UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)



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

For the quarterly period ended ~~June 30, 2016~~March 31, 2017



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

For the transition period from to

________________________



Commission file number	Registrant, State of Incorporation or Organization, Address of Principal Executive Offices and Telephone Number	IRS Employer Identification No.

1-32853	DUKE ENERGY CORPORATION (a Delaware corporation) 550 South Tryon Street Charlotte, North Carolina 28202-1803 704-382-3853	20-2777218



Commission file number	Registrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number and IRS Employer Identification Number	Commission file number	Registrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number and IRS Employer Identification Number
1-4928	DUKE ENERGY CAROLINAS, LLC (a North Carolina limited liability company) 526 South Church Street Charlotte, North Carolina 28202-1803 704-382-3853 56-0205520	1-3274	DUKE ENERGY FLORIDA, LLC (a Florida limited liability company) 299 First Avenue North St. Petersburg, Florida 33701 704-382-3853 59-0247770
1-15929	PROGRESS ENERGY, INC. (a North Carolina corporation) 410 South Wilmington Street Raleigh, North Carolina 27601-1748 704-382-3853 56-2155481	1-1232	DUKE ENERGY OHIO, INC. (an Ohio corporation) 139 East Fourth Street Cincinnati, Ohio 45202 704-382-3853 31-0240030
1-3382	DUKE ENERGY PROGRESS, LLC (a North Carolina limited liability company) 410 South Wilmington Street Raleigh, North Carolina 27601-1748 704-382-3853 56-0165465	1-3543	DUKE ENERGY INDIANA, LLC (an Indiana limited liability company) 1000 East Main Street Plainfield, Indiana 46168 704-382-3853 35-0594457
1-6196	PIEDMONT NATURAL GAS COMPANY, INC. (a North Carolina corporation) 4720 Piedmont Row Drive Charlotte, North Carolina 28210 704-364-3120 56-0556998

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.



Duke Energy Corporation (Duke Energy)	Yes x	No ¨	Duke Energy Florida, LLC (Duke Energy Florida)	Yes x	No ¨
Duke Energy Carolinas, LLC (Duke Energy Carolinas)	Yes x	No ¨	Duke Energy Ohio, Inc. (Duke Energy Ohio)	Yes x	No ¨
Progress Energy, Inc. (Progress Energy)	Yes x	No ¨	Duke Energy Indiana, LLC (Duke Energy Indiana)	Yes x	No ¨
Duke Energy Progress, LLC (Duke Energy Progress)	Yes x	No ¨	Piedmont Natural Gas Company, Inc. (Piedmont)	Yesx	No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).



Duke Energy	Yes x	No ¨	Duke Energy Florida	Yes x	No ¨
Duke Energy Carolinas	Yes x	No ¨	Duke Energy Ohio	Yes x	No ¨
Progress Energy	Yes x	No ¨	Duke Energy Indiana	Yes x	No ¨
Duke Energy Progress	Yes x	No ¨	Piedmont	Yesx	No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Duke Energy	Large accelerated filer x	Accelerated filer ¨	Non-accelerated filer ¨	Smaller reporting company¨	Emerging Growth Company ¨
Duke Energy Carolinas	Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filer x	Smaller reporting company ¨	Emerging Growth Company ¨
Progress Energy	Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filer x	Smaller reporting company¨	Emerging Growth Company ¨
Duke Energy Progress	Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filer x	Smaller reporting company ¨	Emerging Growth Company ¨
Duke Energy Florida	Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filer x	Smaller reporting company¨	Emerging Growth Company ¨
Duke Energy Ohio	Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filer x	Smaller reporting company ¨	Emerging Growth Company ¨
Duke Energy Indiana	Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filer x	Smaller reporting company ¨	Emerging Growth Company ¨
Piedmont	Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filerx	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 x	Duke Energy Florida	Yes ¨	No x
Duke Energy Carolinas	Yes ¨	No x	Duke Energy Ohio	Yes ¨	No x
Progress Energy	Yes ¨	No x	Duke Energy Indiana	Yes ¨	No x
Duke Energy Progress	Yes ¨	No x	Piedmont	Yes ¨	Nox

Number of shares of Common stock outstanding at ~~June 30, 2016:~~March 31, 2017:



Registrant	Description	Shares
Duke Energy	Common stock, $0.001 par value	~~688,933,508~~
~~Duke Energy Carolinas~~	~~All of the registrant's limited liability company member interests are directly owned by Duke Energy.~~
~~Progress Energy~~	~~All of the registrant's common stock is directly owned by Duke Energy.~~
~~Duke Energy Progress~~	~~All of the registrant's limited liability company member interests are indirectly owned by Duke Energy.~~
~~Duke Energy Florida~~	~~All of the registrant's limited liability company member interests are indirectly owned by Duke Energy.~~
~~Duke Energy Ohio~~	~~All of the registrant's common stock is indirectly owned by Duke Energy.~~
~~Duke Energy Indiana~~	~~All of the registrant's limited liability company member interests are indirectly owned by Duke Energy.~~699,883,528

This combined Form 10-Q is filed separately by ~~seven~~eight registrants: Duke Energy, Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, ~~and~~ 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, ~~and~~ 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~~DUKE ENERGY CORPORATION

(a Delaware corporation)

550 South Tryon Street

Charlotte, North Carolina 28202-1803

704-382-3853

20-2777218



	~~Cautionary Statement Regarding Forward-Looking Information~~

Commission file number	Registrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number and IRS Employer Identification Number	Commission file number	Registrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number and IRS Employer Identification Number
1-4928	DUKE ENERGY CAROLINAS, LLC (a North Carolina limited liability company) 526 South Church Street Charlotte, North Carolina 28202-1803 704-382-3853 56-0205520	1-3274	DUKE ENERGY FLORIDA, LLC (a Florida limited liability company) 299 First Avenue North St. Petersburg, Florida 33701 704-382-3853 59-0247770
1-15929	PROGRESS ENERGY, INC. (a North Carolina corporation) 410 South Wilmington Street Raleigh, North Carolina 27601-1748 704-382-3853 56-2155481	1-1232	DUKE ENERGY OHIO, INC. (an Ohio corporation) 139 East Fourth Street Cincinnati, Ohio 45202 704-382-3853 31-0240030
1-3382	DUKE ENERGY PROGRESS, LLC (a North Carolina limited liability company) 410 South Wilmington Street Raleigh, North Carolina 27601-1748 704-382-3853 56-0165465	1-3543	DUKE ENERGY INDIANA, LLC (an Indiana limited liability company) 1000 East Main Street Plainfield, Indiana 46168 704-382-3853 35-0594457
1-6196	PIEDMONT NATURAL GAS COMPANY, INC. (a North Carolina corporation) 4720 Piedmont Row Drive Charlotte, North Carolina 28210 704-364-3120 56-0556998
~~PART I. FINANCIAL INFORMATION~~

~~Item 1.~~

~~Financial Statements~~

~~Duke Energy Corporation Financial Statements~~

~~Duke Energy Carolinas, LLC Financial Statements~~

~~Progress Energy, Inc. Financial Statements~~

~~Duke Energy Progress, LLC Financial Statements~~

~~Duke Energy Florida, LLC Financial Statements~~

~~Duke Energy Ohio, Inc. Financial Statements~~

~~Duke Energy Indiana, LLC Financial Statements~~

~~Combined Notes to Condensed Consolidated Financial Statements~~

~~Note 1 – Organization and Basis of Presentation~~

~~Note 2 – Acquisitions and Dispositions~~

~~Note 3 – Business Segments~~

~~Note 4 – Regulatory Matters~~

~~Note 5 – Commitments and Contingencies~~

~~Note 6 – Debt and Credit Facilities~~

~~Note 7 – Goodwill and Intangible Assets~~

~~Note 8 – Related Party Transactions~~

~~Note 9 – Derivatives and Hedging~~

~~Note 10 – Investments in Debt and Equity Securities~~

~~Note 11 – Fair Value Measurements~~

~~Note 12 – Variable Interest Entities~~

~~Note 13 – Common Stock~~

~~Note 14 – Stock-Based Compensation~~

~~Note 15 – Employee Benefit Plans~~

~~Note 16 – Income Taxes~~

~~Note 17 – Subsequent Events~~

~~Item 2.~~

~~Management's Discussion and Analysis of Financial Condition and Results of Operations~~

~~Item 3.~~

~~Quantitative and Qualitative Disclosures About Market Risk~~

~~116~~

~~Item 4.~~

~~Controls and Procedures~~

~~116~~

~~PART II. OTHER INFORMATION~~

~~Item 1.~~

~~Legal Proceedings~~

~~117~~

~~Item 1A.~~

~~Risk Factors~~

~~117~~

~~Item 2.~~

~~Unregistered Sales of Equity Securities and Use of Proceeds~~

~~117~~

~~Item 6.~~

~~Exhibits~~

~~118~~

~~Signatures~~

~~120~~



Duke Energy Corporation (Duke Energy)	Yesx	No ¨	Duke Energy Florida, LLC (Duke Energy Florida)	Yesx	No ¨
Duke Energy Carolinas, LLC (Duke Energy Carolinas)	Yesx	No ¨	Duke Energy Ohio, Inc. (Duke Energy Ohio)	Yesx	No ¨
Progress Energy, Inc. (Progress Energy)	Yesx	No ¨	Duke Energy Indiana, LLC (Duke Energy Indiana)	Yesx	No ¨
Duke Energy Progress, LLC (Duke Energy Progress)	Yesx	No ¨	Piedmont Natural Gas Company, Inc. (Piedmont)	Yesx	No ¨



Duke Energy	Yesx	No ¨	Duke Energy Florida	Yesx	No ¨
Duke Energy Carolinas	Yesx	No ¨	Duke Energy Ohio	Yesx	No ¨
Progress Energy	Yesx	No ¨	Duke Energy Indiana	Yesx	No ¨
Duke Energy Progress	Yesx	No ¨	Piedmont	Yesx	No ¨



Duke Energy	Large accelerated filerx	Accelerated filer ¨	Non-accelerated filer ¨	Smaller reporting company ¨	Emerging Growth Company ¨
Duke Energy Carolinas	Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filerx	Smaller reporting company ¨	Emerging Growth Company ¨
Progress Energy	Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filerx	Smaller reporting company ¨	Emerging Growth Company ¨
Duke Energy Progress	Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filerx	Smaller reporting company ¨	Emerging Growth Company ¨
Duke Energy Florida	Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filerx	Smaller reporting company ¨	Emerging Growth Company ¨
Duke Energy Ohio	Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filerx	Smaller reporting company ¨	Emerging Growth Company ¨
Duke Energy Indiana	Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filerx	Smaller reporting company ¨	Emerging Growth Company ¨
Piedmont	Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filerx	Smaller reporting company ¨	Emerging Growth Company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).



Duke Energy	Yes ¨	Nox	Duke Energy Florida	Yes ¨	Nox
Duke Energy Carolinas	Yes ¨	Nox	Duke Energy Ohio	Yes ¨	Nox
Progress Energy	Yes ¨	Nox	Duke Energy Indiana	Yes ¨	Nox
Duke Energy Progress	Yes ¨	Nox	Piedmont	Yes ¨	Nox

Number of shares of Common stock outstanding at March 31, 2017:



Registrant	Description	Shares
Duke Energy	Common stock, $0.001 par value	699,883,528

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.

~~CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION~~

This document includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are based on management’s beliefs and assumptions and can often be identified by terms and phrases that include “anticipate,” “believe,” “intend,” “estimate,” “expect,” “continue,” “should,” “could,” “may,” “plan,” “project,” “predict,” “will,” “potential,” “forecast,” “target,” “guidance,” “outlook” or other similar terminology. Various factors may cause actual results to be materially different than the suggested outcomes within forward-looking statements; accordingly, there is no assurance that such results will be realized. These factors include, but are not limited to:


◦	State, federal and foreign legislative and regulatory initiatives, including costs of compliance with existing and future environmental requirements or climate change, as well as rulings that affect cost and investment recovery or have an impact on rate structures or market prices;


◦	The extent and timing of 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 the regulatory process;


◦	The costs of decommissioning Crystal River Unit 3 and other nuclear facilities could prove to be more extensive than amounts estimated and all costs may not be fully recoverable through the regulatory process;


◦	~~Credit ratings of the Duke Energy Registrants may be different from what is expected;~~


◦	~~Costs and effects of legal and administrative proceedings, settlements, investigations and claims;~~


◦	Industrial, commercial and residential growth or decline in service territories or customer bases resulting from variations in customer usage patterns, including energy efficiency efforts and use of alternative energy sources, including 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 rooftop 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 markets and continued industry consolidation;~~


◦	~~Political, economic and regulatory uncertainty in Brazil and other countries in which Duke Energy conducts business;~~


◦	~~The influence of weather and other natural phenomena on operations, including the economic, operational and other effects of severe storms, hurricanes, droughts, earthquakes and tornadoes;~~


◦	The ability to successfully operate electric generating facilities and deliver electricity to customers including direct or indirect effects to the company resulting from an incident that affects the U.S. electric grid or generating resources;


◦	The impact on facilities and business from a terrorist attack, cybersecurity threats, data security breaches, and other catastrophic events such as fires, explosions, pandemic health events or other similar occurrences;


◦	~~The inherent risks associated with the operation and potential construction of nuclear facilities, including environmental, health, safety, regulatory and financial risks;~~


◦	The timing and extent of changes in commodity prices, interest rates and foreign currency exchange rates and the ability to recover such costs through the regulatory process, where appropriate, and their impact on liquidity positions and the value of underlying assets;


◦	The results of financing efforts, including the ability to obtain financing on favorable terms, which can be affected by various factors, including credit ratings, interest rate fluctuations, and general economic conditions;


◦	Declines in the market prices of equity and fixed income securities and resultant cash funding requirements for defined benefit pension plans, other post-retirement benefit plans and nuclear decommissioning trust funds;

◦

Construction and development risks associated with the completion of Duke Energy Registrants’ capital investment projects, including risks related to financing, obtaining and complying with terms of permits, meeting construction budgets and schedules, and satisfying operating and environmental performance standards, as well as the ability to recover costs from customers in a timely manner or at all;


◦	Changes in rules for regional transmission organizations, including changes in rate designs and new and evolving capacity markets, and risks related to obligations created by the default of other participants;


◦	~~The ability to control operation and maintenance costs;~~


◦	~~The level of creditworthiness of counterparties to transactions;~~


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


◦	~~The ability of subsidiaries to pay dividends or distributions to Duke Energy Corporation holding company (the Parent);~~


◦	~~The performance of projects undertaken by our nonregulated businesses and the success of efforts to invest in and develop new opportunities;~~


◦	~~The effect of accounting pronouncements issued periodically by accounting standard-setting bodies;~~


◦	~~The impact of potential goodwill impairments;~~


◦	~~The ability to successfully complete future merger, acquisition or divestiture plans;~~

◦

The expected timing and likelihood of completion of the proposed acquisition of Piedmont Natural Gas Company, Inc. (Piedmont), including the timing, receipt and terms and conditions of any required governmental and regulatory approvals of the proposed acquisition that could reduce anticipated benefits or cause the parties to abandon the acquisition, and under certain specified circumstances pay a termination fee of $250 million, as well as the ability to successfully integrate the businesses and realize anticipated benefits and the risk that the credit ratings of the combined company or its subsidiaries may be different from what the companies expect; and


◦	The likelihood, terms and timing of the potential sale of International Energy, excluding the equity investment in National Methanol Company (NMC), could change the presentation of certain assets, liabilities and results of operations as assets held for sale, liabilities associated with assets held for sale, and discontinued operations, respectively.

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 www.sec.gov. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than described. Forward-looking statements speak only as of the date they are made and the Duke Energy Registrants expressly disclaim an obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

~~PART I. FINANCIAL INFORMATION~~

~~ITEM 1. FINANCIAL STATEMENTS~~

DUKE ENERGY CORPORATION

~~Condensed Consolidated Statements of Operations~~(a Delaware corporation)

~~(Unaudited)~~550 South Tryon Street

Charlotte, North Carolina 28202-1803

704-382-3853

20-2777218

Three Months Ended Six Months Ended
June 30, June 30,
(in millions, except per-share amounts) 2016
2015
2016
2015
Operating Revenues
Regulated electric $ 4,965
$ 5,090
$ 10,018
$ 10,547
Nonregulated electric and other 422
403
822
780
Regulated natural gas 97
96
266
327
Total operating revenues 5,484
5,589
11,106
11,654
Operating Expenses
Fuel used in electric generation and purchased power – regulated 1,509
1,721
3,086
3,662
Fuel used in electric generation and purchased power – nonregulated 82
118
140
222
Cost of natural gas 21
26
81
137
Operation, maintenance and other 1,431
1,422
2,920
2,848
Depreciation and amortization 813
790
1,627
1,567
Property and other taxes 293
279
590
543
Impairment charges 195
—
198
—
Total operating expenses 4,344
4,356
8,642
8,979
Gains on Sales of Other Assets and Other, net 5
13
14
27
Operating Income 1,145
1,246
2,478
2,702
Other Income and Expenses
Equity in earnings of unconsolidated affiliates 15
23
23
36
Other income and expenses, net 92
72
171
146
Total other income and expenses 107
95
194
182
Interest Expense 500
403
1,011
806
Income From Continuing Operations Before Income Taxes 752
938
1,661
2,078
Income Tax Expense from Continuing Operations 239
334
452
698
Income From Continuing Operations 513
604
1,209
1,380
(Loss) Income From Discontinued Operations, net of tax (1 ) (57 ) 2
34
Net Income 512
547
1,211
1,414
Less: Net Income Attributable to Noncontrolling Interests 3
4
8
7
Net Income Attributable to Duke Energy Corporation $ 509
$ 543
$ 1,203
$ 1,407

Earnings Per Share – Basic and Diluted
Income from continuing operations attributable to Duke Energy Corporation common stockholders
Basic $ 0.74
$ 0.87
$ 1.74
$ 1.96
Diluted $ 0.74
$ 0.87
$ 1.74
$ 1.96
(Loss) Income from discontinued operations attributable to Duke Energy Corporation common stockholders
Basic $ —
$ (0.09 ) $ —
$ 0.05
Diluted $ —
$ (0.09 ) $ —
$ 0.05
Net income attributable to Duke Energy Corporation common stockholders
Basic $ 0.74
$ 0.78
$ 1.74
$ 2.01
Diluted $ 0.74
$ 0.78
$ 1.74
$ 2.01
Weighted average shares outstanding
Basic 689
692
689
700
Diluted 690
692
689
700

~~PART I~~

~~DUKE ENERGY CORPORATION~~

~~Condensed Consolidated Statements~~

Commission file number

Registrant, State of ~~Comprehensive Income~~

~~(Unaudited)~~

Three Months Ended Six Months Ended
June 30, June 30,
(in millions) 2016
2015
2016
2015
Net Income $ 512
$ 547
$ 1,211
$ 1,414
Other Comprehensive Income (Loss), net of tax
Foreign currency translation adjustments 58
9
107
(116 )
Pension and OPEB adjustments 2
7
2
2
Net unrealized (losses) gains on cash flow hedges (11 ) 9
(25 ) 2
Reclassification into earnings from cash flow hedges —
1
2
5
Unrealized gains (losses) on available-for-sale securities 3
(3 ) 7
(3 )
Other Comprehensive Income (Loss), net of tax 52
23
93
(110 )
Comprehensive Income 564
570
1,304
1,304
Less: Comprehensive Income Attributable to Noncontrolling Interests 6
3
12
2
Comprehensive Income Attributable to Duke Energy Corporation $ 558
$ 567
$ 1,292
$ 1,302

~~PART I~~

~~DUKE ENERGY CORPORATION~~

~~Condensed Consolidated Balance Sheets~~

~~(Unaudited)~~

(in millions) June 30, 2016 December 31, 2015
ASSETS
Current Assets
Cash and cash equivalents $ 676
$ 857
Receivables (net of allowance for doubtful accounts of $23 at 2016 and $18 at 2015) 575
703
Receivables of VIEs (net of allowance for doubtful accounts of $56 at 2016 and $53 at 2015) 1,943
1,748
Inventory 3,627
3,810
Regulatory assets (includes $34 related to VIEs at 2016) 825
877
Other 451
327
Total current assets 8,097
8,322
Investments and Other Assets
Investments in equity method unconsolidated affiliates 613
499
Nuclear decommissioning trust funds 5,966
5,825
Goodwill 16,357
16,343
Other 2,972
3,042
Total investments and other assets 25,908
25,709
Property, Plant and Equipment
Cost 115,143
112,826
Accumulated depreciation and amortization (38,412 ) (37,665 )
Generation facilities to be retired, net 598
548
Net property, plant and equipment 77,329
75,709
Regulatory Assets and Deferred Debits
Regulatory assets (includes $1,194 related to VIEs at 2016) 11,290
11,373
Other 30
43
Total regulatory assets and deferred debits 11,320
11,416
Total Assets $ 122,654
$ 121,156
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable $ 2,221
$ 2,400
Notes payable and commercial paper 2,312
3,633
Taxes accrued 467
348
Interest accrued 448
430
Current maturities of long-term debt (includes $197 at 2016 and $125 at 2015 related to VIEs) 2,342
2,074
Regulatory liabilities 332
400
Other 1,784
2,115
Total current liabilities 9,906
11,400
Long-Term Debt (includes $3,383 at 2016 and $2,197 at 2015 related to VIEs) 39,931
37,495
Deferred Credits and Other Liabilities
Deferred income taxes 13,038
12,705
Investment tax credits 492
472
Accrued pension and other post-retirement benefit costs 1,044
1,088
Asset retirement obligations 10,231
10,264
Regulatory liabilities 6,334
6,255
Other 1,730
1,706
Total deferred credits and other liabilities 32,869
32,490
Commitments and Contingencies

Equity
Common stock, $0.001 par value, 2 billion shares authorized; 689 million and 688 million shares outstanding at 2016 and 2015, respectively 1
1
Additional paid-in capital 37,984
37,968
Retained earnings 2,627
2,564
Accumulated other comprehensive loss (717 ) (806 )
Total Duke Energy Corporation stockholders' equity 39,895
39,727
Noncontrolling interests 53
44
Total equity 39,948
39,771
Total Liabilities and Equity $ 122,654
$ 121,156

~~PART I~~

~~DUKE ENERGY CORPORATION~~

~~Condensed Consolidated Statements~~Incorporation or Organization, Address of ~~Cash Flows~~

~~(Unaudited)~~

Six Months Ended
June 30,
(in millions) 2016
2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,211
$ 1,414
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion (including amortization of nuclear fuel) 1,868
1,784
Equity component of AFUDC (87 ) (82 )
Gains on sales of other assets (18 ) (29 )
Impairment charges 198
37
Deferred income taxes 285
699
Equity in earnings of unconsolidated affiliates (23 ) (36 )
Accrued pension and other post-retirement benefit costs 8
36
Contributions to qualified pension plans —
(132 )
Payments for asset retirement obligations (263 ) (125 )
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions 199
(29 )
Receivables (57 ) 105
Inventory 178
2
Other current assets (51 ) (161 )
Increase (decrease) in
Accounts payable (153 ) (288 )
Taxes accrued 216
(29 )
Other current liabilities (281 ) (145 )
Other assets (9 ) (63 )
Other liabilities (15 ) (79 )
Net cash provided by operating activities 3,206
2,879
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (3,393 ) (3,062 )
Investment expenditures (136 ) (98 )
Acquisitions —
(29 )
Purchases of available-for-sale securities (3,033 ) (2,187 )
Proceeds from sales and maturities of available-for-sale securities 3,059
2,200
Net proceeds from the sale of the Disposal Group —
2,792
Net proceeds from the sales of equity investments and other assets 2
40
Change in restricted cash (21 ) (3 )
Other (86 ) 53
Net cash used in investing activities (3,608 ) (294 )
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the:
Issuance of long-term debt 3,514
574
Issuance of common stock related to employee benefit plans 7
16
Payments for the redemption of long-term debt (795 ) (1,246 )
Proceeds from the issuance of short-term debt with original maturities greater than 90 days 500
287
Payments for the redemption of short-term debt with original maturities greater than 90 days (492 ) (664 )
Notes payable and commercial paper (1,349 ) 12
Distributions to noncontrolling interests (3 ) (7 )
Dividends paid (1,140 ) (1,115 )
Repurchase of common shares —
(1,500 )
Other (21 ) (18 )
Net cash provided by (used in) financing activities 221
(3,661 )
Net decrease in cash and cash equivalents (181 ) (1,076 )
Cash and cash equivalents at beginning of period 857
2,036
Cash and cash equivalents at end of period $ 676
$ 960
Supplemental Disclosures:
Significant non-cash transactions:
Accrued capital expenditures $ 670
$ 547

~~PART I~~

~~DUKE ENERGY CORPORATION~~

~~Condensed Consolidated Statements~~Principal Executive Offices, Telephone Number and IRS Employer Identification Number

Commission file number

Registrant, State of ~~Changes in Equity~~

~~(Unaudited)~~

Accumulated Other Comprehensive Loss
Net Unrealized
Total

Foreign
Net
Gains (Losses)
Duke Energy

Common
Additional
Currency
Losses on
on Available-
Pension and
Corporation

Stock
Common
Paid-in
Retained
Translation
Cash Flow
for-Sale-
OPEB
Stockholders'
Noncontrolling
Total
(in millions) Shares
Stock
Capital
Earnings
Adjustments
Hedges
Securities
Adjustments
Equity
Interests
Equity
Balance at December 31, 2014 707
$ 1
$ 39,405
$ 2,012
$ (439 ) $ (59 ) $ 3
$ (48 ) $ 40,875
$ 24
$ 40,899
Net income —
—
—
1,407
—
—
—
—
1,407
7
1,414
Other comprehensive (loss) income —
—
—
—
(111 ) 7
(3 ) 2
(105 ) (5 ) (110 )
Common stock issuances, including dividend reinvestment and employee benefits 1
—
28
—
—
—
—
—
28
—
28
Stock repurchase (20 ) —
(1,500 ) —
—
—
—
—
(1,500 ) —
(1,500 )
Common stock dividends —
—
—
(1,115 ) —
—
—
—
(1,115 ) —
(1,115 )
Distributions to noncontrolling interest in subsidiaries —
—
—
—
—
—
—
—
—
(7 ) (7 )
Other^(a)
—
—
—
(10 ) —
—
—
—
(10 ) 18
8
Balance at June 30, 2015 688
$ 1

$ 37,933

$ 2,294

$ (550 )
$ (52 )
$ —

$ (46 )
$ 39,580

$ 37

$ 39,617

Balance at December 31, 2015 688
$ 1
$ 37,968
$ 2,564
$ (692 ) $ (50 ) $ (3 ) $ (61 ) $ 39,727
$ 44
$ 39,771
Net income —
—
—
1,203
—
—
—
—
1,203
8
1,211
Other comprehensive income (loss) —
—
—
—
103
(23 ) 7
2
89
4
93
Common stock issuances, including dividend reinvestment and employee benefits 1
—
16
—
—
—
—
—
16
—
16
Common stock dividends —
—
—
(1,140 ) —
—
—
—
(1,140 ) —
(1,140 )
Distributions to noncontrolling interest in subsidiaries —
—
—
—
—
—
—
—
—
(3 ) (3 )
Balance at June 30, 2016 689

$ 1

$ 37,984

$ 2,627

$ (589 )
$ (73 )
$ 4

$ (59 )
$ 39,895

$ 53

$ 39,948

Incorporation or Organization, Address of Principal Executive Offices, Telephone Number and IRS Employer Identification Number

1-4928
~~(a)~~	~~The $18 million change in Noncontrolling Interests is primarily related to an acquisition of majority interest in a solar company for an insignificant amount of cash consideration.~~

~~PART I~~

DUKE ENERGY CAROLINAS, LLC

~~Condensed Consolidated Statements of Operations and Comprehensive Income~~(a North Carolina limited liability company)

~~(Unaudited)~~526 South Church Street

Charlotte, North Carolina 28202-1803

Three Months Ended Six Months Ended
June 30, June 30,
(in millions) 2016
2015
2016
2015
Operating Revenues $ 1,675
$ 1,707
$ 3,415
$ 3,608
Operating Expenses
Fuel used in electric generation and purchased power 389
427
810
1,005
Operation, maintenance and other 476
469
988
958
Depreciation and amortization 275
261
534
510
Property and other taxes 71
67
138
137
Total operating expenses 1,211
1,224
2,470
2,610
Operating Income 464
483
945
998
Other Income and Expenses, net 45
41
82
83
Interest Expense 107
106
214
208
Income Before Income Taxes 402
418
813
873
Income Tax Expense 141
153
281
316
Net Income $ 261
$ 265
$ 532
$ 557
Other Comprehensive Income, net of tax
Reclassification into earnings from cash flow hedges —
—
1
—
Comprehensive Income $ 261
$ 265
$ 533
$ 557
704-382-3853

56-0205520

~~PART I~~

1-3274

DUKE ENERGY ~~CAROLINAS,~~FLORIDA, LLC

~~Condensed Consolidated Balance Sheets~~(a Florida limited liability company)

~~(Unaudited)~~299 First Avenue North

St. Petersburg, Florida 33701

(in millions) June 30, 2016
December 31, 2015
ASSETS
Current Assets
Cash and cash equivalents $ 16
$ 13
Receivables (net of allowance for doubtful accounts of $2 at 2016 and $3 at 2015) 112
142
Receivables of VIEs (net of allowance for doubtful accounts of $7 at 2016 and 2015) 696
596
Receivables from affiliated companies 71
107
Notes receivable from affiliated companies 252
163
Inventory 1,169
1,276
Regulatory assets 262
305
Other 86
128
Total current assets 2,664
2,730
Investments and Other Assets
Nuclear decommissioning trust funds 3,133
3,050
Other 916
999
Total investments and other assets 4,049
4,049
Property, Plant and Equipment
Cost 40,285
39,398
Accumulated depreciation and amortization (13,880 ) (13,521 )
Net property, plant and equipment 26,405
25,877
Regulatory Assets and Deferred Debits
Regulatory assets 2,856
2,766
Other 3
4
Total regulatory assets and deferred debits 2,859
2,770
Total Assets $ 35,977
$ 35,426
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable $ 565
$ 753
Accounts payable to affiliated companies 173
229
Taxes accrued 137
25
Interest accrued 108
95
Current maturities of long-term debt 468
356
Regulatory liabilities 91
39
Other 400
519
Total current liabilities 1,942

2,016
Long-Term Debt 8,592
7,711
Long-Term Debt Payable to Affiliated Companies 300
300
Deferred Credits and Other Liabilities
Deferred income taxes 6,472
6,146
Investment tax credits 196
199
Accrued pension and other post-retirement benefit costs 96
107
Asset retirement obligations 3,910
3,918
Regulatory liabilities 2,885
2,802
Other 645
621
Total deferred credits and other liabilities 14,204
13,793
Commitments and Contingencies

Equity
Member's equity 10,949
11,617
Accumulated other comprehensive loss (10 ) (11 )
Total equity 10,939
11,606
Total Liabilities and Equity $ 35,977
$ 35,426

704-382-3853

~~PART I~~59-0247770

~~DUKE ENERGY CAROLINAS, LLC~~

~~Condensed Consolidated Statements of Cash Flows~~

~~(Unaudited)~~

Six Months Ended
June 30,
(in millions) 2016
2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 532
$ 557
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including amortization of nuclear fuel) 673
670
Equity component of AFUDC (48 ) (48 )
Deferred income taxes 273
184
Accrued pension and other post-retirement benefit costs 2
7
Contributions to qualified pension plans —
(42 )
Payments for asset retirement obligations (118 ) (60 )
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions 3
—
Receivables (48 ) 45
Receivables from affiliated companies 36
(31 )
Inventory 102
(31 )
Other current assets 24
34
Increase (decrease) in
Accounts payable (226 ) (200 )
Accounts payable to affiliated companies (56 ) (13 )
Taxes accrued 188
73
Other current liabilities 28
(33 )
Other assets 22
58
Other liabilities (14 ) (49 )
Net cash provided by operating activities 1,373
1,121
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (1,031 ) (954 )
Purchases of available-for-sale securities (1,395 ) (1,410 )
Proceeds from sales and maturities of available-for-sale securities 1,395
1,410
Notes receivable from affiliated companies (89 ) (550 )
Other (41 ) 8
Net cash used in investing activities (1,161 ) (1,496 )
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt 992
496
Payments for the redemption of long-term debt (1 ) —
Distributions to parent (1,200 ) (100 )
Other —
(6 )
Net cash (used in) provided by financing activities (209 ) 390
Net increase in cash and cash equivalents 3
15
Cash and cash equivalents at beginning of period 13
13
Cash and cash equivalents at end of period $ 16
$ 28
Supplemental Disclosures:
Significant non-cash transactions:
Accrued capital expenditures $ 228
$ 160

~~PART I~~

~~DUKE ENERGY CAROLINAS, LLC~~

~~Condensed Consolidated Statements of Changes in Equity~~

~~(Unaudited)~~

Accumulated Other
Comprehensive Loss
Net Unrealized

Net Losses on
Losses on

Member's
Cash Flow
Available-for-
Total
(in millions) Equity
Hedges
Sale Securities
Equity
Balance at December 31, 2014 $ 10,937
$ (12 ) $ (1 ) $ 10,924
Net income 557
—
—
557
Distributions to parent (100 ) —
—
(100 )
Balance at June 30, 2015 $ 11,394
$ (12 ) $ (1 ) $ 11,381

Balance at December 31, 2015 $ 11,617
$ (11 ) $ —
$ 11,606
Net income 532
—
—
532
Other comprehensive income —
1
—
1
Distributions to parent (1,200 ) —
—
(1,200 )
Balance at June 30, 2016 $ 10,949
$ (10 ) $ —
$ 10,939

~~PART I~~

1-15929

PROGRESS ENERGY, INC.

~~Condensed Consolidated Statements of Operations and Comprehensive Income~~(a North Carolina corporation)

~~(Unaudited)~~410 South Wilmington Street

Raleigh, North Carolina 27601-1748

Three Months Ended Six Months Ended
June 30, June 30,
(in millions) 2016
2015
2016
2015
Operating Revenues $ 2,348
$ 2,476
$ 4,680
$ 5,012
Operating Expenses
Fuel used in electric generation and purchased power 852
1,003
1,712
2,035
Operation, maintenance and other 525
568
1,117
1,133
Depreciation and amortization 296
283
586
570
Property and other taxes 120
124
239
235
Impairment charges 1
—
3
—
Total operating expenses 1,794
1,978
3,657
3,973
Gains on Sales of Other Assets and Other, net 6
6
12
14
Operating Income 560
504
1,035
1,053
Other Income and Expenses, net 28
19
48
46
Interest Expense 160
166
320
334
Income From Continuing Operations Before Income Taxes 428
357
763
765
Income Tax Expense From Continuing Operations 154
140
277
284
Income From Continuing Operations 274
217
486
481
Loss From Discontinued Operations, net of tax —
—
—
(1 )
Net Income 274
217
486
480
Less: Net Income Attributable to Noncontrolling Interests 2
2
5
5
Net Income Attributable to Parent $ 272
$ 215
$ 481
$ 475

Net Income $ 274
$ 217
$ 486
$ 480
Other Comprehensive Income, net of tax
Pension and OPEB adjustments 1
1
2
2
Reclassification into earnings from cash flow hedges 2
1
3
(1 )
Unrealized (losses) gains on available-for-sale securities —
(1 ) 1
(1 )
Other Comprehensive Income, net of tax 3

1

6

—
Comprehensive Income 277
218
492
480
Less: Comprehensive Income Attributable to Noncontrolling Interests 2
2
5
5
Comprehensive Income Attributable to Parent $ 275

$ 216

$ 487

$ 475
704-382-3853

56-2155481

1-1232

~~PART I~~

~~PROGRESS~~DUKE ENERGY OHIO, INC.

~~Condensed Consolidated Balance Sheets~~(an Ohio corporation)

~~(Unaudited)~~139 East Fourth Street

Cincinnati, Ohio 45202

(in millions) June 30, 2016
December 31, 2015
ASSETS
Current Assets
Cash and cash equivalents $ 34
$ 44
Receivables (net of allowance for doubtful accounts of $6 at 2016 and 2015) 100
151
Receivables of VIEs (net of allowance for doubtful accounts of $8 at 2016 and 2015) 776
658
Receivables from affiliated companies 11
375
Inventory 1,725
1,751
Regulatory assets (includes $34 related to VIEs at 2016) 322
362
Other 168
156
Total current assets 3,136
3,497
Investments and Other Assets
Nuclear decommissioning trust funds 2,834
2,775
Goodwill 3,655
3,655
Other 852
834
Total investments and other assets 7,341
7,264
Property, Plant and Equipment
Cost 43,720
42,666
Accumulated depreciation and amortization (15,087 ) (14,867 )
Generation facilities to be retired, net 506
548
Net property, plant and equipment 29,139
28,347
Regulatory Assets and Deferred Debits
Regulatory assets (includes $1,194 related to VIEs at 2016) 5,298
5,435
Other 4
5
Total regulatory assets and deferred debits 5,302
5,440
Total Assets $ 44,918
$ 44,548
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable $ 690
$ 722
Accounts payable to affiliated companies 232
311
Notes payable to affiliated companies 916
1,308
Taxes accrued 162
53
Interest accrued 185
195
Current maturities of long-term debt (includes $35 related to VIEs at 2016) 300
315
Regulatory liabilities 166
286
Other 702
891
Total current liabilities 3,353
4,081
Long-Term Debt (includes $1,768 at 2016 and $479 at 2015 related to VIEs) 15,036
13,999
Long-Term Debt Payable to Affiliated Companies 150
150
Deferred Credits and Other Liabilities
Deferred income taxes 5,044
4,790
Accrued pension and other post-retirement benefit costs 519
536
Asset retirement obligations 5,386
5,369
Regulatory liabilities 2,409
2,387
Other 328
383
Total deferred credits and other liabilities 13,686
13,465
Commitments and Contingencies

Equity
Common stock, $0.01 par value, 100 shares authorized and outstanding at 2016 and 2015 —
—
Additional paid-in capital 8,092
8,092
Retained earnings 4,661
4,831
Accumulated other comprehensive loss (42 ) (48 )
Total Progress Energy, Inc. stockholders' equity 12,711
12,875
Noncontrolling interests (18 ) (22 )
Total equity 12,693
12,853
Total Liabilities and Equity $ 44,918
$ 44,548

704-382-3853

~~PART I~~31-0240030

~~PROGRESS ENERGY, INC.~~

~~Condensed Consolidated Statements of Cash Flows~~

~~(Unaudited)~~

Six Months Ended
June 30,
(in millions) 2016
2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 486
$ 480
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion (including amortization of nuclear fuel) 696
648
Equity component of AFUDC (30 ) (26 )
Gains on sales of other assets (15 ) (14 )
Impairment charges 3
—
Deferred income taxes 285
358
Accrued pension and other post-retirement benefit costs (12 ) (3 )
Contributions to qualified pension plans —
(42 )
Payments for asset retirement obligations (126 ) (61 )
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions 32
5
Receivables (66 ) (103 )
Receivables from affiliated companies 306
(55 )
Inventory 25
62
Other current assets 45
215
Increase (decrease) in
Accounts payable (26 ) (182 )
Accounts payable to affiliated companies (79 ) 68
Taxes accrued 90
94
Other current liabilities (162 ) (9 )
Other assets (72 ) (70 )
Other liabilities 15
(32 )
Net cash provided by operating activities 1,395
1,333
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (1,441 ) (1,170 )
Purchases of available-for-sale securities (1,570 ) (562 )
Proceeds from sales and maturities of available-for-sale securities 1,594
624
Proceeds from insurance 58
—
Notes receivable from affiliated companies —
220
Change in restricted cash (6 ) —
Other (14 ) 4
Net cash used in investing activities (1,379 ) (884 )
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt 1,338
—
Payments for the redemption of long-term debt (320 ) (549 )
Notes payable to affiliated companies (392 ) 110
Distributions to noncontrolling interests (1 ) (4 )
Dividends to parent (651 ) —
Other —
(3 )
Net cash used in financing activities (26 ) (446 )
Net (decrease) increase in cash and cash equivalents (10 ) 3
Cash and cash equivalents at beginning of period 44
42
Cash and cash equivalents at end of period $ 34
$ 45
Supplemental Disclosures:
Significant non-cash transactions:
Accrued capital expenditures $ 288
$ 271

~~PART I~~

~~PROGRESS ENERGY, INC.~~

~~Condensed Consolidated Statements of Changes in Equity~~

~~(Unaudited)~~

Accumulated Other Comprehensive Loss
Net
Net Unrealized
Total Progress

Additional
Losses on
Gains on
Pension and
Energy, Inc.

Common
Paid-in
Retained
Cash Flow
Available-for-
OPEB
Stockholders'
Noncontrolling
Total
(in millions) Stock
Capital
Earnings
Hedges
Sale Securities
Adjustments
Equity
Interests
Equity
Balance at December 31, 2014 $ —
$ 7,467
$ 3,782
$ (35 ) $ 1
$ (7 ) $ 11,208
$ (32 ) $ 11,176
Net income —
—
475
—
—
—
475
5
480
Other comprehensive (loss) income —
—
—
(1 ) (1 ) 2
—
—
—
Distributions to noncontrolling interests —
—
—
—
—
—
—
(4 ) (4 )
Other —
—
(2 ) —
—
—
(2 ) 4
2
Balance at June 30, 2015 $ —

$ 7,467

$ 4,255

$ (36 )
$ —

$ (5 )
$ 11,681

$ (27 )
$ 11,654

Balance at December 31, 2015 $ —
$ 8,092
$ 4,831
$ (31 ) $ —
$ (17 ) $ 12,875
$ (22 ) $ 12,853
Net income —
—
481
—
—
—
481
5
486
Other comprehensive income —
—
—
3
1
2
6
—
6
Distributions to noncontrolling interests —
—
—
—
—
—
—
(1 ) (1 )
Dividends to parent —
—
(651 ) —
—
—
(651 ) —
(651 )
Balance at June 30, 2016 $ —

$ 8,092

$ 4,661

$ (28 )
$ 1

$ (15 )
$ 12,711

$ (18 )
$ 12,693

~~PART I~~

1-3382

DUKE ENERGY PROGRESS, LLC

~~Condensed Consolidated Statements of Operations and Comprehensive Income~~(a North Carolina limited liability company)

~~(Unaudited)~~410 South Wilmington Street

Raleigh, North Carolina 27601-1748

Three Months Ended Six Months Ended
June 30, June 30,
(in millions) 2016
2015
2016
2015
Operating Revenues $ 1,213
$ 1,193
$ 2,520
$ 2,642
Operating Expenses
Fuel used in electric generation and purchased power 424
449
872
1,024
Operation, maintenance and other 321
362
707
737
Depreciation and amortization 175
163
350
315
Property and other taxes 38
35
79
67
Total operating expenses 958
1,009
2,008
2,143
Gains on Sales of Other Assets and Other, net —
—
1
1
Operating Income 255
184
513
500
Other Income and Expenses, net 12
15
29
35
Interest Expense 64
56
127
116
Income Before Income Taxes 203
143
415
419
Income Tax Expense 72
58
147
151
Net Income and Comprehensive Income $ 131
$ 85
$ 268
$ 268
704-382-3853

56-0165465

~~PART I~~

~~DUKE ENERGY PROGRESS, LLC~~

~~Condensed Consolidated Balance Sheets~~

~~(Unaudited)~~

(in millions) June 30, 2016
December 31, 2015
ASSETS
Current Assets
Cash and cash equivalents $ 8
$ 15
Receivables (net of allowance for doubtful accounts of $4 at 2016 and 2015) 35
87
Receivables of VIEs (net of allowance for doubtful accounts of $5 at 2016 and 2015) 421
349
Receivables from affiliated companies 9
16
Inventory 1,068
1,088
Regulatory assets 187
264
Other 35
121
Total current assets 1,763
1,940
Investments and Other Assets
Nuclear decommissioning trust funds 2,110
2,035
Other 509
486
Total investments and other assets 2,619
2,521
Property, Plant and Equipment
Cost 27,771
27,313
Accumulated depreciation and amortization (10,350 ) (10,141 )
Generation facilities to be retired, net 506
548
Net property, plant and equipment 17,927
17,720
Regulatory Assets and Deferred Debits
Regulatory assets 2,744
2,710
Other 2
3
Total regulatory assets and deferred debits 2,746
2,713
Total Assets $ 25,055
$ 24,894
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable $ 300
$ 399
Accounts payable to affiliated companies 134
190
Notes payable to affiliated companies 78
209
Taxes accrued 71
15
Interest accrued 96
96
Current maturities of long-term debt 252
2
Regulatory liabilities 84
85
Other 314
412
Total current liabilities 1,329
1,408
Long-Term Debt 6,163
6,366
Long-Term Debt Payable to Affiliated Companies 150
150
Deferred Credits and Other Liabilities
Deferred income taxes 3,167
3,027
Investment tax credits 152
132
Accrued pension and other post-retirement benefit costs 249
262
Asset retirement obligations 4,594
4,567
Regulatory liabilities 1,901
1,878
Other 23
45
Total deferred credits and other liabilities 10,086
9,911
Commitments and Contingencies

Equity
Member's Equity 7,327
7,059
Total equity 7,327
7,059
Total Liabilities and Equity $ 25,055
$ 24,894

~~PART I~~

~~DUKE ENERGY PROGRESS, LLC~~

~~Condensed Consolidated Statements of Cash Flows~~

~~(Unaudited)~~

Six Months Ended
June 30,
(in millions) 2016
2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 268
$ 268
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion (including amortization of nuclear fuel) 451
389
Equity component of AFUDC (20 ) (23 )
Gains on sales of other assets (3 ) (1 )
Deferred income taxes 172
177
Accrued pension and other post-retirement benefit costs (16 ) (7 )
Contributions to qualified pension plans —
(21 )
Payments for asset retirement obligations (100 ) (32 )
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions (1 ) (3 )
Receivables (19 ) (64 )
Receivables from affiliated companies 7
6
Inventory 20
53
Other current assets 131
156
Increase (decrease) in
Accounts payable (28 ) (128 )
Accounts payable to affiliated companies (56 ) 62
Taxes accrued 56
66
Other current liabilities (12 ) (15 )
Other assets (26 ) (31 )
Other liabilities (6 ) (21 )
Net cash provided by operating activities 818
831
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (704 ) (699 )
Purchases of available-for-sale securities (1,299 ) (319 )
Proceeds from sales and maturities of available-for-sale securities 1,284
301
Notes receivable from affiliated companies —
237
Other (19 ) 6
Net cash used in investing activities (738 ) (474 )
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt 59
—
Payments for the redemption of long-term debt (15 ) (544 )
Notes payable to affiliated companies (131 ) 192
Other —
(1 )
Net cash used in financing activities (87 ) (353 )
Net (decrease) increase in cash and cash equivalents (7 ) 4
Cash and cash equivalents at beginning of period 15
9
Cash and cash equivalents at end of period $ 8
$ 13
Supplemental Disclosures:
Significant non-cash transactions:
Accrued capital expenditures $ 73
$ 135

~~PART I~~

~~DUKE ENERGY PROGRESS, LLC~~

~~Condensed Consolidated Statements of Changes in Equity~~

~~(Unaudited)~~

Common
Retained
Member's
Total
(in millions) Stock
Earnings
Equity
Equity
Balance at December 31, 2014 $ 2,159
$ 3,708
$ —
$ 5,867
Net income —
268
—
268
Balance at June 30, 2015 $ 2,159
$ 3,976
$ —
$ 6,135

Balance at December 31, 2015 $ —
$ —
$ 7,059
$ 7,059
Net income —
—
268
268
Balance at June 30, 2016 $ —
$ —
$ 7,327
$ 7,327

~~PART I~~

~~DUKE ENERGY FLORIDA, LLC~~

~~Condensed Consolidated Statements of Operations and Comprehensive Income~~

~~(Unaudited)~~

Three Months Ended Six Months Ended
June 30, June 30,
(in millions) 2016
2015
2016
2015
Operating Revenues $ 1,133
$ 1,281
$ 2,157
$ 2,367
Operating Expenses
Fuel used in electric generation and purchased power 429
554
841
1,011
Operation, maintenance and other 199
202
404
390
Depreciation and amortization 122
122
236
256
Property and other taxes 82
88
160
168
Impairment charges 1
—
3
—
Total operating expenses 833
966
1,644
1,825
Operating Income 300
315
513
542
Other Income and Expenses, net 14
4
19
10
Interest Expense 40
50
81
99
Income Before Income Taxes 274
269
451
453
Income Tax Expense 103
104
170
175
Net Income $ 171
$ 165
$ 281
$ 278
Other Comprehensive Income, net of tax
Unrealized gains on investments in available-for-sale securities —
$ —
1
—
Comprehensive Income $ 171
$ 165
$ 282

$ 278

~~PART I~~

~~DUKE ENERGY FLORIDA, LLC~~

~~Condensed Consolidated Balance Sheets~~

~~(Unaudited)~~

(in millions) June 30, 2016
December 31, 2015
ASSETS
Current Assets
Cash and cash equivalents $ 8
$ 8
Receivables (net of allowance for doubtful accounts of $2 at 2016 and 2015) 64
60
Receivables of VIEs (net of allowance for doubtful accounts of $3 at 2016 and 2015) 355
308
Receivables from affiliated companies 3
84
Inventory 657
663
Regulatory assets (includes $34 related to VIEs at 2016) 135
98
Other 43
21
Total current assets 1,265
1,242
Investments and Other Assets
Nuclear decommissioning trust funds 724
740
Other 288
292
Total investments and other assets 1,012
1,032
Property, Plant and Equipment
Cost 15,938
15,343
Accumulated depreciation and amortization (4,730 ) (4,720 )
Net property, plant and equipment 11,208
10,623
Regulatory Assets and Deferred Debits
Regulatory assets (includes $1,194 related to VIEs at 2016) 2,553
2,725
Other 3
2
Total regulatory assets and deferred debits 2,556
2,727
Total Assets $ 16,041
$ 15,624
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable $ 390
$ 322
Accounts payable to affiliated companies 100
116
Notes payable to affiliated companies 406
813
Taxes accrued 156
132
Interest accrued 40
43
Current maturities of long-term debt (includes $35 related to VIEs at 2016) 48
13
Regulatory liabilities 82
200
Other 361
452
Total current liabilities 1,583
2,091
Long-Term Debt (includes $1,468 at 2016 and $225 at 2015 related to VIEs) 5,492
4,253
Deferred Credits and Other Liabilities
Deferred income taxes 2,571
2,460
Accrued pension and other post-retirement benefit costs 238
242
Asset retirement obligations 792
802
Regulatory liabilities 508
509
Other 103
146
Total deferred credits and other liabilities 4,212
4,159
Commitments and Contingencies

Equity
Member's equity 4,753
5,121
Accumulated other comprehensive income 1
—
Total equity 4,754
5,121
Total Liabilities and Equity $ 16,041
$ 15,624

~~PART I~~

~~DUKE ENERGY FLORIDA, LLC~~

~~Condensed Consolidated Statements of Cash Flows~~

~~(Unaudited)~~

Six Months Ended
June 30,
(in millions) 2016
2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 281
$ 278
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion 239
258
Equity component of AFUDC (9 ) (2 )
Impairment charges 3
—
Deferred income taxes 113
237
Accrued pension and other post-retirement benefit costs 1
3
Contributions to qualified pension plans —
(21 )
Payments for asset retirement obligations (25 ) (28 )
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions 34
5
Receivables (49 ) (40 )
Receivables from affiliated companies 23
(53 )
Inventory 5
10
Other current assets (13 ) 10
Increase (decrease) in
Accounts payable 3
(53 )
Accounts payable to affiliated companies (16 ) 3
Taxes accrued 5
65
Other current liabilities (142 ) 5
Other assets (47 ) (44 )
Other liabilities 20
(19 )
Net cash provided by operating activities 426
614
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (737 ) (471 )
Purchases of available-for-sale securities (271 ) (243 )
Proceeds from sales and maturities of available-for-sale securities 310
323
Proceeds from insurance 58
—
Change in restricted cash (6 ) —
Other 5
1
Net cash used in investing activities (641 ) (390 )
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt 1,278
—
Payments for the redemption of long-term debt (5 ) (5 )
Notes payable to affiliated companies (407 ) 137
Dividends to parent —
(350 )
Distributions to parent (649 ) —
Other (2 ) (1 )
Net cash provided by (used in) financing activities 215
(219 )
Net increase in cash and cash equivalents —
5
Cash and cash equivalents at beginning of period 8
8
Cash and cash equivalents at end of period $ 8
$ 13
Supplemental Disclosures:
Significant non-cash transactions:
Accrued capital expenditures $ 215
$ 136

~~PART I~~

~~DUKE ENERGY FLORIDA, LLC~~

~~Condensed Consolidated Statements of Changes in Equity~~

~~(Unaudited)~~

Accumulated
Other
Comprehensive
Income
Net Unrealized

Gains on

Common
Retained
Member's
Available-for-Sale
Total
(in millions) Stock
Earnings
Equity
Securities
Equity
Balance at December 31, 2014 $ 1,762
$ 3,460
$ —
$ —
$ 5,222
Net income —
278
—
—
278
Dividends to parent —
(350 ) —
—
(350 )
Balance at June 30, 2015 $ 1,762
$ 3,388
$ —
$ —
$ 5,150

Balance at December 31, 2015 $ —
$ —
$ 5,121
$ —
$ 5,121
Net income —
—
281
—
281
Other comprehensive income —
—
—
1
1
Distributions to parent —
—
(649 ) —
(649 )
Balance at June 30, 2016 $ —
$ —
$ 4,753
$ 1
$ 4,754

~~PART I~~

~~DUKE ENERGY OHIO, INC.~~

~~Condensed Consolidated Statements of Operations and Comprehensive Income~~

~~(Unaudited)~~

Three Months Ended Six Months Ended
June 30, June 30,
(in millions) 2016
2015
2016

2015
Operating Revenues
Regulated electric $ 323
$ 299
$ 663
$ 638
Nonregulated electric and other 6
9
12
23
Regulated natural gas 99
97
269
330
Total operating revenues 428
405
944
991
Operating Expenses
Fuel used in electric generation and purchased power – regulated 100
107
211
222
Fuel used in electric generation and purchased power – nonregulated 13
12
23
26
Cost of natural gas 9
12
58
109
Operation, maintenance and other 122
118
241
246
Depreciation and amortization 64
58
125
115
Property and other taxes 65
57
136
127
Total operating expenses 373
364
794
845
Gains on Sales of Other Assets and Other, net —
2
1
8
Operating Income 55
43
151
154
Other Income and Expenses, net 1
(5 ) 3
(2 )
Interest Expense 21
18
41
38
Income From Continuing Operations Before Income Taxes 35
20
113
114
Income Tax Expense From Continuing Operations 12
7
33
42
Income From Continuing Operations 23
13
80
72
Income (Loss) From Discontinued Operations, net of tax —
(65 ) 2
25
Net Income (Loss) and Comprehensive Income (Loss) $ 23
$ (52 ) $ 82
$ 97

~~PART I~~

~~DUKE ENERGY OHIO, INC.~~

~~Condensed Consolidated Balance Sheets~~

~~(Unaudited)~~

(in millions) June 30, 2016
December 31, 2015
ASSETS
Current Assets
Cash and cash equivalents $ 10
$ 14
Receivables (net of allowance for doubtful accounts of $2 at 2016 and 2015) 63
66
Receivables from affiliated companies 35
84
Notes receivable from affiliated companies 186
—
Inventory 110
105
Regulatory assets 54
36
Other 65
110
Total current assets 523
415
Investments and Other Assets
Goodwill 920
920
Other 16
20
Total investments and other assets 936
940
Property, Plant and Equipment
Cost 7,906
7,750
Accumulated depreciation and amortization (2,536 ) (2,507 )
Net property, plant and equipment 5,370
5,243
Regulatory Assets and Deferred Debits
Regulatory assets 472
497
Other 2
2
Total regulatory assets and deferred debits 474
499
Total Assets $ 7,303
$ 7,097
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable $ 218
$ 207
Accounts payable to affiliated companies 76
53
Notes payable to affiliated companies —
103
Taxes accrued 108
171
Interest accrued 19
18
Current maturities of long-term debt 54
106
Regulatory liabilities 18
12
Other 82
153
Total current liabilities 575
823
Long-Term Debt 1,808
1,467
Long-Term Debt Payable to Affiliated Companies 25
25
Deferred Credits and Other Liabilities
Deferred income taxes 1,476
1,407
Accrued pension and other post-retirement benefit costs 52
56
Asset retirement obligations 125
125
Regulatory liabilities 241
245
Other 160
165
Total deferred credits and other liabilities 2,054
1,998
Commitments and Contingencies

Equity
Common stock, $8.50 par value, 120,000,000 shares authorized; 89,663,086 shares outstanding at 2016 and 2015 762
762
Additional paid-in capital 2,695
2,720
Accumulated deficit (616 ) (698 )
Total equity 2,841
2,784
Total Liabilities and Equity $ 7,303
$ 7,097

~~PART I~~

~~DUKE ENERGY OHIO, INC.~~

~~Condensed Consolidated Statements of Cash Flows~~

~~(Unaudited)~~

Six Months Ended
June 30,
(in millions) 2016
2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 82
$ 97
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion 127
117
Equity component of AFUDC (2 ) (2 )
Gains on sales of other assets and other, net (1 ) (8 )
Impairment charges —
40
Deferred income taxes 68
62
Accrued pension and other post-retirement benefit costs 3
4
Contributions to qualified pension plans —
(1 )
Payments for asset retirement obligations (3 ) (1 )
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions (2 ) (12 )
Receivables 3
6
Receivables from affiliated companies 49
46
Inventory (5 ) 3
Other current assets 49
32
Increase (decrease) in
Accounts payable 8
(12 )
Accounts payable to affiliated companies 23
19
Taxes accrued (68 ) (68 )
Other current liabilities (66 ) 99
Other assets (8 ) 19
Other liabilities (9 ) (52 )
Net cash provided by operating activities 248
388
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (214 ) (166 )
Notes receivable from affiliated companies (186 ) 130
Other (13 ) (4 )
Net cash used in investing activities (413 ) (40 )
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt 341
—
Payments for the redemption of long-term debt (52 ) (152 )
Notes payable to affiliated companies (103 ) (193 )
Dividends to parent (25 ) —
Other —
(1 )
Net cash provided by (used in) financing activities 161
(346 )
Net (decrease) increase in cash and cash equivalents (4 ) 2
Cash and cash equivalents at beginning of period 14
20
Cash and cash equivalents at end of period $ 10
$ 22
Supplemental Disclosures:
Significant non-cash transactions:
Accrued capital expenditures $ 30
$ 19
Distribution of membership interest of Duke Energy SAM, LLC to parent —
1,912

~~PART I~~

~~DUKE ENERGY OHIO, INC.~~

~~Condensed Consolidated Statements of Changes in Equity~~

~~(Unaudited)~~

Additional

Common
Paid-in
Accumulated
Total
(in millions) Stock
Capital
Deficit
Equity
Balance at December 31, 2014 $ 762
$ 4,782
$ (870 ) $ 4,674
Net Income —
—
97
97
Distribution of membership interest of Duke Energy SAM, LLC to parent —
(1,912 ) —
(1,912 )
Balance at June 30, 2015 $ 762
$ 2,870
$ (773 ) $ 2,859

Balance at December 31, 2015 $ 762
$ 2,720
$ (698 ) $ 2,784
Net income —
—
82
82
Dividends to parent —
(25 ) —
(25 )
Balance at June 30, 2016 $ 762

$ 2,695

$ (616 )
$ 2,841

~~PART I~~

1-3543

DUKE ENERGY INDIANA, LLC

~~Condensed Consolidated Statements of Operations and Comprehensive Income~~(an Indiana limited liability company)

~~(Unaudited)~~1000 East Main Street

Plainfield, Indiana 46168

704-382-3853

35-0594457

1-6196

PIEDMONT NATURAL GAS COMPANY, INC.

(a North Carolina corporation)

4720 Piedmont Row Drive

Charlotte, North Carolina 28210

704-364-3120

56-0556998

Three Months Ended Six Months Ended
June 30, June 30,
(in millions) 2016
2015
2016
2015
Operating Revenues $ 702
$ 686
$ 1,416
$ 1,474
Operating Expenses
Fuel used in electric generation and purchased power 220
235
448
529
Operation, maintenance and other 189
180
351
361
Depreciation and amortization 97
107
222
211
Property and other taxes 22
19
45
18
Total operating expenses 528
541
1,066
1,119
Gain on Sale of Other Assets and Other, net —

1
—
1
Operating Income 174
146
350
356
Other Income and Expenses, net 6
4
10
9
Interest Expense 47
43
91
88
Income Before Income Taxes 133
107

269

277
Income Tax Expense 48
39
89
101
Net Income $ 85
$ 68

$ 180

$ 176
Other Comprehensive Loss, net of tax
Reclassification into earnings from cash flow hedges —
—
(1 ) (1 )
Comprehensive Income $ 85
$ 68

$ 179

$ 175



Duke Energy Corporation (Duke Energy)	Yesx	No ¨	Duke Energy Florida, LLC (Duke Energy Florida)	Yesx	No ¨
Duke Energy Carolinas, LLC (Duke Energy Carolinas)	~~PART I~~Yesx	No ¨	Duke Energy Ohio, Inc. (Duke Energy Ohio)	Yesx	~~DUKE ENERGY INDIANA,~~No ¨
Progress Energy, Inc. (Progress Energy)	Yesx	No ¨	Duke Energy Indiana, LLC (Duke Energy Indiana)	Yesx	~~Condensed Consolidated Balance Sheets~~No ¨
Duke Energy Progress, LLC (Duke Energy Progress)	~~(Unaudited)~~Yesx	No ¨	Piedmont Natural Gas Company, Inc. (Piedmont)	Yesx	No ¨

(in millions) June 30, 2016
December 31, 2015
ASSETS
Current Assets
Cash and cash equivalents $ 12
$ 9
Receivables (net of allowance for doubtful accounts of $1 at 2016 and 2015) 87
96
Receivables from affiliated companies 60
71
Notes receivable from affiliated companies 147
83
Inventory 508
570
Regulatory assets 115
102
Other 45
15
Total current assets 974
946
Investments and Other Assets 221
212
Property, Plant and Equipment
Cost 13,677
14,007
Accumulated depreciation and amortization (4,219 ) (4,484 )
Generation facilities to be retired, net 93
—
Net property, plant and equipment 9,551
9,523
Regulatory Assets and Deferred Debits
Regulatory assets 825
716
Other 2
2
Total regulatory assets and deferred debits 827
718
Total Assets $ 11,573
$ 11,399
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable $ 146
$ 189
Accounts payable to affiliated companies 87
83
Taxes accrued 40
89
Interest accrued 59
56
Current maturities of long-term debt 221
547
Regulatory liabilities 57
62
Other 101
97
Total current liabilities 711
1,123
Long-Term Debt 3,566
3,071
Long-Term Debt Payable to Affiliated Companies 150
150
Deferred Credits and Other Liabilities
Deferred income taxes 1,732
1,657
Investment tax credits 137
138
Accrued pension and other post-retirement benefit costs 74
80
Asset retirement obligations 520
525
Regulatory liabilities 745
754
Other 72
65
Total deferred credits and other liabilities 3,280
3,219
Commitments and Contingencies

Equity
Member's equity 3,866
—
Common stock, no par; $0.01 stated value, 60,000,000 shares authorized; 53,913,701 shares outstanding at 2015 —
1
Additional paid-in capital —
1,384
Retained earnings —
2,450
Accumulated other comprehensive income —
1
Total equity 3,866
3,836
Total Liabilities and Equity $ 11,573
$ 11,399



Duke Energy	Yesx	No ¨	Duke Energy Florida	Yesx	~~PART I~~No ¨
Duke Energy Carolinas	Yesx	No ¨	Duke Energy Ohio	~~DUKE ENERGY INDIANA, LLC~~Yesx	~~Condensed Consolidated Statements of Cash Flows~~No ¨
Progress Energy	~~(Unaudited)~~Yesx	No ¨	Duke Energy Indiana	Yesx	No ¨
Duke Energy Progress	Yesx	No ¨	Piedmont	Yesx	No ¨

Six Months Ended
June 30,
(in millions) 2016
2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 180
$ 176
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion 223
214
Equity component of AFUDC (7 ) (6 )
Gain on sale of other assets and other, net —
(1 )
Deferred income taxes 36
232
Accrued pension and other post-retirement benefit costs 4
6
Contributions to qualified pension plans —
(9 )
Payments for asset retirement obligations (16 ) (3 )
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions
—
(2 )
Receivables 12
(1 )
Receivables from affiliated companies 11
6
Inventory 62
(42 )
Other current assets (19 ) 87
Increase (decrease) in
Accounts payable (22 ) 26
Accounts payable to affiliated companies 4
2
Taxes accrued (42 ) (21 )
Other current liabilities (60 ) 5
Other assets (29 ) (31 )
Other liabilities 44
(43 )
Net cash provided by operating activities 381
595
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (325 ) (380 )
Purchases of available-for-sale securities (7 ) (4 )
Proceeds from sales and maturities of available-for-sale securities 5
3
Proceeds from the sales of other assets —
14
Notes receivable from affiliated companies (64 ) (25 )
Other (6 ) 25
Net cash used in investing activities (397 ) (367 )
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt 495
—
Payments for the redemption of long-term debt (326 ) —
Notes payable to affiliated companies —
(71 )
Dividends to parent —
(150 )
Distributions to parent (149 ) —
Other (1 ) (1 )
Net cash provided by (used in) financing activities 19
(222 )
Net increase in cash and cash equivalents 3

6
Cash and cash equivalents at beginning of period 9
6
Cash and cash equivalents at end of period $ 12
$ 12
Supplemental Disclosures:
Significant non-cash transactions:
Accrued capital expenditures $ 43
$ 46



Duke Energy	Large accelerated filerx	Accelerated filer ¨	Non-accelerated filer ¨	~~PART I~~Smaller reporting company ¨	Emerging Growth Company ¨
Duke Energy Carolinas	Large accelerated filer ¨	~~DUKE ENERGY INDIANA, LLC~~Accelerated filer ¨	~~Condensed Consolidated Statements of Changes in Equity~~Non-accelerated filerx	~~(Unaudited)~~Smaller reporting company ¨	Emerging Growth Company ¨
Progress Energy	Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filerx	Smaller reporting company ¨	Emerging Growth Company ¨
Duke Energy Progress	Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filerx	Smaller reporting company ¨	Emerging Growth Company ¨
Duke Energy Florida	Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filerx	Smaller reporting company ¨	Emerging Growth Company ¨
Duke Energy Ohio	Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filerx	Smaller reporting company ¨	Emerging Growth Company ¨
Duke Energy Indiana	Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filerx	Smaller reporting company ¨	Emerging Growth Company ¨
Piedmont	Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filerx	Smaller reporting company ¨	Emerging Growth Company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Accumulated
Other
Comprehensive
Income
Additional
Net Gains on

Common
Paid-in
Retained
Member's
Cash Flow
Total
(in millions) Stock
Capital
Earnings
Equity
Hedges
Equity
Balance at December 31, 2014 $ 1
$ 1,384
$ 2,460
$ —
$ 3
$ 3,848
Net income —
—
176
—
—
176
Other comprehensive loss —
—
—
—
(1 ) (1 )
Dividends to parent —
—
(150 ) —
—
(150 )
Balance at June 30, 2015 $ 1
$ 1,384
$ 2,486

$ —
$ 2
$ 3,873

Balance at December 31, 2015 $ 1
$ 1,384
$ 2,450
$ —
$ 1
$ 3,836
Net income —
—
—
180
—
180
Other comprehensive loss —
—
—
—
(1 ) (1 )
Distributions to parent —
—
—
(149 ) —
(149 )
Transfer to Member's Equity (1 ) (1,384 ) (2,450 ) 3,835
—
—
Balance at June 30, 2016 $ —
$ —
$ —

$ 3,866
$ —
$ 3,866



Duke Energy	Yes ¨	Nox	Duke Energy Florida	Yes ¨	Nox
Duke Energy Carolinas	Yes ¨	Nox	Duke Energy Ohio	Yes ¨	Nox
Progress Energy	Yes ¨	Nox	Duke Energy Indiana	Yes ¨	Nox
Duke Energy Progress	Yes ¨	Nox	Piedmont	Yes ¨	Nox

Number of shares of Common stock outstanding at March 31, 2017:



Registrant	Description	Shares
Duke Energy	Common stock, $0.001 par value	699,883,528

TABLE OF CONTENTS



	Cautionary Statement Regarding Forward-Looking Information

PART II. FINANCIAL INFORMATION
Item 1.	~~DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS,~~Financial Statements

	Duke Energy Corporation Financial Statements	6

	Duke Energy Carolinas, LLC ~~– PROGRESS ENERGY, INC. –~~Financial Statements	~~DUKE ENERGY PROGRESS,~~11

	Progress Energy, Inc. Financial Statements	15

	Duke Energy Progress, LLC ~~– DUKE ENERGY FLORIDA,~~Financial Statements	19

	Duke Energy Florida, LLC ~~– DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA,~~Financial Statements	23

	Duke Energy Ohio, Inc. Financial Statements	27

	Duke Energy Indiana, LLC Financial Statements	31

	Piedmont Natural Gas Company, Inc. Financial Statements	35

	Combined Notes to Condensed Consolidated Financial Statements
	Note 1 – Organization and Basis of Presentation	~~(Unaudited)~~39
	Note 2 – Acquisitions and Dispositions	43
	Note 3 – Business Segments	45
	Note 4 – Regulatory Matters	47
	Note 5 – Commitments and Contingencies	~~Index~~53
	Note 6 – Debt and Credit Facilities	59
	Note 7 – Goodwill and Intangible Assets	60
	Note 8 – Related Party Transactions	61
	Note 9 – Derivatives and Hedging	62
	Note 10 – Investments in Debt and Equity Securities	67
	Note 11 – Fair Value Measurements	73
	Note 12 – Variable Interest Entities	81
	Note 13 – Common Stock	85
	Note 14 – Stock-Based Compensation	86
	Note 15 – Employee Benefit Plans	86
	Note 16 – Income Taxes	89
	Note 17 – Subsequent Events	89

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	90

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	117

Item 4.	Controls and Procedures	117

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	119

Item 1A.	Risk Factors	119

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	119

Item 6.	Exhibits	120

	Signatures	123

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION


◦	State, federal and foreign legislative and regulatory initiatives, including costs of compliance with existing and future environmental requirements or climate change, as well as rulings that affect cost and investment recovery or have an impact on rate structures or market prices;


◦	The extent and timing of costs and liabilities to ~~Combined Notes~~comply with federal and state laws, regulations and legal requirements related to ~~Condensed Consolidated Financial Statements~~ coal ash remediation, including amounts for required closure of certain ash impoundments, are uncertain and difficult to estimate;


◦	The ~~unaudited notes~~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 the regulatory process;


◦	The costs of decommissioning Crystal River Unit 3 and other nuclear facilities could prove to be more extensive than amounts estimated and all costs may not be fully recoverable through the regulatory process;


◦	Costs and effects of legal and administrative proceedings, settlements, investigations and claims;


◦	Industrial, commercial and residential growth or decline in service territories or customer bases resulting from variations in customer usage patterns, including energy efficiency efforts and use of alternative energy sources, including self-generation and distributed generation technologies;


◦	Federal and state regulations, laws and other efforts designed to promote and expand the use of energy efficiency measures and distributed generation technologies, such as private solar and battery storage, in Duke Energy service territories could result in customers leaving the electric distribution system, excess generation resources as well as stranded costs;


◦	Advancements in technology;


◦	Additional competition in electric and natural gas markets and continued industry consolidation;


◦	The influence of weather and other natural phenomena on operations, including the economic, operational and other effects of severe storms, hurricanes, droughts, earthquakes and tornadoes, including extreme weather associated with climate change;


◦	The ability to successfully operate electric generating facilities and deliver electricity to customers including direct or indirect effects to the ~~condensed consolidated financial statements~~company resulting from an incident that ~~follow are~~affects the U.S. electric grid or generating resources;


◦	The ability to complete necessary or desirable pipeline expansion or infrastructure projects in our natural gas business;


◦	Operational interruptions to our 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 combined presentation. The following list indicates the registrants to which the footnotes apply. Tables within the notes may not sum across due to Progress Energy's consolidation of Duke Energy Progress, Duke Energy Floridaterrorist attack, cybersecurity threats, data security breaches, and other ~~subsidiaries that are not registrants. In addition,~~catastrophic events such as fires, explosions, pandemic health events or other similar occurrences;

◦

The inherent risks associated with the ~~Duke Energy amounts include balances from subsidiaries that are not registrants.~~

Applicable Notes
Registrant 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
Duke Energy Corporation • • • • • • • • • • • • • • • •
Duke Energy Carolinas, LLC • • • • • • • • • • • • •
Progress Energy, Inc. • • • • • • • • • • • • • • •
Duke Energy Progress, LLC • • • • • • • • • • • • • •
Duke Energy Florida, LLC • • • • • • • • • • • • •
Duke Energy Ohio, Inc. • • • • • • • • • • • • • •
Duke Energy Indiana, LLC • • • • • • • • • • • • •

~~1. ORGANIZATION AND BASIS OF PRESENTATION~~

~~NATURE OF OPERATIONS AND BASIS OF CONSOLIDATION~~

~~Duke Energy Corporation (collectively with its subsidiaries, Duke Energy) is an energy company headquartered~~operation and potential construction 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 ~~Charlotte, North Carolina, subject~~commodity prices and interest rates and the ability to ~~regulation by~~recover such costs through the ~~Federal Energy Regulatory Commission (FERC). Duke Energy operates in~~regulatory process, where appropriate, and their impact on liquidity positions and the United States (U.S.) and Latin America primarily through its direct and indirect subsidiaries. Duke Energy’s subsidiaries include its subsidiary registrants, Duke Energy Carolinas, LLC (Duke Energy Carolinas); Progress Energy, Inc. (Progress Energy); Duke Energy Progress, LLC (Duke Energy Progress); Duke Energy Florida, LLC (Duke Energy Florida); Duke Energy Ohio, Inc. (Duke Energy Ohio) and Duke Energy Indiana, LLC (Duke Energy Indiana, formerly Duke Energy Indiana, Inc.). When discussing Duke Energy’s consolidated financial information, it necessarily includes thevalue of underlying assets;

◦

The results of ~~its six separate subsidiary registrants (collectively referred~~financing efforts, including the ability to ~~as the Subsidiary Registrants),~~obtain financing on favorable terms, which ~~along with Duke Energy, are collectively referred to as the Duke Energy Registrants (Duke Energy Registrants).~~

~~These Condensed Consolidated Financial Statements include, after eliminating intercompany transactions~~can be affected by various factors, including credit ratings, interest rate fluctuations, and ~~balances, the accounts~~general economic conditions;


◦	Credit ratings of the Duke Energy Registrants may be different from what is expected;


◦	Declines in the market prices of equity and ~~subsidiaries where~~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 ~~respective Duke Energy Registrants have control. These Condensed Consolidated Financial Statements also reflect~~completion of the Duke Energy Registrants’ ~~proportionate share~~capital investment projects, including risks related to financing, obtaining and complying with terms of ~~certain jointly owned generation~~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 ~~facilities.~~

~~Duke Energy Carolinas is a regulated public utility primarily engaged~~organizations, including changes in ~~the generation, transmission, distribution~~rate designs and ~~sale of electricity in portions of North Carolina~~new and ~~South Carolina. Duke Energy Carolinas is subject~~evolving capacity markets, and risks related to the regulatory provisions of the North Carolina Utilities Commission (NCUC), Public Service Commission of South Carolina (PSCSC), U.S. Nuclear Regulatory Commission (NRC) and FERC. Substantially all of Duke Energy Carolinas’ operations qualify for regulatory accounting.

