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Derivatives and Hedging
6 Months Ended
Jun. 30, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives and Hedging DERIVATIVES AND HEDGING
The Duke Energy Registrants use commodity, interest rate and foreign currency contracts to manage commodity price risk, interest rate risk and foreign currency exchange 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. Foreign currency derivatives are used to manage risk related to foreign currency exchange rates on certain issuances of debt.
All derivative instruments not identified as NPNS are recorded at fair value as assets or liabilities on the Condensed Consolidated Balance Sheets. Cash collateral related to derivative instruments executed under master netting arrangements is offset against the collateralized derivatives on the Condensed Consolidated Balance Sheets. The cash impacts of settled derivatives are recorded as operating activities or financing activities on the Condensed Consolidated Statements of Cash Flows consistent with the classification of the hedged transaction.
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 accumulated other comprehensive loss for the three and six months ended June 30, 2022, and 2021, 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 Condensed Consolidated Statements of Operations and Comprehensive Income.
The following table shows notional amounts of outstanding derivatives related to interest rate risk.
June 30, 2022
DukeDukeDuke
DukeEnergyEnergyEnergy
(in millions)EnergyCarolinasIndianaOhio
Cash flow hedges$2,877 $ $ $ 
Undesignated contracts577 250 300 27 
Total notional amount(a)
$3,454 $250 $300 $27 
December 31, 2021
DukeDukeDukeDuke
DukeEnergyProgressEnergyEnergyEnergy
(in millions)EnergyCarolinasEnergyProgressIndianaOhio
Cash flow hedges$2,415 $— $— $— $— $— 
Undesignated contracts1,177 350 500 500 300 27 
Total notional amount(a)
$3,592 $350 $500 $500 $300 $27 
(a)Duke Energy includes amounts related to consolidated VIEs of $627 million and $665 million in cash flow hedges as of June 30, 2022, and December 31, 2021, respectively.
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 loss for the three and six months ended June 30, 2022, and 2021, were not material. Duke Energy’s commodity derivatives designated as hedges include long-term electricity sales in the Commercial Renewables segment.
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.
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 natural gas costs volatility for customers.
Duke Energy’s undesignated contracts include long-term electricity sales in the Commercial Renewables segment.
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.
June 30, 2022
DukeDukeDukeDuke
DukeEnergyProgressEnergyEnergyEnergy
EnergyCarolinasEnergyProgressOhioIndianaPiedmont
Electricity (GWh)(a)
39,032    4,002 24,241  
Natural gas (millions of dekatherms)873 283 259 259  13 318 
December 31, 2021
DukeDukeDukeDuke
DukeEnergyProgressEnergyEnergyEnergy
EnergyCarolinasEnergyProgressOhioIndianaPiedmont
Electricity (GWh)(a)
22,344 — — — 1,681 10,688 — 
Natural gas (millions of dekatherms)823 264 215 215 — 336 
(a)Duke Energy includes 4,477 GWh and 9,975 GWh related to cash flow hedges as of June 30, 2022, and December 31, 2021, respectively.
FOREIGN CURRENCY RISK
Duke Energy may enter into foreign currency derivatives to hedge exposure to changes in foreign currency exchange rates, such as that arising from the issuance of debt denominated in a currency other than U.S. dollars.
Fair Value Hedges
Derivatives related to existing fixed rate securities are accounted for as fair value hedges, where the derivatives’ fair value gains or losses and hedged items’ fair value gains or losses are both recorded directly to earnings on the same income statement line item, including foreign currency gains or losses arising from changes in the U.S. currency exchange rates. Duke Energy has elected to exclude the cross-currency basis spread from the assessment of effectiveness in the fair value hedges of its foreign currency risk and record any difference between the change in the fair value of the excluded components and the amounts recognized in earnings as a component of OCI.
The following table shows Duke Energy's outstanding derivatives related to foreign currency risk. There were no fair value hedges in 2021.
