v2.4.0.8

Fair Value Measurements | 9 Months Ended
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Sep. 30, 2014
Fair Value Disclosures [Abstract] |
Fair Value Measurements | FAIR VALUE MEASUREMENTS Fair value is the exchange price to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. The fair value definition focuses on an exit price versus the acquisition cost. Fair value measurements use market data or assumptions market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs may be readily observable, corroborated by market data, or generally unobservable. Valuation techniques maximize the use of observable inputs and minimize use of unobservable inputs. A midmarket pricing convention (the midpoint price between bid and ask prices) is permitted for use as a practical expedient. Fair value measurements are classified in three levels based on the fair value hierarchy: Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity can access at the measurement date. An active market is one in which transactions for an asset or liability occur with sufficient frequency and volume to provide ongoing pricing information. Level 2 – A fair value measurement utilizing inputs other than quoted prices included in Level 1 that are observable, either directly or indirectly, for an asset or liability. Inputs include (i) quoted prices for similar assets or liabilities in active markets, (ii) quoted prices for identical or similar assets or liabilities in markets that are not active, (iii) and inputs other than quoted market prices that are observable for the asset or liability, such as interest rate curves and yield curves observable at commonly quoted intervals, volatilities, and credit spreads. A Level 2 measurement cannot have more than an insignificant portion of its valuation based on unobservable inputs. Instruments in this category include non-exchange-traded derivatives, such as over-the-counter forwards, swaps and options; certain marketable debt securities; and financial instruments traded in less than active markets. Level 3 – Any fair value measurement which includes unobservable inputs for more than an insignificant portion of the valuation. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value. Level 3 measurements may include longer-term instruments that extend into periods in which observable inputs are not available. The 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. Transfers between levels represent assets or liabilities that were previously (i) categorized at a higher level for which the inputs to the estimate became less observable or (ii) classified at a lower level for which the inputs became more observable during the period. The Duke Energy Registrant’s policy is to recognize transfers between levels of the fair value hierarchy at the end of the period. There were no transfers between levels 1 and 2 during the three and nine months ended September 30, 2014 and 2013. Transfers out of Level 3 during the three and nine months ended September 30, 2014 are the result of forward commodity prices becoming observable due to the passage of time. 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 NASDAQ and NYSE. Foreign equity prices are translated from their trading currency using the currency exchange rate in effect at the close of the principal active market. There was no after-hours market activity that was required to be reflected in the reported fair value measurements. Investments in equity securities that are Level 2 or 3 are typically ownership interests in commingled investment funds. 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. Other commodity derivatives are primarily fair valued using internally developed discounted cash flow models which incorporate forward price, adjustments for liquidity (bid-ask spread) and credit or non-performance risk (after reflecting credit enhancements such as collateral), and are discounted to present value. Pricing inputs are derived from published exchange transaction prices and other observable data sources. In the absence of an active market, the last available price may be used. 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 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 fair value of gas commodity contracts by a market participant price verification procedure. This procedure provides a comparison of internal forward commodity curves to market participant generated curves. Interest rate derivatives Most over-the-counter interest rate contract derivatives are valued using financial models which 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. Goodwill, Long-lived Assets and Assets Held for Sale See Note 8 for a discussion of the valuation of goodwill and long-lived assets and Note 2 related to the Midwest Generation Disposal Group. DUKE ENERGY The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets. Derivative amounts in the table below exclude cash collateral, which is disclosed in Note 10. See Note 11 for additional information related to investments by major security type.
