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Fair Value Measurements | 3 Months Ended
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Mar. 31, 2022
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 as defined by GAAP. Certain investments are not categorized within the fair value hierarchy. These investments are measured at fair value using the net asset value (NAV) per share practical expedient. The NAV is derived based on the investment cost, less any impairment, plus or minus changes resulting from observable price changes for an identical or similar investment of the same issuer. Fair value accounting guidance permits entities to elect to measure certain financial instruments that are not required to be accounted for at fair value, such as equity method investments or the company’s own debt, at fair value. The Duke Energy Registrants have not elected to record any of these items at fair value. Valuation methods of the primary fair value measurements disclosed below are as follows. Investments in equity securities The majority of investments in equity securities are valued using Level 1 measurements. Investments in equity securities are typically valued at the closing price in the principal active market as of the last business day of the quarter. Principal active markets for equity prices include published exchanges such as the New York Stock Exchange and Nasdaq Stock Market. Foreign equity prices are translated from their trading currency using the currency exchange rate in effect at the close of the principal active market. There was no after-hours market activity that was required to be reflected in the reported fair value measurements. Investments in debt securities Most investments in debt securities are valued using Level 2 measurements because the valuations use interest rate curves and credit spreads applied to the terms of the debt instrument (maturity and coupon interest rate) and consider the counterparty credit rating. If the market for a particular fixed-income security is relatively inactive or illiquid, the measurement is Level 3. Commodity derivatives Commodity derivatives with clearinghouses are classified as Level 1. Commodity derivatives with observable forward curves are classified as Level 2. If forward price curves are not observable for the full term of the contract and the unobservable period had more than an insignificant impact on the valuation, the commodity derivative is classified as Level 3. In isolation, increases (decreases) in natural gas forward prices result in favorable (unfavorable) fair value adjustments for natural gas purchase contracts; and increases (decreases) in electricity forward prices result in unfavorable (favorable) fair value adjustments for electricity sales contracts. Duke Energy regularly evaluates and validates pricing inputs used to estimate the fair value of natural 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 that utilize observable inputs for similar instruments and are classified as Level 2. Inputs include forward interest rate curves, notional amounts, interest rates and credit quality of the counterparties. Other fair value considerations See Note 11 in Duke Energy's Annual Report on Form 10-K for the year ended December 31, 2021, for a discussion of the valuation of goodwill and intangible assets. 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 tables below for all Duke Energy Registrants exclude cash collateral, which is disclosed in Note 8. See Note 9 for additional information related to investments by major security type for the Duke Energy Registrants.
| March 31, 2022
(in millions) | Total Fair Value | Level 1 | Level 2 | Level 3 | Not Categorized
NDTF cash and cash equivalents | $ | 128 |  | $ | 128 |  | $ | — |  | $ | — |  | $ | — |
NDTF equity securities | 6,853 |  | 6,806 |  | — |  | — |  | 47 |
NDTF debt securities | 2,845 |  | 947 |  | 1,898 |  | — |  | — |
Other equity securities | 147 |  | 147 |  | — |  | — |  | — |
Other debt securities | 288 |  | 39 |  | 249 |  | — |  | — |
Other cash and cash equivalents | 110 |  | 110 |  | — |  | — |  | — |
Derivative assets | 1,108 |  | 27 |  | 1,071 |  | 10 |  | — |
Total assets | 11,479 |  | 8,204 |  | 3,218 |  | 10 |  | 47 |
Derivative liabilities | (433) |  | — |  | (224) |  | (209) |  | — |
Net assets (liabilities) | $ | 11,046 |  | $ | 8,204 |  | $ | 2,994 |  | $ | (199) |  | $ | 47 |
| December 31, 2021
(in millions) | Total Fair Value | Level 1 | Level 2 | Level 3 | Not Categorized
NDTF cash and cash equivalents | $ | 160 |  | $ | 160 |  | $ | — |  | $ | — |  | $ | — |
NDTF equity securities | 7,350 |  | 7,300 |  | — |  | — |  | 50 |
NDTF debt securities | 2,891 |  | 967 |  | 1,924 |  | — |  | — |
Other equity securities | 156 |  | 156 |  | — |  | — |  | — |
Other debt securities | 300 |  | 45 |  | 255 |  | — |  | — |
Other cash and cash equivalents | 36 |  | 36 |  | — |  | — |  | — |
Derivative assets | 320 |  | 3 |  | 293 |  | 24 |  | — |
Total assets | 11,213 |  | 8,667 |  | 2,472 |  | 24 |  | 50 |
Derivative liabilities | (472) |  | (13) |  | (314) |  | (145) |  | — |
Net assets (liabilities) | $ | 10,741 |  | $ | 8,654 |  | $ | 2,158 |  | $ | (121) |  | $ | 50 |
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 March 31,
(in millions) |  |  |  |  | 2022 |  | 2021
Balance at beginning of period |  |  |  |  | $ | (121) |  |  | $ | (77) |
Total pretax realized or unrealized losses included in comprehensive income |  |  |  |  | (68) |  |  | (44) |
Purchases, sales, issuances and settlements: |  |  |  |  |  |  |
Settlements |  |  |  |  | (3) |  |  | (7) |
Total (losses) gains included on the Condensed Consolidated Balance Sheet |  |  |  |  | (7) |  |  | 2 |
Balance at end of period |  |  |  |  | $ | (199) |  |  | $ | (126) |
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.
