UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
ýQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017March 31, 2019
OR
¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
_________________________________to_________
Commission file number
Registrant, State of Incorporation or Organization,
Address of Principal Executive Offices and Telephone Number
IRS Employer Identification No.
 
dukeenergylogo4ca41.jpg
 
1-32853
DUKE ENERGY CORPORATION
(a Delaware corporation)
550 South Tryon Street
Charlotte, North Carolina 28202-1803
704-382-3853
20-2777218
Commission file numberRegistrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number and IRS Employer Identification Number Commission file numberRegistrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number and IRS Employer Identification Number
1-4928
DUKE ENERGY CAROLINAS, LLC
(a North Carolina limited liability company)
526 South Church Street
Charlotte, North Carolina 28202-1803
704-382-3853
56-0205520
 1-3274
DUKE ENERGY FLORIDA, 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)
Yes x
No ¨


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Duke Energy
Yes x
No ¨
 Duke Energy Florida
Yes x
No ¨
Duke Energy Carolinas
Yes x
No ¨
 Duke Energy Ohio
Yes x
No ¨
Progress Energy
Yes x
No ¨
 Duke Energy Indiana
Yes x
No ¨
Duke Energy Progress
Yes x
No ¨
 Piedmont
Yes x
No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Duke Energy
Large accelerated filer x
Accelerated filer ¨
Non-accelerated filer ¨
Smaller reporting company ¨
Emerging Growth Companygrowth company ¨
Duke Energy Carolinas
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer x
Smaller reporting company ¨
Emerging Growth Companygrowth company ¨
Progress Energy
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer x
Smaller reporting company ¨
Emerging Growth Companygrowth company ¨
Duke Energy Progress
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer x
Smaller reporting company ¨
Emerging Growth Companygrowth company ¨
Duke Energy Florida
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer x
Smaller reporting company ¨
Emerging Growth Companygrowth company ¨
Duke Energy Ohio
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer x
Smaller reporting company ¨
Emerging Growth Companygrowth company ¨
Duke Energy Indiana
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer x
Smaller reporting company ¨
Emerging Growth Companygrowth company ¨
Piedmont
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer x
Smaller reporting company ¨
Emerging Growth Companygrowth 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 ¨
No x
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
RegistrantTitle of each classTrading Symbol(s)Name of each exchange on which registered
Duke EnergyCommon Stock, $0.001 par valueDUKNew York Stock Exchange LLC
Duke Energy5.125% Junior Subordinated Debentures due January 15, 2073DUKHNew York Stock Exchange LLC
Duke Energy5.625% Junior Subordinated Debentures due September 15, 2078DUKBNew York Stock Exchange LLC
Duke EnergyDepositary Shares, each representing a 1/1,000th interest in a share of 5.75% Series A Cumulative Redeemable Perpetual Preferred Stock, par value $0.001 per shareDUK PR ANew York Stock Exchange LLC
Number of shares of Common stock outstanding at SeptemberApril 30, 2017:2019:
RegistrantDescriptionShares
Duke EnergyCommon stock, $0.001 par value699,975,614728,046,950
This combined Form 10-Q is filed separately by eight registrants: Duke Energy, Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont (collectively the Duke Energy Registrants). Information contained herein relating to any individual registrant is filed by such registrant solely on its own behalf. Each registrant makes no representation as to information relating exclusively to the other registrants.
Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont meet the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and are therefore filing this form with the reduced disclosure format specified in General Instructions H(2) of Form 10-Q.



TABLE OF CONTENTSDUKE 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 numberRegistrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number and IRS Employer Identification NumberCommission file numberRegistrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number and IRS Employer Identification Number
1-4928
DUKE ENERGY CAROLINAS, LLC
(a North Carolina limited liability company)
526 South Church Street
Charlotte, North Carolina 28202-1803
704-382-3853
56-0205520
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
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.
Item 1.
Financial Statements
Duke Energy Corporation Financial Statements
6
Duke Energy Carolinas, LLC Financial Statements
11
Progress Energy, Inc. Financial Statements
15
Duke Energy Progress, LLC Financial Statements
19
Duke Energy Florida, LLC 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
39
Note 2 – Acquisitions and Dispositions
44
Note 3 – Business Segments
46
Note 4 – Regulatory Matters
49
Note 5 – Commitments and Contingencies
57
Note 6 – Debt and Credit Facilities
62
Note 7 – Asset Retirement Obligations
65
Note 8 – Goodwill and Intangible Assets
65
Note 9 – Related Party Transactions
67
Note 10 – Derivatives and Hedging
68
Note 11 – Investments in Debt and Equity Securities
74
Note 12 – Fair Value Measurements
80
Note 13 – Variable Interest Entities
86
Note 14 – Common Stock
91
Note 15 – Stock-Based Compensation
91
Note 16 – Employee Benefit Plans
92
Note 17 – Income Taxes
96
Note 18 – Subsequent Events
97
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
98
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
126
Item 4.
Controls and Procedures
126
PART II. OTHER INFORMATION
Item 1.
Legal Proceedings
128
Item 1A.
Risk Factors
128
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
128
Item 6.
Exhibits
129
Signatures
132
Duke Energy Corporation (Duke Energy)
Yesx
No ¨
Duke Energy Florida, LLC (Duke Energy Florida)
Yesx
No ¨
Duke Energy Carolinas, LLC (Duke Energy Carolinas)
Yesx
No ¨
Duke Energy Ohio, Inc. (Duke Energy Ohio)
Yesx
No ¨
Progress Energy, Inc. (Progress Energy)
Yesx
No ¨
Duke Energy Indiana, LLC (Duke Energy Indiana)
Yesx
No ¨
Duke Energy Progress, LLC (Duke Energy Progress)
Yesx
No ¨
Piedmont Natural Gas Company, Inc. (Piedmont)
Yesx
No ¨


Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Duke Energy
Yesx
No ¨
Duke Energy Florida
Yesx
No ¨
Duke Energy Carolinas
Yesx
No ¨
Duke Energy Ohio
Yesx
No ¨
Progress Energy
Yesx
No ¨
Duke Energy Indiana
Yesx
No ¨
Duke Energy Progress
Yesx
No ¨
Piedmont
Yesx
No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Duke Energy
Large accelerated filerx
Accelerated filer ¨
Non-accelerated filer ¨
Smaller reporting company ¨
Emerging growth company ¨
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 ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Duke Energy
Yes ¨
Nox
Duke Energy Florida
Yes ¨
Nox
Duke Energy Carolinas
Yes ¨
Nox
Duke Energy Ohio
Yes ¨
Nox
Progress Energy
Yes ¨
Nox
Duke Energy Indiana
Yes ¨
Nox
Duke Energy Progress
Yes ¨
Nox
Piedmont
Yes ¨
Nox
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
RegistrantTitle of each classTrading Symbol(s)Name of each exchange on which registered
Duke EnergyCommon Stock, $0.001 par valueDUKNew York Stock Exchange LLC
Duke Energy5.125% Junior Subordinated Debentures due January 15, 2073DUKHNew York Stock Exchange LLC
Duke Energy5.625% Junior Subordinated Debentures due September 15, 2078DUKBNew York Stock Exchange LLC
Duke EnergyDepositary Shares, each representing a 1/1,000th interest in a share of 5.75% Series A Cumulative Redeemable Perpetual Preferred Stock, par value $0.001 per shareDUK PR ANew York Stock Exchange LLC
Number of shares of Common stock outstanding at April 30, 2019:
RegistrantDescriptionShares
Duke EnergyCommon stock, $0.001 par value728,046,950
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, including those related to climate change, as well as rulings that affect cost and investment recovery or have an impact on rate structures or market prices;
◦The extent and timing of costs and liabilities to comply with federal and state laws, regulations and legal requirements related to coal ash remediation, including amounts for required closure of certain ash impoundments, are uncertain and difficult to estimate;
◦The ability to recover eligible costs, including amounts associated with coal ash impoundment retirement obligations and costs related to significant weather events, and to earn an adequate return on investment through rate case proceedings and the regulatory process;
◦The costs of decommissioning Crystal River Unit 3 and other nuclear facilities could prove to be more extensive than amounts estimated and all costs may not be fully recoverable through the regulatory process;
◦Costs and effects of legal and administrative proceedings, settlements, investigations and claims;
◦Industrial, commercial and residential growth or decline in service territories or customer bases resulting from sustained downturns of the economy and the economic health of our service territories or variations in customer usage patterns, including energy efficiency efforts and use of alternative energy sources, such as self-generation and distributed generation technologies;
◦Federal and state regulations, laws and other efforts designed to promote and expand the use of energy efficiency measures and distributed generation technologies, such as private solar and battery storage, in Duke Energy service territories could result in customers leaving the electric distribution system, excess generation resources as well as stranded costs;
◦Advancements in technology;
◦Additional competition in electric and natural gas markets and continued industry consolidation;
◦The influence of weather and other natural phenomena on operations, including the economic, operational and other effects of severe storms, hurricanes, droughts, earthquakes and tornadoes, including extreme weather associated with climate change;
◦The ability to successfully operate electric generating facilities and deliver electricity to customers including direct or indirect effects to the company resulting from an incident that affects the U.S. electric grid or generating resources;
◦The ability to complete necessary or desirable pipeline expansion or infrastructure projects in our natural gas business;
◦Operational interruptions to our natural gas distribution and transmission activities;
◦The availability of adequate interstate pipeline transportation capacity and natural gas supply;
◦The impact on facilities and business from a terrorist attack, cybersecurity threats, data security breaches and other catastrophic events, such as fires, explosions, pandemic health events or other similar occurrences;
◦The inherent risks associated with the operation 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 commodity prices and interest rates and the ability to recover such costs through the regulatory process, where appropriate, and their impact on liquidity positions and the value of underlying assets;
◦The results of financing efforts, including the ability to obtain financing on favorable terms, which can be affected by various factors, including credit ratings, interest rate fluctuations and 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 fixed-income securities and resultant cash funding requirements for defined benefit pension plans, other post-retirement benefit plans and nuclear decommissioning trust funds;
◦Construction and development risks associated with the completion of the Duke Energy Registrants’ capital investment projects, including risks related to financing, obtaining and complying with terms of permits, meeting construction budgets and schedules and satisfying operating and environmental performance standards, as well as the ability to recover costs from customers in a timely manner, or at all;
◦Changes in rules for regional transmission organizations, including changes in rate designs and new and evolving capacity markets, and risks related to obligations created by the default of other participants;
◦The ability to control operation and maintenance costs;
◦The level of creditworthiness of counterparties to transactions;
◦Employee workforce factors, including the potential inability to attract and retain key personnel;
◦The ability of subsidiaries to pay dividends or distributions to Duke Energy Corporation holding company (the Parent);
◦The performance of projects undertaken by our nonregulated businesses and the success of efforts to invest in and develop new opportunities;
◦The effect of accounting pronouncements issued periodically by accounting standard-setting bodies;


◦Substantial revision to the 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;
◦The ability to successfully integrate the natural gas businesses following the acquisition of Piedmont Natural Gas Company, Inc. and realize anticipated benefits; and
◦The ability to implement our business strategy.
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 Nine Months Ended
 September 30, September 30,
(in millions, except per-share amounts)2017
 2016
 2017
 2016
Operating Revenues       
Regulated electric$6,091
 $6,303
 $16,122
 $16,321
Regulated natural gas247
 89
 1,168
 355
Nonregulated electric and other144
 184
 476
 490
Total operating revenues6,482
 6,576
 17,766
 17,166
Operating Expenses    
 
Fuel used in electric generation and purchased power1,863
 2,031
 4,853
 5,140
Cost of natural gas68
 6
 402
 64
Operation, maintenance and other1,442
 1,460
 4,282
 4,227
Depreciation and amortization900
 819
 2,594
 2,402
Property and other taxes313
 302
 924
 887
Impairment charges207
 10
 216
 14
Total operating expenses4,793
 4,628
 13,271
 12,734
Gains on Sales of Other Assets and Other, net6
 6
 24
 21
Operating Income1,695
 1,954
 4,519
 4,453
Other Income and Expenses    

 

Equity in earnings (losses) of unconsolidated affiliates36
 (60) 101
 (37)
Other income and expenses, net88
 86
 255
 237
Total other income and expenses124
 26
 356
 200
Interest Expense498
 464
 1,475
 1,431
Income From Continuing Operations Before Income Taxes1,321
 1,516
 3,400
 3,222
Income Tax Expense from Continuing Operations364
 515
 1,035
 1,020
Income From Continuing Operations957
 1,001
 2,365
 2,202
(Loss) Income From Discontinued Operations, net of tax(2) 180
 (4) 190
Net Income955
 1,181
 2,361
 2,392
Less: Net Income Attributable to Noncontrolling Interests1
 5
 5
 13
Net Income Attributable to Duke Energy Corporation$954
 $1,176
 $2,356
 $2,379
        
Earnings Per Share – Basic and Diluted       
Income from continuing operations attributable to Duke Energy Corporation common stockholders       
Basic$1.36
 $1.44
 $3.37
 $3.19
Diluted$1.36
 $1.44
 $3.37
 $3.18
Income (Loss) from discontinued operations attributable to Duke Energy Corporation common stockholders       
Basic$—
 $0.26
 $(0.01) $0.26
Diluted$—
 $0.26
 $(0.01) $0.26
Net income attributable to Duke Energy Corporation common stockholders       
Basic$1.36
 $1.70
 $3.36
 $3.45
Diluted$1.36
 $1.70
 $3.36
 $3.44
Weighted average shares outstanding       
Basic700
 689
 700
 689
Diluted700
 691
 700
 690

See Notes to Condensed Consolidated Financial Statements
6

PART I

DUKE ENERGY CORPORATION
Condensed Consolidated Statements
Commission file numberRegistrant, State of Comprehensive Income
(Unaudited)
 Three Months Ended Nine Months Ended
 September 30, September 30,
(in millions)2017
 2016
 2017
 2016
Net Income$955
 $1,181
 $2,361
 $2,392
Other Comprehensive Income, net of tax       
Foreign currency translation adjustments—
 (12) —
 95
Pension and OPEB adjustments—
 —
 2
 2
Net unrealized gains (losses) on cash flow hedges2
 6
 (2) (19)
Reclassification into earnings from cash flow hedges(2) 1
 3
 3
Unrealized gains on available-for-sale securities2
 —
 10
 7
Other Comprehensive Income (Loss), net of tax2
 (5) 13
 88
Comprehensive Income957
 1,176
 2,374
 2,480
Less: Comprehensive Income Attributable to Noncontrolling Interests1
 4
 5
 16
Comprehensive Income Attributable to Duke Energy Corporation$956
 $1,172
 $2,369
 $2,464


See Notes to Condensed Consolidated Financial Statements
7

PART I

DUKE ENERGY CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)September 30, 2017 December 31, 2016
ASSETS   
Current Assets   
Cash and cash equivalents$282
 $392
Receivables (net of allowance for doubtful accounts of $13 at 2017 and $14 at 2016)528
 751
Receivables of VIEs (net of allowance for doubtful accounts of $54 at 2017 and 2016)2,089
 1,893
Inventory3,265
 3,522
Regulatory assets (includes $51 at 2017 and $50 at 2016 related to VIEs)1,109
 1,023
Other433
 458
Total current assets7,706
 8,039
Property, Plant and Equipment   
Cost125,582
 121,397
Accumulated depreciation and amortization(41,161) (39,406)
Generation facilities to be retired, net441
 529
Net property, plant and equipment84,862
 82,520
Other Noncurrent Assets   
Goodwill19,418
 19,425
Regulatory assets (includes $1,101 at 2017 and $1,142 at 2016 related to VIEs)13,367
 12,878
Nuclear decommissioning trust funds6,814
 6,205
Investments in equity method unconsolidated affiliates1,366
 925
Other2,792
 2,769
Total other noncurrent assets43,757
 42,202
Total Assets$136,325
 $132,761
LIABILITIES AND EQUITY   
Current Liabilities   
Accounts payable$2,645
 $2,994
Notes payable and commercial paper1,899
 2,487
Taxes accrued627
 384
Interest accrued538
 503
Current maturities of long-term debt (includes $215 at 2017 and $260 at 2016 related to VIEs)2,485
 2,319
Asset retirement obligations619
 411
Regulatory liabilities273
 409
Other1,734
 2,044
Total current liabilities10,820
 11,551
Long-Term Debt (includes $4,219 at 2017 and $3,587 at 2016 related to VIEs)48,929
 45,576
Other Noncurrent Liabilities   
Deferred income taxes15,058
 14,155
Asset retirement obligations9,586
 10,200
Regulatory liabilities7,027
 6,881
Accrued pension and other post-retirement benefit costs1,105
 1,111
Investment tax credits534
 493
Other1,624
 1,753
Total other noncurrent liabilities34,934
 34,593
Commitments and Contingencies

 

Equity   
Common stock, $0.001 par value, 2 billion shares authorized; 700 million shares outstanding at 2017 and 20161
 1
Additional paid-in capital38,774
 38,741
Retained earnings2,936
 2,384
Accumulated other comprehensive loss(80) (93)
Total Duke Energy Corporation stockholders' equity41,631
 41,033
Noncontrolling interests11
 8
Total equity41,642
 41,041
Total Liabilities and Equity$136,325
 $132,761

See Notes to Condensed Consolidated Financial Statements
8

PART I

DUKE ENERGY CORPORATION
Condensed Consolidated StatementsIncorporation or Organization, Address of Cash Flows
(Unaudited)
 Nine Months Ended
 September 30,
(in millions)2017
 2016
CASH FLOWS FROM OPERATING ACTIVITIES   
Net income$2,361
 $2,392
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation, amortization and accretion (including amortization of nuclear fuel)2,990
 2,847
Equity component of AFUDC(175) (140)
Gains on sales of other assets(28) (27)
Impairment charges216
 279
Deferred income taxes1,016
 648
Equity in earnings of unconsolidated affiliates(101) (34)
Accrued pension and other post-retirement benefit costs19
 12
Contributions to qualified pension plans(8) —
Payments for asset retirement obligations(420) (443)
(Increase) decrease in   
Net realized and unrealized mark-to-market and hedging transactions4
 36
Receivables80
 (276)
Inventory248
 455
Other current assets(176) (163)
Increase (decrease) in   
Accounts payable(554) (207)
Taxes accrued233
 417
Other current liabilities(532) (157)
Other assets(160) (64)
Other liabilities(2) 36
Net cash provided by operating activities5,011
 5,611
CASH FLOWS FROM INVESTING ACTIVITIES   
Capital expenditures(5,841) (5,252)
Contributions to equity method investments(370) (198)
Purchases of available-for-sale securities(3,170) (4,048)
Proceeds from sales and maturities of available-for-sale securities3,199
 4,107
Change in restricted cash(29) (34)
Other(149) (130)
Net cash used in investing activities(6,360) (5,555)
CASH FLOWS FROM FINANCING ACTIVITIES   
Proceeds from the:   
Issuance of long-term debt5,710
 8,647
Issuance of common stock related to employee benefit plans—
 7
Payments for the redemption of long-term debt(2,035) (988)
Proceeds from the issuance of short-term debt with original maturities greater than 90 days265
 1,424
Payments for the redemption of short-term debt with original maturities greater than 90 days(237) (492)
Notes payable and commercial paper(647) (1,579)
Dividends paid(1,825) (1,731)
Other8
 (22)
Net cash provided by financing activities1,239
 5,266
Changes in cash and cash equivalents associated with assets held for sale—
 11
Net (decrease) increase in cash and cash equivalents(110) 5,333
Cash and cash equivalents at beginning of period392
 383
Cash and cash equivalents at end of period$282
 $5,716
Supplemental Disclosures:   
Significant non-cash transactions:   
Accrued capital expenditures$740
 $631

See Notes to Condensed Consolidated Financial Statements
9

PART I

DUKE ENERGY CORPORATION
Condensed Consolidated StatementsPrincipal Executive Offices, Telephone Number and IRS Employer Identification Number
Commission file numberRegistrant, State 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, 2015688
 $1
 $37,968
 $2,564
 $(692) $(50) $(3) $(61) $39,727
 $44
 $39,771
Net income—
 —
 —
 2,379
 —
 —
 —
 —
 2,379
 13
 2,392
Other comprehensive income (loss)—
 —
 —
 —
 92
 (16) 7
 2
 85
 3
 88
Common stock issuances, including dividend reinvestment and employee benefits1
 —
 29
 —
 —
 —
 —
 —
 29
 —
 29
Common stock dividends—
 —
 —
 (1,731) —
 —
 —
 —
 (1,731) —
 (1,731)
Distributions to noncontrolling interest in subsidiaries—
 —
 —
 —
 —
 —
 —
 —
 —
 (3) (3)
Balance at September 30, 2016689
 $1

$37,997

$3,212

$(600)
$(66)
$4

$(59)
$40,489

$57

$40,546
                      
Balance at December 31, 2016700
 $1
 $38,741
 $2,384
 $—
 $(20) $(1) $(72) $41,033
 $8
 $41,041
Net income—
 —
 —
 2,356
 —
 —
 —
 —
 2,356
 5
 2,361
Other comprehensive income—
 —
 —
 —
 —
 1
 10
 2
 13
 —
 13
Common stock issuances, including dividend reinvestment and employee benefits—
 —
 33
 —
 —
 —
 —
 —
 33
 —
 33
Common stock dividends—
 —
 —
 (1,825) —
 —
 —
 —
 (1,825) —
 (1,825)
Distributions to noncontrolling interest in subsidiaries—
 —
 —
 —
 —
 —
 —
 —
 —
 (2) (2)
Other(a)
—
 —
 —
 21
 —
 —
 —
 —
 21
 —
 21
Balance at September 30, 2017700

$1

$38,774

$2,936

$—

$(19)
$9

$(70)
$41,631

$11

$41,642
Incorporation or Organization, Address of Principal Executive Offices, Telephone Number and IRS Employer Identification Number
1-4928
(a)Cumulative-effect adjustment due to implementation of a new accounting standard related to stock-based compensation and the associated income taxes. See Note 1 for more information.

See Notes to Condensed Consolidated Financial Statements
10

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 Nine Months Ended
 September 30, September 30,
(in millions)2017
 2016
 2017
 2016
Operating Revenues$2,136
 $2,226
 $5,581
 $5,641
Operating Expenses       
Fuel used in electric generation and purchased power531
 581
 1,394
 1,391
Operation, maintenance and other480
 493
 1,431
 1,481
Depreciation and amortization281
 268
 804
 802
Property and other taxes67
 68
 206
 206
Total operating expenses1,359
 1,410
 3,835
 3,880
Loss on Sales of Other Assets and Other, net—
 (1) —
 (1)
Operating Income777
 815
 1,746
 1,760
Other Income and Expenses, net26
 39
 99
 121
Interest Expense108
 102
 314
 316
Income Before Income Taxes695
 752
 1,531
 1,565
Income Tax Expense229
 258
 522
 539
Net Income$466
 $494
 $1,009
 $1,026
Other Comprehensive Income, net of tax       
Reclassification into earnings from cash flow hedges—
 —
 1
 1
Comprehensive Income$466
 $494
 $1,010
 $1,027
704-382-3853

56-0205520
See Notes to Condensed Consolidated Financial Statements
11

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)September 30, 2017
 December 31, 2016
ASSETS   
Current Assets   
Cash and cash equivalents$18
 $14
Receivables (net of allowance for doubtful accounts of $2 at 2017 and 2016)180
 160
Receivables of VIEs (net of allowance for doubtful accounts of $7 at 2017 and 2016)691
 645
Receivables from affiliated companies146
 163
Notes receivable from affiliated companies—
 66
Inventory1,000
 1,055
Regulatory assets237
 238
Other27
 37
Total current assets2,299
 2,378
Property, Plant and Equipment   
Cost42,321
 41,127
Accumulated depreciation and amortization(14,969) (14,365)
Net property, plant and equipment27,352
 26,762
Other Noncurrent Assets   
Regulatory assets3,077
 3,159
Nuclear decommissioning trust funds3,621
 3,273
Other910
 943
Total other noncurrent assets7,608
 7,375
Total Assets$37,259
 $36,515
LIABILITIES AND EQUITY   
Current Liabilities   
Accounts payable$726
 $833
Accounts payable to affiliated companies159
 247
Notes payable to affiliated companies468
 —
Taxes accrued368
 143
Interest accrued135
 102
Current maturities of long-term debt705
 116
Asset retirement obligations304
 222
Regulatory liabilities105
 161
Other435
 468
Total current liabilities3,405

2,292
Long-Term Debt8,520
 9,187
Long-Term Debt Payable to Affiliated Companies300
 300
Other Noncurrent Liabilities   
Deferred income taxes6,796
 6,544
Asset retirement obligations3,297
 3,673
Regulatory liabilities2,884
 2,840
Accrued pension and other post-retirement benefit costs108
 97
Investment tax credits234
 203
Other559
 607
Total other noncurrent liabilities13,878
 13,964
Commitments and Contingencies

 

Equity   
Member's equity11,164
 10,781
Accumulated other comprehensive loss(8) (9)
Total equity11,156
 10,772
Total Liabilities and Equity$37,259
 $36,515
704-382-3853

59-0247770
See Notes to Condensed Consolidated Financial Statements
12

PART I

DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 Nine Months Ended
 September 30,
(in millions)2017
 2016
CASH FLOWS FROM OPERATING ACTIVITIES   
Net income$1,009
 $1,026
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization (including amortization of nuclear fuel)1,051
 1,020
Equity component of AFUDC(79) (75)
Losses on sales of other assets and other, net—
 1
Deferred income taxes330
 382
Accrued pension and other post-retirement benefit costs—
 3
Payments for asset retirement obligations(201) (204)
(Increase) decrease in   
Net realized and unrealized mark-to-market and hedging transactions1
 4
Receivables(40) (191)
Receivables from affiliated companies17
 19
Inventory50
 217
Other current assets8
 81
Increase (decrease) in   
Accounts payable(78) (179)
Accounts payable to affiliated companies(88) (100)
Taxes accrued225
 248
Other current liabilities(149) 51
Other assets(18) 57
Other liabilities(26) (15)
Net cash provided by operating activities2,012
 2,345
CASH FLOWS FROM INVESTING ACTIVITIES   
Capital expenditures(1,747) (1,531)
Purchases of available-for-sale securities(1,660) (2,070)
Proceeds from sales and maturities of available-for-sale securities1,664
 2,070
Notes receivable from affiliated companies66
 131
Other(58) (65)
Net cash used in investing activities(1,735) (1,465)
CASH FLOWS FROM FINANCING ACTIVITIES   
Proceeds from the issuance of long-term debt—
 992
Payments for the redemption of long-term debt(115) (3)
Notes payable to affiliated companies468
 —
Distributions to parent(625) (1,800)
Other(1) —
Net cash used in financing activities(273) (811)
Net increase in cash and cash equivalents4
 69
Cash and cash equivalents at beginning of period14
 13
Cash and cash equivalents at end of period$18
 $82
Supplemental Disclosures:   
Significant non-cash transactions:   
Accrued capital expenditures$292
 $228

See Notes to Condensed Consolidated Financial Statements
13

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 income1,026
 —
 1,026
Other comprehensive income—
 1
 1
Distributions to parent(1,800) —
 (1,800)
Other(3) —
 (3)
Balance at September 30, 2016$10,840
 $(10) $10,830
      
Balance at December 31, 2016$10,781
 $(9) $10,772
Net income1,009
 —
 1,009
Other comprehensive income—
 1
 1
Distributions to parent(625) —
 (625)
Other(1) —
 (1)
Balance at September 30, 2017$11,164
 $(8) $11,156

See Notes to Condensed Consolidated Financial Statements
14

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 Nine Months Ended
 September 30, September 30,
(in millions)2017
 2016
 2017
 2016
Operating Revenues$2,864
 $2,965
 $7,435
 $7,645
Operating Expenses       
Fuel used in electric generation and purchased power1,031
 1,120
 2,588
 2,832
Operation, maintenance and other572
 582
 1,650
 1,699
Depreciation and amortization334
 318
 958
 904
Property and other taxes140
 136
 386
 375
Impairment charges135
 1
 137
 4
Total operating expenses2,212
 2,157
 5,719
 5,814
Gains on Sales of Other Assets and Other, net5
 6
 19
 18
Operating Income657
 814
 1,735
 1,849
Other Income and Expenses, net20
 31
 65
 79
Interest Expense193
 177
 595
 497
Income Before Income Taxes484
 668
 1,205
 1,431
Income Tax Expense141
 219
 384
 496
Net Income343
 449
 821
 935
Less: Net Income Attributable to Noncontrolling Interests2
 3
 7
 8
Net Income Attributable to Parent$341
 $446
 $814
 $927
        
Net Income$343
 $449
 $821
 $935
Other Comprehensive Income, net of tax       
Pension and OPEB adjustments3
 —
 5
 2
Net unrealized (loss) gain on cash flow hedges(2) —
 4
 —
Reclassification into earnings from cash flow hedges—
 1
 —
 4
Unrealized gains on available-for-sale securities1
 1
 3
 2
Other Comprehensive Income, net of tax2

2

12

8
Comprehensive Income345
 451
 833
 943
Less: Comprehensive Income Attributable to Noncontrolling Interests2
 3
 7
 8
Comprehensive Income Attributable to Parent$343

$448

$826

$935
704-382-3853

56-2155481
1-1232

See Notes to Condensed Consolidated Financial Statements
15

PART I

PROGRESSDUKE ENERGY OHIO, INC.
Condensed Consolidated Balance Sheets(an Ohio corporation)
(Unaudited)139 East Fourth Street
Cincinnati, Ohio 45202
(in millions)September 30, 2017
 December 31, 2016
ASSETS   
Current Assets   
Cash and cash equivalents$30
 $46
Receivables (net of allowance for doubtful accounts of $4 at 2017 and $6 at 2016)93
 114
Receivables of VIEs (net of allowance for doubtful accounts of $7 at 2017 and 2016)900
 692
Receivables from affiliated companies—
 106
Notes receivable from affiliated companies170
 80
Inventory1,584
 1,717
Regulatory assets (includes $51 at 2017 and $50 at 2016 related to VIEs)440
 401
Other243
 148
Total current assets3,460
 3,304
Property, Plant and Equipment   
Cost46,659
 44,864
Accumulated depreciation and amortization(15,760) (15,212)
Generation facilities to be retired, net441
 529
Net property, plant and equipment31,340
 30,181
Other Noncurrent Assets   
Goodwill3,655
 3,655
Regulatory assets (includes $1,101 at 2017 and $1,142 at 2016 related to VIEs)6,438
 5,722
Nuclear decommissioning trust funds3,194
 2,932
Other909
 856
Total other noncurrent assets14,196
 13,165
Total Assets$48,996
 $46,650
LIABILITIES AND EQUITY   
Current Liabilities   
Accounts payable$1,015
 $1,003
Accounts payable to affiliated companies289
 348
Notes payable to affiliated companies576
 729
Taxes accrued227
 83
Interest accrued216
 201
Current maturities of long-term debt (includes $53 at 2017 and $62 at 2016 related to VIEs)770
 778
Asset retirement obligations250
 189
Regulatory liabilities121
 189
Other652
 745
Total current liabilities4,116
 4,265
Long-Term Debt (includes $1,689 at 2017 and $1,741 at 2016 related to VIEs)16,717
 15,590
Long-Term Debt Payable to Affiliated Companies150
 1,173
Other Noncurrent Liabilities   
Deferred income taxes6,463
 5,246
Asset retirement obligations5,189
 5,286
Regulatory liabilities2,511
 2,395
Accrued pension and other post-retirement benefit costs535
 547
Other298
 341
Total other noncurrent liabilities14,996
 13,815
Commitments and Contingencies
 
Equity   
Common stock, $0.01 par value, 100 shares authorized and outstanding at 2017 and 2016—
 —
Additional paid-in capital9,143
 8,094
Retained earnings3,906
 3,764
Accumulated other comprehensive loss(26) (38)
Total Progress Energy, Inc. stockholders' equity13,023
 11,820
Noncontrolling interests(6) (13)
Total equity13,017
 11,807
Total Liabilities and Equity$48,996
 $46,650
704-382-3853

31-0240030
See Notes to Condensed Consolidated Financial Statements
16

PART I

PROGRESS ENERGY, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 Nine Months Ended
 September 30,
(in millions)2017
 2016
CASH FLOWS FROM OPERATING ACTIVITIES   
Net income$821
 $935
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation, amortization and accretion (including amortization of nuclear fuel)1,130
 1,071
Equity component of AFUDC(68) (51)
Gains on sales of other assets(20) (23)
Impairment charges137
 4
Deferred income taxes651
 425
Accrued pension and other post-retirement benefit costs(9) (19)
Payments for asset retirement obligations(190) (203)
(Increase) decrease in   
Net realized and unrealized mark-to-market and hedging transactions1
 33
Receivables(182) (155)
Receivables from affiliated companies102
 329
Inventory126
 99
Other current assets(279) (30)
Increase (decrease) in   
Accounts payable(281) (24)
Accounts payable to affiliated companies(59) (109)
Taxes accrued143
 159
Other current liabilities(184) (156)
Other assets(100) (90)
Other liabilities(85) (4)
Net cash provided by operating activities1,654
 2,191
CASH FLOWS FROM INVESTING ACTIVITIES   
Capital expenditures(2,419) (2,286)
Purchases of available-for-sale securities(1,393) (1,849)
Proceeds from sales and maturities of available-for-sale securities1,411
 1,899
Proceeds from insurance4
 58
Notes receivable from affiliated companies(90) (43)
Change in restricted cash5
 (6)
Other(40) (17)
Net cash used in investing activities(2,522) (2,244)
CASH FLOWS FROM FINANCING ACTIVITIES   
Proceeds from the issuance of long-term debt1,720
 2,375
Payments for the redemption of long-term debt(611) (327)
Notes payable to affiliated companies(129) (798)
Dividends to parent(125) (1,075)
Other(3) (1)
Net cash provided by financing activities852
 174
Net (decrease) increase in cash and cash equivalents(16) 121
Cash and cash equivalents at beginning of period46
 44
Cash and cash equivalents at end of period$30
 $165
Supplemental Disclosures:   
Significant non-cash transactions:   
Accrued capital expenditures$174
 $228
Equitization of certain notes payable to affiliates1,047
 —
Dividend to parent related to a legal entity restructuring547
 —

See Notes to Condensed Consolidated Financial Statements
17

PART I

PROGRESS ENERGY, INC.
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
     Accumulated Other Comprehensive Loss      
       Net Unrealized
   Total Progress
    
 Additional
   Net Losses 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—
 927
 —
 —
 —
 927
 8
 935
Other comprehensive income—
 —
 4
 2
 2
 8
 —
 8
Distributions to noncontrolling interests—
 —
 —
 —
 —
 —
 (1) (1)
Dividends to parent—
 (1,075) —
 —
 —
 (1,075) —
 (1,075)
Other4
 —
 —
 —
 —
 4
 (1) 3
Balance at September 30, 2016$8,096

$4,683

$(27)
$2

$(15)
$12,739

$(16)
$12,723
                
Balance at December 31, 2016$8,094
 $3,764
 $(23) $1
 $(16) $11,820
 $(13) $11,807
Net income—
 814
 —
 —
 —
 814
 7
 821
Other comprehensive income—
 —
 4
 3
 5
 12
 —
 12
Dividends to parent(a)
—
 (672) —
 —
 —
 (672) —
 (672)
Equitization of certain notes payable to affiliates1,047
 —
 —
 —
 —
 1,047
 —
 1,047
Other2
 —
 —
 —
 —
 2
 —
 2
Balance at September 30, 2017$9,143

$3,906

$(19)
$4

$(11)
$13,023

$(6)
$13,017
1-3382
(a)Includes a $547 million non-cash dividend related to a legal entity restructuring.

