Duke Energy 2014 Annual Report Download - page 198

178
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)
December 31, 2013
Investment Type
Fair Value
(in millions) Valuation Technique Unobservable Input Range
Duke Energy
Natural gas contracts $ (2) Discounted cash fl ow Forward natural gas curves – price per MMBtu $ 3.07 —$ 5.37
FERC mitigation power sale agreements $ (2) Discounted cash fl ow Forward electricity curves – price per MWh $ 25.79 —$ 52.38
FTRs $ 12 RTO auction pricing FTR price – per MWh $ (0.30) —$ 13.80
Electricity contracts $ 23 Discounted cash fl ow Forward electricity curves – price per MWh $ 20.77 —$ 58.90
Commodity capacity option contracts $ 4 Discounted cash fl ow Forward capacity option curves – price per MW day $ 30.40 —$165.10
Reserves $(22) Bid-ask spreads, implied volatility, probability of default
Total Level 3 derivatives $ 13
Duke Energy Carolinas
FERC mitigation power sale agreements $ (2) Discounted cash fl ow Forward electricity curves – price per MWh $ 25.79 —$ 52.38
Duke Energy Ohio
Electricity contracts $ 18 Discounted cash fl ow Forward electricity curves – price per MWh $ 20.77 —$ 58.90
Natural gas contracts $ (2) Discounted cash fl ow Forward natural gas curves – price per MMBtu $ 3.07 —$ 5.37
Reserves $(20) Bid-ask spreads, implied volatility, probability of default
Total Level 3 derivatives $ (4)
Duke Energy Indiana
FTRs $ 12 RTO auction pricing FTR price – per MWh $ (0.30) —$ 13.80
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.
December 31, 2014 December 31, 2013
(in millions) Book Value Fair Value Book Value Fair Value
Duke Energy $ 40,020 $44,566 $40,256 $42,592
Duke Energy Carolinas $ 8,391 $ 9,626 $ 8,436 $ 9,123
Progress Energy $ 14,754 $16,951 $14,115 $15,234
Duke Energy Progress $ 6,201 $ 6,696 $ 5,235 $ 5,323
Duke Energy Florida $ 4,860 $ 5,767 $ 4,886 $ 5,408
Duke Energy Ohio $ 1,766 $ 1,970 $ 2,188 $ 2,237
Duke Energy Indiana $ 3,791 $ 4,456 $ 3,796 $ 4,171
At both December 31, 2014 and December 31, 2013, fair value of cash and cash equivalents, accounts and notes receivable, accounts payable, notes payable
and commercial paper, and non-recourse notes payable of variable interest entities 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.
17. 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 signifi cant 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 most signifi cant activities of the VIE that impact its economic
performance, and (ii) what party has rights to receive benefi ts or is obligated
to absorb losses that are signifi cant to the VIE. The analysis of the party that
consolidates a VIE is a continual reassessment.
No fi nancial support was provided to any of the consolidated VIEs during
the years ended December 31, 2014, 2013 and 2012, or is expected to be
provided in the future, that was not previously contractually required.