UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)



ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31,~~June 30, 2015



¨	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 number	Registrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number and IRS Employer Identification Number	Commission file number	Registrant, 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, LLC (formerly DUKE ENERGY FLORIDA, INC.) (a Florida ~~corporation)~~limited liability company) 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, LLC (formerly DUKE ENERGY PROGRESS, INC.) (a North Carolina ~~corporation)~~limited liability company) 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.~~LLC (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.~~LLC (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 x	No ¨	Duke Energy Florida	Yes x	No ¨
Duke Energy Carolinas	Yes x	No ¨	Duke Energy Ohio	Yes x	No ¨
Progress Energy	Yes x	No ¨	Duke Energy Indiana	Yes x	No ¨
Duke Energy Progress	Yes x	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 x	Accelerated filer ¨	Non-accelerated filer ¨	Smaller reporting company ¨
Duke Energy Carolinas	Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filer x	Smaller reporting company ¨
Progress Energy	Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filer x	Smaller reporting company ¨
Duke Energy Progress	Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filer x	Smaller reporting company ¨
Duke Energy Florida	Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filer x	Smaller reporting company ¨
Duke Energy Ohio	Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filer x	Smaller reporting company ¨
Duke Energy Indiana	Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filer x	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 x	Duke Energy Florida	Yes ¨	No x
Duke Energy Carolinas	Yes ¨	No x	Duke Energy Ohio	Yes ¨	No x
Progress Energy	Yes ¨	No x	Duke Energy Indiana	Yes ¨	No x
Duke Energy Progress	Yes ¨	No x

Number of shares of Common ~~Stock~~stock outstanding at ~~May 5,~~August 4, 2015:



Registrant	Description	Shares
Duke Energy	Common ~~Stock,~~stock, $0.001 par value	~~691,537,400~~688,330,456
Duke Energy Carolinas	All of the registrant's limited liability company member interests are directly owned by Duke Energy.
Progress Energy	All of the registrant's common stock is directly owned by Duke Energy.
Duke Energy Progress	All of the registrant's ~~common stock is~~limited liability company member interests are indirectly owned by Duke Energy.
Duke Energy Florida	All of the registrant's ~~common stock is~~limited liability company member interests are indirectly owned by Duke Energy.
Duke Energy Ohio	All of the registrant's common stock is indirectly owned by Duke Energy.
Duke Energy Indiana	All of the registrant'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



	Cautionary Statement Regarding Forward-Looking Information

PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements

	Duke Energy Corporation Financial Statements	6

	Duke Energy Carolinas, LLC Financial Statements	11

	Progress Energy, Inc. Financial Statements	15

	Duke Energy Progress, Inc. Financial Statements (subsequently Duke Energy Progress, LLC)	19

	Duke Energy Florida, Inc. Financial Statements (subsequently Duke Energy Florida, LLC)	23

	Duke Energy Ohio, Inc. Financial Statements	27

	Duke Energy Indiana, Inc. Financial Statements	31

	Combined Notes to Condensed Consolidated Financial Statements
	Note 1 – Organization and Basis of Presentation	35
	Note 2 – Acquisitions and Dispositions	38
	Note 3 – Business Segments	4039
	Note 4 – Regulatory Matters	4243
	Note 5 – Commitments and Contingencies	4647
	Note 6 – Debt and Credit Facilities	5355
	Note 7 – ~~Goodwill~~	55
	~~Note 8 – Related Party Transactions~~Asset Retirement Obligations	56
	Note 98 – ~~Derivatives and Hedging~~Goodwill	57
	Note 9 – Related Party Transactions	58
	Note 10 – Derivatives and Hedging	59
	Note 11 – Investments in Debt and Equity Securities	65
	Note 1112 – Fair Value Measurements	71
	Note 1213 – Variable Interest Entities	80
	~~Note 13 – Common Stock~~	8581
	Note 14 – ~~Stock-Based Compensation~~Common Stock	86
	Note 15 – ~~Employee Benefit Plans~~Stock-Based Compensation	8687
	Note 16 – ~~Income Taxes~~Employee Benefit Plans	8988
	Note 17 – Income Taxes	91
	Note 18 – Subsequent Events	8992

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	9093

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	~~111~~121

Item 4.	Controls and Procedures	~~111~~121

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	~~112~~122

Item 1A.	Risk Factors	~~112~~122

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	~~112~~122

Item 6.	Exhibits	~~113~~123

	Signatures	~~115~~126

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 amounts estimated and all costs may not be fully recoverable through the regulatory process;


◦	Credit ratings of the Duke Energy Registrants may be different from what 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 prospective undistributed earnings of foreign subsidiaries or repatriate such earnings on a tax-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 March 31,					Three Months Ended June 30,						Six Months Ended June 30,
(in millions, except per-share amounts)	2015		2014			2015			2014			2015		2014
Operating Revenues
Regulated electric	$	5,457	$	5,550		$	5,090		$	5,138		$	10,547	$	10,688
Nonregulated electric and other	377		491			403			463			780		954
Regulated natural gas	231		222			96			107			327		329
Total operating revenues	6,065		6,263			5,589			5,708			11,654		11,971
Operating Expenses
Fuel used in electric generation and purchased power – regulated	1,941		2,000			1,721			1,808			3,662		3,808
Fuel used in electric generation and purchased power – nonregulated	104		136			118			126			222		262
Cost of natural gas and other	111		116			26			38			137		154
Operation, maintenance and other	1,426		1,449			1,422			1,396			2,848		2,845
Depreciation and amortization	777		755			790			762			1,567		1,517
Property and other taxes	264		350			279			311			543		661
Impairment charges	—		96			—			(16		)	—		80
Total operating expenses	4,623		4,902			4,356			4,425			8,979		9,327
Gains on Sales of Other Assets and Other, net	14		1			13			6			27		7
Operating Income	1,456		1,362			1,246			1,289			2,702		2,651
Other Income and Expenses
Equity in earnings of unconsolidated affiliates	13		36			23			33			36		69
Other income and expenses, net	74		95			72			89			146		184
Total other income and expenses	87		131			95			122			182		253
Interest Expense	403		404			403			403			806		807
Income From Continuing Operations Before Income Taxes	1,140		1,089			938			1,008			2,078		2,097
Income Tax Expense from Continuing Operations	364		339			334			282			698		621
Income From Continuing Operations	776		750			604			726			1,380		1,476
Income (Loss) From Discontinued Operations, net of tax	91		(843		)
Net Income (Loss)	867		(93		)
(Loss) Income From Discontinued Operations, net of tax						(57		)	(113		)	34		(956		)
Net Income						547			613			1,414		520
Less: Net Income Attributable to Noncontrolling Interests	3		4			4			4			7		8
Net Income (Loss) Attributable to Duke Energy Corporation	$	864	$	(97	)
Net Income Attributable to Duke Energy Corporation						$	543		$	609		$	1,407	$	512

Earnings Per Share – Basic and Diluted
Income from continuing operations attributable to Duke Energy Corporation common shareholders
Basic	$	1.09	$	1.05		$	0.87		$	1.02		$	1.96	$	2.07
Diluted	$	1.09	$	1.05		$	0.87		$	1.02		$	1.96	$	2.07
Income (Loss) from discontinued operations attributable to Duke Energy Corporation common shareholders
(Loss) Income from discontinued operations attributable to Duke Energy Corporation common shareholders
Basic	$	0.13	$	(1.19	)	$	(0.09	)	$	(0.16	)	$	0.05	$	(1.35	)
Diluted	$	0.13	$	(1.19	)	$	(0.09	)	$	(0.16	)	$	0.05	$	(1.35	)
Net Income (Loss) attributable to Duke Energy Corporation common shareholders
Net income attributable to Duke Energy Corporation common shareholders
Basic	$	1.22	$	(0.14	)	$	0.78		$	0.86		$	2.01	$	0.72
Diluted	$	1.22	$	(0.14	)	$	0.78		$	0.86		$	2.01	$	0.72
Weighted-average shares outstanding
Basic	708		706			692			707			700		707
Diluted	708		706			692			707			700		707

See Notes to Condensed Consolidated Financial Statements

PART I

DUKE ENERGY CORPORATION

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

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 )



	Three Months Ended June 30,						Six Months Ended June 30,
(in millions)	2015			2014			2015			2014
Net Income	$	547		$	613		$	1,414		$	520
Other Comprehensive Income (Loss), net of tax
Foreign currency translation adjustments	9			28			(116		)	52
Pension and OPEB adjustments	7			1			2			—
Net unrealized gains on cash flow hedges	9			—			2			—
Reclassification into earnings from cash flow hedges	1			(9		)	5			(9		)
Unrealized (losses) gains on available-for-sale securities	(3		)	2			(3		)	2
Other Comprehensive Income (Loss), net of tax	23			22			(110		)	45
Comprehensive Income	570			635			1,304			565
Less: Comprehensive Income Attributable to Noncontrolling Interests	3			4			2			9
Comprehensive Income Attributable to Duke Energy Corporation	$	567		$	631		$	1,302		$	556

See Notes to Condensed Consolidated Financial Statements

PART I

DUKE ENERGY CORPORATION

Condensed Consolidated Balance Sheets

(Unaudited)


(in millions)	March 31, 2015			December 31, 2014			June 30, 2015			December 31, 2014
ASSETS
Current Assets
Cash and cash equivalents	$	2,821		$	2,036		$	960		$	2,036
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
Receivables (net of allowance for doubtful accounts of $17 at June 30, 2015 and December 31, 2014)							650			791
Restricted receivables of variable interest entities (net of allowance for doubtful accounts of $55 at June 30, 2015 and $51 at December 31, 2014)							2,046			1,973
Inventory	3,413			3,459			3,469			3,459
Assets held for sale	354			364			—			364
Regulatory assets	960			1,115			975			1,115
Other	2,008			1,837			1,498			1,837
Total current assets	12,322			11,575			9,598			11,575
Investments and Other Assets
Investments in equity method unconsolidated affiliates	343			358			375			358
Nuclear decommissioning trust funds	5,576			5,546			5,529			5,546
Goodwill	16,329			16,321			16,328			16,321
Assets held for sale	2,603			2,642			—			2,642
Other	3,207			3,008			3,239			3,008
Total investments and other assets	28,058			27,875			25,471			27,875
Property, Plant and Equipment
Cost	105,692			104,861			107,125			104,861
Accumulated depreciation and amortization	(35,400		)	(34,824		)	(35,826		)	(34,824		)
Generation facilities to be retired, net	9			9			460			9
Net property, plant and equipment	70,301			70,046			71,759			70,046
Regulatory Assets and Deferred Debits
Regulatory assets	11,279			11,042			11,564			11,042
Other	182			171			183			171
Total regulatory assets and deferred debits	11,461			11,213			11,747			11,213
Total Assets	$	122,142		$	120,709		$	118,575		$	120,709
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	1,920		$	2,271		$	1,920		$	2,271
Notes payable and commercial paper	3,790			2,514			2,162			2,514
Taxes accrued	508			569			550			569
Interest accrued	490			418			419			418
Current maturities of long-term debt	2,800			2,807			2,374			2,807
Liabilities associated with assets held for sale	146			262			—			262
Regulatory liabilities	235			204			245			204
Other	2,014			2,188			1,976			2,188
Total current liabilities	11,903			11,233			9,646			11,233
Long-Term Debt	37,173			37,213			36,795			37,213
Deferred Credits and Other Liabilities
Deferred income taxes	13,914			13,423			13,664			13,423
Investment tax credits	424			427			420			427
Accrued pension and other post-retirement benefit costs	1,170			1,145			1,152			1,145
Liabilities associated with assets held for sale	26			35			—			35
Asset retirement obligations	8,541			8,466			9,490			8,466
Regulatory liabilities	6,237			6,193			6,203			6,193
Other	1,667			1,675			1,588			1,675
Total deferred credits and other liabilities	31,979			31,364			32,517			31,364
Commitments and Contingencies
Equity
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, respectively	1			1
Common stock, $0.001 par value, 2 billion shares authorized; 688 million and 707 million shares outstanding at June 30, 2015 and December 31, 2014, respectively							1			1
Additional paid-in capital	39,413			39,405			37,933			39,405
Retained earnings	2,309			2,012			2,294			2,012
Accumulated other comprehensive loss	(672		)	(543		)	(648		)	(543		)
Total Duke Energy Corporation stockholders' equity	41,051			40,875			39,580			40,875
Noncontrolling interests	36			24			37			24
Total equity	41,087			40,899			39,617			40,899
Total Liabilities and Equity	$	122,142		$	120,709		$	118,575		$	120,709

See Notes to Condensed Consolidated Financial Statements

PART I

DUKE ENERGY CORPORATION

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Three Months Ended March 31,						Six Months Ended June 30,
(in millions)	2015			2014			2015			2014
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	867		$	(93	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Net income							$	1,414		$	520
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion (including amortization of nuclear fuel)	883			884			1,784			1,748
Equity component of AFUDC	(42		)	(28		)	(82		)	(61		)
Gains on sales of other assets	(16		)	—			(29		)	(2		)
Impairment charges	43			1,382			37			1,388
Deferred income taxes	368			(178		)	699			(46		)
Equity in earnings of unconsolidated affiliates	(13		)	(36		)	(36		)	(69		)
Accrued pension and other post-retirement benefit costs	18			27			36			54
Contributions to qualified pension plans	(132		)	—			(132		)	—
Payments for asset retirement obligations							(125		)	—
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	(47		)	45			(29		)	116
Receivables	(41		)	29			105			(118		)
Inventory	57			272			2			122
Other current assets	(63		)	(297		)	(161		)	(451		)
Increase (decrease) in
Accounts payable	(201		)	(97		)	(288		)	(218		)
Taxes accrued	(63		)	(175		)	(29		)	(84		)
Other current liabilities	(85		)	(346		)	(145		)	(308		)
Other assets	30			(22		)	(63		)	(45		)
Other liabilities	(123		)	6			(79		)	73
Net cash provided by operating activities	1,440			1,373			2,879			2,619
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(1,411		)	(1,232		)	(3,062		)	(2,400		)
Investment expenditures	(14		)	(36		)	(98		)	(38		)
Acquisitions	(29		)	—			(29		)	(16		)
Purchases of available-for-sale securities	(1,035		)	(967		)	(2,187		)	(1,773		)
Proceeds from sales and maturities of available-for-sale securities	1,069			1,004			2,200			1,793
Net proceeds from the sales of equity investments and other assets	1			4			2,832			119
Change in restricted cash	(36		)	(27		)	(3		)	(6		)
Other	(1		)	(32		)	53			(46		)
Net cash used in investing activities	(1,456		)	(1,286		)	(294		)	(2,367		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the:
Issuance of long-term debt	497			875			574			2,088
Issuance of common stock related to employee benefit plans	15			19			16			23
Payments for the redemption of long-term debt	(403		)	(1,287		)	(1,246		)	(1,757		)
Proceeds from the issuance of short-term debt with original maturities greater than 90 days	187			—			287			—
Payments for the redemption of short-term debt with original maturities greater than 90 days	(643		)	—			(664		)	—
Notes payable and commercial paper	1,727			898			12			1,024
Distributions to noncontrolling interests	—			(3		)	(7		)	(9		)
Dividends paid	(564		)	(553		)	(1,115		)	(1,107		)
Repurchase of common shares							(1,500		)	—
Other	(15		)	(6		)	(18		)	(7		)
Net cash provided by (used in) financing activities	801			(57		)
Net increase in cash and cash equivalents	785			30
Net cash (used in) provided by financing activities							(3,661		)	255
Net (decrease) increase in cash and cash equivalents							(1,076		)	507
Cash and cash equivalents at beginning of period	2,036			1,501			2,036			1,501
Cash and cash equivalents at end of period	$	2,821		$	1,531		$	960		$	2,008
Supplemental Disclosures:
Significant non-cash transactions:
Accrued capital expenditures	$	438		$	361		$	547		$	348

See Notes to Condensed Consolidated Financial Statements

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 Losses on Cash Flow Hedges			Net Gains 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, 2013	706	$	1	$	39,365	$	2,363		$	(307	)	$	(40	)	$	—	$	(52	)	$	41,330		$	78		$	41,408		706		$	1	$	39,365		$	2,363		$	(307	)	$	(40	)	$	—		$	(52	)	$	41,330		$	78		$	41,408
Net (loss) income	—	—		—		(97		)	—			—			—		—			(97		)	4			(93		)
Net income																													—		—		—			512			—			—			—			—			512			8			520
Other comprehensive income (loss)	—	—		—		—			23			—			—		(1		)	22			1			23			—		—		—			—			51			(9		)	2			—			44			1			45
Common stock issuances, including dividend reinvestment and employee benefits	1	—		7		—			—			—			—		—			7			—			7			1		—		24			—			—			—			—			—			24			—			24
Common stock dividends	—	—		—		(553		)	—			—			—		—			(553		)	—			(553		)	—		—		—			(1,107		)	—			—			—			—			(1,107		)	—			(1,107		)
Distributions to noncontrolling interest in subsidiaries	—	—		—		—			—			—			—		—			—			(3		)	(3		)	—		—		—			—			—			—			—			—			—			(9		)	(9		)
Balance at March 31, 2014	707	$	1	$	39,372	$	1,713		$	(284	)	$	(40	)	$	—	$	(53	)	$	40,709		$	80		$	40,789
Balance at June 30, 2014																													707		$	1	$	39,389		$	1,768		$	(256	)	$	(49	)	$	2		$	(52	)	$	40,803		$	78		$	40,881

Balance at December 31, 2014	707	$	1	$	39,405	$	2,012		$	(439	)	$	(59	)	$	3	$	(48	)	$	40,875		$	24		$	40,899		707		$	1	$	39,405		$	2,012		$	(439	)	$	(59	)	$	3		$	(48	)	$	40,875		$	24		$	40,899
Net income	—	—		—		864			—			—			—		—			864			3			867			—		—		—			1,407			—			—			—			—			1,407			7			1,414
Other comprehensive (loss) income	—	—		—		—			(121		)	(3		)	—		(5		)	(129		)	(4		)	(133		)	—		—		—			—			(111		)	7			(3		)	2			(105		)	(5		)	(110		)
Common stock issuances, including dividend reinvestment and employee benefits	1	—		8		—			—			—			—		—			8			—			8			1		—		28			—			—			—			—			—			28			—			28
Stock repurchase																													(20	)	—		(1,500		)	—			—			—			—			—			(1,500		)	—			(1,500		)
Common stock dividends	—	—		—		(564		)	—			—			—		—			(564		)	—			(564		)	—		—		—			(1,115		)	—			—			—			—			(1,115		)	—			(1,115		)
Distributions to noncontrolling interest in subsidiaries																													—		—		—			—			—			—			—			—			—			(7		)	(7		)
Other ^(a)	—	—		—		(3		)	—			—			—		—			(3		)	13			10			—		—		—			(10		)	—			—			—			—			(10		)	18			8
Balance at March 31, 2015	708	$	1	$	39,413	$	2,309		$	(560	)	$	(62	)	$	3	$	(53	)	$	41,051		$	36		$	41,087
Balance at June 30, 2015																													688		$	1	$	37,933		$	2,294		$	(550	)	$	(52	)	$	—		$	(46	)	$	39,580		$	37		$	39,617


(a)	The ~~$13~~$18 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

PART I

DUKE ENERGY CAROLINAS, LLC

Condensed Consolidated Statements of Operations and Comprehensive Income

(Unaudited)


	Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2015		2014		2015		2014		2015		2014
Operating Revenues	$	1,901	$	2,000	$	1,707	$	1,755	$	3,608	$	3,755
Operating Expenses
Fuel used in electric generation and purchased power	578		658		427		503		1,005		1,161
Operation, maintenance and other	489		487		469		463		958		950
Depreciation and amortization	249		242		261		248		510		490
Property and other taxes	70		104		67		100		137		204
Impairment charges					—		3		—		3
Total operating expenses	1,386		1,491		1,224		1,317		2,610		2,808
Operating Income	515		509		483		438		998		947
Other Income and Expenses, net	42		49		41		44		83		93
Interest Expense	102		101		106		102		208		203
Income Before Income Taxes	455		457		418		380		873		837
Income Tax Expense	163		171		153		110		316		281
Net Income	$	292	$	286	$	265	$	270	$	557	$	556
Other Comprehensive Income, net of tax
Reclassification into earnings from cash flow hedges	—		1		—		1		—		2
Comprehensive Income	$	292	$	287	$	265	$	271	$	557	$	558

See Notes to Condensed Consolidated Financial Statements

PART I

DUKE ENERGY CAROLINAS, LLC

Condensed Consolidated Balance Sheets

(Unaudited)


(in millions)	March 31, 2015			December 31, 2014			June 30, 2015			December 31, 2014
ASSETS
Current Assets
Cash and cash equivalents	$	30		$	13		$	28		$	13
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 (net of allowance for doubtful accounts of $3 at June 30, 2015 and December 31, 2014)							76			129
Restricted receivables of variable interest entities (net of allowance for doubtful accounts of $6 at June 30, 2015 and December 31, 2014)							692			647
Receivables from affiliated companies	91			75			106			75
Notes receivable from affiliated companies	755			150			700			150
Inventory	1,117			1,124			1,154			1,124
Regulatory assets	376			399			343			399
Other	41			77			54			77
Total current assets	3,174			2,614			3,153			2,614
Investments and Other Assets
Nuclear decommissioning trust funds	3,118			3,042			3,094			3,042
Other	996			959			1,041			959
Total investments and other assets	4,114			4,001			4,135			4,001
Property, Plant and Equipment
Cost	37,682			37,372			38,085			37,372
Accumulated depreciation and amortization	(12,935		)	(12,700		)	(13,120		)	(12,700		)
Net property, plant and equipment	24,747			24,672			24,965			24,672
Regulatory Assets and Deferred Debits
Regulatory assets	2,460			2,465			2,631			2,465
Other	45			42			44			42
Total regulatory assets and deferred debits	2,505			2,507			2,675			2,507
Total Assets	$	34,540		$	33,794		$	34,928		$	33,794
LIABILITIES AND MEMBER'S EQUITY
Current Liabilities
Accounts payable	$	504		$	709		$	494		$	709
Accounts payable to affiliated companies	204			154			141			154
Taxes accrued	129			146			225			146
Interest accrued	135			95			104			95
Current maturities of long-term debt	506			507			506			507
Regulatory liabilities	26			34			31			34
Other	398			434			379			434
Total current liabilities	1,902			2,079			1,880			2,079
Long-Term Debt	8,079			7,584			8,079			7,584
Long-Term Debt Payable to Affiliated Companies	300			300			300			300
Deferred Credits and Other Liabilities
Deferred income taxes	5,901			5,812			6,019			5,812
Investment tax credits	203			204			201			204
Accrued pension and other post-retirement benefit costs	109			111			109			111
Asset retirement obligations	3,460			3,428			3,604			3,428
Regulatory liabilities	2,730			2,710			2,738			2,710
Other	640			642			617			642
Total deferred credits and other liabilities	13,043			12,907			13,288			12,907
Commitments and Contingencies
Member's Equity
Member's equity	11,229			10,937			11,394			10,937
Accumulated other comprehensive loss	(13		)	(13		)	(13		)	(13		)
Total member's equity	11,216			10,924			11,381			10,924
Total Liabilities and Member's Equity	$	34,540		$	33,794		$	34,928		$	33,794

See Notes to Condensed Consolidated Financial Statements

PART I

DUKE ENERGY CAROLINAS, LLC

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Three Months Ended March 31,						Six Months Ended June 30,
(in millions)	2015			2014			2015			2014
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	292		$	286		$	557		$	556
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including amortization of nuclear fuel)	324			309			670			621
Equity component of AFUDC	(24		)	(22		)	(48		)	(44		)
Impairment charges							—			3
Deferred income taxes	113			87			184			132
Accrued pension and other post-retirement benefit costs	4			6			7			11
Contributions to qualified pension plans	(42		)	—			(42		)	—
Payments for asset retirement obligations							(60		)	—
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	—			3			—			3
Receivables	16			11			45			(39		)
Receivables from affiliated companies	(16		)	(27		)	(31		)	(12		)
Inventory	7			181			(31		)	157
Other current assets	2			(59		)	34			(150		)
Increase (decrease) in
Accounts payable	(133		)	(100		)	(200		)	(107		)
Accounts payable to affiliated companies	50			21			(13		)	(5		)
Taxes accrued	(17		)	(3		)	73			95
Other current liabilities	(27		)	(26		)	(33		)	(57		)
Other assets	44			14			58			6
Other liabilities	(17		)	(9		)	(49		)	15
Net cash provided by operating activities	576			672			1,121			1,185
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(448		)	(426		)	(954		)	(851		)
Purchases of available-for-sale securities	(643		)	(584		)	(1,410		)	(1,098		)
Proceeds from sales and maturities of available-for-sale securities	643			579			1,410			1,087
Notes receivable from affiliated companies	(605		)	(115		)	(550		)	(58		)
Other	4			(6		)	8			(14		)
Net cash used in investing activities	(1,049		)	(552		)	(1,496		)	(934		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	496			—			496			—
Distributions to parent	—			(126		)	(100		)	(251		)
Other	(6		)	—			(6		)	—
Net cash provided by (used in) financing activities	490			(126		)	390			(251		)
Net increase (decrease) in cash and cash equivalents	17			(6		)
Net increase in cash and cash equivalents							15			—
Cash and cash equivalents at beginning of period	13			23			13			23
Cash and cash equivalents at end of period	$	30		$	17		$	28		$	23
Supplemental Disclosures:
Significant non-cash transactions:
Accrued capital expenditures	$	102		$	133		$	160		$	113

See Notes to Condensed Consolidated Financial Statements

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 on Cash Flow Hedges			Unrealized Losses on Available-for-Sale Securities			Total			Member's Equity			Net Losses on Cash Flow Hedges			Net Losses on Available-for-Sale Securities			Total
Balance at December 31, 2013	$	10,365		$	(14	)	$	(1	)	$	10,350		$	10,365		$	(14	)	$	(1	)	$	10,350
Net income	286			—			—			286			556			—			—			556
Other comprehensive income	—			1			—			1			—			2			—			2
Distributions to parent	(126		)	—			—			(126		)	(251		)	—			—			(251		)
Balance at March 31, 2014	$	10,525		$	(13	)	$	(1	)	$	10,511
Balance at June 30, 2014													$	10,670		$	(12	)	$	(1	)	$	10,657

Balance at December 31, 2014	$	10,937		$	(12	)	$	(1	)	$	10,924		$	10,937		$	(12	)	$	(1	)	$	10,924
Net income	292			—			—			292			557			—			—			557
Balance at March 31, 2015	$	11,229		$	(12	)	$	(1	)	$	11,216
Distributions to parent													(100		)	—			—			(100		)
Balance at June 30, 2015													$	11,394		$	(12	)	$	(1	)	$	11,381

See Notes to Condensed Consolidated Financial Statements

PART I

PROGRESS ENERGY, INC.

Condensed Consolidated Statements of Operations and Comprehensive Income

(Unaudited)


	Three Months Ended March 31,						Three Months Ended June 30,						Six Months Ended June 30,
(in millions)	2015			2014			2015			2014			2015			2014
Operating Revenues	$	2,536		$	2,541		$	2,476		$	2,421		$	5,012		$	4,962
Operating Expenses
Fuel used in electric generation and purchased power	1,032			1,043			1,003			977			2,035			2,020
Operation, maintenance and other	565			595			568			555			1,133			1,150
Depreciation and amortization	287			276			283			281			570			557
Property and other taxes	111			151			124			137			235			288
Impairment charges							—			(17		)	—			(17		)
Total operating expenses	1,995			2,065			1,978			1,933			3,973			3,998
Gains on Sales of Other Assets and Other, net	8			1			6			—			14			1
Operating Income	549			477			504			488			1,053			965
Other Income and Expenses, net	27			15			19			13			46			28
Interest Expense	168			169			166			167			334			336
Income From Continuing Operations Before Taxes	408			323			357			334			765			657
Income Tax Expense From Continuing Operations	144			119			140			127			284			246
Income From Continuing Operations	264			204			217			207			481			411
Loss From Discontinued Operations, net of tax	(1		)	(1		)	—			(5		)	(1		)	(6		)
Net Income	263			203			217			202			480			405
Less: Net Income Attributable to Noncontrolling Interest	3			1			2			—			5			1
Net Income Attributable to Parent	$	260		$	202		$	215		$	202		$	475		$	404

Net Income	$	263		$	203		$	217		$	202		$	480		$	405
Other Comprehensive Income (Loss), net of tax
Other Comprehensive Income, net of tax
Pension and OPEB adjustments	1			1			1			—			2			1
Net unrealized gain on cash flow hedges	—			1
Reclassification into earnings from cash flow hedges	(2		)	—			1			4			(1		)	4
Other Comprehensive (Loss) Income, net of tax	(1		)	2
Unrealized losses on available-for-sale securities							(1		)	—			(1		)	—
Other Comprehensive Income, net of tax							1			4			—			5
Comprehensive Income	262			205			218			206			480			410
Less: Comprehensive Income Attributable to Noncontrolling Interests	3			1			2			—			5			1
Comprehensive Income Attributable to Parent	$	259		$	204		$	216		$	206		$	475		$	409

See Notes to Condensed Consolidated Financial Statements

PART I

PROGRESS ENERGY, INC.

Condensed Consolidated Balance Sheets

(Unaudited)


(in millions)	March 31, 2015			December 31, 2014			June 30, 2015			December 31, 2014
ASSETS
Current Assets
Cash and cash equivalents	$	44		$	42		$	45		$	42
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 (net of allowance for doubtful accounts of $5 at June 30, 2015 and $8 at December 31, 2014)							136			129
Restricted receivables of variable interest entities (net of allowance for doubtful accounts of $8 at June 30, 2015 and December 31, 2014)							854			741
Receivables from affiliated companies	80			59			114			59
Notes receivable from affiliated companies	178			220			—			220
Inventory	1,543			1,590			1,529			1,590
Regulatory assets	392			491			435			491
Other	793			1,285			709			1,285
Total current assets	3,938			4,557			3,822			4,557
Investments and Other Assets
Nuclear decommissioning trust funds	2,458			2,503			2,435			2,503
Goodwill	3,655			3,655			3,655			3,655
Other	777			670			803			670
Total investments and other assets	6,890			6,828			6,893			6,828
Property, Plant and Equipment
Cost	39,067			38,650			38,958			38,650
Accumulated depreciation and amortization	(13,714		)	(13,506		)	(13,614		)	(13,506		)
Generation facilities to be retired, net							460			—
Net property, plant and equipment	25,353			25,144			25,804			25,144
Regulatory Assets and Deferred Debits
Regulatory assets	5,687			5,408			5,813			5,408
Other	90			91			87			91
Total regulatory assets and deferred debits	5,777			5,499			5,900			5,499
Total Assets	$	41,958		$	42,028		$	42,419		$	42,028
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	667		$	847		$	689		$	847
Accounts payable to affiliated companies	286			203			271			203
Notes payable to affiliated companies	650			835			945			835
Taxes accrued	161			114			209			114
Interest accrued	203			184			179			184
Current maturities of long-term debt	1,564			1,507			1,264			1,507
Regulatory liabilities	125			106			122			106
Other	961			1,021			918			1,021
Total current liabilities	4,617			4,817			4,597			4,817
Long-Term Debt	12,946			13,247			12,942			13,247
Deferred Credits and Other Liabilities
Deferred income taxes	4,834			4,759			4,907			4,759
Accrued pension and other post-retirement benefit costs	561			533			553			533
Asset retirement obligations	4,738			4,711			4,995			4,711
Regulatory liabilities	2,413			2,379			2,387			2,379
Other	411			406			384			406
Total deferred credits and other liabilities	12,957			12,788			13,226			12,788
Commitments and Contingencies
Common Stockholder's Equity
Common stock, $0.01 par value, 100 shares authorized and outstanding at March 31, 2015 and December 31, 2014	—			—
Common stock, $0.01 par value, 100 shares authorized and outstanding at June 30, 2015 and December 31, 2014							—			—
Additional paid-in capital	7,467			7,467			7,467			7,467
Retained earnings	4,039			3,782			4,255			3,782
Accumulated other comprehensive loss	(42		)	(41		)	(41		)	(41		)
Total common stockholder's equity	11,464			11,208			11,681			11,208
Noncontrolling interests	(26		)	(32		)	(27		)	(32		)
Total equity	11,438			11,176			11,654			11,176
Total Liabilities and Common Stockholder's Equity	$	41,958		$	42,028		$	42,419		$	42,028

See Notes to Condensed Consolidated Financial Statements

PART I

PROGRESS ENERGY, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Three Months Ended March 31,						Six Months Ended June 30,
(in millions)	2015			2014			2015			2014
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	263		$	203		$	480		$	405
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion (including amortization of nuclear fuel)	329			316			648			642
Equity component of AFUDC	(14		)	(1		)	(26		)	(9		)
Gains on sales of other assets and other, net	(8		)	(1		)
(Gains) losses on sales of other assets							(14		)	3
Impairment charges							—			(17		)
Deferred income taxes	196			183			358			261
Accrued pension and other post-retirement benefit costs	(1		)	7			(3		)	14
Contributions to qualified pension plans	(42		)	—			(42		)	—
Payments for asset retirement obligations							(61		)	—
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	(22		)	13			5			14
Receivables	(66		)	(45		)	(103		)	(166		)
Receivables from affiliated companies	(21		)	—			(55		)	(15		)
Inventory	47			72			62			(18		)
Other current assets	302			(134		)	215			(199		)
Increase (decrease) in
Accounts payable	(107		)	(53		)	(182		)	(41		)
Accounts payable to affiliated companies	83			114			68			111
Taxes accrued	47			3			94			49
Other current liabilities	(10		)	(116		)	(9		)	(157		)
Other assets	(21		)	(52		)	(70		)	(71		)
Other liabilities	(48		)	(6		)	(32		)	(27		)
Net cash provided by operating activities	907			503			1,333			779
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(563		)	(475		)	(1,170		)	(888		)
Purchases of available-for-sale securities	(298		)	(266		)	(562		)	(453		)
Proceeds from sales and maturities of available-for-sale securities	367			269			624			442
Notes receivable from affiliated companies	42			(101		)	220			10
Other	(20		)	(25		)	4			(41		)
Net cash used in investing activities	(472		)	(598		)	(884		)	(930		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	—			875			—			875
Payments for the redemption of long-term debt	(245		)	(469		)	(549		)	(473		)
Notes payable to affiliated companies	(185		)	(291		)	110			(229		)
Distributions to noncontrolling interests	—			(3		)	(4		)	(2		)
Other	(3		)	(39		)	(3		)	(40		)
Net cash (used in) provided by financing activities	(433		)	73			(446		)	131
Net increase (decrease) in cash and cash equivalents	2			(22		)	3			(20		)
Cash and cash equivalents at beginning of period	42			58			42			58
Cash and cash equivalents at end of period	$	44		$	36		$	45		$	38
Supplemental Disclosures:
Significant non-cash transactions:
Accrued capital expenditures	$	176		$	158		$	271		$	156

See Notes to Condensed Consolidated Financial Statements

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 Losses on Cash Flow Hedges			Net Gains on Available for Sale Securities		Pension and OPEB 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, 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	—		—		202			—			—		—			202			1			203			—		—		404			—			—			—			404			1			405
Other comprehensive income	—		—		—			1			—		1			2			—			2			—		—		—			4			—			1			5			—			5
Distributions to noncontrolling interests	—		—		—			—			—		��			—			(3		)	(3		)	—		—		—			—			—			—			—			(2		)	(2		)
Transfer of service company net assets to Duke Energy	—		—		(542		)	3			—		—			(539		)	—			(539		)	—		—		(539		)	—			—			—			(539		)	—			(539		)
Balance at March 31, 2014	$	—	$	7,467	$	3,112		$	(39	)	$	—	$	(15	)	$	10,525		$	2		$	10,527
Balance at June 30, 2014																									$	—	$	7,467	$	3,317		$	(39	)	$	—		$	(15	)	$	10,730		$	3		$	10,733

Balance at December 31, 2014	$	—	$	7,467	$	3,782		$	(35	)	$	1	$	(7	)	$	11,208		$	(32	)	$	11,176		$	—	$	7,467	$	3,782		$	(35	)	$	1		$	(7	)	$	11,208		$	(32	)	$	11,176
Net income	—		—		260			—					—			260			3			263			—		—		475			—						—			475			5			480
Other comprehensive (loss) income	—		—		—			(2		)	—		1			(1		)	—			(1		)	—		—		—			(1		)	(1		)	2			—			—			—
Distributions to noncontrolling interests																									—		—		—			—			—			—			—			(4		)	(4		)
Other	—		—		(3		)	—			—		—			(3		)	3			—			—		—		(2		)	—			—			—			(2		)	4			2
Balance at March 31, 2015	$	—	$	7,467	$	4,039		$	(37	)	$	1	$	(6	)	$	11,464		$	(26	)	$	11,438
Balance at June 30, 2015																									$	—	$	7,467	$	4,255		$	(36	)	$	—		$	(5	)	$	11,681		$	(27	)	$	11,654

See Notes to Condensed Consolidated Financial Statements

PART I

DUKE ENERGY PROGRESS, INC. (subsequently DUKE ENERGY PROGRESS, LLC)

Condensed Consolidated Statements of Operations and Comprehensive Income

(Unaudited)


	Three Months Ended March 31,				Three Months Ended June 30,					Six Months Ended June 30,
(in millions)	2015		2014		2015		2014			2015		2014
Operating Revenues	$	1,449	$	1,422	$	1,193	$	1,191		$	2,642	$	2,613
Operating Expenses
Fuel used in electric generation and purchased power	575		573		449		454			1,024		1,027
Operation, maintenance and other	375		381		362		347			737		728
Depreciation and amortization	152		144		163		142			315		286
Property and other taxes	32		67		35		54			67		121
Impairment charges					—		(18		)	—		(18		)
Total operating expenses	1,134		1,165		1,009		979			2,143		2,144
Gains on Sales of Other Assets and Other, net	1		1		—		—			1		1
Operating Income	316		258		184		212			500		470
Other Income and Expenses, net	20		9		15		7			35		16
Interest Expense	60		57		56		58			116		115
Income Before Income Taxes	276		210		143		161			419		371
Income Tax Expense	93		77		58		60			151		137
Net Income and Comprehensive Income	$	183	$	133	$	85	$	101		$	268	$	234

See Notes to Condensed Consolidated Financial Statements

PART I

DUKE ENERGY PROGRESS, INC. (subsequently DUKE ENERGY PROGRESS, LLC)

Condensed Consolidated Balance Sheets

(Unaudited)


(in millions)	March 31, 2015			December 31, 2014			June 30, 2015			December 31, 2014
ASSETS
Current Assets
Cash and cash equivalents	$	6		$	9		$	13		$	9
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 (net of allowance for doubtful accounts of $3 at June 30, 2015 and $7 at December 31, 2014)							49			43
Restricted receivables of variable interest entities (net of allowance for doubtful accounts of $4 at June 30, 2015 and $5 at December 31, 2014)							469			436
Receivables from affiliated companies	4			10			4			10
Notes receivable from affiliated companies	205			237			—			237
Inventory	929			966			914			966
Regulatory assets	267			287			316			287
Other	99			384			49			384
Total current assets	2,038			2,372			1,814			2,372
Investments and Other Assets
Nuclear decommissioning trust funds	1,738			1,701			1,734			1,701
Other	450			412			464			412
Total investments and other assets	2,188			2,113			2,198			2,113
Property, Plant and Equipment
Cost	24,444			24,207			24,093			24,207
Accumulated depreciation and amortization	(9,162		)	(9,021		)	(8,982		)	(9,021		)
Generation facilities to be retired, net							460			—
Net property, plant and equipment	15,282			15,186			15,571			15,186
Regulatory Assets and Deferred Debits
Regulatory assets	2,857			2,675			3,119			2,675
Other	34			34			33			34
Total regulatory assets and deferred debits	2,891			2,709			3,152			2,709
Total Assets	$	22,399		$	22,380		$	22,735		$	22,380
LIABILITIES AND COMMON STOCKHOLDER'S EQUITY
Current Liabilities
Accounts payable	$	363		$	481		$	342		$	481
Accounts payable to affiliated companies	183			120			182			120
Notes payable to affiliated companies							192			—
Taxes accrued	61			47			113			47
Interest accrued	87			81			78			81
Current maturities of long-term debt	702			945			402			945
Regulatory liabilities	80			71			74			71
Other	359			409			349			409
Total current liabilities	1,835			2,154			1,732			2,154
Long-Term Debt	5,255			5,256			5,255			5,256
Deferred Credits and Other Liabilities
Deferred income taxes	2,978			2,908			3,012			2,908
Accrued pension and other post-retirement benefit costs	287			290			281			290
Asset retirement obligations	3,936			3,905			4,262			3,905
Regulatory liabilities	1,883			1,832			1,891			1,832
Other	175			168			167			168
Total deferred credits and other liabilities	9,259			9,103			9,613			9,103
Commitments and Contingencies
Common Stockholder's Equity
Common stock, no par value, 200 million shares authorized; 160 million shares outstanding at March 31, 2015 and December 31, 2014	2,159			2,159
Common stock, no par value, 200 million shares authorized; 160 million shares outstanding at June 30, 2015 and December 31, 2014							2,159			2,159
Retained earnings	3,891			3,708			3,976			3,708
Total common stockholder's equity	6,050			5,867			6,135			5,867
Total Liabilities and Common Stockholder's Equity	$	22,399		$	22,380		$	22,735		$	22,380

See Notes to Condensed Consolidated Financial Statements

PART I

DUKE ENERGY PROGRESS, INC. (subsequently DUKE ENERGY PROGRESS, LLC)