~~Progress Energy is a public utility holding company headquartered in Raleigh, North Carolina, subject to regulation~~obligations created by the ~~FERC. Progress Energy conducts operations through its wholly owned~~default of other participants;


◦	The ability to control operation and maintenance costs;


◦	The level of creditworthiness of counterparties to transactions;


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

◦

The ability of subsidiaries ~~Duke Energy Progress and Duke Energy Florida. Substantially all of Progress Energy’s operations qualify for regulatory accounting.~~

Duke Energy Progress is a regulated public utility primarily engaged in the generation, transmission, distribution and sale of electricity in portions of North Carolina and South Carolina. Duke Energy Progress is subject to ~~the regulatory provisions of the NCUC, PSCSC, NRC and FERC. Substantially all of Duke Energy Progress’ operations qualify for regulatory accounting.~~

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

Duke Energy Ohio is a regulated public utility primarily engaged in the transmission and distribution of electricity in portions of Ohio and Kentucky, the generation and sale of electricity in portions of Kentucky, and the transportation and sale of natural gas in portions of Ohio and Kentucky. Duke Energy Ohio conducts competitive auctions for retail electricity supply in Ohio whereby the energy price is recovered from retail customers and recorded in Operating Revenues on the Condensed Consolidated Statements of Operations and Comprehensive Income. Operations in Kentucky are conducted through its wholly owned subsidiary, Duke Energy Kentucky, Inc. (Duke Energy Kentucky). References hereinpay dividends or distributions to Duke Energy ~~Ohio collectively include Duke Energy Ohio~~Corporation holding company (the Parent);


◦	The performance of projects undertaken by our nonregulated businesses and ~~its subsidiaries, unless otherwise noted. Duke Energy Ohio is subject~~the success of efforts to invest in and develop new opportunities;


◦	The effect of accounting pronouncements issued periodically by accounting standard-setting bodies;


◦	Substantial revision to the ~~regulatory provisions~~U.S. tax code, such as changes to the corporate tax rate or material change in the deductibility of interest;


◦	The impact of potential goodwill impairments;


◦	The ability to successfully complete future merger, acquisition or divestiture plans; and


◦	The ability to successfully integrate the ~~Public Utilities Commission~~natural gas businesses following the acquisition of ~~Ohio (PUCO), Kentucky Public Service Commission (KPSC)~~Piedmont Natural Gas Company, Inc. and ~~FERC. On April 2, 2015, Duke Energy completed~~realize anticipated benefits.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DUKE ENERGY CORPORATION

Condensed Consolidated Statements of Operations

(Unaudited)



	Three Months Ended
	March 31,
(in millions, except per-share amounts)	2017		2016
Operating Revenues
Regulated electric	$	4,913	$	5,053
Regulated natural gas	646		169
Nonregulated electric and other	170		155
Total operating revenues	5,729		5,377
Operating Expenses
Fuel used in electric generation and purchased power	1,449		1,588
Cost of natural gas	258		49
Operation, maintenance and other	1,433		1,416
Depreciation and amortization	859		793
Property and other taxes	304		295
Impairment charges	—		3
Total operating expenses	4,303		4,144
Gains on Sales of Other Assets and Other, net	11		7
Operating Income	1,437		1,240
Other Income and Expenses
Equity in earnings of unconsolidated affiliates	29		8
Other income and expenses, net	86		70
Total other income and expenses	115		78
Interest Expense	491		489
Income From Continuing Operations Before Income Taxes	1,061		829
Income Tax Expense from Continuing Operations	344		252
Income From Continuing Operations	717		577
Income From Discontinued Operations, net of tax	—		122
Net Income	717		699
Less: Net Income Attributable to Noncontrolling Interests	1		5
Net Income Attributable to Duke Energy Corporation	$	716	$	694

Earnings Per Share – Basic and Diluted
Income from continuing operations attributable to Duke Energy Corporation common stockholders
Basic	$	1.02	$	0.83
Diluted	$	1.02	$	0.83
Income from discontinued operations attributable to Duke Energy Corporation common stockholders
Basic	$	—	$	0.18
Diluted	$	—	$	0.18
Net income attributable to Duke Energy Corporation common stockholders
Basic	$	1.02	$	1.01
Diluted	$	1.02	$	1.01
Weighted average shares outstanding
Basic	700		689
Diluted	700		689

PART I

DUKE ENERGY CORPORATION

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)



	Three Months Ended
	March 31,
(in millions)	2017		2016
Net Income	$	717	$	699
Other Comprehensive Income, net of tax
Foreign currency translation adjustments	—		49
Pension and OPEB adjustments	1		—
Net unrealized gains (losses) on cash flow hedges	2		(14		)
Reclassification into earnings from cash flow hedges	1		2
Unrealized gains on available-for-sale securities	4		4
Other Comprehensive Income, net of tax	8		41
Comprehensive Income	725		740
Less: Comprehensive Income Attributable to Noncontrolling Interests	1		6
Comprehensive Income Attributable to Duke Energy Corporation	$	724	$	734

PART I

DUKE ENERGY CORPORATION

Condensed Consolidated Balance Sheets

(Unaudited)



(in millions)	March 31, 2017			December 31, 2016
ASSETS
Current Assets
Cash and cash equivalents	$	878		$	392
Receivables (net of allowance for doubtful accounts of $13 at 2017 and $14 at 2016)	623			751
Receivables of VIEs (net of allowance for doubtful accounts of $57 at 2017 and $54 at 2016)	1,682			1,893
Inventory	3,366			3,522
Regulatory assets (includes $53 at 2017 and $50 at 2016 related to VIEs)	1,031			1,023
Other	425			458
Total current assets	8,005			8,039
Property, Plant and Equipment
Cost	123,301			121,397
Accumulated depreciation and amortization	(40,293		)	(39,406		)
Generation facilities to be retired, net	508			529
Net property, plant and equipment	83,516			82,520
Other Noncurrent Assets
Goodwill	19,425			19,425
Regulatory assets (includes $1,131 at 2017 and $1,142 at 2016 related to VIEs)	12,838			12,878
Nuclear decommissioning trust funds	6,448			6,205
Investments in equity method unconsolidated affiliates	1,122			925
Other	2,754			2,769
Total other noncurrent assets	42,587			42,202
Total Assets	$	134,108		$	132,761
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	2,203		$	2,994
Notes payable and commercial paper	3,558			2,487
Taxes accrued	363			384
Interest accrued	526			503
Current maturities of long-term debt (includes $281 at 2017 and $260 at 2016 related to VIEs)	1,977			2,319
Asset retirement obligations	404			411
Regulatory liabilities	340			409
Other	1,570			2,044
Total current liabilities	10,941			11,551
Long-Term Debt (includes $4,108 at 2017 and $3,587 at 2016 related to VIEs)	47,021			45,576
Other Noncurrent Liabilities
Deferred income taxes	14,443			14,155
Asset retirement obligations	10,186			10,200
Regulatory liabilities	6,972			6,881
Accrued pension and other post-retirement benefit costs	1,115			1,111
Investment tax credits	537			493
Other	1,707			1,753
Total other noncurrent liabilities	34,960			34,593
Commitments and Contingencies
Equity
Common stock, $0.001 par value, 2 billion shares authorized; 700 million shares outstanding at 2017 and 2016	1			1
Additional paid-in capital	38,742			38,741
Retained earnings	2,521			2,384
Accumulated other comprehensive loss	(85		)	(93		)
Total Duke Energy Corporation stockholders' equity	41,179			41,033
Noncontrolling interests	7			8
Total equity	41,186			41,041
Total Liabilities and Equity	$	134,108		$	132,761

PART I

DUKE ENERGY CORPORATION

Condensed Consolidated Statements of Cash Flows

(Unaudited)



	Three Months Ended
	March 31,
(in millions)	2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	717		$	699
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion (including amortization of nuclear fuel)	991			931
Equity component of AFUDC	(62		)	(42		)
Gains on sales of other assets	(11		)	(9		)
Impairment charges	—			3
Deferred income taxes	342			181
Equity in earnings of unconsolidated affiliates	(29		)	(8		)
Accrued pension and other post-retirement benefit costs	6			4
Payments for asset retirement obligations	(134		)	(112		)
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	(38		)	102
Receivables	343			139
Inventory	155			89
Other current assets	16			13
Increase (decrease) in
Accounts payable	(463		)	(210		)
Taxes accrued	(28		)	40
Other current liabilities	(478		)	(81		)
Other assets	(40		)	45
Other liabilities	2			(102		)
Net cash provided by operating activities	1,289			1,682
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(2,160		)	(1,645		)
Contributions to equity method investments	(175		)	(59		)
Purchases of available-for-sale securities	(1,386		)	(1,347		)
Proceeds from sales and maturities of available-for-sale securities	1,405			1,362
Change in restricted cash	(34		)	(32		)
Other	(49		)	(37		)
Net cash used in investing activities	(2,399		)	(1,758		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the:
Issuance of long-term debt	1,563			1,140
Issuance of common stock related to employee benefit plans	—			7
Payments for the redemption of long-term debt	(408		)	(389		)
Proceeds from the issuance of short-term debt with original maturities greater than 90 days	25			—
Payments for the redemption of short-term debt with original maturities greater than 90 days	(7		)	(92		)
Notes payable and commercial paper	1,045			(66		)
Change in bank overdrafts	5			—
Dividends paid	(600		)	(570		)
Other	(27		)	(33		)
Net cash provided by (used in) financing activities	1,596			(3		)
Changes in cash and cash equivalents associated with assets held for sale	—			30
Net increase (decrease) in cash and cash equivalents	486			(49		)
Cash and cash equivalents at beginning of period	392			383
Cash and cash equivalents at end of period	$	878		$	334
Supplemental Disclosures:
Significant non-cash transactions:
Accrued capital expenditures	$	575		$	576

PART I

DUKE ENERGY CORPORATION

Condensed Consolidated Statements of Changes in Equity

(Unaudited)



										Accumulated Other Comprehensive Loss
																Net Unrealized						Total
										Foreign			Net			(Losses) Gains						Duke Energy
	Common			Additional						Currency			Losses on			on Available-			Pension and			Corporation
	Stock	Common		Paid-in			Retained			Translation			Cash Flow			for-Sale-			OPEB			Stockholders'			Noncontrolling			Total
(in millions)	Shares	Stock		Capital			Earnings			Adjustments			Hedges			Securities			Adjustments			Equity			Interests			Equity
Balance at December 31, 2015	688	$	1	$	37,968		$	2,564		$	(692	)	$	(50	)	$	(3	)	$	(61	)	$	39,727		$	44		$	39,771
Net income	—	—		—			694			—			—			—			—			694			5			699
Other comprehensive income (loss)	—	—		—			—			48			(12		)	4			—			40			1			41
Common stock issuances, including dividend reinvestment and employee benefits	1	—		1			—			—			—			—			—			1			—			1
Common stock dividends	—	—		—			(570		)	—			—			—			—			(570		)	—			(570		)
Distributions to noncontrolling interest in subsidiaries	—	—		—			—			—			—			—			—			—			(1		)	(1		)
Balance at March 31, 2016	689	$	1	$	37,969		$	2,688		$	(644	)	$	(62	)	$	1		$	(61	)	$	39,892		$	49		$	39,941

Balance at December 31, 2016	700	$	1	$	38,741		$	2,384		$	—		$	(20	)	$	(1	)	$	(72	)	$	41,033		$	8		$	41,041
Net income	—	—		—			716			—			—			—			—			716			1			717
Other comprehensive income	—	—		—			—			—			3			4			1			8			—			8
Common stock issuances, including dividend reinvestment and employee benefits	—	—		1			—			—			—			—			—			1			—			1
Common stock dividends	—	—		—			(600		)	—			—			—			—			(600		)	—			(600		)
Distributions to noncontrolling interest in subsidiaries	—	—		—			—			—			—			—			—			—			(2		)	(2		)
Other^(a)	—	—		—		��	21			—			—			—			—			21			—			21
Balance at March 31, 2017	700	$	1	$	38,742		$	2,521		$	—		$	(17	)	$	3		$	(71	)	$	41,179		$	7		$	41,186

(a)

Cumulative-effect adjustment due to implementation of a new accounting standard related to stock-based compensation and the ~~sale of its nonregulated Midwest generation business, which sold power into wholesale energy markets, to a subsidiary of Dynegy Inc. (Dynegy).~~associated income taxes. See Note 21 for ~~additional~~more information. ~~Substantially all of Duke Energy Ohio’s operations that remain after the sale qualify for regulatory accounting.~~

Duke Energy Indiana is a regulated public utility primarily engaged in the generation, transmission, distribution and sale of electricity in portions of Indiana. Duke Energy Indiana is subject to the regulatory provisions of the Indiana Utility Regulatory Commission (IURC) and FERC. Substantially all of Duke Energy Indiana’s operations qualify for regulatory accounting. On January 1, 2016, Duke Energy Indiana, an Indiana corporation, converted into an Indiana limited liability company.

PART I

~~DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –~~

~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC~~

~~Combined Notes to Condensed Consolidated Financial Statements – (Continued)~~

~~(Unaudited)~~

DUKE ENERGY CAROLINAS, LLC

Condensed Consolidated Statements of Operations and Comprehensive Income

(Unaudited)



	Three Months Ended
	March 31,
(in millions)	2017		2016
Operating Revenues	$	1,716	$	1,740
Operating Expenses
Fuel used in electric generation and purchased power	428		421
Operation, maintenance and other	482		512
Depreciation and amortization	254		259
Property and other taxes	68		67
Total operating expenses	1,232		1,259
Operating Income	484		481
Other Income and Expenses, net	37		37
Interest Expense	103		107
Income Before Income Taxes	418		411
Income Tax Expense	148		140
Net Income	$	270	$	271
Other Comprehensive Income, net of tax
Reclassification into earnings from cash flow hedges	—		1
Comprehensive Income	$	270	$	272

PART I

DUKE ENERGY CAROLINAS, LLC

Condensed Consolidated Balance Sheets

(Unaudited)



(in millions)	March 31, 2017			December 31, 2016
ASSETS
Current Assets
Cash and cash equivalents	$	11		$	14
Receivables (net of allowance for doubtful accounts of $2 at 2017 and 2016)	166			160
Receivables of VIEs (net of allowance for doubtful accounts of $7 at 2017 and 2016)	563			645
Receivables from affiliated companies	109			163
Notes receivable from affiliated companies	—			66
Inventory	1,051			1,055
Regulatory assets	233			238
Other	65			37
Total current assets	2,198			2,378
Property, Plant and Equipment
Cost	41,600			41,127
Accumulated depreciation and amortization	(14,649		)	(14,365		)
Net property, plant and equipment	26,951			26,762
Other Noncurrent Assets
Regulatory assets	3,098			3,159
Nuclear decommissioning trust funds	3,406			3,273
Other	926			943
Total other noncurrent assets	7,430			7,375
Total Assets	$	36,579		$	36,515
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	602		$	833
Accounts payable to affiliated companies	250			247
Notes payable to affiliated companies	337			—
Taxes accrued	90			143
Interest accrued	134			102
Current maturities of long-term debt	404			116
Asset retirement obligations	224			222
Regulatory liabilities	118			161
Other	345			468
Total current liabilities	2,504			2,292
Long-Term Debt	8,787			9,187
Long-Term Debt Payable to Affiliated Companies	300			300
Other Noncurrent Liabilities
Deferred income taxes	6,668			6,544
Asset retirement obligations	3,658			3,673
Regulatory liabilities	2,860			2,840
Accrued pension and other post-retirement benefit costs	103			97
Investment tax credits	237			203
Other	595			607
Total other noncurrent liabilities	14,121			13,964
Commitments and Contingencies
Equity
Member's equity	10,876			10,781
Accumulated other comprehensive loss	(9		)	(9		)
Total equity	10,867			10,772
Total Liabilities and Equity	$	36,579		$	36,515

PART I

DUKE ENERGY CAROLINAS, LLC

Condensed Consolidated Statements of Cash Flows

(Unaudited)



	Three Months Ended
	March 31,
(in millions)	2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	270		$	271
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including amortization of nuclear fuel)	339			330
Equity component of AFUDC	(30		)	(23		)
Deferred income taxes	162			145
Accrued pension and other post-retirement benefit costs	—			1
Payments for asset retirement obligations	(65		)	(52		)
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	3			3
Receivables	66			2
Receivables from affiliated companies	54			33
Inventory	4			40
Other current assets	(26		)	102
Increase (decrease) in
Accounts payable	(131		)	(165		)
Accounts payable to affiliated companies	3			21
Taxes accrued	(53		)	52
Other current liabilities	(125		)	21
Other assets	(3		)	26
Other liabilities	(2		)	(26		)
Net cash provided by operating activities	466			781
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(563		)	(459		)
Purchases of available-for-sale securities	(722		)	(785		)
Proceeds from sales and maturities of available-for-sale securities	722			785
Notes receivable from affiliated companies	66			(691		)
Other	(20		)	(18		)
Net cash used in investing activities	(517		)	(1,168		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	—			992
Payments for the redemption of long-term debt	(113		)	(1		)
Notes payable to affiliated companies	337			—
Distributions to parent	(175		)	(600		)
Other	(1		)	—
Net cash provided by financing activities	48			391
Net (decrease) increase in cash and cash equivalents	(3		)	4
Cash and cash equivalents at beginning of period	14			13
Cash and cash equivalents at end of period	$	11		$	17
Supplemental Disclosures:
Significant non-cash transactions:
Accrued capital expenditures	$	164		$	179

PART I

DUKE ENERGY CAROLINAS, LLC

Condensed Consolidated Statements of Changes in Equity

(Unaudited)



				Accumulated Other
				Comprehensive
				Loss
				Net Losses on
	Member's			Cash Flow			Total
(in millions)	Equity			Hedges			Equity
Balance at December 31, 2015	$	11,617		$	(11	)	$	11,606
Net income	271			—			271
Other comprehensive income	—			1			1
Distributions to parent	(600		)	—			(600		)
Balance at March 31, 2016	$	11,288		$	(10	)	$	11,278

Balance at December 31, 2016	$	10,781		$	(9	)	$	10,772
Net income	270			—			270
Distributions to parent	(175		)	—			(175		)
Balance at March 31, 2017	$	10,876		$	(9	)	$	10,867

PART I

PROGRESS ENERGY, INC.

Condensed Consolidated Statements of Operations and Comprehensive Income

(Unaudited)



	Three Months Ended
	March 31,
(in millions)	2017		2016
Operating Revenues	$	2,179	$	2,332
Operating Expenses
Fuel used in electric generation and purchased power	726		860
Operation, maintenance and other	544		592
Depreciation and amortization	313		290
Property and other taxes	117		119
Impairment charges	—		2
Total operating expenses	1,700		1,863
Gains on Sales of Other Assets and Other, net	8		6
Operating Income	487		475
Other Income and Expenses, net	24		20
Interest Expense	206		160
Income Before Income Taxes	305		335
Income Tax Expense	104		123
Net Income	201		212
Less: Net Income Attributable to Noncontrolling Interests	2		3
Net Income Attributable to Parent	$	199	$	209

Net Income	$	201	$	212
Other Comprehensive Income, net of tax
Pension and OPEB adjustments	1		1
Reclassification into earnings from cash flow hedges	1		1
Unrealized gains on available-for-sale securities	1		1
Other Comprehensive Income, net of tax	3		3
Comprehensive Income	204		215
Less: Comprehensive Income Attributable to Noncontrolling Interests	2		3
Comprehensive Income Attributable to Parent	$	202	$	212

PART I

PROGRESS ENERGY, INC.

Condensed Consolidated Balance Sheets

(Unaudited)



(in millions)	March 31, 2017			December 31, 2016
ASSETS
Current Assets
Cash and cash equivalents	$	38		$	46
Receivables (net of allowance for doubtful accounts of $3 at 2017 and $6 at 2016)	80			114
Receivables of VIEs (net of allowance for doubtful accounts of $7 at 2017 and 2016)	612			692
Receivables from affiliated companies	2			106
Notes receivable from affiliated companies	184			80
Inventory	1,652			1,717
Regulatory assets (includes $53 at 2017 and $50 at 2016 related to VIEs)	447			401
Other	252			148
Total current assets	3,267			3,304
Property, Plant and Equipment
Cost	45,902			44,864
Accumulated depreciation and amortization	(15,618		)	(15,212		)
Generation facilities to be retired, net	508			529
Net property, plant and equipment	30,792			30,181
Other Noncurrent Assets
Goodwill	3,655			3,655
Regulatory assets (includes $1,131 at 2017 and $1,142 at 2016 related to VIEs)	5,815			5,722
Nuclear decommissioning trust funds	3,041			2,932
Other	851			856
Total other noncurrent assets	13,362			13,165
Total Assets	$	47,421		$	46,650
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	678		$	1,003
Accounts payable to affiliated companies	316			348
Notes payable to affiliated companies	866			729
Taxes accrued	96			83
Interest accrued	224			201
Current maturities of long-term debt (includes $55 at 2017 and $62 at 2016 related to VIEs)	521			778
Asset retirement obligations	180			189
Regulatory liabilities	157			189
Other	627			745
Total current liabilities	3,665			4,265
Long-Term Debt (includes $1,713 at 2017 and $1,741 at 2016 related to VIEs)	16,454			15,590
Long-Term Debt Payable to Affiliated Companies	1,173			1,173
Other Noncurrent Liabilities
Deferred income taxes	5,484			5,246
Asset retirement obligations	5,289			5,286
Regulatory liabilities	2,472			2,395
Accrued pension and other post-retirement benefit costs	540			547
Other	332			341
Total other noncurrent liabilities	14,117			13,815
Commitments and Contingencies
Equity
Common stock, $0.01 par value, 100 shares authorized and outstanding at 2017 and 2016	—			—
Additional paid-in capital	8,094			8,094
Retained earnings	3,963			3,764
Accumulated other comprehensive loss	(35		)	(38		)
Total Progress Energy, Inc. stockholders' equity	12,022			11,820
Noncontrolling interests	(10		)	(13		)
Total equity	12,012			11,807
Total Liabilities and Equity	$	47,421		$	46,650

PART I

PROGRESS ENERGY, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)



	Three Months Ended
	March 31,
(in millions)	2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	201		$	212
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion (including amortization of nuclear fuel)	365			342
Equity component of AFUDC	(24		)	(14		)
Gains on sales of other assets	(9		)	(7		)
Impairment charges	—			2
Deferred income taxes	220			182
Accrued pension and other post-retirement benefit costs	(3		)	(6		)
Payments for asset retirement obligations	(60		)	(54		)
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	(2		)	6
Receivables	115			70
Receivables from affiliated companies	100			295
Inventory	65			3
Other current assets	(173		)	(76		)
Increase (decrease) in
Accounts payable	(228		)	9
Accounts payable to affiliated companies	(32		)	(55		)
Taxes accrued	12			42
Other current liabilities	(121		)	(64		)
Other assets	(53		)	(46		)
Other liabilities	(14		)	(7		)
Net cash provided by operating activities	359			834
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(1,011		)	(750		)
Purchases of available-for-sale securities	(629		)	(533		)
Proceeds from sales and maturities of available-for-sale securities	635			548
Proceeds from insurance	4			43
Notes receivable from affiliated companies	(104		)	—
Change in restricted cash	5			—
Other	(4		)	(15		)
Net cash used in investing activities	(1,104		)	(707		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	892			53
Payments for the redemption of long-term debt	(288		)	(310		)
Notes payable to affiliated companies	137			128
Distributions to noncontrolling interests	(1		)	(1		)
Other	(3		)	—
Net cash provided by (used in) financing activities	737			(130		)
Net decrease in cash and cash equivalents	(8		)	(3		)
Cash and cash equivalents at beginning of period	46			44
Cash and cash equivalents at end of period	$	38		$	41
Supplemental Disclosures:
Significant non-cash transactions:
Accrued capital expenditures	$	219		$	228

PART I

PROGRESS ENERGY, INC.

Condensed Consolidated Statements of Changes in Equity

(Unaudited)



					Accumulated Other Comprehensive Loss
					Net (Losses)			Net Unrealized					Total Progress
	Additional				Gains on			Gains on		Pension and			Energy, Inc.
	Paid-in		Retained		Cash Flow			Available-for-		OPEB			Stockholders'		Noncontrolling			Total
(in millions)	Capital		Earnings		Hedges			Sale Securities		Adjustments			Equity		Interests			Equity
Balance at December 31, 2015	$	8,092	$	4,831	$	(31	)	$	—	$	(17	)	$	12,875	$	(22	)	$	12,853
Net income	—		209		—			—		—			209		3			212
Other comprehensive income	—		—		1			1		1			3		—			3
Distributions to noncontrolling interests	—		—		—			—		—			—		(1		)	(1		)
Balance at March 31, 2016	$	8,092	$	5,040	$	(30	)	$	1	$	(16	)	$	13,087	$	(20	)	$	13,067

Balance at December 31, 2016	$	8,094	$	3,764	$	(23	)	$	1	$	(16	)	$	11,820	$	(13	)	$	11,807
Net income	—		199		—			—		—			199		2			201
Other comprehensive income	—		—		1			1		1			3		—			3
Other	—		—		—			—		—			—		1			1
Balance at March 31, 2017	$	8,094	$	3,963	$	(22	)	$	2	$	(15	)	$	12,022	$	(10	)	$	12,012

PART I

DUKE ENERGY PROGRESS, LLC

Condensed Consolidated Statements of Operations and Comprehensive Income

(Unaudited)



	Three Months Ended
	March 31,
(in millions)	2017		2016
Operating Revenues	$	1,219	$	1,307
Operating Expenses
Fuel used in electric generation and purchased power	364		448
Operation, maintenance and other	350		386
Depreciation and amortization	181		175
Property and other taxes	40		41
Total operating expenses	935		1,050
Gains on Sales of Other Assets and Other, net	2		1
Operating Income	286		258
Other Income and Expenses, net	19		17
Interest Expense	82		63
Income Before Income Taxes	223		212
Income Tax Expense	76		75
Net Income and Comprehensive Income	$	147	$	137

PART I

DUKE ENERGY PROGRESS, LLC

Condensed Consolidated Balance Sheets

(Unaudited)



(in millions)	March 31, 2017			December 31, 2016
ASSETS
Current Assets
Cash and cash equivalents	$	11		$	11
Receivables (net of allowance for doubtful accounts of $1 at 2017 and $4 at 2016)	28			51
Receivables of VIEs (net of allowance for doubtful accounts of $5 at 2017 and 2016)	364			404
Receivables from affiliated companies	6			5
Notes receivable from affiliated companies	—			165
Inventory	1,053			1,076
Regulatory assets	187			188
Other	102			57
Total current assets	1,751			1,957
Property, Plant and Equipment
Cost	28,769			28,419
Accumulated depreciation and amortization	(10,716		)	(10,561		)
Generation facilities to be retired, net	508			529
Net property, plant and equipment	18,561			18,387
Other Noncurrent Assets
Regulatory assets	3,338			3,243
Nuclear decommissioning trust funds	2,315			2,217
Other	535			525
Total other noncurrent assets	6,188			5,985
Total Assets	$	26,500		$	26,329
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	317		$	589
Accounts payable to affiliated companies	244			227
Notes payable to affiliated companies	502			—
Taxes accrued	35			104
Interest accrued	90			102
Current maturities of long-term debt	202			452
Asset retirement obligations	180			189
Regulatory liabilities	149			158
Other	294			365
Total current liabilities	2,013			2,186
Long-Term Debt	6,409			6,409
Long-Term Debt Payable to Affiliated Companies	150			150
Other Noncurrent Liabilities
Deferred income taxes	3,453			3,323
Asset retirement obligations	4,516			4,508
Regulatory liabilities	2,012			1,946
Accrued pension and other post-retirement benefit costs	247			252
Investment tax credits	146			146
Other	49			51
Total other noncurrent liabilities	10,423			10,226
Commitments and Contingencies
Equity
Member's Equity	7,505			7,358
Total Liabilities and Equity	$	26,500		$	26,329

PART I

DUKE ENERGY PROGRESS, LLC

Condensed Consolidated Statements of Cash Flows

(Unaudited)



	Three Months Ended
	March 31,
(in millions)	2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	147		$	137
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including amortization of nuclear fuel)	228			223
Equity component of AFUDC	(13		)	(10		)
Gains on sales of other assets	(3		)	(2		)
Deferred income taxes	120			100
Accrued pension and other post-retirement benefit costs	(5		)	(8		)
Payments for asset retirement obligations	(47		)	(42		)
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	(2		)	(1		)
Receivables	65			18
Receivables from affiliated companies	(1		)	10
Inventory	23			15
Other current assets	(60		)	83
Increase (decrease) in
Accounts payable	(192		)	(16		)
Accounts payable to affiliated companies	17			(14		)
Taxes accrued	(68		)	18
Other current liabilities	(81		)	(39		)
Other assets	(44		)	(17		)
Other liabilities	(10		)	(4		)
Net cash provided by operating activities	74			451
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(474		)	(379		)
Purchases of available-for-sale securities	(476		)	(390		)
Proceeds from sales and maturities of available-for-sale securities	470			384
Notes receivable from affiliated companies	165			—
Other	(9		)	(13		)
Net cash used in investing activities	(324		)	(398		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	—			53
Payments for the redemption of long-term debt	(250		)	(8		)
Notes payable to affiliated companies	502			(101		)
Other	(2		)	(1		)
Net cash provided by (used in) financing activities	250			(57		)
Net decrease in cash and cash equivalents	—			(4		)
Cash and cash equivalents at beginning of period	11			15
Cash and cash equivalents at end of period	$	11		$	11
Supplemental Disclosures:
Significant non-cash transactions:
Accrued capital expenditures	$	66		$	55

PART I

DUKE ENERGY PROGRESS, LLC

Condensed Consolidated Statements of Changes in Equity

(Unaudited)



	Member's
(in millions)	Equity
Balance at December 31, 2015	$	7,059
Net income	137
Balance at March 31, 2016	$	7,196

Balance at December 31, 2016	$	7,358
Net income	147
Balance at March 31, 2017	$	7,505

PART I

DUKE ENERGY FLORIDA, LLC

Condensed Consolidated Statements of Operations and Comprehensive Income

(Unaudited)



	Three Months Ended
	March 31,
(in millions)	2017		2016
Operating Revenues	$	959	$	1,024
Operating Expenses
Fuel used in electric generation and purchased power	362		412
Operation, maintenance and other	191		205
Depreciation and amortization	132		114
Property and other taxes	77		78
Impairment charges	1		2
Total operating expenses	763		811
Operating Income	196		213
Other Income and Expenses, net	16		5
Interest Expense	70		41
Income Before Income Taxes	142		177
Income Tax Expense	52		67
Net Income	$	90	$	110
Other Comprehensive Income, net of tax
Unrealized gains on available-for-sale securities	1		1
Comprehensive Income	$	91	$	111

PART I

DUKE ENERGY FLORIDA, LLC

Condensed Consolidated Balance Sheets

(Unaudited)



(in millions)	March 31, 2017			December 31, 2016
ASSETS
Current Assets
Cash and cash equivalents	$	7		$	16
Receivables (net of allowance for doubtful accounts of $2 at 2017 and 2016)	50			61
Receivables of VIEs (net of allowance for doubtful accounts of $2 at 2017 and 2016)	248			288
Receivables from affiliated companies	2			5
Notes receivable from affiliated companies	293			—
Inventory	599			641
Regulatory assets (includes $53 at 2017 and $50 at 2016 related to VIEs)	260			213
Other (includes $14 at 2017 and $53 at 2016 related to VIEs)	104			125
Total current assets	1,563			1,349
Property, Plant and Equipment
Cost	17,122			16,434
Accumulated depreciation and amortization	(4,894		)	(4,644		)
Net property, plant and equipment	12,228			11,790
Other Noncurrent Assets
Regulatory assets (includes $1,131 at 2017 and $1,142 at 2016 related to VIEs)	2,476			2,480
Nuclear decommissioning trust funds	726			715
Other	268			278
Total other noncurrent assets	3,470			3,473
Total Assets	$	17,261		$	16,612
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	361		$	413
Accounts payable to affiliated companies	77			125
Notes payable to affiliated companies	—			297
Taxes accrued	62			33
Interest accrued	76			49
Current maturities of long-term debt (includes $55 at 2017 and $62 at 2016 related to VIEs)	319			326
Regulatory liabilities	7			31
Other	309			352
Total current liabilities	1,211			1,626
Long-Term Debt (includes $1,414 at 2017 and $1,442 at 2016 related to VIEs)	6,662			5,799
Other Noncurrent Liabilities
Deferred income taxes	2,800			2,694
Asset retirement obligations	773			778
Regulatory liabilities	459			448
Accrued pension and other post-retirement benefit costs	261			262
Other	104			105
Total other noncurrent liabilities	4,397			4,287
Commitments and Contingencies
Equity
Member's equity	4,989			4,899
Accumulated other comprehensive income	2			1
Total equity	4,991			4,900
Total Liabilities and Equity	$	17,261		$	16,612

PART I

DUKE ENERGY FLORIDA, LLC

Condensed Consolidated Statements of Cash Flows

(Unaudited)



	Three Months Ended
	March 31,
(in millions)	2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	90		$	110
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion	134			116
Equity component of AFUDC	(11		)	(4		)
Impairment charges	1			2
Deferred income taxes	100			83
Accrued pension and other post-retirement benefit costs	1			1
Payments for asset retirement obligations	(14		)	(12		)
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	—			7
Receivables	51			52
Receivables from affiliated companies	(1		)	14
Inventory	42			(12		)
Other current assets	(33		)	(44		)
Increase (decrease) in
Accounts payable	(35		)	25
Accounts payable to affiliated companies	(48		)	(40		)
Taxes accrued	29			(70		)
Other current liabilities	(47		)	(14		)
Other assets	(13		)	(30		)
Other liabilities	(5		)	(6		)
Net cash provided by operating activities	241			178
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(538		)	(370		)
Purchases of available-for-sale securities	(153		)	(143		)
Proceeds from sales and maturities of available-for-sale securities	165			164
Proceeds from insurance	4			43
Notes receivable from affiliated companies	(293		)	—
Other	9			(1		)
Net cash used in investing activities	(806		)	(307		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	892			—
Payments for the redemption of long-term debt	(38		)	(2		)
Notes payable to affiliated companies	(297		)	135
Other	(1		)	—
Net cash provided by financing activities	556			133
Net (decrease) increase in cash and cash equivalents	(9		)	4
Cash and cash equivalents at beginning of period	16			8
Cash and cash equivalents at end of period	$	7		$	12
Supplemental Disclosures:
Significant non-cash transactions:
Accrued capital expenditures	$	153		$	173

PART I

DUKE ENERGY FLORIDA, LLC

Condensed Consolidated Statements of Changes in Equity

(Unaudited)



			Accumulated
			Other
			Comprehensive
			Income
			Net Unrealized
			Gains on
	Member's		Available-for-Sale		Total
(in millions)	Equity		Securities		Equity
Balance at December 31, 2015	$	5,121	$	—	$	5,121
Net income	110		—		110
Other comprehensive income	—		1		1
Balance at March 31, 2016	$	5,231	$	1	$	5,232

Balance at December 31, 2016	$	4,899	$	1	$	4,900
Net income	90		—		90
Other comprehensive income	—		1		1
Balance at March 31, 2017	$	4,989	$	2	$	4,991

PART I

DUKE ENERGY OHIO, INC.

Condensed Consolidated Statements of Operations and Comprehensive Income

(Unaudited)



	Three Months Ended
	March 31,
(in millions)	2017		2016
Operating Revenues
Regulated electric	$	337	$	340
Regulated natural gas	170		170
Nonregulated electric and other	11		6
Total operating revenues	518		516
Operating Expenses
Fuel used in electric generation and purchased power – regulated	97		111
Fuel used in electric generation and purchased power – nonregulated	15		10
Cost of natural gas	54		49
Operation, maintenance and other	130		119
Depreciation and amortization	67		61
Property and other taxes	72		71
Total operating expenses	435		421
Gains on Sales of Other Assets and Other, net	—		1
Operating Income	83		96
Other Income and Expenses, net	4		2
Interest Expense	22		20
Income From Continuing Operations Before Income Taxes	65		78
Income Tax Expense From Continuing Operations	23		21
Income From Continuing Operations	42		57
Income From Discontinued Operations, net of tax	—		2
Net Income and Comprehensive Income	$	42	$	59

PART I

DUKE ENERGY OHIO, INC.

Condensed Consolidated Balance Sheets

(Unaudited)



(in millions)	March 31, 2017			December 31, 2016
ASSETS
Current Assets
Cash and cash equivalents	$	13		$	13
Receivables (net of allowance for doubtful accounts of $2 at 2017 and 2016)	63			71
Receivables from affiliated companies	88			129
Notes receivable from affiliated companies	179			94
Inventory	118			137
Regulatory assets	21			37
Other	34			37
Total current assets	516			518
Property, Plant and Equipment
Cost	8,236			8,126
Accumulated depreciation and amortization	(2,611		)	(2,579		)
Net property, plant and equipment	5,625			5,547
Other Noncurrent Assets
Goodwill	920			920
Regulatory assets	525			520
Other	23			23
Total other noncurrent assets	1,468			1,463
Total Assets	$	7,609		$	7,528
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	252		$	282
Accounts payable to affiliated companies	64			63
Notes payable to affiliated companies	8			16
Taxes accrued	127			178
Interest accrued	33			19
Current maturities of long-term debt	1			1
Regulatory liabilities	21			21
Other	83			91
Total current liabilities	589			671
Long-Term Debt	1,951			1,858
Long-Term Debt Payable to Affiliated Companies	25			25
Other Noncurrent Liabilities
Deferred income taxes	1,472			1,443
Asset retirement obligations	76			77
Regulatory liabilities	236			236
Accrued pension and other post-retirement benefit costs	56			56
Other	166			166
Total other noncurrent liabilities	2,006			1,978
Commitments and Contingencies
Equity
Common stock, $8.50 par value, 120,000,000 shares authorized; 89,663,086 shares outstanding at 2017 and 2016	762			762
Additional paid-in capital	2,695			2,695
Accumulated deficit	(419		)	(461		)
Total equity	3,038			2,996
Total Liabilities and Equity	$	7,609		$	7,528

PART I

DUKE ENERGY OHIO, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)



	Three Months Ended
	March 31,
(in millions)	2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	42		$	59
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	68			62
Equity component of AFUDC	(2		)	(1		)
Gains on sales of other assets	—			(1		)
Deferred income taxes	30			11
Accrued pension and other post-retirement benefit costs	1			1
Payments for asset retirement obligations	(2		)	(1		)
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	1			2
Receivables	7			(18		)
Receivables from affiliated companies	41			(9		)
Inventory	19			1
Other current assets	9			78
Increase (decrease) in
Accounts payable	(10		)	(1		)
Accounts payable to affiliated companies	1			—
Taxes accrued	(52		)	(31		)
Other current liabilities	9			14
Other assets	(6		)	(2		)
Other liabilities	(3		)	—
Net cash provided by operating activities	153			164
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(143		)	(85		)
Notes receivable from affiliated companies	(85		)	(19		)
Other	(8		)	(4		)
Net cash used in investing activities	(236		)	(108		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	93			95
Payments for the redemption of long-term debt	(1		)	(51		)
Notes payable to affiliated companies	(8		)	(95		)
Other	(1		)	—
Net cash provided by (used in) financing activities	83			(51		)
Net increase in cash and cash equivalents	—			5
Cash and cash equivalents at beginning of period	13			14
Cash and cash equivalents at end of period	$	13		$	19
Supplemental Disclosures:
Significant non-cash transactions:
Accrued capital expenditures	$	57		$	31

PART I

DUKE ENERGY OHIO, INC.

Condensed Consolidated Statements of Changes in Equity

(Unaudited)



			Additional
	Common		Paid-in		Accumulated			Total
(in millions)	Stock		Capital		Deficit			Equity
Balance at December 31, 2015	$	762	$	2,720	$	(698	)	$	2,784
Net income	—		—		59			59
Balance at March 31, 2016	$	762	$	2,720	$	(639	)	$	2,843

Balance at December 31, 2016	$	762	$	2,695	$	(461	)	$	2,996
Net income	—		—		42			42
Balance at March 31, 2017	$	762	$	2,695	$	(419	)	$	3,038

PART I

DUKE ENERGY INDIANA, LLC

Condensed Consolidated Statements of Operations and Comprehensive Income

(Unaudited)



	Three Months Ended
	March 31,
(in millions)	2017		2016
Operating Revenues	$	758	$	714
Operating Expenses
Fuel used in electric generation and purchased power	251		228
Operation, maintenance and other	174		162
Depreciation and amortization	125		125
Property and other taxes	22		23
Total operating expenses	572		538
Operating Income	186		176
Other Income and Expenses, net	8		4
Interest Expense	44		44
Income Before Income Taxes	150		136
Income Tax Expense	59		41
Net Income	$	91	$	95
Other Comprehensive Loss, net of tax
Reclassification into earnings from cash flow hedges	—		(1		)
Comprehensive Income	$	91	$	94

PART I

DUKE ENERGY INDIANA, LLC

Condensed Consolidated Balance Sheets

(Unaudited)



(in millions)	March 31, 2017			December 31, 2016
ASSETS
Current Assets
Cash and cash equivalents	$	15		$	17
Receivables (net of allowance for doubtful accounts of $1 at 2017 and 2016)	72			105
Receivables from affiliated companies	88			114
Notes receivable from affiliated companies	199			86
Inventory	478			504
Regulatory assets	156			149
Other	35			45
Total current assets	1,043			1,020
Property, Plant and Equipment
Cost	14,411			14,241
Accumulated depreciation and amortization	(4,426		)	(4,317		)
Net property, plant and equipment	9,985			9,924
Other Noncurrent Assets
Regulatory assets	1,066			1,073
Other	156			147
Total other noncurrent assets	1,222			1,220
Total Assets	$	12,250		$	12,164
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	210		$	263
Accounts payable to affiliated companies	75			74
Taxes accrued	72			31
Interest accrued	52			61
Current maturities of long-term debt	3			3
Regulatory liabilities	44			40
Other	75			93
Total current liabilities	531			565
Long-Term Debt	3,631			3,633
Long-Term Debt Payable to Affiliated Companies	150			150
Other Noncurrent Liabilities
Deferred income taxes	1,921			1,900
Asset retirement obligations	867			866
Regulatory liabilities	743			748
Accrued pension and other post-retirement benefit costs	77			71
Investment tax credits	148			137
Other	24			27
Total other noncurrent liabilities	3,780			3,749
Commitments and Contingencies
Equity
Member's Equity	4,158			4,067
Total Liabilities and Equity	$	12,250		$	12,164

PART I

DUKE ENERGY INDIANA, LLC

Condensed Consolidated Statements of Cash Flows

(Unaudited)



	Three Months Ended
	March 31,
(in millions)	2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	91		$	95
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion	126			127
Equity component of AFUDC	(6		)	(3		)
Deferred income taxes	37			(16		)
Accrued pension and other post-retirement benefit costs	1			2
Payments for asset retirement obligations	(7		)	(5		)
(Increase) decrease in
Receivables	44			16
Receivables from affiliated companies	26			7
Inventory	26			45
Other current assets	(2		)	(19		)
Increase (decrease) in
Accounts payable	(32		)	(44		)
Accounts payable to affiliated companies	1			(22		)
Taxes accrued	41			30
Other current liabilities	(15		)	(18		)
Other assets	(11		)	(4		)
Other liabilities	(3		)	(11		)
Net cash provided by operating activities	317			180
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(189		)	(151		)
Purchases of available-for-sale securities	(4		)	(5		)
Proceeds from sales and maturities of available-for-sale securities	2			4
Notes receivable from affiliated companies	(113		)	(19		)
Other	(12		)	(1		)
Net cash used in investing activities	(316		)	(172		)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments for the redemption of long-term debt	(2		)	—
Other	(1		)	—
Net cash used in financing activities	(3		)	—
Net (decrease) increase in cash and cash equivalents	(2		)	8
Cash and cash equivalents at beginning of period	17			9
Cash and cash equivalents at end of period	$	15		$	17
Supplemental Disclosures:
Significant non-cash transactions:
Accrued capital expenditures	$	84		$	42

PART I

DUKE ENERGY INDIANA, LLC

Condensed Consolidated Statements of Changes in Equity

(Unaudited)



												Accumulated
												Other
												Comprehensive
												Income
				Additional								Net Gains on
	Common			Paid-in			Retained			Member's		Cash Flow			Total
(in millions)	Stock			Capital			Earnings			Equity		Hedges			Equity
Balance at December 31, 2015	$	1		$	1,384		$	2,450		$	—	$	1		$	3,836
Net income	—			—			—			95		—			95
Other comprehensive loss	—			—			—			—		(1		)	(1		)
Transfer to Member's Equity	(1		)	(1,384		)	(2,450		)	3,835		—			—
Balance at March 31, 2016	$	—		$	—		$	—		$	3,930	$	—		$	3,930

Balance at December 31, 2016	$	—		$	—		$	—		$	4,067	$	—		$	4,067
Net income	—			—			—			91		—			91
Balance at March 31, 2017	$	—		$	—		$	—		$	4,158	$	—		$	4,158

PART I

PIEDMONT NATURAL GAS COMPANY, INC.

Condensed Consolidated Statements of Operations and Comprehensive Income

(Unaudited)



	Three Months Ended
	March 31,
	2017		2016
Operating Revenues
Regulated natural gas	$	498	$	481
Nonregulated natural gas and other	2		2
Total operating revenues	500		483
Operating Expenses
Cost of natural gas	205		197
Operation, maintenance and other	77		74
Depreciation and amortization	35		34
Property and other taxes	13		11
Total operating expenses	330		316
Operating Income	170		167
Equity in Earnings of Unconsolidated Affiliates	3		16
Interest Expense	20		17
Income Before Income Taxes	153		166
Income Tax Expense	58		63
Net Income and Comprehensive Income	$	95	$	103

PART I

PIEDMONT NATURAL GAS COMPANY, INC.

Condensed Consolidated Balance Sheets

(Unaudited)



(in millions)	March 31, 2017			December 31, 2016
ASSETS
Current Assets
Cash and cash equivalents	$	15		$	25
Receivables (net of allowance for doubtful accounts of $5 at 2017 and $3 at 2016)	193			232
Receivables from affiliated companies	7			7
Inventory	29			66
Regulatory assets	98			124
Other	21			21
Total current assets	363			475
Property, Plant and Equipment
Cost	6,297			6,174
Accumulated depreciation and amortization	(1,390		)	(1,360		)
Net property, plant and equipment	4,907			4,814
Other Noncurrent Assets
Goodwill	49			49
Regulatory assets	350			373
Investments in equity method unconsolidated affiliates	225			212
Other	19			21
Total other noncurrent assets	643			655
Total Assets	$	5,913		$	5,944
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	104		$	155
Accounts payable to affiliated companies	3			8
Notes payable and commercial paper	—			330
Notes payable to affiliated companies	261			—
Taxes accrued	69			67
Interest accrued	27			33
Current maturities of long-term debt	35			35
Other	70			102
Total current liabilities	569			730
Long-Term Debt	1,786			1,786
Other Noncurrent Liabilities
Deferred income taxes	981			931
Asset retirement obligations	14			14
Regulatory liabilities	613			608
Accrued pension and other post-retirement benefit costs	14			14
Other	169			189
Total other noncurrent liabilities	1,791			1,756
Commitments and Contingencies
Equity
Common stock, no par value: 100 shares authorized and outstanding at 2017 and 2016	860			860
Retained earnings	907			812
Total equity	1,767			1,672
Total Liabilities and Equity	$	5,913		$	5,944

PART I

PIEDMONT NATURAL GAS COMPANY, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)



	Three Months Ended
	March 31,
(in millions)	2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	95		$	103
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	37			37
Deferred income taxes	50			68
Equity in earnings from unconsolidated affiliates	(3		)	(16		)
Accrued pension and other post-retirement benefit costs	3			1
Payments for asset retirement obligations	—			(1		)
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	(41		)	—
Receivables	40			(14		)
Inventory	37			49
Other current assets	24			20
Increase (decrease) in
Accounts payable	(31		)	(21		)
Accounts payable to affiliated companies	(5		)	—
Taxes accrued	2			3
Other current liabilities	(17		)	(9		)
Other assets	25			23
Other liabilities	(1		)	(20		)
Net cash provided by operating activities	215			223
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(141		)	(132		)
Contributions to equity method investments	(12		)	(9		)
Other	(3		)	(1		)
Net cash used in investing activities	(156		)	(142		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of common stock	—			7
Notes payable and commercial paper	(330		)	(80		)
Notes payable to affiliated companies	261			—
Dividends paid	—			(27		)
Net cash used in financing activities	(69		)	(100		)
Net decrease in cash and cash equivalents	(10		)	(19		)
Cash and cash equivalents at beginning of period	25			33
Cash and cash equivalents at end of period	$	15		$	14
Supplemental Disclosures:
Significant non-cash transactions:
Accrued capital expenditures	$	24		$	43

PART I

PIEDMONT NATURAL GAS COMPANY, INC.

Condensed Consolidated Statements of Changes in Equity

(Unaudited)



						Accumulated
						Other
						Comprehensive
						Income
						Net Loss on
						Hedging Activities
	Common		Retained			of Unconsolidated			Total
(in millions)	Stock		Earnings			Affiliates			Equity
Balance at December 31, 2015	$	728	$	731		$	(1	)	$	1,458
Net income	—		103			—			103
Common stock issuances, including dividend reinvestments and employee benefits	7		—			—			7
Common stock dividends	—		(27		)	—			(27		)
Balance at March 31, 2016	$	735	$	807		$	(1	)	$	1,541

Balance at December 31, 2016	$	860	$	812		$	—		$	1,672
Net income	—		95			—			95
Balance at March 31, 2017	$	860	$	907		$	—		$	1,767

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited)

Index to Combined Notes to Condensed Consolidated Financial Statements

The unaudited notes to the condensed consolidated financial statements that follow are a combined presentation. The following list indicates the registrants to which the footnotes apply.

Applicable Notes

Registrant

Duke Energy Corporation

•

Duke Energy Carolinas, LLC

•

Progress Energy, Inc.

•

Duke Energy Progress, LLC

•

Duke Energy Florida, LLC

•

Duke Energy Ohio, Inc.

•

Duke Energy Indiana, LLC

•

Piedmont Natural Gas Company, Inc.

•

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, (ii) subsidiaries that are not registrants but included in the consolidated Duke Energy balances and (iii) the Piedmont registrant not included in the consolidated Duke Energy results for the three months ended March 31, 2016, as Piedmont results were not consolidated by Duke Energy until after the acquisition date of October 3, 2016.

1. ORGANIZATION AND BASIS OF PRESENTATION

NATURE OF OPERATIONS AND BASIS OF CONSOLIDATION

Duke Energy Corporation (collectively with its subsidiaries, Duke Energy) is an energy company headquartered in Charlotte, North Carolina, subject to regulation by the Federal Energy Regulatory Commission (FERC). Duke Energy operates in the United States (U.S.) primarily through its direct and indirect subsidiaries. Certain Duke Energy subsidiaries are also subsidiary registrants, including Duke Energy Carolinas, LLC (Duke Energy Carolinas); Progress Energy, Inc. (Progress Energy); Duke Energy Progress, LLC (Duke Energy Progress); Duke Energy Florida, LLC (Duke Energy Florida); Duke Energy Ohio, Inc. (Duke Energy Ohio), Duke Energy Indiana, LLC (Duke Energy Indiana) and Piedmont Natural Gas Company, Inc. (Piedmont). When discussing Duke Energy’s consolidated financial information, it necessarily includes the results of its separate subsidiary registrants (collectively referred to as the Subsidiary Registrants), which, along with Duke Energy, are collectively referred to as the Duke Energy Registrants.

On October 3, 2016, Duke Energy completed the acquisition of Piedmont. Piedmont's results of operations and cash flows are included in the accompanying condensed consolidated financial statements of Duke Energy for the three months ended March 31, 2017, but not for the three months ended March 31, 2016, as Piedmont's earnings and cash flows are only included in Duke Energy's consolidated results subsequent to the acquisition date. See Note 2 for additional information regarding the acquisition.

In December 2016, Duke Energy completed an exit of the Latin American market to focus on its domestic regulated business, which was further bolstered by the acquisition of Piedmont. The sale of the International Energy business segment, excluding an equity method investment in National Methanol Company (NMC), was completed through two transactions including a sale of assets in Brazil to China Three Gorges (Luxembourg) Energy S.à.r.l. (China Three Gorges) and a sale of Duke Energy's remaining Latin American assets in Peru, Chile, Ecuador, Guatemala, El Salvador and Argentina to ISQ Enerlam Aggregator, L.P. and Enerlam (UK) Holding Ltd. (I Squared Capital) (collectively, the International Disposal Group). See Note 2 for additional information on the sale of International Energy.

The results of operations of the International Disposal Group have been classified as Discontinued Operations on the Condensed Consolidated Statements of Operations. Duke Energy has elected to present cash flows of discontinued operations combined with cash flows of continuing operations. Unless otherwise noted, the notes to these Condensed Consolidated Financial Statements exclude amounts related to discontinued operations. See Note 2 for additional information.

These Condensed Consolidated Financial Statements include, after eliminating intercompany transactions and balances, the accounts of the Duke Energy Registrants and subsidiaries where the respective Duke Energy Registrants have control. These Condensed Consolidated Financial Statements also reflect the Duke Energy Registrants’ proportionate share of certain jointly owned generation and transmission facilities. Substantially all of the Subsidiary Registrants' operations qualify for regulatory accounting.

Duke Energy Carolinas is a regulated public utility primarily engaged in the generation, transmission, distribution and sale of electricity in portions of North Carolina and South Carolina. Duke Energy Carolinas is subject to the regulatory provisions of the North Carolina Utilities Commission (NCUC), Public Service Commission of South Carolina (PSCSC), U.S. Nuclear Regulatory Commission (NRC) and FERC.

Progress Energy is a public utility holding company headquartered in Raleigh, North Carolina, subject to regulation by FERC. Progress Energy conducts operations through its wholly owned subsidiaries, Duke Energy Progress and Duke Energy Florida.

Duke Energy Progress is a regulated public utility primarily engaged in the generation, transmission, distribution and sale of electricity in portions of North Carolina and South Carolina. Duke Energy Progress is subject to the regulatory provisions of the NCUC, PSCSC, NRC and FERC.

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

Duke Energy Ohio is a regulated public utility primarily engaged in the transmission and distribution of electricity in portions of Ohio and Kentucky, the generation and sale of electricity in portions of Kentucky and the transportation and sale of natural gas in portions of Ohio and Kentucky. Duke Energy Ohio conducts competitive auctions for retail electricity supply in Ohio whereby the energy price is recovered from retail customers and recorded in Operating Revenues on the Condensed Consolidated Statements of Operations and Comprehensive Income. Operations in Kentucky are conducted through its wholly owned subsidiary, Duke Energy Kentucky, Inc. (Duke Energy Kentucky). References herein to Duke Energy Ohio collectively include Duke Energy Ohio and its subsidiaries, unless otherwise noted. Duke Energy Ohio is subject to the regulatory provisions of the Public Utilities Commission of Ohio (PUCO), Kentucky Public Service Commission (KPSC) and FERC.

Piedmont is a regulated public utility primarily engaged in the distribution of natural gas in portions of North Carolina, South Carolina and Tennessee. Piedmont is also invested in joint venture, energy-related businesses, including regulated interstate natural gas transportation and storage and intrastate natural gas transportation businesses. Piedmont is subject to the regulatory provisions of the NCUC, PSCSC, Tennessee Public Utility Commission (formerly the Tennessee Regulatory Authority) (TPUC) and FERC.

BASIS OF PRESENTATION

Duke Energy completed the sale of Duke Energy Ohio's nonregulated Midwest generation business and Duke Energy Retail Sales (collectively, the Disposal Group), a retail sales business owned by Duke Energy, to Dynegy on April 2, 2015. The results of operations of these businesses prior to the date of sale have been classified as Discontinued Operations on the Condensed Consolidated Statements of Operations. Duke Energy has elected to present cash flows of discontinued operations combined with cash flows of continuing operations. Unless otherwise noted, the notes to these Condensed Consolidated Financial Statements exclude amounts related to discontinued operations. See Note 2 ~~for additional information.~~

These Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles (GAAP) in the U.S. for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, these Condensed Consolidated Financial Statements do not include all information and notes required by GAAP in the U.S. for annual financial statements. Since the interim Condensed Consolidated Financial Statements and Notes do not include all information and notes required by GAAP in the U.S. for annual financial statements, the Condensed Consolidated Financial Statements and other information included in this quarterly report should be read in conjunction with the Consolidated Financial Statements and Notes in the Duke Energy Registrants’ combined Annual Report on Form 10-K for the year ended December 31, ~~2015.~~2016, and the Consolidated Financial Statements and Notes in the Piedmont Annual Report on Form 10-K for the year ended October 31, 2016.

Effective November 1, 2016, Piedmont's fiscal year-end was changed from October 31 to December 31, the year-end of Duke Energy. A transition report was filed on Form 10-Q (Form 10-QT) as of December 31, 2016, for the transition period from November 1, 2016 to December 31, 2016.

The information in these combined notes relates to each of the Duke Energy Registrants as noted in the Index to Combined Notes to Condensed Consolidated Financial Statements. However, none of the registrants make any representations as to information related solely to Duke Energy or the subsidiaries of Duke Energy other than itself.

These Condensed Consolidated Financial Statements, in the opinion of the respective companies’ management, reflect all normal recurring adjustments necessary to fairly present the financial position and results of operations of each of the Duke Energy Registrants. Amounts reported in Duke Energy’s interim Condensed Consolidated Statements of Operations and each of the Subsidiary Registrants’ interim Condensed Consolidated Statements of Operations and Comprehensive Income are not necessarily indicative of amounts expected for the respective annual periods due to effects of seasonal temperature variations on energy consumption, regulatory rulings, timing of maintenance on electric generating units, changes in mark-to-market valuations, changing commodity prices and other factors.

In preparing financial statements that conform to GAAP, management must make estimates and assumptions that affect the reported amounts of assets and liabilities, the reported amounts of revenues and expenses, and the disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.

Certain prior year amounts have been reclassified to conform to the current year presentation.

UNBILLED REVENUE

Revenues on sales of electricity and natural gas are recognized when service is provided or the product is delivered. Unbilled revenues are recognized by applying customer billing rates to the estimated volumes of energy and natural gas delivered but not yet billed. Unbilled revenues can vary significantly from period to period as a result of seasonality, weather, customer usage patterns, customer mix, average price in effect for customer classes, timing of rendering customer bills, ~~and~~ meter reading ~~schedules.~~schedules, and the impact of weather normalization or margin decoupling mechanisms.

Unbilled revenues ~~which~~ are included within Receivables and Receivables of variable interest entities (VIEs) on the Condensed Consolidated Balance Sheets ~~are presented~~as shown in the following table.


(in millions)	June 30, 2016		December 31, 2015		March 31, 2017		December 31, 2016
Duke Energy	$	840	$	748	$	724	$	831
Duke Energy Carolinas	330		283		296		313
Progress Energy	209		172		151		161
Duke Energy Progress	104		102		84		102
Duke Energy Florida	105		70		67		59
Duke Energy Ohio	2		3		2		2
Duke Energy Indiana	38		31		27		32
Piedmont					38		77

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

Additionally, Duke Energy Ohio and Duke Energy Indiana sell nearly all of their retail accounts receivable to an affiliate, Cinergy Receivables Company, LLC (CRC), on a revolving basis. These transfers of receivables are accounted for as sales and include receivables for unbilled revenues. Accordingly, the receivables sold are not reflected on the Condensed Consolidated Balance Sheets of Duke Energy Ohio and Duke Energy Indiana. See Note 12 for further information. These receivables for unbilled revenues are shown in the table below.

(in millions) June 30, 2016
December 31, 2015
Duke Energy Ohio $ 70
$ 71
Duke Energy Indiana 109
97

~~PART I~~

~~DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –~~

~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC~~

~~Combined Notes to Condensed Consolidated Financial Statements – (Continued)~~

~~(Unaudited)~~



(in millions)	March 31, 2017		December 31, 2016
Duke Energy Ohio	$	69	$	97
Duke Energy Indiana	106		123

AMOUNTS ATTRIBUTABLE TO CONTROLLING INTERESTS

Duke Energy's amount of Income ~~(Loss)~~ from Discontinued Operations, net of tax presented on the ~~respective~~ Condensed Consolidated Statements of Operations for the three months ended March 31, 2016, includes amounts attributable to noncontrolling interest. The following table presents Net Income Attributable to Duke Energy Corporation for continuing operations and Progress Energy is attributable only to controlling interests for all periods presented. Other comprehensive income reported on the Condensed Consolidated Statements of Changes in Equity for Progress Energy is attributable only to controlling interests for all periods presented.discontinued operations.



	Three Months Ended
(in millions)	March 31, 2016
Income from Continuing Operations	$	577
Income from Continuing Operations Attributable to Noncontrolling Interests	3
Income from Continuing Operations Attributable to Duke Energy Corporation	$	574
Income from Discontinued Operations, net of tax	$	122
Income from Discontinued Operations Attributable to Noncontrolling Interests, net of tax	2
Income from Discontinued Operations Attributable to Duke Energy Corporation, net of tax	$	120
Net Income	$	699
Net Income Attributable to Noncontrolling Interests	5
Net Income Attributable to Duke Energy Corporation	$	694

INVENTORY

Inventory is used for operations and is recorded primarily using the average cost method. Inventory related to regulated operations is valued at historical cost. Inventory related to nonregulated operations is valued at the lower of cost or market. Materials and supplies are recorded as inventory when purchased and subsequently charged to expense or capitalized to property, plant and equipment when installed. Inventory, including excess or obsolete inventory, is written-down to the lower of cost or market value. Once inventory has been written-down, it creates a new cost basis for the inventory that is not subsequently written-up. Provisions for inventory write-offs were not material for the three months ended March 31, 2017 and December 31, 2016. The components of inventory are presented in the tables below.



	March 31, 2017
			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	$	2,328	$	766	$	1,122	$	780	$	341	$	85	$	315	$	2
Coal	724		248		297		162		135		17		161		—
Natural gas, oil and other fuel	314		37		233		111		123		16		2		27
Total inventory	$	3,366	$	1,051	$	1,652	$	1,053	$	599	$	118	$	478	$	29



	December 31, 2016
			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	$	2,374	$	767	$	1,167	$	813	$	354	$	84	$	312	$	1
Coal	774		251		314		148		166		19		190		—
Natural gas, oil and other fuel	374		37		236		115		121		34		2		65
Total inventory	$	3,522	$	1,055	$	1,717	$	1,076	$	641	$	137	$	504	$	66

EXCISE TAXES

Certain excise taxes levied by state or local governments are required to be paid even if not collected from the customer. These taxes are recognized on a gross basis. Otherwise, excise taxes are accounted for net.

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

Excise taxes accounted for on a gross basis as both operating revenues and property and other taxes on the Condensed Consolidated Statements of Operations were as follows.


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended March 31,
(in millions)	2016		2015		2016		2015		2017		2016
Duke Energy	$	87	$	97	$	178	$	197	$	91	$	91
Duke Energy Carolinas	7		9		15		18		9		8
Progress Energy	50		57		96		106		46		47
Duke Energy Progress	4		4		9		8		5		5
Duke Energy Florida	46		53		87		98		41		42
Duke Energy Ohio	22		23		51		55		28		28
Duke Energy Indiana	8		8		16		18		7		8
Piedmont									1		1

NEW ACCOUNTING STANDARDS

The new accounting standards adopted for ~~2016~~2017 and ~~2015~~2016 had no material impact on the presentation or results of operations, cash flows or financial position of the Duke Energy Registrants. ~~The~~While immaterial, adoption of the following accounting standard ~~was adopted by~~had the most significant impact on the Duke Energy ~~Registrants during 2015.~~results of operations, cash flows and financial position for the three months ended March 31, 2017.

~~Balance Sheet Presentation of Debt Issuance Costs.~~Stock-Based Compensation and Income Taxes. In ~~April and August of 2015, the~~March 2017, Duke Energy adopted Financial Accounting Standards Board (FASB) ~~issued~~guidance, which revised the accounting for stock-based compensation and the associated income taxes. The adopted guidance changes certain aspects of accounting for stock-based payment awards to employees including the ~~presentation of debt issuance costs. The core principle of this revised~~ accounting ~~guidance is that debt issuance costs are not assets, but adjustments to the carrying cost of debt. For Duke Energy, this revised accounting guidance was adopted retrospectively.~~

~~The implementation of this accounting standard resulted in a reduction of Other within Regulatory Assets~~for income taxes and ~~Deferred Debits and in Long-Term Debt of $192 million and $170 million~~classification on the Condensed Consolidated ~~Balance Sheets~~Statements of Cash Flows. The primary impact to Duke Energy as a result of ~~June 30, 2016,~~implementing this guidance was a cumulative-effect adjustment to retained earnings for tax benefits not previously recognized and ~~December~~higher income tax expense for the three months ended March 31, ~~2015, respectively.~~2017. See the Duke Energy Condensed Consolidated Statements of Changes in Equity and Note 16 for further information.

The following new Accounting Standards Updates (ASUs) have been issued, but have not yet been adopted by Duke Energy, as of ~~June 30, 2016.~~March 31, 2017.

Retirement Benefits. In March 2017, the FASB issued revised accounting guidance for the presentation of net periodic costs related to benefit plans. Current GAAP permits the aggregation of all the components of net periodic costs on the income statement and does not require the disclosure of the location of net periodic costs on the Condensed Consolidated Statement of Operations. Under the amended guidance, the service cost component of net periodic costs must be included within Operating income within the same line as other compensation expenses. All other components of net periodic costs must be outside of Operating income. In addition, the updated guidance permits only the service cost component of net periodic costs to be capitalized to Inventory or Property, Plant and Equipment. This represents a change from current GAAP, which permits all components of net periodic costs to be capitalized. The guidance allows for a practical expedient that permits a company to use amounts disclosed in prior-period financial statements as the estimation basis for applying the retrospective presentation requirements.

For Duke Energy, this guidance is effective for interim and annual periods beginning January 1, 2018. These amendments should be applied retrospectively for the presentation of the various components of net periodic costs and prospectively for the change in eligible costs to be capitalized. Duke Energy currently presents all of the components of net periodic costs that are not capitalized within Operation, maintenance and other on the Condensed Consolidated Statement of Operations. Under this updated guidance, Duke Energy will retrospectively move all the components of net periodic costs except for the service cost component to below Operating income. However, Duke Energy will continue to present the service cost component not capitalized within Operation, maintenance and other as this line item includes other compensation expense. Duke Energy is currently evaluating the financial statement impact, if any, of adopting this standard and whether or not the practical expedient will be utilized.

Goodwill Impairment. In January 2017, the FASB issued revised guidance for subsequent measurement of goodwill. Under the guidance, a company will recognize an impairment to goodwill for the amount by which a reporting unit's carrying value exceeds the reporting unit's fair value, not to exceed the amount of goodwill allocated to that reporting unit. For Duke Energy, this guidance is effective for interim and annual periods beginning January 1, 2020. However, Duke Energy expects to early adopt this guidance on a prospective basis for the next interim or annual goodwill impairment test. Duke Energy does not expect adopting this guidance will have a material impact to its results of operations or financial position.

Revenue from Contracts with ~~Customers.~~Customers. In May 2014, the FASB issued revised accounting guidance for revenue recognition from contracts with customers. The core principle of this guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in this update also require disclosure of sufficient information to allow users to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

Most of Duke Energy’s revenue is expected to be in scope of the new guidance. The majority of our sales, including energy provided to residential customers, are from tariff offerings that provide natural gas or electricity without a defined contractual term (‘at-will’). For such arrangements, Duke Energy expects that the ~~revised~~revenue from contracts with customers will be equivalent to the electricity or natural gas supplied and billed in that period (including estimated billings). As such, Duke Energy does not expect that there will be a significant shift in the timing or pattern of revenue recognition for such sales. The evaluation of other revenue streams is ongoing, including long-term contracts with industrial customers and long-term purchase power agreements (PPA).

Duke Energy continues to evaluate what information would be most useful for users of the financial statements, including information already provided in disclosures outside of the financial statement footnotes. These additional disclosures could include the disaggregation of revenues by geographic location, type of service, customer class or by duration of contract (‘at-will’ versus contracted revenue). Revenues from contracts with customers, revenue recognized under regulated operations accounting ~~guidance is~~and revenue from lease accounting will also be disclosed.

Duke Energy intends to use the modified retrospective method of adoption effective ~~for interim and annual periods beginning~~ January 1, 2018. ~~The guidance can~~This method results in a cumulative-effect adjustment that will be ~~applied retrospectively~~recorded to ~~all prior reporting periods presented or retrospectively with a cumulative effect~~retained earnings as of January 1, 2018, as if the ~~initial date~~standard had always been in effect. Disclosures for 2018 will include a comparison to what would have been reported for 2018 under the current revenue recognition rules in order to assist financial statement users in understanding how revenue recognition has changed as a result of ~~application. Duke Energy is currently evaluating~~this standard and to facilitate comparability with prior year reported results, which are not restated under the ~~requirements. The ultimate impact of the new standard has not yet been determined.~~modified retrospective approach.

Leases. In February 2016, the FASB issued revised accounting guidance for leases. The core principle of this guidance is that a lessee should recognize the assets and liabilities that arise from leases on the balance sheet.

For Duke Energy, this guidance is effective for interim and annual periods beginning January 1, 2019, although it can be early adopted. The guidance is applied using a modified retrospective approach. Duke Energy is currently evaluating the ~~requirements.~~financial statement impact of adopting this standard. Other than an expected increase in assets and liabilities, the ultimate impact of the new standard has not yet been determined. Significant system enhancements may be required to facilitate the identification, tracking and reporting of potential leases based upon requirements of the new lease standard.

~~Stock-Based Compensation and Income Taxes.~~Statement of Cash Flows. In ~~March~~November 2016, the FASB issued revised accounting guidance to reduce diversity in practice for the presentation and classification of restricted cash on the statement of cash flows. Under the updated guidance, restricted cash and restricted cash equivalents will be included within beginning-of-period and end-of-period cash and cash equivalents on the statement of cash flows.

For Duke Energy, this guidance is effective for the interim and annual periods beginning January 1, 2018, although it can be early adopted. The guidance will be applied using a retrospective transition method to each period presented. Upon adoption by Duke Energy, the revised guidance will result in a change to the amount of cash and cash equivalents and restricted cash explained when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. Prior to adoption, the Duke Energy Registrants reflect changes in restricted cash within Cash Flows from Investing Activities on the Condensed Consolidated Statement of Cash Flows.

Financial Instruments Classification and Measurement. In January 2016, the FASB issued revised accounting guidance for ~~stock-based compensation~~the classification and measurement of financial instruments. Changes in the ~~associated~~fair value of all equity securities will be required to be recorded in net income. Current GAAP allows some changes in fair value for available-for-sale equity securities to be recorded in Accumulated other comprehensive income ~~taxes. This standard changes certain aspects~~(AOCI). Additional disclosures will be required to present separately the financial assets and financial liabilities by measurement category and form of financial asset. An entity's equity investments that are accounted for under the equity method of accounting ~~for stock-based payment awards to employees including~~are not included within the ~~accounting for income taxes, statutory tax withholding requirements, as well as~~scope of the classification on the Condensed Consolidated Statements of Cash Flows. This guidance will be applied prospectively, retrospectively, or using a modified retrospective transition method depending on the item changed.new guidance.

For Duke Energy, ~~this~~the revised accounting guidance is effective for interim and annual periods beginning January 1, ~~2017, although it can be early adopted.~~2018, by recording a cumulative-effect adjustment to retained earnings as of January 1, 2018. This guidance is expected to have minimal impact on the Duke Energy ~~is currently evaluating the requirements. The primary change expected is an increase~~Registrant's Condensed Consolidated Statements of Operations and Comprehensive Income as changes in the ~~volatility~~fair value of ~~income tax expense.~~most of the Duke Energy Registrants' available-for-sale equity securities are deferred as regulatory assets or liabilities pursuant to accounting guidance for regulated operations.

~~PART I~~

~~DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –~~

~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC~~

~~Combined Notes to Condensed Consolidated Financial Statements – (Continued)~~

~~(Unaudited)~~

2. ACQUISITIONS AND DISPOSITIONS

ACQUISITIONS

The Duke Energy Registrants consolidate assets and liabilities from acquisitions as of the purchase date, and include earnings from acquisitions in consolidated earnings after the purchase date.

Acquisition of Piedmont Natural Gas

On October ~~24, 2015,~~3, 2016, Duke Energy ~~entered into an Agreement~~acquired all outstanding common stock of Piedmont for a total cash purchase price of $5.0 billion and ~~Plan~~assumed Piedmont's existing long-term debt, which had a fair value of ~~Merger (Merger Agreement) with Piedmont Natural Gas Company, Inc. (Piedmont), a North Carolina corporation. Under~~approximately $2.0 billion at the ~~terms~~time of the ~~Merger Agreement,~~acquisition. The acquisition provides a foundation for Duke Energy ~~will acquire~~to establish a broader, long-term strategic natural gas infrastructure platform to complement its existing natural gas pipeline investments and regulated natural gas business in the Midwest. In connection with the closing of the acquisition, Piedmont ~~for approximately $4.9 billion in cash and Piedmont will become~~became a wholly owned subsidiary of Duke Energy. In addition, Duke Energy will assume Piedmont's existing debt, which was approximately $2.0 billion at April 30, 2016, the end of Piedmont's most recent filed quarter. The excess of the purchase price over the fair value of Piedmont's assets and liabilities on the acquisition date will be recorded as goodwill. Duke Energy estimates the transaction would result in incremental goodwill of approximately $3.5 billion. Duke Energy expects to finance the transaction with a combination of debt, equity issuances and other cash sources. As of June 30, 2016, Duke Energy had entered into $1.4 billion of forward-starting interest rate swaps to manage interest rate exposure for the expected financing of the Piedmont acquisition. For additional information on the forward-starting swaps, see Note 9.

In March 2016, Duke Energy marketed an equity offering of 10.6 million shares of common stock. In lieu of issuing equity at the time of the offering, Duke Energy entered into equity forward sale agreements (the Equity Forwards) with Barclays Capital, Inc. (Barclays). Duke Energy expects to settle the Equity Forwards on or around the closing date of the Piedmont acquisition. The net proceeds received upon settlement are expected to be used to finance a portion of the acquisition of Piedmont. For additional information regarding the Equity Forwards, see Note 13.

In connection with the Merger Agreement with Piedmont, Duke Energy entered into a $4.9 billion senior unsecured bridge financing facility (Bridge Facility) with Barclays. The Bridge Facility, if drawn upon, may be used to (i) fund the cash consideration for the transaction and (ii) pay certain fees and expenses in connection with the transaction. In November 2015, Barclays syndicated its commitment under the Bridge Facility to a broader group of lenders. Duke Energy does not expect to draw upon the Bridge Facility. The amount of the Bridge Facility is reduced by any financings related to the Piedmont acquisition entered into by Duke Energy, and has accordingly been reduced to approximately $3.2 billion as a result of the Equity Forwards and $1 billion of the commitments under a term loan amended and restated as of August 1, 2016. See Note 6, Term Loan Facility, for more information.

