Progress Energy (PREX) 10-Q 2021 Q1 Quarterly report

0001326160us-gaap:FairValueInputsLevel2Memberduk:ProgressEnergyMemberduk:NdtfMember2021-03-31

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2021

OR

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

For the transition period from _________to_________

Commission file number	Registrant, State of Incorporation or Organization, Address of Principal Executive Offices and Telephone Number	IRS Employer Identification Number
1-32853	DUKE ENERGY CORPORATION	20-2777218

(a Delaware corporation)

550 South Tryon Street

Charlotte, North Carolina 28202-1803

704-382-3853

1-4928 DUKE ENERGY CAROLINAS, LLC 56-0205520

(a North Carolina limited liability company)

526 South Church Street

Charlotte, North Carolina 28202-1803

704-382-3853

1-15929 PROGRESS ENERGY, INC. 56-2155481

(a North Carolina corporation)

410 South Wilmington Street

Raleigh, North Carolina 27601-1748

704-382-3853

1-3382 DUKE ENERGY PROGRESS, LLC 56-0165465

(a North Carolina limited liability company)

410 South Wilmington Street

Raleigh, North Carolina 27601-1748

704-382-3853

1-3274 DUKE ENERGY FLORIDA, LLC 59-0247770

(a Florida limited liability company)

299 First Avenue North

St. Petersburg, Florida 33701

704-382-3853

1-1232 DUKE ENERGY OHIO, INC. 31-0240030

(an Ohio corporation)

139 East Fourth Street

Cincinnati, Ohio 45202

704-382-3853

1-3543 DUKE ENERGY INDIANA, LLC 35-0594457

(an Indiana limited liability company)

1000 East Main Street

Plainfield, Indiana 46168

704-382-3853

1-6196 PIEDMONT NATURAL GAS COMPANY, INC. 56-0556998

(a North Carolina corporation)

4720 Piedmont Row Drive

Charlotte, North Carolina 28210

704-364-3120

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

Name of each exchange on

Registrant    Title of each class    Trading symbols        which registered

Duke Energy    Common Stock, $0.001 par value    DUK    New York Stock Exchange LLC

Duke Energy    5.125% Junior Subordinated Debentures due    DUKH    New York Stock Exchange LLC

January 15, 2073

Duke Energy    5.625% Junior Subordinated Debentures due    DUKB    New York Stock Exchange LLC

September 15, 2078

Duke Energy    Depositary Shares, each representing a 1/1,000th    DUK PR A    New 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)	Yes	☒	No	☐	Duke Energy Florida, LLC (Duke Energy Florida)	Yes	☒	No	☐
Duke Energy Carolinas, LLC (Duke Energy Carolinas)	Yes	☒	No	☐	Duke Energy Ohio, Inc. (Duke Energy Ohio)	Yes	☒	No	☐
Progress Energy, Inc. (Progress Energy)	Yes	☒	No	☐	Duke Energy Indiana, LLC (Duke Energy Indiana)	Yes	☒	No	☐
Duke Energy Progress, LLC (Duke Energy Progress)	Yes	☒	No	☐	Piedmont Natural Gas Company, Inc. (Piedmont)	Yes	☒	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	Yes	☒	No	☐	Duke Energy Florida	Yes	☒	No	☐
Duke Energy Carolinas	Yes	☒	No	☐	Duke Energy Ohio	Yes	☒	No	☐
Progress Energy	Yes	☒	No	☐	Duke Energy Indiana	Yes	☒	No	☐
Duke Energy Progress	Yes	☒	No	☐	Piedmont	Yes	☒	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 Filer	☒	Accelerated filer	☐	Non-accelerated Filer	☐	Smaller reporting company	☐	Emerging growth company	☐
Duke Energy Carolinas	Large Accelerated Filer	☐	Accelerated filer	☐	Non-accelerated Filer	☒	Smaller reporting company	☐	Emerging growth company	☐
Progress Energy	Large Accelerated Filer	☐	Accelerated filer	☐	Non-accelerated Filer	☒	Smaller reporting company	☐	Emerging growth company	☐
Duke Energy Progress	Large Accelerated Filer	☐	Accelerated filer	☐	Non-accelerated Filer	☒	Smaller reporting company	☐	Emerging growth company	☐
Duke Energy Florida	Large Accelerated Filer	☐	Accelerated filer	☐	Non-accelerated Filer	☒	Smaller reporting company	☐	Emerging growth company	☐
Duke Energy Ohio	Large Accelerated Filer	☐	Accelerated filer	☐	Non-accelerated Filer	☒	Smaller reporting company	☐	Emerging growth company	☐
Duke Energy Indiana	Large Accelerated Filer	☐	Accelerated filer	☐	Non-accelerated Filer	☒	Smaller reporting company	☐	Emerging growth company	☐
Piedmont	Large Accelerated Filer	☐	Accelerated filer	☐	Non-accelerated Filer	☒	Smaller reporting company	☐	Emerging 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	☐	No	☒	Duke Energy Florida	Yes	☐	No	☒
Duke Energy Carolinas	Yes	☐	No	☒	Duke Energy Ohio	Yes	☐	No	☒
Progress Energy	Yes	☐	No	☒	Duke Energy Indiana	Yes	☐	No	☒
Duke Energy Progress	Yes	☐	No	☒	Piedmont	Yes	☐	No	☒

Number of shares of common stock outstanding at April 30, 2021:

Registrant	Description	Shares
Duke Energy	Common stock, $0.001 par value	769,218,956

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

	Cautionary Statement Regarding Forward-Looking Information
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Duke Energy Corporation Financial Statements	9
	Duke Energy Carolinas, LLC Financial Statements	14
	Progress Energy, Inc. Financial Statements	18
	Duke Energy Progress, LLC Financial Statements	22
	Duke Energy Florida, LLC Financial Statements	26
	Duke Energy Ohio, Inc. Financial Statements	30
	Duke Energy Indiana, LLC Financial Statements	34
	Piedmont Natural Gas Company, Inc. Financial Statements	38
	Combined Notes to Condensed Consolidated Financial Statements
	Note 1 – Organization and Basis of Presentation	42
	Note 2 ��� Business Segments	44
	Note 3 – Regulatory Matters	46
	Note 4 – Commitments and Contingencies	55
	Note 5 – Debt and Credit Facilities	58
	Note 6 – Goodwill	59
	Note 7 – Related Party Transactions	60
	Note 8 – Derivatives and Hedging	61
	Note 9 – Investments in Debt and Equity Securities	66
	Note 10 – Fair Value Measurements	70
	Note 11 – Variable Interest Entities	75
	Note 12 – Revenue	78
	Note 13 – Stockholders' Equity	82
	Note 14 – Employee Benefit Plans	83
	Note 15 – Income Taxes	84
	Note 16 – Subsequent Events	84
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	85
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	100
Item 4.	Controls and Procedures	100
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	101
Item 1A.	Risk Factors	101
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	101
Item 6.	Exhibits	102
	Signatures	105

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:

◦The impact of the COVID-19 pandemic;

◦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 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;

◦Changing customer expectations and demands including heightened emphasis on environmental, social and governance concerns;

◦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 United States electric grid or generating resources;

◦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;

◦The ability to obtain adequate insurance at acceptable costs;

◦Employee workforce factors, including the potential inability to attract and retain key personnel;

FORWARD-LOOKING STATEMENTS

◦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 United States 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.

GLOSSARY OF TERMS

Glossary of Terms 

The following terms or acronyms used in this Form 10-Q are defined below:

Term or Acronym	Definition
2013 Settlement	Revised and Restated Stipulation and Settlement Agreement approved in November 2013 among Duke Energy Florida, the Florida Office of Public Counsel and other customer representatives
2017 Settlement	Second Revised and Restated Settlement Agreement in 2017 among Duke Energy Florida, the Florida Office of Public Counsel and other customer representatives, which replaces and supplants the 2013 Settlement
ACP	Atlantic Coast Pipeline, LLC, a limited liability company owned by Dominion Energy, Inc. and Duke Energy
ACP pipeline	The approximately 600-mile canceled interstate natural gas pipeline
AFS	Available for Sale
AFUDC	Allowance for funds used during construction
ARO	Asset retirement obligations
Bison	Bison Insurance Company Limited
CCR	Coal Combustion Residuals
Coal Ash Act	North Carolina Coal Ash Management Act of 2014
the company	Duke Energy Corporation and its subsidiaries
COVID-19	Coronavirus Disease 2019
CRC	Cinergy Receivables Company, LLC
Crystal River Unit 3	Crystal River Unit 3 Nuclear Plant
DEFPF	Duke Energy Florida Project Finance, LLC
DEFR	Duke Energy Florida Receivables, LLC
DEPR	Duke Energy Progress Receivables, LLC
DERF	Duke Energy Receivables Finance Company, LLC
Duke Energy	Duke Energy Corporation (collectively with its subsidiaries)
Duke Energy Ohio	Duke Energy Ohio, Inc.
Duke Energy Progress	Duke Energy Progress, LLC
Duke Energy Carolinas	Duke Energy Carolinas, LLC
Duke Energy Florida	Duke Energy Florida, LLC
Duke Energy Indiana	Duke Energy Indiana, LLC
Duke Energy Kentucky	Duke Energy Kentucky, Inc.
Duke Energy Registrants	Duke Energy, Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont
EDIT	Excess deferred income tax
EPA	U.S. Environmental Protection Agency
EPS	Earnings Per Share
ETR	Effective tax rate
Exchange Act	Securities Exchange Act of 1934
FERC	Federal Energy Regulatory Commission
FPSC	Florida Public Service Commission
FTR	Financial transmission rights
GAAP	Generally accepted accounting principles in the U.S.
GAAP Reported Earnings	Net Income Available to Duke Energy Corporation Common Stockholders
GAAP Reported EPS	Basic Earnings Per Share Available to Duke Energy Corporation common stockholders

GLOSSARY OF TERMS

GIC	GIC Private Limited
GWh	Gigawatt-hours
IGCC	Integrated Gasification Combined Cycle
IMR	Integrity Management Rider
IRS	Internal Revenue Service
Investment Trusts	NDTF investments and grantor trusts of Duke Energy Progress, Duke Energy Florida and Duke Energy Indiana
IURC	Indiana Utility Regulatory Commission
KPSC	Kentucky Public Service Commission
LLC	Limited Liability Company
MGP	Manufactured gas plant
MW	Megawatt
MWh	Megawatt-hour
NCUC	North Carolina Utilities Commission
NDTF	Nuclear decommissioning trust funds
NPNS	Normal purchase/normal sale
OPEB	Other Post-Retirement Benefit Obligations
OVEC	Ohio Valley Electric Corporation
Piedmont	Piedmont Natural Gas Company, Inc.
PJM	Pennsylvania-New Jersey-Maryland Interconnection
PPA	Purchase Power Agreement
Progress Energy	Progress Energy, Inc.
PSCSC	Public Service Commission of South Carolina
PUCO	Public Utilities Commission of Ohio
RTO	Regional Transmission Organization
Subsidiary Registrants	Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont
the Tax Act	Tax Cuts and Jobs Act
TPUC	Tennessee Public Utility Commission
U.S.	United States
VIE	Variable Interest Entity
WACC	Weighted Average Cost of Capital

FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS

DUKE ENERGY CORPORATION

Condensed Consolidated Statements of Operations

(Unaudited)

	Three Months Ended
	March 31,
(in millions, except per share amounts)	2021		2020
Operating Revenues
Regulated electric	$	5,219	$	5,124
Regulated natural gas	749		638
Nonregulated electric and other	182		187
Total operating revenues	6,150		5,949
Operating Expenses
Fuel used in electric generation and purchased power	1,443		1,447
Cost of natural gas	276		199
Operation, maintenance and other	1,402		1,339
Depreciation and amortization	1,226		1,130
Property and other taxes	353		345
Impairment of assets and other charges	—		2
Total operating expenses	4,700		4,462
Gains on Sales of Other Assets and Other, net	—		1
Operating Income	1,450		1,488
Other Income and Expenses
Equity in (losses) earnings of unconsolidated affiliates	(17)		44
Other income and expenses, net	127		46
Total other income and expenses	110		90
Interest Expense	535		551
Income Before Income Taxes	1,025		1,027
Income Tax Expense	84		137
Net Income	941		890
Add: Net Loss Attributable to Noncontrolling Interests	51		48
Net Income Attributable to Duke Energy Corporation	992		938
Less: Preferred Dividends	39		39
Net Income Available to Duke Energy Corporation Common Stockholders	$	953	$	899
Earnings Per Share – Basic and Diluted
Net income available to Duke Energy Corporation common stockholders
Basic and Diluted	$	1.25	$	1.24
Weighted Average Shares Outstanding
Basic	769		734
Diluted	769		736

See Notes to Condensed Consolidated Financial Statements

9

FINANCIAL STATEMENTS

DUKE ENERGY CORPORATION

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

	Three Months Ended
	March 31,
(in millions)		2021		2020
Net Income		$	941	$	890
Other Comprehensive Income (Loss), net of tax(a)
Pension and OPEB adjustments		2		1
Net unrealized gains (losses) on cash flow hedges		29		(81)
Reclassification into earnings from cash flow hedges		3		2
Unrealized (losses) gains on available-for-sale securities		(8)		1
Other Comprehensive Income (Loss), net of tax		26		(77)
Comprehensive Income		967		813
Add: Comprehensive Loss Attributable to Noncontrolling Interests		44		62
Comprehensive Income Attributable to Duke Energy		1,011		875
Less: Preferred Dividends		39		39
Comprehensive Income Available to Duke Energy Corporation Common Stockholders		$	972	$	836

(a)Net of income tax impacts of approximately $8 million and $23 million for the three months ended March 31, 2021, and 2020, respectively.

See Notes to Condensed Consolidated Financial Statements

10

FINANCIAL STATEMENTS

DUKE ENERGY CORPORATION

Condensed Consolidated Balance Sheets

(Unaudited)

(in millions)	March 31, 2021		December 31, 2020
ASSETS
Current Assets
Cash and cash equivalents	$	379	$	259
Receivables (net of allowance for doubtful accounts of $31 at 2021 and $29 at 2020)	950		1,009
Receivables of VIEs (net of allowance for doubtful accounts of $116 at 2021 and $117 at 2020)	1,834		2,144
Inventory	3,076		3,167
Regulatory assets (includes $54 at 2021 and $53 at 2020 related to VIEs)	1,650		1,641
Other (includes $333 at 2021 and $296 at 2020 related to VIEs)	619		462
Total current assets	8,508		8,682
Property, Plant and Equipment
Cost	157,372		155,580
Accumulated depreciation and amortization	(49,772)		(48,827)
Generation facilities to be retired, net	29		29
Net property, plant and equipment	107,629		106,782
Other Noncurrent Assets
Goodwill	19,303		19,303
Regulatory assets (includes $927 at 2021 and $937 at 2020 related to VIEs)	12,441		12,421
Nuclear decommissioning trust funds	9,410		9,114
Operating lease right-of-use assets, net	1,540		1,524
Investments in equity method unconsolidated affiliates	919		961
Other (includes $82 at 2021 and $81 at 2020 related to VIEs)	3,715		3,601
Total other noncurrent assets	47,328		46,924
Total Assets	$	163,465	$	162,388
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	2,497	$	3,144
Notes payable and commercial paper	4,064		2,873
Taxes accrued	574		482
Interest accrued	536		537
Current maturities of long-term debt (includes $472 at 2021 and 2020 related to VIEs)	5,586		4,238
Asset retirement obligations	709		718
Regulatory liabilities	1,509		1,377
Other	1,858		2,936
Total current liabilities	17,333		16,305
Long-Term Debt (includes $3,686 at 2021 and $3,535 at 2020 related to VIEs)	54,768		55,625
Other Noncurrent Liabilities
Deferred income taxes	9,459		9,244
Asset retirement obligations	12,299		12,286
Regulatory liabilities	15,070		15,029
Operating lease liabilities	1,352		1,340
Accrued pension and other post-retirement benefit costs	1,010		969
Investment tax credits	747		687
Other (includes $331 at 2021 and $316 at 2020 related to VIEs)	1,769		1,719
Total other noncurrent liabilities	41,706		41,274
Commitments and Contingencies	0		0
Equity
Preferred stock, Series A, $0.001 par value, 40 million depositary shares authorized and outstanding at 2021 and 2020	973		973
Preferred stock, Series B, $0.001 par value, 1 million shares authorized and outstanding at 2021 and 2020	989		989
Common stock, $0.001 par value, 2 billion shares authorized; 769 million shares outstanding at 2021 and 2020	1		1
Additional paid-in capital	43,761		43,767
Retained earnings	2,680		2,471
Accumulated other comprehensive loss	(218)		(237)
Total Duke Energy Corporation stockholders' equity	48,186		47,964
Noncontrolling interests	1,472		1,220
Total equity	49,658		49,184
Total Liabilities and Equity	$	163,465	$	162,388

See Notes to Condensed Consolidated Financial Statements

11

FINANCIAL STATEMENTS

DUKE ENERGY CORPORATION

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ended
	March 31,
(in millions)	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	941	$	890
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion (including amortization of nuclear fuel)	1,385		1,301
Equity in losses (earnings) of unconsolidated affiliates	17		(44)
Equity component of AFUDC	(42)		(40)
Deferred income taxes	86		422
Payments for asset retirement obligations	(114)		(132)
(Increase) decrease in
Receivables	377		466
Inventory	91		(92)
Other current assets	(47)		(131)
Increase (decrease) in
Accounts payable	(467)		(657)
Taxes accrued	104		113
Other current liabilities	(263)		(455)
Other assets	51		(37)
Other liabilities	(31)		(50)
Net cash provided by operating activities	2,088		1,554
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(2,215)		(2,832)
Contributions to equity method investments	—		(77)
Purchases of debt and equity securities	(1,584)		(1,392)
Proceeds from sales and maturities of debt and equity securities	1,601		1,347
Disbursements to canceled equity method investments	(855)		—
Other	(84)		(68)
Net cash used in investing activities	(3,137)		(3,022)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the:
Issuance of long-term debt	608		1,954
Issuance of common stock	5		40
Payments for the redemption of long-term debt	(76)		(292)
Proceeds from the issuance of short-term debt with original maturities greater than 90 days	50		1,784
Payments for the redemption of short-term debt with original maturities greater than 90 days	(909)		(17)
Notes payable and commercial paper	2,046		(198)
Contributions from noncontrolling interests	303		103
Dividends paid	(783)		(707)
Other	(59)		(74)
Net cash provided by financing activities	1,185		2,593
Net increase in cash, cash equivalents and restricted cash	136		1,125
Cash, cash equivalents and restricted cash at beginning of period	556		573
Cash, cash equivalents and restricted cash at end of period	$	692	$	1,698
Supplemental Disclosures:
Significant non-cash transactions:
Accrued capital expenditures	$	921	$	934
Non-cash dividends	—		27

See Notes to Condensed Consolidated Financial Statements

12

FINANCIAL STATEMENTS

DUKE ENERGY CORPORATION

Condensed Consolidated Statements of Changes in Equity

(Unaudited)

										Accumulated Other Comprehensive
										(Loss) Income
												Net Unrealized				Total
										Net Gains		Gains (Losses)				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, 2019	$	1,962	733	$	1	$	40,881	$	4,108	$	(51)	$	3	$	(82)	$	46,822	$	1,129	$	47,951
Net income (loss)	—		—	—		—		899		—		—		—		899		(48)		851
Other comprehensive (loss) income	—		—	—		—		—		(65)		1		1		(63)		(14)		(77)
Common stock issuances, including dividend reinvestment and employee benefits	—		2	—		50		—		—		—		—		50		—		50
Common stock dividends	—		—	—		—		(695)		—		—		—		(695)		—		(695)
Contributions from noncontrolling interests, net of transaction costs	—		—	—		—		—		—		—		—		—		103		103
Distributions to noncontrolling interest in subsidiaries	—		—	—		—		—		—		—		—		—		(7)		(7)
Other(a)	—		—	—		(1)		(91)		—		—		—		(92)		(1)		(93)
Balance at March 31, 2020	$	1,962	735	$	1	$	40,930	$	4,221	$	(116)	$	4	$	(81)	$	46,921	$	1,162	$	48,083
Balance at December 31, 2020	$	1,962	769	$	1	$	43,767	$	2,471	$	(167)	$	6	$	(76)	$	47,964	$	1,220	$	49,184
Net income (loss)	—		—	—		—		953		—		—		—		953		(51)		902
Other comprehensive income (loss)	—		—	—		—		—		25		(8)		2		19		7		26
Common stock issuances, including dividend reinvestment and employee benefits	—		—	—		(3)		—		—		—		—		(3)		—		(3)
Common stock dividends	—		—	—		—		(744)		—		—		—		(744)		—		(744)
Contributions from noncontrolling interests, net of transaction costs	—		—	—		(3)		—		—		—		—		(3)		303		300
Distributions to noncontrolling interest in subsidiaries	—		—	—		—		—		—		—		—		—		(7)		(7)
Balance at March 31, 2021	$	1,962	769	$	1	$	43,761	$	2,680	$	(142)	$	(2)	$	(74)	$	48,186	$	1,472	$	49,658

(a)    Amounts in Retained earnings primarily represent impacts due to implementation of a new accounting standard related to Current Estimated Credit Losses. See Note 1 for additional discussion.

See Notes to Condensed Consolidated Financial Statements

13

FINANCIAL STATEMENTS

DUKE ENERGY CAROLINAS, LLC

Condensed Consolidated Statements of Operations and Comprehensive Income

(Unaudited)

	Three Months Ended
	March 31,
(in millions)		2021		2020
Operating Revenues		$	1,716	$	1,748
Operating Expenses
Fuel used in electric generation and purchased power		422		453
Operation, maintenance and other		441		386
Depreciation and amortization		359		343
Property and other taxes		83		81
Impairment of assets and other charges		—		2
Total operating expenses		1,305		1,265
Gains on Sales of Other Assets and Other, net		—		1
Operating Income		411		484
Other Income and Expenses, net		48		43
Interest Expense		124		123
Income Before Income Taxes		335		404
Income Tax Expense		23		65
Net Income and Comprehensive Income		$	312	$	339

See Notes to Condensed Consolidated Financial Statements

14

FINANCIAL STATEMENTS

DUKE ENERGY CAROLINAS, LLC

Condensed Consolidated Balance Sheets

(Unaudited)

(in millions)	March 31, 2021		December 31, 2020
ASSETS
Current Assets
Cash and cash equivalents	$	12	$	21
Receivables (net of allowance for doubtful accounts of $2 at 2021 and $1 at 2020)	171		247
Receivables of VIEs (net of allowance for doubtful accounts of $32 at 2021 and $22 at 2020)	613		696
Receivables from affiliated companies	119		124
Inventory	1,021		1,010
Regulatory assets	433		473
Other	90		20
Total current assets	2,459		2,591
Property, Plant and Equipment
Cost	51,027		50,640
Accumulated depreciation and amortization	(17,690)		(17,453)
Net property, plant and equipment	33,337		33,187
Other Noncurrent Assets
Regulatory assets	3,028		2,996
Nuclear decommissioning trust funds	5,147		4,977
Operating lease right-of-use assets, net	105		110
Other	1,185		1,187
Total other noncurrent assets	9,465		9,270
Total Assets	$	45,261	$	45,048
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	643	$	1,000
Accounts payable to affiliated companies	206		199
Notes payable to affiliated companies	508		506
Taxes accrued	138		76
Interest accrued	128		117
Current maturities of long-term debt	507		506
Asset retirement obligations	258		264
Regulatory liabilities	559		473
Other	440		546
Total current liabilities	3,387		3,687
Long-Term Debt	11,522		11,412
Long-Term Debt Payable to Affiliated Companies	300		300
Other Noncurrent Liabilities
Deferred income taxes	3,913		3,842
Asset retirement obligations	5,117		5,086
Regulatory liabilities	6,540		6,535
Operating lease liabilities	93		97
Accrued pension and other post-retirement benefit costs	72		73
Investment tax credits	235		236
Other	616		626
Total other noncurrent liabilities	16,586		16,495
Commitments and Contingencies	0		0
Equity
Member's equity	13,473		13,161
Accumulated other comprehensive loss	(7)		(7)
Total equity	13,466		13,154
Total Liabilities and Equity	$	45,261	$	45,048

See Notes to Condensed Consolidated Financial Statements

15

FINANCIAL STATEMENTS

DUKE ENERGY CAROLINAS, LLC

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ended
	March 31,
(in millions)	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	312	$	339
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including amortization of nuclear fuel)	428		414
Equity component of AFUDC	(16)		(14)
Deferred income taxes	(8)		22
Payments for asset retirement obligations	(35)		(41)
(Increase) decrease in
Receivables	156		156
Receivables from affiliated companies	5		27
Inventory	(11)		(72)
Other current assets	(48)		96
Increase (decrease) in
Accounts payable	(255)		(253)
Accounts payable to affiliated companies	7		15
Taxes accrued	62		87
Other current liabilities	(77)		(108)
Other assets	43		(60)
Other liabilities	(17)		(10)
Net cash provided by operating activities	546		598
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(622)		(724)
Purchases of debt and equity securities	(1,128)		(607)
Proceeds from sales and maturities of debt and equity securities	1,128		607
Notes receivable from affiliated companies	—		(436)
Other	(43)		(18)
Net cash used in investing activities	(665)		(1,178)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	142		910
Payments for the redemption of long-term debt	(33)		(2)
Notes payable to affiliated companies	2		(29)
Distributions to parent	—		(300)
Other	(1)		(1)
Net cash provided by financing activities	110		578
Net decrease in cash and cash equivalents	(9)		(2)
Cash and cash equivalents at beginning of period	21		18
Cash and cash equivalents at end of period	$	12	$	16
Supplemental Disclosures:
Significant non-cash transactions:
Accrued capital expenditures	$	268	$	254

See Notes to Condensed Consolidated Financial Statements

16

FINANCIAL STATEMENTS

DUKE ENERGY CAROLINAS, LLC

Condensed Consolidated Statements of Changes in Equity

(Unaudited)

			Accumulated Other
			Comprehensive
			Loss
	Member's		Net Losses on		Total
(in millions)	Equity		Cash Flow Hedges		Equity
Balance at December 31, 2019	$	12,818	$	(7)	$	12,811
Net income	339		—		339
Distributions to parent	(300)		—		(300)
Other(a)	(13)		—		(13)
Balance at March 31, 2020	$	12,844	$	(7)	$	12,837
Balance at December 31, 2020	$	13,161	$	(7)	$	13,154
Net income	312		—		312
Balance at March 31, 2021	$	13,473	$	(7)	$	13,466

(a)Amounts primarily represent impacts due to implementation of a new accounting standard related to Current Estimated Credit Losses. See Note 1 for additional discussion.

See Notes to Condensed Consolidated Financial Statements

17

FINANCIAL STATEMENTS

PROGRESS ENERGY, INC.

