filings.toolsDuke Energy 10-Q 2022-09-30
Filed 2022-11-04. 7 sections, 673K characters. Original on sec.gov · Markdown · JSON
Cover and table of contents
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2022
OR
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
| Commission file number | Registrant, State of Incorporation or Organization, Address of Principal Executive Offices and Telephone Number | IRS Employer Identification Number | |||||||||
 | |||||||||||
| 1-32853 | DUKE ENERGY CORPORATION | 20-2777218 |
(a Delaware corporation)
526 South Church Street
Charlotte, North Carolina 28202-1803
704-382-3853
| 1-4928 | DUKE ENERGY CAROLINAS, LLC | 56-0205520 |
(a North Carolina limited liability company)
526 South Church Street
Charlotte, North Carolina 28202-1803
704-382-3853
| 1-15929 | PROGRESS ENERGY, INC. | 56-2155481 |
(a North Carolina corporation)
410 South Wilmington Street
Raleigh, North Carolina 27601-1748
704-382-3853
| 1-3382 | DUKE ENERGY PROGRESS, LLC | 56-0165465 |
(a North Carolina limited liability company)
410 South Wilmington Street
Raleigh, North Carolina 27601-1748
704-382-3853
| 1-3274 | DUKE ENERGY FLORIDA, LLC | 59-0247770 |
(a Florida limited liability company)
299 First Avenue North
St. Petersburg, Florida 33701
704-382-3853
| 1-1232 | DUKE ENERGY OHIO, INC. | 31-0240030 |
(an Ohio corporation)
139 East Fourth Street
Cincinnati, Ohio 45202
704-382-3853
| 1-3543 | DUKE ENERGY INDIANA, LLC | 35-0594457 |
(an Indiana limited liability company)
1000 East Main Street
Plainfield, Indiana 46168
704-382-3853
| 1-6196 | PIEDMONT NATURAL GAS COMPANY, INC. | 56-0556998 |
(a North Carolina corporation)
4720 Piedmont Row Drive
Charlotte, North Carolina 28210
704-364-3120
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of each exchange on
Registrant Title of each class Trading symbols which registered
Duke Energy Common Stock, $0.001 par value DUK New York Stock Exchange LLC
Duke Energy 5.625% Junior Subordinated Debentures due DUKB New York Stock Exchange LLC
September 15, 2078
Duke Energy Depositary Shares, each representing a 1/1,000th DUK PR A New York Stock Exchange LLC
interest in a share of 5.75% Series A Cumulative
Redeemable Perpetual Preferred Stock, par value
$0.001 per share
Duke Energy 3.10% Senior Notes due 2028 DUK 28A New York Stock Exchange LLC
Duke Energy 3.85% Senior Notes due 2034 DUK 34 New York Stock Exchange LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
| Duke Energy Corporation (Duke Energy) | Yes | ☒ | No | ☐ | Duke Energy Florida, LLC (Duke Energy Florida) | Yes | ☒ | No | ☐ | |||||||||||||||||||||||
| Duke Energy Carolinas, LLC (Duke Energy Carolinas) | Yes | ☒ | No | ☐ | Duke Energy Ohio, Inc. (Duke Energy Ohio) | Yes | ☒ | No | ☐ | |||||||||||||||||||||||
| Progress Energy, Inc. (Progress Energy) | Yes | ☒ | No | ☐ | Duke Energy Indiana, LLC (Duke Energy Indiana) | Yes | ☒ | No | ☐ | |||||||||||||||||||||||
| Duke Energy Progress, LLC (Duke Energy Progress) | Yes | ☒ | No | ☐ | Piedmont Natural Gas Company, Inc. (Piedmont) | Yes | ☒ | No | ☐ |
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
| Duke Energy | Yes | ☒ | No | ☐ | Duke Energy Florida | Yes | ☒ | No | ☐ | |||||||||||||||||||||||
| Duke Energy Carolinas | Yes | ☒ | No | ☐ | Duke Energy Ohio | Yes | ☒ | No | ☐ | |||||||||||||||||||||||
| Progress Energy | Yes | ☒ | No | ☐ | Duke Energy Indiana | Yes | ☒ | No | ☐ | |||||||||||||||||||||||
| Duke Energy Progress | Yes | ☒ | No | ☐ | Piedmont | Yes | ☒ | No | ☐ |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| Duke Energy | Large Accelerated Filer | ☒ | Accelerated filer | ☐ | Non-accelerated Filer | ☐ | Smaller reporting company | ☐ | Emerging growth company | ☐ | ||||||||||||||||||||||
| Duke Energy Carolinas | Large Accelerated Filer | ☐ | Accelerated filer | ☐ | Non-accelerated Filer | ☒ | Smaller reporting company | ☐ | Emerging growth company | ☐ | ||||||||||||||||||||||
| Progress Energy | Large Accelerated Filer | ☐ | Accelerated filer | ☐ | Non-accelerated Filer | ☒ | Smaller reporting company | ☐ | Emerging growth company | ☐ | ||||||||||||||||||||||
| Duke Energy Progress | Large Accelerated Filer | ☐ | Accelerated filer | ☐ | Non-accelerated Filer | ☒ | Smaller reporting company | ☐ | Emerging growth company | ☐ | ||||||||||||||||||||||