See Notes to Condensed Consolidated Financial Statements
18

PART I


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 Nine Months Ended
 September 30, September 30,
(in millions)2017
 2016
 2017
 2016
Operating Revenues$1,460
 $1,583
 $3,878
 $4,103
Operating Expenses       
Fuel used in electric generation and purchased power475
 569
 1,214
 1,441
Operation, maintenance and other352
 360
 1,032
 1,067
Depreciation and amortization182
 176
 536
 526
Property and other taxes40
 40
 120
 119
Impairment charges—
 1
 —
 1
Total operating expenses1,049
 1,146
 2,902
 3,154
Gains on Sales of Other Assets and Other, net—
 1
 3
 2
Operating Income411
 438
 979
 951
Other Income and Expenses, net14
 18
 47
 47
Interest Expense65
 61
 217
 188
Income Before Income Taxes360
 395
 809
 810
Income Tax Expense114
 124
 262
 271
Net Income and Comprehensive Income$246
 $271
 $547
 $539
704-382-3853

56-0165465

See Notes to Condensed Consolidated Financial Statements
19

PART I

DUKE ENERGY PROGRESS, LLC
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)September 30, 2017
 December 31, 2016
ASSETS   
Current Assets   
Cash and cash equivalents$15
 $11
Receivables (net of allowance for doubtful accounts of $1 at 2017 and $4 at 2016)29
 51
Receivables of VIEs (net of allowance for doubtful accounts of $5 at 2017 and 2016)472
 404
Receivables from affiliated companies8
 5
Notes receivable from affiliated companies101
 165
Inventory1,018
 1,076
Regulatory assets230
 188
Other40
 57
Total current assets1,913
 1,957
Property, Plant and Equipment   
Cost29,104
 28,419
Accumulated depreciation and amortization(10,793) (10,561)
Generation facilities to be retired, net441
 529
Net property, plant and equipment18,752
 18,387
Other Noncurrent Assets   
Regulatory assets3,588
 3,243
Nuclear decommissioning trust funds2,463
 2,217
Other565
 525
Total other noncurrent assets6,616
 5,985
Total Assets$27,281
 $26,329
LIABILITIES AND EQUITY   
Current Liabilities   
Accounts payable$271
 $589
Accounts payable to affiliated companies207
 227
Taxes accrued137
 104
Interest accrued91
 102
Current maturities of long-term debt203
 452
Asset retirement obligations250
 189
Regulatory liabilities107
 158
Other318
 365
Total current liabilities1,584
 2,186
Long-Term Debt7,204
 6,409
Long-Term Debt Payable to Affiliated Companies150
 150
Other Noncurrent Liabilities   
Deferred income taxes3,606
 3,323
Asset retirement obligations4,426
 4,508
Regulatory liabilities2,097
 1,946
Accrued pension and other post-retirement benefit costs246
 252
Investment tax credits144
 146
Other44
 51
Total other noncurrent liabilities10,563
 10,226
Commitments and Contingencies
 
Equity   
Member's Equity7,780
 7,358
Total Liabilities and Equity$27,281
 $26,329

See Notes to Condensed Consolidated Financial Statements
20

PART I

DUKE ENERGY PROGRESS, LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 Nine Months Ended
 September 30,
(in millions)2017
 2016
CASH FLOWS FROM OPERATING ACTIVITIES   
Net income$547
 $539
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization (including amortization of nuclear fuel)691
 679
Equity component of AFUDC(35) (34)
Gains on sales of other assets(4) (4)
Impairment charges—
 1
Deferred income taxes287
 325
Accrued pension and other post-retirement benefit costs(15) (24)
Payments for asset retirement obligations(149) (163)
(Increase) decrease in   
Net realized and unrealized mark-to-market and hedging transactions(2) —
Receivables(47) (78)
Receivables from affiliated companies(3) 11
Inventory52
 91
Other current assets(34) 37
Increase (decrease) in   
Accounts payable(286) (44)
Accounts payable to affiliated companies(20) (47)
Taxes accrued33
 76
Other current liabilities(139) 37
Other assets(49) (32)
Other liabilities(9) (10)
Net cash provided by operating activities818
 1,360
CASH FLOWS FROM INVESTING ACTIVITIES   
Capital expenditures(1,247) (1,106)
Purchases of available-for-sale securities(995) (1,470)
Proceeds from sales and maturities of available-for-sale securities974
 1,448
Notes receivable from affiliated companies64
 (65)
Other(26) (27)
Net cash used in investing activities(1,230) (1,220)
CASH FLOWS FROM FINANCING ACTIVITIES   
Proceeds from the issuance of long-term debt812
 505
Payments for the redemption of long-term debt(270) (15)
Notes payable to affiliated companies—
 (209)
Distributions to parent(125) (301)
Other(1) 1
Net cash provided by (used in) financing activities416
 (19)
Net increase in cash and cash equivalents4
 121
Cash and cash equivalents at beginning of period11
 15
Cash and cash equivalents at end of period$15
 $136
Supplemental Disclosures:   
Significant non-cash transactions:   
Accrued capital expenditures$116
 $66

See Notes to Condensed Consolidated Financial Statements
21

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 income539
Distributions to parent(301)
Balance at September 30, 2016$7,297
  
Balance at December 31, 2016$7,358
Net income547
Distributions to parent(125)
Balance at September 30, 2017$7,780


See Notes to Condensed Consolidated Financial Statements
22

PART I


DUKE ENERGY FLORIDA, LLC
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
 Three Months Ended Nine Months Ended
 September 30, September 30,
(in millions)2017
 2016
 2017
 2016
Operating Revenues$1,401
 $1,381
 $3,551
 $3,538
Operating Expenses       
Fuel used in electric generation and purchased power557
 550
 1,374
 1,391
Operation, maintenance and other216
 219
 610
 623
Depreciation and amortization154
 142
 423
 378
Property and other taxes99
 96
 265
 256
Impairment charges135
 1
 137
 4
Total operating expenses1,161
 1,008
 2,809
 2,652
Operating Income240
 373
 742
 886
Other Income and Expenses, net15
 11
 45
 30
Interest Expense71
 62
 211
 143
Income Before Income Taxes184
 322
 576
 773
Income Tax Expense64
 116
 208
 286
Net Income$120
 $206
 $368
 $487
Other Comprehensive Income, net of tax
 
 

 

Unrealized gains on available-for-sale securities1
 1
 3
 2
Comprehensive Income$121
 $207
 $371

$489


See Notes to Condensed Consolidated Financial Statements
23

PART I

DUKE ENERGY FLORIDA, LLC
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)September 30, 2017
 December 31, 2016
ASSETS   
Current Assets   
Cash and cash equivalents$8
 $16
Receivables (net of allowance for doubtful accounts of $3 at 2017 and $2 at 2016)61
 61
Receivables of VIEs (net of allowance for doubtful accounts of $2 at 2017 and 2016)428
 288
Receivables from affiliated companies—
 5
Notes receivable from affiliated companies70
 —
Inventory566
 641
Regulatory assets (includes $51 at 2017 and $50 at 2016 related to VIEs)211
 213
Other (includes $20 at 2017 and $53 at 2016 related to VIEs)154
 125
Total current assets1,498
 1,349
Property, Plant and Equipment   
Cost17,546
 16,434
Accumulated depreciation and amortization(4,960) (4,644)
Net property, plant and equipment12,586
 11,790
Other Noncurrent Assets   
Regulatory assets (includes $1,101 at 2017 and $1,142 at 2016 related to VIEs)2,850
 2,480
Nuclear decommissioning trust funds731
 715
Other293
 278
Total other noncurrent assets3,874
 3,473
Total Assets$17,958
 $16,612
LIABILITIES AND EQUITY   
Current Liabilities   
Accounts payable$744
 $413
Accounts payable to affiliated companies90
 125
Notes payable to affiliated companies—
 297
Taxes accrued143
 33
Interest accrued71
 49
Current maturities of long-term debt (includes $53 at 2017 and $62 at 2016 related to VIEs)567
 326
Regulatory liabilities14
 31
Other310
 352
Total current liabilities1,939
 1,626
Long-Term Debt (includes $1,389 at 2017 and $1,442 at 2016 related to VIEs)6,129
 5,799
Other Noncurrent Liabilities   
Deferred income taxes3,076
 2,694
Asset retirement obligations763
 778
Regulatory liabilities414
 448
Accrued pension and other post-retirement benefit costs257
 262
Other106
 105
Total other noncurrent liabilities4,616
 4,287
Commitments and Contingencies
 
Equity   
Member's equity5,270
 4,899
Accumulated other comprehensive income4
 1
Total equity5,274
 4,900
Total Liabilities and Equity$17,958
 $16,612

See Notes to Condensed Consolidated Financial Statements
24

PART I

DUKE ENERGY FLORIDA, LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 Nine Months Ended
 September 30,
(in millions)2017
 2016
CASH FLOWS FROM OPERATING ACTIVITIES   
Net income$368
 $487
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation, amortization and accretion431
 383
Equity component of AFUDC(33) (16)
Impairment charges137
 4
Deferred income taxes366
 136
Accrued pension and other post-retirement benefit costs3
 2
Payments for asset retirement obligations(41) (41)
(Increase) decrease in   
Net realized and unrealized mark-to-market and hedging transactions3
 34
Receivables(140) (78)
Receivables from affiliated companies1
 41
Inventory74
 8
Other current assets(162) (32)
Increase (decrease) in   
Accounts payable6
 20
Accounts payable to affiliated companies(35) (55)
Taxes accrued109
 61
Other current liabilities(45) (183)
Other assets(35) (56)
Other liabilities(71) 1
Net cash provided by operating activities936
 716
CASH FLOWS FROM INVESTING ACTIVITIES   
Capital expenditures(1,172) (1,179)
Purchases of available-for-sale securities(398) (379)
Proceeds from sales and maturities of available-for-sale securities437
 450
Proceeds from insurance4
 58
Notes receivable from affiliated companies(70) —
Change in restricted cash—
 (6)
Other(14) 10
Net cash used in investing activities(1,213) (1,046)
CASH FLOWS FROM FINANCING ACTIVITIES   
Proceeds from the issuance of long-term debt908
 1,870
Payments for the redemption of long-term debt(341) (12)
Notes payable to affiliated companies(297) (750)
Distributions to parent—
 (774)
Other(1) (2)
Net cash provided by financing activities269
 332
Net (decrease) increase in cash and cash equivalents(8) 2
Cash and cash equivalents at beginning of period16
 8
Cash and cash equivalents at end of period$8
 $10
Supplemental Disclosures:   
Significant non-cash transactions:   
Accrued capital expenditures$102
 $162

See Notes to Condensed Consolidated Financial Statements
25

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 income487
 —
 487
Other comprehensive income—
 2
 2
Distributions to parent(774) —
 (774)
Other3
 —
 3
Balance at September 30, 2016$4,837
 $2
 $4,839
      
Balance at December 31, 2016$4,899
 $1
 $4,900
Net income368
 —
 368
Other comprehensive income—
 3
 3
Other3
 —
 3
Balance at September 30, 2017$5,270
 $4
 $5,274

See Notes to Condensed Consolidated Financial Statements
26

PART I


DUKE ENERGY OHIO, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
 Three Months Ended Nine Months Ended
 September 30, September 30,
(in millions)2017
 2016
 2017

2016
Operating Revenues       
Regulated electric$371
 $390
 $1,036
 $1,053
Regulated natural gas90
 89
 360
 358
Nonregulated electric and other10
 10
 30
 22
Total operating revenues471
 489
 1,426
 1,433
Operating Expenses       
Fuel used in electric generation and purchased power – regulated100
 129
 283
 340
Fuel used in electric generation and purchased power – nonregulated13
 14
 42
 37
Cost of natural gas5
 6
 69
 64
Operation, maintenance and other124
 126
 385
 367
Depreciation and amortization63
 50
 193
 175
Property and other taxes65
 59
 204
 195
Impairment charges—
 —
 1
 —
Total operating expenses370
 384
 1,177
 1,178
Gains on Sales of Other Assets and Other, net1
 1
 1
 2
Operating Income102
 106
 250
 257
Other Income and Expenses, net4
 3
 12
 6
Interest Expense22
 22
 67
 63
Income From Continuing Operations Before Income Taxes84
 87
 195
 200
Income Tax Expense From Continuing Operations28
 32
 67
 65
Income From Continuing Operations56
 55
 128
 135
(Loss) Income From Discontinued Operations, net of tax(1) 34
 (1) 36
Net Income and Comprehensive Income$55
 $89
 $127
 $171


See Notes to Condensed Consolidated Financial Statements
27

PART I

DUKE ENERGY OHIO, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)September 30, 2017
 December 31, 2016
ASSETS   
Current Assets   
Cash and cash equivalents$7
 $13
Receivables (net of allowance for doubtful accounts of $2 at 2017 and 2016)68
 71
Receivables from affiliated companies81
 129
Notes receivable from affiliated companies87
 94
Inventory139
 137
Regulatory assets57
 37
Other18
 37
Total current assets457
 518
Property, Plant and Equipment   
Cost8,509
 8,126
Accumulated depreciation and amortization(2,658) (2,579)
Net property, plant and equipment5,851
 5,547
Other Noncurrent Assets   
Goodwill920
 920
Regulatory assets510
 520
Other27
 23
Total other noncurrent assets1,457
 1,463
Total Assets$7,765
 $7,528
LIABILITIES AND EQUITY   
Current Liabilities   
Accounts payable$251
 $282
Accounts payable to affiliated companies59
 63
Notes payable to affiliated companies—
 16
Taxes accrued157
 178
Interest accrued33
 19
Current maturities of long-term debt—
 1
Asset retirement obligations6
 —
Regulatory liabilities15
 21
Other74
 91
Total current liabilities595
 671
Long-Term Debt2,042
 1,858
Long-Term Debt Payable to Affiliated Companies25
 25
Other Noncurrent Liabilities   
Deferred income taxes1,512
 1,443
Asset retirement obligations75
 77
Regulatory liabilities232
 236
Accrued pension and other post-retirement benefit costs52
 56
Other134
 166
Total other noncurrent liabilities2,005
 1,978
Commitments and Contingencies
 
Equity   
Common stock, $8.50 par value, 120 million shares authorized; 90 million shares outstanding at 2017 and 2016762
 762
Additional paid-in capital2,670
 2,695
Accumulated deficit(334) (461)
Total equity3,098
 2,996
Total Liabilities and Equity$7,765
 $7,528

See Notes to Condensed Consolidated Financial Statements
28

PART I

DUKE ENERGY OHIO, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 Nine Months Ended
 September 30,
(in millions)2017
 2016
CASH FLOWS FROM OPERATING ACTIVITIES   
Net income$127
 $171
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization196
 178
Equity component of AFUDC(8) (4)
Gains on sales of other assets(1) (2)
Impairment charges1
 —
Deferred income taxes70
 36
Accrued pension and other post-retirement benefit costs3
 4
Contributions to qualified pension plans(4) —
Payments for asset retirement obligations(4) (4)
(Increase) decrease in   
Net realized and unrealized mark-to-market and hedging transactions1
 —
Receivables3
 (1)
Receivables from affiliated companies48
 (3)
Inventory1
 (5)
Other current assets(8) 50
Increase (decrease) in   
Accounts payable(48) 13
Accounts payable to affiliated companies(4) (4)
Taxes accrued(21) (13)
Other current liabilities(6) (53)
Other assets(13) (8)
Other liabilities(2) (28)
Net cash provided by operating activities331
 327
CASH FLOWS FROM INVESTING ACTIVITIES   
Capital expenditures(457) (334)
Notes receivable from affiliated companies7
 (47)
Other(25) (21)
Net cash used in investing activities(475) (402)
CASH FLOWS FROM FINANCING ACTIVITIES   
Proceeds from the issuance of long-term debt182
 341
Payments for the redemption of long-term debt(2) (53)
Notes payable to affiliated companies(16) (103)
Dividends to parent(25) (25)
Other(1) —
Net cash provided by financing activities138
 160
Net (decrease) increase in cash and cash equivalents(6) 85
Cash and cash equivalents at beginning of period13
 14
Cash and cash equivalents at end of period$7
 $99
Supplemental Disclosures:   
Significant non-cash transactions:   
Accrued capital expenditures$65
 $56

See Notes to Condensed Consolidated Financial Statements
29

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—
 —
 171
 171
Dividends to parent—
 (25) —
 (25)
Contribution from parent—
 —
 9
 9
Balance at September 30, 2016$762
 $2,695
 $(518) $2,939
        
Balance at December 31, 2016$762
 $2,695
 $(461) $2,996
Net income—
 —
 127
 127
Dividends to parent—
 (25) —
 (25)
Balance at September 30, 2017$762

$2,670

$(334)
$3,098


See Notes to Condensed Consolidated Financial Statements
30

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
 Three Months Ended Nine Months Ended
 September 30, September 30,
(in millions)2017
 2016
 2017
 2016
Operating Revenues$802
 $809
 $2,302
 $2,225
Operating Expenses       
Fuel used in electric generation and purchased power259
 242
 744
 690
Operation, maintenance and other175
 175
 541
 526
Depreciation and amortization120
 123
 336
 345
Property and other taxes19
 22
 56
 67
Impairment charges—
 8
 —
 8
Total operating expenses573
 570
 1,677
 1,636
Gain on Sale of Other Assets and Other, net1

—
 1
 —
Operating Income230
 239

626

589
Other Income and Expenses, net10
 5
 27
 15
Interest Expense44
 45
 132
 136
Income Before Income Taxes196
 199

521

468
Income Tax Expense75
 70
 203
 159
Net Income$121
 $129

$318

$309
Other Comprehensive Loss, net of tax       
Reclassification into earnings from cash flow hedges—
 —
 —
 (1)
Comprehensive Income$121
 $129

$318

$308
704-382-3853

35-0594457

See Notes to Condensed Consolidated Financial Statements
31

PART I

DUKE ENERGY INDIANA, LLC
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)September 30, 2017
 December 31, 2016
ASSETS   
Current Assets   
Cash and cash equivalents$22
 $17
Receivables (net of allowance for doubtful accounts of $1 at 2017 and 2016)74
 105
Receivables from affiliated companies83
 114
Notes receivable from affiliated companies29
 86
Inventory450
 504
Regulatory assets158
 149
Other34
 45
Total current assets850
 1,020
Property, Plant and Equipment   
Cost14,716
 14,241
Accumulated depreciation and amortization(4,592) (4,317)
Net property, plant and equipment10,124
 9,924
Other Noncurrent Assets   
Regulatory assets1,123
 1,073
Other170
 147
Total other noncurrent assets1,293
 1,220
Total Assets$12,267
 $12,164
LIABILITIES AND EQUITY   
Current Liabilities   
Accounts payable$188
 $263
Accounts payable to affiliated companies73
 74
Taxes accrued146
 31
Interest accrued54
 61
Current maturities of long-term debt3
 3
Asset retirement obligations58
 —
Regulatory liabilities28
 40
Other111
 93
Total current liabilities661
 565
Long-Term Debt3,632
 3,633
Long-Term Debt Payable to Affiliated Companies150
 150
Other Noncurrent Liabilities   
Deferred income taxes1,979
 1,900
Asset retirement obligations735
 866
Regulatory liabilities735
 748
Accrued pension and other post-retirement benefit costs78
 71
Investment tax credits147
 137
Other65
 27
Total other noncurrent liabilities3,739
 3,749
Commitments and Contingencies
 
Equity   
Member's Equity4,085
 4,067
Total Liabilities and Equity$12,267
 $12,164

See Notes to Condensed Consolidated Financial Statements
32

PART I

DUKE ENERGY INDIANA, LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 Nine Months Ended
 September 30,
(in millions)2017
 2016
CASH FLOWS FROM OPERATING ACTIVITIES   
Net income$318
 $309
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation, amortization and accretion339
 347
Equity component of AFUDC(20) (11)
Gain on sale of other assets and other, net(1) —
Impairment charges—
 8
Deferred income taxes101
 122
Accrued pension and other post-retirement benefit costs4
 6
Payments for asset retirement obligations(26) (31)
(Increase) decrease in   
Receivables53
 16
Receivables from affiliated companies31
 (3)
Inventory54
 146
Other current assets18
 (105)
Increase (decrease) in   
Accounts payable(71) (14)
Accounts payable to affiliated companies(1) (1)
Taxes accrued115
 12
Other current liabilities(18) (85)
Other assets(24) (38)
Other liabilities32
 64
Net cash provided by operating activities904
 742
CASH FLOWS FROM INVESTING ACTIVITIES   
Capital expenditures(603) (540)
Purchases of available-for-sale securities(15) (12)
Proceeds from sales and maturities of available-for-sale securities6
 9
Notes receivable from affiliated companies57
 45
Other(40) (28)
Net cash used in investing activities(595) (526)
CASH FLOWS FROM FINANCING ACTIVITIES   
Proceeds from the issuance of long-term debt—
 495
Payments for the redemption of long-term debt(3) (476)
Distributions to parent(300) (149)
Other(1) (1)
Net cash used in financing activities(304) (131)
Net increase in cash and cash equivalents5

85
Cash and cash equivalents at beginning of period17
 9
Cash and cash equivalents at end of period$22
 $94
Supplemental Disclosures:   
Significant non-cash transactions:   
Accrued capital expenditures$101
 $56

See Notes to Condensed Consolidated Financial Statements
33

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
 $3,836
Net income—
 —
 —
 309
 —
 309
Other comprehensive loss—
 —
 —
 —
 (1) (1)
Distributions to parent—
 —
 —
 (149) —
 (149)
Transfer to Member's Equity(1) (1,384) (2,450) 3,835
 —
 —
Balance at September 30, 2016$—
 $—
 $—

$3,995
 $—
 $3,995
            
Balance at December 31, 2016$—
 $—
 $—
 $4,067
 $—
 $4,067
Net income—
 —
 —
 318
 —
 318
Distributions to parent—
 —
 —
 (300) —
 (300)
Balance at September 30, 2017$—
 $—
 $—

$4,085
 $—
 $4,085


See Notes to Condensed Consolidated Financial Statements
34

PART I


1-6196
PIEDMONT NATURAL GAS COMPANY, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income(a North Carolina corporation)
(Unaudited)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.
 Three Months Ended Nine Months Ended
 September 30, September 30,
 2017
 2016
 2017
 2016
Operating Revenues       
Regulated natural gas$181
 $155
 $877
 $815
Nonregulated natural gas and other2
 3
 7
 8
Total operating revenues183
 158
 884
 823
Operating Expenses       
Cost of natural gas63
 42
 333
 289
Operation, maintenance and other73
 74
 226
 221
Depreciation and amortization38
 35
 109
 103
Property and other taxes13
 11
 38
 33
Impairment charges—
 —
 7
 —
Total operating expenses187
 162
 713
 646
Operating (Loss) Income(4) (4) 171
 177
Equity in earnings of unconsolidated affiliates3
 2
 8
 25
Other income and expenses, net—
 (1) (1) (1)
Total other income and expenses3
 1
 7
 24
Interest Expense20
 17
 59
 50
(Loss) Income Before Income Taxes(21) (20) 119
 151
Income Tax (Benefit) Expense(10) (8) 43
 57
Net (Loss) Income$(11) $(12) $76
 $94
Other Comprehensive Income, net of tax       
Reclassification into earnings from hedging activities of equity method investments—
 1
 —
 1
Comprehensive (Loss) Income$(11) $(11) $76
 $95
Duke Energy Corporation (Duke Energy)
Yesx

No ¨
Duke Energy Florida, LLC (Duke Energy Florida)
Yesx
See Notes to Condensed Consolidated Financial StatementsNo ¨
Duke Energy Carolinas, LLC (Duke Energy Carolinas)
35Yesx
No ¨
Duke Energy Ohio, Inc. (Duke Energy Ohio)
Yesx
No ¨
Progress Energy, Inc. (Progress Energy)

Yesx
PART INo ¨
Duke Energy Indiana, LLC (Duke Energy Indiana)
Yesx

No ¨
Duke Energy Progress, LLC (Duke Energy Progress)
PIEDMONT NATURAL GAS COMPANY, INC.Yesx
Condensed Consolidated Balance SheetsNo ¨
Piedmont Natural Gas Company, Inc. (Piedmont)
(Unaudited)Yesx
No ¨


Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
(in millions)September 30, 2017
 December 31, 2016
ASSETS   
Current Assets   
Cash and cash equivalents$12
 $25
Receivables (net of allowance for doubtful accounts of $2 at 2017 and $3 at 2016)77
 232
Receivables from affiliated companies8
 7
Inventory53
 66
Regulatory assets133
 124
Income taxes receivable99
 9
Other31
 12
Total current assets413
 475
Property, Plant and Equipment   
Cost6,579
 6,174
Accumulated depreciation and amortization(1,454) (1,360)
Net property, plant and equipment5,125
 4,814
Other Noncurrent Assets   
Goodwill49
 49
Regulatory assets322
 373
Investments in equity method unconsolidated affiliates76
 212
Other11
 21
Total other noncurrent assets458
 655
Total Assets$5,996
 $5,944
LIABILITIES AND EQUITY   
Current Liabilities   
Accounts payable$98
 $155
Accounts payable to affiliated companies7
 8
Notes payable and commercial paper—
 330
Notes payable to affiliated companies284
 —
Taxes accrued30
 67
Interest accrued24
 33
Current maturities of long-term debt—
 35
Regulatory liabilities3
 —
Other72
 102
Total current liabilities518
 730
Long-Term Debt2,036
 1,786
Other Noncurrent Liabilities   
Deferred income taxes1,046
 931
Asset retirement obligations15
 14
Regulatory liabilities627
 608
Accrued pension and other post-retirement benefit costs14
 14
Other141
 189
Total other noncurrent liabilities1,843
 1,756
Commitments and Contingencies
 
Equity   
Common stock, no par value: 100 shares authorized and outstanding at 2017 and 2016860
 860
Retained earnings739
 812
Total equity1,599
 1,672
Total Liabilities and Equity$5,996
 $5,944
Duke Energy
Yesx

No ¨
Duke Energy Florida
Yesx
See Notes to Condensed Consolidated Financial StatementsNo ¨
Duke Energy Carolinas
36Yesx
No ¨
Duke Energy Ohio
Yesx
No ¨
Progress Energy

Yesx
PART INo ¨
Duke Energy Indiana
Yesx

No ¨
Duke Energy Progress
PIEDMONT NATURAL GAS COMPANY, INC.Yesx
Condensed Consolidated Statements of Cash FlowsNo ¨
Piedmont
(Unaudited)Yesx
No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
 Nine Months Ended
 September 30,
(in millions)2017
 2016
CASH FLOWS FROM OPERATING ACTIVITIES   
Net income$76
 $94
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization112
 111
Impairment charges7
 —
Deferred income taxes127
 50
Equity in earnings from unconsolidated affiliates(8) (25)
Accrued pension and other post-retirement benefit costs9
 2
Contributions to qualified pension plans—
 (1)
Payments for asset retirement obligations—
 (5)
(Increase) decrease in   
Receivables157
 88
Receivables from affiliated companies(1) —
Inventory13
 33
Other current assets(129) (50)
Increase (decrease) in   
Accounts payable(52) 11
Accounts payable to affiliated companies(1) —
Taxes accrued(37) 12
Other current liabilities(21) (11)
Other assets(9) 55
Other liabilities(7) 17
Net cash provided by operating activities236
 381
CASH FLOWS FROM INVESTING ACTIVITIES   
Capital expenditures(407) (416)
Contributions to equity method investments(12) (40)
Other2
 (2)
Net cash used in investing activities(417) (458)
CASH FLOWS FROM FINANCING ACTIVITIES   
Proceeds from the:   
Issuance of long-term debt250
 296
Issuance of common stock—
 121
Payments for the redemption of long-term debt(35) (40)
Notes payable and commercial paper(330) (210)
Notes payable to affiliated companies284
 —
Dividends paid—
 (82)
Other(1) —
Net cash provided by financing activities168
 85
Net (decrease) increase in cash and cash equivalents(13) 8
Cash and cash equivalents at beginning of period25
 33
Cash and cash equivalents at end of period$12
 $41
Supplemental Disclosures:   
Significant non-cash transactions:   
Accrued capital expenditures$47
 $30
Transfer of ownership interest of certain equity method investees to parent149
 —
Duke Energy
Large accelerated filerx

Accelerated filer ¨
Non-accelerated filer ¨
See Notes to Condensed Consolidated Financial StatementsSmaller reporting company ¨
37Emerging growth company ¨
Duke Energy Carolinas
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filerx

Smaller reporting company ¨
PART IEmerging growth company ¨
Progress Energy
Large accelerated filer ¨

Accelerated filer ¨
PIEDMONT NATURAL GAS COMPANY, INC.Non-accelerated filerx
Condensed Consolidated Statements of Changes in EquitySmaller reporting company ¨
(Unaudited)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 ¨
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).
     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—
 94
 —
 94
Other comprehensive income—
 —
 1
 1
Common stock issuances, including dividend reinvestments and employee benefits121
 —
 —
 121
Common stock dividends—
 (87) —
 (87)
Balance at September 30, 2016$849
 $738
 $—
 $1,587
        
Balance at December 31, 2016$860
 $812
 $—
 $1,672
Net income—
 76
 —
 76
Transfer of ownership interest of certain equity method investees to parent—
 (149) —
 (149)
Balance at September 30, 2017$860
 $739
 $—
 $1,599
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

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
RegistrantTitle of each classTrading Symbol(s)Name of each exchange on which registered
Duke EnergyCommon Stock, $0.001 par valueDUKNew York Stock Exchange LLC
Duke Energy5.125% Junior Subordinated Debentures due January 15, 2073DUKHNew York Stock Exchange LLC
Duke Energy5.625% Junior Subordinated Debentures due September 15, 2078DUKBNew York Stock Exchange LLC
Duke EnergyDepositary Shares, each representing a 1/1,000th interest in a share of 5.75% Series A Cumulative Redeemable Perpetual Preferred Stock, par value $0.001 per shareDUK PR ANew York Stock Exchange LLC
Number of shares of Common stock outstanding at April 30, 2019:
RegistrantDescriptionShares
Duke EnergyCommon stock, $0.001 par value728,046,950
This combined Form 10-Q is filed separately by eight registrants: Duke Energy, Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont (collectively the Duke Energy Registrants). Information contained herein relating to any individual registrant is filed by such registrant solely on its own behalf. Each registrant makes no representation as to information relating exclusively to the other registrants.
Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont meet the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and are therefore filing this form with the reduced disclosure format specified in General Instructions H(2) of Form 10-Q.