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Three Months Ended March 31,						Six Months Ended June 30,
(in millions)	2015			2014			2015			2014
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	183		$	133		$	268		$	234
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion (including amortization of nuclear fuel)	193			183			389			368
Equity component of AFUDC	(13		)	(2		)	(23		)	(9		)
Gains on sales of other assets and other, net	(1		)	(1		)	(1		)	(1		)
Impairment charges							—			(18		)
Deferred income taxes	138			117			177			156
Accrued pension and other post-retirement benefit costs	(4		)	(2		)	(7		)	(4		)
Contributions to qualified pension plans	(21		)	—			(21		)	—
Payments for asset retirement obligations							(32		)	—
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	(4		)	6			(3		)	7
Receivables	(92		)	10			(64		)	(8		)
Receivables from affiliated companies	6			(5		)	6			(4		)
Inventory	37			53			53			(22		)
Other current assets	170			(183		)	156			(151		)
Increase (decrease) in
Accounts payable	(52		)	(37		)	(128		)	(61		)
Accounts payable to affiliated companies	63			139			62			59
Taxes accrued	14			—			66			11
Other current liabilities	(28		)	(41		)	(15		)	(52		)
Other assets	(2		)	(13		)	(31		)	(13		)
Other liabilities	(23		)	(1		)	(21		)	(7		)
Net cash provided by operating activities	564			356			831			485
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(338		)	(299		)	(699		)	(540		)
Purchases of available-for-sale securities	(149		)	(151		)	(319		)	(269		)
Proceeds from sales and maturities of available-for-sale securities	144			149			301			253
Notes receivable from affiliated companies	32			(65		)	237			—
Other	(12		)	(18		)	6			(34		)
Net cash used in investing activities	(323		)	(384		)	(474		)	(590		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	—			650			—			650
Payments for the redemption of long-term debt	(243		)	(168		)	(544		)	(168		)
Notes payable to affiliated companies	—			(462		)	192			(261		)
Dividends to parent							—			(125		)
Other	(1		)	(4		)	(1		)	(5		)
Net cash (used in) provided by financing activities	(244		)	16			(353		)	91
Net decrease in cash and cash equivalents	(3		)	(12		)
Net increase (decrease) in cash and cash equivalents							4			(14		)
Cash and cash equivalents at beginning of period	9			21			9			21
Cash and cash equivalents at end of period	$	6		$	9		$	13		$	7
Supplemental Disclosures:
Significant non-cash transactions:
Accrued capital expenditures	$	82		$	116		$	135		$	113

See Notes to Condensed Consolidated Financial Statements

PART I

DUKE ENERGY PROGRESS, INC. (subsequently DUKE ENERGY PROGRESS, LLC)

Condensed Consolidated Statements of Changes in Common Stockholder's Equity

(Unaudited)


(in millions)	Common Stock		Retained Earnings		Total Equity		Common Stock		Retained Earnings			Total Equity
Balance at December 31, 2013	$	2,159	$	3,466	$	5,625	$	2,159	$	3,466		$	5,625
Net income	—		133		133		—		234			234
Balance at March 31, 2014	$	2,159	$	3,599	$	5,758
Dividends to parent							—		(125		)	(125		)
Balance at June 30, 2014							$	2,159	$	3,575		$	5,734

Balance at December 31, 2014	$	2,159	$	3,708	$	5,867	$	2,159	$	3,708		$	5,867
Net income	—		183		183		—		268			268
Balance at March 31, 2015	$	2,159	$	3,891	$	6,050
Balance at June 30, 2015							$	2,159	$	3,976		$	6,135

See Notes to Condensed Consolidated Financial Statements

PART I

DUKE ENERGY FLORIDA, INC. (subsequently DUKE ENERGY FLORIDA, LLC)

Condensed Consolidated Statements of Operations and Comprehensive Income

(Unaudited)


	Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2015		2014		2015		2014		2015		2014
Operating Revenues	$	1,086	$	1,116	$	1,281	$	1,225	$	2,367	$	2,341
Operating Expenses
Fuel used in electric generation and purchased power	457		470		554		523		1,011		993
Operation, maintenance and other	188		211		202		204		390		414
Depreciation and amortization	134		132		122		139		256		271
Property and other taxes	80		84		88		83		168		167
Impairment charges					—		—		—		1
Total operating expenses	859		897		966		949		1,825		1,846
Operating Income	227		219		315		276		542		495
Other Income and Expenses, net	6		5		4		6		10		11
Interest Expense	49		49		50		50		99		99
Income Before Income Taxes	184		175		269		232		453		407
Income Tax Expense	71		67		104		90		175		157
Net Income	$	113	$	108	$	165	$	142	$	278	$	250
Other Comprehensive Income, net of tax
Net unrealized gain on cash flow hedges	—		1
Reclassification into earnings from cash flow hedges					—		—		—		1
Comprehensive Income	$	113	$	109	$	165	$	142	$	278	$	251

See Notes to Condensed Consolidated Financial Statements

PART I

DUKE ENERGY FLORIDA, INC. (subsequently DUKE ENERGY FLORIDA, LLC)

Condensed Consolidated Balance Sheets

(Unaudited)


(in millions)	March 31, 2015			December 31, 2014			June 30, 2015			December 31, 2014
ASSETS
Current Assets
Cash and cash equivalents	$	10		$	8		$	13		$	8
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 (net of allowance for doubtful accounts of $2 at June 30, 2015 and December 31, 2014)							85			84
Restricted receivables of variable interest entities (net of allowance for doubtful accounts of $3 at June 30, 2015 and December 31, 2014)							385			305
Receivables from affiliated companies	60			40			93			40
Inventory	614			623			615			623
Regulatory assets	124			203			119			203
Other	333			521			282			521
Total current assets	1,519			1,784			1,592			1,784
Investments and Other Assets
Nuclear decommissioning trust funds	720			803			701			803
Other	270			204			283			204
Total investments and other assets	990			1,007			984			1,007
Property, Plant and Equipment
Cost	14,613			14,433			14,854			14,433
Accumulated depreciation and amortization	(4,545		)	(4,478		)	(4,625		)	(4,478		)
Net property, plant and equipment	10,068			9,955			10,229			9,955
Regulatory Assets and Deferred Debits
Regulatory assets	2,830			2,733			2,694			2,733
Other	39			39			37			39
Total regulatory assets and deferred debits	2,869			2,772			2,731			2,772
Total Assets	$	15,446		$	15,518		$	15,536		$	15,518
LIABILITIES AND COMMON STOCKHOLDER'S EQUITY
Current Liabilities
Accounts payable	$	302		$	365		$	346		$	365
Accounts payable to affiliated companies	85			70			73			70
Notes payable to affiliated companies	192			84			221			84
Taxes accrued	126			65			130			65
Interest accrued	68			47			45			47
Current maturities of long-term debt	562			562			562			562
Regulatory liabilities	45			35			48			35
Other	577			586			543			586
Total current liabilities	1,957			1,814			1,968			1,814
Long-Term Debt	4,296			4,298			4,293			4,298
Deferred Credits and Other Liabilities
Deferred income taxes	2,465			2,452			2,500			2,452
Accrued pension and other post-retirement benefit costs	254			221			252			221
Asset retirement obligations	803			806			733			806
Regulatory liabilities	529			547			494			547
Other	157			158			146			158
Total deferred credits and other liabilities	4,208			4,184			4,125			4,184
Commitments and Contingencies
Common Stockholder's Equity
Common Stock, no par; 60 million shares authorized; 100 shares outstanding at March 31, 2015 and December 31, 2014	1,762			1,762
Common stock, no par; 60 million shares authorized; 100 shares outstanding at June 30, 2015 and December 31, 2014							1,762			1,762
Retained earnings	3,223			3,460			3,388			3,460
Total common stockholder's equity	4,985			5,222			5,150			5,222
Total Liabilities and Common Stockholder's Equity	$	15,446		$	15,518		$	15,536		$	15,518

See Notes to Condensed Consolidated Financial Statements

PART I

DUKE ENERGY FLORIDA, INC. (subsequently DUKE ENERGY FLORIDA, LLC)

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Three Months Ended March 31,						Six Months Ended June 30,
(in millions)	2015			2014			2015			2014
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	113		$	108		$	278		$	250
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion	136			133			258			273
Equity component of AFUDC	(1		)	—			(2		)	—
Impairment charges							—			1
Deferred income taxes	39			60			237			84
Accrued pension and other post-retirement benefit costs	1			7			3			15
Contributions to qualified pension plans	(21		)	—			(21		)	—
Payments for asset retirement obligations							(28		)	—
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	(20		)	5			5			3
Receivables	24			21			(40		)	(82		)
Receivables from affiliated companies	(20		)	(7		)	(53		)	(4		)
Inventory	10			20			10			4
Other current assets	143			68			10			(49		)
Increase (decrease) in
Accounts payable	(54		)	24			(53		)	58
Accounts payable to affiliated companies	15			28			3			29
Taxes accrued	61			10			65			108
Other current liabilities	24			(63		)	5			(94		)
Other assets	(17		)	(36		)	(44		)	(58		)
Other liabilities	(29		)	(13		)	(19		)	(29		)
Net cash provided by operating activities	404			365			614			509
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(224		)	(176		)	(471		)	(348		)
Purchases of available-for-sale securities	(149		)	(115		)	(243		)	(183		)
Proceeds from sales and maturities of available-for-sale securities	223			120			323			188
Notes receivable from affiliated companies	—			(110		)	—			(76		)
Other	(7		)	(8		)	1			(8		)
Net cash used in investing activities	(157		)	(289		)	(390		)	(427		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	—			225			—			225
Payments for the redemption of long-term debt	(2		)	(1		)	(5		)	(4		)
Notes payable to affiliated companies	108			(181		)	137			(181		)
Dividends to parent	(350		)	(124		)	(350		)	(124		)
Other	(1		)	(1		)	(1		)	(1		)
Net cash used in financing activities	(245		)	(82		)	(219		)	(85		)
Net increase (decrease) in cash and cash equivalents	2			(6		)	5			(3		)
Cash and cash equivalents at beginning of period	8			16			8			16
Cash and cash equivalents at end of period	$	10		$	10		$	13		$	13
Supplemental Disclosures:
Significant non-cash transactions:
Accrued capital expenditures	$	94		$	42		$	136		$	44

See Notes to Condensed Consolidated Financial Statements

PART I

DUKE ENERGY FLORIDA, INC. (subsequently DUKE ENERGY FLORIDA, LLC)

Condensed Consolidated Statements of Changes in Common Stockholder's Equity

(Unaudited)


						Accumulated Other Comprehensive Loss											Accumulated Other Comprehensive Loss
(in millions)	Common Stock		Retained Earnings			Net Loss on Cash Flow Hedges			Total			Common Stock		Retained Earnings			Net Loss on Cash Flow Hedges			Total
Balance at December 31, 2013	$	1,762	$	3,036		$	(1	)	$	4,797		$	1,762	$	3,036		$	(1	)	$	4,797
Net income	—		108			—			108			—		250			—			250
Other comprehensive income	—		—			1			1			—		—			1			1
Dividends to parent	—		(124		)	—			(124		)	—		(124		)	—			(124		)
Balance at March 31, 2014	$	1,762	$	3,020		$	—		$	4,782
Balance at June 30, 2014												$	1,762	$	3,162		$	—		$	4,924

Balance at December 31, 2014	$	1,762	$	3,460		$	—		$	5,222		$	1,762	$	3,460		$	—		$	5,222
Net income	—		113			—			113			—		278			—			278
Dividends to parent	—		(350		)	—			(350		)	—		(350		)	—			(350		)
Balance at March 31, 2015	$	1,762	$	3,223		$	—		$	4,985
Balance at June 30, 2015												$	1,762	$	3,388		$	—		$	5,150

See Notes to Condensed Consolidated Financial Statements

PART I

DUKE ENERGY OHIO, INC.

Condensed Consolidated Statements of Operations and Comprehensive Income

(Unaudited)


	Three Months Ended March 31,					Three Months Ended June 30,						Six Months Ended June 30,
(in millions)	2015		2014			2015			2014			2015			2014
Operating Revenues
Regulated electric	$	339	$	339		$	299		$	307		$	638		$	646
Nonregulated electric and other	14		13			9			(2		)	23			11
Regulated natural gas	233		223			97			107			330			330
Total operating revenues	586		575			405			412			991			987
Operating Expenses
Fuel used in electric generation and purchased power – regulated	115		124			107			107			222			231
Fuel used in electric generation and purchased power – nonregulated	14		13			12			6			26			19
Cost of natural gas	97		99			12			22			109			121
Operation, maintenance and other	128		127			118			117			246			244
Depreciation and amortization	57		57			58			56			115			113
Property and other taxes	70		68			57			44			127			112
Impairment charges	—		94			—			—			—			94
Total operating expenses	481		582			364			352			845			934
Gains on Sales of Other Assets and Other, net	6		—			2			—			8			—
Operating Income (Loss)	111		(7		)
Operating Income						43			60			154			53
Other Income and Expenses, net	3		3			(5		)	3			(2		)	6
Interest Expense	20		20			18			20			38			40
Income (Loss) From Continuing Operations Before Income Taxes	94		(24		)
Income Tax Expense (Benefit) From Continuing Operations	35		(9		)
Income (Loss) From Continuing Operations	59		(15		)
Income (Loss) From Discontinued Operations, net of tax	90		(875		)
Net Income (Loss) and Comprehensive Income (Loss)	$	149	$	(890	)
Income From Continuing Operations Before Income Taxes						20			43			114			19
Income Tax Expense From Continuing Operations						7			15			42			6
Income From Continuing Operations						13			28			72			13
(Loss) Income From Discontinued Operations, net of tax						(65		)	(135		)	25			(1,010		)
Net (Loss) Income and Comprehensive (Loss) Income						$	(52	)	$	(107	)	$	97		$	(997	)

See Notes to Condensed Consolidated Financial Statements

PART I

DUKE ENERGY OHIO, INC.

Condensed Consolidated Balance Sheets

(Unaudited)


(in millions)	March 31, 2015			December 31, 2014			June 30, 2015			December 31, 2014
ASSETS
Current Assets
Cash and cash equivalents	$	52		$	20		$	22		$	20
Receivables (net of allowance for doubtful accounts of $2 at March 31, 2015 and December 31, 2014)	98			93
Receivables (net of allowance for doubtful accounts of $2 at June 30, 2015 and December 31, 2014)							84			93
Receivables from affiliated companies	91			107			61			107
Notes receivable from affiliated companies	40			145			15			145
Inventory	109			97			102			97
Assets held for sale	295			316			—			316
Regulatory assets	21			49			29			49
Other	97			167			142			167
Total current assets	803			994			455			994
Investments and Other Assets
Goodwill	920			920			920			920
Assets held for sale	2,565			2,605			—			2,605
Other	35			23			16			23
Total investments and other assets	3,520			3,548			936			3,548
Property, Plant and Equipment
Cost	7,208			7,141			7,613			7,141
Accumulated depreciation and amortization	(2,264		)	(2,213		)	(2,496		)	(2,213		)
Generation facilities to be retired, net	9			9			—			9
Net property, plant and equipment	4,953			4,937			5,117			4,937
Regulatory Assets and Deferred Debits
Regulatory assets	512			512			506			512
Other	8			8			8			8
Total regulatory assets and deferred debits	520			520			514			520
Total Assets	$	9,796		$	9,999		$	7,022		$	9,999
LIABILITIES AND COMMON STOCKHOLDER'S EQUITY
Current Liabilities
Accounts payable	$	221		$	209		$	193		$	209
Accounts payable to affiliated companies	123			74			93			74
Notes payable to affiliated companies	298			491			5			491
Taxes accrued	181			163			117			163
Interest accrued	29			19			18			19
Current maturities of long-term debt	56			157			56			157
Liabilities associated with assets held for sale	129			246			—			246
Regulatory liabilities	24			10			34			10
Other	64			66			154			66
Total current liabilities	1,125			1,435			670			1,435
Long-Term Debt	1,525			1,584			1,524			1,584
Long-Term Debt Payable to Affiliated Companies	25			25			25			25
Deferred Credits and Other Liabilities
Deferred income taxes	1,790			1,765			1,330			1,765
Accrued pension and other post-retirement benefit costs	48			48			56			48
Liabilities associated with assets held for sale	25			34			—			34
Asset retirement obligations	26			27			143			27
Regulatory liabilities	243			241			247			241
Other	166			166			168			166
Total deferred credits and other liabilities	2,298			2,281			1,944			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 March 31, 2015 and December 31, 2014	762			762
Common stock, $8.50 par value, 120,000,000 shares authorized; 89,663,086 shares outstanding at June 30, 2015 and December 31, 2014							762			762
Additional paid-in capital	4,782			4,782			2,870			4,782
Accumulated deficit	(721		)	(870		)	(773		)	(870		)
Total common stockholder's equity	4,823			4,674			2,859			4,674
Total Liabilities and Common Stockholder's Equity	$	9,796		$	9,999		$	7,022		$	9,999

See Notes to Condensed Consolidated Financial Statements

PART I

DUKE ENERGY OHIO, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Three Months Ended March 31,						Six Months Ended June 30,
(in millions)	2015			2014			2015			2014
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	149		$	(890	)	$	97		$	(997	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	58			92
Depreciation, amortization and accretion							117			154
Equity component of AFUDC	(1		)	(1		)	(2		)	(2		)
Gains on sales of other assets and other, net	(6		)	—			(8		)	—
Impairment charges	40			1,417			40			1,438
Deferred income taxes	25			(501		)	62			(513		)
Accrued pension and other post-retirement benefit costs	2			1			4			4
Contributions to qualified pension plans	(1		)	—			(1		)	—
Payments for asset retirement obligations							(1		)	—
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	(28		)	39			(12		)	139
Receivables	(8		)	(16		)	6			(98		)
Receivables from affiliated companies	16			(6		)	46			48
Inventory	(3		)	29			3			(4		)
Other current assets	80			(92		)	32			(30		)
Increase (decrease) in
Accounts payable	20			21			(12		)	(6		)
Accounts payable to affiliated companies	49			(13		)	19			(3		)
Taxes accrued	(4		)	(38		)	(68		)	(74		)
Other current liabilities	24			(7		)	99			(9		)
Other assets	15			(9		)	19			(36		)
Other liabilities	(74		)	7			(52		)	(8		)
Net cash provided by operating activities	353			33			388			3
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(81		)	(83		)	(166		)	(167		)
Notes receivable from affiliated companies	105			(110		)	130			(127		)
Net cash provided by (used in) investing activities	24			(193		)
Other							(4		)	—
Net cash used in investing activities							(40		)	(294		)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments for the redemption of long-term debt	(151		)	(1		)	(152		)	(405		)
Notes payable to affiliated companies	(193		)	263			(193		)	785
Dividends to parent	—			(100		)	—			(100		)
Other	(1		)	—			(1		)	—
Net cash (used in) provided by financing activities	(345		)	162			(346		)	280
Net increase in cash and cash equivalents	32			2
Net increase (decrease) in cash and cash equivalents							2			(11		)
Cash and cash equivalents at beginning of period	20			36			20			36
Cash and cash equivalents at end of period	$	52		$	38		$	22		$	25
Supplemental Disclosures:
Significant non-cash transactions:
Accrued capital expenditures	$	15		$	24		$	19		$	19
Distribution of membership interest of Duke Energy SAM, LLC to parent							$	1,912		$	—

See Notes to Condensed Consolidated Financial Statements

PART I

DUKE ENERGY OHIO, INC.

Condensed Consolidated Statements of Changes in Common Stockholder's Equity

(Unaudited)


(in millions)	Common Stock		Additional Paid-in Capital			Accumulated Deficit			Total			Common Stock		Additional Paid-in Capital			Accumulated Deficit			Total
Balance at December 31, 2013	$	762	$	4,882		$	(375	)	$	5,269		$	762	$	4,882		$	(375	)	$	5,269
Net loss	—		—			(890		)	(890		)	—		—			(997		)	(997		)
Dividends to parent	—		(100		)	—			(100		)	—		(100		)	—			(100		)
Balance at March 31, 2014	$	762	$	4,782		$	(1,265	)	$	4,279
Balance at June 30, 2014												$	762	$	4,782		$	(1,372	)	$	4,172

Balance at December 31, 2014	$	762	$	4,782		$	(870	)	$	4,674		$	762	$	4,782		$	(870	)	$	4,674
Net income	—		—			149			149			—		—			97			97
Balance at March 31, 2015	$	762	$	4,782		$	(721	)	$	4,823
Distribution of membership interest of Duke Energy SAM, LLC to parent												—		(1,912		)	—			(1,912		)
Balance at June 30, 2015												$	762	$	2,870		$	(773	)	$	2,859

See Notes to Condensed Consolidated Financial Statements

PART I

DUKE ENERGY INDIANA, INC.

Condensed Consolidated Statements of Operations and Comprehensive Income

(Unaudited)


	Three Months Ended March 31,					Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2015			2014		2015		2014		2015			2014
Operating Revenues	$	788		$	845	$	686	$	748	$	1,474		$	1,593
Operating Expenses
Fuel used in electric generation and purchased power	294			339		235		287		529			626
Operation, maintenance and other	181			166		180		159		361			325
Depreciation and amortization	104			102		107		103		211			205
Property and other taxes	(1		)	23		19		21		18			44
Total operating expenses	578			630		541		570		1,119			1,200
Gain on Sale of Other Assets and Other, net						1		—		1			—
Operating Income	210			215		146		178		356			393
Other Income and Expenses, net	5			7		4		4		9			11
Interest Expense	45			43		43		44		88			87
Income Before Income Taxes	170			179		107		138		277			317
Income Tax Expense	62			66		39		51		101			117
Net Income	$	108		$	113	$	68	$	87	$	176		$	200
Other Comprehensive (Loss) Income, net of tax
Other Comprehensive Loss, net of tax
Reclassification into earnings from cash flow hedges	(1		)	1		—		—		(1		)	—
Comprehensive Income	$	107		$	114	$	68	$	87	$	175		$	200

See Notes to Condensed Consolidated Financial Statements

PART I

DUKE ENERGY INDIANA, INC.

Condensed Consolidated Balance Sheets

(Unaudited)


(in millions)	March 31, 2015			December 31, 2014			June 30, 2015			December 31, 2014
ASSETS
Current Assets
Cash and cash equivalents	$	16		$	6		$	12		$	6
Receivables (net of allowance for doubtful accounts of $1 at March 31, 2015 and December 31, 2014)	83			87
Receivables (net of allowance for doubtful accounts of $1 at June 30, 2015 and December 31, 2014)							86			87
Receivables from affiliated companies	114			115			109			115
Notes receivable from affiliated companies	106			—			25			—
Inventory	542			537			579			537
Regulatory assets	88			93			91			93
Other	240			326			124			326
Total current assets	1,189			1,164			1,026			1,164
Investments and Other Assets
Other	257			251			250			251
Total investments and other assets	257			251			250			251
Property, Plant and Equipment
Cost	13,180			13,034			13,667			13,034
Accumulated depreciation and amortization	(4,314		)	(4,219		)	(4,344		)	(4,219		)
Net property, plant and equipment	8,866			8,815			9,323			8,815
Regulatory Assets and Deferred Debits
Regulatory assets	686			685			707			685
Other	23			24			23			24
Total regulatory assets and deferred debits	709			709			730			709
Total Assets	$	11,021		$	10,939		$	11,329		$	10,939
LIABILITIES AND COMMON STOCKHOLDER'S EQUITY
Current Liabilities
Accounts payable	$	173		$	179		$	165		$	179
Accounts payable to affiliated companies	59			58			60			58
Notes payable to affiliated companies	—			71			—			71
Taxes accrued	67			54			33			54
Interest accrued	51			56			58			56
Current maturities of long-term debt	5			5			330			5
Regulatory liabilities	60			54			57			54
Other	88			98			90			98
Total current liabilities	503			575			793			575
Long-Term Debt	3,636			3,636			3,311			3,636
Long-Term Debt Payable to Affiliated Companies	150			150			150			150
Deferred Credits and Other Liabilities
Deferred income taxes	1,656			1,591			1,696			1,591
Investment tax credits	139			139			138			139
Accrued pension and other post-retirement benefit costs	81			82			82			82
Asset retirement obligations	33			32			453			32
Regulatory liabilities	790			796			776			796
Other	78			90			57			90
Total deferred credits and other liabilities	2,777			2,730			3,202			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 March 31, 2015 and December 31, 2014	1			1
Common stock, no par; $0.01 stated value, 60,000,000 shares authorized; 53,913,701 shares outstanding at June 30, 2015 and December 31, 2014							1			1
Additional paid-in capital	1,384			1,384			1,384			1,384
Retained earnings	2,568			2,460			2,486			2,460
Accumulated other comprehensive income	2			3			2			3
Total common stockholder's equity	3,955			3,848			3,873			3,848
Total Liabilities and Common Stockholder's Equity	$	11,021		$	10,939		$	11,329		$	10,939

See Notes to Condensed Consolidated Financial Statements

PART I

DUKE ENERGY INDIANA, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Three Months Ended March 31,						Six Months Ended June 30,
(in millions)	2015			2014			2015			2014
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	108		$	113		$	176		$	200
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	105			103
Depreciation, amortization and accretion							214			206
Equity component of AFUDC	(3		)	(4		)	(6		)	(6		)
Gain on sale of other assets and other, net							(1		)	—
Deferred income taxes	140			(39		)	232			45
Accrued pension and other post-retirement benefit costs	3			4			6			7
Contributions to qualified pension plans	(9		)	—			(9		)	—
Payments for asset retirement obligations							(3		)	—
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions							(2		)	—
Receivables	3			(23		)	(1		)	(19		)
Receivables from affiliated companies	1			10			6			43
Inventory	(5		)	(10		)	(42		)	(6		)
Other current assets	9			(41		)	87			(16		)
Increase (decrease) in
Accounts payable	21			(36		)	26			(47		)
Accounts payable to affiliated companies	1			12			2			13
Taxes accrued	13			110			(21		)	51
Other current liabilities	6			(6		)	5			(4		)
Other assets	(8		)	(3		)	(31		)	(8		)
Other liabilities	(24		)	50			(43		)	35
Net cash provided by operating activities	361			240			595			494
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(188		)	(133		)	(380		)	(291		)
Purchases of available-for-sale securities	(3		)	(3		)	(4		)	(9		)
Proceeds from sales and maturities of available-for-sale securities	2			3			3			6
Proceeds from the sales of other assets							14			—
Notes receivable from affiliated companies	(106		)	(94		)	(25		)	21
Other	16			—			25			3
Net cash used in investing activities	(279		)	(227		)	(367		)	(270		)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments for the redemption of long-term debt	—			(1		)	—			(1		)
Notes payable to affiliated companies	(71		)	—			(71		)	—
Dividends to parent							(150		)	(225		)
Other	(1		)	(1		)	(1		)	(1		)
Net cash used in financing activities	(72		)	(2		)	(222		)	(227		)
Net increase in cash and cash equivalents	10			11
Net increase (decrease) in cash and cash equivalents							6			(3		)
Cash and cash equivalents at beginning of period	6			15			6			15
Cash and cash equivalents at end of period	$	16		$	26		$	12		$	12
Supplemental Disclosures:
Significant non-cash transactions:
Accrued capital expenditures	$	60		$	32		$	46		$	43

See Notes to Condensed Consolidated Financial Statements

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 on Cash Flow Hedges			Total			Common Stock		Additional Paid-in Capital		Retained Earnings			Net Gains on Cash Flow Hedges			Total
Balance at December 31, 2013	$	1	$	1,384	$	2,551	$	3		$	3,939		$	1	$	1,384	$	2,551		$	3		$	3,939
Net income	—		—		113		—			113			—		—		200			—			200
Other comprehensive income	—		—		—		1			1
Balance at March 31, 2014	$	1	$	1,384	$	2,664	$	4		$	4,053
Dividends to parent													—		—		(225		)	—			(225		)
Balance at June 30, 2014													$	1	$	1,384	$	2,526		$	3		$	3,914

Balance at December 31, 2014	$	1	$	1,384	$	2,460	$	3		$	3,848		$	1	$	1,384	$	2,460		$	3		$	3,848
Net income	—		—		108		—			108			—		—		176			—			176
Other comprehensive loss	—		—		—		(1		)	(1		)	—		—		—			(1		)	(1		)
Balance at March 31, 2015	$	1	$	1,384	$	2,568	$	2		$	3,955
Dividends to parent													—		—		(150		)	—			(150		)
Balance at June 30, 2015													$	1	$	1,384	$	2,486		$	2		$	3,873

See Notes to Condensed Consolidated Financial Statements

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 to 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 Notes

Registrant

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.~~LLC (Duke Energy ~~Progress)~~Progress, formerly Duke Energy Progress, Inc.); Duke Energy Florida, ~~Inc.~~LLC (Duke Energy ~~Florida)~~Florida, formerly Duke Energy Florida, Inc.); 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. On August 1, 2015, Duke Energy Progress, a North Carolina corporation, converted into a North Carolina limited liability company.

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. On August 1, 2015, Duke Energy Florida, a Florida corporation, converted into a Florida limited liability company.

Duke Energy Ohio is a regulated public utility primarily engaged in the 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. Duke Energy Ohio conducts competitive auctions for retail electricity supply in Ohio whereby the ~~energy~~full requirements service 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 applied regulatory accounting to a portion of its operations.~~ On April 2, 2015, Duke Energy completed the sale of its nonregulated Midwest generation business, which sold power into wholesale energy markets, to a subsidiary of Dynegy Inc. (Dynegy). See Note 2 (Midwest Generation Exit) 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.

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 (Duke Energy Retail), a retail sales business owned by Duke Energy, to Dynegy on April 2, 2015. The results of operations of these businesses prior to the date of sale 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.~~sale. See Note 2 (Midwest Generation Exit) 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. Since 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, 2014.

The information in these combined notes relate to each of the Duke Energy Registrants 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 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 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.


(in millions)	March 31, 2015		December 31, 2014		June 30, 2015		December 31, 2014
Duke Energy	$	710	$	827	$	821	$	827
Duke Energy Carolinas	257		295		314		295
Progress Energy	188		217		224		217
Duke Energy Progress	114		135		117		135
Duke Energy Florida	74		82		107		82
Duke Energy Ohio	1		—		2		—
Duke Energy Indiana	28		27		30		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 1213 for further information. These receivables for unbilled revenues are shown in the table below.


(in millions)	March 31, 2015		December 31, 2014		June 30, 2015		December 31, 2014
Duke Energy Ohio	$	62	$	79	$	67	$	79
Duke Energy Indiana	91		112		98		112

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

Loss From Discontinued Operations, net of tax presented on the respective Condensed Consolidated Statements of Operations for Duke Energy and Progress Energy, is attributable only to controlling interests for all periods presented. Other comprehensive income reported on the Condensed Consolidated Statements of Changes in Equity for Progress Energy is attributable only to controlling interests for all periods presented.

ACCUMULATED OTHER COMPREHENSIVE INCOME

For the three and six months ended ~~March 31,~~June 30, 2015 and 2014, 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.

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, excise 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.


	Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2015		2014		2015		2014		2015		2014
Duke Energy	$	100	$	167	$	97	$	151	$	197	$	318
Duke Energy Carolinas	9		46		9		43		18		89
Progress Energy	49		77		57		74		106		151
Duke Energy Progress	4		32		4		24		8		56
Duke Energy Florida	45		45		53		50		98		95
Duke Energy Ohio	32		34		23		25		55		59
Duke Energy Indiana	10		10		8		9		18		19

NEW ACCOUNTING STANDARDS

The new accounting standards adopted for 2015 and 2014 had no significant impact on the presentation or results of operations, cash flows or financial position of the Duke Energy Registrants.

ASC 205 —– Reporting Discontinued Operations. 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~~qualified disposals of components or classifications as held for sale that occur after January 1, 2015. Under the standard, the guidance is not effective for a component classified as held for sale before the effective date even if the disposal occurs after the effective date of the guidance. Duke 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 ~~March 31,~~June 30, 2015.

ASC 606 —– Revenue from Contracts with Customers. 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 has approved the ~~FASB is considering allowing~~issuance of a new ASU to allow companies toa one year delay ~~implementation for one year.~~of implementation. Duke Energy is currently evaluating requirements, and the ultimate impact of the revised 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 the amount of debt issuance costs reported as of December 31, 2014 in the Consolidated Balance Sheets, Duke Energy would record a

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)

This revised accounting guidance would be effective retroactively for Duke Energy beginning January 1, 2016, but can be adopted earlier. Based on the amount of debt issuance costs reported in the Consolidated Balance Sheets as of December 31, 2014, Duke Energy would record a reduction of ~~$137~~approximately $118 million in Regulatory Assets and Deferred Debits and Long-Term Debt. Duke Energy is currently evaluating whether implementation will occur prior to the first quarter of 2016.

2. ACQUISITIONS AND DISPOSITIONS

ACQUISITIONS

Purchase of NCEMPA's Generation

On ~~September 5, 2014,~~July 31, 2015, Duke Energy Progress ~~executed an agreement to~~completed the purchase of North Carolina Eastern Municipal Power Agency’s (NCEMPA) ownership interests in certain generating assets, fuel and spare parts inventory jointly owned with and operated by Duke Energy ~~Progress.~~Progress for approximately $1.25 billion, which exceeds the historical carrying value of the assets acquired by $350 million. This purchase acquisition adjustment is recoverable in wholesale and retail rates, as described below. The ~~agreement provides for~~purchase resulted in the acquisition of a total of approximately 700 megawatts (MW) of generating capacity at Brunswick Nuclear ~~Station,~~Plant, Shearon Harris Nuclear ~~Station (Harris),~~Plant, Mayo ~~Steam Station~~Plant and Roxboro Steam Station. The purchase price for the ownership interest and fuel and spare parts inventory is approximately $1.2 billion. On December 9, 2014, the FERC approved Duke Energy Progress' request to purchase NCEMPA's interests in the generation assets, approved Duke Energy Progress' 30-year wholesale power supply agreementPlant. In connection with ~~NCEMPA and approved Duke Energy Progress' inclusion of the acquisition adjustment resulting from the asset purchase in wholesale power formula rates. On December 22, 2014,~~this transaction, Duke Energy Progress and NCEMPA ~~filed~~entered into a ~~request with~~30-year wholesale power agreement, whereby Duke Energy Progress will sell power to NCEMPA to continue to meet the ~~NRC~~needs of NCEMPA customers.

Duke Energy Progress received FERC approval for inclusion of the purchase acquisition adjustment in wholesale power formula rates on December 9, 2014. On July 8, 2015, the NCUC adopted a new rule that enables a rider mechanism for recovery of the costs to ~~transfer~~acquire, operate and maintain interests in the ~~Brunswick Nuclear Station and Harris operating licenses from NCEMPA~~assets purchased as allocated to Duke Energy ~~Progress. On April 2, 2015,~~Progress' North Carolina ~~legislation was passed that, among other things, allows~~retail operations, including the purchase acquisition adjustment. Duke Energy Progress plans to ~~recover its retail investment, including~~petition the ~~acquisition adjustment, and operating~~PSCSC for an order to allow the deferral of these costs associated with the acquisition through a rider mechanism. On April 13, 2015, Duke Energy Progress and NCEMPA filed a Joint Notice of Transfer and Request for Approval of Certificate of Public Convenience and Necessity (CPCN) with the NCUC, seeking to transfer the CPCN for NCEMPA's ownership interestsas allocated to Duke Energy ~~Progress. Closing of~~Progress' South Carolina retail operations until the ~~transaction is conditioned on approval from the NCUC, the NRC and all municipality members of NCEMPA. The transaction is expected to close by the end of 2015.~~costs are reflected in Duke Energy Progress' retail rates in South Carolina.

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~~On April 1, 2015, prior to the sale, Duke Energy Ohio distributed its indirect ownership interest in the nonregulated Midwest generation business to a subsidiary of Duke Energy ~~Corporation on April 1, 2015.~~Corporation.

The assets and liabilities of the Disposal Group prior to the sale were included in the Commercial ~~Power~~Portfolio (formerly 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.



Facility	Plant 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 Rock	Combined 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	%
Washington	Combined Cycle	Natural Gas	OH	617	617	100	%
Fayette	Combined Cycle	Natural Gas	PA	614	614	100	%
Killen^(b)(c)	Fossil Steam	Coal	OH	600	198	33	%
Lee	Combustion Turbine	Natural Gas	IL	568	568	100	%
Dick's Creek	Combustion Turbine	Natural Gas	OH	136	136	100	%
Miami Fort	Combustion 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 iswas not operated by Duke Energy Ohio.


(d)	Total MWMegawatt (MW) capacity is based on summer capacity.

The Disposal Group also ~~includes~~included a retail sales business owned by Duke Energy. In the second quarter of 2014, Duke Energy Ohio removed Ohio Valley Electric Corporation's (OVEC) purchase power agreement from the Disposal Group as it no longer intended to sell it with the Disposal Group. Duke Energy Ohio is seeking cost-based recovery of its contractual entitlement in OVEC in its 2014 Electric Security Plan (ESP) application. See Note 4 for information related to the 2014 ESP.

The results of operations of the Disposal Group prior to the date of sale 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.

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

Three Months Ended March 31,
(in millions) 2015
2014
Operating Revenues $ 543
$ 368
Estimated loss on disposition (43 ) (1,287 )

Income (loss) before income taxes $ 147
$ (1,303 )
Income tax expense (benefit) 51
(466 )
Income (loss) from discontinued operations of the Disposal Group 96
(837 )
Other, net of tax^(a)
(5 ) (6 )
Income (Loss) from Discontinued Operations, net of tax $ 91
$ (843 )



	Three Months Ended June 30,						Six Months Ended June 30,
(in millions)	2015			2014			2015			2014
Operating Revenues	$	—		$	245		$	543		$	613
Gain (Loss) on disposition^(a)	6			(20		)	(37		)	(1,307		)

(Loss) Income before income taxes^(b)	$	(80	)	$	(184	)	$	67		$	(1,487	)
Income tax (benefit) expense	(21		)	(73		)	30			(539		)
(Loss) Income from discontinued operations of the Disposal Group	(59		)	(111		)	37			(948		)
Other, net of tax^(c)	2			(2		)	(3		)	(8		)
(Loss) Income from Discontinued Operations, net of tax	$	(57	)	$	(113	)	$	34		$	(956	)


(a)	~~Other~~The Gain (Loss) on disposition includes impairments recorded to write down the carrying amount of the assets to the estimated fair value of the business, based on the selling price to Dynegy less cost to sell.


(b)	The (Loss) Income before income taxes includes the pretax impact of a $71 million and $81 million charge for the agreement in principle reached in a lawsuit related to the Disposal Group for the three and six months ended June 30, 2015, respectively. Refer to Note 5 for further information related to the lawsuit.


(c)	Includes other discontinued operations ~~relates~~related 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 )



	Three Months Ended June 30,						Six Months Ended June 30,
(in millions)	2015			2014			2015			2014
Operating Revenues	$	—		$	122		$	412		$	317
Loss on disposition^(a)	—			(21		)	(44		)	(1,344		)

(Loss) Income before income taxes^(b)	$	(88	)	$	(210	)	$	52		$	(1,564	)
Income tax (benefit) expense	(23		)	(75		)	27			(554		)
(Loss) Income from Discontinued Operations, net of tax	$	(65	)	$	(135	)	$	25		$	(1,010	)

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.


(a)	The Loss on disposition includes impairments recorded to write down the carrying amount of the assets to the estimated fair value of the business, based on the selling price to Dynegy less cost to sell.


(b)	The (Loss) Income before income taxes includes the pretax impact of a $71 million and $81 million charge for the agreement in principle reached in a lawsuit related to the Disposal Group for the three and six months ended June 30, 2015, respectively. Refer to Note 5 for further information related to the lawsuit.

Commercial ~~Power~~Portfolio has a revolving credit agreement (RCA) which was used to support the operations of the nonregulated Midwest generation business. Interest expense associated with the RCA ~~has been~~was allocated to discontinued operations. No other interest expense related to corporate level debt ~~has been~~was 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 assets 50
45
Property, plant and equipment 2,553
2,520
Total Assets held for sale $ 2,957
$ 2,860
Current liabilities $ 146
$ 129
Deferred credits and other liabilities 26
25
Total Liabilities associated with assets held for sale $ 172
$ 154

Duke Energy Ohio ~~has~~had a power purchase agreement with the Disposal Group for a portion of its standard service offer (SSO) supply ~~requirement through~~requirement. The agreement and the SSO expired in 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~~are retained by Duke Energy Ohio subsequent to the sale.

~~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.~~performance of the business.

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.

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

Duke Energy has the following reportable operating segments: Regulated Utilities, International Energy and Commercial ~~Power.~~Portfolio.

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 that are substantially all regulated and, accordingly, qualify for regulatory accounting treatment. These operations are primarily conducted through the Subsidiary Registrants and 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~~relate to 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~~Portfolio 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 segment was renamed as a result of 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~~discussed in Note 2. For periods ~~presented. Certain costs such as interest and general and administrative expenses previously allocated~~subsequent to the ~~Disposal Group were not reclassified to discontinued operations. As a result~~sale, beginning in the second quarter of ~~the sale, Commercial Power will no longer qualify as a Duke Energy Ohio reportable operating segment. The remaining assets and related~~2015, certain immaterial results of operations and related assets previously ~~reported~~presented in the Commercial ~~Power will be~~Portfolio segment are presented asin Regulated Utilities and Other.

The remainder of Duke Energy’s operations is presented as ~~Other. While it~~Other, which is ~~not an operating segment, Other~~ primarily ~~includes~~comprised of unallocated corporate interest expense, ~~certain~~ unallocated corporate costs, ~~Bison Insurance Company Limited (Bison),~~contributions to The Duke Energy Foundation, and the operations of Duke Energy’s wholly owned captive insurance subsidiary, ~~and contributions to The Duke Energy Foundation.~~Bison Insurance Company Limited (Bison).


	Three Months Ended March 31, 2015																Three Months Ended June 30, 2015
(in millions)	Regulated Utilities		International Energy		Commercial Power		Total Reportable Segments		Other			Eliminations			Consolidated		Regulated Utilities		International Energy		Commercial Portfolio			Total Reportable Segments		Other			Eliminations			Consolidated
Unaffiliated revenues	$	5,713	$	273	$	73	$	6,059	$	6		$	—		$	6,065	$	5,211	$	287	$	75		$	5,573	$	16		$	—		$	5,589
Intersegment revenues	10		—		—		10		21			(31		)	—		9		—		—			9		18			(27		)	—
Total revenues	$	5,723	$	273	$	73	$	6,069	$	27		$	(31	)	$	6,065	$	5,220	$	287	$	75		$	5,582	$	34		$	(27	)	$	5,589
Segment income (loss)^(a)(b)	$	774	$	36	$	1	$	811	$	(37	)	$	(1	)	$	773	$	632	$	52	$	(33	)	$	651	$	(48	)	$	(3	)	$	600
Add back noncontrolling interests component															3																	4
Income from discontinued operations, net of tax															91
Loss from discontinued operations, net of tax ^(c)																																(57		)
Net income															$	867																$	547
Segment assets	$	106,642	$	4,892	$	6,202	$	117,736	$	4,230		$	176		$	122,142	$	108,139	$	3,913	$	3,462		$	115,514	$	2,880		$	181		$	118,575

(a) Other includes after-tax costs to achieve the Progress Energy merger of ~~$13~~$14 million.


