XML 195 R27.htm IDEA: XBRL DOCUMENT
v3.19.3.a.u2

Variable Interest Entities | 12 Months Ended
--- | ---
Dec. 31, 2019
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. 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. No financial support was provided to any of the consolidated VIEs during the years ended December 31, 2019, 2018, and 2017, 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. The sole source of funds to satisfy the related debt obligations is cash collections from the receivables. Amounts borrowed under the credit facilities are reflected on the Consolidated Balance Sheets as 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. 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 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 75% cash and 25% 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 $3 million. 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 The following table summarizes the amounts and expiration dates of the credit facilities and associated restricted receivables described above.
| Duke Energy
|  |  | Duke Energy |  |  | Duke Energy |  |  | Duke Energy |
|  |  | Carolinas |  |  | Progress |  |  | Florida |
(in millions) | CRC |  |  | DERF |  |  | DEPR |  |  | DEFR |
Expiration date | February 2023 |  |  | December 2022 |  |  | February 2021 |  |  | April 2021 |
Credit facility amount | $ | 350 |  |  | $ | 475 |  |  | $ | 325 |  |  | $ | 250 |
Amounts borrowed at December 31, 2019 | 350 |  |  | 474 |  |  | 325 |  |  | 250 |
Amounts borrowed at December 31, 2018 | 325 |  |  | 450 |  |  | 300 |  |  | 225 |
Restricted Receivables at December 31, 2019 | 522 |  |  | 642 |  |  | 489 |  |  | 336 |
Restricted Receivables at December 31, 2018 | 564 |  |  | 699 |  |  | 547 |  |  | 357 |
Nuclear Asset-Recovery Bonds – Duke Energy Florida Project Finance, LLC (DEFPF) 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. The following table summarizes the impact of DEFPF on Duke Energy Florida's Consolidated Balance Sheets.
| December 31,
(in millions) | 2019 |  | 2018 |
Receivables of VIEs | $ | 5 |  | $ | 5 |
Regulatory Assets: Current | 52 |  | 52 |
Current Assets: Other | 39 |  | 39 |
Other Noncurrent Assets: Regulatory assets | 989 |  | 1,041 |
Current Liabilities: Other | 10 |  | 10 |
Current maturities of long-term debt | 54 |  | 53 |
Long-Term Debt | 1,057 |  | 1,111 |
Commercial Renewables Certain 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. Assets are restricted and cannot be pledged as collateral or sold to third parties without prior approval of debt holders. Additionally, Duke Energy has VIEs associated with tax equity arrangements entered into with third-party investors in order to finance the cost of renewable assets eligible for tax credits. The activities that most significantly impacted the economic performance of these renewable energy facilities were decisions associated with siting, negotiating PPAs and EPC agreements, and decisions associated with ongoing operations and maintenance-related activities. Duke Energy is considered the primary beneficiary and consolidates the entities as it is responsible for all of these decisions. The table below presents material balances reported on Duke Energy's Consolidated Balance Sheets related to Commercial Renewables VIEs.
| December 31,
(in millions) | 2019 |  | 2018 |
Current Assets: Other | $ | 203 |  | $ | 123 |
Property, Plant and Equipment: Cost | 5,747 |  | 4,007 |
Accumulated depreciation and amortization | (1,041 | ) | (698 | )
Other Noncurrent Assets: Other | 106 |  | 261 |
Current maturities of long-term debt | 162 |  | 174 |
Long-Term Debt | 1,541 |  | 1,587 |
Other Noncurrent Liabilities: AROs | 127 |  | 106 |
Other Noncurrent Liabilities: Other | 228 |  | 212 |
NON-CONSOLIDATED VIEs The following tables summarize the impact of non-consolidated VIEs on the Consolidated Balance Sheets.
