Stock-Based Compensation

12 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement [Abstract]

STOCK-BASED COMPENSATION

The Duke Energy Corporation 2015 Long-Term Incentive Plan (the 2015 Plan) provides for the grant of stock-based compensation awards to employees and outside directors. The 2015 Plan reserves 10 million shares of common stock for issuance. Duke Energy has historically issued new shares upon exercising or vesting of share-based awards. However, Duke Energy may use a combination of new share issuances and open market repurchases for share-based awards that are exercised or vest in the future. Duke Energy has not determined with certainty the amount of such new share issuances or open market repurchases.

The following table summarizes the total expense recognized by the Duke Energy Registrants, net of tax, for stock-based compensation.



	Years Ended December 31,
(in millions)	2019		2018		2017
Duke Energy	$	65	$	56	$	43
Duke Energy Carolinas	24		20		15
Progress Energy	24		21		16
Duke Energy Progress	15		13		10
Duke Energy Florida	9		8		6
Duke Energy Ohio	5		4		3
Duke Energy Indiana	6		5		4
Piedmont	3		3		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.



	Years Ended December 31,
(in millions)	2019		2018		2017
RSU awards	$	44	$	43	$	41
Performance awards	45		35		27
Pretax stock-based compensation cost	$	89	$	78	$	68
Stock-based compensation costs capitalized	5		5		4
Stock-based compensation expense	$	84	$	73	$	64
Tax benefit associated with stock-based compensation expense	$	19	$	17	$	25

RESTRICTED STOCK UNIT AWARDS

RSU awards generally vest over periods from immediate to three years. Fair value amounts are based on the market price of Duke Energy's common stock on the grant date. The following table includes information related to RSU awards.



	Years Ended December 31,
	2019		2018		2017
Shares granted (in thousands)	571		649		583
Fair value (in millions)	$	51	$	49	$	47

The following table summarizes information about RSU awards outstanding.



			Weighted Average
	Shares		Grant Date Fair Value
	(in thousands)		(per share)
Outstanding at December 31, 2018	1,153		$	77
Granted	571		89
Vested	(631	)	77
Forfeited	(83	)	82
Outstanding at December 31, 2019	1,010		83
RSU awards expected to vest	951		83

The total grant date fair value of shares vested during the years ended December 31, 2019, 2018 and 2017, was $49 million, $43 million and $42 million, respectively. At December 31, 2019, Duke Energy had $30 million of unrecognized compensation cost, which is expected to be recognized over a weighted average period of 23 months. Prior to Duke Energy's acquisition of Piedmont, Piedmont had an incentive compensation plan that had a series of three-year performance and RSU awards for eligible officers and other participants. The 2016-2018 performance award cycle was approved subsequent to the Agreement and Plan of Merger between Duke Energy and Piedmont and was converted into a Duke Energy RSU award at the consummation of the acquisition.

PERFORMANCE AWARDS

Stock-based performance awards generally vest after three years if performance targets are met. The actual number of shares issued will range from zero to 200% of target shares, depending on the level of performance achieved.

Performance awards contain performance conditions and a market condition. The performance conditions are based on Duke Energy's cumulative adjusted EPS and total incident case rate (total incident case rate is one of our key employee safety metrics). The market condition is based on TSR of Duke Energy relative to a predefined peer group.

Relative TSR is valued using a path-dependent model that incorporates expected relative TSR into the fair value determination of Duke Energy’s performance-based share awards. The model uses three-year historical volatilities and correlations for all companies in the predefined peer group, including Duke Energy, to simulate Duke Energy’s relative TSR as of the end of the performance period. For each simulation, Duke Energy’s relative TSR associated with the simulated stock price at the end of the performance period plus expected dividends within the period results in a value per share for the award portfolio. The average of these simulations is the expected portfolio value per share. Actual life to date results of Duke Energy’s relative TSR for each grant are incorporated within the model. For performance awards granted in 2019, the model used a risk-free interest rate of 2.5%, which reflects the yield on three-year Treasury bonds as of the grant date, and an expected volatility of 14.8% based on Duke Energy's historical volatility over three years using daily stock prices.

The following table includes information related to stock-based performance awards.



	Years Ended December 31,
	2019		2018		2017
Shares granted assuming target performance (in thousands)	320		372		461
Fair value (in millions)	$	27	$	27	$	37

The following table summarizes information about stock-based performance awards outstanding and assumes payout at the target level.



			Weighted Average
	Shares		Grant Date Fair Value
	(in thousands)		(per share)
Outstanding at December 31, 2018	1,117		$	77
Granted	320		86
Vested	(310	)	75
Forfeited	(18	)	81
Outstanding at December 31, 2019	1,109		80
Stock-based performance awards expected to vest	1,080		80

The total grant date fair value of shares vested during the years ended December 31, 2019, and 2018, was $23 million and $13 million, respectively. No performance awards vested during the year ended December 31, 2017. At December 31, 2019, Duke Energy had $27 million of unrecognized compensation cost, which is expected to be recognized over a weighted average period of 22 months.