Document/ExhibitDescriptionPagesSize 1: 10-Q Quarterly Report HTML 8.13M
2: EX-31.1 1 Certification of Chief Executive Officer HTML 51K
3: EX-31.1 2 Certification of Chief Executive Officer HTML 51K
4: EX-31.1 3 Certification of Chief Executive Officer HTML 51K
5: EX-31.1 4 Certification of Chief Executive Officer HTML 51K
6: EX-31.1 5 Certification of Chief Executive Officer HTML 51K
7: EX-31.1 6 Certification of Chief Executive Officer HTML 51K
8: EX-31.1 7 Certification of Chief Executive Officer HTML 51K
9: EX-31.1 8 Certification of Chief Executive Officer HTML 51K
10: EX-31.2 1 Certification of Chief Financial Officer HTML 51K
11: EX-31.2 2 Certification of Chief Financial Officer HTML 51K
12: EX-31.2 3 Certification of Chief Financial Officer HTML 51K
13: EX-31.2 4 Certification of Chief Financial Officer HTML 51K
14: EX-31.2 5 Certification of Chief Financial Officer HTML 51K
15: EX-31.2 6 Certification of Chief Financial Officer HTML 51K
16: EX-31.2 7 Certification of Chief Financial Officer HTML 51K
17: EX-31.2 8 Certification of Chief Financial Officer HTML 51K
18: EX-32.1 1 Certification Pursuant to 18 U.S.C. Section 1350 HTML 48K
19: EX-32.1 2 Certification Pursuant to 18 U.S.C. Section 1350 HTML 48K
20: EX-32.1 3 Certification Pursuant to 18 U.S.C. Section 1350 HTML 48K
21: EX-32.1 4 Certification Pursuant to 18 U.S.C. Section 1350 HTML 48K
22: EX-32.1 5 Certification Pursuant to 18 U.S.C. Section 1350 HTML 48K
23: EX-32.1 6 Certification Pursuant to 18 U.S.C. Section 1350 HTML 48K
24: EX-32.1 7 Certification Pursuant to 18 U.S.C. Section 1350 HTML 48K
25: EX-32.1 8 Certification Pursuant to 18 U.S.C. Section 1350 HTML 48K
26: EX-32.2 1 Certification Pursuant to 18 U.S.C. Section 1350 HTML 48K
27: EX-32.2 2 Certification Pursuant to 18 U.S.C. Section 1350 HTML 48K
28: EX-32.2 3 Certification Pursuant to 18 U.S.C. Section 1350 HTML 48K
29: EX-32.2 4 Certification Pursuant to 18 U.S.C. Section 1350 HTML 48K
30: EX-32.2 5 Certification Pursuant to 18 U.S.C. Section 1350 HTML 48K
31: EX-32.2 6 Certification Pursuant to 18 U.S.C. Section 1350 HTML 48K
32: EX-32.2 7 Certification Pursuant to 18 U.S.C. Section 1350 HTML 48K
33: EX-32.2 8 Certification Pursuant to 18 U.S.C. Section 1350 HTML 48K
39: R1 Cover Page HTML 166K
40: R2 Condensed Consolidated Statements of Operations HTML 191K
41: R3 Condensed Consolidated Statements of Comprehensive HTML 100K
Income
42: R4 Condensed Consolidated Statements of Comprehensive HTML 52K
Income (Parenthetical)
43: R5 Condensed Consolidated Balance Sheets HTML 222K
44: R6 Condensed Consolidated Balance Sheets HTML 86K
(Parenthetical)
45: R7 Condensed Consolidated Statements of Cash Flows HTML 169K
46: R8 Condensed Consolidated Statements of Changes in HTML 156K
Equity
47: R9 Condensed Consolidated Statements of Operations HTML 106K
and Comprehensive Income - Duke Energy Carolinas
48: R10 Condensed Consolidated Balance Sheets - Duke HTML 190K
Energy Carolinas
49: R11 Condensed Consolidated Balance Sheets - Duke HTML 70K
Energy Carolinas (Parenthetical)
50: R12 Condensed Consolidated Statements of Cash Flows - HTML 163K
Duke Energy Carolinas
51: R13 Condensed Consolidated Statements of Changes in HTML 75K
Equity - Duke Energy Carolinas
52: R14 Condensed Consolidated Statements of Operations HTML 154K
and Comprehensive Income - Progress Energy
53: R15 Condensed Consolidated Balance Sheets - Progress HTML 204K
Energy
54: R16 Condensed Consolidated Balance Sheets - Progress HTML 82K
Energy (Parenthetical)
55: R17 Condensed Consolidated Statements of Cash Flows - HTML 160K
Progress Energy
56: R18 Condensed Consolidated Statements of Changes in HTML 139K
Equity - Progress Energy
57: R19 Condensed Consolidated Statements of Operations HTML 106K
and Comprehensive Income - Duke Energy Progress
58: R20 Condensed Consolidated Balance Sheets - Duke HTML 175K
Energy Progress
59: R21 Condensed Consolidated Balance Sheets - Duke HTML 70K
Energy Progress (Parenthetical)
60: R22 Condensed Consolidated Statements of Cash Flows - HTML 160K
Duke Energy Progress
61: R23 Condensed Consolidated Statements of Changes in HTML 71K
Equity - Duke Energy Progress
62: R24 Condensed Consolidated Statements of Operations HTML 118K
and Comprehensive Income - Duke Energy Florida
63: R25 Condensed Consolidated Balance Sheets - Duke HTML 211K
Energy Florida
64: R26 Condensed Consolidated Balance Sheets - Duke HTML 70K
Energy Florida (Parenthetical)
65: R27 Condensed Consolidated Statements of Cash Flows - HTML 158K
Duke Energy Florida
66: R28 Condensed Consolidated Statements of Changes in HTML 79K
Equity - Duke Energy Florida
67: R29 Condensed Consolidated Statements of Operations HTML 115K
and Comprehensive Income - Duke Energy Ohio
68: R30 Condensed Consolidated Balance Sheets - Duke HTML 192K
Energy Ohio
69: R31 Condensed Consolidated Balance Sheets - Duke HTML 58K
Energy Ohio (Parenthetical)
70: R32 Condensed Consolidated Statements of Cash Flows - HTML 152K
Duke Energy Ohio
71: R33 Condensed Consolidated Statements of Changes in HTML 77K
Equity - Duke Energy Ohio
72: R34 Condensed Consolidated Statements of Operations HTML 104K
and Comprehensive Income - Duke Energy Indiana
73: R35 Condensed Consolidated Balance Sheets - Duke HTML 175K
Energy Indiana
74: R36 Condensed Consolidated Balance Sheets - Duke HTML 49K
Energy Indiana (Parenthetical)
75: R37 Condensed Consolidated Statements of Cash Flows - HTML 158K
Duke Energy Indiana
76: R38 Condensed Consolidated Statements of Changes in HTML 75K
Equity - Duke Energy Indiana
77: R39 Condensed Consolidated Statements of Operations HTML 106K
and Comprehensive Income - Piedmont
78: R40 Condensed Consolidated Balance Sheets - Piedmont HTML 200K
79: R41 Condensed Consolidated Balance Sheets - Piedmont HTML 56K
(Parenthetical)
80: R42 Condensed Consolidated Statements of Cash Flows - HTML 149K
Duke Energy Piedmont
81: R43 Condensed Consolidated Statements of Changes in HTML 104K
Equity - Piedmont
82: R44 Organization and Basis of Presentation HTML 228K
83: R45 Dispositions HTML 127K
84: R46 Business Segments HTML 244K
85: R47 Regulatory Matters HTML 106K
86: R48 Commitments and Contingencies HTML 81K
87: R49 Debt and Credit Facilities HTML 220K
88: R50 Asset Retirement Obligations HTML 127K
89: R51 Goodwill HTML 52K
90: R52 Related Party Transactions HTML 145K
91: R53 Derivatives and Hedging HTML 634K
92: R54 Investments in Debt and Equity Securities HTML 406K
93: R55 Fair Value Measurements HTML 391K
94: R56 Variable Interest Entities HTML 184K
95: R57 Revenue HTML 557K
96: R58 Stockholders' Equity HTML 102K
97: R59 Employee Benefit Plans HTML 223K
98: R60 Income Taxes HTML 78K
99: R61 Subsequent Events HTML 49K
100: R62 Pay vs Performance Disclosure HTML 60K
101: R63 Insider Trading Arrangements HTML 60K
102: R64 Organization and Basis of Presentation (Policy) HTML 86K
103: R65 Organization and Basis of Presentation (Tables) HTML 221K
104: R66 Dispositions (Tables) HTML 123K
105: R67 Business Segments (Tables) HTML 243K
106: R68 Commitments and Contingencies (Tables) HTML 61K
107: R69 Debt and Credit Facilities (Tables) HTML 212K
108: R70 Asset Retirement Obligations (Tables) HTML 128K
109: R71 Related Party Transactions (Tables) HTML 139K
110: R72 Derivatives and Hedging (Tables) HTML 821K
111: R73 Investments in Debt and Equity Securities (Tables) HTML 688K
112: R74 Fair Value Measurements (Tables) HTML 403K
113: R75 Variable Interest Entities (Tables) HTML 186K
114: R76 Revenue (Tables) HTML 557K
115: R77 Stockholders' Equity (Tables) HTML 96K
116: R78 Employee Benefit Plans (Tables) HTML 243K
117: R79 Income Taxes (Tables) HTML 72K
118: R80 Organization and Basis of Presentation (Schedule HTML 79K
of Cash and Cash Equivalents) (Details)
119: R81 Organization and Basis of Presentation (Schedule HTML 78K
of Inventory) (Details)
120: R82 Organization and Basis of Presentation (Other HTML 52K
Noncurrent Assets) (Details)
121: R83 Organization and Basis of Presentation (Confirmed HTML 78K
Obligations) (Details)
122: R84 Dispositions (Narrative) (Details) HTML 64K
123: R85 Dispositions (Balance Sheet) (Details) HTML 127K
124: R86 Dispositions (Income Statement) (Details) HTML 92K
125: R87 Dispositions (Cash Flow Statement) (Details) HTML 55K
126: R88 Business Segments (Narrative) (Details) HTML 51K
127: R89 Business Segments (Business Segment Data) HTML 140K
(Details)
128: R90 Regulatory Matters (Regulatory Matters Narrative - HTML 62K
Duke Energy Carolinas and Duke Energy Progress)
(Details)
129: R91 Regulatory Matters (Regulatory Matters Narrative - HTML 80K
Duke Energy Carolinas) (Details)
130: R92 Regulatory Matters (Regulatory Matters Narrative - HTML 123K
Duke Energy Progress) (Details)
131: R93 Regulatory Matters (Regulatory Matters Narrative - HTML 157K
Duke Energy Florida) (Details)
132: R94 Regulatory Matters (Regulatory Matters Narrative - HTML 99K
Duke Energy Ohio) (Details)
133: R95 Regulatory Matters (Regulatory Matters Narrative - HTML 108K
Duke Energy Indiana) (Details)
134: R96 Regulatory Matters (Regulatory Matters Narrative - HTML 58K
Piedmont) (Details)
135: R97 Commitments and Contingencies (Schedule of HTML 67K
Environmental Loss Contingencies) (Details)
136: R98 Commitments and Contingencies (Narrative) HTML 76K
(Details)
137: R99 Debt and Credit Facilities (Summary of Debt HTML 157K
Issuances) (Details)
138: R100 Debt and Credit Facilities (Narrative) (Details) HTML 100K
139: R101 Debt and Credit Facilities (Summary of Current HTML 86K
Maturities of Long-term Debt) (Details)
140: R102 Debt and Credit Facilities (Schedule of Line of HTML 85K
Credit Facilities) (Details)
141: R103 Asset Retirement Obligations (ARO by Category) HTML 96K
(Details)
142: R104 Asset Retirement Obligations (ARO Rollforward) HTML 78K
(Details)
143: R105 Goodwill (Details) HTML 71K
144: R106 Related Party Transactions (Other Revenue and HTML 108K
Expense) (Details)
145: R107 Related Party Transactions (Intercompany Income HTML 69K
Taxes) (Details)
146: R108 Derivatives and Hedging (Notional Amounts of HTML 91K
Derivative Instruments) (Details)
147: R109 Derivatives and Hedging (Foreign Exchange Risk) HTML 68K
(Details)
148: R110 Derivatives and Hedging (Location and Fair Value HTML 179K
Amounts of Derivatives Reflected in the Condensed
Consolidated Balance Sheets) (Details)
149: R111 Derivatives and Hedging (Schedule of Offsetting HTML 105K
Assets) (Details)
150: R112 Derivatives and Hedging (Schedule of Offsetting HTML 105K
Liabilities) (Details)
151: R113 Derivatives and Hedging (Derivative Instruments HTML 90K
with Credit-Risk Related Contingent Features and
Cash Collateral) (Details)
152: R114 Investments in Debt and Equity Securities HTML 174K
(Estimated Fair Value of Investments in Debt and
Equity Securities) (Details)
153: R115 Investments in Debt and Equity Securities HTML 69K
(Realized Gains and Losses) (Details)
154: R116 Investments in Debt and Equity Securities HTML 80K
(Maturities) (Details)
155: R117 Fair Value Measurements (Fair Value Measurement HTML 187K
Amounts for Assets and Liabilities) (Details)
156: R118 Fair Value Measurements (Reconciliation of Assets HTML 66K
and Liabilities Measured At Fair Value On A
Recurring Basis Using Unobservable Inputs)
(Details)
157: R119 Fair Value Measurements (Quantitative Level 3 Fair HTML 74K
Value Disclosures) (Details)
158: R120 Fair Value Measurements (Other Fair Value HTML 81K
Disclosure) (Details)
159: R121 Variable Interest Entities (Narrative) (Details) HTML 68K
160: R122 Variable Interest Entities (Schedule of Accounts HTML 73K
Receivable Securitizations) (Details)
161: R123 Variable Interest Entities (Schedule of HTML 103K
Consolidated VIEs) (Details)
162: R124 Variable Interest Entities (Schedule of HTML 99K
Non-Consolidated VIEs) (Details)
163: R125 Variable Interest Entities (Receivables Sold) HTML 63K
(Details)
164: R126 Variable Interest Entities (Sales and Cash Flows) HTML 67K
(Details)
165: R127 Revenue (Remaining Performance Obligations) HTML 112K
(Details)
166: R128 Revenue (Remaining Performance Obligations Total) HTML 59K
(Details)
167: R129 Revenue (Disaggregation of Revenue) (Details) HTML 175K
168: R130 Revenue (Reserve for Credit Losses for Trade and HTML 86K
Other Receivables) (Details)
169: R131 Revenue (Aging of Trade Receivables) (Details) HTML 119K
170: R132 Stockholders' Equity (Earnings Per Share Data) HTML 125K
(Details)
171: R133 Employee Benefit Plans (Plan Contributions) HTML 67K
(Details)
172: R134 Employee Benefit Plans (Components of Net Periodic HTML 101K
Pension Costs) (Details)
173: R135 Income Taxes (Effective Tax Rates) (Details) HTML 66K
174: R136 Income Taxes (Narrative) (Details) HTML 50K
177: XML IDEA XML File -- Filing Summary XML 307K
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of each exchange on
RegistrantTitle of each classTrading symbolswhich
registered
Duke Energy iCommon Stock, $0.001 par valueiDUKiNew York Stock Exchange LLC
Duke Energy i5.625%
Junior Subordinated Debentures due iDUKBiNew York Stock Exchange LLC
September 15, 2078
Duke Energy iDepositary Shares, each representing a 1/1,000th iDUK
PR AiNew York Stock Exchange LLC
interest in a share of 5.75% Series A Cumulative
Redeemable Perpetual Preferred Stock, par value
$0.001 per share
Duke Energy i3.10% Senior Notes due 2028 iDUK
28AiNew York Stock Exchange LLC
Duke Energy i3.85% Senior Notes due 2034 iDUK 34iNew
York Stock Exchange LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Duke
Energy Corporation (Duke Energy)
iYes
☒
No
☐
Duke Energy Florida, LLC (Duke Energy Florida)
iYes
☒
No
☐
Duke
Energy Carolinas, LLC (Duke Energy Carolinas)
iYes
☒
No
☐
Duke Energy Ohio, Inc. (Duke Energy Ohio)
iYes
☒
No
☐
Progress
Energy, Inc. (Progress Energy)
iYes
☒
No
☐
Duke Energy Indiana, LLC (Duke Energy Indiana)
iYes
☒
No
☐
Duke
Energy Progress, LLC (Duke Energy Progress)
iYes
☒
No
☐
Piedmont Natural Gas Company, Inc. (Piedmont)
iYes
☒
No
☐
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Duke
Energy
iYes
☒
No
☐
Duke Energy Florida
iYes
☒
No
☐
Duke
Energy Carolinas
iYes
☒
No
☐
Duke Energy Ohio
iYes
☒
No
☐
Progress
Energy
iYes
☒
No
☐
Duke Energy Indiana
iYes
☒
No
☐
Duke
Energy Progress
iYes
☒
No
☐
Piedmont
iYes
☒
No
☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,”“accelerated filer,”“smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Duke
Energy
iLarge Accelerated Filer
☒
Accelerated filer
☐
Non-accelerated Filer
☐
Smaller reporting company
i☐
Emerging
growth company
i☐
Duke Energy Carolinas
Large Accelerated Filer
☐
Accelerated filer
☐
iNon-accelerated
Filer
☒
Smaller reporting company
i☐
Emerging growth company
i☐
Progress
Energy
Large Accelerated Filer
☐
Accelerated filer
☐
iNon-accelerated Filer
☒
Smaller reporting company
i☐
Emerging
growth company
i☐
Duke Energy Progress
Large Accelerated Filer
☐
Accelerated filer
☐
iNon-accelerated
Filer
☒
Smaller reporting company
i☐
Emerging growth company
i☐
Duke
Energy Florida
Large Accelerated Filer
☐
Accelerated filer
☐
iNon-accelerated Filer
☒
Smaller reporting company
i☐
Emerging
growth company
i☐
Duke Energy Ohio
Large Accelerated Filer
☐
Accelerated filer
☐
iNon-accelerated
Filer
☒
Smaller reporting company
i☐
Emerging growth company
i☐
Duke
Energy Indiana
Large Accelerated Filer
☐
Accelerated filer
☐
iNon-accelerated Filer
☒
Smaller reporting company
i☐
Emerging
growth company
i☐
Piedmont
Large Accelerated Filer
☐
Accelerated filer
☐
iNon-accelerated
Filer
☒
Smaller reporting company
i☐
Emerging growth company
i☐
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Duke
Energy
Yes
i☐
No
☒
Duke Energy Florida
Yes
i☐
No
☒
Duke
Energy Carolinas
Yes
i☐
No
☒
Duke Energy Ohio
Yes
i☐
No
☒
Progress
Energy
Yes
i☐
No
☒
Duke Energy Indiana
Yes
i☐
No
☒
Duke
Energy Progress
Yes
i☐
No
☒
Piedmont
Yes
i☐
No
☒
Number
of shares of common stock outstanding at October 31, 2023:
Registrant
Description
Shares
Duke Energy
Common stock, $0.001 par value
i770,711,728
Duke
Energy Carolinas
All of the registrant's limited liability company member interests are directly owned by Duke Energy.
N/A
Progress Energy
All of the registrant's common stock is directly owned by Duke Energy.
i100
Duke Energy Progress
All of the registrant's
limited liability company member interests are indirectly owned by Duke Energy.
N/A
Duke Energy Florida
All of the registrant's limited liability company member interests are indirectly owned by Duke Energy.
N/A
Duke Energy Ohio
All of the registrant's common stock is indirectly owned by Duke Energy.
i89,663,086
Duke
Energy Indiana
All of the registrant's limited liability company member interests are owned by a Duke Energy subsidiary that is 80.1% indirectly owned by Duke Energy.
N/A
Piedmont
All of the registrant's common stock is directly owned by Duke Energy.
i100
This
combined Form 10-Q is filed separately by eight registrants: Duke Energy, Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont (collectively the Duke Energy Registrants). Information contained herein relating to any individual registrant is filed by such registrant solely on its own behalf. Each registrant makes no representation as to information relating exclusively to the other registrants.
Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont meet the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and are therefore filing this form with the reduced disclosure format specified in General Instructions H(2) of Form 10-Q.
The following terms or acronyms used in this Form 10-Q are defined below:
Term or Acronym
Definition
2021 Settlement
Settlement Agreement in 2021 among Duke Energy Florida, the Florida Office of Public Counsel, the Florida Industrial Power Users Group, White Springs Agricultural Chemicals, Inc. d/b/a PSC Phosphate and NUCOR Steel Florida,
Inc.
AFUDC
Allowance for funds used during construction
ArcLight
ArcLight Capital Partners, LLC
ARM
Annual Review Mechanism
ARO
Asset retirement obligations
Bison
Bison
Insurance Company Limited
Brookfield
Brookfield Renewable Partners L.P.
CEP
Capital Expenditure Program
the Company
Duke Energy Corporation and its subsidiaries
Commercial Renewables Disposal Groups
Commercial Renewables
business segment, excluding the offshore wind contract for Carolina Long Bay, separated into the utility-scale solar and wind group, the distributed generation group and the remaining assets
COVID-19
Coronavirus Disease 2019
CRC
Cinergy Receivables Company, LLC
Crystal River Unit 3
Crystal River Unit 3 Nuclear Plant
DEFR
Duke
Energy Florida Receivables, LLC
DEPR
Duke Energy Progress Receivables, LLC
DERF
Duke Energy Receivables Finance Company, LLC
Duke Energy
Duke Energy Corporation (collectively with its subsidiaries)
Duke Energy Ohio
Duke Energy
Ohio, Inc.
Duke Energy Progress
Duke Energy Progress, LLC
Duke Energy Carolinas
Duke Energy Carolinas, LLC
Duke Energy Florida
Duke Energy Florida, LLC
Duke Energy Indiana
Duke Energy Indiana, LLC
Duke Energy Registrants
Duke
Energy, Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont
EDIT
Excess deferred income tax
EPA
United States Environmental Protection Agency
EPS
Earnings (Loss) Per Share
ERCOT
Electric
Reliability Council of Texas
ETR
Effective tax rate
EU&I
Electric Utilities and Infrastructure
Exchange Act
Securities Exchange Act of 1934
FERC
Federal Energy Regulatory Commission
FPSC
Florida
Public Service Commission
FTR
Financial transmission rights
GAAP
Generally accepted accounting principles in the U.S.
GAAP Reported Earnings
Net Income Available to Duke Energy Corporation Common Stockholders
GAAP Reported EPS
Basic
Earnings Per Share Available to Duke Energy Corporation common stockholders
GIC
GIC Private Limited, Singapore's sovereign wealth fund and an experienced investor in U.S. infrastructure
GU&I
Gas Utilities and Infrastructure
GLOSSARY
OF TERMS
GWh
Gigawatt-hours
HB 951
The Energy Solutions for North Carolina, or House Bill 951, passed in October 2021
IMR
Integrity Management Rider
IRA
Inflation
Reduction Act
IRS
Internal Revenue Service
IURC
Indiana Utility Regulatory Commission
KPSC
Kentucky Public Service Commission
LLC
Limited Liability Company
MGP
Manufactured
gas plant
MGP Settlement
Stipulation and Recommendation filed jointly by Duke Energy Ohio the staff of the PUCO, the Office of the Ohio Consumers' Counsel and the Ohio Energy Group on August 31, 2021
MW
Megawatt
MWh
Megawatt-hour
MYRP
Multiyear
rate plan
NCUC
North Carolina Utilities Commission
NDTF
Nuclear decommissioning trust funds
NPNS
Normal purchase/normal sale
NYSE
The New York Stock Exchange
OCC
Ohio
Consumers' Counsel
OPEB
Other Post-Retirement Benefit Obligations
the Parent
Duke Energy Corporation holding company
PBR
Performance-based regulation
Piedmont
Piedmont Natural Gas Company, Inc.
Progress
Energy
Progress Energy, Inc.
PSCSC
Public Service Commission of South Carolina
PUCO
Public Utilities Commission of Ohio
RTO
Regional Transmission Organization
Subsidiary Registrants
Duke
Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont
TPUC
Tennessee Public Utility Commission
U.S.