(b)	Commercial Portfolio includes state tax expense of $41 million, resulting from changes to state apportionment factors due to the sale of the Disposal Group, that does not qualify for discontinued operations. Refer to Note 2 for further information related to the sale.


(c)	Includes the after-tax impact of $46 million for the agreement in principle reached in a lawsuit related to the Disposal Group. Refer to Note 5 for further information related to the lawsuit.



	Three Months Ended June 30, 2014
(in millions)	Regulated Utilities		International Energy		Commercial Portfolio			Total Reportable Segments		Other			Eliminations			Consolidated
Unaffiliated revenues	$	5,272	$	364	$	64		$	5,700	$	8		$	—		$	5,708
Intersegment revenues	11		—		—			11		21			(32		)	—
Total revenues	$	5,283	$	364	$	64		$	5,711	$	29		$	(32	)	$	5,708
Segment income (loss)^(a)	$	689	$	146	$	(21	)	$	814	$	(90	)	$	(2	)	$	722
Add back noncontrolling interests component																4
Loss from discontinued operations, net of tax																(113		)
Net income																$	613

(a) Other includes after-tax costs to achieve the Progress Energy merger of $38 million.

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)



	Six Months Ended June 30, 2015
(in millions)	Regulated Utilities		International Energy		Commercial Portfolio			Total Reportable Segments		Other			Eliminations			Consolidated
Unaffiliated revenues	$	10,924	$	560	$	148		$	11,632	$	22		$	—		$	11,654
Intersegment revenues	19		—		—			19		39			(58		)	—
Total revenues	$	10,943	$	560	$	148		$	11,651	$	61		$	(58	)	$	11,654
Segment income (loss)^(a)(b)	$	1,406	$	88	$	(32	)	$	1,462	$	(85	)	$	(4	)	$	1,373
Add back noncontrolling interests component																7
Income from discontinued operations, net of tax ^(c)																34
Net income																$	1,414

(a) Other includes after-tax costs to achieve the Progress Energy merger of $27 million.


(b)	Commercial Portfolio includes state tax expense of $41 million, resulting from changes to state apportionment factors due to the sale of the Disposal Group, that does not qualify for discontinued operations. Refer to Note 2 for further information related to the sale.


(c)	Includes after-tax impact of $53 million for the agreement in principle reached in a lawsuit related to the Disposal Group. Refer to Note 5 for further information related to the lawsuit.



	Six Months Ended June 30, 2014
(in millions)	Regulated Utilities		International Energy		Commercial Portfolio			Total Reportable Segments		Other			Eliminations			Consolidated
Unaffiliated revenues	$	11,067	$	746	$	145		$	11,958	$	13		$	—		$	11,971
Intersegment revenues	21		—		—			21		41			(62		)	—
Total revenues	$	11,088	$	746	$	145		$	11,979	$	54		$	(62	)	$	11,971
Segment income (loss)^(a)(b)	$	1,426	$	276	$	(53	)	$	1,649	$	(177	)	$	(4	)	$	1,468
Add back noncontrolling interest																8
Loss from discontinued operations, net of tax																(956		)
Net income																$	520


(a)	Commercial Portfolio includes a pretax impairment charge of $94 million related to OVEC. See Note 13 for additional information.

(b) Other includes after-tax costs to achieve the Progress Energy merger of $72 million.

DUKE ENERGY OHIO

All of Duke Energy Ohio’s revenues are generated domestically and its long-lived assets are all in the U.S.

Duke Energy Ohio had two reportable operating segments until the sale of the nonregulated Midwest generation business, Regulated Utilities and Commercial Portfolio. Commercial Portfolio no longer qualifies as a Duke Energy Ohio reportable operating segment as a result of the sale. Refer to Note 2 for further information about the sale. Therefore, for periods subsequent to the sale, beginning in the second quarter of 2015, all of the remaining assets and related results of operations previously presented in Commercial Portfolio are presented in Regulated Utilities and Other.

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.

Other is primarily comprised of governance costs allocated by its parent, Duke Energy, and revenues and expenses related to Duke Energy Ohio's contractual arrangement to buy power from OVEC's power plants. Duke Energy Ohio had no intersegment revenues for the six months ended June 30, 2015 or 2014. For additional information on related party transactions refer to Note 9.



	Three Months Ended June 30, 2015
(in millions)	Regulated Utilities		Other			Eliminations			Consolidated
Total revenues	$	396	$	9		$	—		$	405
Segment income (loss)	$	19	$	(6	)	$	—		$	13
Loss from discontinued operations, net of tax ^(a)									(65		)
Net loss									$	(52	)
Segment assets	$	6,941	$	106		$	(25	)	$	7,022

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)	Includes the after-tax impact of $46 million for the agreement in principle reached in a lawsuit related to the Disposal Group. Refer to Note 5 for further information related to the lawsuit.



	Three Months Ended June 30, 2014
(in millions)	Regulated Utilities		Commercial Portfolio			Total Reportable Segments		Other			Consolidated
Total revenues	$	415	$	(3	)	$	412	$	—		$	412
Segment income (loss)	$	47	$	(14	)	$	33	$	(5	)	$	28
Loss from discontinued operations, net of tax											(135		)
Net loss											$	(107	)



	Six Months Ended June 30, 2015
(in millions)	Regulated Utilities		Commercial Portfolio			Total Reportable Segments		Other			Consolidated
Total revenues	$	968	$	14		$	982	$	9		$	991
Segment income (loss)	$	89	$	(9	)	$	80	$	(8	)	$	72
Income from discontinued operations, net of tax ^(a)											25
Net income											$	97


(a)	Includes after-tax impact of $53 million for the agreement in principle reached in a lawsuit related to the Disposal Group. Refer to Note 5 for further information related to the lawsuit.



	Six Months Ended June 30, 2014
(in millions)	Regulated Utilities		Commercial Portfolio			Total Reportable Segments		Other			Consolidated
Total revenues	$	977	$	10		$	987	$	—		$	987
Segment income (loss)^(a)	$	108	$	(88	)	$	20	$	(7	)	$	13
Loss from discontinued operations, net of tax											(1,010		)
Net loss											$	(997	)

(a) Commercial Portfolio includes a pretax impairment charge of $94 million related to OVEC. See Note 13 for additional information.

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 Utilities, 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 June 30,						Six Months Ended June 30,
(in millions)	2015			2014			2015			2014
Duke Energy Carolinas	$	(10	)	$	(27	)	$	(18	)	$	(48	)
Progress Energy^(a)	(42		)	(45		)	(84		)	(97		)
Duke Energy Progress	(4		)	(3		)	(8		)	(13		)
Duke Energy Florida	(3		)	(7		)	(6		)	(11		)
Duke Energy Indiana	(2		)	(4		)	(4		)	(7		)


(a)	Other for Progress Energy also includes interest expense on corporate debt instruments of $59 million and $119 million for the three and six months ended June 30, 2015, respectively, and $60 million and $123 million for the three and six months ended June 30, 2014, respectively.

The assets of Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida and Duke Energy Indiana are substantially all included within the Regulated Utilities segment at June 30, 2015 and 2014.

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 revenues 10
—
—
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.~~

~~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 respective 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~~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~~began construction in ~~summer~~July 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~~certificate of public convenience and necessity (CPCN) application with the NCUC for approval to construct an 84 MW black start combustion turbine (CT) project at the existing Sutton ~~plant~~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. In June 2015, the Public Staff of the NCUC recommended the NCUC approve Duke Energy Progress' application. On August 3, 2015, the NCUC issued an order granting the application and requiring annual construction and cost progress reports.

Western Carolinas Modernization Plan

In May 2015, Duke Energy Progress announced a $1.1 billion plan to modernize the Western Carolinas energy system. The ~~NCUC has scheduled~~plan includes retiring the Asheville coal-fired plant, building a 650 MW combined-cycle natural gas power plant and installing solar generation at the site, building new transmission lines and upgrading area substations. These investments will be made within the next five years in North Carolina and South Carolina. Duke Energy is also working with the local natural gas distribution company to upgrade an ~~evidentiary hearing~~existing natural gas pipeline to serve the natural gas plant. On June 24, 2015, the North Carolina governor signed into law the Mountain Energy Act of 2015 (Mountain Energy Act) which provides for an expedited CPCN process for the proposed Asheville combined-cycle project and extends certain North Carolina Coal Ash Management Act of 2014 (Coal Ash Act) deadlines for the coal ash basin at the Asheville Plant site. The plan requires various approvals including regulatory approvals in North Carolina and South Carolina.

The carrying value of the 376 MW Asheville coal-fired plant, including associated ash basin closure costs, of $460 million is included in Generation facilities to be retired, net on Duke Energy Progress' Condensed Consolidated Balance Sheet as of June ~~22, 2015 and a decision is expected by October~~30, 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 on equity should be reduced to 8.69 percent. The FERC consolidated all complaints for the purposes of settlement, hearing and decision. ~~The~~On July 21, 2015, the parties ~~are engaged~~filed with the FERC for approval of a settlement agreement under which (i) Duke Energy Florida will pay a total of $14.1 million as refunds for all periods through December 31, 2014, (ii) the rate of return on equity will be 10 percent effective January 1, 2015, and (iii) none of the parties will seek a change in ~~settlement discussions. The outcome~~the rate of ~~this matter is not expected~~return on equity prior to ~~be material.~~January 1, 2018.

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~~combined-cycle natural gas plant in Citrus County, Florida. On May 5, 2015, the Florida Department of Environmental Protection approved Duke Energy Florida's Site Certification Application. 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.

4243

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~~combined-cycle natural gas plant in Auburndale, Florida (Osprey Plant acquisition) for approximately $166 million. ~~Closing~~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 (Suwannee project) with an estimated cost of $197 million, is ~~subject~~the most cost-effective generation alternative to meet Duke Energy Florida's remaining generation need prior to 2018. On July 21, 2015, the ~~approval~~FPSC approved the Osprey Plant acquisition as the most cost-effective alternative and an order is expected in August 2015. On July 24, 2015, the FERC issued an order approving the Osprey Plant acquisition. Closing of the ~~FERC, FPSC and~~acquisition is contingent upon 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.

Crystal River Unit 3

On ~~January 30,~~May 22, 2015, Duke Energy Florida petitioned the FPSC ~~requesting~~for approval to include in base rates the revenue requirement for the Crystal River Unit 3 Regulatory asset as authorized by the 2013 Revised and Restated Stipulation and Settlement Agreement (2013 Agreement). The value of the Crystal River Unit 3 Regulatory asset to be recovered is projected to be $1.298 billion at December 31, 2015. Based upon this projected value, the initial annual revenue requirement is estimated to be $170 million.

In June 2015, the Governor of Florida signed into law legislation to allow utilities to petition for a ~~determination that the Osprey Plant acquisition or, alternatively, the construction~~financing order for securitization of ~~a 320 MW combustion turbine at its existing Suwannee generating facility with an estimated cost of $197 million is the most cost-effective~~certain retired nuclear generation ~~alternative to meet Duke Energy Florida's remaining generation need prior to 2018. A hearing with the FPSC is scheduled for June 2015.~~assets. On ~~March 13,~~July 27, 2015, Duke Energy Florida ~~made~~petitioned the FPSC for a ~~filing requesting FERC approval~~financing order to finance the Crystal River Unit 3 Regulatory asset with low-cost securities. If the FPSC issues an acceptable financing order and Duke Energy Florida issues the bonds, securitization would replace the base rate recovery methodology established in the 2013 Agreement described above, and would result in a lower rate impact to customers. The annual revenue requirement with securitization, subject to changes in assumed interest rates and timing of issuance 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~~securitization bonds, is estimated to be ~~constructed~~approximately $100 million. The FPSC is expected to hold a hearing on both the Crystal River Unit 3 Regulatory asset filing and the securitization filing in ~~connection~~October 2015. Duke Energy Florida cannot predict the outcome of this matter.

Levy Nuclear Project

On April 16, 2015, the FPSC approved Duke Energy Florida’s petition to cease collection of the Levy Nuclear Project fixed charge beginning with the ~~Osprey Plant acquisition. If timely~~first billing cycle in May. Duke Energy Florida also sought approval to defer collection of the ~~Osprey Plant acquisition is~~$54 million regulatory asset until litigation with Westinghouse Electric Co. concludes. The FPSC found that it was unnecessary to act on the request, finding that its previous order requiring the downward adjustment in projected costs primarily affected the timing of when the fixed charge would end, but that it did not ~~received from the FERC, the Suwannee project would~~disallow recovery of any costs previously determined to be ~~constructed.~~prudent.

Duke Energy Ohio

2014 Electric Security Plan

In April 2015, the PUCO modified and approved Duke Energy Ohio's proposed ESP, with a three-year term and an effective date of June 1, 2015. The PUCO approved a competitive procurement process for SSO load, a distribution capital investment rider, and a tracking mechanism for incremental distribution expenses caused by major storms. The PUCO order also approved a placeholder tariff for a price stabilization rider, but denied Duke Energy Ohio's specific request to include OVEC in the rider at this time; however, the order allows Duke Energy Ohio to submit additional information to request recovery in the future. On May 4, 2015, Duke Energy Ohio filed an application for rehearing requesting the PUCO to modify or amend certain aspects of the order. On May 14, 2015, Duke Energy Ohio completed a competitive bidding process to procure a portion of the supply for its SSO load for the term of the ESP. The PUCO approved the results on May 15, 2015. On May 28, 2015, the PUCO granted all applications for rehearing filed in the case for future consideration. Duke Energy Ohio cannot predict the outcome of this matter.

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. 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~~The PUCO authorized Duke Energy Ohio to recover $56 million, excluding carrying costs, of environmental remediation 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.

Certain consumer groups appealed the PUCO’s decision authorizing the MGP rider to the Ohio Supreme Court and ~~further~~ asked the court to stay implementation of the PUCO’s order and collections under the MGP rider pending their appeal. 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 approved Duke Energy Ohio’s request, in January 2015, to reinstate collections under the MGP rider and Duke Energy Ohio resumed billings. Amounts collected prior to the suspension of the rider were immaterial. On March 31, 2015, Duke Energy Ohio filed an application to adjust the MGP rider to recover remediation costs incurred in 2014. 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.

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 December 22, 2010, the KPSC approved Duke Energy Kentucky’s request to effect the RTO realignment, subject to a commitment not to seek double 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~~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~~As of ~~the beginning and ending balances of~~June 30, 2015, Duke Energy ~~Ohio’s~~Ohio had recorded obligations of $93 million related to its withdrawal from ~~MISO. As of March 31, 2015, $73 million is recorded as~~MISO and a Regulatory asset of $73 million recorded on ~~Duke Energy Ohio's~~the Condensed Consolidated Balance Sheets.

MTEP costs billed by MISO are recovered by Duke Energy Ohio through a non-bypassable rider.

(in millions) December 31, 2014

Provision /
Adjustments

Cash
Reductions

March 31, 2015
Duke Energy Ohio $ 94
$ —
$ (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)~~

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.

Any liability related to the MISO MVP matter or MTEP costs attributable to the Disposal Group was not transferred to Dynegy upon the sale of the nonregulated 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 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 CPCN for the construction of the Edwardsport IGCC ~~power plant.~~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.

The Edwardsport IGCC ~~plant~~Plant was placed in commercial operation in June 2013. Costs for the Edwardsport IGCC ~~plant~~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~~

The ninth semi-annual IGCC rider ~~is currently pending. The twelfth and thirteenth semi-annual IGCC riders were combined for hearings which were held in February 2015. Issues in this proceeding include whether the IGCC plant~~order 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.~~

~~The ninth and tenth semi-annual IGCC rider orders have been~~ 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. On February 25, 2015, the IURC issued a new order upholding its prior decision and ~~providing~~provided additional detailed findings. Joint Intervenors have appealed this remand order to the Indiana Court of Appeals.

The 10th semi-annual IGCC rider order was also appealed by the Joint Intervenors. On August 21, 2014 the Indiana Court of Appeals affirmed the IURC order in the 10th IGCC rider proceeding and on October 29, 2014 denied the 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.

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)

An order on the 11th semi-annual IGCC rider is currently pending. The 12th and 13th semi-annual IGCC riders were combined for hearings which were held in February 2015 and an order is currently pending. 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 10 months of operations. Duke Energy Indiana has filed the 14th and 15th semi-annual IGCC rider proceedings, with a hearing scheduled in November 2015.

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~~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~~12th and ~~thirteenth~~13th 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~~Plant shall be subject to refund pending the outcome of the ~~twelfth~~12th and ~~thirteenth~~13th semi-annual IGCC riders.

On August 6, 2015, the IURC granted a motion to defer ruling on all pending matters until September 15, 2015 to allow time for settlement discussions. The Commission is expected to proceed with issuance of an order if the parties do not reach a settlement agreement. Duke Energy Indiana cannot predict the outcome of the fuel adjustment clause proceedings or pending and future IGCC rider proceedings.

~~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 on equity 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, 80 percent~~In May 2015, the IURC denied the proposal due to an insufficient level of detailed projects and cost estimates in the ~~costs will be recovered through a rate tracker. The remaining 20 percent are subject to deferral and subsequent recovery through future rate case proceedings. Hearings were held in January 2015 and~~plan. Duke Energy Indiana ~~expects~~is evaluating the order and plans to file a ~~decision in mid-2015.~~revised infrastructure improvement plan by the end of 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 company, Atlantic Coast Pipeline, LLC (ACP), to build and own the proposed Atlantic Coast Pipeline (the pipeline), a 550-mile interstate natural gas pipeline. The pipeline 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 pipeline and will own 45 percent. Duke Energy will have a 40 percent ownership interest in ACP through its Commercial ~~Power~~Portfolio 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 ACP will seek to secure by summer 2016. The estimated in-service date of the pipeline is late 2018.

Sabal Trail Transmission, LLC Pipeline

On May 4, 2015, Duke Energy acquired a 7.5 percent ownership interest from Spectra Energy in the proposed 500-mile Sabal Trail natural gas pipeline. Spectra Energy will continue to own 59.5 percent of the 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.

East Bend Station

On December 30, 2014, Duke Energy Ohio acquired The Dayton Power and Light Company's (DP&L) 31 percent interest in East Bend Station for approximately $12.4 million. The purchase price, in accordance with FERC guidelines, was reflected with the net purchase amount as an increase to property, plant and equipment as of December 31, 2014 and with the DP&L's historical original cost as an increase to property, plant and equipment and accumulated depreciation as of June 30, 2015.

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)

NC WARN FERC Complaint

On December 16, 2014, ~~NC WARN~~North Carolina Waste Awareness and Reduction Network filed a complaint with the FERC 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. ANC WARN also filed a copy of the complaint ~~was filed~~ with the PSCSC on January 6, 2015. ~~Duke Energy Carolinas and Duke Energy Progress have filed responses requesting dismissal of the complaint with the FERC and the PSCSC.~~ In April 2015, the FERC and the PSCSC issued separate orders dismissing the NC WARN petition. On May 14, 2015, NC WARN filed with FERC a motion for reconsideration.

~~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 20 years), 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 North Carolina, 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.

~~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 contains the net carrying value of generating facilities planned for retirement or ~~being~~included in recent IRPs as evaluated for potential retirement ~~included in recent IRPs.~~due to a lack of requisite environmental control equipment. Dollar amounts in the table below are included in Net property, plant and equipment on the Condensed Consolidated Balance Sheets.


	March 31, 2015										June 30, 2015
	Duke Energy		Progress Energy_(b)		Duke Energy Florida_(b)		Duke Energy Ohio_(c)		Duke Energy Indiana_(d)		Duke Energy		Progress Energy_(b)		Duke Energy Florida_(b)		Duke Energy Indiana_(c)
Capacity (in MW)	1,704		873		873		163		668		1,541		873		873		668
Remaining net book value (in millions)^(a)	$	243	$	120	$	120	$	9	$	114	$	237	$	125	$	125	$	112


(a)	~~Included in Property, plant and equipment,~~Remaining net asbook value amounts presented exclude any capitalized asset retirement costs related to closure of ~~March 31, 2015, on the Condensed Consolidated Balance Sheets.~~ash basins.


(b)	Includes Crystal River Units 1 and 2.


(c)	~~Includes Miami Fort Unit 6, which is expected to be retired by June 1, 2015.~~


~~(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 the 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~~is evaluating the potential ~~for~~retirement of coal-fired generating ~~unit retirements~~units with a net carrying value of approximately $110 million, ~~and $150 million, respectively,~~excluding capitalized asset retirement costs related to closure of ash basins, included in Net property, plant and equipment on the Condensed Consolidated Balance Sheets. These generating units are not included in the table above.

Duke Energy continues to evaluate the potential need to retire 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.

Refer to the "Western Carolinas Modernization Plan" discussion above for details of planned retirements for Duke Energy Progress.

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.

The 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 tables 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.



	Six Months Ended June 30, 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/adjustments	5			—		2			—			2			1			3
Cash reductions	(4		)	—		(2		)	(1		)	(1		)	(1		)	(1		)
Balance at end of period	$	98		$	10	$	17		$	4		$	13		$	54		$	12


	Three Months Ended March 31, 2015																	Six Months Ended June 30, 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
Balance at beginning of period	$	97		$	10	$	17	$	5	$	12	$	54		$	10		$	79		$	11		$	27		$	8		$	19		$	27		$	7
Provisions/adjustments	2			—		—		—		—		1			2			9			(1		)	4			3			1			5			—
Cash reductions	(3		)	—		—		—		—		(1		)	(1		)	(6		)	—			(4		)	(2		)	(2		)	(1		)	—
Balance at end of period	$	96		$	10	$	17	$	5	$	12	$	54		$	11		$	82		$	10		$	27		$	9		$	18		$	31		$	7

~~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/adjustments 3
—
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 Carolinas	25
Progress Energy	15
Duke Energy Progress	1
Duke Energy Florida	14
Duke Energy Ohio	42
Duke Energy Indiana	7

North Carolina and South Carolina Ash Basins

On February 2, 2014, a break in a stormwater pipe beneath an ash basin at Duke Energy Carolinas’ retired Dan River ~~steam station~~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 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. 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 not seek recovery of these costs from ratepayers. See the "Litigation" section below for additional information on litigation, investigations and 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 long-term environmental impact costs cannot be reasonably estimated at this time.

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 September 20, 2014, the ~~North Carolina~~ Coal Ash ~~Management~~ Act ~~of 2014 (Coal Ash Act)~~ became ~~law.~~law and was amended on June 24, 2015, by the Mountain Energy Act. The Coal Ash Act, as amended, (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; (iii) requires closure of ash impoundments at Duke Energy Progress' ~~Asheville and~~ Sutton ~~stations~~Plant and Duke Energy Carolinas' Riverbend and Dan River stations no later than August 1, ~~2019;~~2019 and Duke Energy Progress' Asheville Plant no later than August 1, 2022; (iv) requires dry disposal of fly ash at active plants, excluding the Asheville Plant, not retired by December 31, 2018; (v) requires dry disposal of bottom ash at active plants, excluding the Asheville Plant, by December 31, 2019, or retirement of active plants; (vi) requires all remaining ash impoundments in North Carolina to be categorized as high-risk, intermediate-risk or low-risk no later than December 31, 2015 by the 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 impoundments; and (viii) enhances the level of regulation for structural fills utilizing coal ash. The Coal Ash Act includes a variance procedure for compliance deadlines and modification of requirements regarding structural fills and compliance boundaries. Provisions of the Coal Ash Act prohibit cost recovery in customer rates for unlawful discharge of ash basin waters occurring after January 1, 2014. The Coal Ash Act leaves the decision on cost recovery determinations related to closure of coal combustion residual (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 or excavation plans in advance of closure plans. These plans and all associated permits must be approved by DENR before any excavation or closure 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 excavation 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. In April 2015, the federal CCR rules were published and Duke Energy Carolinas subsequently executed an agreement with the conservation groups Upstate Forever and Save Our Saluda requiring Duke Energy Carolinas to remediate all active and inactive ash storage areas at the W.S. Lee Steam Station. Coal-fired generation at W.S. Lee ceased in 2014 and unit 3 is being converted to natural gas. In July 2015, Duke Energy Progress executed a consent agreement with the SCDHEC requiring the excavation of an inactive ash fill area at the Robinson Plant within eight years. The Robinson Plant and W.S. Lee Station sites are required to be closed pursuant to the recently issued CCR rule and the provisions of these consent agreements are consistent with the federal CCR closure requirements.

Asset retirement obligations are recorded on the Duke Energy Carolinas and Duke Energy Progress Condensed Consolidated Balance Sheets at ~~March 31,~~June 30, 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. See Note 7 for additional information.

~~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)~~

Coal Combustion Residuals

On April 17, 2015, the EPA published in the Federal ~~Registry~~Register a rule to regulate the disposal of CCR from electric utilities as solid waste. The federal regulation classifies CCR as nonhazardous waste under Subtitle D of the Resource Conservation and Recovery ~~Act.~~Act and allows beneficial use of CCRs with some restrictions. 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. In accordance with ASC 410-20, Asset Retirement and Environmental Obligations - Asset Retirement Obligations, Duke Energy records an asset retirement 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~~Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Ohio and Duke Energy Indiana recorded 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. See Note 7 for additional information.

LITIGATION

Duke Energy

Ash Basin Shareholder Derivative Litigation

Five shareholder derivative lawsuits were filed in Delaware Chancery Court relating to the release at Dan River and to the management of Duke Energy’s ash basins. On October 31, 2014, the five lawsuits were consolidated in a single proceeding titled "In Re Duke Energy Corporation Coal Ash Derivative Litigation." On December 2, 2014, plaintiffs filed a Corrected Verified Consolidated Shareholder Derivative Complaint (Consolidated Complaint). The Consolidated 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.

The Consolidated Complaint alleges the Duke Energy Defendants breached their fiduciary duties ~~to the company~~ by failing to adequately oversee Duke Energy’s ash basins and that these breaches of fiduciary duty may have contributed to the incident at Dan River and continued thereafter. The lawsuit also asserts 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 lawsuit 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.

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 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 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 March 24, 2015, Duke Energy received a shareholder litigation demand letter sent on behalf of shareholder Saul Bresalier. The letter alleges that the members of the Board of Directors and certain officers breached their fiduciary duties in their management of the ~~company's~~Duke Energy'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. In May 2015, counsel for the shareholder was informed that the matter had been referred to the Demand Review Committee.

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.

Ash Basin Shareholder Securities Litigation

~~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~~On May 26, 2015, Plaintiff E.F. Greenberg filed a lawsuit against the members of the Duke Energy Board of Directors (the Board) alleging violations of Section 14(a) of the Exchange Act for false or misleading statements contained in Duke Energy’s 2015 Proxy Statement. The plaintiff contends the Board caused Duke Energy to ~~Condensed Consolidated Financial Statements – (Continued)~~omit material facts from the 2015 Proxy Statement that a reasonable shareholder would consider important in casting a vote, especially with respect to the election of directors. Accordingly, Plaintiff alleges that shareholders were misled in casting their votes. Plaintiff seeks a determination that the 2015 Proxy Statement was false and misleading, an order from the court invalidating all votes from the Annual Meeting and requiring a revised 2015 Proxy Statement, as well as attorneys’ fees. On July 31, 2015, the defendants filed a Motion to Dismiss the case. It is not possible to predict the outcome that might occur in connection with the remaining matters.

~~(Unaudited)~~

Progress Energy Merger Shareholder Litigation

Duke Energy, the ~~eleven~~11 members of the Board of Directors who were also members of the pre-merger 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).

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.litigation. On March 10, 2015, the parties filed a Stipulation of Settlement and a Motion for Preliminary Approval of the Settlement. The court issued an order for preliminary approval of the settlement on March 25, 2015. Under the terms of the agreement, Duke Energy agreed to pay $146 million to settle the claim. On April 22, 2015, Duke Energy made a payment of $25 million into the settlement escrow account. The remainder of $121 million was paid by insurers into the settlement escrow account. Notice has been sent to members of the class and a final approval hearing is ~~expected to occur in the second half of~~scheduled for August 12, 2015.

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. Pursuant to an order entered on September 2, 2014, the court administratively closed this consolidated derivative action. The parties filed a status report with the court on December 1, 2014, and will continue to do so every six months thereafter until the Nieman v. Duke Energy Corporation, et al. case in North Carolina has been resolved.

It is not possible to estimate the maximum exposure of loss that may occur in connection with these lawsuits.

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)

Price Reporting Cases

Five lawsuits were filed against a Duke Energy affiliate, 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 lawsuits 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 five cases. The U.S. Court of Appeals for the Ninth Circuit subsequently reversed the lower court’s decision. On April 21, 2015, the Supreme Court affirmed the U.S. Court of Appeals decision. The case ~~will be remanded~~has been reassigned to the same consolidated federal ~~district~~ court proceeding in Nevada for 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. 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.

Brazil Generation

Record drought conditions in Brazil continue to impact Duke Energy International, Geracao Paranapanema S.A. (DEIGP) in 2015. In the midst of negotiations between the hydroelectric generators and the Brazilian federal government to find ways to mitigate the financial impact on these companies, Santo Antonio Energia (SAE), a large hydro generator, filed an independent lawsuit seeking financial relief in Brazilian federal court. In May 2015, SAE was granted an injunction by a Brazilian court limiting the financial impact of its declining hydroelectric dispatch to 95 percent of its guaranteed dispatch level. Following the court’s ruling in the SAE litigation, the Brazilian electricity dispatch authority (CCEE) announced that the electric system shortfall resulting from the court-ordered limitation of liability for SAE will be compensated on a pro-rata basis with contributions from all other hydroelectric generators in Brazil. In response, the Independent Power Producer Association (APINE), on behalf of the hydroelectric generators, filed a lawsuit against the Brazilian electricity regulatory agency seeking relief from exposure to their diminished dispatch levels similar to the relief previously granted SAE. On July 2, 2015, an injunction was granted in favor of APINE limiting the market exposure of DEIGP and other independent generators to 100 percent of the guaranteed dispatch level, until the merits of the lawsuit are determined. The decision is subject to appeal. It is not possible to predict the impact to Duke Energy, if any, from the outcome of these matters.

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 CWA 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.

~~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 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 CWA 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. The SELC, on behalf of several environmental groups, has been permitted to intervene in these cases.

On July 10, 2015, Duke Energy Carolinas and Duke Energy Progress filed Motions for Partial Summary Judgment in the case on the basis that there is no longer either a genuine controversy or disputed material facts about the relief for seven of the 14 North Carolina plants with coal ash basins.

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.

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)

DENR Notices of Violation (NOV)

In August 2014, DENR issued ~~a Notice of Violation (NOV)~~an NOV for alleged groundwater violations at Duke Energy Progress' L.V. Sutton ~~plant.~~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.~~Plant. 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~~scheduled for ~~August 24,~~October 12, 2015.

In February 2015, DENR issued an NOV for alleged groundwater violations at Duke Energy Progress' Asheville ~~plant.~~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.

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 NCSC. Oral argument was held on March 16, 2015. On June 11, 2015, the North Carolina Supreme Court issued its opinion in favor of Duke Energy Carolinas, Duke Energy Progress and the EMC and remanded the matter to the state court judge with instructions to dismiss the case.

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.~~Steam Station. 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.~~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 9order 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;~~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;~~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.~~Steam Station. Motions to Stay or Dismiss the proceedings were filed in each of the three cases. The proceedings related to Cape Fear and H.F. Lee have been stayed. A hearing was held August 5, 2015 on the motion relating to Buck.

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.

Duke Energy Ohio



	Three Months Ended June 30,						Six Months Ended June 30,
(in millions)	2015			2014			2015			2014
Operating Revenues	$	—		$	122		$	412		$	317
Loss on disposition^(a)	—			(21		)	(44		)	(1,344		)

(Loss) Income before income taxes^(b)	$	(88	)	$	(210	)	$	52		$	(1,564	)
Income tax (benefit) expense	(23		)	(75		)	27			(554		)
(Loss) Income from Discontinued Operations, net of tax	$	(65	)	$	(135	)	$	25		$	(1,010	)


(a)	The Loss on disposition includes impairments recorded to write down the carrying amount of the assets to the estimated fair value of the business, based on the selling price to Dynegy less cost to sell.


(b)	The (Loss) Income before income taxes includes the pretax impact of a $71 million and $81 million charge for the agreement in principle reached in a lawsuit related to the Disposal Group for the three and six months ended June 30, 2015, respectively. Refer to Note 5 for further information related to the lawsuit.

Commercial Portfolio has a revolving credit agreement (RCA) which was used to support the operations of the nonregulated Midwest generation business. Interest expense associated with the RCA was allocated to discontinued operations. No other interest expense related to corporate level debt was allocated to discontinued operations.

Duke Energy Ohio had a power purchase agreement with the Disposal Group for a portion of its standard service offer (SSO) supply requirement. The agreement and the SSO expired in 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 are retained by Duke Energy Ohio subsequent to the sale.

3. BUSINESS SEGMENTS

Operating segments are determined based on information used by the chief operating decision-maker in deciding how to allocate resources and evaluate the performance of the business.

Products and services are sold between affiliate companies and reportable segments of Duke Energy at cost. Segment assets presented in the following tables exclude all intercompany assets.

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

Duke Energy has the following reportable operating segments: Regulated Utilities, International Energy and Commercial Portfolio.

RegulatedUtilities conducts electric and natural gas operations that are substantially all regulated and, accordingly, qualify for regulatory accounting treatment. These operations are primarily conducted through the Subsidiary Registrants and are subject to the rules and regulations of the FERC, NRC, NCUC, PSCSC, FPSC, PUCO, IURC and KPSC.

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 relate to 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 Portfolio builds, develops and operates wind and solar renewable generation and energy transmission projects throughout the continental U.S. The segment was renamed as a result of the sale of the nonregulated Midwest generation business, as discussed in Note 2. For periods subsequent to the sale, beginning in the second quarter of 2015, certain immaterial results of operations and related assets previously presented in the Commercial Portfolio segment are presented in Regulated Utilities and Other.

Theremainder of Duke Energy’s operations is presented as Other, which is primarily comprised of unallocated corporate interest expense, unallocated corporate costs, contributions to The Duke Energy Foundation, and the operations of Duke Energy’s wholly owned captive insurance subsidiary, Bison Insurance Company Limited (Bison).



	Three Months Ended June 30, 2015
(in millions)	Regulated Utilities		International Energy		Commercial Portfolio			Total Reportable Segments		Other			Eliminations			Consolidated
Unaffiliated revenues	$	5,211	$	287	$	75		$	5,573	$	16		$	—		$	5,589
Intersegment revenues	9		—		—			9		18			(27		)	—
Total revenues	$	5,220	$	287	$	75		$	5,582	$	34		$	(27	)	$	5,589
Segment income (loss)^(a)(b)	$	632	$	52	$	(33	)	$	651	$	(48	)	$	(3	)	$	600
Add back noncontrolling interests component																4
Loss from discontinued operations, net of tax ^(c)																(57		)
Net income																$	547
Segment assets	$	108,139	$	3,913	$	3,462		$	115,514	$	2,880		$	181		$	118,575

(a) Other includes after-tax costs to achieve the Progress Energy merger of $14 million.


(b)	Commercial Portfolio includes state tax expense of $41 million, resulting from changes to state apportionment factors due to the sale of the Disposal Group, that does not qualify for discontinued operations. Refer to Note 2 for further information related to the sale.


(c)	Includes the after-tax impact of $46 million for the agreement in principle reached in a lawsuit related to the Disposal Group. Refer to Note 5 for further information related to the lawsuit.



	Three Months Ended June 30, 2014
(in millions)	Regulated Utilities		International Energy		Commercial Portfolio			Total Reportable Segments		Other			Eliminations			Consolidated
Unaffiliated revenues	$	5,272	$	364	$	64		$	5,700	$	8		$	—		$	5,708
Intersegment revenues	11		—		—			11		21			(32		)	—
Total revenues	$	5,283	$	364	$	64		$	5,711	$	29		$	(32	)	$	5,708
Segment income (loss)^(a)	$	689	$	146	$	(21	)	$	814	$	(90	)	$	(2	)	$	722
Add back noncontrolling interests component																4
Loss from discontinued operations, net of tax																(113		)
Net income																$	613

(a) Other includes after-tax costs to achieve the Progress Energy merger of $38 million.

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)



	Six Months Ended June 30, 2015
(in millions)	Regulated Utilities		International Energy		Commercial Portfolio			Total Reportable Segments		Other			Eliminations			Consolidated
Unaffiliated revenues	$	10,924	$	560	$	148		$	11,632	$	22		$	—		$	11,654
Intersegment revenues	19		—		—			19		39			(58		)	—
Total revenues	$	10,943	$	560	$	148		$	11,651	$	61		$	(58	)	$	11,654
Segment income (loss)^(a)(b)	$	1,406	$	88	$	(32	)	$	1,462	$	(85	)	$	(4	)	$	1,373
Add back noncontrolling interests component																7
Income from discontinued operations, net of tax ^(c)																34
Net income																$	1,414

(a) Other includes after-tax costs to achieve the Progress Energy merger of $27 million.


(b)	Commercial Portfolio includes state tax expense of $41 million, resulting from changes to state apportionment factors due to the sale of the Disposal Group, that does not qualify for discontinued operations. Refer to Note 2 for further information related to the sale.


(c)	Includes after-tax impact of $53 million for the agreement in principle reached in a lawsuit related to the Disposal Group. Refer to Note 5 for further information related to the lawsuit.



	Six Months Ended June 30, 2014
(in millions)	Regulated Utilities		International Energy		Commercial Portfolio			Total Reportable Segments		Other			Eliminations			Consolidated
Unaffiliated revenues	$	11,067	$	746	$	145		$	11,958	$	13		$	—		$	11,971
Intersegment revenues	21		—		—			21		41			(62		)	—
Total revenues	$	11,088	$	746	$	145		$	11,979	$	54		$	(62	)	$	11,971
Segment income (loss)^(a)(b)	$	1,426	$	276	$	(53	)	$	1,649	$	(177	)	$	(4	)	$	1,468
Add back noncontrolling interest																8
Loss from discontinued operations, net of tax																(956		)
Net income																$	520


(a)	Commercial Portfolio includes a pretax impairment charge of $94 million related to OVEC. See Note 13 for additional information.

(b) Other includes after-tax costs to achieve the Progress Energy merger of $72 million.

DUKE ENERGY OHIO

All of Duke Energy Ohio’s revenues are generated domestically and its long-lived assets are all in the U.S.



	Three Months Ended June 30, 2015
(in millions)	Regulated Utilities		Other			Eliminations			Consolidated
Total revenues	$	396	$	9		$	—		$	405
Segment income (loss)	$	19	$	(6	)	$	—		$	13
Loss from discontinued operations, net of tax ^(a)									(65		)
Net loss									$	(52	)
Segment assets	$	6,941	$	106		$	(25	)	$	7,022

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)	Includes the after-tax impact of $46 million for the agreement in principle reached in a lawsuit related to the Disposal Group. Refer to Note 5 for further information related to the lawsuit.



	Three Months Ended June 30, 2014
(in millions)	Regulated Utilities		Commercial Portfolio			Total Reportable Segments		Other			Consolidated
Total revenues	$	415	$	(3	)	$	412	$	—		$	412
Segment income (loss)	$	47	$	(14	)	$	33	$	(5	)	$	28
Loss from discontinued operations, net of tax											(135		)
Net loss											$	(107	)



	Six Months Ended June 30, 2015
(in millions)	Regulated Utilities		Commercial Portfolio			Total Reportable Segments		Other			Consolidated
Total revenues	$	968	$	14		$	982	$	9		$	991
Segment income (loss)	$	89	$	(9	)	$	80	$	(8	)	$	72
Income from discontinued operations, net of tax ^(a)											25
Net income											$	97


(a)	Includes after-tax impact of $53 million for the agreement in principle reached in a lawsuit related to the Disposal Group. Refer to Note 5 for further information related to the lawsuit.



	Six Months Ended June 30, 2014
(in millions)	Regulated Utilities		Commercial Portfolio			Total Reportable Segments		Other			Consolidated
Total revenues	$	977	$	10		$	987	$	—		$	987
Segment income (loss)^(a)	$	108	$	(88	)	$	20	$	(7	)	$	13
Loss from discontinued operations, net of tax											(1,010		)
Net loss											$	(997	)

(a) Commercial Portfolio includes a pretax impairment charge of $94 million related to OVEC. See Note 13 for additional information.

DUKE ENERGY CAROLINAS, PROGRESS ENERGY, DUKE ENERGY PROGRESS, DUKE ENERGY FLORIDA AND DUKE ENERGY INDIANA



	Three Months Ended June 30,						Six Months Ended June 30,
(in millions)	2015			2014			2015			2014
Duke Energy Carolinas	$	(10	)	$	(27	)	$	(18	)	$	(48	)
Progress Energy^(a)	(42		)	(45		)	(84		)	(97		)
Duke Energy Progress	(4		)	(3		)	(8		)	(13		)
Duke Energy Florida	(3		)	(7		)	(6		)	(11		)
Duke Energy Indiana	(2		)	(4		)	(4		)	(7		)


(a)	Other for Progress Energy also includes interest expense on corporate debt instruments of $59 million and $119 million for the three and six months ended June 30, 2015, respectively, and $60 million and $123 million for the three and six months ended June 30, 2014, respectively.

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)

4. REGULATORY MATTERS

RATE RELATED INFORMATION

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 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. Duke Energy Carolinas began construction in July 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 and Southern Alliance for Clean Energy 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 certificate of public convenience and necessity (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. In June 2015, the Public Staff of the NCUC recommended the NCUC approve Duke Energy Progress' application. On August 3, 2015, the NCUC issued an order granting the application and requiring annual construction and cost progress reports.

