UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
ýQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2014March 31, 2015
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 No.
 
 
1-32853
DUKE ENERGY CORPORATION
(a Delaware corporation)
550 South Tryon Street
Charlotte, North Carolina 28202-1803
704-382-3853
20-2777218
Commission file numberRegistrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number and IRS Employer Identification Number Commission file numberRegistrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number and IRS Employer Identification Number
1-4928
DUKE ENERGY CAROLINAS, LLC
(a North Carolina limited liability company)
526 South Church Street
Charlotte, North Carolina 28202-1803
704-382-3853
56-0205520
 1-3274
DUKE ENERGY FLORIDA, INC.
(a Florida corporation)
299 First Avenue North
St. Petersburg, Florida 33701
704-382-3853
59-0247770
1-15929
PROGRESS ENERGY, INC.
(a North Carolina corporation)
410 South Wilmington Street
Raleigh, North Carolina 27601-1748
704-382-3853
56-2155481
 1-1232
DUKE ENERGY OHIO, INC.
(an Ohio corporation)
139 East Fourth Street
Cincinnati, Ohio 45202
704-382-3853
31-0240030
1-3382
DUKE ENERGY PROGRESS, INC.
(a North Carolina corporation)
410 South Wilmington Street
Raleigh, North Carolina 27601-1748
704-382-3853
56-0165465
 1-3543
DUKE ENERGY INDIANA, INC.
(an Indiana corporation)
1000 East Main Street
Plainfield, Indiana 46168
704-382-3853
35-0594457
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 x
No ¨
 Duke Energy Florida, Inc. (Duke Energy Florida)
Yes x
No ¨
Duke Energy Carolinas, LLC (Duke Energy Carolinas)
Yes x
No ¨
 Duke Energy Ohio, Inc. (Duke Energy Ohio)
Yes x
No ¨
Progress Energy, Inc. (Progress Energy)
Yes x
No ¨
 Duke Energy Indiana, Inc. (Duke Energy Indiana)
Yes x
No ¨
Duke Energy Progress, Inc. (Duke Energy Progress)
Yes x
No ¨
    




Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted 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 and post 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 ¨
    
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Duke Energy
Large accelerated filer 
Accelerated filer ¨
Non-accelerated filer ¨
Smaller reporting company ¨
Duke Energy Carolinas
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer 
Smaller reporting company ¨
Progress Energy
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer 
Smaller reporting company ¨
Duke Energy Progress
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer 
Smaller reporting company ¨
Duke Energy Florida
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer 
Smaller reporting company ¨
Duke Energy Ohio
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer 
Smaller reporting company ¨
Duke Energy Indiana
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer 
Smaller reporting company ¨
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 
    
Number of shares of Common Stock outstanding at November 4, 2014:May 5, 2015:
RegistrantDescriptionShares
Duke EnergyCommon Stock, $0.001 par value707,290,608691,537,400
Duke Energy CarolinasAll of the registrant's limited liability company member interests are directly owned by Duke Energy.
Progress EnergyAll of the registrant's common stock is directly owned by Duke Energy.
Duke Energy ProgressAll of the registrant’sregistrant's common stock is indirectly owned by Duke Energy.
Duke Energy FloridaAll of the registrant’sregistrant's common stock is indirectly owned by Duke Energy.
Duke Energy OhioAll of the registrant’sregistrant's common stock is indirectly owned by Duke Energy.
Duke Energy IndianaAll of the registrant’sregistrant's common stock is indirectly owned by Duke Energy.
This combined Form 10-Q is filed separately by seven registrants: Duke Energy, Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio and Duke Energy Indiana (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 and Duke Energy Indiana 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
  
   
PART I. FINANCIAL INFORMATION
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
   
   
   
PART II. OTHER INFORMATION
   
   
   
   
 





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. These forward-looking statements are identified by terms and phrases such as “anticipate,” “believe,” “intend,” “estimate,” “expect,” “continue,” “should,” “could,” “may,” “plan,” “project,” “predict,” “will,” “potential,” “forecast,” “target,” “guidance,” “outlook,” and similar expressions. Forward-looking statements involve risks and uncertainties that may cause actual results to be materially different from the results predicted. Factors that could cause actual results to differ materially from those indicated in any forward-looking statement include, but are not limited to:
State, federal and foreign legislative and regulatory initiatives, including costs of compliance with existing and future environmental requirements or 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 the costs and liabilities relating to the Dan River ash basin release and compliance with current regulations and any future regulatory changes related to the management of coal ash;
The ability to recover eligible costs, including those associated with future significant weather events, and earn an adequate return on investment through the regulatory process;
The costs of decommissioning Crystal River Unit 3 could prove to be more extensive than are currently identifiedamounts estimated and all costs may not be fully recoverable through the regulatory process;
The risk that the creditCredit ratings of the company or its subsidiariesDuke Energy Registrants may be different from what the companies expect;is expected;
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 customer usage patterns, including energy efficiency efforts and use of alternative energy sources, including self-generation and distributed generation technologies;
Additional competition in electric markets and continued industry consolidation;
Political and regulatory uncertainty in other countries in which Duke Energy conducts business;
The influence of weather and other natural phenomena on operations, including the economic, operational and other effects of severe storms, hurricanes, droughts and tornadoes;
The ability to successfully operate electric generating facilities and deliver electricity to customers;
The impact on facilities and business from a terrorist attack, cybersecurity threats, data security breaches and other catastrophic events;
The inherent risks associated with the operation and potential construction of nuclear facilities, including environmental, health, safety, regulatory and financial risks;
The timing and extent of changes in commodity prices, interest rates and foreign currency exchange 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 and general economic conditions;
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 Duke Energy Registrants’ capital investment projects in existing and new generation facilities, 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;
The ability to control operation and maintenance costs;
The level of creditworthiness of counterparties to transactions;
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 potential goodwill impairments;
The ability to reinvest retainedprospective undistributed earnings of foreign subsidiaries or repatriate such earnings on a tax-freetax-efficient basis; and
The ability to successfully complete future merger, acquisition or divestiture plans.




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; the Duke Energy Registrants undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise that occur after that date.



PART I. FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS

DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,Three Months Ended March 31,
(in millions, except per-share amounts)2014
 2013
 2014
 2013
2015
 2014
Operating Revenues          
Regulated electric$5,861
 $5,685
 $16,549
 $15,355
$5,457
 $5,550
Nonregulated electric, natural gas and other449
 449
 1,403
 1,415
Nonregulated electric and other377
 491
Regulated natural gas85
 83
 414
 362
231
 222
Total operating revenues6,395
 6,217
 18,366
 17,132
6,065
 6,263
Operating Expenses          
Fuel used in electric generation and purchased power - regulated2,132
 2,013
 5,940
 5,394
Fuel used in electric generation and purchased power - nonregulated148
 130
 410
 435
Fuel used in electric generation and purchased power – regulated1,941
 2,000
Fuel used in electric generation and purchased power – nonregulated104
 136
Cost of natural gas and other27
 18
 181
 132
111
 116
Operation, maintenance and other1,409
 1,402
 4,254
 4,211
1,426
 1,449
Depreciation and amortization788
 672
 2,305
 1,940
777
 755
Property and other taxes275
 319
 936
 972
264
 350
Impairment charges1
 2
 81
 388

 96
Total operating expenses4,780
 4,556
 14,107
 13,472
4,623
 4,902
Gains (Losses) on Sales of Other Assets and Other, net4
 (1) 11
 3
Gains on Sales of Other Assets and Other, net14
 1
Operating Income1,619
 1,660
 4,270
 3,663
1,456
 1,362
Other Income and Expenses          
Equity in earnings of unconsolidated affiliates28
 32
 97
 91
13
 36
Other income and expenses, net109
 55
 293
 182
74
 95
Total other income and expenses137
 87
 390
 273
87
 131
Interest Expense405
 378
 1,212
 1,125
403
 404
Income From Continuing Operations Before Income Taxes1,351
 1,369
 3,448
 2,811
1,140
 1,089
Income Tax Expense from Continuing Operations460
 423
 1,081
 909
364
 339
Income From Continuing Operations891
 946
 2,367
 1,902
776
 750
Income (Loss) From Discontinued Operations, net of tax378
 62
 (578) 82
91
 (843)
Net Income1,269
 1,008
 1,789
 1,984
Less: Net Income (Loss) Attributable to Noncontrolling Interests(5) 4
 3
 7
Net Income Attributable to Duke Energy Corporation$1,274
 $1,004
 $1,786
 $1,977
Net Income (Loss)867
 (93)
Less: Net Income Attributable to Noncontrolling Interests3
 4
Net Income (Loss) Attributable to Duke Energy Corporation$864
 $(97)
          
Earnings Per Share - Basic and Diluted       
Earnings Per Share – Basic and Diluted   
Income from continuing operations attributable to Duke Energy Corporation common shareholders          
Basic$1.25
 $1.33
 $3.33
 $2.67
$1.09
 $1.05
Diluted$1.25
 $1.33
 $3.33
 $2.67
$1.09
 $1.05
Income (Loss) from discontinued operations attributable to Duke Energy Corporation common shareholders          
Basic$0.55
 $0.09
 $(0.81) $0.12
$0.13
 $(1.19)
Diluted$0.55
 $0.09
 $(0.81) $0.12
$0.13
 $(1.19)
Net Income attributable to Duke Energy Corporation common shareholders       
Net Income (Loss) attributable to Duke Energy Corporation common shareholders   
Basic$1.80
 $1.42
 $2.52
 $2.79
$1.22
 $(0.14)
Diluted$1.80
 $1.42
 $2.52
 $2.79
$1.22
 $(0.14)
Weighted-average shares outstanding          
Basic707
 706
 707
 706
708
 706
Diluted707
 706
 707
 706
708
 706

See Notes to Condensed Consolidated Financial Statements
56


PART I

DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
 Three Months Ended Nine Months Ended
 September 30, September 30,
(in millions)2014
 2013
 2014
 2013
Net Income$1,269
 $1,008
 $1,789
 $1,984
Other Comprehensive Loss, net of tax       
Foreign currency translation adjustments(102) (8) (50) (137)
Pension and OPEB adjustments1
 
 1
 5
Net unrealized gains (losses) on cash flow hedges(a)
2
 1
 (10) 55
Reclassification into earnings from cash flow hedges2
 1
 5
 1
Unrealized (losses) gains on investments in available-for-sale securities
 (1) 2
 (5)
Reclassification into earnings from available-for-sale-securities
 3
 
 3
Other Comprehensive Loss, net of tax(97) (4) (52) (78)
Comprehensive Income1,172
 1,004
 1,737
 1,906
Less: Comprehensive (Loss) Income Attributable to Noncontrolling Interests(1) 4
 8
 3
Comprehensive Income Attributable to Duke Energy Corporation$1,173
 $1,000
 $1,729
 $1,903
 Three Months Ended March 31,
(in millions) 2015
 2014
Net Income (Loss) $867
 $(93)
Other Comprehensive (Loss) Income, net of tax    
Foreign currency translation adjustments (125) 24
Pension and OPEB adjustments (5) (1)
Net unrealized losses on cash flow hedges (7) 
Reclassification into earnings from cash flow hedges 4
 
Other Comprehensive (Loss) Income, net of tax (133) 23
Comprehensive Income (Loss) 734
 (70)
Less: Comprehensive (Loss) Income Attributable to Noncontrolling Interests (1) 5
Comprehensive Income (Loss) Attributable to Duke Energy Corporation $735
 $(75)

(a)Net of insignificant tax expense and $5 million tax benefit for the three and nine months ended September 30, 2014 and $1 million tax benefit and $17 million tax expense for the three and nine months ended September 30, 2013.

See Notes to Condensed Consolidated Financial Statements
67


PART I

DUKE ENERGY CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)September 30, 2014 December 31, 2013March 31, 2015 December 31, 2014
ASSETS      
Current Assets      
Cash and cash equivalents$1,931
 $1,501
$2,821
 $2,036
Short-Term investments
 44
Receivables (net of allowance for doubtful accounts of $16 at September 30, 2014 and $30 at December 31, 2013)854
 1,286
Restricted receivables of variable interest entities (net of allowance for doubtful accounts of $52 at September 30, 2014 and $43 at December 31, 2013)2,069
 1,719
Receivables (net of allowance for doubtful accounts of $16 at March 31, 2015 and $17 at December 31, 2014)750
 791
Restricted receivables of variable interest entities (net of allowance for doubtful accounts of $54 at March 31, 2015 and $51 at December 31, 2014)2,016
 1,973
Inventory3,200
 3,250
3,413
 3,459
Assets held for sale335
 
354
 364
Regulatory assets1,232
 895
960
 1,115
Other1,954
 1,821
2,008
 1,837
Total current assets11,575
 10,516
12,322
 11,575
Investments and Other Assets      
Investments in equity method unconsolidated affiliates350
 390
343
 358
Nuclear decommissioning trust funds5,374
 5,132
5,576
 5,546
Goodwill16,331
 16,340
16,329
 16,321
Assets held for sale2,718
 107
2,603
 2,642
Other3,287
 3,432
3,207
 3,008
Total investments and other assets28,060
 25,401
28,058
 27,875
Property, Plant and Equipment      
Cost104,140
 103,115
105,692
 104,861
Accumulated depreciation and amortization(34,545) (33,625)(35,400) (34,824)
Generation facilities to be retired, net9
 9
Net property, plant and equipment69,595
 69,490
70,301
 70,046
Regulatory Assets and Deferred Debits      
Regulatory assets10,252
 9,191
11,279
 11,042
Other174
 181
182
 171
Total regulatory assets and deferred debits10,426
 9,372
11,461
 11,213
Total Assets$119,656
 $114,779
$122,142
 $120,709
LIABILITIES AND EQUITY      
Current Liabilities      
Accounts payable$1,801
 $2,391
$1,920
 $2,271
Notes payable and commercial paper1,787
 839
3,790
 2,514
Taxes accrued704
 551
508
 569
Interest accrued476
 440
490
 418
Current maturities of long-term debt1,156
 2,104
2,800
 2,807
Liabilities associated with assets held for sale284
 7
146
 262
Regulatory liabilities175
 316
235
 204
Other1,868
 1,996
2,014
 2,188
Total current liabilities8,251
 8,644
11,903
 11,233
Long-Term Debt38,702
 38,152
37,173
 37,213
Deferred Credits and Other Liabilities      
Deferred income taxes12,989
 12,097
13,914
 13,423
Investment tax credits431
 442
424
 427
Accrued pension and other post-retirement benefit costs1,231
 1,322
1,170
 1,145
Liabilities associated with assets held for sale57
 66
26
 35
Asset retirement obligations8,499
 4,950
8,541
 8,466
Regulatory liabilities6,220
 5,949
6,237
 6,193
Other1,823
 1,749
1,667
 1,675
Total deferred credits and other liabilities31,250
 26,575
31,979
 31,364
Commitments and Contingencies

 



 

Equity      
Common stock, $0.001 par value, 2 billion shares authorized; 707 million and 706 million shares outstanding at September 30, 2014 and December 31, 2013, respectively1
 1
Common stock, $0.001 par value, 2 billion shares authorized; 708 million and 707 million shares outstanding at March 31, 2015 and December 31, 2014, respectively1
 1
Additional paid-in capital39,388
 39,365
39,413
 39,405
Retained earnings2,479
 2,363
2,309
 2,012
Accumulated other comprehensive loss(456) (399)(672) (543)
Total Duke Energy Corporation stockholders' equity41,412
 41,330
41,051
 40,875
Noncontrolling interests41
 78
36
 24
Total equity41,453
 41,408
41,087
 40,899
Total Liabilities and Equity$119,656
 $114,779
$122,142
 $120,709

See Notes to Condensed Consolidated Financial Statements
78


PART I

DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended September 30,Three Months Ended March 31,
(in millions)2014
 2013
2015
 2014
CASH FLOWS FROM OPERATING ACTIVITIES      
Net Income$1,789
 $1,984
Adjustments to reconcile net income to net cash provided by operating activities:   
Net income (loss)$867
 $(93)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:   
Depreciation, amortization and accretion (including amortization of nuclear fuel)2,641
 2,365
883
 884
Equity component of AFUDC(99) (121)(42) (28)
Community support and charitable contributions expense
 34
(Gains) losses on sales of other assets(27) 8
Gains on sales of other assets(16) 
Impairment charges848
 388
43
 1,382
Deferred income taxes562
 1,014
368
 (178)
Equity in earnings of unconsolidated affiliates(97) (91)(13) (36)
Accrued pension and other post-retirement benefit costs81
 259
18
 27
Contributions to qualified pension plans
 (27)(132) 
(Increase) decrease in      
Net realized and unrealized mark-to-market and hedging transactions128
 (14)(47) 45
Receivables(24) (154)(41) 29
Inventory(17) 119
57
 272
Other current assets(315) (48)(63) (297)
Increase (decrease) in      
Accounts payable(303) (412)(201) (97)
Taxes accrued37
 245
(63) (175)
Other current liabilities(99) (31)(85) (346)
Other assets(100) (307)30
 (22)
Other liabilities162
 (221)(123) 6
Net cash provided by operating activities5,167
 4,990
1,440
 1,373
CASH FLOWS FROM INVESTING ACTIVITIES      
Capital expenditures(3,755) (3,854)(1,411) (1,232)
Investment expenditures(65) (53)(14) (36)
Acquisitions(16) 
(29) 
Purchases of available-for-sale securities(2,424) (4,591)(1,035) (967)
Proceeds from sales and maturities of available-for-sale securities2,445
 4,687
1,069
 1,004
Net proceeds from the sales of equity investments and other assets172
 59
1
 4
Change in restricted cash(15) 166
(36) (27)
Other(76) 20
(1) (32)
Net cash used in investing activities(3,734) (3,566)(1,456) (1,286)
CASH FLOWS FROM FINANCING ACTIVITIES      
Proceeds from the:      
Issuance of long-term debt2,217
 2,993
497
 875
Issuance of common stock related to employee benefit plans24
 8
15
 19
Payments for the:   
Redemption of long-term debt(2,503) (2,506)
Redemption of preferred stock of a subsidiary
 (96)
Payments for the redemption of long-term debt(403) (1,287)
Proceeds from the issuance of short-term debt with original maturities greater than 90 days187
 
Payments for the redemption of short-term debt with original maturities greater than 90 days(643) 
Notes payable and commercial paper941
 537
1,727
 898
Distributions to noncontrolling interests(45) (9)
 (3)
Dividends paid(1,670) (1,636)(564) (553)
Other33
 27
(15) (6)
Net cash used in financing activities(1,003) (682)
Net cash provided by (used in) financing activities801
 (57)
Net increase in cash and cash equivalents430
 742
785
 30
Cash and cash equivalents at beginning of period1,501
 1,424
2,036
 1,501
Cash and cash equivalents at end of period$1,931
 $2,166
$2,821
 $1,531
Supplemental Disclosures:      
Significant non-cash transactions:      
Accrued capital expenditures$466
 $383
$438
 $361

See Notes to Condensed Consolidated Financial Statements
89


PART I

DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
        Accumulated Other Comprehensive Loss              Accumulated Other Comprehensive Loss      
(in millions)
Common
Stock
Shares

 
Common
Stock

 
Additional
Paid-in
Capital

 
Retained
Earnings

 Foreign Currency Translation Adjustments
 Net Gains (Losses) on Cash Flow Hedges
 Net Gains (Losses) on Available-for-Sale Securities
 Pension and OPEB Adjustments
 
Common
Stockholders'
Equity

 
Noncontrolling
Interests

 
Total
Equity

Common
Stock
Shares

 
Common
Stock

 
Additional
Paid-in
Capital

 
Retained
Earnings

 Foreign Currency Translation Adjustments
 Net Losses on Cash Flow Hedges
 Net Gains on Available-for-Sale Securities
 Pension and OPEB Adjustments
 
Common
Stockholders'
Equity

 
Noncontrolling
Interests

 
Total
Equity

Balance at December 31, 2012704
 $1
 $39,279
 $1,889
 $(116) $(100) $
 $(90) $40,863
 $78
 $40,941
Balance at December 31, 2013706
 $1
 $39,365
 $2,363
 $(307) $(40) $
 $(52) $41,330
 $78
 $41,408
Net (loss) income
 
 
 (97) 
 
 
 
 (97) 4
 (93)
Other comprehensive income (loss)
 
 
 
 23
 
 
 (1) 22
 1
 23
Common stock issuances, including dividend reinvestment and employee benefits1
 
 7
 
 
 
 
 
 7
 
 7
Common stock dividends
 
 
 (553) 
 
 
 
 (553) 
 (553)
Distributions to noncontrolling interest in subsidiaries
 
 
 
 
 
 
 
 
 (3) (3)
Balance at March 31, 2014707
 $1
 $39,372
 $1,713
 $(284) $(40) $
 $(53) $40,709
 $80
 $40,789
                     
Balance at December 31, 2014707
 $1
 $39,405
 $2,012
 $(439) $(59) $3
 $(48) $40,875
 $24
 $40,899
Net income
 
 
 1,977
 
 
 
 
 1,977
 7
 1,984

 
 
 864
 
 
 
 
 864
 3
 867
Other comprehensive (loss) income
 
 
 
 (133) 56
 (2) 5
 (74) (4) (78)
 
 
 
 (121) (3) 
 (5) (129) (4) (133)
Common stock issuances, including dividend reinvestment and employee benefits2
 
 38
 
 
 
 
 
 38
 
 38
1
 
 8
 
 
 
 
 
 8
 
 8
Common stock dividends
 
 
 (1,636) 
 
 
 
 (1,636) 
 (1,636)
 
 
 (564) 
 
 
 
 (564) 
 (564)
Premium on the redemption of preferred stock of subsidiaries
 
 
 (3) 
 
 
 
 (3) 
 (3)
Changes in noncontrolling interest in subsidiaries
 
 
 
 
 
 
 
 
 (9) (9)
Balance at September 30, 2013706
 $1
 $39,317
 $2,227
 $(249) $(44) $(2) $(85) $41,165
 $72
 $41,237
                     
Balance at December 31, 2013706
 $1
 $39,365
 $2,363
 $(307) $(40) $
 $(52) $41,330
 $78
 $41,408
Net income
 
 
 1,786
 
 
 
 
 1,786
 3
 1,789
Other comprehensive (loss) income
 
 
 
 (55) (5) 2
 1
 (57) 5
 (52)
Common stock issuances, including dividend reinvestment and employee benefits1
 
 23
 
 
 
 
 
 23
 
 23
Common stock dividends
 
 
 (1,670) 
 
 
 
 (1,670) 
 (1,670)
Distributions to noncontrolling interest in subsidiaries
 
 
 
 
 
 
 
 
 (45) (45)
Balance at September 30, 2014707
 $1
 $39,388
 $2,479
 $(362) $(45) $2
 $(51) $41,412
 $41
 $41,453
Other (a)

 
 
 (3) 
 
 
 
 (3) 13
 10
Balance at March 31, 2015708

$1

$39,413

$2,309

$(560)
$(62)
$3

$(53)
$41,051

$36

$41,087

(a)The $13 million change in Noncontrolling Interests is primarily related to an acquisition of majority interest in a solar company for an insignificant amount of cash consideration.

See Notes to Condensed Consolidated Financial Statements
910


PART I


DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,Three Months Ended March 31,
(in millions)2014
 2013
 2014
 2013
2015
 2014
Operating Revenues$1,938
 $1,919
 $5,693
 $5,239
$1,901
 $2,000
Operating Expenses          
Fuel used in electric generation and purchased power524
 539
 1,685
 1,500
578
 658
Operation, maintenance and other465
 456
 1,415
 1,392
489
 487
Depreciation and amortization260
 228
 750
 676
249
 242
Property and other taxes59
 90
 263
 282
70
 104
Impairment charges
 
 3
 
Total operating expenses1,308
 1,313
 4,116
 3,850
1,386
 1,491
Losses on Sales of Other Assets and Other, net
 (2) 
 
Operating Income630
 604
 1,577
 1,389
515
 509
Other Income and Expenses, net44
 29
 137
 94
42
 49
Interest Expense104
 82
 307
 255
102
 101
Income Before Income Taxes570
 551
 1,407
 1,228
455
 457
Income Tax Expense193
 209
 474
 461
163
 171
Net Income$377
 $342
 $933
 $767
$292
 $286
Other Comprehensive Income, net of tax          
Reclassification into earnings from cash flow hedges
 1
 2
 1

 1
Comprehensive Income$377
 $343
 $935
 $768
$292
 $287


See Notes to Condensed Consolidated Financial Statements
1011


PART I

DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)September 30, 2014
 December 31, 2013
March 31, 2015
 December 31, 2014
ASSETS      
Current Assets      
Cash and cash equivalents$34
 $23
$30
 $13
Receivables (net of allowance for doubtful accounts of $3 at September 30, 2014 and December 31, 2013)123
 186
Restricted receivables of variable interest entities (net of allowance for doubtful accounts of $6 at September 30, 2014 and December 31, 2013)695
 673
Receivables (net of allowance for doubtful accounts of $3 at March 31, 2015 and
December 31, 2014)
106
 129
Restricted receivables of variable interest entities (net of allowance for doubtful accounts of $6 at March 31, 2015 and December 31, 2014)658
 647
Receivables from affiliated companies117
 75
91
 75
Notes receivable from affiliated companies339
 222
755
 150
Inventory973
 1,065
1,117
 1,124
Regulatory assets388
 295
376
 399
Other247
 309
41
 77
Total current assets2,916
 2,848
3,174
 2,614
Investments and Other Assets      
Nuclear decommissioning trust funds2,965
 2,840
3,118
 3,042
Other975
 1,000
996
 959
Total investments and other assets3,940
 3,840
4,114
 4,001
Property, Plant and Equipment      
Cost37,670
 34,906
37,682
 37,372
Accumulated depreciation and amortization(12,544) (11,894)(12,935) (12,700)
Net property, plant and equipment25,126
 23,012
24,747
 24,672
Regulatory Assets and Deferred Debits      
Regulatory assets1,986
 1,527
2,460
 2,465
Other42
 46
45
 42
Total regulatory assets and deferred debits2,028
 1,573
2,505
 2,507
Total Assets$34,010
 $31,273
$34,540
 $33,794
LIABILITIES AND MEMBER'S EQUITY      
Current Liabilities      
Accounts payable$514
 $701
$504
 $709
Accounts payable to affiliated companies176
 161
204
 154
Taxes accrued334
 147
129
 146
Interest accrued130
 97
135
 95
Current maturities of long-term debt7
 47
506
 507
Regulatory liabilities31
 65
26
 34
Other399
 393
398
 434
Total current liabilities1,591

1,611
1,902

2,079
Long-Term Debt8,087
 8,089
8,079
 7,584
Long-Term Debt Payable to Affiliated Companies300
 300
300
 300
Deferred Credits and Other Liabilities      
Deferred income taxes5,725
 5,706
5,901
 5,812
Investment tax credits205
 210
203
 204
Accrued pension and other post-retirement benefit costs149
 161
109
 111
Asset retirement obligations3,691
 1,594
3,460
 3,428
Regulatory liabilities2,690
 2,576
2,730
 2,710
Other663
 676
640
 642
Total deferred credits and other liabilities13,123
 10,923
13,043
 12,907
Commitments and Contingencies

 



 

Member's Equity      
Member's equity10,922
 10,365
11,229
 10,937
Accumulated other comprehensive loss(13) (15)(13) (13)
Total member's equity10,909
 10,350
11,216
 10,924
Total Liabilities and Member's Equity$34,010
 $31,273
$34,540
 $33,794

See Notes to Condensed Consolidated Financial Statements
1112


PART I

DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended September 30,Three Months Ended March 31,
(in millions)2014
 2013
2015
 2014
CASH FLOWS FROM OPERATING ACTIVITIES      
Net income$933
 $767
$292
 $286
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization (including amortization of nuclear fuel)952
 865
324
 309
Equity component of AFUDC(68) (70)(24) (22)
Community support and charitable contributions expense
 14
Impairment charges3
 
Deferred income taxes47
 487
113
 87
Accrued pension and other post-retirement benefit costs16
 29
4
 6
Contributions to qualified pension plans(42) 
(Increase) decrease in      
Net realized and unrealized mark-to-market and hedging transactions
 (7)
 3
Receivables5
 (24)16
 11
Receivables from affiliated companies(42) (37)(16) (27)
Inventory91
 23
7
 181
Other current assets(130) 35
2
 (59)
Increase (decrease) in      
Accounts payable(167) (90)(133) (100)
Accounts payable to affiliated companies15
 107
50
 21
Taxes accrued173
 18
(17) (3)
Other current liabilities7
 2
(27) (26)
Other assets23
 (80)44
 14
Other liabilities21
 (66)(17) (9)
Net cash provided by operating activities1,879
 1,973
576
 672
CASH FLOWS FROM INVESTING ACTIVITIES      
Capital expenditures(1,289) (1,205)(448) (426)
Purchases of available-for-sale securities(1,533) (1,883)(643) (584)
Proceeds from sales and maturities of available-for-sale securities1,516
 1,847
643
 579
Notes receivable from affiliated companies(117) (213)(605) (115)
Other(27) (11)4
 (6)
Net cash used in investing activities(1,450) (1,465)(1,049) (552)
CASH FLOWS FROM FINANCING ACTIVITIES      
Payments for the redemption of long-term debt(42) 
Proceeds from the issuance of long-term debt496
 
Distributions to parent(376) (500)
 (126)
Other
 (2)(6) 
Net cash used in financing activities(418) (502)
Net increase in cash and cash equivalents11
 6
Net cash provided by (used in) financing activities490
 (126)
Net increase (decrease) in cash and cash equivalents17
 (6)
Cash and cash equivalents at beginning of period23
 19
13
 23
Cash and cash equivalents at end of period$34
 $25
$30
 $17
Supplemental Disclosures:      
Significant non-cash transactions:      
Accrued capital expenditures$177
 $111
$102
 $133

See Notes to Condensed Consolidated Financial Statements
1213


PART I

DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Statements of Changes in Member's Equity
(Unaudited)
  Accumulated Other Comprehensive Loss    Accumulated Other Comprehensive Loss  
(in millions)
Member's
Equity

 Net (Losses) Gains on Cash Flow Hedges
 Unrealized Losses on Available-for-Sale Securities
 Total
Member's
Equity

 Net Losses on Cash Flow Hedges
 Unrealized Losses on Available-for-Sale Securities
 Total
Balance at December 31, 2012$9,888
 $(15) $(1) $9,872
Net income767
 
 
 767
Other comprehensive income
 1
 
 1
Distributions to parent(500) 
 
 (500)
Balance at September 30, 2013$10,155
 $(14) $(1) $10,140
       
Balance at December 31, 2013$10,365
 $(14) $(1) $10,350
$10,365
 $(14) $(1) $10,350
Net income933
 
 
 933
286
 
 
 286
Other comprehensive income
 2
 
 2

 1
 
 1
Distributions to parent(376) 
 
 (376)(126) 
 
 (126)
Balance at September 30, 2014$10,922
 $(12) $(1) $10,909
Balance at March 31, 2014$10,525
 $(13) $(1) $10,511
       
Balance at December 31, 2014$10,937
 $(12) $(1) $10,924
Net income292
 
 
 292
Balance at March 31, 2015$11,229
 $(12) $(1) $11,216


See Notes to Condensed Consolidated Financial Statements
1314


PART I


PROGRESS ENERGY, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,Three Months Ended March 31,
(in millions)2014
 2013
 2014
 2013
2015
 2014
Operating Revenues$2,863
 $2,766
 $7,825
 $7,233
$2,536
 $2,541
Operating Expenses          
Fuel used in electric generation and purchased power1,214
 1,154
 3,234
 2,932
1,032
 1,043
Operation, maintenance and other564
 559
 1,714
 1,653
565
 595
Depreciation and amortization294
 240
 851
 644
287
 276
Property and other taxes127
 141
 415
 423
111
 151
Impairment charges1
 2
 (16) 368
Total operating expenses2,200
 2,096
 6,198
 6,020
1,995
 2,065
Gains on Sales of Other Assets and Other, net2
 1
 3
 2
8
 1
Operating Income665
 671
 1,630
 1,215
549
 477
Other Income and Expenses, net26
 26
 54
 63
27
 15
Interest Expense166
 162
 502
 520
168
 169
Income From Continuing Operations Before Taxes525
 535
 1,182
 758
408
 323
Income Tax Expense From Continuing Operations195
 207
 441
 289
144
 119
Income From Continuing Operations330
 328
 741
 469
264
 204
Income (Loss) From Discontinued Operations, net of tax
 14
 (6) 10
Loss From Discontinued Operations, net of tax(1) (1)
Net Income330
 342
 735
 479
263
 203
Less: Net Income Attributable to Noncontrolling Interest1
 1
 2
 2
3
 1
Net Income Attributable to Parent$329
 $341
 $733
 $477
$260
 $202
          
Net Income$330
 $342
 $735
 $479
$263
 $203
Other Comprehensive Income, net of tax       
Other Comprehensive Income (Loss), net of tax   
Pension and OPEB adjustments1
 4
 2
 5
1
 1
Net unrealized loss on cash flow hedges
 (3) 
 
Net unrealized gain on cash flow hedges
 1
Reclassification into earnings from cash flow hedges1
 3
 5
 3
(2) 
Unrealized gain on investments in available-for-sale securities1
 
 1
 
Other Comprehensive Income, net of tax3

4

8

8
Other Comprehensive (Loss) Income, net of tax(1)
2
Comprehensive Income333
 346
 743
 487
262
 205
Less: Comprehensive Income Attributable to Noncontrolling Interests1
 1
 2
 2
3
 1
Comprehensive Income Attributable to Parent$332

$345

$741

$485
$259

$204


See Notes to Condensed Consolidated Financial Statements
1415


PART I

PROGRESS ENERGY, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)September 30, 2014
 December 31, 2013
March 31, 2015
 December 31, 2014
ASSETS      
Current Assets      
Cash and cash equivalents$47
 $58
$44
 $42
Receivables (net of allowance for doubtful accounts of $7 at September 30, 2014 and $14 at December 31, 2013)184
 528
Restricted receivables of variable interest entities (net of allowance for doubtful accounts of $8 at September 30, 2014)877
 417
Receivables (net of allowance for doubtful accounts of $7 at March 31, 2015 and $8 at December 31, 2014)129
 129
Restricted receivables of variable interest entities (net of allowance for doubtful accounts of $8 at March 31, 2015 and December 31, 2014)779
 741
Receivables from affiliated companies36
 4
80
 59
Notes receivable from affiliated companies164
 75
178
 220
Inventory1,509
 1,424
1,543
 1,590
Regulatory assets566
 353
392
 491
Other622
 726
793
 1,285
Total current assets4,005
 3,585
3,938
 4,557
Investments and Other Assets      
Nuclear decommissioning trust funds2,409
 2,292
2,458
 2,503
Goodwill3,655
 3,655
3,655
 3,655
Other792
 804
777
 670
Total investments and other assets6,856
 6,751
6,890
 6,828
Property, Plant and Equipment      
Cost37,796
 36,480
39,067
 38,650
Accumulated depreciation and amortization(13,397) (13,098)(13,714) (13,506)
Net property, plant and equipment24,399
 23,382
25,353
 25,144
Regulatory Assets and Deferred Debits      
Regulatory assets4,818
 4,155
5,687
 5,408
Other94
 96
90
 91
Total regulatory assets and deferred debits4,912
 4,251
5,777
 5,499
Total Assets$40,172
 $37,969
$41,958
 $42,028
LIABILITIES AND EQUITY      
Current Liabilities      
Accounts payable$636
 $836
$667
 $847
Accounts payable to affiliated companies265
 123
286
 203
Notes payable to affiliated companies822
 1,213
650
 835
Taxes accrued317
 105
161
 114
Interest accrued192
 181
203
 184
Current maturities of long-term debt318
 485
1,564
 1,507
Regulatory liabilities106
 207
125
 106
Other743
 896
961
 1,021
Total current liabilities3,399
 4,046
4,617
 4,817
Long-Term Debt14,194
 13,630
12,946
 13,247
Deferred Credits and Other Liabilities      
Deferred income taxes3,999
 3,283
4,834
 4,759
Accrued pension and other post-retirement benefit costs621
 765
561
 533
Asset retirement obligations4,015
 2,562
4,738
 4,711
Regulatory liabilities2,397
 2,292
2,413
 2,379
Other515
 527
411
 406
Total deferred credits and other liabilities11,547
 9,429
12,957
 12,788
Commitments and Contingencies
 

 
Common Stockholder's Equity      
Common stock, $0.01 par value, 100 shares authorized and outstanding at September 30, 2014 and December 31, 2013
 
Common stock, $0.01 par value, 100 shares authorized and outstanding at March 31, 2015 and December 31, 2014
 
Additional paid-in capital7,467
 7,467
7,467
 7,467
Retained earnings3,647
 3,452
4,039
 3,782
Accumulated other comprehensive loss(51) (59)(42) (41)
Total common stockholder's equity11,063
 10,860
11,464
 11,208
Noncontrolling interests(31) 4
(26) (32)
Total equity11,032
 10,864
11,438
 11,176
Total Liabilities and Common Stockholder's Equity$40,172
 $37,969
$41,958
 $42,028

See Notes to Condensed Consolidated Financial Statements
1516


PART I

PROGRESS ENERGY, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended September 30,Three Months Ended March 31,
(in millions)2014
 2013
2015
 2014
CASH FLOWS FROM OPERATING ACTIVITIES      
Net income$735
 $479
$263
 $203
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation, amortization and accretion (including amortization of nuclear fuel)985
 764
329
 316
Equity component of AFUDC(18) (39)(14) (1)
Community support and charitable contributions expense
 20
Losses on sales of other assets1
 3
Impairment charges(16) 368
Gains on sales of other assets and other, net(8) (1)
Deferred income taxes231
 384
196
 183
Accrued pension and other post-retirement benefit costs20
 158
(1) 7
Contributions to qualified pension plans
 (27)(42) 
(Increase) decrease in      
Net realized and unrealized mark-to-market and hedging transactions28
 33
(22) 13
Receivables(162) (219)(66) (45)
Receivables from affiliated companies(32) 12
(21) 
Inventory(45) 79
47
 72
Other current assets(147) (102)302
 (134)
Increase (decrease) in      
Accounts payable(73) (227)(107) (53)
Accounts payable to affiliated companies142
 25
83
 114
Taxes accrued166
 161
47
 3
Other current liabilities(96) 113
(10) (116)
Other assets(126) (223)(21) (52)
Other liabilities(9) (64)(48) (6)
Net cash provided by operating activities1,584
 1,698
907
 503
CASH FLOWS FROM INVESTING ACTIVITIES      
Capital expenditures(1,383) (1,739)(563) (475)
Purchases of available-for-sale securities(609) (1,651)(298) (266)
Proceeds from sales and maturities of available-for-sale securities594
 1,630
367
 269
Net proceeds from the sales of other assets2
 
Notes receivable from affiliated companies(89) (103)42
 (101)
Other(39) 12
(20) (25)
Net cash used in investing activities(1,524) (1,851)(472) (598)
CASH FLOWS FROM FINANCING ACTIVITIES      
Proceeds from the:   
Issuance of long-term debt875
 545
Payments for the:   
Redemption of long-term debt(479) (1,194)
Redemption of preferred stock of subsidiary
 (96)
Proceeds from the issuance of long-term debt
 875
Payments for the redemption of long-term debt(245) (469)
Notes payable to affiliated companies(391) 740
(185) (291)
Distributions to noncontrolling interests(37) (2)
 (3)
Other(39) (5)(3) (39)
Net cash used in financing activities(71) (12)
Net decrease in cash and cash equivalents(11) (165)
Net cash (used in) provided by financing activities(433) 73
Net increase (decrease) in cash and cash equivalents2
 (22)
Cash and cash equivalents at beginning of period58
 231
42
 58
Cash and cash equivalents at end of period$47
 $66
$44
 $36
Supplemental Disclosures:      
Significant non-cash transactions:      
Accrued capital expenditures$159
 $199
$176
 $158

See Notes to Condensed Consolidated Financial Statements
1617


PART I

PROGRESS ENERGY, INC.
Condensed Consolidated Statements of Changes in Common Stockholder's Equity
(Unaudited)
      Accumulated Other Comprehensive Loss            Accumulated Other Comprehensive Loss      
(in millions)
Common
Stock

 
Additional
Paid-in Capital

 
Retained
Earnings

 Net Gains (Losses) on Cash Flow Hedges
 Net Gains on Available for Sale Securities
 Pension and OPEB Related Adjustments
 Common Stockholder's Equity
 
Noncontrolling
Interests

 
Total
Equity

Common
Stock

 
Additional
Paid-in Capital

 
Retained
Earnings

 Net Losses on Cash Flow Hedges
 Net Gains on Available for Sale Securities
 Pension and OPEB Adjustments
 Common Stockholder's Equity
 
Noncontrolling
Interests

 
Total
Equity

Balance at December 31, 2012$
 $7,465
 $2,783
 $(42) $
 $(25) $10,181
 $4
 $10,185
Net income
 
 477
 
 
 
 477
 2
 479
Other comprehensive income
 
 
 3
 
 5
 8
 
 8
Premium on the redemption of preferred stock of subsidiaries
 
 (3) 
 
 
 (3) 
 (3)
Distributions to noncontrolling interests
 
 
 
 
 
 
 (2) (2)
Balance at September 30, 2013$
 $7,465
 $3,257
 $(39) $
 $(20) $10,663
 $4
 $10,667
                 
Balance at December 31, 2013$
 $7,467
 $3,452
 $(43) $
 $(16) $10,860
 $4
 $10,864
$
 $7,467
 $3,452
 $(43) $
 $(16) $10,860
 $4
 $10,864
Net income
 
 733
 
 

 
 733
 2
 735

 
 202
 
 
 
 202
 1
 203
Other comprehensive income
 
 
 5
 1
 2
 8
 
 8

 
 
 1
 
 1
 2
 
 2
Distributions to noncontrolling interests
 
 
 
 
 
 
 (37) (37)
 
 
 
 
 ��
 
 (3) (3)
Transfer of service company net assets to Duke Energy
 
 (538) 
 
 
 (538) 
 (538)
 
 (542) 3
 
 
 (539) 
 (539)
Balance at September 30, 2014$
 $7,467
 $3,647
 $(38) $1
 $(14) $11,063
 $(31) $11,032
Balance at March 31, 2014$

$7,467

$3,112

$(39)
$

$(15)
$10,525

$2

$10,527
                 
Balance at December 31, 2014$
 $7,467
 $3,782
 $(35) $1
 $(7) $11,208
 $(32) $11,176
Net income
 
 260
 
 

 
 260
 3
 263
Other comprehensive (loss) income
 
 
 (2) 
 1
 (1) 
 (1)
Other
 
 (3) 
 
 
 (3) 3
 
Balance at March 31, 2015$

$7,467

$4,039

$(37)
$1

$(6)
$11,464

$(26)
$11,438


See Notes to Condensed Consolidated Financial Statements
1718


PART I


DUKE ENERGY PROGRESS, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,Three Months Ended March 31,
(in millions)2014 2013 2014 20132015
 2014
Operating Revenues$1,367
 $1,430
 $3,980
 $3,781
$1,449
 $1,422
Operating Expenses          
Fuel used in electric generation and purchased power552
 574
 1,579
 1,470
575
 573
Operation, maintenance and other346
 352
 1,074
 1,044
375
 381
Depreciation and amortization155
 143
 441
 393
152
 144
Property and other taxes29
 59
 150
 172
32
 67
Impairment charges
 
 (18) 22
Total operating expenses1,082
 1,128
 3,226
 3,101
1,134
 1,165
Gains on Sales of Other Assets and Other, net
 1
 1
 1
1
 1
Operating Income285
 303
 755
 681
316
 258
Other Income and Expenses, net18
 21
 34
 43
20
 9
Interest Expense57
 52
 172
 147
60
 57
Income Before Income Taxes246
 272
 617
 577
276
 210
Income Tax Expense89
 97
 226
 215
93
 77
Net Income and Comprehensive Income$157
 $175
 $391
 $362
$183
 $133


See Notes to Condensed Consolidated Financial Statements
1819


PART I

DUKE ENERGY PROGRESS, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)September 30, 2014
 December 31, 2013
March 31, 2015
 December 31, 2014
ASSETS      
Current Assets      
Cash and cash equivalents$6
 $21
$6
 $9
Receivables (net of allowance for doubtful accounts of $6 at September 30, 2014 and $10 at December 31, 2013)72
 145
Restricted receivables of variable interest entities (net of allowance for doubtful accounts of $5 at September 30, 2014)475
 417
Receivables (net of allowance for doubtful accounts of $6 at March 31, 2015 and $7 at December 31, 2014)49
 43
Restricted receivables of variable interest entities (net of allowance for doubtful accounts of $4 at March 31, 2015 and $5 at December 31, 2014)479
 436
Receivables from affiliated companies9
 2
4
 10
Notes receivable from affiliated companies205
 237
Inventory928
 853
929
 966
Regulatory assets325
 127
267
 287
Other261
 296
99
 384
Total current assets2,076
 1,861
2,038
 2,372
Investments and Other Assets      
Nuclear decommissioning trust funds1,626
 1,539
1,738
 1,701
Other475
 443
450
 412
Total investments and other assets2,101
 1,982
2,188
 2,113
Property, Plant and Equipment      
Cost23,511
 22,273
24,444
 24,207
Accumulated depreciation and amortization(8,931) (8,623)(9,162) (9,021)
Net property, plant and equipment14,580
 13,650
15,282
 15,186
Regulatory Assets and Deferred Debits      
Regulatory assets2,187
 1,384
2,857
 2,675
Other34
 32
34
 34
Total regulatory assets and deferred debits2,221
 1,416
2,891
 2,709
Total Assets$20,978
 $18,909
$22,399
 $22,380
LIABILITIES AND COMMON STOCKHOLDER'S EQUITY      
Current Liabilities      
Accounts payable$305
 $420
$363
 $481
Accounts payable to affiliated companies205
 103
183
 120
Notes payable to affiliated companies122
 462
Taxes accrued149
 37
61
 47
Interest accrued78
 70
87
 81
Current maturities of long-term debt306
 174
702
 945
Regulatory liabilities66
 63
80
 71
Other344
 392
359
 409
Total current liabilities1,575
 1,721
1,835
 2,154
Long-Term Debt5,410
 5,061
5,255
 5,256
Deferred Credits and Other Liabilities      
Deferred income taxes2,729
 2,557
2,978
 2,908
Accrued pension and other post-retirement benefit costs311
 321
287
 290
Asset retirement obligations3,206
 1,729
3,936
 3,905
Regulatory liabilities1,796
 1,673
1,883
 1,832
Other159
 222
175
 168
Total deferred credits and other liabilities8,201
 6,502
9,259
 9,103
Commitments and Contingencies





Common Stockholder's Equity      
Common stock, no par value, 200 million shares authorized; 160 million shares outstanding at September 30, 2014 and December 31, 20132,159
 2,159
Common stock, no par value, 200 million shares authorized; 160 million shares outstanding at March 31, 2015 and December 31, 20142,159
 2,159
Retained earnings3,633
 3,466
3,891
 3,708
Total common stockholder's equity5,792
 5,625
6,050
 5,867
Total Liabilities and Common Stockholder's Equity$20,978
 $18,909
$22,399
 $22,380

See Notes to Condensed Consolidated Financial Statements
1920


PART I

DUKE ENERGY PROGRESS, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended September 30,Three Months Ended March 31,
(in millions)2014
 2013
2015
 2014
CASH FLOWS FROM OPERATING ACTIVITIES      
Net income$391
 $362
$183
 $133
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation, amortization and accretion (including amortization of nuclear fuel)570
 507
193
 183
Equity component of AFUDC(17) (33)(13) (2)
Community support and charitable contributions expense
 20
Gains on sales of other assets and other, net(1) (1)(1) (1)
Impairment charges(18) 22
Deferred income taxes152
 272
138
 117
Accrued pension and other post-retirement benefit costs(5) 74
(4) (2)
Contributions to qualified pension plans(21) 
(Increase) decrease in      
Net realized and unrealized mark-to-market and hedging transactions9
 (11)(4) 6
Receivables33
 (75)(92) 10
Receivables from affiliated companies(7) 4
6
 (5)
Inventory(53) 32
37
 53
Other current assets(97) (41)170
 (183)
Increase (decrease) in      
Accounts payable(67) (168)(52) (37)
Accounts payable to affiliated companies102
 
63
 139
Taxes accrued95
 63
14
 
Other current liabilities(46) (75)(28) (41)
Other assets(28) (87)(2) (13)
Other liabilities(23) (77)(23) (1)
Net cash provided by operating activities990
 788
564
 356
CASH FLOWS FROM INVESTING ACTIVITIES      
Capital expenditures(871) (998)(338) (299)
Purchases of available-for-sale securities(371) (460)(149) (151)
Proceeds from sales and maturities of available-for-sale securities351
 438
144
 149
Notes receivable from affiliated companies32
 (65)
Other(25) 3
(12) (18)
Net cash used in investing activities(916) (1,017)(323) (384)
CASH FLOWS FROM FINANCING ACTIVITIES      
Proceeds from the issuance of long-term debt650
 545

 650
Payments for the:   
Redemption of long-term debt(169) (451)
Redemption of preferred stock of subsidiary
 (62)
Payments for the redemption of long-term debt(243) (168)
Notes payable to affiliated companies(340) 217

 (462)
Dividends to parent(224) 
Other(6) (6)(1) (4)
Net cash (used in) provided by financing activities(89) 243
(244) 16
Net (decrease) increase in cash and cash equivalents(15) 14
Net decrease in cash and cash equivalents(3) (12)
Cash and cash equivalents at beginning of period21
 18
9
 21
Cash and cash equivalents at end of period$6
 $32
$6
 $9
Supplemental Disclosures:      
Significant non-cash transactions:      
Accrued capital expenditures$107
 $122
$82
 $116

See Notes to Condensed Consolidated Financial Statements
2021


PART I

DUKE ENERGY PROGRESS, INC.
Condensed Consolidated Statements of Changes in Common Stockholder's Equity
(Unaudited)
(in millions)
Common
Stock

 
Retained
Earnings

 
Total
Equity

Balance at December 31, 2012$2,159
 $2,968
 $5,127
Net income
 362
 362
Premium on the redemption of preferred stock
 (2) (2)
Balance at September 30, 2013$2,159
 $3,328
 $5,487
      
Balance at December 31, 2013$2,159
 $3,466
 $5,625
Net income
 391
 391
Dividends to parent
 (224) (224)
Balance at September 30, 2014$2,159
 $3,633
 $5,792
(in millions)
Common
Stock

 
Retained
Earnings

 
Total
Equity

Balance at December 31, 2013$2,159
 $3,466
 $5,625
Net income
 133
 133
Balance at March 31, 2014$2,159
 $3,599
 $5,758
      
Balance at December 31, 2014$2,159
 $3,708
 $5,867
Net income
 183
 183
Balance at March 31, 2015$2,159
 $3,891
 $6,050


See Notes to Condensed Consolidated Financial Statements
2122


PART I


DUKE ENERGY FLORIDA, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,Three Months Ended March 31,
(in millions)2014
 2013
 2014
 2013
2015
 2014
Operating Revenues$1,491
 $1,332
 $3,832
 $3,442
$1,086
 $1,116
Operating Expenses          
Fuel used in electric generation and purchased power662
 579
 1,655
 1,462
457
 470
Operation, maintenance and other212
 207
 626
 616
188
 211
Depreciation and amortization139
 95
 410
 237
134
 132
Property and other taxes99
 81
 266
 245
80
 84
Impairment charges1
 1
 2
 346
Total operating expenses1,113
 963
 2,959
 2,906
859
 897
Gains on Sales of Other Assets and Other, net
 
 
 1
Operating Income378
 369
 873
 537
227
 219
Other Income and Expenses, net6
 6
 17
 19
6
 5
Interest Expense51
 46
 150
 138
49
 49
Income Before Income Taxes333
 329
 740
 418
184
 175
Income Tax Expense128
 132
 285
 168
71
 67
Net Income$205
 $197
 $455
 $250
$113
 $108
Other Comprehensive Income (Loss), net of tax       
Pension and OPEB adjustments
 $(1) 
 $(1)
Reclassification into earnings from cash flow hedges
 
 1
 
Other Comprehensive Income (Loss), net of tax$
 $(1) $1
 $(1)
Other Comprehensive Income, net of tax   
Net unrealized gain on cash flow hedges
 1
Comprehensive Income$205
 $196
 $456

$249
$113
 $109


See Notes to Condensed Consolidated Financial Statements
2223


PART I

DUKE ENERGY FLORIDA, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)September 30, 2014
 December 31, 2013
March 31, 2015
 December 31, 2014
ASSETS      
Current Assets      
Cash and cash equivalents$15
 $16
$10
 $8
Receivables (net of allowance for doubtful accounts of $2 at September 30, 2014 and $4 at December 31, 2013)109
 375
Restricted receivables of variable interest entities (net of allowance for doubtful accounts of $3 at September 30, 2014)403
 
Receivables (net of allowance for doubtful accounts of $2 at March 31, 2015 and
December 31, 2014)
77
 84
Restricted receivables of variable interest entities (net of allowance for doubtful accounts of $3 at March 31, 2015 and $3 at December 31, 2014)301
 305
Receivables from affiliated companies40
 3
60
 40
Notes receivable from affiliated companies182
 
Inventory581
 571
614
 623
Regulatory assets241
 221
124
 203
Other230
 182
333
 521
Total current assets1,801
 1,368
1,519
 1,784
Investments and Other Assets      
Nuclear decommissioning trust funds783
 753
720
 803
Other261
 252
270
 204
Total investments and other assets1,044
 1,005
990
 1,007
Property, Plant and Equipment      
Cost14,275
 13,863
14,613
 14,433
Accumulated depreciation and amortization(4,460) (4,252)(4,545) (4,478)
Net property, plant and equipment9,815
 9,611
10,068
 9,955
Regulatory Assets and Deferred Debits      
Regulatory assets2,631
 2,729
2,830
 2,733
Other42
 44
39
 39
Total regulatory assets and deferred debits2,673
 2,773
2,869
 2,772
Total Assets$15,333
 $14,757
$15,446
 $15,518
LIABILITIES AND COMMON STOCKHOLDER'S EQUITY      
Current Liabilities      
Accounts payable$331
 $333
$302
 $365
Accounts payable to affiliated companies67
 38
85
 70
Notes payable to affiliated companies
 181
192
 84
Taxes accrued164
 66
126
 65
Interest accrued65
 46
68
 47
Current maturities of long-term debt12
 11
562
 562
Regulatory liabilities40
 144
45
 35
Other370
 445
577
 586
Total current liabilities1,049
 1,264
1,957
 1,814
Long-Term Debt5,090
 4,875
4,296
 4,298
Deferred Credits and Other Liabilities      
Deferred income taxes2,109
 1,829
2,465
 2,452
Accrued pension and other post-retirement benefit costs277
 286
254
 221
Asset retirement obligations809
 833
803
 806
Regulatory liabilities600
 618
529
 547
Other270
 255
157
 158
Total deferred credits and other liabilities4,065
 3,821
4,208
 4,184
Commitments and Contingencies
 

 
Common Stockholder's Equity      
Common Stock, no par; 60 million shares authorized; 100 shares outstanding at September 30, 2014 and December 31, 20131,762
 1,762
Common Stock, no par; 60 million shares authorized; 100 shares outstanding at March 31, 2015 and December 31, 20141,762
 1,762
Retained earnings3,367
 3,036
3,223
 3,460
Accumulated other comprehensive loss
 (1)
Total common stockholder's equity5,129
 4,797
4,985
 5,222
Total Liabilities and Common Stockholder's Equity$15,333
 $14,757
$15,446
 $15,518

See Notes to Condensed Consolidated Financial Statements
2324


PART I

DUKE ENERGY FLORIDA, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended September 30,Three Months Ended March 31,
(in millions)2014
 2013
2015
 2014
CASH FLOWS FROM OPERATING ACTIVITIES      
Net income$455
 $250
$113
 $108
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation, amortization and accretion413
 240
136
 133
Equity component of AFUDC(1) (6)(1) 
Gains on sales of other assets and other, net
 (1)
Impairment charges2
 346
Deferred income taxes194
 229
39
 60
Accrued pension and other post-retirement benefit costs22
 66
1
 7
Contributions to qualified pension plans
 (27)(21) 
(Increase) decrease in      
Net realized and unrealized mark-to-market and hedging transactions13
 37
(20) 5
Receivables(118) (127)24
 21
Receivables from affiliated companies(37) 19
(20) (7)
Inventory7
 46
10
 20
Other current assets(90) (132)143
 68
Increase (decrease) in      
Accounts payable32
 30
(54) 24
Accounts payable to affiliated companies29
 (19)15
 28
Taxes accrued68
 152
61
 10
Other current liabilities(50) 203
24
 (63)
Other assets(92) (128)(17) (36)
Other liabilities(53) (44)(29) (13)
Net cash provided by operating activities794
 1,134
404
 365
CASH FLOWS FROM INVESTING ACTIVITIES      
Capital expenditures(513) (734)(224) (176)
Purchases of available-for-sale securities(238) (1,191)(149) (115)
Proceeds from sales and maturities of available-for-sale securities243
 1,192
223
 120
Notes receivable from affiliated companies(182) 177

 (110)
Other(14) 
(7) (8)
Net cash used in investing activities(704) (556)(157) (289)
CASH FLOWS FROM FINANCING ACTIVITIES      
Proceeds from the issuance of long-term debt225
 

 225
Payments for the:   
Redemption of long-term debt(10) (435)
Redemption of preferred stock
 (34)
Payments for the redemption of long-term debt(2) (1)
Notes payable to affiliated companies(181) 
108
 (181)
Dividends to parent(124) (225)(350) (124)
Other(1) 
(1) (1)
Net cash used in financing activities(91) (694)(245) (82)
Net decrease in cash and cash equivalents(1) (116)
Net increase (decrease) in cash and cash equivalents2
 (6)
Cash and cash equivalents at beginning of period16
 131
8
 16
Cash and cash equivalents at end of period$15
 $15
$10
 $10
Supplemental Disclosures:      
Significant non-cash transactions:      
Accrued capital expenditures$52
 $76
$94
 $42

See Notes to Condensed Consolidated Financial Statements
2425


PART I

DUKE ENERGY FLORIDA, INC.
Condensed Consolidated Statements of Changes in Common Stockholder's Equity
(Unaudited)
    
Accumulated Other
Comprehensive Income
      
Accumulated Other
Comprehensive Loss
  
(in millions)
Common
Stock

 
Retained
Earnings

 Net Gain (Loss) on Cash Flow Hedges
 Pension and OPEB Related Adjustments
 Total
Common
Stock

 
Retained
Earnings

 Net Loss on Cash Flow Hedges
 Total
Balance at December 31, 2012$1,762
 $3,037
 $
 $
 $4,799
Net income
 250
 
 
 250
Other comprehensive loss
 
 
 (1) (1)
Dividends to parent
 (225) 
 
 (225)
Premium on the redemption of preferred stock
 (1) 
 
 (1)
Balance at September 30, 2013$1,762
 $3,061
 $
 $(1) $4,822
         
Balance at December 31, 2013$1,762
 $3,036
 $(1) $
 $4,797
$1,762
 $3,036
 $(1) $4,797
Net income
 455
 
 
 455

 108
 
 108
Other comprehensive income
 
 1
 
 1

 
 1
 1
Dividends to parent
 (124) 
 
 (124)
 (124) 
 (124)
Balance at September 30, 2014$1,762
 $3,367
 $
 $
 $5,129
Balance at March 31, 2014$1,762
 $3,020
 $
 $4,782
       
Balance at December 31, 2014$1,762
 $3,460
 $
 $5,222
Net income
 113
 
 113
Dividends to parent
 (350) 
 (350)
Balance at March 31, 2015$1,762
 $3,223
 $
 $4,985

See Notes to Condensed Consolidated Financial Statements
2526


PART I


DUKE ENERGY OHIO, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,Three Months Ended March 31,
(in millions)2014
 2013
 2014
 2013
2015
 2014
Operating Revenues          
Regulated electric$352
 $338
 $998
 $957
$339
 $339
Nonregulated electric and other6
 16
 17
 28
14
 13
Regulated natural gas88
 84
 418
 364
233
 223
Total operating revenues446
 438
 1,433
 1,349
586
 575
Operating Expenses          
Fuel used in electric generation and purchased power - regulated129
 121
 360
 327
Fuel used in electric generation and purchased power - nonregulated5
 13
 24
 32
Fuel used in electric generation and purchased power – regulated115
 124
Fuel used in electric generation and purchased power – nonregulated14
 13
Cost of natural gas8
 9
 129
 102
97
 99
Operation, maintenance and other134
 133
 378
 415
128
 127
Depreciation and amortization54
 53
 167
 160
57
 57
Property and other taxes58
 59
 170
 184
70
 68
Impairment charges
 
 94
 

 94
Total operating expenses388
 388
 1,322
 1,220
481
 582
Gains on Sales of Other Assets and Other, net
 
 
 4
6
 
Operating Income58
 50
 111
 133
Operating Income (Loss)111
 (7)
Other Income and Expenses, net3
 2
 9
 4
3
 3
Interest Expense20
 14
 60
 47
20
 20
Income From Continuing Operations Before Income Taxes41
 38
 60
 90
Income Tax Expense From Continuing Operations15
 14
 21
 33
Income From Continuing Operations$26
 $24
 $39
 $57
Income (Loss) From Continuing Operations Before Income Taxes94
 (24)
Income Tax Expense (Benefit) From Continuing Operations35
 (9)
Income (Loss) From Continuing Operations59
 (15)
Income (Loss) From Discontinued Operations, net of tax413
 35
 (597) 39
90
 (875)
Net Income (Loss)$439
 $59
 $(558) $96
Other Comprehensive Income, net of tax       
Pension and OPEB adjustments
 
 
 1
Comprehensive Income (Loss)$439
 $59
 $(558) $97
Net Income (Loss) and Comprehensive Income (Loss)$149
 $(890)


See Notes to Condensed Consolidated Financial Statements
2627


PART I

DUKE ENERGY OHIO, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)September 30, 2014
 December 31, 2013
March 31, 2015
 December 31, 2014
ASSETS      
Current Assets      
Cash and cash equivalents$28
 $36
$52
 $20
Receivables (net of allowance for doubtful accounts of $1 at September 30, 2014 and $2 at December 31, 2013)110
 121
Receivables (net of allowance for doubtful accounts of $2 at March 31, 2015 and December 31, 2014)98
 93
Receivables from affiliated companies59
 121
91
 107
Notes receivable from affiliated companies235
 57
40
 145
Inventory139
 229
109
 97
Assets held for sale284
 
295
 316
Regulatory assets67
 57
21
 49
Other135
 270
97
 167
Total current assets1,057
 891
803
 994
Investments and Other Assets      
Goodwill920
 920
920
 920
Assets held for sale2,682
 
2,565
 2,605
Other20
 232
35
 23
Total investments and other assets3,622
 1,152
3,520
 3,548
Property, Plant and Equipment      
Cost7,155
 11,143
7,208
 7,141
Accumulated depreciation and amortization(2,250) (2,908)(2,264) (2,213)
Generation facilities to be retired, net9
 9
Net property, plant and equipment4,905
 8,235
4,953
 4,937
Regulatory Assets and Deferred Debits      
Regulatory assets480
 471
512
 512
Other8
 14
8
 8
Total regulatory assets and deferred debits488
 485
520
 520
Total Assets$10,072
 $10,763
$9,796
 $9,999
LIABILITIES AND COMMON STOCKHOLDER'S EQUITY      
Current Liabilities      
Accounts payable$168
 $319
$221
 $209
Accounts payable to affiliated companies71
 77
123
 74
Notes payable to affiliated companies563
 43
298
 491
Taxes accrued188
 167
181
 163
Interest accrued30
 17
29
 19
Current maturities of long-term debt197
 47
56
 157
Liabilities associated with assets held for sale269
 
129
 246
Regulatory liabilities10
 27
24
 10
Other79
 110
64
 66
Total current liabilities1,575
 807
1,125
 1,435
Long-Term Debt1,586
 2,141
1,525
 1,584
Long-Term Debt Payable to Affiliated Companies25
 25
Deferred Credits and Other Liabilities      
Deferred income taxes1,753
 2,012
1,790
 1,765
Accrued pension and other post-retirement benefit costs29
 58
48
 48
Liabilities associated with assets held for sale57
 
25
 34
Asset retirement obligations25
 28
26
 27
Regulatory liabilities267
 262
243
 241
Other169
 186
166
 166
Total deferred credits and other liabilities2,300
 2,546
2,298
 2,281
Commitments and Contingencies
 

