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Variable Interest Entities | 9 Months Ended
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Sep. 30, 2020
Variable Interest Entities [Abstract] |
Variable Interest Entities | VARIABLE 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. No financial support was provided to any of the consolidated VIEs during the nine months ended September 30, 2020, and the year ended December 31, 2019, 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 credit facilities for DERF and DEPR are reflected on the Condensed Consolidated Balance Sheets as Long-Term Debt. Amounts borrowed under the credit facilities for DEFR are reflected on the Condensed Consolidated Balance Sheets as Current maturities of long-term debt. Due to the COVID-19 pandemic, as described in Note 1, the Duke Energy Registrants suspended customer disconnections for nonpayment. Since taking action to suspend customer disconnections for nonpayment, certain jurisdictions have now returned to normal operations and billing practices. The full impact of COVID-19 and the Duke Energy Registrant’s related response on customers’ ability to pay for service is uncertain. However, the level of past-due receivables at Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida have increased significantly during the COVID-19 pandemic, and it is reasonably possible eventual write-offs of customer receivables may increase over current estimates. In the second quarter of 2020, DERF, DEPR and DEFR executed amendments to their credit facilities to manage the impact of past-due receivables resulting from the suspension of customer disconnections from COVID-19. In the third quarter of 2020, DERF executed another amendment to lengthen the terms of the amendment executed in the second quarter. See Note 3 for information about COVID-19 filings with state utility commissions. 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 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. Due to the COVID-19 pandemic, as described in Note 1, the Duke Energy Registrants suspended customer disconnections for nonpayment. Since taking action to suspend customer disconnections for nonpayment, certain jurisdictions have now returned to normal operations and billing practices. The full impact of COVID-19 and the Duke Energy Registrant’s related response on customers’ ability to pay for service is uncertain. However, the level of past-due receivables at Duke Energy Ohio and Duke Energy Indiana have increased significantly during the COVID-19 pandemic, and it is reasonably possible eventual write-offs of customer receivables may increase over current estimates. In July of 2020, CRC executed an amendment to its credit facility to manage the impact of past-due receivables resulting from the suspension of customer disconnections from COVID-19. See Note 3 for information about COVID-19 filings with state utility commissions. 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 |  |  | April 2023 |  |  | April 2021 |
Credit facility amount | $ | 350 |  |  | $ | 475 |  |  | $ | 350 |  |  | $ | 250 |
Amounts borrowed at September 30, 2020 | 350 |  |  | 475 |  |  | 350 |  |  | 250 |
Amounts borrowed at December 31, 2019 | 350 |  |  | 474 |  |  | 325 |  |  | 250 |
Restricted Receivables at September 30, 2020 | 479 |  |  | 770 |  |  | 559 |  |  | 506 |
Restricted Receivables at December 31, 2019 | 522 |  |  | 642 |  |  | 489 |  |  | 336 |
Nuclear Asset-Recovery Bonds – 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 Condensed Consolidated Balance Sheets.
(in millions) | September 30, 2020 |  | December 31, 2019 |
Receivables of VIEs | $ | 6 |  | $ | 5 |
Regulatory Assets: Current | 53 |  | 52 |
Current Assets: Other | 16 |  | 39 |
Other Noncurrent Assets: Regulatory assets | 951 |  | 989 |
Current Liabilities: Other | 2 |  | 10 |
Current maturities of long-term debt | 55 |  | 54 |
Long-Term Debt | 1,001 |  | 1,057 |
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 Engineering, Procurement and Construction 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 Condensed Consolidated Balance Sheets related to Commercial Renewables VIEs.
(in millions) | September 30, 2020 |  | December 31, 2019 |
Current Assets: Other | $ | 319 |  | $ | 203 |
Property, Plant and Equipment: Cost | 6,239 |  | 5,747 |
Accumulated depreciation and amortization | (1,200 | ) | (1,041 | )
Other Noncurrent Assets: Other | 79 |  | 106 |
Current maturities of long-term debt | 161 |  | 162 |
Long-Term Debt | 1,452 |  | 1,541 |
Other Noncurrent Liabilities: AROs | 150 |  | 127 |
Other Noncurrent Liabilities: Other | 342 |  | 228 |
NON-CONSOLIDATED VIEs The following tables summarize the impact of non-consolidated VIEs on the Condensed Consolidated Balance Sheets.