| Duke Energy Florida | Large Accelerated Filer | ☐ | Accelerated filer | ☐ | Non-accelerated Filer | ☒ | Smaller reporting company | ☐ | Emerging growth company | ☐ | ||||||||||||||||||||||
| Duke Energy Ohio | Large Accelerated Filer | ☐ | Accelerated filer | ☐ | Non-accelerated Filer | ☒ | Smaller reporting company | ☐ | Emerging growth company | ☐ | ||||||||||||||||||||||
| Duke Energy Indiana | Large Accelerated Filer | ☐ | Accelerated filer | ☐ | Non-accelerated Filer | ☒ | Smaller reporting company | ☐ | Emerging growth company | ☐ | ||||||||||||||||||||||
| Piedmont | Large Accelerated Filer | ☐ | Accelerated filer | ☐ | Non-accelerated Filer | ☒ | Smaller reporting company | ☐ | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
| Duke Energy | Yes | ☐ | No | ☒ | Duke Energy Florida | Yes | ☐ | No | ☒ | |||||||||||||||||||||||
| Duke Energy Carolinas | Yes | ☐ | No | ☒ | Duke Energy Ohio | Yes | ☐ | No | ☒ | |||||||||||||||||||||||
| Progress Energy | Yes | ☐ | No | ☒ | Duke Energy Indiana | Yes | ☐ | No | ☒ | |||||||||||||||||||||||
| Duke Energy Progress | Yes | ☐ | No | ☒ | Piedmont | Yes | ☐ | No | ☒ |
Number of shares of common stock outstanding at October 31, 2022:
| Registrant | Description | Shares | ||||||
| Duke Energy | Common stock, $0.001 par value | 770,062,772 | ||||||
This combined Form 10-Q is filed separately by eight registrants: Duke Energy, Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont (collectively the Duke Energy Registrants). Information contained herein relating to any individual registrant is filed by such registrant solely on its own behalf. Each registrant makes no representation as to information relating exclusively to the other registrants.
Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont meet the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and are therefore filing this form with the reduced disclosure format specified in General Instructions H(2) of Form 10-Q.
TABLE OF CONTENTS
| GLOSSARY OF TERMS |
Glossary of Terms
The following terms or acronyms used in this Form 10-Q are defined below:
| Term or Acronym | Definition | ||||
| 2021 Settlement | Settlement Agreement in 2021 among Duke Energy Florida, the Florida Office of Public Counsel, the Florida Industrial Power Users Group, White Springs Agricultural Chemicals, Inc. d/b/a PSC Phosphate and NUCOR Steel Florida, Inc. | ||||
| ACP | Atlantic Coast Pipeline, LLC, a limited liability company owned by Dominion Energy, Inc. and Duke Energy | ||||
| AFUDC | Allowance for funds used during construction | ||||
| ARO | Asset retirement obligations | ||||
| Bison | Bison Insurance Company Limited | ||||
| Board of Directors | Duke Energy Board of Directors | ||||
| CCR | Coal Combustion Residuals | ||||
| the company | Duke Energy Corporation and its subsidiaries | ||||
| COVID-19 | Coronavirus Disease 2019 | ||||
| CRC | Cinergy Receivables Company, LLC | ||||
| Crystal River Unit 3 | Crystal River Unit 3 Nuclear Plant | ||||
| DEFPF | Duke Energy Florida Project Finance, LLC | ||||
| DEFR | Duke Energy Florida Receivables, LLC | ||||
| DEPR | Duke Energy Progress Receivables, LLC | ||||
| DERF | Duke Energy Receivables Finance Company, LLC | ||||
| DOE | Department of Energy | ||||
| Duke Energy | Duke Energy Corporation (collectively with its subsidiaries) | ||||
| Duke Energy Ohio | Duke Energy Ohio, Inc. | ||||
| Duke Energy Progress | Duke Energy Progress, LLC | ||||
| Duke Energy Carolinas | Duke Energy Carolinas, LLC | ||||
| Duke Energy Florida | Duke Energy Florida, LLC | ||||
| Duke Energy Indiana | Duke Energy Indiana, LLC | ||||
| Duke Energy Registrants | Duke Energy, Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont | ||||
| EDIT | Excess deferred income tax | ||||
| EPS | Earnings Per Share | ||||
| ERCOT | Electric Reliability Council of Texas | ||||
| ETR | Effective tax rate | ||||
| Exchange Act | Securities Exchange Act of 1934 | ||||
| FERC | Federal Energy Regulatory Commission | ||||
| FPSC | Florida Public Service Commission | ||||
| FTR | Financial transmission rights | ||||
| GAAP | Generally accepted accounting principles in the U.S. | ||||
| GAAP Reported Earnings | Net Income Available to Duke Energy Corporation Common Stockholders | ||||
| GAAP Reported EPS | Basic Earnings Per Share Available to Duke Energy Corporation common stockholders | ||||