 
Common Stockholder's Equity      
Common stock, $8.50 par value, 120,000,000 shares authorized; 89,663,086 shares outstanding at September 30, 2014 and December 31, 2013762
 762
Common stock, $8.50 par value, 120,000,000 shares authorized; 89,663,086 shares outstanding at March 31, 2015 and December 31, 2014762
 762
Additional paid-in capital4,782
 4,882
4,782
 4,782
Accumulated deficit(933) (375)(721) (870)
Total common stockholder's equity4,611
 5,269
4,823
 4,674
Total Liabilities and Common Stockholder's Equity$10,072
 $10,763
$9,796
 $9,999

See Notes to Condensed Consolidated Financial Statements
2728


PART I

DUKE ENERGY OHIO, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended September 30,Three Months Ended March 31,
(in millions)2014 20132015
 2014
CASH FLOWS FROM OPERATING ACTIVITIES      
Net (loss) income$(558) $96
Adjustments to reconcile net (loss) income to net cash provided by operating activities:   
Net income (loss)$149
 $(890)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:   
Depreciation and amortization205
 268
58
 92
Equity component of AFUDC(3) 
(1) (1)
Gains on sales of other assets and other, net
 (5)(6) 
Impairment charges889
 
40
 1,417
Deferred income taxes(285) 76
25
 (501)
Accrued pension and other post-retirement benefit costs6
 12
2
 1
Contributions to qualified pension plans(1) 
(Increase) decrease in      
Net realized and unrealized mark-to-market and hedging transactions124
 
(28) 39
Receivables(66) (6)(8) (16)
Receivables from affiliated companies62
 1
16
 (6)
Inventory(16) 29
(3) 29
Other current assets56
 (8)80
 (92)
Increase (decrease) in      
Accounts payable(42) (56)20
 21
Accounts payable to affiliated companies(6) 4
49
 (13)
Taxes accrued13
 (29)(4) (38)
Other current liabilities46
 10
24
 (7)
Other assets(8) 3
15
 (9)
Other liabilities(20) (63)(74) 7
Net cash provided by operating activities397
 332
353
 33
CASH FLOWS FROM INVESTING ACTIVITIES      
Capital expenditures(242) (318)(81) (83)
Net proceeds from the sales of other assets
 11
Notes receivable from affiliated companies(178) (45)105
 (110)
Other
 1
Net cash used in investing activities(420) (351)
Net cash provided by (used in) investing activities24
 (193)
CASH FLOWS FROM FINANCING ACTIVITIES      
Proceeds from the issuance of long-term debt
 450
Payments for the redemption of long-term debt(406) (257)(151) (1)
Notes payable to affiliated companies520
 (176)(193) 263
Dividends to parent(100) 

 (100)
Other1
 (2)(1) 
Net cash provided by financing activities15
 15
Net decrease in cash and cash equivalents(8) (4)
Net cash (used in) provided by financing activities(345) 162
Net increase in cash and cash equivalents32
 2
Cash and cash equivalents at beginning of period36
 31
20
 36
Cash and cash equivalents at end of period$28
 $27
$52
 $38
Supplemental Disclosures:      
Significant non-cash transactions:      
Accrued capital expenditures$21
 $20
$15
 $24

See Notes to Condensed Consolidated Financial Statements
2829


PART I

DUKE ENERGY OHIO, INC.
Condensed Consolidated Statements of Changes in Common Stockholder's Equity
(Unaudited)
      Accumulated Other Comprehensive (Loss) Income  
(in millions)
Common
Stock

 
Additional
Paid-in
Capital

 Accumulated Deficit
 Pension and OPEB Related Adjustments
 Total
Common
Stock

 
Additional
Paid-in
Capital

 Accumulated Deficit
 Total
Balance at December 31, 2012$762
 $4,882
 $(477) $(1) $5,166
Net income
 
 96
 
 96
Other comprehensive income
 
 
 1
 1
Balance at September 30, 2013$762
 $4,882
 $(381) $
 $5,263
         
Balance at December 31, 2013$762
 $4,882
 $(375) $
 $5,269
$762
 $4,882
 $(375) $5,269
Net loss
 
 (558) 
 (558)
 
 (890) (890)
Dividends to parent
 (100) 
 
 (100)
 (100) 
 (100)
Balance at September 30, 2014$762
 $4,782
 $(933) $
 $4,611
Balance at March 31, 2014$762
 $4,782
 $(1,265) $4,279
       
Balance at December 31, 2014$762
 $4,782
 $(870) $4,674
Net income
 
 149
 149
Balance at March 31, 2015$762
 $4,782
 $(721) $4,823


See Notes to Condensed Consolidated Financial Statements
2930


PART I


DUKE ENERGY INDIANA, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,Three Months Ended March 31,
(in millions)2014
 2013
 2014
 2013
2015
 2014
Operating Revenues$790
 $755
 $2,383
 $2,179
$788
 $845
Operating Expenses          
Fuel used in electric generation and purchased power319
 283
 945
 852
294
 339
Operation, maintenance and other160
 176
 485
 489
181
 166
Depreciation and amortization104
 72
 309
 227
104
 102
Property and other taxes25
 21
 69
 59
(1) 23
Total operating expenses608
 552
 1,808
 1,627
578
 630
Operating Income182
 203
 575
 552
210
 215
Other Income and Expenses, net5
 4
 16
 14
5
 7
Interest Expense40
 43
 127
 127
45
 43
Income Before Income Taxes147
 164
 464
 439
170
 179
Income Tax Expense46
 60
 163
 163
62
 66
Net Income$101
 $104
 $301
 $276
$108
 $113
Other Comprehensive Loss, net of tax       
Other Comprehensive (Loss) Income, net of tax   
Reclassification into earnings from cash flow hedges
 (1) 
 (2)(1) 1
Comprehensive Income$101
 $103
 $301
 $274
$107
 $114


See Notes to Condensed Consolidated Financial Statements
3031


PART I

DUKE ENERGY INDIANA, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)September 30, 2014
 December 31, 2013
March 31, 2015
 December 31, 2014
ASSETS      
Current Assets      
Cash and cash equivalents$24
 $15
$16
 $6
Receivables (net of allowance for doubtful accounts of $1 at September 30, 2014 and December 31, 2013)54
 22
Receivables (net of allowance for doubtful accounts of $1 at March 31, 2015 and December 31, 2014)83
 87
Receivables from affiliated companies79
 151
114
 115
Notes receivable from affiliated companies
 96
106
 
Inventory464
 434
542
 537
Regulatory assets134
 118
88
 93
Other235
 125
240
 326
Total current assets990
 961
1,189
 1,164
Investments and Other Assets      
Other214
 269
257
 251
Total investments and other assets214
 269
257
 251
Property, Plant and Equipment      
Cost12,918
 12,489
13,180
 13,034
Accumulated depreciation and amortization(4,138) (3,913)(4,314) (4,219)
Net property, plant and equipment8,780
 8,576
8,866
 8,815
Regulatory Assets and Deferred Debits      
Regulatory assets670
 717
686
 685
Other24
 25
23
 24
Total regulatory assets and deferred debits694
 742
709
 709
Total Assets$10,678
 $10,548
$11,021
 $10,939
LIABILITIES AND COMMON STOCKHOLDER'S EQUITY      
Current Liabilities      
Accounts payable$152
 $206
$173
 $179
Accounts payable to affiliated companies60
 56
59
 58
Notes payable to affiliated companies61
 

 71
Taxes accrued51
 57
67
 54
Interest accrued53
 56
51
 56
Current maturities of long-term debt5
 5
5
 5
Regulatory liabilities28
 16
60
 54
Other116
 88
88
 98
Total current liabilities526
 484
503
 575
Long-Term Debt3,640
 3,641
3,636
 3,636
Long-Term Debt Payable to Affiliated Companies150
 150
150
 150
Deferred Credits and Other Liabilities      
Deferred income taxes1,441
 1,171
1,656
 1,591
Investment tax credits139
 140
139
 139
Accrued pension and other post-retirement benefit costs104
 163
81
 82
Asset retirement obligations30
 30
33
 32
Regulatory liabilities811
 782
790
 796
Other48
 48
78
 90
Total deferred credits and other liabilities2,573
 2,334
2,777
 2,730
Commitments and Contingencies
 

 
Common Stockholder's Equity      
Common Stock, no par; $0.01 stated value, 60,000,000 shares authorized; 53,913,701 shares outstanding at September 30, 2014 and December 31, 20131
 1
Common Stock, no par; $0.01 stated value, 60,000,000 shares authorized; 53,913,701 shares outstanding at March 31, 2015 and December 31, 20141
 1
Additional paid-in capital1,384
 1,384
1,384
 1,384
Retained earnings2,401
 2,551
2,568
 2,460
Accumulated other comprehensive income3
 3
2
 3
Total common stockholder's equity3,789
 3,939
3,955
 3,848
Total Liabilities and Common Stockholder's Equity$10,678
 $10,548
$11,021
 $10,939

See Notes to Condensed Consolidated Financial Statements
3132


PART I

DUKE ENERGY INDIANA, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended September 30,Three Months Ended March 31,
(in millions)2014
 2013
2015
 2014
CASH FLOWS FROM OPERATING ACTIVITIES      
Net income$301
 $276
$108
 $113
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization311
 230
105
 103
Equity component of AFUDC(10) (11)(3) (4)
Deferred income taxes136
 190
140
 (39)
Accrued pension and other post-retirement benefit costs12
 19
3
 4
Contributions to qualified pension plans(9) 
(Increase) decrease in      
Net realized and unrealized mark-to-market and hedging transactions

 (31)
Receivables(20) 15
3
 (23)
Receivables from affiliated companies72
 (19)1
 10
Inventory(30) (33)(5) (10)
Other current assets40
 27
9
 (41)
Increase (decrease) in      
Accounts payable(44) (22)21
 (36)
Accounts payable to affiliated companies4
 (7)1
 12
Taxes accrued(36) 16
13
 110
Other current liabilities3
 (9)6
 (6)
Other assets(15) 2
(8) (3)
Other liabilities44
 (78)(24) 50
Net cash provided by operating activities768
 565
361
 240
CASH FLOWS FROM INVESTING ACTIVITIES      
Capital expenditures(462) (387)(188) (133)
Purchases of available-for-sale securities(17) (7)(3) (3)
Proceeds from sales and maturities of available-for-sale securities13
 6
2
 3
Notes receivable from affiliated companies96
 (69)(106) (94)
Other4
 (4)16
 
Net cash used in investing activities(366) (461)(279) (227)
CASH FLOWS FROM FINANCING ACTIVITIES      
Proceeds from the issuance of long-term debt
 498
Payments for the redemption of long-term debt(2) (403)
 (1)
Notes payable to affiliated companies61
 (81)(71) 
Dividends to parent(451) (125)
Other(1) (4)(1) (1)
Net cash used in financing activities(393) (115)(72) (2)
Net increase (decrease) in cash and cash equivalents9
 (11)
Net increase in cash and cash equivalents10
 11
Cash and cash equivalents at beginning of period15
 36
6
 15
Cash and cash equivalents at end of period$24
 $25
$16
 $26
Supplemental Disclosures:      
Significant non-cash transactions:      
Accrued capital expenditures$64
 $36
$60
 $32

See Notes to Condensed Consolidated Financial Statements
3233


PART I

DUKE ENERGY INDIANA, INC.
Condensed Consolidated Statements of Changes in Common Stockholder's Equity
(Unaudited)
      Accumulated Other Comprehensive Income        Accumulated Other Comprehensive Income  
(in millions)
Common
Stock

 
Additional
Paid-in
Capital

 
Retained
Earnings

 Net Gains (Losses) on Cash Flow Hedges
 Total
Common
Stock

 
Additional
Paid-in
Capital

 
Retained
Earnings

 Net Gains on Cash Flow Hedges
 Total
Balance at December 31, 2012$1
 $1,384
 $2,318
 $5
 $3,708
Balance at December 31, 2013$1
 $1,384
 $2,551
 $3
 $3,939
Net income
 
 113
 
 113
Other comprehensive income
 
 
 1
 1
Balance at March 31, 2014$1
 $1,384
 $2,664
 $4
 $4,053
         
Balance at December 31, 2014$1
 $1,384
 $2,460
 $3
 $3,848
Net income
 
 276
 
 276

 
 108
 
 108
Other comprehensive loss
 
 
 (2) (2)
 
 
 (1) (1)
Dividends to parent
 
 (125) 
 (125)
Balance at September 30, 2013$1
 $1,384
 $2,469
 $3
 $3,857
         
Balance at December 31, 2013$1
 $1,384
 $2,551
 $3
 $3,939
Net income
 
 301
 
 301
Dividends to parent
 
 (451) 
 (451)
Balance at September 30, 2014$1
 $1,384
 $2,401
 $3
 $3,789
Balance at March 31, 2015$1
 $1,384
 $2,568
 $2
 $3,955


See Notes to Condensed Consolidated Financial Statements
3334


PART I
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 Condensed Consolidated Financial Statements
(Unaudited)


Index to Combined Notes Toto Condensed Consolidated Financial Statements
The unaudited notes to the condensed consolidated financial statements that follow are a combined presentation. The following list indicates the registrants to which the footnotes apply.
Applicable NotesApplicable Notes
Registrant1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 181 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
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.                        
1. ORGANIZATION AND BASIS OF PRESENTATION
NATURE OF OPERATIONS AND BASIS OF CONSOLIDATION
Duke Energy Corporation (collectively with its subsidiaries, Duke Energy) is an energy company headquartered in Charlotte, North Carolina, subject to regulation by the Federal Energy Regulatory Commission (FERC). Duke Energy operates in the United States (U.S.) and Latin America primarily through its direct and indirect subsidiaries. Duke Energy’s subsidiaries include its subsidiary registrants, Duke Energy Carolinas, LLC (Duke Energy Carolinas); Progress Energy, Inc. (Progress Energy); Duke Energy Progress, Inc. (Duke Energy Progress); Duke Energy Florida, Inc. (Duke Energy Florida); Duke Energy Ohio, Inc. (Duke Energy Ohio) and Duke Energy Indiana, Inc. (Duke Energy Indiana). When discussing Duke Energy’s consolidated financial information, it necessarily includes the results of its six separate subsidiary registrants (collectively referred to as the Subsidiary Registrants), which, along with Duke Energy, are collectively referred to as the Duke Energy Registrants (Duke Energy Registrants).
These Condensed Consolidated Financial Statements include, after eliminating intercompany transactions and balances, the accounts of the Duke Energy Registrants and subsidiaries where the respective Duke Energy Registrants have control. These Condensed Consolidated Financial Statements also reflect the Duke Energy Registrants’ proportionate share of certain jointly owned generation and transmission facilities.
Duke Energy Carolinas is a regulated public utility primarily engaged in the generation, transmission, distribution and sale of electricity in portions of North Carolina and South Carolina. Duke Energy Carolinas is subject to the regulatory provisions of the North Carolina Utilities Commission (NCUC), Public Service Commission of South Carolina (PSCSC), U.S. Nuclear Regulatory Commission (NRC) and FERC. Substantially all of Duke Energy Carolinas’ operations qualify for regulatory accounting.
Progress Energy is a public utility holding company headquartered in Raleigh, North Carolina, subject to regulation by the FERC. Progress Energy conducts operations through its wholly owned subsidiaries, Duke Energy Progress and Duke Energy Florida. Substantially all of Progress Energy’s operations qualify for regulatory accounting.
Duke Energy Progress is a regulated public utility primarily engaged in the generation, transmission, distribution and sale of electricity in portions of North Carolina and South Carolina. Duke Energy Progress is subject to the regulatory provisions of the NCUC, PSCSC, NRC and FERC. Substantially all of Duke Energy Progress’ operations qualify for regulatory accounting.
Duke Energy Florida is a regulated public utility primarily engaged in the generation, transmission, distribution and sale of electricity in portions of Florida. Duke Energy Florida is subject to the regulatory provisions of the Florida Public Service Commission (FPSC), NRC and FERC. Substantially all of Duke Energy Florida’s operations qualify for regulatory accounting.
Duke Energy Ohio is a regulated public utility primarily engaged in the generation, transmission and distribution of electricity in portions of Ohio and Kentucky, in the generation and sale of electricity in portions of Kentucky, and the transportation and sale of natural gas in portions of Ohio and Kentucky. Operations in Kentucky are conducted through its wholly owned subsidiary, Duke Energy Kentucky, Inc. (Duke Energy Kentucky). Duke Energy Ohio conducts competitive auctions for retail electricity supply in Ohio whereby the energy price is recovered from retail customers. Operations in Kentucky are conducted through its wholly owned subsidiary, Duke Energy Kentucky, Inc. (Duke Energy Kentucky). References herein to Duke Energy Ohio collectively include Duke Energy Ohio and its subsidiaries, unless otherwise noted. Duke Energy Ohio is subject to the regulatory provisions of the Public Utilities Commission of Ohio (PUCO), Kentucky Public Service Commission (KPSC) and FERC. Duke Energy Ohio appliesapplied regulatory accounting to a portion of its operations. On April 2, 2015, Duke Energy has agreed to sell Duke Energy Ohio'scompleted the sale of its nonregulated Midwest generation business, which sellssold power into wholesale energy markets, to a subsidiary of Dynegy Inc. (Dynegy). See Note 2 for additional information. Substantially all of Duke Energy Ohio’s operations that remain after the sale qualify for regulatory accounting.

Duke Energy Indiana is a regulated public utility primarily engaged in the generation, transmission, distribution and sale of electricity in portions of Indiana. Duke Energy Indiana is subject to the regulatory provisions of the Indiana Utility Regulatory Commission (IURC) and FERC. Substantially all of Duke Energy Indiana’s operations qualify for regulatory accounting.

3435


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


BASIS OF PRESENTATION
Duke Energy completed the sale of Duke Energy Ohio's nonregulated Midwest generation business and Duke Energy Retail Sales LLC to Dynegy on April 2, 2015. The results of operations of these businesses have been classified as Discontinued Operations on the Condensed Consolidated Statements of Operations for all periods presented. Duke Energy has elected to present cash flows of discontinued operations combined with cash flows of continuing operations. Unless otherwise noted, the notes to these Condensed Consolidated Financial Statements exclude amounts related to discontinued operations for all periods presented, assets held for sale and liabilities associated with assets held for sale as of March 31, 2015. See Note 2 for additional information.
These Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles (GAAP) in the U.S. for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, these Condensed Consolidated Financial Statements do not include all information and notes required by GAAP in the U.S. for annual financial statements. BecauseSince the interim Condensed Consolidated Financial Statements and Notes do not include all information and notes required by GAAP in the U.S. for annual financial statements, the Condensed Consolidated Financial Statements and other information included in this quarterly report should be read in conjunction with the Consolidated Financial Statements and Notes in the Duke Energy Registrants’ combined Annual Report on Form 10-K for the year ended December 31, 2013.2014.
On August 21, 2014,The information in these combined notes relate to each of the Duke Energy Commercial Enterprises, Inc., an indirect wholly owned subsidiaryRegistrants as noted in the Index to the Combined Notes to Condensed Consolidated Financial Statements. However, none of the registrants makes any representations as to information related solely to Duke Energy or the subsidiaries of Duke Energy Corporation, and Duke Energy SAM, LLC, a wholly owned subsidiary of Duke Energy Ohio, entered into a purchase and sale agreement (PSA) with a subsidiary of Dynegy whereby Dynegy will acquire Duke Energy Ohio’s nonregulated Midwest generation business (Disposal Group). The results of operations of the nonregulated Midwest generation business have been classified as Discontinued Operations on the Condensed Consolidated Statements of Operations for the current and prior periods presented. Duke Energy has elected to present cash flows of discontinued operations combined with cash flows of continuing operations. See Note 2 for additional information.other than itself.

These Condensed Consolidated Financial Statements reflect all normal recurring adjustments in the opinion of the respective companies’ management, necessary to fairly present the financial position and results of operations of each of the Duke Energy Registrants. Amounts reported in Duke Energy’s interim Condensed Consolidated Statements of Operations and each of the Subsidiary Registrants’ interim Condensed Consolidated Statements of Operations and Comprehensive Income are not necessarily indicative of amounts expected for the respective annual periods due to effects of seasonal temperature variations on energy consumption, regulatory rulings, timing of maintenance on electric generating units, changes in mark-to-market valuations, changing commodity prices and other factors.
In preparing financial statements that conform to GAAP, management must make estimates and assumptions that affect the reported amounts of assets and liabilities, the reported amounts of revenues and expenses, and the disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.
Certain prior year amounts have been reclassified to conform to the current year presentation.
UNBILLED REVENUE
Revenues on sales of electricity and natural gas are recognized when service is provided.provided or the product is delivered. Unbilled revenues are recognized by applying customer billing rates to the estimated volumes of energy delivered but not yet billed. Unbilled revenues can vary significantly from period to period as a result of seasonality, weather, customer usage patterns, customer mix, average price in effect for customer classes and meter reading schedules.
Unbilled revenues are included within Receivables and Restricted receivables of variable interest entities on the Condensed Consolidated Balance Sheets as shown in the following table. This table excludes amounts included in assets held for sale (AHFS).
(in millions)September 30, 2014
 December 31, 2013
March 31, 2015
 December 31, 2014
Duke Energy$798
 $937
$710
 $827
Duke Energy Carolinas285
 323
257
 295
Progress Energy232
 189
188
 217
Duke Energy Progress131
 120
114
 135
Duke Energy Florida101
 69
74
 82
Duke Energy Ohio
 55
1
 
Duke Energy Indiana26
 5
28
 27
Additionally, Duke Energy Ohio and Duke Energy Indiana sell, on a revolving basis, nearly all of their retail accounts receivable, including receivables for unbilled revenues, to an affiliate, Cinergy Receivables Company, LLC (CRC), and account for the transfers of receivables as sales. Accordingly, the receivables sold are not reflected on the Condensed Consolidated Balance Sheets of Duke Energy Ohio and Duke Energy Indiana. See Note 1312 for further information. These receivables for unbilled revenues are shown in the table below.
(in millions)September 30, 2014
 December 31, 2013
March 31, 2015
 December 31, 2014
Duke Energy Ohio$54
 $89
$62
 $79
Duke Energy Indiana94
 144
91
 112

3536


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


AMOUNTS ATTRIBUTABLE TO CONTROLLING INTERESTS
The following table presents Net Income Attributable toLoss From Discontinued Operations, net of tax presented on the respective Condensed Consolidated Statements of Operations for Duke Energy Corporationand Progress Energy, is attributable only to controlling interests for continuing operations and discontinued operationsall periods presented. Other comprehensive income reported on the Condensed Consolidated Statements of Changes in Equity for the three and nine months ended September 30, 2014 and 2013.Progress Energy is attributable only to controlling interests for all periods presented.
 Three Months Ended September 30,
 2014 2013
(in millions)Duke Energy
Progress Energy
 Duke Energy
Progress Energy
Income from Continuing Operations$891
$330
 $946
$328
Income of Continuing Operations Attributable to Noncontrolling Interests3
1
 4
1
Income from Continuing Operations Attributable to Duke Energy Corporation$888
$329
 $942
$327
Income From Discontinued Operations, net of tax$378
$
 $62
$14
Loss of Discontinued Operations attributable to Noncontrolling Interests, net of tax(8)
 

Discontinued Operations Attributable to Duke Energy Corporation, net of tax$386
$
 $62
$14
Net income$1,269
$330
 $1,008
$342
Net (Loss) Income Attributable to Noncontrolling Interest(5)1
 4
1
Net Income Attributable to Duke Energy Corporation$1,274
$329
 $1,004
$341
 Nine Months Ended September 30,
 2014 2013
(in millions)Duke Energy
Progress Energy
 Duke Energy
Progress Energy
Income from Continuing Operations$2,367
$741
 $1,902
$469
(Loss) Income of Continuing Operations Attributable to Noncontrolling Interests11
2
 12
2
Income from Continuing Operations Attributable to Duke Energy Corporation$2,356
$739
 $1,890
$467
(Loss) Income From Discontinued Operations, net of tax$(578)$(6) $82
$10
Income (Loss) of Discontinued Operations attributable to Noncontrolling Interests, net of tax(8)
 (5)
Discontinued Operations Attributable to Duke Energy Corporation, net of tax$(570)$(6) $87
$10
Net income$1,789
$735
 $1,984
$479
Net Income Attributable to Noncontrolling Interest3
2
 7
2
Net Income Attributable to Duke Energy Corporation$1,786
$733
 $1,977
$477

ACCUMULATED OTHER COMPREHENSIVE INCOME
For the three and nine months ended September 30,March 31, 2015 and 2014, and 2013, reclassifications out of accumulated other comprehensive income (AOCI) for the Duke Energy Registrants were not material. Changes in AOCI for the Duke Energy Registrants are presented in their respective Condensed Consolidated Statements of Equity.

36

PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


EXCISE TAXES
Certain excise taxes levied by state or local governments are required to be paid even if not collected from the customer. These taxes are recognized on a gross basis. Otherwise, theexcise taxes are accounted for net.
Excise taxes recognized on a gross basis are recorded as Operating Revenues and Property and other taxes on the Condensed Consolidated Statements of Operations. The following table provides the amount of excise taxes accounted for on a gross basis as operating revenues in the Condensed Consolidated Statements of Operations were as follows.basis.
 Three Months Ended September 30, Nine Months Ended September 30,
(in millions)2014
 2013
 2014
 2013
Duke Energy$101
 $168
 $416
 $457
Duke Energy Carolinas4
 46
 93
 124
Progress Energy63
 89
 214
 230
Duke Energy Progress
 33
 56
 88
Duke Energy Florida63
 56
 158
 142
Duke Energy Ohio24
 24
 80
 77
Duke Energy Indiana10
 9
 29
 26
During the third quarter of 2014, the North Carolina gross receipts tax was terminated due to the North Carolina Tax Simplification and Rate Reduction Act. The North Carolina gross receipts tax is no longer imposed effective July 1, 2014.
 Three Months Ended March 31,
(in millions)2015
 2014
Duke Energy$100
 $167
Duke Energy Carolinas9
 46
Progress Energy49
 77
Duke Energy Progress4
 32
Duke Energy Florida45
 45
Duke Energy Ohio32
 34
Duke Energy Indiana10
 10
NEW ACCOUNTING STANDARDS
The new accounting standards adopted infor 2015 and 2014 and 2013 had no significant impact on the presentation or results of operations, cash flows or financial position of the Duke Energy Registrants. Disclosures have been enhanced to provide a discussion and tables on derivative contracts subject to enforceable master netting agreements.
The following new Accounting Standards Updates (ASUs) have been issued, but have not yet been adopted by the Duke Energy Registrants, as of September 30, 2014.
ASC 205 — Reporting Discontinued OperationsOperations.. In April 2014, the Financial Accounting Standards Board (FASB) issued revised accounting guidance for reporting discontinued operations. A discontinued operation would be either (i) a component of an entity or a group of components of an entity that represents a separate major line of business or major geographical area of operations that either has been disposed of or is part of a single coordinated plan to be classified as held for sale or (ii) a business that, on acquisition, meets the criteria to be classified as held for sale.
For the Duke Energy Registrants, this revised accounting guidance is effective on a prospective basis for interim and annual periods beginning January 1, 2015. This guidance will also result in increased disclosures. In general, this guidance is likely to result in fewer disposalsDuke Energy has not reported any discontinued operations under the revised accounting guidance.
The following new Accounting Standards Updates (ASUs) have been issued, but have not yet been adopted by the Duke Energy Registrants, as of assets qualifying as discontinued operations.March 31, 2015.
ASC 606 — Revenue from Contracts with CustomersCustomers.. In May 2014, the FASB issued revised accounting guidance for revenue recognition from contracts with customers. The core principle of this revised accounting guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in this update also require disclosure of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.
For the Duke Energy Registrants, this revised accounting guidance is effective for interim and annual periods beginning January 1, 2017. However, the FASB is considering allowing companies to delay implementation for one year. Duke Energy is currently evaluating requirements, and the potentialultimate impact of the adoptionrevised accounting guidance has not yet been determined.
ASC 835 — Presentation of Debt Issuance Costs. In April 2015, the FASB issued revised accounting guidance for the presentation of debt issuance costs. The core principle of this revised accounting guidance is that debt issuance costs are not assets, but adjustments to the carrying cost of debt.
This revised accounting guidance would be effective retroactively beginning January 1, 2016 for Duke Energy, but can be adopted earlier. Based on its revenue recognitionthe amount of debt issuance costs reported as of December 31, 2014 in the Consolidated Balance Sheets, Duke Energy would record a

37


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)

reduction of $137 million in Regulatory Assets and Deferred Debits and Long-Term Debt. Duke Energy is unablecurrently evaluating whether implementation will occur prior to estimate at this time the impactfirst quarter of adoption on its consolidated results of operations, cash flows, financial position or disclosures.2016.
2. ACQUISITIONS AND DISPOSITIONS
ACQUISITIONS
Purchase of NCEMPA's Generation
On September 5, 2014, Duke Energy Progress executed an agreement to purchase North Carolina Eastern Municipal Power Agency’s (NCEMPA) ownership interests in certain generating assets jointly owned with and operated by Duke Energy Progress. The agreement provides for the acquisition of a total of approximately 700 megawatts (MW) at Brunswick Nuclear Station, Shearon Harris Nuclear Station (Harris), Mayo Steam Station and Roxboro Steam Station. The purchase price for the ownership interest and fuel and spare parts inventory is approximately $1.2 billion. UnderOn December 9, 2014, the agreement,FERC approved Duke Energy Progress and NCEMPA will enter into a 30-year wholesale power supply agreement to continue meeting the needs of NCEMPA’s customers. There are several conditions precedent including state and federal regulatory approvals and legislative action required prior to completing the transaction. On October 10, 2014, Duke Energy Progress filed with the FERC for approvalProgress' request to purchase NCEMPA's interests in the generation assets. Theassets, approved Duke Energy Progress' 30-year wholesale power supply agreement requireswith NCEMPA and approved Duke Energy Progress' inclusion of the transaction to be completed byacquisition adjustment resulting from the end of 2016.
Midwest Generation Exit
asset purchase in wholesale power formula rates. On August 21,December 22, 2014, Duke Energy Commercial Enterprises, Inc., an indirect wholly owned subsidiary ofProgress and NCEMPA filed a request with the NRC to transfer the Brunswick Nuclear Station and Harris operating licenses from NCEMPA to Duke Energy Corporation, andProgress. On April 2, 2015, North Carolina legislation was passed that, among other things, allows Duke Energy SAM, LLC,Progress to recover its retail investment, including the acquisition adjustment, and operating costs associated with the acquisition through a wholly owned subsidiary ofrider mechanism. On April 13, 2015, Duke Energy Ohio, entered intoProgress and NCEMPA filed a PSAJoint Notice of Transfer and Request for Approval of Certificate of Public Convenience and Necessity (CPCN) with a subsidiary of Dynegy whereby Dynegy will acquirethe NCUC, seeking to transfer the CPCN for NCEMPA's ownership interests to Duke Energy Ohio’s Disposal Group for approximately $2.8 billion in cash subject to adjustments at closing for changes in working capital and capital expenditures. The completionProgress. Closing of the transaction is conditioned on expiration or terminationapproval from the NCUC, the NRC and all municipality members of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, approval by FERC, and the release of certain credit support obligations. ClosingNCEMPA. The transaction is expected to beclose by the end of 2015.
DISPOSITIONS
Midwest Generation Exit
Duke Energy, through indirect subsidiaries, completed the sale of the nonregulated Midwest generation business and Duke Energy Retail Sales LLC (Disposal Group) to a subsidiary of Dynegy on April 2, 2015, for approximately $2.8 billion in cash. Prior to the sale, Duke Energy Ohio distributed its indirect ownership interest in the fourth quarternonregulated Midwest generation business to a subsidiary of 2014 orDuke Energy Corporation on April 1, 2015.
The assets and liabilities of the first quarterDisposal Group were included in the Commercial Power segment and are classified as held for sale in Duke Energy's and Duke Energy Ohio's Condensed Consolidated Balance Sheet. The following table presents information related to the Duke Energy Ohio generation plants included in the Disposal Group.
FacilityPlant Type Primary Fuel Location 
Total MW Capacity(d)

 
Owned MW Capacity(d)

 Ownership Interest
Stuart(a)(c)
Fossil Steam Coal OH 2,308
 900
 39%
Zimmer(a)
Fossil Steam Coal OH 1,300
 605
 46.5%
Hanging RockCombined Cycle Natural Gas OH 1,226
 1,226
 100%
Miami Fort (Units 7 and 8) (b)
Fossil Steam Coal OH 1,020
 652
 64%
Conesville(a)(c)
Fossil Steam Coal OH 780
 312
 40%
WashingtonCombined Cycle Natural Gas OH 617
 617
 100%
FayetteCombined Cycle Natural Gas PA 614
 614
 100%
Killen(b)(c)
Fossil Steam Coal OH 600
 198
 33%
LeeCombustion Turbine Natural Gas IL 568
 568
 100%
Dick's CreekCombustion Turbine Natural Gas OH 136
 136
 100%
Miami FortCombustion Turbine Oil OH 56
 56
 100%
Total Midwest Generation      9,225
 5,884
  
(a)Jointly owned with America Electric Power Generation Resources and The Dayton Power & Light Company.
(b)Jointly owned with The Dayton Power & Light Company.
(c)Facility is not operated by Duke Energy Ohio.
(d)Total MW capacity is based on summer capacity.
The Disposal Group also includes a retail sales business owned by Duke Energy.
The results of 2015.operations of the Disposal Group are classified as discontinued operations in the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income. Certain immaterial costs that may be eliminated as a result of the sale have remained in continuing operations. The following table presents the results of discontinued operations.

3738


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


The Disposal Group was included in the Commercial Power segment. The following table presents information related to the Duke Energy Ohio generation plants included in the Disposal Group.
FacilityPlant Type Primary Fuel Location 
Total Average MW Capacity(c)

 
Owned Average MW Capacity(c)

 Ownership Interest
Stuart(a)(b)
Fossil Steam Coal OH 2,318
 904
 39%
Zimmer(a)
Fossil Steam Coal OH 1,338
 622
 46.5%
Hanging RockCombined Cycle Gas OH 1,274
 1,274
 100%
Miami Fort (Units 7 and 8)(a)
Fossil Steam Coal OH 1,020
 653
 64%
Conesville(a)(b)
Fossil Steam Coal OH 780
 312
 40%
WashingtonCombined Cycle Gas OH 637
 637
 100%
FayetteCombined Cycle Gas PA 640
 640
 100%
Killen(a)(b)
Fossil Steam Coal OH 618
 204
 33%
LeeCombustion Turbine Gas IL 640
 640
 100%
Dick's CreekCombustion Turbine Gas OH 136
 136
 100%
Miami FortCombustion Turbine Oil OH 68
 68
 100%
Total Midwest Generation      9,469
 6,090
  
(a)Jointly owned with Ohio Power Company and/or The Dayton Power & Light Company.
(b)Station is not operated by Duke Energy Ohio.
(c)Average MW capacity is calculated as the average of winter capacity and summer capacity.
The Disposal Group also includes a retail sales business owned by Duke Energy. In the second quarter of 2014, Duke Energy Ohio removed Ohio Valley Electric Corporation (OVEC) from the Disposal Group as it no longer intended to sell it with the Disposal Group. Duke Energy Ohio has requested cost-based recovery of its contractual entitlement in OVEC in its 2014 Electric Security Plan (ESP) application filed on May 29, 2014. See Note 4 for information related to the 2014 ESP.
Duke Energy Ohio had triggered held for sale accounting treatment on March 31, 2014. The assets and associated liabilities of the Disposal Group are classified as held for sale in Duke Energy's and Duke Energy Ohio's Condensed Consolidated Balance Sheet at September 30, 2014.
Beginning in the third quarter of 2014, the results of operations of the Disposal Group are required to be classified as discontinued operations for current and prior periods in the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income. Certain costs that are not material have remained in continuing operations that may be eliminated as a result of the sale. Results of discontinued operations were as follows.
Duke Energy
Three Months Ended September 30, Nine Months Ended September 30, Three Months Ended March 31,
(in millions)2014
 2013
 2014
 2013
 2015
 2014
Operating Revenues$620
 $491
 $1,233
 $1,369
 $543
 $368
Estimated gain (loss) on disposition460
 
 (847) 
Estimated loss on disposition (43) (1,287)
           
Income (loss) before income taxes$623
 $82
 $(864) $126
 $147
 $(1,303)
Income tax expense (benefit)218
 34
 (321) 43
 51
 (466)
Income (loss) from discontinued operations of the Disposal Group405
 48
 (543) 83
 96
 (837)
Other, net of tax(a)
(27) 14
 (35) (1) (5) (6)
Income (Loss) from Discontinued Operations, net of tax$378
 $62
 $(578) $82
 $91
 $(843)
(a)Other discontinued operations relates to prior sales of businesses and includes indemnifications provided for certain legal, tax and environmental matters, and foreign currency translation adjustments.
Duke Energy Ohio
 Three Months Ended March 31,
(in millions)2015
 2014
Operating Revenues$412
 $195
Estimated loss on disposition(44) (1,323)
    
Income (loss) before income taxes$140
 $(1,354)
Income tax expense (benefit)50
 (479)
Income (Loss) from Discontinued Operations, net of tax$90
 $(875)
The Duke Energy and Duke Energy Ohio held for sale assets include net pretax impairments of approximately $43 million and $44 million, respectively, for the three months ended March 31, 2015, and approximately $1,287 million and $1,323 million, respectively, for the three months ended March 31, 2014. The impairment was recorded to write down the carrying amount of the assets to the estimated fair value of the business, based on the expected selling price to Dynegy less cost to sell. These losses were included in Income (Loss) from Discontinued Operations, net of tax in the Condensed Consolidated Statements of Operations and Comprehensive Income. The final loss on disposition is not expected to result in a material impact on Duke Energy's or Duke Energy Ohio's operations in the second quarter of 2015.
Commercial Power has a revolving credit agreement (RCA) to support the operations of the nonregulated Midwest generation business. Interest expense associated with the RCA has been allocated to discontinued operations. No other interest expense related to corporate level debt has been allocated to discontinued operations.
The following table presents the Disposal Group's carrying values in the Condensed Consolidated Balance Sheets' major classes of Assets held for sale and Liabilities associated with assets held for sale.
 March 31, 2015
(in millions)
Duke
Energy

 
Duke
Energy
Ohio

Current assets$354
 $295
Investments and other assets50
 45
Property, plant and equipment2,553
 2,520
Total Assets held for sale$2,957
 $2,860
Current liabilities$146
 $129
Deferred credits and other liabilities26
 25
Total Liabilities associated with assets held for sale$172
 $154
Duke Energy Ohio has a power purchase agreement with the Disposal Group for a portion of its standard service offer (SSO) supply requirement through May 2015. Duke Energy will also provide, and receive reimbursement for, transition services provided to Dynegy for a period of up to 12 months. The continuing cash flows are not considered direct cash flows and are not expected to be material. Duke Energy or Duke Energy Ohio will not significantly influence the operations of the Disposal Group during the transition service period.
See Notes 4 and 5 for a discussion of contingencies related to the Disposal Group that will be retained by Duke Energy Ohio subsequent to the sale.

3839


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


Duke Energy Ohio
 Three Months Ended September 30, Nine Months Ended September 30,
(in millions)2014
 2013
 2014
 2013
Operating Revenues$536
 $389
 $853
 $1,054
Estimated gain (loss) on disposition466
 
 (878) 
        
Income (loss) before income taxes$647
 $65
 $(917) $71
Income tax expense (benefit)234
 30
 (320) 32
Income (Loss) from Discontinued Operations, net of tax$413
 $35
 $(597) $39
The Duke Energy and Duke Energy Ohio held for sale assets include net pretax impairments of approximately $847 million and $878 million, respectively, for the nine months ended September 30, 2014. During the first quarter of 2014 an impairment was recorded to write-down the carrying amount of the assets to the estimated fair value of the business, less estimated costs to sell. For the three months ended September 30, 2014, a reversal of the pretax impairments was recorded of approximately $460 million and $466 million for Duke Energy and Duke Energy Ohio, respectively, based on the expected selling price to Dynegy less cost to sell. These losses and gains were included in Income (Loss) from Discontinued Operations, net of tax in the Condensed Consolidated Statements of Operations and Comprehensive Income. The impairment will be updated, if necessary, based on the final execution of the purchase sale agreement and any changes in estimated fair value as additional information related to the potential transaction becomes available.
Commercial Power has a revolving credit agreement (RCA) that is used to support the operations of the nonregulated Midwest generation business. Interest expense associated with the RCA has been allocated to discontinued operations. No other interest expense related to corporate level debt has been allocated to discontinued operations.
The following table presents the carrying values of the major classes of Assets held for sale and Liabilities associated with assets held for sale included in the Disposal Group in the Condensed Consolidated Balance Sheets. Amounts included in the following table exclude certain other disposal groups which are not material and accordingly may not agree to amounts presented in the Duke Energy Condensed Consolidated Balance Sheets.
 September 30, 2014
(in millions)Duke Energy
 Duke Energy Ohio
Current assets$335
 $284
Investments and other assets43
 38
Property, plant and equipment2,675
 2,644
Total assets held for sale$3,053
 $2,966
Current liabilities$284
 $269
Deferred credits and other liabilities57
 57
Total liabilities associated with assets held for sale$341
 $326
Duke Energy Ohio will continue to have transactions with the Disposal Group after the divestiture is complete. Duke Energy Ohio has a power purchase agreement with the Disposal Group, which extends through May 2015, for a portion of its standard service offer (SSO) supply requirement. In addition, for a period of up to 12 months, Duke Energy may provide transition services to Dynegy. Duke Energy will be reimbursed for transition services provided. The continuing cash flows are not expected to be material and are not considered direct cash flows. These arrangements do not allow Duke Energy or Duke Energy Ohio to significantly influence the operations of the Disposal Group once the sale is complete.
See Notes 4 and 5 for a discussion of contingencies related to the Disposal Group that will be retained by Duke Energy Ohio subsequent to the sale.
3. BUSINESS SEGMENTS
Duke Energy evaluates segment performance based on segment income. Segment income is defined as income from continuing operations net of income attributable to noncontrolling interests. Segment income, as discussed below, includes intercompany revenues and expenses that are eliminated in the Condensed Consolidated Financial Statements. Certain governance costs are allocated to each segment. In addition, direct interest expense and income taxes are included in segment income.
Operating segments are determined based on information used by the chief operating decision makerdecision-maker in deciding how to allocate resources and evaluate the performance.
Products and services are sold between affiliate companies and reportable segments of Duke Energy at cost. Segment assets as presented in the following tables that follow exclude all intercompany assets.
DUKE ENERGY
Duke Energy has the following reportable operating segments: Regulated Utilities, International Energy and Commercial Power.

39

PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


Regulated Utilities conducts operations primarily through Duke Energy Carolinas, Duke Energy Progress, Duke Energy Florida, Duke Energy Indiana, and the regulated transmission and distribution operations of Duke Energy Ohio. These electric and natural gas operations are subject to the rules and regulations of the FERC, NRC, NCUC, PSCSC, FPSC, PUCO, IURC and KPSC. Substantially all of Regulated Utilities’ operations are regulated and, accordingly, these operations qualify for regulatory accounting treatment.
International Energy principally operates and manages power generation facilities and engages in sales and marketing of electric power, natural gas and natural gas liquids outside the U.S. Its activities principally target power generation in Latin America. Additionally, International Energy owns a 25 percent interest in National Methanol Company (NMC), a large regional producer of methyl tertiary-butyltertiary butyl ether (MTBE) located in Saudi Arabia. The investment in NMC is accounted for under the equity method of accounting.
Commercial Power builds, develops and operates wind and solar renewable generation and energy transmission projects throughout the continental U.S. As discussed in Note 2, Duke Energy entered into an agreement to sellcompleted the sale of Commercial Power's nonregulated Midwest generation business to Dynegy in a transaction that is expected to close in the fourth quarter of 2014 or the first quarter ofclosed on April 2, 2015. As a result of this divestiture, theThe results of operations of the nonregulated Midwest generation business have been reclassified toclassified as Discontinued Operations on the Condensed Consolidated Statements of Operations.Operations for all periods presented. Certain costs such as interest and general and administrative expenses previously allocated to the Disposal Group were not reclassified to discontinued operations. As a result of the sale, Commercial Power will no longer qualify as a Duke Energy Ohio reportable operating segment. The remaining assets and related results of operations previously reported in Commercial Power will be presented as Other.
The remainder of Duke Energy’s operations is presented as Other. While it is not an operating segment, Other primarily includes unallocated corporate interest expense, certain unallocated corporate costs, Bison Insurance Company Limited (Bison), Duke Energy’s wholly owned, captive insurance subsidiary, and contributions to theThe Duke Energy Foundation. On December 31, 2013, Duke Energy sold its interest in DukeNet Communications Holdings, LLC (DukeNet) to Time Warner Cable, Inc.
 Three Months Ended March 31, 2015
(in millions)Regulated Utilities
 
International
Energy

 
Commercial
Power

 
Total
Reportable
Segments

 Other
 Eliminations
 Consolidated
Unaffiliated revenues$5,713
 $273
 $73
 $6,059
 $6
 $
 $6,065
Intersegment revenues10
 
 
 10
 21
 (31) 
Total revenues$5,723
 $273
 $73
 $6,069
 $27
 $(31) $6,065
Segment income (loss)(a)
$774
 $36
 $1
 $811
 $(37) $(1) $773
Add back noncontrolling interests component            3
Income from discontinued operations, net of tax            91
Net income            $867
Segment assets$106,642
 $4,892
 $6,202
 $117,736
 $4,230
 $176
 $122,142
 Three Months Ended September 30, 2014
(in millions)Regulated Utilities
 
International
Energy

 
Commercial
Power

 
Total
Reportable
Segments

 Other
 Eliminations
 Consolidated
Unaffiliated revenues$5,975
 $366
 $50
 $6,391
 $4
 $
 $6,395
Intersegment revenues11
 
 
 11
 21
 (32) 
Total revenues$5,986
 $366
 $50
 $6,402
 $25
 $(32) $6,395
Segment income (loss)(a)
$920
 $80
 $(17) $983
 $(92) $(3) $888
Add back noncontrolling interests component            3
Income from discontinued operations, net of tax            378
Net income            $1,269
Segment assets$105,172
 $5,159
 $6,196
 $116,527
 $2,944
 $185
 $119,656
(a)    Other includes after-tax costs to achieve the Progress Energy merger.
merger of $13 million.
 Three Months Ended September 30, 2013
(in millions)Regulated Utilities
 
International
Energy

 
Commercial
Power

 
Total
Reportable
Segments

 Other
 Eliminations
 Consolidated
Unaffiliated revenues(a)
$5,768
 $370
 $56
 $6,194
 $23
 $
 $6,217
Intersegment revenues18
 
 2
 20
 24
 (44) 
Total revenues$5,786
 $370
 $58
 $6,214
 $47
 $(44) $6,217
Segment income (loss)(a)(b)
$923
 $116
 $(28) $1,011
 $(64) $(5) $942
Add back noncontrolling interests component            4
Income from discontinued operations, net of tax            62
Net income            $1,008
(a)In September 2013, Duke Energy Carolinas implemented revised customer rates approved by the NCUC and the PSCSC. These rate increases impact Regulated Utilities.
(b)Other includes costs to achieve the Progress Energy merger.

40


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


Nine Months Ended September 30, 2014Three Months Ended March 31, 2014
(in millions)Regulated Utilities
 
International
Energy

 
Commercial
Power

 
Total
Reportable
Segments

 Other
 Eliminations
 Consolidated
Regulated Utilities
 
International
Energy

 
Commercial
Power

 
Total
Reportable
Segments

 Other
 Eliminations
 Consolidated
Unaffiliated revenues$17,041
 $1,111
 $195
 $18,347
 $19
 $
 $18,366
$5,795
 $382
 $81
 $6,258
 $5
 $
 $6,263
Intersegment revenues33
 
 
 33
 60
 (93) 
10
 
 
 10
 20
 (30) 
Total revenues$17,074
 $1,111
 $195
 $18,380
 $79
 $(93) $18,366
$5,805
 $382
 $81
 $6,268
 $25
 $(30) $6,263
Segment income (loss)(a)(b)
$2,346
 $356
 $(70) $2,632
 $(269) $(7) $2,356
$737
 $130
 $(32) $835
 $(87) $(2) $746
Add back noncontrolling interests component            11
Add back noncontrolling interest            4
Loss from discontinued operations, net of tax            (578)            (843)
Net income            $1,789
Net loss            $(93)
(a)Commercial Power recorded a pretax impairment charge of $94 million related to reducing the carrying value of OVEC to zero.Ohio Valley Electric Corporation (OVEC). See Note 1312 for additional information.
(b)Other includes costs to achieve the Progress Energy merger.
(b)    Other includes after-tax costs to achieve the Progress Energy merger of $34 million.
 Nine Months Ended September 30, 2013
(in millions)Regulated Utilities
 
International
Energy

 
Commercial
Power

 
Total
Reportable
Segments

 Other
 Eliminations
 Consolidated
Unaffiliated revenues(a)(b)(c)(d)
$15,731
 $1,168
 $184
 $17,083
 $49
 $
 $17,132
Intersegment revenues35
 
 5
 40
 64
 (104) 
Total revenues$15,766
 $1,168
 $189
 $17,123
 $113
 $(104) $17,132
Segment income (loss)(a)(b)(c)(d)(e)(f)
$1,932
 $300
 $(54) $2,178
 $(278) $(10) $1,890
Add back noncontrolling interest            12
Income from discontinued operations, net of tax            82
Net income            $1,984
(a)In May 2013, the PUCO approved a Duke Energy Ohio settlement agreement that provides for a net annual increase in electric distribution revenues beginning in May 2013. This rate increase impacts Regulated Utilities.
(b)In June 2013, NCUC approved a Duke Energy Progress settlement agreement that included an increase in rates in the first year beginning in June 2013. This rate increase impacts Regulated Utilities.
(c)In September 2013, Duke Energy Carolinas implemented revised customer rates approved by the NCUC and the PSCSC. These rate increases impact Regulated Utilities.
(d)Regulated Utilities recorded an impairment charge related to Duke Energy Florida's Crystal River Unit 3. See Note 4 for additional information.
(e)Regulated Utilities recorded an impairment charge related to the letter Duke Energy Progress filed with the NRC requesting the NRC to suspend its review activities associated with the combined construction and operating license (COL) at Harris site. Regulated Utilities also recorded an impairment charge related to the write-off of the wholesale portion of the Levy investments at Duke Energy Florida in accordance with the 2013 Settlement. See Note 4 for additional information.
(f)Other includes costs to achieve the Progress Energy merger.
DUKE ENERGY OHIO
Duke Energy Ohio has two reportable operating segments, Regulated Utilities and Commercial Power.
Regulated Utilities transmits and distributes electricity in portions of Ohio and generates, distributes and sells electricity in portions of Kentucky. Regulated Utilities also transports and sells natural gas in portions of Ohio and northernNorthern Kentucky. It conducts operations primarily through Duke Energy Ohio and its wholly owned subsidiary, Duke Energy Kentucky.
As discussed in Note 2, Duke Energy entered into an agreement to sellcompleted the sale of Commercial Power's nonregulated Midwest generation business to Dynegy in a transaction that is expected to be completed in the fourth quarter of 2014 or the first quarter ofclosed on April 2, 2015. As a result of this divestiture, theThe results of operations of the nonregulated Midwest generation business have been reclassified toclassified as Discontinued Operations on the Condensed Consolidated Statements of Operations and Comprehensive Income.Income for all periods presented. Amounts remaining in Commercial Power relate to assets not included in the Disposal Group. Certain costs such as interest and general and administrative expenses previously allocated to the Disposal Group were not reclassified to discontinued operations. As a result of the sale, Commercial Power will no longer qualify as a Duke Energy Ohio reportable operating segment. The remaining assets and related results of operations previously reported in Commercial Power will be presented as Other.
The remainder of Duke Energy Ohio’s operations is presented as Other. While it is not considered an operating segment, Other primarily includes certain governance costs allocated by its parent, Duke Energy. See Note 8 for additional information. All of Duke Energy Ohio’s revenues are generated domestically and its long-lived assets are all in the U.S.
 Three Months Ended March 31, 2015
(in millions)Regulated Utilities
 Commercial Power
 Total Reportable Segments
 Other
 Eliminations
 Consolidated
Unaffiliated revenues$572
 $14
 $586
 $
 $
 $586
Total revenues$572
 $14
 $586
 $
 $
 $586
Segment income (loss)$70
 $(9) $61
 $(2) $
 $59
Income from discontinued operations, net of tax          90
Net income          $149
Segment assets$6,782
 $2,984
 $9,766
 $43
 $(13) $9,796
 Three Months Ended March 31, 2014
(in millions)Regulated Utilities
 Commercial Power
 Total Reportable Segments
 Other
 Eliminations
 Consolidated
Unaffiliated revenues$562
 $13
 $575
 $
 $
 $575
Total revenues$562
 $13
 $575
 $
 $
 $575
Segment income (loss)(a)
$61
 $(74) $(13) $(2) $
 $(15)
Loss from discontinued operations, net of tax          (875)
Net loss          $(890)
(a)    Commercial Power recorded a pretax impairment charge of $94 million related to OVEC. See Note 12 for additional information.

41


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


The remainder of Duke Energy Ohio’s operations is presented as Other. While it is not considered an operating segment, Other primarily includes certain governance costs allocated by its parent, Duke Energy. See Note 9 for additional information. All of Duke Energy Ohio’s revenues are generated domestically and its long-lived assets are all in the U.S.
 Three Months Ended September 30, 2014
(in millions)Regulated Utilities
 Commercial Power
 Total Reportable Segments
 Other
 Eliminations
 Consolidated
Unaffiliated revenues$440
 $6
 $446
 $
 $
 $446
Intersegment revenues1
 
 1
 
 (1) 
Total revenues$441
 $6
 $447
 $
 $(1) $446
Segment income (loss)$43
 $(13) $30
 $(4) $
 $26
Income from discontinued operations, net of tax          $413
Net income          439
Segment assets$7,297
 $3,266
 $10,563
 $131
 $(622) $10,072
 Three Months Ended September 30, 2013
(in millions)Regulated Utilities
 Commercial Power
 Total Reportable Segments
 Other
 Eliminations
 Consolidated
Unaffiliated revenues$421
 $17
 $438
 $
 $
 $438
Total revenues$421
 $17
 $438
 $
 $
 $438
Segment income (loss)$42
 $(13) $29
 $(5) $
 $24
Income from discontinued operations, net of tax          35
Net income          $59
 Nine Months Ended September 30, 2014
(in millions)Regulated Utilities
 Commercial Power
 Total Reportable Segments
 Other
 Eliminations
 Consolidated
Unaffiliated revenues$1,416
 $17
 $1,433
 $
 $
 $1,433
Intersegment revenues1
 
 1
 
 (1) 
Total revenues$1,417
 $17
 $1,434
 $
 $(1) $1,433
Segment income (loss)(a)
$151
 $(101) $50
 $(11) $
 $39
Loss from discontinued operations, net of tax          (597)
Net loss          $(558)
a)Duke Energy Ohio recorded a pretax impairment charge of $94 million related to reducing the carrying value of OVEC to zero. See Note 13 for additional information.
 Nine Months Ended September 30, 2013
(in millions)Regulated Utilities
 Commercial Power
 Total Reportable Segments
 Other
 Eliminations
 Consolidated
Unaffiliated revenues$1,317
 $32
 $1,349
 $
 $
 $1,349
Total revenues$1,317
 $32
 $1,349
 $
 $
 $1,349
Segment income (loss)$122
 $(51) $71
 $(14) $
 $57
Income from discontinued operations, net of tax          39
Net income          $96

42

PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


DUKE ENERGY CAROLINAS, PROGRESS ENERGY, DUKE ENERGY PROGRESS, DUKE ENERGY FLORIDA AND DUKE ENERGY INDIANA
The remaining Subsidiary Registrants each have one reportable operating segment, Regulated Utility, which generates, transmits, distributes and sells electricity. The remainder of each company’s operations is classified as Other. While not considered a reportable segment for any of these companies, Other consists of certain unallocated corporate costs. Other for Progress Energy also includes interest expense on corporate debt instruments of $58 million and $64 million for the three months ended September 30, 2014 and 2013, respectively and $181 million and $235 million for the nine months ended September 30, 2014 and 2013, respectively. The following table summarizes the net loss for Other at each of these registrants.
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended March 31,
(in millions)2014
 2013
 2014
 2013
2015
 2014
Duke Energy Carolinas$(19) $(26) $(67) $(69)$(8) $(21)
Progress Energy(a)(48) (72) (145) (205)(42) (52)
Duke Energy Progress(10) (20) (23) (40)(4) (10)
Duke Energy Florida(5) (6) (16) (18)(3) (4)
Duke Energy Indiana(3) (5) (10) (13)(2) (3)
(a)Other for Progress Energy also includes interest expense on corporate debt instruments of $60 million and $63 million for the three months ended March 31, 2015 and 2014, respectively.
The respective Regulated Utility operating segments include substantially all of Duke Energy Carolinas’, Progress Energy’s, Duke Energy Progress’, Duke Energy Florida’s and Duke Energy Indiana’s assets at September 30,March 31, 2015 and 2014.
4. REGULATORY MATTERS
RATE RELATED INFORMATION
The NCUC, PSCSC, FPSC, IURC, PUCO and KPSC approve rates for retail electric and natural gas services within their states. The FERC approves rates for electric sales to wholesale customers served under cost-based rates (excluding Ohio and Indiana), as well as sales of transmission service.
Duke Energy Carolinas
2013 North Carolina Rate Case
On September 24, 2013, the NCUC approved a settlement agreement related to Duke Energy Carolinas’ request for a rate increase with minor modifications. The parties agreed to a three-year step-in rate increase, with the first two years providing for $204 million, or a 4.5 percent average increase in rates, and the third year providing for rates to be increased by an additional $30 million, or 0.6 percent. The agreement is based upon a return on equity of 10.2 percent and an equity component of the capital structure of 53 percent. New rates went into effect on September 25, 2013.
On October 23, 2013, the North Carolina Attorney General (NCAG) appealed the rate of return and capital structure approved in the agreement. On October 24, 2013, the NC Waste Awareness and Reduction Network (NC WARN) also appealed various matters in the settlement. The North Carolina Supreme Court (NCSC) denied a motion to consolidate these appeals with other North Carolina rate case appeals involving Duke Energy Carolinas and Duke Energy Progress on March 13, 2014. Briefing has concluded in this matter and oral argument occurred on September 8, 2014. Duke Energy Carolinas cannot predict the outcome of this matter.
2011 North Carolina Rate Case
On January 27, 2012, the NCUC approved a settlement agreement related to Duke Energy Carolinas’ request for a rate increase. The NCUC Public Staff (Public Staff) was a party to the settlement. On October 23, 2013, the NCUC reaffirmed the rate of return approved in the settlement agreement, in response to an appeal by the NCAG. On November 21, 2013, the NCAG appealed the reaffirmed order. The NCSC denied a motion to consolidate this appeal with other North Carolina rate case appeals involving Duke Energy Carolinas and Duke Energy Progress on March 13, 2014. Briefing has concluded in this matter and oral argument occurred on September 8, 2014. Duke Energy Carolinas cannot predict the outcome of this matter.
William States Lee Combined Cycle Facility
On April 9, 2014, the PSCSC granted Duke Energy CarolinasOhio
 Three Months Ended March 31,
(in millions)2015
 2014
Operating Revenues$412
 $195
Estimated loss on disposition(44) (1,323)
    
Income (loss) before income taxes$140
 $(1,354)
Income tax expense (benefit)50
 (479)
Income (Loss) from Discontinued Operations, net of tax$90
 $(875)
The Duke Energy and North Carolina Electric Membership Corporation (NCEMC) a CertificateDuke Energy Ohio held for sale assets include net pretax impairments of Environmental Compatibilityapproximately $43 million and Public Convenience and Necessity (CECPCN)$44 million, respectively, for the constructionthree months ended March 31, 2015, and operationapproximately $1,287 million and $1,323 million, respectively, for the three months ended March 31, 2014. The impairment was recorded to write down the carrying amount of the assets to the estimated fair value of the business, based on the expected selling price to Dynegy less cost to sell. These losses were included in Income (Loss) from Discontinued Operations, net of tax in the Condensed Consolidated Statements of Operations and Comprehensive Income. The final loss on disposition is not expected to result in a 750 MW combined cycle natural gas-fired generating plant at its existing William States Lee Generating Station in Anderson, South Carolina. On May 16, 2014,material impact on Duke Energy's or Duke Energy Carolinas announced its intentionOhio's operations in the second quarter of 2015.
Commercial Power has a revolving credit agreement (RCA) to begin construction in summer 2015 and estimates a cost to build of $600 million for its sharesupport the operations of the facility, including allowancenonregulated Midwest generation business. Interest expense associated with the RCA has been allocated to discontinued operations. No other interest expense related to corporate level debt has been allocated to discontinued operations.
The following table presents the Disposal Group's carrying values in the Condensed Consolidated Balance Sheets' major classes of Assets held for funds used during construction (AFUDC).sale and Liabilities associated with assets held for sale.
 March 31, 2015
(in millions)
Duke
Energy

 
Duke
Energy
Ohio

Current assets$354
 $295
Investments and other assets50
 45
Property, plant and equipment2,553
 2,520
Total Assets held for sale$2,957
 $2,860
Current liabilities$146
 $129
Deferred credits and other liabilities26
 25
Total Liabilities associated with assets held for sale$172
 $154
Duke Energy Ohio has a power purchase agreement with the Disposal Group for a portion of its standard service offer (SSO) supply requirement through May 2015. Duke Energy will also provide, and receive reimbursement for, transition services provided to Dynegy for a period of up to 12 months. The project iscontinuing cash flows are not considered direct cash flows and are not expected to be commercially available in late 2017. NCEMCmaterial. Duke Energy or Duke Energy Ohio will own approximately 13 percentnot significantly influence the operations of the project. On July 3, 2014,Disposal Group during the South Carolina Coastal Conservation League (SCCCL)transition service period.
See Notes 4 and Southern Alliance5 for Clean Energy (SACE) jointly filed a Noticediscussion of Appeal withcontingencies related to the Court of Appeals of South Carolina seeking the court's review of the PSCSC's decision.Disposal Group that will be retained by Duke Energy Carolinas cannot predictOhio subsequent to the outcome of this matter.sale.