Condensed Consolidated Statements of Operations and Comprehensive Income

(Unaudited)

	Three Months Ended
	March 31,
(in millions)		2021		2020
Operating Revenues		$	2,505	$	2,422
Operating Expenses
Fuel used in electric generation and purchased power		795		763
Operation, maintenance and other		601		554
Depreciation and amortization		485		452
Property and other taxes		142		135
Total operating expenses		2,023		1,904
Losses on Sales of Other Assets and Other, net		—		(1)
Operating Income		482		517
Other Income and Expenses, net		43		32
Interest Expense		192		206
Income Before Income Taxes		333		343
Income Tax Expense		43		60
Net Income		$	290	$	283
Net Income		$	290	$	283
Other Comprehensive Income, net of tax
Net unrealized gains on cash flow hedges		1		1
Unrealized (losses) gains on available-for-sale securities		(1)		1
Other Comprehensive Income, net of tax		—		2
Comprehensive Income		$	290	$	285

See Notes to Condensed Consolidated Financial Statements

18

FINANCIAL STATEMENTS

PROGRESS ENERGY, INC.

Condensed Consolidated Balance Sheets

(Unaudited)

(in millions)	March 31, 2021		December 31, 2020
ASSETS
Current Assets
Cash and cash equivalents	$	74	$	59
Receivables (net of allowance for doubtful accounts of $8 at 2021 and 2020)	166		228
Receivables of VIEs (net of allowance for doubtful accounts of $29 at 2021 and 2020)	749		901
Receivables from affiliated companies	76		157
Inventory	1,336		1,375
Regulatory assets (includes $54 at 2021 and $53 at 2020 related to VIEs)	821		758
Other (includes $14 at 2021 and $39 at 2020 related to VIEs)	257		109
Total current assets	3,479		3,587
Property, Plant and Equipment
Cost	58,546		57,892
Accumulated depreciation and amortization	(18,718)		(18,368)
Generation facilities to be retired, net	29		29
Net property, plant and equipment	39,857		39,553
Other Noncurrent Assets
Goodwill	3,655		3,655
Regulatory assets (includes $927 at 2021 and $937 at 2020 related to VIEs)	5,749		5,775
Nuclear decommissioning trust funds	4,263		4,137
Operating lease right-of-use assets, net	720		690
Other	1,267		1,227
Total other noncurrent assets	15,654		15,484
Total Assets	$	58,990	$	58,624
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	796	$	919
Accounts payable to affiliated companies	321		289
Notes payable to affiliated companies	2,844		2,969
Taxes accrued	143		121
Interest accrued	187		202
Current maturities of long-term debt (includes $305 at 2021 and 2020 related to VIEs)	2,127		1,426
Asset retirement obligations	267		283
Regulatory liabilities	702		640
Other	744		793
Total current liabilities	8,131		7,642
Long-Term Debt (includes $1,322 at 2021 and $1,252 at 2020 related to VIEs)	17,056		17,688
Long-Term Debt Payable to Affiliated Companies	150		150
Other Noncurrent Liabilities
Deferred income taxes	4,489		4,396
Asset retirement obligations	5,859		5,866
Regulatory liabilities	5,126		5,051
Operating lease liabilities	648		623
Accrued pension and other post-retirement benefit costs	501		505
Other	500		462
Total other noncurrent liabilities	17,123		16,903
Commitments and Contingencies	0		0
Equity
Common Stock, $0.01 par value, 100 shares authorized and outstanding at 2021 and 2020	—		—
Additional paid-in capital	9,143		9,143
Retained earnings	7,400		7,109
Accumulated other comprehensive loss	(15)		(15)
Total Progress Energy, Inc. stockholders' equity	16,528		16,237
Noncontrolling interests	2		4
Total equity	16,530		16,241
Total Liabilities and Equity	$	58,990	$	58,624

See Notes to Condensed Consolidated Financial Statements

19

FINANCIAL STATEMENTS

PROGRESS ENERGY, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ended
	March 31,
(in millions)	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	290	$	283
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion (including amortization of nuclear fuel)	575		552
Equity component of AFUDC	(13)		(14)
Deferred income taxes	79		80
Payments for asset retirement obligations	(69)		(79)
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	6		1
Receivables	214		149
Receivables from affiliated companies	81		27
Inventory	39		(40)
Other current assets	(150)		43
Increase (decrease) in
Accounts payable	(69)		(211)
Accounts payable to affiliated companies	32		19
Taxes accrued	23		71
Other current liabilities	(60)		(128)
Other assets	(27)		(38)
Other liabilities	(64)		(56)
Net cash provided by operating activities	887		659
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(796)		(972)
Purchases of debt and equity securities	(517)		(651)
Proceeds from sales and maturities of debt and equity securities	537		643
Notes receivable from affiliated companies	—		164
Other	(59)		(39)
Net cash used in investing activities	(835)		(855)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	98		—
Payments for the redemption of long-term debt	(34)		(283)
Notes payable to affiliated companies	(125)		479
Other	(2)		(1)
Net cash (used in) provided by financing activities	(63)		195
Net decrease in cash, cash equivalents and restricted cash	(11)		(1)
Cash, cash equivalents and restricted cash at beginning of period	200		126
Cash, cash equivalents and restricted cash at end of period	$	189	$	125
Supplemental Disclosures:
Significant non-cash transactions:
Accrued capital expenditures	$	317	$	310

See Notes to Condensed Consolidated Financial Statements

20

FINANCIAL STATEMENTS

PROGRESS ENERGY, INC.

Condensed Consolidated Statements of Changes in Equity

(Unaudited)

					Accumulated Other Comprehensive Income (Loss)
					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, 2019	$	9,143	$	6,465	$	(10)	$	(1)	$	(7)	$	15,590	$	3	$	15,593
Net income	—		283		—		—		—		283		—		283
Other comprehensive income	—		—		1		1		—		2		—		2
Other	—		(1)		—		—		—		(1)		—		(1)
Balance at March 31, 2020	$	9,143	$	6,747	$	(9)	$	—	$	(7)	$	15,874	$	3	$	15,877
Balance at December 31, 2020	$	9,143	$	7,109	$	(5)	$	(2)	$	(8)	$	16,237	$	4	$	16,241
Net income	—		290		—		—		—		290		—		290
Other comprehensive income (loss)	—		—		1		(1)		—		—		—		—
Distributions to noncontrolling interests	—		—		—		—		—		—		(1)		(1)
Other	—		1		—		—		—		1		(1)		—
Balance at March 31, 2021	$	9,143	$	7,400	$	(4)	$	(3)	$	(8)	$	16,528	$	2	$	16,530

See Notes to Condensed Consolidated Financial Statements

21

FINANCIAL STATEMENTS

DUKE ENERGY PROGRESS, LLC

Condensed Consolidated Statements of Operations and Comprehensive Income

(Unaudited)

	Three Months Ended
	March 31,
(in millions)		2021		2020
Operating Revenues		$	1,401	$	1,338
Operating Expenses
Fuel used in electric generation and purchased power		436		405
Operation, maintenance and other		357		305
Depreciation and amortization		285		287
Property and other taxes		49		47
Total operating expenses		1,127		1,044
Losses on Sales of Other Assets and Other, net		—		(1)
Operating Income		274		293
Other Income and Expenses, net		24		22
Interest Expense		69		69
Income Before Income Taxes		229		246
Income Tax Expense		19		42
Net Income and Comprehensive Income		$	210	$	204

See Notes to Condensed Consolidated Financial Statements

22

FINANCIAL STATEMENTS

DUKE ENERGY PROGRESS, LLC

Condensed Consolidated Balance Sheets

(Unaudited)

(in millions)	March 31, 2021		December 31, 2020
ASSETS
Current Assets
Cash and cash equivalents	$	46	$	39
Receivables (net of allowance for doubtful accounts of $4 at 2021 and 2020)	80		132
Receivables of VIEs (net of allowance for doubtful accounts of $19 at 2021 and 2020)	422		500
Receivables from affiliated companies	70		50
Inventory	882		911
Regulatory assets	469		492
Other	138		60
Total current assets	2,107		2,184
Property, Plant and Equipment
Cost	36,077		35,759
Accumulated depreciation and amortization	(13,064)		(12,801)
Generation facilities to be retired, net	29		29
Net property, plant and equipment	23,042		22,987
Other Noncurrent Assets
Regulatory assets	4,033		3,976
Nuclear decommissioning trust funds	3,645		3,500
Operating lease right-of-use assets, net	386		346
Other	759		740
Total other noncurrent assets	8,823		8,562
Total Assets	$	33,972	$	33,733
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	339	$	454
Accounts payable to affiliated companies	225		215
Notes payable to affiliated companies	163		295
Taxes accrued	73		85
Interest accrued	71		99
Current maturities of long-term debt	1,302		603
Asset retirement obligations	267		283
Regulatory liabilities	618		530
Other	383		411
Total current liabilities	3,441		2,975
Long-Term Debt	7,904		8,505
Long-Term Debt Payable to Affiliated Companies	150		150
Other Noncurrent Liabilities
Deferred income taxes	2,374		2,298
Asset retirement obligations	5,366		5,352
Regulatory liabilities	4,454		4,394
Operating lease liabilities	356		323
Accrued pension and other post-retirement benefit costs	240		242
Investment tax credits	131		132
Other	86		102
Total other noncurrent liabilities	13,007		12,843
Commitments and Contingencies	0		0
Equity
Member's Equity	9,470		9,260
Total Liabilities and Equity	$	33,972	$	33,733

See Notes to Condensed Consolidated Financial Statements

23

FINANCIAL STATEMENTS

DUKE ENERGY PROGRESS, LLC

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ended
	March 31,
(in millions)	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	210	$	204
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including amortization of nuclear fuel)	331		331
Equity component of AFUDC	(8)		(10)
Deferred income taxes	6		43
Payments for asset retirement obligations	(46)		(75)
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	2		(2)
Receivables	131		133
Receivables from affiliated companies	(20)		2
Inventory	29		(22)
Other current assets	(21)		54
Increase (decrease) in
Accounts payable	(62)		(220)
Accounts payable to affiliated companies	10		5
Taxes accrued	(12)		26
Other current liabilities	(25)		(73)
Other assets	(35)		(48)
Other liabilities	(15)		(8)
Net cash provided by operating activities	475		340
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(400)		(466)
Purchases of debt and equity securities	(382)		(550)
Proceeds from sales and maturities of debt and equity securities	380		540
Other	(29)		(16)
Net cash used in investing activities	(431)		(492)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	98		—
Payments for the redemption of long-term debt	(2)		(1)
Notes payable to affiliated companies	(132)		163
Other	(1)		—
Net cash (used in) provided by financing activities	(37)		162
Net increase in cash and cash equivalents	7		10
Cash and cash equivalents at beginning of period	39		22
Cash and cash equivalents at end of period	$	46	$	32
Supplemental Disclosures:
Significant non-cash transactions:
Accrued capital expenditures	$	96	$	87

See Notes to Condensed Consolidated Financial Statements

24

FINANCIAL STATEMENTS

DUKE ENERGY PROGRESS, LLC

Condensed Consolidated Statements of Changes in Equity

(Unaudited)

	Member's
(in millions)	Equity
Balance at December 31, 2019	$	9,246
Net income	204
Balance at March 31, 2020	$	9,450
Balance at December 31, 2020	$	9,260
Net income	210
Balance at March 31, 2021	$	9,470

See Notes to Condensed Consolidated Financial Statements

25

FINANCIAL STATEMENTS

DUKE ENERGY FLORIDA, LLC

Condensed Consolidated Statements of Operations and Comprehensive Income

(Unaudited)

	Three Months Ended
	March 31,
(in millions)		2021		2020
Operating Revenues		$	1,101	$	1,080
Operating Expenses
Fuel used in electric generation and purchased power		359		358
Operation, maintenance and other		242		245
Depreciation and amortization		200		165
Property and other taxes		93		88
Total operating expenses		894		856
Operating Income		207		224
Other Income and Expenses, net		18		10
Interest Expense		80		84
Income Before Income Taxes		145		150
Income Tax Expense		28		30
Net Income		$	117	$	120
Other Comprehensive Income, net of tax
Unrealized (losses) gains on available-for-sale securities		(1)		1
Comprehensive Income		$	116	$	121

See Notes to Condensed Consolidated Financial Statements

26

FINANCIAL STATEMENTS

DUKE ENERGY FLORIDA, LLC

Condensed Consolidated Balance Sheets

(Unaudited)

(in millions)	March 31, 2021		December 31, 2020
ASSETS
Current Assets
Cash and cash equivalents	$	22	$	11
Receivables (net of allowance for doubtful accounts of $5 at 2021 and $4 at 2020)	84		94
Receivables of VIEs (net of allowance for doubtful accounts of $10 at 2021 and 2020)	327		401
Receivables from affiliated companies	7		3
Inventory	455		464
Regulatory assets (includes $54 at 2021 and $53 at 2020 related to VIEs)	352		265
Other (includes $14 at 2021 and $39 at 2020 related to VIEs)	82		41
Total current assets	1,329		1,279
Property, Plant and Equipment
Cost	22,459		22,123
Accumulated depreciation and amortization	(5,646)		(5,560)
Net property, plant and equipment	16,813		16,563
Other Noncurrent Assets
Regulatory assets (includes $927 at 2021 and $937 at 2020 related to VIEs)	1,717		1,799
Nuclear decommissioning trust funds	617		637
Operating lease right-of-use assets, net	333		344
Other	355		335
Total other noncurrent assets	3,022		3,115
Total Assets	$	21,164	$	20,957
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	457	$	465
Accounts payable to affiliated companies	108		85
Notes payable to affiliated companies	279		196
Taxes accrued	84		82
Interest accrued	75		69
Current maturities of long-term debt (includes $305 at 2021 and 2020 related to VIEs)	824		823
Regulatory liabilities	84		110
Other	356		374
Total current liabilities	2,267		2,204
Long-Term Debt (includes $972 at 2021 and $1,002 at 2020 related to VIEs)	7,060		7,092
Other Noncurrent Liabilities
Deferred income taxes	2,209		2,191
Asset retirement obligations	493		514
Regulatory liabilities	672		658
Operating lease liabilities	292		300
Accrued pension and other post-retirement benefit costs	230		231
Other	267		209
Total other noncurrent liabilities	4,163		4,103
Commitments and Contingencies	0		0
Equity
Member's equity	7,677		7,560
Accumulated other comprehensive loss	(3)		(2)
Total equity	7,674		7,558
Total Liabilities and Equity	$	21,164	$	20,957

See Notes to Condensed Consolidated Financial Statements

27

FINANCIAL STATEMENTS

DUKE ENERGY FLORIDA, LLC

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ended
	March 31,
(in millions)	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	117	$	120
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion	243		219
Equity component of AFUDC	(4)		(4)
Deferred income taxes	74		34
Payments for asset retirement obligations	(24)		(5)
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	2		3
Receivables	83		15
Receivables from affiliated companies	(4)		—
Inventory	10		(19)
Other current assets	(101)		7
Increase (decrease) in
Accounts payable	(7)		11
Accounts payable to affiliated companies	23		(20)
Taxes accrued	3		31
Other current liabilities	(41)		(58)
Other assets	12		13
Other liabilities	(48)		(46)
Net cash provided by operating activities	338		301
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(396)		(506)
Purchases of debt and equity securities	(134)		(101)
Proceeds from sales and maturities of debt and equity securities	157		103
Notes receivable from affiliated companies	—		173
Other	(30)		(23)
Net cash used in investing activities	(403)		(354)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments for the redemption of long-term debt	(33)		(282)
Notes payable to affiliated companies	83		305
Other	—		(1)
Net cash provided by financing activities	50		22
Net decrease in cash, cash equivalents and restricted cash	(15)		(31)
Cash, cash equivalents and restricted cash at beginning of period	50		56
Cash, cash equivalents and restricted cash at end of period	$	35	$	25
Supplemental Disclosures:
Significant non-cash transactions:
Accrued capital expenditures	$	222	$	223

See Notes to Condensed Consolidated Financial Statements

28

FINANCIAL STATEMENTS

DUKE ENERGY FLORIDA, LLC

Condensed Consolidated Statements of Changes in Equity

(Unaudited)

			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, 2019	$	6,789	$	(1)	$	6,788
Net income	120		—		120
Other comprehensive income	—		1		1
Balance at March 31, 2020	$	6,909	$	—	$	6,909
Balance at December 31, 2020	$	7,560	$	(2)	$	7,558
Net income	117		—		117
Other comprehensive loss	—		(1)		(1)
Balance at March 31, 2021	$	7,677	$	(3)	$	7,674

See Notes to Condensed Consolidated Financial Statements

29

FINANCIAL STATEMENTS

DUKE ENERGY OHIO, INC.

Condensed Consolidated Statements of Operations and Comprehensive Income

(Unaudited)

	Three Months Ended
	March 31,
(in millions)		2021		2020
Operating Revenues
Regulated electric		$	363	$	346
Regulated natural gas		169		152
Total operating revenues		532		498
Operating Expenses
Fuel used in electric generation and purchased power		82		87
Cost of natural gas		51		37
Operation, maintenance and other		108		123
Depreciation and amortization		74		68
Property and other taxes		92		83
Total operating expenses		407		398
Operating Income		125		100
Other Income and Expenses, net		5		3
Interest Expense		25		24
Income Before Income Taxes		105		79
Income Tax Expense		14		14
Net Income and Comprehensive Income		$	91	$	65

See Notes to Condensed Consolidated Financial Statements

30

FINANCIAL STATEMENTS

DUKE ENERGY OHIO, INC.

Condensed Consolidated Balance Sheets

(Unaudited)

(in millions)	March 31, 2021		December 31, 2020
ASSETS
Current Assets
Cash and cash equivalents	$	18	$	14
Receivables (net of allowance for doubtful accounts of $4 at 2021 and 2020)	98		98
Receivables from affiliated companies	60		102
Inventory	108		110
Regulatory assets	54		39
Other	18		31
Total current assets	356		394
Property, Plant and Equipment
Cost	11,199		11,022
Accumulated depreciation and amortization	(3,049)		(3,013)
Net property, plant and equipment	8,150		8,009
Other Noncurrent Assets
Goodwill	920		920
Regulatory assets	620		610
Operating lease right-of-use assets, net	20		20
Other	75		72
Total other noncurrent assets	1,635		1,622
Total Assets	$	10,141	$	10,025
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	266	$	279
Accounts payable to affiliated companies	56		68
Notes payable to affiliated companies	270		169
Taxes accrued	192		247
Interest accrued	32		31
Current maturities of long-term debt	50		50
Asset retirement obligations	8		3
Regulatory liabilities	59		65
Other	67		70
Total current liabilities	1,000		982
Long-Term Debt	3,015		3,014
Long-Term Debt Payable to Affiliated Companies	25		25
Other Noncurrent Liabilities
Deferred income taxes	1,001		981
Asset retirement obligations	104		108
Regulatory liabilities	739		748
Operating lease liabilities	20		20
Accrued pension and other post-retirement benefit costs	114		113
Other	97		99
Total other noncurrent liabilities	2,075		2,069
Commitments and Contingencies	0		0
Equity
Common Stock, $8.50 par value, 120 million shares authorized; 90 million shares outstanding at 2021 and 2020	762		762
Additional paid-in capital	2,776		2,776
Retained earnings	488		397
Total equity	4,026		3,935
Total Liabilities and Equity	$	10,141	$	10,025

See Notes to Condensed Consolidated Financial Statements

31

FINANCIAL STATEMENTS

DUKE ENERGY OHIO, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ended
	March 31,
(in millions)	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	91	$	65
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	75		69
Equity component of AFUDC	(2)		(1)
Deferred income taxes	12		14
(Increase) decrease in
Receivables	—		1
Receivables from affiliated companies	5		40
Inventory	2		14
Other current assets	(5)		8
Increase (decrease) in
Accounts payable	8		(19)
Accounts payable to affiliated companies	(12)		—
Taxes accrued	(55)		(49)
Other current liabilities	(8)		2
Other assets	(16)		(2)
Other liabilities	1		(5)
Net cash provided by operating activities	96		137
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(220)		(217)
Notes receivable from affiliated companies	37		—
Other	(10)		(10)
Net cash used in investing activities	(193)		(227)
CASH FLOWS FROM FINANCING ACTIVITIES
Notes payable to affiliated companies	101		87
Net cash provided by financing activities	101		87
Net increase (decrease) in cash and cash equivalents	4		(3)
Cash and cash equivalents at beginning of period	14		17
Cash and cash equivalents at end of period	$	18	$	14
Supplemental Disclosures:
Significant non-cash transactions:
Accrued capital expenditures	$	84	$	66

See Notes to Condensed Consolidated Financial Statements

32

FINANCIAL STATEMENTS

DUKE ENERGY OHIO, INC.

Condensed Consolidated Statements of Changes in Equity

(Unaudited)

			Additional
	Common		Paid-in		Retained		Total
(in millions)	Stock		Capital		Earnings		Equity
Balance at December 31, 2019	$	762	$	2,776	$	145	$	3,683
Net income	—		—		65		65
Balance at March 31, 2020	$	762	$	2,776	$	210	$	3,748
Balance at December 31, 2020	$	762	$	2,776	$	397	$	3,935
Net income	—		—		91		91
Balance at March 31, 2021	$	762	$	2,776	$	488	$	4,026

See Notes to Condensed Consolidated Financial Statements

33

FINANCIAL STATEMENTS

DUKE ENERGY INDIANA, LLC

Condensed Consolidated Statements of Operations and Comprehensive Income

(Unaudited)

	Three Months Ended
	March 31,
(in millions)		2021		2020
Operating Revenues		$	745	$	692
Operating Expenses
Fuel used in electric generation and purchased power		217		194
Operation, maintenance and other		178		186
Depreciation and amortization		152		132
Property and other taxes		21		22
Total operating expenses		568		534
Operating Income		177		158
Other Income and Expenses, net		9		10
Interest Expense		50		43
Income Before Income Taxes		136		125
Income Tax Expense		24		26
Net Income and Comprehensive Income		$	112	$	99

See Notes to Condensed Consolidated Financial Statements

34

FINANCIAL STATEMENTS

DUKE ENERGY INDIANA, LLC

Condensed Consolidated Balance Sheets

(Unaudited)

(in millions)	March 31, 2021		December 31, 2020
ASSETS
Current Assets
Cash and cash equivalents	$	17	$	7
Receivables (net of allowance for doubtful accounts of $3 at 2021 and 2020)	63		55
Receivables from affiliated companies	62		112
Notes receivable from affiliated companies	51		—
Inventory	436		473
Regulatory assets	151		125
Other	34		37
Total current assets	814		809
Property, Plant and Equipment
Cost	17,548		17,382
Accumulated depreciation and amortization	(5,821)		(5,661)
Net property, plant and equipment	11,727		11,721
Other Noncurrent Assets
Regulatory assets	1,217		1,203
Operating lease right-of-use assets, net	54		55
Other	251		253
Total other noncurrent assets	1,522		1,511
Total Assets	$	14,063	$	14,041
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	163	$	188
Accounts payable to affiliated companies	72		88
Notes payable to affiliated companies	—		131
Taxes accrued	122		62
Interest accrued	59		51
Current maturities of long-term debt	123		70
Asset retirement obligations	176		168
Regulatory liabilities	119		111
Other	82		83
Total current liabilities	916		952
Long-Term Debt	3,818		3,871
Long-Term Debt Payable to Affiliated Companies	150		150
Other Noncurrent Liabilities
Deferred income taxes	1,230		1,228
Asset retirement obligations	997		1,008
Regulatory liabilities	1,629		1,627
Operating lease liabilities	52		53
Accrued pension and other post-retirement benefit costs	172		171
Investment tax credits	168		168
Other	35		30
Total other noncurrent liabilities	4,283		4,285
Commitments and Contingencies	0		0
Equity
Member's Equity	4,896		4,783
Total Liabilities and Equity	$	14,063	$	14,041

See Notes to Condensed Consolidated Financial Statements

35

FINANCIAL STATEMENTS

DUKE ENERGY INDIANA, LLC

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ended
	March 31,
(in millions)	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	112	$	99
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion	153		133
Equity component of AFUDC	(5)		(6)
Deferred income taxes	(12)		16
Payments for asset retirement obligations	(10)		(12)
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	1		—
Receivables	(9)		15
Receivables from affiliated companies	—		3
Inventory	38		(21)
Other current assets	(23)		25
Increase (decrease) in
Accounts payable	1		(13)
Accounts payable to affiliated companies	(16)		(21)
Taxes accrued	71		43
Other current liabilities	20		(27)
Other assets	3		(4)
Other liabilities	12		8
Net cash provided by operating activities	336		238
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(186)		(210)
Purchases of debt and equity securities	(5)		(5)
Proceeds from sales and maturities of debt and equity securities	4		2
Notes receivable from affiliated companies	(1)		(543)
Other	(7)		(6)
Net cash used in investing activities	(195)		(762)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	—		544
Notes payable to affiliated companies	(131)		(30)
Net cash (used in) provided by financing activities	(131)		514
Net increase (decrease) in cash and cash equivalents	10		(10)
Cash and cash equivalents at beginning of period	7		25
Cash and cash equivalents at end of period	$	17	$	15
Supplemental Disclosures:
Significant non-cash transactions:
Accrued capital expenditures	$	74	$	70

See Notes to Condensed Consolidated Financial Statements

36

FINANCIAL STATEMENTS

DUKE ENERGY INDIANA, LLC

Condensed Consolidated Statements of Changes in Equity

(Unaudited)

	Member's
(in millions)	Equity
Balance at December 31, 2019	$	4,575
Net income	99
Balance at March 31, 2020	$	4,674
Balance at December 31, 2020	$	4,783
Net income	112
Other	1
Balance at March 31, 2021	$	4,896

See Notes to Condensed Consolidated Financial Statements

37

FINANCIAL STATEMENTS

PIEDMONT NATURAL GAS COMPANY, INC.

Condensed Consolidated Statements of Operations and Comprehensive Income

(Unaudited)

	Three Months Ended
	March 31,
(in millions)		2021		2020
Operating Revenues		$	606	$	512
Operating Expenses
Cost of natural gas		225		162
Operation, maintenance and other		78		80
Depreciation and amortization		48		45
Property and other taxes		14		12
Total operating expenses		365		299
Operating Income		241		213
Other Income and Expenses, net		17		12
Interest Expense		29		27
Income Before Income Taxes		229		198
Income Tax Expense		26		20
Net Income and Comprehensive Income		$	203	$	178

See Notes to Condensed Consolidated Financial Statements

38

FINANCIAL STATEMENTS

PIEDMONT NATURAL GAS COMPANY, INC.