| GIC | GIC Private Limited, Singapore's sovereign wealth fund and an experienced investor in U.S. infrastructure | ||||
| GWh | Gigawatt-hours | ||||
| IRA | Inflation Reduction Act | ||||
| IRS | Internal Revenue Service | ||||
| IURC | Indiana Utility Regulatory Commission |
| GLOSSARY OF TERMS |
| KPSC | Kentucky Public Service Commission | ||||
| LLC | Limited Liability Company | ||||
| MGP | Manufactured gas plant | ||||
| MGP Settlement | Stipulation and Recommendation filed jointly by Duke Energy Ohio the staff of the PUCO, the Office of the Ohio Consumers' Counsel and the Ohio Energy Group on August 31, 2021 | ||||
| MW | Megawatt | ||||
| MWh | Megawatt-hour | ||||
| NCUC | North Carolina Utilities Commission | ||||
| NDTF | Nuclear decommissioning trust funds | ||||
| NPNS | Normal purchase/normal sale | ||||
| OPEB | Other Post-Retirement Benefit Obligations | ||||
| OVEC | Ohio Valley Electric Corporation | ||||
| Piedmont | Piedmont Natural Gas Company, Inc. | ||||
| PJM | Pennsylvania-New Jersey-Maryland Interconnection | ||||
| PPA | Purchase Power Agreement | ||||
| Progress Energy | Progress Energy, Inc. | ||||
| PSCSC | Public Service Commission of South Carolina | ||||
| PUCO | Public Utilities Commission of Ohio | ||||
| RTO | Regional Transmission Organization | ||||
| Subsidiary Registrants | Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont | ||||
| TPUC | Tennessee Public Utility Commission | ||||
| U.S. | United States | ||||
| VIE | Variable Interest Entity |
| FORWARD-LOOKING STATEMENTS |
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This document includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are based on management’s beliefs and assumptions and can often be identified by terms and phrases that include “anticipate,” “believe,” “intend,” “estimate,” “expect,” “continue,” “should,” “could,” “may,” “plan,” “project,” “predict,” “will,” “potential,” “forecast,” “target,” “guidance,” “outlook” or other similar terminology. Various factors may cause actual results to be materially different than the suggested outcomes within forward-looking statements; accordingly, there is no assurance that such results will be realized. These factors include, but are not limited to:
◦The impact of the COVID-19 pandemic;
◦State, federal and foreign legislative and regulatory initiatives, including costs of compliance with existing and future environmental requirements, including those related to climate change, as well as rulings that affect cost and investment recovery or have an impact on rate structures or market prices;
◦The extent and timing of costs and liabilities to comply with federal and state laws, regulations and legal requirements related to coal ash remediation, including amounts for required closure of certain ash impoundments, are uncertain and difficult to estimate;
◦The ability to recover eligible costs, including amounts associated with coal ash impoundment retirement obligations, asset retirement and construction costs related to carbon emissions reductions, and costs related to significant weather events, and to earn an adequate return on investment through rate case proceedings and the regulatory process;
◦The costs of decommissioning nuclear facilities could prove to be more extensive than amounts estimated and all costs may not be fully recoverable through the regulatory process;
◦Costs and effects of legal and administrative proceedings, settlements, investigations and claims;
◦Industrial, commercial and residential growth or decline in service territories or customer bases resulting from sustained downturns of the economy, reduced customer usage due to cost pressures from inflation or fuel costs, and the economic health of our service territories or variations in customer usage patterns, including energy efficiency efforts, natural gas building and appliance electrification, and use of alternative energy sources, such as self-generation and distributed generation technologies;
◦Federal and state regulations, laws and other efforts designed to promote and expand the use of energy efficiency measures, natural gas electrification, and distributed generation technologies, such as private solar and battery storage, in Duke Energy service territories could result in a reduced number of customers, excess generation resources as well as stranded costs;