4339


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


3. BUSINESS SEGMENTS
Duke Energy Progressevaluates segment performance based on segment income. Segment income is defined as income from continuing operations net of income attributable to noncontrolling interests. Segment income, as discussed below, includes intercompany revenues and expenses that are eliminated in the Condensed Consolidated Financial Statements. Certain governance costs are allocated to each segment. In addition, direct interest expense and income taxes are included in segment income.
2012 North Carolina Rate CaseOperating segments are determined based on information used by the chief operating decision-maker in deciding how to allocate resources and evaluate the performance.
On May 30, 2013, the NCUC approved a settlement agreement related toProducts and services are sold between affiliate companies and reportable segments of Duke Energy Progress’ request for a rate increase. The Public Staff was a party to the settlement agreement. The parties agreed to a two-year step-in rate increase, with the first year providing for a $147 million, or a 4.5 percent average increase in rates, and the second year providing for rates to be increased by an additional $31 million, or a 1.0 percent average increase in rates. The agreement is based upon a return on equity of 10.2 percent and an equity component of the capital structure of 53 percent. The initial rate increase went into effect on June 1, 2013 and the step-in rate increase went into effect in June 2014.
On July 1, 2013, the NCAG appealed the NCUC’s approval of the rate of return and capital structure includedat cost. Segment assets as presented in the agreement. NC WARN also appealed various matters infollowing tables exclude all intercompany assets.
DUKE ENERGY
Duke Energy has the settlement. The NCSC denied a motion to consolidate these appeals with other North Carolina rate case appeals involvingfollowing reportable operating segments: Regulated Utilities, International Energy and Commercial Power.
RegulatedUtilities conducts operations primarily through Duke Energy Carolinas, and Duke Energy Progress, on March 13, 2014. Briefing has concluded in this matter and oral argument was held on May 5, 2014. On August 20, 2014, the NCSC affirmed the NCUC's order approving Duke Energy Progress' rate of return and capital structure.
Shearon Harris Nuclear Station Expansion
In 2006,Florida, Duke Energy Progress selected a site at Harris to evaluate for possible future nuclear expansion. On February 19, 2008,Indiana, and the regulated transmission and distribution operations of Duke Energy Progress filed its COL application withOhio. These electric and natural gas operations are subject to the rules and regulations of the FERC, NRC, NCUC, PSCSC, FPSC, PUCO, IURC and KPSC. Substantially all of Regulated Utilities’ operations are regulated and, accordingly, these operations qualify for two Westinghouse AP1000 reactors at Harris, whichregulatory accounting treatment.
International Energy principally operates and manages power generation facilities and engages in sales and marketing of electric power, natural gas and natural gas liquids outside the NRC docketedU.S. Its activities principally target power generation in Latin America. Additionally, International Energy owns a 25 percent interest in National Methanol Company (NMC), a large regional producer of methyl tertiary butyl ether (MTBE) located in Saudi Arabia. The investment in NMC is accounted for review. On Mayunder the equity method of accounting.
Commercial Power builds, develops and operates wind and solar renewable generation and energy transmission projects throughout the continental U.S. As discussed in Note 2, 2013, Duke Energy Progress filedcompleted the sale of Commercial Power's nonregulated Midwest generation business to Dynegy in a letter withtransaction that closed on April 2, 2015. The results of operations of the NRC requestingnonregulated Midwest generation business have been classified as Discontinued Operations on the NRCCondensed Consolidated Statements of Operations for all periods presented. Certain costs such as interest and general and administrative expenses previously allocated to suspend its review activities associated with the COL at the Harris site.Disposal Group were not reclassified to discontinued operations. As a result of the decision to suspend the COL applications, during the second quarter of 2013,sale, Commercial Power will no longer qualify as a Duke Energy Progress recorded a pretax impairment chargeOhio reportable operating segment. The remaining assets and related results of $22 million, which representedoperations previously reported in Commercial Power will be presented as Other.
Theremainder of Duke Energy’s operations is presented as Other. While it is not an operating segment, Other primarily includes unallocated corporate interest expense, certain unallocated corporate costs, associated with the COL, which were not probable of recovery. As of September 30, 2014, approximately $48 million is recorded in Regulatory assets onBison Insurance Company Limited (Bison), Duke Energy’s wholly owned, captive insurance subsidiary, and contributions to The Duke Energy Progress' Condensed Consolidated Balance Sheet.Foundation.
Wholesale Depreciation Rates
On April 19, 2013, Duke
 Three Months Ended March 31, 2015
(in millions)Regulated Utilities
 
International
Energy

 
Commercial
Power

 
Total
Reportable
Segments

 Other
 Eliminations
 Consolidated
Unaffiliated revenues$5,713
 $273
 $73
 $6,059
 $6
 $
 $6,065
Intersegment revenues10
 
 
 10
 21
 (31) 
Total revenues$5,723
 $273
 $73
 $6,069
 $27
 $(31) $6,065
Segment income (loss)(a)
$774
 $36
 $1
 $811
 $(37) $(1) $773
Add back noncontrolling interests component            3
Income from discontinued operations, net of tax            91
Net income            $867
Segment assets$106,642
 $4,892
 $6,202
 $117,736
 $4,230
 $176
 $122,142
(a)    Other includes after-tax costs to achieve the Progress Energy Progress filed an application with FERC for acceptancemerger of changes to generation depreciation rates and in August 2013 filed for acceptance of additional changes. These changes will affect the rates of Duke Energy Progress wholesale power customers that purchase or will purchase power under formula rates. Certain Duke Energy Progress wholesale customers filed interventions and protests. FERC accepted the depreciation rate changes, subject to refund, and set the matter for settlement and hearing in a consolidated proceeding. FERC further initiated an action with respect to the justness and reasonableness of the proposed rate changes. Settlement was reached in October 2014, subject to FERC approval, for changes to the depreciation rates and conforming changes to the wholesale formula rates. The agreement will have no material or adverse impact to the rates originally proposed by Duke Energy Progress, and Duke Energy Progress will receive cost recovery for early retired plants previously included in the depreciation rates.
Duke Energy Florida
FPSC Settlement Agreements
On February 22, 2012, the FPSC approved a settlement agreement (the 2012 Settlement) among Duke Energy Florida, the Florida Office of Public Counsel (OPC) and other customer advocates. The 2012 Settlement was to continue through the last billing cycle of December 2016. On October 17, 2013, the FPSC approved a settlement agreement (the 2013 Settlement) between Duke Energy Florida, OPC, and other customer advocates. The 2013 Settlement replaces and supplants the 2012 Settlement and substantially resolves issues related to (i) Crystal River Unit 3, (ii) Levy, (iii) Crystal River 1 and 2 coal units, and (iv) future generation needs in Florida. Refer to the remaining sections below and the 2013 Annual Report on Form 10-K for further discussion of these settlement agreements.
Crystal River Unit 3
On February 5, 2013, Duke Energy Florida announced the retirement of Crystal River Unit 3. On February 20, 2013, Duke Energy Florida filed with the NRC a certification of permanent cessation of power operations and permanent removal of fuel from the reactor vessel. In December 2013, and March 2014, Duke Energy Florida filed an updated site-specific decommissioning plan with the NRC and FPSC, respectively. The plan included a decommissioning cost estimate of $1,180 million, including amounts applicable to joint owners, under the safe storage (SAFSTOR) option. Duke Energy Florida’s decommissioning study assumes Crystal River Unit 3 will be in SAFSTOR configuration, requiring limited staffing to monitor plant conditions, until the eventual dismantling and decontamination activities to be completed by 2073. This decommissioning approach is currently utilized at a number of retired domestic nuclear power plants and is one of three accepted approaches to decommissioning approved by the NRC.
Duke Energy Florida has reclassified all Crystal River Unit 3 investments, including property, plant and equipment, nuclear fuel, inventory, and other assets, to a regulatory asset. Duke Energy agreed to forgo recovery of $295 million of regulatory assets and an impairment charge was recorded in the second quarter of 2013 for this matter. Duke Energy Florida is allowed to accelerate cash recovery of approximately $130 million of the Crystal River Unit 3 regulatory asset from retail customers from 2014 through 2016 through its fuel clause. Duke Energy Florida will begin recovery of the remaining Crystal River Unit 3 regulatory asset, up to a cap of $1,466 million from retail customers upon the earlier of (i) full recovery of the uncollected Levy investment or (ii) the first billing period of January 2017. Recovery will continue 240 months from inception of collection of the regulatory asset in base rates. The Crystal River Unit 3 base rate component will be adjusted at least every four years.
Included in this recovery, but not subject to the cap, are costs of building an Independent Spent Fuel Storage Installation (ISFSI). The return rate will be based on the currently approved AFUDC rate with a return on equity of 7.35 percent, or 70 percent of the currently approved 10.5 percent. The return rate is subject to change if the return on equity changes in the future. In May 2014, Duke Energy Florida petitioned the FPSC for approval of the decision to construct the ISFSI and approval of an accounting order to defer amortization of the ISFSI pending resolution of its litigation against the federal government as a result of the Department of Energy's breach of its obligation to accept spent nuclear fuel. The regulatory asset associated with the original power uprate project to increase generating capacity will continue to be recovered through the Nuclear Cost Recovery Clause (NCRC) over an estimated seven year period that began in 2013.$13 million.

4440


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


Through September 30, 2014,
 Three Months Ended March 31, 2014
(in millions)Regulated Utilities
 
International
Energy

 
Commercial
Power

 
Total
Reportable
Segments

 Other
 Eliminations
 Consolidated
Unaffiliated revenues$5,795
 $382
 $81
 $6,258
 $5
 $
 $6,263
Intersegment revenues10
 
 
 10
 20
 (30) 
Total revenues$5,805
 $382
 $81
 $6,268
 $25
 $(30) $6,263
Segment income (loss)(a)(b)
$737
 $130
 $(32) $835
 $(87) $(2) $746
Add back noncontrolling interest            4
Loss from discontinued operations, net of tax            (843)
Net loss            $(93)
(a)Commercial Power recorded a pretax impairment charge of $94 million related to Ohio Valley Electric Corporation (OVEC). See Note 12 for additional information.
(b)    Other includes after-tax costs to achieve the Progress Energy merger of $34 million.
DUKE ENERGY OHIO
Duke Energy Florida deferred $1,373 million for rate recovery related to Crystal River Unit 3, which is subject to the rate recovery capOhio has two reportable operating segments, Regulated Utilities and Commercial Power.
Regulated Utilities transmits and distributes electricity in the 2013 Settlement. In addition,portions of Ohio and generates, distributes and sells electricity in portions of Kentucky. Regulated Utilities also transports and sells natural gas in portions of Ohio and Northern Kentucky. It conducts operations primarily through Duke Energy Florida deferred $268 million for recovery associated with building an ISFSIOhio and the original uprate project, which is not subject to the rate recovery cap discussed above.its wholly owned subsidiary, Duke Energy Florida does not expect the Crystal River Unit 3 costs to exceed the cap.Kentucky.
The following table includes a summary of retail customer refunds agreed toAs discussed in the 2012 Settlement and the 2013 Settlement. Refer to the 2013 Annual Report on Form 10-K for additional information on each of these refunds.
 September 30, 2014
     Remaining Amount to be Refunded
(in millions)Total
 Refunded to date
 2014
 2015
 2016
2012 Settlement refund$288
 $233
 $35
 $10
 $10
Retirement decision refund100
 
 
 40
 60
NEIL proceeds490
 449
 41
 
 
Total customer refunds$878
 682
 76
 50
 70
Accelerated regulatory asset recovery(130) (28) (9) (37) (56)
Net customer refunds$748
 $654
 $67
 $13
 $14
Levy
On July 28, 2008,Note 2, Duke Energy Florida appliedcompleted the sale of Commercial Power's nonregulated Midwest generation business to the NRC forDynegy in a COL for two Westinghouse AP1000 reactors at Levy. In 2008, the FPSC granted Duke Energy Florida’s petition for an affirmative Determinationtransaction that closed on April 2, 2015. The results of Need and related orders requesting cost recovery under Florida’s nuclear cost-recovery rule, together with the associated facilities, including transmission lines and substation facilities.
On January 28, 2014, Duke Energy Florida terminated the Levy engineering, procurement and construction agreement (EPC). Duke Energy Florida may be required to pay for work performed under the EPC and to bring existing work to an orderly conclusion, including but not limited to costs to demobilize and cancel certain equipment and material orders placed. Duke Energy Florida recorded an exit obligation of $25 million upon terminationoperations of the EPC. This liability was recorded within Other in Deferred Credits and Other Liabilities with an offset primarily to Regulatory assetsnonregulated Midwest generation business have been classified as Discontinued Operations on the Condensed Consolidated Balance Sheets. Duke Energy Florida is allowed to recover reasonable and prudent EPC cancellation costs from its retail customers.
The 2012 Settlement provided that Duke Energy Florida include the allocated wholesale cost of Levy as a retail regulatory asset and include this asset as a component of rate base and amortization expense for regulatory reporting. In accordance with the 2013 Settlement, Duke Energy Florida ceased amortization of the wholesale allocation of Levy investments against retail rates. In the second quarter of 2013, Duke Energy Florida recorded a pretax charge of $65 million to write off the wholesale portion of Levy investments. This amount is included in Impairment charges on Duke Energy Florida's Condensed Statements of Operations and Comprehensive Income.
On October 27, 2014,Income for all periods presented. Amounts remaining in Commercial Power relate to assets not included in the FPSC approvedDisposal Group. Certain costs such as interest and general and administrative expenses previously allocated to the Disposal Group were not reclassified to discontinued operations. As a result of the sale, Commercial Power will no longer qualify as a Duke Energy Florida ratesOhio reportable operating segment. The remaining assets and related results of operations previously reported in Commercial Power will be presented as Other.
The remainder of Duke Energy Ohio’s operations is presented as Other. While it is not considered an operating segment, Other primarily includes certain governance costs allocated by its parent, Duke Energy. See Note 8 for 2015 for Levy as filedadditional information. All of Duke Energy Ohio’s revenues are generated domestically and consistent with those establishedits long-lived assets are all in the 2013 Revised and Restated Settlement Agreement. RecoveryU.S.
 Three Months Ended March 31, 2015
(in millions)Regulated Utilities
 Commercial Power
 Total Reportable Segments
 Other
 Eliminations
 Consolidated
Unaffiliated revenues$572
 $14
 $586
 $
 $
 $586
Total revenues$572
 $14
 $586
 $
 $
 $586
Segment income (loss)$70
 $(9) $61
 $(2) $
 $59
Income from discontinued operations, net of tax          90
Net income          $149
Segment assets$6,782
 $2,984
 $9,766
 $43
 $(13) $9,796
 Three Months Ended March 31, 2014
(in millions)Regulated Utilities
 Commercial Power
 Total Reportable Segments
 Other
 Eliminations
 Consolidated
Unaffiliated revenues$562
 $13
 $575
 $
 $
 $575
Total revenues$562
 $13
 $575
 $
 $
 $575
Segment income (loss)(a)
$61
 $(74) $(13) $(2) $
 $(15)
Loss from discontinued operations, net of tax          (875)
Net loss          $(890)
(a)    Commercial Power recorded a pretax impairment charge of the remaining retail portion of the project costs will occur over five years from 2013 through 2017. Duke Energy Florida has an ongoing responsibility to demonstrate prudency related to the wind down of the Levy investment and the potential for salvage of Levy assets. As of September 30, 2014, Duke Energy Florida has a net uncollected investment in Levy of approximately $207 million, including AFUDC. Of this amount, $54 million is included in Regulatory assets, $120$94 million related to land and the COL is included in Net, property, plant and equipment, and $33 million is included in Regulatory assets within Current Assets on the Condensed Consolidated Balance Sheets.
New Generation
The 2013 Settlement establishes a recovery mechanismOVEC. See Note 12 for additional generation needs. This recovery mechanism, the Generation Base Rate Adjustment (GBRA), allows recovery of prudent costs of these items through an increase in base rates, upon the in-service date of such assets, without a general rate case at a 10.5 percent return on equity.
On May 27, 2014, Duke Energy Florida petitioned the FPSC for a Determination of Need to (i) construct a 1,640 MW combined cycle natural gas plant in Citrus County, Florida to be in service in 2018 with an estimated cost of $1.5 billion, (ii) construct a 320 MW combustion turbine plant at its existing Suwannee generating facility with an estimated cost of $197 million, and (iii) add inlet chilling to its existing Hines Energy Complex (Hines) combined cycle units which will increase the output of those units by 220 MW at an estimated cost of $160 million. These cost estimates include AFUDC. On August 26, 2014, Duke Energy Florida requested the FPSC withdraw consideration for the Suwannee project so that Duke Energy Florida could pursue further negotiations on an alternative power plant acquisition. On October 2, 2014, the FPSC approved the requests for the Citrus County plant and the uprate project at the Hines facility. Additional environmental and governmental approvals will be sought for the Citrus County project. The Hines uprate project is expected to be completed no later than 2017.
Cost of Removal Reserve
The 2012 Settlement and the 2013 Settlement provided Duke Energy Florida the discretion to reduce cost of removal amortization expense up to the balance in the cost of removal reserve until the earlier of its applicable cost of removal reserve reaching zero or the expiration of the 2013 Settlement. Duke Energy Florida was not allowed to reduce amortization expense if the reduction would cause it to exceed the appropriate high point of the return on equity range. Duke Energy Florida recognized a reduction in amortization expense of $22 million for the three months ended September 30, 2013 and $95 million for the nine months ended September 30, 2013. Duke Energy Florida had no cost of removal reserves eligible for amortization to income remaining after December 31, 2013.information.

4541


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


DUKE ENERGY CAROLINAS, PROGRESS ENERGY, DUKE ENERGY PROGRESS, DUKE ENERGY FLORIDA AND DUKE ENERGY INDIANA
The remaining Subsidiary Registrants each have one reportable operating segment, Regulated Utility, which generates, transmits, distributes and sells electricity. The remainder of each company’s operations is classified as Other. While not considered a reportable segment for any of these companies, Other consists of certain unallocated corporate costs. The following table summarizes the net loss for Other at each of these registrants.

 Three Months Ended March 31,
(in millions)2015
 2014
Duke Energy Carolinas$(8) $(21)
Progress Energy(a)
(42) (52)
Duke Energy Progress(4) (10)
Duke Energy Florida(3) (4)
Duke Energy Indiana(2) (3)
(a)Other for Progress Energy also includes interest expense on corporate debt instruments of $60 million and $63 million for the three months ended March 31, 2015 and 2014, respectively.
The respective Regulated Utility operating segments include substantially all of Duke Energy Carolinas’, Progress Energy’s, Duke Energy Progress’, Duke Energy Florida’s and Duke Energy Indiana’s assets at March 31, 2015 and 2014.
4. REGULATORY MATTERS
RATE RELATED INFORMATION
The NCUC, PSCSC, FPSC, IURC, PUCO and KPSC approve rates for retail electric and natural gas services within their states. The FERC approves rates for electric sales to wholesale customers served under cost-based rates (excluding Ohio and Indiana), as well as sales of transmission service.
Duke Energy Carolinas
Duke Energy Ohio
 Three Months Ended March 31,
(in millions)2015
 2014
Operating Revenues$412
 $195
Estimated loss on disposition(44) (1,323)
    
Income (loss) before income taxes$140
 $(1,354)
Income tax expense (benefit)50
 (479)
Income (Loss) from Discontinued Operations, net of tax$90
 $(875)
The Duke Energy and Duke Energy Ohio River Fuel Spillheld for sale assets include net pretax impairments of approximately $43 million and $44 million, respectively, for the three months ended March 31, 2015, and approximately $1,287 million and $1,323 million, respectively, for the three months ended March 31, 2014. The impairment was recorded to write down the carrying amount of the assets to the estimated fair value of the business, based on the expected selling price to Dynegy less cost to sell. These losses were included in Income (Loss) from Discontinued Operations, net of tax in the Condensed Consolidated Statements of Operations and Comprehensive Income. The final loss on disposition is not expected to result in a material impact on Duke Energy's or Duke Energy Ohio's operations in the second quarter of 2015.
On August 18, 2014, approximately 9,000 gallonsCommercial Power has a revolving credit agreement (RCA) to support the operations of fuel oil was inadvertently discharged into the Ohio River during a fuel oil transfer atnonregulated Midwest generation business. Interest expense associated with the W.C. Beckjord generating plant. The total costsRCA has been allocated to be incurreddiscontinued operations. No other interest expense related to corporate level debt has been allocated to discontinued operations.
The following table presents the clean-upDisposal Group's carrying values in the Condensed Consolidated Balance Sheets' major classes of Assets held for sale and Liabilities associated with assets held for sale.
 March 31, 2015
(in millions)
Duke
Energy

 
Duke
Energy
Ohio

Current assets$354
 $295
Investments and other assets50
 45
Property, plant and equipment2,553
 2,520
Total Assets held for sale$2,957
 $2,860
Current liabilities$146
 $129
Deferred credits and other liabilities26
 25
Total Liabilities associated with assets held for sale$172
 $154
Duke Energy Ohio has a power purchase agreement with the oil spillDisposal Group for a portion of its standard service offer (SSO) supply requirement through May 2015. Duke Energy will also provide, and receive reimbursement for, transition services provided to Dynegy for a period of up to 12 months. The continuing cash flows are not considered direct cash flows and are not expected to be material. Duke Energy or Duke Energy Ohio will not significantly influence the operations of the Disposal Group during the transition service period.
See Notes 4 and 5 for a discussion of contingencies related to the Disposal Group that will be retained by Duke Energy Ohio subsequent to the sale.

39


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)

3. BUSINESS SEGMENTS
Duke Energy evaluates segment performance based on segment income. Segment income is defined as income from continuing operations net of income attributable to noncontrolling interests. Segment income, as discussed below, includes intercompany revenues and expenses that are eliminated in the Condensed Consolidated Financial Statements. Certain governance costs are allocated to each segment. In addition, direct interest expense and income taxes are included in segment income.
Operating segments are determined based on information used by the chief operating decision-maker in deciding how to allocate resources and evaluate the performance.
Products and services are sold between affiliate companies and reportable segments of Duke Energy at cost. Segment assets as presented in the following tables exclude all intercompany assets.
DUKE ENERGY
Duke Energy has the following reportable operating segments: Regulated Utilities, International Energy and Commercial Power.
RegulatedUtilities conducts operations primarily through Duke Energy Carolinas, Duke Energy Progress, Duke Energy Florida, Duke Energy Indiana, and the regulated transmission and distribution operations of Duke Energy Ohio. These electric and natural gas operations are subject to the rules and regulations of the FERC, NRC, NCUC, PSCSC, FPSC, PUCO, IURC and KPSC. Substantially all of Regulated Utilities’ operations are regulated and, accordingly, these operations qualify for regulatory accounting treatment.
International Energy principally operates and manages power generation facilities and engages in sales and marketing of electric power, natural gas and natural gas liquids outside the U.S. Its activities principally target power generation in Latin America. Additionally, International Energy owns a 25 percent interest in National Methanol Company (NMC), a large regional producer of methyl tertiary butyl ether (MTBE) located in Saudi Arabia. The investment in NMC is accounted for under the equity method of accounting.
Commercial Power builds, develops and operates wind and solar renewable generation and energy transmission projects throughout the continental U.S. As discussed in Note 2, Duke Energy completed the sale of Commercial Power's nonregulated Midwest generation business to Dynegy in a transaction that closed on April 2, 2015. The results of operations of the nonregulated Midwest generation business have been classified as Discontinued Operations on the Condensed Consolidated Statements of Operations for all periods presented. Certain costs such as interest and general and administrative expenses previously allocated to the Disposal Group were not reclassified to discontinued operations. As a result of the sale, Commercial Power will no longer qualify as a Duke Energy Ohio reportable operating segment. The remaining assets and related results of operations previously reported in Commercial Power will be presented as Other.
Theremainder of Duke Energy’s operations is presented as Other. While it is not an operating segment, Other primarily includes unallocated corporate interest expense, certain unallocated corporate costs, Bison Insurance Company Limited (Bison), Duke Energy’s wholly owned, captive insurance subsidiary, and contributions to The Duke Energy Foundation.
 Three Months Ended March 31, 2015
(in millions)Regulated Utilities
 
International
Energy

 
Commercial
Power

 
Total
Reportable
Segments

 Other
 Eliminations
 Consolidated
Unaffiliated revenues$5,713
 $273
 $73
 $6,059
 $6
 $
 $6,065
Intersegment revenues10
 
 
 10
 21
 (31) 
Total revenues$5,723
 $273
 $73
 $6,069
 $27
 $(31) $6,065
Segment income (loss)(a)
$774
 $36
 $1
 $811
 $(37) $(1) $773
Add back noncontrolling interests component            3
Income from discontinued operations, net of tax            91
Net income            $867
Segment assets$106,642
 $4,892
 $6,202
 $117,736
 $4,230
 $176
 $122,142
(a)    Other includes after-tax costs to achieve the Progress Energy merger of $13 million.

40


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)

 Three Months Ended March 31, 2014
(in millions)Regulated Utilities
 
International
Energy

 
Commercial
Power

 
Total
Reportable
Segments

 Other
 Eliminations
 Consolidated
Unaffiliated revenues$5,795
 $382
 $81
 $6,258
 $5
 $
 $6,263
Intersegment revenues10
 
 
 10
 20
 (30) 
Total revenues$5,805
 $382
 $81
 $6,268
 $25
 $(30) $6,263
Segment income (loss)(a)(b)
$737
 $130
 $(32) $835
 $(87) $(2) $746
Add back noncontrolling interest            4
Loss from discontinued operations, net of tax            (843)
Net loss            $(93)
(a)Commercial Power recorded a pretax impairment charge of $94 million related to Ohio Valley Electric Corporation (OVEC). See Note 12 for additional information.
(b)    Other includes after-tax costs to achieve the Progress Energy merger of $34 million.
DUKE ENERGY OHIO
Duke Energy Ohio has two reportable operating segments, Regulated Utilities and Commercial Power.
Regulated Utilities transmits and distributes electricity in portions of Ohio and generates, distributes and sells electricity in portions of Kentucky. Regulated Utilities also transports and sells natural gas in portions of Ohio and Northern Kentucky. It conducts operations primarily through Duke Energy Ohio and its wholly owned subsidiary, Duke Energy Kentucky.
As discussed in Note 2, Duke Energy completed the sale of Commercial Power's nonregulated Midwest generation business to Dynegy in a transaction that closed on April 2, 2015. The results of operations of the nonregulated Midwest generation business have been classified as Discontinued Operations on the Condensed Consolidated Statements of Operations and Comprehensive Income for all periods presented. Amounts remaining in Commercial Power relate to assets not included in the Disposal Group. Certain costs such as interest and general and administrative expenses previously allocated to the Disposal Group were not reclassified to discontinued operations. As a result of the sale, Commercial Power will no longer qualify as a Duke Energy Ohio reportable operating segment. The remaining assets and related results of operations previously reported in Commercial Power will be presented as Other.
The remainder of Duke Energy Ohio’s operations is presented as Other. While it is not considered an operating segment, Other primarily includes certain governance costs allocated by its parent, Duke Energy. See Note 8 for additional information. All of Duke Energy Ohio’s revenues are generated domestically and its long-lived assets are all in the U.S.
 Three Months Ended March 31, 2015
(in millions)Regulated Utilities
 Commercial Power
 Total Reportable Segments
 Other
 Eliminations
 Consolidated
Unaffiliated revenues$572
 $14
 $586
 $
 $
 $586
Total revenues$572
 $14
 $586
 $
 $
 $586
Segment income (loss)$70
 $(9) $61
 $(2) $
 $59
Income from discontinued operations, net of tax          90
Net income          $149
Segment assets$6,782
 $2,984
 $9,766
 $43
 $(13) $9,796
 Three Months Ended March 31, 2014
(in millions)Regulated Utilities
 Commercial Power
 Total Reportable Segments
 Other
 Eliminations
 Consolidated
Unaffiliated revenues$562
 $13
 $575
 $
 $
 $575
Total revenues$562
 $13
 $575
 $
 $
 $575
Segment income (loss)(a)
$61
 $(74) $(13) $(2) $
 $(15)
Loss from discontinued operations, net of tax          (875)
Net loss          $(890)
(a)    Commercial Power recorded a pretax impairment charge of $94 million related to OVEC. See Note 12 for additional information.

41


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)

DUKE ENERGY CAROLINAS, PROGRESS ENERGY, DUKE ENERGY PROGRESS, DUKE ENERGY FLORIDA AND DUKE ENERGY INDIANA
The remaining Subsidiary Registrants each have one reportable operating segment, Regulated Utility, which generates, transmits, distributes and sells electricity. The remainder of each company’s operations is classified as Other. While not considered a reportable segment for any of these companies, Other consists of certain unallocated corporate costs. The following table summarizes the net loss for Other at each of these registrants.
 Three Months Ended March 31,
(in millions)2015
 2014
Duke Energy Carolinas$(8) $(21)
Progress Energy(a)
(42) (52)
Duke Energy Progress(4) (10)
Duke Energy Florida(3) (4)
Duke Energy Indiana(2) (3)
(a)Other for Progress Energy also includes interest expense on corporate debt instruments of $60 million and $63 million for the three months ended March 31, 2015 and 2014, respectively.
The respective Regulated Utility operating segments include substantially all of Duke Energy Carolinas’, Progress Energy’s, Duke Energy Progress’, Duke Energy Florida’s and Duke Energy Indiana’s assets at March 31, 2015 and 2014.
4. REGULATORY MATTERS
RATE RELATED INFORMATION
The NCUC, PSCSC, FPSC, IURC, PUCO and KPSC approve rates for retail electric and natural gas services within their states. The FERC approves rates for electric sales to wholesale customers served under cost-based rates (excluding Ohio and Indiana), as well as sales of transmission service.
Duke Energy Carolinas
William States Lee Combined Cycle Facility
On April 9, 2014, the PSCSC granted Duke Energy Carolinas and North Carolina Electric Membership Corporation (NCEMC) a Certificate of Environmental Compatibility and Public Convenience and Necessity (CECPCN) for the construction and operation of a 750 MW combined cycle natural gas-fired generating plant at Duke Energy Carolinas' existing William States Lee Generating Station in Anderson, South Carolina. On May 16, 2014, Duke Energy Carolinas announced its intention to begin construction in summer 2015 and estimates a cost to build of $600 million for its share of the facility, including allowance for funds used during construction (AFUDC). The project is expected to be commercially available in late 2017. NCEMC will own approximately 13 percent of the project. On July 3, 2014, the South Carolina Coastal Conservation League (SCCCL) and Southern Alliance for Clean Energy (SACE) jointly filed a Notice of Appeal with the Court of Appeals of South Carolina seeking the court's review of the PSCSC's decision. The case has been fully briefed and is pending in the Court of Appeals. Duke Energy Carolinas cannot predict the outcome of this matter.
Duke Energy Progress
Sutton Black Start Combustion Turbine CPCN
On April 15, 2015, Duke Energy Progress filed a CPCN application with the NCUC for approval to construct an 84 MW black start combustion turbine (CT) project at the existing Sutton plant (Sutton Black Start CT Project). The Sutton Black Start CT Project would replace three existing CTs with total capacity of 61 MW with two new 42 MW CT units with black start and fast start capability. In addition to peaking system capacity, the Sutton Black Start CT Project will provide regional black start capability and tertiary backup power services for the Brunswick Nuclear Plant. The NCUC has scheduled an evidentiary hearing on June 22, 2015 and a decision is expected by October 2015.
Duke Energy Florida
FERC Transmission Return on Equity Complaint
Seminole Electric Cooperative, Inc. and Florida Municipal Power Agency filed multiple complaints with the FERC alleging Duke Energy Florida's current rate of return on equity in transmission formula rates of 10.8 percent is unjust and unreasonable. The latest complaint, filed on August 12, 2014, claims the rate of return should be reduced to 8.69 percent. The FERC consolidated all complaints for the purposes of settlement, hearing and decision. The parties are engaged in settlement discussions. The outcome of this matter is not expected to be material.
Citrus County Combined Cycle Facility
On October 2, 2014, the FPSC granted Duke Energy Florida a Determination of Need for the construction of a 1,640 MW combined cycle natural gas plant in Citrus County, Florida. The facility is expected to be commercially available in 2018 at an estimated cost of $1.5 billion, including AFUDC. Additional environmental and governmental approvals will be sought for the Citrus County project.

42


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)

Purchase of Osprey Energy Center
In December 2014, Duke Energy Florida and Osprey Energy Center, LLC, a wholly owned subsidiary of Calpine Corporation (Calpine), entered into an Asset Purchase and Sale Agreement for the purchase of a 599 MW combined cycle natural gas plant in Auburndale, Florida (Osprey Plant acquisition) for approximately $166 million. Closing is subject to the approval of the FERC, FPSC and the expiration of the Hart Scott Rodino waiting period and is expected to occur by the first quarter of 2017 upon the expiration of an existing Power Purchase Agreement between Calpine and Duke Energy Florida.
On January 30, 2015, Duke Energy Florida petitioned the FPSC requesting a determination that the Osprey Plant acquisition or, alternatively, the construction of a 320 MW combustion turbine at its existing Suwannee generating facility with an estimated cost of $197 million is the most cost-effective generation alternative to meet Duke Energy Florida's remaining generation need prior to 2018. A hearing with the FPSC is scheduled for June 2015. On March 13, 2015, Duke Energy Florida made a filing requesting FERC approval of the Osprey Plant acquisition by July 30, 2015. In the FERC proceeding, no protests were filed. Seminole Electric Cooperative intervened to request clarification concerning the transmission facilities to be constructed in connection with the Osprey Plant acquisition. If timely approval of the Osprey Plant acquisition is not received from the FERC, the Suwannee project would be constructed.
Duke Energy Ohio
2014 Electric Security Plan
On May 29, 2014,In April 2015, the PUCO modified and approved Duke Energy Ohio filedOhio's proposed ESP, with a three-year term and an application for approvaleffective date of an SSO in the form of an ESP, effective June 1, 2015. The proposed ESP includesPUCO approved a competitive procurement process for SSO load, a distribution capital investment rider, and a tracking mechanism for incremental distribution costsexpenses caused by major storms, andstorms. The PUCO order also approved a cost-based recovery ofplaceholder tariff for a price stabilization rider, but denied Duke Energy Ohio’s contractual entitlementOhio's specific request to include OVEC in OVEC. The proposed plan also seeks rate design modifications and continuance, revision, or termination of existing riders. An evidentiary hearing forthe rider at this case commenced on October 22, 2014.time; however, the order allows Duke Energy Ohio cannot predictto submit additional information to request recovery in the outcomefuture. On May 4, 2015, Duke Energy Ohio filed an application for rehearing requesting the PUCO to modify or amend certain aspects of this matter.the order.
2012 Natural Gas Rate Case
On November 13, 2013, the PUCO issued an order approving a settlement among Duke Energy Ohio, the PUCO Staff and intervening parties (the Gas Settlement). The Gas Settlement provided for (i) no increase in base rates for natural gas distribution service and (ii) a return on equity of 9.84 percent, and (iii)percent. The Gas Settlement provided for a subsequent hearing on Duke Energy Ohio’s request for rider recovery of environmental remediation costs associated with its former manufactured gas plant (MGP) sites. After the conclusion of the evidentiary hearing and briefs, the PUCO authorized Duke Energy Ohio to recover $56 million, excluding carrying costs, of environmental remediation costs associated with former manufactured gas plants (MGP) incurred through 2012.costs. The MGP rider became effective in April 2014 for a five-year period. On March 31, 2014, Duke Energy Ohio filed an application with the PUCO to adjust the MGP rider for investigation and remediation costs incurred in 2013.
On May 14, 2014,Certain consumer groups appealed the PUCO’s decision to the Ohio Supreme Court granted certain consumer groups' motionand further asked the court to stay implementation of the PUCO’s order and collections under the MGP rider pending their appealsappeal. The Ohio Supreme Court granted the motion to stay and subsequently required the posting of a bond to effectuate the stay. When the bond was not posted, the PUCO approval ofapproved Duke Energy Ohio’s request, in January 2015, to reinstate collections under the Gas Settlement. The appellants, the PUCOMGP rider and Duke Energy Ohio have all filed briefs addressingresumed billings. Amounts collected prior to the meritssuspension of this matter with the Ohio Supreme Court.rider were immaterial. On July 29, 2014, the Ohio Supreme Court denied Duke Energy Ohio's motion to lift the stay, but did require appellants to post a bond. Briefs have been submitted in the case. No bond amount or date for oral argument has been set.March 31, 2015, Duke Energy Ohio suspended billing offiled an application to adjust the MGP rider to recover remediation costs incurred in June 2014. Amounts collected under the rider prior to suspension are immaterial. Duke Energy Ohio cannot predict the outcome of the appeal of this matter.
Regional Transmission Organization (RTO) Realignment
Duke Energy Ohio, including Duke Energy Kentucky, transferred control of its transmission assets from Midcontinent Independent System Operator, Inc. (MISO) to PJM Interconnection, LLC (PJM), effective December 31, 2011.
On December 22, 2010, the KPSC approved Duke Energy Kentucky’s request to effect the RTO realignment, subject to a commitment not to seek double-recoverydouble recovery in a future rate case of the transmission expansion fees that may be charged by MISO and PJM in the same period or overlapping periods.
On May 25, 2011, the PUCO approved a settlement between Duke Energy Ohio, Ohio Energy Group, the Office of Ohio Consumers’ Counsel and the PUCO Staff related to Duke Energy Ohio’s recovery of certain costs of the RTO realignment via a non-bypassable rider. Duke Energy Ohio is allowed to recover all MISO Transmission Expansion Planning (MTEP) costs, including but not limited to Multi-Value Project (MVP) costs, directly or indirectly charged to Ohio customers. Duke Energy Ohio also agreed to vigorously defend against any charges for MVP projects from MISO.
Upon its exit from MISO on December 31, 2011, Duke Energy Ohio recorded a liability for its exit obligation and share of MTEP costs, excluding MVP. This liability was recorded within Other in Current liabilities and Other in Deferred credits and other liabilities on Duke Energy Ohio’s Condensed Consolidated Balance Sheets.
The following table provides a reconciliation of the beginning and ending balancebalances of Duke Energy Ohio’s recorded obligations related to its withdrawal from MISO. As of September 30, 2014, $74March 31, 2015, $73 million is recorded as a Regulatory asset on Duke Energy Ohio's Condensed Consolidated Balance Sheets.
(in millions)December 31, 2013
 
Provision /
Adjustments

 
Cash
Reductions

 September 30, 2014
December 31, 2014
 
Provision /
Adjustments

 
Cash
Reductions

 March 31, 2015
Duke Energy Ohio$95
 $3
 $(3) $95
$94
 $
 $(1) $93

43


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)

MVP. MISO approved 17 MVP proposals prior to Duke Energy Ohio’s exit from MISO on December 31, 2011. Construction of these projects is expected to continue through 2020. Costs of these projects, including operating and maintenance costs, property and income taxes, depreciation and an allowed return, are allocated and billed to MISO transmission owners.
On December 29, 2011, MISO filed a tariff with the FERC providing for the allocation of MVP costs to a withdrawing owner based on monthly energy usage. The FERC set for hearing (i) whether MISO’s proposed cost allocation methodology to transmission owners who withdrew from MISO prior to January 1, 2012 is consistent with the tariff at the time of their withdrawal from MISO, and, (ii) if not, what the amount of and methodology for calculating any MVP cost responsibility should be. On July 16, 2013, a FERC Administrative Law Judge (ALJ) issued an initial decision. Under this initial decision, Duke Energy Ohio would be liable for MVP costs. Duke Energy Ohio filed exceptions to the initial decision, requesting the FERC overturn the ALJ’s decision. After reviewing the initial decision, along with all exceptions and responses filed by the parties, the FERC will issue a final decision. Duke Energy Ohio fully intends to appeal to the federal court of appeals if the FERC affirms the ALJ’s decision. Duke Energy Ohio cannot predict the outcome of these proceedings.
In 2012, MISO estimated Duke Energy Ohio’s MVP obligation over the period from 2012 to 2071 at $2.7 billion, on an undiscounted basis. The estimated obligation is subject to great uncertainty including the ultimate cost of the projects, the annual costs of operations and maintenance, taxes and return over the project lives, the number of years in service for the projects and the allocation to Duke Energy Ohio.

46

PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


Any liability related to the MISO MVP matter attributable to the Disposal Group willwas not be transferred to Dynegy upon closingthe sale of the disposalnonregulated Midwest generation business.
FERC Transmission Return on Equity and MTEP Cost Settlement
On October 14, 2011, Duke Energy Ohio and Duke Energy Kentucky submitted with the FERC proposed modifications to the PJM Interconnection Open Access Transmission Tariff pertaining to recovery of the Midwest generation business.transmission revenue requirement as PJM transmission owners. The filing was made in connection with Duke Energy Ohio's and Duke Energy Kentucky's move from MISO to PJM effective January 1, 2012. On April 24, 2012, the FERC issued an order accepting the proposed filing effective January 1, 2012, except that the order denied a request to recover certain costs associated with the move from MISO to PJM without prejudice to the right to submit another filing seeking such recovery and including certain additional evidence, and set the rate of return on equity of 12.38 percent for settlement and hearing. On April 16, 2015, the FERC approved a settlement agreement between Duke Energy Ohio, Duke Energy Kentucky and six PJM transmission customers with load in the Duke Energy Ohio and Duke Energy Kentucky zone. The principal terms of the settlement agreement are that, effective upon the date of FERC approval, (i) the return on equity for wholesale transmission service is reduced to 11.38 percent, (ii) the settling parties agreed not to seek a change in the return on equity that would be effective prior to June 1, 2017 and (iii) Duke Energy Ohio and Duke Energy Kentucky will recover 30 percent of the wholesale portion of costs arising from their obligation to pay any portion of the costs of projects included in any MTEP that was approved prior to the date of Duke Energy Ohio's and Duke Energy Kentucky's integration into PJM.
Duke Energy Indiana
Edwardsport Integrated Gasification Combined Cycle (IGCC) Plant
On November 20, 2007, the IURC granted Duke Energy Indiana a Certificate of Public Convenience and Necessity (CPCN)CPCN for the construction of a 618MWthe Edwardsport IGCC power plant at Duke Energy Indiana’s existing Edwardsport Generating Station in Knox County, Indiana with a cost estimate of $1.985 billion assuming timely recovery of financing costs related to the project.plant. The Citizens Action Coalition of Indiana, Inc., Sierra Club, Inc., Save the Valley, Inc., and Valley Watch, Inc. (collectively, the Joint Intervenors) were intervenors in several matters related to the Edwardsport IGCC Plant.
On December 27, 2012, the IURC approved a settlement agreement (2012The Edwardsport settlement) related to the cost increase for the construction of the project, including subdockets before the IURC related to the project. The Office of Utility Consumer Counselor (OUCC), the Duke Energy Indiana Industrial Group and Nucor Steel-Indiana were parties to the settlement. The settlement agreement, as approved, capped costs to be reflected in customer rates at $2.595 billion, including estimated AFUDC through June 30, 2012. Duke Energy Indiana is allowed to recover AFUDC after June 30, 2012, until customer rates are revised, with such recovery decreasing to 85 percent on AFUDC accrued after November 30, 2012.
The projectIGCC plant was placed in commercial operation in June 2013. Costs for the Edwardsport IGCC plant are recovered from retail electric customers via a tracking mechanism, the IGCC rider. Updates to the IGCC rider are filed semi-annually. An order on the eleventh semi-annual IGCC rider is currently pending. The twelfth and thirteenth semi-annual IGGCIGCC riders have beenwere combined and are scheduled for hearings which were held in February 2015. Issues in this proceeding include whether the IGCC plant was properly declared in service for ratemaking purposes in June 2013 and the operational performance of the plant during its initial ten months of operations.
On March 18, 2014, the Indiana Court of Appeals denied an appeal filed by the Joint Intervenors and affirmed the IURC order approving the 2012 Edwardsport settlement and other related regulatory orders. On June 5, 2014, the Indiana Court of Appeals affirmed the decision on rehearing. The Joint Intervenors requested to seek transfer to the Indiana Supreme Court. On November 7, 2014, the Indiana Supreme Court denied the Joint Intervenors' request to transfer the appeal of these proceedings. The ninth and tenth semi-annual IGCC rider orders have also been appealed.appealed by the Joint Intervenors. On August 21, 2014, the Indiana Court of Appeals affirmed the IURC order in the tenth IGCC rider proceeding and on October 29, 2014 denied Joint Intervenors' request for rehearing. The Joint Intervenors requested the Indiana Supreme Court to review the decision, which was denied on April 23, 2015, concluding the appeal. On September 8, 2014, the Indiana Court of Appeals remanded the IURC order in the ninth IGCC rider proceeding back to the IURC for further findings concerning approximately $61 million of financing chargesfindings. On February 25, 2015, the IURC issued a new order upholding its prior decision and providing additional detailed findings. Joint Intervenors claimed were caused by construction delay and a ratemaking issue concerninghave appealed this remand order to the in-service date determination for tax purposes.Indiana Court of Appeals.
On April 2, 2014, the IURC established a subdocket to Duke Energy Indiana’s current fuel adjustment clause proceeding. In this fuel adjustment subdocket, the IURC intends to review underlying causes for net negative generation amounts at the Edwardsport IGCC plant during the period September through November 2013. Duke Energy Indiana contends the net negative generation is related to the consumption of fuel and auxiliary power when the plant was in start-up or off line. In addition to the OUCC, the Duke Energy Indiana Industrial Group, Nucor Steel-Indiana, Steel Dynamics, Inc., and the Joint Intervenors are parties to the subdocket. The IURC has deferred the fuel adjustment subdocket until resolution of the twelfth and thirteenth semi-annual IGCC rider proceedings. In addition, although the IURC approved fuel adjustment clause recovery for the period December 2013 through March 2014, it determined such fuel costs reasonably related to the operational performance of the Edwardsport IGCC plant shall be subject to refund pending the outcome of the twelfth and thirteenth semi-annual IGCC riders.
Duke Energy Indiana cannot predict the outcome of the fuel adjustment clause proceedings or pending and future IGCC Riderrider proceedings.

44


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)

FERC Transmission Return on Equity Complaint
Customer groups have filed with the FERC complaints against MISO and its transmission-owning members, including Duke Energy Indiana, alleging, among other things, that the current base rate of return on equity earned by MISO transmission owners of 12.38 percent is unjust and unreasonable. The latest complaint, filed on February 12, 2015, claims the base rate of return should be reduced to 8.67 percent and requests a consolidation of complaints. On January 5, 2015, the FERC issued an order accepting the MISO transmission owners 0.50 percent adder to the base rate of return on equity based on participation in an RTO subject to it being applied to a return on equity that is shown to be just and reasonable in the pending return on equity complaint. Settlement procedures in the base return on equity proceeding were terminated and a hearing is scheduled for August 17, 2015. Duke Energy Indiana cannot predict the outcome of this matter.
Grid Infrastructure Improvement Plan
On August 29, 2014, Duke Energy Indiana filed a seven-year grid infrastructure improvement plan with the IURC with an estimated cost of $1.9 billion, focusing on the reliability, integrity and modernization of the transmission and distribution system. If approved, eighty80 percent of the costs will be recovered through a rate tracker. The remaining twenty20 percent are subject to deferral and subsequent recovery through future rate case proceedings. Hearings are set for December 2014were held in January 2015 and Duke Energy Indiana expects a decision in the second quarter of 2015.mid-2015.
OTHER REGULATORY MATTERS
Atlantic Coast Pipeline
On September 2, 2014, Duke Energy, Dominion Resources (Dominion), Piedmont Natural Gas and AGL Resources announced the formation of a joint venture,company, Atlantic Coast Pipeline, LLC (ACP), to build and own the proposed Atlantic Coast Pipeline (ACP)(the pipeline), a 550-mile interstate natural gas pipeline. The ACPpipeline is designed to meet the needs identified in requests for proposals by Duke Energy Carolinas, Duke Energy Progress and Piedmont Natural Gas. Dominion will build and operate the ACPpipeline and will own 45 percent. Duke Energy will have a 40 percent ownership of the pipelineinterest in ACP through its Commercial Power segment. The remaining share will be owned by Piedmont Natural Gas and AGL Resources. Duke Energy Carolinas and Duke Energy Progress, among others, will be customers of the pipeline. Purchases will be made under several 20-year supply contracts, subject to state regulatory approval. In October 2014, the NCUC and PSCSC approved the Duke Energy Carolinas and Duke Energy Progress requests to enter into certain affiliate agreements, pay compensation to ACP and to grant a waiver of certain Code of Conduct provisions relating to contractual and jurisdictional matters. The project will require FERC approval, which the joint ventureACP will seek to secure by summer 2016. The estimated in-service date of the pipeline is late 2018.
Merger AppealsSabal Trail Transmission, LLC Pipeline
On January 9, 2013,May 4, 2015, Duke Energy acquired a 7.5 percent ownership interest from Spectra Energy in the Cityproposed 500-mile Sabal Trail natural gas pipeline. Spectra Energy will continue to own 59.5 percent of Orangeburgthe pipeline and NextEra Energy will own the remaining 33 percent of the pipeline. The pipeline will traverse Alabama, Georgia and Florida to meet rapidly growing demand for natural gas in those states. The primary customers of the pipeline, Duke Energy Florida and Florida Power & Light Company, have each contracted to buy pipeline capacity for 25-year initial terms. The pipeline, scheduled to begin service in 2017, requires federal and other regulatory approvals. 
NC WARN appealedFERC Complaint
On December 16, 2014, NC WARN filed a complaint with the NCUC’s approvalFERC against Duke Energy Carolinas and Duke Energy Progress that alleged (i) Duke Energy Carolinas and Duke Energy Progress manipulated the electricity market by constructing costly and unneeded generation facilities leading to unjust and unreasonable rates; (ii) Duke Energy Carolinas and Duke Energy Progress failed to comply with Order 1000 by not effectively connecting their transmission systems with neighboring utilities which also have excess capacity; (iii) the plans of Duke Energy Carolinas and Duke Energy Progress for unrealistic future growth lead to unnecessary and expensive generating plants; (iv) the FERC should investigate the practices of Duke Energy Carolinas and Duke Energy Progress and the potential benefits of having them enter into a regional transmission organization; and (v) the FERC should force Duke Energy Carolinas and Duke Energy Progress to purchase power from other utilities rather than construct wasteful and redundant power plants. A copy of the merger betweencomplaint was filed with the PSCSC on January 6, 2015. Duke Energy Carolinas and Duke Energy Progress Energy. Onhave filed responses requesting dismissal of the complaint with the FERC and the PSCSC. In April 29, 2013,2015, the NCUC granted Duke Energy’s motionFERC and the PSCSC issued separate orders dismissing the NC WARN petition.
Planned and Potential Coal Plant Retirements
The Subsidiary Registrants periodically file Integrated Resource Plans (IRP) with their state regulatory commissions. The IRPs provide a view of forecasted energy needs over a long term (10 to dismiss20 years), and options being considered to meet those needs. Recent IRPs filed by the Subsidiary Registrants included planning assumptions to potentially retire certain exceptions containedcoal-fired generating facilities in NC WARN’s appeal.Florida, Ohio and Indiana earlier than their current estimated useful lives. These facilities do not have the requisite emission control equipment, primarily to meet United States Environmental Protection Agency (EPA) regulations recently approved or proposed.

4745


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


On November 6, 2013, the North Carolina Court of Appeals heard oral arguments on the appeals. On March 4, 2014, the Court of Appeals issued an opinion affirming the NCUC’s approval of the merger. On April 8, 2014, NC WARN filed a petition for discretionary review by the North Carolina Supreme Court. On April 21, 2014, Duke Energy and the Public Staff jointly filed their response opposing NC WARN’s petition. The City of Orangeburg did not file a petition for discretionary review. Duke Energy cannot predict the outcome of these matters.
Progress Energy Merger FERC Mitigation
In June 2012, the FERC approved the merger with Progress Energy, including Duke Energy and Progress Energy’s revised market power mitigation plan, the Joint Dispatch Agreement (JDA) and the joint Open Access Transmission Tariff. Several intervenors filed requests for rehearing challenging various aspects of the FERC approval. On October 29, 2014, FERC denied all of the requests for rehearing.
The revised market power mitigation plan provided for the acceleration of one transmission project and the completion of seven other transmission projects (Long-Term FERC Mitigation) and interim firm power sale agreements during the completion of the transmission projects (Interim FERC Mitigation). The Long-Term FERC Mitigation was expected to increase power imported into the Duke Energy Carolinas and Duke Energy Progress service areas and enhance competitive power supply options in the service areas. All of these projects were completed in or before 2014. On May 30, 2014, the Independent Monitor filed with FERC a final report stating that the Long-Term FERC Mitigation is complete. Therefore, Duke Energy Carolinas' and Duke Energy Progress' obligations associated with the Interim FERC Mitigation have terminated. In the second quarter of 2014, Duke Energy Progress recorded an $18 million partial reversal of an impairment recorded in the third quarter of 2012. This reversal adjusts the initial disallowance from the Long-Term FERC mitigation and reflects updated information on the construction costs and in-service dates of the transmission projects.
Following the closing of the merger, outside counsel reviewed Duke Energy’s mitigation plan and discovered a technical error in the calculations. On December 6, 2013, Duke Energy submitted a filing to the FERC disclosing the error and arguing that no additional mitigation is necessary. The City of New Bern filed a protest and requested that FERC order additional mitigation. On October 29, 2014, FERC ordered that the amount of the stub mitigation be increased from 25 MW to 129 MW. The stub mitigation is Duke’s commitment to set aside for third parties a certain quantity of firm transmission capacity from Duke Energy Carolinas to Duke Energy Progress during summer off-peak hours. FERC also ordered that Duke Energy operate certain phase shifters to create additional import capability and that such operation be monitored by an independent monitor. Duke Energy does not expect the costs to comply with this order to be material.
Planned and Potential Coal Plant Retirements
The Subsidiary Registrants periodically file Integrated Resource Plans (IRP) with their state regulatory commissions. The IRPs provide a view of forecasted energy needs over a 10 to 20-year period, and options being considered to meet those needs. Recent IRPs filed by the Subsidiary Registrants included planning assumptions to potentially retire certain coal-fired generating facilities in South Carolina, Florida, Indiana and Ohio earlier than their current estimated useful lives. The facilities do not have the requisite emission control equipment, primarily to meet United States Environmental Protection Agency (EPA) regulations recently approved or proposed.
The table below contains the net carrying value of generating facilities planned for early retirement or being evaluated for potential retirement included in Property,recent IRPs. Dollar amounts in the table below are included in Net property, plant and equipment net on the Condensed Consolidated Balance Sheets.
September 30, 2014March 31, 2015
Duke Energy
 
Duke Energy Carolinas(b)

 Progress Energy
 
Duke Energy Florida(c)

 
Duke Energy Ohio(d)

 
Duke Energy Indiana(e)

Duke Energy
 
Progress Energy(b)

 
Duke Energy Florida(b)

 
Duke Energy Ohio(c)

 
Duke Energy Indiana(d)

Capacity (in MW)2,297
 200
 873
 873
 556
 668
1,704
 873
 873
 163
 668
Remaining net book value (in millions)(a)
$256
 $19
 $109
 $109
 $9
 $119
$243
 $120
 $120
 $9
 $114
(a)Included in Property, plant and equipment, net as of September 30, 2014,March 31, 2015, on the Condensed Consolidated Balance Sheets.
(b)Includes Lee Units 1 and 2. Excludes 170 MW Lee Unit 3 that is expected to be converted to gas in 2014. Duke Energy Carolinas expects to retire or convert these units by December 2020 in conjunction with a settlement agreement associated with the Cliffside Unit 6 air permit.
(c)Includes Crystal River Units 1 and 2.
(d)(c)Includes Beckjord Units 5 and 6 and Miami Fort Unit 6. Beckjord units have no remaining book value and were6, which is expected to be retired Octoberby June 1, 2014.2015.
(e)(d)Includes Wabash River Units 2 through 6. Wabash River Unit 6 is being evaluated for potential conversion to natural gas. Duke Energy Indiana committed to retire or convert these unitsthe Wabash River Units 2 through 5 by June 2018 in conjunction with a settlement agreement associated with the Edwardsport air permit.
In addition to evaluations based on the extent facilities are equipped to comply with environmental regulations, Duke Energy continually monitors and evaluates the appropriate generation mix and fuel diversity for its generation fleet when making retirement decisions. Duke Energy Carolinas and Duke Energy Progress are evaluating the potential for coal-fired generating unit retirements with a net carrying value of approximately $110 million and $150 million, respectively, included in Net property, plant and equipment on the Condensed Consolidated Balance Sheets.
Duke Energy continues to evaluate the potential need to retire these coal-fired generating facilities earlier than the current estimated useful lives, and plans to seek regulatory recovery, as necessary, for amounts that would not be otherwise recovered when any of these assets are retired. However, such recovery, including recovery of carrying costs on remaining book values, could be subject to future regulatory approvals and therefore cannot be assured.
5. COMMITMENTS AND CONTINGENCIES
ENVIRONMENTAL
Duke Energy is subject to international, federal, state and local regulations regarding air and water quality, hazardous and solid waste disposal, and other environmental matters. The Subsidiary Registrants are subject to federal, state and local regulations regarding air and water quality, hazardous and solid waste disposal and other environmental matters. These regulations can be changed from time to time, imposing new obligations on the Duke Energy Registrants.

48The following environmental matters impact all of the Duke Energy Registrants.

PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


Remediation Activities
The Duke Energy Registrants are responsible for environmental remediation at various contaminated sites. These include some properties that are part of ongoing operations and sites formerly owned or used by Duke Energy entities. These sites are in various stages of investigation, remediation and monitoring. Managed in conjunction with relevant federal, state and local agencies, activities vary with site conditions and locations, remediation requirements, complexity and sharing of responsibility. If remediation activities involve joint and several liability provisions, strict liability, or cost recovery or contribution actions, the Duke Energy Registrants could potentially be held responsible for contamination caused by other potentially responsible parties, and may also benefit from insurance policies or contractual indemnities that cover some or all cleanup costs. Liabilities are recorded when losses become probable and are reasonably estimable. The total costs that may be incurred cannot be estimated because the extent of environmental impact, allocation among potentially responsible parties, remediation alternatives and/or regulatory decisions have not yet been determined. Additional costs associated with remediation activities are likely to be incurred in the future and could be significant. Costs are typically expensed as Operation, maintenance and other in the Condensed Consolidated Statements of Operations unless regulatory recovery of the costs is deemed probable.
The following table containstables contain information regarding reserves for probable and estimable costs related to the various environmental sites. These reserves are recorded in Other within Deferred Credits and Other Liabilities on the Condensed Consolidated Balance Sheets.
 Nine Months Ended September 30, 2014
(in millions)Duke Energy
 Duke Energy Carolinas
 Progress Energy
 Duke Energy Progress
 Duke Energy Florida
 Duke Energy Ohio
 Duke Energy Indiana
Balance at beginning of period$79
 $11
 $27
 $8
 $19
 $27
 $7
Provisions/adjustments34
 (1) 4
 3
 1
 28
 3
Cash reductions(8) 
 (6) (4) (2) (1) (1)
Balance at end of period$105
 $10
 $25
 $7
 $18
 $54
 $9
 Nine Months Ended September 30, 2013
(in millions)Duke Energy
 Duke Energy Carolinas
 Progress Energy
 Duke Energy Progress
 Duke Energy Florida
 Duke Energy Ohio
 Duke Energy Indiana
Balance at beginning of period$75
 $12
 $33
 $14
 $19
 $15
 $8
Provisions/adjustments6
 
 5
 1
 4
 (1) 1
Cash reductions(17) 
 (6) (2) (4) (8) (2)
Balance at end of period$64
 $12
 $32
 $13
 $19
 $6
 $7
Additional losses in excess of recorded reserves that could be incurred for the stages of investigation, remediation, and monitoring for environmental sites that have been evaluated at this time are presented in the table below.
(in millions) 
Duke Energy$83
Duke Energy Carolinas25
Progress Energy9
Duke Energy Progress2
Duke Energy Florida7
Duke Energy Ohio42
Duke Energy Indiana7
Ash Basins
On February 2, 2014, a break in a 48-inch stormwater pipe beneath an ash basin at Duke Energy Carolinas’ retired Dan River steam station caused a release of ash basin water and ash into the Dan River. On February 8, 2014, a permanent plug was installed in the 48-inch stormwater pipe, stopping the release of materials into the river. On February 21, 2014, a permanent plug was installed in a 36-inch stormwater pipe beneath an adjacent ash basin. Duke Energy Carolinas estimates 30,000 to 39,000 tons of ash and 24 million to 27 million gallons of basin water were released into the river during the incident. Duke Energy Carolinas incurred approximately $20 million of repairs and remediation expense related to this incident during the nine months ended September 30, 2014. These amounts are recorded in Operations, maintenance and other on the Condensed Consolidated Statements of Operations and Comprehensive Income. Duke Energy Carolinas will not seek recovery of these costs from ratepayers. In July, Duke Energy completed remediation work identified by the EPA. Other costs related to the Dan River release including future regulatory directives, natural resources damages, pending litigation, future claims or litigation, and long-term environmental impact costs cannot be reasonably estimated at this time.
 Three Months Ended March 31, 2015
(in millions)Duke Energy
 Duke Energy Carolinas
 Progress Energy
 Duke Energy Progress
 Duke Energy Florida
 Duke Energy Ohio
 Duke Energy Indiana
Balance at beginning of period$97
 $10
 $17
 $5
 $12
 $54
 $10
Provisions/adjustments2
 
 
 
 
 1
 2
Cash reductions(3) 
 
 
 
 (1) (1)
Balance at end of period$96
 $10
 $17
 $5
 $12
 $54
 $11

4946


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


 Three Months Ended March 31, 2014
(in millions)Duke Energy
 Duke Energy Carolinas
 Progress Energy
 Duke Energy Progress
 Duke Energy Florida
 Duke Energy Ohio
 Duke Energy Indiana
Balance at beginning of period$79
 $11
 $27
 $8
 $19
 $27
 $7
Provisions/adjustments3
 
 3
 2
 1
 
 
Cash reductions(1) 
 (1) 
 (1) 
 
Balance at end of period$81
 $11
 $29
 $10
 $19
 $27
 $7
Additional losses in excess of recorded reserves that could be incurred for the stages of investigation, remediation and monitoring for environmental sites that have been evaluated at this time are presented in the table below.
(in millions) 
Duke Energy$89
Duke Energy Carolinas25
Progress Energy15
Duke Energy Progress1
Duke Energy Florida14
Duke Energy Ohio42
Duke Energy Indiana7
North Carolina and South Carolina Ash Basins
On February 2, 2014, a break in a stormwater pipe beneath an ash basin at Duke Energy engaged third-party engineering experts to complete an independent engineering reviewCarolinas’ retired Dan River steam station caused a release of all its ash basins. Initial field work has been completed. Findingsbasin water and recommendations are being reviewed with management and repair actions are being taken to addressash into the findings.Dan River. On February 8, 2014, a permanent plug was installed in the stormwater pipe, stopping the release of materials into the river. Duke Energy is also preparing a comprehensive, longer-termCarolinas estimates 30,000 to 39,000 tons of ash and 24 million to 27 million gallons of basin strategy, whichwater were released into the river. In July 2014, Duke Energy completed remediation work identified by the EPA and continues to cooperate with the EPA's civil enforcement process. Total repairs and remediation expenses incurred by Duke Energy Carolinas related to the release were approximately $24 million. No additional expenses were recorded in the first quarter of 2015. Duke Energy Carolinas will involve a site by site analysisnot seek recovery of applicable laws, regulations, site characteristics,these costs from ratepayers. See the "Litigation" section below for additional information on litigation, investigations and engineering feasibility. Each site is unique,enforcement actions related to ash basins, including the Memorandum of Plea Agreement (Plea Agreements) in connection to the North Carolina Ash Basin Grand Jury Investigation. Other costs related to the Dan River release, including pending or future state or federal civil enforcement proceedings, future regulatory directives, natural resources damages, additional pending litigation, future claims or litigation, and site-specific engineering will help determine the most appropriate closure method for that site.long-term environmental impact costs cannot be reasonably estimated at this time.
On September 20, 2014, the North Carolina Coal Ash Management Act of 2014 (Coal Ash Act) became law. The billCoal Ash Act (i) establishes a Coal Ash Management Commission (Coal Ash Commission) to oversee handling of coal ash within the state; (ii) prohibits construction of new and expansion of existing ash impoundments and use of existing impoundments at retired facilities, effective October 1, 2014;facilities; (iii) requires closure of ash impoundments at Duke Energy Progress' Asheville and Sutton stations and Duke Energy Carolinas' Riverbend and Dan River stations no later than August 1, 2019; (iv) requires conversion to dry disposal of fly ash handling at active plants not retired by December 31, 2018; (v) requires conversion to dry disposal of bottom ash handling at active plants by December 31, 2019, or retirement of active plants; (vi) requires all remaining ash impoundments in North Carolina to be approvedcategorized as high-risk, intermediate-risk or low-risk no later than December 31, 2015 by Thethe North Carolina Department of Environment and Natural Resources (DENR) with the method of closure and timing to be based upon the assigned risk, with closure no later than December 31, 2029; (vii) establishes requirements to deal with groundwater and surface water impacts from impoundmentsimpoundments; and (viii) enhances the level of regulation for structural fills utilizing coal ash. AThe Coal Ash Act includes a variance procedure for compliance deadlines and modification of requirements regarding structural fills and compliance boundaries is also outlined.boundaries. Provisions of the billCoal Ash Act prohibit cost recovery for unlawful discharge of ash basin waters occurring after January 1, 2014. The Coal Ash Act includes a moratorium for any NCUC ordered rate changes to effectuate the legislation, which ends January 15, 2015. The Coal Ash Act leaves the decision on cost recovery determinations related to closure of coal combustion residualsresidual (CCR) surface impoundments (ash basins or impoundments) to the normal ratemaking processes before utility regulatory commissions. Duke Energy has and will periodically submit to DENR site-specific coal ash impoundment closure plans. These plans and all associated permits must be approved by DENR before any excavation work can begin.
In September 2014, Duke Energy Carolinas executed a consent agreement with the South Carolina Department of Health and Environmental Control (SCDHEC) requiring the retirementexcavation of an inactive ash basin and ash fill area at the W.S. Lee Steam Station. As part of this agreement, in December 2014, Duke Energy Carolinas filed an ash removal plan and schedule with SCDHEC.
Asset retirement obligations are recorded on the Duke Energy Carolinas and Duke Energy Progress recorded asset retirement obligationsCondensed Consolidated Balance Sheets at September 30, 2014March 31, 2015 based upon the legal obligation for closure of coal ash basins and the disposal of related ash as a result of the Coal Ash Act and the agreement with SCDHEC. Refer

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DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Note 7Condensed Consolidated Financial Statements – (Continued)
(Unaudited)

Coal Combustion Residuals
On April 17, 2015, the EPA published in the Federal Registry a rule to regulate the disposal of CCR from electric utilities as solid waste. The federal regulation classifies CCR as nonhazardous waste under the Resource Conservation and Recovery Act. The regulation applies to all new and existing landfills, new and existing surface impoundments, structural fills and CCR piles. The rule establishes requirements regarding landfill design, structural integrity design and assessment criteria for further discussionsurface impoundments, groundwater monitoring and protection procedures and other operational and reporting procedures to ensure the safe disposal and management of CCR. In addition to the requirements of the federal CCR regulation, CCR landfills and surface impoundments will continue to be independently regulated by most states. Duke Energy records an asset retirement obligations recorded at September 30, 2014.obligation when it has a legal obligation to incur retirement costs associated with the retirement of a long-lived asset and the obligation can be reasonably estimated. Duke Energy Registrants impacted by the rule will record additional asset retirement obligation amounts in the second quarter of 2015. Cost recovery for future expenditures will be pursued through the normal ratemaking process with federal and state utility commissions, which permit recovery of necessary and prudently incurred costs associated with Duke Energy’s regulated operations.
LITIGATION
Duke Energy
Ash Basin Shareholder Derivative Litigation
Five shareholder derivative lawsuits have beenwere filed in Delaware Chancery Court relating to the release at Dan River and to the management of Duke Energy’s ash basins. TheOn October 31, 2014, the five lawsuits were filedconsolidated in Delaware Chancery Court on (i) May 21, 2014, by shareholders Edward Tansey and the Police Retirement System of St. Louis; (ii) July 18, 2014, by shareholder Robert Reese; (iii) August 5, 2014, by shareholder Leatrice Seinfeld; (iv) Septembera single proceeding titled "In Re Duke Energy Corporation Coal Ash Derivative Litigation." On December 2, 2014, by the City of Birmingham; and (v) October 3, 2014, by shareholder Andrew Behar.
plaintiffs filed a Corrected Verified Consolidated Shareholder Derivative Complaint (Consolidated Complaint). The lawsuits nameConsolidated Complaint names as defendants several current and former Duke Energy officers and directors (collectively, the “Duke Energy Defendants”). Duke Energy is named as a nominal defendant in all five lawsuits.defendant.
All of the complaints allegeThe Consolidated Complaint alleges the Duke Energy Defendants breached their fiduciary duties to the company by failing to adequately oversee Duke Energy’s ash basins since 2008 and that these breaches of fiduciary duty may have contributed to the incident at Dan River and continued thereafter. The lawsuitslawsuit also assertasserts claims against the Duke Energy Defendants for corporate waste (relating to the money Duke Energy has spent and will spend as a result of the fines, penalties and coal ash removal) and unjust enrichment (relating to the compensation and director remuneration that was received despite these alleged breaches of fiduciary duty). The lawsuits seeklawsuit seeks both injunctive relief against Duke Energy and restitution from the Duke Energy Defendants. On January 21, 2015, the Duke Energy Defendants filed a Motion to Stay and an alternative Motion to Dismiss.
On March 5, 2015, shareholder Judy Mesirov filed a shareholder derivative complaint (Mesirov Complaint) in North Carolina state court. The lawsuit, styled Mesirov v. Good, is similar to the consolidated derivative action pending in Delaware Chancery Court and was filed against the same current directors and former directors and officers as the Delaware litigation. Duke Energy Corporation, Duke Energy Progress and Duke Energy Carolinas are named as nominal defendants. The Mesirov Complaint alleges that the Duke Energy Board of Directors was aware of Clean Water Act (CWA) compliance issues and failures to maintain structures in ash basins, but that the Board of Directors did not require Duke Energy Carolinas and Duke Energy Progress to take action to remedy deficiencies. The Mesirov Complaint further alleges that the Board of Directors sanctioned activities to avoid compliance with the law by allowing improper influence of DENR to minimize regulation and by opposing previously anticipated citizen suit litigation. The Mesirov Complaint seeks corporate governance reforms and damages relating to costs associated with the Dan River release, remediation of ash basins that are out of compliance with the CWA and defending and payment of fines, penalties and settlements relating to criminal and civil investigations and lawsuits.
In addition to the above derivative complaints, Duke Energy has also received two shareholder litigation demand letters. On May 28, 2014, Duke Energy received a shareholder litigation demand letter sent on behalf of shareholder Mitchell Pinsly. The letter alleges that the members of the Duke Energy Board of Directors and certain officers breached their fiduciary duties by allowing the company to illegally dispose of and store coal ash pollutants. The letter demands that the Board of Directors take action to recover damages associated with those breaches of fiduciary duty; otherwise, the attorney will file a shareholder derivative action. By letter dated July 3, 2014, counsel for the shareholder was informed that the Board of Directors appointed a Demand Review Committee to evaluate the allegations in the Demand Letter.
On October 31, 2014,March 24, 2015, Duke Energy received a shareholder litigation demand letter sent on behalf of shareholder Saul Bresalier. The letter alleges that the Delaware Chancery Court judge issued an order consolidatingmembers of the five lawsuits. Board of Directors and certain officers breached their fiduciary duties in their management of the company's environmental practices, as well as in their decision-making relating to the leadership changes following the close of the Progress Energy merger in July 2012. The letter demands that the Board of Directors take action to recover damages associated with those alleged breaches of fiduciary duty; otherwise, the attorney will file a shareholder derivative action.
It is not possible to predict whether Duke Energy will incur any liability or to estimate the damages, if any, it might incur in connection with these matters.