Piedmont's shareholders have approved the company's acquisition by Duke Energy and the Federal Trade Commission (FTC) has granted early termination of the 30-day waiting period under the federal Hart-Scott-Rodino Antitrust Improvements Act of 1976. On January 15, 2016, Duke Energy and Piedmont filed an application with the NCUC for approval of the proposed business combination and associated financing transactions. On January 29, 2016, the NCUC approved Duke Energy's proposed financing transactions. On March 7, 2016, the KPSC granted Duke Energy's declaratory request that the transaction does not constitute a change in control and does not require KPSC approval. The Tennessee Regulatory Authority approved Duke Energy's and Piedmont's request of the change in control resulting from the transaction at its March 14, 2016, meeting. On June 10, 2016 the North Carolina Public Staff reached an agreement with Duke Energy and Piedmont on certain stipulations and conditions for approval of the transaction. Duke Energy and Piedmont have also entered into settlement agreements with the Environmental Defense Fund (EDF) and the Carolina Utility Customers Association, Inc. (CUCA) resolving EDF's and CUCA's issues in the case.

The Merger Agreement contains certain termination rights for both Duke Energy and Piedmont, and provides that, upon termination of the Merger Agreement under specified circumstances, Duke Energy would be required to pay a termination fee of $250 million to Piedmont and Piedmont would be required to pay Duke Energy a termination fee of $125 million.

~~See Note~~ 4 ~~for additional information regarding Duke Energy and Piedmont's joint investment in Atlantic Coast Pipeline, LLC (ACP).~~

~~Purchase of NCEMPA's Generation~~

On July 31, 2015, Duke Energy Progress completed the purchase of North Carolina Eastern Municipal Power Agency’s (NCEMPA) ownership interests in certain generating assets, fuel and spare parts inventory jointly owned with and operated by Duke Energy Progress for approximately $1.25 billion. This purchase was accounted for as an asset acquisition. The purchase resulted in the acquisition of a total of approximately 700 megawatts (MW) of generating capacity at Brunswick Nuclear Plant, Shearon Harris Nuclear Plant, Mayo Steam Plant and Roxboro Steam Plant. In connection with this transaction, Duke Energy Progress and NCEMPA entered into a 30-year wholesale power agreement, whereby Duke Energy Progress will sell power to NCEMPA to continue to meet the needs of NCEMPA customers.

The purchase price exceeded the historical carrying value of the acquired assets by $350 million, which was recognized as an acquisition adjustment and recorded in property, plant and equipment. Duke Energy Progress established a rider in North Carolina to recover the costs to acquire, operate and maintain interests in the assets purchased as allocated to its North Carolina retail operations, including the purchase acquisition adjustment, and included the purchase acquisition adjustment in wholesale power formula rates. Duke Energy Progress received an order from the PSCSC to defer the recovery of the South Carolina retail allocated costs of the asset purchased until the Duke Energy Progress' next general rate case, which was filed in July 2016. See Note 4, for additional information on the South Carolina Rate Case.

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

~~(Unaudited)~~

~~DISPOSITIONS~~Purchase Price Allocation

~~Potential Sale~~The purchase price allocation of ~~International Energy~~the Piedmont acquisition is as follows:

~~In February 2016,~~



(in millions)
Current assets	$	497
Property, plant and equipment, net	4,714
Goodwill	3,353
Other long-term assets	804
Total assets	9,368
Current liabilities, including current maturities of long-term debt	576
Long-term liabilities	1,790
Long-term debt	2,002
Total liabilities	4,368
Total purchase price	$	5,000

The fair value of Piedmont's assets and liabilities were determined based on significant estimates and assumptions that are judgmental in nature, including projected future cash flows (including timing), discount rates reflecting risk inherent in the future cash flows and market prices of long-term debt.

The majority of Piedmont’s operations are subject to the rate-setting authority of the NCUC, the PSCSC and the TPUC and are accounted for pursuant to accounting guidance for regulated operations. The rate-setting and cost recovery provisions currently in place for Piedmont’s regulated operations provide revenues derived from costs, including a return on investment of assets and liabilities included in rate base. Thus, the fair value of Piedmont's assets and liabilities subject to these rate-setting provisions approximates the pre-acquisition carrying value and does not reflect any net valuation adjustments.

The significant assets and liabilities for which valuation adjustments were reflected within the purchase price allocation include the acquired equity method investments and long-term debt. The difference between the fair value and the pre-acquisition carrying value of long-term debt for regulated operations was recorded as a regulatory asset.

The excess of the purchase price over the fair value of Piedmont's assets and liabilities on the acquisition date was recorded as goodwill. The goodwill reflects the value paid by Duke Energy ~~announced it~~primarily for establishing a broader, long-term strategic natural gas infrastructure platform, an improved risk profile and expected synergies resulting from the combined entities.

Under Securities and Exchange Commission (SEC) regulations, Duke Energy elected not to apply push down accounting to the stand-alone Piedmont financial statements.

Accounting Charges Related to the Acquisition

Duke Energy incurred pretax nonrecurring transaction and integration costs associated with the acquisition of $16 million and $101 million for the three months ended March 31, 2017 and 2016, respectively. The 2016 amount includes $100 million of Interest Expense, which was driven by $93 million of unrealized losses on forward-starting interest rate swaps related to the acquisition financing. See Note 9 for additional information on the swaps.

Pro Forma Financial Information

The following unaudited pro forma financial information reflects the combined results of operations of Duke Energy and Piedmont as if the merger had ~~initiated a process to divest the International Energy business segment, excluding~~occurred as of January 1, 2016. The pro forma financial information excludes potential cost savings, intercompany revenues, Piedmont’s earnings from the equity method investment in ~~National Methanol Company (NMC). Duke Energy is actively marketing~~SouthStar sold immediately prior to the ~~business. Non-binding offers have been received~~merger, and ~~are being evaluated. There is no assurance that this process will result in a~~after-tax nonrecurring transaction and ~~the timing for execution of a potential transaction is uncertain. Proceeds from a successful sale would be used~~integration costs incurred by Duke Energy ~~to reduce debt~~ and ~~fund the operations~~Piedmont of $63 million. See Note 3 for additional information on Piedmont's sale of SouthStar.

This information has been presented for illustrative purposes only and ~~growth of domestic businesses. If the potential of a sale were to progress, it could result in classification of International Energy as assets held for sale and as a discontinued operation.~~

~~Based upon the advancement~~is not necessarily indicative of the marketing efforts, Duke Energy performed recoverability tests of the long-lived asset groups of International Energy as of June 30, 2016. As a result, Duke Energy determined the carrying value of certain assets in Central America is not fully recoverable and recorded a pretax impairment charge of $194 million, which is included within Impairment Charges on the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2016. The impairment charge represents the excess of carrying value over the estimated fair value of the assets. The fair value of the assets was primarily determined from the income approach using discounted cash flows but also considered market information obtained in 2016.

As of June 30, 2016, the International Energy segment had a carrying value of approximately $2.4 billion, adjusted for approximately $589 million of cumulative foreign currency translation losses currently classified as accumulated other comprehensive loss.

~~Midwest Generation Exit~~

Duke Energy, through indirect subsidiaries, completed the sale of the Disposal Group to a subsidiary of Dynegy on April 2, 2015, for approximately $2.8 billion in cash. The nonregulated Midwest generation business included generation facilities with approximately 5,900 MW of owned capacity located in Ohio, Pennsylvania and Illinois. On April 1, 2015, prior to the sale, Duke Energy Ohio distributed its indirect ownership interest in the nonregulated Midwest generation business to a subsidiary of Duke Energy Corporation.

~~The Disposal Group's~~consolidated results of operations ~~are classified as discontinued operations in~~that would have been achieved or the ~~accompanying Condensed Consolidated Statements of Operations and Comprehensive Income. The following table presents the~~future consolidated results of ~~discontinued~~ operations ~~for the three and six months ended June 30, 2015.~~of Duke Energy.

Three Months Ended Six Months Ended
June 30, 2015 June 30, 2015
Duke
Duke
Duke
Energy
Duke
Energy
(in millions) Energy
Ohio
Energy
Ohio
Operating Revenues $ —
$ —
$ 543
$ 412
Gain (Loss) on disposition 6
—
(37 ) (44 )

(Loss) Income before income taxes^(a)
$ (80 ) $ (88 ) $ 67
$ 52
Income tax (benefit) expense (21 ) (23 ) 30
27
(Loss) Income from discontinued operations of the Disposal Group (59 ) (65 ) 37
25
Other, net of tax^(b)
2
—
(3 ) —
(Loss) Income from Discontinued Operations, net of tax $ (57 ) $ (65 ) $ 34
$ 25


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


~~(b)~~	Relates to discontinued operations of businesses not related to the Disposal Group and includes indemnifications provided for certain legal, tax and environmental matters, and foreign currency translation adjustments.

Commercial Portfolio utilized a revolving credit agreement (RCA) to support the operations of the nonregulated Midwest generation business. Interest expense associated with the RCA was allocated to discontinued operations. No other interest expense related to corporate level debt was allocated to discontinued operations. Duke Energy Ohio had a power purchase agreement with the Disposal Group for a portion of its standard service offer (SSO) supply requirement. The agreement and the SSO expired in May 2015.

~~3. BUSINESS SEGMENTS~~

Duke Energy evaluates segment performance based on segment income. Segment income is defined as income from continuing operations net of income attributable to noncontrolling interests. Segment income, as discussed below, includes intercompany revenues and expenses that are eliminated in the Condensed Consolidated Financial Statements. Certain governance costs are allocated to each segment. In addition, direct interest expense and income taxes are included in segment income.



	Three Months Ended
(in millions)	March 31, 2016
Operating Revenues	$	5,840
Net Income Attributable to Duke Energy Corporation	832

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

~~(Unaudited)~~

DISPOSITIONS

Sale of International Energy

In December 2016, Duke Energy sold its International Energy businesses, excluding the equity method investment in NMC (the International Disposal Group), in two separate transactions. Duke Energy sold its Brazilian business to China Three Gorges for approximately $1.2 billion, including the assumption of debt, and its remaining Central and South American businesses to I Squared Capital in a deal also valued at approximately $1.2 billion, including the assumption of debt. The transactions generated cash proceeds of $1.9 billion, excluding transaction costs, which were primarily used to reduce Duke Energy holding company debt.

The following table presents the results of the International Disposal Group, which are included in Income from Discontinued Operations, net of tax in Duke Energy's Condensed Consolidated Statements of Operations. Interest expense directly associated with the International Disposal Group was allocated to discontinued operations. No interest from corporate level debt was allocated to discontinued operations.



	Three Months Ended
(in millions)	March 31, 2016
Operating Revenues	$	246
Fuel used in electric generation and purchased power	47
Cost of natural gas	11
Operation, maintenance and other	71
Depreciation and amortization	22
Property and other taxes	3
Other Income and Expenses, net	10
Interest Expense	22
Income before income taxes	80
Income tax benefit^(a)	(39		)
Income from discontinued operations of the International Disposal Group	119
Income from discontinued operations of other businesses	3
Income from Discontinued Operations, net of tax	$	122


(a)	Includes an income tax benefit of $95 million related to historical undistributed foreign earnings. See Note 16 for additional information.

Duke Energy has elected not to separately disclose discontinued operations on the Condensed Consolidated Statements of Cash Flows. The following table summarizes Duke Energy's cash flows from discontinued operations related to the International Disposal Group.



	Three Months Ended
(in millions)	March 31, 2016
Cash flows provided by (used in):
Operating activities	$	85
Investing activities	(9		)

Other Sale Related Matters

Duke Energy will provide certain transition services to China Three Gorges and I Squared Capital for a period not to extend beyond November 2017 and December 2017, respectively. Cash flows related to providing the transition services are not material. In addition, Duke Energy will reimburse China Three Gorges and I Squared Capital for all tax obligations arising from the period preceding consummation on the transactions, totaling approximately $78 million. Duke Energy has not recorded any other liabilities, contingent liabilities or indemnifications related to the International Disposal Group.

3. BUSINESS SEGMENTS

Operating segments are determined based on information used by the chief operating decision-maker in deciding how to allocate resources and evaluate the performance of the business. ~~During the first quarter of 2016, the~~ Duke Energy ~~chief operating decision-maker began to evaluate interim period~~evaluates segment performance based on ~~financial information that includes the impact~~segment income. Segment income is defined as income from continuing operations net of income ~~tax levelization within segment income. This represents a change from~~attributable to noncontrolling interests. Segment income includes intercompany revenues and expenses that are eliminated in the previous measure, where the interim period impacts of income tax levelization were included within Other, and therefore excluded from segment income. As a result, prior period segment results presented have been recast to conform to this change.

Condensed Consolidated Financial Statements. Products and services are sold between affiliate companies and reportable segments of Duke Energy at cost. ~~Segment assets as presented~~

Duke Energy

Due to the Piedmont acquisition and the sale of International Energy in the ~~tables that follow exclude all intercompany assets.~~fourth quarter of 2016, Duke Energy's segment structure has been realigned to include the following segments: Electric Utilities and Infrastructure, Gas Utilities and Infrastructure and Commercial Renewables. Prior period information has been recast to conform to the current segment structure. See Note 2 for further information on the Piedmont and International Energy transactions.

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

The Electric Utilities and Infrastructure segment includes Duke ~~Energy has~~Energy's regulated electric utilities in the ~~following reportable operating segments: Regulated Utilities, International Energy~~Carolinas, Florida and ~~Commercial Portfolio.~~

~~RegulatedUtilities conducts~~the Midwest. The regulated electric ~~and natural gas~~utilities conduct operations through the Subsidiary Registrants that are substantially all regulated and, accordingly, qualify for regulatory accounting treatment. ~~These~~Electric Utilities and Infrastructure also includes Duke Energy's electric transmission infrastructure investments.

The Gas Utilities and Infrastructure segment includes Piedmont, Duke Energy's natural gas local distribution companies in Ohio and Kentucky, and Duke Energy's natural gas storage and mid-stream pipeline investments. Gas Utilities and Infrastructure's operations are ~~primarily conducted through the Subsidiary Registrants~~substantially all regulated and, ~~are subject to the rules and regulations of the FERC, NRC, NCUC, PSCSC, FPSC, PUCO, IURC and KPSC.~~

International Energy operates and manages power generation facilities and engages in sales and marketing of electric power, natural gas and natural gas liquids outside the U.S. Its activities principally target power generation in Latin America. Additionally, International Energy owns a 25 percent interest in NMC, a large regional producer of methyl tertiary butyl ether (MTBE) located in Saudi Arabia. The investment in NMC is accountedaccordingly, qualify for under the equity method of accounting. In February 2016, Duke Energy announced it had initiated a process to potentially divest its International Energy business segment, excluding the investment in NMC. See Note 2 ~~for further information.~~regulatory accounting treatment.

Commercial ~~Portfolio builds, develops and operates~~Renewables is primarily comprised of nonregulated utility scale wind and solar ~~renewable~~ generation ~~and storage and energy transmission projects~~assets located throughout the U.S. For periods subsequent to the sale of the Disposal Group, beginning in the second quarter of 2015, certain immaterial results of operations and related assets previously presented in the Commercial Portfolio segment are presented in Regulated Utilities and Other.

Theremainder of Duke Energy’s operations is presented as Other, which is primarily comprised of unallocated corporate interest expense, unallocated corporate costs, contributions to the Duke Energy Foundation and the operations of Duke Energy’s wholly owned captive insurance subsidiary, Bison Insurance Company Limited (Bison). Other also includes Duke Energy's 25 percent interest in NMC, a large regional producer of methyl tertiary butyl ether (MTBE) located in Saudi Arabia. The investment in NMC is accounted for under the equity method of accounting.

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



	Three Months Ended March 31, 2017
	Electric		Gas				Total
	Utilities and		Utilities and		Commercial		Reportable
(in millions)	Infrastructure		Infrastructure		Renewables		Segments		Other			Eliminations			Consolidated
Unaffiliated revenues	$	4,939	$	648	$	128	$	5,715	$	14		$	—		$	5,729
Intersegment revenues	8		22		—		30		19			(49		)	—
Total revenues	$	4,947	$	670	$	128	$	5,745	$	33		$	(49	)	$	5,729
Segment income (loss)	$	635	$	133	$	25	$	793	$	(77	)	$	—		$	716
Add back noncontrolling interests															1
Net income															$	717
Segment assets	$	115,766	$	10,866	$	4,400	$	131,032	$	2,898		$	178		$	134,108


	Three Months Ended June 30, 2016																		Three Months Ended March 31, 2016
								Total											Electric		Gas				Total
	Regulated		International			Commercial		Reportable											Utilities and		Utilities and		Commercial		Reportable
(in millions)	Utilities		Energy			Portfolio		Segments		Other			Eliminations			Consolidated			Infrastructure		Infrastructure		Renewables		Segments		Other			Eliminations			Consolidated
Unaffiliated revenues	$	5,090	$	270		$	112	$	5,472	$	12		$	—		$	5,484		$	5,081	$	169	$	114	$	5,364	$	13		$	—		$	5,377
Intersegment revenues	9		—			—		9		17			(26		)	—			8		1		—		9		16			(25		)	—
Total revenues	$	5,099	$	270		$	112	$	5,481	$	29		$	(26	)	$	5,484		$	5,089	$	170	$	114	$	5,373	$	29		$	(25	)	$	5,377
Segment income (loss)^(b)(a)	$	718	$	(102	)	$	14	$	630	$	(120	)	$	—		$	510		$	664	$	32	$	26	$	722	$	(148	)	$	—		$	574
Add back noncontrolling interests																3																	3
Loss from discontinued operations, net of tax																(1		)
Income from discontinued operations, net of tax																																	122
Net income																$	512																$	699
Segment assets	$	112,754	$	3,131		$	4,329	$	120,214	$	2,260		$	180		$	122,654

(a)

Other includes $74 million of after-tax ~~charges for~~ costs to achieve mergers, ~~of $69 million, primarily due to unrealized~~including losses on forward-starting interest rate swaps related to the Piedmont acquisition ~~and cost savings initiatives of $15 million primarily due to severance costs. See Notes 2 and 9 for additional information related to the forward-starting interest rate swaps.~~


~~(b)~~	~~International Energy includes an after-tax impairment charge of $145 million.~~financing. See Note 29 for additional information.

Duke Energy Ohio

Three Months Ended June 30, 2015
Total

Regulated
International
Commercial
Reportable

(in millions) Utilities
Energy
Portfolio
Segments
Other
Eliminations
Consolidated
Unaffiliated revenues $ 5,211
$ 287
$ 75
$ 5,573
$ 16
$ —
$ 5,589
Intersegment revenues 9
—
—
9
18
(27 ) —
Total revenues $ 5,220
$ 287
$ 75
$ 5,582
$ 34
$ (27 ) $ 5,589
Segment income (loss)^(a)(b)
$ 632
$ 52
$ (30 ) $ 654
$ (51 ) $ (3 ) $ 600
Add back noncontrolling interests 4
Loss from discontinued operations, net of tax^(c)
(57 )
Net income $ 547
Duke Energy Ohio has two reportable operating segments, Electric Utilities and Infrastructure and Gas Utilities and Infrastructure.

~~(a) Other includes after-tax costs to achieve the Progress~~Electric Utilities and Infrastructure transmits and distributes electricity in portions of Ohio and generates, distributes and sells electricity in portions of Kentucky. Gas Utilities and Infrastructure transports and sells natural gas in portions of Ohio and northern Kentucky. It conducts operations primarily through Duke Energy ~~merger of $14 million.~~Ohio and its wholly owned subsidiary, Duke Energy Kentucky.

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

~~(Unaudited)~~


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


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

Other is primarily comprised of governance costs allocated by its parent, Duke Energy, and revenues and expenses related to Duke Energy Ohio's contractual arrangement to buy power from the Ohio Valley Electric Corporation's (OVEC) power plants. See Note 8 for additional information on related party transactions.



	Three Months Ended March 31, 2017
	Electric		Gas		Total
	Utilities and		Utilities and		Reportable
(in millions)	Infrastructure		Infrastructure		Segments		Other			Eliminations			Consolidated
Total revenues	$	337	$	170	$	507	$	11		$	—		$	518
Segment income (loss)/Net Income	24		26		50		(8		)	—			42
Segment assets	4,856		2,696		7,552		71			(14		)	7,609



	Three Months Ended March 31, 2016
	Electric		Gas		Total
	Utilities and		Utilities and		Reportable
(in millions)	Infrastructure		Infrastructure		Segments		Other			Eliminations			Consolidated
Total revenues	$	340	$	170	$	510	$	6		$	—		$	516
Segment income (loss)	$	36	$	31	$	67	$	(9	)	$	(1	)	$	57
Income from discontinued operations, net of tax													2
Net income													$	59

Six Months Ended June 30, 2016
Total

Regulated
International
Commercial
Reportable

(in millions) Utilities
Energy
Portfolio
Segments
Other
Eliminations
Consolidated
Unaffiliated revenues $ 10,340
$ 516
$ 227
$ 11,083
$ 23
$ —
$ 11,106
Intersegment revenues 18
—
—
9
35
(53 ) —
Total revenues $ 10,358
$ 516
$ 227
$ 11,092
$ 58
$ (53 ) $ 11,106
Segment income (loss)^(a)(b)
$ 1,413
$ 21
$ 41
$ 1,475
$ (274 ) $ —
$ 1,201
Add back noncontrolling interests 8
Income from discontinued operations, net of tax 2
Net income $ 1,211


~~(a)~~	Other includes after-tax charges for costs to achieve mergers of $143 million, primarily due to unrealized losses on forward-starting interest rate swaps related to the Piedmont acquisition, and cost savings initiatives of $27 million primarily due to severance costs. See Notes 2 and 9 for additional information related to the forward-starting interest rate swaps.


~~(b)~~	~~International Energy includes an after-tax impairment charge of $145 million. See Note 2 for additional information.~~

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

Six Months Ended June 30, 2015
Total

Regulated
International
Commercial
Reportable

(in millions) Utilities
Energy
Portfolio
Segments
Other
Eliminations
Consolidated
Unaffiliated revenues $ 10,924
$ 560
$ 148
$ 11,632
$ 22
$ —
$ 11,654
Intersegment revenues 19
—
—
19
39
(58 ) —
Total revenues $ 10,943
$ 560
$ 148
$ 11,651
$ 61
$ (58 ) $ 11,654
Segment income (loss)^(a)(b)
$ 1,406
$ 88
$ (23 ) $ 1,471
$ (94 ) $ (4 ) $ 1,373
Add back noncontrolling interests 7
Income from discontinued operations, net of tax^(c)
34
Net income $ 1,414

~~(a)~~Piedmont has one reportable segment, Gas Utilities and Infrastructure, which transports and sells natural gas. The remainder of Piedmont's operations is classified as Other. While not considered a reportable segment, Other ~~includes after-tax~~primarily consists of certain unallocated corporate costs, including acquisition-related expenses, and Piedmont's equity method investment in SouthStar Energy Services, LLC (SouthStar) prior to ~~achieve~~its sale. Piedmont sold its 15 percent membership interest in SouthStar on October 3, 2016. Piedmont's income, net of tax, from SouthStar for the ~~Progress Energy merger of $27~~three months ended March 31, 2016 was $7 million.


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


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

~~SUBSIDIARY REGISTRANTS~~

The remaining Subsidiary Registrants each have one reportable operating segment, ~~Regulated~~Electric Utilities and Infrastructure, which generates, transmits, distributes and sells ~~electricity, and for Duke Energy Ohio, also transports and sells natural gas.~~electricity. The remainder of each company's operations is ~~primarily comprised of unallocated corporate costs and~~ classified as Other. While not considered a reportable segment for any of these companies, Other consists of certain unallocated corporate costs. Other for Progress Energy also includes interest expense on corporate debt instruments of $55 million and $56 million for the three months ended March 31, 2017 and 2016, respectively. The following table ~~provides~~summarizes the ~~amount~~net loss of Other ~~net expense.~~for each of these entities.

Three Months Ended Six Months Ended
June 30, June 30,
(in millions) 2016
2015
2016
2015
Duke Energy Carolinas $ (17 ) $ (10 ) $ (34 ) $ (18 )
Progress Energy^(a)
(45 ) (42 ) (94 ) (84 )
Duke Energy Progress (8 ) (4 ) (16 ) (8 )
Duke Energy Florida (5 ) (3 ) (9 ) (6 )
Duke Energy Ohio (10 ) (6 ) (19 ) (8 )
Duke Energy Indiana (5 ) (2 ) (7 ) (4 )


~~(a)~~	Other for Progress Energy also includes interest expense on corporate debt instruments of $55 million and $111 million for the three and six months ended June 30, 2016, respectively, and $59 million and $119 million for the three and six months ended June 30, 2015, respectively.

~~PART I~~

~~DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –~~

~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC~~

~~Combined Notes to Condensed Consolidated Financial Statements – (Continued)~~

~~(Unaudited)~~



	Three Months Ended
	March 31,
(in millions)	2017			2016
Duke Energy Carolinas	$	(6	)	$	(17	)
Progress Energy	(43		)	(49		)
Duke Energy Progress	(3		)	(8		)
Duke Energy Florida	(2		)	(4		)
Duke Energy Indiana	(2		)	(2		)
Piedmont	(4		)	6

The assets ~~of the Subsidiary Registrants~~at Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida and Duke Energy Indiana are substantially all included within the ~~Regulated~~Electric Utilities and Infrastructure segment at ~~June 30, 2016.~~

~~Duke Energy Ohio~~

~~Duke Energy Ohio had two reportable operating segments, Regulated~~March 31, 2017. The assets at Piedmont are substantially all included within the Gas Utilities and ~~Commercial Portfolio, during 2015 prior to the sale of the nonregulated Midwest generation business. Duke Energy Ohio's Commercial Portfolio~~Infrastructure segment ~~had total revenues of $14 million and segment loss of $9 million for the six months ended June 30, 2015. As a result of the sale discussed in Note~~ 2, Commercial Portfolio no longer qualifies as a Duke Energy Ohio reportable operating segment. Therefore, beginning in the second quarter of 2015, all of the remaining assets and related results of operations previously presented in Commercial Portfolio are presented in Regulated Utilities and Other.at March 31, 2017.

4. 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 ~~Kentucky~~ and Indiana), as well as sales of transmission service. The FERC also regulates certification and siting of new interstate natural gas pipeline projects.

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

Duke Energy Carolinas and Duke Energy Progress

Ash Basin Closure Costs Deferral

On ~~July 13,~~December 30, 2016, ~~in response to a joint petition of~~ Duke Energy Carolinas and Duke Energy Progress filed a joint petition with the ~~PSCSC issued~~NCUC seeking an accounting order ~~for the deferment into a regulatory account~~authorizing deferral of certain costs incurred in connection with federal and state environmental remediation requirements related to the permanent closure of ash basins and other ash storage units at coal-fired generating facilities that have provided or are providing generation to customers located in ~~South~~North Carolina. The decision allows for ash basin closure expenses to be partially offset with excess regulatory liability amounts from the deferral of nuclear decommissioning costs that are collected from South Carolina retail customersInitial comments were received in March 2017, and for Duke Energy Progress to offset incurred ash basin closure costs with costs of removal amounts collected from customers. The PSCSC's ruling does not change retail rates or the tariff amounts and in no way limits the PSCSC's ability to challenge the reasonableness of expenditures in subsequent proceedings.

~~FERC Transmission Return~~reply comments were filed on ~~Equity Complaints~~

On January 7, 2016, a group of transmission service customers filed a complaint with the FERC that the rate of return on equity of 10.2 percent in Duke Energy Carolinas' transmission formula rates is excessive and should be reduced to no higher than 8.49 percent, effective upon the complaint date. On the same date a similar complaint was filed with the FERC claiming that the rate of return on equity of 10.8 percent in Duke Energy Progress' transmission formula rates is excessive and should be reduced to no higher than 8.49 percent, effective upon the complaint date. On April ~~21, 2016, the FERC issued an order which consolidated the cases, set a refund effective date of January 7, 2016, and set the consolidated case for settlement and hearing.~~19, 2017. Duke Energy Carolinas and Duke Energy Progress ~~do not expect~~cannot predict the ~~potential impact on results~~outcome of ~~operations, cash flows or financial position to be material.~~this matter.

Duke Energy Carolinas

~~Advanced Metering Infrastructure Deferral~~

On July 12, 2016, the PSCSC issued an accounting order for Duke Energy Carolinas to defer the financial effects of depreciation expense incurred for the installation of advanced metering infrastructure (AMI) meters, the carrying costs on the investment at its weighted average cost of capital and the carrying costs on the deferred costs at its weighted average cost of capital not to exceed $45 million. The decision also allows Duke Energy Carolinas to continue to depreciate the non-AMI meters to be replaced. Current retail rates will not change as a result of the decision and the PSCSC's ability to challenge the reasonableness of expenditures in subsequent proceedings is not limited.

William States Lee Combined Cycle Facility

On April 9, 2014, the PSCSC granted Duke Energy Carolinas and North Carolina Electric Membership Corporation (NCEMC) a Certificate of Environmental Compatibility and Public Convenience and Necessity (CECPCN) for the construction and operation of a ~~750 MW~~750-MW combined-cycle natural gas-fired generating plant at Duke Energy Carolinas' existing William States Lee Generating Station in Anderson, South Carolina. Duke Energy Carolinas began construction in July 2015 and estimates a cost to build of $600 million for its share of the facility, including ~~allowance for funds used during construction (AFUDC).~~AFUDC. The project is expected to be commercially available in late 2017. NCEMC will own approximately 13 percent of the project. On July 3, 2014, the South Carolina Coastal Conservation League (SCCL) and Southern Alliance for Clean Energy (SACE) jointly filed a Notice of Appeal with the Court of Appeals of South Carolina (S.C. Court of Appeals) seeking the court's review of the PSCSC's decision, claiming the PSCSC did not properly consider a request related to a proposed solar facility prior to granting approval of the CECPCN. The S.C. Court of Appeals affirmed the PSCSC's decision on February 10, 2016, and on March 24, 2016, denied a request for rehearing filed by SCCL and SACE. On April 21, 2016, SCCL and SACE petitioned the South Carolina Supreme Court for review of the S.C. Court of Appeals decision. On March 24, 2017, the South Carolina Supreme Court denied the request for review, thus concluding the matter.

William States Lee III Nuclear Station

In December 2007, Duke Energy Carolinas ~~filed its response on June 13, 2016,~~applied to the NRC for combined operating licenses (COLs) for two Westinghouse Electric Company (Westinghouse) AP1000 reactors for the proposed William States Lee III Nuclear Station to be located at a site in Cherokee County, South Carolina. The NCUC and ~~SCCL and SACE filed a reply on June 23, 2016.~~PSCSC have concurred with the prudency of Duke Energy Carolinas ~~cannot predict~~decisions to incur certain project development and preconstruction costs through several separately issued orders, although full cost recovery is not guaranteed. In December 2016, the ~~outcome~~NRC issued a COL for each reactor. Duke Energy Carolinas is not required to build the nuclear reactors as a result of ~~this matter.~~the COLs being issued.

~~PART I~~

~~DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –~~

~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC~~

~~Combined Notes~~On March 29, 2017, Westinghouse filed for voluntary Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of New York. Duke Energy Carolinas is monitoring the bankruptcy proceedings to ~~Condensed Consolidated Financial Statements – (Continued)~~

~~(Unaudited)~~

assess the impact it will have on the future construction of nuclear plants.

Duke Energy Progress

~~South Carolina Rate Case~~Storm Cost Deferral Filing

On ~~July 1,~~December 16, 2016, Duke Energy Progress filed ~~an application~~a petition with the ~~PSCSC~~NCUC requesting an ~~average 14.5 percent increase~~accounting order to defer certain costs incurred in ~~retail revenues. The requested rate change would increase annual revenues by approximately $79 million,~~connection with ~~a rate of return on equity of 10.75 percent. The increase is designed~~response to ~~recover the cost of investment~~Hurricane Matthew and other significant storms in ~~new generation infrastructure, environmental expenditures including allocated historical ash basin closure costs and increased nuclear operating costs.~~2016. Duke Energy Progress ~~has~~proposed in the filing to true-up the total costs quarterly through August 2017. The current estimate of incremental operation and maintenance and capital costs is $116 million. On March 15, 2017, the Public Staff filed comments supporting deferral of a portion of Duke Energy Progress’ requested ~~new rates to be effective January 1,~~amount. Duke Energy Progress filed reply comments on April 12, 2017. ~~A hearing has been scheduled to begin on October 31, 2016.~~ Duke Energy Progress cannot predict the outcome of this matter.

Western Carolinas Modernization Plan

On November 4, 2015, ~~in response to community feedback,~~ Duke Energy Progress announced a ~~revised~~ Western Carolinas Modernization Plan, ~~with an estimated cost of $1.1 billion. The revised plan includes~~which included retirement of the existing Asheville coal-fired plant, the construction of two ~~280~~ 280‑MW combined-cycle natural gas plants having dual fuel capability, with the option to build a third natural gas simple cycle unit in 2023 based upon the outcome of initiatives to reduce the region's power demand. The ~~revised~~ plan ~~includes~~also included upgrades to existing transmission lines and substations, but eliminates the need for a new transmission line and a new substation associated with the project in South Carolina. The revised plan has the same overall project cost as the original plan and the plans to installinstallation of solar generation ~~remain unchanged. Duke Energy Progress has also proposed to add~~and a pilot battery storage project. These investments will be made within the next seven years. Duke Energy Progress is also working with the local natural gas distribution company to upgrade an existing natural gas pipeline to serve the natural gas plant. ~~The plan requires various approvals including regulatory approvals in North Carolina.~~

~~Duke Energy Progress filed for a Certificate of Public Convenience and Necessity (CPCN) with the NCUC for the new natural gas units on January 15, 2016.~~ On March 28, 2016, the NCUC issued an order approving ~~the CPCN~~a Certificate of Public Convenience and Necessity (CPCN) for the new combined-cycle natural gas plants, but denying the CPCN for the contingent simple cycle unit without prejudice to Duke Energy Progress to refile for approval in the future. ~~Construction~~On March 28, 2017, Duke Energy Progress filed an annual progress report for the construction of the combined-cycle plants with the NCUC, with an estimated cost of $893 million. Site preparation activities for the combined-cycle plants are underway and construction of these plants is scheduled to begin in ~~2016 and the plants are~~fall 2017, with an expected ~~to be~~in-service date in ~~service by~~ late 2019. Duke Energy Progress plans to file for future approvals related to the proposed solar generation and pilot battery storage project.

On May 27, 2016, NC WARN and The Climate Times filed a notice of appeal from the CPCN order to the N.C. Court of Appeals. On May 31, 2016, Duke Energy Progress filed a motion to dismiss the notice of appeal with the NCUC due to NC WARN's and The Climate Times' failure to post a required appeal bond. After a series of filings, an NCUC order, petitions to the N.C. Court of Appeals and an evidentiary hearing, on July 8, 2016, the NCUC issued an order setting NC WARN's and The Climate Times' appeal bond at $98 million. On July 28, 2016, NC WARN and The Climate Times filed a notice of appeal and exceptions from the NCUC's July 8, 2016, appeal bond order. On August 2, 2016, the NCUC granted Duke Energy Progress' motion to dismiss NC WARN's and The Climate Times' notice of appeal from the CPCN order due to failure to post the requisite bond. Duke Energy Progress cannot predict the outcome of this matter.

The carrying value of the ~~376 MW~~376-MW Asheville coal-fired plant, including associated ash basin closure costs, of ~~$506~~$471 million and ~~$548~~$492 million are included in Generation facilities to be retired, net on Duke Energy Progress' Condensed Consolidated Balance Sheet as of ~~June 30, 2016~~March 31, 2017 and December 31, ~~2015,~~2016, respectively.

~~Duke Energy Florida~~

~~Hines Chiller Uprate Project~~

On May 20, 2016, Duke Energy Florida filed a petition seeking approval to include in base rates the revenue requirement for a Chiller Uprate Project (Uprate Project) at the Hines station. Duke Energy Florida proposes to complete the Uprate Project in two phases: phase one work on Hines Units 1-3 and the common equipment to be completed and placed into service in October 2016; and phase two work on Hines Unit 4 to be completed and placed into service in January 2017. The final construction cost estimate for both phases of approximately $150 million is below the cost estimate provided during the need determination proceeding. Duke Energy Florida estimates the annual retail revenue requirements for phases one and two to be approximately $16 million and $3 million, respectively. Duke Energy Florida’s petition seeks approval of both revenue requirements, but only seeks to include the phase one revenue requirement in base rates and customer bills beginning November 2016, and will separately petition to include the phase two revenue requirement in base rates and customer bills beginning February 2017. Duke Energy Florida cannot predict the outcome of this matter.

~~Purchase of Osprey Energy Center~~

In December 2014, Duke Energy Florida and Osprey Energy Center, LLC, a wholly owned subsidiary of Calpine Corporation (Calpine), entered into an Asset Purchase and Sale Agreement for the purchase of a 599 MW combined-cycle natural gas plant in Auburndale, Florida (Osprey Plant acquisition) for approximately $166 million. In July 2015, the FERC and the FPSC issued separate orders of approval for the Osprey Plant acquisition. The Hart-Scott-Rodino waiting period expired on May 2, 2016. Closing of the acquisition is expected to occur by the first quarter of 2017, upon the expiration of an existing Power Purchase Agreement between Calpine and Duke Energy Florida. In anticipation of closing, in August 2016, Duke Energy Florida filed a petition seeking approval to include in base rates the revenue requirements for the Osprey Plant acquisition to be included in customer bills beginning in February 2017. Duke Energy Florida estimates the retail revenue requirements to be approximately $48 million.

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

~~(Unaudited)~~

~~Crystal River Unit 3 Regulatory Asset~~Duke Energy Florida

~~In June 2015,~~Hines Chiller Uprate Project

On February 2, 2017, Duke Energy Florida filed a petition seeking approval to include in base rates the ~~governor~~revenue requirement for a Chiller Uprate Project (Uprate Project) at the Hines Energy Complex. The Uprate Project was placed into service in March 2017 at a cost of ~~Florida signed legislation to allow utilities to issue nuclear asset-recovery bonds to finance the recovery of certain retired nuclear generation assets, with approval of the FPSC. In November 2015,~~approximately $150 million. The retail revenue requirement is approximately $19 million. On March 28, 2017, the FPSC issued ~~a financing~~an order approving the revenue requirement which were included in base rates for the first billing cycle of April 2017.

Levy Nuclear Project

On July 28, 2008, Duke Energy Florida applied to the NRC for COLs for two Westinghouse AP1000 reactors at Levy. In 2008, the FPSC granted Duke Energy Florida’s ~~request to issue~~petition for an affirmative Determination of Need and related orders requesting cost recovery under Florida’s nuclear ~~asset-recovery bonds to finance its unrecovered regulatory asset related to Crystal River Unit 3 (Crystal River 3) through a wholly owned special purpose entity.~~cost-recovery rule, together with the associated facilities, including transmission lines and substation facilities. In October 2016, the NRC issued COLs for the proposed Levy Nuclear ~~asset-recovery bonds replace the base rate recovery methodology authorized by the 2013 Revised~~Plant Units 1 and ~~Restated Stipulation and Settlement Agreement (2013 Agreement) and result in a lower rate impact to customers with a recovery period of approximately 20 years.~~

~~Pursuant to provisions in Florida Statutes and the FPSC financing order, in 2016,~~2. Duke Energy Florida ~~formed~~is not required to build the nuclear reactors as a result of the COLs being issued.

On January 28, 2014, Duke Energy Florida ~~Project Finance, LLC (DEFPF), a wholly owned, bankruptcy remote special purpose subsidiary for~~terminated the purpose of issuing nuclear asset-recovery bonds. In June 2016, DEFPF issued $1,294 million aggregate principal amount of senior secured bonds (nuclear asset-recovery bonds) to finance the recovery of Duke Energy Florida's Crystal River 3 regulatory asset.

~~In connection with this financing, net proceeds to DEFPF of approximately $1,287 million, after underwriting costs, were used to acquire nuclear asset-recovery property from~~Levy engineering, procurement and construction agreement (EPC). Duke Energy Florida ~~and~~may be required to pay ~~transaction related expenses. The nuclear asset-recovery property includes~~for work performed under the ~~right to impose, bill, collect and adjust a non-bypassable nuclear asset-recovery charge, to be collected on a per kilowatt-hour basis from all~~EPC. Duke Energy Florida ~~retail customers until~~recorded an exit obligation in 2014 for the ~~bonds are paid~~termination of the EPC. This liability was recorded within Other in ~~full.~~Deferred Credits and Other Liabilities with an offset primarily to Regulatory assets on the Condensed Consolidated Balance Sheets. Duke Energy Florida ~~began collecting~~is allowed to recover reasonable and prudent EPC cancellation costs from its retail customers. On May 1, 2017, Duke Energy Florida filed a request with the FPSC to recover approximately $82 million of Levy Nuclear Project costs from retail customers in 2018. A hearing is scheduled in August 2017. Duke Energy Florida cannot predict the outcome of this matter.

On March 29, 2017, Westinghouse filed for voluntary Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of New York. Duke Energy Florida is monitoring the bankruptcy proceedings to assess the impact it will have on the future construction of nuclear ~~asset-recovery charge on behalf of DEFPF in customer rates in July 2016.~~

~~See Notes 6 and 12 for additional information.~~plants.

Duke Energy Ohio

Ohio Valley Electric Corporation

On March 31, 2017, Duke Energy Ohio filed for approval to adjust its existing price stabilization rider (Rider PSR) to pass through net costs related to its contractual entitlement to capacity and energy from the generating assets owned by OVEC. The PUCO approved Rider PSR, but set it at zero dollars in connection with the most recent electric security plan. The application seeks to adjust Rider PSR as of April 1, 2017. Duke Energy Ohio is seeking deferral authority for net costs incurred from April 1, 2017, until the new rates under Rider PSR are put into effect. See Note 12 for additional discussion of Duke Energy Ohio's ownership interest in OVEC. Duke Energy Ohio cannot predict the outcome of this proceeding.

East Bend Coal Ash Basin Filing

On December 2, 2016, Duke Energy Kentucky filed with the KPSC a request for a CPCN for construction projects necessary to close and repurpose an ash basin at the East Bend facility as a result of current and proposed U.S. Environmental Protection Agency (EPA) regulations. Duke Energy Kentucky estimated a total cost of approximately $93 million in the filing and expects in-service date in the fourth quarter of 2018. Duke Energy Kentucky expects the KPSC to issue an order in the second quarter of 2017.

Base Rate Case

Duke Energy Ohio filed with the PUCO an electric distribution base rate case application and supporting testimony in March 2017. Duke Energy Ohio has requested an estimated annual increase of approximately $15 million and a return on equity of 10.4 percent. The application also includes requests to continue certain current riders and establish new riders related to LED Outdoor Lighting Service and regulatory mandates. Duke Energy Ohio cannot predict the outcome of this matter.

Natural Gas Pipeline Extension

Advanced Metering Infrastructure

On April 25, 2016, Duke Energy Kentucky filed with the KPSC an application for approval of a ~~certificate of public convenience and necessity~~CPCN for the construction of advanced metering infrastructure. Duke Energy Kentucky ~~anticipates that~~estimates the ~~estimated~~ $49 million project, if approved, will take ~~about~~ two years to complete. Duke Energy Kentucky also requested approval to establish a regulatory asset of approximately $10 million for the remaining book value of existing meter equipment and inventory ~~that will~~to be replaced. ~~On July 20, 2016,~~Duke Energy Kentucky and the Kentucky Attorney General ~~the only intervenor in the proceeding, moved~~entered into a stipulation to ~~dismiss~~settle matters related to the application. ~~Duke Energy Kentucky filed its opposition to~~An evidentiary hearing on the ~~Kentucky Attorney General's motion to dismiss~~application and stipulation was held on ~~July 27,~~December 8, 2016. Duke Energy Kentucky cannot predict the outcome of this matter.

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

Accelerated Natural Gas Service Line Replacement Rider

On January 20, 2015, Duke Energy Ohio filed an application for approval of an accelerated natural gas service line replacement program (ASRP). Under the ASRP, Duke Energy Ohio ~~proposes~~proposed to replace certain natural gas service lines on an accelerated ~~basis. The program is proposed to last 10 years. Through the ASRP,~~basis over a 10-year period. Duke Energy Ohio also ~~proposes~~proposed to complete preliminary survey and investigation work related to natural gas service lines that are customer owned and for which it does not have valid records and, further, to relocate interior natural gas meters to suitable exterior locations where such relocation can be accomplished. Duke Energy ~~Ohio projects~~Ohio's current projected total capital and operations and maintenance expenditures under the ASRP ~~to approximate $320~~are approximately $240 million. The filing also ~~seeks~~sought approval of ~~Rider ASRP~~a rider mechanism (Rider ASRP) to recover related expenditures. Duke Energy Ohio ~~proposes~~proposed to update Rider ASRP on an annual basis. ~~Duke Energy Ohio’s application is pending before the PUCO and it is uncertain when an order will be issued.~~ Intervenors ~~oppose~~opposed the ASRP, primarily because they believe the program is neither required nor necessary under federal pipeline regulation. On October 26, 2016, the PUCO issued an order denying the proposed ASRP. The ~~hearing concluded on November 19, 2015,~~PUCO did, however, encourage Duke Energy Ohio to work with the PUCO Staff and ~~initial and reply briefs were~~intervenors. Duke Energy Ohio filed ~~with briefing complete on~~an application for rehearing of the PUCO decision. In December ~~23, 2015.~~2016, the PUCO granted the request for the purpose of further review. Duke Energy Ohio cannot predict the outcome of this matter.

Energy Efficiency Cost Recovery

On March 28, 2014, Duke Energy Ohio filed an application for recovery of program costs, lost distribution revenue and performance incentives related to its energy efficiency and peak demand reduction programs. These programs are undertaken to comply with environmental mandates set forth in Ohio law. ~~After a comment period, the~~The PUCO approved Duke Energy Ohio’s application, but found that Duke Energy Ohio was not permitted to use banked energy savings from previous years in order to calculate the amount of allowed incentive. This conclusion represented a change to the cost recovery mechanism that had been agreed toupon by intervenors and approved by the PUCO in previous cases. The PUCO granted the applications for rehearing filed by Duke Energy Ohio and an ~~intervenor on July 8, 2015. Substantive ruling on the application for rehearing is pending.~~intervenor. On January 6, 2016, Duke Energy Ohio and the PUCO Staff entered into a stipulation, pending ~~PUCO~~the PUCO's approval, ~~resolving the~~to resolve issues related to ~~among other things,~~ performance incentives and the PUCO Staff audit of 2013 ~~costs. Based on~~costs, among other issues. In December 2015, based upon the stipulation, ~~in December 2015,~~ Duke Energy Ohio re-established approximately $20 million of the revenues that had been ~~reversed in~~previously reversed. On October 26, 2016, the ~~second quarter of 2015. A hearing on~~PUCO issued an order approving the stipulation ~~commenced on March 10,~~without modification. Intervenors requested a rehearing of the PUCO decision. In December 2016, ~~and~~ the ~~post-hearing briefing has concluded.~~PUCO granted a rehearing for the purpose of further review. Duke Energy Ohio cannot predict the outcome of this matter.

~~PART I~~

~~DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –~~

~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC~~

~~Combined Notes to Condensed Consolidated Financial Statements – (Continued)~~

~~(Unaudited)~~

2012 Natural Gas Rate Case/Manufactured Gas Plant Cost Recovery

On November 13, 2013, the PUCO issued an order approving a settlement of Duke Energy Ohio’s natural gas base rate case and authorizing the recovery of costs incurred between 2008 and 2012 for environmental investigation and remediation of two former manufactured gas plant (MGP) sites. The ~~order contained deadlines for the recovery of such costs. Specifically, for the property known as the East End site,~~ PUCO established a deadline of December 31, 2016, and for the West End site, a deadline of December 31, 2019. The PUCO authorized Duke Energy Ohio to seek to extend these deadlines due to certain circumstances. On May 16, 2016, Duke Energy Ohio filed an application to extend the deadline for cost recovery applicable to the East End site. The order also authorized Duke Energy Ohio to continue deferring MGP environmental investigation and remediation costs incurred subsequent to 2012 and to submit annual filings to adjust the MGP rider for future costs. Intervening parties appealed this decision to the Ohio Supreme Court and that appeal remains pending. Oral argument was heard on February 28, 2017. Incurred and projected investigation and remediation expenses at these MGP sites that have not been collected through the MGP rider are approximately $100 million and are recorded as Regulatory assets on Duke Energy ~~Ohio submitted MGP rider update filings in 2014, 2015, and 2016 for recovery~~Ohio's Condensed Consolidated Balance Sheet as of ~~costs incurred in 2013, 2014, and 2015, which are pending approval.~~March 31, 2017. Duke Energy Ohio cannot predict the outcome of this matter.

Regional Transmission Organization Realignment

Duke Energy Ohio, including Duke Energy Kentucky, transferred control of its transmission assets from Midcontinent Independent System Operator, Inc. (MISO) to PJM Interconnection, LLC (PJM), effective December 31, 2011. The PUCO approved a settlement related to Duke Energy Ohio’s recovery of certain costs of the Regional Transmission Organization (RTO) realignment via a non-bypassable rider. Duke Energy Ohio is allowed to recover all MISO Transmission Expansion Planning (MTEP) costs, including but not limited to Multi Value Project (MVP) costs, directly or indirectly charged to Ohio customers. Duke Energy Ohio also agreed to vigorously defend against any charges for MVP projects from MISO. The KPSC also approved a request to effect the RTO realignment, subject to a commitment not to seek double recovery in a future rate case of the transmission expansion fees that may be charged by MISO and PJM in the same period or overlapping periods.

Duke Energy Ohio had a recorded liability for its exit obligation and share of MTEP costs, excluding MVP, of ~~$91~~$90 million ~~and $92 million, respectively,~~ at ~~June 30, 2016~~March 31, 2017, and December 31, ~~2015,~~2016, recorded within Other in Current liabilities and Other in ~~Deferred credits and other liabilities~~Other Noncurrent Liabilities on ~~Duke Energy Ohio’s~~the Condensed Consolidated Balance Sheets. The retail ~~portion~~portions of MTEP costs billed by MISO are recovered by Duke Energy Ohio through a non-bypassable rider. As of ~~June 30, 2016~~March 31, 2017, and December 31, ~~2015,~~2016, Duke Energy Ohio had ~~$72~~$71 million recorded in Regulatory assets on the Condensed Consolidated Balance Sheets.

MVP. MISO approved 17 MVP proposals prior to Duke Energy Ohio’s exit from MISO on December 31, 2011. Construction of these projects is expected to continue through 2020. Costs of these projects, including operating and maintenance costs, property and income taxes, depreciation and an allowed return, are allocated and billed to MISO transmission owners.

On December 29, 2011, MISO filed a tariff with the FERC providing for the allocation of MVP costs to a withdrawing owner based on monthly energy usage. The FERC set for hearing (i) whether MISO’s proposed cost allocation methodology to transmission owners who withdrew from MISO prior to January 1, 2012, is consistent with the tariff at the time of their withdrawal from MISO and, (ii) if not, what the amount of and methodology for calculating any MVP cost responsibility should be. In 2012, MISO estimated Duke Energy Ohio’s MVP obligation over the period from 2012 to 2071 at $2.7 billion, on an undiscounted basis. On July 16, 2013, a FERC Administrative Law Judge (ALJ) issued an initial decision. Under this ~~initial decision,~~Initial Decision, Duke Energy Ohio would be liable for MVP costs. Duke Energy Ohio filed exceptions to the initial decision, requesting FERC to overturn the ALJ’s decision.

On October 29, 2015, the FERC issued an order reversing the ALJ's decision. The FERC ruled the cost allocation methodology is not consistent with the MISO tariff and that Duke Energy Ohio has no liability for MVP costs after its withdrawal from MISO. On May 19, 2016, the FERC denied the request for rehearing filed by MISO and the MISO Transmission Owners. On July 15, 2016, the MISO Transmission Owners filed a petition for review with the U.S. Court of Appeals for the Sixth Circuit. Duke Energy Ohio cannot predict the outcome of this matter.

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

Duke Energy Indiana

Coal Combustion Residual Plan

On March 17, 2016, Duke Energy Indiana filed with the IURC a request for approval of its first group of federally mandated Coal Combustion Residual (CCR) rule compliance projects (Phase I CCR Compliance Projects) to comply with the ~~U.S. Environmental Protection Agency's (EPA)~~EPA's CCR rule. The projects in this Phase I filing are CCR compliance projects, including the conversion of Cayuga and Gibson ~~Stations~~stations to dry bottom ash handling and related water treatment. Duke Energy Indiana has requested timely recovery of approximately $380 million in retail capital costs and incremental operating and maintenance costs, including AFUDC, under a federal mandate tracker ~~which~~that provides for timely recovery of 80 percent of such costs and deferral with carrying costs of 20 percent of such costs for recovery in a subsequent retail base rate case. On January 24, 2017, Duke Energy Indiana and various Intervenors filed a settlement agreement with the IURC. Terms of the settlement include recovery of 60 percent of the estimated CCR compliance construction project capital costs through existing rider mechanisms and deferral of 40 percent of these costs until Duke Energy Indiana's next general retail rate case. The deferred costs will earn a return based on Duke Energy Indiana's long-term debt rate of 4.73 percent until costs are included in retail rates, at which time the deferred costs will earn a full return. Costs are to be capped at $365 million, plus actual AFUDC. Costs above the cap may be recoverable in the next rate case. Terms of the settlement agreement also require Duke Energy Indiana to perform certain reporting and groundwater monitoring. The settlement is subject to approval by the IURC. An evidentiary hearing ~~is scheduled for November 2016.~~was held on February 23, 2017, and Duke Energy Indiana filed a proposed order with the IURC on March 30, 2017. Duke Energy Indiana cannot predict the outcome of this matter.

~~Edwardsport Integrated Gasification Combined Cycle Plant~~

On November 20, 2007, the IURC granted Duke Energy Indiana a CPCN for the construction of the Edwardsport Integrated Gasification Combined Cycle (IGCC) Plant. The Citizens Action Coalition of Indiana, Inc., Sierra Club, Inc., Save the Valley, Inc., and Valley Watch, Inc. (collectively, the Joint Intervenors) were intervenors in several matters related to the Edwardsport IGCC Plant. The Edwardsport IGCC Plant was placed in commercial operation in June 2013. Costs for the Edwardsport IGCC Plant are recovered from retail electric customers via a tracking mechanism, the IGCC rider.

The ninth semi-annual IGCC rider order was appealed by the Joint Intervenors. The proceeding has been remanded to the IURC for further proceedings and additional findings on the tax in-service issue. An evidentiary hearing has been set for September 13, 2016.

~~PART I~~

~~DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –~~

~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC~~

~~Combined Notes to Condensed Consolidated Financial Statements – (Continued)~~

~~(Unaudited)~~

The 11th through 15th semi-annual IGCC riders and a subdocket to Duke Energy Indiana's fuel adjustment clause remain pending at the IURC. Issues in these filings include the determination whether the IGCC plant was properly declared in-service for ratemaking purposes in June 2013 and a review of the operational performance of the plant. On September 17, 2015, Duke Energy Indiana, the Office of Utility Consumer Counselor, the Industrial Group and Nucor Steel Indiana reached a settlement agreement to resolve these pending issues. On January 15, 2016, The Citizens Action Coalition of Indiana, Inc., Sierra Club, Save the Valley and Valley Watch joined a revised settlement (IGCC settlement). The IGCC settlement will result in customers not being billed for previously incurred operating costs of $87.5 million, and for additional Duke Energy Indiana payments and commitments of $5.5 million for attorneys’ fees and amounts to fund consumer programs. Attorneys’ fees and expenses for the new settling parties will be addressed in a separate proceeding. Duke Energy Indiana recognized pretax impairment and related charges of $93 million in 2015. Additionally, under the IGCC settlement, the operating and maintenance expenses and ongoing maintenance capital at the plant are subject to certain caps during the years of 2016 and 2017. The IGCC settlement also includes a commitment to either retire or stop burning coal by December 31, 2022, at the Gallagher Station. Pursuant to the IGCC settlement, the in-service date used for accounting and ratemaking will remain as June 2013. Remaining deferred costs will be recovered over eight years and not earn a carrying cost. The IGCC settlement, which is opposed by an intervenor, is subject to IURC approval. An evidentiary hearing on the IGCC settlement was held on April 18, 2016, and a decision is expected in the third quarter of 2016. As of June 30, 2016, deferred costs related to the project are approximately $175 million. Under the IGCC settlement, future IGCC riders will be filed annually, rather than every six months, with the next filing scheduled for first quarter 2017.

~~Duke Energy Indiana cannot predict the outcome of these matters or future IGCC rider proceedings.~~

FERC Transmission Return on Equity ~~Complaint~~Complaints

Customer groups have filed with the FERC complaints against MISO and its transmission-owning members, including Duke Energy Indiana, alleging, among other things, that the current base rate of return on equity earned by MISO transmission owners of 12.38 percent is unjust and unreasonable. The ~~latest complaint, filed on February 12, 2015, claims~~complaints, among other things, claim that the current base rate of return on equity earned by MISO transmission owners should be reduced to 8.67 ~~percent and requests a consolidation of complaints. The motion to consolidate complaints was denied.~~percent. On January 5, 2015, the FERC issued an order accepting the MISO transmission ~~owners~~owners' adder of 0.50 percent ~~adder~~ to the base rate of return on equity based on participation in an RTO subject to it being applied to a return on equity that is shown to be just and reasonable in the pending return on equity complaints. ~~A hearing in the base return on equity proceeding was held in August 2015.~~ On December 22, 2015, the presiding FERC ALJ in the first complaint issued an Initial Decision in which ~~he set~~ the base rate of return on equity was set at 10.32 percent. On September 28, 2016, the Initial Decision in the first complaint was affirmed by FERC, but is subject to rehearing requests. On June 30, 2016, the presiding FERC ALJ in the second complaint issued an Initial Decision setting the base rate of return on equity at 9.70 percent. The Initial ~~Decisions will be reviewed~~Decision in the second complaint is pending FERC review. On April 14, 2017, the U.S. Court of Appeals for the District of Columbia Circuit, in Emera Maine v. FERC, reversed and remanded certain aspects of the methodology employed by FERC to establish rates of return on equity. This decision may affect the ~~FERC.~~outcome of the complaints against Duke Energy Indiana. Duke Energy Indiana currently believes these matters will not have ~~an immaterial~~a material impact on its results of operations, cash flows and financial position.

~~Grid Infrastructure Improvement Plan~~Piedmont

North Carolina Integrity Management Rider Filings

In October 2016, Piedmont filed a petition with the NCUC under the integrity management rider (IMR) mechanism seeking authority to collect an additional $8 million in annual revenues, effective December 2016, based on the eligible capital investments closed to integrity and safety projects over the six-month period ending September 30, 2016. In November 2016, the NCUC approved the request.

On ~~August 29, 2014, pursuant to a new statute, Duke Energy Indiana~~May 1, 2017, Piedmont filed a ~~seven-year grid infrastructure improvement plan~~petition with the ~~IURC with~~NCUC under the IMR mechanism to collect an ~~estimated cost of $1.9 billion, focusing~~additional $11.6 million in annual revenues, effective June 2017, based on the ~~reliability,~~eligible capital investments closed to integrity and ~~modernization of~~safety projects over the ~~transmission and distribution system. The plan also provided for cost recovery through a transmission and distribution rider (T&D Rider).~~ six-month period ending March 31, 2017. A ruling from the NCUC is pending.

Tennessee IMR Filings

In ~~May 2015,~~November 2016, Piedmont filed an annual report with the ~~IURC denied~~TPUC under the ~~original proposal due~~IMR mechanism seeking authority to collect an ~~insufficient level of detailed projects and cost estimates~~additional $1.7 million in the plan. On December 7, 2015, Duke Energy Indiana filed a revised infrastructure improvement plan with an estimated cost of $1.8 billion in response to guidance from IURC orders and the Indiana Court of Appeals decisions related to this new statute. The revised plan uses a combination of advanced technology and infrastructure upgrades to improve service to customers and provide them with better information about their energy use. It also provides for cost recovery through a T&D rider. In March 2016, Duke Energy Indiana entered into a settlement with all parties to the proceeding except the Citizens Action Coalition of Indiana, Inc. The settlement agreement decreasedannual revenues effective January 2017, based on the capital ~~expenditures eligible for timely recovery of costs~~investments in integrity and safety projects over the ~~seven-year plan to approximately $1.4 billion, including the removal of an AMI project.~~12-month period ending October 31, 2016. The settlement provided for deferral accounting for depreciation and post-in-service carrying costs for AMI projects outside the seven-year plan. Duke Energy Indiana withdrew its request for a regulatory asset for current meters and will retain any savings associated with future AMI installation until the next retail base rate case, which is required to be filed prior to the end of the seven-year plan. Under the settlement, the return on equity to be used in the T&D Rider is 10 percent. The IURCTPUC approved the ~~settlement and issued~~request at a ~~final order~~hearing on ~~June 29, 2016.~~April 10, 2017.

OTHER REGULATORY MATTERS

Atlantic Coast Pipeline

On September 2, 2014, Duke Energy, Dominion Resources (Dominion), Piedmont and ~~AGL Resources~~Southern Company Gas announced the formation of ~~a company, ACP,~~Atlantic Coast Pipeline, LLC (ACP) to build and own the proposed Atlantic Coast Pipeline ~~(the~~(ACP pipeline), ~~a 564-mile~~an approximately 600-mile interstate natural gas ~~pipeline.~~pipeline running from West Virginia to North Carolina. The ACP pipeline is designed to meet the needs identified in ~~requests for proposals~~RFPs by Duke Energy Carolinas, Duke Energy Progress and Piedmont. The ACP pipeline development costs are estimated between $5.0 billion to $5.5 billion. Dominion will build and operate the ACP pipeline and ~~has~~holds a ~~45 percent~~leading ownership percentage in ~~ACP.~~ACP of 48 percent. Duke Energy ~~has~~owns a 4047 percent ~~ownership~~ interest ~~in ACP~~ through its ~~Commercial Portfolio~~Gas Utilities and Infrastructure segment. ~~Piedmont owns 10~~Southern Company Gas maintains a 5 percent and the remaining share is owned by AGL Resources. Duke Energy Carolinas and Duke Energy Progress, among others, will be customers of the pipeline. Purchases will be made under several 20-year supply contracts, subject to state regulatory approval. In October 2014, the NCUC and PSCSC approved the Duke Energy Carolinas and Duke Energy Progress requests to enter into certain affiliate agreements, pay compensation to ACP and to grant a waiver of certain Code of Conduct provisions relating to contractual and jurisdictional matters. On September 18, 2015, ACP filed an application with the FERC requesting a CPCN authorizing ACP to construct the pipeline. FERC approval of the application is expected in early 2017 and construction is projected to begin in summer of 2017, with a targeted in-service date of late 2018. ACP is working with various agencies to develop the final pipeline route. ACP also requested approval of an open access tariff and the precedent agreements it entered into with future pipeline customers, including Duke Energy Carolinas and Duke Energy Progress.

~~On October 24, 2015, Duke Energy entered into a Merger Agreement with Piedmont. The ACP partnership agreement includes provisions to allow Dominion an option to purchase~~interest. See Note 12 for additional ~~ownership interest in ACP to maintain a leading ownership percentage. Any change in ownership interests is not expected to be material to Duke Energy. Refer to Note 2 for further~~ information related to Duke Energy's ~~proposed acquisition of Piedmont.~~ownership interest.

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

~~(Unaudited)~~

Duke Energy Carolinas, Duke Energy Progress and Piedmont, among others, will be customers of the pipeline. Purchases will be made under several 20-year supply contracts, subject to state regulatory approval. On September 18, 2015, ACP filed an application with the FERC requesting a CPCN authorizing ACP to construct the pipeline. ACP executed a construction agreement in September 2016. ACP also requested approval of an open access tariff and the precedent agreements it entered into with future pipeline customers. In December 2016, FERC issued a draft Environmental Impact Statement (EIS) indicating that the proposed pipeline would not cause significant harm to the environment or protected populations. The draft EIS comment period ended in April 2017, and ACP is working to resolve items identified through the comment process. The final EIS is expected in summer 2017. FERC approval of the application is expected within 90 days of the issuance of the final EIS. Construction is projected to begin in the second-half of 2017, with a targeted in-service date in the second half of 2019.

Sabal Trail Transmission, LLC Pipeline

On May 4, 2015, Duke Energy acquired a 7.5 percent ownership interest in Sabal Trail Transmission, LLC (Sabal Trail) from Spectra Energy Partners, LP, a master limited partnership, formed by Enbridge Inc. (formerly Spectra Energy Corp.). Spectra Energy Partners, LP holds a 50 percent ownership interest in ~~the proposed 500-mile~~ Sabal Trail ~~natural gas pipeline. Spectra Energy will continue to own 59.5 percent of the Sabal Trail pipeline~~ and NextEra Energy ~~will own the remaining 33 percent.~~has a 42.5 percent ownership interest. Sabal Trail is a joint venture that is constructing a 515-mile natural gas pipeline (Sabal Trail pipeline) to transport natural gas to Florida. Total estimated project costs are approximately $3.2 billion. The Sabal Trail pipeline will traverse Alabama, Georgia and ~~Florida to meet rapidly growing demand for natural gas in those states.~~Florida. The primary customers of the Sabal Trail pipeline, Duke Energy Florida and Florida Power & Light Company (FP&L), have each contracted to buy pipeline capacity for 25-year initial terms. On February 3, 2016, the FERC issued an order granting the request for a CPCN to construct and operate the ~~Sabal Trail~~ pipeline. On September 7, 2016, FERC denied the intervenors' rehearing requests. On September 21, 2016, intervenors filed an appeal of FERC's CPCN orders to the U.S. Court of Appeals for the District of Columbia Circuit. Oral argument on the appeal was held on April 18, 2017, and a decision is expected in the summer of 2017. The Sabal Trail pipeline ~~requires additional~~has received other required regulatory approvals and construction began in the summer of 2016, with an expected in-service date in mid-2017. See Note 12 for additional information related to Duke Energy's ownership interest.

Constitution Pipeline

Duke Energy owns a 24 percent ownership interest in Constitution Pipeline Company, LLC (Constitution). Constitution is ~~scheduled~~a natural gas pipeline project slated to ~~begin service~~transport natural gas supplies from the Marcellus supply region in northern Pennsylvania to major northeastern markets. The pipeline will be constructed and operated by Williams Partners L.P., which has a 41 percent ownership share. The remaining interest is held by Cabot Oil and Gas Corporation and WGL Holdings, Inc.

On April 22, 2016, the New York State Department of Environmental Conservation (NYSDEC) denied Constitution’s application for a necessary water quality certification for the New York portion of the Constitution pipeline. Constitution filed legal actions in the U.S. District Court for the Northern District of New York and in the U.S. Court of Appeals for the Second Circuit (U.S. Court of Appeals) challenging the legality and appropriateness of the NYSDEC’s decision. Both courts granted Constitution's motions to expedite the schedules for the legal actions. On November 16, 2016, oral arguments were heard in the U.S. Court of Appeals. On March 16, 2017, the U.S. District Court for the Northern District of New York dismissed without prejudice Constitution’s claim that New York State permits were preempted by the federal permitting process. The ruling on oral arguments made in the U.S. Court of Appeals regarding NYSDEC's denial of the water quality certification is currently expected in mid-2017.

~~Progress Energy Merger FERC Mitigation~~Constitution remains steadfastly committed to pursuing the project and intends to pursue all available options to challenge the NYSDEC's decision. In light of the denial of the certification, Constitution revised its target in-service date of the project to be as early as the second half of 2018, assuming that the challenge process is satisfactorily and promptly concluded.

In ~~June 2012,~~July 2016, Constitution requested, and the FERC approved, an extension of the ~~merger~~construction period and in-service deadline of the project to December 2018. Also in July, the FERC denied the New York Attorney General's (NYAG) complaint and request for a stay of the certificate order authorizing the project on the grounds that Constitution had improperly cut trees along the proposed route. The FERC found the complaint procedurally deficient and that there was no justification for a stay; it did find the filing constituted a valid request for investigation and thus referred the matter to FERC staff for further examination as may be appropriate. On November 22, 2016, the FERC denied the NYAG's request for reconsideration of this order.

Since April 2016, with ~~Progress Energy, including~~the actions of the NYSDEC, Constitution stopped construction and discontinued capitalization of future development costs until the project's uncertainty is resolved. As a result, Duke Energy evaluated the investment in the Constitution project for other-than-temporary impairments (OTTIs). At this time, no OTTI has been determined and ~~Progress Energy’s revised market power mitigation plan,~~therefore no impairment charge to reduce the Joint Dispatch Agreement (JDA) and the joint Open Access Transmission Tariff. The revised market power mitigation plan provided for the acceleration of one transmission project and the completion of seven other transmission projects (Long-Term FERC Mitigation) and interim firm power sale agreements during the completioncarrying value of the ~~transmission projects (Interim FERC Mitigation). The Long-Term FERC Mitigation was expected~~investment has been recorded. However, to ~~increase power imported into~~ the extent that the legal and regulatory proceedings have unfavorable outcomes, or if Constitution concludes that the project is not viable or does not go forward as legal and regulatory actions progress, the conclusions with respect to OTTIs could change and may require that an impairment charge of up to the recorded investment in the project, net of any cash and working capital returned, be recorded. Duke Energy ~~Carolinas~~will continue to monitor and ~~Duke Energy Progress service areas~~update the OTTI analysis as required. Different assumptions could affect the timing and ~~enhance competitive power supply options in the service areas. All of these projects were completed in or before 2014.~~

Following the closing of the merger, outside counsel reviewed Duke Energy’s mitigation plan and discovered a technical error in the calculations. On December 6, 2013, Duke Energy submitted a filing to the FERC disclosing the error and arguing that no additional mitigation is necessary. The city of New Bern filed a protest and requested that FERC order additional mitigation. On October 29, 2014, the FERC ordered that the amount of ~~the stub mitigation be increased from 25 MW to 129 MW. The stub mitigation is Duke Energy’s commitment to set aside for third parties~~any charge recorded in a certain quantity of firm transmission capacity from Duke Energy Carolinas to Duke Energy Progress during summer off-peak hours. The FERC also ordered that Duke Energy operate certain phase shifters to create additional import capability and that such operation be monitored by an independent monitor. The costs to comply with this order are not material. The FERC also referred Duke Energy’s failure to expressly designate the phase shifter reactivation as a mitigation project in the original mitigation plan filing in March 2012 to the FERC Office of Enforcement for further inquiry. In response, and since December 2014, the FERC Office of Enforcement has conducted a nonpublic investigation of Duke Energy's market power analyses included in the Progress merger filings submitted to FERC. Duke Energy cannot predictperiod.

Pending the outcome of ~~this investigation.~~the matters described above, and when construction proceeds, Duke Energy remains committed to fund an amount in proportion to its ownership interest for the development and construction of the new pipeline. Duke Energy's total anticipated contributions are approximately $229 million.

~~Potential Coal Plant Retirements~~

~~The Subsidiary Registrants periodically file Integrated Resource Plans (IRP) with their state regulatory commissions. The IRPs provide a view of forecasted energy needs over a long term (10~~See Note 12 for additional information related to ~~20 years),~~ownership interest and options being considered to meet those needs. Recent IRPs filed by the Subsidiary Registrants included planning assumptions to potentially retire certain coal-fired generating facilities in Florida and Indiana earlier than their current estimated useful lives. These facilities do not have the requisite emission control equipment, primarily to meet EPA regulations recently approved or proposed.

~~The table below contains the net~~ carrying value of ~~generating facilities planned for retirement or included in recent IRPs as evaluated for potential retirement due to a lack of requisite environmental control equipment. Dollar amounts in~~ the ~~table below are included in Net property, plant and equipment on the Condensed Consolidated Balance Sheets as of June 30, 2016.~~

investment.

Remaining Net
Capacity

Book Value^(a)

(in MW)
(in millions)
Progress Energy and Duke Energy Florida
Crystal River Units 1 and 2 873
126
Duke Energy Indiana
Wabash River Unit 6^(b)
318
34
Gallagher Units 2 and 4^(c)
280
135
Total Duke Energy 1,471
295


~~(a)~~	~~Remaining net book value amounts exclude any capitalized asset retirement costs.~~

~~(b)~~

In April 2016, Wabash River 6 terminated coal burning operations and is targeted for retirement by the end of 2016. The total net book value of $93 million for the retail portion of Wabash River Unit 6 and the retail portion of capitalized asset retirement costs for Wabash River Units 2 through 6 is classified as Generation facilities to be retired, net on Duke Energy Indiana's Condensed Consolidated Balance Sheet at June 30, 2016.


~~(c)~~	~~Duke Energy Indiana committed to either retire or stop burning coal at Gallagher Units 2 and 4 by December 31, 2022, as part of the proposed settlement of Edwardsport IGCC matters.~~

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

~~(Unaudited)~~

~~On October 23, 2015,~~Potential Coal Plant Retirements

The Subsidiary Registrants periodically file Integrated Resource Plans (IRP) with their state regulatory commissions. The IRPs provide a view of forecasted energy needs over a long term (10 to 20 years) and options being considered to meet those needs. Recent IRPs filed by the Subsidiary Registrants included planning assumptions to potentially retire certain coal-fired generating facilities in North Carolina, Florida and Indiana earlier than their current estimated useful lives primarily because facilities do not have the requisite emission control equipment to meet EPA ~~published~~regulations recently approved or proposed.

The table below contains the net carrying value of generating facilities planned for retirement or included in recent IRPs as evaluated for potential retirement. Dollar amounts in the ~~Federal Register~~table below are included in Net property, plant and equipment on the ~~Clean Power Plan (CPP) rule for regulating carbon dioxide (CO~~2~~) emissions from existing fossil fuel-fired electric generating units (EGUs). The CPP establishes CO~~2 ~~emission rates~~Condensed Consolidated Balance Sheets as of March 31, 2017, and mass cap goals that apply to fossil fuel-fired generation. Under the CPP, states are required to develop and submit a final compliance plan, or an initial plan with an extension request, to the EPA by September 6, 2016, or no later than September 6, 2018, with an approved extension. These state plans are subject to EPA approval, with a federal plan applied to states that fail to submit a plan to the EPA or if a state plan is not approved. Legal challenges to the CPP have been filed by stakeholders and motions to stay the requirements of the rule pending the outcome of the litigation were granted by the U.S. Supreme Court in February 2016. Final resolution of these legal challenges could take several years. Compliance with CPP could cause the industry to replace coal generation with natural gas and renewables, especially in states that have significant CO2 reduction targets under the rule. Costs to operate coal-fired generation plants continue to grow due to increasing environmental compliance requirements, including ash management costs unrelated to CPP, and this may result in theexclude capitalized asset retirement of coal-fired generation plants earlier than the current end of useful lives. Duke Energy continues to evaluate the need to retire generating facilities and plans to seek regulatory recovery, where appropriate, for amounts that have not been recovered upon asset retirements. However, recovery is subject to future regulatory approval, including the recovery of carrying costs on remaining book values, and therefore cannot be assured.costs.