United States
VIE
Variable Interest Entity
FORWARD-LOOKING
STATEMENTS
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This document includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are based on management’s beliefs and assumptions and can often be identified by terms and phrases that include “anticipate,”“believe,”“intend,”“estimate,”“expect,”“continue,”“should,”“could,”“may,”“plan,”“project,”“predict,”“will,”“potential,”“forecast,”“target,”“guidance,”“outlook” or other similar terminology. Various factors may cause actual results to be materially different than the suggested outcomes within forward-looking
statements; accordingly, there is no assurance that such results will be realized. These factors include, but are not limited to:
◦The ability to implement our business strategy, including our carbon emission reduction goals;
◦State, federal and foreign legislative and regulatory initiatives, including costs of compliance with existing and future environmental requirements, including those related to climate change, as well as rulings that affect cost and investment recovery or have an impact on rate structures or market prices;
◦The extent and timing of costs and liabilities to comply with federal and state laws, regulations and legal requirements related to coal ash remediation, including amounts for required closure of certain ash impoundments, are
uncertain and difficult to estimate;
◦The ability to recover eligible costs, including amounts associated with coal ash impoundment retirement obligations, asset retirement and construction costs related to carbon emissions reductions, and costs related to significant weather events, and to earn an adequate return on investment through rate case proceedings and the regulatory process;
◦The costs of decommissioning nuclear facilities could prove to be more extensive than amounts estimated and all costs may not be fully recoverable through the regulatory process;
◦The impact of extraordinary external events, such as the pandemic health event resulting from COVID-19, and their collateral consequences, including the disruption of global supply chains or
the economic activity in our service territories;
◦Costs and effects of legal and administrative proceedings, settlements, investigations and claims;
◦Industrial, commercial and residential growth or decline in service territories or customer bases resulting from sustained downturns of the economy, reduced customer usage due to cost pressures from inflation or fuel costs, and the economic health of our service territories or variations in customer usage patterns, including energy efficiency efforts, natural gas building and appliance electrification, and use of alternative energy sources, such as self-generation and distributed generation technologies;
◦Federal and state regulations, laws and other efforts designed to promote and expand the use of energy
efficiency measures, natural gas electrification, and distributed generation technologies, such as private solar and battery storage, in Duke Energy service territories could result in a reduced number of customers, excess generation resources as well as stranded costs;
◦Advancements in technology;
◦Additional competition in electric and natural gas markets and continued industry consolidation;
◦The influence of weather and other natural phenomena on operations, including the economic, operational and other effects of severe storms, hurricanes, droughts, earthquakes and tornadoes, including extreme weather associated with climate change;
◦Changing investor, customer and other
stakeholder expectations and demands including heightened emphasis on environmental, social and governance concerns and costs related thereto;
◦The ability to successfully operate electric generating facilities and deliver electricity to customers including direct or indirect effects to the Company resulting from an incident that affects the United States electric grid or generating resources;
◦Operational interruptions to our natural gas distribution and transmission activities;
◦The availability of adequate interstate pipeline transportation capacity and natural gas supply;
◦The impact on facilities and business from a terrorist or other attack, war, vandalism, cybersecurity
threats, data security breaches, operational events, information technology failures or other catastrophic events, such as fires, explosions, pandemic health events or other similar occurrences;
◦The inherent risks associated with the operation of nuclear facilities, including environmental, health, safety, regulatory and financial risks, including the financial stability of third-party service providers;
◦The timing and extent of changes in commodity prices and interest rates and the ability to recover such costs through the regulatory process, where appropriate, and their impact on liquidity positions and the value of underlying assets;
◦The results of financing efforts, including the ability to obtain financing on favorable terms, which can be affected
by various factors, including credit ratings, interest rate fluctuations, compliance with debt covenants and conditions, an individual utility’s generation mix, and general market and economic conditions;
◦Credit ratings of the Duke Energy Registrants may be different from what is expected;
◦Declines in the market prices of equity and fixed-income securities and resultant cash funding requirements for defined benefit pension plans, other post-retirement benefit plans and nuclear decommissioning trust funds;
FORWARD-LOOKING
STATEMENTS
◦Construction and development risks associated with the completion of the Duke Energy Registrants’ capital investment projects, including risks related to financing, timing and receipt of necessary regulatory approvals, obtaining and complying with terms of permits, meeting construction budgets and schedules and satisfying operating and environmental performance standards, as well as the ability to recover costs from customers in a timely manner, or at all;
◦Changes in rules for regional transmission organizations, including changes in rate designs and new and evolving capacity markets, and risks related to obligations created by the default of other participants;
◦The ability to control
operation and maintenance costs;
◦The level of creditworthiness of counterparties to transactions;
◦The ability to obtain adequate insurance at acceptable costs;
◦Employee workforce factors, including the potential inability to attract and retain key personnel;
◦The ability of subsidiaries to pay dividends or distributions to Duke Energy Corporation holding company (the Parent);
◦The performance of projects undertaken by our nonregulated businesses and the success of efforts to invest in and develop new opportunities, as well as the successful sale of the Commercial Renewables Disposal Groups;
◦The
effect of accounting and reporting pronouncements issued periodically by accounting standard-setting bodies and the SEC;
◦The impact of United States tax legislation to our financial condition, results of operations or cash flows and our credit ratings;
◦The impacts from potential impairments of goodwill or equity method investment carrying values;
◦Asset or business acquisitions and dispositions may not yield the anticipated benefits; and
◦The actions of activist shareholders could disrupt our operations, impact our ability to execute on our business strategy, or cause fluctuations in the trading price of our common stock.
Additional
risks and uncertainties are identified and discussed in the Duke Energy Registrants' reports filed with the SEC and available at the SEC's website at sec.gov. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than described. Forward-looking statements speak only as of the date they are made and the Duke Energy Registrants expressly disclaim any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
FINANCIAL
STATEMENTS
ITEM 1. FINANCIAL STATEMENTS
DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
Three
Months Ended
Nine Months Ended
September 30,
September 30,
(in millions, except per share amounts)
2023
2022
2023
2022
Operating Revenues
Regulated
electric
$
i7,640
$
i7,373
$
i20,140
$
i19,381
Regulated
natural gas
i284
i397
i1,497
i1,824
Nonregulated
electric and other
i70
i72
i211
i212
Total
operating revenues
i7,994
i7,842
i21,848
i21,417
Operating
Expenses
Fuel used in electric generation and purchased power
i2,571
i2,632
i6,987
i6,421
Cost
of natural gas
i57
i189
i434
i859
Operation,
maintenance and other
i1,428
i1,308
i4,113
i4,223
Depreciation
and amortization
i1,353
i1,299
i3,913
i3,793
Property
and other taxes
i394
i368
i1,136
i1,118
Impairment
of assets and other charges
i88
(i4)
i96
i202
Total
operating expenses
i5,891
i5,792
i16,679
i16,616
Gains
on Sales of Other Assets and Other, net
i8
i6
i46
i17
Operating
Income
i2,111
i2,056
i5,215
i4,818
Other
Income and Expenses
Equity in earnings of unconsolidated affiliates
i45
i28
i85
i92
Other
income and expenses, net
i133
i87
i431
i290
Total
other income and expenses
i178
i115
i516
i382
Interest
Expense
i774
i603
i2,221
i1,760
Income
From Continuing Operations Before Income Taxes
i1,515
i1,568
i3,510
i3,440
Income
Tax Expense From Continuing Operations
i42
i158
i316
i297
Income
From Continuing Operations
i1,473
i1,410
i3,194
i3,143
(Loss)
Income From Discontinued Operations, net of tax
(i152)
i3
(i1,316)
(i30)
Net
Income
i1,321
i1,413
i1,878
i3,113
Add:
Net (Income) Loss Attributable to Noncontrolling Interests
(i69)
i9
(i42)
i73
Net
Income Attributable to Duke Energy Corporation
i1,252
i1,422
i1,836
i3,186
Less:
Preferred Dividends
i39
i39
i92
i92
Net
Income Available to Duke Energy Corporation Common Stockholders
$
i1,213
$
i1,383
$
i1,744
$
i3,094
Earnings
Per Share – Basic and Diluted
Income from continuing operations available to Duke Energy Corporation common stockholders
Basic and Diluted
$
ii1.83/
$
ii1.78/
$
ii3.94/
$
ii3.95/
(Loss)
Income from discontinued operations attributable to Duke Energy Corporation common stockholders
Basic and Diluted
$
(ii0.24/)
$
ii0.03/
$
(ii1.67/)
$
ii0.08/
Net
income available to Duke Energy Corporation common stockholders
Basic and Diluted
$
ii1.59/
$
ii1.81/
$
ii2.27/
$
ii4.03/
Weighted
Average Shares Outstanding
Basic and Diluted
ii771/
ii770/
ii771/
ii770/
See
Notes to Condensed Consolidated Financial Statements
9
FINANCIAL STATEMENTS
DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
Three
Months Ended
Nine Months Ended
September 30,
September 30,
(in millions)
2023
2022
2023
2022
Net Income
$
i1,321
$
i1,413
$
i1,878
$
i3,113
Other
Comprehensive Income, net of tax(a)
Pension and OPEB adjustments
(i1)
(i7)
(i1)
(i3)
Net
unrealized gains on cash flow hedges
i200
i14
i206
i276
Reclassification
into earnings from cash flow hedges
i24
—
i28
i9
Net
unrealized gains (losses) on fair value hedges
i15
(i8)
i30
(i20)
Unrealized
(losses) gains on available-for-sale securities
(i6)
i1
(i2)
(i20)
Other
Comprehensive Income, net of tax
i232
—
i261
i242
Comprehensive
Income
i1,553
i1,413
i2,139
i3,355
Add:
Comprehensive (Income) Loss Attributable to Noncontrolling Interests
(i69)
i4
(i42)
i56
Comprehensive
Income Attributable to Duke Energy
i1,484
i1,417
i2,097
i3,411
Less:
Preferred Dividends
i39
i39
i92
i92
Comprehensive
Income Available to Duke Energy Corporation Common Stockholders
$
i1,445
$
i1,378
$
i2,005
$
i3,319
(a)Net
of income tax expense of approximately $i69 million for the three months ended September 30, 2023, and approximately $i78 million and $i72 million
for the nine months ended September 30, 2023, and 2022, respectively. All other periods presented include immaterial income tax impacts.
See Notes to Condensed Consolidated Financial Statements
See
Notes to Condensed Consolidated Financial Statements
42
FINANCIAL STATEMENTS
ORGANIZATION AND BASIS OF PRESENTATION
Index to Combined Notes to Condensed Consolidated Financial Statements
The unaudited notes to the Condensed Consolidated Financial Statements that follow are a combined presentation. The following list indicates the registrants to which the footnotes apply.
Applicable
Notes
Registrant
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
Duke
Energy
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Duke
Energy Carolinas
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Progress
Energy
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Duke
Energy Progress
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Duke
Energy Florida
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Duke
Energy Ohio
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Duke
Energy Indiana
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Piedmont
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Tables
within the notes may not sum across due to (i) Progress Energy's consolidation of Duke Energy Progress, Duke Energy Florida and other subsidiaries that are not registrants and (ii) subsidiaries that are not registrants but included in the consolidated Duke Energy balances.
1. iORGANIZATION AND BASIS OF PRESENTATION
i
BASIS
OF PRESENTATION
These Condensed Consolidated Financial Statements have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, these Condensed Consolidated Financial Statements do not include all information and notes required by GAAP for annual financial statements and should be read in conjunction with the Consolidated Financial Statements in the Duke Energy's Annual Report on Form 10-K for the year ended December 31, 2022.
The information in these combined notes relates to each of the Duke Energy Registrants as noted in the Index to Combined Notes to Condensed Consolidated Financial Statements. However, none of the registrants make any representations as to information related solely to Duke Energy or the subsidiaries of Duke Energy other than
itself.
These Condensed Consolidated Financial Statements, in the opinion of the respective companies’ management, reflect all normal recurring adjustments necessary to fairly present the financial position and results of operations of each of the Duke Energy Registrants. Amounts reported in Duke Energy’s interim Condensed Consolidated Statements of Operations and each of the Subsidiary Registrants’ interim Condensed Consolidated Statements of Operations and Comprehensive Income are not necessarily indicative of amounts expected for the respective annual periods due to effects of seasonal temperature variations on energy consumption, regulatory rulings, timing of maintenance on electric generating units, changes in mark-to-market valuations, changing commodity prices and other factors.
In preparing financial statements that conform to GAAP, management must make estimates and assumptions
that affect the reported amounts of assets and liabilities, the reported amounts of revenues and expenses and the disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.
i
BASIS OF CONSOLIDATION
These Condensed Consolidated Financial Statements include, after eliminating intercompany transactions and balances, the accounts of the Duke Energy Registrants and subsidiaries or VIEs where the respective Duke Energy Registrants have control. See Note 13 for additional information on VIEs. These Condensed
Consolidated Financial Statements also reflect the Duke Energy Registrants’ proportionate share of certain jointly owned generation and transmission facilities.
i
Discontinued Operations
Duke Energy has elected to present cash flows of discontinued operations combined with cash flows of continuing operations. Unless otherwise noted, the notes to these condensed consolidated financial statements exclude amounts related to discontinued operations for all periods presented. For the nine months ended September 30, 2023, and 2022,
the Loss (Income) From Discontinued Operations, net of tax on Duke Energy's Condensed Consolidated Statements of Operations includes amounts related to noncontrolling interests. A portion of Noncontrolling interests on Duke Energy's Condensed Consolidated Balance Sheets relates to discontinued operations for the periods presented. See Note 2 for discussion of discontinued operations related to the Commercial Renewables Disposal Groups.
NONCONTROLLING INTEREST
Duke Energy maintains a controlling financial interest in certain less than wholly owned subsidiaries. As a result, Duke Energy consolidates these subsidiaries and presents the third-party investors' portion of Duke Energy's net income (loss), net assets and comprehensive income (loss) as noncontrolling interest. Noncontrolling interest is included as a component of equity on the Condensed Consolidated Balance Sheets. Operating agreements
of Duke Energy's subsidiaries with noncontrolling interest allocate profit and loss based on their pro rata shares of the ownership interest in the respective subsidiary. Therefore, Duke Energy allocates net income or loss and other comprehensive income or loss of these subsidiaries to the owners based on their pro rata shares.
43
FINANCIAL
STATEMENTS
ORGANIZATION AND BASIS OF PRESENTATION
iCASH, CASH EQUIVALENTS AND RESTRICTED CASH
Duke Energy, Duke Energy Carolinas, Progress Energy, Duke Energy Progress and Duke Energy Florida have restricted cash balances related primarily to collateral assets, escrow deposits and VIEs. See Notes 11 and 13 for additional information. Restricted cash amounts are included in Other within Current Assets and Other Noncurrent Assets on the
Condensed Consolidated Balance Sheets. iThe following table presents the components of cash, cash equivalents and restricted cash included in the Condensed Consolidated Balance Sheets.
(a) Certain
prior year balances have been adjusted for held for sale presentation. See Note 2 for additional information.
INVENTORY
Provisions for inventory write-offs were not material at September 30, 2023, and December 31, 2022. iThe components of inventory are presented in the tables below.
Duke Energy, through a nonregulated subsidiary, was the winner of the Carolina Long Bay offshore wind auction in May 2022 and recorded an asset of $i150 million related to the arrangement in Other within Other noncurrent assets. In November 2022, Duke Energy committed to a plan to sell the Commercial Renewables business segment, excluding the offshore wind contract for Carolina Long Bay, which was moved to the Electric Utilities and Infrastructure (EU&I) segment. See Notes 2 and 3 for further information.
ACCOUNTS PAYABLE
Duke
Energy maintains a supply chain finance program (the “program”) with a global financial institution. The program is voluntary and allows Duke Energy suppliers, at their sole discretion, to sell their receivables from Duke Energy to the financial institution at a rate that leverages Duke Energy’s credit rating and which may result in favorable terms compared to the rate available to the supplier on their own credit rating. Suppliers participating in the program determine at their sole discretion which invoices they will sell to the financial institution. Duke Energy confirms invoices sold by suppliers under the program to the financial institution and pays the financial institution based on commercial terms negotiated between Duke Energy and the supplier regardless of program participation. Suppliers’ decisions on which invoices are sold do not impact Duke Energy’s payment terms. The commercial terms negotiated between Duke Energy and its suppliers are consistent
regardless of whether the supplier elects to participate in the program. Duke Energy does not issue any guarantees with respect to the program and does not participate in negotiations between suppliers and the financial institution. Duke Energy does not have an economic interest in the supplier’s decision to participate in the program and receives no interest, fees or other benefit from the financial institution based on supplier participation in the program.
44
FINANCIAL STATEMENTS
ORGANIZATION AND BASIS OF PRESENTATION
i
The
following table represents the changes in confirmed obligations outstanding for the three and nine months ended September 30, 2023, and 2022.
No new accounting standards were adopted by the Duke Energy Registrants in 2023.
2. iDISPOSITIONS
Sale of Commercial Renewables Segment
In August 2022, Duke Energy announced a strategic review of its commercial renewables business. Since 2007, Duke Energy has built
a portfolio of commercial wind, solar and battery projects across the U.S., and established a development pipeline. Duke Energy has developed a strategy to focus on renewables, grid and other investment opportunities within its regulated operations. In November 2022, Duke Energy committed to a plan to sell the Commercial Renewables business segment, excluding the offshore wind contract for Carolina Long Bay, which was moved to the EU&I segment. In June 2023, Duke Energy announced that it had entered into a purchase and sale agreement with affiliates of Brookfield for the sale of the utility-scale solar and wind group. Duke Energy closed on this transaction on October 25, 2023, for proceeds of $i1.1 billion,
with approximately half of the proceeds received at closing and the remainder due 18 months after closing. In July 2023, Duke Energy announced that it had entered into a purchase and sale agreement with affiliates of ArcLight for the distributed generation group. Duke Energy closed on this transaction on October 4, 2023, and received proceeds of $i243 million. In March 2023, assets for certain projects were removed from the utility-scale solar and wind group and placed in a separate
disposal group. The disposal process for the remaining assets is expected to be completed by early 2024, with net proceeds from the dispositions not anticipated to be material.
Assets Held For Sale and Discontinued Operations
The utility-scale solar and wind group, the distributed generation group and the remaining assets (collectively, Commercial Renewables Disposal Groups) were classified as held for sale and as discontinued operations in the fourth quarter of 2022. Originally debt and the related restricted cash and interest rate swaps were not expected to transfer to a buyer but during the marketing process it was determined they would be included with the sale and were classified as held for sale in March 2023. As a result, adjustments were made to the December 31, 2022, Consolidated Balance Sheet to present debt and the related
restricted cash and interest rate swaps as held for sale. No adjustments were made to the historical activity within the Consolidated Statements of Comprehensive Income, Consolidated Statements of Cash Flows or the Consolidated Statements of Changes in Equity. Unless otherwise noted, the notes to these consolidated financial statements exclude amounts related to discontinued operations for all periods presented.
No interest from corporate level debt was allocated to discontinued operations.
45
FINANCIAL STATEMENTS
DISPOSITIONS
i
The
following table presents the carrying values of the major classes of Assets held for sale and Liabilities associated with assets held for sale included in Duke Energy's Consolidated Balance Sheets.
The following table presents the results of the Commercial Renewables Disposal Groups, which are included in (Loss) Income from Discontinued Operations, net of tax in Duke Energy's Consolidated Statements of Operations.
Three Months Ended
Nine Months Ended
September
30,
September 30,
(in millions)
2023
2022
2023
2022
Operating revenues
$
i103
$
i129
$
i293
$
i372
Operation,
maintenance and other
i93
i85
i270
i248
Depreciation
and amortization(a)
i—
i65
i—
i193
Property
and other taxes
i8
i10
i27
i31
Other
income and expenses, net
(i2)
(i1)
(i9)
(i4)
Interest
expense
i10
i18
i53
i55
Loss
on disposal
i169
i—
i1,603
i—
Loss
before income taxes
(i179)
(i50)
(i1,669)
(i159)
Income
tax benefit
(i27)
(i30)
(i353)
(i106)
Loss
from discontinued operations
$
(i152)
$
(i20)
$
(i1,316)
$
(i53)
Add:
Net (income) loss attributable to noncontrolling interest included in discontinued operations
(i38)
i20
i33
i92
Net
(loss) income from discontinued operations attributable to Duke Energy Corporation
$
(i190)
$
i—
$
(i1,283)
$
i39
(a) Upon
meeting the criteria for assets held for sale, beginning in November 2022 depreciation and amortization expense were ceased.
/
46
FINANCIAL STATEMENTS
DISPOSITIONS
The Commercial Renewables Disposal Groups' held for sale assets reflected pretax impairments of approximately $i1.7 billion
as of December 31, 2022, and an incremental pretax impairment of $i220 million as of March 31, 2023. The final purchase and sale agreements were signed with Brookfield in June 2023 for the utility-scale solar and wind group and with ArcLight in July 2023 for the distributed generation group, and accordingly, in the second quarter of 2023, pretax impairments of approximately $i1.2 billion
were recorded to write-down the carrying amount of property, plant and equipment assets to the estimated fair value of the business, based on the expected selling price less estimated costs to sell. Pretax impairments of $i169 million were recorded in the third quarter of 2023 reflecting closing-related adjustments for the transactions that closed and ongoing assessment of the estimated fair values of the remaining assets held for sale. The impairments were included in (Loss) Income from Discontinued Operations, net of
tax, in Duke Energy's Condensed Consolidated Statements of Operations and Comprehensive Income for the periods presented. The fair value was primarily determined from purchase and sale agreements for the utility scale and distributed generation groups and discounted cash flow analysis for the remainder of the assets. The discounted cash flow model utilized Level 2 and Level 3 inputs. The fair value hierarchy levels are further discussed in Note 12. The impairments for the utility-scale and distributed generation assets were updated based on customary adjustments at closing, and will be updated, if necessary, for any post-closing adjustments. The carrying amounts for the remaining assets will be updated, if necessary, based on final disposition amounts.
Duke Energy has elected not to separately disclose discontinued operations on Duke Energy's Consolidated Statements of Cash Flows. The following table summarizes Duke Energy's
cash flows from discontinued operations related to the Commercial Renewables Disposal Groups.
Nine Months Ended
September 30,
(in millions)
2023
2022
Cash flows provided by (used in):
Operating
activities
$
i545
$
i485
Investing
activities
(i597)
(i223)
Other
Sale-Related Matters
Duke Energy (Parent) and several Duke Energy renewables project companies, located in the ERCOT market, were named in several lawsuits arising out of Texas Storm Uri, which occurred in February 2021. The legal actions related to project companies in this matter transferred to affiliates of Brookfield in conjunction with the transaction closing in October 2023. The plaintiffs have begun to dismiss Duke Energy (parent) from these lawsuits and have represented to the court that they will dismiss Duke Energy (Parent) from all such cases. See Note 5 for more information.
As part of the purchase and sale agreement for the distributed generation group, Duke Energy has agreed to retain certain guarantees, with expiration dates between 2029 through 2034, related to tax equity partners' assets and operations that will be disposed of via sale. Duke Energy has obtained certain
guarantees from the buyers in regards to future performance obligations to assist in limiting Duke Energy's exposure under the retained guarantees. The fair value of the guarantees is immaterial as Duke Energy does not believe conditions are likely for performance under these guarantees.
3. iBUSINESS SEGMENTS
Duke Energy
Due to Duke Energy's commitment in the fourth quarter of 2022 to sell the Commercial
Renewables business segment, Duke Energy's segment structure now includes the following itwo segments: EU&I and GU&I. Prior period information has been recast to conform to the current segment structure. See Note 2 for further information on the Commercial Renewables Disposal Groups.
The EU&I segment primarily includes Duke Energy's regulated electric utilities in the Carolinas, Florida and the Midwest. EU&I also includes Duke Energy's electric transmission infrastructure investments and the offshore wind contract for Carolina Long Bay. Refer to Note 2
for further information.
The GU&I segment includes Piedmont, Duke Energy's natural gas local distribution companies in Ohio and Kentucky and Duke Energy's natural gas storage, midstream pipeline and renewable natural gas investments.
The remainder of Duke Energy’s operations is presented as Other, which is primarily comprised of interest expense on holding company debt, unallocated corporate costs, Duke Energy’s wholly owned captive insurance company, Bison, and Duke Energy's ownership interest in National Methanol Company.
47
FINANCIAL STATEMENTS
BUSINESS
SEGMENTS
i
Business segment information is presented in the following tables. Segment assets presented exclude intercompany assets.
(a)EU&I
includes $i95 million recorded within Impairment of assets and other charges and $i16 million within Operations, maintenance and other on Duke Energy Carolinas'
and Duke Energy Progress' Condensed Consolidated Statement of Operations related primarily to Duke Energy Carolinas' North Carolina rate case settlement and Duke Energy Progress' North Carolina rate case order. See Note 4 for additional information.
(b)Other includes Assets Held for Sale balances related to the Commercial Renewables Disposal Groups. Refer to Note 2 for further information.
(a)EU&I
includes $i95 million recorded within Impairment of assets and other charges and $i16 million within Operations, maintenance and other on Duke Energy Carolinas'
and Duke Energy Progress' Condensed Consolidated Statement of Operations related primarily to Duke Energy Carolinas' North Carolina rate case settlement and Duke Energy Progress' North Carolina rate case order. See Note 4 for additional information.
(b)EU&I includes $i211 million recorded within Impairment of assets and other charges, $i46 million
within Operating revenues and $i20 million within Noncontrolling Interests on the Condensed Consolidated Statements of Operations related to a Duke Energy Indiana Supreme Court ruling. See Note 4 for additional information.
Duke Energy Ohio
Duke Energy Ohio has itwo
reportable segments, EU&I and GU&I. The remainder of Duke Energy Ohio's operations is presented as Other.
