Fair Value Measurements

3 Months Ended

Mar. 31, 2023

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 the 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 per share practical expedient. The net asset value 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 NYSE 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. Derivatives related to interest rate risk for the Commercial Renewables Disposal Groups are now classified as held for sale and are excluded from the following disclosures. See Note 2 for further information.

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 12 in Duke Energy's Annual Report on Form 10-K for the year ended December 31, 2022, 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.

	March 31, 2023
(in millions)	Total Fair Value		Level 1		Level 2		Level 3		Not Categorized
NDTF cash and cash equivalents	$	161	$	161	$	—	$	—	$	—
NDTF equity securities	6,367		6,326		—		—		41
NDTF debt securities	2,595		822		1,773		—		—
Other equity securities	137		137		—		—		—
Other debt securities	278		60		218		—		—
Other cash and cash equivalents	134		134		—		—		—
Derivative assets	268		1		255		12		—
Total assets	9,940		7,641		2,246		12		41
Derivative liabilities	(603)		(19)		(584)		—		—
Net assets (liabilities)	$	9,337	$	7,622	$	1,662	$	12	$	41

	December 31, 2022
(in millions)	Total Fair Value		Level 1		Level 2		Level 3		Not Categorized
NDTF cash and cash equivalents	$	215	$	215	$	—	$	—	$	—
NDTF equity securities	5,871		5,829		—		—		42
NDTF debt securities	2,550		780		1,770		—		—
Other equity securities	128		128		—		—		—
Other debt securities	265		55		210		—		—
Other cash and cash equivalents	22		22		—		—		—
Derivative assets	795		1		760		34		—
Total assets	9,846		7,030		2,740		34		42
Derivative liabilities	(437)		(16)		(421)		—		—
Net assets (liabilities)	$	9,409	$	7,014	$	2,319	$	34	$	42

The following table provides reconciliations of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements.

	Derivatives (net)
	Three Months Ended March 31,
(in millions)	2023		2022
Balance at beginning of period	$	34	$	24
Purchases, sales, issuances and settlements:
Settlements	(20)		(7)
Total losses included on the Condensed Consolidated Balance Sheet	(2)		(7)
Balance at end of period	$	12	$	10

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.

	March 31, 2023
(in millions)	Total Fair Value		Level 1		Level 2		Not Categorized
NDTF cash and cash equivalents	$	69	$	69	$	—	$	—
NDTF equity securities	3,677		3,636		—		41
NDTF debt securities	1,329		372		957		—
Derivative assets	80		—		80		—
Total assets	5,155		4,077		1,037		41
Derivative liabilities	(201)		—		(201)		—
Net assets	$	4,954	$	4,077	$	836	$	41

	December 31, 2022
(in millions)	Total Fair Value		Level 1		Level 2		Not Categorized
NDTF cash and cash equivalents	$	117	$	117	$	—	$	—
NDTF equity securities	3,367		3,325		—		42
NDTF debt securities	1,298		323		975		—
Derivative assets	330		—		330		—
Total assets	5,112		3,765		1,305		42
Derivative liabilities	(127)		—		(127)		—
Net assets	$	4,985	$	3,765	$	1,178	$	42

PROGRESS ENERGY

The following table provides recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets.

	March 31, 2023						December 31, 2022
(in millions)	Total Fair Value		Level 1		Level 2		Total Fair Value		Level 1		Level 2
NDTF cash and cash equivalents	$	92	$	92	$	—	$	98	$	98	$	—
NDTF equity securities	2,690		2,690		—		2,504		2,504		—
NDTF debt securities	1,266		450		816		1,252		457		795
Other debt securities	25		—		25		25		—		25
Other cash and cash equivalents	8		8		—		11		11		—
Derivative assets	88		—		88		248		—		248
Total assets	4,169		3,240		929		4,138		3,070		1,068
Derivative liabilities	(153)		—		(153)		(66)		—		(66)
Net assets	$	4,016	$	3,240	$	776	$	4,072	$	3,070	$	1,002

DUKE ENERGY PROGRESS

The following table provides recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets.

	March 31, 2023						December 31, 2022
(in millions)	Total Fair Value		Level 1		Level 2		Total Fair Value		Level 1		Level 2
NDTF cash and cash equivalents	$	72	$	72	$	—	$	56	$	56	$	—
NDTF equity securities	2,590		2,590		—		2,411		2,411		—
NDTF debt securities	977		219		758		963		225		738
Other cash and cash equivalents	7		7		—		9		9		—
Derivative assets	82		—		82		230		—		230
Total assets	3,728		2,888		840		3,669		2,701		968
Derivative liabilities	(149)		—		(149)		(48)		—		(48)
Net assets	$	3,579	$	2,888	$	691	$	3,621	$	2,701	$	920

DUKE ENERGY FLORIDA

The following table provides recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets.

