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Fair Value Measurements
9 Months Ended
Sep. 30, 2021
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.
Other fair value considerations
See Note 11 in Duke Energy's Annual Report on Form 10-K for the year ended December 31, 2020, 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 8. See Note 9 for additional information related to investments by major security type for the Duke Energy Registrants.
September 30, 2021
(in millions)Total Fair ValueLevel 1Level 2Level 3Not Categorized
NDTF cash and cash equivalents$164 $164 $ $ $ 
NDTF equity securities6,754 6,705   49 
NDTF debt securities2,943 998 1,945   
Other equity securities145 145    
Other debt securities283 45 238   
Other cash and cash equivalents87 87    
Derivative assets543 27 490 26  
Total assets10,919 8,171 2,673 26 49 
Derivative liabilities(415)(2)(256)(157) 
Net assets (liabilities)$10,504 $8,169 $2,417 $(131)$49 
December 31, 2020
(in millions)Total Fair ValueLevel 1Level 2Level 3Not Categorized
NDTF cash and cash equivalents$177 $177 $— $— $— 
NDTF equity securities6,235 6,189 — — 46 
NDTF debt securities2,717 874 1,843 — — 
Other equity securities146 146 — — — 
Other debt securities285 37 248 — — 
Other cash and cash equivalents127 127 — — — 
Derivative assets61 53 — 
Total assets9,748 7,551 2,144 46 
Derivative liabilities(324)— (240)(84)— 
Net assets (liabilities)$9,424 $7,551 $1,904 $(77)$46 
The following tables provide reconciliations of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements.
Derivatives (net)
Three Months Ended September 30,Nine Months Ended September 30,
(in millions) 2021202020212020
Balance at beginning of period$(131)$(92)$(77)$(102)
Total pretax realized or unrealized losses included in comprehensive income(11)(102)(86)(102)
Purchases, sales, issuances and settlements:
Purchases — 21 14 
Settlements4 (3)(4)(18)
Total gains (losses) included on the Condensed Consolidated Balance Sheet7 (6)15 
Balance at end of period$(131)$(203)$(131)$(203)
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, 2021
(in millions)Total Fair ValueLevel 1Level 2Not Categorized
NDTF cash and cash equivalents$60 $60 $ $ 
NDTF equity securities3,912 3,863  49 
NDTF debt securities1,461 359 1,102  
Derivative assets271  271  
Total assets5,704 4,282 1,373 49 
Derivative liabilities(18) (18) 
Net assets$5,686 $4,282 $1,355 $49 
December 31, 2020
(in millions)Total Fair ValueLevel 1Level 2Not Categorized
NDTF cash and cash equivalents$30 $30 $— $— 
NDTF equity securities3,685 3,639 — 46 
NDTF debt securities1,250 192 1,058 — 
Derivative assets20 — 20 — 
Total assets4,985 3,861 1,078 46 
Derivative liabilities(20)— (20)— 
Net assets$4,965 $3,861 $1,058 $46 
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, 2021December 31, 2020
(in millions)Total Fair ValueLevel 1Level 2Total Fair ValueLevel 1Level 2
NDTF cash and cash equivalents$104 $104 $ $147 $147 $— 
NDTF equity securities2,842 2,842  2,550 2,550 — 
NDTF debt securities1,482 639 843 1,467 682 785 
Other debt securities26  26 26 — 26 
Other cash and cash equivalents18 18  106 106 — 
Derivative assets215  215 33 — 33 
Total assets4,687 3,603 1,084 4,329 3,485 844 
Derivative liabilities(12) (12)(29)— (29)
Net assets$4,675 $3,603 $1,072 $4,300 $3,485 $815 
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, 2021December 31, 2020
(in millions)Total Fair ValueLevel 1Level 2Total Fair ValueLevel 1Level 2
NDTF cash and cash equivalents$92 $92 $ $76 $76 $— 
NDTF equity securities2,736 2,736  2,459 2,459 — 
NDTF debt securities1,030 278 752 993 237 756 
Other cash and cash equivalents16 16  — 
Derivative assets215  215 33 — 33 
Total assets4,089 3,122 967 3,562 2,773 789 
Derivative liabilities   (14)— (14)
Net assets$4,089 $3,122 $967 $3,548 $2,773 $775 
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, 2021December 31, 2020
(in millions)Total Fair ValueLevel 1Level 2Total Fair ValueLevel 1Level 2
NDTF cash and cash equivalents$12 $12 $ $71 $71 $— 
NDTF equity securities106 106  91 91 — 
NDTF debt securities452 361 91 474 445 29 
Other debt securities26  26 26 — 26 
Other cash and cash equivalents1 1  — 
Total assets597 480 117 663 608 55 
Derivative liabilities(12) (12)— — — 
Net assets$585 $480 $105 $663 $608 $55 
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, 2021, and December 31, 2020.
