0001326160 duk:DukeEnergyProgressMember us-gaap:LineOfCreditMember 2019-09-30 0001326160 duk:DukeEnergyCarolinasMember duk:OtherRevenuesMember duk:ElectricUtilitiesandInfrastructureMember 2019-07-01 2019-09-30




UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
ýQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20182019
OR
¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
_________________________________to_________
Commission file number
Registrant, State of Incorporation or Organization,
Address of Principal Executive Offices and Telephone Number
IRS Employer Identification No.Number
 
dukeenergylogo4ca57.jpg
 
1-32853
DUKE ENERGY CORPORATION
(a Delaware corporation)
550 South Tryon Street
Charlotte, North Carolina 28202-1803
704-382-3853
20-2777218
(a Delaware corporation)
550 South Tryon Street
Charlotte, North Carolina28202-1803
704-382-3853
Commission file numberRegistrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number and IRS Employer Identification NumberCommission file numberRegistrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number and IRS Employer Identification Number
1-4928
DUKE ENERGY CAROLINAS, LLC
(a North Carolina limited liability company)
526 South Church Street
Charlotte, North Carolina 28202-1803
704-382-3853
56-0205520
56-0205520
(a North Carolina limited liability company)
526 South Church Street
Charlotte, North Carolina28202-1803
704-382-3853
1-3274
1-15929
PROGRESS ENERGY, INC.

56-2155481
(a North Carolina corporation)
410 South Wilmington Street
Raleigh, North Carolina27601-1748
704-382-3853
1-3382

DUKE ENERGY PROGRESS, LLC
56-0165465
(a North Carolina limited liability company)
410 South Wilmington Street
Raleigh, North Carolina27601-1748
704-382-3853
1-3274

DUKE ENERGY FLORIDA, LLC
59-0247770
(a Florida limited liability company)
299 First Avenue North
St. Petersburg, Florida33701
704-382-3853
(a Florida limited liability company)
299 First Avenue North
St. Petersburg, Florida 33701
704-382-3853
59-0247770
1-15929
1-1232

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.
31-0240030
(an Ohio corporation)
139 East Fourth Street
Cincinnati, Ohio45202
704-382-3853
(an Ohio corporation)
139 East Fourth Street
Cincinnati, Ohio 45202
704-382-3853
31-0240030
1-3382
1-3543

DUKE ENERGY PROGRESS, LLC
(a North Carolina limited liability company)
410 South Wilmington Street
Raleigh, North Carolina 27601-1748
704-382-3853
56-0165465
1-3543
DUKE ENERGY INDIANA, LLC
35-0594457
(an Indiana limited liability company)
1000 East Main Street
Plainfield, Indiana46168
704-382-3853
(an Indiana limited liability company)
1000 East Main Street
Plainfield, Indiana 46168
704-382-3853
35-0594457
1-6196

PIEDMONT NATURAL GAS COMPANY, INC.
56-0556998
(a North Carolina corporation)
4720 Piedmont Row Drive
Charlotte, North Carolina28210
704-364-3120
(a North Carolina corporation)
4720 Piedmont Row Drive
Charlotte, North Carolina 28210
704-364-3120
56-0556998
   




SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of each exchange on
Registrant
Title of each classTrading symbolswhich registered
Duke Energy
Common Stock, $0.001 par valueDUKNew York Stock Exchange LLC

Duke Energy
5.125% Junior Subordinated Debentures due    DUKHNew York Stock Exchange LLC
January 15, 2073
Duke Energy
5.625% Junior Subordinated Debentures due    DUKBNew York Stock Exchange LLC
September 15, 2078
Duke Energy
Depositary Shares, each representing a 1/1,000th    DUK PR ANew York Stock Exchange LLC
interest in a share of 5.75% Series A Cumulative
Redeemable Perpetual Preferred Stock, par value
$0.001 per share
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)
Yesx
No¨ Duke Energy Florida, LLC (Duke Energy Florida)
Yesx
No¨
Duke Energy Carolinas, LLC (Duke Energy Carolinas)
Yesx
No¨ Duke Energy Ohio, Inc. (Duke Energy Ohio)
Yesx
No¨
Progress Energy, Inc. (Progress Energy)
Yesx
No¨ Duke Energy Indiana, LLC (Duke Energy Indiana)
Yesx
No¨
Duke Energy Progress, LLC (Duke Energy Progress)
Yesx
No¨ Piedmont Natural Gas Company, Inc. (Piedmont)
Yesx
No¨


Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
Duke Energy
Yesx
No¨ Duke Energy Florida
Yesx
No¨
Duke Energy Carolinas
Yesx
No¨ Duke Energy Ohio
Yesx
No¨
Progress Energy
Yesx
No¨ Duke Energy Indiana
Yesx
No¨
Duke Energy Progress
Yesx
No¨ Piedmont
Yesx
No¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Duke Energy
Large accelerated filerx
Accelerated filer¨
Non-accelerated filer¨
Smaller reporting company¨
Emerging Growth Company ¨growth company
Duke Energy Carolinas
Large accelerated filer¨
Accelerated filer¨
Non-accelerated filerx
Smaller reporting company¨
Emerging Growth Company ¨growth company
Progress Energy
Large accelerated filer¨
Accelerated filer¨
Non-accelerated filerx
Smaller reporting company¨
Emerging Growth Company ¨growth company
Duke Energy Progress
Large accelerated filer¨
Accelerated filer¨
Non-accelerated filerx
Smaller reporting company¨
Emerging Growth Company ¨growth company
Duke Energy Florida
Large accelerated filer¨
Accelerated filer¨
Non-accelerated filerx
Smaller reporting company¨
Emerging Growth Company ¨growth company
Duke Energy Ohio
Large accelerated filer¨
Accelerated filer¨
Non-accelerated filerx
Smaller reporting company¨
Emerging Growth Company ¨growth company
Duke Energy Indiana
Large accelerated filer¨
Accelerated filer¨
Non-accelerated filerx
Smaller reporting company¨
Emerging Growth Company ¨growth company
Piedmont
Large accelerated filer¨
Accelerated filer¨
Non-accelerated filerx
Smaller reporting company¨
Emerging Growth Company ¨growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Duke Energy
Yes¨
Nox Duke Energy Florida
Yes¨
Nox
Duke Energy Carolinas
Yes¨
Nox Duke Energy Ohio
Yes¨
Nox
Progress Energy
Yes¨
Nox Duke Energy Indiana
Yes¨
Nox
Duke Energy Progress
Yes¨
Nox Piedmont
Yes¨
Nox


Number of shares of Commoncommon stock outstanding at October 31, 2018:2019:
RegistrantDescriptionShares
Duke EnergyCommon stock, $0.001 par value712,877,558729,032,868
This combined Form 10-Q is filed separately by eight registrants: Duke Energy, Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont (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, Duke Energy Indiana and Piedmont meet the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and are therefore filing this form with the reduced disclosure format specified in General Instructions H(2) of Form 10-Q.







TABLE OF CONTENTS
  
   
PART I. FINANCIAL INFORMATION
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 Piedmont Natural Gas Company, Inc. Financial Statements
   
  
 Note 1 – Organization and Basis of Presentation
 Note 2 – Business Segments
 Note 3 – Regulatory Matters
 Note 4 – Commitments and Contingencies
 Note 5 – Debt and Credit FacilitiesLeases
 Note 6 – Asset Retirement ObligationsDebt and Credit Facilities
 Note 7 – GoodwillAsset Retirement Obligations
 Note 8 – Related Party TransactionsGoodwill
 Note 9 – Derivatives and HedgingRelated Party Transactions
 Note 10 – Investments in DebtDerivatives and Equity SecuritiesHedging
 Note 11 – Fair Value MeasurementsInvestments in Debt and Equity Securities
 Note 12 – Variable Interest EntitiesFair Value Measurements
 Note 13 – RevenueVariable Interest Entities
 Note 14 – Common StockRevenue
 Note 15 – Stock-Based CompensationStockholders' Equity
 Note 16 – Employee Benefit Plans
 Note 17 – Income Taxes
 Note 18 – Subsequent Events
   
   
   
   
PART II. OTHER INFORMATION
   
   
   
   
 







FORWARD-LOOKING STATEMENTS


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 and can often be identified by terms and phrases that include “anticipate,” “believe,” “intend,” “estimate,” “expect,” “continue,” “should,” “could,” “may,” “plan,” “project,” “predict,” “will,” “potential,” “forecast,” “target,” “guidance,” “outlook” or other similar terminology. Various factors may cause actual results to be materially different than the suggested outcomes within forward-looking statements; accordingly, there is no assurance that such results will be realized. These factors include, but are not limited to:
State, federal and foreign legislative and regulatory initiatives, including costs of compliance with existing and future environmental requirements, including those related to 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 costs and liabilities to comply with federal and state laws, regulations and legal requirements related to coal ash remediation, including amounts for required closure of certain ash impoundments, are uncertain and difficult to estimate;
The ability to recover eligible costs, including amounts associated with coal ash impoundment retirement obligations and costs related to significant weather events, and to earn an adequate return on investment through rate case proceedings and the regulatory process;
The costs of decommissioning Crystal River Unit 3 and other nuclear facilities could prove to be more extensive than amounts estimated and all costs may not be fully recoverable through the regulatory process;
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 sustained downturns of the economy and the economic health of our service territories or variations in customer usage patterns, including energy efficiency efforts and use of alternative energy sources, such as self-generation and distributed generation technologies;
Federal and state regulations, laws and other efforts designed to promote and expand the use of energy efficiency measures and distributed generation technologies, such as private solar and battery storage, in Duke Energy service territories could result in customers leaving the electric distribution system, excess generation resources as well as stranded costs;
Advancements in technology;
Additional competition in electric and natural gas markets and continued industry consolidation;
The influence of weather and other natural phenomena on operations, including the economic, operational and other effects of severe storms, hurricanes, droughts, earthquakes and tornadoes, including extreme weather associated with climate change;
The ability to successfully operate electric generating facilities and deliver electricity to customers including direct or indirect effects to the company resulting from an incident that affects the U.S. electric grid or generating resources;
The ability to obtain the necessary permits and approvals and to complete necessary or desirable pipeline expansion or infrastructure projects in our natural gas business;
Operational interruptions to our natural gas distribution and transmission activities;
The availability of adequate interstate pipeline transportation capacity and natural gas supply;
The impact on facilities and business from a terrorist attack, cybersecurity threats, data security breaches, operational accidents, information technology failures or other catastrophic events, such as fires, explosions, pandemic health events or other similar occurrences;
The inherent risks associated with the operation of nuclear facilities, including environmental, health, safety, regulatory and financial risks, including the financial stability of third-party service providers;
The timing and extent of changes in commodity prices and interest 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, interest rate fluctuations, compliance with debt covenants and conditions and general market and economic conditions;
Credit ratings of the Duke Energy Registrants may be different from what is expected;
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 the Duke Energy Registrants’ capital investment projects, 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);



FORWARD-LOOKING STATEMENTSState, federal and foreign legislative and regulatory initiatives, including costs of compliance with existing and future environmental requirements, including those related to 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 costs and liabilities to comply with federal and state laws, regulations and legal requirements related to coal ash remediation, including amounts for required closure of certain ash impoundments, are uncertain and difficult to estimate;
The ability to recover eligible costs, including amounts associated with coal ash impoundment retirement obligations and costs related to significant weather events, and to earn an adequate return on investment through rate case proceedings and the regulatory process;
The costs of decommissioning Crystal River Unit 3 and other nuclear facilities could prove to be more extensive than amounts estimated and all costs may not be fully recoverable through the regulatory process;
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 sustained downturns of the economy and the economic health of our service territories or variations in customer usage patterns, including energy efficiency efforts and use of alternative energy sources, such as self-generation and distributed generation technologies;
Federal and state regulations, laws and other efforts designed to promote and expand the use of energy efficiency measures and distributed generation technologies, such as private solar and battery storage, in Duke Energy service territories could result in customers leaving the electric distribution system, excess generation resources as well as stranded costs;
Advancements in technology;
Additional competition in electric and natural gas markets and continued industry consolidation;
The influence of weather and other natural phenomena on operations, including the economic, operational and other effects of severe storms, hurricanes, droughts, earthquakes and tornadoes, including extreme weather associated with climate change;
The ability to successfully operate electric generating facilities and deliver electricity to customers including direct or indirect effects to the company resulting from an incident that affects the U.S. electric grid or generating resources;
The ability to obtain the necessary permits and approvals and to complete necessary or desirable pipeline expansion or infrastructure projects in our natural gas business;
Operational interruptions to our natural gas distribution and transmission activities;
The availability of adequate interstate pipeline transportation capacity and natural gas supply;
The impact on facilities and business from a terrorist attack, cybersecurity threats, data security breaches and other catastrophic events, such as fires, explosions, pandemic health events or other similar occurrences;
The inherent risks associated with the operation of nuclear facilities, including environmental, health, safety, regulatory and financial risks, including the financial stability of third-party service providers;
The timing and extent of changes in commodity prices and interest 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, interest rate fluctuations, compliance with debt covenants and conditions and general market and economic conditions;
Credit ratings of the Duke Energy Registrants may be different from what is expected;
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 the Duke Energy Registrants’ capital investment projects, 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 new U.S. tax legislation to our financial condition, results of operations or cash flows and our credit ratings;
The impacts from potential impairments of goodwill or equity method investment carrying values; and
The ability to implement our business strategy.

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 U.S. tax legislation to our financial condition, results of operations or cash flows and our credit ratings;
The impacts from potential impairments of goodwill or equity method investment carrying values; and
The ability to implement our business strategy, including enhancing existing technology systems.
Additional risks and uncertainties are identified and discussed in the Duke Energy Registrants' reports filed with the SEC and available at the SEC's website at sec.gov. 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 and the Duke Energy Registrants expressly disclaim an obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.





PART I. FINANCIAL INFORMATION

GLOSSARY OF TERMS



Glossary of Terms
The following terms or acronyms used in this Form 10-Q are defined below:
Term or AcronymDefinition
2013 SettlementRevised and Restated Stipulation and Settlement Agreement approved in November 2013 among Duke Energy Florida, the Florida OPC and other customer representatives
2017 SettlementSecond Revised and Restated Settlement Agreement in 2017 among Duke Energy Florida, the Florida OPC and other customer representatives, which replaces and supplants the 2013 Settlement
ACPAtlantic Coast Pipeline, LLC, a limited liability company owned by Dominion Energy, Inc., Duke Energy and Southern Company Gas
ACP pipelineThe approximately 600-mile proposed interstate natural gas pipeline
AFSAvailable for Sale
AFUDCAllowance for funds used during construction
the AgentsWells Fargo Securities, LLC, Citigroup Global Market Inc., J.P. Morgan Securities, LLC
ALJAdministrative Law Judge
AMIAdvanced Metering Infrastructure
AMTAlternative Minimum Tax
AOCIAccumulated Other Comprehensive Income (Loss)
AROAsset retirement obligations
ATMAt-the-market
BeckjordBeckjord Generating Station
Belews CreekBelews Creek Steam Station
BisonBison Insurance Company Limited
CardinalCardinal Pipeline Company, LLC
CECLCurrent expected credit loss
CCCombined Cycle
CCRCoal Combustion Residuals
Citrus County CCCitrus County Combined Cycle Facility
Coal Ash ActNorth Carolina Coal Ash Management Act of 2014
the CompanyDuke Energy Corporation and its subsidiaries
ConstitutionConstitution Pipeline Company, LLC
CPCNCertificate of Public Convenience and Necessity
CPRECompetitive Procurement of Renewable Energy
CRCCinergy Receivables Company, LLC
Crystal River Unit 3Crystal River Unit 3 Nuclear Plant
CWAClean Water Act
D.C. Circuit CourtU.S. Court of Appeals for the District of Columbia Circuit
DEFPFDuke Energy Florida Project Finance, LLC
DEFRDuke Energy Florida Receivables, LLC
DEPRDuke Energy Progress Receivables, LLC
DERFDuke Energy Receivables Finance Company, LLC
DRIPDividend Reinvestment Program
Duke EnergyDuke Energy Corporation (collectively with its subsidiaries)
Duke Energy OhioDuke Energy Ohio, Inc.



GLOSSARY OF TERMS


Duke Energy ProgressDuke Energy Progress, LLC
Duke Energy CarolinasDuke Energy Carolinas, LLC
Duke Energy FloridaDuke Energy Florida, LLC
Duke Energy IndianaDuke Energy Indiana, LLC
Duke Energy KentuckyDuke Energy Kentucky, Inc.
Duke Energy RegistrantsDuke Energy, Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont
EDAEquity Distribution Agreement
EDITExcess deferred income tax
EPAU.S. Environmental Protection Agency
EPCEngineering, Procurement and Construction agreement
EPSEarnings Per Share
ESPElectric Security Plan
ETREffective tax rate
Exchange ActSecurities Exchange Act of 1934
FASBFinancial Accounting Standards Board
FERCFederal Energy Regulatory Commission
FESFirstEnergy Solutions Corp.
FitchFitch Ratings, Inc.
FluorFluor Enterprises, Inc.
FPSCFlorida Public Service Commission
FTRFinancial transmission rights
FV-NIFair value through net income
GAAPGenerally accepted accounting principles in the U.S.
GAAP Reported EarningsNet Income Attributable to Duke Energy Corporation
GAAP Reported EPSDiluted EPS Attributable to Duke Energy Corporation common stockholders
GWhGigawatt-hours
Hardy StorageHardy Storage Company, LLC
HLBVHypothetical Liquidation at Book Value
ICPAInter-Company Power Agreement
IGCCIntegrated Gasification Combined Cycle
IMRIntegrity Management Rider
IRPIntegrated Resource Plan
IRSInternal Revenue Service
Investment TrustsNDTF investments and grantor trusts of Duke Energy Progress, Duke Energy Florida and Duke Energy Indiana
IURCIndiana Utility Regulatory Commission
JDAJoint Dispatch Agreement
KPSCKentucky Public Service Commission
Lee Nuclear StationWilliam States Lee III Nuclear Station
MGPManufactured gas plant
MISOMidcontinent Independent System Operator, Inc.
MMBtuMillion British Thermal Unit



GLOSSARY OF TERMS


Moody'sMoody's Investors Service, Inc.
MWMegawatt
MWhMegawatt-hour
NAVNet asset value
NCDEQNorth Carolina Department of Environmental Quality
NCUCNorth Carolina Utilities Commission
NDTFNuclear decommissioning trust funds
NMCNational Methanol Company
NPDESNational Pollutant Discharge Elimination System
NPNSNormal purchase/normal sale
NRCU.S. Nuclear Regulatory Commission
OPEBOther Post-Retirement Benefit Obligations
ORSSouth Carolina Office of Regulatory Staff
OTTIOther-than-temporary impairment
OVECOhio Valley Electric Corporation
PiedmontPiedmont Natural Gas Company, Inc.
Piedmont Term LoanTerm loan facility with commitments totaling $350M entered in June 2017
Pine NeedlePine Needle LNG Company, LLC
PioneerPioneer Transmission, LLC
PJMPJM Interconnection, LLC
PMPAPiedmont Municipal Power Agency
PPAPurchase Power Agreement
Progress EnergyProgress Energy, Inc.
PSCSCPublic Service Commission of South Carolina
PUCOPublic Utilities Commission of Ohio
RECRenewable Energy Certificate
ROU assetsRight-of-use assets
RRBARoanoke River Basin Association
SELCSouthern Environmental Law Center
S&PStandard & Poor's Rating Services
Subsidiary RegistrantsDuke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont
the Tax ActTax Cuts and Jobs Act
TPUCTennessee Public Utility Commission
U.S.United States
VIEVariable Interest Entity
WACCWeighted Average Cost of Capital
WNAWeather normalization adjustment
W.S. Lee CCWilliam States Lee Combined Cycle Facility




FINANCIAL STATEMENTS


ITEM 1. FINANCIAL STATEMENTS


DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended Nine Months EndedThree Months Ended Nine Months Ended
September 30, September 30,September 30, September 30,
(in millions, except per-share amounts)2018
 2017
 2018
 2017
2019
 2018
 2019
 2018
Operating Revenues              
Regulated electric$6,216
 $6,091
 $16,678
 $16,122
$6,515
 $6,216
 $17,223
 $16,678
Regulated natural gas230
 247
 1,221
 1,168
223
 230
 1,231
 1,221
Nonregulated electric and other182
 144
 507
 476
202
 182
 522
 507
Total operating revenues6,628
 6,482
 18,406
 17,766
6,940
 6,628
 18,976
 18,406
Operating Expenses    
 
    
 
Fuel used in electric generation and purchased power1,931
 1,863
 5,181
 4,853
1,978
 1,931
 5,228
 5,181
Cost of natural gas58
 68
 460
 402
48
 58
 451
 460
Operation, maintenance and other1,584
 1,476
 4,592
 4,385
1,484
 1,584
 4,337
 4,592
Depreciation and amortization1,039
 900
 2,979
 2,594
1,186
 1,039
 3,364
 2,979
Property and other taxes323
 313
 954
 924
335
 323
 1,012
 954
Impairment charges124
 207
 339
 216
(20) 124
 (16) 339
Total operating expenses5,059
 4,827
 14,505
 13,374
5,011
 5,059
 14,376
 14,505
Gains (Losses) on Sales of Other Assets and Other, net10
 6
 (87) 24

 10
 
 (87)
Operating Income1,579
 1,661
 3,814
 4,416
1,929
 1,579
 4,600
 3,814
Other Income and Expenses    

 

    

 

Equity in earnings of unconsolidated affiliates37
 36
 49
 101
50
 37
 137
 49
Other income and expenses, net131
 122
 327
 358
104
 131
 308
 327
Total other income and expenses168
 158
 376
 459
154
 168
 445
 376
Interest Expense517
 498
 1,550
 1,475
572
 517
 1,657
 1,550
Income From Continuing Operations Before Income Taxes1,230
 1,321
 2,640
 3,400
1,511
 1,230
 3,388
 2,640
Income Tax Expense From Continuing Operations168
 364
 449
 1,035
188
 168
 424
 449
Income From Continuing Operations1,062
 957
 2,191
 2,365
1,323
 1,062
 2,964
 2,191
Income (Loss) From Discontinued Operations, net of tax4
 (2) (1) (4)
 4
 
 (1)
Net Income1,066
 955
 2,190
 2,361
1,323
 1,066
 2,964
 2,190
Less: Net (Loss) Income Attributable to Noncontrolling Interests(16) 1
 (12) 5
Less: Net Loss Attributable to Noncontrolling Interests(19) (16) (110) (12)
Less: Preferred Dividends15
 
 27
 
Net Income Attributable to Duke Energy Corporation$1,082
 $954
 $2,202
 $2,356
$1,327
 $1,082
 $3,047
 $2,202
              
Earnings Per Share – Basic and Diluted              
Income from continuing operations attributable to Duke Energy Corporation common stockholders              
Basic$1.51
 $1.36
 $3.12
 $3.37
$1.82
 $1.51
 $4.18
 $3.12
Diluted$1.51
 $1.36
 $3.11
 $3.37
$1.82
 $1.51
 $4.18
 $3.11
Loss from discontinued operations attributable to Duke Energy Corporation common stockholders       
Basic$
 $
 $
 $(0.01)
Diluted$
 $
 $
 $(0.01)
Income (Loss) from discontinued operations attributable to Duke Energy Corporation common stockholders       
Basic and Diluted$
 $
 $
 $
Net income attributable to Duke Energy Corporation common stockholders              
Basic$1.51
 $1.36
 $3.12
 $3.36
$1.82
 $1.51
 $4.18
 $3.12
Diluted$1.51
 $1.36
 $3.11
 $3.36
$1.82
 $1.51
 $4.18
 $3.11
Weighted average shares outstanding              
Basic713
 700
 705
 700
729
 713
 728
 705
Diluted714
 700
 706
 700
729
 714
 728
 706


PART I
FINANCIAL STATEMENTS


DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
 Three Months Ended Nine Months Ended
 September 30, September 30,
(in millions)2019
 2018
 2019
 2018
Net Income$1,323
 $1,066
 $2,964
 $2,190
Other Comprehensive (Loss) Income, net of tax       
Pension and OPEB adjustments(2) 1
 1
 3
Net unrealized (losses) gains on cash flow hedges(16) (3) (62) 10
Reclassification into earnings from cash flow hedges1
 6
 4
 5
Unrealized gains (losses) on available-for-sale securities2
 
 10
 (5)
Other Comprehensive (Loss) Income, net of tax(15) 4
 (47) 13
Comprehensive Income1,308
 1,070
 2,917
 2,203
Less: Comprehensive Loss Attributable to Noncontrolling Interests(19) (16) (110) (12)
Less: Preferred Dividends15
 
 27
 
Comprehensive Income Attributable to Duke Energy Corporation$1,312
 $1,086
 $3,000
 $2,215




FINANCIAL STATEMENTS
 Three Months Ended Nine Months Ended
 September 30, September 30,
(in millions)2018
 2017
 2018
 2017
Net Income$1,066
 $955
 $2,190
 $2,361
Other Comprehensive Income, net of tax       
Pension and OPEB adjustments1
 
 3
 2
Net unrealized (losses) gains on cash flow hedges(3) 2
 10
 (2)
Reclassification into earnings from cash flow hedges6
 (2) 5
 3
Unrealized (losses) gains on available-for-sale securities
 2
 (5) 10
Other Comprehensive Income, net of tax4
 2
 13
 13
Comprehensive Income1,070
 957
 2,203
 2,374
Less: Comprehensive (Loss) Income Attributable to Noncontrolling Interests(16) 1
 (12) 5
Comprehensive Income Attributable to Duke Energy Corporation$1,086
 $956
 $2,215
 $2,369


PART I


DUKE ENERGY CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)September 30, 2018 December 31, 2017September 30, 2019 December 31, 2018
ASSETS      
Current Assets      
Cash and cash equivalents$303
 $358
$379
 $442
Receivables (net of allowance for doubtful accounts of $17 at 2018 and $14 at 2017)682
 779
Receivables of VIEs (net of allowance for doubtful accounts of $55 at 2018 and $54 at 2017)2,397
 1,995
Receivables (net of allowance for doubtful accounts of $20 at 2019 and $16 at 2018)755
 962
Receivables of VIEs (net of allowance for doubtful accounts of $53 at 2019 and $55 at 2018)2,322
 2,172
Inventory3,140
 3,250
3,107
 3,084
Regulatory assets (includes $52 at 2018 and $51 at 2017 related to VIEs)1,906
 1,437
Other1,092
 634
Regulatory assets (includes $52 at 2019 and 2018 related to VIEs)1,723
 2,005
Other (includes $188 at 2019 and $162 at 2018 related to VIEs)1,333
 1,049
Total current assets9,520
 8,453
9,619
 9,714
Property, Plant and Equipment      
Cost132,677
 127,507
143,794
 134,458
Accumulated depreciation and amortization(43,200) (41,537)(45,149) (43,126)
Generation facilities to be retired, net388
 421
267
 362
Net property, plant and equipment89,865
 86,391
98,912
 91,694
Other Noncurrent Assets      
Goodwill19,303
 19,396
19,303
 19,303
Regulatory assets (includes $1,055 at 2018 and $1,091 at 2017 related to VIEs)12,616
 12,442
Regulatory assets (includes $1,002 at 2019 and $1,041 at 2018 related to VIEs)13,916
 13,617
Nuclear decommissioning trust funds7,421
 7,097
7,695
 6,720
Operating lease right-of-use assets, net1,703
 
Investments in equity method unconsolidated affiliates1,328
 1,175
1,864
 1,409
Other3,112
 2,960
Other (includes $63 at 2019 and $261 at 2018 related to VIEs)2,905
 2,935
Total other noncurrent assets43,780
 43,070
47,386
 43,984
Total Assets$143,165
 $137,914
$155,917
 $145,392
LIABILITIES AND EQUITY      
Current Liabilities      
Accounts payable$3,234
 $3,043
$2,946
 $3,487
Notes payable and commercial paper2,891
 2,163
2,469
 3,410
Taxes accrued674
 551
712
 577
Interest accrued557
 525
559
 559
Current maturities of long-term debt (includes $228 at 2018 and $225 at 2017 related to VIEs)3,455
 3,244
Current maturities of long-term debt (includes $231 at 2019 and $227 at 2018 related to VIEs)3,096
 3,406
Asset retirement obligations902
 689
861
 919
Regulatory liabilities506
 402
673
 598
Other1,703
 1,865
2,074
 2,085
Total current liabilities13,922
 12,482
13,390
 15,041
Long-Term Debt (includes $4,015 at 2018 and $4,306 at 2017 related to VIEs)50,507
 49,035
Long-Term Debt (includes $4,060 at 2019 and $3,998 at 2018 related to VIEs)54,818
 51,123
Other Noncurrent Liabilities      
Deferred income taxes7,765
 6,621
8,776
 7,806
Asset retirement obligations9,354
 9,486
11,740
 9,548
Regulatory liabilities15,587
 15,330
15,202
 14,834
Operating lease liabilities1,456
 
Accrued pension and other post-retirement benefit costs1,001
 1,103
900
 988
Investment tax credits539
 539
579
 568
Other1,477
 1,581
Other (includes $218 at 2019 and $212 at 2018 related to VIEs)1,649
 1,650
Total other noncurrent liabilities35,723
 34,660
40,302
 35,394
Commitments and Contingencies

 



 


Equity      
Common stock, $0.001 par value, 2 billion shares authorized; 713 million shares outstanding at 2018 and 700 million shares outstanding at 20171
 1
Preferred stock, Series A, $0.001 par value, 40 million depositary shares authorized and outstanding at 2019973
 
Preferred stock, Series B, $0.001 par value, 1 million shares authorized and outstanding at 2019990
 
Common stock, $0.001 par value, 2 billion shares authorized; 729 million shares outstanding at 2019 and 727 million shares outstanding at 20181
 1
Additional paid-in capital39,747
 38,792
40,488
 40,795
Retained earnings3,313
 3,013
4,139
 3,113
Accumulated other comprehensive loss(66) (67)(153) (92)
Total Duke Energy Corporation stockholders' equity42,995
 41,739
46,438
 43,817
Noncontrolling interests18
 (2)969
 17
Total equity43,013
 41,737
47,407
 43,834
Total Liabilities and Equity$143,165
 $137,914
$155,917
 $145,392


PART I
FINANCIAL STATEMENTS


DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months EndedNine Months Ended
September 30,September 30,
(in millions)2018
 2017
2019
 2018
CASH FLOWS FROM OPERATING ACTIVITIES      
Net income$2,190
 $2,361
$2,964
 $2,190
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation, amortization and accretion (including amortization of nuclear fuel)3,447
 2,990
3,831
 3,447
Equity component of AFUDC(175) (175)(99) (175)
Losses (gains) on sales of other assets87
 (28)
Losses on sales of other assets
 87
Impairment charges339
 216
(16) 339
Deferred income taxes1,099
 1,016
736
 1,099
Equity in earnings of unconsolidated affiliates(49) (101)(137) (49)
Accrued pension and other post-retirement benefit costs46
 19
13
 46
Contributions to qualified pension plans(141) (8)(77) (141)
Payments for asset retirement obligations(389) (420)(582) (389)
Payment for disposal of other assets(105) 

 (105)
Other rate case adjustments37
 

 37
Provision for rate refunds375
 
61
 375
(Increase) decrease in      
Net realized and unrealized mark-to-market and hedging transactions15
 4
(4) 15
Receivables(288) 80
62
 (288)
Inventory104
 248
(3) 104
Other current assets(648) (210)(134) (648)
Increase (decrease) in      
Accounts payable389
 (554)(538) 389
Taxes accrued122
 233
125
 122
Other current liabilities(180) (532)(198) (180)
Other assets(585) (159)(264) (585)
Other liabilities(23) (2)(103) (23)
Net cash provided by operating activities5,667
 4,978
5,637
 5,667
CASH FLOWS FROM INVESTING ACTIVITIES      
Capital expenditures(6,752) (5,841)(8,084) (6,752)
Contributions to equity method investments(298) (370)(264) (298)
Purchases of debt and equity securities(2,763) (3,170)(3,105) (2,763)
Proceeds from sales and maturities of debt and equity securities2,718
 3,199
3,092
 2,718
Other(175) (149)(272) (175)
Net cash used in investing activities(7,270) (6,331)(8,633) (7,270)
CASH FLOWS FROM FINANCING ACTIVITIES      
Proceeds from the:      
Issuance of long-term debt4,110
 5,710
6,131
 4,110
Issuance of preferred stock1,963
 
Issuance of common stock834
 
41
 834
Payments for the redemption of long-term debt(2,278) (2,035)(2,737) (2,278)
Proceeds from the issuance of short-term debt with original maturities greater than 90 days243
 265
339
 243
Payments for the redemption of short-term debt with original maturities greater than 90 days(207) (237)(479) (207)
Notes payable and commercial paper638
 (647)(879) 638
Contributions from noncontrolling interests615
 
Dividends paid(1,835) (1,825)(1,990) (1,835)
Other42
 8
(17) 42
Net cash provided by financing activities1,547
 1,239
2,987
 1,547
Net decrease in cash, cash equivalents and restricted cash(56) (114)(9) (56)
Cash, cash equivalents and restricted cash at beginning of period505
 541
591
 505
Cash, cash equivalents and restricted cash at end of period$449
 $427
$582
 $449
Supplemental Disclosures:      
Significant non-cash transactions:      
Accrued capital expenditures$1,016
 $740
$1,073
 $1,016
Non-cash dividends79
 
81
 79


PART I

FINANCIAL STATEMENTS




DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
         Accumulated Other Comprehensive Income (Loss)      
           Net Unrealized
   Total
    
         Net Gains
 (Losses) Gains
   Duke Energy
    
 Common
   Additional
   (Losses) on
 on Available-
 Pension and
 Corporation
    
 Stock
 Common
 Paid-in
 Retained
 Cash Flow
 for-Sale-
 OPEB
 Stockholders'
 Noncontrolling
 Total
(in millions)Shares
 Stock
 Capital
 Earnings
 Hedges
 Securities
 Adjustments
 Equity
 Interests
 Equity
Balance at December 31, 2016700
 $1
 $38,741
 $2,384
 $(20) $(1) $(72) $41,033
 $8
 $41,041
Net income
 
 
 2,356
 
 
 
 2,356
 5
 2,361
Other comprehensive income
 
 
 
 1
 10
 2
 13
 
 13
Common stock issuances, including dividend reinvestment and employee benefits
 
 33
 
 
 
 
 33
 
 33
Common stock dividends
 
 
 (1,825) 
 
 
 (1,825) 
 (1,825)
Distributions to noncontrolling interest in subsidiaries
 
 
 
 
 
 
 
 (2) (2)
Other(a)

 
 
 21
 
 
 
 21
 
 21
Balance at September 30, 2017700
 $1

$38,774

$2,936

$(19)
$9

$(70)
$41,631

$11

$41,642
                    
Balance at December 31, 2017700
 $1
 $38,792
 $3,013
 $(10) $12
 $(69) $41,739
 $(2) $41,737
Net income (loss)
 
 
 2,202
 
 
 
 2,202
 (12) 2,190
Other comprehensive income (loss)
 
 
 
 15
 (5) 3
 13
 
 13
Common stock issuances, including dividend reinvestment and employee benefits13
 
 955
 
 
 
 
 955
 
 955
Common stock dividends
 
 
 (1,914) 
 
 
 (1,914) 
 (1,914)
Distributions to noncontrolling interest in subsidiaries
 
 
 
 
 
 
 
 (1) (1)
Other(b)

 
 
 12
 
 (12) 
 
 33
 33
Balance at September 30, 2018713

$1

$39,747

$3,313

$5

$(5)
$(66)
$42,995

$18

$43,013
 Three Months Ended September 30, 2018 and 2019
      Accumulated Other Comprehensive   
       (Loss) Income   
       Net Unrealized
 Total
  
      Net Gains
(Losses) Gains
 Duke Energy
  
  Common
 Additional
 (Losses) on
on Available-
Pension and
Corporation
  
 Preferred
Stock
Common
Paid-in
Retained
Cash Flow
for-Sale-
OPEB
Stockholders'
Noncontrolling
Total
(in millions)Stock
Shares
Stock
Capital
Earnings
Hedges
Securities
Adjustments
Equity
Interests
Equity
Balance at June 30, 2018$
712
$1
$39,682
$2,894
$2
$(5)$(67)$42,507
$8
$42,515
Net income (loss)



1,082



1,082
(16)1,066
Other comprehensive income




3

1
4

4
Common stock issuances, including dividend reinvestment and employee benefits
1

65




65

65
Common stock dividends



(663)


(663)
(663)
Other








26
26
Balance at September 30, 2018$
713
$1
$39,747
$3,313
$5
$(5)$(66)$42,995
$18
$43,013
            
Balance at June 30, 2019$973
728
$1
$40,885
$3,502
$(63)$4
$(89)$45,213
$119
$45,332
Net income (loss)



1,327



1,327
(19)1,308
Other comprehensive (loss) income




(15)2
(2)(15)
(15)
Preferred stock, Series B, issuances, net of issuance costs(c)
990







990

990
Common stock issuances, including dividend reinvestment and employee benefits
1

69




69

69
Common stock dividends



(690)


(690)
(690)
Sale of noncontrolling interest(d)



(465)
10


(455)863
408
Contribution from noncontrolling interest in subsidiaries(e)









7
7
Other


(1)



(1)(1)(2)
Balance at September 30, 2019$1,963
729
$1
$40,488
$4,139
$(68)$6
$(91)$46,438
$969
$47,407

FINANCIAL STATEMENTS




DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
 Nine Months Ended September 30, 2018 and 2019
      Accumulated Other Comprehensive   
       (Loss) Income   
       Net Unrealized
 Total
  
      Net Gains
(Losses) Gains
 Duke Energy
  
  Common
 Additional
 (Losses) on
on Available-
Pension and
Corporation
  
 Preferred
Stock
Common
Paid-in
Retained
Cash Flow
for-Sale-
OPEB
Stockholders'
Noncontrolling
Total
(in millions)Stock
Shares
Stock
Capital
Earnings
Hedges
Securities
Adjustments
Equity
Interests
Equity
Balance at December 31, 2017$
700
$1
$38,792
$3,013
$(10)$12
$(69)$41,739
$(2)$41,737
Net income (loss)



2,202



2,202
(12)2,190
Other comprehensive income (loss)




15
(5)3
13

13
Common stock issuances, including dividend reinvestment and employee benefits
13

955




955

955
Common stock dividends



(1,914)


(1,914)
(1,914)
Distributions to noncontrolling interest in subsidiaries








(1)(1)
Other(a)




12

(12)

33
33
Balance at September 30, 2018$
713
$1
$39,747
$3,313
$5
$(5)$(66)$42,995
$18
$43,013
            
Balance at December 31, 2018$
727
$1
$40,795
$3,113
$(14)$(3)$(75)$43,817
$17
$43,834
Net income (loss)



3,047



3,047
(110)2,937
Other comprehensive (loss) income




(58)10
1
(47)
(47)
Preferred stock, Series A, issuances, net of issuance costs(b)
973







973

973
Preferred stock, Series B, issuances, net of issuance costs(c)
990







990

990
Common stock issuances, including dividend reinvestment and employee benefits
2

158




158

158
Common stock dividends



(2,044)


(2,044)
(2,044)
Sale of noncontrolling interest(d)



(465)
10


(455)863
408
Contributions from noncontrolling interest in subsidiaries(e)









200
200
Distributions to noncontrolling interest in subsidiaries








(1)(1)
Other(f)




23
(6)(1)(17)(1)
(1)
Balance at September 30, 2019$1,963
729
$1
$40,488
$4,139
$(68)$6
$(91)$46,438
$969
$47,407

(a)Cumulative-effect adjustment due to implementation of a new accounting standard related to stock-based compensation and the associated income taxes.
(b)Amounts in Retained Earnings and Accumulated Other Comprehensive Loss(Loss) Income represent a cumulative-effect adjustment due to implementation of a new accounting standard related to Financial Instruments Classification and Measurement.
(b)Duke Energy issued 40 million depositary shares of preferred stock, series A, in the first quarter of 2019.
(c)Duke Energy issued 1 million shares of preferred stock, series B, in the third quarter of 2019.
(d)See Note 12 for more information. Amount in Noncontrolling Interests relatesadditional discussion of the transaction.
(e)Relates to tax equity financing activity in the Commercial Renewables segment. See Note 1 for additional discussion.
(f)Amounts in Retained Earnings and Accumulated Other Comprehensive (Loss) Income primarily represent impacts to accumulated other comprehensive income due to implementation of a new accounting standard related to Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.


PART I
FINANCIAL STATEMENTS




DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
Three Months Ended Nine Months EndedThree Months Ended Nine Months Ended
September 30, September 30,September 30, September 30,
(in millions)2018
 2017
 2018
 2017
2019
 2018
 2019
 2018
Operating Revenues$2,090
 $2,136
 $5,525
 $5,581
$2,162
 $2,090
 $5,619
 $5,525
Operating Expenses              
Fuel used in electric generation and purchased power490
 531
 1,370
 1,394
504
 490
 1,371
 1,370
Operation, maintenance and other514
 494
 1,464
 1,472
443
 514
 1,324
 1,464
Depreciation and amortization305
 281
 866
 804
350
 305
 1,013
 866
Property and other taxes67
 67
 214
 206
66
 67
 221
 214
Impairment charges1
 
 191
 
6
 1
 11
 191
Total operating expenses1,377
 1,373
 4,105
 3,876
1,369
 1,377
 3,940
 4,105
Losses on Sales of Other Assets and Other, net
 
 (1) 

 
 
 (1)
Operating Income713
 763
 1,419
 1,705
793
 713
 1,679
 1,419
Other Income and Expenses, net34
 40
 108
 140
34
 34
 106
 108
Interest Expense106
 108
 323
 314
119
 106
 346
 323
Income Before Income Taxes641
 695
 1,204
 1,531
708
 641
 1,439
 1,204
Income Tax Expense145
 229
 268
 522
118
 145
 255
 268
Net Income$496
 $466
 $936
 $1,009
$590
 $496
 $1,184
 $936
Other Comprehensive Income, net of tax              
Reclassification into earnings from cash flow hedges
 
 1
 1

 
 
 1
Comprehensive Income$496
 $466
 $937
 $1,010
$590
 $496
 $1,184
 $937


PART I
FINANCIAL STATEMENTS


DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)September 30, 2018
 December 31, 2017
September 30, 2019
 December 31, 2018
ASSETS      
Current Assets      
Cash and cash equivalents$27
 $16
$23
 $33
Receivables (net of allowance for doubtful accounts of $2 at 2018 and 2017)203
 200
Receivables of VIEs (net of allowance for doubtful accounts of $7 at 2018 and 2017)795
 640
Receivables (net of allowance for doubtful accounts of $2 at 2019 and 2018)234
 219
Receivables of VIEs (net of allowance for doubtful accounts of $7 at 2019 and 2018)775
 699
Receivables from affiliated companies158
 95
108
 182
Inventory976
 971
943
 948
Regulatory assets435
 299
573
 520
Other55
 19
19
 72
Total current assets2,649
 2,240
2,675
 2,673
Property, Plant and Equipment      
Cost44,086
 42,939
47,815
 44,741
Accumulated depreciation and amortization(15,536) (15,063)(16,359) (15,496)
Net property, plant and equipment28,550
 27,876
31,456
 29,245
Other Noncurrent Assets      
Regulatory assets3,188
 2,853
3,587
 3,457
Nuclear decommissioning trust funds3,943
 3,772
4,104
 3,558
Operating lease right-of-use assets, net135
 
Other1,009
 979
1,061
 1,027
Total other noncurrent assets8,140
 7,604
8,887
 8,042
Total Assets$39,339
 $37,720
$43,018
 $39,960
LIABILITIES AND EQUITY      
Current Liabilities      
Accounts payable$888
 $842
$644
 $988
Accounts payable to affiliated companies142
 209
174
 230
Notes payable to affiliated companies804
 104
49
 439
Taxes accrued189
 234
262
 171
Interest accrued141
 108
138
 102
Current maturities of long-term debt506
 1,205
457
 6
Asset retirement obligations292
 337
214
 290
Regulatory liabilities144
 126
197
 199
Other419
 486
545
 571
Total current liabilities3,525

3,651
2,680

2,996
Long-Term Debt9,589
 8,598
11,001
 10,633
Long-Term Debt Payable to Affiliated Companies300
 300
300
 300
Other Noncurrent Liabilities      
Deferred income taxes3,639
 3,413
3,853
 3,689
Asset retirement obligations3,420
 3,273
5,184
 3,659
Regulatory liabilities6,480
 6,231
6,364
 5,999
Operating lease liabilities108
 
Accrued pension and other post-retirement benefit costs97
 95
88
 99
Investment tax credits233
 232
232
 231
Other508
 566
617
 671
Total other noncurrent liabilities14,377
 13,810
16,446
 14,348
Commitments and Contingencies

 



 

Equity      
Member's equity11,554
 11,368
12,598
 11,689
Accumulated other comprehensive loss(6) (7)(7) (6)
Total equity11,548
 11,361
12,591
 11,683
Total Liabilities and Equity$39,339
 $37,720
$43,018
 $39,960


PART I
FINANCIAL STATEMENTS


DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months EndedNine Months Ended
September 30,September 30,
(in millions)2018
 2017
2019
 2018
CASH FLOWS FROM OPERATING ACTIVITIES      
Net income$936
 $1,009
$1,184
 $936
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization (including amortization of nuclear fuel)1,084
 1,051
1,227
 1,084
Equity component of AFUDC(57) (79)(29) (57)
Losses on sales of other assets1
 

 1
Impairment charges191
 
11
 191
Deferred income taxes266
 330
96
 266
Accrued pension and other post-retirement benefit costs3
 
(5) 3
Contributions to qualified pension plans(46) 
(7) (46)
Payments for asset retirement obligations(174) (201)(234) (174)
Provision for rate refunds163
 
34
 163
(Increase) decrease in      
Net realized and unrealized mark-to-market and hedging transactions2
 1
(7) 2
Receivables(154) (40)(80) (154)
Receivables from affiliated companies(63) 17
74
 (63)
Inventory(11) 50
5
 (11)
Other current assets(54) 8
(117) (54)
Increase (decrease) in      
Accounts payable69
 (78)(284) 69
Accounts payable to affiliated companies(67) (88)(56) (67)
Taxes accrued(47) 225
91
 (47)
Other current liabilities(129) (149)44
 (129)
Other assets18
 (18)2
 18
Other liabilities(47) (26)(43) (47)
Net cash provided by operating activities1,884
 2,012
1,906
 1,884
CASH FLOWS FROM INVESTING ACTIVITIES      
Capital expenditures(2,006) (1,747)(1,984) (2,006)
Purchases of debt and equity securities(1,386) (1,660)(1,658) (1,386)
Proceeds from sales and maturities of debt and equity securities1,386
 1,664
1,658
 1,386
Notes receivable from affiliated companies
 66
Other(103) (58)(80) (103)
Net cash used in investing activities(2,109) (1,735)(2,064) (2,109)
CASH FLOWS FROM FINANCING ACTIVITIES      
Proceeds from the issuance of long-term debt991
 
819
 991
Payments for the redemption of long-term debt(704) (115)(5) (704)
Notes payable to affiliated companies700
 468
(390) 700
Distributions to parent(750) (625)(275) (750)
Other(1) (1)(1) (1)
Net cash provided by (used in) financing activities236
 (273)
Net increase in cash and cash equivalents11
 4
Net cash provided by financing activities148
 236
Net (decrease) increase in cash and cash equivalents(10) 11
Cash and cash equivalents at beginning of period16
 14
33
 16
Cash and cash equivalents at end of period$27
 $18
$23
 $27
Supplemental Disclosures:      
Significant non-cash transactions:      
Accrued capital expenditures$299
 $292
$261
 $299


PART I
FINANCIAL STATEMENTS


DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
  Accumulated Other  Three Months Ended September 30, 2018 and 2019
  Comprehensive    Accumulated Other  
  Loss    Comprehensive  
  Net Losses on
    Loss  
Member's
 Cash Flow
 Total
Member's
 Net Income (Losses) on
 Total
(in millions)Equity
 Hedges
 Equity
Equity
 Cash Flow Hedges
 Equity
Balance at December 31, 2016$10,781
 $(9) $10,772
Balance at June 30, 2018$11,308
 $(6) $11,302
Net income1,009
 
 1,009
496
 
 496
Other comprehensive income
 1
 1
Distributions to parent(625) 
 (625)(250) 
 (250)
Other(1) 
 (1)
Balance at September 30, 2017$11,164
 $(8) $11,156
Balance at September 30, 2018$11,554
 $(6) $11,548
          
Balance at June 30, 2019$12,283
 $(7) $12,276
Net income590
 
 590
Distributions to parent(275) 
 (275)
Balance at September 30, 2019$12,598
 $(7) $12,591
     
Nine Months Ended September 30, 2018 and 2019
  Accumulated Other  
  Comprehensive  
  Loss  
Member's
 Net Income (Losses) on
 Total
(in millions)Equity
 Cash Flow Hedges
 Equity
Balance at December 31, 2017$11,368
 $(7) $11,361
$11,368
 $(7) $11,361
Net income936
 
 936
936
 
 936
Other comprehensive income
 1
 1

 1
 1
Distributions to parent(750) 
 (750)(750) 
 (750)
Balance at September 30, 2018$11,554
 $(6) $11,548
$11,554
 $(6) $11,548
     
Balance at December 31, 2018$11,689
 $(6) $11,683
Net income1,184
 
 1,184
Distributions to parent(275) 
 (275)
Other
 (1) (1)
Balance at September 30, 2019$12,598
 $(7) $12,591


PART I
FINANCIAL STATEMENTS




PROGRESS ENERGY, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
Three Months Ended Nine Months EndedThree Months Ended Nine Months Ended
September 30, September 30,September 30, September 30,
(in millions)2018
 2017
 2018
 2017
2019
 2018
 2019
 2018
Operating Revenues$3,045
 $2,864
 $8,119
 $7,435
$3,242
 $3,045
 $8,558
 $8,119
Operating Expenses              
Fuel used in electric generation and purchased power1,148
 1,031
 3,019
 2,588
1,187
 1,148
 3,100
 3,019
Operation, maintenance and other680
 588
 1,913
 1,697
640
 680
 1,813
 1,913
Depreciation and amortization419
 334
 1,183
 958
496
 419
 1,377
 1,183
Property and other taxes145
 140
 399
 386
159
 145
 439
 399
Impairment charges1
 135
 34
 137
(25) 1
 (25) 34
Total operating expenses2,393
 2,228
 6,548
 5,766
2,457
 2,393
 6,704
 6,548
Gains on Sales of Other Assets and Other, net11
 5
 23
 19
1
 11
 
 23
Operating Income663
 641
 1,594
 1,688
786
 663
 1,854
 1,594
Other Income and Expenses, net51
 36
 128
 112
41
 51
 106
 128
Interest Expense214
 193
 626
 595
212
 214
 650
 626
Income Before Income Taxes500
 484
 1,096
 1,205
615
 500
 1,310
 1,096
Income Tax Expense94
 141
 186
 384
94
 94
 212
 186
Net Income406
 343
 910
 821
521
 406
 1,098
 910
Less: Net Income Attributable to Noncontrolling Interests2
 2
 6
 7

 2
 
 6
Net Income Attributable to Parent$404
 $341
 $904
 $814
$521
 $404
 $1,098
 $904
              
Net Income$406
 $343
 $910
 $821
$521
 $406
 $1,098
 $910
Other Comprehensive Income, net of tax              
Pension and OPEB adjustments
 3
 2
 5

 
 2
 2
Net unrealized gains (losses) on cash flow hedges2
 (2) 5
 4
Unrealized (losses) gains on available-for-sale securities
 1
 (1) 3
Net unrealized gains on cash flow hedges1
 2
 4
 5
Unrealized gains (losses) on available-for-sale securities1
 
 2
 (1)
Other Comprehensive Income, net of tax2

2

6

12
2

2

8

6
Comprehensive Income408
 345
 916
 833
523
 408
 1,106
 916
Less: Comprehensive Income Attributable to Noncontrolling Interests2
 2
 6
 7

 2
 
 6
Comprehensive Income Attributable to Parent$406

$343

$910

$826
$523

$406

$1,106

$910




PART I
FINANCIAL STATEMENTS


PROGRESS ENERGY, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)September 30, 2018
 December 31, 2017
September 30, 2019
 December 31, 2018
ASSETS      
Current Assets      
Cash and cash equivalents$43
 $40
$82
 $67
Receivables (net of allowance for doubtful accounts of $5 at 2018 and $4 at 2017)131
 123
Receivables of VIEs (net of allowance for doubtful accounts of $8 at 2018 and $7 at 2017)1,098
 780
Receivables (net of allowance for doubtful accounts of $6 at 2019 and $5 at 2018)181
 220
Receivables of VIEs (net of allowance for doubtful accounts of $8 at 2019 and 2018)1,042
 909
Receivables from affiliated companies15
 31
33
 168
Notes receivable from affiliated companies445
 240
Inventory1,473
 1,592
1,434
 1,459
Regulatory assets (includes $52 at 2018 and $51 at 2017 related to VIEs)1,122
 741
Other256
 334
Regulatory assets (includes $52 at 2019 and 2018 related to VIEs)881
 1,137
Other (includes $16 at 2019 and $39 at 2018 related to VIEs)242
 125
Total current assets4,583
 3,881
3,895
 4,085
Property, Plant and Equipment      
Cost49,822
 47,323
53,491
 50,260
Accumulated depreciation and amortization(16,652) (15,857)(16,917) (16,398)
Generation facilities to be retired, net388
 421
267
 362
Net property, plant and equipment33,558
 31,887
36,841
 34,224
Other Noncurrent Assets      
Goodwill3,655
 3,655
3,655
 3,655
Regulatory assets (includes $1,055 at 2018 and $1,091 at 2017 related to VIEs)5,987
 6,010
Regulatory assets (includes $1,002 at 2019 and $1,041 at 2018 related to VIEs)6,733
 6,564
Nuclear decommissioning trust funds3,477
 3,324
3,590
 3,162
Operating lease right-of-use assets, net814
 
Other1,019
 931
989
 974
Total other noncurrent assets14,138
 13,920
15,781
 14,355
Total Assets$52,279
 $49,688
$56,517
 $52,664
LIABILITIES AND EQUITY      
Current Liabilities      
Accounts payable$1,301
 $1,006
$1,095
 $1,172
Accounts payable to affiliated companies327
 251
354
 360
Notes payable to affiliated companies794
 805
1,789
 1,235
Taxes accrued244
 101
271
 109
Interest accrued228
 212
212
 246
Current maturities of long-term debt (includes $53 at 2018 and 2017 related to VIEs)1,322
 771
Current maturities of long-term debt (includes $54 at 2019 and $53 at 2018 related to VIEs)1,276
 1,672
Asset retirement obligations475
 295
478
 514
Regulatory liabilities246
 213
296
 280
Other672
 729
850
 821
Total current liabilities5,609
 4,383
6,621
 6,409
Long-Term Debt (includes $1,636 at 2018 and $1,689 at 2017 related to VIEs)17,440
 16,916
Long-Term Debt (includes $1,631 at 2019 and $1,636 at 2018 related to VIEs)17,693
 17,089
Long-Term Debt Payable to Affiliated Companies150
 150
150
 150
Other Noncurrent Liabilities      
Deferred income taxes3,947
 3,502
4,389
 3,941
Asset retirement obligations4,960
 5,119
5,610
 4,897
Regulatory liabilities5,275
 5,306
5,165
 5,049
Operating lease liabilities710
 
Accrued pension and other post-retirement benefit costs513
 545
455
 521
Other255
 302
361
 351
Total other noncurrent liabilities14,950
 14,774
16,690
 14,759
Commitments and Contingencies
 

 
Equity      
Common stock, $0.01 par value, 100 shares authorized and outstanding at 2018 and 2017
 
Common stock, $0.01 par value, 100 shares authorized and outstanding at 2019 and 2018
 
Additional paid-in capital9,143
 9,143
9,143
 9,143
Retained earnings5,009
 4,350
6,236
 5,131
Accumulated other comprehensive loss(24) (25)(19) (20)
Total Progress Energy, Inc. stockholders' equity14,128
 13,468
15,360
 14,254
Noncontrolling interests2
 (3)3
 3
Total equity14,130
 13,465
15,363
 14,257
Total Liabilities and Equity$52,279
 $49,688
$56,517
 $52,664


PART I
FINANCIAL STATEMENTS


PROGRESS ENERGY, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months EndedNine Months Ended
September 30,September 30,
(in millions)2018
 2017
2019
 2018
CASH FLOWS FROM OPERATING ACTIVITIES      
Net income$910
 $821
$1,098
 $910
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation, amortization and accretion (including amortization of nuclear fuel)1,458
 1,130
1,649
 1,458
Equity component of AFUDC(80) (68)(48) (80)
Gains on sales of other assets(23) (20)
 (23)
Impairment charges34
 137
(25) 34
Deferred income taxes342
 651
342
 342
Accrued pension and other post-retirement benefit costs18
 (9)14
 18
Contributions to qualified pension plans(45) 
(57) (45)
Payments for asset retirement obligations(164) (190)(309) (164)
Other rate case adjustments37
 

 37
Provision for rate refunds101
 
13
 101
(Increase) decrease in      
Net realized and unrealized mark-to-market and hedging transactions14
 1
9
 14
Receivables(316) (182)(128) (316)
Receivables from affiliated companies16
 102
135
 16
Inventory119
 126
45
 119
Other current assets(156) (312)79
 (156)
Increase (decrease) in      
Accounts payable427
 (281)(64) 427
Accounts payable to affiliated companies76
 (59)(6) 76
Taxes accrued143
 143
150
 143
Other current liabilities(28) (184)(96) (28)
Other assets(668) (100)(281) (668)
Other liabilities(34) (85)(90) (34)
Net cash provided by operating activities2,181
 1,621
2,430
 2,181
CASH FLOWS FROM INVESTING ACTIVITIES      
Capital expenditures(2,689) (2,419)(2,866) (2,689)
Purchases of debt and equity securities(1,216) (1,393)(1,304) (1,216)
Proceeds from sales and maturities of debt and equity securities1,225
 1,411
1,300
 1,225
Net proceeds from the sales of other assets20
 

 20
Notes receivable from affiliated companies(205) (90)
 (205)
Other(142) (36)(130) (142)
Net cash used in investing activities(3,007) (2,527)(3,000) (3,007)
CASH FLOWS FROM FINANCING ACTIVITIES      
Proceeds from the issuance of long-term debt1,785
 1,720
1,295
 1,785
Payments for the redemption of long-term debt(719) (611)(1,263) (719)
Notes payable to affiliated companies(11) (129)554
 (11)
Dividends to parent(250) (125)
 (250)
Other(3) (3)8
 (3)
Net cash provided by financing activities802
 852
594
 802
Net decrease in cash, cash equivalents and restricted cash(24) (54)
Net increase (decrease) in cash, cash equivalents and restricted cash24
 (24)
Cash, cash equivalents and restricted cash at beginning of period87
 110
112
 87
Cash, cash equivalents and restricted cash at end of period$63
 $56
$136
 $63
Supplemental Disclosures:      
Significant non-cash transactions:      
Accrued capital expenditures$441
 $174
$400
 $441
Equitization of certain notes payable to affiliates
 1,047
Dividend to parent related to a legal entity restructuring
 547


PART I

FINANCIAL STATEMENTS




PROGRESS ENERGY, INC.
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
Three Months Ended September 30, 2018 and 2019
    Accumulated Other Comprehensive Income (Loss)          Accumulated Other Comprehensive (Loss) Income      
      Net Unrealized
   Total Progress
        Net Gains
 Net Unrealized
   Total Progress
    
Additional
   Net Losses on
 Gains (losses) on
 Pension and
 Energy, Inc.
    Additional
   (Losses) on
 Gains (Losses) on
 Pension and
 Energy, Inc.
    
Paid-in
 Retained
 Cash Flow
 Available-for-
 OPEB
 Stockholders'
 Noncontrolling
 Total
Paid-in
 Retained
 Cash Flow
 Available-for-
 OPEB
 Stockholders'
 Noncontrolling
 Total
(in millions)Capital
 Earnings
 Hedges
 Sale Securities
 Adjustments
 Equity
 Interests
 Equity
Capital
 Earnings
 Hedges
 Sale Securities
 Adjustments
 Equity
 Interests
 Equity
Balance at December 31, 2016$8,094
 $3,764
 $(23) $1
 $(16) $11,820
 $(13) $11,807
Balance at June 30, 2018$9,143
 $4,855
 $(15) $(1) $(10) $13,972
 $
 $13,972
Net income
 814
 
 
 
 814
 7
 821

 404
 
 
 
 404
 2
 406
Other comprehensive income
 
 4
 3
 5
 12
 
 12

 
 2
 
 
 2
 
 2
Dividends to parent(a)

 (672) 
 
 
 (672) 
 (672)
Equitization of certain notes payable to affiliates1,047
 
 
 
 
 1,047
 
 1,047
Dividends to parent
 (250) 
 
 
 (250) 
 (250)
Balance at September 30, 2018$9,143
 $5,009
 $(13) $(1) $(10) $14,128
 $2
 $14,130
               
Balance at June 30, 2019$9,143
 $5,715
 $(13) $
 $(8) $14,837
 $2
 $14,839
Net income
 521
 
 
 
 521
 
 521
Other comprehensive income
 
 1
 1
 
 2
 
 2
Other2
 
 
 
 
 2
 
 2

 
 
 (1) 1
 
 1
 1
Balance at September 30, 2017$9,143

$3,906

$(19)
$4

$(11) $13,023

$(6)
$13,017
Balance at September 30, 2019$9,143
 $6,236
 $(12) $
 $(7) $15,360
 $3
 $15,363
               
Nine Months Ended September 30, 2018 and 2019
    Accumulated Other Comprehensive (Loss) Income      
    Net Gains
 Net Unrealized
   Total Progress
    
Additional
   (Losses) on
 Gains (Losses) on
 Pension and
 Energy, Inc.
    
Paid-in
 Retained
 Cash Flow
 Available-for-
 OPEB
 Stockholders'
 Noncontrolling
 Total
               Capital
 Earnings
 Hedges
 Sale Securities
 Adjustments
 Equity
 Interests
 Equity
Balance at December 31, 2017$9,143
 $4,350
 $(18) $5
 $(12) $13,468
 $(3) $13,465
$9,143
 $4,350
 $(18) $5
 $(12) $13,468
 $(3) $13,465
Net income
 904
 
 
 
 904
 6
 910

 904
 
 
 
 904
 6
 910
Other comprehensive income (loss)
 
 5
 (1) 2
 6
 
 6

 
 5
 (1) 2
 6
 
 6
Distributions to noncontrolling interests
 
 
 
 
 
 (1) (1)
 
 
 
 
 
 (1) (1)
Dividends to parent
 (250) 
 
 
 (250) 
 (250)
 (250) 
 
 
 (250) 
 (250)
Other(a)

 5
 
 (5) 
 
 
 
Balance at September 30, 2018$9,143

$5,009

$(13)
$(1)
$(10) $14,128

$2

$14,130
               
Balance at December 31, 2018$9,143
 $5,131
 $(12) $(1) $(7) $14,254
 $3
 $14,257
Net income
 1,098
 
 
 
 1,098
 
 1,098
Other comprehensive income
 
 4
 2
 2
 8
 
 8
Other(b)

 5
 
 (5) 
 
 
 

 7
 (4) (1) (2) 
 
 
Balance at September 30, 2018$9,143

$5,009

$(13)
$(1)
$(10) $14,128

$2

$14,130
Balance at September 30, 2019$9,143

$6,236

$(12)
$

$(7) $15,360

$3

$15,363
(a)Includes a $547 million non-cash dividend related to a legal entity restructuring.
(b)Amounts in Retained Earnings and Accumulated Other Comprehensive Loss(Loss) Income represent a cumulative-effect adjustment due to implementation of a new accounting standard related to Financial Instruments Classification and Measurement. See Note 1 for more information.
(b)Amounts in Retained Earnings and Accumulated Other Comprehensive (Loss) Income primarily represent impacts to accumulated other comprehensive income due to implementation of a new accounting standard related to Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.


PART I
FINANCIAL STATEMENTS




DUKE ENERGY PROGRESS, LLC
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
Three Months Ended Nine Months EndedThree Months Ended Nine Months Ended
September 30, September 30,September 30, September 30,
(in millions)2018
 2017
 2018
 2017
2019
 2018
 2019
 2018
Operating Revenues$1,582
 $1,460
 $4,333
 $3,878
$1,688
 $1,582
 $4,559
 $4,333
Operating Expenses              
Fuel used in electric generation and purchased power535
 475
 1,452
 1,214
577
 535
 1,571
 1,452
Operation, maintenance and other431
 365
 1,187
 1,069
378
 431
 1,070
 1,187
Depreciation and amortization253
 182
 723
 536
314
 253
 855
 723
Property and other taxes40
 40
 115
 120
46
 40
 131
 115
Impairment charges
 
 33
 

 
 
 33
Total operating expenses1,259
 1,062
 3,510
 2,939
1,315
 1,259
 3,627
 3,510
Gains on Sales of Other Assets and Other, net7
 
 9
 3

 7
 
 9
Operating Income330
 398
 832
 942
373
 330
 932
 832
Other Income and Expenses, net24
 27
 61
 84
27
 24
 75
 61
Interest Expense82
 65
 241
 217
74
 82
 232
 241
Income Before Income Taxes272
 360
 652
 809
326
 272
 775
 652
Income Tax Expense56
 114
 120
 262
48
 56
 125
 120
Net Income and Comprehensive Income$216
 $246
 $532
 $547
$278
 $216
 $650
 $532




PART I
FINANCIAL STATEMENTS


DUKE ENERGY PROGRESS, LLC
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)September 30, 2018
 December 31, 2017
September 30, 2019
 December 31, 2018
ASSETS      
Current Assets      
Cash and cash equivalents$17
 $20
$49
 $23
Receivables (net of allowance for doubtful accounts of $2 at 2018 and $1 at 2017)34
 56
Receivables of VIEs (net of allowance for doubtful accounts of $5 at 2018 and 2017)635
 459
Receivables (net of allowance for doubtful accounts of $2 at 2019 and 2018)75
 75
Receivables of VIEs (net of allowance for doubtful accounts of $5 at 2019 and 2018)564
 547
Receivables from affiliated companies6
 3
34
 23
Notes receivable from affiliated companies52
 
Inventory956
 1,017
939
 954
Regulatory assets677
 352
515
 703
Other112
 97
95
 62
Total current assets2,489
 2,004
2,271
 2,387
Property, Plant and Equipment      
Cost31,091
 29,583
33,594
 31,459
Accumulated depreciation and amortization(11,484) (10,903)(11,761) (11,423)
Generation facilities to be retired, net388
 421
267
 362
Net property, plant and equipment19,995
 19,101
22,100
 20,398
Other Noncurrent Assets      
Regulatory assets3,822
 3,507
4,363
 4,111
Nuclear decommissioning trust funds2,744
 2,588
2,872
 2,503
Operating lease right-of-use assets, net397
 
Other653
 599
595
 612
Total other noncurrent assets7,219
 6,694
8,227
 7,226
Total Assets$29,703
 $27,799
$32,598
 $30,011
LIABILITIES AND EQUITY      
Current Liabilities      
Accounts payable$808
 $402
$550
 $660
Accounts payable to affiliated companies252
 179
198
 278
Notes payable to affiliated companies
 240
79
 294
Taxes accrued92
 64
101
 53
Interest accrued100
 102
89
 116
Current maturities of long-term debt603
 3
306
 603
Asset retirement obligations470
 295
476
 509
Regulatory liabilities162
 139
210
 178
Other353
 376
416
 408
Total current liabilities2,840
 1,800
2,425
 3,099
Long-Term Debt7,401
 7,204
8,593
 7,451
Long-Term Debt Payable to Affiliated Companies150
 150
150
 150
Other Noncurrent Liabilities      
Deferred income taxes2,076
 1,883
2,316
 2,119
Asset retirement obligations4,371
 4,378
5,038
 4,311
Regulatory liabilities4,128
 3,999
4,152
 3,955
Operating lease liabilities360
 
Accrued pension and other post-retirement benefit costs240
 248
230
 237
Investment tax credits143
 143
138
 142
Other48
 45
105
 106
Total other noncurrent liabilities11,006
 10,696
12,339
 10,870
Commitments and Contingencies
 

 
Equity      
Member's Equity8,306
 7,949
9,091
 8,441
Total Liabilities and Equity$29,703
 $27,799
$32,598
 $30,011


PART I
FINANCIAL STATEMENTS


DUKE ENERGY PROGRESS, LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months EndedNine Months Ended
September 30,September 30,
(in millions)2018
 2017
2019
 2018
CASH FLOWS FROM OPERATING ACTIVITIES      
Net income$532
 $547
$650
 $532
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization (including amortization of nuclear fuel)869
 691
996
 869
Equity component of AFUDC(41) (35)(44) (41)
Gains on sales of other assets(9) (4)
 (9)
Impairment charges33
 

 33
Deferred income taxes187
 287
144
 187
Accrued pension and other post-retirement benefit costs11
 (15)2
 11
Contributions to qualified pension plans(25) 
(4) (25)
Payments for asset retirement obligations(133) (149)(288) (133)
Other rate case adjustments37
 

 37
Provision for rate refunds101
 
13
 101
(Increase) decrease in      
Net realized and unrealized mark-to-market and hedging transactions3
 (2)(4) 3
Receivables(154) (47)(9) (154)
Receivables from affiliated companies(3) (3)(11) (3)
Inventory62
 52
15
 62
Other current assets(239) (34)65
 (239)
Increase (decrease) in      
Accounts payable325
 (286)(54) 325
Accounts payable to affiliated companies73
 (20)(80) 73
Taxes accrued28
 33
37
 28
Other current liabilities(27) (139)(17) (27)
Other assets(358) (49)(197) (358)
Other liabilities11
 (9)33
 11
Net cash provided by operating activities1,283
 818
1,247
 1,283
CASH FLOWS FROM INVESTING ACTIVITIES      
Capital expenditures(1,526) (1,247)(1,592) (1,526)
Purchases of debt and equity securities(831) (995)(656) (831)
Proceeds from sales and maturities of debt and equity securities807
 974
632
 807
Net proceeds from the sales of other assets20
 

 20
Notes receivable from affiliated companies(52) 64

 (52)
Other(82) (26)(56) (82)
Net cash used in investing activities(1,664) (1,230)(1,672) (1,664)
CASH FLOWS FROM FINANCING ACTIVITIES      
Proceeds from the issuance of long-term debt796
 812
1,270
 796
Payments for the redemption of long-term debt(2) (270)(603) (2)
Notes payable to affiliated companies(240) 
(215) (240)
Distributions to parent(175) (125)
 (175)
Other(1) (1)(1) (1)
Net cash provided by financing activities378
 416
451
 378
Net (decrease) increase in cash and cash equivalents(3) 4
Net increase (decrease) in cash and cash equivalents26
 (3)
Cash and cash equivalents at beginning of period20
 11
23
 20
Cash and cash equivalents at end of period$17
 $15
$49
 $17
Supplemental Disclosures:      
Significant non-cash transactions:      
Accrued capital expenditures$261
 $116
$182
 $261


PART I
FINANCIAL STATEMENTS


DUKE ENERGY PROGRESS, LLC
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
Three Months Ended
September 30, 2018 and 2019
Member'sMember's
(in millions)EquityEquity
Balance at December 31, 2016$7,358
Balance at June 30, 2018$8,265
Net income547
216
Distributions to parent(125)(175)
Balance at September 30, 2017$7,780
Balance at September 30, 2018$8,306
  
Balance at June 30, 2019$8,813
Net income278
Balance at September 30, 2019$9,091
 
Nine Months Ended
September 30, 2018 and 2019
Member's
(in millions)Equity
Balance at December 31, 2017$7,949
$7,949
Net income532
532
Distributions to parent(175)(175)
Balance at September 30, 2018$8,306
$8,306
 
Balance at December 31, 2018$8,441
Net income650
Balance at September 30, 2019$9,091




PART I
FINANCIAL STATEMENTS




DUKE ENERGY FLORIDA, LLC
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
Three Months Ended Nine Months EndedThree Months Ended Nine Months Ended
September 30, September 30,September 30, September 30,
(in millions)2018
 2017
 2018
 2017
2019
 2018
 2019
 2018
Operating Revenues$1,462
 $1,401
 $3,780
 $3,551
$1,548
 $1,462
 $3,987
 $3,780
Operating Expenses              
Fuel used in electric generation and purchased power614
 557
 1,567
 1,374
610
 614
 1,529
 1,567
Operation, maintenance and other245
 220
 719
 623
256
 245
 730
 719
Depreciation and amortization166
 154
 460
 423
182
 166
 522
 460
Property and other taxes105
 99
 284
 265
113
 105
 309
 284
Impairment charges1
 135
 1
 137
(25) 1
 (25) 1
Total operating expenses1,131
 1,165
 3,031
 2,822
1,136
 1,131
 3,065
 3,031
Gains on Sales of Other Assets and Other, net1
 
 
 
Operating Income331
 236
 749
 729
413
 331
 922
 749
Other Income and Expenses, net28
 19
 75
 58
14
 28
 39
 75
Interest Expense73
 71
 210
 211
81
 73
 246
 210
Income Before Income Taxes286
 184
 614
 576
346
 286
 715
 614
Income Tax Expense43
 64
 100
 208
57
 43
 129
 100
Net Income$243
 $120
 $514
 $368
$289
 $243
 $586
 $514
Other Comprehensive (Loss) Income, net of tax
 
 

 

Unrealized (losses) gains on available-for-sale securities
 1
 (1) 3
Other Comprehensive Income (Loss), net of tax
 
 

 

Unrealized gains (losses) on available-for-sale securities1
 
 2
 (1)
Comprehensive Income$243
 $121
 $513

$371
$290
 $243
 $588

$513




PART I
FINANCIAL STATEMENTS


DUKE ENERGY FLORIDA, LLC
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)September 30, 2018
 December 31, 2017
September 30, 2019
 December 31, 2018
ASSETS      
Current Assets      
Cash and cash equivalents$20
 $13
$24
 $36
Receivables (net of allowance for doubtful accounts of $3 at 2018 and 2017)95
 65
Receivables of VIEs (net of allowance for doubtful accounts of $3 at 2018 and $2 at 2017)463
 321
Receivables (net of allowance for doubtful accounts of $3 at 2019 and 2018)104
 143
Receivables of VIEs (net of allowance for doubtful accounts of $3 at 2019 and 2018)478
 362
Receivables from affiliated companies20
 2
1
 28
Notes receivable from affiliated companies393
 313
Inventory517
 574
495
 504
Regulatory assets (includes $52 at 2018 and $51 at 2017 related to VIEs)445
 389
Other (includes $14 at 2018 and $40 at 2017 related to VIEs)27
 86
Regulatory assets (includes $52 at 2019 and 2018 related to VIEs)367
 434
Other (includes $16 at 2019 and $39 at 2018 related to VIEs)42
 46
Total current assets1,980
 1,763
1,511
 1,553
Property, Plant and Equipment      
Cost18,722
 17,730
19,887
 18,792
Accumulated depreciation and amortization(5,161) (4,947)(5,148) (4,968)
Net property, plant and equipment13,561
 12,783
14,739
 13,824
Other Noncurrent Assets      
Regulatory assets (includes $1,055 at 2018 and $1,091 at 2017 related to VIEs)2,165
 2,503
Regulatory assets (includes $1,002 at 2019 and $1,041 at 2018 related to VIEs)2,370
 2,454
Nuclear decommissioning trust funds734
 736
718
 659
Operating lease right-of-use assets, net417
 
Other315
 284
307
 311
Total other noncurrent assets3,214
 3,523
3,812
 3,424
Total Assets$18,755
 $18,069
$20,062
 $18,801
LIABILITIES AND EQUITY      
Current Liabilities      
Accounts payable$492
 $602
$542
 $511
Accounts payable to affiliated companies83
 74
158
 91
Notes payable to affiliated companies356
 108
Taxes accrued232
 34
175
 74
Interest accrued74
 56
72
 75
Current maturities of long-term debt (includes $53 at 2018 and 2017 related to VIEs)269
 768
Current maturities of long-term debt (includes $54 at 2019 and $53 at 2018 related to VIEs)621
 270
Asset retirement obligations4
 
2
 5
Regulatory liabilities84
 74
87
 102
Other315
 334
423
 406
Total current liabilities1,553
 1,942
2,436
 1,642
Long-Term Debt (includes $1,336 at 2018 and $1,389 at 2017 related to VIEs)7,102
 6,327
Long-Term Debt (includes $1,306 at 2019 and $1,336 at 2018 related to VIEs)6,511
 7,051
Other Noncurrent Liabilities      
Deferred income taxes2,012
 1,761
2,199
 1,986
Asset retirement obligations589
 742
572
 586
Regulatory liabilities1,146
 1,307
1,013
 1,094
Operating lease liabilities350
 
Accrued pension and other post-retirement benefit costs241
 264
196
 254
Other56
 108
102
 93
Total other noncurrent liabilities4,044
 4,182
4,432
 4,013
Commitments and Contingencies
 

 
Equity      
Member's equity6,058
 5,614
6,683
 6,097
Accumulated other comprehensive (loss) income(2) 4
Accumulated other comprehensive loss
 (2)
Total equity6,056
 5,618
6,683
 6,095
Total Liabilities and Equity$18,755
 $18,069
$20,062
 $18,801


PART I
FINANCIAL STATEMENTS


DUKE ENERGY FLORIDA, LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months EndedNine Months Ended
September 30,September 30,
(in millions)2018
 2017
2019
 2018
CASH FLOWS FROM OPERATING ACTIVITIES      
Net income$514
 $368
$586
 $514
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation, amortization and accretion581
 431
647
 581
Equity component of AFUDC(40) (33)(4) (40)
Impairment charges1
 137
(25) 1
Deferred income taxes169
 366
164
 169
Accrued pension and other post-retirement benefit costs4
 3
8
 4
Contributions to qualified pension plans(20) 
(53) (20)
Payments for asset retirement obligations(31) (41)(21) (31)
(Increase) decrease in      
Net realized and unrealized mark-to-market and hedging transactions7
 3
9
 7
Receivables(163) (140)(119) (163)
Receivables from affiliated companies(18) 1
27
 (18)
Inventory57
 74
29
 57
Other current assets51
 (195)100
 51
Increase (decrease) in      
Accounts payable101
 6
(11) 101
Accounts payable to affiliated companies9
 (35)67
 9
Taxes accrued198
 109
101
 198
Other current liabilities1
 (45)(77) 1
Other assets(308) (35)(81) (308)
Other liabilities(58) (71)(127) (58)
Net cash provided by operating activities1,055
 903
1,220
 1,055
CASH FLOWS FROM INVESTING ACTIVITIES      
Capital expenditures(1,162) (1,172)(1,274) (1,162)
Purchases of debt and equity securities(385) (398)(648) (385)
Proceeds from sales and maturities of debt and equity securities418
 437
668
 418
Notes receivable from affiliated companies(80) (70)
 (80)
Other(61) (10)(73) (61)
Net cash used in investing activities(1,270) (1,213)(1,327) (1,270)
CASH FLOWS FROM FINANCING ACTIVITIES      
Proceeds from the issuance of long-term debt989
 908
25
 989
Payments for the redemption of long-term debt(717) (341)(210) (717)
Notes payable to affiliated companies
 (297)248
 
Distributions to parent(75) 

 (75)
Other(1) (1)9
 (1)
Net cash provided by financing activities196
 269
72
 196
Net decrease in cash, cash equivalents and restricted cash(19) (41)(35) (19)
Cash, cash equivalents and restricted cash at beginning of period53
 69
75
 53
Cash, cash equivalents and restricted cash at end of period$34
 $28
$40
 $34
Supplemental Disclosures:      
Significant non-cash transactions:      
Accrued capital expenditures$180
 $102
$218
 $180


PART I
FINANCIAL STATEMENTS


DUKE ENERGY FLORIDA, LLC
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
Three Months Ended September 30, 2018 and 2019
  Accumulated    Accumulated  
  Other    Other  
  Comprehensive    Comprehensive  
  Income (Loss)    Income (Loss)  
  Net Unrealized
    Net Unrealized
  
  Gains (Losses) on
    Gains (Losses) on
  
Member's
 Available-for-Sale
 Total
Member's
 Available-for-Sale
 Total
(in millions)Equity
 Securities
 Equity
Equity
 Securities
 Equity
Balance at December 31, 2016$4,899
 $1
 $4,900
Balance at June 30, 2018$5,890
 $(2) $5,888
Net income243
 
 243
Distributions to parent(75) 
 (75)
Balance at September 30, 2018$6,058
 $(2) $6,056
     
Balance at June 30, 2019$6,394
 $(1) $6,393
Net income368
 
 368
289
 
 289
Other comprehensive income
 3
 3

 1
 1
Other3
 
 3
Balance at September 30, 2017$5,270
 $4
 $5,274
Balance at September 30, 2019$6,683
 $
 $6,683
          
Nine Months Ended September 30, 2018 and 2019
  Accumulated  
  Other  
  Comprehensive  
  Income (Loss)  
  Net Unrealized
  
  Gains (Losses) on
  
Member's
 Available-for-Sale
 Total
(in millions)Equity
 Securities
 Equity
Balance at December 31, 2017$5,614
 $4
 $5,618
$5,614
 $4
 $5,618
Net income514
 
 514
514
 
 514
Other comprehensive loss
 (1) (1)
 (1) (1)
Distributions to parent(75) 
 (75)(75) 
 (75)
Other(a)
5
 (5) 
5
 (5) 
Balance at September 30, 2018$6,058
 $(2) $6,056
$6,058
 $(2) $6,056
     
Balance at December 31, 2018$6,097
 $(2) $6,095
Net income586
 
 586
Other comprehensive income
 2
 2
Balance at September 30, 2019$6,683
 $
 $6,683


(a)Amounts in Member's Equity and Accumulated Other Comprehensive Income (Loss) represent a cumulative-effect adjustment due to implementation of a new accounting standard related to Financial Instruments Classification and Measurement. See Note 1 for more information.


PART I
FINANCIAL STATEMENTS




DUKE ENERGY OHIO, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
Three Months Ended Nine Months EndedThree Months Ended Nine Months Ended
September 30, September 30,September 30, September 30,
(in millions)2018
 2017
 2018

2017
2019
 2018
 2019

2018
Operating Revenues              
Regulated electric$373
 $371
 $1,055
 $1,036
$408
 $373
 $1,099
 $1,055
Regulated natural gas84
 90
 361
 360
81
 84
 354
 361
Nonregulated electric and other12
 10
 36
 30

 12
 
 36
Total operating revenues469
 471
 1,452
 1,426
489
 469
 1,453
 1,452
Operating Expenses              
Fuel used in electric generation and purchased power – regulated99
 100
 284
 283
114
 99
 293
 284
Fuel used in electric generation and purchased power – nonregulated14
 13
 43
 42

 14
 
 43
Cost of natural gas4
 5
 73
 69
4
 4
 68
 73
Operation, maintenance and other76
 125
 337
 388
123
 76
 378
 337
Depreciation and amortization64
 63
 196
 193
69
 64
 199
 196
Property and other taxes73
 65
 218
 204
71
 73
 229
 218
Impairment charges
 
 
 1
Total operating expenses330
 371
 1,151
 1,180
381
 330
 1,167
 1,151
Gains (Losses) on Sales of Other Assets and Other, net
 1
 (106) 1
Losses on Sales of Other Assets and Other, net
 
 
 (106)
Operating Income139
 101
 195
 247
108
 139
 286
 195
Other Income and Expenses, net3
 5
 17
 15
4
 3
 19
 17
Interest Expense23
 22
 68
 67
27
 23
 81
 68
Income From Continuing Operations Before Income Taxes119
 84
 144
 195
Income Tax Expense From Continuing Operations19
 28
 23
 67
Income From Continuing Operations100
 56
 121
 128
Loss From Discontinued Operations, net of tax
 (1) 
 (1)
Income Before Income Taxes85
 119
 224
 144
Income Tax Expense11
 19
 34
 23
Net Income and Comprehensive Income$100
 $55
 $121
 $127
$74
 $100
 $190
 $121




PART I
FINANCIAL STATEMENTS


DUKE ENERGY OHIO, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)September 30, 2018
 December 31, 2017
September 30, 2019
 December 31, 2018
ASSETS      
Current Assets      
Cash and cash equivalents$7
 $12
$11
 $21
Receivables (net of allowance for doubtful accounts of $3 at 2018 and 2017)112
 68
Receivables (net of allowance for doubtful accounts of $4 at 2019 and $2 at 2018)81
 102
Receivables from affiliated companies71
 133
63
 114
Notes receivable from affiliated companies
 14
74
 
Inventory135
 133
128
 126
Regulatory assets41
 49
47
 33
Other28
 39
28
 24
Total current assets394
 448
432
 420
Property, Plant and Equipment      
Cost9,176
 8,732
9,993
 9,360
Accumulated depreciation and amortization(2,683) (2,691)(2,785) (2,717)
Net property, plant and equipment6,493
 6,041
7,208
 6,643
Other Noncurrent Assets      
Goodwill920
 920
920
 920
Regulatory assets427
 445
553
 531
Operating lease right-of-use assets, net22
 
Other62
 21
48
 41
Total other noncurrent assets1,409
 1,386
1,543
 1,492
Total Assets$8,296
 $7,875
$9,183
 $8,555
LIABILITIES AND EQUITY      
Current Liabilities      
Accounts payable$251
 $313
$266
 $316
Accounts payable to affiliated companies54
 62
69
 78
Notes payable to affiliated companies268
 29
167
 274
Taxes accrued159
 190
162
 202
Interest accrued34
 21
29
 22
Current maturities of long-term debt452
 3
100
 551
Asset retirement obligations7
 3
3
 6
Regulatory liabilities57
 36
64
 57
Other67
 71
74
 74
Total current liabilities1,349
 728
934
 1,580
Long-Term Debt1,589
 2,039
2,594
 1,589
Long-Term Debt Payable to Affiliated Companies25
 25
25
 25
Other Noncurrent Liabilities      
Deferred income taxes790
 781
901
 817
Asset retirement obligations91
 81
82
 87
Regulatory liabilities865
 891
793
 840
Operating lease liabilities21
 
Accrued pension and other post-retirement benefit costs84
 59
103
 79
Other113
 108
95
 93
Total other noncurrent liabilities1,943
 1,920
1,995
 1,916
Commitments and Contingencies      
Equity      
Common stock, $8.50 par value, 120 million shares authorized; 90 million shares outstanding at 2018 and 2017762
 762
Common stock, $8.50 par value, 120 million shares authorized; 90 million shares outstanding at 2019 and 2018762
 762
Additional paid-in capital2,776
 2,670
2,776
 2,776
Accumulated deficit(148) (269)
Retained Earnings (Accumulated deficit)97
 (93)
Total equity3,390
 3,163
3,635
 3,445
Total Liabilities and Equity$8,296
 $7,875
$9,183
 $8,555


PART I
FINANCIAL STATEMENTS


DUKE ENERGY OHIO, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months EndedNine Months Ended
September 30,September 30,
(in millions)2018
 2017
2019
 2018
CASH FLOWS FROM OPERATING ACTIVITIES      
Net income$121
 $127
$190
 $121
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization199
 196
202
 199
Equity component of AFUDC(10) (8)(9) (10)
Losses (gains) on sales of other assets106
 (1)
Impairment charges
 1
Losses on sales of other assets
 106
Deferred income taxes9
 70
68
 9
Accrued pension and other post-retirement benefit costs3
 3
1
 3
Contributions to qualified pension plans
 (4)(2) 
Payments for asset retirement obligations(3) (4)(7) (3)
Provision for rate refunds23
 
5
 23
(Increase) decrease in      
Net realized and unrealized mark-to-market and hedging transactions
 1
Receivables(44) 3
24
 (44)
Receivables from affiliated companies62
 48
51
 62
Inventory(2) 1
(2) (2)
Other current assets12
 (8)(15) 12
Increase (decrease) in      
Accounts payable(47) (48)(40) (47)
Accounts payable to affiliated companies(8) (4)(9) (8)
Taxes accrued(31) (21)(40) (31)
Other current liabilities19
 (6)(4) 19
Other assets3
 (13)(10) 3
Other liabilities(17) (2)(25) (17)
Net cash provided by operating activities395
 331
378
 395
CASH FLOWS FROM INVESTING ACTIVITIES      
Capital expenditures(588) (457)(714) (588)
Cost of removal, net of salvage(63) (25)
Notes receivable from affiliated companies14
 7
(74) 14
Other1
 
(45) (62)
Net cash used in investing activities(636) (475)(833) (636)
CASH FLOWS FROM FINANCING ACTIVITIES      
Proceeds from the issuance of long-term debt
 182
1,003
 
Payments for the redemption of long-term debt(3) (2)(451) (3)
Notes payable to affiliated companies239
 (16)(107) 239
Dividends to parent
 (25)
Other
 (1)
Net cash provided by financing activities236
 138
445
 236
Net decrease in cash and cash equivalents(5) (6)(10) (5)
Cash and cash equivalents at beginning of period12
 13
21
 12
Cash and cash equivalents at end of period$7
 $7
$11
 $7
Supplemental Disclosures:      
Significant non-cash transactions:      
Accrued capital expenditures$83
 $65
$100
 $83
Non-cash equity contribution from parent106
 

 106


PART I
FINANCIAL STATEMENTS


DUKE ENERGY OHIO, INC.
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
 Three Months Ended September 30, 2018 and 2019
   Additional
 Retained
  
 Common
 Paid-in
 Earnings
 Total
(in millions)Stock
 Capital
 (Deficit)
 Equity
Balance at June 30, 2018$762
 $2,776
 $(248) $3,290
Net income
 
 100
 100
Balance at September 30, 2018$762
 $2,776
 $(148) $3,390
        
Balance at June 30, 2019$762
 $2,776
 $23
 $3,561
Net income
 
 74
 74
Balance at September 30, 2019$762
 $2,776
 $97
 $3,635
        
 Nine Months Ended September 30, 2018 and 2019
   Additional
 Retained
  
 Common
 Paid-in
 Earnings
 Total
(in millions)Stock
 Capital
 (Deficit)
 Equity
Balance at December 31, 2017$762
 $2,670
 $(269) $3,163
Net income
 
 121
 121
Contribution from parent(a)

 106
 
 106
Balance at September 30, 2018$762
 $2,776
 $(148) $3,390
        
Balance at December 31, 2018$762
 $2,776
 $(93) $3,445
Net income
 
 190
 190
Balance at September 30, 2019$762

$2,776

$97

$3,635
   Additional
    
 Common
 Paid-in
 Accumulated
 Total
(in millions)Stock
 Capital
 Deficit
 Equity
Balance at December 31, 2016$762
 $2,695
 $(461) $2,996
Net income
 
 127
 127
Dividends to parent
 (25) 
 (25)
Balance at September 30, 2017$762
 $2,670
 $(334) $3,098
        
Balance at December 31, 2017$762
 $2,670
 $(269) $3,163
Net income
 
 121
 121
Contribution from parent(a)

 106
 
 106
Balance at September 30, 2018$762

$2,776

$(148)
$3,390

(a)Represents a non-cash settlement through equity of an intercompany payable from Duke Energy Ohio to its parent.