TABLE OF CONTENTS
See Notes to Condensed Consolidated Cautionary Statement Regarding Forward-Looking Information
PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements
38
Duke Energy Corporation Financial Statements
9

PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS,Duke Energy Carolinas, LLC – PROGRESS ENERGY, INC. –Financial Statements
DUKE ENERGY PROGRESS,14
Progress Energy, Inc. Financial Statements
18
Duke Energy Progress, LLC – DUKE ENERGY FLORIDA,Financial Statements
22
Duke Energy Florida, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA,Financial Statements
26
Duke Energy Ohio, Inc. Financial Statements
30
Duke Energy Indiana, LLC – PIEDMONT NATURAL GAS COMPANY, INC.Financial Statements
34
Piedmont Natural Gas Company, Inc. Financial Statements
38
Combined Notes to Condensed Consolidated Financial Statements
Note 1 – (Unaudited)Organization and Basis of Presentation
42
Note 2 – Business Segments
44
Note 3 – Regulatory Matters
46
Note 4 – Commitments and Contingencies
54
Note 5 – Leases
58
Note 6 – Debt and Credit Facilities
62
Note 7 – Asset Retirement Obligations
64
Note 8 – Goodwill
65
Note 9 – Related Party Transactions
66
Note 10 – Derivatives and Hedging
67
Note 11 – Investments in Debt and Equity Securities
72
Note 12 – Fair Value Measurements
77
Note 13 – Variable Interest Entities
82
Note 14 – Revenue
86
Note 15 – Stockholders' Equity
89
Note 16 – Employee Benefit Plans
90
Note 17 – Income Taxes
91
Note 18 – Subsequent Events
92
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
93
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
113
Item 4.
Controls and Procedures
113
PART II. OTHER INFORMATION
Item 1.
Legal Proceedings
114
Item 1A.
Risk Factors
114
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
114
Item 6.
Exhibits
115
Signatures
118




Index to Combined Notes to Condensed Consolidated Financial Statements
The unaudited notes to the condensed consolidated financial statements that follow are a combined presentation. The following list indicates the registrants to which the footnotes apply.
 Applicable Notes
Registrant1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
Duke Energy Corporation• • • • • • • •   • • • • • • • • •
Duke Energy Carolinas, LLC•   • • • • •   • • • • •     • • •
Progress Energy, Inc.•   • • • • • • • • • • •     • • •
Duke Energy Progress, LLC•   • • • • •   • • • • •     • • •
Duke Energy Florida, LLC•   • • • • •   • • • • •     • • •
Duke Energy Ohio, Inc.• • • • • • • • • •   • •     • • •
Duke Energy Indiana, LLC•   • • • • •   • • • • •     • • •
Piedmont Natural Gas Company, Inc.• • • • • • • • • • • • •   • • • •
FORWARD LOOKING STATEMENTS


CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This document includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are based on management’s beliefs and assumptions and can often be identified by terms and phrases that include “anticipate,” “believe,” “intend,” “estimate,” “expect,” “continue,” “should,” “could,” “may,” “plan,” “project,” “predict,” “will,” “potential,” “forecast,” “target,” “guidance,” “outlook” or other similar terminology. Various factors may cause actual results to be materially different than the suggested outcomes within forward-looking statements; accordingly, there is no assurance that such results will be realized. These factors include, but are not limited to:
State, federal and foreign legislative and regulatory initiatives, including costs of compliance with existing and future environmental requirements, including those related to climate change, as well as rulings that affect cost and investment recovery or have an impact on rate structures or market prices;
The extent and timing of costs and liabilities to comply with federal and state laws, regulations and legal requirements related to coal ash remediation, including amounts for required closure of certain ash impoundments, are uncertain and difficult to estimate;
The ability to recover eligible costs, including amounts associated with coal ash impoundment retirement obligations and costs related to significant weather events, and to earn an adequate return on investment through rate case proceedings and the regulatory process;
The costs of decommissioning Crystal River Unit 3 and other nuclear facilities could prove to be more extensive than amounts estimated and all costs may not be fully recoverable through the regulatory process;
Costs and effects of legal and administrative proceedings, settlements, investigations and claims;
Industrial, commercial and residential growth or decline in service territories or customer bases resulting from sustained downturns of the economy and the economic health of our service territories or variations in customer usage patterns, including energy efficiency efforts and use of alternative energy sources, such as self-generation and distributed generation technologies;
Federal and state regulations, laws and other efforts designed to promote and expand the use of energy efficiency measures and distributed generation technologies, such as private solar and battery storage, in Duke Energy service territories could result in customers leaving the electric distribution system, excess generation resources as well as stranded costs;
Advancements in technology;
Additional competition in electric and natural gas markets and continued industry consolidation;
The influence of weather and other natural phenomena on operations, including the economic, operational and other effects of severe storms, hurricanes, droughts, earthquakes and tornadoes, including extreme weather associated with climate change;
The ability to successfully operate electric generating facilities and deliver electricity to customers including direct or indirect effects to the company resulting from an incident that affects the U.S. electric grid or generating resources;
The ability to obtain the necessary permits and approvals and to complete necessary or desirable pipeline expansion or infrastructure projects in our natural gas business;
Operational interruptions to our natural gas distribution and transmission activities;
The availability of adequate interstate pipeline transportation capacity and natural gas supply;
The impact on facilities and business from a terrorist attack, cybersecurity threats, data security breaches, operational accidents, information technology failures or other catastrophic events, such as fires, explosions, pandemic health events or other similar occurrences;
The inherent risks associated with the operation of nuclear facilities, including environmental, health, safety, regulatory and financial risks, including the financial stability of third-party service providers;
The timing and extent of changes in commodity prices and interest rates and the ability to recover such costs through the regulatory process, where appropriate, and their impact on liquidity positions and the value of underlying assets;
The results of financing efforts, including the ability to obtain financing on favorable terms, which can be affected by various factors, including credit ratings, interest rate fluctuations, compliance with debt covenants and conditions and general market and economic conditions;
Credit ratings of the Duke Energy Registrants may be different from what is expected;
Declines in the market prices of equity and fixed-income securities and resultant cash funding requirements for defined benefit pension plans, other post-retirement benefit plans and nuclear decommissioning trust funds;
Construction and development risks associated with the completion of the Duke Energy Registrants’ capital investment projects, including risks related to financing, obtaining and complying with terms of permits, meeting construction budgets and schedules and satisfying operating and environmental performance standards, as well as the ability to recover costs from customers in a timely manner, or at all;
Changes in rules for regional transmission organizations, including changes in rate designs and new and evolving capacity markets, and risks related to obligations created by the default of other participants;
The ability to control operation and maintenance costs;
The level of creditworthiness of counterparties to transactions;
Employee workforce factors, including the potential inability to attract and retain key personnel;
The ability of subsidiaries to pay dividends or distributions to Duke Energy Corporation holding company (the Parent);


Tables within
FORWARD LOOKING STATEMENTS


The performance of projects undertaken by our nonregulated businesses and the success of efforts to invest in and develop new opportunities;
The effect of accounting pronouncements issued periodically by accounting standard-setting bodies;
The impact of U.S. tax legislation to our financial condition, results of operations or cash flows and our credit ratings;
The impacts from potential impairments of goodwill or equity method investment carrying values; and
The ability to implement our business strategy, including enhancing existing technology systems.
Additional risks and uncertainties are identified and discussed in the Duke Energy Registrants' reports filed with the SEC and available at the SEC's website at sec.gov. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than described. Forward-looking statements speak only as of the date they are made and the Duke Energy Registrants expressly disclaim an obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.


GLOSSARY OF TERMS


Glossary of Terms
The following terms or acronyms used in this Form 10-Q are defined below:
Term or AcronymDefinition
2013 SettlementRevised and Restated Stipulation and Settlement Agreement approved in November 2013 among Duke Energy Florida, the notes may not sum across dueFlorida OPC and other customer advocates
2017 SettlementSecond Revised and Restated Settlement Agreement in 2017 among Duke Energy Florida, the Florida OPC and other customer advocates, which replaces and supplants the 2013 Settlement
ACPAtlantic Coast Pipeline, LLC, a limited liability company owned by Dominion, Duke Energy and Southern Company Gas
ACP pipelineThe approximately 600-mile proposed interstate natural gas pipeline
AFSAvailable for Sale
AFUDCAllowance for funds used during construction
the AgentsWells Fargo Securities, LLC, Citigroup Global Market Inc., J.P. Morgan Securities, LLC
AMIAdvanced Metering Infrastructure
AMTAlternative Minimum Tax
AOCIAccumulated Other Comprehensive Income (Loss)
AROAsset retirement obligations
ATMAt-the-market
BeckjordBeckjord Generating Station
Belews CreekBelews Creek Steam Station
BisonBison Insurance Company Limited
CardinalCardinal Pipeline Company, LLC
CCCombined Cycle
CCRCoal Combustion Residuals
Citrus County CCCitrus County Combined Cycle Facility
Coal Ash ActNorth Carolina Coal Ash Management Act of 2014
the CompanyDuke Energy Corporation and its subsidiaries
ConstitutionConstitution Pipeline Company, LLC
CPCNCertificate of Public Convenience and Necessity
CRCCinergy Receivables Company LLC
Crystal River Unit 3Crystal River Unit 3 Nuclear Plant
CWAClean Water Act
D.C. Circuit CourtU.S. Court of Appeals for the District of Columbia Circuit
DEFPFDuke Energy Florida Project Finance, LLC
DEFRDuke Energy Florida Receivables, LLC
DEPRDuke Energy Progress Receivables, LLC
DERFDuke Energy Receivables Finance Company, LLC
DRIPDividend Reinvestment Program
Duke EnergyDuke Energy Corporation (collectively with its subsidiaries)
Duke Energy OhioDuke Energy Ohio, Inc.
Duke Energy ProgressDuke Energy Progress, LLC
Duke Energy CarolinasDuke Energy Carolinas, LLC
Duke Energy FloridaDuke Energy Florida, LLC


GLOSSARY OF TERMS


Duke Energy IndianaDuke Energy Indiana, LLC
Duke Energy KentuckyDuke Energy Kentucky, Inc.
Duke Energy RegistrantsDuke Energy, Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont
the EDAEquity Distribution Agreement
EDITExcess deferred income tax
EPAU.S. Environmental Protection Agency
EPCEngineering, Procurement and Construction agreement
EPSEarnings Per Share
ESPElectric Security Plan
ETREffective tax rate
Exchange ActSecurities Exchange Act of 1934
FASBFinancial Accounting Standards Board
FERCFederal Energy Regulatory Commission
FESFirstEnergy Solutions Corp.
FluorFluor Enterprises, Inc.
FPSCFlorida Public Service Commission
FTRFinancial transmission rights
FV-NIFair value through net income
GAAPGenerally accepted accounting principles in the U.S.
GAAP Reported EarningsNet Income Attributable to (i) Progress Energy's consolidationDuke Energy Corporation
GAAP Reported EPSDiluted EPS Attributable to Duke Energy Corporation common stockholders
GWhGigawatt-hours
Hardy StorageHardy Storage Company, LLC
ICPAInter-Company Power Agreement
IGCCIntegrated Gasification Combined Cycle
IMRIntegrity Management Rider
IRPIntegrated Resource Plan
IRSInternal Revenue Service
Investment TrustsNDTF investments and grantor trusts of Duke Energy Progress, Duke Energy Florida and other subsidiaries that are not registrants, (ii) subsidiaries that are not registrants but includedDuke Energy Indiana
IURCIndiana Utility Regulatory Commission
JAARJoint Asset Agency Rider
JDAJoint Dispatch Agreement
KPSCKentucky Public Service Commission
Lee Nuclear StationWilliam States Lee III Nuclear Station
MGPManufactured gas plant
MISOMidcontinent Independent System Operator, Inc.
MMBtuMillion British Thermal Unit
MWMegawatt
MWhMegawatt-hour
NAVNet asset value


GLOSSARY OF TERMS


NCDEQNorth Carolina Department of Environmental Quality (formerly the North Carolina Department of Environment and Natural Resources)
NCUCNorth Carolina Utilities Commission
NDTFNuclear decommissioning trust funds
NMCNational Methanol Company
NPDESNational Pollutant Discharge Elimination System
NPNSNormal purchase/normal sale
NRCU.S. Nuclear Regulatory Commission
OPEBOther Post-Retirement Benefit Obligations
ORSSouth Carolina Office of Regulatory Staff
OTTIOther-than-temporary impairment
OVECOhio Valley Electric Corporation
PiedmontPiedmont Natural Gas Company, Inc.
Piedmont Term LoanTerm loan facility with commitments totaling $350M entered in June 2017
Pine NeedlePine Needle LNG Company, LLC
PioneerPioneer Transmission, LLC
PJMPJM Interconnection, LLC
PMPAPiedmont Municipal Power Agency
PPAsPurchase Power Agreements
Progress EnergyProgress Energy, Inc.
PSCSCPublic Service Commission of South Carolina
PUCOPublic Utilities Commission of Ohio
RECRenewable Energy Certificate
REC SolarREC Solar Corp.
ROU assetsRight-of-use assets
RRBARoanoke River Basin Association
SELCSouthern Environmental Law Center
Subsidiary RegistrantsDuke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont
the Tax ActTax Cuts and Jobs Act
TDSICTransmission, Distribution and Storage System Improvement Charge
TPUCTennessee Public Utility Commission
U.S.United States
VIEVariable Interest Entity
WNAWeather normalization adjustment
W.S. Lee CCWilliam States Lee Combined Cycle Facility



FINANCIAL STATEMENTS


ITEM 1. FINANCIAL STATEMENTS

DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
 Three Months Ended
 March 31,
(in millions, except per-share amounts)2019
 2018
Operating Revenues   
Regulated electric$5,285
 $5,284
Regulated natural gas728
 700
Nonregulated electric and other150
 151
Total operating revenues6,163
 6,135
Operating Expenses
 
Fuel used in electric generation and purchased power1,609
 1,676
Cost of natural gas327
 313
Operation, maintenance and other1,419
 1,464
Depreciation and amortization1,089
 967
Property and other taxes343
 316
Impairment charges—
 43
Total operating expenses4,787
 4,779
Losses on Sales of Other Assets and Other, net(3) (100)
Operating Income1,373
 1,256
Other Income and Expenses

 

Equity in earnings (losses) of unconsolidated affiliates43
 (24)
Other income and expenses, net115
 86
Total other income and expenses158
 62
Interest Expense543
 515
Income Before Income Taxes988
 803
Income Tax Expense95
 181
Net Income893
 622
Less: Net (Loss) Income Attributable to Noncontrolling Interests(7) 2
Net Income Attributable to Duke Energy Corporation$900
 $620
    
Earnings Per Share – Basic and Diluted   
Net income attributable to Duke Energy Corporation common stockholders   
Basic and Diluted$1.24
 $0.88
Weighted average shares outstanding   
Basic and Diluted727
 701

See Notes to Condensed Consolidated Financial Statements
9


FINANCIAL STATEMENTS

DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
 Three Months Ended
 March 31,
(in millions)2019
 2018
Net Income$893
 $622
Other Comprehensive Income, net of tax   
Pension and OPEB adjustments—
 1
Net unrealized (losses) gains on cash flow hedges(17) 12
Reclassification into earnings from cash flow hedges1
 1
Unrealized gains (losses) on available-for-sale securities4
 (3)
Other Comprehensive (Loss) Income, net of tax(12) 11
Comprehensive Income881
 633
Less: Comprehensive (Loss) Income Attributable to Noncontrolling Interests(7) 2
Comprehensive Income Attributable to Duke Energy Corporation$888
 $631


See Notes to Condensed Consolidated Financial Statements
10


FINANCIAL STATEMENTS

DUKE ENERGY CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)March 31, 2019 December 31, 2018
ASSETS   
Current Assets   
Cash and cash equivalents$377
 $442
Receivables (net of allowance for doubtful accounts of $19 at 2019 and $16 at 2018)775
 962
Receivables of VIEs (net of allowance for doubtful accounts of $56 at 2019 and $55 at 2018)1,981
 2,172
Inventory3,102
 3,084
Regulatory assets (includes $52 at 2019 and 2018 related to VIEs)1,957
 2,005
Other (includes $152 at 2019 and $162 at 2018 related to VIEs)976
 1,049
Total current assets9,168
 9,714
Property, Plant and Equipment   
Cost139,377
 134,458
Accumulated depreciation and amortization(43,992) (43,126)
Generation facilities to be retired, net336
 362
Net property, plant and equipment95,721
 91,694
Operating Lease Right-of-Use Assets, net1,698
 —
Other Noncurrent Assets   
Goodwill19,303
 19,303
Regulatory assets (includes $1,032 at 2019 and $1,041 at 2018 related to VIEs)13,301
 13,617
Nuclear decommissioning trust funds7,374
 6,720
Investments in equity method unconsolidated affiliates1,602
 1,409
Other (includes $280 at 2019 and $261 at 2018 related to VIEs)2,969
 2,935
Total other noncurrent assets44,549
 43,984
Total Assets$151,136
 $145,392
LIABILITIES AND EQUITY   
Current Liabilities   
Accounts payable$2,538
 $3,487
Notes payable and commercial paper3,029
 3,410
Taxes accrued470
 577
Interest accrued544
 559
Current maturities of long-term debt (includes $227 at 2019 and 2018 related to VIEs)2,501
 3,406
Asset retirement obligations779
 919
Regulatory liabilities611
 598
Other1,810
 2,085
Total current liabilities12,282
 15,041
Long-Term Debt (includes $4,065 at 2019 and $3,998 at 2018 related to VIEs)53,681
 51,123
Operating Lease Liabilities1,488
 —
Other Noncurrent Liabilities   
Deferred income taxes8,040
 7,806
Asset retirement obligations12,256
 9,548
Regulatory liabilities15,212
 14,834
Accrued pension and other post-retirement benefit costs974
 988
Investment tax credits571
 568
Other (includes $212 at 2019 and 2018 related to VIEs)1,587
 1,650
Total other noncurrent liabilities38,640
 35,394
Commitments and Contingencies

 

Equity   
Preferred stock, $0.001 par value, 40 million depositary shares authorized and outstanding at 2019974
 —
Common stock, $0.001 par value, 2 billion shares authorized; 728 million shares outstanding at 2019 and 727 million shares outstanding at 20181
 1
Additional paid-in capital40,823
 40,795
Retained earnings3,360
 3,113
Accumulated other comprehensive loss(128) (92)
Total Duke Energy Corporation stockholders' equity45,030
 43,817
Noncontrolling interests15
 17
Total equity45,045
 43,834
Total Liabilities and Equity$151,136
 $145,392

See Notes to Condensed Consolidated Financial Statements
11


FINANCIAL STATEMENTS

DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 Three Months Ended
 March 31,
(in millions)2019
 2018
CASH FLOWS FROM OPERATING ACTIVITIES   
Net income$893
 $622
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation, amortization and accretion (including amortization of nuclear fuel)1,238
 1,089
Equity component of AFUDC(31) (55)
Losses on sales of other assets3
 100
Impairment charges—
 43
Deferred income taxes97
 199
Equity in (earnings) losses of unconsolidated affiliates(43) 24
Accrued pension and other post-retirement benefit costs2
 15
Contributions to qualified pension plans—
 (141)
Payments for asset retirement obligations(152) (122)
Payment for disposal of other assets—
 (105)
Other rate case adjustments—
 37
Provision for rate refunds35
 158
(Increase) decrease in   
Net realized and unrealized mark-to-market and hedging transactions10
 4
Receivables388
 64
Inventory(31) 101
Other current assets98
 27
Increase (decrease) in   
Accounts payable(636) (327)
Taxes accrued(107) (107)
Other current liabilities(407) (171)
Other assets(158) (59)
Other liabilities40
 (5)
Net cash provided by operating activities1,239
 1,391
CASH FLOWS FROM INVESTING ACTIVITIES   
Capital expenditures(2,536) (2,087)
Contributions to equity method investments(94) (74)
Purchases of debt and equity securities(860) (958)
Proceeds from sales and maturities of debt and equity securities851
 930
Other(74) (75)
Net cash used in investing activities(2,713) (2,264)
CASH FLOWS FROM FINANCING ACTIVITIES   
Proceeds from the:   
Issuance of long-term debt2,737
 1,240
Issuance of preferred stock974
 —
Issuance of common stock13
 21
Payments for the redemption of long-term debt(1,201) (487)
Proceeds from the issuance of short-term debt with original maturities greater than 90 days135
 135
Payments for the redemption of short-term debt with original maturities greater than 90 days(239) (50)
Notes payable and commercial paper(304) 706
Dividends paid(649) (599)
Other(33) (19)
Net cash provided by financing activities1,433
 947
Net (decrease) increase in cash, cash equivalents and restricted cash(41) 74
Cash, cash equivalents and restricted cash at beginning of period591
 505
Cash, cash equivalents and restricted cash at end of period$550
 $579
Supplemental Disclosures:   
Significant non-cash transactions:   
Accrued capital expenditures$811
 $799
Non-cash dividends27
 26

See Notes to Condensed Consolidated Financial Statements
12

FINANCIAL STATEMENTS




DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
      Accumulated Other Comprehensive   
       (Loss) Income   
       Net Unrealized
 Total
  
      Net Gains
(Losses) Gains
 Duke Energy
  
  Common
 Additional
 (Losses) on
on Available-
Pension and
Corporation
  
 Preferred
Stock
Common
Paid-in
Retained
Cash Flow
for-Sale-
OPEB
Stockholders'
Noncontrolling
Total
(in millions)Stock
Shares
Stock
Capital
Earnings
Hedges
Securities
Adjustments
Equity
Interests
Equity
Balance at December 31, 2017$—
700
$1
$38,792
$3,013
$(10)$12
$(69)$41,739
$(2)$41,737
Net income—
—
—
—
620
—
—
—
620
2
622
Other comprehensive income (loss)—
—
—
—
—
13
(3)1
11
—
11
Common stock issuances, including dividend reinvestment and employee benefits—
1
—
47
—
—
—
—
47
—
47
Common stock dividends—
—
—
—
(625)—
—
—
(625)—
(625)
Distributions to noncontrolling interest in subsidiaries—
—
—
—
—
—
—
—
—
(1)(1)
Other(a)
—
—
—
—
13
—
(13)—
—
7
7
Balance at March 31, 2018$—
701
$1
$38,839
$3,021
$3
$(4)$(68)$41,792
$6
$41,798
            
Balance at December 31, 2018$—
727
$1
$40,795
$3,113
$(14)$(3)$(75)$43,817
$17
$43,834
Net income (loss)—
—
—
—
900
—
—
—
900
(7)893
Other comprehensive (loss) income—
—
—
—
—
(16)4
—
(12)—
(12)
Preferred stock issuances, net of issuance costs(b)
974
—
—
—
—
—
—
—
974
—
974
Common stock issuances, including dividend reinvestment and employee benefits—
1
—
28
—
—
—
—
28
—
28
Common stock dividends—
—
—
—
(676)—
—
—
(676)—
(676)
Other(c)
—
—
—
—
23
(6)(1)(17)(1)5
4
Balance at March 31, 2019$974
728
$1
$40,823
$3,360
$(36)$—
$(92)$45,030
$15
$45,045
(a)Amounts in Retained Earnings and Accumulated Other Comprehensive (Loss) Income represent a cumulative-effect adjustment due to implementation of a new accounting standard related to Financial Instruments Classification and Measurement.
(b)Duke Energy issued 40 million depositary shares of preferred stock in the consolidated Duke Energy balancesfirst quarter of 2019.
(c)Amounts in Retained Earnings and (iii)Accumulated Other Comprehensive (Loss) Income primarily represent impacts to accumulated other comprehensive income as a result of the Piedmont registrant not includedadoption of Accounting Standards Update 2018-02: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.

See Notes to Condensed Consolidated Financial Statements
13


FINANCIAL STATEMENTS


DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
 Three Months Ended
 March 31,
(in millions)2019
 2018
Operating Revenues$1,744
 $1,763
Operating Expenses   
Fuel used in electric generation and purchased power472
 473
Operation, maintenance and other440
 451
Depreciation and amortization317
 272
Property and other taxes80
 72
Impairment charges—
 13
Total operating expenses1,309
 1,281
Operating Income435
 482
Other Income and Expenses, net31
 39
Interest Expense110
 107
Income Before Income Taxes356
 414
Income Tax Expense63
 91
Net Income$293
 $323
Other Comprehensive Income, net of tax   
Reclassification into earnings from cash flow hedges—
 1
Comprehensive Income$293
 $324

See Notes to Condensed Consolidated Financial Statements
14


FINANCIAL STATEMENTS

DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)March 31, 2019
 December 31, 2018
ASSETS   
Current Assets   
Cash and cash equivalents$—
 $33
Receivables (net of allowance for doubtful accounts of $2 at 2019 and 2018)166
 219
Receivables of VIEs (net of allowance for doubtful accounts of $7 at 2019 and 2018)630
 699
Receivables from affiliated companies88
 182
Inventory1,007
 948
Regulatory assets560
 520
Other31
 72
Total current assets2,482
 2,673
Property, Plant and Equipment   
Cost46,929
 44,741
Accumulated depreciation and amortization(15,899) (15,496)
Net property, plant and equipment31,030
 29,245
Operating Lease Right-of-Use Assets, net146
 —
Other Noncurrent Assets   
Regulatory assets3,429
 3,457
Nuclear decommissioning trust funds3,913
 3,558
Other1,027
 1,027
Total other noncurrent assets8,369
 8,042
Total Assets$42,027
 $39,960
LIABILITIES AND EQUITY   
Current Liabilities   
Accounts payable$643
 $988
Accounts payable to affiliated companies248
 230
Notes payable to affiliated companies745
 439
Taxes accrued80
 171
Interest accrued134
 102
Current maturities of long-term debt7
 6
Asset retirement obligations209
 290
Regulatory liabilities200
 199
Other415
 571
Total current liabilities2,681

2,996
Long-Term Debt10,658
 10,633
Long-Term Debt Payable to Affiliated Companies300
 300
Operating Lease Liabilities123
 —
Other Noncurrent Liabilities   
Deferred income taxes3,769
 3,689
Asset retirement obligations5,219
 3,659
Regulatory liabilities6,325
 5,999
Accrued pension and other post-retirement benefit costs97
 99
Investment tax credits235
 231
Other645
 671
Total other noncurrent liabilities16,290
 14,348
Commitments and Contingencies

 

Equity   
Member's equity11,982
 11,689
Accumulated other comprehensive loss(7) (6)
Total equity11,975
 11,683
Total Liabilities and Equity$42,027
 $39,960

See Notes to Condensed Consolidated Financial Statements
15


FINANCIAL STATEMENTS

DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 Three Months Ended
 March 31,
(in millions)2019
 2018
CASH FLOWS FROM OPERATING ACTIVITIES   
Net income$293
 $323
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization (including amortization of nuclear fuel)388
 347
Equity component of AFUDC(9) (21)
Impairment charges—
 13
Deferred income taxes64
 80
Accrued pension and other post-retirement benefit costs(2) 1
Contributions to qualified pension plans—
 (46)
Payments for asset retirement obligations(65) (55)
Provision for rate refunds19
 61
(Increase) decrease in   
Net realized and unrealized mark-to-market and hedging transactions1
 —
Receivables124
 19
Receivables from affiliated companies94
 (11)
Inventory(59) (9)
Other current assets(35) (144)
Increase (decrease) in   
Accounts payable(266) (76)
Accounts payable to affiliated companies18
 50
Taxes accrued(91) (129)
Other current liabilities(70) (23)
Other assets(29) 12
Other liabilities(7) (43)
Net cash provided by operating activities368
 349
CASH FLOWS FROM INVESTING ACTIVITIES   
Capital expenditures(721) (621)
Purchases of debt and equity securities(405) (494)
Proceeds from sales and maturities of debt and equity securities405
 494
Other(9) (21)
Net cash used in investing activities(730) (642)
CASH FLOWS FROM FINANCING ACTIVITIES   
Proceeds from the issuance of long-term debt25
 991
Payments for the redemption of long-term debt(1) (401)
Notes payable to affiliated companies306
 (59)
Distributions to parent—
 (250)
Other(1) (1)
Net cash provided by financing activities329
 280
Net decrease in cash and cash equivalents(33) (13)
Cash and cash equivalents at beginning of period33
 16
Cash and cash equivalents at end of period$—
 $3
Supplemental Disclosures:   
Significant non-cash transactions:   
Accrued capital expenditures$221
 $267

See Notes to Condensed Consolidated Financial Statements
16


FINANCIAL STATEMENTS

DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
   Accumulated Other  
   Comprehensive  
   Loss  
   Net Losses on
  
 Member's
 Cash Flow
 Total
(in millions)Equity
 Hedges
 Equity
Balance at December 31, 2017$11,368
 $(7) $11,361
Net income323
 —
 323
Other comprehensive income—
 1
 1
Distributions to parent(250) —
 (250)
Balance at March 31, 2018$11,441
 $(6) $11,435
      
Balance at December 31, 2018$11,689
 $(6) $11,683
Net income293
 —
 293
Other—
 (1) (1)
Balance at March 31, 2019$11,982
 $(7) $11,975

See Notes to Condensed Consolidated Financial Statements
17


FINANCIAL STATEMENTS


PROGRESS ENERGY, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
 Three Months Ended
 March 31,
(in millions)2019
 2018
Operating Revenues$2,572
 $2,576
Operating Expenses   
Fuel used in electric generation and purchased power925
 976
Operation, maintenance and other567
 623
Depreciation and amortization455
 384
Property and other taxes137
 123
Impairment charges—
 29
Total operating expenses2,084
 2,135
Gains on Sales of Other Assets and Other, net—
 6
Operating Income488
 447
Other Income and Expenses, net31
 35
Interest Expense219
 209
Income Before Income Taxes300
 273
Income Tax Expense52
 36
Net Income248
 237
Less: Net (Loss) Income Attributable to Noncontrolling Interests(1) 2
Net Income Attributable to Parent$249
 $235
    
Net Income$248
 $237
Other Comprehensive Income, net of tax   
Pension and OPEB adjustments1
 —
Net unrealized gains (losses) on cash flow hedges2
 2
Other Comprehensive Income, net of tax3

2
Comprehensive Income251
 239
Less: Comprehensive Income Attributable to Noncontrolling Interests(1) 2
Comprehensive Income Attributable to Parent$252

$237


See Notes to Condensed Consolidated Financial Statements
18


FINANCIAL STATEMENTS

PROGRESS ENERGY, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)March 31, 2019
 December 31, 2018
ASSETS   
Current Assets   
Cash and cash equivalents$45
 $67
Receivables (net of allowance for doubtful accounts of $5 at 2019 and 2018)128
 220
Receivables of VIEs (net of allowance for doubtful accounts of $8 at 2019 and 2018)817
 909
Receivables from affiliated companies46
 168
Notes receivable from affiliated companies31
 —
Inventory1,464
 1,459
Regulatory assets (includes $52 at 2019 and 2018 related to VIEs)1,076
 1,137
Other (includes $12 at 2019 and $39 at 2018 related to VIEs)143
 125
Total current assets3,750
 4,085
Property, Plant and Equipment   
Cost52,309
 50,260
Accumulated depreciation and amortization(16,646) (16,398)
Generation facilities to be retired, net336
 362
Net property, plant and equipment35,999
 34,224
Operating Lease Right-of-Use Assets, net835
 —
Other Noncurrent Assets   
Goodwill3,655
 3,655
Regulatory assets (includes $1,032 at 2019 and $1,041 at 2018 related to VIEs)6,358
 6,564
Nuclear decommissioning trust funds3,461
 3,162
Other1,029
 974
Total other noncurrent assets14,503
 14,355
Total Assets$55,087
 $52,664
LIABILITIES AND EQUITY   
Current Liabilities   
Accounts payable$781
 $1,172
Accounts payable to affiliated companies266
 360
Notes payable to affiliated companies1,605
 1,235
Taxes accrued135
 109
Interest accrued213
 246
Current maturities of long-term debt (includes $54 at 2019 and $53 at 2018 related to VIEs)825
 1,672
Asset retirement obligations456
 514
Regulatory liabilities259
 280
Other778
 821
Total current liabilities5,318
 6,409
Long-Term Debt (includes $1,657 at 2019 and $1,636 at 2018 related to VIEs)18,276
 17,089
Long-Term Debt Payable to Affiliated Companies150
 150
Operating Lease Liabilities748
 —
Other Noncurrent Liabilities   
Deferred income taxes4,064
 3,941
Asset retirement obligations6,050
 4,897
Regulatory liabilities5,116
 5,049
Accrued pension and other post-retirement benefit costs516
 521
Other341
 351
Total other noncurrent liabilities16,087
 14,759
Commitments and Contingencies
 
Equity   
Common stock, $0.01 par value, 100 shares authorized and outstanding at 2019 and 2018—
 —
Additional paid-in capital9,143
 9,143
Retained earnings5,386
 5,131
Accumulated other comprehensive loss(23) (20)
Total Progress Energy, Inc. stockholders' equity14,506
 14,254
Noncontrolling interests2
 3
Total equity14,508
 14,257
Total Liabilities and Equity$55,087
 $52,664

See Notes to Condensed Consolidated Financial Statements
19


FINANCIAL STATEMENTS

PROGRESS ENERGY, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 Three Months Ended
 March 31,
(in millions)2019
 2018
CASH FLOWS FROM OPERATING ACTIVITIES   
Net income$248
 $237
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation, amortization and accretion (including amortization of nuclear fuel)546
 439
Equity component of AFUDC(15) (26)
Gains on sales of other assets—
 (6)
Impairment charges—
 29
Deferred income taxes82
 71
Accrued pension and other post-retirement benefit costs4
 6
Contributions to qualified pension plans—
 (45)
Payments for asset retirement obligations(75) (55)
Other rate case adjustments—
 37
Provision for rate refunds6
 33
(Increase) decrease in   
Net realized and unrealized mark-to-market and hedging transactions1
 4
Receivables187
 (33)
Receivables from affiliated companies122
 29
Inventory(18) 55
Other current assets35
 (60)
Increase (decrease) in   
Accounts payable(196) (53)
Accounts payable to affiliated companies(94) 33
Taxes accrued26
 8
Other current liabilities(196) (82)
Other assets(112) (86)
Other liabilities(10) (8)
Net cash provided by operating activities541
 527
CASH FLOWS FROM INVESTING ACTIVITIES   
Capital expenditures(1,012) (762)
Purchases of debt and equity securities(409) (406)
Proceeds from sales and maturities of debt and equity securities405
 411
Notes receivable from affiliated companies(31) 127
Other(45) (40)
Net cash used in investing activities(1,092) (670)
CASH FLOWS FROM FINANCING ACTIVITIES   
Proceeds from the issuance of long-term debt1,295
 —
Payments for the redemption of long-term debt(1,132) (80)
Notes payable to affiliated companies370
 177
Other1
 (2)
Net cash provided by financing activities534
 95
Net decrease in cash, cash equivalents and restricted cash(17) (48)
Cash, cash equivalents and restricted cash at beginning of period112
 87
Cash, cash equivalents and restricted cash at end of period$95
 $39
Supplemental Disclosures:   
Significant non-cash transactions:   
Accrued capital expenditures$310
 $316

See Notes to Condensed Consolidated Financial Statements
20

FINANCIAL STATEMENTS




PROGRESS ENERGY, INC.
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
     Accumulated Other Comprehensive (Loss) Income      
       Net Unrealized
   Total Progress
    
 Additional
   Net Losses on
 Gains (losses) 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, 2017$9,143
 $4,350
 $(18) $5
 $(12) $13,468
 $(3) $13,465
Net income—
 235
 —
 —
 —
 235
 2
 237
Other comprehensive income—
 —
 2
 —
 —
 2
 —
 2
Other(a)
(1) 6
 —
 (6) —
 (1) —
 (1)
Balance at March 31, 2018$9,142

$4,591

$(16)
$(1)
$(12) $13,704

$(1)
$13,703
                
Balance at December 31, 2018$9,143
 $5,131
 $(12) $(1) $(7) $14,254
 $3
 $14,257
Net income—
 249
 —
 —
 —
 249
 (1) 248
Other comprehensive income—
 —
 2
 —
 1
 3
 —
 3
Other(b)
—
 6
 (4) —
 (2) —
 —
 —
Balance at March 31, 2019$9,143

$5,386

$(14)
$(1)
$(8) $14,506

$2

$14,508
(a)Amounts in Retained Earnings and Accumulated Other Comprehensive Loss represent a cumulative-effect adjustment due to implementation of a new accounting standard related to Financial Instruments Classification and Measurement.
(b)Amounts in Retained Earnings and Accumulated Other Comprehensive (Loss) Income primarily represent impacts to accumulated other comprehensive income as a result of the consolidated Duke Energy results for the threeadoption of Accounting Standards Update 2018-02: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.

See Notes to Condensed Consolidated Financial Statements
21


FINANCIAL STATEMENTS


DUKE ENERGY PROGRESS, LLC
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
 Three Months Ended
 March 31,
(in millions)2019
 2018
Operating Revenues$1,484
 $1,460
Operating Expenses   
Fuel used in electric generation and purchased power515
 509
Operation, maintenance and other335
 381
Depreciation and amortization290
 235
Property and other taxes44
 35
Impairment charges—
 32
Total operating expenses1,184
 1,192
Gains on Sales of Other Assets and Other, net—
 1
Operating Income300
 269
Other Income and Expenses, net24
 18
Interest Expense77
 81
Income Before Income Taxes247
 206
Income Tax Expense44
 29
Net Income and Comprehensive Income$203
 $177


See Notes to Condensed Consolidated Financial Statements
22


FINANCIAL STATEMENTS

DUKE ENERGY PROGRESS, LLC
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)March 31, 2019
 December 31, 2018
ASSETS   
Current Assets   
Cash and cash equivalents$30
 $23
Receivables (net of allowance for doubtful accounts of $2 at 2019 and 2018)42
 75
Receivables of VIEs (net of allowance for doubtful accounts of $5 at 2019 and 2018)495
 547
Receivables from affiliated companies28
 23
Notes receivable from affiliated companies38
 —
Inventory959
 954
Regulatory assets622
 703
Other45
 62
Total current assets2,259
 2,387
Property, Plant and Equipment   
Cost33,188
 31,459
Accumulated depreciation and amortization(11,635) (11,423)
Generation facilities to be retired, net336
 362
Net property, plant and equipment21,889
 20,398
Operating Lease Right-of-Use Assets, net388
 —
Other Noncurrent Assets   
Regulatory assets4,041
 4,111
Nuclear decommissioning trust funds2,744
 2,503
Other627
 612
Total other noncurrent assets7,412
 7,226
Total Assets$31,948
 $30,011
LIABILITIES AND EQUITY   
Current Liabilities   
Accounts payable$363
 $660
Accounts payable to affiliated companies221
 278
Notes payable to affiliated companies—
 294
Taxes accrued49
 53
Interest accrued87
 116
Current maturities of long-term debt5
 603
Asset retirement obligations452
 509
Regulatory liabilities176
 178
Other346
 408
Total current liabilities1,699
 3,099
Long-Term Debt8,893
 7,451
Long-Term Debt Payable to Affiliated Companies150
 150
Operating Lease Liabilities361
 —
Other Noncurrent Liabilities   
Deferred income taxes2,172
 2,119
Asset retirement obligations5,471
 4,311
Regulatory liabilities4,093
 3,955
Accrued pension and other post-retirement benefit costs235
 237
Investment tax credits141
 142
Other89
 106
Total other noncurrent liabilities12,201
 10,870
Commitments and Contingencies
 
Equity   
Member's Equity8,644
 8,441
Total Liabilities and Equity$31,948
 $30,011

See Notes to Condensed Consolidated Financial Statements
23


FINANCIAL STATEMENTS

DUKE ENERGY PROGRESS, LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 Three Months Ended
 March 31,
(in millions)2019
 2018
CASH FLOWS FROM OPERATING ACTIVITIES   
Net income$203
 $177
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization (including amortization of nuclear fuel)336
 284
Equity component of AFUDC(14) (14)
Gains on sales of other assets—
 (1)
Impairment charges—
 32
Deferred income taxes33
 42
Accrued pension and other post-retirement benefit costs—
 4
Contributions to qualified pension plans—
 (25)
Payments for asset retirement obligations(68) (44)
Other rate case adjustments—
 37
Provision for rate refunds6
 33
(Increase) decrease in   
Net realized and unrealized mark-to-market and hedging transactions(3) 2
Receivables87
 (31)
Receivables from affiliated companies(5) (2)
Inventory(5) 15
Other current assets96
 (88)
Increase (decrease) in   
Accounts payable(196) (39)
Accounts payable to affiliated companies(57) 29
Taxes accrued(4) (28)
Other current liabilities(109) (64)
Other assets(45) 18
Other liabilities(9) (5)
Net cash provided by operating activities246
 332
CASH FLOWS FROM INVESTING ACTIVITIES   
Capital expenditures(548) (424)
Purchases of debt and equity securities(315) (284)
Proceeds from sales and maturities of debt and equity securities308
 281
Notes receivable from affiliated companies(38) —
Other(20) (30)
Net cash used in investing activities(613) (457)
CASH FLOWS FROM FINANCING ACTIVITIES   
Proceeds from the issuance of long-term debt1,270
 —
Payments for the redemption of long-term debt(601) —
Notes payable to affiliated companies(294) 114
Other(1) (1)
Net cash provided by financing activities374
 113
Net increase (decrease) in cash and cash equivalents7
 (12)
Cash and cash equivalents at beginning of period23
 20
Cash and cash equivalents at end of period$30
 $8
Supplemental Disclosures:   
Significant non-cash transactions:   
Accrued capital expenditures$117
 $137

See Notes to Condensed Consolidated Financial Statements
24


FINANCIAL STATEMENTS

DUKE ENERGY PROGRESS, LLC
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
 Member's
(in millions)Equity
Balance at December 31, 2017$7,949
Net income177
Balance at March 31, 2018$8,126
  
Balance at December 31, 2018$8,441
Net income203
Balance at March 31, 2019$8,644


See Notes to Condensed Consolidated Financial Statements
25


FINANCIAL STATEMENTS


DUKE ENERGY FLORIDA, LLC
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
 Three Months Ended
 March 31,
(in millions)2019
 2018
Operating Revenues$1,086
 $1,115
Operating Expenses   
Fuel used in electric generation and purchased power410
 467
Operation, maintenance and other230
 237
Depreciation and amortization165
 150
Property and other taxes93
 88
Total operating expenses898
 942
Operating Income188
 173
Other Income and Expenses, net13
 21
Interest Expense82
 71
Income Before Income Taxes119
 123
Income Tax Expense23
 20
Net Income$96
 $103
Other Comprehensive Income, net of tax

 

Unrealized gains on available-for-sale securities1
 —
Other Comprehensive Income, net of tax$1
 $—
Comprehensive Income$97

$103


See Notes to Condensed Consolidated Financial Statements
26


FINANCIAL STATEMENTS

DUKE ENERGY FLORIDA, LLC
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)March 31, 2019
 December 31, 2018
ASSETS   
Current Assets   
Cash and cash equivalents$8
 $36
Receivables (net of allowance for doubtful accounts of $3 at 2019 and 2018)85
 143
Receivables of VIEs (net of allowance for doubtful accounts of $3 at 2019 and 2018)322
 362
Receivables from affiliated companies34
 28
Inventory505
 504
Regulatory assets (includes $52 at 2019 and 2018 related to VIEs)454
 434
Other (includes $12 at 2019 and $39 at 2018 related to VIEs)55
 46
Total current assets1,463
 1,553
Property, Plant and Equipment   
Cost19,111
 18,792
Accumulated depreciation and amortization(5,003) (4,968)
Net property, plant and equipment14,108
 13,824
Operating Lease Right-of-Use Assets, net447
 —
Other Noncurrent Assets   
Regulatory assets (includes $1,032 at 2019 and $1,041 at 2018 related to VIEs)2,316
 2,454
Nuclear decommissioning trust funds717
 659
Other318
 311
Total other noncurrent assets3,351
 3,424
Total Assets$19,369
 $18,801
LIABILITIES AND EQUITY   
Current Liabilities   
Accounts payable$417
 $511
Accounts payable to affiliated companies29
 91
Notes payable to affiliated companies399
 108
Taxes accrued94
 74
Interest accrued74
 75
Current maturities of long-term debt (includes $54 at 2019 and $53 at 2018 related to VIEs)470
 270
Asset retirement obligations4
 5
Regulatory liabilities83
 102
Other426
 406
Total current liabilities1,996
 1,642
Long-Term Debt (includes $1,332 at 2019 and $1,336 at 2018 related to VIEs)6,795
 7,051
Operating Lease Liabilities387
 —
Other Noncurrent Liabilities   
Deferred income taxes2,051
 1,986
Asset retirement obligations579
 586
Regulatory liabilities1,023
 1,094
Accrued pension and other post-retirement benefit costs251
 254
Other95
 93
Total other noncurrent liabilities3,999
 4,013
Commitments and Contingencies
 
Equity   
Member's equity6,193
 6,097
Accumulated other comprehensive loss(1) (2)
Total equity6,192
 6,095
Total Liabilities and Equity$19,369
 $18,801

See Notes to Condensed Consolidated Financial Statements
27


FINANCIAL STATEMENTS

DUKE ENERGY FLORIDA, LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 Three Months Ended
 March 31,
(in millions)2019
 2018
CASH FLOWS FROM OPERATING ACTIVITIES   
Net income$96
 $103
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation, amortization and accretion207
 152
Equity component of AFUDC(1) (12)
Deferred income taxes45
 29
Accrued pension and other post-retirement benefit costs3
 1
Contributions to qualified pension plans—
 (20)
Payments for asset retirement obligations(7) (11)
(Increase) decrease in   
Net realized and unrealized mark-to-market and hedging transactions2
 2
Receivables55
 (2)
Receivables from affiliated companies(6) —
Inventory(13) 39
Other current assets(35) 42
Increase (decrease) in   
Accounts payable—
 (13)
Accounts payable to affiliated companies(62) 8
Taxes accrued20
 38
Other current liabilities(84) (17)
Other assets(66) (107)
Other liabilities(1) (5)
Net cash provided by operating activities153
 227
CASH FLOWS FROM INVESTING ACTIVITIES   
Capital expenditures(422) (338)
Purchases of debt and equity securities(95) (122)
Proceeds from sales and maturities of debt and equity securities97
 129
Notes receivable from affiliated companies—
 160
Other(25) (10)
Net cash used in investing activities(445) (181)
CASH FLOWS FROM FINANCING ACTIVITIES   
Proceeds from the issuance of long-term debt25
 —
Payments for the redemption of long-term debt(81) (80)
Notes payable to affiliated companies291
 —
Other2
 —
Net cash provided by (used in) financing activities237
 (80)
Net decrease in cash, cash equivalents and restricted cash(55) (34)
Cash, cash equivalents and restricted cash at beginning of period75
 53
Cash, cash equivalents and restricted cash at end of period$20
 $19
Supplemental Disclosures:   
Significant non-cash transactions:   
Accrued capital expenditures$193
 $179

See Notes to Condensed Consolidated Financial Statements
28


FINANCIAL STATEMENTS

DUKE ENERGY FLORIDA, LLC
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
   Accumulated  
   Other  
   Comprehensive  
   Income (Loss)  
   Net Unrealized
  
   Gains (Losses) on
  
 Member's
 Available-for-Sale
 Total
(in millions)Equity
 Securities
 Equity
Balance at December 31, 2017$5,614
 $4
 $5,618
Net income103
 —
 103
Other(a)
6
 (6) —
Balance at March 31, 2018$5,723
 $(2) $5,721
      
Balance at December 31, 2018$6,097
 $(2) $6,095
Net income96
 —
 96
Other comprehensive income—
 1
 1
Balance at March 31, 2019$6,193
 $(1) $6,192

(a)Amounts in Member's Equity and nine months ended September 30, 2016, as Piedmont results were not consolidated by Duke Energy until after the acquisition dateAccumulated Other Comprehensive Income (Loss) represent a cumulative-effect adjustment due to implementation of October 3, 2016.a new accounting standard related to Financial Instruments Classification and Measurement.

See Notes to Condensed Consolidated Financial Statements
29


FINANCIAL STATEMENTS


DUKE ENERGY OHIO, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
 Three Months Ended
 March 31,
(in millions)2019

2018
Operating Revenues   
Regulated electric$355
 $336
Regulated natural gas176
 174
Nonregulated electric and other—
 14
Total operating revenues531
 524
Operating Expenses   
Fuel used in electric generation and purchased power – regulated93
 92
Fuel used in electric generation and purchased power – nonregulated—
 15
Cost of natural gas54
 54
Operation, maintenance and other132
 131
Depreciation and amortization64
 70
Property and other taxes84
 77
Total operating expenses427
 439
Losses on Sales of Other Assets and Other, net—
 (106)
Operating Income (Loss)104
 (21)
Other Income and Expenses, net9
 6
Interest Expense30
 22
Income (Loss) Before Income Taxes83
 (37)
Income Tax Expense (Benefit)14
 (12)
Net Income (Loss) and Comprehensive Income$69
 $(25)


See Notes to Condensed Consolidated Financial Statements
30


FINANCIAL STATEMENTS

DUKE ENERGY OHIO, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)March 31, 2019
 December 31, 2018
ASSETS   
Current Assets   
Cash and cash equivalents$17
 $21
Receivables (net of allowance for doubtful accounts of $3 at 2019 and $2 at 2018)99
 102
Receivables from affiliated companies79
 114
Notes receivable from affiliated companies463
 —
Inventory111
 126
Regulatory assets59
 33
Other25
 24
Total current assets853
 420
Property, Plant and Equipment   
Cost9,542
 9,360
Accumulated depreciation and amortization(2,739) (2,717)
Net property, plant and equipment6,803
 6,643
Operating Lease Right-of-Use Assets, net22
 —
Other Noncurrent Assets   
Goodwill920
 920
Regulatory assets501
 531
Other45
 41
Total other noncurrent assets1,466
 1,492
Total Assets$9,144
 $8,555
LIABILITIES AND EQUITY   
Current Liabilities   
Accounts payable$288
 $316
Accounts payable to affiliated companies70
 78
Notes payable to affiliated companies38
 274
Taxes accrued157
 202
Interest accrued43
 22
Current maturities of long-term debt551
 551
Asset retirement obligations6
 6
Regulatory liabilities51
 57
Other69
 74
Total current liabilities1,273
 1,580
Long-Term Debt2,384
 1,589
Long-Term Debt Payable to Affiliated Companies25
 25
Operating Lease Liabilities21
 —
Other Noncurrent Liabilities   
Deferred income taxes842
 817
Asset retirement obligations87
 87
Regulatory liabilities839
 840
Accrued pension and other post-retirement benefit costs80
 79
Other79
 93
Total other noncurrent liabilities1,927
 1,916
Commitments and Contingencies   
Equity   
Common stock, $8.50 par value, 120 million shares authorized; 90 million shares outstanding at 2019 and 2018762
 762
Additional paid-in capital2,776
 2,776
Accumulated deficit(24) (93)
Total equity3,514
 3,445
Total Liabilities and Equity$9,144
 $8,555

See Notes to Condensed Consolidated Financial Statements
31


FINANCIAL STATEMENTS

DUKE ENERGY OHIO, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 Three Months Ended
 March 31,
(in millions)2019
 2018
CASH FLOWS FROM OPERATING ACTIVITIES   
Net income (loss)$69
 $(25)
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization65
 71
Equity component of AFUDC(3) (4)
Losses on sales of other assets—
 106
Deferred income taxes20
 (15)
Accrued pension and other post-retirement benefit costs—
 1
Payments for asset retirement obligations(1) (1)
Provision for rate refunds4
 16
(Increase) decrease in   
Receivables5
 (1)
Receivables from affiliated companies35
 56
Inventory15
 25
Other current assets(6) 19
Increase (decrease) in   
Accounts payable(5) (27)
Accounts payable to affiliated companies(8) (95)
Taxes accrued(45) (45)
Other current liabilities14
 20
Other assets(10) —
Other liabilities(4) (13)
Net cash provided by operating activities145
 88
CASH FLOWS FROM INVESTING ACTIVITIES   
Capital expenditures(233) (188)
Notes receivable from affiliated companies(463) 14
Other(11) (14)
Net cash used in investing activities(707) (188)
CASH FLOWS FROM FINANCING ACTIVITIES   
Proceeds from the issuance of long-term debt794
 —
Notes payable to affiliated companies(236) 101
Other—
 (1)
Net cash provided by financing activities558
 100
Net decrease in cash and cash equivalents(4) —
Cash and cash equivalents at beginning of period21
 12
Cash and cash equivalents at end of period$17
 $12
Supplemental Disclosures:   
Significant non-cash transactions:   
Accrued capital expenditures$68
 $64

See Notes to Condensed Consolidated Financial Statements
32


FINANCIAL STATEMENTS

DUKE ENERGY OHIO, INC.
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
   Additional
    
 Common
 Paid-in
 Accumulated
 Total
(in millions)Stock
 Capital
 Deficit
 Equity
Balance at December 31, 2017$762
 $2,670
 $(269) $3,163
Net loss—
 —
 (25) (25)
Balance at March 31, 2018$762
 $2,670
 $(294) $3,138
        
Balance at December 31, 2018$762
 $2,776
 $(93) $3,445
Net income—
 —
 69
 69
Balance at March 31, 2019$762

$2,776

$(24)
$3,514


See Notes to Condensed Consolidated Financial Statements
33


FINANCIAL STATEMENTS


DUKE ENERGY INDIANA, LLC
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
 Three Months Ended
 March 31,
(in millions)2019
 2018
Operating Revenues$768
 $731
Operating Expenses   
Fuel used in electric generation and purchased power257
 232
Operation, maintenance and other189
 181
Depreciation and amortization131
 130
Property and other taxes19
 20
Total operating expenses596
 563
Losses on Sales of Other Assets and Other, net(3) —
Operating Income169

168
Other Income and Expenses, net19
 7
Interest Expense43
 40
Income Before Income Taxes145

135
Income Tax Expense35
 35
Net Income and Comprehensive Income$110

$100


See Notes to Condensed Consolidated Financial Statements
34


FINANCIAL STATEMENTS

DUKE ENERGY INDIANA, LLC
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)March 31, 2019
 December 31, 2018
ASSETS   
Current Assets   
Cash and cash equivalents$20
 $24
Receivables (net of allowance for doubtful accounts of $2 at 2019 and 2018)50
 52
Receivables from affiliated companies102
 122
Inventory435
 422
Regulatory assets151
 175
Other23
 35
Total current assets781
 830
Property, Plant and Equipment   
Cost15,633
 15,443
Accumulated depreciation and amortization(5,021) (4,914)
Net property, plant and equipment10,612
 10,529
Operating Lease Right-of-Use Assets, net61
 —
Other Noncurrent Assets   
Regulatory assets981
 982
Other201
 194
Total other noncurrent assets1,182
 1,176
Total Assets$12,636
 $12,535
LIABILITIES AND EQUITY   
Current Liabilities   
Accounts payable$198
 $200
Accounts payable to affiliated companies72
 83
Notes payable to affiliated companies136
 167
Taxes accrued63
 43
Interest accrued53
 58
Current maturities of long-term debt3
 63
Asset retirement obligations108
 109
Regulatory liabilities27
 25
Other92
 107
Total current liabilities752
 855
Long-Term Debt3,569
 3,569
Long-Term Debt Payable to Affiliated Companies150
 150
Operating Lease Liabilities57
 —
Other Noncurrent Liabilities   
Deferred income taxes1,050
 1,009
Asset retirement obligations611
 613
Regulatory liabilities1,709
 1,722
Accrued pension and other post-retirement benefit costs113
 115
Investment tax credits147
 147
Other29
 16
Total other noncurrent liabilities3,659
 3,622
Commitments and Contingencies   
Equity   
Member's Equity4,449
 4,339
Total Liabilities and Equity$12,636
 $12,535

See Notes to Condensed Consolidated Financial Statements
35


FINANCIAL STATEMENTS

DUKE ENERGY INDIANA, LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 Three Months Ended
 March 31,
(in millions)2019
 2018
CASH FLOWS FROM OPERATING ACTIVITIES   
Net income$110
 $100
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation, amortization and accretion132
 131
Equity component of AFUDC(4) (4)
Losses on sale of other assets3
 —
Deferred income taxes28
 17
Accrued pension and other post-retirement benefit costs1
 2
Contributions to qualified pension plans—
 (8)
Payments for asset retirement obligations(11) (11)
Provision for rate refunds—
 26
(Increase) decrease in   
Receivables4
 —
Receivables from affiliated companies20
 26
Inventory(13) (3)
Other current assets19
 (23)
Increase (decrease) in   
Accounts payable8
 21
Accounts payable to affiliated companies(11) (5)
Taxes accrued20
 (1)
Other current liabilities(15) (10)
Other assets12
 (1)
Other liabilities5
 —
Net cash provided by operating activities308
 257
CASH FLOWS FROM INVESTING ACTIVITIES   
Capital expenditures(208) (231)
Purchases of debt and equity securities(6) (6)
Proceeds from sales and maturities of debt and equity securities4
 3
Other(11) (4)
Net cash used in investing activities(221) (238)
CASH FLOWS FROM FINANCING ACTIVITIES   
Payments for the redemption of long-term debt(60) (12)
Notes payable to affiliated companies(31) —
Other—
 (1)
Net cash used in financing activities(91) (13)
Net (decrease) increase in cash and cash equivalents(4)
6
Cash and cash equivalents at beginning of period24
 9
Cash and cash equivalents at end of period$20
 $15
Supplemental Disclosures:   
Significant non-cash transactions:   
Accrued capital expenditures$76
 $64

See Notes to Condensed Consolidated Financial Statements
36


FINANCIAL STATEMENTS

DUKE ENERGY INDIANA, LLC
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
  Member's
(in millions) Equity
Balance at December 31, 2017 $4,121
Net income 100
Balance at March 31, 2018
$4,221
   
Balance at December 31, 2018 $4,339
Net income 110
Balance at March 31, 2019
$4,449


See Notes to Condensed Consolidated Financial Statements
37


FINANCIAL STATEMENTS


PIEDMONT NATURAL GAS COMPANY, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
 Three Months Ended
 March 31,
(in millions)2019
 2018
Operating Revenues$579
 $553
Operating Expenses   
Cost of natural gas273
 259
Operation, maintenance and other80
 82
Depreciation and amortization42
 39
Property and other taxes12
 12
Total operating expenses407
 392
Operating Income172
 161
Other Income and Expenses   
Equity in earnings of unconsolidated affiliates2
 2
Other income and expenses, net4
 3
Total other income and expenses6
 5
Interest Expense22
 21
Income Before Income Taxes156
 145
Income Tax Expense34
 35
Net Income and Comprehensive Income$122
 $110

See Notes to Condensed Consolidated Financial Statements
38


FINANCIAL STATEMENTS

PIEDMONT NATURAL GAS COMPANY, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)March 31, 2019
 December 31, 2018
ASSETS   
Current Assets   
Receivables (net of allowance for doubtful accounts of $4 at 2019 and $2 at 2018)$241
 $266
Receivables from affiliated companies10
 22
Inventory25
 70
Regulatory assets28
 54
Other19
 19
Total current assets323
 431
Property, Plant and Equipment   
Cost7,676
 7,486
Accumulated depreciation and amortization(1,587) (1,575)
Net property, plant and equipment6,089
 5,911
Operating Lease Right-of-Use Assets, net27
 —
Other Noncurrent Assets   
Goodwill49
 49
Regulatory assets289
 303
Investments in equity method unconsolidated affiliates64
 64
Other51
 52
Total other noncurrent assets453
 468
Total Assets$6,892
 $6,810
LIABILITIES AND EQUITY   
Current Liabilities   
Accounts payable$161
 $203
Accounts payable to affiliated companies34
 38
Notes payable to affiliated companies201
 198
Taxes accrued35
 84
Interest accrued25
 31
Current maturities of long-term debt350
 350
Regulatory liabilities75
 37
Other49
 58
Total current liabilities930
 999
Long-Term Debt1,788
 1,788
Operating Lease Liabilities26
 —
Other Noncurrent Liabilities   
Deferred income taxes575
 551
Asset retirement obligations19
 19
Regulatory liabilities1,179
 1,181
Accrued pension and other post-retirement benefit costs4
 4
Other158
 177
Total other noncurrent liabilities1,935
 1,932
Commitments and Contingencies
 
Equity   
Common stock, no par value: 100 shares authorized and outstanding at 2019 and 20181,160
 1,160
Retained earnings1,053
 931
Total equity2,213
 2,091
Total Liabilities and Equity$6,892
 $6,810

See Notes to Condensed Consolidated Financial Statements
39


FINANCIAL STATEMENTS

PIEDMONT NATURAL GAS COMPANY, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 Three Months Ended
 March 31,
(in millions)2019
 2018
CASH FLOWS FROM OPERATING ACTIVITIES   
Net income$122
 $110
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization42
 39
Deferred income taxes23
 (7)
Equity in earnings from unconsolidated affiliates(2) (2)
Accrued pension and other post-retirement benefit costs(2) (1)
Provision for rate refunds7
 23
(Increase) decrease in   
Receivables27
 22
Receivables from affiliated companies12
 —
Inventory45
 37
Other current assets22
 79
Increase (decrease) in   
Accounts payable(44) (15)
Accounts payable to affiliated companies(4) 19
Taxes accrued(49) 46
Other current liabilities15
 18
Other assets(1) 4
Other liabilities(5) (1)
Net cash provided by operating activities208
 371
CASH FLOWS FROM INVESTING ACTIVITIES   
Capital expenditures(209) (121)
Other(2) —
Net cash used in investing activities(211) (121)
CASH FLOWS FROM FINANCING ACTIVITIES   
Notes payable to affiliated companies3
 (257)
Net cash provided by (used in) financing activities3
 (257)
Net decrease in cash and cash equivalents—
 (7)
Cash and cash equivalents at beginning of period—
 19
Cash and cash equivalents at end of period$—
 $12
Supplemental Disclosures:   
Significant non-cash transactions:   
Accrued capital expenditures$92
 $52

See Notes to Condensed Consolidated Financial Statements
40


FINANCIAL STATEMENTS

PIEDMONT NATURAL GAS COMPANY, INC.
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
 Common
 Retained
 Total
(in millions)Stock
 Earnings
 Equity
Balance at December 31, 2017$860
 $802
 $1,662
Net income—
 110
 110
Balance at March 31, 2018$860
 $912
 $1,772
      
Balance at December 31, 2018$1,160
 $931
 $2,091
Net income—
 122
 122
Balance at March 31, 2019$1,160
 $1,053
 $2,213


See Notes to Condensed Consolidated Financial Statements
41



FINANCIAL STATEMENTSORGANIZATION AND BASIS OF PRESENTATION


Index to Combined Notes to Condensed Consolidated Financial Statements
The unaudited notes to the Condensed Consolidated Financial Statements that follow are a combined presentation. The following list indicates the registrants to which the footnotes apply.
 Applicable Notes
Registrant1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
Duke Energy• • • • • • • •   • • • • • • • • •
Duke Energy Carolinas• • • • • • •   • • • • • •   • • •
Progress Energy• • • • • • • • • • • • • •   • • •
Duke Energy Progress• • • • • • •   • • • • • •   • • •
Duke Energy Florida• • • • • • •   • • • • • •   • • •
Duke Energy Ohio• • • • • • • • • •   • • •   • • •
Duke Energy Indiana• • • • • • •   • • • • • •   • • •
Piedmont• • • • • • • • • •   •   •   • • •
Tables within the notes may not sum across due to (i) Progress Energy's consolidation of Duke Energy Progress, Duke Energy Florida and other subsidiaries that are not registrants and (ii) subsidiaries that are not registrants but included in the consolidated Duke Energy balances.
1. ORGANIZATION AND BASIS OF PRESENTATION
NATURE OF OPERATIONS AND BASIS OF CONSOLIDATION
Duke Energy Corporation (collectively with its subsidiaries, Duke Energy) is an energy company headquartered in Charlotte, North Carolina, subject to regulation by the Federal Energy Regulatory Commission (FERC). Duke Energy operates in the United States (U.S.) primarily through its direct and indirect subsidiaries. Certain Duke Energy subsidiaries are also subsidiary registrants, including Duke Energy Carolinas, LLC (Duke Energy Carolinas); Progress Energy, Inc. (Progress Energy); Duke Energy Progress, LLC (Duke Energy Progress); Duke Energy Florida, LLC (Duke Energy Florida); Duke Energy Ohio, Inc. (Duke Energy Ohio), Duke Energy Indiana, LLC (Duke Energy Indiana) and Piedmont Natural Gas Company, Inc. (Piedmont). When discussing Duke Energy’s consolidated financial information, it necessarily includes the results of its separate subsidiary registrants (collectively referred to as the Subsidiary Registrants), which, along with Duke Energy, are collectively referred to as the Duke Energy Registrants.
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 and nine months ended September 30, 2017, but not for the three and nine months ended September 30, 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.
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.