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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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)

Progress Energy Merger Shareholder Litigation
Duke Energy, the eleven members of the Duke Energy Board of Directors who were also members of the pre-merger Duke Energy Board of Directors (Legacy Duke Energy Directors) and certain Duke Energy officers are defendants in a purported securities class action lawsuit (Nieman v. Duke Energy Corporation, et al). This lawsuit consolidates three lawsuits originally filed in July 2012, and is pending in the United States District Court for the Western District of North Carolina. The plaintiffs allege federal Securities Act and Exchange Act claims based on allegations of materially false and misleading representations and omissions in the Registration Statement filed on July 7, 2011, and purportedly incorporated into other documents, all in connection with the post-merger change in Chief Executive Officer (CEO). The claims are purportedly brought on behalf of a class of all persons who purchased or otherwise acquired Duke Energy securities between June 11, 2012 and July 9, 2012. On July 26, 2013, the Magistrate Judge recommended the District Court Judge deny the defendants’ motion to dismiss. On October 2, 2013, the District Judge heard defendants’ objections to this recommendation. A decision is pending on the motion to dismiss. On August 15, 2014, the parties reached an agreement in principle to settle the litigation for an amount which, net of the expected proceeds of insurance policies, is not anticipated to have a material effect on the results of operations, cash flows or financial position of Duke Energy. On March 10, 2015, the parties filed a Stipulation of Settlement and a Motion for Preliminary Approval of the Settlement. The agreementcourt issued an order for preliminary approval of the settlement on March 25, 2015. Notice has been sent to members of the class and a final approval hearing is expected to occur in principle is subject to the executionsecond half of a term sheet, which is being negotiated, and will be submitted to the court for approval.2015.

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DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


On May 31, 2013, the Delaware Chancery Court consolidated four shareholder derivative lawsuits filed in 2012. The Court also appointed a lead plaintiff and counsel for plaintiffs and designated the case as In Re Duke Energy Corporation Derivative Litigation. The lawsuit names as defendants the Legacy Duke Energy Directors. Duke Energy is named as a nominal defendant. The case alleges claims for breach of fiduciary duties of loyalty and care in connection with the post-merger change in CEO. The case is stayed pending resolution of the Nieman v. Duke Energy Corporation, et al. case in North Carolina.
Two shareholder Derivative Complaints, filed in 2012 in federal district court in Delaware, were consolidated as Tansey v. Rogers, et al. The case alleges claims for breach of fiduciary duty and waste of corporate assets, as well as claims under Section 14(a) and 20(a) of the Exchange Act. Duke Energy is named as a nominal defendant. On May 17, 2013,Pursuant to an order entered on September 2, 2014, the judge grantedcourt administratively closed this consolidated derivative action. The parties filed a status report with the defendants' motioncourt on December 1, 2014, and will continue to staydo so every six months thereafter until the litigation until a decision is rendered on the motion to dismiss in the Nieman v. Duke Energy Corporation, et al.al. case in North Carolina.
On August 3, 2012, Duke Energy was served with a shareholder Derivative Complaint, which was transferred to the North Carolina Business Court (Krieger v. Johnson, et al.). The lawsuit names as defendants William D. Johnson and the Legacy Duke Energy Directors. Duke Energy is named as a nominal defendant. The lawsuit alleges claims for breach of fiduciary duty in granting excessive compensation to Mr. Johnson. On April 30, 2014, the North Carolina Business Court granted the Legacy Duke Energy Directors’ motion to dismiss the lawsuit.has been resolved.
It is not possible to estimate the maximum exposure of loss that may occur in connection with these lawsuits.
Price Reporting Cases
A total of fiveFive lawsuits were filed against a Duke Energy affiliatesaffiliate, Duke Energy Trading and Marketing, LLC, and other energy companies and remain pending in a consolidated, single federal court proceeding in Nevada.
Each of these caseslawsuits contain similar claims that defendants allegedly manipulated natural gas markets by various means, including providing false information to natural gas trade publications and entering into unlawful arrangements and agreements in violation of the antitrust laws of the respective states. Plaintiffs seek damages in unspecified amounts.
On July 18, 2011, the judge granted a defendant’s motion for summary judgment in two of the remaining five cases to which Duke Energy affiliates are a party.cases. The U.S. Court of Appeals for the Ninth Circuit subsequently reversed the lower court’s decision. On July 1, 2014,April 21, 2015, the Supreme Court affirmed the U.S. Supreme Court grantedof Appeals decision. The case will be remanded to the defendants', including Duke Energy, petitionfederal district court for certiorari. No date has been set for oral arguments.further proceedings.
It is not possible to predict whether Duke Energy will incur any liability or to estimate the damages, if any, it might incur in connection with the remaining matters. However, based on Duke Energy’s past experiences with similar cases of this nature, it does not believe its exposure under these remaining matters is material.
Brazil Expansion Lawsuit
On August 9, 2011, the State of São Paulo sued Duke Energy International Geracao Paranapenema S.A. (DEIGP) in Brazilian state court. The lawsuit claims DEIGP is under a continuing obligation to expand installed generation capacity in the State of São Paulo by 15 percent pursuant to a stock purchase agreement under which DEIGP purchased generation assets from the state. On August 10, 2011, a judge granted an ex parte injunction ordering DEIGP to present a detailed expansion plan in satisfaction of the 15 percent obligation. DEIGP has previously taken a position the expansion obligation is no longer viable given changes that have occurred in the electric energy sector since privatization. DEIGP submitted its proposed expansion plan on November 11, 2011, but reserved objections regarding enforceability. No trial date has been set.In January 2013, DEIGP filed appeals in the federal courts regarding various procedural issues. A decision on the merits in the first instance court is pending. It is not possible to predict whether Duke Energy will incur any liability or to estimate the damages, if any, it might incur in connection with this matter.
Duke Energy Carolinas and Duke Energy Progress
DENR State Enforcement Actions
In the first quarter of 2013, environmental organizations sent notices of intent to sue Duke Energy Carolinas and Duke Energy Progress related to alleged groundwater violations and Clean Water ActCWA violations from coal ash basins at two of their coal-fired power plants in North Carolina. DENR filed enforcement actions against Duke Energy Carolinas and Duke Energy Progress alleging violations of water discharge permits and North Carolina groundwater standards. The case against Duke Energy Carolinas was filed in Mecklenburg County Superior Court. The case against Duke Energy Progress was filed in Wake County Superior Court. The cases are being heard before a single judge.
On October 4, 2013, Duke Energy Carolinas, Duke Energy Progress and DENR negotiated a proposed consent order covering these two plants. The consent order would have assessed civil penalties and imposed a compliance schedule requiring Duke Energy Carolinas and Duke Energy Progress to undertake monitoring and data collection activities toward making appropriate corrective action to address any substantiated violations. In light of the coal ash release that occurred at Dan River on February 2, 2014, on March 21, 2014, DENR withdrew its support of the consent orders and requested that the court proceed with the litigation.

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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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)

On August 16, 2013, DENR filed an enforcement action against Duke Energy Carolinas and Duke Energy Progress related to their remaining plants in North Carolina, alleging violations of the Clean Water ActCWA and violations of the North Carolina groundwater standards. The case against Duke Energy Carolinas was filed in Mecklenburg County Superior Court. The case against Duke Energy Progress was filed in Wake County Superior Court. Both of these cases have been assigned to the judge handling the enforcement actions discussed above. Southern Environmental Law Center (SELC),The SELC, on behalf of several environmental groups, has been permitted to intervene in these cases.
In August 2014, DENR issued a Notice of Violation (NOV) for alleged groundwater violations at Duke Energy Progress' L.V. Sutton plant. On March 10, 2015, DENR issued a civil penalty of approximately $25 million to Duke Energy Progress for environmental damages related to the groundwater contamination at the L.V. Sutton station. On April 9, 2015, Duke Energy Progress filed a Petition for Contested Case hearing in the Office of Administrative Hearings, which has been assigned to an Administrative Judge. Duke Energy Progress has appealed the penalty on the basis that DENR exceeded its statutory authority. Hearing is set for August 24, 2015.
In February 2015, DENR issued an NOV for alleged groundwater violations at Duke Energy Progress' Asheville plant. Duke Energy Progress has responded to DENR regarding this NOV. DENR has not taken any enforcement action for this NOV, but penalties may be assessed in the future.
It is not possible to predict any liability or estimate any damages Duke Energy Carolinas or Duke Energy Progress might incur in connection with these matters.

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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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


North Carolina Declaratory Judgment Action
On October 10, 2012, the SELC, on behalf of the same environmental groups that were permitted to challenge the consent decrees discussed above, filed a petition with the North Carolina Environmental Management Commission (EMC) asking for a declaratory ruling seeking to clarify the application of the state’s groundwater protection rules to coal ash basins. The petition sought to change the interpretation of regulations that permitted DENR to assess the extent, cause and significance of any groundwater contamination before ordering action to eliminate the source of contamination, among other issues. Duke Energy Carolinas and Duke Energy Progress were both permitted to intervene in the matter. On December 3, 2012, the EMC affirmed this interpretation of the regulations.
On March 6, 2014, the North Carolina State Court judge overturned the ruling of the EMC holding that in the case of groundwater contamination, DENR was required to issue an order to immediately eliminate the source of the contamination before an assessment of the nature, significance and extent of the contamination or the continuing damage to the groundwater was conducted. Duke Energy Carolinas, Duke Energy Progress and the EMC appealed the ruling in April 2014. On May 16, 2014, the North Carolina Court of Appeals denied a petition to stay the case during the appeal. On October 10, 2014, the parties were notified the case has been transferred to the North Carolina Supreme Court.NCSC. Oral argument was held on March 16, 2015.
Federal Citizens Suits
There are currently five cases filed in various North Carolina federal courts contending that the DENR state enforcement actions discussed above do not adequately address the issues raised in the notices of intent to sue related to the Riverbend, Sutton, Cape Fear, H.F. Lee and Buck plants.
On June 11, 2013, Catawba Riverkeeper Foundation, Inc. (Catawba Riverkeeper) filed a separate action in the United States Court for the Western District of North Carolina. The lawsuit contends the state enforcement action discussed above does not adequately address issues raised in Catawba Riverkeeper’s notice of intent to sue relating to the Riverbend plant. On April 11, 2014, the Court denied Catawba Riverkeeper’s objections to the Magistrate Judge’s recommendation that plaintiff’s case be dismissed as well as Duke Energy Carolinas’ motion to dismiss. The Court allowed limited discovery, after which Duke Energy Carolinas may file any renewed motions to dismiss.
On September 12, 2013, Cape Fear River Watch, Inc., Sierra Club and Waterkeeper Alliance filed a citizen suit in the Federal District Court for the Eastern District of North Carolina. The lawsuit alleges unpermitted discharges to surface water and groundwater violations at the Sutton plant. On June 9, 2014, the court granted Duke Energy Progress' request to dismiss the groundwater claims but rejected its request to dismiss the surface water claims. In response to a motion filed by the SELC, on August 1, 2014, the court modified the original June 9thorder to dismiss only the plaintiff's federal law claim based on hydrologic connections at Sutton Lake. The claims related to the alleged state court violations of the permits are back in the case.
On September 3, 2014, three cases were filed by various environmental groups: (i) a citizen suit in the United States Court for the Middle District of North Carolina alleging unpermitted discharges to surface water and groundwater violations at the Cape Fear plant; (ii) a citizen suit in the United States Court for the Eastern District of North Carolina alleging unpermitted discharges to surface water and groundwater violations at the H.F. Lee plant; and (iii) a citizen suit in the United States Court for the Middle District of North Carolina alleging unpermitted discharges to surface water and groundwater violations at the Buck plant. Motions to Stay the proceedings were filed in each of the three cases.
It is not possible to predict whether Duke Energy Carolinas or Duke Energy Progress will incur any liability or to estimate the damages, if any, they might incur in connection with these matters.
Dan RiverNorth Carolina Ash Basin Grand Jury Investigation
As a result of the Dan River ash basin water release discussed above, DENR issued a Notice of Violation and Recommendation of Assessment of Civil Penalties with respect to this matter on February 28, 2014, which the company responded to on March 13, 2014. Duke Energy and certain Duke Energy employees have received subpoenas issued by the United States Attorney for the Eastern District of North Carolina in connection with a criminal investigation related to the release and all fourteen14 of the North Carolina facilities with ash basins and the nature of Duke Energy's contacts with DENR with respect to those facilities. This is a multidistrict investigation that also involves state law enforcement authorities.

It is not possible
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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 predict whetherCondensed Consolidated Financial Statements – (Continued)
(Unaudited)

On February 20, 2015, Duke Energy Carolinas, or Duke Energy Progress will incur any liability or to estimate the damages, if any, they might incurand Duke Energy Business Services LLC (DEBS), a wholly owned subsidiary of Duke Energy, each entered into Plea Agreements in connection with the investigation initiated by the United States Department of Justice Environmental Crimes Section and the United States Attorneys for the Eastern District of North Carolina, the Middle District of North Carolina and the Western District of North Carolina (collectively, USDOJ). The Plea Agreements are subject to the approval of the United States District Court for the Eastern District of North Carolina and, if approved, will end the grand jury investigation related to the Dan River ash basin release and the management of coal ash basins at 14 plants in North Carolina with coal ash basins, as discussed above. A hearing on the Plea Agreements is scheduled for May 14, 2015.
Under the Plea Agreements, the USDOJ charged DEBS and Duke Energy Progress with four misdemeanor CWA violations related to violations at Duke Energy Progress’ H.F. Lee Steam Electric Plant, Cape Fear Steam Electric Plant and Asheville Steam Electric Generating Plant. The USDOJ charged Duke Energy Carolinas and DEBS with five misdemeanor CWA violations related to violations at Duke Energy Carolinas’ Dan River Steam Station and Riverbend Steam Station. DEBS, Duke Energy Carolinas and Duke Energy Progress also agreed (i) to a five-year probation period, (ii) to pay a total of approximately $68 million in fines and restitution and $34 million for community service and mitigation (the Payments), (iii) to fund and establish environmental compliance plans subject to the oversight of a court-appointed monitor in addition to certain other conditions set out in the Plea Agreements. Duke Energy Carolinas and Duke Energy Progress also agree to each maintain $250 million under their Master Credit Facility as security to meet their obligations under the Plea Agreements. Payments under the Plea Agreements will be borne by shareholders and are not tax deductible. Duke Energy Corporation has agreed to issue a guarantee of all payments and performance due from DEBS, Duke Energy Carolinas and Duke Energy Progress, including but not limited to payments for fines, restitution, community service, mitigation and the funding of, and obligations under, the environmental compliance plans. As a result of the Plea Agreements, Duke Energy Carolinas and Duke Energy Progress have liabilities of $72 million and $30 million, respectively, within Accounts payable on the Condensed Consolidated Balance Sheets.
The Plea Agreements do not cover pending civil claims related to the Dan River coal ash release and operations at other North Carolina coal plants. Duke Energy Corporation will continue to cooperate with government agencies and defend against remaining civil litigation associated with these matters.
Duke Energy Carolinas
New Source Review
In 1999-2000, the U.S. Department of Justice (DOJ) on behalf of the EPA filed a number of complaints and notices of violation against multiple utilities, including Duke Energy Carolinas, for alleged violations of the New Source Review (NSR) provisions of the Clean Air Act (CAA). The government alleges the utilities violated the CAA when undertaking certain maintenance and repair projects at certain coal plants without (i) obtaining NSR permits and (ii) installing the best available emission controls for sulfur dioxide, nitrogen oxide and particulate matter. The complaints seek the installation of pollution control technology on generating units that allegedly violated the CAA, and unspecified civil penalties in amounts of up to $37,500 per day for each violation. Duke Energy Carolinas asserts there were no CAA violations because the applicable regulations do not require NSR permitting in cases where the projects undertaken are “routine” or otherwise do not result in a net increase in emissions.

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DUKE ENERGY PROGRESS, INC. – DUKE ENERGY FLORIDA, INC. – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


In 2000, the government sued Duke Energy Carolinas in the U.S. District Court in Greensboro, North Carolina, claiming NSR violations for 29 projects performed at 25 of Duke Energy Carolinas’ coal-fired units. Duke Energy Carolinas asserts the projects were routine and not projected to increase emissions. The parties subsequently filed a stipulation agreeing to dismiss with prejudice all but 13 claims at 13 generating units, 11 of which have since been retired. The parties filed opposing motions for summary judgment on the remaining claims. The Court substantially denied both motions for summary judgment. A Duke Energy request for leave to file another motion for summary judgment on alternative grounds, including expiration of the applicable statute of limitations, was denied. On October 24, 2014, Duke Energy Carolinas filed a motion to certify an appeal of the statute of limitations issue to the U.S. Court of Appeals for the Fourth Circuit. That motion is pending. No trialTrial date has been set.set for October 2015. It is not possible to predict whether Duke Energy Carolinas will incur any liability or to estimate the damages, if any, it might incur in connection with this matter. Ultimate resolution of these matters could have a material effect on the results of operations, cash flows or financial position of Duke Energy Carolinas. However, the appropriate regulatory recovery will be pursued for costs incurred in connection with such resolution.
Asbestos-related Injuries and Damages Claims
Duke Energy Carolinas has experienced numerous claims for indemnification and medical cost reimbursement related to asbestos exposure. These claims relate to damages for bodily injuries alleged to have arisen from exposure to or use of asbestos in connection with construction and maintenance activities conducted on its electric generation plants prior to 1985. As of September 30, 2014,March 31, 2015, there were 61121 asserted claims for non-malignant cases with the cumulative relief sought of up to $13$26 million, and 2332 asserted claims for malignant cases with the cumulative relief sought of up to $7$10 million. Based on Duke Energy Carolinas’ experience, it is expected that the ultimate resolution of most of these claims likely will be less than the amount claimed.
Duke Energy Carolinas has recognized asbestos-related reserves of $591$570 million at September 30, 2014March 31, 2015 and $616$575 million at December 31, 2013.2014. These reserves are classified in Other within Deferred Credits and Other Liabilities and Other within Current Liabilities on the Condensed Consolidated Balance Sheets. These reserves are based upon the minimum amount of the range of loss for current and future asbestos claims through 2033, are recorded on an undiscounted basis and incorporate anticipated inflation. In light of the uncertainties inherent in a longer-term forecast, management does not believe they can reasonably estimate the indemnity and medical costs that might be incurred after 2033 related to such potential claims. It is possible Duke Energy Carolinas may incur asbestos liabilities in excess of the recorded reserves.
Duke Energy Carolinas has third-party insurance to cover certain losses related to asbestos-related injuries and damages above an aggregate self-insured retention of $476 million. Duke Energy Carolinas’ cumulative payments began to exceed the self-insurance retention in 2008. Future payments up to the policy limit will be reimbursed by the third-party insurance carrier. The insurance policy limit for potential future insurance recoveries indemnification and medical cost claim payments is $864 million in excess of the self-insured retention. Receivables for insurance recoveries were $616$617 million at September 30, 2014,March 31, 2015, and $649$616 million at December 31, 2013.2014. These amounts are classified in Other within Investments and Other Assets and Receivables on the Condensed Consolidated Balance Sheets. Duke Energy Carolinas is not aware of any uncertainties regarding the legal sufficiency of insurance claims. Duke Energy Carolinas believes the insurance recovery asset is probable of recovery as the insurance carrier continues to have a strong financial strength rating.
Progress Energy
Synthetic Fuels Matters
Progress Energy and a number of its subsidiaries and affiliates are defendants in lawsuits arising out of a 1999 Asset Purchase Agreement. Parties to the Asset Purchase Agreement include U.S. Global, LLC (Global) and affiliates of Progress Energy.
In a case filed in the Circuit Court for Broward County, Florida, in March 2003 (the Florida Global Case), Global requested an unspecified amount of compensatory damages, as well as declaratory relief. In November 2009, the court ruled in favor of Global. In December 2009, Progress Energy made a $154 million payment, which represented payment of the total judgment, including prejudgment interest, and a required premium equivalent to two years of interest, to the Broward County Clerk of Court bond account. Progress Energy continued to accrue interest related to this judgment.
On October 3, 2012, the Florida Fourth District Court of Appeals reversed the lower court ruling. The court held that Global was entitled to approximately $90 million of the amount paid into the registry of the court. Progress Energy was entitled to a refund of the remainder of the funds. Progress Energy received cash and recorded a $63 million pretax gain for the refund in December 2012. The gain was recorded in Income from Discontinued Operations, net of tax in the Condensed Consolidated Statements of Operations and Comprehensive Income.
On May 9, 2013, Global filed a Seventh Amended Complaint asserting a single count for breach of the Asset Purchase Agreement and seeking specific performance. The parties reached a settlement in this matter in May 2014, and the case has been dismissed. The amount of the settlement did not have a material effect on the results of operations, cash flows or financial position of Progress Energy. As a result of the settlement of the Florida Global Case, a second suit filed in the Superior Court for Wake County, North Carolina, Progress Synfuel Holdings, Inc. et al. v. U.S. Global, LLC, has been dismissed.
Duke Energy Progress and Duke Energy Florida
Spent Nuclear Fuel Matters
On December 12, 2011, Duke Energy Progress and Duke Energy Florida sued the United States in the U.S. Court of Federal Claims. The lawsuit claims the Department of Energy breached a contract in failing to accept spent nuclear fuel under the Nuclear Waste Policy Act of 1982 and asserts damages for the cost of on-site storage. Duke Energy Progress and Duke Energy Florida assert damages for the period January 1, 2006 through December 31, 2010. Claims for all periods prior to 2006 have been resolved. On March 24, 2014, the U.S. Court of Federal Claims issued a judgment in favor of Duke Energy Progress and Duke Energy Florida on this matter, awarding amounts of $83 million and $21 million, respectively. The majority of the awards were recorded as a reduction to capital costs associated with construction of on-site storage facilities. Duke Energy Progress and Duke Energy Florida received payment of the award in September 2014. On October 16, 2014, Duke Energy Progress and Duke Energy Florida filed a new action for costs incurred from 2011 through 2013.

5351


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


Duke Energy Florida
Westinghouse Contract Litigation
On March 28, 2014, Duke Energy Florida filed a lawsuit against Westinghouse in the U.S. District Court for the Western District of North Carolina. The lawsuit seeks recovery of $54 million in milestone payments in excess of work performed under the terminated EPCengineering, procurement and construction agreement (EPC) for Levy as well as a determination by the court of the amounts due to Westinghouse as a result of the termination of the EPC.
On March 31, 2014, Westinghouse filed a lawsuit against Duke Energy Florida in U.S. District Court for the Western District of Pennsylvania. The Pennsylvania lawsuit alleged damages under the EPC in excess of $510 million for engineering and design work, costs to end supplier contracts and an alleged termination fee.
On June 9, 2014, the judge in the North Carolina case ruled that the litigation will proceed in the Western District of North Carolina. In November 2014, Westinghouse filed a Motion for Partial Judgment on the pleadings, which was denied on March 30, 2015. Trial is set for February 2016. It is not possible to predict the outcome of the litigation and whether Duke Energy Florida will incur any liability for terminating the EPC or to estimate the damages, if any, it might incur in connection with these matters. Ultimate resolution of these matters could have a material effect on the results of operations, financial position or cash flows of Duke Energy Florida. However, appropriate regulatory recovery will be pursued for the retail portion of any costs incurred in connection with such resolution.
Duke Energy Ohio
Antitrust Lawsuit
In January 2008, four plaintiffs, including individual, industrial and nonprofit customers, filed a lawsuit against Duke Energy Ohio in federal court in the Southern District of Ohio. Plaintiffs alleged Duke Energy Ohio conspired to provide inequitable and unfair price advantages for certain large business consumers by entering into non-public option agreements in exchange for their withdrawal of challenges to Duke Energy Ohio’s Rate Stabilization Plan (RSP) implemented in early 2005. In March 2014, a federal judge certified this matter as a class action. Plaintiffs allege claims for antitrust violations under the federal Robinson Patman Act as well as fraud and conspiracy allegations under the federal Racketeer Influenced and Corrupt Organizations statute and the Ohio Corrupt Practices Act which could exceed $500 million. Plaintiffs also claim to be entitled to treble damages.
A March 31, 2015 mediation was unsuccessful. Duke Energy Ohio's motion for summary judgment is pending. Trial has been set to begin on July 27, 2015. It is not possible to predict whether Duke Energy Ohio will incur any liability or to estimate the damages, whichif any, that may be incurred in connection with this lawsuit.matter. Ultimate resolution of this matter could have a material effect on the results of operations, cash flows or financial position of Duke Energy Ohio.
Any liability related to the lawsuit attributable to the Disposal Group willwas not be transferred to Dynegy upon closingthe sale of the disposal ofDisposal Group. See Note 2 for further discussion on the Midwest generation business.Generation Exit.
Duke Energy Indiana
Edwardsport IGCC
On December 11, 2012, Duke Energy Indiana filed an arbitration action against General Electric Company and Bechtel Corporation in connection with their work at the Edwardsport IGCC facility. Duke Energy Indiana is seeking damages equaling some or all of the additional costs incurred in the construction of the project not less than $560 million.recovered at the IURC. The arbitration began on October 20, 2014hearing concluded in December 2014. Post-hearing briefs have been submitted and a ruling is scheduled to continue into January 2015.pending. Duke Energy Indiana cannot predict the outcome of this matter.
Other Litigation and Legal Proceedings
The Duke Energy Registrants are involved in other legal, tax and regulatory proceedings arising in the ordinary course of business, some of which involve significant amounts. The Duke Energy Registrants believe the final disposition of these proceedings will not have a material effect on their results of operations, cash flows or financial position.

52


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)

The table below presents recorded reserves based on management’s best estimate of probable loss for legal matters discussed above, excluding asbestos relatedasbestos-related reserves. Reserves are classified on the Condensed Consolidated Balance Sheets in Other within Deferred Credits and Other Liabilities and Accounts payable and Other within Current Liabilities. The reasonably possible range of loss for all non-asbestos relatednon-asbestos-related matters in excess of recorded reserves is not material.
(in millions)September 30, 2014
 December 31, 2013
March 31, 2015
 December 31, 2014
Reserves for Legal Matters      
Duke Energy$227
 $204
$331
 $323
Duke Energy Carolinas72
 72
Progress Energy70
 78
93
 93
Duke Energy Progress9
 10
37
 37
Duke Energy Florida41
 43
34
 36
Duke Energy Ohio10
 
OTHER COMMITMENTS AND CONTINGENCIES
General
As part of their normal business, the Duke Energy Registrants are party to various financial guarantees, performance guarantees and other contractual commitments to extend guarantees of credit and other assistance to various subsidiaries, investees and other third parties. These guarantees involve elements of performance and credit risk, which are not fully recognized on the Condensed Consolidated Balance Sheets and have unlimited maximum potential payments. However, the Duke Energy Registrants do not believe these guarantees will have a material effect on their results of operations, cash flows or financial position.
In addition, the Duke Energy Registrants enter into various fixed-price, non-cancelable commitments to purchase or sell power, take-or-pay arrangements, transportation, or throughput agreements and other contracts that may or may not be recognized on their respective Condensed Consolidated Balance Sheets. Some of these arrangements may be recognized at fair value on their respective Condensed Consolidated Balance Sheets if such contracts meet the definition of a derivative and the normal purchase/normal sale (NPNS) exception does not apply. In most cases, the Duke Energy Registrants’ purchase obligation contracts contain provisions for price adjustments, minimum purchase levels and other financial commitments.
6. DEBT AND CREDIT FACILITIES
SUMMARY OF SIGNIFICANT DEBT ISSUANCES
The following table summarizes significant debt issuances (in millions).
    Three Months Ended March 31, 2015
Issuance DateMaturity Date Interest Rate
 
Duke
Energy

 
Duke
Energy
Carolinas

First Mortgage Bonds       
March 2015(a)
June 2045
3.750% $500
 $500
Total issuances    $500
 $500
(a)Proceeds will be used to redeem $500 million of first mortgage bonds due October 2015.

CURRENT MATURITIES OF LONG-TERM DEBT
The following table shows the significant components of Current maturities of long-term debt on the Condensed Consolidated Balance Sheets. The Duke Energy Registrants currently anticipate satisfying these obligations with cash on hand and proceeds from additional borrowings.

5453


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


6. DEBT AND CREDIT FACILITIES
SUMMARY OF SIGNIFICANT DEBT ISSUANCES
The following table summarizes significant debt issuances (in millions).
     Nine Months Ended September 30, 2014
Issuance DateMaturity Date Interest Rate
 Duke Energy (Parent)
 Duke Energy Progress
 Duke Energy Florida
 Duke Energy
Unsecured Debt           
April 2014(a)
April 2024
3.750% $600
 $
 $
 $600
April 2014(a)
April 2017
0.612% 400
 
 
 400
June 2014(b)
May 2019
11.870%






108
June 2014(b)
May 2021
13.680%






110
Secured Debt


        
March 2014(c)
March 2017
0.854% 
 
 225
 225
July 2014(d)
July 2036
5.340%






129
First Mortgage Bonds


        
March 2014(e)
March 2044
4.375% 
 400
 
 400
March 2014(e)
March 2017
0.433% 
 250
 
 250
Total issuances    $1,000
 $650
 $225
 $2,222
(in millions)Maturity Date Interest Rate
 March 31, 2015
Unsecured Debt     
Duke Energy (Parent)April 2015 3.350% $450
Progress Energy (Parent)January 2016 5.625% 300
First Mortgage Bonds     
Duke Energy ProgressApril 2015 5.150% 300
Duke Energy CarolinasOctober 2015 5.300% 500
Duke Energy FloridaNovember 2015 0.650% 250
Duke Energy FloridaDecember 2015 5.100% 300
Duke Energy ProgressDecember 2015 5.250% 400
Other    300
Current maturities of long-term debt    $2,800
(a)Proceeds were used to redeem $402 million of tax-exempt bonds at Duke Energy Ohio, the repayment of outstanding commercial paper and for general corporate purposes. See Note 9 for additional information related to the redemption of Duke Energy Ohio's tax-exempt bonds.
(b)Proceeds were used to repay $196 million of debt for International Energy and for general corporate purposes.
(c)Relates to the securitization of accounts receivable at a subsidiary of Duke Energy Florida. Proceeds were used to repay short-term borrowings under the intercompany money pool borrowing arrangement and for general corporate purposes. See Note 13 for further details.
(d)Proceeds were used to fund a portion of Duke Energy's prior investment in the existing Wind Star renewables portfolio.
(e)Proceeds were used to repay short-term borrowings under the intercompany money pool borrowing arrangement and for general corporate purposes.
CURRENT MATURITIES OF LONG-TERM DEBT
The following table shows the significant components of Current maturities of long-term debt on the Condensed Consolidated Balance Sheets. The Duke Energy Registrants currently anticipate satisfying these obligations with cash on hand and proceeds from additional borrowings.
(in millions)Maturity Date Interest Rate
 September 30, 2014
Unsecured Debt     
Duke Energy (Parent)April 2015 3.350% $450
First Mortgage Bonds     
Duke Energy OhioMarch 2015 0.373% 150
Duke Energy ProgressApril 2015 5.150% 300
Other    256
Current maturities of long-term debt    $1,156

55

PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


MASTER CREDIT FACILITY
Duke Energy has a Master Credit Facility with a capacity of $6$7.5 billion through December 2018.January 2020. The SubsidiaryDuke Energy Registrants, excluding Progress Energy each(Parent), have borrowing capacity under the Master Credit Facility up to a specified sublimitssublimit for each borrower. Duke Energy has the unilateral ability at any time to increase or decrease the borrowing sublimits of each borrower, subject to a maximum sublimit for each borrower. The amount available under the Master Credit Facility has been reduced to backstop issuances of commercial paper, certain letters of credit and variable-rate demand tax-exempt bonds that may be put to the Duke Energy Registrants at the option of the holder. The table below includes the current borrowing sublimits and available capacity under the Master Credit Facility.
September 30, 2014March 31, 2015
(in millions)Duke Energy
 Duke Energy (Parent)
 Duke Energy Carolinas
 Duke Energy Progress
 Duke Energy Florida
 Duke Energy Ohio
 Duke Energy Indiana
Duke Energy
 Duke Energy (Parent)
 Duke Energy Carolinas
 Duke Energy Progress
 Duke Energy Florida
 Duke Energy Ohio
 Duke Energy Indiana
Facility size(a)
$6,000
 $2,250
 $1,000
 $750
 $650
 $650
 $700
$7,500
 $3,200
 $1,200
 $1,000
 $900
 $600
 $600
Reduction to backstop issuances                          
Commercial paper(b)
(1,278) (784) (300) (27) 
 (4) (163)(3,256) (2,764) (300) 
 (17) (25) (150)
Outstanding letters of credit(64) (56) (4) (2) (1) 
 (1)(66) (60) (4) (1) (1) 
 
Tax-exempt bonds(116) 
 (35) 
 
 
 (81)(116) 
 (35) 
 
 
 (81)
Available capacity$4,542
 $1,410
 $661
 $721
 $649
 $646
 $455
$4,062
 $376
 $861
 $999
 $882
 $575
 $369
(a)Represents the sublimit of each borrower.
(b)Duke Energy issued $450$475 million of commercial paper and loaned the proceeds through the money pool to Duke Energy Carolinas, Duke Energy Ohio and Duke Energy Indiana. The balances are classified withinas Long-Term Debt Payable to Affiliated Companies in Duke Energy Carolinas' and Duke Energy Indiana’sthe Condensed Consolidated Balance Sheets.
7. ASSET RETIREMENT OBLIGATIONS
ASH BASINS
AsIn April 2015, Duke Energy paid down its outstanding commercial paper by approximately $1.3 billion using a resultportion of the Coal Ash Actproceeds from the sale of the nonregulated Midwest generation business. See Note 2 for additional information.
On February 20, 2015, Duke Energy Carolinas, Duke Energy Progress and DEBS, a wholly owned subsidiary of Duke Energy, each entered into Plea Agreements in connection with the agreement with SCDHEC discussed in Note 5,investigation initiated by the USDOJ. Duke Energy Carolinas and Duke Energy Progress recorded asset retirement obligations (ARO) at September 30, 2014 of $2,026 million and $1,406 million, respectively, relatedare required to closure of ash basins in North Carolina and South Carolina. The amounts recorded assume ash will retain a non-hazardous designation by the EPA.
The ARO amount is based upon estimated ash basin closure costs for each of Duke Energy's 32 ash basins located at 14 plants in North Carolina and an ash basin at a plant in South Carolina. The amount recorded represents the discounted cash flows for estimated closure costs of these ash basins based upon probability weightings of the potential closure methods as evaluated on a site by site basis. Actual costs to be incurred will be dependent upon factors that vary from site to site. The most significant factors are the method and timeframe of closure at the individual sites. Closure methods considered include removing the water from the basins and capping the ash with a synthetic barrier, excavating and relocating the ash to a lined structural fill or lined landfill, or recycling the ash for concrete or some other beneficial use. The ultimate method and timetable for closure will be in compliance with future standards set by the Coal Ash Management Commission established by the Coal Ash Act. The ARO amount will be adjusted as additional information is gained from the Coal Ash Management Commission on acceptable compliance approaches which may change management assumptions.
Asset retirement costs associated with the asset retirement obligations for operating plants and retired plants have been included in Net property, plant and equipment, and Regulatory assets, respectively, on the Condensed Consolidated Balance Sheets. As of September 30, 2014, $1,559 million and $610 million were recorded in Net property, plant and equipment for Duke Energy Carolinas and Duke Energy Progress, respectively, and $467 million and $763 million were recorded in Regulatory assets for Duke Energy Carolinas and Duke Energy Progress, respectively. The asset retirement costs recorded for Duke Energy Progress are net of $33maintain $250 million of Regulatory liabilities relatedavailable capacity under the Master Credit Facility as security to cost of removal. Cost recoverymeet their obligations under the Plea Agreements, in addition to certain other conditions. The Plea Agreements are subject to court approval. See Note 5 for these expenditures is believed to be probable and will be pursued through the normal ratemaking process with the NCUC, PSCSC, and FERC.
The following table presents changes in the liability associated with asset retirement obligations for Duke Energy and the Subsidiary Registrants impacted by the Coal Ash Act and the agreement with SCDHEC.
(in millions)Duke Energy
 Duke Energy Carolinas
 Progress Energy
 Duke Energy Progress
Balance at December 31, 2013(a)(b)
$4,958
 $1,594
 $2,570
 $1,737
Accretion expense(c)
164
 71
 91
 63
Liabilities settled(56) 
 (52) 
Liabilities incurred in the current year(d)
3,433
 2,026
 1,406
 1,406
Balance at September 30, 2014$8,499
 $3,691
 $4,015
 $3,206
further details.

5654


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


(a)The balance as of December 31, 2013 primarily relates to decommissioning nuclear power facilities, asbestos removal and closure of landfills at fossil generation facilities.
(b)The balance at December 31, 2013 includes $8 million reported in Other current liabilities on the Condensed Consolidated Balance Sheets at Duke Energy, Progress Energy and Duke Energy Progress.
(c)Substantially all accretion expense for the nine months ended September 30, 2014 relates to Duke Energy's regulated electric operations from previously established asset retirement obligations and has been deferred in accordance with regulatory accounting treatment.
(d)Amounts relate to asset obligations recorded in the third quarter of 2014 as a result of the Coal Ash Act and an agreement with the SCDHEC related to the W.S Lee Steam Station.

7. GOODWILL AND INTANGIBLE ASSETS

8. GOODWILL
The following tables present goodwill by reportable operating segment for Duke Energy and Duke Energy Ohio.
Duke Energy
(in millions)Regulated Utilities
 International Energy
 Commercial Power
 Total
Regulated Utilities
 International Energy
 Commercial Power
 Total
Balance at December 31, 2013       
Balance at December 31, 2014       
Goodwill$15,950
 $326
 $935
 $17,211
$15,950
 $307
 $935
 $17,192
Accumulated impairment charges
 
 (871) (871)
 
 (871) (871)
Balance at December 31, 2013, as adjusted for accumulated impairment charges15,950
 326
 64
 16,340
Balance at December 31, 2014, as adjusted for accumulated impairment charges15,950
 307
 64
 16,321
Foreign exchange and other changes
 (9) 
 (9)
 (16) 
 (16)
Balance at September 30, 2014       
Acquisitions
 
 24
 24
Balance at March 31, 2015       
Goodwill15,950
 317
 935
 17,202
15,950
 291
 959
 17,200
Accumulated impairment charges
 
 (871) (871)
 
 (871) (871)
Balance at September 30, 2014, as adjusted for accumulated impairment charges$15,950
 $317
 $64
 $16,331
Balance at March 31, 2015, as adjusted for accumulated impairment charges$15,950
 $291
 $88
 $16,329
Duke Energy Ohio
(in millions)Regulated Utilities
 Commercial Power
 Total
Regulated Utilities
 Commercial Power
 Total
Balance at December 31, 2013     
Balance at December 31, 2014     
Goodwill$1,136
 $1,188
 $2,324
$1,136
 $1,188
 $2,324
Accumulated impairment charges(216) (1,188) (1,404)(216) (1,188) (1,404)
Balance at December 31, 2013, as adjusted for accumulated impairment charges920
 
 920
Balance at September 30, 2014     
Balance at December 31, 2014, as adjusted for accumulated impairment charges920
 
 920
Balance at March 31, 2015     
Goodwill1,136
 1,188
 2,324
1,136
 1,188
 2,324
Accumulated impairment charges(216) (1,188) (1,404)(216) (1,188) (1,404)
Balance at September 30, 2014, as adjusted for accumulated impairment charges$920
 $
 $920
Balance at March 31, 2015, as adjusted for accumulated impairment charges$920
 $
 $920
Progress Energy
Progress Energy's Goodwill is included in the Regulated Utilities operating segment and there are no accumulated impairment charges.
Impairment TestingINTANGIBLE ASSETS
Duke Energy,During 2014, Duke Energy Ohio and Progress Energy are requiredreduced the carrying amount of OVEC to perform an annual goodwill impairment test aszero. A charge of the same date each year and, accordingly, performs its annual impairment testing of goodwill as of August 31.$94 million is recorded in Impairment charges on Duke Energy Duke Energy Ohio and Progress Energy update their test between annual tests if events or circumstances occur that would more likely than not reduce the fair valueOhio's Condensed Consolidated Statement of a reporting unit below its carrying value. As the fair value of Duke Energy, Duke Energy Ohio and Progress Energy’s reporting units exceeded their respective carrying values at the date of the annual impairment analysis, no impairment charges were recorded in the third quarter of 2014.

Operations. See Note 12 for additional information.

5755


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


9.8. 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 Condensed 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 Condensed Consolidated Statements of Operations and Comprehensive Income are presented in the following table.
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended March 31,
(in millions)2014
 2013
 2014
 2013
2015
 2014
Duke Energy Carolinas          
Corporate governance and shared service expenses(a)
$199
 $236
 $638
 $714
$219
 $222
Indemnification coverages(b)
5
 5
 16
 16
6
 5
Joint Dispatch Agreement (JDA) revenue(c)
13
 24
 125
 101
26
 97
Joint Dispatch Agreement (JDA) expense(c)
36
 39
 127
 71
57
 51
Progress Energy          
Corporate governance and shared services provided by Duke Energy(a)
$182
 $54
 $560
 $327
$167
 $178
Corporate governance and shared services provided to Duke Energy(d)

 24
 
 74
Indemnification coverages(b)
8
 9
 25
 26
10
 8
JDA revenue(c)
36
 39
 127
 71
57
 51
JDA expense(c)
13
 24
 125
 101
26
 97
Duke Energy Progress          
Corporate governance and shared service expenses(a)
$91
 $33
 $291
 $195
$101
 $96
Indemnification coverages(b)
4
 5
 13
 15
4
 4
JDA revenue(c)
36
 39
 127
 71
57
 51
JDA expense(c)
13
 24
 125
 101
26
 97
Duke Energy Florida          
Corporate governance and shared service expenses(a)
$91
 $20
 $269
 $131
$66
 $81
Indemnification coverages(b)
4
 4
 12
 11
6
 4
Duke Energy Ohio          
Corporate governance and shared service expenses(a)
$83
 $89
 $242
 $261
$85
 $77
Indemnification coverages(b)
3
 3
 10
 11
3
 3
Duke Energy Indiana          
Corporate governance and shared service expenses(a)
$94
 $113
 $293
 $313
$89
 $105
Indemnification coverages(b)
3
 5
 8
 10
2
 3
(a)The Subsidiary Registrants are charged their proportionate share of corporate governance and other shared services costs, primarily related to human resources, employee benefits, legal and accounting fees, as well as other third-party costs. These amounts are recorded in Operation, maintenance and other on the Condensed Consolidated Statements of Operations and Comprehensive Income.
(b)The Subsidiary Registrants incur expenses related to certain indemnification coverages through Bison, Duke Energy’s wholly owned captive insurance subsidiary. These expenses are recorded in Operation, maintenance and other on the Condensed 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 Condensed 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 Condensed Consolidated Statements of Operations and Comprehensive Income.
(d)In 2013, Progress Energy Service Company (PESC), a consolidated subsidiary of Progress Energy, charged a proportionate share of corporate governance and other costs to consolidated affiliates of Duke Energy. Corporate governance and other shared costs were primarily related to human resources, employee benefits, 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 Condensed 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 Condensed Consolidated Statements of Changes in Common Stockholder's Equity during the nine months ended September 30, 2014.

58

PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


In addition to the amounts presented above, the Subsidiary Registrants record the impact on net income of other affiliate transactions, including rental of office space, participation in a money pool arrangement, other operational transactions and their proportionate share of certain charged expenses. See Note 6 to the Consolidated Financial Statements in the Annual Report on Form 10-K for more information regarding money pool. The net impact of these transactions was not material for the three and nine months ended September 30,March 31, 2015 and 2014 and 2013 for the Subsidiary Registrants.
See Note 1312 for information relative to sale of receivables to an affiliate consolidated by Duke Energy.
Because it is not a rated entity, Duke Energy Commercial Asset Management Inc. (DECAM) receives itswas a nonregulated, indirect subsidiary of Duke Energy Ohio that owned generating plants included in the Disposal Group discussed in Note 2. DECAM's business activities included 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 entered were 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 Income (Loss) From Discontinued Operations, net of tax in Duke Energy Ohio’s Condensed Consolidated Statements of Operations and Comprehensive Income. These amounts totaled net expense of $3 million and $54 million for the three months ended March 31, 2015 and 2014, respectively.

56


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)

DECAM, not a credit rated entity, received credit support from Duke Energy or its nonregulated subsidiaries and not from the regulated utility operations of Duke Energy Ohio. DECAM meetsmet its funding needs through an intercompany loan agreement fromwith a subsidiary of Duke Energy. DECAM also hashad the ability to loan money to the subsidiary of Duke Energy. DECAM had an outstanding intercompany loan payable of $550$294 million and $43$459 million, respectively, as of September 30, 2014March 31, 2015 and December 31, 2013.2014. These amounts are recorded in Notes payable to affiliated companies on Duke Energy Ohio’s Condensed Consolidated Balance Sheets.
As discussed in Note 6, in The intercompany loan payable was repaid on April 2014, Duke Energy issued $1 billion of senior unsecured notes. Proceeds2, 2015 with funds received from the issuances were used in partsale of the Disposal Group. Refer to loan approximately $400 million to DECAM, and such funds were ultimately used to redeem $402 million of tax-exempt bonds at Duke Energy Ohio. This transaction substantially completes the restructuring of Duke Energy Ohio’s capital structure to reflect appropriate debt and equity ratiosNote 2 for its regulated operations. The restructuring was completed in the second quarter of 2014, and resulted in the transfer of all of Duke Energy Ohio’s nonregulated generation assets, excluding Beckjord, out of its regulated public utility subsidiary.further information on this disposition.
10.9. DERIVATIVES AND HEDGING
The Duke Energy Registrants use commodity and interest rate contracts to manage commodity price and interest rate risks. The primary use of energy commodity derivatives is to hedge the generation portfolio against changes in the prices of electricity and natural gas. Interest rate swaps are used to manage interest rate risk associated with borrowings.
All derivative instruments not identified as NPNS are recorded at fair value as assets or liabilities on the Condensed Consolidated Balance Sheets. Cash collateral related to derivative instruments executed under master netting agreement is offset against the collateralized derivatives on the balance sheet.
Changes in the fair value of derivative agreements that either do not qualify for or have not been designated as hedges are reflected in current earnings or as regulatory assets or liabilities.
COMMODITY PRICE RISK
The Duke Energy Registrants are exposed to the impact of changes in the future 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.
Commodity Fair Value and Cash Flow Hedges
At September 30, 2014,March 31, 2015, there were no open commodity derivative instruments designated as hedges.
Undesignated Contracts
Undesignated contracts may include contracts not designated as a hedge, contracts that do not qualify for hedge accounting, derivatives that do not or no longer qualify for the NPNS scope exception, and de-designated hedge contracts. These contracts expire as late as 2018.
Duke Energy Carolinas’ undesignated contracts are primarily associated with forward sales and purchases of electricity. Duke Energy Progress’ and Duke Energy Florida’s undesignated contracts are primarily associated with forward purchases of natural gas. Duke Energy Ohio’s undesignated contracts are primarily associated with forward sales and purchases of electricity, coal, and natural gas. Duke Energy Indiana’s undesignated contracts are primarily associated with forward purchases and sales of electricity and financial transmission rights.

59

PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


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. Amounts disclosed represent the absolute value of notional amounts. 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.
September 30, 2014March 31, 2015
Duke Energy
 Duke Energy Carolinas
 Progress Energy
 Duke Energy Progress
 Duke Energy Florida
 Duke Energy Ohio
 Duke Energy Indiana
Duke Energy
 Duke Energy Carolinas
 Progress Energy
 Duke Energy Progress
 Duke Energy Florida
 Duke Energy Ohio
 Duke Energy Indiana
Electricity (gigawatt-hours)(a)
29,569
 
 
 
 
 25,680
 607
22,810
 
 
 
 
 17,734
 571
Natural gas (millions of decatherms)659
 
 319
 117
 202
 340
 
666
 57
 333
 111
 222
 276
 
December 31, 2013December 31, 2014
Duke Energy
 Duke Energy Carolinas
 Progress Energy
 Duke Energy Progress
 Duke Energy Florida
 Duke Energy Ohio
 Duke Energy Indiana
Duke Energy
 Duke Energy Carolinas
 Progress Energy
 Duke Energy Progress
 Duke Energy Florida
 Duke Energy Ohio
 Duke Energy Indiana
Electricity (gigawatt-hours)(a)
71,466
 1,205
 925
 925
 
 69,362
 203
25,370
 
 
 
 
 19,141
 
Natural gas (millions of decatherms)636
 
 363
 141
 222
 274
 
676
 35
 328
 116
 212
 313
 
(a)Amounts at Duke Energy Ohio include intercompany positions that eliminate at Duke Energy.
INTEREST RATE RISK
The Duke Energy Registrants are exposed to changes in interest rates as a result of their issuance or anticipated issuance of variable-rate and fixed-rate debt and commercial paper. Interest rate risk is managed by limiting variable-rate exposures to a percentage of total debt and by monitoring changes in interest rates. To manage risk associated with changes in interest rates, the Duke Energy Registrants may enter into interest rate swaps, U.S. Treasury lock agreements and other financial contracts. In anticipation of certain fixed-rate debt issuances, a series of forward starting interest rate swaps may be executed to lock in components of current market interest rates. These instruments are later terminated prior to or upon the issuance of the corresponding debt. Pretax gains or losses recognized from inception to termination of the hedges are amortized as a component of interest expense over the life of the debt.
Duke Energy has a combination foreign exchange, pay fixed-receive floating interest rate swap to fix the US dollar equivalent payments on a floating-rate Chilean debt issue.
The following tables show notional amounts for derivatives related to interest rate risk.
 September 30, 2014 December 31, 2013
(in millions)
Duke
Energy

 
Duke
Energy
Ohio

 
Duke
Energy

 
Duke
Energy
Ohio

Cash flow hedges(a)
$764
 $
 $798
 $
Undesignated contracts27
 27
 34
 27
Total notional amount$791
 $27
 $832
 $27
(a)Duke Energy includes amounts related to consolidated Variable Interest Entities (VIEs) of $552 million at September 30, 2014 and $584 million at December 31, 2013.

6057


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


DUKE ENERGYIn January 2015, Duke Energy Progress executed fixed-to-floating rate swaps. The swaps were issued to economically convert $250 million of fixed rate first mortgage bonds due September 15, 2021, to floating rate with an initial rate of approximately 1.75 percent.
The following table shows notional amounts for derivatives related to interest rate risk.
 March 31, 2015 December 31, 2014
(in millions)
Duke
Energy

 Duke Energy Progress
 
Duke
Energy
Florida

 Duke Energy Ohio
 
Duke
Energy

 
Duke
Energy
Florida

 Duke Energy Ohio
Cash flow hedges(a)
$750
 $
 $
 $
 $750
 $
 $
Undesignated contracts527
 250
 250
 27
 277
 250
 27
Total notional amount$1,277
 $250
 $250
 $27
 $1,027
 $250
 $27
(a)Duke Energy includes amounts related to consolidated Variable Interest Entities (VIEs) of $541 million at March 31, 2015 and December 31, 2014, respectively.
LOCATION AND FAIR VALUE OF DERIVATIVE ASSETS AND LIABILITIES RECOGNIZED IN THE CONDENSED CONSOLIDATED BALANCE SHEETS
The following tables show the fair value of derivatives and the line items in the Condensed Consolidated Balance Sheets where they are reported. Although derivatives subject to master netting arrangements are netted on the Condensed Consolidated Balance Sheets, the fair values presented below are shownshow gross and cash collateral on the derivatives has not been netted against the fair values shown.
 September 30, 2014 December 31, 2013
(in millions)Asset
 Liability
 Asset
 Liability
Derivatives Designated as Hedging Instruments       
Commodity contracts       
Current Liabilities: Other$
 $1
 $
 $1
Interest rate contracts       
Investments and Other Assets: Other16
 
 27
 
Current Liabilities: Other
 14
 
 18
Deferred Credits and Other Liabilities: Other
 23
 
 4
Total Derivatives Designated as Hedging Instruments16
 38
 27
 23
Derivatives Not Designated as Hedging Instruments       
Commodity contracts       
Current Assets: Other36
 
 201
 158
Current Assets: Assets Held for Sale2
 2
 
 
Investments and Other Assets: Other9
 
 215
 131
Investments and Other Assets: Assets Held for Sale9
 2
 
 
Current Liabilities: Other4
 123
 13
 153
Current Liabilities: Liabilities Associated with Assets Held for Sale346
 445
 
 
Deferred Credits and Other Liabilities: Other
 37
 5
 166
Deferred Credits and Other Liabilities: Liabilities Associated with Assets Held for Sale148
 260
 
 
Interest rate contracts       
Current Liabilities: Other
 1
 
 1
Deferred Credits and Other Liabilities: Other
 5
 
 4
Total Derivatives Not Designated as Hedging Instruments554
 875
 434
 613
Total Derivatives$570
 $913
 $461
 $636
Derivative Assets March 31, 2015
(in millions) Duke Energy
 Duke Energy Carolinas
 Progress Energy
 Duke Energy Progress
 Duke Energy Florida
 Duke Energy Ohio
 Duke Energy Indiana
Commodity Contracts              
Not Designated as Hedging Instruments              
Current Assets: Other $4
 $
 $
 $
 $
 $
 $3
Current Assets: Assets held for sale 45
 
 
 
 
 78
 
Investments and Other Assets: Assets held for sale 21
 
 
 
 
 48
 
Current Liabilities: Other 1
 
 1
 
 1
 
 
Current Liabilities: Assets held for sale 206
 
 
 
 
 206
 
Deferred Credits and Other Liabilities: Other 2
 
 2
 
 2
 
 
Deferred Credits and Other Liabilities: Assets held for sale 123
 
 
 
 
 123
 
Total Derivative Assets - Commodity Contracts $402

$

$3

$

$3

$455

$3
Interest Rate Contracts              
Designated as Hedging Instruments              
Investments and Other Assets: Other $3
 $
 $
 $
 $
 $
 $
Not Designated as Hedging Instruments              
Current Assets: Other 5
 
 5
 2
 3
 
 
Investments and Other Assets: Other 1
 
 1
 
 1
 
 
Total Derivative Assets - Interest Rate Contracts 9



6

2

4




Total Derivative Assets $411

$

$9

$2

$7

$455

$3

58


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)

Derivative Liabilities March 31, 2015
(in millions) Duke Energy
 Duke Energy Carolinas
 Progress Energy
 Duke Energy Progress
 Duke Energy Florida
 Duke Energy Ohio
 Duke Energy Indiana
Commodity Contracts              
Not Designated as Hedging Instruments              
Current Assets: Assets held for sale $21
 $
 $
 $
 $
 $59
 $
Investments and Other Assets: Assets held for sale 7
 
 
 
 
 23
 
Current Liabilities: Other 308
 19
 289
 100
 189
 
 
Current Liabilities: Assets held for sale 263
 
 
 
 
 249
 
Deferred Credits and Other Liabilities: Other 112
 8
 104
 26
 78
 
 
Deferred Credits and Other Liabilities: Assets held for sale 209
 
 
 
 
 207
 
Total Derivative Liabilities - Commodity Contracts $920
 $27
 $393
 $126
 $267
 $538
 $
Interest Rate Contracts              
Designated as Hedging Instruments              
Current Liabilities: Other $14
 $
 $
 $
 $
 $1
 $
Deferred Credits and Other Liabilities: Other 38
 
 
 
 
 6
 
Not Designated as Hedging Instruments              
Current Liabilities: Other 1
 
 
 
 
 
 
Deferred Credits and Other Liabilities: Other 11
 
 5
 5
 
 
 
Total Derivative Liabilities - Interest Rate Contracts 64
 
 5
 5
 
 7
 
Total Derivative Liabilities $984
 $27
 $398
 $131
 $267
 $545
 $
Derivative Assets December 31, 2014
(in millions) Duke Energy
 Duke Energy Carolinas
 Progress Energy
 Duke Energy Progress
 Duke Energy Florida
 Duke Energy Ohio
 Duke Energy Indiana
Commodity Contracts              
Not Designated as Hedging Instruments              
Current Assets: Other $18
 $
 $
 $
 $
 $1
 $
Current Assets: Assets Held for sale 15
 
 
 
 
 28
 
Investments and Other Assets: Other 3
 
 
 
 
 
 
Investments and Other Assets: Assets held for sale 15
 
 
 
 
 26
 
Current Liabilities: Other 1
 
 
 
 
 
 
Current Liabilities: Assets held for sale 174
 
 
 
 
 175
 
Deferred Credits and Other Liabilities: Other 2
 
 
 
 
 
 
Deferred Credits and Other Liabilities: Assets held for sale 111
 
 
 
 
 111
 
Total Derivative Assets - Commodity Contracts $339
 $
 $
 $
 $
 $341
 $
Interest Rate Contracts              
Designated as Hedging Instruments              
Current Assets: Other $
 $
 $
 $
 $
 $
 $14
Investments and Other Assets: Other 10
 
 
 
 
 
 
Not Designated as Hedging Instruments              
Current Assets: Other 2
 
 2
 
 2
 
 
Total Derivative Assets - Interest Rate Contracts 12
 
 2
 
 2
 
 14
Total Derivative Assets $351
 $
 $2
 $
 $2
 $341
 $14

59


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)

Derivative Liabilities December 31, 2014
(in millions) Duke Energy
 Duke Energy Carolinas
 Progress Energy
 Duke Energy Progress
 Duke Energy Florida
 Duke Energy Ohio
 Duke Energy Indiana
Commodity Contracts              
Designated as Hedging Instruments              
Current Liabilities: Other $
 $
 $1
 $1
 $
 $
 $
Not Designated as Hedging Instruments              
Current Assets: Assets held for sale 
 
 
 
 
 4
 
Investments and Other Assets: Assets held for sale 
 
 
 
 
 4
 
Current Liabilities: Other 307
 14
 288
 108
 180
 
 
Current Liabilities: Assets held for sale 253
 
 
 
 
 252
 
Deferred Credits and Other Liabilities: Other 91
 5
 80
 23
 57
 
 
Deferred Credits and Other Liabilities: Assets held for sale 208
 
 
 
 
 207
 
Total Derivative Liabilities - Commodity Contracts $859
 $19
 $369
 $132
 $237
 $467
 $
Interest Rate Contracts              
Designated as Hedging Instruments              
Current Liabilities: Other $13
 $
 $
 $
 $
 $1
 $
Deferred Credits and Other Liabilities: Other 29
 
 
 
 
 5
 
Not Designated as Hedging Instruments              
Current Liabilities: Other 1
 
 
 
 
 
 
Deferred Credits and Other Liabilities: Other 7
 
 2
 
 2
 
 
Total Derivative Liabilities - Interest Rate Contracts 50
 
 2
 
 2
 6
 
Total Derivative Liabilities $909
 $19
 $371
 $132
 $239
 $473
 $
OFFSETTING ASSETS AND LIABILITIES
The following tables below show the balance sheet location of derivative contracts subject to enforceable master netting agreements and include collateral posted to offset the net position. This disclosure is intended to enable users to evaluate the effect of netting arrangements on financial position. The amounts shown were calculated by counterparty. Accounts receivable or accounts payable may also be available to offset exposures in the event of bankruptcy. These amounts are not included in the tables below.
Derivative Assets
September 30, 2014 December 31, 2013
Derivative Assets March 31, 2015
(in millions)
Current(a)
 
Non-Current(b)
 
Current(e)
 
Non-Current(f)
 Duke Energy
 Duke Energy Carolinas
 Progress Energy
 Duke Energy Progress
 Duke Energy Florida
 Duke Energy Ohio
 Duke Energy Indiana
Current(a)
              
Gross amounts recognized$388
 $175
 $214
 $233
 $261
 $
 $6
 $2
 $4
 $284
 $3
Gross amounts offset(362) (127) (179) (138) (227) 
 (1) 
 (1) (265) 
Net amount subject to master netting26
 48
 35
 95
Net amounts subject to master netting 34
 
 5
 2
 3
 19
 3
Amounts not subject to master netting
 7
 
 14
 
 
 
 
 
 
 
Net amounts recognized on the Condensed Consolidated Balance Sheet$26
 $55
 $35
 $109
 $34
 $
 $5
 $2
 $3
 $19
 $3
Non-Current(b)
              
Gross amounts recognized $150
 $
 $3
 $
 $3
 $171
 $
Gross amounts offset (131) 
 (2) 
 (2) (145) 
Net amounts subject to master netting 19
 
 1
 
 1
 26
 
Amounts not subject to master netting 
 
 
 
 
 
 
Net amounts recognized on the Condensed Consolidated Balance Sheet $19
 $
 $1
 $
 $1
 $26
 $
(a)Amounts for Duke Energy Registrants, except Duke Energy and Duke Energy Ohio, are included in Other within Current Assets on the Condensed Consolidated Balance Sheets. Amounts for Duke Energy and Duke Energy Ohio are included in Other and Assets held for sale within Current Assets on the Condensed Consolidated Balance Sheets.