PART I
FINANCIAL STATEMENTS




DUKE ENERGY INDIANA, LLC
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
Three Months Ended Nine Months EndedThree Months Ended Nine Months Ended
September 30, September 30,September 30, September 30,
(in millions)2018
 2017
 2018
 2017
2019
 2018
 2019
 2018
Operating Revenues$819
 $802
 $2,288
 $2,302
$807
 $819
 $2,289
 $2,288
Operating Expenses              
Fuel used in electric generation and purchased power272
 259
 730
 744
234
 272
 720
 730
Operation, maintenance and other198
 177
 576
 546
192
 198
 569
 576
Depreciation and amortization130
 120
 386
 336
130
 130
 393
 386
Property and other taxes16
 19
 56
 56
16
 16
 55
 56
Impairment charges30
 
 30
 

 30
 
 30
Total operating expenses646
 575
 1,778
 1,682
572
 646
 1,737
 1,778
Gains on Sale of Other Assets and Other, net

1
 
 1
Operating Income173
 228

510

621
235
 173

552

510
Other Income and Expenses, net23
 12
 36
 32
8
 23
 35
 36
Interest Expense42
 44
 125
 132
40
 42
 111
 125
Income Before Income Taxes154
 196

421

521
203
 154

476

421
Income Tax Expense35
 75
 104
 203
47
 35
 113
 104
Net Income and Comprehensive Income$119
 $121

$317

$318
$156
 $119

$363

$317




PART I
FINANCIAL STATEMENTS


DUKE ENERGY INDIANA, LLC
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)September 30, 2018
 December 31, 2017
September 30, 2019
 December 31, 2018
ASSETS      
Current Assets      
Cash and cash equivalents$17
 $9
$20
 $24
Receivables (net of allowance for doubtful accounts of $2 at 2018 and 2017)56
 57
Receivables (net of allowance for doubtful accounts of $3 at 2019 and $2 at 2018)56
 52
Receivables from affiliated companies98
 125
85
 122
Notes receivable from affiliated companies213
 
Inventory434
 450
478
 422
Regulatory assets190
 165
91
 175
Other64
 30
29
 35
Total current assets859
 836
972
 830
Property, Plant and Equipment      
Cost15,298
 14,948
16,137
 15,443
Accumulated depreciation and amortization(4,831) (4,662)(5,200) (4,914)
Net property, plant and equipment10,467
 10,286
10,937
 10,529
Other Noncurrent Assets      
Regulatory assets950
 978
1,088
 982
Operating lease right-of-use assets, net58
 
Other233
 189
211
 194
Total other noncurrent assets1,183
 1,167
1,357
 1,176
Total Assets$12,509
 $12,289
$13,266
 $12,535
LIABILITIES AND EQUITY      
Current Liabilities      
Accounts payable$177
 $196
$196
 $200
Accounts payable to affiliated companies72
 78
74
 83
Notes payable to affiliated companies201
 161

 167
Taxes accrued44
 95
29
 43
Interest accrued54
 57
54
 58
Current maturities of long-term debt62
 3
651
 63
Asset retirement obligations128
 54
165
 109
Regulatory liabilities25
 24
39
 25
Other109
 104
107
 107
Total current liabilities872
 772
1,315
 855
Long-Term Debt3,571
 3,630
3,407
 3,569
Long-Term Debt Payable to Affiliated Companies150
 150
150
 150
Other Noncurrent Liabilities      
Deferred income taxes988
 925
1,119
 1,009
Asset retirement obligations616
 727
659
 613
Regulatory liabilities1,761
 1,723
1,684
 1,722
Operating lease liabilities55
 
Accrued pension and other post-retirement benefit costs110
 76
157
 115
Investment tax credits147
 147
161
 147
Other31
 18
57
 16
Total other noncurrent liabilities3,653
 3,616
3,892
 3,622
Commitments and Contingencies      
Equity      
Member's Equity4,263
 4,121
4,502
 4,339
Total Liabilities and Equity$12,509
 $12,289
$13,266
 $12,535


PART I
FINANCIAL STATEMENTS


DUKE ENERGY INDIANA, LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months EndedNine Months Ended
September 30,September 30,
(in millions)2018
 2017
2019
 2018
CASH FLOWS FROM OPERATING ACTIVITIES      
Net income$317
 $318
$363
 $317
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation, amortization and accretion388
 339
395
 388
Equity component of AFUDC(28) (20)(13) (28)
Gain on sale of other assets and other, net
 (1)
Impairment charges30
 

 30
Deferred income taxes94
 101
108
 94
Accrued pension and other post-retirement benefit costs5
 4
3
 5
Contributions to qualified pension plans(8) 
(2) (8)
Payments for asset retirement obligations(49) (26)(31) (49)
Provision for rate refunds58
 

 58
(Increase) decrease in      
Receivables1
 53
1
 1
Receivables from affiliated companies27
 31
37
 27
Inventory16
 54
(56) 16
Other current assets(59) 18
91
 (59)
Increase (decrease) in      
Accounts payable28
 (71)1
 28
Accounts payable to affiliated companies(6) (1)(9) (6)
Taxes accrued(51) 115
(14) (51)
Other current liabilities6
 (18)(12) 6
Other assets29
 (24)(73) 29
Other liabilities(13) 32
62
 (13)
Net cash provided by operating activities785
 904
851
 785
CASH FLOWS FROM INVESTING ACTIVITIES      
Capital expenditures(619) (603)(663) (619)
Purchases of debt and equity securities(42) (15)(19) (42)
Proceeds from sales and maturities of debt and equity securities18
 6
15
 18
Notes receivable from affiliated companies
 57
(213) 
Other3
 (40)(33) 3
Net cash used in investing activities(640) (595)(913) (640)
CASH FLOWS FROM FINANCING ACTIVITIES      
Proceeds from the issuance of long-term debt485
 
Payments for the redemption of long-term debt(1) (3)(60) (1)
Notes payable to affiliated companies40
 
(167) 40
Distributions to parent(175) (300)(200) (175)
Other(1) (1)
 (1)
Net cash used in financing activities(137) (304)
Net increase in cash and cash equivalents8

5
Net cash provided by (used in) financing activities58
 (137)
Net (decrease) increase in cash and cash equivalents(4)
8
Cash and cash equivalents at beginning of period9
 17
24
 9
Cash and cash equivalents at end of period$17
 $22
$20
 $17
Supplemental Disclosures:      
Significant non-cash transactions:      
Accrued capital expenditures$71
 $101
$82
 $71


PART I
FINANCIAL STATEMENTS


DUKE ENERGY INDIANA, LLC
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
 Three Months Ended
 September 30, 2018 and 2019
 Member's
 Member's
(in millions) Equity
 Equity
Balance at December 31, 2016 $4,067
Balance at June 30, 2018 $4,244
Net income 318
 119
Distributions to parent (300) (100)
Balance at September 30, 2017
$4,085
Balance at September 30, 2018 $4,263
    
Balance at June 30, 2019 $4,546
Net income 156
Distributions to parent (200)
Balance at September 30, 2019 $4,502
  
 Nine Months Ended
 September 30, 2018 and 2019
 Member's
(in millions) Equity
Balance at December 31, 2017 $4,121
 $4,121
Net income 317
 317
Distributions to parent (175) (175)
Balance at September 30, 2018
$4,263

$4,263
  
Balance at December 31, 2018 $4,339
Net income 363
Distributions to parent (200)
Balance at September 30, 2019
$4,502




PART I
FINANCIAL STATEMENTS




PIEDMONT NATURAL GAS COMPANY, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
Three Months Ended Nine Months EndedThree Months Ended Nine Months Ended
September 30, September 30,September 30, September 30,
(in millions)2018
 2017
 2018
 2017
2019
 2018
 2019
 2018
Operating Revenues$172
 $183
 $940
 $884
$168
 $172
 $956
 $940
Operating Expenses              
Cost of natural gas54
 63
 387
 333
46
 54
 384
 387
Operation, maintenance and other85
 73
 252
 226
78
 85
 241
 252
Depreciation and amortization40
 38
 118
 109
43
 40
 127
 118
Property and other taxes12
 13
 36
 38
14
 12
 39
 36
Impairment charges
 
 
 7
Total operating expenses191
 187
 793
 713
181
 191
 791
 793
Operating (Loss) Income(19) (4) 147
 171
(13) (19) 165
 147
Other Income and Expenses       
Equity in earnings of unconsolidated affiliates3
 3
 6
 8
Other income and expenses, net3
 
 9
 (1)
Total other income and expenses6
 3
 15
 7
Other Income and Expenses, net7
 6
 19
 15
Interest Expense19
 20
 60
 59
22
 19
 65
 60
(Loss) Income Before Income Taxes(32) (21) 102
 119
(28) (32) 119
 102
Income Tax (Benefit) Expense(11) (10) 21
 43
(10) (11) 22
 21
Net (Loss) Income and Comprehensive (Loss) Income$(21) $(11) $81
 $76
$(18) $(21) $97
 $81


PART I
FINANCIAL STATEMENTS


PIEDMONT NATURAL GAS COMPANY, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)September 30, 2018
 December 31, 2017
September 30, 2019
 December 31, 2018
ASSETS      
Current Assets      
Cash and cash equivalents$6
 $19
Receivables (net of allowance for doubtful accounts of $1 at 2018 and $2 at 2017)83
 275
Receivables (net of allowance for doubtful accounts of $5 at 2019 and $2 at 2018)$78
 $266
Receivables from affiliated companies10
 7
10
 22
Notes receivable from affiliated companies11
 
Inventory51
 66
47
 70
Regulatory assets38
 95
48
 54
Other48
 52
122
 19
Total current assets247
 514
305
 431
Property, Plant and Equipment      
Cost7,265
 6,725
8,234
 7,486
Accumulated depreciation and amortization(1,553) (1,479)(1,652) (1,575)
Net property, plant and equipment5,712
 5,246
6,582
 5,911
Other Noncurrent Assets      
Goodwill49
 49
49
 49
Regulatory assets305
 283
306
 303
Operating lease right-of-use assets, net25
 
Investments in equity method unconsolidated affiliates63
 61
82
 64
Other65
 65
42
 52
Total other noncurrent assets482
 458
504
 468
Total Assets$6,441
 $6,218
$7,391
 $6,810
LIABILITIES AND EQUITY      
Current Liabilities      
Accounts payable$131
 $125
$140
 $203
Accounts payable to affiliated companies27
 13
50
 38
Notes payable to affiliated companies
 364
262
 198
Taxes accrued31
 19
33
 84
Interest accrued25
 31
32
 31
Current maturities of long-term debt350
 250

 350
Regulatory liabilities34
 3
77
 37
Other51
 69
63
 58
Total current liabilities649
 874
657
 999
Long-Term Debt1,788
 1,787
2,384
 1,788
Other Noncurrent Liabilities      
Deferred income taxes586
 564
663
 551
Asset retirement obligations15
 15
20
 19
Regulatory liabilities1,171
 1,141
1,154
 1,181
Operating lease liabilities24
 
Accrued pension and other post-retirement benefit costs3
 5
6
 4
Other186
 170
145
 177
Total other noncurrent liabilities1,961
 1,895
2,012
 1,932
Commitments and Contingencies
 

 
Equity      
Common stock, no par value: 100 shares authorized and outstanding at 2018 and 20171,160
 860
Common stock, no par value: 100 shares authorized and outstanding at 2019 and 20181,310
 1,160
Retained earnings883
 802
1,028
 931
Total equity2,043
 1,662
2,338
 2,091
Total Liabilities and Equity$6,441
 $6,218
$7,391
 $6,810


PART I
FINANCIAL STATEMENTS


PIEDMONT NATURAL GAS COMPANY, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months EndedNine Months Ended
September 30,September 30,
(in millions)2018
 2017
2019
 2018
CASH FLOWS FROM OPERATING ACTIVITIES      
Net income$81
 $76
$97
 $81
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization120
 112
129
 120
Impairment charges
 7
Deferred income taxes2
 127
110
 2
Equity in earnings from unconsolidated affiliates(6) (8)(6) (6)
Accrued pension and other post-retirement benefit costs(3) 9
(7) (3)
Contributions to qualified pension plans(1) 
Provision for rate refunds31
 
9
 31
(Increase) decrease in      
Receivables192
 157
192
 192
Receivables from affiliated companies(3) (1)12
 (3)
Inventory16
 13
23
 16
Other current assets58
 (129)(95) 58
Increase (decrease) in      
Accounts payable(48) (52)(93) (48)
Accounts payable to affiliated companies14
 (1)12
 14
Taxes accrued11
 (37)(51) 11
Other current liabilities8
 (21)(6) 8
Other assets(4) (9)(4) (4)
Other liabilities(5) (7)(4) (5)
Net cash provided by operating activities464
 236
317
 464
CASH FLOWS FROM INVESTING ACTIVITIES      
Capital expenditures(497) (407)(751) (497)
Cost of removal, net of salvage(8) 
Contributions to equity method investments
 (12)(16) 
Notes receivable from affiliated companies(11) 

 (11)
Other3
 2
(10) (5)
Net cash used in investing activities(513) (417)(777) (513)
CASH FLOWS FROM FINANCING ACTIVITIES      
Proceeds from the issuance of long-term debt100
 250
596
 100
Payments for the redemption of long-term debt
 (35)(350) 
Notes payable and commercial paper
 (330)
Notes payable to affiliated companies(364) 284
64
 (364)
Capital contributions from parent300
 
150
 300
Other
 (1)
Net cash provided by financing activities36
 168
460
 36
Net decrease in cash and cash equivalents(13) (13)
 (13)
Cash and cash equivalents at beginning of period19
 25

 19
Cash and cash equivalents at end of period$6
 $12
$
 $6
Supplemental Disclosures:      
Significant non-cash transactions:      
Accrued capital expenditures$89
 $47
$121
 $89
Transfer of ownership interest of certain equity method investees to parent
 149


PART I
FINANCIAL STATEMENTS


PIEDMONT NATURAL GAS COMPANY, INC.
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
Three Months Ended September 30, 2018 and 2019
Common
 Retained
 Total
Common
 Retained
 Total
(in millions)Stock
 Earnings
 Equity
Stock
 Earnings
 Equity
Balance at December 31, 2016$860
 $812
 $1,672
Net income
 76
 76
Transfer of ownership interest of certain equity method investees to parent
 (149) (149)
Balance at September 30, 2017$860
 $739
 $1,599
Balance at June 30, 2018$1,160
 $904
 $2,064
Net loss
 (21) (21)
Balance at September 30, 2018$1,160
 $883
 $2,043
          
Balance at June 30, 2019$1,310
 $1,046
 $2,356
Net loss
 (18) (18)
Balance at September 30, 2019$1,310
 $1,028
 $2,338
     
Nine Months Ended September 30, 2018 and 2019
Common
 Retained
 Total
(in millions)Stock
 Earnings
 Equity
Balance at December 31, 2017$860
 $802
 $1,662
$860
 $802
 $1,662
Net income
 81
 81

 81
 81
Contribution from parent300
 
 300
300
 
 300
Balance at September 30, 2018$1,160
 $883
 $2,043
$1,160
 $883
 $2,043
     
Balance at December 31, 2018$1,160
 $931
 $2,091
Net income
 97
 97
Contribution from parent150
 
 150
Balance at September 30, 2019$1,310
 $1,028
 $2,338




PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements (Unaudited)


FINANCIAL STATEMENTSORGANIZATION AND BASIS OF PRESENTATION


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
Registrant1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
Duke Energy Corporation                  
Duke Energy Carolinas, LLC                    
Progress Energy, Inc.                   
Duke Energy Progress, LLC                    
Duke Energy Florida, LLC                    
Duke Energy Ohio, Inc.                    
Duke Energy Indiana, LLC                    
Piedmont Natural Gas Company, Inc.                     
 Applicable Notes
Registrant1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
Duke Energy                  
Duke Energy Carolinas                   
Progress Energy                  
Duke Energy Progress                   
Duke Energy Florida                   
Duke Energy Ohio                   
Duke Energy Indiana                   
Piedmont                    
Tables within the notes may not sum across due to (i) Progress Energy's consolidation of Duke Energy Progress, Duke Energy Florida and other subsidiaries that are not registrants and (ii) subsidiaries that are not registrants but included in the consolidated Duke Energy balances.
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.) primarily through its direct and indirect subsidiaries. Certain Duke Energy subsidiaries are also subsidiary registrants, including Duke Energy Carolinas, LLC (Duke Energy Carolinas); Progress Energy, Inc. (Progress Energy); Duke Energy Progress, LLC (Duke Energy Progress); Duke Energy Florida, LLC (Duke Energy Florida); Duke Energy Ohio, Inc. (Duke Energy Ohio), Duke Energy Indiana, LLC (Duke Energy Indiana) and Piedmont Natural Gas Company, Inc. (Piedmont). When discussing Duke Energy’s consolidated financial information, it necessarily includes the results of its separate subsidiary registrants (collectively referred to as the Subsidiary Registrants), which, along with Duke Energy, are collectively referred to as the 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. Substantially all of the Subsidiary Registrants' operations qualify for regulatory accounting.
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.
Progress Energy is a public utility holding company headquartered in Raleigh, North Carolina, subject to regulation by FERC. Progress Energy conducts operations through its wholly owned subsidiaries, Duke Energy Progress and Duke Energy Florida.
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.
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.
Duke Energy Ohio is a regulated public utility primarily engaged in the transmission and distribution of electricity in portions of Ohio and Kentucky, 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 price is recovered from retail customers and recorded in Operating Revenues on the Condensed Consolidated Statements of Operations and Comprehensive Income. 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 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.
Piedmont is a regulated public utility primarily engaged in the distribution of natural gas in portions of North Carolina, South Carolina and Tennessee. Piedmont is subject to the regulatory provisions of the NCUC, PSCSC, Tennessee Public Utility Commission (TPUC) and FERC.

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





BASIS OF PRESENTATION
These Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the U.S. (GAAP)GAAP 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 for annual financial statements. Since the interim Condensed Consolidated Financial Statementsstatements 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/A10-K for the year ended December 31, 2017.2018.
The information in these combined notes relates to each of the Duke Energy Registrants as noted in the Index to Combined Notes to Condensed Consolidated Financial Statements. However, none of the registrants make any representations as to information related solely to Duke Energy or the subsidiaries of Duke Energy other than itself.
These Condensed Consolidated Financial Statements, in the opinion of the respective companies’ management, reflect all normal recurring adjustments 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 toBASIS OF CONSOLIDATION
These Condensed Consolidated Financial Statements include, after eliminating intercompany transactions and balances, the current year presentation.
REVENUE
accounts of the Duke Energy recognizes revenue as customers obtain control of promised goodsRegistrants and services in an amount that reflects consideration expected in exchange for those goodssubsidiaries or services. Generally,VIEs where the delivery of electricity and natural gas results in the transfer of control to customers at the time the commodity is delivered and the amount of revenue recognized is equal to the amount billed to each customer, including estimated volumes delivered when billingsrespective Duke Energy Registrants have not yet occurred.control. See Note 13 for further information.additional information on VIEs. These Condensed Consolidated Financial Statements also reflect the Duke Energy Registrants’ proportionate share of certain jointly owned generation and transmission facilities.
NONCONTROLLING INTEREST
Duke Energy maintains a controlling financial interest in certain less-than wholly owned non-regulated subsidiaries. As a result, Duke Energy consolidates these subsidiaries and presents the third-party investors' portion of Duke Energy's net income (loss), net assets and comprehensive income (loss) as noncontrolling interest. Noncontrolling interest is included as a component of equity on the Condensed Consolidated Balance Sheet.
Several operating agreements of Duke Energy's subsidiaries with noncontrolling interest are subject to allocations of earnings, tax attributes and cash flows in accordance with contractual agreements that vary throughout the lives of the subsidiaries. Therefore, Duke Energy and the other investors' (the owners) interests in the subsidiaries are not fixed, and the subsidiaries apply the HLBV method in allocating book profit or loss and other comprehensive income or loss (all measured on a pretax basis) to the owners. The HLBV method measures the amounts that each owner would hypothetically claim at each balance sheet reporting date, including tax benefits realized by the owners, upon a hypothetical liquidation of the subsidiary at the net book value of its underlying assets. The change in the amount that each owner would hypothetically receive at the reporting date compared to the amount it would have received on the previous reporting date represents the amount of profit or loss allocated to each owner for the reporting period. Duke Energy’s North Rosamond solar farm commenced commercial operations resulting in the allocation of losses to the noncontrolling tax equity members of $12 million and $86 million for the three and nine months ended September 30, 2019, respectively, utilizing the HLBV method.



FINANCIAL STATEMENTSORGANIZATION AND BASIS OF PRESENTATION


Other operating agreements of Duke Energy's subsidiaries with noncontrolling interest allocate profit and loss based on their pro rata shares of the ownership interest in the respective subsidiary. Therefore, Duke Energy allocates net income or loss and other comprehensive income or loss of these subsidiaries to the owners based on their pro rata shares.
During the third quarter of 2019, Duke Energy completed a sale of a minority interest in a portion of certain renewable assets to John Hancock. John Hancock's ownership interest in the assets represents a noncontrolling interest. See Note 2 for additional information on the sale.
OTHER CURRENT ASSETS
Duke Energy recorded a receivable related to the Tax ActIncluded in Other within Current Assets in September 2018. As a result, Income taxes receivable exceeds five percent of Total current assets on the Duke EnergyPiedmont Condensed Consolidated Balance Sheets and is $655are income taxes receivable of $90 million and $260$11 million as of September 30, 2018,2019, and December 31, 2017,2018, respectively, and prepaid assets of $30 million and $5 million as of September 30, 2019, and December 31, 2018, respectively. See Note 17The income taxes receivable relates to increased projected NOL utilization for further information.Piedmont as well as intercompany tax settlements. The prepaid assets relate to replenishment of depleted natural gas supply as required by natural gas supply asset management contracts.
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Duke Energy, Progress Energy and Duke Energy Florida have restricted cash balances related primarily to collateral assets, escrow deposits and variable interest entities (VIEs).VIEs. See Note 1213 for additional information. Restricted cash amounts are included in Other within Current Assets and Other Noncurrent Assets.Assets on the Condensed Consolidated Balance Sheets. The following table presents the components of cash, cash equivalents and restricted cash included in the Condensed Consolidated Balance Sheets.
 September 30, 2019 December 31, 2018
   Duke
   Duke
 Duke
Progress
Energy
 Duke
Progress
Energy
 Energy
Energy
Florida
 Energy
Energy
Florida
Current Assets       
Cash and cash equivalents$379
$82
$24
 $442
$67
$36
Other163
16
16
 141
39
39
Other Noncurrent Assets       
Other40
38

 8
6

Total cash, cash equivalents and restricted cash$582
$136
$40
 $591
$112
$75
 September 30, 2018 December 31, 2017
   Duke
   Duke
 Duke
Progress
Energy
 Duke
Progress
Energy
 Energy
Energy
Florida
 Energy
Energy
Florida
Current Assets       
Cash and cash equivalents$303
$43
$20
 $358
$40
$13
Other139
14
14
 138
40
40
Other Noncurrent Assets       
Other7
6

 9
7

Total cash, cash equivalents and restricted cash$449
$63
$34
 $505
$87
$53

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)






INVENTORY
Inventory is used for operations and is recorded primarily using the average cost method. Inventory related to regulated operations is valued at historical cost. Inventory related to nonregulated operations is valued at the lower of cost or market. Materials and supplies are recorded as inventory when purchased and subsequently charged to expense or capitalized to property, plant and equipment when installed. Inventory, including excess or obsolete inventory, is written-down to the lower of cost or market value. Once inventory has been written-down, it creates a new cost basis for the inventory that is not subsequently written-up. Provisions for inventory write-offs were not material at September 30, 2018,2019, and December 31, 2017.2018. The components of inventory are presented in the tables below.
September 30, 2018September 30, 2019
  Duke
   Duke
 Duke
 Duke
 Duke
    Duke
   Duke
 Duke
 Duke
 Duke
  
Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Materials and supplies$2,283
 $758
 $1,071
 $748
 $323
 $87
 $294
 $1
$2,284
 $749
 $1,056
 $710
 $346
 $75
 $325
 $4
Coal515
 176
 187
 99
 88
 14
 138
 
490
 153
 172
 118
 54
 12
 152
 
Natural gas, oil and other fuel342
 42
 215
 109
 106
 34
 2
 50
333
 41
 206
 111
 95
 41
 1
 43
Total inventory$3,140
 $976
 $1,473
 $956
 $517
 $135
 $434
 $51
$3,107
 $943
 $1,434
 $939
 $495
 $128
 $478
 $47
December 31, 2017December 31, 2018
  Duke
   Duke
 Duke
 Duke
 Duke
    Duke
   Duke
 Duke
 Duke
 Duke
  
Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Materials and supplies$2,293
 $744
 $1,118
 $774
 $343
 $82
 $309
 $2
$2,238
 $731
 $1,049
 $734
 $315
 $84
 $312
 $2
Coal603
 192
 255
 139
 116
 17
 139
 
491
 175
 192
 106
 86
 14
 109
 
Natural gas, oil and other fuel354
 35
 219
 104
 115
 34
 2
 64
355
 42
 218
 114
 103
 28
 1
 68
Total inventory$3,250
 $971
 $1,592
 $1,017
 $574
 $133
 $450
 $66
$3,084
 $948
 $1,459
 $954
 $504
 $126
 $422
 $70
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 on a net basis.
Excise taxes accounted for on a gross basis within both Operating Revenues and Property and other taxes on the Condensed Consolidated Statements of Operations were as follows.
 Three Months Ended September 30, Nine Months Ended September 30,
(in millions)2018
 2017
 2018
 2017
Duke Energy$114

$107

$308

$289
Duke Energy Carolinas10
 9
 27
 27
Progress Energy71
 67
 181
 168
Duke Energy Progress5
 5
 15
 14
Duke Energy Florida66
 62
 166
 154
Duke Energy Ohio26
 24
 81
 75
Duke Energy Indiana6
 6
 17
 16
Piedmont1
 1
 2
 3

NEW ACCOUNTING STANDARDS
TheExcept as noted below, the new accounting standards adopted for 2018 and 20172019 had no material impact on the presentation or results of operations, cash flows or financial position of the Duke Energy Registrants. While immaterial, adoption of the following accounting standards had the most significant impact on the Duke Energy results of operations, cash flows and financial position for the nine months ended September 30, 2018.
Revenue from Contracts with Customers. In May 2014, the Financial Accounting Standards Board (FASB) issued revised accounting guidance for revenue recognition from contracts with customers. The core principle of this 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 expected in exchange for those goods or services. The amendments also required disclosure of sufficient information to allow users to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The majority of Duke Energy’s revenue is in scope of the new guidance. Other revenue arrangements, such as alternative revenue programs and certain purchase power agreements (PPAs) and lighting agreements accounted for as leases, are excluded from the scope of this guidance and, therefore, are accounted for and evaluated for separate presentation and disclosure under other relevant accounting guidance.


PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





FINANCIAL STATEMENTSORGANIZATION AND BASIS OF PRESENTATION
Duke Energy elected the modified retrospective method of adoption effective January 1, 2018. Under the modified retrospective method of adoption, prior year reported results are not restated. Adoption of this standard did not result in a material change in the timing or pattern of revenue recognition and a cumulative-effect adjustment was not recorded at January 1, 2018. Duke Energy utilized certain practical expedients including applying this guidance to open contracts at the date of adoption, expensing costs to obtain a contract where the amortization period of the asset would have been one year or less, ignoring the effects of a significant financing when the period between transfer of the good or service and payment is one year or less and recognizing revenues for certain contracts under the invoice practical expedient, which allows revenue recognition to be consistent with invoiced amounts (including unbilled estimates) provided certain criteria are met, including consideration of whether the invoiced amounts reasonably represent the value provided to customers.
In preparation for adoption, Duke Energy identified material revenue streams and reviewed representative contracts and tariffs, including those associated with certain long-term customer contracts such as wholesale contracts, PPAs and other customer arrangements. Duke Energy also monitored the activities of the power and utilities industry revenue recognition task force and has reviewed published positions on specific industry issues to evaluate the impact, if any, on Duke Energy’s specific contracts and conclusions.
Duke Energy applied the available practical expedient to portfolios of tariffs and contracts with similar characteristics. The vast majority of sales, including energy provided to retail customers, are from tariff offerings that provide natural gas or electricity without a defined contractual term ("at-will"). In most circumstances, revenue from contracts with customers is equivalent to the electricity or natural gas supplied and billed in that period (including unbilled estimates). As such, adoption of the new rules did not result in a shift in the timing or pattern of revenue recognition for such sales. While there have been changes to the captions and descriptions of revenues in Duke Energy’s financial statements, the most significant impact as a result of adopting the standard are additional disclosures around the nature, amount, timing and uncertainty of revenues and cash flows arising from contracts with customers. See Note 13 for further information.
Financial Instruments Classification and Measurement. On January 1, 2018, Duke Energy adopted FASB guidance, which revised the classification and measurement of certain financial instruments. The adopted guidance changes the presentation of realized and unrealized gains and losses in certain equity securities that were previously recorded in accumulated other comprehensive income (AOCI). These gains and losses are now recorded in net income. An entity's equity investments that are accounted for under the equity method of accounting are not included within the scope of the new guidance. This guidance had a minimal impact on the Duke Energy Registrant's Condensed Consolidated Statements of Operations and Comprehensive Income as changes in the fair value of most of the Duke Energy Registrants' equity securities are deferred as regulatory assets or liabilities pursuant to accounting guidance for regulated operations. The resulting adjustment of unrealized gains and losses in AOCI to retained earnings was immaterial. The primary impact to Duke Energy as a result of implementing this guidance is adding disclosure requirements to present separately the financial assets and financial liabilities by measurement category and form of financial asset. See Notes 10 and 11 for further information.
Statement of Cash Flows. In November 2016, the FASB issued revised accounting guidance to reduce diversity in practice for the presentation and classification of restricted cash on the Condensed Consolidated Statements of Cash Flows. Under the updated guidance, restricted cash and restricted cash equivalents are included within beginning-of-period and end-of-period cash and cash equivalents on the Condensed Consolidated Statements of Cash Flows. Duke Energy adopted this guidance on January 1, 2018. The guidance has been applied using a retrospective transition method to each period presented. The adoption by Duke Energy of the revised guidance resulted in a change to the amount of Cash, cash equivalents and restricted cash explained when reconciling the beginning-of-period and end-of-period total amounts shown on the Condensed Consolidated Statements of Cash Flows. In addition, a reconciliation has been provided of Cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets that sums to the total of the same such amounts in the Condensed Consolidated Statements of Cash Flows. Prior to adoption, the Duke Energy Registrants reflected changes in noncurrent restricted cash within Cash Flows from Investing Activities and changes in current restricted cash within Cash Flows from Operating Activities on the Condensed Consolidated Statements of Cash Flows.
In August 2016, the FASB issued accounting guidance addressing diversity in practice for eight separate cash flow issues. The guidance requires entities to classify distributions received from equity method investees using either the cumulative earnings approach or the nature of the distribution approach. Duke Energy adopted this guidance on January 1, 2018, and elected the nature of distribution approach. This approach requires all distributions received to be categorized based on legal documentation describing the nature of the activities generating the distribution. Cash inflows resulting in a return on investment (surplus) will be reflected in Cash Flows from Operating Activities on the Condensed Consolidated Statements of Cash Flows, whereas cash inflows resulting in a return of investment (capital) will be reflected in Cash Flows from Investing Activities on the Condensed Consolidated Statements of Cash Flows. The guidance has been applied using the retrospective transition method to each period presented. There are no changes to the Condensed Consolidated Statements of Cash Flows for the periods presented as a result of this accounting change.
Retirement Benefits. In March 2017, the FASB issued revised accounting guidance for the presentation of net periodic costs related to benefit plans. Previous guidance required the aggregation of all the components of net periodic costs on the Condensed Consolidated Statement of Operations and did not require the disclosure of the location of net periodic costs on the Condensed Consolidated Statement of Operations. Under the amended guidance, the service cost component of net periodic costs is included within Operating Income within the same line as other compensation expenses. All other components of net periodic costs are outside of Operating Income. In addition, the updated guidance permits only the service cost component of net periodic costs to be capitalized to Inventory or Property, Plant and Equipment. This represents a change from previous guidance, which permitted all components of net periodic costs to be eligible for capitalization.
Duke Energy adopted this guidance on January 1, 2018. Under previous guidance, Duke Energy presented the total non-capitalized net periodic costs within Operation, maintenance and other on the Condensed Consolidated Statements of Operations. The adoption of this guidance resulted in a retrospective change to reclassify the presentation of the non-service cost (benefit) components of net periodic costs to Other income and expenses. Duke Energy utilized the practical expedient for retrospective presentation. The change in components of net periodic costs eligible for capitalization is applicable prospectively. Since Duke Energy’s service cost component is greater than the total net periodic costs, the change results in increased capitalization of net periodic costs, higher Operation, maintenance and other and higher Other income and expenses. The resulting prospective impact to Duke Energy is an immaterial increase in Net Income. See Note 15 for further information.

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)







For Duke Energy, the retrospective change resulted in higher Operation, maintenance and other and higher Other income and expenses, net, of $156 million, $131 million and $96 million for the years ended December 31, 2017, 2016 and 2015, respectively. There was no change to Net Income for these prior periods.
The following new Accounting Standards Updates (ASUs) have been issued, but have not yet been adopted by Duke Energy, as of September 30, 2018.
Leases. In February 2016, the FASB issued revised accounting guidance for leases. The core principle of this guidance is that a lessee should recognize the assets and liabilities that arise from leases on the balance sheet.
For This resulted in a material impact on the presentation for the statement of financial position of the Duke Energy this guidance isRegistrants for the period ended September 30, 2019, and an immaterial impact to the Duke Energy Registrants' results of operations for the three and nine months ended September 30, 2019, and cash flows for the nine months ended September 30, 2019.
Duke Energy elected the modified retrospective method of adoption effective for interim and annual periods beginning January 1, 2019. The guidance will be applied using aUnder the modified retrospective approach. Uponmethod of adoption, agreements considered leases for the use of certain aircraft, space on communication towers, industrial equipment, fleet vehicles, fuel transportation (barges and railcars), land and office space will be recognized on the balance sheet.prior year reported results are not restated. For adoption, Duke Energy expectshas elected to elect certain ofapply the following practical expedients upon adoption:expedients:
Practical ExpedientDescriptionElection
Package of transition practical expedients (for leases commenced prior to adoption date and must be adopted as a package)Do not need to 1) reassess whether any expired or existing contracts are/or contain leases, 2) reassess the lease classification for any expired or existing leases and 3) reassess initial direct costs for any existing leases.Duke Energy plans to elect this practical expedient.
Short-term lease expedient (elect by class of underlying asset)Elect as an accounting policy to not apply the recognition requirements to short-term leases by asset class.Duke Energy plans to elect this practical expedient for all asset classes.
Lease and non-lease components (elect by class of underlying asset)Elect as an accounting policy to not separate non-lease components from lease components and instead account for each lease and associated non-lease component as a single lease component by asset class.Duke Energy is currently assessing the election of this practical expedient.
Hindsight expedient (when determining lease term)Elect to use hindsight to determine the lease term.Duke Energy plans to elect this practical expedient.
Existing and expired land easements not previously accounted for as leasesElect to not evaluate existing or expired easements under the new guidance and carry forward current accounting treatment.Duke Energy plans to elect this practical expedient.
Comparative reporting requirements for initial adoption


Elect to apply transition requirements at adoption date, recognize cumulative effect adjustment to retained earnings in period of adoption and not apply ASC 842the new requirements to comparative periods, including disclosures.Duke Energy plans to elect this practical expedient.
Lessor expedient (elect by class of underlying asset)


Elect as an accounting policy to aggregate non-lease components with the related lease component when specified conditions are met by asset class. Account for the combined component based on its predominant characteristic (revenue or operating lease).Duke Energy is currently assessing the election of this practical expedient.

Duke Energy is currently evaluatingevaluated the financial statement impact of adopting thisthe standard and is continuing to monitormonitored industry implementation issues, includingissues. Under agreements considered leases, within asset retirement obligations, pipeline laterals and renewable energy PPAs. In arrangements where Duke Energy is the lessee, it expects an increase in assetsfor the use of certain aircraft, space on communication towers, industrial equipment, fleet vehicles, fuel transportation (barges and liabilitiesrailcars), land, office space and PPAs are now recognized on itsthe balance sheet along with the addition of required disclosures of key lease information. However, the ultimate lessee impact of the new standard has not yet been determined.sheet. The Duke Energy doesRegistrants did not expecthave a material change to itsthe financial statements from the adoption of the new standard for contracts where it is the lessor. System enhancements,See Note 5 for further information.
The following new accounting standard has been issued but not yet adopted by the Duke Energy Registrants as of September 30, 2019.
Credit Losses. In June 2016, the FASB issued new accounting guidance for credit losses. This guidance establishes the new CECL impairment model applicable to certain financial assets, including additional processestrade and controls,other receivables, net investments in leases, and debt securities classified as held-for-sale investments. The model also applies to financial guarantees.
For Duke Energy, this guidance is effective for interim and annual periods beginning January 1, 2020. This guidance will be requiredapplied using a modified retrospective approach through a cumulative-effect adjustment to facilitateretained earnings as of January 1, 2020. The updated guidance requires Duke Energy to establish an allowance for credit losses based on management's estimate of losses expected to be incurred over the identification, tracking and reporting of potential leases based upon requirementslife of the new lease standard.asset or guarantee. Duke Energy is implementing a third-party software tool to help withcurrently evaluating the adoption and ongoing accounting under the newimpact of adopting this standard.
2. 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. 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 includes intercompany revenues and expenses that are eliminated on 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.
Duke Energy
Duke Energy's segment structure includes the following segments: Electric Utilities and Infrastructure, Gas Utilities and Infrastructure and Commercial Renewables.

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





The Electric Utilities and Infrastructure segment primarily includes Duke Energy's regulated electric utilities in the Carolinas, Florida and the Midwest. The regulated electric utilities conduct operations through the Subsidiary Registrants that are substantially all regulated and, accordingly, qualify for regulatory accounting treatment. Electric Utilities and Infrastructure also includes Duke Energy's electric transmission infrastructure investments.
The Gas Utilities and Infrastructure segment includes Piedmont, Duke Energy's natural gas local distribution companies in Ohio and Kentucky, and Duke Energy's natural gas storage and midstream pipeline investments. Gas Utilities and Infrastructure's operations are substantially all regulated and, accordingly, qualify for regulatory accounting treatment.
The Commercial Renewables segment is primarily comprised of nonregulated utility scaleutility-scale wind and solar generation assets located throughout the U.S. On April 24, 2019, Duke Energy executed an agreement to sell a minority interest in a portion of certain renewable assets. The sale closed on September 6, 2019, and resulted in pretax proceeds to Duke Energy of $415 million. The portion of Duke Energy’s commercial renewables energy portfolio sold includes 49% of 37 operating wind, solar and battery storage assets and 33% of 11 operating solar assets across the U.S. Duke Energy retained control of these assets, and, therefore, no gain or loss was recognized on the Condensed Consolidated Statements of Operations. The difference between the fair value of the consideration received and the carrying value of the noncontrolling interest claim on net assets of $465 million, net of a tax benefit of $8 million, was recorded in equity.



FINANCIAL STATEMENTSBUSINESS SEGMENTS


During 2019, Duke Energy evaluated recoverability of the wind and solar generation assets included in the minority interest sale as a result of the portfolio fair value of consideration received being less than the carrying value of the assets and determined the assets were all recoverable. Additionally, in 2019, Duke Energy evaluated recoverability of its renewable merchant plants principally located in the Electric Reliability Council of Texas West market due to declining market pricing and declining long-term forecasted energy prices, primarily driven by lower forecasted natural gas prices. Duke Energy determined that the assets were not impaired because the carrying value of $160 million approximates the aggregate estimated future cash flows and further testing was not required. A continued decline in energy market pricing would likely result in a future impairment.
The remainder of Duke Energy’s operations is presented as Other, which is primarily comprised of interest expense on holding company debt, unallocated corporate costs, and Duke Energy’s wholly owned captive insurance company, Bison, Insurance Company Limited (Bison). Other also includesand Duke Energy's 17.5 percent interest in National Methanol Company (NMC), a large regional producer of methyl tertiary butyl ether located in Saudi Arabia. The investment in NMC is accounted for under the equity method of accounting.NMC.
Business segment information is presented in the following tables. Segment assets presented exclude intercompany assets.
 Three Months Ended September 30, 2019
 Electric
 Gas
   Total
      
 Utilities and
 Utilities and
 Commercial
 Reportable
      
(in millions)Infrastructure
 Infrastructure
 Renewables
 Segments
 Other
 Eliminations
 Total
Unaffiliated revenues$6,569
 $225
 $138
 $6,932
 $8
 $
 $6,940
Intersegment revenues8
 24
 
 32
 17
 (49) 
Total revenues$6,577
 $249
 $138
 $6,964
 $25
 $(49) $6,940
Segment income (loss)(a)
$1,385
 $26
 $40
 $1,451
 $(124) $
 $1,327
Add back noncontrolling interests(b)
            (19)
Add back preferred stock dividend            15
Net income            $1,323
Segment assets$133,296
 $13,424
 $5,278
 $151,998
 $3,734
 $185
 $155,917

Three Months Ended September 30, 2018Three Months Ended September 30, 2018
Electric
 Gas
   Total
      Electric
 Gas
   Total
      
Utilities and
 Utilities and
 Commercial
 Reportable
      Utilities and
 Utilities and
 Commercial
 Reportable
      
(in millions)Infrastructure
 Infrastructure
 Renewables
 Segments
 Other
 Eliminations
 Consolidated
Infrastructure
 Infrastructure
 Renewables
 Segments
 Other
 Eliminations
 Total
Unaffiliated revenues$6,253
 $232
 $127
 $6,612
 $16
 $
 $6,628
$6,253
 $232
 $127
 $6,612
 $16
 $
 $6,628
Intersegment revenues7
 24
 
 31
 18
 (49) 
7
 24
 
 31
 18
 (49) 
Total revenues$6,260
 $256
 $127
 $6,643
 $34
 $(49) $6,628
$6,260
 $256
 $127
 $6,643
 $34
 $(49) $6,628
Segment income (loss)(c)(e)
$1,167
 $17
 $(62) $1,122
 $(44) $
 $1,078
$1,167
 $17
 $(62) $1,122
 $(44) $
 $1,078
Add back noncontrolling interests            (16)            (16)
Income from discontinued operations, net of tax            4
Loss from discontinued operations, net of tax            4
Net income            $1,066
            $1,066
Segment assets$123,847
 $11,806
 $4,212
 $139,865
 $3,115
 $185
 $143,165

Three Months Ended September 30, 2017Nine Months Ended September 30, 2019
Electric
 Gas
   Total
      Electric
 Gas
   Total
      
Utilities and
 Utilities and
 Commercial
 Reportable
      Utilities and
 Utilities and
 Commercial
 Reportable
      
(in millions)Infrastructure
 Infrastructure
 Renewables
 Segments
 Other
 Eliminations
 Consolidated
Infrastructure
 Infrastructure
 Renewables
 Segments
 Other
 Eliminations
 Total
Unaffiliated revenues$6,122
 $249
 $95
 $6,466
 $16
 $
 $6,482
$17,357
 $1,239
 $362
 $18,958
 $18
 $
 $18,976
Intersegment revenues7
 23
 
 30
 19
 (49) 
24
 72
 
 96
 53
 (149) 
Total revenues$6,129
 $272
 $95
 $6,496
 $35
 $(49) $6,482
$17,381
 $1,311
 $362
 $19,054
 $71
 $(149) $18,976
Segment income (loss)(e)(a)
$1,020
 $19
 $(49) $990
 $(34) $
 $956
$2,944
 $292
 $139
 $3,375
 $(328) $
 $3,047
Add back noncontrolling interests(b)            1
            (110)
Loss from discontinued operations, net of tax            (2)
Add back preferred stock dividend            27
Net income            $955
            $2,964



FINANCIAL STATEMENTSBUSINESS SEGMENTS


 Nine Months Ended September 30, 2018
 Electric
 Gas
   Total
      
 Utilities and
 Utilities and
 Commercial
 Reportable
      
(in millions)Infrastructure
 Infrastructure
 Renewables
 Segments
 Other
 Eliminations
 Total
Unaffiliated revenues$16,783
 $1,229
 $347
 $18,359
 $47
 $
 $18,406
Intersegment revenues23
 72
 
 95
 54
 (149) 
Total revenues$16,806
 $1,301
 $347
 $18,454
 $101
 $(149) $18,406
Segment income (loss)(c)(d)(e)(f)(g)(h)
$2,492
 $161
 $(4) $2,649
 $(446) $
 $2,203
Add back noncontrolling interests            (12)
Loss from discontinued operations, net of tax            (1)
Net income            $2,190
(a)All segments include adjustmentsElectric Utilities and Infrastructure includes a reduction of a prior year impairment at Citrus County CC related to the December 31, 2017 estimate of the income tax effects of the Tax Act.plant's cost cap. See Note 173 for additional information.
(b)Includes the allocation of losses to noncontrolling tax equity members. See Note 1 for additional information.
(c)All segments include adjustments of prior year tax estimates related to the Tax Act.
(d)Commercial Renewables includes an impairment charge related to goodwill.
(e)Other includes costs to achieve the Piedmont acquisition.
(c)Commercial Renewables includes an impairment charge related to goodwill. See Note 7 for additional information.
(d)Electric Utilities and Infrastructure includes an impairment charge related to the unrecovered Levy Nuclear Project costs at Duke Energy Florida.
(e)Commercial Renewables includes impairment charges related to certain wind projects.

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





 Nine Months Ended September 30, 2018
 Electric
 Gas
   Total
      
 Utilities and
 Utilities and
 Commercial
 Reportable
      
(in millions)Infrastructure
 Infrastructure
 Renewables
 Segments
 Other
 Eliminations
 Consolidated
Unaffiliated revenues$16,783
 $1,229
 $347
 $18,359
 $47
 $
 $18,406
Intersegment revenues23
 72
 
 95
 54
 (149) 
Total revenues$16,806
 $1,301
 $347
 $18,454
 $101
 $(149) $18,406
Segment income (loss)(a)(b)(c)(d)(e)(f)
$2,492
 $161
 $(4) $2,649
 $(446) $
 $2,203
Add back noncontrolling interests            (12)
Loss from discontinued operations, net of tax            (1)
Net income            $2,190
 Nine Months Ended September 30, 2017
 Electric
 Gas
   Total
      
 Utilities and
 Utilities and
 Commercial
 Reportable
      
(in millions)Infrastructure
 Infrastructure
 Renewables
 Segments
 Other
 Eliminations
 Consolidated
Unaffiliated revenues$16,211
 $1,175
 $333
 $17,719
 $47
 $
 $17,766
Intersegment revenues23
 68
 
 91
 56
 (147) 
Total revenues$16,234
 $1,243
 $333
 $17,810
 $103
 $(147) $17,766
Segment income (loss)(c)(g)(h)
$2,384
 $179
 $2
 $2,565
 $(205) $
 $2,360
Add back noncontrolling interests            5
Loss from discontinued operations, net of tax            (4)
Net income            $2,361

(a)All segments include adjustments to the December 31, 2017 estimate of the income tax effects of the Tax Act. See Note 17 for additional information.
(b)(f)Electric Utilities and Infrastructure includes regulatory and legislative impairment charges related to rate case orders, settlements or other actions of regulators or legislative bodies. See Note 3 for additional information.
(c)Other includes costs to achieve the Piedmont acquisition.
(d)(g)Gas Utilities and Infrastructure includes an impairment of the investment in Constitution Pipeline Company, LLC (Constitution).Constitution. See Note 3 for additional information.
(e)(h)Other includes the loss on the sale of the retired Beckjord Generating Station (Beckjord) described below and a valuation allowance recorded against the alternative minimum tax credits subject to sequestration. See Note 17 for additional information on the valuation allowance.
(f)Commercial Renewables includes an impairment charge related to goodwill. See Note 7 for additional information.
(g)Electric Utilities and Infrastructure includes an impairment charge related to the unrecovered Levy Nuclear Project costs at Duke Energy Florida.
(h)Commercial Renewables includes impairment charges related to certain wind projects.AMT credits.
In February 2018, Duke Energy sold Beckjord, a nonregulated facility retired during 2014, and recorded a pretax loss of $106 million within Gains (Losses) on Sales of Other Assets and Other, net and $1 million within Operation, maintenance and other on Duke Energy's Condensed Consolidated Statements of Operations for the nine months ended September 30, 2018. The sale included the transfer of coal ash basins and other real property and indemnification from any and all potential future claims related to the property, whether arising under environmental laws or otherwise.
Duke Energy Ohio
Duke Energy Ohio has two2 reportable operating segments, Electric Utilities and Infrastructure and Gas Utilities and Infrastructure.
Electric Utilities and Infrastructure transmits and distributes electricity in portions of Ohio and generates, distributes and sells electricity in portions of Northern Kentucky. Gas Utilities and Infrastructure transports and sells natural gas in portions of Ohio and Northern Kentucky. Both reportable operating segments conduct operations primarily through Duke Energy Ohio and its wholly owned subsidiary, Duke Energy Kentucky.

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





The remainder of Duke Energy Ohio's operations is presented as Other, which 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 the Ohio Valley Electric Corporation's (OVEC) power plants. See Note 8 for additional information on related party transactions.
 Three Months Ended September 30, 2018
 Electric
 Gas
 Total
      
 Utilities and
 Utilities and
 Reportable
      
(in millions)Infrastructure
 Infrastructure
 Segments
 Other
 Eliminations
 Consolidated
Total revenues$373
 $84
 $457
 $12
 $
 $469
Segment income/Net income$85
 $12
 $97
 $3
 $
 $100
Segment assets$5,484
 $2,775
 $8,259
 $39
 $(2) $8,296
Other.
 Three Months Ended September 30, 2017
 Electric
 Gas
 Total
    
 Utilities and
 Utilities and
 Reportable
    
(in millions)Infrastructure
 Infrastructure
 Segments
 Other
 Consolidated
Total revenues$371
 $90
 $461
 $10
 $471
Segment income (loss)$50
 $14
 $64
 $(8) $56
Loss from discontinued operations, net of tax        (1)
Net income  

 

 

 $55
 Three Months Ended September 30, 2019
 Electric
 Gas
 Total
      
 Utilities and
 Utilities and
 Reportable
      
(in millions)Infrastructure
 Infrastructure
 Segments
 Other
 Eliminations
 Total
Total revenues$408
 $81
 $489
 $
 $
 $489
Segment income/Net (loss) income$62
 $13
 $75
 $(1) $
 $74
Segment assets$6,107
 $3,049
 $9,156
 $30
 $(3) $9,183
 Three Months Ended September 30, 2018
 Electric
 Gas
 Total
    
 Utilities and
 Utilities and
 Reportable
    
(in millions)Infrastructure
 Infrastructure
 Segments
 Other
 Total
Total revenues$373
 $84
 $457
 $12
 $469
Segment income/Net income$85
 $12
 $97
 $3
 $100


 Nine Months Ended September 30, 2019
 Electric
 Gas
 Total
    
 Utilities and
 Utilities and
 Reportable
    
(in millions)Infrastructure
 Infrastructure
 Segments
 Other
 Total
Total revenues$1,099
 $354
 $1,453
 $
 $1,453
Segment income/Net (loss) income$129
 $65
 $194
 $(4) $190



 Nine Months Ended September 30, 2018
 Electric
 Gas
 Total
    
 Utilities and
 Utilities and
 Reportable
    
(in millions)Infrastructure
 Infrastructure
 Segments
 Other
 Consolidated
Total revenues$1,055
 $361
 $1,416
 $36
 $1,452
Segment income (loss)/Net income(a)
$157
 $64
 $221
 $(100) $121
FINANCIAL STATEMENTSBUSINESS SEGMENTS



 Nine Months Ended September 30, 2017
 Electric
 Gas
 Total
    
 Utilities and
 Utilities and
 Reportable
    
(in millions)Infrastructure
 Infrastructure
 Segments
 Other
 Consolidated
Total revenues$1,036
 $360
 $1,396
 $30
 $1,426
Segment income (loss)$96
 $56
 $152
 $(24) $128
Loss from discontinued operations, net of tax        (1)
Net income        $127
 Nine Months Ended September 30, 2018
 Electric
 Gas
 Total
    
 Utilities and
 Utilities and
 Reportable
    
(in millions)Infrastructure
 Infrastructure
 Segments
 Other
 Total
Total revenues$1,055
 $361
 $1,416
 $36
 $1,452
Segment income/Net (loss) income(a)
$157
 $64
 $221
 $(100) $121
(a)    Other includes the loss on the sale of Beckjord.Beckjord described above.

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





3. REGULATORY MATTERS
RATE-RELATED INFORMATION
The NCUC, PSCSC, FPSC, IURC, PUCO, TPUC and KPSC approve rates for retail electric and natural gas services within their states. The FERC approves rates for electric sales to wholesale customers served under cost-based rates (excluding Ohio and Indiana), as well as sales of transmission service. The FERC also regulates certification and siting of new interstate natural gas pipeline projects.
Duke Energy Carolinas and Duke Energy Progress
Grid Improvement – South CarolinaHurricane Florence, Hurricane Michael and Winter Storm Diego Deferral Filings
On June 22,December 21, 2018, Duke Energy Carolinas and Duke Energy Progress filed a joint petition with the PSCSC seeking an accounting order authorizing deferral of certainNCUC petitions for approval to defer the incremental costs incurred in connection with grid reliability, resiliency and modernization work that is being performed under the companies’ grid improvement initiative. On October 3, 2018, the PSCSC granted Duke Energy Carolinas' and Duke Energy Progress' joint petition.
response to Hurricane Florence, Hurricane Michael and Winter Storm Damage
In September 2018, Hurricane Florence made landfall and inflicted severe damage to the Duke Energy Carolinas and Duke Energy Progress territories in North Carolina and South Carolina. Approximately 1.8 million customers were impacted. The companies incurred approximately $455 million in operation and maintenance expenses ($35 million and $420 million for Duke Energy Carolinas and Duke Energy Progress, respectively,) and approximately $85 million in capital costs ($10 million and $75 million for Duke Energy Carolinas and Duke Energy Progress, respectively,) which are included in Net property, plant and equipment on the Condensed Consolidated Balance Sheets as of September 30, 2018, resulting from the hurricane restoration efforts. Most of the operation and maintenance expenses are deferred in Regulatory assets within Other Noncurrent Assets on the Condensed Consolidated Balance Sheets as of September 30, 2018. The balance of operation and maintenance expenses are included in Operation, maintenance and other on the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2018.
Given the magnitude of the storm, Duke Energy Progress intends to request approval in North Carolina and South Carolina to defer the incremental costs incurredDiego to a regulatory asset for recovery in the next base rate case. These requests are expectedThe NCUC issued an order requesting comments on the deferral positions. On March 5, 2019, the North Carolina Public Staff (Public Staff) filed comments. On April 2, 2019, Duke Energy Carolinas and Duke Energy Progress filed reply comments, which included revised estimates of approximately $553 million in incremental operation and maintenance expenses ($171 million and $382 million for Duke Energy Carolinas and Duke Energy Progress, respectively) and approximately $96 million in capital costs ($20 million and $76 million for Duke Energy Carolinas and Duke Energy Progress, respectively). On September 30, 2019, Duke Energy Carolinas requested that the NCUC consolidate its pending deferral request with its general rate case filed on that date. On October 30, 2019, Duke Energy Progress requested that the NCUC consolidate its pending deferral request with its general rate case filed on that date. Duke Energy Carolinas and Duke Energy Progress cannot predict the outcome of these matters. Duke Energy Progress filed a deferral request for these storms with the PSCSC on January 11, 2019, which also included a request for the continuation of prior deferrals requested for ice storms and Hurricane Matthew, and on January 30, 2019, the PSCSC issued a directive approving the deferral request, followed by an order issued on February 21, 2019. On March 15, 2019, Duke Energy Progress filed a request with FERC requesting permission to defer transmission-related storm costs that would be filed duringcharged to wholesale transmission customers through Duke Energy Progress' Open Access Transmission Tariff (OATT) and to recover those costs from wholesale transmission customers over a three-year recovery period. FERC accepted the fourth quarter of 2018.filing on May 14, 2019, which allows Duke Energy Progress to proceed with the proposed cost deferral and recovery.
Duke Energy Carolinas
2017 North Carolina Rate Case
On August 25, 2017, Duke Energy Carolinas filed an application with the NCUC for a rate increase for retail customers of approximately $647 million, which represented an approximate 13.6 percent13.6% increase in annual base revenues. The request for rate increase was driven by capital investments subsequent to the previous base rate case, including the William StatesW.S. Lee Combined Cycle Facility discussed below,CC, grid improvement projects, advanced metering infrastructure (AMI),AMI, investments in customer service technologies, costs of complying with coal combustion residuals (CCR)CCR regulations and the North Carolina Coal Ash Management Act of 2014 (Coal Ash Act) and recovery of costs related to licensing and development of the William States Lee III Nuclear Station (Lee Nuclear Station) discussed below.Station.
On February 28, 2018, Duke Energy Carolinas and the North Carolina Public Staff (Public Staff) filed an Agreement and Stipulation of Partial Settlement resolving certain portions of the proceeding. Terms of the settlement included a return on equity of 9.9 percent9.9% and a capital structure of 52 percent52% equity and 48 percent48% debt. As a result of the settlement, Duke Energy Carolinas recorded a pretax charge of approximately $4 million in the first quarter of 2018 to Operation, maintenance and other on the Condensed Consolidated Statements of Operations.
On June 1, 2018, Duke Energy Carolinas and certain intervenors filed a Pilot Grid Rider Agreement and Stipulation (Grid Rider Stipulation) in which the parties agreed to the proposal Duke Energy Carolinas introduced in a post-hearing brief on April 27, 2018, along with additional commitments by Duke Energy Carolinas. Also on June 1, 2018, Duke Energy Carolinas and the Commercial Group filed a Partial Stipulation and Settlement Agreement to be considered in conjunction with the Stipulation.
Components of the Grid Rider Stipulation included:
Duke Energy Carolinas would recover grid improvement costs through a pilot, three-year Grid Rider except for costs related to targeted undergrounding of power lines, cable and conduit replacement, and power pole replacement;
Excluded costs were to be deferred with a return until Duke Energy Carolinas’ next base rate case proceeding; and
Costs incurred during the three-year pilot, both rider recoverable and deferred, were subject to a 4.5 percent cumulative cap of total annual electric service revenue.

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





On June 22, 2018, the NCUC issued an order approving the Stipulation of Partial Settlement and requiring a revenue reduction. The order also included the following material components not covered in the Stipulation:
Recovery of $554 million of deferred coal ash basin closure costs over a five-year period with a return at Duke Energy Carolinas' weighted average cost of capital (WACC);
Assessment of a $70 million management penalty ratably over a five-year period by reducing the annual recovery of the deferred coal ash costs;
Denial of Duke Energy Carolinas' request for recovery of future estimated ongoing annual coal ash costs of $201 million with approval to defer such costs with a return at Duke Energy Carolinas' WACC, to be considered for recovery in the next rate case;
Inclusion in rates of costs related to the Lee Combined Cycle Facility, two new solar facilities, and AMI deployment as requested;
Recovery of Lee Nuclear Station licensing and development cost of $347 million over a 12-year period, but denial of a return on the deferred balance of costs;
Reduction in revenue related to lower income tax expense resulting from the Federal Tax Cuts and Jobs Act (Tax Act), and a requirement to maintain all excess deferred income tax (EDIT) resulting from the Tax Act in a regulatory liability account pending flow back to customers as approved by the commission at the earlier of three years or Duke Energy Carolinas’ next general rate case proceeding; and
Denial of the proposed Grid Rider Stipulation related to grid improvement costs and denial of deferral accounting treatment of the costs at this time. Duke Energy Carolinas may petition for deferral of grid modernization costs outside of a general rate case proceeding if it can show financial hardship or a stipulation that includes greater consensus among intervening parties on costs being classified as grid modernization.
As a result of the Order,order, Duke Energy Carolinas recorded a pretax charge of approximately $150 million to Impairment charges and Operation, maintenance and other on the Condensed Consolidated Statements of Operations. The charge iswas primarily related to the denial of a return on the Lee Nuclear Project and for previously recognized return impactedthe assessment of a $70 million management penalty by reducing the annual recovery of deferred coal ash management penalty described above.costs by $14 million per year over a five-year recovery period. On July 27, 2018, NCUC approved Duke Energy Carolinas' compliance filing. As a result, revised customer rates were effective on August 1, 2018.



FINANCIAL STATEMENTSREGULATORY MATTERS


On July 20, 2018, the North Carolina Attorney General filed a Notice of Appeal to the North Carolina Supreme Court from the June 22, 2018, Order Accepting Stipulation, Deciding Contested Issues and Requiring Revenue Reduction issued by the NCUC. The Attorney General contends the commission’s order should be reversed and remanded, as it is in excess of the commission’s statutory authority; affected by errors of law; unsupported by competent, material and substantial evidence in view of the entire record as submitted; and arbitrary or capricious. The Sierra Club, North Carolina Sustainable Energy Association, North Carolina Justice Center, North Carolina Housing Coalition, Natural Resource Defense Council and Southern Alliance for Clean Energy have also filed Notices of Appeal to the North Carolina Supreme Court from the June 22, 2018, Order Accepting Stipulation, Deciding Contested Issues and Requiring Revenue Reduction.Court. On August 8, 2018, the Public Staff filed a Notice of Cross Appeal to the North Carolina Supreme Court, fromwhich contends the commission’s June 22, 2018, Order Accepting Stipulation, Deciding Contested Issues and Requiring Revenue Reduction issued by the NCUC. The Public Staff contends the commission’s order should be reversed and remanded, as it is affected by errors of law, and is unsupported by substantial evidence with regard to the commission’s failure to consider substantial evidence of coal ash related environmental violations. On November 29, 2018, the North Carolina Attorney General's Office filed a motion with the North Carolina Supreme Court requesting the court consolidate the Duke Energy Carolinas and Duke Energy Progress appeals and enter an order adopting the parties’ proposed briefing schedule as set out in the filing. On November 29, 2018, the North Carolina Supreme Court adopted a schedule for briefing set forth in the motion to consolidate the Duke Energy Carolinas and Duke Energy Progress appeals. Appellant’s brief was filed on April 26, 2019. The briefing will likelyAppellee response briefs were filed on September 25, 2019. Duke Energy Carolinas cannot predict the outcome of this matter.
2019 North Carolina Rate Case
On September 30, 2019, Duke Energy Carolinas filed an application with the NCUC for a net rate increase for retail customers of approximately $291 million, which represents an approximate 6% increase in annual base revenues. The gross rate case revenue increase request is $445 million, which is offset by an EDIT rider of $154 million to return to customers North Carolina and federal EDIT resulting from recent reductions in corporate tax rates. The request for rate increase is driven by major capital investments subsequent to the previous base rate case, coal ash pond closure costs, accelerated coal plant depreciation and deferred 2018 storm costs. Duke Energy Carolinas requests rates be delayed until the second quarter of 2019.effective no later than August 1, 2020. Duke Energy Carolinas cannot predict the outcome of this matter.
2018 South Carolina Rate Case
On OctoberNovember 8, 2018, Duke Energy Carolinas filed a noticean application with the PSCSC for a rate increase for retail customers of approximately $168 million, which represents an approximate 10% increase in retail revenues. The request for rate increase was driven by capital investments and environmental compliance progress made by Duke Energy Carolinas since its previous rate case, including the further implementation of Duke Energy Carolinas’ generation modernization program, which consists of retiring, replacing and upgrading generation plants, investments in customer service technologies and continued investments in base work to maintain its transmission and distribution systems. The request included net tax benefits resulting from the Tax Act of $66 million to reflect the change in ongoing tax expense, primarily from the reduction in the federal income tax rate from 35% to 21%. The request also included $46 million to return EDIT resulting from the federal tax rate change and deferred revenues since January 2018 related to the change and benefits of $17 million from a reduction in North Carolina state income taxes allocable to South Carolina (EDIT Rider).
Duke Energy Carolinas also requested approval of its proposed Grid Improvement Plan (GIP), adjustments to its Prepaid Advantage Program and a variety of accounting orders related to ongoing costs for environmental compliance, including recovery over a five-year period of $242 million of deferred coal ash related compliance costs, grid investments between rate changes, incremental depreciation expense, a result of new depreciation rates from the depreciation study approved in the 2017 North Carolina Rate Case above, and the balance of development costs associated with the cancellation of the company’s intentLee Nuclear Project. Finally, Duke Energy Carolinas sought approval to establish a reserve and accrual for end-of-life nuclear costs for nuclear fuel and materials and supplies. On March 8, 2019, the ORS moved to establish a new and separate hearing docket to review and consider the GIP proposed by Duke Energy Carolinas. Subsequently, on March 12, 2019, the ORS and Duke Energy Carolinas executed a Stipulation resolving the ORS’s motion. The Stipulation provided that costs incurred for the GIP after January 1, 2019, will be deferred with a return, subject to evaluation in a future rate proceeding, and that Duke Energy Carolinas will refile for consideration of the GIP in a new docket for resolution by January 1, 2020. The Stipulation was approved by the PSCSC on June 19, 2019.
After hearings in March 2019, the PSCSC issued an order on May 21, 2019, which included a return on equity of 9.5% and a capital structure of 53% equity and 47% debt. The order also included the following material components:
Approval of cancellation of the Lee Nuclear Project, with Duke Energy Carolinas maintaining the Combined Operating License;
Approval of recovery of $125 million (South Carolina retail portion) of Lee Nuclear Project development costs (including AFUDC through December 2017) over a 12-year period, but denial of a return on the deferred balance of costs;
Approval of recovery of $96 million of coal ash costs over a five-year period with a return at Duke Energy Carolinas' WACC;
Denial of recovery of $115 million of certain coal ash costs deemed to be related to the Coal Ash Act and incremental to the federal CCR rule;
Approval of a $66 million decrease to base rates to reflect the change in ongoing tax expense, primarily the reduction in the federal income tax rate from 35% to 21%;
Approval of a $45 million decrease through the EDIT Rider to return EDIT resulting from the federal tax rate change and deferred revenues since January 2018 related to the change, to be returned in accordance with the Average Rate Assumption Method (ARAM) for protected EDIT, over a 20-year period for unprotected EDIT associated with Property, Plant and Equipment, over a five-year period for unprotected EDIT not associated with Property, Plant and Equipment and over a five-year period for the deferred revenues; and
Approval of a $17 million decrease through the EDIT Rider related to reductions in the North Carolina state income tax rate from 6.9% to 2.5% to be returned over a five-year period.



FINANCIAL STATEMENTSREGULATORY MATTERS


As a result of the order, revised customer rates were effective June 1, 2019. On May 31, 2019, Duke Energy Carolinas filed a Petition for Rehearing or Reconsideration of that order contending substantial rights of Duke Energy Carolinas were prejudiced by unlawful, arbitrary and capricious rulings by the commission on certain issues presented in the proceeding. On June 19, 2019, the PSCSC issued a Directive denying Duke Energy Carolinas' request to rehear or reconsider the commission's rulings on certain issues presented in the proceeding including coal ash remediation and disposal costs, return on equity and the recovery of a return on deferred operation and maintenance expenses. An order detailing the commission's decision in the Directive was issued on October 18, 2019. Duke Energy Carolinas intends to file a base rate adjustment application no earlier thannotice of appeal within 30 days fromof the notice submittal date.date of the order with the South Carolina Supreme Court. Based on legal analysis and Duke Energy Carolinas' intention to file such an appeal, Duke Energy Carolinas has not recorded an adjustment for its deferred coal ash costs. Duke Energy Carolinas cannot predict the outcome of this matter.
FERC Formula Rate Matter
On July 31, 2017, Piedmont Municipal Power Agency (PMPA)PMPA filed a complaint with FERC against Duke Energy Carolinas alleging that Duke Energy Carolinas misapplied the formula rate under the PPA between the parties by including in its rates amortization expense associated with regulatory assets and recorded in a certain account without FERC approval. On February 15, 2018, FERC issued an order ruling in favor of PMPA and ordered Duke Energy Carolinas to refund to PMPA all amounts improperly collected under the PPA. Duke Energy Carolinas has issued to PMPA and similarly situated wholesale customers refunds of approximately $25 million. FERC also set the matter for settlement and hearing. PMPA and other customers filed a protest to Duke Energy Carolinas' refund report claiming that the refunds are inadequate in that (1) Duke Energy Carolinas invoked the limitations periods in the contracts to limit the time period for which the refunds were paid and the customers disagree that this limitation applies, and (2) Duke Energy Carolinas refunded only amounts recovered through a certain account and the customers have asserted that the order applies to all regulatory assets. On July 3, 2018, FERC issued an order accepting Duke Energy Carolinas' refund report and ruling that these two claims are outside the scope of FERC's February order. The settlement agreements and revised formula rates for all parties to the proceeding were filed on December 28, 2018. On April 2, 2019, FERC issued an order approving the settlement agreement as filed. Since then, Duke Energy Carolinas will file revised formulahas implemented the terms of the settlement in rates as well as settlement agreements which are subject to FERC approval.with all wholesale customers, including non-intervening customers. On July 25, 2019, Duke Energy Carolinas cannot predict the outcome of this matter.

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





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 Necessityreceived FERC approval for the construction and operation of a 750-megawatt (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 its share of the cost to build the facility was approximately $650 million, including allowanceaccounting treatment requested for funds used during construction (AFUDC). Approximately $600 million is being recovered through base rate or deferral filings in North Carolina and South Carolina. The remaining amount will becertain assets included in future rate filings. The project commenced commercial operation on April 5, 2018. NCEMC owns approximately 13 percent of the project.
Lee Nuclear Station
In December 2007, Duke Energy Carolinas applied tosettlement agreements. This is the NRC for combined operating licenses (COLs) for two Westinghouse Electric Company (Westinghouse) AP1000 reactors for the proposed William States Lee III Nuclear Station to be located at a site in Cherokee County, South Carolina. The NCUCfinal approval needed from FERC and PSCSC concurred with the prudency of Duke Energy Carolinas incurring certain project development and preconstruction costs through several separately issued orders, although full cost recovery is not guaranteed. In December 2016, the NRC issued a COL for each reactor. Duke Energy Carolinas is not required to build the nuclear reactors as a result of the COLs being issued.
The Duke Energy Carolinas rate case filing discussed above included a request to cancel the development of the Lee Nuclear Station project, recover incurred licensing and development costs and maintain the license issued by the NRC as an option for potential future development. The cancellation request was due to the Westinghouse bankruptcy filing and other market activity. The NCUC Order issued on June 22, 2018, approved the cancellation of the Lee Nuclear Project, allowed Duke Energy Carolinas to continue to maintain the COLs, provided for recovery of the North Carolina retail allocation of project development costs, including AFUDC accrued through December 31, 2017, over 12 years and disallowed any return on the unamortized balance during the 12-year recovery period.
Given the recent repeal of certain sections of the Base Load Review Act in South Carolina combined with the cancellation of the project, Duke Energy Carolinas determined that it was no longer probable it would be allowed a return on its share of project development costs attributable to South Carolina. As a result, Duke Energy Carolinas recorded a pretax impairment in the second quarter of $29 million within Impairment charges on the Condensed Consolidated Statements of Operations and Comprehensive Income.
South Carolina Petition
On June 22, 2018, Duke Energy Carolinas filed a petition with the PSCSC requesting an accounting order to defer certain costs incurred in connection with the addition of the William States Lee Combined Cycle Facility, the ongoing deployment of Duke Energy Carolinas new billing and Customer Information System and the addition of the Carolinas West Primary Distribution Control Center. This request totaling approximately $33 million was approved on July 25, 2018.concludes this proceeding.
Sale of Hydroelectric (Hydro) Plants
In May 2018, Duke Energy Carolinas entered an agreement for the sale of five hydro plants with a combined 18.7-MW generation capacity in the Western Carolinas region to Northbrook Energy. The completion of the transaction iswas subject to approval from FERC for the four FERC-licensed plants, as well as other state regulatory agencies and iswas contingent upon regulatory approval from the NCUC and PSCSC to defer the total estimated loss on the sale of approximately $40 million. On July 5, 2018, Duke Energy Carolinas filed with NCUC for approval of the sale of the five hydro plants to Northbrook, to transfer the Certificates of Public Convenience and Necessity (CPCN)CPCNs for the four North Carolina hydro plants and to establish a regulatory asset for the North Carolina retail portion of the difference between sales proceeds and net book value. On September 4, 2018,June 5, 2019, the Public Staff filed comments supportingNCUC issued an order approving the CPCN transfer with conditions, specifically thatof the commission directhydro plants from Duke Energy Carolinas to Northbrook, granting deferral accounting and denying the Public Staff to further evaluate the reasonableness of Duke Energy Carolinas' expenditures at the facilities in the 36 months leading up to the agreementStaff's motion for the sale for consideration in the next rate case. On September 18, 2018, Duke Energy Carolinas filed reply comments opposing this condition. The Public Staff also recommended that the amortization period for the regulatory asset start in the month in which the asset transfer is completed, rather than be delayed until the next rate case. reconsideration.
On August 28, 2018, Duke Energy Carolinas filed with PSCSC itsan Application for Approval of Transfer and Sale of Hydroelectric Generation Facilities, Acceptance for Filing of a Power Purchase Agreement and an Accounting Order to Establish a Regulatory Asset. On September 10, 2018, the South Carolina Office of Regulatory Staff (ORS)ORS provided a letter to the commission stating its position on the application and on September 18, 2018, Duke Energy Carolinas requested this matter be carried over to allow Duke Energy Carolinas time to discuss certain accounting issues with the ORS. At their June 26, 2019, agenda meeting, the PSCSC voted to approve the transfer and sale subject to the recommendation of the ORS that the issuance of an Accounting Order will not preclude the ORS, the commission or any other party from addressing the reasonableness of these costs, any return sought and including any carrying costs in the next rate case.
On OctoberAugust 9, 2018, Duke Energy Carolinas and Northbrook filed a Notice ofjoint Application for Transfer of Licenses with the FERC. On December 27, 2018, the FERC which provides 30 days to file comments and motions to intervene.
If commission approvals are not received,issued its Order Approving Transfer of Licenses (“Order”) for the four FERC-licensed hydro plants. On January 18, 2019, Duke Energy Carolinas can canceland Northbrook Carolina Hydro II, LLC requested a six-month extension of time to comply with the sales agreementrequirement of the Order that Northbrook submit to FERC certified copies of all instruments of conveyance and retainsigned acceptance sheets within 60 days of the hydro facilities. If commission approvals are received,date of the Order. On February 14, 2019, FERC issued an order granting extensions until August 26, 2019, to comply with the requirements of the December 27, 2018, Order.
The closing is expectedoccurred on August 16, 2019. A regulatory asset was established for approximately $32 million, which represents the total deferral amount for North Carolina and South Carolina retail. The North Carolina retail portion will be amortized pursuant to occur duringan order from the first quarter of 2019. After closing,NCUC. Duke Energy Carolinas will purchase all the capacity and energy generated by these facilities at the avoided cost for five years through power purchase agreements. Duke Energy Carolinas cannot predict the outcome of this matter.

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





Duke Energy Progress
2017 North Carolina Rate Case
On June 1, 2017, Duke Energy Progress filed an application with the NCUC for a rate increase for retail customers of approximately $477 million, which represented an approximate 14.9 percent14.9% increase in annual base revenues. Subsequent to the filing, Duke Energy Progress adjusted the requested amount to $420 million, representing an approximate 13 percent13% increase. The request for rate increase iswas driven by capital investments subsequent to the previous base rate case, costs of complying with CCR regulations and the Coal Ash Act, costs relating to storm recovery, investments in customer service technologies and recovery of costs associated with renewable purchased power.
On December 16, 2016, Duke Energy Progress filed a petition with the NCUC requesting an accounting order to defer certain costs incurred in connection with response to Hurricane Matthew and other significant storms in 2016. The final estimate of incremental operation and maintenance and capital costs of $116 million was filed with the NCUC in September 2017. On July 10, 2017, the NCUC consolidated Duke Energy Progress' storm deferral request into the Duke Energy Progress rate case docket for decision.
On November 22, 2017, Duke Energy Progress and the Public Staff filed an Agreement and Stipulation of Partial Settlement resolving certain portions of the proceeding. Terms of the settlement included a return on equity of 9.9 percent9.9% and a capital structure of 52 percent52% equity and 48 percent48% debt. As a result of the settlement, in 2017 Duke Energy Progress recorded pretax charges totaling approximately $25 million to Impairment charges and Operation, maintenance and other on the Condensed Consolidated Statements of Operations, principally related to disallowances from rate base of certain projects at the Mayo and Sutton plants. On February 23, 2018, the NCUC issued an order approving the stipulation. The order also included the following material components not covered in the stipulation:
Recovery of the remaining $234 million of deferred coal ash basin closure costs over a five-year period with a return at Duke Energy Progress' WACC, excluding $9.5 million of retail deferred coal ash basin costs related to ash hauling at Duke Energy Progress' Asheville Plant;

Assessment of a $30 million management penalty ratably over a five-year period by reducing the annual recovery of the deferred coal ash costs;
Denial of Duke Energy Progress' request for recovery of future estimated ongoing annual coal ash costs of $129 million with approval to defer such costs with a return at Duke Energy Progress' WACC, to be considered for recovery in the next rate case; and
Approval to recover $51 million of the approximately $80 million deferred storm costs over a five-year period with amortization beginning in October 2016. The order did not allow the deferral of the associated capital costs or a return on the deferred balance during the deferral period.
FINANCIAL STATEMENTSREGULATORY MATTERS


The order also impacted certain amounts that were similarly recorded on Duke Energy Carolinas' Condensed Consolidated Balance Sheets. As a result of the order, Duke Energy Progress and Duke Energy Carolinas recorded pretax charges of $68 million and $14 million, respectively, in the first quarter of 2018 to Impairment charges, Operation, maintenance and other and Interest Expense on the Condensed Consolidated Statements of Operations. These charges primarily related to the coal ash basin disallowance and previously recognized return impacted by the coal ash management penalty and deferred storm cost adjustments. Revised customer rates became effective on March 16, 2018.
On May 15, 2018, the Public Staff filed a Notice of Cross Appeal to the North Carolina Supreme Court from the NCUC's February 23, 2018, Order Accepting Stipulation, Deciding Contested Issues and Granting Partial Rate Increase issued by the NCUC.Order. The Public Staff contendcontends the commission’sNCUC’s order should be reversed and remanded, as it is affected by errors of law, and is unsupported by competent, material and substantial evidence in view of the entire record as submitted. The North Carolina Attorney General and Sierra Club have also filed Notices of Appeal to the North Carolina Supreme Court from the February 23, 2018, Order Accepting Stipulation, Deciding Contested IssuesOrder. On November 29, 2018, the North Carolina Attorney General's Office filed a motion with the North Carolina Supreme Court requesting the court consolidate the Duke Energy Progress and Granting Partial Rate Increase.Duke Energy Carolinas appeals and enter an order adopting the parties’ proposed briefing schedule as set out in the filing. Appellant’s brief was filed on April 26, 2019. The briefing will likely be delayed until the second quarter ofAppellee response briefs were filed on September 25, 2019. Duke Energy Progress cannot predict the outcome of this matter.
2016 South2019 North Carolina Rate Case
In December 2016, the PSCSC approved a rate case settlement agreement among the ORS, intervenors and Duke Energy Progress. Terms of the settlement agreement included an approximate $56 million increase in revenues over a two-year period. An increase of approximately $38 million in revenues was effective January 1, 2017, and an additional increase of approximately $18.5 million in revenues was effective January 1, 2018.On October 30, 2019, Duke Energy Progress amortizedfiled an application with the NCUC for a net rate increase for retail customers of approximately $18.5$464 million, which represents an approximate 12.3% increase in annual base revenues. The gross rate case revenue increase request is $586 million, which is offset by riders of $122 million, primarily an EDIT rider of $120 million to return to customers North Carolina and federal EDIT resulting from recent reductions in corporate tax rates. The request for rate increase is driven by major capital investments subsequent to the cost of removal reserve in 2017. Other settlement terms included aprevious base rate of return on equity of 10.1 percent, recovery ofcase, coal ash costs incurred from January 1, 2015, through June 30, 2016, over a 15year period and ongoing deferral of allocated ash basinpond closure costs, from July 1, 2016, until the next base rate case. The settlement also provides thataccelerated coal plant depreciation and deferred 2018 storm costs. Duke Energy Progress will not seek an increaseseeks to defer and recover incremental Hurricane Dorian storm costs in this proceeding and requests rates be effective no later than September 1, 2020. Duke Energy Progress cannot predict the outcome of this matter.
Hurricane Dorian
Hurricane Dorian reached the Carolinas in September 2019 as a Category 2 hurricane making landfall within Duke Energy Progress’ service territory. Approximately 270,000 North Carolina customers and 30,000 South Carolina customers were impacted by the slow-moving storm that brought high winds, tornadoes and heavy rain. With storm-response mobilization occurring in preparation for the storm and the assistance of mutual aid partners, full restoration was accomplished within four days for all customers able to occur priorreceive service. Total estimated incremental operation and maintenance expenses incurred to 2019,repair and restore the system are approximately $208 million with limited exceptions.an additional $10 million in capital investments made for restoration efforts. Approximately $182 million of the operation and maintenance expenses are deferred in Regulatory assets within Other Noncurrent Assets on the Condensed Consolidated Balance Sheets as of September 30, 2019. The balance of operation and maintenance expenses are included in Operation, maintenance and other on the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2019.
2018 South Carolina Rate Case
On OctoberNovember 8, 2018, Duke Energy Progress filed a noticean application with the PSCSC for a rate increase for retail customers of approximately $59 million, which represents an approximate 10.3% increase in annual base revenues. The request for rate increase was driven by capital investments and environmental compliance progress made by Duke Energy Progress since its previous rate case, including the further implementation of Duke Energy Progress’ generation modernization program, which consists of retiring, replacing and upgrading generation plants, investments in customer service technologies and continued investments in base work to maintain its transmission and distribution systems. The request included a decrease resulting from the Tax Act of $17 million to reflect the change in ongoing tax expense, primarily the reduction in the federal income tax rate from 35% to 21%. The request also included $10 million to return EDIT resulting from the federal tax rate change and deferred revenues since January 2018 related to the change (EDIT Rider) and a $12 million increase due to the expiration of EDITs related to reductions in North Carolina state income taxes allocable to South Carolina.
Duke Energy Progress also requested approval of its proposed GIP, approval of a Prepaid Advantage Program and a variety of accounting orders related to ongoing costs for environmental compliance, including recovery over a five-year period of $51 million of deferred coal ash related compliance costs, AMI deployment, grid investments between rate changes and regulatory asset treatment related to the retirement of a generating plant located in Asheville, North Carolina. Finally, Duke Energy Progress sought approval to establish a reserve and accrual for end-of-life nuclear costs for materials and supplies and nuclear fuel. On March 8, 2019, the ORS moved to establish a new and separate hearing docket to review and consider the GIP proposed by Duke Energy Progress. Subsequently, on March 12, 2019, the ORS and Duke Energy Carolinas executed a Stipulation resolving the ORS’s motion, and Duke Energy Progress agreed to the Stipulation, as did other parties in the rate case. The Stipulation provides that costs incurred for the GIP after January 1, 2019, will be deferred with a return, with all costs subject to evaluation in a future rate proceeding, and that Duke Energy Progress will refile for consideration of the company’s intentGIP in a new docket for resolution by January 1, 2020. The Stipulation was approved by the PSCSC on June 19, 2019.
After hearings in April 2019, the PSCSC issued an order on May 21, 2019, which included a return on equity of 9.5% and a capital structure of 53% equity and 47% debt. The order also included the following material components:
Approval of recovery of $4 million of coal ash costs over a five-year period with a return at Duke Energy Progress' WACC;
Denial of recovery of $65 million of certain coal ash costs deemed to be related to the Coal Ash Act and incremental to the federal CCR rule;
Approval of a $17 million decrease to base rates to reflect the change in ongoing tax expense, primarily the reduction in the federal income tax rate from 35% to 21%;



FINANCIAL STATEMENTSREGULATORY MATTERS


Approval of a $12 million decrease through the EDIT Tax Savings Rider resulting from the federal tax rate change and deferred revenues since January 2018 related to the change, to be returned in accordance with ARAM for protected EDIT, over a 20-year period for unprotected EDIT associated with Property, Plant and Equipment, over a five-year period for unprotected EDIT not associated with Property, Plant and Equipment and over a three-year period for the deferred revenues; and
Approval of a $12 million increase due to the expiration of EDIT related to reductions in the North Carolina state income tax rate from 6.9% to 2.5%.
As a result of the order, revised customer rates were effective June 1, 2019. On May 31, 2019, Duke Energy Progress filed a Petition for Rehearing or Reconsideration of that order contending substantial rights of Duke Energy Progress were prejudiced by unlawful, arbitrary and capricious rulings by the commission on certain issues presented in the proceeding. On June 19, 2019, the PSCSC issued a Directive denying Duke Energy Progress' request to rehear or reconsider the commission's rulings on certain issues presented in the proceeding including coal ash remediation and disposal costs, return on equity and the recovery of a return on deferred operation and maintenance expenses, but allowing additional litigation-related costs. As a result of the Directive allowing litigation-related costs, customer rates were revised effective July 1, 2019. An order detailing the commission's decision in the Directive was issued on October 18, 2019. Duke Energy Progress intends to file a base rate adjustment application no earlier thannotice of appeal within 30 days fromof the notice submittal date.

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notesdate of the order with the South Carolina Supreme Court. Based on legal analysis and Duke Energy Progress' intention to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)file such an appeal, Duke Energy Progress has not recorded an adjustment for its deferred coal ash costs. Duke Energy Progress cannot predict the outcome of this matter.





Western Carolinas Modernization Plan
On November 4, 2015, Duke Energy Progress announced a Western Carolinas Modernization Plan, which included retirement of the existing Asheville coal-fired plant, the construction of two 280‑MW combined-cycle natural gas plants having dual-fuel capability, with the option to build a third natural gas simple cycle unit in 2023 based upon the outcome of initiatives to reduce the region's power demand. The plan also included upgrades to existing transmission lines and substations, installation of solar generation and a pilot battery storage project. These investments will be made within the next seven years. Duke Energy Progress is also workingworked with the local natural gas distribution company to upgrade and lease an existing natural gas pipeline to serve the natural gas plant. The lease for the new pipeline became effective on March 2, 2019.
On March 28, 2016, the NCUC issued an order approving a CPCN for the new combined-cycle natural gas plants, but denying the CPCN for the contingent simple cycle unit without prejudice tois requiring Duke Energy Progress to refile for CPCN approval infor the future.contingent simple cycle unit. On March 28, 2018,2019, Duke Energy Progress filed an annual progress report for the construction of the combined-cycle plants with the NCUC, with an estimated cost of $893 million. Site preparation activities for the combined-cycle plants are complete and construction of these plants began in 2017, with an expected in-service date in late 2019.
On October 8, 2018, Duke Energy Progress plansfiled an application with the NCUC for a CPCN to file for future approvals related toconstruct the proposed solar generationHot Springs Microgrid Solar and pilot battery storage project.Battery Storage Facility. On March 22, 2019, Duke Energy Progress and the Public Staff filed a Joint Proposed Order. On May 10, 2019, the NCUC issued an Order Granting Certificate of Public Convenience and Necessity with Conditions.
The carrying value of the 376-MW Asheville coal-fired plant, including associated ash basin closure costs, of $352$234 million and $385$327 million is included in Generation facilities to be retired, net on Duke Energy Progress' Condensed Consolidated Balance Sheets as of September 30, 2018,2019, and December 31, 2017,2018, respectively. Duke Energy Progress' request for a regulatory asset at the time of retirement with amortization over a 10-year period was approved by the NCUC on February 23, 2018.
Shearon Harris Nuclear Plant ExpansionFERC Return on Equity Complaint
In 2006,On October 11, 2019, North Carolina Eastern Municipal Power Agency (Power Agency) filed a complaint at FERC against Duke Energy Progress selectedpursuant to Section 206 of the Federal Power Act (FPA). The complaint alleges that the return on equity component in the formula rate contained within the Full Requirements Power Purchase Agreement (FRPPA) is unjust and unreasonable. The FRPPA’s return on equity is 11% as applied to the Production Capacity Rate for the full requirements service provided by Duke Energy Progress. The complaint does not definitively propose a site at Harris to evaluate for possible future nuclear expansion. On February 19, 2008,replacement return on equity. Under FPA Section 206, the earliest refund effective date that FERC can establish is the date of the filing of the complaint. The complaint could raise risks across the Duke Energy Progress filed its COL applicationwholesale business because, depending on how FERC treats Power Agency’s complaint, other parties may come forward with the NRC for two Westinghouse AP1000 reactors at Harris, which the NRC docketed for review. On May 2, 2013, Duke Energy Progress filed a letter with the NRC requesting the NRC to suspend its review activities associated with the COL at the Harris site. The NCUC and PSCSC approved deferral of retail costs. Total deferred costs were approximately $47 million as of December 31, 2017, and are recorded in Regulatory assets on Duke Energy Progress’ Condensed Consolidated Balance Sheets. On November 17, 2016, the FERC approved Duke Energy Progress’ rate recovery request filing for the wholesale ratepayers’ share of the abandonment costs, including a debt-only return to be recovered through revised formula rates and amortized over a 15-year period beginning May 1, 2014. As part of the settlement agreement for the 2017 North Carolina Rate Case discussed above, Duke Energy Progress will amortize the regulatory asset over an eight-year period. NCUC approved the settlement on February 23, 2018.
South Carolina Petitions
On June 22, 2018, Duke Energy Progress filed a petition with the PSCSC seeking an accounting order authorizing Duke Energy Progress to adopt new depreciation rates, effective March 16, 2018, that reflect the results of Duke Energy Progress’ most recent depreciation study. Also on June 22, 2018, Duke Energy Progress filed a petition with the PSCSC requesting an accounting order to defer certain costs incurred in connection with the deployment of AMI, the ongoing deployment of Duke Energy Progress' new billing and Customer Information System, new depreciation rates and costs incurred in connection with the return of certain excess deferred state income taxes from North Carolina. These requests totaling approximately $20 million were approved on July 25, 2018.
FERC Form 1 Reporting Matter
On October 18, 2017, Fayetteville Public Works Commission (FPWC) filed with FERC a complaint against Duke Energy Progress. In the complaint, FPWC alleges that Duke Energy Progress’ change in its method of reporting materials and supplies inventory on FERC Form 1 for 2015 constituted a change in accounting practice that Duke Energy Progress was not permitted to implement without first obtaining FERC approval. On April 23, 2018, FERC issued an order finding that Duke Energy Progress’ new reporting methodology was not proper and required Duke Energy Progress to revise its FERC Form 1s beginning in 2014 and to issue refunds to formula rate customers. Duke Energy Progress estimates that these refunds will total approximately $14 million. On May 23, 2018, Duke Energy Progress filed a request for rehearing alleging that FERC’s order is incorrect. Duke Energy Progress revised its FERC Form 1 filings in June 2018. On August 31, 2018, Duke Energy Progress filed with FERC a refund report memorializing its payment of refunds to FPWC.similar complaints. Duke Energy Progress cannot predict the outcome of this matter.
Tax Act
As ordered by the NCUC on October 5, 2018, Duke Energy Progress filed a proposal on October 25, 2018, to adjust rates to reflect the reduction in federal corporate income tax rate from 35 to 21 percent for taxable years beginning after December 31, 2017, as outlined in the Tax Act. Duke Energy Progress proposes that this rate decrement be effective for service rendered on and after December 1, 2018. The Public Staff is requested to file comments on the proposal no later than November 14, 2018, and other parties may also file comments on the proposals no later than November 14, 2018. Duke Energy Progress cannot predict the outcome of this matter.


PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





FINANCIAL STATEMENTSREGULATORY MATTERS


Duke Energy Florida
Storm Restoration Cost Recovery
In September 2017, Duke Energy Florida’s service territory suffered significant damage from Hurricane Irma, resulting in approximately 1.31 million customers experiencing outages. In the fourth quarter of 2017, Duke Energy Florida also incurred preparation costs related to Hurricane Nate. On December 28, 2017, Duke Energy Florida filed a petition with the FPSC to recover incremental storm restoration costs for hurricanesHurricane Irma and Hurricane Nate and to replenish the storm reserve. On February 6, 2018, the FPSC approved a stipulation that would apply tax savings resulting from the Tax Act toward storm costs effective January 2018 in lieu of implementing a storm surcharge. Storm costs are currently expected to be fully recovered by approximately mid-2021. On May 31, 2018, Duke Energy Florida filed a petition for approval of actual storm restoration costs and associated recovery process related to HurricanesHurricane Irma and Hurricane Nate. The petition is seekingsought the approval for the recovery in the amount of $510 million in actual recoverable storm restoration costs, including the replenishment of Duke Energy Florida’s storm reserve of $132 million, and the process for recovering these recoverable storm costs. On August 20, 2018, the FPSC approved Duke Energy Florida's unopposed Motion for Continuance filed August 17, 2018, to allow for an evidentiary hearing in this matter. On January 28, 2019, Duke Energy Florida made a supplemental filing to reduce the total storm cost recovery from $510 million to $508 million. On April 3, 2019, the FPSC issued an Order abating all remaining filing dates. On April 9, 2019, Duke Energy Florida filed an unopposed motion to approve a settlement agreement resolving all outstanding issues in this docket. On June 13, 2019, the FPSC issued its order approving the settlement agreement. The commission has scheduledStorm Cost Settlement Agreement obligates Duke Energy Florida to capitalize $18 million of storm costs and remove $6 million of operating and maintenance expense, thereby reducing the hearingrequested storm cost recovery amount by $24 million. Duke Energy Florida will also implement process changes with respect to begin on May 21, 2019.storm cost restoration. At September 30, 2019, and December 31, 2018, Duke Energy Florida's Condensed Consolidated Balance Sheets included approximately $258$80 million and $217 million, respectively, of recoverable costs under the FPSC's storm rule in Regulatory assets within Current Assets and Other Noncurrent Assets related to storm recovery.recovery for Hurricane Irma and Hurricane Nate.
In October 2018, Duke Energy Florida’s service territory suffered damage when Hurricane Michael made landfall as a Category 5 hurricane with maximum sustained winds of 160 mph. The storm caused catastrophic damage from wind and storm surge, particularly from Panama City Beach to Mexico Beach, resulting in widespread outages and significant damage to transmission and distribution facilities across the central Florida Panhandle. In response to Hurricane Michael, Duke Energy Florida restored service to approximately 72,000 customers. Total estimated incremental operation and maintenance and capital costs are $360 million. Approximately $85 million and $35 million of the costs are included in Net property, plant and equipment on the Condensed Consolidated Balance Sheets as of September 30, 2019, and December 31, 2018, respectively. Approximately $220 million and $165 million of costs are included in Regulatory assets within Other Noncurrent Assets on the Condensed Consolidated Balance Sheets as of September 30, 2019, and December 31, 2018, respectively, representing recoverable costs under the FPSC’s storm rule and Duke Energy Florida's OATT formula rates.
Duke Energy Florida filed a petition with the FPSC on April 30, 2019, to recover the retail portion of incremental storm restoration costs for Hurricane Michael. The estimated recovery amount is approximately $221 million. On June 11, 2019, the FPSC approved the petition for recovery of incremental storm restoration costs related to Hurricane Michael. The FPSC also approved the stipulation Duke Energy Florida filed, which will allow Duke Energy Florida to use the tax savings resulting from the Tax Act to recover these storm costs in lieu of implementing a storm surcharge. Approved storm costs are currently expected to be fully recovered by approximately year-end 2021. Duke Energy Florida expects to file actual costs for approval with the FPSC in 2019. Duke Energy Florida cannot predict the outcome of this matter.
Hurricane Dorian
In September 2019, Duke Energy Florida’s service territory was threatened by Hurricane Dorian with landfall as a possible Category 5 hurricane. For several days, various forecasts and models predicted significant impact to Duke Energy Florida’s service territory; accordingly, Duke Energy Florida incurred costs to secure necessary resources to be prepared for that potential impact. Although Hurricane Dorian never made landfall in Florida, affects were still felt, and outages did occur. Preparations were required so that, if Hurricane Dorian had made landfall and impacts had been more severe, Duke Energy Florida would have been prepared to restore its customers’ power in a timely fashion.
Total current estimated incremental costs are approximately $153 million. These costs are included in Regulatory assets within Other Noncurrent Assets on the Condensed Consolidated Balance Sheets as of September 30, 2019, representing recoverable costs under the FPSC’s storm rule and Duke Energy Florida's OATT formula rates. Duke Energy Florida anticipates filing a petition with the FPSC to recover these costs, consistent with the provisions in the 2017 Settlement. Duke Energy Florida cannot predict the outcome of this matter.
Tax Act
Pursuant to Duke Energy Florida's 2017 Revised and Restated Settlement, Agreement, on May 31, 2018, Duke Energy Florida filed a petition related to the Tax Act, which included revenue requirement impacts of annual tax savings of $84$134 million and estimated annual amortization of EDIT of $67 million for a total of $151$201 million. The pretax revenue requirement impact is $201 million, of whichOf this amount, $50 million willwould be offset withby accelerated depreciation of Crystal River 4 and 5 coal units and an estimated $151 million willwould be offset by Hurricane Irma storm cost recovery as explained in the Storm Restoration Cost Recovery section above. On December 27, 2018, Duke Energy Florida filed actual EDIT balances and amortization based on its 2017 filed tax return. This increased the revenue requirement impact of the amortization of EDIT by $4 million, from $67 million to $71 million, which increased the total storm amortization from $151 million to $155 million. On January 8, 2019, the FPSC approved a joint motion by Duke Energy Florida and the Office of Public Counsel resolving all stipulated positions. As part of that stipulation, Duke Energy Florida agreed to seek a Private Letter Ruling (PLR) from the IRS on its treatment of cost of removal (COR) as mostly protected by tax normalization rules. If the IRS rules that COR is not protected by tax normalization rules, then Duke Energy Florida will make a final adjustment to the amortization of EDIT and an adjustment to the storm recovery amount retroactive to January 2018. The petitionIRS has communicated that it will not issue individual PLRs on the treatment of COR. Rather, the IRS is subjectdrafting a notice that will request comments on a number of issues, including COR, and the IRS plans to review and approval by the FPSC.issue industrywide guidance on those issues. Duke Energy Florida cannot predict the outcome of this matter.
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 project has received all required permits and approvals and construction began in October 2015. The facility is expected to be commercially available by the end of 2018 at an estimated cost of $1.5 billion, including AFUDC. Actual costs are expected to exceed this estimate by an immaterial amount after recoveries; therefore, an impairment is not expected. On April 2, 2018, Duke Energy Florida filed a petition seeking approval to include in base rates the revenue requirements associated with the new facility. The annual retail revenue requirement is approximately $200 million. On July 10, 2018, the FPSC voted to approve Duke Energy Florida's request to include the revenue requirements for the new Citrus County combined-cycle units in base rates. The first 820-MW power block came on line on October 26, 2018, and the rate increase for this unit will be effective in December 2018. The second 820-MW power block remains on track to start serving customers in December 2018. The rate increase for the second unit is expected to take place in January 2019. The plant will receive natural gas from the Sabal Trail pipeline discussed below.

FINANCIAL STATEMENTSREGULATORY MATTERS


Solar Base Rate Adjustment
On July 31, 2018, Duke Energy Florida petitioned the FPSC to include in base rates the revenue requirements for its first two solar generation projects, the Hamilton Project and the Columbia Project, as authorized by the 2017 Second Revised and Restated Stipulation and Settlement Agreement.Settlement. The Hamilton Project, which was placed into service on December 22, 2018, has an annual retail revenue requirement forof $15 million. At its October 30, 2018, Agenda Conference, the FPSC approved the rate increase related to the Hamilton Project is $15.2 million and the increase would taketo go into effect beginning with the first billing cycle in January 2019 under its file and suspend authority, and revised customer rates became effective in January 2019. The Columbia Project has a projected annual revenue requirement of $14 million and a projected in-service date in early 2020; the associated rate increase would take place with the first month’s billing cycle after the Columbia Project goes into service. At its October 30, 2018, Agenda Conference,On April 2, 2019, the commission approved both solar projects as filed.
On March 25, 2019, Duke Energy Florida petitioned the FPSC to include in base rates the revenue requirements for its next wave of solar generation projects, the Trenton, Lake Placid and DeBary Solar Projects, as authorized by the 2017 Settlement. The annual retail revenue requirement for the Trenton and Lake Placid Projects is $13 million and $8 million, respectively, with projected in-service dates in the fourth quarter of 2019. The DeBary Project has a projected annual revenue requirement of $11 million and a projected in-service date in the first quarter of 2020. The associated rate increase would take place with the first month’s billing cycle after each solar generation project goes into service. On July 22, 2019, the FPSC issued an order approving Duke Energy Florida's request.
Crystal River Unit 3 Accelerated Decommissioning Filing
On May 29, 2019, Duke Energy Florida entered into a Decommissioning Services Agreement for the accelerated decommissioning of the Crystal River Unit 3 nuclear power station located in Citrus County, Florida, with ADP CR3, LLC and ADP SF1, LLC, each of which is a wholly owned subsidiary of Accelerated Decommissioning Partners, LLC, a joint venture between NorthStar Group Services, Inc. and Orano USA LLC. Closing of this agreement is contingent upon the approval of the NRC and FPSC. If approved, the rate increasedecommissioning will be accelerated starting in 2020 and continuing through 2027, rather than the expected time frame under SAFSTOR of starting in 2067 and ending in 2074. Duke Energy Florida expects that the assets of the Nuclear Decommissioning Trust Fund will be sufficient to cover the contract price. On July 10, 2019, Duke Energy Florida petitioned the FPSC for approval of the agreement. Duke Energy Florida cannot predict the outcome of this matter.
Citrus County CC
Construction of the 1,640-MW combined-cycle natural gas plant in Citrus County, Florida, began in October 2015 with an estimated cost of $1.5 billion, including AFUDC. Both units came on-line in the fourth quarter of 2018. The ultimate cost of the facility was estimated to be $1.6 billion, and Duke Energy Florida recorded Impairment charges on Duke Energy’s Consolidated Statements of Operations of $60 million in the fourth quarter of 2018 for the overrun. In September 2019, Duke Energy Florida recorded a $25 million reduction to a prior-year impairment due to a decrease in the cost estimate of the Citrus County CC, primarily related to the Hamilton Project to go into effect beginningsettlement agreement with Fluor, the first billing cycle in January 2019 under its file and suspend authority. Rates are subject to true up pending the outcome of the final hearing, which is scheduled to take place on April 2, 2019.EPC contractor. See Note 4 for additional information.
Duke Energy Ohio
2017 Electric Security Plan Filing
On June 1, 2017, Duke Energy Ohio filed with the PUCO a request for a standard service offer in the form of an electric security plan (ESP). If approved byESP. On February 15, 2018, the procedural schedule was suspended to facilitate ongoing settlement discussions. On April 13, 2018, Duke Energy Ohio filed a Motion to consolidate this proceeding with several other cases pending before the PUCO, including, but not limited to, its Electric Base Rate Case. Additionally, on April 13, 2018, Duke Energy Ohio, along with certain intervenors, filed a Stipulation and Recommendation (Stipulation) with the PUCO resolving certain issues in this proceeding. The term of the ESP would be from June 1, 2018, to May 31, 2025. Terms of the ESP include2025, and included continuation of market-based customer rates through competitive procurement processes for generation, continuation and expansion of existing rider mechanisms and proposed new rider mechanisms relating to regulatory mandates, costs incurred to enhance the customer experience and transform the grid and a service reliability rider for vegetation management. On February 15, 2018, the procedural schedule was suspended to facilitate ongoing settlement discussions. On April 13, 2018, Duke Energy Ohio filed a Motion to consolidate this proceeding with several other cases currently pending before the PUCO, including, but not limited to, its Electric Base Rate Case. Additionally, on April 13, 2018, Duke Energy Ohio, along with certain intervenors, filed a Stipulation and Recommendation (Stipulation) with the PUCO resolving certain issues in this proceeding. The Stipulation establishesestablished a regulatory model for the next seven years via the approval of the ESP and continuescontinued the current model for procuring supply for non-shopping customers, including recovery mechanisms. On December 19, 2018, the PUCO approved the Stipulation without material modification. Several parties filed applications for rehearing. On February 6, 2019, the PUCO granted the parties rehearing. The Stipulation is subjectPUCO issued its Second Entry on Rehearing on July 17, 2019, upholding its December 19, 2018 order and denying all assignments of error raised by the non-stipulating parties. On September 13, 2019, Interstate Gas Supply/Retail Supply Association filed appeals to the reviewOhio Supreme Court claiming the PUCO’s order was in error because it approved unsupported charges to competitive suppliers and cost subsidies shopping customers pay for non-shopping customers. On September 16, 2019, the Office of the Ohio Consumers' Counsel (OCC) filed an appeal challenging the PUCO’s approval of PUCO. An evidentiary hearing to reviewOVEC recovery through Duke Energy Ohio's Price Stability Rider (Rider PSR) alleging the StipulationFPA pre-empts the commission’s jurisdiction and other issuesthat the record does not support finding that Rider PSR results in a limitation on shopping. On October 11, 2019, the cases concludedOCC filed its Third Application for Rehearing arguing the PUCO erred in finding OCC’s Second Application for Rehearing as improper. Duke Energy Ohio filed its Memorandum Contra on August 6, 2018. Initial briefs were filed on September 11, 2018. Reply briefs were filed October 2, 2018.21, 2019. Duke Energy Ohio cannot predict the outcome of this matter.


PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





FINANCIAL STATEMENTSREGULATORY MATTERS


Electric Base Rate Case
Duke Energy Ohio filed with the PUCO an electric distribution base rate case application and supporting testimony in March 2017. Duke Energy Ohio has requested an estimated annual increase of approximately $15 million and a return on equity of 10.4 percent.10.4%. The application also includesincluded requests to continue certain current riders and establish new riders. On September 26, 2017, the PUCO staff filed a report recommending a revenue decrease between approximately $18 million and $29 million and a return on equity between 9.22 percent9.22% and 10.24 percent. On February 15, 2018, the procedural schedule was suspended to facilitate ongoing settlement discussions.10.24%. On April 13, 2018, Duke Energy Ohio filed a Motion to consolidate this proceeding with several other cases currently pending before the PUCO. On April 13, 2018, Duke Energy Ohio, along with certain intervenors, filed the Stipulation with the PUCO resolving numerous issues including those in this base rate proceeding. Major components of the Stipulation related to the base distribution rate case includeincluded a $19 million decrease in annual base distribution revenue with a return on equity unchanged from the current rate of 9.84 percent9.84% based upon a capital structure of 50.75 percent50.75% equity and 49.25 percent49.25% debt. Upon approval of new rates, Duke Energy Ohio's rider for recovering its initial SmartGrid implementation endsended as these costs willwould be recovered through base rates. The Stipulation also renewsrenewed 14 existing riders, some of which were included in the company's ESP, and addsadded two new riders including the Enhanced Service Reliability Rider to recover vegetation management costs not included in base rates, up to $10 million per year (operation and maintenance only) and the PowerForward Rider to recover costs incurred to enhance the customer experience and further transform the grid (operation and maintenance and capital). The Stipulation is subject to the review and approval of the PUCO. An evidentiary hearing to review the Stipulation and other issues in the cases concluded on August 6, 2018. Initial briefs were filed on September 11, 2018. Reply briefs were filed October 2, 2018. In addition to the changes in revenue attributable to the Stipulation, Duke Energy Ohio’s capital-related riders, including the Distribution Capital Investments Rider, began to reflect the lower federal income tax rate associated with the Tax Act with updates to customers’ bills beginning April 1, 2018. This change reducesreduced electric revenue by approximately $20 million on an annualized basis. On December 19, 2018, the PUCO approved the Stipulation without material modification. New base rates were implemented effective January 2, 2019. Several parties filed applications for rehearing. On February 6, 2019, the PUCO granted the parties rehearing. The PUCO issued its Second Entry on Rehearing on July 17, 2019, upholding its December 19, 2018 order and denying all assignments of error raised by the non-stipulating parties. On September 13, 2019, Interstate Gas Supply/Retail Supply Association filed appeals to the Ohio Supreme Court claiming the PUCO’s order was in error because it approved unsupported charges to competitive suppliers and cost subsidies shopping customers pay for non-shopping customers. On September 16, 2019, the OCC filed an appeal challenging the PUCO’s approval of OVEC recovery through Rider PSR alleging the FPA pre-empts the commission’s jurisdiction and that the record does not support finding that Rider PSR results in a limitation on shopping. On October 11, 2019, the OCC filed its Third Application for Rehearing arguing the PUCO erred in finding OCC’s Second Application for Rehearing as improper. Duke Energy Ohio filed its Memorandum Contra on October 21, 2019. Duke Energy Ohio cannot predict the outcome of this matter.
Ohio Valley Electric Corporation
On March 31, 2017, Duke Energy Ohio filed for approval to adjust its existing price stabilization rider (Rider PSR), which is currently set at zero dollars,Rider PSR to pass through net costs related to its contractual entitlement to capacity and energy from the generating assets owned by OVEC. Duke Energy Ohio is seekingsought deferral authority for net costs incurred from April 1, 2017, until the new rates under Rider PSR arewere put into effect. Various intervenors have filed motions to dismiss or stay the proceeding and Duke Energy Ohio has opposed these filings. On April 13, 2018, Duke Energy Ohio filed a Motion to consolidate this proceeding with several other cases currently pending before the PUCO. Also, on April 13, 2018, Duke Energy Ohio, along with certain intervenors, filed a Stipulation with the PUCO resolving numerous issues including those related to Rider PSR. The Stipulation if approved, would activateactivated Rider PSR for recovery of net costs incurred sincefrom January 1, 2018.2018, through May 2025. On December 19, 2018, the PUCO approved the Stipulation without material modification. The StipulationPSR rider became effective April 1, 2019. Several parties filed applications for rehearing. On February 6, 2019, the PUCO granted the parties rehearing. The PUCO issued its Second Entry on Rehearing on July 17, 2019, upholding its December 19, 2018 order and denying all assignments of error raised by the non-stipulating parties. On September 13, 2019, Interstate Gas Supply/Retail Supply Association filed appeals to the Ohio Supreme Court claiming the PUCO’s order was in error because it approved unsupported charges to competitive suppliers and cost subsidies shopping customers pay for non-shopping customers. On September 16, 2019, the OCC filed an appeal challenging the PUCO’s approval of OVEC recovery through Rider PSR alleging the FPA pre-empts the commission’s jurisdiction and that the record does not support finding that Rider PSR results in a limitation on shopping. On October 11, 2019, the OCC filed its Third Application for Rehearing arguing the PUCO erred in finding OCC’s Second Application for Rehearing as improper. Duke Energy Ohio filed its Memorandum Contra on October 21, 2019. Duke Energy Ohio cannot predict the outcome of this matter.
On July 23, 2019, an Ohio bill was signed into law that will be effective January 1, 2020. Among other things, the bill allows for recovery of prudently incurred costs, net of any revenues, for Ohio investor-owned utilities that are participants under the OVEC power agreement. The recovery shall be through a non-bypassable rider that is to replace any existing recovery mechanism approved by the PUCO and will remain in place through 2030. The amounts recoverable from customers will be subject to the reviewan annual cap, with incremental costs that exceed such cap eligible for deferral and approval of PUCO. An evidentiary hearingrecovery subject to review the Stipulation and other issues in the cases concluded on August 6, 2018. Initial briefs were filed on September 11, 2018. Reply briefs were filed October 2, 2018.review. See Note 1213 for additional discussion of Duke Energy Ohio's ownership interest in OVEC. Duke Energy Ohio cannot predict the outcome of this matter.
Tax Act – Ohio
On July 25, 2018, Duke Energy Ohio filed an application to establish a new rider to implement the benefits of the Tax Act for electric distribution customers. Duke Energy Ohio requested commission approval to implement the rider effective October 1, 2018, as a credit to all distribution customers based upon a percent reduction to Duke Energy Ohio’s distribution rates. The new rider will flow through to customers the benefit of the lower statutory federal tax rate from 3535% to 21 percent21% since January 1, 2018, all future benefits of the lower tax rates and a full refund of deferred income taxes collected at the higher tax rates in prior years. Deferred income taxes subject to normalization rules will be refunded consistent with federal law and deferred income taxes not subject to normalization rules will be refunded over a 10-year period. An order is expected during the fourth quarter of 2018. Duke Energy Ohio's transmission rates reflect lower federal income tax but guidance from FERC on amortization of both protected and unprotected transmission-related EDITs is still pending. On October 24, 2018, the PUCO issued a Finding and Order that, among other things, directed all rate-regulated utilities over which the commission has ratemaking authority to file an application not for an increase in rates to reflectpass the impactbenefits of the Tax Act on their current ratesto customers by January 1, 2019, unless otherwise exempted or directed by the PUCO. Duke Energy Ohio's July 25, 2018, filing for electric distribution operations is consistent with the commission's October 24, 2018, Finding and Order and no further action is needed. Options forOn February 20, 2019, the PUCO approved the application without material modification. Rates became effective March 1, 2019.



FINANCIAL STATEMENTSREGULATORY MATTERS


On December 21, 2018, Duke Energy Ohio filed an application to change its base rates and establish a new rider to implement the benefits of the Tax Act for natural gas customers. Duke Energy Ohio requested commission approval to implement the changes and rider effective April 1, 2019. The new rider will flow through to customers are still being evaluated.the benefit of the lower statutory federal tax rate from 35% to 21% since January 1, 2018, all future benefits of the lower tax rates and a full refund of deferred income taxes collected at the higher tax rates in prior years. Deferred income taxes subject to normalization rules will be refunded consistent with federal law and deferred income taxes not subject to normalization rules will be refunded over a 10-year period. The PUCO established a procedural schedule and testimony was filed on July 31, 2019. An evidentiary hearing occurred on August 7, 2019. Initial briefs were filed on September 11, 2019. Reply briefs were filed on September 25, 2019. Duke Energy Ohio cannot predict the outcome of this matter.

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





Energy Efficiency Cost Recovery
On March 28, 2014, Duke Energy Ohio filed an application for recovery of program costs, lost distribution revenue and performance incentives related to its energy efficiency and peak demand reduction programs. These programs are undertaken to comply with environmental mandates set forth in Ohio law. The PUCO approved Duke Energy Ohio’s application but found that Duke Energy Ohio was not permitted to use banked energy savings from previous years in order to calculate the amount of allowed incentive. This conclusion represented a change to the cost recovery mechanism that had been agreed upon by intervenors and approved by the PUCO in previous cases. The PUCO granted the applications for rehearing filed by Duke Energy Ohio and an intervenor. On January 6, 2016, Duke Energy Ohio and the PUCO Staff entered into a stipulation, pending the PUCO's approval, to resolve issues related to performance incentives and the PUCO Staff audit of 2013 costs, among other issues. In December 2015, based upon the stipulation, Duke Energy Ohio re-established approximately $20 million of the revenues that had been previously reversed. On October 26, 2016, the PUCO issued an order approving the stipulation without modification. In December 2016, the PUCO granted the intervenors request for rehearing for the purpose of further review. Duke Energy Ohio cannot predictOn April 10, 2019, the outcome of this matter.PUCO issued an Entry on Rehearing denying the rehearing applications.
On June 15, 2016, Duke Energy Ohio filed an application for approval of a three-year energy efficiency and peak demand reduction portfolio of programs. A stipulation and modified stipulation were filed on December 22, 2016, and January 27, 2017, respectively. Under the terms of the stipulations, which included support for deferral authority of all costs and a cap on shared savings incentives, Duke Energy Ohio has offered its energy efficiency and peak demand reduction programs throughout 2017. On February 3, 2017, Duke Energy Ohio filed for deferral authority of its costs incurred in 2017 in respect of its proposed energy efficiency and peak demand reduction portfolio. On September 27, 2017, the PUCO issued an order approving a modified stipulation. The modifications impose an annual cap of approximately $38 million on program costs and shared savings incentives combined, but allowed for Duke Energy Ohio to file for a waiver of costs in excess of the cap in 2017. The PUCO approved the waiver request for 2017 up to a total cost of $56 million. On November 21, 2017, the PUCO granted Duke Energy Ohio's and intervenor's applications for rehearing of the September 27, 2017, order. On January 10, 2018, the PUCO denied the Ohio Consumers' Counsel’sOCC's application for rehearing of the PUCO order granting Duke Energy Ohio's waiver request; however, a decision on Duke Energy Ohio's application for rehearing remains pending. Duke Energy Ohio cannot predict the outcome of this matter.
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 (Rider DCI) and a tracking mechanism for incremental distribution expenses caused by major storms. The PUCO also approved a placeholder tariff for a price stabilization rider, but denied Duke Energy Ohio's specific request to include Duke Energy Ohio's entitlement to generation from 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 28, 2015, the PUCO granted all applications for rehearing filed in the case for future consideration. On March 21,30, 2018, the PUCO issuedapproved an order denyingextension of Duke Energy Ohio's issues on rehearing. On April 20, 2018, Duke Energy Ohio filed a second application for rehearing based upon the commission’s March 21, 2018, Order. On May 16, 2018, the commission issued its third Entry on Rehearing granting in part, and denying in part, Duke Energy Ohio’s rehearing request.
On March 9, 2018, Duke Energy Ohio filed a motion to extend its then-current ESP, including all terms and conditions thereof, pending approvalexcluding an extension of a new ESP. On May 30, 2018, the PUCO granted the request, with modification. Specifically, the PUCO did not extend the cap applicable to Rider DCI beyond July 31, 2018. Duke Energy Ohio soughtOhio’s Rider DCI. Following rehearing, of this finding. Onon July 25, 2018, the PUCO granted the request and allowed a continuing cap on recovery under Rider DCI. On August 24, 2018, OMA and OCC filed an Application for Rehearing of the commission's decision. Duke Energy Ohio filed a Memorandum Contra OCC's request forThe orders were upheld on rehearing of the commission's continuation of Rider DCI on September 4, 2018. On September 19, 2018, the PUCO issued an Order granting rehearing on the matter for further consideration. Duke Energy Ohio cannot predict the outcome of this matter.
On May 21, 2018,requested by the Ohio Manufacturers' Association (OMA) and OCC. The time period for parties to file for rehearing or appeal has expired.
In 2018, the OMA and OCC filed a notice of appealseparate appeals of PUCO's approval of Duke Energy Ohio’s ESP with the Ohio Supreme Court, challenging PUCO's approval of Duke Energy Ohio’s Price Stability Rider PSR as a placeholder and its Rider DCI to recover incremental revenue requirement for distribution capital since Duke Energy Ohio’s last base rate case. On July 16, 2018,The Ohio Supreme Court issued an order on March 13, 2019, for the Officeappellants to show cause why the appeals should not be dismissed as moot in light of the Ohio Consumers' Counsel (OCC) filed its own appealcommission’s approval of Duke Energy Ohio’s ESP withcurrent ESP. The OCC and OMA made the Ohio Supreme Court raising similar issues to that of the OMA. Duke Energy Ohio's Application for Rehearing was grantedrequested filings on July 25, 2018. Duke Energy Ohio filed a Motion to Intervene in the two Ohio Supreme Court appeals. OMA's Supreme Court brief was filed on AugustMarch 20, 2018. PUCO submitted its brief on October 26, 2018,2019, and Duke Energy Ohio filed its briefresponse on October 29, 2018. Duke EnergyMarch 27, 2019. Subsequent to OCC and OMA making the requested filings, the Ohio cannot predictSupreme Court dismissed the outcome of this matter.appeals as moot on May 8, 2019.
Natural Gas Pipeline Extension
Duke Energy Ohio is proposing to install a new natural gas pipeline (the Central Corridor Project) in its Ohio service territory to increase system reliability and enable the retirement of older infrastructure. Duke Energy Ohio currently estimates the pipeline development costs and construction activities will range from $163 million to $245 million in direct costs (excluding overheads and AFUDC). Project construction activities, schedule and final costs are still subject to uncertainty due to potential additional permitting delays, construction productivity and other conditions and risks, which could result in additional project cost availability and a potential delay in the targeted in-service date. On January 20, 2017, Duke Energy Ohio filed an amended application with the Ohio Power Siting Board (OPSB) for approval of one of two proposed routes. A public hearing was held on June 15, 2017, and an adjudicatory hearing was scheduled to begin September 11, 2017. On August 24, 2017, an Attorney Examiner granted a request made by Duke Energy Ohio to delay the procedural schedule while it works through various issues related to the pipeline route. In April 2018, Duke Energy Ohio filed a motion with OPSB to establish a procedural schedule and filed supplemental information supporting its application. On December 18, 2018, the OPSB established a procedural schedule that included a local public hearing on March 21, 2019. An evidentiary hearing began on April 9, 2019, and concluded on April 11, 2019. Briefs were filed on May 13, 2019, and reply briefs were filed on June 10, 2019. If approved, construction of the pipeline extension is expected to be completed before the 2021/2022 winter season. Duke Energy Ohio expects a decision by the end of 2019. Duke Energy Ohio cannot predict the outcome of this matter.


PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





FINANCIAL STATEMENTSREGULATORY MATTERS


2012 Natural Gas Rate Case/MGP Cost Recovery
As part of its 2012 natural gas base rate case, Duke Energy Kentucky Electric Rate Case
Ohio has approval to defer and recover costs related to environmental remediation at two sites (East End and West End) that housed former MGP operations. Duke Energy Ohio has made annual applications for recovery of these deferred costs. Duke Energy Ohio has collected approximately $55 million in environmental remediation costs between 2009 through 2012 through a separate rider, Rider MGP, which is currently suspended. Duke Energy Ohio has made annual applications with the PUCO to recover its incremental remediation costs consistent with the PUCO’s directive in Duke Energy Ohio’s 2012 natural gas rate case. To date, the PUCO has not ruled on Duke Energy Ohio’s annual applications for the calendar years 2013 through 2017. On September 1,28, 2018, the staff of the PUCO issued a report recommending a disallowance of approximately $12 million of the $26 million in MGP remediation costs incurred between 2013 through 2017 that staff believes are not eligible for recovery. Staff interprets the PUCO’s 2012 Order granting Duke Energy KentuckyOhio recovery of MGP remediation as limiting the recovery to work directly on the East End and West End sites. On October 30, 2018, Duke Energy Ohio filed a rate case withreply comments objecting to the KPSC requesting an increase in electric base ratesstaff’s recommendations and explaining, among other things, the obligation Duke Energy Ohio has under Ohio law to remediate all areas impacted by the former MGPs and not just physical property that housed the former plants and equipment. To date, the PUCO has not ruled on Duke Energy Ohio’s applications. On March 29, 2019, Duke Energy Ohio filed its annual application to recover incremental remediation expense for the calendar year 2018 seeking recovery of approximately $49$20 million which representsin remediation costs. On July 12, 2019, the staff recommended a disallowance of approximately $11 million for work that staff believes occurred in areas not authorized for recovery. Additionally, staff recommended that any discussion pertaining to Duke Energy Ohio's recovery of ongoing MGP costs should be directly tied to or netted against insurance proceeds collected by Duke Energy Ohio. The PUCO has established a procedural schedule with an approximate 15 percent increaseevidentiary hearing to commence on November 18, 2019. Duke Energy Ohio cannot predict the average customer bill.outcome of this matter.
The 2012 PUCO order also contained conditional deadlines for completing the MGP environmental investigation and remediation costs at the MGP sites. Subsequent to the filing,order, the deadline was extended to December 31, 2019. On May 10, 2019, Duke Energy Kentucky adjusted the requested amount to $30.1 million, in part to reflect the benefits of the Tax Act, representing an approximate 9 percent increase on the average customer bill. The rate increase is driven by increased investment in utility plant, increased operations and maintenance expenses, and recovery of regulatory assets. The application also includes requests to implement an Environmental Surcharge Mechanism to recover environmental costs not recovered in base rates, to establish a Distribution Capital Investment Rider to recover incremental costs of specific programs, to establish a FERC Transmission Cost Reconciliation Rider to recover escalating transmission costs and to modify existing Profit Sharing Mechanism to increase customers' share of proceeds from the benefits of owning generation and to mitigate shareholder risks associated with that generation. An evidentiary hearing concluded on March 8, 2018, and the KPSC issued an order on April 13, 2018. Major components of the Order include approval of an $8.4 million increase in base rates with a return on equity at 9.725 percent based upon a capital structure of 49 percent equity on a total allocable capitalization of approximately $650 million. The Order approved the Environmental Surcharge Mechanism Rider and in June 2018 recovery began of capital-related environmental costs, including costs related to ash and ash disposal, and environmental operation and maintenance expenses formerly recovered in base rates, including expenses for environmental reagents and emission allowances. The incremental revenue from this rider will be approximately $13 million on an annualized basis. The order settles all issues associated with the Tax Act as it relates to the electric business by lowering the income tax component of the revenue requirement and refunding protected EDIT under allowable normalization rules and unprotected EDIT over 10 years. The Order denied requests to implement riders for certain transmission costs and distribution capital investments. Duke Energy Kentucky implemented new base rates on May 1, 2018. On May 3, 2018, Duke Energy KentuckyOhio filed an application requesting a continuation of its existing deferral authority for rehearingMGP remediation and investigation that must occur after December 31, 2019. On September 13, 2019, intervenor comments were filed opposing Duke Energy Ohio's request for continuation of existing deferral authority and on certain aspects of the order; on May 23, 2018, the KPSC granted a rehearing. On October 2, 2018, the KPSC issued its rehearing order correcting certain findings in its initial order and making additional changes that are immaterial to the company's earnings.2019, Duke Energy Kentucky does not plan any further appeals.Ohio filed reply comments. Duke Energy Ohio cannot predict the outcome of this matter.
Duke Energy Kentucky Natural Gas Base Rate Case
On August 31, 2018, Duke Energy Kentucky filed an application with the KPSC requesting an increase in natural gas base rates of approximately $10.5$11 million, an approximate 11.1 percent11.1% average increase across all customer classes. The increase iswas net of approximately $5.2$5 million in annual savings as a result of the Tax Act. The drivers for this case arewere capital invested since the Duke Energy Kentucky’s last rate case in 2009. Duke Energy Kentucky is also seekingsought implementation of a Weather Normalization Adjustment Mechanism, amortization of regulatory assets and to implement the impacts of the Tax Act, prospectively. The KPSC acceptedOn January 30, 2019, Duke Energy Kentucky’s filing asKentucky entered into a settlement agreement with the Attorney General of September 10, 2018, as meeting all filing requirementsKentucky, the only intervenor in the case. The settlement provided for an approximate $7 million increase in natural gas base revenue, a return on equity of 9.7% and issued its first roundapproval of discovery. A procedural schedule was set.the proposed Weather Normalization Mechanism. A hearing is set to commencewas held on February 5, 2019. A rulingThe commission issued its order approving the settlement without material modification on March 27, 2019. Revised customer rates were effective April 1, 2019.
Duke Energy Kentucky Electric Base Rate Case
On September 3, 2019, Duke Energy Kentucky filed a rate case with the KPSC requesting an increase in electric base rates of approximately $46 million, which represents an approximate 12.5% increase across all customer classes. The request for rate increase is expecteddriven by increased investment in late firstutility plant since the last electric base rate case in 2017. Duke Energy Kentucky seeks to implement a Storm Deferral Mechanism that will enable Duke Energy Kentucky to defer actual costs incurred for major storms that are over or under amounts in base rates. In response to large customers’ desire to have access to renewable resources, Duke Energy Kentucky is proposing a Green Source Advantage tariff designed for those large customers that wish to invest in renewable energy resources to meet sustainability goals. Duke Energy Kentucky is proposing an electric vehicle (EV) infrastructure pilot and modest incentives to assist customers in investing in EV technologies. Additionally, Duke Energy Kentucky is proposing to build an approximate 5.5 MW distribution battery energy storage system to be attached to Duke Energy Kentucky’s distribution system providing frequency regulation and enhanced reliability to Kentucky customers. The commission issued a procedural schedule with two rounds of discovery and opportunities for intervenor and rebuttal testimony.Duke Energy Kentucky anticipates that rates will go into effect in the second quarter 2019.of 2020. Duke Energy Kentucky cannot predict the outcome of this matter.
FERC 494 Refund of Regional Transmission Enhancement Projects
FERC Order No. 494 Settlement Agreement (FERC 494 Settlement Agreement) was entered into by most of the PJM Interconnection, LLC (PJM) transmission owners, including Duke Energy Ohio andIndiana
2019 Indiana Rate Case
On July 2, 2019, Duke Energy Kentucky,Indiana filed a general rate case with the IURC, its first general rate case in Indiana in 16 years, for a rate increase for retail customers of approximately $395 million. The request for rate increase is driven by strategic investments to generate cleaner electricity, improve reliability and serve a growing customer base. The request is premised upon a Duke Energy Indiana rate base of $10.2 billion as of December 31, 2018, and adjusted for projected changes through December 31, 2020. On September 9, 2019, Duke Energy Indiana revised its revenue request from $395 million to $393 million and filed updated testimony for the PJM state regulatory commissionsRetail Rate Case. The updated filing reflects a clarification in the presentation of Utility Receipts Tax, a $2 million reduction in the revenue requirement for revenues that will remain in riders and changes to allocation of revenue requirements within rate classes. The Utility Receipts Tax is currently embedded in base rates and rider rates. The proposed treatment is to include the Utility Receipts Tax as a line item on the customer bill rather than included in rates. The request is an approximate 15% increase in retail revenues and approximately two years ago and was planned17% when including estimated Utility Receipts Tax. Hearings are expected to commence in early 2020, with rates to be effective on January 1, 2016; however, it was not approved by FERC until May 31, 2018. The FERC 494 Settlement Agreement was due to the Seventh Circuit Court of Appeals finding that FERC had failed to adequately justify the costs that the customers in the western part of PJM were being charged for high voltage transmission projects, or Regional Transmission Expansion Plan (RTEP) projects (500 kV and above) built in the east. These costs were being allocated to all PJM customers on a load-ratio share basis but the court determined that these costs were not justifiable to customers in the west, includingmid-2020. Duke Energy Ohio and Duke Energy Kentucky, that did not benefit fromIndiana cannot predict the RTEP projects. Costs for the periods 2012 through 2015 are expected to be refunded to Duke Energy Ohio and Duke Energy Kentucky on a monthly basis through December 2025. The refund amount for similar costs incurred beginning in 2016 through June 30, 2018, prior to the change in cost allocation by PJM was determined in the third quarteroutcome of 2018 and these amounts will be refunded over a 12-month period beginning in July 2018. These refunds, totaling approximately $47 million for Duke Energy Ohio and Duke Energy Kentucky, have been recorded to Operation, maintenance and other on the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2018.this matter.
Duke Energy Indiana



FINANCIAL STATEMENTSREGULATORY MATTERS


FERC Transmission Return on Equity Complaint
Customer groups have filed with the FERC complaints against Midcontinent Independent System Operator, Inc. (MISO)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 percent12.38% is unjust and unreasonable. The complaints claim, among other things, that the current base rate of return on equity earned by MISO transmission owners should be reduced to 8.67 percent.8.67%. On January 5, 2015, the FERC issued an order accepting the MISO transmission owners' adder of 0.50 percent0.5% 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 complaints. On December 22, 2015, the presiding FERC ALJ in the first complaint issued an Initial Decision in which the base rate of return on equity was set at 10.32 percent.10.32%. On September 28, 2016, the Initial Decision in the first complaint was affirmed by FERC, but is subject to rehearing requests. On June 30, 2016, the presiding FERC ALJ in the second complaint issued an Initial Decision setting the base rate of return on equity at 9.70 percent.9.7%. The Initial Decision in the second complaint is pending FERC review. On April 14, 2017, the U.S.D.C. Circuit Court, of Appeals for the District of Columbia Circuit, in Emera Maine v. FERC, reversed and remanded certain aspects of the methodology employed by FERC to establish rates of return on equity. On October 16, 2018, FERC issued an order in response to the Emera remand proceeding proposing a new method for determining whether an existing return on equity is unjust and unreasonable, and a new process for determining a just and reasonable return on equity. TheOn November 14, 2018, FERC directed parties involvedto the MISO complaints to file briefs on how the new process for determining return on equity proposed in the Emera proceeding are directedshould be applied to file briefs by December 15, 2018. Duke Energy Indiana is in discussions with the other MISO Transmission Owners to determine strategy in light of this order. This decision may affect the outcome of the complaints against Duke Energy Indiana.involving the MISO transmission owners’ return on equity. Initial briefs were filed on February 13, 2019, and reply briefs were filed April 10, 2019. Duke Energy Indiana currently believes these matters will not have a material impact on its results of operations, cash flows and financial position.

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





Benton County Wind Farm Dispute
On December 16, 2013, Benton County Wind Farm LLC (BCWF) filed a lawsuit against Duke Energy Indiana seeking damages for past generation losses alleging Duke Energy Indiana violated its obligations under a 2006 PPA by refusing to offer electricity to the market at negative prices. Damage claims continue to increase during times that BCWF is not dispatched. Under 2013 revised MISO market rules, Duke Energy Indiana is required to make a price offer to MISO for the power it proposes to sell into MISO markets and MISO determines whether BCWF is dispatched. Because market prices would have been negative due to increased market participation, Duke Energy Indiana determined it would not bid at negative prices in order to balance customer needs against BCWF's need to run. BCWF contends Duke Energy Indiana must bid at the lowest negative price to ensure dispatch, while Duke Energy Indiana contends it is not obligated to bid at any particular price, that it cannot ensure dispatch with any bid and that it has reasonably balanced the parties' interests. On July 6, 2015, the U.S. District Court for the Southern District of Indiana entered judgment against BCWF on all claims. BCWF appealed the decision and on December 9, 2016, the appeals court ruled in favor of BCWF. Duke Energy Indiana recorded an obligation and a regulatory asset related to the settlement amount in fourth quarter 2016. On June 30, 2017, the parties finalized a settlement agreement. Terms of the settlement included Duke Energy Indiana paying $29 million for back damages. Additionally, the parties agreed on the method by which the contract will be bid into the market in the future. The settlement amount was paid in June 2017. The IURC issued an order on September 27, 2017, approving recovery of the settlement amount through Duke Energy Indiana's fuel clause. The IURC order has been appealed to the Indiana Court of Appeals. On May 21, 2018, the Indiana Court of Appeals upheld the commission's decision. The appellants have requested rehearing at the Indiana Court of Appeals. The Indiana Court of Appeals denied the request for rehearing. The appellants have requested transfer to the Indiana Supreme Court, including briefs in support from environmental groups. Duke Energy Indiana cannot predict the outcome of this matter.
Edwardsport Integrated Gasification Combined Cycle Plant
On September 20, 2018, Duke Energy Indiana, the Indiana Office of Utility Consumer Counselor, (OUCC), the Duke Industrial Group and Nucor Steel – Indiana entered into a settlement agreement to resolve integrated gasification combined cycle (IGCC)IGCC ratemaking issues for calendar years 2018 and 2019. The agreement will remain in effect until new rates are established in Duke Energy Indiana's next base rate case, which is expectedwas filed on July 2, 2019, with rates to be filed in mid-2019 with rates effective in mid-2020. It addresses the pending Edwardsport filing at the commission and eliminates the need for future filings until the overall rate case. This settlement includes caps on Duke Energy Indiana’s retail operating expenses for 2018 and 2019, reduces Duke Energy Indiana's regulatory asset by $30 million (with a corresponding reduction of the amount of amortization of the regulatory asset included in rates by $10 million annually beginning with the implementation of final IGCC 17 rates), and provides funding for low- income assistance and clean energy projects. Duke Energy Indiana recognized pretax impairment and related charges of $32 million in the third quarter of 2018. The settlement is subject to IURC approval. An evidentiary hearing is scheduled for December 2018. Duke Energy Indiana cannot predict the outcome of this matter.
Tax Act
On June 27, 2018, Duke Energy Indiana, the Indiana Office of Utility Consumer Counselor, the Indiana Industrial Group and Nucor Steel – Indiana filed testimony consistent with their Stipulation and Settlement Agreement (Settlement Agreement) in the federal tax act proceeding with the IURC. The Settlement Agreement outlines how Duke Energy Indiana will implement the impacts of the Tax Act. Material components of the Settlement Agreement were as follows:
Riders to reflect the change in the statutory federal tax rate from 35 to 21 percent as they are filed in 2018;
Base rates to reflect the change in the statutory federal tax rate from 35 to 21 percent upon IURC approval, but no later than September 1, 2018;
Duke Energy Indiana to continue to defer protected federal EDIT until January 1, 2020, at which time it will be returned to customers according to the Average Rate Assumption Method (ARAM) required by the Internal Revenue Service over approximately 26 years; and
Duke Energy Indiana to begin returning unprotected federal EDIT upon IURC approval, over 10 years. In order to mitigate the negative impacts to cash flow and credit metrics, the Settlement Agreement allows Duke Energy Indiana to return $7 million per year over the first five years, with a step up to $35 million per year in the following five years.
The settlement was subject to the review and approval of the IURC. An evidentiary hearing was held in December 2018, and on July 13, 2018. On August 22, 2018,June 5, 2019, the IURC approvedissued an order approving the settlement and rates have been adjusted effective September 1, 2018.2018 Settlement Agreement.
Piedmont
South Carolina Rate Stabilization Adjustment Filing
On June 15, 2018, Piedmont filed with the PSCSC under the South Carolina Rate Stabilization Act its quarterly monitoring report for the 12-month period ending March 31, 2018. The filing included a revenue deficiency calculation and tariff rates in order to permit Piedmont the opportunity to earn the rate of return on common equity established in its last general rate case. The filing also incorporated the impacts of the Tax Act by lowering the income tax component of the revenue requirement, refunding protected EDIT under allowable normalization rules, unprotected EDIT and amounts over collected from the customers from January 1, 2018, through the end of the review period for this proceeding. A settlement agreement reached between Piedmont and ORS was filed with the PSCSC on September 14, 2018, and approved by the PSCSC on October 3, 2018. Terms of the settlement include implementation of rates for the 12-month period beginning November 2018 with a return on equity of 10.2 percent.

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





North Carolina Integrity Management Rider Filing
InOn October 2018,31, 2019, Piedmont filed a petition under the Integrity Management Rider (IMR)IMR mechanism to collect an additional $9.5$11 million in annual revenues effective December 20181, 2019, based on the eligible capital investments closed to integrity and safety projects over the six-month period endedbetween July 1, 2019, and September 30, 2018.2019. Piedmont cannot predict the outcome of this matter.
In May 2018,On April 30, 2019, Piedmont filed and the NCUC approved, a petition under the IMR mechanism to update rates, effective June 2018, based on the eligible capital investments closed to integrity and safety projects over the six-month period ending March 31, 2018,2019. The NCUC approved the petition on May 29, 2019, and the decrease in the corporate federal income tax raterates became effective JanuaryJune 1, 2018.2019. The combined effect of the update was a reductionan increase to annual revenues of approximately $5.7$9 million.
Tennessee Integrity Management Rider Filing
In November 2018, Piedmont filed a petition with the TPUC under the IMR mechanism to collect an additional $3 million in annual revenues, effective January 2019, based on the eligible capital investments closed to integrity and safety projects over the 12-month period ending October 31, 2018. A hearing on the matter was held on March 11, 2019. On May 20, 2019, the TPUC approved Piedmont's IMR application as filed and revised customer rates were effective June 1, 2019.
2019 North Carolina Rate Case
On April 1, 2019, Piedmont filed an application with the NCUC, its first general rate case in North Carolina in six years, for a rate increase for retail customers of approximately $83 million, which represents an approximate 9% increase in retail revenues. The request for rate increase is driven by significant infrastructure upgrade investments (plant additions) since the last general rate case through June 30, 2019, offset by savings that customers will begin receiving due to federal and state tax reform. Approximately half of the plant additions being included in rate base are categories of plant investment not covered under the IMR mechanism, which was originally approved as part of the 2013 North Carolina Rate Case.
On August 13, 2019, Piedmont, the Public Staff, and two groups representing industrial customers filed an Agreement and Stipulation Settlement resolving issues in the base rate proceeding, which included a return on equity of 9.7% and a capital structure of 52% equity and 48% debt. The North Carolina Attorney General's Office did not support the settlement. Other major components of the Stipulation included:
An annual increase in revenues of $109 million before consideration of riders associated with federal and state tax reform;
A decrease through a rider mechanism of $23 million per year to return unprotected federal EDIT over a five-year period and deferred revenues related to the federal rate reduction of $37 million to be returned over one year;
A decrease through a rider mechanism of $21 million per year related to reductions in the North Carolina state income tax rate to be returned over a three-year period;
An overall cap on net revenue increase of $83 million. This will impact Piedmont beginning November 1, 2022 only if the company does not file another general rate case in the interim;
Continuation of the IMR mechanism; and



FINANCIAL STATEMENTSREGULATORY MATTERS


Establishment of a new Distribution Integrity Management Program (DIMP) deferral mechanism for average annual pretax operations and maintenance expenses of approximately $11 million.
An evidentiary hearing began on August 19, 2019. On October 31, 2019, the NCUC approved the Stipulation and the revised customer rates were effective November 1, 2019.
OTHER REGULATORY MATTERS
Progress Energy Merger FERC Mitigation
Since December 2014, the FERC Office of Enforcement has conducted an investigation of Duke Energy’s market power filings in its application for approval of the Progress Energy merger submitted in 2012. On June 8, 2018, the FERC issued an order approving a settlement agreement under which Duke Energy paid a penalty of $3.5 million. The FERC Office of Enforcement stated in its conclusion that Duke Energy violated FERC regulations by failing to fully and accurately describe certain specific matters in its market power filings. Duke neither admitted nor denied the alleged violations.
Atlantic Coast Pipeline, LLC
On September 2, 2014, Duke Energy, Dominion ResourcesEnergy, Inc. (Dominion), Piedmont and Southern Company Gas announced the formation of Atlantic Coast Pipeline, LLC (ACP) to build and own the proposed Atlantic Coast Pipeline (ACP pipeline), an approximately 600-mile interstate natural gas pipeline running from West Virginia to North Carolina. The ACP pipeline is designed to meet, in part, the needs identified by Duke Energy Carolinas, Duke Energy Progress and Piedmont. Dominion will buildbe responsible for building and operateoperating the ACP pipeline and holds a leading ownership percentage in ACP of 48 percent.48%. Duke Energy owns a 47 percent47% interest, which is accounted for as an equity method investment through its Gas Utilities and Infrastructure segment. Southern Company Gas maintains a 5 percent5% interest. See Note 1213 for additional information related to Duke Energy's ownership interest. Duke Energy Carolinas, Duke Energy Progress and Piedmont, among others, will be customers of the pipeline. Purchases will be made under several 20-year supply contracts, subject to state regulatory approval.
In 2018, the FERC issued a series of Notices to Proceed, which authorized the project to begin certain construction-related activities along the pipeline route, including supply header and compressors. On May 11, 2018, and October 19, 2018, FERC issued Notices to Proceed allowing full construction activities in all areas of West Virginia except in the Monongahela National Forest. On July 24, 2018, FERC issued a Notice to Proceed allowing full construction activities along the project route in North Carolina. On October 19, 2018, the conditions to effectiveness of the Virginia 401 water quality certification were satisfied. Immediatelysatisfied and, following receipt of the Virginia 401 certification, ACP filed a request for FERC to issue a Notice to Proceed with full construction activities in Virginia. Due to legal challenges not directly related to the request for a Notice to Proceed in Virginia, receipt of whichthis request is expected shortly. We appreciate the professional and collaborative process the permitting agencies have pursued to ensure that this critical energy infrastructure project will meet the stringent environmental standards required by law and regulation.still pending.
ACP is the subject of challenges in state and federal courts and agencies, including, among others, challenges of the project’s biological opinion (BiOp) and incidental take statement (ITS), crossings of the Blue Ridge Parkway, the Appalachian Trail, and the Monongahela and George Washington National Forests, the project’s U.S. Army Corps of Engineers (USACE) 404 permit, the project's air permit for a compressor station at Buckingham, Virginia, conditional 401 water quality certification, the FERC Environmental Impact Statement order and the FERC order approving the Certificate of Public Convenience and Necessity. Each of these challenges alleges non-compliance on the part of federal and state permitting authorities and adverse ecological consequences if the project is permitted to proceed. Since December 2018, notable developments in these challenges include a stay in December 2018 issued by the U.S. Court of Appeals for the Fourth Circuit (Fourth Circuit) and the same court's July 26, 2019, vacatur of the project's BiOp and ITS (which stay and subsequent vacatur halted most project construction activity), a Fourth Circuit decision vacating the project's permits to cross the Monongahela and George Washington National Forests and the Appalachian Trail, the Fourth Circuit's remand to USACE of ACP's Huntington District 404 verification and the Fourth Circuit’s remand to the National Park Service of ACP’s Blue Ridge Parkway right-of-way. ACP is vigorously defending these challenges and coordinating with the federal and state authorities which are the direct parties to the challenges. Since July 2018, notable developments in these challenges include a stay issued byThe Solicitor General of the U.S.United States and ACP filed petitions for certiorari to the Supreme Court of Appeals for the Fourth Circuit (Fourth Circuit)United States on construction activities throughJune 25, 2019, regarding the MonongahelaAppalachian Trail crossing and George Washington National Forests, a reissuancecertiorari was granted on October 4, 2019. A ruling is expected in the second quarter of the project’s ITS and Blue Ridge Parkway right-of-way and renewed challenges2020. ACP is also evaluating possible legislative remedies to this issue.
In anticipation of these reissued permits and the USACE’s lifting of its administrative stay of ACP’s Huntington District 404 permit.
The FERC Stop Work Order following the Fourth Circuit's vacatur of the project'sBiOp and ITS, ACP and Blue Ridge Parkway right-of-way, togetherthe FWS commenced work in mid-May of 2019 to set the basis for a reissued BiOp and ITS. ACP continues coordinating and working with FWS and other parties in preparation for a reissuance of the BiOp and ITS.
Given the legal challenges described above and ongoing discussions with customers, ACP expects mechanical completion of the full project in late 2021 with in-service likely in the first half of 2022.
The delays in obtaining permits necessary for constructionresulting from the legal challenges described above have impacted the cost and schedule for the project. As a result, projectProject cost estimates have increased from a range of $6.0are $7.3 billion to $6.5 billion to a range of $6.5 billion to $7.0$7.8 billion, excluding financing costs. ACP is pursuingGiven the status of current discussions with FWS regarding a phased in-service approachnew BiOp and ITS, as well as discussions with customers whereby it maintains a late 2019 in-service date for key segments of the projectcontractors regarding efficiencies which may be realized going forward, these estimates are under review and subject to meet peak winter demand in critically constrained regions served by the project. ACP will be pursuing a mid-2020 in-service date for the remaining segments.upward pressure. Abnormal weather, work delays (including delays due to judicial or regulatory action) and other conditions may also result in cost or schedule modifications, in the future.
Sabal Trail Transmission, LLC
On May 4, 2015, Duke Energy acquired a 7.5 percent ownership interest in Sabal Trail, which is accountedsuspension of AFUDC for as an equity method investment, from Spectra Energy Partners, LP, a master limited partnership, formed by Enbridge Inc. (formerly Spectra Energy Corp.). Spectra Energy Partners, LP holds a 50 percent ownership interest in Sabal Trail and NextEra Energy has a 42.5 percent ownership interest. Sabal Trail is a joint venture to construct a 515-mile natural gas pipeline (Sabal Trail pipeline) to transport natural gas to Florida. Total estimated project costs are approximately $3.2 billion. The Sabal Trail pipeline traverses Alabama, Georgia and Florida. The primary customers of the Sabal Trail pipeline, Duke Energy Florida and Florida Power & Light Company (FP&L), have each contracted to buy pipeline capacity for 25-year initial terms. See Note 12 for additional information relatedACP and/or impairment charges potentially material to Duke Energy's ownership interest.cash flows, financial position and results of operations.

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





On February 3, 2016, the FERC issued an order granting the request for a CPCN to construct and operate the pipeline. The Sabal Trail pipeline received other required regulatory approvals and the Phase 1 mainlineDuke Energy’s investment in ACP was placed in service in July 2017. On October 12, 2017, Sabal Trail filed a request with FERC to place in service a lateral line to$1.1 billion at September 30, 2019. Duke Energy Florida's Citrus County Combined Cycle Facility. This request is required to support commissioningevaluated this investment for impairment at September 30, 2019, and testing activities at the facility. On March 16, 2018, FERC approved the Citrus lateraldetermined that fair value approximated carrying value and ittherefore no impairment was placed in service.
On September 21, 2016, intervenors filed an appeal of FERC's CPCN orders to the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit Court of Appeals). On August 22, 2017, the appeals court ruled against FERC in the case for failing to include enough information on the impact of greenhouse-gas emissions carried by the pipeline, vacated the CPCN order and remanded the case to FERC. In response to the August 2017 court decision, the FERC issued a draft Supplemental Environmental Impact Statement (SEIS) on September 27, 2017. On October 6, 2017, FERC and a group of industry intervenors, including Sabal Trail andnecessary. Duke Energy Florida, filed separate petitions with the D.C. Circuit Court of Appeals requesting rehearing regarding the court's decision to vacate the CPCN order. On January 31, 2018, the D.C. Circuit Court of Appeals denied the requests for rehearing. On February 2, 2018, Sabal Trail filedalso has a request with FERC for expedited issuance ofguarantee agreement supporting its order on remand and reissuanceshare of the CPCN. InACP revolving credit facility. Duke Energy’s maximum exposure to loss under the alternative, the pipeline requested that FERC issue a temporary emergency CPCN to allow for continued operations. On February 5, 2018, FERC issued the final SEIS. On February 6, 2018, FERC and the intervenors in this case each filed motions for stay with the D.C. Circuit Court to stay the court's mandate. On March 7, 2018, the D.C. Circuit Court of Appeals granted FERC and Sabal Trail’s stay request. On March 14, 2018, FERC issued its final order on remand, which recertified the project. On August 10, 2018, FERC denied requests for rehearingterms of the final order on remand.guarantee is $802 million, which represents 47% of the outstanding borrowings under the credit facility as of September 30, 2019. See Note 13 for additional information.
Constitution Pipeline Company, LLC
Duke Energy owns a 24 percent24% ownership interest in Constitution, which is accounted for as an equity method investment. Constitution is a natural gas pipeline project slated to transport natural gas supplies from the Marcellus supply region in northern Pennsylvania to major northeastern markets. The pipeline will be constructed and operated by Williams Partners L.P., which has a 41 percent41% ownership share. The remaining interest is held by Cabot Oil and Gas Corporation and WGL Holdings, Inc. Before the permitting delays discussed below, Duke Energy's total anticipated contributions were approximately $229 million. As a result of the permitting delays and project uncertainty, total anticipated contributions by Duke Energy can no longer be reasonably estimated. Since April 2016, with the actions of the New York State Department of Environmental Conservation (NYSDEC), Constitution stopped construction and discontinued capitalization of future development costs until the project's uncertainty is resolved.



FINANCIAL STATEMENTSREGULATORY MATTERS


In December 2014, Constitution received approval from the FERC to construct and operate the proposed pipeline. However, on April 22, 2016, the NYSDEC denied Constitution’s application for a necessary water quality certification for the New York portion of the Constitution pipeline. Constitution filed a series of legal actions in the U.S. Court of Appeals for the Second Circuit (U.S. Court of Appeals) challenging the legality and appropriateness of the NYSDEC’s decision, and on August 18, 2017, the petition was deniedculminating in part and dismissed in part. In September 2017, Constitution filed a petition for a rehearing of portions of the decision unrelatedan appeal to the water quality certification, which was denied by the U.S. Court of Appeals. In January 2018, Constitution petitioned the Supreme Court of the United States, to review the U.S. Court of Appeals decision, andwhich appeal was denied on April 30, 2018, the Supreme Court denied Constitution's petition.2018. In addition, in October 2017, Constitution filed a petition for declaratory order requesting FERC to find that, the NYSDEC waived its rights to issue a Section 401 water quality certification by not acting on Constitution's application within a reasonable period of time as required by statute. Thisstatute, the NYSDEC waived its rights to issue a Section 401 water quality certification. Constitution's petition was baseddenied on precedent established by another pipeline’s successful petition with FERC following a District of ColumbiaJanuary 11, 2018.
On January 25, 2019, the D.C. Circuit Court ruling. On January 11,rendered a decision in Hoopa Valley Tribe v. FERC that withdrawal and resubmission of an application for a Section 401 water quality certification constituted a waiver by the relevant state agency when such withdrawals and resubmissions were intended to extend the one-year limit on accepting or rejecting such an application. As Constitution had made similar arguments in its 2018 petition to FERC denied Constitution's petition. In February 2018,for a declaratory order, on April 1, 2019, Constitution filed a new petition for declaratory order requesting FERC find a waiver on the part of NYSDEC in accordance with the D.C. Circuit Court’s newly established precedent. On August 28, 2019, FERC issued an order declaring that NYSDEC had in fact waived its water quality certification authority. On September 27, 2019, NYSDEC and numerous intervenors filed requests for rehearing request with FERC of its finding that the NYSDEC did not waive the Section 401 certification requirement. On July 19, 2018, FERC denied Constitution's rehearing request. FERC’s August 28, 2019, waiver determination.
Constitution is currently unable to approximate an in-service date for the project due to the NYSDEC's denial of the water quality certification. The Constitution partners remain committed to the project and are evaluating next steps to move the project forward. On June 25, 2018, Constitution filed with FERC a Request for Extension of Time until December 2, 2020, for construction of the project. Duke Energy cannot predict the outcomeOn November 5, 2018, FERC issued an Order Granting Extension of this matter.Time.
During the nine months ended September 30, 2018, Duke Energy recorded an other-than-temporary impairment (OTTI)OTTI of $55 million within Equity in earnings of unconsolidated affiliates on Duke Energy's Condensed Consolidated Statements of Operations.Income. The charge representsrepresented the excess carrying value over the estimated fair value of the project, which was based on a Level 3 Fair Value measurement that was determined from the income approach using discounted cash flows. The impairment was primarily due to the recent actions taken by the courts and regulators to uphold the NYSDEC's denial of the certification and uncertainty associated with the remaining legal and regulatory challenges.
See Note 1213 for additional information related to ownership interest and carrying value of the investment.
Potential Coal Plant Retirements
The Subsidiary Registrants periodically file Integrated Resource Plans (IRP)IRPs 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. 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. Duke Energy continues to evaluate the potential need to retire these coal-fired generating facilities earlier than the current estimated useful lives primarily because facilities doand plans to seek regulatory recovery for amounts that would not have the requisite emission control equipment to meet U.S. Environmental Protection Agency (EPA) regulations recently approved or proposed.be otherwise recovered when any of these assets are retired.

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





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.retirement. Dollar amounts in the table below are included in Net property, plant and equipment on the Condensed Consolidated Balance Sheets as of September 30, 2018,2019, and exclude capitalized asset retirement costs.
  Remaining Net
  Remaining Net
Capacity
 Book Value
Capacity
 Book Value
(in MW)
 (in millions)
(in MW)
 (in millions)
Duke Energy Carolinas      
Allen Steam Station Units 1-3(a)
585
 $132
585
 $154
Progress Energy and Duke Energy Florida   
Crystal River Units 1 and 2(b)
766
 100
Duke Energy Indiana      
Gallagher Units 2 and 4(c)
280
 123
Gallagher Units 2 and 4(b)
280
 116
Gibson Units 1-5(c)
3,132
 1,949
Cayuga Units 1-2(c)
1,005
 974
Total Duke Energy1,631
 $355
5,002
 $3,193
(a)Duke Energy Carolinas will retire Allen Steam Station Units 1 through 3 by December 31, 2024, as part of the resolution of a lawsuit involving alleged New Source Review violations.
(b)Duke Energy Florida expects to retire these coal units by the end of 2018 to comply with environmental regulations.
(c)Duke Energy Indiana committed to either retire or stop burning coal at Gallagher Units 2 and 4 by December 31, 2022, as part of the 2016 settlement of Edwardsport IGCC matters.
(c)On July 1, 2019, Duke Energy Indiana filed its 2018 IRP with the IURC. The 2018 IRP included scenarios evaluating the potential retirement of coal-fired generating units at Gibson and Cayuga. The rate case filed July 2, 2019, includes proposed depreciation rates reflecting retirement dates from 2026 to 2038.
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 approvals and therefore cannot be assured.
Duke Energy Carolinas and Duke Energy Progress are evaluating the potential for coal-fired generating unit retirements with a net carrying value of approximately $732 million and $1.2 billion, respectively, included in Net property, plant and equipment on the Condensed Consolidated Balance Sheets as of September 30, 2019.
Refer to the "Western Carolinas Modernization Plan" discussion above for details of Duke Energy Progress' planned retirements.



FINANCIAL STATEMENTSCOMMITMENTS AND CONTINGENCIES


4. COMMITMENTS AND CONTINGENCIES
ENVIRONMENTAL
The Duke Energy Registrants are subject to federal, state and local regulations regarding air and water quality, hazardous and solid waste disposal, coal ash 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.
Remediation Activities
In addition to asset retirement obligations (ARO)AROs recorded as a result of various environmental regulations, the Duke Energy Registrants are responsible for environmental remediation at various sites. These include certain 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, remediation activities vary based upon site conditions and location, 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 environmental impacts 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 at all sites. 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 on the Condensed Consolidated Statements of Operations unless regulatory recovery of the costs is deemed probable.

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





The following tables contain information regarding reserves for probable and estimable costs related to the various environmental sites. These reserves are recorded in Accounts Payable within Current Liabilities and Other within Other Noncurrent Liabilities on the Condensed Consolidated Balance Sheets.
 Nine Months Ended September 30, 2018
   Duke
   Duke
 Duke
 Duke
 Duke
  
 Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Balance at beginning of period$81
 $10
 $15
 $3
 $12
 $47
 $5
 $2
Provisions/adjustments7
 3
 2
 3
 (1) 3
 1
 
Cash reductions(20) (2) (5) (1) (4) (12) (1) 
Balance at end of period$68
 $11
 $12
 $5
 $7
 $38
 $5
 $2
 Nine Months Ended September 30, 2017
   Duke
   Duke
 Duke
 Duke
 Duke
  
 Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Balance at beginning of period$98
 $10
 $18
 $3
 $14
 $59
 $10
 $1
Provisions/adjustments(1) 2
 1
 
 1
 (3) (2) 1
Cash reductions(13) (2) (3) 
 (3) (7) (1) 
Balance at end of period$84
 $10
 $16
 $3
 $12
 $49
 $7
 $2
 Nine Months Ended September 30, 2019
   Duke
   Duke
 Duke
 Duke
 Duke
  
 Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Balance at beginning of period$77
 $11
 $11
 $4
 $6
 $48
 $5
 $2
Provisions/adjustments30
 4
 9
 3
 5
 10
 
 6
Cash reductions(35) (4) (3) (2) (1) (28) 
 
Balance at end of period$72
 $11
 $17
 $5
 $10
 $30
 $5
 $8
 Nine Months Ended September 30, 2018
   Duke
   Duke
 Duke
 Duke
 Duke
  
 Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Balance at beginning of period$81
 $10
 $15
 $3
 $12
 $47
 $5
 $2
Provisions/adjustments7
 3
 2
 3
 (1) 3
 1
 
Cash reductions(20) (2) (5) (1) (4) (12) (1) 
Balance at end of period$68
 $11
 $12
 $5
 $7
 $38
 $5
 $2

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 not material except as presented in the table below.
(in millions) 
Duke Energy$49
Duke Energy Carolinas11
Duke Energy Ohio31
Piedmont2



(in millions) 
Duke Energy$57
Duke Energy Carolinas17
Duke Energy Ohio30
Piedmont2
FINANCIAL STATEMENTSCOMMITMENTS AND CONTINGENCIES


LITIGATION
Duke Energy Carolinas and Duke Energy Progress
NCDEQ Closure Litigation
The Coal Ash Act requires CCR surface impoundments in North Carolina to be closed, with the closure method and timing based on a risk ranking classification determined by legislation or state regulators. The NCDEQ previously classified the impoundments at Allen, Belews Creek, Rogers, Marshall, Mayo and Roxboro as low risk and Duke Energy expected to close those sites through a combination of a cap system and a groundwater monitoring system. However, on April 1, 2019, NCDEQ issued a closure determination (NCDEQ's April 1 Order) requiring Duke Energy Carolinas and Duke Energy Progress to excavate all remaining coal ash impoundments at these facilities. On April 26, 2019, Duke Energy Carolinas and Duke Energy Progress filed Petitions for Contested Case Hearings in the Office of Administrative Hearings to challenge NCDEQ's April 1 Order. On May 9, 2019, NCDEQ issued a supplemental order requiring that closure plans be submitted on December 31, 2019, but providing that the corrective action plans are not due until March 31, 2020. Duke Energy Carolinas and Duke Energy Progress filed amended petitions on May 24, 2019, incorporating the May 9, 2019 order.
On June 14, 2019, NCDEQ filed a motion to dismiss several claims in Duke Energy Carolinas' and Duke Energy Progress' appeals. On August 2, 2019, the court entered an order granting NCDEQ's motion to dismiss several of the claims. Duke Energy has filed a petition with the North Carolina Superior Court seeking review of this order. The lawsuit will proceed on the remaining issues, including whether the NCDEQ's decision was arbitrary and capricious. On September 24, 2019, NCDEQ filed a Motion for Partial Summary Judgment on the issue of whether Duke Energy had notice that NCDEQ was going to make a closure determination on April 1, 2019. On October 28, 2019, the court entered an order granting NCDEQ’s Partial Motion for Summary Judgment. Duke Energy has until November 27, 2019 to file an appeal of that decision. The trial is expected to occur in June 2020. Duke Energy Carolinas and Duke Energy Progress cannot predict the outcome of this matter.
Coal Ash Insurance Coverage Litigation
In March 2017, Duke Energy Carolinas and Duke Energy Progress filed a civil action in North Carolina Superior Court against various insurance providers. The lawsuit seeks payment for coal ash-related liabilities covered by third-party liability insurance policies. The insurance policies were issued between 1971 and 1986 and provide third-party liability insurance for property damage. The civil action seeks damages for breach of contract and indemnification for costs arising from the Coal Ash Act and the EPA CCR rule at 15 coal-fired plants in North Carolina and South Carolina. On May 14, 2019, the court granted an extension of stay, until September 15, 2019, to allow the parties to discuss potential resolution. As no resolution was reached, litigation has resumed with fact discovery. The parties are engaged in discovery.trial is now scheduled for February 2021. Duke Energy Carolinas and Duke Energy Progress cannot predict the outcome of this matter.
NCDEQ State Enforcement Actions
In the first quarter of 2013, the Southern Environmental Law Center (SELC)SELC sent notices of intent to sue Duke Energy Carolinas and Duke Energy Progress related to alleged Clean Water Act (CWA)CWA violations from coal ash basins at two of their coal-fired power plants in North Carolina. The NCDEQ filed enforcement actions against Duke Energy Carolinas and Duke Energy Progress alleging violations of water discharge permits and North Carolina groundwater standards. The cases have been consolidated and are being heard before a single judge in the North Carolina Superior Court.
On August 16, 2013, the NCDEQ 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. Both of these cases have been assigned to the judge handling the enforcement actions discussed above. SELC is representing several environmental groups who have been permitted to intervene in these cases.
The court issued orders in 2016 granting Motions for Partial Summary Judgment for seven7 of the 14 North Carolina plants named in the enforcement actions. On February 13, 2017, the court issued an order denying motions for partial summary judgment brought by both the environmental groups and Duke Energy Carolinas and Duke Energy Progress for the remaining seven7 plants. On March 15, 2017, Duke Energy Carolinas and Duke Energy Progress filed a Notice of Appeal with the North Carolina Court of Appeals to challenge the trial court’s order. The parties were unable to reach an agreement at mediation in April 2017 and submitted briefs to the trial court on remaining issues to be tried. On August 1, 2018, the Court of Appeals dismissed the appeal and the matter is proceeding before the trial court. No trial dateThe court decided to stay any activity in the case and has been scheduled.holding periodic status conferences while NCDEQ works through the Coal Ash Act process and the ongoing appeal of the April 1 closure decision. Duke Energy Carolinas and Duke Energy Progress cannot predict the outcome of this matter.

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





Federal Citizens Suits
On June 13, 2016, the Roanoke River Basin Association (RRBA)RRBA filed a federal citizen suit in the Middle District of North Carolina alleging unpermitted discharges to surface water and groundwater violations at the Mayo Plant. On August 19, 2016, Duke Energy Progress filed a Motion to Dismiss. On April 26, 2017, the court entered an order dismissing four of the claims in the federal citizen suit. Two claims relating to alleged violations of National Pollutant Discharge Elimination System (NPDES)NPDES permit provisions survived the motion to dismiss, and Duke Energy Progress filed its response on May 10, 2017. Duke Energy Progress and RRBA each filed motions for summary judgment on March 23, 2018. The court has not yet ruled on these motions.
On May 16, 2017, RRBA filed a federal citizen suit in the U.S. District Court for the Middle District of North Carolina, which asserts two claims relating to alleged violations of NPDES permit provisions at the Roxboro Plant and one claim relating to the use of nearby water bodies. Duke Energy Progress and RRBA each filed motions for summary judgment on April 17, 2018, and the court has not yet ruled on these motions.
On May 8, 2018, on motion from Duke Energy Progress, the court ordered trial in both of the above matters to be consolidated. Trial is currently scheduled for July 15, 2019.
On June 20, 2017, RRBA filed a federal citizen suit in the U.S. District Court for the Middle District of North Carolina challenging the closure plans at the Mayo Plant under the EPA CCR Rule.April 5, 2019, Duke Energy Progress filed a motion to dismiss, which was granted bystay the court on March 30, 2018. RRBA had untilcase following the NCDEQ’s April 30, 2018, to file an appeal to the Fourth Circuit but did not do so.
1 Order. On August 2, 2017, RRBA filed a federal citizen suit in the U.S. District Court for the Middle District of North Carolina challenging the closure plans at the Roxboro Plant under the EPA CCR Rule. Duke Energy Progress filed a motion to dismiss on October 2, 2017, which was granted by2019, the court on May 29, 2018. RRBA had until June 28, 2018, to file an appeal toordered that this case is stayed and shall remain stayed pending further order from the Fourth Circuit but did not do so.court.



FINANCIAL STATEMENTSCOMMITMENTS AND CONTINGENCIES


On December 5, 2017, various parties filed a federal citizen suit in the U.S. District Court for the Middle District of North Carolina for alleged violations at Duke Energy Carolinas' Belews Creek Steam Station (Belews Creek) under the CWA. Duke Energy Carolinas filed a motion to dismiss on February 5, 2018, and on August 13, 2018, the court issued an order denying Duke Energy Carolinas’ motion to dismiss. Duke Energy Carolinas' answer to the complaint was filed on August 27, 2018. On October 10, 2018, Duke Energy Carolinas filed Motions to Dismiss for lack of standing, Motion for Judgment on the Pleadings and Motion to Stay Discovery. A hearing onOn January 9, 2019, the court entered an order denying Duke Energy Carolinas' motion to stay is scheduled for December 12, 2018, and a scheduling conferencediscovery. There has been set for January 2019.no ruling on the other pending motions. On April 5, 2019, Duke Energy Carolinas filed a motion to stay the case following the NCDEQ’s April 1 Order. On August 2, 2019, the court ordered that this case is stayed and shall remain stayed pending further order from the court.
Duke Energy Carolinas and Duke Energy Progress cannot predict the outcome of these matters.
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 the NCDEQ advising them not to drink water from the private wells on their land tested by the NCDEQ 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 (DHHS). Results of Comprehensive Site Assessments testing performed by Duke Energy under the Coal Ash Act have been consistent with historical data provided to state regulators over many years. The DHHS and NCDEQ sent follow-up letters on October 15, 2015, to residents near coal ash basins who had their wells tested, stating that private well samplings at a considerable distance from coal ash basins, as well as some municipal water supplies, contain similar levels of vanadium and hexavalent chromium, which led investigators to believe these constituents are naturally occurring. In March 2016, DHHS rescinded the advisories.
Duke Energy Carolinas and Duke Energy Progress have received formal demand letters from residents near Duke Energy Carolinas' and Duke Energy Progress' coal ash basins. The residents claim damages for nuisance and diminution in property value, among other things. The parties held three days of mediation discussions that ended at an impasse. On January 6, 2017, Duke Energy Carolinas and Duke Energy Progress received the plaintiffs' notice of their intent to file suits should the matter not settle. The NCDEQ preliminarily approved Duke Energy’s permanent water solution plans on January 13, 2017, and as a result shortly thereafter, Duke Energy issued a press release, providing additional details regarding the homeowner compensation package. This package consists of three components: (i) a $5,000 goodwill payment to each eligible well owner to support the transition to a new water supply, (ii) where a public water supply is available and selected by the eligible well owner, a stipend to cover 25 years of water bills and (iii) the Property Value Protection Plan. The Property Value Protection Plan is a program offered by Duke Energy designed to guarantee eligible plant neighbors the fair market value of their residential property should they decide to sell their property during the time that the plan is offered. Settlement payments are being made, and, as of September 30, 2018, Duke Energy Carolinas and Duke Energy Progress have remaining reserves of $4 million and $2 million, respectively.
On August 23, 2017, a class-action suit was filed in Wake County Superior Court, North Carolina, against Duke Energy Carolinas and Duke Energy Progress on behalf of certain property owners living near coal ash impoundments at Allen, Asheville, Belews Creek, Buck, Cliffside, Lee, Marshall, Mayo and Roxboro. The class is defined as those who are “well-eligible” under the Coal Ash Act or those to whom Duke Energy has promised a permanent replacement water supply and seeks declaratory and injunctive relief, along with compensatory damages. Plaintiffs allege that Duke Energy’s improper maintenance of coal ash impoundments caused harm, particularly through groundwater contamination. Despite NCDEQ’s preliminary approval, Plaintiffs contend that Duke Energy’s proposed permanent water solutions plan fails to comply with the Coal Ash Act. On September 28, 2017, Duke Energy Carolinas and Duke Energy Progress filed a Motion to Dismiss and Motion to Strike the class designation. The parties entered into a Settlement Agreement on January 24, 2018, which resulted in the dismissal of the underlying class action on January 25, 2018.

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





On September 14, 2017, a complaint was filed against Duke Energy Progress in New Hanover County Superior Court by a group of homeowners residing approximately 1 mile from Duke Energy Progress' Sutton Steam Plant (Sutton). The homeowners allege that coal ash constituents have been migrating from ash impoundments at Sutton into their groundwater for decades and that in 2015, Duke Energy Progress discovered these releases of coal ash, but failed to notify any officials or neighbors and failed to take remedial action. The homeowners claim unspecified physical and mental injuries as a result of consuming their well water and seek actual damages for personal injury, medical monitoring and punitive damages. On March 6, 2018, Plaintiffs' counsel voluntarily dismissed the action without prejudice
It is not possible to estimate the maximum exposure of loss, if any, that may occur in connection with future claims that might be made by these residents.
Asbestos-related Injuries and Damages Claims
Duke Energy Carolinas has experienced numerous claims for indemnification and medical cost reimbursement related to asbestos exposure. These claims relate to damages for bodily injuries alleged to have arisen from exposure to or use of asbestos in connection with construction and maintenance activities conducted on its electric generation plants prior to 1985. As of September 30, 2018,2019, there were 160121 asserted claims for non-malignant cases with cumulative relief sought of up to $43$32 million, and 6340 asserted claims for malignant cases with cumulative relief sought of up to $19$13 million. Based on Duke Energy Carolinas’ experience, it is expected that the ultimate resolution of most of these claims likely will be less than the amount claimed.
Duke Energy Carolinas has recognized asbestos-related reserves of $461$592 million at September 30, 2018,2019, and $489$630 million at December 31, 2017.2018. These reserves are classified in Other within Other Noncurrent Liabilities and Other within Current Liabilities on the Condensed Consolidated Balance Sheets. These reserves are based upon the minimum amount of the range of lossDuke Energy Carolinas' best estimate for current and future asbestos claims through 2037,2038 and are recorded on an undiscounted basis and incorporate anticipated inflation.basis. 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 20372038 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. Duke Energy Carolinas’ cumulative payments began to exceed the self-insuranceself-insured 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 $764$747 million in excess of the self-insured retention. Receivables for insurance recoveries were $553$722 million at September 30, 2018,2019, and $585$739 million at December 31, 2017.2018. These amounts are classified in Other within Other Noncurrent Assets and Receivables within Current Assets 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 Progress and Duke Energy Florida
Spent Nuclear Fuel Matters
On October 16, 2014,June 18, 2018, Duke Energy Progress and Duke Energy Florida sued the U.S. in the U.S. Court of Federal Claims.Claims for damages incurred for the period 2014 through 2018. The lawsuit claimed the Department of Energy breached a contract in failing to accept spent nuclear fuel under the Nuclear Waste Policy Act of 1982 and asserted damages for the cost of on-site storage.storage in the amount of $100 million and $203 million for Duke Energy Progress and Duke Energy Florida, asserted damages for the period January 1, 2011, through December 31, 2013, of $48 millionrespectively. Discovery is ongoing and $25 million, respectively. On November 17, 2017, the court awarded Duke Energy Progress and Duke Energy Florida $48 million and $21 million, respectively, subjecta trial is expected to appeal. No appeals were filed and Duke Energy Progress and Duke Energy Florida recognized the recoveriesoccur in the first quarter of 2018. Claims for all periods through 2013 have been resolved. On June 22, 2018, Duke Energy Progress and Duke Energy Florida filed a complaint for damages incurred for 2014 through first quarter 2018.
Duke Energy Progress
Gypsum Supply Agreement Matter
On June 30, 2017, CertainTeed Gypsum NC, Inc. (CertainTeed) filed a declaratory judgment action against Duke Energy Progress in the North Carolina Business Court relating to a gypsum supply agreement. In its complaint, CertainTeed sought an order from the court declaring that the minimum amount of gypsum Duke Energy Progress must provide to CertainTeed under the supply agreement is 50,000 tons per month through 2029. Subsequently, CertainTeed also sought a preliminary injunction requiring Duke Energy Progress to provide 50,000 tons of gypsum per month through the trial date. The parties reached an agreement under which Duke Energy Progress delivered 50,000 tons of gypsum per month through August 2018. Trial in this matter was completed on July 16, 2018. On August 29, 2018, the court issued an order and opinion finding that Duke Energy Progress is required to supply 50,000 tons of gypsum/month, but that CertainTeed’s sole remedy for Duke Energy Progress’ long-term discontinuance under the agreement is liquidated damages. This ruling effectively limits CertainTeed’s remedies in the event that Duke Energy Progress elects to permanently discontinue gypsum supply at the Roxboro plant. The estimated maximum amount that would be owed under the liquidated damages provision is approximately $90 million. Both CertainTeed and Duke Energy Progress have filed cross-appeals, as they explore a possible resolution. Duke Energy Progress cannot predict the outcome of this matter.

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





2020.
Duke Energy Florida
Class Action LawsuitFluor Contract Litigation
On February 22, 2016,January 29, 2019, Fluor filed a breach of contract lawsuit was filed in the U.S. District Court for the SouthernMiddle District of Florida against Duke Energy Florida related to an EPC agreement for the combined-cycle natural gas plant in Citrus County, Florida. Fluor filed an amended complaint on behalfFebruary 13, 2019. Fluor’s multicount complaint sought civil, statutory and contractual remedies related to Duke Energy Florida’s $67 million draw in early 2019, on Fluor’s letter of credit and offset of invoiced amounts. Duke Energy Florida moved to dismiss all counts of Fluor's amended complaint, and on April 16, 2019, the court dismissed Fluor's complaint without prejudice. On April 26, 2019, Fluor filed a putative class ofsecond amended complaint.
On August 1, 2019, Duke Energy Florida and FP&L’s customers in Florida. The suit allegesFluor reached a settlement to resolve the statepending litigation and other outstanding issues related to completing the Citrus County CC. Pursuant to the terms of Florida’s nuclear power plant cost recovery statutes (NCRS) are unconstitutionalthe settlement, Fluor filed a notice of voluntary dismissal, and pre-empted by federal law. Plaintiffs claim they are entitled to repayment of all money paid by customers of Duke Energy Florida and FP&L ason August 27, 2019, the court dismissed the case with prejudice. As a result of the NCRS, as well as an injunction against any future charges under those statutes. The constitutionality of the NCRS has been challenged unsuccessfully in a number of prior cases on alternative grounds.settlement with Fluor, Duke Energy Florida and FP&L filed motionsrecorded a $25 million reduction to dismiss the complainta prior-year impairment within Impairment charges on May 5, 2016. On September 21, 2016, the court granted the motions to dismiss with prejudice. Plaintiffs filed a motion for reconsideration, which was denied. On January 4, 2017, plaintiffs filed a noticeDuke Energy's Condensed Consolidated Statements of appeal to the Eleventh Circuit U.S. Court of Appeals (Eleventh Circuit). On July 11, 2018, the Eleventh Circuit affirmed the U.S. District Court's dismissal of the lawsuit. The deadline to file a petition for cert was October 9, 2018, and no petition was filed; therefore, the dismissal of the lawsuit is final.
Westinghouse Contract Litigation
On March 28, 2014, Duke Energy Florida filed a lawsuit against WestinghouseOperations in the U.S. District Court for the Western Districtthird quarter of North Carolina. The lawsuit sought recovery of $54 million in milestone payments in excess of work performed under an 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 an EPC contract. Duke Energy Florida recognized an exit obligation as a result of the termination of the EPC. On March 31, 2014, Westinghouse filed a separate lawsuit against Duke Energy Florida in U.S. District Court for the Western District of Pennsylvania alleging damages under the same EPC contract 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 would proceed in the Western District of North Carolina.2019.
On July 11, 2016, Duke Energy Florida and Westinghouse filed separate Motions for Summary Judgment. On September 29, 2016, the court issued its ruling, granting Westinghouse a $30 million termination fee claim and dismissing Duke Energy Florida's $54 million refund claim. Westinghouse's claim for termination costs continued to trial. Following a trial on the matter, the court issued an order in December 2016 denying Westinghouse’s claim for termination costs and reaffirming its earlier ruling in favor of Westinghouse on the $30 million termination fee. Judgment was entered against Duke Energy Florida in the amount of approximately $34 million, which includes prejudgment interest. Westinghouse appealed the trial court's order to the Fourth Circuit and Duke Energy Florida cross-appealed.
On March 29, 2017, Westinghouse filed Chapter 11 bankruptcy in the Southern District of New York, which automatically stayed the appeal. On May 23, 2017, the bankruptcy court entered an order lifting the stay with respect to the appeal. Briefing of the appeal concluded on October 20, 2017. Westinghouse and Duke Energy Florida executed a settlement agreement resolving this matter on April 5, 2018. The bankruptcy court approved the settlement and Duke Energy Florida paid approximately $34 million to Westinghouse in July 2018 pursuant to this agreement. At the request of the parties, the Fourth Circuit has dismissed the appeal.
MGP Cost Recovery Action
On December 30, 2011, Duke Energy Florida filed a lawsuit against FirstEnergy Corp. (FirstEnergy) to recover investigation and remediation costs incurred by Duke Energy Florida in connection with the restoration of two former MGP sites in Florida. Duke Energy Florida alleged that FirstEnergy, as the successor to Associated Gas & Electric Co., owes past and future contribution and response costs of up to $43 million for the investigation and remediation of MGP sites. On December 6, 2016, the trial court entered judgment against Duke Energy Florida in the case. In January 2017, Duke Energy Florida appealed the decision to the U.S. Court of Appeals for the Sixth Circuit, which affirmed the trial court's ruling on April 10, 2018. The dismissal of the lawsuit is therefore final.
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.



FINANCIAL STATEMENTSCOMMITMENTS AND CONTINGENCIES


The table below presents recorded reserves based on management’s best estimate of probable loss for legal matters, excluding asbestos-related reserves and the exit obligation related to the termination of an EPC contract discussed above. Reserves are classified on the Condensed Consolidated Balance Sheets in Other within Other Noncurrent Liabilities and Accounts payable and Other within Current Liabilities. The reasonably possible range of loss in excess of recorded reserves is not material, other than as described above.
(in millions)September 30, 2019
 December 31, 2018
Reserves for Legal Matters   
Duke Energy$62
 $65
Duke Energy Carolinas8
 9
Progress Energy52
 54
Duke Energy Progress13
 12
Duke Energy Florida22
 24
Piedmont1
 1
(in millions)September 30, 2018
 December 31, 2017
Reserves for Legal Matters   
Duke Energy$63
 $88
Duke Energy Carolinas11
 30
Progress Energy50
 55
Duke Energy Progress11
 13
Duke Energy Florida23
 24
Piedmont1
 2

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)






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, noncancelable commitments to purchase or sell power or natural gas, 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)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.
5. LEASES
As described in Note 1, Duke Energy adopted the revised accounting guidance for Leaseseffective January 1, 2019, using the modified retrospective method of adoption, which does not require restatement of prior year reported results. Adoption of the new standard resulted in the recording of ROU assets and operating lease liabilities as follows:
 As of January 1, 2019
   Duke
   Duke
 Duke
 Duke
 Duke
  
 Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
ROU assets$1,750
 $153
 $863
 $407
 $456
 $23
 $61
 $26
Operating lease liabilities – current205
 28
 96
 35
 61
 1
 4
 4
Operating lease liabilities – noncurrent1,504
 127
 766
 371
 395
 22
 58
 25

As part of its operations, Duke Energy leases certain aircraft, space on communication towers, industrial equipment, fleet vehicles, fuel transportation (barges and railcars), land and office space under various terms and expiration dates. Additionally, Duke Energy Carolinas, Duke Energy Progress and Duke Energy Indiana have finance leases related to firm natural gas pipeline transportation capacity. Duke Energy Progress and Duke Energy Florida have entered into certain PPAs, which are classified as finance and operating leases.
Duke Energy has certain lease agreements, which include variable lease payments that are based on the usage of an asset. These variable lease payments are not included in the measurement of the ROU assets or operating lease liabilities on the Condensed Consolidated Financial Statements.
Certain Duke Energy lease agreements include options for renewal and early termination. The intent to renew a lease varies depending on the lease type and asset. Renewal options that are reasonably certain to be exercised are included in the lease measurements. The decision to terminate a lease early is dependent on various economic factors. No termination options have been included in any of the lease measurements.
Duke Energy operates various renewable energy projects and sells the generated output to utilities, electric cooperatives, municipalities and commercial and industrial customers through long-term PPAs. In certain situations, these PPAs and the associated renewable energy projects qualify as operating leases. Rental income from these leases is accounted for as Nonregulated electric and other revenues in the Condensed Consolidated Statements of Operations. There are no minimum lease payments as all payments are contingent based on actual electricity generated by the renewable energy projects. Contingent lease payments were $69 million and $205 million for the three and nine months ended September 30, 2019, respectively. As of September 30, 2019, renewable energy projects owned by Duke Energy and accounted for as operating leases had a cost basis of $3,347 million and accumulated depreciation of $692 million. These assets are principally classified as nonregulated electric generation and transmission assets.