◦Advancements in technology;
◦Additional competition in electric and natural gas markets and continued industry consolidation;
◦The influence of weather and other natural phenomena on operations, including the economic, operational and other effects of severe storms, hurricanes, droughts, earthquakes and tornadoes, including extreme weather associated with climate change;
◦Changing investor, customer and other stakeholder expectations and demands including heightened emphasis on environmental, social and governance concerns;
◦The ability to successfully operate electric generating facilities and deliver electricity to customers including direct or indirect effects to the company resulting from an incident that affects the U.S. electric grid or generating resources;
◦Operational interruptions to our natural gas distribution and transmission activities;
◦The availability of adequate interstate pipeline transportation capacity and natural gas supply;
◦The impact on facilities and business from a terrorist attack, cybersecurity threats, data security breaches, operational accidents, information technology failures or other catastrophic events, such as fires, explosions, pandemic health events or other similar occurrences;
◦The inherent risks associated with the operation of nuclear facilities, including environmental, health, safety, regulatory and financial risks, including the financial stability of third-party service providers;
◦The timing and extent of changes in commodity prices and interest rates and the ability to recover such costs through the regulatory process, where appropriate, and their impact on liquidity positions and the value of underlying assets;
◦The results of financing efforts, including the ability to obtain financing on favorable terms, which can be affected by various factors, including credit ratings, interest rate fluctuations, compliance with debt covenants and conditions, an individual utility's generation mix, and general market and economic conditions;
◦Credit ratings of the Duke Energy Registrants may be different from what is expected;
◦Declines in the market prices of equity and fixed-income securities and resultant cash funding requirements for defined benefit pension plans, other post-retirement benefit plans and nuclear decommissioning trust funds;
◦Construction and development risks associated with the completion of the Duke Energy Registrants’ capital investment projects, including risks related to financing, obtaining and complying with terms of permits, meeting construction budgets and schedules and satisfying operating and environmental performance standards, as well as the ability to recover costs from customers in a timely manner, or at all;
◦Changes in rules for regional transmission organizations, including changes in rate designs and new and evolving capacity markets, and risks related to obligations created by the default of other participants;
| FORWARD-LOOKING STATEMENTS |
◦The ability to control operation and maintenance costs;
◦The level of creditworthiness of counterparties to transactions;
◦The ability to obtain adequate insurance at acceptable costs;
◦Employee workforce factors, including the potential inability to attract and retain key personnel;
◦The ability of subsidiaries to pay dividends or distributions to Duke Energy Corporation holding company (the Parent);
◦The performance of projects undertaken by our nonregulated businesses and the success of efforts to invest in and develop new opportunities;
◦The effect of accounting pronouncements issued periodically by accounting standard-setting bodies;
◦The impact of U.S. tax legislation to our financial condition, results of operations or cash flows and our credit ratings;
◦The impacts from potential impairments of goodwill or equity method investment carrying values;
◦Asset or business acquisitions and dispositions, including our ability to successfully consummate the second closing of the minority investment in Duke Energy Indiana, may not yield the anticipated benefits;
◦The actions of activist shareholders could disrupt our operations, impact our ability to execute on our business strategy, or cause fluctuations in the trading price of our common stock; and
◦The ability to implement our business strategy, including its carbon emission reduction goals.