The NCUC, PSCSC, FPSC, IURC, PUCO, TPUC and KPSC approve rates for retail electric and natural gas services within their states. The FERC approves rates for electric sales to wholesale customers served under cost-based rates (excluding Ohio and Indiana), as well as sales of transmission service. The FERC also regulates certification and siting of new interstate natural gas pipeline projects.
49
FINANCIAL
STATEMENTS
REGULATORY MATTERS
Duke Energy Carolinas and Duke Energy Progress
Nuclear Station Subsequent License Renewal
On June 7, 2021, Duke Energy Carolinas filed a subsequent license renewal (SLR) application for the Oconee Nuclear Station (ONS) with the U.S. Nuclear Regulatory Commission (NRC) to renew ONS’s operating license for an additional i20 years. The SLR would
extend operations of the facility from i60 to i80 years. The current licenses for units 1 and 2 expire in 2033 and the license for unit 3 expires in 2034. By a Federal Register Notice dated July 28, 2021, the NRC provided a i60-day
comment period for persons whose interest may be affected by the issuance of a subsequent renewed license for ONS to file a request for a hearing and a petition for leave to intervene. On September 27, 2021, Beyond Nuclear and Sierra Club (Petitioners) filed a Hearing Request and Petition to Intervene (Hearing Request) and a Petition for Waiver. The Hearing Request proposed ithree contentions and claimed that Duke Energy Carolinas did not satisfy the National Environmental Policy Act (NEPA) of 1969, as amended,
or the NRC’s NEPA-implementing regulations. Following Duke Energy Carolinas' answer and the Petitioners' reply, on February 11, 2022, the Atomic Safety and Licensing Board (ASLB) issued its decision on the Hearing Request and found that the Petitioners failed to establish that the proposed contentions are litigable. The ASLB also denied the Petitioners' Petition for Waiver and terminated the proceeding.
On February 24, 2022, the NRC issued a decision in the SLR appeal related to Florida Power and Light's Turkey Point nuclear generating station in Florida. The NRC ruled that the NRC’s license renewal Generic Environmental Impact Statement (GEIS) does not apply to SLR because the GEIS does not address SLR. The decision overturned a 2020 NRC decision that found the GEIS applies to SLR. Although Turkey Point is not owned or operated
by a Duke Energy Registrant, the NRC’s order applies to all SLR applicants, including ONS. The NRC order also indicated no subsequent renewed licenses will be issued until the NRC staff has completed an adequate NEPA review for each application. On April 5, 2022, the NRC approved a 24-month rulemaking plan that will enable the NRC staff to complete an adequate NEPA review. Although an SLR applicant may wait until the rulemaking is completed, the NRC also noted that an applicant may submit a supplement to its environmental report providing information on environmental impacts during the SLR period prior to the rulemaking being completed. On November 7, 2022, Duke Energy Carolinas submitted a supplement to its environmental report addressing environmental impacts during the SLR period. On September 14, 2023, the NRC posted
on its website that the issuance of the GEIS will now be issued in August 2024 instead of May 2024 due to the volume and technical complexity of the comments received.
On December 19, 2022, the NRC published a notice in the Federal Register that the NRC will conduct a limited scoping process to gather additional information necessary to prepare an environmental impact statement (EIS) to evaluate the environmental impacts at ONS during the SLR period. The NRC received comments from the EPA and the Petitioners and these comments identify 18 potential impacts that should be considered by the NRC in the EIS, which include, but are not limited to, climate change and flooding, environmental justice, severe accidents, and external events. The NRC has notified Duke Energy Carolinas that the draft EIS will now be issued in January 2024.
On
December 19, 2022, the NRC issued the Safety Evaluation Report (SER) for the safety portion of the SLR application. The NRC determined Duke Energy Carolinas met the requirements of the applicable regulations and identified actions that have been taken or will be taken to manage the effects of aging and address time-limited analyses. Duke Energy Carolinas and the NRC met with the Advisory Committee on Reactor Safeguards (ACRS) on February 2, 2023, to discuss issues regarding the SER and SLR application. On February 25, 2023, the ACRS issued a report to the NRC on the safety aspects of the ONS SLR application, which concluded that the established programs and commitments made by Duke Energy Carolinas to manage age-related degradation provide confidence that ONS can be operated in accordance with its current licensing basis
for the subsequent period of extended operation without undue risk to the health and safety of the public and the SLR application for ONS should be approved.
Although the NRC’s GEIS applicability decision will delay completion of the SLR proceeding, Duke Energy Carolinas does not believe it changes the probability that the ONS subsequent renewed licenses will ultimately be issued, although Duke Energy Carolinas cannot guarantee the outcome of the license application process.
Duke Energy Carolinas and Duke Energy Progress intend to seek renewal of operating licenses and i20-year
license extensions for all of their nuclear stations. New depreciation rates were implemented for all of the nuclear facilities during the second quarter of 2021. Duke Energy Carolinas and Duke Energy Progress cannot predict the outcome of these additional relicensing proceedings.
Duke Energy Carolinas
2023 North Carolina Rate Case
On January 19, 2023, Duke Energy Carolinas filed a PBR application with the NCUC to request an increase in base rate retail revenues. The PBR Application included an MYRP to recover projected capital investments during the three-year MYRP period. In addition to the MYRP, the PBR Application included an Earnings Sharing
Mechanism, Residential Decoupling Mechanism and Performance Incentive Mechanisms (PIMS) as required by HB 951. The application as originally filed requested an overall retail revenue increase of $i501 million in Year 1, $i172 million
in Year 2 and $i150 million in Year 3, for a combined total of $i823 million, or i15.7%,
by early 2026. The rate increase is driven primarily by major transmission and distribution investments since the last rate case and projected in the MYRP, as well as investments in energy storage and solar assets included in the MYRP consistent with the Carolinas Carbon Plan (Carbon Plan). The Public Staff – North Carolina Utilities Commission (Public Staff) and intervenor testimony was filed on July 19, 2023, and Duke Energy Carolinas' rebuttal testimony was filed on August 4, 2023.
On August 22, 2023, Duke Energy Carolinas filed with the NCUC a partial settlement with the Public Staff in connection with its PBR application. The partial settlement includes, among other things, agreement
on a substantial portion of the North Carolina retail rate base for the historic base case of approximately $i19.5 billion and all of the capital projects and related costs to be included in the three-year MYRP, including $i4.6 billion
(North Carolina retail allocation) projected to go in service over the MYRP period. Additionally, the partial settlement includes agreement, with certain adjustments, on depreciation rates, the recovery of grid improvement plan costs and PIMs, Tracking Metrics and the Residential Decoupling Mechanism under the PBR application. On August 28, 2023, Duke Energy Carolinas filed with the NCUC a second partial settlement with the Public Staff resolving additional issues, including the future treatment of nuclear production tax credits related to the Inflation Reduction Act, through a stand-alone rider that will provide the benefits to customers beginning January 1, 2025. As a result of the partial settlements, Duke Energy Carolinas recognized
pretax charges of $i59 million within Impairment of assets and other charges, which primarily related to certain COVID-19 deferred costs, and $i8 million within
Operations, maintenance and other, for the three and nine months ended September 30, 2023, on the Condensed Consolidated Statements of Operations. These partial settlements are subject to the review and approval of the NCUC.
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Remaining items litigated at the evidentiary hearing, which occurred August 28 to September 5, 2023, include ROE, capital structure,
and recovery of the remaining COVID-19 deferred costs. Duke Energy Carolinas implemented interim rates, subject to refund, on September 1, 2023, and has requested permanent rates be effective by January 1, 2024. On October 13, 2023, the Public Staff filed supplemental testimony, and on October 23, 2023, the NCUC ordered the hearing to reconvene on October 30, 2023. Duke Energy Carolinas expects a decision on its application in this case in the fourth quarter of this year. Duke Energy Carolinas cannot predict the outcome of this matter.
Duke
Energy Progress
2022 North Carolina Rate Case
On October 6, 2022, Duke Energy Progress filed a PBR application with the NCUC to request an increase in base rate retail revenues. The rate request before the NCUC included an MYRP to recover projected capital investments during the three-year MYRP period. In addition to the MYRP, the PBR Application included an Earnings Sharing Mechanism, Residential Decoupling Mechanism and PIMs as required by HB 951. The overall retail revenue increase as originally filed would have been $i326 million
in Year 1, $i151 million in Year 2 and $i138 million in Year 3, for a combined total of $i615 million,
by late 2025. The rate increase is driven primarily by major transmission and distribution investments since the last rate case and as projected in the MYRP, as well as investments in energy storage and solar assets included in the MYRP consistent with the Carbon Plan.
On April 26, 2023, Duke Energy Progress filed with the NCUC a partial settlement with Public Staff, which included agreement on many aspects of Duke Energy Progress' three-year MYRP proposal. In May 2023, the Carolina Industrial Group for Fair Utility Rates II (CIGFUR) joined this partial settlement and Public Staff and CIGFUR filed a separate settlement reaching agreement on PIMs, Tracking Metrics and the Residential Decoupling Mechanism under the PBR application.
On August
18, 2023, the NCUC issued an order approving Duke Energy Progress' PBR Application, as modified by the partial settlements and the order, approving of an overall retail revenue increase of $i233 million in Year 1, $i126 million
in Year 2 and $i135 million in Year 3, for a combined total of $i494 million. Key aspects of the order include the approval of North Carolina retail rate
base for the historic base case of approximately $i12.2 billion and capital projects and related costs to be included in the three-year MYRP, including $i3.5 billion (North Carolina retail allocation) projected
to go in service over the MYRP period. The order established an ROE of i9.8% based upon a capital structure of i53% equity and i47%
debt and approved, with certain adjustments, depreciation rates and the recovery of grid improvement plan costs and certain deferred COVID-related costs. Additionally, the Residential Decoupling Mechanism and PIMs were approved as requested under the PBR Application and revised by the partial settlements. As a result of the order, Duke Energy Progress recognized pretax charges of $i28 million within Impairment of assets and other charges, which primarily related to certain COVID-19 deferred costs, and $i8 million
within Operations, maintenance and other, for the three and nine months ended September 30, 2023, on the Condensed Consolidated Statements of Operations. Duke Energy Progress implemented interim rates, subject to refund, on June 1, 2023, and implemented revised Year 1 rates and the residential decoupling on October 1, 2023.
On October 17, 2023, CIGFUR and Haywood Electric Membership Corporation each filed a Notice of Appeal and Exceptions to the Supreme Court of North Carolina. Both parties are appealing certain matters that do not impact the overall revenue requirement in the rate case. Specifically, they are appealing the class subsidy reduction percentage, and CIGFUR is also appealing the Customer Assistance Program and the fuel
cost allocation methodology. CIGFUR also filed with the NCUC a Motion for Reconsideration and Motion for Stay with respect to those issues during the pendency of the appeal. Duke Energy Progress cannot predict the outcome of this matter.
2023 South Carolina Storm Securitization
On May 31, 2023, Duke Energy Progress filed a petition with the PSCSC requesting authorization for the financing of Duke Energy Progress' storm recovery costs in the amount of approximately $i171 million,
through securitization, due to storm recovery activities required as a result of the following storms: Pax, Ulysses, Matthew, Florence, Michael, Dorian, Izzy and Jasper. On September 8, 2023, Duke Energy Progress filed a comprehensive settlement agreement with all parties on all cost recovery issues raised in the storm securitization proceeding.
The evidentiary hearing occurred in early September 2023. On September 20, 2023, the PSCSC approved the comprehensive settlement agreement and on October 13, 2023, the PSCSC issued its financing order. Duke Energy Progress will proceed with structuring, marketing and pricing the storm recovery bonds and then seek PSCSC authorization to issue the bonds in the first half of 2024. Duke Energy Progress cannot predict
the outcome of this matter.
2022 South Carolina Rate Case
On September 1, 2022, Duke Energy Progress filed an application with the PSCSC to request an increase in base rate retail revenues. On January 12, 2023, Duke Energy Progress and the ORS, as well as other consumer, environmental, and industrial intervening parties, filed a comprehensive Agreement and Stipulation of Settlement resolving all issues in the base rate proceeding. The major components of the stipulation include:
•A $i52 million
annual customer rate increase prior to the reduction from the accelerated return to customers of federal unprotected Property, Plant and Equipment related EDIT. After extending the remaining EDIT giveback to customers to 33 months, the net annual retail rate increase is approximately $i36 million.
•ROE of i9.6%
based on a capital structure of i52.43% equity and i47.57% debt.
•Continuation of deferral treatment of coal ash basin closure costs. Supports an amortization period
for remaining coal ash closure costs in this rate case of iseven years. Duke Energy Progress agreed not to seek recovery of approximately $i50 million of deferred coal ash expenditures related to retired sites in this rate case (South
Carolina retail allocation).
•Acceptance of the 2021 Depreciation Study as proposed in this case, as adjusted for certain recommendations from ORS and includes accelerated retirement dates for certain coal units as originally proposed.
•Establishment of a storm reserve to help offset the costs of major storms.
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FINANCIAL STATEMENTS
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The PSCSC held a hearing on January
17, 2023, to consider evidence supporting the stipulation and unanimously voted to approve the comprehensive agreement on February 9, 2023. A final written order was issued on March 8, 2023. New rates went into effect April 1, 2023.
Duke Energy Florida
2021 Settlement Agreement
On January 14, 2021, Duke Energy Florida filed a Settlement Agreement (the “2021 Settlement”) with the FPSC. The parties to the 2021 Settlement include Duke Energy Florida, the Office of Public Counsel (OPC), the Florida Industrial Power Users
Group, White Springs Agricultural Chemicals, Inc. d/b/a PCS Phosphate and NUCOR Steel Florida, Inc. (collectively, the “Parties”).
Pursuant to the 2021 Settlement, the Parties agreed to a base rate stay-out provision that expires year-end 2024; however, Duke Energy Florida is allowed an increase to its base rates of an incremental $i67 million in 2022, $i49 million
in 2023 and $i79 million in 2024, subject to adjustment in the event of tax reform during the years 2021, 2022 and 2023. The Parties also agreed to an ROE band of i8.85% to i10.85%
with a midpoint of i9.85% based on a capital structure of i53% equity and i47%
debt. The ROE band can be increased by i25 basis points if the average 30-year U.S. Treasury rate increases i50 basis points or more over a six-month period in which case the midpoint ROE would rise from i9.85%
to i10.10%. On July 25, 2022, this provision was triggered. Duke Energy Florida filed a petition with the FPSC on August 12, 2022, to increase the ROE effective August 2022 with a base rate increase effective January 1, 2023. The FPSC approved this request on October 4, 2022. The 2021 Settlement Agreement also provided that Duke Energy Florida will be able to retain $i173 million
of the expected Department of Energy (DOE) award from its lawsuit to recover spent nuclear fuel to mitigate customer rates over the term of the 2021 Settlement. Duke Energy Florida is permitted to recognize the $i173 million into earnings through the approved settlement period. Duke Energy Florida settled the DOE lawsuit and received payment of approximately $i180 million
on June 15, 2022, of which the retail portion was approximately $i154 million. The 2021 Settlement authorizes Duke Energy Florida to collect the difference between $i173 million
and the $i154 million retail portion of the amount received through the capacity cost recovery clause. As of September 30, 2023, Duke Energy Florida has recognized $i94 million
into earnings. The remaining $i79 million is expected to be recognized over the remainder of 2023 and 2024, while also remaining within the approved return on equity band.
The 2021 Settlement also contained a provision to recover or flow back the effects of tax law changes. As a result of the IRA enacted on August 16, 2022, Duke Energy Florida is eligible for Production Tax Credits (PTCs) associated with solar facilities placed in service beginning in January 2022. Duke Energy Florida filed a
petition with the FPSC on October 17, 2022, to reduce base rates effective January 1, 2023, by $i56 million to flow back the expected 2023 PTCs and to flow back the expected 2022 PTCs via an adjustment to the capacity cost recovery clause. On December 14, 2022, the FPSC issued an order approving Duke Energy Florida's petition.
In addition to these terms,
the 2021 Settlement contained provisions related to the accelerated depreciation of Crystal River Units 4-5, the approval of approximately $i1 billion in future investments in new cost-effective solar power, the implementation of a new Electric Vehicle Charging Station Program and the deferral and recovery of costs in connection with the implementation of Duke Energy Florida’s Vision Florida program, which explores various emerging non-carbon emitting generation technology, distributed technologies and resiliency projects, among other things. The 2021 Settlement also resolved remaining unrecovered
storm costs for Hurricane Michael and Hurricane Dorian.
On July 1, 2020, Duke Energy Florida petitioned the FPSC for approval of a voluntary solar program. The program consists of i10
new solar generating facilities with combined capacity of approximately i750 MW. The program allows participants to support cost-effective solar development in Florida by paying a subscription fee based on per kilowatt subscriptions and receiving a credit on their bill based on the actual generation associated with their portion of the solar portfolio. The estimated cost of the i10
new solar generation facilities is approximately $i1 billion and the projects are expected to be completed by the end of 2024. This investment will be included in base rates offset by the revenue from the subscription fees and the credits will be included for recovery in the fuel cost recovery clause. The FPSC approved the program in January 2021.
On February 24, 2021, the League of United Latin American Citizens (LULAC) filed a notice of appeal of the
FPSC’s order approving the Clean Energy Connection to the Supreme Court of Florida. The Supreme Court of Florida heard oral arguments in the appeal on February 9, 2022. On May 27, 2022, the Supreme Court of Florida issued an order remanding the case to the FPSC so that the FPSC can amend its order to better address some of the arguments raised by LULAC. On September 23, 2022, the FPSC issued a revised order and submitted it on September 26, 2022, to the Supreme Court of Florida. The Supreme Court of Florida requested that the parties file supplemental briefs regarding the revised order, which were filed February 6, 2023. LULAC has filed a request for Oral Argument on the issues discussed in the supplemental briefs, but the
Court has yet to rule on that request. The FPSC approval order remains in effect pending the outcome of the appeal. Duke Energy Florida cannot predict the outcome of this matter.
Storm Protection Plan
On April 11, 2022, Duke Energy Florida filed a Storm Protection Plan for approval with the FPSC. The plan, which covers investments for the 2023-2032 time frame, reflects approximately $i7 billion
of capital investment in transmission and distribution meant to strengthen its infrastructure, reduce outage times associated with extreme weather events, reduce restoration costs and improve overall service reliability. The evidentiary hearing began on August 2, 2022. On October 4, 2022, the FPSC voted to approve Duke Energy Florida’s plan with one modification to remove the transmission loop radially fed program, representing a reduction of approximately $i80 million
over the i10-year period starting in 2025. On December 9, 2022, the OPC filed a notice of appeal of this order to the Florida Supreme Court. The OPC's initial brief was filed on April 18, 2023. Duke Energy Florida filed its brief on July 17, 2023. The OPC's reply brief was filed on October 16, 2023. The OPC has filed a request for oral argument, but the Florida Supreme Court has yet to rule on that request. Duke Energy Florida
cannot predict the outcome of this matter.
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FINANCIAL STATEMENTS
REGULATORY MATTERS
Hurricanes Ian and Idalia
On September 28, 2022, much of Duke Energy Florida’s service territory was impacted by Hurricane Ian, which caused significant damage resulting in more than i1.1 million
outages. Duke Energy Florida's September 30, 2023, Condensed Consolidated Balance Sheets includes an estimate of approximately $i357 million in regulatory assets related to deferred Hurricane Ian storm costs consistent with the FPSC's storm rule. After depleting any existing storm reserves, which were approximately $i107 million
before Hurricane Ian, Duke Energy Florida is permitted to petition the FPSC for recovery of additional incremental operation and maintenance costs resulting from the storm and to replenish the retail customer storm reserve to approximately $i132 million. Duke Energy Florida filed its petition for cost recovery of various storms, including Hurricane Ian, and replenishment of the storm reserve on January 23, 2023, seeking recovery of $i442 million,
for recovery over 12 months beginning with the first billing cycle in April 2023. On March 7, 2023, the FPSC approved this request for interim recovery, subject to refund, and ordered Duke Energy Florida to file documentation of the total actual storm costs, once known. Duke Energy Florida filed documentation evidencing its total actual storm costs of $i431 million on September 29, 2023.
On August 30, 2023, Hurricane Idalia
made landfall on Florida’s gulf coast, causing damage and impacting more than i200,000 customers across Duke Energy Florida's service territory. Duke Energy Florida's September 30, 2023, Condensed Consolidated Balance Sheets includes an estimate of approximately $i96 million
in regulatory assets related to deferred Hurricane Idalia storm costs consistent with the FPSC's storm rule. On October 16, 2023, Duke Energy Florida requested to combine the $i92 million retail portion of the deferred estimated Hurricane Idalia costs with $i74 million
of costs projected to be collected after December 31, 2023, under the existing approved storm cost recovery and storm surcharge. This $i74 million of costs relates primarily to the approved ongoing replenishment of the storm reserves. Duke Energy Florida is seeking recovery of the total $i166 million
over 12 months beginning with its first billing cycle in January 2024, replacing the previously approved storm cost recovery and storm surcharge. Duke Energy Florida cannot predict the outcome of these matters.
Duke Energy Ohio
Duke Energy Ohio Electric Base Rate Case
Duke Energy Ohio filed with the PUCO an electric distribution base rate case application on October 1, 2021, with supporting testimony filed on October 15, 2021, requesting an increase in electric distribution base rates of approximately $i55 million
and an ROE of i10.3%. On September 19, 2022, Duke Energy Ohio filed a Stipulation and Recommendation with the PUCO, which includes an increase in overall electric distribution base rates of approximately $i23 million
and an ROE of i9.5%. The stipulation is among all but one party to the proceeding. The PUCO issued an order on December 14, 2022, approving the Stipulation without material modification. Rates went into effect on January 3, 2023. The OCC filed an application for rehearing on January 13, 2023, arguing the Stipulation was unreasonable, discriminatory, and denied OCC due process. On February 8, 2023, the
PUCO granted the OCC's application for rehearing for further consideration. Duke Energy Ohio cannot predict the outcome of this matter.
Energy Efficiency Cost Recovery
In response to changes in Ohio law that eliminated Ohio's energy efficiency mandates, the PUCO issued an order on February 26, 2020, directing utilities to wind down their demand-side management programs by September 30, 2020, and to terminate the programs by December 31, 2020. Duke Energy Ohio took the following actions:
•On March 27, 2020, Duke Energy Ohio filed an application for rehearing seeking clarification on the final true
up and reconciliation process after 2020. On November 18, 2020, the PUCO issued an order replacing the cost cap previously imposed upon Duke Energy Ohio with a cap on shared savings recovery. On December 18, 2020, Duke Energy Ohio filed an additional application for rehearing challenging, among other things, the imposition of the cap on shared savings. On January 13, 2021, the application for rehearing was granted for further consideration.
•On October 9, 2020, Duke Energy Ohio filed an application to implement a voluntary energy efficiency program portfolio to commence on January 1, 2021. The application proposed a mechanism for recovery of program costs
and a benefit associated with avoided transmission and distribution costs.
•On November 18, 2020, the PUCO issued an order directing all utilities to set their energy efficiency riders to zero effective January 1, 2021, and to file a separate application for final reconciliation of all energy efficiency costs prior to December 31, 2020. Effective January 1, 2021, Duke Energy Ohio suspended its energy efficiency programs.
•On February 23, 2022, the PUCO issued its Fifth Entry on Rehearing that 1) affirmed its reduction in Duke Energy Ohio's shared savings cap; 2) denied rehearing/clarification regarding lost distribution revenues and shared savings recovery for periods after December 31, 2020; and 3) directed Duke Energy Ohio to submit an updated application with exhibits. On March 25, 2022, Duke Energy Ohio filed its Amended Application consistent with the PUCO's order.
•On March
17, 2023, the Staff of the PUCO submitted its Staff Review and Recommendation. This Staff Report, like prior such reports, recommends certain disallowances related to incentives.
•On March 27, 2023, the PUCO established a procedural schedule. Intervention/comments were filed on April 26, 2023, and Duke Energy Ohio filed reply comments on May 11, 2023.
On August 9, 2023, the PUCO issued its decision approving the Company’s request for recovery and final true up of energy efficiency program costs, lost distribution revenues and performance incentives from calendar years 2018 through 2020, resulting in $i14 million
of Regulated electric revenue on the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2023, and resolving all outstanding issues in these proceedings. Rates were revised effective September 1, 2023.
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FINANCIAL STATEMENTS
REGULATORY MATTERS
Duke Energy Ohio Natural Gas Base Rate Case
Duke Energy Ohio filed with the PUCO a natural
gas base rate case application on June 30, 2022, with supporting testimony filed onJuly 14, 2022, requesting an increase in natural gas base rates of approximately $i49 million and an ROE of i10.3%.
