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Variable Interest Entities | 9 Months Ended
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Sep. 30, 2015
Variable Interest Entities [Abstract] |
Variable Interest Entities | VARIABLE INTEREST ENTITIES A VIE is an entity that is evaluated for consolidation using more than a simple analysis of voting control. The analysis to determine whether an entity is a VIE considers contracts with an entity, credit support for an entity, the adequacy of the equity investment of an entity and the relationship of voting power to the amount of equity invested in an entity. This analysis is performed either upon the creation of a legal entity or upon the occurrence of an event requiring reevaluation, such as a significant change in an entity’s assets or activities. A qualitative analysis of control determines the party that consolidates a VIE. This assessment is based on (i) what party has the power to direct the activities of the VIE that most significantly impact its economic performance and (ii) what party has rights to receive benefits or is obligated to absorb losses that could potentially be significant to the VIE. The analysis of the party that consolidates a VIE is a continual reassessment. No financial support was provided to any of the consolidated VIEs during the nine months ended September 30, 2015 and the year ended December 31, 2014, or is expected to be provided in the future, that was not previously contractually required. CONSOLIDATED VIEs The following tables summarize the impact of VIEs consolidated by Duke Energy and the Subsidiary Registrants on the Condensed Consolidated Balance Sheets.
| September 30, 2015
| Duke Energy
| Duke |  |  | Duke |  |  | Duke |  |  |  |  |  |  |  |  |
| Energy |  |  | Energy |  |  | Energy |  |  |  |  |  |  |  |  |
| Carolinas |  |  | Progress |  |  | Florida |  |  |  |  |  |  |  |  |
(in millions) | DERF |  |  | DEPR(c) |  |  | DEFR(c) |  |  | CRC |  |  | Renewables |  |  | Other |  |  | Total |
ASSETS |  |  |  |  |  |  |  |  |  |  |  |  |
Current Assets |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and Cash Equivalents | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 2 |  |  | $ | — |  |  | $ | 2 |
Restricted receivables of variable interest entities (net of allowance for doubtful accounts) | 687 |  |  | 468 |  |  | 395 |  |  | 453 |  |  | 12 |  |  | 22 |  |  | 2,037 |
Other | — |  |  | 1 |  |  | 2 |  |  | — |  |  | 215 |  |  | 4 |  |  | 222 |
Investments and Other Assets |  |  |  |  |  |  |  |  |  |  |  |  |
Other | — |  |  | — |  |  | — |  |  | — |  |  | 20 |  |  | 5 |  |  | 25 |
Property, Plant and Equipment |  |  |  |  |  |  |  |  |  |  |  |  |
Property, plant and equipment, cost(a) | — |  |  | — |  |  | — |  |  | — |  |  | 1,926 |  |  | 19 |  |  | 1,945 |
Accumulated depreciation and amortization | — |  |  | — |  |  | — |  |  | — |  |  | (302 | ) |  | (5 | ) |  | (307 | )
Regulatory Assets and Deferred Debits |  |  |  |  |  |  |  |  |  |  |  |  |
Other | — |  |  | — |  |  | — |  |  | — |  |  | 37 |  |  | 1 |  |  | 38 |
Total assets | $ | 687 |  |  | $ | 469 |  |  | $ | 397 |  |  | $ | 453 |  |  | $ | 1,910 |  |  | $ | 46 |  |  | $ | 3,962 |
LIABILITIES AND EQUITY |  |  |  |  |  |  |  |  |  |  |  |  |
Current Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |
Accounts payable | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 6 |  |  | $ | — |  |  | $ | 6 |
Taxes accrued | 5 |  |  | 3 |  |  | 1 |  |  | — |  |  | 6 |  |  | — |  |  | 15 |
Current maturities of long-term debt | — |  |  | — |  |  | — |  |  | — |  |  | 73 |  |  | 18 |  |  | 91 |
Other | — |  |  | — |  |  | — |  |  | — |  |  | 23 |  |  | 4 |  |  | 27 |
Long-Term Debt(b) | 400 |  |  | 300 |  |  | 225 |  |  | 325 |  |  | 916 |  |  | 3 |  |  | 2,169 |
Deferred Credits and Other Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |
Deferred income taxes | — |  |  | — |  |  | — |  |  | — |  |  | 325 |  |  | — |  |  | 325 |
Asset retirement obligations | — |  |  | — |  |  | — |  |  | — |  |  | 30 |  |  | — |  |  | 30 |
Other | — |  |  | — |  |  | — |  |  | — |  |  | 42 |  |  | — |  |  | 42 |
Total liabilities | $ | 405 |  |  | $ | 303 |  |  | $ | 226 |  |  | $ | 325 |  |  | $ | 1,421 |  |  | $ | 25 |  |  | $ | 2,705 |
Net assets of consolidated variable interest entities | $ | 282 |  |  | $ | 166 |  |  | $ | 171 |  |  | $ | 128 |  |  | $ | 489 |  |  | $ | 21 |  |  | $ | 1,257 |
(a) Restricted as collateral for nonrecourse debt of VIEs. (b) Nonrecourse to the general assets of the applicable registrant.