Condensed Consolidated Balance Sheets

(Unaudited)

(in millions)	March 31, 2021		December 31, 2020
ASSETS
Current Assets
Cash and cash equivalents	$	1	$	0
Receivables (net of allowance for doubtful accounts of $14 at 2021 and $12 at 2020)	257		250
Receivables from affiliated companies	10		10
Notes receivable from affiliated companies	198		0
Inventory	37		68
Regulatory assets	100		153
Other	12		20
Total current assets	615		501
Property, Plant and Equipment
Cost	9,358		9,134
Accumulated depreciation and amortization	(1,809)		(1,749)
Net property, plant and equipment	7,549		7,385
Other Noncurrent Assets
Goodwill	49		49
Regulatory assets	324		302
Operating lease right-of-use assets, net	19		20
Investments in equity method unconsolidated affiliates	88		88
Other	274		270
Total other noncurrent assets	754		729
Total Assets	$	8,918	$	8,615
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	166	$	230
Accounts payable to affiliated companies	58		79
Notes payable to affiliated companies	—		530
Taxes accrued	68		23
Interest accrued	37		34
Current maturities of long-term debt	160		160
Regulatory liabilities	70		88
Other	73		69
Total current liabilities	632		1,213
Long-Term Debt	2,967		2,620
Other Noncurrent Liabilities
Deferred income taxes	837		821
Asset retirement obligations	20		20
Regulatory liabilities	1,015		1,044
Operating lease liabilities	17		19
Accrued pension and other post-retirement benefit costs	8		8
Other	179		155
Total other noncurrent liabilities	2,076		2,067
Commitments and Contingencies	0		0
Equity
Common stock, no par value: 100 shares authorized and outstanding at 2021 and 2020	1,635		1,310
Retained earnings	1,608		1,405
Total equity	3,243		2,715
Total Liabilities and Equity	$	8,918	$	8,615

See Notes to Condensed Consolidated Financial Statements

39

FINANCIAL STATEMENTS

PIEDMONT NATURAL GAS COMPANY, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ended
	March 31,
(in millions)	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	203	$	178
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	48		46
Equity component of AFUDC	(6)		(5)
Deferred income taxes	(12)		12
Equity in earnings from unconsolidated affiliates	(2)		(2)
(Increase) decrease in
Receivables	(8)		65
Receivables from affiliated companies	—		(3)
Inventory	31		33
Other current assets	66		(9)
Increase (decrease) in
Accounts payable	(63)		(76)
Accounts payable to affiliated companies	(21)		9
Taxes accrued	45		12
Other current liabilities	(16)		(12)
Other assets	2		1
Other liabilities	(2)		(19)
Net cash provided by operating activities	265		230
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(200)		(231)
Notes receivable from affiliated companies	(198)		—
Other	(8)		(5)
Net cash used in investing activities	(406)		(236)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	347		—
Notes payable to affiliated companies	(530)		10
Capital contributions from parent	325		—
Net cash provided by financing activities	142		10
Net increase in cash and cash equivalents	1		4
Cash and cash equivalents at beginning of period	—		—
Cash and cash equivalents at end of period	$	1	$	4
Supplemental Disclosures:
Significant non-cash transactions:
Accrued capital expenditures	$	106	$	114

See Notes to Condensed Consolidated Financial Statements

40

FINANCIAL STATEMENTS

PIEDMONT NATURAL GAS COMPANY, INC.

Condensed Consolidated Statements of Changes in Equity

(Unaudited)

	Common		Retained		Total
(in millions)	Stock		Earnings		Equity
Balance at December 31, 2019	$	1,310	$	1,133	$	2,443
Net income	—		178		178
Other	—		(1)		(1)
Balance at March 31, 2020	$	1,310	$	1,310	$	2,620
Balance at December 31, 2020	$	1,310	$	1,405	$	2,715
Net income	—		203		203
Contribution from parent	325		—		325
Balance at March 31, 2021	$	1,635	$	1,608	$	3,243

See Notes to Condensed Consolidated Financial Statements

41

FINANCIAL STATEMENTS ORGANIZATION 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

Registrant

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

Duke Energy

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•

Duke Energy Carolinas

•

•

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•

•

•

•

•

•

•

•

Progress Energy

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

Duke Energy Progress

•

•

•

•

•

•

•

•

•

•

•

•

•

•

Duke Energy Florida

•

•

•

•

•

•

•

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•

•

•

•

•

Duke Energy Ohio

•

•

•

•

•

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•

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•

•

•

•

•

•

Duke Energy Indiana

•

•

•

•

•

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•

•

•

•

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•

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

BASIS OF PRESENTATION

These Condensed Consolidated Financial Statements have been prepared in accordance with 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 and should be read in conjunction with the Consolidated Financial Statements in the Duke Energy Registrants’ combined Annual Report on Form 10-K for the year ended December 31, 2020.

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.

BASIS OF CONSOLIDATION

These Condensed Consolidated Financial Statements include, after eliminating intercompany transactions and balances, the accounts of the Duke Energy Registrants and subsidiaries or VIEs where the respective Duke Energy Registrants have control. See Note 11 for 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.

OTHER CURRENT LIABILITIES

Included in Other within Current Liabilities on the Duke Energy Condensed Consolidated Balance Sheet is a current liability of $46 million and $936 million as of March 31, 2021, and December 31, 2020, respectively. The current liability, initially recorded in 2020, primarily represented Duke Energy's share of ACP's obligations of outstanding debt and to satisfy ARO requirements to restore construction sites. See Notes 3 and 11 for further information.

NONCONTROLLING INTEREST

Duke Energy maintains a controlling financial interest in certain less than wholly owned nonregulated 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 Hypothetical Liquidation at Book Value (HLBV) method in allocating income 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 over the IRS recapture period, 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 income or loss allocated to each owner for the reporting period.

42

FINANCIAL STATEMENTS ORGANIZATION 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.

The following table presents cash received for the sale of noncontrolling interest and allocated losses to noncontrolling interest for the three months ended March 31, 2021, and 2020.

	Three Months Ended March 31,
(in millions)		2021		2020
Noncontrolling Interest Capital Contributions
Cash received for the sale of noncontrolling interest to tax equity members		$	303	$	103
Cash received for the sale of noncontrolling interest to pro rata share members		0		0
Total Noncontrolling Interest Capital Contributions		303		103
Noncontrolling Interest Allocation of Income
Allocated losses to noncontrolling tax equity members utilizing the HLBV method		43		49
Allocated losses (gains) to noncontrolling members based on pro rata shares of ownership		8		(1)
Total Noncontrolling Interest Allocated Losses		$	51	$	48

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 VIEs. See Notes 9 and 11 for additional information. Restricted cash amounts are included in Other within Current Assets and Other Noncurrent 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.

	March 31, 2021						December 31, 2020
					Duke						Duke
	Duke		Progress		Energy		Duke		Progress		Energy
	Energy		Energy		Florida		Energy		Energy		Florida
Current Assets
Cash and cash equivalents	$	379	$	74	$	22	$	259	$	59	$	11
Other	210		13		13		194		39		39
Other Noncurrent Assets
Other	103		102		—		103		102		—
Total cash, cash equivalents and restricted cash	$	692	$	189	$	35	$	556	$	200	$	50

INVENTORY

Provisions for inventory write-offs were not material at March 31, 2021, and December 31, 2020. The components of inventory are presented in the tables below.

	March 31, 2021
			Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Materials and supplies	$	2,365	$	816	$	1,011	$	680	$	332	$	77	$	313	$	11
Coal	464		170		160		101		59		12		122		—
Natural gas, oil and other fuel	247		35		165		101		64		19		1		26
Total inventory	$	3,076	$	1,021	$	1,336	$	882	$	455	$	108	$	436	$	37

	December 31, 2020
			Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Materials and supplies	$	2,312	$	785	$	999	$	673	$	325	$	78	$	307	$	12
Coal	561		186		193		131		63		16		165		—
Natural gas, oil and other fuel	294		39		183		107		76		16		1		56
Total inventory	$	3,167	$	1,010	$	1,375	$	911	$	464	$	110	$	473	$	68

43

FINANCIAL STATEMENTS ORGANIZATION AND BASIS OF PRESENTATION

NEW ACCOUNTING STANDARDS

No new accounting standards were adopted by the Duke Energy Registrants in 2021, but the following accounting standard was adopted by the Duke Energy Registrants in 2020.

Current Expected Credit Losses. In June 2016, the Financial Accounting Standards Board (FASB) issued new accounting guidance for credit losses. Duke Energy adopted the new accounting guidance for credit losses effective January 1, 2020, using the modified retrospective method of adoption, which does not require restatement of prior year results. Duke Energy did not adopt any practical expedients.

Duke Energy recognizes allowances for credit losses based on management's estimate of losses expected to be incurred over the lives of certain assets or guarantees. Management monitors credit quality, changes in expected credit losses and the appropriateness of the allowance for credit losses on a forward-looking basis. Management reviews the risk of loss periodically as part of the existing assessment of collectability of receivables.

Duke Energy reviews the credit quality of its counterparties as part of its regular risk management process and requires credit enhancements, such as deposits or letters of credit, as appropriate and as allowed by regulators.

Duke Energy recorded cumulative effects of changes in accounting principles related to the adoption of new credit loss standard, for allowances for credit losses of trade and other receivables, insurance receivables and financial guarantees. These amounts are included in the Condensed Consolidated Balance Sheets in Receivables, Receivables of VIEs, Other Noncurrent Assets and Other Noncurrent Liabilities. See Notes 4 and 12 for more information.

Duke Energy recorded an adjustment for the cumulative effect of a change in accounting principle due to the adoption of this standard on January 1, 2020, as shown in the table below:

	January 1, 2020
			Duke				Duke		Duke
	Duke		Energy		Progress		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Piedmont
Total pretax impact to Retained Earnings	$	120	$	16	$	2	$	1	$	1	$	1

The following new accounting standard has been issued but not yet adopted by the Duke Energy Registrants as of March 31, 2021.

Reference Rate Reform. In March 2020, the FASB issued new accounting guidance for reference rate reform. This guidance is elective and provides expedients to facilitate financial reporting for the anticipated transition away from the London Inter-bank Offered Rate (LIBOR) and other interbank reference rates by the end of 2021. The optional expedients are effective for modification of existing contracts or new arrangements executed between March 12, 2020, through December 31, 2022.

Duke Energy has variable-rate debt and manages interest rate risk by entering into financial contracts including interest rate swaps that are generally indexed to LIBOR. Impacted financial arrangements extending beyond 2021 may require contractual amendment or termination to fully adapt to a post-LIBOR environment. Duke Energy is assessing these financial arrangements and is evaluating the use of optional expedients outlined in the new accounting guidance. Alternative index provisions are also being assessed and incorporated into new financial arrangements that extend beyond 2021. The full outcome of the transition away from LIBOR cannot be determined at this time, but is not expected to have a material impact on the financial statements.

2. BUSINESS SEGMENTS

Duke Energy

Duke Energy's segment structure includes the following segments: Electric Utilities and Infrastructure, Gas Utilities and Infrastructure and Commercial Renewables. The Electric Utilities and Infrastructure segment primarily includes Duke Energy's regulated electric utilities in the Carolinas, Florida and the Midwest. 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.

The Commercial Renewables segment is primarily comprised of nonregulated utility-scale wind and solar generation assets located throughout the U.S. In 2021, Duke Energy continues to monitor recoverability of its renewable merchant plants located in the Electric Reliability Council of Texas West market and in the PJM West market due to declining market pricing and declining long-term forecasted energy prices, primarily driven by lower forecasted natural gas prices. The assets were not impaired as of March 31, 2021, because the carrying value of approximately $210 million continues to approximate the aggregate estimated future undiscounted cash flows. A continued decline in energy market pricing would likely result in a future impairment. Duke Energy retained 51% ownership interest in these facilities following the 2019 transaction to sell a minority interest in certain renewable assets.

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, Duke Energy’s wholly owned captive insurance company, Bison, and Duke Energy's ownership interest in National Methanol Company.

44

FINANCIAL STATEMENTS BUSINESS SEGMENTS

Business segment information is presented in the following tables. Segment assets presented exclude intercompany assets.

	Three Months Ended March 31, 2021
	Electric		Gas				Total
	Utilities and		Utilities and		Commercial		Reportable
(in millions)	Infrastructure		Infrastructure		Renewables		Segments		Other		Eliminations		Total
Unaffiliated revenues	$	5,273	$	752	$	119	$	6,144	$	6	$	—	$	6,150
Intersegment revenues	8		23		—		31		20		(51)		—
Total revenues	$	5,281	$	775	$	119	$	6,175	$	26	$	(51)	$	6,150
Segment income (loss)(a)	$	820	$	245	$	27	$	1,092	$	(139)	$	—	$	953
Less: Noncontrolling interests													51
Add: Preferred stock dividend													39
Net Income													$	941
Segment assets	$	138,734	$	14,139	$	6,894	$	159,767	$	3,710	$	(12)	$	163,465

	Three Months Ended March 31, 2020
	Electric		Gas				Total
	Utilities and		Utilities and		Commercial		Reportable
(in millions)	Infrastructure		Infrastructure		Renewables		Segments		Other		Eliminations		Total
Unaffiliated revenues	$	5,174	$	640	$	129	$	5,943	$	6	$	—	$	5,949
Intersegment revenues	9		24		—		33		17		(50)		—
Total revenues	$	5,183	$	664	$	129	$	5,976	$	23	$	(50)	$	5,949
Segment income (loss)(b)	$	705	$	249	$	57	$	1,011	$	(112)	$	—	$	899
Less: Noncontrolling interests													48
Add: Preferred stock dividend													39
Net Income													$	890

(a)    Commercial Renewables includes a $35 million loss related to Texas Storm Uri, of which $8 million is recorded within Nonregulated electric and other revenues, $2 million within Operations, maintenance and other, $29 million within Equity in (losses) earnings of unconsolidated affiliates and $12 million within Loss Attributable to Noncontrolling Interests on the Condensed Consolidated Statements of Operations. See Note 4 for additional information. Gas Utilities and Infrastructure includes $6 million, recorded within Equity in (losses) earnings of unconsolidated affiliates on the Condensed Consolidated Statements of Operations, related to gas pipeline investments. See Note 3 for additional information.

(b)    Other includes a $98 million reversal, recorded within Operations, maintenance and other on the Condensed Consolidated Statements of Operations, related to 2018 severance costs due to the partial settlement of the Duke Energy Carolinas 2019 North Carolina rate case. See Note 3 for additional information.

Duke Energy Ohio

Duke Energy Ohio has 2 reportable segments, Electric Utilities and Infrastructure and Gas Utilities and Infrastructure. The remainder of Duke Energy Ohio's operations is presented as Other.

	Three Months Ended March 31, 2021
	Electric		Gas		Total
	Utilities and		Utilities and		Reportable
(in millions)	Infrastructure		Infrastructure		Segments		Other		Eliminations		Total
Total revenues	$	363	$	169	$	532	$	—	$	—	$	532
Segment income/Net income	$	50	$	43	$	93	$	(2)	$	—	$	91
Segment assets	$	6,544	$	3,575	$	10,119	$	29	$	(7)	$	10,141

	Three Months Ended March 31, 2020
	Electric		Gas		Total
	Utilities and		Utilities and		Reportable
(in millions)	Infrastructure		Infrastructure		Segments		Other		Total
Total revenues	$	346	$	152	$	498	$	—	$	498
Segment income/Net income	$	30	$	36	$	66	$	(1)	$	65

45

FINANCIAL STATEMENTS REGULATORY MATTERS

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

2021 Coal Ash Settlement

On January 22, 2021, Duke Energy Carolinas and Duke Energy Progress entered into the Coal Combustion Residuals Settlement Agreement (the “CCR Settlement Agreement”) with the North Carolina Public Staff (Public Staff), the North Carolina Attorney General’s Office and the Sierra Club (collectively, the "Settling Parties"), which was filed with the NCUC on January 25, 2021. The CCR Settlement Agreement resolves all coal ash prudence and cost recovery issues in connection with 2019 rate cases filed by Duke Energy Carolinas and Duke Energy Progress with the NCUC, as well as the equitable sharing issue on remand from the 2017 Duke Energy Carolinas and Duke Energy Progress North Carolina rate cases as a result of the December 11, 2020, North Carolina Supreme Court opinion. The settlement also provides clarity on coal ash cost recovery in North Carolina for Duke Energy Carolinas and Duke Energy Progress through January 2030 and February 2030 (the "Term"), respectively.

Duke Energy Carolinas and Duke Energy Progress agreed not to seek recovery of approximately $1 billion of systemwide deferred coal ash expenditures, but will retain the ability to earn a debt and equity return during the amortization period, which shall be five years in the pending 2019 North Carolina rate cases and will be set by the NCUC in future rate case proceedings. The equity return and the amortization period on deferred coal ash costs under the 2017 Duke Energy Carolinas and Duke Energy Progress North Carolina rate cases will remain unaffected. The equity return on deferred coal ash costs under the 2019 North Carolina rate cases and future rate cases in North Carolina will be set at 150 basis points lower than the authorized return on equity (ROE) then in effect, with a capital structure composed of 48% debt and 52% equity. Duke Energy Carolinas and Duke Energy Progress retain the ability to earn a full WACC return during the deferral period, which is the period from when costs are incurred until they are recovered in rates.

The Settling Parties agreed that execution by Duke Energy Carolinas and Duke Energy Progress of a settlement agreement between themselves and the NCDEQ dated December 31, 2019, (the “DEQ Settlement”) and the coal ash management plans included therein or subsequently approved by DEQ are reasonable and prudent. The Settling Parties retain the right to challenge the reasonableness and prudence of actions taken by Duke Energy Carolinas and Duke Energy Progress and costs incurred to implement the scope of work agreed upon in the DEQ Settlement, after February 1, 2020, and March 1, 2020, for Duke Energy Carolinas and Duke Energy Progress, respectively. The Settling Parties further agreed to waive rights through the Term to challenge the reasonableness or prudence of Duke Energy Carolinas’ and Duke Energy Progress’ historical coal ash management practices, and to waive the right to assert any arguments that future coal ash costs, including financing costs, shall be shared between either company and customers through equitable sharing or any other rate base or return adjustment that shares the revenue requirement burden of coal ash costs not otherwise disallowed due to imprudence.

The Settling Parties agreed to a sharing arrangement for future coal ash insurance litigation proceeds between Duke Energy Carolinas and Duke Energy Progress and North Carolina customers, if achieved.

On January 29, 2021, Duke Energy Carolinas and Duke Energy Progress filed joint motions with the Settling Parties seeking approval of the CCR Settlement Agreement, along with supporting testimony and exhibits from Duke Energy Carolinas and Duke Energy Progress. On February 5, 2021, the Public Staff filed testimony and exhibits supporting the CCR Settlement Agreement.

As a result of the CCR Settlement Agreement, Duke Energy Carolinas and Duke Energy Progress recorded a pretax charge of approximately $454 million and $494 million, respectively, in the fourth quarter of 2020 to Impairment charges and a reversal of approximately $50 million and $102 million, respectively, to Regulated electric operating revenues on the respective Consolidated Statements of Operations.

The Coal Ash Settlement was approved without modification in the NCUC Orders in the 2019 rate cases on March 31, 2021, and April 16, 2021, for Duke Energy Carolinas and Duke Energy Progress, respectively.

2020 North Carolina Storm Securitization Filings

On October 26, 2020, Duke Energy Carolinas and Duke Energy Progress filed a joint petition with the NCUC, as agreed to in partial settlements reached in the 2019 North Carolina Rate Cases for Duke Energy Carolinas and Duke Energy Progress, seeking authorization for the financing of the costs of each utility's storm recovery activities required as a result of Hurricane Florence, Hurricane Michael, Hurricane Dorian and Winter Storm Diego. Specifically, Duke Energy Carolinas and Duke Energy Progress requested that the NCUC find that their storm recovery costs and related financing costs are appropriately financed by debt secured by storm recovery property, and that the commission issue financing orders by which each utility may accomplish such financing using a securitization structure. On January 27, 2021, Duke Energy Carolinas, Duke Energy Progress and the Public Staff filed an Agreement and Stipulation of Partial Settlement, which is subject to review and approval of the NCUC, resolving certain accounting issues, including agreement to support an 18- to 20-year bond period. The total revenue requirement over a proposed 20-year bond period for the storm recovery charges is approximately $287 million for Duke Energy Carolinas and $920 million for Duke Energy Progress. A remote evidentiary hearing ended on January 29, 2021, and on February 1, 2021, the NCUC granted a motion by Duke Energy Carolinas and Duke Energy Progress for a temporary 30-day waiver of the 135-day time frame for the NCUC to issue orders on the joint petition, extending the deadline for the NCUC to issue an order to May 10, 2021. In the NCUC Orders in the 2019 rate cases on March 31, 2021, and April 16, 2021, for Duke Energy Carolinas and Duke Energy Progress, respectively, the reasonableness and prudence of the deferred storm costs was approved. Duke Energy Carolinas and Duke Energy Progress cannot predict the outcome of this matter.

46

FINANCIAL STATEMENTS REGULATORY MATTERS

COVID-19 Filings

North Carolina

Duke Energy Carolinas and Duke Energy Progress filed a joint petition on August 7, 2020, with the NCUC for deferral treatment of incremental costs and waived customer fees due to the COVID-19 pandemic. Comments on the joint petition were filed on November 5, 2020, and reply comments were filed on November 30, 2020. Duke Energy Carolinas and Duke Energy Progress cannot predict the outcome of this matter.

South Carolina

Duke Energy Carolinas and Duke Energy Progress filed a report on June 30, 2020, as required by PSCSC order, reporting revenue impact, costs and savings related to COVID-19 to date. On August 14, 2020, Duke Energy Carolinas and Duke Energy Progress filed a joint petition with the PSCSC for approval of an accounting order to defer incremental COVID-19 related costs incurred through June 30, 2020, and for the ongoing months during the duration of the COVID-19 pandemic. The deferral request did not include lost revenues. Updates on cost impacts were filed on September 30, 2020, and included financial impacts through the end of August 2020. On October 16, 2020, the South Carolina Office of Regulatory Staff (ORS) requested the PSCSC delay taking formal action on the deferral request until the ORS and any intervenors complete discovery. The PSCSC issued an order on October 21, 2020, to grant additional time to complete discovery until January 20, 2021, and to establish a procedural schedule. Updates on cost impacts were filed on December 30, 2020, and included financial impacts through November 30, 2020. On January 15, 2021, the ORS requested the PSCSC suspend the dates for the ORS report and public hearing. The ORS conferred with the companies regarding the status of the docket, and the parties mutually agreed that recently enacted federal laws addressing COVID-19 aid and recovery should be studied before further action is taken in this docket. On January 27, 2021, the PSCSC voted to grant the ORS request to suspend the virtual public hearing. The ORS filed its report on April 16, 2021. Duke Energy Carolinas and Duke Energy Progress cannot predict the outcome of this matter.

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. On February 28, 2018, Duke Energy Carolinas and the Public Staff filed an Agreement and Stipulation of Partial Settlement resolving certain portions of the proceeding. Terms of the settlement included an ROE of 9.9% and a capital structure of 52% equity and 48% debt. On June 22, 2018, the NCUC issued an order approving the Stipulation of Partial Settlement and requiring a revenue reduction.

The North Carolina Attorney General and other parties separately filed Notices of Appeal to the North Carolina Supreme Court. The North Carolina Supreme Court consolidated the Duke Energy Carolinas and Duke Energy Progress appeals. On December 11, 2020, the North Carolina Supreme Court issued an opinion, which affirmed, in part, and reversed and remanded, in part, the NCUC’s decisions. In the Opinion, the court upheld the NCUC's decision to include coal ash costs in the cost of service, as well as the NCUC’s discretion to allow a return on the unamortized balance of coal ash costs. The court also remanded to the NCUC a single issue to consider the assessment of support for the Public Staff’s equitable sharing argument. In response to a NCUC order seeking comments on the proposed procedure on remand, on January 11, 2021, Duke Energy Carolinas, Duke Energy Progress, the Public Staff, the North Carolina Attorney General, Sierra Club and Carolina Industrial Group for Fair Utility Rates II and III filed joint comments proposing that the NCUC not hold additional evidentiary hearings, but instead rely upon existing records in the 2017 North Carolina rate cases, or in the alternative the records in the 2019 North Carolina rate cases, in deciding the issue on remand. On January 22, 2021, Duke Energy Carolinas and Duke Energy Progress entered into the CCR Settlement Agreement with the Settling Parties, which was filed with the NCUC on January 25, 2021, and approved by the NCUC on March 31, 2021.

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 represented an approximate 6% increase in annual base revenues. The gross rate case revenue increase request was $445 million, which was 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 a rate increase was 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 requested rates be effective no later than August 1, 2020. The NCUC established a procedural schedule with an evidentiary hearing to begin on March 23, 2020. On March 16, 2020, in consideration of public health and safety as a result of the COVID-19 pandemic, Duke Energy Carolinas filed a motion with the NCUC seeking a suspension of the procedural schedule in the rate case, including issuing discovery requests, and postponement of the evidentiary hearing for 60 days. Also on March 16, 2020, the NCUC issued an Order Postponing Hearing and Addressing Procedural Matters, which postponed the evidentiary hearing until further order by the commission.

On March 25, 2020, Duke Energy Carolinas and the Public Staff filed an Agreement and Stipulation of Partial Settlement, subject to review and approval of the NCUC, resolving certain issues in the base rate proceeding. On July 24, 2020, Duke Energy Carolinas filed its request for approval of its notice to customers required to implement temporary rates. On July 27, 2020, Duke Energy Carolinas filed a joint motion with Duke Energy Progress and the Public Staff notifying the commission that the parties reached a joint partial settlement with the Public Staff. Also on July 27, 2020, Duke Energy Carolinas filed a letter stating that it intended to update its temporary rates calculation to reflect the terms of the partial settlement. On July 31, 2020, Duke Energy Carolinas and the Public Staff filed a Second Agreement and Stipulation of Partial Settlement (Second Partial Settlement), subject to review and approval of the NCUC, resolving certain remaining issues in the base rate proceeding. The remaining items litigated at hearing included recovery of deferred coal ash compliance costs that are subject to asset retirement obligation accounting, implementation of new depreciation rates and the amortization period of the loss on the hydro station sale.

On August 4, 2020, Duke Energy Carolinas filed an amended motion for approval of its amended notice to customers, seeking to exercise its statutory right to implement temporary rates subject to refund on or after August 24, 2020. The revenue requirement to be recovered, subject to refund, through the temporary rates was based on and consistent with the base rate component of the Second Partial Settlement and excluded the items to be litigated noted above. The NCUC approved the August 4, 2020 amended temporary rates motion on August 6, 2020, and temporary rates went into effect on August 24, 2020.

47

FINANCIAL STATEMENTS REGULATORY MATTERS

The Duke Energy Carolinas evidentiary hearing concluded on September 18, 2020, and post-hearing filings were made with the NCUC from all parties by November 4, 2020. On January 22, 2021, Duke Energy Carolinas and Duke Energy Progress entered into the CCR Settlement Agreement with the Settling Parties, which was filed with the NCUC on January 25, 2021.

On March 31, 2021, the NCUC issued an order approving the March 25, 2020, and July 31, 2020, partial settlements. The order includes approval of 1) an ROE of 9.6% based upon a capital structure of 52% equity and 48% debt; 2) deferral treatment of approximately $800 million of grid improvement projects with a return; 3) a flow back period of five years for unprotected federal EDIT; and 4) the reasonableness and prudence of $213 million of deferred storm costs, which were removed from the rate case and for which Duke Energy Carolinas filed a petition seeking securitization in October 2020. Additionally, the order approved without modification the CCR Settlement Agreement.

The order denied Duke Energy Carolinas' proposal to shorten the remaining depreciable lives of certain Duke Energy Carolinas coal-fired generating units, indicating the appropriate proceeding for the review of generating plant retirements is Duke Energy Carolinas' integrated resource planning (IRP) proceeding.