This is an approximate i5.6% average increase in the customer's total bill across all customer classes. The drivers for this case are capital invested since Duke Energy Ohio's last natural gas base rate case in 2012. Duke Energy Ohio is also seeking to adjust the caps on its CEP rider. The report of the Staff of the PUCO was issued on December 21, 2022, recommending an increase in natural gas base rates of $i24 million
to $i36 million, with an equity ratio of i52.32% and an ROE range of i9.03%
to i10.04%. On April 28, 2023, Duke Energy Ohio filed a stipulation with all parties to the case except the OCC. In the stipulation, the parties agreed to approximately $i32 million
in revenue increases with an equity ratio of i52.32% and an ROE of i9.6%, and adjustments to the CEP Rider caps. The stipulation was opposed by the OCC at an evidentiary hearing that concluded on May 24, 2023. Initial briefs were filed June
16, 2023, and reply briefs were filed on July 14, 2023. On November 1, 2023, PUCO issued an order approving the stipulation as filed. New rates went into effect November 1, 2023. Duke Energy Ohio cannot predict the outcome of this matter.
Duke Energy Kentucky Electric Base Rate Case
On December 1, 2022, Duke Energy Kentucky filed a rate case with the KPSC requesting an annualized increase in electric base rates of approximately $i75 million
and an ROE of i10.35%. This is an overall increase in rates of approximately i17.8%. The request for rate increase is driven by capital investments to strengthen the electricity generation and delivery systems along with
adjusted depreciation rates for the East Bend and Woodsdale Combustion Turbine (CT) generation stations. Duke Energy Kentucky is also requesting approval for new programs for the benefit of customers and tariff updates, including a voluntary community-based renewable subscription program and two electric vehicle charging programs. Intervenor testimony was filed March 10, 2023, and rebuttal testimony was filed April 14, 2023. The Kentucky Attorney General recommended an increase of $i31 million
and an ROE of i9.55%. An evidentiary hearing concluded on May 11, 2023, with simultaneous briefs filed June 9, 2023, and replies filed on June 19, 2023. The KPSC issued an order on October 12, 2023, including a $i48 million
increase in base revenues, an ROE of i9.75% for electric base rates and i9.65% for electric riders and an equity ratio of i52.145%.
The Company's request to align the depreciation rates of East Bend with a 2035 retirement date was denied and the KPSC ordered depreciation rates with a 2041 retirement date for the unit. The KPSC did approve the request to align the depreciation rates of Woodsdale CT with a 2040 retirement date and denied the voluntary community-based renewable subscription program and the two electric vehicle charging programs. On November 1, 2023, Duke Energy Kentucky filed for rehearing requesting certain matters be reconsidered by the KPSC. Duke Energy Kentucky cannot predict the outcome of this matter.
Duke Energy Indiana
2019 Indiana Rate Case
On July
2, 2019, Duke Energy Indiana filed a general rate case with the IURC for a rate increase for retail customers of approximately $i395 million. The rebuttal case, filed on December 4, 2019, updated the requested revenue requirement to result in a i15.6%,
or $i396 million, average retail rate increase, including the impacts of the utility receipts tax. On June 29, 2020, the IURC issued an order in the rate case approving a revenue increase of $i146
million before certain adjustments and ratemaking refinements. The order approved Duke Energy Indiana’s requested forecasted rate base of $i10.2 billion as of December 31, 2020, including the Edwardsport Integrated Gasification Combined Cycle (IGCC) Plant. The IURC reduced Duke Energy Indiana’s request by slightly more than $i200
million, when accounting for the utility receipts tax and other adjustments. Approximately i50% of the reduction was due to a prospective change in depreciation and use of regulatory asset for the end-of-life inventory at retired generating plants, approximately i20%
was due to the approved ROE of i9.7% versus the requested ROE of i10.4% and approximately i20%
was related to miscellaneous earnings neutral adjustments. Step one rates were estimated to be approximately i75% of the total and became effective on July 30, 2020. Step two rates estimated to be the remaining i25%
of the total rate increase were approved on July 28, 2021, and implemented in August 2021.
Several groups appealed the IURC order to the Indiana Court of Appeals. The Indiana Court of Appeals affirmed the IURC decision on May 13, 2021. However, upon appeal by the Indiana Office of Utility Consumer Counselor (OUCC) and the Duke Industrial Group on March 10, 2022, the Indiana Supreme Court found that the IURC erred in allowing Duke Energy Indiana to recover coal ash costs incurred before the IURC’s rate case order in June 2020. The Indiana Supreme Court found that allowing Duke Energy Indiana to recover coal ash costs incurred between rate cases that exceeded the amount built into base rates violated the prohibition against retroactive ratemaking. The IURC’s order has been remanded
to the IURC for additional proceedings consistent with the Indiana Supreme Court’s opinion. As a result of the court's opinion, Duke Energy Indiana recognized pretax charges of approximately $i211 million to Impairment of assets and other charges and $i46 million
to Operating revenues in the Condensed Consolidated Statements of Operations for the three months ended March 31, 2022. Duke Energy Indiana filed a request for rehearing with the Supreme Court on April 11, 2022, which the court denied onMay 26, 2022. Duke Energy Indiana filed its testimony in the remand proceeding on August 18, 2022. On February 3, 2023, Duke Energy Indiana filed a settlement agreement reached with the OUCC and Duke Industrial Group, which includes an agreed amount of approximately $i70 million
of refunds to be paid to customers. The IURC approved this settlement agreement in its entirety on April 12, 2023. In June of 2023, Duke Energy Indiana commenced refunding the approximate $i70 million to customers in accordance with the settlement agreement.
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REGULATORY MATTERS
Indiana Coal Ash Recovery Cases
In Duke Energy Indiana’s 2019 rate case, the IURC also opened a subdocket for post-2018 coal ash related expenditures. Duke Energy Indiana filed testimony on April 15, 2020, in the coal ash subdocket requesting recovery for the post-2018 coal ash basin closure costs for plans that have been approved by the Indiana Department of Environmental Management (IDEM) as well as continuing deferral, with carrying costs, on the balance. An evidentiary hearing was held on September 14, 2020. Briefing was completed by mid-September 2021. On November 3, 2021, the IURC issued an order allowing recovery for post-2018
coal ash basin closure costs for the plans that have been approved by IDEM, as well as continuing deferral, with carrying costs, on the balance. The OUCC and the Duke Industrial Group appealed. The Indiana Court of Appeals issued its opinion on February 21, 2023, reversing the IURC's order to the extent that it allowed Duke Energy Indiana to recover federally mandated costs incurred prior to the IURC's November 3, 2021, order. In addition, the court found that any costs incurred pre-petition to determine federally mandated compliance options were not specifically authorized by the statute and should also be disallowed. As a result of the Court's opinion, Duke Energy Indiana recognized a pretax charge of approximately $i175 million
to Impairment of assets and other charges for the year ended December 31, 2022. Duke Energy Indiana filed its proposal to remove from rates certain costs incurred prior to the IURC's November 3, 2021, order date. On September 20, 2023, the commission approved the Company's proposal to remove the costs from its rates and assessed simple interest of the refunds of i4.71%, beginning from when the costs were initially recovered from customers. Duke Energy Indiana also filed
a new petition under the amended version of the federal mandate statute for additional post-2018 coal ash closure costs for the remaining basins not included in the 2020 Indiana Coal Ash Recovery Case. An evidentiary hearing has been scheduled for January 25, 2024. Duke Energy Indiana cannot predict the outcome of this matter.
TDSIC 2.0
On November 23, 2021, Duke Energy Indiana filed for approval of the Transmission, Distribution, Storage Improvement Charge 2.0 investment plan for 2023-2028 (TDSIC 2.0). On June 15, 2022, the IURC approved, without modification, TDSIC 2.0, which includes approximately $i2 billion
in transmission and distribution investments selected to improve customer reliability, harden and improve resiliency of the grid, enable expansion of renewable and distributed energy projects and encourage economic development. In addition, the IURC set up a subdocket to consider the targeted economic development project, which the IURC approved on March 2, 2022. On July 15, 2022, the OUCC filed a notice of appeal to the Indiana Court of Appeals in Duke Energy Indiana’s TDSIC 2.0 proceeding. An appellant brief was filed on October 28, 2022, and Duke Energy Indiana filed its responsive brief on December 28, 2022. The Indiana Court of Appeals issued its opinion on March 9, 2023, affirming the IURC’s order in its entirety. The
Duke Industrial Group filed a petition to transfer to the Indiana Supreme Court. The Indiana Supreme Court granted transfer and held an oral argument on September 28, 2023. Duke Energy Indiana cannot predict the outcome of this matter.
Piedmont
Tennessee Annual Review Mechanism
On October 10, 2022, the TPUC approved Piedmont’s petition to adopt an ARM as allowed by Tennessee law. Under the ARM, Piedmont will adjust rates annually to achieve its allowed i9.80%
ROE over the upcoming year and to true up any variance between its allowed ROE and actual ROE from the prior calendar year. The initial year subject to the true up is 2022, and Piedmont filed the initial rate adjustments request on May 19, 2023, for a total increase of approximately $i42 million and for rates to become effective October 1, 2023. On September 11, 2023, the TPUC approved a settlement between Piedmont
and the Consumer Advocate Division of the Tennessee Attorney General's Office, which provided for recovery of the Historic Base Period Reconciliation cost of service of $i11 million through rider rates and an increase in Piedmont's base rates of $i29 million
for the Annual Base Rate Reset component of the ARM. These amounts result in a total increase of $i40 million with adjusted rates effective October 1, 2023.
5. iCOMMITMENTS
AND CONTINGENCIES
ENVIRONMENTAL
The Duke Energy Registrants are subject to federal, state and local regulations regarding air and water quality, hazardous and solid waste disposal, coal ash and other environmental matters. These regulations can be changed from time to time, imposing new obligations on the Duke Energy Registrants. The following environmental matters impact all Duke Energy Registrants.
Remediation Activities
In addition to AROs recorded as a result of various environmental regulations, the Duke Energy Registrants are responsible for environmental remediation at various sites. These include certain properties that are part of ongoing operations and sites formerly owned or used by Duke Energy entities. These sites are in various stages of investigation, remediation and monitoring.
Managed in conjunction with relevant federal, state and local agencies, remediation activities vary based on site conditions and location, remediation requirements, complexity and sharing of responsibility. If remediation activities involve joint and several liability provisions, strict liability, or cost recovery or contribution actions, the Duke Energy Registrants could potentially be held responsible for environmental impacts caused by other potentially responsible parties and may also benefit from insurance policies or contractual indemnities that cover some or all cleanup costs. iLiabilities are recorded when losses become probable and are reasonably estimable. The
total costs that may be incurred cannot be estimated because the extent of environmental impact, allocation among potentially responsible parties, remediation alternatives and/or regulatory decisions have not yet been determined at all sites. Additional costs associated with remediation activities are likely to be incurred in the future and could be significant. Costs are typically expensed as Operation, maintenance and other on the Condensed Consolidated Statements of Operations unless regulatory recovery of the costs is deemed probable.
55
FINANCIAL STATEMENTS
COMMITMENTS AND CONTINGENCIES
i
The
following table contains information regarding reserves for probable and estimable costs related to the various environmental sites. These reserves are recorded in Other within Other Noncurrent Liabilities on the Condensed Consolidated Balance Sheets.
Additional
losses in excess of recorded reserves that could be incurred for the stages of investigation, remediation and monitoring for environmental sites that have been evaluated at this time are not material.
LITIGATION
Duke Energy
Texas Storm Uri Tort Litigation
Duke Energy (Parent), several Duke Energy renewables project companies, and others in the ERCOT market were named in multiple lawsuits arising out of Texas Storm Uri, which occurred in February 2021. These lawsuits seek recovery for property damages, personal injury and wrongful death allegedly caused by the power outages that plaintiffs claim were the collective failure of generators, transmission and distribution operators (TDUs), retail energy providers, and all others, including
ERCOT. The cases were consolidated into a Texas state court multidistrict litigation (MDL) proceeding for discovery and pre-trial motions. iFive MDL cases were designated as lead cases in which motions to dismiss were filed and all other cases were stayed. On January 28, 2023, the Court denied certain motions including those by the generator defendants and TDUs and granted others. The generators and TDUs filed petitions for Writ of Mandamus to the Texas Court of Appeals seeking to overturn the denials. The
TDUs' petition, filed first, was accepted and oral argument was held on October 23, 2023. The parties await a ruling from the court. The generators’ petition has not yet been set for argument. After the rulings on the motions to dismiss, plaintiffs filed new lawsuits against Duke Energy (Parent), Duke Energy Renewables, LLC, and several Duke Energy renewable entities, which are included in the MDL proceeding and are currently stayed. The plaintiffs have begun to dismiss Duke Energy (Parent) from these lawsuits and have represented to the court that they will dismiss Duke Energy (Parent) from all such cases. Duke Energy cannot predict the outcome of this matter. See Note 2 for more information related to the sale of the Commercial Renewables Disposal Groups.
Duke
Energy Carolinas
Ruben Villano, et al. v. Duke Energy Carolinas, LLC
On June 16, 2021, a group of inine individuals went over a low-head dam adjacent to the Dan River Steam Station in Eden, North Carolina, while water tubing. Emergency personnel rescued ifour
people and ifive others were confirmed deceased. On August 11, 2021, Duke Energy Carolinas was served with the complaint filed in Durham County Superior Court on behalf of ifour
survivors, which was later amended to include all the decedents along with the survivors. The lawsuit alleges that Duke Energy Carolinas knew that the river was used for recreational purposes, did not adequately warn about the dam, and created a dangerous and hidden hazard on the Dan River by building and maintaining the low-head dam. Duke Energy Carolinas reached an agreement that resolved this matter. The resolution, which did not have a material financial impact, was approved by the Durham County Superior Court. The case was dismissed on June 6, 2023.
NTE Carolinas II, LLC Litigation
In November 2017, Duke Energy Carolinas entered into a standard FERC large generator interconnection agreement (LGIA) with NTE Carolinas II, LLC (NTE), a company that proposed to build a combined-cycle natural
gas plant in Rockingham County, North Carolina. On September 6, 2019, Duke Energy Carolinas filed a lawsuit in Mecklenburg County Superior Court against NTE for breach of contract, alleging that NTE's failure to pay benchmark payments for Duke Energy Carolinas' transmission system upgrades required under the interconnection agreement constituted a termination of the interconnection agreement. Duke Energy Carolinas sought a monetary judgment against NTE because NTE failed to make multiple milestone payments. The lawsuit was moved to federal court in North Carolina. NTE filed a motion to dismiss Duke Energy Carolinas’ complaint and brought counterclaims alleging anti-competitive conduct and violations of state and federal statutes. Duke Energy Carolinas filed a motion to dismiss NTE's counterclaims. Both NTE's and Duke Energy Carolinas' motions to dismiss were subsequently denied by the court.
On
May 21, 2020, in response to a NTE petition challenging Duke Energy Carolinas' termination of the LGIA, FERC issued a ruling that 1) it has exclusive jurisdiction to determine whether a transmission provider may terminate a LGIA; 2) FERC approval is required to terminate a conforming LGIA if objected to by the interconnection customer; and 3) Duke Energy may not announce the termination of a conforming LGIA unless FERC has approved the termination. FERC's Office of Enforcement also initiated an investigation of Duke Energy Carolinas into matters pertaining to the LGIA. On April 6, 2023, Duke Energy Carolinas received notice from the FERC Office of Enforcement that they have closed their non-public investigation with no further action recommended.
56
FINANCIAL
STATEMENTS
COMMITMENTS AND CONTINGENCIES
Following completion of discovery, Duke Energy Carolinas filed a motion for summary judgment seeking a ruling in its favor as to some of its affirmative claims against NTE and to all of NTE’s counterclaims. On June 24, 2022, the court issued an order partially granting Duke Energy Carolinas' motion by dismissing NTE's counterclaims that Duke Energy Carolinas engaged in anti-competitive behavior in violation of state and federal statutes. On October 12, 2022, the parties executed a settlement agreement with respect to the remaining breach of contract claims in the litigation and a Stipulation of Dismissal was filed with the court on October 13, 2022. On November
11, 2022, NTE filed its Notice of Appeal to the U.S. Court of Appeals for the Fourth Circuit as to the District Court's summary judgment ruling in Duke Energy Carolinas' favor on NTE's antitrust and unfair competition claims. Briefing on NTE's appeal was completed on June 30, 2023. The oral argument has been scheduled for t December 7, 2023. Duke Energy Carolinas cannot predict the outcome of this matter.
Asbestos-related Injuries and Damages Claims
Duke Energy Carolinas has experienced numerous claims for indemnification and medical cost reimbursement related to asbestos exposure. These claims relate to damages for bodily injuries alleged to have arisen from exposure to or use of asbestos in connection with construction and maintenance activities conducted on its electric generation
plants prior to 1985.
Duke Energy Carolinas has recognized asbestos-related reserves of $i436 million at September 30, 2023, and $i457
million at December 31, 2022. These reserves are classified in Other within Other Noncurrent Liabilities and Other within Current Liabilities on the Condensed Consolidated Balance Sheets. These reserves are based on Duke Energy Carolinas' best estimate for current and future asbestos claims through 2043 and are recorded on an undiscounted basis. In light of the uncertainties inherent in a longer-term forecast, management does not believe they can reasonably estimate the indemnity and medical costs that might be incurred after 2043 related to such potential claims. It is possible Duke Energy Carolinas may incur asbestos liabilities in excess of the recorded reserves.
Duke Energy Carolinas has third-party insurance to cover certain losses related to asbestos-related injuries and damages above an aggregate self-insured retention. Receivables for insurance recoveries were $i572
million at September 30, 2023, and $i595 million at December 31, 2022. These amounts are classified in Other within Other Noncurrent Assets and Receivables within Current Assets on the Condensed Consolidated Balance Sheets. Any future payments up to the policy limit will be reimbursed by the third-party insurance carrier. Duke Energy Carolinas is not aware of any uncertainties regarding the legal sufficiency of insurance claims. Duke Energy Carolinas believes the insurance
recovery asset is probable of recovery as the insurance carrier continues to have a strong financial strength rating.
The reserve for credit losses for insurance receivables is $i9 million and $i12
million for Duke Energy and Duke Energy Carolinas as of September 30, 2023, and December 31, 2022, respectively. The insurance receivable is evaluated based on the risk of default and the historical losses, current conditions and expected conditions around collectability. Management evaluates the risk of default annually based on payment history, credit rating and changes in the risk of default from credit agencies.
Duke Energy Indiana
Coal Ash Insurance Coverage Litigation
In June 2022, Duke Energy Indiana filed a civil action in Indiana Superior Court against various insurance companies seeking declaratory relief with respect to insurance coverage for coal combustion residuals-related expenses and liabilities covered by third-party liability
insurance policies. The insurance policies cover the 1969-1972 and 1984-1985 periods and provide third-party liability insurance for claims and suits alleging property damage, bodily injury and personal injury (or a combination thereof). A trial date has not yet been set. On June 30, 2023, Duke Energy Indiana and Associated Electric and Gas Insurance Services (AEGIS) reached a confidential settlement, the results of which were not material, and as a result, AEGIS was dismissed from the litigation on July 13, 2023. The lawsuit remains pending as to the other insurers, but is stayed until December 31, 2023, to allow for further settlement negotiations. Duke Energy Indiana cannot predict the outcome of this matter.
Other Litigation and Legal
Proceedings
The Duke Energy Registrants are involved in other legal, tax and regulatory proceedings arising in the ordinary course of business, some of which involve significant amounts. The Duke Energy Registrants believe the final disposition of these proceedings will not have a material effect on their results of operations, cash flows or financial position. Reserves are classified on the Condensed Consolidated Balance Sheets in Other within Other Noncurrent Liabilities and Other within Current Liabilities.
OTHER COMMITMENTS AND CONTINGENCIES
General
As part of their normal business, the Duke Energy Registrants are party to various financial guarantees, performance guarantees and other contractual commitments to extend guarantees of credit and other assistance to various subsidiaries, investees
and other third parties. These guarantees involve elements of performance and credit risk, which are not fully recognized on the Condensed Consolidated Balance Sheets and have uncapped maximum potential payments. However, the Duke Energy Registrants do not believe these guarantees will have a material effect on their results of operations, cash flows or financial position.
In addition, the Duke Energy Registrants enter into various fixed-price, noncancelable commitments to purchase or sell power or natural gas, take-or-pay arrangements, transportation, or throughput agreements and other contracts that may or may not be recognized on their respective Condensed Consolidated Balance Sheets. Some of these arrangements may be recognized at fair value on their respective Condensed Consolidated Balance Sheets if such contracts meet the definition of a derivative and the NPNS exception does not apply. In most cases, the Duke Energy
Registrants’ purchase obligation contracts contain provisions for price adjustments, minimum purchase levels and other financial commitments.
6. iDEBT AND CREDIT FACILITIES
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.
57
FINANCIAL
STATEMENTS
DEBT AND CREDIT FACILITIES
SUMMARY OF SIGNIFICANT DEBT ISSUANCES
i
The following table summarizes significant debt issuances (in millions).
(a)See
"Duke Energy (Parent) Convertible Senior Notes"below for additional information.
(b)Proceeds will be used to repay $i45 million of maturities due October 2023, to pay down a portion of short-term debt and for general corporate purposes.
(c)Proceeds were primarily used to repay $i400 million
of maturities due October 2023, to pay down a portion of short-term debt and for general corporate purposes.
(d)Proceeds were used to repay $i1 billion of maturities due March 2023, to pay down a portion of short-term debt and for general company purposes.
(e)Proceeds will be used to repay $i300 million
of maturities due September 2023, to pay down a portion of short-term debt and for general company purposes.
(f)Proceeds will be used to repay $i300 million of maturities due September 2023 and a portion of the $i100 million term
loan due October 2023. Remaining proceeds will be used to repay a portion of short-term debt and for general corporate purposes.
(g)Proceeds were used to repay the $i300 million term loan due October 2023. Remaining proceeds will be used to repay a portion of short-term debt and for general company purposes.
(h)Proceeds were used to pay down a portion of short-term debt and for general company purposes.
(i)Proceeds were used to pay
down a portion of short-term debt and for general company purposes.
/
Duke Energy (Parent) Convertible Senior Notes
In April 2023, Duke Energy (Parent) completed the sale of $i1.7 billion i4.125%
Convertible Senior Notes due April 2026 (convertible notes). The convertible notes are senior unsecured obligations of Duke Energy, and will mature on April 15, 2026, unless earlier converted or repurchased in accordance with their terms. The convertible notes bear interest at a fixed rate of i4.125% per year, payable semiannually in arrears on April 15 and October 15 of each year, beginning on October 15, 2023. Proceeds were used to repay a portion of outstanding commercial paper and for general corporate purposes.
Prior
to the close of business on the business day immediately preceding January 15, 2026, the convertible notes will be convertible at the option of the holders when the following conditions are met:
•during any calendar quarter commencing after the calendar quarter ending on June 30, 2023, (and only during such calendar quarter) if the last reported sale price of Duke Energy common stock for at least i20 trading days (whether or not consecutive) during
a period of i30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to i130% of the
conversion price on each applicable trading day;
•during the ifive consecutive business day period after any i10 consecutive
trading day period (the measurement period) in which the trading price, as defined, per $1,000 principal amount of notes for each trading day of the measurement period was less than i98% of the product of the last reported sale price of Duke Energy common stock and the conversion rate on each such trading day; or
•upon the occurrence of specified corporate events described in the indenture agreement.
58
FINANCIAL
STATEMENTS
DEBT AND CREDIT FACILITIES
On or after January 15, 2026, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders of the convertible notes may convert all or any portion of their convertible notes at their option at any time at the conversion rate then in effect, irrespective of these conditions. Duke Energy will settle conversions of the convertible notes by paying cash up to the aggregate principal amount of the convertible notes to be converted and paying or delivering, as the case may be, cash, shares of Duke Energy's common stock, $i0.001
par value per share, or a combination of cash and shares of its common stock, at its election, in respect of the remainder, if any, of its conversion obligation in excess of the aggregate principal amount of the convertible notes being converted.
The conversion rate for the convertible notes is initially 8.4131 shares of Duke Energy's common stock per $1,000 principal amount of convertible notes. The initial conversion price of the convertible notes represents a premium of approximately i25% over the last reported sale price
of Duke Energy’s common stock on the NYSE on April 3, 2023. The conversion rate and the corresponding conversion price will not be adjusted for any accrued and unpaid interest but will be subject to adjustment in some instances, such as stock splits or share combinations, certain distributions to common stockholders, or tender offers at off-market rates. The changes in the conversion rates are intended to make convertible note holders whole for changes in the fair value of Duke Energy common stock resulting from such events. Duke Energy may not redeem the convertible notes prior to the maturity date.
Duke Energy issued the convertible notes pursuant to an indenture, dated as of April 6, 2023, by and between Duke Energy and The Bank of New York Mellon Trust Company, N.A., as trustee. The terms of the convertible notes include customary
fundamental change provisions that require repayment of the notes with interest upon certain events, such as a stockholder approved plan of liquidation or if Duke Energy's common stock ceases to be listed on the NYSE.
CURRENT MATURITIES OF LONG-TERM DEBT
The following table shows the significant components of Current maturities of long-term debt on the Condensed Consolidated Balance Sheets. The Duke Energy Registrants currently anticipate satisfying these obligations with cash on hand and proceeds from additional borrowings.