(c) | The amount for Progress Energy is equal to the sum of the amounts for Duke Energy Progress Receivables Company, LLC (DEPR) and Duke Energy Florida Receivables Company, LLC (DEFR).
| December 31, 2014
| Duke Energy
| Duke |  |  | Duke |  |  | Duke |  |  |  |  |  |  |  |  |
| Energy |  |  | Energy |  |  | Energy |  |  |  |  |  |  |  |  |
| Carolinas |  |  | Progress |  |  | Florida |  |  |  |  |  |  |  |  |
(in millions) | DERF |  |  | DEPR(c) |  |  | DEFR(c) |  |  | CRC |  |  | Renewables |  |  | Other |  |  | Total |
ASSETS |  |  |  |  |  |  |  |  |  |  |  |  |
Current Assets |  |  |  |  |  |  |  |  |  |  |  |  |
Restricted receivables of variable interest entities (net of allowance for doubtful accounts) | $ | 647 |  |  | $ | 436 |  |  | $ | 305 |  |  | $ | 547 |  |  | $ | 20 |  |  | $ | 18 |  |  | $ | 1,973 |
Other | — |  |  | — |  |  | — |  |  | — |  |  | 68 |  |  | 6 |  |  | 74 |
Investments and Other Assets |  |  |  |  |  |  |  |  |  |  |  |  |
Other | — |  |  | — |  |  | — |  |  | — |  |  | 25 |  |  | 25 |  |  | 50 |
Property, Plant and Equipment |  |  |  |  |  |  |  |  |  |  |  |  |
Property, plant and equipment, cost(a) | — |  |  | — |  |  | — |  |  | — |  |  | 1,855 |  |  | 18 |  |  | 1,873 |
Accumulated depreciation and amortization | — |  |  | — |  |  | — |  |  | — |  |  | (250 | ) |  | (5 | ) |  | (255 | )
Regulatory Assets and Deferred Debits |  |  |  |  |  |  |  |  |  |  |  |  |
Other | — |  |  | — |  |  | — |  |  | — |  |  | 34 |  |  | 2 |  |  | 36 |
Total assets | $ | 647 |  |  | $ | 436 |  |  | $ | 305 |  |  | $ | 547 |  |  | $ | 1,752 |  |  | $ | 64 |  |  | $ | 3,751 |
LIABILITIES AND EQUITY |  |  |  |  |  |  |  |  |  |  |  |  |
Current Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |
Accounts payable | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 3 |  |  | $ | — |  |  | $ | 3 |
Taxes accrued | — |  |  | — |  |  | — |  |  | — |  |  | 6 |  |  | — |  |  | 6 |
Current maturities of long-term debt | — |  |  | — |  |  | — |  |  | — |  |  | 68 |  |  | 16 |  |  | 84 |
Other | — |  |  | — |  |  | — |  |  | — |  |  | 16 |  |  | 5 |  |  | 21 |
Long-Term Debt(b) | 400 |  |  | 300 |  |  | 225 |  |  | 325 |  |  | 967 |  |  | 17 |  |  | 2,234 |
Deferred Credits and Other Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |
Deferred income taxes | — |  |  | — |  |  | — |  |  | — |  |  | 283 |  |  | — |  |  | 283 |
Asset retirement obligations | — |  |  | — |  |  | — |  |  | — |  |  | 29 |  |  | — |  |  | 29 |
Other | — |  |  | — |  |  | — |  |  | — |  |  | 34 |  |  | 4 |  |  | 38 |
Total liabilities | $ | 400 |  |  | $ | 300 |  |  | $ | 225 |  |  | $ | 325 |  |  | $ | 1,406 |  |  | $ | 42 |  |  | $ | 2,698 |
Net assets of consolidated variable interest entities | $ | 247 |  |  | $ | 136 |  |  | $ | 80 |  |  | $ | 222 |  |  | $ | 346 |  |  | $ | 22 |  |  | $ | 1,053 |
(a) Restricted as collateral for nonrecourse debt of VIEs. (b) Nonrecourse to the general assets of the applicable registrant.