| September 30, 2014
(in millions) | Total Fair Value |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Nuclear decommissioning trust fund equity securities | $ | 3,824 |  |  | $ | 3,649 |  |  | $ | 3 |  |  | $ | 172 |
Nuclear decommissioning trust fund debt securities | 1,550 |  |  | 388 |  |  | 1,162 |  |  | — |
Other trading and available-for-sale equity securities | 96 |  |  | 96 |  |  | — |  |  | — |
Other trading and available-for-sale debt securities | 284 |  |  | 31 |  |  | 238 |  |  | 15 |
Derivative assets | 85 |  |  | 6 |  |  | 45 |  |  | 34 |
Total assets | 5,839 |  |  | 4,170 |  |  | 1,448 |  |  | 221 |
Derivative liabilities | (428 | ) |  | (119 | ) |  | (253 | ) |  | (56 | )
Net assets | $ | 5,411 |  |  | $ | 4,051 |  |  | $ | 1,195 |  |  | $ | 165 |
| December 31, 2013
(in millions) | Total Fair Value |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Nuclear decommissioning trust fund equity securities | $ | 3,579 |  |  | $ | 3,495 |  |  | $ | 57 |  |  | $ | 27 |
Nuclear decommissioning trust fund debt securities | 1,553 |  |  | 402 |  |  | 1,100 |  |  | 51 |
Other trading and available-for-sale equity securities | 102 |  |  | 91 |  |  | 11 |  |  | — |
Other trading and available-for-sale debt securities | 333 |  |  | 36 |  |  | 277 |  |  | 20 |
Derivative assets | 145 |  |  | 33 |  |  | 70 |  |  | 42 |
Total assets | 5,712 |  |  | 4,057 |  |  | 1,515 |  |  | 140 |
Derivative liabilities | (321 | ) |  | 11 |  |  | (303 | ) |  | (29 | )
Net assets | $ | 5,391 |  |  | $ | 4,068 |  |  | $ | 1,212 |  |  | $ | 111 |
The following tables provide reconciliations of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements. Amounts included in earnings for derivatives are primarily included in Operating Revenues.
| Three Months Ended September 30, 2014
(in millions) | Investments |  |  | Derivatives (net) |  |  | Total |
Balance at beginning of period | $ | 188 |  |  | $ | 22 |  |  | $ | 210 |
Total pretax realized or unrealized gains (losses) included in earnings | — |  |  | (33 | ) |  | (33 | )
Purchases, sales, issuances and settlements: |  |  |  |  |
Purchases | 13 |  |  | (1 | ) |  | 12 |
Sales | (13 | ) |  | — |  |  | (13 | )
Issuances | — |  |  | 1 |  |  | 1 |
Transfers out of Level 3 due to observability of inputs | — |  |  | (1 | ) |  | (1 | )
Total gains (losses) included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities | 4 |  |  | (10 | ) |  | (6 | )
Balance at end of period | $ | 192 |  |  | $ | (22 | ) |  | $ | 170 |
Pretax amounts included in the Condensed Consolidated Statements of Comprehensive Income related to Level 3 measurements outstanding | $ | — |  |  | $ | (49 | ) |  | $ | (49 | )
| Three Months Ended September 30, 2013
(in millions) | Investments |  |  | Derivatives (net) |  |  | Total |
Balance at beginning of period | $ | 97 |  |  | $ | (87 | ) |  | $ | 10 |
Total pretax realized or unrealized gains (losses) included in earnings | — |  |  | 13 |  |  | 13 |
Total pretax gains included in other comprehensive income | 1 |  |  | — |  |  | 1 |
Purchases, sales, issuances and settlements: |  |  |  |  |
Purchases | 2 |  |  | — |  |  | 2 |
Sales | (2 | ) |  | — |  |  | (2 | )
Issuances | — |  |  | 4 |  |  | 4 |
Settlements | (2 | ) |  | (3 | ) |  | (5 | )
Transfers out of Level 3 due to observability of inputs | — |  |  | 34 |  |  | 34 |
Total gains (losses) included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities | 1 |  |  | 1 |  |  | 2 |
Balance at end of period | $ | 97 |  |  | $ | (38 | ) |  | $ | 59 |
| Nine Months Ended September 30, 2014
(in millions) | Investments |  |  | Derivatives (net) |  |  | Total |
Balance at beginning of period | $ | 98 |  |  | $ | 13 |  |  | $ | 111 |
Total pretax realized or unrealized gains (losses) included in earnings | — |  |  | (21 | ) |  | (21 | )
Purchases, sales, issuances and settlements: |  |  |  |  |
Purchases | 29 |  |  | 50 |  |  | 79 |
Sales | (15 | ) |  | — |  |  | (15 | )
Settlements | — |  |  | (45 | ) |  | (45 | )
Transfers out of Level 3 due to observability of inputs | 68 |  |  | (4 | ) |  | 64 |
Total gains (losses) included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities | 12 |  |  | (15 | ) |  | (3 | )
Balance at end of period | $ | 192 |  |  | $ | (22 | ) |  | $ | 170 |
Pretax amounts included in the Condensed Consolidated Statements of Comprehensive Income related to Level 3 measurements outstanding | $ | — |  |  | $ | (49 | ) |  | $ | (49 | )
| Nine Months Ended September 30, 2013
(in millions) | Investments |  |  | Derivatives (net) |  |  | Total |
Balance at beginning of period | $ | 98 |  |  | $ | (85 | ) |  | $ | 13 |
Total pretax realized or unrealized gains (losses) included in earnings | — |  |  | (8 | ) |  | (8 | )
Total pretax gains included in other comprehensive income | (1 | ) |  | — |  |  | (1 | )
Purchases, sales, issuances and settlements: |  |  |  |  |
Purchases | 5 |  |  | 21 |  |  | 26 |
Sales | (5 | ) |  | — |  |  | (5 | )
Issuances | — |  |  | 9 |  |  | 9 |
Settlements | (3 | ) |  | (5 | ) |  | (8 | )
Transfers out of Level 3 due to observability of inputs | — |  |  | 34 |  |  | 34 |
Total gains (losses) included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities | 3 |  |  | (4 | ) |  | (1 | )
Balance at end of period | $ | 97 |  |  | $ | (38 | ) |  | $ | 59 |
DUKE ENERGY CAROLINAS The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets. Derivative amounts in the table below exclude cash collateral, which is disclosed in Note 10. See Note 11 for additional information related to investments by major security type.