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, 2021December 31, 2020
(in millions)Total Fair ValueLevel 1Level 2Level 3Total Fair ValueLevel 1Level 2Level 3
Other equity securities$90 $90 $ $ $97 $97 $— $— 
Other debt securities46  46  45 — 45 — 
Other cash and cash equivalents19 19   — — 
Derivative assets36 12  24 — — 
Total assets191 121 46 24 149 98 45 
Derivative liabilities(2)(2)  (1)(1)— — 
Net assets$189 $119 $46 $24 $148 $97 $45 $
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)2021202020212020
Balance at beginning of period$22 $10 $6 $11 
Purchases, sales, issuances and settlements:
Purchases — 18 10 
Settlements(3)(3)(12)(13)
Total gains included on the Condensed Consolidated Balance Sheet5 12 — 
Balance at end of period$24 $$24 $
PIEDMONT
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets.
September 30, 2021December 31, 2020
(in millions)Total Fair ValueLevel 1Level 2Total Fair ValueLevel 1Level 2
Derivative assets$12 $12 $ $$$— 
Derivative liabilities(148) (148)(122)— (122)
Net (liabilities) assets$(136)$12 $(148)$(121)$$(122)
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)2021202020212020
Balance at beginning of period$ $(105)$ $(117)
Total (losses) gains and settlements (6) 
Balance at end of period$ $(111)$ $(111)
QUANTITATIVE INFORMATION ABOUT UNOBSERVABLE INPUTS
The following tables include quantitative information about the Duke Energy Registrants' derivatives classified as Level 3.
September 30, 2021
Weighted
Fair ValueAverage
Investment Type(in millions)Valuation TechniqueUnobservable InputRangeRange
Duke Energy      
Electricity contracts$(157)RTO forward pricingForward electricity curves – price per MWh$18.02 -$143.85 $38.43 
Duke Energy Ohio 
FTRs2 RTO auction pricingFTR price – per MWh0.06 -1.27 0.71 
Duke Energy Indiana 
FTRs24 RTO auction pricingFTR price – per MWh(1.11)-8.55 1.61 
Duke Energy
Total Level 3 derivatives$(131)
December 31, 2020
Weighted
Fair ValueAverage
Investment Type(in millions)Valuation TechniqueUnobservable InputRangeRange
Duke Energy      
Electricity contracts$(84)Discounted cash flowForward electricity curves – price per MWh$14.68 -$151.84$28.84
Duke Energy Ohio   
FTRsRTO auction pricingFTR price – per MWh0.25 -1.68 0.79 
Duke Energy Indiana    
FTRsRTO auction pricingFTR price – per MWh(2.40)-7.41 1.05 
Duke Energy
Total Level 3 derivatives$(77)
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, 2021December 31, 2020
(in millions)Book ValueFair ValueBook ValueFair Value
Duke Energy(a)
$62,802 $69,381 $59,863 $69,292 
Duke Energy Carolinas12,975 14,964 12,218 14,917 
Progress Energy19,488 22,593 19,264 23,470 
Duke Energy Progress9,848 10,915 9,258 10,862 
Duke Energy Florida7,549 8,932 7,915 9,756 
Duke Energy Ohio3,092 3,517 3,089 3,650 
Duke Energy Indiana4,092 4,883 4,091 5,204 
Piedmont2,968 3,320 2,780 3,306 
(a)Book value of long-term debt includes $1.3 billion at September 30, 2021, and December 31, 2020, 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, 2021, and December 31, 2020, 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.