| March 31, 2022
(in millions) | Total Fair Value | Level 1 | Level 2 |  | Not Categorized
NDTF cash and cash equivalents | $ | 60 |  | $ | 60 |  | $ | — |  |  | $ | — |
NDTF equity securities | 3,962 |  | 3,915 |  | — |  |  | 47 |
NDTF debt securities | 1,419 |  | 349 |  | 1,070 |  |  | — |
Derivative assets | 493 |  | — |  | 493 |  |  | — |
Total assets | 5,934 |  | 4,324 |  | 1,563 |  |  | 47 |
Derivative liabilities | (37) |  | — |  | (37) |  |  | — |
Net assets | $ | 5,897 |  | $ | 4,324 |  | $ | 1,526 |  |  | $ | 47 |
| December 31, 2021
(in millions) | Total Fair Value | Level 1 | Level 2 |  | Not Categorized
NDTF cash and cash equivalents | $ | 53 |  | $ | 53 |  | $ | — |  |  | $ | — |
NDTF equity securities | 4,265 |  | 4,215 |  | — |  |  | 50 |
NDTF debt securities | 1,441 |  | 339 |  | 1,102 |  |  | — |
Derivative assets | 162 |  | — |  | 162 |  |  | — |
Total assets | 5,921 |  | 4,607 |  | 1,264 |  |  | 50 |
Derivative liabilities | (35) |  | — |  | (35) |  |  | — |
Net assets | $ | 5,886 |  | $ | 4,607 |  | $ | 1,229 |  |  | $ | 50 |
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.
| March 31, 2022 |  | December 31, 2021 |  |
(in millions) | Total Fair Value | Level 1 | Level 2 |  | Total Fair Value | Level 1 | Level 2 |  |  |  |  |  |
NDTF cash and cash equivalents | $ | 68 |  | $ | 68 |  | $ | — |  |  | $ | 107 |  | $ | 107 |  | $ | — |  |  |  |  |  |  |
NDTF equity securities | 2,891 |  | 2,891 |  | — |  |  | 3,085 |  | 3,085 |  | — |  |  |  |  |  |  |
NDTF debt securities | 1,426 |  | 598 |  | 828 |  |  | 1,450 |  | 628 |  | 822 |  |  |  |  |  |  |
Other debt securities | 26 |  | — |  | 26 |  |  | 26 |  | — |  | 26 |  |  |  |  |  |  |
Other cash and cash equivalents | 17 |  | 17 |  | — |  |  | 20 |  | 20 |  | — |  |  |  |  |  |  |
Derivative assets | 425 |  | 2 |  | 423 |  |  | 124 |  | — |  | 124 |  |  |  |  |  |  |
Total assets | 4,853 |  | 3,576 |  | 1,277 |  |  | 4,812 |  | 3,840 |  | 972 |  |  |  |  |  |  |
Derivative liabilities | — |  | — |  | — |  |  | (24) |  | — |  | (24) |  |  |  |  |  |  |
Net assets | $ | 4,853 |  | $ | 3,576 |  | $ | 1,277 |  |  | $ | 4,788 |  | $ | 3,840 |  | $ | 948 |  |  |  |  |  |  |
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.