		Remaining Net
	Capacity	Book Value
	(in MW)	(in millions)
Duke Energy Carolinas
Allen Steam Station Units 1-3^(a)	585	$	167
Progress Energy and Duke Energy Florida
Crystal River Units 1 and 2^(b)	873	117
Duke Energy Indiana
Gallagher Units 2 and 4^(c)	280	135
Total Duke Energy	1,738	$	419


(a)	Duke Energy Carolinas will retire Allen Steam Station Units 1 through 3 by December 31, 2024, as part of the resolution of a lawsuit involving alleged New Source Review violations.


(b)	Duke Energy Florida will likely retire these coal units by 2018 to comply with environmental regulations.


(c)	Duke Energy Indiana committed to either retire or stop burning coal at Gallagher Units 2 and 4 by December 31, 2022, as part of the settlement of Edwardsport IGCC matters.

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

5. COMMITMENTS AND CONTINGENCIES

ENVIRONMENTAL

The Duke Energy ~~is subject to international, federal, state and local regulations regarding air and water quality, hazardous and solid waste disposal and other environmental matters. The Subsidiary~~ Registrants are subject to federal, state and local regulations regarding air and water quality, hazardous and solid waste disposal and other environmental matters. These regulations can be changed from time to time, imposing new obligations on the Duke Energy Registrants. The following environmental matters impact all of the Duke Energy Registrants.

Remediation Activities

In addition to ~~Asset Retirement Obligations~~asset retirement obligations (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.~~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 in the Condensed Consolidated Statements of Operations unless regulatory recovery of the costs is deemed probable.

The following tables contain information regarding reserves for probable and estimable costs related to the various environmental sites. These reserves are recorded in Other within Deferred Credits and Other Liabilities on the Condensed Consolidated Balance Sheets.

Six Months Ended June 30, 2016
Duke
Duke
Duke
Duke
Duke
Duke
Energy
Progress
Energy
Energy
Energy
Energy
(in millions) Energy
Carolinas
Energy
Progress
Florida
Ohio
Indiana
Balance at beginning of period $ 97
$ 10
$ 17
$ 3
$ 14
$ 54
$ 12
Provisions/adjustments 28
3
4
1
3
1
21
Cash reductions (7 ) (2 ) (4 ) (1 ) (3 ) (1 ) (1 )
Balance at end of period $ 118
$ 11
$ 17
$ 3
$ 14
$ 54
$ 32

Six Months Ended June 30, 2015
Duke
Duke
Duke
Duke
Duke
Duke
Energy
Progress
Energy
Energy
Energy
Energy
(in millions) Energy
Carolinas
Energy
Progress
Florida
Ohio
Indiana
Balance at beginning of period $ 97
$ 10
$ 17
$ 5
$ 12
$ 54
$ 10
Provisions/adjustments 5
—
2
—
2
1
3
Cash reductions (4 ) —
(2 ) (1 ) (1 ) (1 ) (1 )
Balance at end of period $ 98
$ 10
$ 17
$ 4
$ 13
$ 54
$ 12

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

~~(Unaudited)~~

The following tables contain information regarding reserves for probable and estimable costs related to the various environmental sites. These reserves are recorded in Other within Other Noncurrent Liabilities on the Condensed Consolidated Balance Sheets.



	Three Months Ended March 31, 2017
				Duke					Duke		Duke			Duke			Duke
	Duke			Energy		Progress			Energy		Energy			Energy			Energy
(in millions)	Energy			Carolinas		Energy			Progress		Florida			Ohio			Indiana			Piedmont
Balance at beginning of period	$	98		$	10	$	18		$	3	$	14		$	59		$	10		$	1
Provisions/adjustments	6			1		—			—		1			4			(1		)	1
Cash reductions	(6		)	—		(1		)	—		(1		)	(4		)	—			—
Balance at end of period	$	98		$	11	$	17		$	3	$	14		$	59		$	9		$	2



	Three Months Ended March 31, 2016
				Duke						Duke			Duke			Duke		Duke
	Duke			Energy			Progress			Energy			Energy			Energy		Energy
(in millions)	Energy			Carolinas			Energy			Progress			Florida			Ohio		Indiana		Piedmont
Balance at beginning of period	$	94		$	10		$	17		$	3		$	14		$	54	$	12	$	1
Provisions/adjustments	10			2			1			—			1			—		6		—
Cash reductions	(3		)	(1		)	(2		)	(1		)	(1		)	—		—		—
Balance at end of period	$	101		$	11		$	16		$	2		$	14		$	54	$	18	$	1

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	$	75	$	71
Duke Energy Carolinas	22		22
Duke Energy Ohio	42		36
Duke Energy Indiana	7		7
Piedmont			2

North Carolina and South Carolina Ash Basins

OnIn February 2, 2014, a break in a stormwater pipe beneath an ash basin at Duke Energy Carolinas’ retired Dan River Steam Station caused a release of ash basin water and ash into the Dan River. ~~On February 8, 2014, a permanent plug was installed in the stormwater pipe, stopping the release of materials into the river.~~ Duke Energy Carolinas estimates 30,000 to 39,000 tons of ash and 24 million to 27 million gallons of basin water were released into the river. In July 2014, Duke Energy completed remediation work identified by the EPA and continues to cooperate with the EPA's civil enforcement process. Future costs related to the Dan River release, including ~~pending or~~ future state or federal civil enforcement proceedings, future regulatory directives, natural resources damages, ~~additional pending litigation,~~ future claims or litigation and long-term environmental impact costs, cannot be reasonably estimated at this time.

The North Carolina Department of Environmental Quality (NCDEQ)~~, formerly the North Carolina Department of Environment and Natural Resources,~~ has historically assessed Duke Energy Carolinas and Duke Energy Progress with Notice of Violations (NOV) for violations that were most often resolved through satisfactory corrective actions and minor, if any, fines or penalties. Subsequent to the Dan River ~~matter discussed above,~~ash release, Duke Energy Carolinas and Duke Energy Progress have been served with a higher level of ~~Notices of Violation (NOVs),~~NOVs, including assessed penalties for violations at L.V. Sutton Combined Cycle Plant (Sutton) and Dan River Steam Station. In August 2014, NCDEQ issued an NOV for alleged groundwater violations at Duke Energy Progress' L.V. Sutton Plant. On March 10, 2015, NCDEQ issued a civil penalty of approximately $25 million to Duke Energy Progress for environmental damages related to groundwater contamination at the L.V. Sutton Plant. On February 8, 2016, NCDEQ assessed a penalty of approximately $6.8 million, including enforcement costs, against Duke Energy Carolinas related to stormwater pipes and associated discharges at the Dan River Steam Station. Duke Energy Carolinas recorded a charge in December 2015 for this penalty. See "Litigation" section below for additional discussion of matters related to these penalties. These fines and penalties are unprecedented and were not consistent with historic enforcement practices of NCDEQ. Based on historic practices the expected liability of any existing notice of violations would not be material. Duke Energy Carolinas and Duke Energy Progress cannot predict whether the NCDEQ will assess future penalties related to existing unresolved NOVs and if such penalties would be material.

~~Asset retirement obligations recorded on the Duke Energy Carolinas and Duke Energy Progress Condensed Consolidated Balance Sheets at June 30, 2016 and December 31, 2015, include the legal obligation~~ See "NCDEQ Notices of Violation" section below for closure of coal ash basins and the disposal of related ash as a result of the North Carolina Coal Ash Management Act of 2014, as amended (Coal Ash Act), and other agreements. In January 2016, NCDEQ published draft proposed risk classifications for sites not specifically delineated by the Coal Ash Act as high priority. These risk rankings were generally determined based on three primary criteria: structural integrity of the impoundments and impact to both surface and groundwater. NCDEQ categorized 12 basins at four sites as intermediate risk and four basins at 3 plants as low risk. Basins at high priority sites (Dan River, Riverbend, Asheville and Sutton) require closure through excavation including a combination of transferring the ash to an appropriate engineered landfill or conversion of the ash for beneficial use. Closure of high priority basins is required to be completed no later than August 1, 2019, except for Asheville which is required to be completed no later than August 1, 2022. Intermediate risk basins require closure through excavation including a combination of converting the basin to a lined industrial landfill, transferring of the ash to an appropriate engineered landfill or conversion of the ash for beneficial use. Closure of intermediate risk basins is required to be completed no later than December 31, 2024. Low risk basins require closure through either the combination of the installation and maintenance of a cap system and groundwater monitoring system designed to minimize infiltration and erosion or other closure options available to intermediate-risk basins. Closure of low risk basins is required to be completed no later than December 31, 2029. NCDEQ also categorized nine basins at six plants as “low-to-intermediate” risk, thereby not assigning a definitive risk ranking at that time. On May 18, 2016, NCDEQ issued new proposed risk classifications, ranking all originally proposed low risk and "low-intermediate" risk sites as intermediate.

On July 14, 2016, the Governor of North Carolina signed legislation which amends the Coal Ash Act and requires Duke Energy to undertake dam improvement projects and to provide access to a permanent alternative drinking water source to certain residents within a half mile of coal ash basin compliance boundaries and to certain other potentially impacted residents. The new legislation also ranks basins at the H.F. Lee, Cape Fear and Weatherspoon stations as intermediate risk consistent with Duke Energy's previously announced plans to excavate those basins. These specific intermediate basins require closure through excavation including a combination of transferring ash to an appropriate engineered landfill or conversion of the ash for beneficial use. Closure of these specific intermediate basins is required to be completed no later than August 1, 2028. Additionally, the new legislation requires the installation and operation of three large-scale coal ash beneficiation projects which are expected to produce reprocessed ash for use in the concrete industry. Closure of basins at sites with these beneficiation projects are required to be completed no later than December 31, 2029. Upon satisfactory completion of the dam improvement projects and installation of alternate drinking water sources by October 15, 2018, the legislation requires NCDEQ to reclassify intermediate risk sites, excluding H.F. Lee, Cape Fear and Weatherspoon, as low risk.

Per the Coal Ash Act, final proposed classifications were to be subject to Coal Ash Management Commission (Coal Ash Commission) approval. In March 2016, the Coal Ash Commission created by the Coal Ash Act was disbanded by the Governor of North Carolina based on a North Carolina Supreme Court ruling regarding the constitutionality of the body. The new legislation eliminates the Coal Ash Commission and transfers responsibility for ash basin closure oversight to the NCDEQ.

~~PART I~~

~~DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –~~

~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC~~

~~Combined Notes to Condensed Consolidated Financial Statements – (Continued)~~

~~(Unaudited)~~

Estimated asset retirement obligations, including impacts from the legislation signed by the Governor of North Carolina on July 14, 2016, have been recognized based on the assigned risk categories or a probability weighting of potential closure methods. Actual closure costs incurred could be materially different from current estimates that form the basis of the recorded asset retirement obligations. Costs incurred have been deferred as regulatory assets and recovery will be pursued through the normal ratemaking process with federal and state utility commissions, which permit recovery of necessary and prudently incurred costs associated with Duke Energy’s regulated operations.

~~Coal Combustion Residuals~~

On April 17, 2015, the EPA published in the Federal Register a rule to regulate the disposal of CCR from electric utilities as solid waste. The federal regulation, which became effective in October 2015, classifies CCR as nonhazardous waste under Subtitle D of the Resource Conservation and Recovery Act and allows for beneficial use of CCR with some restrictions. The regulation applies to all new and existing landfills, new and existing surface impoundments receiving CCR and existing surface impoundments that are no longer receiving CCR but contain liquid located at stations currently generating electricity (regardless of fuel source). The rule establishes requirements regarding landfill design, structural integrity design and assessment criteria for surface impoundments, groundwater monitoring and protection procedures and other operational and reporting procedures to ensure the safe disposal and management of CCR. Various industry and environmental parties have appealed the EPA's CCR rule in the D.C. Circuit Court of Appeals. On April 18, 2016, the EPA filed an unopposed motion with the federal court to settle five issues raised in litigation. On June 14, 2016, the court approved the motion with respect to all of those issues. Duke Energy does not expect a material impact from the settlement or that it will result in additional ~~asset retirement obligation adjustments.~~discussion.

In addition to the requirements of the federal CCR regulation, CCR landfills and surface impoundments will continue to be independently regulated by most states. As a result of the EPA rule, the Subsidiary Registrants recorded asset retirement obligation amounts during 2015.

~~LITIGATION~~

Duke Energy Carolinas and Duke Energy Progress

Ash Basin ~~Shareholder Derivative Litigation~~Closure Costs Deferral

Five shareholder derivative lawsuits were filed in Delaware Chancery Court relating to the release at Dan River and to the management of Duke Energy’s ash basins. On October 31, 2014, the five lawsuits were consolidated in a single proceeding titled ~~In Re Duke Energy Corporation Coal Ash Derivative Litigation~~. On December 2, 2014, plaintiffs filed a Corrected Verified Consolidated Shareholder Derivative Complaint (Consolidated Complaint). The Consolidated Complaint names as defendants several current and former Duke Energy officers and directors (Duke Energy Defendants). Duke Energy is named as a nominal defendant.

The Consolidated Complaint alleges the Duke Energy Defendants breached their fiduciary duties by failing to adequately oversee Duke Energy’s ash basins and that these breaches of fiduciary duty may have contributed to the incident at Dan River and continued thereafter. The lawsuit also asserts claims against the Duke Energy Defendants for corporate waste (relating to the money Duke Energy has spent and will spend as a result of the fines, penalties and coal ash removal) and unjust enrichment (relating to the compensation and director remuneration that was received despite these alleged breaches of fiduciary duty). The lawsuit seeks both injunctive relief against Duke Energy and restitution from the Duke Energy Defendants. On January 21, 2015, the Duke Energy Defendants filed a Motion to Stay and an alternative Motion to Dismiss. On August 31, 2015, the court issued an order staying the case which was lifted on March 24, 2016. On April 22,30, 2016, plaintiffs filed an Amended Verified Consolidated Shareholder Derivative Complaint (Amended Complaint) making the same allegations as in the Consolidated Complaint. The Duke Energy Defendants filed a motion to dismiss the Amended Complaint on June 21, 2016.

~~On March 5, 2015, shareholder Judy Mesirov filed a shareholder derivative complaint (Mesirov Complaint) in North Carolina state court. The lawsuit, styled~~ ~~Mesirov v. Good~~, is similar to the consolidated derivative action pending in Delaware Chancery Court and was filed against the same current directors and former directors and officers as the Delaware litigation. Duke Energy Corporation, Duke Energy Progress and Duke Energy Carolinas are named as nominal defendants. The Mesirov Complaint alleges that the Duke Energy Board of Directors was aware of Clean Water Act (CWA) compliance issues and failures to maintain structures in ash basins, but that the Board of Directors did not require Duke Energy Carolinas and Duke Energy Progress ~~to take action to remedy deficiencies. The Mesirov Complaint further alleges that the Board of Directors sanctioned activities to avoid compliance~~filed a joint petition with the ~~law by allowing improper influence~~NCUC seeking an accounting order authorizing deferral of ~~NCDEQ~~certain costs incurred in connection with federal and state environmental remediation requirements related to ~~minimize regulation and by opposing previously anticipated citizen suit litigation. The Mesirov Complaint seeks corporate governance reforms and damages relating to costs associated with~~ the ~~Dan River release, remediation~~permanent closure of ash basins and other ash storage units at coal-fired generating facilities that have provided or are ~~out~~providing generation to customers located in North Carolina. Initial comments were received in March 2017, and reply comments were filed on April 19, 2017. Duke Energy Carolinas and Duke Energy Progress cannot predict the outcome of ~~compliance with~~this matter.

Duke Energy Carolinas

William States Lee Combined Cycle Facility

On April 9, 2014, the ~~CWA~~PSCSC granted Duke Energy Carolinas and ~~defending~~North Carolina Electric Membership Corporation (NCEMC) a Certificate of Environmental Compatibility and ~~payment~~Public Convenience and Necessity (CECPCN) for the construction and operation of ~~fines, penalties~~a 750-MW combined-cycle natural gas-fired generating plant at Duke Energy Carolinas' existing William States Lee Generating Station in Anderson, South Carolina. Duke Energy Carolinas began construction in July 2015 and ~~settlements relating~~estimates a cost to ~~criminal and civil investigations and lawsuits.~~build of $600 million for its share of the facility, including AFUDC. The ~~case was stayed until July 1, 2016.~~project is expected to be commercially available in late 2017. NCEMC will own approximately 13 percent of the project. On July ~~5, 2016,~~3, 2014, the ~~plaintiff~~South Carolina Coastal Conservation League (SCCL) and Southern Alliance for Clean Energy (SACE) jointly filed a Notice of ~~Voluntary Dismissal Without Prejudice, closing~~Appeal with the Court of Appeals of South Carolina (S.C. Court of Appeals) seeking the court's review of the PSCSC's decision, claiming the PSCSC did not properly consider a request related to a proposed solar facility prior to granting approval of the CECPCN. The S.C. Court of Appeals affirmed the PSCSC's decision on February 10, 2016, and on March 24, 2016, denied a request for rehearing filed by SCCL and SACE. On April 21, 2016, SCCL and SACE petitioned the South Carolina Supreme Court for review of the S.C. Court of Appeals decision. On March 24, 2017, the South Carolina Supreme Court denied the request for review, thus concluding the matter.

William States Lee III Nuclear Station

In December 2007, Duke Energy Carolinas applied to the NRC for combined operating licenses (COLs) for two Westinghouse Electric Company (Westinghouse) AP1000 reactors for the proposed William States Lee III Nuclear Station to be located at a site in Cherokee County, South Carolina. The NCUC and PSCSC have concurred with the prudency of Duke Energy Carolinas decisions to incur certain project development and preconstruction costs through several separately issued orders, although full cost recovery is not guaranteed. In December 2016, the NRC issued a COL for each reactor. Duke Energy Carolinas is not required to build the nuclear reactors as a result of the COLs being issued.

On March 29, 2017, Westinghouse filed for voluntary Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of New York. Duke Energy Carolinas is monitoring the bankruptcy proceedings to assess the impact it will have on the future construction of nuclear plants.

Duke Energy Progress

Storm Cost Deferral Filing

On December 16, 2016, Duke Energy Progress filed a petition with the NCUC requesting an accounting order to defer certain costs incurred in connection with response to Hurricane Matthew and other significant storms in 2016. Duke Energy Progress proposed in the filing to true-up the total costs quarterly through August 2017. The current estimate of incremental operation and maintenance and capital costs is $116 million. On March 15, 2017, the Public Staff filed comments supporting deferral of a portion of Duke Energy Progress’ requested amount. Duke Energy Progress filed reply comments on April 12, 2017. Duke Energy Progress cannot predict the outcome of this matter.

~~In addition~~Western Carolinas Modernization Plan

On November 4, 2015, Duke Energy Progress announced a Western Carolinas Modernization Plan, which included retirement of the existing Asheville coal-fired plant, the construction of two 280‑MW combined-cycle natural gas plants having dual fuel capability, with the option to build a third natural gas simple cycle unit in 2023 based upon the outcome of initiatives to reduce the region's power demand. The plan also included upgrades to existing transmission lines and substations, installation of solar generation and a pilot battery storage project. These investments will be made within the next seven years. Duke Energy Progress is also working with the local natural gas distribution company to upgrade an existing natural gas pipeline to serve the natural gas plant.

On March 28, 2016, the NCUC issued an order approving a Certificate of Public Convenience and Necessity (CPCN) for the new combined-cycle natural gas plants, but denying the CPCN for the contingent simple cycle unit without prejudice to Duke Energy Progress to refile for approval in the future. On March 28, 2017, Duke Energy Progress filed an annual progress report for the construction of the combined-cycle plants with the NCUC, with an estimated cost of $893 million. Site preparation activities for the combined-cycle plants are underway and construction of these plants is scheduled to begin in fall 2017, with an expected in-service date in late 2019. Duke Energy Progress plans to file for future approvals related to the ~~above derivative complaints,~~proposed solar generation and pilot battery storage project.

The carrying value of the 376-MW Asheville coal-fired plant, including associated ash basin closure costs, of $471 million and $492 million are included in ~~2014,~~Generation facilities to be retired, net on Duke Energy ~~also received two shareholder litigation demand letters. The letters alleged that the members~~Progress' Condensed Consolidated Balance Sheet as of ~~the Board of Directors~~March 31, 2017 and certain officers breached their fiduciary duties by allowing the company to illegally dispose of and store coal ash pollutants. One of the letters also alleged a breach of fiduciary duty in the decision-making relating to the leadership changes following the close of the Progress Energy merger in July 2012.

By letter dated September 4, 2015, attorneys for the shareholders were informed that, on the recommendation of the Demand Review Committee formed to consider such matters, the Board of Directors concluded not to pursue potential claims against individuals. One of the shareholders, Mitchell Pinsly, sent a formal demand for records and Duke Energy responded to this request.December 31, 2016, respectively.

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

~~(Unaudited)~~

Duke Energy Florida

Hines Chiller Uprate Project

On ~~October 30, 2015, shareholder Saul Bresalier~~February 2, 2017, Duke Energy Florida filed a ~~shareholder derivative complaint (Bresalier Complaint)~~petition seeking approval to include in base rates the revenue requirement for a Chiller Uprate Project (Uprate Project) at the Hines Energy Complex. The Uprate Project was placed into service in March 2017 at a cost of approximately $150 million. The retail revenue requirement is approximately $19 million. On March 28, 2017, the FPSC issued an order approving the revenue requirement which were included in base rates for the first billing cycle of April 2017.

Levy Nuclear Project

On July 28, 2008, Duke Energy Florida applied to the NRC for COLs for two Westinghouse AP1000 reactors at Levy. In 2008, the FPSC granted Duke Energy Florida’s petition for an affirmative Determination of Need and related orders requesting cost recovery under Florida’s nuclear cost-recovery rule, together with the associated facilities, including transmission lines and substation facilities. In October 2016, the NRC issued COLs for the proposed Levy Nuclear Plant Units 1 and 2. Duke Energy Florida is not required to build the nuclear reactors as a result of the COLs being issued.

On January 28, 2014, Duke Energy Florida terminated the Levy engineering, procurement and construction agreement (EPC). Duke Energy Florida may be required to pay for work performed under the EPC. Duke Energy Florida recorded an exit obligation in 2014 for the termination of the EPC. This liability was recorded within Other in Deferred Credits and Other Liabilities with an offset primarily to Regulatory assets on the Condensed Consolidated Balance Sheets. Duke Energy Florida is allowed to recover reasonable and prudent EPC cancellation costs from its retail customers. On May 1, 2017, Duke Energy Florida filed a request with the FPSC to recover approximately $82 million of Levy Nuclear Project costs from retail customers in 2018. A hearing is scheduled in August 2017. Duke Energy Florida cannot predict the outcome of this matter.

On March 29, 2017, Westinghouse filed for voluntary Chapter 11 bankruptcy in the U.S. ~~District~~Bankruptcy Court for the Southern District of ~~Delaware. The lawsuit alleges that several current and former~~New York. Duke Energy ~~officers and directors (Bresalier Defendants) breached their fiduciary duties in connection with coal ash environmental issues,~~Florida is monitoring the ~~post-merger change in Chief Executive Officer (CEO) and oversight~~bankruptcy proceedings to assess the impact it will have on the future construction of ~~political contributions.~~ nuclear plants.

Duke Energy is named as a nominal defendant. The Bresalier Complaint contends that the Demand Review Committee failed to appropriately consider the shareholder’s earlier demand for litigation and improperly decided not to pursue claims against the Bresalier Defendants. The Bresalier Defendants filed a Motion to Dismiss the Bresalier litigation on January 15, 2016. In lieu of a response to the Motion to Dismiss, the plaintiff filed a Motion to Convert the Bresalier Defendants' Motion to Dismiss into a Motion for Summary Judgment and also for limited discovery. Following a hearing on June 15, 2016, the court denied the plaintiff's Motion to Convert and is requiring the parties to complete briefing on the Bresalier Defendants' Motion to Dismiss. Ohio

Ohio Valley Electric Corporation

On ~~July 29, 2016, the Bresalier Defendants filed an Amended Motion to Dismiss.~~

~~It is not possible to predict whether~~March 31, 2017, Duke Energy ~~will incur any liability or~~Ohio filed for approval to ~~estimate~~adjust its existing price stabilization rider (Rider PSR) to pass through net costs related to its contractual entitlement to capacity and energy from the ~~damages, if any,~~generating assets owned by OVEC. The PUCO approved Rider PSR, but set it ~~might incur in connection with these matters.~~

~~Progress Energy Merger Shareholder Litigation~~

On May 31, 2013, the Delaware Chancery Court consolidated four shareholder derivative lawsuits filed in 2012. The Court also appointed a lead plaintiff and counsel for plaintiffs and designated the case as ~~In Re Duke Energy Corporation Derivative Litigation~~. The lawsuit names as defendants the 11 members of the Board of Directors who were also members of the pre-merger Board of Directors (Legacy Duke Energy Directors). Duke Energy is named as a nominal defendant. The case alleges claims for breach of fiduciary duties of loyalty and careat zero dollars in connection with the ~~post-merger change~~most recent electric security plan. The application seeks to adjust Rider PSR as of April 1, 2017. Duke Energy Ohio is seeking deferral authority for net costs incurred from April 1, 2017, until the new rates under Rider PSR are put into effect. See Note 12 for additional discussion of Duke Energy Ohio's ownership interest in ~~CEO.~~ OVEC. Duke Energy Ohio cannot predict the outcome of this proceeding.

East Bend Coal Ash Basin Filing

On December ~~10, 2015, the Legacy~~2, 2016, Duke Energy ~~Directors~~Kentucky filed with the KPSC a ~~Motion~~request for a CPCN for construction projects necessary to ~~Dismiss~~close and repurpose an ash basin at the ~~litigation. The court heard oral argument on the motion on May 9, 2016.~~

~~Two shareholder Derivative Complaints, filed in 2012 in federal district court in Delaware, were consolidated~~East Bend facility as ~~Tansey v. Rogers, et al.~~ ~~The case alleges claims against the Legacy~~a result of current and proposed U.S. Environmental Protection Agency (EPA) regulations. Duke Energy ~~Directors~~Kentucky estimated a total cost of approximately $93 million in the filing and expects in-service date in the fourth quarter of 2018. Duke Energy Kentucky expects the KPSC to issue an order in the second quarter of 2017.

Base Rate Case

Natural Gas Pipeline Extension

Duke Energy Ohio is proposing to install a new natural gas pipeline in its Ohio service territory to increase system reliability and enable the retirement of older infrastructure. On January 20, 2017, Duke Energy Ohio filed an amended application with the Ohio Power Siting Board for ~~breach~~approval of ~~fiduciary duty and waste~~one of ~~corporate assets, as well as claims under Section 14(a) and 20(a)~~two proposed routes. If approved, construction of the ~~Exchange Act. Duke Energy~~pipeline extension is ~~named as a nominal defendant. On December 21, 2015, Plaintiff filed a Consolidated Amended Complaint asserting~~expected to be completed before the same claims contained in the original complaints. The Legacy Duke Energy Directors filed a Motion to Dismiss on February 19, 2016. On March 18, 2016, the Chancery Court Plaintiffs moved to intervene in the ~~Tansey~~ proceeding, asking the federal district court to stay the federal litigation in favor of the Delaware Chancery litigation, which was denied on June 27, 2016. Oral argument on the Legacy Duke Energy Directors' Motion to Dismiss2019/2020 winter season. A public hearing is scheduled for ~~August 24, 2016.~~June 15, 2017, and an adjudicatory hearing is scheduled to begin July 12, 2017. The proposed project involves the installation of a natural gas line and is estimated to cost between $86 million and $110 million, excluding AFUDC.

~~It is not possible to predict whether~~Advanced Metering Infrastructure

On April 25, 2016, Duke Energy ~~will incur any liability or to estimate the damages, if any, it might incur in connection~~Kentucky filed with the ~~remaining litigation.~~

~~Price Reporting Cases~~

KPSC an application for approval of a CPCN for the construction of advanced metering infrastructure. Duke Energy ~~Trading and Marketing, LLC (DETM), a non-operating~~Kentucky estimates the $49 million project, if approved, will take two years to complete. Duke Energy ~~affiliate, was~~Kentucky also requested approval to establish a ~~defendant, along with numerous other energy companies, in four class action lawsuits~~regulatory asset of approximately $10 million for the remaining book value of existing meter equipment and inventory to be replaced. Duke Energy Kentucky and the Kentucky Attorney General entered into a fifth single-plaintiff lawsuit pending in a consolidated federal court proceeding in Nevada. Each of these lawsuits contains similar claims that defendants allegedly manipulated natural gas markets by various means, including providing false information to natural gas trade publications and entering into unlawful arrangements and agreements in violation of the antitrust laws of the respective states. Plaintiffs seek damages in unspecified amounts.

~~In February 2016, DETM reached agreements in principle~~stipulation to settle ~~all of~~matters related to the ~~pending lawsuits. Settlement of~~application. An evidentiary hearing on the ~~single-plaintiff settlement~~application and stipulation was ~~finalized and paid in March~~held on December 8, 2016. ~~Settlement of the class action lawsuits are currently being finalized and will be subject to court approval. The settlement amounts are not material to Duke Energy.~~

~~Brazil Expansion Lawsuit~~

~~On August 9, 2011, the State of São Paulo sued~~ Duke Energy International Geracao Paranapenema S.A. (DEIGP) in Brazilian state court. The lawsuit claims DEIGP is under a continuing obligation to expand installed generation capacity in the State of São Paulo by 15 percent pursuant to a stock purchase agreement under which DEIGP purchased generation assets from the state. On August 10, 2011, a judge granted an injunction ordering DEIGP to present a detailed expansion plan in satisfaction of the 15 percent obligation. DEIGP has previously taken a position that the expansion obligation is no longer viable given changes that have occurred in the electric energy sector since privatization. DEIGP submitted its proposed expansion plan on November 11, 2011, but reserved objections regarding enforceability. In January 2013, DEIGP filed appeals in the federal courts, which are still pending, regarding various procedural issues. A decision on the merits in the first instance court is also pending. It is not possible toKentucky cannot predict ~~whether Duke Energy will incur any liability or to estimate the damages, if any, it might incur in connection with this matter.~~

~~Brazil Generation~~

Record drought conditions in Brazil during 2014 and 2015 negatively impacted DEIGP. A number of electric generators have filed lawsuits seeking relief in the Brazilian courts to mitigate hydrological exposure and diminishing dispatch levels. Some courts have granted injunction orders to limit the financial exposure of certain generators. The implication of these orders is that other electricity market participants not covered by the injunctions may be required to compensate for the financial impact of the liability limitations. The Independent Power Producer Association (APINE) filed one such lawsuit on behalf of DEIGP and other hydroelectric generators against the Brazilian electric regulatory agency (ANEEL). On July 2, 2015, an injunction was granted in favor of APINE limiting the financial exposure of DEIGP and the other plaintiff generators, until the merits of the lawsuit are determined. ANEEL's appeal of the injunction was denied on December 18, 2015. The outcome of these lawsuits is uncertain. It is not possible to predict the impact to Duke Energy from the outcome of ~~these matters.~~this matter.

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

~~(Unaudited)~~

Accelerated Natural Gas Service Line Replacement Rider

On January 20, 2015, Duke Energy Ohio filed an application for approval of an accelerated natural gas service line replacement program (ASRP). Under the ASRP, Duke Energy Ohio proposed to replace certain natural gas service lines on an accelerated basis over a 10-year period. Duke Energy Ohio also proposed to complete preliminary survey and investigation work related to natural gas service lines that are customer owned and for which it does not have valid records and, further, to relocate interior natural gas meters to suitable exterior locations where such relocation can be accomplished. Duke Energy Ohio's current projected total capital and operations and maintenance expenditures under the ASRP are approximately $240 million. The filing also sought approval of a rider mechanism (Rider ASRP) to recover related expenditures. Duke Energy Ohio proposed to update Rider ASRP on an annual basis. Intervenors opposed the ASRP, primarily because they believe the program is neither required nor necessary under federal pipeline regulation. On October 26, 2016, the PUCO issued an order denying the proposed ASRP. The PUCO did, however, encourage Duke Energy Ohio to work with the PUCO Staff and intervenors. Duke Energy Ohio filed an application for rehearing of the PUCO decision. In December 2016, the PUCO granted the request for the purpose of further review. Duke Energy Ohio cannot predict the outcome of this matter.

Energy Efficiency Cost Recovery

On March 28, 2014, Duke Energy Ohio filed an application for recovery of program costs, lost distribution revenue and performance incentives related to its energy efficiency and peak demand reduction programs. These programs are undertaken to comply with environmental mandates set forth in Ohio law. The PUCO approved Duke Energy Ohio’s application, but found that Duke Energy Ohio was not permitted to use banked energy savings from previous years in order to calculate the amount of allowed incentive. This conclusion represented a change to the cost recovery mechanism that had been agreed upon by intervenors and approved by the PUCO in previous cases. The PUCO granted the applications for rehearing filed by Duke Energy Ohio and an intervenor. On January 6, 2016, Duke Energy Ohio and the PUCO Staff entered into a stipulation, pending the PUCO's approval, to resolve issues related to performance incentives and the PUCO Staff audit of 2013 costs, among other issues. In December 2015, based upon the stipulation, Duke Energy Ohio re-established approximately $20 million of the revenues that had been previously reversed. On October 26, 2016, the PUCO issued an order approving the stipulation without modification. Intervenors requested a rehearing of the PUCO decision. In December 2016, the PUCO granted a rehearing for the purpose of further review. Duke Energy Ohio cannot predict the outcome of this matter.

2012 Natural Gas Rate Case/Manufactured Gas Plant Cost Recovery

Regional Transmission Organization Realignment

Duke Energy Ohio had a recorded liability for its exit obligation and share of MTEP costs, excluding MVP, of $90 million at March 31, 2017, and December 31, 2016, recorded within Other in Current liabilities and Other in Other Noncurrent Liabilities on the Condensed Consolidated Balance Sheets. The retail portions of MTEP costs billed by MISO are recovered by Duke Energy Ohio through a non-bypassable rider. As of March 31, 2017, and December 31, 2016, Duke Energy Ohio had $71 million recorded in Regulatory assets on the Condensed Consolidated Balance Sheets.

On December 29, 2011, MISO filed a tariff with the FERC providing for the allocation of MVP costs to a withdrawing owner based on monthly energy usage. The FERC set for hearing (i) whether MISO’s proposed cost allocation methodology to transmission owners who withdrew from MISO prior to January 1, 2012, is consistent with the tariff at the time of their withdrawal from MISO and, (ii) if not, what the amount of and methodology for calculating any MVP cost responsibility should be. In 2012, MISO estimated Duke Energy Ohio’s MVP obligation over the period from 2012 to 2071 at $2.7 billion, on an undiscounted basis. On July 16, 2013, a FERC Administrative Law Judge (ALJ) issued an initial decision. Under this Initial Decision, Duke Energy Ohio would be liable for MVP costs. Duke Energy Ohio filed exceptions to the initial decision, requesting FERC to overturn the ALJ’s decision.

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

Duke Energy Indiana

Coal Combustion Residual Plan

On March 17, 2016, Duke Energy Indiana filed with the IURC a request for approval of its first group of federally mandated Coal Combustion Residual (CCR) rule compliance projects (Phase I CCR Compliance Projects) to comply with the EPA's CCR rule. The projects in this Phase I filing are CCR compliance projects, including the conversion of Cayuga and Gibson stations to dry bottom ash handling and related water treatment. Duke Energy Indiana has requested timely recovery of approximately $380 million in retail capital costs and incremental operating and maintenance costs, including AFUDC, under a federal mandate tracker that provides for timely recovery of 80 percent of such costs and deferral with carrying costs of 20 percent of such costs for recovery in a subsequent retail base rate case. On January 24, 2017, Duke Energy Indiana and various Intervenors filed a settlement agreement with the IURC. Terms of the settlement include recovery of 60 percent of the estimated CCR compliance construction project capital costs through existing rider mechanisms and deferral of 40 percent of these costs until Duke Energy Indiana's next general retail rate case. The deferred costs will earn a return based on Duke Energy Indiana's long-term debt rate of 4.73 percent until costs are included in retail rates, at which time the deferred costs will earn a full return. Costs are to be capped at $365 million, plus actual AFUDC. Costs above the cap may be recoverable in the next rate case. Terms of the settlement agreement also require Duke Energy Indiana to perform certain reporting and groundwater monitoring. The settlement is subject to approval by the IURC. An evidentiary hearing was held on February 23, 2017, and Duke Energy Indiana filed a proposed order with the IURC on March 30, 2017. Duke Energy Indiana cannot predict the outcome of this matter.

FERC Transmission Return on Equity Complaints

Customer groups have filed with the FERC complaints against MISO and its transmission-owning members, including Duke Energy Indiana, alleging, among other things, that the current base rate of return on equity earned by MISO transmission owners of 12.38 percent is unjust and unreasonable. The complaints, among other things, claim that the current base rate of return on equity earned by MISO transmission owners should be reduced to 8.67 percent. On January 5, 2015, the FERC issued an order accepting the MISO transmission owners' adder of 0.50 percent to the base rate of return on equity based on participation in an RTO subject to it being applied to a return on equity that is shown to be just and reasonable in the pending return on equity complaints. On December 22, 2015, the presiding FERC ALJ in the first complaint issued an Initial Decision in which the base rate of return on equity was set at 10.32 percent. On September 28, 2016, the Initial Decision in the first complaint was affirmed by FERC, but is subject to rehearing requests. On June 30, 2016, the presiding FERC ALJ in the second complaint issued an Initial Decision setting the base rate of return on equity at 9.70 percent. The Initial Decision in the second complaint is pending FERC review. On April 14, 2017, the U.S. Court of Appeals for the District of Columbia Circuit, in Emera Maine v. FERC, reversed and remanded certain aspects of the methodology employed by FERC to establish rates of return on equity. This decision may affect the outcome of the complaints against Duke Energy Indiana. Duke Energy Indiana currently believes these matters will not have a material impact on its results of operations, cash flows and financial position.

Piedmont

North Carolina Integrity Management Rider Filings

On May 1, 2017, Piedmont filed a petition with the NCUC under the IMR mechanism to collect an additional $11.6 million in annual revenues, effective June 2017, based on the eligible capital investments closed to integrity and safety projects over the six-month period ending March 31, 2017. A ruling from the NCUC is pending.

Tennessee IMR Filings

In November 2016, Piedmont filed an annual report with the TPUC under the IMR mechanism seeking authority to collect an additional $1.7 million in annual revenues effective January 2017, based on the capital investments in integrity and safety projects over the 12-month period ending October 31, 2016. The TPUC approved the request at a hearing on April 10, 2017.

OTHER REGULATORY MATTERS

Atlantic Coast Pipeline

On September 2, 2014, Duke Energy, Dominion Resources (Dominion), Piedmont and Southern Company Gas announced the formation of Atlantic Coast Pipeline, LLC (ACP) to build and own the proposed Atlantic Coast Pipeline (ACP pipeline), an approximately 600-mile interstate natural gas pipeline running from West Virginia to North Carolina. The ACP pipeline is designed to meet the needs identified in RFPs by Duke Energy Carolinas, Duke Energy Progress and Piedmont. The ACP pipeline development costs are estimated between $5.0 billion to $5.5 billion. Dominion will build and operate the ACP pipeline and holds a leading ownership percentage in ACP of 48 percent. Duke Energy owns a 47 percent interest through its Gas Utilities and Infrastructure segment. Southern Company Gas maintains a 5 percent interest. See Note 12 for additional information related to Duke Energy's ownership interest.

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

Sabal Trail Transmission, LLC Pipeline

On May 4, 2015, Duke Energy acquired a 7.5 percent ownership interest in Sabal Trail Transmission, LLC (Sabal Trail) from Spectra Energy Partners, LP, a master limited partnership, formed by Enbridge Inc. (formerly Spectra Energy Corp.). Spectra Energy Partners, LP holds a 50 percent ownership interest in Sabal Trail and NextEra Energy has a 42.5 percent ownership interest. Sabal Trail is a joint venture that is constructing a 515-mile natural gas pipeline (Sabal Trail pipeline) to transport natural gas to Florida. Total estimated project costs are approximately $3.2 billion. The Sabal Trail pipeline will traverse Alabama, Georgia and Florida. The primary customers of the Sabal Trail pipeline, Duke Energy Florida and Florida Power & Light Company (FP&L), have each contracted to buy pipeline capacity for 25-year initial terms. On February 3, 2016, the FERC issued an order granting the request for a CPCN to construct and operate the pipeline. On September 7, 2016, FERC denied the intervenors' rehearing requests. On September 21, 2016, intervenors filed an appeal of FERC's CPCN orders to the U.S. Court of Appeals for the District of Columbia Circuit. Oral argument on the appeal was held on April 18, 2017, and a decision is expected in the summer of 2017. The Sabal Trail pipeline has received other required regulatory approvals and construction began in the summer of 2016, with an expected in-service date in mid-2017. See Note 12 for additional information related to Duke Energy's ownership interest.

Constitution Pipeline

Duke Energy owns a 24 percent ownership interest in Constitution Pipeline Company, LLC (Constitution). Constitution is a natural gas pipeline project slated to transport natural gas supplies from the Marcellus supply region in northern Pennsylvania to major northeastern markets. The pipeline will be constructed and operated by Williams Partners L.P., which has a 41 percent ownership share. The remaining interest is held by Cabot Oil and Gas Corporation and WGL Holdings, Inc.

Constitution remains steadfastly committed to pursuing the project and intends to pursue all available options to challenge the NYSDEC's decision. In light of the denial of the certification, Constitution revised its target in-service date of the project to be as early as the second half of 2018, assuming that the challenge process is satisfactorily and promptly concluded.

In July 2016, Constitution requested, and the FERC approved, an extension of the construction period and in-service deadline of the project to December 2018. Also in July, the FERC denied the New York Attorney General's (NYAG) complaint and request for a stay of the certificate order authorizing the project on the grounds that Constitution had improperly cut trees along the proposed route. The FERC found the complaint procedurally deficient and that there was no justification for a stay; it did find the filing constituted a valid request for investigation and thus referred the matter to FERC staff for further examination as may be appropriate. On November 22, 2016, the FERC denied the NYAG's request for reconsideration of this order.

Since April 2016, with the actions of the NYSDEC, Constitution stopped construction and discontinued capitalization of future development costs until the project's uncertainty is resolved. As a result, Duke Energy evaluated the investment in the Constitution project for other-than-temporary impairments (OTTIs). At this time, no OTTI has been determined and therefore no impairment charge to reduce the carrying value of the investment has been recorded. However, to the extent that the legal and regulatory proceedings have unfavorable outcomes, or if Constitution concludes that the project is not viable or does not go forward as legal and regulatory actions progress, the conclusions with respect to OTTIs could change and may require that an impairment charge of up to the recorded investment in the project, net of any cash and working capital returned, be recorded. Duke Energy will continue to monitor and update the OTTI analysis as required. Different assumptions could affect the timing and amount of any charge recorded in a period.

Pending the outcome of the matters described above, and when construction proceeds, Duke Energy remains committed to fund an amount in proportion to its ownership interest for the development and construction of the new pipeline. Duke Energy's total anticipated contributions are approximately $229 million.

See Note 12 for additional information related to ownership interest and carrying value of the investment.

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

Potential Coal Plant Retirements

The table below contains the net carrying value of generating facilities planned for retirement or included in recent 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, 2017, and exclude capitalized asset retirement costs.



		Remaining Net
	Capacity	Book Value
	(in MW)	(in millions)
Duke Energy Carolinas
Allen Steam Station Units 1-3^(a)	585	$	167
Progress Energy and Duke Energy Florida
Crystal River Units 1 and 2^(b)	873	117
Duke Energy Indiana
Gallagher Units 2 and 4^(c)	280	135
Total Duke Energy	1,738	$	419


(a)	Duke Energy Carolinas will retire Allen Steam Station Units 1 through 3 by December 31, 2024, as part of the resolution of a lawsuit involving alleged New Source Review violations.


(b)	Duke Energy Florida will likely retire these coal units by 2018 to comply with environmental regulations.


(c)	Duke Energy Indiana committed to either retire or stop burning coal at Gallagher Units 2 and 4 by December 31, 2022, as part of the settlement of Edwardsport IGCC matters.

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

5. 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 and other environmental matters. These regulations can be changed from time to time, imposing new obligations on the Duke Energy Registrants. The following environmental matters impact all of the Duke Energy Registrants.

Remediation Activities

In addition to asset retirement obligations (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 in the Condensed Consolidated Statements of Operations unless regulatory recovery of the costs is deemed probable.

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

The following tables contain information regarding reserves for probable and estimable costs related to the various environmental sites. These reserves are recorded in Other within Other Noncurrent Liabilities on the Condensed Consolidated Balance Sheets.



	Three Months Ended March 31, 2017
				Duke					Duke		Duke			Duke			Duke
	Duke			Energy		Progress			Energy		Energy			Energy			Energy
(in millions)	Energy			Carolinas		Energy			Progress		Florida			Ohio			Indiana			Piedmont
Balance at beginning of period	$	98		$	10	$	18		$	3	$	14		$	59		$	10		$	1
Provisions/adjustments	6			1		—			—		1			4			(1		)	1
Cash reductions	(6		)	—		(1		)	—		(1		)	(4		)	—			—
Balance at end of period	$	98		$	11	$	17		$	3	$	14		$	59		$	9		$	2



	Three Months Ended March 31, 2016
				Duke						Duke			Duke			Duke		Duke
	Duke			Energy			Progress			Energy			Energy			Energy		Energy
(in millions)	Energy			Carolinas			Energy			Progress			Florida			Ohio		Indiana		Piedmont
Balance at beginning of period	$	94		$	10		$	17		$	3		$	14		$	54	$	12	$	1
Provisions/adjustments	10			2			1			—			1			—		6		—
Cash reductions	(3		)	(1		)	(2		)	(1		)	(1		)	—		—		—
Balance at end of period	$	101		$	11		$	16		$	2		$	14		$	54	$	18	$	1



(in millions)
Duke Energy	$	71
Duke Energy Carolinas	22
Duke Energy Ohio	36
Duke Energy Indiana	7
Piedmont	2

North Carolina and South Carolina Ash Basins

In February 2014, a break in a stormwater pipe beneath an ash basin at Duke Energy Carolinas’ retired Dan River Steam Station caused a release of ash basin water and ash into the Dan River. Duke Energy Carolinas estimates 30,000 to 39,000 tons of ash and 24 million to 27 million gallons of basin water were released into the river. In July 2014, Duke Energy completed remediation work identified by the EPA and continues to cooperate with the EPA's civil enforcement process. Future costs related to the Dan River release, including future state or federal civil enforcement proceedings, future regulatory directives, natural resources damages, future claims or litigation and long-term environmental impact costs, cannot be reasonably estimated at this time.

The North Carolina Department of Environmental Quality (NCDEQ) has historically assessed Duke Energy Carolinas and Duke Energy Progress with Notice of Violations (NOV) for violations that were most often resolved through satisfactory corrective actions and minor, if any, fines or penalties. Subsequent to the Dan River ash release, Duke Energy Carolinas and Duke Energy Progress have been served with a higher level of NOVs, including assessed penalties for violations at L.V. Sutton Combined Cycle Plant (Sutton) and Dan River Steam Station. Duke Energy Carolinas and Duke Energy Progress cannot predict whether the NCDEQ will assess future penalties related to existing unresolved NOVs and if such penalties would be material. See "NCDEQ Notices of Violation" section below for additional discussion.

Duke Energy Carolinas and Duke Energy Progress

~~NCDEQ Notices of Violation~~

In August 2014, NCDEQ issued an NOV for alleged groundwater violations at Duke Energy Progress' L.V. Sutton Plant. On March 10, 2015, NCDEQ issued a civil penalty of approximately $25 million to Duke Energy Progress for environmental damages related to the groundwater contamination at the L.V. Sutton Plant. On April 9, 2015, Duke Energy Progress filed a Petition for Contested Case hearing in the Office of Administrative Hearings. In February 2015, NCDEQ issued an NOV for alleged groundwater violations at Duke Energy Progress' Asheville Plant. Duke Energy Progress responded to NCDEQ regarding this NOV.Ash Basin Closure Costs Deferral

On September 29, 2015, Duke Energy Progress and Duke Energy Carolinas entered into a settlement agreement with NCDEQ resolving all former, current and future groundwater penalties at all Duke Energy Carolinas and Duke Energy Progress coal facilities in North Carolina. Under the agreement, Duke Energy Progress paid approximately $6 million and Duke Energy Carolinas paid approximately $1 million. In addition to these payments, Duke Energy Progress and Duke Energy Carolinas will accelerate remediation actions at the Sutton, Asheville, Belews Creek and H.F. Lee plants. The ALJ entered a consent order resolving the contested case relating to the Sutton Plant and NCDEQ rescinded the NOVs relating to alleged groundwater violations at both the Sutton and Asheville plants.

On October 13, 2015, the Southern Environmental Law Center (SELC), representing multiple conservation groups, filed a lawsuit in North Carolina Superior Court seeking judicial review of the order approving the settlement agreement with NCDEQ. The conservation groups contend that the ALJ exceeded his statutory authority in approving a settlement that provided for past, present, and future resolution of groundwater issues at facilities which were not at issue in the penalty appeal. On December ~~18, 2015,~~30, 2016, Duke Energy Carolinas and Duke Energy Progress filed a ~~Motion~~joint petition with the NCUC seeking an accounting order authorizing deferral of certain costs incurred in connection with federal and state environmental remediation requirements related to ~~Dismiss~~ the ~~complaint.~~ permanent closure of ash basins and other ash storage units at coal-fired generating facilities that have provided or are providing generation to customers located in North Carolina. Initial comments were received in March 2017, and reply comments were filed on April 19, 2017. Duke Energy Carolinas and Duke Energy Progress cannot predict the outcome of this matter.

Duke Energy Carolinas

William States Lee Combined Cycle Facility

On ~~February 12, 2016,~~April 9, 2014, the ~~ALJ entered~~PSCSC granted Duke Energy Carolinas and North Carolina Electric Membership Corporation (NCEMC) a ~~new order clarifying that~~Certificate of Environmental Compatibility and Public Convenience and Necessity (CECPCN) for the ~~dismissal~~construction and operation of a 750-MW combined-cycle natural gas-fired generating plant at Duke Energy Carolinas' existing William States Lee Generating Station in Anderson, South Carolina. Duke Energy Carolinas began construction in July 2015 and estimates a cost to build of $600 million for its share of the ~~contested case only~~facility, including AFUDC. The project is expected to be commercially available in late 2017. NCEMC will own approximately 13 percent of the project. On July 3, 2014, the South Carolina Coastal Conservation League (SCCL) and Southern Alliance for Clean Energy (SACE) jointly filed a Notice of Appeal with the Court of Appeals of South Carolina (S.C. Court of Appeals) seeking the court's review of the PSCSC's decision, claiming the PSCSC did not properly consider a request related to a proposed solar facility prior to granting approval of the CECPCN. The S.C. Court of Appeals affirmed the PSCSC's decision on February 10, 2016, and on March 24, 2016, denied a request for rehearing filed by SCCL and SACE. On April 21, 2016, SCCL and SACE petitioned the South Carolina Supreme Court for review of the S.C. Court of Appeals decision. On March 24, 2017, the South Carolina Supreme Court denied the request for review, thus concluding the matter.

William States Lee III Nuclear Station

In December 2007, Duke Energy Carolinas applied to the ~~specific~~NRC for combined operating licenses (COLs) for two Westinghouse Electric Company (Westinghouse) AP1000 reactors for the proposed William States Lee III Nuclear Station to be located at a site in Cherokee County, South Carolina. The NCUC and PSCSC have concurred with the prudency of Duke Energy Carolinas decisions to incur certain project development and preconstruction costs through several separately issued orders, although full cost recovery is not guaranteed. In December 2016, the NRC issued a COL for each reactor. Duke Energy Carolinas is not required to build the nuclear reactors as a result of the COLs being issued.

Duke Energy Progress

Storm Cost Deferral Filing

Western Carolinas Modernization Plan

On March 28, 2016, the NCUC issued an order approving a Certificate of Public Convenience and Necessity (CPCN) for the new combined-cycle natural gas plants, but denying the CPCN for the contingent simple cycle unit without prejudice to Duke Energy Progress to refile for approval in the future. On March 28, 2017, Duke Energy Progress filed an annual progress report for the construction of the combined-cycle plants with the NCUC, with an estimated cost of $893 million. Site preparation activities for the combined-cycle plants are underway and construction of these plants is scheduled to begin in fall 2017, with an expected in-service date in late 2019. Duke Energy Progress plans to file for future approvals related to the proposed solar generation and pilot battery storage project.

The carrying value of the 376-MW Asheville coal-fired plant, including associated ash basin closure costs, of $471 million and $492 million are included in Generation facilities to be retired, net on Duke Energy Progress' Condensed Consolidated Balance Sheet as of March 31, 2017 and December 31, 2016, respectively.

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

Duke Energy Florida

Hines Chiller Uprate Project

On February 2, 2017, Duke Energy Florida filed a petition seeking approval to include in base rates the revenue requirement for a Chiller Uprate Project (Uprate Project) at the Hines Energy Complex. The Uprate Project was placed into service in March 2017 at a cost of approximately $150 million. The retail revenue requirement is approximately $19 million. On March 28, 2017, the FPSC issued an order approving the revenue requirement which were included in base rates for the first billing cycle of April 2017.

Levy Nuclear Project

Duke Energy Ohio

Ohio Valley Electric Corporation

East Bend Coal Ash Basin Filing

Base Rate Case

Natural Gas Pipeline Extension

Advanced Metering Infrastructure

On April 25, 2016, Duke Energy Kentucky filed with the KPSC an application for approval of a CPCN for the construction of advanced metering infrastructure. Duke Energy Kentucky estimates the $49 million project, if approved, will take two years to complete. Duke Energy Kentucky also requested approval to establish a regulatory asset of approximately $10 million for the remaining book value of existing meter equipment and inventory to be replaced. Duke Energy Kentucky and the Kentucky Attorney General entered into a stipulation to settle matters related to the application. An evidentiary hearing on the application and stipulation was held on December 8, 2016. Duke Energy Kentucky cannot predict the outcome of this matter.

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

Accelerated Natural Gas Service Line Replacement Rider

Energy Efficiency Cost Recovery

On March 28, 2014, Duke Energy Ohio filed an application for recovery of program costs, lost distribution revenue and performance incentives related to its energy efficiency and peak demand reduction programs. These programs are undertaken to comply with environmental mandates set forth in Ohio law. The PUCO approved Duke Energy Ohio’s application, but found that Duke Energy Ohio was not permitted to use banked energy savings from previous years in order to calculate the amount of allowed incentive. This conclusion represented a change to the cost recovery mechanism that had been agreed upon by intervenors and approved by the PUCO in previous cases. The PUCO granted the applications for rehearing filed by Duke Energy Ohio and an intervenor. On January 6, 2016, Duke Energy Ohio and the PUCO Staff entered into a stipulation, pending the PUCO's approval, to resolve issues ~~before~~related to performance incentives and the PUCO Staff audit of 2013 costs, among other issues. In December 2015, based upon the stipulation, Duke Energy Ohio re-established approximately $20 million of the revenues that had been previously reversed. On October 26, 2016, the PUCO issued an order approving the stipulation without modification. Intervenors requested a rehearing of the PUCO decision. In December 2016, the PUCO granted a rehearing for the purpose of further review. Duke Energy Ohio cannot predict the outcome of this matter.

2012 Natural Gas Rate Case/Manufactured Gas Plant Cost Recovery

Regional Transmission Organization Realignment

On December 29, 2011, MISO filed a tariff with the FERC providing for the allocation of MVP costs to a withdrawing owner based on monthly energy usage. The FERC set for hearing (i) whether MISO’s proposed cost allocation methodology to transmission owners who withdrew from MISO prior to January 1, 2012, is consistent with the tariff at the time of their withdrawal from MISO and, (ii) if not, what the amount of and methodology for calculating any MVP cost responsibility should be. In 2012, MISO estimated Duke Energy Ohio’s MVP obligation over the period from 2012 to 2071 at $2.7 billion, on an undiscounted basis. On July 16, 2013, a FERC Administrative Law Judge (ALJ) issued an initial decision. Under this Initial Decision, Duke Energy Ohio would be liable for MVP costs. Duke Energy Ohio filed exceptions to the initial decision, requesting FERC to overturn the ALJ’s decision.

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

Duke Energy Indiana

Coal Combustion Residual Plan

On March 17, 2016, Duke Energy Indiana filed with the IURC a request for approval of its first group of federally mandated Coal Combustion Residual (CCR) rule compliance projects (Phase I CCR Compliance Projects) to comply with the EPA's CCR rule. The projects in this Phase I filing are CCR compliance projects, including the conversion of Cayuga and Gibson stations to dry bottom ash handling and related water treatment. Duke Energy Indiana has requested timely recovery of approximately $380 million in retail capital costs and incremental operating and maintenance costs, including AFUDC, under a federal mandate tracker that provides for timely recovery of 80 percent of such costs and deferral with carrying costs of 20 percent of such costs for recovery in a subsequent retail base rate case. On January 24, 2017, Duke Energy Indiana and various Intervenors filed a settlement agreement with the IURC. Terms of the settlement include recovery of 60 percent of the estimated CCR compliance construction project capital costs through existing rider mechanisms and deferral of 40 percent of these costs until Duke Energy Indiana's next general retail rate case. The deferred costs will earn a return based on Duke Energy Indiana's long-term debt rate of 4.73 percent until costs are included in retail rates, at which time the deferred costs will earn a full return. Costs are to be capped at $365 million, plus actual AFUDC. Costs above the cap may be recoverable in the next rate case. Terms of the settlement agreement also require Duke Energy Indiana to perform certain reporting and groundwater monitoring. The settlement is subject to approval by the IURC. An evidentiary hearing was held on February 23, 2017, and Duke Energy Indiana filed a proposed order with the IURC on March 30, 2017. Duke Energy Indiana cannot predict the outcome of this matter.

FERC Transmission Return on Equity Complaints

Customer groups have filed with the FERC complaints against MISO and its transmission-owning members, including Duke Energy Indiana, alleging, among other things, that the current base rate of return on equity earned by MISO transmission owners of 12.38 percent is unjust and unreasonable. The complaints, among other things, claim that the current base rate of return on equity earned by MISO transmission owners should be reduced to 8.67 percent. On January 5, 2015, the FERC issued an order accepting the MISO transmission owners' adder of 0.50 percent to the base rate of return on equity based on participation in an RTO subject to it being applied to a return on equity that is shown to be just and reasonable in the pending return on equity complaints. On December 22, 2015, the presiding FERC ALJ in the ~~Petition for Contested Case.~~first complaint issued an Initial Decision in which the base rate of return on equity was set at 10.32 percent. On ~~March 10,~~September 28, 2016, the ~~court dismissed~~Initial Decision in the ~~SELC lawsuit~~first complaint was affirmed by FERC, but is subject to rehearing requests. On June 30, 2016, the presiding FERC ALJ in the second complaint issued an Initial Decision setting the base rate of return on equity at 9.70 percent. The Initial Decision in the second complaint is pending FERC review. On April 14, 2017, the U.S. Court of Appeals for the District of Columbia Circuit, in Emera Maine v. FERC, reversed and remanded certain aspects of the methodology employed by FERC to establish rates of return on equity. This decision may affect the outcome of the complaints against Duke Energy Indiana. Duke Energy Indiana currently believes these matters will not have a material impact on its results of operations, cash flows and financial position.

Piedmont

North Carolina Integrity Management Rider Filings

In October 2016, Piedmont filed a petition with the NCUC under the integrity management rider (IMR) mechanism seeking authority to collect an additional $8 million in annual revenues, effective December 2016, based on the ~~ALJ's entry~~eligible capital investments closed to integrity and safety projects over the six-month period ending September 30, 2016. In November 2016, the NCUC approved the request.

Tennessee IMR Filings

OTHER REGULATORY MATTERS

Atlantic Coast Pipeline

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

Sabal Trail Transmission, LLC Pipeline

On May 4, 2015, Duke Energy acquired a 7.5 percent ownership interest in Sabal Trail Transmission, LLC (Sabal Trail) from Spectra Energy Partners, LP, a master limited partnership, formed by Enbridge Inc. (formerly Spectra Energy Corp.). Spectra Energy Partners, LP holds a 50 percent ownership interest in Sabal Trail and NextEra Energy has a 42.5 percent ownership interest. Sabal Trail is a joint venture that is constructing a 515-mile natural gas pipeline (Sabal Trail pipeline) to transport natural gas to Florida. Total estimated project costs are approximately $3.2 billion. The Sabal Trail pipeline will traverse Alabama, Georgia and Florida. The primary customers of the Sabal Trail pipeline, Duke Energy Florida and Florida Power & Light Company (FP&L), have each contracted to buy pipeline capacity for 25-year initial terms. On February 3, 2016, the FERC issued an order granting the request for a CPCN to construct and operate the pipeline. On September 7, 2016, FERC denied the intervenors' rehearing requests. On September 21, 2016, intervenors filed an appeal of FERC's CPCN orders to the U.S. Court of Appeals for the District of Columbia Circuit. Oral argument on the appeal was held on April 18, 2017, and a decision is expected in the summer of 2017. The Sabal Trail pipeline has received other required regulatory approvals and construction began in the summer of 2016, with an expected in-service date in mid-2017. See Note 12 for additional information related to Duke Energy's ownership interest.

Constitution Pipeline

Pending the outcome of the matters described above, and when construction proceeds, Duke Energy remains committed to fund an amount in proportion to its ownership interest for the development and construction of the new ~~order.~~pipeline. Duke Energy's total anticipated contributions are approximately $229 million.

OnSee Note 12 for additional information related to ownership interest and carrying value of the investment.

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

Potential Coal Plant Retirements

The table below contains the net carrying value of generating facilities planned for retirement or included in recent 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, 2017, and exclude capitalized asset retirement costs.



		Remaining Net
	Capacity	Book Value
	(in MW)	(in millions)
Duke Energy Carolinas
Allen Steam Station Units 1-3^(a)	585	$	167
Progress Energy and Duke Energy Florida
Crystal River Units 1 and 2^(b)	873	117
Duke Energy Indiana
Gallagher Units 2 and 4^(c)	280	135
Total Duke Energy	1,738	$	419


(a)	Duke Energy Carolinas will retire Allen Steam Station Units 1 through 3 by December 31, 2024, as part of the resolution of a lawsuit involving alleged New Source Review violations.


(b)	Duke Energy Florida will likely retire these coal units by 2018 to comply with environmental regulations.


(c)	Duke Energy Indiana committed to either retire or stop burning coal at Gallagher Units 2 and 4 by December 31, 2022, as part of the settlement of Edwardsport IGCC matters.

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

5. COMMITMENTS AND CONTINGENCIES

ENVIRONMENTAL

Remediation Activities

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

The following tables contain information regarding reserves for probable and estimable costs related to the various environmental sites. These reserves are recorded in Other within Other Noncurrent Liabilities on the Condensed Consolidated Balance Sheets.



	Three Months Ended March 31, 2017
				Duke					Duke		Duke			Duke			Duke
	Duke			Energy		Progress			Energy		Energy			Energy			Energy
(in millions)	Energy			Carolinas		Energy			Progress		Florida			Ohio			Indiana			Piedmont
Balance at beginning of period	$	98		$	10	$	18		$	3	$	14		$	59		$	10		$	1
Provisions/adjustments	6			1		—			—		1			4			(1		)	1
Cash reductions	(6		)	—		(1		)	—		(1		)	(4		)	—			—
Balance at end of period	$	98		$	11	$	17		$	3	$	14		$	59		$	9		$	2



	Three Months Ended March 31, 2016
				Duke						Duke			Duke			Duke		Duke
	Duke			Energy			Progress			Energy			Energy			Energy		Energy
(in millions)	Energy			Carolinas			Energy			Progress			Florida			Ohio		Indiana		Piedmont
Balance at beginning of period	$	94		$	10		$	17		$	3		$	14		$	54	$	12	$	1
Provisions/adjustments	10			2			1			—			1			—		6		—
Cash reductions	(3		)	(1		)	(2		)	(1		)	(1		)	—		—		—
Balance at end of period	$	101		$	11		$	16		$	2		$	14		$	54	$	18	$	1



(in millions)
Duke Energy	$	71
Duke Energy Carolinas	22
Duke Energy Ohio	36
Duke Energy Indiana	7
Piedmont	2

North Carolina and South Carolina Ash Basins

In February ~~8, 2016, NCDEQ assessed~~2014, a ~~penalty~~break in a stormwater pipe beneath an ash basin at Duke Energy Carolinas’ retired Dan River Steam Station caused a release of ~~approximately $6.8 million, including enforcement costs, against~~ash basin water and ash into the Dan River. Duke Energy Carolinas estimates 30,000 to 39,000 tons of ash and 24 million to 27 million gallons of basin water were released into the river. In July 2014, Duke Energy completed remediation work identified by the EPA and continues to cooperate with the EPA's civil enforcement process. Future costs related to ~~storm water pipes~~the Dan River release, including future state or federal civil enforcement proceedings, future regulatory directives, natural resources damages, future claims or litigation and ~~associated discharges~~long-term environmental impact costs, cannot be reasonably estimated at this time.

The North Carolina Department of Environmental Quality (NCDEQ) has historically assessed Duke Energy Carolinas and Duke Energy Progress with Notice of Violations (NOV) for violations that were most often resolved through satisfactory corrective actions and minor, if any, fines or penalties. Subsequent to the Dan River ash release, Duke Energy Carolinas and Duke Energy Progress have been served with a higher level of NOVs, including assessed penalties for violations at L.V. Sutton Combined Cycle Plant (Sutton) and Dan River Steam Station. Duke Energy Carolinas ~~recorded~~and Duke Energy Progress cannot predict whether the NCDEQ will assess future penalties related to existing unresolved NOVs and if such penalties would be material. See "NCDEQ Notices of Violation" section below for additional discussion.

LITIGATION

Duke Energy

Duke Energy no longer has exposure to litigation matters related to the International Energy Disposal Group as a ~~charge~~result of the divestiture of the business in December 2016. See Note 2 for additional information related to the sale of International Energy.

Ash Basin Shareholder Derivative Litigation

Five shareholder derivative lawsuits were filed in Delaware Chancery Court relating to the release at Dan River and to the management of Duke Energy’s ash basins. On October 31, 2014, the five lawsuits were consolidated in a single proceeding titled In Re Duke Energy Corporation Coal Ash Derivative Litigation. On December 2, 2014, plaintiffs filed a Corrected Verified Consolidated Shareholder Derivative Complaint (Consolidated Complaint). The Consolidated Complaint names as defendants several current and former Duke Energy officers and directors (collectively, the Duke Energy Defendants). Duke Energy is named as a nominal defendant.

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

The Consolidated Complaint alleges the Duke Energy Defendants breached their fiduciary duties by failing to adequately oversee Duke Energy’s ash basins and that these breaches of fiduciary duty may have contributed to the incident at Dan River and continued thereafter. The lawsuit also asserts claims against the Duke Energy Defendants for corporate waste (relating to the money Duke Energy has spent and will spend as a result of the fines, penalties and coal ash removal) and unjust enrichment (relating to the compensation and director remuneration that was received despite these alleged breaches of fiduciary duty). The lawsuit seeks both injunctive relief against Duke Energy and restitution from the Duke Energy Defendants. On April 22, 2016, plaintiffs filed an Amended Verified Consolidated Shareholder Derivative Complaint (Amended Complaint) making the same allegations as in the Consolidated Complaint. The Duke Energy Defendants filed a motion to dismiss the Amended Complaint on June 21, 2016. On December 14, 2016, the Delaware Chancery Court entered an order dismissing the Amended Complaint. Plaintiffs filed an appeal to the Delaware Supreme Court on January 9, 2017. The parties have completed briefing in the case and a date for oral argument has not been set.

On October 30, 2015, shareholder Saul Bresalier filed a shareholder derivative complaint (Bresalier Complaint) in the U.S. District Court for ~~this penalty.~~ the District of Delaware. The lawsuit alleges that several current and former Duke Energy officers and directors (Bresalier Defendants) breached their fiduciary duties in connection with coal ash environmental issues, the post-merger change in Chief Executive Officer (CEO) and oversight of political contributions. Duke Energy is named as a nominal defendant. The Bresalier Complaint contends that the appointed Demand Review Committee failed to appropriately consider the shareholder’s earlier demand for litigation and improperly decided not to pursue claims against the Bresalier Defendants. On March 30, 2017, the court granted Defendants’ Motion to Dismiss on the claims relating to coal ash environmental issues and political contributions. A notice of appeal has not been filed. As discussed below, an agreement-in-principle has been reached to settle the merger related claims in the Bresalier Complaint, and those claims were also dismissed subject to that agreement.

It is not possible to predict whether Duke Energy will incur any liability or to estimate the damages, if any, it might incur in connection with these matters.

Progress Energy Merger Shareholder Litigation

Two shareholder Derivative Complaints, filed in 2012 in federal district court in Delaware, were consolidated as Tansey v. Rogers, et al. The case alleges claims against the Legacy Duke Energy Directors for breach of fiduciary duty and waste of corporate assets, as well as claims under Section 14(a) and 20(a) of the Exchange Act. Duke Energy is named as a nominal defendant. On December 21, 2015, Plaintiff filed a Consolidated Amended Complaint asserting the same claims contained in the original complaints.

The Legacy Duke Energy Directors have reached an agreement-in-principle to settle the Merger Chancery Litigation, conditioned on dismissal as well, of the Tansey v. Rogers, et al case and the merger related claims in the Bresalier Complaint discussed above, for a total of $27 million. The entire settlement amount is to be funded by insurance. The settlement amount, less court-approved attorney fees, will be payable to Duke Energy. Settlement documents have been submitted to the court for approval and a hearing has been set for July 13, 2017.

Price Reporting Cases

Duke Energy Trading and Marketing, LLC (DETM), a non-operating Duke Energy affiliate, was a defendant, along with numerous other energy companies, in four class-action lawsuits and a fifth single-plaintiff lawsuit in a consolidated federal court proceeding in Nevada. Each of these lawsuits contained similar claims that defendants allegedly manipulated natural gas markets by various means, including providing false information to natural gas trade publications and entering into unlawful arrangements and agreements in violation of the antitrust laws of the respective states. Plaintiffs sought damages in unspecified amounts. In February 2016, DETM reached agreements in principle to settle all of the pending lawsuits. Settlement of the single-plaintiff settlement was finalized and paid in March ~~2016,~~ 2016. The proposed settlement of the class action lawsuits was submitted to the Court and preliminarily approved on January 26, 2017. The Court will consider final approval of the class settlement following notice to the class members. The settlement amounts are not material to Duke Energy.

Duke Energy Carolinas ~~filed an appeal of this penalty. A summary judgment hearing is set for August 22, 2016, for this proceeding.~~and Duke Energy Progress

Coal Ash Insurance Coverage Litigation

In March 2017, Duke Energy Carolinas and Duke Energy Progress filed a civil action in North Carolina Superior Court against various insurance providers. The lawsuit seeks payment for coal ash related liabilities covered by third-party liability insurance policies. The insurance policies were issued between 1971 and 1986 and provide third-party liability insurance for property damage. The civil action seeks damages for breach of contract and indemnification for costs arising from the North Carolina Coal Ash Management Act of 2014, as amended, (Coal Ash Act) and the EPA CCR rule at 15 coal-fired plants in North Carolina and South Carolina. Duke Energy Carolinas and Duke Energy Progress cannot predict the outcome of this matter.

NCDEQ State Enforcement Actions

In the first quarter of 2013, SELC sent notices of intent to sue Duke Energy Carolinas and Duke Energy Progress related to alleged CWA violations from coal ash basins at two of their coal-fired power plants in North Carolina. The NCDEQ filed enforcement actions against Duke Energy Carolinas and Duke Energy Progress alleging violations of water discharge permits and North Carolina groundwater standards. The cases have been consolidated and are being heard before a single judge.

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

On August 16, 2013, the NCDEQ filed an enforcement action against Duke Energy Carolinas and Duke Energy Progress related to their remaining plants in North Carolina, alleging violations of the CWA and violations of the North Carolina groundwater standards. Both of these cases have been assigned to the judge handling the enforcement actions discussed above. SELC is representing several environmental groups who have been permitted to intervene in these cases.

~~On July 10, 2015, Duke Energy Carolinas and Duke Energy Progress filed two Motions~~The court issued orders in 2016 granting Motions' for Partial Summary Judgment ~~in the case on the basis that there is no longer either a genuine controversy or disputed material facts about the relief~~ for seven of the 14 North Carolina plants ~~with coal ash basins. On September 14, 2015,~~named in the court granted the Motions for Partial Summary Judgment pending court approval of the terms through an order. On April 4, 2016, the court issued an order granting Duke Energy Progress' Motion for Partial Summary Judgment for cases involving the H.F. Lee, Cape Fear and Weatherspoon plants. On June 1, 2016, the court issued an order granting Duke Energy Carolinas' and Duke Energy Progress' Motion for Partial Summary Judgment for cases involving the Asheville, Dan River, Riverbend and Sutton plants.enforcement actions. The litigation is concluded for these seven plants. Litigation continues for the remaining seven plants. In response to a motion for partial summary judgment on the groundwater claims filed by the environmental groups, on October 17, 2016, Duke Energy Carolinas and Duke Energy Progress filed a cross-motion for partial summary judgment on the groundwater claims. On February 13, 2017, the court issued an order denying both the environmental groups' motion for partial summary judgment and Duke Energy Carolinas and Duke Energy Progress' cross-motion for partial summary judgment. On March 15, 2017, Duke Energy Carolinas and Duke Energy Progress filed a Notice of Appeal to challenge the trial court’s denial of their cross-motion for partial summary judgment. The parties were unable to reach an agreement at mediation on April 18, 2017.

It is not possible to predict any liability or estimate any damages Duke Energy Carolinas or Duke Energy Progress might incur in connection with these matters.

Federal Citizens Suits

There are currently three cases filed in various North Carolina federal courts related to the Sutton, Buck and Mayo plants. Three other previously filed cases involving the Riverbend, Cape Fear and H.F. Lee plants were dismissed on June 7, 2016.

On September 12, 2013, Cape Fear River Watch, Inc., Sierra Club and Waterkeeper Alliance filed a citizen suit in the Federal District Court for the Eastern District of North Carolina. The lawsuit alleges unpermitted discharges to surface water and groundwater violations at the Sutton Plant. On June 9, 2014, the court granted Duke Energy Progress' request to dismiss the groundwater claims but rejected its request to dismiss the surface water claims. In response to a motion filed by the SELC on August 1, 2014, the court modified the original order to dismiss only the plaintiff's federal law claim based on hydrologic connections at Sutton Lake. The claims related to the alleged state court violations of the permits are back in the case. On August 26, 2015, the court suspended the proceedings until further order from the court.

~~PART I~~

~~DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –~~

~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC~~

~~Combined Notes to Condensed Consolidated Financial Statements – (Continued)~~

~~(Unaudited)~~

On September 3, 2014, three citizen suits were filed by various environmental groups: (i) a citizen suit in the United States Court for the Middle District of North Carolina alleging unpermitted discharges to surface water and groundwater violations at the Cape Fear Plant; (ii) in the United States Court for the Eastern District of North Carolina alleging unpermitted discharges to surface water and groundwater violations at the H.F. Lee Plant; and (iii) in the United States Court for the Middle District of North Carolina alleging unpermitted discharges to surface water and groundwater violations at the Buck Steam Station. Motions to Stay or Dismiss the proceedings were filed in each of the three cases. The proceedings related to Cape Fear and H.F. Lee were dismissed on June 8, 2016, closing these matters. On October 20, 2015, the court issued an order denying the motions to stay or dismiss in the Buck proceedings. Duke Energy Carolinas' motion seeking appellate review of the District Court's decision relating to Buck was denied on January 29, 2016. The court has set an April 2017 trial date in the Buck proceeding.