Additional risks and uncertainties are identified and discussed in the Duke Energy Registrants' reports filed with the SEC and available at the SEC's website at sec.gov. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than described. Forward-looking statements speak only as of the date they are made and the Duke Energy Registrants expressly disclaim an obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
| FINANCIAL STATEMENTS |
Item 1. FINANCIAL STATEMENTS
DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| (in millions, except per share amounts) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
| Operating Revenues | |||||||||||||||||||||||
| Regulated electric | $ | 7,374 | $ | 6,495 | $ | 19,381 | $ | 16,972 | |||||||||||||||
| Regulated natural gas | 397 | 263 | 1,824 | 1,314 | |||||||||||||||||||
| Nonregulated electric and other | 197 | 193 | 580 | 573 | |||||||||||||||||||
| Total operating revenues | 7,968 | 6,951 | 21,785 | 18,859 | |||||||||||||||||||
| Operating Expenses | |||||||||||||||||||||||
| Fuel used in electric generation and purchased power | 2,629 | 1,844 | 6,418 | 4,702 | |||||||||||||||||||
| Cost of natural gas | 189 | 75 | 859 | 430 | |||||||||||||||||||
| Operation, maintenance and other | 1,394 | 1,507 | 4,471 | 4,319 | |||||||||||||||||||
| Depreciation and amortization | 1,364 | 1,265 | 3,986 | 3,698 | |||||||||||||||||||
| Property and other taxes | 378 | 371 | 1,149 | 1,073 | |||||||||||||||||||
| Impairment of assets and other charges | (4) | 211 | 202 | 342 | |||||||||||||||||||
| Total operating expenses | 5,950 | 5,273 | 17,085 | 14,564 | |||||||||||||||||||
| Gains on Sales of Other Assets and Other, net | 6 | 9 | 16 | 11 | |||||||||||||||||||
| Operating Income | 2,024 | 1,687 | 4,716 | 4,306 | |||||||||||||||||||
| Other Income and Expenses | |||||||||||||||||||||||
| Equity in earnings of unconsolidated affiliates | 26 | 22 | 87 | 14 | |||||||||||||||||||
| Other income and expenses, net | 89 | 238 | 293 | 493 | |||||||||||||||||||
| Total other income and expenses | 115 | 260 | 380 | 507 | |||||||||||||||||||
| Interest Expense | 621 | 581 | 1,815 | 1,688 | |||||||||||||||||||
| Income From Continuing Operations Before Income Taxes | 1,518 | 1,366 | 3,281 | 3,125 | |||||||||||||||||||
| Income Tax Expense From Continuing Operations | 128 | 90 | 191 | 210 | |||||||||||||||||||
| Income From Continuing Operations | 1,390 | 1,276 | 3,090 | 2,915 | |||||||||||||||||||
| Income From Discontinued Operations, net of tax | 23 | — | 23 | — | |||||||||||||||||||
| Net Income | 1,413 | 1,276 | 3,113 | 2,915 | |||||||||||||||||||
| Add: Net Loss Attributable to Noncontrolling Interests | 9 | 129 | 73 | 247 | |||||||||||||||||||
| Net Income Attributable to Duke Energy Corporation | 1,422 | 1,405 | 3,186 | 3,162 | |||||||||||||||||||
| Less: Preferred Dividends | 39 | 39 | 92 | 92 | |||||||||||||||||||
| Net Income Available to Duke Energy Corporation Common Stockholders | $ | 1,383 | $ | 1,366 | $ | 3,094 | $ | 3,070 | |||||||||||||||
| Earnings Per Share – Basic and Diluted | |||||||||||||||||||||||
| Income from continuing operations available to Duke Energy Corporation common stockholders | |||||||||||||||||||||||
| Basic and Diluted | $ | 1.78 | $ | 1.79 | $ | 4.00 | $ | 4.00 | |||||||||||||||
| Income from discontinued operations attributable to Duke Energy Corporation common stockholders | |||||||||||||||||||||||
| Basic and Diluted | $ | 0.03 | $ | — | $ | 0.03 | $ | — | |||||||||||||||
| Net income available to Duke Energy Corporation common stockholders | |||||||||||||||||||||||
| Basic and Diluted | $ | 1.81 | $ | 1.79 | $ | 4.03 | $ | 4.00 | |||||||||||||||
| Weighted Average Shares Outstanding | |||||||||||||||||||||||
| Basic and Diluted | 770 | 769 | 770 | 769 | |||||||||||||||||||
See Notes to Condensed Consolidated Financial Statements
| FINANCIAL STATEMENTS |
DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| (in millions) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
| Net Income | $ | 1,413 | $ | 1,276 | $ | 3,113 | $ | 2,915 | |||||||||||||||
| Other Comprehensive Income (Loss), net of tax**(a)** | |||||||||||||||||||||||
| Pension and OPEB adjustments | (7) | 1 | (3) | 3 | |||||||||||||||||||
| Net unrealized gains (losses) on cash flow hedges | 14 | 9 | 276 | (59) | |||||||||||||||||||
| Reclassification into earnings from cash flow hedges | — | 2 | 9 | 9 | |||||||||||||||||||
| Net unrealized losses on fair value hedges | (8) | — | (20) | — | |||||||||||||||||||
| Unrealized gains (losses) on available-for-sale securities | 1 | (2) | (20) | (6) | |||||||||||||||||||
Showing the first 8K of 518K characters. Open the full section
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following combined Management’s Discussion and Analysis of Financial Condition and Results of Operations is separately filed by Duke Energy and Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont. However, none of the registrants make any representation as to information related solely to Duke Energy or the Subsidiary Registrants of Duke Energy other than itself.
DUKE ENERGY
Duke Energy is an energy company headquartered in Charlotte, North Carolina. Duke Energy operates in the U.S. primarily through its subsidiaries, Duke Energy Carolinas, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont. When discussing Duke Energy’s consolidated financial information, it necessarily includes the results of the Subsidiary Registrants, which along with Duke Energy are collectively referred to as the Duke Energy Registrants.
Management’s Discussion and Analysis should be read in conjunction with the Condensed Consolidated Financial Statements and Notes for the nine months ended September 30, 2022, and with Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2021.
Executive Overview
Advancing Our Clean Energy Transformation
During the third quarter of 2022, we continued to execute on our clean energy transformation, delivering strong, sustainable value for shareholders, customers, communities and employees.
-
In October 2022, we announced an additional interim target to reduce carbon emissions from electric generation by 80% by 2040. We also adopted a goal of reducing Scope 2 and certain Scope 3 emissions, including emissions from upstream purchased power and fossil fuel purchases, as well as downstream customer use of natural gas, by 50% by 2035. Duke Energy is one of the first utilities to address the totality of its impact – 95% of the company's greenhouse gas emissions are now tied to a measurable net-zero goal. Over the next decade, we expect to deploy approximately $145 billion of capital into our regulated businesses, driven by clean energy transition investments.
-
In August 2022, we announced a strategic review of our commercial renewables business, which has been an integral part of Duke Energy's renewable energy platform over the past 15 years. Since 2007, we have built a portfolio of approximately 5,000 megawatts of commercial wind, solar and battery projects across the U.S., and established a robust development pipeline. As we look forward to the remainder of this decade and beyond, we have line of sight to significant renewable, grid and other investment opportunities within our faster-growing regulated operations. In November 2022, the Board of Directors committed to a plan to sell the Commercial Renewables business segment, excluding the Offshore Wind lease for Carolina Long Bay. See Note 1 to the Condensed Consolidated Financial Statements, "Organization and Basis of Presentation," for additional information.
-
In August 2022, Duke Energy launched the utility industry’s first sustainable commercial paper notes focused on socioeconomic advancement. The company plans to disburse or allocate an amount equal to the net proceeds from the sustainable commercial paper notes to fund expenditures and programs related to enabling opportunities for diverse businesses.
-
In August 2022, Duke Energy Carolinas filed for approval of a new demand response pilot program expected to launch in 2023 for customers in the Duke Energy Carolinas (DEC) service area. Pilot incentives will reduce vehicle lease payments for program participants who lease an eligible electric vehicle, including Ford F-150 Lightning trucks. In exchange, customers will allow their electric vehicles to feed energy back to the grid – helping to balance it during peak demand. Also in August 2022, Duke Energy Florida announced a research and development pilot program to test and evaluate the viability of the new Ford F-150 Lightning all-electric truck's high-capacity batteries as a grid edge resource.
Regulatory Activity. During the third quarter of 2022, we continued to monitor developments while moving our regulatory strategy forward. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
-
In October 2022, Duke Energy Florida received approval from the FPSC for its proposed ten year storm protection plan, with minor modifications. This plan will continue to provide for investments to enhance the integrity and reliability of the state's electric grid. Also in October 2022, as a result of rising interest rates and as allowed under the 2021 Settlement, the FPSC approved an increase in Duke Energy Florida's ROE band, increasing the ROE midpoint effective in January 1, 2023 base rates from 9.85% to 10.1%.
-
In October 2022, Duke Energy Progress filed a rate case in North Carolina to request an increase in base rate retail revenues. This proposal is the first by Duke Energy Progress in North Carolina to increase base rates since 2019 and is our first rate case filing in North Carolina to include a Performance Based Regulation Application and a Multiyear Rate Plan as allowed under HB 951. Duke Energy Progress’ rate request before the NCUC proposes a gradual rate increase over three years as the company continues to strengthen the electricity grid, reducing power outages for customers and facilitating the clean energy transition in a manner that supports economic development across the state.
-
In September 2022, Duke Energy Progress filed a rate case in South Carolina to request an increase in base rate retail revenues. This proposal is the first by Duke Energy Progress in South Carolina to increase base rates since 2018 and is driven by ongoing investments to improve resiliency, work toward an orderly transition to a secure energy future and improve the customer experience. Duke Energy Progress’ rate request before the PSCSC proposes a step in of the proposed rate increase over two years.