| September 30, 2014
(in millions) | Total Fair Value |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Nuclear decommissioning trust fund equity securities | $ | 2,124 |  |  | $ | 1,949 |  |  | $ | 3 |  |  | $ | 172 |
Nuclear decommissioning trust fund debt securities | 845 |  |  | 150 |  |  | 695 |  |  | — |
Other trading and available-for-sale debt securities | 3 |  |  | — |  |  | — |  |  | 3 |
Net assets | $ | 2,972 |  |  | $ | 2,099 |  |  | $ | 698 |  |  | $ | 175 |
| December 31, 2013
(in millions) | Total Fair Value |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Nuclear decommissioning trust fund equity securities | $ | 1,964 |  |  | $ | 1,879 |  |  | $ | 58 |  |  | $ | 27 |
Nuclear decommissioning trust fund debt securities | 870 |  |  | 168 |  |  | 651 |  |  | 51 |
Other trading and available-for-sale debt securities | 3 |  |  | — |  |  | — |  |  | 3 |
Total assets | 2,837 |  |  | 2,047 |  |  | 709 |  |  | 81 |
Derivative liabilities | (2 | ) |  | — |  |  | — |  |  | (2 | )
Net assets | $ | 2,835 |  |  | $ | 2,047 |  |  | $ | 709 |  |  | $ | 79 |
The following tables provide reconciliations of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements.
| Three Months Ended September 30, 2014
(in millions) | Investments |  |  | Derivatives (net) |  |  | Total |
Balance at beginning of period | $ | 171 |  |  | $ | (3 | ) |  | $ | 168 |
Purchases, sales, issuances and settlements: |  |  |  |  |
Purchases | 13 |  |  | — |  |  | 13 |
Sales | (13 | ) |  | — |  |  | (13 | )
Settlements | — |  |  | 3 |  |  | 3 |
Total gains (losses) included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities | 4 |  |  | — |  |  | 4 |
Balance at end of period | $ | 175 |  |  | $ | — |  |  | $ | 175 |
| Three Months Ended September 30, 2013
(in millions) | Investments |  |  | Derivatives (net) |  |  | Total |
Balance at beginning of period | $ | 74 |  |  | $ | (4 | ) |  | $ | 70 |
Purchases, sales, issuances and settlements: |  |  |  |  |
Purchases | 2 |  |  | — |  |  | 2 |
Sales | (2 | ) |  | — |  |  | (2 | )
Total gains (losses) included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities | 1 |  |  | — |  |  | 1 |
Balance at end of period | $ | 75 |  |  | $ | (4 | ) |  | $ | 71 |
| Nine Months Ended September 30, 2014
(in millions) | Investments |  |  | Derivatives (net) |  |  | Total |
Balance at beginning of period | $ | 81 |  |  | $ | (2 | ) |  | $ | 79 |
Purchases, sales, issuances and settlements: |  |  |  |  |
Purchases | 29 |  |  | — |  |  | 29 |
Sales | (15 | ) |  | — |  |  | (15 | )
Settlements | — |  |  | 2 |  |  | 2 |
Transfers out of Level 3 due to observability of inputs | 68 |  |  | — |  |  | 68 |
Total gains (losses) included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities | 12 |  |  | — |  |  | 12 |
Balance at end of period | $ | 175 |  |  | $ | — |  |  | $ | 175 |
| Nine Months Ended September 30, 2013
(in millions) | Investments |  |  | Derivatives (net) |  |  | Total |
Balance at beginning of period | $ | 72 |  |  | $ | (12 | ) |  | $ | 60 |
Purchases, sales, issuances and settlements: |  |  |  |  |
Purchases | 5 |  |  | — |  |  | 5 |
Sales | (5 | ) |  | — |  |  | (5 | )
Settlements | — |  |  | 8 |  |  | 8 |
Total gains (losses) included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities | 3 |  |  | — |  |  | 3 |
Balance at end of period | $ | 75 |  |  | $ | (4 | ) |  | $ | 71 |
PROGRESS ENERGY The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets. Derivative amounts in the table below exclude cash collateral, which is disclosed in Note 10. See Note 11 for additional information related to investments by major security type.