6160


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


 Derivative Liabilities
 September 30, 2014 December 31, 2013
(in millions)
Current(c)
 
Non-Current(d)
 
Current(g)
 
Non-Current(h)
Gross amounts recognized$583
 $314
 $322
 $299
Gross amounts offset(402) (203) (192) (155)
Net amounts subject to master netting181
 111
 130
 144
Amounts not subject to master netting3
 13
 4
 11
Net amounts recognized on the Condensed Consolidated Balance Sheet$184
 $124
 $134
 $155
(a)Included in Other and Assets Held for Sale within Current Assets on the Condensed Consolidated Balance Sheet.
(b)Included in OtherAmounts for Duke Energy Registrants, except Duke Energy and Assets Held for Sale within Investments and Other Assets on the Condensed Consolidated Balance Sheet.
(c)Included in Other and Liabilities Associated with Assets Held for Sale within Current Liabilities on the Condensed Consolidated Balance Sheet.
(d)Included in Other and Liabilities Associated with Assets Held for Sale within Deferred Credits and Other Liabilities on the Condensed Consolidated Balance Sheet.
(e)Included in Other within Current Assets on the Condensed Consolidated Balance Sheet.
(f)IncludedDuke Energy Ohio, are included in Other within Investments and Other Assets on the Condensed Consolidated Balance Sheet.Sheets. Amounts for Duke Energy and Duke Energy Ohio are included in Other and Assets held for sale within Investments and Other Assets on the Condensed Consolidated Balance Sheets.
Derivative Liabilities March 31, 2015
(in millions) Duke Energy
 Duke Energy Carolinas
 Progress Energy
 Duke Energy Progress
 Duke Energy Florida
 Duke Energy Ohio
 Duke Energy Indiana
Current(c)
              
Gross amounts recognized $607
 $19
 $289
 $100
 $189
 $309
 $
Gross amounts offset (293) 
 (32) (1) (31) (300) 
Net amounts subject to master netting 314
 19
 257
 99
 158
 9
 
Amounts not subject to master netting 
 
 
 
 
 
 
Net amounts recognized on the Condensed Consolidated Balance Sheet $314
 $19
 $257
 $99
 $158
 $9
 $
Non-Current(d)
              
Gross amounts recognized $377
 $8
 $109
 $31
 $78
 $236
 $
Gross amounts offset (216) 
 (14) 
 (14) (218) 
Net amounts subject to master netting 161
 8
 95
 31
 64
 18
 
Amounts not subject to master netting 
 
 
 
 
 
 
Net amounts recognized on the Condensed Consolidated Balance Sheet $161
 $8
 $95
 $31
 $64
 $18
 $
(g)(c)IncludedAmounts for Duke Energy Registrants, except Duke Energy and Duke Energy Ohio, are included in Other within Current Liabilities on the Condensed Consolidated Balance Sheet.Sheets. Amounts for Duke Energy and Duke Energy Ohio are included in Other and Liabilities associated with assets held for sale within Current Liabilities on the Condensed Consolidated Balance Sheets.
(h)(d)IncludedAmounts for Duke Energy Registrants, except Duke Energy and Duke Energy Ohio, are included in Other within Deferred Credits and Other Liabilities on the Condensed Consolidated Balance Sheet.Sheets. Amounts for Duke Energy and Duke Energy Ohio are included in Other and Liabilities associated with assets held for sale within Deferred Credits and Other Liabilities on the Condensed Consolidated Balance Sheets.
The following table shows the gains and losses recognized on cash flow hedges and the line items on the Condensed Consolidated Statements of Operations where such gains and losses are included when reclassified from AOCI. Amounts for interest rate contracts are reclassified to earnings as interest expense over the term of the related debt.
 Three Months Ended September 30, Nine Months Ended September 30,
(in millions)2014
 2013
 2014
 2013
Pretax Gains (Losses) Recorded in AOCI       
Interest rate contracts$(6) $
 $(15) $71
Commodity contracts
 
 
 1
Total Pretax Gains (Losses) Recorded in AOCI$(6) $
 $(15) $72
Location of Pretax Gains (Losses) Reclassified from AOCI into Earnings       
Interest rate contracts       
Interest expense(2) 
 (7) (2)
Derivative Assets December 31, 2014
(in millions) Duke Energy
 Duke Energy Carolinas
 Progress Energy
 Duke Energy Progress
 Duke Energy Florida
 Duke Energy Ohio
 Duke Energy Indiana
Current(a)
              
Gross amounts recognized $210
 $
 $2
 $
 $2
 $204
 $14
Gross amounts offset (153) 
 (2) 
 (2) (179) 
Net amounts subject to master netting 57
 
 
 
 
 25
 14
Amounts not subject to master netting 
 
 
 
 
 
 
Net amounts recognized on the Condensed Consolidated Balance Sheet $57
 $
 $
 $
 $
 $25
 $14
Non-Current(b)
              
Gross amounts recognized $136
 $
 $
 $
 $
 $137
 $
Gross amounts offset (88) 
 
 
 
 (114) 
Net amounts subject to master netting 48
 
 
 
 
 23
 
Amounts not subject to master netting 5
 
 
 
 
 
 
Net amounts recognized on the Condensed Consolidated Balance Sheet $53
 $
 $
 $
 $
 $23
 $
There was no hedge ineffectiveness during the three and nine months ended September 30, 2014 and 2013, and no gains or losses were excluded from the assessment of hedge effectiveness during the same periods.
A $9 million pretax gain is expected to be recognized in earnings during the next 12 months as interest expense.
(a)Amounts for Duke Energy Registrants, except Duke Energy and Duke Energy Ohio, are included in Other within Current Assets on the Condensed Consolidated Balance Sheets. Amounts for Duke Energy and Duke Energy Ohio are included in Other and Assets held for sale within Current Assets on the Condensed Consolidated Balance Sheets.
(b)Amounts for Duke Energy Registrants, except Duke Energy and Duke Energy Ohio, are included in Other within Investments and Other Assets on the Condensed Consolidated Balance Sheets. Amounts for Duke Energy and Duke Energy Ohio are included in Other and Assets held for sale within Investments and Other Assets on the Condensed Consolidated Balance Sheets.

6261


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)

Derivative Liabilities December 31, 2014
(in millions) Duke Energy
 Duke Energy Carolinas
 Progress Energy
 Duke Energy Progress
 Duke Energy Florida
 Duke Energy Ohio
 Duke Energy Indiana
Current(c)
              
Gross amounts recognized $573
 $14
 $289
 $109
 $180
 $257
 $
Gross amounts offset (213) 
 (17) 
 (17) (222) 
Net amounts subject to master netting 360
 14
 272
 109
 163
 35
 
Amounts not subject to master netting 1
 
 
 
 
 
 
Net amounts recognized on the Condensed Consolidated Balance Sheet $361
 $14
 $272
 $109
 $163
 $35
 $
Non-Current(d)
              
Gross amounts recognized $319
 $5
 $82
 $23
 $59
 $216
 $
Gross amounts offset (173) 
 (8) 
 (8) (193) 
Net amounts subject to master netting 146
 5
 74
 23
 51
 23
 
Amounts not subject to master netting 16
 
 
 
 
 
 
Net amounts recognized on the Condensed Consolidated Balance Sheet $162
 $5
 $74
 $23
 $51
 $23
 $
(c)Amounts for Duke Energy Registrants, except Duke Energy and Duke Energy Ohio, are included in Other within Current Liabilities on the Condensed Consolidated Balance Sheets. Amounts for Duke Energy and Duke Energy Ohio are included in Other and Liabilities associated with assets held for sale within Current Liabilities on the Condensed Consolidated Balance Sheets.
(d)Amounts for Duke Energy Registrants, except Duke Energy and Duke Energy Ohio, are included in Other within Deferred Credits and Other Liabilities on the Condensed Consolidated Balance Sheets. Amounts for Duke Energy and Duke Energy Ohio are included in Other and Liabilities associated with assets held for sale within Deferred Credits and Other Liabilities on the Condensed Consolidated Balance Sheets.
GAINS AND LOSSES RECOGNIZED ON CASH FLOW HEDGES
The following tables show the gains and losses recognized on cash flow hedges and the line items on the Condensed Consolidated Statements of Operations or Condensed Consolidated Balance Sheets where such gains and losses are included when reclassified from AOCI. Amounts for interest rate contracts are reclassified to earnings as interest expense over the term of the related debt.
There was no hedge ineffectiveness during the three months ended March 31, 2015 and 2014, and no gains or losses were excluded from the assessment of hedge effectiveness during the same periods.
  Three Months Ended March 31, 2015
(in millions) 
Duke Energy(a)

 Duke Energy Carolinas
 Duke Energy Indiana
Pretax Gains (Losses) Recorded in AOCI      
Interest rate contracts $(11) $
 $
Total Pretax Gains (Losses) Recorded in AOCI (11) 
 
Location of Pretax Gains (Losses) Reclassified from AOCI into Earnings      
Interest rate contracts      
Interest expense (1) (1) 1
Total Pretax Gains (Losses) Reclassified from AOCI into Earnings $(1) $(1) $1
(a)    A $5 million pretax gain is expected to be recognized in earnings during the next 12 months as interest expense.

62


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)

  Three Months Ended March 31, 2014
(in millions) Duke Energy
 Duke Energy Carolinas
 Duke Energy Indiana
Pretax Gains (Losses) Recorded in AOCI      
Interest rate contracts $2
 $
 $
Total Pretax Gains (Losses) Recorded in AOCI 2
 
 
Location of Pretax Gains (Losses) Reclassified from AOCI into Earnings      
Interest rate contracts      
Interest expense (1) 
 
Total Pretax Gains (Losses) Reclassified from AOCI into Earnings $(1) $
 $
GAINS AND LOSSES RECOGNIZED ON UNDESIGNATED CONTRACTS
The following table showstables show the gains and losses during the year recognized on undesignated derivatives and the line items on the Condensed Consolidated Statements of Operations or the Condensed Consolidated Balance Sheets where the pretax gains and losses were reported. Amounts included in Regulatory Assets or Liabilities for commodity contracts are reclassified to earnings to match recovery through the fuel clause. Amounts included in Regulatory Assets or Liabilities for interest rate contracts are reclassified to earnings as interest expense over the term of the related debt. These amounts reclassified to earnings from Regulated Assets or Liabilities for commodity and interest rate contracts are excluded from the following tables.
Three Months Ended September 30, Nine Months Ended September 30, Three Months Ended March 31, 2015
(in millions)2014
 2013
 2014
 2013
 Duke Energy
 Duke Energy Carolinas
 Progress Energy
 Duke Energy Progress
 Duke Energy Florida
 Duke Energy Ohio
 Duke Energy Indiana
Location of Pretax Gains and (Losses) Recognized in Earnings       
Location of Pretax Gains (Losses) Recognized in Earnings              
Commodity contracts                     
Revenue: Regulated electric$
 $3
 $
 $10
 $1
 $
 $
 $
 $
 $
 $1
Revenue: Nonregulated electric, natural gas and other
 (7) 
 (7)
Fuel used in electric generation and purchased power - regulated32
 (68) 18
 (157)
Revenue: Nonregulated electric and other 17
 
 
 
 
 13
 
Fuel used in electric generation and purchased power - nonregulated
 (2) 
 
 37
 
 
 
 
 37
 
Loss from Discontinued Operations(319) 
 (825) (28)
Interest rate contracts                     
Interest expense9
 (4) 
 (13) (1) 
 (1) 
 (1) 
 
Total Pretax Gains (Losses) Recognized in Earnings$(278) $(78) $(807) $(195) $54
 $
 $(1) $
 $(1) $50
 $1
Location of Pretax Gains and (Losses) Recognized as Regulatory Assets or Liabilities       
Location of Pretax (Losses) Gains Recognized as Regulatory Assets or Liabilities              
Commodity contracts                     
Regulatory assets$3
 $(29) $2
 $(34) $(340) $(28) $(314) $(127) $(187) $
 $2
Regulatory liabilities1
 6
 
 10
 (2) 
 
 
 
 2
 (4)
Interest rate contracts                     
Regulatory assets(7) 12
 9
 51
 (5) 
 (4) (5) 1
 (1) 
Regulatory liabilities(12) 
 16
 
 3
 
 3
 2
 1
 
 
Total Pretax Gains (Losses) Recognized as Regulatory Assets or Liabilities$(15) $(11) $27
 $27
 $(344) $(28) $(315) $(130) $(185) $1
 $(2)
DUKE ENERGY CAROLINAS
The fair values of derivative instruments were not material for the periods presented in this quarterly report.
PROGRESS ENERGY
The following table shows the fair value of derivatives and the line items in the Condensed Consolidated Balance Sheets where they are reported. Although derivatives subject to master netting arrangements are netted on the Condensed Consolidated Balance Sheets, the fair values presented below are shown gross and cash collateral on the derivatives has not been netted against the fair values shown.
 September 30, 2014 December 31, 2013
(in millions)Asset
 Liability
 Asset
 Liability
Derivatives Designated as Hedging Instruments       
Commodity contracts       
Current Liabilities: Other$
 $
 $
 $1
Deferred Credits and Other Liabilities: Other
 
 
 4
Total Derivatives Designated as Hedging Instruments
 
 
 5
Derivatives Not Designated as Hedging Instruments       
Commodity contracts       
Current Assets: Other
 
 3
 2
Investments and Other Assets: Other
 
 2
 1
Current Liabilities: Other1
 115
 11
 105
Deferred Credits and Other Liabilities: Other1
 29
 4
 91
Total Derivatives Not Designated as Hedging Instruments2
 144
 20
 199
Total Derivatives$2
 $144
 $20
 $204


63


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


The tables below show the balance sheet location of derivative contracts subject to enforceable master netting agreements and include collateral posted to offset the net position. This disclosure is intended to enable users to evaluate the effect of netting arrangements on financial position. The amounts shown were calculated by counterparty. Accounts receivable or accounts payable may also be available to offset exposures in the event of bankruptcy. These amounts are not included in the tables below.
 Derivative Assets
 September 30, 2014 December 31, 2013
(in millions)
Current(a)

 
Non-Current(b)

 
Current(a)

 
Non-Current(b)

Gross amounts recognized$1
 $1
 $15
 $5
Gross amounts offset(1) (1) (13) (4)
Net amounts recognized on the Condensed Consolidated Balance Sheet$
 $
 $2
 $1
 Derivative Liabilities
 September 30, 2014 December 31, 2013
(in millions)
Current(c)

 
Non-Current(d)
 
Current(c)

 
Non-Current(d)

Gross amounts recognized$115
 $29
 $107
 $93
Gross amounts offset(1) (1) (17) (10)
Net amounts subject to master netting114
 28
 90
 83
Amounts not subject to master netting
 
 
 4
Net amounts recognized on the Condensed Consolidated Balance Sheet$114
 $28
 $90
 $87
(a)Included in Other within Current Assets on the Condensed Consolidated Balance Sheet.
(b)Included in Other within Investments and Other Assets on the Condensed Consolidated Balance Sheet.
(c)Included in Other within Current Liabilities on the Condensed Consolidated Balance Sheet.
(d)Included in Other within Deferred Credits and Other Liabilities on the Condensed Consolidated Balance Sheet.
Gains and losses on cash flow hedges and reclassifications from AOCI were not material for the periods presented in this quarterly report.
The following table shows the gains and losses during the year recognized on undesignated derivatives and the line items on the Condensed Consolidated Statements of Operations and Comprehensive Income or the Condensed Consolidated Balance Sheets where the pretax gains or losses were reported. Amounts included in Regulatory Assets or Liabilities for commodity contracts are reclassified to earnings to match recovery through the fuel clause. Amounts included in Regulatory Assets or Liabilities for interest rate contracts are reclassified to earnings as interest expense over the term of the related debt.
 Three Months Ended September 30, Nine Months Ended September 30,
(in millions)2014
 2013
 2014
 2013
Location of Pretax Gains and (Losses) Recognized in Earnings       
Commodity contracts       
Operating revenues$1
 $3
 $
 $10
Fuel used in electric generation and purchased power32
 (68) 18
 (157)
Interest rate contracts       
Interest expense
 (4) 
 (13)
Total Pretax Gains (Losses) Recognized in Earnings$33
 $(69) $18
 $(160)
Location of Pretax Gains and (Losses) Recognized as Regulatory Assets or Liabilities       
Commodity contracts       
Regulatory assets$3
 $(31) $19
 $(34)
Interest rate contracts       
Regulatory assets
 4
 
 13
Total Pretax Gains (Losses) Recognized as Regulatory Assets or Liabilities$3
 $(27) $19
 $(21)

64

PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


DUKE ENERGY PROGRESS
The following table shows the fair value of derivatives and the line items in the Condensed Consolidated Balance Sheets where they are reported. Although derivatives subject to master netting arrangements are netted on the Condensed Consolidated Balance Sheets, the fair values presented below are shown gross and cash collateral on the derivatives has not been netted against the fair values shown. Substantially all derivatives not designated as hedging instruments receive regulatory accounting treatment.
 September 30, 2014 December 31, 2013
(in millions)Asset
 Liability
 Asset
 Liability
Derivatives Designated as Hedging Instruments       
Commodity contracts       
Current Liabilities: Other$
 $1
 $
 $1
Total Derivatives Designated as Hedging Instruments
 1
 
 1
Derivatives Not Designated as Hedging Instruments       
Commodity contracts       
Investments and Other Assets: Other
 
 2
 1
Current Liabilities: Other2
 39
 2
 40
Deferred Credits and Other Liabilities: Other1
 8
 2
 29
Total Derivatives Not Designated as Hedging Instruments3
 47
 6
 70
Total Derivatives$3
 $48
 $6
 $71
The tables below show the balance sheet location of derivative contracts subject to enforceable master netting agreements and include collateral posted to offset the net position. This disclosure is intended to enable users to evaluate the effect of netting arrangements on financial position. The amounts shown were calculated by counterparty. Accounts receivable or accounts payable may also be available to offset exposures in the event of bankruptcy. These amounts are not included in the tables below.
 Derivative Assets
 September 30, 2014 December 31, 2013
(in millions)
Current(a)

 
Non-Current(b)

 
Current(a)

 
Non-Current(b)

Gross amounts recognized$2
 $1
 $3
 $3
Gross amounts offset(2) (1) (3) (3)
Net amounts recognized on the Condensed Consolidated Balance Sheet$
 $
 $
 $
 Derivative Liabilities
 September 30, 2014 December 31, 2013
(in millions)
Current(c)

 
Non-Current(d)
 
Current(c)

 
Non-Current(d)

Gross amounts recognized$40
 $8
 $41
 $30
Gross amounts offset(2) (1) (3) (3)
Net amounts recognized on the Condensed Consolidated Balance Sheet$38
 $7
 $38
 $27
(a)Included in Other within Current Assets on the Condensed Consolidated Balance Sheet.
(b)Included in Other within Investments and Other Assets on the Condensed Consolidated Balance Sheet.
(c)Included in Other within Current Liabilities on the Condensed Consolidated Balance Sheet.
(d)Included in Other within Deferred Credits and Other Liabilities on the Condensed Consolidated Balance Sheet.
Gain and losses on cash flow hedges and reclassifications from AOCI were not material for the periods presented in this quarterly report.

65

PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


The following table shows the gains and losses during the year recognized on undesignated derivatives and the line items on the Condensed Consolidated Statements of Operations and Comprehensive Income or the Condensed Consolidated Balance Sheets where the pretax gains and losses were reported. Amounts included in Regulatory Assets or Liabilities for commodity contracts are reclassified to earnings to match recovery through the fuel clause. Amounts included in Regulatory Assets or Liabilities for interest rate contracts are reclassified to earnings as interest expense over the term of the related debt.
 Three Months Ended September 30, Nine Months Ended September 30,
(in millions)2014
 2013
 2014
 2013
Location of Pretax Gains and (Losses) Recognized in Earnings       
Commodity contracts       
Operating revenues$1
 $3
 $
 $10
Fuel used in electric generation and purchased power13
 (24) 4
 (53)
Interest rate contracts       
Interest expense
 (3) 
 (9)
Total Pretax Gains (Losses) Recognized in Earnings$14
 $(24) $4
 $(52)
Location of Pretax Gains and (Losses) Recognized as Regulatory Assets or Liabilities       
Commodity contracts       
Regulatory assets$(19) $(11) $21
 $(18)
Interest rate contracts       
Regulatory assets
 3
 
 10
Total Pretax Gains (Losses) Recognized as Regulatory Assets or Liabilities$(19) $(8) $21
 $(8)
DUKE ENERGY FLORIDA
The following table shows the fair value of derivatives and the line items in the Condensed Consolidated Balance Sheets where they are reported. Although derivatives subject to master netting arrangements are netted on the Condensed Consolidated Balance Sheets, the fair values presented below are shown gross and cash collateral on the derivatives has not been netted against the fair values shown. Substantially all derivatives not designated as hedging instruments receive regulatory accounting treatment.
 September 30, 2014 December 31, 2013
(in millions)Asset
 Liability
 Asset
 Liability
Derivatives Not Designated as Hedging Instruments       
Commodity contracts       
Current Assets: Other$
 $
 $3
 $2
Current Liabilities: Other1
 75
 9
 64
Deferred Credits and Other Liabilities: Other1
 21
 2
 63
Total Derivatives$2
 $96
 $14
 $129
The tables below show the balance sheet location of derivative contracts subject to enforceable master netting agreements and include collateral posted to offset the net position. This disclosure is intended to enable users to evaluate the effect of netting arrangements on financial position. The amounts shown were calculated by counterparty. Accounts receivable or accounts payable may also be available to offset exposures in the event of bankruptcy. These amounts are not included in the tables below.
 Derivative Assets
 September 30, 2014 December 31, 2013
(in millions)
Current(a)

 
Non-Current(b)
 
Current(a)

 
Non-Current(b)

Gross amounts recognized$1
 $1
 $12
 $2
Gross amounts offset(1) (1) (10) (2)
Net amounts recognized on the Condensed Consolidated Balance Sheet$
 $
 $2
 $

66

PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


 Derivative Liabilities
 September 30, 2014 December 31, 2013
(in millions)
Current(c)

 
Non-Current(d)

 
Current(c)

 
Non-Current(d)

Gross amounts recognized$75
 $21
 $66
 $63
Gross amounts offset(1) (1) (15) (7)
Net amounts recognized on the Condensed Consolidated Balance Sheet$74
 $20
 $51
 $56
  Three Months Ended March 31, 2014
(in millions) Duke Energy
 Duke Energy Carolinas
 Progress Energy
 Duke Energy Progress
 Duke Energy Florida
 Duke Energy Ohio
 Duke Energy Indiana
Location of Pretax Gains (Losses) Recognized in Earnings              
Commodity contracts              
Revenue: Regulated electric $(4) $
 $(3) $(3) $
 $
 $
Revenue: Nonregulated electric and other (397) 
 
 
 
 (449) 
Fuel used in electric generation and purchased power - regulated 7
 
 7
 7
 
 
 
Fuel used in electric generation and purchased power - nonregulated 138
 
 
 
 
 138
 
Interest rate contracts              
Interest expense (4) 
 (4) (3) (1) 
 
Total Pretax Gains (Losses) Recognized in Earnings $(260) $
 $
 $1
 $(1) $(311) $
Location of Pretax Gains (Losses) Recognized as Regulatory Assets or Liabilities              
Commodity contracts              
Regulatory assets $(2) $
 $(2) $17
 $(19) $
 $
Regulatory liabilities 27
 
 
 
 
 2
 
Interest rate contracts              
Regulatory assets 4
 
 4
 3
 1
 
 
Total Pretax Gains (Losses) Recognized as Regulatory Assets or Liabilities $29
 $
 $2
 $20
 $(18) $2
 $
(a)
Included in Other within Current Assets on the Condensed Balance Sheet.
(b)Included in Other within Investments and Other Assets on the Condensed Balance Sheet.
(c)Included in Other within Current Liabilities on the Condensed Balance Sheet.
(d)Included in Other within Deferred Credits and Other Liabilities on the Condensed Balance Sheet.
Gains and losses on cash flow hedges and reclassifications from AOCI were not material for the periods presented in this quarterly report.
The following table shows the gains and losses during the year recognized on undesignated derivatives and the line items on the Condensed Consolidated Statements of Operations and Comprehensive Income or the Condensed Consolidated Balance Sheets where the pretax gains and losses were reported. Amounts included in Regulatory Assets or Liabilities for commodity contracts are reclassified to earnings to match recovery through the fuel clause.
 Three Months Ended September 30, Nine Months Ended September 30,
(in millions)2014
 2013
 2014
 2013
Location of Pretax Gains and (Losses) Recognized in Earnings       
Commodity contracts       
Fuel used in electric generation and purchased power20
 (45) 14
 (105)
Interest rate contracts       
Interest expense
 (1) 
 (3)
Total Pretax Gains (Losses) Recognized in Earnings$20
 $(46) $14
 $(108)
Location of Pretax Gains and (Losses) Recognized as Regulatory Assets or Liabilities       
Commodity contracts       
Regulatory assets$22
 $(19) $(2) $(16)
Interest rate contracts       
Regulatory assets
 1
 
 3
Total Pretax Gains (Losses) Recognized as Regulatory Assets or Liabilities$22
 $(18) $(2) $(13)

67

PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


DUKE ENERGY OHIO
The following table shows the fair value of derivatives and the line items in the Condensed Consolidated Balance Sheets where they are reported. Although derivatives subject to master netting arrangements are netted on the Condensed Consolidated Balance Sheets, the fair values presented below are shown gross and cash collateral on the derivatives has not been netted against the fair values shown.
 September 30, 2014 December 31, 2013
(in millions)Asset
 Liability
 Asset
 Liability
Derivatives Not Designated as Hedging Instruments       
Commodity contracts       
Current Assets: Other$2
 $
 $186
 $163
Current Assets: Assets Held for Sale1
 1
 
 
Investments and Other Assets: Other
 
 202
 130
Investments and Other Assets: Assets Held for Sale9
 2
 
 
Current Liabilities: Other
 
 1
 36
Current Liabilities: Liabilities Associated with Assets Held for Sale378
 484
 
 
Deferred Credits and Other Liabilities: Other
 
 2
 56
Deferred Credits and Other Liabilities: Liabilities Associated with Assets Held for Sale174
 287
 
 
Interest rate contracts       
Current Liabilities: Other
 
 
 1
Deferred Credits and Other Liabilities: Other
 4
 
 4
Total Derivatives Designated as Hedging Instruments564
 778
 391
 390
Total Derivatives$564
 $778
 $391
 $390
The tables below show the balance sheet location of derivative contracts subject to enforceable master netting agreements and include collateral posted to offset the net position. This disclosure is intended to enable users to evaluate the effect of netting arrangements on financial position. The amounts shown were calculated by counterparty. Accounts receivable or accounts payable may also be available to offset exposures in the event of bankruptcy. These amounts are not included in the tables below.
 Derivative Assets
 September 30, 2014 December 31, 2013
(in millions)
Current(a)

 
Non-Current(b)
 
Current(e)

 
Non-Current(f)

Gross amounts recognized$381
 $183
 $186
 $205
Gross amounts offset(377) (177) (165) (132)
Net amounts recognized on the Condensed Consolidated Balance Sheet$4
 $6
 $21
 $73
 Derivative Liabilities
 September 30, 2014 December 31, 2013
(in millions)
Current(c)

 
Non-Current(d)
 
Current(g)

 
Non-Current(h)

Gross amounts recognized$485
 $293
 $199
 $186
Gross amounts offset(419) (251) (173) (143)
Net amounts subject to master netting66
 42
 26
 43
Amounts not subject to master netting
 
 1
 4
Net amounts recognized on the Condensed Consolidated Balance Sheet$66
 $42
 $27
 $47
(a)Included in Assets Held for Sale within Current Assets on the Condensed Consolidated Balance Sheet.
(b)Included in Assets Held for Sale within Investments and Other Assets on the Condensed Consolidated Balance Sheet.
(c)Included in Liabilities Associated with Assets Held for Sale within Current Liabilities on the Condensed Consolidated Balance Sheet.
(d)Included in Liabilities Associated with Assets Held for Sale within Deferred Credits and Other Liabilities on the Condensed Consolidated Balance Sheet.
(e)Included in Other within Current Assets on the Condensed Consolidated Balance Sheet.
(f)Included in Other within Investments and Other Assets on the Condensed Consolidated Balance Sheet.
(g)Included in Other within Current Liabilities on the Condensed Consolidated Balance Sheet.
(h)Included in Other within Deferred Credits and Other Liabilities on the Condensed Consolidated Balance Sheet.
Gains and losses on cash flow hedges and reclassifications from AOCI were not material for the periods presented in this quarterly report.

68

PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


The following table shows the gains and losses during the year recognized on undesignated derivatives and the line items on the Condensed Consolidated Statements of Operations and Comprehensive Income or the Condensed Consolidated Balance Sheets where the pretax gains and losses were reported.
 Three Months Ended September 30, Nine Months Ended September 30,
(in millions)2014
 2013
 2014
 2013
Location of Pretax Gains and (Losses) Recognized in Earnings       
Commodity contracts       
Income (Loss) from Discontinued Operations$(303) $3
 $(887) $(28)
Interest rate contracts       
Interest expense
 
 (1) (1)
Total Pretax Gains (Losses) Recognized in Earnings$(303) $3
 $(888) $(29)
Location of Pretax Gains and (Losses) Recognized as Regulatory Assets or Liabilities       
Commodity contracts       
Regulatory assets$
 $
 $(1) $
Interest rate contracts       
Regulatory assets
 
 
 3
Regulatory liabilities
 
 6
 
Total Pretax Gains (Losses) Recognized as Regulatory Assets or Liabilities$
 $
 $5
 $3
DUKE ENERGY INDIANA
The fair values of derivative instruments were not material for the periods presented in this quarterly report.
CREDIT RISK
Certain derivative contracts contain contingent credit features. These features may include (i) material adverse change clauses or payment acceleration clauses that could result in immediate payments or (ii) the posting of letters of credit or termination of the derivative contract before maturity if specific events occur, such as a credit rating downgrade below investment grade.
The following tables show information with respect to derivative contracts that are in a net liability position and contain objective credit-risk relatedcredit-risk-related payment provisions. Amounts for Duke Energy Carolinas and Duke Energy Indiana were not material.
September 30, 2014March 31, 2015
(in millions)
Duke
Energy

 Progress Energy
 
Duke
Energy
Progress

 
Duke
Energy
Florida

 
Duke
Energy
Ohio

Duke
Energy

 Duke Energy Carolinas
 Progress Energy
 
Duke
Energy
Progress

 
Duke
Energy
Florida

 
Duke
Energy
Ohio

Aggregate fair value amounts of derivative instruments in a net liability position$688
 $107
 $38
 $69
 $688
$834
 $11
 $344
 $110
 $234
 $479
Fair value of collateral already posted202
 
 
 
 202
219
 
 43
 1
 42
 176
Additional cash collateral or letters of credit in the event credit-risk-related contingent features were triggered86
 107
 38
 69
 86
326
 11
 301
 109
 192
 14
December 31, 2013December 31, 2014
(in millions)
Duke
Energy

 Progress Energy
 
Duke
Energy
Progress

 
Duke
Energy
Florida

 
Duke
Energy
Ohio

Duke
Energy

 Duke Energy Carolinas
 Progress Energy
 
Duke
Energy
Progress

 
Duke
Energy
Florida

 
Duke
Energy
Ohio

Aggregate fair value amounts of derivative instruments in a net liability position$525
 $168
 $60
 $108
 $355
$845
 $19
 $370
 $131
 $239
 $456
Fair value of collateral already posted135
 10
 
 10
 125
209
 
 23
 
 23
 186
Additional cash collateral or letters of credit in the event credit-risk-related contingent features were triggered205
 158
 60
 98
 47
407
 19
 347
 131
 216
 41

6964


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


The Duke Energy Registrants have elected to offset cash collateral and fair values of derivatives. For amounts to be netted, the derivative must be executed with the same counterparty under the same master netting agreement. Amounts disclosed below represent the receivables related to the right to reclaim cash collateral and payables related to the obligation to return cash collateral under master netting arrangements. Amounts for Duke Energy Carolinas Duke Energy Progress and Duke Energy Indiana were not material.
 September 30, 2014 December 31, 2013
(in millions)Receivables Receivables
Duke Energy   
Amounts offset against net derivative positions$116
 $30
Amounts not offset against net derivative positions86
 122
Progress Energy   
Amounts offset against net derivative positions
 10
Duke Energy Florida   
Amounts offset against net derivative positions
 10
Duke Energy Ohio   
Amounts offset against net derivative positions116
 19
Amounts not offset against net derivative positions86
 115

 March 31, 2015 December 31, 2014
(in millions)Receivables Receivables
Duke Energy   
Amounts offset against net derivative positions$151
 $145
Amounts not offset against net derivative positions68
 64
Progress Energy   
Amounts offset against net derivative positions43
 23
Duke Energy Progress   
Amounts offset against net derivative positions1
 
Duke Energy Florida   
Amounts offset against net derivative positions42
 23
Duke Energy Ohio   
Amounts offset against net derivative positions108
 122
Amounts not offset against net derivative positions68
 64
11.10. INVESTMENTS IN DEBT AND EQUITY SECURITIES
The Duke Energy Registrants classify their investments in debt and equity securities as either trading or available-for-sale.
TRADING SECURITIES
Investments in debt and equity securities held in grantor trusts associated with certain deferred compensation plans and certain other investments are classified as trading securities. The fair value of these investments was $7$10 million at September 30, 2014March 31, 2015 and $18$7 million at December 31, 2013.2014.
AVAILABLE-FOR-SALE SECURITIES
All other investments in debt and equity securities are classified as available-for-sale securities.
Duke Energy’s available-for-sale securities are primarily comprised of investments held in (i) the Nuclear Decommissioning Trust Fund (NDTF) at Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida, (ii) grantor trusts at Duke Energy Progress, Duke Energy Florida and Duke Energy Indiana related to OPEBother post-retirement benefit obligations (OPEB) plans, (iii) Duke Energy’s captive insurance investment portfolio and (iv) Duke Energy’s foreign operations investment portfolio.
Duke Energy holds corporate debt securities that were purchased using excess cash from its foreign operations. These investments are either classified as Cash and cash equivalents or Short-Term investments on the Condensed Consolidated Balance Sheet based on maturity date and are available for current operations of Duke Energy’s foreign business. The fair value of these investments classified as Short-Term investments was $44 million as of December 31, 2013.
Duke Energy classifies all other investments in debt and equity securities as long-term, unless otherwise noted.
Investment Trusts
The investments within the NDTF at Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida and the Duke Energy Progress, Duke Energy Florida and Duke Energy Indiana grantor trusts (Investment Trusts) are managed by independent investment managers with discretion to buy, sell and invest pursuant to the objectives set forth by the trust agreements. The Duke Energy Registrants have limited oversight of the day-to-day management of these investments. As a result, the ability to hold investments in unrealized loss positions is outside the control of the Duke Energy Registrants. Accordingly, all unrealized losses associated with debt and equity securities within the Investment Trusts are considered other-than-temporary impairments and are recognized immediately. Pursuant to regulatory accounting, substantially all realized and unrealized gains and losses associated with investments within the Investment Trusts are deferred as a regulatory asset or liability. As a result, there is no immediate impact on earnings of the Duke Energy Registrants.
Other Available-for-Sale Securities
Unrealized gains and losses on all other available-for-sale securities are included in other comprehensive income until realized, unless it is determined the carrying value of an investment is other-than-temporarily impaired. If an other-than-temporary impairment exists, the unrealized loss is included in earnings based on the criteria discussed below.
The Duke Energy Registrants analyze all investment holdings each reporting period to determine whether a decline in fair value should be considered other-than-temporary. Criteria used to evaluate whether an impairment associated with equity securities is other-than-temporary includes, but is not limited to, (i) the length of time over which the market value has been lower than the cost basis of the investment, (ii) the percentage decline compared to the cost of the investment and (iii) management’s intent and ability to retain its investment for a period of time sufficient to allow for any anticipated recovery in market value. If a decline in fair value is determined to be other-than-temporary, the investment is written down to its fair value through a charge to earnings.

7065


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


If the entity does not have an intent to sell a debt security and it is not more likely than not management will be required to sell the debt security before the recovery of its cost basis, the impairment write-down to fair value would be recorded as a component of other comprehensive income, except for when it is determined a credit loss exists. In determining whether a credit loss exists, management considers, among other things, (i) the length of time and the extent to which the fair value has been less than the amortized cost basis, (ii) changes in the financial condition of the issuer of the security, or in the case of an asset backedasset-backed security, the financial condition of the underlying loan obligors, (iii) consideration of underlying collateral and guarantees of amounts by government entities, (iv) ability of the issuer of the security to make scheduled interest or principal payments and (v) any changes to the rating of the security by rating agencies. If a credit loss exists, the amount of impairment write-down to fair value is split between credit loss and other factors. The amount related to credit loss is recognized in earnings. The amount related to other factors is recognized in other comprehensive income. There were no credit losses as of September 30, 2014March 31, 2015 and December 31, 2013.2014. There were no other-than-temporary impairments for debt or equity securities as of September 30, 2014March 31, 2015 and December 31, 2013.2014.
DUKE ENERGY
The following table presents the estimated fair value of investments in available-for-sale securities.
September 30, 2014 December 31, 2013March 31, 2015 December 31, 2014
(in millions)Gross Unrealized Holding Gains
 Gross Unrealized Holding Losses
 Estimated Fair Value
 Gross Unrealized Holding Gains
 Gross Unrealized Holding Losses
 Estimated Fair Value
Gross Unrealized Holding Gains
 
Gross Unrealized Holding Losses(b)

 
Estimated Fair Value(c)

 Gross Unrealized Holding Gains
 
Gross Unrealized Holding Losses(b)

 Estimated Fair Value
NDTF                      
Cash and cash equivalents$
 $
 $74
 $
 $
 $110
$
 $
 $106
 $
 $
 $136
Equity securities1,943
 28
 3,825
 1,813
 10
 3,579
1,916
 28
 3,643
 1,926
 29
 3,650
Corporate debt securities13
 3
 493
 8
 6
 400
19
 1
 482
 14
 2
 454
Municipal bonds5
 1
 132
 2
 6
 160
7
 2
 227
 5
 
 184
U.S. government bonds12
 4
 713
 7
 12
 730
24
 1
 864
 19
 2
 978
Other debt securities
 1
 137
 22
 2
 154
2
 2
 148
 1
 2
 147
Total NDTF(d)$1,973
 $37
 $5,374
 $1,852
 $36
 $5,133
$1,968
 $34
 $5,470
 $1,965
 $35
 $5,549
Other Investments                  
  
  
Cash and cash equivalents$
 $
 $16
 $
 $
 $21
$
 $
 $29
 $
 $
 $15
Equity securities32
 
 95
 29
 
 91
36
 
 98
 34
 
 96
Corporate debt securities2
 
 68
 1
 1
 99
3
 
 81
 1
 1
 58
Municipal bonds3
 
 82
 2
 2
 79
3
 1
 75
 3
 1
 76
U.S. government bonds
 
 16
 
 
 17

 
 45
 
 
 27
Other debt securities1
 5
 96
 
 8
 111
1
 2
 83
 1
 1
 80
Total Other Investments(a)
$38
 $5
 $373
 $32
 $11
 $418
$43
 $3
 $411
 $39
 $3
 $352
Total Investments$2,011
 $42
 $5,747
 $1,884
 $47
 $5,551
$2,011
 $37
 $5,881
 $2,004
 $38
 $5,901
(a)    These amounts are recorded in Other with Investments and Other Assets on the Condensed Consolidated Balance Sheets.
(b)Substantially all these amounts represent other-than-temporary impairments on investments within Investment Trusts that have been recognized immediately as a regulatory asset.
(c)These amounts exclude net pending trade receivables of $107 million as of March 31, 2015.
(d)The decrease in the estimated fair value of the NDTF for the three months ended March 31, 2015 is primarily due to reimbursement from the NDTF for Duke Energy Florida's costs related to ongoing decommissioning activity of the Crystal River Unit 3 Nuclear Station.
The table below summarizes the maturity date for debt securities.
(in millions)September 30, 2014
March 31, 2015
Due in one year or less$33
$110
Due after one through five years452
603
Due after five through 10 years457
488
Due after 10 years795
804
Total$1,737
$2,005
Realized gains and losses, which were determined on a specific identification basis, from sales of available-for-sale securities were as follows.
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended March 31,
(in millions)2014
 2013
 2014
 2013
2015
 2014
Realized gains$28
 $72
 $90
 $135
$102
 $31
Realized losses51
 16
 57
 38
14
 4

7166


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


DUKE ENERGY CAROLINAS
The following table presents the estimated fair value of investments in available-for-sale securities.
September 30, 2014 December 31, 2013March 31, 2015 December 31, 2014
(in millions)Gross Unrealized Holding Gains
 Gross Unrealized Holding Losses
 Estimated Fair Value
 Gross Unrealized Holding Gains
 Gross Unrealized Holding Losses
 Estimated Fair Value
Gross Unrealized Holding Gains
 
Gross Unrealized Holding Losses(b)

 
Estimated Fair Value(c)

 Gross Unrealized Holding Gains
 
Gross Unrealized Holding Losses(b)

 Estimated Fair Value
NDTF                      
Cash and cash equivalents$
 $
 $39
 $
 $
 $42
$
 $
 $42
 $
 $
 $51
Equity securities1,046
 17
 2,124
 974
 6
 1,964
1,076
 16
 2,127
 1,102
 17
 2,162
Corporate debt securities7
 3
 345
 5
 5
 274
11
 1
 329
 8
 2
 316
Municipal bonds1
 
 22
 
 2
 54
2
 1
 90
 1
 
 62
U.S. government bonds4
 2
 317
 3
 7
 354
8
 1
 296
 7
 1
 308
Other debt securities
 1
 122
 22
 2
 146
2
 2
 128
 1
 2
 133
Total NDTF$1,058
 $23
 $2,969
 $1,004
 $22
 $2,834
$1,099
 $21
 $3,012
 $1,119
 $22
 $3,032
Other Investments                      
Other debt securities$
 $1
 $3
 $
 $1
 $3
$
 $1
 $3
 $
 $1
 $3
Total Other Investments(a)
$
 $1
 $3
 $
 $1
 $3
$
 $1
 $3
 $
 $1
 $3
Total Investments$1,058
 $24
 $2,972
 $1,004
 $23
 $2,837
$1,099
 $22
 $3,015
 $1,119
 $23
 $3,035
(a)    These amounts are recorded in Other within Investments and Other Assets on the Condensed Consolidated Balance Sheets.
(a)These amounts are recorded in Other within Investments and Other Assets on the Condensed Consolidated Balance Sheets.
(b)Substantially all these amounts represent other-than-temporary impairments on investments within Investment Trusts that have been recognized immediately as a regulatory asset.
(c)These amounts exclude net pending trade receivables of $107 million as of March 31, 2015.
The table below summarizes the maturity date for debt securities.
(in millions)September 30, 2014
March 31, 2015
Due in one year or less$2
$5
Due after one through five years171
177
Due after five through 10 years256
257
Due after 10 years380
407
Total$809
$846
Realized gains and losses, which were determined on a specific identification basis, from sales of available-for-sale securities were as follows.
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended March 31,
(in millions)2014
 2013
 2014
 2013
2015
 2014
Realized gains$20
 $49
 $72
 $95
$90
 $23
Realized losses48
 1
 50
 11
12
 1

7267


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


PROGRESS ENERGY
The following table presents the estimated fair value investments in available-for-sale securities.
September 30, 2014 December 31, 2013March 31, 2015 December 31, 2014
(in millions)Gross Unrealized Holding Gains
 Gross Unrealized Holding Losses
 Estimated Fair Value
 Gross Unrealized Holding Gains
 Gross Unrealized Holding Losses
 Estimated Fair Value
Gross Unrealized Holding Gains
 
Gross Unrealized Holding Losses(b)

 Estimated Fair Value
 Gross Unrealized Holding Gains
 
Gross Unrealized Holding Losses(b)

 Estimated Fair Value
NDTF                      
Cash and cash equivalents$
 $
 $35
 $
 $
 $68
$
 $
 $64
 $
 $
 $85
Equity securities897
 11
 1,701
 839
 4
 1,615
840
 12
 1,516
 824
 12
 1,488
Corporate debt securities6
 
 148
 3
 1
 126
8
 
 153
 6
 
 138
Municipal bonds4
 1
 110
 2
 4
 106
5
 1
 137
 4
 
 122
U.S. government bonds8
 2
 396
 4
 5
 376
16
 
 568
 12
 1
 670
Other debt securities
 
 15
 
 
 8

 
 20
 
 
 14
Total NDTF(c)$915
 $14
 $2,405
 $848
 $14
 $2,299
$869
 $13
 $2,458
 $846
 $13
 $2,517
Other Investments                      
Cash and cash equivalents$
 $
 $15
 $
 $
 $20
$
 $
 $18
 $
 $
 $15
Municipal bonds3
 
 43
 1
 
 39
3
 
 42
 3
 
 43
Total Other Investments(a)
$3
 $
 $58
 $1
 $
 $59
$3
 $
 $60
 $3
 $
 $58
Total Investments$918
 $14
 $2,463
 $849
 $14
 $2,358
$872
 $13
 $2,518
 $849
 $13
 $2,575
(a)    These amounts are recorded in Other within Investments and Other Assets on the Condensed Consolidated Balance Sheets.
(b)Substantially all these amounts represent other-than-temporary impairments on investments within Investment Trusts that have been recognized immediately as a regulatory asset.
(c)The decrease in the estimated fair value of the NDTF for the three months ended March 31, 2015 is primarily due to reimbursement from the NDTF for Duke Energy Florida's costs related to ongoing decommissioning activity of the Crystal River Unit 3 Nuclear Station.
The table below summarizes the maturity date for debt securities.
(in millions)September 30, 2014
March 31, 2015
Due in one year or less$21
$84
Due after one through five years218
350
Due after five through 10 years145
160
Due after 10 years328
326
Total$712
$920
Realized gains and losses, which were determined on a specific identification basis, from sales of available-for-sale securities were as follows.
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended March 31,
(in millions)2014
 2013
 2014
 2013
2015
 2014
Realized gains$8
 $22
 $17
 $37
$12
 $7
Realized losses3
 11
 6
 20
1
 2

7368


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


DUKE ENERGY PROGRESS
The following table presents the estimated fair value of investments in available-for-sale securities.
September 30, 2014 December 31, 2013March 31, 2015 December 31, 2014
(in millions)Gross Unrealized Holding Gains
 Gross Unrealized Holding Losses
 Estimated Fair Value
 Gross Unrealized Holding Gains
 Gross Unrealized Holding Losses
 Estimated Fair Value
Gross Unrealized Holding Gains
 
Gross Unrealized Holding Losses(b)

 Estimated Fair Value
 Gross Unrealized Holding Gains
 
Gross Unrealized Holding Losses(b)

 Estimated Fair Value
NDTF                      
Cash and cash equivalents$
 $
 $28
 $
 $
 $48
$
 $
 $40
 $
 $
 $50
Equity securities574
 7
 1,127
 535
 3
 1,069
626
 10
 1,194
 612
 10
 1,171
Corporate debt securities4
 
 95
 3
 1
 80
6
 
 107
 5
 
 97
Municipal bonds4
 1
 108
 2
 4
 104
5
 1
 135
 4
 
 120
U.S. government bonds6
 2
 257
 4
 3
 232
10
 
 251
 9
 1
 265
Other debt securities
 
 8
 
 
 5

 
 12
 
 
 8
Total NDTF$588
 $10
 $1,623
 $544
 $11
 $1,538
$647
 $11
 $1,739
 $630
 $11
 $1,711
Other Investments                  
  
  
Cash and cash equivalents$
 $
 $2
 $
 $
 $2
$
 $
 $1
 $
 $
 $
Total Other Investments(a)
$
 $
 $2
 $
 $
 $2
$
 $
 $1
 $
 $
 $
Total Investments$588
 $10
 $1,625
 $544
 $11
 $1,540
$647
 $11
 $1,740
 $630
 $11
 $1,711
(a)    These amounts are recorded in Other with Investments and Other Assets on the Condensed Consolidated Balance Sheets.
(b)Substantially all these amounts represent other-than-temporary impairments on investments within Investment Trusts that have been recognized immediately as a regulatory asset.
The table below summarizes the maturity date for debt securities.
(in millions)September 30, 2014
March 31, 2015
Due in one year or less$10
$12
Due after one through five years147
147
Due after five through 10 years94
113
Due after 10 years217
233
Total$468
$505
Realized gains and losses, which were determined on a specific identification basis, from sales of available-for-sale securities were as follows.
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended March 31,
(in millions)2014
 2013
 2014
 2013
2015
 2014
Realized gains$4
 $7
 $11
 $15
$9
 $6
Realized losses2
 2
 4
 6
1
 2

7469


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


DUKE ENERGY FLORIDA
The following table presents the estimated fair value of investments in available-for-sale securities.
September 30, 2014 December 31, 2013March 31, 2015 December 31, 2014
(in millions)Gross Unrealized Holding Gains
 Gross Unrealized Holding Losses
 Estimated Fair Value
 Gross Unrealized Holding Gains
 Gross Unrealized Holding Losses
 Estimated Fair Value
Gross Unrealized Holding Gains
 
Gross Unrealized Holding Losses(b)

 Estimated Fair Value
 Gross Unrealized Holding Gains
 
Gross Unrealized Holding Losses(b)

 Estimated Fair Value
NDTF                      
Cash and cash equivalents$
 $
 $7
 $
 $
 $20
$
 $
 $24
 $
 $
 $35
Equity securities323
 4
 574
 304
 1
 546
214
 2
 322
 212
 2
 317
Corporate debt securities2
 
 53
 
 
 46
2
 
 46
 1
 
 41
Municipal bonds
 
 2
 
 
 2

 
 2
 
 
 2
U.S. government bonds2
 
 139
 
 2
 144
6
 
 317
 3
 
 405
Other debt securities
 
 7
 
 
 3

 
 8
 
 
 6
Total NDTF$327
 $4
 $782
 $304
 $3
 $761
$222
 $2
 $719
 $216
 $2
 $806
Other Investments                  
  
  
Cash and cash equivalents$
 $
 $
 $
 $
 $3
$
 $
 $2
 $
 $
 $1
Municipal bonds3
 
 43
 1
 
 39
3
 
 42
 3
 
 43
Total Other Investments(a)
$3
 $
 $43
 $1
 $
 $42
$3
 $
 $44
 $3
 $
 $44
Total Investments$330
 $4
 $825
 $305
 $3
 $803
$225
 $2
 $763
 $219
 $2
 $850
(a)    These amounts are recorded in Other with Investments and Other Assets on the Condensed Consolidated Balance Sheets.
(b)Substantially all these amounts represent other-than-temporary impairments on investments within Investment Trusts that have been recognized immediately as a regulatory asset.
(c)The decrease in the estimated fair value of the NDTF for the three months ended March 31, 2015 is primarily due to reimbursement from the NDTF for Duke Energy Florida's costs related to ongoing decommissioning activity of the Crystal River Unit 3 Nuclear Station.
The table below summarizes the maturity date for debt securities.
(in millions)September 30, 2014
March 31, 2015
Due in one year or less$11
$72
Due after one through five years71
203
Due after five through 10 years51
47
Due after 10 years111
93
Total$244
$415
Realized gains and losses, which were determined on a specific identification basis, from sales of available-for-sale securities were as follows.
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended March 31,
(in millions)2014
 2013
 2014
 2013
2015
 2014
Realized gains$3
 $14
 $5
 $22
$3
 $1
Realized losses1
 9
 2
 13

 1

7570


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


DUKE ENERGY INDIANA
The following table presents the estimated fair value of investments in available-for-sale securities.
September 30, 2014 December 31, 2013March 31, 2015 December 31, 2014
(in millions)Gross Unrealized Holding Gains
 Gross Unrealized Holding Losses
 Estimated Fair Value
 Gross Unrealized Holding Gains
 Gross Unrealized Holding Losses
 Estimated Fair Value
Gross Unrealized Holding Gains
 
Gross Unrealized Holding Losses(b)

 Estimated Fair Value
 Gross Unrealized Holding Gains
 
Gross Unrealized Holding Losses(b)

 Estimated Fair Value
Other Investments                      
Cash and cash equivalents$
 $
 $1
 $
 $
 $1
Equity securities26
 
 68
 24
 
 65
$30
 $
 $73
 $28
 $
 $71
Municipal bonds
 
 30
 
 1
 28

 1
 30
 
 1
 30
Total Other Investments(a)
$26
 $
 $99
 $24
 $1
 $94
$30
 $1
 $103
 $28
 $1
 $101
Total Investments$26
 $
 $99
 $24
 $1
 $94
$30
 $1
 $103
 $28
 $1
 $101
(a)    These amounts are recorded in Other within Investments and Other Assets on the Condensed Consolidated Balance Sheets.
(b)Substantially all these amounts represent other-than-temporary impairments on investments within Investment Trusts that have been recognized immediately as a regulatory asset.
The table below summarizes the maturity date for debt securities.
(in millions)September 30, 2014
March 31, 2015
Due in one year or less$1
$2
Due after one through five years18
17
Due after five through 10 years8
8
Due after 10 years3
3
Total$30
$30
Realized gains and losses, which were determined on a specific identification basis, from sales of available-for-sale securities were insignificant for the three and nine months ended September 30, 2014March 31, 2015 and 2013.2014.
12.11. FAIR VALUE MEASUREMENTS
Fair value is the exchange price to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. The fair value definition focuses on an exit price versus the acquisition cost. Fair value measurements use market data or assumptions market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs may be readily observable, corroborated by market data or generally unobservable. Valuation techniques maximize the use of observable inputs and minimize use of unobservable inputs. A midmarket pricing convention (the midpoint price between bid and ask prices) is permitted for use as a practical expedient.
Fair value measurements are classified in three levels based on the fair value hierarchy:
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity can access at the measurement date. An active market is one in which transactions for an asset or liability occur with sufficient frequency and volume to provide ongoing pricing information.
Level 2 – A fair value measurement utilizing inputs other than quoted prices included in Level 1 that are observable, either directly or indirectly, for an asset or liability. Inputs include (i) quoted prices for similar assets or liabilities in active markets, (ii) quoted prices for identical or similar assets or liabilities in markets that are not active and (iii) and inputs other than quoted market prices that are observable for the asset or liability, such as interest rate curves and yield curves observable at commonly quoted intervals, volatilities and credit spreads. A Level 2 measurement cannot have more than an insignificant portion of its valuation based on unobservable inputs. Instruments in this category include non-exchange-traded derivatives, such as over-the-counter forwards, swaps and options; certain marketable debt securities; and financial instruments traded in less than active markets.
Level 3 – Any fair value measurement which includes unobservable inputs for more than an insignificant portion of the valuation. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value. Level 3 measurements may include longer-term instruments that extend into periods in which observable inputs are not available.
The fair value accounting guidance permits entities to elect to measure certain financial instruments that are not required to be accounted for at fair value, such as equity method investments or the company’s own debt, at fair value. The Duke Energy Registrants have not elected to record any of these items at fair value.

71


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)

Transfers between levels represent assets or liabilities that were previously (i) categorized at a higher level for which the inputs to the estimate became less observable or (ii) classified at a lower level for which the inputs became more observable during the period. The Duke Energy Registrant’s policy is to recognize transfers between levels of the fair value hierarchy at the end of the period. There were no transfers between levels 1 and 2 during the three and nine months ended September 30, 2014March 31, 2015 and 2013.2014. Transfers out of Level 3 during the three and nine months ended September 30, 2014March 31, 2015 are the result of forward commodity prices becoming observable due to the passage of time.

76

PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


Valuation methods of the primary fair value measurements disclosed below are as follows.
Investments in equity securities 
The majority of investments in equity securities are valued using Level 1 measurements. Investments in equity securities are typically valued at the closing price in the principal active market as of the last business day of the quarter. Principal active markets for equity prices include published exchanges such as NASDAQNasdaq composite (NASDAQ) and NYSE.New York Stock Exchange (NYSE). Foreign equity prices are translated from their trading currency using the currency exchange rate in effect at the close of the principal active market. There was no after-hours market activity that was required to be reflected in the reported fair value measurements. Investments in equity securities that are Level 2 or 3 are typically ownership interests in commingled investment funds.
Investments in debt securities
MostWith the exception of U.S. Treasuries which are classified as Level 1, most investments in debt securities are valued using Level 2 measurements because the valuations use interest rate curves and credit spreads applied to the terms of the debt instrument (maturity and coupon interest rate) and consider the counterparty credit rating. If the market for a particular fixed income security is relatively inactive or illiquid, the measurement is Level 3.
Commodity derivatives
Commodity derivatives with clearinghouses are classified as Level 1. Other commodity derivatives are primarily fair valued using internally developed discounted cash flow models which incorporate forward price, adjustments for liquidity (bid-ask spread) and credit or non-performance risk (after reflecting credit enhancements such as collateral), and are discounted to present value. Pricing inputs are derived from published exchange transaction prices and other observable data sources. In the absence of an active market, the last available price may be used. If forward price curves are not observable for the full term of the contract and the unobservable period had more than an insignificant impact on the valuation, the commodity derivative is classified as Level 3.
In isolation, increases (decreases) in natural gas forward prices result in favorable (unfavorable) fair value adjustments for natural gas purchase contracts; and increases (decreases) in electricity forward prices result in unfavorable (favorable) fair value adjustments for electricity sales contracts. Duke Energy regularly evaluates and validates pricing inputs used to estimate fair value of natural gas commodity contracts by a market participant price verification procedure. This procedure provides a comparison of internal forward commodity curves to market participant generated curves.
Interest rate derivatives
Most over-the-counter interest rate contract derivatives are valued using financial models which utilize observable inputs for similar instruments and are classified as Level 2. Inputs include forward interest rate curves, notional amounts, interest rates and credit quality of the counterparties.
Goodwill, Long-lived Assets and Assets Held for Sale
See Note 87 for a discussion of the valuation of goodwill and long-lived assets and Note 2 related to the Midwest Generationassets and related liabilities of the Disposal Group.Group classified as held for sale.
DUKE ENERGY
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed ConsolidatedBalance Sheets. Derivative amounts in the table below exclude cash collateral, which is disclosed in Note 10.9. See Note 1110 for additional information related to investments by major security type.
September 30, 2014March 31, 2015
(in millions)Total Fair Value
 Level 1
 Level 2
 Level 3
Total Fair Value
 Level 1
 Level 2
 Level 3
Nuclear decommissioning trust fund equity securities$3,824
 $3,649
 $3
 $172
$3,643
 $3,476
 $3
 $164
Nuclear decommissioning trust fund debt securities1,550
 388
 1,162
 
1,827
 542
 1,285
 
Other trading and available-for-sale equity securities96
 96
 
 
98
 98
 
 
Other trading and available-for-sale debt securities284
 31
 238
 15
323
 73
 245
 5
Derivative assets85
 6
 45
 34
52
 7
 22
 23
Total assets5,839
 4,170
 1,448
 221
5,943
 4,196
 1,555
 192
Derivative liabilities(428) (119) (253) (56)(625) (119) (497) (9)
Net assets$5,411
 $4,051
 $1,195
 $165
$5,318
 $4,077
 $1,058
 $183

7772


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


December 31, 2013December 31, 2014
(in millions)Total Fair Value
 Level 1
 Level 2
 Level 3
Total Fair Value
 Level 1
 Level 2
 Level 3
Nuclear decommissioning trust fund equity securities$3,579
 $3,495
 $57
 $27
$3,650
 $3,493
 $6
 $151
Nuclear decommissioning trust fund debt securities1,553
 402
 1,100
 51
1,899
 648
 1,251
 
Other trading and available-for-sale equity securities102
 91
 11
 
96
 96
 
 
Other trading and available-for-sale debt securities333
 36
 277
 20
263
 41
 217
 5
Derivative assets145
 33
 70
 42
110
 49
 24
 37
Total assets5,712
 4,057
 1,515
 140
6,018
 4,327
 1,498
 193
Derivative liabilities(321) 11
 (303) (29)(668) (162) (468) (38)
Net assets$5,391
 $4,068
 $1,212
 $111
$5,350
 $4,165
 $1,030
 $155
The following tables provide reconciliations of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements. Amounts included in earnings for derivatives are primarily included in Operating Revenues.
 Three Months Ended September 30, 2014
(in millions)Investments
 Derivatives (net)
 Total
Balance at beginning of period$188
 $22
 $210
Total pretax realized or unrealized gains (losses) included in earnings
 (33) (33)
Purchases, sales, issuances and settlements:     
Purchases13
 (1) 12
Sales(13) 
 (13)
Issuances
 1
 1
Transfers out of Level 3 due to observability of inputs
 (1) (1)
Total gains (losses) included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities4
 (10) (6)
Balance at end of period$192
 $(22) $170
Pretax amounts included in the Condensed Consolidated Statements of Comprehensive Income related to Level 3 measurements outstanding$
 $(49) $(49)
 Three Months Ended September 30, 2013
(in millions)Investments
 Derivatives (net)
 Total
Balance at beginning of period$97
 $(87) $10
Total pretax realized or unrealized gains (losses) included in earnings
 13
 13
Total pretax gains included in other comprehensive income1
 
 1
Purchases, sales, issuances and settlements:     
Purchases2
 
 2
Sales(2) 
 (2)
Issuances
 4
 4
Settlements(2) (3) (5)
Transfers out of Level 3 due to observability of inputs
 34
 34
Total gains (losses) included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities1
 1
 2
Balance at end of period$97
 $(38) $59
 Three Months Ended March 31, 2015
(in millions)Investments
 Derivatives (net)
 Total
Balance at beginning of period$156
 $(1) $155
Total pretax realized or unrealized gains (losses) included in earnings
 24
 24
Purchases, sales, issuances and settlements:     
Purchases9
 
 9
Sales(1) 
 (1)
Settlements
 (10) (10)
Total gains (losses) included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities5
 1
 6
Balance at end of period$169
 $14
 $183
 Three Months Ended March 31, 2014
(in millions)Investments
 Derivatives (net)
 Total
Balance at beginning of period$98
 $13
 $111
Total pretax realized or unrealized gains (losses) included in earnings
 18
 18
Purchases, sales, issuances and settlements:     
Purchases1
 
 1
Sales(1) 
 (1)
Settlements
 (39) (39)
Transfers out of Level 3 due to observability of inputs
 (5) (5)
Total gains (losses) included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities1
 (1) 
Balance at end of period$99
 $(14) $85
Pretax amounts included in the Condensed Consolidated Statements of Comprehensive Income related to Level 3 measurements outstanding$
 $7
 $7

7873


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


 Nine Months Ended September 30, 2014
(in millions)Investments
 Derivatives (net)
 Total
Balance at beginning of period$98
 $13
 $111
Total pretax realized or unrealized gains (losses) included in earnings
 (21) (21)
Purchases, sales, issuances and settlements:     
Purchases29
 50
 79
Sales(15) 
 (15)
Settlements
 (45) (45)
Transfers out of Level 3 due to observability of inputs68
 (4) 64
Total gains (losses) included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities12
 (15) (3)
Balance at end of period$192
 $(22) $170
Pretax amounts included in the Condensed Consolidated Statements of Comprehensive Income related to Level 3 measurements outstanding$
 $(49) $(49)
 Nine Months Ended September 30, 2013
(in millions)Investments
 Derivatives (net)
 Total
Balance at beginning of period$98
 $(85) $13
Total pretax realized or unrealized gains (losses) included in earnings
 (8) (8)
Total pretax gains included in other comprehensive income(1) 
 (1)
Purchases, sales, issuances and settlements:     
Purchases5
 21
 26
Sales(5) 
 (5)
Issuances
 9
 9
Settlements(3) (5) (8)
Transfers out of Level 3 due to observability of inputs
 34
 34
Total gains (losses) included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities3
 (4) (1)
Balance at end of period$97
 $(38) $59
DUKE ENERGY CAROLINAS
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets. Derivative amounts in the table below exclude cash collateral, which is disclosed in Note 10.9. See Note 1110 for additional information related to investments by majorsecuritytype.
September 30, 2014March 31, 2015
(in millions)Total Fair Value
 Level 1
 Level 2
 Level 3
Total Fair Value
 Level 1
 Level 2
 Level 3
Nuclear decommissioning trust fund equity securities$2,124
 $1,949
 $3
 $172
$2,127
 $1,960
 $3
 $164
Nuclear decommissioning trust fund debt securities845
 150
 695
 
885
 131
 754
 
Other trading and available-for-sale debt securities3
 
 
 3
3
 
 
 3
Total assets3,015
 2,091
 757
 167
Derivative liabilities(27) 
 (27) 
Net assets$2,972
 $2,099
 $698
 $175
$2,988
 $2,091
 $730
 $167
December 31, 2013December 31, 2014
(in millions)Total Fair Value
 Level 1
 Level 2
 Level 3
Total Fair Value
 Level 1
 Level 2
 Level 3
Nuclear decommissioning trust fund equity securities$1,964
 $1,879
 $58
 $27
$2,162
 $2,005
 $6
 $151
Nuclear decommissioning trust fund debt securities870
 168
 651
 51
870
 138
 732
 
Other trading and available-for-sale debt securities3
 
 
 3
3
 
 
 3
Total assets2,837
 2,047
 709
 81
3,035
 2,143
 738
 154
Derivative liabilities(2) 
 
 (2)(19) 
 (19) 
Net assets$2,835
 $2,047
 $709
 $79
$3,016
 $2,143
 $719
 $154

7974


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


The following tables provide reconciliations of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements.
 Three Months Ended September 30, 2014
(in millions)Investments
 Derivatives (net)
 Total
Balance at beginning of period$171
 $(3) $168
Purchases, sales, issuances and settlements:     
Purchases13
 
 13
Sales(13) 
 (13)
Settlements
 3
 3
Total gains (losses) included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities4
 
 4
Balance at end of period$175
 $
 $175
 Three Months Ended September 30, 2013
(in millions)Investments
 Derivatives (net)
 Total
Balance at beginning of period$74
 $(4) $70
Purchases, sales, issuances and settlements:     
Purchases2
 
 2
Sales(2) 
 (2)
Total gains (losses) included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities1
 
 1
Balance at end of period$75
 $(4) $71
Nine Months Ended September 30, 2014Three Months Ended March 31, 2015
(in millions)Investments
 Derivatives (net)
 Total
Investments
 Derivatives (net)
 Total
Balance at beginning of period$81
 $(2) $79
$154
 $
 $154
Purchases, sales, issuances and settlements:          
Purchases29
 
 29
9
 
 9
Sales(15) 
 (15)
Settlements
 2
 2
Transfers out of Level 3 due to observability of inputs68
 
 68
Issuances(1) 
 (1)
Total gains (losses) included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities12
 
 12
5
 
 5
Balance at end of period$175
 $
 $175
$167
 $
 $167
Nine Months Ended September 30, 2013Three Months Ended March 31, 2014
(in millions)Investments
 Derivatives (net)
 Total
Investments
 Derivatives (net)
 Total
Balance at beginning of period$72
 $(12) $60
$81
 $(2) $79
Purchases, sales, issuances and settlements:          
Purchases5
 
 5
1
 
 1
Sales(5) 
 (5)(1) 
 (1)
Settlements
 8
 8

 (2) (2)
Total gains (losses) included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities3
 
 3
1
 
 1
Balance at end of period$75
 $(4) $71
$82
 $(4) $78
PROGRESS ENERGY
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets. Derivative amounts in the table below exclude cash collateral, which is disclosed in Note 9. See Note 10 for additional information related to investments by major security type.
 March 31, 2015
(in millions)Total Fair Value
 Level 1
 Level 2
 Level 3
Nuclear decommissioning trust fund equity securities$1,516
 $1,516
 $
 $
Nuclear decommissioning trust fund debt securities942
 411
 531
 
Other trading and available-for-sale debt securities60
 16
 44
 
Derivative assets6
 
 6
 
Total assets2,524
 1,943
 581
 
Derivative liabilities(395) 
 (395) 
Net assets$2,129
 $1,943
 $186
 $
 December 31, 2014
(in millions)Total Fair Value
 Level 1
 Level 2
 Level 3
Nuclear decommissioning trust fund equity securities$1,488
 $1,488
 $
 $
Nuclear decommissioning trust fund debt securities1,029
 510
 519
 
Other trading and available-for-sale debt securities58
 15
 43
 
Derivative assets4
 
 4
 
Total assets2,579
 2,013
 566
 
Derivative liabilities(373) 
 (373) 
Net assets$2,206
 $2,013
 $193
 $

8075


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


The following tables provide reconciliations of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements.