Western Carolinas Modernization Plan

In May 2015, Duke Energy Progress announced a $1.1 billion plan to modernize the Western Carolinas energy system. The plan includes retiring the Asheville coal-fired plant, building a 650 MW combined-cycle natural gas power plant and installing solar generation at the site, building new transmission lines and upgrading area substations. These investments will be made within the next five years in North Carolina and South Carolina. Duke Energy is also working with the local natural gas distribution company to upgrade an existing natural gas pipeline to serve the natural gas plant. On June 24, 2015, the North Carolina governor signed into law the Mountain Energy Act of 2015 (Mountain Energy Act) which provides for an expedited CPCN process for the proposed Asheville combined-cycle project and extends certain North Carolina Coal Ash Management Act of 2014 (Coal Ash Act) deadlines for the coal ash basin at the Asheville Plant site. The plan requires various approvals including regulatory approvals in North Carolina and South Carolina.

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 on equity should be reduced to 8.69 percent. The FERC consolidated all complaints for the purposes of settlement, hearing and decision. On July 21, 2015, the parties filed with the FERC for approval of a settlement agreement under which (i) Duke Energy Florida will pay a total of $14.1 million as refunds for all periods through December 31, 2014, (ii) the rate of return on equity will be 10 percent effective January 1, 2015, and (iii) none of the parties will seek a change in the rate of return on equity prior to January 1, 2018.

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. On May 5, 2015, the Florida Department of Environmental Protection approved Duke Energy Florida's Site Certification Application. 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.

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. 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 (Suwannee project) 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. On July 21, 2015, the FPSC approved the Osprey Plant acquisition as the most cost-effective alternative and an order is expected in August 2015. On July 24, 2015, the FERC issued an order approving the Osprey Plant acquisition. Closing of the acquisition is contingent upon 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.

Crystal River Unit 3

On May 22, 2015, Duke Energy Florida petitioned the FPSC for approval to include in base rates the revenue requirement for the Crystal River Unit 3 Regulatory asset as authorized by the 2013 Revised and Restated Stipulation and Settlement Agreement (2013 Agreement). The value of the Crystal River Unit 3 Regulatory asset to be recovered is projected to be $1.298 billion at December 31, 2015. Based upon this projected value, the initial annual revenue requirement is estimated to be $170 million.

In June 2015, the Governor of Florida signed into law legislation to allow utilities to petition for a financing order for securitization of certain retired nuclear generation assets. On July 27, 2015, Duke Energy Florida petitioned the FPSC for a financing order to finance the Crystal River Unit 3 Regulatory asset with low-cost securities. If the FPSC issues an acceptable financing order and Duke Energy Florida issues the bonds, securitization would replace the base rate recovery methodology established in the 2013 Agreement described above, and would result in a lower rate impact to customers. The annual revenue requirement with securitization, subject to changes in assumed interest rates and timing of issuance of the securitization bonds, is estimated to be approximately $100 million. The FPSC is expected to hold a hearing on both the Crystal River Unit 3 Regulatory asset filing and the securitization filing in October 2015. Duke Energy Florida cannot predict the outcome of this matter.

Levy Nuclear Project

On April 16, 2015, the FPSC approved Duke Energy Florida’s petition to cease collection of the Levy Nuclear Project fixed charge beginning with the first billing cycle in May. Duke Energy Florida also sought approval to defer collection of the $54 million regulatory asset until litigation with Westinghouse Electric Co. concludes. The FPSC found that it was unnecessary to act on the request, finding that its previous order requiring the downward adjustment in projected costs primarily affected the timing of when the fixed charge would end, but that it did not disallow recovery of any costs previously determined to be prudent.

Duke Energy Ohio

2014 Electric Security Plan

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. 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. The PUCO authorized Duke Energy Ohio to recover $56 million, excluding carrying costs, of environmental remediation 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.

Certain consumer groups appealed the PUCO’s decision authorizing the MGP rider to the Ohio Supreme Court and asked the court to stay implementation of the PUCO’s order and collections under the MGP rider pending their appeal. 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 approved Duke Energy Ohio’s request, in January 2015, to reinstate collections under the MGP rider and Duke Energy Ohio resumed billings. Amounts collected prior to the suspension of the rider were immaterial. On March 31, 2015, Duke Energy Ohio filed an application to adjust the MGP rider to recover remediation costs incurred in 2014. Duke Energy Ohio cannot predict the outcome of the appeal of this matter.

Regional Transmission Organization (RTO) Realignment

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 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.

As of June 30, 2015, Duke Energy Ohio had recorded obligations of $93 million related to its withdrawal from MISO and a Regulatory asset of $73 million recorded on the Condensed Consolidated Balance Sheets. MTEP costs billed by MISO are recovered by Duke Energy Ohio through a non-bypassable rider.

Any liability related to the MISO MVP matter or MTEP costs attributable to the Disposal Group was not transferred to Dynegy upon the sale of the nonregulated Midwest generation business.

FERC Transmission Return on Equity and MTEP Cost Settlement

Duke Energy Indiana

Edwardsport Integrated Gasification Combined Cycle (IGCC) Plant

On November 20, 2007, the IURC granted Duke Energy Indiana a CPCN for the construction of the Edwardsport IGCC 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. The Edwardsport IGCC 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.

The ninth semi-annual IGCC rider order was appealed by the Joint Intervenors. 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. On February 25, 2015, the IURC issued a new order upholding its prior decision and provided additional detailed findings. Joint Intervenors have appealed this remand order to the Indiana Court of Appeals.

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 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 12th and 13th 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 12th and 13th semi-annual IGCC riders.

FERC Transmission Return on Equity Complaint

Grid Infrastructure Improvement Plan

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 company, Atlantic Coast Pipeline, LLC (ACP), to build and own the proposed Atlantic Coast Pipeline (the pipeline), a 550-mile interstate natural gas pipeline. The pipeline 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 pipeline and will own 45 percent. Duke Energy will have a 40 percent ownership interest in ACP through its Commercial Portfolio 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 ACP will seek to secure by summer 2016. The estimated in-service date of the pipeline is late 2018.

Sabal Trail Transmission, LLC Pipeline

East Bend Station

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)

NC WARN FERC Complaint

On December 16, 2014, North Carolina Waste Awareness and Reduction Network filed a complaint with the FERC 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. NC WARN also filed a copy of the complaint with the PSCSC on January 6, 2015. In April 2015, the FERC and the PSCSC issued separate orders dismissing the NC WARN petition. On May 14, 2015, NC WARN filed with FERC a motion for reconsideration.

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 20 years), 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 North Carolina, Florida 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.

The table below contains the net carrying value of generating facilities planned for retirement or included in recent IRPs as evaluated for potential retirement due to a lack of requisite environmental control equipment. Dollar amounts in the table below are included in Net property, plant and equipment on the Condensed Consolidated Balance Sheets.



	June 30, 2015
	Duke Energy		Progress Energy_(b)		Duke Energy Florida_(b)		Duke Energy Indiana_(c)
Capacity (in MW)	1,541		873		873		668
Remaining net book value (in millions)^(a)	$	237	$	125	$	125	$	112


(a)	Remaining net book value amounts presented exclude any capitalized asset retirement costs related to closure of ash basins.


(b)	Includes Crystal River Units 1 and 2.


(c)	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 the 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 is evaluating the potential retirement of coal-fired generating units with a net carrying value of approximately $110 million, excluding capitalized asset retirement costs related to closure of ash basins, included in Net property, plant and equipment on the Condensed Consolidated Balance Sheets. These generating units are not included in the table above.

Refer to the "Western Carolinas Modernization Plan" discussion above for details of planned retirements for Duke Energy Progress.

5. COMMITMENTS AND CONTINGENCIES

ENVIRONMENTAL

The 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



	Six Months Ended June 30, 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/adjustments	5			—		2			—			2			1			3
Cash reductions	(4		)	—		(2		)	(1		)	(1		)	(1		)	(1		)
Balance at end of period	$	98		$	10	$	17		$	4		$	13		$	54		$	12



	Six Months Ended June 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/adjustments	9			(1		)	4			3			1			5			—
Cash reductions	(6		)	—			(4		)	(2		)	(2		)	(1		)	—
Balance at end of period	$	82		$	10		$	27		$	9		$	18		$	31		$	7



(in millions)
Duke Energy	$	89
Duke Energy Carolinas	25
Progress Energy	15
Duke Energy Progress	1
Duke Energy Florida	14
Duke Energy Ohio	42
Duke Energy Indiana	7

North Carolina and South Carolina Ash Basins

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 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. 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 2015. Duke Energy Carolinas will not seek recovery of these costs from ratepayers. See the "Litigation" section below for additional information on litigation, investigations and 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~~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 long-term environmental impact costs cannot be reasonably estimated at this time.

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 September 20, 2014, the Coal Ash Act became law and was amended on June 24, 2015, by the Mountain Energy Act. The Coal Ash Act, as amended, (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; (iii) requires closure of ash impoundments at Duke Energy Progress' Sutton Plant and Duke Energy Carolinas' Riverbend and Dan River stations no later than August 1, 2019 and Duke Energy Progress' Asheville Plant no later than August 1, 2022; (iv) requires dry disposal of fly ash at active plants, excluding the Asheville Plant, not retired by December 31, 2018; (v) requires dry disposal of bottom ash at active plants, excluding the Asheville Plant, by December 31, 2019, or retirement of active plants; (vi) requires all remaining ash impoundments in North Carolina to be categorized as high-risk, intermediate-risk or low-risk no later than December 31, 2015 by the 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 impoundments; and (viii) enhances the level of regulation for structural fills utilizing coal ash. The Coal Ash Act includes a variance procedure for compliance deadlines and modification of requirements regarding structural fills and compliance boundaries. Provisions of the Coal Ash Act prohibit cost recovery in customer rates for unlawful discharge of ash basin waters occurring after January 1, 2014. The Coal Ash Act leaves the decision on cost recovery determinations related to closure of coal combustion residual (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 or excavation plans in advance of closure plans. These plans and all associated permits must be approved by DENR before any excavation or closure work can begin.

Asset retirement obligations are recorded on the Duke Energy Carolinas and Duke Energy Progress Condensed Consolidated Balance Sheets at June 30, 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. See Note 7 for additional information.

Coal Combustion Residuals

On April 17, 2015, the EPA published in the Federal Register a rule to regulate the disposal of CCR from electric utilities as solid waste. The federal regulation classifies CCR as nonhazardous waste under Subtitle D of the Resource Conservation and Recovery Act and allows beneficial use of CCRs with some restrictions. 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. In accordance with ASC 410-20, Asset Retirement and Environmental Obligations - Asset Retirement Obligations, Duke Energy records an asset retirement 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 Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Ohio and Duke Energy Indiana recorded 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. See Note 7 for additional information.

LITIGATION

Duke Energy

Ash Basin Shareholder Derivative Litigation

Five shareholder derivative lawsuits were filed in Delaware Chancery Court relating to the release at Dan River and to the management of Duke Energy’s ash ~~basin water~~basins. On October 31, 2014, the five lawsuits were consolidated in a single proceeding titled "In Re Duke Energy Corporation Coal Ash Derivative Litigation." On December 2, 2014, plaintiffs filed a Corrected Verified Consolidated Shareholder Derivative Complaint (Consolidated Complaint). The Consolidated 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.

The Consolidated Complaint alleges the Duke Energy Defendants breached their fiduciary duties by failing to adequately oversee Duke Energy’s ash basins and that these breaches of fiduciary duty may have contributed to the incident at Dan River and continued thereafter. The lawsuit also asserts 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 lawsuit 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.

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 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, ~~discussed~~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 ~~DENR issued~~derivative complaints, Duke Energy has also received two shareholder litigation demand letters. On May 28, 2014, Duke Energy received a ~~Notice~~shareholder litigation demand letter sent on behalf of ~~Violation~~shareholder Mitchell Pinsly. The letter alleges that the members of the Board of Directors and ~~Recommendation~~certain officers breached their fiduciary duties by allowing the company to illegally dispose of ~~Assessment~~and store coal ash pollutants. The letter demands that the Board of ~~Civil Penalties~~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 March 24, 2015, Duke Energy received a shareholder litigation demand letter sent on behalf of shareholder Saul Bresalier. The letter alleges that the members of the Board of Directors and certain officers breached their fiduciary duties in their management of the Duke Energy'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. In May 2015, counsel for the shareholder was informed that the matter had been referred to the Demand Review Committee.

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.

Ash Basin Shareholder Securities Litigation

On May 26, 2015, Plaintiff E.F. Greenberg filed a lawsuit against the members of the Duke Energy Board of Directors (the Board) alleging violations of Section 14(a) of the Exchange Act for false or misleading statements contained in Duke Energy’s 2015 Proxy Statement. The plaintiff contends the Board caused Duke Energy to omit material facts from the 2015 Proxy Statement that a reasonable shareholder would consider important in casting a vote, especially with respect to ~~this matter on February 28, 2014, which~~ the ~~company responded~~election of directors. Accordingly, Plaintiff alleges that shareholders were misled in casting their votes. Plaintiff seeks a determination that the 2015 Proxy Statement was false and misleading, an order from the court invalidating all votes from the Annual Meeting and requiring a revised 2015 Proxy Statement, as well as attorneys’ fees. On July 31, 2015, the defendants filed a Motion to ~~on March 13, 2014.~~ Dismiss the case. It is not possible to predict the outcome that might occur in connection with the remaining matters.

Progress Energy Merger Shareholder Litigation

Duke Energy, the 11 members of the Board of Directors who were also members of the pre-merger Board of Directors (Legacy Duke Energy Directors) and certain Duke Energy ~~employees received subpoenas issued by~~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 ~~Attorney~~District Court for the ~~Eastern~~Western District of North ~~Carolina~~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).

On August 15, 2014 the parties reached an agreement in principle to settle the litigation. On March 10, 2015, the parties filed a ~~criminal investigation related to all 14~~Stipulation of Settlement and a Motion for Preliminary Approval of the Settlement. The court issued an order for preliminary approval of the settlement on March 25, 2015. Under the terms of the agreement, Duke Energy agreed to pay $146 million to settle the claim. On April 22, 2015, Duke Energy made a payment of $25 million into the settlement escrow account. The remainder of $121 million was paid by insurers into the settlement escrow account. Notice has been sent to members of the class and a final approval hearing is scheduled for August 12, 2015.

It is not possible to estimate the maximum exposure of loss that may occur in connection 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.~~these lawsuits.

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 February 20, 2015,~~Price Reporting Cases

Five lawsuits were filed against a Duke Energy ~~Carolinas,~~affiliate, Duke Energy ~~Progress~~Trading and ~~Duke Energy Business Services~~Marketing, LLC, ~~(DEBS),~~and other energy companies and remain pending in a ~~wholly owned subsidiary~~consolidated, single federal court proceeding in Nevada. Each of ~~Duke Energy, each entered~~these lawsuits 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 ~~Plea Agreements~~unlawful arrangements and agreements in ~~connection with~~violation of the ~~investigation initiated by~~antitrust laws of the ~~United States Department~~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 ~~Justice Environmental Crimes Section and the United States Attorneys~~five cases. The U.S. Court of Appeals for the ~~Eastern District~~Ninth Circuit subsequently reversed the lower court’s decision. On April 21, 2015, the Supreme Court affirmed the U.S. Court of ~~North Carolina, the Middle District of North Carolina and the Western District of North Carolina (collectively, USDOJ).~~Appeals decision. The ~~Plea Agreements are subject~~case has been reassigned to the ~~approval of the United States District Court~~same consolidated federal court proceeding in Nevada 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.further proceedings.

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.

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. Trial date has been 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 the remaining matters.

Brazil Expansion Lawsuit

Brazil Generation

~~Asbestos-related Injuries and Damages Claims~~matters.

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 March 31, 2015, there were 121 asserted claims for non-malignant cases with the cumulative relief sought of up to $26 million, and 32 asserted claims for malignant cases with the cumulative relief sought of up to $10 million. Based on Duke Energy ~~Carolinas’ experience, it is expected that~~Progress

DENR State Enforcement Actions

In the ~~ultimate resolution~~first quarter of ~~most~~2013, environmental organizations sent notices of ~~these claims likely will be less than the amount claimed.~~

intent to sue Duke Energy Carolinas ~~has recognized asbestos-related reserves~~and Duke Energy Progress related to alleged groundwater violations and CWA violations from coal ash basins at two of ~~$570 million at March 31, 2015~~their coal-fired power plants in North Carolina. DENR filed enforcement actions against Duke Energy Carolinas and ~~$575 million at December 31, 2014. These reserves~~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 ~~classified in Other within Deferred Credits~~being heard before a single judge.

On October 4, 2013, Duke Energy Carolinas, Duke Energy Progress and ~~Other Liabilities~~DENR negotiated a proposed consent order covering these two plants. The consent order would have assessed civil penalties 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~~imposed a compliance schedule requiring Duke Energy Carolinas and ~~future asbestos claims through 2033, are recorded on an undiscounted basis~~Duke Energy Progress to undertake monitoring and ~~incorporate anticipated inflation.~~data collection activities toward making appropriate corrective action to address any substantiated violations. In light of the ~~uncertainties inherent in a longer-term forecast, management does not believe they can reasonably estimate~~coal ash release that occurred at Dan River on February 2, 2014, on March 21, 2014, DENR withdrew its support of the ~~indemnity~~consent orders and ~~medical costs~~requested that ~~might be incurred after 2033 related to such potential claims. It is possible~~the court proceed with the litigation.

On August 16, 2013, DENR filed an enforcement action against Duke Energy Carolinas ~~may incur asbestos liabilities~~and Duke Energy Progress related to their remaining plants in ~~excess~~North Carolina, alleging violations of the ~~recorded reserves.~~

CWA and violations of the North Carolina groundwater standards. The case against 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.~~was filed in Mecklenburg County Superior Court. The case against Duke Energy ~~Carolinas’ cumulative payments began to exceed the self-insurance retention~~Progress was filed in ~~2008. Future payments up~~Wake County Superior Court. Both of these cases have been assigned to the ~~policy limit will be reimbursed by~~judge handling the ~~third-party insurance carrier.~~enforcement actions discussed above. The ~~insurance policy limit for potential future insurance recoveries indemnification and medical cost claim payments is $864 million~~SELC, on behalf of several environmental groups, has been permitted to intervene in ~~excess of the self-insured retention. Receivables for insurance recoveries were $617 million at March 31,~~these cases.

On July 10, 2015, ~~and $616 million at December 31, 2014. These amounts are classified in Other within Investments and Other Assets and Receivables on the Condensed Consolidated Balance Sheets.~~ Duke Energy Carolinas and Duke Energy Progress filed Motions for Partial Summary Judgment in the case on the basis that there is no longer either a genuine controversy or disputed material facts about the relief for seven of the 14 North Carolina plants with coal ash basins.

It is not ~~aware of~~possible to predict any ~~uncertainties regarding the legal sufficiency of insurance claims.~~liability or estimate any damages Duke Energy Carolinas ~~believes the insurance recovery asset is probable of recovery as the insurance carrier continues to have a strong financial strength rating.~~or Duke Energy Progress might incur in connection with these matters.

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)

DENR Notices of Violation (NOV)

In August 2014, DENR issued an NOV for alleged groundwater violations at Duke Energy ~~Florida~~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 Plant. 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 scheduled for October 12, 2015.

~~Westinghouse Contract Litigation~~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.

North Carolina Declaratory Judgment Action

On March ~~28,~~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 ~~Florida~~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 NCSC. Oral argument was held on March 16, 2015. On June 11, 2015, the North Carolina Supreme Court issued its opinion in favor of Duke Energy Carolinas, Duke Energy Progress and the EMC and remanded the matter to the state court judge with instructions to dismiss the case.

Federal Citizens Suits

On June 11, 2013, Catawba Riverkeeper Foundation, Inc. (Catawba Riverkeeper) filed a ~~lawsuit against Westinghouse~~separate action in the ~~U.S. District~~United States Court for the Western District of North Carolina. The lawsuit ~~seeks recovery~~contends the state enforcement action discussed above does not adequately address issues raised in Catawba Riverkeeper’s notice of ~~$54 million in milestone payments in excess of work performed under~~intent to sue relating to the ~~terminated engineering, procurement and construction agreement (EPC) for Levy~~Riverbend Steam Station. 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 ~~a determination by the court of the amounts due~~Duke Energy Carolinas’ motion to ~~Westinghouse as a result of the termination of the EPC.~~dismiss. The Court allowed limited discovery, after which Duke Energy Carolinas may file any renewed motions to dismiss.

On ~~March 31, 2014, Westinghouse~~September 12, 2013, Cape Fear River Watch, Inc., Sierra Club and Waterkeeper Alliance filed a ~~lawsuit against Duke Energy Florida~~citizen suit in ~~U.S.~~the Federal District Court for the ~~Western~~Eastern District of ~~Pennsylvania.~~North Carolina. The ~~Pennsylvania~~ lawsuit ~~alleged damages under~~alleges unpermitted discharges to surface water and groundwater violations at the ~~EPC in excess of $510 million for engineering and design work, costs to end supplier contracts and an alleged termination fee.~~

Sutton Plant. On June 9, 2014, the ~~judge~~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 9order 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 ~~North Carolina case ruled that the litigation will proceed~~case.

On September 3, 2014, three cases were filed by various environmental groups: (i) a citizen suit in the ~~Western~~United States Court for the Middle District of North ~~Carolina. In November 2014, Westinghouse~~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 Steam Station. Motions to Stay or Dismiss the proceedings were filed ~~a Motion for Partial Judgment~~in each of the three cases. The proceedings related to Cape Fear and H.F. Lee have been stayed. A hearing was held August 5, 2015 on the ~~pleadings, which was denied on March 30, 2015. Trial is set for February 2016.~~ motion relating to Buck.

It is not possible to predict ~~the outcome of the litigation and~~ whether Duke Energy ~~Florida~~Carolinas or Duke Energy Progress will incur any liability ~~for terminating the EPC~~ or to estimate the damages, if any, itthey 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



	Three Months Ended June 30,						Six Months Ended June 30,
(in millions)	2015			2014			2015			2014
Operating Revenues	$	—		$	122		$	412		$	317
Loss on disposition^(a)	—			(21		)	(44		)	(1,344		)

(Loss) Income before income taxes^(b)	$	(88	)	$	(210	)	$	52		$	(1,564	)
Income tax (benefit) expense	(23		)	(75		)	27			(554		)
(Loss) Income from Discontinued Operations, net of tax	$	(65	)	$	(135	)	$	25		$	(1,010	)


(a)	The Loss on disposition includes impairments recorded to write down the carrying amount of the assets to the estimated fair value of the business, based on the selling price to Dynegy less cost to sell.


(b)	The (Loss) Income before income taxes includes the pretax impact of a $71 million and $81 million charge for the agreement in principle reached in a lawsuit related to the Disposal Group for the three and six months ended June 30, 2015, respectively. Refer to Note 5 for further information related to the lawsuit.

See Notes 4 and 5 for a discussion of contingencies related to the Disposal Group that are retained by Duke Energy Ohio subsequent to the sale.

3. BUSINESS SEGMENTS

Operating segments are determined based on information used by the chief operating decision-maker in deciding how to allocate resources and evaluate the performance of the business.

Products and services are sold between affiliate companies and reportable segments of Duke Energy at cost. Segment assets presented in the following tables exclude all intercompany assets.

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

Duke Energy has the following reportable operating segments: Regulated Utilities, International Energy and Commercial Portfolio.

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 relate to 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.



	Three Months Ended June 30, 2015
(in millions)	Regulated Utilities		International Energy		Commercial Portfolio			Total Reportable Segments		Other			Eliminations			Consolidated
Unaffiliated revenues	$	5,211	$	287	$	75		$	5,573	$	16		$	—		$	5,589
Intersegment revenues	9		—		—			9		18			(27		)	—
Total revenues	$	5,220	$	287	$	75		$	5,582	$	34		$	(27	)	$	5,589
Segment income (loss)^(a)(b)	$	632	$	52	$	(33	)	$	651	$	(48	)	$	(3	)	$	600
Add back noncontrolling interests component																4
Loss from discontinued operations, net of tax ^(c)																(57		)
Net income																$	547
Segment assets	$	108,139	$	3,913	$	3,462		$	115,514	$	2,880		$	181		$	118,575

(a) Other includes after-tax costs to achieve the Progress Energy merger of $14 million.


(b)	Commercial Portfolio includes state tax expense of $41 million, resulting from changes to state apportionment factors due to the sale of the Disposal Group, that does not qualify for discontinued operations. Refer to Note 2 for further information related to the sale.


(c)	Includes the after-tax impact of $46 million for the agreement in principle reached in a lawsuit related to the Disposal Group. Refer to Note 5 for further information related to the lawsuit.



	Three Months Ended June 30, 2014
(in millions)	Regulated Utilities		International Energy		Commercial Portfolio			Total Reportable Segments		Other			Eliminations			Consolidated
Unaffiliated revenues	$	5,272	$	364	$	64		$	5,700	$	8		$	—		$	5,708
Intersegment revenues	11		—		—			11		21			(32		)	—
Total revenues	$	5,283	$	364	$	64		$	5,711	$	29		$	(32	)	$	5,708
Segment income (loss)^(a)	$	689	$	146	$	(21	)	$	814	$	(90	)	$	(2	)	$	722
Add back noncontrolling interests component																4
Loss from discontinued operations, net of tax																(113		)
Net income																$	613

(a) Other includes after-tax costs to achieve the Progress Energy merger of $38 million.

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)



	Six Months Ended June 30, 2015
(in millions)	Regulated Utilities		International Energy		Commercial Portfolio			Total Reportable Segments		Other			Eliminations			Consolidated
Unaffiliated revenues	$	10,924	$	560	$	148		$	11,632	$	22		$	—		$	11,654
Intersegment revenues	19		—		—			19		39			(58		)	—
Total revenues	$	10,943	$	560	$	148		$	11,651	$	61		$	(58	)	$	11,654
Segment income (loss)^(a)(b)	$	1,406	$	88	$	(32	)	$	1,462	$	(85	)	$	(4	)	$	1,373
Add back noncontrolling interests component																7
Income from discontinued operations, net of tax ^(c)																34
Net income																$	1,414

(a) Other includes after-tax costs to achieve the Progress Energy merger of $27 million.


(b)	Commercial Portfolio includes state tax expense of $41 million, resulting from changes to state apportionment factors due to the sale of the Disposal Group, that does not qualify for discontinued operations. Refer to Note 2 for further information related to the sale.


(c)	Includes after-tax impact of $53 million for the agreement in principle reached in a lawsuit related to the Disposal Group. Refer to Note 5 for further information related to the lawsuit.



	Six Months Ended June 30, 2014
(in millions)	Regulated Utilities		International Energy		Commercial Portfolio			Total Reportable Segments		Other			Eliminations			Consolidated
Unaffiliated revenues	$	11,067	$	746	$	145		$	11,958	$	13		$	—		$	11,971
Intersegment revenues	21		—		—			21		41			(62		)	—
Total revenues	$	11,088	$	746	$	145		$	11,979	$	54		$	(62	)	$	11,971
Segment income (loss)^(a)(b)	$	1,426	$	276	$	(53	)	$	1,649	$	(177	)	$	(4	)	$	1,468
Add back noncontrolling interest																8
Loss from discontinued operations, net of tax																(956		)
Net income																$	520


(a)	Commercial Portfolio includes a pretax impairment charge of $94 million related to OVEC. See Note 13 for additional information.

(b) Other includes after-tax costs to achieve the Progress Energy merger of $72 million.

DUKE ENERGY OHIO

All of Duke Energy Ohio’s revenues are generated domestically and its long-lived assets are all in the U.S.



	Three Months Ended June 30, 2015
(in millions)	Regulated Utilities		Other			Eliminations			Consolidated
Total revenues	$	396	$	9		$	—		$	405
Segment income (loss)	$	19	$	(6	)	$	—		$	13
Loss from discontinued operations, net of tax ^(a)									(65		)
Net loss									$	(52	)
Segment assets	$	6,941	$	106		$	(25	)	$	7,022

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)	Includes the after-tax impact of $46 million for the agreement in principle reached in a lawsuit related to the Disposal Group. Refer to Note 5 for further information related to the lawsuit.



	Three Months Ended June 30, 2014
(in millions)	Regulated Utilities		Commercial Portfolio			Total Reportable Segments		Other			Consolidated
Total revenues	$	415	$	(3	)	$	412	$	—		$	412
Segment income (loss)	$	47	$	(14	)	$	33	$	(5	)	$	28
Loss from discontinued operations, net of tax											(135		)
Net loss											$	(107	)



	Six Months Ended June 30, 2015
(in millions)	Regulated Utilities		Commercial Portfolio			Total Reportable Segments		Other			Consolidated
Total revenues	$	968	$	14		$	982	$	9		$	991
Segment income (loss)	$	89	$	(9	)	$	80	$	(8	)	$	72
Income from discontinued operations, net of tax ^(a)											25
Net income											$	97


(a)	Includes after-tax impact of $53 million for the agreement in principle reached in a lawsuit related to the Disposal Group. Refer to Note 5 for further information related to the lawsuit.



	Six Months Ended June 30, 2014
(in millions)	Regulated Utilities		Commercial Portfolio			Total Reportable Segments		Other			Consolidated
Total revenues	$	977	$	10		$	987	$	—		$	987
Segment income (loss)^(a)	$	108	$	(88	)	$	20	$	(7	)	$	13
Loss from discontinued operations, net of tax											(1,010		)
Net loss											$	(997	)

(a) Commercial Portfolio includes a pretax impairment charge of $94 million related to OVEC. See Note 13 for additional information.

DUKE ENERGY CAROLINAS, PROGRESS ENERGY, DUKE ENERGY PROGRESS, DUKE ENERGY FLORIDA AND DUKE ENERGY INDIANA



	Three Months Ended June 30,						Six Months Ended June 30,
(in millions)	2015			2014			2015			2014
Duke Energy Carolinas	$	(10	)	$	(27	)	$	(18	)	$	(48	)
Progress Energy^(a)	(42		)	(45		)	(84		)	(97		)
Duke Energy Progress	(4		)	(3		)	(8		)	(13		)
Duke Energy Florida	(3		)	(7		)	(6		)	(11		)
Duke Energy Indiana	(2		)	(4		)	(4		)	(7		)


(a)	Other for Progress Energy also includes interest expense on corporate debt instruments of $59 million and $119 million for the three and six months ended June 30, 2015, respectively, and $60 million and $123 million for the three and six months ended June 30, 2014, respectively.

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)

4. REGULATORY MATTERS

RATE RELATED INFORMATION

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 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. Duke Energy Carolinas began construction in July 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 and Southern Alliance for Clean Energy 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

Western Carolinas Modernization Plan

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 on equity should be reduced to 8.69 percent. The FERC consolidated all complaints for the purposes of settlement, hearing and decision. On July 21, 2015, the parties filed with the FERC for approval of a settlement agreement under which (i) Duke Energy Florida will pay a total of $14.1 million as refunds for all periods through December 31, 2014, (ii) the rate of return on equity will be 10 percent effective January 1, 2015, and (iii) none of the parties will seek a change in the rate of return on equity prior to January 1, 2018.

Citrus County Combined Cycle Facility

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. 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 (Suwannee project) 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. On July 21, 2015, the FPSC approved the Osprey Plant acquisition as the most cost-effective alternative and an order is expected in August 2015. On July 24, 2015, the FERC issued an order approving the Osprey Plant acquisition. Closing of the acquisition is contingent upon 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.

Crystal River Unit 3

Levy Nuclear Project

Duke Energy Ohio

2014 Electric Security Plan

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. 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. The PUCO authorized Duke Energy Ohio to recover $56 million, excluding carrying costs, of environmental remediation 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.

Regional Transmission Organization (RTO) Realignment

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 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.

Any liability related to the MISO MVP matter or MTEP costs attributable to the Disposal Group was not transferred to Dynegy upon the sale of the nonregulated Midwest generation business.

FERC Transmission Return on Equity and MTEP Cost Settlement

Duke Energy Indiana

Edwardsport Integrated Gasification Combined Cycle (IGCC) Plant

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 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 12th and 13th 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 12th and 13th semi-annual IGCC riders.

FERC Transmission Return on Equity Complaint

Grid Infrastructure Improvement Plan

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 company, Atlantic Coast Pipeline, LLC (ACP), to build and own the proposed Atlantic Coast Pipeline (the pipeline), a 550-mile interstate natural gas pipeline. The pipeline 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 pipeline and will own 45 percent. Duke Energy will have a 40 percent ownership interest in ACP through its Commercial Portfolio 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 ACP will seek to secure by summer 2016. The estimated in-service date of the pipeline is late 2018.

Sabal Trail Transmission, LLC Pipeline

East Bend Station

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)

NC WARN FERC Complaint

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 20 years), 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 North Carolina, Florida 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.



	June 30, 2015
	Duke Energy		Progress Energy_(b)		Duke Energy Florida_(b)		Duke Energy Indiana_(c)
Capacity (in MW)	1,541		873		873		668
Remaining net book value (in millions)^(a)	$	237	$	125	$	125	$	112


(a)	Remaining net book value amounts presented exclude any capitalized asset retirement costs related to closure of ash basins.


(b)	Includes Crystal River Units 1 and 2.


(c)	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 the 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 is evaluating the potential retirement of coal-fired generating units with a net carrying value of approximately $110 million, excluding capitalized asset retirement costs related to closure of ash basins, included in Net property, plant and equipment on the Condensed Consolidated Balance Sheets. These generating units are not included in the table above.

Refer to the "Western Carolinas Modernization Plan" discussion above for details of planned retirements for Duke Energy Progress.

5. COMMITMENTS AND CONTINGENCIES

ENVIRONMENTAL

The 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



	Six Months Ended June 30, 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/adjustments	5			—		2			—			2			1			3
Cash reductions	(4		)	—		(2		)	(1		)	(1		)	(1		)	(1		)
Balance at end of period	$	98		$	10	$	17		$	4		$	13		$	54		$	12



	Six Months Ended June 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/adjustments	9			(1		)	4			3			1			5			—
Cash reductions	(6		)	—			(4		)	(2		)	(2		)	(1		)	—
Balance at end of period	$	82		$	10		$	27		$	9		$	18		$	31		$	7



(in millions)
Duke Energy	$	89
Duke Energy Carolinas	25
Progress Energy	15
Duke Energy Progress	1
Duke Energy Florida	14
Duke Energy Ohio	42
Duke Energy Indiana	7

North Carolina and South Carolina Ash Basins

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 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. 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 2015. Duke Energy Carolinas will not seek recovery of these costs from ratepayers. See the "Litigation" section below for additional information on litigation, investigations and 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 long-term environmental impact costs cannot be reasonably estimated at this time.

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)

Coal Combustion Residuals

LITIGATION

Duke Energy

Ash Basin Shareholder Derivative Litigation

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 March 24, 2015, Duke Energy received a shareholder litigation demand letter sent on behalf of shareholder Saul Bresalier. The letter alleges that the members of the Board of Directors and certain officers breached their fiduciary duties in their management of the Duke Energy'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. In May 2015, counsel for the shareholder was informed that the matter had been referred to the Demand Review Committee.

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.

Ash Basin Shareholder Securities Litigation

On May 26, 2015, Plaintiff E.F. Greenberg filed a lawsuit against the members of the Duke Energy Board of Directors (the Board) alleging violations of Section 14(a) of the Exchange Act for false or misleading statements contained in Duke Energy’s 2015 Proxy Statement. The plaintiff contends the Board caused Duke Energy to omit material facts from the 2015 Proxy Statement that a reasonable shareholder would consider important in casting a vote, especially with respect to the election of directors. Accordingly, Plaintiff alleges that shareholders were misled in casting their votes. Plaintiff seeks a determination that the 2015 Proxy Statement was false and misleading, an order from the court invalidating all votes from the Annual Meeting and requiring a revised 2015 Proxy Statement, as well as attorneys’ fees. On July 31, 2015, the defendants filed a Motion to Dismiss the case. It is not possible to predict the outcome that might occur in connection with the remaining matters.

Progress Energy Merger Shareholder Litigation

Duke Energy, the 11 members of the Board of Directors who were also members of the pre-merger 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).

On August 15, 2014 the parties reached an agreement in principle to settle the litigation. On March 10, 2015, the parties filed a Stipulation of Settlement and a Motion for Preliminary Approval of the Settlement. The court issued an order for preliminary approval of the settlement on March 25, 2015. Under the terms of the agreement, Duke Energy agreed to pay $146 million to settle the claim. On April 22, 2015, Duke Energy made a payment of $25 million into the settlement escrow account. The remainder of $121 million was paid by insurers into the settlement escrow account. Notice has been sent to members of the class and a final approval hearing is scheduled for August 12, 2015.

It is not possible to estimate the maximum exposure of loss that may occur in connection with these lawsuits.

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)

Price Reporting Cases

On July 18, 2011, the judge granted a defendant’s motion for summary judgment in two of five cases. The U.S. Court of Appeals for the Ninth Circuit subsequently reversed the lower court’s decision. On April 21, 2015, the Supreme Court affirmed the U.S. Court of Appeals decision. The case has been reassigned to the same consolidated federal court proceeding in Nevada for 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.

Brazil Expansion Lawsuit

Brazil Generation

Duke Energy Carolinas and Duke Energy Progress

DENR State Enforcement Actions

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.

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)

DENR Notices of Violation (NOV)

In August 2014, DENR issued an 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 Plant. 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 scheduled for October 12, 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.

North Carolina Declaratory Judgment Action

Federal Citizens Suits

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 Steam Station. 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 9order 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 Steam Station. Motions to Stay or Dismiss the proceedings were filed in each of the three cases. The proceedings related to Cape Fear and H.F. Lee have been stayed. A hearing was held August 5, 2015 on the motion relating to Buck.

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.

North 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 received subpoenas issued by the United States Attorney for the Eastern District of North Carolina in connection with a criminal investigation related to all 14 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.

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 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 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). On May 14, 2015, the United States District Court for the Eastern District of North Carolina approved the Plea Agreements.

Under the Plea Agreements, DEBS and Duke Energy Progress pleaded guilty to 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. Duke Energy Carolinas and DEBS pleaded guilty to 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. Payment of the amounts relating to fines and restitution were made between May and July 2015. Duke Energy Carolinas and Duke Energy Progress have remaining liabilities of $18 million and $16 million, respectively, within Accounts payable on the Condensed Consolidated Balance Sheets as of June 30, 2015.

On May 14, 2015, Duke Energy reached an Interim Administrative Agreement with the U.S. Environmental Protection Agency Office of Suspension and Debarment that avoids debarment of DEBS, Duke Energy Carolinas or Duke Energy Progress with respect to all active generating facilities. The Interim Administrative Agreement imposes a number of requirements relating to environmental and ethical compliance, subject to the oversight of an independent monitor. 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.

Potential Groundwater Contamination Claims

Beginning in May 2015, a number of residents living in the vicinity of the North Carolina facilities with ash basins received letters from DENR advising them not to drink water from the private wells on their land tested by DENR as the samples were found to have certain substances at levels higher than the criteria set by the North Carolina Department of Health and Human Services. The criteria, in some cases, are considerably more stringent than federal drinking water standards established to protect human health and welfare. The Coal Ash Act requires additional groundwater monitoring and assessments for each of the 14 coal-fired plants in North Carolina, including sampling of private water supply wells. The data gathered through these comprehensive groundwater assessments will be used to determine whether the water quality of these private water supply wells has been adversely impacted by the ash basins. The first of these groundwater assessments was submitted to DENR on August 5, 2015. It is not possible to estimate the maximum exposure of loss, if any, that may occur in connection with claims which might be made by these residents.

Duke Energy Carolinas

New Source Review

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. Trial date has been 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 June 30, 2015, there were 133 asserted claims for non-malignant cases with the cumulative relief sought of up to $34 million, and 66 asserted claims for malignant cases with the cumulative relief sought of up to $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.

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 has recognized asbestos-related reserves of $564 million at June 30, 2015 and $575 million at December 31, 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 $617 million at June 30, 2015 and $616 million at December 31, 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.

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 engineering, 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~~nonpublic option agreements in exchange for their withdrawal of challenges to Duke Energy Ohio’s Rate Stabilization Plan 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~~Act.

The parties have reached an agreement in principle to ~~be entitled~~settle the case for approximately $81 million subject to ~~treble damages.~~

the execution of definitive documents among the parties and approval by the federal court. A ~~March 31, 2015 mediation~~litigation settlement reserve was ~~unsuccessful.~~recorded for the full amount and classified as Other within Current Liabilities on Duke Energy Ohio's ~~motion for summary judgment is pending. Trial has been set to begin on July 27,~~Condensed Consolidated Balance Sheets as of June 30, 2015. ~~It is not possible to predict whether~~ Duke Energy Ohio ~~will incur any liability or to estimate~~has recognized pretax charges in (Loss) Income From Discontinued Operations, net of tax in the ~~damages, if any, that may be incurred in connection with this matter. Ultimate resolution~~Condensed Consolidated Statements of ~~this matter could have a material effect on~~Operations and Comprehensive Income of $71 million and $81 million for the ~~results of operations, cash flows or financial position of Duke Energy Ohio.~~

~~Any liability related to the lawsuit attributable to the Disposal Group was not transferred to Dynegy upon the sale of the Disposal Group.~~three and six months ended June 30, 2015, respectively. See Note 2 for further discussion on the Midwest 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~~sought damages equaling some or all of the additional costs incurred in the construction of the project not recovered at the IURC. The arbitration hearing concluded in December 2014. ~~Post-hearing briefs have been submitted and a ruling is pending.~~On May 6, 2015, the arbitration panel issued its final decision unanimously dismissing all of Duke Energy ~~Indiana cannot predict~~Indiana’s claims. This ruling resolves all outstanding issues in the ~~outcome of this matter.~~arbitration.

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.

5254

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-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-related matters in excess of recorded reserves is not material.


(in millions)	March 31, 2015		December 31, 2014		June 30, 2015		December 31, 2014
Reserves for Legal Matters
Duke Energy	$	331	$	323	$	191	$	323
Duke Energy Carolinas	72		72		19		72
Progress Energy	93		93		79		93
Duke Energy Progress	37		37		22		37
Duke Energy Florida	34		36		36		36
Duke Energy Ohio	10		—		81		—

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~~noncancelable 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								Six Months Ended June 30, 2015
Issuance Date	Maturity Date	Interest Rate			Duke Energy		Duke Energy Carolinas		Maturity Date	Interest Rate		Duke Energy		Duke Energy Carolinas
First Mortgage Bonds
March 2015^(a)	June 2045	3.750	%		$	500	$	500	June 2045	3.750	%	$	500	$	500
Total issuances					$	500	$	500				$	500	$	500


(a)	Proceeds will be used to redeem at maturity $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.



