Duke Energy 2015 Annual Report Download - page 177

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PART II
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, INC.
Combined Notes to Consolidated Financial Statements – (Continued)
COMMODITY PRICE RISK
The Duke Energy Registrants are exposed to the impact of changes in the
prices of electricity, coal and natural gas. Exposure to commodity price risk is
influenced by a number of factors including the term of contracts, the liquidity of
markets and delivery locations.
Regulated public utilities may have cost-based rate regulations and
various other cost recovery mechanisms that result in a limited exposure to
market volatility of commodity fuel prices. Financial derivative contracts, where
approved by the respective state regulatory commissions, can be used to
manage the risk of price volatility. At December 31, 2015, all of Duke Energy’s
open commodity derivative instruments were undesignated because they are
accounted for under regulatory accounting. Mark-to-market gains or losses on
contracts that use regulatory accounting are deferred as regulatory liabilities or
regulatory assets, respectively. Undesignated contracts expire as late as 2048.
The Subsidiary Registrants utilize cost-tracking mechanisms, commonly
referred to as fuel adjustment clauses. These clauses allow for the recovery of
fuel and fuel-related costs, including settlements of undesignated derivatives
for fuel commodities, and portions of purchased power costs through surcharges
on customer rates. The difference between the costs incurred and the surcharge
revenues is recorded as an adjustment to Fuel used in electric generation and
purchased power – regulated or as Operating Revenues: Regulated electric
on the Consolidated Statements of Operations with an offsetting impact on
regulatory assets or liabilities. Therefore, due to the regulatory accounting
followed by the Subsidiary Registrants for undesignated derivatives, realized
and unrealized gains and losses on undesignated commodity derivatives do not
have an immediate impact on reported net income.
Mark-to-market gains and losses related to the nonregulated Midwest
generation business were recorded in discontinued operations and open
positions at April 2, 2014, were included in the sale of the Disposal Group.
Refer to Note 2 for further information on the sale of the Disposal Group. Gains
and losses on undesignated derivative contracts for nonregulated continuing
operations are not material.
Volumes
The tables below show information relating to volumes of outstanding
commodity derivatives. Amounts disclosed represent the absolute value of
notional volumes of commodity contracts excluding NPNS. The Duke Energy
Registrants have netted contractual amounts where offsetting purchase and
sale contracts exist with identical delivery locations and times of delivery. Where
all commodity positions are perfectly offset, no quantities are shown.
December 31, 2015
Duke
Energy
Duke Energy
Carolinas
Progress
Energy
Duke Energy
Progress
Duke Energy
Florida
Duke Energy
Ohio
Duke Energy
Indiana
Electricity (gigawatt-hours) 70 — — — — 34 36
Natural gas (millions of decatherms) 398 66 332 117 215 — —
December 31, 2014
Duke
Energy
Duke Energy
Carolinas
Progress
Energy
Duke Energy
Progress
Duke Energy
Florida
Duke Energy
Ohio
Duke Energy
Indiana
Electricity (gigawatt-hours)(a)(b) 25,370 — — — — 19,141 —
Natural gas (millions of decatherms)(a) 676 35 328 116 212 313 —
(a) Duke Energy Ohio includes amounts related to the Disposal Group. Refer to Note 2 for further information on the sale.
(b) Amounts at Duke Energy Ohio include intercompany positions that eliminate at Duke Energy.