XML 97 R58.htm IDEA: XBRL DOCUMENT v3.22.2.2
Fair Value Measurements
 9 Months Ended
Sep. 30, 2022
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. 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, 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.
Foreign currency derivatives
Most over-the-counter foreign currency derivatives are valued using financial models that utilize observable inputs for similar instruments and are classified as Level 2. Inputs include forward foreign currency rate curves, notional amounts, rates and credit quality of the counterparties.
Other fair value considerations
See Note 11 in Duke Energy's Annual Report on Form 10-K for the year ended December 31, 2021, 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, 2022
(in millions)Total Fair ValueLevel 1Level 2Level 3Not Categorized
NDTF cash and cash equivalents$120 $120 $— $— $— 
NDTF equity securities5,447 5,402 — — 45 
NDTF debt securities2,556 778 1,778 — — 
Other equity securities116 116 — — — 
Other debt securities264 56 208 — — 
Other cash and cash equivalents37 37 — — — 
Derivative assets1,259 3 1,196 60 — 
Total assets9,799 6,512 3,182 60 45 
Derivative liabilities(671)(18)(432)(221)— 
Net assets (liabilities)$9,128 $6,494 $2,750 $(161)$45 
December 31, 2021
(in millions)Total Fair ValueLevel 1Level 2Level 3Not Categorized
NDTF cash and cash equivalents$160 $160 $— $— $— 
NDTF equity securities7,350 7,300 — — 50 
NDTF debt securities2,891 967 1,924 — — 
Other equity securities156 156 — — — 
Other debt securities300 45 255 — — 
Other cash and cash equivalents36 36 — — — 
Derivative assets320 3 293 24 — 
Total assets11,213 8,667 2,472 24 50 
Derivative liabilities(472)(13)(314)(145)— 
Net assets (liabilities)$10,741 $8,654 $2,158 $(121)$50 
The following tables provide reconciliations of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements.
Derivatives (net)
Three Months Ended September 30,Nine Months Ended September 30,
(in millions) 2022202120222021
Balance at beginning of period$(156)$(131)$(121)$(77)
Total pretax realized or unrealized gains included in earnings15 — 15 — 
Total pretax realized or unrealized losses included in comprehensive income(5)(11)(115)(86)
Purchases, sales, issuances and settlements:
Purchases— — 77 21 
Settlements(6)4 12 (4)
Total (losses) gains included on the Condensed Consolidated Balance Sheet(9)7 (29)15 
Balance at end of period$(161)$(131)$(161)$(131)
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, 2022
(in millions)Total Fair ValueLevel 1Level 2Not Categorized
NDTF cash and cash equivalents$41 $41 $— $— 
NDTF equity securities3,154 3,109 — 45 
NDTF debt securities1,286 276 1,010 — 
Derivative assets535 — 535 — 
Total assets5,016 3,426 1,545 45 
Derivative liabilities(113)— (113)— 
Net assets$4,903 $3,426 $1,432 $45 
December 31, 2021
(in millions)Total Fair ValueLevel 1Level 2Not Categorized
NDTF cash and cash equivalents$53 $53 $— $— 
NDTF equity securities4,265 4,215 — 50 
NDTF debt securities1,441 339 1,102 — 
Derivative assets162 — 162 — 
Total assets5,921 4,607 1,264 50 
Derivative liabilities(35)— (35)— 
Net assets$5,886 $4,607 $1,229 $50 
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, 2022December 31, 2021
(in millions)Total Fair ValueLevel 1Level 2Total Fair ValueLevel 1Level 2
NDTF cash and cash equivalents$79 $79 $— $107 $107 $— 
NDTF equity securities2,293 2,293 — 3,085 3,085 — 
NDTF debt securities1,270 502 768 1,450 628 822 
Other debt securities25 — 25 26 — 26 
Other cash and cash equivalents13 13 — 20 20 — 
Derivative assets437 — 437 124 — 124 
Total assets4,117 2,887 1,230 4,812 3,840 972 
Derivative liabilities(9)— (9)(24)— (24)
Net assets$4,108 $2,887 $1,221 $4,788 $3,840 $948 
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, 2022December 31, 2021
(in millions)Total Fair ValueLevel 1Level 2Total Fair ValueLevel 1Level 2
NDTF cash and cash equivalents$47 $47 $— $94 $94 $— 
NDTF equity securities2,206 2,206 — 2,970 2,970 — 
NDTF debt securities951 243 708 1,025 289 736 
Other cash and cash equivalents11 11 — 16 16 — 
Derivative assets415 — 415 124 — 124 
Total assets3,630 2,507 1,123 4,229 3,369 860 
Derivative liabilities(9)— (9)(10)— (10)
Net assets$3,621 $2,507 $1,114 $4,219 $3,369 $850 
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, 2022December 31, 2021
(in millions)Total Fair ValueLevel 1Level 2Total Fair ValueLevel 1Level 2
NDTF cash and cash equivalents$32 $32 $— $13 $13 $— 
NDTF equity securities87 87 — 115 115 — 
NDTF debt securities319 259 60 425 339 86 
Other debt securities25 — 25 26 — 26 
Other cash and cash equivalents1 1 — 3 3 — 
Derivative assets22 — 22 — — — 
Total assets486 379 107 582 470 112 
Derivative liabilities— — — (14)— (14)
Net assets$486 $379 $107 $568 $470 $98 
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, 2022, and December 31, 2021.