| September 30, 2014
(in millions) | Total Fair Value |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Nuclear decommissioning trust fund equity securities | $ | 1,700 |  |  | $ | 1,700 |  |  | $ | — |  |  | $ | — |
Nuclear decommissioning trust fund debt securities | 705 |  |  | 238 |  |  | 467 |  |  | — |
Other trading and available-for-sale debt securities | 58 |  |  | 15 |  |  | 43 |  |  | — |
Total assets | 2,463 |  |  | 1,953 |  |  | 510 |  |  | — |
Derivative liabilities | (142 | ) |  | — |  |  | (142 | ) |  | — |
Net assets | $ | 2,321 |  |  | $ | 1,953 |  |  | $ | 368 |  |  | $ | — |
| December 31, 2013
(in millions) | Total Fair Value |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Nuclear decommissioning trust fund equity securities | $ | 1,615 |  |  | $ | 1,615 |  |  | $ | — |  |  | $ | — |
Nuclear decommissioning trust fund debt securities | 677 |  |  | 233 |  |  | 444 |  |  | — |
Other trading and available-for-sale debt securities | 58 |  |  | 19 |  |  | 39 |  |  | — |
Derivative assets | 3 |  |  | — |  |  | 3 |  |  | — |
Total assets | 2,353 |  |  | 1,867 |  |  | 486 |  |  | — |
Derivative liabilities | (187 | ) |  | — |  |  | (187 | ) |  | — |
Net assets | $ | 2,166 |  |  | $ | 1,867 |  |  | $ | 299 |  |  | $ | — |
The following tables provide reconciliations of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements.
| Derivatives (net)
| Three Months Ended September 30, |  | Nine Months Ended September 30,
(in millions) | 2014 |  |  | 2013 |  |  | 2014 |  |  | 2013 |
Balance at beginning of period | $ | — |  |  | $ | (35 | ) |  | $ | — |  |  | $ | (38 | )
Purchases, sales, issuances and settlements: |  |  |  |  |  |  |
Issuances | — |  |  | 2 |  |  | — |  |  | 10 |
Transfers out of Level 3 due to observability of inputs | 2 |  |  | 34 |  |  | — |  |  | 34 |
Total gains included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities | (2 | ) |  | (1 | ) |  | — |  |  | (6 | )
Balance at end of period | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
DUKE ENERGY PROGRESS The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets. Derivative amounts in the table below exclude cash collateral, which is disclosed in Note 10. See Note 11 for additional information related to investments by major security type.
| September 30, 2014
(in millions) | Total Fair Value |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Nuclear decommissioning trust fund equity securities | $ | 1,126 |  |  | $ | 1,126 |  |  | $ | — |  |  | $ | — |
Nuclear decommissioning trust fund debt securities | 497 |  |  | 155 |  |  | 342 |  |  | — |
Other trading and available-for-sale debt securities | 2 |  |  | 2 |  |  | — |  |  | — |
Total assets | 1,625 |  |  | 1,283 |  |  | 342 |  |  | — |
Derivative liabilities | (45 | ) |  | — |  |  | (45 | ) |  | — |
Net assets | $ | 1,580 |  |  | $ | 1,283 |  |  | $ | 297 |  |  | $ | — |
| December 31, 2013
(in millions) | Total Fair Value |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Nuclear decommissioning trust fund equity securities | $ | 1,069 |  |  | $ | 1,069 |  |  | $ | — |  |  | $ | — |
Nuclear decommissioning trust fund debt securities | 470 |  |  | 137 |  |  | 333 |  |  | — |
Other trading and available-for-sale debt securities | 3 |  |  | 3 |  |  | — |  |  | — |
Derivative assets | 1 |  |  | — |  |  | 1 |  |  | — |
Total assets | 1,543 |  |  | 1,209 |  |  | 334 |  |  | — |
Derivative liabilities | (66 | ) |  | — |  |  | (66 | ) |  | — |
Net assets | $ | 1,477 |  |  | $ | 1,209 |  |  | $ | 268 |  |  | $ | — |
The following tables provide reconciliations of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements.