| March 31, 2022 |  | December 31, 2021 |  |
(in millions) | Total Fair Value | Level 1 | Level 2 |  | Total Fair Value | Level 1 | Level 2 |  |  |  |  |  |
NDTF cash and cash equivalents | $ | 58 |  | $ | 58 |  | $ | — |  |  | $ | 94 |  | $ | 94 |  | $ | — |  |  |  |  |  |  |
NDTF equity securities | 2,782 |  | 2,782 |  | — |  |  | 2,970 |  | 2,970 |  | — |  |  |  |  |  |  |
NDTF debt securities | 1,031 |  | 279 |  | 752 |  |  | 1,025 |  | 289 |  | 736 |  |  |  |  |  |  |
Other cash and cash equivalents | 14 |  | 14 |  | — |  |  | 16 |  | 16 |  | — |  |  |  |  |  |  |
Derivative assets | 385 |  | 2 |  | 383 |  |  | 124 |  | — |  | 124 |  |  |  |  |  |  |
Total assets | 4,270 |  | 3,135 |  | 1,135 |  |  | 4,229 |  | 3,369 |  | 860 |  |  |  |  |  |  |
Derivative liabilities | — |  | — |  | — |  |  | (10) |  | — |  | (10) |  |  |  |  |  |  |
Net assets | $ | 4,270 |  | $ | 3,135 |  | $ | 1,135 |  |  | $ | 4,219 |  | $ | 3,369 |  | $ | 850 |  |  |  |  |  |  |
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.
| March 31, 2022 |  | December 31, 2021 |  |
(in millions) | Total Fair Value | Level 1 | Level 2 |  | Total Fair Value | Level 1 | Level 2 |  |  |  |  |  |
NDTF cash and cash equivalents | $ | 10 |  | $ | 10 |  | $ | — |  |  | $ | 13 |  | $ | 13 |  | $ | — |  |  |  |  |  |  |
NDTF equity securities | 109 |  | 109 |  | — |  |  | 115 |  | 115 |  | — |  |  |  |  |  |  |
NDTF debt securities | 395 |  | 319 |  | 76 |  |  | 425 |  | 339 |  | 86 |  |  |  |  |  |  |
Other debt securities | 26 |  | — |  | 26 |  |  | 26 |  | — |  | 26 |  |  |  |  |  |  |
Other cash and cash equivalents | 2 |  | 2 |  | — |  |  | 3 |  | 3 |  | — |  |  |  |  |  |  |
Derivative assets | 40 |  | — |  | 40 |  |  | — |  | — |  | — |  |  |  |  |  |  |
Total assets | 582 |  | 440 |  | 142 |  |  | 582 |  | 470 |  | 112 |  |  |  |  |  |  |
Derivative liabilities | — |  | — |  | — |  |  | (14) |  | — |  | (14) |  |  |  |  |  |  |
Net assets | $ | 582 |  | $ | 440 |  | $ | 142 |  |  | $ | 568 |  | $ | 470 |  | $ | 98 |  |  |  |  |  |  |
DUKE ENERGY OHIO The recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets were not material at March 31, 2022, and December 31, 2021. 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.
| March 31, 2022 |  | December 31, 2021 |  |
(in millions) | Total Fair Value | Level 1 | Level 2 | Level 3 |  | Total Fair Value | Level 1 | Level 2 | Level 3 |  |  |  |  |
Other equity securities | $ | 91 |  | $ | 91 |  | $ | — |  | $ | — |  |  | $ | 97 |  | $ | 97 |  | $ | — |  | $ | — |  |  |  |  |  |
Other debt securities | 63 |  | — |  | 63 |  | — |  |  | 64 |  | — |  | 64 |  | — |  |  |  |  |  |
Other cash and cash equivalents | 1 |  | 1 |  | — |  | — |  |  | — |  | — |  | — |  | — |  |  |  |  |  |
Derivative assets | 45 |  | 18 |  | 17 |  | 10 |  |  | 23 |  | 1 |  | — |  | 22 |  |  |  |  |  |
Total assets | 200 |  | 110 |  | 80 |  | 10 |  |  | 184 |  | 98 |  | 64 |  | 22 |  |  |  |  |  |
Derivative liabilities | — |  | — |  | — |  | — |  |  | (27) |  | (13) |  | (14) |  | — |  |  |  |  |  |
Net assets | $ | 200 |  | $ | 110 |  | $ | 80 |  | $ | 10 |  |  | $ | 157 |  | $ | 85 |  | $ | 50 |  | $ | 22 |  |  |  |  |  |
The following table provides a reconciliation of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements.
|  |  |  |  | Derivatives (net)
|  |  | Three Months Ended March 31,
(in millions) |  |  |  |  | 2022 |  | 2021
Balance at beginning of period |  |  |  |  | $ | 22 |  |  | $ | 6 |
Purchases, sales, issuances and settlements: |  |  |  |  |  |  |
Settlements |  |  |  |  | (6) |  |  | (6) |
Total (losses) gains included on the Condensed Consolidated Balance Sheet |  |  |  |  | (6) |  |  | 2 |
Balance at end of period |  |  |  |  | $ | 10 |  |  | $ | 2 |
PIEDMONT The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets.