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, 2022December 31, 2021
(in millions)Total Fair ValueLevel 1Level 2Level 3Total Fair ValueLevel 1Level 2Level 3
Other equity securities$72 $72 $— $— $97 $97 $— $— 
Other debt securities59 — 59 — 64 — 64 — 
Other cash and cash equivalents1 1 — — — — — — 
Derivative assets131 2 73 56 23 1 — 22 
Total assets263 75 132 56 184 98 64 22 
Derivative liabilities(18)(18)— — (27)(13)(14)— 
Net assets$245 $57 $132 $56 $157 $85 $50 $22 
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)2022202120222021
Balance at beginning of period$84 $22 $22 $6 
Purchases, sales, issuances and settlements:
Purchases— — 74 18 
Settlements(20)(3)(10)(12)
Total (losses) gains included on the Condensed Consolidated Balance Sheet(8)5 (30)12 
Balance at end of period$56 $24 $56 $24 
PIEDMONT
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets.
September 30, 2022December 31, 2021
(in millions)Total Fair ValueLevel 1Level 2Total Fair ValueLevel 1Level 2
Derivative assets$— $— $— $3 $3 $— 
Derivative liabilities(171)— (171)(139)— (139)
Net (liabilities) assets$(171)$— $(171)$(136)$3 $(139)
QUANTITATIVE INFORMATION ABOUT UNOBSERVABLE INPUTS
The following tables include quantitative information about the Duke Energy Registrants' derivatives classified as Level 3.
September 30, 2022
Weighted
Fair ValueAverage
Investment Type(in millions)Valuation TechniqueUnobservable InputRangeRange
Duke Energy      
Electricity contracts$(221)RTO forward pricingForward electricity curves – price per MWh$24.46 -$145.44 $52.10 
Duke Energy Ohio 
FTRs4 RTO auction pricingFTR price – per MWh— -3.00 1.49 
Duke Energy Indiana 
FTRs56 RTO auction pricingFTR price – per MWh(0.64)-21.81 3.41 
Duke Energy
Total Level 3 derivatives$(161)
December 31, 2021
Weighted
Fair ValueAverage
Investment Type(in millions)Valuation TechniqueUnobservable InputRangeRange
Duke Energy      
Electricity contracts$(145)RTO forward pricingForward electricity curves – price per MWh$19.04 -$139.11$37.57
Duke Energy Ohio   
FTRs2 RTO auction pricingFTR price – per MWh0.06 -1.79 0.96 
Duke Energy Indiana   
FTRs22 RTO auction pricingFTR price – per MWh(1.18)-13.11 2.68 
Duke Energy
Total Level 3 derivatives$(121)
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, 2022December 31, 2021
(in millions)Book ValueFair ValueBook ValueFair Value
Duke Energy(a)
$69,309 $60,247 $63,835 $69,683 
Duke Energy Carolinas14,222 12,614 13,275 15,101 
Progress Energy21,149 18,744 20,823 23,751 
Duke Energy Progress11,090 9,495 10,249 11,252 
Duke Energy Florida8,417 7,528 8,482 9,772 
Duke Energy Ohio3,244 2,891 3,193 3,570 
Duke Energy Indiana4,310 3,821 4,323 5,067 
Piedmont3,363 2,857 2,968 3,278 
(a)Book value of long-term debt includes $1.19 billion and $1.25 billion at September 30, 2022, and December 31, 2021, respectively, of net unamortized debt discount and premium 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, 2022, and December 31, 2021, 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.