| December 31, 2019
| Duke Energy |  | Duke |  |  | Duke |
| Pipeline |  |  | Commercial |  |  | Other |  |  |  |  | Energy |  |  | Energy |
(in millions) | Investments |  |  | Renewables |  |  | VIEs(a) |  |  | Total |  |  | Ohio |  |  | Indiana |
Receivables from affiliated companies | $ | — |  |  | $ | (1 | ) |  | $ | — |  |  | $ | (1 | ) |  | $ | 64 |  |  | $ | 77 |
Investments in equity method unconsolidated affiliates | 1,179 |  |  | 300 |  |  | — |  |  | 1,479 |  |  | — |  |  | — |
Total assets | $ | 1,179 |  |  | $ | 299 |  |  | $ | — |  |  | $ | 1,478 |  |  | $ | 64 |  |  | $ | 77 |
Taxes accrued | (1 | ) |  | — |  |  | — |  |  | (1 | ) |  | — |  |  | — |
Other current liabilities | — |  |  | — |  |  | 4 |  |  | 4 |  |  | — |  |  | — |
Deferred income taxes | 59 |  |  | — |  |  | — |  |  | 59 |  |  | — |  |  | — |
Other noncurrent liabilities | — |  |  | — |  |  | 11 |  |  | 11 |  |  | — |  |  | — |
Total liabilities | $ | 58 |  |  | $ | — |  |  | $ | 15 |  |  | $ | 73 |  |  | $ | — |  |  | $ | — |
Net assets (liabilities) | $ | 1,121 |  |  | $ | 299 |  |  | $ | (15 | ) |  | $ | 1,405 |  |  | $ | 64 |  |  | $ | 77 |
(a) | Duke Energy holds a 50% equity interest in Pioneer. As of December 31, 2018, Pioneer was considered a VIE due to having insufficient equity to finance its own activities without subordinated financial support. In October 2019, Pioneer closed on a private placement debt offering that gave Pioneer sufficient equity to finance its own activities and, therefore, is no longer considered a VIE. Duke Energy's investment in Pioneer was $57 million at December 31, 2019.
| December 31, 2018
| Duke Energy |  | Duke |  |  | Duke |
| Pipeline |  |  | Commercial |  |  | Other |  |  |  |  | Energy |  |  | Energy |
(in millions) | Investments |  |  | Renewables |  |  | VIEs |  |  | Total |  |  | Ohio |  |  | Indiana |
Receivables from affiliated companies | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 93 |  |  | $ | 118 |
Investments in equity method unconsolidated affiliates | 822 |  |  | 190 |  |  | 48 |  |  | 1,060 |  |  | — |  |  | — |
Total assets | $ | 822 |  |  | $ | 190 |  |  | $ | 48 |  |  | $ | 1,060 |  |  | $ | 93 |  |  | $ | 118 |
Taxes accrued | (1 | ) |  | — |  |  | — |  |  | (1 | ) |  | — |  |  | — |
Other current liabilities | — |  |  | — |  |  | 4 |  |  | 4 |  |  | — |  |  | — |
Deferred income taxes | 21 |  |  | — |  |  | — |  |  | 21 |  |  | — |  |  | — |
Other noncurrent liabilities | — |  |  | — |  |  | 12 |  |  | 12 |  |  | — |  |  | — |
Total liabilities | $ | 20 |  |  | $ | — |  |  | $ | 16 |  |  | $ | 36 |  |  | $ | — |  |  | $ | — |
Net assets | $ | 802 |  |  | $ | 190 |  |  | $ | 32 |  |  | $ | 1,024 |  |  | $ | 93 |  |  | $ | 118 |
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 PPA with OVEC, which is discussed below, and various guarantees, including Duke Energy's guarantee agreement to support its share of the ACP revolving credit facility. Duke Energy's maximum exposure to loss under the terms of the guarantee is $827 million, which represents 47% of the outstanding borrowings under the credit facility as of December 31, 2019. For more information on various guarantees, refer to Note 8. Pipeline Investments Duke Energy has investments in various joint ventures with pipeline projects currently under construction. 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. The table below presents Duke Energy's ownership interest and investment balances in these joint ventures.
|  |  | VIE Investment Amount (in millions)
| Ownership |  | December 31, |  | December 31,
Entity Name | Interest |  | 2019 |  | 2018
ACP(a) | 47 | % |  | $ | 1,179 |  |  | $ | 797 |
Constitution(b) | 24 | % |  | — |  |  | 25 |
Total |  |  | $ | 1,179 |  |  | $ | 822 |
(a) | Duke Energy evaluated this investment for impairment as of December 31, 2019, and 2018, and determined that fair value approximated carrying value and therefore no impairment was necessary.
(b) | During the years ended December 31, 2019, and 2018, Duke Energy recorded an OTTI of $25 million and $55 million, respectively, related to Constitution within Equity in earnings of unconsolidated affiliates on Duke Energy's Consolidated Statements of Income. The current year charge resulted in the full write-down of Duke Energy's investment in Constitution. See Notes 4 and 13 for additional information.
