Derivative Financial Instruments

6 Months Ended

Jun. 30, 2025

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

7. DERIVATIVE FINANCIAL INSTRUMENTS

DESC’s accounting policies, objectives and strategies for using derivative instruments are discussed in Note 2 in the Consolidated Financial Statements in DESC’s Annual Report on Form 10-K for the year ended December 31, 2024. See Note 8 for further information about fair value measurements and associated valuation methods for derivatives.

Cash collateral, as presented in the table below, is used to offset derivative assets and liabilities when applicable. Certain of DESC’s derivative instruments contain credit-related contingent provisions. These provisions require DESC to provide collateral upon the occurrence of specific events, primarily a credit rating downgrade. If the credit-related contingent features underlying the instruments that are in a liability position and not fully collateralized with cash were fully triggered as of both June 30, 2025 and December 31, 2024, DESC would have been required to post $1 million of additional collateral to its counterparties. The collateral that would be required to be posted includes the impacts of any offsetting asset positions and any amounts already posted for derivatives and non-derivative contracts per contractual terms. DESC had not posted any collateral at June 30, 2025 and December 31, 2024 related to derivatives with credit-related contingent provisions that are in a liability position and not fully collateralized with cash. The aggregate fair value of all derivative instruments with credit-related contingent provisions that are in a liability position and not fully collateralized with cash as of both June 30, 2025 and December 31, 2024 was $1 million, which does not include the impact of any offsetting asset positions.

The tables below present derivative balances by type of financial instrument, if the gross amounts recognized in the Consolidated Balance Sheets were netted with derivative instruments and cash collateral received or paid:

	June 30, 2025								December 31, 2024
	Gross Amounts Not Offset in the Consolidated Balance Sheet								Gross Amounts Not Offset in the Consolidated Balance Sheet
(millions)	Gross Assets Presented in the Consolidated Balance Sheet(1)		Financial Instruments		Cash Collateral Received		Net Amounts		Gross Assets Presented in the Consolidated Balance Sheet(1)		Financial Instruments		Cash Collateral Received		Net Amounts
Interest rate contracts:
Over-the-counter	$	2	$	—	$	—	$	2	$	2	$	—	$	—	$	2
Commodity contracts:
Over-the-counter		70		1		—		69		81		—		—		81
Total derivatives	$	72	$	1	$	—	$	71	$	83	$	—	$	—	$	83

(1)Excludes derivative assets of $201 million and $289 million at June 30, 2025 and December 31, 2024, respectively, which are not subject to master netting or similar arrangements.

	June 30, 2025								December 31, 2024
	Gross Amounts Not Offset in the Consolidated Balance Sheet								Gross Amounts Not Offset in the Consolidated Balance Sheet
(millions)	Gross Liabilities Presented in the Consolidated Balance Sheet(1)		Financial Instruments		Cash Collateral Paid		Net Amounts		Gross Liabilities Presented in the Consolidated Balance Sheet(1)		Financial Instruments		Cash Collateral Paid		Net Amounts
Interest rate contracts:
Over-the-counter	$	1	$	—	$	—	$	1	$	1	$	—	$	—	$	1
Commodity contracts:
Over-the-counter		3		1		—		2		—		—		—		—
Total derivatives	$	4	$	1	$	—	$	3	$	1	$	—	$	—	$	1

(1)Excludes derivative liabilities of $4 million at June 30, 2025, which are not subject to master netting or similar arrangements. DESC did not have any derivative liabilities at December 31, 2024 which were not subject to master netting or similar arrangements.

Volumes

The following table presents the volume of derivative activity at June 30, 2025. These volumes are based on open derivative positions and represent the combined absolute value of their long and short positions.

Natural Gas (bcf):	Current		Noncurrent
Basis(1)		36		27
Fixed price		3		—
Electricity (MWh in millions):
Fixed price		2		22
Interest rate(2) (in millions)	$	—	$	71

(1)Includes options.

(2)Maturity is determined based on final settlement period.

Fair Value and Gains and Losses on Derivative Instruments

The following tables present the fair values of derivatives and where they are presented in the Consolidated Balance Sheets:

	Assets		Liabilities
(millions)
At June 30, 2025
Current derivatives not under cash flow hedge accounting
Commodity	$	61	$	3
Total current derivatives	$	61	$	3
Noncurrent derivatives not under cash flow hedge accounting
Commodity	$	210	$	4
Interest rate		2		1
Total noncurrent derivatives		212		5
Total derivatives	$	273	$	8
At December 31, 2024
Current derivatives not under cash flow hedge accounting
Commodity	$	63	$	—
Total current derivatives	$	63	$	—
Noncurrent derivatives not under cash flow hedge accounting
Commodity	$	307	$	—
Interest rate		2		1
Total noncurrent derivatives		309		1
Total derivatives	$	372	$	1

The following tables present the gains and losses on derivatives, as well as where the associated activity is presented in the Consolidated Balance Sheets and Statements of Comprehensive Income:

Derivatives in Cash Flow Hedging Relationships

(millions)	Increase (Decrease) in Derivatives Subject to Regulatory Treatment(1)(2)
Three Months Ended June 30,	2025		2024
Derivative type and location of gains (losses):
Interest rate	$	1	$	1
Total	$	1	$	1
Six Months Ended June 30,
Derivative type and location of gains (losses):
Interest rate	$	1	$	1
Total	$	1	$	1

(1)Represents net derivative activity deferred into and amortized out of regulatory assets/liabilities. Amounts deferred into regulatory assets/ liabilities have no associated effect in the Consolidated Statements of Comprehensive Income.

(2)All derivatives in cash flow hedging relationships have settled and are being amortized over the life of the debt.

Derivatives Not Designated as Hedging Instruments

(millions)	Amount of Gain (Loss) Recognized in Income on Derivatives(1)
Three Months Ended June 30,	2025			2024
Derivative type and location of gains (losses):
Commodity:
Purchased power	$	2		$	(1	)
Interest rate:
Interest charges		—			—
Total	$	2		$	(1	)
Six Months Ended June 30,
Derivative type and location of gains (losses):
Commodity:
Purchased power	$	5		$	(3	)
Interest rate:
Interest charges		(1	)		(1	)
Total	$	4		$	(4	)

(1)Includes derivative activity amortized out of regulatory assets/liabilities. Amounts deferred into regulatory assets/liabilities have no associated effect in the Consolidated Statements of Comprehensive Income.