 Derivatives (net)
 Three Months Ended March 31,
(in millions)2015
 2014
Balance at beginning of period$
 $
Total pretax realized or unrealized gains included in earnings
 (3)
Balance at end of period$
 $(3)
Pretax amounts included in the Condensed Consolidated Statements of Operations and Comprehensive Income related to Level 3 measurements outstanding at March 31, 2014$
 $(3)
DUKE ENERGY PROGRESS
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets.Derivative amounts in the table below exclude cash collateral, which is disclosed in Note 10.9. See Note 1110 for additional information related to investments by majorsecurity type.
September 30, 2014March 31, 2015
(in millions)Total Fair Value
 Level 1
 Level 2
 Level 3
Total Fair Value
 Level 1
 Level 2
 Level 3
Nuclear decommissioning trust fund equity securities$1,700
 $1,700
 $
 $
$1,194
 $1,194
 $
 $
Nuclear decommissioning trust fund debt securities705
 238
 467
 
545
 140
 405
 
Other trading and available-for-sale debt securities58
 15
 43
 
1
 1
 
 
Derivative assets2
 
 2
 
Total assets2,463
 1,953
 510
 
1,742
 1,335
 407
 
Derivative liabilities(142) 
 (142) 
(131) 
 (131) 
Net assets$2,321
 $1,953
 $368
 $
$1,611
 $1,335
 $276
 $
December 31, 2013December 31, 2014
(in millions)Total Fair Value
 Level 1
 Level 2
 Level 3
Total Fair Value
 Level 1
 Level 2
 Level 3
Nuclear decommissioning trust fund equity securities$1,615
 $1,615
 $
 $
$1,171
 $1,171
 $
 $
Nuclear decommissioning trust fund debt securities677
 233
 444
 
540
 151
 389
 
Other trading and available-for-sale debt securities58
 19
 39
 
Derivative assets3
 
 3
 
Total assets2,353
 1,867
 486
 
1,711
 1,322
 389
 
Derivative liabilities(187) 
 (187) 
(132) 
 (132) 
Net assets$2,166
 $1,867
 $299
 $
$1,579
 $1,322
 $257
 $
The following tables provide reconciliations of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements.
 Derivatives (net)
 Three Months Ended September 30, Nine Months Ended September 30,
(in millions)2014
 2013
 2014
 2013
Balance at beginning of period$
 $(35) $
 $(38)
Purchases, sales, issuances and settlements:       
Issuances
 2
 
 10
Transfers out of Level 3 due to observability of inputs2
 34
 
 34
Total gains included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities(2) (1) 
 (6)
Balance at end of period$
 $
 $
 $
 Derivatives (net)
 Three Months Ended March 31,
(in millions)2015
 2014
Balance at beginning of period$
 $
Total pretax realized or unrealized gains included in earnings
 (3)
Balance at end of period$
 $(3)
Pretax amounts included in the Condensed Consolidated Statements of Operations and Comprehensive Income related to Level 3 measurements outstanding at March 31, 2014$
 $(3)

8176


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


DUKE ENERGY PROGRESSFLORIDA
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets.Derivative amounts in the table below exclude cash collateral, which is disclosed in Note 10.9. See Note 1110 for additional information related to investments by majorsecuritytype.
September 30, 2014March 31, 2015
(in millions)Total Fair Value
 Level 1
 Level 2
 Level 3
Total Fair Value
 Level 1
 Level 2
 Level 3
Nuclear decommissioning trust fund equity securities$1,126
 $1,126
 $
 $
$322
 $322
 $
 $
Nuclear decommissioning trust fund debt securities497
 155
 342
 
Other trading and available-for-sale debt securities2
 2
 
 
Nuclear decommissioning trust fund debt securities and other397
 271
 126
 
Other trading and available-for-sale debt securities and other44
 
 44
 
Derivative assets4
 
 4
 
Total assets1,625
 1,283
 342
 
767
 593
 174
 
Derivative liabilities(45) 
 (45) 
(264) 
 (264) 
Net assets$1,580
 $1,283
 $297
 $
Net assets (liabilities)$503
 $593
 $(90) $
December 31, 2013December 31, 2014
(in millions)Total Fair Value
 Level 1
 Level 2
 Level 3
Total Fair Value
 Level 1
 Level 2
 Level 3
Nuclear decommissioning trust fund equity securities$1,069
 $1,069
 $
 $
$317
 $317
 $
 $
Nuclear decommissioning trust fund debt securities470
 137
 333
 
Other trading and available-for-sale debt securities3
 3
 
 
Nuclear decommissioning trust fund debt securities and other489
 359
 130
 
Other trading and available-for-sale debt securities and other44
 
 44
 
Derivative assets1
 
 1
 
4
 
 4
 
Total assets1,543
 1,209
 334
 
854
 676
 178
 
Derivative liabilities(66) 
 (66) 
(241) 
 (241) 
Net assets$1,477
 $1,209
 $268
 $
Net assets (liabilities)$613
 $676
 $(63) $
DUKE ENERGY OHIO
The following tables provide reconciliations of beginning and endingrecorded balances offor assets and liabilities measured at fair value using Level 3 measurements.on a recurring basis on the Condensed Consolidated Balance Sheets. Derivative amounts in the table below exclude cash collateral, which is disclosed in Note 9.
 March 31, 2015
(in millions)Total Fair Value
 Level 1
 Level 2
 Level 3
Derivative assets$44
 $20
 $8
 $16
Derivative liabilities(134) (108) (17) (9)
Net liabilities$(90) $(88) $(9) $7
 Derivatives (net)
 Three Months Ended September 30, Nine Months Ended September 30,
(in millions)2014
 2013
 2014
 2013
Balance at beginning of period$
 $(35) $
 $(38)
Purchases, sales, issuances and settlements:       
Issuances
 
 
 9
Settlements
 2
 
 
Total gains included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities
 (1) 
 (5)
Transfers out of Level 3 due to observability of inputs
 34
 
 34
Balance at end of period$
 $
 $
 $
 December 31, 2014
(in millions)Total Fair Value
 Level 1
 Level 2
 Level 3
Derivative assets$49
 $20
 $9
 $20
Derivative liabilities(181) (117) (26) (38)
Net liabilities$(132) $(97) $(17) $(18)

8277


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


The following tables provide reconciliations of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements.

 Derivatives (net)
 Three Months Ended March 31,
(in millions)2015
 2014
Balance at beginning of period$(18) $(4)
Total pretax realized or unrealized gains (losses) included in earnings25
 (6)
Purchases, sales, issuances and settlements:   
Settlements
 (4)
Transfers out of Level 3 due to observability of inputs
 (5)
Balance at end of period$7
 $(19)
Pretax amounts included in the Condensed Consolidated Statements of Operations and Comprehensive Income related to Level 3 measurements outstanding at March 31, 2014$
 (7)
DUKE ENERGY FLORIDAINDIANA
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets.Derivative amounts in the table below exclude cash collateral, which is disclosed in Note 10.9. See Note 1110 for additional information related to investments by major security type.
 September 30, 2014
(in millions)Total Fair Value
 Level 1
 Level 2
 Level 3
Nuclear decommissioning trust fund equity securities$574
 $574
 $
 $
Nuclear decommissioning trust fund debt securities and other208
 83
 125
 
Other trading and available-for-sale debt securities and other43
 
 43
 
Derivative assets3
 
 3
 
Total assets828
 657
 171
 
Derivative liabilities(97) 
 (97) 
Net assets$731
 $657
 $74
 $
 March 31, 2015
(in millions)Total Fair Value
 Level 1
 Level 2
 Level 3
Available-for-sale equity securities$73
 $73
 $
 $
Available-for-sale debt securities30
 
 30
 
Derivative assets3
 
 
 3
Net assets$106
 $73
 $30
 $3
 December 31, 2013
(in millions)Total Fair Value
 Level 1
 Level 2
 Level 3
Nuclear decommissioning trust fund equity securities$546
 $546
 $
 $
Nuclear decommissioning trust fund debt securities and other214
 96
 118
 
Other trading and available-for-sale debt securities and other40
 2
 38
 
Derivative assets1
 
 1
 
Total assets801
 644
 157
 
Derivative liabilities(116) 
 (116) 
Net assets$685
 $644
 $41
 $
 December 31, 2014
(in millions)Total Fair Value
 Level 1
 Level 2
 Level 3
Available-for-sale equity securities$71
 $71
 $
 $
Available-for-sale debt securities30
 
 30
 
Derivative assets14
 
 
 14
Net assets$115
 $71
 $30
 $14
DUKE ENERGY OHIO
The following tables provide recordedreconciliations of beginning and ending balances forof assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets.Derivative amounts in the table below exclude cash collateral, which is disclosed in Note 10.using Level 3 measurements.
 September 30, 2014
(in millions)Total Fair Value
 Level 1
 Level 2
 Level 3
Derivative assets$7
 $
 $3
 $4
Derivative liabilities(221) (114) (48) (59)
Net assets (liabilities)$(214) $(114) $(45) $(55)
 December 31, 2013
(in millions)Total Fair Value
 Level 1
 Level 2
 Level 3
Derivative assets$96
 $50
 $21
 $25
Derivative liabilities(95) (1) (65) (29)
Net assets (liabilities)$1
 $49
 $(44) $(4)
 Derivatives (net)
 Three Months Ended March 31,
(in millions)2015
 2014
Balance at beginning of period$14
 $12
Total pretax realized or unrealized gains (losses) included in earnings(3) 27
Purchases, sales, issuances and settlements:   
Settlements(9) (31)
Total gains included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities1
 (1)
Balance at end of period$3
 $7

8378


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


The following tables provide reconciliations of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements.
 Derivatives (net)
 Three Months Ended September 30, Nine Months Ended September 30,
(in millions)2014
 2013
 2014
 2013
Balance at beginning of period$(28) $(19) $(4) $(6)
Total pretax realized or unrealized gains (losses) included in earnings(24) 11
 (43) (4)
Purchases, sales, issuances and settlements:       
Purchases
 
 1
 1
Settlements(2) 2
 (6) 
Total gains included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities(1) 
 1
 3
Transfers out of Level 3 due to observability of inputs
 
 (4) 
Balance at end of period$(55) $(6) $(55) $(6)
Pretax amounts included in the Condensed Consolidated Statements of Operations and Comprehensive Income related to Level 3 measurements outstanding at June 30, 2014

   $(52)  
DUKE ENERGY INDIANA
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets.Derivative amounts in the table below exclude cash collateral, which is disclosed in Note 10. See Note 11 for additional information related to investments by major security type.
 September 30, 2014
(in millions)Total Fair Value
 Level 1
 Level 2
 Level 3
Available-for-sale equity securities$69
 $69
 $
 $
Available-for-sale debt securities30
 
 30
 
Derivative assets23
 1
 
 22
Net assets$122
 $70
 $30
 $22
 December 31, 2013
(in millions)Total Fair Value
 Level 1
 Level 2
 Level 3
Available-for-sale equity securities$65
 $65
 $
 $
Available-for-sale debt securities29
 
 29
 
Derivative assets12
 
 
 12
Net assets$106
 $65
 $29
 $12
The following tables provide reconciliations of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements.
 Derivatives (net)
 Three Months Ended September 30, Nine Months Ended September 30,
(in millions)2014
 2013
 2014
 2013
Balance at beginning of period$45
 $18
 $12
 $10
Total pretax realized or unrealized gains (losses) included in earnings(13) 3
 14
 5
Purchases, sales, issuances and settlements:       
Purchases
 
 49
 20
Settlements
 (10) (38) (23)
Total gains included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities(10) 3
 (15) 2
Balance at end of period$22
 $14
 $22
 $14

84

PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


QUANTITATIVE DISCLOSURES ABOUT UNOBSERVABLE INPUTS
The following table includes quantitative information about the Duke Energy Registrants' derivatives classified as Level 3.
September 30, 2014March 31, 2015
Investment Type
Fair Value
(in millions)

Valuation TechniqueUnobservable InputRange  
Fair Value
(in millions)

Valuation TechniqueUnobservable InputRange
Duke Energy          
Natural gas contracts$(33)Discounted cash flowForward natural gas curves - price per MMBtu$2.45
-$4.66
$11
Discounted cash flowForward natural gas curves – price per MMBtu$1.96
-$3.78
Financial transmission rights (FTRs)22
RTO auction pricingFTR price - per MWh(2.47)-12.92
3
RTO auction pricingFTR price – per MWh(0.83)-8.47
Electricity contracts(2)Discounted cash flowForward electricity curves - price per MWh25.18
-59.17
8
Discounted cash flowForward electricity curves – price per MWh24.96
-51.33
Commodity capacity option contracts5
Discounted cash flowForward capacity option curves - price per MW day28.60
-189.25
1
Discounted cash flowForward capacity option curves – price per MW day19.00
-109.50
Reserves(14) Bid-ask spreads, implied volatility, probability of default   
Commodity contract reserves(9) Bid-ask spreads, implied volatility, probability of default   
Total Level 3 derivatives$(22)    $14
    
Duke Energy Ohio          
Electricity contracts$(10)Discounted cash flowForward electricity curves - price per MWh25.35
-59.60
$2
Discounted cash flowForward electricity curves – price per MWh25.05
-51.33
Natural gas contracts(33)Discounted cash flowForward natural gas curves - price per MMBtu2.45
-4.66
11
Discounted cash flowForward natural gas curves – price per MMBtu1.96
-3.78
Reserves(12) Bid-ask spreads, implied volatility, probability of default   
Commodity contract reserves(6) Bid-ask spreads, implied volatility, probability of default   
Total Level 3 derivatives$(55)    $7
    
Duke Energy Indiana          
FTRs$22
RTO auction pricingFTR price - per MWh(2.47)-12.92
$3
RTO auction pricingFTR price – per MWh(0.83)-8.47
December 31, 2013December 31, 2014
Investment Type
Fair Value
(in millions)

Valuation TechniqueUnobservable InputRange  
Fair Value
(in millions)

Valuation TechniqueUnobservable InputRange
Duke Energy          
Natural gas contracts$(2)Discounted cash flowForward natural gas curves - price per MMBtu$3.07
-$5.37
$(5)Discounted cash flowForward natural gas curves – price per MMBtu$2.12
-$4.35
FERC mitigation power sale agreements(2)Discounted cash flowForward electricity curves - price per MWh25.79
-52.38
Financial transmission rights (FTRs)12
RTO auction pricingFTR price - per MWh(0.30)-13.80
14
RTO auction pricingFTR price – per MWh(1.92)-9.86
Electricity contracts23
Discounted cash flowForward electricity curves - price per MWh20.77
-58.90
(1)Discounted cash flowForward electricity curves – price per MWh25.16
-51.75
Commodity capacity option contracts4
Discounted cash flowForward capacity option curves - price per MW day30.40
-165.10
2
Discounted cash flowForward capacity option curves – price per MW day21.00
-109.00
Reserves(22) Bid-ask spreads, implied volatility, probability of default   
Commodity contract reserves(11) Bid-ask spreads, implied volatility, probability of default   
Total Level 3 derivatives$13
    $(1)    
Duke Energy Carolinas     
FERC mitigation power sale agreements$(2)Discounted cash flowForward electricity curves - price per MWh25.79
-52.38
Duke Energy Ohio          
Electricity contracts$18
Discounted cash flowForward electricity curves - price per MWh20.77
-58.90
$(6)Discounted cash flowForward electricity curves – price per MWh25.25
-51.75
Natural gas contracts(2)Discounted cash flowForward natural gas curves - price per MMBtu3.07
-5.37
(5)Discounted cash flowForward natural gas curves – price per MMBtu2.12
-4.35
Reserves(20) Bid-ask spreads, implied volatility, probability of default   
Commodity contract reserves(7) Bid-ask spreads, implied volatility, probability of default   
Total Level 3 derivatives$(4)    $(18)    
Duke Energy Indiana          
FTRs$12
RTO auction pricingFTR price - per MWh(0.30)-13.80
$14
RTO auction pricingFTR price – per MWh(1.92)-9.86

8579


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


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.
September 30, 2014 December 31, 2013March 31, 2015 December 31, 2014
(in millions)Book Value
Fair Value
 Book Value
Fair Value
Book Value
Fair Value
 Book Value
Fair Value
Duke Energy$39,858
$43,602
 $40,256
$42,592
$39,973
$45,113
 $40,020
$44,566
Duke Energy Carolinas8,394
9,426
 8,436
9,123
8,885
10,301
 8,391
9,626
Progress Energy14,512
16,305
 14,115
15,234
14,510
16,956
 14,754
16,951
Duke Energy Progress5,716
6,013
 5,235
5,323
5,957
6,549
 6,201
6,696
Duke Energy Florida5,102
5,867
 4,886
5,408
4,858
5,867
 4,860
5,767
Duke Energy Ohio1,783
1,967
 2,188
2,237
1,606
1,810
 1,766
1,970
Duke Energy Indiana3,795
4,356
 3,796
4,171
3,791
4,529
 3,791
4,456
At both September 30, 2014March 31, 2015 and December 31, 2013,2014, the 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.
13.12. 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 significant 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 significant activities of the VIE that most significantly impact its economic performance and (ii) what party has rights to receive benefits or is obligated to absorb losses that arecould potentially be significant to the VIE. The analysis of the party that consolidates a VIE is a continual reassessment.
Other than the discussion below related to CRC, noNo financial support was provided to any of the consolidated VIEs during the ninethree months ended September 30, 2014March 31, 2015 and the year ended December 31, 2013,2014, or is expected to be provided in the future, that was not previously contractually required.

8680


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


CONSOLIDATED VIEs
The following tables below showsummarize the impact of VIEs consolidated by Duke Energy and how these entities impactthe Subsidiary Registrants on the Condensed Consolidated Balance Sheets.
September 30, 2014March 31, 2015
Duke EnergyDuke Energy
Duke Energy Carolinas
 Duke Energy Progress
 Duke Energy Florida
        Duke Energy Carolinas
 Duke Energy Progress
 Duke Energy Florida
        
(in millions)DERF
 DEPR
 DEFR
 CRC
 Renewables
 Other
 Total
DERF
 
DEPR(c)

 
DEFR(c)

 CRC
 Renewables
 Other
 Total
ASSETS                          
Current Assets                          
Restricted receivables of variable interest entities (net of allowance for doubtful accounts)$695
 $474
 $403
 $465
 $12
 $20
 $2,069
$658
 $478
 $300
 $540
 $18
 $22
 $2,016
Other
 
 
 
 141
 13
 154

 
 
 
 102
 7
 109
Investments and Other Assets                          
Other
 
 
 
 29
 34
 63

 
 
 
 22
 15
 37
Property, Plant and Equipment                          
Property, plant and equipment, cost(a)

 
 
 
 1,856
 18
 1,874

 
 
 
 1,854
 19
 1,873
Accumulated depreciation and amortization
 
 
 
 (232) (5) (237)
 
 
 
 (267) (6) (273)
Regulatory Assets and Deferred Debits                          
Other1
 
 1
 
 35
 
 37

 1
 1
 
 36
 
 38
Total assets$696
 $474
 $404
 $465
 $1,841
 $80
 $3,960
$658
 $479
 $301
 $540
 $1,765
 $57
 $3,800
LIABILITIES AND EQUITY                          
Current Liabilities                          
Accounts payable$
 $
 $
 $
 $2
 $
 $2
$
 $
 $
 $
 $2
 $
 $2
Taxes accrued
 
 
 
 6
 
 6
2
 2
 1
 
 4
 
 9
Current maturities of long-term debt
 
 
 
 67
 16
 83

 
 
 
 68
 17
 85
Other
 
 
 
 26
 12
 38

 
 
 
 23
 8
 31
Long-Term Debt(b)400
 300
 225
 325
 989
 21
 2,260
Long-Term Debt(b)
400
 300
 225
 325
 967
 12
 2,229
Deferred Credits and Other Liabilities                          
Deferred income taxes
 
 
 
 292
 
 292

 
 
 
 270
 
 270
Asset retirement obligations
 
 
 
 31
 
 31

 
 
 
 30
 
 30
Other
 
 
 
 33
 10
 43

 
 
 
 40
 
 40
Total liabilities$400
 $300
 $225
 $325
 $1,446
 $59
 $2,755
$402
 $302
 $226
 $325
 $1,404
 $37
 $2,696
Net assets of consolidated variable interest entities$296
 $174
 $179
 $140
 $395
 $21
 $1,205
$256
 $177
 $75
 $215
 $361
 $20
 $1,104
(a)    Restricted as collateral for non-recourse debt of VIEs.
(b)    Non-recourse to the general assets of the applicable registrant.
(c)The amount for Progress Energy is equal to the sum of the amounts for Duke Energy Progress Receivables Company, LLC (DEPR) and Duke Energy Florida Receivables Company, LLC (DEFR).




8781


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


December 31, 2013December 31, 2014
Duke EnergyDuke Energy
Duke Energy Carolinas
 Duke Energy Progress
        Duke Energy Carolinas
 Duke Energy Progress
 Duke Energy Florida
        
(in millions)DERF
 DEPR
 CRC
 Renewables
 Other
 Total
DERF
 
DEPR(c)

 
DEFR(c)

 CRC
 Renewables
 Other
 Total
ASSETS                        
Current Assets                        
Restricted receivables of variable interest entities (net of allowance for doubtful accounts)$673
 $416
 $595
 $18
 $17
 $1,719
$647
 $436
 $305
 $547
 $20
 $18
 $1,973
Other
 
 
 89
 12
 101

 
 
 
 68
 6
 74
Investments and Other Assets                        
Other
 
 
 29
 51
 80

 
 
 
 25
 25
 50
Property, Plant and Equipment                        
Property, plant and equipment, cost(a)

 
 
 1,662
 18
 1,680

 
 
 
 1,855
 18
 1,873
Accumulated depreciation and amortization
 
 
 (170) (5) (175)
 
 
 
 (250) (5) (255)
Regulatory Assets and Deferred Debits                        
Other1
 1
 
 34
 
 36

 
 
 
 34
 2
 36
Total assets$674
 $417
 $595
 $1,662
 $93
 $3,441
$647
 $436
 $305
 $547
 $1,752
 $64
 $3,751
LIABILITIES AND EQUITY                        
Current Liabilities                        
Accounts payable$
 $
 $
 $2
 $
 $2
$
 $
 $
 $
 $3
 $
 $3
Taxes accrued
 
 
 10
 
 10

 
 
 
 6
 
 6
Current maturities of long-term debt
 
 
 66
 14
 80

 
 
 
 68
 16
 84
Other
 
 
 17
 10
 27

 
 
 
 16
 5
 21
Long-Term Debt(b)400
 300
 325
 907
 34
 1,966
Long-Term Debt(b)
400
 300
 225
 325
 967
 17
 2,234
Deferred Credits and Other Liabilities                        
Deferred income taxes
 
 
 290
 
 290

 
 
 
 283
 
 283
Asset retirement obligations
 
 
 26
 
 26

 
 
 
 29
 
 29
Other1
 
 
 17
 13
 31

 
 
 
 34
 4
 38
Total liabilities$401
 $300
 $325
 $1,335
 $71
 $2,432
$400
 $300
 $225
 $325
 $1,406
 $42
 $2,698
Net assets of consolidated variable interest entities$273
 $117
 $270
 $327
 $22
 $1,009
$247
 $136
 $80
 $222
 $346
 $22
 $1,053
(a)    Restricted as collateral for non-recourse debt of VIEs.
(b)    Non-recourse to the general assets of the applicable registrant.
(c)The amount for Progress Energy is equal to the sum of the amounts for DEPR and DEFR.
The obligations of these VIEs are non-recourse to Duke Energy, Duke Energy Carolinas, Progress Energy, Duke Energy Progress and Duke Energy Florida. These entities have no requirement to provide liquidity to, purchase assets of or guarantee performance of these VIEs unless noted in the following paragraphs.
DERF / DEPR / DEFR
Duke Energy Receivables Finance Company, LLC (DERF), Duke Energy Progress Receivables Company, LLC (DEPR), and Duke Energy Florida Receivables Company, LLC (DEFR) are bankruptcy remote, special purpose subsidiaries of Duke Energy Carolinas, Duke Energy Progress, and Duke Energy Florida, respectively. On a daily basis, DERF, DEPR, and DEFR buy certain accounts receivable arising from the sale of electricity and/or related services from Duke Energy Carolinas, Duke Energy Progress, and Duke Energy Florida. DERF, DEPR, and DEFR are wholly owned limited liability companies with separate legal existence from their parents, and their assets are not generally available to creditors of Duke Energy Carolinas, Duke Energy Progress, and Duke Energy Florida. DERF, DEPR, and DEFR borrow amounts under credit facilities to buy the receivables. Borrowings are limited to the amount of qualified receivables sold, which is expected to be in excess of the credit facilities. The credit facilities are reflected on the Condensed Consolidated Balance Sheets as Long-Term Debt. The secured credit facilities were not structured to meet the criteria for sale accounting treatment under the accounting guidance for transfers and servicing of financial assets.
The most significant activity that impacts the economic performance of DERF, DEPR, and DEFR are the decisions made to manage delinquent receivables. Duke Energy Carolinas, Duke Energy Progress, and Duke Energy Florida consolidate DERF, DEPR, and DEFR, respectively, as they make those decisions.

8882


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


DERF / DEPR / DEFR
Duke Energy Receivables Finance Company, LLC (DERF), DEPR and DEFR are bankruptcy remote, special purpose subsidiaries of Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida, respectively. On a daily basis, DERF, DEPR and DEFR buy certain accounts receivable arising from the sale of electricity and/or related services from their parent companies. DERF, DEPR and DEFR are wholly owned limited liability companies with separate legal existence from their parents, and their assets are not generally available to creditors of their parent companies. DERF, DEPR and DEFR borrow amounts under credit facilities to buy the receivables. Borrowing availability is limited to the amount of qualified receivables sold, which is generally expected to be in excess of the credit facilities. The credit facilities are reflected on the Condensed Consolidated Balance Sheets as Long-Term Debt. The secured credit facilities were not structured to meet the criteria for sale accounting treatment under the accounting guidance for transfers and servicing of financial assets.
The following table outlinessummarizes the amounts and expiration dates of the credit facilities.facilities reflected on the Condensed Consolidated Balance Sheets as Long-Term Debt.
 DERF
DEPR
DEFR
Credit facility amount (in millions)$400
$300
$225
Expiration dateOctober 2016
December 2016
March 2017
The activity that most significantly impacts the economic performance of DERF, DEPR and DEFR are the decisions made to manage delinquent receivables. Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida consolidate DERF, DEPR and DEFR, respectively, as they are the related parties most closely associated with the VIE.
CRC
On a revolving basis, CRC buys certain accounts receivable arising from the sale of electricity and/or related services from Duke Energy Ohio and Duke Energy Indiana. Receivables sold are securitized by CRC through a credit facility managed by two unrelated third parties. The proceeds Duke Energy Ohio and Duke Energy Indiana receive from the sale of receivables to CRC are typically 75 percent cash and 25 percent in the form of a subordinated note from CRC. The subordinated note is a retained interest in the receivables sold. Cash collections from the receivables are the sole source of funds to satisfy the related debt obligation. Depending on experience with collections, additional equity infusions to CRC may be required by Duke Energy to maintain a minimum equity balance of $3 million. There were no infusions to CRC during the three or nine months ended September 30, 2014 and 2013, respectively. Borrowing availability is limited to the amount of qualified receivables sold, which is generally expected to be in excess of the credit facility. The credit facility expires in November 2016 and is reflected on the Condensed Consolidated Balance Sheets as Long-Term Debt.
CRC is considered a VIE because (i) equity capitalization is insufficient to support its operations, (ii) power to direct the most significant activities that most significantly impact the economic performance of the entity are not performed by the equity holder, Cinergy, and (iii) deficiencies in net worth of CRC are not funded by Cinergy, but by Duke Energy. The most significant activityactivities of CRC relates to theare decisions made with respectrelated to the management of delinquent receivables. Duke Energy consolidates CRC as it makes these decisions. Neither Duke Energy Ohio nor Duke Energy Indiana consolidate CRC.
Renewables
Certain of Duke Energy’s renewable energy facilities are VIEs due to long-term fixed-price power purchase agreements with terms that approximate the expected life of the projects.agreements. These fixed pricefixed-price agreements effectively transfer commodity price risk to the buyer of the power. Certain other of Duke Energy’s renewable energy facilities are VIEs due to Duke Energy issuing guarantees for debt service and operations and maintenance reserves in support of debt financings. AssetsFor certain VIEs, assets are restricted and cannot be pledged as collateral or sold to third parties without prior approval of debt holders. The most significant activities that most significantly impact the economic performance of these renewable energy facilities were decisions associated with siting, negotiating purchase power agreements, engineering, procurement and construction, and decisions associated with ongoing operations and maintenance-related activities. Duke Energy consolidates the entities as it makes all of these decisions.
NON-CONSOLIDATED VIEs
The following tables below showinclude VIEs not consolidated and how these entities impact the Condensed Consolidated Balance Sheets.
September 30, 2014March 31, 2015
Duke Energy 
Duke Energy
Ohio

 
Duke Energy
Indiana

Duke Energy 
Duke Energy
Ohio

 
Duke Energy
Indiana

(in millions)Renewables
 Other
 Total
 Renewables
 Other
 Total
 
Receivables$
 $
 $
 $49
 $76
$
 $
 $
 $90
 $105
Investments in equity method unconsolidated affiliates149
 3
 152
 
 $
147
 66
 213
 
 $
Investments and other assets
 4
 4
 
 

 3
 3
 
 
Total assets$149
 $7
 $156
 $49
 $76
$147
 $69
 $216
 $90
 $105
Other current liabilities$
 $2
 $2
 $
 $
$
 $2
 $2
 $
 $
Deferred credits and other liabilities
 14
 14
 
 

 14
 14
 
 
Total liabilities$
 $16
 $16
 $
 $
$
 $16
 $16
 $
 $
Net assets (liabilities)$149
 $(9) $140
 $49
 $76
$147
 $53
 $200
 $90
 $105

8983


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


December 31, 2013December 31, 2014
Duke Energy Duke Energy Ohio
 Duke Energy Indiana
Duke Energy Duke Energy Ohio
 Duke Energy Indiana
(in millions)Renewables
 Other
 Total
 Renewables
 Other
 Total
 
Receivables$
 $
 $
 $114
 $143
$
 $
 $
 $91
 $113
Investments in equity method unconsolidated affiliates153
 60
 213
 
 
150
 38
 188
 
 
Intangibles, net
 96
 96
 96
 
Investments and other assets
 4
 4
 
 

 4
 4
 
 
Total assets$153
 $160
 $313
 $210
 $143
$150
 $42
 $192
 $91
 $113
Other current liabilities$
 $3
 $3
 $
 $

 3
 3
 
 
Deferred credits and other liabilities
 15
 15
 
 

 14
 14
 
 
Total liabilities$
 $18
 $18
 $
 $
$
 $17
 $17
 $
 $
Net assets$153
 $142
 $295
 $210
 $143
$150
 $25
 $175
 $91
 $113
The Duke Energy Registrants are not aware of any situations where the maximum exposure to loss significantly exceeds the carrying values shown above except for the power purchase agreement with OVEC, which is discussed below, and various guarantees, (See Note 5), reflected in the table above as Deferred credits and other liabilities. For more information on various guarantees, refer to Note 5, "Commitments and Contingencies".
Renewables
Duke Energy has investments in various renewable energy project entities. Some of these entities are VIEs due to long-term fixed-price power purchase agreements with terms that approximate the expected life of the project.agreements. These fixed pricefixed-price agreements effectively transfer commodity price risk to the buyer of the power. Duke Energy does not consolidate these VIEs because power to direct and control key activities is shared jointly by Duke Energy and other owners.
Other
At December 31, 2013,Duke Energy holds a 50 percent equity interest in Duke-American Transmission Company, LLC (DATC). DATC is considered a VIE due to insufficient equity at risk to permit DATC to finance its own activities without additional subordinated financial support. The activities that most significantly impact DATC’s economic performance are the decisions related to investing in existing and development of new transmission facilities. The power to direct these activities is jointly and equally shared by Duke Energy and the other joint venture partner and, therefore, Duke Energy does not consolidate.

Duke Energy has a 40 percent equity interest in ACP, which is considered a VIE as the equity is not sufficient to permit the entity to finance its activities without additional subordinated financial support. The activity that most significantsignificantly impacts the economic performance of the Other non-consolidated VIEsACP is construction. Duke Energy does not control these activities and therefore does not consolidate ACP.

OVEC
Duke Energy Ohio’s 9 percent ownership interest in OVEC.OVEC is considered a non-consolidated VIE. Through its ownership interest in OVEC, Duke Energy Ohio has a contractual arrangement to buy power from OVEC’s power plants through June 2040. Proceeds from the sale of power by OVEC to its power purchase agreement counterparties are designed to be sufficient to meet its operating expenses, fixed costs, debt amortization and interest expense, as well as earn a return on equity. Accordingly, the value of this contract is subject to variability due to fluctuations in power prices and changes in OVEC’s costs of business, including costs associated with its 2,256 MW of coal-fired generation capacity. The initial carrying valueProposed environmental rule-making could increase the costs of this contract was recorded as an intangible asset whenOVEC, which would be passed through to Duke Energy acquired Cinergy in April 2006. The carrying amount of OVEC, including this intangible asset, was fully impaired at September 30, 2014.Ohio. In 2014, Duke Energy recorded a $94 million impairment related to OVEC.
CRC
See discussion under Consolidated VIEs for additional information related to CRC.
Amounts included in Receivables in the above table for Duke Energy Ohio and Duke Energy Indiana reflect their retained interest in receivables sold to CRC. These subordinated notes held by Duke Energy Ohio and Duke Energy Indiana are stated at fair value and are classified within Receivables in their Condensed Consolidated Balance Sheets.value. Carrying values of retained interests are determined by allocating carrying value of the receivables between assets sold and interests retained based on relative fair value. The allocated bases of the subordinated notes are not materially different than their face value because (i) the receivables generally turnover in less than two months, (ii) credit losses are reasonably predictable due to the broad customer base and lack of significant concentration, and (iii) the equity in CRC is subordinate to all retained interests and thus would absorb losses first. The hypothetical effect on fair value of the retained interests assuming both a 10 percent and a 20 percent unfavorable variation in credit losses or discount rates is not material due to the short turnover of receivables and historically low credit loss history. Interest accrues to Duke Energy Ohio and Duke Energy Indiana on the retained interests using the acceptable yield method. This method generally approximates the stated rate on the notes since the allocated basis and the face value are nearly equivalent. An impairment charge is recorded against the carrying value of both retained interests and purchased beneficial interest whenever it is determined that an other-than-temporary impairment has occurred.
Key assumptions used in estimating fair value are detailed in the following table.
 Duke Energy Ohio Duke Energy Indiana
 2014
 2013
 2014
 2013
Anticipated credit loss ratio0.6% 0.6% 0.3% 0.3%
Discount rate1.2% 1.2% 1.2% 1.2%
Receivable turnover rate12.8% 12.8% 10.5% 10.3%

9084


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


Key assumptions used in estimating fair value are detailed in the following table.

 Duke Energy Ohio Duke Energy Indiana
 2015
 2014
 2015
 2014
Anticipated credit loss ratio0.6% 0.6% 0.3% 0.3%
Discount rate1.2% 1.2% 1.2% 1.2%
Receivable turnover rate12.8% 12.8% 10.5% 10.4%
The following table shows the gross and net receivables sold.
Duke Energy Ohio Duke Energy IndianaDuke Energy Ohio Duke Energy Indiana
(in millions)September 30, 2014
 December 31, 2013
 September 30, 2014
 December 31, 2013
March 31, 2015
 December 31, 2014
 March 31, 2015
 December 31, 2014
Receivables sold$216
 $290
 $287
 $340
$284
 $273
 $296
 $310
Less: Retained interests49
 114
 76
 143
90
 91
 105
 113
Net receivables sold$167
 $176
 $211
 $197
$194
 $182
 $191
 $197
The following table shows sales and cash flows related to receivables sold.
Duke Energy Ohio Duke Energy IndianaDuke Energy Ohio Duke Energy Indiana
Three Months Ended September 30, Nine Months Ended September 30, Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended March 31, Three Months Ended March 31,
(in millions)2014
 2013
 2014
 2013
 2014
 2013
 2014
 2013
2015
 2014
 2015
 2014
Sales                      
Receivables sold$477
 $514
 $1,705
 $1,664
 $739
 $765
 $2,173
 $2,214
$644
 $741
 $716
 $755
Loss recognized on sale3
 3
 9
 9
 3
 2
 8
 8
3
 4
 3
 3
Cash flows                      
Cash proceeds from receivables sold494
 518
 1,761
 1,674
 759
 758
 2,233
 2,204
640
 723
 722
 761
Collection fees received
 
 1
 1
 
 
 1
 1
Return received on retained interests
 1
 3
 4
 2
 2
 5
 5
1
 2
 2
 2
Cash flows from sales of receivables are reflected within Operating Activities on Duke Energy Ohio’s and Duke Energy Indiana’s Condensed Consolidated Statements of Cash Flows.
Collection fees received in connection with servicing transferred accounts receivable are included in Operation, maintenance and other on Duke Energy Ohio’s and Duke Energy Indiana’s Condensed Consolidated Statements of Operations and Comprehensive Income. The loss recognized on sales of receivables is calculated monthly by multiplying receivables sold during the month by the required discount. The required discount is derived monthly utilizing a three-year weighted average formula that considers charge-off history, late charge history and turnover history on the sold receivables, as well as a component for the time value of money. The discount rate, or component for the time value of money, is calculated monthly by summing the prior month-end London Interbank Offered Rate (LIBOR) plus a fixed rate of 1.00 percent.
14.13. COMMON STOCK
Basic Earnings Per Share (EPS) is computed by dividing net income attributable to Duke Energy common shareholders, adjusted for distributed and undistributed earnings allocated to participating securities, by the weighted-average number of common shares outstanding during the period. Diluted EPS is computed by dividing net income attributable to Duke Energy common shareholders, as adjusted for distributed and undistributed earnings allocated to participating securities, by the diluted weighted-average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution that could occur if securities or other agreements to issue common stock, such as stock options, phantom shares and stock-based performance unit awards, were exercised or settled. Duke Energy’s participating securities are restricted stock units that are entitled to dividends declared on Duke Energy common shares during the restricted stock unit’s vesting periods.

85


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)

The following table presents Duke Energy’s basic and diluted EPS calculations and reconciles the weighted-average number of common shares outstanding to the diluted weighted-average number of common shares outstanding.
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended March 31,
(in millions, except per share amounts)2014 2013 2014 20132015
 2014
Income from continuing operations attributable to Duke Energy common shareholders$887
 $942
 $2,351
 $1,884
$772
 $744
Weighted-average shares outstanding - basic707
 706
 707
 706
Weighted-average shares outstanding - diluted707 706 707 706
Weighted-average shares outstanding – basic708
 706
Weighted-average shares outstanding – diluted708 706
Earnings per share from continuing operations attributable to Duke Energy common shareholders          
Basic$1.25
 $1.33
 $3.33
 $2.67
$1.09
 $1.05
Diluted$1.25
 $1.33
 $3.33
 $2.67
$1.09
 $1.05
Potentially dilutive items excluded from the calculation(a)
    2 22
 2
Dividends declared per common share$0.795
 $0.78
 $2.355
 $2.31
$0.795
 $0.78
(a)StockCertain stock options and performance and unvested stock awards were not included in the dilutive securities calculation because either the option exercise prices were greater than the average market price of the common shares during thosethe presented periods, or performance measures related to the awards had not yet been met.

On April 6, 2015, Duke Energy entered into agreements with each of Goldman, Sachs & Co. and JPMorgan Chase Bank, National Association (the Dealers) to repurchase a total of $1.5 billion of Duke Energy common stock under an accelerated stock repurchase program (the ASR). Duke Energy made payments of $750 million to each of the Dealers and was delivered 16.6 million shares, which is approximately 85 percent of the total number of shares of Duke Energy common stock expected to be repurchased under the ASR. The total fair market value of the delivered shares, based on the closing Duke Energy stock price of $76.97 per share at the commencement of the ASR, was $1.275 billion. The final number of shares to be repurchased is dependent upon the average of the daily volume-weighted average stock prices of Duke Energy’s common stock during the term of the program, less a discount and subject to adjustments pursuant to the terms and conditions of the ASR agreements. The delivery of additional shares of common stock to Duke Energy or delivery of shares of common stock or cash payment, at Duke Energy’s election, to the Dealers from Duke Energy may be required under certain circumstances. Final settlement of the ASR transaction is expected to occur by the end of the third quarter of 2015.
91The $225 million unsettled portion of the ASR meets the criteria to be accounted for as a forward contract indexed to Duke Energy's stock and qualifies as an equity instrument. The company recorded the $1.5 billion payment as a reduction to common stock, which included the $1.275 billion of initial shares repurchased and the unsettled forward contract of $225 million, as of April 6, 2015. The initial delivery of shares will result in a reduction to Duke Energy's common stock outstanding used to calculate earnings per share beginning in the second quarter of 2015.



15.14. STOCK-BASED COMPENSATION
For employee awards, equity classified stock-based compensation cost is measured at the service inception date or the grant date, based on the estimated achievement of certain performance metrics or the fair value of the award, and is recognized as expense or capitalized as a component of property, plant and equipment over the requisite service period.
Duke Energy recorded pretax stock-based compensation expense as follows.
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended March 31,
(in millions)2014
 2013
 2014
 2013
2015
 2014
Stock options
 $
 
 $2
Restricted stock unit awards8
 10
 30
 36
$9
 $11
Performance awards4
 7
 14
 25
5
 5
Total$12
 $17
 $44
 $63
$14
 $16
Tax benefit associated with stock-based compensation expense$5
 $6
 17
 $24
$5
 $6
Stock-based compensation costs capitalized1
 1
 3
 3
1
 1
16.15. EMPLOYEE BENEFIT PLANS
DEFINED BENEFIT RETIREMENT PLANS
Duke Energy maintains, and the Subsidiary Registrants participate in, qualified, non-contributory defined benefit retirement plans. The plans cover most U.S. employees using a cash balance formula. Under a cash balance formula, a plan participant accumulates a retirement benefit consisting of pay credits based uponequal to a percentage of current eligible earnings based on age and/or years of service, and interest credits. Certain employees are covered under plans that use a final average earnings formula. Under these average earnings formulas, a plan participant accumulates a retirement benefit equal to the sum of percentages of their (i) highest three-year or four-year average earnings, (ii) highest three-year or four-year average earnings in excess of covered compensation per year of participation (maximum of 35 years), and/or (iii) highest three-year or four-year average earnings times years of participation in excess of 35 years. Duke Energy also maintains, and the Subsidiary Registrants participate in, non-qualified, non-contributory defined benefit retirement plans which cover certain executives. As of January 1, 2014, the qualified and non-qualified non-contributory defined benefit plans are closed to new and rehired non-union and certain unionized employees.

86


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)

Duke Energy uses a December 31 measurement date for its defined benefit retirement plan assets and obligations.
Duke Energy’s policy is to fund amounts on an actuarial basis to provide assets sufficient to meet benefit payments to be paid to plan participants. The following table includes information related to the Duke Energy madeRegistrants’ contributions directly to its U.S. qualified defined benefit pension plan assets during the three and nine months ended September 30, 2013 of $27 million, all of which relates to Duke Energy Florida. plans.
 Three Months Ended March 31, 2015
(in millions)Duke Energy
 Duke Energy Carolinas
 Progress Energy
 Duke Energy Progress
 Duke Energy Florida
 Duke Energy Ohio
 Duke Energy Indiana
           
Contributions$132
 $42
 $42
 $21
 $21
 $1
 $9
Duke Energy did not make any contributions to its U.S. qualified defined benefit retirementpension plans during the ninethree months ended September 30,March 31, 2014.
Net periodic benefit costs disclosed in the tables below represent the cost of the respective benefit plan for the periods presented. However, portions of the net periodic benefit costs disclosed in the tables below have been capitalized as a component of property, plant and equipment. Amounts presented in the tables below for the Subsidiary Registrants represent the amounts of pension and other post-retirement benefit costcosts allocated by Duke Energy for employees of the Subsidiary Registrants. Additionally, the Subsidiary Registrants are allocated their proportionate share of pension and post-retirement benefit costcosts for employees of Duke Energy’s shared services affiliate that provide support to the Subsidiary Registrants. These allocated amounts are included in the governance and shared service costs discussed in Note 9.8.
QUALIFIED PENSION PLANS
The following tables include the components of net periodic pension costs for qualified pension plans.
 Three Months Ended September 30, 2014
(in millions)Duke Energy
 Duke Energy Carolinas
 Progress Energy
 Duke Energy Progress
 Duke Energy Florida
 Duke Energy Ohio
 Duke Energy Indiana
Service cost$34
 $10
 $10
 $6
 $5
 $1
 $3
Interest cost on projected benefit obligation86
 22
 28
 13
 14
 5
 7
Expected return on plan assets(128) (33) (44) (21) (21) (7) (10)
Amortization of actuarial loss37
 8
 17
 8
 8
 1
 3
Amortization of prior service credit(4) (2) 
 
 
 
 
Other3
 1
 1
 
 
 
 
Net periodic pension costs$28
 $6
 $12
 $6
 $6
 $
 $3
 Three Months Ended March 31, 2015
(in millions)Duke Energy
 Duke Energy Carolinas
 Progress Energy
 Duke Energy Progress
 Duke Energy Florida
 Duke Energy Ohio
 Duke Energy Indiana
Service cost$40
 $13
 $11
 $6
 $5
 $1
 $3
Interest cost on projected benefit obligation82
 21
 26
 12
 14
 5
 7
Expected return on plan assets(129) (36) (43) (20) (22) (6) (10)
Amortization of actuarial loss43
 10
 17
 8
 8
 2
 3
Amortization of prior service credit(4) (2) (1) 
 
 
 
Other2
 1
 1
 
 
 
 
Net periodic pension costs$34
 $7
 $11
 $6
 $5
 $2
 $3
 Three Months Ended March 31, 2014
(in millions)Duke Energy
 Duke Energy Carolinas
 Progress Energy
 Duke Energy Progress
 Duke Energy Florida
 Duke Energy Ohio
 Duke Energy Indiana
Service cost$34
 $10
 $10
 $5
 $5
 $1
 $2
Interest cost on projected benefit obligation86
 21
 28
 13
 14
 5
 7
Expected return on plan assets(128) (33) (43) (21) (21) (7) (9)
Amortization of actuarial loss37
 9
 17
 8
 8
 1
 3
Amortization of prior service credit(4) (2) (1) 
 
 
 
Other2
 1
 1
 
 
 
 
Net periodic pension costs$27
 $6
 $12
 $5
 $6
 $
 $3
NON-QUALIFIED PENSION PLANS
The net periodic pension costs for non-qualified pension plans were not material for the three months ended March 31, 2015 and 2014.

9287


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


 Three Months Ended September 30, 2013
(in millions)Duke Energy
 Duke Energy Carolinas
 Progress Energy
 Duke Energy Progress
 Duke Energy Florida
 Duke Energy Ohio
 Duke Energy Indiana
Service cost$41
 $12
 $15
 $6
 $8
 $1
 $2
Interest cost on projected benefit obligation80
 20
 29
 13
 13
 5
 7
Expected return on plan assets(137) (37) (50) (24) (21) (7) (11)
Amortization of actuarial loss61
 15
 26
 11
 12
 3
 6
Amortization of prior service credit(2) (2) (1) (1) (1) 
 
Other2
 1
 
 1
 
 
 1
Net periodic pension costs$45
 $9
 $19
 $6
 $11
 $2
 $5
 Nine Months Ended September 30, 2014
(in millions)Duke Energy
 Duke Energy Carolinas
 Progress Energy
 Duke Energy Progress
 Duke Energy Florida
 Duke Energy Ohio
 Duke Energy Indiana
Service cost$102
 $31
 $30
 $16
 $15
 $3
 $7
Interest cost on projected benefit obligation258
 64
 84
 40
 43
 15
 22
Expected return on plan assets(383) (99) (130) (64) (64) (20) (30)
Amortization of actuarial loss111
 26
 51
 24
 24
 3
 9
Amortization of prior service credit(11) (6) (2) (1) (1) 
 
Other6
 2
 2
 1
 1
 
 
Net periodic pension costs$83
 $18
 $35
 $16
 $18
 $1
 $8
 Nine Months Ended September 30, 2013
(in millions)Duke Energy
 Duke Energy Carolinas
 Progress Energy
 Duke Energy Progress
 Duke Energy Florida
 Duke Energy Ohio
 Duke Energy Indiana
Service cost$125
 $37
 $45
 $17
 $23
 $4
 $8
Interest cost on projected benefit obligation240
 60
 87
 38
 40
 16
 21
Expected return on plan assets(411) (111) (149) (71) (65) (22) (33)
Amortization of actuarial loss183
 45
 76
 34
 37
 9
 17
Amortization of prior service credit(8) (5) (3) (1) (2) 
 
Other5
 2
 1
 1
 
 
 1
Net periodic pension costs$134
 $28
 $57
 $18
 $33
 $7
 $14
NON-QUALIFIED PENSION PLANS
The following tables include the components of net periodic pension costs for non-qualified pension plans for registrants with non-qualified pension costs.
 Three Months Ended September 30, 2014
(in millions)Duke Energy
 Duke Energy Carolinas
 Progress Energy
 Duke Energy Progress
 Duke Energy Florida
Service cost$1
 $
 $
 $1
 $
Interest cost on projected benefit obligation3
 1
 2
 
 
Amortization of actuarial loss1
 
 
 
 
Amortization of prior service credit
 
 (1) 
 
Net periodic pension costs$5
 $1
 $1
 $1
 $

93

PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


 Three Months Ended September 30, 2013
(in millions)Duke Energy
 Duke Energy Carolinas
 Progress Energy
 Duke Energy Progress
 Duke Energy Florida
Service cost$1
 $
 $1
 $1
 $
Interest cost on projected benefit obligation3
 
 1
 
 
Amortization of actuarial loss1
 
 1
 1
 1
Net periodic pension costs$5
 $
 $3
 $2
 $1
 Nine Months Ended September 30, 2014
(in millions)Duke Energy
 Duke Energy Carolinas
 Progress Energy
 Duke Energy Progress
 Duke Energy Florida
Service cost$2
 $
 $1
 $1
 $
Interest cost on projected benefit obligation10
 1
 4
 1
 1
Amortization of actuarial loss2
 
 1
 
 
Amortization of prior service credit
 
 (1) 
 
Net periodic pension costs$14
 $1
 $5
 $2
 $1
 Nine Months Ended September 30, 2013
(in millions)Duke Energy
 Duke Energy Carolinas
 Progress Energy
 Duke Energy Progress
 Duke Energy Florida
Service cost$2
 $
 $1
 $1
 $
Interest cost on projected benefit obligation10
 1
 5
 1
 1
Amortization of actuarial loss4
 
 3
 1
 1
Amortization of prior service credit(1) 
 (1) 
 
Net periodic pension costs$15
 $1
 $8
 $3
 $2
OTHER POST-RETIREMENT BENEFIT PLANS
Duke Energy provides, and the Subsidiary Registrants participate in, some health care and life insurance benefits for retired employees on a contributory and non-contributory basis. Employees are eligible for these benefits if they have met age and service requirements at retirement, as defined in the plans. The health care benefits include medical, dental and prescription drug coverage and are subject to certain limitations, such as deductibles and co-payments.
Duke Energy uses a December 31 measurement date for its other post-retirement benefit plan assets and obligations. However, due to the impact of certain changes in Legacy Progress Energy health care benefits announced in September 2013, Duke Energy remeasured its Legacy Progress Energy other post-retirement benefit plan obligation as of September 30, 2013. There are no plan assets associated with the Legacy Progress Energy other post-retirement benefit plan. The discount rate used for the remeasurement was 4.7%. The health care cost trend rate of 8.5% reduces to 5.0% over eight years. The mortality tables were updated to account for mortality improvement.
Duke Energy did not make any pre-funding contributions to its other post-retirement benefit plans during the three and nine months ended September 30, 2014March 31, 2015 and 2013.2014.
The following tables include the components of net periodic other post-retirement benefit costs.
 Three Months Ended September 30, 2014
(in millions)Duke Energy
 Duke Energy Carolinas
 Progress Energy
 Duke Energy Progress
 Duke Energy Florida
 Duke Energy Indiana
Service cost$2
 $
 $1
 $
 $
 $
Interest cost on accumulated post-retirement benefit obligation13
 3
 6
 3
 3
 1
Expected return on plan assets(3) (2) 
 
 
 
Amortization of actuarial loss9
 1
 10
 8
 3
 
Amortization of prior service credit(31) (3) (24) (19) (5) 
Net periodic other post-retirement benefit costs$(10) $(1) $(7) $(8) $1
 $1

94

PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


 Three Months Ended September 30, 2013
(in millions)Duke Energy
 Duke Energy Carolinas
 Progress Energy
 Duke Energy Progress
 Duke Energy Florida
 Duke Energy Indiana
Service cost$7
 $1
 $6
 $3
 $2
 $1
Interest cost on accumulated post-retirement benefit obligation19
 3
 12
 7
 5
 1
Expected return on plan assets(4) (2) 
 
 
 (1)
Amortization of actuarial loss13
 
 13
 8
 4
 1
Amortization of prior service credit(3) (2) 
 
 
 
Net periodic other post-retirement benefit costs$32
 $
 $31
 $18
 $11
 $2
 Nine Months Ended September 30, 2014
(in millions)Duke Energy
 Duke Energy Carolinas
 Progress Energy
 Duke Energy Progress
 Duke Energy Florida
 Duke Energy Ohio
 Duke Energy Indiana
Service cost$7
 $1
 $3
 $1
 $2
 $
 $
Interest cost on accumulated post-retirement benefit obligation38
 9
 17
 8
 9
 1
 4
Expected return on plan assets(9) (6) 
 
 
 
 (1)
Amortization of actuarial loss (gain)29
 2
 31
 23
 8
 (1) 
Amortization of prior service credit(94) (8) (71) (55) (16) 
 
Net periodic other post-retirement benefit costs$(29) $(2) $(20) $(23) $3
 $
 $3
 Three Months Ended March 31, 2015
(in millions)Duke Energy
 Duke Energy Carolinas
 Progress Energy
 Duke Energy Progress
 Duke Energy Florida
 Duke Energy Ohio
 Duke Energy Indiana
Service cost$2
 $
 $
 $
 $
 $
 $
Interest cost on accumulated post-retirement benefit obligation9
 2
 4
 2
 2
 
 
Expected return on plan assets(3) (2) 
 
 
 
 
Amortization of actuarial loss6
 
 7
 5
 3
 
 
Amortization of prior service credit(35) (4) (26) (17) (9) 
 
Net periodic other post-retirement benefit costs$(21) $(4) $(15) $(10) $(4) $
 $
Nine Months Ended September 30, 2013Three Months Ended March 31, 2014
(in millions)Duke Energy
 Duke Energy Carolinas
 Progress Energy
 Duke Energy Progress
 Duke Energy Florida
 Duke Energy Ohio
 Duke Energy Indiana
Duke Energy
 Duke Energy Carolinas
 Progress Energy
 Duke Energy Progress
 Duke Energy Florida
 Duke Energy Ohio
 Duke Energy Indiana
Service cost$21
 $2
 $17
 $9
 $6
 $
 $1
$2
 $
 $1
 $
 $1
 $
 $
Interest cost on accumulated post-retirement benefit obligation55
 9
 35
 19
 13
 1
 4
12
 3
 6
 3
 3
 
 1
Expected return on plan assets(11) (7) 
 
 
 
 (1)(3) (2) 
 
 
 
 
Amortization of actuarial loss (gain)39
 2
 42
 26
 12
 (1) 1
Amortization of actuarial loss10
 1
 10
 7
 2
 
 
Amortization of prior service credit(9) (6) (1) (1) 
 
 
(31) (3) (24) (18) (5) 
 
Net periodic other post-retirement benefit costs$95
 $
 $93
 $53
 $31
 $
 $5
$(10) $(1) $(7) $(8) $1
 $
 $1
EMPLOYEE SAVINGS PLANS
Duke Energy sponsors, and the Subsidiary Registrants participate in, employee savings plans that cover substantially all U.S. employees. Effective January 1, 2015, all employee savings plans were merged into a single plan. Most employees participate in a matching contribution formula where Duke Energy provides a matching contribution generally equal to 100 percent of employee before-tax and Roth 401(k) contributions and, as applicable, after-tax contributions of up to 6 percent of eligible pay per pay period. Prior to 2015, Duke Energy also provided a match on after-tax contributions for certain plans. Dividends on Duke Energy shares held by the savings plans are charged to retained earnings when declared and shares held in the plans are considered outstanding in the calculation of basic and diluted earnings per share.
As of January 1, 2014, for new and rehired non-union and certain unionized employees who are not eligible to participate in Duke Energy’s defined benefit plans, an additional employer contribution of 4 percent of eligible pay per pay period, subject to three-year vesting, is provided to the employee’s savings plan account, which is subjectaccount.
The following table includes pretax employer matching contributions, as well as the additional contribution of 4 percent of eligible pay per pay period for employees not eligible to participate in a three-year vesting schedule.defined benefit plan, made by Duke Energy and expensed by the Subsidiary Registrants.
(in millions)Duke Energy
 Duke Energy Carolinas
 Progress Energy
 Duke Energy Progress
 Duke Energy Florida
 Duke Energy Ohio
 Duke Energy Indiana
Three Months Ended March 31,          
2015$49
 $16
 $14
 $11
 $4
 $1
 $2
201443
 14
 12
 9
 4
 1
 2

9588


PART I
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 Condensed Consolidated Financial Statements – (Continued)
(Unaudited)


The following table includes pretax employer matching contributions made by Duke Energy and expensed by the Subsidiary Registrants.
(in millions)Duke Energy
 Duke Energy Carolinas
 Progress Energy
 Duke Energy Progress
 Duke Energy Florida
 Duke Energy Ohio
 Duke Energy Indiana
Three Months Ended September 30,          
2014(a)
$30
 $10
 $10
 $7
 $3
 $
 $1
201330
 10
 12
 7
 4
 
 2
Nine Months Ended September 30,          
2014(a)
$110
 $36
 $33
 $23
 $10
 $2
 $5
2013101
 34
 34
 19
 11
 2
 5
(a)For the three and nine months ended September 30, 2014, amounts include the additional contribution of 4 percent of eligible pay per pay period for employees not eligible to participate in a defined benefit plan.
17.16. INCOME TAXES
The effective tax rates from continuing operations for each of the Duke Energy Registrants are included in the following table.
 Three Months Ended September 30, Nine Months Ended September 30,
 2014
 2013
 2014
 2013
Duke Energy34.0% 30.9% 31.4% 32.3%
Duke Energy Carolinas33.9% 37.9% 33.7% 37.5%
Progress Energy37.1% 38.8% 37.3% 38.1%
Duke Energy Progress36.3% 35.7% 36.6% 37.3%
Duke Energy Florida38.5% 40.0% 38.6% 40.0%
Duke Energy Ohio38.3% 35.9% 34.9% 36.5%
Duke Energy Indiana31.6% 36.6% 35.2% 37.2%
The increase in the effective tax rate for Duke Energy for the three months ended September 30, 2014 is primarily due to a favorable deferred state tax adjustment in the third quarter of 2013.
 Three Months Ended March 31,
 2015
 2014
Duke Energy31.9% 31.2%
Duke Energy Carolinas35.8% 37.4%
Progress Energy35.4% 36.9%
Duke Energy Progress33.8% 36.6%
Duke Energy Florida38.6% 38.5%
Duke Energy Ohio36.7% 36.4%
Duke Energy Indiana36.6% 36.8%
The decrease in the effective tax rate for Duke Energy Carolinas for the three months ended September 30, 2014March 31, 2015 is primarily due to an increasethe reduction of state rates in the tax benefit related to the manufacturing deduction in 2014 as the prior year deduction was limited by taxable income. The decrease in the effective tax rate for Duke Energy Carolinas for the nine months ended September 30, 2014 is primarily due to favorable audit settlements, changes in apportionment related to state income tax,certain jurisdictions and the tax benefit related to the manufacturing deduction in 20142015 as the prior yearprior-year deduction was limited by taxable income.
The decrease in the effective tax rate for Progress Energy for the three months ended September 30, 2014March 31, 2015 is primarily due to certain nondeductible book depreciation.an increase in AFUDC-equity.
The decrease in the effective tax rate for Duke Energy Florida for the three and nine months ended September 30, 2014 is primarily due to certain nondeductible book depreciation.
The increase in the effective tax rate for Duke Energy OhioProgress for the three months ended September 30, 2014March 31, 2015 is primarily due to an increase in the tax benefit related to the manufacturing deduction. The decrease in the effective tax rate for Duke Energy Ohio for the nine months ended September 30, 2014 is primarily due to certain nondeductible book depreciation.
The decrease in the effective tax rate for Duke Energy Indiana for the three and nine months ended September 30, 2014 is primarily due to a reduction in the statutory Indiana corporate income tax rate and a prior period audit settlement.AFUDC-equity.
18.17. SUBSEQUENT EVENTS
For information on subsequent events related to acquisitions and dispositions, regulatory matters, commitments and contingencies, and debt and credit facilities and common stock see Notes2, 4, 5, 6 and 6,13, respectively.