Commercial Renewables Duke Energy has investments in various renewable energy project entities. Some of these entities are VIEs due to Duke Energy issuing guarantees for debt service and operations and maintenance reserves in support of debt financings. Duke Energy does not consolidate these VIEs because power to direct and control key activities is shared jointly by Duke Energy and other owners. In 2019, Duke Energy acquired a majority ownership in a portfolio of distributed fuel cell projects from Bloom Energy Corporation. Duke Energy is not the primary beneficiary of the assets within the portfolio and does not consolidate the assets in the portfolio. OVEC Duke Energy Ohio’s 9% ownership interest in OVEC is considered a non-consolidated VIE due to OVEC having insufficient equity to finance its activities without subordinated financial support. The activities that most significantly impact OVEC's economic performance include fuel strategy and supply activities and decisions associated with ongoing operations and maintenance-related activities. Duke Energy Ohio does not have the unilateral power to direct these activities, and therefore, does not consolidate OVEC. As a counterparty to an Inter-Company Power Agreement (ICPA), Duke Energy Ohio has a contractual arrangement to receive entitlements to capacity and energy from OVEC’s power plants through June 2040 commensurate with its power participation ratio, which is equivalent to Duke Energy Ohio's ownership interest. Costs, including fuel, operating expenses, fixed costs, debt amortization and interest expense, are allocated to counterparties to the ICPA based on their power participation ratio. The value of the ICPA is subject to variability due to fluctuation in power prices and changes in OVEC's cost of business. On March 31, 2018, FES, a subsidiary of FirstEnergy Corp. and an ICPA counterparty with a power participation ratio of 4.85%, filed for Chapter 11 bankruptcy, which could increase costs allocated to the counterparties. On July 31, 2018, the bankruptcy court rejected the FES ICPA, which means OVEC is an unsecured creditor in the FES bankruptcy proceeding. Duke Energy Ohio cannot predict the impact of the bankruptcy filing on its OVEC interests. In addition, certain proposed environmental rulemaking could result in future increased OVEC cost allocations. See Note 4 for additional information. 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. 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 turnover 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% and a 20% 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 OTTI has occurred. Key assumptions used in estimating fair value are detailed in the following table.
| Duke Energy Ohio |  | Duke Energy Indiana
| 2019 |  |  | 2018 |  |  | 2019 |  |  | 2018 |
Anticipated credit loss ratio | 0.6 | % |  | 0.5 | % |  | 0.3 | % |  | 0.3 | %
Discount rate | 3.3 | % |  | 3.0 | % |  | 3.3 | % |  | 3.0 | %
Receivable turnover rate | 13.4 | % |  | 13.5 | % |  | 11.5 | % |  | 11.0 | %
The following table shows the gross and net receivables sold.
| Duke Energy Ohio |  | Duke Energy Indiana
| December 31, |  | December 31,
(in millions) | 2019 |  |  | 2018 |  |  | 2019 |  |  | 2018 |
Receivables sold | $ | 253 |  |  | $ | 269 |  |  | $ | 307 |  |  | $ | 336 |
Less: Retained interests | 64 |  |  | 93 |  |  | 77 |  |  | 118 |
Net receivables sold | $ | 189 |  |  | $ | 176 |  |  | $ | 230 |  |  | $ | 218 |
The following table shows sales and cash flows related to receivables sold.
| Duke Energy Ohio |  | Duke Energy Indiana
| Years Ended December 31, |  | Years Ended December 31,
(in millions) | 2019 |  |  | 2018 |  |  | 2017 |  |  | 2019 |  |  | 2018 |  |  | 2017 |
Sales |  |  |  |  |  |  |  |  |  |  |
Receivables sold | $ | 1,979 |  |  | $ | 1,987 |  |  | $ | 1,879 |  |  | $ | 2,837 |  |  | $ | 2,842 |  |  | $ | 2,711 |
Loss recognized on sale | 14 |  |  | 13 |  |  | 10 |  |  | 17 |  |  | 16 |  |  | 12 |
Cash flows |  |  |  |  |  |  |  |  |  |  |
Cash proceeds from receivables sold | 1,993 |  |  | 1,967 |  |  | 1,865 |  |  | 2,860 |  |  | 2,815 |  |  | 2,694 |
Collection fees received | 1 |  |  | 1 |  |  | 1 |  |  | 1 |  |  | 1 |  |  | 1 |
Return received on retained interests | 6 |  |  | 6 |  |  | 3 |  |  | 9 |  |  | 9 |  |  | 7 |
Cash flows from sales of receivables are reflected within Cash Flows From Operating Activities on Duke Energy Ohio’s and Duke Energy Indiana’s 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 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 LIBOR plus a fixed rate of 1.00%.

X
- Definition Variable Interest Entities [Abstract] + References No definition available. + Details
Name: | duk_VariableInterestEntitiesAbstract
Namespace Prefix: | duk_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -URI http://asc.fasb.org/topic&trid=2197479 + Details
Name: | us-gaap_VariableInterestEntityDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration