Duke Energy 2014 Annual Report Download - page 171

151
PART II
DUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. •
DUKE ENERGY PROGRESS, INC. • DUKE ENERGY FLORIDA, INC. • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, INC.
Combined Notes to Consolidated Financial Statements – (Continued)
Commercial Power
Investments accounted for under the equity method primarily consist of
Duke Energy’s approximate 50 percent ownership interest in the fi ve Catamount
Sweetwater, LLC wind farm projects (Phase I-V), INDU Solar Holdings, LLC and
DS Cornerstone, LLC. All of these entities own solar or wind power projects
in the United States. Duke Energy also owns a 50 percent interest in Duke
American Transmission Co., LLC, which builds, owns and operates electric
transmission facilities in North America.
Other
On December 31, 2013, Duke Energy completed the sale of its 50 percent
ownership interest in DukeNet, which owned and operated telecommunications
businesses, to Time Warner Cable, Inc. After retiring existing DukeNet debt and
payment of transaction expenses, Duke Energy received $215 million in cash
proceeds and recorded a $105 million pretax gain in the fourth quarter of 2013.
13. RELATED PARTY TRANSACTIONS
The Subsidiary Registrants engage in related party transactions, which are
generally performed at cost and in accordance with the applicable state and federal
commission regulations. Refer to the Consolidated Balance Sheets of the Subsidiary
Registrants for balances due to or due from related parties. Material amounts
related to transactions with related parties included in the Consolidated Statements
of Operations and Comprehensive Income are presented in the following table.
Years Ended December 31,
(in millions) 2014 2013 2012
Duke Energy Carolinas
Corporate governance and shared service expenses(a) $ 851 $ 927 $1,112
Indemnifi cation coverages(b) 21 22 21
JDA revenue(c) 133 121 18
JDA expense(c) 198 116 91
Progress Energy
Corporate governance and shared services provided
by Duke Energy(a) $ 732 $ 290 $ 63
Corporate governance and shared services provided
to Duke Energy(d) —96 47
Indemnifi cation coverages(b) 33 34 17
JDA revenue(c) 198 116 91
JDA expense(c) 133 121 18
Duke Energy Progress
Corporate governance and shared service expenses(a) $ 386 $ 266 $ 254
Indemnifi cation coverages(b) 17 20 8
JDA revenue(c) 198 116 91
JDA expense(c) 133 121 18
Duke Energy Florida
Corporate governance and shared service expenses(a) $ 346 $ 182 $ 186
Indemnifi cation coverages(b) 16 14 8
Duke Energy Ohio
Corporate governance and shared service expenses(a) $ 316 $ 347 $ 358
Indemnifi cation coverages(b) 13 15 15
Duke Energy Indiana
Corporate governance and shared service expenses(a) $ 384 $ 422 $ 419
Indemnifi cation coverages(b) 11 14 8
(a) The Subsidiary Registrants are charged their proportionate share of corporate governance and other
shared services costs, primarily related to human resources, employee benefi ts, legal and accounting
fees, as well as other third-party costs. These amounts are recorded in Operation, maintenance and other
on the Consolidated Statements of Operations and Comprehensive Income.
(b) The Subsidiary Registrants incur expenses related to certain indemnifi cation coverages through Bison,
Duke Energy’s wholly owned captive insurance subsidiary. These expenses are recorded in Operation,
maintenance and other on the Consolidated Statements of Operations and Comprehensive Income.
(c) Duke Energy Carolinas and Duke Energy Progress participate in a JDA which allows the collective dispatch
of power plants between the service territories to reduce customer rates. Revenues from the sale of
power under the JDA are recorded in Operating Revenues on the Consolidated Statements of Operations
and Comprehensive Income. Expenses from the purchase of power under the JDA are recorded in Fuel
used in electric generation and purchased power on the Consolidated Statements of Operations and
Comprehensive Income.
(d) In 2013 and 2012, Progress Energy Service Company (PESC), a consolidated subsidiary of Progress
Energy, charged a proportionate share of corporate governance and other costs to consolidated affi liates
of Duke Energy. Corporate governance and other shared costs were primarily related to human resources,
employee benefi ts, legal and accounting fees, as well as other third-party costs. These charges were
recorded as an offset to Operation, maintenance and other in the Consolidated Statements of Operations
and Comprehensive Income. Effective January 1, 2014, PESC was contributed to Duke Energy Corporate
Services (DECS), a consolidated subsidiary of Duke Energy, and these costs were no longer charged out of
Progress Energy. Progress Energy recorded a non-cash after-tax equity transfer related to the contribution
of PESC to DECS in its Consolidated Statements of Changes in Common Stockholder’s Equity.
In addition to the amounts presented above, the Subsidiary Registrants
record the impact on net income of other affi liate transactions, including rental
of offi ce space, participation in a money pool arrangement, other operational
transactions and their proportionate share of certain charged expenses. See
Note 6 for more information regarding money pool. The net impact of these
transactions was not material for the years ended December 31, 2014, 2013
and 2012 for the Subsidiary Registrants.
As discussed in Note 17, certain trade receivables have been sold by Duke
Energy Ohio and Duke Energy Indiana to CRC, an affi liate formed by a subsidiary of
Duke Energy. The proceeds obtained from the sales of receivables are largely cash
but do include a subordinated note from CRC for a portion of the purchase price.
In January 2012, Duke Energy Ohio recorded a non-cash equity transfer of
$28 million related to the sale of Vermillion to Duke Energy Indiana. Duke Energy
Indiana recorded a non-cash after-tax equity transfer of $26 million for the
purchase of Vermillion from Duke Energy Ohio. See Note 2 for further discussion.
Duke Energy Commercial Asset Management (DECAM) is a nonregulated,
indirect subsidiary of Duke Energy Ohio that owns generating plants included in
the Disposal Group discussed in Note 2. DECAM’s business activities include the
execution of commodity transactions, third-party vendor and supply contracts,
and service contracts for certain of Duke Energy’s nonregulated entities.
The commodity contracts DECAM enters are accounted for as undesignated
contracts or NPNS. Consequently, mark-to-market impacts of intercompany
contracts with, and sales of power to, nonregulated entities are included in
(Loss) Income from discontinued operations in Duke Energy Ohio’s Consolidated
Statements of Operations and Comprehensive Income. These amounts totaled
net expense of $24 million and $6 million and net revenue of $24 million, for the
years ended December 31, 2014, 2013 and 2012, respectively.
Because it is not a rated entity, DECAM receives credit support from Duke
Energy or its nonregulated subsidiaries, not from the regulated utility operations of
Duke Energy Ohio. DECAM meets its funding needs through an intercompany loan
agreement from a subsidiary of Duke Energy. DECAM also has the ability to loan
money to the subsidiary of Duke Energy. DECAM had an outstanding intercompany
loan payable of $459 million and $43 million for the years ended December 31,
2014 and 2013, respectively, These amounts are recorded in Notes payable to
affi liated companies on Duke Energy Ohio’s Consolidated Balance Sheets.
As discussed in Note 6, in April 2014, Duke Energy issued $1 billion
of senior unsecured notes. Proceeds from the issuances of approximately
$400 million were loaned to DECAM, and such funds were ultimately used to
redeem $402 million of tax-exempt bonds at Duke Energy Ohio. This transaction
substantially completed the restructuring of Duke Energy Ohio’s capital structure