9689


PART I

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 Corporation (collectively with its subsidiaries, Duke Energy) and Duke Energy Carolinas, LLC (Duke Energy Carolinas), Progress Energy, Inc. (Progress Energy), Duke Energy Progress, Inc. (Duke Energy Progress), Duke Energy Florida, Inc. (Duke Energy Florida), Duke Energy Ohio, Inc. (Duke Energy Ohio), and Duke Energy Indiana, Inc. (Duke Energy Indiana) (collectively referred to as the Subsidiary Registrants). However, none of the registrants makes 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 United States (U.S.) primarily through its wholly owned subsidiaries, Duke Energy Carolinas, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio and Duke Energy Indiana, as well as in Latin America through International Energy.America.
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 includes financial information prepared in accordance with generally accepted accounting principles (GAAP) in the U.S., as well as certain non-GAAP financial measures such as adjusted earnings, adjusted diluted earnings per share (EPS), and adjusted segment income, discussed below. Generally, a non-GAAP financial measure is a numerical measure of financial performance, financial position or cash flows that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP. The non-GAAP financial measures should be viewed as a supplement to, and not a substitute for, financial measures presented in accordance with GAAP. Non-GAAP measures presented herein may not be comparable to similarly titled measures used by other companies.
Management’s Discussion and Analysis should be read in conjunction with the Condensed Consolidated Financial Statements and Notes for the ninethree months ended September 30, 2014,March 31, 2015, and with Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2013.2014.
Midwest Generation Exit
On August 21, 2014, Duke Energy, Commercial Enterprises, Inc., anthrough indirect wholly owned subsidiarysubsidiaries, completed the sale of Duke Energy Corporation,the nonregulated Midwest generation business and Duke Energy SAM,Retail Sales LLC a wholly owned subsidiary of Duke Energy Ohio, entered into a purchase and sale agreement (PSA) with(Disposal Group) to a subsidiary of Dynegy Inc. (Dynegy) whereby Dynegy will acquire Duke Energy Ohio's nonregulated Midwest generation business (Disposal Group). The results of operations of the nonregulated Midwest generation business have been classified as Discontinued Operations on the Condensed Consolidated Statements of OperationsApril 2, 2015, for the current and prior periods presented. Closing is expectedapproximately $2.8 billion in cash. Refer to be completed in the fourth quarter of 2014 or the first quarter of 2015. See Note 2 to the Condensed Consolidated Financial Statements, “Acquisitions and Dispositions,” for further discussionadditional information on this transaction.
Accelerated Stock Repurchase Program
On April 6, 2015, Duke Energy entered into agreements with each of Goldman, Sachs & Co. and JPMorgan Chase Bank, National Association (the Dealers) to repurchase a total of $1.5 billion of Duke Energy common stock under an accelerated stock repurchase program (the ASR). Duke Energy made payments of $750 million to each of the Disposal Group.Dealers and was delivered 16.6 million shares, which is approximately 85 percent of the total number of shares of Duke Energy common stock expected to be repurchased under the ASR. The total fair market value of the delivered shares, based on the closing Duke Energy stock price of $76.97 per share at the commencement of the ASR, was $1.275 billion. The final number of shares to be repurchased is dependent upon the average of the daily volume-weighted average stock prices of Duke Energy’s common stock during the term of the program, less a discount and subject to adjustments pursuant to the terms and conditions of the ASR agreements. The delivery of additional shares of common stock to Duke Energy or delivery of shares of common stock or cash payment, at Duke Energy’s election, to the Dealers from Duke Energy may be required under certain circumstances. Final settlement of the ASR transaction is expected to occur by the end of the third quarter of 2015.
For additional information on the details of this transaction, see Note 13 to the Condensed Consolidated Financial Statements, “Common Stock.”

90


PART I

Results of Operations
In this section, Duke Energy provides analysis and discussion of earnings and factors affecting earnings on both a GAAP and non-GAAP basis.
Management evaluates financial performance in part based on the non-GAAP financial measures, adjusted earnings and adjusted diluted EPS. These items are measured as income from continuing operations net of income (loss) attributable to noncontrolling interests, adjusted for the dollar and per shareper-share impact of mark-to-market impacts of economic hedges in the Commercial Power segment and special items including the operating results of the Disposal Group classified as discontinued operations for GAAP purposes. Special items represent certain charges and credits, which management believes will not be recurring on a regular basis, although it is reasonably possible such charges and credits could recur. As result of the agreement in August of 2014 to sell the Disposal Group to Dynegy, the operating results of the Disposal Group wereare classified as discontinued operations, in the current period and retrospectively, including a portion of the mark-to-market adjustments associated with derivative contracts. Management believes that including the operating results of the Disposal Group classified as discontinued operations better reflects its financial performance and therefore has included these results in adjusted earnings and adjusted diluted EPS. Derivative contracts are used in Duke Energy’s hedging of a portion of the economic value of its generation assets in the Commercial Power segment. The mark-to-market impact of derivative contracts is recognized in GAAP earnings immediately and, if associated with the Disposal Group, classified as discontinued operations, as such derivative contracts do not qualify for hedge accounting or regulatory treatment. The economic value of generation assets is subject to fluctuations in fair value due to market price volatility of input and output commodities (e.g., coal, electricity, natural gas). Economic hedging involves both purchases and sales of those input and output commodities related to generation assets. Operations of the generation assets are accounted for under the accrual method. Management believes excluding impacts of mark-to-market changes of the derivative contracts from adjusted earnings until settlement better matches the financial impacts of the derivative contract with the portion of economic value of the underlying hedged asset. However, due to the divestiture of the Disposal Group as mentioned above, certain derivative positions have tenors beyond the planned disposal date of these assets. As such, management excluded any settlement of these derivative positions from adjusted diluted EPS as these realized gains and losses more closely relate to the disposal of these assets. Management believes the presentation of adjusted earnings and adjusted diluted EPS provides useful information to investors, as it provides them an additional relevant comparison of Duke Energy’s performance across periods. Management uses these non-GAAP financial measures for planning and forecasting and for reporting results to the Duke Energy Board of Directors (Board of Directors), employees, shareholders, analysts and investors concerning Duke Energy’s financial performance. Adjusted diluted EPS is also used as a basis for employee incentive bonuses. The most directly comparable GAAP measures for adjusted earnings and adjusted diluted EPS are Net Income Attributable to Duke Energy Corporation and Diluted EPS Attributable to Duke Energy Corporation common shareholders, which include the dollar and per shareper-share impact of special items, mark-to-market impacts of economic hedges in the Commercial Power segment and discontinued operations.

97

PART I

Management evaluates segment performance based on segment income. Segment income is defined as income from continuing operations net of income (loss) attributable to noncontrolling interests. Segment income, as discussed below, includes intercompany revenues and expenses that are eliminated in the Condensed Consolidated Financial Statements. Management also uses adjusted segment income as a measure of historical and anticipated future segment performance. Adjusted segment income is a non-GAAP financial measure, as it is based upon segment income adjusted for the mark-to-market impacts of economic hedges in the Commercial Power segment and special items, including the operating results of the Disposal Group classified as discontinued operations for GAAP purposes. Management believes the presentation of adjusted segment income as presented provides useful information to investors, as it provides them with an additional relevant comparison of a segment’s performance across periods. The most directly comparable GAAP measure for adjusted segment income is segment income, which represents segment income from continuing operations, including any special items and the mark-to-market impacts of economic hedges in the Commercial Power segment.
Duke Energy’s adjusted earnings, adjusted diluted EPS segment income and adjusted segment income may not be comparable to similarly titled measures of another company because other entities may not calculate the measures in the same manner.
See Note 3 to the Condensed Consolidated Financial Statements, “Business Segments,” for a discussion of Duke Energy’s segment structure.
Executive Overview
The following table reconciles non-GAAP measures to their most directly comparable GAAP measures.
 Three Months Ended September 30, 2014
(in millions, except per-share amounts)
Regulated
Utilities

 
International
Energy

 
Commercial
Power

 
Total Reportable
Segments

 Other
 Eliminations/ Discontinued Operations
 
Duke
Energy

 
Per
Diluted
Share

Adjusted segment income/Adjusted earnings$920
 $80
 $51
 $1,051
 $(58) $
 $993
 $1.40
Costs to achieve Progress Energy merger
 
 
 
 (35) 
 (35) (0.05)
Midwest generation operations
 
 (68) (68) (8) 76
 
 
Asset sales
 
 
 
 9
 
 9
 0.01
Discontinued operations
 
 
 
 
 307
 307
 0.44
Segment income (loss)/ Net Income Attributable to Duke Energy Corporation$920
 $80
 $(17) $983
 $(92) $383
 $1,274
 $1.80
 Three Months Ended September 30, 2013
(in millions, except per-share amounts)
Regulated
Utilities

 
International
Energy

 
Commercial
Power

 
Total Reportable
Segments

 Other
 Eliminations/ Discontinued Operations
 
Duke
Energy

 
Per
Diluted
Share

Adjusted segment income/Adjusted earnings$923
 $116
 $15
 $1,054
 $(21) $
 $1,033
 $1.46
Costs to achieve Progress Energy merger
 
 
 
 (54) 
 (54) (0.08)
Midwest generation operations
 
 (43) (43) 11
 32
 
 
Discontinued operations
 
 
 
 
 25
 25
 0.04
Segment income (loss)/ Net Income Attributable to Duke Energy Corporation$923
 $116
 $(28) $1,011
 $(64) $57
 $1,004
 $1.42
 Three Months Ended March 31, 2015
(in millions, except per-share amounts)
Regulated
Utilities

 
International
Energy

 
Commercial
Power

 
Total Reportable
Segments

 Other
 Eliminations/ Discontinued Operations
 
Duke
Energy

 
Per
Diluted
Share

Adjusted segment income/Adjusted earnings$774
 $36
 $95
 $905
 $(24) $
 $881
 $1.24
Midwest generation operations
 
 (94) (94) 
 94
 
 
Costs to achieve Progress Energy merger
 
 
 
 (13) 
 (13) (0.02)
Discontinued operations
 
 
 
 
 (4) (4) 
Segment income (loss)/Net Income Attributable to Duke Energy Corporation$774
 $36
 $1
 $811
 $(37) $90
 $864
 $1.22

91


PART I

 Three Months Ended March 31, 2014
(in millions, except per-share amounts)
Regulated
Utilities

 
International
Energy

 
Commercial
Power

 
Total Reportable
Segments

 Other
 Eliminations/ Discontinued Operations
 
Duke
Energy

 
Per
Diluted
Share

Adjusted segment income/Adjusted earnings$737
 $130
 $10
 $877
 $(48) $
 $829
 $1.17
Asset impairment
 
 (59) (59) 
 
 (59) (0.08)
Costs to achieve Progress Energy merger
 
 
 
 (34) 
 (34) (0.04)
Economic hedges (mark-to-market)
 
 (3) (3) 
 
 (3) (0.01)
Midwest generation operations
 
 20
 20
 (5) (15) 
 
Discontinued operations
 
 
 
 
 (830) (830) (1.18)
Segment income (loss)/Net Loss Attributable to Duke Energy Corporation$737
 $130
 $(32) $835
 $(87) $(845) $(97) $(0.14)
The variance in adjusted earnings for three months ended September 30, 2014,March 31, 2015, compared to the same period in 2013,2014, was primarily due to:
Higher depreciationresults at the nonregulated Midwest generation business due to higher PJM Interconnection LLC (PJM) capacity revenues and amortization expenseincreased generation margins;
Increased wholesale net margins largely due to increases in contracted amounts and prices;
Increased retail pricing primarily due to higher depreciable asset base rates and lower reductionsrate riders in certain jurisdictions, including increased revenues related to cost of removal reserves;
Lower earnings in Latin America, due to higher purchased power costs in Brazil and an unplanned outage in Chile;
Lower post in-service debt returns due to projects added to customer rates;
Lower weather-normalized retail customer volumes;energy efficiency programs; and
A higherThe impact of a lower effective income tax rate.
Partially offset by:
Increased retail pricing and riders primarily resulting from the implementation of revised rates in most jurisdictions;
Higher PJM Interconnection, LLC (PJM) capacity revenues; and
Favorable weather driven by less mild summer temperatures than in the prior year.

98

PART I

 Nine Months Ended September 30, 2014
(in millions, except per-share amounts)
Regulated
Utilities

 
International
Energy

 
Commercial
Power

 
Total Reportable
Segments

 Other
 Eliminations/ Discontinued Operations
 
Duke
Energy

 
Per
Diluted
Share

Adjusted segment income/Adjusted earnings$2,346
 $356
 $77
 $2,779
 $(171) $
 $2,608
 $3.69
Costs to achieve Progress Energy merger
 
 
 
 (107) 
 (107) (0.15)
Midwest generation operations
 
 (82) (82) 
 82
 
 
Asset sales
 
 
 
 9
 
 9
 0.01
Asset impairment
 
 (59) (59) 
 
 (59) (0.08)
Economic hedges (mark-to-market)
 
 (6) (6) 
 
 (6) (0.01)
Discontinued operations
 
 
 
 
 (659) (659) (0.94)
Segment income (loss)/ Net Income Attributable to Duke Energy Corporation$2,346
 $356
 $(70) $2,632
 $(269) $(577) $1,786
 $2.52
 Nine Months Ended September 30, 2013
(in millions, except per-share amounts)
Regulated
Utilities

 
International
Energy

 
Commercial
Power

 
Total Reportable
Segments

 Other
 Eliminations/ Discontinued Operations
 
Duke
Energy

 
Per
Diluted
Share

Adjusted segment income/Adjusted earnings$2,169
 $300
 $18
 $2,487
 $(114) $
 $2,373
 $3.36
Costs to achieve Progress Energy merger
 
 
 
 (139) 
 (139) (0.20)
Nuclear development charges(57) 
 
 (57) 
 
 (57) (0.08)
Litigation reserve
 
 
 
 (31) 
 (31) (0.04)
Crystal River Unit 3 impairment(180) 
 
 (180) 
 
 (180) (0.26)
Midwest generation operations
 
 (72) (72) 6
 66
 
 
Discontinued operations
 
 
 
 
 11
 11
 0.01
Segment income (loss)/ Net Income Attributable to Duke Energy Corporation$1,932
 $300
 $(54) $2,178
 $(278) $77
 $1,977
 $2.79
The variance in adjusted earnings for nine months ended September 30, 2014, compared to the same period in 2013, was primarily due to:
Increased retail pricing and riders primarily resulting from the implementation of revised rates in most jurisdictions;
Favorable weather in 2014 compared to 2013;
Higher results at Commercial Power due to ceasing depreciation on assets held for sale and higher PJM capacity revenues;
HigherLower results in Latin America primarily due to a tax benefit related tolower hydro generation volumes and higher purchased power costs resulting from the reorganization of Chilean operations; andmulti-year drought in Brazil;
Higher net wholesale margins resulting from growth in contracted amountsoperations and favorable weather.
Partially offset by:
Higher depreciation and amortizationmaintenance expense primarily due to higher depreciable asset basenuclear costs, including impacts of nuclear outage levelization deferrals and related amortization, and higher outage costs at fossil generation stations, partially offset by lower reductions to cost of removal reserves;storm costs;
Lower post in-service debt returns due to projects added to customer rates.weather-normal retail sales volumes in the residential sector; and

99Lower margins at National Methanol Company (NMC), largely driven by lower methyl tertiary butyl ether (MTBE) prices.

PART I

SEGMENT RESULTS
The remaining information in this discussion of results of operations is presented on a GAAP basis.
Regulated Utilities
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended March 31,
(in millions)2014
 2013
 Variance
 2014
 2013
 Variance
2015
 2014
 Variance
Operating Revenues$5,986
 $5,786
 $200
 $17,074
 $15,766
 $1,308
$5,723
 $5,805
 $(82)
Operating Expenses4,361
 4,131
 230
 12,807
 12,136
 671
4,305
 4,427
 (122)
Gains on Sales of Other Assets and Other, net1
 
 1
 2
 6
 (4)7
 1
 6
Operating Income1,626
 1,655
 (29) 4,269
 3,636
 633
1,425
 1,379
 46
Other Income and Expenses, net75
 57
 18
 206
 166
 40
72
 69
 3
Interest Expense271
 235
 36
 816
 713
 103
275
 270
 5
Income Before Income Taxes1,430
 1,477
 (47) 3,659
 3,089
 570
1,222
 1,178
 44
Income Tax Expense510
 554
 (44) 1,313
 1,157
 156
448
 441
 7
Segment Income$920
 $923
 $(3) $2,346
 $1,932
 $414
$774
 $737
 $37
          

    

Duke Energy Carolinas GWh sales22,821
 22,935
 (114) 67,350
 65,383
 1,967
22,468
 23,693
 (1,225)
Duke Energy Progress GWh sales16,540
 17,005
 (465) 47,394
 45,761
 1,633
16,765
 16,161
 604
Duke Energy Florida GWh sales11,550
 11,263
 287
 30,051
 29,132
 919
8,473
 8,661
 (188)
Duke Energy Ohio GWh sales6,465
 6,589
 (124) 18,768
 18,567
 201
6,767
 6,479
 288
Duke Energy Indiana GWh sales8,224
 8,747
 (523) 25,553
 25,189
 364
8,728
 8,874
 (146)
Total Regulated Utilities GWh sales65,600
 66,539
 (939) 189,116
 184,032
 5,084
63,201
 63,868
 (667)
Net proportional MW capacity in operation    

 49,471
 49,425
 46
49,739
 49,595
 144

92


PART I

Three Months Ended September 30, 2014March 31, 2015 as Compared to September 30, 2013March 31, 2014
Regulated Utilities’ results were essentially flat as a result ofpositively impacted by an increase in wholesale power margins and higher rate riders. These impacts were partially offset by lower weather-normal sales volumes, higher depreciation and amortization expense, and higher operation and maintenance costs, higher interest expense, and lower weather-normal sales volumes. These impacts were offset by higher retail pricing, and favorable weather.costs. The following is a detailed discussion of the variance drivers by line item.
Operating RevenuesRevenues. . The variancewas driven primarily by:
A $148 millionnet increase in retail pricing primarily due to retail rate changes;
A $118 million increase in fuel revenues driven primarily by higher fuel rates for electric retail customers for all jurisdictions, except North Carolina; partially offset by decreased demand from electric retail customers. Fuel revenues represent sales to retail and wholesale customers; and
A $36 million increase in electric sales (net of fuel revenue) to retail customers due to favorable weather conditions. For the Carolinas, cooling degree days for the third quarter of 2014 were 11 percent below normal as compared with 17 percent below normal during the same period in 2013. For the Midwest, cooling degree days for the third quarter of 2014 were 29 percent below normal as compared with 11 percent below normal during the same period in 2013. For Florida, cooling degree days for the third quarter of 2014 were 1 percent below normal as compared with 4 percent below normal during the same period in 2013.
Partially offset by:
A $76$73 million decrease in gross receipts tax revenue due to the North CarolinaN.C. Tax Simplification and Rate Reduction Act which terminated the collection of the North Carolina gross receipts tax effective July 1, 2014;
A $58 million decrease in fuel revenues driven primarily by overall lower fuel rates for electric retail customers for all jurisdictions, except South Carolina and Florida. Fuel revenues represent sales to retail and wholesale customers; and
A $29$26 million decrease in weather-normal sales volumes to residential retail customers (net of fuel revenue), reflecting decreased demand.
Partially offset by:
A $45 million increase in wholesale power revenues, net of sharing, primarily due to additional volumes and capacity charges for customers served under long-term contracts; and
A $16 million net increase in retail pricing primarily due to increased revenues related to energy efficiency programs.
Operating ExpensesExpenses. . The variance was driven primarily by:
A $118 million increase in fuel expense (including purchased power and natural gas purchases for resale) primarily related to (i) the application of the Nuclear Insurance Insurance Limited (NEIL) proceeds in 2013 for Duke Energy Florida and (ii) higher natural gas prices; partially offset by (i) lower volumes of coal, oil and gas used in electric generation, and (ii) lower coal prices;
A $113 million increase in depreciation and amortization expense primarily due to increases in depreciation as a result of additional plant in service and amortization of regulatory assets, and higher 2013 reductions to cost of removal reserves in accordance with regulatory orders; and
A $41 million increase in operating and maintenance expense primarily due to higher nuclear costs, including nuclear outage levelization costs and higher environmental and operational costs that are recoverable in rates; partially offset by decreased benefits costsand 2013 donations in accordance with 2013 North Carolina Utilities Commission (NCUC) and Public Service Commission of South Carolina (PSCSC) rate case orders.

100

PART I

Partially offset by:
A $41$95 million decrease in property and other taxes primarily due to the termination of the collection of the North Carolina gross receipts tax as mentioned above, partially offset by higher property taxes.
Other Income and Expenses, net. The varianceis primarily due to recognition of post in-service equity returns for projects that had been completed prior to being reflected in customer rates.
Interest Expense. The variancewas primarily due to no longer recording post in-service debt returns on projects now reflected in customer rates.
Income Tax Expense. The variance was primarily due to a decrease in pretax income. The effective tax rate for the three months ended September 30, 2014lower sales and 2013 was 35.7 percentuse tax; and 37.5 percent, respectively. The decrease in the effective tax rate is primarily due to the tax benefit related to the manufacturing deduction in 2014 as the prior year deduction was limited by taxable income.
Nine Months Ended September 30, 2014 as Compared to September 30, 2013
Regulated Utilities’ results were positively impacted by higher retail pricing and rate riders, favorable weather, an increase in wholesale power margins, higher weather-normal sales volumes, and prior year impairments. These impacts were partially offset by higher depreciation and amortization expense, higher operation and maintenance costs, and higher interest expense. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The variancewas driven primarily by:
A $580 million increase in fuel revenues driven primarily by increased demand from electric retail customers resulting from favorable weather conditions, and higher fuel rates for electric retail customers for all jurisdictions, except North Carolina. Fuel revenues represent sales to retail and wholesale customers;
A $508 million net increase in retail pricing primarily due to retail rate changes and updated rate riders;
A $203 million increase in electric sales (net of fuel revenue) to retail customers due to more favorable weather conditions. For the first nine months of 2014 in the Carolinas, cooling degree days were 5 percent below normal as compared with 16 percent below normal during the same period in 2013, and heating degree days were 15 percent above normal as compared with 7 percent above normal during the same period in 2013. For the first nine months of 2014 in the Midwest, cooling degree days were 21 percent below normal as compared with 8 percent below normal during the same period in 2013, and heating degree days were 23 percent above normal as compared with 5 percent above normal during the same period in 2013. For the first nine months of 2014 in Florida, cooling degree days were 1 percent below normal as compared with 2 percent below normal during the same period in 2013, and heating degree days were 1 percent above normal as compared with 22 percent below normal during the same period in 2013;
A $51 million increase in wholesale power revenues, net of sharing, primarily due to additional volumes and capacity charges for customers served under long-term contracts; and
A $35 million increase in weather-normal sales volumes to retail customers (net of fuel revenue) reflecting increased demand.
Partially offset by:
A $76 million decrease in gross receipts tax revenue due to the NC Tax Simplification and Rate Reduction Act which terminated the collection of the North Carolina gross receipts tax effective July 1, 2014.
Operating Expenses. The variancewas driven primarily by:
A $573$62 million increase decreasein fuel expense (including purchased power and natural gas purchases for resale) primarily relateddue to (i) higherlower natural gas and coal prices, and (ii) lower volumes of coal and oil andused in electric generation, partially offset by (iii) higher volumes of gas used in electric generation due primarily to increased generation resulting from favorable weather conditions, (ii) higher natural gas prices, and (iii) the application of the NEIL settlement proceeds in 2013 for Duke Energy Florida;generation.
Partially offset by:
A $386$21 million increase in depreciation and amortization expense primarily due to increases in depreciation as a result of additional plant in service and amortizationan absence of regulatory assets, and higher 2013 reductions toa prior-year decrease in the reduction of the cost of removal reserves in accordance with regulatory orders;component of amortization expense; and
A $124$14 million increase in operating and maintenance expense primarily due to higher storm costs, repairs and remediation expenses associated with the Dan River coal ash discharge, and higher nuclear costs, including impacts of nuclear outage levelization deferrals and related amortization, higher outage costs at fossil generation stations, and higher environmental and operationalmaintenance costs that are recoverable in rates; partially offset by decreased benefits costs and 2013 donations for low-income customers and job training in accordance with 2013 NCUC and PSCSC rate case orders.
Partially offset by:
A $345 million decrease due to the 2013 impairment and other charges primarily related to Crystal River Unit 3 Nuclear Station (Crystal River Unit 3) and the proposed Levy Nuclear Station (Levy);
A $26 million decrease in property and other taxes primarily due to the termination of the collection of the North Carolina gross receipts tax as mentioned above, partially offset by higher property taxes; and
A $22 million decrease due to the 2013 impairment resulting from the decision to suspend the application for two proposed nuclear units at Shearon Harris Nuclear Station (Harris).
Other Income and Expenses, net. The variance is primarily due to recognition of post in-service equity returns for projects that had been completed prior to being reflected in customer rates,distribution, partially offset by lower allowance for funds used during construction (AFUDC) - equity, due to placing the Sutton plant into service in late 2013.

101

PART I

Interest Expense. The variancewas primarily due to no longer recording post in-service debt returns on projects now reflected in customer rates.storm costs.
Income Tax Expense.The variance was primarily due to an increase in pretax income. The effective tax rate for the ninethree months ended September 30,March 31, 2015 and 2014 and 2013 was 35.936.7 percent and 37.5 percent, respectively. The decrease in the effective tax rate is primarily due to favorable audit settlements, the tax benefit related to the manufacturing deduction in 2014 as the prior year deduction was limited by taxable income, and changes in apportionment related to state income tax.
Matters Impacting Future Regulated Utilities Results
Appeals of recently approved rate cases are pending at the North Carolina Supreme Court. The North Carolina Attorney General (NCAG) and NC Waste Awareness and Reduction Network (NC WARN) dispute the rate of return, capital structure and other matters approved by the NCUC. The outcome of these appeals could have an adverse impact to Regulated Utilities’ financial position, results of operations and cash flows. See Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
On February 2, 2014, a break in a stormwater pipe beneath an ash basin at the retired Dan River steam station caused a release of ash basin water and ash into the Dan River. On February 8, 2014, a permanent plug was installed in the stormwater pipe, stopping the release of materials into the river. Duke Energy is a party to multiple lawsuits filed in regardsand could be subject to coal ash management practices, both precedingfines and followingother penalties related to the Dan River incident. The United States Attorney for the Eastern District ofcoal ash release and operations at other North Carolina initiated a criminal investigation related to the discharge.facilities with ash basins. The outcome of these lawsuits and investigationpotential fines and penalties could have an adverse impact to Regulated Utilities’ financial position, results of operations and cash flows. See Note 5 to the Condensed Consolidated Financial Statements, “Commitments and Contingencies,” for additional information.
An order from regulatory authorities disallowing recovery of costs related to closure of ash basins could have an adverse impact to the Regulated Utilities' financial position, results of operations and cash flows. See NotesNote 5 and 7 to the Condensed Consolidated Financial Statements, “Commitments and Contingencies” and "Asset Retirement Obligations," respectively,Contingencies,” for additional information.
In 2013, a FERC Administrative Law Judge issued an initial decision holding that Duke Energy is responsible for costs associated with Multi Value Projects (MVP), a type of Transmission Expansion Planning (MTEP) cost, approved by Midcontinent Independent System Operator, Inc. (MISO) prior to the date of Duke Energy’s withdrawal. The initial decision will be reviewed by the FERC. If the FERC upholds the initial decision, Duke Energy intends to file an appeal in federal court. If Duke Energy is deemed responsible for these costs, and if a portion of these costs is not eligible for recovery, there may be an adverse impact to its financial position, results of operations and cash flows. See Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
In 2015, the Indiana Utility Regulatory Commission (IURC) is examining intervenors' allegations regarding the Edwardsport IGCC in-service date for ratemaking purposes, operational performance of the plant, the level of operating costs and financing charges associated with construction delays. The outcome of these proceedings could have an adverse impact to Regulated Utilities' financial position, results of operations and cash flows. Regulated Utilities cannot predict the outcome of these proceedings. See Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
In April 2015, the Florida Legislature passed legislation, which is pending approval by the governor, to allow utilities to issue securitization bonds as an option to recover the costs of certain retired generation facilities. If enacted, this legislation would apply to Duke Energy Florida’s retired Crystal River Unit 3 nuclear station. Securitization of the costs of the retired Crystal River Unit 3 nuclear station would result in an initial acceleration of cash, followed by a reduction to Regulated Utilities’ future results of operations and ongoing cash flows as it would no longer earn an equity return on these costs. Under the settlement agreement with the FPSC, the allowed return on equity for Crystal River Unit 3 is limited to 70 percent of the approved return on equity, which is currently 10.5 percent.

93


PART I

International Energy
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended March 31,
(in millions)2014
 2013
 Variance
 2014
 2013
 Variance
2015
 2014
 Variance
Operating Revenues$366
 $370
 $(4) $1,111
 $1,168
 $(57)$273
 $382
 $(109)
Operating Expenses275
 232
 43
 760
 765
 (5)207
 231
 (24)
Gains on Sales of Other Assets and Other, net2
 
 2
 7
 
 7
Operating Income93
 138
 (45) 358
 403
 (45)66
 151
 (85)
Other Income and Expense, net43
 48
 (5) 152
 95
 57
14
 57
 (43)
Interest Expense25
 22
 3
 71
 60
 11
23
 23
 
Income Before Income Taxes111
 164
 (53) 439
 438
 1
57
 185
 (128)
Income Tax Expense29
 44
 (15) 74
 128
 (54)20
 51
 (31)
Less: Income Attributable to Noncontrolling Interests2
 4
 (2) 9
 10
 (1)1
 4
 (3)
Segment Income$80
 $116
 $(36) $356
 $300
 $56
$36
 $130
 $(94)
          

    

Sales, GWh4,292
 5,062
 (770) 13,814
 14,744
 (930)4,470
 5,241
 (771)
Net proportional MW capacity in operation    

 4,358
 4,600
 (242)4,335
 4,600
 (265)
Three Months Ended September 30, 2014March 31, 2015 as Compared to September 30, 2013March 31, 2014
International Energy’s results were impacted by unfavorable hydrology in Brazil, lower sales volumes in Central America and lower marginsequity earnings in Chile and National Methanol Company (NMC), partially offset by favorable hydrology in Central America.NMC. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The variance was driven primarily by:
A $16$52 million decrease in Brazil due to unfavorable exchange rates and lower spot energy sales volumes;
A $37 million decrease in Central America due to lower energy sales volumes and average prices; and
A $15 million decrease in Peru due to lower sales volumes partially offset by higher average prices;
A $15 million decrease in Chile as a result of lower averageenergy and hydrocarbon prices and sales volumes due to an unplanned outage;
An $8 million decrease in Brazil due to lower sales volumes partially offset by higher average prices; and
A $4 million decrease in Argentina due to unfavorable exchange rates and lower average prices partially offset by higher sales volumes.
Partially offset by:
A $39 million increase in Central America due to higher sales volumes and average prices.exchanges rates.
Operating Expenses. The variance was driven primarily by:
A $38$21 million increase in Brazil due to higher purchased power as a result of unfavorable hydrology; and
A $25 million increasedecrease in Central America due to higherlower fuel consumption in Guatemalapartially offset by higher purchased power; and purchased power in El Salvador as a result of increased dispatch.

102

PART I

Partially offset by:
A $17$15 million decrease in Peru due to lower fuelhydrocarbon royalty and variable costs.
Income Tax Expense. The variance was primarily due to a decrease in pretax income. The effective tax rate for the three months ended September 30, 2014 and 2013 was 25.9 percent and 27.2 percent, respectively. The decrease in the effective tax rate was primarily due to a reduction of related investment income.
Nine Months Ended September 30, 2014 as Compared to September 30, 2013
International Energy’s results were impacted by a merger step up tax benefit in Chile, favorable results in Central America, and a net remeasurement gain in Latin America, partially offset by unfavorable hydrology and exchange rates in Brazil. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The variance was driven primarily by:
A $28 million decrease in Peru as a result of lower sales volumes and unfavorable exchange rates partially offset by higher average prices; and     
A $23 million decrease in Chile as a result of lower average prices and sales volumes due to an unplanned outage; and
A $19 million decrease in Argentina due to unfavorable exchange ratespurchased power costs, and lower average prices partially offset by higher sales volumes.fuel consumption.
Partially offset by:
A $12 million increase in Central America as a result of higher sales volumes partially offset by lower average prices.
Operating Expenses. The variance was driven primarily by:
A $26 million decrease in Peru due to lower purchased power and fuel costs; and
A $21 million decrease in Argentina as a result of lower purchased power and fuel consumption, and favorable exchange rates.
Partially offset by:
A $42$14 million increase in Brazil due to higher purchased power as a result of unfavorable hydrology, partially offset by favorable exchange rates.
Other Income and Expenses, net.net. The variance is primarily due to a net remeasurement gainloss in Latin America, higherlower interest expenseincome in Brazil and higherlower equity earnings in NMC as a result of higher methyl tertiary butyl ether volumeslower average MTBE and methanol prices, partially offset by lower average prices.butane costs.
InterestIncome Tax Expense.The variance in tax expense is primarily due to higher interest rates and debt prepayment penalty in Brazil.
Income Tax Expense. The variance was primarily due to a deferred tax benefit recorded in second quarter of 2014 as a result of the merger of two Chilean subsidiaries, which resulted in a decrease in the effective tax rate, and an increase in pretax income. The effective tax rate for the ninethree months ended September 30,March 31, 2015 and 2014 and 2013 was 16.935.6 percent and 29.327.7 percent, respectively. The increase in the effective tax rate is primarily due to unfavorable Brazilian exchange rates.
Matters Impacting Future International Energy Results
International Energy's operations include conventional hydroelectric power generation facilities located in Brazil where water reservoirs are currently at abnormally low levels due to a lack of rainfall. Weather and economic conditions within Brazil have resulted in higher energy prices and a reduction in demand. In addition, International Energy’s equity earnings from NMC reflect sales of methanol and MTBE, which generate margins that are directionally correlated with crude oil prices. International Energy's earnings and future cash flows could be adversely impacted by either a sustained period of low reservoir levels, especially if the government of Brazil were to implement rationing or some other mandatory conservation program, changes to power prices that further impact demand, further decline of economic conditions within Brazil or a significant decrease in crude oil prices.

94


PART I

Commercial Power
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended March 31,
(in millions)2014
 2013
 Variance
 2014
 2013
 Variance
2015
 2014
 Variance
Operating Revenues$50
 $58
 $(8) $195
 $189
 $6
$73
 $81
 $(8)
Operating Expenses87
 104
 (17) 355
 308
 47
89
 188
 (99)
Gains on Sales of Other Assets and Other, net
 
 
 
 1
 (1)
Operating Loss(37) (46) 9
 (160) (118) (42)(16) (107) 91
Other Income and Expense, net5
 (2) 7
 15
 9
 6
2
 5
 (3)
Interest Expense14
 15
 (1) 41
 45
 (4)12
 14
 (2)
(Loss) Income Before Income Taxes(46) (63) 17
 (186) (154) (32)
Loss Before Income Taxes(26) (116) 90
Income Tax Benefit(29) (35) 6
 (116) (100) (16)(27) (84) 57
Segment Loss$(17) $(28) $11
 $(70) $(54) $(16)
Segment Income (Loss)$1
 $(32) $33
                
Coal-fired plant production, GWh192
 516
 (324) 867
 1,266
 (399)
 471
 (471)
Renewable plant production, GWh1,054
 941
 113
 4,112
 3,761
 351
1,310
 1,589
 (279)
Total Commercial Power production, GWh1,246
 1,457
 (211) 4,979
 5,027
 (48)1,310
 2,060
 (750)
Net proportional MW capacity in operation    

 1,698
 2,060
 (362)1,415
 1,886
 (471)
Three Months Ended September 30, 2014March 31, 2015 as Compared to September 30, 2013March 31, 2014
Commercial Power’s results were primarily attributable to a gain on the sale of intangible assets and lower depreciation expense. The following is a detailed discussion of the variance drivers by line item.

103

PART I

Operating Revenues. The variance was driven primarily by an $8 million decrease in electric revenues for the Beckjord station, which is not included in the Disposal Group, driven by lower production as units have been retired.
Operating Expenses. The variance was driven primarily by:
An $8 million decrease in fuel expense for the Beckjord station driven by lower cost of coal from decreased production as units have been retired; and
A $5 million decrease in depreciation driven by discontinued amortization of an intangible asset that was impaired and written off in 2014 and extensions on the projected useful lives of assets in the renewable portfolio.
Other Income and Expense. The variance was primarily due to a net gain recognized for the sale of certain renewable intangible assets and increased equity earnings from higher production in the renewable wind portfolio.
Income Tax Expense. The variance was primarily due to a decrease in pretax losses and higher production tax credits in 2014 for the Renewables portfolio. The effective tax rate for the three months ended September 30, 2014 and 2013 was 64.1 percent and 56.3 percent, respectively.
Nine Months Ended September 30, 2014 as Compared to September 30, 2013
Commercial Power’s results were negativelypositively impacted by anthe prior-period impairment recorded for an intangible asset. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The variance was driven primarily by a $17an $8 million increasedecrease in electric revenues from higherlower production in the renewables portfolio partially offset by a $9 million decreasedue to changes in net mark-to-market revenues on non-qualifying power hedge contracts.wind patterns.
Operating Expenses. The variance was driven primarily by:
Aby a $94 million increase driven by anthe 2014 impairment taken related to reducingOhio Valley Electric Corporation (OVEC). See Note 7 to the carrying value of OVEC to zero.
Partially offset by:
A $13 million decrease in depreciation driven by discontinued amortization of an intangible asset that was impairedCondensed Consolidated Financial Statements, "Goodwill and written off in 2014 and extensions on the projected useful lives of assets in the renewable portfolio; and
An $8 million decrease in fuel expenseIntangible Assets" for the Beckjord station, which is not included in the Disposal Group, driven by lower cost of coal from decreased production as units have been retired; and
A $6 million decrease in property tax expense driven by cost reductions in the renewables portfolio resulting from a property tax abatement that went into effect in the current year; and
A $6 million decrease in operations and maintenance expense for the renewables portfolio driven primarily by reductions in development activities.additional information.
Other Income and Expense.Tax Benefit. The variance was primarily due to a net gain recognized for the sale of certain renewable intangible assets and increased equity earnings from higher production in the renewable wind portfolio.
Income Tax Expense. The variance was primarily due to an increase inlarger pretax losses and higher production tax creditsloss in 2014 for the Renewables portfolio.as compared to 2015. The effective tax rate for the nine monthsyears ended September 30,December 31, 2015 and 2014 and 2013 was 62.4104.7 percent and 65.3 72.5percent, respectively. The change in the effective tax rate is due to a prior-year state tax benefit and a reduction in renewable energy credits relative to pretax loss.
Matters Impacting Future Commercial Power Results
In 2013,As a Federal Energy Regulatory Commission (FERC) Administrative Law Judge issued an initial decision holding that Commercial Power is responsible for certain Multi Value Projects (MVP) costs, a type of Transmission Expansion Planning (MTEP) cost, approved by Midcontinent Independent System Operator, Inc. (MISO) prior to the date of Commercial Power’s withdrawal. The initial decision will be reviewed by FERC. If FERC upholds the initial decision, Commercial Power intends to file an appeal in federal court. If Commercial Power is deemed responsible for these costs, and if a portion of these costs are not eligible for recovery, there may be an adverse impact to its financial position, results of operations and cash flows. See Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
Income (Loss) From Discontinued Operations, Net Of Tax
Discontinued Operations increased $316 million for the three months ended September 30, 2014 compared to the same period in the prior year, primarily due to a $460 million pretax reversalresult of the impairment oncompletion of the Disposal Group based on the transaction price included in the PSA less cost to sell exceeding the adjusted carrying amount. Included in the variance is the $40 million impact of ceasing depreciation on the assetssale of the Disposal Group beginningon April 2, 2015, Commercial Power will record a tax charge in the second quarter of 2014.
Discontinued Operations decreased $6602015. The estimated charge of approximately $35 million to $50 million will not qualify for the nine months ended September 30, 2014 compared to the same period in the prior year, primarily due to a $847 million pretax write-down of the carrying amount of the assets to the estimated fair value of the Disposal Group, based on the transaction price included in the PSA, less estimated costs to sell and a $195 million pretax mark-to-market loss on economic hedges for the Disposal Group. Included in the variance is the $82 million impact of ceasing depreciation on the assets of the Disposal Group beginning in the second quarter of 2014.classification as discontinued operations.

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PART I

Other
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended March 31,
(in millions)2014
 2013
 Variance
 2014
 2013
 Variance
2015
 2014
 Variance
Operating Revenues$25
 $47
 $(22) $79
 $113
 $(34)$27
 $25
 $2
Operating Expenses84
 128
 (44) 269
 360
 (91)50
 84
 (34)
Gains (Losses) on Sales of Other Assets and Other, net1
 (1) 2
 2
 (4) 6
Gains on Sales of Other Assets and Other, net7
 
 7
Operating Loss(58) (82) 24
 (188) (251) 63
(16) (59) 43
Other Income and Expense, net18
 (14) 32
 33
 4
 29
1
 6
 (5)
Interest Expense101
 108
 (7) 302
 305
 (3)97
 103
 (6)
Loss Before Income Taxes(141) (204) 63
 (457) (552) 95
(112) (156) 44
Income Tax Benefit(50) (140) 90
 (190) (276) 86
(77) (69) (8)
Less: Income Attributable to Noncontrolling Interests1
 
 1
 2
 2
 
2
 
 2
Net Expense$(92) $(64) $(28) $(269) $(278) $9
$(37) $(87) $50
Three Months Ended September 30, 2014March 31, 2015 as Compared to September 30, 2013
Other’s results were negatively impacted by a decrease in income tax benefit. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The decrease was primarily due to mark-to-market activity of mitigation sales related to the Progress Energy merger, partially offset by prior-year mark-to-market activity for Duke Energy Trading and Marketing, LLC (DETM), which was divested in 2013.
Operating Expenses. The decrease was primarily due to lower charges related to the Progress Energy merger, partially offset by lower expenses related to DETM and unfavorable loss experience at Bison Insurance Company Limited (Bison).
Other Income and Expenses. The increase was primarily due to a gain on investment sale inMarch 31, 2014 and lower interest income following the settlement of a 2004 and 2005 federal tax audit in the prior year.
Income Tax Expense. The variance was primarily due to a decrease in pretax losses. The effective tax rate for the three months ended September 30, 2014 and 2013 was 35.2 percent and 69.0 percent, respectively. The decrease in the effective tax rate is primarily due to a favorable deferred state tax adjustment in the third quarter of 2013.
Nine Months Ended September 30, 2014 as Compared to September 30, 2013
Other’s results were positively impacted by a decrease in operating expenses. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The decrease was primarily due to mark-to-market activity of mitigation sales related to the Progress Energy merger, partially offset by prior-year mark-to-market activity for DETM.
Operating Expenses. The decrease was primarily due to lower charges related to the Progress Energy merger and lower litigation reserves, partially offset by unfavorablehigher prior-year captive insurance loss experience at Bison and lower expenses related to DETM.experience.
Other Income and Expenses.Gains on sales of other assets. The increase was primarily due to a gain on investment sale in 2014 and lower interest income following the settlementmonetization of a 2004 and 2005 federal tax audit in the prior year.telecommunication leases.

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PART I

Income Tax Expense.Benefit. The variance was primarily due to the increase in the effective tax rate, partially offset by a decrease in pretax losses.loss. The effective tax rate for the ninethree months ended September 30,March 31, 2015 and 2014 and 2013 was 41.569.5 percent and 50.144.5 percent, respectively. The decreaseincrease in the effective tax rate is primarily due to a favorable deferred state tax adjustment in the third quarter of 2013.levelization.
Matters Impacting Future Other Results
Duke Energy previously heldOhio’s retired Beckjord generating station (Beckjord) became an effective 50 percent interest in Crescent Resources, LLC (Crescent). Crescent was a real estate joint venture formed by Duke Energy in 2006 that filed for Chapter 11 bankruptcy protection in June 2009. On June 9, 2010, Crescent restructured and emerged from bankruptcy and Duke Energy forfeited its entire 50 percent ownership interest to Crescent debt holders. This forfeiture caused Duke Energy to recognize a loss, for tax purposes, on its interestasset of Other after the sale of the nonregulated Midwest Generation business in the second quarter of 2010. Although Crescent has reorganized and emerged from bankruptcy with creditors owning all Crescent interest, there remains uncertainty as2015. Beckjord, a nonregulated facility retired during 2014, is not subject to the tax treatment associated with the restructuring. Based on this uncertainty, it is possible that Duke Energy could incur a future tax liabilityrecently enacted Environmental Protection Agency (EPA) rule related to the tax lossesdisposal of coal combustion residuals (CCR) from electric utilities. However, if costs are incurred as a result of environmental regulations or to mitigate risk associated with its partnership interestcoal ash, the costs could have an adverse impact on Other's financial position, results of operations and cash flows. See Note 3, “Business Segments” and Note 5, "Commitments and Contingencies," to the Condensed Consolidated Financial Statements for additional information.
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAX
Discontinued Operations, Net of Tax. The variance was primarily driven by the 2014 impairment recognized for the nonregulated Midwest generation business and favorable operating results in Crescent2015 primarily due to higher PJM capacity revenues related to higher average cleared capacity auction pricing, increased generation margins and lower depreciation expense. Included in the resolutionvariance is the impact of issues associated with Crescent’s emergence from bankruptcy.ceasing depreciation on the assets of the Disposal Group beginning in the second quarter of 2014. The foregone depreciation for the three months ended March 31, 2015 was approximately $40 million.

10596


PART I

DUKE ENERGY CAROLINAS
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the ninethree months ended September 30,March 31, 2015 and 2014 and 2013 and the Annual Report on Form 10-K for the year ended December 31, 2013.2014.
The results of operations and variance discussion is presented in a reduced disclosure format in accordance with General Instruction H(2) of Form 10-Q.
Results of Operations
Nine Months Ended September 30,Three Months Ended March 31,
(in millions)2014
 2013
 Variance
2015
 2014
 Variance
Operating Revenues$5,693
 $5,239
 $454
$1,901
 $2,000
 $(99)
Operating Expenses4,116
 3,850
 266
1,386
 1,491
 (105)
Operating Income1,577
 1,389
 188
515
 509
 6
Other Income and Expenses, net137
 94
 43
42
 49
 (7)
Interest Expense307
 255
 52
102
 101
 1
Income Before Income Taxes1,407
 1,228
 179
455
 457
 (2)
Income Tax Expense474
 461
 13
163
 171
 (8)
Net Income$933
 $767
 $166
$292
 $286
 $6
The following table shows the percent changes in GWh sales and average number of customers. The below percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales, and wholesale sales to incorporated municipalities and to public and private utilities and power marketers. Amounts are not weather normalized.weather-normalized.
Increase (decrease)(Decrease) increase over prior year20142015
Residential sales5.1(1.0)%
General service sales2.71.2 %
Industrial sales2.33.3 %
Wholesale power sales(2.630.9)%
Total sales3.0(5.2)%
Average number of customers0.91.2 %
NineThree Months Ended September 30, 2014March 31, 2015 as Compared to September 30, 2013March 31, 2014
Operating Revenues.The variance was driven primarily by:
A $186$63 million increasedecrease in fuel revenues driven primarily by increasedlower natural gas and coal prices, and decreased demand from retail customers mainly due to favorable weather conditions, and higher natural gas prices.in the residential sector. Fuel revenues represent sales to retail and wholesale customers;
A $182 million increase in retail pricing and updated rate riders, which primarily reflects the impact of the 2013 North Carolina and South Carolina retail rate cases;
A $103 million increase in electric sales (net of fuel revenues) to retail customers due to favorable weather conditions. Heating degree days for the first nine months of 2014 were 16 percent above normal compared to 8 percent above normal during the same period in 2013 and cooling degree days for the first nine months of 2014 were 7 percent below normal as compared to 18 percent below normal in 2013; and
A $19 million increase in weather-normal sales volumes to retail customers reflecting increased demand.
Partially offset by:
A $42 million decrease in gross receipts tax revenue due to the NCNorth Carolina Tax Simplification and Rate Reduction Act, which terminated the collection of the North Carolina gross receipts tax effective July 1, 2014.2014; and
An $11 million decrease in weather-normal sales volumes to residential retail customers (net of fuel revenue) reflecting decreased demand.
Partially offset by:
An $18 million increase in retail pricing and rate riders, which primarily reflects increased revenues related to the energy efficiency programs and the second year base rate step-up from the 2013 South Carolina rate case.
Operating Expenses.The variance was driven primarily by:
A $185An $80 million increasedecrease in fuel expense (including purchased power) primarily related to increasedlower natural gas and coal prices, and decreased generation due to higherlower sales volumes and increased prices of natural gas used in electric generation, net of change in fuel mix;
A $74 million increase in depreciation and amortization primarily due to higher depreciation as a result of additional plant in service and amortization of certain regulatory assets, partially offset by lower amortization expense due to reductions in regulatory liabilities for costs of removal in accordance with the 2013 North Carolina and South Carolina rate case orders;volumes; and
A $23 million increase in operating and maintenance expenses primarily due to higher non-outage costs at generation plants, higher storm costs, repairs and remediation expenses associated with the Dan River coal ash discharge and higher energy efficiency program costs, partially offset by decreased corporate costs, lower costs associated with the Progress Energy merger, lower nuclear outage expenses including the impacts of levelization and decreased employee benefit costs.

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PART I

Partially offset by:
A $19$34 million decrease in property and other tax expenses primarily due to lower revenue relatedrevenue-related taxes driven by the elimination of the North Carolina gross receipts tax effective July 1, 2014, partially offset by higher property tax expense.
Other Income and Expenses, net. The variance was primarily due to the recognition of post in-service equity returns for projects that had been completed prior to being reflected in customer rates.
Interest Expense. The variance was primarily due to no longer recording post in-service debt returns on projects now reflected in customer rates, partially offset by lower interest on bonds.as mentioned above.
Income Tax Expense. The variance was primarily due to an increase in pretax income. The effective tax rate for the ninethree months ended September 30,March 31, 2015 and 2014 and 2013 was 33.735.8 percent and 37.537.4 percent, respectively. The decrease in the effective tax rate is primarily due to favorable audit settlements, changesthe reduction of state rates in apportionment related to state income taxcertain jurisdictions and the tax benefit related to the manufacturing deduction in 20142015 as the prior yearprior-year deduction was limited by taxable income.
Matters Impacting Future Results
Appeals of recently approved rate cases are pending at the North Carolina Supreme Court. The NCAG and NC WARN dispute the rate of return, capital structure and other matters approved by the NCUC. The outcome of these appeals could have an adverse impact to Duke Energy Carolinas’ financial position, results of operations and cash flows. See Note 4 to the Consolidated Financial Statements, “Regulatory Matters,” for additional information.
On February 2, 2014, a break in a stormwater pipe beneath an ash basin at the retired Dan River steam station caused a release of ash basin water and ash into the Dan River. On February 8, 2014, a permanent plug was installed in the stormwater pipe, stopping the release of materials into the river. Duke EnergyCarolinas is a party to multiple lawsuits filed in regardsand subject to coal ash management practices, both precedingfines and followingother penalties related to the Dan River incident. The United States Attorney for the Eastern District ofcoal ash release and operations at other North Carolina initiated a criminal investigation related to the discharge.facilities with ash basins. The outcome of these lawsuits, fines and investigationpenalties could have an adverse impact to Duke Energy Carolinas’ financial position, results of operations and cash flows. See Note 5 to the Condensed Consolidated Financial Statements, “Commitments and Contingencies,” for additional information.
An order from regulatory authorities disallowing recovery of costs related to closure of ash basins could have an adverse impact to Duke Energy Carolinas' financial position, results of operations and cash flows. See NotesNote 5 and 7 to the Condensed Consolidated Financial Statements, “Commitments and Contingencies” and "Asset Retirement Obligations," respectively,Contingencies,” for additional information.


10797


PART I

PROGRESS ENERGY
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the ninethree months ended September 30,March 31, 2015 and 2014 and 2013 and the Annual Report on Form 10-K for the year ended December 31, 2013.2014.
The results of operations and variance discussion is presented in a reduced disclosure format in accordance with General Instruction H(2) of Form 10-Q.
Results of Operations
Nine Months Ended September 30,Three Months Ended March 31,
(in millions)2014
 2013
 Variance
2015
 2014
 Variance
Operating Revenues$7,825
 $7,233
 $592
$2,536
 $2,541
 $(5)
Operating Expenses6,198
 6,020
 178
1,995
 2,065
 (70)
Gains on Sales of Other Assets and Other, net3
 2
 1
8
 1
 7
Operating Income1,630
 1,215
 415
549
 477
 72
Other Income and Expenses, net54
 63
 (9)27
 15
 12
Interest Expense502
 520
 (18)168
 169
 (1)
Income From Continuing Operations Before Taxes1,182
 758
 424
408
 323
 85
Income Tax Expense From Continuing Operations441
 289
 152
144
 119
 25
Income From Continuing Operations741
 469
 272
264
 204
 60
(Loss) Income From Discontinued Operations, net of tax(6) 10
 (16)
Loss From Discontinued Operations, net of tax(1) (1) 
Net Income735
 479
 256
263
 203
 60
Less: Net Income Attributable to Noncontrolling Interest2
 2
 
3
 1
 2
Net Income Attributable to Parent$733
 $477
 $256
$260
 $202
 $58
NineThree Months Ended September 30, 2014March 31, 2015 as Compared to September 30, 2013March 31, 2014
Operating Revenues.The variance was driven primarily by:
A $311$31 million increasedecrease in gross receipts tax revenue due to the North Carolina Tax Simplification and Rate Reduction Act, which terminated the collection of North Carolina gross receipts tax effective July 1, 2014;
A $16 million decrease in fuel revenues (including emission allowances) and capacity revenues primarily due to decreased usage in the current year for Duke Energy Florida; and
A $20 million decrease in retail pricing primarily for Duke Energy Florida due to a reduction in energy conservation cost recovery clause and environmental cost recovery clause revenues due to lower recovery rates in the current year.
Partially offset by:
A $46 million increase in wholesale power revenues primarily driven primarily by increased demand from wholesalecapacity rates on contracts in the current year for Duke Energy Florida and retail customers, partially resulting from favorable weather conditions,increased capacity rates and higher fuel rates for wholesale customers reflective of higher fuel costspeak demand for Duke Energy Progress; and to increased demand from electric retail customers in the current year mainly due to favorable weather as well as a higher fuel rate in the current year related to lower NEIL insurance reimbursements and accelerated Crystal River Unit 3 regulatory asset cost recovery in 2014 as allowed by the 2013 Settlement for Duke Energy Florida. Fuel revenues represent sales to retail and wholesale customers;
A $131$17 million increase in retail pricing and rate riders for Duke Energy Progress, which primarily reflects increased revenues related to the impact ofenergy efficiency programs and the second year base rate step-up from the 2013 North Carolina retail rate case in North Carolina and the 2014 base rate increase in Florida;
A $100 million increase (net of fuel revenue) in GWh sales to retail customers due to favorable weather conditions. For Duke Energy Progress, Heating degree days for the nine months ended September 30, 2014 were 15 percent above normal compared to 6 percent above normal for the prior year and cooling degree days were 3 percent below normal compared to 14 percent below normal for the prior year. For Duke Energy Florida, Heating degree days for the nine months ended September 30, 2014 were 24 percent higher and cooling degree days were one percent higher compared to the same period in 2013;
A $50 million increase in nuclear cost recovery clause and energy conservation cost recovery clause revenues at Duke Energy Florida due to higher recovery rates in the current year;case.
Operating Expenses.The variance was driven primarily by:
A $302$40 million increasedecrease in fuel expenses (including purchased power). For Duke Energy Florida the increase isproperty and other taxes primarily due to the applicationtermination of the NEIL settlement proceeds in 2013 and higher sales volumes driven by increased demand and higher fuel prices incollection of the current year. For Duke Energy Progress the increase is primarily due to increased sales volumes and higher fuel prices.North Carolina gross receipts tax as mentioned above;
A $221$30 million increase in depreciation and amortization. For Duke Energy Florida the increase is primarily due to a reduction of the cost of removal component of amortization expense in 2013 as allowed under the 2012 Settlement and increased environmental cost recovery clause amortization related to prior year under-recovery and nuclear cost recovery clause amortization due to an increase in recoverable nuclear assets in the current year. For Duke Energy Progress the increase is primarily due to additional plant in service and amortization of certain regulatory assets and a prior year reversal of a portion of cost of removal reserves in accordance with the 2013 NCUC rate case order; and
A $43 million increasedecrease in operations and maintenance expenses. For Duke Energy Progress the increase is primarily due to decreased expenses that were recoverable through the impacts of amortization onenergy conservation and environmental cost recovery clauses and a decrease related to prior-year nuclear levelization outage deferrals and higher stormdecommissioning costs partially offset by prior year donations for low-income customers and job training in accordance with the 2013 NCUC rate case order and lower costs to achieve the merger withat Duke Energy including transmission projectsFlorida.
Other Income and severance. For Duke Energy Florida the increaseExpenses, net. The variance is due to higher AFUDC-equity, primarily due to an increase in expenses that are recoverable under the energy conservation cost recovery clause, partially offset by a decrease in overall corporate costs, including benefits.

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PART I

Partially offset by:
A $344 million decrease due to 2013 impairment and other charges at Duke Energy Florida primarily related to Crystal River Unit 3 and Levy; and
A $40 million decrease at Duke Energy Progress due to a current year $18 million reduction to a 2012 impairment charge related to the disallowance of transmission project costs, which are a portion of the Long-Term FERC Mitigation and a $22 million prior year impairment charge resulting from the decision to suspend the application for two proposed nuclear units at the Harris nuclear station.
Interest Expense.The variance was primarily due to the $29 million charge to interest expense on the redemption of Progress Energy’s 7.10 percent Cumulative Quarterly Income Preferred Securities in January of 2013.plant expenditures.
Income Tax Expense. The variance was primarily due to an increase in pretax income. The effective tax rate for the ninethree months ended September 30,March 31, 2015 and 2014 and 2013 was 37.335.4 percent and 38.136.9 percent, respectively. The decrease in the effective tax rate is primarily due to an increase in AFUDC-equity.
Matters Impacting Future Results
On February 2, 2014, a break in a stormwater pipe beneath an ash basin at Duke Energy Carolinas' retired Dan River steam station caused a release of ash basin water and ash into the Dan River. On February 8, 2014, a permanent plug was installed in the stormwater pipe, stopping the release of materials into the river. Duke Energy is a party to multiple lawsuits filed in regardsand subject to coal ash management practices, both precedingfines and followingother penalties related to the Dan River incident.coal ash release and operations at other North Carolina facilities with ash basins. The outcome of these lawsuits, fines and penalties could have an adverse impact to Progress Energy'sEnergy’s financial position, results of operations and cash flows. See Note 5 to the Condensed Consolidated Financial Statements, “Commitments and Contingencies,” for additional information.

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PART I

An order from regulatory authorities disallowing recovery of costs related to closure of ash basins could have an adverse impact to Progress Energy'sEnergy’s financial position, results of operations and cash flows. See NotesNote 5 and 7 to the Condensed Consolidated Financial Statements, “Commitments and Contingencies” and "Asset Retirement Obligations," respectively,Contingencies,” for additional information.

In April 2015, the Florida Legislature passed legislation, which is pending approval by the governor, to allow utilities to issue securitization bonds as an option to recover the costs of certain retired generation facilities. If enacted, this legislation would apply to Duke Energy Florida’s retired Crystal River Unit 3 nuclear station. Securitization of the costs of the retired Crystal River Unit 3 nuclear station would result in a reduction to Progress Energy's future results of operations and cash flows as it would no longer earn an equity return on these costs. Under the current settlement agreement with the FPSC, allowed return on equity is limited to 70 percent of the approved rate of 10.5 percent.


10999


PART I

DUKE ENERGY PROGRESS
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the ninethree months ended September 30,March 31, 2015 and 2014 and 2013 and the Annual Report on Form 10-K for the year ended December 31, 2013.2014.
The results of operations and variance discussion is presented in a reduced disclosure format in accordance with General Instruction H(2) of Form 10-Q.
Results of Operations
Nine Months Ended September 30,Three Months Ended March 31,
(in millions)2014
 2013
 Variance
2015
 2014
 Variance
Operating Revenues$3,980
 $3,781
 $199
$1,449
 $1,422
 $27
Operating Expenses3,226
 3,101
 125
1,134
 1,165
 (31)
Gains on Sales of Other Assets and Other, net1
 1
 
1
 1
 
Operating Income755
 681
 74
316
 258
 58
Other Income and Expenses, net34
 43
 (9)20
 9
 11
Interest Expense172
 147
 25
60
 57
 3
Income Before Income Taxes617
 577
 40
276
 210
 66
Income Tax Expense226
 215
 11
93
 77
 16
Net Income and Comprehensive Income$391
 $362
 $29
$183
 $133
 $50
The following table shows the percent changes in GWh sales and average number of customers. The below percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales, and wholesale sales to incorporated municipalities and to public and private utilities and power marketers. Amounts are not weather normalized.weather-normalized.
Increase (decrease) over prior period20142015
Residential sales6.73.4%
General service sales2.93.0%
Industrial sales(3.32.4)%
Wholesale power sales6.915.4%
Total sales3.63.7%
Average number of customers1.11.3%
NineThree Months Ended September 30, 2014March 31, 2015 as Compared to September 30, 2013March 31, 2014
Operating Revenues.The variance was driven primarily by:
A $96 million increase in fuel revenues (including emission allowances) driven primarily by increased demand from wholesale and retail customers, partially resulting from favorable weather conditions, and higher fuel rates for wholesale customers reflective of higher fuel costs. Fuel revenues represent sales to retail and wholesale customers;
A $72 million increase in retail pricing, which primarily reflects the impact of the 2013 North Carolina retail rate case;
A $70 million increase (net of fuel revenue) in electric sales to retail customers due to favorable weather conditions. Heating degree days for the nine months ended September 30, 2014 were 15 percent above normal compared to 6 percent above normal for the prior year and cooling degree days were 3 percent below normal compared to 14 percent below normal for the prior year; and
A $27$34 million increase in wholesale power revenues primarily due to higher energy rates, increased capacity rates and higher peak demand.demand; and
A $17 million increase in retail pricing and rate riders, which primarily reflects increased revenues related to the energy efficiency programs and the second year base rate step-up from the 2013 North Carolina rate case.
Partially offset by:
A $34$31 million decrease in gross receipts tax revenue due to the NCNorth Carolina Tax Simplification and Rate Reduction Act, which terminated the collection of the North Carolina gross receipts tax effective July 1, 2014; and
An $18 million decrease in weather-normal sales volumes to retail customers reflecting decreased demand.2014.
Operating Expenses.The variance was driven primarily by:by a:
A $109 million increase in fuel expenses (including purchased power) primarily due to increased sales volumes;
A $48 million increase in depreciation and amortization expenses primarily due to higher depreciation as a result of additional plant in service and amortization of certain regulatory assets and a prior year reversal of a portion of cost of removal reserves in accordance with the 2013 NCUC rate case order; and

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PART I

A $30 million increase in operations and maintenance expenses primarily due to the impacts of amortization on nuclear levelization outage deferrals and higher storm costs, partially offset by prior year donations for low-income customers and job training in accordance with the 2013 NCUC rate case order and lower costs to achieve the merger with Duke Energy including transmission projects and severance.
Partially offset by:
A $40 million decrease due to a current year $18 million reduction to a 2012 impairment charge related to the disallowance of transmission project costs, which are a portion of the Long-Term FERC Mitigation and a $22 million prior year impairment charge resulting from the decision to suspend the application for two proposed nuclear units at the Harris nuclear station; and
A $22$35 million decrease in property and other tax expensestaxes primarily due to lower revenue related taxes driven by the eliminationtermination of the collection of the North Carolina gross receipts tax effective July 1, 2014, partially offset by higher property tax expense.as mentioned above.
Interest Expense.Other Income and Expenses, net. The variance wasis due to higher AFUDC-equity, primarily due to no longer recording post in-service debt returns on projects now reflected in customer rates and lower AFUDC - debt due to projects placed in service.nuclear plant expenditures.
Income Tax Expense. The variance was primarily due to an increase in pretax income. The effective tax rate for the ninethree months ended September 30,March 31, 2015 and 2014 was 33.8 percent and 2013 was 36.6 percent, and 37.3 percent, respectively. The decrease in the effective tax rate is primarily due to an increase in AFUDC-equity.
Matters Impacting Future Results
On February 2, 2014, a break in a stormwater pipe beneath an ash basin at Duke Energy Carolinas' retired Dan River steam station caused a release of ash basin water and ash into the Dan River. On February 8, 2014, a permanent plug was installed in the stormwater pipe, stopping the release of materials into the river. Duke EnergyProgress is a party to multiple lawsuits filed in regardsand subject to coal ash management practices, both precedingfines and followingother penalties related to the Dan River incident.coal ash release and operations at other North Carolina facilities with ash basins. The outcome of these lawsuits, fines and penalties could have an adverse impact to Duke Energy Progress’ financial position, results of operations and cash flows. See Note 5 to the Condensed Consolidated Financial Statements, “Commitments and Contingencies,” for additional information.
An order from regulatory authorities disallowing recovery of costs related to closure of ash basins could have an adverse impact to Duke Energy Progress'Progress’ financial position, results of operations and cash flows. See NotesNote 5 and 7 to the Condensed Consolidated Financial Statements, “Commitments and Contingencies” and "Asset Retirement Obligations," respectively,Contingencies,” for additional information.