-
In September 2022, Duke Energy Ohio reached an electric distribution base rate settlement with the PUCO's technical staff and other parties, subject to review and approval of the PUCO.
| MD&A | MATTERS IMPACTING FUTURE RESULTS |
Matters Impacting Future Results
The matters discussed herein could materially impact the future operating results, financial condition and cash flows of the Duke Energy Registrants and Business Segments.
Regulatory Matters
Coal Ash Costs
Future spending of coal ash costs, including amounts recorded for depreciation and liability accretion, is expected to continue to be deferred and recovered in future rate cases or rider filings. The majority of spend is expected to occur over the next 15-20 years.
Duke Energy Indiana has interpreted the CCR rule to identify the coal ash basin sites impacted and has assessed the amounts of coal ash subject to the rule and a method of compliance. Interpretation of the requirements of the CCR rule is subject to further legal challenges and regulatory approvals, which could result in additional coal ash basin closure requirements, higher costs of compliance and greater AROs. Additionally, Duke Energy Indiana has retired facilities that are not subject to the CCR rule. Duke Energy Indiana may incur costs at these facilities to comply with environmental regulations or to mitigate risks associated with on-site storage of coal ash. In January 2022, Duke Energy Indiana received a letter from the EPA regarding interpretation of the CCR rule. See Note 4 to the Condensed Consolidated Financial Statements, "Commitments and Contingencies" for more information.
Commercial Renewables
On November 1, 2022, the Board of Directors committed to a plan to sell the Commercial Renewables business segment, excluding the offshore wind lease for
Showing the first 8K of 96K characters. Open the full section
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For an in-depth discussion of the Duke Energy Registrants' market risks, see “Quantitative and Qualitative Disclosures about Market Risk” in Item 7 of Duke Energy's Annual Report on Form 10-K for the year ended December 31, 2021.
Foreign Currency Exchange Risk
Duke Energy is exposed to risk resulting from changes in the foreign currency exchange rates as a result of its issuances of long-term debt denominated in a foreign currency. Duke Energy manages foreign currency exchange risk exposure by entering into cross-currency swaps, a type of financial derivative instrument, which mitigate foreign currency exchange exposure. See Notes 5, 9 and 11 to the Condensed Consolidated Financial Statements, “Debt and Credit Facilities,” “Derivatives and Hedging” and “Fair Value Measurements," respectively.
Credit Risk
Duke Energy is subject to credit risk from transactions with counterparties to cross-currency swaps related to future interest and principal payments. The credit exposure to such counterparties may take the form of higher costs to meet Duke Energy's future Euro-denominated interest and principal payments in the event of counterparty default. Duke Energy selects highly rated banks as counterparties and allocates the hedge for each debt issuance across multiple counterparties. The master agreements with the counterparties impose collateral requirements on the parties in certain circumstances indicative of material deterioration in a party's creditworthiness.
Item 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by the Duke Energy Registrants in the reports they file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified by the SEC rules and forms.
Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by the Duke Energy Registrants in the reports they file or submit under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, the Duke Energy Registrants have evaluated the effectiveness of their disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2022, and, based upon this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these controls and procedures are effective in providing reasonable assurance of compliance.
Changes in Internal Control over Financial Reporting
Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, the Duke Energy Registrants have evaluated changes in internal control over financial reporting (as such term is defined in Rules 13a-15 and 15d-15 under the Exchange Act) that occurred during the fiscal quarter ended September 30, 2022, and have concluded no change has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.
| OTHER INFORMATION |
ITEM 1. LEGAL PROCEEDINGS
For information regarding material legal proceedings, including regulatory and environmental matters, see Note 3, "Regulatory Matters," and Note 4, "Commitments and Contingencies," to the Condensed Consolidated Financial Statements. For additional information, see Item 3, "Legal Proceedings," in Duke Energy's Annual Report on Form 10-K for the year ended December 31, 2021.
Item 1A. RISK FACTORS
In addition to the other information set forth in this report, careful consideration should be given to the factors discussed in Part I, “Item 1A. Risk Factors” in the Duke Energy's Annual Report on Form 10-K for the year ended December 31, 2021, which could materially affect the Duke Energy Registrants’ financial condition or future results. The information presented below updates, and should be read in conjunction with, the risk factors and information disclosed in Duke Energy's Annual Report on Form 10-K for the year ended December 31, 2021.
The Duke Energy Registrants rely on access to short-term borrowings and longer-term debt and equity markets to finance their capital requirements and support their liquidity needs. Access to those markets can be adversely affected by a number of conditions, many of which are beyond the Duke Energy Registrants’ control.