| Derivatives (net)
| Three Months Ended September 30, |  | Nine Months Ended September 30,
(in millions) | 2014 |  |  | 2013 |  |  | 2014 |  |  | 2013 |
Balance at beginning of period | $ | — |  |  | $ | (35 | ) |  | $ | — |  |  | $ | (38 | )
Purchases, sales, issuances and settlements: |  |  |  |  |  |  |
Issuances | — |  |  | — |  |  | — |  |  | 9 |
Settlements | — |  |  | 2 |  |  | — |  |  | — |
Total gains included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities | — |  |  | (1 | ) |  | — |  |  | (5 | )
Transfers out of Level 3 due to observability of inputs | — |  |  | 34 |  |  | — |  |  | 34 |
Balance at end of period | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
DUKE ENERGY FLORIDA The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets. Derivative amounts in the table below exclude cash collateral, which is disclosed in Note 10. See Note 11 for additional information related to investments by major security type.
| September 30, 2014
(in millions) | Total Fair Value |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Nuclear decommissioning trust fund equity securities | $ | 574 |  |  | $ | 574 |  |  | $ | — |  |  | $ | — |
Nuclear decommissioning trust fund debt securities and other | 208 |  |  | 83 |  |  | 125 |  |  | — |
Other trading and available-for-sale debt securities and other | 43 |  |  | — |  |  | 43 |  |  | — |
Derivative assets | 3 |  |  | — |  |  | 3 |  |  | — |
Total assets | 828 |  |  | 657 |  |  | 171 |  |  | — |
Derivative liabilities | (97 | ) |  | — |  |  | (97 | ) |  | — |
Net assets | $ | 731 |  |  | $ | 657 |  |  | $ | 74 |  |  | $ | — |
| December 31, 2013
(in millions) | Total Fair Value |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Nuclear decommissioning trust fund equity securities | $ | 546 |  |  | $ | 546 |  |  | $ | — |  |  | $ | — |
Nuclear decommissioning trust fund debt securities and other | 214 |  |  | 96 |  |  | 118 |  |  | — |
Other trading and available-for-sale debt securities and other | 40 |  |  | 2 |  |  | 38 |  |  | — |
Derivative assets | 1 |  |  | — |  |  | 1 |  |  | — |
Total assets | 801 |  |  | 644 |  |  | 157 |  |  | — |
Derivative liabilities | (116 | ) |  | — |  |  | (116 | ) |  | — |
Net assets | $ | 685 |  |  | $ | 644 |  |  | $ | 41 |  |  | $ | — |
DUKE ENERGY OHIO 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 table below exclude cash collateral, which is disclosed in Note 10.
| September 30, 2014
(in millions) | Total Fair Value |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Derivative assets | $ | 7 |  |  | $ | — |  |  | $ | 3 |  |  | $ | 4 |
Derivative liabilities | (221 | ) |  | (114 | ) |  | (48 | ) |  | (59 | )
Net assets (liabilities) | $ | (214 | ) |  | $ | (114 | ) |  | $ | (45 | ) |  | $ | (55 | )
| December 31, 2013
(in millions) | Total Fair Value |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Derivative assets | $ | 96 |  |  | $ | 50 |  |  | $ | 21 |  |  | $ | 25 |
Derivative liabilities | (95 | ) |  | (1 | ) |  | (65 | ) |  | (29 | )
Net assets (liabilities) | $ | 1 |  |  | $ | 49 |  |  | $ | (44 | ) |  | $ | (4 | )
The following tables provide reconciliations of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements.