| March 31, 2022 |  | December 31, 2021
(in millions) | Total Fair Value | Level 1 | Level 2 |  |  | Total Fair Value | Level 1 | Level 2 |
Derivative assets | $ | 7 |  | $ | 7 |  | $ | — |  |  |  | $ | 3 |  | $ | 3 |  | $ | — |  |
Derivative liabilities | (173) |  | — |  | (173) |  |  |  | (139) |  | — |  | (139) |  |
Net (liabilities) assets | $ | (166) |  | $ | 7 |  | $ | (173) |  |  |  | $ | (136) |  | $ | 3 |  | $ | (139) |  |
QUANTITATIVE INFORMATION ABOUT UNOBSERVABLE INPUTS The following tables include quantitative information about the Duke Energy Registrants' derivatives classified as Level 3.
| March 31, 2022
|  |  |  |  |  |  | Weighted
| Fair Value |  |  |  |  |  | Average
Investment Type | (in millions) | Valuation Technique | Unobservable Input | Range | Range
Duke Energy |  |  |  |  |  |  |
Electricity contracts | $ | (210) |  | RTO forward pricing | Forward electricity curves – price per MWh | $ | 20.33 |  | - | $ | 187.82 |  | $ | 46.51 |
Duke Energy Ohio |  |  |  |  |  |  |
FTRs | 1 |  | RTO auction pricing | FTR price – per MWh | 0.16 |  | - | 1.26 |  | 0.63 |
Duke Energy Indiana |  |  |  |  |  |  |
FTRs | 10 |  | RTO auction pricing | FTR price – per MWh | (0.46) |  | - | 17.24 |  | 2.32 |
Duke Energy |  |  |  |  |  |  |
Total Level 3 derivatives | $ | (199) |  |  |  |  |  |  |
| December 31, 2021
|  |  |  |  |  |  | Weighted
| Fair Value |  |  |  |  |  | Average
Investment Type | (in millions) | Valuation Technique | Unobservable Input | Range | Range
Duke Energy |  |  |  |  |  |  |
Electricity contracts | $ | (145) |  | RTO forward pricing | Forward electricity curves – price per MWh | $ | 19.04 |  | - | $139.11 | $37.57
Duke Energy Ohio |  |  |  |  |  |  |
FTRs | 2 |  | RTO auction pricing | FTR price – per MWh | 0.06 |  | - | 1.79 |  | 0.96 |
Duke Energy Indiana |  |  |  |  |  |  |
FTRs | 22 |  | RTO auction pricing | FTR price – per MWh | (1.18) |  | - | 13.11 |  | 2.68 |
Duke Energy |  |  |  |  |  |  |
Total Level 3 derivatives | $ | (121) |  |  |  |  |  |  |
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.
| March 31, 2022 |  | December 31, 2021
(in millions) | Book Value |  | Fair Value |  | Book Value |  | Fair Value
Duke Energy(a) | $ | 66,080 |  |  | $ | 66,633 |  |  | $ | 63,835 |  |  | $ | 69,683 |
Duke Energy Carolinas | 14,470 |  |  | 15,117 |  |  | 13,275 |  |  | 15,101 |
Progress Energy | 21,657 |  |  | 22,669 |  |  | 20,823 |  |  | 23,751 |
Duke Energy Progress | 11,114 |  |  | 11,260 |  |  | 10,249 |  |  | 11,252 |
Duke Energy Florida | 8,451 |  |  | 8,911 |  |  | 8,482 |  |  | 9,772 |
Duke Energy Ohio | 3,193 |  |  | 3,278 |  |  | 3,193 |  |  | 3,570 |
Duke Energy Indiana | 4,270 |  |  | 4,554 |  |  | 4,323 |  |  | 5,067 |
Piedmont | 2,969 |  |  | 2,984 |  |  | 2,968 |  |  | 3,278 |
(a)Book value of long-term debt inc ludes $1.2 billion and $1.25 billion at March 31, 2022, and December 31, 2021, respectively, of net unamortized debt discount and premium of purchase accounting adjustments related to the mergers with Progress Energy and Piedmont that are excluded from fair value of long-term debt. At both March 31, 2022, and December 31, 2021, fair value of cash and cash equivalents, accounts and notes receivable, accounts payable, notes payable and commercial paper and nonrecourse notes payable of VIEs are not materially different from their carrying amounts because of the short-term nature of these instruments and/or because the stated rates approximate market rates.

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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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=123874694&loc=d3e19207-110258 + Details
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