(a)Debt has a floating interest rate. In October 2023, Duke Energy Kentucky's $i50 million
two-year term loan facility was increased to $i75 million and it's maturity was extended to April 2024. The term loan was fully drawn at the time of closing with incremental borrowings under the facility used to pay down short-term debt and for general corporate purposes.
(b)Includes finance lease obligations, amortizing debt, tax-exempt bonds with mandatory put options and small bullet maturities.
AVAILABLE CREDIT FACILITIES
Master Credit Facility
In
March 2023, Duke Energy amended its existing Master Credit Facility of $i9 billion to extend the termination date to March 2028. The Duke Energy Registrants, excluding Progress Energy, have borrowing capacity under the Master Credit Facility up to a specified sublimit for each borrower. Duke Energy has the unilateral ability at any time to increase or decrease the borrowing sublimits of each borrower, subject to a maximum sublimit for each borrower. The amount available under the Master Credit Facility has been reduced to backstop issuances of commercial paper, certain
letters of credit and variable-rate demand tax-exempt bonds that may be put to the Duke Energy Registrants at the option of the holder. An amendment in conjunction with the issuance of the Convertible Senior Notes due April 2026 clarifies that payments due as a result of a conversion of a convertible note would not constitute an event of default.
59
FINANCIAL STATEMENTS
DEBT AND CREDIT FACILITIES
i
The
table below includes the current borrowing sublimits and available capacity under these credit facilities.
Available
capacity under the Master Credit Facility
$
i6,065
$
i2,142
$
i940
$
i558
$
i951
$
i452
$
i519
$
i503
(a)Represents
the sublimit of each borrower.
/
(b)Duke Energy issued $i625 million of commercial paper and loaned the proceeds through the money pool to Duke Energy Carolinas, Duke Energy Progress, Duke Energy Ohio and Duke Energy Indiana. The balances are classified as Long-Term Debt Payable to Affiliated Companies on the Condensed Consolidated Balance Sheets.
Other
Credit Facilities
Duke Energy (Parent) Term Loan Facility
In March 2022, Duke Energy (Parent) entered into a Term Loan Credit Agreement (Credit Agreement) with commitments totaling $i1.4 billion maturing March 2024. The maturity date of the Credit Agreement may be extended for up to itwo
years by request of Duke Energy (Parent), upon satisfaction of certain conditions contained in the Credit Agreement. Borrowings under the facility were used to repay amounts drawn under the iThree-Year Revolving Credit Facility and for general corporate purposes, including repayment of a portion of Duke Energy's outstanding commercial paper. The balance is classified as Current maturities of long-term debt on Duke Energy's Condensed Consolidated Balance Sheets.
In March 2023, Duke Energy amended its existing Credit Agreement in conjunction with the issuance of the Convertible Senior Notes due April 2026 to clarify that payments due as a result of a
conversion of a convertible note would not constitute an event of default.
7. iASSET RETIREMENT OBLIGATIONS
The Duke Energy Registrants record AROs when there is a legal obligation to incur retirement costs associated with the retirement of a long-lived asset and the obligation can be reasonably estimated. Actual costs incurred could be materially different from current estimates that form the basis of the recorded AROs.
i
The following table presents the AROs recorded on the Condensed Consolidated Balance Sheets.
(a)Primarily relates to decommissioning nuclear power facilities, closure of ash impoundments, asbestos removal, closure of landfills at fossil generation facilities, retirement of natural gas mains and removal of renewable energy generation assets.
(b)For the nine months ended September 30, 2023, substantially all accretion expense relates to Duke Energy's regulated operations and has been deferred in accordance with regulatory accounting treatment.
(c)Primarily relates to ash impoundment closures and nuclear decommissioning.
(d)The amounts
recorded represent the discounted cash flows for estimated closure costs as evaluated on a site-by-site basis. The decreases primarily relate to lower unit costs associated with basin closure, routine maintenance and beneficiation activities, as well as a reduction in monitoring wells needed.
Asset retirement costs associated with the AROs for operating plants and retired plants are included in Net property, plant and equipment and Regulatory assets within Other Noncurrent Assets, respectively, on the Condensed Consolidated Balance Sheets.
8. iGOODWILL
Duke
Energy
Duke Energy's Goodwill balance of $ii19.3/ billion is allocated $ii17.4/ billion
to EU&I and $ii1.9/ billion to GU&I on Duke Energy's Condensed Consolidated Balance Sheets at September 30, 2023, and December 31, 2022.
There are iino/ accumulated impairment charges.
Duke
Energy Ohio
Duke Energy Ohio's Goodwill balance of $ii920/ million, allocated $ii596/
million to EU&I and $ii324/ million to GU&I, is presented net of accumulated impairment charges of $ii216/
million on the Condensed Consolidated Balance Sheets at September 30, 2023, and December 31, 2022.
Progress Energy
Progress Energy's Goodwill is included in the EU&I segment and there are iino/
accumulated impairment charges.
Piedmont
Piedmont's Goodwill is included in the GU&I segment and there are iino/
accumulated impairment charges.
Impairment Testing
Duke Energy, Progress Energy, Duke Energy Ohio and Piedmont are required to perform an annual goodwill impairment test as of the same date each year and, accordingly, perform their annual impairment testing of goodwill as of August 31. Duke Energy, Progress Energy, Duke Energy Ohio and Piedmont update their test between annual tests if events or circumstances occur that would more likely than not reduce the fair value of a reporting unit below its carrying value. As the fair value for Duke Energy, Progress Energy, Duke Energy Ohio and Piedmont exceeded their respective carrying values at the date of the annual impairment analysis, no goodwill impairment charges were recorded in the third quarter of 2023.
61
FINANCIAL
STATEMENTS
RELATED PARTY TRANSACTIONS
9. iRELATED PARTY TRANSACTIONS
The Subsidiary Registrants engage in related party transactions in accordance with applicable state and federal commission regulations. Refer to the Condensed Consolidated Balance Sheets of the Subsidiary Registrants for balances due to or due from related parties. iMaterial
amounts related to transactions with related parties included on the Condensed Consolidated Statements of Operations and Comprehensive Income are presented in the following table.
Three Months Ended September 30,
Nine Months Ended September 30,
(in
millions)
2023
2022
2023
2022
Duke Energy Carolinas
Corporate governance and shared service expenses(a)
$
i198
$
i193
$
i586
$
i590
Indemnification
coverages(b)
i9
i7
i26
i21
Joint
Dispatch Agreement (JDA) revenue(c)
i5
i16
i26
i54
JDA
expense(c)
i58
i210
i121
i477
Intercompany
natural gas purchases(d)
i5
i5
i14
i14
Progress
Energy
Corporate governance and shared service expenses(a)
$
i172
$
i188
$
i522
$
i568
Indemnification
coverages(b)
i11
i10
i35
i32
JDA
revenue(c)
i58
i210
i121
i477
JDA
expense(c)
i5
i16
i26
i54
Intercompany
natural gas purchases(d)
i19
i19
i56
i57
Duke
Energy Progress
Corporate governance and shared service expenses(a)
$
i103
$
i111
$
i314
$
i338
Indemnification
coverages(b)
i5
i5
i15
i15
JDA
revenue(c)
i58
i210
i121
i477
JDA
expense(c)
i5
i16
i26
i54
Intercompany
natural gas purchases(d)
i19
i19
i56
i57
Duke
Energy Florida
Corporate governance and shared service expenses(a)
$
i69
$
i77
$
i208
$
i230
Indemnification
coverages(b)
i6
i5
i20
i17
Duke
Energy Ohio
Corporate governance and shared service expenses(a)
$
i73
$
i87
$
i222
$
i251
Indemnification
coverages(b)
i1
i2
i4
i4
Duke
Energy Indiana
Corporate governance and shared service expenses(a)
$
i92
$
i115
$
i275
$
i330
Indemnification
coverages(b)
i2
i2
i6
i6
Piedmont
Corporate
governance and shared service expenses(a)
$
i32
$
i37
$
i107
$
i109
Indemnification
coverages(b)
i1
i1
i3
i2
Intercompany
natural gas sales(d)
i24
i24
i70
i71
Natural
gas storage and transportation costs(e)
i6
i6
i18
i17
(a)The
Subsidiary Registrants are charged their proportionate share of corporate governance and other shared services costs, primarily related to human resources, employee benefits, information technology, legal and accounting fees, as well as other third-party costs. These amounts are primarily recorded in Operation, maintenance and other and Impairment of assets and other charges on the Condensed Consolidated Statements of Operations and Comprehensive Income.
(b)The Subsidiary Registrants incur expenses related to certain indemnification coverages through Bison, Duke Energy’s wholly owned captive insurance subsidiary. These expenses are recorded in Operation, maintenance and other on the Condensed Consolidated Statements of Operations and Comprehensive Income.
(c)Duke Energy Carolinas and Duke Energy Progress participate in a JDA, which allows
the collective dispatch of power plants between the service territories to reduce customer rates. Revenues from the sale of power and expenses from the purchase of power pursuant to the JDA are recorded in Operating Revenues and Fuel used in electric generation and purchased power, respectively, on the Condensed Consolidated Statements of Operations and Comprehensive Income.
(d)Piedmont provides long-term natural gas delivery service to certain Duke Energy Carolinas and Duke Energy Progress natural gas-fired generation facilities. Piedmont records the sales in Operating Revenues, and Duke Energy Carolinas and Duke Energy Progress record the related purchases as a component of Fuel used in electric generation and purchased power on their respective Condensed Consolidated Statements of Operations and Comprehensive Income.
(e)Piedmont
has related party transactions as a customer of its equity method investments in Pine Needle LNG Company, LLC, Hardy Storage Company, LLC and Cardinal Pipeline Company, LLC natural gas storage and transportation facilities. These expenses are included in Cost of natural gas on Piedmont's Condensed Consolidated Statements of Operations and Comprehensive Income.
62
FINANCIAL STATEMENTS
RELATED PARTY TRANSACTIONS
In addition to the amounts presented above, the Subsidiary Registrants have other affiliate transactions, including
rental of office space, participation in a money pool arrangement, other operational transactions, such as pipeline lease arrangements, and their proportionate share of certain charged expenses. These transactions of the Subsidiary Registrants are incurred in the ordinary course of business and are eliminated in consolidation.
As discussed in Note 13, certain trade receivables have been sold by Duke Energy Ohio and Duke Energy Indiana to CRC, an affiliate formed by a subsidiary of Duke Energy. The proceeds obtained from the sales of receivables are largely cash but do include a subordinated note from CRC for a portion of the purchase price.
Intercompany Income Taxes
Duke Energy and the Subsidiary Registrants file a consolidated federal income tax return and other state and jurisdictional returns. The Subsidiary Registrants have a tax sharing
agreement with Duke Energy for the allocation of consolidated tax liabilities and benefits. Income taxes recorded represent amounts the Subsidiary Registrants would incur as separate C-Corporations. The following table includes the balance of intercompany income tax receivables and payables for the Subsidiary Registrants.
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. 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.
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 income (loss) for the three and nine months ended September 30, 2023, and 2022, were not material. Duke Energy's interest rate derivatives designated as hedges include 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.
iDuke 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.
63
FINANCIAL STATEMENTS
DERIVATIVES AND HEDGING
i
The
following tables show notional amounts of outstanding derivatives related to interest rate 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.
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 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.
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.
64
FINANCIAL STATEMENTS
DERIVATIVES AND HEDGING
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 other comprehensive income or loss.
The following table shows Duke Energy's outstanding derivatives related to foreign currency risk at September 30, 2023.
Fair
Value Loss(a)
(in millions)
Pay Notional
Receive Notional
Receive
Hedge
Three Months Ended September 30,
Nine Months Ended September 30,
(in millions)
Pay
Rate
(in millions)
Rate
Maturity Date
2023
2022
2023
2022
Fair value hedges
$
i645
i4.75
%
i600
euros
i3.10
%
June
2028
$
(i20)
$
(i41)
$
(i10)
$
(i57)
i537
i5.31
%
i500
euros
i3.85
%
June
2034
(i17)
(i34)
(i9)
(i47)
Total
notional amount
$
i1,182
i1,100
euros
$
(i37)
$
(i75)
$
(i19)
$
(i104)
(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 IN THE CONDENSED CONSOLIDATED BALANCE SHEETS
i
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.
Total
Derivative Liabilities – Commodity Contracts
$
i377
$
i127
$
i66
$
i48
$
i19
$
—
$
i16
$
i168
Interest
Rate Contracts
Not
Designated as Hedging Instruments
Noncurrent
$
i2
$
—
$
—
$
—
$
—
$
i2
$
—
$
—
Total
Derivative Liabilities – Interest Rate Contracts
$
i2
$
—
$
—
$
—
$
—
$
i2
$
—
$
—
Foreign
Currency Contracts
Designated as Hedging Instruments
Current
$
i18
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Noncurrent
i40
—
—
—
—
—
—
—
Total
Derivative Liabilities – Equity Securities Contracts
$
i58
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Total
Derivative Liabilities
$
i437
$
i127
$
i66
$
i48
$
i19
$
i2
$
i16
$
i168
OFFSETTING
ASSETS AND LIABILITIES
ii
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 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.
Net
amounts presented in Current Liabilities: Other
$
i144
$
i81
$
i18
$
—
$
i19
$
—
$
—
$
i27
Noncurrent
Gross
amounts recognized
$
i244
$
i31
$
i30
$
i30
$
—
$
i2
$
—
$
i141
Offset
(i59)
(i29)
(i30)
(i30)
—
—
—
—
Net
amounts presented in Other Noncurrent Liabilities: Other
$
i185
$
i2
$
—
$
—
$
—
$
i2
$
—
$
i141
68
FINANCIAL
STATEMENTS
DERIVATIVES AND HEDGING
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. iThe following tables show information with respect to derivative contracts that are in a net liability position and contain objective credit risk-related payment provisions.
Aggregate fair value of derivatives in a net liability position
$
i141
$
i86
$
i55
$
i48
$
i7
Fair
value of collateral already posted
—
—
—
—
—
Additional cash collateral or letters of credit in the event credit risk-related contingent features were triggered
$
i141
$
i86
$
i55
$
i48
$
i7
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.
11.iINVESTMENTS IN DEBT AND EQUITY SECURITIES
Duke
Energy’s investments in debt and equity securities are primarily comprised of investments held in (i) the NDTF at Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida, (ii) the grantor trusts at Duke Energy Progress, Duke Energy Florida and Duke Energy Indiana related to OPEB plans and (iii) Bison. The Duke Energy Registrants classify investments in debt securities as Available for Sale (AFS) and investments in equity securities as fair value through net income (FV-NI).
For investments in debt securities classified as AFS, the unrealized gains and losses are included in other comprehensive income until realized, at which time they are reported through net income. For investments in equity securities classified as FV-NI, both realized and unrealized gains and losses are reported through net income. Substantially all of Duke Energy’s investments in debt and equity securities qualify for regulatory accounting, and
accordingly, all associated realized and unrealized gains and losses on these investments are deferred as a regulatory asset or liability.
Duke Energy classifies the majority of investments in debt and equity securities as long term, unless otherwise noted.
Investment Trusts
The investments within the Investment Trusts are managed by independent investment managers with discretion to buy, sell and invest pursuant to the guidelines set forth by the investment manager agreements and trust agreements. The Duke Energy Registrants have limited oversight of the day-to-day management of these investments. iAs
a result, the ability to hold investments in unrealized loss positions is outside the control of the Duke Energy Registrants. Accordingly, all unrealized losses associated with debt securities within the Investment Trusts are recognized immediately and deferred to regulatory accounts where appropriate.
Other AFS Securities
Unrealized gains and losses on all other AFS securities are included in other comprehensive income until realized, unless it is determined the carrying value of an investment has a credit loss. The Duke Energy Registrants analyze all investment holdings each reporting period to determine whether a decline in fair value is related to a credit loss. If a credit loss exists, the unrealized credit loss is included in earnings. There were no material credit losses as of September 30, 2023, and December 31,
2022.
Other Investments amounts are recorded in Other within Other Noncurrent Assets on the Condensed Consolidated Balance Sheets.
69
FINANCIAL STATEMENTS
INVESTMENTS IN DEBT AND EQUITY SECURITIES
DUKE ENERGY
ii
The
following table presents the estimated fair value of investments in debt and equity securities; equity investments are classified as FV-NI and debt investments are classified as AFS.
Realized
gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the three and nine months ended September 30, 2023, and 2022, were as follows.
The following table presents the estimated fair value of investments in debt and equity securities; equity investments are classified as FV-NI and debt investments are classified as AFS.
Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the three and nine months ended September 30, 2023, and 2022, were as follows.
The following table presents the estimated fair value of investments in debt and equity securities; equity investments are classified as FV-NI and debt investments are classified as AFS.
Realized
gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the three and nine months ended September 30, 2023, and 2022, were as follows.
The following table presents the estimated fair value of investments in debt and equity securities; equity investments
are classified as FV-NI and debt investments are classified as AFS.
Realized
gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the three and nine months ended September 30, 2023, and 2022, were as follows.
The following table presents the estimated fair value of investments in debt and equity securities; equity investments are classified as FV-NI and debt investments are classified as AFS.
(a)During
the nine months ended September 30, 2023, and the year ended December 31, 2022, Duke Energy Florida received reimbursements from the NDTF for costs related to ongoing decommissioning activity of Crystal River Unit 3.
//
72
FINANCIAL STATEMENTS
INVESTMENTS
IN DEBT AND EQUITY SECURITIES
Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the three and nine months ended September 30, 2023, and 2022, were immaterial.
DUKE
ENERGY INDIANA
ii
The following table presents the estimated fair value of investments in debt and equity securities; equity investments are measured at FV-NI and debt investments are classified as AFS.
Realized
gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the three and nine months ended September 30, 2023, and 2022, were immaterial.
DEBT SECURITY MATURITIES
i
The table below summarizes the maturity date for debt securities.
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.
73
FINANCIAL
STATEMENTS
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 certain 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, foreign currency 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. Also, see Note 8 for further information on the annual impairment test as of August 31, 2023.
DUKE ENERGY
i
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 10. See Note 11 for additional information related to investments by major security type for the Duke Energy Registrants.
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 September 30,
Nine Months Ended September 30,
(in millions)
2023
2022
2023
2022
Balance at beginning of period
$
i41
$
i89
$
i34
$
i24
Purchases,
sales, issuances and settlements:
Purchases
i3
—
i50
i77
Settlements
(i18)
(i21)
(i76)
(i13)
Total
gains (losses) included on the Condensed Consolidated Balance Sheet
i4
(i8)
i22
(i28)
Balance
at end of period
$
i30
$
i60
$
i30
$
i60
/
DUKE
ENERGY CAROLINAS
i
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets.
The following table provides recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets.
The following table provides recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets.
The following table provides recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets.
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, 2023, and December 31, 2022.
DUKE ENERGY INDIANA
i
The following table provides recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed
Consolidated Balance Sheets.
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)
2023
2022
2023
2022
Balance at beginning of period
$
i37
$
i84
$
i29
$
i22
Purchases,
sales, issuances and settlements:
Purchases
—
—
i42
i74
Settlements
(i14)
(i20)
(i70)
(i10)
Total
gains (losses) included on the Condensed Consolidated Balance Sheet
i4
(i8)
i26
(i30)
Balance
at end of period
$
i27
$
i56
$
i27
$
i56
/
PIEDMONT
i
The
following table provides recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets.
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.
(a)Book
value of long-term debt includes $i1.1 billion and $i1.2 billion at September 30, 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 September 30, 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.
13. iVARIABLE
INTEREST ENTITIES
CONSOLIDATED VIEs
The obligations of the consolidated VIEs discussed in the following paragraphs are nonrecourse to the Duke Energy Registrants. The registrants have no requirement to provide liquidity to, purchase assets of or guarantee performance of these VIEs unless noted in the following paragraphs.
iNo financial support was provided to any of the consolidated VIEs during the nine months ended September 30,
2023, and the year ended December 31, 2022, or is expected to be provided in the future that was not previously contractually required.
Receivables Financing – DERF/DEPR/DEFR
DERF, DEPR and DEFR are bankruptcy remote, special purpose subsidiaries of Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida, respectively. DERF, DEPR and DEFR are wholly owned LLCs with separate legal existence from their parent companies, and their assets are not generally available to creditors of their parent companies. On a revolving basis, DERF, DEPR and DEFR buy certain accounts receivable arising from the sale of electricity and related services from their parent companies.
DERF, DEPR and DEFR borrow amounts under credit facilities to buy these receivables. Borrowing availability from the
credit facilities is limited to the amount of qualified receivables purchased, which generally exclude receivables past due more than a predetermined number of days and reserves for expected past-due balances. The sole source of funds to satisfy the related debt obligations is cash collections from the receivables. Amounts borrowed under the DERF and DEPR credit facilities are reflected on the Condensed Consolidated Balance Sheets as Long-Term Debt. Amounts borrowed under the DEFR credit facility are reflected on the Condensed Consolidated Balance Sheets as Current maturities of long-term debt.
The most significant activity that impacts the economic performance of DERF, DEPR and DEFR are the decisions made to manage delinquent receivables. Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida are considered the primary beneficiaries and consolidate DERF, DEPR and DEFR, respectively, as they make those decisions.
Receivables Financing – CRC
CRC is a bankruptcy remote, special purpose entity indirectly owned by Duke Energy. On a revolving basis, CRC buys certain accounts receivable arising from the sale of electricity, natural gas and related services from Duke Energy Ohio and Duke Energy Indiana. CRC borrows amounts under a credit facility to buy the receivables from Duke Energy Ohio and Duke Energy Indiana. Borrowing availability from the credit facility is limited to the amount of qualified receivables sold to CRC, which generally exclude receivables past due more than a predetermined number of days and reserves for expected past-due balances. The sole source of funds to satisfy the related debt obligation is cash collections from the receivables. Amounts borrowed under the credit facility are reflected on Duke Energy's Condensed Consolidated Balance Sheets as Long-Term Debt.
The
proceeds Duke Energy Ohio and Duke Energy Indiana receive from the sale of receivables to CRC are approximately i75% cash and i25% in the form of a subordinated note from CRC. The subordinated note is a retained interest in the receivables sold. Depending on collection experience, additional equity infusions to
CRC may be required by Duke Energy to maintain a minimum equity balance of $i3 million.
78
FINANCIAL STATEMENTS
VARIABLE INTEREST ENTITIES
CRC
is considered a VIE because (i) equity capitalization is insufficient to support its operations, (ii) power to direct the activities that most significantly impact the economic performance of the entity is not held by the equity holder and (iii) deficiencies in net worth of CRC are funded by Duke Energy. The most significant activities that impact the economic performance of CRC are decisions made to manage delinquent receivables. Duke Energy is considered the primary beneficiary and consolidates CRC as it makes these decisions. Neither Duke Energy Ohio nor Duke Energy Indiana consolidate CRC.
Receivables Financing – Credit Facilities
i
The
following table summarizes the amounts and expiration dates of the credit facilities and associated restricted receivables described above.
Nuclear
Asset-Recovery Bonds – Duke Energy Florida Project Finance
Duke Energy Florida Project Finance, LLC (DEFPF) is a bankruptcy remote, wholly owned special purpose subsidiary of Duke Energy Florida. DEFPF was formed in 2016 for the sole purpose of issuing nuclear asset-recovery bonds to finance Duke Energy Florida's unrecovered regulatory asset related to Crystal River Unit 3.
In 2016, DEFPF issued senior secured bonds and used the proceeds to acquire nuclear asset-recovery property from Duke Energy Florida. The nuclear asset-recovery property acquired includes the right to impose, bill, collect and adjust a non-bypassable nuclear asset-recovery charge from all Duke Energy Florida retail customers until the bonds are paid in full and all financing costs have been recovered. The nuclear asset-recovery bonds are secured by the nuclear asset-recovery property and cash collections from the
nuclear asset-recovery charges are the sole source of funds to satisfy the debt obligation. The bondholders have no recourse to Duke Energy Florida.
DEFPF is considered a VIE primarily because the equity capitalization is insufficient to support its operations. Duke Energy Florida has the power to direct the significant activities of the VIE as described above and therefore Duke Energy Florida is considered the primary beneficiary and consolidates DEFPF.
i
The following table summarizes the impact of DEFPF on Duke Energy Florida's Condensed Consolidated Balance Sheets.
Storm
Recovery Bonds – Duke Energy Carolinas NC Storm Funding and Duke Energy Progress NC Storm Funding
Duke Energy Carolinas NC Storm Funding, LLC (DECNCSF) and Duke Energy Progress NC Storm Funding, LLC (DEPNCSF) are bankruptcy remote, wholly owned special purpose subsidiaries of Duke Energy Carolinas and Duke Energy Progress, respectively. These entities were formed in 2021 for the sole purpose of issuing storm recovery bonds to finance certain of Duke Energy Carolinas’ and Duke Energy Progress’ unrecovered regulatory assets related to storm costs.
In November 2021, DECNCSF and DEPNCSF issued $i237 million
and $i770 million of senior secured bonds, respectively and used the proceeds to acquire storm recovery property from Duke Energy Carolinas and Duke Energy Progress. The storm recovery property was created by state legislation and NCUC financing orders for the purpose of financing storm costs incurred in 2018 and 2019. The storm recovery property acquired includes the right to impose, bill, collect and adjust a non-bypassable charge from all Duke Energy Carolinas’ and Duke Energy Progress’ retail customers until the bonds are paid in full and all financing costs have been recovered.