On June 13, 2016, the Roanoke River Basin Association filed a federal citizen suit in the Middle District of North Carolina alleging unpermitted discharges to surface water and groundwater violations at the Mayo Plant. On August 19, 2016, Duke Energy Progress ~~expects~~filed a Motion to ~~file~~Dismiss. On April 26, 2017, the court entered an order dismissing four of the claims in the federal citizen suit. Two claims relating to alleged violations of National Pollutant Discharge Elimination System permit provisions survived the motion to dismiss, and Duke Energy Progress’ response is due on May 10, 2017.

On March 16, 2017, the Roanoke River Basin Association served Duke Energy Progress with a ~~response~~60-day notice of intent to bring suit pursuant to the ~~complaint in third quarter~~citizen suit provision of ~~2016.~~the CWA for alleged violations of effluent standards and limitations at the Roxboro Plant.

It is not possible to predict whether ~~Duke Energy Carolinas or~~ Duke Energy Progress will incur any liability or to estimate the damages, if any, ~~they~~it might incur in connection with ~~these matters.~~this matter.

Five previously filed cases involving the Riverbend, Cape Fear, H.F. Lee, Sutton and Buck plants were dismissed or settled in 2016.

Potential Groundwater Contamination Claims

Beginning in May 2015, a number of residents living in the vicinity of the North Carolina facilities with ash basins received letters from the NCDEQ advising them not to drink water from the private wells on their land tested by the NCDEQ as the samples were found to have certain substances at levels higher than the criteria set by the North Carolina Department of Health and Human Services (DHHS). The criteria, in some cases, are considerably more stringent than federal drinking water standards established to protect human health and welfare. The Coal Ash Act requires additional groundwater monitoring and assessments for each of the 14 coal-fired plants in North Carolina, including sampling of private water supply wells. The data gathered through these Comprehensive Site Assessments (CSAs) will be used by NCDEQ to determine whether the water quality of these private water supply wells has been adversely impacted by the ash basins. Duke Energy has submitted CSAs documenting the results of extensive groundwater monitoring around coal ash basins at all 14 of the plants with coal ash basins. Generally, the data gathered through the installation of new monitoring wells and soil and water samples across the state have been consistent with historical data provided to state regulators over many years. The DHHS and NCDEQ sent follow-up letters on October 15, 2015, to residents near coal ash basins who have had their wells tested, stating that private well samplings at a considerable distance from coal ash ~~impoundments,~~basins, as well as some municipal water supplies, contain similar levels of vanadium and hexavalent chromium, which leads investigators to believe these constituents are naturally occurring. In March 2016, DHHS rescinded the advisories.

Duke Energy Carolinas and Duke Energy Progress have received formal demand letters from residents near Duke Energy Carolinas' and Duke Energy Progress' coal ash basins. The residents claim damages for nuisance and diminution in property value, among other things. The parties held three days of mediation discussions that ended at impasse. On January 6, 2017, Duke Energy Carolinas and Duke Energy Progress received the plaintiffs' notice of their intent to file suits should the matter not settle. The NCDEQ preliminarily approved Duke Energy’s permanent water solution plans on January 13, 2017, and as a result shortly thereafter, Duke Energy issued a press release, providing additional details regarding the homeowner compensation package. This package consists of three components: (i) a $5,000 goodwill payment to each eligible well owner to support the transition to a new water supply, (ii) where a public water supply is available and selected by the eligible well owner, a stipend to cover 25 years of water bills and (iii) the Property Value Protection Plan. The Property Value Protection Plan is a program offered by Duke Energy designed to guarantee eligible plant neighbors the fair market value of their residential property should they decide to sell their property during the time that the plan is offered. Duke Energy received a letter from Plaintiffs' counsel indicating their intent to file suit on February 2, 2017, should a settlement not be reached by that date. Plaintiff’s counsel did not file suit upon the expiration of the tolling agreement on February 2, 2017, and no suit has been filed to date. Duke Energy Carolinas and Duke Energy Progress have recognized reserves of $18 million and $4 million, respectively.

It is not possible to estimate the maximum exposure of loss, if any, that may occur in connection with claims, which might be made by these residents.

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

Asbestos-related Injuries and Damages Claims

Duke Energy Carolinas has experienced numerous claims for indemnification and medical cost reimbursement related to asbestos exposure. These claims relate to damages for bodily injuries alleged to have arisen from exposure to or use of asbestos in connection with construction and maintenance activities conducted on its electric generation plants prior to 1985. As of ~~June 30, 2016,~~March 31, 2017, there were 89111 asserted claims for non-malignant cases with the cumulative relief sought of up to ~~$24~~$29 million, and 8358 asserted claims for malignant cases with the cumulative relief sought of up to ~~$15~~$16 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 ~~$515~~$506 million at ~~June 30, 2016~~March 31, 2017 and ~~$536~~$512 million at December 31, ~~2015.~~2016. These reserves are classified in Other within ~~Deferred Credits and~~ Other Noncurrent Liabilities and Other within Current Liabilities on the Condensed Consolidated Balance Sheets. These reserves are based upon the minimum amount of the range of loss for current and future asbestos claims through ~~2033,~~2036, are recorded on an undiscounted basis and incorporate anticipated inflation. In light of the uncertainties inherent in a longer-term forecast, management does not believe they can reasonably estimate the indemnity and medical costs that might be incurred after ~~2033~~2036 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-insurance retention in 2008. Future payments up to the policy limit will be reimbursed by the third-party insurance carrier. The insurance policy limit for potential future insurance recoveries indemnification and medical cost claim payments is ~~$847~~$814 million in excess of the self-insured retention. Receivables for insurance recoveries were ~~$600~~$587 million at ~~June 30, 2016~~March 31, 2017 and ~~$599 million at~~ December 31, ~~2015.~~2016. These amounts are classified in Other within ~~Investments and~~ Other Noncurrent Assets and Receivables on the Condensed Consolidated Balance Sheets. Duke Energy Carolinas is not aware of any uncertainties regarding the legal sufficiency of insurance claims. Duke Energy Carolinas believes the insurance recovery asset is probable of recovery as the insurance carrier continues to have a strong financial strength rating.

Duke Energy Florida

Class Action Lawsuit

On February 22, 2016, a lawsuit was filed in the U.S. District Court for the Southern District of Florida on behalf of a putative class of Duke Energy Florida and FP&L’s customers in Florida. The suit alleges the State of Florida’s nuclear power plant cost recovery statutes (NCRS) are unconstitutional and pre-empted by federal law. Plaintiffs claim they are entitled to repayment of all money paid by customers of Duke Energy Florida and FP&L as a result of the NCRS, as well as an injunction against any future charges under those statutes. The constitutionality of the NCRS has been challenged unsuccessfully in a number of prior cases on alternative grounds. Duke Energy Florida and FP&L filed motions to dismiss the complaint on May 5, 2016. On September 21, 2016, the Court granted the motions to dismiss with prejudice. Plaintiffs filed a motion for reconsideration, which was denied. On January 4, 2017, plaintiffs filed a notice of appeal. Plaintiffs filed an appellate brief on March 16, 2017, and Duke Energy Florida filed responses on April 17, 2017. Duke Energy Florida cannot predict the outcome of this ~~matter.~~

~~PART I~~

~~DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –~~

~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC~~

~~Combined Notes to Condensed Consolidated Financial Statements – (Continued)~~

~~(Unaudited)~~

appeal.

Westinghouse Contract Litigation

On March 28, 2014, Duke Energy Florida filed a lawsuit against Westinghouse in the U.S. District Court for the Western District of North Carolina. The lawsuit seeks recovery of $54 million in milestone payments in excess of work performed under ~~the terminated Engineering, Procurement and Construction agreement (EPC)~~an EPC for Levy as well as a determination by the court of the amounts due to Westinghouse as a result of the termination of the EPC. Duke Energy Florida recognized an exit obligation as a result of the termination of the ~~EPC contract.~~EPC.

On March 31, 2014, Westinghouse filed a lawsuit against Duke Energy Florida in U.S. District Court for the Western District of Pennsylvania. The Pennsylvania lawsuit alleged damages under the EPC in excess of $510 million for engineering and design work, costs to end supplier contracts and an alleged termination fee.

On June 9, 2014, the judge in the North Carolina case ruled that the litigation will proceed in the Western District of North Carolina. ~~In November 2014, Westinghouse filed a Motion for Partial Judgment on the pleadings, which was denied on March 30, 2015. The trial date is set for October 17, 2016.~~ On July 11, 2016, Duke Energy Florida and Westinghouse filed separate Motions for Summary Judgment. On September 29, 2016, the court issued its ruling on the parties' respective Motions for Summary Judgment, ruling in favor of Westinghouse on a $30 million termination fee claim and dismissing Duke Energy Florida's $54 million refund claim, but stating that Duke Energy Florida could use the refund claim to offset any damages for termination costs. Westinghouse's claim for termination costs was unaffected by this ruling and continued to trial. At trial, Westinghouse reduced its claim for termination costs from $482 million to $424 million. Following a trial on the matter, the court issued its final order in December 2016 denying Westinghouse’s claim for termination costs and re-affirming its earlier ruling in favor of Westinghouse on the $30 million termination fee and Duke Energy Florida’s refund claim. Judgment was entered against Duke Energy Florida in the amount of approximately $34 million, which includes prejudgment interest. Westinghouse has appealed the trial court's order and Duke Energy Florida has cross-appealed.

It is not possible to predict the ultimate outcome of the ~~litigation, whether Duke Energy Florida will ultimately have any liability for terminating~~appeal of the ~~EPC contract or to estimate the damages, if any, it might incur in connection with these matters.~~trial court's order. Ultimate resolution of these matters could have a material effect on the results of operations, financial position or cash flows of Duke Energy Florida. However, appropriate regulatory recovery will be pursued for the retail portion of any costs incurred in connection with such resolution.

On March 29, 2017, Westinghouse filed Chapter 11 bankruptcy in the Southern District of New York, which could delay the timing of the appeal. Additional impacts, if any, of this bankruptcy filing on the resolution of the pending appeal and cross-appeal are unknown at this time.

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

MGP Cost Recovery Action

On December 30, 2011, Duke Energy ~~Ohio~~

~~Antitrust Lawsuit~~

Florida filed a lawsuit against FirstEnergy Corp. (FirstEnergy) to recover investigation and remediation costs incurred by Duke Energy Florida in connection with the restoration of two former MGP sites in Florida. Duke Energy Florida alleged that FirstEnergy, as the successor to Associated Gas & Electric Co., owes past and future contribution and response costs of up to $43 million for the investigation and remediation of MGP sites. On December 6, 2016, the trial court entered judgment against Duke Energy Florida in the case. In January ~~2008, four plaintiffs, including individual, industrial and nonprofit customers,~~2017, Duke Energy Florida appealed the decision to the U.S. Court of Appeals for the 6th Circuit. Duke Energy Florida cannot predict the outcome of this appeal.

Duke Energy Indiana

Benton County Wind Farm Dispute

On December 16, 2013, Benton County Wind Farm LLC (BCWF) filed a lawsuit against Duke Energy ~~Ohio in federal court in the Southern District of Ohio. Plaintiffs alleged~~Indiana seeking damages for past generation losses totaling approximately $16 million alleging Duke Energy ~~Ohio conspired~~Indiana violated its obligations under a 2006 PPA by refusing to ~~provide inequitable and unfair price advantages for certain large business consumers by entering into nonpublic option agreements in exchange for their withdrawal of challenges~~offer electricity to the market at negative prices. Damage claims continue to increase during times that BCWF is not dispatched. Under 2013 revised MISO market rules, Duke Energy ~~Ohio’s Rate Stabilization Plan implemented~~Indiana is required to make a price offer to MISO for the power it proposes to sell into MISO markets and MISO determines whether BCWF is dispatched. Because market prices would have been negative due to increased market participation, Duke Energy Indiana determined it would not bid at negative prices in ~~early 2005. In March 2014, a federal judge certified this matter as a class action. Plaintiffs alleged claims of antitrust violations under~~order to balance customer needs against BCWF's need to run. BCWF contends Duke Energy Indiana must bid at the ~~federal Robinson Patman Act as well as fraud~~lowest negative price to ensure dispatch, while Duke Energy Indiana contends it is not obligated to bid at any particular price, that it cannot ensure dispatch with any bid and ~~conspiracy allegations under~~that is has reasonably balanced the ~~federal Racketeer Influenced and Corrupt Organizations statute and the Ohio Corrupt Practices Act.~~

~~During~~parties' interests. On July 6, 2015, the parties received preliminary court approval of a settlement agreement. Duke Energy Ohio included a litigation reserve of $81 million in Other within Current Liabilities on the Consolidated Balance Sheet at December 31, 2015. Duke Energy Ohio recognized pretax charges of $71 million and $81 million in (Loss) Income from Discontinued Operations, net of tax in the Condensed Consolidated Statements of Operations and Comprehensive Income for the three and six months ended June 30, 2015, respectively. The settlement agreement was approved at a federal court hearing on April 19, 2016.

~~W.C. Beckjord Fuel Release~~

On August 18, 2014, approximately 9,000 gallons of fuel oil were inadvertently discharged into the Ohio River during a fuel oil transfer at the W.C. Beckjord generating station. The Ohio Environmental Protection Agency (Ohio EPA) issued a NOV related to the discharge. Duke Energy Ohio is cooperating with the Ohio EPA, the EPA and the U.S. ~~Attorney~~District Court for the Southern District of ~~Ohio. No NOV~~Indiana entered judgment against BCWF on all claims. BCWF appealed the decision and on December 9, 2016, the appeals court ruled in favor of BCWF. The matter has been ~~issued by~~remanded to a lower court to determine damages. A settlement conference is scheduled on May 31, 2017. Duke Energy Indiana cannot predict the ~~EPA and no penalty has been assessed. Total repair and remediation~~outcome of this matter. Ultimate resolution of this matter could have a material effect on the results of operations, financial position or cash flows of Duke Energy Indiana. However, appropriate regulatory recovery will be pursued for the retail portion of any costs ~~related to the release were not material. Other costs related to the release, including state or federal civil or criminal enforcement proceedings, cannot be reasonably estimated at this time.~~incurred in connection with such resolution.

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~~asbestos-related reserves and the exit obligation discussed above related to the termination of an EPC contract. Reserves are classified on the Condensed Consolidated Balance Sheets in Other within ~~Deferred Credits and~~ Other Noncurrent Liabilities and Accounts payable and Other within Current Liabilities. The reasonably possible range of loss in excess of recorded reserves is not material, other than as described above.

(in millions) June 30, 2016
December 31, 2015
Reserves for Legal Matters
Duke Energy $ 110
$ 166
Duke Energy Carolinas 14
11
Progress Energy 52
54
Duke Energy Progress 6
6
Duke Energy Florida 30
31
Duke Energy Ohio 4
80

~~PART I~~

~~DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –~~

~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC~~

~~Combined Notes to Condensed Consolidated Financial Statements – (Continued)~~

~~(Unaudited)~~



(in millions)	March 31, 2017		December 31, 2016
Reserves for Legal Matters
Duke Energy	$	91	$	98
Duke Energy Carolinas	23		23
Progress Energy	57		59
Duke Energy Progress	13		14
Duke Energy Florida	27		28
Duke Energy Ohio	4		4
Piedmont	2		2

OTHER COMMITMENTS AND CONTINGENCIES

General

As part of their normal business, the Duke Energy Registrants are party to various financial guarantees, performance guarantees and other contractual commitments to extend guarantees of credit and other assistance to various subsidiaries, investees and other third parties. These guarantees involve elements of performance and credit risk, which are not fully recognized on the Condensed Consolidated Balance Sheets and have unlimited maximum potential payments. However, the Duke Energy Registrants do not believe these guarantees will have a material effect on their results of operations, cash flows or financial position.

In addition, the Duke Energy Registrants enter into various fixed-price, noncancelable commitments to purchase or sell power or natural gas, take-or-pay arrangements, transportation, or throughput agreements and other contracts that may or may not be recognized on their respective Condensed Consolidated Balance Sheets. Some of these arrangements may be recognized at fair value on their respective Condensed Consolidated Balance Sheets if such contracts meet the definition of a derivative and the normal purchase/normal sale (NPNS) 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.

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

6. DEBT AND CREDIT FACILITIES

SUMMARY OF SIGNIFICANT DEBT ISSUANCES

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

Six Months Ended
June 30, 2016
Duke
Duke
Duke
Duke
Duke
Maturity Interest
Duke
Energy
Energy
Energy
Energy
Energy
Issuance Date Date Rate
Energy
(Parent)
Carolinas
Florida
Ohio
Indiana
Unsecured
April 2016^(a)
April 2023 2.875 % $ 350
$ 350
$ —
$ —
$ —
$ —
First Mortgage Bonds
March 2016^(b)
March 2023
2.500 % 500
—
500
—
—
—
March 2016^(b)
March 2046
3.875 % 500
—
500
—
—
—
May 2016^(c)
May 2046
3.750 %
500

—
—
—
—
500
June 2016^(b)
June 2046
3.700 %
250

—
—
—
250
—
Secured Debt

June 2016^(d)
March 2020
1.196 % 183
—
—
183
—
—
June 2016^(d)
September 2022
1.731 %
150

—
—
150
—
—
June 2016^(d)
September 2029 2.538 % 436
—
—
436
—
—
June 2016^(d)
March 2033
2.858 % 250
—
—
250
—
—
June 2016^(d)
September 2036
3.112 % 275
—
—
275
—
—
Total issuances $ 3,394
$ 350

$ 1,000
$ 1,294

$ 250

$ 500



				Three Months Ended March 31, 2017
						Duke		Duke
	Maturity	Interest		Duke		Energy		Energy
Issuance Date	Date	Rate		Energy		Florida		Ohio
Secured Debt
February 2017^(a)	June 2034	4.120	%	$	587	$	—	$	—
First Mortgage Bonds
January 2017^(b)	January 2020	1.850	%	250		250		—
January 2017^(b)	January 2027	3.200	%	650		650		—
March 2017^(c)	June 2046	3.700	%	100		—		100
Total issuances				$	1,587	$	900	$	100


(a)	Portfolio financing of four Texas and Oklahoma wind facilities. Secured by substantially all of the assets of these wind facilities and nonrecourse to Duke Energy. Proceeds were used to ~~pay down outstanding commercial paper~~reimburse Duke Energy for a portion of previously funded construction expenditures.


(b)	Debt issued to fund capital expenditures for ongoing construction and capital maintenance, to repay at maturity a $250 million aggregate principal amount of bonds due September 2017 and for general corporate purposes.


~~(b)~~(c)	Proceeds were used to fund capital expenditures for ongoing construction, capital maintenance and for general corporate purposes.


~~(c)~~	~~Proceeds~~ In April 2017, Duke Energy (Parent) issued $420 million of unsecured notes with a fixed interest rate of 3.364 percent and maturity date of April 2025. The net proceeds were used ~~to repay $325 million of unsecured debt due June 2016, $150 million of first mortgage bonds due July 2016 and for general corporate purposes.~~

~~(d)~~

Proceeds from the nuclear asset recovery bonds issued by DEFPF, a bankruptcy remote subsidiary of Duke Energy Florida, were used to acquire nuclear asset-recovery property from its parent, Duke Energy Florida. The nuclear asset-recovery bonds are payable only from and secured by the nuclear asset-recovery property. DEFPF is consolidated for financial reporting purposes; however, the nuclear asset-recovery bonds do not constitute a debt, liability or other legal obligation of, or interest in, Duke Energy Florida or any of its affiliates other than DEFPF. The assets of DEFPF, including the nuclear asset-recovery property, are not available to pay creditors of Duke Energy Florida or any of its affiliates. Duke Energy Florida used the proceeds from the sale to repay short-term borrowings under the intercompany money pool borrowing arrangement and make an equity distribution of $649 million to the ultimate parent, Duke Energy (Parent), which repaid short-term borrowings. The nuclear asset-recovery bonds are sequential pay amortizing bonds. The maturity date above represents the scheduled final maturity date for the bonds. See Notes 4 ~~and~~ 12 ~~for additional information.~~

~~PART I~~

~~DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –~~

~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC~~

~~Combined Notes~~ to ~~Condensed Consolidated Financial Statements – (Continued)~~refinance $400 million of unsecured debt at maturity and to repay outstanding commercial paper.

~~(Unaudited)~~

CURRENT MATURITIES OF LONG-TERM DEBT

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


(in millions)	Maturity Date	Interest Rate		June 30, 2016		Maturity Date	Interest Rate		March 31, 2017
Unsecured Debt
Duke Energy (Parent)	November 2016	2.150	%	$	500	August 2017	1.625	%	$	700
Duke Energy (Parent)	April 2017	1.009	%	400
Duke Energy	May 2017	15.530	%	56
Piedmont						September 2017	8.510	%	35
Secured Debt
Duke Energy	June 2017	2.075	%	45		June 2017	2.605	%	45
Duke Energy						June 2017	2.455	%	34
First Mortgage Bonds
Duke Energy Indiana	July 2016	0.979	%	150
Duke Energy Florida						September 2017	5.800	%	250
Duke Energy Progress						November 2017	1.252	%	200
Duke Energy Carolinas	December 2016	1.750	%	350		January 2018	5.250	%	400
Duke Energy Progress	March 2017	0.880	%	250
Tax-exempt Bonds
Duke Energy Carolinas	February 2017	3.600	%	77
Duke Energy Ohio^(a)	August 2027	1.280	%	50
Duke Energy Indiana^(b)	May 2035	1.092	%	44
Other^(c)				420
Other^(a)									313
Current maturities of long-term debt				$	2,342				$	1,977


~~(a)~~	~~Represents Duke Energy Kentucky's bonds with a mandatory put in December 2016.~~


~~(b)~~	~~The bonds have a mandatory put in December 2016.~~


~~(c)~~	~~Includes capital lease obligations, amortizing debt and small bullet maturities.~~

(a) Includes capital lease obligations, amortizing debt and small bullet maturities.

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

AVAILABLE CREDIT FACILITIES

Master Credit Facility

In March 2017, Duke Energy ~~has a~~amended its Master Credit Facility ~~with a~~to increase its capacity offrom $7.5 billion ~~through~~to $8 billion, and to extend the termination date of the facility from January ~~2020.~~30, 2020, to March 16, 2022. The amendment also added Piedmont as a borrower within the Master Credit Facility. Piedmont's separate $850 million credit facility was terminated in connection with the amendment. With the amendment, the Duke Energy Registrants, excluding Progress Energy (Parent), have borrowing capacity under the Master Credit Facility up to a specified sublimit for each borrower. Duke Energy has the unilateral ability at any time to increase or decrease the borrowing sublimits of each borrower, subject to a maximum sublimit for each borrower. The amount available under the Master Credit Facility has been reduced to backstop issuances of commercial paper, certain letters of credit and variable-rate demand tax-exempt bonds that may be put to the Duke Energy Registrants at the option of the holder. Duke Energy Carolinas and Duke Energy Progress are also required to each maintain $250 million of available capacity under the Master Credit Facility as security to meet obligations under plea agreements reached with the U.S. Department of Justice in 2015 related to violations at North Carolina facilities with ash basins. The table below includes the current borrowing sublimits and available capacity under the Master Credit Facility.


	June 30, 2016																					March 31, 2017
				Duke			Duke			Duke			Duke			Duke			Duke						Duke			Duke			Duke			Duke			Duke			Duke
	Duke			Energy			Energy			Energy			Energy			Energy			Energy			Duke			Energy			Energy			Energy			Energy			Energy			Energy
(in millions)	Energy			(Parent)			Carolinas			Progress			Florida			Ohio			Indiana			Energy			(Parent)			Carolinas			Progress			Florida			Ohio			Indiana			Piedmont
Facility size^(a)	$	7,500		$	3,475		$	800		$	1,000		$	1,200		$	425		$	600		$	8,000		$	3,400		$	1,100		$	1,000		$	950		$	450		$	600		$	500
Reduction to backstop issuances
Commercial paper^(b)	(1,673		)	(992		)	(300		)	(159		)	(47		)	(25		)	(150		)	(3,134		)	(1,822		)	(469		)	(402		)	—			(30		)	(150		)	(261		)
Outstanding letters of credit	(77		)	(70		)	(4		)	(2		)	(1		)	—			—			(71		)	(62		)	(4		)	(2		)	(1		)	—			—			(2		)
Tax-exempt bonds	(116		)	—			(35		)	—			—			—			(81		)	(81		)	—			—			—			—			—			(81		)	—
Coal ash set-aside	(500		)	—			(250		)	(250		)	—			—			—			(500		)	—			(250		)	(250		)	—			—			—			—
Available capacity	$	5,134		$	2,413		$	211		$	589		$	1,152		$	400		$	369		$	4,214		$	1,516		$	377		$	346		$	949		$	420		$	369		$	237


(a)	Represents the sublimit of each borrower. Certain sublimits were reallocated in May 2017 to provide additional liquidity to certain borrowers in light of near-term funding needs.


(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 in the Condensed Consolidated Balance Sheets.

~~PART I~~

~~DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –~~

~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC~~

~~Combined Notes to Condensed Consolidated Financial Statements – (Continued)~~

~~(Unaudited)~~

~~Piedmont Bridge Facility~~

In connection with the Merger Agreement with Piedmont, Duke Energy entered into a $4.9 billion Bridge Facility with Barclays. The Bridge Facility, if drawn upon, may be used (i) to fund the cash consideration for the transaction and (ii) to pay certain fees and expenses in connection with the transaction. In November 2015, Barclays syndicated its commitment under the Bridge Facility to a broader group of lenders. Duke Energy does not expect to draw upon the Bridge Facility. The amount of the Bridge Facility is reduced by any financings related to the Piedmont acquisition entered into by Duke Energy, and has accordingly been reduced to approximately $3.2 billion as a result of the Equity Forwards described in Note 13 ~~and $1 billion of commitments under a term loan amended and restated as of August 1, 2016, described below. Refer to Note~~ 2 ~~for additional information on the Piedmont acquisition.~~

~~Term Loan Facility~~

On February 22, 2016, Duke Energy entered into a six-month term loan facility with commitments totaling $1.0 billion (the February 2016 Term Loan). As of June 30, 2016, $100 million was outstanding under the February 2016 Term Loan. On August 1, 2016, Duke Energy and each of the lenders under the February 2016 Term Loan amended and restated certain terms of this facility, resulting in aggregate commitments of $1.5 billion and extending the maturity date to July 31, 2017.

As of August 1, 2016, $100 million has been drawn under the amended and restated term loan (the August 2016 Term Loan). The remaining $1.4 billion of commitments under the August 2016 Term Loan can be drawn in up to two separate borrowings, which must occur no later than 90 calendar days following August 1, 2016. Any borrowings under the August 2016 Term Loan will be used to manage short-term liquidity, including funding a portion of the Piedmont acquisition, and for general corporate purposes. The terms and conditions of the August 2016 Term Loan are generally consistent with those governing Duke Energy’s Master Credit Facility.

~~Solar Facilities Financing~~

In August 2016, Emerald State Solar, LLC, an indirect wholly owned subsidiary of Duke Energy, entered into a portfolio financing of approximately 22 North Carolina Solar facilities. The $333 million term loan facility consists of Tranche A of $228 million due in June 2034 secured by substantially all the assets of the solar facilities and Tranche B of $105 million due in June 2020 secured by an Equity Contribution Agreement with Duke Energy. The initial interest rate on the loans is six months London Interbank Offered Rate (LIBOR) plus an applicable margin. The initial applicable margin is 1.75 percent with 0.125 percent increases every three years thereafter. In connection with this debt issuance, Emerald State Solar, LLC entered into two interest rate swaps to convert the substantial majority of the loan interest payments from variable rates to fixed rates of approximately 1.81 percent for Tranche A and 1.38 percent for Tranche B, plus the applicable margin.

7. GOODWILL AND INTANGIBLE ASSETS

GOODWILL

Duke Energy

The following table presents the goodwill by reportable operating segment ~~for~~on Duke ~~Energy.~~

~~Duke Energy~~Energy's Condensed Consolidated Balance Sheets at March 31, 2017 and December 31, 2016.

Regulated
International
Commercial

(in millions) Utilities
Energy
Portfolio
Total
Goodwill at December 31, 2015 $ 15,950
$ 271
$ 122
$ 16,343
Foreign exchange changes —
14
—
14
Goodwill at June 30, 2016 $ 15,950
$ 285
$ 122
$ 16,357



	Electric Utilities		Gas Utilities		Commercial
(in millions)	and Infrastructure		and Infrastructure		Renewables		Total
Goodwill	$	17,379	$	1,924	$	122	$	19,425

Duke Energy Ohio

Duke Energy Ohio's Goodwill balance of $920 million, ~~is included in the Regulated~~allocated $596 million to Electric Utilities ~~operating segment~~ 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 ~~June 30, 2016~~March 31, 2017 and December 31, ~~2015.~~2016.

Progress Energy

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

Piedmont

Piedmont's Goodwill is included in the Gas Utilities and Infrastructure operating segment and there are no accumulated impairment charges. Effective November 1, 2016, Piedmont's fiscal year was changed from October 31 to December 31. Effective with this change, Piedmont changed the date of their annual impairment testing of goodwill from October 31 to August 31 to align with the other Duke Energy Registrants.

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

~~(Unaudited)~~

8. 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 in the Condensed Consolidated Statements of Operations and Comprehensive Income are presented in the following table.


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended March 31,
(in millions)	2016		2015		2016		2015		2017		2016
Duke Energy Carolinas
Corporate governance and shared service expenses^(a)	$	199	$	202	$	416	$	421	$	199	$	217
Indemnification coverages^(b)	5		6		11		12		6		5
JDA revenue^(c)	2		14		11		40		16		9
JDA expense^(c)	50		38		91		95		31		41
Intercompany natural gas purchases^(d)									1		—
Progress Energy
Corporate governance and shared service expenses^(a)	$	160	$	172	$	334	$	339	$	169	$	174
Indemnification coverages^(b)	9		9		17		19		10		9
JDA revenue^(c)	50		38		91		95		31		41
JDA expense^(c)	2		14		11		40		16		9
Intercompany natural gas purchases^(d)									19		—
Duke Energy Progress
Corporate governance and shared service expenses^(a)	$	89	$	93	$	189	$	194	$	103	$	100
Indemnification coverages^(b)	4		4		7		8		4		4
JDA revenue^(c)	50		38		91		95		31		41
JDA expense^(c)	2		14		11		40		16		9
Intercompany natural gas purchases^(d)									19		—
Duke Energy Florida
Corporate governance and shared service expenses^(a)	$	71	$	79	$	145	$	145	$	66	$	74
Indemnification coverages^(b)	5		5		10		11		6		5
Duke Energy Ohio
Corporate governance and shared service expenses^(a)	$	87	$	103	$	172	$	188	$	90	$	85
Indemnification coverages^(b)	1		1		2		4		1		1
Duke Energy Indiana
Corporate governance and shared service expenses^(a)	$	89	$	83	$	183	$	172	$	90	$	94
Indemnification coverages^(b)	2		2		4		4		2		2
Piedmont
Corporate governance and shared service expenses^(a)									$	6	$	—
Indemnification coverages^(b)									1		—
Intercompany natural gas sales^(d)									20		—

(a)

The Subsidiary Registrants are charged their proportionate share of corporate governance and other shared services costs, primarily related to human resources, ~~and~~ employee benefits, information technology, legal and accounting fees, as well as other third-party costs. These amounts are recorded in Operation, maintenance and other on the Condensed Consolidated Statements of Operations and Comprehensive Income.


(b)	The Subsidiary Registrants incur expenses related to certain indemnification coverages through Bison, Duke Energy’s wholly owned captive insurance subsidiary. These expenses are recorded in Operation, maintenance and other on the Condensed Consolidated Statements of Operations and Comprehensive Income.

(c)

Duke Energy Carolinas and Duke Energy Progress participate in a JDA, which allows the collective dispatch of power plants between the service territories to reduce customer rates. Revenues from the sale of power under the JDA are recorded in Operating Revenues on the Condensed Consolidated Statements of Operations and Comprehensive Income. Expenses from the purchase of power under the JDA are recorded in Fuel used in electric generation and purchased power on the Condensed Consolidated Statements of Operations and Comprehensive Income.

(d)

Piedmont provides long-term natural gas delivery service to Duke Energy Carolinas and Duke Energy Progress' natural gas-fired generation facilities. Piedmont recorded the sales in Operating Revenues – Regulated natural gas, and Duke Energy Carolinas and Duke Energy Progress recorded the related purchases in Operating Expenses – Cost of natural gas on their Condensed Consolidated Statements of Operations and Comprehensive Income. The amounts are not eliminated in accordance with rate-based accounting regulations. For the three months ended March 31, 2016, which was prior to the Piedmont acquisition, Piedmont recorded $19 million and $1 million of natural gas sales with Duke Energy Progress and Duke Energy Carolinas, respectively.

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

In addition to the amounts presented above, the Subsidiary Registrants record the impact on net income of other affiliate transactions, including rental of office space, participation in a money pool arrangement, other operational transactions and their proportionate share of certain charged expenses. See Note 6 to the Consolidated Financial Statements in the Annual Report on Form 10-K for the year ended December 31, 2016 for more information regarding money pool. The net impact of these transactions was not material for the three ~~and six~~ months ended ~~June 30,~~March 31, 2017 and 2016, ~~and 2015~~ for the Subsidiary Registrants.

As discussed in Note 12, 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 also include a subordinated note from the affiliate for a portion of the purchase price.

Equity Method Investments

~~Duke Energy Ohio's nonregulated indirect subsidiary, Duke Energy Commercial Asset Management (DECAM), owned generating plants~~Piedmont has related party transactions as a customer of its equity method investments in natural gas storage and transportation facilities. Below are expenses for the three months ended March 31, 2017 and 2016, which are included in ~~the Disposal Group sold~~Operating Expenses – Cost of natural gas on Piedmont's Condensed Consolidated Statement of Operations and Comprehensive Income.



		Three Months Ended March 31,
(in millions)	Type of expense	2017		2016
Cardinal	Transportation Costs	$	2	$	2
Pine Needle	Gas Storage Costs	2		3
Hardy Storage	Gas Storage Costs	2		2
Total		$	6	$	7

In association with these transactions, Piedmont has accounts payable to ~~Dynegy on April 2, 2015. On April 1, 2015, Duke Energy Ohio distributed~~ its ~~indirect ownership interest~~equity method investments of $2 million at March 31, 2017, and December 31, 2016. These amounts are included in ~~DECAM to a Duke Energy subsidiary and non-cash settled DECAM's intercompany loan~~Accounts payable ~~of $294 million. Refer to Note~~ 2 ~~for further information~~ on the ~~sale of the Disposal Group.~~

~~PART I~~

~~DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –~~

~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC~~

~~Combined Notes to~~ Condensed Consolidated ~~Financial Statements – (Continued)~~Balance Sheets.

~~(Unaudited)~~

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		Duke				Duke		Duke		Duke		Duke
	Energy		Progress		Energy		Energy		Energy		Energy		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Carolinas		Energy		Progress		Florida		Ohio		Indiana		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
June 30, 2016
March 31, 2017
Intercompany income tax receivable	$	10	$	90	$	—	$	—	$	15	$	6	$	19	$	139	$	47	$	48	$	8	$	—	$	—
Intercompany income tax payable	—		—		11		48		—		—		—		—		—		—		—		23		44

December 31, 2015
December 31, 2016
Intercompany income tax receivable	$	122	$	120	$	104	$	—	$	54	$	—	$	1	$	—	$	—	$	37	$	—	$	—	$	—
Intercompany income tax payable	—		—		—		96		—		47		—		37		90		—		1		3		38

9. 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 gas supply contracts to provide diversification, reliability and gas cost benefits to their customers. Interest rate swaps are used to manage interest rate risk associated with borrowings.

All derivative instruments not identified as NPNS are recorded at fair value as assets or liabilities on the Condensed Consolidated Balance Sheets. Cash collateral related to derivative instruments executed under master netting 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 may be executed to lock in components of current market interest rates. These instruments are later terminated prior to or upon the issuance of the corresponding debt.

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

Cash Flow Hedges

For a derivative designated as hedging the exposure to variable cash flows of a future transaction, referred to as a cash flow hedge, the effective portion of the derivative's gain or loss is initially reported as a component of other comprehensive income and subsequently reclassified into earnings once the future transaction ~~affects~~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 income (AOCI)~~AOCI for the three ~~and six~~ months ended ~~June 30, 2016,~~March 31, 2017, were not material. Duke Energy's interest rate derivatives designated as hedges include interest rate swaps used to hedge existing debt within the ~~International Energy and Renewables' businesses.~~Commercial Renewables business.

Undesignated Contracts

Undesignated contracts include contracts not designated as a hedge because they are accounted for under regulatory accounting and contracts that do not qualify for hedge accounting.

Duke Energy’s interest rate swaps for its ~~Regulated Utilities~~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.

As of ~~June 30,~~March 31, 2016, Duke Energy ~~has~~ entered into $1.4 billion of forward-starting interest rate swaps to manage interest rate exposure ~~for the expected financing of~~related to the Piedmont ~~acquisition.~~acquisition financing. The swaps dodid not qualify for hedge accounting and ~~are~~were marked-to-market, with any gains or losses included within earnings. ~~Unrealized~~For the three months ended March 31, 2016, unrealized losses on the swaps of ~~$75 million and $168~~$93 million were included within Interest Expense on ~~the~~Duke Energy's Condensed Consolidated Statements of ~~Operations for the three and six months ended June 30, 2016.~~Operations. The swaps ~~will be terminated~~were unwound in August 2016 in conjunction with the acquisition financing. See Note 2 for additional information related to the Piedmont acquisition.

~~PART I~~

~~DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –~~

~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC~~

~~Combined Notes to Condensed Consolidated Financial Statements – (Continued)~~

~~(Unaudited)~~

The following table shows notional amounts of outstanding derivatives related to interest rate ~~risk.~~risk as of March 31, 2017 and December 31, 2016.

June 30, 2016
Duke
Duke
Duke
Duke
Duke
Energy
Progress
Energy
Energy
Energy
(in millions) Energy
Carolinas
Energy
Progress
Florida
Ohio
Cash flow hedges^(a)
$ 663
$ —
$ —
$ —
$ —
$ —
Undesignated contracts 2,327
400
500
250
250
27
Total notional amount $ 2,990

$ 400

$ 500

$ 250

$ 250

$ 27


	December 31, 2015
			Duke				Duke		Duke		Duke				Duke				Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Duke		Energy		Progress		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Energy		Carolinas		Energy		Progress		Florida		Ohio
Cash flow hedges^(a)	$	700	$	—	$	—	$	—	$	—	$	—	$	750	$	—	$	—	$	—	$	—	$	—
Undesignated contracts	1,827		400		500		250		250		27		927		400		500		250		250		27
Total notional amount	$	2,527	$	400	$	500	$	250	$	250	$	27	$	1,677	$	400	$	500	$	250	$	250	$	27

(a) Duke Energy includes amounts related to consolidated VIEs of $750 million as of March 31, 2017 and December 31, 2016.


~~(a)~~
~~Duke Energy includes amounts related to consolidated VIEs of $463 million at June 30, 2016 and $497 million at December 31, 2015.~~

COMMODITY PRICE RISK

The Duke Energy Registrants are exposed to the impact of changes in the prices of electricity purchased and sold in bulk power markets and coal and natural ~~gas.~~gas purchases, including Piedmont's 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.

~~Regulated public utilities may have cost-based rate regulations~~ For the Subsidiary Registrants, bulk power electricity and ~~various~~coal and natural gas purchases flow through fuel adjustment clauses, formula based contracts or other cost ~~recovery mechanisms that result~~sharing mechanisms. Differences between the costs included in ~~a limited exposure to market volatility of commodity fuel prices. Financial~~rates and the incurred costs, including undesignated derivative contracts, where approved by the respective state regulatory commissions, can be used to manage the risk of price volatility. At June 30, 2016, substantially all of Duke Energy's open commodity derivative instruments were undesignated because they are ~~accounted for under regulatory accounting. Mark-to-market gains or losses on contracts that use regulatory accounting are~~largely deferred as regulatory ~~liabilities~~assets or regulatory ~~assets, respectively. Undesignated contracts expire as late as 2020.~~

~~The Subsidiary Registrants utilize cost-tracking mechanisms, commonly referred to as fuel adjustment clauses. These clauses~~liabilities. Piedmont policies allow for the ~~recovery~~use of ~~fuel~~financial instruments to hedge commodity price risks. The strategy and ~~fuel-related~~objective of these hedging programs are to use the financial instruments to reduce gas costs ~~including settlements of undesignated derivatives~~volatility for fuel commodities, and portions of purchased power costs through surcharges on customer rates. The difference between the costs incurred and the surcharge revenues is recorded as an adjustment to Fuel used in electric generation and purchased power – regulated or as Operating Revenues: Regulated electric on the Condensed Consolidated Statements of Operations, with an offsetting impact on regulatory assets or liabilities. Therefore, due to the regulatory accounting followed by the Subsidiary Registrants for undesignated derivatives, realized and unrealized gains and losses on undesignated commodity derivatives do not have an immediate impact on reported net income.customers.

Volumes

The tables below ~~show~~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.


	June 30, 2016							March 31, 2017
		Duke		Duke	Duke	Duke	Duke		Duke		Duke	Duke	Duke
	Duke	Energy	Progress	Energy	Energy	Energy	Energy	Duke	Energy	Progress	Energy	Energy	Energy
	Energy	Carolinas	Energy	Progress	Florida	Ohio	Indiana	Energy	Carolinas	Energy	Progress	Florida	Indiana	Piedmont
Electricity (gigawatt-hours)	7	—	—	—	—	—	7	184	—	—	—	—	184	—
Natural gas (millions of decatherms)	418	80	338	124	214	—	—
Natural gas (millions of dekatherms)								817	85	228	105	123	—	504


	December 31, 2015							December 31, 2016
		Duke		Duke	Duke	Duke	Duke		Duke		Duke	Duke	Duke
	Duke	Energy	Progress	Energy	Energy	Energy	Energy	Duke	Energy	Progress	Energy	Energy	Energy
	Energy	Carolinas	Energy	Progress	Florida	Ohio	Indiana	Energy	Carolinas	Energy	Progress	Florida	Indiana	Piedmont
Electricity (gigawatt-hours)	70	—	—	—	—	34	36	147	—	—	—	—	147	—
Natural gas (millions of decatherms)	398	66	332	117	215	—	—
Natural gas (millions of dekatherms)								890	91	269	118	151	1	529

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

~~(Unaudited)~~

LOCATION AND FAIR VALUE OF DERIVATIVE ASSETS AND LIABILITIES RECOGNIZED IN 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	June 30, 2016														March 31, 2017
			Duke				Duke		Duke		Duke		Duke				Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy		Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Commodity Contracts
Not Designated as Hedging Instruments
Current	$	64	$	8	$	20	$	8	$	12	$	5	$	31	$	58	$	16	$	30	$	19	$	11	$	—	$	9	$	2
Noncurrent	28		10		18		10		8		—		—		5		1		2		1		1		1		—		—
Total Derivative Assets – Commodity Contracts	$	92	$	18	$	38	$	18	$	20	$	5	$	31	$	63	$	17	$	32	$	20	$	12	$	1	$	9	$	2
Interest Rate Contracts
Designated as Hedging Instruments
Noncurrent															$	18	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Not Designated as Hedging Instruments
Current	$	3	$	—	$	3	$	1	$	2	$	—	$	—	2		—		2		—		2		—		—		—
Noncurrent	13		—		13		6		7		—		—
Total Derivative Assets – Interest Rate Contracts	$	16	$	—	$	16	$	7	$	9	$	—	$	—	$	20	$	—	$	2	$	—	$	2	$	—	$	—	$	—
Total Derivative Assets	$	108	$	18	$	54	$	25	$	29	$	5	$	31	$	83	$	17	$	34	$	20	$	14	$	1	$	9	$	2


Derivative Liabilities	June 30, 2016														March 31, 2017
			Duke				Duke		Duke		Duke		Duke				Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy		Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Commodity Contracts
Not Designated as Hedging Instruments
Current	$	84	$	7	$	77	$	18	$	59	$	—	$	1	$	32	$	—	$	17	$	1	$	17	$	—	$	—	$	14
Noncurrent	23		—		23		—		17		—		—		145		4		11		4		1		—		—		131
Total Derivative Liabilities – Commodity Contracts	$	107	$	7	$	100	$	18	$	76	$	—	$	1	$	177	$	4	$	28	$	5	$	18	$	—	$	—	$	145
Interest Rate Contracts
Designated as Hedging Instruments
Current	$	9	$	—	$	—	$	—	$	—	$	—	$	—	$	8	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Noncurrent	52		—		—		—		—		—		—		9		—		—		—		—		—		—		—
Not Designated as Hedging Instruments
Current^(a)	170		—		—		—		—		1		—
Current															1		—		—		—		—		1		—		—
Noncurrent	90		82		—		—		—		7		—		21		10		6		5		1		4		—		—
Total Derivative Liabilities – Interest Rate Contracts	$	321	$	82	$	—	$	—	$	—	$	8	$	—	$	39	$	10	$	6	$	5	$	1	$	5	$	—	$	—
Total Derivative Liabilities	$	428	$	89	$	100	$	18	$	76	$	8	$	1	$	216	$	14	$	34	$	10	$	19	$	5	$	—	$	145


~~(a)~~	~~Duke Energy amount includes $168 million related to forward-starting interest rate swaps associated with the Piedmont acquisition.~~

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

~~(Unaudited)~~


Derivative Assets	December 31, 2015														December 31, 2016
			Duke				Duke		Duke		Duke		Duke				Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy		Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Commodity Contracts
Not Designated as Hedging Instruments
Current	$	12	$	—	$	1	$	—	$	1	$	3	$	7	$	108	$	23	$	61	$	35	$	26	$	4	$	16	$	3
Noncurrent	4		—		4		—		4		—		—		32		10		21		10		11		1		—		—
Total Derivative Assets – Commodity Contracts	$	16	$	—	$	5	$	—	$	5	$	3	$	7	$	140	$	33	$	82	$	45	$	37	$	5	$	16	$	3
Interest Rate Contracts
Designated as Hedging Instruments
Noncurrent	$	4	$	—	$	—	$	—	$	—	$	—	$	—	$	19	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Not Designated as Hedging Instruments
Current	6		—		6		2		2		—		—		3		—		3		1		2		—		—		—
Total Derivative Assets – Interest Rate Contracts	$	10	$	—	$	6	$	2	$	2	$	—	$	—	$	22	$	—	$	3	$	1	$	2	$	—	$	—	$	—
Total Derivative Assets	$	26	$	—	$	11	$	2	$	7	$	3	$	7	$	162	$	33	$	85	$	46	$	39	$	5	$	16	$	3


Derivative Liabilities	December 31, 2015														December 31, 2016
			Duke				Duke		Duke		Duke		Duke				Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy		Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Commodity Contracts
Not Designated as Hedging Instruments
Current	$	256	$	32	$	222	$	77	$	145	$	—	$	—	$	43	$	—	$	12	$	—	$	12	$	—	$	2	$	35
Noncurrent	100		8		92		16		71		—		—		166		1		7		1		—		—		—		152
Total Derivative Liabilities – Commodity Contracts	$	356	$	40	$	314	$	93	$	216	$	—	$	—	$	209	$	1	$	19	$	1	$	12	$	—	$	2	$	187
Interest Rate Contracts
Designated as Hedging Instruments
Current	$	11	$	—	$	—	$	—	$	—	$	—	$	—	$	8	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Noncurrent	33		—		—		—		—		—		—		8		—		—		—		—		—		—		—
Not Designated as Hedging Instruments																													—
Current	4		—		3		—		—		1		—		1		—		—		—		—		1		—		—
Noncurrent	15		5		5		5		—		6		—		26		15		6		6		—		5		—		—
Total Derivative Liabilities – Interest Rate Contracts	$	63	$	5	$	8	$	5	$	—	$	7	$	—	$	43	$	15	$	6	$	6	$	—	$	6	$	—	$	—
Total Derivative Liabilities	$	419	$	45	$	322	$	98	$	216	$	7	$	—	$	252	$	16	$	25	$	7	$	12	$	6	$	2	$	187

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.

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

~~(Unaudited)~~


Derivative Assets	June 30, 2016																			March 31, 2017
				Duke						Duke			Duke			Duke		Duke					Duke						Duke			Duke			Duke		Duke
	Duke			Energy			Progress			Energy			Energy			Energy		Energy		Duke			Energy			Progress			Energy			Energy			Energy		Energy
(in millions)	Energy			Carolinas			Energy			Progress			Florida			Ohio		Indiana		Energy			Carolinas			Energy			Progress			Florida			Ohio		Indiana		Piedmont
Current
Gross amounts recognized	$	67		$	8		$	23		$	9		$	14		$	5	$	31	$	60		$	16		$	32		$	19		$	13		$	—	$	9	$	2
Gross amounts offset	(15		)	(3		)	(13		)	(6		)	(7		)	—		—		(7		)	—			(7		)	(1		)	(6		)	—		—		—
Net amounts presented in Current Assets: Other	$	52		$	5		$	10		$	3		$	7		$	5	$	31	$	53		$	16		$	25		$	18		$	7		$	—	$	9	$	2
Noncurrent
Gross amounts recognized	$	41		$	10		$	31		$	16		$	15		$	—	$	—	$	23		$	1		$	2		$	1		$	1		$	1	$	—	$	—
Gross amounts offset	(5		)	—			(5		)	—			(4		)	—		—		(2		)	(1		)	(1		)	(1		)	—			—		—		—
Net amounts presented in Investments and Other Assets: Other	$	36		$	10		$	26		$	16		$	11		$	—	$	—
Net amounts presented in Other Noncurrent Assets: Other																				$	21		$	—		$	1		$	—		$	1		$	1	$	—	$	—


Derivative Liabilities	June 30, 2016																			March 31, 2017
				Duke						Duke			Duke			Duke		Duke					Duke						Duke			Duke			Duke		Duke
	Duke			Energy			Progress			Energy			Energy			Energy		Energy		Duke			Energy			Progress			Energy			Energy			Energy		Energy
(in millions)	Energy			Carolinas			Energy			Progress			Florida			Ohio		Indiana		Energy			Carolinas			Energy			Progress			Florida			Ohio		Indiana		Piedmont
Current
Gross amounts recognized	$	263		$	7		$	77		$	18		$	59		$	1	$	1	$	41		$	—		$	17		$	1		$	17		$	1	$	—	$	14
Gross amounts offset	(15		)	(3		)	(13		)	(6		)	(7		)	—		—		(7		)	—			(7		)	(1		)	(6		)	—		—		—
Net amounts presented in Current Liabilities: Other	$	248		$	4		$	64		$	12		$	52		$	1	$	1	$	34		$	—		$	10		$	—		$	11		$	1	$	—	$	14
Noncurrent
Gross amounts recognized	$	165		$	82		$	23		$	—		$	17		$	7	$	—	$	175		$	14		$	17		$	9		$	2		$	4	$	—	$	131
Gross amounts offset	(5		)	—			(5		)	—			(4		)	—		—		(2		)	(1		)	(1		)	(1		)	—			—		—		—
Net amounts presented in Deferred Credits and Other Liabilities: Other	$	160		$	82		$	18		$	—		$	13		$	7	$	—
Net amounts presented in Other Noncurrent Liabilities: Other																				$	173		$	13		$	16		$	8		$	2		$	4	$	—	$	131

Derivative Assets December 31, 2015
Duke
Duke
Duke
Duke
Duke
Duke
Energy
Progress
Energy
Energy
Energy
Energy
(in millions) Energy
Carolinas
Energy
Progress
Florida
Ohio
Indiana
Current
Gross amounts recognized $ 18
$ —
$ 7
$ 2
$ 3
$ 3
$ 7
Gross amounts offset (3 ) —
(2 ) —
(2 ) —
—
Net amounts presented in Current Assets: Other $ 15
$ —
$ 5
$ 2
$ 1
$ 3
$ 7
Noncurrent
Gross amounts recognized $ 8
$ —
$ 4
$ —
$ 4
$ —
$ —
Gross amounts offset (4 ) —
(4 ) —
(4 ) —
—
Net amounts presented in Investments and Other Assets: Other $ 4
$ —
$ —
$ —
$ —
$ —
$ —


Derivative Liabilities	December 31, 2015
Derivative Assets																			December 31, 2016
				Duke					Duke			Duke			Duke		Duke					Duke						Duke			Duke			Duke		Duke
	Duke			Energy		Progress			Energy			Energy			Energy		Energy		Duke			Energy			Progress			Energy			Energy			Energy		Energy
(in millions)	Energy			Carolinas		Energy			Progress			Florida			Ohio		Indiana		Energy			Carolinas			Energy			Progress			Florida			Ohio		Indiana		Piedmont
Current
Gross amounts recognized	$	271		$	32	$	225		$	77		$	145		$	1	$	—	$	111		$	23		$	64		$	36		$	28		$	4	$	16	$	3
Gross amounts offset	(22		)	—		(21		)	(1		)	(20		)	—		—		(11		)	—			(11		)	—			(11		)	—		—		—
Net amounts presented in Current Liabilities: Other	$	249		$	32	$	204		$	76		$	125		$	1	$	—
Net amounts presented in Current Assets: Other																			$	100		$	23		$	53		$	36		$	17		$	4	$	16	$	3
Noncurrent
Gross amounts recognized	$	148		$	13	$	97		$	21		$	71		$	6	$	—	$	51		$	10		$	21		$	10		$	11		$	1	$	—	$	—
Gross amounts offset	(16		)	—		(15		)	—			(15		)	—		—		(2		)	(1		)	(1		)	(1		)	—			—		—		—
Net amounts presented in Deferred Credits and Other Liabilities: Other	$	132		$	13	$	82		$	21		$	56		$	6	$	—
Net amounts presented in Other Noncurrent Assets: Other																			$	49		$	9		$	20		$	9		$	11		$	1	$	—	$	—

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

~~(Unaudited)~~



Derivative Liabilities	December 31, 2016
				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	$	52		$	—		$	12		$	—		$	12		$	1	$	2	$	35
Gross amounts offset	(11		)	—			(11		)	—			(11		)	—		—		—
Net amounts presented in Current Liabilities: Other	$	41		$	—		$	1		$	—		$	1		$	1	$	2	$	35
Noncurrent
Gross amounts recognized	$	200		$	16		$	13		$	7		$	—		$	5	$	—	$	152
Gross amounts offset	(2		)	(1		)	(1		)	(1		)	—			—		—		—
Net amounts presented in Other Noncurrent Liabilities: Other	$	198		$	15		$	12		$	6		$	—		$	5	$	—	$	152

OBJECTIVE CREDIT CONTINGENT FEATURES

Certain derivative contracts contain objective credit contingent features. These features include the requirement to post cash collateral or letters of credit if specific events occur, such as a credit rating downgrade below investment grade. The following tables show information with respect to derivative contracts that are in a net liability position and contain objective credit-risk-related payment provisions. Amounts for Duke Energy Ohio, ~~and~~ Duke Energy Indiana and Piedmont were not material.


	June 30, 2016										March 31, 2017
			Duke				Duke		Duke				Duke				Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Duke		Energy		Progress		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Energy		Carolinas		Energy		Progress		Florida
Aggregate fair value of derivatives in a net liability position	$	348	$	89	$	90	$	18	$	72	$	40	$	14	$	25	$	9	$	17
Fair value of collateral already posted	—		—		—		—		—		—		—		—		—		—
Additional cash collateral or letters of credit in the event credit-risk-related contingent features were triggered	348		89		90		18		72		40		14		25		9		17


	December 31, 2015										December 31, 2016
			Duke				Duke		Duke				Duke				Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Duke		Energy		Progress		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Energy		Carolinas		Energy		Progress		Florida
Aggregate fair value of derivatives in a net liability position	$	334	$	45	$	290	$	93	$	194	$	34	$	16	$	18	$	6	$	12
Fair value of collateral already posted	30		—		30		—		30		—		—		—		—		—
Additional cash collateral or letters of credit in the event credit-risk-related contingent features were triggered	304		45		260		93		164		34		16		18		6		12

The Duke Energy Registrants have elected to offset cash collateral and fair values of derivatives. For amounts to be netted, the derivative and cash collateral must be executed with the same counterparty under the same master netting arrangement. Amounts disclosed below represent the receivables related to the right to reclaim cash collateral under master netting arrangements. All receivables presented below were offset against net derivative positions on the Condensed Consolidated Balance Sheets.

June 30, 2016 December 31, 2015
(in millions) Receivables Receivables
Duke Energy $ —
$ 30
Progress Energy —
30
Duke Energy Florida —
30

10. INVESTMENTS IN DEBT AND EQUITY SECURITIES

The Duke Energy Registrants classify their investments in debt and equity securities as either trading or available-for-sale.

TRADING SECURITIES

Piedmont's investments in debt and equity securities held in rabbi trusts associated with certain deferred compensation plans are classified as trading securities. The fair value of these investments was $5 million as of March 31, 2017 and December 31, 2016.

AVAILABLE-FOR-SALE SECURITIES

All other investments in debt and equity securities are classified as available-for-sale.

Duke Energy’s available-for-sale securities are primarily comprised of investments held in (i) the nuclear decommissioning fund (NDTF) at Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida, (ii) grantor trusts at Duke Energy Progress, Duke Energy Florida and Duke Energy Indiana related to Other Post-Retirement Benefit Obligations (OPEB) plans and (iii) Bison.

Duke Energy classifies all other investments in debt and equity securities as long term, unless otherwise noted.

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

Investment Trusts

The investments within the NDTF investments and the Duke Energy Progress, Duke Energy Florida and Duke Energy Indiana grantor trusts (Investment Trusts) are managed by independent investment managers with discretion to buy, sell, and invest pursuant to the objectives set forth by the trust agreements. The Duke Energy Registrants have limited oversight of the day-to-day management of these investments. As a result, the ability to hold investments in unrealized loss positions is outside the control of the Duke Energy Registrants. Accordingly, all unrealized losses associated with debt and equity securities within the Investment Trusts are considered ~~other-than-temporary impairments~~OTTIs and are recognized immediately.

Investments within the Investment Trusts generally qualify for regulatory accounting, and accordingly realized and unrealized gains and losses are deferred as a regulatory asset or liability. However, certain investments held in Duke Energy Florida's NDTF, which were acquired in a settlement with Florida Municipal Joint Owners (FMJO), do not qualify for regulatory accounting. Except for other than temporary impairments of unrealized losses, unrealized gains and losses on these assets are included in other comprehensive income until realized. The other than temporary impairments of realized amounts and unrealized losses are included within Other income and expense, net on the Condensed Consolidated Statements of Operations. The value of these assets has not materially changed since the assets were acquired from FMJO. As a result, there is no material impact on earnings of the Duke Energy Registrants.

~~PART I~~

~~DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –~~

~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC~~

~~Combined Notes to Condensed Consolidated Financial Statements – (Continued)~~

~~(Unaudited)~~

Other Available-for-Sale Securities

Unrealized gains and losses on all other available-for-sale securities are included in other comprehensive income until realized, unless it is determined the carrying value of an investment is other-than-temporarily impaired. The Duke Energy Registrants analyze all investment holdings each reporting period to determine whether a decline in fair value should be considered other-than-temporary. If an ~~other than temporary impairment~~OTTI exists, the unrealized credit loss is included in earnings. There were no material credit losses as of ~~June 30, 2016~~March 31, 2017 and December 31, ~~2015.~~2016.

DUKE ENERGY

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

June 30, 2016 December 31, 2015
Gross
Gross
Gross
Gross

Unrealized
Unrealized
Estimated
Unrealized
Unrealized
Estimated
Holding
Holding
Fair
Holding
Holding
Fair
(in millions) Gains

Losses_(b)

Value
Gains

Losses_(b)

Value
NDTF
Cash and cash equivalents $ —
$ —
$ 189
$ —
$ —
$ 179
Equity securities 1,869
78
3,834
1,823
58
3,590
Corporate debt securities 22
1
480
7
8
432
Municipal bonds 12
1
307
5
1
185
U.S. government bonds 38
—
1,038
11
5
1,254
Other debt securities 1
3
144
—
4
177
Total NDTF $ 1,942
$ 83
$ 5,992
$ 1,846
$ 76
$ 5,817
Other Investments

Cash and cash equivalents $ —
$ —
$ 27
$ —
$ —
$ 29
Equity securities 34
1
98
32
1
95
Corporate debt securities 2
1
97
1
3
92
Municipal bonds 6
1
80
3
1
74
U.S. government bonds 2
—
47
—
—
45
Other debt securities —
1
57
—
2
62
Total Other Investments^(a)
$ 44
$ 4
$ 406
$ 36
$ 7
$ 397
Total Investments $ 1,986
$ 87
$ 6,398
$ 1,882
$ 83
$ 6,214

~~(a) These amounts are recorded in Other within Investments and Other Assets on the Condensed Consolidated Balance Sheets.~~



	March 31, 2017						December 31, 2016
	Gross		Gross				Gross		Gross
	Unrealized		Unrealized		Estimated		Unrealized		Unrealized		Estimated
	Holding		Holding		Fair		Holding		Holding		Fair
(in millions)	Gains		Losses_(a)		Value		Gains		Losses_(a)		Value
NDTF
Cash and cash equivalents	$	—	$	—	$	114	$	—	$	—	$	111
Equity securities	2,250		32		4,284		2,092		54		4,106
Corporate debt securities	10		5		576		10		8		528
Municipal bonds	3		6		336		3		10		331
U.S. government bonds	10		8		949		10		8		984
Other debt securities	—		3		132		—		3		124
Total NDTF	$	2,273	$	54	$	6,391	$	2,115	$	83	$	6,184
Other Investments
Cash and cash equivalents	$	—	$	—	$	18	$	—	$	—	$	25
Equity securities	44		—		106		38		—		104
Corporate debt securities	1		—		60		1		1		66
Municipal bonds	2		1		84		2		1		82
U.S. government bonds	—		—		43		—		1		51
Other debt securities	—		2		42		—		2		42
Total Other Investments^(b)	$	47	$	3	$	353	$	41	$	5	$	370
Total Investments	$	2,320	$	57	$	6,744	$	2,156	$	88	$	6,554


~~(b)~~(a)	Substantially all ~~these~~ amounts are considered ~~other-than-temporary impairments~~OTTIs on investments within Investment Trusts that have been recognized immediately as a regulatory asset.


(b)	These amounts are recorded in Other within Other Noncurrent Assets on the Condensed Consolidated Balance Sheets.

The table below summarizes the maturity date for debt securities.

(in millions) June 30, 2016
Due in one year or less $ 88
Due after one through five years 660
Due after five through 10 years 511
Due after 10 years 991
Total $ 2,250

~~Realized gains and losses, which were determined on a specific identification basis, from sales of available-for-sale securities were as follows.~~

Three Months Ended Six Months Ended
June 30, June 30,
(in millions) 2016
2015
2016
2015
Realized gains $ 64
$ 28
$ 118
$ 130
Realized losses 42
17
92
31



(in millions)	March 31, 2017
Due in one year or less	$	82
Due after one through five years	640
Due after five through 10 years	514
Due after 10 years	986
Total	$	2,222

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

~~(Unaudited)~~

~~DUKE ENERGY CAROLINAS~~

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

June 30, 2016 December 31, 2015
Gross
Gross
Gross
Gross

Unrealized
Unrealized
Estimated
Unrealized
Unrealized
Estimated
Holding
Holding
Fair
Holding
Holding
Fair
(in millions) Gains

Losses_(b)

Value
Gains

Losses_(b)

Value
NDTF
Cash and cash equivalents $ —
$ —
$ 66
$ —
$ —
$ 34
Equity securities 1,045
44
2,128
1,021
27
2,094
Corporate debt securities 13
1
309
3
5
292
Municipal bonds 2
—
42
1
—
33
U.S. government bonds 16
—
482
3
3
438
Other debt securities 1
3
136
—
4
147
Total NDTF $ 1,077
$ 48

$ 3,163
$ 1,028
$ 39
$ 3,038
Other Investments
Other debt securities $ —
$ 1
$ 3
$ —
$ 1
$ 3
Total Other Investments^(a)
$ —
$ 1
$ 3
$ —
$ 1
$ 3
Total Investments $ 1,077
$ 49
$ 3,166
$ 1,028
$ 40
$ 3,041


~~(a)~~	~~These amounts are recorded in Other within Investments and Other Assets on the Condensed Consolidated Balance Sheets.~~


~~(b)~~	~~Substantially all these amounts represent other-than-temporary impairments on investments within Investment Trusts that have been recognized immediately as a regulatory asset.~~

~~The table below summarizes the maturity date for debt securities.~~

(in millions) June 30, 2016
Due in one year or less $ 6
Due after one through five years 198
Due after five through 10 years 235
Due after 10 years 533
Total $ 972

Realized gains and losses, which were determined on a specific identification basis, from sales of available-for-sale securities were as follows.


	Three Months Ended				Six Months Ended				Three Months Ended
	June 30,				June 30,				March 31,
(in millions)	2016		2015		2016		2015		2017		2016
Realized gains	$	33	$	17	$	67	$	107	$	93	$	54
Realized losses	19		11		56		23		62		50

DUKE ENERGY CAROLINAS

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



	March 31, 2017						December 31, 2016
	Gross		Gross				Gross		Gross
	Unrealized		Unrealized		Estimated		Unrealized		Unrealized		Estimated
	Holding		Holding		Fair		Holding		Holding		Fair
(in millions)	Gains		Losses_(a)		Value		Gains		Losses_(a)		Value
NDTF
Cash and cash equivalents	$	—	$	—	$	20	$	—	$	—	$	18
Equity securities	1,229		15		2,366		1,157		28		2,245
Corporate debt securities	5		4		388		5		6		354
Municipal bonds	1		1		67		1		2		67
U.S. government bonds	3		5		431		2		5		458
Other debt securities	—		3		120		—		3		116
Total NDTF	$	1,238	$	28	$	3,392	$	1,165	$	44	$	3,258
Other Investments
Other debt securities	$	—	$	1	$	3	$	—	$	1	$	3
Total Other Investments^(b)	$	—	$	1	$	3	$	—	$	1	$	3
Total Investments	$	1,238	$	29	$	3,395	$	1,165	$	45	$	3,261


(a)	Substantially all amounts are considered OTTIs on investments within Investment Trusts that have been recognized immediately as a regulatory asset.


(b)	These amounts are recorded in Other within Other Noncurrent Assets on the Condensed Consolidated Balance Sheets.

The table below summarizes the maturity date for debt securities.



(in millions)	March 31, 2017
Due in one year or less	$	2
Due after one through five years	221
Due after five through 10 years	269
Due after 10 years	517
Total	$	1,009

Realized gains and losses, which were determined on a specific identification basis, from sales of available-for-sale securities were as follows.



	Three Months Ended
	March 31,
(in millions)	2017		2016
Realized gains	$	66	$	34
Realized losses	40		37

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

~~(Unaudited)~~

PROGRESS ENERGY

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

June 30, 2016 December 31, 2015
Gross
Gross
Gross
Gross

Unrealized
Unrealized
Estimated
Unrealized
Unrealized
Estimated
Holding
Holding
Fair
Holding
Holding
Fair
(in millions) Gains

Losses_(b)

Value
Gains

Losses_(b)

Value
NDTF
Cash and cash equivalents $ —
$ —
$ 123
$ —
$ —
$ 145
Equity securities 824
34
1,706
802
31
1,496
Corporate debt securities 9
—
171
4
3
140
Municipal bonds 10
1
265
4
1
152
U.S. government bonds 22
—
556
8
2
816
Other debt securities —
—
8
—
—
30
Total NDTF $ 865
$ 35
$ 2,829
$ 818
$ 37
$ 2,779
Other Investments
Cash and cash equivalents $ —
$ —
$ 21
$ —
$ —
$ 18
Municipal bonds 4
—
47
3
—
45
Total Other Investments^(a)
$ 4
$ —
$ 68
$ 3
$ —
$ 63
Total Investments $ 869
$ 35
$ 2,897
$ 821
$ 37
$ 2,842

~~(a) These amounts are recorded in Other within Investments and Other Assets on the Condensed Consolidated Balance Sheets.~~



	March 31, 2017						December 31, 2016
	Gross		Gross				Gross		Gross
	Unrealized		Unrealized		Estimated		Unrealized		Unrealized		Estimated
	Holding		Holding		Fair		Holding		Holding		Fair
(in millions)	Gains		Losses_(a)		Value		Gains		Losses_(a)		Value
NDTF
Cash and cash equivalents	$	—	$	—	$	94	$	—	$	—	$	93
Equity securities	1,021		17		1,918		935		26		1,861
Corporate debt securities	5		1		188		5		2		174
Municipal bonds	2		5		269		2		8		264
U.S. government bonds	7		3		518		8		3		526
Other debt securities	—		—		12		—		—		8
Total NDTF	$	1,035	$	26	$	2,999	$	950	$	39	$	2,926
Other Investments
Cash and cash equivalents	$	—	$	—	$	12	$	—	$	—	$	21
Municipal bonds	2		—		46		2		—		44
Total Other Investments^(b)	$	2	$	—	$	58	$	2	$	—	$	65
Total Investments	$	1,037	$	26	$	3,057	$	952	$	39	$	2,991


~~(b)~~(a)	Substantially all ~~these~~ amounts ~~represent other-than-temporary impairments~~are considered OTTIs on investments within Investment Trusts that have been recognized immediately as a regulatory asset.


(b)	These amounts are recorded in Other within Other Noncurrent Assets on the Condensed Consolidated Balance Sheets.

The table below summarizes the maturity date for debt securities.


(in millions)	June 30, 2016		March 31, 2017
Due in one year or less	$	65	$	72
Due after one through five years	375		355
Due after five through 10 years	200		189
Due after 10 years	407		417
Total	$	1,047	$	1,033

Realized gains and losses, which were determined on a specific identification basis, from sales of available-for-sale securities were as follows.


	Three Months Ended				Six Months Ended				Three Months Ended
	June 30,				June 30,				March 31,
(in millions)	2016		2015		2016		2015		2017		2016
Realized gains	$	31	$	9	$	50	$	21	$	27	$	19
Realized losses	23		5		36		6		21		13

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

~~(Unaudited)~~

DUKE ENERGY PROGRESS

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

June 30, 2016 December 31, 2015
Gross
Gross
Gross
Gross

Unrealized
Unrealized
Estimated
Unrealized
Unrealized
Estimated
Holding
Holding
Fair
Holding
Holding
Fair
(in millions) Gains

Losses_(b)

Value
Gains

Losses_(b)

Value
NDTF
Cash and cash equivalents $ —
$ —
$ 58
$ —
$ —
$ 110
Equity securities 614
28
1,379
596
25
1,178
Corporate debt securities 7
—
118
3
2
96
Municipal bonds 10
1
265
4
1
150
U.S. government bonds 14
—
281
6
2
486
Other debt securities —
—
5
—
—
18
Total NDTF $ 645
$ 29
$ 2,106
$ 609
$ 30
$ 2,038
Other Investments

Cash and cash equivalents $ —
$ —
$ 1
$ —
$ —
$ 1
Total Other Investments^(a)
$ —
$ —
$ 1
$ —
$ —
$ 1
Total Investments $ 645
$ 29
$ 2,107
$ 609
$ 30
$ 2,039

~~(a) These amounts are recorded in Other within Investments and Other Assets on the Condensed Consolidated Balance Sheets.~~



	March 31, 2017						December 31, 2016
	Gross		Gross				Gross		Gross
	Unrealized		Unrealized		Estimated		Unrealized		Unrealized		Estimated
	Holding		Holding		Fair		Holding		Holding		Fair
(in millions)	Gains		Losses_(a)		Value		Gains		Losses_(a)		Value
NDTF
Cash and cash equivalents	$	—	$	—	$	43	$	—	$	—	$	45
Equity securities	772		13		1,541		704		21		1,505
Corporate debt securities	4		1		131		4		1		120
Municipal bonds	2		5		268		2		8		263
U.S. government bonds	5		2		284		5		2		275
Other debt securities	—		—		7		—		—		5
Total NDTF	$	783	$	21	$	2,274	$	715	$	32	$	2,213
Other Investments
Cash and cash equivalents	$	—	$	—	$	1	$	—	$	—	$	1
Total Other Investments^(b)	$	—	$	—	$	1	$	—	$	—	$	1
Total Investments	$	783	$	21	$	2,275	$	715	$	32	$	2,214


~~(b)~~(a)	Substantially all ~~these~~ amounts ~~represent other-than-temporary impairments~~are considered OTTIs on investments within Investment Trusts that have been recognized immediately as a regulatory asset.


(b)	These amounts are recorded in Other within Other Noncurrent Assets on the Condensed Consolidated Balance Sheets.

The table below summarizes the maturity date for debt securities.


(in millions)	June 30, 2016		March 31, 2017
Due in one year or less	$	14	$	17
Due after one through five years	191		215
Due after five through 10 years	154		142
Due after 10 years	310		316
Total	$	669	$	690

Realized gains and losses, which were determined on a specific identification basis, from sales of available-for-sale securities were as follows.


	Three Months Ended				Six Months Ended				Three Months Ended
	June 30,				June 30,				March 31,
(in millions)	2016		2015		2016		2015		2017		2016
Realized gains	$	27	$	8	$	42	$	17	$	24	$	15
Realized losses	20		4		31		5		19		11

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

~~(Unaudited)~~

DUKE ENERGY FLORIDA

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

June 30, 2016 December 31, 2015
Gross
Gross
Gross
Gross

Unrealized
Unrealized
Estimated
Unrealized
Unrealized
Estimated
Holding
Holding
Fair
Holding
Holding
Fair
(in millions) Gains

Losses_(b)

Value
Gains

Losses_(b)

Value
NDTF
Cash and cash equivalents $ —
$ —
$ 65
$ —
$ —
$ 35
Equity securities 210
6
327
206
6
318
Corporate debt securities 2
—
53
1
1
44
Municipal bonds —
—
—
—
—
2
U.S. government bonds 8
—
275
2
—
330
Other debt securities —
—
3
—
—
12
Total NDTF $ 220
$ 6
$ 723
$ 209
$ 7
$ 741
Other Investments

Cash and cash equivalents $ —
$ —
$ 4
$ —
$ —
$ 6
Municipal bonds 4
—
47
3
—
45
Total Other Investments^(a)
$ 4
$ —
$ 51
$ 3
$ —
$ 51
Total Investments $ 224
$ 6
$ 774
$ 212
$ 7
$ 792

~~(a) These amounts are recorded in Other within Investments and Other Assets on the Condensed Consolidated Balance Sheets.~~



	March 31, 2017						December 31, 2016
	Gross		Gross				Gross		Gross
	Unrealized		Unrealized		Estimated		Unrealized		Unrealized		Estimated
	Holding		Holding		Fair		Holding		Holding		Fair
(in millions)	Gains		Losses_(a)		Value		Gains		Losses_(a)		Value
NDTF
Cash and cash equivalents	$	—	$	—	$	51	$	—	$	—	$	48
Equity securities	249		4		377		231		5		356
Corporate debt securities	1		—		57		1		1		54
Municipal bonds	—		—		1		—		—		1
U.S. government bonds	2		1		234		3		1		251
Other debt securities	—		—		5		—		—		3
Total NDTF^(b)	$	252	$	5	$	725	$	235	$	7	$	713
Other Investments
Cash and cash equivalents	$	—	$	—	$	1	$	—	$	—	$	4
Municipal bonds	2		—		46		2		—		44
Total Other Investments^(c)	$	2	$	—	$	47	$	2	$	—	$	48
Total Investments	$	254	$	5	$	772	$	237	$	7	$	761


~~(b)~~(a)	Substantially all ~~these~~ amounts ~~represent other-than-temporary impairments~~are considered OTTIs on investments within Investment Trusts that have been recognized immediately as a regulatory asset.