	March 31, 2023						December 31, 2022
(in millions)	Total Fair Value		Level 1		Level 2		Total Fair Value		Level 1		Level 2
NDTF cash and cash equivalents	$	20	$	20	$	—	$	42	$	42	$	—
NDTF equity securities	100		100		—		93		93		—
NDTF debt securities	289		231		58		289		232		57
Other debt securities	25		—		25		25		—		25
Other cash and cash equivalents	—		—		—		1		1		—
Derivative assets	6		—		6		17		—		17
Total assets	440		351		89		467		368		99
Derivative liabilities	(3)		—		(3)		(19)		—		(19)
Net assets	$	437	$	351	$	86	$	448	$	368	$	80

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 March 31, 2023, and December 31, 2022.

DUKE ENERGY INDIANA

The following table provides recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets.

	March 31, 2023								December 31, 2022
(in millions)	Total Fair Value		Level 1		Level 2		Level 3		Total Fair Value		Level 1		Level 2		Level 3
Other equity securities	$	85	$	85	$	—	$	—	$	79	$	79	$	—	$	—
Other debt securities	64		—		64		—		60		—		60		—
Other cash and cash equivalents	1		1		—		—		1		1		—		—
Derivative assets	11		—		—		11		110		—		81		29
Total assets	161		86		64		11		250		80		141		29
Derivative liabilities	(28)		(19)		(9)		—		(16)		(16)		—		—
Net assets	$	133	$	67	$	55	$	11	$	234	$	64	$	141	$	29

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 March 31,
(in millions)	2023		2022
Balance at beginning of period	$	29	$	22
Purchases, sales, issuances and settlements:
Settlements	(19)		(6)
Total gains (losses) included on the Condensed Consolidated Balance Sheet	1		(6)
Balance at end of period	$	11	$	10

PIEDMONT

The following table provides recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets.

	March 31, 2023						December 31, 2022
(in millions)	Total Fair Value		Level 1		Level 2		Total Fair Value		Level 1		Level 2
Derivative assets	$	1	$	1	$	—	$	—	$	—	$	—
Derivative liabilities	(144)		—		(144)		(168)		—		(168)
Net (liabilities) assets	$	(143)	$	1	$	(144)	$	(168)	$	—	$	(168)

QUANTITATIVE INFORMATION ABOUT UNOBSERVABLE INPUTS

The following tables include quantitative information about the Duke Energy Registrants' derivatives classified as Level 3.

	March 31, 2023
								Weighted
	Fair Value							Average
Investment Type	(in millions)		Valuation Technique	Unobservable Input	Range			Range
Duke Energy Ohio
FTRs	1		RTO auction pricing	FTR price – per MWh	(0.19)	-	2.71	1.08
Duke Energy Indiana
FTRs	11		RTO auction pricing	FTR price – per MWh	0.03	-	14.88	2.63
Duke Energy
Total Level 3 derivatives	$	12

	December 31, 2022
										Weighted
	Fair Value									Average
Investment Type	(in millions)		Valuation Technique	Unobservable Input	Range					Range
Duke Energy Ohio
FTRs	$	5	RTO auction pricing	FTR price – per MWh	$	0.89	-	$	6.25	$	3.35
Duke Energy Indiana
FTRs	29		RTO auction pricing	FTR price – per MWh	0.09		-	21.79		2.74
Duke Energy
Total Level 3 derivatives	$	34

OTHER FAIR VALUE DISCLOSURES

The fair value and book value of long-term debt, including current maturities, is summarized in the following table. Debt related to the Commercial Renewables Disposal Groups is now classified as held for sale and is excluded from the following disclosures. See Note 2 for further information. 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.

	March 31, 2023				December 31, 2022
(in millions)	Book Value		Fair Value		Book Value		Fair Value
Duke Energy(a)	$	72,437	$	66,455	$	69,751	$	61,986
Duke Energy Carolinas	15,105		14,176		14,266		12,943
Progress Energy	23,371		21,974		22,439		20,467
Duke Energy Progress	12,047		10,911		11,087		9,689
Duke Energy Florida	9,683		9,242		9,709		8,991
Duke Energy Ohio	3,991		3,768		3,245		2,927
Duke Energy Indiana	4,503		4,265		4,307		3,913
Piedmont	3,364		3,014		3,363		2,940

(a)Book value of long-term debt includes $1.15 billion and $1.17 billion at March 31, 2023, and December 31, 2022, 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 March 31, 2023, and December 31, 2022, 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.