The storm recovery bonds are secured by the storm recovery property and cash collections from the storm recovery charges are the sole source of funds to satisfy the debt obligation. The bondholders have no recourse to Duke Energy Carolinas or Duke Energy Progress.
DECNCSF and DEPNCSF are considered VIEs primarily because the equity capitalization is insufficient to support their operations. Duke Energy Carolinas and Duke Energy Progress have the power to direct the significant activities of the VIEs as described above and therefore Duke Energy Carolinas and Duke Energy Progress are considered the primary beneficiaries and consolidate DECNCSF and DEPNCSF, respectively.
79
FINANCIAL
STATEMENTS
VARIABLE INTEREST ENTITIES
i
The following table summarizes the impact of these VIEs on Duke Energy Carolinas’ and Duke Energy Progress’ Consolidated Balance Sheets.
Investments
in equity method unconsolidated affiliates
i43
—
—
Other noncurrent assets
i45
—
—
Total
assets
$
i88
$
i198
$
i317
Other
current liabilities
i59
—
—
Other
noncurrent liabilities
i47
—
—
Total liabilities
$
i106
$
—
$
—
Net
(liabilities) assets
$
(i18)
$
i198
$
i317
/
The
Duke Energy Registrants are not aware of any situations where the maximum exposure to loss significantly exceeds the carrying values shown above.
Natural Gas Investments
Duke Energy has investments in various joint ventures including pipeline and renewable natural gas projects. These entities are considered VIEs due to having insufficient equity to finance their own activities without subordinated financial support. Duke Energy does not have the power to direct the activities that most significantly impact the economic performance, the obligation to absorb losses or the right to receive benefits of these VIEs and therefore does not consolidate these entities.
CRC
See discussion under Consolidated VIEs for additional information related to CRC.
Amounts included
in Receivables from affiliated companies in the above table for Duke Energy Ohio and Duke Energy Indiana reflect their retained interest in receivables sold to CRC. These subordinated notes held by Duke Energy Ohio and Duke Energy Indiana are stated at fair value.
80
FINANCIAL STATEMENTS
VARIABLE INTEREST ENTITIES
i
The
following table shows the gross and net receivables sold.
The
following table shows sales and cash flows related to receivables sold.
Duke
Energy Ohio
Duke Energy Indiana
Nine Months Ended
Nine Months Ended
September 30,
September 30,
(in millions)
2023
2022
2023
2022
Sales
Receivables
sold
$
i1,973
$
i1,869
$
i2,453
$
i2,646
Loss
recognized on sale
i25
i11
i29
i15
Cash
flows
Cash proceeds from receivables sold
$
i2,024
$
i1,757
$
i2,580
$
i2,465
Collection
fees received
i1
i1
i1
i1
Return
received on retained interests
i15
i6
i19
i9
/
Cash
flows from sales of receivables are reflected within Cash Flows From Operating Activities and Cash Flows from Investing Activities on Duke Energy Ohio’s and Duke Energy Indiana’s Condensed Consolidated Statements of Cash Flows.
14. iREVENUE
iDuke
Energy earns substantially all of its revenues through its reportable segments, EU&I and GU&I.
Electric Utilities and Infrastructure
EU&I earns the majority of its revenues through retail and wholesale electric service through the generation, transmission, distribution and sale of electricity. Duke Energy generally provides retail and wholesale electric service customers with their full electric load requirements or with supplemental load requirements when the customer has other sources of electricity.
The majority of wholesale revenues are full requirements contracts where the customers purchase the substantial majority of their energy needs and do not have a fixed quantity of contractually required energy or capacity. As such, related forecasted revenues are considered optional purchases. iSupplemental
requirements contracts that include contracted blocks of energy and capacity at contractually fixed prices have the following estimated remaining performance obligations:
Remaining Performance Obligations
(in millions)
2023
2024
2025
2026
2027
Thereafter
Total
Progress
Energy
$
i15
$
i70
$
i7
$
i7
$
i7
$
i36
$
i142
Duke
Energy Progress
i2
i8
—
—
—
—
i10
Duke
Energy Florida
i13
i62
i7
i7
i7
i36
i132
Duke
Energy Indiana
i4
i16
i17
i15
i7
i5
i64
Revenues
for block sales are recognized monthly as energy is delivered and stand-ready service is provided, consistent with invoiced amounts and unbilled estimates.
Gas Utilities and Infrastructure
GU&I earns its revenue through retail and wholesale natural gas service through the transportation, distribution and sale of natural gas. Duke Energy generally provides retail and wholesale natural gas service customers with all natural gas load requirements. Additionally, while natural gas can be stored, substantially all natural gas provided by Duke Energy is consumed by customers simultaneously with receipt of delivery.
Fixed-capacity payments under long-term contracts for the GU&I segment include minimum margin contracts and supply arrangements with municipalities and power generation facilities. Revenues for related sales are recognized monthly
as natural gas is delivered and stand-ready service is provided, consistent with invoiced amounts and unbilled estimates. Estimated remaining performance obligations are as follows:
Remaining Performance Obligations
(in millions)
2023
2024
2025
2026
2027
Thereafter
Total
Piedmont
$
i17
$
i62
$
i61
$
i51
$
i49
$
i241
$
i481
81
FINANCIAL
STATEMENTS
REVENUE
Other
The remainder of Duke Energy’s operations is presented as Other, which does not include material revenues from contracts with customers.
Total
Electric Utilities and Infrastructure revenue from contracts with customers
$
i7,435
$
i2,184
$
i3,869
$
i1,967
$
i1,902
$
i508
$
i1,081
$
—
Gas
Utilities and Infrastructure
Residential
$
i167
$
—
$
—
$
—
$
—
$
i88
$
—
$
i79
Commercial
i108
—
—
—
—
i26
—
i82
Industrial
i34
—
—
—
—
i4
—
i30
Power
Generation
—
—
—
—
—
—
—
i24
Other
revenues
i103
—
—
—
—
i4
—
i83
Total
Gas Utilities and Infrastructure revenue from contracts with customers
$
i412
$
—
$
—
$
—
$
—
$
i122
$
—
$
i298
Other
Revenue
from contracts with customers
$
i6
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Total
revenue from contracts with customers
$
i7,853
$
i2,184
$
i3,869
$
i1,967
$
i1,902
$
i630
$
i1,081
$
i298
Other
revenue sources(a)
$
(i11)
$
(i9)
$
i12
$
i2
$
i5
$
(i2)
$
i14
$
i8
Total
revenues
$
i7,842
$
i2,175
$
i3,881
$
i1,969
$
i1,907
$
i628
$
i1,095
$
i306
(a)Other
revenue sources include revenues from leases, derivatives and alternative revenue programs that are not considered revenues from contracts with customers. Alternative revenue programs in certain jurisdictions include regulatory mechanisms that periodically adjust for over or under collection of related revenues.
Total
Electric Utilities and Infrastructure revenue from contracts with customers
$
i20,072
$
i6,116
$
i10,211
$
i4,836
$
i5,375
$
i1,382
$
i2,559
$
—
Gas
Utilities and Infrastructure
Residential
$
i838
$
—
$
—
$
—
$
—
$
i317
$
—
$
i522
Commercial
i421
—
—
—
—
i113
—
i309
Industrial
i103
—
—
—
—
i19
—
i84
Power
Generation
—
—
—
—
—
—
—
i69
Other
revenues
i93
—
—
—
—
i15
—
i32
Total
Gas Utilities and Infrastructure revenue from contracts with customers
$
i1,455
$
—
$
—
$
—
$
—
$
i464
$
—
$
i1,016
Other
Revenue
from contracts with customers
$
i24
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Total
Revenue from contracts with customers
$
i21,551
$
i6,116
$
i10,211
$
i4,836
$
i5,375
$
i1,846
$
i2,559
$
i1,016
Other
revenue sources(a)
$
i297
$
i39
$
i104
$
i8
$
i81
$
i29
$
i47
$
i103
Total
revenues
$
i21,848
$
i6,155
$
i10,315
$
i4,844
$
i5,456
$
i1,875
$
i2,606
$
i1,119
(a)Other
revenue sources include revenues from leases, derivatives and alternative revenue programs that are not considered revenues from contracts with customers. Alternative revenue programs in certain jurisdictions include regulatory mechanisms that periodically adjust for over or under collection of related revenues.
Total
Electric Utilities and Infrastructure revenue from contracts with customers
$
i19,503
$
i5,852
$
i10,054
$
i5,173
$
i4,881
$
i1,309
$
i2,780
$
—
Gas
Utilities and Infrastructure
Residential
$
i936
$
—
$
—
$
—
$
—
$
i331
$
—
$
i605
Commercial
i504
—
—
—
—
i128
—
i376
Industrial
i125
—
—
—
—
i17
—
i108
Power
Generation
—
—
—
—
—
—
—
i71
Other
revenues
i284
—
—
—
—
i16
—
i220
Total
Gas Utilities and Infrastructure revenue from contracts with customers
$
i1,849
$
—
$
—
$
—
$
—
$
i492
$
—
$
i1,380
Other
Revenue
from contracts with customers
$
i21
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Total
Revenue from contracts with customers
$
i21,373
$
i5,852
$
i10,054
$
i5,173
$
i4,881
$
i1,801
$
i2,780
$
i1,380
Other
revenue sources(a)
$
i44
$
(i8)
$
i33
$
i9
$
i9
$
i10
$
i55
$
i41
Total
revenues
$
i21,417
$
i5,844
$
i10,087
$
i5,182
$
i4,890
$
i1,811
$
i2,835
$
i1,421
(a)Other
revenue sources include revenues from leases, derivatives and alternative revenue programs that are not considered revenues from contracts with customers. Alternative revenue programs in certain jurisdictions include regulatory mechanisms that periodically adjust for over or under collection of related revenues.
85
FINANCIAL STATEMENTS
REVENUE
i
The
following table presents the reserve for credit losses for trade and other receivables.
Trade
and other receivables are evaluated based on an estimate of the risk of loss over the life of the receivable and current and historical conditions using supportable assumptions. Management evaluates the risk of loss for trade and other receivables by comparing the historical write-off amounts to total revenue over a specified period. Historical loss rates are adjusted due to the impact of current conditions, as well as forecasted conditions over a reasonable time period. The calculated write-off rate can be applied to the receivable balance for which an established reserve does not already exist. Management reviews the assumptions and risk of loss periodically for trade and other receivables.
i
The
aging of trade receivables is presented in the table below.
(a)Unbilled
revenues are recognized by applying customer billing rates to the estimated volumes of energy or natural gas delivered but not yet billed and are included within Receivables and Receivables of VIEs on the Condensed Consolidated Balance Sheets.
(b)Duke Energy Ohio and Duke Energy Indiana sell, on a revolving basis, nearly all of their retail accounts receivable, including receivables for unbilled revenues, to an affiliate, CRC, and account for the transfers of receivables as sales. Accordingly, the receivables sold are not reflected on the Condensed Consolidated Balance Sheets of Duke Energy Ohio and Duke Energy Indiana. See Note 13 for further information. These receivables for unbilled revenues are $i95
million and $i156 million for Duke Energy Ohio and Duke Energy Indiana, respectively, as of September 30, 2023, and $i148 million and $i260 million
for Duke Energy Ohio and Duke Energy Indiana, respectively, as of December 31, 2022.
(c)Due to ongoing financial hardships impacting customers, Duke Energy has permitted customers to defer payment of past-due amounts through installment payment plans.
15. iSTOCKHOLDERS' EQUITY
iBasic
EPS is computed by dividing net income available to Duke Energy common stockholders, as adjusted for distributed and undistributed earnings allocated to participating securities and accumulated preferred dividends, by the weighted average number of common shares outstanding during the period. Diluted EPS is computed by dividing net income available to Duke Energy common stockholders, as adjusted for distributed and undistributed earnings allocated to participating securities and accumulated preferred dividends, by the diluted weighted average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution that could occur if securities or other agreements to issue common stock, such as equity forward sale agreements or convertible debt, were exercised or settled. Duke Energy applies the if-converted method for calculating any potential dilutive effect of the conversion of the outstanding convertible notes on diluted EPS, if applicable.
Duke Energy’s participating securities are restricted stock units that are entitled to dividends declared on Duke Energy common stock during the restricted stock unit’s vesting periods. Dividends declared on preferred stock are recorded on the Condensed Consolidated Statements of Operations as a reduction of net income to arrive at net income available to Duke Energy common stockholders. Dividends accumulated on preferred stock are an adjustment to net income used in the calculation of basic and diluted EPS.
87
FINANCIAL STATEMENTS
STOCKHOLDERS' EQUITY
i
The
following table presents Duke Energy’s basic and diluted EPS calculations, the weighted average number of common shares outstanding and common and preferred share dividends declared.
Three Months Ended September 30,
Nine Months Ended September 30,
(in
millions, except per share amounts)
2023
2022
2023
2022
Net Income available to Duke Energy common stockholders
$
i1,213
$
i1,383
$
i1,744
$
i3,094
Less:
(Loss) Income from discontinued operations attributable to Duke Energy common stockholders
(i190)
i23
(i1,283)
i62
Accumulated
preferred stock dividends adjustment
i12
i12
i12
i12
Less:
Impact of participating securities
i2
i1
i4
i2
Income
from continuing operations available to Duke Energy common stockholders
$
i1,413
$
i1,371
$
i3,035
$
i3,042
(Loss)
Income from discontinued operations, net of tax
$
(i152)
$
i3
$
(i1,316)
$
(i30)
Add:
(Income) Loss attributable to NCI
(i38)
i20
i33
i92
(Loss)
Income from discontinued operations attributable to Duke Energy common stockholders
$
(i190)
$
i23
$
(i1,283)
$
i62
Weighted
average common shares outstanding – basic and diluted
ii771/
ii770/
ii771/
ii770/
EPS
from continuing operations available to Duke Energy common stockholders
Basic and diluted(a)
$
ii1.83/
$
ii1.78/
$
ii3.94/
$
ii3.95/
(Loss)
Earnings Per Share from discontinued operations attributable to Duke Energy common stockholders
Basic and diluted(a)
$
(ii0.24/)
$
ii0.03/
$
(ii1.67/)
$
ii0.08/
Potentially
dilutive items excluded from the calculation(b)
i2
i2
i2
i2
Dividends
declared per common share
$
i1.025
$
i1.005
$
i3.035
$
i2.975
Dividends
declared on Series A preferred stock per depositary share(c)
$
i0.359
$
i0.359
$
i1.078
$
i1.078
Dividends
declared on Series B preferred stock per share(d)
$
i24.375
$
i24.375
$
i48.750
$
i48.750
(a)For
the periods presented subsequent to issuance in April 2023, the convertible notes were excluded from the calculations of diluted EPS because the effect was antidilutive.
(b)Performance stock awards were not included in the dilutive securities calculation because the performance measures related to the awards had not been met.
(c)i5.75% Series A Cumulative Redeemable Perpetual Preferred Stock dividends are payable quarterly in arrears on the 16th day of March, June, September and December.
The preferred stock has a $i25 liquidation preference per depositary share.
(d)i4.875% Series B Fixed-Rate Reset Cumulative Redeemable Perpetual Preferred Stock dividends are payable semiannually in arrears on
the 16th day of March and September. The preferred stock has a $i1,000 liquidation preference per share.
/
16. iEMPLOYEE
BENEFIT PLANS
DEFINED BENEFIT RETIREMENT PLANS
Duke Energy and certain subsidiaries maintain, and the Subsidiary Registrants participate in, qualified and non-qualified, non-contributory defined benefit retirement plans. Duke Energy's policy is to fund amounts on an actuarial basis to provide assets sufficient to meet benefit payments to be paid to plan participants.
i
The following table includes information related to the Duke Energy Registrants' contributions to its qualified defined benefit pension plans.
The
decrease in the ETR for Duke Energy for the three months ended September 30, 2023, was primarily due to benefits associated with ongoing tax efficiency efforts, partially offset by a decrease in the amortization of excess deferred taxes. During the third quarter of 2023, the Company evaluated the deductibility of certain items spanning periods currently open under federal statute, including items related to interest on company-owned life insurance. As a result of this analysis, the Company recorded a favorable adjustment of approximately $i120 million.
The
increase in the ETR for Duke Energy Carolinas for the nine months ended September 30, 2023, was primarily due to a decrease in the amortization of excess deferred taxes.
The decrease in the ETR for Duke Energy Progress for the three months ending September 30, 2023, was primarily due to the amortization of excess deferred taxes in relation to lower pretax income.
The increase in the ETR for Duke Energy Florida for the three months ending September 30, 2023, was primarily due to a decrease in the amortization of excess deferred taxes, partially offset by an increase in production tax credits.
The increase in the ETR for Duke Energy Ohio for the nine months ended September 30,
2023, was primarily due to a decrease in the amortization of excess deferred taxes related to the MGP Settlement recorded in the prior year.
The increase in the ETR for Duke Energy Indiana for the three months ended September 30, 2023, was primarily due to the amortization of excess deferred taxes in relation to higher pretax income.
The increase in the ETR for Duke Energy Indiana for the nine months ended September 30, 2023, was primarily due to the coal ash impairment based on the Indiana Supreme Court Opinion and the associated amortization of excess deferred taxes recorded in the prior year.
The increase in the ETR for Piedmont for the three months ended September
30, 2023, was primarily due to the amortization of excess deferred taxes in relation to lower pretax losses.
The increase in the ETR for Piedmont for the nine months ended September 30, 2023, was primarily due to a decrease in the amortization of excess deferred taxes.
18. iSUBSEQUENT EVENTS
For information on subsequent events related to dispositions, regulatory matters,
commitments and contingencies, and debt and credit facilities, see Notes 2, 4, 5 and 6, respectively.
90
MD&A
DUKE ENERGY
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following combined Management’s Discussion and Analysis of Financial Condition and Results of Operations is separately filed by Duke Energy
and Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont. However, none of the registrants make any representation as to information related solely to Duke Energy or the Subsidiary Registrants of Duke Energy other than itself.
DUKE ENERGY
Duke Energy is an energy company headquartered in Charlotte, North Carolina. Duke Energy operates in the U.S. primarily through its subsidiaries, Duke Energy Carolinas, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont. When discussing Duke Energy’s consolidated financial information, it necessarily includes the results of the Subsidiary Registrants, which along with Duke Energy are collectively referred to
as the Duke Energy Registrants.
Management’s Discussion and Analysis should be read in conjunction with the Condensed Consolidated Financial Statements and Notes for the nine months ended September 30, 2023, and with Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2022.
Executive Overview
Advancing Our Clean Energy Transformation
During the nine months ended September 30, 2023, we continued to execute on our clean energy transformation, delivering strong, sustainable value for shareholders, customers, communities and employees.
•In November 2022, the Duke Energy
Board of Directors approved pursuing the sale of the Commercial Renewables business, excluding the offshore wind contract for Carolina Long Bay. We entered into purchase and sale agreements with affiliates of Brookfield for the sale of the utility-scale solar and wind group in June 2023 and with affiliates of ArcLight for the distributed generation group in July 2023. Both transactions closed in October 2023. See Note 2 to the Condensed Consolidated Financial Statements, "Dispositions," for additional information.
•Renewable energy remains a critical component of our generation mix and we've continued to actively expand the use of these assets across our service territories. In June 2023, we announced an agreement with Ranger Power for up to 199 MW of solar power in Indiana. Pending regulatory approval, energy generated from this facility will be sold to Duke Energy Indiana and serve the equivalent
of roughly 35,000 homes. In July 2023, we announced a new utility-scale solar panel installation in Kentucky. Located on the rooftop of a facility owned by Amazon, the site complements our emerging solar portfolio in the state and demonstrates our commitment to furthering the clean energy goals of both the Company and our customers.
•In March 2023, we began operating the largest battery system in North Carolina, an 11-MW project in Onslow County, which will operate in conjunction with an adjacent 13-MW solar facility located on a leased site within Marine Corps Base (MCB) Camp Lejeune. Both projects are connected to a Duke Energy substation and will be used to serve all Duke Energy Progress customers. As part of an ongoing collaboration with the Department of Defense, further work could enable the solar and battery systems to improve the resiliency of MCB Camp Lejeune against outages.
•In
March 2023, Duke Energy Florida announced two new solar projects as part of Clean Energy Connection, the Company's community solar program. Once complete, each 74.9-MW solar facility will generate enough carbon-free electricity to power what would be the equivalent to around 23,000 homes. Additionally, in March 2023, Duke Energy Florida announced its first floating solar array pilot. The project will feature more than 1,800 floating solar modules and occupy approximately 2 acres of water surface on an existing cooling pond at the Duke Energy Hines Energy Complex in Bartow. The pilot is part of Duke Energy's Vision Florida program, which is designed to test innovative projects such as microgrids and battery energy storage, among others, to prepare the power grid for a clean energy future. We now operate 1,200 MW of solar in Florida, with plans to continue adding approximately 300 MW a year going forward.
•While
transitioning to cleaner energy resources, affordability continues to be a focus for Duke Energy. Our cost reduction initiatives are grounded in our culture of safety and serving our customers with excellence, while maintaining our assets for the future. We’re leveraging digital innovation, data analytics, and process improvements to increase efficiency, making targeted capital investments to reduce maintenance costs, and reshaping our operations to streamline work and lower costs. Coming into 2023, we implemented a $300 million cost mitigation initiative to address cost pressures, primarily related to rising interest rates. These cost reductions are primarily focused on corporate and support areas, and remain on track.
91
MD&A
DUKE
ENERGY
Regulatory Activity. During the nine months ended September 30, 2023, we continued to monitor developments while moving our regulatory strategy forward. See Note 4 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
•HB 951 provides the framework for many of the benefits of modernized regulatory constructs in North Carolina under the direction of the NCUC including PBR and MYRP. Duke Energy Progress filed its first rate case utilizing these benefits, including both PBR and MYRP, in North Carolina in October 2022, and reached partial settlements on key matters in April and May 2023. In August 2023, the NCUC issued a constructive order approving these partial settlements and Duke
Energy Progress' PBR Application with certain modifications, marking the first implementation of an MYRP under the performance-based regulations authorized by HB 951 in North Carolina. Duke Energy Progress implemented revised Year 1 rates and residential decoupling on October 1, 2023.
•In January 2023, Duke Energy Carolinas filed a rate case in North Carolina that also incorporated elements of PBR and MYRP as allowed under HB 951. In August 2023, we reached partial settlements on key matters with the Public Staff, subject to the approval of the NCUC. We expect an order from the NCUC on the Duke Energy Carolinas rate case in the fourth quarter of this year.
•In the Midwest, we received a constructive order on our Duke Energy Kentucky electric rate case in October 2023. In August 2023,
the PUCO approved recovery and true up of certain historical energy efficiency program costs in Ohio, with new rates effective September 1, 2023.
•In August 2023, we filed new resource plans in North Carolina and South Carolina. Between economic development success, population growth and increased adoption of electric vehicles, energy use by Duke Energy customers in the Carolinas is projected to grow by around 35,000 GWh over the next 15 years – more than the annual electric generation of Delaware, Maine and New Hampshire combined. These plans advance our energy transition while prioritizing reliability and affordability.
•In February 2023, the PSCSC approved a constructive comprehensive settlement with all parties in the Duke Energy Progress South Carolina rate case and Duke Energy Progress
implemented new customer rates effective April 1, 2023. We also made progress on our South Carolina storm securitization filings, completing our petition for a financing order with the PSCSC in May 2023. The PSCSC approved a comprehensive settlement in September 2023 and issued its financing order in October 2023.
•In February 2023, the Indiana Court of Appeals issued an opinion finding certain coal ash related expenditures should be disallowed under a statute specific to federally mandated projects and also denied a petition for rehearing on the matter.
•As it relates to our natural gas businesses, in Duke Energy Ohio, we filed a stipulation on key matters in our base rate case with all parties except the OCC in April 2023. We received an order approving the stipulation in November 2023.
In September 2023, the TPUC approved a settlement related to our Annual Review Mechanism in Tennessee, with adjusted rates effective October 1, 2023.
Matters Impacting Future Results
The matters discussed herein could materially impact the future operating results, financial condition and cash flows of the Duke Energy Registrants and Business Segments.
Regulatory Matters
Coal Ash Costs
Future spending of coal ash costs, including amounts recorded for depreciation and liability accretion, is expected to be recovered in future rate cases or rider filings. The majority of spend is expected
to occur over the next 10 to 15 years.