June 30, 2022
ReceiveFair Value
Pay NotionalNotionalReceive Hedge
Gain (Loss)(a)
(in millions)Pay Rate(in millions)RateMaturity Date(in millions)
Fair value hedges
$645 4.75 %600 euros3.10 %June 2028$(16)
537 5.31 %500 euros3.85 %June 2034(13)
Total notional amount$1,182 1,100 euros$(29)
(a)    Amounts are recorded in Other Income and expenses, net on the Condensed Consolidated Statement of Operations, which offsets an equal translation adjustment of the foreign denominated debt. See the Condensed Consolidated Statements of Comprehensive Income for amounts excluded from the assessment of effectiveness for which the difference between changes in fair value and periodic amortization is recorded.
LOCATION AND FAIR VALUE OF DERIVATIVE ASSETS AND LIABILITIES RECOGNIZED ON THE CONDENSED 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 Condensed 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 AssetsJune 30, 2022
DukeDukeDukeDukeDuke
DukeEnergyProgressEnergyEnergyEnergyEnergy
(in millions)EnergyCarolinasEnergyProgressFloridaOhioIndianaPiedmont
Commodity Contracts
Not Designated as Hedging Instruments
Current$571 $268 $203 $203 $ $5 $86 $ 
Noncurrent350 186 165 165     
Total Derivative Assets – Commodity Contracts$921 $454 $368 $368 $ $5 $86 $ 
Interest Rate Contracts
Designated as Hedging Instruments
Current$242 $ $ $ $ $ $ $ 
Noncurrent88        
Not Designated as Hedging Instruments
Current55      55  
Noncurrent30 30       
Total Derivative Assets – Interest Rate Contracts$415 $30 $ $ $ $ $55 $ 
Total Derivative Assets$1,336 $484 $368 $368 $ $5 $141 $ 
Derivative LiabilitiesJune 30, 2022
DukeDukeDukeDukeDuke
DukeEnergyProgressEnergyEnergyEnergyEnergy
(in millions)EnergyCarolinasEnergyProgressFloridaOhioIndianaPiedmont
Commodity Contracts
Designated as Hedging Instruments
Current$35 $ $ $ $ $ $  
Noncurrent114        
Not Designated as Hedging Instruments
Current135 32 33 1 33  21 25 
Noncurrent259 9 10 10    168 
Total Derivative Liabilities – Commodity Contracts$543 $41 $43 $11 $33 $ $21 $193 
Interest Rate Contracts
Designated as Hedging Instruments
Current$1 $ $ $ $ $ $ $ 
Noncurrent2        
Not Designated as Hedging Instruments
Current1     1   
Noncurrent2     2   
Total Derivative Liabilities – Interest Rate Contracts$6 $ $ $ $ $3 $ $ 
Foreign Currency Contracts
Designated as Hedging Instruments
Current$18 $ $ $ $ $ $ $ 
Noncurrent26        
Total Derivative Liabilities – Foreign Currency Contracts$44 $ $ $ $ $ $ $ 
Total Derivative Liabilities$593 $41 $43 $11 $33 $3 $21 $193 
Derivative AssetsDecember 31, 2021
DukeDukeDukeDukeDuke
DukeEnergyProgressEnergyEnergyEnergyEnergy
(in millions)EnergyCarolinasEnergyProgressFloridaOhioIndianaPiedmont
Commodity Contracts
Not Designated as Hedging Instruments
Current$199 $99 $72 $72 $— $$23 $
Noncurrent113 63 50 50 — — — — 
Total Derivative Assets – Commodity Contracts$312 $162 $122 $122 $— $$23 $
Interest Rate Contracts
Designated as Hedging Instruments
Current$$— $— $— $— $— $— $— 
Noncurrent— — — — — — — 
Not Designated as Hedging Instruments
Current— — — — — 
Total Derivative Assets – Interest Rate Contracts$$— $$$— $— $— $— 
Total Derivative Assets$320 $162 $124 $124 $— $$23 $
Derivative LiabilitiesDecember 31, 2021
DukeDukeDukeDukeDuke
DukeEnergyProgressEnergyEnergyEnergyEnergy
(in millions)EnergyCarolinasEnergyProgressFloridaOhioIndianaPiedmont
Commodity Contracts
Designated as Hedging Instruments
Current$27 $— $— $— $— $— $— $— 
Noncurrent117 — — — — — — — 
Not Designated as Hedging Instruments
Current72 18 19 14 — 13 21 
Noncurrent132 — — — 118 
Total Derivative Liabilities – Commodity Contracts$348 $27 $24 $10 $14 $— $13 $139 
Interest Rate Contracts
Designated as Hedging Instruments
Current$75 $— $— $— $— $— $— $— 
Noncurrent21 — — — — — — — 
Not Designated as Hedging Instruments
Current10 — — — — — 
Noncurrent18 — — — — 14 — 
Total Derivative Liabilities – Interest Rate Contracts$124 $$— $— $— $$14 $— 
Total Derivative Liabilities$472 $35 $24 $10 $14 $$27 $139 
OFFSETTING ASSETS AND LIABILITIES
The following tables present the line items on the Condensed 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 cash collateral posted to offset the net position. The amounts shown are calculated by counterparty. Accounts receivable or accounts payable and letters of credit may also be available to offset exposures in the event of bankruptcy. These amounts are not included in the tables below.