On April 12, 2021, Duke Energy Carolinas filed its final revenue requirement with the NCUC, which results in a net increase of approximately $33 million. Revised customer rates are expected to become effective in June 2021.

2018 South Carolina Rate Case

On November 8, 2018, Duke Energy Carolinas filed an application with the PSCSC for a rate increase for retail customers of approximately $168 million.

After hearings in March 2019, the PSCSC issued an order on May 21, 2019, which included an ROE 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.

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 PSCSC 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, ROE 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 filed a notice of appeal on November 15, 2019, with the Supreme Court of South Carolina. On November 20, 2019, the South Carolina Energy Users Committee filed a Notice of Appeal with the Supreme Court of South Carolina. Initial briefs were filed on April 21, 2020, which included the South Carolina Energy User's Committee brief arguing that the PSCSC erred in allowing Duke Energy Carolinas' recovery of costs related to the Lee Nuclear Station. Response briefs were filed on July 6, 2020, and reply briefs were filed on August 11, 2020. Oral arguments before the Supreme Court of South Carolina have been scheduled to occur on May 26, 2021. Based on legal analysis and the filing of the appeal, Duke Energy Carolinas has not recorded an adjustment for its deferred coal ash costs in this matter. Duke Energy Carolinas cannot predict the outcome of this matter.

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 was subsequently adjusted to $420 million. 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 an ROE of 9.9% and a capital structure of 52% equity and 48% debt. On February 23, 2018, the NCUC issued an order approving the stipulation. The Public Staff, the North Carolina Attorney General and the Sierra Club filed notices of appeal to the North Carolina Supreme Court.

48

FINANCIAL STATEMENTS REGULATORY MATTERS

The North Carolina Supreme Court consolidated the Duke Energy Carolinas and Duke Energy Progress appeals. On December 11, 2020, the North Carolina Supreme Court issued an opinion, which affirmed, in part, and reversed and remanded, in part, the NCUC’s decisions. In the Opinion, the court upheld the NCUC's decision to include coal ash costs in the cost of service, as well as the NCUC’s discretion to allow a return on the unamortized balance of coal ash costs. The court also remanded to the NCUC a single issue to consider the assessment of support for the Public Staff’s equitable sharing argument. In response to a NCUC order seeking comments on the proposed procedure on remand, on January 11, 2021, Duke Energy Carolinas, Duke Energy Progress, the Public Staff, the North Carolina Attorney General, Sierra Club and Carolina Industrial Group for Fair Utility Rates II and III filed joint comments proposing that the NCUC not hold additional evidentiary hearings, but instead rely upon existing records in the 2017 North Carolina rate cases or in the alternative the records in the 2019 North Carolina rate cases, in deciding the issue on remand. On January 22, 2021, Duke Energy Progress and Duke Energy Carolinas entered into the CCR Settlement Agreement with the Settling Parties, which was filed with the NCUC on January 25, 2021, and approved by the NCUC on April 16, 2021.

2019 North Carolina Rate Case

On October 30, 2019, Duke Energy Progress filed an application with the NCUC for a net rate increase for retail customers of approximately $464 million, which represented an approximate 12.3% increase in annual base revenues. The gross rate case revenue increase request was $586 million, which was 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 was 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 Progress sought to defer and recover incremental Hurricane Dorian storm costs in this proceeding and requested rates be effective no later than September 1, 2020. As a result of the COVID-19 pandemic, on March 24, 2020, the NCUC suspended the procedural schedule and postponed the previously scheduled evidentiary hearing on this matter indefinitely. On April 7, 2020, the NCUC issued an order partially resuming the procedural schedule requiring intervenors to file direct testimony on April 13, 2020. Public Staff filed supplemental direct testimony on April 23, 2020. Duke Energy Progress filed rebuttal testimony on May 4, 2020.

On June 2, 2020, Duke Energy Progress and the Public Staff filed an Agreement and Stipulation of Partial Settlement, subject to review and approval of the NCUC, resolving certain issues in the base rate proceeding. On July 27, 2020, Duke Energy Progress filed a joint motion with Duke Energy Carolinas and the Public Staff notifying the commission that the parties reached a joint partial settlement with the Public Staff. On July 31, 2020, Duke Energy Progress and the Public Staff filed a Second Agreement and Stipulation of Partial Settlement, subject to review and approval of the NCUC, resolving certain remaining issues in the base rate proceeding. The remaining items litigated at hearing included recovery of deferred coal ash compliance costs that are subject to asset retirement obligation accounting and implementation of new depreciation rates.

On August 7, 2020, Duke Energy Progress filed a motion for approval of notice required to implement temporary rates, seeking to exercise its statutory right to implement temporary rates subject to refund on or after September 1, 2020. The revenue requirement to be recovered subject to refund through the temporary rates was based on and consistent with the terms of the base rate component of the settlement agreements with the Public Staff and excluded items to be litigated noted above. Duke Energy Progress will not begin the amortization or implementation of these items until a final determination is issued in the rate case and new base rates are implemented. These items will also be excluded when determining whether a refund of amounts collected through these temporary rates is needed. In addition, Duke Energy Progress also sought authorization to place a temporary decrement EDIT Rider into effect, concurrent with the temporary base rate change. The temporary rate changes are not final rates and remain subject to the NCUC's determination of the just and reasonable rates to be charged by Duke Energy Progress on a permanent basis. The NCUC approved the August 7, 2020 temporary rates motion on August 11, 2020, and temporary rates went into effect on September 1, 2020.

The Duke Energy Progress evidentiary hearing concluded on October 6, 2020, and post-hearing filings were filed with the NCUC from all parties by December 4, 2020. On January 22, 2021, Duke Energy Progress and Duke Energy Carolinas entered into the CCR Settlement Agreement with the Settling Parties, which was filed with the NCUC on January 25, 2021.

On April 16, 2021, the NCUC issued an order approving the June 2, 2020, and July 31, 2020, partial settlements. The order includes approval of 1) an ROE of 9.6% based upon a capital structure of 52% equity and 48% debt; 2) deferral treatment of approximately $400 million of grid improvement projects with a return; 3) a flow back period of five years for unprotected federal EDIT; and 4) the reasonableness and prudence of approximately $714 million of deferred storm costs, which were removed from the rate case and for which Duke Energy Progress filed a petition seeking securitization in October 2020. Additionally, the order approved without modification the CCR Settlement Agreement.

The order denied Duke Energy Progress' proposal to shorten the remaining depreciable lives of certain Duke Energy Progress coal-fired generating units, indicating the appropriate proceeding for the review of generating plant retirements is Duke Energy Progress' IRP proceeding.

On April 26, 2021, Duke Energy Progress filed its final revenue requirement with the NCUC, which results in a net increase of approximately $178 million. Revised customer rates are expected to become effective in June 2021.

Hurricane Dorian

Hurricane Dorian reached the Carolinas in September 2019 as a Category 2 hurricane making landfall within Duke Energy Progress’ service territory. Total estimated incremental operation and maintenance expenses incurred to repair and restore the system are approximately $168 million with an additional $4 million in capital investments made for restoration efforts. Approximately $145 million of the operation and maintenance expenses are deferred in Regulatory assets within Other Noncurrent Assets on the Condensed Consolidated Balance Sheets as of March 31, 2021, and December 31, 2020. A request for an accounting order to defer incremental storm costs associated with Hurricane Dorian was included in Duke Energy Progress' October 30, 2019, general rate case filing with the NCUC. Terms of the June 2, 2020, Agreement and Stipulation of Partial Settlement removed incremental storm costs from the general rate case. A petition seeking to securitize these costs, along with costs from Hurricane Florence, Hurricane Michael and Winter Storm Diego, was filed on October 26, 2020, with the NCUC. For information on the securitization filing, see "2020 North Carolina Storm Securitization Filings." Duke Energy Progress cannot predict the outcome of this matter.

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FINANCIAL STATEMENTS REGULATORY MATTERS

2018 South Carolina Rate Case

On November 8, 2018, Duke Energy Progress filed an application with the PSCSC for a rate increase for retail customers of approximately $59 million.

After hearings in April 2019, the PSCSC issued an order on May 21, 2019, which included an ROE 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%;

•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 PSCSC 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, ROE 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 filed a notice of appeal on November 15, 2019, with the Supreme Court of South Carolina. Initial briefs were filed on April 21, 2020. Response briefs were filed on July 6, 2020, and reply briefs were filed on August 11, 2020. Oral arguments before the Supreme Court of South Carolina have been scheduled to occur on May 26, 2021. Based on legal analysis and the filing of the appeal, Duke Energy Progress has not recorded an adjustment for its deferred coal ash costs in this matter. Duke Energy Progress cannot predict the outcome of this matter.

Western Carolinas Modernization Plan

On October 8, 2018, Duke Energy Progress filed an application with the NCUC for a CPCN to construct the Hot Springs Microgrid Solar and Battery Storage Facility, which was approved with certain conditions on May 10, 2019. A hearing to update the NCUC on the status of the project was held on March 5, 2020. Construction began in May 2020 with commercial operation expected to begin in October 2021.

On July 27, 2020, Duke Energy Progress filed an application with the NCUC for a CPCN to construct the Woodfin Solar Facility, a 5-MW solar generating facility to be constructed on a closed landfill in Buncombe County. The expert hearing was held on November 18, 2020. The application was approved and a CPCN was granted by order of the NCUC on April 20, 2021.

FERC Return on Equity Complaints

On October 11, 2019, North Carolina Eastern Municipal Power Agency (NCEMPA) filed a complaint at the FERC against Duke Energy Progress pursuant to Section 206 of the Federal Power Act (FPA), alleging that the 11% stated ROE component contained in the demand formula rate in the Full Requirements Power Purchase Agreement (FRPPA) between NCEMPA and Duke Energy Progress is unjust and unreasonable. On July 16, 2020, the FERC set this matter for hearing and settlement judge procedures and established a refund effective date of October 11, 2019. In its order setting the matter for settlement, the FERC allowed for the consideration of variations to the base transmission-related ROE methodology developed in its Order No. 569-A, through the introduction of “specific facts and circumstances” involving issues specific to the case. The parties reached a settlement in principle at a settlement conference on January 7, 2021, and filed a settlement package on March 10, 2021. The FERC Trial Staff filed comments in support of the settlement. On April 19, 2021, the Settlement Judge certified the settlement to the FERC as an uncontested settlement and recommended approval by the FERC. Duke Energy Progress cannot predict the outcome of this matter.

On October 16, 2020, North Carolina Electric Membership Corporation (NCEMC) filed a complaint at the FERC against Duke Energy Progress pursuant to Section 206 of the FPA, alleging that the 11% stated ROE component in the demand formula rate in the Power Supply and Coordination Agreement between NCEMC and Duke Energy Progress is unjust and unreasonable. Under FPA Section 206, the earliest refund effective date that the FERC can establish is the date of the filing of the complaint. Duke Energy Progress responded to the complaint on November 20, 2020, seeking dismissal, demonstrating that the 11% ROE is just and reasonable for the service provided. The parties filed responsive pleadings and are awaiting an order from the FERC. Duke Energy Progress cannot predict the outcome of this matter.

Duke Energy Florida

2021 Settlement Agreement

On January 14, 2021, Duke Energy Florida filed a Settlement Agreement (the “Settlement”) with the FPSC. The parties to the Settlement include Duke Energy Florida, the Office of Public Counsel (OPC), the Florida Industrial Power Users Group, White Springs Agricultural Chemicals, Inc. d/b/a PCS Phosphate and NUCOR Steel Florida, Inc. (collectively, the “Parties”).

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FINANCIAL STATEMENTS REGULATORY MATTERS

Pursuant to the Settlement, the parties agreed to a base rate stay-out provision that expires year-end 2024; however, Duke Energy Florida is allowed an increase to its base rates of an incremental $67 million in 2022, $49 million in 2023 and $79 million in 2024, subject to adjustment in the event of tax reform during the years 2021, 2022 and 2023. The parties also agreed to a ROE band of 8.85% to 10.85% with a midpoint of 9.85% based on a capital structure of 53% equity and 47% debt. The ROE band can be increased by 25 basis points if the average 30-year U.S. Treasury rate increases 50 basis points or more over a six-month period in which case the midpoint ROE would rise from 9.85% to 10.10%. Duke Energy Florida will also be able to retain the DOE award of approximately $173 million for spent nuclear fuel, which is expected to be received in 2022, in order to mitigate customer rates over the term of the Settlement. In return, Duke Energy Florida will be able to recognize the $173 million into earnings from 2022 through 2024.

In addition to these terms, the Settlement contains provisions related to the accelerated depreciation of Crystal River Units 4-5, the approval of approximately $1 billion in future investments in new cost effective solar power, the implementation of a new Electric Vehicle Charging Station Program and the deferral and recovery of costs in connection with the implementation of Duke Energy Florida’s Vision Florida program, which explores various emerging non-carbon emitting generation technology, distributed technologies and resiliency projects, among other things. The Settlement also resolves remaining unrecovered storm costs for hurricanes Dorian and Michael.

The FPSC approved the Settlement on May 4, 2021. Revised customer rates will be effective January 1, 2022, with subsequent base rate increases effective January 1, 2023, and January 1, 2024.

Storm Restoration Cost Recovery

Duke Energy Florida filed a petition with the FPSC on April 30, 2019, to recover $223 million of estimated retail incremental storm restoration costs for Hurricane Michael, consistent with the provisions in the 2017 Settlement, and the FPSC approved the petition on June 11, 2019. The FPSC also approved allowing 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. On November 22, 2019, Duke Energy Florida filed a petition for approval of actual retail recoverable storm restoration costs related to Hurricane Michael in the amount of $191 million plus interest. On May 19, 2020, Duke Energy Florida filed a supplemental true up reducing the actual retail recoverable storm restoration costs related to Hurricane Michael by approximately $3 million, resulting in a total request to recover $188 million actual retail recoverable storm restoration costs, plus interest. Approximately $42 million and $80 million of these costs are included in Regulatory assets within Current Assets and Other Noncurrent Assets on the Condensed Consolidated Balance Sheets as of March 31, 2021, and December 31, 2020, respectively.

Duke Energy Florida filed a petition with the FPSC on December 19, 2019, to recover $169 million of estimated retail incremental storm restoration costs for Hurricane Dorian, consistent with the provisions in the 2017 Settlement and the FPSC approved the petition on February 24, 2020. The final actual amount of $145 million was filed on September 30, 2020. The Settlement was approved by the FPSC and all matters regarding storm cost recovery relating to Hurricane Michael and Hurricane Dorian are resolved.

Clean Energy Connection

On July 1, 2020, Duke Energy Florida petitioned the FPSC for approval of a voluntary solar program. The program consists of 10 new solar generating facilities with combined capacity of approximately 750 MW. The program allows participants to support cost-effective solar development in Florida by paying a subscription fee based on per kilowatt-subscriptions and receiving a credit on their bill based on the actual generation associated with their portion of the solar portfolio. The estimated cost of the 10 new solar generation facilities is approximately $1 billion over the next four years, and this investment will be included in base rates offset by the revenue from the subscription fees. The credits will be included for recovery in the fuel cost recovery clause. A remote hearing was held on November 17, 2020, and post-hearing briefs were filed with the FPSC from all parties by December 9, 2020. The FPSC voted to approve the program on January 5, 2021, and issued its written order on January 26, 2021.

On February 24, 2021, the League of United Latin American Citizens filed a notice of appeal of the FPSC’s Order approving the Clean Energy Connection to the Florida Supreme Court. The FPSC approval order remains in effect pending the outcome of the appeal. Duke Energy Florida cannot predict the outcome of this matter.

Duke Energy Ohio

Ohio House Bill 6

On July 23, 2019, House Bill 6 was signed into law that became effective January 1, 2020. Among other things, the bill allows for funding, through a rider mechanism referred to as the Clean Air Fund (Rider CAF), of 2 nuclear generating facilities located in Northern Ohio owned by Energy Harbor (f/k/a FirstEnergy Solutions), repeal of energy efficiency mandates and recovery of prudently incurred costs, net of any revenues, for Ohio investor-owned utilities that are participants under the OVEC power agreement. The recovery is through a non-bypassable rider that replaced any existing recovery mechanism approved by the PUCO and will remain in place through 2030. As such, Duke Energy Ohio created the Legacy Generation Rider (Rider LGR) that replaced Rider PSR effective January 1, 2020. The amounts recoverable from customers are subject to an annual cap, with incremental costs that exceed such cap eligible for deferral and recovery subject to review. See Note 11 for additional discussion of Duke Energy Ohio's ownership interest in OVEC. House Bill 128 was signed into law on March 31, 2021, which becomes effective June 30, 2021. The bill removes nuclear plant funding from Rider CAF and does not impact OVEC cost recovery.

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FINANCIAL STATEMENTS REGULATORY MATTERS

Energy Efficiency Cost Recovery

On February 26, 2020, the PUCO issued an order directing utilities to wind down their demand-side management programs by September 30, 2020, and to terminate the programs by December 31, 2020, in response to changes in Ohio law that eliminated Ohio's energy efficiency mandates. On March 27, 2020, Duke Energy Ohio filed an Application for Rehearing seeking clarification on the final true up and reconciliation process after 2020. On November 18, 2020, the PUCO issued two orders on the application for rehearing. The first order was a Third Entry on Rehearing on the Duke Energy Ohio portfolio holding the cost cap previously imposed was unlawful, a shared savings cap of $8 million pretax should be imposed and lost distribution revenues could not be recovered after December 31, 2020. The second order directs all utilities set the rider to zero effective January 1, 2021, and to file a separate application for final reconciliation of all energy efficiency costs prior to December 31, 2020. On December 18, 2020, Duke Energy Ohio filed an application for rehearing. On January 13, 2021, the application for rehearing was granted for further consideration. Duke Energy Ohio cannot predict the outcome of this matter.

On October 9, 2020, Duke Energy Ohio filed an application to implement a voluntary efficiency program portfolio to commence on January 1, 2021. The application proposes a mechanism for recovery of program costs and a benefit associated with avoided transmission and distribution costs. The application remains under review. As of January 1, 2021, Duke Energy Ohio suspended its energy efficiency programs due to changes in Ohio law. Duke Energy Ohio cannot predict the outcome of this matter.

Natural Gas Pipeline Extension

Duke Energy Ohio is installing 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) and that construction of the pipeline extension will be completed before the 2021/2022 winter season. An evidentiary hearing for a Certificate of Environmental Compatibility and Public Need concluded on April 11, 2019. On November 21, 2019, the Ohio Power Siting Board (OPSB) approved Duke Energy Ohio's application subject to 41 conditions on construction. Applications for rehearing were filed by several stakeholders on December 23, 2019, arguing that the OPSB approval was incorrect. On February 20, 2020, the OPSB denied the rehearing requests. On April 15, 2020, Joint Appellants filed a notice of appeal at the Supreme Court of Ohio of the OPSB’s decision approving Duke Energy Ohio’s Central Corridor application. The appeal was fully briefed and the Ohio Supreme Court oral argument was held on March 31, 2021. Duke Energy Ohio cannot predict the outcome of this matter.

On September 22, 2020, Duke Energy Ohio filed an application with the OPSB for approval to amend the certificated pipeline route due to changes in the route negotiated with property owners and municipalities. On January 21, 2021, the OPSB approved the amended filing with recommended conditions that reaffirm previous conditions and provide guidance regarding local permitting and construction supervision. Duke Energy Ohio cannot predict the outcome of this matter.

MGP Cost Recovery

In an order issued in 2013, the PUCO approved Duke Energy Ohio's deferral and recovery of costs related to environmental remediation at 2 sites (East End and West End) that housed former MGP operations. Duke Energy Ohio has collected approximately $55 million in environmental remediation costs incurred between 2009 through 2012 through 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 base rate case. To date, the PUCO has not ruled on Duke Energy Ohio’s annual applications for the calendar years 2013 through 2019. On September 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 Ohio 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 reply comments objecting to the staff’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. 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 $20 million in 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. An evidentiary hearing concluded on November 21, 2019. Initial briefs were filed on January 17, 2020, and reply briefs were filed on February 14, 2020. Duke Energy Ohio cannot predict the outcome of this matter.

On March 31, 2020, Duke Energy Ohio filed its annual application to recover incremental remediation expense for the calendar year 2019 seeking recovery of approximately $39 million in remediation costs incurred during 2019. On July 23, 2020, the staff recommended a disallowance of approximately $4 million for work the staff believes occurred in areas not authorized for recovery. Additionally, the staff recommended insurance proceeds, net of litigation costs and attorney fees, should be reimbursed to customers and not be held by Duke Energy Ohio until all investigation and remediation is complete. Duke Energy Ohio filed comments in response to the staff report on August 21, 2020, and intervenor comments were filed on November 9, 2020. Duke Energy Ohio cannot predict the outcome of this matter.

The 2012 PUCO order also contained conditional deadlines for completing the MGP environmental remediation and the deferral of remediation costs at the MGP sites. Subsequent to the order, the deadline was extended to December 31, 2019. On May 10, 2019, Duke Energy Ohio filed an application requesting a continuation of its existing deferral authority for MGP remediation that must occur after December 31, 2019. On July 12, 2019, staff recommended the commission deny the deferral authority request. On September 13, 2019, intervenor comments were filed opposing Duke Energy Ohio's request for continuation of existing deferral authority and on October 2, 2019, Duke Energy Ohio filed reply comments. Duke Energy Ohio cannot predict the outcome of this matter.

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FINANCIAL STATEMENTS REGULATORY MATTERS

Tax Act – Ohio

On December 21, 2018, Duke Energy Ohio filed an application to change its base rate tariffs 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 tariff changes and rider effective April 1, 2019. The new rider will flow through to customers 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.

Duke Energy Kentucky Natural Gas Base Rate Case

On April 30, 2021, Duke Energy Kentucky filed a Notice of Intent with the KPSC to file a general natural gas rate case no earlier than 30 days from the date of the notice.

Duke Energy Indiana

2019 Indiana Rate Case

On July 2, 2019, Duke Energy Indiana filed a general rate case with the IURC for a rate increase for retail customers of approximately $395 million. The rebuttal case, filed on December 4, 2019, updated the requested revenue requirement to result in a 15.6% or $396 million average retail rate increase, including the impacts of the Utility Receipts Tax. Hearings concluded on February 7, 2020. On June 29, 2020, the IURC issued the order in the rate case approving a revenue increase of $146 million before certain adjustments and ratemaking refinements. The order provided for an overall cost of capital of 5.7% based on an ROE of 9.7% and a 53% equity component of the capital structure, and approved Duke Energy Indiana’s requested forecasted rate base of $10.2 billion as of December 31, 2020, including the Edwardsport IGCC Plant. The IURC reduced Duke Energy Indiana’s request by slightly more than $200 million, when accounting for the utility receipts tax and other adjustments. Approximately 50% of the reduction is due to a prospective change in depreciation and use of regulatory asset for the end-of-life inventory at retired generating plants, approximately 20% is due to the approved ROE of 9.7%versus the requested ROE of 10.4% and approximately 20% is related to miscellaneous earnings neutral adjustments. Step one rates are estimated to be approximately 75% of the total and became effective on July 30, 2020. Step two rates are estimated to be the remaining 25% of the total rate increase and will be implemented in mid-2021. Several groups appealed the IURC order to the Indiana Court of Appeals. Appellate briefs were filed on October 14, 2020, focusing on three issues: wholesale sales allocations, coal ash basin cost recovery and the Edwardsport IGCC operating and maintenance expense level approved. The appeal was fully briefed in January 2021 and an oral argument was held on April 8, 2021. A decision is expected in the second or third quarter of 2021. Duke Energy Indiana cannot predict the outcome of this matter.

2020 Indiana Coal Ash Recovery Case

In Duke Energy Indiana’s 2019 rate case, the IURC approved coal ash basin closure costs expended through 2018 including financing costs as a regulatory asset and included in rate base. The IURC opened a subdocket to deal with the post-2018 coal ash related expenditures. Duke Energy Indiana filed testimony on April 15, 2020, in the coal ash subdocket requesting recovery for the post-2018 coal ash basin closure costs for plans that have been approved by the Indiana Department of Environmental Management as well as continuing deferral, with carrying costs, on the balance. An evidentiary hearing was held on September 14, 2020, and the parties have agreed on a delayed briefing schedule that allows for the Indiana Rate Case appeal to proceed. Briefing will be completed by mid-August 2021. Duke Energy Indiana cannot predict the outcome of this matter.

Piedmont

2020 Tennessee Rate Case

On July 2, 2020, Piedmont filed an application with the TPUC, its first general rate case in Tennessee in nine years, for a rate increase for retail customers of approximately $30 million, which represents an approximate 15% increase in annual revenues. The rate increase is driven by significant infrastructure upgrade investments since Piedmont's previous rate case. Approximately half of the plant additions being added to rate base are categories of capital investment not covered under the IMR mechanism, which was approved in 2013. Piedmont amended its requested increase to approximately $26 million in December 2020. As authorized under Tennessee law, Piedmont implemented interim rates on January 2, 2021, at the level requested in its adjusted request. A settlement reached with the Tennessee Consumer Advocate in mid-January was filed with the TPUC on February 2, 2021. The settlement results in an increase of revenues of approximately $16 million and a ROE of 9.8%. On May 6, 2021, the TPUC issued an order approving the settlement. Revised customer rates became effective January 2, 2021. Piedmont refunded customers the difference between bills previously rendered under interim rates and such bills if rendered under approved rates, plus interest, in April 2021.

2021 North Carolina Rate Case

On March 22, 2021, Piedmont filed an application with the NCUC for a rate increase for retail customers of approximately $109 million, which represents an approximate 10% increase in retail revenues. The rate increase is driven by customer growth and significant infrastructure upgrade investments (plant additions) since the last general rate case. Approximately 30% of the plant additions being rolled into rate base are categories of plant investment that are covered under the IMR mechanism, which was originally approved as part of the 2013 North Carolina Rate Case. A hearing date has not yet been established. Piedmont cannot predict the outcome of this matter.

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FINANCIAL STATEMENTS REGULATORY MATTERS

OTHER REGULATORY MATTERS

Atlantic Coast Pipeline, LLC

Atlantic Coast Pipeline (ACP pipeline) was planned to be an approximately 600-mile interstate natural gas pipeline running from West Virginia to North Carolina. Duke Energy indirectly owns a 47% interest, which is accounted for as an equity method investment through its Gas Utilities and Infrastructure segment.

As a result of the uncertainty created by various legal rulings, the potential impact on the cost and schedule for the project, the ongoing legal challenges and the risk of additional legal challenges and delays through the construction period and Dominion’s decision to sell substantially all of its gas transmission and storage segment assets, Duke Energy's Board of Directors and management decided that it was not prudent to continue to invest in the project. On July 5, 2020, Duke Energy and Dominion announced the cancellation of the ACP pipeline project.

As part of the pretax charges to earnings of approximately $2.1 billion recorded in June 2020, within Equity in (losses) earnings of unconsolidated affiliates on the Duke Energy Condensed Consolidated Statements of Operations, Duke Energy established liabilities related to the cancellation of the ACP pipeline project. In February 2021, Duke Energy paid approximately $855 million to fund ACP's outstanding debt, relieving Duke Energy of its guarantee. At March 31, 2021, there is $38 million and $48 million within Other Current Liabilities and Other Noncurrent Liabilities, respectively, in the Gas Utilities and Infrastructure segment. The liabilities represent Duke Energy's obligation of approximately $86 million to satisfy remaining ARO requirements to restore construction sites.