39

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.
Duke Energy Indiana is a regulated public utility primarily engaged in the generation, transmission, distribution and sale of electricity in portions of Indiana. Duke Energy Indiana is subject to the regulatory provisions of the Indiana Utility Regulatory Commission (IURC) and FERC.
Piedmont is a regulated public utility primarily engaged in the distribution of natural gas in portions of North Carolina, South Carolina and Tennessee. Piedmont is subject to the regulatory provisions of the NCUC, PSCSC, Tennessee Public Utility Commission (formerly the Tennessee Regulatory Authority) (TPUC) and FERC.
BASIS OF PRESENTATION
These Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles (GAAP) in the U.S.GAAP for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, these Condensed Consolidated Financial Statements do not include all information and notes required by GAAP 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, 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, 2016.2018.
The information in these combined notes relates to each of the Duke Energy Registrants as noted in the Index to Combined Notes to Condensed Consolidated Financial Statements. However, none of the registrants make any representations as to information related solely to Duke Energy or the subsidiaries of Duke Energy other than itself.
These Condensed Consolidated Financial Statements, in the opinion of the respective companies’ management, reflect all normal recurring adjustments necessary to fairly present the financial position and results of operations of each of the Duke Energy Registrants. Amounts reported in Duke Energy’s interim Condensed Consolidated Statements of Operations and each of the Subsidiary Registrants’ interim Condensed Consolidated Statements of Operations and Comprehensive Income are not necessarily indicative of amounts expected for the respective annual periods due to effects of seasonal temperature variations on energy consumption, regulatory rulings, timing of maintenance on electric generating units, changes in mark-to-market valuations, changing commodity prices and other factors.
In preparing financial statements that conform to GAAP, management must make estimates and assumptions that affect the reported amounts of assets and liabilities, the reported amounts of revenues and expenses, and the disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.
Certain prior year amountsBASIS OF CONSOLIDATION
These Condensed Consolidated Financial Statements include, after eliminating intercompany transactions and balances, the accounts of the Duke Energy Registrants and subsidiaries or VIEs where the respective Duke Energy Registrants have been reclassified to conform tocontrol. See Note 13 for additional information on VIEs. These Condensed Consolidated Financial Statements also reflect the current year presentation.Duke Energy Registrants’ proportionate share of certain jointly owned generation and transmission facilities.
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, meter reading schedules, and the impact of weather normalization or margin decoupling mechanisms.
42



FINANCIAL STATEMENTSORGANIZATION AND BASIS OF PRESENTATION


CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Unbilled revenuesDuke Energy, Progress Energy and Duke Energy Florida have restricted cash balances related primarily to collateral assets, escrow deposits and VIEs. See Note 13 for additional information. Restricted cash amounts are included in Other within ReceivablesCurrent Assets and Receivables of variable interest entities (VIEs)Other Noncurrent Assets on the Condensed Consolidated Balance Sheets as shownSheets. The following table presents the components of cash, cash equivalents and restricted cash included in the following table.
(in millions)September 30, 2017
 December 31, 2016
Duke Energy$771
 $831
Duke Energy Carolinas307
 313
Progress Energy216
 161
Duke Energy Progress113
 102
Duke Energy Florida103
 59
Duke Energy Ohio2
 2
Duke Energy Indiana29
 32
Piedmont4
 77

40

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 13 for further information. These receivables for unbilled revenues are shown in the table below.Sheets.
(in millions)September 30, 2017
 December 31, 2016
Duke Energy Ohio$70
 $97
Duke Energy Indiana119
 123
AMOUNTS ATTRIBUTABLE TO CONTROLLING INTERESTS
For the three and nine months ended September 30, 2017, the Loss from Discontinued Operations, net of tax on Duke Energy's Condensed Consolidated Statements of Operations is entirely attributable to controlling interests. The following table presents Net Income Attributable to Duke Energy Corporation for continuing operations and discontinued operations for the three and nine months ended September 30, 2016.
 Three Months Ended Nine Months Ended
(in millions)September 30, 2016 September 30, 2016
Income from Continuing Operations$1,001
 $2,202
Income from Continuing Operations Attributable to Noncontrolling Interests2
 5
Income from Continuing Operations Attributable to Duke Energy Corporation$999
 $2,197
Income from Discontinued Operations, net of tax$180
 $190
Income from Discontinued Operations Attributable to Noncontrolling Interests, net of tax3
 8
Income from Discontinued Operations Attributable to Duke Energy Corporation, net of tax$177
 $182
Net Income$1,181
 $2,392
Net Income Attributable to Noncontrolling Interests5
 13
Net Income Attributable to Duke Energy Corporation$1,176
 $2,379
 March 31, 2019 December 31, 2018
   Duke
   Duke
 Duke
Progress
Energy
 Duke
Progress
Energy
 Energy
Energy
Florida
 Energy
Energy
Florida
Current Assets       
Cash and cash equivalents$377
$45
$8
 $442
$67
$36
Other134
12
12
 141
39
39
Other Noncurrent Assets       
Other39
38
—
 8
6
—
Total cash, cash equivalents and restricted cash$550
$95
$20
 $591
$112
$75
INVENTORY
Inventory is used for operations and is recorded primarily using the average cost method. Inventory related to regulated operations is valued at historical cost. Inventory related to nonregulated operations is valued at the lower of cost or market. Materials and supplies are recorded as inventory when purchased and subsequently charged to expense or capitalized to property, plant and equipment when installed. Inventory, including excess or obsolete inventory, is written-down to the lower of cost or market value. Once inventory has been written-down, it creates a new cost basis for the inventory that is not subsequently written-up. Provisions for inventory write-offs were not material at September 30, 2017,March 31, 2019, and December 31, 2016.2018. The components of inventory are presented in the tables below.
September 30, 2017March 31, 2019
  Duke
   Duke
 Duke
 Duke
 Duke
    Duke
   Duke
 Duke
 Duke
 Duke
  
Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Materials and supplies$2,335
 $767
 $1,132
 $780
 $351
 $83
 $312
 $2
$2,231
 $738
 $1,033
 $720
 $313
 $79
 $321
 $2
Coal581
 197
 231
 130
 101
 17
 136
 —
572
 228
 218
 127
 91
 13
 113
 —
Natural gas, oil and other fuel349
 36
 221
 108
 114
 39
 2
 51
299
 41
 213
 112
 101
 19
 1
 23
Total inventory$3,265
 $1,000
 $1,584
 $1,018
 $566
 $139
 $450
 $53
$3,102
 $1,007
 $1,464
 $959
 $505
 $111
 $435
 $25
December 31, 2016December 31, 2018
  Duke
   Duke
 Duke
 Duke
 Duke
    Duke
   Duke
 Duke
 Duke
 Duke
  
Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Materials and supplies$2,374
 $767
 $1,167
 $813
 $354
 $84
 $312
 $1
$2,238
 $731
 $1,049
 $734
 $315
 $84
 $312
 $2
Coal774
 251
 314
 148
 166
 19
 190
 —
491
 175
 192
 106
 86
 14
 109
 —
Natural gas, oil and other fuel374
 37
 236
 115
 121
 34
 2
 65
355
 42
 218
 114
 103
 28
 1
 68
Total inventory$3,522
 $1,055
 $1,717
 $1,076
 $641
 $137
 $504
 $66
$3,084
 $948
 $1,459
 $954
 $504
 $126
 $422
 $70
EXCISE TAXES
Certain excise taxes levied by state or local governments are required to be paid even if not collected from the customer. These taxes are recognized on a gross basis. Otherwise, excise taxes are accounted for on a net basis.

41

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 September 30, Nine Months Ended September 30,
(in millions)2017
 2016
 2017
 2016
Duke Energy$107

$107

$289

$285
Duke Energy Carolinas9
 6
 27
 21
Progress Energy67
 65
 168
 161
Duke Energy Progress5
 4
 14
 13
Duke Energy Florida62
 61
 154
 148
Duke Energy Ohio24
 26
 75
 77
Duke Energy Indiana6
 10
 16
 26
Piedmont1
 1
 3
 2
NEW ACCOUNTING STANDARDS
TheExcept as noted below, the new accounting standards adopted for 20172018 and 20162019 had no material impact on the presentation or results of operations, cash flows or financial position of the Duke Energy Registrants. While immaterial, adoption of the following accounting standards had the most significant impact on the Duke Energy results of operations, cash flows and financial position for the nine months ended September 30, 2017.
Stock-Based Compensation and Income Taxes. In first quarter 2017, Duke Energy adopted Financial Accounting Standards Board (FASB) 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 accounting for income taxes and classification on the Condensed Consolidated Statements of Cash Flows. The primary impact to Duke Energy as a result of implementing this guidance was a cumulative-effect adjustment to retained earnings for tax benefits not previously recognized and additional income tax expense for the nine months ended September 30, 2017. See the Duke Energy Condensed Consolidated Statements of Changes in Equity for further information.
Goodwill Impairment. In January 2017, the FASB issued revised guidance for the 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. Duke Energy early adopted this guidance for the 2017 annual goodwill impairment test.
The following new Accounting Standards Updates (ASUs) have been issued, but have not yet been adopted by Duke Energy, as of September 30, 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. 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. 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. Duke Energy currently presents the total non-capitalized net periodic costs within Operation, maintenance and other on the Condensed Consolidated Statement of Operations. The adoption of this guidance will result in a retrospective change to reclassify the presentation of the non-service cost (benefit) components of net periodic costs to Other income and expenses. Duke Energy intends to utilize the practical expedient for retrospective presentation. The change in net periodic costs eligible for capitalization is applicable prospectively. Since Duke Energy’s service cost component is expected to be greater than the total net periodic costs, the change will result in increased capitalization of net periodic costs, higher Operation, maintenance and other and higher Other income and expenses. The resulting impact to Duke Energy is expected to be an immaterial increase in net income resulting from the limitation of eligible capitalization of net periodic costs to the service cost component, which is larger than the total net periodic costs.
Revenue from Contracts with Customers. In May 2014, the FASB issued revised accounting guidance for revenue recognition from contracts with customers. The core principle of this 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.

42

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 has identified material revenue streams, which served as the basis for accounting analysis and documentation of the impact of this guidance on revenue recognition. The accounting analysis included reviewing representative contracts and tariffs for each material revenue stream. 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 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.
Also included in the accounting analysis was the evaluation of certain long-term revenue streams including electric wholesale contracts and renewables power purchase agreements (PPAs) under this guidance. For such arrangements, Duke Energy does not expect material changes to the pattern of revenue recognition on the registrants. In addition, the power and utilities industry revenue recognition task force released several draft positions on specific industry issues in October 2017 for public comment. Duke Energy has been working closely with the industry task force and will be reviewing these updated positions to evaluate the impact, if any, on Duke Energy’s specific contracts and preliminary conclusions to date. The evaluation of other revenue streams is ongoing along with consideration of potential revisions to processes, policies and controls, primarily related to evaluating supplemental disclosures required as a result of adopting this guidance. Some revenue arrangements, such as alternative revenue programs and certain PPAs accounted for as leases, are excluded from the scope of this guidance and, therefore, will be accounted for and evaluated for separate presentation and disclosure under other relevant accounting guidance.
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).
Duke Energy intends to use the modified retrospective method of adoption effective January 1, 2018. Under the modified retrospective method of adoption, prior year reported results are not restated and a cumulative-effect adjustment, if applicable, is recorded to retained earnings at January 1, 2018, as if the standard had always been in effect. In addition, disclosures, if applicable, include a comparison to what would have been reported for 2018 under the previous revenue recognition rules to assist financial statement users in understanding how revenue recognition has changed as a result of this standard and to facilitate comparability with prior year reported results, which are not restated under the modified retrospective approach as described above. Duke Energy also plans to utilize certain practical expedients including applying this guidance to open contracts at the date of adoption and recognizing revenues for certain contracts under the invoice practical expedient, which allows revenue recognition to be consistent with invoiced amounts (including estimated billings) provided certain criteria are met, including consideration of whether the invoiced amounts reasonably represent the value provided to customers. While the adoption of this guidance, including the cumulative-effect adjustment, is not expected to have a material impact on either the timing or amount of revenues recognized in Duke Energy's financial statements, Duke Energy anticipates additional disclosures around the nature, amount, timing and uncertainty of our revenues and cash flows arising from contracts with customers and will continue to evaluate the requirements, as well as any additional clarifying guidance that may be issued.
Leases. In February 2016, the FASB issued revised accounting guidance for leases. The core principle of this guidance is that a lessee should recognize the assets and liabilities that arise from leases on the balance sheet.
For This resulted in a material impact on the presentation for the statement of financial position of the Duke Energy this guidance isRegistrants for the period ended March 31, 2019, and an immaterial impact to the Duke Energy results of operations and cash flows for the three months ended March 31, 2019.
Duke Energy elected the modified retrospective method of adoption effective for interim and annual periods beginning January 1, 2019, although it can be early adopted. The guidance is applied using a2019. Under the modified retrospective approach.method of adoption, prior year reported results are not restated. For adoption, Duke Energy is currently evaluatinghas elected to apply the following practical expedients:

43



FINANCIAL STATEMENTSORGANIZATION AND BASIS OF PRESENTATION


Practical ExpedientDescription
Package of transition practical expedients (for leases commenced prior to adoption date and must be adopted as a package)Do not need to 1) reassess whether any expired or existing contracts are/or contain leases, 2) reassess the lease classification for any expired or existing leases and 3) reassess initial direct costs for any existing leases.
Short-term lease expedient (elect by class of underlying asset)Elect as an accounting policy to not apply the recognition requirements to short-term leases by asset class.
Lease and non-lease components (elect by class of underlying asset)Elect as an accounting policy to not separate non-lease components from lease components and instead account for each lease and associated non-lease component as a single lease component by asset class.
Hindsight expedient (when determining lease term)Elect to use hindsight to determine the lease term.
Existing and expired land easements not previously accounted for as leasesElect to not evaluate existing or expired easements under the new guidance and carry forward current accounting treatment.
Comparative reporting requirements for initial adoption

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

Elect as an accounting policy to aggregate non-lease components with the related lease component when specified conditions are met by asset class. Account for the combined component based on its predominant characteristic (revenue or operating lease).
Duke Energy evaluated the financial statement impact of adopting thisthe standard and is continuing to monitormonitored industry implementation issues, including easements, pole attachmentsissues. Under agreements considered leases, where Duke Energy is the lessee, for the use of certain aircraft, space on communication towers, industrial equipment, fleet vehicles, fuel transportation (barges and renewable PPAs. Other than an expected increase in assetsrailcars), land, office space and liabilities,PPAs are now recognized on the ultimate impactbalance sheet. The Duke Energy Registrants did not have a material change to the financial statements from the adoption of the new standard hasfor contracts where it is the lessor. See Note 5 for further information.
No new accounting standards that have been issued but not yet been determined. Significant system enhancements, including additional processes and controls, may be required to facilitate the identification, tracking and reporting of potential leases based upon requirements of the new lease standard.
Statement of Cash Flows. In November 2016, the FASB issued revised accounting guidance to reduce diversity in practice for the presentation and classification of restricted cash on the 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. 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 non-current restricted cash within Cash Flows from Investing Activities and changes in current restricted cash within Cash Flows from Operating Activities on the Condensed Consolidated Statement of Cash Flows.
Financial Instruments Classification and Measurement. In January 2016, the FASB issued revised accounting guidance for the classification and measurement of financial instruments. Changes in the 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 (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 thatadopted are accounted for under the equity method of accounting are not included within the scope of the new guidance.
For Duke Energy, the revised accounting guidance is effective for interim and annual periods beginning January 1, 2018, by recording a cumulative-effect adjustment to retained earnings as of January 1, 2018. This guidance is expected to have minimala material impact on the Duke Energy Registrant's Condensed Consolidated Statements of Operations and Comprehensive Income as changes in the fair value of most of the Duke Energy Registrants' available-for-sale equity securities are deferred as regulatory assets or liabilities pursuant to accounting guidance for regulated operations.

43

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)





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.
2016 Acquisition of Piedmont Natural Gas
On October 3, 2016, Duke Energy acquired all outstanding common stock of Piedmont for a total cash purchase price of $5.0 billion and assumed Piedmont's existing long-term debt, which had a fair value of approximately $2.0 billion at the time of the 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 Midwest. In connection with the closing of the acquisition, Piedmont became a wholly owned subsidiary of Duke Energy.
Purchase Price Allocation
The purchase price allocation of the Piedmont acquisition is as follows:
(in millions) 
Current assets$497
Property, plant and equipment, net4,714
Goodwill3,353
Other long-term assets804
Total assets9,368
Current liabilities, including current maturities of long-term debt576
Long-term liabilities1,790
Long-term debt2,002
Total liabilities4,368
Total purchase price$5,000
The fair value of Piedmont's assets and liabilities was determined based on significant estimates and assumptions that are judgmental in nature, including the amount and timing of projected future cash flows, 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 primarily for establishing a broader, long-term strategic natural gas infrastructure growth 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.
Other Acquisition-Related Matters
Duke Energy recorded realized losses on forward-starting interest rate swaps related to the acquisition financing of $22 million and $190 million for the three and nine months ended September 30, 2016, respectively. See Note 10 for additional information.
During the nine months ended September 30, 2017, Piedmont recorded a $7 million software impairment resulting from planned accounting system and process integration.
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 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 SouthStar Energy Services, LLC (SouthStar) sold immediately prior to the merger, and after-tax nonrecurring transaction and integration costs incurred by Duke Energy and Piedmont of $41 million and $161 million for the three and nine months ended September 30, 2016, respectively. See Note 3 for additional information on Piedmont's sale of SouthStar.

44

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)





This information has been presented for illustrative purposes only and is not necessarily indicative of the consolidated results of operations that would have been achieved or the future consolidated results of operations of Duke Energy.
 Three Months Ended Nine Months Ended
(in millions)September 30, 2016 September 30, 2016
Operating Revenues$6,713
 $17,927
Net Income Attributable to Duke Energy Corporation1,180
 2,552
DISPOSITIONS
2016 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 (Loss) 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 Nine Months Ended
(in millions)September 30, 2016 September 30, 2016
Operating Revenues$245
 $761
Fuel used in electric generation and purchased power60
 177
Cost of natural gas11
 34
Operation, maintenance and other85
 240
Depreciation and amortization18
 62
Property and other taxes1
 6
Impairment charges (a)
—
 194
Loss on Sales of Other Assets and Other, net(3) (2)
Other Income and Expenses, net14
 35
Interest Expense19
 63
Income before income taxes62
 18
Income tax expense (benefit) (b)
4
 (48)
Income from discontinued operations of the International Disposal Group58
 66
Income from discontinued operations of other businesses(c)
122
 124
Income from Discontinued Operations, net of tax$180
 $190
(a)In conjunction with the advancements of marketing efforts during 2016, Duke Energy performed recoverability tests of the long-lived asset groups of International Energy. As a result, Duke Energy determined the carrying value of certain assets in Central America was not fully recoverable and recorded a pretax impairment charge of $194 million. The charge represents the excess carrying value over the estimated fair value of the assets, which was based on a Level 3 Fair Value measurement that was primarily determined from the income approach using discounted cash flows but also considered market information obtained in 2016.
(b)Includes an income tax benefit of $95 million for the nine months ended September 30, 2016, related to historical undistributed foreign earnings. See Note 17 for additional information.
(c)Duke Energy recognized an income tax benefit of $122 million resulting from immaterial out of period deferred tax liability adjustments for the three and nine months ended September 30, 2016. The amount includes $34 million recorded at Duke Energy Ohio.
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.
 Nine Months Ended
(in millions)September 30, 2016
Cash flows provided by (used in): 
Operating activities$201
Investing activities(35)

45

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





Other Sale-Related Matters
During 2017, Duke Energy provided certain transition services to China Three Gorges and I Squared Capital. Cash flows related to providing the transition services were not material and as of September 30, 2017, all transition services related to the International Disposal Group ended. Additionally, 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.March 31, 2019.
3.2. BUSINESS SEGMENTS
Operating segments are determined based on information used by the chief operating decision-maker in deciding how to allocate resources and evaluate the performance of the business. Duke Energy evaluates segment performance based on segment income. Segment income is defined as income from continuing operations net of income attributable to noncontrolling interests. Segment income includes intercompany revenues and expenses that are eliminated on the Condensed Consolidated Financial Statements.
Duke Energy
Due to the Piedmont acquisition and the sale of International Energy in the fourth quarter of 2016, Duke Energy's segment structure was realigned to includeincludes 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.
The Electric Utilities and Infrastructure segment includes Duke Energy's regulated electric utilities in the Carolinas, Florida and the Midwest. The regulated electric utilities conduct operations through the Subsidiary Registrants that are substantially all regulated and, accordingly, qualify for regulatory accounting treatment. Electric Utilities and Infrastructure also includes Duke Energy's electric transmission infrastructure investments.
The Gas Utilities and Infrastructure segment includes Piedmont, Duke Energy's natural gas local distribution companies in Ohio and Kentucky, and Duke Energy's natural gas storage and midstream pipeline investments. Gas Utilities and Infrastructure's operations are substantially all regulated and, accordingly, qualify for regulatory accounting treatment.
The Commercial Renewables segment is primarily comprised of nonregulated utility scaleutility-scale wind and solar generation assets located throughout the U.S. On April 24, 2019, Duke Energy executed an agreement to sell a minority interest in a portion of certain renewable assets. The portion of Duke Energy’s commercial renewables energy portfolio to be sold includes 49 percent of 37 operating wind, solar and battery storage assets and 33 percent of 11 operating solar assets across the U.S. The sale will result in pretax proceeds to Duke Energy of $415 million. Duke Energy will retain control of these assets, and, therefore, no gain or loss is expected to be recognized in the Condensed Consolidated Statements of Operations upon closing of the transaction. The sale is subject to customary closing conditions, including approvals from the FERC, the Public Utility Commission of Texas and the Committee on Foreign Investment in the U.S. The transaction is expected to close in the second half of 2019.
The remainder of Duke Energy’s operations is presented as Other, which is primarily comprised of corporate interest expense on holding company debt, unallocated corporate costs, contributions to the Duke Energy Foundation and the operations of Duke Energy’s wholly owned captive insurance subsidiary,company, Bison, Insurance Company Limited (Bison). Other also includesand Duke Energy's 25 percent interest in NMC, a large regional producer of methyl tertiary butyl ether (MTBE) located in Saudi Arabia. In October 2017, Duke Energy's economic ownership interest in NMC decreased from 25 percent to 17.5 percent. The investment in NMC is accounted for under the equity method of accounting.NMC.
Business segment information is presented in the following tables. Segment assets presented exclude intercompany assets.
Three Months Ended September 30, 2017Three Months Ended March 31, 2019
Electric
 Gas
   Total
      Electric
 Gas
   Total
      
Utilities and
 Utilities and
 Commercial
 Reportable
      Utilities and
 Utilities and
 Commercial
 Reportable
      
(in millions)Infrastructure
 Infrastructure
 Renewables
 Segments
 Other
 Eliminations
 Consolidated
Infrastructure
 Infrastructure
 Renewables
 Segments
 Other
 Eliminations
 Total
Unaffiliated revenues$6,122
 $249
 $95
 $6,466
 $16
 $—
 $6,482
$5,321
 $732
 $106
 $6,159
 $4
 $—
 $6,163
Intersegment revenues7
 23
 —
 30
 19
 (49) —
8
 24
 —
 32
 17
 (49) —
Total revenues$6,129
 $272
 $95
 $6,496
 $35
 $(49) $6,482
$5,329
 $756
 $106
 $6,191
 $21
 $(49) $6,163
Segment income (loss)(c)
$1,020
 $19
 $(49) $990
 $(34) $—
 $956
$750
 $226
 $13
 $989
 $(89) $—
 $900
Add back noncontrolling interests            1
Loss from discontinued operations, net of tax            (2)
Add back noncontrolling interest component            (7)
Net income            $955
            $893
Segment assets$118,323
 $11,361
 $4,216
 $133,900
 $2,240
 $185
 $136,325
$130,406
 $12,639
 $4,378
 $147,423
 $3,536
 $177
 $151,136

4644

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



FINANCIAL STATEMENTSBUSINESS SEGMENTS


 Three Months Ended September 30, 2016
 Electric
 Gas
   Total
      
 Utilities and
 Utilities and
 Commercial
 Reportable
      
(in millions)Infrastructure
 Infrastructure
 Renewables
 Segments
 Other
 Eliminations
 Consolidated
Unaffiliated revenues$6,332
 $89
 $139
 $6,560
 $16
 $—
 $6,576
Intersegment revenues8
 —
 —
 8
 16
 (24) —
Total revenues$6,340
 $89
 $139
 $6,568
 $32
 $(24) $6,576
Segment income (loss)(a)(c)
$1,189
 $15
 $(24) $1,180
 $(181) $—
 $999
Add back noncontrolling interests            2
Income from discontinued operations, net of tax(d)
            180
Net income            $1,181
 Nine Months Ended September 30, 2017
 Electric
 Gas
   Total
      
 Utilities and
 Utilities and
 Commercial
 Reportable
      
(in millions)Infrastructure
 Infrastructure
 Renewables
 Segments
 Other
 Eliminations
 Consolidated
Unaffiliated revenues$16,211
 $1,175
 $333
 $17,719
 $47
 $—
 $17,766
Intersegment revenues23
 68
 —
 91
 56
 (147) —
Total revenues$16,234
 $1,243
 $333
 $17,810
 $103
 $(147) $17,766
Segment income (loss)(a)(b)(c)
$2,384
 $179
 $2
 $2,565
 $(205) $—
 $2,360
Add back noncontrolling interests            5
Loss from discontinued operations, net of tax            (4)
Net income            $2,361
Nine Months Ended September 30, 2016Three Months Ended March 31, 2018
Electric
 Gas
   Total
      Electric
 Gas
   Total
      
Utilities and
 Utilities and
 Commercial
 Reportable
      Utilities and
 Utilities and
 Commercial
 Reportable
      
(in millions)Infrastructure
 Infrastructure
 Renewables
 Segments
 Other
 Eliminations
 Consolidated
Infrastructure
 Infrastructure
 Renewables
 Segments
 Other
 Eliminations
 Total
Unaffiliated revenues$16,406
 $355
 $365
 $17,126
 $40
 $—
 $17,166
$5,315
 $702
 $101
 $6,118
 $17
 $—
 $6,135
Intersegment revenues24
 3
 —
 27
 51
 (78) —
8
 25
 —
 33
 18
 (51) —
Total revenues$16,430
 $358
 $365
 $17,153
 $91
 $(78) $17,166
$5,323
 $727
 $101
 $6,151
 $35
 $(51) $6,135
Segment income (loss)(a)(c)
$2,557
 $63
 $13
 $2,633
 $(436) $—
 $2,197
Add back noncontrolling interests            5
Income from discontinued operations, net of tax(d)
            190
Segment income (loss)(a)(b)(c)
$750
 $116
 $20
 $886
 $(266) $—
 $620
Add back noncontrolling interest component            2
Net income            $2,392
            $622
(a)OtherElectric Utilities and Infrastructure includes costsregulatory and legislative impairment charges related to achieve the Piedmont acquisition.rate case orders, settlements or other actions of regulators or legislative bodies. See Notes 2 and 10Note 3 for additional information.
(b)For the three and nine months ended September 30, 2017, ElectricGas Utilities and Infrastructure includes an impairment charge related toof the Florida settlement agreement.investment in Constitution. See Note 43 for additional information.
(c)Commercial RenewablesOther includes impairment charges relatedthe loss on the sale of Beckjord described below, costs to certain wind projects. See discussion below.
(d)Forachieve the threePiedmont acquisition and nine months ended September 30, 2016, Income from Discontinued Operations includes an income tax benefit resulting from immaterial out of period deferred tax liability adjustments. See Note 2 for additional information.a valuation allowance recorded against the AMT credits.
During the three and nine months ended September 30, 2017,In February 2018, Duke Energy sold Beckjord, a nonregulated facility retired during 2014, and recorded a pretax impairment chargeloss of $69$106 million within Losses on a wholly owned non-contracted wind project. The impairment was recordedSales of Other Assets and Other, net and $1 million within Impairment charges on Duke Energy’s Condensed Consolidated Statements of Operations. The charge represents the excess carrying value over the estimated fair value of the project, which was based on a Level 3 Fair Value measurement that was determined from the income approach using discounted cash flows. The impairment was primarily due to the non-contracted wind project being located in a market that has experienced declining market pricing during 2017Operation, maintenance and declining long-term forecasted energy and capacity prices, driven by low natural gas prices, additional renewable generation placed in service and lack of significant load growth.
During the three and nine months ended September 30, 2016, Duke Energy recorded an other than temporary impairment (OTTI) of certain Commercial Renewables wind project investments accounted for under the equity method. The $71 million pretax impairment was recorded within Equity in earnings (losses) of unconsolidated affiliates on Duke Energy's Condensed Consolidated Statements of Operations. The other than temporary decline in value of these investments was primarily attributable to a sustained decline in market pricing where the wind investments are located, the continued projected net lossesOperations for the projectsthree months ended March 31, 2018. The sale included the transfer of coal ash basins and a reduction in the projected cash distributionsother real property and indemnification from any and all potential future claims related to the class of investment owned by Duke Energy.property, whether arising under environmental laws or otherwise.

47

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
Duke Energy Ohio has two reportable operating segments, Electric Utilities and Infrastructure and Gas Utilities and Infrastructure.
Electric Utilities and Infrastructure transmits and distributes electricity in portions of Ohio and generates, distributes and sells electricity in portions of Northern Kentucky. Gas Utilities and Infrastructure transports and sells natural gas in portions of Ohio and Northern Kentucky. It conducts operations primarily through Duke Energy Ohio and its wholly owned subsidiary, Duke Energy Kentucky.
The remainder of Duke Energy Ohio's operations is presented as Other, which is primarily comprised of governance costs allocated by its parent, Duke Energy, and revenues and expenses related to Duke Energy Ohio's contractual arrangement to buy power from the Ohio Valley Electric Corporation's (OVEC) power plants. See Note 9 for additional information on related party transactions.
 Three Months Ended September 30, 2017
 Electric
 Gas
 Total
    
 Utilities and
 Utilities and
 Reportable
    
(in millions)Infrastructure
 Infrastructure
 Segments
 Other
 Consolidated
Total revenues$371
 $90
 $461
 $10
 $471
Segment income (loss)50
 14
 64
 (8) 56
Loss from discontinued operations, net of tax        (1)
Net income        55
Segment assets$5,006
 $2,708
 $7,714
 $51
 $7,765
Other.
 Three Months Ended September 30, 2016
 Electric
 Gas
 Total
    
 Utilities and
 Utilities and
 Reportable
    
(in millions)Infrastructure
 Infrastructure
 Segments
 Other
 Consolidated
Total revenues$390
 $89
 $479
 $10
 $489
Segment income (loss)52
 12
 64
 (9) 55
Income from discontinued operations, net of tax(a)
        34
Net income        $89
 Nine Months Ended September 30, 2017
 Electric
 Gas
 Total
    
 Utilities and
 Utilities and
 Reportable
    
(in millions)Infrastructure
 Infrastructure
 Segments
 Other
 Consolidated
Total revenues$1,036
 $360
 $1,396
 $30
 $1,426
Segment income (loss)96
 56
 152
 (24) 128
Loss from discontinued operations, net of tax        (1)
Net income        $127
 Three Months Ended March 31, 2019
 Electric
 Gas
 Total
      
 Utilities and
 Utilities and
 Reportable
      
(in millions)Infrastructure
 Infrastructure
 Segments
 Other
 Eliminations
 Total
Total revenues$355
 $176
 $531
 $—
 $—
 $531
Segment income/Net (loss) income$36
 $35
 $71
 $(2) $—
 $69
Segment assets$6,058
 $3,051
 $9,109
 $37
 $(2) $9,144
 Nine Months Ended September 30, 2016
 Electric
 Gas
 Total
    
 Utilities and
 Utilities and
 Reportable
    
(in millions)Infrastructure
 Infrastructure
 Segments
 Other
 Consolidated
Total revenues$1,053
 $358
 $1,411
 $22
 $1,433
Segment income (loss)107
 57
 164
 (29) 135
Income from discontinued operations, net of tax(a)
        36
Net income        $171
 Three Months Ended March 31, 2018
 Electric
 Gas
 Total
    
 Utilities and
 Utilities and
 Reportable
    
(in millions)Infrastructure
 Infrastructure
 Segments
 Other
 Total
Total revenues$336
 $174
 $510
 $14
 $524
Segment income/Net loss(a)
$33
 $34
 $67
 $(92) $(25)
(a)ForOther includes the three and nine months ended September 30, 2016, Income from Discontinued Operations includes an income tax benefit resulting from immaterial outloss on the sale of period deferred tax liability adjustments. See Note 2 for additional information.Beckjord described above.
DUKE ENERGY CAROLINAS, PROGRESS ENERGY, DUKE ENERGY PROGRESS, DUKE ENERGY FLORIDA, DUKE ENERGY INDIANA AND PIEDMONT
Piedmont has one reportable segment, Gas Utilities and Infrastructure, which transports and sells natural gas. The remainder of Piedmont's operations is presented as Other, which is comprised of certain unallocated corporate costs, including acquisition-related expenses, and earnings from Piedmont's equity method investment in SouthStar prior to 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 three and nine months ended September 30, 2016, was $2 million and $12 million, respectively.

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



FINANCIAL STATEMENTSREGULATORY MATTERS


The remaining Subsidiary Registrants each have one reportable operating segment, Electric Utilities and Infrastructure, which generates, transmits, distributes and sells electricity. The remainder of each company's operations is presented as Other, which is comprised of certain unallocated corporate costs. Other for Progress Energy also includes interest expense on corporate debt instruments of $56 million and $167 million for the three and nine months ended September 30, 2017, respectively, and $55 million and $166 million for the three and nine months ended September 30, 2016, respectively. The following table summarizes the net (loss) income of Other for each of these entities.
 Three Months EndedNine Months Ended
 September 30,September 30,
(in millions)2017
 2016
2017
 2016
Duke Energy Carolinas$(6) $(16)$(18) $(50)
Progress Energy(32) (45)(120) (139)
Duke Energy Progress(4) (10)(11) (26)
Duke Energy Florida(2) (5)(7) (14)
Duke Energy Indiana(2) (3)(5) (10)
Piedmont(5) —
(18) 7
The assets at Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida and Duke Energy Indiana are substantially all included within the Electric Utilities and Infrastructure segment at September 30, 2017. The assets at Piedmont are substantially all included within the Gas Utilities and Infrastructure segment at September 30, 2017.
4.3. REGULATORY MATTERS
RATE-RELATED INFORMATION
The NCUC, PSCSC, FPSC, IURC, PUCO, TPUC and KPSC approve rates for retail electric and natural gas services within their states. The FERC approves rates for electric sales to wholesale customers served under cost-based rates (excluding Ohio and Indiana), as well as sales of transmission service. The FERC also regulates certification and siting of new interstate natural gas pipeline projects.
Duke Energy Carolinas and Duke Energy Progress
Ash Basin Closure CostsHurricane Florence, Hurricane Michael and Winter Storm Diego Deferral Filings
On December 30, 2016,21, 2018, Duke Energy Carolinas and Duke Energy Progress filed a joint petition with the NCUC seeking an accounting order authorizing deferral of certainpetitions for approval to defer the incremental costs incurred in connection with federalthe response to Hurricane Florence, Hurricane Michael and state environmental remediation requirements relatedWinter Storm Diego to a regulatory asset for recovery in 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 North Carolina. Initial comments were received in March 2017, and reply comments were filed on April 19, 2017.next base rate case. The NCUC has consolidatedissued an order requesting comments on the deferral positions. On March 5, 2019, the North Carolina Public Staff (Public Staff) filed comments. On April 2, 2019, Duke Energy Carolinas'Carolinas and Duke Energy Progress’ coal ash deferral requests into their respective general rate case docketsProgress filed reply comments, which included revised estimates of approximately $553 million in incremental operation and maintenance expenses ($171 million and $382 million for decision. See "2017 North Carolina Rate Case" sections belowDuke Energy Carolinas and Duke Energy Progress, respectively,) and approximately $96 million in capital costs ($20 million and $76 million for additional discussion.Duke Energy Carolinas and Duke Energy Progress, respectively). Duke Energy Carolinas and Duke Energy Progress cannot predict the outcome of this matter. Duke Energy Progress filed a similar request with the PSCSC on January 11, 2019, which also included a request for the continuation of prior deferrals requested for ice storms and Hurricane Matthew, and on January 30, 2019, the PSCSC issued a directive approving the deferral request.
Duke Energy Carolinas
2017 North Carolina Rate Case
On August 25, 2017, Duke Energy Carolinas filed an application with the NCUC for a rate increase for retail customers of approximately $647 million, which representsrepresented an approximate 13.6 percent increase in annual base revenues. The rate increase iswas driven by capital investments subsequent to the previous base rate case, including the W.S. Lee CC, grid improvement projects, AMI, investments in customer service technologies, costs of complying with coal combustion residuals (CCR)CCR regulations and the North Carolina Coal Ash Management Act of 2014 (Coal Ash Act) and recovery of costs related to licensing and development of the William States Lee III Nuclear Station (Lee Nuclear Station) discussed below. An evidentiary hearingStation.
On February 28, 2018, Duke Energy Carolinas and the Public Staff filed an Agreement and Stipulation of Partial Settlement resolving certain portions of the proceeding. Terms of the settlement included a return on equity of 9.9 percent and a capital structure of 52 percent equity and 48 percent debt. As a result of the settlement, Duke Energy Carolinas recorded a pretax charge of approximately $4 million in the first quarter of 2018 to Operation, maintenance and other on the Condensed Consolidated Statements of Operations.
On June 22, 2018, the NCUC issued an order approving the Stipulation of Partial Settlement and requiring a revenue reduction. As a result, revised customer rates were effective on August 1, 2018.
On July 20, 2018, the North Carolina Attorney General filed a Notice of Appeal to the North Carolina Supreme Court from the June 22, 2018, Order Accepting Stipulation, Deciding Contested Issues and Requiring Revenue Reduction issued by the NCUC. The Attorney General contends the commission’s order should be reversed and remanded, as it is scheduledin excess of the commission’s statutory authority; affected by errors of law; unsupported by competent, material and substantial evidence in view of the entire record as submitted; and arbitrary or capricious. The Sierra Club, North Carolina Sustainable Energy Association, North Carolina Justice Center, North Carolina Housing Coalition, Natural Resource Defense Council and Southern Alliance for Clean Energy also filed Notices of Appeal to beginthe North Carolina Supreme Court from the June 22, 2018, Order Accepting Stipulation, Deciding Contested Issues and Requiring Revenue Reduction. On August 8, 2018, the Public Staff filed a Notice of Cross Appeal to the North Carolina Supreme Court from the June 22, 2018, Order Accepting Stipulation, Deciding Contested Issues and Requiring Revenue Reduction issued by the NCUC. The Public Staff contends the commission’s order should be reversed and remanded, as it is affected by errors of law, and is unsupported by substantial evidence with regard to the commission’s failure to consider substantial evidence of coal ash related environmental violations. On November 29, 2018, the North Carolina Attorney General's Office filed a motion with the North Carolina Supreme Court requesting the court consolidate the Duke Energy Carolinas and Duke Energy Progress appeals and enter an order adopting the parties’ proposed briefing schedule as set out in the filing. On November 29, 2018, the North Carolina Supreme Court adopted a schedule for briefing set forth in the motion to consolidate the Duke Energy Carolinas and Duke Energy Progress appeals. On March 14, 2019, the North Carolina Attorney General’s Office filed a motion for extension of time to file its brief. On March 18, 2019, the North Carolina Supreme Court granted the North Carolina Attorney General’s motion, and the Appellant’s brief was filed on February 19, 2018.April 26, 2019. The Appellee response briefs are due on August 24, 2019. Duke Energy Carolinas cannot predict the outcome of this matter.
Lincoln County Combustion Turbine Addition2018 South Carolina Rate Case
On June 12, 2017,November 8, 2018, Duke Energy Carolinas filed an application with the NCUCPSCSC for a Certificaterate increase for retail customers of Public Convenienceapproximately $168 million, which represents an approximate 10.0 percent increase in retail revenues. The rate increase is driven by capital investments and Necessity (CPCN)environmental compliance progress made by Duke Energy Carolinas since its previous rate case, including the further implementation of Duke Energy Carolinas’ generation modernization program, which consists of retiring, replacing and upgrading generation plants, investments in customer service technologies and continued investments in base work to constructmaintain its transmission and operate a new 402-megawatt (MW) simple cycle advanced combustion turbine natural gas-fueled electric generating unit at its existing Lincoln County site.distribution systems. The request included net tax benefits resulting from the Tax Act of $66 million to reflect the change in ongoing tax expense, primarily from the reduction in the federal income tax rate from 35 to 21 percent. The request also included construction$46 million to return EDIT resulting from the federal tax rate change and deferred revenues since January 2018 related to the change and benefits of $17 million from a reduction in North Carolina state income taxes allocable to South Carolina (EDIT Rider).

46



FINANCIAL STATEMENTSREGULATORY MATTERS


Duke Energy Carolinas also requested approval of its proposed Grid Improvement Plan (GIP), adjustments to its Prepaid Advantage Program and a variety of accounting orders related transmissionto ongoing costs for environmental compliance, including recovery over a five-year period of $242 million of deferred coal ash related compliance costs, grid investments between rate changes, incremental depreciation expense, a result of new depreciation rates from the depreciation study approved in the 2017 North Carolina Rate Case above, and natural gas pipeline interconnection facilities. Ifthe balance of development costs associated with the cancellation of the Lee Nuclear Project. Finally, Duke Energy Carolinas sought approval to establish a reserve and accrual for end-of-life nuclear costs for nuclear fuel and materials and supplies. On March 8, 2019, the ORS moved to establish a new and separate hearing docket to review and consider the GIP proposed by Duke Energy Carolinas. Subsequently, on March 12, 2019, the ORS and Duke Energy Carolinas executed a Stipulation resolving the ORS’s motion. The Stipulation provides that costs incurred after January 1, 2019, for the GIP will be deferred with a return, subject to evaluation in a future rate proceeding, and that Duke Energy Carolinas will refile for consideration of the GIP in a new docket for resolution by January 1, 2020. The Stipulation was approved construction would begin in 2018 with an extended commissioning and validation period from 2020-2024 and an estimated commercial operation date in 2024.by the PSCSC’s hearing officer on March 13, 2019. An evidentiary hearing was heldbegan on March 21, 2019, and concluded March 27, 2019.
On May 1, 2019, the PSCSC issued a Commission Directive on Duke Energy Carolinas’ application for a retail rate increase. The Directive granted, among other things: a retail rate increase of $107 million, excluding the EDIT Rider; a return on equity of 9.5 percent; and a capital structure of 53 percent equity and 47 percent debt. The Directive denied the recovery of coal ash costs of approximately $115 million. Based upon legal analysis and Duke Energy Carolinas' intention to file a Petition for Rehearing with the PSCSC, Duke Energy Carolinas has not recorded an adjustment for its deferred coal ash costs. The Directive also denied recovery of a return on pre-construction costs associated with the canceled Lee Nuclear Project. Duke Energy Carolinas is evaluating the financial statement impacts of this Directive and will record associated one-time costs when the final order is issued. Except for the coal ash matter, the financial statement impacts of this Directive are not material. An order and revised customer rates are expected by mid-2019. Duke Energy Carolinas cannot predict the outcome of this matter.
FERC Formula Rate Matter
On July 31, 2017, PMPA filed a complaint with FERC alleging that Duke Energy Carolinas misapplied the formula rate under the PPA between the parties by including in August 2017. Briefsits rates amortization expense associated with regulatory assets and proposed ordersrecorded in a certain account without FERC approval. On February 15, 2018, FERC issued an order ruling in favor of PMPA and ordered Duke Energy Carolinas to refund to PMPA all amounts improperly collected under the PPA. Duke Energy Carolinas has issued to PMPA and similarly situated wholesale customers refunds of approximately $25 million. FERC also set the matter for settlement and hearing. PMPA and other customers filed a protest to Duke Energy Carolinas' refund report claiming that the refunds are inadequate in that (1) Duke Energy Carolinas invoked the limitations periods in the contracts to limit the time period for which the refunds were paid and the customers disagree that this limitation applies, and (2) Duke Energy Carolinas refunded only amounts recovered through a certain account and the customers have asserted that the order applies to all regulatory assets. On July 3, 2018, FERC issued an order accepting Duke Energy Carolinas' refund report and ruling that these two claims are outside the scope of FERC's February order. The settlement agreements and revised formula rates for all parties to the proceeding were filed on OctoberDecember 28, 2018. On April 2, 2019, FERC issued an order approving the settlement agreement as filed. Duke Energy Carolinas is working with wholesale customers that did not intervene in this case to implement the same settlement terms.
Sale of Hydroelectric (Hydro) Plants
In May 2018, Duke Energy Carolinas entered an agreement for the sale of five hydro plants with a combined 18.7-MW generation capacity in the Western Carolinas region to Northbrook Energy. The completion of the transaction is subject to approval from FERC for the four FERC-licensed plants, as well as other state regulatory agencies and is contingent upon regulatory approval from the NCUC and PSCSC to defer the total estimated loss on the sale of approximately $40 million. On July 5, 2018, Duke Energy Carolinas filed with NCUC for approval of the sale of the five hydro plants to Northbrook, to transfer the CPCNs for the four North Carolina hydro plants and to establish a regulatory asset for the North Carolina retail portion of the difference between sales proceeds and net book value. On September 4, 2018, the Public Staff filed comments supporting the CPCN transfer with conditions. On September 18, 2018, Duke Energy Carolinas filed reply comments opposing the Public Staff’s proposed conditions. On November 29, 2018, the NCUC issued a procedural order and held an evidentiary hearing on this matter on February 5, 2019. On March 27, 2019, Duke Energy Carolinas and the Public Staff filed proposed orders with the NCUC. On August 28, 2018, Duke Energy Carolinas filed with PSCSC its Application for Approval of Transfer and Sale of Hydroelectric Generation Facilities, Acceptance for Filing of a Power Purchase Agreement and an Accounting Order to Establish a Regulatory Asset. On September 10, 2018, the ORS provided a letter to the commission stating its position on the application and on September 18, 2018, Duke Energy Carolinas requested this matter be carried over to allow Duke Energy Carolinas time to discuss certain accounting issues with the ORS. On August 9, 2017. A decision2018, Duke Energy Carolinas and Northbrook filed a joint Application for Transfer of Licenses with the FERC. On December 27, 2018, the FERC issued its Order Approving Transfer of Licenses (“Order”) for the four FERC-licensed hydro plants. On January 18, 2019, Duke Energy Carolinas and Northbrook Carolina Hydro II, LLC requested a six-month extension of time to comply with the requirement of the Order that Northbrook submit to FERC certified copies of all instruments of conveyance and signed acceptance sheets within 60 days of the date of the Order, given that compliance by the deadline set in the Order was not possible because the conveyance of the projects is contingent on the receipt of state regulatory approvals, which were not anticipated to be issued by February 25, 2019. On February 14, 2019, FERC issued an Order Granting Extensions of Time until August 26, 2019, to comply with the requirements of the Order.
If commission approvals are not received, Duke Energy Carolinas can cancel the sales agreement and retain the hydro facilities. If commission approvals are received, the closing is expected to occur in 2019. After closing, Duke Energy Carolinas will purchase all the capacity and energy generated by these facilities at the end of 2017.avoided cost for five years through power purchase agreements. Duke Energy Carolinas cannot predict the outcome of this matter.

4947

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



FINANCIAL STATEMENTSREGULATORY MATTERS


William States Lee Combined Cycle Facility
On April 9, 2014, the PSCSC granted Duke Energy Carolinas and North Carolina Electric Membership Corporation (NCEMC) a Certificate of Environmental Compatibility and Public Convenience and Necessity (CECPCN) for the construction and operation of a 750-MW combined-cycle natural gas-fired generating plant at Duke Energy Carolinas' existing William States Lee Generating Station in Anderson, South Carolina. Duke Energy Carolinas began construction in July 2015 and estimates a cost to build of $600 million for its share of the facility, including allowance for funds used during construction (AFUDC). The project is expected to be commercially available in late 2017. NCEMC will own approximately 13 percent of the project. On July 3, 2014, the South Carolina Coastal Conservation League (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.
Lee 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 Lee Nuclear Station to be located at a site in Cherokee County, South Carolina. The NCUC and PSCSC concurred with the prudency of Duke Energy Carolinas decisions to incur certain project development and preconstruction costs through several separately issued orders through 2011, 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. On May 15, 2017, the NCUC issued an order requiring Duke Energy Carolinas to provide information regarding potential impacts of the Westinghouse bankruptcy on the Lee Nuclear Station, as well as Duke Energy Carolinas' plans for cost recovery and additional financial information regarding the project. As part of its 2017 North Carolina Rate Case discussed above, Duke Energy Carolinas is seeking NCUC approval to cancel the development of the Lee Nuclear Station project due to the Westinghouse bankruptcy filing and other market activity and is requesting recovery of incurred licensing and development costs. Duke Energy Carolinas will maintain the license issued by the NRC in December 2016. Duke Energy Carolinas cannot predict the outcome of this matter.
Duke Energy Progress
2017 North Carolina Rate Case
On June 1, 2017, Duke Energy Progress filed an application with the NCUC for a rate increase for retail customers of approximately $477 million, which representsrepresented an approximate 14.9 percent increase in annual base revenues. Subsequent to the filing, Duke Energy Progress adjusted the requested amount to $420 million, representing an approximate 13 percent increase. The rate increase iswas driven by capital investments subsequent to the previous base rate case, costs of complying with CCR regulations and the Coal Ash Act, costs relating to storm recovery, investments in customer service technologies and recovery of costs associated with renewable purchased power. Intervenors in
On November 22, 2017, Duke Energy Progress and the casePublic Staff filed testimony in October 2017an Agreement and Stipulation of Partial Settlement resolving certain portions of the proceeding. Terms of the settlement included a return on equity of 9.9 percent and a capital structure of 52 percent equity and 48 percent debt. On February 23, 2018, the NCUC issued an order approving the stipulation.
The order also impacted certain amounts that were similarly recorded on Duke Energy Carolinas' Condensed Consolidated Balance Sheets. As a result of the order, Duke Energy Progress and Duke Energy Progress' responsesCarolinas recorded pretax charges of $68 million and $14 million, respectively, in the first quarter of 2018 to Impairment charges, Operation, maintenance and other and Interest Expense on the Condensed Consolidated Statements of Operations. Revised customer rates became effective on March 16, 2018.
On May 15, 2018, the Public Staff filed a Notice of Cross Appeal to the North Carolina Supreme Court from the February 23, 2018, Order Accepting Stipulation, Deciding Contested Issues and Granting Partial Rate Increase issued by the NCUC. The Public Staff contend the commission’s order should be reversed and remanded, as it is affected by errors of law, and is unsupported by competent, material and substantial evidence in view of the entire record as submitted. The North Carolina Attorney General and Sierra Club also filed Notices of Appeal to the North Carolina Supreme Court from the February 23, 2018, Order Accepting Stipulation, Deciding Contested Issues and Granting Partial Rate Increase. On November 29, 2018, the North Carolina Attorney General's Office filed a motion with the North Carolina Supreme Court requesting the court consolidate the Duke Energy Progress and Duke Energy Carolinas appeals and enter an order adopting the parties’ proposed briefing schedule as set out in the filing. On November 29, 2018, the North Carolina Supreme Court adopted a schedule for briefing set forth in the motion to consolidate the Duke Energy Progress and Duke Energy Carolinas appeals. On March 14, 2019, the North Carolina Attorney General’s Office filed a motion for extension of time to file its brief. On March 18, 2019, the North Carolina Supreme Court granted the North Carolina Attorney General’s motion, and the Appellant’s brief was filed on April 26, 2019. The Appellee response briefs are due November 6, 2017. An evidentiary hearing is scheduled to begin November 20, 2017.on August 24, 2019. Duke Energy Progress cannot predict the outcome of this matter.
Storm Cost Deferral Filing2018 South Carolina Rate Case
On December 16, 2016,November 8, 2018, Duke Energy Progress filed a petitionan application with the NCUC requestingPSCSC for a rate increase for retail customers of approximately $59 million, which represents an accounting order to defer certain costs incurredapproximate 10.3 percent increase in connection with response to Hurricane Matthewannual base revenues. The rate increase is driven by capital investments and other significant storms in 2016. The final estimate of incremental operation and maintenance and capital costs of $116 million was filed withenvironmental compliance progress made by Duke Energy Progress since its previous rate case, including the NCUC in September 2017. On March 15, 2017, the NCUC Public Staff filed comments supporting deferral of a portionfurther implementation of Duke Energy Progress’ requested amount. generation modernization program, which consists of retiring, replacing and upgrading generation plants, investments in customer service technologies and continued investments in base work to maintain its transmission and distribution systems. The request included a decrease resulting from the Tax Act of $17 million to reflect the change in ongoing tax expense, primarily the reduction in the federal income tax rate from 35 to 21 percent. The request also included $10 million to return EDIT resulting from the federal tax rate change and deferred revenues since January 2018 related to the change (EDIT Rider) and a $12 million increase due to the expiration of EDITs related to reductions in North Carolina state income taxes allocable to South Carolina.
Duke Energy Progress filed reply commentsalso requested approval of its proposed GIP, approval of a Prepaid Advantage Program and a variety of accounting orders related to ongoing costs for environmental compliance, including recovery over a five-year period of $51 million of deferred coal ash related compliance costs, AMI deployment, grid investments between rate changes and regulatory asset treatment related to the retirement of a generating plant located in Asheville, North Carolina. Finally, Duke Energy Progress sought approval to establish a reserve and accrual for end-of-life nuclear costs for materials and supplies and nuclear fuel. On March 8, 2019, the ORS moved to establish a new and separate hearing docket to review and consider the GIP proposed by Duke Energy Progress. Subsequently, on March 12, 2019, the ORS and Duke Energy Carolinas executed a Stipulation resolving the ORS’s motion, and Duke Energy Progress agreed to the Stipulation, as did other parties in the rate case. The Stipulation provides that costs incurred after January 1, 2019, for the GIP will be deferred with a return, with all costs subject to evaluation in a future rate proceeding, and that Duke Energy Progress will refile for consideration of the GIP in a new docket for resolution by January 1, 2020. The Stipulation was approved by the PSCSC’s hearing officer on March 13, 2019. An evidentiary hearing began on April 12, 2017. 11, 2019, and concluded on April 17, 2019.
On July 10, 2017,May 8, 2019, the NCUC consolidatedPSCSC issued a Commission Directive on Duke Energy Progress’ application for a retail rate increase. The Directive granted, among other things: a retail rate increase of $41 million, excluding the EDIT Rider; a return on equity of 9.5 percent and a capital structure of 53 percent equity and 47 percent debt. The Directive denied the recovery of coal ash costs of approximately $65 million. Based upon legal analysis and Duke Energy Progress' storm deferral request intointention to file a Petition for Rehearing with the PSCSC, Duke Energy Progress rate case dockethas not recorded an adjustment for decision. See "2017 North Carolina Rate Case"its deferred coal ash costs. Duke Energy Progress is evaluating the financial statement impacts of this Directive and will record associated one-time costs when the final order is issued. Except for additional discussion.the coal ash matter, the financial statement impacts of this Directive are not material. An order and revised customer rates are expected by mid-2019. Duke Energy Progress cannot predict the outcome of this matter.

48



FINANCIAL STATEMENTSREGULATORY MATTERS


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 fueldual-fuel capability, with the option to build a third natural gas simple cycle unit in 2023 based upon the outcome of initiatives to reduce the region's power demand. The plan also included upgrades to existing transmission lines and substations, installation of solar generation and a pilot battery storage project. These investments will be made within the next seven years. Duke Energy Progress is also workingworked with the local natural gas distribution company to upgrade an existing natural gas pipeline to serve the natural gas plant. The lease became effective on March 2, 2019.
On March 28, 2016, the NCUC issued an order approving a CPCN for the new combined-cycle natural gas plants, but denying the CPCN for the contingent simple cycle unit without prejudice to Duke Energy Progress to refile for approval in the future. On March 28, 2017,2018, 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 underwaycomplete and construction of these plants is scheduled to beginbegan in 2017, with an expected in-service date in late 2019.
On October 8, 2018, Duke Energy Progress plansfiled an application with the NCUC for a CPCN to file for future approvals relatedconstruct the Hot Springs Microgrid Solar and Battery Storage Facility. On November 30, 2018, the NCUC issued an order scheduling hearings, requiring filing of testimony, establishing discovery guidelines and requiring public notice. On February 7, 2019, Duke Energy Progress made a joint filing with the Public Staff, which accepted the Public Staff’s proposed conditions and requested that the NCUC cancel the evidentiary hearing. On February 19, 2019, the NCUC granted the request to cancel the proposed solar generationhearing. On March 22, 2019, Duke Energy Progress and pilot battery storage project.the Public Staff filed a Joint Proposed Order now pending before the NCUC. Duke Energy Progress cannot predict the outcome of this matter.
The carrying value of the 376-MW Asheville coal-fired plant, including associated ash basin closure costs, of $405$302 million and $492$327 million is included in Generation facilities to be retired, net on Duke Energy Progress' Condensed Consolidated Balance Sheets as of September 30, 2017,March 31, 2019, and December 31, 2016,2018, respectively.

50

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





Duke Energy Progress' request for a regulatory asset at the time of retirement with amortization over a 10-year period was approved by the NCUC on February 23, 2018.
Duke Energy Florida
Hurricane Irma Storm DamageRestoration Cost Recovery
In September 2017, all of Duke Energy Florida’s service territory was impacted bysuffered significant damage from Hurricane Irma, which caused significant damage, resulting in approximately 1.31 million customers experiencing outages. TotalIn the fourth quarter of 2017, Duke Energy Florida also incurred preparation costs related to Hurricane Nate. On December 28, 2017, Duke Energy Florida filed a petition with the FPSC to recover incremental storm restoration costs including capital, are currently estimated at approximately $500 million. These estimates could change as Duke Energy Florida receives additional information on actual costs. After depleting any existing storm reserves, which were approximately $60 million beforefor Hurricane Irma Duke Energy Florida is permitted to petition the FPSC for recovery of additional incremental operation and maintenance costs resulting from the stormHurricane Nate and to replenish the storm reservereserve. On February 6, 2018, the FPSC approved a stipulation that would apply tax savings resulting from the Tax Act toward storm costs effective January 2018 in lieu of implementing a storm surcharge. Storm costs are currently expected to be fully recovered by approximately $132 million for retail customers.mid-2021. On May 31, 2018, Duke Energy Florida plansfiled a petition for approval of actual storm restoration costs and associated recovery process related to makeHurricane Irma and Hurricane Nate. The petition sought the approval for the recovery in the amount of $510 million in actual recoverable storm restoration costs, including the replenishment of Duke Energy Florida’s storm reserve of $132 million, and the process for recovering these recoverable storm costs. On August 20, 2018, the FPSC approved Duke Energy Florida's unopposed Motion for Continuance filed August 17, 2018, to allow for an evidentiary hearing in this petitionmatter. On January 28, 2019, Duke Energy Florida made a supplemental filing to reduce the total storm cost recovery from $510 million to $508 million. On April 3, 2019, the FPSC issued an Order abating all remaining filing dates. On April 9, 2019, Duke Energy Florida filed an unopposed motion to approve a settlement agreement resolving all outstanding issues in this docket. The FPSC has scheduled the hearing to begin on May 21, 2019, to consider the Storm Cost Settlement Agreement filed with the FPSC. If approved, the Storm Cost Settlement Agreement would obligate Duke Energy Florida to capitalize $18 million of storm costs and remove $6 million of operating and maintenance expense, thereby reducing the requested storm cost recovery amount by the end of 2017.$24 million. Duke Energy Florida will also implement process changes with respect to storm cost restoration. At September 30, 2017,March 31, 2019, and December 31, 2018, Duke Energy Florida's Condensed Consolidated Balance Sheets included approximately $400$157 million and $217 million, respectively, of recoverable costs under the FPSC's storm rule in Regulatory assets within Current Assets and Other Noncurrent Assets related to deferredstorm recovery for Hurricane Irma storm costs. This amount is in addition to the storm reserve replenishment discussed above as part of Duke Energy Florida's petition to the FPSC.
2017 Second Revised and Restated Settlement Agreement
On October 25, 2017, the FPSC approved a 2017 Second Revised and Restated Settlement Agreement (2017 Settlement) filed by Duke Energy Florida. The 2017 Settlement replaces and supplants the Revised and Restated Stipulation and Settlement Agreement approved in November 2013 (2013 Settlement). The 2017 Settlement extends the base rate case stay-out provision from the 2013 Settlement through the end of 2021 unless actual or projected return on equity falls below 9.5 percent; however,Hurricane Nate. Duke Energy Florida is allowedcannot predict the outcome of this matter.
In October 2018, Duke Energy Florida’s service territory suffered damage when Hurricane Michael made landfall as a multiyear increasestrong Category 5 hurricane with maximum sustained winds of 160 mph. The storm caused catastrophic damage from wind and storm surge, particularly from Panama City Beach to its base rates of $67 million per yearMexico Beach, resulting in 2019, 2020widespread outages and 2021, as well as base rate increases for solar generation.significant damage to transmission and distribution facilities across the central Florida Panhandle. In additionresponse to carrying forward the provisions contained in the 2013 Settlement related to the Crystal River 1 and 2 coal units and future generation needs in Florida, the 2017 Settlement contains provisions related to future investments in solar and renewable energy technology, future investments in AMI technology as well as recovery of existing meters, impacts of potential tax reform, an electric vehicle charging station pilot program, as well as the termination of the proposed Levy Nuclear Project discussed below. As part of the 2017 Settlement,Hurricane Michael, Duke Energy Florida will not move forward with buildingrestored service to approximately 72,000 customers. Total current estimated incremental operation and maintenance and capital costs are $360 million. Approximately $70 million and $35 million of the Levy nuclearcosts are included in Net property, plant and recorded an pretax impairment charge of approximately $135 million in third quarter 2017 to write off all unrecovered Levy Nuclear Project costs, including the COL.
The 2017 Settlement includes provisions to recover 2017 under-recovered fuel costs of approximately $196 million over a 24-month period beginning in January 2018. On September 1, 2017, Duke Energy Florida submitted Alternate 2018 Fuel and Capacity clause projection filings consistent with the terms of the 2017 Settlement. The updated capacity filing reflects the removal of all Levy costs. The FPSC approved Duke Energy Florida's 2018 Alternate projection filings on October 25, 2017. A final order is expected by the end of 2017.
Levy Nuclear Project
On July 28, 2008, Duke Energy Florida applied to the NRC for COLs for two Westinghouse AP1000 reactors at Levy (Levy Nuclear Project). 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 Other Noncurrent Liabilities with an offset primarily to Regulatory assetsequipment on the Condensed Consolidated Balance Sheets.Sheets as of March 31, 2019, and December 31, 2018, respectively. Approximately $213 million and $165 million of costs represent recoverable costs under the FPSC’s storm rule and Duke Energy Florida is allowed to recover reasonableFlorida's Open Access Transmission Tariff formula rates and prudent EPC cancellationare included in Regulatory assets within Other Noncurrent Assets on the Condensed Consolidated Balance Sheets as of March 31, 2019, and December 31, 2018, respectively. Additional 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 customerscould be incurred in 2018. As part of the 2017 Settlement discussed above, Duke Energy Florida is no longer seeking recovery of costs2019 related to the Levy Nuclear Project and the ongoing Westinghouse litigation discussed in Note 5. All remaining Levy Nuclear Project issues have been resolved.this fourth quarter 2018 storm.
Hines Chiller Uprate Project
On February 2, 2017, Duke Energy Florida filed a petition seekingwith the FPSC on April 30, 2019, to recover incremental storm restoration costs for Hurricane Michael. The estimated recovery amount is approximately $221 million to be recovered over a 12-month period beginning in July 2019, subject to true up through the Storm Surcharge consistent with the provisions of the 2017 Settlement. Concurrently, Duke Energy Florida filed for approval a stipulation that would apply tax savings resulting from the Tax Act toward storm costs in lieu of implementing a storm surcharge. Storm costs are currently expected to be fully recovered by approximately year-end 2021. Duke Energy Florida cannot predict the outcome of this matter.

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FINANCIAL STATEMENTSREGULATORY MATTERS


Tax Act
Pursuant to Duke Energy Florida's 2017 Settlement, on May 31, 2018, Duke Energy Florida filed a petition related to the Tax Act, which included revenue requirement impacts of annual tax savings of $134 million and estimated annual amortization of EDIT of $67 million for a total of $201 million. Of this amount, $50 million would be offset by accelerated depreciation of Crystal River 4 and 5 coal units and an estimated $151 million would be offset by Hurricane Irma storm cost recovery as explained in the Storm Restoration Cost Recovery section above. On December 27, 2018, Duke Energy Florida filed actual EDIT balances and amortization based on its 2017 filed tax return. This increased the revenue requirement impact of the amortization of EDIT by $4 million, from $67 million to $71 million, which increased the total storm amortization from $151 million to $155 million. On January 8, 2019, the FPSC approved a joint motion by Duke Energy Florida and the Office of Public Counsel resolving all stipulated positions. As part of that stipulation, Duke Energy Florida agreed to seek a Private Letter Ruling (PLR) from the IRS on its treatment of cost of removal (COR) as mostly protected by tax normalization rules. If the IRS rules that COR is not protected by tax normalization rules, then Duke Energy Florida will make a final adjustment to the amortization of EDIT and an adjustment to the storm recovery amount retroactive to January 2018. The IRS has communicated that it will not issue individual PLRs on the treatment of COR. Rather, the IRS is drafting a notice that will request comments on a number of issues, including COR, and the IRS plans to issue industrywide guidance on those issues. Duke Energy Florida cannot predict the outcome of this matter.
Solar Base Rate Adjustment
On July 31, 2018, Duke Energy Florida petitioned the FPSC to include in base rates the revenue requirementrequirements for a Chiller Uprateits first two solar generation projects, the Hamilton Project (Uprate Project) atand the Hines Energy Complex.Columbia Project, as authorized by the 2017 Settlement. The UprateHamilton Project, which was placed into service on December 22, 2018, has an annual retail revenue requirement of $15 million and the increase was effective in January 2019. The Columbia Project has a projected annual revenue requirement of $14 million and a projected in-service date in early 2020; the associated rate increase would take place with the first month’s billing cycle after the Columbia Project goes into service. At its October 30, 2018, Agenda Conference, the FPSC approved the rate increase related to the Hamilton Project to go into effect beginning with the first billing cycle in January 2019 under its file and suspend authority. On April 2, 2019, the commission approved both solar projects as filed.
On March 25, 2019, Duke Energy Florida petitioned the FPSC to include in base rates the revenue requirements for its next wave of solar generation projects, the Trenton, Lake Placid and DeBary Solar Projects, as authorized by the 2017 at a cost of approximately $150 million.Settlement. The annual retail revenue requirement for the Trenton and Lake Placid Projects is approximately $19 million. On March 28, 2017,$13 million and $8 million, respectively, with projected in-service dates in the FPSC issued an order approving thefourth quarter of 2019. The DeBary Project has a projected annual revenue requirement which was includedof $11 million and a projected in-service date in base rates for the first quarter of 2020. The associated rate increase would take place with the first month’s billing cycle of April 2017.
after each solar generation project goes into service. Duke Energy Ohio
Duke Energy Kentucky Rate Case
On September 1, 2017, Duke Energy Kentucky filed a rate case with the KPSC requesting an increase in electric base rates of approximately $49 million, which represents an approximate 15 percent increase on the average customer bill. The rate increase is driven by increased investment in utility plant, increased operations and maintenance expenses, and recovery of regulatory assets. The application also includes implementation of the Environmental Surcharge Mechanism to recover environmental costs not recovered in base rates, requests to establish a Distribution Capital Investment Rider to recover incremental costs of specific programs, requests to establish a FERC Transmission Cost Reconciliation Rider to recover escalating transmission costs and modification to the Profit Sharing Mechanism to increase customers' share of proceeds from the benefits of owning generation and to mitigate shareholder risks associated with that generation. The KPSC set filing deadlines of December 29, 2017, and February 14, 2018, for intervenor testimony and rebuttal testimony, respectively. An evidentiary hearing has not been scheduled.Duke Energy Kentucky anticipates that rates will go into effect in mid-April 2018. Duke Energy KentuckyFlorida cannot predict the outcome of this matter.

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





Electric Security Plan FilingOhio
On June 1, 2017,July 25, 2018, Duke Energy Ohio filed an application to establish a new rider to implement the benefits of the Tax Act for electric distribution customers. The new rider will flow through to customers the benefit of the lower statutory federal tax rate from 35 to 21 percent since January 1, 2018, all future benefits of the lower tax rates and a full refund of deferred income taxes collected at the higher tax rates in prior years. Deferred income taxes subject to normalization rules will be refunded consistent with federal law and deferred income taxes not subject to normalization rules will be refunded over a 10-year period. Duke Energy Ohio's transmission rates reflect lower federal income tax but guidance from FERC on amortization of both protected and unprotected transmission-related EDITs is still pending. On October 24, 2018, the PUCO issued a Finding and Order that, among other things, directed all utilities over which the commission has rate-making authority to file an application to pass the benefits of the Tax Act to customers by January 1, 2019, unless otherwise exempted or directed by the PUCO. Duke Energy Ohio's July 25, 2018, filing for electric distribution operations is consistent with the PUCO a request for a standard service offer in the form of an electric security plan (ESP). If approved bycommission's October 24, 2018, Finding and Order and no further action is needed. On February 20, 2019, the PUCO approved the termapplication without material modification. Rates became effective March 1, 2019.
On December 21, 2018, Duke Energy Ohio filed an application to change its base rates and establish a new rider to implement the benefits of the ESP would beTax Act for natural gas customers. Duke Energy Ohio requested commission approval to implement the changes and rider effective April 1, 2019. The new rider will flow through to customers the benefit of the lower statutory federal tax rate from June35 to 21 percent since January 1, 2018, to May 31, 2024. Termsall future benefits of the ESP include continuation of market-based customerlower tax rates through competitive procurement processes for generation, continuation and expansion of existing rider mechanisms and proposed new rider mechanisms relating to regulatory mandates, costs incurred to enhance the customer experience and transform the grid and a service reliability riderfull refund of deferred income taxes collected at the higher tax rates in prior years. Deferred income taxes subject to normalization rules will be refunded consistent with federal law and deferred income taxes not subject to normalization rules will be refunded over a 10-year period. The PUCO has not yet ruled on the application for vegetation management. Public hearings were held in October 2017 and an evidentiary hearing scheduled to begin on November 13, 2017, has been continued to November 28, 2017.changes for natural gas customers. Duke Energy Ohio cannot predict the outcome of this matter.
Woodsdale Station Fuel System FilingEnergy Efficiency Cost Recovery
On March 28, 2014, Duke Energy Ohio filed an application for recovery of program costs, lost distribution revenue and performance incentives related to its energy efficiency and peak demand reduction programs. These programs are undertaken to comply with environmental mandates set forth in Ohio law. The PUCO approved Duke Energy Ohio’s application but found that Duke Energy Ohio was not permitted to use banked energy savings from previous years in order to calculate the amount of allowed incentive. This conclusion represented a change to the cost recovery mechanism that had been agreed upon by intervenors and approved by the PUCO in previous cases. The PUCO granted the applications for rehearing filed by Duke Energy Ohio and an intervenor. On January 6, 2016, Duke Energy Ohio and the PUCO Staff entered into a stipulation, pending the PUCO's approval, to resolve issues related to performance incentives and the PUCO Staff audit of 2013 costs, among other issues. In December 2015, based upon the stipulation, Duke Energy Ohio re-established approximately $20 million of the revenues that had been previously reversed. On October 26, 2016, the PUCO issued an order approving the stipulation without modification. In December 2016, the PUCO granted the intervenors request for rehearing for the purpose of further review. On April 10, 2019, the PUCO issued an Entry on Rehearing denying the rehearing applications.

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FINANCIAL STATEMENTSREGULATORY MATTERS


On June 9, 2015, the FERC ruled in favor of PJM Interconnection, LLC (PJM) on a revised Tariff and Reliability Assurance Agreement including implementation of a Capacity Performance (CP) proposal and to amend sections of the Operating Agreement related to generation non-performance. The CP proposal includes performance-based penalties for non-compliance.15, 2016, Duke Energy Kentucky is a Fixed Resource Requirement (FRR) entity, and therefore is subject to the compliance standards through its FRR plans. A partial CP obligation will apply to Duke Energy Kentucky in the delivery year beginning June 1, 2019, with full compliance beginning June 1, 2020. Duke Energy Kentucky has developed strategies for CP compliance investments. On May 31, 2017, Duke Energy KentuckyOhio filed an application withfor approval of a three-year energy efficiency and peak demand reduction portfolio of programs. A stipulation and modified stipulation were filed on December 22, 2016, and January 27, 2017, respectively. Under the KPSC requestingterms of the stipulations, which included support for deferral authority to construct an ultra-low sulfur diesel backup fuel system for the Woodsdale Station. The back-up fuel system is projected to cost approximately $55 millionof all costs and if approved, is anticipated to be in service prior to the CP compliance deadline of April 2019.a cap on shared savings incentives, Duke Energy Kentucky cannot predict the outcome of this matter.
Ohio Valley Electric Corporation
has offered its energy efficiency and peak demand reduction programs throughout 2017. On March 31,February 3, 2017, Duke Energy Ohio filed for approval to adjustdeferral authority of its existing price stabilization rider (Rider PSR), which is currently set at zero dollars, to pass through net costs related toincurred in 2017 in respect of its contractual entitlement to capacityproposed energy efficiency and energy frompeak demand reduction portfolio. On September 27, 2017, the generating assets owned by OVEC.PUCO issued an order approving a modified stipulation. The filing seeks to adjust Rider PSRmodifications impose an annual cap of approximately $38 million on program costs and shared savings incentives combined, but allowed for OVEC costs subsequent to April 1, 2017. Duke Energy Ohio is seeking deferral authorityto file for neta waiver of costs incurred from April 1,in excess of the cap in 2017. The PUCO approved the waiver request for 2017 untilup to a total cost of $56 million. On November 21, 2017, the new rates under Rider PSR are put into effect. Various intervenors have filed motions to dismiss or stay the proceeding and Duke Energy Ohio has opposed these filings. See Note 13 for additional discussion ofPUCO granted Duke Energy Ohio's ownership interest in OVEC.and intervenor's applications for rehearing of the September 27, 2017, order. On January 10, 2018, the PUCO denied the Ohio Consumers' Counsel’s application for rehearing of the PUCO order granting Duke Energy Ohio's waiver request; however, a decision on Duke Energy Ohio's application for rehearing remains pending. Duke Energy Ohio cannot predict the outcome of this matter.
East Bend Coal Ash Basin Filing2014 Electric Security Plan
On December 2, 2016,In April 2015, the PUCO modified and approved Duke Energy Kentucky filedOhio's proposed ESP, with the KPSC a requestthree-year term and an effective date of June 1, 2015. The PUCO approved a competitive procurement process for SSO load, a distribution capital investment rider (Rider DCI) and a tracking mechanism for incremental distribution expenses caused by major storms. The PUCO also approved a placeholder tariff for a 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.price stabilization rider, but denied Duke Energy Kentucky estimated a total cost of approximately $93 millionOhio's specific request to include Duke Energy Ohio's entitlement to generation from OVEC in the filing and expects in-service daterider at this time; however, the order allows Duke Energy Ohio to submit additional information to request recovery in the fourth quarter of 2018.future. On June 6, 2017, the KPSC approved the CPCN request.
Base Rate Case
May 4, 2015, Duke Energy Ohio filed withan application for rehearing requesting the PUCO to modify or amend certain aspects of the order. On May 28, 2015, the PUCO granted all applications for rehearing filed in the case for future consideration. On March 21, 2018, the PUCO issued an electric distribution base rate case application and supporting testimony in March 2017.order denying Duke Energy Ohio's issues on rehearing. On April 20, 2018, Duke Energy Ohio has requestedfiled a second application for rehearing based upon the commission’s March 21, 2018, Order. On May 16, 2018, the commission issued its third Entry on Rehearing granting in part, and denying in part, Duke Energy Ohio’s rehearing request.
On March 9, 2018, Duke Energy Ohio filed a motion to extend its then-current ESP, including all terms and conditions thereof, pending approval of a new ESP. On May 30, 2018, the PUCO granted the request, with modification. Specifically, the PUCO did not extend the cap applicable to Rider DCI beyond July 31, 2018. Duke Energy Ohio sought rehearing of this finding. On July 25, 2018, the PUCO granted the request and allowed a continuing cap on recovery under Rider DCI. On August 24, 2018, the Ohio Manufacturers' Association (OMA) and the Office of the Ohio Consumers' Counsel (OCC) filed an estimated annual increaseApplication for Rehearing of approximately $15 millionthe commission's decision. Duke Energy Ohio filed a Memorandum Contra OCC's request for rehearing of the commission's continuation of Rider DCI on September 4, 2018. On September 19, 2018, the PUCO issued an Order granting rehearing on the matter for further consideration. On April 3, 2019, the PUCO issued its Fourth Entry on Rehearing denying the rehearing of OCC and a return on equity of 10.4 percent. The application also includes requestsOMA and upholding its decision to continue certain current riders and establish new riders related to LED Outdoor Lighting Service and regulatory mandates. On September 26, 2017, the PUCO staff filed a report recommending a revenue decrease between approximately $18 million and $29 million and a return on equity between 9.22 percent and 10.24 percent. Objections to the staff reportRider DCI. Further applications for rehearing or notices of appeal are due by November 9, 2017. Public hearings were held in late October and early November. An evidentiary hearing is scheduled to begin on December 11, 2017.60 days. Duke Energy Ohio cannot predict the outcome of this matter.
On May 21, 2018, the OMA filed a notice of appeal of PUCO's approval of Duke Energy Ohio’s ESP with the Ohio Supreme Court, challenging PUCO's approval of Duke Energy Ohio’s Price Stability Rider as a placeholder and its Rider DCI to recover incremental revenue requirement for distribution capital since Duke Energy Ohio’s last base rate case. On July 16, 2018, the OCC filed its own appeal of Duke Energy Ohio’s ESP with the Ohio Supreme Court raising similar issues to that of the OMA. Duke Energy Ohio filed a Motion to Intervene in the two Ohio Supreme Court appeals. OMA's Supreme Court brief was filed on August 20, 2018. PUCO submitted its brief on October 26, 2018, and Duke Energy Ohio filed its brief on October 29, 2018. The OCC’s Supreme Court brief was filed on October 15, 2018. Duke Energy Ohio filed its brief on December 20, 2018. The PUCO submitted its brief on December 21, 2018. The Ohio Supreme Court issued an order on March 13, 2019, for the appellants to show cause why the appeals should not be dismissed as moot in light of the commission’s approval of Duke Energy Ohio’s current ESP. OCC and OMA made the requested filings on March 20, 2019, and Duke Energy Ohio filed its response on March 27, 2019. On May 8, 2019, the Ohio Supreme Court dismissed the appeals as moot.
Natural Gas Pipeline Extension
Duke Energy Ohio is proposing to install a new natural gas pipeline (the Central Corridor Project) in its Ohio service territory to increase system reliability and enable the retirement of older infrastructure. Duke Energy Ohio currently estimates the pipeline development costs and construction activities will range from $163 million to $245 million in direct costs (excluding overheads and AFUDC). On January 20, 2017, Duke Energy Ohio filed an amended application with the Ohio Power Siting Board (OPSB) for approval of one of two proposed routes. A public hearing was held on June 15, 2017, and an adjudicatory hearing was scheduled to begin September 11, 2017. On August 24, 2017, an administrative law judge (ALJ) granted a request made byIn April 2018, Duke Energy Ohio filed a motion with OPSB to delay theestablish a procedural schedule while it works through various issues related toand filed supplemental information supporting its application. On December 18, 2018, the pipeline route.OPSB established a procedural schedule that included a local public hearing on March 21, 2019. An evidentiary hearing began on April 9, 2019, and concluded on April 11, 2019. Briefs are due May 13, 2019, with reply briefs due June 10, 2019. If approved, construction of the pipeline extension is expected to be completed before the 2020/20212021/2022 winter season. The proposed project involves the installation of a natural gas line and is estimated to cost approximately $110 million, excluding AFUDC.
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 will take two years to complete. Duke Energy Kentucky also requested approval to establish a regulatory asset 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. On May 25, 2017, the KPSC issued an order to approve the stipulation with certain modifications. On June 1, 2017, Duke Energy Kentucky filed its acceptance of the modifications. Duke Energy Ohio has approximately $7 million included in Regulatory assets on its Condensed Consolidated Balance Sheets at September 30, 2017, for the book value of existing meter equipment.

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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 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 projected total capital and operations and maintenance expenditures under the ASRP were 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. Duke Energy Ohio's application for rehearing of the PUCO decision was denied on May 17, 2017.
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.

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FINANCIAL STATEMENTSREGULATORY MATTERS


2012 Natural Gas Rate Case/MGP Cost Recovery
As part of its 2012 natural gas base rate case, Duke Energy Ohio has approval to defer and recover costs related to environmental remediation at two sites (East End and West End) that housed former MGP operations. Duke Energy Ohio has made annual applications for recovery of these deferred costs. Duke Energy Ohio is currently recovering approximately $55 million in environmental remediation costs between 2009 through 2012 through a separate rider, Rider MGP. Duke Energy Ohio has made annual applications with the PUCO to recover its incremental remediation costs consistent with the PUCO’s directive in Duke Energy Ohio’s 2012 natural gas rate case. To date, the PUCO has not ruled on Duke Energy Ohio’s annual applications for the calendar years 2013 through 2017. On June 15, 2016,September 28, 2018, the staff of the PUCO issued a report recommending a disallowance of approximately $12 million of the $26 million in MGP remediation costs incurred between 2013 through 2017 that staff believes are not eligible for recovery. Staff interprets the PUCO’s 2012 Order granting Duke Energy Ohio recovery of MGP remediation as limiting the recovery to work directly on the East End and West End sites. On October 30, 2018, Duke Energy Ohio filed an application for approval of a three-year energy efficiencyreply comments objecting to the staff’s recommendations and peak demand reduction portfolio of programs. A stipulation and modified stipulation were filed on December 22, 2016, and January 27, 2017, respectively. Underexplaining, among other things, the terms of the stipulations, which included support for deferral authority of all costs and a cap on shared savings incentives,obligation Duke Energy Ohio has offered its energy efficiencyunder Ohio law to remediate all areas impacted by the former MGPs and peak demand reduction programs throughout 2017.not just physical property that housed the former plants and equipment. To date, the PUCO has not issued a procedural schedule and has not ruled on Duke Energy Ohio’s applications. On February 3, 2017,March 29, 2019, Duke Energy Ohio filed its annual application to recover incremental remediation expense for deferral authority of its costs incurred in 2017 in respect of its proposed energy efficiency and peak demand reduction portfolio. The PUCO staff and one intervenor have proposed a cap on both program costs and shared savings. On September 27, 2017, the PUCO issued an order approving a modified stipulation. The modifications impose an annual cap of approximately $38 million on program costs and shared savings incentives combined, but allowed for Duke Energy Ohio to file for a waiver of costs in excess of the cap in 2017. On October 12, 2017, Duke Energy Ohio filed a motion for a waiver for recovery of costs incurred in 2017 above the annual cap.calendar year 2018. Duke Energy Ohio cannot predict the outcome of this matter.
2012Duke Energy Kentucky Natural Gas Base Rate Case/Manufactured Gas Plant Cost RecoveryCase
On November 13, 2013, the PUCO issued an order approving a settlement ofAugust 31, 2018, Duke Energy Ohio’sKentucky filed an application with the KPSC requesting an increase in natural gas base rates of approximately $11 million, an approximate 11.1 percent average increase across all customer classes. The increase was net of approximately $5 million in annual savings as a result of the Tax Act. The drivers for this case are capital invested since Duke Energy Kentucky’s last 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 PUCO 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 on June 29, 2017, the Ohio Supreme Court issued its decision affirming the PUCO order. Appellants filed a request for reconsideration, which was denied on September 27, 2017. This matter is now final.
The PUCO order also contained deadlines for completing the MGP environmental investigation and remediation costs at the MGP sites. For the property known as the East End site, the PUCO order established a deadline of December 31, 2016, which was subsequently extended to December 31, 2019. In January 2017, intervening parties filed for rehearing of the PUCO's decision. On February 8, 2017, the PUCO denied the rehearing request. As of September 30, 2017, Duke Energy Ohio had approximately $36 million included in Regulatory assets on the Condensed Consolidated Balance Sheets for future remediation costs expected to be incurred at the East End site.
Regional Transmission Organization Realignment
Duke Energy Ohio, including2009. Duke Energy Kentucky transferred controlalso sought implementation of its transmissiona Weather Normalization Adjustment Mechanism, amortization of regulatory assets from Midcontinent Independent System Operator, Inc. (MISO)and to PJM, effective December 31, 2011. The PUCO approvedimplement the impacts of the Tax Act, prospectively. On January 30, 2019, Duke Energy Kentucky entered into a settlement related to Duke Energy Ohio’s recoveryagreement with the Attorney General of certain costsKentucky, the only intervenor in the case. The settlement provided for an approximate $7 million increase in natural gas base revenue and approval 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.proposed Weather Normalization Mechanism. A hearing was held on February 5, 2019. The KPSC also approved a request to effectcommission issued its Order approving 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 $90 million at September 30, 2017, and December 31, 2016, recorded within Other in Current liabilities and Other in Other Noncurrent Liabilitiessettlement without material modification 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 September 30, 2017, and December 31, 2016, Duke Energy Ohio had $71 million recorded in Regulatory assets on the Condensed Consolidated Balance Sheets.March 27, 2019.
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.

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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 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 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.
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. On June 21, 2017, a three-judge panel affirmed FERC's 2015 decision holding that Duke Energy Ohio has no liability for the cost of the MVP projects constructed after Duke Energy Ohio's withdrawal from MISO. MISO did not file further petitions for review and this matter is now final.
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 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, including AFUDC, and recovery of incremental operating and maintenance costs 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 would be considered for recovery in the next rate case. Terms of the settlement agreement also require Duke Energy Indiana to perform certain reporting and groundwater monitoring. An evidentiary hearing was held on February 23, 2017, and Duke Energy Indiana filed a proposed order with the IURC on March 30, 2017. On May 24, 2017, the IURC approved the settlement agreement.
FERC Transmission Return on Equity ComplaintsComplaint
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 claim, 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.D.C. Circuit Court, of Appeals for the District of Columbia Circuit, in Emera Maine v. FERC, reversed and remanded certain aspects of the methodology employed by FERC to establish rates of return on equity. This decision may affectOn October 16, 2018, FERC issued an order in response to the outcome ofEmera remand proceeding proposing a new method for determining whether an existing return on equity is unjust and unreasonable, and a new process for determining a just and reasonable return on equity. On November 14, 2018, FERC directed parties to the MISO complaints to file briefs on how the new process for determining return on equity proposed in the Emera proceeding should be applied to the complaints against Duke Energy Indiana.involving the MISO transmission owners’ return on equity. Initial briefs were filed on February 13, 2019, and reply briefs were filed April 10, 2019. Duke Energy Indiana currently believes these matters will not have a material impact on its results of operations, cash flows and financial position.
Grid Infrastructure Improvement PlanEdwardsport Integrated Gasification Combined Cycle Plant
In June 2016,On September 20, 2018, Duke Energy Indiana, the IURC issued an order approvingIndiana Office of Utility Consumer Counselor, the Duke Industrial Group and Nucor Steel – Indiana entered into a settlement agreement amongto resolve IGCC ratemaking issues for calendar years 2018 and 2019. The agreement will remain in effect until new rates are established in Duke Energy Indiana and certain parties related to a proposed grid infrastructure improvement plan. The settlement agreement included the removal of an AMI project and also provided for deferral accounting for depreciation and post-in-service carrying costs for AMI projects outside the 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 theIndiana's next retail base rate case, which is requiredexpected to be filed prior toin mid-2019 with rates effective in mid-2020. It addressed the end of the plan. During the third quarter of 2016, Duke Energy Indiana decided to implement the AMI project. This decision resulted in a pretax impairment charge related to existing or non-AMI meters of approximately $8 million for the three and nine months ended September 30, 2016, based in part on the requirement to file a base rate case in 2022 under the approved plan. As of September 30, 2017, Duke Energy Indiana's remaining net book value of non-AMI meters is approximately $43 million and will be depreciated through 2022. In the event that Duke Energy Indiana were to file a base rate case earlier than 2022, it would result in additional impairment charges.

54

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





Benton County Wind Farm Dispute
On December 16, 2013, Benton County Wind Farm LLC (BCWF) filed a lawsuit against Duke Energy Indiana seeking damages for past generation losses totaling approximately $16 million alleging Duke Energy Indiana violated its obligations under a 2006 PPA by refusing to offer electricity to the market at negative prices. Damage claims continue to increase during times that BCWF is not dispatched. Under 2013 revised MISO market rules, Duke Energy Indiana is required to make a price offer to MISO for the power it proposes to sell into MISO markets and MISO determines whether BCWF is dispatched. Because market prices would have been negative due to increased market participation, Duke Energy Indiana determined it would not bid at negative prices in order to balance customer needs against BCWF's need to run. BCWF contends Duke Energy Indiana must bidpending Edwardsport filing at the lowest negative price to ensure dispatch, while Duke Energy Indiana contends it is not obligated to bid at any particular price, that it cannot ensure dispatch with any bidcommission and that it has reasonably balancedeliminated the parties' interests. On July 6, 2015,need for future filings until the U.S. District Court for the Southern District of Indiana entered judgment against BCWF on all claims. BCWF appealed the decision and on December 9, 2016, the appeals court ruled in favor of BCWF. On June 30, 2017, the parties finalized a settlement agreement. Terms of the settlement included Duke Energy Indiana paying $29 million for back damages. Additionally, the parties agreed on the method by which the contract will be bid into the market in the future. Duke Energy Indiana recorded an obligation and a regulatory asset related to the settlement amount in fourth quarter 2016.overall rate case. The settlement amountis subject to IURC approval. An evidentiary hearing was paidheld in June 2017. TheDecember 2018, and an IURC issued an order on September 27, 2017, approving recovery of the settlement amount through Duke Energy Indiana's fuel clause. The IURC order has been appealed to the Indiana Court of Appeals.Order is expected in May 2019. Duke Energy Indiana cannot predict the outcome of this matter.
Piedmont
South Carolina Rate Stabilization AdjustmentTennessee Integrity Management Rider Filing
In June 2017, Piedmont filed with the PSCSC under the South Carolina Rate Stabilization Act its quarterly monitoring report for the 12-month period ending March 31, 2017. The filing included a revenue deficiency calculation and tariff rates in order to permit Piedmont the opportunity to earn the rate of return on equity of 12.6 percent established in its last general rate case. On October 4, 2017, the PSCSC approved a settlement agreement between Piedmont and the PSCSC Office of Regulatory Staff. Terms of the settlement included implementation of rates for the 12-month period beginning November 2017 with a return on equity of 10.2 percent.
North Carolina Integrity Management Rider Filings
In October 2017,2018, Piedmont filed a petition with the TPUC under the Integrity Management Rider (IMR)IMR mechanism to collect an additional $8.9$3 million in annual revenues, effective December 2017,January 2019, based on the eligible capital investments closed to integrity and safety projects over the six-month12-month period ending September 30, 2017.October 31, 2018. A hearing on the matter was held on March 11, 2019, and a decision is expected in May 2019.