(in millions)	Maturity Date	Interest Rate		June 30, 2015
Unsecured Debt
Progress Energy (Parent)	January 2016	5.625	%	$	300
Duke Energy Indiana	June 2016	6.05	%	325
First Mortgage Bonds
Duke Energy Carolinas	October 2015	5.300	%	500
Duke Energy Florida	November 2015	0.650	%	250
Duke Energy Florida	December 2015	5.100	%	300
Duke Energy Progress	December 2015	5.250	%	400
Other				299
Current maturities of long-term debt				$	2,374

5355

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 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 Progress April 2015 5.150 % 300
Duke Energy Carolinas October 2015 5.300 % 500
Duke Energy Florida November 2015 0.650 % 250
Duke Energy Florida December 2015 5.100 % 300
Duke Energy Progress December 2015 5.250 % 400
Other 300
Current maturities of long-term debt $ 2,800

MASTER CREDIT FACILITY

Duke Energy has a Master Credit Facility with a capacity of $7.5 billion through January 2020. The Duke Energy Registrants, excluding Progress Energy (Parent), have borrowing capacity under the Master Credit Facility up to a specified sublimit 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.~~holder and as security to meet obligations under the Plea Agreements. The table below includes the current borrowing sublimits and available capacity under the Master Credit Facility.


	March 31, 2015																					June 30, 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)	$	7,500		$	3,200		$	1,200		$	1,000		$	900		$	600		$	600		$	7,500		$	3,200		$	1,200		$	1,000		$	900		$	600		$	600
Reduction to backstop issuances
Commercial paper^(b)	(3,256		)	(2,764		)	(300		)	—			(17		)	(25		)	(150		)	(1,589		)	(972		)	(300		)	(65		)	(75		)	(27		)	(150		)
Outstanding letters of credit	(66		)	(60		)	(4		)	(1		)	(1		)	—			—			(71		)	(63		)	(4		)	(3		)	(1		)	—			—
Tax-exempt bonds	(116		)	—			(35		)	—			—			—			(81		)	(116		)	—			(35		)	—			—			—			(81		)
Coal ash set-aside^(c)																						(500		)	—			(250		)	(250		)	—			—			—
Available capacity	$	4,062		$	376		$	861		$	999		$	882		$	575		$	369		$	5,224		$	2,165		$	611		$	682		$	824		$	573		$	369


(a)	Represents the sublimit of each borrower. Sublimits were reallocated in July 2015 to maintain adequate levels of liquidity for each borrower in light of near-term funding needs.


(b)	Duke Energy issued $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 as Long-Term Debt Payable to Affiliated Companies in the Condensed Consolidated Balance Sheets.

(c)

On May 14, 2015, the United States District Court for the Eastern District of North Carolina approved the separate Plea Agreements entered into by Duke Energy Carolinas, Duke Energy Progress and DEBS, a wholly owned subsidiary of Duke Energy 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. See Note 5 for further details.

7. ASSET RETIREMENT OBLIGATIONS

COAL COMBUSTION RESIDUALS

In ~~April 2015,~~accordance with ASC 410-20, Asset Retirement and Environmental Obligations - Asset Retirement Obligations, Duke Energy ~~paid down its outstanding commercial paper by approximately $1.3 billion using~~records an asset retirement obligation (ARO) when it has a ~~portion~~legal obligation that can be reasonably estimated to incur retirement costs associated with the retirement of a long-lived asset.

On April 17, 2015, the EPA published in the Federal Register a rule to regulate the disposal of CCR from electric utilities as solid waste. The federal regulation, which becomes effective six months after publication, classifies CCR as nonhazardous waste under Subtitle D of the ~~proceeds from~~Resource Conservation and Recovery Act and allows beneficial use of CCRs with some restrictions. 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 ~~sale~~safe disposal and management of CCR. In addition to the requirements of the ~~nonregulated Midwest generation business. See Note 2 for additional information.~~

~~On February 20, 2015,~~federal CCR regulation, CCR landfills and surface impoundments will continue to be independently regulated by most states. Duke Energy Carolinas, Progress Energy, Duke Energy Progress, ~~and 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~~Ohio and Duke Energy ~~Progress~~Indiana were impacted by the EPA rule and recorded additional asset retirement obligation amounts during the second quarter of 2015.

The ARO amount recorded that relates to the EPA rule was based upon estimated closure costs for ash basins at seven plants located in South Carolina, Indiana and Kentucky. 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 ~~required~~the method and time frame 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 ~~each maintain $250 million~~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 standards set by the EPA rule and any current or future state regulation. The ARO amount will be adjusted as additional information is gained through the closure process, including acceptance and approval of ~~available capacity under~~compliance approaches which may change management assumptions, and may result in a material change to 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 for further details.balance.

5456

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)

7.The following table presents changes in the liability associated with asset retirement obligations for Duke Energy and the Subsidiary Registrants.



(in millions)	Duke Energy			Duke Energy Carolinas			Progress Energy			Duke Energy Progress			Duke Energy Florida			Duke Energy Ohio			Duke Energy Indiana
Balance at December 31, 2014^(a)	$	8,466		$	3,428		$	4,711		$	3,905		$	806		$	27		$	32
Acquisitions	9			—			—			—			—			—			—
Accretion expense^(b)	171			81			97			79			18			1			6
Liabilities settled^(c)	(187		)	(60		)	(123		)	(32		)	(91		)	(1		)	(3		)
Liabilities incurred in the current year^(d)(e)	983			178			270			270			—			116			418
Revisions in estimates of cash flows	48			(23		)	40			40			—			—			—
Balance at June 30, 2015	$	9,490		$	3,604		$	4,995		$	4,262		$	733		$	143		$	453


(a)	Primarily relates to decommissioning nuclear power facilities, closure of ash basins in North Carolina and South Carolina, asbestos removal, closure of landfills at fossil generation facilities, retirement of natural gas mains and removal of renewable energy generation assets.


(b)	For the six months ended June 30, 2015, substantially all accretion expense relates to previously established asset retirement obligations from Duke Energy's regulated electric operations and has been deferred in accordance with regulatory accounting treatment.


(c)	Primarily relates to closure of ash basins in North Carolina and South Carolina and nuclear decommissioning of Crystal River Unit 3 in Florida.


(d)	Primarily relates to amounts recorded in the second quarter of 2015 as a result of the EPA's rule for disposal of CCR as solid waste.


(e)	Retail cost recovery is believed to be probable and will be pursued through the normal ratemaking process with the NCUC, PSCSC, KPSC and IURC.Wholesale cost recovery, except for Duke Energy Indiana amounts, is believed to be probable and will be pursued through the normal ratemaking process with FERC.

Asset retirement costs associated with the asset retirement obligations for operating plants and retired plants are included in Net property, plant and equipment, and Regulatory assets, respectively, on the Condensed Consolidated Balance Sheets. The following table summarizes the associated long-lived assets related to ARO liabilities incurred during the six months ended June 30, 2015.



	June 30, 2015
(in millions)	Duke Energy		Duke Energy Carolinas		Progress Energy		Duke Energy Progress		Duke Energy Ohio		Duke Energy Indiana
Net property, plant and equipment	$	535	$	—	$	—	$	—	$	116	$	418
Regulatory Assets	448		178		270		270		—		—

8. GOODWILL AND INTANGIBLE ASSETS

GOODWILL

The following ~~tables present~~table presents goodwill by reportable operating segment for Duke ~~Energy and Duke Energy Ohio.~~Energy.

Duke Energy

(in millions) Regulated Utilities
International Energy
Commercial Power
Total
Balance at December 31, 2014
Goodwill $ 15,950
$ 307
$ 935
$ 17,192
Accumulated impairment charges —
—
(871 ) (871 )
Balance at December 31, 2014, as adjusted for accumulated impairment charges 15,950
307
64
16,321
Foreign exchange and other changes —
(16 ) —
(16 )
Acquisitions —
—
24
24
Balance at March 31, 2015
Goodwill 15,950
291
959
17,200
Accumulated impairment charges —
—
(871 ) (871 )
Balance at March 31, 2015, as adjusted for accumulated impairment charges $ 15,950
$ 291
$ 88
$ 16,329



(in millions)	Regulated Utilities		International Energy			Commercial Portfolio		Total
Goodwill at December 31, 2014^(a)	15,950		307			64		16,321
Foreign exchange and other changes	—		(17		)	—		(17		)
Acquisitions	—		—			24		24
Goodwill at June 30, 2015	$	15,950	$	290		$	88	$	16,328


(a)	Excludes fully impaired Goodwill of $871 million related to the Disposal Group which was sold in the second quarter of 2015. See Note 2 for further information related to the sale of the Disposal Group. There are no other accumulated impairment charges during the periods presented.

Duke Energy Ohio

(in millions) Regulated Utilities
Commercial Power
Total
Balance at December 31, 2014
Goodwill $ 1,136
$ 1,188
$ 2,324
Accumulated impairment charges (216 ) (1,188 ) (1,404 )
Balance at December 31, 2014, as adjusted for accumulated impairment charges 920
—
920
Balance at March 31, 2015
Goodwill 1,136
1,188
2,324
Accumulated impairment charges (216 ) (1,188 ) (1,404 )
Balance at March 31, 2015, as adjusted for accumulated impairment charges $ 920
$ —
$ 920
Duke Energy Ohio's Goodwill balance of $920 million is included in the Regulated Utilities operating segment and presented net of $216 million of accumulated impairment charges on the Condensed Consolidated Balance Sheets at June 30, 2015 and December 31, 2014. However, the balance of Goodwill at December 31, 2014, also included Goodwill of $1,188 million and an equal amount of accumulated impairment charges disposed of in the second quarter of 2015 related to the sale of the Commercial Portfolio's Disposal Group.

Progress Energy

Progress Energy's Goodwill is included in the Regulated Utilities operating segment and there are no accumulated impairment charges.

~~INTANGIBLE ASSETS~~

During 2014, Duke Energy Ohio reduced the carrying amount of OVEC to zero. A charge of $94 million is recorded in Impairment charges on Duke Energy Ohio's Condensed Consolidated Statement of Operations. See Note 12 for additional information.

5557

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)

8.INTANGIBLE ASSETS

9. 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 March 31,				Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2015		2014		2015		2014		2015		2014
Duke Energy Carolinas
Corporate governance and shared service expenses^(a)	$	219	$	222	$	202	$	217	$	421	$	439
Indemnification coverages^(b)	6		5		6		5		12		11
Joint Dispatch Agreement (JDA) revenue^(c)	26		97		14		15		40		112
Joint Dispatch Agreement (JDA) expense^(c)	57		51		38		40		95		91
Progress Energy
Corporate governance and shared services provided by Duke Energy^(a)	$	167	$	178	$	172	$	200	$	339	$	378
Indemnification coverages^(b)	10		8		9		8		19		17
JDA revenue^(c)	57		51		38		40		95		91
JDA expense^(c)	26		97		14		15		40		112
Duke Energy Progress
Corporate governance and shared service expenses^(a)	$	101	$	96	$	93	$	104	$	194	$	200
Indemnification coverages^(b)	4		4		4		4		8		9
JDA revenue^(c)	57		51		38		40		95		91
JDA expense^(c)	26		97		14		15		40		112
Duke Energy Florida
Corporate governance and shared service expenses^(a)	$	66	$	81	$	79	$	97	$	145	$	178
Indemnification coverages^(b)	6		4		5		4		11		8
Duke Energy Ohio
Corporate governance and shared service expenses^(a)	$	85	$	77	$	103	$	82	$	188	$	159
Indemnification coverages^(b)	3		3		1		3		4		6
Duke Energy Indiana
Corporate governance and shared service expenses^(a)	$	89	$	105	$	83	$	94	$	172	$	199
Indemnification coverages^(b)	2		3		2		3		4		5


(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.

In addition to the amounts presented above, the Subsidiary Registrants record the impact ~~on net income~~ of other affiliate transactions in net income, 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 six months ended ~~March 31,~~June 30, 2015 and 2014 for the Subsidiary Registrants.

See Note 1213 for information ~~relative~~related to the sale of receivables to an affiliate consolidated by Duke Energy.

Duke Energy Commercial Asset Management (DECAM) was 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.

5658

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~~Ohio's nonregulated ~~subsidiaries and not from the regulated utility operations of~~indirect subsidiary, Duke Energy ~~Ohio.~~Commercial Asset Management (DECAM), owned generating plants included in the Disposal Group sold to Dynegy on April 2, 2015. On April 1, 2015, Duke Energy Ohio distributed its indirect ownership interest in DECAM ~~met its funding needs through an intercompany loan agreement with~~to a Duke Energy subsidiary ~~of Duke Energy. DECAM also had the ability to loan money to the subsidiary of Duke Energy. DECAM had an outstanding~~and non-cash settled DECAM's intercompany loan payable of $294 ~~million and $459 million, respectively, as of March 31, 2015 and December 31, 2014. These amounts are~~million. The intercompany loan payable recorded in Notes payable to affiliated companies on Duke Energy Ohio’s Condensed Consolidated Balance ~~Sheets. The intercompany loan payable~~Sheets was ~~repaid on April 2,~~$459 million as of December 31, 2014.

Intercompany transactions between DECAM and related parties 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 were a net expense of $3 million and $81 million for the six months ended June 30, 2015 ~~with funds received from~~and 2014, respectively, and a net expense of $27 million for the ~~sale of the Disposal Group.~~ three months ended June 30, 2014.

Refer to Note 2 for further information on ~~this disposition.~~the sale of the Disposal Group.

9.10. 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. The cash impacts of settled derivatives are recorded as operating activities on the Condensed Consolidated Statements of Cash Flows.

Changes in the fair value of derivative ~~agreements~~instruments that either do not qualify for or have not been designated as hedges are reflected in current earnings or as regulatory assets or liabilities.

FAIR VALUE AND CASH FLOW HEDGES

For a derivative designated as hedging the exposure to variable cash flows of a future transaction, referred to as a cash flow hedge, the effective portion of the derivative's gain or loss is initially reported as a component of other comprehensive income and subsequently reclassified into earnings once the future transaction effects earnings. Gains and losses reclassified out of AOCI for the three and six months ended June 30, 2015 and 2014 were immaterial.

Amounts for interest rate contracts are reclassified to earnings as interest expense over the term of the related debt.

At June 30, 2015, there were no open commodity derivative instruments designated as hedges.

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.

~~Fair Value~~Regulated public utilities may have cost-based rate regulations and ~~Cash Flow Hedges~~

~~At March 31, 2015, there were no open~~various other cost recovery mechanisms that result in a limited exposure to market volatility of commodity fuel prices. Financial derivative ~~instruments designated as hedges.~~contracts, where approved by the respective state regulatory commission, can be used to manage the risk of price volatility. Wholesale generating capacity used to sell electricity results in exposure to market volatility in energy-related commodity prices.

Undesignated Contracts

Undesignated contracts may include contracts not designated as a hedge because they are accounted for under Regulated Operations accounting, 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.

Mark-to-market gains or losses on contracts accounted for under Regulated Operations are deferred and recorded as Regulatory Liabilities or Regulatory Assets, respectively. The Subsidiary Registrants utilize cost-tracking mechanisms, commonly referred to as fuel adjustment clauses. These clauses allow for the recovery of fuel and fuel-related costs, including settlements of undesignated derivatives for fuel commodities, and portions of purchased power costs through surcharges on customer rates. The difference between the costs incurred and the surcharge revenues is recorded as an adjustment to Fuel used in electric generation and purchased power – regulated or as Operating Revenues – Regulated electric on the Consolidated Statements of Operations with an offsetting impact on regulatory assets or liabilities. Therefore, due to the regulatory accounting followed by our Regulated Operations for undesignated derivatives, realized and unrealized gains and losses on undesignated derivatives do not have an immediate impact on reported net income.

Mark-to-market gains and losses related to the nonregulated Midwest generation business are recorded in discontinued operations and open positions at April 2, 2015 were included in the sale of the Disposal Group. Refer to Note 2 for further information on the sale of the Disposal Group. Gains and losses on undesignated derivative contracts for nonregulated continuing operations is immaterial, including electric contracts used to hedge renewables generation in Electric Reliability Council of Texas (ERCOT), hedges for a business that is winding down by the end of 2016, and revenues during 2014 for mitigation contracts which were terminated by December 31, 2014.

Undesignated contracts expire as late as 2018.

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.


	March 31, 2015							June 30, 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)	22,810	—	—	—	—	17,734	571	75	—	—	—	—	—	18
Natural gas (millions of decatherms)	666	57	333	111	222	276	—	360	63	297	109	188	—	—


	December 31, 2014							December 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)(b)	25,370	—	—	—	—	19,141	—	25,370	—	—	—	—	19,141	—
Natural gas (millions of decatherms)	676	35	328	116	212	313	—
Natural gas (millions of decatherms)^(a)								676	35	328	116	212	313	—


(a)	Amounts at Duke Energy Ohio include volumes related to the nonregulated Midwest generation business sold during the second quarter of 2015. Refer to Note 2 for further information on the sale.


(b)	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~~Duke’s interest rate ~~swap~~swaps for its Regulated Utilities operations employ Regulated Operations accounting. Regulated Operations accounting records the Mark-to-Market on the swaps as Regulatory Assets or Regulatory Liabilities. The accrual of interest on the swaps is recorded as Interest Expense. Regulatory assets and liabilities are amortized consistent with the treatment of the related costs in the ratemaking process.

The following table shows notional amounts for derivatives related to ~~fix the US dollar equivalent payments on a floating-rate Chilean debt issue.~~interest rate risk.



	June 30, 2015										December 31, 2014
(in millions)	Duke Energy		Progress Energy		Duke Energy Progress		Duke Energy Florida		Duke Energy Ohio		Duke Energy		Progress Energy		Duke Energy Florida		Duke Energy Ohio
Cash flow hedges^(a)	$	714	$	—	$	—	$	—	$	—	$	750	$	—	$	—	$	—
Undesignated contracts^(b)	527		500		250		250		27		277		250		250		27
Total notional amount	$	1,241	$	500	$	250	$	250	$	27	$	1,027	$	250	$	250	$	27


(a)	Duke Energy includes amounts related to consolidated Variable Interest Entities (VIEs) of $509 million and $541 million at June 30, 2015 and December 31, 2014, respectively.


(b)	In 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.

5760

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 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 contracts 527
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 ~~show~~are shown gross and cash collateral on the derivatives has not been netted against the fair values shown.



Derivative Assets	June 30, 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	$	27	$	—	$	—	$	—	$	—	$	5	$	18
Investments and Other Assets: Other	1		—		—		—		—		—		—
Current Liabilities: Other	4		1		3		—		3		—		—
Deferred Credits and Other Liabilities: Other	4		—		4		—		4		—		—
Total Derivative Assets – Commodity Contracts	$	36	$	1	$	7	$	—	$	7	$	5	$	18
Interest Rate Contracts
Designated as Hedging Instruments
Investments and Other Assets: Other	$	9	$	—	$	—	$	—	$	—	$	—	$	—
Not Designated as Hedging Instruments
Current Assets: Other	6		—		5		2		3		—		—
Total Derivative Assets – Interest Rate Contracts	$	15	$	—	$	5	$	2	$	3	$	—	$	—
Total Derivative Assets	$	51	$	1	$	12	$	2	$	10	$	5	$	18

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



Derivative Liabilities	June 30, 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 Liabilities: Other	$	233	$	15	$	213	$	74	$	139	$	—	$	—
Deferred Credits and Other Liabilities: Other	78		4		73		13		55		—		—
Total Derivative Liabilities – Commodity Contracts	$	311	$	19	$	286	$	87	$	194	$	—	$	—
Interest Rate Contracts
Designated as Hedging Instruments
Current Liabilities: Other	$	13	$	—	$	—	$	—	$	—	$	—	$	—
Deferred Credits and Other Liabilities: Other	28		—		—		—		—				—
Not Designated as Hedging Instruments
Current Liabilities: Other	1		—		—		—		—		1		—
Deferred Credits and Other Liabilities: Other	16		—		10		9		1		5		—
Total Derivative Liabilities – Interest Rate Contracts	$	58	$	—	$	10	$	9	$	1	$	6	$	—
Total Derivative Liabilities	$	369	$	19	$	296	$	96	$	195	$	6	$	—

5861

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 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	$	14
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	$	14
Interest Rate Contracts
Designated as Hedging Instruments
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	$	—	$	—
Total Derivative Assets	$	351	$	—	$	2	$	—	$	2	$	341	$	14


Derivative Liabilities	March 31, 2015														December 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
Commodity Contracts
Designated as Hedging Instruments
Current Liabilities: Other															$	—	$	—	$	1	$	1	$	—	$	—	$	—
Not Designated as Hedging Instruments
Current Assets: Assets held for sale	$	21	$	—	$	—	$	—	$	—	$	59	$	—	—		—		—		—		—		4		—
Investments and Other Assets: Assets held for sale	7		—		—		—		—		23		—		—		—		—		—		—		4		—
Current Liabilities: Other	308		19		289		100		189		—		—		307		14		288		108		180		—		—
Current Liabilities: Assets held for sale	263		—		—		—		—		249		—		253		—		—		—		—		252		—
Deferred Credits and Other Liabilities: Other	112		8		104		26		78		—		—		91		5		80		23		57		—		—
Deferred Credits and Other Liabilities: Assets held for sale	209		—		—		—		—		207		—		208		—		—		—		—		207		—
Total Derivative Liabilities - Commodity Contracts	$	920	$	27	$	393	$	126	$	267	$	538	$	—
Total Derivative Liabilities – Commodity Contracts															$	859	$	19	$	369	$	132	$	237	$	467	$	—
Interest Rate Contracts
Designated as Hedging Instruments
Current Liabilities: Other	$	14	$	—	$	—	$	—	$	—	$	1	$	—	$	13	$	—	$	—	$	—	$	—	$	—	$	—
Deferred Credits and Other Liabilities: Other	38		—		—		—		—		6		—		29		—		—		—		—		—		—
Not Designated as Hedging Instruments
Current Liabilities: Other	1		—		—		—		—		—		—		1		—		—		—		—		1		—
Deferred Credits and Other Liabilities: Other	11		—		5		5		—		—		—		7		—		2		—		2		5		—
Total Derivative Liabilities - Interest Rate Contracts	64		—		5		5		—		7		—
Total Derivative Liabilities – Interest Rate Contracts															$	50	$	—	$	2	$	—	$	2	$	6	$	—
Total Derivative Liabilities	$	984	$	27	$	398	$	131	$	267	$	545	$	—	$	909	$	19	$	371	$	132	$	239	$	473	$	—

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

5962

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 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	March 31, 2015																		June 30, 2015
(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
Current^(a)
Gross amounts recognized	$	261		$	—	$	6		$	2	$	4		$	284		$	3	$	37		$	1		$	8		$	2	$	6		$	5	$	18
Gross amounts offset	(227		)	—		(1		)	—		(1		)	(265		)	—		(5		)	(1		)	(3		)	—		(3		)	—		—
Net amounts subject to master netting	34			—		5			2		3			19			3		32			—			5			2		3			5		18
Amounts not subject to master netting	—			—		—			—		—			—			—		—			—			—			—		—			—		—
Net amounts recognized on the Condensed Consolidated Balance Sheet	$	34		$	—	$	5		$	2	$	3		$	19		$	3	$	32		$	—		$	5		$	2	$	3		$	5	$	18
Non-Current^(b)
Gross amounts recognized	$	150		$	—	$	3		$	—	$	3		$	171		$	—	$	14		$	—		$	4		$	—	$	4		$	—	$	—
Gross amounts offset	(131		)	—		(2		)	—		(2		)	(145		)	—		(4		)	—			(4		)	—		(4		)	—		—
Net amounts subject to master netting	19			—		1			—		1			26			—		10			—			—			—		—			—		—
Amounts not subject to master netting	—			—		—			—		—			—			—		—			—			—			—		—			—		—
Net amounts recognized on the Condensed Consolidated Balance Sheet	$	19		$	—	$	1		$	—	$	1		$	26		$	—	$	10		$	—		$	—		$	—	$	—		$	—	$	—


(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.


(b)	Amounts for Duke Energy ~~and Duke Energy Ohio~~Registrants are included in Other within Investments and ~~Assets held for sale within Current~~Other Assets on the Condensed Consolidated Balance Sheets.



Derivative Liabilities	June 30, 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	$	247		$	15		$	213		$	74	$	139		$	1	$	—
Gross amounts offset	(19		)	(1		)	(17		)	—		(17		)	—		—
Net amounts subject to master netting	228			14			196			74		122			1		—
Amounts not subject to master netting	—			—			—			—		—			—		—
Net amounts recognized on the Condensed Consolidated Balance Sheet	$	228		$	14		$	196		$	74	$	122		$	1	$	—
Non-Current^(d)
Gross amounts recognized	$	117		$	4		$	78		$	22	$	56		$	5	$	—
Gross amounts offset	(9		)	—			(9		)	—		(9		)	—		—
Net amounts subject to master netting	108			4			69			22		47			5		—
Amounts not subject to master netting	5			—			5			—		—			—		—
Net amounts recognized on the Condensed Consolidated Balance Sheet	$	113		$	4		$	74		$	22	$	47		$	5	$	—


(c)	Amounts for Duke Energy Registrants are included in Other within Current Liabilities on the Condensed Consolidated Balance Sheets.


(d)	Amounts for Duke Energy Registrants are included in Other within Deferred Credits and Other Liabilities on the Condensed Consolidated Balance Sheets.

6063

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)


~~(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.

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
$ —


~~(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.



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		$	—


(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.

~~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)

~~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.~~

~~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 tables 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 March 31, 2015
(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 $ 1
$ —
$ —
$ —
$ —
$ —
$ 1
Revenue: Nonregulated electric and other 17
—
—
—
—
13
—
Fuel used in electric generation and purchased power - nonregulated 37
—
—
—
—
37
—
Interest rate contracts
Interest expense (1 ) —
(1 ) —
(1 ) —
—
Total Pretax Gains (Losses) Recognized in Earnings $ 54
$ —
$ (1 ) $ —
$ (1 ) $ 50
$ 1
Location of Pretax (Losses) Gains Recognized as Regulatory Assets or Liabilities
Commodity contracts
Regulatory assets $ (340 ) $ (28 ) $ (314 ) $ (127 ) $ (187 ) $ —
$ 2
Regulatory liabilities (2 ) —
—
—
—
2
(4 )
Interest rate contracts
Regulatory assets (5 ) —
(4 ) (5 ) 1
(1 ) —
Regulatory liabilities 3
—
3
2
1
—
—
Total Pretax Gains (Losses) Recognized as Regulatory Assets or Liabilities $ (344 ) $ (28 ) $ (315 ) $ (130 ) $ (185 ) $ 1
$ (2 )

~~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
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
$ —

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-related payment provisions. Amounts for Duke Energy Indiana were not material.

March 31, 2015
(in millions)
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 $ 834
$ 11
$ 344
$ 110
$ 234
$ 479
Fair value of collateral already posted 219
—
43
1
42
176
Additional cash collateral or letters of credit in the event credit-risk-related contingent features were triggered 326
11
301
109
192
14

December 31, 2014
(in millions)
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 $ 845
$ 19
$ 370
$ 131
$ 239
$ 456
Fair value of collateral already posted 209
—
23
—
23
186
Additional cash collateral or letters of credit in the event credit-risk-related contingent features were triggered 407
19
347
131
216
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)



	June 30, 2015
(in millions)	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	$	289	$	—	$	262	$	94	$	168	$	—
Fair value of collateral already posted	19		—		19		—		19		—
Additional cash collateral or letters of credit in the event credit-risk-related contingent features were triggered	270		—		243		94		149		—



	December 31, 2014
(in millions)	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	$	845	$	19	$	370	$	131	$	239	$	456
Fair value of collateral already posted	209		—		23		—		23		186
Additional cash collateral or letters of credit in the event credit-risk-related contingent features were triggered	407		19		347		131		216		41

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 and Duke Energy Indiana were not material.


	March 31, 2015		December 31, 2014		June 30, 2015		December 31, 2014
(in millions)	Receivables		Receivables		Receivables		Receivables
Duke Energy
Amounts offset against net derivative positions	$	151	$	145	$	19	$	145
Amounts not offset against net derivative positions	68		64		—		64
Progress Energy
Amounts offset against net derivative positions	43		23		19		23
Duke Energy Progress
Amounts offset against net derivative positions	1		—
Duke Energy Florida
Amounts offset against net derivative positions	42		23		19		23
Duke Energy Ohio
Amounts offset against net derivative positions	108		122		—		122
Amounts not offset against net derivative positions	68		64		—		64

~~10.~~11. 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. These investments were sold prior to June 30, 2015. The fair value of these investments was ~~$10 million at March 31, 2015 and~~ $7 million at December 31, 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 other 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 classifies all other investments in debt and equity securities as ~~long-term,~~long term, unless otherwise noted.

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)

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.

~~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-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 ~~March 31, 2015 and December 31, 2014. There were no other-than-temporary impairments for debt or equity securities as of March 31,~~June 30, 2015 and December 31, 2014.

DUKE ENERGY

The following table presents the estimated fair value of investments in available-for-sale securities.


	March 31, 2015						December 31, 2014						June 30, 2015						December 31, 2014
(in millions)	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		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	$	—	$	—	$	106	$	—	$	—	$	136	$	1	$	—	$	120	$	—	$	—	$	136
Equity securities	1,916		28		3,643		1,926		29		3,650		1,890		31		3,654		1,926		29		3,650
Corporate debt securities	19		1		482		14		2		454		8		7		510		14		2		454
Municipal bonds	7		2		227		5		—		184		4		4		226		5		—		184
U.S. government bonds	24		1		864		19		2		978		14		3		838		19		2		978
Other debt securities	2		2		148		1		2		147		1		3		188		1		2		147
Total NDTF^(d)(c)	$	1,968	$	34	$	5,470	$	1,965	$	35	$	5,549	$	1,918	$	48	$	5,536	$	1,965	$	35	$	5,549
Other Investments
Cash and cash equivalents	$	—	$	—	$	29	$	—	$	—	$	15	$	—	$	—	$	30	$	—	$	—	$	15
Equity securities	36		—		98		34		—		96		35		—		98		34		—		96
Corporate debt securities	3		—		81		1		1		58		1		2		94		1		1		58
Municipal bonds	3		1		75		3		1		76		2		1		70		3		1		76
U.S. government bonds	—		—		45		—		—		27		—		—		55		—		—		27
Other debt securities	1		2		83		1		1		80		—		1		71		1		1		80
Total Other Investments^(a)	$	43	$	3	$	411	$	39	$	3	$	352	$	38	$	4	$	418	$	39	$	3	$	352
Total Investments	$	2,011	$	37	$	5,881	$	2,004	$	38	$	5,901	$	1,956	$	52	$	5,954	$	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) March 31, 2015
Due in one year or less $ 110
Due after one through five years 603
Due after five through 10 years 488
Due after 10 years 804
Total $ 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 March 31,
(in millions) 2015
2014
Realized gains $ 102
$ 31
Realized losses 14
4

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)


(c)	The decrease in the estimated fair value of the NDTF for the six months ended June 30, 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 Plant.

The table below summarizes the maturity date for debt securities.



(in millions)	June 30, 2015
Due in one year or less	$	86
Due after one through five years	642
Due after five through 10 years	500
Due after 10 years	824
Total	$	2,052

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 June 30,				Six Months Ended June 30,
(in millions)	2015		2014		2015		2014
Realized gains	$	28	$	31	$	130	$	62
Realized losses	17		2		31		6

DUKE ENERGY CAROLINAS

The following table presents the estimated fair value of investments in available-for-sale securities.


	March 31, 2015						December 31, 2014						June 30, 2015						December 31, 2014
(in millions)	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		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	$	—	$	—	$	42	$	—	$	—	$	51	$	—	$	—	$	43	$	—	$	—	$	51
Equity securities	1,076		16		2,127		1,102		17		2,162		1,061		19		2,132		1,102		17		2,162
Corporate debt securities	11		1		329		8		2		316		4		6		352		8		2		316
Municipal bonds	2		1		90		1		—		62		1		2		90		1		—		62
U.S. government bonds	8		1		296		7		1		308		4		2		329		7		1		308
Other debt securities	2		2		128		1		2		133		1		3		153		1		2		133
Total NDTF	$	1,099	$	21	$	3,012	$	1,119	$	22	$	3,032	$	1,071	$	32	$	3,099	$	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	$	1,099	$	22	$	3,015	$	1,119	$	23	$	3,035	$	1,071	$	33	$	3,102	$	1,119	$	23	$	3,035


(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) March 31, 2015
Due in one year or less $ 5
Due after one through five years 177
Due after five through 10 years 257
Due after 10 years 407
Total $ 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 March 31,
(in millions) 2015
2014
Realized gains $ 90
$ 23
Realized losses 12
1



(in millions)	June 30, 2015
Due in one year or less	$	10
Due after one through five years	197
Due after five through 10 years	275
Due after 10 years	445
Total	$	927

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)

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 June 30,				Six Months Ended June 30,
(in millions)	2015		2014		2015		2014
Realized gains	$	17	$	29	$	107	$	52
Realized losses	11		1		23		2

PROGRESS ENERGY

The following table presents the estimated fair value investments in available-for-sale securities.


	March 31, 2015						December 31, 2014						June 30, 2015						December 31, 2014
(in millions)	Gross Unrealized Holding Gains		Gross Unrealized Holding Losses_(b)		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		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses_(b)		Estimated Fair Value
NDTF
Cash and cash equivalents	$	—	$	—	$	64	$	—	$	—	$	85	$	1	$	—	$	77	$	—	$	—	$	85
Equity securities	840		12		1,516		824		12		1,488		829		12		1,522		824		12		1,488
Corporate debt securities	8		—		153		6		—		138		4		1		158		6		—		138
Municipal bonds	5		1		137		4		—		122		3		2		136		4		—		122
U.S. government bonds	16		—		568		12		1		670		10		1		509		12		1		670
Other debt securities	—		—		20		—		—		14		—		—		35		—		—		14
Total NDTF^(c)	$	869	$	13	$	2,458	$	846	$	13	$	2,517	$	847	$	16	$	2,437	$	846	$	13	$	2,517
Other Investments
Cash and cash equivalents	$	—	$	—	$	18	$	—	$	—	$	15	$	—	$	—	$	21	$	—	$	—	$	15
Municipal bonds	3		—		42		3		—		43		2		—		40		3		—		43
Total Other Investments^(a)	$	3	$	—	$	60	$	3	$	—	$	58	$	2	$	—	$	61	$	3	$	—	$	58
Total Investments	$	872	$	13	$	2,518	$	849	$	13	$	2,575	$	849	$	16	$	2,498	$	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~~six months ended ~~March 31,~~June 30, 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.~~Plant.

The table below summarizes the maturity date for debt securities.


(in millions)	March 31, 2015		June 30, 2015
Due in one year or less	$	84	$	55
Due after one through five years	350		345
Due after five through 10 years	160		156
Due after 10 years	326		322
Total	$	920	$	878

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 March 31,				Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2015		2014		2015		2014		2015		2014
Realized gains	$	12	$	7	$	9	$	2	$	21	$	9
Realized losses	1		2		5		1		6		3

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.


	March 31, 2015						December 31, 2014						June 30, 2015						December 31, 2014
(in millions)	Gross Unrealized Holding Gains		Gross Unrealized Holding Losses_(b)		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		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses_(b)		Estimated Fair Value
NDTF
Cash and cash equivalents	$	—	$	—	$	40	$	—	$	—	$	50	$	1	$	—	$	47	$	—	$	—	$	50
Equity securities	626		10		1,194		612		10		1,171		617		10		1,198		612		10		1,171
Corporate debt securities	6		—		107		5		—		97		3		1		110		5		—		97
Municipal bonds	5		1		135		4		—		120		3		2		134		4		—		120
U.S. government bonds	10		—		251		9		1		265		7		1		228		9		1		265
Other debt securities	—		—		12		—		—		8		—		—		21		—		—		8
Total NDTF	$	647	$	11	$	1,739	$	630	$	11	$	1,711	$	631	$	14	$	1,738	$	630	$	11	$	1,711
Other Investments
Cash and cash equivalents	$	—	$	—	$	1	$	—	$	—	$	—	$	—	$	—	$	1	$	—	$	—	$	—
Total Other Investments^(a)	$	—	$	—	$	1	$	—	$	—	$	—	$	—	$	—	$	1	$	—	$	—	$	—
Total Investments	$	647	$	11	$	1,740	$	630	$	11	$	1,711	$	631	$	14	$	1,739	$	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)	March 31, 2015		June 30, 2015
Due in one year or less	$	12	$	12
Due after one through five years	147		142
Due after five through 10 years	113		106
Due after 10 years	233		233
Total	$	505	$	493

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 March 31,				Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2015		2014		2015		2014		2015		2014
Realized gains	$	9	$	6	$	8	$	1	$	17	$	7
Realized losses	1		2		4		—		5		2

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.


	March 31, 2015						December 31, 2014						June 30, 2015						December 31, 2014
(in millions)	Gross Unrealized Holding Gains		Gross Unrealized Holding Losses_(b)		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		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses_(b)		Estimated Fair Value
NDTF
Cash and cash equivalents	$	—	$	—	$	24	$	—	$	—	$	35	$	—	$	—	$	30	$	—	$	—	$	35
Equity securities	214		2		322		212		2		317		212		2		324		212		2		317
Corporate debt securities	2		—		46		1		—		41		1		—		48		1		—		41
Municipal bonds	—		—		2		—		—		2		—		—		2		—		—		2
U.S. government bonds	6		—		317		3		—		405		3		—		281		3		—		405
Other debt securities	—		—		8		—		—		6		—		—		14		—		—		6
Total NDTF(c)	$	222	$	2	$	719	$	216	$	2	$	806	$	216	$	2	$	699	$	216	$	2	$	806
Other Investments
Cash and cash equivalents	$	—	$	—	$	2	$	—	$	—	$	1	$	—	$	—	$	9	$	—	$	—	$	1
Municipal bonds	3		—		42		3		—		43		2		—		40		3		—		43
Total Other Investments^(a)	$	3	$	—	$	44	$	3	$	—	$	44	$	2	$	—	$	49	$	3	$	—	$	44
Total Investments	$	225	$	2	$	763	$	219	$	2	$	850	$	218	$	2	$	748	$	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~~six months ended ~~March 31,~~June 30, 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.~~Plant.

The table below summarizes the maturity date for debt securities.


(in millions)	March 31, 2015		June 30, 2015
Due in one year or less	$	72	$	43
Due after one through five years	203		203
Due after five through 10 years	47		50
Due after 10 years	93		89
Total	$	415	$	385

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 March 31,				Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2015		2014		2015		2014		2015		2014
Realized gains	$	3	$	1	$	1	$	1	$	4	$	2
Realized losses	—		1		1		—		1		1

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.


	March 31, 2015						December 31, 2014						June 30, 2015						December 31, 2014
(in millions)	Gross Unrealized Holding Gains		Gross Unrealized Holding Losses_(b)		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		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses_(b)		Estimated Fair Value
Other Investments
Equity securities	$	30	$	—	$	73	$	28	$	—	$	71	$	29	$	—	$	73	$	28	$	—	$	71
Corporate debt securities													—		—		3		—		—		—
Municipal bonds	—		1		30		—		1		30		—		1		27		—		1		30
Total Other Investments^(a)	$	30	$	1	$	103	$	28	$	1	$	101	$	29	$	1	$	103	$	28	$	1	$	101
Total Investments	$	30	$	1	$	103	$	28	$	1	$	101	$	29	$	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)	March 31, 2015		June 30, 2015
Due in one year or less	$	2	$	2
Due after one through five years	17		16
Due after five through 10 years	8		8
Due after 10 years	3		4
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 six months ended ~~March 31,~~June 30, 2015 and 2014.

~~11.~~12. 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) 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.

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 six months ended ~~March 31,~~June 30, 2015 and 2014. Transfers out of Level 3 during the three and six months ended ~~March 31,~~June 30, 2015 are the result of forward commodity prices becoming observable due to the passage of time.

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 Nasdaq composite (NASDAQ) and 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

With 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~~nonperformance 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 78 for a discussion of the valuation of goodwill and long-lived assets and Note 2 related to the assets and related liabilities of the Disposal 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 Consolidated Balance Sheets. Derivative amounts in the table below exclude cash collateral, which is disclosed in Note 9.10. See Note 1011 for additional information related to investments by major security type.


	March 31, 2015												June 30, 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	$	3,643		$	3,476		$	3		$	164		$	3,654		$	3,485		$	1		$	168
Nuclear decommissioning trust fund debt securities	1,827			542			1,285			—			1,882			517			1,365			—
Other trading and available-for-sale equity securities	98			98			—			—			98			98			—			—
Other trading and available-for-sale debt securities	323			73			245			5			320			85			230			5
Derivative assets	52			7			22			23			51			1			27			23
Total assets	5,943			4,196			1,555			192			6,005			4,186			1,623			196
Derivative liabilities	(625		)	(119		)	(497		)	(9		)	(369		)	(1		)	(368		)	—
Net assets	$	5,318		$	4,077		$	1,058		$	183		$	5,636		$	4,185		$	1,255		$	196

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, 2014
(in millions)	Total Fair Value			Level 1			Level 2			Level 3
Nuclear decommissioning trust fund equity securities	$	3,650		$	3,493		$	6		$	151
Nuclear decommissioning trust fund debt securities	1,899			648			1,251			—
Other trading and available-for-sale equity securities	96			96			—			—
Other trading and available-for-sale debt securities	263			41			217			5
Derivative assets	110			49			24			37
Total assets	6,018			4,327			1,498			193
Derivative liabilities	(668		)	(162		)	(468		)	(38		)
Net assets	$	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 June 30, 2015
(in millions)	Investments			Derivatives (net)			Total
Balance at beginning of period	$	169		$	14		$	183
Total pretax realized or unrealized gains (losses) included in earnings^(a)	—			(6		)	(6		)
Purchases, sales, issuances and settlements:
Purchases	3			24			27
Sales	(3		)	—			(3		)
Settlements	—			(12		)	(12		)
Total gains (losses) included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities	4			3			7
Balance at end of period	$	173		$	23		$	196


(a)
Includes amounts related to nonregulated operations and classified as (Loss) Income From Discontinued Operations, net of tax in Duke Energy's Condensed Consolidated Statements of Operations.