Duke Energy Indiana has interpreted the Coal Combustion Residuals (CCR) rule to identify the coal ash basin sites impacted and has assessed the amounts of coal ash subject to the rule and a method of compliance. Interpretation of the requirements of the CCR rule is subject to further legal challenges and regulatory approvals, which could result in additional coal ash basin closure requirements, higher costs of compliance and greater AROs. Additionally, Duke Energy Indiana has retired facilities that are not subject to the CCR rule. Duke Energy Indiana may incur costs at these facilities to comply with environmental regulations or to mitigate risks associated with on-site storage of coal ash. In January 2022, Duke Energy Indiana received a letter from the EPA regarding application and interpretation of the CCR rule for some of the ash basins at its Gallagher Station. In response to the letter,
Duke Energy Indiana has submitted revised closure plans for those basins to the Indiana Department of Environmental Management (IDEM). Those closure plans are pending review by IDEM. For more information, see Note 4 to the Condensed Consolidated Financial Statements, "Regulatory Matters."
Fuel Cost Recovery
As a result of rapidly rising commodity costs during 2022, including natural gas, fuel and purchased power prices in excess of amounts included in fuel-related revenues led to an increase in the under collection of fuel costs from customers in jurisdictions including Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida. These amounts have been deferred in regulatory assets and have impacted the cash flows of the registrants, including increased borrowings to temporarily finance related expenditures until recovery. Natural gas costs have stabilized in 2023 and
the Duke Energy Registrants are making progress collecting deferred fuel balances. Regulatory filings have now been made for recovery of all remaining uncollected 2022 fuel costs. Across all jurisdictions, Duke Energy is currently on pace to recover $1.7 billion of deferred fuel costs in 2023, and expects deferred fuel balances to be back in line with historical norms by the end of 2024.
Commercial Renewables
In November 2022, Duke Energy committed to a plan to sell the Commercial Renewables Disposal Groups. The Commercial Renewables Disposal Groups were classified as held for sale and as discontinued operations in the fourth quarter of 2022. Duke Energy entered into purchase and sale agreements with affiliates of Brookfield in June 2023 for the sale of the utility-scale solar and wind group and with affiliates of ArcLight in July 2023 for the distributed generation group.
Both transactions closed in October 2023 and proceeds from the sales are expected to be used for debt avoidance. Duke Energy expects to complete the disposition of the remaining assets by early 2024. For more information, see Note 2 to the Condensed Consolidated Financial Statements, "Dispositions."
92
MD&A
MATTERS IMPACTING FUTURE RESULTS
In February 2021, a severe winter storm impacted certain Commercial Renewables assets in Texas. Extreme weather conditions limited the ability for these
solar and wind facilities to generate and sell electricity into the ERCOT market. Originally, Duke Energy (Parent) was named in multiple lawsuits arising out of this winter storm, but the plaintiffs have begun to dismiss Duke Energy (parent) from these lawsuits and have represented to the court that they will dismiss Duke Energy (Parent) from all such cases. The legal actions related to project companies in this matter transferred to affiliates of Brookfield in conjunction with the transaction closing in October 2023. For more information, see Note 5 to the Condensed Consolidated Financial Statements, "Commitments and Contingencies."
Supply Chain
In 2023, Duke Energy has experienced modest improvement in the stability of the markets for key materials purchased and used by the Company. The Company continues to monitor developments, including proposed federal regulations, that
could disrupt or impact the Company's supply chain and, as a result, may impact Duke Energy's future financial results or the achievement of its clean energy goals.
Goodwill
The Duke Energy Registrants performed their annual goodwill impairment tests as of August 31, 2023, as described in Note 8 to the Condensed Consolidated Financial Statements, "Goodwill." As of August 31, 2023, all of Duke Energy Registrants' reporting units' estimated fair values materially exceeded the carrying values except for the GU&I reporting unit of Duke Energy Ohio. While no goodwill impairment charges were recorded in the third quarter of 2023, continued rising interest rates, and the related impact on the weighted average cost of capital, without timely or adequate updates to the regulated allowed
return on equity or deteriorating economic conditions impacting GU&I's future cash flows or equity valuations of peer companies could impact the estimated fair value of GU&I, and goodwill impairment charges could be recorded in the future. The carrying value of goodwill within GU&I for Duke Energy Ohio was approximately $324 million as of September 30, 2023.
Other
Duke Energy is monitoring general market conditions, including the potential for continued rising interest rates, and evaluating the impact to its results of operations, financial position and cash flows in the future.
Results of Operations
Non-GAAP Measures
Management’s
Discussion and Analysis includes financial information prepared in accordance with GAAP in the U.S., as well as certain non-GAAP financial measures, adjusted earnings and adjusted EPS, discussed below. Non-GAAP financial measures are numerical measures of financial performance, financial position or cash flows that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP financial measures should be viewed as a supplement to, and not a substitute for, financial measures presented in accordance with GAAP. Non-GAAP measures presented may not be comparable to similarly titled measures used by other companies because other companies may not calculate the measures in the same manner.
Management evaluates financial performance in part based on non-GAAP financial measures, including adjusted earnings and adjusted EPS. Adjusted
earnings and adjusted EPS represent income from continuing operations available to Duke Energy Corporation common stockholders in dollar and per share amounts, adjusted for the dollar and per share impact of special items. As discussed below, special items represent certain charges and credits, which management believes are not indicative of Duke Energy's ongoing performance. The most directly comparable GAAP measures for adjusted earnings and adjusted EPS are GAAP Reported Earnings (Loss) and GAAP Reported Earnings (Loss) Per Share, respectively.
Special items included in the periods presented below include the following, which management believes do not reflect ongoing costs:
•For 2022, Regulatory Matters represents the net impact of charges related to the 2022 Indiana Supreme Court ruling on coal ash, and for 2023, it primarily represents
impairment charges related to Duke Energy Carolinas' North Carolina rate case settlement and Duke Energy Progress' North Carolina rate case order.
Discontinued operations primarily includes the impairments on the sale of the Commercial Renewables business in the current year and results from Duke Energy's Commercial Renewables Disposal Groups.
GAAP reported EPS was $1.59 for the third quarter of 2023 compared to $1.81 in the third quarter of 2022. In addition to the drivers below, GAAP reported EPS decreased primarily due to impairments on the sale of the Commercial Renewables business.
As discussed above, management also evaluates
financial performance based on adjusted EPS. Duke Energy’s third quarter 2023 adjusted EPS was $1.94 compared to $1.78 for the third quarter of 2022. The increase in adjusted EPS was primarily due to ongoing tax efficiency efforts, growth from riders and other margin, rate case impacts and favorable weather, partially offset by higher interest expense and lower volumes.
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DUKE ENERGY
The following table reconciles non-GAAP measures, including adjusted EPS, to their most directly comparable
GAAP measures.
GAAP Reported EPS was $2.27 for the nine months ended September 30, 2023, compared to $4.03 for the nine months ended September 30, 2022. In addition to the drivers below, GAAP reported EPS decreased primarily due to impairments on the sale of the Commercial Renewables business.
As discussed above, management also evaluates financial performance based on adjusted EPS. Duke
Energy’s adjusted EPS was $4.05 for the nine months ended September 30, 2023, compared to $4.16 for the nine months ended September 30, 2022. The decrease in adjusted EPS was primarily due to higher interest expense, unfavorable weather and lower volumes, partially offset by growth from riders and other margin, rate case impacts, lower operations and maintenance expense and ongoing tax efficiency efforts.
The following table reconciles non-GAAP measures, including adjusted EPS, to their most directly comparable GAAP measures.
(a)In
2023, net of $27 million tax benefit. $95 within Impairment of assets and other charges and $16 million within Operations, maintenance and other. In 2022, net of $80 million tax benefit. $211 million recorded within Impairment of assets and other charges, $46 million within Regulated electric (Operating revenues) and $20 million within Noncontrolling Interests.
(b)Recorded in (Loss) Income from Discontinued Operations, net of tax, and Net (Income) Loss Attributable to Noncontrolling Interests.
SEGMENT RESULTS
The remaining information presented in this discussion of results of operations is on a GAAP basis. Management evaluates segment performance based on segment income. Segment
income is defined as income from continuing operations net of income attributable to noncontrolling interests and preferred stock dividends. Segment income includes intercompany revenues and expenses that are eliminated in the Condensed Consolidated Financial Statements.
Duke Energy's segment structure includes the following segments: EU&I and GU&I. The remainder of Duke Energy’s operations is presented as Other. See Note 3 to the Condensed Consolidated Financial Statements, “Business Segments,” for additional information on Duke Energy’s segment structure.
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SEGMENT
RESULTS — ELECTRIC UTILITIES AND INFRASTRUCTURE
Electric Utilities and Infrastructure
Three
Months Ended September 30,
Nine Months Ended September 30,
(in millions)
2023
2022
Variance
2023
2022
Variance
Operating Revenues
$
7,715
$
7,439
$
276
$
20,363
$
19,576
$
787
Operating
Expenses
Fuel used in electric generation and purchased power
2,591
2,653
(62)
7,045
6,481
564
Operation,
maintenance and other
1,398
1,257
141
4,008
4,011
(3)
Depreciation and amortization
1,209
1,170
39
3,493
3,411
82
Property
and other taxes
392
336
56
1,077
1,004
73
Impairment of assets and other charges
88
8
80
100
214
(114)
Total
operating expenses
5,678
5,424
254
15,723
15,121
602
Gains on Sales of Other Assets and Other, net
2
7
(5)
30
12
18
Operating
Income
2,039
2,022
17
4,670
4,467
203
Other Income and Expenses, net
131
114
17
388
381
7
Interest
Expense
468
377
91
1,364
1,144
220
Income Before Income Taxes
1,702
1,759
(57)
3,694
3,704
(10)
Income
Tax Expense
224
207
17
531
448
83
Less: Income Attributable to Noncontrolling Interest
31
12
19
75
19
56
Segment
Income
$
1,447
$
1,540
$
(93)
$
3,088
$
3,237
$
(149)
Duke
Energy Carolinas GWh sales
24,810
24,554
256
66,367
69,125
(2,758)
Duke Energy Progress GWh sales
19,704
19,608
96
50,503
54,492
(3,989)
Duke
Energy Florida GWh sales
13,665
13,555
110
34,055
35,797
(1,742)
Duke Energy Ohio GWh sales
6,356
7,074
(718)
17,694
18,635
(941)
Duke
Energy Indiana GWh sales
8,526
8,934
(408)
22,803
24,528
(1,725)
Total Electric Utilities and Infrastructure GWh sales
EU&I’s lower segment income is due to higher interest expense and higher depreciation related to higher plant in service.
The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The variance was driven primarily by:
•a $155 million increase in fuel revenues primarily due to higher fuel cost recovery in the current year;
•a $146 million increase in storm revenues at Duke Energy Florida due to hurricanes Ian and Nicole collections;
•a $76 million increase in price due to 2022 Duke Energy Ohio Electric retail rate case and Ohio tax reform deferrals in prior year, higher pricing at Duke Energy Progress from the South Carolina retail rate case and interim rates from the North Carolina retail rate case, and base rate adjustments related to annual increases from the 2021 Settlement Agreement
at Duke Energy Florida;
•a $60 million increase in retail sales due to favorable weather compared to prior year; and
•a $42 million increase in rider revenues primarily due to a decrease in the return of EDIT to customers compared to the prior year at Duke Energy Carolinas and increased Storm Protection Plan rider revenue at Duke Energy Florida.
Partially offset by:
•a $141 million decrease in wholesale revenues primarily due to lower capacity volumes at Duke Energy Progress and lower demand at Duke Energy Florida; and
•a $72 million decrease in weather-normal retail sales volumes.
Operating Expenses. The
variance was driven primarily by:
•a $141 million increase in operation, maintenance and other primarily driven by higher storm amortization at Duke Energy Florida;
•an $80 million increase in impairment of assets and other charges primarily due to rate case impacts at Duke Energy Carolinas and Duke Energy Progress in the current year;
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•a
$56 million increase in property and other taxes primarily due to franchise taxes and higher property tax valuation adjustments at Duke Energy Florida; and
•a $39 million increase in depreciation and amortization primarily due to higher plant in service.
Partially offset by:
•a $62 million decrease in fuel used in electric generation and purchased power due to lower fuel prices and lower volumes, partially offset by higher amortizations of deferred fuel.
Other Income and Expenses, net. The increase is primarily due to the sale of OPEB liabilities to a third party insurance company.
Interest Expense. The variance was primarily driven by higher interest rates
and outstanding debt balances.
Income Tax Expense. The increase in tax expense was primarily due to a decrease in the amortization of excess deferred taxes, partially offset by a decrease in pretax income. The ETRs for the three months ended September 30, 2023, and 2022, were 13.2% and 11.8%, respectively. The increase in the ETR was primarily due to a decrease in the amortization of excess deferred taxes.
Income Attributable to Noncontrolling Interest.The increase is due to the second and final tranche of the GIC minority interest sale.
EU&I’s lower segment income is due to unfavorable weather, lower weather-normal retail sales volumes and higher interest expense, partially offset by the prior year Indiana Supreme Court ruling on recovery of certain coal ash costs. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The variance was driven primarily by:
•a $1,052 million increase in fuel revenues primarily due to higher fuel cost recovery in the current year;
•a $260 million increase in storm revenues at Duke Energy Florida due to hurricanes Ian
and Nicole collections;
•a $154 million increase in price due to 2022 Duke Energy Ohio Electric retail rate case, higher pricing at Duke Energy Progress from the South Carolina retail rate case and interim rates from the North Carolina retail rate case and base rate adjustments related to annual increases from the 2021 Settlement Agreement at Duke Energy Florida;
•an $84 million increase in rider revenues primarily due to a decrease in the return of EDIT to customers compared to the prior year at Duke Energy Carolinas and increased Storm Protection Plan rider revenue at Duke Energy Florida; and
•a $71 million increase due to the provision for rate refund recognized in the prior year related to the Indiana Supreme Court ruling on recovery of certain coal ash costs.
Partially
offset by:
•a $320 million decrease in wholesale revenues primarily due to lower capacity revenues at Duke Energy Progress and lower demand at Duke Energy Florida;
•a $294 million decrease in retail sales due to unfavorable weather compared to prior year; and
•a $214 million decrease in weather-normal retail sales volumes.
Operating Expenses. The variance was driven primarily by:
•a $564 million increase in fuel used in electric generation and purchased power due to changes in the generation mix at Duke Energy Carolinas and higher amortization of deferred fuel;
•an
$82 million increase in depreciation and amortization primarily due to higher plant in service, partially offset by the amortization of the Department of Energy settlement regulatory liability at Duke Energy Florida; and
•a $73 million increase in property and other taxes primarily due to higher property tax valuations at Duke Energy Florida and Duke Energy Carolinas, partially offset by favorable property tax true ups at Duke Energy Indiana.
Partially offset by:
•a $114 million decrease in impairment of assets and other charges primarily due to the Indiana Supreme Court ruling on recovery of certain coal ash costs in the prior year, partially offset by rate case impacts at Duke Energy Carolinas and Duke Energy Progress in the current year.
Gains
on Sales of Other Assets and Other, net. Theincrease was primarily due to the sale of the Mint Street parking deck.
Interest Expense. The variance was primarily driven by higher interest rates and outstanding debt balances.
Income Tax Expense. The increase in tax expense was primarily due to a decrease in the amortization of excess deferred taxes. The ETRs for the nine months ended September 30, 2023, and 2022, were 14.4% and 12.1%, respectively. The increase in the ETR was primarily due to a decrease in the amortization of excess deferred taxes.
Income Attributable to Noncontrolling Interest.The increase is due to the second and final tranche of the GIC minority interest sale.
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SEGMENT RESULTS — GAS UTILITIES AND INFRASTRUCTURE
Gas Utilities and Infrastructure
Three
Months Ended September 30,
Nine Months Ended September 30,
(in millions)
2023
2022
Variance
2023
2022
Variance
Operating Revenues
$
313
$
427
$
(114)
$
1,583
$
1,912
$
(329)
Operating
Expenses
Cost of natural gas
57
189
(132)
434
859
(425)
Operation,
maintenance and other
103
115
(12)
332
410
(78)
Depreciation and amortization
88
80
8
257
241
16
Property
and other taxes
32
29
3
93
103
(10)
Impairment of assets and other charges
—
(12)
12
(4)
(12)
8
Total
operating expenses
280
401
(121)
1,112
1,601
(489)
(Losses) Gains on Sales of Other Assets and Other, net
GU&I’s results were impacted primarily by margin growth, partially offset by higher interest expense. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues.The variance was driven primarily by:
•a $132 million decrease in cost of natural gas due to lower rates, decreased off-system sales natural gas costs and lower volumes.
Partially offset by:
•an $11 million increase due to Tennessee ARM revenue true up.
Operating
Expenses.The variance was driven primarily by:
•a $132 million decrease in cost of natural gas due to lower rates, decreased off-system sales natural gas costs and lower volumes; and
•a $12 million decrease in operations, maintenance and other primarily due to lower spend on internal and contract labor costs.
Partially offset by:
•a $12 million increase in impairment in assets and other charges due to the reversal in the prior year of the impairment related to the propane caverns in Ohio; and
•an $8 million increase in depreciation and amortization due to additional plant in service and lower CEP deferrals.
Other
Income and Expenses, Net. The increase was primarily due to the revision in the Atlantic Coast Pipeline (ACP) ARO closure cost.
Interest Expense.The increase was primarily due to higher interest rates and outstanding debt balances.
Income Tax Expense (Benefit). The decrease in tax expense was primarily due to an increase in the amortization of excess deferred taxes, partially offset by an increase in pretax income. The ETRs for the three months ended September 30, 2023, and 2022, were 6.3% and 33.3%, respectively. The decrease in the ETR was primarily due to an increase in the amortization of excess deferred taxes.
GU&I’s results were impacted primarily by margin growth partially offset by higher interest expense. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues.The variance was driven primarily by:
•a $425 million decrease due to lower natural gas costs passed through to customers, lower volumes, and decreased off-system sales natural gas costs.
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RESULTS — GAS UTILITIES AND INFRASTRUCTURE
Partially offset by:
•an $18 million increase due to rider revenues related to Ohio CEP;
•an $18 million increase due to secondary marketing sales;
•a $15 million increase due to the MGP Settlement in prior year; and
•a $13 million increase due to North Carolina IMR.
Operating Expenses.The variance was driven primarily by:
•a $425 million decrease in cost of natural gas due to lower natural gas costs passed through to customers, lower
volumes, and decreased off-system sales natural gas costs;
•a $78 million decrease in operations, maintenance and other due to Ohio MGP Settlement in prior year and lower spend on internal and contract labor costs; and
•a $10 million decrease in property and other taxes due to Ohio and Kentucky property tax true ups.
Partially offset by:
•a $16 million increase in depreciation and amortization due to additional plant in service and lower CEP deferrals.
Other Income and Expenses, net. The increase was primarily due to revision in ACP ARO closure cost and higher AFUDC equity income.
Interest Expense.The increase was primarily due to higher outstanding debt balances and interest rates.
Income Tax Expense (Benefit). The increase in tax expense was primarily due to a decrease in the amortization of excess deferred taxes related to the Ohio MGP Settlement recorded in the prior year and an increase in pretax income. The ETRs for the nine months ended September 30, 2023, and 2022, were 17.8% and (11.2)%, respectively. The increase in the ETR was primarily due to a decrease in the amortization of excess deferred taxes related to the Ohio MGP Settlement recorded in the prior year.
Other
Three
Months Ended September 30,
Nine Months Ended September 30,
(in millions)
2023
2022
Variance
2023
2022
Variance
Operating Revenues
$
33
$
30
$
3
$
98
$
91
$
7
Operating
Expenses
4
27
(23)
53
69
(16)
Gains on Sales of Other Assets and Other, net
5
—
5
16
1
15
Operating
Income
34
3
31
61
23
38
Other Income and Expenses, net
47
6
41
168
(5)
173
Interest
Expense
283
205
78
810
529
281
Loss Before Income Taxes
(202)
(196)
(6)
(581)
(511)
(70)
Income
Tax Benefit
(182)
(51)
(131)
(285)
(123)
(162)
Add: Income Attributable to Noncontrolling Interests
The lower net loss was driven by an increase in the tax benefit due to a favorable adjustment related to certain allowable tax deductions, lower franchise tax expense and higher returns on investments, partially offset by higher interest expense.
Operating Expenses. The decrease was primarily driven by franchise tax refunds of $38 million in the current year, partially offset by an increase in franchise tax accruals of $6 million.
Other Income and Expenses, net. The variance was primarily due to higher yields on captive insurance investments and higher return on investments that fund
certain employee benefit obligations.
Interest Expense. The variance was primarily due to higher interest rates on long-term debt and commercial paper, and higher outstanding long-term debt balances.
Income Tax Benefit. The increase in the tax benefit was primarily due to benefits associated with ongoing tax efficiency efforts. The ETRs for the three months ended September 30, 2023, and 2022, were 90.1% and 26.0%, respectively. The decrease in the ETR was primarily due to benefits associated with ongoing tax efficiency efforts. During the third quarter of 2023, the Company evaluated the deductibility of certain items spanning periods currently open under federal statute, including items related to interest on company-owned life insurance. As a result
of this analysis, the Company recorded a favorable adjustment of approximately $120 million.
The lower net loss was driven by an increase in the tax benefit and higher return on investments, partially offset by higher interest expense.
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SEGMENT
RESULTS - OTHER
Operating Expenses. The decrease was primarily driven by franchise tax refunds of $63 million in the current year, partially offset by an increase in franchise tax accruals of $19 million and $26 million of increased expense on certain employee benefit obligations in the current year.
Other Income and Expenses, net. The variance was primarily due to higher return on investments that fund certain employee benefit obligations and higher yields on captive insurance investments.
Interest Expense. The variance was primarily due to higher interest rates on long-term debt and commercial paper, and higher outstanding long-term debt balances.
Income Tax Benefit. The increase
in the tax benefit was primarily due to benefits associated with ongoing tax efficiency efforts and an increase in pretax losses. The ETRs for the nine months ended September 30, 2023, and 2022, were 49.1% and 24.1%, respectively. The increase in the ETR was primarily due to benefits associated with ongoing tax efficiency efforts. During the third quarter of 2023, the Company evaluated the deductibility of certain items spanning periods currently open under federal statute, including items related to interest on company-owned life insurance. As a result of this analysis, the Company recorded a favorable adjustment of approximately $120 million.
(LOSS) INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX
Three
Months Ended September 30,
Nine Months Ended September 30,
(in millions)
2023
2022
Variance
2023
2022
Variance
(Loss) Income From Discontinued Operations, net of tax
The variance was primarily driven by the impairments on the sale of the Commercial Renewables business recorded in 2023.
DUKE
ENERGY CAROLINAS
Results of Operations
Nine Months Ended September 30,
(in millions)
2023
2022
Variance
Operating Revenues
$
6,155
$
5,844
$
311
Operating
Expenses
Fuel used in electric generation and purchased power
1,823
1,423
400
Operation, maintenance and other
1,285
1,410
(125)
Depreciation
and amortization
1,186
1,138
48
Property and other taxes
276
258
18
Impairment of assets and other charges
70
(3)
73
Total
operating expenses
4,640
4,226
414
Gains on Sales of Other Assets and Other, net
26
4
22
Operating Income
1,541
1,622
(81)
Other
Income and Expenses, net
181
172
9
Interest Expense
504
415
89
Income Before Income Taxes
1,218
1,379
(161)
Income
Tax Expense
97
87
10
Net Income
$
1,121
$
1,292
$
(171)
The following table shows the percent changes in GWh sales and average number of customers. The percentages
for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized.
Operating Revenues.The variance was driven primarily by:
•a $429 million increase in fuel revenues due to higher fuel cost recovery; and
•a $73 million increase in rider revenues primarily due to the decrease in the return of EDIT to customers compared to the prior year and increases in energy efficiency primarily due to program performance.
Partially offset by:
•a $153 million decrease
in retail sales due to unfavorable weather compared to prior year; and
•a $71 million decrease in weather-normal retail sales volumes.
Operating Expenses. The variance was driven primarily by:
•a $400 million increase in fuel used in electric generation and purchased power primarily due to changes in the generation mix and higher amortization of deferred fuel, partially offset by lower Joint Dispatch Agreement (JDA) purchased volumes and prices;
•a $73 million increase in impairment of assets and other primarily due to rate case impacts and a prior year adjustment of the South Carolina Supreme Court decision on coal ash; and
•a
$48 million increase in depreciation and amortization primarily due to a higher depreciable base, partially offset by a decrease in depreciation and amortization primarily due to the prior year South Carolina Supreme Court decision on coal ash and an increase in Grid Improvement Plan deferrals.
Partially offset by:
•a $125 million decrease in operation, maintenance and other expense primarily due to a decrease in spend on outside services and lower storm restoration costs.
Gains on Sales of Other Assets and Other, net. Theincrease was primarily due to the sale of the Mint Street parking deck.
Interest Expense. The variance was driven by higher interest rates and outstanding debt
balances.
Income Tax Expense.The increase in tax expense was primarily due to a decrease in the amortization of excess deferred taxes, partially offset by a decrease in pretax income.
