 
2,384

 
2,642


(a)
Book value of long-term debt includes $1.4 billion at September 30, 2020, and $1.5 billion at December 31, 2019, of unamortized debt discount and premium, net of purchase accounting adjustments related to the mergers with Progress Energy and Piedmont that are excluded from fair value of long-term debt.
At both September 30, 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.