111100


PART I

DUKE ENERGY FLORIDA
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the ninethree months ended September 30,March 31, 2015 and 2014 and 2013 and the Annual Report on Form 10-K for the year ended December 31, 2013.2014.
The results of operations and variance discussion is presented in a reduced disclosure format in accordance with General Instruction H(2) of Form 10-Q.
Results of Operations
Nine Months Ended September 30,Three Months Ended March 31,
(in millions)2014
 2013
 Variance
2015
 2014
 Variance
Operating Revenues$3,832
 $3,442
 $390
$1,086
 $1,116
 $(30)
Operating Expenses2,959
 2,906
 53
859
 897
 (38)
Gains on Sales of Other Assets and Other, net
 1
 (1)
Operating Income873
 537
 336
227
 219
 8
Other Income and Expenses, net17
 19
 (2)6
 5
 1
Interest Expense150
 138
 12
49
 49
 
Income Before Income Taxes740
 418
 322
184
 175
 9
Income Tax Expense285
 168
 117
71
 67
 4
Net Income$455
 $250
 $205
$113
 $108
 $5
The following table shows the percent changes in GWh sales and average number of customers. The below percentages for retail customer classes represent billed sales only. Wholesale power sales include both billed and unbilled sales. Total sales includes billed and unbilled retail sales, and wholesale sales to incorporated municipalities and to public and private utilities and power marketers. Amounts are not weather normalized.weather-normalized.
Increase (decrease) over prior period20142015
Residential sales5.11.3%
General service sales1.4(0.4)%
Industrial sales1.5(5.1)%
Wholesale power sales3.4(38.9)%
Total sales3.2(2.2)%
Average number of customers1.41.6%
NineThree Months Ended September 30, 2014March 31, 2015 as Compared to September 30, 2013March 31, 2014
Operating Revenues.The variance was driven primarily by:
A $215$20 million increasedecrease in energy conservation cost recovery clause and environmental cost recovery clause revenues due to lower recovery rates in the current year; and
A $16 million decrease in fuel and capacity revenues primarily due to increased demand from electric retail customersdecreased usage in the current year mainly due to favorable weather as well as a higher fuel rate in the current year related to lower NEIL insurance reimbursements and accelerated Crystal River Unit 3 regulatory asset cost recovery in 2014 as allowed by the 2013 Settlement. Fuel revenues represent sales to retail and wholesale customers;year.
Partially offset by:
A $59 million net increase in base revenues due primarily to the 2014 base rate increase;
A $50 million increase in nuclear cost recovery clause and energy conservation cost recovery clause revenues due to higher recovery rates in the current year;
A $30 million increase in electric sales (net of fuel revenue) to retail customers due to favorable weather conditions. Heating degree days in 2014 were 24 percent higher and cooling degree days were one percent higher compared to the same period in 2013;
A $16 million increase in weather-normal sales volumes to retail customers reflecting increased demand; and
A $13$12 million increase in wholesale power revenues primarily driven by increased capacity rates partially offset byon contracts in the impact of contracts that expired in 2013.current year.
Operating Expenses.The variance was driven primarily by:
A $193$23 million increasedecrease in operations and maintenance primarily due to decreased expenses that were recoverable through the energy conservation and environmental cost recovery clauses and a decrease related to prior-year nuclear decommissioning costs; and
A $13 million decrease in fuel used in electric generation and purchased power due to the application of the NEIL settlement proceeds in 2013 and higher sales volumes driven by increased demand and higher fuel prices in the current year;
A $173 million increase in depreciation and amortization primarily due to a reduction of the cost of removal component of amortization expense in 2013 as allowed under the 2012 Settlementlower fuel prices and increased environmental cost recovery clause amortization related to prior year under-recovery and nuclear cost recovery clause amortization due to an increase in recoverable nuclear assets in the current year;
A $21 million increase in property and other taxes primarily driven by higher revenue-related taxes in 2014 due to the higher revenues and higher property taxes; and

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An $10 million increase in operations and maintenance costs primarily due to an increase in expenses that are recoverable under the energy conservation cost recovery clause, partially offset by a decrease in overall corporate costs, including benefits.
Partially offset by:
A $344 million decrease due to 2013 impairment and other charges primarily related to Crystal River Unit 3 and Levy.
Interest Expense. The increase is due to a lower debt return in 2014 driven by the Crystal River Unit 3 regulatory asset impairment in 2013 and accelerated Crystal River Unit 3 regulatory asset cost recovery in 2014 as allowed by the 2013 Settlement.volumes.
Income Tax Expense. The variance was primarily due to an increase in pretax income. The effective tax rate for the ninethree months ended September 30,March 31, 2015 and 2014 and 2013 was 38.6 percent and 40.038.5 percent, respectively. The decrease
Matters Impacting Future Results
In April 2015, the Florida Legislature passed legislation, which is pending approval by the governor, to allow utilities to issue securitization bonds as an option to recover the costs of certain retired generation facilities. If enacted, this legislation would apply to Duke Energy Florida’s retired Crystal River Unit 3 nuclear station. Securitization of the costs of the retired Crystal River Unit 3 nuclear station would result in an initial acceleration of cash, followed by a reduction to Regulated Utilities’ future results of operations and ongoing cash flows as it would no longer earn an equity return on these costs. Under the effective tax rate was primarily duesettlement agreement with the FPSC, the allowed return on equity for Crystal River Unit 3 is limited to certain nondeductible book depreciation.70 percent of the approved return on equity, which is currently 10.5 percent.


113101


PART I

DUKE ENERGY OHIO
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the ninethree months ended September 30,March 31, 2015 and 2014 and 2013 and the Annual Report on Form 10-K for the year ended December 31, 2013.2014.
The results of operations and variance discussion is presented in a reduced disclosure format in accordance with General Instruction H(2) of Form 10-Q.
Results of Operations
Nine Months Ended September 30,Three Months Ended March 31,
(in millions)2014
 2013
 Variance
2015
 2014
 Variance
Operating Revenues$1,433
 $1,349
 $84
$586
 $575
 $11
Operating Expenses1,322
 1,220
 102
481
 582
 (101)
Gains on Sales of Other Assets and Other, net
 4
 (4)6
 
 6
Operating Income111
 133
 (22)
Operating Income (Loss)111
 (7) 118
Other Income and Expenses, net9
 4
 5
3
 3
 
Interest Expense60
 47
 13
20
 20
 
Income from Continuing Operations Before Income Taxes60
 90
 (30)
Income Tax Expense from Continuing Operations21
 33
 (12)
Income from Continuing Operations39
 57
 (18)
(Loss) Income from Discontinued Operations, net of tax(597) 39
 (636)
Net (Loss) Income$(558) $96
 $(654)
Income (Loss) from Continuing Operations Before Income Taxes94
 (24) 118
Income Tax Expense (Benefit) from Continuing Operations35
 (9) 44
Income (Loss) from Continuing Operations59
 (15) 74
Income (Loss) from Discontinued Operations, net of tax90
 (875) 965
Net Income (Loss)$149
 $(890) $1,039
The following table shows the percent changes in Regulated Utilities' GWh sales and average number of customers. The below percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales, and wholesale sales to incorporated municipalities and to public and private utilities and power marketers. Amounts are not weather normalized.weather-normalized.
Increase (decrease)(Decrease) increase over prior year20142015
Residential sales2.4(3.5)%
General service sales1.5(0.4)%
Industrial sales4.30.8 %
Wholesale power sales(29.2258.5)%
Total sales1.14.4 %
Average number of customers0.6 %
NineThree Months Ended September 30, 2014March 31, 2015 as Compared to September 30, 2013March 31, 2014
Operating Revenues.The variance was driven primarily by:
A $48$9 million increase in Kentucky wholesale revenues due to the purchase of the additional capacity in the East Bend generating station in December 2014; and
A $10 million increase in regulated natural gas rate riders primarily due to rate increases.
Partially offset by:
A $9 million decrease in regulated fuel revenues primarily driven by higherlower fuel costs andoffset by increased sales volumes; and
A $42 million increase in retail pricing and rate riders primarily due to 2013 rate increases.
Partially offset by:
A $10 million decrease in net mark-to-market revenue on non-qualifying power hedge contracts.volumes.
Operating Expenses. The variance was driven primarily by:
Aby a $94 million impairment taken in 2014 related to reduce the carrying valueOVEC.
Gain/(Loss) on Sales of OVEC to zero; and
A $60 million increase in regulated fuel expenseOther Assets. The variance was driven primarily by higher fuel costs and increased volumes.
Partially offset by:
A $32 million decrease in operating and maintenance expenses primarily due to lower corporate governance costs; and
A $14 million decrease in property and other taxes driven primarily by an Ohio gas excise tax settlement in 2014.
Interest Expense. The increase was primarily due to higher average debt balances in 2014 compared to 2013.a gain on the disposition of certain nonutility assets.
Income Tax Expense.Expense/(Benefit). The variance was primarily due to a decreasean increase in pretax income. The effective tax rate for the ninethree months ended September 30,March 31, 2015 and 2014 and 2013 was 34.936.7 percent and 36.536.4 percent, respectively. The decrease in the effective tax rate was primarily due to certain nondeductible book depreciation.
Discontinued Operations, Net of Tax.The variance was primarily due todriven by the 2014 impairment recognized for the nonregulated Midwest generation business and unfavorable mark-to-market results.favorable operating results in 2015 primarily due to higher PJM capacity revenues related to higher average cleared capacity auction pricing, increased generation margins and lower depreciation expense. Included in the variance is the impact of ceasing depreciation on the assets of the Disposal Group beginning in the second quarter of 2014. The foregone depreciation for the three months ended March 31, 2015 was approximately $40 million.

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Matters Impacting Future Results
On February 17, 2014, Duke Energy Ohio announced it had initiated a process to exit its nonregulated Midwest generation business. Duke Energy Ohio expects to dispose of the nonregulated Midwest generation business in the fourth quarter of 2014 or the first quarter of 2015. Duke Energy Ohio recognized a pretax impairment charge of $878 million for the nine months ended September 30, 2014, which represents the excess of the carrying value over the estimated fair value of the business based on the transaction price included in the PSA, less estimated costs to sell. The impairment will be updated, if necessary, based on the final execution of the purchase sale agreement and any changes in estimated fair value as additional information related to the potential transaction becomes available.
In 2013, a FERC Administrative Law Judge issued an initial decision that Duke Energy Ohio is responsible for costs associated with certain MVP costs, a type of MTEP cost, approved by MISO prior to the date of Duke Energy Ohio’s withdrawal. The initial decision will be reviewed by the FERC. If the FERC upholds the initial decision, Duke Energy Ohio intends to file an appeal in federal court. If Duke Energy Ohio is deemed responsible for these costs, and if a portion of these costs areis not eligible for recovery, there may be an adverse impact to its financial position, results of operations and cash flows. See Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.

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PART I

Duke Energy Ohio’s nonregulated Beckjord generating station (Beckjord), a facility retired during 2014, is not subject to the recently enacted EPA rule related to the disposal of CCR from electric utilities. However, if costs are incurred as a result of environmental regulations or to mitigate risk associated with coal ash, the costs could have an adverse impact on Duke Energy Ohio's financial position, results of operations and cash flows. See Note 5, "Commitments and Contingencies," to the Condensed Consolidated Financial Statements for additional information.
Duke Energy Ohio is the defendant in a class action lawsuit in which plaintiffs allege antitrust violations under the federal Robinson Patman Act, as well as fraud and conspiracy allegations under the federal Racketeer Influenced and Corrupt Organizations statute and the Ohio Corrupt Practices Act, which could exceed $500 million, for inequitable and unfair price advantages for certain large business consumers by entering into non-public option agreements in exchange for their withdrawal of challenges to Duke Energy Ohio’s Rate Stabilization Plan implemented in early 2005. Plaintiffs allege claims for antitrust violations and also claim to be entitled to treble damages. Trial has been set to begin on July 27, 2015. Ultimate resolution of this matter could have a material adverse effect on the results of operations, cash flows or financial position of Duke Energy Ohio. See Note 5 to the Condensed Consolidated Financial Statements, "Commitments and Contingencies," for additional information

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PART I

DUKE ENERGY INDIANA
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the ninethree months ended September 30,March 31, 2015 and 2014 and 2013 and the Annual Report on Form 10-K for the year ended December 31, 2013.2014.
The results of operations and variance discussion is presented in a reduced disclosure format in accordance with General Instruction H(2) of Form 10-Q.
Results of Operations
Nine Months Ended September 30,Three Months Ended March 31,
(in millions)2014
 2013
 Variance
2015
 2014
 Variance
Operating Revenues$2,383
 $2,179
 $204
$788
 $845
 $(57)
Operating Expenses1,808
 1,627
 181
578
 630
 (52)
Operating Income575
 552
 23
210
 215
 (5)
Other Income and Expenses, net16
 14
 2
5
 7
 (2)
Interest Expense127
 127
 
45
 43
 2
Income Before Income Taxes464
 439
 25
170
 179
 (9)
Income Tax Expense163
 163
 
62
 66
 (4)
Net Income$301
 $276
 $25
$108
 $113
 $(5)
The following table shows the percent changes in GWh sales and average number of customers. The below percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales, and wholesale sales to incorporated municipalities and to public and private utilities and power marketers. Amounts are not weather normalized.weather-normalized.
Increase(Decrease) increase over prior year20142015
Residential sales3.3(6.8)%
General service sales0.6(1.4)%
Industrial sales2.50.8%
Wholesale power sales3.4(9.5)%
Total sales1.4(1.6)%
Average number of customers0.6%
NineThree Months Ended September 30, 2014March 31, 2015 as Compared to September 30, 2013March 31, 2014
Operating Revenues.The variance was driven primarily by:
A $96$51 million increasedecrease in fuel revenues (including emission allowances) primarily due to an increasea decrease in fuel rates as a result of higherlower fuel and purchased power costs;
An $89 million net increase in rate riders primarily due to updates to the integrated gasification combined cycle (IGCC) rider;costs, and
A $9 million increase in weather-normal lower sales volumes to retail customers (net of fuel revenue) reflecting increased demand.volumes.
Operating Expenses.The variance was driven primarily by:
A $93$45 million increasedecrease in fuel costs primarily driven by higher fuelused in electric generation and purchased power costs;primarily due to lower sales volumes and lower fuel prices; and
An $82A $24 million increasedecrease in depreciationproperty and amortizationother taxes, primarily as a result of the Edwardsport IGCC plant being placed into servicelower sales and use tax.
Partially offset by:
A $15 million increase in the second quarteroperation and maintenance primarily due to timing and increased scope of 2013.outage work at generation plants.
Income Tax Expense.The variance was primarily due to a decrease in pretax income. The effective tax rate for the ninethree months ended September 30,March 31, 2015 and 2014 and 2013 was 35.236.6 percent and 37.236.8 percent, respectively. The decrease in the effective tax rate was primarily due to a reduction in the Indiana statutory corporate state income tax rate and a prior period audit settlement.
Matters Impacting Future Results
Duke Energy Indiana is evaluating converting Wabash River Unit 6 to a natural gas-fired unit or retiring the unit earlier than its current estimated useful life. If Duke Energy Indiana elects early retirement of the unit, recovery of remaining book values and associated carrying costs totaling approximately $40 million could be subject to future regulatory approvals and therefore cannot be assured.
In 2015, the Indiana Utility Regulatory Commission (IURC) is examining intervenors' allegations regarding the Edwardsport IGCC in-service date for ratemaking purposes, operational performance of the plant, the level of operating costs and financing charges associated with construction delays. The outcome of these proceedings could have an adverse impact to Regulated Utilities' financial position, results of operations and cash flows. Regulated Utilities cannot predict the outcome of these proceedings. See Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.


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PART I

LIQUIDITY AND CAPITAL RESOURCES
Sources and Uses of Cash
Duke Energy relies primarily upon cash flows from operations, debt issuances and its existing cash and cash equivalents to fund its domestic liquidity and capital requirements. Duke Energy’s capital requirements arise primarily from capital and investment expenditures, repaying long-term debt and paying dividends to shareholders. See Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 20132014 for a summary of primary sources and uses of cash for 2014 – 20162015-2017 and a more detailed discussion of each.
The Subsidiary Registrants generally maintain minimal cash balances and use short-term borrowings to meet their working capital needs and other cash requirements. The Subsidiary Registrants, excluding Progress Energy (Parent), support their short-term borrowing needs through participation with Duke Energy and certain of its other subsidiaries in a money pool arrangement. The companies with short-term funds may provide short-term loans to affiliates participating under this arrangement.
Duke Energy and the Subsidiary Registrants, excluding Progress Energy (Parent), may also use short-term debt, including commercial paper and the money pool, as a bridge to long-term debt financings. The levels of borrowing may vary significantly over the course of the year due to the timing of long-term debt financings and the impact of fluctuations in cash flows from operations. Duke Energy’s current liabilities may at times exceed current assets resulting from the use of short-term debt as a funding source to meet scheduled maturities of long-term debt, as well as cash needs, which can fluctuate due to the seasonality of its business.
Credit Facility and Registration Statements
Master Credit Facility Summary
Duke Energy has a Master Credit Facility with a capacity of $6$7.5 billion through December 2018.January 2020. The SubsidiaryDuke Energy Registrants, excluding Progress Energy each(Parent), have borrowing capacity under the Master Credit Facility up to a specified sublimitssublimit for each borrower. Duke Energy has the unilateral ability at any time to increase or decrease the borrowing sublimits of each borrower, subject to a maximum sublimit for each borrower. The amount available under the Master Credit Facility has been reduced to backstop issuances of commercial paper, certain letters of credit and variable-rate demand tax-exempt bonds that may be put to the Duke Energy Registrants at the option of the holder. The table below includes the current borrowing sublimits and available capacity under the Master Credit Facility.
September 30, 2014March 31, 2015
(in millions)Duke Energy
 Duke Energy (Parent)
 Duke Energy Carolinas
 Duke Energy Progress
 Duke Energy Florida
 Duke Energy Ohio
 Duke Energy Indiana
Duke Energy
 Duke Energy (Parent)
 Duke Energy Carolinas
 Duke Energy Progress
 Duke Energy Florida
 Duke Energy Ohio
 Duke Energy Indiana
Facility size(a)
$6,000
 $2,250
 $1,000
 $750
 $650
 $650
 $700
$7,500
 $3,200
 $1,200
 $1,000
 $900
 $600
 $600
Reduction to backstop issuances                          
Commercial paper(b)
(1,278) (784) (300) (27) 
 (4) (163)(3,256) (2,764) (300) 
 (17) (25) (150)
Outstanding letters of credit(64) (56) (4) (2) (1) 
 (1)(66) (60) (4) (1) (1) 
 
Tax-exempt bonds(116) 
 (35) 
 
 
 (81)(116) 
 (35) 
 
 
 (81)
Available capacity$4,542
 $1,410
 $661
 $721
 $649
 $646
 $455
$4,062
 $376
 $861
 $999
 $882
 $575
 $369
(a)Represents the sublimit of each borrower.
(b)Duke Energy issued $450$475 million of commercial paper and loaned the proceeds through the money pool to Duke Energy Carolinas, Duke Energy Ohio and Duke Energy Indiana. The balances are classified withinas Long-Term Debt Payable to Affiliated Companies in Duke Energy Carolinas' and Duke Energy Indiana’sthe Condensed Consolidated Balance Sheets.
On April 2, 2015, Duke Energy completed the sale of the nonregulated Midwest generation business to Dynegy for approximately $2.8 billion in cash. Duke Energy used the proceeds to pay down its outstanding commercial paper by approximately $1.3 billion and initiated an agreement to repurchase $1.5 billion of Duke Energy common stock under the ASR. See Notes 2 and 13 to the Condensed Consolidated Financial Statements, “Acquisitions and Dispositions” and "Common Stock", respectively, for additional information.
On February 20, 2015, Duke Energy Carolinas, Duke Energy Progress and Duke Energy Business Services LLC (DEBS), a wholly owned subsidiary of Duke Energy, each entered into Plea Agreements in connection with the investigation initiated by the USDOJ. Duke Energy Carolinas and Duke Energy Progress are required to each maintain $250 million of available capacity under the Master Credit Facility as security to meet their obligations under the Plea Agreements, in addition to certain other conditions. The Plea Agreements are subject to court approval. See Note 5 to the Condensed Consolidated Financial Statements, “Commitments and Contingencies,” for additional information.
PremierNotes
Duke Energy has an effective Form S-3 with the Securities and Exchange Commission (SEC) to sell up to $3 billion of variable denomination floating-rate demand notes, called PremierNotes. The Form S-3 states that no more than $1.5 billion of the notes will be outstanding at any particular time. The notes are offered on a continuous basis and bear interest at a floating rate per annum determined by the Duke Energy PremierNotes Committee, or its designee, on a weekly basis. The interest rate payable on notes held by an investor may vary based on the principal amount of the investment. The notes have no stated maturity date, are non-transferable and may be redeemed in whole or in part by Duke Energy or at the investor’s option at any time. The balance as of September 30, 2014March 31, 2015 and December 31, 20132014 was $960$1,010 million and $836$968 million, respectively. The notes are short-term debt obligations of Duke Energy and are classified within Notes payable and commercial paper on Duke Energy’s Condensed Consolidated Balance Sheets.

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Shelf Registration
In September 2013, Duke Energy filed a Form S-3 with the SEC. Under this Form S-3, which is uncapped, the Duke Energy Registrants, excluding Progress Energy, may issue debt and other securities in the future at amounts, prices and with terms to be determined at the time of future offerings. The registration statement also allows for the issuance of common stock by Duke Energy.

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DEBT MATURITIES
The following table shows the significant components of Current maturities of long-term debt on the Condensed Consolidated Balance Sheets. The Duke Energy Registrants currently anticipate satisfying these obligations with cash on hand and proceeds from additional borrowings.
(in millions)Maturity Date Interest Rate
 September 30, 2014
Maturity Date Interest Rate
 March 31, 2015
Unsecured Debt        
Duke Energy (Parent)April 2015 3.350% $450
April 2015 3.350% $450
Progress Energy (Parent)January 2016 5.625% 300
First Mortgage Bonds        
Duke Energy OhioMarch 2015 0.373% 150
Duke Energy ProgressApril 2015 5.150% 300
Duke Energy CarolinasOctober 2015 5.300% 500
Duke Energy FloridaNovember 2015 0.650% 250
Duke Energy FloridaDecember 2015 5.100% 300
Duke Energy ProgressApril 2015 5.150% 300
December 2015 5.250% 400
Other   256
   300
Current maturities of long-term debt   $1,156
   $2,800
CASH FLOWS FROM OPERATING ACTIVITIES
The relatively stable operating cash flows of Regulated Utilities compose a substantial portion of Duke Energy’s cash flows from operations. Regulated Utilities’ cash flows from operations are primarily driven by sales of electricity and natural gas and costs of operations. Weather conditions, commodity price fluctuations and unanticipated expenses, including unplanned plant outages and storms, can affect the timing and level of cash flows from operations.
Duke Energy provides the liquidity support for Commercial Power’s coal-fired and gas-fired assets that are dispatched into the PJM wholesale market. Commercial Power has economically hedged a portion of its forecasted generation through 2018 with various counterparties, and a substantial portion of these contracts require daily posting of margin, which can be significant. On August 21, 2014, Duke Energy Commercial Enterprises, Inc., an indirect wholly owned subsidiary of Duke Energy Corporation, and Duke Energy SAM, LLC, a wholly owned subsidiary of Duke Energy Ohio, entered into a purchase and sale agreement with a subsidiary of Dynegy whereby Dynegy will acquire the Disposal Group, including Commercial Power’s coal-fired and gas-fired assets. In the third quarter of 2014, the results of operations of the Disposal Group were classified as discontinued operations for current and prior periods in the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income. The transaction is expected to close in the fourth quarter of 2014 or the first quarter of 2015. See Note 2 to the Condensed Consolidated Financial Statements, "Acquisitions and Dispositions," for further discussion on the Midwest generation exit. After the close of the sale, Duke Energy will no longer have margin requirements associated with these hedging activities.
Cash flows from operations are subject to a number of other factors, including but not limited to regulatory constraints, economic trends and market volatility (see “Item 1A. Risk Factors,” in the Duke Energy Registrants’ Annual Report on Form 10-K for the year ended December 31, 20132014 for additional information).
At September 30, 2014,March 31, 2015, Duke Energy had cash and cash equivalents and short-term investments of $1.9$2.8 billion, of which $1.6$1.7 billion is held by entities domiciled in foreign jurisdictionsjurisdictions. In December 2014, Duke Energy declared a taxable dividend of historical foreign earnings in the form of notes payable that will result in the repatriation of approximately $2.7 billion of cash held and is forecastedexpected to be generated by International Energy over a period of up to eight years. Approximately $1.2-$1.4 billion will be remitted in 2015, with the remaining amount remitted by 2022. The remittances will principally be used to fundsupport Duke Energy's dividend and growth in the operations of and investments in International Energy. Undistributed earnings associated with foreign operations are considered indefinitely reinvested.domestic business. As a result noof the decision to repatriate all cumulative historic undistributed foreign earnings, during the fourth quarter of 2014, Duke Energy recorded U.S. income tax is recorded on such earnings. This assertion is based on management’s determination the cash held in foreign jurisdictions is not needed to fundexpense of approximately $373 million. Duke Energy’s U.S. operations and that it either has invested or has intentions to reinvest such earnings. While management currently intendsintention is to indefinitely reinvest all unremitted foreign earnings, should circumstances change, Duke Energy may need to record additional income tax expense in the period in which such determination changes. The cumulativeprospective undistributed earnings asgenerated by Duke Energy's foreign subsidiaries. As of September 30, 2014, on which Duke Energy has not provided deferred U.S. income taxes and foreign withholding taxes, is approximately $2.6 billion. TheMarch 31, 2015, the amount of unrecognized deferred tax liability related to these undistributed earnings is estimated at approximately $300 million.
Duke Energy is conducting a strategic review of its international business. The review is considering a wide range of options and opportunitieswas not material. See Note 17 to the Condensed Consolidated Financial Statements, “Income Taxes,” for growth of the business, including strategies for utilization of off-shore cash. Duke Energy expects to complete the strategic review in late 2014 or early 2015.additional information.
Restrictive Debt Covenants
The Duke Energy Registrants’ debt and credit agreements contain various financial and other covenants. The Master Credit Facility contains a covenant requiring the debt-to-total capitalization ratio to not exceed 65 percent for each borrower. Failure to meet those covenants beyond applicable grace periods could result in accelerated due dates and/or termination of the agreements. As of September 30, 2014,March 31, 2015, each of the Duke Energy Registrants was in compliance with all covenants related to their significant debt agreements. In addition, some credit agreements may allow for acceleration of payments or termination of the agreements due to nonpayment, or the acceleration of other significant indebtedness of the borrower or some of its subsidiaries. None of the significant debt or credit agreements contain material adverse change clauses.
Credit Ratings
Credit ratings are intended to provide credit lenders a framework for comparing the credit quality of securities and are not a recommendation to buy, sell or hold. The Duke Energy Registrants’ credit ratings are dependent on the rating agencies’ assessments of their ability to meet their debt principal and interest obligations when they come due. If, as a result of market conditions or other factors, the Duke Energy Registrants are unable to maintain current balance sheet strength, or if earnings and cash flow outlook materially deteriorates,deteriorate, credit ratings could be negatively impacted.

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PART I

The Duke Energy Registrants each hold credit ratings by Fitch Ratings, Inc. (Fitch), Moody’s Investors Service, Inc. (Moody’s) and Standard & Poor’s Rating Services (S&P). On April 2, 2015, S&P upgraded Duke Energy's and Progress Energy's corporate credit rating to A- from BBB+ and their unsecured credit rating to BBB+ from BBB. The Duke Energy Registrants'unsecured credit ratings at Fitch, Moody’s and S&P have not changed since February 13, 2014, and their outlooks remain stable, excluding Fitch's outlook for Duke Energy Carolinas and S&P's outlook forof the Duke Energy Registrants. On June 17, 2014, Fitch revised Duke Energy Carolinas' outlookother Subsidiary Registrants were upgraded to positiveA- from stable. On November 5, 2014, S&P revised the Duke Energy Registrants outlook to positive from stable.
BBB+.

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PART I

Cash Flow Information
The following table summarizes Duke Energy’s cash flows.
 Nine Months Ended September 30, Three Months Ended March 31,
(in millions) 2014
 2013
 2015
 2014
Cash flows provided by (used in):        
Operating activities $5,167
 $4,990
 $1,440
 $1,373
Investing activities (3,734) (3,566) (1,456) (1,286)
Financing activities (1,003) (682) 801
 (57)
Net increase in cash and cash equivalents 430
 742
 785
 30
Cash and cash equivalents at beginning of period 1,501
 1,424
 2,036
 1,501
Cash and cash equivalents at end of period $1,931
 $2,166
 $2,821
 $1,531
OPERATING CASH FLOWS
The following table summarizes key components of Duke Energy’s operating cash flows.
 Nine Months Ended September 30, Three Months Ended March 31,
(in millions) 2014
 2013
 2015
 2014
Net income $1,789
 $1,984
Non-cash adjustments to net income 3,909
 3,856
Net income (loss) $867
 $(93)
Non-cash adjustments to net income (loss) 1,241
 2,051
Contributions to qualified pension plans 
 (27) (132) 
Working capital (531) (823) (536) (585)
Net cash provided by operating activities $5,167
 $4,990
 $1,440
 $1,373
The variance was driven primarily due to:
IncreasedA $150 million increase in net income after non-cash adjustments, mainly due to higher PJM capacity prices and operating margins in the Commercial Power segment, higher wholesale origination results primarily due to increases in volume and capacity rates, and higher retail pricing and rate riders, and favorable weather; partially offset by the under collection of fuel and purchased power costs.a $132 million increase in contributions to qualified pension plans.
INVESTING CASH FLOWS
The following table summarizes key components of Duke Energy’s investing cash flows.
 Nine Months Ended September 30, Three Months Ended March 31,
(in millions) 2014
 2013
 2015
 2014
Capital, investment and acquisition expenditures $(3,836) $(3,907) $(1,454) $(1,268)
Available for sale securities, net 21
 96
 34
 37
Proceeds from sales of other assets 172
 59
 1
 4
Other investing items (91) 186
 (37) (59)
Net cash used in investing activities $(3,734) $(3,566) $(1,456) $(1,286)
The variance was primarily due to:
A $192 million return of collateral related to the Chilean hydro acquisition in 2013 and
A $75 million decrease in net proceeds from sales and maturities of available for sale securities, net of purchases.
Partially offset by:
A $113$186 million increase in proceeds,capital, investment and acquisition expenditures mainly due to expansion projects at the sale of Las Flores at International Energy.Regulated Utilities.



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FINANCING CASH FLOWS
The following table summarizes key components of Duke Energy’s financing cash flows.
 Nine Months Ended September 30, Three Months Ended March 31,
(in millions) 2014
 2013
 2015
 2014
Issuance of common stock related to employee benefit plans $24
 $8
 $15
 $19
(Redemption) Issuance of long-term debt, net (286) 487
Issuance (Redemptions) of long-term debt, net 94
 (412)
Notes payable and commercial paper 941
 537
 1,271
 898
Dividends paid (1,670) (1,636) (564) (553)
Other financing items (12) (78) (15) (9)
Net cash used in financing activities $(1,003) $(682)
Net cash provided by (used in) financing activities $801
 $(57)

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The variance was due primarily to:
A $773$506 million decreaseincrease in net issuances of long-term debt, primarily due to the timing of issuances and redemptions across years.
Partially offset by:years; and
A $404$373 million increase in proceeds from net issuances of notes payable and commercial paper, primarily to fund short-term working capital needs and
A $96 million prior year payment for the redemption of preferred stock of subsidiaries.needs.
Summary of Significant Debt Issuances
The following table summarizes significant debt issuances (in millions).
     Nine Months Ended September 30, 2014
Issuance DateMaturity Date Interest Rate
 Duke Energy (Parent)
 Duke Energy Progress
 Duke Energy Florida
 Duke Energy
Unsecured Debt           
April 2014(a)
April 2024 3.750% $600
 $
 $
 $600
April 2014(a)
April 2017 0.612% 400
 
 
 400
June 2014(b)
May 2019 11.870% 
 
 
 108
June 2014(b)
May 2021 13.680% 
 
 
 110
Secured Debt           
March 2014(c)
March 2017 0.854% 
 
 225
 225
July 2014(d)
July 2036 5.340% 
 
 
 129
First Mortgage Bonds           
March 2014(e)
March 2044 4.375% 
 400
 
 400
March 2014(e)
March 2017 0.433% 
 250
 
 250
Total issuances    $1,000
 $650
 $225
 $2,222
    Three Months Ended March 31, 2015
Issuance DateMaturity Date Interest Rate
 
Duke
Energy

 
Duke
Energy
Carolinas

First Mortgage Bonds       
March 2015(a)
June 2045 3.750% $500
 $500
Total issuances    $500
 $500
(a)Proceeds werewill be used to redeem $402$500 million of tax-exemptfirst mortgage bonds at Duke Energy Ohio, the repayment of outstanding commercial paper and for general corporate purposes. See Note 9 to the Condensed Consolidated Financial Statements, "Related Party Transactions," for additional information related to the redemption of Duke Energy Ohio's tax-exempt bonds.
(b)Proceeds were used to repay $196 million of debt at International Energy and for general corporate purposes.
(c)Relates to the securitization of accounts receivable at a subsidiary of Duke Energy Florida. Proceeds were used to repay short-term borrowings under the intercompany money pool borrowing arrangement and for general corporate purposes. See Note 13 to the Condensed Consolidated Financial Statements, "Variable Interest Entities," for further details.
(d)Proceeds were used to fund a portion of Duke Energy's prior investment in the existing Wind Star renewables portfolio.
(e)Proceeds were used to repay short-term borrowings under the intercompany money pool borrowing arrangement and for general corporate purposes.due October 2015.
OTHER MATTERS
Midwest Generation Exit
Merchant power plants have in the recent past delivered volatile returns in the competitive energy markets in the Midwest. In Ohio, the Public Utilities Commission of Ohio (PUCO) had granted revenue support from regulated retail markets to help stabilize returns during the transition to competitive markets. However, in early 2014 a request for continued revenue support was denied by the PUCO. This decision made it clear the energy markets in Ohio were to be fully unregulated. Although the undiscounted cash flows recover the carrying value of the Midwest Generation assets, the recovery period is over a long period of time, with risks inherent in operating these assets in competitive energy markets and in an ever changing landscape of environmental regulations related to fossil fuel based generation sources. Management concluded in early 2014 that the projected risk and earnings profile of these assets was no longer consistent with Duke Energy’s strategy and initiated a plan to sell these assets and realize the fair value over a shorter period while reducing the risk and volatility associated with these assets.

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On August 21, 2014, Duke Energy Commercial Enterprises, Inc., an indirect wholly owned subsidiary of Duke Energy Corporation, and Duke Energy SAM, LLC, a wholly owned subsidiary of Duke Energy Ohio, entered into a PSA with a subsidiary of Dynegy whereby Dynegy will acquire Duke Energy Ohio’s Disposal Group for approximately $2.8 billion in cash subject to adjustments at closing for changes in working capital and capital expenditures. The completion of the transaction is conditioned on expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, approval by FERC, and the release of certain credit support obligations. Closing is expected to be completed in the fourth quarter of 2014 or the first quarter of 2015.
The Duke Energy and Duke Energy Ohio held for sale assets include net pretax impairments of approximately $847 million and $878 million, respectively, for the nine months ended September 30, 2014. During the first quarter of 2014 an impairment was recorded to write-down the carrying amount of the assets to the estimated fair value of the business, less estimated costs to sell. For the three months ended September 30, 2014, a reversal of the pretax impairments was recorded of approximately $460 million and $466 million for Duke Energy and Duke Energy Ohio, respectively, based on the expected selling price to Dynegy less cost to sell. These losses and gains were included in Income (Loss) from Discontinued Operations, net of tax in the Condensed Consolidated Statements of Operations and Comprehensive Income. The impairment will be updated, if necessary, based on the final execution of the purchase sale agreement and any changes in estimated fair value as additional information related to the potential transaction becomes available.
North Carolina Ash Basins
On February 2, 2014, a break in a 48-inch stormwater pipe beneath an ash basin at Duke Energy Carolinas’ retired Dan River steam station caused a release of ash basin water and ash into the Dan River. On February 8, 2014, a permanent plug was installed in the 48-inch stormwater pipe, stopping the release of materials into the river. On February 21, 2014, a permanent plug was installed in a 36-inch stormwater pipe beneath an adjacent ash basin. Duke Energy Carolinas estimates 30,000 to 39,000 tons of ash and 24 million to 27 million gallons of basin water were released into the river during the incident. See Note 5 to the Condensed Consolidated Financial Statements, "Commitments and Contingencies," for further discussion of Duke Energy’s response to the release.
Environmental Regulations
Duke Energy is subject to international, federal, state and local regulations regarding air and water quality, hazardous and solid waste disposal, and other environmental matters. The Subsidiary Registrants are subject to federal, state and local regulations regarding air and water quality, hazardous and solid waste disposal and other environmental matters. These regulations can be changed from time to time and result in new obligations of the Duke Energy Registrants.
The following sections outline various proposed and recently enacted regulations that may impact the Duke Energy Registrants. The Duke Energy Registrants also expect to incur increased fuel, purchased power, operation and maintenance, and other costs for replacement generation for potential coal-fired power plant retirements as a result of these proposed and final regulations. The actual compliance costs may be materially different from these estimates based on the timing and requirements of the final EPA regulations. Refer to Note 4 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for further information regarding potential plant retirements and regulatory filings related to the Duke Energy Registrants.
Coal Combustion Residuals
On April 17, 2015, the EPA published in the Federal Registry a rule to regulate the disposal of CCR from electric utilities as solid waste. The federal regulation classifies CCR as nonhazardous waste under the Resource Conservation and Recovery Act. The regulation applies to all new and existing landfills, new and existing surface impoundments, structural fills and CCR piles. The rule establishes requirements regarding landfill design, structural integrity design and assessment criteria for surface impoundments, groundwater monitoring and protection procedures and other operational and reporting procedures to ensure the safe disposal and management of CCR. In addition to the requirements of the federal CCR regulation, CCR landfills and surface impoundments will continue to be independently regulated by most states. Duke Energy records an asset retirement obligation (ARO) when it has a legal obligation to incur retirement costs associated with the retirement of a long-lived asset and the obligation can be reasonably estimated. Duke Energy Registrants impacted by the rule will record additional asset retirement obligation amounts in the second quarter of 2015. Cost recovery for future expenditures will be pursued through the normal ratemaking process with federal and state utility commissions, which permit recovery of necessary and prudently incurred costs associated with Duke Energy’s regulated operations. For more information, see Note 5 to the Condensed Consolidated Financial Statements, "Commitments and Contingencies." The following table provides estimated cost ranges for compliance with the CCR regulation incremental to existing state statutes.
(in millions)Range
Duke Energy$290
$1,555
Duke Energy Carolinas30
105
Progress Energy40
235
Duke Energy Progress40
235
Duke Energy Ohio35
110
Duke Energy Indiana185
1,105

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Coal Ash Management Act of 2014
On September 20, 2014, the North Carolina Coal Ash Management Act of 2014 (Coal Ash Act) became law. The billCoal Ash Act (i) establishes a Coal Ash Management Commission (Coal Ash Commission) to oversee handling of coal ash within the state; (ii) prohibits construction of new and expansion of existing ash impoundments and use of existing impoundments at retired facilities, effective October 1, 2014;facilities; (iii) requires closure of ash impoundments at Duke Energy Progress' Asheville and Sutton stations and Duke Energy Carolinas' Riverbend and Dan River stations no later than August 1, 2019; (iv) requires conversion to dry disposal of fly ash handling at active plants not retired by December 31, 2018; (v) requires conversion to dry disposal of bottom ash handling at active plants by December 31, 2019, or retirement of active plants; (vi) requires all remaining ash impoundments in North Carolina to be approvedcategorized as high-risk, intermediate-risk or low-risk no later than December 31, 2015 by Thethe North Carolina Department of Environment and Natural Resources (DENR) with the method of closure and timing to be based upon the assigned risk, with closure no later than December 31, 2029; (vii) establishes requirements to deal with groundwater and surface water impacts from impoundmentsimpoundments; and (viii) enhances the level of regulation for structural fills utilizing coal ash. AThe Coal Ash Act includes a variance procedure for compliance deadlines and modification of requirements regarding structural fills and compliance boundaries is also outlined.boundaries. Provisions of the billCoal Ash Act prohibit cost recovery for unlawful discharge of ash basin waters occurring after January 1, 2014. The Coal Ash Act includes a moratorium for any NCUC ordered rate changes to effectuate the legislation, which ends January 15, 2015. The Coal Ash Act leaves the decision on cost recovery determinations related to closure of coal combustion residualsCCR surface impoundments (ash basins or impoundments) to the normal ratemaking processes before utility regulatory commissions. Duke Energy has and will periodically submit to DENR site-specific coal ash impoundment closure plans. These plans and all associated permits must be approved by DENR before any excavation work can begin.
In September 2014, Duke Energy Carolinas executed a consent agreement with the South Carolina Department of Health and Environmental Control (SCDHEC) requiring the retirementexcavation of an inactive ash basin and ash fill area at the W.S. Lee Steam Station. As part of this agreement, in December 2014, Duke Energy Carolinas filed an ash removal plan and schedule with SCDHEC.
For further information, refer to Note 5 of the Condensed Consolidated Financial Statements, “Commitments and Contingencies.”
Mercury and Air Toxics Standards
The table below provides the estimated costsfinal Mercury and Air Toxics Standards (MATS) rule was issued on February 16, 2012. The rule establishes emission limits for hazardous air pollutants from new and existing coal-fired and oil-fired steam electric generating units. The rule requires sources to comply with emission limits by April 16, 2015. Under the Clean Air Act (CAA), permitting authorities have the discretion to grant up to a one-year compliance extension, on a case-by-case basis, to sources that are unable to complete the installation of emission controls before the compliance deadline. The Duke Energy Registrants have requested and received compliance extensions for a number of its plants and have met the rule requirements where a compliance extension was not received. Strategies to achieve compliance include installation of the Coal Ash Act to convert to dry fly ashnew air emission control equipment, development of monitoring processes, fuel switching and dry bottom ash handling at active plants. Ash basin closure costs recorded at September 30, 2014 are excluded from this table.acceleration of retirement for some coal-fired electric-generation units. For furtheradditional information, refer to Note 7 of4 to the Condensed Consolidated Financial Statements, "Asset Retirement Obligations."Regulatory Matters,"
regarding potential plant retirements.
(in millions)Range
Duke Energy$425
  $650
Duke Energy Carolinas250
  375
Progress Energy175
  275
Duke Energy Progress175
  275
Cross-State Air Pollution Rule
On August 8, 2011,In April 2014, several petitions for review of the final Cross-State Air Pollution Rule (CSAPR) was published in the Federal Register. The CSAPR established state-level annual SO2 budgets and annual seasonal NOx budgets thatrule were to take effect on January 1, 2012.

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On August 21, 2012,denied by the U.S. Court of Appeals for the District of Columbia (D.C. Circuit Court) vacated the CSAPR. The court also directed the Environmental Protection Agency (EPA) to continue administering the Clean Air Interstate Rule (CAIR). The CAIR requires additional reductions in sulfur dioxide (SO2) and nitrogen oxide (NOx) emissions beginning in 2015. On April 29,November 25, 2014, the U.S. Supreme Court (Supreme Court) reversedgranted a petition for review based on the D.C. Circuit Court’s decision, finding that with CSAPRissue of whether the EPA reasonably interpreted the good neighbor provision of the Clean Air Act. The case was remandedunreasonably refused to the D.C. Circuit Court for further proceedings consistent with the Supreme Court’s opinion. On October 23, 2014, the D.C. Circuit Court lifted the stayconsider costs in determining whether it is appropriate to regulate hazardous air pollutants from coal-fired and directed Phase 1 of the rule to take effectoil-fired steam electric generating units. Oral arguments were held on January 1,March 25, 2015.
When the CSAPR takes effect, the stringency of the CSAPR requirements will vary among the Duke Energy Registrants. Where the CSAPR requirements are constraining, actions to meet the requirements could include purchasing emission allowances, power purchases, curtailing generation and utilizing low sulfur fuel. The CSAPR is not expected to result in Duke Energy Registrants adding new emission controls.
Coal Combustion Residuals
On June 21, 2010, the EPA proposed a regulation under the Resource Conservation and Recovery Act, related to coal combustion residuals (CCR) associated with the generation of electricity from coal. The EPA proposal contains two regulatory options whereby CCRs not employed in approved beneficial use applications would either (i) be regulated as hazardous waste or (ii) continue to be regulated as non-hazardous waste. On October 29, 2013, the U.S. District Court for the District of Columbia directed the EPA to provide the Court, within 60 days of the Order, a proposed schedule for completing the CCR rulemaking. On January 29, 2014, the EPA filed a consent decree agreeing to issue the final rule by December 19, 2014. The Duke Energy Registrants cannot predict the outcome of the Supreme Court review of the D.C. Circuit Court decision.
Clean Water Act 316(b)
The EPA published the final 316(b) cooling water intake structure rule on August 15, 2014, with an effective date of October 14, 2014. The rule applies to 27 of the electric generating facilities the Duke Energy Registrants own and operate depending on unit retirement dates, excluding stations included in the Disposal Group. The rule allows several options for demonstrating compliance and provides flexibility to the state environmental permitting agencies to make determinations on controls, if any, that will be required for cooling water intake structures. Any required intake structure modifications and/or retrofits are expected to be installed in the 2019 to 2022 time frame. Petitions challenging the rule have been filed by several groups. It is unknown at this rulemaking, buttime when the impact could be significant.courts will rule on the petitions.
Steam Electric Effluent LimitationLimitations Guidelines
On June 7, 2013, the EPA proposed Steam Electric Effluent Limitations Guidelines (ELGs)(ELG). The EPA is under a revised court order to finalize the rule by September 30, 2015. The EPA has proposed eight options for the rule, which vary in stringency and cost. The proposed regulation applies to seven waste streams, including wastewater from air pollution control equipment and ash transport water. Most, if not all, of the steam electric generating facilities the Duke Energy Registrants own are likely affected sources. Requirements to comply with the final rule may begin as early as late 2018 for some facilities. The Duke Energy Registrants are unable to predict the outcome of the rulemaking, but the impact could be significant.
Carbon Dioxide New Source Performance Standards
On January 8, 2014, the EPA proposed a rule to establish carbon dioxide (CO2) emissions standards for new pulverized coal, IGCC, natural gas combined cycle, and simple cycle electric generating units commencing construction on or after the date the proposal appeared in the Federal Register. Based on the proposal, future coal and IGCC units will be required to employ carbon capture and storage technology to meet the proposed standard.
The Duke Energy Registrants do not expect a material impact on their future results of operations or cash flows based on the EPA’s proposal. The final rule, however, could be significantly different from the proposal. It is not known when the EPA might finalize the rule.
CO2 Existing Source Performance Standards and Standards for Reconstructed and Modified Units
The EPA proposed CO2 emission guidelines for existing fossil fuel-fired electric generating units were published in the Federal Register on June 18, 2014. On the same date, the EPA proposed standards for reconstructed and modified units. The comment period for the existing source proposal will end December 1, 2014. The comment period for the reconstructed and modified units proposal ended October 16, 2014. The EPA is expected to finalize both proposals by June 1, 2015. Once emission guidelines for existing sources are finalized, states will be required to develop regulations that will apply to covered sources, based on the emission performance standards established by the EPA in its guidelines. Based on the EPA proposal, states are to develop and submit their regulations to the EPA for approval between June 30, 2016 and June 30, 2018. The EPA has proposed a phasing-in of CO2 emission reductions during the period 2020 to 2030. The Duke Energy Registrants are unable to predict the outcome of this rulemaking, but the impact could be significant.
Clean Water Act 316(b)
The EPA signed the final 316(b) cooling water intake structure rule on May 19, 2014. The rule became effective October 14, 2014, and will be applicable to 27 of the steam electric generating facilities the Duke Energy Registrants own and operate depending on unit retirement dates. The rule allows several options for demonstrating compliance and provides flexibility to the state environmental permitting agencies to make determinations on controls, if any, that will be required for cooling water intake structures. Any required intake structure modifications and/or retrofits are expected to be installed in the 2019 to 2022 timeframe. Petitions challenging the rule have been filed by Environment American and Environment Massachusetts, the River Keeper, Inc. et al., Sierra Club and the Utility Water Activities Group and Entergy Corporation.
The table below provides estimated costs to comply, assuming no station is required to retrofit to closed-cycle cooling. These numbers represent a rough order of magnitude given the number of compliance options allowed, and the fact that the final determination of controls required will be made by the state permitting agencies.
(in millions)Range
Duke Energy$390
  $480
Duke Energy Carolinas165
  190
Progress Energy210
  250
Duke Energy Progress60
  75
Duke Energy Florida(a)
150
  175
Duke Energy Indiana15
  40
(a)    Assumes Crystal River Units 1 and 2 and Suwannee are retired prior to the timeframe for required modifications.

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Mercury and Air Toxics Standards
The final Mercury and Air Toxics Standards (MATS) rule, previously referred to as the Utility MACT Rule, was issued on February 16, 2012. The final rule establishes emission limits for hazardous air pollutants from new and existing coal-fired and oil-fired steam electric generating units. The rule requires sources to comply with emission limits by April 16, 2015. Under the Clean Air Act (CAA), permitting authorities have the discretion to grant up to a one-year compliance extension, on a case-by-case basis, to sources that are unable to complete the installation of emission controls before the compliance deadline. Strategies to achieve compliance with the final rule will include installation of new air emission control equipment, development of monitoring processes, fuel switching, and acceleration of retirement for some coal-fired electric-generation units. For additional information, refer to Note 4 to the Condensed Consolidated Financial Statements, "Regulatory Matters," regarding potential plant retirements.
In April 2014, several petitions for review of the final rule were denied by the D.C. Circuit Court. Several petitioners in the case have requested the Supreme Court review the D.C. Circuit Court's decision. The Duke Energy Registrants cannot predict the outcome of the litigation and are planning for the rule to be implemented as promulgated. Refer to the table below for a summary of estimated costs to comply with regulations.
The table below includes estimated undiscounted costs for new control equipment necessary to comply with the MATS rule,
(in millions)Range
Duke Energy$850
  $975
Duke Energy Carolinas275
  310
Progress Energy80
  95
Duke Energy Progress20
  25
Duke Energy Florida60
  70
Duke Energy Ohio45
  70
Duke Energy Indiana450
  500
Estimated Cost and Impacts of Rulemakings
The ultimate compliance requirements for the abovecurrently proposed environmental regulations will not be known until all the rules have been finalized. The Duke Energy Registrants also expect to incur increased fuel, purchased power, operation and maintenance, and other expenses, in addition to costs for replacement generation for potential coal-fired power plant retirements as a result of these EPA regulations. The actual compliance costs incurred may be materially different from these estimates based on the timing and requirements of the final EPA regulations. The Duke Energy Registrants intend to seek rate recovery of appropriate amounts incurred associated with regulated operations in complying with these regulations. Refer to Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters," for further information regarding potential plant retirements and regulatory filings related to the Duke Energy Registrants.

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The following table provides estimated costs, excluding AFUDC, of new control equipment that may need to be installed on existing power plants over the five years ended December 31, 2019, These costs are primarily to comply with the Coal Ash Act requirements for conversion to dry disposal of bottom ash and fly ash, MATS, Clean Water Act 316(b) and ELGs. The table excludes ash basin closure costs recorded as ARO.
(in millions)Estimated 5-Year Cost
Duke Energy$1,800
Duke Energy Carolinas625
Progress Energy475
Duke Energy Progress375
Duke Energy Florida100
Duke Energy Ohio100
Duke Energy Indiana600
Cross-State Air Pollution Rule
On August 8, 2011, the final Cross-State Air Pollution Rule (CSAPR) was published in the Federal Register. The CSAPR established state-level annual sulfur dioxide (SO2) budgets and annual and seasonal nitrogen oxide (NOx) budgets that were to take effect on January 1, 2012.
On August 21, 2012, the D.C. Circuit Court vacated the CSAPR. The court also directed the EPA to continue administering the Clean Air Interstate Rule (CAIR), which required additional reductions in SO2 and NOx emissions beginning in 2015. On April 29, 2014, the U.S. Supreme Court (Supreme Court) reversed the D.C. Circuit Court’s decision, finding that with CSAPR the EPA reasonably interpreted the good neighbor provision of the CAA. The case was remanded to the D.C. Circuit Court for further proceedings consistent with the Supreme Court’s opinion. On October 23, 2014, the D.C. Circuit Court lifted the CSAPR stay, which allowed Phase 1 of the rule to take effect on January 1, 2015, terminating the CAIR. Where the CSAPR requirements are constraining, actions to meet the requirements could include purchasing emission allowances, power purchases, curtailing generation and utilizing low sulfur fuel. The CSAPR will not result in Duke Energy Registrants adding new emission controls.
Additional legal challenges to the CSAPR filed in 2012, not addressed by the D.C. Circuit Court decision to vacate the CSAPR, are still ongoing. Oral arguments were held February 25, 2015. The Duke Energy Registrants cannot predict the outcome of these proceedings or how the requirements of the CSAPR may be impacted going forward.
Carbon Dioxide New Source Performance Standards
On January 8, 2014, the EPA proposed a rule to establish carbon dioxide (CO2) emissions standards for new pulverized coal, IGCC, natural gas combined cycle, and simple cycle electric generating units commencing construction on or after that date. Based on the proposal, future coal and IGCC units will be required to employ carbon capture and storage technology to meet the proposed standard.
In January 2015, the EPA announced that it would finalize the rule for new power plants in the summer of 2015. The Duke Energy Registrants do not expect a material impact on their future results of operations or cash flows based on the EPA’s proposal. The final rule, however, could be significantly different from the proposal.
CO2 Existing Source Performance Standards and Standards for Reconstructed and Modified Units
On June 18, 2014, the EPA’s proposed Clean Power Plan (CPP) for regulating CO2 emissions from existing fossil fuel-fired electric generating units (EGUs) was published in the Federal Register. On the same date the EPA proposed carbon pollution standards for reconstructed and modified EGUs. The comment period ended October 16, 2014 for the reconstructed and modified proposal and December 1, 2014 for the CPP. Duke Energy submitted comments on both proposals. In January 2015 the EPA announced that it would finalize both proposals in the summer of 2015.
Once the CPP is finalized, states will be required to develop plans to implement its requirements. The CPP will not directly impose any regulatory requirements on Duke Energy Registrants. State implementation plans will include the regulatory requirements that will apply to Duke Energy Registrants. Based on the EPA’s June 18, 2014 proposal, states will have from one to three years after the CPP is finalized to submit a plan for EPA’s review. In January 2015 the EPA announced that it would also propose a federal implementation plan for public comment in the summer of 2015. A federal plan would be EPA’s plan for meeting the requirements of the CPP and could take the place of a state plan if a state either fails to submit a plan or submits a plan that is not approved by the EPA.
The EPA has proposed to phase CO2 emission reductions in over the period 2020 to 2030. The final requirements of the CPP, however, including the implementation schedule, are uncertain and could be significantly different from the proposal. In addition, it will be several years before the requirements of the subsequent state plans are known. Also unknown at this time are the requirements of any federal plan that might be imposed on states in which the Duke Energy Registrants operate should a state fail to submit a plan or have their plan disapproved by the EPA. The Duke Energy Registrants are therefore unable to predict the outcome of this rulemaking, or how it might impact them, but the impact could be significant.
Global Climate Change
For other information on global climate change and the potential impacts on Duke Energy, see “Other Issues” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2013.2014.

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Nuclear Matters
For other information on nuclear matters and the potential impacts on Duke Energy, see “Other Issues” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2013.2014.
New Accounting Standards
See Note 1 to the Condensed Consolidated Financial Statements, “Organization and Basis of Presentation,” for a discussion of the impact of new accounting standards.
Off-Balance Sheet Arrangements
During the three and nine months ended September 30, 2014,March 31, 2015, there were no material changes to Duke Energy’s off-balance sheet arrangements. For information on Duke Energy’s off-balance sheet arrangements, see “Off-Balance Sheet Arrangements” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2013.2014.
Contractual Obligations
Duke Energy enters into contracts that require payment of cash at certain specified periods, based on certain specified minimum quantities and prices. During the three and nine months ended September 30, 2014,March 31, 2015, there were no material changes in Duke Energy’s contractual obligations. For an in-depth discussion of Duke Energy’s contractual obligations, see “Contractual Obligations” and “Quantitative and Qualitative Disclosures about Market Risk” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2013.2014.
Subsequent Events
See Note 1817 to the Condensed Consolidated Financial Statements, “Subsequent Events,” for a discussion of subsequent events.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
During the three and nine months ended September 30, 2014,March 31, 2015, there were no material changes to Duke Energy’s disclosures about market risk. For an in-depth discussion of Duke Energy’s market risks, see “Management’s Discussion and Analysis of Quantitative and Qualitative Disclosures about Market Risk” in Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2013.2014.
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 Securities Exchange Act of 1934 (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, 2014,March 31, 2015, 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(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ended September 30, 2014March 31, 2015 and have concluded no change has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.

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PART II. OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS
For information regarding legal proceedings that became reportable events or in which there were material developments in the thirdfirst quarter of 2014,2015, see Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters” and Note 5 to the Condensed Consolidated Financial Statements, “Commitments and Contingencies — Litigation” and “Commitments and Contingencies — Environmental.”
Virginia Department of Environmental Quality Civil Enforcement
In April 2015, Duke Energy Carolinas and the Virginia Department of Environmental Quality (VDEQ) announced a proposed consent order to resolve VDEQ's civil enforcement claims related to the February 2014 Dan River coal ash release. Pursuant to the terms of the proposed consent order, Duke Energy Carolinas will pay a total of $2.5 million, with a near-term $250,000 cash payment to be placed in a fund VDEQ uses to respond to environmental emergencies. The balance of the settlement amount will be satisfied through Duke Energy Carolinas funding of environmental projects in Virginia. Failure to perform sufficient funding of environmental projects will require Duke Energy Carolinas to make a cash payment in the amount of the shortfall. The settlement is subject to public notice and approval by the Virginia State Water Control Board.
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”Factors.” in the Duke Energy Registrants’ Annual Report on Form 10-K for the year ended December 31, 2013,2014, which could materially affect the Duke Energy Registrants’ financial condition or future results.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
ISSUER PURCHASES OF EQUITY SECURITIES
There were no issuer purchases of equity securities during the thirdfirst quarter of 2014.2015.

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PART II

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 (***).
Exhibit
Number
 Duke Energy 
Duke Energy
Carolinas
 Progress Energy Duke Energy Progress Duke Energy Florida Duke Energy Ohio 
Duke Energy
Indiana
10.14.1
AgreementNinety-Sixth Supplemental Indenture, dated as March 12, 2015, between Duke Energy SAM, LLC, Duke Energy Ohio, Inc.the Company and The Bank of New York Mellon Trust Company, N.A., Duke Energy Commercial Enterprise, Inc. and Dynegy Resource I, LLC, dated August 21, 2014as Trustee (incorporated by reference to Exhibit 99.14.1 to registrant’sDuke Energy Carolina, LLC's Current Report on Form 8-K filed on August 22, 2014,March 12, 2015, File Nos. 1-32853 and 1-1232)No. 1-04928).

X         X 
10.210.1
Asset Purchase Agreement betweenAmendment No. 2 and Consent among Duke Energy Corporation, Duke Energy Carolinas, LLC, Duke Energy Ohio, Inc., Duke Energy Indiana, Inc., Duke Energy Kentucky, Inc., Duke Energy Progress, Inc. (f/k/a Progress Energy Carolinas, Inc.) and North Carolina Eastern Municipal Power AgencyDuke Energy Florida, Inc. (f/k/a Progress Energy Florida, Inc.), the Lenders party hereto, the Issuing Lenders party hereto, Wells Fargo Bank, National Association, as Administrative Agent and Swingline Lender, dated September 5, 2014as of January 30, 2015 (incorporated by reference to Item 1.01 to registrant’sExhibit 10.1 of registrants' Current Report on Form 8-K filed on September 8, 2014,February 5, 2015, File Nos. 1-32853, 1-04928, 1-01232, 1-03543, 1-03382 and 1-3382)1-03274).

X X   X X X X
*12.112Computation of Ratio of Earnings to Fixed Charges - DUKE ENERGY CORPORATIONX            
*12.2Computation of Ratio of Earnings to Fixed Charges - DUKE ENERGY CAROLINASX
*12.3Computation of Ratio of Earnings to Fixed Charges - PROGRESS ENERGYX
*12.4Computation of Ratio of Earnings to Fixed Charges - DUKE ENERGY PROGRESSX
*12.5Computation of Ratio of Earnings to Fixed Charges - DUKE ENERGY FLORIDAX
*12.6Computation of Ratio of Earnings to Fixed Charges - DUKE ENERGY INDIANAX
*31.1.1Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.X            
*31.1.2Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.  X          
*31.1.3Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.    X        
*31.1.4Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.      X      
*31.1.5Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.        X    
*31.1.6Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.          X  
*31.1.7Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.            X
*31.2.1Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.X            
*31.2.2Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.  X          
*31.2.3Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.    X        
*31.2.4Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.      X      

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PART II

*31.2.5Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.        X    

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PART II

*31.2.6Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.          X  
*31.2.7Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.            X
*32.1.1Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.X            
*32.1.2Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.  X          
*32.1.3Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.    X        
*32.1.4Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.      X      
*32.1.5Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.        X    
*32.1.6Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.          X  
*32.1.7Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.            X
*32.2.1Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.X            
*32.2.2Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.  X          
*32.2.3Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.    X        
*32.2.4Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.      X      
*32.2.5Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.        X    
*32.2.6Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.          X  
*32.2.7Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.            X
*101.INSXBRL Instance DocumentX X X X X X X
*101.SCHXBRL Taxonomy Extension Schema DocumentX X X X X X X
*101.CALXBRL Taxonomy Calculation Linkbase DocumentX X X X X X X
*101.LABXBRL Taxonomy Label Linkbase DocumentX X X X X X X
*101.PREXBRL Taxonomy Presentation Linkbase DocumentX X X X X X X
*101.DEFXBRL Taxonomy Definition Linkbase DocumentX 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 percent 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.

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PART II

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, INC.
DUKE ENERGY FLORIDA, INC.
DUKE ENERGY OHIO, INC.
DUKE ENERGY INDIANA, INC.
   
Date:November 7, 2014May 8, 2015/S/s/ STEVEN K. YOUNG
  
Steven K. Young
Executive Vice President and Chief Financial Officer
   
Date:November 7, 2014May 8, 2015/S/s/ BRIAN D. SAVOY
  
Brian D. Savoy
Senior Vice President, Chief Accounting Officer and Controller

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