(b)	During the three months ended March 31, 2017, Duke Energy Florida continued to receive reimbursements from the NDTF for costs related to ongoing commissioning activity of the Crystal River Unit 3 nuclear plant.


(c)	These amounts are recorded in Other within Other Noncurrent Assets on the Condensed Consolidated Balance Sheets.

The table below summarizes the maturity date for debt securities.


(in millions)	June 30, 2016		March 31, 2017
Due in one year or less	$	51	$	55
Due after one through five years	184		140
Due after five through 10 years	46		47
Due after 10 years	97		101
Total	$	378	$	343

Realized gains and losses, which were determined on a specific identification basis, from sales of available-for-sale securities were as follows.


	Three Months Ended				Six Months Ended				Three Months Ended
	June 30,				June 30,				March 31,
(in millions)	2016		2015		2016		2015		2017		2016
Realized gains	$	4	$	1	$	8	$	4	$	3	$	4
Realized losses	3		1		5		1		2		2

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

~~(Unaudited)~~

DUKE ENERGY INDIANA

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

~~(a) These amounts are recorded in Other within Investments and Other Assets on the Condensed Consolidated Balance Sheets.~~



	March 31, 2017						December 31, 2016
	Gross		Gross				Gross		Gross
	Unrealized		Unrealized		Estimated		Unrealized		Unrealized		Estimated
	Holding		Holding		Fair		Holding		Holding		Fair
(in millions)	Gains		Losses_(a)		Value		Gains		Losses_(a)		Value
Other Investments
Equity securities	$	38	$	—	$	84	$	33	$	—	$	79
Corporate debt securities	—		—		2		—		—		2
Municipal bonds	—		1		28		—		1		28
U.S. government bonds	—		—		1		—		—		1
Total Other Investments^(b)	$	38	$	1	$	115	$	33	$	1	$	110
Total Investments	$	38	$	1	$	115	$	33	$	1	$	110


~~(b)~~(a)	Substantially all ~~these~~ amounts ~~represent other-than-temporary impairments~~are considered OTTIs on investments within Investment Trusts that have been recognized immediately as a regulatory asset.


(b)	These amounts are recorded in Other within Other Noncurrent Assets on the Condensed Consolidated Balance Sheets.

The table below summarizes the maturity date for debt securities.


(in millions)	June 30, 2016		March 31, 2017
Due in one year or less	$	2	$	2
Due after one through five years	16		15
Due after five through 10 years	8		9
Due after 10 years	5		5
Total	$	31	$	31

Realized gains and losses, which were determined on a specific identification basis, from sales of available-for-sale securities were insignificant for the three ~~and six~~ months ended ~~June 30, 2016~~March 31, 2017 and ~~2015.~~2016.

11. FAIR VALUE MEASUREMENTS

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

Fair value measurements are classified in three levels based on the fair value hierarchy:

Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity can access at the measurement date. An active market is one in which transactions for an asset or liability occur with sufficient frequency and volume to provide ongoing pricing information.

Level 2 – A fair value measurement utilizing inputs other than quoted prices included in Level 1 that are observable, either directly or indirectly, for an asset or liability. Inputs include (i) quoted prices for similar assets or liabilities in active markets, (ii) quoted prices for identical or similar assets or liabilities in markets that are not active, (iii) and inputs other than quoted market prices that are observable for the asset or liability, such as interest rate curves and yield curves observable at commonly quoted intervals, volatilities and credit spreads. A Level 2 measurement cannot have more than an insignificant portion of its valuation based on unobservable inputs. Instruments in this category include non-exchange-traded derivatives, such as over-the-counter forwards, swaps and options; certain marketable debt securities; and financial instruments traded in ~~less than active~~less-than-active markets.

Level 3 – Any fair value measurement ~~which~~that includes unobservable inputs for more than an insignificant portion of the valuation. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value. Level 3 measurements may include longer-term instruments that extend into periods in which observable inputs are not available.

Not Categorized – Certain investments are not categorized within the Fair Value hierarchy. These investments are measured based on the fair value of the underlying investments but may not be readily redeemable at that fair value.

Fair value accounting guidance permits entities to elect to measure certain financial instruments that are not required to be accounted for at fair value, such as equity method investments or the company’s own debt, at fair value. The Duke Energy Registrants have not elected to record any of these items at fair value.

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

~~(Unaudited)~~

Transfers between levels represent assets or liabilities that were previously (i) categorized at a higher level for which the inputs to the estimate became less observable or (ii) classified at a lower level for which the inputs became more observable during the period. The Duke Energy Registrant’s policy is to recognize transfers between levels of the fair value hierarchy at the end of the period. There were no transfers between levels during the three ~~and six~~ months ended ~~June 30, 2016~~March 31, 2017 and ~~2015.~~2016.

Valuation methods of the primary fair value measurements disclosed below are as follows.

Investments in equity securities

The majority of investments in equity securities are valued using Level 1 measurements. Investments in equity securities are typically valued at the closing price in the principal active market as of the last business day of the quarter. Principal active markets for equity prices include published exchanges such as ~~Nasdaq Composite (NASDAQ) and~~ New York Stock Exchange (NYSE). and Nasdaq Stock Market. Foreign equity prices are translated from their trading currency using the currency exchange rate in effect at the close of the principal active market. There was no after-hours market activity that was required to be reflected in the reported fair value measurements.

Investments in debt securities

Most investments in debt securities are valued using Level 2 measurements because the valuations use interest rate curves and credit spreads applied to the terms of the debt instrument (maturity and coupon interest rate) and consider the counterparty credit rating. If the market for a particular ~~fixed income~~fixed-income security is relatively inactive or illiquid, the measurement is Level 3.

Commodity derivatives

Commodity derivatives with clearinghouses are classified as Level 1. Other commodity derivatives, including Piedmont's gas supply contracts, are primarily valued using internally developed discounted cash flow models ~~which~~that incorporate forward price, adjustments for liquidity (bid-ask spread) and credit or non-performance risk (after reflecting credit enhancements such as collateral), and are discounted to present value. Pricing inputs are derived from published exchange transaction prices and other observable data sources. In the absence of an active market, the last available price may be used. If forward price curves are not observable for the full term of the contract and the unobservable period had more than an insignificant impact on the valuation, the commodity derivative is classified as Level 3. In isolation, increases (decreases) in natural gas forward prices result in favorable (unfavorable) fair value adjustments for ~~natural~~ gas purchase contracts; and increases (decreases) in electricity forward prices result in unfavorable (favorable) fair value adjustments for electricity sales contracts. Duke Energy regularly evaluates and validates pricing inputs used to estimate the fair value of ~~natural~~ gas commodity contracts by a market participant price verification procedure. This procedure provides a comparison of internal forward commodity curves to market participant generated curves.

Interest rate derivatives

Most over-the-counter interest rate contract derivatives are valued using financial models ~~which~~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 2 related to the acquisition of Piedmont in 2016. See Note 11 in Duke Energy's Annual Report on Form 10-K for the year ended December 31, 2016 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 table below exclude cash collateral, which is disclosed in Note 9. See Note 10 for additional information related to investments by major security type.


	June 30, 2016													March 31, 2017
(in millions)	Total Fair Value			Level 1			Level 2			Level 3		Not categorized		Total Fair Value			Level 1		Level 2			Level 3			Not categorized
Nuclear decommissioning trust fund equity securities	$	3,834		$	3,666		$	1		$	—	$	167	$	4,284		$	4,207	$	—		$	—		$	77
Nuclear decommissioning trust fund debt securities	2,158			744			1,414			—		—		2,107			602		1,505			—			—
Other available-for-sale equity securities	98			98			—			—		—
Other available-for-sale debt securities	308			74			230			4		—
Other trading and available-for-sale equity securities														110			110		—			—			—
Other trading and available-for-sale debt securities														248			61		182			5			—
Derivative assets	108			2			72			34		—		83			2		71			10			—
Total assets	6,506			4,584			1,717			38		167		6,832			4,982		1,758			15			77
Derivative liabilities	(428		)	(1		)	(427		)	—		—		(216		)	—		(71		)	(145		)	—
Net assets	$	6,078		$	4,583		$	1,290		$	38	$	167
Net assets (liabilities)														$	6,616		$	4,982	$	1,687		$	(130	)	$	77

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

~~(Unaudited)~~


	December 31, 2015												December 31, 2016
(in millions)	Total Fair Value			Level 1		Level 2			Level 3		Not categorized		Total Fair Value			Level 1			Level 2			Level 3			Not categorized
Nuclear decommissioning trust fund equity securities	$	3,590		$	3,418	$	—		$	—	$	172	$	4,106		$	4,029		$	—		$	—		$	77
Nuclear decommissioning trust fund debt securities	2,227			672		1,555			—		—		2,078			632			1,446			—			—
Other available-for-sale equity securities	95			95		—			—		—
Other available-for-sale debt securities	302			75		222			5		—
Other trading and available-for-sale equity securities													104			104			—			—			—
Other trading and available-for-sale debt securities													266			75			186			5			—
Derivative assets	26			—		16			10		—		162			5			136			21			—
Total assets	6,240			4,260		1,793			15		172		6,716			4,845			1,768			26			77
Derivative liabilities	(419		)	—		(419		)	—		—		(252		)	(2		)	(63		)	(187		)	—
Net assets	$	5,821		$	4,260	$	1,374		$	15	$	172
Net assets (liabilities)													$	6,464		$	4,843		$	1,705		$	(161	)	$	77

The following tables provide reconciliations of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements. Amounts included in earnings for derivatives are primarily included in Operating Revenues. ~~There was no change to the Level 3 balance during the three months ended June 30, 2015.~~

Three Months Ended June 30, 2016
(in millions) Investments
Derivatives (net)
Total
Balance at beginning of period $ 4
$ 2
$ 6
Purchases, sales, issuances and settlements:

Purchases —
34
34
Settlements —
(6 ) (6 )
Total gains included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities —
4
4
Balance at end of period $ 4
$ 34
$ 38


	Six Months Ended June 30, 2016									Three Months Ended March 31, 2017
(in millions)	Investments			Derivatives (net)			Total			Investments		Derivatives (net)			Total
Balance at beginning of period	$	5		$	10		$	15		$	5	$	(166	)	$	(161	)
Purchases, sales, issuances and settlements:
Purchases	—			34			34
Sales	(1		)	—			(1		)
Settlements	—			(13		)	(13		)	—		(9		)	(9		)
Total gains included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities	—			3			3
Total amount included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities										—		40			40
Balance at end of period	$	4		$	34		$	38		$	5	$	(135	)	$	(130	)

Six Months Ended June 30, 2015
(in millions) Investments
Derivatives (net)
Total
Balance at beginning of period $ 5
$ (1 ) $ 4
Total pretax realized or unrealized gains included in earnings —
18
18
Purchases, sales, issuances and settlements:
Purchases —
24
24
Settlements —
(22 ) (22 )
Total gains included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities —
4
4
Balance at end of period $ 5
$ 23
$ 28



	Three Months Ended March 31, 2016
(in millions)	Investments			Derivatives (net)			Total
Balance at beginning of period	$	5		$	10		$	15
Purchases, sales, issuances and settlements:
Sales	(1		)	—			(1		)
Settlements	—			(7		)	(7		)
Total losses included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities	—			(1		)	(1		)
Balance at end of period	$	4		$	2		$	6

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

~~(Unaudited)~~

DUKE ENERGY CAROLINAS


	June 30, 2016												March 31, 2017
(in millions)	Total Fair Value			Level 1		Level 2			Level 3		Not categorized		Total Fair Value			Level 1		Level 2			Level 3		Not categorized
Nuclear decommissioning trust fund equity securities	$	2,128		$	1,960	$	1		$	—	$	167	$	2,366		$	2,289	$	—		$	—	$	77
Nuclear decommissioning trust fund debt securities	1,035			245		790			—		—		1,026			146		880			—		—
Other available-for-sale debt securities	3			—		—			3		—		3			—		—			3		—
Derivative assets	18			—		18			—		—		17			—		17			—		—
Total assets	3,184			2,205		809			3		167		3,412			2,435		897			3		77
Derivative liabilities	(89		)	—		(89		)	—		—		(14		)	—		(14		)	—		—
Net assets	$	3,095		$	2,205	$	720		$	3	$	167	$	3,398		$	2,435	$	883		$	3	$	77


	December 31, 2015												December 31, 2016
(in millions)	Total Fair Value			Level 1		Level 2			Level 3		Not categorized		Total Fair Value			Level 1		Level 2			Level 3		Not categorized
Nuclear decommissioning trust fund equity securities	$	2,094		$	1,922	$	—		$	—	$	172	$	2,245		$	2,168	$	—		$	—	$	77
Nuclear decommissioning trust fund debt securities	944			246		698			—		—		1,013			178		835			—		—
Other available-for-sale debt securities	3			—		—			3		—		3			—		—			3		—
Derivative assets													33			—		33			—		—
Total assets	3,041			2,168		698			3		172		3,294			2,346		868			3		77
Derivative liabilities	(45		)	—		(45		)	—		—		(16		)	—		(16		)	—		—
Net assets	$	2,996		$	2,168	$	653		$	3	$	172	$	3,278		$	2,346	$	852		$	3	$	77

There was no change to the Level 3 balance during the three ~~and six~~ months ended ~~June 30, 2016~~March 31, 2017 and ~~June 30, 2015.~~March 31, 2016.

PROGRESS ENERGY


	June 30, 2016								March 31, 2017
(in millions)	Total Fair Value			Level 1		Level 2			Total Fair Value			Level 1		Level 2
Nuclear decommissioning trust fund equity securities	$	1,706		$	1,706	$	—		$	1,918		$	1,918	$	—
Nuclear decommissioning trust fund debt securities	1,123			499		624			1,081			456		625
Other available-for-sale debt securities	68			21		47			58			12		46
Derivative assets	54			—		54			34			—		34
Total assets	2,951			2,226		725			3,091			2,386		705
Derivative liabilities	(100		)	—		(100		)	(34		)	—		(34		)
Net assets	$	2,851		$	2,226	$	625		$	3,057		$	2,386	$	671


	December 31, 2015								December 31, 2016
(in millions)	Total Fair Value			Level 1		Level 2			Total Fair Value			Level 1		Level 2
Nuclear decommissioning trust fund equity securities	$	1,496		$	1,496	$	—		$	1,861		$	1,861	$	—
Nuclear decommissioning trust fund debt securities	1,283			426		857			1,065			454		611
Other available-for-sale debt securities	63			18		45			65			21		44
Derivative assets	11			—		11			85			—		85
Total assets	2,853			1,940		913			3,076			2,336		740
Derivative liabilities	(322		)	—		(322		)	(25		)	—		(25		)
Net assets	$	2,531		$	1,940	$	591		$	3,051		$	2,336	$	715

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

~~(Unaudited)~~

DUKE ENERGY PROGRESS


	June 30, 2016								March 31, 2017
(in millions)	Total Fair Value			Level 1		Level 2			Total Fair Value			Level 1		Level 2
Nuclear decommissioning trust fund equity securities	$	1,379		$	1,379	$	—		$	1,541		$	1,541	$	—
Nuclear decommissioning trust fund debt securities and other	727			228		499			733			221		512
Other available-for-sale debt securities and other	1			1		—			1			1		—
Derivative assets	25			—		25			20			—		20
Total assets	2,132			1,608		524			2,295			1,763		532
Derivative liabilities	(18		)	—		(18		)	(10		)	—		(10		)
Net assets	$	2,114		$	1,608	$	506		$	2,285		$	1,763	$	522


	December 31, 2015								December 31, 2016
(in millions)	Total Fair Value			Level 1		Level 2			Total Fair Value			Level 1		Level 2
Nuclear decommissioning trust fund equity securities	$	1,178		$	1,178	$	—		$	1,505		$	1,505	$	—
Nuclear decommissioning trust fund debt securities and other	860			141		719			708			207		501
Other available-for-sale debt securities and other	1			1		—			1			1		—
Derivative assets	2			—		2			46			—		46
Total assets	2,041			1,320		721			2,260			1,713		547
Derivative liabilities	(98		)	—		(98		)	(7		)	—		(7		)
Net assets	$	1,943		$	1,320	$	623		$	2,253		$	1,713	$	540

DUKE ENERGY FLORIDA


	June 30, 2016								March 31, 2017
(in millions)	Total Fair Value			Level 1		Level 2			Total Fair Value			Level 1		Level 2
Nuclear decommissioning trust fund equity securities	$	327		$	327	$	—		$	377		$	377	$	—
Nuclear decommissioning trust fund debt securities and other	396			271		125			348			235		113
Other available-for-sale debt securities and other	51			4		47			47			1		46
Derivative assets	29			—		29			14			—		14
Total assets	803			602		201			786			613		173
Derivative liabilities	(76		)	—		(76		)	(19		)	—		(19		)
Net assets	$	727		$	602	$	125		$	767		$	613	$	154


	December 31, 2015								December 31, 2016
(in millions)	Total Fair Value			Level 1		Level 2			Total Fair Value			Level 1		Level 2
Nuclear decommissioning trust fund equity securities	$	318		$	318	$	—		$	356		$	356	$	—
Nuclear decommissioning trust fund debt securities and other	423			285		138			357			247		110
Other available-for-sale debt securities and other	51			6		45			48			4		44
Derivative assets	7			—		7			39			—		39
Total assets	799			609		190			800			607		193
Derivative liabilities	(216		)	—		(216		)	(12		)	—		(12		)
Net assets (liabilities)	$	583		$	609	$	(26	)
Net assets									$	788		$	607	$	181

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

~~(Unaudited)~~

DUKE ENERGY OHIO


	June 30, 2016										March 31, 2017
(in millions)	Total Fair Value			Level 1		Level 2			Level 3		Total Fair Value			Level 1		Level 2			Level 3
Derivative assets	$	5		$	—	$	—		$	5	$	1		$	—	$	—		$	1
Derivative liabilities	(8		)	—		(8		)	—		(5		)	—		(5		)	—
Net (liabilities) assets	$	(3	)	$	—	$	(8	)	$	5	$	(4	)	$	—	$	(5	)	$	1


	December 31, 2015										December 31, 2016
(in millions)	Total Fair Value			Level 1		Level 2			Level 3		Total Fair Value			Level 1		Level 2			Level 3
Derivative assets	$	3		$	—	$	—		$	3	$	5		$	—	$	—		$	5
Derivative liabilities	(7		)	—		(7		)	—		(6		)	—		(6		)	—
Net (liabilities) assets	$	(4	)	$	—	$	(7	)	$	3	$	(1	)	$	—	$	(6	)	$	5

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 June 30,
(in millions) 2016
2015
Balance at beginning of period $ —
$ 7
Total pretax realized or unrealized gains included in earnings —
(4 )
Purchases, sales, issuances and settlements:
Purchases 5
—
Sales —
5
Settlements —
(3 )
Balance at end of period $ 5
$ 5


	Derivatives (net)						Derivatives (net)
	Six Months Ended June 30,						Three Months Ended March 31,
(in millions)	2016			2015			2017			2016
Balance at beginning of period	$	3		$	(18	)	$	5		$	3
Total pretax realized or unrealized gains included in earnings	—			21
Purchases, sales, issuances and settlements:
Purchases	5			—
Sales	—			5
Settlements	(2		)	(3		)	(1		)	(2		)
Total losses included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities	(1		)	—			(3		)	(1		)
Balance at end of period	$	5		$	5		$	1		$	—

~~PART I~~

~~DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –~~

~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC~~

~~Combined Notes to Condensed Consolidated Financial Statements – (Continued)~~

~~(Unaudited)~~

DUKE ENERGY INDIANA


	June 30, 2016										March 31, 2017
(in millions)	Total Fair Value			Level 1			Level 2		Level 3		Total Fair Value		Level 1		Level 2		Level 3
Other available-for-sale equity securities	$	73		$	73		$	—	$	—	$	84	$	84	$	—	$	—
Other available-for-sale debt securities and other	31			—			31		—		31		—		31		—
Derivative assets	31			2			—		29		9		—		—		9
Total assets	135			75			31		29
Derivative liabilities	(1		)	(1		)	—		—
Net assets	$	134		$	74		$	31	$	29	$	124	$	84	$	31	$	9

December 31, 2015
(in millions) Total Fair Value
Level 1
Level 2
Level 3
Other available-for-sale equity securities $ 71
$ 71
$ —
$ —
Other available-for-sale debt securities and other 30
2
28
—
Derivative assets 7
—
—
7
Net assets $ 108
$ 73
$ 28
$ 7

~~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 June 30,
(in millions) 2016
2015
Balance at beginning of period $ 2
$ 3
Purchases, sales, issuances and settlements:

Purchases 29
18
Settlements (6 ) (10 )
Total gains included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities 4
6
Balance at end of period $ 29
$ 17

Derivatives (net)
Six Months Ended June 30,
(in millions) 2016
2015
Balance at beginning of period $ 7
$ 14
Purchases, sales, issuances and settlements:
Purchases 29
18
Settlements (11 ) (19 )
Total gains included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities 4
4
Balance at end of period $ 29
$ 17



	December 31, 2016
(in millions)	Total Fair Value			Level 1			Level 2		Level 3
Other available-for-sale equity securities	$	79		$	79		$	—	$	—
Other available-for-sale debt securities and other	31			—			31		—
Derivative assets	16			—			—		16
Total assets	126			79			31		16
Derivative liabilities	(2		)	(2		)	—		—
Net assets	$	124		$	77		$	31	$	16

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

~~(Unaudited)~~

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)	2017			2016
Balance at beginning of period	$	16		$	7
Purchases, sales, issuances and settlements:
Settlements	(7		)	(5		)
Balance at end of period	$	9		$	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. See Note 10 for additional information related to investments.



	March 31, 2017
(in millions)	Total Fair Value			Level 1		Level 3
Other trading equity securities	4			4		—
Other trading debt securities	1			1		—
Derivative assets	2			2		—
Total assets	7			7		—
Derivative liabilities	(145		)	—		(145		)
Net (liabilities) assets	$	(138	)	$	7	$	(145	)



	December 31, 2016
(in millions)	Total Fair Value			Level 1		Level 3
Other trading equity securities	$	4		$	4	$	—
Other trading debt securities	1			1		—
Derivative assets	3			3		—
Total assets	8			8		—
Derivative liabilities	(187		)	—		(187		)
Net (liabilities) assets	$	(179	)	$	8	$	(187	)

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

The following table provides a reconciliation of 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)	2017			2016
Balance at beginning of period	$	(187	)	$	(149	)
Total gains and settlements	42			23
Balance at end of period	$	(145	)	$	(126	)

QUANTITATIVE INFORMATION ABOUT UNOBSERVABLE INPUTS

The following table includes quantitative information about the Duke Energy Registrants' derivatives classified as Level 3. ~~As of June 30, 2016 and December 31, 2015, all Level 3 derivatives were financial transmission rights (FTRs).~~


	June 30, 2016										March 31, 2017
	Fair Value of FTRs										Fair Value
	(in millions)		Valuation Technique	Unobservable Input	Range
Investment Type											(in millions)			Valuation Technique	Unobservable Input	Range
Duke Energy Ohio
Financial Transmission Rights (FTRs)											$	1		RTO auction pricing	FTR price – per megawatt-hour (MWh)	$	0.23		-	$	2.02
Duke Energy Indiana
FTRs											9			RTO auction pricing	FTR price – per MWh	(1.08		)	-	5.33
Piedmont
Natural gas contracts											(145		)	Discounted cash flow	Forward natural gas curves – price per million British thermal unit (MMBtu)	2.08			-	3.57
Duke Energy	$	34	RTO auction pricing	FTR price – per Megawatt-Hour (MWh)	$	(1.64	)	-	$	8.64
Duke Energy Ohio	5		RTO auction pricing	FTR price – per MWh	0.36			-	2.47
Duke Energy Indiana	29		RTO auction pricing	FTR price – per MWh	(1.64		)	-	8.64
Total Level 3 derivatives											$	(135	)


	December 31, 2015										December 31, 2016
	Fair Value of FTRs										Fair Value
	(in millions)		Valuation Technique	Unobservable Input	Range
Investment Type											(in millions)			Valuation Technique	Unobservable Input	Range
Duke Energy Ohio
FTRs											$	5		RTO auction pricing	FTR price – per MWh	$	0.77		-	$	3.52
Duke Energy Indiana
FTRs											16			RTO auction pricing	FTR price – per MWh	(0.83		)	-	9.32
Piedmont
Natural gas contracts											(187		)	Discounted cash flow	Forward natural gas curves – price per MMBtu	2.31			-	4.18
Duke Energy	$	10	RTO auction pricing	FTR price – per MWh	$	(0.74	)	-	$	7.29
Duke Energy Ohio	3		RTO auction pricing	FTR price – per MWh	0.67			-	2.53
Duke Energy Indiana	7		RTO auction pricing	FTR price – per MWh	(0.74		)	-	7.29
Total Level 3 derivatives											$	(166	)

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.


	June 30, 2016				December 31, 2015				March 31, 2017				December 31, 2016
(in millions)	Book Value		Fair Value		Book Value		Fair Value		Book Value		Fair Value		Book Value		Fair Value
Duke Energy	$	42,273	$	47,953	$	39,569	$	42,537	$	48,998	$	50,480	$	47,895	$	49,161
Duke Energy Carolinas	9,360		10,874		8,367		9,156		9,491		10,405		9,603		10,494
Progress Energy	15,486		16,715		14,464		15,856		18,148		19,742		17,541		19,107
Duke Energy Progress	6,565		7,344		6,518		6,757		6,761		7,103		7,011		7,357
Duke Energy Florida	5,540		5,226		4,266		4,908		6,981		7,596		6,125		6,728
Duke Energy Ohio	1,887		2,134		1,598		1,724		1,977		2,122		1,884		2,020
Duke Energy Indiana	3,937		4,717		3,768		4,219		3,784		4,292		3,786		4,260
Piedmont									1,821		1,954		1,821		1,933

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

At both ~~June 30, 2016~~March 31, 2017 and December 31, ~~2015,~~2016, fair value of cash and cash equivalents, accounts and notes receivable, accounts payable, notes payable and commercial paper, and ~~non-recourse~~nonrecourse notes payable of 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.

12. VARIABLE INTEREST ENTITIES

A VIE is an entity that is evaluated for consolidation using more than a simple analysis of voting control. The analysis to determine whether an entity is a VIE considers contracts with an entity, credit support for an entity, the adequacy of the equity investment of an entity and the relationship of voting power to the amount of equity invested in an entity. This analysis is performed either upon the creation of a legal entity or upon the occurrence of an event requiring reevaluation, such as a significant change in an entity’s assets or activities. A qualitative analysis of control determines the party that consolidates a VIE. This assessment is based on (i) what party has the power to direct the activities of the VIE that most significantly impact its economic performance and (ii) what party has rights to receive benefits or is obligated to absorb losses that could potentially be significant to the VIE. The analysis of the party that consolidates a VIE is a continual reassessment.

CONSOLIDATED VIEs

The obligations of the consolidated VIEs discussed in the following paragraphs are nonrecourse to the Duke Energy registrants. The registrants have no requirement to provide liquidity to, purchase assets of or guarantee performance of these VIEs unless noted in the following paragraphs.

No financial support was provided to any of the consolidated VIEs during the ~~six~~three months ended ~~June 30, 2016~~March 31, 2017 and the year ended December 31, ~~2015,~~2016, or is expected to be provided in the future, that was not previously contractually required.

Receivables Financing – DERF / DEPR / DEFR

Duke Energy Receivables Finance Company, LLC (DERF), Duke Energy Progress Receivables, LLC (DEPR) and Duke Energy Florida Receivables, LLC (DEFR) are bankruptcy remote, special purpose subsidiaries of Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida, respectively. DERF, DEPR and DEFR are wholly owned limited liability companies with separate legal existence from their parent companies, and their assets are not generally available to creditors of their parent companies. On a revolving basis, DERF, DEPR and DEFR buy certain accounts receivable arising from the sale of electricity and related services from their parent companies.

~~PART I~~

~~DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –~~

~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC~~

~~Combined Notes to Condensed Consolidated Financial Statements – (Continued)~~

~~(Unaudited)~~

DERF, DEPR and DEFR borrow amounts under credit facilities to buy these receivables. Borrowing availability from the credit facilities is limited to the amount of qualified receivables purchased. The sole source of funds to satisfy the related debt obligations is cash collections from the receivables. Amounts borrowed under the credit facilities are reflected on the Condensed Consolidated Balance Sheets as Long-Term Debt.

The most significant activity that impacts the economic performance of DERF, DEPR and DEFR are the decisions made to manage delinquent receivables. Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida consolidate DERF, DEPR and DEFR, respectively, as they make those decisions.

Receivables Financing – CRC

CRC is a bankruptcy remote, special purpose entity indirectly owned by Duke Energy. On a revolving basis, CRC buys certain accounts receivable arising from the sale of electricity, natural gas and related services from Duke Energy Ohio and Duke Energy Indiana. CRC borrows amounts under a credit facility to buy the receivables from Duke Energy Ohio and Duke Energy Indiana. Borrowing availability from the credit facility is limited to the amount of qualified receivables sold to CRC. The sole source of funds to satisfy the related debt obligation is cash collections from the receivables. Amounts borrowed under the credit facility are reflected on Duke Energy's Condensed Consolidated Balance Sheets as Long-Term Debt.

The proceeds Duke Energy Ohio and Duke Energy Indiana receive from the sale of receivables to CRC are typically 75 percent cash and 25 percent in the form of a subordinated note from CRC. The subordinated note is a retained interest in the receivables sold. Depending on collection experience, additional equity infusions to CRC may be required by Duke Energy to maintain a minimum equity balance of $3 million.

CRC is considered a VIE because (i) equity capitalization is insufficient to support its operations, (ii) power to direct the activities that most significantly impact the economic performance of the entity are not performed by the equity holder, and (iii) deficiencies in net worth of CRC are funded by Duke Energy. The most significant activities that impact the economic performance of CRC are decisions made to manage delinquent receivables. Duke Energy 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 described above. ~~Amounts borrowed under the credit facilities are reflected on the~~



	Duke Energy
			Duke Energy		Duke Energy		Duke Energy
			Carolinas		Progress		Florida
(in millions)	CRC		DERF		DEPR		DEFR
Expiration date	December 2018		December 2018		February 2019		April 2019
Credit facility amount	$	325	$	425	$	300	$	225
Amounts borrowed at March 31, 2017	325		425		300		225
Amounts borrowed at December 31, 2016	325		425		300		225

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated ~~Balance Sheets as Long-Term Debt.~~Financial Statements – (Unaudited) – (Continued)

Duke Energy
Duke Energy
Duke Energy
Duke Energy
Carolinas
Progress
Florida
CRC
DERF
DEPR
DEFR
Expiration date December 2018
December 2018
February 2019
April 2019
Credit facility amount (in millions) $ 325
$ 425
$ 300
$ 225
Amounts borrowed at June 30, 2016 325
425
300
225
Amounts borrowed at December 31, 2015 325
425
254
225

Nuclear Asset-Recovery Bonds – DEFPF

~~DEFPF~~Duke Energy Florida Project Finance, LLC (DEFPF) is a bankruptcy remote, wholly owned special purpose subsidiary of Duke Energy Florida. DEFPF was formed in 2016 for the sole purpose of issuing nuclear asset-recovery bonds to finance Duke Energy Florida's unrecovered regulatory asset related to Crystal River Unit 3.

In June 2016, DEFPF issued $1,294 million of 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. For additional information see ~~Notes~~Note 4 ~~and~~ 6.

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)	June 30, 2016		March 31, 2017		December 31, 2016
Regulatory Assets: Current	$	34
Receivables of VIEs			$	4	$	6
Current Assets: Regulatory assets			53		50
Current Assets: Other	7		14		53
Regulatory Assets and Deferred Debits: Regulatory assets	1,194
Other Noncurrent Assets: Regulatory assets			1,131		1,142
Current Liabilities: Other			3		17
Current maturities of long-term debt	35		55		62
Long-Term Debt	1,243		1,189		1,217

~~PART I~~

~~DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –~~

~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC~~

~~Combined Notes to Condensed Consolidated Financial Statements – (Continued)~~

~~(Unaudited)~~

Commercial Renewables

Certain of Duke Energy renewable energy facilities are VIEs due to long-term fixed-price power purchase agreements. These fixed-price agreements effectively transfer commodity price risk to the buyer of the power. Certain other Duke EnergyEnergy’s renewable energy facilities are VIEs due to Duke Energy issuing guarantees for debt service and operations and maintenance reserves in support of debt financings. ~~For certain VIEs, assets~~Assets are restricted and cannot be pledged as collateral or sold to third parties without prior approval of debt holders. The activities that most significantly impact the economic performance of these renewable energy facilities were decisions associated with siting, negotiating ~~purchase power agreements,~~PPAs, engineering, procurement and construction and decisions associated with ongoing operations and maintenance-related activities. Duke Energy 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 renewables VIEs.

(in millions) June 30, 2016
December 31, 2015
Current Assets: Other $ 223
$ 138
Property, plant and equipment, cost 2,578
2,015
Accumulated depreciation and amortization (376 ) (321 )
Current maturities of long-term debt 154
108
Long-Term Debt 866
968
Deferred Credits and Other Liabilities: Deferred income taxes 31
289
Deferred Credits and Other Liabilities: Other 277
33

~~NON-CONSOLIDATED VIEs~~

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

June 30, 2016
Duke Energy Duke
Duke
Energy
Energy
(in millions) Renewables
Other
Total
Ohio
Indiana
Receivables from affiliated companies $ —
$ —
$ —
$ 39
$ 58
Investments in equity method unconsolidated affiliates 222
252
474
—
—
Total assets $ 222
$ 252
$ 474
$ 39
$ 58
Other current liabilities —
3
3
—
—
Deferred credits and other liabilities —
13
13
—
—
Total liabilities $ —
$ 16
$ 16
$ —
$ —
Net assets $ 222
$ 236
$ 458
$ 39
$ 58

December 31, 2015
Duke Energy Duke
Duke
Energy
Energy
(in millions) Renewables
Other
Total
Ohio
Indiana
Receivables from affiliated companies $ —
$ —
$ —
$ 47
$ 60
Investments in equity method unconsolidated affiliates 235
152
387
—
—
Total assets $ 235
$ 152
$ 387
$ 47
$ 60
Other current liabilities —
3
3
—
—
Deferred credits and other liabilities —
14
14
—
—
Total liabilities $ —
$ 17
$ 17
$ —
$ —
Net assets $ 235
$ 135
$ 370
$ 47
$ 60

The Duke Energy Registrants are not aware of any situations where the maximum exposure to loss significantly exceeds the carrying values shown above except for the power purchase agreement with Ohio Valley Electric Corporation (OVEC), which is discussed below, and various guarantees, reflected in the table above as Deferred credits and other liabilities. For more information on various guarantees, refer to Note 5.

~~Renewables~~

Duke Energy has investments in various renewable energy project entities. Some of these entities are VIEs due to long-term fixed-price power purchase agreements. These fixed-price agreements effectively transfer commodity price risk to the buyer of the power. Duke Energy does not consolidate these VIEs because power to direct and control key activities is shared jointly by Duke Energy and other owners.



(in millions)	March 31, 2017			December 31, 2016
Current Assets: Other	$	336		$	223
Property, plant and equipment, cost	3,671			3,419
Accumulated depreciation and amortization	(448		)	(453		)
Current maturities of long-term debt	227			198
Long-Term Debt	1,645			1,097
Deferred income taxes	321			275
Other Noncurrent Liabilities: Other	251			252

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

~~(Unaudited)~~

NON-CONSOLIDATED VIEs

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



	March 31, 2017
	Duke Energy										Duke		Duke
	Pipeline			Commercial		Other					Energy		Energy
(in millions)	Investments			Renewables		VIEs		Total			Ohio		Indiana		Piedmont
Receivables from affiliated companies	$	—		$	—	$	—	$	—		$	53	$	69	$	—
Investments in equity method unconsolidated affiliates	673			173		92		938			—		—		152
Other noncurrent assets	12			—		—		12			—		—		—
Total assets	$	685		$	173	$	92	$	950		$	53	$	69	$	152
Taxes accrued^(a)	23			—		—		23			—		—		(1		)
Other current liabilities	—			—		2		2			—		—		—
Deferred income taxes^(a)	(7		)	—		—		(7		)	—		—		4
Other noncurrent liabilities	—			—		13		13			—		—		—
Total liabilities	$	16		$	—	$	15	$	31		$	—	$	—	$	3
Net assets	$	669		$	173	$	77	$	919		$	53	$	69	$	149


(a)	Taxes accrued and Deferred income taxes are netted by jurisdiction on a consolidated basis on the Condensed Consolidated Balance Sheets.



	December 31, 2016
	Duke Energy								Duke		Duke
	Pipeline		Commercial		Other				Energy		Energy
(in millions)	Investments		Renewables		VIEs		Total		Ohio		Indiana		Piedmont
Receivables from affiliated companies	$	—	$	—	$	—	$	—	$	82	$	101	$	—
Investments in equity method unconsolidated affiliates	487		174		90		751		—		—		139
Other noncurrent assets	12		—		—		12		—		—		—
Total assets	$	499	$	174	$	90	$	763	$	82	$	101	$	139
Other current liabilities	—		—		3		3		—		—		—
Other noncurrent liabilities	—		—		13		13		—		—		4
Total liabilities	$	—	$	—	$	16	$	16	$	—	$	—	4
Net assets	$	499	$	174	$	74	$	747	$	82	$	101	$	135

The Duke Energy Registrants are not aware of any situations where the maximum exposure to loss significantly exceeds the carrying values shown above except for the power purchase agreement with OVEC, which is discussed below, and various guarantees, some of which are reflected in the table above as Other noncurrent liabilities. For more information on various guarantees, refer to Note 5.

Pipeline Investments

Duke Energy has investments in various joint ventures with pipeline projects currently under construction. These entities are considered VIEs due to having insufficient equity to finance their own activities without subordinated financial support. Duke Energy does not have the power to direct the activities that most significantly impact the economic performance, the obligation to absorb losses or the right to receive benefits of these VIEs and therefore does not consolidate these entities.

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

The table below presents the ownership interest and investment balances in these joint ventures.



	Duke Energy						Piedmont
			Investment Amount (in millions)						Investment Amount (in millions)
	Ownership		March 31,		December 31,		Ownership		March 31,		December 31,
Entity Name	Interest		2017		2016		Interest^(a)		2017		2016
ACP	47	%	$	403	$	265	7	%	$	59	$	46
Sabal Trail	7.5	%	188		140
Constitution^(b)	24	%	82		82		24	%	93		93
Total			$	673	$	487			$	152	$	139


(a)	On April 1, 2017, Piedmont transferred its ownership interests in ACP and Constitution to a wholly owned subsidiary of Duke Energy at Piedmont's book value.


(b)	Duke Energy's investment amount includes purchase accounting adjustments not recorded at the Piedmont registrant.

Commercial Renewables

Duke Energy has investments in various renewable energy project entities. Some of these entities are VIEs due to Duke Energy issuing guarantees for debt service and operations and maintenance reserves in support of debt financings. Duke Energy does not consolidate these VIEs because power to direct and control key activities is shared jointly by Duke Energy and other owners.

Other VIEs

Duke Energy holds a 50 percent equity interest in Duke-American Transmission Company, LLC (DATC). DATC is considered a VIE due to having insufficient equity ~~at risk to permit DATC~~ to finance ~~its~~their own activities without ~~additional~~ subordinated financial support. The activities that most significantly impact ~~DATC’s~~DATC's economic performance are ~~the~~ decisions related to investing in existing and development of new transmission facilities. The power to direct these activities is jointly and equally shared by Duke Energy and the other joint venture partner, ~~and~~American Transmission Company, LLC, therefore Duke Energy does not consolidate DATC.

Duke Energy ~~has~~holds a ~~40 percent equity interest and a 7.5~~50 percent equity interest in ~~ACP and Sabal Trail~~Pioneer Transmission, LLC ~~(Sabal Trail), respectively. These entities are~~(Pioneer). Pioneer is considered ~~VIEs as their~~a VIE due to having insufficient equity ~~is not sufficient to permit the entities~~ to finance their own activities without ~~additional~~ subordinated financial support. The ~~activity~~activities that most significantly ~~impacts the~~impact Pioneer's economic performance are decisions related to the development of ~~both ACP~~new transmission facilities. The power to direct these activities is jointly and ~~Sabal Trail is construction.~~equally shared by Duke Energy and the other joint venture partner, American Electric Power, therefore Duke Energy does not ~~control these activities and therefore does not~~ consolidate ~~ACP or Sabal Trail.~~Pioneer.

OVEC

Duke Energy Ohio’s 9 percent ownership interest in OVEC is considered a non-consolidated ~~VIE. Through its ownership interest in OVEC,~~VIE due to having insufficient equity to finance their activities without subordinated financial support. As a counterparty to an inter-company power agreement (ICPA), Duke Energy Ohio has a contractual arrangement to ~~buy power~~receive entitlements to capacity and energy from OVEC’s power plants through June ~~2040. Proceeds from the sale of power by OVEC to~~2040 commensurate with its power ~~purchase agreement counterparties are designed~~participation ratio, which is equivalent to ~~be sufficient to meet its~~Duke Energy Ohio's ownership interest. Costs, including fuel, operating expenses, fixed costs, debt amortization, and interest expense ~~as well as earn a return~~are allocated to counterparties to the ICPA based on ~~equity. Accordingly, the~~their power participation ratio. The value of ~~this contract~~the ICPA is subject to variability due to ~~fluctuations~~fluctuation in power prices and changes in ~~OVEC’s costs~~OVEC's cost of business, including costs associated with its 2,256 MW of coal-fired generation capacity. ~~Proposed environmental rulemaking~~Deterioration in the credit quality, or bankruptcy of one or more parties to the ICPA could increase the costs of ~~OVEC, which would be passed through to Duke Energy Ohio.~~OVEC. In addition, certain proposed environmental rulemaking could result in future increased cost allocations.

CRC

See discussion under Consolidated VIEs for additional information related to CRC.

Amounts included in Receivables from affiliated companies in the above table for Duke Energy Ohio and Duke Energy Indiana reflect their retained interest in receivables sold to CRC. These subordinated notes held by Duke Energy Ohio and Duke Energy Indiana are stated at fair value. Carrying values of retained interests are determined by allocating carrying value of the receivables between assets sold and interests retained based on relative fair value. The allocated bases of the subordinated notes are not materially different than their face value because (i) the receivables generally turn over in less than two months, (ii) credit losses are reasonably predictable due to the broad customer base and lack of significant concentration, and (iii) the equity in CRC is subordinate to all retained interests and thus would absorb losses first. The hypothetical effect on fair value of the retained interests assuming both a 10 percent and a 20 percent unfavorable variation in credit losses or discount rates is not material due to the short turnover of receivables and historically low credit loss history. Interest accrues to Duke Energy Ohio and Duke Energy Indiana on the retained interests using the acceptable yield method. This method generally approximates the stated rate on the notes since the allocated basis and the face value are nearly equivalent. An impairment charge is recorded against the carrying value of both retained interests and purchased beneficial interest whenever it is determined that an ~~other-than-temporary impairment~~OTTI has occurred.

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

Duke Energy Ohio Duke Energy Indiana
2016
2015
2016
2015
Anticipated credit loss ratio 0.5 % 0.6 % 0.3 % 0.3 %
Discount rate 1.4 % 1.2 % 1.4 % 1.2 %
Receivable turnover rate 13.2 % 12.9 % 10.6 % 10.6 %

~~The following table shows the gross and net receivables sold.~~

Duke Energy Ohio Duke Energy Indiana
(in millions) June 30, 2016
December 31, 2015
June 30, 2016
December 31, 2015
Receivables sold $ 208
$ 233
$ 279
$ 260
Less: Retained interests 39
47
58
60
Net receivables sold $ 169
$ 186
$ 221
$ 200



	Duke Energy Ohio				Duke Energy Indiana
	2017		2016		2017		2016
Anticipated credit loss ratio	0.5	%	0.5	%	0.3	%	0.3	%
Discount rate	1.8	%	1.5	%	1.8	%	1.5	%
Receivable turnover rate	13.4	%	13.3	%	10.7	%	10.6	%

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

~~(Unaudited)~~

The following table shows the gross and net receivables sold.



	Duke Energy Ohio				Duke Energy Indiana
(in millions)	March 31, 2017		December 31, 2016		March 31, 2017		December 31, 2016
Receivables sold	$	238	$	267	$	277	$	306
Less: Retained interests	53		82		69		101
Net receivables sold	$	185	$	185	$	208	$	205

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


	Duke Energy Ohio								Duke Energy Indiana								Duke Energy Ohio				Duke Energy Indiana
	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended				Three Months Ended				Three Months Ended
	June 30,				June 30,				June 30,				June 30,				March 31,				March 31,
(in millions)	2016		2015		2016		2015		2016		2015		2016		2015		2017		2016		2017		2016
Sales
Receivables sold	$	429	$	425	$	961	$	1,069	$	623	$	637	$	1,258	$	1,353	$	533	$	532	$	664	$	635
Loss recognized on sale	2		2		5		5		2		2		5		5		2		3		3		3
Cash flows
Cash proceeds from receivables sold	427		467		964		1,107		612		660		1,255		1,382		$	559	$	537	$	693	$	643
Collection fees received	—		1		—		1		1		1		1		1
Return received on retained interests	—		1		1		2		1		1		2		3		1		1		2		1

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

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

13. COMMON STOCK

Basic Earnings Per Share (EPS) is computed by dividing net income attributable to Duke Energy common stockholders, adjusted for distributed and undistributed earnings allocated to participating securities, by the weighted average number of common ~~stock~~shares outstanding during the period. Diluted EPS is computed by dividing net income attributable to Duke Energy common stockholders, as adjusted for distributed and undistributed earnings allocated to participating securities, by the diluted weighted average number of common ~~stock~~shares outstanding during the period. Diluted EPS reflects the potential dilution that could occur if securities or other agreements to issue common stock, such as stock options and ~~the Equity Forwards,~~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.

The following table presents Duke Energy’s basic and diluted EPS calculations and reconciles the weighted average number of common ~~stock~~shares outstanding to the diluted weighted average number of common shares outstanding.


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended March 31,
(in millions, except per-share amounts)	2016		2015		2016		2015
(in millions, except per share amounts)									2017		2016
Income from continuing operations attributable to Duke Energy common stockholders excluding impact of participating securities	$	508	$	600	$	1,199	$	1,372	$	715	$	574
Weighted average shares outstanding – basic	689		692		689		700		700		689
Equity Forwards	1		—		—		—
Weighted average shares outstanding – diluted	690		692		689		700		700		689
Earnings per share from continuing operations attributable to Duke Energy common stockholders
Basic	$	0.74	$	0.87	$	1.74	$	1.96	$	1.02	$	0.83
Diluted	$	0.74	$	0.87	$	1.74	$	1.96	$	1.02	$	0.83
Potentially dilutive items excluded from the calculation^(a)	2		2		2		2		2		2
Dividends declared per common share	$	0.825	$	0.795	$	1.65	$	1.59	$	0.855	$	0.825


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

~~Equity Forwards~~

In March 2016, Duke Energy marketed an equity offering of 10.6 million shares of common stock. In lieu of issuing equity at the time of the offering, Duke Energy entered into Equity Forwards with Barclays. No amounts have or will be recorded in Duke Energy’s Condensed Consolidated Financial Statements with respect to the equity offering until settlements of the Equity Forwards occur. The Equity Forwards require Duke Energy to, at its election prior to June 30, 2017, either physically settle the transactions by issuing the total of 10.6 million of its common stock to Barclays in exchange for net proceeds at the then-applicable forward sale price specified by the agreements (initially $69.84 per share) or Duke Energy can net settle the transactions in whole or in part through the delivery or receipt of cash or shares. If Duke Energy had elected to net share settle the contract as of June 30, 2016, Duke Energy would have been required to deliver 2.1 million shares. The forward sale price is subject to adjustment on a daily basis based on a floating interest rate factor and will decrease by other fixed amounts specified in the agreements. The net proceeds received upon settlement are expected to be used to finance a portion of the acquisition of Piedmont.

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

~~(Unaudited)~~

~~Until settlement~~Equity Forwards

In March 2016, Duke Energy marketed an equity offering of 10.6 million shares of common stock. In lieu of issuing equity at the time of the offering, Duke Energy entered into equity forward sale agreements with Barclays (the Equity Forwards). The Equity Forwards ~~earnings per~~required Duke Energy to either physically settle the transactions by issuing 10.6 million shares, or net settle in whole or in part through the delivery or receipt of cash or shares. As of March 31, 2016, share dilution resulting from the agreements ~~will be~~was determined under the treasury stock method.

~~Accelerated Stock Repurchase Program~~

~~On April 6, 2015,~~ Duke Energy entered into agreements with each of Goldman, Sachs & Co. and JPMorgan Chase Bank, National Association (the Dealers) to repurchase a total of $1.5 billion of Duke Energy common stock under an accelerated stock repurchase program (the ASR). Duke Energy made payments of $750 million to eachphysically settled the Equity Forwards in full in October 2016 following the close of the ~~Dealers and was delivered 16.6 million shares, with a total fair value of $1.275 billion, which represented approximately 85 percent of~~Piedmont acquisition. See Note 2 for additional information related to the total number of shares of Duke Energy common stock expected to be repurchased under the ASR. The company recorded the $1.5 billion payment as a reduction to common stock as of April 6, 2015. In June 2015, the Dealers delivered 3.2 million additional shares to Duke Energy to complete the ASR. Approximately 19.8 million shares, in total, were delivered to Duke Energy and retired under the ASR at an average price of $75.75 per share. The final number of shares repurchased was based upon the average of the daily volume weighted average stock prices of Duke Energy’s common stock during the term of the program, less a discount.Piedmont acquisition.

14. STOCK-BASED COMPENSATION

For employee awards, equity classified stock-based compensation cost is measured at the service inception date or the grant date, based on the estimated achievement of certain performance metrics or the fair value of the award, and is recognized as expense or capitalized as a component of property, plant and equipment over the requisite service period.

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


	Three Months Ended				Six Months Ended				Three Months Ended
	June 30,				June 30,				March 31,
(in millions)	2016		2015		2016		2015		2017		2016
Restricted stock unit awards	$	10	$	11	$	17	$	20	$	8	$	7
Performance awards	5		8		10		13		7		5
Pretax stock-based compensation cost	$	15	$	19	$	27	$	33	$	15	$	12
Tax benefit associated with stock-based compensation expense	$	5	$	7	$	9	$	12	$	5	$	4
Stock-based compensation costs capitalized	1		1		2		2		1		1

Prior to Duke Energy acquiring Piedmont, Piedmont had an incentive compensation plan for eligible officers and other participants. Piedmont's total stock-based compensation costs were approximately $2 million for the three months ended March 31, 2016.

15. EMPLOYEE BENEFIT PLANS

DEFINED BENEFIT RETIREMENT PLANS

Duke Energy maintains, and the Subsidiary Registrants participate in, qualified and non-qualified, non-contributory defined benefit retirement plans. The plans cover most U.S. employees using a cash balance formula. Under a cash balance formula, a plan participant accumulates a retirement benefit consisting of pay credits equal to a percentage of current eligible earnings based on age or the combination of age and years of service, and interest credits. Certain employees are covered under plans that use a final average earnings formula. Under these average earnings formulas, a plan participant accumulates a retirement benefit equal to the sum of percentages of their (i) highest three-year or four-year average earnings, (ii) highest three-year or four-year average earnings in excess of covered compensation per year of participation (maximum of 35 years) and/or (iii) highest three-year average earnings times years of participation in excess of 35 years. Duke Energy also maintains, and the Subsidiary Registrants participate in, non-qualified, non-contributory defined benefit retirement plans which cover certain executives. The qualified and non-qualified, non-contributory defined benefit plans are closed to new and rehired non-union and certain unionized employees.

Duke Energy’s policy is to fund amounts on an actuarial basis to provide assets sufficient to meet benefit payments to be paid to plan participants. ~~The following table includes information related to the Duke Energy Registrants’ contributions to its U.S. qualified defined benefit pension plans.~~ Duke Energy did not make any contributions to its U.S. qualified defined benefit pension plans during the ~~six~~three months ended ~~June 30,~~March 31, 2017 and 2016.

Six Months Ended June 30, 2015
Duke
Duke
Duke
Duke
Duke
Duke
Energy
Progress
Energy
Energy
Energy
Energy
(in millions) Energy
Carolinas
Energy
Progress
Florida
Ohio
Indiana
Contributions $ 132
$ 42
$ 42
$ 21
$ 21
$ 1
$ 9

Net periodic benefit costs disclosed in the tables below represent the cost of the respective benefit plan for the periods presented. However, portions of the net periodic benefit costs disclosed in the tables below have been capitalized as a component of property, plant and equipment. Amounts presented in the tables below for the Subsidiary Registrants represent the amounts of pension and other post-retirement benefit costs allocated by Duke Energy for employees of the Subsidiary Registrants. Additionally, the Subsidiary Registrants are allocated their proportionate share of pension and post-retirement benefit costs for employees of Duke Energy’s shared services affiliate that provides support to the Subsidiary Registrants. These allocated amounts are included in the governance and shared service costs discussed in Note 8. Duke Energy uses a December 31 measurement date for its defined benefit retirement plan assets and obligations.

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

~~(Unaudited)~~

QUALIFIED PENSION PLANS

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


	Three Months Ended June 30, 2016																					Three Months Ended March 31, 2017
				Duke						Duke			Duke			Duke			Duke						Duke						Duke			Duke			Duke			Duke
	Duke			Energy			Progress			Energy			Energy			Energy			Energy			Duke			Energy			Progress			Energy			Energy			Energy			Energy
(in millions)	Energy			Carolinas			Energy			Progress			Florida			Ohio			Indiana			Energy			Carolinas			Energy			Progress			Florida			Ohio			Indiana			Piedmont
Service cost	$	37		$	12		$	10		$	6		$	5		$	1		$	2		$	40		$	12		$	12		$	6		$	5		$	1		$	2		$	3
Interest cost on projected benefit obligation	83			22			27			13			14			5			7			82			20			25			12			13			5			7			3
Expected return on plan assets	(129		)	(36		)	(42		)	(20		)	(21		)	(7		)	(11		)	(136		)	(35		)	(43		)	(21		)	(21		)	(7		)	(11		)	(6		)
Amortization of actuarial loss	33			8			13			5			7			1			3			36			8			14			6			7			1			3			3
Amortization of prior service credit	(4		)	(2		)	(1		)	(1		)	—			—			—			(6		)	(2		)	(1		)	—			—			—			—			(1		)
Other	1			—			—			1			—			—			—			2			—			1			—			—			—			—			—
Net periodic pension costs	$	21		$	4		$	7		$	4		$	5		$	—		$	1		$	18		$	3		$	8		$	3		$	4		$	—		$	1		$	2


	Three Months Ended June 30, 2015																					Three Months Ended March 31, 2016
				Duke						Duke			Duke			Duke			Duke						Duke						Duke			Duke			Duke			Duke
	Duke			Energy			Progress			Energy			Energy			Energy			Energy			Duke			Energy			Progress			Energy			Energy			Energy			Energy
(in millions)	Energy			Carolinas			Energy			Progress			Florida			Ohio			Indiana			Energy			Carolinas			Energy			Progress			Florida			Ohio			Indiana			Piedmont
Service cost	$	39		$	12		$	11		$	6		$	5		$	1		$	2		$	36		$	12		$	11		$	6		$	5		$	1		$	2		$	3
Interest cost on projected benefit obligation	81			20			26			12			13			4			7			83			21			26			12			14			5			7			2
Expected return on plan assets	(129		)	(33		)	(41		)	(21		)	(22		)	(7		)	(11		)	(129		)	(35		)	(42		)	(21		)	(21		)	(7		)	(10		)	(6		)
Amortization of actuarial loss	44			10			17			9			8			3			4			33			8			14			6			7			1			3			2
Amortization of prior service credit	(3		)	(2		)	(1		)	(1		)	(1		)	—			—			(4		)	(2		)	(1		)	—			—			—			—			—
Other	2			—			—			1			1			—			—			3			1			1			—			—			—			—			—
Net periodic pension costs	$	34		$	7		$	12		$	6		$	4		$	1		$	2		$	22		$	5		$	9		$	3		$	5		$	—		$	2		$	1

Six Months Ended June 30, 2016
Duke
Duke
Duke
Duke
Duke
Duke
Energy
Progress
Energy
Energy
Energy
Energy
(in millions) Energy
Carolinas
Energy
Progress
Florida
Ohio
Indiana
Service cost $ 73
$ 24
$ 21
$ 12
$ 10
$ 2
$ 4
Interest cost on projected benefit obligation 166
43
53
25
28
10
14
Expected return on plan assets (258 ) (71 ) (84 ) (41 ) (42 ) (14 ) (21 )
Amortization of actuarial loss 66
16
27
11
14
2
6
Amortization of prior service credit (8 ) (4 ) (2 ) (1 ) —
—
—
Other 4
1
1
1
—
—
—
Net periodic pension costs $ 43
$ 9
$ 16
$ 7
$ 10
$ —
$ 3

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

NON-QUALIFIED PENSION PLANS

Net periodic costs for non-qualified pension plans were not material for the three months ended March 31, 2017 and 2016.

OTHER POST-RETIREMENT BENEFIT PLANS

Duke Energy provides, and the Subsidiary Registrants participate in, some health care and life insurance benefits for retired employees on a contributory and non-contributory basis.

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

~~(Unaudited)~~

~~NON-QUALIFIED PENSION PLANS~~

The following tables include the components of net periodic ~~pension costs for non-qualified pension plans for registrants with non-qualified pension~~other post-retirement benefit costs.



	Three Months Ended March 31, 2017
				Duke						Duke			Duke			Duke		Duke
	Duke			Energy			Progress			Energy			Energy			Energy		Energy
(in millions)	Energy			Carolinas			Energy			Progress			Florida			Ohio		Indiana		Piedmont
Service cost	$	1		$	—		$	—		$	—		$	—		$	—	$	—	$	—
Interest cost on accumulated post-retirement benefit obligation	9			2			4			2			2			—		—		—
Expected return on plan assets	(3		)	(2		)	—			—			—			—		—		—
Amortization of actuarial loss (gain)	2			(1		)	5			3			2			—		—		—
Amortization of prior service credit	(29		)	(2		)	(21		)	(14		)	(8		)	—		—		—
Net periodic other post-retirement benefit	$	(20	)	$	(3	)	$	(12	)	$	(9	)	$	(4	)	$	—	$	—	$	—



	Three Months Ended March 31, 2016
				Duke						Duke			Duke			Duke		Duke
	Duke			Energy			Progress			Energy			Energy			Energy		Energy
(in millions)	Energy			Carolinas			Energy			Progress			Florida			Ohio		Indiana			Piedmont
Service cost	$	1		$	—		$	—		$	—		$	—		$	—	$	—		$	—
Interest cost on accumulated post-retirement benefit obligation	8			2			4			2			2			—		1			—
Expected return on plan assets	(3		)	(2		)	—			—			—			—		—			—
Amortization of actuarial loss (gain)	1			(1		)	5			3			2			—		(1		)	—
Amortization of prior service credit	(35		)	(3		)	(26		)	(17		)	(9		)	—		—			—
Net periodic other post-retirement benefit	$	(28	)	$	(4	)	$	(17	)	$	(12	)	$	(5	)	$	—	$	—		$	—

Three Months Ended June 30, 2016
Duke
Duke
Duke
Duke
Energy
Progress
Energy
Energy
(in millions) Energy
Carolinas
Energy
Progress
Florida
Service cost $ 1
$ —
$ —
$ —
$ —
Interest cost on projected benefit obligation 3
1
1
1
1
Amortization of actuarial loss 2
—
—
—
—
Net periodic pension costs $ 6
$ 1
$ 1
$ 1
$ 1
DEFINED CONTRIBUTION RETIREMENT PLANS

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

Six Months Ended June 30, 2016
Duke
Duke
Duke
Duke
Energy
Progress
Energy
Energy
(in millions) Energy
Carolinas
Energy
Progress
Florida
Service cost $ 1
$ —
$ —
$ —
$ —
Interest cost on projected benefit obligation 7
1
2
1
1
Amortization of actuarial loss 4
—
1
—
—
Net periodic pension costs $ 12
$ 1
$ 3
$ 1
$ 1

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

~~OTHER POST-RETIREMENT BENEFIT PLANS~~EMPLOYEE SAVINGS PLAN

Duke Energy ~~provides,~~sponsors, and the Subsidiary Registrants participate in, ~~some health care~~employee savings plans that cover substantially all U.S. employees.

The following table presents employer contributions made by Duke Energy and ~~life insurance benefits for retired employees on a contributory~~expensed by the Subsidiary Registrants.



			Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Three Months Ended March 31,
2017	$	65	$	22	$	18	$	13	$	5	$	1	$	3	$	2
2016	52		18		15		11		4		1		2		2

MONEY PURCHASE PENSION PLAN

Duke Energy provides, and ~~non-contributory basis. Employees are eligible for these benefits if they have met age and service requirements at retirement, as set forth~~Piedmont participates in, the ~~plans. The health care benefits include medical, dental, vision,~~Money Purchase Pension (MPP) plan, which is a defined contribution pension plan that allows employees to direct investments and ~~prescription drug coverage and are subject~~assume risk of investment returns. In January 2017, a $2 million contribution was made to ~~certain limitations, such as deductibles and co-payments.~~the MPP plan.

PART I

DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –

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

Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)

~~(Unaudited)~~

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

Three Months Ended June 30, 2016
Duke
Duke
Duke
Duke
Duke
Duke
Energy
Progress
Energy
Energy
Energy
Energy
(in millions) Energy
Carolinas
Energy
Progress
Florida
Ohio
Indiana
Service cost $ 1
$ —
$ —
$ —
$ —
$ —
$ —
Interest cost on accumulated post-retirement benefit obligation 9
2
3
2
1
1
1
Expected return on plan assets (4 ) (2 ) —
—
—
—
(1 )
Amortization of actuarial loss (gain) 2
(1 ) 6
3
3
(1 ) —
Amortization of prior service credit (36 ) (3 ) (25 ) (17 ) (9 ) —
—
Net periodic other post-retirement benefit costs $ (28 ) $ (4 ) $ (16 ) $ (12 ) $ (5 ) $ —
$ —

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

Six Months Ended June 30, 2016
Duke
Duke
Duke
Duke
Duke
Duke
Energy
Progress
Energy
Energy
Energy
Energy
(in millions) Energy
Carolinas
Energy
Progress
Florida
Ohio
Indiana
Service cost $ 2
$ —
$ —
$ —
$ —
$ —
$ —
Interest cost on accumulated post-retirement benefit obligation 17
4
7
4
3
1
2
Expected return on plan assets (7 ) (4 ) —
—
—
—
(1 )
Amortization of actuarial loss (gain) 3
(2 ) 11
6
5
(1 ) (1 )
Amortization of prior service credit (71 ) (6 ) (51 ) (34 ) (18 ) —
—
Net periodic other post-retirement benefit costs $ (56 ) $ (8 ) $ (33 ) $ (24 ) $ (10 ) $ —
$ —

Six Months Ended June 30, 2015
Duke
Duke
Duke
Duke
Duke
Duke
Energy
Progress
Energy
Energy
Energy
Energy
(in millions) Energy
Carolinas
Energy
Progress
Florida
Ohio
Indiana
Service cost $ 3
$ 1
$ 1
$ —
$ —
$ —
$ —
Interest cost on accumulated post-retirement benefit obligation 18
4
7
4
3
1
2
Expected return on plan assets (6 ) (4 ) —
—
—
—
—
Amortization of actuarial loss (gain) 13
(1 ) 14
9
5
—
(1 )
Amortization of prior service credit (70 ) (7 ) (51 ) (33 ) (16 ) —
—
Net periodic other post-retirement benefit costs $ (42 ) $ (7 ) $ (29 ) $ (20 ) $ (8 ) $ 1
$ 1

~~PART I~~

~~DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –~~

~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC~~

~~Combined Notes to Condensed Consolidated Financial Statements – (Continued)~~

~~(Unaudited)~~

~~EMPLOYEE SAVINGS PLAN~~

Duke Energy sponsors, and the Subsidiary Registrants participate in, an employee savings plan that covers substantially all U.S. employees. Most employees participate in a matching contribution formula where Duke Energy provides a matching contribution generally equal to 100 percent of employee before-tax and Roth 401(k) contributions of up to 6 percent of eligible pay per pay period. Dividends on Duke Energy shares held by the savings plan are charged to retained earnings when declared and shares held in the plan are considered outstanding in the calculation of basic and diluted earnings per share.

For new and rehired non-union and certain unionized employees who are not eligible to participate in Duke Energy’s defined benefit plans, an additional employer contribution of 4 percent of eligible pay per pay period, subject to a three-year vesting requirement, is provided to the employee’s savings plan account.

~~The following table presents employer contributions made by Duke Energy and expensed by the Subsidiary Registrants.~~

Duke
Duke
Duke
Duke
Duke
Duke
Energy
Progress
Energy
Energy
Energy
Energy
(in millions) Energy
Carolinas
Energy
Progress
Florida
Ohio
Indiana
Three Months Ended June 30,
2016 $ 39
$ 13
$ 12
$ 8
$ 4
$ 1
$ 2
2015 37
13
12
8
3
1
2
Six Months Ended June 30,
2016 $ 91
$ 31
$ 27
$ 19
$ 8
$ 2
$ 4
2015 86
29
26
19
7
2
4

16. INCOME TAXES

~~TAXES ON FOREIGN EARNINGS~~

As of December 31, 2015, Duke Energy's intention was to indefinitely reinvest foreign earnings of International Energy earned after December 31, 2014. In February 2016, Duke Energy announced it had initiated a process to divest the International Energy business segment, excluding the investment in NMC. Accordingly, Duke Energy no longer intends to indefinitely reinvest the undistributed earnings of International Energy. The Company recorded U.S. income taxes of approximately $4 million and $16 million for the three and six months ended June 30, 2016, respectively, related to such earnings and will prospectively provide U.S. income taxes on future foreign earnings.

This change in the Company's intent, combined with the extension of bonus depreciation by Congress in late 2015, allows Duke Energy to more efficiently utilize foreign tax credits and reduce U.S. deferred tax liabilities associated with historic unremitted foreign earnings by approximately $95 million for the six months ended June 30, 2016.

EFFECTIVE TAX RATES

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


	Three Months Ended				Six Months Ended				Three Months Ended
	June 30,				June 30,				March 31,
	2016		2015		2016		2015		2017		2016
Duke Energy	31.8	%	35.6	%	27.2	%	33.6	%	32.4	%	30.4	%
Duke Energy Carolinas	35.1	%	36.6	%	34.6	%	36.2	%	35.4	%	34.1	%
Progress Energy	36.0	%	39.2	%	36.3	%	37.1	%	34.1	%	36.7	%
Duke Energy Progress	35.5	%	40.6	%	35.4	%	36.0	%	34.1	%	35.4	%
Duke Energy Florida	37.6	%	38.7	%	37.7	%	38.6	%	36.6	%	37.9	%
Duke Energy Ohio	34.3	%	35.0	%	29.2	%	36.8	%	35.4	%	26.9	%
Duke Energy Indiana	36.1	%	36.4	%	33.1	%	36.5	%	39.3	%	30.2	%
Piedmont									37.9	%	38.0	%

The ~~decrease~~increase in the effective tax rate (ETR) for Duke Energy for the three ~~and six~~ months ended ~~June 30, 2016,~~March 31, 2017, is ~~driven by lower income taxes on foreign earnings~~primarily due to ~~a more efficient utilization of foreign~~lower investment tax credits ~~as described above,~~due to lower solar investments in the current year, the inclusion of Piedmont's earnings at a higher ETR, and ~~favorable impacts~~a tax charge related to the implementation of ~~finalizing federal~~a new accounting standard related to stock compensation; partially offset by higher production tax ~~audits. Refer~~credits related to ~~"Taxes on Foreign Earnings" above~~wind projects placed in service. See Note 1 for additional ~~information.~~information on the new accounting standard.

The ~~decrease~~increase in the ~~effective tax rate~~ETR for Duke Energy Carolinas for the three ~~and six~~ months ended ~~June 30, 2016,~~March 31, 2017, is primarily due to a favorable state resolution booked in 2016 related to ~~prior-year~~prior year tax ~~returns and favorable impacts of finalizing tax audits.~~returns.

The decrease in the ~~effective tax rate~~ETR for Progress Energy for the three months ended ~~June 30, 2016,~~March 31, 2017, is primarily due to ~~a change in tax levelization.~~higher AFUDC equity and the amortization of excess North Carolina deferred tax.

The decrease in the ~~effective tax rate~~ETR for Duke Energy Progress for the three months ended ~~June 30, 2016,~~March 31, 2017, is primarily due to ~~a change in tax levelization.~~

~~PART I~~

~~DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –~~

~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC~~

~~Combined Notes to Condensed Consolidated Financial Statements – (Continued)~~

~~(Unaudited)~~

the amortization of excess North Carolina deferred tax.

The decrease in the ~~effective tax rate~~ETR for Duke Energy Florida for the three months ended ~~June 30, 2016,~~March 31, 2017, is primarily due to ~~an increase in~~higher AFUDC equity.

The ~~decrease~~increase in the ~~effective tax rate~~ETR for Duke Energy Ohio for the ~~six~~three months ended ~~June 30, 2016,~~March 31, 2017, is primarily due to ~~a favorable prior-period~~an immaterial out of period adjustment ~~for depreciation and other~~in the prior year related to deferred tax balances associated with property, plant and equipment.

The ~~decrease~~increase in the ~~effective tax rate~~ETR for Duke Energy Indiana for the ~~six~~three months ended ~~June 30, 2016,~~March 31, 2017, is primarily due to ~~a favorable prior-period~~an immaterial out of period adjustment ~~for depreciation and other~~in the prior year related to deferred tax balances associated with property, plant and equipment.

TAXES ON FOREIGN EARNINGS

~~PART I~~

~~DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –~~

~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC~~

~~Combined Notes~~As of December 31, 2015, Duke Energy's intention was to indefinitely reinvest any future undistributed foreign earnings earned after December 31, 2014. In February 2016, Duke Energy announced it had initiated a process to divest the International Disposal Group and, accordingly, no longer intended to indefinitely reinvest post-2014 undistributed foreign earnings. This change in the company's intent, combined with the extension of bonus depreciation by Congress in late 2015, allowed Duke Energy to more efficiently utilize foreign tax credits and reduce U.S. deferred tax liabilities associated with historical unremitted foreign earnings by approximately $95 million for the three months ended March 31, 2016. Due to the classification of the International Disposal Group as discontinued operations, income tax amounts related to the International Disposal Group's foreign earnings are presented within Income from Discontinued Operations, net of tax on the Condensed Consolidated ~~Financial~~ Statements ~~– (Continued)~~of Operations. See Note 2 for additional information related to the sale of the International Disposal Group.

~~(Unaudited)~~

17. SUBSEQUENT EVENTS

For information on additional subsequent events related to ~~acquisitions,~~ regulatory matters, commitments and contingencies, ~~and~~ debt and credit facilities, and variable interest entities see Notes 2, 4, 5, 6 and 6,12, respectively.

PART I

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following combined Management’s Discussion and Analysis of Financial Condition and Results of Operations is separately filed by Duke Energy Corporation (collectively with its subsidiaries, Duke Energy) and Duke Energy Carolinas, LLC (Duke Energy Carolinas), Progress Energy, Inc. (Progress Energy), Duke Energy Progress, LLC (Duke Energy Progress), Duke Energy Florida, LLC (Duke Energy Florida), Duke Energy Ohio, Inc. (Duke Energy Ohio) ~~and~~, Duke Energy Indiana, LLC (Duke Energy Indiana) and Piedmont Natural Gas Company, Inc. (Piedmont) (collectively referred to as the Subsidiary Registrants). However, none of the registrants make any representation as to information related solely to Duke Energy or the Subsidiary Registrants of Duke Energy other than itself.

DUKE ENERGY

Duke Energy is an energy company headquartered in Charlotte, North Carolina. Duke Energy operates in the United States (U.S.) primarily through its wholly owned subsidiaries, Duke Energy Carolinas, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, ~~and~~ Duke Energy Indiana ~~as well as in Latin America.~~

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 includes financial information prepared in accordance with generally accepted accounting principles (GAAP) in the U.S., as well as certain non-GAAP financial measures such as adjusted earnings, adjusted diluted earnings per share (EPS) and adjusted segment income, discussed below. Generally, a non-GAAP financial measure is a numerical measure Piedmont's results of ~~financial performance, financial position or cash flows that excludes (or includes) amounts that~~operations are included in ~~(or excluded from)~~Duke Energy's results for the ~~most directly comparable measure calculated and presented~~three months ended March 31, 2017, but not for the three months ended March 31, 2016, as Piedmont's earnings are only included in ~~accordance with GAAP. The non-GAAP financial measures should be viewed as a supplement~~Duke Energy's consolidated results subsequent to ~~and not a substitute~~the acquisition date. See below for ~~financial measures presented in accordance with GAAP. Non-GAAP measures presented herein may not be comparable to similarly titled measures used by other companies.~~additional information regarding the acquisition.

Management’s Discussion and Analysis should be read in conjunction with the Condensed Consolidated Financial Statements and Notes for the ~~six~~three months ended ~~June 30, 2016,~~March 31, 2017, and with Duke Energy’s Annual Report on Form 10-K for the year ended December 31, ~~2015.~~2016, Piedmont's Annual Report on Form 10-K for the year ended October 31, 2016, and the transition report filed by Piedmont on Form 10-Q (Form 10-QT) as of December 31, 2016, for the transition period from November 1, 2016 to December 31, 2016.

Executive Overview

Acquisition of Piedmont Natural Gas

On October ~~24, 2015,~~3, 2016, Duke Energy ~~entered into an Agreement and Plan~~completed the acquisition of ~~Merger (Merger Agreement) with Piedmont Natural Gas Company, Inc., (Piedmont) a North Carolina corporation. Under the terms of the Merger Agreement, Duke Energy will acquire~~ Piedmont for ~~approximately $4.9~~a total cash purchase price of $5.0 billion ~~in cash~~ and ~~Piedmont will become a wholly owned subsidiary of Duke Energy. In addition, Duke Energy will assume~~assumed Piedmont's existing long-term debt, which ~~was~~had a fair value of approximately $2.0 billion at ~~April 30, 2016,~~ the ~~end of Piedmont's most recent filed quarter. The excess~~time of the ~~purchase price over~~acquisition. The acquisition provides a foundation for Duke Energy to establish a broader, long-term strategic natural gas infrastructure platform to complement its existing natural gas pipeline investments and regulated natural gas business in the ~~fair value of Piedmont's assets~~Midwest.