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:
Purchases 9
—
9
Sales (1 ) —
(1 )
Settlements —
(10 ) (10 )
Total gains (losses) included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities 5
1
6
Balance at end of period $ 169
$ 14
$ 183


	Three Months Ended March 31, 2014									Three Months Ended June 30, 2014
(in millions)	Investments			Derivatives (net)			Total			Investments			Derivatives (net)			Total
Balance at beginning of period	$	98		$	13		$	111		$	99		$	(14	)	$	85
Total pretax realized or unrealized gains (losses) included in earnings	—			18			18			—			(6		)	(6		)
Purchases, sales, issuances and settlements:
Purchases	1			—			1			15			51			66
Sales	(1		)	—			(1		)	(1		)	—			(1		)
Issuances										—			(1		)	(1		)
Settlements	—			(39		)	(39		)	—			(6		)	(6		)
Transfers out of Level 3 due to observability of inputs	—			(5		)	(5		)	68			2			70
Total gains (losses) included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities	1			(1		)	—			7			(4		)	3
Balance at end of period	$	99		$	(14	)	$	85		$	188		$	22		$	210
Pretax amounts included in the Condensed Consolidated Statements of Comprehensive Income related to Level 3 measurements outstanding	$	—		$	7		$	7		$	—		$	(25	)	$	(25	)

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)



	Six Months Ended June 30, 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^(a)	—			18			18
Purchases, sales, issuances and settlements:
Purchases	12			24			36
Sales	(4		)	—			(4		)
Settlements	—			(22		)	(22		)
Total gains (losses) included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities	9			4			13
Balance at end of period	$	173		$	23		$	196


(a)	Includes amounts related to nonregulated operations and classified as (Loss) Income From Discontinued Operations, net of tax in Duke Energy's Condensed Consolidated Statements of Operations.



	Six Months Ended June 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	—			12			12
Purchases, sales, issuances and settlements:
Purchases	16			51			67
Sales	(2		)	—			(2		)
Issuances	—			(1		)	(1		)
Settlements	—			(45		)	(45		)
Transfers out of Level 3 due to observability of inputs	68			(3		)	65
Total gains (losses) included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities	8			(5		)	3
Balance at end of period	$	188		$	22		$	210
Pretax amounts included in the Condensed Consolidated Statements of Comprehensive Income related to Level 3 measurements outstanding	$	—		$	(25	)	$	(25	)

DUKE ENERGY CAROLINAS


	March 31, 2015										June 30, 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	$	2,127		$	1,960	$	3		$	164	$	2,132		$	1,963	$	1		$	168
Nuclear decommissioning trust fund debt securities	885			131		754			—		967			158		809			—
Other trading and available-for-sale debt securities	3			—		—			3		3			—		—			3
Derivative assets											1			—		1			—
Total assets	3,015			2,091		757			167		3,103			2,121		811			171
Derivative liabilities	(27		)	—		(27		)	—		(19		)	—		(19		)	—
Net assets	$	2,988		$	2,091	$	730		$	167	$	3,084		$	2,121	$	792		$	171



	December 31, 2014
(in millions)	Total Fair Value			Level 1		Level 2			Level 3
Nuclear decommissioning trust fund equity securities	$	2,162		$	2,005	$	6		$	151
Nuclear decommissioning trust fund debt securities	870			138		732			—
Other trading and available-for-sale debt securities	3			—		—			3
Total assets	3,035			2,143		738			154
Derivative liabilities	(19		)	—		(19		)	—
Net assets	$	3,016		$	2,143	$	719		$	154

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 June 30, 2015
(in millions)	Investments			Derivatives (net)		Total
Balance at beginning of period	$	167		$	—	$	167
Purchases, sales, issuances and settlements:
Purchases	3			—		3
Issuances	(3		)	—		(3		)
Total gains (losses) included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities	4			—		4
Balance at end of period	$	171		$	—	$	171



	Three Months Ended June 30, 2014
(in millions)	Investments			Derivatives (net)			Total
Balance at beginning of period	$	82		$	(4	)	$	78
Purchases, sales, issuances and settlements:
Purchases	15			—			15
Sales	(1		)	—			(1		)
Settlements	—			1			1
Transfers out of Level 3 due to observability of inputs	68			—			68
Total gains (losses) included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities	7			—			7
Balance at end of period	$	171		$	(3	)	$	168


	Three Months Ended March 31, 2015								Six Months Ended June 30, 2015
(in millions)	Investments			Derivatives (net)		Total			Investments			Derivatives (net)		Total
Balance at beginning of period	$	154		$	—	$	154		$	154		$	—	$	154
Purchases, sales, issuances and settlements:
Purchases	9			—		9			12			—		12
Issuances	(1		)	—		(1		)	(4		)	—		(4		)
Total gains (losses) included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities	5			—		5			9			—		9
Balance at end of period	$	167		$	—	$	167		$	171		$	—	$	171


	Three Months Ended March 31, 2014									Six Months Ended June 30, 2014
(in millions)	Investments			Derivatives (net)			Total			Investments			Derivatives (net)			Total
Balance at beginning of period	$	81		$	(2	)	$	79		$	81		$	(2	)	$	79
Purchases, sales, issuances and settlements:
Purchases	1			—			1			16			—			16
Sales	(1		)	—			(1		)
Issuances										(2		)	—			(2		)
Settlements	—			(2		)	(2		)	—			(1		)	(1		)
Transfers out of Level 3 to observability of inputs										68			—			68
Total gains (losses) included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities	1			—			1			8			—			8
Balance at end of period	$	82		$	(4	)	$	78		$	171		$	(3	)	$	168

PROGRESS ENERGY

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 securities 942
411
531
—
Other trading and available-for-sale debt securities 60
16
44
—
Derivative assets 6
—
6
—
Total assets 2,524
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 securities 1,029
510
519
—
Other trading and available-for-sale debt securities 58
15
43
—
Derivative assets 4
—
4
—
Total assets 2,579
2,013
566
—
Derivative liabilities (373 ) —
(373 ) —
Net assets $ 2,206
$ 2,013
$ 193
$ —

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)



	June 30, 2015
(in millions)	Total Fair Value			Level 1		Level 2			Level 3
Nuclear decommissioning trust fund equity securities	$	1,522		$	1,522	$	—		$	—
Nuclear decommissioning trust fund debt securities	915			359		556			—
Other trading and available-for-sale debt securities	61			20		41			—
Derivative assets	12			—		12			—
Total assets	2,510			1,901		609			—
Derivative liabilities	(296		)	—		(296		)	—
Net assets	$	2,214		$	1,901	$	313		$	—



	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 securities	1,029			510		519			—
Other trading and available-for-sale debt securities	58			15		43			—
Derivative assets	4			—		4			—
Total assets	2,579			2,013		566			—
Derivative liabilities	(373		)	—		(373		)	—
Net assets	$	2,206		$	2,013	$	193		$	—

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


	Derivatives (net)					Derivatives (net)
	Three Months Ended March 31,					Three Months Ended June 30,					Six Months Ended June 30,
(in millions)	2015		2014			2015		2014			2015		2014
Balance at beginning of period	$	—	$	—		$	—	$	(3	)	$	—	$	—
Total pretax realized or unrealized gains included in earnings	—		(3		)	—		3			—		—
Transfers out of Level 3 due to observability of inputs						—		2			—		2
Total gains included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities						—		(2		)	—		(2		)
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	)

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


	March 31, 2015										June 30, 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	$	1,194		$	1,194	$	—		$	—	$	1,198		$	1,198	$	—		$	—
Nuclear decommissioning trust fund debt securities	545			140		405			—		540			121		419			—
Other trading and available-for-sale debt securities	1			1		—			—		1			1		—			—
Derivative assets	2			—		2			—		2			—		2			—
Total assets	1,742			1,335		407			—		1,741			1,320		421			—
Derivative liabilities	(131		)	—		(131		)	—		(96		)	—		(96		)	—
Net assets	$	1,611		$	1,335	$	276		$	—	$	1,645		$	1,320	$	325		$	—



	December 31, 2014
(in millions)	Total Fair Value			Level 1		Level 2			Level 3
Nuclear decommissioning trust fund equity securities	$	1,171		$	1,171	$	—		$	—
Nuclear decommissioning trust fund debt securities	540			151		389			—
Total assets	1,711			1,322		389			—
Derivative liabilities	(132		)	—		(132		)	—
Net assets	$	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)					Derivatives (net)
	Three Months Ended March 31,					Three Months Ended June 30,					Six Months Ended June 30,
(in millions)	2015		2014			2015		2014			2015		2014
Balance at beginning of period	$	—	$	—		$	—	$	(3	)	$	—	$	—
Total pretax realized or unrealized gains included in earnings	—		(3		)	—		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	)

7677

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


	March 31, 2015										June 30, 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	$	322		$	322	$	—		$	—	$	324		$	324	$	—		$	—
Nuclear decommissioning trust fund debt securities and other	397			271		126			—		375			238		137			—
Other trading and available-for-sale debt securities and other	44			—		44			—		49			9		40			—
Derivative assets	4			—		4			—		10			—		10			—
Total assets	767			593		174			—		758			571		187			—
Derivative liabilities	(264		)	—		(264		)	—		(195		)	—		(195		)	—
Net assets (liabilities)	$	503		$	593	$	(90	)	$	—	$	563		$	571	$	(8	)	$	—



	December 31, 2014
(in millions)	Total Fair Value			Level 1		Level 2			Level 3
Nuclear decommissioning trust fund equity securities	$	317		$	317	$	—		$	—
Nuclear decommissioning trust fund debt securities and other	489			359		130			—
Other trading and available-for-sale debt securities and other	44			—		44			—
Derivative assets	4			—		4			—
Total assets	854			676		178			—
Derivative liabilities	(241		)	—		(241		)	—
Net assets (liabilities)	$	613		$	676	$	(63	)	$	—

DUKE ENERGY OHIO


	March 31, 2015												June 30, 2015
(in millions)	Total Fair Value			Level 1			Level 2			Level 3			Total Fair Value			Level 1		Level 2			Level 3
Derivative assets	$	44		$	20		$	8		$	16		$	5		$	—	$	—		$	5
Derivative liabilities	(134		)	(108		)	(17		)	(9		)	(6		)	—		(6		)	—
Net liabilities	$	(90	)	$	(88	)	$	(9	)	$	7		$	(1	)	$	—	$	(6	)	$	5



	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	)

7778

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)						Derivatives (net)
	Three Months Ended March 31,						Three Months Ended June 30,						Six Months Ended June 30,
(in millions)	2015			2014			2015			2014			2015			2014
Balance at beginning of period	$	(18	)	$	(4	)	$	7		$	(19	)	$	(18	)	$	(4	)
Total pretax realized or unrealized gains (losses) included in earnings(a)	25			(6		)	(4		)	(13		)	21			(19		)
Purchases, sales, issuances and settlements:
Purchases							—			1			—			1
Sales							5			—			5			—
Settlements	—			(4		)	(3		)	—			(3		)	(4		)
Total gains included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities							—			2			—			2
Transfers out of Level 3 due to observability of inputs	—			(5		)	—			1			—			(4		)
Balance at end of period	$	7		$	(19	)	$	5		$	(28	)	$	5		$	(28	)
Pretax amounts included in the Condensed Consolidated Statements of Operations and Comprehensive Income related to Level 3 measurements outstanding at March 31, 2014	$	—		(7		)
Pretax amounts included in the Condensed Consolidated Statements of Operations and Comprehensive Income related to Level 3 measurements outstanding at June 30, 2014							$	—		$	—		$	—		(27		)


(a)	Includes amounts related to nonregulated operations and classified as (Loss) Income From Discontinued Operations, net of tax in Duke Energy Ohio's Condensed Consolidated Statements of Operations and Comprehensive Income.

DUKE ENERGY INDIANA


	March 31, 2015								June 30, 2015
(in millions)	Total Fair Value		Level 1		Level 2		Level 3		Total Fair Value		Level 1		Level 2		Level 3
Available-for-sale equity securities	$	73	$	73	$	—	$	—	$	73	$	73	$	—	$	—
Available-for-sale debt securities	30		—		30		—		30		—		30		—
Derivative assets	3		—		—		3		18		1		—		17
Net assets	$	106	$	73	$	30	$	3	$	121	$	74	$	30	$	17



	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 securities	30		—		30		—
Derivative assets	14		—		—		14
Net assets	$	115	$	71	$	30	$	14

~~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 $ 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 liabilities 1
(1 )
Balance at end of period $ 3
$ 7

7879

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 June 30,						Six Months Ended June 30,
(in millions)	2015			2014			2015			2014
Balance at beginning of period	$	3		$	7		$	14		$	12
Total pretax realized or unrealized gains (losses) included in earnings	—			—			—			27
Purchases, sales, issuances and settlements:
Purchases	18			49			18			49
Settlements	(10		)	(7		)	(19		)	(38		)
Total gains included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities	6			(4		)	4			(5		)
Balance at end of period	$	17		$	45		$	17		$	45

QUANTITATIVE DISCLOSURES ABOUT UNOBSERVABLE INPUTS

The following table includes quantitative information about the Duke Energy Registrants' derivatives classified as Level 3.


	March 31, 2015											June 30, 2015
Investment Type	Fair Value (in millions)			Valuation Technique	Unobservable Input	Range						Fair Value (in millions)		Valuation Technique	Unobservable Input	Range
Duke Energy
Natural gas contracts	$	11		Discounted cash flow	Forward natural gas curves – price per MMBtu	$	1.96		-	$	3.78
Swing options												1		Discounted cash flow	Forward capacity option curves – price per MMBtu	$	13.85		–	$	113.10
Financial transmission rights (FTRs)	3			RTO auction pricing	FTR price – per MWh	(0.83		)	-	8.47		22		RTO auction pricing	FTR price – per MWh	(1.72		)	–	8.85
Electricity contracts	8			Discounted cash flow	Forward electricity curves – price per MWh	24.96			-	51.33
Commodity capacity option contracts	1			Discounted cash flow	Forward capacity option curves – price per MW day	19.00			-	109.50
Commodity contract reserves	(9		)		Bid-ask spreads, implied volatility, probability of default
Total Level 3 derivatives	$	14										$	23
Duke Energy Ohio
Electricity contracts	$	2		Discounted cash flow	Forward electricity curves – price per MWh	25.05			-	51.33
Natural gas contracts	11			Discounted cash flow	Forward natural gas curves – price per MMBtu	1.96			-	3.78
Commodity contract reserves	(6		)		Bid-ask spreads, implied volatility, probability of default
Total Level 3 derivatives	$	7
FTRs												5		RTO auction pricing	FTR price – per MWh	0.07			–	4.09
Duke Energy Indiana
FTRs	$	3		RTO auction pricing	FTR price – per MWh	(0.83		)	-	8.47		$	17	RTO auction pricing	FTR price – per MWh	(1.72		)	–	8.85


	December 31, 2014											December 31, 2014
Investment Type	Fair Value (in millions)			Valuation Technique	Unobservable Input	Range						Fair Value (in millions)			Valuation Technique	Unobservable Input	Range
Duke Energy
Natural gas contracts	$	(5	)	Discounted cash flow	Forward natural gas curves – price per MMBtu	$	2.12		-	$	4.35	$	(5	)	Discounted cash flow	Forward natural gas curves – price per MMBtu	$	2.12		–	$	4.35
Financial transmission rights (FTRs)	14			RTO auction pricing	FTR price – per MWh	(1.92		)	-	9.86		14			RTO auction pricing	FTR price – per MWh	(1.92		)	–	9.86
Electricity contracts	(1		)	Discounted cash flow	Forward electricity curves – price per MWh	25.16			-	51.75		(1		)	Discounted cash flow	Forward electricity curves – price per MWh	25.16			–	51.75
Commodity capacity option contracts	2			Discounted cash flow	Forward capacity option curves – price per MW day	21.00			-	109.00		2			Discounted cash flow	Forward capacity option curves – price per MW day	21.00			–	109.00
Commodity contract reserves	(11		)		Bid-ask spreads, implied volatility, probability of default							(11		)		Bid-ask spreads, implied volatility, probability of default
Total Level 3 derivatives	$	(1	)									$	(1	)
Duke Energy Ohio
Electricity contracts	$	(6	)	Discounted cash flow	Forward electricity curves – price per MWh	25.25			-	51.75		$	(6	)	Discounted cash flow	Forward electricity curves – price per MWh	25.25			–	51.75
Natural gas contracts	(5		)	Discounted cash flow	Forward natural gas curves – price per MMBtu	2.12			-	4.35		(5		)	Discounted cash flow	Forward natural gas curves – price per MMBtu	2.12			–	4.35
Commodity contract reserves	(7		)		Bid-ask spreads, implied volatility, probability of default							(7		)		Bid-ask spreads, implied volatility, probability of default
Total Level 3 derivatives	$	(18	)									$	(18	)
Duke Energy Indiana
FTRs	$	14		RTO auction pricing	FTR price – per MWh	(1.92		)	-	9.86		$	14		RTO auction pricing	FTR price – per MWh	(1.92		)	–	9.86

7980

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.


	March 31, 2015				December 31, 2014				June 30, 2015				December 31, 2014
(in millions)	Book Value		Fair Value		Book Value		Fair Value		Book Value		Fair Value		Book Value		Fair Value
Duke Energy	$	39,973	$	45,113	$	40,020	$	44,566	$	39,169	$	42,276	$	40,020	$	44,566
Duke Energy Carolinas	8,885		10,301		8,391		9,626		8,885		9,695		8,391		9,626
Progress Energy	14,510		16,956		14,754		16,951		14,206		15,689		14,754		16,951
Duke Energy Progress	5,957		6,549		6,201		6,696		5,657		5,881		6,201		6,696
Duke Energy Florida	4,858		5,867		4,860		5,767		4,855		5,507		4,860		5,767
Duke Energy Ohio	1,606		1,810		1,766		1,970		1,605		1,760		1,766		1,970
Duke Energy Indiana	3,791		4,529		3,791		4,456		3,791		4,259		3,791		4,456

At both ~~March 31,~~June 30, 2015 and December 31, 2014, the fair value of cash and cash equivalents, accounts and notes receivable, accounts payable, notes payable and commercial paper, and ~~non-recourse~~nonrecourse 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.

~~12.~~13. 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 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 could potentially be significant to the VIE. The analysis of the party that consolidates a VIE is a continual reassessment.

No financial support was provided to any of the consolidated VIEs during the ~~three~~six months ended ~~March 31,~~June 30, 2015 and the year ended December 31, 2014, or is expected to be provided in the future, that was not previously contractually required.

8081

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 summarize the impact of VIEs consolidated by Duke Energy and the Subsidiary Registrants on the Condensed Consolidated Balance Sheets.


	March 31, 2015																	June 30, 2015
	Duke Energy																	Duke Energy
	Duke Energy Carolinas		Duke Energy Progress		Duke Energy Florida													Duke Energy Carolinas		Duke Energy Progress		Duke Energy Florida
(in millions)	DERF		DEPR^(c)		DEFR^(c)		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)	$	658	$	478	$	300	$	540	$	18		$	22		$	2,016		$	692	$	469	$	385	$	467	$	13		$	20		$	2,046
Other	—		—		—		—		102			7			109			—		—		1		—		83			8			92
Investments and Other Assets
Other	—		—		—		—		22			15			37			—		—		—		—		24			11			35
Property, Plant and Equipment
Property, plant and equipment, cost^(a)	—		—		—		—		1,854			19			1,873			—		—		—		—		1,856			20			1,876
Accumulated depreciation and amortization	—		—		—		—		(267		)	(6		)	(273		)	—		—		—		—		(285		)	(6		)	(291		)
Regulatory Assets and Deferred Debits
Other	—		1		1		—		36			—			38			1		1		1		—		38			(2		)	39
Total assets	$	658	$	479	$	301	$	540	$	1,765		$	57		$	3,800		$	693	$	470	$	387	$	467	$	1,729		$	51		$	3,797
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	—	$	—	$	—	$	—	$	2		$	—		$	2		$	—	$	—	$	—	$	—	$	2		$	—		$	2
Taxes accrued	2		2		1		—		4			—			9			3		2		1		—		4			—			10
Current maturities of long-term debt	—		—		—		—		68			17			85			—		—		—		—		73			18			91
Other	—		—		—		—		23			8			31			—		—		—		—		14			6			20
Long-Term Debt^(b)	400		300		225		325		967			12			2,229			400		300		225		314		917			7			2,163
Deferred Credits and Other Liabilities
Deferred income taxes	—		—		—		—		270			—			270			—		—		—		—		264			—			264
Asset retirement obligations	—		—		—		—		30			—			30			—		—		—		—		30			—			30
Other	—		—		—		—		40			—			40			—		—		—		—		31			1			32
Total liabilities	$	402	$	302	$	226	$	325	$	1,404		$	37		$	2,696		$	403	$	302	$	226	$	314	$	1,335		$	32		$	2,612
Net assets of consolidated variable interest entities	$	256	$	177	$	75	$	215	$	361		$	20		$	1,104		$	290	$	168	$	161	$	153	$	394		$	19		$	1,185

(a) Restricted as collateral for ~~non-recourse~~nonrecourse debt of VIEs.

(b) ~~Non-recourse~~Nonrecourse 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).

8182

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, 2014
	Duke Energy
	Duke Energy Carolinas		Duke Energy Progress		Duke Energy Florida
(in millions)	DERF		DEPR^(c)		DEFR^(c)		CRC		Renewables			Other			Total
ASSETS
Current Assets
Restricted receivables of variable interest entities (net of allowance for doubtful accounts)	$	647	$	436	$	305	$	547	$	20		$	18		$	1,973
Other	—		—		—		—		68			6			74
Investments and Other Assets
Other	—		—		—		—		25			25			50
Property, Plant and Equipment
Property, plant and equipment, cost^(a)	—		—		—		—		1,855			18			1,873
Accumulated depreciation and amortization	—		—		—		—		(250		)	(5		)	(255		)
Regulatory Assets and Deferred Debits
Other	—		—		—		—		34			2			36
Total assets	$	647	$	436	$	305	$	547	$	1,752		$	64		$	3,751
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	—	$	—	$	—	$	—	$	3		$	—		$	3
Taxes accrued	—		—		—		—		6			—			6
Current maturities of long-term debt	—		—		—		—		68			16			84
Other	—		—		—		—		16			5			21
Long-Term Debt^(b)	400		300		225		325		967			17			2,234
Deferred Credits and Other Liabilities
Deferred income taxes	—		—		—		—		283			—			283
Asset retirement obligations	—		—		—		—		29			—			29
Other	—		—		—		—		34			4			38
Total liabilities	$	400	$	300	$	225	$	325	$	1,406		$	42		$	2,698
Net assets of consolidated variable interest entities	$	247	$	136	$	80	$	222	$	346		$	22		$	1,053

(a) Restricted as collateral for ~~non-recourse~~nonrecourse debt of VIEs.

(b) ~~Non-recourse~~Nonrecourse 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~~nonrecourse 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.

~~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.

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 summarizes the amounts and expiration dates of the credit facilities reflected on the Condensed Consolidated Balance Sheets as Long-Term Debt.



	DERF		DEPR		DEFR
Credit facility amount (in millions)	$	400	$	300	$	225
Expiration date	October 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. 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 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 activities of CRC are decisions made related 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. These fixed-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. For certain VIEs, assets are restricted and cannot be pledged as collateral or sold to third parties without prior approval of debt holders. The 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 include VIEs not consolidated and how these entities impact the Condensed Consolidated Balance Sheets.


	March 31, 2015										June 30, 2015
	Duke Energy						Duke Energy Ohio		Duke Energy Indiana		Duke Energy						Duke Energy Ohio		Duke Energy Indiana
(in millions)	Renewables		Other		Total		Duke Energy Ohio		Duke Energy Indiana		Renewables		Other		Total		Duke Energy Ohio		Duke Energy Indiana
Receivables	$	—	$	—	$	—	$	90	$	105	$	—	$	—	$	—	$	52	$	80
Investments in equity method unconsolidated affiliates	147		66		213		—		$	—	149		98		247		—		$	—
Investments and other assets	—		3		3		—		—		—		1		1		—		—
Total assets	$	147	$	69	$	216	$	90	$	105	$	149	$	99	$	248	$	52	$	80
Other current liabilities	$	—	$	2	$	2	$	—	$	—	$	—	$	3	$	3	$	—	$	—
Deferred credits and other liabilities	—		14		14		—		—		—		14		14		—		—
Total liabilities	$	—	$	16	$	16	$	—	$	—	$	—	$	17	$	17	$	—	$	—
Net assets (liabilities)	$	147	$	53	$	200	$	90	$	105
Net assets											$	149	$	82	$	231	$	52	$	80

8384

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, 2014
	Duke Energy						Duke Energy Ohio		Duke Energy Indiana
(in millions)	Renewables		Other		Total		Duke Energy Ohio		Duke Energy Indiana
Receivables	$	—	$	—	$	—	$	91	$	113
Investments in equity method unconsolidated affiliates	150		38		188		—		—
Investments and other assets	—		4		4		—		—
Total assets	$	150	$	42	$	192	$	91	$	113
Other current liabilities	—		3		3		—		—
Deferred credits and other liabilities	—		14		14		—		—
Total liabilities	$	—	$	17	$	17	$	—	$	—
Net assets	$	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, reflected in the table above as Deferred credits and other liabilities. For more information on various guarantees, refer to Note 5, "Commitments and ~~Contingencies".~~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. These fixed-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

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 and a 7.5 percent equity interest in ACP ~~which is~~and Sabal Trail Transmission, LLC (Sabal Trail), respectively. These entities are considered ~~a VIE~~VIEs as ~~the~~their equity is not sufficient to permit the ~~entity~~entities to finance ~~its~~their activities without additional subordinated financial support. The activity that most significantly impacts the economic performance of both ACP and Sabal Trail is construction. Duke Energy does not control these activities and therefore does not consolidate ~~ACP.~~ACP or Sabal Trail.

OVEC

Duke Energy Ohio’s 9 percent ownership interest in 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. Proposed environmental rule-making could increase the costs of OVEC, which would be passed through to Duke Energy Ohio. In 2014, Duke Energy Ohio 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. 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.

8485

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				Duke Energy Ohio				Duke Energy Indiana
	2015		2014		2015		2014		2015		2014		2015		2014
Anticipated credit loss ratio	0.6	%	0.6	%	0.3	%	0.3	%	0.6	%	0.6	%	0.3	%	0.3	%
Discount rate	1.2	%	1.2	%	1.2	%	1.2	%	1.2	%	1.2	%	1.2	%	1.2	%
Receivable turnover rate	12.8	%	12.8	%	10.5	%	10.4	%	12.8	%	12.8	%	10.6	%	10.5	%

The following table shows the gross and net receivables sold.


	Duke Energy Ohio				Duke Energy Indiana				Duke Energy Ohio				Duke Energy Indiana
(in millions)	March 31, 2015		December 31, 2014		March 31, 2015		December 31, 2014		June 30, 2015		December 31, 2014		June 30, 2015		December 31, 2014
Receivables sold	$	284	$	273	$	296	$	310	$	228	$	273	$	279	$	310
Less: Retained interests	90		91		105		113		52		91		80		113
Net receivables sold	$	194	$	182	$	191	$	197	$	176	$	182	$	199	$	197

The following table shows sales and cash flows related to receivables sold.


	Duke Energy Ohio				Duke Energy Indiana				Duke Energy Ohio								Duke Energy Indiana
	Three Months Ended March 31,				Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2015		2014		2015		2014		2015		2014		2015		2014		2015		2014		2015		2014
Sales
Receivables sold	$	644	$	741	$	716	$	755	$	425	$	487	$	1,069	$	1,228	$	637	$	679	$	1,353	$	1,434
Loss recognized on sale	3		4		3		3		2		2		5		6		2		2		5		5
Cash flows
Cash proceeds from receivables sold	640		723		722		761		467		544		1,107		1,267		660		713		1,382		1,474
Collection fees received									1		1		1		1		1		1		1		1
Return received on retained interests	1		2		2		2		1		1		2		3		1		1		3		3

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~~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 the prior month-end London Interbank Offered Rate (LIBOR) plus a fixed rate of 1.00 percent.

~~13.~~14. 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.

8586

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 March 31,				Three Months Ended June 30,				Six Months Ended June 30,
(in millions, except per share amounts)	2015		2014		2015		2014		2015		2014
Income from continuing operations attributable to Duke Energy common shareholders	$	772	$	744	$	600	$	720	$	1,372	$	1,464
Weighted-average shares outstanding – basic	708		706		692		707		700		707
Weighted-average shares outstanding – diluted	708		706		692		707		700		707
Earnings per share from continuing operations attributable to Duke Energy common shareholders
Basic	$	1.09	$	1.05	$	0.87	$	1.02	$	1.96	$	2.07
Diluted	$	1.09	$	1.05	$	0.87	$	1.02	$	1.96	$	2.07
Potentially dilutive items excluded from the calculation^(a)	2		2
Potentially dilutive shares excluded from the calculation^(a)					2		2		2		2
Dividends declared per common share	$	0.795	$	0.78	$	0.795	$	0.78	$	1.59	$	1.56

(a)

~~Certain~~Performance stock ~~options~~awards and ~~performance~~certain stock ~~awards~~options were not included in the dilutive securities calculation because either the performance measures related to the awards had not yet been met, or the option exercise prices were greater than the average market price of the common shares during the presented ~~periods, or performance measures related to the awards had not yet been met.~~periods.

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, with a total fair value of $1.275 billion, which isrepresented 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.

~~The~~ $225 million unsettled portion ~~of the ASR meets~~met the criteria to be accounted for as a forward contract indexed to Duke Energy's stock and ~~qualifies~~qualified 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. In June, 2015, the Dealers delivered 3.2 million additional shares to Duke Energy to complete the ASR. Approximately 19.8 million shares, in total, were delivered to Duke Energy and retired under the ASR at an average price of $75.75 per share. The ~~initial delivery~~final number of shares ~~will result in a reduction to~~repurchased was based upon the average of the daily volume weighted-average stock prices of Duke ~~Energy's~~Energy’s common stock ~~outstanding used to calculate earnings per share beginning in~~during the ~~second quarter~~term of ~~2015.~~the program, less a discount.

~~14.~~15. 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.

The Duke Energy ~~recorded pretax~~Corporation 2015 Long-Term Incentive Plan (the 2015 Plan) provides for the grant of stock-based compensation awards to employees and outside directors. The 2015 Plan reserves 10 million shares of common stock for issuance under the Plan. The 2015 Plan supersedes the 2010 Long-Term Incentive Plan, as amended (the 2010 Plan) and the Progress Energy, Inc. 2007 Equity Incentive Plan (the Progress Plan). No additional grants will be made from the 2010 Plan and the Progress Plan.

Pretax stock-based compensation costs, the tax benefit associated with stock-based compensation expense, ~~as follows.~~and stock-based compensation costs capitalized are included in the following table.


	Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2015		2014		2015		2014		2015		2014
Restricted stock unit awards	$	9	$	11	$	11	$	11	$	20	$	22
Performance awards	5		5		8		5		13		10
Total	$	14	$	16
Pretax stock-based compensation cost					$	19	$	16	$	33	$	32
Tax benefit associated with stock-based compensation expense	$	5	$	6	$	7	$	6	$	12	$	12
Stock-based compensation costs capitalized	1		1		1		1		2		2

~~15.~~

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)

16. 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 equal 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~~The qualified and non-qualified, non-contributory defined benefit plans are closed to new and rehired non-union and certain unionized employees.

~~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 Registrants’ contributions to its U.S. qualified defined benefit pension plans.


	Three Months Ended March 31, 2015														Six Months Ended June 30, 2015
(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

Contributions	$	132	$	42	$	42	$	21	$	21	$	1	$	9	$	132	$	42	$	42	$	21	$	21	$	1	$	9

Duke Energy did not make any contributions to its U.S. qualified defined benefit pension plans during the three months ended ~~March 31,~~June 30, 2015, and the six months ended June 30, 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 costs 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 costs for employees of Duke Energy’s shared services affiliate that ~~provide~~provides support to the Subsidiary Registrants. These allocated amounts are included in the governance and shared service costs discussed in Note 8.9.

QUALIFIED PENSION PLANS

The following tables include the components of net periodic pension costs for qualified pension plans.



	Three Months Ended June 30, 2015
(in millions)	Duke Energy			Duke Energy Carolinas			Progress Energy			Duke Energy Progress			Duke Energy Florida			Duke Energy Ohio			Duke Energy Indiana
Service cost	$	39		$	12		$	11		$	6		$	5		$	1		$	2
Interest cost on projected benefit obligation	81			20			26			12			13			4			7
Expected return on plan assets	(129		)	(33		)	(41		)	(21		)	(22		)	(7		)	(11		)
Amortization of actuarial loss	44			10			17			9			8			3			4
Amortization of prior service credit	(3		)	(2		)	(1		)	(1		)	(1		)	—			—
Other	2			—			—			1			1			—			—
Net periodic pension costs	$	34		$	7		$	12		$	6		$	4		$	1		$	2

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 obligation 82
21
26
12
14
5
7
Expected return on plan assets (129 ) (36 ) (43 ) (20 ) (22 ) (6 ) (10 )
Amortization of actuarial loss 43
10
17
8
8
2
3
Amortization of prior service credit (4 ) (2 ) (1 ) —
—
—
—
Other 2
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 obligation 86
21
28
13
14
5
7
Expected return on plan assets (128 ) (33 ) (43 ) (21 ) (21 ) (7 ) (9 )
Amortization of actuarial loss 37
9
17
8
8
1
3
Amortization of prior service credit (4 ) (2 ) (1 ) —
—
—
—
Other 2
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.~~



	Three Months Ended June 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		$	11		$	10		$	5		$	5		$	1		$	2
Interest cost on projected benefit obligation	86			21			28			14			15			5			8
Expected return on plan assets	(127		)	(33		)	(43		)	(22		)	(22		)	(6		)	(11		)
Amortization of actuarial loss	37			9			17			8			8			1			3
Amortization of prior service credit	(3		)	(2		)	(1		)	(1		)	(1		)	—			—
Other	1			—			—			1			1			—			—
Net periodic pension costs	$	28		$	6		$	11		$	5		$	6		$	1		$	2

8788

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)



	Six Months Ended June 30, 2015
(in millions)	Duke Energy			Duke Energy Carolinas			Progress Energy			Duke Energy Progress			Duke Energy Florida			Duke Energy Ohio			Duke Energy Indiana
Service cost	$	79		$	25		$	22		$	12		$	10		$	2		$	5
Interest cost on projected benefit obligation	163			41			52			24			27			9			14
Expected return on plan assets	(258		)	(69		)	(84		)	(41		)	(44		)	(13		)	(21		)
Amortization of actuarial loss	87			20			34			17			16			5			7
Amortization of prior service credit	(7		)	(4		)	(2		)	(1		)	(1		)	—			—
Other	4			1			1			1			1			—			—
Net periodic pension costs	$	68		$	14		$	23		$	12		$	9		$	3		$	5



	Six Months Ended June 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	$	68		$	21		$	20		$	10		$	10		$	2		$	4
Interest cost on projected benefit obligation	172			42			56			27			29			10			15
Expected return on plan assets	(255		)	(66		)	(86		)	(43		)	(43		)	(13		)	(20		)
Amortization of actuarial loss	74			18			34			16			16			2			6
Amortization of prior service credit	(7		)	(4		)	(2		)	(1		)	(1		)	—			—
Other	3			1			1			1			1			—			—
Net periodic pension costs	$	55		$	12		$	23		$	10		$	12		$	1		$	5

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 June 30, 2015
(in millions)	Duke Energy		Duke Energy Carolinas		Progress Energy		Duke Energy Progress		Duke Energy Florida
Service cost	$	1	$	—	$	—	$	—	$	—
Interest cost on projected benefit obligation	3		—		1		1		1
Amortization of actuarial loss	1		—		1		—		—
Net periodic pension costs	$	5	$	—	$	2	$	1	$	1



	Three Months Ended June 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 obligation	3		—		—		—		1
Amortization of actuarial loss	1		—		1		—		—
Net periodic pension costs	$	5	$	—	$	2	$	—	$	1



	Six Months Ended June 30, 2015
(in millions)	Duke Energy		Duke Energy Carolinas		Progress Energy		Duke Energy Progress		Duke Energy Florida
Service cost	$	1	$	—	$	1	$	—	$	—
Interest cost on projected benefit obligation	7		1		2		1		1
Amortization of actuarial loss	3		—		1		—		1
Net periodic pension costs	$	11	$	1	$	4	$	1	$	2

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)



	Six Months Ended June 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 obligation	7		—		2		1		1
Amortization of actuarial loss	1		—		1		—		—
Net periodic pension costs	$	9	$	—	$	4	$	1	$	1

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 did not make any pre-funding contributions to its other post-retirement benefit plans during the ~~three~~six months ended ~~March 31,~~June 30, 2015 and 2014.

The following tables include the components of net periodic other post-retirement benefit costs.



	Three Months Ended June 30, 2015
(in millions)	Duke Energy			Duke Energy Carolinas			Progress Energy			Duke Energy Progress			Duke Energy Florida			Duke Energy Ohio		Duke Energy Indiana
Service cost	$	1		$	1		$	1		$	—		$	—		$	—	$	—
Interest cost on accumulated post-retirement benefit obligation	9			2			3			2			1			1		2
Expected return on plan assets	(3		)	(2		)	—			—			—			—		—
Amortization of actuarial loss (gain)	7			(1		)	7			4			2			—		(1		)
Amortization of prior service credit	(35		)	(3		)	(25		)	(16		)	(7		)	—		—
Net periodic other post-retirement benefit costs	$	(21	)	$	(3	)	$	(14	)	$	(10	)	$	(4	)	$	1	$	1



	Three Months Ended June 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	$	3		$	1		$	1		$	1		$	1		$	—		$	—
Interest cost on accumulated post-retirement benefit obligation	13			3			5			2			3			1			2
Expected return on plan assets	(3		)	(2		)	—			—			—			—			(1		)
Amortization of actuarial loss (gain)	10			—			11			8			3			(1		)	—
Amortization of prior service credit	(32		)	(2		)	(23		)	(18		)	(6		)	—			—
Net periodic other post-retirement benefit costs	$	(9	)	$	—		$	(6	)	$	(7	)	$	1		$	—		$	1

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 obligation 9
2
4
2
2
—
—
Expected return on plan assets (3 ) (2 ) —
—
—
—
—
Amortization of actuarial loss 6
—
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 ) $ —
$ —


	Three Months Ended March 31, 2014																			Six Months Ended June 30, 2015
(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	$	2		$	—		$	1		$	—		$	1		$	—	$	—	$	3		$	1		$	1		$	—		$	—		$	—	$	—
Interest cost on accumulated post-retirement benefit obligation	12			3			6			3			3			—		1		18			4			7			4			3			1		2
Expected return on plan assets	(3		)	(2		)	—			—			—			—		—		(6		)	(4		)	—			—			—			—		—
Amortization of actuarial loss	10			1			10			7			2			—		—
Amortization of actuarial loss (gain)																				13			(1		)	14			9			5			—		(1		)
Amortization of prior service credit	(31		)	(3		)	(24		)	(18		)	(5		)	—		—		(70		)	(7		)	(51		)	(33		)	(16		)	—		—
Net periodic other post-retirement benefit costs	$	(10	)	$	(1	)	$	(7	)	$	(8	)	$	1		$	—	$	1	$	(42	)	$	(7	)	$	(29	)	$	(20	)	$	(8	)	$	1	$	1

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)



	Six Months Ended June 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	$	5		$	1		$	2		$	1		$	2		$	—		$	—
Interest cost on accumulated post-retirement benefit obligation	25			6			11			5			6			1			3
Expected return on plan assets	(6		)	(4		)	—			—			—			—			(1		)
Amortization of actuarial loss (gain)	20			1			21			15			5			(1		)	—
Amortization of prior service credit	(63		)	(5		)	(47		)	(36		)	(11		)	—			—
Net periodic other post-retirement benefit costs	$	(19	)	$	(1	)	$	(13	)	$	(15	)	$	2		$	—		$	2

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 then-existing 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 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~~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.

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 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		Duke Energy		Duke Energy Carolinas		Progress Energy		Duke Energy Progress		Duke Energy Florida		Duke Energy Ohio		Duke Energy Indiana
Three Months Ended March 31,
Three Months Ended June 30,															Three Months Ended June 30,
2015	$	49	$	16	$	14	$	11	$	4	$	1	$	2	$	37	$	13	$	12	$	8	$	3	$	1	$	2
2014	43		14		12		9		4		1		2		36		12		11		7		3		1		2
Six Months Ended June 30,															Six Months Ended June 30,
2015															$	86	$	29	$	26	$	19	$	7	$	2	$	4
2014															80		26		23		16		7		2		4

17. 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 June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Duke Energy	35.6	%	28.0	%	33.6	%	29.6	%
Duke Energy Carolinas	36.6	%	28.9	%	36.2	%	33.6	%
Progress Energy	39.2	%	37.7	%	37.1	%	37.4	%
Duke Energy Progress	40.6	%	37.3	%	36.0	%	36.9	%
Duke Energy Florida	38.7	%	38.7	%	38.6	%	38.6	%
Duke Energy Ohio	35.0	%	35.7	%	36.8	%	33.3	%
Duke Energy Indiana	36.4	%	36.9	%	36.5	%	36.8	%

The increase in the effective tax rate for Duke Energy for the three and six months ended June 30, 2015 is primarily due to a deferred tax benefit related to the merger of two Chilean subsidiaries recorded in second quarter 2014 and a deferred tax charge for changes in apportionment related to state income taxes recorded in second quarter 2015.

The increase in the effective tax rate for Duke Energy Carolinas for the three and six months ended June 30, 2015, is primarily due to favorable audit settlements and changes in apportionment related to state income tax in second quarter 2014.

The increase in the effective tax rate for Progress Energy for the three months ended June 30, 2015, is primarily due to tax levelization.