See Notes 1 and 11 for additional information regarding this transaction.

Potential Coal Plant Retirements

The Subsidiary Registrants periodically file integrated resource plans 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 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 and plans to seek regulatory recovery for amounts that would not be otherwise recovered when any of these assets are retired.

The table below contains the net carrying value of generating facilities planned for retirement or included in recent integrated resource plans (IRPs) as evaluated for potential retirement. Dollar amounts in the table below are included in Net property, plant and equipment on the Condensed Consolidated Balance Sheets as of March 31, 2021, and exclude capitalized asset retirement costs.

		Remaining Net
	Capacity	Book Value
	(in MW)	(in millions)
Duke Energy Carolinas
Allen Steam Station Units 1-2(a)	334	$	21
Allen Steam Station Units 4-5(b)	526	388
Cliffside Unit 5(b)	546	343
Duke Energy Progress
Mayo Unit 1(b)	746	660
Roxboro Units 3-4(b)	1,409	478
Duke Energy Florida
Crystal River Units 4-5(c)	1,430	1,683
Duke Energy Indiana
Gallagher Units 2 and 4(d)	280	91
Gibson Units 1-5(e)	2,845	1,834
Cayuga Units 1-2(e)	1,005	755
Total Duke Energy	9,121	$	6,253

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FINANCIAL STATEMENTS REGULATORY MATTERS

(a)As part of the 2015 resolution of a lawsuit involving alleged New Source Review violations, Duke Energy Carolinas must retire Allen Steam Station Units 1 through 3 by December 31, 2024. The long-term energy options considered in the IRP could result in retirement of these units earlier than their current estimated useful lives. Unit 3 with a capacity of 270 MW and a net book value of $26 million at December 31, 2020, was retired in March 2021.

(b)These units are included in the IRP filed by Duke Energy Carolinas and Duke Energy Progress in North Carolina and South Carolina on September 1, 2020. The long-term energy options considered in the IRP could result in retirement of these units earlier than their current estimated useful lives. In 2019, Duke Energy Carolinas and Duke Energy Progress filed North Carolina rate cases that included depreciation studies that accelerate end-of-life dates for these plants. NCUC issued orders in the 2019 rate cases of Duke Energy Carolinas and Duke Energy Progress on March 31, 2021, and April 16, 2021, respectively, in which the proposals to shorten the remaining depreciable lives of these units were denied, while indicating the IRP proceeding was the appropriate proceeding for the review of generating plant retirements.

(c)On January 14, 2021, Duke Energy Florida filed a settlement agreement with the FPSC, which proposed depreciation rates reflecting retirement dates for Duke Energy Florida's last 2 coal-fired generating facilities, Crystal River Units 4-5, eight years ahead of schedule in 2034 rather than in 2042. The settlement was approved by the FPSC on May 4, 2021.

(d)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. In February 2021, upon approval by MISO of a new retirement date, Duke Energy Indiana determined it would modify the retirement date to June 1, 2021.

(e)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, included proposed depreciation rates reflecting retirement dates from 2026 to 2038. The depreciation rates reflecting these updated retirement dates were approved by the IURC as part of the rate case order issued on June 29, 2020.

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 Duke Energy Registrants.

Remediation Activities

In addition to 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.

The following table contains 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.

(in millions)	March 31, 2021		December 31, 2020
Reserves for Environmental Remediation
Duke Energy	$	74	$	75
Duke Energy Carolinas	18		19
Progress Energy	18		19
Duke Energy Progress	6		6
Duke Energy Florida	12		12
Duke Energy Ohio	21		22
Duke Energy Indiana	5		6
Piedmont	11		10

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	$	20
Duke Energy Carolinas	12
Duke Energy Ohio	4

55

FINANCIAL STATEMENTS COMMITMENTS AND CONTINGENCIES

LITIGATION

Duke Energy

Texas Storm Uri Tort Litigation

Duke Energy and several Duke Energy renewables project companies have been named in multiple lawsuits arising out of Texas Storm Uri in mid-February 2021, and particularly, in the deregulated market managed by the Electric Reliability Council of Texas.. Currently, 15 state court actions have been filed in counties across Texas and 1 case is pending in federal court in Texas. These lawsuits, filed by individuals, seek recovery for property damages, personal injury and for wrongful death allegedly incurred by the plaintiffs as a result of power losses, which the plaintiffs claim was the result of the defendants' failure to take appropriate precautions. Certain defendants have moved to transfer all related cases including those naming Duke Energy entities into a Texas state court multi-district litigation proceeding for coordination before a single judge. No ruling has yet been issued on this motion. Duke Energy cannot predict the outcomes of these state and federal litigation matters.

Duke Energy Carolinas and Duke Energy Progress

Coal Ash Insurance Coverage Litigation

In March 2017, Duke Energy Carolinas and Duke Energy Progress filed a civil action in the North Carolina Business 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 U.S. Environmental Protection Agency CCR rule at 15 coal-fired plants in North Carolina and South Carolina. Fact discovery has been completed. The parties' fully briefed and argued motions relating to key legal matters are pending before the court for rulings. Trial remains scheduled for January 24, 2022. Duke Energy Carolinas and Duke Energy Progress cannot predict the outcome of this matter.

Duke Energy Carolinas

NTE Carolinas II, LLC Litigation

In November 2017, Duke Energy Carolinas entered into a standard FERC large generator interconnection agreement (LGIA) with NTE Carolinas II, LLC (NTE), a company that proposed to build a combined-cycle natural gas plant in Rockingham County, North Carolina. On September 6, 2019, Duke Energy Carolinas filed a lawsuit in Mecklenburg County Superior Court against NTE for breach of contract, alleging that NTE's failure to pay benchmark payments for Duke Energy Carolinas' transmission system upgrades required under the interconnection agreement constituted a termination of the interconnection agreement. Duke Energy Carolinas is seeking a monetary judgment against NTE because NTE failed to make multiple milestone payments. The lawsuit was moved to federal court in North Carolina. NTE filed a motion to dismiss Duke Energy Carolinas’ complaint and brought counterclaims alleging anti-competitive conduct and violations of state and federal statutes. Duke Energy Carolinas filed a motion to dismiss NTE's counterclaims.

On May 21, 2020, in response to a NTE petition challenging Duke Energy Carolinas' termination of the LGIA, FERC issued a ruling (i) that it has exclusive jurisdiction to determine whether a transmission provider may terminate a LGIA, (ii) FERC approval is required to terminate a conforming LGIA if objected to by the interconnection customer, and (iii) Duke Energy may not announce the termination of a conforming LGIA unless FERC has approved the termination. FERC's Office of Enforcement also initiated an investigation of Duke Energy Carolinas into matters pertaining to the LGIA. Duke Energy Carolinas is cooperating with the Office of Enforcement but cannot predict the outcome of this investigation.

On August 17, 2020, the court denied both NTE’s and Duke Energy Carolinas’ Motion to Dismiss. The parties are in active discovery and trial is scheduled for June 20, 2022. Duke Energy Carolinas cannot predict the outcome of this matter.

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 March 31, 2021, there were 126 asserted claims for non-malignant cases with cumulative relief sought of up to $31 million, and 47 asserted claims for malignant cases with cumulative relief sought of up to $17 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 $564 million at March 31, 2021, and $572 million at December 31, 2020. 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 Duke Energy Carolinas' best estimate for current and future asbestos claims through 2040 and are recorded on an undiscounted 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 2040 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-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 $714 million in excess of the self-insured retention. Receivables for insurance recoveries were $704 million at March 31, 2021, and December 31, 2020. 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.

56

FINANCIAL STATEMENTS COMMITMENTS AND CONTINGENCIES

As described in Note 1, Duke Energy adopted the new guidance for credit losses effective January 1, 2020, using the modified retrospective method of adoption, which does not require restatement of prior year reported results. The reserve for credit losses for insurance receivables based on adoption of the new standard is $15 million for Duke Energy and Duke Energy Carolinas as of March 31, 2021, and December 31, 2020. The insurance receivable is evaluated based on the risk of default and the historical losses, current conditions and expected conditions around collectability. Management evaluates the risk of default annually based on payment history, credit rating and changes in the risk of default from credit agencies.

Duke Energy Progress and Duke Energy Florida

Spent Nuclear Fuel Matters

On June 18, 2018, Duke Energy Progress and Duke Energy Florida sued the U.S. in the U.S. Court of Federal 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 in the amount of $100 million and $200 million for Duke Energy Progress and Duke Energy Florida, respectively. Discovery is ongoing and a trial is expected to occur in 2021.

Duke Energy Florida

Power Purchase Dispute Arbitration

Duke Energy Florida, on behalf of its customers, entered into a PPA for the purchase of firm capacity and energy from a qualifying facility under the Public Utilities Regulatory Policies Act of 1978. Duke Energy Florida determined the qualifying facility did not perform in accordance with the PPA, and Duke Energy Florida terminated the PPA. The qualifying facility counterparty filed a confidential American Arbitration Association (AAA) arbitration demand, challenging the termination of the PPA and seeking damages.

The final arbitration hearing occurred during the week of December 7, 2020. An arbitral award was issued in March 2021, upholding Duke Energy Florida's positions on all issues and awarding the company termination costs.

Duke Energy Indiana

Coal Ash Basin Closure Plan Appeal

On January 27, 2020, Hoosier Environmental Council (HEC) filed a Petition for Administrative Review with the Indiana Office of Environmental Adjudication challenging the Indiana Department of Environmental Management’s December 10, 2019, partial approval of Duke Energy Indiana’s ash pond closure plan. On March 11, 2020, Duke Energy Indiana filed a Motion to Dismiss. On May 5, 2020, the court denied the motion. After hearing oral arguments in early April 2021 on Duke Energy Indiana's and HEC's competing Motions for Summary Judgment, on May 4, 2021, the administrative court rejected all of HEC’s claims and issued a ruling in favor of Duke Energy Indiana. HEC has until June 3, 2021, to seek judicial review of the order. Duke Energy Indiana cannot predict the outcome of this matter.

Other Litigation and Legal Proceedings

The Duke Energy Registrants are involved in other legal, tax and regulatory proceedings arising in the ordinary course of business, some of which involve significant amounts. The Duke Energy Registrants believe the final disposition of these proceedings will not have a material effect on their results of operations, cash flows or financial position.

The table below presents recorded reserves based on management’s best estimate of probable loss for legal matters, excluding asbestos-related reserves discussed above. Reserves are classified on the Condensed Consolidated Balance Sheets in Other within Other Noncurrent Liabilities 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)	March 31, 2021		December 31, 2020
Reserves for Legal Matters
Duke Energy	$	65	$	68
Duke Energy Carolinas	3		2
Progress Energy	57		61
Duke Energy Progress	11		13
Duke Energy Florida	26		28
Piedmont	1		1

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 uncapped 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.

57

FINANCIAL STATEMENTS COMMITMENTS AND CONTINGENCIES

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 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. DEBT AND CREDIT FACILITIES

SUMMARY OF SIGNIFICANT DEBT ISSUANCES

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

				Three Months Ended March 31, 2021
						Duke		Duke		Duke		Duke		Duke		Duke
	Maturity	Interest		Duke		Energy		Energy		Energy		Energy		Energy		Energy
Issuance Date	Date	Rate		Energy		(Parent)		Carolinas		Progress		Florida		Ohio		Indiana		Piedmont
Unsecured Debt
March 2021(a)	Mar 2031	2.500	%	$	350	$	0	$	—	$	—	$	—	$	—	$	—	$	350
Total issuances				$	350	$	0	$	0	$	0	$	0	$	0	$	0	$	350

(a)Debt issued to repay at maturity $160 million senior unsecured notes due June 2021, pay down short-term debt and for general corporate purposes.

In March 2021, Duke Energy Carolinas priced $1 billion of First Mortgage Bonds. The issuance and sale of securities settled in April 2021, in 2 separate tranches. The first tranche was issued for $550 million at a fixed interest rate of 2.55% and mature in April 2031. The second tranche was issued for $450 million at a fixed interest rate of 3.45% and mature in April 2051. Proceeds from the issuance will be used to repay at maturity $500 million of 3.90% First Mortgage Bonds due June 2021, pay down intercompany short-term debt and for general company purposes.

CURRENT MATURITIES OF LONG-TERM DEBT

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

(in millions)	Maturity Date	Interest Rate			March 31, 2021
Unsecured Debt
Duke Energy (Parent)	May 2021	0.698	%	(a)	500
Piedmont	June 2021	4.240	%		160
Duke Energy (Parent)	September 2021	3.550	%		500
Duke Energy (Parent)	September 2021	1.800	%		750
Duke Energy Florida	November 2021	0.441	%	(a)	200
Duke Energy Progress	February 2022	0.369	%	(a)	700
Duke Energy (Parent)	March 2022	3.227	%		300
Duke Energy (Parent)	March 2022	0.827	%	(a)	300
First Mortgage Bonds
Duke Energy Carolinas	June 2021	3.900	%		500
Duke Energy Florida	August 2021	3.100	%		300
Duke Energy Progress	September 2021	3.000	%		500
Duke Energy Progress	September 2021	8.625	%		100
Duke Energy Indiana	January 2022	8.850	%		53
Other(b)					723
Current maturities of long-term debt					$	5,586

(a)    Debt has a floating interest rate.

(b)    Includes finance lease obligations, amortizing debt, tax-exempt bonds with mandatory put options and small bullet maturities.

AVAILABLE CREDIT FACILITIES

Master Credit Facility

In March 2021, Duke Energy amended its existing $8 billion Master Credit Facility to extend the termination date to March 2026. The Duke Energy Registrants, excluding Progress Energy, 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.

58

FINANCIAL STATEMENTS DEBT AND CREDIT FACILITIES

The table below includes the current borrowing sublimits and available capacity under these credit facilities.

	March 31, 2021
			Duke		Duke		Duke		Duke		Duke		Duke
	Duke		Energy		Energy		Energy		Energy		Energy		Energy
(in millions)	Energy		(Parent)		Carolinas		Progress		Florida		Ohio		Indiana		Piedmont
Facility size(a)	$	8,000	$	2,650	$	1,475	$	1,250	$	700	$	625	$	600	$	700
Reduction to backstop issuances
Commercial paper(b)	(3,466)		(1,781)		(741)		(292)		(243)		(259)		(150)		—
Outstanding letters of credit	(31)		(25)		(4)		(2)		—		—		—		—
Tax-exempt bonds	(81)		—		—		—		—		—		(81)		—
Available capacity under the Master Credit Facility	$	4,422	$	844	$	730	$	956	$	457	$	366	$	369	$	700

(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.

Other Credit Facilities

	March 31, 2021
(in millions)	Facility size		Amount drawn
Duke Energy (Parent) Three-Year Revolving Credit Facility(a)	$	1,000	$	500

(a)During March 2021, Duke Energy extended the maturity date of the Three-Year Revolving Credit Facility from May 2022, to May 2024.

6. GOODWILL

Duke Energy

The following table presents the goodwill by reportable segment included on Duke Energy's Condensed Consolidated Balance Sheets at March 31, 2021, and December 31, 2020.

	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	0		0		(122)		(122)
Goodwill, adjusted for accumulated impairment charges	$	17,379	$	1,924	$	0	$	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 March 31, 2021, and December 31, 2020.

Progress Energy

Progress Energy's Goodwill is included in the Electric Utilities and Infrastructure segment and there are 0 accumulated impairment charges.

Piedmont

Piedmont's Goodwill is included in the Gas Utilities and Infrastructure segment and there are 0 accumulated impairment charges.

59

FINANCIAL STATEMENTS RELATED PARTY TRANSACTIONS

7. 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 March 31,
(in millions)	2021		2020
Duke Energy Carolinas
Corporate governance and shared service expenses(a)	$	203	$	134
Indemnification coverages(b)	6		5
Joint Dispatch Agreement (JDA) revenue(c)	13		7
JDA expense(c)	40		24
Intercompany natural gas purchases(d)	14		6
Progress Energy
Corporate governance and shared service expenses(a)	$	181	$	146
Indemnification coverages(b)	10		9
JDA revenue(c)	40		24
JDA expense(c)	13		7
Intercompany natural gas purchases(d)	19		19
Duke Energy Progress
Corporate governance and shared service expenses(a)	$	105	$	75
Indemnification coverages(b)	5		4
JDA revenue(c)	40		24
JDA expense(c)	13		7
Intercompany natural gas purchases(d)	19		19
Duke Energy Florida
Corporate governance and shared service expenses(a)	$	76	$	71
Indemnification coverages(b)	5		5
Duke Energy Ohio
Corporate governance and shared service expenses(a)	$	79	$	84
Indemnification coverages(b)	1		1
Duke Energy Indiana
Corporate governance and shared service expenses(a)	$	113	$	106
Indemnification coverages(b)	2		2
Piedmont
Corporate governance and shared service expenses(a)	$	33	$	34
Indemnification coverages(b)	1		1
Intercompany natural gas sales(d)	33		25
Natural gas storage and transportation costs(e)	6		6

(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 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 LNG Company, LLC, Hardy Storage Company, LLC and Cardinal Pipeline Company, LLC natural gas storage and transportation facilities. These expenses are included in Cost of natural gas on Piedmont's Condensed Consolidated Statements of Operations and Comprehensive Income.

60

FINANCIAL STATEMENTS RELATED 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, such as pipeline lease arrangements, and their proportionate share of certain charged expenses. These transactions of the Subsidiary Registrants are incurred in the ordinary course of business and are eliminated in consolidation.

As discussed in Note 11, certain trade receivables have been sold by Duke Energy Ohio and Duke Energy Indiana to CRC, an affiliate formed by a subsidiary of Duke Energy. The proceeds obtained from the sales of receivables are largely cash but do include a subordinated note from CRC for a portion of the purchase price.

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
March 31, 2021
Intercompany income tax receivable	$	—	$	84	$	—	$	46	$	—	$	—	$	—
Intercompany income tax payable	31		—		12		—		2		36		39
December 31, 2020
Intercompany income tax receivable	$	—	$	—	$	—	$	—	$	—	$	9	$	10
Intercompany income tax payable	31		33		46		35		2		—		—

8. 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 derivatives 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.

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 accumulated other comprehensive loss for the three months ended March 31, 2021, and 2020, 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 segment 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.

61

FINANCIAL STATEMENTS DERIVATIVES AND HEDGING

The following table shows notional amounts of outstanding derivatives related to interest rate risk.

	March 31, 2021
			Duke				Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio
Cash flow hedges	$	1,630	$	—	$	—	$	—	$	—	$	—
Undesignated contracts	1,731		400		1,250		750		500		27
Total notional amount(a)	$	3,361	$	400	$	1,250	$	750	$	500	$	27

	December 31, 2020
			Duke				Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio
Cash flow hedges	$	632	$	—	$	—	$	—	$	—	$	—
Undesignated contracts	1,177		400		750		750		—		27
Total notional amount(a)	$	1,809	$	400	$	750	$	750	$	—	$	27

(a)    Duke Energy includes amounts related to consolidated VIEs of $631 million in cash flow hedges and $54 million in undesignated contracts as of March 31, 2021, and $632 million in cash flow hedges as of December 31, 2020.

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 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. To manage risk associated with commodity prices, the Duke Energy Registrants may enter into long-term power purchase or sales contracts and long-term natural gas supply agreements.

Cash Flow Hedges

For derivatives designated as hedging the exposure to variable cash flows of a future transaction, referred to as a cash flow hedge, 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. Gains and losses reclassified out of accumulated other comprehensive loss for the three months ended March 31, 2021, and 2020, were not material. Duke Energy’s commodity derivatives designated as hedges include long-term electricity sales in the Commercial Renewables segment.

Undesignated Contracts

For the Subsidiary Registrants, bulk power electricity 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.

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.

	March 31, 2021
		Duke		Duke	Duke	Duke
	Duke	Energy	Progress	Energy	Energy	Energy
	Energy	Carolinas	Energy	Progress	Ohio	Indiana	Piedmont
Electricity (GWh)(a)	16,259	—	—	—	1,325	4,214	—
Natural gas (millions of dekatherms)	675	151	158	158	—	2	364

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FINANCIAL STATEMENTS DERIVATIVES AND HEDGING

	December 31, 2020
		Duke		Duke	Duke	Duke
	Duke	Energy	Progress	Energy	Energy	Energy
	Energy	Carolinas	Energy	Progress	Ohio	Indiana	Piedmont
Electricity (GWh)(a)	35,409	—	—	—	2,559	10,802	—
Natural gas (millions of dekatherms)	678	145	158	158	—	2	373

(a)    Duke Energy includes 10,720 GWh and 22,048 GWh related to cash flow hedges as of March 31, 2021, and December 31, 2020, respectively.

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	March 31, 2021
			Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Commodity Contracts
Not Designated as Hedging Instruments
Current	$	32	$	17	$	12	$	12	$	—	$	—	$	2	$	1
Noncurrent	14		7		7		7		—		—		—		—
Total Derivative Assets – Commodity Contracts	$	46	$	24	$	19	$	19	$	—	$	—	$	2	$	1
Interest Rate Contracts
Designated as Hedging Instruments
Current	$	31	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Not Designated as Hedging Instruments
Current	$	129	$	38	$	84	$	81	$	3	$	—	$	—	$	—
Total Derivative Assets – Interest Rate Contracts	$	160	$	38	$	84	$	81	$	3	$	—	$	—	$	—
Total Derivative Assets	$	206	$	62	$	103	$	100	$	3	$	—	$	2	$	1

Derivative Liabilities	March 31, 2021
			Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Commodity Contracts
Designated as Hedging Instruments
Current	$	19	$	—	$	—	$	—	$	—	$	—	$	—	—
Noncurrent	109		—		—		—		—		—		—		—
Not Designated as Hedging Instruments
Current	$	19	$	—	$	—	$	—	$	—	$	—	$	—	$	19
Noncurrent	154		—		25		9		—		—		—		129
Total Derivative Liabilities – Commodity Contracts	$	301	$	—	$	25	$	9	$	—	$	—	$	—	$	148
Interest Rate Contracts
Designated as Hedging Instruments
Current	$	15	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Noncurrent	25		—		—		—		—		—		—		—
Not Designated as Hedging Instruments
Current	4		—		3		—		3		1		—		—
Noncurrent	4		—		—		—		—		4		—		—
Total Derivative Liabilities – Interest Rate Contracts	$	48	$	—	$	3	$	—	$	3	$	5	$	—	$	—
Total Derivative Liabilities	$	349	$	—	$	28	$	9	$	3	$	5	$	—	$	148

63

FINANCIAL STATEMENTS DERIVATIVES AND HEDGING

Derivative Assets	December 31, 2020
			Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Commodity Contracts
Not Designated as Hedging Instruments
Current	$	30	$	14	$	9	$	9	$	—	$	1	$	6	$	1
Noncurrent	13		6		6		6		—		—		—		—
Total Derivative Assets – Commodity Contracts	$	43	$	20	$	15	$	15	$	—	$	1	$	6	$	1
Interest Rate Contracts
Not Designated as Hedging Instruments
Current	$	18	$	—	$	18	$	18	$	—	$	—	$	—	$	—
Total Derivative Assets – Interest Rate Contracts	$	18	$	—	$	18	$	18	$	—	$	—	$	—	$	—
Total Derivative Assets	$	61	$	20	$	33	$	33	$	—	$	1	$	6	$	1

Derivative Liabilities	December 31, 2020
			Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Commodity Contracts
Designated as Hedging Instruments
Current	$	14	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Noncurrent	70		—		—		—		—		—		—		—
Not Designated as Hedging Instruments
Current	$	30	$	13	$	2	$	2	$	—	$	—	$	1	$	15
Noncurrent	137		3		27		12		—		—		—		107
Total Derivative Liabilities – Commodity Contracts	$	251	$	16	$	29	$	14	$	—	$	—	$	1	$	122
Interest Rate Contracts
Designated as Hedging Instruments
Current	$	15	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Noncurrent	48		—		—		—		—		—		—		—
Not Designated as Hedging Instruments
Current	5		4		—		—		—		1		—		—
Noncurrent	5		—		—		—		—		5		—		—
Total Derivative Liabilities – Interest Rate Contracts	$	73	$	4	$	—	$	—	$	—	$	6	$	—	$	—
Total Derivative Liabilities	$	324	$	20	$	29	$	14	$	—	$	6	$	1	$	122

64

FINANCIAL STATEMENTS DERIVATIVES 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	March 31, 2021
			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	$	192	$	55	$	96	$	93	$	3	$	—	$	2	$	1
Gross amounts offset	—		—		—		—		—		—		—		—
Net amounts presented in Current Assets: Other	$	192	$	55	$	96	$	93	$	3	$	—	$	2	$	1
Noncurrent
Gross amounts recognized	$	14	$	7	$	7	$	7	$	—	$	—	$	—	$	—
Gross amounts offset	(4)		—		(4)		(4)		—		—		—		—
Net amounts presented in Other Noncurrent Assets: Other	$	10	$	7	$	3	$	3	$	—	$	—	$	—	$	—

Derivative Liabilities	March 31, 2021
			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	$	57	$	—	$	3	$	—	$	3	$	1	$	—	$	19
Gross amounts offset	—		—		—		—		—		—		—		—
Net amounts presented in Current Liabilities: Other	$	57	$	—	$	3	$	—	$	3	$	1	$	—	$	19
Noncurrent
Gross amounts recognized	$	292	$	—	$	25	$	9	$	—	$	4	$	—	$	129
Gross amounts offset	(4)		—		(4)		(4)		—		—		—		—
Net amounts presented in Other Noncurrent Liabilities: Other	$	288	$	—	$	21	$	5	$	—	$	4	$	—	$	129

Derivative Assets	December 31, 2020
			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	$	48	$	14	$	27	$	27	$	—	$	1	$	6	$	1
Gross amounts offset	(3)		(2)		(2)		(2)		—		—		—		—
Net amounts presented in Current Assets: Other	$	45	$	12	$	25	$	25	$	—	$	1	$	6	$	1
Noncurrent
Gross amounts recognized	$	13	$	6	$	6	$	6	$	—	$	—	$	—	$	—
Gross amounts offset	(5)		(1)		(4)		(4)		—		—		—		—
Net amounts presented in Other Noncurrent Assets: Other	$	8	$	5	$	2	$	2	$	—	$	—	$	—	$	—

65

FINANCIAL STATEMENTS DERIVATIVES AND HEDGING

Derivative Liabilities	December 31, 2020
			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	$	64	$	17	$	2	$	2	$	—	$	1	$	1	$	15
Gross amounts offset	(3)		(2)		(2)		(2)		—		—		—		—
Net amounts presented in Current Liabilities: Other	$	61	$	15	$	—	$	—	$	—	$	1	$	1	$	15
Noncurrent
Gross amounts recognized	$	260	$	3	$	27	$	12	$	—	$	5	$	—	$	107
Gross amounts offset	(5)		(1)		(4)		(4)		—		—		—		—
Net amounts presented in Other Noncurrent Liabilities: Other	$	255	$	2	$	23	$	8	$	—	$	5	$	—	$	107

9. INVESTMENTS IN DEBT AND EQUITY SECURITIES

Duke Energy’s investments in debt and equity securities are primarily comprised of investments held in (i) the 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 OPEB plans and (iii) Bison. The Duke Energy Registrants classify investments in debt securities as AFS and investments in equity securities as fair value through net income (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.