FINANCIAL STATEMENTSLEASES


The following tables present the components of lease expense.
 Three Months Ended September 30, 2019
   Duke
   Duke
 Duke
 Duke
 Duke
  
 Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Operating lease expense(a)
$75
 $13
 $39
 $16
 $23
 $3
 $5
 $1
Short-term lease expense(a)
2
 
 
 
 
 
 1
 
Variable lease expense(a)
27
 6
 22
 21
 1
 
 
 
Finance lease expense               
Amortization of leased assets(b)
28
 2
 9
 1
 8
 
 
 
Interest on lease liabilities(c)
7
 3
 12
 10
 2
 
 
 
Total finance lease expense35
 5
 21
 11
 10
 
 
 
Total lease expense$139
 $24
 $82
 $48
 $34
 $3
 $6
 $1
 Nine Months Ended September 30, 2019
   Duke
   Duke
 Duke
 Duke
 Duke
  
 Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Operating lease expense(a)
$220
 $36
 $121
 $52
 $69
 $9
 $15
 $4
Short-term lease expense(a)
15
 4
 7
 3
 4
 1
 2
 
Variable lease expense(a)
48
 18
 29
 24
 5
 
 
 
Finance lease expense               
Amortization of leased assets(b)
84
 4
 17
 3
 14
 1
 
 
Interest on lease liabilities(c)
44
 10
 31
 24
 7
 
 1
 
Total finance lease expense128
 14
 48
 27
 21
 1
 1
 
Total lease expense$411
 $72
 $205
 $106
 $99
 $11
 $18
 $4
(a)Included in Operations, maintenance and other or, for barges and railcars, Fuel used in electric generation and purchased power on the Condensed Consolidated Statements of Operations.
(b)Included in Depreciation and amortization on the Condensed Consolidated Statements of Operations.
(c)Included in Interest Expense on the Condensed Consolidated Statements of Operations.
The following table presents rental expense for operating leases, as reported under the old lease standard. These amounts are included in Operation, maintenance and other and Fuel used in electric generation and purchased power on the Condensed Consolidated Statements of Operations.
(in millions)Year Ended December 31, 2018
Duke Energy$268
Duke Energy Carolinas49
Progress Energy143
Duke Energy Progress75
Duke Energy Florida68
Duke Energy Ohio13
Duke Energy Indiana21
Piedmont11




FINANCIAL STATEMENTSLEASES


The following table presents operating lease maturities and a reconciliation of the undiscounted cash flows to operating lease liabilities.
 Twelve Months Ended September 30,
   Duke
   Duke
 Duke
 Duke
 Duke
  
 Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
2020$278
 $32
 $129
 $51
 $78
 $2
 $6
 $5
2021220
 20
 100
 45
 55
 2
 4
 5
2022201
 19
 95
 40
 55
 2
 4
 5
2023192
 18
 95
 41
 54
 2
 4
 5
2024179
 14
 95
 41
 54
 2
 4
 5
Thereafter1,008
 60
 480
 291
 189
 22
 63
 6
Total operating lease payments2,078
 163
 994
 509
 485
 32
 85
 31
Less: present value discount(410) (28) (185) (113) (72) (10) (27) (3)
Total operating lease liabilities(a)
$1,668
 $135
 $809
 $396
 $413
 $22
 $58
 $28
(a)Certain operating lease payments include renewal options that are reasonably certain to be exercised.
The following table presents future minimum lease payments under operating leases, which at inception had a noncancelable term of more than one year, as reported under the old lease standard.
 December 31, 2018
   Duke
   Duke
 Duke
 Duke
 Duke
  
 Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
2019$239
 $33
 $97
 $49
 $48
 $2
 $6
 $5
2020219
 29
 90
 46
 44
 2
 5
 5
2021186
 19
 79
 37
 42
 2
 4
 5
2022170
 19
 76
 34
 42
 2
 4
 5
2023160
 17
 77
 35
 42
 2
 5
 6
Thereafter1,017
 68
 455
 314
 141
 23
 66
 11
Total$1,991
 $185
 $874
 $515
 $359
 $33
 $90
 $37

The following table presents finance lease maturities and a reconciliation of the undiscounted cash flows to finance lease liabilities.
 Twelve Months Ended September 30,
   Duke
   Duke
 Duke
 Duke
 Duke
 Energy
 Progress
 Energy
 Energy
 Energy
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Indiana
2020$179
 $19
 $69
 $44
 $25
 $1
2021184
 16
 69
 44
 25
 1
2022177
 14
 69
 44
 25
 1
2023173
 14
 69
 44
 25
 1
2024149
 14
 57
 44
 13
 1
Thereafter827
 189
 552
 539
 13
 27
Total finance lease payments1,689
 266
 885
 759
 126
 32
Less: amounts representing interest(699) (160) (477) (451) (26) (22)
Total finance lease liabilities$990
 $106
 $408
 $308
 $100
 $10




FINANCIAL STATEMENTSLEASES


The following table presents future minimum lease payments under finance leases, as reported under the old lease standard.
 December 31, 2018
   Duke
   Duke
 Duke
 Duke
 Duke
 Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
2019$170
 $20
 $45
 $20
 $25
 $2
 $1
2020174
 20
 46
 21
 25
 
 1
2021177
 15
 45
 20
 25
 
 1
2022165
 15
 45
 21
 24
 
 1
2023165
 15
 45
 21
 24
 
 1
Thereafter577
 204
 230
 209
 21
 
 27
Minimum annual payments1,428
 289
 456
 312
 144
 2
 32
Less: amount representing interest(487) (180) (205) (175) (30) 
 (22)
Total$941
 $109
 $251
 $137
 $114
 $2
 $10

The following tables contain additional information related to leases.
  September 30, 2019
                 
    Duke
   Duke
 Duke
 Duke
 Duke
  
  Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions)ClassificationEnergy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Assets                
OperatingOperating lease ROU assets, net$1,703
 $135
 $814
 $397
 $417
 $22
 $58
 $25
FinanceNet property, plant and equipment952
 125
 448
 309
 139
 
 10
 
Total lease assets $2,655
 $260
 $1,262
 $706
 $556
 $22
 $68
 $25
Liabilities                
Current                
OperatingOther current liabilities$212
 $27
 $99
 $36
 $63
 $1
 $3
 $4
FinanceCurrent maturities of long-term debt117
 6
 23
 6
 17
 
 
 
Noncurrent                
OperatingOperating lease liabilities1,456
 108
 710
 360
 350
 21
 55
 24
FinanceLong-Term Debt873
 100
 385
 302
 83
 
 10
 
Total lease liabilities $2,658
 $241
 $1,217
 $704
 $513
 $22
 $68
 $28




FINANCIAL STATEMENTSLEASES


 Nine Months Ended September 30, 2019
                
   Duke
   Duke
 Duke
 Duke
 Duke
  
 Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Cash paid for amounts included in the measurement of lease liabilities(a)
               
Operating cash flows from operating leases$221
 $26
 $104
 $43
 $61
 $1
 $5
 $6
Operating cash flows from finance leases44
 10
 31
 24
 7
 
 1
 
Financing cash flows from finance leases84
 4
 17
 3
 14
 1
 
 
                
Lease assets obtained in exchange for new lease liabilities (non-cash)               
Operating(b)
$147
 $44
 $30
 $30
 $
 $
 $
 $1
Finance175
 
 175
 175
 
 
 
 
(a)No amounts were classified as investing cash flows from operating leases for the nine months ended September 30, 2019.
(b)Does not include ROU assets recorded as a result of the adoption of the new lease standard.
 September 30, 2019
                
   Duke
   Duke
 Duke
 Duke
 Duke
  
 Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
 Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Weighted-average remaining lease term (years)               
Operating leases11
 9
 10
 12
 8
 18
 18
 6
Finance leases13
 18
 16
 18
 11
 
 27
 
Weighted-average discount rate(a)
               
Operating leases3.9% 3.5% 3.8% 3.9% 3.8% 4.3% 4.1% 3.6%
Finance leases8.0% 12.9% 11.8% 12.4% 8.3% % 11.9% %
(a)The discount rate is calculated using the rate implicit in a lease if it is readily determinable. Generally, the rate used by the lessor is not provided to Duke Energy and in these cases the incremental borrowing rate is used. Duke Energy will typically use its fully collateralized incremental borrowing rate as of the commencement date to calculate and record the lease. The incremental borrowing rate is influenced by the lessee’s credit rating and lease term and as such may differ for individual leases, embedded leases or portfolios of leased assets.



FINANCIAL STATEMENTSDEBT AND CREDIT FACILITIES


6. DEBT AND CREDIT FACILITIES
SUMMARY OF SIGNIFICANT DEBT ISSUANCES
The following table summarizes significant debt issuances (in millions).
    Nine Months Ended September 30, 2018
      Duke
 Duke
 Duke
 Duke
 MaturityInterest
 Duke
 Energy
 Energy
 Energy
 Energy
Issuance DateDateRate
 Energy
 (Parent)
 Carolinas
 Progress
 Florida
Unsecured Debt            
March 2018(a)
April 20253.950% $250
 $250
 $
 $
 $
May 2018(b)
May 20212.819% 500
 500
 
 
 
September 2018(c)
September 20785.625% 500
 500
 
 
 
First Mortgage Bonds            
March 2018(d)
March 20233.050% 500
 
 500
 
 
March 2018(d)
March 20483.950% 500
 
 500
 
 
June 2018(e)
July 20283.800%
600


 
 
 600
June 2018(e)
July 20484.200%
400


 
 
 400
August 2018(f)
September 20233.375% 300
 
 
 300
 
August 2018(f)
September 20283.700% 500
 
 
 500
 
Total issuances   $4,050
 $1,250

$1,000

$800
 $1,000
    Nine Months Ended September 30, 2019
      Duke
 Duke
 Duke
 Duke
 Duke
  
 MaturityInterest
 Duke
 Energy
 Energy
 Energy
 Energy
 Energy
  
Issuance DateDateRate
 Energy
 (Parent)
 Carolinas
 Progress
 Ohio
 Indiana
 Piedmont
Unsecured Debt                
March 2019(a)
March 20222.788%
(b) 
$300
 $300
 $
 $
 $
 $
 $
March 2019(a)
March 20223.227% 300
 300
 
 
 
 
 
May 2019(e)
June 20293.500% 600
 
 
 
 
 
 600
June 2019(a)
June 20293.400% 600
 600
 
 
 
 
 
June 2019(a)
June 20494.200% 600
 600
 
 
 
 
 
July 2019(g)
July 20494.320% 40
 
 
 
 40
 
 
September 2019(g)
October 20253.230% 95
 
 
 
 95
 
 
September 2019(g)
October 20293.560% 75
 
 
 
 75
 
 
First Mortgage Bonds                
January 2019(c)
February 20293.650% 400
 
 
 
 400
 
 
January 2019(c)
February 20494.300% 400
 
 
 
 400
 
 
March 2019(d)
March 20293.450%
600


 
 600
 
 
 
August 2019(a)
August 20292.450% 450
 
 450
 
 
 
 
August 2019(a)
August 20493.200% 350
 
 350
 
 
 
 
September 2019(f)
October 20493.250% 500
 
 
 
 
 500
 
Total issuances   $5,310
 $1,800

$800

$600
 $1,010

$500
 $600
(a)Debt issued to pay down short-term debt.debt and for general corporate purposes.
(b)Debt issued to pay down short-term debt. Debt issuance has a floating interest rate.
(c)Callable after September 2023 at par. Debt issued to repay at maturity $450 million first mortgage bonds due April 2019, pay down short-term debt and for general corporate purposes.
(d)Debt issued to fund eligible green energy projects in the Carolinas.
(e)
Debt issued to repay at maturity a $300in full the outstanding $350 million first mortgage bond Piedmont unsecured term loan due April 2018,September 2019, pay down intercompanyshort-term debt and for general corporate purposes.
(f)Debt issued to retire $150 million of pollution control bonds, pay down short-term debt and for general corporate purposes.
(e)(g)Debt issued to repay a portion of intercompany short-term debt under money-pool borrowing arrangement and for general corporate purposes.
(f)Debt issued to repayat maturity $100 million debentures due October 2019, pay down short-term debt and for general corporate purposes.


PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





FINANCIAL STATEMENTSDEBT AND CREDIT FACILITIES


CURRENT MATURITIES OF LONG-TERM DEBT
The following table shows the significant components of Current Maturities of Long-Term Debt on the Condensed Consolidated Balance Sheets. The Duke Energy Registrants currently anticipate satisfying these obligations with cash on hand and proceeds from additional borrowings.
(in millions)Maturity Date Interest Rate
 September 30, 2019
Unsecured Debt     
Duke Energy KentuckyOctober 2019 4.650% $100
Progress EnergyDecember 2019 4.875% 350
Duke Energy (Parent)June 2020 2.100% 330
First Mortgage Bonds     
Duke Energy FloridaJanuary 2020 1.850% 250
Duke Energy FloridaApril 2020 4.550% 250
Duke Energy CarolinasJune 2020 4.300% 450
Duke Energy IndianaJuly 2020 3.750% 500
Duke Energy ProgressSeptember 2020 2.282%
(a) 
300
Other(b)
    566
Current maturities of long-term debt    $3,096
(in millions)Maturity Date Interest Rate
 September 30, 2018
Unsecured Debt     
Progress EnergyMarch 2019 7.050% $450
Duke Energy (Parent)September 2019 5.050% 500
PiedmontSeptember 2019 2.848%
(b) 
350
First Mortgage Bonds     
Duke Energy CarolinasNovember 2018 7.000% 500
Duke Energy ProgressJanuary 2019 5.300% 600
Duke Energy OhioApril 2019 5.450% 450
Other(a)
    605
Current maturities of long-term debt    $3,455

(a)    Debt issuance has a floating interest rate.
(b)    Includes capitalfinance lease obligations, amortizing debt and small bullet maturities.
(b)    Debt issuance has a floating interest rate.
AVAILABLE CREDIT FACILITIES
Master Credit Facility
In January 2018,March 2019, Duke Energy extended the termination date of substantially all ofamended its existing $8 billion Master Credit Facility capacity from March 16, 2022,to extend the termination date to March 16, 2023. In May 2018, Duke Energy completed the extension process with 100 percent of all commitments to the Master Credit Facility extending to March 16, 2023.2024. 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. Duke Energy Carolinas and Duke Energy Progress are also required to each maintain $250 million of available capacity under the Master Credit Facility as security to meet obligations under plea agreements reached with the U.S. Department of Justice in 2015 related to violations at North Carolina facilities with ash basins. The table below includes the current borrowing sublimits and available capacity under the Master Credit Facility.
September 30, 2018September 30, 2019


 Duke
 Duke
 Duke
 Duke
 Duke
 Duke
  

 Duke
 Duke
 Duke
 Duke
 Duke
 Duke
  
Duke
 Energy
 Energy
 Energy
 Energy
 Energy
 Energy
  Duke
 Energy
 Energy
 Energy
 Energy
 Energy
 Energy
  
(in millions)Energy
 (Parent)
 Carolinas
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Energy
 (Parent)
 Carolinas
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Facility size(a)
$8,000
 $2,650
 $1,750
 $1,400
 $650
 $450
 $600
 $500
$8,000
 $2,650
 $1,750
 $1,250
 $800
 $450
 $600
 $500
Reduction to backstop issuances                              
Commercial paper(b)
(2,519) (988) (872) (150) 
 (216) (293) 
(1,971) (627) (338) (211) (277) (164) (150) (204)
Outstanding letters of credit(55) (47) (4) (2) 
 
 
 (2)(51) (43) (4) (2) 
 
 
 (2)
Tax-exempt bonds(81) 
 
 
 
 
 (81) 
(81) 
 
 
 
 
 (81) 
Coal ash set-aside(500) 
 (250) (250) 
 
 
 
(500) 
 (250) (250) 
 
 
 
Available capacity under the Master Credit Facility$4,845

$1,615

$624

$998

$650

$234

$226
 $498
$5,397

$1,980

$1,158

$787

$523

$286

$369
 $294
(a)Represents the sublimit of each borrower.
(b)Duke Energy issued $625 million of commercial paper and loaned the proceeds through the money pool to Duke Energy Carolinas, Duke Energy Progress, Duke Energy Ohio and Duke Energy Indiana. The balances are classified as Long-Term Debt Payable to Affiliated Companies on the Condensed Consolidated Balance Sheets.
Three-Year Revolving



FINANCIAL STATEMENTSDEBT AND CREDIT FACILITIES


Other Credit Facility
Facilities
Duke Energy (Parent) has a $1.0 billion revolving credit facility (the Three Year Revolver) through June 2020. As of September 30, 2018, $500 million has been drawn under the Three Year Revolver. This balance is classified as Long-Term Debt on Duke Energy's Condensed Consolidated Balance Sheets. Any undrawn commitments can be drawn and borrowings can be prepaid, at any time throughout the term of the facility. The terms and conditions of the Three Year Revolver are generally consistent with those governing Duke Energy's Master Credit Facility.

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





 September 30, 2019
(in millions)Facility size
 Amount drawn
Duke Energy (Parent) Three-Year Revolving Credit Facility(a)
$1,000
 $500
Duke Energy Progress Term Loan Facility700
 700
(a)In May 2019, Duke Energy (Parent) extended the termination date to May 2022.
Piedmont Term Loan Facility
In September 2018,May 2019, the $350 million Piedmont executed an amendment to its existing senior unsecured term loan (thewas paid off in full with proceeds from the $600 million Piedmont Term Loan). The amendment increased commitments from $250 million to $350 million and extended the maturity date to September 2019. As of September 30, 2018, the entire $350 million has been drawn under the Piedmont Term Loan. The balance is classified as Current maturities of long-term debt on Piedmont's Condensed Consolidated Balance Sheets.offering.
6.7. ASSET RETIREMENT OBLIGATIONS
The Duke Energy Registrants record AROs when there is a legal obligation to incur retirement costs associated with the retirement of a long-lived asset and the obligation can be reasonably estimated. Actual closure costs incurred could be materially different from current estimates that form the basis of the recorded AROs.
The following table presents the AROs recorded on the Condensed Consolidated Balance Sheets.
September 30, 2018September 30, 2019
  Duke
   Duke
 Duke
 Duke
 Duke
    Duke
   Duke
 Duke
 Duke
 Duke
  
Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Decommissioning of Nuclear Power Facilities(a)
$5,367
 $2,031
 $3,181
 $2,650
 $531
 $
 $
 $
Closure of Ash Impoundments4,575
 1,623
 2,175
 2,154
 20
 52
 725
 
Decommissioning of nuclear power facilities(a)
$5,789
 $2,435
 $3,295
 $2,769
 $526
 $
 $
 $
Closure of ash impoundments6,486
 2,917
 2,722
 2,707
 15
 43
 804
 
Other314
 58
 79
 37
 42
 46
 19
 15
326
 46
 71
 38
 33
 42
 20
 20
Total ARO$10,256
 $3,712
 $5,435
 $4,841
 $593
 $98
 $744
 $15
$12,601
 $5,398
 $6,088
 $5,514
 $574
 $85
 $824
 $20
Less: current portion902
 292
 475
 470
 4
 7
 128
 
861
 214
 478
 476
 2
 3
 165
 
Total noncurrent ARO$9,354

$3,420

$4,960

$4,371

$589

$91

$616
 $15
$11,740

$5,184

$5,610

$5,038

$572

$82

$659
 $20
(a)    Duke Energy amount includes purchase accounting adjustments related to the merger with Progress Energy.
ARO Liability Rollforward
Actual closure costs incurred could be materially different from current estimates that form the basis of the recorded AROs. The following table presents the change in liability associated with AROs for the Duke Energy Registrants.
  Duke
   Duke
 Duke
 Duke
 Duke
    Duke
   Duke
 Duke
 Duke
 Duke
  
Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Balance at December 31, 2017(a)
$10,175
 $3,610
 $5,414
 $4,673
 $742
 $84
 $781
 $15
Balance at December 31, 2018(a)
$10,467
 $3,949
 $5,411
 $4,820
 $591
 $93
 $722
 $19
Accretion expense(b)
319
 133
 168
 145
 23
 3
 22
 
377
 173
 190
 171
 19
 3
 21
 1
Liabilities settled(c)
(431) (198) (186) (155) (31) (5) (42) 
(691) (276) (375) (341) (34) (9) (32) 
Liabilities incurred in the current year34
 8
 
 
 
 
 25
 
Revisions in estimates of cash flows(d)
159
 159
 39
 178
 (141) 16
 (42) 
2,448
 1,552
 862
 864
 (2) (2) 113
 
Balance at September 30, 2018$10,256
 $3,712
 $5,435
 $4,841
 $593
 $98
 $744
 $15
Balance at September 30, 2019$12,601
 $5,398
 $6,088
 $5,514
 $574
 $85
 $824
 $20
(a)Primarily relates to decommissioning nuclear power facilities, closure of ash impoundments, asbestos removal, closure of landfills at fossil generation facilities, retirement of natural gas mains and removal of renewable energy generation assets.
(b)For the nine months ended September 30, 2018,2019, substantially all accretion expense relates to Duke Energy's regulated operations and has been deferred in accordance with regulatory accounting treatment.
(c)Primarily relates to ash impoundment closures and nuclear decommissioning of Crystal River Unit 3.closures.
(d)Primarily relates to increases in groundwater monitoringclosure estimates for closure ofcertain ash impoundments partially offset by modifications toas a result of the timing of expectedNCDEQ's April 1 Order. See Note 4 for more information. The incremental amount recorded represents the discounted cash flows andfor estimated closure costs based upon the probability weightings of the potential closure methods as evaluated on a reduction for nuclear decommissioning at Crystal River Unit 3 compared to original estimates.site-by-site basis.
Asset retirement costs associated with the AROs for operating plants and retired plants are included in Net property, plant and equipment and Regulatory assets within Other Noncurrent Assets, respectively, on the Condensed Consolidated Balance Sheets.


PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





FINANCIAL STATEMENTSASSET RETIREMENT OBLIGATIONS
7.

Nuclear Decommissioning Trust Funds
Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida each maintain NDTFs that are intended to pay for the decommissioning costs of their respective nuclear power plants. The following table presents the fair value of NDTF assets legally restricted for purposes of settling AROs associated with nuclear decommissioning. Duke Energy Florida is actively decommissioning Crystal River Unit 3 and was granted an exemption from the NRC, which allows for use of the NDTF for all aspects of nuclear decommissioning. The entire balance of Duke Energy Florida's NDTF may be applied toward license termination, spent fuel and site restoration costs incurred to decommission Crystal River Unit 3 and is excluded from the table below. See Note 12 for additional information related to the fair value of the Duke Energy Registrants' NDTFs.
(in millions)September 30, 2019 December 31, 2018
Duke Energy$6,403
 $5,579
Duke Energy Carolinas3,614
 3,133
Duke Energy Progress2,789
 2,446

8. GOODWILL
Duke Energy
The following table presents the goodwill by reportable operating segment included on Duke Energy's Condensed Consolidated Balance Sheets at September 30, 2018,2019, and December 31, 2017.2018.
 Electric Utilities
 Gas Utilities
 Commercial
  
(in millions)and Infrastructure
 and Infrastructure
 Renewables
 Total
Goodwill balance$17,379
 $1,924
 $122
 $19,425
Accumulated impairment charges
 
 (122) (122)
Goodwill, adjusted for accumulated impairment charges$17,379
 $1,924
 $
 $19,303
 Electric Utilities
 Gas Utilities
 Commercial
  
(in millions)and Infrastructure
 and Infrastructure
 Renewables
 Total
Goodwill balance at December 31, 2017$17,379
 $1,924
 $122
 $19,425
Accumulated impairment charges
 
 (29) $(29)
Goodwill balance at December 31, 2017, adjusted for accumulated impairment charges$17,379
 $1,924
 $93
 $19,396



 

 

 

Goodwill balance at September 30, 2018$17,379
 $1,924
 $122
 $19,425
Accumulated impairment charges
 
 (122) (122)
Goodwill balance at September 30, 2018, adjusted for accumulated impairment charges$17,379
 $1,924
 $
 $19,303

Duke Energy Ohio
Duke Energy Ohio's Goodwill balance of $920 million, allocated $596 million to Electric Utilities and Infrastructure and $324 million to Gas Utilities and Infrastructure, is presented net of accumulated impairment charges of $216 million on the Condensed Consolidated Balance Sheets at September 30, 2018,2019, and December 31, 2017.2018.
Progress Energy
Progress Energy's Goodwill is included in the Electric Utilities and Infrastructure operating segment and there are no0 accumulated impairment charges.
Piedmont
Piedmont's Goodwill is included in the Gas Utilities and Infrastructure operating segment and there are no0 accumulated impairment charges.
Impairment Testing
Duke Energy, Progress Energy, Duke Energy Ohio and Piedmont are required to perform an annual goodwill impairment test as of the same date each year and, accordingly, perform their annual impairment testing of goodwill as of August 31. Duke Energy, Progress Energy, Duke Energy Ohio and Piedmont update their test between annual tests if events or circumstances occur that would more likely than not reduce the fair value of a reporting unit below its carrying value.
In the third quarter of 2018, based on the results of the annual quantitative goodwill impairment test, management determined that As the fair value of the Commercial Renewables reporting unit was below its respective carrying value, including goodwill. Determination of the Commercial Renewables reporting unit fair value was based on an income approach, which estimates the fair value based on discounted future cash flows. The fair value of the Commercial Renewables reporting unit is impacted by several factors, including forecasted tax credit utilization, the cost of capital, current and forecasted solar and wind volumes, and legislative developments. Certain assumptions used in determining the fair value of the reporting unit in the 2018 impairment test changed from those used in the 2017 annual impairment test including the cost of capital as a result of rising interest rates and the timing of tax credit utilization due to the Tax Act and IRS (Internal Revenue Service) clarification on bonus depreciation in August 2018. Based on the quantitative impairment test, the estimated fair value of the Commercial Renewables reporting unit was below its carrying value by an immaterial amount but still more than the goodwill balance assigned to the reporting unit. As such, the entire remaining goodwill balance of approximately $93 million was impaired during the third quarter of 2018.
The fair value of all other reporting units for Duke Energy, Progress Energy, Duke Energy Ohio and Piedmont exceeded their respective carrying values at the date of the annual impairment analysis. As such,analysis, no othergoodwill impairment charges were recorded in the third quarter of 2018.2019.


PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





FINANCIAL STATEMENTSRELATED PARTY TRANSACTIONS
8.

9. RELATED PARTY TRANSACTIONS
The Subsidiary Registrants engage in related party transactions in accordance with 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 on the Condensed Consolidated Statements of Operations and Comprehensive Income are presented in the following table.
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended September 30, Nine Months Ended September 30,
(in millions)2018
 2017
 2018
 2017
2019
 2018
 2019
 2018
Duke Energy Carolinas              
Corporate governance and shared service expenses(a)
$214
 $206
 $647
 $645
$197
 $214
 $606
 $647
Indemnification coverages(b)
6
 5
 17
 17
5
 6
 15
 17
JDA revenue(c)
13
 9
 66
 42
12
 13
 52
 66
JDA expense(c)
61
 39
 134
 91
32
 61
 145
 134
Intercompany natural gas purchases(d)
3
 3
 11
 5

 3
 7
 11
Progress Energy              
Corporate governance and shared service expenses(a)
$216
 $207
 $613
 $555
$194
 $216
 $553
 $613
Indemnification coverages(b)
8
 10
 25
 29
8
 8
 27
 25
JDA revenue(c)
61
 39
 134
 91
32
 61
 145
 134
JDA expense(c)
13
 9
 66
 42
12
 13
 52
 66
Intercompany natural gas purchases(d)
20
 19
 58
 57
19
 20
 57
 58
Duke Energy Progress              
Corporate governance and shared service expenses(a)
$138
 $112
 $382
 $321
$114
 $138
 $328
 $382
Indemnification coverages(b)
3
 4
 9
 11
3
 3
 11
 9
JDA revenue(c)
61
 39
 134
 91
32
 61
 145
 134
JDA expense(c)
13
 9
 66
 42
12
 13
 52
 66
Intercompany natural gas purchases(d)
20
 19
 58
 57
19
 20
 57
 58
Duke Energy Florida              
Corporate governance and shared service expenses(a)
$78
 $95
 $231
 $234
$80
 $78
 $225
 $231
Indemnification coverages(b)
5
 6
 16
 18
5
 5
 16
 16
Duke Energy Ohio              
Corporate governance and shared service expenses(a)
$85
 $90
 $264
 $275
$90
 $85
 $258
 $264
Indemnification coverages(b)
1
 1
 3
 3
1
 1
 3
 3
Duke Energy Indiana              
Corporate governance and shared service expenses(a)
$105
 $94
 $302
 $281
$109
 $105
 $299
 $302
Indemnification coverages(b)
2
 2
 6
 6
2
 2
 5
 6
Piedmont              
Corporate governance and shared service expenses(a)
$39
 $11
 $115
 $25
$33
 $39
 $102
 $115
Indemnification coverages(b)
1
 1
 2
 2
1
 1
 2
 2
Intercompany natural gas sales(d)
23
 22
 69
 62
19
 23
 64
 69
Natural gas storage and transportation costs(e)
6
 6
 17
 18
(a)The Subsidiary Registrants are charged their proportionate share of corporate governance and other shared services costs, primarily related to human resources, employee benefits, information technology, legal and accounting fees, as well as other third-party costs. These amounts are primarily 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 Joint Dispatch Agreement (JDA),JDA, which allows the collective dispatch of power plants between the service territories to reduce customer rates. Revenues from the sale of power and expenses from the purchase of power pursuant to the JDA are recorded in Operating Revenues and Fuel used in electric generation and purchased power, respectively, on the Condensed Consolidated Statements of Operations and Comprehensive Income.
(d)Piedmont provides long-term natural gas delivery service to certain Duke Energy Carolinas and Duke Energy Progress natural gas-fired generation facilities. Piedmont records the sales in Operating revenues, and Duke Energy Carolinas and Duke Energy Progress record the related purchases as a component of Fuel used in electric generation and purchased power on their respective Condensed Consolidated Statements of Operations and Comprehensive Income.
(e)Piedmont has related party transactions as a customer of its equity method investments in Pine Needle, Hardy Storage, and Cardinal natural gas storage and transportation facilities. These intercompany revenues and expenses are eliminatedincluded in consolidation.Cost of natural gas on Piedmont's Condensed Consolidated Statements of Operations and Comprehensive Income.



FINANCIAL STATEMENTSRELATED PARTY TRANSACTIONS


In addition to the amounts presented above, the Subsidiary Registrants have other affiliate transactions, including rental of office space, participation in a money pool arrangement, other operational transactions and their proportionate share of certain charged expenses. These transactions of the Subsidiary Registrants were not material forare incurred in the threeordinary course of business and nine months ended September 30, 2018, and 2017.are eliminated in consolidation.

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





As discussed in Note 1213, certain trade receivables have been sold by Duke Energy Ohio and Duke Energy Indiana to Cinergy Receivables Company LLC (CRC),CRC, an indirectaffiliate formed by a subsidiary of Duke Energy. The proceeds obtained from the sales of receivables are largely cash but alsodo include a subordinated note from CRC for a portion of the purchase price.
Equity Method Investments
Piedmont has related party transactions as a customer of its equity method investments in natural gas storage and transportation facilities. The following table presents expenses for the three and nine months ended September 30, 2018, and 2017, which are included in Cost of natural gas on Piedmont's Condensed Consolidated Statements of Operations and Comprehensive Income.
  Three Months Ended September 30, Nine Months Ended September 30,
(in millions)Type of expense20182017 20182017
CardinalTransportation Costs$2
$2
 $5
$6
Pine NeedleNatural Gas Storage Costs2
2
 6
6
Hardy StorageNatural Gas Storage Costs2
2
 7
7
Total $6
$6
 $18
$19
Piedmont had accounts payable to its equity method investments of $2 million at September 30, 2018, and December 31, 2017, related to these transactions. These amounts are included in Accounts payable on the Condensed Consolidated Balance Sheets.
Intercompany Income Taxes
Duke Energy and the Subsidiary Registrants file a consolidated federal income tax return and other state and jurisdictional returns. The Subsidiary Registrants have a tax sharing agreement with Duke Energy for the allocation of consolidated tax liabilities and benefits. Income taxes recorded represent amounts the Subsidiary Registrants would incur as separate C-Corporations. The following table includes the balance of intercompany income tax receivables and payables for the Subsidiary Registrants.
 Duke
 Duke
Duke
Duke
Duke
 
 Energy
Progress
Energy
Energy
Energy
Energy
 
(in millions)Carolinas
Energy
Progress
Florida
Ohio
Indiana
Piedmont
September 30, 2019       
Intercompany income tax receivable$
$178
$60
$10
$14
$3
$85
Intercompany income tax payable71






        
December 31, 2018       
Intercompany income tax receivable$52
$47
$29
$
$
$8
$���
Intercompany income tax payable


16
3

45
 Duke
 Duke
Duke
Duke
Duke
 
 Energy
Progress
Energy
Energy
Energy
Energy
 
(in millions)Carolinas
Energy
Progress
Florida
Ohio
Indiana
Piedmont
September 30, 2018       
Intercompany income tax receivable$32
$196
$80
$
$
$22
$11
Intercompany income tax payable


77
9


        
December 31, 2017       
Intercompany income tax receivable$
$168
$
$44
$22
$
$7
Intercompany income tax payable44

21


35


9.10. DERIVATIVES AND HEDGING
The Duke Energy Registrants use commodity and interest rate contracts to manage commodity price risk and interest rate risk. The primary use of commodity derivatives is to hedge the generation portfolio against changes in the prices of electricity and natural gas. Piedmont enters into natural gas supply contracts to provide diversification, reliability and natural gas cost benefits to its customers. Interest rate swapsderivatives 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 arrangements is offset against the collateralized derivatives on the Condensed Consolidated Balance Sheets. The cash impacts of settled derivatives are recorded as operating activities on the Condensed Consolidated Statements of Cash Flows.
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 or Treasury locks 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.

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





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 impacts earnings. Amounts for interest rate contracts are reclassified to earnings as interest expense over the term of the related debt. Gains and losses reclassified out of AOCI for the three and nine months ended September 30, 2018,2019, and 20172018, were not material. Duke Energy's interest rate derivatives designated as hedges include interest rate swaps used to hedge existing debt within the Commercial Renewables business.business and forward-starting interest rate swaps not accounted for under regulatory accounting.
Undesignated Contracts
Undesignated contracts primarily include contracts not designated as a hedge because they are accounted for under regulatory accounting or contracts that do not qualify for hedge accounting.
Duke Energy’s interest rate swaps for its regulated operations employ regulatory accounting. With regulatory accounting, the mark-to-market gains or losses on the swaps are deferred as regulatory liabilities or regulatory assets, respectively. Regulatory assets and liabilities are amortized consistent with the treatment of the related costs in the ratemaking process. The accrual of interest on the swaps is recorded as Interest Expense on the Duke Energy Registrant's Condensed Consolidated Statements of Operations and Comprehensive Income.



FINANCIAL STATEMENTSDERIVATIVES AND HEDGING


The following table shows notional amounts of outstanding derivatives related to interest rate risk.
September 30, 2018September 30, 2019
  Duke
   Duke
 Duke
 Duke
  Duke
   Duke
 Duke
 Duke
Duke
 Energy
 Progress
 Energy
 Energy
 Energy
Duke
 Energy
 Progress
 Energy
 Energy
 Energy
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
Cash flow hedges$411
 $
 $
 $
 $
 $
$1,031
 $
 $
 $
 $
 $
Undesignated contracts1,127
 400
 500
 250
 250
 27
1,577
 450
 1,100
 250
 850
 27
Total notional amount(a)
$1,538

$400

$500

$250

$250

$27
$2,608

$450

$1,100

$250

$850

$27
December 31, 2017December 31, 2018
  Duke
   Duke
 Duke
 Duke
  Duke
   Duke
 Duke
 Duke
Duke
 Energy
 Progress
 Energy
 Energy
 Energy
Duke
 Energy
 Progress
 Energy
 Energy
 Energy
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
Cash flow hedges(a)
$660
 $
 $
 $
 $
 $
$923
 $
 $
 $
 $
 $
Undesignated contracts927
 400
 500
 250
 250
 27
1,721
 300
 1,200
 650
 550
 27
Total notional amount(a)$1,587
 $400
 $500
 $250
 $250
 $27
$2,644
 $300
 $1,200
 $650
 $550
 $27

(a)Duke Energy includes amounts related to consolidated VIEs of $411 million in cash flow hedges and $200 million in undesignated contracts as of September 30, 2018, and $660$731 million in cash flow hedges as of September 30, 2019, and $422 million in cash flow hedges and $194 million in undesignated contracts as of December 31, 2017.2018.
COMMODITY PRICE RISK
The Duke Energy Registrants are exposed to the impact of changes in the prices of electricity purchased and sold in bulk power markets and coal and natural gas purchases, including Piedmont's natural gas supply contracts. Exposure to commodity price risk is influenced by a number of factors including the term of contracts, the liquidity of markets and delivery locations. For the Subsidiary Registrants, bulk power electricity and coal and natural gas purchases flow through fuel adjustment clauses, formula-based contracts or other cost-sharing mechanisms. Differences between the costs included in rates and the incurred costs, including undesignated derivative contracts, are largely deferred as regulatory assets or regulatory liabilities. Piedmont policies allow for the use of financial instruments to hedge commodity price risks. The strategy and objective of these hedging programs are to use the financial instruments to reduce natural gas costs volatility for customers.

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





Volumes
The tables below include volumes of outstanding commodity derivatives. Amounts disclosed represent the absolute value of notional volumes of commodity contracts excluding NPNS. The Duke Energy Registrants have netted contractual amounts where offsetting purchase and sale contracts exist with identical delivery locations and times of delivery. Where all commodity positions are perfectly offset, no quantities are shown.
September 30, 2018September 30, 2019
  Duke
   Duke
 Duke
 Duke
    Duke
   Duke
 Duke
 Duke
 Duke
  
Duke
 Energy
 Progress
 Energy
 Energy
 Energy
  Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
Energy
 Carolinas
 Energy
 Progress
 Florida
 Indiana
 Piedmont
Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Electricity (gigawatt-hours)170
 
 
 
 
 170
 
Electricity (GWh)25,658
 
 
 
 
 2,774
 22,884
 
Natural gas (millions of dekatherms)744
 119
 167
 158
 9
 1
 457
729
 130
 175
 175
 
 
 4
 420
December 31, 2017December 31, 2018
  Duke
   Duke
 Duke
 Duke
    Duke
   Duke
 Duke
 Duke
 Duke
  
Duke
 Energy
 Progress
 Energy
 Energy
 Energy
  Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
Energy
 Carolinas
 Energy
 Progress
 Florida
 Indiana
 Piedmont
Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Electricity (gigawatt-hours)34
 
 
 
 
 34
 
Electricity (GWh)15,286
 
 
 
 
 1,786
 13,500
 
Natural gas (millions of dekatherms)770
 105
 183
 133
 50
 2
 480
739
 121
 169
 166
 3
 
 1
 448

U.S. EQUITY SECURITIES RISK
In May 2019, Duke Energy Florida entered into a Decommissioning Services Agreement for the accelerated decommissioning of Crystal River Unit 3 with ADP CR3, LLC and ADP SF1, LLC. See Note 3 for additional information on the accelerated decommissioning. Duke Energy Florida executed U.S. equity option collars within the NDTF in May 2019 to preserve the U.S. equity portfolio value in the Duke Energy Florida NDTF in the event the accelerated decommissioning is approved. These option collars were executed as a purchase of a put option and the sale of a call option on certain U.S. equity index funds. The put and call options create a collar to guarantee a minimum and maximum investment value for the Duke Energy Florida NDTF U.S. equity portfolio. The put and call options were entered into at zero-cost, with the price to purchase the puts offset entirely by the funds received to sell the calls. As of September 30, 2019, the aggregate notional amount of both the put and call options was 305,000 units in U.S. equity security index funds. The options are not designated as hedging instruments. Substantially all of Duke Energy Florida’s NDTF qualifies for regulatory accounting. With regulatory accounting, the mark-to-market gains or losses on the options are deferred as regulatory liabilities or regulatory assets, respectively.




FINANCIAL STATEMENTSDERIVATIVES AND HEDGING
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)







LOCATION AND FAIR VALUE OF DERIVATIVE ASSETS AND LIABILITIES RECOGNIZED ON THE CONDENSED CONSOLIDATED BALANCE SHEETS
The following tables show the fair value and balance sheet location of derivative instruments. Although derivatives subject to master netting arrangements are netted on the Condensed Consolidated Balance Sheets, the fair values presented below are shown gross and cash collateral on the derivatives has not been netted against the fair values shown.
Derivative Assets September 30, 2018 September 30, 2019
   Duke
   Duke
 Duke
 Duke
 Duke
     Duke
   Duke
 Duke
 Duke
 Duke
  
 Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
   Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions) Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
 Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Commodity Contracts                                
Not Designated as Hedging Instruments                                
Current $46
 $2
 $3
 $2
 $1
 $8
 $29
 $4
 $23
 $
 $
 $
 $
 $5
 $16
 $2
Noncurrent 1
 
 
 
 
 
 
 
Total Derivative Assets – Commodity Contracts $47
 $2
 $3
 $2
 $1
 $8
 $29
 $4
 $23
 $
 $
 $
 $
 $5
 $16
 $2
Interest Rate Contracts                                
Designated as Hedging Instruments                                
Current $6
 $5
 $
 $
 $
 $
 $
 $
 $3
 $
 $
 $
 $
 $
 $
 $
Noncurrent 6
 
 
 
 
 
 
 
Total Derivative Assets – Interest Rate Contracts $3
 $
 $
 $
 $
 $
 $
 $
Equity Securities Contracts                
Not Designated as Hedging Instruments                                
Current 1
 
 
 
 
 
 
 
 5
 
 5
 
 5
 
 
 
Noncurrent 17
 
 
 
 
 
 
 
Total Derivative Assets – Interest Rate Contracts $30
 $5
 $
 $
 $
 $
 $
 $
Total Derivative Assets – Equity Securities Contracts $5
 $
 $5
 $
 $5
 $
 $
 $
Total Derivative Assets $77

$7

$3

$2

$1

$8

$29
 $4
 $31

$

$5

$

$5

$5

$16
 $2
Derivative Liabilities September 30, 2018 September 30, 2019
   Duke
   Duke
 Duke
 Duke
 Duke
     Duke
   Duke
 Duke
 Duke
 Duke
  
 Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
   Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions) Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
 Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Commodity Contracts                                
Not Designated as Hedging Instruments                                
Current $26
 $14
 $5
 $5
 $
 $
 $
 $7
 $66
 $33
 $24
 $24
 $
 $
 $
 $9
Noncurrent 177
 14
 17
 8
 
 
 
 146
 147
 12
 34
 18
 
 
 
 102
Total Derivative Liabilities – Commodity Contracts $203
 $28
 $22
 $13
 $
 $
 $
 $153
 $213
 $45
 $58
 $42
 $
 $
 $
 $111
Interest Rate Contracts                                
Designated as Hedging Instruments                                
Current $2
 $
 $
 $
 $
 $
 $
 $
 $2
 $
 $
 $
 $
 $
 $
 $
Noncurrent 56
 
 
 
 
 
 
 
Not Designated as Hedging Instruments                                
Current 7
 
 6
 3
 3
 1
 
 
 64
 22
 42
 1
 41
 1
 
 
Noncurrent 13
 
 9
 8
 2
 3
 
 
 8
 
 3
 
 3
 5
 
 
Total Derivative Liabilities – Interest Rate Contracts $22
 $
 $15
 $11
 $5
 $4
 $
 $
 $130
 $22
 $45
 $1
 $44
 $6
 $
 $
Equity Securities Contracts                
Not Designated as Hedging Instruments                
Current 10
 
 10
 
 10
 
 
 
Total Derivative Liabilities – Equity Securities Contracts $10
 $
 $10
 $
 $10
 $
 $
 $
Total Derivative Liabilities $225

$28

$37

$24

$5

$4

$
 $153
 $353

$67

$113

$43

$54

$6

$
 $111





FINANCIAL STATEMENTSDERIVATIVES AND HEDGING
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)







Derivative Assets December 31, 2017 December 31, 2018
   Duke
   Duke
 Duke
 Duke
 Duke
     Duke
   Duke
 Duke
 Duke
 Duke
  
 Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
   Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions) Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
 Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Commodity Contracts                                
Not Designated as Hedging Instruments                                
Current $34
 $2
 $2
 $1
 $1
 $1
 $27
 $2
 $35
 $2
 $2
 $2
 $
 $6
 $23
 $3
Noncurrent 1
 
 1
 1
 
 
 
 
 4
 1
 2
 2
 
 
 
 
Total Derivative Assets – Commodity Contracts $35
 $2
 $3
 $2
 $1
 $1
 $27
 $2
 $39
 $3
 $4
 $4
 $
 $6
 $23
 $3
Interest Rate Contracts                                
Designated as Hedging Instruments                                
Current $1
 $
 $
 $
 $
 $
 $
 $
 $1
 $
 $
 $
 $
 $
 $
 $
Noncurrent 15
 
 
 
 
 
 
 
 3
 
 
 
 
 
 
 
Not Designated as Hedging Instruments                
Current 2
 
 
 
 
 
 
 
Noncurrent 12
 
 
 
 
 
 
 
Total Derivative Assets – Interest Rate Contracts $16
 $
 $
 $
 $
 $
 $
 $
 $18
 $
 $
 $
 $
 $
 $
 $
Total Derivative Assets $51
 $2
 $3
 $2
 $1
 $1
 $27
 $2
 $57
 $3
 $4
 $4
 $
 $6
 $23
 $3
Derivative Liabilities December 31, 2017 December 31, 2018
   Duke
   Duke
 Duke
 Duke
 Duke
     Duke
   Duke
 Duke
 Duke
 Duke
  
 Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
   Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions) Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
 Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Commodity Contracts                                
Not Designated as Hedging Instruments                                
Current $36
 $6
 $18
 $8
 $10
 $
 $
 $11
 $33
 $14
 $10
 $5
 $6
 $
 $
 $8
Noncurrent 146
 4
 10
 4
 
 
 
 131
 158
 10
 15
 6
 
 
 
 133
Total Derivative Liabilities – Commodity Contracts $182
 $10
 $28
 $12
 $10
 $
 $
 $142
 $191
 $24
 $25
 $11
 $6
 $
 $
 $141
Interest Rate Contracts                                
Designated as Hedging Instruments                                
Current $29
 $25
 $
 $
 $
 $
 $
 $
 $12
 $
 $
 $
 $
 $
 $
 $
Noncurrent 6
 
 
 
 
 
 
 
 6
 
 
 
 
 
 
 
Not Designated as Hedging Instruments                                
Current 1
 
 1
 
 
 1
 
 
 23
 9
 13
 11
 2
 1
 
 
Noncurrent 12
 
 7
 6
 2
 4
 
 
 10
 
 6
 5
 1
 4
 
 
Total Derivative Liabilities – Interest Rate Contracts $48
 $25
 $8
 $6
 $2
 $5
 $
 $
 $51
 $9
 $19
 $16
 $3
 $5
 $
 $
Total Derivative Liabilities $230
 $35
 $36
 $18
 $12
 $5
 $
 $142
 $242
 $33
 $44
 $27
 $9
 $5
 $
 $141




FINANCIAL STATEMENTSDERIVATIVES AND HEDGING


OFFSETTING ASSETS AND LIABILITIES
The following tables present the line items on the Condensed Consolidated Balance Sheets where derivatives are reported. Substantially all of Duke Energy's outstanding derivative contracts are subject to enforceable master netting arrangements. The gross amounts offset in the tables below show the effect of these netting arrangements on financial position, and include collateral posted to offset the net position. The amounts shown are calculated by counterparty. Accounts receivable or accounts payable may also be available to offset exposures in the event of bankruptcy. These amounts are not included in the tables below.
Derivative Assets September 30, 2019
    Duke
   Duke
 Duke
 Duke
 Duke
  
  Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions) Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Current                
Gross amounts recognized $31
 $
 $5
 $
 $5
 $5
 $16
 $2
Gross amounts offset (5) 
 (5) 
 (5) 
 
 
Net amounts presented in Current Assets: Other $26
 $
 $
 $
 $
 $5
 $16
 $2
Derivative Liabilities September 30, 2019
    Duke
   Duke
 Duke
 Duke
 Duke
  
  Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions) Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Current                
Gross amounts recognized $142
 $55
 $76
 $25
 $51
 $1
 $
 $9
Gross amounts offset (10) 
 (10) 
 (10) 
 
 
Net amounts presented in Current Liabilities: Other $132
 $55
 $66
 $25
 $41
 $1
 $
 $9
Noncurrent                
Gross amounts recognized $211
 $12
 $37
 $18
 $3
 $5
 $
 $102
Gross amounts offset 
 
 
 
 
 
 
 
Net amounts presented in Other Noncurrent Liabilities: Other $211
 $12
 $37
 $18
 $3
 $5
 $
 $102
Derivative Assets December 31, 2018
    Duke
   Duke
 Duke
 Duke
 Duke
  
  Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions) Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Current                
Gross amounts recognized $38
 $2
 $2
 $2
 $
 $6
 $23
 $3
Gross amounts offset (3) (2) (2) (2) 
 
 
 
Net amounts presented in Current Assets: Other $35
 $
 $
 $
 $
 $6
 $23
 $3
Noncurrent                
Gross amounts recognized $19
 $1
 $2
 $2
 $
 $
 $
 $
Gross amounts offset (3) (1) (2) (2) 
 
 
 
Net amounts presented in Other Noncurrent Assets: Other $16
 $
 $
 $
 $
 $
 $
 $



PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





Derivative Assets September 30, 2018
    Duke
   Duke
 Duke
 Duke
 Duke
  
  Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions) Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Current                
Gross amounts recognized $53
 $7
 $3
 $2
 $1
 $8
 $29
 $4
Gross amounts offset (4) (2) (2) (2) 
 
 
 
Net amounts presented in Current Assets: Other $49
 $5
 $1
 $
 $1
 $8
 $29
 $4
Noncurrent                
Gross amounts recognized $24
 $
 $
 $
 $
 $
 $
 $
Gross amounts offset (1) 
 
 
 
 
 
 
Net amounts presented in Other Noncurrent Assets: Other $23
 $
 $
 $
 $
 $
 $
 $
Derivative Liabilities September 30, 2018
    Duke
   Duke
 Duke
 Duke
 Duke
  
  Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions) Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Current                
Gross amounts recognized $35
 $14
 $11
 $8
 $3
 $1
 $
 $7
Gross amounts offset (4) (2) (2) (2) 
 
 
 
Net amounts presented in Current Liabilities: Other $31
 $12
 $9
 $6
 $3
 $1
 $
 $7
Noncurrent                
Gross amounts recognized $190
 $14
 $26
 $16
 $2
 $3
 $
 $146
Gross amounts offset (1) 
 (1) (1) 
 
 
 
Net amounts presented in Other Noncurrent Liabilities: Other $189
 $14
 $25
 $15
 $2
 $3
 $
 $146
Derivative Assets December 31, 2017
    Duke
   Duke
 Duke
 Duke
 Duke
  
  Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions) Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Current                
Gross amounts recognized $35
 $2
 $2
 $1
 $1
 $1
 $27
 $2
Gross amounts offset 
 
 
 
 
 
 
 
Net amounts presented in Current Assets: Other $35
 $2
 $2
 $1
 $1
 $1
 $27
 $2
Noncurrent                
Gross amounts recognized $16
 $
 $1
 $1
 $
 $
 $
 $
Gross amounts offset 
 
 
 
 
 
 
 
Net amounts presented in Other Noncurrent Assets: Other $16
 $
 $1
 $1
 $
 $
 $
 $

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)






Derivative Liabilities December 31, 2017
    Duke
   Duke
 Duke
 Duke
 Duke
  
  Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions) Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Current                
Gross amounts recognized $66
 $31
 $19
 $8
 $10
 $1
 $
 $11
Gross amounts offset (3) (2) (2) (2) 
 
 
 
Net amounts presented in Current Liabilities: Other $63
 $29
 $17
 $6
 $10
 $1
 $
 $11
Noncurrent                
Gross amounts recognized $164
 $4
 $17
 $10
 $2
 $4
 $
 $131
Gross amounts offset (1) 
 (1) (1) 
 
 
 
Net amounts presented in Other Noncurrent Liabilities: Other $163
 $4
 $16
 $9
 $2
 $4
 $
 $131
FINANCIAL STATEMENTSDERIVATIVES AND HEDGING


Derivative Liabilities December 31, 2018
    Duke
   Duke
 Duke
 Duke
 Duke
  
  Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions) Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Current                
Gross amounts recognized $68
 $23
 $23
 $16
 $8
 $1
 $
 $8
Gross amounts offset (4) (2) (2) (2) 
 
 
 
Net amounts presented in Current Liabilities: Other $64
 $21
 $21
 $14
 $8
 $1
 $
 $8
Noncurrent                
Gross amounts recognized $174
 $10
 $21
 $11
 $1
 $4
 $
 $133
Gross amounts offset (3) (1) (2) (2) 
 
 
 
Net amounts presented in Other Noncurrent Liabilities: Other $171
 $9
 $19
 $9
 $1
 $4
 $
 $133

OBJECTIVE CREDIT CONTINGENT FEATURES
Certain derivative contracts contain objective credit contingent features. These features include the requirement to post cash collateral or letters of credit 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.
September 30, 2018September 30, 2019
  Duke
   Duke
 Duke
  Duke
   Duke
Duke
 Energy
 Progress
 Energy
 Energy
Duke
 Energy
 Progress
 Energy
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
Energy
 Carolinas
 Energy
 Progress
Aggregate fair value of derivatives in a net liability position$48
 $26
 $23
 $22
 $
$82
 $40
 $42
 $42
Fair value of collateral already posted
 
 
 
 

 
 
 
Additional cash collateral or letters of credit in the event credit-risk-related contingent features were triggered48
 26
 23
 22
 
82
 40
 42
 42
December 31, 2017December 31, 2018
  Duke
   Duke
 Duke
  Duke
   Duke
Duke
 Energy
 Progress
 Energy
 Energy
Duke
 Energy
 Progress
 Energy
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
Energy
 Carolinas
 Energy
 Progress
Aggregate fair value of derivatives in a net liability position$59
 $35
 $25
 $15
 $10
$44
 $19
 $25
 $25
Fair value of collateral already posted
 
 
 
 

 
 
 
Additional cash collateral or letters of credit in the event credit-risk-related contingent features were triggered59
 35
 25
 15
 10
44
 19
 25
 25

The Duke Energy Registrants have elected to offset cash collateral and fair values of derivatives. For amounts to be netted, the derivative and cash collateral must be executed with the same counterparty under the same master netting arrangement.
10.11.INVESTMENTS IN DEBT AND EQUITY SECURITIES
Duke Energy’s investments in debt and equity securities are primarily comprised of investments held in (i) the nuclear decommissioning trust funds (NDTF)NDTF at Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida, (ii) the grantor trusts at Duke Energy Progress, Duke Energy Florida and Duke Energy Indiana related to Other Post-Retirement Benefit Obligations (OPEB)OPEB plans and (iii) Bison. The Duke Energy Registrants classify investments in debt securities as available-for-sale (AFS)AFS and investments in equity securities as fair value through net income (FV-NI).FV-NI. 
For investments in debt securities classified as AFS, the unrealized gains and losses are included in other comprehensive income until realized, at which time, they are reported through net income. For investments in equity securities classified as FV-NI, both realized and unrealized gains and losses are reported through net income. Substantially all of Duke Energy’s investments in debt and equity securities qualify for regulatory accounting, and accordingly, all associated realized and unrealized gains and losses on these investments are deferred as a regulatory asset or liability.
Duke Energy classifies the majority of investments in debt and equity securities as long term, unless otherwise noted.

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





Investment Trusts
The investments within the NDTF investments and the Duke Energy Progress, Duke Energy Florida and Duke Energy Indiana grantor trusts (Investment 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 securities within the Investment Trusts are considered OTTIs and are recognized immediately and deferred to regulatory accounts where appropriate.



FINANCIAL STATEMENTSINVESTMENTS IN DEBT AND EQUITY SECURITIES


Other AFS Securities
Unrealized gains and losses on all other AFS securities are included in other comprehensive income until realized, unless it is determined the carrying value of an investment is other-than-temporarily impaired. 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. If an OTTI exists, the unrealized credit loss is included in earnings. There were no material credit losses as of September 30, 2018,2019, and December 31, 2017.2018.
Other Investments amounts are recorded in Other within Other Noncurrent Assets on the Condensed Consolidated Balance Sheets.
DUKE ENERGY
The following table presents the estimated fair value of investments in debt and equity securities; equity investments are classified as FV-NI and debt investments are classified as AFS.
 September 30, 2019 December 31, 2018
 Gross
 Gross
   Gross
 Gross
  
 Unrealized
 Unrealized
 Estimated
 Unrealized
 Unrealized
 Estimated
 Holding
 Holding
 Fair
 Holding
 Holding
 Fair
(in millions)Gains
 Losses
 Value
 Gains
 Losses
 Value
NDTF           
Cash and cash equivalents$
 $
 $114
 $
 $
 $88
Equity securities3,118
 63
 5,222
 2,402
 95
 4,475
Corporate debt securities40
 1
 633
 4
 13
 566
Municipal bonds14
 
 370
 1
 4
 353
U.S. government bonds39
 
 1,217
 14
 12
 1,076
Other debt securities4
 
 142
 
 2
 148
Total NDTF Investments$3,215
 $64
 $7,698
 $2,421
 $126
 $6,706
Other Investments           
Cash and cash equivalents$
 $
 $53
 $
 $
 $22
Equity securities48
 
 112
 36
 1
 99
Corporate debt securities2
 
 72
 
 2
 60
Municipal bonds5
 
 94
 
 1
 85
U.S. government bonds3
 
 40
 1
 
 45
Other debt securities1
 
 65
 
 1
 58
Total Other Investments$59
 $
 $436
 $37
 $5
 $369
Total Investments$3,274
 $64
 $8,134
 $2,458
 $131
 $7,075

 
September 30, 2018(a)
 December 31, 2017
 Gross
 Gross
   Gross
 Gross
  
 Unrealized
 Unrealized
 Estimated
 Unrealized
 Unrealized
 Estimated
 Holding
 Holding
 Fair
 Holding
 Holding
 Fair
(in millions)Gains
 Losses
 Value
 Gains
 Losses
 Value
NDTF           
Cash and cash equivalents$
 $
 $75
 $
 $
 $115
Equity securities3,117
 48
 5,272
 2,805
 27
 4,914
Corporate debt securities5
 10
 595
 17
 2
 570
Municipal bonds
 7
 346
 4
 3
 344
U.S. government bonds5
 25
 974
 11
 7
 1,027
Other debt securities
 3
 141
 
 1
 118
Total NDTF Investments$3,127
 $93
 $7,403
 $2,837
 $40
 $7,088
Other Investments           
Cash and cash equivalents$
 $
 $21
 $
 $
 $15
Equity securities51
 
 115
 59
 
 123
Corporate debt securities
 1
 64
 1
 
 57
Municipal bonds1
 1
 85
 2
 1
 83
U.S. government bonds
 1
 59
 
 
 41
Other debt securities
 1
 43
 
 1
 44
Total Other Investments$52
 $4
 $387
 $62
 $2
 $363
Total Investments$3,179
 $97
 $7,790
 $2,899
 $42
 $7,451
(a)
Where regulatory accounting is applied, realized and unrealized gains and losses are deferred as regulatory assets or liabilities, and there is no impact to net income or other comprehensive income until the gain or loss is amortized or collected.
The table below summarizes the maturity date for debt securities.
(in millions)September 30, 2018
Due in one year or less$100
Due after one through five years492
Due after five through 10 years561
Due after 10 years1,154
Total$2,307

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the three and nine months endedSeptember 30, 2018,2019, and from sales of AFS securities for the three and nine months ended September 30, 2017,2018, were as follows.
 Three Months Ended Nine Months Ended
(in millions)September 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018
FV-NI:       
 Realized gains$60
 $19
 $161
 $85
 Realized losses43
 16
 136
 60
AFS:       
 Realized gains53
 4
 110
 14
 Realized losses36
 7
 83
 32

 Three Months Ended Nine Months Ended
(in millions)September 30, 2018 September 30, 2018
FV-NI:   
 Realized gains$19
 $85
 Realized losses16
 60
AFS:   
 Realized gains4
 14
 Realized losses7
 32



 Three Months Ended Nine Months Ended
(in millions)September 30, 2017 September 30, 2017
Realized gains$37
 $170
Realized losses25
 124
FINANCIAL STATEMENTSINVESTMENTS IN DEBT AND EQUITY SECURITIES


DUKE ENERGY CAROLINAS
The following table presents the estimated fair value of investments in debt and equity securities; equity investments are classified as FV-NI and debt investments are classified as AFS.
 September 30, 2019 December 31, 2018
 Gross
 Gross
   Gross
 Gross
  
 Unrealized
 Unrealized
 Estimated
 Unrealized
 Unrealized
 Estimated
 Holding
 Holding
 Fair
 Holding
 Holding
 Fair
(in millions)Gains
 Losses
 Value
 Gains
 Losses
 Value
NDTF           
Cash and cash equivalents$
 $
 $36
 $
 $
 $29
Equity securities1,680
 15
 2,901
 1,309
 54
 2,484
Corporate debt securities24
 1
 409
 2
 9
 341
Municipal bonds4
 
 96
 
 1
 81
U.S. government bonds19
 
 517
 5
 8
 475
Other debt securities4
 
 137
 
 2
 143
Total NDTF Investments$1,731
 $16

$4,096
 $1,316
 $74
 $3,553

 
September 30, 2018(a)
 December 31, 2017
 Gross
 Gross
   Gross
 Gross
  
 Unrealized
 Unrealized
 Estimated
 Unrealized
 Unrealized
 Estimated
 Holding
 Holding
 Fair
 Holding
 Holding
 Fair
(in millions)Gains
 Losses
 Value
 Gains
 Losses
 Value
NDTF           
Cash and cash equivalents$
 $
 $18
 $
 $
 $32
Equity securities1,692
 29
 2,890
 1,531
 12
 2,692
Corporate debt securities2
 7
 372
 9
 2
 359
Municipal bonds
 2
 80
 
 1
 60
U.S. government bonds1
 14
 439
 3
 4
 503
Other debt securities
 3
 137
 
 1
 112
Total NDTF Investments$1,695
 $55

$3,936
 $1,543
 $20
 $3,758
(a)
Where regulatory accounting is applied, realized and unrealized gains and losses are deferred as regulatory assets or liabilities, and there is no impact to net income or other comprehensive income until the gain or loss is amortized or collected.
The table below summarizes the maturity date for debt securities.
(in millions)September 30, 2018
Due in one year or less$12
Due after one through five years161
Due after five through 10 years289
Due after 10 years566
Total$1,028

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the three and nine months ended September 30, 2018,2019, and from sales of AFS securities for the three and nine months ended September 30, 2017,2018, were as follows.
 Three Months Ended Nine Months Ended
(in millions)September 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018
FV-NI:       
 Realized gains$34
 $11
 $101
 $47
 Realized losses26
 8
 95
 30
AFS:       
 Realized gains21
 4
 46
 13
 Realized losses13
 6
 34
 24
 Three Months Ended Nine Months Ended
(in millions)September 30, 2018 September 30, 2018
FV-NI:   
 Realized gains$11
 $47
 Realized losses8
 30
AFS:   
 Realized gains4
 13
 Realized losses6
 24
 Three Months Ended Nine Months Ended
(in millions)September 30, 2017 September 30, 2017
Realized gains$20
 $110
Realized losses13
 76

PROGRESS ENERGY
The following table presents the estimated fair value of investments in debt and equity securities; equity investments are classified as FV-NI and debt investments are classified as AFS.
 September 30, 2019 December 31, 2018
 Gross
 Gross
   Gross
 Gross
  
 Unrealized
 Unrealized
 Estimated
 Unrealized
 Unrealized
 Estimated
 Holding
 Holding
 Fair
 Holding
 Holding
 Fair
(in millions)Gains
 Losses
 Value
 Gains
 Losses
 Value
NDTF           
Cash and cash equivalents$
 $
 $78
 $
 $
 $59
Equity securities1,438
 48
 2,321
 1,093
 41
 1,991
Corporate debt securities16
 
 224
 2
 4
 225
Municipal bonds10
 
 274
 1
 3
 272
U.S. government bonds20
 
 700
 9
 4
 601
Other debt securities
 
 5
 
 
 5
Total NDTF Investments$1,484
 $48
 $3,602
 $1,105
 $52
 $3,153
Other Investments           
Cash and cash equivalents$
 $
 $49
 $
 $
 $17
Municipal bonds4
 
 52
 
 
 47
Total Other Investments$4
 $
 $101
 $
 $
 $64
Total Investments$1,488
 $48
 $3,703
 $1,105
 $52
 $3,217




 
September 30, 2018(a)
 December 31, 2017
 Gross
 Gross
   Gross
 Gross
  
 Unrealized
 Unrealized
 Estimated
 Unrealized
 Unrealized
 Estimated
 Holding
 Holding
 Fair
 Holding
 Holding
 Fair
(in millions)Gains
 Losses
 Value
 Gains
 Losses
 Value
NDTF          ��
Cash and cash equivalents$
 $
 $57
 $
 $
 $83
Equity securities1,425
 19
 2,382
 1,274
 15
 2,222
Corporate debt securities3
 3
 223
 8
 
 211
Municipal bonds
 5
 266
 4
 2
 284
U.S. government bonds4
 11
 535
 8
 3
 524
Other debt securities
 
 4
 
 
 6
Total NDTF Investments$1,432
 $38
 $3,467
 $1,294
 $20
 $3,330
Other Investments           
Cash and cash equivalents$
 $
 $18
 $
 $
 $12
Municipal bonds1
 
 48
 2
 
 47
Total Other Investments$1
 $
 $66
 $2
 $
 $59
Total Investments$1,433
 $38
 $3,533
 $1,296
 $20
 $3,389
(a)FINANCIAL STATEMENTS
Where regulatory accounting is applied, realized and unrealized gains and losses are deferred as regulatory assets or liabilities, and there is no impact to net income or other comprehensive income until the gain or loss is amortized or collected.
INVESTMENTS IN DEBT AND EQUITY SECURITIES
The table below summarizes the maturity date for debt securities.

(in millions)September 30, 2018
Due in one year or less$83
Due after one through five years268
Due after five through 10 years217
Due after 10 years508
Total$1,076


PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the three and nine months endedSeptember 30, 2018,2019, and from sales of AFS securities for the three and nine months ended September 30, 2017,2018, were as follows.
 Three Months EndedNine Months Ended
(in millions)September 30, 2018 September 30, 2018
FV-NI:   
 Realized gains$8
 $38
 Realized losses8
 30
AFS:   
 Realized gains
 1
 Realized losses1
 8
Three Months Ended Nine Months EndedThree Months EndedNine Months Ended
(in millions)September 30, 2017 September 30, 2017September 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018
FV-NI:       
Realized gains$16
 $58
$26
 $8
 $60
 $38
Realized losses12
 47
17
 8
 41
 30
AFS:       
Realized gains31
 
 62
 1
Realized losses23
 1
 49
 8
DUKE ENERGY PROGRESS
The following table presents the estimated fair value of investments in debt and equity securities; equity investments are classified as FV-NI and debt investments are classified as AFS.
 September 30, 2019 December 31, 2018
 Gross
 Gross
   Gross
 Gross
  
 Unrealized
 Unrealized
 Estimated
 Unrealized
 Unrealized
 Estimated
 Holding
 Holding
 Fair
 Holding
 Holding
 Fair
(in millions)Gains
 Losses
 Value
 Gains
 Losses
 Value
NDTF           
Cash and cash equivalents$
 $
 $52
 $
 $
 $46
Equity securities1,107
 30
 1,907
 833
 30
 1,588
Corporate debt securities16
 
 224
 2
 3
 171
Municipal bonds10
 
 274
 1
 3
 271
U.S. government bonds19
 
 420
 6
 3
 415
Other debt securities
 
 5
 
 
 3
Total NDTF Investments$1,152
 $30
 $2,882
 $842
 $39
 $2,494
Other Investments           
Cash and cash equivalents$
 $
 $2
 $
 $
 $6
Total Other Investments$
 $
 $2
 $
 $
 $6
Total Investments$1,152
 $30
 $2,884
 $842
 $39
 $2,500

 
September 30, 2018(a)
 December 31, 2017
 Gross
 Gross
   Gross
 Gross
  
 Unrealized
 Unrealized
 Estimated
 Unrealized
 Unrealized
 Estimated
 Holding
 Holding
 Fair
 Holding
 Holding
 Fair
(in millions)Gains
 Losses
 Value
 Gains
 Losses
 Value
NDTF           
Cash and cash equivalents$
 $
 $42
 $
 $
 $50
Equity securities1,101
 14
 1,913
 980
 12
 1,795
Corporate debt securities2
 2
 162
 6
 
 149
Municipal bonds
 5
 265
 4
 2
 283
U.S. government bonds3
 8
 352
 5
 2
 310
Other debt securities
 
 2
 
 
 4
Total NDTF Investments$1,106
 $29
 $2,736
 $995
 $16
 $2,591
Other Investments           
Cash and cash equivalents$
 $
 $8
 $
 $
 $1
Total Other Investments$
 $
 $8
 $
 $
 $1
Total Investments$1,106
 $29
 $2,744
 $995
 $16
 $2,592
(a)
Where regulatory accounting is applied, realized and unrealized gains and losses are deferred as regulatory assets or liabilities, and there is no impact to net income or other comprehensive income until the gain or loss is amortized or collected.
The table below summarizes the maturity date for debt securities.
(in millions)September 30, 2018
Due in one year or less$40
Due after one through five years200
Due after five through 10 years156
Due after 10 years385
Total$781

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the three and nine months endedSeptember 30, 2018,2019, and from sales of AFS securities for the three and nine months ended September 30, 2017,2018, were as follows.
 Three Months EndedNine Months Ended
(in millions)September 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018
FV-NI:       
Realized gains$10
 $7
 $27
 $32
Realized losses9
 7
 24
 27
AFS:       
 Realized gains2
 
 4
 1
 Realized losses
 1
 2
 6

 Three Months EndedNine Months Ended
(in millions)September 30, 2018 September 30, 2018
FV-NI:   
Realized gains$7
 $32
Realized losses7
 27
AFS:   
 Realized gains
 1
 Realized losses1
 6



 Three Months Ended Nine Months Ended
(in millions)September 30, 2017 September 30, 2017
Realized gains$14
 $49
Realized losses11
 41
FINANCIAL STATEMENTSINVESTMENTS IN DEBT AND EQUITY SECURITIES


DUKE ENERGY FLORIDA
The following table presents the estimated fair value of investments in debt and equity securities; equity investments are classified as FV-NI and debt investments are classified as AFS.
September 30, 2018(a)
 December 31, 2017September 30, 2019 December 31, 2018
Gross
 Gross
   Gross
 Gross
  Gross
 Gross
   Gross
 Gross
  
Unrealized
 Unrealized
 Estimated
 Unrealized
 Unrealized
 Estimated
Unrealized
 Unrealized
 Estimated
 Unrealized
 Unrealized
 Estimated
Holding
 Holding
 Fair
 Holding
 Holding
 Fair
Holding
 Holding
 Fair
 Holding
 Holding
 Fair
(in millions)Gains
 Losses
 Value
 Gains
 Losses
 Value
Gains
 Losses
 Value
 Gains
 Losses
 Value
NDTF                      
Cash and cash equivalents$
 $
 $15
 $
 $
 $33
$
 $
 $26
 $
 $
 $13
Equity securities324
 5
 469
 294
 3
 427
331
 18
 414
 260
 11
 403
Corporate debt securities1
 1
 61
 2
 
 62

 
 
 
 1
 54
Municipal bonds
 
 1
 
 
 1

 
 
 
 
 1
U.S. government bonds1
 3
 183
 3
 1
 214
1
 
 280
 3
 1
 186
Other debt securities
 
 2
 
 
 2

 
 
 
 
 2
Total NDTF Investments(b)(a)
$326
 $9
 $731
 $299
 $4
 $739
$332
 $18
 $720
 $263
 $13
 $659
Other Investments                      
Cash and cash equivalents$
 $
 $
 $
 $
 $1
$
 $
 $4
 $
 $
 $1
Municipal bonds1
 
 48
 2
 
 47
4
 
 52
 
 
 47
Total Other Investments$1
 $
 $48
 $2
 $
 $48
$4
 $
 $56
 $
 $
 $48
Total Investments$327
 $9
 $779
 $301
 $4
 $787
$336
 $18
 $776
 $263
 $13
 $707
(a)
Where regulatory accounting is applied, realized and unrealized gains and losses are deferred as regulatory assets or liabilities, and there is no impact to net income or other comprehensive income until the gain or loss is amortized or collected.
(b)During the nine months ended September 30, 2018,2019, Duke Energy Florida continued to receive reimbursements from the NDTF for costs related to ongoing decommissioning activity of the Crystal River Unit 3 nuclear plant.3.
The table below summarizes the maturity date for debt securities.
(in millions)September 30, 2018
Due in one year or less$43
Due after one through five years68
Due after five through 10 years61
Due after 10 years123
Total$295

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the three and nine months endedSeptember 30, 2018,2019, and from sales of AFS securities for the three and nine months ended September 30, 2017,2018, were as follows.
 Three Months EndedNine Months Ended
(in millions)September 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018
FV-NI:       
Realized gains$16
 $1
 $33
 $6
Realized losses8
 1
 17
 3
AFS:       
 Realized gains29
 
 58
 
 Realized losses23
 
 47
 2
 Three Months EndedNine Months Ended
(in millions)September 30, 2018 September 30, 2018
FV-NI:   
Realized gains$1
 $6
Realized losses1
 3
AFS:   
 Realized gains
 
 Realized losses
 2
 Three Months EndedNine Months Ended
(in millions)September 30, 2017 September 30, 2017
Realized gains$2
 $9
Realized losses1
 6

DUKE ENERGY INDIANA
The following table presents the estimated fair value of investments in debt and equity securities; equity investments are measured at FV-NI and debt investments are classified as AFS.
 September 30, 2019 December 31, 2018
 Gross
 Gross
   Gross
 Gross
  
 Unrealized
 Unrealized
 Estimated
 Unrealized
 Unrealized
 Estimated
 Holding
 Holding
 Fair
 Holding
 Holding
 Fair
(in millions)Gains
 Losses
 Value
 Gains
 Losses
 Value
Investments           
Equity securities$37
 $
 $74
 $29
 $
 $67
Corporate debt securities
 
 6
 
 
 8
Municipal bonds1
 
 36
 
 1
 33
U.S. government bonds
 
 1
 
 
 
Total Investments$38
 $
 $117
 $29
 $1
 $108
 
September 30, 2018(a)
 December 31, 2017
 Gross
 Gross
   Gross
 Gross
  
 Unrealized
 Unrealized
 Estimated
 Unrealized
 Unrealized
 Estimated
 Holding
 Holding
 Fair
 Holding
 Holding
 Fair
(in millions)Gains
 Losses
 Value
 Gains
 Losses
 Value
Investments           
Equity securities$40
 $
 $78
 $49
 $
 $97
Corporate debt securities
 
 8
 
 
 3
Municipal bonds
 1
 32
 
 1
 28
Total Investments$40
 $1
 $118
 $49
 $1
 $128
(a)
Realized and unrealized gains and losses where regulatory accounting is applied are deferred as regulatory assets or liabilities, and there is no impact to net income or other comprehensive income until the gain or loss is amortized or collected.
The table below summarizes the maturity date for debt securities.
(in millions)September 30, 2018
Due in one year or less$2
Due after one through five years20
Due after five through 10 years5
Due after 10 years13
Total$40

Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the three and nine months ended September 30, 2018,2019, and from sales of AFS securities for the three and nine months ended September 30, 2017,2018, were insignificant.



FINANCIAL STATEMENTSINVESTMENTS IN DEBT AND EQUITY SECURITIES


DEBT SECURITY MATURITIES
The table below summarizes the maturity date for debt securities.
 September 30, 2019
   Duke
   Duke
 Duke
 Duke
 Duke
 Energy
 Progress
 Energy
 Energy
 Energy
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Indiana
Due in one year or less$400
 $65
 $328
 $48
 $280
 $4
Due after one through five years524
 220
 253
 243
 10
 15
Due after five through 10 years450
 187
 209
 201
 8
 5
Due after 10 years1,259
 687
 465
 431
 34
 19
Total$2,633

$1,159

$1,255

$923

$332

$43

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.

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





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, suchhierarchy 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 that 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.
Not Categorizeddefined by GAAP. Certain investments are not categorized within the Fair Valuefair value hierarchy. These investments are measured at fair value using the net asset value (NAV)NAV per share practical expedient. The NAV is derived based on the investment cost, less any impairment, plus or minus changes resulting from observable price changes for an identical or similar investment of the same issuer.
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.
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 no0 transfers between levels during the three and nine months ended September 30, 2018,2019, and 2017.2018.
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 the New York Stock Exchange and Nasdaq Stock Market. 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 debt securities
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, including Piedmont's natural gas supply contracts, are primarily valued using internally developed discounted cash flow models that incorporate forward price, adjustments for liquidity (bid-ask spread) and credit or non-performance risk (after reflecting credit enhancements such as collateral), and are discounted to present value. Pricing inputs are derived from published exchange transaction prices and other observable data sources. In the absence of an active market, the last available price may be used. If forward price curves are not observable for the full term of the contract and the unobservable period had more than an insignificant impact on the valuation, the commodity derivative is classified as Level 3. In isolation, increases (decreases) in natural gas forward prices result in favorable (unfavorable) fair value adjustments for natural gas purchase contracts; and increases (decreases) in electricity forward prices result in unfavorable (favorable) fair value adjustments for electricity sales contracts. Duke Energy regularly evaluates and validates pricing inputs used to estimate the 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.



FINANCIAL STATEMENTSFAIR VALUE MEASUREMENTS

Interest rate derivatives
Most over-the-counter interest rate contract derivatives are valued using financial models that 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.
Other fair value considerations
See Note 11 in Duke Energy's Annual Report on Form 10-K/A10-K for the year ended December 31, 2017,2018, for a discussion of the valuation of goodwill and intangible assets.

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





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 tables below for all Duke Energy Registrants exclude cash collateral, which is disclosed in Note 9.10. See Note 1011 for additional information related to investments by major security type for the Duke Energy Registrants.
September 30, 2018September 30, 2019
(in millions)Total Fair Value
Level 1
Level 2
Level 3
Not Categorized
Total Fair Value
Level 1
Level 2
Level 3
Not Categorized
NDTF equity securities$5,272
$5,203
$
$
$69
$5,222
$5,168
$
$
$54
NDTF debt securities2,131
510
1,621


2,476
804
1,672


Other equity securities115
115



112
112



Other debt securities272
78
194


324
92
232


Derivative assets77
4
36
37

31
2
8
21

Total assets7,867
5,910
1,851
37
69
8,165
6,178
1,912
21
54
Derivative liabilities(225)
(72)(153)
(353)(25)(217)(111)
Net assets (liabilities)$7,642
$5,910
$1,779
$(116)$69
$7,812
$6,153
$1,695
$(90)$54
 December 31, 2018
(in millions)Total Fair Value
Level 1
Level 2
Level 3
Not Categorized
NDTF equity securities$4,475
$4,410
$
$
$65
NDTF debt securities2,231
576
1,655


Other equity securities99
99



Other debt securities270
67
203


Derivative assets57
4
25
28

Total assets7,132
5,156
1,883
28
65
Derivative liabilities(242)(11)(90)(141)
Net assets (liabilities)$6,890
$5,145
$1,793
$(113)$65
 December 31, 2017
(in millions)Total Fair Value
Level 1
Level 2
Level 3
Not Categorized
NDTF equity securities$4,914
$4,840
$
$
$74
NDTF debt securities2,174
635
1,539


Other equity securities123
123



Other debt securities241
57
184


Derivative assets51
3
20
28

Total assets7,503
5,658
1,743
28
74
Derivative liabilities(230)(2)(86)(142)
Net assets (liabilities)$7,273
$5,656
$1,657
$(114)$74

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 Cost of natural gas on the Duke Energy Registrants' Condensed Consolidated Statements of Operations and Comprehensive Income. Amounts included in changes of net assets on the Duke Energy Registrants' Condensed Consolidated Balance Sheets are included in regulatory assets or liabilities. All derivative assets and liabilities are presented on a net basis.
 Derivatives (net)
 Three Months Ended September 30, Nine Months Ended September 30,
(in millions)2019
 2018
 2019
 2018
Balance at beginning of period$(79) $(97) $(113) $(114)
Purchases, sales, issuances and settlements:       
Purchases
 
 38
 56
Settlements(9) (14) (32) (43)
Total (losses) gains included on the Condensed Consolidated Balance Sheet(2) (5) 17
 (15)
Balance at end of period$(90) $(116) $(90) $(116)
 Three Months Ended September 30, 2018 Three Months Ended September 30, 2017
(in millions)Investments
 Derivatives (net)
 Total
 Investments
 Derivatives (net)
 Total
Balance at beginning of period$
 $(97) $(97) $
 $(91) $(91)
Purchases, sales, issuances and settlements:    

      
Settlements
 (14) (14) 
 (12) (12)
Total (losses) gains included on the Condensed Consolidated Balance Sheet
 (5) (5) 
 10
 10
Balance at end of period$
 $(116) $(116) $
 $(93) $(93)




FINANCIAL STATEMENTSFAIR VALUE MEASUREMENTS
 Nine Months Ended September 30, 2018 Nine Months Ended September 30, 2017
(in millions)Investments
 Derivatives (net)
 Total
 Investments
 Derivatives (net)
 Total
Balance at beginning of period$
 $(114) $(114) $5
 $(166) $(161)
Total pretax realized or unrealized gains included in comprehensive income
 
 
 1
 
 1
Purchases, sales, issuances and settlements:           
Purchases
 56
 56
 
 55
 55
Sales
 
 
 (6) 
 (6)
Settlements
 (43) (43) 
 (30) (30)
Total (losses) gains included on the Condensed Consolidated Balance Sheet
 (15) (15) 
 48
 48
Balance at end of period$
 $(116) $(116) $
 $(93) $(93)

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)






DUKE ENERGY CAROLINAS
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets.
September 30, 2018September 30, 2019
(in millions)Total Fair Value
Level 1
Level 2
Not Categorized
Total Fair Value
Level 1
Level 2
Not Categorized
NDTF equity securities$2,890
$2,821
$
$69
$2,901
$2,847
$
$54
NDTF debt securities1,046
122
924

1,195
189
1,006

Derivative assets7

7

Total assets3,943
2,943
931
69
4,096
3,036
1,006
54
Derivative liabilities(28)
(28)
(67)
(67)
Net assets$3,915
$2,943
$903
$69
$4,029
$3,036
$939
$54
 December 31, 2018
(in millions)Total Fair Value
Level 1
Level 2
Not Categorized
NDTF equity securities$2,484
$2,419
$
$65
NDTF debt securities1,069
149
920

Derivative assets3

3

Total assets3,556
2,568
923
65
Derivative liabilities(33)
(33)
Net assets$3,523
$2,568
$890
$65
 December 31, 2017
(in millions)Total Fair Value
Level 1
Level 2
Not Categorized
NDTF equity securities$2,692
$2,618
$
$74
NDTF debt securities1,066
204
862

Derivative assets2

2

Total assets3,760
2,822
864
74
Derivative liabilities(35)(1)(34)
Net assets$3,725
$2,821
$830
$74
The following table provides a reconciliation of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements.
 Investments
 Three Months Ended September 30, Nine Months Ended September 30,
(in millions)2018
 2017
 2018
 2017
Balance at beginning of period$
 $
 $
 $3
Total pretax realized or unrealized gains included in comprehensive income
 
 
 1
Purchases, sales, issuances and settlements:       
Sales
 
 
 (4)
Balance at end of period$
 $
 $
 $

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)






PROGRESS ENERGY
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets.
 September 30, 2019 December 31, 2018
(in millions)Total Fair Value
Level 1
Level 2
 Total Fair Value
Level 1
Level 2
NDTF equity securities$2,321
$2,321
$
 $1,991
$1,991
$
NDTF debt securities1,281
615
666
 1,162
427
735
Other debt securities101
49
52
 64
17
47
Derivative assets5

5
 4

4
Total assets3,708
2,985
723
 3,221
2,435
786
Derivative liabilities(113)
(113) (44)
(44)
Net assets$3,595
$2,985
$610
 $3,177
$2,435
$742
 September 30, 2018 December 31, 2017
(in millions)Total Fair Value
Level 1
Level 2
 Total Fair Value
Level 1
Level 2
NDTF equity securities$2,382
$2,382
$
 $2,222
$2,222
$
NDTF debt securities1,085
388
697
 1,108
431
677
Other debt securities66
18
48
 59
12
47
Derivative assets3

3
 3
1
2
Total assets3,536
2,788
748
 3,392
2,666
726
Derivative liabilities(37)
(37) (36)(1)(35)
Net assets$3,499
$2,788
$711
 $3,356
$2,665
$691

DUKE ENERGY PROGRESS
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets.
 September 30, 2019 December 31, 2018
(in millions)Total Fair Value
Level 1
Level 2
 Total Fair Value
Level 1
Level 2
NDTF equity securities$1,907
$1,907
$
 $1,588
$1,588
$
NDTF debt securities975
309
666
 906
294
612
Other debt securities2
2

 6
6

Derivative assets


 4

4
Total assets2,884
2,218
666
 2,504
1,888
616
Derivative liabilities(43)
(43) (27)
(27)
Net assets$2,841
$2,218
$623
 $2,477
$1,888
$589




FINANCIAL STATEMENTSFAIR VALUE MEASUREMENTS
 September 30, 2018 December 31, 2017
(in millions)Total Fair Value
Level 1
Level 2
 Total Fair Value
Level 1
Level 2
NDTF equity securities$1,913
$1,913
$
 $1,795
$1,795
$
NDTF debt securities823
254
569
 796
243
553
Other debt securities8
8

 1
1

Derivative assets2

2
 2
1
1
Total assets2,746
2,175
571
 2,594
2,040
554
Derivative liabilities(24)
(24) (18)(1)(17)
Net assets$2,722
$2,175
$547
 $2,576
$2,039
$537

DUKE ENERGY FLORIDA
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets.
 September 30, 2019 December 31, 2018
(in millions)Total Fair Value
Level 1
Level 2
 Total Fair Value
Level 1
Level 2
NDTF equity securities$414
$414
$
 $403
$403
$
NDTF debt securities306
306

 256
133
123
Other debt securities56
4
52
 48
1
47
Derivative assets5

5
 


Total assets781
724
57
 707
537
170
Derivative liabilities(54)
(54) (9)
(9)
Net assets$727
$724
$3
 $698
$537
$161
 September 30, 2018 December 31, 2017
(in millions)Total Fair Value
Level 1
Level 2
 Total Fair Value
Level 1
Level 2
NDTF equity securities$469
$469
$
 $427
$427
$
NDTF debt securities262
134
128
 312
188
124
Other debt securities48

48
 48
1
47
Derivative assets1

1
 1

1
Total assets780
603
177
 788
616
172
Derivative liabilities(5)
(5) (12)
(12)
Net assets$775
$603
$172
 $776
$616
$160

DUKE ENERGY OHIO
The following table provides recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets.
 September 30, 2018 December 31, 2017
(in millions)Total Fair Value
Level 2
Level 3
 Total Fair Value
Level 2
Level 3
Derivative assets$8
$
$8
 $1
$
$1
Derivative liabilities(4)(4)
 (5)(5)
Net assets (liabilities)$4
$(4)$8
 $(4)$(5)$1

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





The following table provides a reconciliation of beginningSheets were not material at September 30, 2019, and ending balances of assets and liabilities measured at fair value using Level 3 measurements.
 Derivatives (net)
 Three Months Ended September 30, Nine Months Ended September 30,
(in millions)2018
 2017
 2018
 2017
Balance at beginning of period$9
 $3
 $1
 $5
Purchases, sales, issuances and settlements:       
Purchases
 
 7
 3
Settlements(1) (1) (2) (3)
Total gains (losses) included on the Condensed Consolidated Balance Sheet
 
 2
 (3)
Balance at end of period$8
 $2
 $8
 $2
December 31, 2018.
DUKE ENERGY INDIANA
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets.
 September 30, 2019 December 31, 2018
(in millions)Total Fair Value
Level 1
Level 2
Level 3
 Total Fair Value
Level 1
Level 2
Level 3
Other equity securities$74
$74
$
$
 $67
$67
$
$
Other debt securities43

43

 41

41

Derivative assets16


16
 23
1

22
Total assets$133
$74
$43
$16
 $131
$68
$41
$22

 September 30, 2018 December 31, 2017
(in millions)Total Fair Value
Level 1
Level 2
Level 3
 Total Fair Value
Level 1
Level 2
Level 3
Other equity securities$78
$78
$
$
 $97
$97
$
$
Other debt securities40

40

 31

31

Derivative assets29


29
 27


27
Total assets$147
$78
$40
$29
 $155
$97
$31
$27
The following table provides a reconciliation of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements.
Derivatives (net)Derivatives (net)
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended September 30, Nine Months Ended September 30,
(in millions)2018
 2017
 2018
 2017
2019
 2018
 2019
 2018
Balance at beginning of period$44
 $51
 $27
 $16
$28
 $44
 $22
 $27
Purchases, sales, issuances and settlements:
      
      
Purchases
 
 49
 52

 
 29
 49
Settlements(13) (11) (41) (27)(7) (13) (26) (41)
Total losses included on the Condensed Consolidated Balance Sheet(2) (12) (6) (13)(5) (2) (9) (6)
Balance at end of period$29
 $28
 $29
 $28
$16
 $29
 $16
 $29


PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
FINANCIAL STATEMENTSFAIR VALUE MEASUREMENTS
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)






PIEDMONT
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets.
 September 30, 2019 December 31, 2018
(in millions)Total Fair Value
Level 1
Level 3
 Total Fair Value
Level 1
Level 3
Derivative assets$2
$2
$
 $3
$3
$
Derivative liabilities(111)
(111) (141)
(141)
Net (liabilities) assets$(109)$2
$(111) $(138)$3
$(141)

 September 30, 2018
(in millions)Total Fair Value
Level 1
Level 3
Derivative assets$4
$4
$
Derivative liabilities(153)
(153)
Net (liabilities) assets$(149)$4
$(153)
 December 31, 2017
(in millions)Total Fair Value
Level 1
Level 3
Other debt securities$1
$1
$
Derivative assets2
2

Total assets3
3

Derivative liabilities(142)
(142)
Net (liabilities) assets$(139)$3
$(142)
The following table provides a reconciliation of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements.
Derivatives (net)Derivatives (net)
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended September 30, Nine Months Ended September 30,
(in millions)2018
 2017
 2018
 2017
2019
 2018
 2019
 2018
Balance at beginning of period$(150) $(145) $(142) $(187)$(114) $(150) $(141) $(142)
Total (losses) gains and settlements(3) 22
 (11) 64
Total gains (losses) and settlements3
 (3) 30
 (11)
Balance at end of period$(153) $(123) $(153) $(123)$(111) $(153) $(111) $(153)

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





QUANTITATIVE INFORMATION ABOUT UNOBSERVABLE INPUTS
The following tables include quantitative information about the Duke Energy Registrants' derivatives classified as Level 3.
September 30, 2018September 30, 2019
Fair Value    Fair Value    
Investment Type(in millions)Valuation TechniqueUnobservable InputRange(in millions)Valuation TechniqueUnobservable InputRange
Duke Energy Ohio 
     
    
Financial Transmission Rights (FTRs)$8
RTO auction pricingFTR price – per megawatt-hour (MWh)$1.03
-$4.10
FTRs$5
RTO auction pricingFTR price – per MWh$0.57
-$3.38
Duke Energy Indiana 
     
    
FTRs29
RTO auction pricingFTR price – per MWh(2.32)-8.11
16
RTO auction pricingFTR price – per MWh(0.52)-6.85
Piedmont          
Natural gas contracts(153)Discounted cash flowForward natural gas curves – price per million British thermal unit (MMBtu)1.74
-3.41
(111)Discounted cash flowForward natural gas curves – price per MMBtu1.85
-2.99
Duke Energy          
Total Level 3 derivatives$(116)    $(90)    
December 31, 2017December 31, 2018
Fair Value    Fair Value    
Investment Type(in millions)Valuation TechniqueUnobservable InputRange(in millions)Valuation TechniqueUnobservable InputRange
Duke Energy Ohio 
     
    
FTRs$1
RTO auction pricingFTR price – per MWh$0.07
-$1.41
$6
RTO auction pricingFTR price – per MWh$1.19
-$4.59
Duke Energy Indiana 
     
    
FTRs27
RTO auction pricingFTR price – per MWh(0.77)-7.44
22
RTO auction pricingFTR price – per MWh(2.07)-8.27
Piedmont          
Natural gas contracts(142)Discounted cash flowForward natural gas curves – price per MMBtu2.10
-2.88
(141)Discounted cash flowForward natural gas curves – price per MMBtu1.87
-2.95
Duke Energy          
Total Level 3 derivatives$(114)    $(113)    




FINANCIAL STATEMENTSFAIR VALUE MEASUREMENTS

OTHER FAIR VALUE DISCLOSURES
The fair value and book value of long-term debt, including current maturities, is summarized in the following table. Estimates determined are not necessarily indicative of amounts that could have been settled in current markets. Fair value of long-term debt uses Level 2 measurements.
 September 30, 2019 December 31, 2018
(in millions)Book Value
 Fair Value
 Book Value
 Fair Value
Duke Energy(a)
$57,914
 $63,276
 $54,529
 $54,534
Duke Energy Carolinas11,758
 13,462
 10,939
 11,471
Progress Energy19,119
 21,952
 18,911
 19,885
Duke Energy Progress9,049
 9,995
 8,204
 8,300
Duke Energy Florida7,132
 8,356
 7,321
 7,742
Duke Energy Ohio2,719
 3,096
 2,165
 2,239
Duke Energy Indiana4,208
 5,018
 3,782
 4,158
Piedmont2,384
 2,664
 2,138
 2,180
 September 30, 2018 December 31, 2017
(in millions)Book Value
 Fair Value
 Book Value
 Fair Value
Duke Energy(a)
$53,962
 $53,949
 $52,279
 $55,331
Duke Energy Carolinas10,395
 10,887
 10,103
 11,372
Progress Energy18,912
 19,825
 17,837
 20,000
Duke Energy Progress8,154
 8,231
 7,357
 7,992
Duke Energy Florida7,371
 7,749
 7,095
 7,953
Duke Energy Ohio2,066
 2,136
 2,067
 2,249
Duke Energy Indiana3,783
 4,178
 3,783
 4,464
Piedmont2,138
 2,175
 2,037
 2,209

(a)Book value of long-term debt includes $1.6$1.5 billion as of September 30, 2018,2019, and $1.7$1.6 billion as of December 31, 2017,2018, of unamortized debt discount and premium, net in purchase accounting adjustments related to the mergers with Progress Energy and Piedmont that are excluded from fair value of long-term debt.
At both September 30, 2018,2019, and December 31, 2017,2018, fair value of cash and cash equivalents, accounts and notes receivable, accounts payable, notes payable and commercial paper, and nonrecourse notes payable of VIEs 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.