8891

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)

~~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 March 31,
2015
2014
Duke Energy 31.9 % 31.2 %
Duke Energy Carolinas 35.8 % 37.4 %
Progress Energy 35.4 % 36.9 %
Duke Energy Progress 33.8 % 36.6 %
Duke Energy Florida 38.6 % 38.5 %
Duke Energy Ohio 36.7 % 36.4 %
Duke Energy Indiana 36.6 % 36.8 %

The decrease in the effective tax rate for Duke Energy Carolinas for the three months ended March 31, 2015 is primarily due to the reduction of state rates in certain jurisdictions and the tax benefit related to the manufacturing deduction in 2015 as the prior-year deduction was limited by taxable income.

~~The decrease in the effective tax rate for Progress Energy for the three months ended March 31, 2015 is primarily due to an~~ increase ~~in AFUDC-equity.~~

~~The decrease~~ in the effective tax rate for Duke Energy Progress for the three months ended ~~March 31,~~June 30, 2015, is primarily due to unfavorable tax levelization offset by an increase in AFUDC-equity.

The increase in the effective tax rate for Duke Energy Ohio for the six months ended June 30, 2015, is primarily due to an increase in ~~AFUDC-equity.~~pretax income.

~~17.~~18. SUBSEQUENT EVENTS

For information on subsequent events related to organization and basis of presentation, acquisitions and dispositions, regulatory matters, and commitments and contingencies, ~~debt and credit facilities and common stock~~ see Notes 1, 2, 4, and 5, ~~6 and 13,~~ respectively.

8992

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.~~LLC (Duke Energy ~~Progress)~~Progress, formerly Duke Energy Progress, Inc.), Duke Energy Florida, ~~Inc.~~LLC (Duke Energy ~~Florida)~~Florida, formerly Duke Energy Florida, Inc.), 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.

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 ~~three~~six months ended ~~March 31,~~June 30, 2015, and with Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2014.

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 Inc. (Dynegy) on April 2, 2015, for approximately $2.8 billion in cash. Refer to Note 2 to the Condensed Consolidated Financial Statements, “Acquisitions and Dispositions,” for additional information on this transaction.

Commercial Portfolio (formerly Commercial Power) builds, develops and operates wind and solar renewable generation and energy transmission projects throughout the continental U.S. The segment was renamed as a result of the sale of the nonregulated Midwest generation business, as discussed in Note 2. For periods subsequent to the sale, beginning in the second quarter of 2015, certain immaterial results of operations and related assets previously presented in the Commercial Portfolio segment are presented in Regulated Utilities and Other.

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 Dealers and was delivered 16.6 million shares, with a total fair value of $1.275 billion, which isrepresented 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~~$225 million unsettled portion met the criteria to be accounted for as a forward contract indexed to Duke Energy's stock and qualified as an equity instrument. The company recorded the $1.5 billion payment as a reduction to common stock as of April 6, 2015. In June, 2015, the Dealers delivered 3.2 million additional shares ~~based on the closing~~to Duke Energy ~~stock~~to complete the ASR. Approximately 19.8 million shares, in total, were delivered to Duke Energy and retired under the ASR at an average price of ~~$76.97~~$75.75 per ~~share at the commencement of the ASR, was $1.275 billion.~~share. The final number of shares ~~to be~~ repurchased ~~is dependent~~was based upon the average of the daily ~~volume-weighted average~~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.discount.

For additional information on the details of this transaction, see Note 1314 to the Condensed Consolidated Financial Statements, “Common Stock.”

9093

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-share impact of mark-to-market impacts of economic hedges in the Commercial ~~Power~~Portfolio 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 2014 to sell the Disposal Group to Dynegy, the operating~~Operating results of the Disposal Group sold to Dynegy are ~~classified~~reported as discontinued operations, 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~~reported as discontinued operations better reflects its financial performance and therefore has included these results in adjusted earnings and adjusted diluted ~~EPS.~~EPS prior to the sale of the Disposal Group. Additionally, as a result of completing the sale of the Disposal Group during the second quarter of 2015, state income tax expense increased as state income tax apportionments changed. The additional tax expense was recognized in Continuing Operations on a GAAP basis. This impact to state income taxes has been reflected in Discontinued Operations in the Commercial Portfolio segment for adjusted diluted EPS purposes as management believes these impacts are incidental to the sale of the Disposal Group. Derivative contracts are used in Duke Energy’s hedging of a portion of the economic value of its generation assets in the Commercial ~~Power~~Portfolio 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. 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-share impact of special items, mark-to-market impacts of economic hedges in the Commercial ~~Power~~Portfolio segment and discontinued operations.

Management 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 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~~Portfolio 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~~Portfolio segment.

Duke Energy’s adjusted earnings, adjusted diluted EPS 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.

PART I

Executive Overview

The following table reconciles non-GAAP measures to their most directly comparable GAAP measures.



	Three Months Ended June 30, 2015
(in millions, except per-share amounts)	Regulated Utilities		International Energy		Commercial Portfolio			Total Reportable Segments			Other			Eliminations/ Discontinued Operations			Duke Energy			Per Diluted Share
Adjusted segment income/Adjusted earnings	$	632	$	52	$	8		$	692		$	(34	)	$	—		$	658		$	0.95
Costs to achieve Progress Energy merger	—		—		—			—			(14		)	—			(14		)	(0.02		)
Discontinued operations	—		—		(41		)	(41		)	—			(60		)	(101		)	(0.15		)
Segment income (loss)/Net Income Attributable to Duke Energy Corporation	$	632	$	52	$	(33	)	$	651		$	(48	)	$	(60	)	$	543		$	0.78



	Three Months Ended June 30, 2014
(in millions, except per-share amounts)	Regulated Utilities		International Energy		Commercial Portfolio			Total Reportable Segments			Other			Eliminations/ Discontinued Operations			Duke Energy			Per Diluted Share
Adjusted segment income/Adjusted earnings	$	689	$	146	$	16		$	851		$	(65	)	$	—		$	786		$	1.11
Costs to achieve Progress Energy merger	—		—		—			—			(38		)	—			(38		)	(0.06		)
Midwest generation operations	—		—		(34		)	(34		)	13			21			—			—
Economic hedges (mark-to-market)	—		—		(3		)	(3		)	—			—			(3		)	—
Discontinued operations	—		—		—			—			—			(136		)	(136		)	(0.19		)
Segment income (loss)/Net Income Attributable to Duke Energy Corporation	$	689	$	146	$	(21	)	$	814		$	(90	)	$	(115	)	$	609		$	0.86

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

~~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 ~~March 31,~~June 30, 2015, compared to the same period in 2014, was primarily due to:

Lower results in Latin America primarily due to a prior-year tax benefit related to the reorganization of Chilean operations and higher purchased power costs resulting from the multiyear drought in Brazil;

Higher operations and maintenance expense primarily due to planned increased spending and the prior-year benefit associated with the adoption of nuclear outage levelization, partially offset by lower storm restoration costs;

Higher depreciation and amortization expense primarily due to higher depreciable base; and

The impact of a higher effective income tax rate due to a prior-year state tax settlement that resulted in a favorable adjustment to deferred taxes.

Partially offset by:

Higher weather-normal retail sales volumes;

Favorable weather in 2015 compared to 2014; and

Reduction in shares outstanding due to the Duke Energy stock repurchase (only impacts per diluted share amounts in the tables above).



	Six Months Ended June 30, 2015
(in millions, except per-share amounts)	Regulated Utilities		International Energy		Commercial Portfolio			Total Reportable Segments			Other			Eliminations/ Discontinued Operations			Duke Energy			Per Diluted Share
Adjusted segment income/Adjusted earnings	$	1,406	$	88	$	103		$	1,597		$	(58	)	$	—		$	1,539		$	2.20
Midwest generation operations	—		—		(94		)	(94		)	—			94			—			—
Costs to achieve Progress Energy merger	—		—		—			—			(27		)	—			(27		)	(0.04		)
Discontinued operations	—		—		(41		)	(41		)	—			(64		)	(105		)	(0.15		)
Segment income (loss)/Net Income Attributable to Duke Energy Corporation	$	1,406	$	88	$	(32	)	$	1,462		$	(85	)	$	30		$	1,407		$	2.01

PART I



	Six Months Ended June 30, 2014
(in millions, except per-share amounts)	Regulated Utilities		International Energy		Commercial Portfolio			Total Reportable Segments			Other			Eliminations/ Discontinued Operations			Duke Energy			Per Diluted Share
Adjusted segment income/Adjusted earnings	$	1,426	$	276	$	26		$	1,728		$	(113	)	$	—		$	1,615		$	2.28
Costs to achieve Progress Energy merger	—		—		—			—			(72		)	—			(72		)	(0.10		)
Asset impairment	—		—		(59		)	(59		)	—			—			(59		)	(0.08		)
Midwest generation operations	—		—		(14		)	(14		)	8			6			—			—
Economic hedges (mark-to-market)	—		—		(6		)	(6		)	—			—			(6		)	(0.01		)
Discontinued operations	—		—		—			—			—			(966		)	(966		)	(1.37		)
Segment income (loss)/Net Loss Attributable to Duke Energy Corporation	$	1,426	$	276	$	(53	)	$	1,649		$	(177	)	$	(960	)	$	512		$	0.72

The variance in adjusted earnings for six months ended June 30, 2015, compared to the same period in 2014, was primarily due to:

Lower results in Latin America primarily due to lower spot market energy sales volume and higher purchased power costs resulting from the multiyear drought in Brazil and a prior-year tax benefit related to the reorganization of Chilean operations;

Higher depreciation and amortization expense primarily due to higher depreciable base; and

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

Partially offset by:

Higher results at the nonregulated Midwest generation business prior to its sale on April 2, 2015, due to higher PJM Interconnection LLC (PJM) capacity revenues and increased generation margins;

~~Increased wholesale net margins largely due to increases in contracted amounts and prices;~~

Increased retail pricing primarily due to higher base rates and rate riders in certain jurisdictions, including increased revenues related to energy efficiency programs; ~~and~~

~~The impact of a lower effective income tax rate.~~

~~Partially offset by:~~

~~Lower results in Latin America primarily~~Increased wholesale net margins largely due to ~~lower hydro generation volumes~~increases in contracted amounts and ~~higher purchased power costs resulting from the multi-year drought~~prices;

Favorable weather in ~~Brazil;~~2015 compared to 2014

Higher operations and maintenance expense primarily due to higher nuclear costs, including impacts of nuclear outage levelization deferrals and related amortization, and higher outage costs at fossil generation stations, partially offset by lower storm costs;

~~Lower~~ weather-normal retail sales ~~volumes~~volumes; and

Reduction in shares outstanding due to the Duke Energy stock repurchase (only impacts per diluted share amounts in the ~~residential sector; and~~tables above).

~~Lower 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 March 31,							Three Months Ended June 30,							Six Months Ended June 30,
(in millions)	2015		2014		Variance			2015		2014		Variance			2015		2014		Variance
Operating Revenues	$	5,723	$	5,805	$	(82	)	$	5,220	$	5,283	$	(63	)	$	10,943	$	11,088	$	(145	)
Operating Expenses	4,305		4,427		(122		)	4,003		4,019		(16		)	8,308		8,446		(138		)
Gains on Sales of Other Assets and Other, net	7		1		6			2		—		2			9		1		8
Operating Income	1,425		1,379		46			1,219		1,264		(45		)	2,644		2,643		1
Other Income and Expenses, net	72		69		3			59		62		(3		)	131		131		—
Interest Expense	275		270		5			274		275		(1		)	549		545		4
Income Before Income Taxes	1,222		1,178		44			1,004		1,051		(47		)	2,226		2,229		(3		)
Income Tax Expense	448		441		7			372		362		10			820		803		17
Segment Income	$	774	$	737	$	37		$	632	$	689	$	(57	)	$	1,406	$	1,426	$	(20	)

Duke Energy Carolinas GWh sales	22,468		23,693		(1,225		)	21,306		20,836		470			43,774		44,529		(755		)
Duke Energy Progress GWh sales	16,765		16,161		604			14,952		14,693		259			31,717		30,854		863
Duke Energy Florida GWh sales	8,473		8,661		(188		)	10,802		9,840		962			19,275		18,501		774
Duke Energy Ohio GWh sales	6,767		6,479		288			6,233		5,824		409			13,000		12,303		697
Duke Energy Indiana GWh sales	8,728		8,874		(146		)	7,705		8,455		(750		)	16,433		17,329		(896		)
Total Regulated Utilities GWh sales	63,201		63,868		(667		)	60,998		59,648		1,350			124,199		123,516		683
Net proportional MW capacity in operation	49,739		49,595		144										49,528		49,452		76

~~PART I~~

Three Months Ended ~~March 31,~~June 30, 2015 as Compared to ~~March 31,~~June 30, 2014

Regulated Utilities’ results were ~~positively~~ impacted by ~~an increase in wholesale power margins~~higher operation and maintenance costs, lower rate riders, higher property and other taxes net of the termination of North Carolina gross receipts taxes, and higher ~~rate riders.~~depreciation and amortization expense. These impacts were partially offset by ~~lower~~higher weather-normal sales volumes, ~~higher depreciation~~favorable weather, and ~~amortization expense, and higher operation and maintenance costs.~~an increase in wholesale power margins. The following is a detailed discussion of the variance drivers by line item.

Operating Revenues. The variance was driven primarily by:

~~A $73~~a $78 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;

a $58 million decrease in gross receipts tax revenue due to the ~~N.C.~~North Carolina Tax Simplification and Rate Reduction Act which terminated the collection of the North Carolina gross receipts tax effective July 1, 2014; and

~~A $58~~a $25 million net decrease in retail pricing primarily due to updated rates and rate riders in certain jurisdictions, including decreased revenues related to Duke Energy Florida's nuclear cost recovery clause and energy efficiency programs.

Partially offset by:

a $50 million increase in weather-normal sales volumes to retail customers (net of fuel revenue) reflecting increased demand;

a $27 million increase in electric sales (net of fuel revenue) to retail customers due to favorable weather conditions. (i) For the three months ended June 30, 2015 in the Carolinas, cooling degree days were 15 percent above normal as compared with 10 percent above normal during the same period in 2014. (ii) For the three months ended June 30, 2015 in the Midwest, cooling degree days were 3 percent above normal as compared to the prior year's normal weather. (iii) For the three months ended June 30, 2015 in Florida, cooling degree days were 19 percent above normal as compared with 1 percent above normal during the same period in 2014; and

a $20 million increase in wholesale power revenues, net of sharing, primarily due to additional volumes and capacity charges for customers served under long-term contracts.

Operating Expenses. The variance was driven primarily by:

a $95 million decrease in fuel expense (including purchased power and natural gas purchases for resale) primarily due to (i) lower natural gas and coal prices, and (ii) lower volumes of coal and oil used in electric generation, partially offset by (iii) higher volumes of natural gas used in electric generation; and

a $34 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 a favorable 2014 Ohio gas excise tax settlement.

PART I

Partially offset by:

a $95 million increase in operating and maintenance expense primarily due to planned spending and the prior-year benefit associated with the adoption of nuclear outage levelization, partially offset by lower storm restoration costs; and

a $19 million increase in depreciation and amortization expense primarily due to increases in depreciation as a result of additional plant in service.

Income Tax Expense. The variance was primarily due to an increase in the effective tax rate. The effective tax rate for the three months ended June 30, 2015 and 2014 was 37.1 percent and 34.4 percent, respectively. The increase in the effective tax rate is primarily due to favorable audit settlements and changes in apportionment related to state income tax in second quarter 2014.

Six Months Ended June 30, 2015 as Compared to June 30, 2014

Regulated Utilities’ results were impacted by higher operation and maintenance costs, and higher depreciation and amortization expense. These impacts were partially offset by an increase in wholesale power margins, favorable weather, and higher weather-normal sales volumes. The following is a detailed discussion of the variance drivers by line item.

Operating Revenues. The variance was driven primarily by:

a $134 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 $26~~a $131 million decrease in ~~weather-normal sales volumes~~gross receipts tax revenue due to ~~residential retail customers (net of fuel revenue), reflecting decreased demand.~~the North Carolina Tax Simplification and Rate Reduction Act as mentioned above.

Partially offset by:

~~A $45~~a $67 million increase in wholesale power revenues, net of sharing, primarily due to additional volumes and capacity charges for customers served under long-term contracts;

a $24 million increase in electric sales (net of fuel revenue) to retail customers due to favorable weather conditions. (i) For the six months ended June 30, 2015 in the Carolinas, cooling degree days were 14 percent above normal as compared with 8 percent above normal during the same period in 2014, and heating degree days were 12 percent above normal as compared with 15 percent above normal during the same period in 2014. (ii) For the six months ended June 30, 2015 in the Midwest, cooling degree days were 1 percent above normal as compared with 2 percent below normal during the same period in 2014, and heating degree days were 15 percent above normal as compared with 22 percent above normal during the same period in 2014. (iii) For the six months ended June 30, 2015 in Florida cooling degree days were 22 percent above normal as compared with 2 percent below normal during the same period in 2014, and heating degree days were 6 percent below normal as compared with 1 percent above normal during the same period in 2014; and

~~A $16~~a $23 million ~~net~~ increase in weather-normal sales volumes to retail ~~pricing primarily due to~~customers (net of fuel revenue) reflecting increased ~~revenues related to energy efficiency programs.~~demand.

Operating Expenses. The variance was driven primarily by:

~~A $95~~a $157 million decrease in fuel expense (including purchased power and natural gas purchases for resale) primarily due to (i) lower natural gas and coal prices, and (ii) lower volumes of coal and oil used in electric generation, partially offset by (iii) higher volumes of natural gas used in electric generation; and

a $129 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, and lower sales and use ~~tax; and~~

~~A $62 million decreasein fuel expense (including purchased power and natural gas purchases for resale) primarily due to (i) lower natural gas and coal prices, and (ii) lower volumes of coal and oilused in electric generation,~~tax, partially offset by ~~(iii) higher volumes of~~a 2014 Ohio gas~~used in electric generation.~~

excise tax settlement.

Partially offset by:

~~A $21~~a $110 million increase in operating and maintenance expense primarily due to planned spending and the prior-year benefit of the adoption of nuclear outage levelization, partially offset by lower storm restoration costs; and

a $40 million increase in depreciation and amortization expense primarily due to increases in depreciation as a result of additional plant in ~~service and an absence of a prior-year decrease in the reduction of the cost of removal component of amortization expense; and~~

A $14 million increase in operating and maintenance expense primarily due to higher nuclear costs, including impacts of nuclear outage levelization deferrals and related amortization, higher outage costs at fossil generation stations, and higher maintenance costs for distribution, partially offset by lower storm costs.service.

Income Tax Expense. The ~~variance was primarily due to an increase in pretax income. The~~ effective tax rate for the ~~three~~six months ended ~~March 31,~~June 30, 2015 and 2014 was ~~36.7~~36.8 percent and ~~37.5~~36.0 percent, respectively.

Matters Impacting Future Regulated Utilities Results

Duke Energy is a party to multiple lawsuits and could be subject to fines and other penalties related to the Dan River coal ash release and operations at other North Carolina facilities with ash basins. The outcome of these lawsuits and potential 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 Note 5 to the Condensed Consolidated Financial Statements, “Commitments and Contingencies,” for additional information.

PART I

In 2013, a ~~FERC~~Federal Energy Regulatory Commission (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 unrecovered costs, and if ~~a portion~~the Public Utilities Commission of Ohio disallows recovery of these costs, ~~is not eligible for recovery,~~ there ~~may~~would be an adverse impact to ~~its~~Regulated Utilities' 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~~integrated gasification combined cycle (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~~June 2015, the Florida ~~Legislature passed~~governor signed legislation ~~which is pending approval by the governor,~~ to allow utilities to ~~issue~~petition for a financing order for securitization ~~bonds as an option to recover the costs~~ of certain retired nuclear generation ~~facilities. If enacted, this legislation would apply to~~assets. On July 27, 2015, Duke Energy ~~Florida’s retired~~Florida petitioned the FPSC for a financing order to finance the Crystal River Unit 3 ~~nuclear station.~~Regulatory asset with low-cost securities. If the FPSC issues an acceptable financing order and Duke Energy Florida issues the bonds, securitization would replace the base rate recovery methodology established in the 2013 Agreement described above, and would result in a lower rate impact to customers. Securitization of the costs of the retired Crystal River Unit 3 ~~nuclear station~~Nuclear Plant 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~~a previous 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. The FPSC is expected to hold a hearing on both the Crystal River Unit 3 Regulatory asset filing and the securitization filing in October 2015.

9399

PART I

International Energy


	Three Months Ended March 31,							Three Months Ended June 30,									Six Months Ended June 30,
(in millions)	2015		2014		Variance			2015			2014			Variance			2015			2014		Variance
Operating Revenues	$	273	$	382	$	(109	)	$	287		$	364		$	(77	)	$	560		$	746	$	(186	)
Operating Expenses	207		231		(24		)	232			254			(22		)	439			485		(46		)
(Losses) Gains on Sales of Other Assets and Other, net								(1		)	5			(6		)	(1		)	5		(6		)
Operating Income	66		151		(85		)	54			115			(61		)	120			266		(146		)
Other Income and Expense, net	14		57		(43		)	31			52			(21		)	45			109		(64		)
Interest Expense	23		23		—			22			23			(1		)	45			46		(1		)
Income Before Income Taxes	57		185		(128		)	63			144			(81		)	120			329		(209		)
Income Tax Expense	20		51		(31		)
Income Tax Expense (Benefit)								10			(5		)	15			30			46		(16		)
Less: Income Attributable to Noncontrolling Interests	1		4		(3		)	1			3			(2		)	2			7		(5		)
Segment Income	$	36	$	130	$	(94	)	$	52		$	146		$	(94	)	$	88		$	276	$	(188	)

Sales, GWh	4,470		5,241		(771		)	4,520			4,281			239			8,990			9,522		(532		)
Net proportional MW capacity in operation	4,335		4,600		(265		)										4,333			4,411		(78		)

Three Months Ended ~~March 31,~~June 30, 2015 as Compared to ~~March 31,~~June 30, 2014

International Energy’s results were impacted by the absence of a prior year merger step-up tax benefit in Chile and unfavorable hydrology in Brazil. The following is a detailed discussion of the variance drivers by line item.

Operating Revenues.The variance was driven primarily by:

a $36 million decrease in Brazil due to unfavorable exchange rates, partially offset by higher average contract prices; and

a $29 million decrease in Central America due to lower average prices as a result of increased competition.

Operating Expenses.The variance was driven primarily by:

a $17 million decrease in Central America due to lower fuel costs and consumption partially offset by higher purchased power; and

a $10 million decrease in Peru due to lower hydrocarbon royalty and purchased power costs.

Other Income and Expenses, net.The variance is primarily due to lower interest income due to a lower cash balance held in Brazil and lower equity earnings in NMC as a result of lower average MTBE and methanol prices, partially offset by lower butane costs.

Income Tax Expense. The effective tax rate for the three months ended June 30, 2015 and 2014 was 15.9 percent and (4.1) percent, respectively. The increase in the effective tax rate is primarily due to a tax benefit recorded in second quarter 2014 as a result of the merger of two Chilean subsidiaries.

Six Months Ended June 30, 2015 as Compared to June 30, 2014

International Energy’s results were impacted by unfavorable hydrology in Brazil, the absence of prior year merger step-up tax benefit in Chile, lower ~~sales volumes~~dispatch in Central America and lower equity earnings in NMC. The following is a detailed discussion of the variance drivers by line item.

Operating Revenues.The variance was driven primarily by:

~~A $52~~an $88 million decrease in Brazil due to unfavorable exchange rates and lower spot energy sales ~~volumes;~~volumes, partially offset by higher average contract prices;

~~A $37~~a $66 million decrease in Central America due to lower ~~energy~~average prices and sales volumes ~~and average prices;~~as a result of increased competition; and

~~A $15~~a $21 million decrease in Peru due to lower average energy and hydrocarbon prices and unfavorable exchanges rates.

Operating ~~Expenses.~~Expenses. The variance was driven primarily by:

~~A $21~~a $38 million decrease in Central America due to lower fuel costs and consumption partially offset by higher purchased ~~power;~~power costs; and

~~A $15~~a $26 million decrease in Peru due to lower hydrocarbon royalty and purchased power costs, and lower fuel consumption.

Partially offset by:

~~A $14~~a $19 million increase in Brazil due to higher purchased power costs as a result of unfavorable hydrology, partially offset by favorable exchange rates.

Other Income and Expenses, net. The variance is primarily due to a net remeasurement loss in Latin America, lower interest income due to a lower cash balance held in Brazil, and lower equity earnings in NMC as a result of lower average MTBE and methanol prices, partially offset by lower butane costs.

100

PART I

Income Tax Expense. The ~~variance in tax expense is primarily due to a decrease in pretax income. The~~ effective tax rate for ~~three~~six months ended ~~March 31,~~June 30, 2015 and 2014 was ~~35.6~~25.0 percent and ~~27.7~~13.9 percent, respectively. The increase in the effective tax rate is primarily due to ~~unfavorable Brazilian exchange rates.~~a tax benefit recorded in second quarter 2014 as a result of the merger of two Chilean subsidiaries.

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.

~~PART I~~

Commercial ~~Power~~Portfolio


	Three Months Ended March 31,									Three Months Ended June 30,									Six Months Ended June 30,
(in millions)	2015			2014			Variance			2015			2014			Variance			2015			2014			Variance
Operating Revenues	$	73		$	81		$	(8	)	$	75		$	64		$	11		$	148		$	145		$	3
Operating Expenses	89			188			(99		)	84			80			4			173			268			(95		)
Gains on Sales of Other Assets and Other, net										6			—			6			6			—			6
Operating Loss	(16		)	(107		)	91			(3		)	(16		)	13			(19		)	(123		)	104
Other Income and Expense, net	2			5			(3		)	(2		)	5			(7		)	—			10			(10		)
Interest Expense	12			14			(2		)	10			13			(3		)	22			27			(5		)
Loss Before Income Taxes	(26		)	(116		)	90			(15		)	(24		)	9			(41		)	(140		)	99
Income Tax Benefit	(27		)	(84		)	57
Segment Income (Loss)	$	1		$	(32	)	$	33
Income Tax Expense (Benefit)										18			(3		)	21			(9		)	(87		)	78
Segment Loss										$	(33	)	$	(21	)	$	(12	)	$	(32	)	$	(53	)	$	21

Coal-fired plant production, GWh	—			471			(471		)	—			204			(204		)	—			675			(675		)
Renewable plant production, GWh	1,310			1,589			(279		)	1,373			1,469			(96		)	2,683			3,058			(375		)
Total Commercial Power production, GWh	1,310			2,060			(750		)
Total Commercial Portfolio production, GWh										1,373			1,673			(300		)	2,683			3,733			(1,050		)
Net proportional MW capacity in operation	1,415			1,886			(471		)										1,634			1,305			329

Three Months Ended ~~March 31,~~June 30, 2015 as Compared to ~~March 31,~~June 30, 2014

Commercial ~~Power’s~~Portfolio’s results were ~~positively~~negatively impacted by the ~~prior-period impairment recorded for an intangible asset.~~impact of changes in apportionment related to state income taxes resulting from the sale of the Midwest generation business. The following is a detailed discussion of the variance drivers by line item.

Operating Revenues.The variance was driven primarily by:

a $16 million increase in electric revenues from new solar portfolio activity; and

a $5 million increase in mark-to-market revenues due to prior year mark-to-market losses that did not recur.

Partially offset by:

a $10 million decrease in electric revenues due to lower production in the wind portfolio primarily resulting from changes in wind patterns.

Operating Expenses.The variance was driven primarily by:

a $15 million increase in operating and maintenance expenses resulting from new solar portfolio activity; and

a $6 million increase in depreciation expense from additional renewables generation facilities in service.

Partially offset by:

a $13 million decrease in operating and maintenance expenses due to lower corporate allocations and the 2014 retirement of the Beckjord Station (Beckjord); and

a $5 million decrease in fuel expense due to the 2014 retirement of Beckjord.

Gains on sales of other assets and other, net. The variance was driven primarily by a $6 million gain on the sale of an investment in a solar development entity.

Other income and expense, net. The variance was driven primarily by lower equity earnings from the renewables portfolio due to lower production resulting from changes in wind patterns.

101

PART I

Income Tax Expense.The variance was primarily due to a decrease in the effective tax rate due to changes to state tax apportionment factors on deferred taxes due to the Midwest generation sale in the second quarter of 2015. The effective tax rate for the three months ended June 30, 2015 and 2014 was (120.0) percent and 12.5 percent, respectively.

Six Months Ended June 30, 2015 as Compared to June 30, 2014

Commercial Portfolio’s results were positively impacted by the prior-period impairment recorded for an $8intangible asset, partially offset by the impact of changes in apportionment related to state income taxes resulting from the sale of the Midwest generation business. The following is a detailed discussion of the variance drivers by line item.

Operating Revenues.The variance was driven primarily by:

an $18 million increase in electric revenues from new solar portfolio activity; and

a $9 million increase in mark-to-market revenues due to prior year mark-to-market losses that did not recur.

Partially offset by:

a $25 million decrease in electric revenues ~~from~~due to lower production in the ~~renewables~~wind portfolio ~~due to~~primarily resulting from changes in wind patterns.

Operating Expenses.The variance was driven primarily by a $94 million increase driven by the 2014 impairment ~~taken~~ related to Ohio Valley Electric Corporation (OVEC). See Note 78 to the Condensed Consolidated Financial Statements, "Goodwill and Intangible Assets" for additional information.

Gains on sales of other assets and other, net. The variance was driven primarily by a $6 million gain on the sale of an investment in a solar development entity.

Other income and expense, net. The variance was driven primarily by lower equity earnings from the renewables portfolio due to lower production resulting from changes in wind patterns.

Income Tax ~~Benefit.~~Expense.The variance was primarily due to ~~larger~~a decrease in pretax ~~loss~~losses and a decrease in ~~2014 as compared~~the effective tax rate due to changes to state tax apportionment factors on deferred taxes due to the Midwest generation sale in the second quarter of 2015. The effective tax rate for the ~~years~~six months ended ~~December 31,~~June 30, 2015 and 2014 was ~~104.7~~22.0 percent and ~~72.5~~62.1 percent, 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~~

As a result of the completion of the sale of the Disposal Group on April 2, 2015, Commercial Power will record a tax charge in the second quarter of 2015. The estimated charge of approximately $35 million to $50 million will not qualify for classification as discontinued operations.

Other


	Three Months Ended March 31,									Three Months Ended June 30,									Six Months Ended June 30,
(in millions)	2015			2014			Variance			2015			2014			Variance			2015			2014			Variance
Operating Revenues	$	27		$	25		$	2		$	34		$	29		$	5		$	61		$	54		$	7
Operating Expenses	50			84			(34		)	63			101			(38		)	113			185			(72		)
Gains on Sales of Other Assets and Other, net	7			—			7			6			1			5			13			1			12
Operating Loss	(16		)	(59		)	43			(23		)	(71		)	48			(39		)	(130		)	91
Other Income and Expense, net	1			6			(5		)	9			9			—			10			15			(5		)
Interest Expense	97			103			(6		)	97			98			(1		)	194			201			(7		)
Loss Before Income Taxes	(112		)	(156		)	44			(111		)	(160		)	49			(223		)	(316		)	93
Income Tax Benefit	(77		)	(69		)	(8		)	(66		)	(71		)	5			(143		)	(140		)	(3		)
Less: Income Attributable to Noncontrolling Interests	2			—			2			3			1			2			5			1			4
Net Expense	$	(37	)	$	(87	)	$	50		$	(48	)	$	(90	)	$	42		$	(85	)	$	(177	)	$	92

Three Months Ended ~~March 31,~~June 30, 2015 as Compared to ~~March 31,~~June 30, 2014

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 Expenses. The decrease was primarily due to lower charges related to the Progress Energy merger integration efforts and ~~higher prior-year~~lower captive insurance loss experience.

Gains on sales of other assets. The increase was primarily due to ~~monetization~~the benefit from the sale of telecommunication leases.

~~PART I~~

Income Tax ~~Benefit.~~ Expense.The variance was primarily due to ~~the increase~~a decrease in ~~the effective tax rate,~~pretax losses, partially offset by a ~~decrease in pretax loss.~~higher effective tax rate. The effective tax rate for the three months ended ~~March 31,~~June 30, 2015 and 2014 was ~~69.5~~59.5 percent and ~~44.5~~44.4 percent, respectively. The increase in the effective tax rate is primarily due to resolution of state tax apportionment issues.

Six Months Ended June 30, 2015 as Compared to June 30, 2014

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 Expenses. The decrease was primarily due to lower charges related to the Progress Energy merger integration efforts and lower captive insurance loss experience.

102

PART I

Gains on sales of other assets. The increase was primarily due to the benefit of the sale of telecommunication leases.

Income Tax Expense.The effective tax rate for the six months ended June 30, 2015 and 2014 was 64.1 percent and 44.3 percent, respectively. The increase in the effective tax rate is primarily due to resolution of state tax apportionment issues and tax levelization.

Matters Impacting Future Other Results

Duke Energy Ohio’s retired Beckjord ~~generating station~~Station (Beckjord) became an asset of Other after the sale of the nonregulated Midwest Generation business in the second quarter of 2015. Beckjord, a nonregulated facility retired during 2014, is not subject to the recently enacted Environmental Protection Agency (EPA) rule related to the disposal 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 the storage of coal 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

Three Months Ended June 30, 2015 as Compared to June 30, 2014

Discontinued Operations, Net of Tax.The variance was primarily driven by the 2014 impairment recognized and unrealized mark-to-market losses on economic hedges for the ~~nonregulated Midwest generation business~~Disposal Group, partially offset by a litigation reserve recorded in 2015, as discussed in Note 5, "Commitments and Contingencies," to the Condensed Consolidated Financial Statements. 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 June 30, 2014, was approximately $42 million.

Six Months Ended June 30, 2015 as Compared to June 30, 2014

Discontinued Operations, Net of Tax. The variance was primarily driven by the 2014 impairment recognized and unrealized mark-to-market losses on economic hedges for the Disposal Group and favorable operating results in 2015, partially offset by a litigation reserve recorded in 2015, as discussed in Note 5, "Commitments and Contingencies," to the Condensed Consolidated Financial Statements. Operating results in 2015 were favorable 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~~six months ended ~~March 31,~~June 30, 2015, and June 30, 2014, was approximately $40 ~~million.~~million and $42 million, respectively.

~~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 ~~three~~six months ended ~~March 31,~~June 30, 2015 and 2014 and the Annual Report on Form 10-K for the year ended December 31, 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


	Three Months Ended March 31,							Six Months Ended June 30,
(in millions)	2015		2014		Variance			2015		2014		Variance
Operating Revenues	$	1,901	$	2,000	$	(99	)	$	3,608	$	3,755	$	(147	)
Operating Expenses	1,386		1,491		(105		)	2,610		2,808		(198		)
Operating Income	515		509		6			998		947		51
Other Income and Expenses, net	42		49		(7		)	83		93		(10		)
Interest Expense	102		101		1			208		203		5
Income Before Income Taxes	455		457		(2		)	873		837		36
Income Tax Expense	163		171		(8		)	316		281		35
Net Income	$	292	$	286	$	6		$	557	$	556	$	1

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.



(Decrease) increase over prior year	2015
Residential sales	(~~1.0~~1.4	)%
General service sales	~~1.2~~0.5	%
Industrial sales	~~3.3~~3.0	%
Wholesale power sales	(~~30.9~~16.8	)%
Total sales	(~~5.2~~1.7	)%
Average number of customers	~~1.2~~1.3	%

~~Three~~Six Months Ended ~~March 31,~~June 30, 2015 as Compared to ~~March 31,~~June 30, 2014

Operating Revenues. The variance was driven primarily by:

~~A $63~~a $139 million decrease in fuel revenues driven primarily by lower natural gas and coal prices, and decreased demand from retail ~~customers in the residential sector.~~customers. Fuel revenues represent sales to retail and wholesale customers; and

103

~~A $42~~PART I

a $78 million decrease 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; and~~2014.

~~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~~a $38 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.~~case;

a $14 million increase in wholesale power revenues, net of sharing, primarily due to additional volumes for customers served under long-term contracts; and

a $12 million increase in weather-normal retail sales volumes (net of fuel revenue) primarily due to increased demand from industrial customers.

Operating Expenses.The variance was driven primarily by:

~~An $80~~a $156 million decrease in fuel expense (including purchased power) primarily related to lower natural gas and coal prices, and decreased generation due to lower sales volumes; and

~~A $34~~a $67 million decrease in property and other tax expenses primarily due to lower revenue-related taxes driven by the elimination of the North Carolina gross receipts tax as mentioned above.

Partially offset by:

a $20 million increase in depreciation and amortization expense primarily due to higher depreciation as a result of additional plant in service, partially offset by lower nuclear decommissioning costs and lower amortization of certain regulatory assets.

Other Income and Expenses, net. The variance was primarily due to a decrease in amortization of deferred returns for projects that had been completed prior to being reflected in customer rates.

Income Tax Expense. The variance is due to an increase in the effective tax rate and in pretax income. The effective tax rate for the ~~three~~six months ended ~~March 31,~~June 30, 2015 and 2014 was ~~35.8~~36.2 percent and ~~37.4~~33.6 percent, respectively. The ~~decrease~~increase in the effective tax rate is primarily due to ~~the reduction of~~favorable audit settlements and changes in apportionment related to state ~~rates~~income taxes recorded in ~~certain jurisdictions and~~2014 offset by an increase in the tax benefit ~~related to~~associated with the manufacturing deduction in ~~2015 as the prior-year deduction was limited by taxable income.~~2015.

Matters Impacting Future Results

Duke Energy Carolinas is a party to multiple lawsuits and subject to fines and other penalties related to the Dan River 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 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 Note 5 to the Condensed Consolidated Financial Statements, “Commitments and Contingencies,” for additional information.

97104

PART I

PROGRESS ENERGY

~~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


	Three Months Ended March 31,									Six Months Ended June 30,
(in millions)	2015			2014			Variance			2015			2014			Variance
Operating Revenues	$	2,536		$	2,541		$	(5	)	$	5,012		$	4,962		$	50
Operating Expenses	1,995			2,065			(70		)	3,973			3,998			(25		)
Gains on Sales of Other Assets and Other, net	8			1			7			14			1			13
Operating Income	549			477			72			1,053			965			88
Other Income and Expenses, net	27			15			12			46			28			18
Interest Expense	168			169			(1		)	334			336			(2		)
Income From Continuing Operations Before Taxes	408			323			85			765			657			108
Income Tax Expense From Continuing Operations	144			119			25			284			246			38
Income From Continuing Operations	264			204			60			481			411			70
Loss From Discontinued Operations, net of tax	(1		)	(1		)	—			(1		)	(6		)	5
Net Income	263			203			60			480			405			75
Less: Net Income Attributable to Noncontrolling Interest	3			1			2			5			1			4
Net Income Attributable to Parent	$	260		$	202		$	58		$	475		$	404		$	71

~~Three~~Six Months Ended ~~March 31,~~June 30, 2015 as Compared to ~~March 31,~~June 30, 2014

Operating Revenues. The variance was driven primarily by:

Aa $63 million increase in wholesale power revenues primarily driven by increased demand rates and higher peak demand at Duke Energy Progress and increased capacity rates on contracts at Duke Energy Florida;

a $31 million increase in retail pricing and rate riders at Duke Energy Progress, 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;

a $29 million increase driven by favorable weather conditions for Duke Energy Florida. Cooling degree days for the six months ended June 30, 2015, were 22 percent above normal as compared with 2 percent below normal during the same period in 2014; and

a $28 million increase in fuel revenues and capacity revenues driven by increased usage at Duke Energy Florida. Fuel revenues represent sales to retail and wholesale customers.

Partially offset by:

a $53 million decrease 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; and

~~A $16~~a $53 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~~nuclear cost recovery clause, 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 by increased capacity rates on contracts in the current year for~~at Duke Energy ~~Florida and increased capacity rates and higher peak demand for Duke Energy Progress; and~~

A $17 million increase in retail pricing and rate riders for Duke Energy Progress, 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.Florida.

Operating Expenses. The variance was driven primarily by:

~~A $40~~a $53 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; and

~~A $30~~a $17 million decrease in operations and maintenance expense 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~~in costs associated with Progress Energy’s merger integration efforts with Duke Energy at Duke Energy Florida, and lower storm restoration costs at Duke Energy Progress; partially offset by higher costs related to three nuclear refueling outages in 2015 compared to one outage during the same period in 2014, and the prior-year benefit associated with the adoption of nuclear levelization at Duke Energy Progress.

Partially offset by:

an $18 million prior-year reversal of an impairment related to the merger with Duke Energy at Duke Energy Progress. These charges related to planned transmission projects for which recovery is not expected, and certain costs associated with mitigation sales pursuant to merger settlement agreements with the FERC;

a $15 million increase in fuel used in electric generation and purchase power related to recovery of prior year under-collections of fuel and increased purchased power, partially offset by lower fuel prices at Duke Energy Florida; and

a $13 million increase in depreciation and amortization expense primarily due to higher depreciation as a result of additional plant in service at Duke Energy Progress, offset by reductions in amounts recoverable through the nuclear cost recovery clause and the environmental cost recovery clause, partially offset by increased depreciation due to plant additions at Duke Energy Florida.

105

PART I

Other Income and Expenses, net. The variance is due to higher ~~AFUDC-equity,~~allowance for funds used during construction (AFUDC)-equity, primarily due to nuclear plant expenditures.

Income Tax Expense. The variance ~~was primarily~~is due to an increase in pretax income. The effective tax rate for the ~~three~~six months ended ~~March 31,~~June 30, 2015 and 2014 was ~~35.4~~37.1 percent and ~~36.9~~37.4 percent, respectively. ~~The decrease in the effective tax rate is primarily due to an increase in AFUDC-equity.~~

Matters Impacting Future Results

~~Duke~~Progress Energy is a party to multiple lawsuits and subject to fines and other penalties related to the Dan River 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’s financial position, results of operations and cash flows. See Note 5 to the Condensed Consolidated Financial Statements, “Commitments and Contingencies,” for additional information.

~~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’s financial position, results of operations and cash flows. See Note 5 to the Condensed Consolidated Financial Statements, “Commitments and Contingencies,” for additional information.