| Derivatives (net)
| Three Months Ended September 30, |  | Nine Months Ended September 30,
(in millions) | 2014 |  |  | 2013 |  |  | 2014 |  |  | 2013 |
Balance at beginning of period | $ | (28 | ) |  | $ | (19 | ) |  | $ | (4 | ) |  | $ | (6 | )
Total pretax realized or unrealized gains (losses) included in earnings | (24 | ) |  | 11 |  |  | (43 | ) |  | (4 | )
Purchases, sales, issuances and settlements: |  |  |  |  |  |  |
Purchases | — |  |  | — |  |  | 1 |  |  | 1 |
Settlements | (2 | ) |  | 2 |  |  | (6 | ) |  | — |
Total gains included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities | (1 | ) |  | — |  |  | 1 |  |  | 3 |
Transfers out of Level 3 due to observability of inputs | — |  |  | — |  |  | (4 | ) |  | — |
Balance at end of period | $ | (55 | ) |  | $ | (6 | ) |  | $ | (55 | ) |  | $ | (6 | )
Pretax amounts included in the Condensed Consolidated Statements of Operations and Comprehensive Income related to Level 3 measurements outstanding at June 30, 2014 |  |  |  |  |  | $ | (52 | ) |  |
DUKE ENERGY INDIANA The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets. Derivative amounts in the table below exclude cash collateral, which is disclosed in Note 10. See Note 11 for additional information related to investments by major security type.
| September 30, 2014
(in millions) | Total Fair Value |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Available-for-sale equity securities | $ | 69 |  |  | $ | 69 |  |  | $ | — |  |  | $ | — |
Available-for-sale debt securities | 30 |  |  | — |  |  | 30 |  |  | — |
Derivative assets | 23 |  |  | 1 |  |  | — |  |  | 22 |
Net assets | $ | 122 |  |  | $ | 70 |  |  | $ | 30 |  |  | $ | 22 |
| December 31, 2013
(in millions) | Total Fair Value |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Available-for-sale equity securities | $ | 65 |  |  | $ | 65 |  |  | $ | — |  |  | $ | — |
Available-for-sale debt securities | 29 |  |  | — |  |  | 29 |  |  | — |
Derivative assets | 12 |  |  | — |  |  | — |  |  | 12 |
Net assets | $ | 106 |  |  | $ | 65 |  |  | $ | 29 |  |  | $ | 12 |
The following tables provide reconciliations of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements.
| Derivatives (net)
| Three Months Ended September 30, |  | Nine Months Ended September 30,
(in millions) | 2014 |  |  | 2013 |  |  | 2014 |  |  | 2013 |
Balance at beginning of period | $ | 45 |  |  | $ | 18 |  |  | $ | 12 |  |  | $ | 10 |
Total pretax realized or unrealized gains (losses) included in earnings | (13 | ) |  | 3 |  |  | 14 |  |  | 5 |
Purchases, sales, issuances and settlements: |  |  |  |  |  |  |
Purchases | — |  |  | — |  |  | 49 |  |  | 20 |
Settlements | — |  |  | (10 | ) |  | (38 | ) |  | (23 | )
Total gains included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities | (10 | ) |  | 3 |  |  | (15 | ) |  | 2 |
Balance at end of period | $ | 22 |  |  | $ | 14 |  |  | $ | 22 |  |  | $ | 14 |
QUANTITATIVE DISCLOSURES ABOUT UNOBSERVABLE INPUTS The following table includes quantitative information about the Duke Energy Registrants' derivatives classified as Level 3.