(c) | The amount for Progress Energy is equal to the sum of the amounts for DEPR and DEFR.
The obligations of these VIEs are nonrecourse to Duke Energy, Duke Energy Carolinas, Progress Energy, Duke Energy Progress and Duke Energy Florida. These entities have no requirement to provide liquidity to, purchase assets of or guarantee performance of these VIEs unless noted in the following paragraphs. DERF / DEPR / DEFR Duke Energy Receivables Finance Company, LLC (DERF), DEPR and DEFR are bankruptcy remote, special purpose subsidiaries of Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida, respectively. On a daily basis, DERF, DEPR and DEFR buy certain accounts receivable arising from the sale of electricity and/or related services from their parent companies. DERF, DEPR and DEFR are wholly owned limited liability companies with separate legal existence from their parents, and their assets are not generally available to creditors of their parent companies. DERF, DEPR and DEFR borrow amounts under credit facilities to buy the receivables. Borrowing availability is limited to the amount of qualified receivables sold, which is generally expected to be in excess of the credit facilities. The credit facilities are reflected on the Condensed Consolidated Balance Sheets as Long-Term Debt. The secured credit facilities were not structured to meet the criteria for sale accounting treatment under the accounting guidance for transfers and servicing of financial assets. The following table summarizes the amounts and expiration dates of the credit facilities reflected on the Condensed Consolidated Balance Sheets as Long-Term Debt.
| DERF |  | DEPR |  | DEFR |
Credit facility amount (in millions) | $ | 400 |  | $ | 300 |  | $ | 225 |
Expiration date | December 2016 |  | December 2016 |  | March 2017 |
The activities that most significantly impact 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 consolidate DERF, DEPR and DEFR, respectively, as they are the related parties most closely associated with the VIE. CRC On a revolving basis, CRC buys certain accounts receivable arising from the sale of electricity and/or related services from Duke Energy Ohio and Duke Energy Indiana. Receivables sold are securitized by CRC through a credit facility managed by two unrelated third parties. The proceeds Duke Energy Ohio and Duke Energy Indiana receive from the sale of receivables to CRC are typically 75 percent cash and 25 percent in the form of a subordinated note from CRC. The subordinated note is a retained interest in the receivables sold. Cash collections from the receivables are the sole source of funds to satisfy the related debt obligation. Depending on experience with collections, additional equity infusions to CRC may be required by Duke Energy to maintain a minimum equity balance of $3 million. Borrowing availability is limited to the amount of qualified receivables sold, which is generally expected to be in excess of the credit facility. The credit facility expires in November 2016 and is reflected on the Condensed Consolidated Balance Sheets as Long-Term Debt. 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 are not performed by the equity holder, Cinergy, and (iii) deficiencies in net worth of CRC are not funded by Cinergy, but by Duke Energy. The most significant activities of CRC are decisions made related to the management of delinquent receivables. Duke Energy consolidates CRC as it makes these decisions. Neither Duke Energy Ohio nor Duke Energy Indiana consolidate CRC. Renewables Certain of Duke Energy’s renewable energy facilities are VIEs due to long-term fixed-price power purchase agreements. These fixed-price agreements effectively transfer commodity price risk to the buyer of the power. Certain other of Duke Energy’s renewable energy facilities are VIEs due to Duke Energy issuing guarantees for debt service and operations and maintenance reserves in support of debt financings. For certain VIEs, assets are restricted and cannot be pledged as collateral or sold to third parties without prior approval of debt holders. The activities that most significantly impact the economic performance of these renewable energy facilities were decisions associated with siting, negotiating purchase power agreements, engineering, procurement and construction, and decisions associated with ongoing operations and maintenance-related activities. Duke Energy consolidates the entities as it makes all of these decisions. NON-CONSOLIDATED VIEs The following tables include VIEs not consolidated and how these entities impact the Condensed Consolidated Balance Sheets.