Duke Energy incurred pretax nonrecurring transaction and ~~liabilities on~~integration costs associated with the acquisition ~~date will be recorded as goodwill. Duke Energy estimates~~of $16 million and $101 million for the ~~transaction would result in incremental goodwill~~three months ended March 31, 2017 and 2016, respectively. The 2016 amount includes $100 million of ~~approximately $3.5 billion.~~Interest Expense, which was driven by unrealized losses on forward-starting interest rate swaps related to the acquisition financing. Duke Energy expects to ~~finance the transaction with a combination of debt, equity issuances~~incur system integration and other ~~cash sources. As of June 30, 2016, Duke Energy entered into $1.4 billion of forward-starting interest rate swaps~~acquisition-related transition costs, primarily through 2018, that are necessary to ~~manage interest rate exposure for the expected financing of the Piedmont acquisition. For additional information on the forward-starting swaps, see~~achieve certain anticipated cost savings, efficiencies and other benefits. See Note 92 to the Condensed Consolidated Financial Statements, ~~"Derivatives~~"Acquisitions and ~~Hedging.~~Dispositions,"

In March 2016, Duke Energy marketed an equity offering of 10.6 million shares of Duke Energy common stock. In lieu of issuing equity at the time of the offering, Duke Energy entered into equity forward sale agreements (the Equity Forwards) with Barclays Capital, Inc. (Barclays). Duke Energy expects to settle the Equity Forwards on or around the closing date of the Piedmont acquisition. The net proceeds received upon settlement are expected to be used to finance a portion of the acquisition of Piedmont. For for additional information regarding the ~~Equity Forwards, see~~transaction.

Sale of International Energy

In December 2016, Duke Energy sold its Latin American generation businesses (International Disposal Group) in two separate transactions for a combined enterprise value of $2.4 billion. Duke Energy sold its Brazilian business to China Three Gorges for approximately $1.2 billion, including the assumption of debt, and its remaining Central and South American businesses to I Squared Capital in a deal also valued at approximately $1.2 billion, including the assumption of debt. The transactions generated cash proceeds of $1.9 billion, excluding transaction costs, which were primarily used to reduce Duke Energy holding company debt. Existing favorable tax attributes resulted in no immediate U.S. federal-level cash tax impacts.

Due to the transactions, results of the International Disposal Group are classified as discontinued operations. See Note 132 to the Condensed Consolidated Financial Statements, ~~"Common Stock."~~

In connection with the Merger Agreement with Piedmont, Duke Energy entered into a $4.9 billion senior unsecured bridge financing facility (Bridge Facility) with Barclays. The Bridge Facility, if drawn upon, may be used to (i) fund the cash consideration for the transaction"Acquisitions and (ii) pay certain fees and expenses in connection with the transaction. In November 2015, Barclays syndicated its commitment under the Bridge Facility to a broader group of lenders. Duke Energy does not expect to draw upon the Bridge Facility. The amount of the Bridge Facility is reduced by any financings related to the Piedmont acquisition entered into by Duke Energy, and has accordingly been reduced to $3.2 billion as a result of the Equity Forwards and $1 billion of the commitments under a term loan amended and restated as of August 1, 2016. See Note 6 to the Condensed Consolidated Financial Statements, "Debt and Credit Facilities,"Dispositions" for additional information.

Piedmont's shareholders have approved the company's acquisition by Duke Energy and the Federal Trade Commission (FTC) has granted early termination of the 30-day waiting period under the federal Hart-Scott-Rodino Antitrust Improvements Act of 1976. On January 15, 2016, Duke Energy and Piedmont filed an application with the North Carolina Utilities Commission (NCUC) for approval of the proposed business combination and associated financing transactions. On January 29, 2016, the NCUC approved Duke Energy's proposed financing transactions. On March 7, 2016, the Kentucky Public Service Commission (KPSC) granted Duke Energy's declaratory request that the transaction does not constitute a change in control and does not require KPSC approval. The Tennessee Regulatory Authority approved Duke Energy's and Piedmont's request of the change in control resulting from the transaction at its March 14, 2016, meeting. On June 10, 2016 the North Carolina Public Staff reached an agreement with Duke Energy and Piedmont on certain stipulations and conditions for approval of the transaction. Duke Energy and Piedmont have also entered into settlement agreements with the Environmental Defense Fund (EDF) and the Carolina Utility Customers Association, Inc. (CUCA) resolving EDF's and CUCA's issues in the case.

On July 19, 2016, the NCUC concluded an evidentiary hearing for the proposed business combination. Proposed orders are due from all parties by August 25, 2016, after which the NCUC will rule on the application. Subject to receipt of NCUC approval, and meeting closing conditions, Duke Energy and Piedmont expect to close the transaction by the end of 2016. Upon closing of the proposed acquisition, Duke Energy expects to record expenses of $175 million to $200 million, representing accruals for commitments made in conjunction with the transaction, such as funding charitable and community support contributions, professional fees and severance.

~~PART I~~

~~Upon closing of the proposed acquisition of Piedmont, the chief operating decision-maker may determine that changes to business segments are necessary. The final outcome has not been determined.~~

See Note 4 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information regarding Duke Energy and Piedmont's joint investment in Atlantic Coast Pipeline, LLC (ACP).

~~Change In Segment Income~~

During the first quarter of 2016, the Duke Energy chief operating decision-maker began to evaluate interim period segment performance based on financial information that includes the impact of income tax levelization within segment income. This represents a change from the previous measure, where the interim period impacts of income tax levelization were included within Other, and therefore excluded from segment income. As a result, prior period segment results presented have been recast to conform to this change.

~~Potential Sale of International Energy~~

In February 2016, Duke Energy announced it had initiated a process to divest the International Energy business segment, excluding the equity method investment in National Methanol Company (NMC). Duke Energy is actively marketing the business. Non-binding offers have been received and are being evaluated. There is no assurance that this process will result in a transaction and the timing for execution of a potential transaction is uncertain. Proceeds from a successful sale would be used by Duke Energy to reduce debt and fund the operations and growth of domestic businesses. If the potential of a sale were to progress, it could result in classification of International Energy as assets held for sale and as a discontinued operation.

Based upon the advancement of the marketing efforts Duke Energy performed recoverability tests of the long-lived asset groups of International Energy as of June 30, 2016. As a result, Duke Energy determined the carrying value of certain assets in Central America is not fully recoverable and recorded a pretax impairment charge of $194 million, which is included within Impairment Charges on the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2016. The impairment charge represents the excess of carrying value over the estimated fair value of the assets. The fair value of the assets was primarily determined from the income approach using discounted cash flows but also considered market information obtained in 2016.

Results of Operations

~~In this section,~~ Non-GAAP Measures

Management’s Discussion and Analysis includes financial information prepared in accordance with generally accepted accounting principles (GAAP) in the U.S., as well as certain non-GAAP financial measures. 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.

Duke Energy ~~provides analysis and discussion of earnings and factors affecting earnings on both a GAAP and non-GAAP basis.~~

~~Management~~management evaluates financial performance in part based on non-GAAP financial measures, including adjusted earnings and adjusted diluted EPS. ~~These items~~Adjusted earnings and adjusted diluted EPS represent income from continuing operations ~~net of income (loss)~~ attributable to ~~noncontrolling interests,~~Duke Energy, adjusted for the dollar and ~~per-share~~per share impact of special items. ~~Special~~As discussed below, special items represent certain charges and credits, which management believes are not indicative of Duke Energy's ongoing ~~performance, as discussed below.~~ performance.

PART I

Management believes the presentation of adjusted earnings and adjusted diluted EPS provides useful information to investors, as it provides them with an additional relevant comparison of Duke Energy’s performance across periods. Management uses these non-GAAP financial measures for planning and forecasting and for reporting financial results to the Duke Energy Board of Directors, employees, stockholders, analysts and ~~investors concerning Duke Energy’s financial performance.~~investors. Adjusted diluted EPS is also used as a basis for employee incentive bonuses. The most directly comparable GAAP measures for adjusted earnings and adjusted diluted EPS are Net Income Attributable to Duke Energy Corporation (GAAP Reported Earnings) and Diluted EPS Attributable to Duke Energy Corporation common ~~stockholders.~~stockholders (GAAP Reported EPS), respectively.

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

Costs to ~~achieve mergers and International impairment~~Achieve Mergers represent charges that result from ~~potential or completed~~ strategic ~~acquisitions~~acquisitions.

Cost Savings Initiatives represents severance charges related to company-wide initiatives, excluding merger integration, to standardize processes and ~~divestitures that do not reflect ongoing costs of the business.~~systems, leverage technology and workforce optimization.

~~Costs savings initiatives represent restructuring charges incurred to reduce future expenses and do not represent ongoing costs.~~

~~Midwest generation operations represents the~~Adjusted earnings also include operating results of the ~~nonregulated Midwest generation business and Duke Energy Retail Sales (collectively, the~~International Disposal ~~Group),~~Group, which have been classified as discontinued operations. Management believes inclusion of the ~~Disposal Group's~~ operating results of the Disposal Group within adjusted earnings and adjusted diluted EPS results in a better reflection of Duke Energy's financial performance during the period.

~~Management evaluates segment performance based on segment income. Segment income is defined as income from continuing operations net~~Reconciliation of ~~income attributable~~GAAP Reported Amounts to noncontrolling interests. Segment income includes intercompany revenues and expenses that are eliminated in the Condensed Consolidated Financial Statements. Management also uses adjusted segment income as a measure of historical and anticipated future segment performance. Adjusted ~~segment income is a~~Amounts

The following table reconciles non-GAAP financial measure, as it is based upon segment income adjusted for special items, which are discussed above. Management believes the presentation of adjusted segment income as presented provides useful informationmeasures to ~~investors, as it provides them with an additional relevant comparison of a segment’s performance across periods. The~~their most directly comparable GAAP ~~measure for adjusted segment income is segment income.~~

measures.

Duke Energy’s adjusted earnings, adjusted diluted EPS, and adjusted segment income may not be comparable to similarly titled measures of another company because other entities may not calculate the measures in the same manner.

~~See Note 3 to the Condensed Consolidated Financial Statements, “Business Segments,” for a discussion of Duke Energy’s segment structure.~~

~~PART I~~



	Three Months Ended March 31,
	2017				2016
(in millions, except per-share amounts)	Earnings		EPS		Earnings			EPS
GAAP Reported Earnings/GAAP Reported EPS	$	716	$	1.02	$	694		$	1.01
Adjustments to Reported:
Costs to Achieve Mergers^(a)	10		0.02		74			0.11
Cost Savings Initiatives^(b)	—		—		12			0.02
Discontinued Operations^(c)	—		—		(3		)	(0.01		)
Adjusted Earnings/Adjusted Diluted EPS	$	726	$	1.04	$	777		$	1.13


(a)	Net of tax of $6 million in 2017 and $46 million in 2016.


(b)	Net of tax of $8 million in 2016.


(c)	The 2016 amount represents GAAP reported Income from Discontinued Operations, less the International Disposal Group operating results, which are included in adjusted earnings.

~~Executive Overview~~

~~Reported EPS attributable to Duke Energy Corporation common stockholders (Reported EPS) was $0.74 for the second quarter of 2016~~Three Months Ended March 31, 2017 as compared to ~~$0.78 for the second quarter of 2015.~~March 31, 2016

GAAP Reported EPS was $1.02 for the first quarter of 2017 compared to $1.01 for the first quarter of 2016. The increase in GAAP Reported EPS was driven by the inclusion of Piedmont's earnings, lower ~~due~~costs to ~~an impairment of certain assets~~achieve mergers including losses in ~~Central America, unrealized losses~~the prior year on forward-starting interest rate swaps related to the ~~proposed~~ Piedmont acquisition financing, as well as lower operations and ~~lower revenues due to less favorable weather;~~maintenance expense at Electric Utilities and Infrastructure; partially offset by ~~higher retail revenues from pricing and rider recoveries, and charges~~warm winter weather in the ~~prior~~current year ~~related to~~and the absence of the International Disposal ~~Group.~~Group's earnings.

As discussed above, management also evaluates financial performance based on adjusted diluted EPS. Duke Energy’s ~~second~~first quarter ~~2016~~2017 adjusted diluted EPS was ~~$1.07~~$1.04 compared to ~~$0.95~~$1.13 for the ~~second~~first quarter of ~~2015.~~2016.

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

Three Months Ended June 30, 2016
(in millions, except per-share amounts)
Regulated
Utilities

International
Energy

Commercial
Portfolio

Total Reportable
Segments

Other
Eliminations/ Discontinued Operations

Duke
Energy

Per
Diluted
Share

Reported Net Income Attributable to Duke Energy Corporation/Reported EPS $ 718
$ (102 ) $ 14
$ 630
$ (120 ) $ (1 ) $ 509
$ 0.74
Costs to achieve, mergers^(a)
—
—
—
—
69
—
69
0.10
International impairment^(b)
—
145
—
145
—
—
145
0.21
Cost savings initiatives^(c)
—
—
—
—
15
—
15
0.02
Discontinued operations —
—
—
—
—
1
1
—
Adjusted earnings/Adjusted EPS $ 718
$ 43
$ 14
$ 775
$ (36 ) $ —
$ 739
$ 1.07


~~(a)~~	Net of $42 million tax benefit. Primarily consists of unrealized losses on forward-starting interest rate swaps utilized to manage interest rate exposure for the expected financing of the Piedmont acquisition.


~~(b)~~	~~Net of $49 million tax benefit. Impairment of certain assets in Central America.~~


~~(c)~~	~~Net of $9 million tax benefit. Primarily consists of severance costs.~~

Three Months Ended June 30, 2015
(in millions, except per-share amounts)
Regulated
Utilities

International
Energy

Commercial
Portfolio

Total Reportable
Segments

Other
Eliminations/ Discontinued Operations

Duke
Energy

Per
Diluted
Share

Reported Net Income Attributable to Duke Energy Corporation/Reported EPS $ 632
$ 52
$ (30 ) $ 654
$ (51 ) $ (60 ) $ 543
$ 0.78
Costs to achieve Progress Energy merger^(a)
—
—
—
—
14
—
14
0.02
Discontinued operations —
—
41
41
—
60
101
0.15
Adjusted earnings/Adjusted EPS $ 632
$ 52
$ 11
$ 695
$ (37 ) $ —
$ 658
$ 0.95


~~(a)~~	~~Net of $8 million tax benefit.~~

The ~~increase~~decrease in adjusted earnings for the three months ended ~~June 30, 2016,~~March 31, 2017, compared to the same period in ~~2015,~~2016, was primarily due to:

~~Higher regulated~~The prior year operating results ~~due to increased retail pricing and riders, including energy efficiency programs, partially offset by less favorable weather;~~

~~Lower operations and maintenance expense primarily due to lower outage costs and cost savings initiatives;~~

~~Improved results in Brazil primarily due to favorable hydrology, partially offset by weaker foreign currency exchange rates; and~~

~~Incremental earnings from the additional ownership interest in generating assets acquired from North Carolina Eastern Municipal Power Agency (NCEMPA).~~

~~Partially offset by:~~

~~Lower earnings from International Energy's equity method investment in NMC, primarily due to lower methyl tertiary butyl ether (MTBE) and methanol prices.~~

~~PART I~~

Duke Energy's Reported EPS was $1.74 for the six months ended June 30, 2016 compared to $2.01 for the six months ended June 30, 2015. Reported EPS was lower due to an impairment of certain assets in Central America, unrealized losses on interest rate swaps related to the proposed Piedmont acquisition, and lower revenues due to less favorable weather; partially offset by higher retail revenues from pricing and rider recoveries, and a favorable tax adjustment at International Energy.

As discussed above, management also evaluates financial performance based on adjusted diluted EPS. Duke Energy’s adjusted diluted EPS was $2.20 for the six months ended June 30, 2016, which is consistent with adjusted diluted EPS for the six months ended June 30, 2015.

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

Six Months Ended June 30, 2016
(in millions, except per-share amounts)
Regulated
Utilities

International
Energy

Commercial
Portfolio

Total Reportable
Segments

Other
Eliminations/ Discontinued Operations

Duke
Energy

Per
Diluted
Share

Net Income Attributable to Duke Energy Corporation/Reported EPS $ 1,413
$ 21
$ 41
$ 1,475
$ (274 ) $ 2
$ 1,203
$ 1.74
Costs to achieve, mergers^(a)
—
—
—
—
143
—
143
0.21
International impairment^(b)
—
145
—
145
—
—
145
0.21
Cost savings initiatives^(c)
—
—
—
—
27
—
27
0.04
Discontinued operations —
—
—
—
—
(2 ) (2 ) —
Adjusted earnings/Adjusted EPS $ 1,413
$ 166
$ 41
$ 1,620
$ (104 ) $ —
$ 1,516
$ 2.20


~~(a)~~	Net of $88 million tax benefit. Primarily consists of unrealized losses on forward-starting interest rate swaps utilized to manage interest rate exposure for the expected financing of the Piedmont acquisition.


~~(b)~~	~~Net of $49 million tax benefit. Impairment of certain assets in Central America.~~


~~(c)~~	~~Net of $17 million tax benefit. Primarily consists of severance costs.~~

Six Months Ended June 30, 2015
(in millions, except per-share amounts)
Regulated
Utilities

International
Energy

Commercial Portfolio

Total Reportable
Segments

Other
Eliminations/ Discontinued Operations

Duke
Energy

Per
Diluted
Share

Net Income Attributable to Duke Energy Corporation/Reported EPS $ 1,406
$ 88
$ (23 ) $ 1,471
$ (94 ) $ 30
$ 1,407
$ 2.01
Midwest generation operations —
—
94
94
—
(94 ) —
—
Costs to achieve Progress Energy merger^(a)
—
—
—
—
27
—
27
0.04
Discontinued operations —
—
41
41
—
64
105
0.15
Adjusted earnings/Adjusted EPS $ 1,406
$ 88
$ 112
$ 1,606
$ (67 ) $ —
$ 1,539
$ 2.20


~~(a)~~	~~Net of $16 million tax benefit.~~

~~The decrease in adjusted earnings for the six months ended June 30, 2016, compared to the same period in 2015, was primarily due to:~~

~~Lower results due to the absence of earnings from the Disposal Group sold in April 2015;~~

~~Increased depreciation and amortization expense primarily due to a higher amount of property, plant and equipment in service; and~~

~~Lower earnings from International Energy's equity method investment in NMC, primarily due to lower MTBE and methanol prices.~~

~~Partially offset by:~~

~~Lower income tax expense as a result of the Company's intent to no longer indefinitely reinvest the foreign earnings~~ of the International ~~Energy segment combined with more efficient utilization~~Disposal Group, which was sold in December 2016. The 2016 operating results included a benefit from the revaluation of ~~foreign tax credits, net of additional tax expense recognized in 2016 on International Energy's unremitted earnings.~~deferred income taxes. See Note 16 to the Condensed Consolidated Financial Statements, "Income Taxes," for additional information; and

~~Higher~~Lower regulated ~~results~~electric revenues due to ~~increased retail pricing and riders, including energy efficiency programs, partially~~warm winter weather in the current year.

Partially offset ~~by less favorable weather;~~by:

~~Higher results in Latin America primarily~~Piedmont's earnings contribution, net of financing costs, due to ~~favorable hydrology in Brazil, partially offset by weaker foreign currency exchange rates;~~the acquisition on October 3, 2016;

Lower operations and maintenance expense ~~primarily~~at Electric Utilities and Infrastructure due to ~~lower outage costs and~~ongoing cost efficiency ~~initiatives, partially offset by an increase in~~efforts and significant storm ~~restoration~~ costs ~~due to more severe winter storms~~ in the ~~Carolinas;~~

~~Incremental earnings from the additional ownership interest in generating assets acquired from NCEMPA;~~prior year; and

~~Reduction~~Higher regulated electric revenues from increased pricing and riders driven by new rates in ~~weighted average shares outstanding primarily due to the prior-year accelerated stock repurchase.~~DEP South Carolina, base rate adjustments in Florida, and energy efficiency rider revenues in North Carolina, as well as growth in retail volumes.

PART I

SEGMENT RESULTS

Management evaluates segment performance based on segment income. Segment income is defined as income from continuing operations net of income attributable to noncontrolling interests. Segment income includes intercompany revenues and expenses that are eliminated in the Condensed Consolidated Financial Statements.

Due to the Piedmont acquisition and the sale of International Energy in the fourth quarter of 2016, Duke Energy's segment structure has been realigned to include the following segments: Electric Utilities and Infrastructure, Gas Utilities and Infrastructure and Commercial Renewables. The ~~remaining information in this discussion~~remainder of ~~results of~~Duke Energy’s operations is presented as Other. Prior period information has been recast to conform to the current segment structure. See Note 2 to the Condensed Consolidated Financial Statements, "Acquisitions and Dispositions," for further information on ~~a GAAP basis.~~the Piedmont acquisition and International Energy sale and Note 3, “Business Segments,” for additional information on Duke Energy’s segments.

~~Regulated~~Electric Utilities and Infrastructure


	Three Months Ended June 30,							Six Months Ended June 30,							Three Months Ended March 31,
(in millions)	2016		2015		Variance			2016		2015		Variance			2017		2016		Variance
Operating Revenues	$	5,099	$	5,220	$	(121	)	$	10,358	$	10,943	$	(585	)	$	4,947	$	5,089	$	(142	)
Operating Expenses	3,772		4,003		(231		)	7,739		8,308		(569		)
Fuel used in electric generation and purchased power															1,454		1,577		(123		)
Operation, maintenance and other															1,271		1,298		(27		)
Depreciation and amortization															737		709		28
Property and other taxes															261		262		(1		)
Impairment charges															—		2		(2		)
Total operating expenses															3,723		3,848		(125		)
Gains on Sales of Other Assets and Other, net	1		2		(1		)	2		9		(7		)	3		1		2
Operating Income	1,328		1,219		109			2,621		2,644		(23		)	1,227		1,242		(15		)
Other Income and Expenses, net	74		59		15			138		131		7
Other Income and Expenses															79		63		16
Interest Expense	278		274		4			555		549		6			315		270		45
Income Before Income Taxes	1,124		1,004		120			2,204		2,226		(22		)	991		1,035		(44		)
Income Tax Expense	406		372		34			791		820		(29		)	356		371		(15		)
Segment Income	$	718	$	632	$	86		$	1,413	$	1,406	$	7		$	635	$	664	$	(29	)

Duke Energy Carolinas Gigawatt-hours (GWh) sales	20,757		21,306		(549		)	42,382		43,774		(1,392		)	20,781		21,625		(844		)
Duke Energy Progress GWh sales	16,829		14,952		1,877			33,978		31,717		2,261			15,637		17,149		(1,512		)
Duke Energy Florida GWh sales	10,646		10,802		(156		)	19,102		19,275		(173		)	8,305		8,456		(151		)
Duke Energy Ohio GWh sales	5,796		6,233		(437		)	11,903		13,000		(1,097		)	6,059		6,107		(48		)
Duke Energy Indiana GWh sales	8,157		7,705		452			17,551		16,433		1,118			8,208		9,394		(1,186		)
Total Regulated Utilities GWh sales	62,185		60,998		1,187			124,916		124,199		717
Total Electric Utilities and Infrastructure GWh sales															58,990		62,731		(3,741		)
Net proportional Megawatt (MW) capacity in operation								49,620		49,528		92			48,964		50,111		(1,147		)

Three Months Ended ~~June 30, 2016~~March 31, 2017 as Compared to ~~June 30, 2015~~March 31, 2016

~~Regulated Utilities’~~Electric Utilities and Infrastructure’s results were impacted by warm winter weather and increased ~~rate riders~~depreciation and ~~retail pricing,~~amortization expense, partially offset by increased rider revenues and lower operations and maintenance ~~expenses, and an increase in wholesale power margins. These impacts were partially offset by less favorable weather in the Carolinas and Florida.~~expense. The following is a detailed discussion of the variance drivers by line item.

Operating Revenues. The variance was driven primarily by:

a ~~$223~~$159 million decrease in retail sales, net of fuel revenues, due to warm winter weather in the current year; and

a $108 million decrease in fuel revenues driven by lower ~~fuel prices included in electric rates and overall lower retail volumes; and~~

~~a $43 million decrease in electric retail~~ sales ~~net of fuel revenue, due to less favorable weather in the Carolinas and Florida compared to the prior year.~~volumes.

Partially offset by:

a ~~$112~~$108 million increase in ~~rate riders, including increased~~rider revenues related to energy efficiency programs, Duke Energy Florida's nuclear asset securitization revenues, and ~~the additional ownership interest in certain generating assets acquired from NCEMPA in the third quarter of 2015, and~~Duke Energy Indiana's clean coal equipment, as well as increased retail ~~electric~~ pricing ~~primarily~~ due to ~~lower sales volumes which resulted in higher average customer rates;~~the Duke Energy Progress South Carolina rate case and Duke Energy Florida's base rate adjustment for the Osprey acquisition; and

~~a $38~~an $11 million increase in ~~wholesale power revenues, primarily due~~weather-normal sales volumes to ~~additional volumes and capacity charges for~~retail customers ~~served under long-term contracts, including~~in the ~~NCEMPA wholesale contract that became effective August 1, 2015.~~current year.

Operating Expenses. The variance was driven primarily by:

a ~~$215~~$123 million decrease in fuel expense, ~~(including~~including purchased power, ~~and natural gas purchases for resale)~~ primarily due to lower sales volumes and lower coal prices, partially offset by higher natural gas ~~and coal prices, and decreased generation due to lower sales volumes;~~prices; and

PART I

a ~~$42~~$27 million decrease in operations and maintenance expense primarily due to lower ~~outage~~storm restoration costs and decreased labor costs, ~~savings initiatives.~~partially offset by higher environmental costs.

Partially offset by:

a $28 million increase in depreciation and amortization expense primarily due to additional plant in service.

Other Income and ~~Expenses, net.~~Expenses. The variance was driven primarily by higher allowance for funds used during construction (AFUDC) equity.

Interest Expense. The increase was primarily due to higher debt outstanding in the current year.

Income Tax Expense. The variance was primarily due to an increase in pretax income, partially offset by a lower effective tax rate. The effective tax rates for the three months ended June 30, 2016 and 2015 were 36.1 percent and 37.1 percent, respectively. The decrease in the effective tax rate is primarily due to favorable impacts of finalizing tax audits.

~~Six Months Ended June 30, 2016 as Compared to June 30, 2015~~

Regulated Utilities’ results were impacted by increased rate riders and retail pricing, an increase in wholesale power margins and lower operations and maintenance expense. These impacts were partially offset by less favorable weather, increased depreciation and amortization expense, and higher property and other tax expense. The following is a detailed discussion of the variance drivers by line item.

~~PART I~~

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

~~a $635 million decrease in fuel revenues driven by lower fuel prices included in electric rates and overall lower volumes; and~~

~~a $157 million decrease in electric retail sales, net of fuel revenue, due to less favorable weather across all the jurisdictions compared to the prior year.~~

~~Partially offset by:~~

a $169 million increase in rate riders including increased revenues related to energy efficiency programs and the additional ownership interest in certain generating assets acquired from NCEMPA in the third quarter of 2015, and retail electric pricing primarily due to lower sales volumes, which resulted in higher average customer rates; and

a $52 million increase in wholesale power revenues, primarily due to additional volumes and capacity charges for customers served under long-term contracts, including the NCEMPA wholesale contract that became effective August 1, 2015.

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

a $627 million decrease in fuel expense (including purchased power and natural gas purchases for resale) primarily due to lower natural gas and coal prices, decreased generation due to lower sales volumes, and lower natural gas volumes and prices to full-service retail natural gas customers; and

~~a $29 million decrease in operations and maintenance expense primarily due to lower outage costs and cost savings initiatives, partially offset by higher storm restoration costs.~~

~~Partially offset by:~~

a $44 million increase in depreciation and amortization expense primarily due to additional plant in service, including the additional ownership interest in generating assets acquired from NCEMPA in the third quarter of 2015; and

~~a $40 million increase in property and other taxes primarily due to higher sales and use tax at Duke Energy Indiana and higher property taxes across multiple jurisdictions.~~

~~Income Tax Expense.~~ ~~The variance is due to~~ a decrease in ~~the effective tax rate and lower~~ pretax income. The effective tax rates for both the ~~six~~three months ended ~~June 30,~~March 31, 2017 and 2016 ~~and 2015~~ were 35.9 ~~percent and 36.8 percent, respectively.~~percent.

Matters Impacting Future ~~Regulated~~Electric Utilities and Infrastructure Results

An order from regulatory authorities disallowing recovery of costs related to closure of ash impoundments could have an adverse impact on Electric Utilities and Infrastructure's financial position, results of operations and cash flows. See Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters” and Note 9 in Duke Energy's Annual Report on Form 10-K for the year ended December 31, 2016, "Asset Retirement Obligations," for additional information.

On May 18, 2016, the ~~North Carolina Department of Environmental Quality (NCDEQ)~~NCDEQ issued proposed risk classifications for all coal ash surface impoundments in North Carolina. All ash impoundments not previously designated as high priority by the ~~North Carolina~~ Coal Ash ~~Management~~ Act ~~of 2014 (Coal Ash Act)~~ were designated as intermediate risk. Certain impoundments classified as intermediate risk, however, may be reassessed in the future as low risk pursuant to legislation signed by the former North Carolina governor on July 14, 2016. ~~Regulated Utilities'~~Electric Utilities and Infrastructure's estimated asset retirement obligations (AROs) related to the closure of North Carolina ash impoundments are based upon the mandated closure method or a probability weighting of potential closure methods for the impoundments that may be reassessed to low risk. As the final risk ranking classifications in North Carolina are delineated, final closure plans and corrective action measures are developed and approved for each site, ~~and~~ the closure work progresses and the closure method scope isand remedial methods are determined, the complexity of work and the amount of coal combustion material could be different than originally estimated and, therefore, could materially impact ~~Regulated Utilities’~~Electric Utilities and Infrastructure's financial position. See Note 9 in Duke Energy's Annual Report on Form 10-K for the year ended December 31, 2016, "Asset Retirement Obligations," for additional information.

Duke Energy is a party to multiple lawsuits and could be subject to fines and other penalties related to operations at certain North Carolina facilities with ash basins. The outcome of these lawsuits and potential fines and penalties could have an adverse impact on Electric Utilities and Infrastructure's financial position, results of operations and cash flows. See Note 5 to the Condensed Consolidated Financial Statements, “Commitments and Contingencies,” for additional information.

In the fourth quarter of 2016, Hurricane Matthew caused historic flooding, extensive damage and widespread power outages within the Duke Energy isProgress service territory. Duke Energy Progress filed a ~~party~~petition with the North Carolina Utilities Commission (NCUC) requesting an accounting order to ~~multiple lawsuits~~defer incremental operation and ~~could be subject~~maintenance and capital costs incurred in response to ~~fines~~Hurricane Matthew and other ~~penalties related to~~significant 2016 storms. Current estimated incremental costs are approximately $116 million. The NCUC has not ruled on the ~~Dan River coal ash release~~petition. A final order from the NCUC that disallows the deferral and ~~operations at other North Carolina facilities with ash basins. The outcome~~future recovery of ~~these lawsuits and potential fines and penalties~~all or a significant portion of the incremental storm restoration costs incurred could ~~have~~result in an adverse impact on ~~Regulated Utilities’ financial position, results of operations~~Electric Utilities and ~~cash flows. See Note 5 to the Condensed Consolidated Financial Statements, “Commitments and Contingencies,” for additional information.~~

An order from regulatory authorities disallowing recovery of costs related to closure of ash impoundments could have an adverse impact on Regulated Utilities' financial position, results of operations and cash flows. See Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters” and Note 9 in Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2015, "Asset Retirement Obligations," for additional information.

Duke Energy Indiana entered into a revised settlement agreement with multiple parties that will resolve all disputes, claims and issues from the IURC proceedings related to post-commercial operating performance and recovery of ongoing operating and capital costs at the Edwardsport Integrated Gasification Combined Cycle (IGCC) generating facility. The agreement is subject to Indiana Utility Regulatory Commission (IURC) approval. Pursuant to the terms of this agreement, Duke Energy Indiana recognized an impairment and related charges of $93 million for the year ended December 31, 2015. The agreement stipulates that recovery of the remaining regulatory asset will be over an eight-year period and confirms an in-service date for accounting and ratemaking purposes of June 7, 2013. The agreement, if approved, will also impose a cost cap for recoverable operations and maintenance retail costs in the second half of 2016, and 2017, as well as a cost cap for ongoing capital expenditures through 2017. As part of the settlement, Duke Energy Indiana committed to either retire or cease burning coal at Gallagher Station by December 31, 2022. If the settlement agreement is not approved, outstanding issues before the IURC related to Edwardsport would resume and the resolution of such could have an adverse impact on Regulated Utilities' financial position, results of operations and cash flows. In addition, an inability to manage operating and capital costs in accordance with caps imposed pursuant to the agreement could have an adverse impact on Regulated Utilities'Infrastructure's financial position, results of operations and cash flows. See Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.

Duke Energy Carolinas and Duke Energy Progress intend to file rate cases in North Carolina in 2017 to recover costs of complying with CCR regulations and the Coal Ash Act, as well as costs of capital investments in generation, transmission and distribution systems and any increase in expenditures subsequent to previous rate cases. Duke Energy Progress has filed notice with the NCUC that it intends to file a general rate case on or about June 1, 2017. In March 2017, Duke Energy Ohio filed an electric distribution base rate case application and supporting testimony. Electric Utilities and Infrastructure's earnings could be adversely impacted if these rate cases are delayed or denied by the NCUC or PUCO.

PART I

~~International Energy~~Gas Utilities and Infrastructure

Three Months Ended June 30, Six Months Ended June 30,
(in millions) 2016
2015
Variance
2016
2015
Variance
Operating Revenues $ 270
$ 287
$ (17 ) $ 516
$ 560
$ (44 )
Operating Expenses 382
232
150
536
439
97
Loss on Sales of Other Assets and Other, net (1 ) (1 ) —
(1 ) (1 ) —
Operating (Loss) Income (113 ) 54
(167 ) (21 ) 120
(141 )
Other Income and Expense, net 23
31
(8 ) 39
45
(6 )
Interest Expense 22
22
—
44
45
(1 )
(Loss) Income Before Income Taxes (112 ) 63
(175 ) (26 ) 120
(146 )
Income Tax (Benefit) Expense (13 ) 10
(23 ) (52 ) 30
(82 )
Less: Income Attributable to Noncontrolling Interests 3
1
2
5
2
3
Segment (Loss) Income $ (102 ) $ 52
$ (154 ) $ 21
$ 88
$ (67 )

Sales, GWh 5,625
4,520
1,105
11,505
8,990
2,515
Net proportional MW capacity in operation

4,315
4,333
(18 )



	Three Months Ended March 31,
(in millions)	2017		2016		Variance
Operating Revenues	$	670	$	170	$	500
Operating Expenses
Cost of natural gas	258		49		209
Operation, maintenance and other	105		32		73
Depreciation and amortization	57		20		37
Property and other taxes	30		18		12
Total operating expenses	450		119		331
Operating Income	220		51		169
Other Income and Expenses	18		3		15
Interest Expense	26		7		19
Income Before Income Taxes	212		47		165
Income Tax Expense	79		15		64
Segment Income	$	133	$	32	$	101

Piedmont LDC throughput (dekatherms) ^(a)	133,276,787		—		133,276,787
Duke Energy Midwest LDC throughput (MCF)	30,830,999		34,741,520		(3,910,521		)

(a) Includes throughput subsequent to Duke Energy's acquisition of Piedmont on October 3, 2016.

Three Months Ended ~~June 30, 2016~~March 31, 2017 as Compared to ~~June 30, 2015~~March 31, 2016

~~International Energy’s~~Gas Utilities and Infrastructure’s higher results were ~~impacted by an impairment~~almost entirely due to the inclusion of ~~certain assets~~Piedmont's earnings in ~~Central America, lower~~the current year as a result of Duke Energy's acquisition of Piedmont on October 3, 2016. Piedmont's earnings ~~from~~included in Gas Utilities and Infrastructure's results were $99 million for the ~~equity method investment in NMC~~three months ended March 31, 2017. All variances are related to the inclusion of Piedmont's results of operations, except for the following:

Other Income and ~~weaker exchange rates; partially offset by improved hydrology in Brazil. The following is a detailed discussion of the variance drivers by line item.~~

~~Operating Revenues.~~Expenses. The variance was driven primarily by ~~a $14 million decrease in Central America due to lower average prices partially offset by~~ higher ~~volumes. Higher revenues at Brazil due to improved hydrology~~earnings from Duke Energy's mid-stream gas pipeline investments that were ~~offset by weaker exchange rates.~~

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

~~a $181 million increase in Central America due~~owned prior to the ~~asset~~Piedmont acquisition.

Matters Impacting Future Gas Utilities and Infrastructure Results

Gas Utilities and Infrastructure has a 24 percent ownership interest in Constitution Pipeline Company, LLC (Constitution), a natural gas pipeline project slated to transport natural gas supplies to major northeastern markets. On April 22, 2016, the New York State Department of Environmental Conservation denied Constitution’s application for a necessary water quality certification for the New York portion of the Constitution pipeline. Constitution has stopped construction and discontinued capitalization of future development costs until the project's uncertainty is resolved. To the extent the legal and regulatory proceedings have unfavorable outcomes, or if Constitution concludes that the project is not viable or does not go forward, an impairment ~~partially offset by lower purchased power costs.~~

~~Partially offset by:~~

~~a $28 million decrease in Brazil due~~charge of up to ~~lower purchased power costs due to improved hydrology and weaker foreign currency exchange rates, partially offset by higher variable costs.~~

~~Other Income and Expense, net.~~ ~~The variance was primarily due to lower earnings from~~ the ~~equity method~~recorded investment in ~~NMC, as a result~~the project, net of ~~lower average MTBE~~any cash and ~~methanol prices.~~

~~Income Tax (Benefit) Expense.~~ ~~The variance was primarily due~~working capital returned, may be recorded. With the project on hold, funding of project costs has ceased until resolution of legal actions. Duke Energy is contractually obligated to ~~a tax benefit associated with~~provide funding of required operating costs, including the ~~impairment~~ownership percentage of ~~certain assets in Central America. The effective tax rates~~legal expenses to obtain the necessary permitting for the ~~three months ended June 30, 2016~~project and ~~2015 were 11.6 percent and 15.9 percent, respectively.~~

~~Six Months Ended June 30, 2016 as Compared~~project costs incurred prior to ~~June 30, 2015~~

~~International Energy’s results were impacted by an impairment of certain assets in Central America, lower earnings from~~ the ~~equity method investment in NMC and weaker exchange rates in Latin America; partially offset by lower income taxes as a result~~denial of the ~~Company's intent~~water permit. If the legal actions result in an outcome where the project is abandoned, Constitution is obligated under various contracts to ~~no longer indefinitely reinvest foreign earnings~~pay breakage fees that Gas Utilities and ~~improved hydrology~~Infrastructure would be obligated to fund up to the ownership percentage, or potentially up to $10 million.

In 2013, the PUCO issued an order (PUCO order) approving Duke Energy Ohio’s recovery of costs incurred between 2008 and 2012 for environmental investigation and remediation of two former MGP sites. At March 31, 2017, Duke Energy Ohio had recorded in ~~Brazil. The following is a detailed discussion~~Regulatory assets on the Condensed Consolidated Balance Sheet approximately $100 million of estimated MGP remediation costs not yet recovered through the MGP rider mechanism. Intervenors have appealed to the Ohio Supreme Court the PUCO order authorizing recovery of these amounts. That appeal remains pending. Duke Energy Ohio cannot predict the outcome of the ~~variance drivers~~appeal before the Ohio Supreme Court or future action by ~~line item.~~

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

~~a $26 million decrease~~the PUCO. If Duke Energy Ohio is not able to recover these remediation costs in ~~Central America due to lower average prices partially offset by higher volumes;~~rates, the costs could have an adverse impact on Gas Utilities and

~~a $17 million decrease in Brazil due to weaker foreign currency exchange rates partially offset by higher volumes.~~

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

~~a $164 million increase in Central America due~~ Infrastructure's financial position, results of operations and cash flows. See Note 4 to the ~~asset impairment, partially offset by lower purchased power costs.~~Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.

~~Partially offset by:~~

~~a $66 million decrease in Brazil due to lower purchased power costs due to improved hydrology and weaker foreign currency exchange rates, partially offset by higher variable costs.~~

~~Other Income and Expense, net.~~ The variance was primarily due to lower earnings from the equity method investment in NMC, primarily due to lower average MTBE and methanol prices, as well as lower MTBE sales volumes driven by planned maintenance; partially offset by lower butane costs.

PART I

~~Income Tax (Benefit) Expense.~~ The variance was due to an increase in the effective tax rate and a decrease in pretax income. The increase in the effective tax rate was primarily a result of Duke Energy's ability to more efficiently utilize foreign tax credits. See Note 16 to the Condensed Consolidated Financial Statements, "Income Taxes," for additional information.

~~Matters Impacting Future International Energy Results~~

International Energy's operations include conventional hydroelectric power generation facilities located in Brazil. The weather and recessionary economic conditions in Brazil during recent years have resulted in higher energy prices, lower electricity demand and unfavorable impacts to the exchange rate of Brazil's currency. These weather and economic conditions have also resulted in lawsuits brought to the Brazilian courts by certain hydroelectric generators to limit the financial exposure to the generators. International Energy's earnings and future cash flows could be adversely impacted if reservoir levels return to the recent low levels, from a further decline of the economic and political conditions within Brazil, or as a result of the outcome of legal matters in the Brazilian courts.

International Energy's earnings from an equity method investment in NMC reflect sales of methanol and MTBE, which generate margins that are directionally correlated with Brent crude oil prices. The recent decline in crude oil prices have reduced the earnings realized from NMC. Further weakness in the market price of Brent crude oil and related commodities may result in a further decline in earnings.

In February 2016, Duke Energy announced it had initiated a process to divest the International Energy business segment, excluding the equity method investment in NMC. Duke Energy is actively marketing the business. Non-binding offers have been received and are being evaluated. There is no assurance that this process will result in a transaction and the timing for execution of a potential transaction is uncertain. Proceeds from a successful sale would be used by Duke Energy to reduce debt and fund the operations and growth of domestic businesses. If the potential of a sale were to progress, it could result in classification of International Energy as assets held for sale and as a discontinued operation. As of June 30, 2016, the International Energy segment had a carrying value of approximately $2.4 billion, adjusted for $589 million of cumulative foreign currency translation losses currently classified as accumulated other comprehensive loss.

Commercial ~~Portfolio~~Renewables


	Three Months Ended June 30,									Six Months Ended June 30,									Three Months Ended March 31,
(in millions)	2016			2015			Variance			2016			2015			Variance			2017			2016			Variance
Operating Revenues	$	112		$	75		$	37		$	226		$	148		$	78		$	128		$	114		$	14
Operating Expenses	121			84			37			232			173			59
Operation, maintenance and other																			77			73			4
Depreciation and amortization																			39			30			9
Property and other taxes																			9			6			3
Total operating expenses																			125			109			16
Gains on Sales of Other Assets and Other, net	1			6			(5		)	2			6			(4		)	2			1			1
Operating Loss	(8		)	(3		)	(5		)	(4		)	(19		)	15
Other Income and Expense, net	4			(2		)	6			6			—			6
Operating Income																			5			6			(1		)
Other Income and Expenses																			(1		)	(2		)	1
Interest Expense	11			10			1			23			22			1			19			11			8
Loss Before Income Taxes	(15		)	(15		)	—			(21		)	(41		)	20			(15		)	(7		)	(8		)
Income Tax (Benefit) Expense	(28		)	15			(43		)	(61		)	(18		)	(43		)
Less: Income Attributable to Noncontrolling Interests	(1		)	—			(1		)	(1		)	—			(1		)
Segment Income (Loss)	$	14		$	(30	)	$	44		$	41		$	(23	)	$	64
Income Tax Benefit																			(39		)	(33		)	(6		)
Less: Loss Attributable to Noncontrolling Interests																			(1		)	—			(1		)
Segment Income																			$	25		$	26		$	(1	)

Renewable plant production, GWh	1,758			1,373			385			3,818			2,683			1,135			2,285			2,060			225
Net proportional MW capacity in operation										1,978			1,634			344			2,907			1,963			944

Three Months Ended ~~June 30, 2016~~March 31, 2017 as Compared to ~~June 30, 2015~~March 31, 2016

Commercial Renewables' results were impacted by higher financing costs and new renewables projects placed in service.

~~Commercial Portfolio’s higher earnings are~~Operating Revenues and Operating Expenses. The increases were primarily due to ~~a state tax charge recorded in the prior year related to the Disposal Group~~. ~~The following is a detailed discussion of the variance drivers by line item.~~

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

~~a $26 million increase in electric revenues due to growth in the REC Solar business; and~~

~~a $9 million increase in electric revenues from~~ new wind and solar generation placed in service.

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

~~a $24 million increase in operating expenses due to growth in the REC Solar business; and~~

~~a $9 million increase in operating expenses from~~by new wind project financings and ~~solar generation placed in service.~~less capitalized interest.

Income Tax ~~(Benefit) Expense.~~Benefit. The variance was primarily due to ~~a $41 million charge~~an increase in pretax losses and higher production tax credits (PTCs) related to wind projects placed in service, partially offset by lower investment tax credits (ITCs) due to lower solar investments in the ~~prior year~~current year.

Matters Impacting Future Commercial Renewables Results

Changes or variability in assumptions used in calculating the fair value of the Commercial Renewables reporting units for goodwill testing purposes including but not limited to, legislative actions related to ~~changes in state~~ tax ~~apportionment factors on deferred taxes resulting from~~credit extensions, long-term growth rates and discount rates, could significantly impact the ~~sale~~estimated fair value of the ~~Disposal Group~~Commercial Renewables reporting units. In the event of a significant decline in the ~~second quarter~~estimated fair value of ~~2015.~~the Commercial Renewables reporting units, goodwill impairment charges could be recorded. The carrying value of goodwill within Commercial Renewables was approximately $122 million at March 31, 2017.

~~Six Months Ended June 30, 2016 as Compared to June 30, 2015~~

~~Commercial Portfolio’s higher earnings are~~Persistently low market pricing for wind resources, primarily ~~due to a state tax charge recorded~~ in the ~~prior year related~~Energy Reliability Council of Texas West market, and the future expiration of tax incentives including ITCs and PTCs could result in adverse impacts to the ~~Midwest generation business, operating expenses recorded in the prior year related to residual Midwest Generation operations that were shifted out~~future results of Commercial ~~Portfolio and new wind and solar generation placed in service~~. ~~The following is a detailed discussion of the variance drivers by line item.~~Renewables.

PART I

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

~~a $56 million increase in electric revenues due to acquisition and growth of REC Solar; and~~

~~a $31 million increase in electric revenues from new wind and solar generation placed in service and improved wind production.~~

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

~~a $55 million increase in operating expenses due to acquisition and growth of REC Solar; and~~

~~a $24 million increase in operating expenses from new wind and solar generation placed in service.~~

~~Partially offset by:~~

a $28 million decrease due to the shift of the residual Midwest generation business out of Commercial Portfolio following the sale of the Disposal Group. See Note 3 to the Condensed Consolidated Financial Statements, “Business Segments” for additional information.

~~Income Tax (Benefit) Expense.~~The variance was primarily due to a $41 million charge in the prior year related to changes in state tax apportionment factors on deferred taxes resulting from the sale of the Disposal Group in the second quarter of 2015.

Other


	Three Months Ended June 30,									Six Months Ended June 30,									Three Months Ended March 31,
(in millions)	2016			2015			Variance			2016			2015			Variance			2017			2016			Variance
Operating Revenues	$	30		$	34		$	(4	)	$	59		$	61		$	(2	)	$	33		$	29		$	4
Operating Expenses	96			63			33			188			113			75
Fuel used in electric generation and purchased power																			15			11			4
Operation, maintenance and other																			8			36			(28		)
Depreciation and amortization																			26			34			(8		)
Property and other taxes																			3			9			(6		)
Impairment charges																			—			2			(2		)
Total operating expenses																			52			92			(40		)
Gains on Sales of Other Assets and Other, net	4			6			(2		)	11			13			(2		)	5			5			—
Operating Loss	(62		)	(23		)	(39		)	(118		)	(39		)	(79		)	(14		)	(58		)	44
Other Income and Expense, net	8			9			(1		)	18			10			8
Other Income and Expenses																			21			17			4
Interest Expense	191			97			94			396			194			202			134			205			(71		)
Loss Before Income Taxes	(245		)	(111		)	(134		)	(496		)	(223		)	(273		)	(127		)	(246		)	119
Income Tax Benefit	(126		)	(63		)	(63		)	(226		)	(134		)	(92		)	(52		)	(101		)	49
Less: Income Attributable to Noncontrolling Interests	1			3			(2		)	4			5			(1		)	2			3			(1		)
Net Expense	$	(120	)	$	(51	)	$	(69	)	$	(274	)	$	(94	)	$	(180	)	$	(77	)	$	(148	)	$	71

Three Months Ended ~~June 30, 2016~~March 31, 2017 as Compared to ~~June 30, 2015~~March 31, 2016

Other's ~~higher~~lower net expense was driven by ~~unrealized losses on forward-starting~~lower interest ~~rate swaps~~expense related to the ~~expected financing of the~~ Piedmont acquisition ~~as well as~~financing, decreased severance ~~accruals.~~accruals and decreased charitable donations. The following is a detailed discussion of the variance drivers by line item.

Operating Expenses. The ~~increase~~variance was primarily due to ~~an increase~~a decrease in severance ~~accruals.~~accruals and a decrease in donations to the Duke Energy Foundation. The Duke Energy Foundation is a nonprofit organization funded by Duke Energy shareholders that makes charitable contributions to selected nonprofits and government subdivisions.

Other Income and Expenses. The increase was primarily driven by higher earnings from NMC due to higher commodity prices.

Interest Expense. The ~~increase~~decrease was primarily due to Piedmont acquisition financing costs in the prior year, including $93 million of unrealized losses on forward-starting interest rate ~~swaps related to the expected financing of the Piedmont acquisition. For additional information see Notes~~ 2 ~~and 9 to the Condensed Consolidated Financial Statements, "Acquisitions and Dispositions" and "Derivatives and Hedging," respectively.~~

~~Income Tax Benefit.~~ The variance was primarily due to an increase in pretax losses, partially offset by a decrease in the effective tax rate. The effective tax rates for the three months ended June 31, 2016 and 2015 were 51.4 percent and 56.8 percent, respectively. The decrease in the effective tax rate was primarily due to an increase in pretax losses, partially offset by favorable impacts of finalizing federal tax audits.

~~Six Months Ended June 30, 2016 as Compared to June 30, 2015~~

Other's higher net expense was due to unrealized losses on forward-starting interest rate swaps related to the expected financing of the Piedmont acquisition, as well as severance accruals. The following is a detailed discussion of the variance drivers by line item.

~~Operating Expenses.~~ The increase was primarily due to severance accruals and higher charges in the current year due to the shift of the residual Midwest Generation business from the Commercial Portfolio segment to Other in the second quarter of 2015. See Note 3 to the Condensed Consolidated Financial Statements, “Business Segments” for additional information.

~~Interest Expense.~~ ~~The increase was primarily due to unrealized losses on forward-starting interest rate swaps related to the expected financing of the Piedmont acquisition.~~swaps. For additional information see Notes 2 and 9 to the Condensed Consolidated Financial Statements, "Acquisitions and Dispositions" and "Derivatives and Hedging," respectively.

Income Tax Benefit. The variance was primarily due ~~to an increase in pretax losses, partially offset by~~ a decrease in ~~the effective tax rate.~~pretax losses. The effective tax rates for the ~~six~~three months ended ~~June 30,~~March 31, 2017 and 2016 ~~and 2015~~ were ~~45.6~~40.9 percent and ~~60.1~~41.1 percent, respectively. ~~The decrease in the effective tax rate was primarily due to an increase in pretax losses, partially offset by favorable impacts of finalizing federal tax audits.~~

~~PART I~~

Matters Impacting Future Other Results

Included in Other is Duke Energy ~~Ohio’s~~Ohio's 9 percent ownership interest in OVEC, which owns 2,256 MW of coal-fired generation capacity. As a counterparty to an inter-company power agreement (ICPA), Duke Energy Ohio has a contractual arrangement to receive entitlements to capacity and energy from OVEC’s power plants through June 2040 commensurate with its power participation ratio, which is equivalent to Duke Energy Ohio's ownership interest. Costs, including fuel, operating expenses, fixed costs, debt amortization, and interest expense, are allocated to counterparties to the ICPA, including Duke Energy Ohio, based on their power participation ratio. The value of the ICPA is subject to variability due to fluctuations in power prices and changes in OVEC’s costs of business. Deterioration in the credit quality or bankruptcy of one or more parties to the ICPA could increase the costs of OVEC. In addition, certain proposed environmental rulemaking costs could result in future increased cost allocations.

The retired Beckjord generating station (Beckjord), ~~previously an asset of Commercial Portfolio, became an asset of Other after the sale of the Disposal Group. Beckjord,~~ a nonregulated facility retired during 2014, is not subject to the ~~U.S. Environmental Protection Agency (EPA)~~EPA rule related to the disposal of ~~Coal Combustion Residuals (CCR)~~CCR from electric utilities. However, if costs are incurred as a result of environmental regulations or to mitigate risk associated with on-site storage of coal ash, the costs could have an adverse impact on Other's financial position, results of operations and cash flows.

Earnings from an equity method investment in NMC reflect sales of methanol and methyl tertiary butyl ether (MTBE), which generate margins that are directionally correlated with Brent crude oil prices. Weakness in the market price of Brent crude oil and related commodities may result in a decline in earnings. Duke Energy's economic ownership interest will decrease from 25 percent to 17.5 percent upon successful startup of NMC's polyacetal production facility, which is expected to occur in the second quarter of 2017.

U.S. federal tax reform has become an important priority of the current Congress and Administration. Any substantial revision to the U.S. tax code, including a loss of the ability to deduct interest expense, could adversely impact Duke Energy's future earnings, cash flows or financial position.

PART I

INCOME ~~(LOSS)~~ FROM DISCONTINUED OPERATIONS, NET OF TAX

Three Months Ended ~~June 30, 2016~~March 31, 2017 as Compared to ~~June 30, 2015~~March 31, 2016

Discontinued Operations, Net of Tax. The variance was ~~primarily~~ driven by ~~a litigation reserve recorded~~2016 earnings from the International Disposal Group, which was sold in ~~2015, as discussed in~~December 2016. See Note ~~5, "Commitments and Contingencies,"~~2 to the Condensed Consolidated Financial ~~Statements.~~

~~Six Months Ended June 30, 2016 as Compared to June 30, 2015~~

~~Discontinued Operations, Net of Tax.~~ ~~The variance was primarily driven by the Disposal Group's operating results in 2015, partially offset by a litigation reserve recorded in 2015, as discussed in Note 5, "Commitments~~Statements, "Acquisitions and ~~Contingencies,~~Dispositions," ~~to the Condensed Consolidated Financial Statements.~~for additional information.

DUKE ENERGY CAROLINAS

Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the ~~six~~three months ended ~~June 30,~~March 31, 2017 and 2016 ~~and 2015~~ and the Annual Report on Form 10-K for the year ended December 31, ~~2015.~~2016.

Results of Operations


	Six Months Ended June 30,							Three Months Ended March 31,
(in millions)	2016		2015		Variance			2017		2016		Variance
Operating Revenues	$	3,415	$	3,608	$	(193	)	$	1,716	$	1,740	$	(24	)
Operating Expenses	2,470		2,610		(140		)
Fuel used in electric generation and purchased power								428		421		7
Operation, maintenance and other								482		512		(30		)
Depreciation and amortization								254		259		(5		)
Property and other taxes								68		67		1
Total operating expenses								1,232		1,259		(27		)
Operating Income	945		998		(53		)	484		481		3
Other Income and Expenses, net	82		83		(1		)
Other Income and Expenses								37		37		—
Interest Expense	214		208		6			103		107		(4		)
Income Before Income Taxes	813		873		(60		)	418		411		7
Income Tax Expense	281		316		(35		)	148		140		8
Net Income	$	532	$	557	$	(25	)	$	270	$	271	$	(1	)

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) ~~increase~~ over prior year	~~2016~~2017
Residential sales	(~~6.9~~9.4	)%
General service sales	(~~1.5~~2.1	)%
Industrial sales	(~~0.6~~0.3	)%
Wholesale power sales	~~2.7~~1.8	%
Joint dispatch sales	~~(59.7~~69.2	)%
Total sales	(~~3.2~~3.9	)%
Average number of customers	1.4	%

~~Six~~Three Months Ended ~~June 30, 2016~~March 31, 2017 as Compared to ~~June 30, 2015~~March 31, 2016

Operating Revenues. The variance was driven primarily by:

~~a $215~~an $84 million decrease in ~~fuel revenues driven by lower fuel prices included in electric~~ retail ~~and wholesale rates and overall lower volumes; and~~

~~a $59 million decrease in electric~~ sales, net of fuel revenues, ~~to retail customers~~ due to ~~less favorable~~warm winter weather ~~compared to~~in the ~~prior~~current year.

Partially offset by:

a ~~$65~~$31 million increase in ~~retail pricing and rate riders, which primarily reflects increased~~rider revenues related to energy efficiency ~~programs~~programs;

a $23 million increase in fuel revenues due to changes in generation mix, partially offset by lower sales volumes; and ~~the expiration~~

a $5 million increase in weather-normal retail sales volumes, net of ~~the North Carolina cost of removal decrement rider.~~fuel revenues.

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

by a ~~$195~~$30 million decrease in ~~fuel used in electric generation~~operations and ~~purchased power primarily related to lower natural gas and coal prices, and decreased generation~~maintenance expense due to lower ~~sales volumes.~~

~~PART I~~

~~Partially offset by:~~

~~a $30 million increase in operating and maintenance expense primarily due to higher~~ storm restoration costs and ~~severance expenses related to cost savings initiatives; and~~

~~a $24 million increase in depreciation and amortization expense primarily due to~~decreased labor costs, partially offset by higher ~~amount of property, plant and equipment in service.~~energy efficiency program costs.

Income Tax Expense. The variance was primarily due to ~~a decrease~~an increase in pretax income and a ~~reduction in the~~higher effective tax rate. The effective tax rates for the ~~six~~three months ended ~~June 30,~~March 31, 2017 and 2016 ~~and 2015~~ were ~~34.6~~35.4 percent and ~~36.2~~34.1 percent, respectively. The ~~decrease~~increase in the effective tax rate was primarily due to a favorable state resolution booked in 2016 related to ~~prior-year~~prior year tax ~~returns and favorable impacts of finalizing tax audits.~~returns.

PART I

Matters Impacting Future Results

An order from regulatory authorities disallowing recovery of costs related to closure of ash impoundments could have an adverse impact on Duke Energy Carolinas' financial position, results of operations and cash flows. See Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters” and Note 9 in Duke Energy's Annual Report on Form 10-K for the year ended December 31, 2016, "Asset Retirement Obligations," for additional information.

On May 18, 2016, the NCDEQ issued proposed risk classifications for all coal ash surface impoundments in North Carolina. All ash impoundments not previously designated as high priority by the Coal Ash Act were designated as intermediate risk. Certain impoundments classified as intermediate risk, however, may be reassessed in the future as low risk pursuant to legislation signed by the former North Carolina governor on July 14, 2016. Duke Energy Carolinas' estimated ~~asset retirement obligations~~AROs related to the closure of North Carolina ash impoundments are based upon the mandated closure method or a probability weighting of potential closure methods for the impoundments that may be reassessed to low risk. As the final risk ranking classifications in North Carolina are delineated, final closure plans and corrective action measures are developed and approved for each site, ~~and~~ the closure work progresses, and the closure method scope isand remedial action methods are determined, the complexity of work and the amount of coal combustion material could be different than originally estimated and, therefore, could materially impact Duke Energy Carolinas' financial ~~position, results of operations and cash flows.~~position. See Note ~~5 to~~9 in Duke Energy's Annual Report on Form 10-K for the ~~Condensed Consolidated Financial Statements, “Commitments and Contingencies,”~~year ended December 31, 2016, "Asset Retirement Obligations," for additional information.

Duke Energy Carolinas is a party to multiple lawsuits and subject to fines and other penalties related to ~~the Dan River coal ash release and~~ operations at ~~other~~certain North Carolina facilities with ash basins. The outcome of these lawsuits, fines and penalties could have an adverse impact on Duke Energy Carolinas’ financial position, results of operations and cash flows. See Note 5 to the Condensed Consolidated Financial Statements, “Commitments and Contingencies,” for additional information.

~~An order from regulatory authorities disallowing recovery~~Duke Energy Carolinas intends to file a rate case in North Carolina in 2017 to recover costs of complying with CCR regulations and the Coal Ash Act, as well as costs ~~related~~of capital investments in generation, transmission and distribution systems and any increase in expenditures subsequent to ~~closure of ash impoundments could have an adverse impact on~~previous rate cases. Duke Energy Carolinas' ~~financial position, results of operations and cash flows. See Notes 4 to~~earnings could be adversely impacted if the ~~Condensed Consolidated Financial Statements, “Regulatory Matters” and Note 9 in Duke Energy’s Annual Report on Form 10-K for~~rate case is delayed or denied by the ~~year ended December 31, 2015, "Asset Retirement Obligations," for additional information.~~NCUC.

PART I

PROGRESS ENERGY

Results of Operations


	Six Months Ended June 30,								Three Months Ended March 31,
(in millions)	2016		2015			Variance			2017		2016		Variance
Operating Revenues	$	4,680	$	5,012		$	(332	)	$	2,179	$	2,332	$	(153	)
Operating Expenses	3,657		3,973			(316		)
Fuel used in electric generation and purchased power									726		860		(134		)
Operation, maintenance and other									544		592		(48		)
Depreciation and amortization									313		290		23
Property and other taxes									117		119		(2		)
Impairment charges									—		2		(2		)
Total operating expenses									1,700		1,863		(163		)
Gains on Sales of Other Assets and Other, net	12		14			(2		)	8		6		2
Operating Income	1,035		1,053			(18		)	487		475		12
Other Income and Expenses, net	48		46			2
Other Income and Expenses									24		20		4
Interest Expense	320		334			(14		)	206		160		46
Income From Continuing Operations Before Taxes	763		765			(2		)
Income Tax Expense From Continuing Operations	277		284			(7		)
Income From Continuing Operations	486		481			5
Loss From Discontinued Operations, net of tax	—		(1		)	1
Income Before Income Taxes									305		335		(30		)
Income Tax Expense									104		123		(19		)
Net Income	486		480			6			201		212		(11		)
Less: Net Income Attributable to Noncontrolling Interest	5		5			—
Less: Net Income Attributable to Noncontrolling Interests									2		3		(1		)
Net Income Attributable to Parent	$	481	$	475		$	6		$	199	$	209	$	(10	)

~~Six~~Three Months Ended ~~June 30, 2016~~March 31, 2017 as Compared to ~~June 30, 2015~~March 31, 2016

Operating Revenues. The variance was driven primarily by:

a ~~$336~~$126 million decrease in fuel ~~and capacity~~ revenues ~~from~~driven by lower retail ~~customers primarily due to lower natural gas prices,~~sales and changes in generation mix ~~and~~at Duke Energy Progress, as well as decreased demand ~~from retail customers; partially offset by increased~~and capacity rates to retail customers at Duke Energy Florida; ~~and~~

a $67 million decrease in retail sales, net of fuel ~~revenue, to retail customers due to less favorable weather compared to the prior year.~~

~~Partially offset by:~~

a $46 million increase in rate riders, including increased revenues related to energy efficiency programs and the additional ownership interest in certain generating assets acquired from NCEMPA in the third quarter of 2015, partially offset by lower nuclear cost recovery clause rider revenues, due to ~~suspending recovery for~~warm winter weather in the ~~Levy nuclear project;~~current year; and

a ~~$32~~$10 million ~~increase~~decrease in wholesale power revenues primarily due to ~~a new NCEMPA contract effective August 1, 2015,~~contracts that expired in the prior year at Duke Energy Florida, partially offset by ~~lower~~higher peak demand at Duke Energy Progress.

Partially offset by:

a $29 million increase in rider revenues related to energy efficiency programs at Duke Energy Progress, and nuclear asset securitization revenues beginning in July 2016 at Duke Energy Florida; and

a $15 million increase in retail pricing due to the Duke Energy Progress South Carolina rate case and Duke Energy Florida's base rate adjustment for the Osprey acquisition.

Operating Expenses. The variance was driven primarily by:

a ~~$323~~$134 million decrease in fuel ~~used in electric generation and purchased power~~expense primarily due to lower ~~fuel prices, decreased demand from~~ retail ~~customers~~sales and changes in generation ~~mix;~~mix at Duke Energy Progress, as well as lower deferred fuel costs and decreased purchased power at Duke Energy Florida; and

a ~~$16~~$48 million decrease in operations and maintenance expense ~~primarily~~ due to lower ~~outage~~storm restoration costs as well as decreased labor and ~~cost savings initiatives, partially offset by higher storm costs, an increase in costs recoverable through the energy conservation cost recovery clause and an increase in employee benefit~~plant outage costs.

Partially offset by:

a ~~$16~~$23 million increase in depreciation and amortization expense primarily due to additional plant in service ~~including the additional ownership interest in generating assets acquired from NCEMPA, partially offset reductions in the amounts recorded through the~~and nuclear ~~cost recovery clause at Duke Energy Florida.~~regulatory asset amortization.

Interest Expense.The variance was ~~driven by accelerated Crystal River Unit 3 regulatory asset cost recovery in 2015, which resulted in a lower~~primarily due to higher debt ~~return in 2015, as well as lower outstanding debt.~~outstanding.

Income Tax Expense. The variance was primarily due to a decrease in pretax income and a lower effective tax rate. The effective tax rates for the ~~six~~three months ended ~~June 30,~~March 31, 2017 and 2016 ~~and 2015~~ were ~~36.3~~34.1 percent and ~~37.1~~36.7 percent, respectively. The decrease in the effective tax rate was primarily due to higher AFUDC equity and the amortization of excess North Carolina deferred tax.

PART I

Matters Impacting Future Results

An order from regulatory authorities disallowing recovery of costs related to closure of ash impoundments could have an adverse impact on Progress Energy’s financial position, results of operations and cash flows. See Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters” and Note 9 in Duke Energy's Annual Report on Form 10-K for the year ended December 31, 2016, "Asset Retirement Obligations," for additional information.

On May 18, 2016, the NCDEQ issued proposed risk classifications for all coal ash surface impoundments in North Carolina. All ash impoundments not previously designated as high priority by the Coal Ash Act were designated as intermediate risk. Certain impoundments classified as intermediate risk, however, may be reassessed in the future as low risk pursuant to legislation signed by the former North Carolina governor on July 14, 2016. Progress Energy's estimated ~~asset retirement obligations~~AROs related to the closure of North Carolina ash impoundments are based upon the mandated closure method or a probability weighting of potential closure methods for the impoundments that may be reassessed to low risk. As the final risk ranking classifications in North Carolina are delineated, final closure plans and corrective action measures are developed and approved for each site, ~~and~~ the closure work progresses, and the closure method scope isand remedial action methods are determined, the complexity of work and the amount of coal combustion material could be different than originally estimated and, therefore, could materially impact Progress Energy's financial ~~position, results of operations and cash flows.~~position. See Note ~~5 to~~9 in Duke Energy's Annual Report on Form 10-K for the ~~Condensed Consolidated Financial Statements, “Commitments and Contingencies,”~~year ended December 31, 2016, "Asset Retirement Obligations," for additional information.

Duke Energy Progress ~~Energy~~ is a party to multiple lawsuits and subject to fines and other penalties related to operations at certain North Carolina facilities with ash basins. The outcome of these lawsuits, fines and penalties could have an adverse impact on Progress Energy’s financial position, results of operations and cash flows. See Note 5 to the Condensed Consolidated Financial Statements, “Commitments and Contingencies,” for additional information.

AnIn the fourth quarter of 2016, Hurricane Matthew caused historic flooding, extensive damage and widespread power outages within the Duke Energy Progress service territory. Duke Energy Progress filed a petition with the NCUC requesting an accounting order to defer incremental operation and maintenance and capital costs incurred in response to Hurricane Matthew and other significant 2016 storms. Current estimated incremental costs are approximately $116 million. The NCUC has not ruled on the petition. A final order from ~~regulatory authorities disallowing~~the NCUC that disallows the deferral and future recovery of all or a significant portion of the incremental storm restoration costs ~~related to closure of ash impoundments~~incurred could ~~have~~result in an adverse impact on Progress ~~Energy’s~~Energy's financial position, results of operations and cash flows. ~~See Notes 4~~

On May 2, 2017, Duke Energy Progress filed notice with the NCUC that it intends to file a general rate case on or about June 1, 2017. Duke Energy Progress will seek to recover costs of complying with CCR regulations and the ~~Condensed Consolidated Financial Statements, “Regulatory Matters”~~Coal Ash Act, as well as costs of capital investments in generation, transmission and ~~Note 9~~distribution systems and any increase in ~~Duke Energy’s Annual Report on Form 10-K for~~expenditures subsequent to previous rate cases. Progress Energy's earnings could be adversely impacted if the ~~year ended December 31, 2015, "Asset Retirement Obligations," for additional information.~~rate case is delayed or denied by the NCUC.

PART I

DUKE ENERGY PROGRESS

Results of Operations


	Six Months Ended June 30,							Three Months Ended March 31,
(in millions)	2016		2015		Variance			2017		2016		Variance
Operating Revenues	$	2,520	$	2,642	$	(122	)	$	1,219	$	1,307	$	(88	)
Operating Expenses	2,008		2,143		(135		)
Fuel used in electric generation and purchased power								364		448		(84		)
Operation, maintenance and other								350		386		(36		)
Depreciation and amortization								181		175		6
Property and other taxes								40		41		(1		)
Total operating expenses								935		1,050		(115		)
Gains on Sales of Other Assets and Other, net	1		1		—			2		1		1
Operating Income	513		500		13			286		258		28
Other Income and Expenses, net	29		35		(6		)
Other Income and Expenses								19		17		2
Interest Expense	127		116		11			82		63		19
Income Before Income Taxes	415		419		(4		)	223		212		11
Income Tax Expense	147		151		(4		)	76		75		1
Net Income and Comprehensive Income	$	268	$	268	$	—		$	147	$	137	$	10

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) ~~Increase~~ over prior period	~~2016~~2017
Residential sales	(~~8.9~~7.3	)%
General service sales	(~~1.3~~3.0	)%
Industrial sales	~~(0.3~~2.1	)%
Wholesale power sales	~~23.4~~(11.6	)%
Joint dispatch sales	~~59.9~~(18.5	)%
Total sales	~~7.1~~(8.8	)%
Average number of customers	1.3	%

~~Six~~Three Months Ended ~~June 30, 2016~~March 31, 2017 as Compared to ~~June 30, 2015~~March 31, 2016

Operating Revenues. The variance was driven primarily by:

a ~~$151~~$76 million decrease in fuel revenues driven by lower ~~natural gas prices,~~retail sales and changes in generation ~~mix and decreased demand from retail customers;~~mix; and

a ~~$50~~$40 million decrease in ~~electric~~retail sales, net of fuel ~~revenue, to retail customers~~revenues, due to ~~less favorable~~warm winter weather ~~compared to~~in the ~~prior~~current year.

Partially offset by:

a ~~$68~~$13 million increase in ~~rate~~ rider revenues related to energy efficiency programs;

a $9 million increase in retail pricing due to the ~~purchase of NCEMPA’s ownership interest in certain generating assets and energy efficiency programs;~~Duke Energy Progress South Carolina rate case; and

~~a $32~~an $8 million increase in wholesale power revenues primarily due to ~~a new NCEMPA contract effective August 1, 2015, partially offset by lower~~higher peak demand.

Operating Expenses. The variance was driven primarily by:

~~a $152~~an $84 million decrease in fuel ~~used in electric generation and purchased power~~expense primarily due to ~~decreased demand from~~lower retail ~~customers, lower natural gas prices,~~sales and changes in generation mix; and

a ~~$30~~$36 million decrease in operations and maintenance expense ~~mostly~~primarily due to lower ~~nuclear outage costs, net of nuclear levelization impacts, driven by fewer outages in 2016, partially offset by higher~~ storm restoration costs.

~~Partially offset by:~~

a $35 million increase in depreciation and amortization expenses primarily due to additional plant in service, including the additional ownership interest in generating assets acquired from NCEMPA in the third quarter of 2015; and

~~a $12 million increase in property and other taxes due to a 2015 North Carolina Franchise Tax refund and increases in current year property taxes in North Carolina and South Carolina.~~

Interest Expense. The variance was primarily ~~driven by~~due to higher debt outstanding, as well as interest ~~related to new debt issuances in 2015.~~charges on North Carolina fuel overcollections.

Income Tax Expense. The variance was primarily due to an increase in pretax income, partially offset by a lower effective tax rate. The effective tax rates for the ~~six~~three months ended ~~June 30,~~March 31, 2017 and 2016 were 34.1 percent and ~~2015 were~~ 35.4 percent, ~~and 36.0 percent,~~ respectively. The decrease in the effective tax rate was primarily due to the amortization of excess North Carolina deferred tax.

PART I

Matters Impacting Future Results

An order from regulatory authorities disallowing recovery of costs related to closure of ash impoundments could have an adverse impact on Duke Energy Progress’ financial position, results of operations and cash flows. See Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters” and Note 9 in Duke Energy's Annual Report on Form 10-K for the year ended December 31, 2016, "Asset Retirement Obligations," for additional information.

On May 18, 2016, the NCDEQ issued proposed risk classifications for all coal ash surface impoundments in North Carolina. All ash impoundments not previously designated as high priority by the Coal Ash Act were designated as intermediate risk. Certain impoundments classified as intermediate risk, however, may be reassessed in the future as low risk pursuant to legislation signed by the former North Carolina governor on July 14, 2016. Duke Energy Progress' estimated ~~asset retirement obligations~~AROs related to the closure of North Carolina ash impoundments are based upon the mandated closure method or a probability weighting of potential closure methods for the impoundments that may be reassessed to low risk. As the final risk ranking classifications in North Carolina are delineated, final closure plans and corrective action measures are developed and approved for each site, ~~and~~ the closure work progresses, and the closure method scope isand remedial action methods are determined, the complexity of work and the amount of coal combustion material could be different than originally estimated and, therefore, could materially impact Duke Energy Progress' financial ~~position, results of operations and cash flows.~~position. See Note ~~5 to~~9 in Duke Energy's Annual Report on Form 10-K for the ~~Condensed Consolidated Financial Statements, “Commitments and Contingencies,”~~year ended December 31, 2016, "Asset Retirement Obligations," for additional information.

Duke Energy Progress is a party to multiple lawsuits and subject to fines and other penalties related to operations at certain North Carolina facilities with ash basins. The outcome of these lawsuits, fines and penalties could have an adverse impact on Duke Energy Progress’ financial position, results of operations and cash flows. See Note 5 to the Condensed Consolidated Financial Statements, “Commitments and Contingencies,” for additional information.