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





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 re-evaluation, 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.
CONSOLIDATED VIEs
The obligations of the consolidated VIEs discussed in the following paragraphs are nonrecourse to the Duke Energy registrants. The registrants have no requirement to provide liquidity to, purchase assets of or guarantee performance of these VIEs unless noted in the following paragraphs.
NoNaN financial support was provided to any of the consolidated VIEs during the nine months ended September 30, 2018,2019, and the year ended December 31, 2017,2018, or is expected to be provided in the future that was not previously contractually required.
Receivables Financing – DERF / DEPR / DEFR
Duke Energy Receivables Finance Company, LLC (DERF), Duke Energy Progress Receivables, LLC (DEPR)DERF, DEPR and Duke Energy Florida Receivables, LLC (DEFR)DEFR are bankruptcy remote, special purpose subsidiaries of Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida, respectively. DERF, DEPR and DEFR are wholly owned limited liability companies with separate legal existence from their parent companies, and their assets are not generally available to creditors of their parent companies. On a revolving basis, DERF, DEPR and DEFR buy certain accounts receivable arising from the sale of electricity and related services from their parent companies.
DERF, DEPR and DEFR borrow amounts under credit facilities to buy these receivables. Borrowing availability from the credit facilities is limited to the amount of qualified receivables purchased. The sole source of funds to satisfy the related debt obligations is cash collections from the receivables. Amounts borrowed under the credit facilities are reflected on the Condensed Consolidated Balance Sheets as Long-Term Debt.
The most significant activity that impacts the economic performance of DERF, DEPR and DEFR are the decisions made to manage delinquent receivables. Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida are considered primary beneficiaries and consolidate DERF, DEPR and DEFR, respectively, as they make those decisions.
Receivables Financing – CRC
CRC is a bankruptcy remote, special purpose entity indirectly owned by Duke Energy. On a revolving basis, CRC buys certain accounts receivable arising from the sale of electricity, natural gas and related services from Duke Energy Ohio and Duke Energy Indiana. CRC borrows amounts under a credit facility to buy the receivables from Duke Energy Ohio and Duke Energy Indiana. Borrowing availability from the credit facility is limited to the amount of qualified receivables sold to CRC. The sole source of funds to satisfy the related debt obligation is cash collections from the receivables. Amounts borrowed under the credit facility are reflected on Duke Energy's Condensed Consolidated Balance Sheets as Long-Term Debt.
The proceeds Duke Energy Ohio and Duke Energy Indiana receive from the sale of receivables to CRC are typically 75 percentapproximately 75% cash and 25 percent25% in the form of a subordinated note from CRC. The subordinated note is a retained interest in the receivables sold. Depending on collection experience, additional equity infusions to CRC may be required by Duke Energy to maintain a minimum equity balance of $3 million.
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 and (iii) deficiencies in net worth of CRC are funded by Duke Energy. The most significant activities that impact the economic performance of CRC are decisions made to manage delinquent receivables. Duke Energy is considered the primary beneficiary and consolidates CRC as it makes these decisions. Neither Duke Energy Ohio nor Duke Energy Indiana consolidate CRC.



FINANCIAL STATEMENTSVARIABLE INTEREST ENTITIES


Receivables Financing – Credit Facilities
The following table summarizes the amounts and expiration dates of the credit facilities and associated restricted receivables described above.
 Duke Energy
   Duke Energy
 Duke Energy
 Duke Energy
   Carolinas
 Progress
 Florida
(in millions)CRC
 DERF
 DEPR
 DEFR
Expiration dateDecember 2020
 December 2020
 February 2021
 April 2021
Credit facility amount$350
 $475
 $325
 $250
Amounts borrowed at September 30, 2019350
 475
 325
 250
Amounts borrowed at December 31, 2018325
 450
 300
 225
Restricted Receivables at September 30, 2019505
 775
 564
 471
Restricted Receivables at December 31, 2018564
 699
 547
 357
 Duke Energy
   Duke Energy
 Duke Energy
 Duke Energy
   Carolinas
 Progress
 Florida
(in millions)CRC
 DERF
 DEPR
 DEFR
Expiration dateDecember 2020
 December 2020
 February 2021
 April 2021
Credit facility amount$325
 $450
 $300
 $225
Amounts borrowed at September 30, 2018325
 450
 300
 225
Amounts borrowed at December 31, 2017325
 450
 300
 225
Restricted Receivables at September 30, 2018504
 795
 635
 456
Restricted Receivables at December 31, 2017545
 640
 459
 317

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)






Nuclear Asset-Recovery Bonds – DEFPF
Duke Energy Florida Project Finance, LLC (DEFPF)DEFPF is a bankruptcy remote, wholly owned special purpose subsidiary of Duke Energy Florida. DEFPF was formed in 2016 for the sole purpose of issuing nuclear asset-recovery bonds to finance Duke Energy Florida's unrecovered regulatory asset related to Crystal River Unit 3.
In June 2016, DEFPF issued senior secured bonds and used the proceeds to acquire nuclear asset-recovery property from Duke Energy Florida. The nuclear asset-recovery property acquired includes the right to impose, bill, collect and adjust a non-bypassable nuclear asset-recovery charge from all Duke Energy Florida retail customers until the bonds are paid in full and all financing costs have been recovered. The nuclear asset-recovery bonds are secured by the nuclear asset-recovery property, and cash collections from the nuclear asset-recovery charges are the sole source of funds to satisfy the debt obligation. The bondholders have no recourse to Duke Energy Florida.
DEFPF is considered a VIE primarily because the equity capitalization is insufficient to support its operations. Duke Energy Florida has the power to direct the significant activities of the VIE as described above, and therefore Duke Energy Florida is considered the primary beneficiary and consolidates DEFPF.
The following table summarizes the impact of DEFPF on Duke Energy Florida's Condensed Consolidated Balance Sheets.
(in millions)September 30, 2019
December 31, 2018
Receivables of VIEs$7
$5
Regulatory Assets: Current52
52
Current Assets: Other16
39
Other Noncurrent Assets: Regulatory assets1,002
1,041
Current Liabilities: Other2
10
Current maturities of long-term debt54
53
Long-Term Debt1,056
1,111
(in millions)September 30, 2018
December 31, 2017
Receivables of VIEs$7
$4
Regulatory Assets: Current52
51
Current Assets: Other14
40
Other Noncurrent Assets: Regulatory assets1,055
1,091
Current Liabilities: Other3
10
Current maturities of long-term debt53
53
Long-Term Debt1,111
1,164

Commercial Renewables
Certain 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. Assets are restricted and cannot be pledged as collateral or sold to third parties without prior approval of debt holders. Additionally, Duke Energy has VIEs associated with tax equity arrangements entered into with third-party investors in order to finance the cost of solar energy systems eligible for tax credits. The activities that most significantly impactimpacted the economic performance of these renewable energy facilities were decisions associated with siting, negotiating PPAs engineering, procurement and constructionEPC agreements, and decisions associated with ongoing operations and maintenance-related activities. Duke Energy is considered the primary beneficiary and consolidates the entities as it is responsible for all of these decisions.
The table below presents material balances reported on Duke Energy's Condensed Consolidated Balance Sheets related to renewablesCommercial Renewables VIEs.
(in millions)September 30, 2019
December 31, 2018
Current Assets: Other$172
$123
Property, Plant and Equipment: Cost5,160
4,007
Accumulated depreciation and amortization(996)(698)
Other Noncurrent Assets: Other63
261
Current maturities of long-term debt177
174
Long-Term Debt1,604
1,587
Other Noncurrent Liabilities: Asset retirement obligations125
106
Other Noncurrent Liabilities: Other218
212




(in millions)September 30, 2018
December 31, 2017
Current Assets: Other$203
$174
Property, plant and equipment, cost4,025
3,923
Accumulated depreciation and amortization(695)(591)
Other Noncurrent Assets: Other268
50
Current maturities of long-term debt175
170
Long-Term Debt1,604
1,700
Other Noncurrent Liabilities: Deferred income taxes
(148)
Other Noncurrent Liabilities: Other225
241
FINANCIAL STATEMENTSVARIABLE INTEREST ENTITIES

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)







NON-CONSOLIDATED VIEs
The following tables summarize the impact of non-consolidated VIEs on the Condensed Consolidated Balance Sheets.
 September 30, 2019
 Duke Energy Duke
 Duke
 Pipeline
 Commercial
 Other
   Energy
 Energy
(in millions)Investments
 Renewables
 
VIEs 

 Total
 Ohio
 Indiana
Receivables from affiliated companies$
 $
 $
 $
 $48
 $76
Investments in equity method unconsolidated affiliates1,152
 235
 55
 1,442
 
 
Total assets$1,152
 $235
 $55
 $1,442
 $48
 $76
Taxes accrued(2) 
 
 (2) 
 
Other current liabilities
 
 3
 3
 
 
Deferred income taxes57
 
 
 57
 
 
Other noncurrent liabilities
 
 11
 11
 
 
Total liabilities$55
 $
 $14
 $69
 $
 $
Net assets$1,097
 $235
 $41
 $1,373
 $48
 $76

September 30, 2018December 31, 2018
Duke Energy Duke
 Duke
Duke Energy Duke
 Duke
Pipeline
 Commercial
 Other
   Energy
 Energy
Pipeline
 Commercial
 Other
   Energy
 Energy
(in millions)
Investments(a)

 Renewables
 
VIEs 

 Total
 Ohio
 Indiana
Investments
 Renewables
 VIEs
 Total
 Ohio
 Indiana
Receivables from affiliated companies$
 $
 $
 $
 $56
 $94
$
 $
 $
 $
 $93
 $118
Investments in equity method unconsolidated affiliates729
 190
 47
 966
 
 
822
 190
 48
 1,060
 
 
Total assets$729
 $190
 $47
 $966
 $56
 $94
$822
 $190
 $48
 $1,060
 $93
 $118
Taxes accrued(1) 
 
 (1) 
 
Other current liabilities
 
 3
 3
 
 

 
 4
 4
 
 
Deferred income taxes14
 
 
 14
 
 
21
 
 
 21
 
 
Other noncurrent liabilities
 
 11
 11
 
 

 
 12
 12
 
 
Total liabilities$14
 $
 $14
 $28
 $
 $
$20

$

$16

$36

$

$
Net assets$715
 $190
 $33
 $938
 $56
 $94
$802
 $190
 $32
 $1,024
 $93
 $118
(a)See Pipeline Investments table below for further details regarding Investments in equity method unconsolidated affiliates.

 December 31, 2017
 Duke Energy Duke
 Duke
 Pipeline
 Commercial
 Other
   Energy
 Energy
(in millions)Investments
 Renewables
 VIEs
 Total
 Ohio
 Indiana
Receivables from affiliated companies$
 $
 $
 $
 $87
 $106
Investments in equity method unconsolidated affiliates697
 180
 42
 919
 
 
Other noncurrent assets17
 
 
 17
 
 
Total assets$714
 $180
 $42
 $936
 $87
 $106
Taxes accrued(29) 
 
 (29) 
 
Other current liabilities
 
 4
 4
 
 
Deferred income taxes42
 
 
 42
 
 
Other noncurrent liabilities
 
 12
 12
 
 
Total liabilities$13

$

$16

$29

$

$
Net assets$701
 $180
 $26
 $907
 $87
 $106
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 agreementPPA with OVEC, which is discussed below, and various guarantees, someincluding Duke Energy's guarantee agreement to support its share of the ACP revolving credit facility. Duke Energy's maximum exposure to loss under the terms of the guarantee is $802 million, which are reflected inrepresents 47% of the table aboveoutstanding borrowings under the credit facility as Other noncurrent liabilities.of September 30, 2019. For more information on various guarantees, refer to Note 4.
Pipeline Investments
Duke Energy has investments in various joint ventures with pipeline projects currently under construction. These entities are considered VIEs due to having insufficient equity to finance their own activities without subordinated financial support. Duke Energy does not have the power to direct the activities that most significantly impact the economic performance, the obligation to absorb losses or the right to receive benefits of these VIEs and therefore does not consolidate these entities.
The table below presents Duke Energy's ownership interest and investment balances in these joint ventures.
   VIE Investment Amount (in millions)
 Ownership September 30, December 31,
Entity NameInterest 2019 2018
ACP(a)
47% $1,127
 $797
Constitution24% 25
 25
Total  $1,152
 $822
   VIE Investment Amount (in millions)
 Ownership September 30, December 31,
Entity NameInterest 2018 2017
ACP47% $704
 $397
Sabal Trail(a)
7.5% 
 219
Constitution(b)
24% 25
 81
Total  $729
 $697

(a)AtDuke Energy evaluated this investment for impairment as of September 30, 2019, and December 31, 2017, Sabal Trail was considered a VIE due to having insufficient equity to finance their own activities without subordinated financial support. However, Sabal Trail is now a fully operational, well capitalized entity. As a result, Sabal Trail has sufficient equity to finance its own activities,2018, and determined that fair value approximated carrying value and therefore is no longer considered a VIE. Duke Energy's investment in Sabal Trailimpairment was $112 million at September 30, 2018.necessary.


PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





(b)FINANCIAL STATEMENTSDuring the nine months ended September 30, 2018, Duke Energy recorded an OTTI of $55 million related to Constitution within Equity in earnings of unconsolidated affiliates on Duke Energy's Condensed Consolidated Statements of Income. See Note 3 for additional information.VARIABLE INTEREST ENTITIES
In 2017, ACP executed a $3.4 billion revolving credit facility with a stated maturity date of October 2021. Duke Energy entered into a guarantee agreement to support its share of the ACP revolving credit facility. Duke Energy's maximum exposure to loss under the terms of the guarantee is $486 million, which represents 47 percent of the outstanding borrowings under the credit facility as of September 30, 2018.

Commercial Renewables
Duke Energy has investments in various renewable energy project entities. Some of these entities are VIEs due to Duke Energy issuing guarantees for debt service and operations and maintenance reserves in support of debt financings. 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 VIEsPioneer
Duke Energy holds a 50 percent50% equity interest in Pioneer. During the nine months ended September 30, 2019, Pioneer Transmission, LLC (Pioneer). Pioneer iswas considered a VIE due to having insufficient equity to finance its own activities without subordinated financial support. TheOn October 1, 2019, Pioneer closed on a private placement debt offering that gave Pioneer sufficient equity to finance its own activities that most significantly impact Pioneer's economic performance are decisions related to the development of new transmission facilities. The power to direct these activitiesand, therefore, is jointly and equally shared byno longer considered a VIE. Duke Energy and the other joint venture partner, American Electric Power; therefore, Duke Energy does not consolidate Pioneer.Energy's investment in Pioneer was $55 million at September 30, 2019.
OVEC
Duke Energy Ohio’s 9 percent9% ownership interest in OVEC is considered a non-consolidated VIE due to OVEC having insufficient equity to finance its activities without subordinated financial support. The activities that most significantly impact OVEC's economic performance include fuel strategy and supply activities and decisions associated with ongoing operations and maintenance-related activities. Duke Energy Ohio does not have the unilateral power to direct these activities, and therefore, does not consolidate OVEC.
As a counterparty to an inter-company power agreement (ICPA),ICPA, Duke Energy Ohio has a contractual arrangement to receive entitlements to capacity and energy from OVEC’s power plants through June 2040 commensurate with its power participation ratio, which is equivalent to Duke Energy Ohio's ownership interest. Costs, including fuel, operating expenses, fixed costs, debt amortization and interest expense, are allocated to counterparties to the ICPA based on their power participation ratio. The value of the ICPA is subject to variability due to fluctuation in power prices and changes in OVEC's cost of business. On March 31, 2018, FirstEnergy Solutions (FES),FES, a subsidiary of FirstEnergy and an ICPA counterparty with a power participation ratio of 4.85 percent,4.85%, filed for Chapter 11 bankruptcy, which could increase costs allocated to the counterparties. On July 31, 2018, the bankruptcy court rejected the FES ICPA, which means OVEC is an unsecured creditor in the FES bankruptcy proceeding. Duke Energy Ohio cannot predict the impact of the bankruptcy filing on its OVEC interests. In addition, certain proposed environmental rulemaking could result in future increased OVEC cost allocations.
CRC
See discussion under Consolidated VIEs for additional information related to CRC.
Amounts included in Receivables from affiliated companies 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 turn over 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 OTTI has occurred.
Key assumptions used in estimating fair value are detailed in the following table.
 Duke Energy Ohio Duke Energy Indiana
 2018
 2017
 2018
 2017
Anticipated credit loss ratio0.5% 0.5% 0.3% 0.3%
Discount rate2.9% 2.1% 2.9% 2.1%
Receivable turnover rate13.6% 13.5% 10.9% 10.7%
The following table shows the gross and net receivables sold.
 Duke Energy Ohio Duke Energy Indiana
(in millions)September 30, 2019
 December 31, 2018
 September 30, 2019
 December 31, 2018
Receivables sold$217
 $269
 $326
 $336
Less: Retained interests48
 93
 76
 118
Net receivables sold$169
 $176
 $250
 $218

 Duke Energy Ohio Duke Energy Indiana
(in millions)September 30, 2018
 December 31, 2017
 September 30, 2018
 December 31, 2017
Receivables sold$218
 $273
 $326
 $312
Less: Retained interests56
 87
 94
 106
Net receivables sold$162
 $186
 $232
 $206

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





The following table shows sales and cash flows related to receivables sold.
 Duke Energy Ohio Duke Energy Indiana
 Three Months Ended Nine Months Ended Three Months Ended Nine Months Ended
 September 30, September 30, September 30, September 30,
(in millions)2019
 2018
 2019
 2018
 2019
 2018
 2019
 2018
Sales               
Receivables sold$479
 $450
 $1,483
 $1,478
 $762
 $754
 $2,172
 $2,140
Loss recognized on sale4
 4
 11
 10
 4
 5
 13
 12
Cash flows               
Cash proceeds from receivables sold$471
 $449
 $1,516
 $1,499
 $762
 $743
 $2,200
 $2,140
Collection fees received
 
 1
 1
 
 
 1
 1
Return received on retained interests1
 2
 5
 5
 2
 3
 7
 7
 Duke Energy Ohio Duke Energy Indiana
 Three Months Ended Nine Months Ended Three Months Ended Nine Months Ended
 September 30, September 30, September 30, September 30,
(in millions)2018
 2017
 2018
 2017
 2018
 2017
 2018
 2017
Sales               
Receivables sold$450
 $438
 $1,478
 $1,392
 $754
 $720
 $2,140
 $2,047
Loss recognized on sale4
 2
 10
 7
 5
 3
 12
 9
Cash flows               
Cash proceeds from receivables sold$449
 $434
 $1,499
 $1,421
 $743
 $713
 $2,140
 $2,064
Collection fees received
 1
 1
 1
 
 
 1
 1
Return received on retained interests2
 
 5
 2
 3
 2
 7
 5

Cash flows from sales of receivables are reflected within Operating Activities on Duke Energy Ohio’s and Duke Energy Indiana’s Condensed Consolidated Statements of Cash Flows.
Collection fees received in connection with servicing transferred accounts receivable are included in Operation, maintenance and other on Duke Energy Ohio’s and Duke Energy Indiana’s Condensed Consolidated Statements of Operations and Comprehensive Income. The loss recognized on sales of receivables is calculated monthly by multiplying receivables sold during the month by the required discount. The required discount is derived monthly utilizing a three-year weighted average formula that considers charge-off history, late charge history and turnover history on the sold receivables, as well as a component for the time value of money. The discount rate, or component for the time value of money, is the prior month-end LIBOR plus a fixed rate of 1.00 percent.
13.



FINANCIAL STATEMENTSREVENUE


14. REVENUE
As described in Note 1, Duke Energy adopted Revenue from Contracts with Customers effective January 1, 2018, using the modified retrospective method of adoption, which does not require restatement of prior year reported results. No cumulative effect adjustment was recorded as the vast majority of Duke Energy’s revenues are at-will and without a defined contractual term. Additionally, comparative disclosures for 2018 operating results with the previous revenue recognition rules are not applicable as Duke Energy’s revenue recognition has not materially changed as a result of the new standard.
Duke Energy recognizes revenue consistent with amounts billed under tariff offerings or at contractually agreed upon rates based on actual physical delivery of electric or natural gas service, including estimated volumes delivered when billings have not yet occurred. As such, the majority of Duke Energy’s revenues have fixed pricing based on the contractual terms of the published tariffs, with variability in expected cash flows attributable to the customer’s volumetric demand and ultimate quantities of energy or natural gas supplied and used during the billing period. The stand-alone selling price of related sales are designed to support recovery of prudently incurred costs and an appropriate return on invested assets and are primarily governed by published tariff rates or contractual agreements approved by relevant regulatory bodies. As described in Note 1, certain excise taxes and franchise fees 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 as part of revenues. Duke Energy elects to account for all other taxes net of revenues.
Performance obligations are satisfied over time as energy or natural gas is delivered and consumed with billings generally occurring monthly and related payments due within 30 days, depending on regulatory requirements. In no event does the timing between payment and delivery of the goods and services exceed one year. Using this output method for revenue recognition provides a faithful depiction of the transfer of electric and natural gas service as customers obtain control of the commodity and benefit from its use at delivery. Additionally, Duke Energy has an enforceable right to consideration for energy or natural gas delivered at any discrete point in time, and will recognize revenue at an amount that reflects the consideration to which Duke Energy is entitled for the energy or natural gas delivered.
As described above, the majority of Duke Energy’s tariff revenues are at-will and, as such, related contracts with customers have an expected duration of one year or less and will not have future performance obligations for disclosure. Additionally, other long-term revenue streams, including wholesale contracts, generally provide services that are part of a single performance obligation, the delivery of electricity or natural gas. As such, other than material fixed consideration under long-term contracts, related disclosures for future performance obligations are also not applicable.
Duke Energy earns substantially all of its revenues through its reportable segments, Electric Utilities and Infrastructure, Gas Utilities and Infrastructure and Commercial Renewables.

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





Electric Utilities and Infrastructure
Electric Utilities and Infrastructure earns the majority of its revenues through retail and wholesale electric service through the generation, transmission, distribution and sale of electricity. Duke Energy generally provides retail and wholesale electric service customers with their full electric load requirements or with supplemental load requirements when the customer has other sources of electricity.
Retail electric service is generally marketed throughout Duke Energy's electric service territory through standard service offers. The standard service offers are through tariffs determined by regulators in Duke Energy's regulated service territory. Each tariff, which is assigned to customers based on customer class, has multiple components such as an energy charge, a demand charge, a basic facilities charge and applicable riders. Duke Energy considers each of these components to be aggregated into a single performance obligation for providing electric service, or in the case of distribution only customers in Duke Energy Ohio, for delivering electricity. Electricity is considered a single performance obligation satisfied over time consistent with the series guidance and is provided and consumed over the billing period (generally one month). Retail electric service is typically provided to at-will customers that can cancel service at any time, without a substantive penalty. Additionally, Duke Energy adheres to applicable regulatory requirements in each jurisdiction to ensure the collectability of amounts billed and appropriate mitigating procedures are followed when necessary. As such, revenue from contracts with customers for such contracts is equivalent to the electricity supplied and billed in that period (including unbilled estimates).
Wholesale electric service is generally provided under long-term contracts using cost-based pricing. FERC regulates costs that may be recovered from customers and the amount of return companies are permitted to earn. Wholesale contracts include both energy and demand charges. For full requirements contracts, Duke Energy considers both charges as a single performance obligation for providing integrated electric service. For contracts where energy and demand charges are considered separate performance obligations, energy and demand are each a distinct performance obligation under the series guidance and are satisfied as energy is delivered and stand-ready service is provided on a monthly basis. This service represents consumption over the billing period and revenue is recognized consistent with billings and unbilled estimates, which generally occur monthly. Contractual amounts owed are typically trued up annually based upon incurred costs in accordance with FERC published filings and the specific customer’s actual peak demand. Estimates of variable consideration related to potential additional billings or refunds owed are updated quarterly.
The majority of wholesale revenues are full requirements contracts where the customers purchase the substantial majority of their energy needs and do not have a fixed quantity of contractually required energy or capacity. As such, related forecasted revenues are considered optional purchases. Supplemental requirements contracts that include contracted blocks of energy and capacity at contractually fixed prices have the following estimated remaining performance obligations:
 Remaining Performance Obligations
(in millions)2019
2020
2021
2022
2023
Thereafter
Total
Progress Energy$31
$121
$86
$81
$38
$41
$398
Duke Energy Progress2
8
8
8
8
8
42
Duke Energy Florida29
113
78
73
30
33
356
Duke Energy Indiana2
10
5



17
 Remaining Performance Obligations
(in millions)2018
2019
2020
2021
2022
Thereafter
Total
Progress Energy$24
$112
$121
$80
$82
$81
$500
Duke Energy Progress2
9
9
9
9
18
56
Duke Energy Florida22
103
112
71
73
63
444
Duke Energy Indiana2
9
10
5


26

Revenues for block sales are recognized monthly as energy is delivered and stand-ready service is provided, consistent with invoiced amounts and unbilled estimates.
Gas Utilities and Infrastructure
Gas Utilities and Infrastructure earns its revenuerevenues through retail and wholesale natural gas service through the transportation, distribution and sale of natural gas. Duke Energy generally provides retail and wholesale natural gas service customers with all natural gas load requirements. Additionally, while natural gas can be stored, substantially all natural gas provided by Duke Energy is consumed by customers simultaneously with receipt of delivery.
Retail natural gas service is marketed throughout Duke Energy's natural gas service territory using published tariff rates. The tariff rates are established by regulators in Duke Energy's service territories. Each tariff, which is assigned to customers based on customer class, have multiple components, such as a commodity charge, demand charge, customer or monthly charge and transportation costs. Duke Energy considers each of these components to be aggregated into a single performance obligation for providing natural gas service. For contracts where Duke Energy provides all of the customer’s natural gas needs, the delivery of natural gas is considered a single performance obligation satisfied over time, and revenue is recognized monthly based on billings and unbilled estimates as service is provided and the commodity is consumed over the billing period. Additionally, natural gas service is typically at-will and customers can cancel service at any time, without a substantive penalty. Duke Energy also adheres to applicable regulatory requirements to ensure the collectability of amounts billed and receivable and appropriate mitigating procedures are followed when necessary.
Certain long-term individually negotiated contracts exist to provide natural gas service. These contracts are regulated and approved by state commissions. The negotiated contracts have multiple components, including a natural gas and a demand charge, similar to retail natural gas contracts. Duke Energy considers each of these components to be a single performance obligation for providing natural gas service. This service represents consumption over the billing period, generally one month.

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





Fixed capacity payments under long-term contracts for the Gas Utilities and Infrastructure segment include minimum margin contracts and supply arrangements with municipalities and power generation facilities. Revenues for related sales are recognized monthly as natural gas is delivered and stand-ready service is provided, consistent with invoiced amounts and unbilled estimates. Estimated remaining performance obligations are as follows:
 Remaining Performance Obligations
(in millions)2019
2020
2021
2022
2023
Thereafter
Total
Piedmont$17
$69
$64
$64
$61
$430
$705
 Remaining Performance Obligations
(in millions)2018
2019
2020
2021
2022
Thereafter
Total
Piedmont$18
$71
$70
$65
$64
$462
$750

Commercial Renewables
Commercial Renewables earns the majority of its revenues through long-term PPAs and generally sells all of its wind and solar facility output, electricity and Renewable Energy Credits (RECs)RECs to customers. The majority of these PPAs have historically been accounted for as leases. For PPAs that are not accounted for as leases, the delivery of electricity and the delivery of RECs are considered separate performance obligations.
The delivery of electricity is a performance obligation satisfied over time and represents generation and consumption of the electricity over the billing period, generally one month. The delivery of RECs is a performance obligation satisfied at a point in time and represents delivery of each REC generated by the wind or solar facility. The majority of self-generated RECs are bundled with energy in Duke Energy’s contracts and, as such, related revenues are recognized as energy is generated and delivered as that pattern is consistent with Duke Energy’s performance. Commercial Renewables recognizes revenue based on the energy generated and billed for the period, generally one month, at contractual rates (including unbilled estimates) according to the invoice practical expedient. Amounts are typically due within 30 days of invoice.
Other
The remainder of Duke Energy’s operations is presented as Other, which does not include material revenues from contracts with customers.


PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





FINANCIAL STATEMENTSREVENUE


Disaggregated Revenues
For the Electric and Gas segments, revenue by customer class is most meaningful to Duke Energy as each respective customer class collectively represents unique customer expectations of service, generally has different energy and demand requirements, and operates under tailored, regulatory approved pricing structures. Additionally, each customer class is impacted differently by weather and a variety of economic factors including the level of population growth, economic investment, employment levels, and regulatory activities in each of Duke Energy’s jurisdictions. As such, analyzing revenues disaggregated by customer class allows Duke Energy to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. For the Commercial Renewables segment, the majority of revenues from contracts with customers are from selling all of the unit-contingent output at contractually defined pricing under long-term PPAs with consistent expectations regarding the timing and certainty of cash flows. Disaggregated revenues are presented as follows:
 Three Months Ended September 30, 2018
  Duke
 Duke
Duke
Duke
Duke
 
(in millions)Duke
Energy
Progress
Energy
Energy
Energy
Energy
 
By market or type of customerEnergy
Carolinas
Energy
Progress
Florida
Ohio
Indiana
Piedmont
Electric Utilities and Infrastructure        
   Residential$2,729
$823
$1,425
$572
$853
$203
$279
$
   General1,763
635
800
373
427
112
218

   Industrial835
352
246
177
69
33
202

   Wholesale589
132
372
335
37
3
81

   Other revenues225
109
134
90
44
20
29

Total Electric Utilities and Infrastructure revenue from contracts with customers$6,141
$2,051
$2,977
$1,547
$1,430
$371
$809
$
         
Gas Utilities and Infrastructure        
   Residential$116
$
$
$
$
$59
$
$57
   Commercial66




20

46
   Industrial28




3

24
   Power Generation






13
   Other revenues23




1

22
Total Gas Utilities and Infrastructure revenue from contracts with customers$233
$
$
$
$
$83
$
$162
         
Commercial Renewables        
Revenue from contracts with customers$61
$
$
$
$
$
$
$
         
Other        
Revenue from contracts with customers$16
$
$
$
$
$12
$
$
         
Total revenue from contracts with customers$6,451
$2,051
$2,977
$1,547
$1,430
$466
$809
$162
         
Other revenue sources(a)
$177
$39
$68
$35
$32
$3
$10
$10
Total revenues$6,628
$2,090
$3,045
$1,582
$1,462
$469
$819
$172
 Three Months Ended September 30, 2019
  Duke
 Duke
Duke
Duke
Duke
 
(in millions)Duke
Energy
Progress
Energy
Energy
Energy
Energy
 
By market or type of customerEnergy
Carolinas
Energy
Progress
Florida
Ohio
Indiana
Piedmont
Electric Utilities and Infrastructure        
   Residential$2,923
$892
$1,522
$625
$897
$215
$294
$
   General1,885
687
843
399
444
127
225

   Industrial869
372
255
189
66
40
204

   Wholesale617
113
429
368
61
13
63

   Other revenues198
76
118
70
48
18
22

Total Electric Utilities and Infrastructure revenue from contracts with customers$6,492
$2,140
$3,167
$1,651
$1,516
$413
$808
$
         
Gas Utilities and Infrastructure        
   Residential$113
$
$
$
$
$53
$
$59
   Commercial68




21

47
   Industrial26




4

25
   Power Generation






13
   Other revenues16




3

13
Total Gas Utilities and Infrastructure revenue from contracts with customers$223
$
$
$
$
$81
$
$157
         
Commercial Renewables        
Revenue from contracts with customers$69
$
$
$
$
$
$
$
         
Other        
Revenue from contracts with customers$8
$
$
$
$
$
$
$
Total revenue from contracts with customers$6,792
$2,140
$3,167
$1,651
$1,516
$494
$808
$157
         
Other revenue sources(a)
$148
$22
$75
$37
$32
$(5)$(1)$11
Total revenues$6,940
$2,162
$3,242
$1,688
$1,548
$489
$807
$168
(a)Other revenue sources include revenues from leases, derivatives and alternative revenue programs that are not considered revenues from contracts with customers. Alternative revenue programs in certain jurisdictions include regulatory mechanisms that periodically adjust for over or under collection of related revenues.




PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)






 Nine Months Ended September 30, 2018
  Duke
 Duke
Duke
Duke
Duke
 
(in millions)Duke
Energy
Progress
Energy
Energy
Energy
Energy
 
By market or type of customerEnergy
Carolinas
Energy
Progress
Florida
Ohio
Indiana
Piedmont
Electric Utilities and Infrastructure        
   Residential$7,264
$2,263
$3,636
$1,540
$2,096
$564
$802
$
   General4,619
1,608
2,109
972
1,137
318
584

   Industrial2,235
893
678
481
197
96
567

   Wholesale1,737
366
1,140
1,019
121
5
226

   Other revenues558
261
359
222
137
57
66

Total Electric Utilities and Infrastructure revenue from contracts with customers$16,413
$5,391
$7,922
$4,234
$3,688
$1,040
$2,245
$
         
Gas Utilities and Infrastructure        
   Residential$682
$
$
$
$
$236
$
$446
   Commercial354




97

257
   Industrial107




13

93
   Power Generation






40
   Other revenues101




13

88
Total Gas Utilities and Infrastructure revenue from contracts with customers$1,244
$
$
$
$
$359
$
$924
         
Commercial Renewables        
Revenue from contracts with customers$141
$
$
$
$
$
$
$
         
Other        
Revenue from contracts with customers$47
$
$
$
$
$36
$
$
         
Total Revenue from contracts with customers$17,845
$5,391
$7,922
$4,234
$3,688
$1,435
$2,245
$924
         
Other revenue sources(a)
$561
$134
$197
$99
$92
$17
$43
$16
Total revenues$18,406
$5,525
$8,119
$4,333
$3,780
$1,452
$2,288
$940
FINANCIAL STATEMENTSREVENUE


 Three Months Ended September 30, 2018
  Duke
 Duke
Duke
Duke
Duke
 
(in millions)Duke
Energy
Progress
Energy
Energy
Energy
Energy
 
By market or type of customerEnergy
Carolinas
Energy
Progress
Florida
Ohio
Indiana
Piedmont
Electric Utilities and Infrastructure        
   Residential$2,729
$823
$1,425
$572
$853
$203
$279
$
   General1,763
635
800
373
427
112
218

   Industrial835
352
246
177
69
33
202

   Wholesale589
132
372
335
37
3
81

   Other revenues225
109
134
90
44
20
29

Total Electric Utilities and Infrastructure revenue from contracts with customers$6,141
$2,051
$2,977
$1,547
$1,430
$371
$809
$
         
Gas Utilities and Infrastructure        
   Residential$116
$
$
$
$
$59
$
$57
   Commercial66




20

46
   Industrial28




3

24
   Power Generation






13
   Other revenues23




1

22
Total Gas Utilities and Infrastructure revenue from contracts with customers$233
$
$
$
$
$83
$
$162
         
Commercial Renewables        
Revenue from contracts with customers$61
$
$
$
$
$
$
$
         
Other        
Revenue from contracts with customers$16
$
$
$
$
$12
$
$
Total revenue from contracts with customers$6,451
$2,051
$2,977
$1,547
$1,430
$466
$809
$162
         
Other revenue sources(a)
$177
$39
$68
$35
$32
$3
$10
$10
Total revenues$6,628
$2,090
$3,045
$1,582
$1,462
$469
$819
$172
(a)Other revenue sources include revenues from leases, derivatives and alternative revenue programs that are not considered revenues from contracts with customers. Alternative revenue programs in certain jurisdictions include regulatory mechanisms that periodically adjust for over or under collection of related revenues.
IMPACT OF WEATHER AND THE TIMING OF BILLING PERIODS

Revenues and costs are influenced by seasonal weather patterns. Peak sales of electricity occur during the summer and winter months, which results in higher revenue and cash flows during these periods. By contrast, lower sales of electricity occur during the spring and fall, allowing for scheduled plant maintenance. Residential and general service customers are more impacted by weather than industrial customers. Estimated weather impacts are based on actual current period weather compared to normal weather conditions. Normal weather conditions are defined as the long-term average of actual historical weather conditions. Heating-degree days measure the variation in weather based on the extent the average daily temperature falls below a base temperature. Cooling-degree days measure the variation in weather based on the extent the average daily temperature rises above the base temperature. Each degree of temperature below the base temperature counts as one heating-degree day and each degree of temperature above the base temperature counts as one cooling-degree day.
The estimated impact of weather on earnings for Electric Utilities and Infrastructure is based on the temperature variances from a normal condition and customers' historic usage patterns. The methodology used to estimate the impact of weather does not consider all variables that may impact customer response to weather conditions, such as humidity in the summer or wind chill in the winter. The precision of this estimate may also be impacted by applying long-term weather trends to shorter-term periods.

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





FINANCIAL STATEMENTSREVENUE
Gas Utilities and Infrastructure's costs and revenues are influenced by seasonal patterns due to peak natural gas sales occurring during the winter months as a result of space heating requirements. Residential customers are the most impacted by weather. There are certain regulatory mechanisms for the North Carolina, South Carolina, Tennessee and Ohio service territories that normalize the margins collected from certain customer classes during the winter. In North Carolina, rate design provides protection from both weather and other usage variations such as conservation, while South Carolina and Tennessee revenues are adjusted solely based on weather. Ohio primarily employs a fixed charge each month regardless of the season and usage.

 Nine Months Ended September 30, 2019
  Duke
 Duke
Duke
Duke
Duke
 
(in millions)Duke
Energy
Progress
Energy
Energy
Energy
Energy
 
By market or type of customerEnergy
Carolinas
Energy
Progress
Florida
Ohio
Indiana
Piedmont
Electric Utilities and Infrastructure        
   Residential$7,597
$2,331
$3,879
$1,657
$2,222
$563
$825
$
   General4,896
1,714
2,225
1,044
1,181
335
619

   Industrial2,339
927
708
514
194
109
595

   Wholesale1,685
341
1,133
992
141
36
176

   Other revenues557
222
389
239
150
59
66

Total Electric Utilities and Infrastructure revenue from contracts with customers$17,074
$5,535
$8,334
$4,446
$3,888
$1,102
$2,281
$
         
Gas Utilities and Infrastructure        
   Residential$673
$
$
$
$
$229
$
$443
   Commercial359




96

263
   Industrial103




14

91
   Power Generation






39
   Other revenues101




13

88
Total Gas Utilities and Infrastructure revenue from contracts with customers$1,236
$
$
$
$
$352
$
$924
         
Commercial Renewables        
Revenue from contracts with customers$157
$
$
$
$
$
$
$
         
Other        
Revenue from contracts with customers$18
$
$
$
$
$
$
$
Total Revenue from contracts with customers$18,485
$5,535
$8,334
$4,446
$3,888
$1,454
$2,281
$924
         
Other revenue sources(a)
$491
$84
$224
$113
$99
$(1)$8
$32
Total revenues$18,976
$5,619
$8,558
$4,559
$3,987
$1,453
$2,289
$956
(a)Other revenue sources include revenues from leases, derivatives and alternative revenue programs that are not considered revenues from contracts with customers. Alternative revenue programs in certain jurisdictions include regulatory mechanisms that periodically adjust for over or under collection of related revenues.



FINANCIAL STATEMENTSREVENUE


 Nine Months Ended September 30, 2018
  Duke
 Duke
Duke
Duke
Duke
 
(in millions)Duke
Energy
Progress
Energy
Energy
Energy
Energy
 
By market or type of customerEnergy
Carolinas
Energy
Progress
Florida
Ohio
Indiana
Piedmont
Electric Utilities and Infrastructure        
   Residential$7,264
$2,263
$3,636
$1,540
$2,096
$564
$802
$
   General4,619
1,608
2,109
972
1,137
318
584

   Industrial2,235
893
678
481
197
96
567

   Wholesale1,737
366
1,140
1,019
121
5
226

   Other revenues558
261
359
222
137
57
66

Total Electric Utilities and Infrastructure revenue from contracts with customers$16,413
$5,391
$7,922
$4,234
$3,688
$1,040
$2,245
$
         
Gas Utilities and Infrastructure        
   Residential$682
$
$
$
$
$236
$
$446
   Commercial354




97

257
   Industrial107




13

93
   Power Generation






40
   Other revenues101




13

88
Total Gas Utilities and Infrastructure revenue from contracts with customers$1,244
$
$
$
$
$359
$
$924
         
Commercial Renewables        
Revenue from contracts with customers$141
$
$
$
$
$
$
$
         
Other        
Revenue from contracts with customers$47
$
$
$
$
$36
$
$
Total Revenue from contracts with customers$17,845
$5,391
$7,922
$4,234
$3,688
$1,435
$2,245
$924
         
Other revenue sources(a)
$561
$134
$197
$99
$92
$17
$43
$16
Total revenues$18,406
$5,525
$8,119
$4,333
$3,780
$1,452
$2,288
$940
(a)Other revenue sources include revenues from leases, derivatives and alternative revenue programs that are not considered revenues from contracts with customers. Alternative revenue programs in certain jurisdictions include regulatory mechanisms that periodically adjust for over or under collection of related revenues.
UNBILLED REVENUE
Unbilled revenues are recognized by applying customer billing rates to the estimated volumes of energy or natural gas 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, timing of rendering customer bills and meter reading schedules, and the impact of weather normalization or margin decoupling mechanisms.
Unbilled revenues are included within Receivables and Receivables of VIEs on the Condensed Consolidated Balance Sheets as shown in the following table.
(in millions)September 30, 2019
 December 31, 2018
Duke Energy$831
 $896
Duke Energy Carolinas312
 313
Progress Energy265
 244
Duke Energy Progress141
 148
Duke Energy Florida124
 96
Duke Energy Ohio2
 2
Duke Energy Indiana19
 23
Piedmont2
 73




(in millions)September 30, 2018
 December 31, 2017
Duke Energy$802
 $944
Duke Energy Carolinas278
 342
Progress Energy283
 228
Duke Energy Progress163
 143
Duke Energy Florida120
 85
Duke Energy Ohio2
 4
Duke Energy Indiana25
 21
Piedmont3
 86
FINANCIAL STATEMENTSREVENUE


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, CRC, and accountsaccount 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)September 30, 2019
 December 31, 2018
Duke Energy Ohio$74
 $86
Duke Energy Indiana124
 128
(in millions)September 30, 2018
 December 31, 2017
Duke Energy Ohio$68
 $104
Duke Energy Indiana121
 132

14. COMMON STOCK15. STOCKHOLDERS' EQUITY
Basic Earnings Per Share (EPS)EPS is computed by dividing net income attributable to Duke Energy common stockholders, as 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 stockholders, 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 and equity forward sale agreements, were exercised or settled. Duke Energy’s participating securities are restricted stock units that are entitled to dividends declared on Duke Energy common stock during the restricted stock unit’s vesting periods. Dividends declared on preferred stock are recorded on the income statement as a reduction of net income to arrive at net income attributable to Duke Energy common stockholders. Dividends accumulated on preferred stock are a reduction to net income used in the calculation of basic and diluted EPS.

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





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 ofand common shares outstanding.and preferred share dividends declared.
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended September 30, Nine Months Ended September 30,
(in millions, except per-share amounts)2018
 2017
 2018
 2017
2019
 2018
 2019
 2018
Income from continuing operations attributable to Duke Energy common stockholders excluding impact of participating securities$1,077
 $954
 $2,199
 $2,356
$1,324
 $1,077
 $3,041
 $2,199
Weighted average shares outstanding – basic713
 700
 705
 700
       
Weighted average common shares outstanding – basic729
 713
 728
 705
Equity Forwards1
 
 1
 

 1
 
 1
Weighted average shares outstanding – diluted714
 700
 706
 700
Earnings per share from continuing operations attributable to Duke Energy common stockholders       
Weighted average common shares outstanding – diluted729
 714
 728
 706
EPS from continuing operations attributable to Duke Energy common stockholders       
Basic$1.51
 $1.36
 $3.12
 $3.37
$1.82
 $1.51
 $4.18
 $3.12
Diluted$1.51
 $1.36
 $3.11
 $3.37
$1.82
 $1.51
 $4.18
 $3.11
Potentially dilutive items excluded from the calculation(a)
2
 2
 2 22
 2
 2
 2
Dividends declared per common share$0.9275
 $0.89
 $2.7075
 $2.60
$0.945
 $0.9275
 $2.800
 $2.7075
Dividends declared on Series A preferred stock per depositary share$0.359
 $
 $0.667
 $
(a)Performance stock awards were not included in the dilutive securities calculation because the performance measures related to the awards had not been met.
Equity IssuanceCommon Stock
On February 20, 2018, Duke Energy filed a prospectus supplement and executed an Equity Distribution Agreement (the EDA)EDA under which it may sell up to $1 billion of its common stock through an at-the-market (ATM)ATM offering program, including an equity forward sales component. The EDA was entered into with Wells Fargo Securities, LLC, Citigroup Global Markets Inc., and J.P. Morgan Securities LLC (the Agents).the Agents. Under the terms of the EDA, Duke Energy maywas allowed to issue and sell, through any of the Agents, shares of common stock throughstock. The existing ATM offering program expired on September 23, 2019. Duke Energy expects to reestablish an ATM offering program during November 2019.
In June 2018, Duke Energy marketed two separate tranches, each for 1.3 million shares, of common stock. The first tranche was marketed with Wells Fargo Bank at an initial forward price of $72.02 per share and the second tranche was marketed with Citibank at an initial forward price of $78.71 per sharestock through equity forward transactions under the ATM program. The Equity Forwards requireIn December 2018, Duke Energy to either physically settle the transactionssettled these equity forwards by issuingdelivering 2.6 million shares of common stock in exchange for net proceeds at the then-applicable forward sale price specified by the agreements or net settle in whole or in part through the delivery or receipt of cash or shares. The settlement alternative is at Duke Energy's election.approximately $195 million.
Separately, in March 2018, Duke Energy marketed an equity offering of 21.3 million shares of common stock through an Underwriting Agreement with Credit Suisse Securities (USA) LLC, J.P. Morgan Securities LLC, Barclays Capital Inc. and Goldman Sachs & Co. LLC, as representatives of several underwriters, Credit Suisse Capital LLC and J.P. Morgan Securities LLC as Forward Sellers, and Credit Suisse Capital LLC and JPMorgan Chase National Bank Associate, acting as forward purchasers.Agreement. In connection with the offering, Duke Energy entered into equity forward sale agreements with Credit Suisse Securities (USA) LLC as Agent for Credit Suisse Capital LLC and J.P. Morgan Chase Bank, National Association.agreements. The sale price was $75 per share less certain net adjustments for an initial forward price of $74.07 per share. The Equity Forwards requireequity forwards required Duke Energy to either physically settle the transactions by issuing 21.3 million shares in exchange for net proceeds at the then-applicable forward sale price specified by the agreements, or net settle in whole or in part through the delivery or receipt of cash or shares. The settlement alternative is at Duke Energy's election. In June 2018, Duke Energy physically settled one-half of the equity forwards by delivering approximately 10.6 million shares of common stock in exchange for net cash proceeds of approximately $781 million. In December 2018, Duke Energy physically settled the remaining equity forward by delivering 10.6 million shares of common stock in exchange for net cash proceeds of approximately $766 million.



FINANCIAL STATEMENTSSTOCKHOLDERS' EQUITY


In 2018, Duke Energy also issued 2.2 million shares through its DRIP with an increase in additional paid-in capital of approximately $174 million. For contracts that have not been settled, nothe nine months ended September 30, 2019, Duke Energy issued 1.4 million shares through its DRIP with an increase in additional paid-in capital of approximately $120 million.
In March and April 2019, Duke Energy marketed two separate tranches, each for 1.1 million shares, of common stock through equity forward transactions under the ATM program. The first tranche had an initial forward price of $89.83 per share and the second tranche had an initial forward price of $88.82 per share. In May and June 2019, a third tranche of 1.6 million shares of common stock was marketed and had an initial forward price of $86.23. The equity forwards require Duke Energy to either physically settle the transaction by issuing shares in exchange for net proceeds at the then-applicable forward sale price specified by the agreements or net settle in whole or in part through the delivery or receipt of cash or shares. The settlement alternative is at Duke Energy's election. No amounts have or will be recorded in Duke Energy's Condensed Consolidated Financial Statements with respect to the equity orthese ATM offerings until settlements of the Equity Forwardsequity forwards occur, which is expected by December 31, 2018. If Duke Energy had elected to net share settle these contracts as of September 30, 2018, Duke Energy would have been required to deliver 1.1 million shares.2019. The initial forward sale price will be subject to adjustment on a daily basis based on a floating interest rate factor and will decrease by other fixed amounts specified in the relevant forward sale agreement.agreements. Until settlement of the Equity Forwards, earnings per shareequity forwards, EPS dilution resulting from the agreements, if any, will be determined under the treasury stock method. Share dilution occurs when
Preferred Stock
On March 29, 2019, Duke Energy completed the average marketissuance of 40 million depositary shares, each representing 1/1,000th share of its Series A Cumulative Redeemable Perpetual Preferred Stock, at a price of $25 per depositary share. The transaction resulted in net proceeds of $973 million after issuance costs with proceeds used for general corporate purposes and to reduce short-term debt. The preferred stock has a $25 liquidation preference per depositary share and earns dividends on a cumulative basis at a rate of 5.75% per annum. Dividends are payable quarterly in arrears on the 16th day of March, June, September and December, and began on June 16, 2019.
The Series A Preferred Stock has no maturity or mandatory redemption date, is not redeemable at the option of the holders and includes separate call options. The first call option allows Duke Energy to call the Series A Preferred Stock at a redemption price of $25.50 per depositary share prior to June 15, 2024, in whole but not in part, at any time within 120 days after a ratings event where a rating agency amends, clarifies or changes the criteria it uses to assign equity credit for securities such as the preferred stock. The second call option allows Duke Energy to call the preferred stock, in whole or in part, at any time, on or after June 15, 2024, at a redemption price of $25 per depositary share. Duke Energy is also required to redeem all accumulated and unpaid dividends if either call option is exercised.
On September 12, 2019, Duke Energy completed the issuance of 1 million shares of its Series B Fixed-Rate Reset Cumulative Redeemable Perpetual Preferred Stock, at a price of $1,000 per share. The transaction resulted in net proceeds of $990 million after issuance costs with proceeds being used to pay down short-term debt, repay at maturity $500 million senior notes due September 2019 and for general corporate purposes. The preferred stock has a $1,000 liquidation preference per share and earns dividends on a cumulative basis at an initial rate of 4.875% per annum. Dividends are payable semiannual in arrears on the 16th day of March and September, beginning on March 16, 2020. On September 16, 2024, the First Call Date, and any fifth anniversary of the First Call Date (each a Reset Date),the dividend rate will reset based on the then current five-year U.S. treasury rate plus a spread of 3.388%.
The Series B Preferred Stock has no maturity or mandatory redemption date, is not redeemable at the option of the holders and includes separate call options. The first call option allows Duke Energy to call the Series B Preferred Stock at a redemption price of $1,020 per share, in whole but not in part, at any time within 120 days after a ratings event. The second call option allows Duke Energy to call the preferred stock, in whole or in part, on the First Call Date or any subsequent Reset Date at a redemption price in cash equal to $1,000 per share. Duke Energy is also required to redeem all accumulated and unpaid dividends if either call option is exercised.
Dividends issued on its Series A and Series B Preferred Stock are subject to approval by the Duke Energy Board of Directors. However, the deferral of dividend payments on the preferred stock prohibits the declaration of common stock dividends.
The Series A and Series B Preferred Stock rank, with respect to dividends and distributions upon liquidation or dissolution:
senior to Common Stock and to each other class or series of capital stock established after the original issue date of the Series A and Series B Preferred Stock that is expressly made subordinated to the Series A and Series B Preferred Stock;
on a parity with any class or series of capital stock established after the original issue date of the Series A and Series B Preferred Stock that is not expressly made senior or subordinated to the Series A or Series B Preferred Stock;
junior to any class or series of capital stock established after the original issue date of the Series A and Series B Preferred Stock that is expressly made senior to the Series A or Series B Preferred Stock;
junior to all of existing and future indebtedness (including indebtedness outstanding under Duke Energy's credit facilities, unsecured senior notes, junior subordinated debentures and commercial paper) and other liabilities with respect to assets available to satisfy claims against Duke Energy; and
structurally subordinated to existing and future indebtedness and other liabilities of Duke Energy's subsidiaries and future preferred stock is higher thanof subsidiaries.



FINANCIAL STATEMENTSSTOCKHOLDERS' EQUITY


Holders of Series A and Series B Preferred Stock have no voting rights with respect to matters that generally require the average forward sales price.
Forapproval of voting stockholders. The limited voting rights of holders of Series A or Series B Preferred Stock include the nine months ended September 30, 2018,right to vote as a single class, respectively, on certain matters that may affect the preference or special rights of the preferred stock, except in the instance that Duke Energy has issued 1.7 million shares through its Dividend Reinvestment Program (DRIP) with an increase in additional paid-in capitalelects to defer the payment of approximately $134 million.

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





15. STOCK-BASED COMPENSATION
Stock-based compensation awarded to employeesdividends for a total of six quarterly full dividend periods for Series A Preferred Stock or outside directors is measured at the service inception datethree semiannual full dividend periods for Series B Preferred Stock. If dividends are deferred for a cumulative total of six quarterly full dividend periods for Series A Preferred Stock or grant date. The fair valuethree semiannual full dividend periods for Series B Preferred Stock, whether or not for consecutive dividend periods, holders of the award is expensed or capitalized overrespective preferred stock have the requisite service period. For awards with performance conditions,right to elect two additional Board members to the probabilityDuke Energy Board of vesting is assessed at each reporting period and compensation cost is adjusted based upon that assessment.
The following table presents information related to Duke Energy's stock–based compensation.
 Three Months Ended Nine Months Ended
 September 30, September 30,
(in millions)2018
 2017
 2018
 2017
Restricted stock unit awards$10
 $10
 $32
 $30
Performance awards13
 7
 27
 20
Pretax stock-based compensation cost$23
 $17
 $59
 $50
Stock-based compensation cost capitalized$1
 $1
 $3
 $2
Stock-based compensation expense$22
 $16
 $56
 $48
Tax benefit associated with stock-based compensation expense$5
 $6
 $13
 $18
Directors.
16. EMPLOYEE BENEFIT PLANS
DEFINED BENEFIT RETIREMENT PLANS
Duke Energy maintains,and certain subsidiaries maintain, and the Subsidiary Registrants participate in, qualified and non-qualified, non-contributory defined benefit retirement plans. Duke Energy’sEnergy'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 presents contributions made byincludes information related to the Duke Energy RegistrantsRegistrants' contributions to theirits qualified defined benefit pension plans during the nine months ended September 30, 2018.
plans.
Nine Months Ended September 30, 2019
  Duke
   Duke
 Duke
 Duke
  Duke
   Duke
 Duke
 Duke
 Duke
  
Duke
 Energy
 Progress
 Energy
 Energy
 Energy
Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Indiana
Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Contributions$141
 $46
 $45
 $25
 $20
 $8
Contributions made$77
 $7
 $57
 $4
 $53
 $2
 $2
 $1
Duke Energy and Duke Energy Ohio made contributions of $8 million and $4 million, respectively, to their qualified defined benefit pension plans during the nine months ended September 30, 2017.
Duke Energy uses a December 31 measurement date for its qualified non-contributory defined benefit retirement plan assets and obligations.
Components However, because Duke Energy believed it was probable in 2019 that total lump-sum benefit payments would exceed the settlement threshold, which is defined as the sum of Net Periodic Benefit Costs
The tables below present totalthe service cost and interest cost on projected benefit obligation components of net periodic pension costs, Duke Energy remeasured the plan assets and plan obligations associated with one of its qualified pension plans as of June 30, 2019, and September 30, 2019, (total lump-sum benefit costs prior to capitalizationpayments exceeded the settlement threshold as of amounts reflectedSeptember 30, 2019). The discount rate used for the remeasurements was 3.5% and 3.2% as Net property, plantof June 30, 2019, and equipmentSeptember 30, 2019, respectively. The cash balance interest crediting rate was 4.0% as of June 30, 2019, and September 30, 2019. All other assumptions used for the June 30, 2019, and September 30, 2019, remeasurements were consistent with the measurement as of December 31, 2018.
As a result of the June 30, 2019, remeasurement, Duke Energy recognized a remeasurement gain of $18 million, which was recorded in Other within Other Noncurrent Assets on the Condensed Consolidated Balance Sheets. OnlySheets as of June 30, 2019. The remeasurement gain, which represents an increase in funded status, reflects an increase of $275 million in the service cost componentfair value of net periodicplan assets and an increase of $257 million in the projected benefit costs is eligible to be capitalized. The remaining non-capitalized portionsobligation. As a result of net periodic benefit costs are classified as either: (1) service cost,the September 30, 2019, remeasurement, Duke Energy recognized a remeasurement loss of $136 million, which iswas recorded in Operations, maintenance and otherOther within Other Noncurrent Assets on the Condensed Consolidated StatementsBalance Sheets as of Operations; orSeptember 30, 2019. The remeasurement loss, which represents a decrease in funded status, reflects a decrease of $10 million in the fair value of plan assets and an increase of $126 million in the projected benefit obligation.
As the result of settlement accounting, Duke Energy recognized settlement charges of $69 million and $16 million, primarily as (2) componentsa regulatory asset within Other Noncurrent Assets on the Condensed Consolidated Balance Sheets as of non-service cost, which isJune 30, 2019, and September 30, 2019, respectively (an immaterial amount was recorded in Other income and expenses, net onwithin the Condensed Consolidated StatementsStatement of Operations. See Note 1 for further information on impacts of the retirement benefits accounting standard adoptedOperations). Settlement charges recognized by Duke Energy on January 1, 2018.
Pension and other post-retirement benefit costs presented in the tables below for the Subsidiary Registrants are amounts allocated fromas of June 30, 2019, were $43 million for Duke Energy Carolinas, $16 million for the employees of the respective Subsidiary Registrants. The Condensed Consolidated Statements of Operations ofDuke Energy Progress, $3 million for Duke Energy Florida, $3 million for Duke Energy Indiana, $1 million for Duke Energy Ohio and $3 million for Piedmont. Settlement charges recognized by the Subsidiary Registrants also include allocated net periodic benefit costsas of September 30, 2019 were $6 million for their proportionate share of pension and post-retirement benefit costs related to employees of the Duke Energy shared services affiliate. However,Carolinas, $3 million for Duke Energy Progress, $2 million for Duke Energy Florida, $1 million for Duke Energy Indiana and $3 million for Piedmont. The settlement charges reflect the recognition of a pro-rata portion of previously unrecognized actuarial losses, equal to the percentage of reduction in the tables below these amounts are only presented in the Duke Energy column. For additional information on the corporate governance and shared service expenses allocatedprojected benefit obligation resulting from the Duke Energy shared service affiliate, see Note 8.total lump-sum benefits payments as of September 30, 2019.


PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





FINANCIAL STATEMENTSEMPLOYEE BENEFIT PLANS


QUALIFIED PENSION PLANS
The following tables include the components of net periodic pension costs for qualified pension plans.
Three Months Ended September 30, 2018Three Months Ended September 30, 2019
  Duke
   Duke
 Duke
 Duke
 Duke
    Duke
   Duke
 Duke
 Duke
 Duke
  
Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Service cost$47
 $15
 $13
 $7
 $5
 $2
 $2
 $2
$42
 $13
 $13
 $7
 $5
 $1
 $2
 $1
Interest cost on projected benefit obligation74
 18
 24
 10
 13
 4
 6
 3
77
 17
 24
 10
 14
 5
 6
 2
Expected return on plan assets(140) (37) (45) (21) (23) (7) (10) (6)(140) (36) (45) (22) (22) (7) (11) (5)
Amortization of actuarial loss33
 7
 11
 6
 6
 1
 2
 3
28
 6
 10
 4
 6
 2
 3
 2
Amortization of prior service credit(8) (2) (1) 
 
 
 
 (3)(8) (2) (1) 
 
 
 
 (2)
Net periodic pension costs$6
 $1
 $2
 $2
 $1
 $
 $
 $(1)$(1) $(2) $1
 $(1) $3
 $1
 $
 $(2)
Three Months Ended September 30, 2017Three Months Ended September 30, 2018
  Duke
   Duke
 Duke
 Duke
 Duke
    Duke
   Duke
 Duke
 Duke
 Duke
  
Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Service cost$40
 $12
 $12
 $6
 $5
 $1
 $2
 $3
$47
 $15
 $13
 $7
 $5
 $2
 $2
 $2
Interest cost on projected benefit obligation82
 20
 25
 12
 13
 4
 7
 3
74
 18
 24
 10
 13
 4
 6
 3
Expected return on plan assets(136) (35) (43) (21) (21) (7) (11) (6)(140) (37) (45) (21) (23) (7) (10) (6)
Amortization of actuarial loss36
 8
 14
 6
 7
 1
 3
 3
33
 7
 11
 6
 6
 1
 2
 3
Amortization of prior service credit(6) (2) (1) 
 
 
 
 (1)(8) (2) (1) 
 
 
 
 (3)
Other2
 
 1
 
 
 
 
 
Net periodic pension costs$18
 $3
 $8
 $3
 $4
 $(1) $1
 $2
$6
 $1
 $2
 $2
 $1
 $
 $
 $(1)

Nine Months Ended September 30, 2018Nine Months Ended September 30, 2019
  Duke
   Duke
 Duke
 Duke
 Duke
    Duke
   Duke
 Duke
 Duke
 Duke
  
Duke Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions)Energy Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Service cost$137
 $45
 $39
 $22
 $16
 $4
 $7
 $6
$116
 $37
 $34
 $19
 $15
 $3
 $6
 $4
Interest cost on projected benefit obligation224
 54
 70
 31
 38
 13
 18
 9
242
 58
 76
 34
 41
 14
 19
 8
Expected return on plan assets(420) (111) (133) (63) (69) (21) (31) (18)(426) (111) (134) (66) (66) (21) (32) (16)
Amortization of actuarial loss99
 21
 33
 16
 18
 3
 6
 9
77
 17
 28
 10
 18
 3
 6
 5
Amortization of prior service credit(24) (6) (3) (1) (1) 
 
 (9)(24) (6) (2) (1) (1) 
 (1) (7)
Net periodic pension costs$16
 $3
 $6
 $5
 $2
 $(1) $
 $(3)$(15) $(5) $2
 $(4) $7
 $(1) $(2) $(6)
 Nine Months Ended September 30, 2018
   Duke
   Duke
 Duke
 Duke
 Duke
  
 Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Service cost$137
 $45
 $39
 $22
 $16
 $4
 $7
 $6
Interest cost on projected benefit obligation224
 54
 70
 31
 38
 13
 18
 9
Expected return on plan assets(420) (111) (133) (63) (69) (21) (31) (18)
Amortization of actuarial loss99
 21
 33
 16
 18
 3
 6
 9
Amortization of prior service credit(24) (6) (3) (1) (1) 
 
 (9)
Net periodic pension costs$16
 $3
 $6
 $5
 $2
 $(1) $
 $(3)
 Nine Months Ended September 30, 2017
   Duke
   Duke
 Duke
 Duke
 Duke
  
 Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Service cost$120
 $36
 $36
 $18
 $15
 $3
 $6
 $9
Interest cost on projected benefit obligation246
 60
 75
 36
 39
 14
 21
 9
Expected return on plan assets(408) (106) (129) (63) (63) (21) (33) (18)
Amortization of actuarial loss108
 24
 42
 18
 21
 3
 9
 9
Amortization of prior service credit(18) (6) (3) 
 
 
 
 (3)
Other6
 
 3
 1
 
 
 
 1
Net periodic pension costs$54
 $8
 $24
 $10
 $12
 $(1) $3
 $7

NON-QUALIFIED PENSION PLANS
The following tables include the components of netNet periodic pension costs for non-qualified pension plans were not material for registrants with non-qualified pension costs.

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





 Three Months Ended September 30, 2018
   Duke
   Duke
 Duke
 Duke
 Energy
 Progress
 Energy
 Energy
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
Interest cost on projected benefit obligation$3
 $
 $1
 $
 $
Amortization of actuarial loss2
 
 
 
 
Net periodic pension costs$5
 $
 $1
 $
 $
 Three Months Ended September 30, 2017
   Duke
   Duke
 Duke
 Duke
 Energy
 Progress
 Energy
 Energy
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
Interest cost on projected benefit obligation$4
 $
 $1
 $1
 $1
Amortization of actuarial loss2
 
 1
 
 
Net periodic pension costs$6
 $
 $2
 $1
 $1
 Nine Months Ended September 30, 2018
   Duke
   Duke
 Duke
 Duke
 Energy
 Progress
 Energy
 Energy
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
Service cost$1
 $1
 $
 $
 $
Interest cost on projected benefit obligation9
 
 3
 1
 1
Amortization of actuarial loss6
 
 
 
 
Amortization of prior service (credit) cost(1) 
 1
 
 
Net periodic pension costs$15
 $1
 $4
 $1
 $1
 Nine Months Ended September 30, 2017
   Duke
   Duke
 Duke
 Duke
 Energy
 Progress
 Energy
 Energy
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
Interest cost on projected benefit obligation$10
 $1
 $3
 $2
 $2
Amortization of actuarial loss6
 
 3
 
 
Net periodic pension costs$16
 $1
 $6
 $2
 $2
the three and nine months ended September 30, 2019, and 2018.
OTHER POST-RETIREMENT BENEFIT PLANS
Duke Energy provides, and the Subsidiary Registrants participate in, certain health care and life insurance benefitsNet periodic costs for retired employees on a contributory and non-contributory basis.

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





The following tables include the components of net periodic other post-retirement benefit costs.
 Three Months Ended September 30, 2018
   Duke
   Duke
 Duke
 Duke
 Duke
  
 Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Service cost$2
 $
 $
 $
 $
 $
 $
 $
Interest cost on accumulated post-retirement benefit obligation7
 2
 3
 2
 1
 
 1
 
Expected return on plan assets(4) (2) 
 
 
 
 
 
Amortization of actuarial loss2
 1
 
 
 
 
 1
 
Amortization of prior service credit(5) (1) (2) 
 (1) 
 
 
Net periodic other post-retirement benefit costs$2
 $
 $1
 $2
 $
 $
 $2
 $
 Three Months Ended September 30, 2017
   Duke
   Duke
 Duke
 Duke
 Duke
  
 Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Service cost$1
 $
 $
 $
 $
 $
 $
 $
Interest cost on accumulated post-retirement benefit obligation9
 2
 4
 2
 2
 
 1
 
Expected return on plan assets(3) (2) 
 
 
 
 
 
Amortization of actuarial loss2
 
 5
 3
 2
 
 
 
Amortization of prior service credit(29) (2) (21) (14) (8) 
 
 
Net periodic other post-retirement benefit costs$(20) $(2) $(12) $(9) $(4) $
 $1
 $

 Nine Months Ended September 30, 2018
   Duke
   Duke
 Duke
 Duke
 Duke
  
 Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Service cost$5
 $1
 $
 $
 $
 $
 $
 $
Interest cost on accumulated post-retirement benefit obligation21
 5
 9
 5
 4
 1
 3
 
Expected return on plan assets(10) (6) 
 
 
 
 
 
Amortization of actuarial loss5
 2
 1
 
 
 
 3
 
Amortization of prior service credit(15) (3) (6) 
 (4) 
 
 (1)
Net periodic other post-retirement benefit costs$6
 $(1) $4
 $5
 $
 $1
 $6
 $(1)
 Nine Months Ended September 30, 2017
   Duke
   Duke
 Duke
 Duke
 Duke
  
 Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Service cost$3
 $
 $
 $
 $
 $
 $
 $
Interest cost on accumulated post-retirement benefit obligation27
 6
 11
 6
 6
 
 1
 
Expected return on plan assets(10) (6) 
 
 
 
 
 
Amortization of actuarial loss (gain)6
 (2) 15
 9
 6
 (1) 
 
Amortization of prior service credit(87) (6) (63) (41) (23) 
 
 
Net periodic other post-retirement benefit costs$(61) $(8) $(37) $(26) $(11) $(1) $1
 $

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)






EMPLOYEE SAVINGS PLAN
Duke Energy sponsors, and the Subsidiary Registrants participate in, an employee savings plan that covers substantially all employees. The following table includes employer contributions made by Duke Energy and expensed by the Subsidiary Registrants.
   Duke
   Duke
 Duke
 Duke
 Duke
  
 Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Three Months Ended September 30,               
2018$49
 $15
 $13
 $9
 $4
 $
 $3
 $4
201743
 14
 12
 9
 4
 1
 2
 2
Nine Months Ended September 30,            
2018$167
 $53
 $45
 $31
 $14
 $2
 $8
 $10
2017147
 49
 42
 30
 13
 3
 7
 5
17. INCOME TAXES
Tax Act
On December 22, 2017, President Trump signed the Tax Act into law. Among other provisions, the Tax Act lowered the corporate federal income tax rate from 35 to 21 percent, limits interest deductions outside of regulated utility operations, requires the normalization of excess deferred taxes associated with property under ARAM as a prerequisite to qualifying for accelerated depreciation and repealed the federal manufacturing deduction. The Tax Act also repealed the corporate alternative minimum tax (AMT) and stipulates a refund of 50 percent of remaining AMT credit carryforwards (to the extent the credits exceed regular taxOPEB plans were not material for the year) for tax years 2018, 2019three and 2020 with all remaining AMT credits to be refunded in tax year 2021. During the three months ended September 30, 2018, the company reclassified $573 million which is 50 percent of the remaining estimated AMT credit carryforwards from noncurrent deferred tax liability to a current federal income tax receivable as a result of the Tax Act. The company reclassified the estimated AMT credit carryforwards during the three months ended September 30, 2018, since the company expects to receive it as a refund from the IRS in the threenine months ended September 30, 2019, based on the expected filing of Duke Energy's 2018 income tax return in the second quarter of 2019.
At this time AMT credits, which are among the certain tax credits treated as refundable under the Tax Act, are subject to sequestration. In the first quarter of 2018, the company revised the December 31, 2017, estimate of the income tax effects of the Tax Act and recorded a $76 million valuation allowance against these AMT credits based on additional interpretative guidance from the Internal Revenue Service related to the Tax Act. See Note 22 to the Consolidated Financial Statements in the Annual Report on Form 10-K/A for the year ended December 31, 2017, for information on the U.S. Securities and Exchange Commission staff's guidance on accounting for the Tax Act (Staff Accounting Bulletin No. 118 (SAB 118), Income Tax Accounting Implications of the Tax Cuts and Jobs Act).
During the three months ended September 30, 2018, the company revised the December 31, 2017 estimate of the income tax effects of the Tax Act, in accordance with SAB 118, by recording a $3 million benefit for the remeasurement of its deferred tax assets and deferred tax liabilities primarily related to the guidance on bonus depreciation issued by the Internal Revenue Service in August of 2018 affecting the computation of the company's 2017 Federal income tax liability. The majority of Duke Energy’s operations are regulated and it is expected that the Subsidiary Registrants will ultimately pass on the savings associated with the amount representing the remeasurement of deferred tax balances related to regulated operations to customers. For Duke Energy's regulated operations, where the reduction is expected to be returned to customers in future rates, the remeasurement has been deferred as a regulatory liability. For the three months ended September 30, 2018, Duke Energy recorded a regulatory liability of $57 million, representing the revaluation of those deferred tax balances. The Subsidiary Registrants continue to respond to requests from regulators in various jurisdictions to determine the timing and magnitude of savings they will pass on to customers.
For the nine months ended September 30, 2018, the company has revised the December 31, 2017, estimates of the income tax effects of the Tax Act, in accordance with SAB 118, by recording an expense of $73 million. Additional tax returns will be filed in the quarter ending December 31, 2018, and Duke Energy expects to make refinements of estimates recorded in the three months ending September 30, 2018. These refinements are not expected to be material to the financial statements. Duke Energy anticipates finalizing and recording any resulting adjustments within the measurement period allowed, which will be no later than the quarter ending December 31, 2018.

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





FINANCIAL STATEMENTSINCOME TAXES


17. INCOME TAXES
EFFECTIVE TAX RATES
The effective tax ratesETRs from continuing operations for each of the Duke Energy Registrants are included in the following table.
 Three Months Ended Nine Months Ended
 September 30, September 30,
 2019
 2018
 2019
 2018
Duke Energy12.4% 13.7% 12.5% 17.0%
Duke Energy Carolinas16.7% 22.6% 17.7% 22.3%
Progress Energy15.3% 18.8% 16.2% 17.0%
Duke Energy Progress14.7% 20.6% 16.1% 18.4%
Duke Energy Florida16.5% 15.0% 18.0% 16.3%
Duke Energy Ohio12.9% 16.0% 15.2% 16.0%
Duke Energy Indiana23.2% 22.7% 23.7% 24.7%
Piedmont35.7% 34.4% 18.5% 20.6%

 Three Months Ended Nine Months Ended
 September 30, September 30,
 2018
 2017
 2018
 2017
Duke Energy13.7% 27.6% 17.0% 30.4%
Duke Energy Carolinas22.6% 32.9% 22.3% 34.1%
Progress Energy18.8% 29.1% 17.0% 31.9%
Duke Energy Progress20.6% 31.7% 18.4% 32.4%
Duke Energy Florida15.0% 34.8% 16.3% 36.1%
Duke Energy Ohio16.0% 33.3% 16.0% 34.4%
Duke Energy Indiana22.7% 38.3% 24.7% 39.0%
Piedmont34.4% 47.6% 20.6% 36.1%
The decrease in the effective tax rate (ETR) for Duke Energy and the Subsidiary Registrants for the three months ended September 30, 2018, is primarily due to the lower statutory federal corporate tax rate under the Tax Act. The decrease in the ETR for Duke Energy andfor the Subsidiary Registrantsthree months ended September 30, 2019, was primarily due to an increase in the amortization of excess deferred taxes.
The decrease in the ETR for Duke Energy for the nine months ended September 30, 2018, is2019, was primarily due to a one-time valuation allowance charge in the lower statutory federal corporateprior year, an adjustment related to the income tax rate underrecognition for equity method investments recorded in the Tax Actfirst quarter of 2019 and an increase in the amortization of federal and state excess deferred taxes, partially offset by a valuation allowance against AMT credits discussed above.taxes. The equity method investment adjustment was immaterial and relates to prior years.
The decrease in the ETR for Duke Energy Carolinas for the three and nine months ended September 30, 2018, is2019, was primarily due to an increase in the lower statutory federal corporate tax rate under the Tax Act and amortization of state excess deferred taxes partially offset by favorable tax return true ups in the prior year.taxes.
The decrease in the ETR for Progress Energy for the three and nine months ended September 30, 2018, is2019, was primarily due to the lower statutory federal corporate tax rate under the Tax Act andan increase in the amortization of federal and state excess deferred taxes.taxes and favorable tax return true ups partially offset by a decrease in AFUDC equity in the current year.
The decrease in the ETR for Duke Energy Progress for the three and nine months ended September 30, 2018, is2019, was primarily due to an increase in the lower statutory federal corporate tax rate under the Tax Act and amortization of state excess deferred taxes.taxes and favorable tax return true ups.
The decreaseincrease in the ETR for Duke Energy Florida for the three and nine months ended September 30, 2018, is2019, was primarily due to a decrease in AFUDC equity in the lower statutory federal corporate tax rate under the Tax Act and the amortization of federal excess deferred taxes.current year.
The decrease in the ETR for Duke Energy Ohio for the three and nine months ended September 30, 2018, is2019, was primarily due to the lower statutory federal corporate tax rate under the Tax Act andan increase in the amortization of federal excess deferred taxes.
The decreaseincrease in the ETR, for Duke Energy Indiana for the three and nine months ended September 30, 2018, is primarily duein relation to the lower statutory federal corporate tax rate under the Tax Act.
The decrease in the ETRpretax losses, for Piedmont for the three months ended September 30, 2018, is2019, was primarily due to an increase in the lower statutory federal corporate tax rate under the Tax Actamortization of excess deferred taxes and partially offset by a decrease in favorable research credits in relation to pretax losses.tax return true ups. The decrease in the ETR for Piedmont for the nine months ended September 30, 2018, is2019, was primarily due to an increase in the lower statutory federal corporateamortization of excess deferred taxes and partially offset by a decrease in favorable tax rate underreturn true ups.
OTHER TAX MATTERS
On October 23, 2019, Duke Energy received a refund of $573 million related to AMT credit carryforwards based on the Tax Act.filing of Duke Energy's 2018 income tax return in 2019.
18. SUBSEQUENT EVENTS
For information on subsequent events related to regulatory matters, stockholders' equity and commitments and contingenciesincome taxes, see Notes 3, 15 and 4,17, respectively.
On October 10, 2018, Hurricane Michael made landfall on Florida's Panhandle as a Category 4 hurricane, the most powerful storm to hit the Florida Panhandle in recorded history. The storm caused significant damage and more than a million power outages within the service territories of Duke Energy Florida, Duke Energy Carolinas and Duke Energy Progress. Duke Energy has not completed the final accumulation of total estimated storm restoration costs incurred; however, the preliminary estimate is approximately $235 million of operation and maintenance expenses and approximately $185 million in capital costs. Given the magnitude of the storm, Duke Energy Carolinas and Duke Energy Progress intend to request approval to defer the incremental costs incurred to a regulatory asset for recovery in the next base rate cases, and Duke Energy Florida will recover these storm costs consistent with the provisions in its 2017 Second Revised and Restated Settlement Agreement.


PART I

MD&ADUKE ENERGY


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, LLC (Duke Energy Progress), Duke Energy Florida, LLC (Duke Energy Florida), Duke Energy Ohio, Inc. (Duke Energy Ohio), Duke Energy Indiana LLC (Duke Energy Indiana) and Piedmont Natural Gas Company, Inc. (Piedmont) (collectively referred to as the Subsidiary Registrants).Piedmont. However, none of the registrants make 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.)U.S. primarily through its wholly owned subsidiaries, Duke Energy Carolinas, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont. 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 should be read in conjunction with the Condensed Consolidated Financial Statements and Notes for the nine months ended September 30, 2018,2019, and with Duke Energy’s Annual Report on Form 10-K/A10-K for the year ended December 31, 2017.2018.
Executive Overview
Global Climate Change
On September 17, 2019, Duke Energy announced an updated climate strategy with a new goal of net-zero carbon emissions from electric generation by 2050. Timelines and initiatives, as well as implementation of new technologies, will vary in each state in which the company operates and will involve collaboration with regulators, customers and other stakeholders.
Hurricane FlorenceDorian
In the third quarter of 2018,2019, Hurricane Florence caused historic flooding, extensive damageDorian impacted approximately 270,000 North Carolina customers and widespread power outages30,000 South Carolina customers within the Duke Energy Progress andservice territory. Duke Energy CarolinasFlorida’s service territories. Approximately 1.8 million customers were impacted. Current estimatedterritory was also threatened by Hurricane Dorian and therefore, Duke Energy Florida also incurred costs to be prepared for potential impact. Estimated restoration costs for Duke Energy are approximately $540$400 million. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
Hurricane Michael
On October 10, 2018, Hurricane Michael made landfall on Florida's Panhandle as a Category 4 hurricane, the most powerful storm to hit the Florida Panhandle in recorded history. The storm caused significant damage and more than a million power outages within the service territories of Duke Energy Florida, Duke Energy Carolinas and Duke Energy Progress. Duke Energy has not completed the final accumulation of total estimated storm restoration costs incurred; however, the preliminary estimate is approximately $235 million of operation and maintenance expenses and approximately $185 million in capital costs. Given the magnitude of the storm, Duke Energy Carolinas and Duke Energy Progress intend to request approval to defer the incremental costs incurred to a regulatory asset for recovery in the next base rate cases, and Duke Energy Florida will recover these storm costs consistent with the provisions in its 2017 Second Revised and Restated Settlement Agreement.
Regulatory Activity
In 2018,2019, Duke Energy advanced regulatory activity underway in multiple jurisdictions, as follows:
Duke Energy Carolinas received an order on itsjurisdictions. The following rate case from the North Carolina Utilities Commission (NCUC) on June 22, 2018. Major components of the order included: a return on equity of 9.9 percent, recovery of past coal ash remediation costs, recovery of Lee Nuclear Project development costs, and partial clarity on the treatment of recent federal tax reform legislation. On July 27, 2018, the NCUC approved Duke Energy Carolinas' compliance filing. As a result, revised customer rates were effective on August 1, 2018.
Duke Energy Progress received an order on its rate case from the NCUC on February 23, 2018. Major components of the order included: a return on equity of 9.9 percent; recovery of past coal ash remediation costs; recovery of deferred storm costs from 2016; and new rates in effect mid-March 2018.cases are underway:
Duke Energy Carolinas and Duke Energy Progress filed a joint petitiongeneral rate cases with the Public Service CommissionNCUC on September 30, 2019, and October 30, 2019, respectively, requesting rate increases go into effect in the third quarter of South Carolina (PSCSC) seeking an order to defer certain costs associated with grid reliability, resiliency, and modernization work that is being performed under the grid improvement initiative. On October 3, 2018, the PSCSC granted Duke Energy Carolinas' and Duke Energy Progress' joint petition.2020.
Duke Energy Carolinas also petitioned the PSCSC seeking an order to defer certain costs associated with the William States Lee Combined Cycle Facility, the new billing and customer information system and the addition of the Carolinas West Primary Distribution Control Center. Duke Energy Progress also petitioned the PSCSC seeking an order to adopt the new depreciation rates and to defer certain costs associated with the deployment of advanced metering infrastructure, the new billing and customer information system and the costs incurred in connection with the return of certain excess deferred state income taxes from North Carolina. These petitions were approved on July 25, 2018.
Duke Energy Florida filed a petition with the Florida Public Service Commission (FPSC) on May 31, 2018, related to approximately $200 million of customer savings associated with the Federal Tax Cuts and Jobs Act (Tax Act). The tax savings will offset accelerated depreciation of Crystal River Units 4 and 5 and Hurricane Irma storm cost recovery. The petition is subject to review and approval by the FPSC.
Duke Energy Ohio along with the Public Utilities Commission of Ohio (PUCO) Staff and certain intervenors filed a Stipulation and Recommendation (Stipulation) with PUCO on April 13, 2018, and the evidentiary hearing concluded on August 6, 2018. The Stipulation, subject to approval by the PUCO, is in connection with Duke Energy Ohio's electric rate case and other regulatory matters.
On July 25, 2018, Duke Energy Ohio filed an application to establish a new rider to implement the benefits of the Tax Act for electric distribution customers. If approved, the new rider will flow through to customers the benefit of the lower statutory federal tax rate since January 1, 2018, all future benefits of the lower tax rates and a full refund of deferred income taxes collected at the higher tax rates in prior years. Deferred income taxes subject to normalization rules will be refunded consistent with federal law and deferred income taxes not subject to normalization rules will be refunded over a 10-year period. An order is expected before the end of the year. Duke Energy Ohio's transmission rates reflect lower federal

PART I

income tax but guidance from FERC on amortization of both protected and unprotected transmission-related EDITs is still pending. On October 24, 2018, the PUCO issued a Finding and Order that, among other things, directed all rate-regulated utilities file an application not for an increase in rates to reflect the impact of the Tax Act on their current rates by January 1, 2019, unless otherwise exempted or directed by the PUCO. Duke Energy Ohio's July 25, 2018, filing for electric distribution operations is consistent with the commission's October 24, 2018, Finding and Order and no further action is needed. Options for Duke Energy Ohio gas customers are still being evaluated.
Duke Energy Kentucky received an order on its electric rate case from the Kentucky Public Service Commission (KPSC) on April 13, 2018. The order granted an annual revenue increase of $21 million, incorporating customer benefits from the Tax Act as well as rider recovery of environmental costs, including coal ash. Duke Energy Kentucky implemented new base rates on May 1, 2018.
On August 31, 2018, Duke Energy Kentucky filed an applicationelectric rate case with the KPSC requesting an increaseon September 3, 2019. Hearings are expected to begin in gas basethe first quarter of 2020 with rates anticipated to go into effect in the second quarter of approximately $10.5 million. The KPSC accepted the filing as of September 10, 2018, and a procedural schedule was set.2020.
On June 27, 2018, Duke Energy Indiana the Indiana Office of Utility Consumers Counselor and others filed testimony consistent with their Stipulation and Settlement Agreement in the federal tax proceedingsa general rate case with the Indiana Utility Regulatory Commission (IURC). Major componentsIURC on July 2, 2019. Hearings are expected to begin in early 2020, with rates to be effective mid-2020.
Additionally, as a result of regulatory orders or settlements, customer rates were impacted in 2019 as follows:
On October 31, 2019, Piedmont received an order from the NCUC and revised customer rates became effective on November 1, 2019.
In May 2019, Duke Energy Carolinas and Duke Energy Progress received orders from the PSCSC and revised customer rates became effective June 1, 2019. As a result of the Directive allowing litigation-related costs, Duke Energy Progress customer rates were revised again July 1, 2019.
Duke Energy Kentucky revised customer rates on April 1, 2019, following settlement on January 30, 2019, of its 2018 Natural Gas Base Rate Case.
At Duke Energy Florida, revised customer rates went into effect in January 2019 as a result of a July 2018 petition to the FPSC to include riders to reflect the lower federal tax rate as they are filed in 2018, base rates the revenue requirement for Duke Energy Florida’s first solar generation project, the Hamilton Project. The FPSC in July 2019, issued an order to reflectallow Duke Energy Florida to include in base rates the lower federal tax rate upon approval, but no later than September 1, 2018, and a timelinerevenue requirements for returning federal excess deferred income taxesits next wave of three solar generation projects, with projected in-service dates ranging from the fourth quarter of 2019 to customers. On August 22, 2018, the IURC approved the settlement and rates have been adjusted effective September 1, 2018.first quarter of 2020.
See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters" for additional information.
Results of Operations
Non-GAAP Measures
Management’s Discussion and Analysis includes financial information prepared in accordance with generally accepted accounting principles (GAAP)GAAP in the U.S., as well as certain non-GAAP financial measures.measures such as adjusted earnings and adjusted EPS 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. 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 may not be comparable to similarly titled measures used by other companies because other companies may not calculate the measures in the same manner.

MD&ADUKE ENERGY


Management evaluates financial performance in part based on non-GAAP financial measures, including adjusted earnings and adjusted diluted earnings per share (EPS).EPS. Adjusted earnings and adjusted diluted EPS represent income from continuing operations attributable to Duke Energy common stockholders in dollar and per-share amounts, adjusted for the dollar and per-share impact of special items. As discussed below, special items represent certain charges and credits, which management believes are not indicative of Duke Energy's ongoing performance.
Management believes the presentation of adjusted earnings and adjusted diluted EPS provides useful information to investors, as it provides them with 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 financial results to the Duke Energy Board of Directors, employees, stockholders, analysts and investors. 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 (GAAPGAAP Reported Earnings)Earnings and DilutedGAAP Reported EPS, Attributable to Duke Energy Corporation common stockholders (GAAP Reported EPS), respectively.
Special items included in the periods presented below include the following items, which management believes do not reflect ongoing costs:following:
Impairment Charges represents a reduction of a prior year impairment at Citrus County CC, an OTTI of an investment in Constitution and a Commercial Renewables goodwill impairment.
Costs to Achieve Piedmont Merger represents charges that resultresulted from the Piedmont acquisition.
Regulatory and Legislative Impacts represents charges related to rate case orders, settlements or other actions of regulators or legislative bodies.
Sale of Retired Plant represents the loss associated with selling Beckjord, Generating Station (Beckjord), a nonregulated generating facility in Ohio.
Impairment Charges represents an other-than-temporary impairment (OTTI) of an investment in Constitution Pipeline Company, LLC (Constitution) and Commercial Renewables impairments.
Impacts of the Tax Act represents an alternative minimum tax (AMT)AMT valuation allowance recognized and a true up of prior year tax estimates related to the Tax Act.

PART I

Three Months Ended September 30, 2018,2019, as compared to September 30, 20172018
GAAP Reported EPS was $1.82 for the third quarter of 2019 compared to $1.51 for the third quarter of 2018 compared to $1.36 for the third quarter of 2017.2018. The increase in GAAP Reported EPSreported earnings was primarily due to favorable weather-normal retail sales volumes, higher income tax benefits, a FERC approved settlement refund of certain transmission costs previously billed by PJM Interconnection, LLC (PJM),weather, positive rate case impacts, and lower regulatory settlement charges compared to theoperating expenses in Electric Utilities and Infrastructure and a prior year. These driversyear goodwill impairment charge in Commercial Renewables; these items were partially offset by increased operations and maintenance expense primarily related to Hurricane Florence and share dilution.higher corporate interest expense.
As discussed above, management also evaluates financial performance based on adjusted diluted EPS. Duke Energy’s third quarter 20182019 adjusted diluted EPS was $1.65$1.79 compared to $1.59$1.65 for the third quarter of 2017. The increase in adjusted earnings was primarily due to favorable weather-normal retail sales volumes, higher income tax benefits, and a FERC approved settlement refund of certain transmission costs previously billed by PJM Interconnection, LLC (PJM). These drivers were partially offset by increased operations and maintenance expense primarily related to Hurricane Florence and share dilution.2018.
The following table reconciles non-GAAP measures, including adjusted diluted EPS, to their most directly comparable GAAP measures.
Three Months Ended September 30,Three Months Ended September 30,
2018 20172019 2018
(in millions, except per-share amounts)Earnings EPS Earnings EPSEarnings EPS Earnings EPS
GAAP Reported Earnings/GAAP Reported EPS$1,082
 $1.51
 $954
 $1.36
$1,327
 $1.82
 $1,082
 $1.51
Adjustments:              
Impairment Charges(a)
91
 0.12
 56
 0.08
Impairment charges(a)
(19) (0.03) 91
 0.12
Costs to Achieve Piedmont Merger(b)
13
 0.02
 14
 0.03

 
 13
 0.02
Impacts of the Tax Act(c)
(3) 
 
 

 
 (3) 
Florida Settlement(d)

 
 84
 0.12
Discontinued Operations(4) 
 2
 

 
 (4) 
Adjusted Earnings/Adjusted Diluted EPS$1,179
 $1.65
 $1,110
 $1.59
$1,308
 $1.79
 $1,179
 $1.65
(a)Net of $6 million tax expense in 2019. Net of $2 million Noncontrolling Interests in 2018 and $28 million tax benefit in 2017.2018.
(b)Net of $3 million tax benefit in 2018 and $9 million tax benefit in 2017.benefit.
(c)Represents a true up of prior year tax estimates related to the Tax Act.
(d)Net of $51 million tax benefit in 2017.

Nine Months Ended September 30, 2018,2019, as compared to September 30, 20172018
Duke Energy's GAAP Reported EPS was $4.18 for the nine months ended September 30, 2019, compared to $3.11 for the nine months ended September 30, 2018, compared to $3.36 for the nine months ended September 30, 2017.2018. The decreaseincrease in GAAP Reported EPSearnings was driven by regulatory and legislative charges relatedprimarily due to the Duke Energy Carolinas North Carolinapositive rate case orderimpacts and the repeal of the South Carolina Base Load Review Act, a goodwill impairment at Commercial Renewables, and higher depreciation expense due to growing asset base. These drivers were partially offset by favorable weather atlower operating expenses in Electric Utilities and Infrastructure, partially offset by higher depreciation and highershare dilution from equity issuances; the allocation of losses to noncontrolling tax equity members resulting primarily from the Commercial Renewables North Rosamond solar farm commencing commercial operations; an adjustment related to income tax benefits.recognition for equity method investments in Gas Utilities and Infrastructure; and prior year regulatory and legislative impacts, impairments charges, an AMT valuation allowance and a loss on sale of a retired plant.
As discussed above, management also evaluates financial performance based on adjusted diluted EPS. Duke Energy'sEnergy’s adjusted diluted EPS was $4.15 for the nine months ended September 30, 2018, was $3.872019, compared to $3.63$3.87 for the nine months ended September 30, 2017. The increase in adjusted earnings for the nine months ended September 30, 2018, compared to the same period in 2017, was primarily due to favorable weather at Electric Utilities and Infrastructure and higher income tax benefits partially offset by higher depreciation expense due to growing asset base.2018.