The Duke Energy Registrants’ businesses are significantly financed through issuances of debt and equity. The maturity and repayment profile of debt used to finance investments often does not correlate to cash flows from their assets. Accordingly, as a source of liquidity for capital requirements not satisfied by the cash flows from their operations and to fund investments originally financed through debt instruments with disparate maturities, the Duke Energy Registrants rely on access to short-term money markets as well as longer-term capital markets. The Subsidiary Registrants also rely on access to short-term intercompany borrowings. If the Duke Energy Registrants are not able to access debt or equity at competitive rates or at all, the ability to finance their operations and implement their strategy and business plan as scheduled could be adversely affected. An inability to access debt and equity may limit the Duke Energy Registrants’ ability to pursue improvements or acquisitions that they may otherwise rely on for future growth.
Market disruptions may increase the cost of borrowing or adversely affect the ability to access one or more financial markets. Such disruptions could include: economic downturns, unfavorable capital market conditions, market prices for natural gas and coal, geopolitical risks, actual or threatened terrorist attacks, or the overall health of the energy industry. Additionally, rapidly rising interest rates could impact the ability to affordably finance the capital plan or increase rates to customers and could have an impact on our ability to execute on our clean energy strategy. The availability of credit under Duke Energy’s Master Credit Facility depends upon the ability of the banks providing commitments under the facility to provide funds when their obligations to do so arise. Systemic risk of the banking system and the financial markets could prevent a bank from meeting its obligations under the facility agreement.
Duke Energy maintains a revolving credit facility to provide backup for its commercial paper program and letters of credit to support variable rate demand tax-exempt bonds that may be put to the Duke Energy Registrant issuer at the option of the holder. The facility includes borrowing sublimits for the Duke Energy Registrants, each of whom is a party to the credit facility, and financial covenants that limit the amount of debt that can be outstanding as a percentage of the total capital for the specific entity. Failure to maintain these covenants at a particular entity could preclude Duke Energy from issuing commercial paper or the Duke Energy Registrants from issuing letters of credit or borrowing under the Master Credit Facility.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
| EXHIBITS |
Item 6. EXHIBITS
Exhibits filed herein are designated by an asterisk (). All exhibits not so designated are incorporated by reference to a prior filing, as indicated. Items constituting management contracts or compensatory plans or arrangements are designated by a double asterisk (). The company agrees to furnish upon request to the commission a copy of any omitted schedules or exhibits upon request on all items designated by a triple asterisk ().
| EXHIBITS |
| EXHIBITS |
| *101.SCH | XBRL Taxonomy Extension Schema Document. | X | X | X | X | X | X | X | X | ||||||||||||||||||||||||||||||||||||||||||||
| *101.CAL | XBRL Taxonomy Calculation Linkbase Document. | X | X | X | X | X | X | X | X | ||||||||||||||||||||||||||||||||||||||||||||
| *101.LAB | XBRL Taxonomy Label Linkbase Document. | X | X | X | X | X | X | X | X | ||||||||||||||||||||||||||||||||||||||||||||
| *101.PRE | XBRL Taxonomy Presentation Linkbase Document. | X | X | X | X | X | X | X | X | ||||||||||||||||||||||||||||||||||||||||||||
| *101.DEF | XBRL Taxonomy Definition Linkbase Document. | X | X | X | X | X | X | X | X | ||||||||||||||||||||||||||||||||||||||||||||
| *104 | Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101). | X | X | X | X | X | X | X | X |
The total amount of securities of the registrant or its subsidiaries authorized under any instrument with respect to long-term debt not filed as an exhibit does not exceed 10% of the total assets of the registrant and its subsidiaries on a consolidated basis. The registrant agrees, upon request of the SEC, to furnish copies of any or all of such instruments to it.
| SIGNATURES |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized.
| DUKE ENERGY CORPORATION DUKE ENERGY CAROLINAS, LLC PROGRESS ENERGY, INC. DUKE ENERGY PROGRESS, LLC DUKE ENERGY FLORIDA, LLC DUKE ENERGY OHIO, INC. DUKE ENERGY INDIANA, LLC PIEDMONT NATURAL GAS COMPANY, INC. | ||||||||
| Date: | November 4, 2022 | /s/ BRIAN D. SAVOY | ||||||
| Brian D. Savoy Executive Vice President and Chief Financial Officer (Principal Financial Officer) | ||||||||
| Date: | November 4, 2022 | /s/ CYNTHIA S. LEE | ||||||
| Cynthia S. Lee Vice President, Chief Accounting Officer and Controller (Principal Accounting Officer) |