Investment Trusts

The investments within the Investment Trusts are managed by independent investment managers with discretion to buy, sell and invest pursuant to the objectives set forth by the investment manager agreements and 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 recognized immediately and deferred to regulatory accounts where appropriate.

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 has a credit loss. The Duke Energy Registrants analyze all investment holdings each reporting period to determine whether a decline in fair value is related to a credit loss. If a credit loss exists, the unrealized credit loss is included in earnings. There were no material credit losses as of March 31, 2021, and December 31, 2020.

Other Investments amounts are recorded in Other within Other Noncurrent Assets on the Condensed Consolidated Balance Sheets.

66

FINANCIAL STATEMENTS INVESTMENTS IN DEBT AND EQUITY SECURITIES

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.

	March 31, 2021						December 31, 2020
	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	$	—	$	—	$	193	$	—	$	—	$	177
Equity securities	4,363		47		6,379		4,138		54		6,235
Corporate debt securities	38		8		793		76		1		806
Municipal bonds	13		1		299		22		—		370
U.S. government bonds	31		18		1,559		51		—		1,361
Other debt securities	5		—		184		8		—		180
Total NDTF Investments	$	4,450	$	74	$	9,407	$	4,295	$	55	$	9,129
Other Investments
Cash and cash equivalents	$	—	$	—	$	222	$	—	$	—	$	127
Equity securities	86		—		154		79		—		146
Corporate debt securities	2		—		109		8		—		110
Municipal bonds	3		1		77		5		—		86
U.S. government bonds	—		1		55		—		—		42
Other debt securities	—		1		36		—		—		47
Total Other Investments	$	91	$	3	$	653	$	92	$	—	$	558
Total Investments	$	4,541	$	77	$	10,060	$	4,387	$	55	$	9,687

Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the three months ended March 31, 2021, and 2020, were as follows.

	Three Months Ended
(in millions)		March 31, 2021		March 31, 2020
FV-NI:
Realized gains		$	140	$	23
Realized losses		23		65
AFS:
Realized gains		18		20
Realized losses		13		6

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.

	March 31, 2021						December 31, 2020
	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	$	—	$	—	$	63	$	—	$	—	$	30
Equity securities	2,531		23		3,738		2,442		23		3,685
Corporate debt securities	23		5		475		49		1		510
Municipal bonds	—		—		22		6		—		91
U.S. government bonds	16		9		669		25		—		475
Other debt securities	4		—		178		7		—		174
Total NDTF Investments	$	2,574	$	37	$	5,145	$	2,529	$	24	$	4,965

67

FINANCIAL STATEMENTS INVESTMENTS IN DEBT AND EQUITY SECURITIES

Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the three months ended March 31, 2021, and 2020, were as follows.

	Three Months Ended
(in millions)		March 31, 2021		March 31, 2020
FV-NI:
Realized gains		$	128	$	9
Realized losses		16		45
AFS:
Realized gains		13		12
Realized losses		9		5

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.

	March 31, 2021						December 31, 2020
	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	$	—	$	—	$	130	$	—	$	—	$	147
Equity securities	1,832		24		2,641		1,696		31		2,550
Corporate debt securities	15		3		318		27		—		296
Municipal bonds	13		1		277		16		—		279
U.S. government bonds	15		9		890		26		—		886
Other debt securities	1		—		6		1		—		6
Total NDTF Investments	$	1,876	$	37	$	4,262	$	1,766	$	31	$	4,164
Other Investments
Cash and cash equivalents	$	—	$	—	$	107	$	—	$	—	$	106
Municipal bonds	2		—		26		3		—		26
Total Other Investments	$	2	$	—	$	133	$	3	$	—	$	132
Total Investments	$	1,878	$	37	$	4,395	$	1,769	$	31	$	4,296

Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the three months ended March 31, 2021, and 2020, were as follows.

	Three Months Ended
(in millions)		March 31, 2021		March 31, 2020
FV-NI:
Realized gains		$	12	$	14
Realized losses		7		20
AFS:
Realized gains		4		5
Realized losses		3		1

68

FINANCIAL STATEMENTS INVESTMENTS IN DEBT AND EQUITY SECURITIES

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.

	March 31, 2021						December 31, 2020
	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	$	—	$	—	$	95	$	—	$	—	$	76
Equity securities	1,746		24		2,547		1,617		31		2,459
Corporate debt securities	15		3		291		27		—		296
Municipal bonds	13		1		277		16		—		279
U.S. government bonds	15		4		429		26		—		412
Other debt securities	1		—		6		1		—		6
Total NDTF Investments	$	1,790	$	32	$	3,645	$	1,687	$	31	$	3,528
Other Investments
Cash and cash equivalents	$	—	$	—	$	1	$	—	$	—	$	1
Total Other Investments	$	—	$	—	$	1	$	—	$	—	$	1
Total Investments	$	1,790	$	32	$	3,646	$	1,687	$	31	$	3,529

Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the three months ended March 31, 2021, and 2020, were as follows.

	Three Months Ended
(in millions)		March 31, 2021		March 31, 2020
FV-NI:
Realized gains		$	12	$	14
Realized losses		7		20
AFS:
Realized gains		4		5
Realized losses		3		1

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.

	March 31, 2021						December 31, 2020
	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	$	—	$	—	$	35	$	—	$	—	$	71
Equity securities	86		—		94		79		—		91
Corporate debt securities	—		—		27		—		—		—
U.S. government bonds	—		5		461		—		—		474
Total NDTF Investments(a)	$	86	$	5	$	617	$	79	$	—	$	636
Other Investments
Cash and cash equivalents	$	—	$	—	$	2	$	—	$	—	$	1
Municipal bonds	2		—		26		3		—		26
Total Other Investments	$	2	$	—	$	28	$	3	$	—	$	27
Total Investments	$	88	$	5	$	645	$	82	$	—	$	663

(a)During the three months ended March 31, 2021, and the year ended December 31, 2020, Duke Energy Florida received reimbursements from the NDTF for costs related to ongoing decommissioning activity of Crystal River Unit 3.

69

FINANCIAL STATEMENTS INVESTMENTS IN DEBT AND EQUITY SECURITIES

Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the three months ended March 31, 2021, and 2020, were immaterial.

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.

	March 31, 2021						December 31, 2020
	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
Cash and cash equivalents	$	—	$	—	$	—	$	—	$	—	$	1
Equity securities	62		—		102		58		—		97
Corporate debt securities	—		—		4		—		—		3
Municipal bonds	1		1		35		1		—		38
U.S. government bonds	—		—		6		—		—		4
Total Investments	$	63	$	1	$	147	$	59	$	—	$	143

Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the three months ended March 31, 2021, and 2020, were immaterial.

DEBT SECURITY MATURITIES

The table below summarizes the maturity date for debt securities.

	March 31, 2021
			Duke				Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Indiana
Due in one year or less	$	152	$	7	$	116	$	18	$	98	$	5
Due after one through five years	1,013		375		579		267		312		18
Due after five through 10 years	693		310		289		217		72		9
Due after 10 years	1,254		652		533		501		32		13
Total	$	3,112	$	1,344	$	1,517	$	1,003	$	514	$	45

10. FAIR VALUE MEASUREMENTS

Fair value is the exchange price to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. The fair value definition focuses on an exit price versus the acquisition cost. Fair value measurements use market data or assumptions market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs may be readily observable, corroborated by market data or generally unobservable. Valuation techniques maximize the use of observable inputs and minimize use of unobservable inputs. A midmarket pricing convention (the midpoint price between bid and ask prices) is permitted for use as a practical expedient.

Fair value measurements are classified in three levels based on the fair value hierarchy as defined by GAAP. Certain investments are not categorized within the fair value hierarchy. These investments are measured at fair value using the net asset value (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.

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.

70

FINANCIAL STATEMENTS 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. Commodity derivatives with observable forward curves are classified as Level 2. 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.

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 for the year ended December 31, 2020, for a discussion of the valuation of goodwill and intangible assets.

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 8. See Note 9 for additional information related to investments by major security type for the Duke Energy Registrants.

	March 31, 2021
(in millions)	Total Fair Value		Level 1		Level 2		Level 3		Not Categorized
NDTF cash and cash equivalents	$	193	$	193	$	—	$	—	$	—
NDTF equity securities	6,379		6,332		—		—		47
NDTF debt securities	2,835		1,019		1,816		—		—
Other equity securities	154		154		—		—		—
Other debt securities	277		49		228		—		—
Other cash and cash equivalents	222		222		—		—		—
Derivative assets	206		1		203		2		—
Total assets	10,266		7,970		2,247		2		47
Derivative liabilities	(349)		—		(221)		(128)		—
Net assets (liabilities)	$	9,917	$	7,970	$	2,026	$	(126)	$	47

	December 31, 2020
(in millions)	Total Fair Value		Level 1		Level 2		Level 3		Not Categorized
NDTF cash and cash equivalents	$	177	$	177	$	—	$	—	$	—
NDTF equity securities	6,235		6,189		—		—		46
NDTF debt securities	2,717		874		1,843		—		—
Other equity securities	146		146		—		—		—
Other debt securities	285		37		248		—		—
Other cash and cash equivalents	127		127		—		—		—
Derivative assets	61		1		53		7		—
Total assets	9,748		7,551		2,144		7		46
Derivative liabilities	(324)		—		(240)		(84)		—
Net assets (liabilities)	$	9,424	$	7,551	$	1,904	$	(77)	$	46

71

FINANCIAL STATEMENTS FAIR VALUE MEASUREMENTS

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

		Derivatives (net)
	Three Months Ended March 31,
(in millions)			2021		2020
Balance at beginning of period			$	(77)	$	(102)
Total pretax realized or unrealized losses included in comprehensive income			(44)		—
Purchases, sales, issuances and settlements:
Settlements			(7)		(9)
Total gains included on the Condensed Consolidated Balance Sheet			2		23
Balance at end of period			$	(126)	$	(88)

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.

	March 31, 2021
(in millions)	Total Fair Value		Level 1		Level 2		Not Categorized
NDTF cash and cash equivalents	$	63	$	63	$	—	$	—
NDTF equity securities	3,738		3,691		—		47
NDTF debt securities	1,344		369		975		—
Derivative assets	62		—		62		—
Total assets	5,207		4,123		1,037		47

	December 31, 2020
(in millions)	Total Fair Value		Level 1		Level 2		Not Categorized
NDTF cash and cash equivalents	$	30	$	30	$	—	$	—
NDTF equity securities	3,685		3,639		—		46
NDTF debt securities	1,250		192		1,058		—
Derivative assets	20		—		20		—
Total assets	4,985		3,861		1,078		46
Derivative liabilities	(20)		—		(20)		—
Net assets	$	4,965	$	3,861	$	1,058	$	46

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.

	March 31, 2021						December 31, 2020
(in millions)	Total Fair Value		Level 1		Level 2		Total Fair Value		Level 1		Level 2
NDTF cash and cash equivalents	$	130	$	130	$	—	$	147	$	147	$	—
NDTF equity securities	2,641		2,641		—		2,550		2,550		—
NDTF debt securities	1,491		650		841		1,467		682		785
Other debt securities	26		—		26		26		—		26
Other cash and cash equivalents	107		107		—		106		106		—
Derivative assets	103		—		103		33		—		33
Total assets	4,498		3,528		970		4,329		3,485		844
Derivative liabilities	(28)		—		(28)		(29)		—		(29)
Net assets	$	4,470	$	3,528	$	942	$	4,300	$	3,485	$	815

72

FINANCIAL STATEMENTS FAIR VALUE MEASUREMENTS

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.

	March 31, 2021						December 31, 2020
(in millions)	Total Fair Value		Level 1		Level 2		Total Fair Value		Level 1		Level 2
NDTF cash and cash equivalents	$	95	$	95	$	—	$	76	$	76	$	—
NDTF equity securities	2,547		2,547		—		2,459		2,459		—
NDTF debt securities	1,003		237		766		993		237		756
Other cash and cash equivalents	1		1		—		1		1		—
Derivative assets	100		—		100		33		—		33
Total assets	3,746		2,880		866		3,562		2,773		789
Derivative liabilities	(9)		—		(9)		(14)		—		(14)
Net assets	$	3,737	$	2,880	$	857	$	3,548	$	2,773	$	775

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.

	March 31, 2021						December 31, 2020
(in millions)	Total Fair Value		Level 1		Level 2		Total Fair Value		Level 1		Level 2
NDTF cash and cash equivalents	$	35	$	35	$	—	$	71	$	71	$	—
NDTF equity securities	94		94		—		91		91		—
NDTF debt securities	488		413		75		474		445		29
Other debt securities	26		—		26		26		—		26
Other cash and cash equivalents	2		2		—		1		1		—
Derivative assets	3		—		3		—		—		—
Total assets	648		544		104		663		608		55
Derivative liabilities	(3)		—		(3)		—		—		—
Net assets	$	645	$	544	$	101	$	663	$	608	$	55

DUKE ENERGY OHIO

The recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets were not material at March 31, 2021, and December 31, 2020.

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.

	March 31, 2021								December 31, 2020
(in millions)	Total Fair Value		Level 1		Level 2		Level 3		Total Fair Value		Level 1		Level 2		Level 3
Other equity securities	$	102	$	102	$	—	$	—	$	97	$	97	$	—	$	—
Other debt securities	45		—		45		—		45		—		45		—
Other cash and cash equivalents	—		—		—		—		1		1		—		—
Derivative assets	2		—		—		2		6		—		—		6
Total assets	$	149	$	102	$	45	$	2	$	149	$	98	$	45	$	6
Derivative liabilities	—		—		—		—		(1)		(1)		—		—
Net assets	$	149	$	102	$	45	$	2	$	148	$	97	$	45	$	6

73

FINANCIAL STATEMENTS FAIR VALUE MEASUREMENTS

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)
	Three Months Ended March 31,
(in millions)			2021		2020
Balance at beginning of period			$	6	$	11
Purchases, sales, issuances and settlements:
Settlements			(6)		(6)
Total gains (losses) included on the Condensed Consolidated Balance Sheet			2		(3)
Balance at end of period			$	2	$	2

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.

	March 31, 2021						December 31, 2020
(in millions)	Total Fair Value		Level 1		Level 2			Total Fair Value		Level 1		Level 2
Derivative assets	$	1	$	1	$	—		$	1	$	1	$	—
Derivative liabilities	(148)		—		(148)			(122)		—		(122)
Net (liabilities) assets	$	(147)	$	1	$	(148)		$	(121)	$	1	$	(122)

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)
	Three Months Ended March 31,
(in millions)			2021		2020
Balance at beginning of period			$	—	$	(117)
Total gains and settlements			—		26
Balance at end of period			$	—	$	(91)

QUANTITATIVE INFORMATION ABOUT UNOBSERVABLE INPUTS

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

	March 31, 2021
										Weighted
	Fair Value									Average
Investment Type	(in millions)		Valuation Technique	Unobservable Input	Range					Range
Duke Energy
Electricity contracts	$	(128)	RTO forward pricing	Forward electricity curves – price per MWh	$	15.55	-	$	134.48	$	34.80
Duke Energy Indiana
FTRs	2		RTO auction pricing	FTR price – per MWh	(1.02)		-	7.23		0.80
Duke Energy
Total Level 3 derivatives	$	(126)

74

FINANCIAL STATEMENTS FAIR VALUE MEASUREMENTS

	December 31, 2020
									Weighted
	Fair Value								Average
Investment Type	(in millions)		Valuation Technique	Unobservable Input	Range				Range
Duke Energy
Electricity contracts	$	(84)	Discounted cash flow	Forward electricity curves – price per MWh	$	14.68	-	$151.84	$28.84
Duke Energy Ohio
FTRs	1		RTO auction pricing	FTR price – per MWh	0.25		-	1.68	0.79
Duke Energy Indiana
FTRs	6		RTO auction pricing	FTR price – per MWh	(2.40)		-	7.41	1.05
Duke Energy
Total Level 3 derivatives	$	(77)

OTHER FAIR VALUE DISCLOSURES

The fair value and book value of long-term debt, including current maturities, is summarized in the following table. Estimates determined are not necessarily indicative of amounts that could have been settled in current markets. Fair value of long-term debt uses Level 2 measurements.

	March 31, 2021				December 31, 2020
(in millions)	Book Value		Fair Value		Book Value		Fair Value
Duke Energy(a)	$	60,354	$	64,641	$	59,863	$	69,292
Duke Energy Carolinas	12,329		13,461		12,218		14,917
Progress Energy	19,333		21,838		19,264		23,470
Duke Energy Progress	9,356		10,131		9,258		10,862
Duke Energy Florida	7,884		9,018		7,915		9,756
Duke Energy Ohio	3,090		3,397		3,089		3,650
Duke Energy Indiana	4,091		4,691		4,091		5,204
Piedmont	3,127		3,412		2,780		3,306

(a)    Book value of long-term debt includes $1.3 billion at March 31, 2021, and December 31, 2020, of unamortized debt discount and premium, net of purchase accounting adjustments related to the mergers with Progress Energy and Piedmont that are excluded from fair value of long-term debt.

At both March 31, 2021, and December 31, 2020, 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.

11. VARIABLE INTEREST ENTITIES

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.

NaN financial support was provided to any of the consolidated VIEs during the three months ended March 31, 2021, and the year ended December 31, 2020, or is expected to be provided in the future that was not previously contractually required.

Receivables Financing – DERF/DEPR/DEFR

DERF, DEPR and 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 LLCs 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, which generally exclude receivables past due more than a predetermined number of days and reserves for expected past-due balances. The sole source of funds to satisfy the related debt obligations is cash collections from the receivables. Amounts borrowed under the credit facilities for DERF and DEPR are reflected on the Condensed Consolidated Balance Sheets as Long-Term Debt. Amounts borrowed under the credit facilities for DEFR are reflected on the Condensed Consolidated Balance Sheets as Current maturities of 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 the primary beneficiaries and consolidate DERF, DEPR and DEFR, respectively, as they make those decisions.

75

FINANCIAL STATEMENTS VARIABLE INTEREST ENTITIES

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, which generally exclude receivables past due more than a predetermined number of days and reserves for expected past-due balances. 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 approximately 75% cash and 25% 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 is not held 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.

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 date	February 2023		December 2022		April 2023		April 2023
Credit facility amount	$	350	$	475	$	350	$	250
Amounts borrowed at March 31, 2021	350		430		350		250
Amounts borrowed at December 31, 2020	350		364		250		250
Restricted Receivables at March 31, 2021	472		613		422		323
Restricted Receivables at December 31, 2020	547		696		500		397

Nuclear Asset-Recovery Bonds – 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 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)	March 31, 2021		December 31, 2020
Receivables of VIEs	$	4	$	4
Regulatory Assets: Current	54		53
Current Assets: Other	14		39
Other Noncurrent Assets: Regulatory assets	927		937
Current Liabilities: Other	2		10
Current maturities of long-term debt	55		55
Long-Term Debt	972		1,002

76

FINANCIAL STATEMENTS VARIABLE INTEREST ENTITIES

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 renewable assets eligible for tax credits. The activities that most significantly impacted the economic performance of these renewable energy facilities were decisions associated with siting, negotiating PPAs and Engineering, Procurement and Construction 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 Commercial Renewables VIEs.

(in millions)	March 31, 2021		December 31, 2020
Current Assets: Other	$	319	$	257
Property, Plant and Equipment: Cost	6,860		6,394
Accumulated depreciation and amortization	(1,297)		(1,242)
Other Noncurrent Assets: Other	66		67
Current maturities of long-term debt	167		167
Long-Term Debt	1,584		1,569
Other Noncurrent Liabilities: AROs	153		148
Other Noncurrent Liabilities: Other	331		316

NON-CONSOLIDATED VIEs

The following tables summarize the impact of non-consolidated VIEs on the Condensed Consolidated Balance Sheets.

	March 31, 2021
	Duke Energy				Duke		Duke
	Pipeline		Commercial				Energy		Energy
(in millions)	Investments		Renewables		Total		Ohio		Indiana
Receivables from affiliated companies	$	—	$	—	$	—	$	46	$	60
Other current assets	4		—		4		—		$	—
Investments in equity method unconsolidated affiliates	3		480		483		—		—
Deferred tax asset	29		—		29		—		—
Total assets	$	36	$	480	$	516	$	46	$	60
Other current liabilities	38		3		41		—		—
Other noncurrent liabilities	48		10		58		—		—
Total liabilities	$	86	$	13	$	99	$	—	$	—
Net (liabilities) assets	$	(50)	$	467	$	417	$	46	$	60

	December 31, 2020
	Duke Energy				Duke		Duke
	Pipeline		Commercial				Energy		Energy
(in millions)	Investments		Renewables		Total		Ohio		Indiana
Receivables from affiliated companies	$	—	$	—	$	—	$	83	$	110
Investments in equity method unconsolidated affiliates	—		530		530		—		—
Other noncurrent assets	31		—		31		—		—
Total assets	$	31	$	530	$	561	$	83	$	110
Other current liabilities	928		5		933		—		—
Other noncurrent liabilities	8		10		18		—		—
Total liabilities	$	936	$	15	$	951	$	—	$	—
Net assets (liabilities)	$	(905)	$	515	$	(390)	$	83	$	110

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 future exit costs associated with the cancellation of the ACP pipeline and certain renewable energy project entities guarantees for debt services and operations and maintenance, as discussed below.

77

FINANCIAL STATEMENTS VARIABLE INTEREST ENTITIES

Pipeline Investments

Duke Energy has investments in various joint ventures to construct and operate pipeline projects. 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.

Duke Energy has a 47% ownership interest in ACP. In 2020, Duke Energy determined that it would no longer invest in the construction of the ACP pipeline. In February 2021, Duke Energy paid approximately $855 million to fund ACP's outstanding debt, relieving Duke Energy of its guarantee. See Notes 1 and 3 for further information regarding this transaction.

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.

OVEC

Duke Energy Ohio’s 9% 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), 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. Duke Energy cannot predict the outcome in this matter. See Note 3 for additional information.

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.

The following table shows the gross and net receivables sold.

	Duke Energy Ohio				Duke Energy Indiana
(in millions)	March 31, 2021		December 31, 2020		March 31, 2021		December 31, 2020
Receivables sold	$	241	$	270	$	285	$	344
Less: Retained interests	46		83		60		110
Net receivables sold	$	195	$	187	$	225	$	234

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

		Duke Energy Ohio					Duke Energy Indiana
	Three Months Ended					Three Months Ended
	March 31,					March 31,
(in millions)		2021		2020			2021		2020
Sales
Receivables sold		$	561	$	537		$	698	$	647
Loss recognized on sale		3		4			3		4
Cash flows
Cash proceeds from receivables sold		$	596	$	559		$	746	$	672
Return received on retained interests		1		2			2		2

Cash flows from sales of receivables are reflected within Cash Flows From Operating Activities and Cash Flows from Investing Activities on Duke Energy Ohio’s and Duke Energy Indiana’s Condensed Consolidated Statements of Cash Flows.

12. REVENUE

Duke Energy earns substantially all of its revenues through its reportable segments, Electric Utilities and Infrastructure, Gas Utilities and Infrastructure and Commercial Renewables.

78

FINANCIAL STATEMENTS REVENUE

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.

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)	2021		2022		2023		2024		2025		Thereafter		Total
Progress Energy	$	71	$	107	$	44	$	45	$	7	$	51	$	325
Duke Energy Progress	6		8		8		8		—		—		30
Duke Energy Florida	65		99		36		37		7		51		295
Duke Energy Indiana	2		—		7		12		12		24		57

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 revenue 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.

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)	2021		2022		2023		2024		2025		Thereafter		Total
Piedmont	$	50	$	67	$	64	$	61	$	60	$	335	$	637

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 Certificates (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.

Other

The remainder of Duke Energy’s operations is presented as Other, which does not include material revenues from contracts with customers.

79

FINANCIAL STATEMENTS REVENUE

Disaggregated Revenues

Disaggregated revenues are presented as follows:

	Three Months Ended March 31, 2021
			Duke				Duke		Duke		Duke		Duke
(in millions)	Duke		Energy		Progress		Energy		Energy		Energy		Energy
By market or type of customer	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Electric Utilities and Infrastructure
Residential	$	2,462	$	793	$	1,162	$	560	$	602	$	195	$	313	$	—
General	1,419		502		624		306		318		104		189		—
Industrial	662		256		207		145		62		31		167		—
Wholesale	504		114		326		292		34		13		50		—
Other revenues	226		74		160		83		77		22		18		—
Total Electric Utilities and Infrastructure revenue from contracts with customers	$	5,273	$	1,739	$	2,479	$	1,386	$	1,093	$	365	$	737	$	—
Gas Utilities and Infrastructure
Residential	$	460	$	—	$	—	$	—	$	—	$	110	$	—	$	351
Commercial	204		—		—		—		—		48		—		156
Industrial	50		—		—		—		—		7		—		43
Power Generation	—		—		—		—		—		—		—		22
Other revenues	47		—		—		—		—		5		—		26
Total Gas Utilities and Infrastructure revenue from contracts with customers	$	761	$	—	$	—	$	—	$	—	$	170	$	—	$	598
Commercial Renewables
Revenue from contracts with customers	$	54	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Other
Revenue from contracts with customers	$	6	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Total revenue from contracts with customers	$	6,094	$	1,739	$	2,479	$	1,386	$	1,093	$	535	$	737	$	598
Other revenue sources(a)	$	56	$	(23)	$	26	$	15	$	8	$	(3)	$	8	$	8
Total revenues	$	6,150	$	1,716	$	2,505	$	1,401	$	1,101	$	532	$	745	$	606

(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.

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FINANCIAL STATEMENTS REVENUE

	Three Months Ended March 31, 2020
			Duke				Duke		Duke		Duke		Duke
(in millions)	Duke		Energy		Progress		Energy		Energy		Energy		Energy
By market or type of customer	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Electric Utilities and Infrastructure
Residential	$	2,261	$	756	$	1,064	$	502	$	562	$	176	$	265	$	—
General	1,492		549		648		319		329		114		181		—
Industrial	693		269		216		154		62		35		175		—
Wholesale	497		114		321		279		42		7		55		—
Other revenues	191		60		118		63		55		20		16		—
Total Electric Utilities and Infrastructure revenue from contracts with customers	$	5,134	$	1,748	$	2,367	$	1,317	$	1,050	$	352	$	692	$	—
Gas Utilities and Infrastructure
Residential	$	362	$	—	$	—	$	—	$	—	$	97	$	—	$	264
Commercial	169		—		—		—		—		43		—		126
Industrial	41		—		—		—		—		6		—		36
Power Generation	—		—		—		—		—		—		—		11
Other revenues	30		—		—		—		—		6		—		24
Total Gas Utilities and Infrastructure revenue from contracts with customers	$	602	$	—	$	—	$	—	$	—	$	152	$	—	$	461
Commercial Renewables
Revenue from contracts with customers	$	58	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Other
Revenue from contracts with customers	$	6	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Total revenue from contracts with customers	$	5,800	$	1,748	$	2,367	$	1,317	$	1,050	$	504	$	692	$	461
Other revenue sources(a)	$	149	$	—	$	55	$	21	$	30	$	(6)	$	—	$	51
Total revenues	$	5,949	$	1,748	$	2,422	$	1,338	$	1,080	$	498	$	692	$	512

(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.

