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Derivatives and Hedging
12 Months Ended
Dec. 31, 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 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.
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 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.
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 Consolidated Statements of Operations and Comprehensive Income.
The following tables show notional amounts of outstanding derivatives related to interest rate risk.
December 31, 2020
DukeDukeDukeDuke
DukeEnergyProgressEnergyEnergyEnergy
(in millions)EnergyCarolinasEnergyProgressFloridaOhio
Cash flow hedges$632 $ $ $ $ $ 
Undesignated contracts1,177 400 750 750  27 
Total notional amount(a)
$1,809 $400 $750 $750 $ $27 
December 31, 2019
DukeDukeDukeDuke
DukeEnergyProgressEnergyEnergyEnergy
(in millions)EnergyCarolinasEnergyProgressFloridaOhio
Cash flow hedges$993 $— $— $— $— $— 
Undesignated contracts1,277 450 800 250 550 27 
Total notional amount(a)
$2,270 $450 $800 $250 $550 $27 
(a)    Duke Energy includes amounts related to consolidated VIEs of $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 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.
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.
December 31, 2020
DukeDukeDukeDuke
DukeEnergyProgressEnergyEnergyEnergy
EnergyCarolinasEnergyProgressOhioIndianaPiedmont
Electricity (GWh)(a)
35,409    2,559 10,802  
Natural gas (millions of Dth)678 145 158 158  2 373 
December 31, 2019
DukeDukeDukeDuke
DukeEnergyProgressEnergyEnergyEnergy
EnergyCarolinasEnergyProgressOhioIndianaPiedmont
Electricity (GWh)15,858 — — — 1,887 13,971 — 
Natural gas (millions of Dth)704 130 160 160 — 411 
(a)    Duke Energy includes 22,048 GWh that relates to cash flow hedges.
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 AssetsDecember 31, 2020
DukeDukeDukeDukeDuke
DukeEnergyProgressEnergyEnergyEnergyEnergy
(in millions)EnergyCarolinasEnergyProgressFloridaOhioIndianaPiedmont
Commodity Contracts
Not Designated as Hedging Instruments
Current$30 $14 $9 $9 $ $1 $6 $1 
Noncurrent13 6 6 6     
Total Derivative Assets – Commodity Contracts$43 $20 $15 $15 $ $1 $6 $1 
Interest Rate Contracts
Not Designated as Hedging Instruments
Current$18 $ $18 $18 $ $ $ $ 
Total Derivative Assets – Interest Rate Contracts$18 $ $18 $18 $ $ $ $ 
Total Derivative Assets$61 $20 $33 $33 $ $1 $6 $1 
Derivative LiabilitiesDecember 31, 2020
DukeDukeDukeDukeDuke
DukeEnergyProgressEnergyEnergyEnergyEnergy
(in millions)EnergyCarolinasEnergyProgressFloridaOhioIndianaPiedmont
Commodity Contracts
Designated as Hedging Instruments
Current$14 $ $ $ $ $ $ $ 
Noncurrent70        
Not Designated as Hedging Instruments
Current$30 $13 $2 $2 $ $ $1 $15 
Noncurrent137 3 27 12    107 
Total Derivative Liabilities – Commodity Contracts$251 $16 $29 $14 $ $ $1 $122 
Interest Rate Contracts
Designated as Hedging Instruments
Current$15 $ $ $ $ $ $ $ 
Noncurrent48        
Not Designated as Hedging Instruments
Current5 4    1   
Noncurrent5     5   
Total Derivative Liabilities – Interest Rate Contracts$73 $4 $ $ $ $6 $ $ 
Total Derivative Liabilities$324 $20 $29 $14 $ $6 $1 $122 
Derivative AssetsDecember 31, 2019
DukeDukeDukeDukeDuke
DukeEnergyProgressEnergyEnergyEnergyEnergy
(in millions)EnergyCarolinasEnergyProgressFloridaOhioIndianaPiedmont
Commodity Contracts
Not Designated as Hedging Instruments
Current$17 $— $— $— $— $$13 $
Noncurrent— — — — — — 
Total Derivative Assets – Commodity Contracts$18 $— $— $— $— $$13 $
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$$— $$— $$— $— $— 
Total Derivative Assets$25 $— $$— $$$13 $
Derivative LiabilitiesDecember 31, 2019
DukeDukeDukeDukeDuke
DukeEnergyProgressEnergyEnergyEnergyEnergy
(in millions)EnergyCarolinasEnergyProgressFloridaOhioIndianaPiedmont
Commodity Contracts
Not Designated as Hedging Instruments
Current$67 $33 $26 $26 $— $— $$
Noncurrent156 10 37 22 — — — 110 
Total Derivative Liabilities – Commodity Contracts$223 $43 $63 $48 $— $— $$117 
Interest Rate Contracts
Designated as Hedging Instruments
Current$19 $— $— $— $— $— $— $— 
Noncurrent21 — — — — — — — 
Not Designated as Hedging Instruments
Current— — — 
Noncurrent— — — — — — 
Total Derivative Liabilities – Interest Rate Contracts$53 $$$$— $$— $— 
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 $$$117 
OFFSETTING ASSETS AND LIABILITIES
The following tables present the line items on the Consolidated Balance Sheets where derivatives are reported. Substantially all of Duke Energy's outstanding derivative contracts are subject to enforceable master netting arrangements. The gross amounts offset in the tables below show the effect of these netting arrangements on financial position and include collateral posted to offset the net position. The amounts shown are calculated by counterparty. Accounts receivable or accounts payable may also be available to offset exposures in the event of bankruptcy. These amounts are not included in the tables below.