PROGRESS ENERGY
Results of Operations
Nine
Months Ended September 30,
(in millions)
2023
2022
Variance
Operating Revenues
$
10,315
$
10,087
$
228
Operating Expenses
Fuel
used in electric generation and purchased power
3,902
3,927
(25)
Operation, maintenance and other
1,963
1,829
134
Depreciation and amortization
1,609
1,607
2
Property
and other taxes
546
472
74
Impairment of assets and other charges
29
4
25
Total operating expenses
8,049
7,839
210
Gains
on Sales of Other Assets and Other, net
20
6
14
Operating Income
2,286
2,254
32
Other Income and Expenses, net
146
150
(4)
Interest
Expense
706
616
90
Income Before Income Taxes
1,726
1,788
(62)
Income Tax Expense
280
289
(9)
Net
Income
$
1,446
$
1,499
$
(53)
Less: Net Income Attributable to Noncontrolling Interests
Operating Revenues. The variance was driven primarily by:
•a $260 million increase in storm revenues at Duke Energy Florida due to hurricanes Ian and Nicole collections;
•a $242 million increase in fuel cost recovery at Duke Energy Florida driven by higher fuel rates in the current year, partially offset by a decrease at Duke Energy Progress driven by lower JDA sales volumes at lower prices;
•a $74 million increase due to higher pricing related to rate cases at Duke Energy Progress from interim rates from the North Carolina retail rate case and the South Carolina retail rate case, and base rate adjustments
related to annual increases from the 2021 Settlement Agreement at Duke Energy Florida;
•a $35 million increase in rider revenues at Duke Energy Florida primarily due to increased Storm Protection Plan rider revenue; and
•a $20 million increase in franchise taxes revenue primarily due to increased revenues over prior year.
Partially offset by:
•a $265 million decrease in wholesale revenues, net of fuel, due to lower capacity rate and volumes at Duke Energy Progress and lower demand at Duke Energy Florida;
•an $85 million decrease in weather-normal retail sales volumes; and
•a $66 million decrease
in retail sales due to unfavorable weather compared to prior year.
Operating Expenses. The variance was driven primarily by:
•a $134 million increase in operation, maintenance and other primarily due to storm amortization at Duke Energy Florida, partially offset by a decrease at Duke Energy Progress due to lower storm costs;
•a $74 million increase in property and other taxes primarily due to franchise taxes driven by higher revenues and property taxes due to higher property tax valuation adjustments at Duke Energy Florida; and
•a $25 million increase in impairment of asset and other charges primarily due to rate case impacts at Duke Energy Progress.
Partially
offset by:
•a $25 million decrease in fuel used in electric generation and purchased power primarily due to lower volumes and price at Duke Energy Progress, partially offset by higher amortization of deferred fuel balances at Duke Energy Florida.
Gains on Sales of Other Assets and Other, net. Theincrease was primarily due to sales of cell tower leases.
Interest Expense. The variance was driven primarily by higher outstanding debt balances and interest rates at Duke Energy Florida and Duke Energy Progress.
Income Tax Expense.The decrease in tax expense was primarily due to a decrease in pretax income.
DUKE
ENERGY PROGRESS
Results of Operations
Nine Months Ended September 30,
(in millions)
2023
2022
Variance
Operating Revenues
$
4,844
$
5,182
$
(338)
Operating
Expenses
Fuel used in electric generation and purchased power
1,685
1,916
(231)
Operation, maintenance and other
1,051
1,101
(50)
Depreciation
and amortization
935
890
45
Property and other taxes
143
136
7
Impairment of assets and other charges
31
4
27
Total
operating expenses
3,845
4,047
(202)
Gains on Sales of Other Assets and Other, net
2
2
—
Operating Income
1,001
1,137
(136)
Other
Income and Expenses, net
92
83
9
Interest Expense
315
260
55
Income Before Income Taxes
778
960
(182)
Income
Tax Expense
101
129
(28)
Net Income
$
677
$
831
$
(154)
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ENERGY PROGRESS
The following table shows the percent changes in GWh sales and average number of customers. The percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized.
Operating Revenues. The variance was driven primarily by:
•a $182 million decrease in fuel revenues due to lower JDA sales volumes at lower prices in the current year, partially offset by higher fuel cost recovery;
•a $110 million decrease in retail sales due to unfavorable weather compared to prior year;
•a $69 million decrease in weather-normal retail sales volumes; and
•a $33 million decrease in wholesale revenues, net of fuel, due to lower capacity rates and volumes.
Partially
offset by:
•a $60 million increase due to higher pricing from interim rates from the North Carolina retail rate case and the South Carolina retail rate case.
Operating Expenses. The variance was driven primarily by:
•a $231 million decrease in fuel used in electric generation and purchased power primarily due to lower volumes and prices, partially offset by the recovery of fuel expenses; and
•a $50 million decrease in operation, maintenance and other expense primarily due to lower storm costs.
Partially offset by:
•a $45 million increase in depreciation and amortization due to higher depreciable
base; and
•a $27 million increase in impairment of assets and other charges primarily due to rate case impacts.
Interest Expense. The variance was driven primarily by higher interest rates and outstanding debt balances.
Income Tax Expense.The decrease in tax expense was primarily due to a decrease in pretax income, partially offset by a decrease in the amortization of excess deferred taxes.
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DUKE
ENERGY FLORIDA
DUKE ENERGY FLORIDA
Results of Operations
Nine Months Ended September 30,
(in millions)
2023
2022
Variance
Operating
Revenues
$
5,456
$
4,890
$
566
Operating Expenses
Fuel used in electric generation and purchased power
2,218
2,011
207
Operation,
maintenance and other
898
716
182
Depreciation and amortization
674
717
(43)
Property and other taxes
403
335
68
Impairment
of assets and other charges
(1)
—
(1)
Total operating expenses
4,192
3,779
413
Gains on Sales of Other Assets and Other, net
1
5
(4)
Operating
Income
1,265
1,116
149
Other Income and Expenses, net
56
74
(18)
Interest Expense
305
258
47
Income
Before Income Taxes
1,016
932
84
Income Tax Expense
206
181
25
Net Income
$
810
$
751
$
59
The
following table shows the percent changes in GWh sales and average number of customers. The percentages for retail customer classes represent billed sales only. Wholesale power sales include both billed and unbilled sales. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized.
Operating Revenues. The variance was driven primarily by:
•a $424 million increase in fuel and capacity revenues primarily due to an increase in fuel and capacity rates billed to retail customers;
•a $260 million increase in storm revenues due to hurricanes Ian and Nicole collections;
•a $44 million increase in retail sales due to favorable weather in the current year;
•a $35 million increase in rider revenues primarily due to increased rate of Storm Protection Plan rider; and
•a
$20 million increase in franchise taxes revenue primarily due to increased revenues over prior year.
Partially offset by:
•a $232 million decrease in wholesale power revenues, net of fuel, primarily due to decreased demand.
Operating Expenses. The variance was driven primarily by:
•a $207 million increase in fuel used in electric generation and purchased power primarily due to higher amortization of deferred fuel and capacity expense;
•a $182 million increase in operation, maintenance and other primarily due to storm amortization; and
•a $68 million increase in property and other taxes primarily
due to franchise taxes driven by higher revenues and property taxes due to higher property tax valuation adjustments.
Partially offset by:
•a $43 million decrease in depreciation and amortization primarily due to the amortization of Department of Energy settlement regulatory liability, partially offset by higher depreciable base.
Other Income and Expenses, net. The decrease is primarily due to the wholesale portion of the Department of Energy settlement for nuclear fuel storage in prior year.
103
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DUKE
ENERGY FLORIDA
Interest Expense. The increase was primarily due to higher interest rates and outstanding debt balances.
Income Tax Expense. The increase in tax expense was primarily due to an increase in pretax income and a decrease in the amortization of excess deferred taxes, partially offset by an increase in production tax credits.
DUKE ENERGY OHIO
Results of Operations
Nine
Months Ended September 30,
(in millions)
2023
2022
Variance
Operating Revenues
Regulated electric
$
1,411
$
1,320
$
91
Regulated
natural gas
464
491
(27)
Total operating revenues
1,875
1,811
64
Operating
Expenses
Fuel used in electric generation and purchased power
485
439
46
Cost of natural gas
118
174
(56)
Operation,
maintenance and other
358
408
(50)
Depreciation and amortization
266
247
19
Property and other taxes
258
272
(14)
Impairment
of assets and other charges
—
(11)
11
Total operating expenses
1,485
1,529
(44)
Operating
Income
390
282
108
Other Income and Expenses, net
33
16
17
Interest Expense
125
92
33
Income
Before Income Taxes
298
206
92
Income Tax Expense (Benefit)
47
(30)
77
Net
Income
$
251
$
236
$
15
The following table shows the percent changes in GWh sales of electricity, dekatherms of natural gas delivered and average number of electric and natural gas customers. The percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized.
Operating Revenues. The variance was driven primarily by:
•a $93 million increase in price due to the 2022 Duke Energy Ohio Electric retail rate case and Ohio tax reform deferrals in prior year;
•a $58 million increase in fuel-related revenues primarily due to higher retail sales volumes and higher fuel cost recovery in the current year; and
•a $15 million increase due to the MGP Settlement in the prior year.
Partially offset by:
•a
$54 million decrease in revenues related to lower Ohio Valley Electric Corporation (OVEC) rider collections and OVEC sales into PJM Interconnection, LLC (PJM);
•a $33 million decrease due to unfavorable weather compared to prior year; and
•a $6 million decrease in retail revenue riders primarily due to the decrease in Distribution Capital Investment Rider (DCI), partially offset by increases in the Ohio CEP rider and Energy Efficiency Rider.
104
MD&A
DUKE
ENERGY OHIO
Operating Expenses. The variance was driven primarily by:
•a $50 million decrease in operation, maintenance and other expense primarily due to the MGP Settlement in the prior year;
•a $14 million decrease in property and other taxes primarily due to property tax true ups in Ohio and Kentucky and higher deferrals, partially offset by higher franchise taxes; and
•a $10 million decrease in fuel expense primarily driven by lower retail prices for natural gas and purchased power, partially offset by an increase in purchased power volumes.
Partially offset by:
•a
$19 million increase in depreciation and amortization primarily driven by an increase in distribution plant in service and depreciation rates resulting from the 2022 Duke Energy Ohio Electric retail rate case implemented in 2023; and
•an $11 million increase in impairment of assets and other charges primarily due to the reversal in the prior year of the impairment related to the propane caverns in Ohio.
Other Income and Expenses. The increase was primarily due intercompany interest income.
Interest Expense. The increase was primarily due to higher outstanding debt balances and interest rates.
Income Tax Expense (Benefit). The increase in tax expense was primarily due to a decrease in the amortization of
excess deferred taxes related to the MGP Settlement recorded in the prior year and an increase in pretax income.
DUKE ENERGY INDIANA
Results of Operations
Nine Months Ended September 30,
(in millions)
2023
2022
Variance
Operating
Revenues
$
2,606
$
2,835
$
(229)
Operating Expenses
Fuel used in electric generation and purchased power
980
1,234
(254)
Operation,
maintenance and other
524
551
(27)
Depreciation and amortization
500
478
22
Property and other taxes
42
60
(18)
Impairment
of assets and other charges
—
211
(211)
Total operating expenses
2,046
2,534
(488)
Operating
Income
560
301
259
Other Income and Expenses, net
58
27
31
Interest Expense
157
138
19
Income
Before Income Taxes
461
190
271
Income Tax Expense
82
1
81
Net Income
$
379
$
189
$
190
The
following table shows the percent changes in GWh sales and average number of customers. The percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized.
Operating
Revenues. The variance was driven primarily by:
•a $111 million decrease in retail fuel revenues primarily due to lower fuel cost recovery driven by lower retail sales volumes and fuel prices;
•a $55 million decrease in wholesale revenues, including fuel revenues, driven by lower fuel and purchased power prices;
•a $51 million decrease in weather-normal retail sales volumes primarily due to lower customer demand;
105
MD&A
DUKE
ENERGY INDIANA
•a $46 million decrease in retail sales due to unfavorable weather; and
•a $26 million decrease primarily due to the Utility Receipts Tax repeal.
Partially offset by:
•a $71 million increase primarily due to the net provision for rate refund related to the Indiana Supreme Court ruling on recovery of certain coal ash costs.
Operating Expenses. The variance was driven primarily by:
•a $254 million decrease in fuel used in electric generation and purchased power primarily due to lower purchased power expense, natural gas and coal costs, partially offset by higher deferred fuel amortization;
•a
$211 million decrease in impairment of assets and other charges primarily due to the Indiana Supreme Court ruling on recovery of certain coal ash costs in the prior year;
•a $27 million decrease in operation, maintenance and other primarily due to lower employee-related expenses and storm contingency costs; and
•an $18 million decrease in property and other taxes primarily due to franchise taxes and property tax true ups for prior periods.
Partially offset by:
•a $22 million increase in depreciation and amortization primarily due to higher depreciable base.
Other Income and Expenses, net. The variance is primarily due to coal ash insurance proceeds and intercompany
interest income.
Interest Expense. The variance is primarily due to higher outstanding debt balances and interest rates.
Income Tax Expense. The increase in tax expense was primarily due to an increase in pretax income and a decrease in the amortization of excess deferred income taxes related to the coal ash impairment recorded in the prior year.
PIEDMONT
Results of Operations
Nine
Months Ended September 30,
(in millions)
2023
2022
Variance
Operating Revenues
$
1,119
$
1,421
$
(302)
Operating
Expenses
Cost of natural gas
316
685
(369)
Operation, maintenance and other
248
270
(22)
Depreciation
and amortization
175
166
9
Property and other taxes
46
44
2
Impairment of assets and other charges
(4)
1
(5)
Total
operating expenses
781
1,166
(385)
Gains on Sales of Other Assets and Other, net
—
4
(4)
Operating Income
338
259
79
Other
Income and Expenses, net
49
41
8
Interest Expense
120
102
18
Income Before Income Taxes
267
198
69
Income
Tax Expense
46
18
28
Net Income
$
221
$
180
$
41
The following table shows the percent changes in dekatherms delivered and average number of customers. The percentages
for all throughput deliveries represent billed and unbilled sales. Amounts are not weather-normalized.
Increase (Decrease) over prior year
2023
Residential deliveries
(16.3)
%
Commercial deliveries
(10.4)
%
Industrial deliveries
(2.9)
%
Power
generation deliveries
(7.7)
%
For resale
(18.1)
%
Total throughput deliveries
(8.0)
%
Secondary market volumes
(27.0)
%
Average number of customers
1.5
%
106
MD&A
PIEDMONT
The
margin decoupling mechanism adjusts for variations in residential and commercial use per customer, including those due to weather and conservation. The weather normalization adjustment mechanisms mostly offset the impact of weather on bills rendered, but do not ensure full recovery of approved margin during periods when winter weather is significantly warmer or colder than normal.
Operating Revenues.The variance was driven primarily by:
•a $369 million decrease due to lower natural gas costs passed through to customers, lower volumes, and decreased off-system sales natural gas costs.
Partially
offset by:
•an $18 million increase due to secondary marketing sales;
•a $13 million increase due to North Carolina IMR;
•an $11 million increase due to customer growth; and
•an $11 million increase due to Tennessee ARM revenue true up.
Operating Expenses.The variance was driven primarily by:
•a $369 million decrease due to lower natural gas costs passed through to customers, lower volumes, and decreased off-system sales natural gas costs; and
•a $22 million decrease in operations,
maintenance and other primarily due to lower spend on internal and contract labor costs.
Partially offset by:
•a $9 million increase in depreciation and amortization due to additional plant in service.
Other Income and Expenses, net. The increase was primarily due to higher AFUDC equity income.
Interest Expense. The increase was primarily due to higher outstanding debt balances and interest rates.
Income Tax Expense. The increase in tax expense was primarily due to an increase in pretax income and a decrease in the amortization of excess deferred taxes.
LIQUIDITY
AND CAPITAL RESOURCES
Sources and Uses of Cash
Duke Energy relies primarily upon cash flows from operations, debt and equity issuances and its existing cash and cash equivalents to fund its liquidity and capital requirements. Duke Energy’s capital requirements arise primarily from capital and investment expenditures, repaying long-term debt and paying dividends to shareholders. Additionally, due to its existing tax attributes and projected tax credits to be generated relating to the IRA, Duke Energy does not expect to be a significant federal cash taxpayer until around 2030. Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2022, included a summary and detailed discussion of projected primary sources and uses of cash for 2023 to 2025.
As of September 30,
2023, Duke Energy had $324 million of cash on hand and $6.1 billion available under its $9 billion Master Credit Facility. Duke Energy expects to have sufficient liquidity in the form of cash on hand, cash from operations and available credit capacity to support its funding needs. Refer to Note 6 to the Condensed Consolidated Financial Statements, "Debt and Credit Facilities," for information regarding Duke Energy's debt issuances and maturities, and available credit facilities including the Master Credit Facility. Additionally, see Note 2 to the Condensed Consolidated Financial Statements, "Dispositions," for the timing of proceeds from the sale of certain Commercial Renewables assets to affiliates of Brookfield and ArcLight.
In April 2023, Moody’s Investors Service, Inc. (Moody's) maintained the credit ratings and affirmed the ratings outlook for all of the Duke Energy Registrants,
including Duke Energy Ohio. Operations in Kentucky are conducted through Duke Energy Ohio's wholly owned subsidiary, Duke Energy Kentucky. Moody's lowered Duke Energy Kentucky's ratings outlook from stable to negative while maintaining Duke Energy Kentucky's credit rating of Baa1 for senior unsecured debt.
107
MD&A
LIQUIDITY AND CAPITAL RESOURCES
Cash Flow Information
The
following table summarizes Duke Energy’s cash flows.
Nine Months Ended
September 30,
(in millions)
2023
2022
Cash flows provided
by (used in):
Operating activities
$
7,309
$
5,188
Investing activities
(9,751)
(8,630)
Financing activities
2,413
3,551
Net
(decrease) increase in cash, cash equivalents and restricted cash
(29)
109
Cash, cash equivalents and restricted cash at beginning of period
603
520
Cash, cash equivalents and restricted cash at end of period
$
574
$
629
OPERATING
CASH FLOWS
The following table summarizes key components of Duke Energy’s operating cash flows.
Nine Months Ended
September 30,
(in
millions)
2023
2022
Variance
Net income
$
1,878
$
3,113
$
(1,235)
Non-cash adjustments to net income
5,887
4,474
1,413
Contributions
to qualified pension plans
(100)
(58)
(42)
Payments for asset retirement obligations
(423)
(418)
(5)
Working capital
(792)
(2,043)
1,251
Other
assets and Other liabilities
859
120
739
Net cash provided by operating activities
$
7,309
$
5,188
$
2,121
The
variance is primarily due to the recovery of deferred fuel costs and the timing of accruals and payments in other working capital accounts.
INVESTING CASH FLOWS
The following table summarizes key components of Duke Energy’s investing cash flows.
Nine Months Ended
September 30,
(in
millions)
2023
2022
Variance
Capital, investment and acquisition expenditures
$
(9,340)
$
(8,185)
$
(1,155)
Other
investing items
(411)
(445)
34
Net cash used in investing activities
$
(9,751)
$
(8,630)
$
(1,121)
The variance is primarily due to higher overall investments
in the EU&I segment.
FINANCING CASH FLOWS
The following table summarizes key components of Duke Energy’s financing cash flows.
Nine Months Ended
September 30,
(in
millions)
2023
2022
Variance
Issuances of long-term debt, net
$
5,607
$
5,663
$
(56)
Notes
payable, commercial paper and other short-term borrowings
(939)
269
(1,208)
Dividends paid
(2,438)
(2,389)
(49)
Contributions from noncontrolling interests
278
132
146
Other
financing items
(95)
(124)
29
Net cash provided by financing activities
$
2,413
$
3,551
$
(1,138)
108
MD&A
LIQUIDITY
AND CAPITAL RESOURCES
The variance was primarily due to:
•a $1,208 million decrease in net borrowings from notes payable and commercial paper.
Partially offset by:
•a $146 million increase in contributions from noncontrolling interests.
OTHER MATTERS
Environmental Regulations
The Duke Energy Registrants are subject to federal, state and local regulations regarding air and water quality, hazardous and solid waste disposal, coal ash and other environmental matters. These regulations
can be changed from time to time and result in new obligations of the Duke Energy Registrants. Refer to Note 4, "Regulatory Matters," in Duke Energy's Annual Report on Form 10-K for the year ended December 31, 2022, for more information regarding potential plant retirements and Note 4, "Regulatory Matters," to the Condensed Consolidated Financial Statements, for further information regarding regulatory filings related to the Duke Energy Registrants.
On May 18, 2023, the EPA published in the Federal Register a proposed rule under the Resource Conservation and Recovery Act, which would establish regulatory requirements for inactive surface impoundments at inactive generating facilities (Legacy CCR Surface Impoundments) and establish groundwater monitoring, corrective action, closure and post-closure care requirements
for all CCR management units at facilities otherwise subject to the CCR rule. Duke Energy is reviewing the proposed rule and analyzing the potential impacts it could have on the Company, which could be material.
On May 23, 2023, the EPA published in the Federal Register proposed new source performance standards under Clean Air Act (CAA) section 111(b) that would establish standards of performance for emissions of carbon dioxide for newly constructed, modified, and reconstructed fossil fuel-fired electric utility steam generating units and fossil fuel-fired stationary combustion turbines. On that same day, in a separate rulemaking under CAA section 111(d), the EPA published proposed emission guidelines for states to use in developing plans to limit carbon dioxide emissions from existing fossil fuel-fired electric generating units and certain large existing stationary combustion
turbines. Duke Energy is reviewing the proposed rules and analyzing the potential impacts they could have on the Company, which could be material.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For an in-depth discussion of the Duke Energy Registrants' market risks, see “Quantitative and Qualitative Disclosures about Market Risk” in Item 7 of Duke Energy's Annual Report on Form 10-K for the year ended December 31, 2022.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure
Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by the Duke Energy Registrants in the reports they file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified by the SEC rules and forms.
Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by the Duke Energy Registrants in the reports they file or submit under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Under the supervision and with the participation
of management, including the Chief Executive Officer and Chief Financial Officer, the Duke Energy Registrants have evaluated the effectiveness of their disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2023, and, based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these controls and procedures are effective in providing reasonable assurance of compliance.
Changes in Internal Control over Financial Reporting
Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, the Duke Energy Registrants have evaluated changes in internal control over financial reporting (as such term is defined in Rules 13a-15 and 15d-15 under the Exchange
Act) that occurred during the fiscal quarter ended September 30, 2023, and have concluded no change has materially affected, or is reasonably likely to materially affect, internal controls over financial reporting.
109
OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS
The Duke Energy Registrants are, from time to time, parties to various lawsuits and regulatory proceedings in the ordinary course of their business. For information regarding legal proceedings, including regulatory and environmental matters, see Note 4, "Regulatory Matters," and Note 5, "Commitments and Contingencies," to the Condensed Consolidated Financial Statements. For additional information, see Item 3, "Legal Proceedings," in Duke Energy's Annual Report on Form 10-K for the year ended December 31, 2022.
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this report, careful consideration should be given
to the factors discussed in Part I, “Item 1A. Risk Factors” in the Duke Energy's Annual Report on Form 10-K for the year ended December 31, 2022, which could materially affect the Duke Energy Registrants’ financial condition or future results.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 5. OTHER INFORMATION
iOn
iAugust 25, 2023, iAlex Glenn, iSenior Vice President and Chief Executive Officer, Duke Energy Florida and Midwest, iadopted
a Rule 10b5-1 trading arrangement for the sale of up to i1,000 shares of the Company’s common stock between January 31, 2024, and March 28, 2024, or such earlier date if such plan is terminated sooner pursuant to the terms specified therein. Mr. Glenn's Rule 10b5-1 trading arrangement was entered into during an open insider trading window and is intended to satisfy the affirmative defense of Rule 10b5-1 under the Exchange Act and the Company's policies regarding insider transactions./
110
EXHIBITS
ITEM
6. EXHIBITS
Exhibits filed herein are designated by an asterisk (*). All exhibits not so designated are incorporated by reference to a prior filing, as indicated. Items constituting management contracts or compensatory plans or arrangements are designated by a double asterisk (**). The Company agrees to furnish upon request to the commission a copy of any omitted schedules or exhibits upon request on all items designated by a triple asterisk (***).
XBRL
Instance Document (this does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
X
X
X
X
X
X
X
X
112
EXHIBITS
*101.SCH
XBRL
Taxonomy Extension Schema Document.
X
X
X
X
X
X
X
X
*101.CAL
XBRL Taxonomy Calculation Linkbase Document.
X
X
X
X
X
X
X
X
*101.LAB
XBRL
Taxonomy Label Linkbase Document.
X
X
X
X
X
X
X
X
*101.PRE
XBRL Taxonomy Presentation Linkbase Document.
X
X
X
X
X
X
X
X
*101.DEF
XBRL
Taxonomy Definition Linkbase Document.
X
X
X
X
X
X
X
X
*104
Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101).
X
X
X
X
X
X
X
X
The
total amount of securities of the registrant or its subsidiaries authorized under any instrument with respect to long-term debt not filed as an exhibit does not exceed 10% of the total assets of the registrant and its subsidiaries on a consolidated basis. The registrant agrees, upon request of the SEC, to furnish copies of any or all of such instruments to it.
113
SIGNATURES
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized.