PART I

MD&ADUKE ENERGY


The following table reconciles non-GAAP measures, including adjusted diluted EPS, to their most directly comparable GAAP measures.
Nine Months Ended September 30,Nine Months Ended September 30,
2018 20172019 2018
(in millions, except per-share amounts)Earnings EPS Earnings EPSEarnings EPS Earnings EPS
GAAP Reported Earnings/GAAP Reported EPS$2,202
 $3.11
 $2,356
 $3.36
$3,047
 $4.18
 $2,202
 $3.11
Adjustments:              
Regulatory and Legislative Impacts(a)
202
 0.29
 
 
Impairment Charges(b)
133
 0.19
 56
 0.08
Costs to Achieve Piedmont Merger(a)

 
 41
 0.06
Regulatory and Legislative Impacts(b)

 
 202
 0.29
Sale of Retired Plant(c)
82
 0.12
 
 

 
 82
 0.12
Impacts of the Tax Act(d)
73
 0.10
 
 
Costs to Achieve Piedmont Merger(e)
41
 0.06
 43
 0.06
Florida Settlement(f)

 
 84
 0.12
Impairment Charges(d)
(19) (0.03) 133
 0.19
Impacts of the Tax Act(e)

 
 73
 0.10
Discontinued Operations1
 
 4
 0.01

 
 1
 
Adjusted Earnings/Adjusted Diluted EPS$2,734
 $3.87
 $2,543
 $3.63
$3,028
 $4.15
 $2,734
 $3.87
(a)Net of $63$12 million tax benefit.
(b)Net of $13$63 million tax benefit and $2 million Noncontrolling Interest in 2018 and $28 million tax benefit in 2017.benefit.
(c)Net of $25 million tax benefit.
(d)Net of $6 million tax expense in 2019. Net of $13 million tax benefit and $2 million Noncontrolling Interests in 2018.
(e)Represents a recognition of AMT valuation allowance and true up of prior year tax estimates related to the Tax Act.
(e)Net of $12 million tax benefit in 2018 and $26 million tax benefit in 2017.
(f)Net of $51 million tax benefit in 2017.
SEGMENT RESULTS
The remaining information presented in this discussion of results of operations is on a GAAP basis. Management evaluates segment performance based on segment income. Segment income is defined as income from continuing operations net of income attributable to noncontrolling interests.interests and preferred stock dividends. Segment income includes intercompany revenues and expenses that are eliminated in the Condensed Consolidated Financial Statements.
Duke Energy's segment structure includes the following segments: Electric Utilities and Infrastructure, Gas Utilities and Infrastructure and Commercial Renewables. The remainder of Duke Energy’s operations is presented as Other. See Note 2 to the Condensed Consolidated Financial Statements, “Business Segments,” for additional information on Duke Energy’s segment structure.
Tax Act
On December 22, 2017, President Trump signed the Tax Act into law. Among other provisions, the Tax Act lowered the corporate federal income tax rate from 35 to 21 percent, limits interest deductions outside of regulated utility operations, requires the normalization of excess deferred taxes associated with property under the average rate assumption method as a prerequisite to qualifying for accelerated depreciation and repealed the federal manufacturing deduction. The Tax Act also repealed the corporate AMT and stipulates a refund of 50 percent of remaining AMT credit carryforwards (to the extent the credits exceed regular tax for the year) for tax years 2018, 2019 and 2020 with all remaining AMT credits to be refunded in tax year 2021. The Tax Act also could be amended or subject to technical correction, which could change the financial impacts that were recorded since December 31, 2017, or are expected to be recorded in future periods. The Federal Energy Regulatory Commission (FERC) and state utility commissions will determine the regulatory treatment of the impacts of the Tax Act for the Subsidiary Registrants. Duke Energy's segments’ future results of operations, financial condition and cash flows could be adversely impacted by the Tax Act, subsequent amendments or corrections, or the actions of the FERC, state utility commissions or credit rating agencies related to the Tax Act. Duke Energy is addressing the rate treatment of the Tax Act by each state utility commission in which the Subsidiary Registrants operate. In January 2018, the Subsidiary Registrants began deferring the estimated ongoing impacts of the Tax Act that are expected to be returned to customers. See Notes 3 and 17 to the Condensed Consolidated Financial Statements, "Regulatory Matters" and “Income Taxes,” respectively, for additional information on the Tax Act.

PART I

Electric Utilities and Infrastructure
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended September 30, Nine Months Ended September 30,
(in millions)2018
 2017
 Variance
 2018
 2017
 Variance
2019
 2018
 Variance
 2019
 2018
 Variance
Operating Revenues$6,260
 $6,129
 $131
 $16,806
 $16,234
 $572
$6,577
 $6,260
 $317
 $17,381
 $16,806
 $575
Operating Expenses                      
Fuel used in electric generation and purchased power1,935
 1,872
 63
 5,202
 4,875
 327
1,994
 1,935
 59
 5,286
 5,202
 84
Operation, maintenance and other1,431
 1,332
 99
 4,151
 3,935
 216
1,357
 1,431
 (74) 3,957
 4,151
 (194)
Depreciation and amortization897
 777
 120
 2,570
 2,228
 342
1,026
 897
 129
 2,924
 2,570
 354
Property and other taxes289
 277
 12
 842
 808
 34
301
 289
 12
 899
 842
 57
Impairment charges31
 132
 (101) 246
 134
 112
(20) 31
 (51) (16) 246
 (262)
Total operating expenses4,583
 4,390
 193
 13,011
 11,980
 1,031
4,658
 4,583
 75
 13,050
 13,011
 39
Gains on Sales of Other Assets and Other, net8
 
 8
 9
 4
 5

 8
 (8) 
 9
 (9)
Operating Income1,685
 1,739
 (54) 3,804
 4,258
 (454)1,919
 1,685
 234
 4,331
 3,804
 527
Other Income and Expenses, net107
 102
 5
 286
 324
 (38)87
 107
 (20) 267
 286
 (19)
Interest Expense322
 305
 17
 955
 925
 30
336
 322
 14
 1,004
 955
 49
Income Before Income Taxes1,470
 1,536
 (66) 3,135
 3,657
 (522)1,670
 1,470
 200
 3,594
 3,135
 459
Income Tax Expense303
 516
 (213) 643
 1,273
 (630)285
 303
 (18) 650
 643
 7
Segment Income$1,167
 $1,020
 $147
 $2,492
 $2,384
 $108
$1,385
 $1,167
 $218
 $2,944
 $2,492
 $452
          

          

Duke Energy Carolinas gigawatt-hours (GWh) sales25,607
 24,135
 1,472
 70,506
 66,159
 4,347
Duke Energy Carolinas GWh sales25,587
 25,607
 (20) 69,019
 70,506
 (1,487)
Duke Energy Progress GWh sales19,625
 18,827
 798
 52,747
 50,026
 2,721
19,502
 19,625
 (123) 52,072
 52,747
 (675)
Duke Energy Florida GWh sales12,375
 12,132
 243
 31,798
 31,177
 621
12,996
 12,375
 621
 32,468
 31,798
 670
Duke Energy Ohio GWh sales6,964
 6,672
 292
 19,183
 18,632
 551
7,135
 6,964
 171
 18,959
 19,183
 (224)
Duke Energy Indiana GWh sales9,114
 8,795
 319
 25,900
 24,975
 925
8,711
 9,114
 (403) 24,181
 25,900
 (1,719)
Total Electric Utilities and Infrastructure GWh sales73,685
 70,561
 3,124
 200,134
 190,969
 9,165
73,931
 73,685
 246
 196,699
 200,134
 (3,435)
Net proportional megawatt (MW) capacity in operation    

 48,757
 48,909
 (152)
Net proportional MW capacity in operation    

 49,711
 48,757
 954

MD&ASEGMENT RESULTS — ELECTRIC UTILITIES AND INFRASTRUCTURE


Three Months Ended September 30, 2018,2019, as Comparedcompared to September 30, 20172018
Electric Utilities and Infrastructure’s results were impacted by favorable weather-normal retail sales volumes,a positive contribution from the Duke Energy Carolinas North and South Carolina rate cases, Duke Energy Florida's base rate adjustments due to the Citrus County CC being placed in service, favorable weather in the current year a positive net contribution from the Duke Energy Progress and Duke Energy Carolinas North Carolina rate cases, a FERC approved settlement refund of certain transmission costs previously billed by PJM, lower income tax expense and lower regulatory charges compared to the prior year related to the unrecovered Levy Nuclear Project costs at Duke Energy Florida.operation, maintenance and other expense.
These drivers were partially offset by higher operationdepreciation from a growing asset base and maintenance expenses primarily due to the impacts of Hurricane Florence and increased depreciation and amortization.higher interest expense. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The variance was driven primarily by:
a $90 million increase in fuel related revenues due to higher sales volumes and increases in fuel rates billed to customers;
a $54 million increase in weather-normal retail sales volumes;
a $59$167 million increase in retail pricing primarily due to the Duke Energy ProgressCarolinas North and South Carolina rate cases and Duke Energy Carolinas North CarolinaFlorida's base rate cases;adjustments related to Citrus County CC being placed in service;
a $38an $88 million increase in retail sales, net of fuel revenues, due to favorable weather in the current year; and
a $23$51 million increase in Joint Asset Agency Rider (JAAR) revenues at Duke Energy Progress in conjunction with implementation of new base rates.fuel related revenues.
Partially offset by:
a $143 million decrease in retail revenues associated with the lower statutory federal corporate tax rate under the Tax Act.
Operating Expenses. The variance was driven primarily by:
a $120$129 million increase in depreciation and amortization expense primarily due to higher amortization of deferred coal ash costs, additional plant in service and new depreciation rates associated with the prior year Duke Energy Carolinas and Duke Energy Progress North Carolina rate cases and Duke Energy Carolinas North Carolina rate cases;Florida's Citrus County CC being placed in service;
a $99 million increase in operation, maintenance and other expense primarily due to higher storm costs due to Hurricane Florence and higher operational costs that are recoverable in rates, partially offset by a FERC approved settlement refund of certain transmission costs previously billed by PJM; and

PART I

a $63$59 million increase in fuel used in electric generation and purchased power primarily due to an increase in the North Carolina Renewable Energy and Energy Efficiency Portfolio Standard requirement from the prior year at Duke Energy Progress; and
a $12 million increase in property and other taxes primarily due to higher sales and higher deferred fuel expenses.property taxes for additional plant in service at Duke Energy Florida.
Partially offset by:
a $101$74 million decrease in operation, maintenance and other expense primarily due to lower storm costs at Duke Energy Progress and Duke Energy Carolinas in the current year and lower payroll costs resulting from prior year workforce reductions; and
a $51 million decrease in impairment charges primarily due to a reduction of a prior year impairment at Duke Energy Florida's Citrus County CC and the write-offprior year Edwardsport IGCC settlement at Duke Energy Indiana.
Other Income and Expenses, net. The variance was driven primarily by AFUDC equity return ending on the Citrus County CC in the fourth quarter of remaining unrecovered Levy Nuclear Project costs2018 at Duke Energy Florida.
Interest Expense. The variance was driven primarily by higher debt outstanding in 2017.the current year and AFUDC debt return ending in the fourth quarter of 2018 on the Citrus County CC at Duke Energy Florida.
Income Tax Expense. The variancedecrease in tax expense was primarily due to an increase in the lower statutory federal corporate tax rate under the Tax Act and a decreaseamortization of excess deferred taxes, partially offset by an increase in pretax income. The effective tax rates (ETRs)ETRs for the three months ended September 30, 2019, and 2018, were 17.1% and 2017 were 20.6 percent and 33.6 percent,20.6%, respectively. The decrease in the ETR was primarily due to the lower statutory federal corporate tax rate under the Tax Act andan increase in the amortization of excess deferred taxes partially offset by favorable tax return true ups in the prior year. For additional information, see Note 17 to the Condensed Consolidated Financial Statements, "Income Taxes."taxes.
Nine Months Ended September 30, 2018,2019, as Comparedcompared to September 30, 20172018
Electric Utilities and Infrastructure’s results were impacted by favorable weather in the current year and a positive net contribution from the 2018 Duke Energy ProgressCarolinas and Duke Energy CarolinasProgress North Carolina rate cases, Duke Energy Florida's base rate adjustments due to the Citrus County CC being placed in service and lower operation, maintenance and other expense.
These drivers were partially offset by higher legislativedepreciation from a growing asset base and regulatory charges compared to the prior year.higher interest expense. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The variance was driven primarily by:
a $398 million increase in fuel related revenues due to higher sales volumes, changes in generation mix and increases in fuel rates billed to customers;
a $288 million increase in retail sales, net of fuel revenues, due to favorable weather in the current year;
a $125$493 million increase in retail pricing primarily due to the prior year Duke Energy ProgressCarolinas and Duke Energy CarolinasProgress North Carolina rate cases and Duke Energy FloridaFlorida's base rate adjustments for the Osprey acquisitionrelated to Citrus County CC being placed in service; and the completion of the Hines Energy Complex Chiller Uprate Project;
an $80$85 million increase in weather-normal retail sales volumes; andfuel related revenues.
a $52 million increase in JAAR revenues at Duke Energy Progress in conjunction with implementation of new base rates.
Partially offset by:
a $401 million decrease in retail revenues associated with the lower statutory federal corporate tax rate under the Tax Act.
Operating Expenses. The variance was driven primarily by:
a $342$354 million increase in depreciation and amortization expense primarily due to higher amortization of deferred coal ash costs, additional plant in service and new depreciation rates perassociated with the prior year Duke Energy Carolinas and Duke Energy Progress North Carolina rate cases and Duke Energy Carolinas North Carolina rate cases;Florida's Citrus County CC being placed in service;
a $327an $84 million increase in fuel used in electric generation and purchased power primarily due to an increase in the North Carolina Renewable Energy and Energy Efficiency Portfolio Standard requirement from the prior year at Duke Energy Progress; and
a $57 million increase in property and other taxes primarily due to higher sales and higher deferred fuel expenses;
a $216 million increaseproperty taxes for additional plant in operation, maintenance and other expense primarily due to impacts associated with the Duke Energy Progress North Carolina rate case, the impacts of Hurricane Florence and higher storm cost amortizationservice at Duke Energy Florida partiallyand current year property tax reassessments at Duke Energy Progress.

MD&ASEGMENT RESULTS — ELECTRIC UTILITIES AND INFRASTRUCTURE


Partially offset by a FERC approved settlement refund of certain transmission costs previously billed by PJM; andby:
a $112$262 million increasedecrease in impairment charges primarily due to the impacts associated with the prior year Duke Energy Carolinas and Duke Energy Progress North Carolina rate cases, offset by the write-off of remaining unrecovered Levy Nuclear projectcases; and
a $194 million decrease in operation, maintenance and other expense primarily due to lower payroll and benefit costs resulting from prior year workforce reductions and lower storm costs at Duke Energy FloridaProgress and Duke Energy Carolinas in the priorcurrent year.
Other Income and Expenses, net. The decreasevariance was driven primarily by AFUDC equity return ending on the Citrus County CC in the fourth quarter of 2018 at Duke Energy Florida.
Interest Expense. The variance was driven primarily by higher debt outstanding in the current year and AFUDC debt return ending in the fourth quarter of 2018 on the Citrus County CC at Duke Energy Florida.
Income Tax Expense. The increase in tax expense was primarily due to lower post in-service equity returns for projects that had been completed prior to being reflectedan increase in customer rates at Duke Energy Carolinas and lowerpretax income, from non-service components of employee benefit costsmostly offset by an increase in the current year at Duke Energy Progress. For additional information on employee benefit costs, see Note 16 to the Condensed Consolidated Financial Statements, "Employee Benefit Plans."
Income Tax Expense. The variance was primarily due to the lower statutory federal corporate tax rate under the Tax Act and a decrease in pretax income.amortization of excess deferred taxes. The ETRs for the nine months ended September 30, 2019, and 2018, were 18.1% and 2017 were 20.5 percent and 34.8 percent,20.5%, respectively. The decrease in the ETR was primarily due to the lower statutory federal corporate tax rate under the Tax Act andan increase in the amortization of excess deferred taxes partially offset by favorable tax return true ups in the prior year.taxes.

PART I

Matters Impacting Future Electric Utilities and Infrastructure Results
On May 18, 2016,21, 2019, Duke Energy Carolinas and Duke Energy Progress received orders from the North Carolina DepartmentPSCSC granting the companies’ requests for retail rate increases but denying recovery of Environmental Quality (NCDEQ) issued proposed risk classifications for allcertain coal ash surface impoundments in North Carolina. All ash impoundments not previously designated as high priority bycosts. Duke Energy Carolinas and Duke Energy Progress intend to file notices of appeals with the NorthSouth Carolina Coal Ash Management ActSupreme Court within 30 days of 2014 (Coal Ash Act) were designated as intermediate risk. Certain impoundments classified as intermediate risk, however, may be reassessed in the future as low risk pursuant to legislation enactedorder that was received on July 14, 2016.October 18, 2019. Electric Utilities and Infrastructure's estimated asset retirement obligations (AROs) relatedresults of operations, financial position and cash flows could be adversely impacted if coal ash costs are not ultimately approved for recovery. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
On April 1, 2019, NCDEQ issued a closure of North Carolinadetermination requiring Duke Energy Carolinas and Duke Energy Progress to excavate all remaining coal ash impoundments are based upon the mandated closure method or a probability weighting of potential closure methods for the impoundments that may be reassessed to low risk. On October 12, 2018, NCDEQ announced that Duke Energy had satisfied the permanent replacement water supply requirements by the October 15, 2018, deadline set out in the Coal Ash Management Act. However, NCDEQ has not yet issued final classifications for these impoundments. As the final risk ranking classifications in North Carolina, are delineated,even though they had been deemed low risk by NCDEQ on November 14, 2018. On April 26, 2019, Duke Energy Carolinas and Duke Energy Progress filed a Petition for Contested Case Hearings in the Office of Administrative Hearings to challenge NCDEQ's April 1 Order. Duke Energy Carolinas and Duke Energy Progress intend to seek recovery of all costs through the ratemaking process consistent with previous proceedings. As the final closure plans and corrective action measures are developed and approved for each site, the closure work progresses and the closure method scope and remedial action methods are determined, the complexity of work and the amount of coal combustion material could be different than originally estimated and, therefore, could materially impact Electric Utilities and Infrastructure's results of operations, financial position and cash flows. See Note 4 to the Condensed Consolidated Financial Statements, "Commitments and Contingencies," for additional information.
Duke Energy is a party to multiple lawsuits and could be subject to fines and other penalties related to operations at certain North Carolina facilities with ash basins. In addition, the orders issued in the Duke Energy Carolinas and Duke Energy Progress North CarolinasCarolina rate cases supporting recovery of past coal ash remediation costs have been appealed by various parties. The outcome of these appeals, lawsuits and potential fines and penalties could have an adverse impact on Electric Utilities and Infrastructure's results of operations, financial position and cash flows. See Notes 3 and 4 to the Condensed Consolidated Financial Statements, "Regulatory Matters" and “Commitments and Contingencies,” respectively, for additional information.
On June 22, 2018, Duke Energy Carolinas received an order from the NCUC, which denied the Grid Rider Stipulation and deferral treatment of grid improvement costs. Duke Energy Carolinas may petitionand Duke Energy Progress have petitioned for deferral of future grid modernization costs outside of a general rate case proceeding if it can show financial hardship or a stipulation that includes greater consensus among intervening parties on costs being classified as grid modernization. While Duke Energy Progress did not request recovery of theseimprovement costs in its most recent case with the NCUC, Duke Energy Progress may request recovery of certain grid modernization costs in future regulatory proceedings.their 2019 rate cases. Electric Utilities and Infrastructure's results of operations, financial position and cash flows could be adversely impacted if grid modernizationimprovement costs are not ultimately approved for recovery and/or deferral treatment. See Note 3 to
During the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
On June 30, 2017, CertainTeed Gypsum NC, Inc. (CertainTeed) filed a declaratory judgment action againstlast half of 2018, Duke Energy Carolinas, Duke Energy Progress in the North Carolina Business Court relating to a gypsum supply agreement. In its complaint, CertainTeed sought an order from the court declaring that the minimum amount of gypsum Duke Energy Progress must provide to CertainTeed under the supply agreement is 50,000 tons per month through 2029. The trial for this matter concluded on July 16, 2018. On August 29, 2018, the court issued an order and opinion finding that Duke Energy Progress is required to supply 50,000 tons of gypsum per month, but that CertainTeed's sole remedy for Duke Energy Progress' long-term discontinuance under the agreement is liquidated damages. The estimated maximum amount that would be owed under the liquidated damages provision is approximately $90 million. Both CertainTeed and Duke Energy Progress have filed cross-appeals. The outcome of the cross-appeals could have an adverse impact on Electric Utilities and Infrastructure's results of operations, financial position and cash flows. See Note 4 to the Condensed Consolidated Financial Statements, “Commitments and Contingencies,” for additional information.
In the third quarter of 2018,Florida’s service territories were impacted by several named storms. Hurricane Florence, Hurricane Michael and Winter Storm Diego caused historic flooding, extensive damage and widespread power outages withinto the service territories of Duke Energy ProgressCarolinas and Duke Energy Carolinas service territories. Approximately 1.8 million customers were impacted. Current estimated restoration costs are approximately $540 million. Most of the operation and maintenance expenses are deferred as of September 30, 2018. Given the magnitude of the storm,Progress. Duke Energy Progress intends to request approval in North Carolina and South Carolina to defer the incremental costs incurred to a regulatory asset for recovery in the next base rate case. These requests are expected to be filed during the fourth quarter of 2018. An order from regulatory authorities disallowing the deferral and future recovery of storm restoration costs could have an adverse impact on Electric Utilities and Infrastructure’s financial position, results of operations and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
On October 10, 2018,Florida’s service territory was also impacted by Hurricane Michael, made landfall on Florida's Panhandle as a Category 45 hurricane and the most powerful storm to hit the Florida Panhandle in recorded history. The storm caused significant damage and more than a million power outages within the service territories ofIn September 2019, Hurricane Dorian impacted Duke Energy Florida, Duke Energy CarolinasProgress and Duke Energy Progress. Duke Energy has not completedFlorida's service territories. A significant portion of the final accumulation of total estimated storm restoration costs incurred; however, the preliminary estimate is approximately $235 million ofincremental operation and maintenance expenses and approximately $185 million in capital costs. Given the magnitude of the storm, Duke Energy Carolinas and Duke Energy Progress intendrelated to request approval to defer the incremental costs incurred to a regulatory asset for recovery in the next base rate cases, and Duke Energy Florida will recover these storm costs consistent with the provisions in its 2017 Second Revised and Restated Settlement Agreement.storms has been deferred. An order from regulatory authorities disallowing the deferral and future recovery of storm restoration costs could have an adverse impact on Electric Utilities and Infrastructure's results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
In 2019, Duke Energy Florida is constructingIndiana filed a general rate case with the 1,640-MW combined-cycle natural gas plant in Citrus County, Florida,IURC, and expects it to be commercially available in 2018. Actual costs are expected to exceed estimated costs by an immaterial amount after recoveries; therefore, an impairment is not expected. Failure to completeDuke Energy Carolinas and Duke Energy Progress filed general rate cases with the construction and achieve commercial operations by the endNCUC. The outcome of 2018 or failure to obtain recoveries from customers or vendorsthese rate cases could materially impact Electric Utilities and Infrastructure's results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, “Regulatory"Regulatory Matters," for additional information.
On February 6, 2018, the FPSC approved a stipulation that would apply tax savings resulting from the Tax Act toward storm costs effective January 2018 in lieu of implementing a storm surcharge. On May 31, 2018, Duke Energy Florida filed for recovery of the storm costs. Storm costs are currently expected to be fully recovered by approximately mid-2021. The commission has scheduled the hearing to begin on May 21, 2019. An order disallowing recovery of these costs could have an adverse impact on Electric Utilities and Infrastructure's results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.

PART I

In March 2017, Duke Energy Ohio filed an electric distribution base rate application with the PUCO to address recovery of electric distribution system capital investments and any increase in expenditures subsequent to previous rate cases. On April 13, 2018, Duke Energy Ohio filed a Stipulation with the PUCO to resolve issues in the electric distribution base rate case and other regulatory matters. If approved by PUCO, the Stipulation would allow for Duke Energy Ohio to recover gains and losses incurred on and after January 1, 2018, related to the Ohio Valley Electric Corporation (OVEC), through the Price Stabilization Rider. Hearings concluded on August 6, 2018. Initial briefs were filed on September 11, 2018, and reply briefs on October 2, 2018. Electric Utilities and Infrastructure's results of operations, financial position and cash flows could be adversely impacted if the Stipulation is denied by the PUCO. See Note 3 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy Registrants' Annual Reports on Form 10-K/A10-K for the year ended December 31, 2017,2018, for discussion of risks associated with the Tax Act.

MD&ASEGMENT RESULTS — GAS UTILITIES AND INFRASTRUCTURE


Gas Utilities and Infrastructure
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended September 30, Nine Months Ended September 30,
(in millions)2018
 2017
 Variance
 2018
 2017
 Variance
2019
 2018
 Variance
 2019
 2018
 Variance
Operating Revenues$256
 $272
 $(16) $1,301
 $1,243
 $58
$249
 $256
 $(7) $1,311
 $1,301
 $10
Operating Expenses                      
Cost of natural gas58
 68
 (10) 460
 402
 58
48
 58
 (10) 451
 460
 (9)
Operation, maintenance and other101
 94
 7
 312
 293
 19
108
 101
 7
 325
 312
 13
Depreciation and amortization61
 57
 4
 182
 171
 11
64
 61
 3
 192
 182
 10
Property and other taxes24
 25
 (1) 81
 81
 
24
 24
 
 84
 81
 3
Total operating expenses244
 244
 
 1,035
 947
 88
244
 244
 
 1,052
 1,035
 17
Operating Income12
 28
 (16) 266
 296
 (30)5
 12
 (7) 259
 266
 (7)
Other Income and Expenses, net29
 23
 6
 16
 62
 (46)42
 29
 13
 119
 16
 103
Interest Expense25
 26
 (1) 78
 78
 
29
 25
 4
 86
 78
 8
Income Before Income Taxes16
 25
 (9) 204
 280
 (76)18
 16
 2
 292
 204
 88
Income Tax (Benefit) Expense(1) 6
 (7) 43
 101
 (58)(8) (1) (7) 
 43
 (43)
Segment Income$17
 $19
 $(2) $161
 $179
 $(18)$26
 $17
 $9
 $292
 $161
 $131
      

          

    
Piedmont local distribution company (LDC) throughput (dekatherms)135,403,188
 107,490,775
 27,912,413
 407,144,529
 334,781,316
 72,363,213
Piedmont LDC throughput (dekatherms)121,378,484
 135,403,188
 (14,024,704) 377,729,141
 407,144,529
 (29,415,388)
Duke Energy Midwest LDC throughput (Mcf)9,370,743
 9,904,644
 (533,901) 62,111,858
 52,940,410
 9,171,448
9,997,444
 9,370,743
 626,701
 62,278,623
 62,111,858
 166,765
Three Months Ended September 30, 2018,2019, as Comparedcompared to September 30, 20172018
Gas Utilities and Infrastructure’s results were primarily impacted by tax benefits related to current year AFUDC equity and higher equity earnings from ACP. These drivers are partially offset by lower revenues. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues.The variance was driven by:
an $11 million decrease due to revenues subject to refund to customers associated with the lower statutory federal corporate tax rate under the Tax Act; and
a $10 million decrease primarily due to lower natural gas costs passed through to customers fromand lower retail volumes sold, partially offset by higher natural gas prices.due to unfavorable weather.
Partially offset by:
a $6$3 million increase primarily due to residentialNorth Carolina and commercial customer revenue, net of natural gas costs passed through to customers, due to customer growth and Integrity Management Rider (IMR) rate adjustments at Piedmont.Tennessee IMR increases.
Operating Expenses.The variance was driven by:drivers were:
a $10 million decrease in cost of natural gas primarily due to lower retail volumes sold, partially offset by slightly higheroff-system sales natural gas costs and lower natural gas prices.
Partially offset by:
a $7 million increase in operations,operation, maintenance and other expense primarily due to increased sharedinformation technology outside services costs and customer operations expense.increased bad debt expense related to a Piedmont industrial customer; and
a $3 million increase in depreciation and amortization expense primarily due to additional plant in service.
Other Income and Expenses, net. The variance was driven by higher equity earnings from ACP in the current year.
Interest Expense. The variance was driven by higher debt outstanding in the current year, higher interest expense due to customers as a result of tax reform deferrals, and intercompany interest, partially offset by favorable AFUDC debt interest.
Income Tax (Benefit) Expense. The increase in the tax benefit was primarily due to higher income from non-service components of employee benefit costs in the current year. For additional information on employee benefit costs, see Note 16 to the Condensed Consolidated Financial Statements, "Employee Benefit Plans."

PART I

Income Tax (Benefit) Expense. The variance was primarily due to the lower statutory federal corporate tax rate under the Tax Act. The ETRs for the three months ended September 30, 2018, and 2017 were (6.3) percent and 24.0 percent, respectively. The decrease in the ETR was primarily due to the lower statutory corporate tax rate under the Tax Act and research credits. For additional information, see Note 17 to the Condensed Consolidated Financial Statements, "Income Taxes."year AFUDC equity.
Nine Months Ended September 30, 2018,2019, as Comparedcompared to September 30, 20172018
Gas Utilities and Infrastructure’s results were primarily impacted by the prior year OTTI recorded on the Constitution investment; partially offset by favorable price adjustmentsinvestment and customer growth.a 2019 adjustment related to the income tax recognition for equity method investments. The equity method investment adjustment was immaterial and relates to prior years. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues.The variance was driven by:
a $58$12 million increase primarily due to higherNorth Carolina and Tennessee IMR increases;
a $9 million increase primarily due to NCUC approval related to tax reform accounting from fixed rate contracts; and
a $4 million increase in pricing primarily in residential and commercial sectors in the Midwest.

MD&ASEGMENT RESULTS — GAS UTILITIES AND INFRASTRUCTURE


Partially offset by:
an $8 million decrease due to lower natural gas costs passed through to customers due to higher retail volumes sold and unfavorable weather in the Midwest, partially offset by higher natural gas prices;
a $37 million increase primarily due to residential and commercial customer revenue, net of natural gas costs passed through to customers, due to customer growth and IMR rate adjustments and new power generation customersprices associated with off-system sales at Piedmont; and
a $7 million decrease primarily due to a reduction of rates in South Carolina.
Operating Expenses.The variance was driven by:
a $13 million increase in operation, maintenance and other expense primarily due to information technology outside services, higher gas operations labor costs, and increased bad debt expense related to a Piedmont industrial customer; and
a $10 million increase in depreciation and amortization expense primarily due to favorable weatheradditional plant in the current year and higher volumes sold in the Midwest.service.
Partially offset by:
a $49$9 million decrease due to revenues subject to refund to customers associated with the lower statutory federal corporate tax rate under the Tax Act.
Operating Expenses.The variance was driven by:
a $58 million increase in cost of natural gas primarily due to higher retail volumes sold and higherlower natural gas prices;prices in the Midwest and lower sales volumes partially offset by higher off-system sales natural gas costs at Piedmont.
a $19 million increase in operations, maintenance and other primarily due to increased shared services and gas operations expense; and
an $11 million increase in depreciation and amortization due to additional plant in service.
Other Income and Expenses, net. The decreaseincrease was primarily due to the prior year OTTI recorded foron the Constitution investment and higher earnings from ACP in Constitutionthe current year.
Interest Expense. The variance was driven by higher debt outstanding in the current year and higher interest expense due to customers as a result of tax reform deferrals, partially offset by higher income from non-service components of employee benefit costs in the current year. For additional information on employee benefit costs, see Note 16 to the Condensed Consolidated Financial Statements, "Employee Benefit Plans."favorable AFUDC debt interest.
Income Tax (Benefit) Expense.The variancedecrease in tax expense was primarily due to an adjustment related to the lower statutory federal corporateincome tax rate under the Tax Act.recognition for equity method investments and current year AFUDC equity, partially offset by an increase in pretax income. The equity method investment adjustment was immaterial and relates to prior years. The ETRs for the nine months ended September 30, 2019, and 2018, were 0.0% and 2017 were 21.1 percent and 36.1 percent,21.1%, respectively. The decrease in the ETR was primarily due to an adjustment related to the lower statutory federal corporateincome tax rate underrecognition for equity method investments that was recorded during the Tax Act.first quarter of 2019 and current year AFUDC equity. The equity method investment adjustment was immaterial and relates to prior years.
Matters Impacting Future Gas Utilities and Infrastructure Results
Gas Utilities and Infrastructure has a 47 percent47% ownership interest in Atlantic Coast Pipeline, LLC (ACP),ACP, which is building an approximately 600-mile interstate natural gas pipeline intended to transport diverse natural gas supplies into southeastern markets. Affected states (West Virginia, Virginia and North Carolina) have issued certain necessary permits; the project remains subject to other pending federal and state approvals, which will allow full construction activities to begin. In 2018, FERC issued a series of Notices to Proceed, which authorized the project to begin certain construction-related activities along the pipeline route. Given legal challenges and ongoing discussions with customers, ACP expects mechanical completion of the full project in late 2021 with in-service likely in the first half of 2022. The delays resulting from legal challenges have impacted the cost and schedule for the project. Project cost estimates have increased from a range of $6.0are $7.3 billion to $6.5 billion to a range of $6.5 billion to $7.0$7.8 billion, excluding financing costs. The project hasGiven the status of current discussions with FWS regarding a targeted in-service date of late 2019 for key portions of the project,new BiOp and ITS, as well as discussions with the remaining segments targeted tocontractors regarding efficiencies which may be in-service in mid-2020. Project construction activities, schedulerealized going forward, these estimates are under review and final costs are subject to uncertainty due to abnormalupward pressure. Abnormal weather, work delays (including delays due to judicial or regulatory action) and other conditions may also result in cost or schedule modifications, a suspension of AFUDC for ACP and/or impairment charges potentially material to Duke Energy's cash flows, financial position and risks thatresults of operations. ACP and Duke Energy will continue to consider their options with respect to the foregoing given their existing contractual and legal obligations. See Notes 3 and 13 to the Condensed Consolidated Financial Statements, "Regulatory Matters" and "Variable Interest Entities," respectively, for additional information.
On November 13, 2013, the PUCO issued an order authorizing recovery of MGP costs at certain sites in Ohio with a deadline to complete the MGP environmental investigation and remediation work prior to December 31, 2016. This deadline was subsequently extended to December 31, 2019. Disallowance of costs incurred, failure to complete the work by the deadline or failure to obtain an extension from the PUCO could result in potential higher project costs, a potential delay in the targeted in-service datesan adverse impact on Gas Utilities and potential impairment charges.Infrastructure’s results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory“Regulatory Matters," for additional information.
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy Registrants' Annual Reports on Form 10-K/A10-K for the year ended December 31, 2017,2018, for discussion of risks associated with the Tax Act.


PART I

Commercial Renewables
 Three Months Ended September 30, Nine Months Ended September 30,
(in millions)2018
 2017
 Variance
 2018
 2017
 Variance
Operating Revenues$127
 $95
 $32
 $347
 $333
 $14
Operating Expenses           
Operation, maintenance and other85
 55
 30
 209
 191
 18
Depreciation and amortization40
 39
 1
 116
 116
 
Property and other taxes6
 9
 (3) 19
 26
 (7)
Impairment charges93
 76
 17
 93
 76
 17
Total operating expenses224
 179
 45
 437
 409
 28
Gains on Sales of Other Assets and Other, net
 1
 (1) 
 5
 (5)
Operating Loss(97) (83) (14) (90) (71) (19)
Other Income and Expenses, net2
 (11) 13
 22
 (12) 34
Interest Expense21
 22
 (1) 66
 64
 2
Loss Before Income Taxes(116) (116) 
 (134) (147) 13
Income Tax Benefit(37) (65) 28
 (112) (146) 34
Less: Loss Attributable to Noncontrolling Interests(17) (2) (15) (18) (3) (15)
Segment (Loss) Income$(62)
$(49) $(13) $(4) $2
 $(6)
            
Renewable plant production, GWh1,897
 1,760
 137
 6,548
 6,276
 272
Net proportional MW capacity in operation    

 2,976
 2,908
 68
MD&ASEGMENT RESULTS — COMMERCIAL RENEWABLES


Commercial Renewables
 Three Months Ended September 30, Nine Months Ended September 30,
(in millions)2019
 2018
 Variance
 2019
 2018
 Variance
Operating Revenues$138
 $127
 $11
 $362
 $347
 $15
Operating Expenses           
Operation, maintenance and other81
 85
 (4) 211
 209
 2
Depreciation and amortization43
 40
 3
 123
 116
 7
Property and other taxes6
 6
 
 18
 19
 (1)
Impairment charges
 93
 (93) 
 93
 (93)
Total operating expenses130
 224
 (94) 352
 437
 (85)
Operating Income (Loss)8
 (97) 105
 10
 (90) 100
Other Income and Expenses, net13
 2
 11
 3
 22
 (19)
Interest Expense35
 21
 14
 78
 66
 12
Loss Before Income Taxes(14) (116) 102
 (65) (134) 69
Income Tax Benefit(35) (37) 2
 (94)��(112) 18
Less: Loss Attributable to Noncontrolling Interests(19) (17) (2) (110) (18) (92)
Segment Income (Loss)$40

$(62) $102
 $139
 $(4) $143
            
Renewable plant production, GWh2,146
 1,897
 249
 6,528
 6,548
 (20)
Net proportional MW capacity in operation(a)
    

 3,162
 2,976
 186
(a)Certain projects are included in tax equity structures where investors have differing interests in the project's economic attributes. One hundred percent of the tax equity project's capacity is included in the table above.
Three Months Ended September 30, 2018,2019, as Comparedcompared to September 30, 20172018
Commercial Renewables' results were unfavorably impacted by thefavorable primarily due to higher tax benefit in 2017 from costrevenues and property, plant and equipment impairments, partially offset by the minority interest loss associated with a third-party tax equity partnership arrangement.prior year goodwill impairment charges. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The increase in revenues was primarily due to an increase in the number of Engineering, Procurement and Construction (EPC) agreements at REC Solar, a California based provider of solar installations.
Operating Expenses. The increase was primarily due to an increase in the number of EPC agreements at REC Solar, higher development expenses and higherfavorable wind portfolio revenue due to favorable wind resource.
Operating Expenses. The decrease was primarily due to goodwill impairment charges in the currentprior year.
Other Income and Expenses, net.Interest Expense. The favorable variance in other income and expensesincrease was primarily a result of the impairment of certain cost investmentsdue to mark-to-market losses in the priorsolar portfolio in the current year.
Income Tax Benefit. The lower tax benefits in 2018 were due to the lower statutory federal corporate tax rate under the Tax Act and higher tax benefit in 2017 from cost and property, plant and equipment impairments.
Loss Attributable to Noncontrolling Interests. The variance is primarily attributable to the entering into a third-party tax equity partnership arrangement during the third quarter.
Nine Months Ended September 30, 2018,2019, as Comparedcompared to September 30, 20172018
Commercial Renewables' results were unfavorably impacted byfavorable primarily due to higher revenues, new tax equity solar projects in the higher tax benefit in 2017 from costcurrent year and property, plant and equipment impairments, primarilyprior year goodwill impairment charges, partially offset by mark-to-market losses in the entering into a third-party tax equity partnership arrangement,solar portfolio in the bankruptcy court approval of the North Allegheny Wind, LLC (NAW)current year and FirstEnergy Solutions (FES)FES settlement agreement andin the minority interest loss associated with a third-party tax equity partnership arrangement.prior year. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The increase in revenues was primarily due to an increase in the number of EPC agreements at REC Solar and favorable solar portfolio revenue.
Operating Expenses. The increase was primarily due to favorable solar portfolio revenue due to new solar projects placed in service and higher development expenses andirradiance.
Operating Expenses. The decrease was primarily due to goodwill impairment charges in the current year, partially offset by lower property taxes due to non-recurring property tax payments made in the prior year.
Other Income and Expenses, net. The favorable variancedecrease was primarily due to income from the North Allegheny Wind, LLC and FES settlement agreement in other incomethe prior year.
Interest Expense. The increase was primarily due to mark-to-market losses in the solar portfolio in the current year.
Income Tax Benefit. The decrease in the tax benefit was primarily driven by taxes associated with Duke Energy's interest in a tax equity solar project recorded in the second quarter of 2019 and expensesa reduction in production tax credits generated.
Loss Attributable to Noncontrolling Interests. The increase was primarily due to the bankruptcy court approved NAW and FES settlement agreement, which allowed retention of previously collected cash collateral under the Purchase Power Agreements (PPAs), mark-to-market gains on interest rate swaps, the impairment of certain cost investments in the prior year and lower equity losses in the current year.
Income Tax Benefit.The lower tax benefits in 2018 were due to the lower statutory federal corporate tax rate under the Tax Act and higher tax benefit in 2017 from cost and property, plant and equipment impairments.
Loss Attributable to Noncontrolling Interests. The variance is primarily attributable to the entering into a third-partynew tax equity partnership arrangement.solar projects entered into during 2019.

PART I

Matters Impacting Future Commercial Renewables ResultsResults
Persistently low market pricing forDuring 2019, Duke Energy evaluated recoverability of the wind resources, primarilyand solar generation assets included in the minority interest sale as a result of the portfolio fair value of consideration received being less than the carrying value of the assets and determined the assets were all recoverable. Additionally, in 2019, Duke Energy evaluated recoverability of its renewable merchant plants principally in the Electric Reliability Council of Texas West market, due to declining market pricing and PJM west and the future expiration of tax incentives including investment tax credits and production tax credits coulddeclining long-term forecasted energy prices, primarily driven by lower forecasted natural gas prices. These assets were not impaired; however, a continued decline in energy market pricing would likely result in adverse impacts to thea future resultsimpairment. Impairment of operations, financial position and cash flows of Commercial Renewables.
Deterioration in credit quality resulting in bankruptcy of an offtaker of power from contracted wind or solarthese assets could result in adverse impacts to the future results of operations, financial position and cash flows of Commercial Renewables. On March 31, 2018, FES, a subsidiary of FirstEnergy and counterpartySee Note 2 to two PPAs with NAW, filedthe Condensed Consolidated Financial Statements, "Business Segments," for Chapter 11 bankruptcy. On June 18, 2018, The United States Bankruptcy Court’s Northern District of Ohio Eastern Division approved the Stipulation between FES and NAW. The Stipulation resulted in, among other items, the termination of the two PPAs between FES and NAW, as a result, NAW is subject to market pricing in the PJM west market.additional information.
On September 26, 2018, Duke Energy announced it is seeking a minority investor for the commercial renewables business. Duke Energy will continue to develop projects, grow its portfolio and manage its renewables assets. Duke Energy Renewable Services, an operations and maintenance business for third-party customers, and REC Solar are not included in the potential transaction. A sale of a minority interest is dependent on a number of factors and cannot be predicted at this time.

MD&ASEGMENT RESULTS — COMMERCIAL RENEWABLES


See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy Registrants' Annual Reports on Form 10-K/A10-K for the year ended December 31, 2017,2018, for discussion of risks associated with the Tax Act.
Other
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended September 30, Nine Months Ended September 30,
(in millions)2018
 2017
 Variance
 2018
 2017
 Variance
2019
 2018
 Variance
 2019
 2018
 Variance
Operating Revenues$34
 $35
 $(1) $101
 $103
 $(2)$25
 $34
 $(9) $71
 $101
 $(30)
Operating Expenses           27
 54
 (27) 66
 167
 (101)
Fuel used in electric generation and purchased power14
 13
 1
 43
 42
 1
Operation, maintenance and other(8) 20
 (28) (2) 47
 (49)
Depreciation and amortization43
 27
 16
 113
 79
 34
Property and other taxes5
 3
 2
 13
 10
 3
Impairment charges
 
 
 
 7
 (7)
Total operating expenses54
 63
 (9) 167
 185
 (18)
Gains (Losses) on Sales of Other Assets and Other, net3
 4
 (1) (96) 15
 (111)
 3
 (3) 
 (96) 96
Operating Loss(17) (24) 7
 (162) (67) (95)
Operating (Loss) Income(2) (17) 15
 5
 (162) 167
Other Income and Expenses, net40
 50
 (10) 81
 100
 (19)24
 40
 (16) 98
 81
 17
Interest Expense163
 150
 13
 484
 423
 61
185
 163
 22
 536
 484
 52
Loss Before Income Taxes(140) (124) (16) (565) (390) (175)(163) (140) (23) (433) (565) 132
Income Tax Benefit(98) (93) (5) (125) (193) 68
(54) (98) 44
 (132) (125) (7)
Less: Income Attributable to Noncontrolling Interests2
 3
 (1) 6
 8
 (2)
Less: Net Income Attributable to Noncontrolling Interests
 2
 (2) 
 6
 (6)
Less: Preferred Dividends15
 
 15
 27
 
 27
Net Loss$(44) $(34) $(10) $(446) $(205) $(241)$(124)
$(44) $(80) $(328) $(446) $118
Three Months Ended September 30, 2018,2019, as Comparedcompared to September 30, 20172018
Other'sThe variance was driven by lower income tax benefit, higher net lossinterest expense, and the declaration of the preferred stock dividends, offset by the absence in the current year of costs related to the Piedmont acquisition. The following is a detailed discussion of the variance drivers by line item.
Operating Expenses. The decrease was primarily due to costs related to the Piedmont acquisition and OVEC fuel expense in the prior year.
Other Income and Expenses, net. The variance was primarily due to lower returns on investments that fund certain employee benefit obligations and lower earnings on the NMC investment.
Interest Expense. The variance was primarily due to higher outstanding debt in the current year.
Income Tax Benefit. The decrease in the tax benefit was primarily driven by insurance proceeds receivedfavorable tax return true ups and tax levelization in the prior year.year, partially offset by an increase in pretax losses.
Preferred Dividends. The variance was driven by the declaration of the preferred stock dividend on preferred stock issued in 2019.
Nine Months Ended September 30, 2019, as compared to September 30, 2018
The variance was driven by the prior year loss on sale of the retired Beckjord station, prior year valuation allowance against AMT credits, and absence in the current year of costs related to the Piedmont acquisition, offset by higher interest expense and the declarations of the preferred stock dividend. The following is a detailed discussion of the variance drivers by line item.
Operating Expenses. The variance was primarily driven byRevenues. Lower operating revenues were due to amounts in the reclassificationprior year related to Duke Energy Ohio’s entitlement of certain immaterialcapacity and energy from OVEC’s power plants. In the current year, costs tothe revenues and expenses for OVEC are reflected in the Electric Utilities and Infrastructure segment.segment due to the 2018 PUCO Order that approved Duke Energy to recover or credit amounts through Rider PSR. These amounts are deemed immaterial. Therefore, the prior period amounts were not restated.
Other Income and Expenses, net. Operating Expenses. The variance was primarily due to insurance proceeds receivedcosts associated with the Piedmont acquisition and OVEC fuel expense in the prior year resulting from settlement of the shareholder litigation related to the Progress Energy merger.year.
Interest Expense. The variance was primarily due to an increase in long-term debt as well as higher interest rates on short-term debt.
Income Tax Benefit. The variance was primarily driven by an increase in pretax losses and favorable tax return true ups, partially offset by the lower statutory corporate federal income tax rate under the Tax Act. For additional information, see Note 17 to the Condensed Consolidated Financial Statements, "Income Taxes."
Nine Months Ended September 30, 2018, as Compared to September 30, 2017
Other's higher net loss was driven by the loss on sale of the retired Beckjord station, higher interest expense and lower tax benefit due to the Tax Act. The following is a detailed discussion of the variance drivers by line item.
Operating Expenses. The variance was primarily driven by the reclassification of certain immaterial current year costs to the Electric Utilities and Infrastructure segment.
Other Income and Expenses, net. The variance was primarily due to insurance proceeds received in the prior year resulting from settlement of the shareholder litigation related to the Progress Energy merger.

PART I

Gains (Losses) on Sales of Other Assets and Other, net. The variance was driven by the prior year loss on sale of the retired Beckjord station, a nonregulated facility retired during 2014, including the transfer of coal ash basins and other real property and indemnification from all potential future claims related to the property, whether arising under environmental laws or otherwise.
Interest Expense. Other Income and Expenses, net. The variance was primarily due to an increase in long-term debt as well as higher interest ratesreturns on short-term debt.investments that fund certain employee benefit obligations.
Income Tax Benefit.Interest Expense. The variance was primarily due to higher outstanding debt in the current year and higher short-term interest rates.
Income Tax Benefit. The increase in the tax benefit was primarily driven by a prior year valuation allowance against AMT credits, and the lower statutory corporate federal income tax rate under the Tax Act, partially offset by an increasea decrease in pretax losses. For additional information, see Note 17 to
Preferred Dividends. The variance was driven by the Condensed Consolidated Financial Statements, "Income Taxes."declarations of preferred stock dividend on preferred stock issued in 2019.

Matters Impacting Future Other Results

Included in Other is Duke Energy Ohio's 9 percent ownership interest in the OVEC, which owns 2,256 MW of coal-fired generation capacity. As a counterparty to an inter-company power agreement (ICPA), Duke Energy Ohio has a contractual arrangement to receive entitlements to capacity and energy from OVEC’s power plants through June 2040 commensurate with its power participation ratio, which is equivalent to Duke Energy Ohio's ownership interest. Costs, including fuel, operating expenses, fixed costs, debt amortization and interest expense, are allocated to counterparties to the ICPA, including Duke Energy Ohio, based on their power participation ratio. The value of the ICPA is subject to variability due to fluctuations in power prices and changes in OVEC’s costs of business. On March 31, 2018, FES, a subsidiary of FirstEnergy and an ICPA counterparty with a power participation ratio of 4.85 percent, filed for Chapter 11 bankruptcy, which could increase costs allocated to the counterparties. On July 31, 2018, the bankruptcy court rejected the FES ICPA, which means OVEC is an unsecured creditor in the FES bankruptcy proceeding. Duke Energy cannot predict the impact of the bankruptcy filing on its OVEC interests. In addition, certain proposed environmental rulemaking costs could result in future increased OVEC cost allocations.
In March 2017, Duke Energy Ohio filed an electric distribution base rate application with the PUCO to address recovery of electric distribution system capital investments and any increase in expenditures subsequent to previous rate cases. On April 13, 2018, Duke Energy Ohio filed a Stipulation with the PUCO to resolve issues in the electric distribution base rate case and other regulatory matters. If approved by PUCO, the Stipulation would allow for Duke Energy Ohio to recover gains and losses incurred on and after January 1, 2018, related to OVEC, through the Price Stabilization Rider and, as a result, Duke Energy Ohio may move its ownership interest to the Electric Utilities and Infrastructure segment. Hearings concluded on August 6, 2018. Initial briefs were filed on September 11, 2018, and reply briefs on October 2, 2018. See Note 3 to the Condensed Consolidated Financial Statements, “Regulatory Matters” for additional information.
MD&ADUKE ENERGY CAROLINAS
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy Registrants' Annual Reports on Form 10-K/A for the year ended December 31, 2017, for discussion of risks associated with the Tax Act.

DUKE ENERGY CAROLINAS
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the nine months ended September 30, 2018,2019, and 20172018, and the Annual Report on Form 10-K/A10-K for the year ended December 31, 2017.2018.
Results of Operations
Nine Months Ended September 30,Nine Months Ended September 30,
(in millions)2018
 2017
 Variance
2019
 2018
 Variance
Operating Revenues$5,525
 $5,581
 $(56)$5,619
 $5,525
 $94
Operating Expenses          
Fuel used in electric generation and purchased power1,370
 1,394
 (24)1,371
 1,370
 1
Operation, maintenance and other1,464
 1,472
 (8)1,324
 1,464
 (140)
Depreciation and amortization866
 804
 62
1,013
 866
 147
Property and other taxes214
 206
 8
221
 214
 7
Impairment charges191
 
 191
11
 191
 (180)
Total operating expenses4,105
 3,876
 229
3,940
 4,105
 (165)
Losses on Sales of Other Assets and Other, net(1) 
 (1)
 (1) 1
Operating Income1,419
 1,705
 (286)1,679
 1,419
 260
Other Income and Expenses, net108
 140
 (32)106
 108
 (2)
Interest Expense323
 314
 9
346
 323
 23
Income Before Income Taxes1,204
 1,531
 (327)1,439
 1,204
 235
Income Tax Expense268
 522
 (254)255
 268
 (13)
Net Income$936
 $1,009
 $(73)$1,184
 $936
 $248

PART I

The following table shows the percent changes in GWh sales and average number of customers. The percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized.
Increase (Decrease) over prior year20182019

Residential sales12.3(3.2)%
General service sales6.1(1.8)%
Industrial sales2.2(4.1)%
Wholesale power sales13.5(13.4)%
Joint dispatch sales7.423.0%
Total sales6.6(2.1)%
Average number of customers1.42.2%
Nine Months Ended September 30, 2018,2019, as Comparedcompared to September 30, 20172018
Operating Revenues.The variance was driven primarily by:
a $197$151 million decreaseincrease in retail salespricing due to revenues subject to refund to customers associated with the lower statutory federal corporate taximpacts of the prior year North Carolina rate undercase and the Tax Act;
a $48 million decrease in rider revenues primarily related to energy efficiency programs;current year South Carolina rate case; and
a $25 million decrease in wholesale power revenues, net of sharing and fuel, primarily due to wholesale customer refunds in the current year related to a FERC order on a complaint filed by Piedmont Municipal Power Agency (PMPA), partially offset by higher revenues related to recovery of coal ash costs.
Partially offset by:
a $141$7 million increase in retail sales, net of fuel revenues, due to favorable weather in the current year;year.
Partially offset by:
a $39$47 million increasedecrease in rider revenues primarily due to excess deferred taxes and energy efficiency programs, partially offset by a decrement rider relating to nuclear decommissioning that ended in the prior year; and
a $24 million decrease in weather-normal retail sales volumes; andvolumes.
a $29 million increase in retail pricing due to the impacts of the North Carolina rate case.
Operating Expenses. The variance was driven primarily by:
a $191$180 million increasedecrease in impairment charges primarily due to the impacts of the prior year North Carolina rate order and charges related to coal ash costs in South Carolina; and
a $140 million decrease in operation, maintenance and other expense primarily due to decreased labor costs and higher storm restoration costs in the prior year.
Partially offset by:
a $62$147 million increase in depreciation and amortization expense primarily due to additional plant in service, new depreciation rates associated with the prior year North Carolina rate case and the current year South Carolina rate case and higher amortization of deferred coal ash costs partially offset by lower amortization of certain regulatory assets.associated with the prior year North Carolina rate case.
Partially offset by:

a $24 million decrease in fuel used in electric generation and purchased power primarily due to decreased coal ash beneficial reuse costs, partially offset by higher sales volumes.
Other Income and Expenses.
MD&ADUKE ENERGY CAROLINAS


Interest Expense. The variance was primarily due to lower AFUDC equity and ahigher debt outstanding in the current year.
Income Tax Expense. The decrease in recognition of post in-service equity returns for projects that were completed prior to being reflected in customer rates.
Income Tax Expense. The variancetax expense was primarily due to the lower statutory federal corporate tax rate under the Tax Act. The ETRs for the nine months ended September 30, 2018, and 2017 were 22.3 percent and 34.1 percent, respectively. The decreasean increase in the ETR was primarily due to the lower statutory federal corporate tax rate under the Tax Act and the amortization of state excess deferred taxes partially offset byand favorable tax return true ups, partially offset by an increase in the prior year. For additional information, see Note 17 to the Condensed Consolidated Financial Statements, "Income Taxes."pretax income.
Matters Impacting Future Results
Duke Energy Carolinas filed a general rate case with the NCUC on September 30, 2019. The outcome of this rate case could materially impact Duke Energy Carolina's results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
On May 21, 2019, the PSCSC issued an order granting Duke Energy Carolinas request for a retail rate increase but denying recovery of certain coal ash costs. Duke Energy Carolinas intends to file a notice of appeal with the South Carolina Supreme Court within 30 days of the order that was received on October 18, 2016,2019. Duke Energy Carolinas' results of operations, financial position and cash flows could be adversely impacted if coal ash costs are not ultimately approved for recovery. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
On April 1, 2019, NCDEQ issued proposed risk classifications fora closure determination requiring Duke Energy Carolinas to excavate all remaining coal ash surface impoundments in North Carolina. All ash impoundments not previously designated as high priorityCarolina, even though they had been deemed low risk by the Coal Ash Act were designated as intermediate risk. Certain impoundments classified as intermediate risk, however, may be reassessedNCDEQ on November 14, 2018. On April 26, 2019, Duke Energy Carolinas filed a Petition for Contested Case Hearings in the future as low risk pursuantOffice of Administrative Hearings to legislation enacted on July 14, 2016.challenge NCDEQ's April 1 Order. Duke Energy Carolinas' estimated AROs relatedCarolinas intends to seek recovery of all costs through the closure of North Carolina ash impoundments are based upon the mandated closure method or a probability weighting of potential closure methods for the impoundments that may be reassessed to low risk. On October 12, 2018, NCDEQ announced that Duke Energy had satisfied the permanent replacement water supply requirements by the October 15, 2018, deadline set out in the Coal Ash Management Act. However, NCDEQ has not yet issued final classifications for these impoundments.ratemaking process consistent with previous proceedings. As the final risk ranking classifications in North Carolina are delineated, final closure plans and corrective action measures are developed and approved for each site, the closure work progresses, and the closure method scope and remedial action methods are determined, the complexity of work and the amount of coal combustion material could be different than originally estimated and, therefore, could materially impact Duke Energy Carolinas' results of operations, financial position and cash flows.

PART I

On June 22, 2018, Duke Energy Carolinas received an order from the NCUC, which denied the Grid Rider Stipulation and deferral treatment of grid improvement costs. Duke Energy Carolinas may petition for deferral of grid modernization costs outside of a general rate case proceeding if it can show financial hardship or a stipulation that includes greater consensus among intervening parties on costs being classified as grid modernization. Duke Energy Carolinas' results of operations, financial position and cash flows could be adversely impacted if grid modernization costs are not ultimately approved for recovery and/or deferral treatment. See Note 34 to the Condensed Consolidated Financial Statements, “Regulatory Matters,”"Commitments and Contingencies," for additional information.
On October 10, 2018, Hurricane Michael made landfall on Florida's Panhandle as a Category 4 hurricane, the most powerful storm to hit the Florida Panhandle in recorded history. The storm caused damage within the service territory of Duke Energy Carolinas. Duke Energy Carolinas has not completed the final accumulation of total estimated storm restoration costs incurred; however, the preliminary estimate is approximately $70 million of operation and maintenance expenses. Given the magnitude of the storm, Duke Energy Carolinas intends to request approval to defer the incremental costs incurred to a regulatory asset for recovery in the next base rate case. An order from regulatory authorities disallowing the deferral and future recovery of storm restoration costs could have an adverse impact on Duke Energy Carolinas' financial position, results of operations and cash flows.
Duke Energy Carolinas is a party to multiple lawsuits and subject to fines and other penalties related to operations at certain North Carolina facilities with ash basins. In addition, the order issued in the Duke Energy Carolinas North CarolinasCarolina rate case supporting recovery of past coal ash remediation costs has been appealed by various parties. The outcome of these appeals, lawsuits, fines and penalties could have an adverse impact on Duke Energy Carolinas’ results of operations, financial position and cash flows. See Notes 3 and 4 to the Condensed Consolidated Financial Statements, "Regulatory Matters" and “Commitments and Contingencies,” respectively, for additional information.
On June 22, 2018, Duke Energy Carolinas received an order from the NCUC, which denied the Grid Rider Stipulation and deferral treatment of grid improvement costs. Duke Energy Carolinas has petitioned for deferral of future grid improvement costs in its 2019 rate case. Duke Energy Carolinas' results of operations, financial position and cash flows could be adversely impacted if grid improvement costs are not ultimately approved for recovery and/or deferral treatment.
During the last half of 2018, Duke Energy Carolinas’ service territory was impacted by several named storms. Hurricane Florence, Hurricane Michael and Winter Storm Diego caused flooding, extensive damage and widespread power outages in the service territory. A significant portion of the incremental operation and maintenance expenses related to these storms has been deferred. An order from regulatory authorities disallowing the deferral and future recovery of storm restoration costs could have an adverse impact on Duke Energy Carolinas' results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy Registrants' Annual Reports on Form 10-K/A10-K for the year ended December 31, 2017,2018, for discussion of risks associated with the Tax Act.

MD&APROGRESS ENERGY


PROGRESS ENERGY
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the nine months ended September 30, 2018,2019, and 20172018, and the Annual Report on Form 10-K/A10-K for the year ended December 31, 2017.2018.
Results of Operations
Nine Months Ended September 30,Nine Months Ended September 30,
(in millions)2018
 2017
 Variance
2019
 2018
 Variance
Operating Revenues$8,119
 $7,435
 $684
$8,558
 $8,119
 $439
Operating Expenses          
Fuel used in electric generation and purchased power3,019
 2,588
 431
3,100
 3,019
 81
Operation, maintenance and other1,913
 1,697
 216
1,813
 1,913
 (100)
Depreciation and amortization1,183
 958
 225
1,377
 1,183
 194
Property and other taxes399
 386
 13
439
 399
 40
Impairment charges34
 137
 (103)(25) 34
 (59)
Total operating expenses6,548
 5,766
 782
6,704
 6,548
 156
Gains on Sales of Other Assets and Other, net23
 19
 4

 23
 (23)
Operating Income1,594
 1,688
 (94)1,854
 1,594
 260
Other Income and Expenses, net128
 112
 16
106
 128
 (22)
Interest Expense626
 595
 31
650
 626
 24
Income Before Income Taxes1,096
 1,205
 (109)1,310
 1,096
 214
Income Tax Expense186
 384
 (198)212
 186
 26
Net Income910
 821
 89
1,098
 910
 188
Less: Net Income Attributable to Noncontrolling Interests6
 7
 (1)
 6
 (6)
Net Income Attributable to Parent$904
 $814
 $90
$1,098
 $904
 $194
Nine Months Ended September 30, 2018,2019, as Comparedcompared to September 30, 20172018
Operating Revenues. The variance was driven primarily by:
a $467$299 million increase in retail pricing primarily due to the impacts of the prior year North Carolina rate case and current year South Carolina rate case at Duke Energy Progress, Duke Energy Florida's base rate adjustments related to Citrus County CC being placed in service and annual increases from the 2017 Settlement Agreement;
a $76 million increase in fuel revenues primarily related revenuesto increased fuel cost recovery due to higher sales volumes, increasesextreme weather in the prior year at Duke Energy Progress, partially offset by a decrease in fuel and capacity rates billed to retail customers and increased demand at Duke Energy Florida;
a $103$56 million increase in wholesale power revenues, net of fuel, primarily due to increased demand;
a $17 million increase in retail sales, net of fuel revenues, due to favorable weather in the current year and impacts of lost revenue resulting from Hurricane Irma in the prior year at Duke Energy Florida; and
an $89a $17 million increase in JAARother revenues primarily due to the implementation of new base ratesincreased transmission revenues and weather normalized volumesnon-regulated products and services revenues at Duke Energy Progress;Florida.
Partially offset by:
a $79$32 million decrease in retail rider revenues primarily related to decreased revenue requirements in the current year.
Operating Expenses. The variance was driven primarily by:
a $194 million increase in retail pricingdepreciation and amortization expense primarily due to higher amortization of deferred coal ash costs, new depreciation rates associated with the impacts of theprior year Duke Energy Progress North Carolina and South Carolina rate cases;case and

PART I

a $73 million increase in wholesale power revenues, net of fuel, primarily due to the recovery of coal ash costs and higher peak demand at Duke Energy Progress.
Partially offset by:
a $98 million decrease in retail sales due to revenues subject to refund to customers associated with the lower statutory federal corporate tax rate under the Tax Act at Duke Energy Progress; and
a $35 million decrease in rider revenues in conjunction with implementation of newFlorida's base rate and impacts of Hurricane Florence at Duke Energy Progress.adjustments related to Citrus County CC being placed in service;
Operating Expenses. The variance was driven primarily by:
a $431an $81 million increase in fuel used in electric generation and purchased power primarily due to higher sales, higher deferredan increase in the North Carolina Renewable Energy and Energy Efficiency Portfolio Standard requirement from the prior year at Duke Energy Progress, partially offset by lower purchased power and lower fuel costs, net of deferrals, at Duke Energy Florida; and capacity expenses, and increased purchased power;
a $225$40 million increase in depreciationproperty and amortizationother taxes primarily due to higher amortization of deferred coal ash costscurrent year property tax reassessments and new depreciation rates associated witha favorable sales and use tax credit in the North Carolina rate caseprior year at Duke Energy Progress, and accelerated depreciation of Crystal River Units 4 and 5 andhigher property taxes for additional plant in service at Duke Energy Florida;Florida.

MD&APROGRESS ENERGY


Partially offset by:
a $216$100 million increasedecrease in operation, maintenance and other expense primarily due to lower storm costs, reduced outage costs, and lower employee benefit costs, partially offset by increased vegetation management costs at Duke Energy Florida; and
a $59 million decrease in impairment charges primarily due to prior year impacts associated with the North Carolina rate case at Duke Energy Progress and storm cost amortizationa reduction of a prior year impairment at Duke Energy Florida;Florida's Citrus County CC.
Other Income and
a $13 million increase in property and other taxes Expenses, net. The variance was driven primarily due to higher revenue related taxes.
Partially offset by:
a $103 million decrease in impairment charges primarily due toby AFUDC equity return ending on the write-off of remaining unrecovered Levy Nuclear Project costsCitrus County CC in the prior yearfourth quarter of 2018 at Duke Energy Florida.Florida, partially offset by life insurance proceeds at Duke Energy Progress.
Interest Expense. The variance was driven primarily by AFUDC debt return ending in the fourth quarter of 2018 on the Citrus County CC at Duke Energy Florida.
Income Tax Expense. The varianceincrease in tax expense was primarily due to the lower statutory federal corporate tax rate under the Tax Act. The ETRs for the nine months ended September 30, 2018, and 2017 were 17.0 percent and 31.9 percent, respectively. The decreasean increase pretax income, partially offset by an increase in the ETR was primarily due to the lower statutory federal corporate tax rate under the Tax Act and levelization for annual amortization of federal and state excess deferred taxes. For additional information, see Note 17 to the Condensed Consolidated Financial Statements, "Income Taxes."
Matters Impacting Future Results
Duke Energy Progress filed a general rate case with the NCUC on October 30, 2019. The outcome of this rate case could materially impact Progress Energy's results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
On May 21, 2019, the PSCSC issued an order granting Duke Energy Progress' request for a retail rate increase but denying recovery of certain coal ash costs. Duke Energy Progress intends to file a notice of appeal with the South Carolina Supreme Court within 30 days of the order that was received on October 18, 2016,2019. Progress Energy's results of operations, financial position and cash flows could be adversely impacted if coal ash costs are not ultimately approved for recovery. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
On April 1, 2019, NCDEQ issued proposed risk classifications fora closure determination requiring Duke Energy Progress to excavate all remaining coal ash surface impoundments in North Carolina. All ash impoundments not previously designated as high priorityCarolina, even though they had been deemed low risk by the Coal Ash Act were designated as intermediate risk. Certain impoundments classified as intermediate risk, however, may be reassessedNCDEQ on November 14, 2018. On April 26, 2019, Duke Energy Progress filed a Petition for Contested Case Hearings in the future as low risk pursuantOffice of Administrative Hearings to legislation enacted on July 14, 2016. Progress Energy's estimated AROs related to the closure of North Carolina ash impoundments are based upon the mandated closure method or a probability weighting of potential closure methods for the impoundments that may be reassessed to low risk. On October 12, 2018, NCDEQ announced thatchallenge NCDEQ's April 1 Order. Duke Energy had satisfiedProgress intends to seek recovery of all costs through the permanent replacement water supply requirements by the October 15, 2018, deadline set out in the Coal Ash Management Act. However, NCDEQ has not yet issued final classifications for these impoundments.ratemaking process consistent with previous proceedings. As the final risk ranking classifications in North Carolina are delineated, final closure plans and corrective action measures are developed and approved for each site, the closure work progresses, and the closure method scope and remedial action methods are determined, the complexity of work and the amount of coal combustion material could be different than originally estimated and, therefore, could materially impact Progress Energy's results of operations, financial position and cash flows.
In the third quarter of 2018, Hurricane Florence caused historic flooding, extensive damage and widespread power outages within the Duke Energy Progress service territory. Current estimated restoration costs are approximately $420 million of operations and maintenance expense and approximately $75 million in capital costs. Most of the operation and maintenance expenses are deferred as of September 30, 2018. Given the magnitude of the storm, Duke Energy Progress intends to request approval to defer the incremental costs incurred to a regulatory asset for recovery in the next base rate case. The request is expected to be filed during the fourth quarter of 2018. An order from regulatory authorities disallowing the deferral and future recovery of storm restoration costs could have an adverse impact on Progress Energy's financial position, results of operations and cash flows. See Note 34 to the Condensed Consolidated Financial Statements, "Regulatory Matters,"Commitments and Contingencies," for additional information.
On October 10, 2018, Hurricane Michael made landfall on Florida's Panhandle as a Category 4 hurricane, the most powerful storm to hit the Florida Panhandle in recorded history. The storm caused significant damage within the service territories of Duke Energy Florida and Duke Energy Progress. Progress Energy has not completed the final accumulation of total estimated storm restoration costs incurred; however, the preliminary estimate is approximately $165 million of operation and maintenance expenses and approximately $175 million of capital costs. Given the magnitude of the storm, Duke Energy Progress intends to request approval to defer the incremental costs incurred to a regulatory asset for recovery in the next base rate case, and Duke Energy Florida will recover these storm costs consistent with the provisions in its 2017 Second Revised and Restated Settlement Agreement. An order from regulatory authorities disallowing the deferral and future recovery of storm restoration costs could have an adverse impact on Progress Energy's financial position, results of operations and cash flows.
Duke Energy Progress is a party to multiple lawsuits and subject to fines and other penalties related to operations at certain North Carolina facilities with ash basins. As noted above, the order issued in the Duke Energy Progress North CarolinasCarolina rate case supporting recovery of past coal ash remediation costs has been appealed by various parties. The outcome of these appeals, lawsuits, fines and penalties could have an adverse impact on Progress Energy’s results of operations, financial position and cash flows. See Notes 3 and 4 to the Condensed Consolidated Financial Statements, "Regulatory Matters" and “Commitments and Contingencies,” respectively, for additional information.

PART I

Duke Energy Carolinas received an order from the NCUC, which denied the Grid Rider Stipulation and deferral treatment of grid improvement costs. The NCUC did allow Duke Energy Carolinas to petitionProgress has petitioned for deferral of future grid modernization costs outside of a general rate case proceeding if it can show financial hardship or a stipulation that includes greater consensus among intervening parties on costs being classified as grid modernization. While Duke Energy Progress did not request recovery of theseimprovement costs in its most recent case with the NCUC, Duke Energy Progress may request recovery of certain grid modernization costs in future regulatory proceedings. If the NCUC were to rule similarly,2019 rate case. Progress Energy's results of operations, financial position and cash flows could be adversely impacted if grid modernizationimprovement costs are not ultimately approved for recovery and/or deferral treatment. See Note 3 to
During the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
On June 30, 2017, CertainTeed filed a declaratory judgment action againstlast half of 2018, Duke Energy Progress in the North Carolina Business Court relating to a gypsum supply agreement. In its complaint, CertainTeed sought an order from the court declaring that the minimum amount of gypsumand Duke Energy Progress must provideFlorida’s service territories were impacted by several named storms. Hurricane Florence, Hurricane Michael and Winter Storm Diego caused flooding, extensive damage and widespread power outages to CertainTeed under the supply agreement is 50,000 tons per month through 2029. The trial for this matter concluded on July 16, 2018. On August 29, 2018, the court issued an order and opinion finding thatservice territory of Duke Energy Progress is requiredProgress. Duke Energy Florida’s service territory was also impacted by Hurricane Michael, a Category 5 hurricane and the most powerful storm to supply 50,000 tons of gypsum per month, but that CertainTeed's sole remedy forhit the Florida Panhandle in recorded history. In September 2019, Hurricane Dorian impacted Duke Energy Progress' long-term discontinuance under the agreement is liquidated damages. The estimated maximum amount that would be owed under the liquidated damages provision is approximately $90 million. Both CertainTeed and Duke Energy Progress have filed cross-appeals. The outcomeFlorida's service territories. A significant portion of the cross-appeals could have an adverse impact on Progress Energy's results of operations, financial positionincremental operation and cash flows. See Note 4maintenance expenses related to these storms has been deferred. An order from regulatory authorities disallowing the Condensed Consolidated Financial Statements, “Commitmentsdeferral and Contingencies,” for additional information.
Duke Energy Florida is constructing the 1,640-MW combined-cycle natural gas plant in Citrus County, Florida, and expects it to be commercially available in 2018. Actual costs are expected to exceed estimated costs by an immaterial amount after recoveries; therefore, an impairment is not expected. Failure to complete the construction and achieve commercial operations by the end of 2018 or failure to obtain recoveries from customers or vendors could materially impact Progress Energy's results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
On February 6, 2018, the FPSC approved a stipulation that would apply tax savings resulting from the Tax Act toward storm costs effective January 2018 in lieu of implementing a storm surcharge. On May 31, 2018, Duke Energy Florida filed forfuture recovery of the storm costs. Storm costs are currently expected to be fully recovered by approximately mid-2021. The commission has scheduled the hearing to begin on May 21, 2019. An order disallowing recovery of theserestoration costs could have an adverse impact on Progress Energy's results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, “Regulatory"Regulatory Matters," for additional information.
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy Registrants' Annual Reports on Form 10-K/A10-K for the year ended December 31, 2017,2018, for discussion of risks associated with the Tax Act.

MD&ADUKE ENERGY PROGRESS


DUKE ENERGY PROGRESS
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the nine months ended September 30, 2018,2019, and 20172018, and the Annual Report on Form 10-K/A10-K for the year ended December 31, 2017.2018.
Results of Operations
Nine Months Ended September 30,Nine Months Ended September 30,
(in millions)2018
 2017
 Variance
2019
 2018
 Variance
Operating Revenues$4,333
 $3,878
 $455
$4,559
 $4,333
 $226
Operating Expenses          
Fuel used in electric generation and purchased power1,452
 1,214
 238
1,571
 1,452
 119
Operation, maintenance and other1,187
 1,069
 118
1,070
 1,187
 (117)
Depreciation and amortization723
 536
 187
855
 723
 132
Property and other taxes115
 120
 (5)131
 115
 16
Impairment charges33
 
 33

 33
 (33)
Total operating expenses3,510
 2,939
 571
3,627
 3,510
 117
Gains on Sales of Other Assets and Other, net9
 3
 6

 9
 (9)
Operating Income832
 942
 (110)932
 832
 100
Other Income and Expenses, net61
 84
 (23)75
 61
 14
Interest Expense241
 217
 24
232
 241
 (9)
Income Before Income Taxes652
 809
 (157)775
 652
 123
Income Tax Expense120
 262
 (142)125
 120
 5
Net Income$532
 $547
 $(15)$650
 $532
 $118

PART I

The following table shows the percent changes in GWh sales and average number of customers. The percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized.
Increase (Decrease) over prior period20182019

Residential sales10.1(4.1)%
General service sales2.1(1.6)%
Industrial sales0.71.6%
Wholesale power sales7.2(2.2)%
Joint dispatch sales2.9(0.3)%
Total sales5.4(1.3)%
Average number of customers1.61.3%
Nine Months Ended September 30, 2018,2019, as Comparedcompared to September 30, 20172018
Operating Revenues. The variance was driven primarily by:
a $268$101 million increase in fuel revenues primarily related revenuesto increased fuel cost recovery due to higher retail sales and changesextreme weather in generation mix;the prior year;
a $79$91 million increase in retail pricing due to the impacts of the prior year North Carolina rate case and the current year South Carolina rate cases;case; and
a $73$47 million increase in wholesale power revenues, net of fuel, primarily due to recovery of coal ash costs and higher peak demand;
a $72 million increasecost recovery in retail sales due to favorable weather conditions;
a $52 million increase in JAAR revenues in conjunction with implementation of new base rates; and
a $37 million increase in weather normalized volumes.the current year.
Partially offsetOffset by:
a $98$17 million decrease in retail sales due to revenues subject to refund to customers associated with the lower statutory federal corporate tax rate under the Tax Act;
a $25 million decrease in certain rider revenues in conjunction with implementation of new base rates; and
a $10 million decrease in revenuesprimarily due to the impactsreturn of Hurricane Florence.excess deferred incomes taxes created by the reduction in the corporate income tax rate, partially offset by increase in rider revenues related to energy efficiency programs.
Operating Expenses. The variance was driven primarily by:
a $238 million increase in fuel used in electric generation and purchased power primarily due higher retail sales and changes in generation mix;
a $187$132 million increase in depreciation and amortization expense primarily due to higher amortization of deferred coal ash costs and new depreciation rates perassociated with the prior year North Carolina and current year South Carolina rate cases, partially offset by the amortization credit for the North Carolina rate case;Renewable Energy and Energy Efficiency Portfolio Standard requirement increase from prior year;
a $118$119 million increase in fuel used in electric generation and purchased power primarily due to a higher deferred fuel balance and an increase in the North Carolina Renewable Energy and Energy Efficiency Portfolio Standard requirement from prior year, partially offset by lower demand and changes in generation mix; and
a $16 million increase in property and other taxes primarily due to current year property tax reassessments and a favorable sales and use tax credit in the prior year.

MD&ADUKE ENERGY PROGRESS


Partially offset by:
a $117 million decrease in operation, maintenance and other expense primarily due to higherlower storm contingency costs in current year, reduced outage costs and lower employee benefit costs; and
a $33 million decrease in impairment charges due to prior year impacts associated with the North Carolina rate case and higher operational costs that are recoverable in rates; and
a $33 million increase in impairment charges associated with the North Carolina rate case.
Other Income and Expenses. Expenses, net. The variance was driven primarily driven by lowerlife insurance proceeds.
Income Tax Expense. The increase in tax expense was primarily due to an increase in pretax income, from non-service componentspartially offset by an increase in the amortization of employment benefit costs. For additional informationexcess deferred taxes.
Matters Impacting Future Results
Duke Energy Progress filed a general rate case with the NCUC on employee benefit costs, seeOctober 30, 2019. The outcome of this rate case could materially impact Duke Energy Progress' results of operations, financial position and cash flows. See Note 163 to the Condensed Consolidated Financial Statements, "Employee Benefit Plans."Regulatory Matters," for additional information.
Income Tax Expense. The varianceOn May 21, 2019, the PSCSC issued an order granting Duke Energy Progress' request for a retail rate increase but denying recovery of certain coal ash costs. Duke Energy Progress intends to file a notice of appeal with the South Carolina Supreme Court within 30 days of the order that was primarily due to the lower statutory federal corporate tax rate under the Tax Act. The ETRsreceived on October 18, 2019. Duke Energy Progress' results of operations, financial position and cash flows could be adversely impacted if coal ash costs are not ultimately approved for the nine months ended September 30, 2018, and 2017 were 18.4 percent and 32.4 percent, respectively. The decrease in the ETR was primarily due to the lower statutory federal corporate tax rate under the Tax Act and the amortization of state excess deferred taxes. For additional information, seerecovery. See Note 173 to the Condensed Consolidated Financial Statements, "Income Taxes."Regulatory Matters,"

PART I

Matters Impacting Future Results for additional information.
On May 18, 2016, theApril 1, 2019, NCDEQ issued proposed risk classifications fora closure determination requiring Duke Energy Progress to excavate all remaining coal ash surface impoundments in North Carolina. All ash impoundments not previously designated as high priorityCarolina, even though they had been deemed low risk by the Coal Ash Act were designated as intermediate risk. Certain impoundments classified as intermediate risk, however, may be reassessedNCDEQ on November 14, 2018. On April 26, 2019, Duke Energy Progress filed a Petition for Contested Case Hearings in the future as low risk pursuantOffice of Administrative Hearings to legislation enacted on July 14, 2016.challenge NCDEQ's April 1 Order. Duke Energy Progress' estimated AROs relatedProgress intends to seek recovery of all costs through the closure of North Carolina ash impoundments are based upon the mandated closure method or a probability weighting of potential closure methods for the impoundments that may be reassessed to low risk. On October 12, 2018, NCDEQ announced that Duke Energy had satisfied the permanent replacement water supply requirements by the October 15, 2018, deadline set out in the Coal Ash Management Act. However, NCDEQ has not yet issued final classifications for these impoundments.ratemaking process consistent with previous proceedings. As the final risk ranking classifications in North Carolina are delineated, final closure plans and corrective action measures are developed and approved for each site, the closure work progresses, and the closure method scope and remedial action methods are determined, the complexity of work and the amount of coal combustion material could be different than originally estimated and, therefore, could materially impact Duke Energy Progress' results of operations, financial position and cash flows.
In the third quarter of 2018, Hurricane Florence caused historic flooding, extensive damage and widespread power outages within the Duke Energy Progress service territory. Current estimated restoration costs are approximately $420 million of operations and maintenance expense and approximately $75 million in capital costs. Most of the operation and maintenance expenses are deferred as of September 30, 2018. Given the magnitude of the storm, Duke Energy Progress intends to request approval to defer the incremental costs incurred to a regulatory asset for recovery in the next base rate case. The request is expected to be filed during the fourth quarter of 2018. An order from regulatory authorities disallowing the deferral and future recovery of storm restoration costs could have an adverse impact on Duke Energy Progress' financial position, results of operations and cash flows. See Note 34 to the Condensed Consolidated Financial Statements, "Regulatory Matters,"Commitments and Contingencies," for additional information.
On October 10, 2018, Hurricane Michael made landfall on Florida's Panhandle as a Category 4 hurricane, the most powerful storm to hit the Florida Panhandle in recorded history. The storm caused damage within the service territory of Duke Energy Progress. Duke Energy Progress has not completed the final accumulation of total estimated storm restoration costs incurred; however, the preliminary estimate is approximately $25 million of operation and maintenance expenses. Given the magnitude of the storm, Duke Energy Progress intends to request approval to defer the incremental costs incurred to a regulatory asset for recovery in the next base rate case. An order from regulatory authorities disallowing the deferral and future recovery of storm restoration costs could have an adverse impact on Duke Energy Progress' financial position, results of operations and cash flows.
Duke Energy Progress is a party to multiple lawsuits and subject to fines and other penalties related to operations at certain North Carolina facilities with ash basins. As noted above, the order issued in the Duke Energy Progress North CarolinasCarolina rate case supporting recovery of past coal ash remediation costs has been appealed by various parties. The outcome of these appeals, lawsuits, fines and penalties could have an adverse impact on Duke Energy Progress’ results of operations, financial position and cash flows. See Notes 3 and 4 to the Condensed Consolidated Financial Statements, "Regulatory Matters" and “Commitments and Contingencies,” respectively, for additional information.
Duke Energy Carolinas received an order from the NCUC, which denied the Grid Rider Stipulation and deferral treatment of grid improvement costs. The NCUC did allow Duke Energy Carolinas to petitionProgress has petitioned for deferral of future grid modernization costs outside of a general rate case proceeding if it can show financial hardship or a stipulation that includes greater consensus among intervening parties on costs being classified as grid modernization. While Duke Energy Progress did not request recovery of theseimprovement costs in its most recent case with the NCUC, Duke Energy Progress may request recovery of certain grid modernization costs in future regulatory proceedings. If the NCUC were to rule similarly,2019 rate case. Duke Energy Progress' results of operations, financial position and cash flows could be adversely impacted if grid modernizationimprovement costs are not ultimately approved for recovery and/or deferral treatment. See Note 3 to
During the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
On June 30, 2017, CertainTeed filed a declaratory judgment action against Duke Energy Progress in the North Carolina Business Court relating to a gypsum supply agreement. In its complaint, CertainTeed sought an order from the court declaring that the minimum amountlast half of gypsum Duke Energy Progress must provide to CertainTeed under the supply agreement is 50,000 tons per month through 2029. The trial for this matter concluded on July 16, 2018. On August 29, 2018, the court issued an order and opinion finding that Duke Energy Progress is required to supply 50,000 tons of gypsum per month, but that CertainTeed's sole remedy for Duke Energy Progress' long-term discontinuance underservice territory was impacted by several named storms. Hurricane Florence, Hurricane Michael and Winter Storm Diego caused flooding, extensive damage and widespread power outages in the agreement is liquidated damages. The estimated maximum amount that would be owed underservice territory. In September 2019, Hurricane Dorian reached the liquidated damages provision is approximately $90 million. Both CertainTeedCarolinas bringing high winds, tornadoes and Duke Energy Progress have filed cross-appeals. The outcomeheavy rain, impacting about 300,000 customers within the service territory. A significant portion of the cross-appealsincremental operation and maintenance expenses related to these storms has been deferred. An order from regulatory authorities disallowing the deferral and future recovery of storm restoration costs could have an adverse impact on Duke Energy's ProgressEnergy Progress' results of operations, financial position and cash flows. See Note 43 to the Condensed Consolidated Financial Statements, “Commitments and Contingencies,”"Regulatory Matters," for additional information.
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy Registrants' Annual Reports on Form 10-K/A10-K for the year ended December 31, 2017,2018, for discussion of risks associated with the Tax Act.


PART I

MD&ADUKE ENERGY FLORIDA


DUKE ENERGY FLORIDA
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the nine months ended September 30, 2018,2019, and 20172018, and the Annual Report on Form 10-K/A10-K for the year ended December 31, 2017.2018.
Results of Operations
Nine Months Ended September 30,Nine Months Ended September 30,
(in millions)2018
 2017
 Variance
2019
 2018
 Variance
Operating Revenues$3,780
 $3,551
 $229
$3,987
 $3,780
 $207
Operating Expenses          
Fuel used in electric generation and purchased power1,567
 1,374
 193
1,529
 1,567
 (38)
Operation, maintenance and other719
 623
 96
730
 719
 11
Depreciation and amortization460
 423
 37
522
 460
 62
Property and other taxes284
 265
 19
309
 284
 25
Impairment charges1
 137
 (136)(25) 1
 (26)
Total operating expenses3,031
 2,822
 209
3,065
 3,031
 34
Operating Income749
 729
 20
922
 749
 173
Other Income and Expenses, net75
 58
 17
39
 75
 (36)
Interest Expense210
 211
 (1)246
 210
 36
Income Before Income Taxes614
 576
 38
715
 614
 101
Income Tax Expense100
 208
 (108)129
 100
 29
Net Income$514
 $368
 $146
$586
 $514
 $72
The following table shows the percent changes in GWh sales and average number of customers. The 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, public and private utilities and power marketers. Amounts are not weather-normalized.
Increase (Decrease) over prior period20182019

Residential sales2.72.2%
General service sales1.11.0%
Industrial sales0.2(6.3)%
Wholesale and other4.432.4%
Total sales2.02.1%
Average number of customers1.6%
Nine Months Ended September 30, 2018,2019, as Comparedcompared to September 30, 20172018
Operating Revenues. The variance was driven primarily by:
a $199$208 million increase in fuel and capacity revenues primarilyretail pricing due to an increasebase rate adjustments related to Citrus County CC being placed in fuelservice, annual increases from the 2017 Settlement Agreement and capacity rates billed to retail customers, as well as increased demand; andthe Solar Base Rate Adjustment;
a $31$17 million increase in retail sales, net of fuel revenues, due to favorable weather in the current yearyear;
a $17 million increase in other revenues primarily due to increased transmission revenues and impactsnon-regulated products and services revenues; and
a $9 million increase in wholesale power revenues, net of lostfuel, primarily due to increased demand.
Partially offset by:
a $25 million decrease in fuel and capacity revenues primarily due to a decrease in fuel and capacity rates billed to retail customers; and
a $22 million decrease in retail rider revenues primarily related to decreased revenue resulting from Hurricane Irmarequirements in the priorcurrent year.
Operating Expenses. The variance was driven primarily by:
a $193$62 million increase in depreciation and amortization expense primarily due to base rate adjustments related to Citrus County CC being placed in service, other additional plant in service and increases resulting from the 2018 Crystal River Unit 3 nuclear decommissioning cost study;
a $25 million increase in property and other taxes primarily due to higher property taxes from additional plant in service; and
an $11 million increase in operation, maintenance and other expense primarily due to increased vegetation management costs and Hurricane Dorian costs, partially offset by lower outage costs.

MD&ADUKE ENERGY FLORIDA


Partially offset by:
a $38 million decrease in fuel used in electric generation and purchased power primarily due to higher deferred fuel and capacity expenses, increasedlower purchased power and increased demand;
a $96 million increase in operations, maintenance and other expense primarily due to storm cost amortizations, partially offset by lower storm restorationfuel costs, in the current year;
a $37 million increase in depreciation and amortization primarily due to accelerated depreciationnet of Crystal River Units 4 and 5 and additional plant in service, partially offset by decreased ARO depreciation due to the updated Crystal River Unit 3 nuclear decommissioning cost study;deferrals; and
a $19 million increase in property and other taxes primarily due to higher revenue related taxes.
Partially offset by:
a $136$26 million decrease in impairment charges primarily due to the write-offa reduction of remaining unrecovered Levy Nuclear Project costs in thea prior year.year impairment at Citrus County CC.
Other Income and Expenses. Expenses, net. The variance was driven primarily by higher AFUDC equity return ending on the Citrus County Combined Cycle projectCC in the fourth quarter of 2018.
Interest Expense. The variance was driven primarily by AFUDC debt return ending on the Citrus County CC in the fourth quarter of 2018 and higher debt outstanding in the current year.