| September 30, 2014
Investment Type | Fair Value (in millions) |  | Valuation Technique | Unobservable Input | Range |  |
Duke Energy |  |  |  |  |  |
Natural gas contracts | $ | (33 | ) | Discounted cash flow | Forward natural gas curves - price per MMBtu | $ | 2.45 |  | - | $ | 4.66 |
Financial transmission rights (FTRs) | 22 |  | RTO auction pricing | FTR price - per MWh | (2.47 | ) | - | 12.92 |
Electricity contracts | (2 | ) | Discounted cash flow | Forward electricity curves - price per MWh | 25.18 |  | - | 59.17 |
Commodity capacity option contracts | 5 |  | Discounted cash flow | Forward capacity option curves - price per MW day | 28.60 |  | - | 189.25 |
Reserves | (14 | ) |  | Bid-ask spreads, implied volatility, probability of default |  |  |
Total Level 3 derivatives | $ | (22 | ) |  |  |  |  |
Duke Energy Ohio |  |  |  |  |  |
Electricity contracts | $ | (10 | ) | Discounted cash flow | Forward electricity curves - price per MWh | 25.35 |  | - | 59.60 |
Natural gas contracts | (33 | ) | Discounted cash flow | Forward natural gas curves - price per MMBtu | 2.45 |  | - | 4.66 |
Reserves | (12 | ) |  | Bid-ask spreads, implied volatility, probability of default |  |  |
Total Level 3 derivatives | $ | (55 | ) |  |  |  |  |
Duke Energy Indiana |  |  |  |  |  |
FTRs | $ | 22 |  | RTO auction pricing | FTR price - per MWh | (2.47 | ) | - | 12.92 |
| December 31, 2013
Investment Type | Fair Value (in millions) |  | Valuation Technique | Unobservable Input | Range |  |
Duke Energy |  |  |  |  |  |
Natural gas contracts | $ | (2 | ) | Discounted cash flow | Forward natural gas curves - price per MMBtu | $ | 3.07 |  | - | $ | 5.37 |
FERC mitigation power sale agreements | (2 | ) | Discounted cash flow | Forward electricity curves - price per MWh | 25.79 |  | - | 52.38 |
Financial transmission rights (FTRs) | 12 |  | RTO auction pricing | FTR price - per MWh | (0.30 | ) | - | 13.80 |
Electricity contracts | 23 |  | Discounted cash flow | Forward electricity curves - price per MWh | 20.77 |  | - | 58.90 |
Commodity capacity option contracts | 4 |  | Discounted cash flow | Forward capacity option curves - price per MW day | 30.40 |  | - | 165.10 |
Reserves | (22 | ) |  | Bid-ask spreads, implied volatility, probability of default |  |  |
Total Level 3 derivatives | $ | 13 |  |  |  |  |  |
Duke Energy Carolinas |  |  |  |  |  |
FERC mitigation power sale agreements | $ | (2 | ) | Discounted cash flow | Forward electricity curves - price per MWh | 25.79 |  | - | 52.38 |
Duke Energy Ohio |  |  |  |  |  |
Electricity contracts | $ | 18 |  | Discounted cash flow | Forward electricity curves - price per MWh | 20.77 |  | - | 58.90 |
Natural gas contracts | (2 | ) | Discounted cash flow | Forward natural gas curves - price per MMBtu | 3.07 |  | - | 5.37 |
Reserves | (20 | ) |  | Bid-ask spreads, implied volatility, probability of default |  |  |
Total Level 3 derivatives | $ | (4 | ) |  |  |  |  |
Duke Energy Indiana |  |  |  |  |  |
FTRs | $ | 12 |  | RTO auction pricing | FTR price - per MWh | (0.30 | ) | - | 13.80 |
OTHER FAIR VALUE DISCLOSURES The fair value and book value of long-term debt, including current maturities, is summarized in the following table. Estimates determined are not necessarily indicative of amounts that could have been settled in current markets. Fair value of long-term debt uses Level 2 measurements.
| September 30, 2014 |  | December 31, 2013
(in millions) | Book Value |  | Fair Value |  |  | Book Value |  | Fair Value |
Duke Energy | $ | 39,858 |  | $ | 43,602 |  |  | $ | 40,256 |  | $ | 42,592 |
Duke Energy Carolinas | 8,394 |  | 9,426 |  |  | 8,436 |  | 9,123 |
Progress Energy | 14,512 |  | 16,305 |  |  | 14,115 |  | 15,234 |
Duke Energy Progress | 5,716 |  | 6,013 |  |  | 5,235 |  | 5,323 |
Duke Energy Florida | 5,102 |  | 5,867 |  |  | 4,886 |  | 5,408 |
Duke Energy Ohio | 1,783 |  | 1,967 |  |  | 2,188 |  | 2,237 |
Duke Energy Indiana | 3,795 |  | 4,356 |  |  | 3,796 |  | 4,171 |
At both September 30, 2014 and December 31, 2013, the fair value of cash and cash equivalents, accounts and notes receivable, accounts payable, notes payable and commercial paper, and non-recourse notes payable of variable interest entities 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.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=35750535&loc=d3e13537-108611 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=35750535&loc=d3e13433-108611 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=36462937&loc=d3e19207-110258 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=35750535&loc=d3e13504-108611 + Details
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