As described in Note 1, Duke Energy adopted the new guidance for credit losses effective January 1, 2020, using the modified retrospective method of adoption, which does not require restatement of prior year reported results. The following table presents the reserve for credit losses for trade and other receivables based on adoption of the new standard.

	Three Months Ended March 31, 2020 and 2021
			Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Balance at December 31, 2019	$	76	$	10	$	16	$	8	$	7	$	4	$	3	$	6
Cumulative Change in Accounting Principle	5		1		2		1		1		—		—		1
Write-Offs	(10)		(3)		(4)		(2)		(2)		—		—		(1)
Credit Loss Expense	18		3		6		2		5		1		—		3
Balance at March 31, 2020	$	89	$	11	$	20	$	9	$	11	$	5	$	3	$	9
Balance at December 31, 2020	$	146	$	23	$	37	$	23	$	14	$	4	$	3	$	12
Write-Offs	(21)		(8)		(10)		(5)		(5)		—		—		(1)
Credit Loss Expense	17		10		7		2		5		—		—		3
Other Adjustments	5		9		3		3		1		—		—		—
Balance at March 31, 2021	$	147	$	34	$	37	$	23	$	15	$	4	$	3	$	14

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FINANCIAL STATEMENTS REVENUE

Trade and other receivables are evaluated based on an estimate of the risk of loss over the life of the receivable and current and historical conditions using supportable assumptions. Management evaluates the risk of loss for trade and other receivables by comparing the historical write-off amounts to total revenue over a specified period. Historical loss rates are adjusted due to the impact of current conditions, as well as forecasted conditions over a reasonable time period. The calculated write-off rate can be applied to the receivable balance for which an established reserve does not already exist. Management reviews the assumptions and risk of loss periodically for trade and other receivables.

The aging of trade receivables is presented in the table below. Duke Energy considers receivables greater than 30 days outstanding past due.

	March 31, 2021
			Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Unbilled Revenue(a)(b)	$	758	$	293	$	183	$	90	$	93	$	4	$	16	$	44
0-30 days	1,656		337		633		357		275		55		35		185
30-60 days	181		62		46		31		15		8		3		21
60-90 days	46		15		11		6		5		3		1		6
90+ days	120		31		26		4		22		28		11		7
Deferred Payment Arrangements(c)	170		80		53		37		16		4		—		8
Trade and Other Receivables	$	2,931	$	818	$	952	$	525	$	426	$	102	$	66	$	271

	December 31, 2020
			Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Unbilled Revenue(a)(b)	$	969	$	328	$	283	$	167	$	116	$	2	$	16	$	86
0-30 days	1,789		445		707		398		307		60		26		149
30-60 days	185		80		54		25		29		8		3		8
60-90 days	22		1		10		4		6		2		1		3
90+ days	119		16		32		9		23		30		12		9
Deferred Payment Arrangements(c)	215		96		80		52		28		—		—		7
Trade and Other Receivables	$	3,299	$	966	$	1,166	$	655	$	509	$	102	$	58	$	262

(a)    Unbilled revenues are recognized by applying customer billing rates to the estimated volumes of energy or natural gas delivered but not yet billed and are included within Receivables and Receivables of VIEs on the Condensed Consolidated Balance Sheets.

(b)    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 account for the transfers of receivables as sales. Accordingly, the receivables sold are not reflected on the Condensed Consolidated Balance Sheets of Duke Energy Ohio and Duke Energy Indiana. See Note 11 for further information. These receivables for unbilled revenues are $55 million and $87 million for Duke Energy Ohio and Duke Energy Indiana, respectively, as of March 31, 2021, and $87 million and $134 million for Duke Energy Ohio and Duke Energy Indiana, respectively, as of December 31, 2020.

(c)    Due to certain customer financial hardships created by the COVID-19 pandemic and resulting stay-at-home orders, Duke Energy permitted customers to defer payment of past-due amounts through an installment payment plan over a period of several months.

13. STOCKHOLDERS' EQUITY

Basic EPS is computed by dividing net income available to Duke Energy common stockholders, as adjusted for distributed and undistributed earnings allocated to participating securities and accumulated preferred dividends, by the weighted average number of common shares outstanding during the period. Diluted EPS is computed by dividing net income available to Duke Energy common stockholders, as adjusted for distributed and undistributed earnings allocated to participating securities and accumulated preferred dividends, 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 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 Condensed Consolidated Statements of Operations as a reduction of net income to arrive at net income available to Duke Energy common stockholders. Dividends accumulated on preferred stock are an adjustment to net income used in the calculation of basic and diluted EPS.

82

FINANCIAL STATEMENTS STOCKHOLDERS' EQUITY

The following table presents Duke Energy’s basic and diluted EPS calculations, the weighted average number of common shares outstanding and common and preferred share dividends declared.

	Three Months Ended March 31,
(in millions, except per share amounts)		2021		2020
Net income available to Duke Energy common stockholders		$	953	$	899
Accumulated preferred stock dividends adjustment		12		13
Less: Impact of participating securities		1		1
Income from continuing operations available to Duke Energy common stockholders		$	964	$	911
Weighted average common shares outstanding – basic		769		734
Equity forwards		0		2
Weighted average common shares outstanding – diluted		769		736
EPS available to Duke Energy common stockholders
Basic and diluted		$	1.25	$	1.24
Potentially dilutive items excluded from the calculation(a)		2		2
Dividends declared per common share		$	0.965	$	0.945
Dividends declared on Series A preferred stock per depositary share(b)		$	0.359	$	0.359
Dividends declared on Series B preferred stock per share(c)		$	24.375	$	24.917

(a)    Performance stock awards were not included in the dilutive securities calculation because the performance measures related to the awards had not been met.

(b)    5.75% Series A Cumulative Redeemable Perpetual Preferred Stock dividends are payable quarterly in arrears on the 16th day of March, June, September and December. The preferred stock has a $25 liquidation preference per depositary share.

(c)    4.875% Series B Fixed-Rate Reset Cumulative Redeemable Perpetual Preferred Stock dividends are payable semiannually in arrears on the 16th day of March and September. The preferred stock has a $1,000 liquidation preference per share.

14. EMPLOYEE BENEFIT PLANS

DEFINED BENEFIT RETIREMENT PLANS

Duke Energy and certain subsidiaries maintain, and the Subsidiary Registrants participate in, qualified and non-qualified, non-contributory defined benefit retirement plans. Duke Energy's policy is to fund amounts on an actuarial basis to provide assets sufficient to meet benefit payments to be paid to plan participants.

QUALIFIED PENSION PLANS

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

	Three Months Ended March 31, 2021
			Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Service cost	$	44	$	14	$	13	$	7	$	5	$	1	$	2	$	1
Interest cost on projected benefit obligation	55		13		17		7		10		3		5		2
Expected return on plan assets	(139)		(35)		(47)		(21)		(26)		(7)		(10)		(5)
Amortization of actuarial loss	33		7		10		5		5		2		3		2
Amortization of prior service credit	(7)		(2)		(1)		—		—		—		—		(1)
Amortization of settlement charges	2		1		1		—		—		—		—		—
Net periodic pension costs	$	(12)	$	(2)	$	(7)	$	(2)	$	(6)	$	(1)	$	—	$	(1)

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FINANCIAL STATEMENTS EMPLOYEE BENEFIT PLANS

	Three Months Ended March 31, 2020
			Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Service cost	$	41	$	12	$	12	$	6	$	5	$	1	$	2	$	1
Interest cost on projected benefit obligation	67		16		21		10		12		4		6		2
Expected return on plan assets	(143)		(36)		(48)		(22)		(25)		(7)		(11)		(5)
Amortization of actuarial loss	34		7		11		5		6		2		3		2
Amortization of prior service credit	(8)		(2)		(1)		—		—		—		—		(2)
Amortization of settlement charges	2		1		1		—		—		—		—		—
Net periodic pension costs	$	(7)	$	(2)	$	(4)	$	(1)	$	(2)	$	—	$	—	$	(2)

NON-QUALIFIED PENSION PLANS

Net periodic pension costs for non-qualified pension plans were not material for the three months ended March 31, 2021, and 2020.

OTHER POST-RETIREMENT BENEFIT PLANS

Net periodic costs for OPEB plans were not material for the three months ended March 31, 2021, and 2020.

15. INCOME TAXES

EFFECTIVE TAX RATES

The ETRs from continuing operations for each of the Duke Energy Registrants are included in the following table.

	Three Months Ended
	March 31,
		2021		2020
Duke Energy		8.2	%	13.3	%
Duke Energy Carolinas		6.9	%	16.1	%
Progress Energy		12.9	%	17.5	%
Duke Energy Progress		8.3	%	17.1	%
Duke Energy Florida		19.3	%	20.0	%
Duke Energy Ohio		13.3	%	17.7	%
Duke Energy Indiana		17.6	%	20.8	%
Piedmont		11.4	%	10.1	%

The decrease in the ETR for Duke Energy for the three months ended March 31, 2021, was primarily due to an increase in the amortization of excess deferred taxes.

The decrease in the ETR for Duke Energy Carolinas for the three months ended March 31, 2021, was primarily due to an increase in the amortization of excess deferred taxes.

The decrease in the ETR for Progress Energy for the three months ended March 31, 2021, was primarily due to an increase in the amortization of excess deferred taxes.

The decrease in the ETR for Duke Energy Progress for the three months ended March 31, 2021, was primarily due to an increase in the amortization of excess deferred taxes.

The decrease in the ETR for Duke Energy Ohio for the three months ended March 31, 2021, was primarily due to an increase in amortization of excess deferred taxes.

The decrease in the ETR for Duke Energy Indiana for the three months ended March 31, 2021, was primarily due to an increase in the amortization of excess deferred taxes.

16. SUBSEQUENT EVENTS

For information on subsequent events related to regulatory matters, commitments and contingencies and debt and credit facilities, see Notes 3, 4 and 5.

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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 and Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and 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 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 three months ended March 31, 2021, and with Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2020.

Executive Overview

Advancing Our Clean Energy Transformation

During the first quarter, we continued to move past the challenges from 2020 while executing on our clean energy transformation. In March of 2021, we expanded the company’s senior management team and realigned roles and responsibilities to further accelerate our clean energy transition. This realignment will accelerate the execution of our strategy, clarify important roles in our clean energy transformation and position our company to grow – for our customers, communities, employees and investors.

To further our progress toward achieving net-zero carbon emissions, we will transform our fleet to shift away from coal and expect our largest source of energy in our regulated utilities will come from renewable energy resources, representing about 40% of our capacity in 2050. During the next five years, we have plans for $600 million in new battery storage investment across our regulated businesses. We expect storage investment to accelerate over this decade and beyond – and presently project more than 13,000 MW's of energy storage on our system by 2050. Our generation transition relies upon modernizing and enhancing our energy grid. We continue to install smart meters – more than 8.5 million so far – providing customers with more information about their energy use while helping us improve outage detection and restoration. By the end of 2021, nearly all of our customers will be served by smart meters.

We developed innovative IRPs in the Carolinas, outlining comprehensive proposals and offering six potential pathways to meet key carbon reduction milestones over the next 15 years while balancing affordability for customers. We’ve been working with stakeholder groups to help shape North Carolina’s Clean Energy Plan, with a common goal of reaching net-zero carbon emissions in a way that best serves our customers and our state. This complements the efforts underway on regulatory reform, including the introduction of more efficient cost recovery mechanisms. We also continue to monitor legislative activity at the federal level and any potential impacts on our strategy and investments across the enterprise.

Regulatory Activity. During the first quarter of 2021, we continued to move our regulatory strategy forward. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.

Duke Energy Carolinas 2019 Rate Case Order

•On March 31, 2021, the NCUC issued an order approving without modification previous settlements reached by Duke Energy Carolinas, the North Carolina Public Staff (the “Public Staff”) and other parties on March 25, 2020, and July 31, 2020, which resolved certain issues in Duke Energy Carolinas' base rate case proceeding originally filed with the NCUC on September 31, 2019.

•The order approved without modification the Agreement and Stipulation of Partial Settlement filed with the NCUC on January 25, 2021, which resolved all coal ash prudence and cost recovery issues through early 2030, including in Duke Energy Carolinas' 2019 base rate case proceeding, as well as the equitable sharing issue on remand from the Duke Energy Carolinas 2017 North Carolina rate case as a result of the December 11, 2020, North Carolina Supreme Court opinion.

•The order also approved a return on equity of 9.6% based upon a capital structure of 52% equity and 48% debt, deferral treatment for approximately $0.8 billion of grid improvement projects with a return, Unprotected Federal Excess Deferred Income Taxes flow back over a period of five years, and the reasonableness and prudence of $213 million of deferred storm costs which were removed from the rate case and for which Duke Energy Carolinas filed a petition seeking to securitize the costs in October 2020.

•The order denied Duke Energy Carolinas' proposal to shorten the remaining depreciable lives of certain coal-fired generating plants, indicating that Duke Energy Carolinas' IRP proceeding was the appropriate proceeding for the review of generating plant retirements.

Duke Energy Progress 2019 Rate Case Order

•On April 16, 2021, the NCUC issued an order approving without modification previous settlements reached by Duke Energy Progress, the Public Staff and other parties on June 2, 2020, and July 31, 2020, which resolved certain issues in Duke Energy Progress’ base rate case proceeding originally filed with the NCUC on October 30, 2019.

•The order approved without modification the Agreement and Stipulation of Partial Settlement filed with the NCUC on January 25, 2021, which resolved all coal ash prudence and cost recovery issues through early 2030, including in Duke Energy Progress’ 2019 base rate case proceeding, as well as the equitable sharing issue on remand from the Duke Energy Progress 2017 North Carolina rate case as a result of the December 11, 2020, North Carolina Supreme Court opinion.

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◦The order also approved a return on equity of 9.6% based upon a capital structure of 52% equity and 48% debt, deferral treatment for approximately $0.4 billion of grid improvement projects with a return, Unprotected Federal Excess Deferred Income Taxes flow back over a period of five years, and the reasonableness and prudence of $714 million of deferred storm costs, which were removed from the rate case and for which Duke Energy Progress filed a petition seeking to securitize the costs in October 2020.

◦The order denied Duke Energy Progress’ proposal to shorten the remaining depreciable lives of certain coal-fired generating plants, indicating that Duke Energy Progress’ IRP proceeding was the appropriate proceeding for the review of generating plant retirements.

Piedmont 2021 North Carolina Rate Case

•On March 22, 2021, Piedmont filed an application with the NCUC for a rate increase for retail customers of approximately $109 million, which represents an approximate 10% increase in retail revenues. The rate increase is driven by customer growth and significant infrastructure upgrade investments (plant additions) since the last general rate case.

Matters Impacting Future Results

The matters discussed herein could materially impact the future operating results, financial condition and cash flows of the Duke Energy Registrants and Business Segments.

Regulatory Matters

Coal Ash Costs

As a result of the NCDEQ settlement on December 31, 2019, Duke Energy Carolinas and Duke Energy Progress agreed to excavate seven of the nine remaining coal ash basins in North Carolina with ash moved to on-site lined landfills. At the two remaining basins, uncapped basin ash will be excavated and moved to off-site lined landfills. The majority of spend is expected to occur over the next 15-20 years. In January 2021, Duke Energy Carolinas and Duke Energy Progress reached a settlement agreement on recovery of coal ash costs as outlined in Note 3, "Regulatory Matters." The company agreed not to seek recovery of approximately $1 billion of deferred coal ash expenditures and Duke Energy Carolinas and Duke Energy Progress took a charge of approximately $500 million each in 2020. On March 31, 2021, and April 16, 2021, the NCUC approved the coal ash settlement for Duke Energy Carolinas and Duke Energy Progress, respectively.

In 2019, Duke Energy Carolinas and Duke Energy Progress received orders from the PSCSC denying recovery of certain coal ash costs. Duke Energy Carolinas and Duke Energy Progress have appealed these decisions to the South Carolina Supreme Court and those appeals are pending. An order from regulatory or judicial authorities that rejects our proposed settlement or disallows recovery of costs related to closure of these ash basins could have an adverse impact.

Duke Energy Indiana has interpreted the CCR 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. In 2020, the Hoosier Environmental Council filed a petition challenging the Indiana Department of Environmental Management's (IDEM) partial approval of five of Duke Energy Indiana’s ash pond site closure plans at Gallagher Station. The petition does not challenge the other thirteen basin closures approved by IDEM at other Indiana stations. Interpretation of the requirements of the CCR rule is subject to further legal challenges and 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.

Rate Cases

In March 2021, Piedmont filed a general rate case with the NCUC. The outcome of this rate case could have a material impact.

MGP

The PUCO has 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. Duke Energy Ohio has filed for a request for extension of the deadline. A hearing on that request has not been scheduled. 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.

For additional information, see Note 3 to the Condensed Consolidated Financial Statements, “Regulatory Matters.”

Minority Interest Investment in Duke Energy Indiana

In January 2021, Duke Energy entered into a definitive agreement providing for a 19.9% minority interest investment in Duke Energy Indiana by an affiliate of GIC, Singapore's sovereign wealth fund. The transaction is subject to the satisfaction of certain customary conditions described in the investment agreement, including receipt of the approval of the FERC and completion of review by the Committee on Foreign Investments in the United States. Failure to obtain related approvals or satisfy the conditions in the investment agreement could result in the termination of the transaction and could result in an adverse impact.

Commercial Renewables

Duke Energy continues to monitor recoverability of renewable merchant plants located in the Electric Reliability Council of Texas West market and in the PJM West market, due to declining market pricing and declining long-term forecasted energy prices, primarily driven by lower forecasted natural gas prices. Based on the most recent recoverability test, the carrying value approximated the aggregate estimated future undiscounted cash flows for the assets under review. A continued decline in energy market pricing would likely result in a future impairment. Impairment of these assets could result in adverse impacts. For additional information, see Note 2 to the Condensed Consolidated Financial Statements, "Business Segments."

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In February 2021, a severe winter storm impacted certain Commercial Renewables assets in Texas. Extreme weather conditions limited the ability for these solar and wind facilities to generate and sell electricity into the Electric Reliability Council of Texas market. Both lost revenues and higher than expected purchased power costs have negatively impacted the operating results of these generating units. The financial impact of the storm is expected to have a material impact on the Commercial Renewables segment's 2021 operating results. In addition, Duke Energy has been named in multiple lawsuits arising out of this winter storm, and particularly, the deregulated market managed by the Electric Reliability Council of Texas. For more information, see Notes 2 and 4 to the Condensed Consolidated Financial Statements, "Business Segments" and "Commitments and Contingencies," respectively.

COVID-19

Duke Energy cannot predict the extent to which the COVID-19 pandemic will impact its results of operations, financial position and cash flows in the future. Duke Energy will continue to actively monitor the impacts of COVID-19 including the economic slowdown caused by business closures or by reduced operations of businesses and governmental agencies. The pandemic and resultant economic slowdown continues to cause an increase in certain costs, such as bad debt, and a reduction in the demand for energy. Duke Energy has mitigation plans in place to partially offset these impacts, and the ability to execute these plans is critical to preserving future financial results. The company is in the process of reviewing the long-term real estate strategy due to a potential change of in-office work policies after the COVID-19 pandemic. The plan may result in a reduction of physical work space, which could create accounting impacts in 2021. Accounting impacts may include reassessments of lease terms and lease modifications, which could result in termination penalties, as well as, asset impairments on property, plant and equipment.

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, 2020, for discussion of risks associated with the Tax Act.

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.

Management evaluates financial performance in part based on non-GAAP financial measures, including adjusted earnings and adjusted EPS. Adjusted earnings and adjusted EPS represent income from continuing operations available to Duke Energy Corporation 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 EPS are GAAP Reported Earnings and GAAP Reported EPS, respectively.

Special items included in the periods presented below include the following, which management believes do not reflect ongoing costs:

•Gas Pipeline Investments represents additional exit obligations related to ACP.

•Severance represents the reversal of 2018 severance charges, which were deferred as a result of a partial settlement in the Duke Energy Carolinas and the Duke Energy Progress 2019 North Carolina rate cases.

Three Months Ended March 31, 2021, as compared to March 31, 2020

GAAP reported EPS was $1.25 for the first quarter of 2021 compared to $1.24 in the first quarter of 2020. GAAP reported EPS increased slightly due to favorable weather and positive rate case impacts, offset by the deferral of severance costs in the prior year, Texas Storm Uri impacts and share dilution from equity issuances.

As discussed above, management also evaluates financial performance based on adjusted EPS. Duke Energy’s first quarter 2021 adjusted EPS was $1.26 compared to $1.14 for the first quarter of 2020. The increase in adjusted EPS was primarily due to better weather and positive rate case contributions, partially offset by Texas Storm Uri impacts, the loss of ACP and share dilution from equity issuances.

The following table reconciles non-GAAP measures, including adjusted EPS, to their most directly comparable GAAP measures.

	Three Months Ended March 31,
	2021				2020
(in millions, except per share amounts)	Earnings		EPS		Earnings		EPS
GAAP Reported Earnings/GAAP Reported EPS	$	953	$	1.25	$	899	$	1.24
Adjustments:
Gas Pipeline Investments(a)	5		0.01		—		—
Severance(b)	—		—		(75)		(0.10)
Adjusted Earnings/Adjusted EPS	$	958	$	1.26	$	824	$	1.14

(a)    Net of tax benefit of $1 million.

(b)    Net of tax expense of $23 million.

87

MD&A SEGMENT RESULTS — ELECTRIC UTILITIES AND INFRASTRUCTURE

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 March 31,
(in millions)		2021		2020		Variance
Operating Revenues		$	5,281	$	5,183	$	98
Operating Expenses
Fuel used in electric generation and purchased power		1,462		1,467		(5)
Operation, maintenance and other		1,282		1,325		(43)
Depreciation and amortization		1,057		977		80
Property and other taxes		311		303		8
Impairment of assets and other charges		—		2		(2)
Total operating expenses		4,112		4,074		38
Gains on Sales of Other Assets and Other, net		—		1		(1)
Operating Income		1,169		1,110		59
Other Income and Expenses, net		104		85		19
Interest Expense		340		339		1
Income Before Income Taxes		933		856		77
Income Tax Expense		113		151		(38)
Segment Income		$	820	$	705	$	115
Duke Energy Carolinas GWh sales		21,962		21,236		726
Duke Energy Progress GWh sales		16,537		15,670		867
Duke Energy Florida GWh sales		8,554		8,617		(63)
Duke Energy Ohio GWh sales		6,004		5,823		181
Duke Energy Indiana GWh sales		7,726		7,606		120
Total Electric Utilities and Infrastructure GWh sales		60,783		58,952		1,831
Net proportional MW capacity in operation		50,026		49,561		465

Three Months Ended March 31, 2021, as compared to March 31, 2020

Electric Utilities and Infrastructure’s higher segment income is due to better weather compared to prior year, lower labor related expenses and rate case contributions in various jurisdictions. The following is a detailed discussion of the variance drivers by line item.

Operating Revenues. The variance was driven primarily by:

•a $92 million increase in retail sales, net of fuel revenues, due to better weather compared to prior year;

•a $33 million increase primarily due to higher base rate pricing from the Duke Energy Indiana retail rate case, partially offset by lower rider revenues;

•an $18 million increase in retail pricing due to base rate adjustments related to Duke Energy Florida annual increases from the 2017 Settlement Agreement and the solar base rate adjustment; and

•an $8 million increase in retail pricing primarily due to the Duke Energy Kentucky general rate case.

Partially offset by:

•a $24 million decrease in rider revenues at Duke Energy Carolinas primarily due to energy efficiency programs;

•a $15 million decrease in wholesale power revenues, net of fuel, at Duke Energy Florida primarily due to a restructured capacity contract which was converted to a seasonal contract; and

•an $8 million decrease in weather-normal retail sales volumes.

88

MD&A SEGMENT RESULTS — ELECTRIC UTILITIES AND INFRASTRUCTURE

Operating Expenses. The variance was driven primarily by:

•an $80 million increase in depreciation and amortization primarily due to accelerated depreciation of retired coal units Crystal River 1 and 2, a change in depreciation rates from the Indiana, North Carolina and South Carolina retail rate cases and additional plant in service.

Partially offset by:

•a $43 million decrease in operation, maintenance and other primarily driven by lower labor related expenses, partially offset by higher storm costs.

Other Income and Expenses, net. The variance was primarily due to lower non-service pension costs and unrealized gains on the Duke Energy Florida nuclear decommissioning trust fund.

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 March 31, 2021, and 2020, were 12.1% and 17.6%, respectively. The decrease in the ETR was primarily due to an increase in the amortization of excess deferred taxes.

Gas Utilities and Infrastructure

	Three Months Ended March 31,
(in millions)		2021		2020		Variance
Operating Revenues		$	775	$	664	$	111
Operating Expenses
Cost of natural gas		276		199		77
Operation, maintenance and other		102		110		(8)
Depreciation and amortization		68		66		2
Property and other taxes		35		30		5
Total operating expenses		481		405		76
Operating Income		294		259		35
Other Income and Expenses, net		17		49		(32)
Interest Expense		33		31		2
Income Before Income Taxes		278		277		1
Income Tax Expense		33		28		5
Segment Income		$	245	$	249	$	(4)
Piedmont LDC throughput (dekatherms)		149,626,582		148,503,995		1,122,587
Duke Energy Midwest LDC throughput (Mcf)		37,109,003		33,785,834		3,323,169

Three Months Ended March 31, 2021, as compared to March 31, 2020

Gas Utilities and Infrastructure’s results were impacted primarily by the cancellation of the ACP pipeline offset by margin growth at Piedmont. The following is a detailed discussion of the variance drivers by line item.

Operating Revenues. The variance was driven primarily by:

•a $77 million increase due to higher natural gas costs passed through to customers, higher volumes and increased off-system sales natural gas costs;

•an $11 million increase due to Tennessee base rate case increases; and

•a $7 million increase due to North Carolina IMR.

Operating Expenses. The variance was driven primarily by:

•a $77 million increase in cost of natural gas primarily due to higher natural gas prices, higher volumes and increased off-system sales natural gas costs.

Other Income and Expenses, net. The variance was primarily driven by the cancellation of the ACP pipeline.

Income Tax Expense. The increase in the tax expense was primarily due to a decrease in AFUDC equity, partially offset by an increase in the amortization of excess deferred taxes. The ETRs for the three months ended March 31, 2021, and 2020 were 11.9% and 10.1%, respectively. The increase in the ETR was primarily due to a decrease in AFUDC equity, partially offset by an increase in the amortization of excess deferred taxes.