PART I

Income Tax Expense. The varianceincrease in tax expense was primarily due to the lower statutory federal corporate tax rate under the Tax Act. The ETRs for the nine months ended September 30, 2018, and 2017 were 16.3 percent and 36.1 percent, respectively. The decreasean increase in the ETR was primarily due to the lower statutory federal corporate tax rate under the Tax Act and the amortization of federal excess deferred taxes. For additional information, see Note 17 to the Condensed Consolidated Financial Statements, "Income Taxes."pretax income.
Matters Impacting Future Results
Duke Energy Florida is constructing the 1,640-MW combined-cycle natural gas plant in Citrus County, Florida, and expects it to be commercially available in 2018. Actual costs are expected to exceed estimated costs by an immaterial amount after recoveries; therefore, an impairment is not expected. Failure to complete the construction and achieve commercial operations by the end of 2018 or failure to obtain recoveries from customers or vendors could materially impact Duke Energy Florida’s results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
On February 6, 2018, the FPSC approved a stipulation that would apply tax savings resulting from the Tax Act toward storm costs effective January 2018 in lieu of implementing a storm surcharge. On May 31, 2018, Duke Energy Florida filed for recovery of the storm costs. Storm costs are currently expected to be fully recovered by approximately mid-2021. The commission has scheduled the hearing to begin on May 21, 2019. An order disallowing recovery of these costs could have an adverse impact on Duke Energy Florida's results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
On October 10, 2018, Hurricane Michael made landfall on Florida's Panhandle as a Category 45 hurricane, the most powerful storm to hit the Florida Panhandle in recorded history. The storm caused significant damage within the service territory of Duke Energy Florida.Florida, particularly from Panama City Beach to Mexico Beach. In September 2019, Duke Energy Florida’s service territory was threatened by Hurricane Dorian with landfall as a possible Category 5 hurricane and therefore Duke Energy Florida has not completedincurred costs to secure necessary resources to be prepared for that potential impact. A significant portion of the final accumulation of total estimated storm restoration costs incurred; however, the preliminary estimate is approximately $140 million ofincremental operation and maintenance expenses and approximately $175 million in capital costs. Given the magnitude of the storm, Duke Energy Florida will recoverrelated to these storm costs consistent with the provisions in its 2017 Second Revised and Restated Settlement Agreement.storms has been deferred. An order from regulatory authorities disallowing the future recovery of storm restoration costs could have an adverse impact on Duke Energy Florida's financial position, results of operations and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy Registrants' Annual Reports on Form 10-K/A10-K for the year ended December 31, 2017,2018, for discussion of risks associated with the Tax Act.
DUKE ENERGY OHIO
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the nine months ended September 30, 2018,2019, and 20172018, and the Annual Report on Form 10-K/A10-K for the year ended December 31, 2017.2018.
Results of Operations
Nine Months Ended September 30,Nine Months Ended September 30,
(in millions)2018
 2017
 Variance
2019
 2018
 Variance
Operating Revenues          
Regulated electric$1,055
 $1,036
 $19
$1,099
 $1,055
 $44
Regulated natural gas361
 360
 1
354
 361
 (7)
Nonregulated electric and other36
 30
 6

 36
 (36)
Total operating revenues1,452
 1,426
 26
1,453
 1,452
 1
Operating Expenses          
Fuel used in electric generation and purchased power – regulated284
 283
 1
293
 284
 9
Fuel used in electric generation and purchased power – nonregulated43
 42
 1

 43
 (43)
Cost of natural gas73
 69
 4
68
 73
 (5)
Operation, maintenance and other337
 388
 (51)378
 337
 41
Depreciation and amortization196
 193
 3
199
 196
 3
Property and other taxes218
 204
 14
229
 218
 11
Impairment charges
 1
 (1)
Total operating expenses1,151
 1,180
 (29)1,167
 1,151
 16
(Losses) Gains on Sales of Other Assets and Other, net(106) 1
 (107)
Losses on Sales of Other Assets and Other, net
 (106) 106
Operating Income195
 247
 (52)286
 195
 91
Other Income and Expenses, net17
 15
 2
19
 17
 2
Interest Expense68
 67
 1
81
 68
 13
Income From Continuing Operations Before Income Taxes144
 195
 (51)
Income Tax Expense From Continuing Operations23
 67
 (44)
Income From Continuing Operations121
 128
 (7)
Loss From Discontinued Operations, net of tax
 (1) 1
Income Before Income Taxes224
 144
 80
Income Tax Expense34
 23
 11
Net Income$121
 $127
 $(6)$190
 $121
 $69


PART I

MD&ADUKE ENERGY OHIO


The following table shows the percent changes in GWh sales of electricity, dekatherms of natural gas delivered and average number of electric and natural gas customers. The percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized.
ElectricNatural GasElectricNatural Gas
Increase (Decrease) over prior year2018
2018
2019
2019
Residential sales13.4%28.6%(4.7)%(1.2)%
General service sales3.6%24.7%(2.6)%0.8 %
Industrial sales(1.0)%9.6%(1.4)%1.9 %
Wholesale electric power sales(58.3)%n/a
46.8 %n/a
Other natural gas salesn/a
0.3%n/a
1.4 %
Total sales3.0%17.3%(1.2)%0.3 %
Average number of customers0.8%0.8%0.6 %0.8 %
Nine Months Ended September 30, 2018,2019, as Comparedcompared to September 30, 20172018
Operating Revenues. The variance was driven primarily by:
a $39$52 million increase in electric and natural gas retail sales, net of fuel revenues,pricing primarily due to favorable weather in the current year;rate case impacts; and
a $16$15 million increase in financialpoint-to-point transmission rights revenues;
a $5 million increase in other revenues related to OVEC;
a $5 million increase in fuel revenues due to higher natural gas costs; and
a $4 million increase in rider revenue primarily due to increased rates.revenues.
Partially offset by:
a $38$28 million decrease in regulatedfuel related revenues primarily due to revenues subject to refund to customers associated with the lower statutory federal corporate tax rate under the Tax Act; anda decrease in price;
a $5$15 million decrease in bulk power marketing sales.FTR rider revenues;
a $14 million decrease in rider revenues primarily related to the implementation of new base rates; and
a $9 million decrease in OVEC revenues.
Operating Expenses. The variance was driven primarily by:
a $51$41 million decreaseincrease in operations, maintenance and other expense primarily due to the FERC approved settlement refund of certain transmission costs previously billed by PJM.PJM recorded in 2018; and
Partially offset by:
a $14an $11 million increase in property and other taxes primarily due to higher property taxes due to higheradditional plant balances; andin service.
Partially offset by:
a $6$34 million increasedecrease in fuel costs primarily due to increased natural gas sales volumes.
Other Incomeused in electric generation and Expenses. The variance was driven primarily by an increase in AFUDC equity due to higher base spending for transmission and fossil plants and an increasepurchased power expense due to the impairmentprior year outage at East Bend Station and the deferral of meters in 2017.OVEC related purchased power costs.
Gains (Losses)Losses on Sales of Other Assets and Other, net. The decreaseincrease was driven by the loss on the prior year sale of Beckjord, a nonregulated facility retired during 2014, includingBeckjord.
Interest Expense. The variance was driven primarily by higher debt outstanding in the transfer of coal ash basins and other real property and indemnification from any and all potential future claims related to the property, whether arising under environmental laws or otherwise.current year.
Income Tax Expense. The varianceincrease in tax expense was primarily due to a decreasean increase in pretax income, and the lower statutory federal corporate tax rate under the Tax Act. The ETRs for the nine months ended September 30, 2018, and 2017 were 16.0 percent and 34.4 percent, respectively. The decreasepartially offset by an increase in the ETR was primarily due to the lower statutory federal corporate tax rate under the Tax Act and the amortization of federal excess deferred taxes. For additional information, see Note 17 to the Condensed Consolidated Financial Statements, "Income Taxes."
Matters Impacting Future Results
Duke EnergyOn November 13, 2013, the PUCO issued an order authorizing recovery of MGP costs at certain sites in Ohio haswith a 9 percent ownership interestdeadline to complete the MGP environmental investigation and remediation work prior to December 31, 2016. This deadline was subsequently extended to December 31, 2019. Disallowance of costs incurred, failure to complete the work by the deadline or failure to obtain an extension from the PUCO could result in OVEC, which owns 2,256 MW of coal-fired generation capacity. As a counterparty to an ICPA, Duke Energy Ohio has a contractual arrangement to receive entitlements to capacity and energy from OVEC’s power plants through June 2040 commensurate with its power participation ratio, which is equivalent toadverse impact on Duke Energy Ohio’s ownership interest. Costs, including fuel, operating expenses, fixed costs, debt amortization and interest expense, are allocated to counterparties to the ICPA, including Duke Energy Ohio, based on their power participation ratio. The value of the ICPA is subject to variability due to fluctuations in power prices and changes in OVEC’s costs of business. On March 31, 2018, FES, a subsidiary of FirstEnergy and an ICPA counterparty with a power participation ratio of 4.85 percent, filed for Chapter 11 bankruptcy, which could increase costs allocated to the counterparties. On July 31, 2018, the bankruptcy court rejected the FES ICPA, which means OVEC is an unsecured creditor in the FES bankruptcy proceeding. Duke Energy Ohio cannot predict the impact of the bankruptcy filing on its OVEC interests. In addition, certain proposed environmental rulemaking costs could result in future increased OVEC cost allocations.

PART I

In March 2017, Duke Energy Ohio filed an electric distribution base rate application with the PUCO to address recovery of electric distribution system capital investments and any increase in expenditures subsequent to previous rate cases. On April 13, 2018, Duke Energy Ohio filed a Stipulation with the PUCO to resolve issues in the electric distribution base rate case and other regulatory matters. If approved by PUCO, the Stipulation would allow for Duke Energy Ohio to recover gains and losses incurred on and after January 1, 2018, related to OVEC, through the Price Stabilization Rider. Hearings concluded on August 6, 2018. Initial briefs were filed on September 11, 2018, and reply briefs on October 2, 2018. Duke Energy Ohio's results of operations, financial position and cash flows could be adversely impacted if the Stipulation is denied by the PUCO.flows. See Note 3 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy Registrants' Annual Reports on Form 10-K/A10-K for the year ended December 31, 2017,2018, for discussion of risks associated with the Tax Act.

MD&ADUKE ENERGY INDIANA


DUKE ENERGY INDIANA
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the nine months ended September 30, 2018,2019, and 20172018, and the Annual Report on Form 10-K/A10-K for the year ended December 31, 2017.2018.
Results of Operations
Nine Months Ended September 30,Nine Months Ended September 30,
(in millions)2018
 2017
 Variance
2019
 2018
 Variance
Operating Revenues$2,288
 $2,302
 $(14)$2,289
 $2,288
 $1
Operating Expenses          
Fuel used in electric generation and purchased power730
 744
 (14)720
 730
 (10)
Operation, maintenance and other576
 546
 30
569
 576
 (7)
Depreciation and amortization386
 336
 50
393
 386
 7
Property and other taxes56
 56
 
55
 56
 (1)
Impairment charges30
 
 30

 30
 (30)
Total operating expenses1,778
 1,682
 96
1,737
 1,778
 (41)
Gains on Sales of Other Assets and Other, net
 1
 (1)
Operating Income510
 621
 (111)552
 510
 42
Other Income and Expenses, net36
 32
 4
35
 36
 (1)
Interest Expense125
 132
 (7)111
 125
 (14)
Income Before Income Taxes421
 521
 (100)476
 421
 55
Income Tax Expense104
 203
 (99)113
 104
 9
Net Income$317
 $318
 $(1)$363
 $317
 $46
The following table shows the percent changes in GWh sales and average number of customers. The percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized.
Increase (Decrease) over prior year20182019

Residential sales14.0(4.9)%
General service sales3.1(2.5)%
Industrial sales0.4(2.3)%
Wholesale power sales(0.928.9)%
Total sales3.7(6.6)%
Average number of customers1.2%
Nine Months Ended September 30, 2018,2019, as Comparedcompared to September 30, 20172018
Operating Revenues.The variance was driven primarily by:
a $25 million increase in revenues primarily due to higher TDSIC rider revenues.
Partially offset by:
an $83 million decrease due to revenues subject to refund to customers associated with the lower statutory federal corporate tax rate under the Tax Act; and
a $22$18 million decrease in wholesale power revenues net of fuel, primarily due to contracts that expired in the prior year.expiration of a contract with a wholesale customer; and

PART I

Partially offset by:
a $53an $8 million increase in rate rider revenues primarily related to the Edwardsport Integrated Gasification Combined Cycle (IGCC) plant and the Transmission, Distribution and Storage System Improvement Charge rider;
a $24 million increase in electric sales to retail customers due to favorable weather in the current year;
a $7 million increasedecrease in weather-normal retail sales volumes to retail customers in the current year; andvolumes.
a $6 million increase in fuel and other revenues primarily due to higher Midcontinent Independent System Operator rider revenue, partially offset by a decrease in retail and wholesale fuel revenues.
Operating Expenses.The variance was driven primarily by:
a $50 million increase in depreciation and amortization primarily due to additional plant in service and the deferral of certain asset retirement obligations in the prior year;
a $30 million increasedecrease in operation, maintenance and other expense primarily due to higher amortizations of previously deferred expenses, higher transmission and customer related costs; and
a $30 million increase in impairment chargesimpairments primarily due to the reduction of a regulatory asset pertaining to theprior year Edwardsport IGCC settlement agreement.
Partially offset by:settlement; and
a $14$10 million decrease in fuel used in electric generation and purchased power expense primarily due to the net benefit to expenselower coal and natural gas costs, partially offset by higher amortization of lower purchaseddeferred fuel costs and higher purchase power and an increase in internal generation, and lower fuel prices.clause.
Other Income and Expenses. The increase was primarily due to higher AFUDC equity resulting from recognition of the equity portion of rider specific post-in-service carrying costs under the tax settlement approved by the IURC.
Income Tax Expense. Interest Expense. The variance was primarily due to recording a debt return on the lower statutory federal corporatecumulative balance of deferred coal ash spend based on probability of recovery. This adjustment was immaterial and primarily relates to prior years.
Income Tax Expense. The increase in tax rate under the Tax Act. The ETRs for the nine months ended September 30, 2018, and 2017 were 24.7 percent and 39.0 percent, respectively. The decrease in the ETRexpense was primarily due to the lower statutory federal corporate tax rate under the Tax Act. For additional information, see Note 17 to the Condensed Consolidated Financial Statements, "Income Taxes."an increase in pretax income.

MD&ADUKE ENERGY INDIANA


Matters Impacting Future Results
On April 17, 2015, the U.S. Environmental Protection Agency (EPA)EPA published in the Federal Register a rule to regulate the disposal of Coal Combustion Residuals (CCR)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 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 AROs. Additionally, Duke Energy Indiana has retired facilities that are not subject to the CCR rule. Duke Energy Indiana may incur costs at these facilities to comply with environmental regulations or to mitigate risks associated with on-site storage of coal ash. An order from regulatory authorities disallowing recovery of costs related to closure of ash basins could have an adverse impact on Duke Energy Indiana's results of operations, financial position and cash flows.
Duke Energy Indiana filed a general rate case with the IURC on July 2, 2019, its first general rate case in Indiana in 16 years. The outcome of this rate case could materially impact Duke Energy Indiana's results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, “Regulatory"Regulatory Matters," for additional information.
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy Registrants' Annual Reports on Form 10-K/A10-K for the year ended December 31, 2017,2018, for discussion of risks associated with the Tax Act.

PART I

PIEDMONT
Management’s Discussion and Analysis should be read in conjunction with the Condensed Consolidated Financial Statements and Notes for the nine months ended September 30, 2018,2019, and 20172018, and the Annual Report on Form 10-K/A10-K for the year ended December 31, 2017.2018.
Results of Operations
Nine Months Ended September 30,Nine Months Ended September 30,
(in millions)2018
 2017
 Variance
2019
 2018
 Variance
Operating Revenues$940
 $884
 $56
$956
 $940
 $16
Operating Expenses          
Cost of natural gas387
 333
 54
384
 387
 (3)
Operation, maintenance and other252
 226
 26
241
 252
 (11)
Depreciation and amortization118
 109
 9
127
 118
 9
Property and other taxes36
 38
 (2)39
 36
 3
Impairment charges
 7
 (7)
Total operating expenses793
 713
 80
791
 793
 (2)
Operating Income147
 171
 (24)165
 147
 18
Other Income and Expenses     
Equity in earnings of unconsolidated affiliates6
 8
 (2)
Other income and expenses, net9
 (1) 10
Total other income and expenses15
 7
 8
Other Income and Expenses, net19
 15
 4
Interest Expense60
 59
 1
65
 60
 5
Income Before Income Taxes102
 119
 (17)119
 102
 17
Income Tax Expense21
 43
 (22)22
 21
 1
Net Income$81
 $76
 $5
$97
 $81
 $16
The following table shows the percent changes in dekatherms delivered and average number of customers. The percentages for all throughput deliveries represent billed and unbilled sales. Amounts are not weather-normalized.
Increase (Decrease) over prior year20182019

Residential deliveries34.2(7.5)%
Commercial deliveries20.1(4.2)%
Industrial deliveries3.32.9%
Power generation deliveries25.9(10.5)%
For resale21.85.9%
Total throughput deliveries21.6(7.2)%
Secondary market volumes(9.82.0)%
Average number of customers1.51.3%
Due to the margin decoupling mechanism in North Carolina and weather normalization adjustment (WNA) mechanismsthe WNA in South Carolina and Tennessee, changes in throughput deliveries do not have a material impact on Piedmont's revenues or earnings. The margin decoupling mechanism adjusts for variations in residential and commercial use per customer, including those due to weather and conservation. The WNA mechanisms mostly offsetoffsets the impact of weather on bills rendered, but do not ensure precise recovery of approved margin during periods when winter weather is significantly warmer or colder than normal.
Nine Months Ended September 30, 2018,2019, as Comparedcompared to September 30, 20172018
Operating Revenues.The variance was driven primarily by:
a $54$12 million increase primarily due to higher natural gas costs passed through to customers due to higher retail volumes soldNorth Carolina and higher natural gas prices;Tennessee IMR increases; and
a $37$9 million increase primarily due to residential and commercial customer revenue, net of natural gas costs passed throughNCUC approval related to customers, due to customer growth and IMRtax reform accounting from fixed rate adjustments; and new power generation customers.contracts.

MD&APIEDMONT


Partially offset by:
a $34$7 million decrease primarily due to revenues subject to refund to customers associated with the lower statutory federal corporate tax rate under the Tax Act.a reduction of rates in South Carolina.

PART I

Operating Expenses.The variance was driven primarily by:
a $54an $11 million increasedecrease in cost of natural gasoperations, maintenance and other expense primarily due to higher retail volumes soldlower labor and higher natural gas prices;
information technology outside services costs and a $26 million increase in operation, maintenance and other primarily dueportion of rent expense being charged to increased shared services costs to achieve merger expenses and natural gas operations; andin the current year.
Partially offset by:
a $9 million increase in depreciation and amortization expense primarily due to additional plant in service.
Partially offset by:
a $7 million decrease due to an impairment of software recorded in the prior year.
Other Income and Expense.Interest Expense. The increasevariance was primarily due todriven by higher income from non-service components of employee benefit costsdebt outstanding in the current year. For additional information on employee benefit costs, see Note 16 to the Condensed Consolidated Financial Statements, "Employee Benefit Plans."
Income Tax Expense. The variance was primarilyyear, higher interest expense due to the lower statutory federal corporatecustomers as a result of tax rate under the Tax Act. The ETRs for the nine months ended September 30, 2018,reform deferrals and 2017 were 20.6 percent and 36.1 percent, respectively. The decrease in the ETR was primarily due to the lower statutory federal corporate tax rate under the Tax Act. For additional information, see Note 17 to the Condensed Consolidated Financial Statements, "Income Taxes."intercompany interest, partially offset by favorable AFUDC debt interest.
Matters Impacting Future Results
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy Registrants' Annual Reports on Form 10-K/A10-K for the year ended December 31, 2017,2018, for discussion of risks associated with the Tax Act.
LIQUIDITY AND CAPITAL RESOURCES
Sources and Uses of Cash
Duke Energy relies primarily upon cash flows from operations, debt and equity issuances and its existing cash and cash equivalents to fund its 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/A10-K for the year ended December 31, 2017,2018, for a summary and detailed discussion of projected primary sources and uses of cash for 20182019 to 2020.2021.
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 certainissued $5.3 billion of its other subsidiaries in a money pool arrangement. The companies with short-term funds may provide short-term loans to affiliates participatingdebt, drew $650 million under this arrangement.
the Duke Energy Progress Term Loan Facility and paid off in full the Subsidiary Registrants, excluding Progress Energy (Parent), may also use short-term debt, including commercial paper and$350 million Piedmont term loan during 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. From time to time, Duke Energy’s current liabilities may 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.
Equity Issuance
nine months ended September 30, 2019. Refer to Note 14 to the CondensedConsolidated Financial Statements, "Common Stock," for further information regarding Duke Energy's equity issuance.
CREDIT FACILITIES AND REGISTRATION STATEMENTS
Refer to Note 56 to the Condensed Consolidated Financial Statements, "Debt and Credit Facilities," for further information regarding Duke Energy's debt issuances, debt maturities and available credit facilities including the Master Credit Facility.
Shelf Registration
In March 2019 and September 2016,2019, Duke Energy filed a registration statement (Form S-3) withissued preferred stock for net proceeds of $973 million and $990 million, respectively. In addition, for the U.S. Securities and Exchange Commission. Under this Form S-3, which is uncapped, thenine months ended September 30, 2019, Duke Energy Registrants, excluding Progress Energy (Parent), 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 issuanceraised approximately $120 million of common stock by Duke Energy.
In January 2017, Duke Energy amendedequity through its Form S-3 to add Piedmont as a registrant and included in the amendment a prospectus for Piedmont under which it may issue debt securities in the same manner as other Duke Energy Registrants.

PART I

DEBT MATURITIES
DRIP. Refer to Note 515 to the CondensedConsolidated Financial Statements, "Debt and Credit Facilities,"Stockholders' Equity," for further information regarding significant components of Current Maturities of Long-Term Debt on the Condensed Consolidated Balance Sheets.Duke Energy's equity issuances.
CASH FLOWS FROM OPERATING ACTIVITIES
Cash flows from operations of Electric Utilities and Infrastructure and Gas Utilities and Infrastructure are primarily driven by sales of electricity and natural gas, respectively, and costs of operations. These cash flows from operations are relatively stable and comprise a substantial portion of Duke Energy’s operating cash flows. Weather conditions, working capital and commodity price fluctuations, and unanticipated expenses including unplanned plant outages, storms, legal costs and related settlements, and regulatory orders can affect the timing and level of cash flows from operations.
In November 2019, Duke Energy believes it has sufficient liquidity resources throughannounced plans to issue approximately $2.5 billion of incremental equity by the commercial paper markets,end of 2020. This equity would support Duke Energy's five-year growth plan by strengthening the balance sheet and ultimatelyallowing the Master Credit and Revolving Facilities,Company to support these operations, including storm restoration costs from Hurricanes Florence and Michael. Cash flows from operations are subject toabsorb a numberwide range 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 Reports on Form 10-K/A for the year ended December 31, 2017, 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 not to exceed 65 percent for all borrowers except Piedmont, and 70 percent for Piedmont. Failure to meet those covenants beyond applicable grace periods could result in accelerated due dates and/or termination of the agreements or sublimits thereto. As of September 30, 2018, each of the Duke Energy Registrants was in complianceoutcomes associated with all covenants related to their debt agreements. In addition, some credit agreements may allow for acceleration of payments or termination of the agreements due to nonpayment or acceleration of other significant indebtedness of the borrower or some of its subsidiaries. None of the debt or credit agreements contain material adverse change clauses.ACP.
Credit Ratings
Credit ratings are intended to provide credit lenders a framework for comparingIn May 2019, S&P revised 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.
Moody’s Investors Service, Inc. (Moody’s), Standard & Poor’s Rating Services and Fitch Ratings, Inc. provide credit ratings for various Duke Energy Registrants.
On August 1, 2018, Moody’s revised its ratings outlook for Duke Energy Corporation and Piedmont from negative to stable and forall other Duke Energy OhioRegistrants from positivestable to stable. Moody’s also revised itsnegative, principally due to concerns of weaker financial measures due to 2018 storms, uncertainty over coal ash remediation costs and recovery in the Carolinas, regulatory lag during a period of robust capital spending and delays related to the ACP pipeline. There have been no changes to the credit ratings as follows: Progress Energy is upgraded from Baa2 to Baa1; Piedmont is downgraded from A2 to A3. On September 6, 2018, Fitch revised its ratings outlook forof any of the Duke Energy Corporation from negativeRegistrants during 2019 by any of the rating agencies. Moody's and Fitch continue to stable.maintain a stable outlook on Duke Energy Corporation.
Cash Flow Information
The following table summarizes Duke Energy’s cash flows.
 Nine Months Ended Nine Months Ended
 September 30, September 30,
(in millions) 2018
 2017
 2019
 2018
Cash flows provided by (used in):        
Operating activities $5,667
 $4,978
 $5,637
 $5,667
Investing activities (7,270) (6,331) (8,633) (7,270)
Financing activities 1,547
 1,239
 2,987
 1,547
Net decrease in cash, cash equivalents and restricted cash (56) (114) (9) (56)
Cash, cash equivalents and restricted cash at beginning of period 505
 541
 591
 505
Cash, cash equivalents and restricted cash at end of period $449
 $427
 $582
 $449


PART I

MD&ALIQUIDITY AND CAPITAL RESOURCES


OPERATING CASH FLOWS
The following table summarizes key components of Duke Energy’s operating cash flows.
 Nine Months Ended Nine Months Ended
 September 30, September 30,
(in millions) 2018
 2017
 Variance
 2019
 2018
 Variance
Net income $2,190
 $2,361
 $(171) $2,964
 $2,190
 $774
Non-cash adjustments to net income 5,206
 3,937
 1,269
 4,389
 5,206
 (817)
Contributions to qualified pension plans (141) (8) (133) (77) (141) 64
Payments for asset retirement obligations (389) (420) 31
 (582) (389) (193)
Payment for disposal of other assets (105) 
 (105) 
 (105) 105
Working capital (1,094) (892) (202) (1,057) (1,094) 37
Net cash provided by operating activities $5,667
 $4,978
 $689
 $5,637
 $5,667
 $(30)
The variance was primarily due to:
a $1,098$193 million increase in net income after adjustmentpayments for non-cash items primarily due to favorable weather and increased pricing and volumes in the current period.asset retirement obligations.
Partially offset by:
a $133$64 million increasedecrease in contributions to qualified pension plans; and
a $105 million payment for disposal of Beckjord.Beckjord in the prior year.
INVESTING CASH FLOWSGlobal Climate Change
The following table summarizes key components of Duke Energy’s investing cash flows.
  Nine Months Ended
  September 30,
(in millions) 2018
 2017
 Variance
Capital, investment and acquisition expenditures $(7,050) $(6,211) $(839)
Other investing items (220) (120) (100)
Net cash used in investing activities $(7,270) $(6,331) $(939)
The variance relates primarily to an increase in capital expenditures due to higher overall investments in regulated generation, natural gas and commercial renewables.
FINANCING CASH FLOWS
The following table summarizes key components of Duke Energy’s financing cash flows.
  Nine Months Ended
  September 30,
(in millions) 2018
 2017
 Variance
Issuances of long-term debt, net $1,832
 $3,675
 $(1,843)
Issuances of common stock 834
 
 834
Notes payable and commercial paper 674
 (619) 1,293
Dividends paid (1,835) (1,825) (10)
Other financing items 42
 8
 34
Net cash provided by financing activities $1,547
 $1,239
 $308
The variance was primarily due to:
an $834 million increase in proceeds from the issuance of common stock; and
a $1,293 million increase in net proceeds from issuances of notes payable and commercial paper primarily due to increased capital expenditures and the timing of debt and common stock issuances.
Partially offset by:
a $1,843 million decrease in proceeds from net issuances of long-term debt primarily due to prior year financings of $820 million in the Commercial Renewables segment and the timing of issuances and redemptions of long-term debt.

PART I

Summary of Significant Debt Issuances
Refer to Note 5 to the Condensed Consolidated Financial Statements, "Debt and Credit Facilities," for further information regarding significant debt issuances.
OTHER MATTERS
Environmental Regulations
TheOn September 17, 2019, Duke Energy Registrants are subject to federal,announced an updated climate strategy with a new goal of net-zero carbon emissions from electric generation by 2050. Timelines and initiatives, as well as implementation of new technologies, will vary in each state in which the company operates and local regulations regarding air and water quality, hazardous and solid waste disposalwill involve collaboration with regulators, customers and other environmental matters. These regulations can be changed from time to timestakeholders.
Hurricane Dorian
In the third quarter of 2019, Hurricane Dorian impacted approximately 270,000 North Carolina customers and result in new obligations of30,000 South Carolina customers within the Duke Energy Registrants.
The following sections outline various proposed and recently enacted statutes and regulations that may impact theProgress service territory. Duke Energy Registrants. ReferFlorida’s service territory was also threatened by Hurricane Dorian and therefore, Duke Energy Florida also incurred costs to be prepared for potential impact. Estimated restoration costs for Duke Energy are approximately $400 million. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for furtheradditional information.
Regulatory Activity
In 2019, Duke Energy advanced regulatory activity in multiple jurisdictions. The following rate cases are underway:
Duke Energy Carolinas and Duke Energy Progress filed general rate cases with the NCUC on September 30, 2019, and October 30, 2019, respectively, requesting rate increases go into effect in the third quarter of 2020.
Duke Energy Kentucky filed an electric rate case with the KPSC on September 3, 2019. Hearings are expected to begin in the first quarter of 2020 with rates anticipated to go into effect in the second quarter of 2020.
Duke Energy Indiana filed a general rate case with the IURC on July 2, 2019. Hearings are expected to begin in early 2020, with rates to be effective mid-2020.
Additionally, as a result of regulatory orders or settlements, customer rates were impacted in 2019 as follows:
On October 31, 2019, Piedmont received an order from the NCUC and revised customer rates became effective on November 1, 2019.
In May 2019, Duke Energy Carolinas and Duke Energy Progress received orders from the PSCSC and revised customer rates became effective June 1, 2019. As a result of the Directive allowing litigation-related costs, Duke Energy Progress customer rates were revised again July 1, 2019.
Duke Energy Kentucky revised customer rates on April 1, 2019, following settlement on January 30, 2019, of its 2018 Natural Gas Base Rate Case.
At Duke Energy Florida, revised customer rates went into effect in January 2019 as a result of a July 2018 petition to the FPSC to include in base rates the revenue requirement for Duke Energy Florida’s first solar generation project, the Hamilton Project. The FPSC in July 2019, issued an order to allow Duke Energy Florida to include in base rates the revenue requirements for its next wave of three solar generation projects, with projected in-service dates ranging from the fourth quarter of 2019 to the first quarter of 2020.
See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters" for additional information.
Results of Operations
Non-GAAP Measures
Management’s Discussion and Analysis includes financial information regarding potential plant retirementsprepared in accordance with GAAP in the U.S., as well as certain non-GAAP financial measures such as adjusted earnings and adjusted EPS 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. 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 may not be comparable to similarly titled measures used by other companies because other companies may not calculate the measures in the same manner.

MD&ADUKE ENERGY


Management evaluates financial performance in part based on non-GAAP financial measures, including adjusted earnings and adjusted diluted EPS. Adjusted earnings and adjusted diluted EPS represent income from continuing operations attributable to Duke Energy common stockholders in dollar and per-share amounts, adjusted for the dollar and per-share impact of special items. As discussed below, special items represent certain charges and credits, which management believes are not indicative of Duke Energy's ongoing performance. The most directly comparable GAAP measures for adjusted earnings and adjusted diluted EPS are GAAP Reported Earnings and GAAP Reported EPS, respectively.
Special items in the periods presented below include the following:
Impairment Charges represents a reduction of a prior year impairment at Citrus County CC, an OTTI of an investment in Constitution and a Commercial Renewables goodwill impairment.
Costs to Achieve Piedmont Merger represents charges that resulted from the Piedmont acquisition.
Regulatory and Legislative Impacts represents charges related to rate case orders, settlements or other actions of regulators or legislative bodies.
Sale of Retired Plant represents the loss associated with selling Beckjord, a nonregulated generating facility in Ohio.
Impacts of the Tax Act represents an AMT valuation allowance recognized and a true up of prior year tax estimates related to the Tax Act.
Three Months Ended September 30, 2019, as compared to September 30, 2018
GAAP Reported EPS was $1.82 for the third quarter of 2019 compared to $1.51 for the third quarter of 2018. The increase in GAAP reported earnings was primarily due to favorable weather, positive rate case impacts, and lower operating expenses in Electric Utilities and Infrastructure and a prior year goodwill impairment charge in Commercial Renewables; these items were partially offset by higher corporate interest expense.
As discussed above, management also evaluates financial performance based on adjusted diluted EPS. Duke Energy’s third quarter 2019 adjusted diluted EPS was $1.79 compared to $1.65 for the third quarter of 2018.
The following table reconciles non-GAAP measures, including adjusted diluted EPS, to their most directly comparable GAAP measures.
 Three Months Ended September 30,
 2019 2018
(in millions, except per-share amounts)Earnings EPS Earnings EPS
GAAP Reported Earnings/GAAP Reported EPS$1,327
 $1.82
 $1,082
 $1.51
Adjustments:       
Impairment charges(a)
(19) (0.03) 91
 0.12
Costs to Achieve Piedmont Merger(b)

 
 13
 0.02
Impacts of the Tax Act(c)

 
 (3) 
Discontinued Operations
 
 (4) 
Adjusted Earnings/Adjusted Diluted EPS$1,308
 $1.79
 $1,179
 $1.65
(a)Net of $6 million tax expense in 2019. Net of $2 million Noncontrolling Interests in 2018.
(b)Net of $3 million tax benefit.
(c)Represents a true up of prior year tax estimates related to the Tax Act.

Nine Months Ended September 30, 2019, as compared to September 30, 2018
GAAP Reported EPS was $4.18 for the nine months ended September 30, 2019, compared to $3.11 for the nine months ended September 30, 2018. The increase in GAAP Reported earnings was primarily due to positive rate case impacts and lower operating expenses in Electric Utilities and Infrastructure, partially offset by higher depreciation and share dilution from equity issuances; the allocation of losses to noncontrolling tax equity members resulting primarily from the Commercial Renewables North Rosamond solar farm commencing commercial operations; an adjustment related to income tax recognition for equity method investments in Gas Utilities and Infrastructure; and prior year regulatory filingsand legislative impacts, impairments charges, an AMT valuation allowance and a loss on sale of a retired plant.
As discussed above, management also evaluates financial performance based on adjusted diluted EPS. Duke Energy’s adjusted diluted EPS was $4.15 for the nine months ended September 30, 2019, compared to $3.87 for the nine months ended September 30, 2018.

MD&ADUKE ENERGY


The following table reconciles non-GAAP measures, including adjusted diluted EPS, to their most directly comparable GAAP measures.
 Nine Months Ended September 30,
 2019 2018
(in millions, except per-share amounts)Earnings EPS Earnings EPS
GAAP Reported Earnings/GAAP Reported EPS$3,047
 $4.18
 $2,202
 $3.11
Adjustments:       
Costs to Achieve Piedmont Merger(a)

 
 41
 0.06
Regulatory and Legislative Impacts(b)

 
 202
 0.29
Sale of Retired Plant(c)

 
 82
 0.12
Impairment Charges(d)
(19) (0.03) 133
 0.19
Impacts of the Tax Act(e)

 
 73
 0.10
Discontinued Operations
 
 1
 
Adjusted Earnings/Adjusted Diluted EPS$3,028
 $4.15
 $2,734
 $3.87
(a)Net of $12 million tax benefit.
(b)Net of $63 million tax benefit.
(c)Net of $25 million tax benefit.
(d)Net of $6 million tax expense in 2019. Net of $13 million tax benefit and $2 million Noncontrolling Interests in 2018.
(e)Represents a recognition of AMT valuation allowance and true up of prior year tax estimates related to the Tax Act.
SEGMENT RESULTS
The remaining information presented in this discussion of results of operations is on a GAAP basis. Management evaluates segment performance based on segment income. Segment income is defined as income from continuing operations net of income attributable to noncontrolling interests and preferred stock dividends. Segment income includes intercompany revenues and expenses that are eliminated in the Condensed Consolidated Financial Statements.
Duke Energy's segment structure includes the following segments: Electric Utilities and Infrastructure, Gas Utilities and Infrastructure and Commercial Renewables. The remainder of Duke Energy’s operations is presented as Other. See Note 2 to the Condensed Consolidated Financial Statements, “Business Segments,” for additional information on Duke Energy’s segment structure.
Electric Utilities and Infrastructure
 Three Months Ended September 30, Nine Months Ended September 30,
(in millions)2019
 2018
 Variance
 2019
 2018
 Variance
Operating Revenues$6,577
 $6,260
 $317
 $17,381
 $16,806
 $575
Operating Expenses           
Fuel used in electric generation and purchased power1,994
 1,935
 59
 5,286
 5,202
 84
Operation, maintenance and other1,357
 1,431
 (74) 3,957
 4,151
 (194)
Depreciation and amortization1,026
 897
 129
 2,924
 2,570
 354
Property and other taxes301
 289
 12
 899
 842
 57
Impairment charges(20) 31
 (51) (16) 246
 (262)
Total operating expenses4,658
 4,583
 75
 13,050
 13,011
 39
Gains on Sales of Other Assets and Other, net
 8
 (8) 
 9
 (9)
Operating Income1,919
 1,685
 234
 4,331
 3,804
 527
Other Income and Expenses, net87
 107
 (20) 267
 286
 (19)
Interest Expense336
 322
 14
 1,004
 955
 49
Income Before Income Taxes1,670
 1,470
 200
 3,594
 3,135
 459
Income Tax Expense285
 303
 (18) 650
 643
 7
Segment Income$1,385
 $1,167
 $218
 $2,944
 $2,492
 $452
           

Duke Energy Carolinas GWh sales25,587
 25,607
 (20) 69,019
 70,506
 (1,487)
Duke Energy Progress GWh sales19,502
 19,625
 (123) 52,072
 52,747
 (675)
Duke Energy Florida GWh sales12,996
 12,375
 621
 32,468
 31,798
 670
Duke Energy Ohio GWh sales7,135
 6,964
 171
 18,959
 19,183
 (224)
Duke Energy Indiana GWh sales8,711
 9,114
 (403) 24,181
 25,900
 (1,719)
Total Electric Utilities and Infrastructure GWh sales73,931
 73,685
 246
 196,699
 200,134
 (3,435)
Net proportional MW capacity in operation    

 49,711
 48,757
 954

MD&ASEGMENT RESULTS — ELECTRIC UTILITIES AND INFRASTRUCTURE


Three Months Ended September 30, 2019, as compared to September 30, 2018
Electric Utilities and Infrastructure’s results were impacted by a positive contribution from the Duke Energy Carolinas North and South Carolina rate cases, Duke Energy Florida's base rate adjustments due to the Citrus County CC being placed in service, favorable weather in the current year and lower operation, maintenance and other expense.
These drivers were partially offset by higher depreciation from a growing asset base and higher interest expense. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The variance was driven primarily by:
a $167 million increase in retail pricing primarily due to the Duke Energy Registrants.Carolinas North and South Carolina rate cases and Duke Energy Florida's base rate adjustments related to Citrus County CC being placed in service;
Coal Combustion Residualsan $88 million increase in retail sales, net of fuel revenues, due to favorable weather in the current year; and
a $51 million increase in fuel related revenues.
Operating Expenses. The variance was driven primarily by:
a $129 million increase in depreciation and amortization expense primarily due to additional plant in service and new depreciation rates associated with the prior year Duke Energy Carolinas and Duke Energy Progress North Carolina rate cases and Duke Energy Florida's Citrus County CC being placed in service;
a $59 million increase in fuel used in electric generation and purchased power primarily due to an increase in the North Carolina Renewable Energy and Energy Efficiency Portfolio Standard requirement from the prior year at Duke Energy Progress; and
a $12 million increase in property and other taxes primarily due to higher property taxes for additional plant in service at Duke Energy Florida.
Partially offset by:
a $74 million decrease in operation, maintenance and other expense primarily due to lower storm costs at Duke Energy Progress and Duke Energy Carolinas in the current year and lower payroll costs resulting from prior year workforce reductions; and
a $51 million decrease in impairment charges primarily due to a reduction of a prior year impairment at Duke Energy Florida's Citrus County CC and the prior year Edwardsport IGCC settlement at Duke Energy Indiana.
Other Income and Expenses, net. The variance was driven primarily by AFUDC equity return ending on the Citrus County CC in the fourth quarter of 2018 at Duke Energy Florida.
Interest Expense. The variance was driven primarily by higher debt outstanding in the current year and AFUDC debt return ending in the fourth quarter of 2018 on the Citrus County CC at Duke Energy Florida.
Income Tax Expense. The decrease in tax expense was primarily due to an increase in the amortization of excess deferred taxes, partially offset by an increase in pretax income. The ETRs for the three months ended September 30, 2019, and 2018, were 17.1% and 20.6%, respectively. The decrease in the ETR was primarily due to an increase in the amortization of excess deferred taxes.
Nine Months Ended September 30, 2019, as compared to September 30, 2018
Electric Utilities and Infrastructure’s results were impacted by a positive contribution from the 2018 Duke Energy Carolinas and Duke Energy Progress North Carolina rate cases, Duke Energy Florida's base rate adjustments due to the Citrus County CC being placed in service and lower operation, maintenance and other expense.
These drivers were partially offset by higher depreciation from a growing asset base and higher interest expense. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The variance was driven primarily by:
a $493 million increase in retail pricing primarily due to the prior year Duke Energy Carolinas and Duke Energy Progress North Carolina rate cases and Duke Energy Florida's base rate adjustments related to Citrus County CC being placed in service; and
an $85 million increase in fuel related revenues.
Operating Expenses. The variance was driven primarily by:
a $354 million increase in depreciation and amortization expense primarily due to additional plant in service and new depreciation rates associated with the prior year Duke Energy Carolinas and Duke Energy Progress North Carolina rate cases and Duke Energy Florida's Citrus County CC being placed in service;
an $84 million increase in fuel used in electric generation and purchased power primarily due to an increase in the North Carolina Renewable Energy and Energy Efficiency Portfolio Standard requirement from the prior year at Duke Energy Progress; and
a $57 million increase in property and other taxes primarily due to higher property taxes for additional plant in service at Duke Energy Florida and current year property tax reassessments at Duke Energy Progress.

MD&ASEGMENT RESULTS — ELECTRIC UTILITIES AND INFRASTRUCTURE


Partially offset by:
a $262 million decrease in impairment charges primarily due to the impacts associated with the prior year Duke Energy Carolinas and Duke Energy Progress North Carolina rate cases; and
a $194 million decrease in operation, maintenance and other expense primarily due to lower payroll and benefit costs resulting from prior year workforce reductions and lower storm costs at Duke Energy Progress and Duke Energy Carolinas in the current year.
Other Income and Expenses, net. The variance was driven primarily by AFUDC equity return ending on the Citrus County CC in the fourth quarter of 2018 at Duke Energy Florida.
Interest Expense. The variance was driven primarily by higher debt outstanding in the current year and AFUDC debt return ending in the fourth quarter of 2018 on the Citrus County CC at Duke Energy Florida.
Income Tax Expense. The increase in tax expense was primarily due to an increase in pretax income, mostly offset by an increase in the amortization of excess deferred taxes. The ETRs for the nine months ended September 30, 2019, and 2018, were 18.1% and 20.5%, respectively. The decrease in the ETR was primarily due to an increase in the amortization of excess deferred taxes.
Matters Impacting Future Electric Utilities and Infrastructure Results
On May 21, 2019, Duke Energy Carolinas and Duke Energy Progress received orders from the PSCSC granting the companies’ requests for retail rate increases but denying recovery of certain coal ash costs. Duke Energy Carolinas and Duke Energy Progress intend to file notices of appeals with the South Carolina Supreme Court within 30 days of the order that was received on October 18, 2019. Electric Utilities and Infrastructure's results of operations, financial position and cash flows could be adversely impacted if coal ash costs are not ultimately approved for recovery. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
On April 1, 2019, NCDEQ issued a closure determination requiring Duke Energy Carolinas and Duke Energy Progress to excavate all remaining coal ash impoundments in North Carolina, even though they had been deemed low risk by NCDEQ on November 14, 2018. On April 26, 2019, Duke Energy Carolinas and Duke Energy Progress filed a Petition for Contested Case Hearings in the Office of Administrative Hearings to challenge NCDEQ's April 1 Order. Duke Energy Carolinas and Duke Energy Progress intend to seek recovery of all costs through the ratemaking process consistent with previous proceedings. As the final closure plans and corrective action measures are developed and approved for each site, the closure work progresses and the closure method scope and remedial action methods are determined, the complexity of work and the amount of coal combustion material could be different than originally estimated and, therefore, could materially impact Electric Utilities and Infrastructure's results of operations, financial position and cash flows. See Note 4 to the Condensed Consolidated Financial Statements, "Commitments and Contingencies," for additional information.
Duke Energy is a party to multiple lawsuits and could be subject to fines and other penalties related to operations at certain North Carolina facilities with ash basins. In addition, the orders issued in the Duke Energy Carolinas and Duke Energy Progress North Carolina rate cases supporting recovery of past coal ash remediation costs have been appealed by various parties. The outcome of these appeals, lawsuits and potential fines and penalties could have an adverse impact on Electric Utilities and Infrastructure's results of operations, financial position and cash flows. See Notes 3 and 4 to the Condensed Consolidated Financial Statements, "Regulatory Matters" and “Commitments and Contingencies,” respectively, for additional information.
On June 22, 2018, Duke Energy Carolinas received an order from the NCUC, which denied the Grid Rider Stipulation and deferral treatment of grid improvement costs. Duke Energy Carolinas and Duke Energy Progress have petitioned for deferral of future grid improvement costs in their 2019 rate cases. Electric Utilities and Infrastructure's results of operations, financial position and cash flows could be adversely impacted if grid improvement costs are not ultimately approved for recovery and/or deferral treatment.
During the last half of 2018, Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida’s service territories were impacted by several named storms. Hurricane Florence, Hurricane Michael and Winter Storm Diego caused flooding, extensive damage and widespread power outages to the service territories of Duke Energy Carolinas and Duke Energy Progress. Duke Energy Florida’s service territory was also impacted by Hurricane Michael, a Category 5 hurricane and the most powerful storm to hit the Florida Panhandle in recorded history. In September 2019, Hurricane Dorian impacted Duke Energy Progress and Duke Energy Florida's service territories. A significant portion of the incremental operation and maintenance expenses related to these storms has been deferred. An order from regulatory authorities disallowing the deferral and future recovery of storm restoration costs could have an adverse impact on Electric Utilities and Infrastructure's results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
In 2019, Duke Energy Indiana filed a general rate case with the IURC, and Duke Energy Carolinas and Duke Energy Progress filed general rate cases with the NCUC. The outcome of these rate cases could materially impact Electric Utilities and Infrastructure's results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy Registrants' Annual Reports on Form 10-K for the year ended December 31, 2018, for discussion of risks associated with the Tax Act.

MD&ASEGMENT RESULTS — GAS UTILITIES AND INFRASTRUCTURE


Gas Utilities and Infrastructure
 Three Months Ended September 30, Nine Months Ended September 30,
(in millions)2019
 2018
 Variance
 2019
 2018
 Variance
Operating Revenues$249
 $256
 $(7) $1,311
 $1,301
 $10
Operating Expenses           
Cost of natural gas48
 58
 (10) 451
 460
 (9)
Operation, maintenance and other108
 101
 7
 325
 312
 13
Depreciation and amortization64
 61
 3
 192
 182
 10
Property and other taxes24
 24
 
 84
 81
 3
Total operating expenses244
 244
 
 1,052
 1,035
 17
Operating Income5
 12
 (7) 259
 266
 (7)
Other Income and Expenses, net42
 29
 13
 119
 16
 103
Interest Expense29
 25
 4
 86
 78
 8
Income Before Income Taxes18
 16
 2
 292
 204
 88
Income Tax (Benefit) Expense(8) (1) (7) 
 43
 (43)
Segment Income$26
 $17
 $9
 $292
 $161
 $131
       

    
Piedmont LDC throughput (dekatherms)121,378,484
 135,403,188
 (14,024,704) 377,729,141
 407,144,529
 (29,415,388)
Duke Energy Midwest LDC throughput (Mcf)9,997,444
 9,370,743
 626,701
 62,278,623
 62,111,858
 166,765
Three Months Ended September 30, 2019, as compared to September 30, 2018
Gas Utilities and Infrastructure’s results were primarily impacted by tax benefits related to current year AFUDC equity and higher equity earnings from ACP. These drivers are partially offset by lower revenues. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues.The variance was driven by:
a $10 million decrease primarily due to lower natural gas costs passed through to customers and lower volumes due to unfavorable weather.
Partially offset by:
a $3 million increase primarily due to North Carolina and Tennessee IMR increases.
Operating Expenses.The drivers were:
a $10 million decrease in cost of natural gas primarily due to lower off-system sales natural gas costs and lower natural gas prices.
Partially offset by:
a $7 million increase in operation, maintenance and other expense primarily due to increased information technology outside services costs and increased bad debt expense related to a Piedmont industrial customer; and
a $3 million increase in depreciation and amortization expense primarily due to additional plant in service.
Other Income and Expenses, net. The variance was driven by higher equity earnings from ACP in the current year.
Interest Expense. The variance was driven by higher debt outstanding in the current year, higher interest expense due to customers as a result of tax reform deferrals, and intercompany interest, partially offset by favorable AFUDC debt interest.
Income Tax (Benefit) Expense. The increase in the tax benefit was primarily due to current year AFUDC equity.
Nine Months Ended September 30, 2019, as compared to September 30, 2018
Gas Utilities and Infrastructure’s results were primarily impacted by the prior year OTTI recorded on the Constitution investment and a 2019 adjustment related to the income tax recognition for equity method investments. The equity method investment adjustment was immaterial and relates to prior years. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues.The variance was driven by:
a $12 million increase primarily due to North Carolina and Tennessee IMR increases;
a $9 million increase primarily due to NCUC approval related to tax reform accounting from fixed rate contracts; and
a $4 million increase in pricing primarily in residential and commercial sectors in the Midwest.

MD&ASEGMENT RESULTS — GAS UTILITIES AND INFRASTRUCTURE


Partially offset by:
an $8 million decrease due to lower natural gas costs passed through to customers and unfavorable weather in the Midwest, partially offset by higher natural gas prices associated with off-system sales at Piedmont; and
a $7 million decrease primarily due to a reduction of rates in South Carolina.
Operating Expenses.The variance was driven by:
a $13 million increase in operation, maintenance and other expense primarily due to information technology outside services, higher gas operations labor costs, and increased bad debt expense related to a Piedmont industrial customer; and
a $10 million increase in depreciation and amortization expense primarily due to additional plant in service.
Partially offset by:
a $9 million decrease in cost of natural gas primarily due to lower natural gas prices in the Midwest and lower sales volumes partially offset by higher off-system sales natural gas costs at Piedmont.
Other Income and Expenses, net. The increase was primarily due to the prior year OTTI recorded on the Constitution investment and higher earnings from ACP in the current year.
Interest Expense. The variance was driven by higher debt outstanding in the current year and higher interest expense due to customers as a result of tax reform deferrals, partially offset by favorable AFUDC debt interest.
Income Tax Expense. The decrease in tax expense was primarily due to an adjustment related to the income tax recognition for equity method investments and current year AFUDC equity, partially offset by an increase in pretax income. The equity method investment adjustment was immaterial and relates to prior years. The ETRs for the nine months ended September 30, 2019, and 2018, were 0.0% and 21.1%, respectively. The decrease in the ETR was primarily due to an adjustment related to the income tax recognition for equity method investments that was recorded during the first quarter of 2019 and current year AFUDC equity. The equity method investment adjustment was immaterial and relates to prior years.
Matters Impacting Future Gas Utilities and Infrastructure Results
Gas Utilities and Infrastructure has a 47% ownership interest in ACP, which is building an approximately 600-mile interstate natural gas pipeline intended to transport diverse natural gas supplies into southeastern markets. Affected states (West Virginia, Virginia and North Carolina) have issued certain necessary permits; the project remains subject to other pending federal and state approvals, which will allow full construction activities to begin. In 2018, FERC issued a series of Notices to Proceed, which authorized the project to begin certain construction-related activities along the pipeline route. Given legal challenges and ongoing discussions with customers, ACP expects mechanical completion of the full project in late 2021 with in-service likely in the first half of 2022. The delays resulting from legal challenges have impacted the cost and schedule for the project. Project cost estimates are $7.3 billion to $7.8 billion, excluding financing costs. Given the status of current discussions with FWS regarding a new BiOp and ITS, as well as discussions with contractors regarding efficiencies which may be realized going forward, these estimates are under review and subject to upward pressure. Abnormal weather, work delays (including delays due to judicial or regulatory action) and other conditions may also result in cost or schedule modifications, a suspension of AFUDC for ACP and/or impairment charges potentially material to Duke Energy's cash flows, financial position and results of operations. ACP and Duke Energy will continue to consider their options with respect to the foregoing given their existing contractual and legal obligations. See Notes 3 and 13 to the Condensed Consolidated Financial Statements, "Regulatory Matters" and "Variable Interest Entities," respectively, for additional information.
On November 13, 2013, the PUCO issued an order authorizing recovery of MGP costs at certain sites in Ohio with a deadline to complete the MGP environmental investigation and remediation work prior to December 31, 2016. This deadline was subsequently extended to December 31, 2019. Disallowance of costs incurred, failure to complete the work by the deadline or failure to obtain an extension from the PUCO could result in an adverse impact on Gas Utilities and Infrastructure’s results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy Registrants' Annual Reports on Form 10-K for the year ended December 31, 2018, for discussion of risks associated with the Tax Act.

MD&ASEGMENT RESULTS — COMMERCIAL RENEWABLES


Commercial Renewables
 Three Months Ended September 30, Nine Months Ended September 30,
(in millions)2019
 2018
 Variance
 2019
 2018
 Variance
Operating Revenues$138
 $127
 $11
 $362
 $347
 $15
Operating Expenses           
Operation, maintenance and other81
 85
 (4) 211
 209
 2
Depreciation and amortization43
 40
 3
 123
 116
 7
Property and other taxes6
 6
 
 18
 19
 (1)
Impairment charges
 93
 (93) 
 93
 (93)
Total operating expenses130
 224
 (94) 352
 437
 (85)
Operating Income (Loss)8
 (97) 105
 10
 (90) 100
Other Income and Expenses, net13
 2
 11
 3
 22
 (19)
Interest Expense35
 21
 14
 78
 66
 12
Loss Before Income Taxes(14) (116) 102
 (65) (134) 69
Income Tax Benefit(35) (37) 2
 (94)��(112) 18
Less: Loss Attributable to Noncontrolling Interests(19) (17) (2) (110) (18) (92)
Segment Income (Loss)$40

$(62) $102
 $139
 $(4) $143
            
Renewable plant production, GWh2,146
 1,897
 249
 6,528
 6,548
 (20)
Net proportional MW capacity in operation(a)
    

 3,162
 2,976
 186
(a)Certain projects are included in tax equity structures where investors have differing interests in the project's economic attributes. One hundred percent of the tax equity project's capacity is included in the table above.
Three Months Ended September 30, 2019, as compared to September 30, 2018
Commercial Renewables' results were favorable primarily due to higher revenues and prior year goodwill impairment charges. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The increase was primarily due to favorable wind portfolio revenue due to favorable wind resource.
Operating Expenses. The decrease was primarily due to goodwill impairment charges in the prior year.
Interest Expense. The increase was primarily due to mark-to-market losses in the solar portfolio in the current year.
Nine Months Ended September 30, 2019, as compared to September 30, 2018
Commercial Renewables' results were favorable primarily due to higher revenues, new tax equity solar projects in the current year and prior year goodwill impairment charges, partially offset by mark-to-market losses in the solar portfolio in the current year and FES settlement agreement in the prior year. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The increase was primarily due to favorable solar portfolio revenue due to new solar projects placed in service and higher irradiance.
Operating Expenses. The decrease was primarily due to goodwill impairment charges in the prior year.
Other Income and Expenses, net. The decrease was primarily due to income from the North Allegheny Wind, LLC and FES settlement agreement in the prior year.
Interest Expense. The increase was primarily due to mark-to-market losses in the solar portfolio in the current year.
Income Tax Benefit. The decrease in the tax benefit was primarily driven by taxes associated with Duke Energy's interest in a tax equity solar project recorded in the second quarter of 2019 and a reduction in production tax credits generated.
Loss Attributable to Noncontrolling Interests. The increase was primarily due to the new tax equity solar projects entered into during 2019.
Matters Impacting Future Commercial Renewables Results
During 2019, Duke Energy evaluated recoverability of the wind and solar generation assets included in the minority interest sale as a result of the portfolio fair value of consideration received being less than the carrying value of the assets and determined the assets were all recoverable. Additionally, in 2019, Duke Energy evaluated recoverability of its renewable merchant plants principally in the Electric Reliability Council of Texas West market, due to declining market pricing and declining long-term forecasted energy prices, primarily driven by lower forecasted natural gas prices. These assets were not impaired; however, a continued decline in energy market pricing would likely result in a future impairment. Impairment of these assets could result in adverse impacts to the future results of operations, financial position and cash flows of Commercial Renewables. See Note 2 to the Condensed Consolidated Financial Statements, "Business Segments," for additional information.

MD&ASEGMENT RESULTS — COMMERCIAL RENEWABLES


See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy Registrants' Annual Reports on Form 10-K for the year ended December 31, 2018, for discussion of risks associated with the Tax Act.
Other
 Three Months Ended September 30, Nine Months Ended September 30,
(in millions)2019
 2018
 Variance
 2019
 2018
 Variance
Operating Revenues$25
 $34
 $(9) $71
 $101
 $(30)
Operating Expenses27
 54
 (27) 66
 167
 (101)
Gains (Losses) on Sales of Other Assets and Other, net
 3
 (3) 
 (96) 96
Operating (Loss) Income(2) (17) 15
 5
 (162) 167
Other Income and Expenses, net24
 40
 (16) 98
 81
 17
Interest Expense185
 163
 22
 536
 484
 52
Loss Before Income Taxes(163) (140) (23) (433) (565) 132
Income Tax Benefit(54) (98) 44
 (132) (125) (7)
Less: Net Income Attributable to Noncontrolling Interests
 2
 (2) 
 6
 (6)
Less: Preferred Dividends15
 
 15
 27
 
 27
Net Loss$(124)
$(44) $(80) $(328) $(446) $118
Three Months Ended September 30, 2019, as compared to September 30, 2018
The variance was driven by lower income tax benefit, higher interest expense, and the declaration of the preferred stock dividends, offset by the absence in the current year of costs related to the Piedmont acquisition. The following is a detailed discussion of the variance drivers by line item.
Operating Expenses. The decrease was primarily due to costs related to the Piedmont acquisition and OVEC fuel expense in the prior year.
Other Income and Expenses, net. The variance was primarily due to lower returns on investments that fund certain employee benefit obligations and lower earnings on the NMC investment.
Interest Expense. The variance was primarily due to higher outstanding debt in the current year.
Income Tax Benefit. The decrease in the tax benefit was primarily driven by favorable tax return true ups and tax levelization in the prior year, partially offset by an increase in pretax losses.
Preferred Dividends. The variance was driven by the declaration of the preferred stock dividend on preferred stock issued in 2019.
Nine Months Ended September 30, 2019, as compared to September 30, 2018
The variance was driven by the prior year loss on sale of the retired Beckjord station, prior year valuation allowance against AMT credits, and absence in the current year of costs related to the Piedmont acquisition, offset by higher interest expense and the declarations of the preferred stock dividend. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. Lower operating revenues were due to amounts in the prior year related to Duke Energy Ohio’s entitlement of capacity and energy from OVEC’s power plants. In the current year, the revenues and expenses for OVEC are reflected in the Electric Utilities and Infrastructure segment due to the 2018 PUCO Order that approved Duke Energy to recover or credit amounts through Rider PSR. These amounts are deemed immaterial. Therefore, the prior period amounts were not restated.
Operating Expenses. The variance was primarily due to costs associated with the Piedmont acquisition and OVEC fuel expense in the prior year.
Gains (Losses) on Sales of Other Assets and Other, net. The variance was driven by the prior year loss on sale of the retired Beckjord station, including the transfer of coal ash basins and other real property and indemnification from all potential future claims related to the property, whether arising under environmental laws or otherwise.
Other Income and Expenses, net. The variance was primarily due to higher returns on investments that fund certain employee benefit obligations.
Interest Expense. The variance was primarily due to higher outstanding debt in the current year and higher short-term interest rates.
Income Tax Benefit. The increase in the tax benefit was primarily driven by a prior year valuation allowance against AMT credits, partially offset by a decrease in pretax losses.
Preferred Dividends. The variance was driven by the declarations of preferred stock dividend on preferred stock issued in 2019.


MD&ADUKE ENERGY CAROLINAS


DUKE ENERGY CAROLINAS
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the nine months ended September 30, 2019, and 2018, and the Annual Report on Form 10-K for the year ended December 31, 2018.
Results of Operations
 Nine Months Ended September 30,
(in millions)2019
 2018
 Variance
Operating Revenues$5,619
 $5,525
 $94
Operating Expenses     
Fuel used in electric generation and purchased power1,371
 1,370
 1
Operation, maintenance and other1,324
 1,464
 (140)
Depreciation and amortization1,013
 866
 147
Property and other taxes221
 214
 7
Impairment charges11
 191
 (180)
Total operating expenses3,940
 4,105
 (165)
Losses on Sales of Other Assets and Other, net
 (1) 1
Operating Income1,679
 1,419
 260
Other Income and Expenses, net106
 108
 (2)
Interest Expense346
 323
 23
Income Before Income Taxes1,439
 1,204
 235
Income Tax Expense255
 268
 (13)
Net Income$1,184
 $936
 $248
The following table shows the percent changes in GWh sales and average number of customers. The percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized.
Increase (Decrease) over prior year2019
Residential sales(3.2)%
General service sales(1.8)%
Industrial sales(4.1)%
Wholesale power sales(13.4)%
Joint dispatch sales23.0 %
Total sales(2.1)%
Average number of customers2.2 %
Nine Months Ended September 30, 2019, as compared to September 30, 2018
Operating Revenues.The variance was driven primarily by:
a $151 million increase in retail pricing due to the impacts of the prior year North Carolina rate case and the current year South Carolina rate case; and
a $7 million increase in retail sales, net of fuel revenues, due to favorable weather in the current year.
Partially offset by:
a $47 million decrease in rider revenues primarily due to excess deferred taxes and energy efficiency programs, partially offset by a decrement rider relating to nuclear decommissioning that ended in the prior year; and
a $24 million decrease in weather-normal retail sales volumes.
Operating Expenses. The variance was driven primarily by:
a $180 million decrease in impairment charges primarily due to impacts of the prior year North Carolina rate order and charges related to coal ash costs in South Carolina; and
a $140 million decrease in operation, maintenance and other expense primarily due to decreased labor costs and higher storm restoration costs in the prior year.
Partially offset by:
a $147 million increase in depreciation and amortization expense primarily due to additional plant in service, new depreciation rates associated with the prior year North Carolina rate case and the current year South Carolina rate case and higher amortization of deferred coal ash costs associated with the prior year North Carolina rate case.

MD&ADUKE ENERGY CAROLINAS


Interest Expense. The variance was primarily due to higher debt outstanding in the current year.
Income Tax Expense. The decrease in tax expense was primarily due to an increase in the amortization of excess deferred taxes and favorable tax return true ups, partially offset by an increase in pretax income.
Matters Impacting Future Results
Duke Energy Carolinas filed a general rate case with the NCUC on September 30, 2019. The outcome of this rate case could materially impact Duke Energy Carolina's results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
On May 21, 2019, the PSCSC issued an order granting Duke Energy Carolinas request for a retail rate increase but denying recovery of certain coal ash costs. Duke Energy Carolinas intends to file a notice of appeal with the South Carolina Supreme Court within 30 days of the order that was received on October 18, 2019. Duke Energy Carolinas' results of operations, financial position and cash flows could be adversely impacted if coal ash costs are not ultimately approved for recovery. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
On April 1, 2019, NCDEQ issued a closure determination requiring Duke Energy Carolinas to excavate all remaining coal ash impoundments in North Carolina, even though they had been deemed low risk by NCDEQ on November 14, 2018. On April 26, 2019, Duke Energy Carolinas filed a Petition for Contested Case Hearings in the Office of Administrative Hearings to challenge NCDEQ's April 1 Order. Duke Energy Carolinas intends to seek recovery of all costs through the ratemaking process consistent with previous proceedings. As the final closure plans and corrective action measures are developed and approved for each site, the closure work progresses, and the closure method scope and remedial action methods are determined, the complexity of work and the amount of coal combustion material could be different than originally estimated and, therefore, could materially impact Duke Energy Carolinas' results of operations, financial position and cash flows. See Note 4 to the Condensed Consolidated Financial Statements, "Commitments and Contingencies," for additional information.
Duke Energy Carolinas is a party to multiple lawsuits and subject to fines and other penalties related to operations at certain North Carolina facilities with ash basins. In addition, the order issued in the Duke Energy Carolinas North Carolina rate case supporting recovery of past coal ash remediation costs has been appealed by various parties. The outcome of these appeals, lawsuits, fines and penalties could have an adverse impact on Duke Energy Carolinas’ results of operations, financial position and cash flows. See Notes 3 and 4 to the Condensed Consolidated Financial Statements, "Regulatory Matters" and “Commitments and Contingencies,” respectively, for additional information.
On June 22, 2018, Duke Energy Carolinas received an order from the NCUC, which denied the Grid Rider Stipulation and deferral treatment of grid improvement costs. Duke Energy Carolinas has petitioned for deferral of future grid improvement costs in its 2019 rate case. Duke Energy Carolinas' results of operations, financial position and cash flows could be adversely impacted if grid improvement costs are not ultimately approved for recovery and/or deferral treatment.
During the last half of 2018, Duke Energy Carolinas’ service territory was impacted by several named storms. Hurricane Florence, Hurricane Michael and Winter Storm Diego caused flooding, extensive damage and widespread power outages in the service territory. A significant portion of the incremental operation and maintenance expenses related to these storms has been deferred. An order from regulatory authorities disallowing the deferral and future recovery of storm restoration costs could have an adverse impact on Duke Energy Carolinas' results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy Registrants' Annual Reports on Form 10-K for the year ended December 31, 2018, for discussion of risks associated with the Tax Act.

MD&APROGRESS ENERGY


PROGRESS ENERGY
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the nine months ended September 30, 2019, and 2018, and the Annual Report on Form 10-K for the year ended December 31, 2018.
Results of Operations
 Nine Months Ended September 30,
(in millions)2019
 2018
 Variance
Operating Revenues$8,558
 $8,119
 $439
Operating Expenses     
Fuel used in electric generation and purchased power3,100
 3,019
 81
Operation, maintenance and other1,813
 1,913
 (100)
Depreciation and amortization1,377
 1,183
 194
Property and other taxes439
 399
 40
Impairment charges(25) 34
 (59)
Total operating expenses6,704
 6,548
 156
Gains on Sales of Other Assets and Other, net
 23
 (23)
Operating Income1,854
 1,594
 260
Other Income and Expenses, net106
 128
 (22)
Interest Expense650
 626
 24
Income Before Income Taxes1,310
 1,096
 214
Income Tax Expense212
 186
 26
Net Income1,098
 910
 188
Less: Net Income Attributable to Noncontrolling Interests
 6
 (6)
Net Income Attributable to Parent$1,098
 $904
 $194
Nine Months Ended September 30, 2019, as compared to September 30, 2018
Operating Revenues. The variance was driven primarily by:
a $299 million increase in retail pricing primarily due to the impacts of the prior year North Carolina rate case and current year South Carolina rate case at Duke Energy Progress, Duke Energy Florida's base rate adjustments related to Citrus County CC being placed in service and annual increases from the 2017 Settlement Agreement;
a $76 million increase in fuel revenues primarily related to increased fuel cost recovery due to extreme weather in the prior year at Duke Energy Progress, partially offset by a decrease in fuel and capacity rates billed to retail customers at Duke Energy Florida;
a $56 million increase in wholesale power revenues, net of fuel, primarily due to increased demand;
a $17 million increase in retail sales, net of fuel revenues, due to favorable weather in the current year at Duke Energy Florida; and
a $17 million increase in other revenues primarily due to increased transmission revenues and non-regulated products and services revenues at Duke Energy Florida.
Partially offset by:
a $32 million decrease in retail rider revenues primarily related to decreased revenue requirements in the current year.
Operating Expenses. The variance was driven primarily by:
a $194 million increase in depreciation and amortization expense primarily due to higher amortization of deferred coal ash costs, new depreciation rates associated with the prior year Duke Energy Progress North Carolina rate case and Duke Energy Florida's base rate adjustments related to Citrus County CC being placed in service;
an $81 million increase in fuel used in electric generation and purchased power primarily due to an increase in the North Carolina Renewable Energy and Energy Efficiency Portfolio Standard requirement from the prior year at Duke Energy Progress, partially offset by lower purchased power and lower fuel costs, net of deferrals, at Duke Energy Florida; and
a $40 million increase in property and other taxes primarily due to current year property tax reassessments and a favorable sales and use tax credit in the prior year at Duke Energy Progress, and higher property taxes for additional plant in service at Duke Energy Florida.

MD&APROGRESS ENERGY


Partially offset by:
a $100 million decrease in operation, maintenance and other expense primarily due to lower storm costs, reduced outage costs, and lower employee benefit costs, partially offset by increased vegetation management costs at Duke Energy Florida; and
a $59 million decrease in impairment charges primarily due to prior year impacts associated with the North Carolina rate case at Duke Energy Progress and a reduction of a prior year impairment at Duke Energy Florida's Citrus County CC.
Other Income and Expenses, net. The variance was driven primarily by AFUDC equity return ending on the Citrus County CC in the fourth quarter of 2018 at Duke Energy Florida, partially offset by life insurance proceeds at Duke Energy Progress.
Interest Expense. The variance was driven primarily by AFUDC debt return ending in the fourth quarter of 2018 on the Citrus County CC at Duke Energy Florida.
Income Tax Expense. The increase in tax expense was primarily due to an increase pretax income, partially offset by an increase in the amortization of excess deferred taxes.
Matters Impacting Future Results
Duke Energy Progress filed a general rate case with the NCUC on October 30, 2019. The outcome of this rate case could materially impact Progress Energy's results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
On May 21, 2019, the PSCSC issued an order granting Duke Energy Progress' request for a retail rate increase but denying recovery of certain coal ash costs. Duke Energy Progress intends to file a notice of appeal with the South Carolina Supreme Court within 30 days of the order that was received on October 18, 2019. Progress Energy's results of operations, financial position and cash flows could be adversely impacted if coal ash costs are not ultimately approved for recovery. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
On April 1, 2019, NCDEQ issued a closure determination requiring Duke Energy Progress to excavate all remaining coal ash impoundments in North Carolina, even though they had been deemed low risk by NCDEQ on November 14, 2018. On April 26, 2019, Duke Energy Progress filed a Petition for Contested Case Hearings in the Office of Administrative Hearings to challenge NCDEQ's April 1 Order. Duke Energy Progress intends to seek recovery of all costs through the ratemaking process consistent with previous proceedings. As the final closure plans and corrective action measures are developed and approved for each site, the closure work progresses, and the closure method scope and remedial action methods are determined, the complexity of work and the amount of coal combustion material could be different than originally estimated and, therefore, could materially impact Progress Energy's results of operations, financial position and cash flows. See Note 4 to the Condensed Consolidated Financial Statements, "Commitments and Contingencies," for additional information.
Duke Energy Progress is a party to multiple lawsuits and subject to fines and other penalties related to operations at certain North Carolina facilities with ash basins. As noted above, the order issued in the Duke Energy Progress North Carolina rate case supporting recovery of past coal ash remediation costs has been appealed by various parties. The outcome of these appeals, lawsuits, fines and penalties could have an adverse impact on Progress Energy’s results of operations, financial position and cash flows. See Notes 3 and 4 to the Condensed Consolidated Financial Statements, "Regulatory Matters" and “Commitments and Contingencies,” respectively, for additional information.
Duke Energy Progress has petitioned for deferral of future grid improvement costs in its 2019 rate case. Progress Energy's results of operations, financial position and cash flows could be adversely impacted if grid improvement costs are not ultimately approved for recovery and/or deferral treatment.
During the last half of 2018, Duke Energy Progress and Duke Energy Florida’s service territories were impacted by several named storms. Hurricane Florence, Hurricane Michael and Winter Storm Diego caused flooding, extensive damage and widespread power outages to the service territory of Duke Energy Progress. Duke Energy Florida’s service territory was also impacted by Hurricane Michael, a Category 5 hurricane and the most powerful storm to hit the Florida Panhandle in recorded history. In September 2019, Hurricane Dorian impacted Duke Energy Progress' and Duke Energy Florida's service territories. A significant portion of the incremental operation and maintenance expenses related to these storms has been deferred. An order from regulatory authorities disallowing the deferral and future recovery of storm restoration costs could have an adverse impact on Progress Energy's results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy Registrants' Annual Reports on Form 10-K for the year ended December 31, 2018, for discussion of risks associated with the Tax Act.

MD&ADUKE ENERGY PROGRESS


DUKE ENERGY PROGRESS
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the nine months ended September 30, 2019, and 2018, and the Annual Report on Form 10-K for the year ended December 31, 2018.
Results of Operations
 Nine Months Ended September 30,
(in millions)2019
 2018
 Variance
Operating Revenues$4,559
 $4,333
 $226
Operating Expenses     
Fuel used in electric generation and purchased power1,571
 1,452
 119
Operation, maintenance and other1,070
 1,187
 (117)
Depreciation and amortization855
 723
 132
Property and other taxes131
 115
 16
Impairment charges
 33
 (33)
Total operating expenses3,627
 3,510
 117
Gains on Sales of Other Assets and Other, net
 9
 (9)
Operating Income932
 832
 100
Other Income and Expenses, net75
 61
 14
Interest Expense232
 241
 (9)
Income Before Income Taxes775
 652
 123
Income Tax Expense125
 120
 5
Net Income$650
 $532
 $118
The following table shows the percent changes in GWh sales and average number of customers. The percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized.
Increase (Decrease) over prior period2019
Residential sales(4.1)%
General service sales(1.6)%
Industrial sales1.6 %
Wholesale power sales(2.2)%
Joint dispatch sales(0.3)%
Total sales(1.3)%
Average number of customers1.3 %
Nine Months Ended September 30, 2019, as compared to September 30, 2018
Operating Revenues. The variance was driven primarily by:
a $101 million increase in fuel revenues primarily related to increased fuel cost recovery due to extreme weather in the prior year;
a $91 million increase in retail pricing due to the impacts of the prior year North Carolina rate case and the current year South Carolina rate case; and
a $47 million increase in wholesale power revenues, net of fuel, primarily due to coal ash cost recovery in the current year.
Partially Offset by:
a $17 million decrease primarily due to the return of excess deferred incomes taxes created by the reduction in the corporate income tax rate, partially offset by increase in rider revenues related to energy efficiency programs.
Operating Expenses. The variance was driven primarily by:
a $132 million increase in depreciation and amortization expense primarily due to higher amortization of deferred coal ash costs and new depreciation rates associated with the prior year North Carolina and current year South Carolina rate cases, partially offset by the amortization credit for the North Carolina Renewable Energy and Energy Efficiency Portfolio Standard requirement increase from prior year;
a $119 million increase in fuel used in electric generation and purchased power primarily due to a higher deferred fuel balance and an increase in the North Carolina Renewable Energy and Energy Efficiency Portfolio Standard requirement from prior year, partially offset by lower demand and changes in generation mix; and
a $16 million increase in property and other taxes primarily due to current year property tax reassessments and a favorable sales and use tax credit in the prior year.

MD&ADUKE ENERGY PROGRESS


Partially offset by:
a $117 million decrease in operation, maintenance and other expense primarily due to lower storm costs in current year, reduced outage costs and lower employee benefit costs; and
a $33 million decrease in impairment charges due to prior year impacts associated with the North Carolina rate case.
Other Income and Expenses, net. The variance was driven primarily by life insurance proceeds.
Income Tax Expense. The increase in tax expense was primarily due to an increase in pretax income, partially offset by an increase in the amortization of excess deferred taxes.
Matters Impacting Future Results
Duke Energy Progress filed a general rate case with the NCUC on October 30, 2019. The outcome of this rate case could materially impact Duke Energy Progress' results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
On May 21, 2019, the PSCSC issued an order granting Duke Energy Progress' request for a retail rate increase but denying recovery of certain coal ash costs. Duke Energy Progress intends to file a notice of appeal with the South Carolina Supreme Court within 30 days of the order that was received on October 18, 2019. Duke Energy Progress' results of operations, financial position and cash flows could be adversely impacted if coal ash costs are not ultimately approved for recovery. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
On April 1, 2019, NCDEQ issued a closure determination requiring Duke Energy Progress to excavate all remaining coal ash impoundments in North Carolina, even though they had been deemed low risk by NCDEQ on November 14, 2018. On April 26, 2019, Duke Energy Progress filed a Petition for Contested Case Hearings in the Office of Administrative Hearings to challenge NCDEQ's April 1 Order. Duke Energy Progress intends to seek recovery of all costs through the ratemaking process consistent with previous proceedings. As the final closure plans and corrective action measures are developed and approved for each site, the closure work progresses, and the closure method scope and remedial action methods are determined, the complexity of work and the amount of coal combustion material could be different than originally estimated and, therefore, could materially impact Duke Energy Progress' results of operations, financial position and cash flows. See Note 4 to the Condensed Consolidated Financial Statements, "Commitments and Contingencies," for additional information.
Duke Energy Progress is a party to multiple lawsuits and subject to fines and other penalties related to operations at certain North Carolina facilities with ash basins. As noted above, the order issued in the Duke Energy Progress North Carolina rate case supporting recovery of past coal ash remediation costs has been appealed by various parties. The outcome of these appeals, lawsuits, fines and penalties could have an adverse impact on Duke Energy Progress’ results of operations, financial position and cash flows. See Notes 3 and 4 to the Condensed Consolidated Financial Statements, "Regulatory Matters" and “Commitments and Contingencies,” respectively, for additional information.
Duke Energy Progress has petitioned for deferral of future grid improvement costs in its 2019 rate case. Duke Energy Progress' results of operations, financial position and cash flows could be adversely impacted if grid improvement costs are not ultimately approved for recovery and/or deferral treatment.
During the last half of 2018, Duke Energy Progress' service territory was impacted by several named storms. Hurricane Florence, Hurricane Michael and Winter Storm Diego caused flooding, extensive damage and widespread power outages in the service territory. In September 2019, Hurricane Dorian reached the Carolinas bringing high winds, tornadoes and heavy rain, impacting about 300,000 customers within the service territory. A significant portion of the incremental operation and maintenance expenses related to these storms has been deferred. An order from regulatory authorities disallowing the deferral and future recovery of storm restoration costs could have an adverse impact on Duke Energy Progress' results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy Registrants' Annual Reports on Form 10-K for the year ended December 31, 2018, for discussion of risks associated with the Tax Act.

MD&ADUKE ENERGY FLORIDA


DUKE ENERGY FLORIDA
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the nine months ended September 30, 2019, and 2018, and the Annual Report on Form 10-K for the year ended December 31, 2018.
Results of Operations
 Nine Months Ended September 30,
(in millions)2019
 2018
 Variance
Operating Revenues$3,987
 $3,780
 $207
Operating Expenses     
Fuel used in electric generation and purchased power1,529
 1,567
 (38)
Operation, maintenance and other730
 719
 11
Depreciation and amortization522
 460
 62
Property and other taxes309
 284
 25
Impairment charges(25) 1
 (26)
Total operating expenses3,065
 3,031
 34
Operating Income922
 749
 173
Other Income and Expenses, net39
 75
 (36)
Interest Expense246
 210
 36
Income Before Income Taxes715
 614
 101
Income Tax Expense129
 100
 29
Net Income$586
 $514
 $72
The following table shows the percent changes in GWh sales and average number of customers. The 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, public and private utilities and power marketers. Amounts are not weather-normalized.
Increase (Decrease) over prior period2019
Residential sales2.2 %
General service sales1.0 %
Industrial sales(6.3)%
Wholesale and other32.4 %
Total sales2.1 %
Average number of customers1.6 %
Nine Months Ended September 30, 2019, as compared to September 30, 2018
Operating Revenues. The variance was driven primarily by:
a $208 million increase in retail pricing due to base rate adjustments related to Citrus County CC being placed in service, annual increases from the 2017 Settlement Agreement and the Solar Base Rate Adjustment;
a $17 million increase in retail sales, net of fuel revenues, due to favorable weather in the current year;
a $17 million increase in other revenues primarily due to increased transmission revenues and non-regulated products and services revenues; and
a $9 million increase in wholesale power revenues, net of fuel, primarily due to increased demand.
Partially offset by:
a $25 million decrease in fuel and capacity revenues primarily due to a decrease in fuel and capacity rates billed to retail customers; and
a $22 million decrease in retail rider revenues primarily related to decreased revenue requirements in the current year.
Operating Expenses. The variance was driven primarily by:
a $62 million increase in depreciation and amortization expense primarily due to base rate adjustments related to Citrus County CC being placed in service, other additional plant in service and increases resulting from the 2018 Crystal River Unit 3 nuclear decommissioning cost study;
a $25 million increase in property and other taxes primarily due to higher property taxes from additional plant in service; and
an $11 million increase in operation, maintenance and other expense primarily due to increased vegetation management costs and Hurricane Dorian costs, partially offset by lower outage costs.

MD&ADUKE ENERGY FLORIDA


Partially offset by:
a $38 million decrease in fuel used in electric generation and purchased power primarily due to lower purchased power and lower fuel costs, net of deferrals; and
a $26 million decrease in impairment charges primarily due to a reduction of a prior year impairment at Citrus County CC.
Other Income and Expenses, net. The variance was driven primarily by AFUDC equity return ending on the Citrus County CC in the fourth quarter of 2018.
Interest Expense. The variance was driven primarily by AFUDC debt return ending on the Citrus County CC in the fourth quarter of 2018 and higher debt outstanding in the current year.
Income Tax Expense. The increase in tax expense was primarily due to an increase in pretax income.
Matters Impacting Future Results
On October 10, 2018, Hurricane Michael made landfall on Florida's Panhandle as a Category 5 hurricane, the most powerful storm to hit the Florida Panhandle in recorded history. The storm caused significant damage within the service territory of Duke Energy Florida, particularly from Panama City Beach to Mexico Beach. In September 2019, Duke Energy Florida’s service territory was threatened by Hurricane Dorian with landfall as a possible Category 5 hurricane and therefore Duke Energy Florida incurred costs to secure necessary resources to be prepared for that potential impact. A significant portion of the incremental operation and maintenance expenses related to these storms has been deferred. An order from regulatory authorities disallowing the future recovery of storm restoration costs could have an adverse impact on Duke Energy Florida's financial position, results of operations and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy Registrants' Annual Reports on Form 10-K for the year ended December 31, 2018, for discussion of risks associated with the Tax Act.
DUKE ENERGY OHIO
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the nine months ended September 30, 2019, and 2018, and the Annual Report on Form 10-K for the year ended December 31, 2018.
Results of Operations
 Nine Months Ended September 30,
(in millions)2019
 2018
 Variance
Operating Revenues     
Regulated electric$1,099
 $1,055
 $44
Regulated natural gas354
 361
 (7)
Nonregulated electric and other
 36
 (36)
Total operating revenues1,453
 1,452
 1
Operating Expenses     
Fuel used in electric generation and purchased power – regulated293
 284
 9
Fuel used in electric generation and purchased power – nonregulated
 43
 (43)
Cost of natural gas68
 73
 (5)
Operation, maintenance and other378
 337
 41
Depreciation and amortization199
 196
 3
Property and other taxes229
 218
 11
Total operating expenses1,167
 1,151
 16
Losses on Sales of Other Assets and Other, net
 (106) 106
Operating Income286
 195
 91
Other Income and Expenses, net19
 17
 2
Interest Expense81
 68
 13
Income Before Income Taxes224
 144
 80
Income Tax Expense34
 23
 11
Net Income$190
 $121
 $69

MD&ADUKE ENERGY OHIO


The following table shows the percent changes in GWh sales of electricity, dekatherms of natural gas delivered and average number of electric and natural gas customers. The percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized.
 ElectricNatural Gas
Increase (Decrease) over prior year2019
2019
Residential sales(4.7)%(1.2)%
General service sales(2.6)%0.8 %
Industrial sales(1.4)%1.9 %
Wholesale electric power sales46.8 %n/a
Other natural gas salesn/a
1.4 %
Total sales(1.2)%0.3 %
Average number of customers0.6 %0.8 %
Nine Months Ended September 30, 2019, as compared to September 30, 2018
Operating Revenues. The variance was driven primarily by:
a $52 million increase in retail pricing primarily due to rate case impacts; and
a $15 million increase in point-to-point transmission revenues.
Partially offset by:
a $28 million decrease in fuel related revenues primarily due to a decrease in price;
a $15 million decrease in FTR rider revenues;
a $14 million decrease in rider revenues primarily related to the implementation of new base rates; and
a $9 million decrease in OVEC revenues.
Operating Expenses. The variance was driven primarily by:
a $41 million increase in operations, maintenance and other expense primarily due to the FERC approved settlement refund of certain transmission costs previously billed by PJM recorded in 2018; and
an $11 million increase in property and other taxes primarily due to additional plant in service.
Partially offset by:
a $34 million decrease in fuel used in electric generation and purchased power expense due to the prior year outage at East Bend Station and the deferral of OVEC related purchased power costs.
Losses on Sales of Other Assets and Other, net. The increase was driven by the loss on the prior year sale of Beckjord.
Interest Expense. The variance was driven primarily by higher debt outstanding in the current year.
Income Tax Expense. The increase in tax expense was primarily due to an increase in pretax income, partially offset by an increase in the amortization of excess deferred taxes.
Matters Impacting Future Results
On November 13, 2013, the PUCO issued an order authorizing recovery of MGP costs at certain sites in Ohio with a deadline to complete the MGP environmental investigation and remediation work prior to December 31, 2016. This deadline was subsequently extended to December 31, 2019. Disallowance of costs incurred, failure to complete the work by the deadline or failure to obtain an extension from the PUCO could result in an adverse impact on Duke Energy Ohio’s results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy Registrants' Annual Reports on Form 10-K for the year ended December 31, 2018, for discussion of risks associated with the Tax Act.

MD&ADUKE ENERGY INDIANA


DUKE ENERGY INDIANA
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the nine months ended September 30, 2019, and 2018, and the Annual Report on Form 10-K for the year ended December 31, 2018.
Results of Operations
 Nine Months Ended September 30,
(in millions)2019
 2018
 Variance
Operating Revenues$2,289
 $2,288
 $1
Operating Expenses     
Fuel used in electric generation and purchased power720
 730
 (10)
Operation, maintenance and other569
 576
 (7)
Depreciation and amortization393
 386
 7
Property and other taxes55
 56
 (1)
Impairment charges
 30
 (30)
Total operating expenses1,737
 1,778
 (41)
Operating Income552
 510
 42
Other Income and Expenses, net35
 36
 (1)
Interest Expense111
 125
 (14)
Income Before Income Taxes476
 421
 55
Income Tax Expense113
 104
 9
Net Income$363
 $317
 $46
The following table shows the percent changes in GWh sales and average number of customers. The percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized.
Increase (Decrease) over prior year2019
Residential sales(4.9)%
General service sales(2.5)%
Industrial sales(2.3)%
Wholesale power sales(28.9)%
Total sales(6.6)%
Average number of customers1.2 %
Nine Months Ended September 30, 2019, as compared to September 30, 2018
Operating Revenues.The variance was driven primarily by:
a $25 million increase in revenues primarily due to higher TDSIC rider revenues.
Partially offset by:
an $18 million decrease in wholesale power revenues primarily due to the expiration of a contract with a wholesale customer; and
an $8 million decrease in weather-normal retail sales volumes.
Operating Expenses.The variance was driven primarily by:
a $30 million decrease in impairments primarily due to the prior year Edwardsport IGCC settlement; and
a $10 million decrease in fuel used in electric generation and purchased power expense primarily due to lower coal and natural gas costs, partially offset by higher amortization of deferred fuel costs and higher purchase power fuel clause.
Interest Expense. The variance was primarily due to recording a debt return on the cumulative balance of deferred coal ash spend based on probability of recovery. This adjustment was immaterial and primarily relates to prior years.
Income Tax Expense. The increase in tax expense was primarily due to an increase in pretax income.

MD&ADUKE ENERGY INDIANA


Matters Impacting Future Results
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 and allows for beneficial use of CCR with some restrictions. The regulation applies to all new and existing landfills, new and existing surface impoundments receiving CCR and existing surface impoundments that are no longer receiving CCR but contain liquid located at stations currently generating electricity (regardless of fuel source). The rule establishes requirements regarding landfill design, structural integrity design and assessment criteria for surface impoundments, groundwater monitoring, protection and remedial procedures and other operational and reporting procedures to ensure the safe disposal and management of CCR. Various industry and environmental parties have appealed the EPA's CCR rule in the U.S. Court of Appeals for the District of Columbia (D.C. Circuit Court). On April 18, 2016, the EPA filed a motion with the federal court to settle five issues raised in litigation. On June 14, 2016, the court approved the motion with respect to all of those issues. Duke Energy does not expect a material impact fromIndiana has interpreted the settlement or that it will result in additional ARO adjustments. On September 13, 2017, EPA respondedrule to a petition byidentify the Utility Solid Waste Activities Group that the agency would reconsider certain provisions of the final rule, and asked the D.C. Circuit Court to suspend the litigation. The D.C. Circuit Court denied EPA’s petition to suspend the litigation and oral argument was held on November 20, 2017. On August 21, 2018, the D.C. Circuit issued its decision in the CCR rule litigation denying relief for industry petitioners' remaining claims and ruling in favor of environmental petitioners on a number of their challenges, including the regulation of inactive CCR surface impoundments at retired plants and the continued operation of unlined impoundments.
On March 15, 2018, EPA published proposed amendments to the federal CCR rule, including revisions that were required as part of a CCR litigation settlement, as well as changes that the agency considers warranted due to the passage of the Water Infrastructure Improvements for the Nation Act, which provides statutory authority for state and federal permit programs. On July 17, 2018, EPA issued a rule finalizing certain, but not all, elements included in the agency's March 15, 2018, proposal. The final rule revises certain closure deadlines and groundwater protection standards in the CCR rule. It does not change the primary requirements for groundwater monitoring, corrective action, inspections and maintenance, and closure, and thus does not materially affect Duke Energy’s coal ash basin closure plans or compliance obligations undersites impacted and has assessed the CCR rule.
In additionamounts of coal ash subject to the rule and a method of compliance. Duke Energy Indiana's interpretation of the requirements of the federal CCR regulation,rule 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 AROs. Additionally, Duke Energy Indiana has retired facilities that are not subject to the CCR landfills and surface impoundments will continuerule. Duke Energy Indiana may incur costs at these facilities to be independently regulated by most states. Cost recovery for future expenditures will be pursued through the normal ratemaking processcomply with federal and state utility commissions and via wholesale contracts, which permitenvironmental regulations or to mitigate risks associated with on-site storage of coal ash. An order from regulatory authorities disallowing recovery of necessarycosts related to closure of ash basins could have an adverse impact on Duke Energy Indiana's results of operations, financial position and prudently incurred costscash flows.
Duke Energy Indiana filed a general rate case with the IURC on July 2, 2019, its first general rate case in Indiana in 16 years. The outcome of this rate case could materially impact Duke Energy Indiana's results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy Registrants' Annual Reports on Form 10-K for the year ended December 31, 2018, for discussion of risks associated with the Tax Act.
PIEDMONT
Management’s Discussion and Analysis should be read in conjunction with the Condensed Consolidated Financial Statements and Notes for the nine months ended September 30, 2019, and 2018, and the Annual Report on Form 10-K for the year ended December 31, 2018.
Results of Operations
 Nine Months Ended September 30,
(in millions)2019
 2018
 Variance
Operating Revenues$956
 $940
 $16
Operating Expenses     
Cost of natural gas384
 387
 (3)
Operation, maintenance and other241
 252
 (11)
Depreciation and amortization127
 118
 9
Property and other taxes39
 36
 3
Total operating expenses791
 793
 (2)
Operating Income165
 147
 18
Other Income and Expenses, net19
 15
 4
Interest Expense65
 60
 5
Income Before Income Taxes119
 102
 17
Income Tax Expense22
 21
 1
Net Income$97
 $81
 $16
The following table shows the percent changes in dekatherms delivered and average number of customers. The percentages for all throughput deliveries represent billed and unbilled sales. Amounts are not weather-normalized.
Increase (Decrease) over prior year2019
Residential deliveries(7.5)%
Commercial deliveries(4.2)%
Industrial deliveries2.9 %
Power generation deliveries(10.5)%
For resale5.9 %
Total throughput deliveries(7.2)%
Secondary market volumes2.0 %
Average number of customers1.3 %
Due to the margin decoupling mechanism in North Carolina and the WNA in South Carolina and Tennessee, changes in throughput deliveries do not have a material impact on Piedmont's revenues or earnings. The margin decoupling mechanism adjusts for variations in residential and commercial use per customer, including those due to weather and conservation. The WNA mostly offsets the impact of weather on bills rendered, but do not ensure precise recovery of approved margin during periods when winter weather is significantly warmer or colder than normal.
Nine Months Ended September 30, 2019, as compared to September 30, 2018
Operating Revenues.The variance was driven primarily by:
a $12 million increase primarily due to North Carolina and Tennessee IMR increases; and
a $9 million increase primarily due to NCUC approval related to tax reform accounting from fixed rate contracts.