| September 30, 2020
| Duke Energy |  | Duke |  |  | Duke |
| Pipeline |  |  | Commercial |  |  | Other |  |  |  |  | Energy |  |  | Energy |
(in millions) | Investments |  |  | Renewables |  |  | VIEs |  |  | Total |  |  | Ohio |  |  | Indiana |
Receivables from affiliated companies | $ | — |  |  | $ | (1 | ) |  | $ | — |  |  | $ | (1 | ) |  | $ | 45 |  |  | $ | 74 |
Other current assets | 413 |  |  | — |  |  | — |  |  | 413 |  |  | — |  |  | $ | — |
Investments in equity method unconsolidated affiliates | — |  |  | 487 |  |  | 1 |  |  | 488 |  |  | — |  |  | — |
Deferred tax asset | 26 |  |  | — |  |  | — |  |  | 26 |  |  | — |  |  | — |
Total assets | $ | 439 |  |  | $ | 486 |  |  | $ | 1 |  |  | $ | 926 |  |  | $ | 45 |  |  | $ | 74 |
Other current liabilities | 927 |  |  | — |  |  | 3 |  |  | 930 |  |  | — |  |  | — |
Other noncurrent liabilities | 19 |  |  | — |  |  | 10 |  |  | 29 |  |  | — |  |  | — |
Total liabilities | $ | 946 |  |  | $ | — |  |  | $ | 13 |  |  | $ | 959 |  |  | $ | — |  |  | $ | — |
Net (liabilities) assets | $ | (507 | ) |  | $ | 486 |  |  | $ | (12 | ) |  | $ | (33 | ) |  | $ | 45 |  |  | $ | 74 |
| December 31, 2019
| Duke Energy |  | Duke |  |  | Duke |
| Pipeline |  |  | Commercial |  |  | Other |  |  |  |  | Energy |  |  | Energy |
(in millions) | Investments |  |  | Renewables |  |  | VIEs |  |  | 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 |
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 future exit costs associated with the cancellation of the ACP pipeline, as discussed below. Pipeline Investments Duke Energy has investments in various joint ventures to construct and operate pipeline 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. On July 5, 2020, Duke Energy determined that it would no longer invest in the construction of the ACP pipeline. See Notes 1, 3 and 4 for further information regarding this transaction. For the three and nine months ended September 30, 2020, the ACP investment is considered a significant subsidiary because its income (loss) exceeds 10% of Duke Energy’s income (loss). The table below presents unaudited summarized financial information for ACP.
| Three Months Ended September 30, | Nine Months Ended September 30,
(in millions) | 2020 |  | 2019 |  | 2020 |  | 2019 |
Net (Loss) Income | $ | (163 | ) | $ | 65 |  | $ | (4,505 | ) | $ | 178 |
The table below presents Duke Energy's ownership interest and investment balances in these joint ventures.
|  |  | VIE Investment Amount (in millions)
| Ownership |  | September 30, |  | December 31,
Entity Name | Interest |  | 2020 |  | 2019
ACP(a) | 47 | % |  | $ | (927 | ) |  | $ | 1,179 |
Constitution(b) | 24 | % |  | — |  |  | — |
Total |  |  | $ | (927 | ) |  | $ | 1,179 |
(a) | During the quarter ended June 30, 2020, Duke Energy determined that it would no longer continue its investment in ACP as described above. The current liability related to the cancellation of the ACP pipeline project represents Duke Energy's continuing obligation to fund its share of ACP's obligations. See Notes 1, 3 and 4 for more information.
(b) | During the year ended December 31, 2019, Duke Energy recorded an other-than-temporary impairment related to Constitution. This charge resulted in the full write-down of Duke Energy's investment in Constitution.
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. Other 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, FirstEnergy Solutions Corp (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. In addition, certain proposed environmental rulemaking could result in future increased OVEC cost allocations. In July 2020, legislation was proposed to repeal HB 6. Duke Energy cannot predict the outcome in this matter. See Note 3 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. The following table shows the gross and net receivables sold.
| Duke Energy Ohio |  | Duke Energy Indiana
(in millions) | September 30, 2020 |  |  | December 31, 2019 |  |  | September 30, 2020 |  |  | December 31, 2019 |
Receivables sold | $ | 226 |  |  | $ | 253 |  |  | $ | 310 |  |  | $ | 307 |
Less: Retained interests | 45 |  |  | 64 |  |  | 74 |  |  | 77 |
Net receivables sold | $ | 181 |  |  | $ | 189 |  |  | $ | 236 |  |  | $ | 230 |
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) | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Sales |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Receivables sold | $ | 462 |  |  | $ | 479 |  |  | $ | 1,428 |  |  | $ | 1,483 |  |  | $ | 717 |  |  | $ | 762 |  |  | $ | 1,947 |  |  | $ | 2,172 |
Loss recognized on sale | 2 |  |  | 4 |  |  | 8 |  |  | 11 |  |  | 3 |  |  | 4 |  |  | 9 |  |  | 13 |
Cash flows |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash proceeds from receivables sold | $ | 449 |  |  | $ | 471 |  |  | $ | 1,439 |  |  | $ | 1,516 |  |  | $ | 689 |  |  | $ | 762 |  |  | $ | 1,941 |  |  | $ | 2,200 |
Collection fees received | 1 |  |  | — |  |  | 1 |  |  | 1 |  |  | — |  |  | — |  |  | 1 |  |  | 1 |
Return received on retained interests | 1 |  |  | 1 |  |  | 3 |  |  | 5 |  |  | 1 |  |  | 2 |  |  | 4 |  |  | 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 Condensed Consolidated Statements of Cash Flows.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -URI http://asc.fasb.org/topic&trid=2197479 + Details
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