| September 30, 2015
| Duke Energy |  | Duke |  |  | Duke |
|  |  |  |  |  |  | Energy |  |  | Energy |
(in millions) | Renewables |  |  | Other |  |  | Total |  |  | Ohio |  |  | Indiana |
Receivables | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 43 |  |  | $ | 64 |
Investments in equity method unconsolidated affiliates | 223 |  |  | 125 |  |  | 348 |  |  | — |  |  | — |
Total assets | $ | 223 |  |  | $ | 125 |  |  | $ | 348 |  |  | $ | 43 |  |  | $ | 64 |
Other current liabilities | — |  |  | 2 |  |  | 2 |  |  | — |  |  | — |
Deferred credits and other liabilities | — |  |  | 14 |  |  | 14 |  |  | — |  |  | — |
Total liabilities | $ | — |  |  | $ | 16 |  |  | $ | 16 |  |  | $ | — |  |  | $ | — |
Net assets | $ | 223 |  |  | $ | 109 |  |  | $ | 332 |  |  | $ | 43 |  |  | $ | 64 |
| December 31, 2014
| Duke Energy |  | Duke |  |  | Duke |
|  |  |  |  |  |  | Energy |  |  | Energy |
(in millions) | Renewables |  |  | Other |  |  | Total |  |  | Ohio |  |  | Indiana |
Receivables | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 91 |  |  | $ | 113 |
Investments in equity method unconsolidated affiliates | 150 |  |  | 38 |  |  | 188 |  |  | — |  |  | — |
Investments and other assets | — |  |  | 4 |  |  | 4 |  |  | — |  |  | — |
Total assets | $ | 150 |  |  | $ | 42 |  |  | $ | 192 |  |  | $ | 91 |  |  | $ | 113 |
Other current liabilities | — |  |  | 3 |  |  | 3 |  |  | — |  |  | — |
Deferred credits and other liabilities | — |  |  | 14 |  |  | 14 |  |  | — |  |  | — |
Total liabilities | $ | — |  |  | $ | 17 |  |  | $ | 17 |  |  | $ | — |  |  | $ | — |
Net assets | $ | 150 |  |  | $ | 25 |  |  | $ | 175 |  |  | $ | 91 |  |  | $ | 113 |
The Duke Energy Registrants are not aware of any situations where the maximum exposure to loss significantly exceeds the carrying values shown above except for the power purchase agreement with OVEC, which is discussed below, and various guarantees, reflected in the table above as Deferred credits and other liabilities. For more information on various guarantees, refer to Note 5, "Commitments and Contingencies." Renewables Duke Energy has investments in various renewable energy project entities. Some of these entities are VIEs due to long-term fixed-price power purchase agreements. These fixed-price agreements effectively transfer commodity price risk to the buyer of the power. Duke Energy does not consolidate these VIEs because power to direct and control key activities is shared jointly by Duke Energy and other owners. Other Duke Energy holds a 50 percent equity interest in Duke-American Transmission Company, LLC (DATC). DATC is considered a VIE due to insufficient equity at risk to permit DATC to finance its own activities without additional subordinated financial support. The activities that most significantly impact DATC’s economic performance are the decisions related to investing in existing and development of new transmission facilities. The power to direct these activities is jointly and equally shared by Duke Energy and the other joint venture partner and, therefore, Duke Energy does not consolidate. Duke Energy has a 40 percent equity interest and a 7.5 percent equity interest in ACP and Sabal Trail Transmission, LLC (Sabal Trail), respectively. These entities are considered VIEs as their equity is not sufficient to permit the entities to finance their activities without additional subordinated financial support. The activity that most significantly impacts the economic performance of both ACP and Sabal Trail is construction. Duke Energy does not control these activities and therefore does not consolidate ACP or Sabal Trail. OVEC Duke Energy Ohio’s 9 percent ownership interest in OVEC is considered a non-consolidated VIE. Through its ownership interest in OVEC, Duke Energy Ohio has a contractual arrangement to buy power from OVEC’s power plants through June 2040. Proceeds from the sale of power by OVEC to its power purchase agreement counterparties are designed to be sufficient to meet its operating expenses, fixed costs, debt amortization and interest expense, as well as earn a return on equity. Accordingly, the value of this contract is subject to variability due to fluctuations in power prices and changes in OVEC’s costs of business, including costs associated with its 2,256 MW of coal-fired generation capacity. Proposed environmental rule-making could increase the costs of OVEC, which would be passed through to Duke Energy Ohio. In 2014, Duke Energy Ohio recorded a $94 million impairment related to OVEC. CRC See discussion under Consolidated VIEs for additional information related to CRC. Amounts included in Receivables 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. Carrying values of retained interests are determined by allocating carrying value of the receivables between assets sold and interests retained based on relative fair value. The allocated bases of the subordinated notes are not materially different than their face value because (i) the receivables generally turn over in less than two months, (ii) credit losses are reasonably predictable due to the broad customer base and lack of significant concentration, and (iii) the equity in CRC is subordinate to all retained interests and thus would absorb losses first. The hypothetical effect on fair value of the retained interests assuming both a 10 percent and a 20 percent unfavorable variation in credit losses or discount rates is not material due to the short turnover of receivables and historically low credit loss history. Interest accrues to Duke Energy Ohio and Duke Energy Indiana on the retained interests using the acceptable yield method. This method generally approximates the stated rate on the notes since the allocated basis and the face value are nearly equivalent. An impairment charge is recorded against the carrying value of both retained interests and purchased beneficial interest whenever it is determined that an other-than-temporary impairment has occurred. Key assumptions used in estimating fair value are detailed in the following table.
| Duke Energy Ohio |  | Duke Energy Indiana
| 2015 |  |  | 2014 |  |  | 2015 |  |  | 2014 |
Anticipated credit loss ratio | 0.6 | % |  | 0.6 | % |  | 0.3 | % |  | 0.3 | %
Discount rate | 1.2 | % |  | 1.2 | % |  | 1.2 | % |  | 1.2 | %
Receivable turnover rate | 12.9 | % |  | 12.8 | % |  | 10.6 | % |  | 10.5 | %
The following table shows the gross and net receivables sold.
| Duke Energy Ohio |  | Duke Energy Indiana
(in millions) | September 30, 2015 |  |  | December 31, 2014 |  |  | September 30, 2015 |  |  | December 31, 2014 |
Receivables sold | $ | 221 |  |  | $ | 273 |  |  | $ | 271 |  |  | $ | 310 |
Less: Retained interests | 43 |  |  | 91 |  |  | 64 |  |  | 113 |
Net receivables sold | $ | 178 |  |  | $ | 182 |  |  | $ | 207 |  |  | $ | 197 |
The following table shows sales and cash flows related to receivables sold.
| Duke Energy Ohio |  | Duke Energy Indiana
| Three Months Ended |  | Nine Months Ended |  | Three Months Ended |  | Nine Months Ended
| September 30, |  | September 30, |  | September 30, |  | September 30,
(in millions) | 2015 |  |  | 2014 |  |  | 2015 |  |  | 2014 |  |  | 2015 |  |  | 2014 |  |  | 2015 |  |  | 2014 |
Sales |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Receivables sold | $ | 449 |  |  | $ | 477 |  |  | $ | 1,518 |  |  | $ | 1,705 |  |  | $ | 679 |  |  | $ | 739 |  |  | $ | 2,032 |  |  | $ | 2,173 |
Loss recognized on sale | 2 |  |  | 3 |  |  | 7 |  |  | 9 |  |  | 3 |  |  | 3 |  |  | 8 |  |  | 8 |
Cash flows |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash proceeds from receivables sold | 461 |  |  | 494 |  |  | 1,568 |  |  | 1,761 |  |  | 692 |  |  | 759 |  |  | 2,074 |  |  | 2,233 |
Collection fees received | — |  |  | — |  |  | 1 |  |  | 1 |  |  | — |  |  | — |  |  | 1 |  |  | 1 |
Return received on retained interests | — |  |  | — |  |  | 2 |  |  | 3 |  |  | 1 |  |  | 2 |  |  | 4 |  |  | 5 |
Cash flows from sales of receivables are reflected within Operating Activities on Duke Energy Ohio’s and Duke Energy Indiana’s Condensed Consolidated Statements of Cash Flows. Collection fees received in connection with servicing transferred accounts receivable are included in Operation, maintenance and other on Duke Energy Ohio’s and Duke Energy Indiana’s Condensed Consolidated Statements of Operations and Comprehensive Income. The loss recognized on sales of receivables is calculated monthly by multiplying receivables sold during the month by the required discount. The required discount is derived monthly utilizing a three-year weighted-average formula that considers charge-off history, late charge history and turnover history on the sold receivables, as well as a component for the time value of money. The discount rate, or component for the time value of money, is the prior month-end London Interbank Offered Rate (LIBOR) plus a fixed rate of 1.00 percent.

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- Definition Variable Interest Entities [Abstract] + References No definition available. + Details
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- Definition The entire disclosure for a variable interest entity (VIE), including but not limited to, judgments and assumptions in determining whether to consolidate and in identifying the primary beneficiary, gain (loss) recognized on the initial consolidation of the VIE, terms of arrangements, amounts and classification of the VIE's assets and liabilities, and the entity's maximum exposure to loss. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -SubTopic 10 -Section 50 -Paragraph 5A -URI http://asc.fasb.org/extlink&oid=52262685&loc=SL6759159-111685 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=52262685&loc=d3e5728-111685 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=52262685&loc=d3e5710-111685 + Details
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