89

MD&A SEGMENT RESULTS — COMMERCIAL RENEWABLES

Commercial Renewables

	Three Months Ended March 31,
(in millions)		2021		2020		Variance
Operating Revenues		$	119	$	129	$	(10)
Operating Expenses
Operation, maintenance and other		72		69		3
Depreciation and amortization		53		48		5
Property and other taxes		9		8		1
Total operating expenses		134		125		9
Operating Income		(15)		4		(19)
Other Income and Expenses, net		(25)		(1)		(24)
Interest Expense		13		18		(5)
Loss Before Income Taxes		(53)		(15)		(38)
Income Tax Benefit		(29)		(24)		(5)
Add: Loss Attributable to Noncontrolling Interests		51		48		3
Segment Income		$	27	$	57	$	(30)
Renewable plant production, GWh		2,588		2,437		151
Net proportional MW capacity in operation(a)		4,294		3,502		792

(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 March 31, 2021, as compared to March 31, 2020

Commercial Renewables' results were unfavorable primarily due to the impacts from Texas Storm Uri resulting in a $35 million pre-tax loss.

Operating Revenues. The variance was primarily driven by a $13 million decrease for lower market prices in the current year impacting the wind portfolio and a $8 million decrease due to low wind resource and operating downtime. This was partially offset by an $8 million increase for market sales in excess of market purchases during Texas Storm Uri and a $5 million increase due to growth of new projects.

Operating Expenses. The variance was primarily driven by a $7 million increase due to the growth of new projects placed in service and a $2 million increase associated with Texas Storm Uri.

Other Income and Expenses, net. The variance was primarily driven by a $29 million loss in equity earnings due to the impacts from Texas Storm Uri, partially offset by $4 million increase in equity earnings from the wind and distributed asset portfolios.

Interest Expense. The decrease was primarily driven by a $4 million gain on an interest rate swap that does not qualify for hedge accounting.

Income Tax Benefit. The increase in the tax benefit was primarily driven by an increase in pretax losses, partially offset by a decrease in production tax credits generated.

Loss Attributable to Noncontrolling Interests. The increase was driven primarily by $15 million for the growth of new projects financed by tax equity, partially offset by a $12 million loss resulting from Texas Storm Uri.

Other

	Three Months Ended March 31,
(in millions)		2021		2020		Variance
Operating Revenues		$	26	$	23	$	3
Operating Expenses		28		(89)		117
Operating (Loss) Income		(2)		112		(114)
Other Income and Expenses, net		21		(33)		54
Interest Expense		151		171		(20)
Loss Before Income Taxes		(132)		(92)		(40)
Income Tax Benefit		(32)		(19)		(13)
Less: Preferred Dividends		39		39		—
Net Loss		$	(139)	$	(112)	$	(27)

90

MD&A SEGMENT RESULTS — COMMERCIAL RENEWABLES

Three Months Ended March 31, 2021, as compared to March 31, 2020

The higher net loss was driven by the prior year reversal of severance charges incurred in previous periods, partially offset by higher returns on investments that fund certain employee benefit obligations and lower interest rates. The following is a detailed discussion of the variance drivers by line item.

Operating Expenses. The increase was primarily due to the 2020 reversal of severance charges, incurred as a result of a 2018 corporate cost savings initiative, due to reaching settlement for regulatory recovery and higher expenses associated with certain employee benefit obligations.

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 lower interest rates on floating rate debt.

Income Tax Benefit. The increase in the tax benefit was primarily driven by an increase in pretax losses. The ETRs for the three months ended March 31, 2021, and 2020 were 24.2% and 20.7%, respectively. The increase in the ETR was primarily due to unfavorable tax impacts in the prior year related to lower investment returns on certain employee benefit obligations.

DUKE ENERGY CAROLINAS

Results of Operations

	Three Months Ended March 31,
(in millions)	2021		2020		Variance
Operating Revenues	$	1,716	$	1,748	$	(32)
Operating Expenses
Fuel used in electric generation and purchased power	422		453		(31)
Operation, maintenance and other	441		386		55
Depreciation and amortization	359		343		16
Property and other taxes	83		81		2
Impairment of assets and other charges	—		2		(2)
Total operating expenses	1,305		1,265		40
Gains on Sales of Other Assets and Other, net	—		1		(1)
Operating Income	411		484		(73)
Other Income and Expenses, net	48		43		5
Interest Expense	124		123		1
Income Before Income Taxes	335		404		(69)
Income Tax Expense	23		65		(42)
Net Income	$	312	$	339	$	(27)

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 year	2021
Residential sales	13.5	%
General service sales	(3.6)	%
Industrial sales	(2.4)	%
Wholesale power sales	15.0	%
Joint dispatch sales	33.0	%
Total sales	3.4	%
Average number of customers	2.1	%

Three Months Ended March 31, 2021, as compared to March 31, 2020

Operating Revenues. The variance was driven primarily by:

•a $33 million decrease in fuel revenues due to lower prices and retail sales volumes;

•a $24 million decrease in rider revenues primarily due to energy efficiency programs; and

•a $14 million decrease in weather-normal retail sales volumes.

Partially offset by:

•a $50 million increase in retail sales due to better weather compared to prior year.

91

MD&A DUKE ENERGY CAROLINAS

Operating Expenses. The variance was driven primarily by:

•a $55 million increase in operation, maintenance and other expense primarily driven by the deferral of 2018 severance costs due to the partial settlement agreement with the Public Staff of the NCUC related to the 2019 North Carolina retail rate case recorded in 2020; partially offset by lower nuclear outage costs; and

•a $16 million increase in depreciation and amortization expense primarily due to additional plant in service and new depreciation rates associated with the North Carolina rate cases.

Partially offset by:

•a $31 million decrease in fuel used in electric generation and purchased power primarily due to lower retail sales volumes.

Income Tax Expense. The decrease in tax expense was primarily due to an increase in the amortization of excess deferred taxes and a decrease in pretax income.

PROGRESS ENERGY

Results of Operations

	Three Months Ended March 31,
(in millions)	2021		2020		Variance
Operating Revenues	$	2,505	$	2,422	$	83
Operating Expenses
Fuel used in electric generation and purchased power	795		763		32
Operation, maintenance and other	601		554		47
Depreciation and amortization	485		452		33
Property and other taxes	142		135		7
Total operating expenses	2,023		1,904		119
Losses on Sales of Other Assets and Other, net	—		(1)		1
Operating Income	482		517		(35)
Other Income and Expenses, net	43		32		11
Interest Expense	192		206		(14)
Income Before Income Taxes	333		343		(10)
Income Tax Expense	43		60		(17)
Net Income	290		283		7

Three Months Ended March 31, 2021, as compared to March 31, 2020

Operating Revenues. The variance was driven primarily by:

•a $33 million increase in retail sales, net of fuel revenues, due to better weather compared to prior year;

•a $21 million increase in fuel cost recovery driven by higher fuel prices and volumes in the current year;

•a $19 million increase in fuel and capacity revenues primarily due to recovery of the remaining value of retired coal units Crystal River 1 and 2; and

•an $18 million increase in retail pricing due to base rate adjustments related to annual increases from the 2017 Settlement Agreement and the solar base rate adjustment.

Partially offset by:

•a $15 million decrease in wholesale power revenues, net of fuel, primarily due to a restructured capacity contract, which was converted to a seasonal contract at Duke Energy Florida.

Operating Expenses. The variance was driven primarily by:

•a $47 million increase in operation, maintenance and other expense at Duke Energy Progress primarily driven by the deferral of 2018 severance costs due to the partial settlement agreement with the Public Staff of the NCUC related to the 2019 North Carolina retail rate case recorded in 2020, as well as increased storm costs;

•a $33 million increase in depreciation and amortization primarily due to accelerated depreciation of retired coal units Crystal River 1 and 2, and increase in plant base; and

•a $32 million increase in fuel used in electric generation and purchased power primarily due to higher demand and changes in generation mix at Duke Energy Progress.

Other Income and Expenses, net. The increase is primarily due to unrealized gains on the nuclear decommissioning trust fund and pension plan assets at Duke Energy Florida.

92

MD&A PROGRESS ENERGY

Interest Expense. The variance was driven primarily by lower intercompany interest expense and lower debt outstanding at Progress Energy, Inc.

Income Tax Expense. The decrease in tax expense was primarily due to an increase in the amortization of excess deferred taxes.

DUKE ENERGY PROGRESS

Results of Operations

	Three Months Ended March 31,
(in millions)	2021		2020		Variance
Operating Revenues	$	1,401	$	1,338	$	63
Operating Expenses
Fuel used in electric generation and purchased power	436		405		31
Operation, maintenance and other	357		305		52
Depreciation and amortization	285		287		(2)
Property and other taxes	49		47		2
Total operating expenses	1,127		1,044		83
Losses on Sales of Other Assets and Other, net	—		(1)		1
Operating Income	274		293		(19)
Other Income and Expenses, net	24		22		2
Interest Expense	69		69		—
Income Before Income Taxes	229		246		(17)
Income Tax Expense	19		42		(23)
Net Income	$	210	$	204	$	6

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 period	2021
Residential sales	18.7	%
General service sales	(0.9)	%
Industrial sales	(1.8)	%
Wholesale power sales	10.2	%
Joint dispatch sales	(7.6)	%
Total sales	5.5	%
Average number of customers	2.0	%

Three Months Ended March 31, 2021, as compared to March 31, 2020

Operating Revenues. The variance was driven primarily by:

•a $42 million increase in retail sales due to better weather compared to prior year; and

•a $21 million increase in fuel cost recovery driven by higher fuel prices and volumes in the current year.

Operating Expenses. The variance was driven primarily by:

•a $52 million increase in operation, maintenance and other expense primarily driven by the deferral of 2018 severance costs due to the partial settlement agreement with the Public Staff of the NCUC related to the 2019 North Carolina retail rate case recorded in 2020, as well as increased storm costs; and

•a $31 million increase in fuel used in electric generation and purchased power primarily due to higher demand and changes in generation mix.

Income Tax Expense. The decrease in tax expense was primarily due to an increase in the amortization of excess deferred taxes.

93

MD&A DUKE ENERGY FLORIDA

DUKE ENERGY FLORIDA

Results of Operations

	Three Months Ended March 31,
(in millions)	2021		2020		Variance
Operating Revenues	$	1,101	$	1,080	$	21
Operating Expenses
Fuel used in electric generation and purchased power	359		358		1
Operation, maintenance and other	242		245		(3)
Depreciation and amortization	200		165		35
Property and other taxes	93		88		5
Total operating expenses	894		856		38
Operating Income	207		224		(17)
Other Income and Expenses, net	18		10		8
Interest Expense	80		84		(4)
Income Before Income Taxes	145		150		(5)
Income Tax Expense	28		30		(2)
Net Income	$	117	$	120	$	(3)

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 period	2021
Residential sales	10.5	%
General service sales	(2.1)	%
Industrial sales	5.6	%
Wholesale and other	38.2	%
Total sales	(0.7)	%
Average number of customers	1.9	%

Three Months Ended March 31, 2021, as compared to March 31, 2020

Operating Revenues. The variance was driven primarily by:

•a $19 million increase in fuel and capacity revenues primarily due to recovery of the remaining value of retired coal units Crystal River 1 and 2;

•an $18 million increase in retail pricing due to base rate adjustments related to annual increases from the 2017 Settlement Agreement and the solar base rate adjustment;

•an $8 million increase in rider revenues primarily due to increased volumes;

•a $7 million increase in transmission revenues and customer equipment rentals: and

•a $5 million increase in weather-normal retail sales volumes.

Partially offset by:

•a $15 million decrease in wholesale power revenues, net of fuel, primarily due to a restructured capacity contract which was converted to a seasonal contract;

•a $12 million decrease in storm revenues due to full recovery of Hurricane Dorian costs in the prior year; and

•a $9 million decrease in retail sales, net of fuel revenues, due to unfavorable weather in the current year.

Operating Expenses. The variance was driven primarily by:

•a $35 million increase in depreciation and amortization primarily due to accelerated depreciation of retired coal units Crystal River 1 and 2 and an increase in plant base.

Other Income and Expense, net. The increase is primarily due to lower non-service pension costs and unrealized gains on the nuclear decommissioning trust fund.

94

MD&A DUKE ENERGY OHIO

DUKE ENERGY OHIO

Results of Operations

	Three Months Ended March 31,
(in millions)	2021		2020		Variance
Operating Revenues
Regulated electric	$	363	$	346	$	17
Regulated natural gas	169		152		17
Total operating revenues	532		498		34
Operating Expenses
Fuel used in electric generation and purchased power	82		87		(5)
Cost of natural gas	51		37		14
Operation, maintenance and other	108		123		(15)
Depreciation and amortization	74		68		6
Property and other taxes	92		83		9
Total operating expenses	407		398		9
Operating Income	125		100		25
Other Income and Expenses, net	5		3		2
Interest Expense	25		24		1
Income Before Income Taxes	105		79		26
Income Tax Expense	14		14		—
Net Income	$	91	$	65	$	26

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.

	Electric		Natural Gas
Increase (Decrease) over prior year	2021		2021
Residential sales	13.0	%	13.6	%
General service sales	(1.2)	%	12.0	%
Industrial sales	(2.2)	%	(0.8)	%
Wholesale electric power sales	115.8	%	n/a
Other natural gas sales	n/a		0.8	%
Total sales	3.1	%	9.8	%
Average number of customers	0.8	%	0.8	%

Three Months Ended March 31, 2021, as compared to March 31, 2020

Operating Revenues. The variance was driven primarily by:

•a $10 million increase in fuel related revenues primarily due to higher prices and increased volumes;

•an $8 million increase in retail pricing primarily due to the Duke Energy Kentucky general rate case;

•a $7 million increase in revenues due to better weather compared to prior year;

•a $7 million increase in PJM transmission revenues as a result of increased capital spend;

•a $4 million increase in other revenues due to higher OVEC sales into PJM; and

•a $3 million increase in bulk power marketing sales.

Partially offset by:

•a $7 million decrease in retail revenue riders primarily due to the suspension of the Ohio energy efficiency rider and a decrease in the Kentucky gas weather normalization rider, partially offset by an increase in the distribution capital investment rider due to an increase in capital spend.

95

MD&A DUKE ENERGY OHIO

Operating Expenses. The variance was driven primarily by:

•a $9 million increase in fuel expense primarily driven by higher retail prices and increased volumes for natural gas;

•a $9 million increase in property and other taxes primarily due to increased plant in service, higher kilowatt and natural gas distribution taxes due to increased usage and a lower Network Integration Transmission Service tax deferral; and

•a $6 million increase in depreciation and amortization primarily driven by an increase in distribution plant.

. Partially offset by:

•a $15 million decrease in operations, maintenance and other expense primarily due lower vegetation management costs, employee-related expenses, environmental reserves and energy efficiency program costs in Ohio.

DUKE ENERGY INDIANA

Results of Operations

	Three Months Ended March 31,
(in millions)	2021		2020		Variance
Operating Revenues	$	745	$	692	$	53
Operating Expenses
Fuel used in electric generation and purchased power	217		194		23
Operation, maintenance and other	178		186		(8)
Depreciation and amortization	152		132		20
Property and other taxes	21		22		(1)
Total operating expenses	568		534		34
Operating Income	177		158		19
Other Income and Expenses, net	9		10		(1)
Interest Expense	50		43		7
Income Before Income Taxes	136		125		11
Income Tax Expense	24		26		(2)
Net Income	$	112	$	99	$	13

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 year	2021
Residential sales	12.3	%
General service sales	(0.2)	%
Industrial sales	(2.6)	%
Wholesale power sales	12.1	%
Total sales	1.6	%
Average number of customers	1.2	%

Three Months Ended March 31, 2021, as compared to March 31, 2020

Operating Revenues. The variance was driven primarily by:

•a $33 million increase primarily due to higher base rate pricing from the Indiana retail rate case, net of lower rider revenues; and

•a $19 million increase in fuel revenues primarily due to higher fuel cost recovery driven by customer demand and fuel prices.

Operating Expenses. The variance was driven primarily by:

•a $23 million increase in fuel used in electric generation and purchased power expense primarily due to higher coal and natural gas costs; and

•a $20 million increase in depreciation and amortization primarily due to a change in depreciation rates from the Indiana retail rate case and additional plant in service.

Partially offset by:

•an $8 million decrease in operation, maintenance and other primarily due to lower outage and other contractor spend.

Interest Expense. The variance was driven by higher post-in-service carrying costs interest resulting from the Indiana retail rate case, partially offset by higher fixed-rate debt outstanding in the prior year.

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MD&A PIEDMONT

PIEDMONT

Results of Operations

	Three Months Ended March 31,
(in millions)	2021		2020		Variance
Operating Revenues	$	606	$	512	$	94
Operating Expenses
Cost of natural gas	225		162		63
Operation, maintenance and other	78		80		(2)
Depreciation and amortization	48		45		3
Property and other taxes	14		12		2
Total operating expenses	365		299		66
Operating Income	241		213		28
Other Income and Expenses, net	17		12		5
Interest Expense	29		27		2
Income Before Income Taxes	229		198		31
Income Tax Expense	26		20		6
Net Income	$	203	$	178	$	25

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 year	2021
Residential deliveries	27.1	%
Commercial deliveries	16.0	%
Industrial deliveries	2.6	%
Power generation deliveries	(12.8)	%
For resale	40.9	%
Total throughput deliveries	0.8	%
Secondary market volumes	5.4	%
Average number of customers	2.2	%

The margin decoupling mechanism adjusts for variations in residential and commercial use per customer, including those due to weather and conservation. The weather normalization adjustment mechanisms mostly offset the impact of weather on bills rendered, but do not ensure full recovery of approved margin during periods when winter weather is significantly warmer or colder than normal.

Three Months Ended March 31, 2021, as compared to March 31, 2020

Operating Revenues. The variance was driven primarily by:

•a $63 million increase due to higher natural gas costs passed through to customers, higher volumes and higher off-system sales natural gas costs;

•an $11 million increase due to Tennessee base rate case increases; and

•a $7 million increase due to North Carolina IMR.

Operating Expenses. The variance was driven primarily by:

•a $63 million increase in cost of natural gas due to higher natural gas prices, higher volumes and higher off-system sales natural gas costs.

Income Tax Expense. The increase in tax expense was primarily due to an increase in pretax income.

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. Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2020, included a summary and detailed discussion of projected primary sources and uses of cash for 2021 to 2023.

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MD&A LIQUIDITY AND CAPITAL RESOURCES

In January 2021, Duke Energy entered into a definitive agreement with an affiliate of GIC, for GIC to make a minority interest investment of 19.9% in Duke Energy Indiana. The investment will be completed following two closings for an aggregate investment amount of approximately $2 billion. The first closing is expected to be completed in the second quarter of 2021 and Duke Energy will issue 11.1% of the membership interests in exchange for 50% of the total investment amount. Duke Energy has the discretion to determine the timing of the second closing, but the closing will occur no later than January 2023. At the second closing, Duke Energy will issue additional membership interests, so GIC's minority interest ownership is 19.9% of Duke Energy Indiana, for the remaining 50% of the total investment amount. Proceeds from the minority interest investment are expected to address common equity needs through 2025 to partially fund Duke Energy's $59 billion capital and investment expenditure plan.

As of March 31, 2021, Duke Energy had approximately $379 million of cash on hand, $4.4 billion available under its $8 billion Master Credit Facility and $500 million available under the $1 billion Three-Year Revolving Credit Facility. Duke Energy expects to have sufficient liquidity in the form of cash on hand, cash from operations and available credit capacity to support its funding needs. Refer to Note 5 to the Condensed Consolidated Financial Statements, "Debt and Credit Facilities," for information regarding Duke Energy's debt issuances and maturities, and available credit facilities including the Master Credit Facility.

Credit Ratings

In March 2021, Moody's Investors Services, Inc. (Moody's) downgraded by one notch the long-term credit ratings for Duke Energy (Parent) and Duke Energy Carolinas. The downgrade reflects Duke Energy's balance sheet objectives. The downgrade for Duke Energy (Parent) and Duke Energy Carolinas also considers the impact for Duke Energy Carolinas and Duke Energy Progress as a result of the 2019 rate case orders and approval of the CCR Settlement Agreement. While these agreements are indicative of a regulatory environment that remains broadly supportive of utility credit quality, their financial terms resulted in current impairment charges and lowered the amount of future cash flow Duke Energy Carolinas and Duke Energy Progress will receive in conjunction with their coal ash remediation spending. As part of the credit rating action, Moody's affirmed Duke Energy's (Parent) short-term and commercial paper credit ratings and confirmed the credit ratings for Duke Energy Progress. Following a January 2021, credit rating downgrade of Duke Energy (Parent) and its subsidiaries, Standard & Poor's Rating Services continues to maintain a stable outlook on Duke Energy Corporation and its subsidiaries as of March 31, 2021.

Cash Flow Information

The following table summarizes Duke Energy’s cash flows.

	Three Months Ended
	March 31,
(in millions)	2021		2020
Cash flows provided by (used in):
Operating activities	$	2,088	$	1,554
Investing activities	(3,137)		(3,022)
Financing activities	1,185		2,593
Net increase in cash, cash equivalents and restricted cash	136		1,125
Cash, cash equivalents and restricted cash at beginning of period	556		573
Cash, cash equivalents and restricted cash at end of period	$	692	$	1,698

OPERATING CASH FLOWS

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

	Three Months Ended
	March 31,
(in millions)	2021		2020		Variance
Net income	$	941	$	890	$	51
Non-cash adjustments to net income	1,446		1,639		(193)
Payments for asset retirement obligations	(114)		(132)		18
Working capital	(185)		(843)		658
Net cash provided by operating activities	$	2,088	$	1,554	$	534

The variance was primarily due to decreases in coal stock balances, incentive payments and the timing of payments.

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MD&A LIQUIDITY AND CAPITAL RESOURCES

INVESTING CASH FLOWS

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

	Three Months Ended
	March 31,
(in millions)	2021		2020		Variance
Capital, investment and acquisition expenditures	$	(2,215)	$	(2,909)	$	694
Other investing items	(922)		(113)		(809)
Net cash used in investing activities	$	(3,137)	$	(3,022)	$	(115)

The variance relates primarily to payment made to fund ACP's outstanding debt, partially offset by decreases in capital expenditures due to lower 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.

	Three Months Ended
	March 31,
(in millions)	2021		2020		Variance
Issuances of long-term debt, net	$	532	$	1,662	$	(1,130)
Issuances of common stock	5		40		(35)
Notes payable, commercial paper and other short-term borrowings	1,187		1,569		(382)
Dividends paid	(783)		(707)		(76)
Contributions from noncontrolling interests	303		103		200
Other financing items	(59)		(74)		15
Net cash provided by financing activities	$	1,185	$	2,593	$	(1,408)

The variance was primarily due to:

•a $1,130 million decrease in proceeds from net issuances of long-term debt primarily due to the timing of issuances and redemptions of long-term debt; and

•a $382 million decrease in net proceeds from issuances of notes payable and commercial paper.

Partially offset by:

•a $200 million increase related to contributions from noncontrolling interests for tax equity financing activity in the Commercial Renewables segment.

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 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.

Off-Balance Sheet Arrangements

During the three months ended March 31, 2021, there were no material changes to Duke Energy’s off-balance sheet arrangements. 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 for the year ended December 31, 2020.

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 months ended March 31, 2021, there were no material changes in Duke Energy's contractual obligations. For an in-depth discussion of Duke Energy’s contractual obligations, see “Contractual Obligations” and “Quantitative and Qualitative Disclosures about Market Risk” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2020.

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ITEM 3. QUANTITATIVE AND QUALITATIVE 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 for the Duke Energy Registrants. During the three months ended March 31, 2021, there were no material changes to the Duke Energy Registrants' disclosures about market risk.

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 Exchange Act is recorded, processed, summarized and reported, within the time periods specified by the SEC rules and forms.

Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by the Duke Energy Registrants in the reports they file or submit under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, the Duke Energy Registrants have evaluated the effectiveness of their disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2021, and, based upon this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these controls and procedures are effective in providing reasonable assurance of compliance.

Changes in Internal Control over Financial Reporting

Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, the Duke Energy Registrants have evaluated changes in internal control over financial reporting (as such term is defined in Rules 13a-15 and 15d-15 under the Exchange Act) that occurred during the fiscal quarter ended March 31, 2021, and have concluded no change has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.

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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. For additional information, see Item 3, "Legal Proceedings," in Duke Energy's Annual Report on Form 10-K for the year ended December 31, 2020.

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 for the year ended December 31, 2020, 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.

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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
4.1	Eleventh Supplemental Indenture, dated as of March 11, 2021 (incorporated by reference to Exhibit 4.1 to registrant’s Current Report on Form 8-K filed on March 11, 2021, File No. 1-6196).								X
4.2	One Hundred and Fifth Supplemental Indenture, dated as of April 1, 2021 (incorporated by reference to Exhibit 4.1 to registrant’s Current Report on Form 8-K filed on April 1, 2021, File No. 1-0928).		X
*10.1	Coal Combustion Residuals Settlement Agreement	X	X		X
*10.2	Investment Agreement by and among Cinergy Corp., Duke Energy Indiana HoldCo, LLC, Duke Energy Corporation, and Epson Investment PTE. LTD.	X						X
*10.3	First Amendment to $1,000,000,000 Credit Agreement, dated as of May 15, 2019, among registrant, the Lenders party thereto, The Bank of Nova Scotia, as Administrative Agent, PNC Bank, National Association, Sumitomo Mitsui Banking Corporation and TD Bank, N.A., as Co-Syndication Agents, and Bank of China, New York Branch, BNP Paribas, Santander Bank, N.A., and U.S. Bank, National Association, as Co-Documentation Agents.	X
*31.1.1	Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	X
*31.1.2	Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.		X
*31.1.3	Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.			X
*31.1.4	Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X
*31.1.5	Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.					X
*31.1.6	Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.						X
*31.1.7	Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.							X
*31.1.8	Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.								X
*31.2.1	Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	X
*31.2.2	Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.		X

102

EXHIBITS

*31.2.3	Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.			X
*31.2.4	Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X
*31.2.5	Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.					X
*31.2.6	Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.						X
*31.2.7	Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.							X
*31.2.8	Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.								X
*32.1.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	X
*32.1.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.		X
*32.1.3	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.			X
*32.1.4	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.				X
*32.1.5	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.					X
*32.1.6	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.						X
*32.1.7	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.							X
*32.1.8	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.								X
*32.2.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	X
*32.2.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.		X
*32.2.3	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.			X
*32.2.4	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.				X
*32.2.5	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.					X
*32.2.6	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.						X

103

EXHIBITS

*32.2.7	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.							X
*32.2.8	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.								X
*101.INS	XBRL Instance 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
*101.SCH	XBRL Taxonomy Extension Schema Document.	X	X	X	X	X	X	X	X
*101.CAL	XBRL Taxonomy Calculation Linkbase Document.	X	X	X	X	X	X	X	X
*101.LAB	XBRL Taxonomy Label Linkbase Document.	X	X	X	X	X	X	X	X
*101.PRE	XBRL Taxonomy Presentation Linkbase Document.	X	X	X	X	X	X	X	X
*101.DEF	XBRL Taxonomy Definition Linkbase Document.	X	X	X	X	X	X	X	X
*104	Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101).	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% 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.

104

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:	May 10, 2021	/s/ STEVEN K. YOUNG
		Steven K. Young Executive Vice President and Chief Financial Officer (Principal Financial Officer)
Date:	May 10, 2021	/s/ DWIGHT L. JACOBS
		Dwight L. Jacobs Senior Vice President, Chief Accounting Officer, Tax and Controller (Principal Accounting Officer)

105