AnIn the fourth quarter of 2016, Hurricane Matthew caused historic flooding, extensive damage and widespread power outages within the Duke Energy Progress service territory. Duke Energy Progress filed a petition with the NCUC requesting an accounting order to defer incremental operation and maintenance and capital costs incurred in response to Hurricane Matthew and other significant 2016 storms. Current estimated incremental costs are approximately $116 million. The NCUC has not ruled on the petition. A final order from ~~regulatory authorities disallowing~~the NCUC that disallows the deferral and future recovery of all or a significant portion of the incremental storm restoration costs ~~related to closure of ash impoundments~~incurred could ~~have~~result in an adverse impact on Duke Energy ~~Progress’~~Progress' financial position, results of operations and cash flows. ~~See Notes 4~~

On May 2, 2017, Duke Energy Progress filed notice with the NCUC that it intends to file a general rate case on or about June 1, 2017. Duke Energy Progress will seek to recover costs of complying with CCR regulations and the ~~Condensed Consolidated Financial Statements, “Regulatory Matters”~~Coal Ash Act, as well as costs of capital investments in generation, transmission and ~~Note 9~~distribution systems and any increase in expenditures subsequent to previous rate cases. Duke ~~Energy’s Annual Report on Form 10-K for~~Energy Progress' earnings could be adversely impacted if the ~~year ended December 31, 2015, "Asset Retirement Obligations," for additional information.~~rate case is delayed or denied by the NCUC.

PART I

DUKE ENERGY FLORIDA

Results of Operations


	Six Months Ended June 30,							Three Months Ended March 31,
(in millions)	2016		2015		Variance			2017		2016		Variance
Operating Revenues	$	2,157	$	2,367	$	(210	)	$	959	$	1,024	$	(65	)
Operating Expenses	1,644		1,825		(181		)
Fuel used in electric generation and purchased power								362		412		(50		)
Operation, maintenance and other								191		205		(14		)
Depreciation and amortization								132		114		18
Property and other taxes								77		78		(1		)
Impairment charges								1		2		(1		)
Total operating expenses								763		811		(48		)
Operating Income	513		542		(29		)	196		213		(17		)
Other Income and Expenses, net	19		10		9
Other Income and Expenses								16		5		11
Interest Expense	81		99		(18		)	70		41		29
Income Before Income Taxes	451		453		(2		)	142		177		(35		)
Income Tax Expense	170		175		(5		)	52		67		(15		)
Net Income	$	281	$	278	$	3		$	90	$	110	$	(20	)

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)~~(Decrease) over prior period	~~2016~~2017
Residential sales	—(8.4	)%
General service sales	(0.4	)%
Industrial sales	~~(1.1~~0.4	)%
Wholesale and other	~~1.7~~5.1	%
Total sales	(~~0.9~~1.8	)%
Average number of customers	~~1.6~~1.4	%

~~Six~~Three Months Ended ~~June 30, 2016~~March 31, 2017 as Compared to ~~June 30, 2015~~March 31, 2016

Operating Revenues. The variance was driven primarily by:

a ~~$185~~$50 million decrease in fuel and capacity revenues primarily due to decreased ~~fuel prices to retail customers, partially offset by increased~~demand and capacity rates to retail customers;

a ~~$22~~$27 million decrease in ~~rider revenues primarily due to a decrease in nuclear cost recovery clause revenues as a result~~retail sales, net of ~~suspending Levy recovery in 2015, partially offset by an increase in energy conservation cost recovery clause and environmental cost recovery clause~~fuel revenues, due to ~~higher recovery rates~~warm winter weather in ~~2016;~~the current year; and

~~a $17~~an $18 million decrease in wholesale power revenues primarily ~~due to less favorable weather compared to~~driven by contracts that expired in the prior year.

Partially offset by:

a ~~$17~~$16 million increase in ~~other revenue~~rider revenues primarily due to ~~a transmission customer settlement charge taken~~nuclear asset securitization revenues beginning in ~~the prior year and~~ July 2016;

an $11 million increase in ~~nonregulated customer products and services~~weather-normal sales volumes to retail customers in the current ~~year.~~year; and

a $6 million increase in retail pricing due to the base rate adjustment for the Osprey acquisition.

Operating Expenses. The variance was driven primarily by:

a ~~$170~~$50 million decrease in fuel ~~used in electric generation and purchased power~~expense primarily due to lower deferred fuel ~~prices~~costs and ~~lower usage;~~decreased purchased power, partially offset by higher generation costs; and

a ~~$20~~$14 million decrease in operations and maintenance expense primarily due to decreased labor costs and planned outage costs.

Partially offset by:

an $18 million increase in depreciation and amortization expense primarily due to ~~reductions in the amounts recorded through the nuclear cost recovery clause, partially offset by increased depreciation due to~~ additional plant in ~~service.~~

~~Partially offset by:~~

a $14 million increase in operations and maintenance expense primarily due to an increase in costs recoverable through the energy conservation cost recovery clause, an increase in expenses associated with fleet outages and an increase in employee benefit costs; partially offset by a decrease in expenses due to routine fleet maintenance work.service, as well as nuclear regulatory asset amortization.

~~Interest Expense.~~Other Income and Expenses. The variance was driven by ~~accelerated Crystal River Unit 3 regulatory asset cost recovery~~higher AFUDC equity return on the Citrus County Combined Cycle and Hines Energy Complex Chiller Uprate projects in ~~2015, which resulted in a~~the current year and gains on insurance policies.

PART I

Interest Expense. The variance was primarily due to higher debt outstanding and lower debt returns, driven by the CR3 debt return recorded prior to the securitization of CR3 in ~~2015, as well as lower outstanding debt.~~June of 2016.

Income Tax Expense. The variance was primarily due to a decrease in pretax income and a decrease in effective tax rate. The effective tax rates for the ~~six~~three months ended ~~June 30,~~March 31, 2017 and 2016 ~~and 2015~~ were ~~37.7~~36.6 percent and ~~38.6~~37.9 percent, respectively. The decrease in the effective tax rate was primarily due to higher AFUDC equity.

PART I

DUKE ENERGY OHIO

Results of Operations


	Six Months Ended June 30,								Three Months Ended March 31,
(in millions)	2016		2015			Variance			2017		2016		Variance
Operating Revenues	$	944	$	991		$	(47	)
Regulated electric									$	337	$	340	$	(3	)
Regulated natural gas									170		170		—
Nonregulated electric and other									11		6		5
Total operating revenues									518		516		2
Operating Expenses	794		845			(51		)
Fuel used in electric generation and purchased power – regulated									97		111		(14		)
Fuel used in electric generation and purchased power – nonregulated									15		10		5
Cost of natural gas									54		49		5
Operation, maintenance and other									130		119		11
Depreciation and amortization									67		61		6
Property and other taxes									72		71		1
Total operating expenses									435		421		14
Gains on Sales of Other Assets and Other, net	1		8			(7		)	—		1		(1		)
Operating Income	151		154			(3		)	83		96		(13		)
Other Income and Expenses, net	3		(2		)	5
Other Income and Expenses									4		2		2
Interest Expense	41		38			3			22		20		2
Income from Continuing Operations Before Income Taxes	113		114			(1		)	65		78		(13		)
Income Tax Expense from Continuing Operations	33		42			(9		)	23		21		2
Income from Continuing Operations	80		72			8			42		57		(15		)
Income from Discontinued Operations, net of tax	2		25			(23		)	—		2		(2		)
Net Income	$	82	$	97		$	(15	)	$	42	$	59	$	(17	)

The following table shows the percent changes in ~~Regulated Utilities'~~ 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) ~~increase~~ over prior year	~~2016~~2017
Residential sales	(~~9.5~~2.9	)%
General service sales	(~~2.2~~1.7	)%
Industrial sales	(~~0.9~~0.2	)%
Wholesale power sales	~~(76.9~~153.2	)%
Total sales	(~~8.4~~0.8	)%
Average number of customers	~~0.7~~0.8	%

~~Six~~Three Months Ended ~~June 30, 2016~~March 31, 2017 as Compared to ~~June 30, 2015~~March 31, 2016

Operating Revenues.The variance was driven primarily by:

an $8 million increase in PJM transmission revenues;

a ~~$45~~$6 million increase in rider revenues primarily due to energy efficiency programs and a rate increase for the distribution capital investment rider, partially offset by a decrease in the percentage of income payment plan rider due to a rate decrease: and

a $5 million increase in other revenues related to Ohio Valley Electric Corporation (OVEC).

Partially offset by:

an $11 million decrease in fuel revenues ~~driven by~~primarily due to lower electric fuel prices and sales volumes, partially offset by higher costs passed through to natural gas ~~prices~~customers due to higher natural gas prices; and ~~decreased~~

an $8 million decrease in electric retail sales, ~~volumes;~~net of fuel revenues, due to warm winter weather in the current year.

PART I

Operating Expenses. The variance was driven primarily by:

an $11 million increase in operations and maintenance expense due to higher energy efficiency program costs, higher storm costs, and higher transmission and distribution operations costs; and

a ~~$15~~$6 million ~~decrease~~increase in depreciation and amortization expense due to ~~less favorable weather compared to the prior year.~~additional plant in service.

Partially offset by:

a ~~$23 million increase in the energy efficiency rider due to a prior year unfavorable regulatory order limiting the ability to utilize energy efficiency banked savings.~~

~~Operating Expenses.~~ ~~The variance was driven by a $51~~$14 million decrease in ~~cost of natural gas, primarily due to decreased~~fuel expense driven by lower sales volumes and lower ~~natural gas prices.~~electric fuel costs.

Income Tax Expense. The variance was primarily due to a decrease in ~~the~~pretax income, partially offset by a higher effective tax rate. The effective tax ~~rates~~rate for the ~~six~~three months ended ~~June 30,~~March 31, 2017 and 2016 ~~and 2015~~ were ~~29.2~~35.4 percent and ~~36.8~~26.9 percent, respectively. The ~~decrease~~increase in the effective tax rate was primarily due to ~~a favorable prior-period~~an immaterial out of period adjustment ~~for depreciation and other~~in the prior year related to deferred tax balances associated with property, plant and equipment.

~~Discontinued Operations, Net of Tax.~~ ~~The variance was primarily driven by the Disposal Group's operating results in 2015.~~

Matters Impacting Future Results

An order from regulatory authorities disallowing recovery of costs related to closure of ash basins could have an adverse impact on Duke Energy Ohio's financial position, results of operations and cash flows. See ~~Notes~~Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters” and Note 9 in Duke ~~Energy’s~~Energy's Annual Report on Form 10-K for the year ended December 31, ~~2015,~~2016, "Asset Retirement Obligations," for additional information.

Duke Energy Ohio’s nonregulated Beckjord station, a facility retired during 2014, is not subject to the EPA rule related to the disposal of CCR from electric utilities. However, if costs are incurred as a result of environmental regulations or to mitigate risk associated with on-site storage of coal ash at the facility, the costs could have an adverse impact on Duke Energy Ohio's financial position, results of operations and cash flows.

In 2013, the PUCO issued an order (PUCO order) approving Duke Energy Ohio’s recovery of costs incurred between 2008 and 2012 for environmental investigation and remediation of two former MGP sites. At March 31, 2017, Duke Energy Ohio had recorded in Regulatory assets on the Condensed Consolidated Balance Sheet approximately $100 million of estimated MGP remediation costs not yet recovered through the MGP rider mechanism. Intervenors have appealed to the Ohio Supreme Court the PUCO order authorizing recovery of these amounts. That appeal remains pending. Duke Energy Ohio cannot predict the outcome of the appeal before the Ohio Supreme Court or future action by the PUCO. If Duke Energy Ohio is not able to recover these remediation costs in rates, the costs could have an adverse impact on Duke Energy Ohio's financial position, results of operations and cash flows. See Note 4 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.

Duke Energy Ohio has a 9 percent ownership interest in OVEC, which owns 2,256 MW of coal-fired generation capacity. As a counterparty to an ICPA, Duke Energy Ohio has a contractual arrangement to receive entitlements to capacity and energy from OVEC’s power plants through June 2040 commensurate with its power participation ratio, which is equivalent to Duke Energy Ohio’s ownership interest. Costs, including fuel, operating expenses, fixed costs, debt amortization, and interest expense, are allocated to counterparties to the ICPA, including Duke Energy Ohio, based on their power participation ratio. The value of the ICPA is subject to variability due to fluctuations in power prices and changes in OVEC’s costs of business. Deterioration in the credit quality or bankruptcy of one or more parties to the ICPA could increase the costs of OVEC. In addition, certain proposed environmental rulemaking costs could result in future increased cost allocations.

On March 2, 2017, Duke Energy Ohio filed an electric distribution base rate application with the PUCO to address recovery of electric distribution system capital investments and any increase in expenditures subsequent to previous rate cases. The application also includes requests to continue certain current riders and establish new riders related to LED Outdoor Lighting Service and regulatory mandates. Duke Energy Ohio's earnings could be adversely impacted if the rate case and requested riders are delayed or denied by the PUCO. See Note 4 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.

PART I

DUKE ENERGY INDIANA

Results of Operations


	Six Months Ended June 30,							Three Months Ended March 31,
(in millions)	2016		2015		Variance			2017		2016		Variance
Operating Revenues	$	1,416	$	1,474	$	(58	)	$	758	$	714	$	44
Operating Expenses	1,066		1,119		(53		)
Gains of Sales of Other Assets and Other, net	—		1		(1		)
Fuel used in electric generation and purchased power								251		228		23
Operation, maintenance and other								174		162		12
Depreciation and amortization								125		125		—
Property and other taxes								22		23		(1		)
Total operating expenses								572		538		34
Operating Income	350		356		(6		)	186		176		10
Other Income and Expenses, net	10		9		1
Other Income and Expenses								8		4		4
Interest Expense	91		88		3			44		44		—
Income Before Income Taxes	269		277		(8		)	150		136		14
Income Tax Expense	89		101		(12		)	59		41		18
Net Income	$	180	$	176	$	4		$	91	$	95	$	(4	)



Increase (Decrease) ~~increase~~ over prior year	~~2016~~2017
Residential sales	(~~8.7~~4.1	)%
General service sales	(~~2.9~~1.3	)%
Industrial sales	~~0.9~~—	%
Wholesale power sales	~~64.3~~(42.7	)%
Total sales	~~6.8~~(12.6	)%
Average number of customers	~~1.0~~1.2	%

~~Six~~Three Months Ended ~~June 30, 2016~~March 31, 2017 as Compared to ~~June 30, 2015~~March 31, 2016

Operating Revenues. The variance was driven primarily by:

a ~~$67~~$28 million ~~decrease~~increase in rider revenues related to Edwardsport IGCC and energy efficiency programs; and

a $17 million increase in fuel revenues ~~including emission allowances,~~ primarily due to ~~a decrease in fuel prices~~higher purchased power costs passed through to customers and ~~lower sales volumes; and~~

~~a $15 million decrease in electric sales, net of fuel revenue, to retail customers due to less favorable weather compared to the prior year.~~

~~Partially offset by:~~

~~a $20 million increase in retail pricing and rate rider revenues due to increased revenues related to clean coal equipment.~~higher financial transmission right (FTR) revenues.

Operating Expenses. The variance was driven primarily by:

~~an $81~~a $23 million ~~decrease~~increase in fuel ~~used in electric generation~~ and purchased power expense, primarily due to higher purchased power volumes and prices, partially offset by lower fuel ~~prices;~~costs due to lower generation; and

a ~~$10~~$14 million ~~decrease~~increase in operations and maintenance expense due to ~~a decrease~~growth in ~~outage work~~energy efficiency programs and higher expenses at ~~generation plants.~~Edwardsport IGCC.

~~Partially offset by:~~

~~a $27 million increase in property~~Other Income and ~~other taxes,~~Expenses. The variance was primarily driven by higher ~~sales and use tax due to the partial reversal in 2015 of a tax reserve upon settlement of the matter; and~~

~~an $11 million increase in depreciation and amortization expenses primarily due to a higher amount of property, plant and equipment in service.~~AFUDC equity.

Income Tax Expense. The variance was primarily due to an increase in pretax income and a ~~decrease in the~~higher effective tax rate. The effective tax rates for the ~~six~~three months ended ~~June 30,~~March 31, 2017 and 2016 ~~and 2015~~ were ~~33.1~~39.3 percent and ~~36.5~~30.2 percent, respectively. The ~~decrease~~increase in the effective tax rate was primarily due to ~~a favorable prior-period~~an immaterial out of period adjustment ~~for depreciation and other~~in the prior year related to deferred tax balances associated with property, plant and equipment.

Matters Impacting Future Results

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

PART I

The IURC approved a settlement agreement between Duke Energy Indiana ~~entered into a revised settlement agreement with~~and multiple parties that ~~will resolve~~resolves all disputes, claims and issues from the IURC proceedings related to post-commercial operating performance and recovery of ongoing operating and capital costs at the Edwardsport IGCC generating facility. ~~The agreement is subject to IURC approval.~~ Pursuant to the terms of this agreement, ~~Duke Energy Indiana recognized an impairment and related charges of $93 million for~~ the ~~year ended December 31, 2015. The~~ agreement stipulates that recovery of the remaining regulatory asset will be over an eight-year period and confirms an in-service date for accounting and ratemaking purposes of June 7, 2013. The agreement, if approved, will also imposeimposes a cost cap for retail recoverable operations and maintenance ~~retail~~ costs ~~in the second half of 2016, and 2017, as well as a cost cap for ongoing capital expenditures~~ through 2017. As part of the settlement, Duke Energy Indiana committed to either retire or cease burning coal at Gallagher Station by December 31, 2022. If the settlement agreement is not approved, outstanding issues before the IURC related to Edwardsport would resume and the resolution of such could have an adverse impact on Duke Energy Indiana's financial position, results of operations and cash flows. In addition, anAn inability to manage operating ~~and capital~~ costs in accordance with caps imposed pursuant to the agreement could have an adverse impact on Duke Energy Indiana's financial position, results of operations and cash flows. See Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.

~~Duke Energy Indiana agreed as part of the grid infrastructure improvement plan to defer depreciation~~

PART I

PIEDMONT

Management’s Discussion and other post-in-service carrying costs related to a planned automated metering infrastructure (AMI) project until the next retail base rate case. Duke Energy Indiana also agreed to withdraw its request for the creation of a regulatory asset for the remaining book value of existing meters that wouldAnalysis should be ~~replaced as part of the AMI project. If Duke Energy Indiana proceeds~~read in conjunction with ~~the AMI project, an impairment charge could be incurred for some or all of the remaining book value of the existing meters. See Note 4 to~~ the Condensed Consolidated Financial Statements ~~“Regulatory Matters,”~~and Notes for the three months ended March 31, 2017, Piedmont's Annual Report on Form 10-K for the year ended October 31, 2016, and the transition report filed on Form 10-Q (Form 10-QT) as of December 31, 2016, for the transition period from November 1, 2016 to December 31, 2016.

Results of Operations



	Three Months Ended March 31,
(in millions)	2017		2016		Variance
Operating Revenues
Regulated natural gas	$	498	$	481	17
Nonregulated natural gas and other	2		2		—
Total operating revenues	500		483		17
Operating Expenses
Cost of natural gas	205		197		8
Operation, maintenance and other	77		74		3
Depreciation and amortization	35		34		1
Property and other taxes	13		11		2
Total operating expenses	330		316		14
Operating Income	170		167		3
Equity in Earnings of Unconsolidated Affiliates	3		16		(13		)
Interest Expense	20		17		3
Income Before Income Taxes	153		166		(13		)
Income Tax Expense	58		63		(5		)
Net Income	$	95	$	103	$	(8	)

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	2017
Residential deliveries	(23.2	)%
Commercial deliveries	(19.9	)%
Industrial deliveries	(7.1	)%
Power generation deliveries	(12.4	)%
For resale	(12.7	)%
Total throughput deliveries	(14.3	)%
Secondary market volumes	(1.7	)%
Average number of customers	1.5	%

Piedmont's throughput was 133,276,787 dekatherms and 155,446,586 dekatherms for the three months ended March 31, 2017 and 2016, respectively. Due to the margin decoupling mechanism in North Carolina and weather normalization adjustment (WNA) mechanisms in South Carolina and Tennessee, changes in throughput deliveries do not have a material impact on Piedmont's revenues or earnings. The margin decoupling mechanism adjusts for variations in residential and commercial use per customer, including those due to weather and conservation. The WNA mechanisms mostly 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, 2017 as Compared to March 31, 2016

Operating Revenues.The variance was driven primarily by:

a $13 million increase in revenues to residential and commercial customers, net of natural gas costs passed through to customers, primarily due to IMR rate adjustments and customer growth, partially offset by decreased volumes delivered due to warmer weather; and

an $8 million increase due to higher natural gas costs passed through to customers, primarily due to higher natural gas prices.

Partially offset by:

a $3 million decrease in secondary market activity primarily due to lower margin sales.

PART I

Operating Expenses.The variance was driven by:

An $8 million increase in costs of natural gas, primarily due to higher natural gas prices and decreased opportunity for capacity release transactions; and

A $6 million increase in other operating expenses, primarily due to higher severance expense, increased property taxes and depreciation attributable to additional ~~information.~~plant in service.

Equity in Earnings of Unconsolidated Affiliates. The variance was primarily due to equity earnings from the investment in SouthStar in the prior year. Piedmont sold its 15 percent membership interest in SouthStar on October 3, 2016.

Income Tax Expense. The variance was primarily due to a decrease in pretax income. The effective tax rates for the three months ended March 31, 2017 and 2016 were 37.9 percent and 38.0 percent, respectively.

Matters Impacting Future Results

On April 1, 2017, Piedmont transferred its ownership interests in Atlantic Coast Pipeline, LLC (ACP) and Constitution to a wholly owned subsidiary of Duke Energy at book value. As a result, Piedmont will not recognize equity earnings (or losses) from these investments in future periods.

PART I

LIQUIDITY AND CAPITAL RESOURCES

Sources and Uses of Cash

Duke Energy relies primarily upon cash flows from operations, debt issuances and its existing cash and cash equivalents to fund its ~~domestic~~ liquidity and capital requirements. Duke Energy’s capital requirements arise primarily from capital and investment expenditures, repaying long-term debt and paying dividends to shareholders. See Duke Energy’s Annual Report on Form 10-K for the year ended December 31, ~~2015,~~2016, for a summary and detailed discussion of projected primary sources and uses of cash for ~~2016~~2017 to ~~2018.~~

On October 24, 2015, Duke Energy entered into a Merger Agreement with Piedmont, a North Carolina corporation. Under the terms of the Merger Agreement, Duke Energy will acquire Piedmont for $4.9 billion in cash. In addition, Duke Energy will assume Piedmont's existing debt, which was approximately $2.0 billion at April 30, 2016, the end of Piedmont's most recent filed fiscal quarter. Duke Energy expects to finance the transaction with a combination of debt, equity issuances and other cash sources. As of June 30, 2016, Duke Energy had entered into $1.4 billion of forward-starting interest rate swaps to manage interest rate exposure for the expected financing of the Piedmont acquisition. For additional information on the Piedmont acquisition, refer to Note 2 ~~to the Condensed Consolidated Financial Statements, “Acquisitions and Dispositions."~~

In March 2016, Duke Energy marketed an equity offering of 10.6 million shares of common stock. In lieu of issuing equity at the time of the offering, Duke Energy entered into the Equity Forwards with Barclays. Duke Energy expects to settle the Equity Forwards on or around the closing date of the Piedmont acquisition. The net proceeds received upon settlement are expected to be used to finance a portion of the acquisition of Piedmont. For additional information regarding the Equity Forwards, see Note 13 ~~to the Condensed Consolidated Financial Statements, "Common Stock."~~2019.

The Subsidiary Registrants generally maintain minimal cash balances and use short-term borrowings to meet their working capital needs and other cash requirements. The Subsidiary Registrants, excluding Progress Energy (Parent), support their short-term borrowing needs through participation with Duke Energy and certain of its other subsidiaries in a money pool arrangement. The companies with short-term funds may provide short-term loans to affiliates participating under this arrangement.

Duke Energy and the Subsidiary Registrants, excluding Progress Energy (Parent), may also use short-term debt, including commercial paper and the money pool, as a bridge to long-term debt financings. The levels of borrowing may vary significantly over the course of the year due to the timing of long-term debt financings and the impact of fluctuations in cash flows from operations. From time to time, Duke Energy’s current liabilities may ~~at times~~ exceed current assets resulting from the use of short-term debt as a funding source to meet scheduled maturities of long-term debt, as well as cash needs, which can fluctuate due to the seasonality of its business.

CREDIT FACILITIES AND REGISTRATION STATEMENTS

Master Credit Facility Summary


	June 30, 2016																					March 31, 2017
				Duke			Duke			Duke			Duke			Duke			Duke						Duke			Duke			Duke			Duke			Duke			Duke
	Duke			Energy			Energy			Energy			Energy			Energy			Energy			Duke			Energy			Energy			Energy			Energy			Energy			Energy
(in millions)	Energy			(Parent)			Carolinas			Progress			Florida			Ohio			Indiana			Energy			(Parent)			Carolinas			Progress			Florida			Ohio			Indiana			Piedmont
Facility size^(a)	$	7,500		$	3,475		$	800		$	1,000		$	1,200		$	425		$	600		$	8,000		$	3,400		$	1,100		$	1,000		$	950		$	450		$	600		$	500
Reduction to backstop issuances
Commercial paper^(b)	(1,673		)	(992		)	(300		)	(159		)	(47		)	(25		)	(150		)	(3,134		)	(1,822		)	(469		)	(402		)	—			(30		)	(150		)	(261		)
Outstanding letters of credit	(77		)	(70		)	(4		)	(2		)	(1		)	—			—			(71		)	(62		)	(4		)	(2		)	(1		)	—			—			(2		)
Tax-exempt bonds	(116		)	—			(35		)	—			—			—			(81		)	(81		)	—			—			—			—			—			(81		)	—
Coal ash set-aside	(500		)	—			(250		)	(250		)	—			—			—			(500		)	—			(250		)	(250		)	—			—			—			—
Available capacity	$	5,134		$	2,413		$	211		$	589		$	1,152		$	400		$	369		$	4,214		$	1,516		$	377		$	346		$	949		$	420		$	369		$	237


(a)	Represents the sublimit of each borrower. Certain sublimits were reallocated in May 2017 to provide additional liquidity to certain borrowers in light of near-term funding needs.


(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 in the Condensed Consolidated Balance Sheets.

~~Piedmont Bridge Facility~~

In connection with the Merger Agreement with Piedmont, Duke Energy entered into a $4.9 billion Bridge Facility with Barclays. The Bridge Facility, if drawn upon, may be used (i) to fund the cash consideration for the transaction and (ii) to pay certain fees and expenses in connection with the transaction. In November 2015, Barclays syndicated its commitment under the Bridge Facility to a broader group of lenders. Duke Energy does not expect to draw upon the Bridge Facility. The amount of the Bridge Facility is reduced by any financings related to the Piedmont acquisition entered into by Duke Energy, and has accordingly been reduced to approximately $3.2 billion as a result of the Equity Forwards described above and $1 billion of commitments under a term loan amended and restated as of August 1, 2016, described below.

~~PART I~~

~~Term Loan Facility~~

~~Solar Facilities Financing~~

In August 2016, Emerald State Solar, LLC, an indirect wholly owned subsidiary of Duke Energy, entered into a portfolio financing of approximately 22 North Carolina Solar facilities. The $333 million term loan facility consists of Tranche A of $228 million due in June 2034 secured by substantially all the assets of the solar facilities and Tranche B of $105 million due in June 2020 secured by an Equity Contribution Agreement with Duke Energy. The initial interest rate on the loans is six months LIBOR plus an applicable margin. The initial applicable margin is 1.75 percent with 0.125 percent increases every three years thereafter. In connection with this debt issuance, Emerald State Solar, LLC entered into two interest rate swaps to convert the substantial majority of the loan interest payments from variable rates to fixed rates of approximately 1.81 percent for Tranche A and 1.38 percent for Tranche B, plus the applicable margin.

Shelf Registration

In September ~~2013,~~2016, Duke Energy filed a ~~Form S-3~~registration statement (Form S-3) with the ~~Securities and Exchange Commission (SEC).~~SEC. Under this Form S-3, which is uncapped, the Duke Energy Registrants, excluding Progress Energy, may issue debt and other securities in the future at amounts, prices and with terms to be determined at the time of future offerings. The registration statement also allows for the issuance of common stock by Duke Energy.

In January 2017, Duke Energy ~~will file a new~~amended its Form S-3 to ~~be effective prior to~~add Piedmont as a registrant and included in the ~~expiration of~~amendment a prospectus for Piedmont under which it may issue debt securities in the ~~current registration statement in September 2016.~~same manner as other Duke Energy Registrants.

PART I

DEBT MATURITIES

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


(in millions)	Maturity Date	Interest Rate		June 30, 2016		Maturity Date	Interest Rate		March 31, 2017
Unsecured Debt
Duke Energy (Parent)	November 2016	2.150	%	$	500	August 2017	1.625	%	700
Duke Energy (Parent)	April 2017	1.009	%	400
Duke Energy	May 2017	15.530	%	56
Piedmont						September 2017	8.510	%	35
Secured Debt
Duke Energy	June 2017	2.075	%	45		June 2017	2.605	%	45
Duke Energy						June 2017	2.455	%	34
First Mortgage Bonds
Duke Energy Indiana	July 2016	0.979	%	150
Duke Energy Florida						September 2017	5.800	%	250
Duke Energy Progress						November 2017	1.252	%	200
Duke Energy Carolinas	December 2016	1.750	%	350		January 2018	5.250	%	400
Duke Energy Progress	March 2017	0.880	%	250
Tax-exempt Bonds
Duke Energy Carolinas	February 2017	3.600	%	77
Duke Energy Ohio^(a)	August 2027	1.280	%	50
Duke Energy Indiana^(b)	May 2035	1.092	%	44
Other^(c)				420
Other^(a)									313
Current maturities of long-term debt				$	2,342				$	1,977


(a)	~~Represents Duke Energy Kentucky, Inc.'s bonds with a mandatory put in December 2016.~~


~~(b)~~	~~The bonds have a mandatory put in December 2016.~~


~~(c)~~	Includes capital lease obligations, amortizing debt and small bullet maturities.

CASH FLOWS FROM OPERATING ACTIVITIES

~~The relatively stable operating cash flows of Regulated Utilities compose a substantial portion of Duke Energy’s cash~~Cash flows from ~~operations. Regulated Utilities’ cash flows from~~ operations of Electric Utilities and Infrastructure and Gas Utilities and Infrastructure are primarily driven by sales of electricity and natural gas, respectively, and costs of operations. These cash flows from operations are relatively stable and comprise a substantial portion of Duke Energy’s operating cash flows. Weather conditions, working capital and commodity price fluctuations, and unanticipated expenses including unplanned plant outages, storms, ~~and~~ legal costs and related settlements can affect the timing and level of cash flows from operations.

Duke Energy believes it has sufficient liquidity resources through the commercial paper markets, and ultimately the Master Credit Facility, to support these operations. Cash flows from operations are subject to a number of other factors, including but not limited to regulatory constraints, economic trends and market volatility (see “Item 1A. Risk Factors,” in the Duke Energy Registrants’ Annual ~~Report~~Reports on Form 10-K for ~~the year ended December 31, 2015, for~~ additional information).

~~PART I~~

At June 30, 2016, Duke Energy had cash and cash equivalents of $676 million, of which $454 million is held by entities domiciled in foreign jurisdictions. In December 2014, Duke Energy declared a taxable dividend of historical foreign earnings in the form of notes payable to repatriate approximately $2.7 billion of cash held and expected to be generated by International Energy over a period of up to eight years. As of June 30, 2016, approximately $1.6 billion has been remitted.

Proceeds received from the notes described above or resulting from a sale of International Energy would be used by Duke Energy to reduce debt and fund the operations and growth of domestic businesses. For further information on the potential sale of International Energy, refer to Note 2 to the Condensed Consolidated Financial Statements, "Acquisitions and Dispositions."

As of December 31, 2015, Duke Energy’s intention was to indefinitely reinvest foreign earnings of International Energy earned after December 31, 2014. In February 2016, Duke Energy announced it had initiated a process to divest the International Energy business segment, excluding the investment in NMC. Accordingly, Duke Energy no longer intends to indefinitely reinvest the undistributed earnings of International Energy. As of June 30, 2016, Duke Energy recorded U.S. income taxes of approximately $16 million related to such earnings and will prospectively provide U.S. income taxes on future foreign earnings.

This change in Duke Energy's intent, combined with the extension of bonus depreciation by Congress in late 2015, allows Duke Energy to more efficiently utilize foreign tax credits and reduce U.S. deferred tax liabilities associated with historic unremitted foreign earnings by approximately $95 million.

Restrictive Debt Covenants

The Duke Energy Registrants’ debt and credit agreements contain various financial and other covenants. The Master Credit Facility contains a covenant requiring the debt-to-total capitalization ratio not to ~~not~~ exceed 65 percent for ~~each borrower.~~all borrowers except Piedmont. The debt-to-total capitalization ratio for Piedmont is not to exceed 70 percent. Failure to meet those covenants beyond applicable grace periods could result in accelerated due dates and/or termination of the agreements. As of ~~June 30, 2016,~~March 31, 2017, each of the Duke Energy Registrants were in compliance with all covenants related to their debt agreements. In addition, some credit agreements may allow for acceleration of payments or termination of the agreements due to nonpayment, or ~~the~~ acceleration of other significant indebtedness of the borrower or some of its subsidiaries. None of the debt or credit agreements contain material adverse change clauses.

Credit Ratings

Credit ratings are intended to provide credit lenders a framework for comparing the credit quality of securities and are not a recommendation to buy, sell or hold. The Duke Energy Registrants’ credit ratings are dependent on the rating agencies’ assessments of their ability to meet their debt principal and interest obligations when they come due. If, as a result of market conditions or other factors, the Duke Energy Registrants are unable to maintain current balance sheet strength or if earnings and cash flow outlook materially deteriorate, credit ratings could be negatively impacted.

The Duke Energy Registrants each hold credit ratings by ~~Fitch Ratings, Inc. (Fitch),~~ Moody’s Investors Service, Inc. (Moody’s) and Standard & Poor’s Rating Services (S&P). ~~The~~In April 2017, Fitch Ratings, Inc. (Fitch) withdrew credit ratings of the Subsidiary Registrants, with the exclusion of Piedmont who was not previously rated by Fitch, due to commercial reasons. Fitch will continue to provide credit ratings for Duke Energy ~~Registrants' credit ratings and outlooks from Fitch, Moody's and S&P have not changed since February 2016.~~Corporation.

PART I

Cash Flow Information

The following table summarizes Duke Energy’s cash flows.


	Six Months Ended						Three Months Ended
	June 30,						March 31,
(in millions)	2016			2015			2017			2016
Cash flows provided by (used in):
Operating activities	$	3,206		$	2,879		$	1,289		$	1,682
Investing activities	(3,608		)	(294		)	(2,399		)	(1,758		)
Financing activities	221			(3,661		)	1,596			(3		)
Net decrease in cash and cash equivalents	(181		)	(1,076		)
Changes in cash and cash equivalents included in assets held for sale							—			30
Net increase (decrease) in cash and cash equivalents							486			(49		)
Cash and cash equivalents at beginning of period	857			2,036			392			383
Cash and cash equivalents at end of period	$	676		$	960		$	878		$	334

OPERATING CASH FLOWS

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

Six Months Ended
June 30,
(in millions) 2016
2015
Net income $ 1,211
$ 1,414
Non-cash adjustments to net income 2,231
2,409
Contributions to qualified pension plans —
(132 )
Payments for asset retirement obligations (263 ) (125 )
Working capital 27
(687 )
Net cash provided by operating activities $ 3,206
$ 2,879

~~PART I~~



	Three Months Ended
	March 31,
(in millions)	2017			2016
Net income	$	717		$	699
Non-cash adjustments to net income	1,237			1,060
Payments for asset retirement obligations	(134		)	(112		)
Working capital	(531		)	35
Net cash provided by operating activities	$	1,289		$	1,682

The variance was ~~driven~~ primarily due to:

a ~~$714~~$566 million ~~increase~~decrease in cash flows from working capital ~~primarily~~ due to ~~unrealized losses on forward-starting interest rate swaps related to~~ the ~~expected financing~~absence of the ~~Piedmont acquisition, higher property tax accruals~~International Disposal Group's operating cash flows, lower regulated electric revenues due to warmer winter weather in the current year and the timing of ~~payments, and lower coal stock inventory due to management~~payment of ~~high inventory levels and timing of shipments partially due to higher utilization as a result of warmer than normal weather;~~accruals.

Partially offset by:

a ~~$381~~$195 million ~~decrease~~increase in net income after non-cash adjustments, primarily due to the ~~absence of~~additional earnings ~~from~~attributed to the ~~Disposal Group sold in April 2015 and less favorable weather in 2016 compared to prior year, partially offset by increased retail pricing and riders.~~Piedmont acquisition.

INVESTING CASH FLOWS

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


	Six Months Ended						Three Months Ended
	June 30,						March 31,
(in millions)	2016			2015			2017			2016
Capital, investment and acquisition expenditures	$	(3,529	)	$	(3,189	)	$	(2,335	)	$	(1,704	)
Available for sale securities, net	26			13			19			15
Proceeds from sales of the Disposal Group	—			2,792
Other investing items	(105		)	90			(83		)	(69		)
Net cash used in investing activities	$	(3,608	)	$	(294	)	$	(2,399	)	$	(1,758	)

The variance was primarily due to:

a ~~$2,832 million decrease in proceeds mainly due to prior year sale of the Disposal Group to Dynegy; and~~

~~a $340~~$631 million increase in capital, investment and acquisition expenditures ~~primarily~~ due to growth in regulated generation investments and natural gas ~~infrastructure and renewable energy projects.~~infrastructure.

PART I

FINANCING CASH FLOWS

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


	Six Months Ended						Three Months Ended
	June 30,						March 31,
(in millions)	2016			2015			2017			2016
Issuance of common stock related to employee benefit plans	$	7		$	16
Issuances (Redemptions) of long-term debt, net	2,719			(672		)
Issuances of long-term debt, net							$	1,155		$	751
Notes payable and commercial paper	(1,341		)	(365		)	1,063			(158		)
Dividends paid	(1,140		)	(1,115		)	(600		)	(570		)
Repurchase of common shares	—			(1,500		)
Other financing items	(24		)	(25		)	(22		)	(26		)
Net cash provided by (used in) financing activities	$	221		$	(3,661	)	$	1,596		$	(3	)

The variance was due ~~primarily~~ to:

a ~~$3,391~~$1,221 million increase in net proceeds from issuances of notes payable and commercial paper primarily as a result of the repayment of commercial paper at the end of 2016 with proceeds from the sale of the international business; and

a $404 million increase in proceeds from net issuances of long-term debt driven by the issuance of $1,294 million of senior secured bonds used to finance the recovery of certain retired nuclear generation assets and other issuances primarily used to fund capital expenditures, repay debt maturities and pay down outstanding commercial paper; and

~~a $1,500 million decrease in cash outflows~~mainly due to the ~~prior year repurchase~~timing of ~~19.8 million common shares under the accelerated stock repurchase program.~~issuances and redemptions of long-term debt.

~~Partially offset by:~~

a $976 million increase in net payments of notes payable and commercial paper, primarily due to repayment of commercial paper. These cash outflows were primarily made with proceeds from long-term debt issuances.

Summary of Significant Debt Issuances

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

Six Months Ended
June 30, 2016
Duke
Duke
Duke
Duke
Duke
Maturity Interest
Duke
Energy
Energy
Energy
Energy
Energy
Issuance Date Date Rate
Energy
(Parent)
Carolinas
Florida
Ohio
Indiana
Unsecured
April 2016^(a)
April 2023 2.875 % $ 350
$ 350
$ —
$ —
$ —
$ —
First Mortgage Bonds
March 2016^(b)
March 2023 2.500 % 500
—
500
—
—
—
March 2016^(b)
March 2046 3.875 % 500
—
500
—
—
—
May 2016^(c)
May 2046 3.750 % 500
—
—
—
—
500
June 2016^(b)
June 2046 3.700 % 250
—
—
—
250
—
Secured Debt
June 2016^(d)
March 2020 1.196 % 183
—
—
183
—
—
June 2016^(d)
September 2022 1.731 % 150
—
—
150
—
—
June 2016^(d)
September 2029 2.538 % 436
—
—
436
—
—
June 2016^(d)
March 2033 2.858 % 250
—
—
250
—
—
June 2016^(d)
September 2036 3.112 % 275
—
—
275
—
—
Total issuances $ 3,394

$ 350
$ 1,000

$ 1,294

$ 250

$ 500



				Three Months Ended March 31, 2017
						Duke		Duke
	Maturity	Interest		Duke		Energy		Energy
Issuance Date	Date	Rate		Energy		Florida		Ohio
Secured Debt
February 2017^(a)	June 2034	4.120	%	$	587	$	—	$	—
First Mortgage Bonds
January 2017^(b)	January 2020	1.850	%	250		250		—
January 2017^(b)	January 2027	3.200	%	650		650		—
March 2017^(c)	June 2046	3.700	%	100		—		100
Total issuances				$	1,587	$	900	$	100


(a)	Portfolio financing of four Texas and Oklahoma wind facilities. Secured by substantially all of the assets of these wind facilities and nonrecourse to Duke Energy. Proceeds were used to ~~pay down outstanding commercial paper~~reimburse Duke Energy for a portion of previously funded construction expenditures.


(b)	Debt issued to fund capital expenditures for ongoing construction and capital maintenance, to repay at maturity a $250 million aggregate principal amount of bonds due September 2017 and for general corporate purposes.


~~(b)~~(c)	Proceeds were used to fund capital expenditures for ongoing construction, capital maintenance and for general corporate purposes.


~~(c)~~	~~Proceeds were used to repay $325 million of unsecured debt due June 2016, $150 million of first mortgage bonds due July 2016 and for general corporate purposes.~~

~~(d)~~

Proceeds from the nuclear asset recovery bonds issued by Duke Energy Florida Project Finance, LLC (DEFPF), a bankruptcy remote subsidiary of Duke Energy Florida, were used to acquire nuclear asset-recovery property from its parent, Duke Energy Florida. The nuclear asset-recovery bonds are payable only from and secured by the nuclear asset-recovery property. DEFPF is consolidated for financial reporting purposes; however, the nuclear asset-recovery bonds do not constitute a debt, liability or other legal obligation of, or interest in, Duke Energy Florida or any of its affiliates other than DEFPF. The assets of DEFPF, including the nuclear asset-recovery property, are not available to pay creditors of Duke Energy Florida or any of its affiliates. Duke Energy Florida used the proceeds from the sale to repay short-term borrowings under the intercompany money pool borrowing arrangement and make an equity distribution of $649 million to the ultimate parent, Duke Energy (Parent), which repaid short-term borrowings. The nuclear asset-recovery bonds are sequential pay amortizing bonds. The maturity date above represents the scheduled final maturity date for the bonds. See Notes 4 ~~and~~ 12 ~~to the Condensed Consolidated Financial Statements, "Regulatory Matters" and "Variable Interest Entities," respectively, for additional information.~~

In April 2017, Duke Energy (Parent) issued $420 million of unsecured notes with a fixed interest rate of 3.364 percent and maturity date of April 2025. The net proceeds were used to refinance $400 million of unsecured debt at maturity and to repay outstanding commercial paper.

OTHER MATTERS

Environmental Regulations

The Duke Energy ~~is subject to international, federal, state and local regulations regarding air and water quality, hazardous and solid waste disposal and other environmental matters. The Subsidiary~~ Registrants are subject to federal, state and local regulations regarding air and water quality, hazardous and solid waste disposal and other environmental matters. These regulations can be changed from time to time and result in new obligations of the Duke Energy Registrants.

The following sections outline various proposed and recently enacted regulations that may impact the Duke Energy Registrants. Refer to Note 4 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for further information regarding potential plant retirements and regulatory filings related to the Duke Energy Registrants.

PART I

Coal Combustion Residuals

OnIn April ~~17,~~ 2015, the EPA published ~~in the Federal Register~~ a rule to regulate the disposal of CCR from electric utilities as solid waste. The federal regulation ~~which became effective in October 2015,~~ classifies CCR as nonhazardous waste ~~under Subtitle D of the Resource Conservation and Recovery Act~~ and allows for beneficial use of CCR with some restrictions. The regulation applies to all new and existing landfills, new and existing surface impoundments receiving CCR and existing surface impoundments that are no longer receiving CCR but contain liquid located at stations currently generating electricity (regardless of fuel source). The rule establishes requirements regarding landfill design, structural integrity design and assessment criteria for surface impoundments, groundwater monitoring, protection and ~~protection~~remedial procedures and other operational and reporting procedures to ensure the safe disposal and management of CCR. As a result of the EPA rule, Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Ohio and Duke Energy Indiana recorded additional ARO amounts during 2015. Various industry and environmental parties have appealed the EPA's CCR rule in the ~~D.C. Circuit~~U.S. Court of ~~Appeals.~~Appeals for the District of Columbia (D.C. Circuit Court). On April 18, 2016, the EPA filed a motion with the federal court to settle five issues raised in litigation. On June 14, 2016, the court approved the motion with respect to all of those issues. A decision by the court on the remaining issues is expected in the third quarter of 2017. Duke Energy does not expect a material impact from the settlement or that it will result in additional ~~asset retirement obligation~~ARO adjustments.

~~PART I~~

In addition to the requirements of the federal CCR regulation, CCR landfills and surface impoundments will continue to be independently regulated by most states. ~~As a result of the EPA rule, the Subsidiary Registrants recorded asset retirement obligation amounts during 2015.~~ Cost recovery for future expenditures will be pursued through the normal ratemaking process with federal and state utility commissions and via wholesale contracts, which permit recovery of necessary and prudently incurred costs associated with Duke Energy’s regulated operations. For more information, see Note 9, ~~"Asset~~“Asset Retirement Obligations,"” in Duke Energy’s Annual Report on Form 10-K for the year ended December 31, ~~2015.~~

Beckjord, a facility retired during 2014, is not subject to the recently enacted EPA rule related to the disposal of CCR from electric utilities. However, if costs are incurred as a result of environmental regulations or to mitigate risk associated with on-site storage of coal ash at the facility, the costs could have an adverse impact on Duke Energy Ohio's financial position, results of operations and cash flows. Costs incurred by Ohio Valley Electric Corporation (OVEC) related to environmental regulations could also have an adverse impact on Duke Energy Ohio's financial position, results of operations and cash flows.2016.

Coal Ash Management Act of 2014

~~On September 20, 2014,~~Asset retirement obligations recorded on the Duke Energy Carolinas and Duke Energy Progress Condensed Consolidated Balance Sheets at March 31, 2017, and December 31, 2016, include the legal obligation for closure of coal ash basins and the disposal of related ash as a result of the Coal Ash Act, ~~became law~~the EPA CCR rule and was amended on June 24, 2015, by the North Carolina Mountain Energy Act. The Coal Ash Act, as amended, established requirements regarding the use and closure of existing ash impoundments, the disposal of ash at active coal plants and the handling of surface and groundwater impacts from ash basins in North Carolina. The Coal Ash Act, as amended, deemed eight ash impoundments at four facilities to be high priority and requires closure no later than August 1, 2019, with a potential extension for closure of the Asheville impoundment until 2022. The Coal Ash Act required state regulators to provide risk ranking classifications for the remaining 25 ash impoundments at 10 North Carolina facilities.

other agreements. In January 2016, the NCDEQ published draft ~~proposed~~ risk classifications for sites not specifically delineated by the Coal Ash Act as high priority. These risk rankings were generally determined based on three primary criteria: structural integrity of the impoundments and ~~impact~~impacts to ~~both~~ surface water and to groundwater. ~~NCDEQ~~The NCDEQ's draft proposed classifications categorized 12 basins at four sites as intermediate risk and four basins at three ~~plants~~sites as low risk. Basins at high priority sites (Dan River, Riverbend, Asheville and Sutton) require closure through excavation including a combination of transferring the ash to an appropriate engineered landfill or conversion of the ash for beneficial use. Closure of high priority basins is required to be completed no later than August 1, 2019, except for Asheville which is required to be completed no later than August 1, 2022. Intermediate risk basins require closure through excavation including a combination of converting the basin to a lined industrial landfill, transferring of the ash to an appropriate engineered landfill or conversion of the ash for beneficial use. Closure of intermediate risk basins is required to be completed no later than December 31, 2024. Low risk basins require closure through either the combination of the installation and maintenance of a cap system and groundwater monitoring system designed to minimize infiltration and erosion or other closure options available to intermediate-risk basins. Closure of low risk basins is required to be completed no later than December 31, 2029. NCDEQThe NCDEQ's draft proposed classifications also categorized nine basins at six ~~plants~~sites as “low-to-intermediate” risk, thereby not assigning a definitive risk ranking at that time. On May 18, 2016, the NCDEQ issued new proposed risk classifications, ~~ranking~~proposing to rank all originally proposed low risk and ~~"low-intermediate"~~"low-to-intermediate" risk sites as intermediate.

On July 14, 2016, the ~~Governor~~former governor of North Carolina signed legislation, which ~~amends~~amended the Coal Ash Act and ~~requires~~required Duke Energy to undertake dam improvement projects and to provide access to a permanent alternative drinking water source to certain residents within a half mile of coal ash basin compliance boundaries and to certain other potentially impacted residents. The new legislation also ranks basins at the H.F. Lee, Cape Fear and Weatherspoon stations as intermediate risk consistent with Duke Energy's previously announced plans to excavate those basins. These specific ~~intermediate~~intermediate-risk basins require closure through excavation including a combination of transferring ash to an appropriate engineered landfill or conversion of the ash for beneficial use. Closure of these specific ~~intermediate~~intermediate-risk basins is required to be completed no later than August 1, 2028. Upon satisfactory completion of the dam improvement projects and installation of alternative drinking water sources by October 15, 2018, the legislation requires the NCDEQ to reclassify sites proposed as intermediate risk, excluding H.F. Lee, Cape Fear and Weatherspoon, as low risk. In January 2017, NCDEQ issued preliminary approval of Duke Energy's plans for the alternative water sources.

Additionally, the ~~new~~July 2016 legislation requires the installation and operation of three large-scale coal ash beneficiation projects, which are expected to produce reprocessed ash for use in the concrete industry. Closure of basins at sites with these beneficiation projects are required to be completed no later than December 31, ~~2029~~. ~~Upon satisfactory completion~~2029. On October 5, 2016, Duke Energy announced Buck Steam Station as a first location for one of the ~~dam improvement projects and installation of alternate drinking water sources by October 15, 2018, the legislation requires NCDEQ to reclassify intermediate risk sites, excluding~~beneficiation projects. On December 13, 2016, Duke Energy announced H.F. Lee ~~Cape Fear and Weatherspoon,~~ as ~~low risk.~~the second location. Duke Energy intends to announce the third location by July 1, 2017.

~~Per~~Provisions of the Coal Ash Act ~~final proposed classifications were to be subject to~~prohibit cost recovery in customer rates for unlawful discharge of ash impoundment waters occurring after January 1, 2014. The Coal Ash ~~Management Commission (Coal Ash Commission) approval. In March 2016,~~Act leaves the ~~Coal Ash Commission created by~~decision on cost recovery determinations related to closure of ash impoundments to the normal ratemaking processes before utility regulatory commissions. Consistent with the requirements of the Coal Ash Act, ~~was disbanded~~Duke Energy has submitted comprehensive site assessments and groundwater corrective plans to NCDEQ and will submit to NCDEQ site-specific coal ash impoundment closure plans in advance of closure. These plans and all associated permits must be approved by the Governor of North Carolina based on a North Carolina Supreme Court ruling regarding the constitutionality of the body. The new legislation eliminates the Coal Ash Commission and transfers responsibility for ash basinNCDEQ before closure ~~oversight to the NCDEQ.~~work can begin.

Estimated asset retirement obligations have been recognized based on the assigned risk categories based on a probability weighting of potential closure methods. Actual closure costs incurred could be materially different from current estimates that form the basis of the recorded asset retirement obligations. Costs incurred have been deferred as regulatory assets and recovery will be pursued through the normal ratemaking process with federal and state utility commissions, which permit recovery of necessary and prudently incurred costs associated withFor more information, see Note 9, “Asset Retirement Obligations,” in Duke Energy’s ~~regulated operations.~~

~~Mercury and Air Toxics Standards~~

~~The final Mercury and Air Toxics Standards (MATS) rule was issued~~Annual Report on ~~February 16, 2012. The rule established emission limits~~Form 10-K for hazardous air pollutants from new and existing coal-fired and oil-fired steam electric generating units. The rule required sources to comply with emission limits by April 16, 2015, or by April 16, 2016, with approved extension. Strategies to achieve compliance included installation of new air emission control equipment, development of monitoring processes, fuel switching and acceleration of retirement for some coal-fired electric-generation units. All of Duke Energy's coal-fired units are in compliance with the emission limits, work practices standards and other requirements of the MATS rule. For additional information, refer to Note 4 of the Condensed Consolidated Financial Statements, “Regulatory Matters,” regarding potential plant retirements.

~~PART I~~

year ended December 31, 2016.

Clean Water Act 316(b)

The EPA published the final 316(b) cooling water intake structure rule on August 15, 2014, with an effective date of October 14, 2014. The rule applies to 26 of the electric generating facilities the Duke Energy Registrants own and operate. The rule allows for several options to demonstrate compliance and provides flexibility to the state environmental permitting agencies to make determinations on controls, if any, that will be required for cooling water intake structures. Any required intake structure modifications and/or retrofits are expected to be installed in the 2019 to 2022 time frame. Petitions challenging the rule have been filed by several groups. It is unknown ~~at this time~~ when the courts will rule on the petitions. The Duke Energy Registrants cannot predict the outcome of these matters.

PART I

Steam Electric Effluent Limitations Guidelines

On January 4, 2016, the final Steam Electric Effluent Limitations Guidelines (ELG) rule became effective. The rule establishes new requirements for wastewater streams associated with steam electric power generation and includes more stringent controls for any new coal plants that may be built in the future. Affected facilities must comply between 2018 and 2023, depending on timing of new Clean Water Act (CWA) permits. Most, if not all, of the steam electric generating facilities the Duke Energy Registrants own are likely affected sources. The Duke Energy Registrants are ~~well positioned~~well-positioned to meet the majority of the requirements of the rule due to current efforts to convert to dry ash handling. Petitions challenging the rule have been filed by several groups. On March 16, 2015, Duke Energy Indiana filed its own legal challenge to the rule with the Seventh Circuit Court of Appeals specific to the ELG for wastewater associated rule focused on the limits imposed on integrated gas combined-cycle facilities. All challenges to the rule have been consolidated in the Fifth Circuit Court of Appeals. ~~It is unknown at this time when~~On April 13, 2017, the ~~courts will~~EPA administrator granted petitions from the Utility Water Act Group and U.S. Small Business Administration requesting reconsideration and an administrative stay of compliance dates in the ELG rule that have not yet passed pending judicial review, effective April 25, 2017. Briefing in the case was scheduled to conclude on July 5, 2017, however, on April 24, 2017, the Fifth Circuit Court of Appeals granted EPA's request to stay the pending litigation on the ~~petitions.~~ELG rule until August 12, 2017. By the end of the stay period, EPA intends to inform the court of the portions of the rule, if any, that it will seek to have remanded to the agency for further rulemaking. The Duke Energy Registrants cannot predict the outcome of these matters.

Estimated Cost and Impacts of Rulemakings

Duke Energy will incur capital expenditures to comply with the environmental regulations and rules discussed above. The following table provides five-year estimated costs, excluding AFUDC, of new control equipment that may need to be installed on existing power plants primarily to comply with the Coal Ash Act requirements for conversion to dry disposal of bottom ash and fly ash, ~~MATS,~~ CWA 316(b) and ELGs through December 31, ~~2020.~~2021. The table excludes ash basin closure costs recorded asin Asset retirement obligations on the Condensed Consolidated Balance Sheets. For more information related to ~~asset retirement obligations,~~AROs, see Note 9, “Asset Retirement Obligations” in Duke Energy’s Annual Report on Form ~~10-K~~10‑K for the year ended December 31, ~~2015.~~2016.


(in millions)	Estimated Cost		Estimated Cost
Duke Energy	$	1,350	$	1,235
Duke Energy Carolinas	625		530
Progress Energy	350		360
Duke Energy Progress	300		260
Duke Energy Florida	50		100
Duke Energy Ohio	100		125
Duke Energy Indiana	275		220

The Duke Energy Registrants also expect to incur increased fuel, purchased power, operation and maintenance and other expenses, in addition to costs for replacement generation for potential coal-fired power plant retirements, as a result of these regulations. Actual compliance costs incurred may be materially different from these estimates due to reasons such as the timing and requirements of EPA regulations and the resolution of legal challenges to the rules. The Duke Energy Registrants intend to seek rate recovery of necessary and prudently incurred costs associated with regulated operations to comply with these regulations.

Cross-State Air Pollution Rule

On ~~August 8, 2011, the final Cross-State Air Pollution Rule (CSAPR) was published in the Federal Register. The CSAPR established state-level annual sulfur dioxide (SO~~2~~) budgets and annual and seasonal nitrogen oxide (NO~~x~~) budgets that were to take effect on January 1, 2012.~~

~~On August 21, 2012, the D.C. Circuit Court vacated the CSAPR. The court also directed the EPA to continue administering the Clean Air Interstate Rule (CAIR), which required additional reductions in SO~~2 ~~and NO~~X emissions beginning in 2015. On April 29, 2014, the Supreme Court reversed the D.C. Circuit Court’s decision, finding that with CSAPR the EPA reasonably interpreted the good neighbor provision of the CAA. The case was remanded to the D.C. Circuit Court for further proceedings consistent with the Supreme Court’s opinion. On October 23, 2014, the D.C. Circuit Court lifted the CSAPR stay, which allowed Phase 1 of the rule to take effect on January 1, 2015, terminating the CAIR. Where the CSAPR requirements are constraining, actions to meet the requirements may include purchasing emission allowances, power purchases, curtailing generation and utilizing low sulfur fuel. The CSAPR did not result in Duke Energy Registrants adding new emission controls.

On December 3, 2015, the EPA proposed a rule to lower the ~~current CSAPR~~Cross-State Air Pollution Rule (CSAPR) Phase 2 state ozone season NOnitrogen oxide (NOX) emission budgets for 23 ~~Eastern~~eastern states, including North Carolina, Ohio, Kentucky and Indiana. The EPA also proposed to eliminate the CSAPR Phase 2 ozone season state NOX budgets for Florida and South Carolina. ~~The~~On September 7, 2016, the EPA ~~proposed~~finalized the CSAPR Update Rule that reduces the CSAPR Phase 2 state ozone season NOX emission budgets for 22 eastern states, including Ohio, Kentucky and Indiana. In the final CSAPR Update Rule, the EPA removed Florida, South Carolina and North Carolina from the ozone season NOx program. Beginning in 2017, Duke Energy Registrants in these ~~changes~~states will not be subject to any CSAPR ozone season NOx emission limitations. For the states that remain in the program, the reduced state ozone season NOx emission budgets ~~take~~took effect on May 1, 2017. In Kentucky and Indiana, where Duke Energy Registrants own and operate coal-fired electric generating units (EGUs) subject to the final rule requirements, potential near-term responses could include changing unit dispatch to run certain generating units less frequently and/or purchasing NOx allowances from the trading market. Longer term, upgrading the performance of existing NOx controls is an option. Numerous parties have filed petitions with the D.C. Circuit Court challenging various aspects of the CSAPR Update Rule. The ~~EPA~~court has ~~indicated that it plans~~yet to ~~finalize~~set a rule during the summer of 2016. The EPA's proposed changes would impose requirements to achieve emission reduction targets within short timelines and could result in an impact on the emission allowance trading market, increase costs for customers, and hamper the ability to demonstrate compliance.briefing schedule. Duke Energy Registrants cannot predict the outcome of these ~~proceedings.~~matters.

~~PART I~~

Carbon Pollution Standards for New, Modified and Reconstructed Power Plants

On October 23, 2015, the EPA published a final rule in the Federal Register establishing carbon dioxide (CO2) emissions limits for new, modified and reconstructed power plants. The requirements for new plants ~~do not apply to any facility that Duke Energy currently has in operation, but would~~ apply to plants that commenced construction after January 8, 2014. The EPA set an emissions standard for coal units of 1,400 pounds of CO₂per gross MWh, which would require the application of partial carbon capture and storage (CCS) technology for a coal unit to be able to meet the limit. Utility-scale CCS is not currently a demonstrated and commercially available technology for coal-fired ~~electric generating units,~~EGUs, and therefore the final standard effectively prevents the development of new coal-fired generation. The EPA set a final standard of 1,000 pounds of CO2 per gross MWh for new natural gas combined-cycle units. ~~Petitions challenging~~

PART I

On March 28, 2017, President Trump signed an Executive Order directing EPA to review the rule ~~have been~~and determine whether to suspend, revise or rescind it. On the same day, the Department of Justice (DOJ) filed a motion with the D.C. Circuit Court requesting that the court stay the litigation of the rule while it is reviewed by ~~several groups. Briefing~~EPA. Subsequent to the DOJ motion, the D.C. Circuit Court canceled oral argument in the case, ~~was~~which had been scheduled ~~to conclude on October 21, 2016, but on June 24, 2016,~~for April 17, 2017. On April 28, 2017, the ~~D.C. Circuit~~court ordered that the litigation be suspended ~~the briefing schedule~~for 60 days and ~~set a deadline of August 4, 2016, for~~directing parties to ~~submit motions~~file supplemental briefs by May 15, 2017, addressing whether the rule should be remanded to ~~amend~~EPA rather than be suspended. The rule remains in effect pending the ~~briefing schedule. It is unknown at this time when briefing or oral argument will occur, or when the court will rule on the petitions.~~outcome of litigation and EPA’s review. EPA has not announced a schedule for completing its review. The Duke Energy Registrants cannot predict the outcome of these matters, but do not expect the impacts of the current final standards will be material to Duke Energy's financial position, results of operations or cash flows.

Clean Power Plan ~~(CPP)~~

On October 23, 2015, the EPA published in the Federal Register the final ~~CPP~~Clean Power Plan (CPP) rule that regulates CO₂emissions from existing fossil fuel-fired ~~electric generating units.~~EGUs. The CPP ~~establishes~~established CO₂emission rates and mass cap goals that apply to existing fossil fuel-fired ~~electric generation units. Under~~EGUs. Petitions challenging the CPP, states are required to develop and submit a final compliance plan, or an initial plan with an extension request, to the EPA by September 6, 2016. States that receive an extension must submit a final completed plan to the EPA by September 6, 2018. The EPA intends to review and approve or disapprove state plans within 12 months of receipt. The CPP does not directly impose regulatory requirements on the Duke Energy Registrants. State implementation plans will include the regulatory requirements that will apply to the Duke Energy Registrants. The EPA also published a proposed federal plan for public comment. A federal plan would be applied to states that fail to submit a plan to EPA or where a state plan is not approved by the EPA. Comments on the proposed federal plan were due by January 21, 2016.

~~Legal challenges to the final CPP~~rule have been filed by ~~stakeholders. On January 21, 2016, the U.S. Court of Appeals for the District of Columbia denied motions from petitioners to stay the CPP pending court review. On~~several groups and on February 9, 2016, the Supreme Court ~~granted~~issued a stay inof the ~~matter,~~final CPP rule, halting implementation of the CPP until legal challenges are resolved. ~~The states~~States in which the Duke ~~Energy's regulated operations are located~~Energy Registrants operate have suspended work on the CPP in response to the stay. Oral arguments before 10 of the ~~full~~11 judges on D.C. Circuit ~~court are scheduled for~~Court were heard on September 27, 2016.

Compliance with CPP could cause the industry to replace coal generation with natural gas and renewables. Costs to operate coal-fired generation plants continue to grow due to increasing environmental compliance requirements, including ash management costs unrelated to CPP, which may result The court has not issued its opinion in the ~~retirement~~case.

On March 28, 2017, President Trump signed an Executive Order directing EPA to review the CPP and determine whether to suspend, revise or rescind the rule. On the same day the DOJ filed a motion with the D.C. Circuit Court requesting that the court stay the litigation of ~~coal-fired generation plants earlier~~the rule while it is reviewed by EPA. On April 28, 2017, the court issued an order to suspend the litigation for 60 days and directing parties to file supplemental briefs by May 15, 2017, addressing whether the rule should be remanded to the EPA rather than be suspended. Neither the Executive Order nor the court's order changes the current end of useful lives. If the CPP is ultimately upheld by the courts and implementation goes forward, the Duke Energy Registrants could incur increased fuel, purchased power, operation and maintenance and other costs for replacement generation as a result of this rule. Due to the uncertainties related to the implementationstatus of the CPP, which is under a legal hold by the U.S. Supreme Court. The EPA has not announced a schedule for completing its review. The Duke Energy Registrants cannot predict the outcome of these matters.

Global Climate Change

For other information on global climate change and the potential impacts on Duke Energy, see “Other Matters” 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, ~~2015.~~2016.

Nuclear Matters

For other information on nuclear matters and the potential impacts on Duke Energy, see “Other Matters” 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, ~~2015.~~2016.

New Accounting Standards

See Note 1 to the Condensed Consolidated Financial Statements, “Organization and Basis of Presentation,” for a discussion of the impact of new accounting standards.

Off-Balance Sheet Arrangements

During the three ~~and six~~ months ended ~~June 30, 2016,~~March 31, 2017, there were no material changes to Duke Energy’s off-balance sheet arrangements. For information on Duke Energy’s off-balance sheet arrangements, see “Off-Balance Sheet Arrangements” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Duke Energy’s Annual Report on Form 10-K for the year ended December 31, ~~2015.~~2016.

Contractual Obligations

Duke Energy enters into contracts that require payment of cash at certain specified periods, based on certain specified minimum quantities and prices. During the three ~~and six~~ months ended ~~June 30, 2016,~~March 31, 2017, 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, ~~2015.~~2016.

Subsequent Events

See Note 17 to the Condensed Consolidated Financial Statements, “Subsequent Events,” for a discussion of subsequent events.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

During the three ~~and six~~ months ended ~~June 30, 2016,~~March 31, 2017, there were no material changes to the Duke ~~Energy’s~~Energy Registrants' disclosures about market risk. For an in-depth discussion of the Duke ~~Energy’s~~Energy Registrants' market risks, see ~~“Management’s Discussion and Analysis of Quantitative~~“Quantitative and Qualitative Disclosures about Market Risk” in ~~Duke Energy’s~~Item 7 of the Annual Report on Form 10-K for the ~~year ended December 31, 2015.~~Duke Energy Registrants.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by the Duke Energy Registrants in the reports they file or submit under the Securities Exchange Act of 1934 (Exchange Act) isare recorded, processed, summarized and reported within the time periods specified by the SEC rules and forms.

PART I

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 isare 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 ~~June 30, 2016,~~March 31, 2017, and, based upon this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these controls and procedures are effective in providing reasonable assurance of compliance.

Changes in Internal Control over Financial Reporting

Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, the Duke Energy Registrants have evaluated changes in internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ended ~~June 30, 2016,~~March 31, 2017, and have concluded no change has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

For information regarding material legal proceedings, including regulatory and environmental matters, ~~that became reportable events or in which there were material developments in the second quarter of 2016,~~ see Note 4, "Regulatory Matters," and Note 5, "Commitments and Contingencies," to the Condensed Consolidated Financial Statements.

MTBE Litigation

On June ~~29, 2007,~~19, 2014, the ~~New Jersey Department~~Commonwealth of ~~Environmental Protection (NJDEP)~~Pennsylvania filed suit against ~~among others,~~ Duke Energy Merchants, ~~(DEM),~~LLC, an indirect wholly owned subsidiary of Duke Energy, among others, alleging contamination of “waters of the state” by MTBE from leaking gasoline storage tanks. MTBE is a gasoline additive intended to increase the oxygen level in gasoline and make it burn cleaner. The case was moved to federal court and consolidated in an existing multidistrict litigation docket of pending MTBE cases. DEM and NJDEP have reached an agreement in principle to settle the case for a payment by DEM of $1.7 million. On February 19, 2016, the court approved a Consent Decree executed by the parties which settles the case. Payment was made in February 2016. The case ~~was dismissed by~~is currently in the court on April 29, 2016. DEM is also a defendant in a similar case filed by the Commonwealth of Pennsylvania on June 19, 2014. That case has been moved to the consolidated multidistrict proceeding. Discovery in this case continues.discovery phase.

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’~~Registrants' Annual Report on Form 10-K, ~~for the year ended December 31, 2015,~~ which could materially affect the Duke Energy Registrants’ financial condition or future results.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

ISSUER PURCHASES OF EQUITY SECURITIES

There were no issuer purchases of equity securities during the ~~second~~first quarter of ~~2016.~~2017.

PART II

ITEM 6. EXHIBITS

Exhibits filed herein are designated by an asterisk (*). All exhibits not so designated are incorporated by reference to a prior filing, as indicated. Items constituting management contracts or compensatory plans or arrangements are designated by a double asterisk (**). The Company agrees to furnish upon request to the Commission a copy of any omitted schedules or exhibits upon request on all items designated by a triple asterisk (***).

Duke

Exhibit

Duke

Energy

Progress

Energy

Number

Energy

Carolinas

Energy

Progress

Florida

Ohio

Indiana

Piedmont

4.1

~~Sixty-Eighth~~Forty-fifth Supplemental Indenture, dated as of ~~May 12, 2016~~March 27, 2017, (incorporated by reference to Exhibit 4.1 to ~~registrant's~~Registrant's Current Report on Form 8-K filed on ~~May 12, 2016,~~March 27, 2017, File No. ~~1-3543).~~

~~4.2~~

~~Forty-Fourth Supplemental Indenture, dated as of June 23, 2016 (incorporated by reference to Exhibit 4.1 registrant's Current Report on Form 8-K filed on June 23, 2016, File No. 1-1232)~~1-01232).

*4.2

Fifteenth Supplemental Indenture, dated as of April 11, 2017.

10.1

~~$1,500,000,000 Amended~~Amendment No. 3 and ~~Restated Term Loan Agreement~~Consent, dated as of March 16, 2017, among ~~Duke Energy Corporation, as Borrower,~~registrants, the Lenders ~~listed therein, The~~party thereto, the Issuing Lenders party thereto, and Wells Fargo Bank, ~~of Tokyo-Mitsubishi UFJ, Ltd.,~~National Association, as Administrative Agent and ~~The Bank of Tokyo-Mitsubishi UFJ, Ltd.,~~Swingline Lender (incorporated by reference to Exhibit 10.1 to Registrants' Current Report on Form 8-K filed on March 17, 2017, File Nos. 1-32853, 1-04928, 1-03382, 1-03274, 1-01232, 1-03543, 1-06196).

*10.2**

Performance-Based Retention Award Agreement.

~~Santander Bank, N.A. and TD Bank, N.A., as Joint Lead Arrangers and Bookrunners, dated as of August 1, 2016.~~

*10.3**

Performance Award Agreement.

*10.4**

Restricted Stock Unit Award Agreement.

*12

Computation of Ratio of Earnings to Fixed Charges – DUKE ENERGY CORPORATION.

*31.1.1

Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

*31.1.2

Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

*31.1.3

Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

*31.1.4

Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

*31.1.5

Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

*31.1.6

Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

*31.1.7

Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

*31.1.8

Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

*31.2.1

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

*31.2.2

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

*31.2.3

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

PART II

*31.2.4

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

*31.2.5

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

*31.2.6

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

*31.2.7

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

~~PART II~~

*31.2.8

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

*32.1.1

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*32.1.2

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*32.1.3

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*32.1.4

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*32.1.5

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*32.1.6

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*32.1.7

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*32.1.8

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*32.2.1

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*32.2.2

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*32.2.3

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*32.2.4

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*32.2.5

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*32.2.6

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

PART II

*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.

*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.

*101.INS

XBRL Instance Document.

*101.SCH

XBRL Taxonomy Extension Schema Document.

*101.CAL

XBRL Taxonomy Calculation Linkbase Document.

*101.LAB

XBRL Taxonomy Label Linkbase Document.

*101.PRE

XBRL Taxonomy Presentation Linkbase Document.

*101.DEF

XBRL Taxonomy Definition Linkbase Document.

The total amount of securities of the registrant or its subsidiaries authorized under any instrument with respect to long-term debt not filed as an exhibit does not exceed 10 percent of the total assets of the registrant and its subsidiaries on a consolidated basis. The registrant agrees, upon request of the SEC, to furnish copies of any or all of such instruments to it.

PART II

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized.



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

Date:	~~August 4, 2016~~May 9, 2017	/s/ STEVEN K. YOUNG
		Steven K. Young Executive Vice President and Chief Financial Officer (Principal Financial Officer)

Date:	~~August 4, 2016~~May 9, 2017	/s/ WILLIAM E. CURRENS JR.
		William E. Currens Jr. Senior Vice President, Chief Accounting Officer and Controller (Principal Accounting Officer)

		~~PROGRESS ENERGY, INC.~~

~~Date:~~	~~August 4, 2016~~	~~/s/ STEVEN K. YOUNG~~
		~~Steven K. Young~~ ~~Executive Vice President and Chief Financial Officer (Principal Financial Officer)~~

~~Date:~~	~~August 4, 2016~~	~~/s/ WILLIAM E. CURRENS JR.~~
		~~William E. Currens Jr.~~ ~~Chief Accounting Officer and Controller~~ ~~(Principal Accounting Officer)~~

~~120~~123



	Three Months Ended						Six Months Ended
	June 30, 2015						June 30, 2015
				Duke						Duke
	Duke			Energy			Duke			Energy
(in millions)	Energy			Ohio			Energy			Ohio
Operating Revenues	$	—		$	—		$	543		$	412
Gain (Loss) on disposition	6			—			(37		)	(44		)

(Loss) Income before income taxes^(a)	$	(80	)	$	(88	)	$	67		$	52
Income tax (benefit) expense	(21		)	(23		)	30			27
(Loss) Income from discontinued operations of the Disposal Group	(59		)	(65		)	37			25
Other, net of tax^(b)	2			—			(3		)	—
(Loss) Income from Discontinued Operations, net of tax	$	(57	)	$	(65	)	$	34		$	25



	Six Months Ended June 30, 2015
								Total
	Regulated		International		Commercial			Reportable
(in millions)	Utilities		Energy		Portfolio			Segments		Other			Eliminations			Consolidated
Unaffiliated revenues	$	10,924	$	560	$	148		$	11,632	$	22		$	—		$	11,654
Intersegment revenues	19		—		—			19		39			(58		)	—
Total revenues	$	10,943	$	560	$	148		$	11,651	$	61		$	(58	)	$	11,654
Segment income (loss)^(a)(b)	$	1,406	$	88	$	(23	)	$	1,471	$	(94	)	$	(4	)	$	1,373
Add back noncontrolling interests																7
Income from discontinued operations, net of tax^(c)																34
Net income																$	1,414



		Remaining Net
	Capacity	Book Value^(a)
	(in MW)	(in millions)
Progress Energy and Duke Energy Florida
Crystal River Units 1 and 2	873	126
Duke Energy Indiana
Wabash River Unit 6^(b)	318	34
Gallagher Units 2 and 4^(c)	280	135
Total Duke Energy	1,471	295



	Three Months Ended June 30, 2016
(in millions, except per-share amounts)	Regulated Utilities		International Energy			Commercial Portfolio		Total Reportable Segments		Other			Eliminations/ Discontinued Operations			Duke Energy		Per Diluted Share
Reported Net Income Attributable to Duke Energy Corporation/Reported EPS	$	718	$	(102	)	$	14	$	630	$	(120	)	$	(1	)	$	509	$	0.74
Costs to achieve, mergers^(a)	—		—			—		—		69			—			69		0.10
International impairment^(b)	—		145			—		145		—			—			145		0.21
Cost savings initiatives^(c)	—		—			—		—		15			—			15		0.02
Discontinued operations	—		—			—		—		—			1			1		—
Adjusted earnings/Adjusted EPS	$	718	$	43		$	14	$	775	$	(36	)	$	—		$	739	$	1.07