MD&APIEDMONT


Partially offset by:
a $7 million decrease primarily due to a reduction of rates in South Carolina.
Operating Expenses.The variance was driven primarily by:
an $11 million decrease in operations, maintenance and other expense primarily due to lower labor and information technology outside services costs and a portion of rent expense being charged to shared services in the current year.
Partially offset by:
a $9 million increase in depreciation and amortization expense primarily due to additional plant in service.
Interest Expense. The variance was driven by higher debt outstanding in the current year, higher interest expense due to customers as a result of tax reform deferrals and intercompany interest, partially offset by favorable AFUDC debt interest.
Matters Impacting Future Results
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy Registrants' Annual Reports on Form 10-K for the year ended December 31, 2018, for discussion of risks associated with the Tax Act.
LIQUIDITY AND CAPITAL RESOURCES
Sources and Uses of Cash
Duke Energy relies primarily upon cash flows from operations, debt and equity issuances and its existing cash and cash equivalents to fund its liquidity and capital requirements. Duke Energy’s regulated operations. For more information, see Note 9, “Asset Retirement Obligations,” incapital 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/A10-K for the year ended December 31, 2017.2018, for a summary and detailed discussion of projected primary sources and uses of cash for 2019 to 2021.
Coal Ash Management ActDuke Energy issued $5.3 billion of 2014
Asset retirement obligations recorded ondebt, drew $650 million under the Duke Energy CarolinasProgress Term Loan Facility and paid off in full the $350 million Piedmont term loan during the nine months ended September 30, 2019. Refer to Note 6 to the Condensed Consolidated Financial Statements, "Debt and Credit Facilities," for information regarding Duke Energy's debt issuances, debt maturities and available credit facilities including the Master Credit Facility.
In March 2019 and September 2019, Duke Energy Progress Condensed Consolidated Balance Sheets atissued preferred stock for net proceeds of $973 million and $990 million, respectively. In addition, for the nine months ended September 30, 2019, Duke Energy raised approximately $120 million of common equity through its DRIP. Refer to Note 15 to the CondensedConsolidated Financial Statements, "Stockholders' Equity," for information regarding Duke Energy's equity issuances.
In November 2019, Duke Energy announced plans to issue approximately $2.5 billion of incremental equity by the end of 2020. This equity would support Duke Energy's five-year growth plan by strengthening the balance sheet and allowing the Company to absorb a wide range of outcomes associated with ACP.
Credit Ratings
In May 2019, S&P revised the credit ratings outlook for Duke Energy Corporation and all other Duke Energy Registrants from stable to negative, principally due to concerns of weaker financial measures due to 2018 and December 31, 2017, include the legal obligation for closure ofstorms, uncertainty over coal ash basinsremediation costs and the disposal of related ash as a result of the Coal Ash Act, the EPA CCR rule and other agreements. The Coal Ash Act requires Duke Energy to undertake dam improvement projects and to provide access to a permanent alternative drinking water source to certain residents within a half-mile of coal ash basin compliance boundaries and to certain other potentially impacted residents. The legislation requires excavation of the Sutton, Riverbend and Dan River basins by August 1, 2019, and Asheville basins by August 1, 2022. Excavation at these sites may include a combination of transfer of coal ash to an engineered landfill or conversion for beneficial use. Basins at the H.F. Lee, Cape Fear and Weatherspoon sites are required to be closed through excavation no later than August 1, 2028. Excavation at these sites can include conversion of the basin to a lined industrial landfill, transfer of ash to an engineered landfill or conversion for beneficial use. The remaining basins are required to be closed no later than December 31, 2024, through conversion to a lined industrial landfill, transfer to an engineered landfill or conversion for beneficial use, unless certain dam improvement projects and alternative drinking water source projects are completed by October 15, 2018. Upon satisfactory completion of these projects, the closure deadline would be extended to December 31, 2029, and could include closure through the combination of a cap system and a groundwater monitoring. On October 12, 2018, NCDEQ announced that Duke Energy had satisfied the permanent replacement water supply requirements by the October 15, 2018, deadline set outrecovery in the Coal Ash Management Act. NCDEQ has until November 14, 2018, to issue final basin classifications.
Additionally, the Coal Ash Act requires the installationCarolinas, regulatory lag during a period of robust capital spending and operation of three large-scale coal ash beneficiation projects to produce reprocessed ash for use in the concrete industry. Duke Energy selected the Buck, H.F. Lee and Cape Fear plants for these projects. Closure at these sites is required to be completed no later than December 31, 2029.

PART I

The Coal Ash Act includes a variance procedure for compliance deadlines and other issues surrounding the management of CCR and CCR surface impoundments and prohibits cost recovery in customer rates for unlawful discharge of ash impoundment waters occurring after January 1, 2014. The Coal Ash Act leaves the decision on cost recovery determinationsdelays related to closure of ash impoundmentsthe ACP pipeline. There have been no changes to the normal ratemaking processes before utility regulatory commissions. Consistent with the requirementscredit ratings of the Coal Ash Act, Duke Energy has submitted comprehensive site assessments and groundwater corrective plans to NCDEQ and will submit to NCDEQ site-specific coal ash impoundment closure plans in advanceany of closure. NCDEQ requested that Duke Energy submit options analyses, groundwater modeling and net environmental benefits analyses for six sites potentially eligible for closure by cap in place by November 15, 2018. These plans and all associated permits must be approved by NCDEQ before closure work can begin.
For more information, see Note 9, “Asset Retirement Obligations,” in Duke Energy’s Annual Report on Form 10-K/A for the year ended December 31, 2017.
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 26 of the electric generating facilities the Duke Energy Registrants ownduring 2019 by any of the rating agencies. Moody's and operate. The rule allows for several optionsFitch continue to demonstrate compliance and provides flexibility to the state environmental permitting agencies to make determinationsmaintain a stable outlook 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 2023 time frame. Petitions challenging the rule have been filed by several groups. Oral argument was held on September 14, 2017. On July 23, 2018, the U.S. Court of Appeals for the Second Circuit announced their decision to uphold the 316(b) rule. Duke Energy continues to work with the state environmental permitting agency to implement the rule.Corporation.
Steam Electric Effluent Limitations Guidelines
On January 4, 2016, the final Steam Electric Effluent Limitations Guidelines (ELG) rule became effective. Cash Flow Information
The rule establishes new requirements for wastewater streams associated with steam electric power generation and includes more stringent controls for any new coal plants that may be built in the future. As originally written, affected facilities were required to comply between 2018 and 2023, depending on the timingfollowing table summarizes Duke Energy’s cash flows.
  Nine Months Ended
  September 30,
(in millions) 2019
 2018
Cash flows provided by (used in):    
Operating activities $5,637
 $5,667
Investing activities (8,633) (7,270)
Financing activities 2,987
 1,547
Net decrease in cash, cash equivalents and restricted cash (9) (56)
Cash, cash equivalents and restricted cash at beginning of period 591
 505
Cash, cash equivalents and restricted cash at end of period $582
 $449

MD&ALIQUIDITY AND CAPITAL RESOURCES


OPERATING CASH FLOWS
The following table summarizes key components of Clean Water Act (CWA) discharge permits. Most of the steam electric generating facilities the Duke Energy Registrants own are affected sources. The Duke Energy Registrants are well-positioned to meet the majority of the requirements of the rule due to current efforts to convert to dry ash handling. Petitions challenging the rule have been filed by several groups. On March 16, 2015, Duke Energy Indiana filed its own legal challenge to the rule with the Seventh Circuit Court of Appeals specific to the ELG rule focused on the limits imposed on IGCC facilities (gasification wastewater). All challenges to the rule were consolidated in the Fifth Circuit Court of Appeals. On August 22, 2017, the Fifth Circuit Court of Appeals granted EPA’s Motion to Govern Further Proceedings, thereby severing and suspending the claims related to flue gas desulfurization wastewater, bottom ash transport water and gasification wastewater. Claims regarding gasification wastewater were stayed, pending the issuance of the variance to Duke Energy Indiana. Duke Energy Indiana’s federal court challenge to EPA’s Effluent Limitations Guidelines and Standards for the Steam Electric Power Generating Point Source Category remains in abeyance. After a long delay, EPA issued a variance for discharges at Edwardsport of wastewater associated with the gasification process. Energy’s operating cash flows.
  Nine Months Ended
  September 30,
(in millions) 2019
 2018
 Variance
Net income $2,964
 $2,190
 $774
Non-cash adjustments to net income 4,389
 5,206
 (817)
Contributions to qualified pension plans (77) (141) 64
Payments for asset retirement obligations (582) (389) (193)
Payment for disposal of other assets 
 (105) 105
Working capital (1,057) (1,094) 37
Net cash provided by operating activities $5,637
 $5,667
 $(30)
The variance was incorporated by the state agency into primarily due to:
a revised wastewater discharge permit,$193 million increase in payments for asset retirement obligations.
Partially offset by:
a $64 million decrease in contributions to qualified pension plans; and Duke Energy Indiana has voluntarily dismissed the federal court challenge. The litigation will continue as to claims related to other waste streams.
Separate from the litigation, EPA finalized a rule on September 18, 2017, postponing the earliest applicability date$105 million payment for bottom ash transport water and flue gas desulfurization wastewater from 2018 to 2020 and retaining the end applicability date of 2023. Also, as part of the rule, EPA reiterated its intent to conduct a new rulemaking to review the effluent limitation guidelines for bottom ash transport water and flue gas desulfurization wastewater. EPA projects that a new rule on these two issues will be finalized by the end of 2019.
The Duke Energy Registrants cannot predict the outcome of these matters.
Estimated Cost and Impacts of Rulemakings
Duke Energy will incur capital expenditures to comply with the environmental regulations and rules discussed above. The following table provides five-year estimated costs, excluding AFUDC, of new control equipment that may need to be installed on existing power plants primarily to comply with the Coal Ash Act requirements for conversion to dry disposal of bottom ash and fly ash, CWA 316(b) and ELGs through December 31, 2022. The table excludes ash basin closure costs recorded in Asset retirement obligations on the Condensed Consolidated Balance Sheets. For more information related to AROs, see Note 9, “Asset Retirement Obligations” in Duke Energy’s Annual Report on Form 10‑K/A for the year ended December 31, 2017.
(in millions)Estimated Cost
Duke Energy$950
Duke Energy Carolinas440
Progress Energy370
Duke Energy Progress270
Duke Energy Florida100
Duke Energy Ohio90
Duke Energy Indiana50
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. Actual compliance costs incurred may be materially different from these estimates due to reasons such as the timing and requirements of EPA regulations and the resolution of legal challenges to the rules. The Duke Energy Registrants intend to seek rate recovery of necessary and prudently incurred costs associated with regulated operations to comply with these regulations.

PART I

Cross-State Air Pollution Rule
On September 7, 2016, EPA finalized a revision to the Cross-State Air Pollution Rule (CSAPR); the revised rule is known as the CSAPR Update Rule. The CSAPR Update Rule reduces the CSAPR Phase 2 state ozone season NOX emission budgets for 22 eastern states, including Ohio, Kentucky and Indiana. In the final CSAPR Update Rule, the EPA removed Florida, South Carolina and North Carolina from the ozone season NOx program. Beginning in 2017, Duke Energy Registrants in these states will not be subject to any CSAPR ozone season NOx emission limitations. For the states that remainBeckjord in the program, the reduced state ozone season NOx emission budgets took effect on May 1, 2017. In Kentucky and Indiana, where Duke Energy Registrants own and operate coal-fired electric generating units (EGUs) subject to the final rule requirements, near-term responses include changing unit dispatch to run certain generating units less frequently and/or purchasing NOx allowances from the trading market. Longer term, upgrading the performance of existing NOx controls is an option. The Indiana Utility Group and the Indiana Energy Association jointly filed a petition for reconsideration asking that the EPA correct errors it made in calculating the Indiana budget and increase the budget accordingly. EPA has yet to act on the petition. Numerous parties have filed petitions with the D.C. Circuit Court challenging various aspects of the CSAPR Update Rule. Final briefs in the case were due April 9, 2018. Oral argument was heard on October 3, 2018. The Duke Energy Registrants cannot predict the outcome of these matters.prior year.
Carbon Pollution Standards for New, Modified and Reconstructed Power Plants
On October 23, 2015, EPA published a final rule in the Federal Register establishing carbon dioxide (CO2) emissions limits for new, modified and reconstructed power plants. The requirements for new plants apply to plants that commenced construction after January 8, 2014. EPA set an emissions standard for coal units of 1,400 pounds of CO2 per gross MWh, which would require the application of partial carbon capture and storage (CCS) technology for a coal unit to be able to meet the limit. Utility-scale CCS is not currently a demonstrated and commercially available technology for coal-fired EGUs, and therefore the final standard effectively prevents the development of new coal-fired generation. EPA set a final standard of 1,000 pounds of CO2 per gross MWh for new natural gas combined-cycle units.
On March 28, 2017, President Trump signed an executive order directing EPA to review the rule and determine whether to suspend, revise or rescind it. On the same day, the Department of Justice (DOJ) filed a motion with the D.C. Circuit Court requesting that the court stay the litigation of the rule while it is reviewed by EPA. Subsequent to the DOJ motion, the D.C. Circuit Court canceled oral argument in the case. On August 10, 2017, the court ordered that the litigation be suspended indefinitely. The rule remains in effect pending the outcome of litigation and EPA’s review. On July 24, 2018, EPA reported to the court that it plans to send a proposed revised rule to the Office of Management and Budget (OMB) for review. EPA has stated that it expects to release the proposed rule in November. The Duke Energy Registrants cannot predict the outcome of these matters but do not expect the impacts of the current final standards will be material to Duke Energy's financial position, results of operations or cash flows.
Clean Power Plan
On October 23, 2015, the EPA published in the Federal Register the final Clean Power Plan (CPP) rule to regulate CO2 emissions from existing fossil fuel-fired EGUs. The CPP established CO2 emission rates and mass cap goals that apply to existing fossil fuel-fired EGUs. Petitions challenging the rule were filed by numerous groups and on February 9, 2016, the Supreme Court issued a stay of the final CPP rule, halting implementation of the CPP until legal challenges are resolved. States in which the Duke Energy Registrants operate have suspended work on the CPP in response to the stay. Oral arguments before 10 of the 11 judges on the D.C. Circuit Court were heard on September 27, 2016. The court has not issued its opinion in the case.
On March 28, 2017, President Trump signed an executive order directing EPA to review the CPP and determine whether to suspend, revise or rescind the rule. On the same day, the DOJ filed a motion with the D.C. Circuit Court requesting that the court stay the litigation of the rule while it is reviewed by EPA. On April 28, 2017, the court issued an order to suspend the litigation for 60 days and required EPA to file status reports with the court every 30 days. The court has issued subsequent orders, most recently on June 26, 2018, maintaining the case in abeyance. On October 16, 2017, EPA issued a Notice of Proposed Rulemaking (NPRM) to repeal the CPP based on a change to EPA’s legal interpretation of the section of the Clean Air Act on which the CPP was based. The comment period on EPA's NPRM ended April 26, 2018. On December 28, 2017, EPA issued an Advance Notice of Proposed Rulemaking (ANPRM) in which it sought public comment on various aspects of a potential CPP replacement rule. The comment period on the ANPRM ended February 26, 2018. On August 31, 2018, EPA published a proposed rule to replace the CPP, the Affordable Clean Energy (ACE) rule. The proposed ACE rule is based on an “inside the fence” approach under which states develop CO2 reduction plans based on efficiency (heat rate) improvements at coal-fired power plants. The rule proposes a list of “candidate technologies” from which the states develop unit-specific emission standards. State compliance plans will be due three years after the rule is finalized. The proposal also revises EPA’s New Source Review (NSR) permitting program to remove impediments to the kinds of efficiency improvements the ACE rule would require. The Duke Energy Registrants cannot predict the outcome of these matters.
Section 126 Petitions
On November 16, 2016, the state of Maryland filed a petition with EPA under Section 126 of the Clean Air Act alleging that 19 power plants, including two that Duke Energy Registrants own and operate, contribute to violations of EPA’s National Ambient Air Quality Standards (NAAQS) for ozone in the state of Maryland. On March 12, 2018, the state of New York filed a petition with EPA, also under Section 126 of the Clean Air Act alleging that over 60 power plants, including four that Duke Energy Registrants own and operate, contribute to violations of EPA’s ozone NAAQS in the state of New York. Both Maryland and New York seek EPA orders requiring the states in which the named power plants operate impose more stringent nitrogen oxide (NOx) emission limitations on the plants. On October 5, 2018, EPA published a final rule denying the Maryland petition. That same day, Maryland appealed EPA's denial of their Section 126 petition. Duke Energy has three units named in the petition. Any other petition to challenge this final rule must be filed within 60 days from EPA's denial. The impact of these petitions could be more stringent requirements for the operation of NOx emission controls at these plants. The Duke Energy Registrants cannot predict the outcome of these matters.
Global Climate Change
ForOn September 17, 2019, Duke Energy announced an updated climate strategy with a new goal of net-zero carbon emissions from electric generation by 2050. Timelines and initiatives, as well as implementation of new technologies, will vary in each state in which the company operates and will involve collaboration with regulators, customers and other stakeholders.
Hurricane Dorian
In the third quarter of 2019, Hurricane Dorian impacted approximately 270,000 North Carolina customers and 30,000 South Carolina customers within the Duke Energy Progress service territory. Duke Energy Florida’s service territory was also threatened by Hurricane Dorian and therefore, Duke Energy Florida also incurred costs to be prepared for potential impact. Estimated restoration costs for Duke Energy are approximately $400 million. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
Regulatory Activity
In 2019, Duke Energy advanced regulatory activity in multiple jurisdictions. The following rate cases are underway:
Duke Energy Carolinas and Duke Energy Progress filed general rate cases with the NCUC on September 30, 2019, and October 30, 2019, respectively, requesting rate increases go into effect in the third quarter of 2020.
Duke Energy Kentucky filed an electric rate case with the KPSC on September 3, 2019. Hearings are expected to begin in the first quarter of 2020 with rates anticipated to go into effect in the second quarter of 2020.
Duke Energy Indiana filed a general rate case with the IURC on July 2, 2019. Hearings are expected to begin in early 2020, with rates to be effective mid-2020.
Additionally, as a result of regulatory orders or settlements, customer rates were impacted in 2019 as follows:
On October 31, 2019, Piedmont received an order from the NCUC and revised customer rates became effective on November 1, 2019.
In May 2019, Duke Energy Carolinas and Duke Energy Progress received orders from the PSCSC and revised customer rates became effective June 1, 2019. As a result of the Directive allowing litigation-related costs, Duke Energy Progress customer rates were revised again July 1, 2019.
Duke Energy Kentucky revised customer rates on April 1, 2019, following settlement on January 30, 2019, of its 2018 Natural Gas Base Rate Case.
At Duke Energy Florida, revised customer rates went into effect in January 2019 as a result of a July 2018 petition to the FPSC to include in base rates the revenue requirement for Duke Energy Florida’s first solar generation project, the Hamilton Project. The FPSC in July 2019, issued an order to allow Duke Energy Florida to include in base rates the revenue requirements for its next wave of three solar generation projects, with projected in-service dates ranging from the fourth quarter of 2019 to the first quarter of 2020.
See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters" for additional information.
Results of Operations
Non-GAAP Measures
Management’s Discussion and Analysis includes financial information prepared in accordance with GAAP in the U.S., as well as certain non-GAAP financial measures such as adjusted earnings and adjusted EPS 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. 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 may not be comparable to similarly titled measures used by other companies because other companies may not calculate the measures in the same manner.

MD&ADUKE ENERGY


Management evaluates financial performance in part based on non-GAAP financial measures, including adjusted earnings and adjusted diluted EPS. Adjusted earnings and adjusted diluted EPS represent income from continuing operations attributable to Duke Energy common stockholders in dollar and per-share amounts, adjusted for the dollar and per-share impact of special items. As discussed below, special items represent certain charges and credits, which management believes are not indicative of Duke Energy's ongoing performance. The most directly comparable GAAP measures for adjusted earnings and adjusted diluted EPS are GAAP Reported Earnings and GAAP Reported EPS, respectively.
Special items in the periods presented below include the following:
Impairment Charges represents a reduction of a prior year impairment at Citrus County CC, an OTTI of an investment in Constitution and a Commercial Renewables goodwill impairment.
Costs to Achieve Piedmont Merger represents charges that resulted from the Piedmont acquisition.
Regulatory and Legislative Impacts represents charges related to rate case orders, settlements or other actions of regulators or legislative bodies.
Sale of Retired Plant represents the loss associated with selling Beckjord, a nonregulated generating facility in Ohio.
Impacts of the Tax Act represents an AMT valuation allowance recognized and a true up of prior year tax estimates related to the Tax Act.
Three Months Ended September 30, 2019, as compared to September 30, 2018
GAAP Reported EPS was $1.82 for the third quarter of 2019 compared to $1.51 for the third quarter of 2018. The increase in GAAP reported earnings was primarily due to favorable weather, positive rate case impacts, and lower operating expenses in Electric Utilities and Infrastructure and a prior year goodwill impairment charge in Commercial Renewables; these items were partially offset by higher corporate interest expense.
As discussed above, management also evaluates financial performance based on adjusted diluted EPS. Duke Energy’s third quarter 2019 adjusted diluted EPS was $1.79 compared to $1.65 for the third quarter of 2018.
The following table reconciles non-GAAP measures, including adjusted diluted EPS, to their most directly comparable GAAP measures.
 Three Months Ended September 30,
 2019 2018
(in millions, except per-share amounts)Earnings EPS Earnings EPS
GAAP Reported Earnings/GAAP Reported EPS$1,327
 $1.82
 $1,082
 $1.51
Adjustments:       
Impairment charges(a)
(19) (0.03) 91
 0.12
Costs to Achieve Piedmont Merger(b)

 
 13
 0.02
Impacts of the Tax Act(c)

 
 (3) 
Discontinued Operations
 
 (4) 
Adjusted Earnings/Adjusted Diluted EPS$1,308
 $1.79
 $1,179
 $1.65
(a)Net of $6 million tax expense in 2019. Net of $2 million Noncontrolling Interests in 2018.
(b)Net of $3 million tax benefit.
(c)Represents a true up of prior year tax estimates related to the Tax Act.

Nine Months Ended September 30, 2019, as compared to September 30, 2018
GAAP Reported EPS was $4.18 for the nine months ended September 30, 2019, compared to $3.11 for the nine months ended September 30, 2018. The increase in GAAP Reported earnings was primarily due to positive rate case impacts and lower operating expenses in Electric Utilities and Infrastructure, partially offset by higher depreciation and share dilution from equity issuances; the allocation of losses to noncontrolling tax equity members resulting primarily from the Commercial Renewables North Rosamond solar farm commencing commercial operations; an adjustment related to income tax recognition for equity method investments in Gas Utilities and Infrastructure; and prior year regulatory and legislative impacts, impairments charges, an AMT valuation allowance and a loss on sale of a retired plant.
As discussed above, management also evaluates financial performance based on adjusted diluted EPS. Duke Energy’s adjusted diluted EPS was $4.15 for the nine months ended September 30, 2019, compared to $3.87 for the nine months ended September 30, 2018.

MD&ADUKE ENERGY


The following table reconciles non-GAAP measures, including adjusted diluted EPS, to their most directly comparable GAAP measures.
 Nine Months Ended September 30,
 2019 2018
(in millions, except per-share amounts)Earnings EPS Earnings EPS
GAAP Reported Earnings/GAAP Reported EPS$3,047
 $4.18
 $2,202
 $3.11
Adjustments:       
Costs to Achieve Piedmont Merger(a)

 
 41
 0.06
Regulatory and Legislative Impacts(b)

 
 202
 0.29
Sale of Retired Plant(c)

 
 82
 0.12
Impairment Charges(d)
(19) (0.03) 133
 0.19
Impacts of the Tax Act(e)

 
 73
 0.10
Discontinued Operations
 
 1
 
Adjusted Earnings/Adjusted Diluted EPS$3,028
 $4.15
 $2,734
 $3.87
(a)Net of $12 million tax benefit.
(b)Net of $63 million tax benefit.
(c)Net of $25 million tax benefit.
(d)Net of $6 million tax expense in 2019. Net of $13 million tax benefit and $2 million Noncontrolling Interests in 2018.
(e)Represents a recognition of AMT valuation allowance and true up of prior year tax estimates related to the Tax Act.
SEGMENT RESULTS
The remaining information presented in this discussion of results of operations is on a GAAP basis. Management evaluates segment performance based on segment income. Segment income is defined as income from continuing operations net of income attributable to noncontrolling interests and preferred stock dividends. Segment income includes intercompany revenues and expenses that are eliminated in the Condensed Consolidated Financial Statements.
Duke Energy's segment structure includes the following segments: Electric Utilities and Infrastructure, Gas Utilities and Infrastructure and Commercial Renewables. The remainder of Duke Energy’s operations is presented as Other. See Note 2 to the Condensed Consolidated Financial Statements, “Business Segments,” for additional information on global climate changeDuke Energy’s segment structure.
Electric Utilities and Infrastructure
 Three Months Ended September 30, Nine Months Ended September 30,
(in millions)2019
 2018
 Variance
 2019
 2018
 Variance
Operating Revenues$6,577
 $6,260
 $317
 $17,381
 $16,806
 $575
Operating Expenses           
Fuel used in electric generation and purchased power1,994
 1,935
 59
 5,286
 5,202
 84
Operation, maintenance and other1,357
 1,431
 (74) 3,957
 4,151
 (194)
Depreciation and amortization1,026
 897
 129
 2,924
 2,570
 354
Property and other taxes301
 289
 12
 899
 842
 57
Impairment charges(20) 31
 (51) (16) 246
 (262)
Total operating expenses4,658
 4,583
 75
 13,050
 13,011
 39
Gains on Sales of Other Assets and Other, net
 8
 (8) 
 9
 (9)
Operating Income1,919
 1,685
 234
 4,331
 3,804
 527
Other Income and Expenses, net87
 107
 (20) 267
 286
 (19)
Interest Expense336
 322
 14
 1,004
 955
 49
Income Before Income Taxes1,670
 1,470
 200
 3,594
 3,135
 459
Income Tax Expense285
 303
 (18) 650
 643
 7
Segment Income$1,385
 $1,167
 $218
 $2,944
 $2,492
 $452
           

Duke Energy Carolinas GWh sales25,587
 25,607
 (20) 69,019
 70,506
 (1,487)
Duke Energy Progress GWh sales19,502
 19,625
 (123) 52,072
 52,747
 (675)
Duke Energy Florida GWh sales12,996
 12,375
 621
 32,468
 31,798
 670
Duke Energy Ohio GWh sales7,135
 6,964
 171
 18,959
 19,183
 (224)
Duke Energy Indiana GWh sales8,711
 9,114
 (403) 24,181
 25,900
 (1,719)
Total Electric Utilities and Infrastructure GWh sales73,931
 73,685
 246
 196,699
 200,134
 (3,435)
Net proportional MW capacity in operation    

 49,711
 48,757
 954

MD&ASEGMENT RESULTS — ELECTRIC UTILITIES AND INFRASTRUCTURE


Three Months Ended September 30, 2019, as compared to September 30, 2018
Electric Utilities and Infrastructure’s results were impacted by a positive contribution from the Duke Energy Carolinas North and South Carolina rate cases, Duke Energy Florida's base rate adjustments due to the Citrus County CC being placed in service, favorable weather in the current year and lower operation, maintenance and other expense.
These drivers were partially offset by higher depreciation from a growing asset base and higher interest expense. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The variance was driven primarily by:
a $167 million increase in retail pricing primarily due to the Duke Energy Carolinas North and South Carolina rate cases and Duke Energy Florida's base rate adjustments related to Citrus County CC being placed in service;
an $88 million increase in retail sales, net of fuel revenues, due to favorable weather in the current year; and
a $51 million increase in fuel related revenues.
Operating Expenses. The variance was driven primarily by:
a $129 million increase in depreciation and amortization expense primarily due to additional plant in service and new depreciation rates associated with the prior year Duke Energy Carolinas and Duke Energy Progress North Carolina rate cases and Duke Energy Florida's Citrus County CC being placed in service;
a $59 million increase in fuel used in electric generation and purchased power primarily due to an increase in the North Carolina Renewable Energy and Energy Efficiency Portfolio Standard requirement from the prior year at Duke Energy Progress; and
a $12 million increase in property and other taxes primarily due to higher property taxes for additional plant in service at Duke Energy Florida.
Partially offset by:
a $74 million decrease in operation, maintenance and other expense primarily due to lower storm costs at Duke Energy Progress and Duke Energy Carolinas in the current year and lower payroll costs resulting from prior year workforce reductions; and
a $51 million decrease in impairment charges primarily due to a reduction of a prior year impairment at Duke Energy Florida's Citrus County CC and the potential impacts onprior year Edwardsport IGCC settlement at Duke Energy see “Other Matters”Indiana.
Other Income and Expenses, net. The variance was driven primarily by AFUDC equity return ending on the Citrus County CC in “Management’sthe fourth quarter of 2018 at Duke Energy Florida.
Interest Expense. The variance was driven primarily by higher debt outstanding in the current year and AFUDC debt return ending in the fourth quarter of 2018 on the Citrus County CC at Duke Energy Florida.
Income Tax Expense. The decrease in tax expense was primarily due to an increase in the amortization of excess deferred taxes, partially offset by an increase in pretax income. The ETRs for the three months ended September 30, 2019, and 2018, were 17.1% and 20.6%, respectively. The decrease in the ETR was primarily due to an increase in the amortization of excess deferred taxes.
Nine Months Ended September 30, 2019, as compared to September 30, 2018
Electric Utilities and Infrastructure’s results were impacted by a positive contribution from the 2018 Duke Energy Carolinas and Duke Energy Progress North Carolina rate cases, Duke Energy Florida's base rate adjustments due to the Citrus County CC being placed in service and lower operation, maintenance and other expense.
These drivers were partially offset by higher depreciation from a growing asset base and higher interest expense. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The variance was driven primarily by:
a $493 million increase in retail pricing primarily due to the prior year Duke Energy Carolinas and Duke Energy Progress North Carolina rate cases and Duke Energy Florida's base rate adjustments related to Citrus County CC being placed in service; and
an $85 million increase in fuel related revenues.
Operating Expenses. The variance was driven primarily by:
a $354 million increase in depreciation and amortization expense primarily due to additional plant in service and new depreciation rates associated with the prior year Duke Energy Carolinas and Duke Energy Progress North Carolina rate cases and Duke Energy Florida's Citrus County CC being placed in service;
an $84 million increase in fuel used in electric generation and purchased power primarily due to an increase in the North Carolina Renewable Energy and Energy Efficiency Portfolio Standard requirement from the prior year at Duke Energy Progress; and
a $57 million increase in property and other taxes primarily due to higher property taxes for additional plant in service at Duke Energy Florida and current year property tax reassessments at Duke Energy Progress.

MD&ASEGMENT RESULTS — ELECTRIC UTILITIES AND INFRASTRUCTURE


Partially offset by:
a $262 million decrease in impairment charges primarily due to the impacts associated with the prior year Duke Energy Carolinas and Duke Energy Progress North Carolina rate cases; and
a $194 million decrease in operation, maintenance and other expense primarily due to lower payroll and benefit costs resulting from prior year workforce reductions and lower storm costs at Duke Energy Progress and Duke Energy Carolinas in the current year.
Other Income and Expenses, net. The variance was driven primarily by AFUDC equity return ending on the Citrus County CC in the fourth quarter of 2018 at Duke Energy Florida.
Interest Expense. The variance was driven primarily by higher debt outstanding in the current year and AFUDC debt return ending in the fourth quarter of 2018 on the Citrus County CC at Duke Energy Florida.
Income Tax Expense. The increase in tax expense was primarily due to an increase in pretax income, mostly offset by an increase in the amortization of excess deferred taxes. The ETRs for the nine months ended September 30, 2019, and 2018, were 18.1% and 20.5%, respectively. The decrease in the ETR was primarily due to an increase in the amortization of excess deferred taxes.
Matters Impacting Future Electric Utilities and Infrastructure Results
On May 21, 2019, Duke Energy Carolinas and Duke Energy Progress received orders from the PSCSC granting the companies’ requests for retail rate increases but denying recovery of certain coal ash costs. Duke Energy Carolinas and Duke Energy Progress intend to file notices of appeals with the South Carolina Supreme Court within 30 days of the order that was received on October 18, 2019. Electric Utilities and Infrastructure's results of operations, financial position and cash flows could be adversely impacted if coal ash costs are not ultimately approved for recovery. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
On April 1, 2019, NCDEQ issued a closure determination requiring Duke Energy Carolinas and Duke Energy Progress to excavate all remaining coal ash impoundments in North Carolina, even though they had been deemed low risk by NCDEQ on November 14, 2018. On April 26, 2019, Duke Energy Carolinas and Duke Energy Progress filed a Petition for Contested Case Hearings in the Office of Administrative Hearings to challenge NCDEQ's April 1 Order. Duke Energy Carolinas and Duke Energy Progress intend to seek recovery of all costs through the ratemaking process consistent with previous proceedings. As the final closure plans and corrective action measures are developed and approved for each site, the closure work progresses and the closure method scope and remedial action methods are determined, the complexity of work and the amount of coal combustion material could be different than originally estimated and, therefore, could materially impact Electric Utilities and Infrastructure's results of operations, financial position and cash flows. See Note 4 to the Condensed Consolidated Financial Statements, "Commitments and Contingencies," for additional information.
Duke Energy is a party to multiple lawsuits and could be subject to fines and other penalties related to operations at certain North Carolina facilities with ash basins. In addition, the orders issued in the Duke Energy Carolinas and Duke Energy Progress North Carolina rate cases supporting recovery of past coal ash remediation costs have been appealed by various parties. The outcome of these appeals, lawsuits and potential fines and penalties could have an adverse impact on Electric Utilities and Infrastructure's results of operations, financial position and cash flows. See Notes 3 and 4 to the Condensed Consolidated Financial Statements, "Regulatory Matters" and “Commitments and Contingencies,” respectively, for additional information.
On June 22, 2018, Duke Energy Carolinas received an order from the NCUC, which denied the Grid Rider Stipulation and deferral treatment of grid improvement costs. Duke Energy Carolinas and Duke Energy Progress have petitioned for deferral of future grid improvement costs in their 2019 rate cases. Electric Utilities and Infrastructure's results of operations, financial position and cash flows could be adversely impacted if grid improvement costs are not ultimately approved for recovery and/or deferral treatment.
During the last half of 2018, Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida’s service territories were impacted by several named storms. Hurricane Florence, Hurricane Michael and Winter Storm Diego caused flooding, extensive damage and widespread power outages to the service territories of Duke Energy Carolinas and Duke Energy Progress. Duke Energy Florida’s service territory was also impacted by Hurricane Michael, a Category 5 hurricane and the most powerful storm to hit the Florida Panhandle in recorded history. In September 2019, Hurricane Dorian impacted Duke Energy Progress and Duke Energy Florida's service territories. A significant portion of the incremental operation and maintenance expenses related to these storms has been deferred. An order from regulatory authorities disallowing the deferral and future recovery of storm restoration costs could have an adverse impact on Electric Utilities and Infrastructure's results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
In 2019, Duke Energy Indiana filed a general rate case with the IURC, and Duke Energy Carolinas and Duke Energy Progress filed general rate cases with the NCUC. The outcome of these rate cases could materially impact Electric Utilities and Infrastructure's results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations”Operations," in the Duke Energy’sEnergy Registrants' Annual ReportReports on Form 10-K/A10-K for the year ended December 31, 2017.2018, for discussion of risks associated with the Tax Act.


PART I

MD&ASEGMENT RESULTS — GAS UTILITIES AND INFRASTRUCTURE


Gas Utilities and Infrastructure
 Three Months Ended September 30, Nine Months Ended September 30,
(in millions)2019
 2018
 Variance
 2019
 2018
 Variance
Operating Revenues$249
 $256
 $(7) $1,311
 $1,301
 $10
Operating Expenses           
Cost of natural gas48
 58
 (10) 451
 460
 (9)
Operation, maintenance and other108
 101
 7
 325
 312
 13
Depreciation and amortization64
 61
 3
 192
 182
 10
Property and other taxes24
 24
 
 84
 81
 3
Total operating expenses244
 244
 
 1,052
 1,035
 17
Operating Income5
 12
 (7) 259
 266
 (7)
Other Income and Expenses, net42
 29
 13
 119
 16
 103
Interest Expense29
 25
 4
 86
 78
 8
Income Before Income Taxes18
 16
 2
 292
 204
 88
Income Tax (Benefit) Expense(8) (1) (7) 
 43
 (43)
Segment Income$26
 $17
 $9
 $292
 $161
 $131
       

    
Piedmont LDC throughput (dekatherms)121,378,484
 135,403,188
 (14,024,704) 377,729,141
 407,144,529
 (29,415,388)
Duke Energy Midwest LDC throughput (Mcf)9,997,444
 9,370,743
 626,701
 62,278,623
 62,111,858
 166,765
Three Months Ended September 30, 2019, as compared to September 30, 2018
Gas Utilities and Infrastructure’s results were primarily impacted by tax benefits related to current year AFUDC equity and higher equity earnings from ACP. These drivers are partially offset by lower revenues. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues.The variance was driven by:
a $10 million decrease primarily due to lower natural gas costs passed through to customers and lower volumes due to unfavorable weather.
Partially offset by:
a $3 million increase primarily due to North Carolina Legislationand Tennessee IMR increases.
ForOperating Expenses.The drivers were:
a $10 million decrease in cost of natural gas primarily due to lower off-system sales natural gas costs and lower natural gas prices.
Partially offset by:
a $7 million increase in operation, maintenance and other expense primarily due to increased information technology outside services costs and increased bad debt expense related to a Piedmont industrial customer; and
a $3 million increase in depreciation and amortization expense primarily due to additional plant in service.
Other Income and Expenses, net. The variance was driven by higher equity earnings from ACP in the current year.
Interest Expense. The variance was driven by higher debt outstanding in the current year, higher interest expense due to customers as a result of tax reform deferrals, and intercompany interest, partially offset by favorable AFUDC debt interest.
Income Tax (Benefit) Expense. The increase in the tax benefit was primarily due to current year AFUDC equity.
Nine Months Ended September 30, 2019, as compared to September 30, 2018
Gas Utilities and Infrastructure’s results were primarily impacted by the prior year OTTI recorded on the Constitution investment and a 2019 adjustment related to the income tax recognition for equity method investments. The equity method investment adjustment was immaterial and relates to prior years. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues.The variance was driven by:
a $12 million increase primarily due to North Carolina legislation and Tennessee IMR increases;
a $9 million increase primarily due to NCUC approval related to tax reform accounting from fixed rate contracts; and
a $4 million increase in pricing primarily in residential and commercial sectors in the potential impactsMidwest.

MD&ASEGMENT RESULTS — GAS UTILITIES AND INFRASTRUCTURE


Partially offset by:
an $8 million decrease due to lower natural gas costs passed through to customers and unfavorable weather in the Midwest, partially offset by higher natural gas prices associated with off-system sales at Piedmont; and
a $7 million decrease primarily due to a reduction of rates in South Carolina.
Operating Expenses.The variance was driven by:
a $13 million increase in operation, maintenance and other expense primarily due to information technology outside services, higher gas operations labor costs, and increased bad debt expense related to a Piedmont industrial customer; and
a $10 million increase in depreciation and amortization expense primarily due to additional plant in service.
Partially offset by:
a $9 million decrease in cost of natural gas primarily due to lower natural gas prices in the Midwest and lower sales volumes partially offset by higher off-system sales natural gas costs at Piedmont.
Other Income and Expenses, net. The increase was primarily due to the prior year OTTI recorded on the Constitution investment and higher earnings from ACP in the current year.
Interest Expense. The variance was driven by higher debt outstanding in the current year and higher interest expense due to customers as a result of tax reform deferrals, partially offset by favorable AFUDC debt interest.
Income Tax Expense. The decrease in tax expense was primarily due to an adjustment related to the income tax recognition for equity method investments and current year AFUDC equity, partially offset by an increase in pretax income. The equity method investment adjustment was immaterial and relates to prior years. The ETRs for the nine months ended September 30, 2019, and 2018, were 0.0% and 21.1%, respectively. The decrease in the ETR was primarily due to an adjustment related to the income tax recognition for equity method investments that was recorded during the first quarter of 2019 and current year AFUDC equity. The equity method investment adjustment was immaterial and relates to prior years.
Matters Impacting Future Gas Utilities and Infrastructure Results
Gas Utilities and Infrastructure has a 47% ownership interest in ACP, which is building an approximately 600-mile interstate natural gas pipeline intended to transport diverse natural gas supplies into southeastern markets. Affected states (West Virginia, Virginia and North Carolina) have issued certain necessary permits; the project remains subject to other pending federal and state approvals, which will allow full construction activities to begin. In 2018, FERC issued a series of Notices to Proceed, which authorized the project to begin certain construction-related activities along the pipeline route. Given legal challenges and ongoing discussions with customers, ACP expects mechanical completion of the full project in late 2021 with in-service likely in the first half of 2022. The delays resulting from legal challenges have impacted the cost and schedule for the project. Project cost estimates are $7.3 billion to $7.8 billion, excluding financing costs. Given the status of current discussions with FWS regarding a new BiOp and ITS, as well as discussions with contractors regarding efficiencies which may be realized going forward, these estimates are under review and subject to upward pressure. Abnormal weather, work delays (including delays due to judicial or regulatory action) and other conditions may also result in cost or schedule modifications, a suspension of AFUDC for ACP and/or impairment charges potentially material to Duke Energy's cash flows, financial position and results of operations. ACP and Duke Energy see “Other Matters”will continue to consider their options with respect to the foregoing given their existing contractual and legal obligations. See Notes 3 and 13 to the Condensed Consolidated Financial Statements, "Regulatory Matters" and "Variable Interest Entities," respectively, for additional information.
On November 13, 2013, the PUCO issued an order authorizing recovery of MGP costs at certain sites in “Management’sOhio with a deadline to complete the MGP environmental investigation and remediation work prior to December 31, 2016. This deadline was subsequently extended to December 31, 2019. Disallowance of costs incurred, failure to complete the work by the deadline or failure to obtain an extension from the PUCO could result in an adverse impact on Gas Utilities and Infrastructure’s results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations”Operations," in the Duke Energy’sEnergy Registrants' Annual ReportReports on Form 10-K/A10-K for the year ended December 31, 2017.2018, for discussion of risks associated with the Tax Act.
Liquefied Natural Gas Facility
Piedmont Natural Gas plans

MD&ASEGMENT RESULTS — COMMERCIAL RENEWABLES


Commercial Renewables
 Three Months Ended September 30, Nine Months Ended September 30,
(in millions)2019
 2018
 Variance
 2019
 2018
 Variance
Operating Revenues$138
 $127
 $11
 $362
 $347
 $15
Operating Expenses           
Operation, maintenance and other81
 85
 (4) 211
 209
 2
Depreciation and amortization43
 40
 3
 123
 116
 7
Property and other taxes6
 6
 
 18
 19
 (1)
Impairment charges
 93
 (93) 
 93
 (93)
Total operating expenses130
 224
 (94) 352
 437
 (85)
Operating Income (Loss)8
 (97) 105
 10
 (90) 100
Other Income and Expenses, net13
 2
 11
 3
 22
 (19)
Interest Expense35
 21
 14
 78
 66
 12
Loss Before Income Taxes(14) (116) 102
 (65) (134) 69
Income Tax Benefit(35) (37) 2
 (94)��(112) 18
Less: Loss Attributable to Noncontrolling Interests(19) (17) (2) (110) (18) (92)
Segment Income (Loss)$40

$(62) $102
 $139
 $(4) $143
            
Renewable plant production, GWh2,146
 1,897
 249
 6,528
 6,548
 (20)
Net proportional MW capacity in operation(a)
    

 3,162
 2,976
 186
(a)Certain projects are included in tax equity structures where investors have differing interests in the project's economic attributes. One hundred percent of the tax equity project's capacity is included in the table above.
Three Months Ended September 30, 2019, as compared to buildSeptember 30, 2018
Commercial Renewables' results were favorable primarily due to higher revenues and prior year goodwill impairment charges. The following is a liquefieddetailed discussion of the variance drivers by line item.
Operating Revenues. The increase was primarily due to favorable wind portfolio revenue due to favorable wind resource.
Operating Expenses. The decrease was primarily due to goodwill impairment charges in the prior year.
Interest Expense. The increase was primarily due to mark-to-market losses in the solar portfolio in the current year.
Nine Months Ended September 30, 2019, as compared to September 30, 2018
Commercial Renewables' results were favorable primarily due to higher revenues, new tax equity solar projects in the current year and prior year goodwill impairment charges, partially offset by mark-to-market losses in the solar portfolio in the current year and FES settlement agreement in the prior year. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The increase was primarily due to favorable solar portfolio revenue due to new solar projects placed in service and higher irradiance.
Operating Expenses. The decrease was primarily due to goodwill impairment charges in the prior year.
Other Income and Expenses, net. The decrease was primarily due to income from the North Allegheny Wind, LLC and FES settlement agreement in the prior year.
Interest Expense. The increase was primarily due to mark-to-market losses in the solar portfolio in the current year.
Income Tax Benefit. The decrease in the tax benefit was primarily driven by taxes associated with Duke Energy's interest in a tax equity solar project recorded in the second quarter of 2019 and a reduction in production tax credits generated.
Loss Attributable to Noncontrolling Interests. The increase was primarily due to the new tax equity solar projects entered into during 2019.
Matters Impacting Future Commercial Renewables Results
During 2019, Duke Energy evaluated recoverability of the wind and solar generation assets included in the minority interest sale as a result of the portfolio fair value of consideration received being less than the carrying value of the assets and determined the assets were all recoverable. Additionally, in 2019, Duke Energy evaluated recoverability of its renewable merchant plants principally in the Electric Reliability Council of Texas West market, due to declining market pricing and declining long-term forecasted energy prices, primarily driven by lower forecasted natural gas facilityprices. These assets were not impaired; however, a continued decline in Robeson County, North Carolina. The project is expectedenergy market pricing would likely result in a future impairment. Impairment of these assets could result in adverse impacts to be completed in the summerfuture results of 2021 at a costoperations, financial position and cash flows of $250 million. Construction will begin inCommercial Renewables. See Note 2 to the summer of 2019.Condensed Consolidated Financial Statements, "Business Segments," for additional information.
Nuclear Matters

For other information on nuclear matters and the potential impacts on Duke Energy, see “Other Matters” in “Management’s
MD&ASEGMENT RESULTS — COMMERCIAL RENEWABLES


See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations”Operations," in the Duke Energy Registrants' Annual Reports on Form 10-K for the year ended December 31, 2018, for discussion of risks associated with the Tax Act.
Other
 Three Months Ended September 30, Nine Months Ended September 30,
(in millions)2019
 2018
 Variance
 2019
 2018
 Variance
Operating Revenues$25
 $34
 $(9) $71
 $101
 $(30)
Operating Expenses27
 54
 (27) 66
 167
 (101)
Gains (Losses) on Sales of Other Assets and Other, net
 3
 (3) 
 (96) 96
Operating (Loss) Income(2) (17) 15
 5
 (162) 167
Other Income and Expenses, net24
 40
 (16) 98
 81
 17
Interest Expense185
 163
 22
 536
 484
 52
Loss Before Income Taxes(163) (140) (23) (433) (565) 132
Income Tax Benefit(54) (98) 44
 (132) (125) (7)
Less: Net Income Attributable to Noncontrolling Interests
 2
 (2) 
 6
 (6)
Less: Preferred Dividends15
 
 15
 27
 
 27
Net Loss$(124)
$(44) $(80) $(328) $(446) $118
Three Months Ended September 30, 2019, as compared to September 30, 2018
The variance was driven by lower income tax benefit, higher interest expense, and the declaration of the preferred stock dividends, offset by the absence in the current year of costs related to the Piedmont acquisition. The following is a detailed discussion of the variance drivers by line item.
Operating Expenses. The decrease was primarily due to costs related to the Piedmont acquisition and OVEC fuel expense in the prior year.
Other Income and Expenses, net. The variance was primarily due to lower returns on investments that fund certain employee benefit obligations and lower earnings on the NMC investment.
Interest Expense. The variance was primarily due to higher outstanding debt in the current year.
Income Tax Benefit. The decrease in the tax benefit was primarily driven by favorable tax return true ups and tax levelization in the prior year, partially offset by an increase in pretax losses.
Preferred Dividends. The variance was driven by the declaration of the preferred stock dividend on preferred stock issued in 2019.
Nine Months Ended September 30, 2019, as compared to September 30, 2018
The variance was driven by the prior year loss on sale of the retired Beckjord station, prior year valuation allowance against AMT credits, and absence in the current year of costs related to the Piedmont acquisition, offset by higher interest expense and the declarations of the preferred stock dividend. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. Lower operating revenues were due to amounts in the prior year related to Duke Energy Ohio’s entitlement of capacity and energy from OVEC’s power plants. In the current year, the revenues and expenses for OVEC are reflected in the Electric Utilities and Infrastructure segment due to the 2018 PUCO Order that approved Duke Energy to recover or credit amounts through Rider PSR. These amounts are deemed immaterial. Therefore, the prior period amounts were not restated.
Operating Expenses. The variance was primarily due to costs associated with the Piedmont acquisition and OVEC fuel expense in the prior year.
Gains (Losses) on Sales of Other Assets and Other, net. The variance was driven by the prior year loss on sale of the retired Beckjord station, including the transfer of coal ash basins and other real property and indemnification from all potential future claims related to the property, whether arising under environmental laws or otherwise.
Other Income and Expenses, net. The variance was primarily due to higher returns on investments that fund certain employee benefit obligations.
Interest Expense. The variance was primarily due to higher outstanding debt in the current year and higher short-term interest rates.
Income Tax Benefit. The increase in the tax benefit was primarily driven by a prior year valuation allowance against AMT credits, partially offset by a decrease in pretax losses.
Preferred Dividends. The variance was driven by the declarations of preferred stock dividend on preferred stock issued in 2019.


MD&ADUKE ENERGY CAROLINAS


DUKE ENERGY CAROLINAS
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the nine months ended September 30, 2019, and 2018, and the Annual Report on Form 10-K for the year ended December 31, 2018.
Results of Operations
 Nine Months Ended September 30,
(in millions)2019
 2018
 Variance
Operating Revenues$5,619
 $5,525
 $94
Operating Expenses     
Fuel used in electric generation and purchased power1,371
 1,370
 1
Operation, maintenance and other1,324
 1,464
 (140)
Depreciation and amortization1,013
 866
 147
Property and other taxes221
 214
 7
Impairment charges11
 191
 (180)
Total operating expenses3,940
 4,105
 (165)
Losses on Sales of Other Assets and Other, net
 (1) 1
Operating Income1,679
 1,419
 260
Other Income and Expenses, net106
 108
 (2)
Interest Expense346
 323
 23
Income Before Income Taxes1,439
 1,204
 235
Income Tax Expense255
 268
 (13)
Net Income$1,184
 $936
 $248
The following table shows the percent changes in GWh sales and average number of customers. The percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized.
Increase (Decrease) over prior year2019
Residential sales(3.2)%
General service sales(1.8)%
Industrial sales(4.1)%
Wholesale power sales(13.4)%
Joint dispatch sales23.0 %
Total sales(2.1)%
Average number of customers2.2 %
Nine Months Ended September 30, 2019, as compared to September 30, 2018
Operating Revenues.The variance was driven primarily by:
a $151 million increase in retail pricing due to the impacts of the prior year North Carolina rate case and the current year South Carolina rate case; and
a $7 million increase in retail sales, net of fuel revenues, due to favorable weather in the current year.
Partially offset by:
a $47 million decrease in rider revenues primarily due to excess deferred taxes and energy efficiency programs, partially offset by a decrement rider relating to nuclear decommissioning that ended in the prior year; and
a $24 million decrease in weather-normal retail sales volumes.
Operating Expenses. The variance was driven primarily by:
a $180 million decrease in impairment charges primarily due to impacts of the prior year North Carolina rate order and charges related to coal ash costs in South Carolina; and
a $140 million decrease in operation, maintenance and other expense primarily due to decreased labor costs and higher storm restoration costs in the prior year.
Partially offset by:
a $147 million increase in depreciation and amortization expense primarily due to additional plant in service, new depreciation rates associated with the prior year North Carolina rate case and the current year South Carolina rate case and higher amortization of deferred coal ash costs associated with the prior year North Carolina rate case.

MD&ADUKE ENERGY CAROLINAS


Interest Expense. The variance was primarily due to higher debt outstanding in the current year.
Income Tax Expense. The decrease in tax expense was primarily due to an increase in the amortization of excess deferred taxes and favorable tax return true ups, partially offset by an increase in pretax income.
Matters Impacting Future Results
Duke Energy Carolinas filed a general rate case with the NCUC on September 30, 2019. The outcome of this rate case could materially impact Duke Energy Carolina's results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
On May 21, 2019, the PSCSC issued an order granting Duke Energy Carolinas request for a retail rate increase but denying recovery of certain coal ash costs. Duke Energy Carolinas intends to file a notice of appeal with the South Carolina Supreme Court within 30 days of the order that was received on October 18, 2019. Duke Energy Carolinas' results of operations, financial position and cash flows could be adversely impacted if coal ash costs are not ultimately approved for recovery. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
On April 1, 2019, NCDEQ issued a closure determination requiring Duke Energy Carolinas to excavate all remaining coal ash impoundments in North Carolina, even though they had been deemed low risk by NCDEQ on November 14, 2018. On April 26, 2019, Duke Energy Carolinas filed a Petition for Contested Case Hearings in the Office of Administrative Hearings to challenge NCDEQ's April 1 Order. Duke Energy Carolinas intends to seek recovery of all costs through the ratemaking process consistent with previous proceedings. As the final closure plans and corrective action measures are developed and approved for each site, the closure work progresses, and the closure method scope and remedial action methods are determined, the complexity of work and the amount of coal combustion material could be different than originally estimated and, therefore, could materially impact Duke Energy Carolinas' results of operations, financial position and cash flows. See Note 4 to the Condensed Consolidated Financial Statements, "Commitments and Contingencies," for additional information.
Duke Energy Carolinas is a party to multiple lawsuits and subject to fines and other penalties related to operations at certain North Carolina facilities with ash basins. In addition, the order issued in the Duke Energy Carolinas North Carolina rate case supporting recovery of past coal ash remediation costs has been appealed by various parties. The outcome of these appeals, lawsuits, fines and penalties could have an adverse impact on Duke Energy Carolinas’ results of operations, financial position and cash flows. See Notes 3 and 4 to the Condensed Consolidated Financial Statements, "Regulatory Matters" and “Commitments and Contingencies,” respectively, for additional information.
On June 22, 2018, Duke Energy Carolinas received an order from the NCUC, which denied the Grid Rider Stipulation and deferral treatment of grid improvement costs. Duke Energy Carolinas has petitioned for deferral of future grid improvement costs in its 2019 rate case. Duke Energy Carolinas' results of operations, financial position and cash flows could be adversely impacted if grid improvement costs are not ultimately approved for recovery and/or deferral treatment.
During the last half of 2018, Duke Energy Carolinas’ service territory was impacted by several named storms. Hurricane Florence, Hurricane Michael and Winter Storm Diego caused flooding, extensive damage and widespread power outages in the service territory. A significant portion of the incremental operation and maintenance expenses related to these storms has been deferred. An order from regulatory authorities disallowing the deferral and future recovery of storm restoration costs could have an adverse impact on Duke Energy Carolinas' results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy Registrants' Annual Reports on Form 10-K for the year ended December 31, 2018, for discussion of risks associated with the Tax Act.

MD&APROGRESS ENERGY


PROGRESS ENERGY
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the nine months ended September 30, 2019, and 2018, and the Annual Report on Form 10-K for the year ended December 31, 2018.
Results of Operations
 Nine Months Ended September 30,
(in millions)2019
 2018
 Variance
Operating Revenues$8,558
 $8,119
 $439
Operating Expenses     
Fuel used in electric generation and purchased power3,100
 3,019
 81
Operation, maintenance and other1,813
 1,913
 (100)
Depreciation and amortization1,377
 1,183
 194
Property and other taxes439
 399
 40
Impairment charges(25) 34
 (59)
Total operating expenses6,704
 6,548
 156
Gains on Sales of Other Assets and Other, net
 23
 (23)
Operating Income1,854
 1,594
 260
Other Income and Expenses, net106
 128
 (22)
Interest Expense650
 626
 24
Income Before Income Taxes1,310
 1,096
 214
Income Tax Expense212
 186
 26
Net Income1,098
 910
 188
Less: Net Income Attributable to Noncontrolling Interests
 6
 (6)
Net Income Attributable to Parent$1,098
 $904
 $194
Nine Months Ended September 30, 2019, as compared to September 30, 2018
Operating Revenues. The variance was driven primarily by:
a $299 million increase in retail pricing primarily due to the impacts of the prior year North Carolina rate case and current year South Carolina rate case at Duke Energy Progress, Duke Energy Florida's base rate adjustments related to Citrus County CC being placed in service and annual increases from the 2017 Settlement Agreement;
a $76 million increase in fuel revenues primarily related to increased fuel cost recovery due to extreme weather in the prior year at Duke Energy Progress, partially offset by a decrease in fuel and capacity rates billed to retail customers at Duke Energy Florida;
a $56 million increase in wholesale power revenues, net of fuel, primarily due to increased demand;
a $17 million increase in retail sales, net of fuel revenues, due to favorable weather in the current year at Duke Energy Florida; and
a $17 million increase in other revenues primarily due to increased transmission revenues and non-regulated products and services revenues at Duke Energy Florida.
Partially offset by:
a $32 million decrease in retail rider revenues primarily related to decreased revenue requirements in the current year.
Operating Expenses. The variance was driven primarily by:
a $194 million increase in depreciation and amortization expense primarily due to higher amortization of deferred coal ash costs, new depreciation rates associated with the prior year Duke Energy Progress North Carolina rate case and Duke Energy Florida's base rate adjustments related to Citrus County CC being placed in service;
an $81 million increase in fuel used in electric generation and purchased power primarily due to an increase in the North Carolina Renewable Energy and Energy Efficiency Portfolio Standard requirement from the prior year at Duke Energy Progress, partially offset by lower purchased power and lower fuel costs, net of deferrals, at Duke Energy Florida; and
a $40 million increase in property and other taxes primarily due to current year property tax reassessments and a favorable sales and use tax credit in the prior year at Duke Energy Progress, and higher property taxes for additional plant in service at Duke Energy Florida.

MD&APROGRESS ENERGY


Partially offset by:
a $100 million decrease in operation, maintenance and other expense primarily due to lower storm costs, reduced outage costs, and lower employee benefit costs, partially offset by increased vegetation management costs at Duke Energy Florida; and
a $59 million decrease in impairment charges primarily due to prior year impacts associated with the North Carolina rate case at Duke Energy Progress and a reduction of a prior year impairment at Duke Energy Florida's Citrus County CC.
Other Income and Expenses, net. The variance was driven primarily by AFUDC equity return ending on the Citrus County CC in the fourth quarter of 2018 at Duke Energy Florida, partially offset by life insurance proceeds at Duke Energy Progress.
Interest Expense. The variance was driven primarily by AFUDC debt return ending in the fourth quarter of 2018 on the Citrus County CC at Duke Energy Florida.
Income Tax Expense. The increase in tax expense was primarily due to an increase pretax income, partially offset by an increase in the amortization of excess deferred taxes.
Matters Impacting Future Results
Duke Energy Progress filed a general rate case with the NCUC on October 30, 2019. The outcome of this rate case could materially impact Progress Energy's results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
On May 21, 2019, the PSCSC issued an order granting Duke Energy Progress' request for a retail rate increase but denying recovery of certain coal ash costs. Duke Energy Progress intends to file a notice of appeal with the South Carolina Supreme Court within 30 days of the order that was received on October 18, 2019. Progress Energy's results of operations, financial position and cash flows could be adversely impacted if coal ash costs are not ultimately approved for recovery. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
On April 1, 2019, NCDEQ issued a closure determination requiring Duke Energy Progress to excavate all remaining coal ash impoundments in North Carolina, even though they had been deemed low risk by NCDEQ on November 14, 2018. On April 26, 2019, Duke Energy Progress filed a Petition for Contested Case Hearings in the Office of Administrative Hearings to challenge NCDEQ's April 1 Order. Duke Energy Progress intends to seek recovery of all costs through the ratemaking process consistent with previous proceedings. As the final closure plans and corrective action measures are developed and approved for each site, the closure work progresses, and the closure method scope and remedial action methods are determined, the complexity of work and the amount of coal combustion material could be different than originally estimated and, therefore, could materially impact Progress Energy's results of operations, financial position and cash flows. See Note 4 to the Condensed Consolidated Financial Statements, "Commitments and Contingencies," for additional information.
Duke Energy Progress is a party to multiple lawsuits and subject to fines and other penalties related to operations at certain North Carolina facilities with ash basins. As noted above, the order issued in the Duke Energy Progress North Carolina rate case supporting recovery of past coal ash remediation costs has been appealed by various parties. The outcome of these appeals, lawsuits, fines and penalties could have an adverse impact on Progress Energy’s results of operations, financial position and cash flows. See Notes 3 and 4 to the Condensed Consolidated Financial Statements, "Regulatory Matters" and “Commitments and Contingencies,” respectively, for additional information.
Duke Energy Progress has petitioned for deferral of future grid improvement costs in its 2019 rate case. Progress Energy's results of operations, financial position and cash flows could be adversely impacted if grid improvement costs are not ultimately approved for recovery and/or deferral treatment.
During the last half of 2018, Duke Energy Progress and Duke Energy Florida’s service territories were impacted by several named storms. Hurricane Florence, Hurricane Michael and Winter Storm Diego caused flooding, extensive damage and widespread power outages to the service territory of Duke Energy Progress. Duke Energy Florida’s service territory was also impacted by Hurricane Michael, a Category 5 hurricane and the most powerful storm to hit the Florida Panhandle in recorded history. In September 2019, Hurricane Dorian impacted Duke Energy Progress' and Duke Energy Florida's service territories. A significant portion of the incremental operation and maintenance expenses related to these storms has been deferred. An order from regulatory authorities disallowing the deferral and future recovery of storm restoration costs could have an adverse impact on Progress Energy's results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy Registrants' Annual Reports on Form 10-K for the year ended December 31, 2018, for discussion of risks associated with the Tax Act.

MD&ADUKE ENERGY PROGRESS


DUKE ENERGY PROGRESS
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the nine months ended September 30, 2019, and 2018, and the Annual Report on Form 10-K for the year ended December 31, 2018.
Results of Operations
 Nine Months Ended September 30,
(in millions)2019
 2018
 Variance
Operating Revenues$4,559
 $4,333
 $226
Operating Expenses     
Fuel used in electric generation and purchased power1,571
 1,452
 119
Operation, maintenance and other1,070
 1,187
 (117)
Depreciation and amortization855
 723
 132
Property and other taxes131
 115
 16
Impairment charges
 33
 (33)
Total operating expenses3,627
 3,510
 117
Gains on Sales of Other Assets and Other, net
 9
 (9)
Operating Income932
 832
 100
Other Income and Expenses, net75
 61
 14
Interest Expense232
 241
 (9)
Income Before Income Taxes775
 652
 123
Income Tax Expense125
 120
 5
Net Income$650
 $532
 $118
The following table shows the percent changes in GWh sales and average number of customers. The percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized.
Increase (Decrease) over prior period2019
Residential sales(4.1)%
General service sales(1.6)%
Industrial sales1.6 %
Wholesale power sales(2.2)%
Joint dispatch sales(0.3)%
Total sales(1.3)%
Average number of customers1.3 %
Nine Months Ended September 30, 2019, as compared to September 30, 2018
Operating Revenues. The variance was driven primarily by:
a $101 million increase in fuel revenues primarily related to increased fuel cost recovery due to extreme weather in the prior year;
a $91 million increase in retail pricing due to the impacts of the prior year North Carolina rate case and the current year South Carolina rate case; and
a $47 million increase in wholesale power revenues, net of fuel, primarily due to coal ash cost recovery in the current year.
Partially Offset by:
a $17 million decrease primarily due to the return of excess deferred incomes taxes created by the reduction in the corporate income tax rate, partially offset by increase in rider revenues related to energy efficiency programs.
Operating Expenses. The variance was driven primarily by:
a $132 million increase in depreciation and amortization expense primarily due to higher amortization of deferred coal ash costs and new depreciation rates associated with the prior year North Carolina and current year South Carolina rate cases, partially offset by the amortization credit for the North Carolina Renewable Energy and Energy Efficiency Portfolio Standard requirement increase from prior year;
a $119 million increase in fuel used in electric generation and purchased power primarily due to a higher deferred fuel balance and an increase in the North Carolina Renewable Energy and Energy Efficiency Portfolio Standard requirement from prior year, partially offset by lower demand and changes in generation mix; and
a $16 million increase in property and other taxes primarily due to current year property tax reassessments and a favorable sales and use tax credit in the prior year.

MD&ADUKE ENERGY PROGRESS


Partially offset by:
a $117 million decrease in operation, maintenance and other expense primarily due to lower storm costs in current year, reduced outage costs and lower employee benefit costs; and
a $33 million decrease in impairment charges due to prior year impacts associated with the North Carolina rate case.
Other Income and Expenses, net. The variance was driven primarily by life insurance proceeds.
Income Tax Expense. The increase in tax expense was primarily due to an increase in pretax income, partially offset by an increase in the amortization of excess deferred taxes.
Matters Impacting Future Results
Duke Energy Progress filed a general rate case with the NCUC on October 30, 2019. The outcome of this rate case could materially impact Duke Energy Progress' results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
On May 21, 2019, the PSCSC issued an order granting Duke Energy Progress' request for a retail rate increase but denying recovery of certain coal ash costs. Duke Energy Progress intends to file a notice of appeal with the South Carolina Supreme Court within 30 days of the order that was received on October 18, 2019. Duke Energy Progress' results of operations, financial position and cash flows could be adversely impacted if coal ash costs are not ultimately approved for recovery. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
On April 1, 2019, NCDEQ issued a closure determination requiring Duke Energy Progress to excavate all remaining coal ash impoundments in North Carolina, even though they had been deemed low risk by NCDEQ on November 14, 2018. On April 26, 2019, Duke Energy Progress filed a Petition for Contested Case Hearings in the Office of Administrative Hearings to challenge NCDEQ's April 1 Order. Duke Energy Progress intends to seek recovery of all costs through the ratemaking process consistent with previous proceedings. As the final closure plans and corrective action measures are developed and approved for each site, the closure work progresses, and the closure method scope and remedial action methods are determined, the complexity of work and the amount of coal combustion material could be different than originally estimated and, therefore, could materially impact Duke Energy Progress' results of operations, financial position and cash flows. See Note 4 to the Condensed Consolidated Financial Statements, "Commitments and Contingencies," for additional information.
Duke Energy Progress is a party to multiple lawsuits and subject to fines and other penalties related to operations at certain North Carolina facilities with ash basins. As noted above, the order issued in the Duke Energy Progress North Carolina rate case supporting recovery of past coal ash remediation costs has been appealed by various parties. The outcome of these appeals, lawsuits, fines and penalties could have an adverse impact on Duke Energy Progress’ results of operations, financial position and cash flows. See Notes 3 and 4 to the Condensed Consolidated Financial Statements, "Regulatory Matters" and “Commitments and Contingencies,” respectively, for additional information.
Duke Energy Progress has petitioned for deferral of future grid improvement costs in its 2019 rate case. Duke Energy Progress' results of operations, financial position and cash flows could be adversely impacted if grid improvement costs are not ultimately approved for recovery and/or deferral treatment.
During the last half of 2018, Duke Energy Progress' service territory was impacted by several named storms. Hurricane Florence, Hurricane Michael and Winter Storm Diego caused flooding, extensive damage and widespread power outages in the service territory. In September 2019, Hurricane Dorian reached the Carolinas bringing high winds, tornadoes and heavy rain, impacting about 300,000 customers within the service territory. A significant portion of the incremental operation and maintenance expenses related to these storms has been deferred. An order from regulatory authorities disallowing the deferral and future recovery of storm restoration costs could have an adverse impact on Duke Energy Progress' results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy Registrants' Annual Reports on Form 10-K for the year ended December 31, 2018, for discussion of risks associated with the Tax Act.

MD&ADUKE ENERGY FLORIDA


DUKE ENERGY FLORIDA
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the nine months ended September 30, 2019, and 2018, and the Annual Report on Form 10-K for the year ended December 31, 2018.
Results of Operations
 Nine Months Ended September 30,
(in millions)2019
 2018
 Variance
Operating Revenues$3,987
 $3,780
 $207
Operating Expenses     
Fuel used in electric generation and purchased power1,529
 1,567
 (38)
Operation, maintenance and other730
 719
 11
Depreciation and amortization522
 460
 62
Property and other taxes309
 284
 25
Impairment charges(25) 1
 (26)
Total operating expenses3,065
 3,031
 34
Operating Income922
 749
 173
Other Income and Expenses, net39
 75
 (36)
Interest Expense246
 210
 36
Income Before Income Taxes715
 614
 101
Income Tax Expense129
 100
 29
Net Income$586
 $514
 $72
The following table shows the percent changes in GWh sales and average number of customers. The 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, public and private utilities and power marketers. Amounts are not weather-normalized.
Increase (Decrease) over prior period2019
Residential sales2.2 %
General service sales1.0 %
Industrial sales(6.3)%
Wholesale and other32.4 %
Total sales2.1 %
Average number of customers1.6 %
Nine Months Ended September 30, 2019, as compared to September 30, 2018
Operating Revenues. The variance was driven primarily by:
a $208 million increase in retail pricing due to base rate adjustments related to Citrus County CC being placed in service, annual increases from the 2017 Settlement Agreement and the Solar Base Rate Adjustment;
a $17 million increase in retail sales, net of fuel revenues, due to favorable weather in the current year;
a $17 million increase in other revenues primarily due to increased transmission revenues and non-regulated products and services revenues; and
a $9 million increase in wholesale power revenues, net of fuel, primarily due to increased demand.
Partially offset by:
a $25 million decrease in fuel and capacity revenues primarily due to a decrease in fuel and capacity rates billed to retail customers; and
a $22 million decrease in retail rider revenues primarily related to decreased revenue requirements in the current year.
Operating Expenses. The variance was driven primarily by:
a $62 million increase in depreciation and amortization expense primarily due to base rate adjustments related to Citrus County CC being placed in service, other additional plant in service and increases resulting from the 2018 Crystal River Unit 3 nuclear decommissioning cost study;
a $25 million increase in property and other taxes primarily due to higher property taxes from additional plant in service; and
an $11 million increase in operation, maintenance and other expense primarily due to increased vegetation management costs and Hurricane Dorian costs, partially offset by lower outage costs.

MD&ADUKE ENERGY FLORIDA


Partially offset by:
a $38 million decrease in fuel used in electric generation and purchased power primarily due to lower purchased power and lower fuel costs, net of deferrals; and
a $26 million decrease in impairment charges primarily due to a reduction of a prior year impairment at Citrus County CC.
Other Income and Expenses, net. The variance was driven primarily by AFUDC equity return ending on the Citrus County CC in the fourth quarter of 2018.
Interest Expense. The variance was driven primarily by AFUDC debt return ending on the Citrus County CC in the fourth quarter of 2018 and higher debt outstanding in the current year.
Income Tax Expense. The increase in tax expense was primarily due to an increase in pretax income.
Matters Impacting Future Results
On October 10, 2018, Hurricane Michael made landfall on Florida's Panhandle as a Category 5 hurricane, the most powerful storm to hit the Florida Panhandle in recorded history. The storm caused significant damage within the service territory of Duke Energy Florida, particularly from Panama City Beach to Mexico Beach. In September 2019, Duke Energy Florida’s service territory was threatened by Hurricane Dorian with landfall as a possible Category 5 hurricane and therefore Duke Energy Florida incurred costs to secure necessary resources to be prepared for that potential impact. A significant portion of the incremental operation and maintenance expenses related to these storms has been deferred. An order from regulatory authorities disallowing the future recovery of storm restoration costs could have an adverse impact on Duke Energy Florida's financial position, results of operations and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy Registrants' Annual Reports on Form 10-K for the year ended December 31, 2018, for discussion of risks associated with the Tax Act.
DUKE ENERGY OHIO
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the nine months ended September 30, 2019, and 2018, and the Annual Report on Form 10-K for the year ended December 31, 2018.
Results of Operations
 Nine Months Ended September 30,
(in millions)2019
 2018
 Variance
Operating Revenues     
Regulated electric$1,099
 $1,055
 $44
Regulated natural gas354
 361
 (7)
Nonregulated electric and other
 36
 (36)
Total operating revenues1,453
 1,452
 1
Operating Expenses     
Fuel used in electric generation and purchased power – regulated293
 284
 9
Fuel used in electric generation and purchased power – nonregulated
 43
 (43)
Cost of natural gas68
 73
 (5)
Operation, maintenance and other378
 337
 41
Depreciation and amortization199
 196
 3
Property and other taxes229
 218
 11
Total operating expenses1,167
 1,151
 16
Losses on Sales of Other Assets and Other, net
 (106) 106
Operating Income286
 195
 91
Other Income and Expenses, net19
 17
 2
Interest Expense81
 68
 13
Income Before Income Taxes224
 144
 80
Income Tax Expense34
 23
 11
Net Income$190
 $121
 $69

MD&ADUKE ENERGY OHIO


The following table shows the percent changes in GWh sales of electricity, dekatherms of natural gas delivered and average number of electric and natural gas customers. The percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized.
 ElectricNatural Gas
Increase (Decrease) over prior year2019
2019
Residential sales(4.7)%(1.2)%
General service sales(2.6)%0.8 %
Industrial sales(1.4)%1.9 %
Wholesale electric power sales46.8 %n/a
Other natural gas salesn/a
1.4 %
Total sales(1.2)%0.3 %
Average number of customers0.6 %0.8 %
Nine Months Ended September 30, 2019, as compared to September 30, 2018
Operating Revenues. The variance was driven primarily by:
a $52 million increase in retail pricing primarily due to rate case impacts; and
a $15 million increase in point-to-point transmission revenues.
Partially offset by:
a $28 million decrease in fuel related revenues primarily due to a decrease in price;
a $15 million decrease in FTR rider revenues;
a $14 million decrease in rider revenues primarily related to the implementation of new base rates; and
a $9 million decrease in OVEC revenues.
Operating Expenses. The variance was driven primarily by:
a $41 million increase in operations, maintenance and other expense primarily due to the FERC approved settlement refund of certain transmission costs previously billed by PJM recorded in 2018; and
an $11 million increase in property and other taxes primarily due to additional plant in service.
Partially offset by:
a $34 million decrease in fuel used in electric generation and purchased power expense due to the prior year outage at East Bend Station and the deferral of OVEC related purchased power costs.
Losses on Sales of Other Assets and Other, net. The increase was driven by the loss on the prior year sale of Beckjord.
Interest Expense. The variance was driven primarily by higher debt outstanding in the current year.
Income Tax Expense. The increase in tax expense was primarily due to an increase in pretax income, partially offset by an increase in the amortization of excess deferred taxes.
Matters Impacting Future Results
On November 13, 2013, the PUCO issued an order authorizing recovery of MGP costs at certain sites in Ohio with a deadline to complete the MGP environmental investigation and remediation work prior to December 31, 2016. This deadline was subsequently extended to December 31, 2019. Disallowance of costs incurred, failure to complete the work by the deadline or failure to obtain an extension from the PUCO could result in an adverse impact on Duke Energy Ohio’s results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy Registrants' Annual Reports on Form 10-K for the year ended December 31, 2018, for discussion of risks associated with the Tax Act.

MD&ADUKE ENERGY INDIANA


DUKE ENERGY INDIANA
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the nine months ended September 30, 2019, and 2018, and the Annual Report on Form 10-K for the year ended December 31, 2018.
Results of Operations
 Nine Months Ended September 30,
(in millions)2019
 2018
 Variance
Operating Revenues$2,289
 $2,288
 $1
Operating Expenses     
Fuel used in electric generation and purchased power720
 730
 (10)
Operation, maintenance and other569
 576
 (7)
Depreciation and amortization393
 386
 7
Property and other taxes55
 56
 (1)
Impairment charges
 30
 (30)
Total operating expenses1,737
 1,778
 (41)
Operating Income552
 510
 42
Other Income and Expenses, net35
 36
 (1)
Interest Expense111
 125
 (14)
Income Before Income Taxes476
 421
 55
Income Tax Expense113
 104
 9
Net Income$363
 $317
 $46
The following table shows the percent changes in GWh sales and average number of customers. The percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized.
Increase (Decrease) over prior year2019
Residential sales(4.9)%
General service sales(2.5)%
Industrial sales(2.3)%
Wholesale power sales(28.9)%
Total sales(6.6)%
Average number of customers1.2 %
Nine Months Ended September 30, 2019, as compared to September 30, 2018
Operating Revenues.The variance was driven primarily by:
a $25 million increase in revenues primarily due to higher TDSIC rider revenues.
Partially offset by:
an $18 million decrease in wholesale power revenues primarily due to the expiration of a contract with a wholesale customer; and
an $8 million decrease in weather-normal retail sales volumes.
Operating Expenses.The variance was driven primarily by:
a $30 million decrease in impairments primarily due to the prior year Edwardsport IGCC settlement; and
a $10 million decrease in fuel used in electric generation and purchased power expense primarily due to lower coal and natural gas costs, partially offset by higher amortization of deferred fuel costs and higher purchase power fuel clause.
Interest Expense. The variance was primarily due to recording a debt return on the cumulative balance of deferred coal ash spend based on probability of recovery. This adjustment was immaterial and primarily relates to prior years.
Income Tax Expense. The increase in tax expense was primarily due to an increase in pretax income.

MD&ADUKE ENERGY INDIANA


Matters Impacting Future Results
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 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 AROs. Additionally, Duke Energy Indiana has retired facilities that are not subject to the CCR rule. Duke Energy Indiana may incur costs at these facilities to comply with environmental regulations or to mitigate risks associated with on-site storage of coal ash. An order from regulatory authorities disallowing recovery of costs related to closure of ash basins could have an adverse impact on Duke Energy Indiana's results of operations, financial position and cash flows.
Duke Energy Indiana filed a general rate case with the IURC on July 2, 2019, its first general rate case in Indiana in 16 years. The outcome of this rate case could materially impact Duke Energy Indiana's results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy Registrants' Annual Reports on Form 10-K for the year ended December 31, 2018, for discussion of risks associated with the Tax Act.
PIEDMONT
Management’s Discussion and Analysis should be read in conjunction with the Condensed Consolidated Financial Statements and Notes for the nine months ended September 30, 2019, and 2018, and the Annual Report on Form 10-K for the year ended December 31, 2018.
Results of Operations
 Nine Months Ended September 30,
(in millions)2019
 2018
 Variance
Operating Revenues$956
 $940
 $16
Operating Expenses     
Cost of natural gas384
 387
 (3)
Operation, maintenance and other241
 252
 (11)
Depreciation and amortization127
 118
 9
Property and other taxes39
 36
 3
Total operating expenses791
 793
 (2)
Operating Income165
 147
 18
Other Income and Expenses, net19
 15
 4
Interest Expense65
 60
 5
Income Before Income Taxes119
 102
 17
Income Tax Expense22
 21
 1
Net Income$97
 $81
 $16
The following table shows the percent changes in dekatherms delivered and average number of customers. The percentages for all throughput deliveries represent billed and unbilled sales. Amounts are not weather-normalized.
Increase (Decrease) over prior year2019
Residential deliveries(7.5)%
Commercial deliveries(4.2)%
Industrial deliveries2.9 %
Power generation deliveries(10.5)%
For resale5.9 %
Total throughput deliveries(7.2)%
Secondary market volumes2.0 %
Average number of customers1.3 %
Due to the margin decoupling mechanism in North Carolina and the WNA in South Carolina and Tennessee, changes in throughput deliveries do not have a material impact on Piedmont's revenues or earnings. The margin decoupling mechanism adjusts for variations in residential and commercial use per customer, including those due to weather and conservation. The WNA mostly offsets the impact of weather on bills rendered, but do not ensure precise recovery of approved margin during periods when winter weather is significantly warmer or colder than normal.
Nine Months Ended September 30, 2019, as compared to September 30, 2018
Operating Revenues.The variance was driven primarily by:
a $12 million increase primarily due to North Carolina and Tennessee IMR increases; and
a $9 million increase primarily due to NCUC approval related to tax reform accounting from fixed rate contracts.

MD&APIEDMONT


Partially offset by:
a $7 million decrease primarily due to a reduction of rates in South Carolina.
Operating Expenses.The variance was driven primarily by:
an $11 million decrease in operations, maintenance and other expense primarily due to lower labor and information technology outside services costs and a portion of rent expense being charged to shared services in the current year.
Partially offset by:
a $9 million increase in depreciation and amortization expense primarily due to additional plant in service.
Interest Expense. The variance was driven by higher debt outstanding in the current year, higher interest expense due to customers as a result of tax reform deferrals and intercompany interest, partially offset by favorable AFUDC debt interest.
Matters Impacting Future Results
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy Registrants' Annual Reports on Form 10-K for the year ended December 31, 2018, for discussion of risks associated with the Tax Act.
LIQUIDITY AND CAPITAL RESOURCES
Sources and Uses of Cash
Duke Energy relies primarily upon cash flows from operations, debt and equity issuances and its existing cash and cash equivalents to fund its 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/A10-K for the year ended December 31, 2017.2018, for a summary and detailed discussion of projected primary sources and uses of cash for 2019 to 2021.
New Accounting Standards
SeeDuke Energy issued $5.3 billion of debt, drew $650 million under the Duke Energy Progress Term Loan Facility and paid off in full the $350 million Piedmont term loan during the nine months ended September 30, 2019. Refer to Note 16 to the Condensed Consolidated Financial Statements, “Organization"Debt and BasisCredit Facilities," for information regarding Duke Energy's debt issuances, debt maturities and available credit facilities including the Master Credit Facility.
In March 2019 and September 2019, Duke Energy issued preferred stock for net proceeds of Presentation,”$973 million and $990 million, respectively. In addition, for the nine months ended September 30, 2019, Duke Energy raised approximately $120 million of common equity through its DRIP. Refer to Note 15 to the CondensedConsolidated Financial Statements, "Stockholders' Equity," for information regarding Duke Energy's equity issuances.
In November 2019, Duke Energy announced plans to issue approximately $2.5 billion of incremental equity by the end of 2020. This equity would support Duke Energy's five-year growth plan by strengthening the balance sheet and allowing the Company to absorb a discussionwide range of outcomes associated with ACP.
Credit Ratings
In May 2019, S&P revised the credit ratings outlook for Duke Energy Corporation and all other Duke Energy Registrants from stable to negative, principally due to concerns of weaker financial measures due to 2018 storms, uncertainty over coal ash remediation costs and recovery in the Carolinas, regulatory lag during a period of robust capital spending and delays related to the ACP pipeline. There have been no changes to the credit ratings of any of the impactDuke Energy Registrants during 2019 by any of the rating agencies. Moody's and Fitch continue to maintain a stable outlook on Duke Energy Corporation.
Cash Flow Information
The following table summarizes Duke Energy’s cash flows.
  Nine Months Ended
  September 30,
(in millions) 2019
 2018
Cash flows provided by (used in):    
Operating activities $5,637
 $5,667
Investing activities (8,633) (7,270)
Financing activities 2,987
 1,547
Net decrease in cash, cash equivalents and restricted cash (9) (56)
Cash, cash equivalents and restricted cash at beginning of period 591
 505
Cash, cash equivalents and restricted cash at end of period $582
 $449

MD&ALIQUIDITY AND CAPITAL RESOURCES


OPERATING CASH FLOWS
The following table summarizes key components of Duke Energy’s operating cash flows.
  Nine Months Ended
  September 30,
(in millions) 2019
 2018
 Variance
Net income $2,964
 $2,190
 $774
Non-cash adjustments to net income 4,389
 5,206
 (817)
Contributions to qualified pension plans (77) (141) 64
Payments for asset retirement obligations (582) (389) (193)
Payment for disposal of other assets 
 (105) 105
Working capital (1,057) (1,094) 37
Net cash provided by operating activities $5,637
 $5,667
 $(30)
The variance was primarily due to:
a $193 million increase in payments for asset retirement obligations.
Partially offset by:
a $64 million decrease in contributions to qualified pension plans; and
a $105 million payment for disposal of Beckjord in the prior year.
INVESTING CASH FLOWS
The following table summarizes key components of Duke Energy’s investing cash flows.
  Nine Months Ended
  September 30,
(in millions) 2019
 2018
 Variance
Capital, investment and acquisition expenditures $(8,348) $(7,050) $(1,298)
Other investing items (285) (220) (65)
Net cash used in investing activities $(8,633) $(7,270) $(1,363)
The variance relates primarily to an increase in capital expenditures due to higher overall investments in the Electric Utilities and Infrastructure, Gas Utilities and Infrastructure and Commercial Renewables segments.
FINANCING CASH FLOWS
The following table summarizes key components of Duke Energy’s financing cash flows.
  Nine Months Ended
  September 30,
(in millions) 2019
 2018
 Variance
Issuances of long-term debt, net $3,394
 $1,832
 $1,562
Issuances of common stock 41
 834
 (793)
Issuances of preferred stock 1,963
 
 1,963
Notes payable and commercial paper (1,019) 674
 (1,693)
Dividends paid (1,990) (1,835) (155)
Contributions from noncontrolling interests 615
 
 615
Other financing items (17) 42
 (59)
Net cash provided by financing activities $2,987
 $1,547
 $1,440
The variance was primarily due to:
a $1,963 million increase in proceeds from the issuance of preferred stock;
a $1,562 million increase in proceeds from net issuances of long-term debt primarily due to the timing of issuances and redemptions of long-term debt;
a $415 million increase related to the sale of a noncontrolling interest in the Commercial Renewables segment; and
a $200 million increase related to contributions from noncontrolling interests for tax equity financing activity in the Commercial Renewables segment.

MD&ALIQUIDITY AND CAPITAL RESOURCES


Partially offset by:
a $1,693 million decrease in net proceeds from issuances of notes payable and commercial paper primarily due to the use of proceeds from the preferred stock issuance and increased long-term debt issuances to pay down outstanding commercial paper; and
a $793 million decrease in proceeds from the issuance of common stock due primarily to prior year issuances under equity forward agreements.
OTHER MATTERS
Environmental Regulations
The Duke Energy Registrants are subject to federal, state and local regulations regarding air and water quality, hazardous and solid waste disposal, coal ash and other environmental matters. These regulations can be changed from time to time and result in new accounting standards.obligations of the Duke Energy Registrants. Refer to Note 3 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 Ash Management Act of 2014
On April 1, 2019, NCDEQ issued a closure determination requiring Duke Energy Carolinas and Duke Energy Progress to excavate all remaining coal ash impoundments at the Allen, Belews Creek, Rogers, Marshall, Mayo and Roxboro facilities in North Carolina. With respect to the final six sites, which NCDEQ has ruled as low risk, science and engineering support a variety of closure methods including capping in place and hybrid cap-in-place as appropriate solutions that protect public health and the environment. On April 26, 2019, Duke Energy Carolinas and Duke Energy Progress filed Petitions for Contested Case Hearings in the Office of Administrative Hearings to challenge NCDEQ’s April 1 Order. For more information, see Note 4, "Commitments and Contingencies," to the Condensed Consolidated Financial Statements.
Duke Energy estimates the undiscounted, unadjusted cost to close the remaining impoundments by excavation, as outlined in the NCDEQ closure determination, will be approximately $4 billion to $5 billion more than the prior project cost estimate of $5.6 billion in the aggregate for the closure for all Duke Energy Carolinas and Duke Energy Progress impoundments. Excavation would likely extend beyond the required federal and state deadlines for impoundment closure. Duke Energy intends to seek recovery of all costs through the ratemaking process consistent with previous proceedings. AROs recorded on the Duke Energy Carolinas and Duke Energy Progress Condensed Consolidated Balance Sheets at September 30, 2019, and December 31, 2018, include the legal obligation for closure of coal ash basins and the disposal of related ash as a result of the Coal Ash Act, the EPA CCR rule and other agreements. For more information, see Note 7, "Asset Retirement Obligations," to the Condensed Consolidated Financial Statements.
Duke Energy has completed excavation of all coal ash at the Riverbend and Dan River plants and coal ash regulated by the Coal Ash Act at the Sutton plant.
North Carolina Competitive Procurement
Based on an independent evaluation process, Duke Energy will own or purchase a total of 551 MW of renewable energy from projects under the North Carolina’s CPRE program. The process used was approved by the NCUC to select projects that would deliver the lowest cost renewable energy for customers. Five Duke Energy projects, totaling about 190 MW, were selected during the competitive bidding process. Duke Energy has completed the contracting process for the winning projects. A second tranche for CPRE opened in October 2019, and the current target date for completion of all tranche 2 contracts is August 2020.
Off-Balance Sheet Arrangements
During the three and nine months ended September 30, 2018,2019, there were no material changes to Duke Energy’s off-balance sheet arrangements. See Note 1213 to the Condensed Consolidated Financial Statements, "Variable Interest Entities," for a discussion of off-balance sheet arrangements regarding ACP. For additional 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/A10-K for the year ended December 31, 2017.2018.
Contractual Obligations
Duke Energy enters into contracts that require payment of cash at certain specified periods, based on certain specified minimum quantities and prices. During the three and nine months ended September 30, 2018,2019, 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/A10-K for the year ended December 31, 2017.
Subsequent Events
See Note 18 to the Condensed Consolidated Financial Statements, “Subsequent Events,” for a discussion of subsequent events.2018.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
During the three and nine months ended September 30, 2018,2019, there were no material changes to the Duke Energy Registrants' disclosures about market risk. For an in-depth discussion of the Duke Energy Registrants' market risks, see “Quantitative and Qualitative Disclosures about Market Risk” in Item 7 of the Annual Report on Form 10-K/A10-K for the Duke Energy Registrants.
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) areis recorded, processed, summarized and reported, within the time periods specified by the U.S. Securities and Exchange CommissionSEC rules and forms.

MD&AOTHER MATTERS


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 areis accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, the Duke Energy Registrants have evaluated the effectiveness of their disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2018,2019, 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
On August 2, 2018,Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, the Duke Energy and Ernst and Young LLP (EY) announced a strategic tax relationship which resulted in approximately 45 tax team employees joining EY as part of an outsourced arrangement for managed tax services. In connection with this new strategic relationship, management will continue to enhance the design and documentation of our internal control processes to ensure suitable controls over financial reporting. During the three months ended September 30, 2018, except as noted above, there were noRegistrants have evaluated changes in Duke Energy’s internal control over financial reporting as(as such term is defined in Rule 13a-15(f)Rules 13a-15 and 15d-15 under the Exchange Act,Act) that occurred during the fiscal quarter ended September 30, 2019, and have concluded no change has materially affected, or areis reasonably likely to materially affect, our internal control over financial reporting.


PART II. OTHER INFORMATION

OTHER INFORMATION




ITEM 1. LEGAL PROCEEDINGS
For information regarding material legal proceedings, including regulatory and environmental matters, see Note 3, "Regulatory Matters," and Note 4, "Commitments and Contingencies," to the Condensed Consolidated Financial Statements.
Methyl tertiary butyl ether (MTBE) Litigation
On June 19, 2014, For additional information, see Item 3, "Legal Proceedings," in Duke Energy's Annual Report on Form 10-K for the Commonwealth of Pennsylvania filed suit against, among others, Duke Energy Merchants, 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 lawsuit was moved to federal court and consolidated into an existing multidistrict litigation docket of pending MTBE cases. This suit was settled for an immaterial amount inyear ended December 2017 and dismissed in January31, 2018.
In December 2017, the state of Maryland filed a lawsuit in Baltimore City Circuit Court against Duke Energy Merchants and other defendants alleging contamination of its water supplies from MTBE. The case was removed to the U.S. District Court in Baltimore. Duke Energy cannot predict the outcome of this matter.
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” in the Duke Energy Registrants' Annual Report on Form 10-K/A,10-K for the year ended December 31, 2018, which could materially affect the Duke Energy Registrants’ financial condition or future results.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.


PART II

EXHIBITS


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 (***).
     Duke   Duke Duke Duke Duke  
Exhibit Duke Energy Progress Energy Energy Energy Energy  
Number Energy Carolinas Energy Progress Florida Ohio Indiana Piedmont
4.13.1X              
*10.14.1X            
*124.2X            X  
*31.1.1X              
*31.1.2  X            
*31.1.3    X          
*31.1.4      X        
*31.1.5        X      
*31.1.6          X    
*31.1.7            X  
*31.1.8              X
*31.2.1X              
*31.2.2  X            
*31.2.3    X          
*31.2.4      X        
*31.2.5        X      
*31.2.6          X    


PART II

EXHIBITS


*31.2.7            X  
*31.2.8              X
*32.1.1X              
*32.1.2  X            
*32.1.3    X          
*32.1.4      X        
*32.1.5        X      
*32.1.6          X    
*32.1.7            X  
*32.1.8              X
*32.2.1X              
*32.2.2  X            
*32.2.3    X          
*32.2.4      X        
*32.2.5        X      
*32.2.6          X    
*32.2.7            X  
*32.2.8              X
*101.INSXBRL Instance Document.Document (this does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).X X X X X X X X

EXHIBITS


*101.SCHXBRL Taxonomy Extension Schema Document.X X X X X X X X

PART II

*101.CALXBRL Taxonomy Calculation Linkbase Document.X X X X X X X X
*101.LABXBRL Taxonomy Label Linkbase Document.X X X X X X X X
*101.PREXBRL Taxonomy Presentation Linkbase Document.X X X X X X X X
*101.DEFXBRL Taxonomy Definition Linkbase Document.X X X X X X X X
The total amount of securities of the registrant or its subsidiaries authorized under any instrument with respect to long-term debt not filed as an exhibit does not exceed 10 percent10% 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.


PART II

SIGNATURES


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, LLC
DUKE ENERGY FLORIDA, LLC
DUKE ENERGY OHIO, INC.
DUKE ENERGY INDIANA, LLC
PIEDMONT NATURAL GAS COMPANY, INC.


   
Date:November 2, 20188, 2019/s/ STEVEN K. YOUNG
  Steven K. Young

Executive Vice President and Chief Financial Officer (Principal Financial Officer)

   
Date:November 2, 20188, 2019/s/ DWIGHT L. JACOBS
  Dwight L. Jacobs

Senior Vice President, Chief Accounting Officer,

Tax
and Controller

(Principal Accounting Officer)


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