In ~~April~~June 2015, the Florida ~~Legislature passed~~governor signed legislation ~~which is pending approval by the governor,~~ to allow utilities to ~~issue~~petition for a financing order for securitization ~~bonds as an option to recover the costs~~ of certain retired nuclear generation ~~facilities. If enacted, this legislation would apply to~~assets. On July 27, 2015, Duke Energy ~~Florida’s retired~~Florida petitioned the FPSC for a financing order to finance the Crystal River Unit 3 ~~nuclear station.~~Regulatory asset with low-cost securities. If the FPSC issues an acceptable financing order and Duke Energy Florida issues the bonds, securitization would replace the base rate recovery methodology established in the 2013 Agreement described above, and would result in a lower rate impact to customers. Securitization of the costs of the retired Crystal River Unit 3 ~~nuclear station~~Nuclear Plant would result in an initial acceleration of cash, followed by a reduction to Progress Energy's future results of operations and ongoing cash flows as it would no longer earn an equity return on these costs. Under ~~the current~~a previous settlement agreement with the FPSC, the allowed return on equity for Crystal River Unit 3 is limited to 70 percent of the approved ~~rate of~~return on equity, which is currently 10.5 percent. The FPSC is expected to hold a hearing on both the Crystal River Unit 3 Regulatory asset filing and the securitization filing in October 2015.

99106

PART I

DUKE ENERGY PROGRESS

~~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


	Three Months Ended March 31,							Six Months Ended June 30,
(in millions)	2015		2014		Variance			2015		2014		Variance
Operating Revenues	$	1,449	$	1,422	$	27		$	2,642	$	2,613	$	29
Operating Expenses	1,134		1,165		(31		)	2,143		2,144		(1		)
Gains on Sales of Other Assets and Other, net	1		1		—			1		1		—
Operating Income	316		258		58			500		470		30
Other Income and Expenses, net	20		9		11			35		16		19
Interest Expense	60		57		3			116		115		1
Income Before Income Taxes	276		210		66			419		371		48
Income Tax Expense	93		77		16			151		137		14
Net Income and Comprehensive Income	$	183	$	133	$	50		$	268	$	234	$	34



Increase over prior period	2015
Residential sales	~~3.4~~(1.0	)%
General service sales	~~3.0~~0.4	%
Industrial sales	~~2.4~~0.1	%
Wholesale power sales	~~15.4~~8.8	%
Total sales	~~3.7~~2.8	%
Average number of customers	~~1.3~~1.4	%

~~Three~~Six Months Ended ~~March 31,~~June 30, 2015 as Compared to ~~March 31,~~June 30, 2014

Operating Revenues. The variance was driven primarily by:

~~A $34~~a $48 million increase in wholesale power revenues primarily due to increased ~~capacity~~demand rates and higher peak demand; and

~~A $17~~a $31 million increase in retail pricing and rate riders, which primarily reflects the increased revenues related to the energy efficiency programs and the second year base rate step-up from the 2013 North Carolina retail rate case.

Partially offset by:

~~A $31~~a $53 million decrease 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.

Operating Expenses. The variance was driven primarily ~~by a:~~by:

~~$35~~a $29 million increase in depreciation and amortization expense primarily due to higher depreciation as a result of additional plant in service;

an $18 million prior-year reversal of an impairment related to the merger with Duke Energy. These charges related to planned transmission projects for which recovery is not expected, and certain costs associated with mitigation sales pursuant to merger settlement agreements with the FERC; and

a $9 million increase in operations and maintenance expense primarily due to three nuclear refueling outages in 2015 compared to one outage during the same period in 2014 and the prior-year benefit associated with the adoption of nuclear levelization, partially offset by lower storm restoration costs.

Partially offset by:

a $54 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.

Other Income and Expenses, net. The variance is due to higher AFUDC-equity, primarily due to nuclear plant expenditures.

Income Tax Expense.The variance ~~was primarily~~is due to an increase in pretax income. The effective tax rate for the ~~three~~six months ended ~~March 31,~~June 30, 2015 and 2014 was ~~33.8~~36.0 percent and ~~36.6~~36.9 percent, ~~respectively. The decrease in the effective tax rate is primarily due to an increase in AFUDC-equity.~~respectively

107

PART I

Matters Impacting Future Results

Duke Energy Progress is a party to multiple lawsuits and subject to fines and other penalties related to the Dan River 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’ financial position, results of operations and cash flows. See Note 5 to the Condensed Consolidated Financial Statements, “Commitments and Contingencies,” for additional information.

~~100~~108

PART I

DUKE ENERGY FLORIDA

~~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


	Three Months Ended March 31,							Six Months Ended June 30,
(in millions)	2015		2014		Variance			2015		2014		Variance
Operating Revenues	$	1,086	$	1,116	$	(30	)	$	2,367	$	2,341	$	26
Operating Expenses	859		897		(38		)	1,825		1,846		(21		)
Operating Income	227		219		8			542		495		47
Other Income and Expenses, net	6		5		1			10		11		(1		)
Interest Expense	49		49		—			99		99		—
Income Before Income Taxes	184		175		9			453		407		46
Income Tax Expense	71		67		4			175		157		18
Net Income	$	113	$	108	$	5		$	278	$	250	$	28

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.



Increase (decrease) over prior period	2015
Residential sales	~~1.3~~7.1	%
General service sales	~~(0.4~~2.0	)%
Industrial sales	(~~5.1~~1.4	)%
Wholesale power sales	(~~38.9~~1.1	)%
Total sales	~~(2.2~~4.2	)%
Average number of customers	~~1.6~~1.5	%

~~Three~~Six Months Ended ~~March 31,~~June 30, 2015 as Compared to ~~March 31,~~June 30, 2014

Operating Revenues.The variance was driven primarily by:

~~A $20~~a $29 million increase driven by favorable weather conditions. Cooling degree days for the six months ended June 30, 2015, were 22 percent above normal as compared with 2 percent below normal during the same period in 2014;

a $28 million increase in fuel and capacity revenues driven by increased usage in the current year. Fuel revenues represent sales to retail and wholesale customers;

a $15 million increase in wholesale power revenues primarily driven by increased capacity rates on contracts; and

a $12 million increase due to weather-normal sales volumes to residential customers.

Partially offset by:

a $53 million decrease in the nuclear cost recovery clause, 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 decreased usage in the current year.~~

~~Partially offset by:~~

~~A $12 million increase in wholesale power revenues primarily driven by increased capacity rates on contracts in the current year.~~rates.

Operating Expenses.The variance was driven primarily by:

~~A $23~~a $24 million decrease in operations and maintenance expense primarily due to decreased expenses related to costs that were recoverable through the energy conservation clause and a decrease in costs associated with Progress Energy’s merger integration activities with Duke Energy; and

a $15 million decrease in depreciation and amortization expense due to reductions in amounts recoverable through the nuclear cost recovery clause and the environmental cost recovery ~~clauses and a decrease related~~clause, partially offset by increased depreciation due to ~~prior-year nuclear decommissioning costs; and~~plant additions.

~~A $13~~Partially offset by:

an $18 million ~~decrease~~increase in fuel used in electric generation and purchase power related to recovery of prior year under-collections of fuel and increased purchased power, ~~primarily due to~~partially offset by lower fuel ~~prices and lower volumes.~~prices.

Income Tax Expense.The variance ~~was primarily~~is due to an increase in pretax income. The effective tax rate is consistent for the ~~three~~six months ended ~~March 31,~~June 30, 2015 and 2014 ~~was~~at 38.6 ~~percent and 38.5 percent, respectively.~~percent.

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PART I

Matters Impacting Future Results

In ~~April~~June 2015, the Florida ~~Legislature passed~~governor signed legislation ~~which is pending approval by the governor,~~ to allow utilities to ~~issue~~petition for a financing order for securitization ~~bonds as an option to recover the costs~~ of certain retired nuclear generation ~~facilities. If enacted, this legislation would apply to~~assets. On July 27, 2015, Duke Energy ~~Florida’s retired~~Florida petitioned the FPSC for a financing order to finance the Crystal River Unit 3 ~~nuclear station.~~Regulatory asset with low-cost securities. If the FPSC issues an acceptable financing order and Duke Energy Florida issues the bonds, securitization would replace the base rate recovery methodology established in the 2013 Agreement described above, and would result in a lower rate impact to customers. Securitization of the costs of the retired Crystal River Unit 3 ~~nuclear station~~Nuclear Plant would result in an initial acceleration of cash, followed by a reduction to ~~Regulated Utilities’~~Duke Energy Florida's future results of operations and ongoing cash flows as it would no longer earn an equity return on these costs. Under ~~the~~a previous 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.

The FPSC is expected to hold a hearing on both the Crystal River Unit 3 Regulatory asset filing and the securitization filing in October 2015.

~~101~~110

PART I

DUKE ENERGY OHIO

~~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


	Three Months Ended March 31,								Six Months Ended June 30,
(in millions)	2015		2014			Variance			2015			2014			Variance
Operating Revenues	$	586	$	575		$	11		$	991		$	987		$	4
Operating Expenses	481		582			(101		)	845			934			(89		)
Gains on Sales of Other Assets and Other, net	6		—			6			8			—			8
Operating Income (Loss)	111		(7		)	118
Operating Income									154			53			101
Other Income and Expenses, net	3		3			—			(2		)	6			(8		)
Interest Expense	20		20			—			38			40			(2		)
Income (Loss) from Continuing Operations Before Income Taxes	94		(24		)	118
Income Tax Expense (Benefit) from Continuing Operations	35		(9		)	44
Income (Loss) from Continuing Operations	59		(15		)	74
Income from Continuing Operations Before Income Taxes									114			19			95
Income Tax Expense from Continuing Operations									42			6			36
Income from Continuing Operations									72			13			59
Income (Loss) from Discontinued Operations, net of tax	90		(875		)	965			25			(1,010		)	1,035
Net Income (Loss)	$	149	$	(890	)	$	1,039
Net Income									$	97		$	(997	)	$	1,094

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.



(Decrease) increase over prior year	2015
Residential sales	(~~3.5~~2.2	)%
General service sales	~~(0.4~~0.1	)%
Industrial sales	~~0.8~~(0.1	)%
Wholesale power sales	~~258.5~~488.2	%
Total sales	~~4.4~~5.7	%
Average number of customers	0.6	%

~~Three~~Six Months Ended ~~March 31,~~June 30, 2015 as Compared to ~~March 31,~~June 30, 2014

Operating ~~Revenues.~~Revenues. The variance was driven primarily by:

~~A $9~~a $20 million increase in Kentucky wholesale revenues primarily due to the purchase of the additional capacity in the East Bend ~~generating station~~Station in December ~~2014; and~~2014, the profits from which are shared with Duke Energy Kentucky retail customers;

~~A $10~~a $12 million increase in regulated natural gas rate riders primarily due to rate ~~increases.~~increases;

an $8 million increase in Ohio other revenues related to OVEC; and

a $5 million increase in PJM transmission revenues.

Partially offset by:

~~A $9~~a $23 million decrease in regulated fuel revenues primarily driven by lower fuel costs, partially offset by increased sales ~~volumes.~~volumes; and

a $23 million decrease in energy efficiency rider revenue due to a May 2015 regulatory order, currently under review, that limits the ability to utilize banked energy efficiency savings in Ohio.

Operating Expenses.The variance was driven primarily by a $94 million impairment taken in 2014 related to OVEC.

~~Gain/(Loss)~~Gain on Sales of Other Assets.The variance was driven primarily by a gain on the disposition of certain nonutility assets.

Income Tax ~~Expense/(Benefit).~~Expense. The ~~variance~~effective tax rate for the six months ended June 30, 2015 and 2014 was 36.8 percent and 33.3 percent, respectively. The increase in the effective tax rate is primarily due to an increase in pretax income. ~~The effective tax rate for the three months ended March 31, 2015 and 2014 was 36.7 percent and 36.4 percent, respectively.~~

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 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~~six months ended ~~March 31,~~June 30, 2015 and June 30, 2014, was approximately $40 ~~million.~~million and $42 million, respectively.

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PART I

Matters Impacting Future Results

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 unrecovered costs, and if ~~a portion~~the Public Utilities Commission of Ohio disallows recovery of these costs, ~~is not eligible for recovery,~~ there ~~may~~would be an adverse impact to ~~its~~Duke Energy Ohio's financial position, results of operations and cash flows. See Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.

~~102~~

~~PART I~~

Duke Energy Ohio’s nonregulated Beckjord ~~generating station (Beckjord),~~Station, 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

~~103~~112

PART I

DUKE ENERGY INDIANA

~~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


	Three Months Ended March 31,							Six Months Ended June 30,
(in millions)	2015		2014		Variance			2015		2014		Variance
Operating Revenues	$	788	$	845	$	(57	)	$	1,474	$	1,593	$	(119	)
Operating Expenses	578		630		(52		)	1,119		1,200		(81		)
Gains of Sales of Other Assets and Other, net								1		—		1
Operating Income	210		215		(5		)	356		393		(37		)
Other Income and Expenses, net	5		7		(2		)	9		11		(2		)
Interest Expense	45		43		2			88		87		1
Income Before Income Taxes	170		179		(9		)	277		317		(40		)
Income Tax Expense	62		66		(4		)	101		117		(16		)
Net Income	$	108	$	113	$	(5	)	$	176	$	200	$	(24	)



(Decrease) increase over prior year	2015
Residential sales	(~~6.8~~5.6	)%
General service sales	(~~1.4~~0.9	)%
Industrial sales	~~0.8~~(1.0	)%
Wholesale power sales	(~~9.5~~24.3	)%
Total sales	(~~1.6~~5.2	)%
Average number of customers	~~0.6~~0.7	%

~~Three~~Six Months Ended ~~March 31,~~June 30, 2015 as Compared to ~~March 31,~~June 30, 2014

Operating Revenues.The variance was driven primarily by:

~~A $51~~a $93 million decrease in fuel revenues ~~(including emission allowances)~~ primarily due to a decrease in fuel rates as a result of lower fuel and purchased power costs, and lower sales volumes. Fuel revenues represent sales to retail and wholesale customers;

a $14 million decrease in rate riders primarily due to lower energy efficiency revenues; and

a $6 million decrease in weather-normal sales volumes to retail customers (net of fuel revenue) reflecting decreased demand.

Operating Expenses.The variance was driven primarily by:

~~A $45~~a $97 million decrease in fuel used in electric generation and purchased power primarily due to lower sales volumes and lower fuel prices; and

~~A $24~~a $26 million decrease in property and other taxes, primarily as a result of lower sales and use tax.

Partially offset by:

~~A $15~~a $36 million increase in operation and maintenance expense primarily due to timing and increased scope of outage work at generation ~~plants.~~plants; and

a $6 million increase in depreciation and amortization expense primarily due to higher depreciation as a result of additional plant in service.

Income Tax Expense.~~The variance was primarily due to a decrease in pretax income.~~ The effective tax rate for the ~~three~~six months ended ~~March 31,~~June 30, 2015 and 2014 was ~~36.6~~36.5 percent and 36.8 percent, respectively.

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)~~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'~~Duke Energy Indiana's financial position, results of operations and cash flows. ~~Regulated Utilities~~Duke Energy Indiana cannot predict the outcome of these proceedings. See Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.

~~104~~113

PART I

On April 17, 2015, the EPA published in the Federal Register a rule to regulate the disposal of CCR from electric utilities as solid waste. Duke Energy Indiana has interpreted the rule to identify the coal ash basin sites impacted and has assessed the amounts of coal ash subject to the rule and a method of compliance. Duke Energy Indiana's interpretation of the requirements of the CCR rule, which becomes effective in October 2015, is subject to potential legal challenges and further regulatory approvals, which could result in additional ash basin closure requirements, higher costs of compliance and greater asset retirement obligations. An order from regulatory authorities disallowing recovery of costs related to closure of ash basins could have an adverse impact to the Duke Energy Indiana's financial position, results of operations and cash flows. See Note 5 to the Condensed Consolidated Financial Statements, “Commitments and Contingencies,” for additional information.

114

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, 2014 for a summary of primary sources and uses of cash for 2015-2017 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


	March 31, 2015																					June 30, 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)	$	7,500		$	3,200		$	1,200		$	1,000		$	900		$	600		$	600		$	7,500		$	3,200		$	1,200		$	1,000		$	900		$	600		$	600
Reduction to backstop issuances
Commercial paper^(b)	(3,256		)	(2,764		)	(300		)	—			(17		)	(25		)	(150		)	(1,589		)	(972		)	(300		)	(65		)	(75		)	(27		)	(150		)
Outstanding letters of credit	(66		)	(60		)	(4		)	(1		)	(1		)	—			—			(71		)	(63		)	(4		)	(3		)	(1		)	—			—
Tax-exempt bonds	(116		)	—			(35		)	—			—			—			(81		)	(116		)	—			(35		)	—			—			—			(81		)
Coal ash set-aside^(c)																						(500		)	—			(250		)	(250		)	—			—			—
Available capacity	$	4,062		$	376		$	861		$	999		$	882		$	575		$	369		$	5,224		$	2,165		$	611		$	682		$	824		$	573		$	369


(a)	Represents the sublimit of each borrower. Sublimits were reallocated in July 2015 to maintain adequate levels of liquidity for each borrower in light of near-term funding needs.


(b)	Duke Energy issued $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 as Long-Term Debt Payable to Affiliated Companies in the 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.

(c)

On May 14, 2015, the United States District Court for the Eastern District of North Carolina approved the separate Plea Agreements entered into by Duke Energy Carolinas, Duke Energy Progress and Duke Energy Business Services LLC (DEBS), a wholly owned subsidiary of Duke Energy 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. 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 ~~March 31,~~June 30, 2015 and December 31, 2014 was ~~$1,010~~$1,048 million and $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.

~~105~~

~~PART I~~

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.

115

PART I

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~~anticipates satisfying these obligations with cash on hand and proceeds from additional borrowings.


(in millions)	Maturity Date	Interest Rate		March 31, 2015		Maturity Date	Interest Rate		June 30, 2015
Unsecured Debt
Duke Energy (Parent)	April 2015	3.350	%	$	450
Progress Energy (Parent)	January 2016	5.625	%	300		January 2016	5.625	%	300
Duke Energy Indiana						June 2016	6.05	%	325
First Mortgage Bonds
Duke Energy Progress	April 2015	5.150	%	300
Duke Energy Carolinas	October 2015	5.300	%	500		October 2015	5.300	%	500
Duke Energy Florida	November 2015	0.650	%	250		November 2015	0.650	%	250
Duke Energy Florida	December 2015	5.100	%	300		December 2015	5.100	%	300
Duke Energy Progress	December 2015	5.250	%	400		December 2015	5.250	%	400
Other				300					299
Current maturities of long-term debt				$	2,800				$	2,374

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, storms and ~~storms,~~legal costs and related settlements, can affect the timing and level of cash flows from operations.

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, 2014 for additional information).

At ~~March 31,~~June 30, 2015, Duke Energy had cash and cash equivalents and short-term investments of ~~$2.8 billion,~~$960 million, of which ~~$1.7 billion~~$664 million is held by entities domiciled in foreign jurisdictions. 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~~to repatriate approximately $2.7 billion of cash held and expected to be generated by International Energy over a period of up to eight years. ~~Approximately $1.2-$1.4~~In June 2015, approximately $1.2 billion was remitted. The remaining amount will be ~~remitted in 2015, with the remaining amount~~ remitted by 2022. The remittances will principally be used to support Duke Energy's dividend and growth in the domestic business. As a result of the decision to repatriate all cumulative historic undistributed foreign earnings, during the fourth quarter of 2014, Duke Energy recorded U.S. income tax expense of approximately $373 million. Duke Energy’s intention is to indefinitely reinvest prospective undistributed earnings generated by Duke Energy's foreign subsidiaries. As a result, no U.S. tax is recorded on such prospective earnings. Duke Energy would be required to accrue taxes on these foreign earnings if they were to be repatriated. As of ~~March 31,~~June 30, 2015, the amount of unrecognized deferred tax liability related to undistributed earnings was not material. ~~See Note 17 to the Condensed Consolidated Financial Statements, “Income Taxes,” for 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 ~~March 31,~~June 30, 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 deteriorate, credit ratings could be negatively impacted.

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). OnIn 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 unsecured credit ratings of the other Subsidiary Registrants were upgraded to A- from

BBB+. In June 2015, Moody's placed Duke Energy, Progress Energy and Duke Energy Progress on negative outlook from stable. In June 2015, Fitch upgraded Duke Energy Carolinas' issuer default rating to A from A-, its unsecured credit rating to A+ from A and its secured credit rating to AA- from A+. Fitch also placed Duke Energy Indiana on positive outlook from stable.

~~106~~116

PART I

Cash Flow Information

The following table summarizes Duke Energy’s cash flows.


	Three Months Ended March 31,						Six Months Ended June 30,
(in millions)	2015			2014			2015			2014
Cash flows provided by (used in):
Operating activities	$	1,440		$	1,373		$	2,879		$	2,619
Investing activities	(1,456		)	(1,286		)	(294		)	(2,367		)
Financing activities	801			(57		)	(3,661		)	255
Net increase in cash and cash equivalents	785			30
Net (decrease) increase in cash and cash equivalents							(1,076		)	507
Cash and cash equivalents at beginning of period	2,036			1,501			2,036			1,501
Cash and cash equivalents at end of period	$	2,821		$	1,531		$	960		$	2,008

OPERATING CASH FLOWS

The following table summarizes key components of Duke Energy’s operating cash flows.


	Three Months Ended March 31,						Six Months Ended June 30,
(in millions)	2015			2014			2015			2014
Net income (loss)	$	867		$	(93	)
Non-cash adjustments to net income (loss)	1,241			2,051
Net income							$	1,414		$	520
Non-cash adjustments to net income							2,409			3,012
Contributions to qualified pension plans	(132		)	—			(132		)	—
Working capital	(536		)	(585		)	(812		)	(913		)
Net cash provided by operating activities	$	1,440		$	1,373		$	2,879		$	2,619

The variance was driven primarily due to:

~~A $150~~a $291 million increase in net income after non-cash adjustments, mainly due to higher PJM capacity prices and operating margins infor the ~~Commercial Power segment,~~nonregulated Midwest generation business, 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

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.


	Three Months Ended March 31,						Six Months Ended June 30,
(in millions)	2015			2014			2015			2014
Capital, investment and acquisition expenditures	$	(1,454	)	$	(1,268	)	$	(3,189	)	$	(2,454	)
Available for sale securities, net	34			37			13			20
Proceeds from sales of other assets	1			4			2,832			119
Other investing items	(37		)	(59		)	50			(52		)
Net cash used in investing activities	$	(1,456	)	$	(1,286	)	$	(294	)	$	(2,367	)

The variance was primarily due to:

~~A $186~~a $2,713 million increase in proceeds mainly due to sale of the nonregulated Midwest generation business to Dynegy, partially offset by

a $735 million increase in capital, investment and acquisition expenditures mainly due to ~~expansion~~growth initiatives in electric and natural gas infrastructure, solar projects ~~at the Regulated Utilities.~~and natural-gas fired generation.

117

PART I

FINANCING CASH FLOWS

The following table summarizes key components of Duke Energy’s financing cash flows.


	Three Months Ended March 31,						Six Months Ended June 30,
(in millions)	2015			2014			2015			2014
Issuance of common stock related to employee benefit plans	$	15		$	19		$	16		$	23
Issuance (Redemptions) of long-term debt, net	94			(412		)
(Redemptions) Issuances of long-term debt, net							(672		)	331
Notes payable and commercial paper	1,271			898			(365		)	1,024
Dividends paid	(564		)	(553		)	(1,115		)	(1,107		)
Repurchase of common shares							(1,500		)	—
Other financing items	(15		)	(9		)	(25		)	(16		)
Net cash provided by (used in) financing activities	$	801		$	(57	)
Net cash (used in) provided by financing activities							$	(3,661	)	$	255

~~107~~

~~PART I~~

The variance was due primarily to:

~~A $506~~a $1,500 million increase in cash outflows due to the repurchase of 19.8 million common shares under the ASR and

a $1,389 million decrease in proceeds from net issuances of notes payable and commercial paper, primarily due to the repayment of commercial paper. These cash outflows were primarily made with proceeds from the sale of the nonregulated Midwest generation business to Dynegy; and

a $1,003 million decrease in net issuances of long-term debt, primarily due to the timing of issuances and redemptions across ~~years; and~~

~~A $373 million increase in proceeds from net issuances of notes payable and commercial paper, primarily to fund short-term working capital needs.~~years.

Summary of Significant Debt Issuances

The following table summarizes significant debt issuances (in millions).


				Three Months Ended March 31, 2015								Six Months Ended June 30, 2015
Issuance Date	Maturity Date	Interest Rate			Duke Energy		Duke Energy Carolinas		Maturity Date	Interest Rate		Duke Energy		Duke Energy Carolinas
First Mortgage Bonds
March 2015^(a)	June 2045	3.750	%		$	500	$	500	June 2045	3.750	%	$	500	$	500
Total issuances					$	500	$	500				$	500	$	500


(a)	Proceeds will be used to redeem $500 million of first mortgage bonds due October 2015.

OTHER MATTERS

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~~Register a rule to regulate the disposal of CCR from electric utilities as solid waste. The federal regulation, which becomes effective six months after publication, classifies CCR as nonhazardous waste under Subtitle D of the Resource Conservation and Recovery ~~Act.~~Act and allows for beneficial use of CCRs with some restrictions. 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.Carolinas, Progress Energy, Duke Energy ~~Registrants impacted by the rule will record additional~~Progress, Duke Energy Ohio and Duke Energy Indiana recorded asset retirement obligation amounts induring 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 57 to the Condensed Consolidated Financial Statements, ~~"Commitments and Contingencies.~~"Asset Retirement Obligations." ~~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 Carolinas 30
– 105
Progress Energy 40
– 235
Duke Energy Progress 40
– 235
Duke Energy Ohio 35
– 110
Duke Energy Indiana 185
– 1,105

~~108~~118

PART I

Duke Energy Ohio's nonregulated Beckjord Station, 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 at the facility, the costs could have an adverse impact to Duke Energy Ohio's financial position, results of operations and cash flows.

Coal Ash Management Act of 2014

On September 20, 2014, the North Carolina Coal Ash Management Act of 2014 ~~(Coal Ash Act)~~ became ~~law.~~law and was amended on June 24, 2015 by the Mountain Energy Act of 2015. The Coal Ash Act, as amended, (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; (iii) requires closure of ash impoundments at Duke Energy Progress' ~~Asheville and~~ Sutton ~~stations~~Plant and Duke Energy Carolinas' Riverbend and Dan River stations no later than August 1, ~~2019;~~2019 and Duke Energy Progress' Asheville Plant no later than August 1, 2022; (iv) requires dry disposal of fly ash at active plants, excluding the Asheville Plant, not retired by December 31, 2018; (v) requires dry disposal of bottom ash at active plants, excluding the Asheville Plant, by December 31, 2019, or retirement of active plants; (vi) requires all remaining ash impoundments in North Carolina to be categorized as high-risk, intermediate-risk or low-risk no later than December 31, 2015 by the 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 impoundments; and (viii) enhances the level of regulation for structural fills utilizing coal ash. The Coal Ash Act includes a variance procedure for compliance deadlines and modification of requirements regarding structural fills and compliance boundaries. Provisions of the Coal Ash Act prohibit cost recovery in customer rates for unlawful discharge of ash basin waters occurring after January 1, 2014. The Coal Ash Act leaves the decision on cost recovery determinations related to closure of 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 or excavation plans in advance of closure plans. These plans and all associated permits must be approved by DENR before any excavation or closure 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 excavation 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. In April 2015, the federal CCR rules were published and Duke Energy Carolinas subsequently executed an agreement with the conservation groups Upstate Forever and Save Our Saluda requiring Duke Energy Carolinas to remediate all active and inactive ash storage areas at the W.S. Lee Steam Station. Coal-fired generation at W.S. Lee ceased in 2014 and unit 3 is being converted to natural gas. In July 2015, Duke Energy Progress executed a consent agreement with the SCDHEC requiring the excavation of an inactive ash fill area at the Robinson Plant within eight years. The Robinson and Lee sites are required to be closed pursuant to the recently issued CCR rule and the provisions of these consent agreements are consistent with the federal CCR closure requirements.

For further information, refer to Note 5 of the Condensed Consolidated Financial Statements, “Commitments and Contingencies.”

Mercury and Air Toxics Standards

The final 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~~plants. The rule requirements apply where a compliance extension was not received. Duke Energy Registrants are on track to meet the requirements. Strategies to achieve compliance 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~~“Regulatory Matters,"” regarding potential plant retirements.

In April 2014, several petitions for review of the final rule were denied by the U.S. Court of Appeals for the District of Columbia (D.C. Circuit Court). On November 25, 2014, the Supreme Court granted a petition for review based on the issue of whether the EPA unreasonably refused to consider costs in determining whether it is appropriate and necessary to regulate hazardous air pollutants from coal-fired and oil-fired steam electric generating units. ~~Oral arguments were held on March 25, 2015. The Duke Energy Registrants cannot predict the outcome of~~In June 2015, the Supreme Court ~~review of~~reversed the D.C. Circuit Court's decision and remanded the case to the D.C. Circuit Court ~~decision.~~for further proceedings, finding that the EPA erred in refusing to consider costs when deciding whether it was appropriate and necessary to regulate emissions of hazardous air pollutants from steam electric generating units. Pending action by the D.C. Circuit Court, the rule remains in effect. Duke Energy cannot predict the results of these proceedings.

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 2726 of the electric generating facilities the Duke Energy Registrants own and ~~operate depending on unit retirement dates, excluding stations included in the Disposal Group.~~operate. The rule allows for several options ~~for demonstrating~~to demonstrate 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 time when the courts will rule on the petitions.

Steam Electric Effluent Limitations Guidelines

On June 7, 2013, the EPA proposed Steam Electric Effluent Limitations Guidelines (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.

119

PART I

Estimated Cost and Impacts of Rulemakings

The ultimate compliance requirements for currently 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 regulations. The actual compliance costs incurred may be materially different from these estimates based on the timing and requirements of the final regulations. The Duke Energy Registrants intend to seek rate recovery of ~~appropriate amounts~~necessary and prudently incurred costs associated with regulated operations in complying with these regulations. Refer to Note 4 toof the Condensed Consolidated Financial Statements, “Regulatory Matters,"” for further information regarding potential plant retirements and regulatory filings related to the Duke Energy Registrants.

~~109~~

~~PART I~~

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,~~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~~estimated 5-year cost excludes amounts for ash basin closure ~~costs~~ recorded as ~~ARO.~~Asset retirement obligations on the Condensed Consolidated Balance Sheets. For more information, see Note 7 to the Condensed Consolidated Financial Statements, "Asset Retirement Obligations."



(in millions)	Estimated 5-Year Cost
Duke Energy	$	1,800
Duke Energy Carolinas	625
Progress Energy	475
Duke Energy Progress	375
Duke Energy Florida	100
Duke Energy Ohio	100
Duke Energy Indiana	600

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₎₂) budgets and annual and seasonal nitrogen oxide (NO_x) 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 NO_x 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~~Pollution Standards for New, ~~Source Performance Standards~~Modified and Reconstructed Power Plants

On ~~January 8, 2014,~~August 3, 2015, the EPA ~~proposed a rule to establish~~issued the final rules establishing carbon dioxide (CO₂) emissions ~~standards~~limits for new, ~~pulverized coal, IGCC,~~modified, and reconstructed power plants. A new source is any fossil fuel-fired power plant that commenced construction on or after January 8, 2014. The 1,400 lb /MWh CO₂ emission limit EPA established for new coal-fired power plants reflects the application of carbon capture technology at a 20 percent capture rate. The 1,000 lb/MWh CO₂ emission limit the EPA established for new stationary combustion turbines is based on natural gas combined cycle ~~and simple cycle electric generating units commencing construction on or after that date. Based~~technology.

The emission standard the EPA established for modified power plants would be a unit-specific limit 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,~~source’s historical annual performance. The emission standards the EPA ~~announced that it would finalize the rule~~established for ~~new~~reconstructed coal-fired power plants ~~in the summer of 2015.~~ ranges from 1,800 to 2,000 lb CO₂/MWh.

The Duke Energy Registrants are evaluating the impacts of the final rule, but do not ~~expect a material impact on their future results of operations or cash flows based on~~believe the ~~EPA’s proposal. The final rule, however, could~~impacts will be ~~significantly different from the proposal.~~material.

CO₂ ~~Existing Source Performance Standards and Standards for Reconstructed and Modified Units~~Clean Power Plan

On ~~June 18, 2014,~~August 3, 2015, the ~~EPA’s proposed~~EPA issued the final 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~~. The CPP establishes state-level CO₂ emission rates 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 announcedmass cap goals that ~~it would finalize both proposals in the summer of 2015.~~

~~Once the CPP is finalized, states will be~~apply to fossil fuel-fired generation. States are required to develop ~~plans~~and submit a final compliance plan, or an initial plan with an extension request, to the EPA by September 6, 2016. States that receive an extension must submit a final completed plan to the EPA by September 6, 2018. The EPA will take a year to review state plans. Once approved, states must implement ~~its requirements.~~their plan to ensure power plants achieve the interim CO₂ emissions performance goals over the period of 2022 to 2029 and the final CO₂ goals in 2030 and beyond. The CPP ~~will~~does not directly impose ~~any~~ regulatory requirements on the 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 CO~~₂ 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.~~Registrants. The Duke Energy Registrants are ~~therefore~~ unable to ~~predict~~determine how the ~~outcome of this rulemaking, or how it might~~final CPP rule will impact them until state plans are developed and approved by the EPA , but the impact could be significant.

The EPA also released a proposed federal plan for public comment. A federal plan would be applied to states that fail to submit a plan to EPA or where a state plan is not approved by the EPA. Comment on the proposed federal plan are due 90 days after it is published in the Federal Register.

120

PART I

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, 2014.

~~110~~

~~PART I~~

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, 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 six months ended ~~March 31,~~June 30, 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, 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 six months ended ~~March 31,~~June 30, 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, 2014.

Subsequent Events

See Note 1718 to the Condensed Consolidated Financial Statements, “Subsequent Events,” for a discussion of subsequent events.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

During the three and six months ended ~~March 31,~~June 30, 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, 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 ~~March 31,~~June 30, 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 ~~March 31,~~June 30, 2015 and have concluded no change has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.

~~111~~121

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 ~~first~~second quarter of 2015, see Note 4 and Note 5 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.~~” respectively.

Virginia Department of Environmental Quality Civil Enforcement

In ~~April~~June 2015, ~~Duke Energy Carolinas and~~the Virginia State Water Control Board voted to approve a consent order to resolve the civil enforcement claim of the Virginia Department of Environmental Quality (VDEQ) ~~announced a proposed consent order to resolve VDEQ's civil enforcement claims~~against Duke Energy Carolinas related to the February 2014 Dan River coal ash release. Pursuant to the terms of the ~~proposed consent order,~~$2.5 million settlement, Duke Energy Carolinas ~~will pay a total~~is required to perform $2.25 million of ~~$2.5 million, with a near-term~~environmental projects that benefit Virginia communities and fund an additional $250,000 ~~cash payment to be placed in a fund~~for 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.

MTBE Litigation

On June 28, 2007, the New Jersey Department of Environmental Protection (NJDEP) filed suit against, among others, Duke Energy Merchants (DEM), alleging contamination of “waters of the state” by MTBE from leaking gasoline storage tanks. MTBE is a gasoline additive intended to increase the oxygen level in gasoline and make it burn cleaner. The ~~settlement~~case was removed to federal court and consolidated in an existing multi-district litigation docket of pending MTBE cases. DEM and NJDEP have reached an agreement in principle to settle the case for a payment by DEM of $1.7 million. Such agreement is subject to ~~public notice~~the execution of a Consent Decree and approval of the Court.

DEM is also a defendant in a similar case filed by the ~~Virginia State Water Control Board.~~Commonwealth of Pennsylvania on June 19, 2014. That case has also been moved to the consolidated multidistrict proceeding.

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, 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 FOR SECOND QUARTER OF 2015

~~There were no issuer purchases of equity securities during the first quarter of 2015.~~



Period	Total Number of Shares (or Units) Purchased ^(a)	Average Price Paid per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs ^(a)	Approximate Dollar Value of Shares (or Units) that May Yet Be Purchased Under Plans or Programs ^(a) (in millions)
April 1 to April 30	16,564,896	$	75.75	16,564,896	$	225
May 1 to May 31	—	—		—	225
June 1 to June 30	3,238,223	75.75		3,238,223	—


(a)	On April 6, 2015, Duke Energy entered into agreements to repurchase a total of $1.5 billion of Duke Energy common stock under an ASR. During the three-month period ended June 30, 2015, Duke Energy repurchased approximately 19.8 million shares for approximately $1.5 billion. See Note 14 for further information.

~~112~~122

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

Carolinas

Progress Energy

Duke Energy Progress

Duke Energy Florida

Duke Energy Ohio

Duke Energy

Indiana

~~4.1~~3.1

~~Ninety-Sixth Supplemental Indenture, dated as March 12, 2015, between the Company and The Bank~~Articles of ~~New York Mellon Trust Company, N.A., as Trustee~~Organization including Articles of Conversion (incorporated by reference to Exhibit ~~4.1~~3.1 to ~~Duke Energy Carolina, LLC's~~Registrant's Current Report on Form 8-K filed on ~~March 12,~~August 4, 2015, File No. ~~1-04928)~~1-03382).

3.2

Plan of Conversion (incorporated by reference to Exhibit 3.2 to Registrant's Current Report on Form 8-K filed on August 4, 2015, File No. 1-03382).

3.3

Limited Liability Company Operating Agreement (incorporated by reference to Exhibit 3.3 to Registrant's Current Report on Form 8-K filed on August 4, 2015, File No. 1-03382).

3.4

Articles of Conversion (incorporated by reference to Exhibit 3.4 to Registrant's Current Report on Form 8-K filed on August 4, 2015, File No. 1-03274).

3.5

Articles of Organization (incorporated by reference to Exhibit 3.5 to Registrant's Current Report on Form 8-K filed on August 4, 2015, File No. 1-03274).

3.6

Plan of Conversion (incorporated by reference to Exhibit 3.6 to Registrant's Current Report on Form 8-K filed on August 4, 2015, File No. 1-03274).

3.7

Limited Liability Company Operating Agreement (incorporated by reference to Exhibit 3.7 to Registrant's Current Report on Form 8-K filed on August 4, 2015, File No. 1-03274).

10.1

Completed Accelerated Stock Repurchase Program executed by Goldman, Sachs & Co. and JPMorgan Chase Bank, N.A. on April 6, 2015 under an agreement with Registrant (incorporated by reference to Registrant's Current Report on Form 8-K filed on April 6, 2015, File No. 1-32853).

*10.2

Duke Energy Corporation 2015 Director Compensation Program Summary

*10.3

Approved Plea Agreement between Registrant and the Court of the Eastern District of North Carolina in connection with the May 14, 2015 Dan River Grand Jury Settlement.

~~10.1~~*10.4

~~Amendment No. 2~~Approved Plea Agreement between Registrant 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 Duke Energy Florida, Inc. (f/k/a Progress Energy Florida, Inc.), the ~~Lenders party hereto,~~Court of the ~~Issuing Lenders party hereto, Wells Fargo Bank, National Association, as Administrative Agent and Swingline Lender, dated as~~Eastern District of ~~January 30,~~North Carolina in connection with the May 14, 2015 ~~(incorporated by reference to Exhibit 10.1 of registrants' Current Report on Form 8-K filed on February 5, 2015, File Nos. 1-32853, 1-04928, 1-01232, 1-03543, 1-03382 and 1-03274).~~Dan River Grand Jury Settlement.

10.5

Amendment to Employment Agreement between Lynn J. Good and Duke Energy Corporation (incorporated by reference to Registrant's Current Report on Form 8-K filed on June 29, 2015, File No. 1-32853).

*12

Computation of Ratio of Earnings to Fixed Charges – DUKE ENERGY CORPORATION

*31.1.1

Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

123

PART II

*31.1.2

Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

*31.1.3

Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

*31.1.4

Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

*31.1.5

Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

*31.1.6

Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

*31.1.7

Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

*31.2.1

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

*31.2.2

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

*31.2.3

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

*31.2.4

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

*31.2.5

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

~~113~~

~~PART II~~

*31.2.6

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

*31.2.7

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

*32.1.1

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*32.1.2

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*32.1.3

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*32.1.4

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*32.1.5

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*32.1.6

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*32.1.7

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*32.2.1

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*32.2.2

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*32.2.3

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

124

PART II

*32.2.4

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*32.2.5

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*32.2.6

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*32.2.7

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*101.INS

XBRL Instance Document

*101.SCH

XBRL Taxonomy Extension Schema Document

*101.CAL

XBRL Taxonomy Calculation Linkbase Document

*101.LAB

XBRL Taxonomy Label Linkbase Document

*101.PRE

XBRL Taxonomy Presentation Linkbase Document

*101.DEF

XBRL Taxonomy Definition Linkbase Document

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.

~~114~~125

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.~~LLC DUKE ENERGY FLORIDA, ~~INC.~~LLC DUKE ENERGY OHIO, INC. DUKE ENERGY INDIANA, INC.

Date:	~~May 8,~~August 7, 2015	/s/ STEVEN K. YOUNG
		Steven K. Young Executive Vice President and Chief Financial Officer

Date:	~~May 8,~~August 7, 2015	/s/ BRIAN D. SAVOY
		Brian D. Savoy Senior Vice President, Chief Accounting Officer and Controller

~~115~~126



(in millions)	December 31, 2014		Provision / Adjustments		Cash Reductions			March 31, 2015
Duke Energy Ohio	$	94	$	—	$	(1	)	$	93



(in millions)	Regulated Utilities			Commercial Power			Total
Balance at December 31, 2014
Goodwill	$	1,136		$	1,188		$	2,324
Accumulated impairment charges	(216		)	(1,188		)	(1,404		)
Balance at December 31, 2014, as adjusted for accumulated impairment charges	920			—			920
Balance at March 31, 2015
Goodwill	1,136			1,188			2,324
Accumulated impairment charges	(216		)	(1,188		)	(1,404		)
Balance at March 31, 2015, as adjusted for accumulated impairment charges	$	920		$	—		$	920



	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