Derivative AssetsJune 30, 2022
DukeDukeDukeDukeDuke
DukeEnergyProgressEnergyEnergyEnergyEnergy
(in millions)EnergyCarolinasEnergyProgressFloridaOhioIndianaPiedmont
Current
Gross amounts recognized$868 $268 $203 $203 $ $5 $141 $ 
Gross amounts offset(331)(193)(137)(137)    
Net amounts presented in Current Assets: Other$537 $75 $66 $66 $ $5 $141 $ 
Noncurrent
Gross amounts recognized$468 $216 $165 $165 $ $ $ $ 
Gross amounts offset(242)(125)(117)(117)    
Net amounts presented in Other Noncurrent Assets: Other$226 $91 $48 $48 $ $ $ $ 
Derivative LiabilitiesJune 30, 2022
DukeDukeDukeDukeDuke
DukeEnergyProgressEnergyEnergyEnergyEnergy
(in millions)EnergyCarolinasEnergyProgressFloridaOhioIndianaPiedmont
Current
Gross amounts recognized$190 $32 $33 $1 $33 $1 $21 $25 
Gross amounts offset(19)(1)(1)(1)  (17) 
Net amounts presented in Current Liabilities: Other$171 $31 $32 $ $33 $1 $4 $25 
Noncurrent
Gross amounts recognized$403 $9 $10 $10 $ $2 $ $168 
Gross amounts offset(19)(9)(10)(10)    
Net amounts presented in Other Noncurrent Liabilities: Other$384 $ $ $ $ $2 $ $168 
Derivative AssetsDecember 31, 2021
DukeDukeDukeDukeDuke
DukeEnergyProgressEnergyEnergyEnergyEnergy
(in millions)EnergyCarolinasEnergyProgressFloridaOhioIndianaPiedmont
Current
Gross amounts recognized$204 $99 $74 $74 $— $$23 $
Gross amounts offset(25)(16)(9)(9)— — — — 
Net amounts presented in Current Assets: Other$179 $83 $65 $65 $— $$23 $
Noncurrent
Gross amounts recognized$116 $63 $50 $50 $— $— $— $— 
Gross amounts offset(23)(15)(8)(8)— — — — 
Net amounts presented in Other Noncurrent Assets: Other$93 $48 $42 $42 $— $— $— $— 
Derivative LiabilitiesDecember 31, 2021
DukeDukeDukeDukeDuke
DukeEnergyProgressEnergyEnergyEnergyEnergy
(in millions)EnergyCarolinasEnergyProgressFloridaOhioIndianaPiedmont
Current
Gross amounts recognized$184 $26 $19 $$14 $$13 $21 
Gross amounts offset(11)(6)(5)(5)— — — — 
Net amounts presented in Current Liabilities: Other$173 $20 $14 $— $14 $$13 $21 
Noncurrent
Gross amounts recognized$288 $$$$— $$14 $118 
Gross amounts offset(12)(8)(5)(5)— — — — 
Net amounts presented in Other Noncurrent Liabilities: Other$276 $$— $— $— $$14 $118