Derivative AssetsDecember 31, 2020
DukeDukeDukeDukeDuke
DukeEnergyProgressEnergyEnergyEnergyEnergy
(in millions)EnergyCarolinasEnergyProgressFloridaOhioIndianaPiedmont
Current
Gross amounts recognized$48 $14 $27 $27 $ $1 $6 $1 
Gross amounts offset(3)(2)(2)(2)    
Net amounts presented in Current Assets: Other$45 $12 $25 $25 $ $1 $6 $1 
Noncurrent
Gross amounts recognized$13 $6 $6 $6 $ $ $ $ 
Gross amounts offset(5)(1)(4)(4)    
Net amounts presented in Other Noncurrent Assets: Other$8 $5 $2 $2 $ $ $ $ 
Derivative LiabilitiesDecember 31, 2020
DukeDukeDukeDukeDuke
DukeEnergyProgressEnergyEnergyEnergyEnergy
(in millions)EnergyCarolinasEnergyProgressFloridaOhioIndianaPiedmont
Current
Gross amounts recognized$64 $17 $2 $2 $ $1 $1 $15 
Gross amounts offset(3)(2)(2)(2)    
Net amounts presented in Current Liabilities: Other$61 $15 $ $ $ $1 $1 $15 
Noncurrent
Gross amounts recognized$260 $3 $27 $12 $ $5 $ $107 
Gross amounts offset(5)(1)(4)(4)    
Net amounts presented in Other Noncurrent Liabilities: Other$255 $2 $23 $8 $ $5 $ $107 
Derivative AssetsDecember 31, 2019
DukeDukeDukeDukeDuke
DukeEnergyProgressEnergyEnergyEnergyEnergy
(in millions)EnergyCarolinasEnergyProgressFloridaOhioIndianaPiedmont
Current
Gross amounts recognized$24 $— $$— $$$13 $
Gross amounts offset(1)— (1)— (1)— — — 
Net amounts presented in Current Assets: Other$23 $— $$— $$$13 $
Noncurrent
Gross amounts recognized$$— $— $— $— $$— $— 
Gross amounts offset— — — — — — — — 
Net amounts presented in Other Noncurrent Assets: Other$$— $— $— $— $$— $— 
Derivative LiabilitiesDecember 31, 2019
DukeDukeDukeDukeDuke
DukeEnergyProgressEnergyEnergyEnergyEnergy
(in millions)EnergyCarolinasEnergyProgressFloridaOhioIndianaPiedmont
Current
Gross amounts recognized$118 $39 $51 $27 $24 $$$
Gross amounts offset(24)— (24)— (24)— — — 
Net amounts presented in Current Liabilities: Other$94 $39 $27 $27 $— $$$
Noncurrent
Gross amounts recognized$182 $10 $37 $22 $— $$— $110 
Gross amounts offset— — — — — — — — 
Net amounts presented in Other Noncurrent Liabilities: Other$182 $10 $37 $22 $— $$— $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.
December 31, 2020
DukeDuke
DukeEnergyProgressEnergy
(in millions)EnergyCarolinasEnergyProgress
Aggregate fair value of derivatives in a net liability position$24 $9 $14 $14 
Fair value of collateral already posted    
Additional cash collateral or letters of credit in the event credit-risk-related contingent features were triggered24 9 14 14 
December 31, 2019
DukeDuke
DukeEnergyProgressEnergy
(in millions)EnergyCarolinasEnergyProgress
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 triggered79 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.