52



FINANCIAL STATEMENTSREGULATORY MATTERS


2019 North Carolina Rate Case
On April 1, 2019, Piedmont filed an application with the NCUC, its first general rate case in North Carolina in six years, for a rate increase for retail customers of approximately $83 million, which represents an approximate 9 percent increase in retail revenues. The rate increase is driven by significant infrastructure upgrade investments (plant additions) since the last general rate case, offset by savings that customers will begin receiving due to federal and state tax reform. Approximately half of the plant additions being rolled into rate base are categories of plant investment not covered under the IMR mechanism, which was originally approved as part of the 2013 North Carolina Rate Case. Piedmont anticipates the NCUC will schedule the evidentiary hearing for late summer/early fall 2019, which would enable the rate change arising from this proceeding to take effect by the end of 2019. Piedmont cannot predict the outcome of this matter.
In May 2017, Piedmont filed, and the NCUC approved, a petition 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.
OTHER REGULATORY MATTERS
Atlantic Coast Pipeline, LLC
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, in part, the needs identified by Duke Energy Carolinas, Duke Energy Progress and Piedmont. The ACP pipeline development costs are estimated between $5.0 billion to $5.5 billion, excluding financing costs. Dominion will buildbe responsible for building and operateoperating the ACP pipeline and holds a leading ownership percentage in ACP of 48 percent. Duke Energy owns a 47 percent interest, which is accounted for as an equity method investment through its Gas Utilities and Infrastructure segment. Southern Company Gas maintains a 5 percent interest. See Note 13 for additional information related to Duke Energy's ownership interest.
Duke Energy Carolinas, Duke Energy Progress and Piedmont, among others, will be customers of the pipeline. Purchases will be made under several 20-year supply contracts, subject to state regulatory approval. On September 18, 2015, ACP filed an application with
In 2018, 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 draftseries of Notices to Proceed, which authorized the project to begin certain construction-related activities along the pipeline route, including supply header and compressors. On May 11, 2018, and October 19, 2018, FERC issued Notices to Proceed allowing full construction activities in all areas of West Virginia except in the Monongahela National Forest. On July 24, 2018, FERC issued a Notice to Proceed allowing full construction activities along the project route in North Carolina. On October 19, 2018, the conditions to effectiveness of the Virginia 401 water quality certification were satisfied. Immediately following receipt of the Virginia 401 certification, ACP filed a request for FERC to issue a Notice to Proceed with full construction activities in Virginia. We appreciate the professional and collaborative process by the permitting agencies designed to ensure that this critical energy infrastructure project will meet the stringent environmental standards required by law and regulation.
ACP is the subject of challenges in state and federal courts and agencies, including, among others, challenges of the project’s incidental take statement (ITS), crossings of the Blue Ridge Parkway, the Appalachian Trail, and the Monongahela and George Washington National Forests, the project’s U.S. Army Corps of Engineers (USACE) 404 permit, the Virginia conditional 401 water quality certification, the FERC Environmental Impact Statement (EIS) indicating thatorder and the proposed pipeline would not cause significant harm to the environment or protected populations. The FERC issued the final EIS in July 2017. On October 13, 2017, FERC issued an order approving the CPCN, subject to conditions. On October 16, 2017, ACP acceptedCertificate of Public Convenience and Necessity. Each of these challenges alleges non-compliance on the FERC order subject to reserving its right to file a request for rehearing or clarification on a timely basis. Construction is projected to begin in the fourth quarterpart of 2017, with a targeted in-service date in late 2019. The project remains subject to other pending federal and state approvals.
Sabal Trail Transmission, LLC
On May 4, 2015, Duke Energy acquiredpermitting authorities and adverse ecological consequences if the project is permitted to proceed. Since December 2018, notable developments in these challenges include a 7.5 percent ownership interest in Sabal Trail Transmission, LLC (Sabal Trail) from Spectra Energy Partners, LP, a master limited partnership, formedstay issued by Enbridge Inc. (formerly Spectra Energy Corp.). Spectra Energy Partners, LP holds a 50 percent ownership interest in Sabal Trail and NextEra Energy has a 42.5 percent ownership interest. Sabal Trail is a joint venture to construct a 515-mile natural gas pipeline (Sabal Trail pipeline) to transport natural gas to Florida. Total estimated project costs are approximately $3.2 billion. The Sabal Trail pipeline traverses Alabama, Georgia and Florida. The primary customers of the Sabal Trail pipeline, Duke Energy Florida and Florida Power & Light Company (FP&L), have each contracted to buy pipeline capacity for 25-year initial terms. See Note 13 for additional information related to Duke Energy's ownership interest.

55

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





On February 3, 2016, the FERC issued an order granting the request for a CPCN to construct and operate the pipeline. 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 Fourth Circuit (Fourth Circuit) of the project's biological opinion and ITS (which stay has halted most project construction activity), a Fourth Circuit decision vacating the project's permits to cross the Monongahela and George Washington National Forests and the Appalachian Trail, the Fourth Circuit's remand to USACE of ACP's Huntington District 404 verification and the Fourth Circuit’s remand to the National Park Service of Columbia Circuit.the ACP’s Blue Ridge Parkway right-of-way. ACP is vigorously defending these challenges and coordinating with the federal and state authorities which are the direct parties to the challenges. ACP and federal agencies are coordinating on a potential appeal of the Fourth Circuit’s recent ruling vacating the project’s permit to cross the Appalachian Trail. ACP is also evaluating possible legislative and administrative remedies. On August 22, 2017,May 9, 2019, ACP, the appeals court ruled against FERCU.S. Fish and Wildlife Service and the Department of Justice will present arguments before the Fourth Circuit supporting the project’s stayed biological opinion and ITS.
The delays resulting from the legal challenges described above have impacted the cost and schedule for the project. As a result, project cost estimates have increased to $7.0 billion to $7.8 billion, excluding financing costs. ACP expects to achieve a late 2020 in-service date for key segments of the project, while it expects the remainder to extend into 2021. Abnormal weather, work delays (including delays due to judicial or regulatory action) and other conditions may result in cost or schedule modifications in the case for failing to include enough information on the impact of greenhouse-gas emissions carried by the pipeline and vacated the CPCN order. In response to the August 2017 court decision, the FERC issued a draft Supplemental Environmental Impact Statement (SEIS) on September 27, 2017. Comments on the SEIS are due by November 20, 2017. On October 6, 2017, FERC filed a petition with the D.C. Circuit Court of Appeals requesting a rehearing regarding the court's decision to vacate the CPCN order. On October 6, 2017, Sabal Trail and other natural gas shippers, including Duke Energy Florida, also filed a rehearing request with the D.C. Circuit Court of Appeals regarding the decision to vacate the CPCN order. It is unclear how this matter will impact the project going forward. The Sabal Trail pipeline has received other required regulatory approvals and the phase one mainline was placed in service in July 2017. On October 12, 2017, Sabal Trail filed a request with FERC to place in-service a lateral line to Duke Energy Florida's Citrus County Combined Cycle facility.future.
Constitution Pipeline Company, LLC
Duke Energy hasowns a 24 percent ownership interest in Constitution, Pipeline Company, LLC (Constitution).which is accounted for as an equity method investment. Constitution is a natural gas pipeline project slated to transport natural gas supplies from the Marcellus supply region in northern Pennsylvania to major northeastern markets. The pipeline will be constructed and operated by Williams Partners L.P., which has a 41 percent ownership share. The remaining interest is held by Cabot Oil and Gas Corporation and WGL Holdings, Inc. Before the permitting delays discussed below, Duke Energy's total anticipated contributions arewere approximately $229 million.
On As a result of the permitting delays and project uncertainty, total anticipated contributions by Duke Energy can no longer be reasonably estimated. Since April 22, 2016, with the actions of the New York State Department of Environmental Conservation (NYSDEC), Constitution stopped construction and discontinued capitalization of future development costs until the project's uncertainty is resolved.
In December 2014, Constitution received approval from the FERC to construct and operate the proposed pipeline. However, on April 22, 2016, the NYSDEC denied Constitution’s application for a necessary water quality certification for the New York portion of the Constitution pipeline. Constitution filed a series of legal actions in the U.S. Court of Appeals for the Second Circuit (U.S. Court of Appeals) challenging the legality and appropriateness of the NYSDEC’s decision, and on August 18, 2017,culminating in an appeal to the petitionSupreme Court of the United States, which appeal was denied on April 30, 2018. In addition, in part and dismissed in part. On September 1, 2017, Constitution filed a petition for a rehearing of portions of the decision unrelated to the water quality certification, which was denied by the U.S. Court of Appeals. On October 11, 2017, Constitution filed a petition for declaratory order with the FERC requesting FERC to issue an order findingfind that the NYSDEC waived its rights to issue a Section 401 water quality certification by not acting on Constitution's application within thea reasonable period of time frameas required by statute, which would allowpetition was denied on January 11, 2018.

53



FINANCIAL STATEMENTSREGULATORY MATTERS


On January 25, 2019, the projectD.C. Circuit Court rendered a decision in Hoopa Valley Tribe v. FERC that withdrawal and resubmission of an application for a Section 401 water quality certification constituted a waiver by the relevant state agency when such withdrawals and resubmissions were intended to proceed.extend the one-year limit on accepting or rejecting such an application. As Constitution has revisedhad made similar arguments in its 2018 petition to FERC for a declaratory order, on April 1, 2019, Constitution filed a new petition for declaratory order requesting FERC find a waiver on the targetpart of NYSDEC in accordance with the D.C. Circuit Court’s newly established precedent. On May 1, 2019, Constitution filed its response to supplemental pleadings filed by NYSDEC and others in this proceeding. A FERC response is expected later this year.
Constitution is currently unable to approximate an in-service date to as early asfor the first half of 2019project due to the NYDSEC'sNYSDEC's denial of the water quality certification. The Constitution partners remain committed to the project and are evaluating next steps to move the project forward. On June 25, 2018, Constitution filed with FERC a Request for Extension of Time until December 2, 2020, for construction of the project. On November 5, 2018, FERC issued an Order Granting Extension of Time.
During the three months ended March 31, 2018, Duke Energy recorded an OTTI of $55 million within Equity in (losses) earnings of unconsolidated affiliates on Duke Energy's Condensed Consolidated Statements of Income. The charge represented the excess carrying value over the estimated fair value of the project, which was based on a Level 3 Fair Value measurement that was determined from the income approach using discounted cash flows. The impairment was primarily due to actions taken by the courts and regulators to uphold the NYSDEC's denial of the certification and the legal actions being taken to challenge the decision, assuming the timely receipt of a Notice to Proceed from the FERC. Duke Energy cannot predict the outcome of this matter.
Since April 2016,uncertainty associated with the actions of the NYSDEC, Constitution stopped construction and discontinued capitalization of future development costs until the project's uncertainty is resolved. To the extent theremaining legal and regulatory proceedings have unfavorable outcomes, or if Constitution concludes that the project is not viable or does not go forward, an impairment charge of up to the recorded investment in the project, net of any cash and working capital returned, may be recorded.challenges.
See Note 13 for additional information related to ownership interest and carrying value of the investment.
Potential Coal Plant Retirements
The Subsidiary Registrants periodically file Integrated Resource Plans (IRP)IRPs with their state regulatory commissions. The IRPs provide a view of forecasted energy needs over a long term (10 to 20 years) and options being considered to meet those needs. 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 regulations recently approved or proposed.regulatory requirements expected to apply in the near future. Duke Energy continues to evaluate the potential need to retire these coal-fired generating facilities earlier than the current estimated useful lives and plans to seek regulatory recovery for amounts that would not be otherwise recovered when any of these assets are retired.
The table below contains the net carrying value of generating facilities planned for retirement or included in recent IRPs as evaluated for potential retirement.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 September 30, 2017,March 31, 2019, and exclude capitalized asset retirement costs.
  Remaining Net
  Remaining Net
Capacity
 Book Value
Capacity
 Book Value
(in MW)
 (in millions)
(in MW)
 (in millions)
Duke Energy Carolinas      
Allen Steam Station Units 1-3(a)
585
 $164
585
 $159
Progress Energy and Duke Energy Florida   
Crystal River Units 1 and 2(b)
873
 111
Duke Energy Indiana      
Gallagher Units 2 and 4(c)
280
 130
Gallagher Units 2 and 4(b)
280
 120
Total Duke Energy1,738
 $405
865
 $279
(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 2016 settlement of Edwardsport IGCC matters.
Refer to the "Western Carolinas Modernization Plan" discussion above for details of Duke Energy Progress' planned retirements.

56

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)





5.4. COMMITMENTS AND CONTINGENCIES
ENVIRONMENTAL
The Duke Energy Registrants are subject to federal, state and local regulations regarding air and water quality, hazardous and solid waste disposal 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.

54



FINANCIAL STATEMENTSCOMMITMENTS AND CONTINGENCIES


Remediation Activities
In addition to asset retirement obligations (ARO)AROs recorded as a result of various environmental regulations, the Duke Energy Registrants are responsible for environmental remediation at various sites. These include certain properties that are part of ongoing operations and sites formerly owned or used by Duke Energy entities. These sites are in various stages of investigation, remediation and monitoring. Managed in conjunction with relevant federal, state and local agencies, remediation activities vary based upon site conditions and location, remediation requirements, complexity and sharing of responsibility. If remediation activities involve joint and several liability provisions, strict liability, or cost recovery or contribution actions, the Duke Energy Registrants could potentially be held responsible for environmental impacts caused by other potentially responsible parties and may also benefit from insurance policies or contractual indemnities that cover some or all cleanup costs. Liabilities are recorded when losses become probable and are reasonably estimable. The total costs that may be incurred cannot be estimated because the extent of environmental impact, allocation among potentially responsible parties, remediation alternatives and/or regulatory decisions have not yet been determined at all sites. Additional costs associated with remediation activities are likely to be incurred in the future and could be significant. Costs are typically expensed as Operation, maintenance and other on the Condensed Consolidated Statements of Operations unless regulatory recovery of the costs is deemed probable.
The following tables contain information regarding reserves for probable and estimable costs related to the various environmental sites. These reserves are recorded in Accounts Payable within Current Liabilities and Other within Other Noncurrent Liabilities on the Condensed Consolidated Balance Sheets.
Nine Months Ended September 30, 2017Three Months Ended March 31, 2019
  Duke
   Duke
 Duke
 Duke
 Duke
    Duke
   Duke
 Duke
 Duke
 Duke
  
Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Balance at beginning of period$98
 $10
 $18
 $3
 $14
 $59
 $10
 $1
$77
 $11
 $11
 $4
 $6
 $48
 $5
 $2
Provisions/adjustments(1) 2
 1
 —
 1
 (3) (2) 1
(2) 2
 2
 1
 2
 (6) —
 —
Cash reductions(13) (2) (3) —
 (3) (7) (1) —
(8) —
 —
 —
 —
 (8) —
 —
Balance at end of period$84
 $10
 $16
 $3
 $12
 $49
 $7
 $2
$67
 $13
 $13
 $5
 $8
 $34
 $5
 $2
Nine Months Ended September 30, 2016Three Months Ended March 31, 2018
  Duke
   Duke
 Duke
 Duke
 Duke
    Duke
   Duke
 Duke
 Duke
 Duke
  
Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Balance at beginning of period$94
 $10
 $17
 $3
 $14
 $54
 $12
 $1
$81
 $10
 $15
 $3
 $12
 $47
 $5
 $2
Provisions/adjustments34
 5
 5
 2
 3
 6
 20
 —
4
 1
 3
 1
 1
 —
 1
 —
Cash reductions(12) (4) (6) (2) (4) (1) (2) —
(5) —
 (2) (1) (1) (3) —
 —
Balance at end of period$116
 $11
 $16
 $3
 $13
 $59
 $30
 $1
$80
 $11
 $16
 $3
 $12
 $44
 $6
 $2
Additional losses in excess of recorded reserves that could be incurred for the stages of investigation, remediation and monitoring for environmental sites that have been evaluated at this time are not material except as presented in the table below.
(in millions) 
Duke Energy$58
Duke Energy Carolinas20
Duke Energy Ohio30
Duke Energy Indiana3
Piedmont2
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. Future costs related to the Dan River release, including future civil enforcement, future regulatory directives, natural resources damages, future claims or litigation and long-term environmental impact costs, cannot be reasonably estimated at this time.
(in millions) 
Duke Energy$45
Duke Energy Carolinas12
Duke Energy Ohio22
Piedmont2

5755

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



FINANCIAL STATEMENTSCOMMITMENTS AND CONTINGENCIES


The North Carolina Department of Environmental Quality (NCDEQ) has historically assessed Duke Energy Carolinas and Duke Energy Progress with Notices 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.
LITIGATION
Duke Energy
Duke Energy no longer has exposure to litigation matters related to the International Disposal Group as a 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 related to the release at Dan River and to the management of Duke Energy’s ash basins. On October 31, 2014, the five lawsuits were consolidated in a single proceeding titled In Re Duke Energy Corporation Coal Ash Derivative Litigation. On December 2, 2014, plaintiffs filed a Corrected Verified Consolidated Shareholder Derivative Complaint (Consolidated Complaint). The Consolidated Complaint names as defendants several current and former Duke Energy officers and directors (collectively, the Duke Energy Defendants). Duke Energy is named as a nominal defendant.
The Consolidated Complaint alleges the Duke Energy Defendants breached their fiduciary duties 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. Oral argument was held on September 27, 2017, and a decision is pending.
On October 30, 2015, shareholder Saul Bresalier filed a shareholder derivative complaint (Bresalier Complaint) in the U.S. District Court for 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. As discussed below, a settlement agreement was approved for the merger-related claims in the Bresalier Complaint, and those claims were dismissed. On September 8, 2017, Bresalier filed a notice of appeal to the U.S. Court of Appeals for the Third Circuit (Third Circuit Court) challenging the dismissal of his coal ash and political contribution claims. Pursuant to a scheduling order issued by the Third Circuit Court, briefing will be complete on December 20, 2017.
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
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 (Merger Chancery Litigation). The lawsuit names as defendants the Legacy Duke Energy Directors. Duke Energy is named as a nominal defendant. The case alleges claims for breach of fiduciary duties of loyalty and care in connection with the post-merger change in CEO.
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 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, which was approved by the Delaware Chancery Court on July 13, 2017. The entire settlement amount was funded by insurance. The settlement amount, less court-approved attorney fees, totaled $20 million and was paid to Duke Energy in third quarter 2017.

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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)





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. The proposed settlement of the class action lawsuits was approved by the Court and all settlement amounts, which are not material to Duke Energy, have been paid.
Duke Energy Carolinas and Duke Energy Progress
NCDEQ Closure Litigation
The Coal Ash Act requires CCR surface impoundments in North Carolina to be closed, with the closure method and timing based on a risk ranking classification determined by legislation or state regulators. The NCDEQ previously classified the impoundments at Allen, Belews Creek, Rogers, Marshall, Mayo and Roxboro as low risk and Duke Energy expected to close those sites through a combination of a cap system and a groundwater monitoring system. However, on April 1, 2019, NCDEQ issued a closure determination requiring Duke Energy Carolinas and Duke Energy Progress to excavate all remaining coal ash impoundments at these facilities. On April 26, 2019, Duke Energy Carolinas and Duke Energy Progress filed Petitions for Contested Case Hearings in the Office of Administrative Hearings to challenge NCDEQ’s determination that all ash basins must be excavated. Duke Energy Carolinas and Duke Energy Progress cannot predict the outcome of this matter.
Coal Ash Insurance Coverage Litigation
In March 2017, Duke Energy Carolinas and Duke Energy Progress filed a civil action in North Carolina Superior Court against various insurance providers. The lawsuit seeks payment for coal ash-related liabilities covered by third-party liability insurance policies. The insurance policies were issued between 1971 and 1986 and provide third-party liability insurance for property damage. The civil action seeks damages for breach of contract and indemnification for costs arising from the Coal Ash Act and the EPA CCR rule at 15 coal-fired plants in North Carolina and South Carolina. On January 23, 2019, the court granted the parties’ joint motion for a four-month stay of the proceedings, until June 3, 2019, to allow the parties to discuss potential resolution. If the case is not fully resolved at that time, litigation will resume. The trial remains scheduled for August 2020. Duke Energy Carolinas and Duke Energy Progress cannot predict the outcome of this matter.
NCDEQ State Enforcement Actions
In the first quarter of 2013, the Southern Environmental Law Center (SELC)SELC sent notices of intent to sue Duke Energy Carolinas and Duke Energy Progress related to alleged Clean Water Act (CWA)CWA violations from coal ash basins at two of their coal-fired power plants in North Carolina. The NCDEQ filed enforcement actions against Duke Energy Carolinas and Duke Energy Progress alleging violations of water discharge permits and North Carolina groundwater standards. The cases have been consolidated and are being heard before a single judge in the North Carolina Superior Court.
On August 16, 2013, the NCDEQ filed an enforcement action against Duke Energy Carolinas and Duke Energy Progress related to their remaining plants in North Carolina, alleging violations of the CWA and violations of the North Carolina groundwater standards. Both of these cases have been assigned to the judge handling the enforcement actions discussed above. SELC is representing several environmental groups who have been permitted to intervene in these cases.
The court issued orders in 2016 granting Motions for Partial Summary Judgment for seven of the 14 North Carolina plants named in the enforcement actions. The litigation is concluded for these seven plants. Litigation continues for the remaining seven plants. On February 13, 2017, the court issued an order denying motions for partial summary judgment brought by both the environmental groups and Duke Energy Carolinas and Duke Energy Progress.Progress for the remaining seven plants. On March 15, 2017, Duke Energy Carolinas and Duke Energy Progress filed a Notice of Appeal with the North Carolina Court of Appeals to challenge the trial court’s order. The parties were unable to reach an agreement at mediation in April 2017. The parties2017 and submitted briefs to the trial court on remaining issues to be tried and a ruling is pending.tried. On August 22, 2017,1, 2018, the Court of Appeals dismissed the appeal and the matter is proceeding before the trial court. In light of the NCDEQ's determination that all ash basins must be excavated, on April 29, 2019, the court decided to stay any activity in the case until August 2019, at which time the court will hold another status conference. Duke Energy Carolinas and Duke Energy Progress filed a Petition for Discretionary Review, requestingcannot predict the North Carolina Supreme Court to accept the appeal. On August 24, 2017, SELC filed a motion to dismiss the appeal. Duke Energy Carolinas' and Duke Energy Progress’ opening appellate briefs were filed on October 12, 2017.outcome of this matter.
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
On June 13, 2016, the Roanoke River Basin Association (RRBA)RRBA filed a federal citizen suit in the Middle District of North Carolina alleging unpermitted discharges to surface water and groundwater violations at the Mayo Plant. On August 19, 2016, Duke Energy Progress filed a Motion to Dismiss. On April 26, 2017, the court entered an order dismissing four of the claims in the federal citizen suit. Two claims relating to alleged violations of National Pollutant Discharge Elimination System (NPDES)NPDES permit provisions survived the motion to dismiss, and Duke Energy Progress filed its response on May 10, 2017. The parties are engaged in pre-trial discovery. Trial has been scheduled for July 9, 2018.
On March 16, 2017, RRBA served Duke Energy Progress with a Notice of Intent to Sue under the CWAand RRBA each filed motions for alleged violations of effluent standards and limitations at the Roxboro Plant. In anticipation of litigation, Duke Energy Progress filed a Complaint for Declaratory Relief in the U.S. District Court for the Western District of Virginiasummary judgment on May 11, 2017, which was subsequently dismissed. March 23, 2018. The court has not yet ruled on these motions.
On May 16, 2017, RRBA filed a federal citizen suit in the U.S. District Court for the Middle District of North Carolina, which asserts two claims relating to alleged violations of NPDES permit provisions at the Roxboro Plant and one claim relating to the use of nearby water bodies. Duke Energy Progress and RRBA each filed motions for summary judgment on April 17, 2018, and the court has not yet ruled on these motions.
On June 20,May 8, 2018, on motion from Duke Energy Progress, the court ordered trial in both of the above matters to be consolidated. On April 5, 2019, Duke Energy Progress filed a motion to stay the case following the NCDEQ’s determination that all ash basins must be excavated. On April 19, 2019, the court entered an order staying the case through August 7, 2019, at which time the court will hold a status conference.
On December 5, 2017, RRBAvarious parties filed a federal citizen suit in the U.S. District Court for the Middle District of North Carolina challenging the closure plans at the Mayo Plant under the EPA CCR Rule. Duke Energy Progress filed a motion to dismiss on August 21, 2017.
On August 2, 2017, RRBA filed a federal citizen suit in the U.S. District Court for the Middle District of North Carolina challenging the closure plans at the Roxboro Plant under the EPA CCR Rule. Duke Energy Progress filed a motion to dismiss on October 2, 2017.
On October 3, 2017, various parties served Duke Energy Carolinas with a Notice of Intent to Sue under the CWA for alleged violations at Duke Energy Carolinas' Belews Creek Steam Station (Belews Creek). A lawsuit may beunder the CWA. Duke Energy Carolinas' answer to the complaint was filed sixty days after service of notice.
It is not possible to predict whetheron August 27, 2018. On October 10, 2018, Duke Energy Carolinas orfiled Motions to Dismiss for lack of standing, Motion for Judgment on the Pleadings and Motion to Stay Discovery. On January 9, 2019, the court entered an order denying Duke Energy Progress will incur any liability orCarolinas' motion to estimatestay discovery. There has been no ruling on the damages, if any, they might incur in connection with these matters.
Five previouslyother pending motions. On April 5, 2019, Duke Energy Carolinas filed cases involvinga motion to stay the Riverbend, Cape Fear, H.F. Lee, Sutton and Buck plants were dismissed or settled in 2016.

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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)





Groundwater Contamination Claims
Beginning in May 2015, a number of residents living incase following the vicinity of the North Carolina facilities withNCDEQ’s determination that all ash basins received letters frommust be excavated. On April 19, 2019, the NCDEQ advising them not to drink water fromcourt entered an order staying the private wells on their land tested bycase through August 7, 2019, at which time the NCDEQ as the samples were found to have certain substances at levels higher than the criteria set by the North Carolina Department of Health and Human Services (DHHS). Results of Comprehensive Site Assessments (CSAs) testing performed by Duke Energy under the Coal Ash Act have been consistent with historical data provided to state regulators over many years. The DHHS and NCDEQ sent follow-up letters on October 15, 2015, to residents near coal ash basins who had their wells tested, stating that private well samplings atcourt will hold a considerable distance from coal ash basins, as well as some municipal water supplies, contain similar levels of vanadium and hexavalent chromium, which led investigators to believe these constituents are naturally occurring. In March 2016, DHHS rescinded the advisories.status conference.
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 dayscannot predict the outcome of mediation discussions that ended at an impasse. On January 6, 2017, Duke Energy Carolinas and Duke Energy Progress received the plaintiffs' notice of their intent to file suits should the matter not settle. The NCDEQ preliminarily approved Duke Energy’s permanent water solution plans on January 13, 2017, and as a result shortly thereafter, Duke Energy issued a press release, providing additional details regarding the homeowner compensation package. This package consists of three components: (i) a $5,000 goodwill payment to each eligible well owner to support the transition to a new water supply, (ii) where a public water supply is available and selected by the eligible well owner, a stipend to cover 25 years of water bills and (iii) the Property Value Protection Plan. The Property Value Protection Plan is a program offered by Duke Energy designed to guarantee eligible plant neighbors the fair market value of their residential property should they decide to sell their property during the time that the plan is offered. Duke Energy Carolinas and Duke Energy Progress have recognized reserves of $19 million and $4 million, respectively. On August 23, 2017, a class action suit was filed in Wake County Superior Court, North Carolina, against Duke Energy Carolinas and Duke Energy Progress on behalf of certain property owners living near coal ash impoundments at Allen, Asheville, Belews Creek, Buck, Cliffside, Lee, Marshall, Mayo and Roxboro. The class is defined as those who are “well-eligible” under the Coal Ash Act or those to whom Duke Energy has promised a permanent replacement water supply and seeks declaratory and injunctive relief, along with compensatory damages. Plaintiffs allege that Duke Energy’s improper maintenance of coal ash impoundments caused harm, particularly through groundwater contamination. Despite NCDEQ’s preliminary approval, Plaintiffs contend that Duke Energy’s proposed permanent water solutions plan fails to comply with the Coal Ash Act. On September 28, 2017, Duke Energy Carolinas and Duke Energy Progress filed a Motion to Dismiss and Motion to Strike the class designation.these matters.
On September 14, 2017, a complaint was filed against Duke Energy Progress in New Hanover County Superior Court by a group of homeowners residing approximately one mile from Duke Energy Progress' Sutton Steam Plant (Sutton). The homeowners allege that coal ash constituents have been migrating from ash impoundments at Sutton into their groundwater for decades and that in 2015, Duke Energy Progress discovered these releases of coal ash, but failed to notify any officials or neighbors and failed to take remedial action. The homeowners claim unspecified physical and mental injuries as a result of consuming their well water and seek actual damages for personal injury, medical monitoring and punitive damages.
It is not possible to estimate the maximum exposure of loss, if any, that may occur in connection with current claims or future claims, which might be made by these residents.
56



FINANCIAL STATEMENTSCOMMITMENTS AND CONTINGENCIES


Asbestos-related Injuries and Damages Claims
Duke Energy Carolinas has experienced numerous claims for indemnification and medical cost reimbursement related to asbestos exposure. These claims relate to damages for bodily injuries alleged to have arisen from exposure to or use of asbestos in connection with construction and maintenance activities conducted on its electric generation plants prior to 1985. As of September 30, 2017,March 31, 2019, there were 120139 asserted claims for non-malignant cases with cumulative relief sought of up to $29$34 million, and 57 asserted claims for malignant cases with cumulative relief sought of up to $16$18 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 $486$617 million at September 30, 2017,March 31, 2019, and $512$630 million at December 31, 2016.2018. These reserves are classified in Other within Other Noncurrent Liabilities and Other within Current Liabilities on the Condensed Consolidated Balance Sheets. These reserves are based upon the minimum amount of the range of lossDuke Energy Carolinas' best estimate for current and future asbestos claims through 2036,2038 and are recorded on an undiscounted basis and incorporate anticipated inflation.basis. In light of the uncertainties inherent in a longer-term forecast, management does not believe they can reasonably estimate the indemnity and medical costs that might be incurred after 20362038 related to such potential claims. It is possible Duke Energy Carolinas may incur asbestos liabilities in excess of the recorded reserves.
Duke Energy Carolinas has third-party insurance to cover certain losses related to asbestos-related injuries and damages above an aggregate self-insured retention. Duke Energy Carolinas’ cumulative payments began to exceed the self-insuranceself-insured retention in 2008. Future payments up to the policy limit will be reimbursed by the third-party insurance carrier. The insurance policy limit for potential future insurance recoveries indemnification and medical cost claim payments is $797$764 million in excess of the self-insured retention. Receivables for insurance recoveries were $570$739 million at September 30, 2017,March 31, 2019, and $587 million at December 31, 2016.2018. These amounts are classified in Other within Other Noncurrent Assets and Receivables within Current Assets on the Condensed Consolidated Balance Sheets. Duke Energy Carolinas is not aware of any uncertainties regarding the legal sufficiency of insurance claims. Duke Energy Carolinas believes the insurance recovery asset is probable of recovery as the insurance carrier continues to have a strong financial strength rating.

Duke Energy Progress and Duke Energy Florida
60

Spent Nuclear Fuel 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 NotesOn October 16, 2014, Duke Energy Progress and Duke Energy Florida sued the U.S. in the U.S. Court of Federal Claims. The lawsuit claimed the Department of Energy breached a contract in failing to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





accept spent nuclear fuel under the Nuclear Waste Policy Act of 1982 and asserted damages for the cost of on-site storage. On June 22, 2018, Duke Energy Progress and Duke Energy Florida filed a complaint for damages incurred for 2014 through first quarter 2018.
Duke Energy Florida
Class Action LawsuitFluor Contract Litigation
On February 22, 2016,January 29, 2019, Fluor filed a breach of contract lawsuit was filed in the U.S. District Court for the SouthernMiddle District of Florida on behalf of a putative class ofagainst Duke Energy Florida related to an EPC agreement for the combined-cycle natural gas plant in Citrus County, Florida. Fluor filed an amended complaint on February 13, 2019. Fluor’s multicount complaint seeks civil, statutory and FP&L’s customerscontractual remedies related to Duke Energy Florida’s $67 million draw in Florida. The suit alleges the Stateearly 2019, on Fluor’s letter of Florida’s nuclear power plant cost recovery statutes (NCRS) are unconstitutionalcredit and pre-empted by federal law. Plaintiffs claim they are entitled to repaymentoffset of all money paid by customers ofinvoiced amounts. Duke Energy Florida moved to dismiss all counts of Fluor's amended complaint, and FP&L ason April 16, 2019, the court dismissed Fluor's complaint without prejudice. On April 26, 2019, Fluor filed 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.second amended complaint. Duke Energy Florida and FP&L filed motionsis attempting 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 to the Eleventh Circuit U.S. Court of Appeals. The appeal, which has been fully briefed, was heard on August 22, 2017, and a decision is pending.recover from Fluor $110 million in additional costs incurred by Duke Energy Florida. Duke Energy Florida cannot predict the outcome of this appeal.matter.
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 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.
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. 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 to the U.S. Court of Appeals for the Fourth Circuit (Fourth Circuit Court) and Duke Energy Florida has cross-appealed. Duke Energy Florida cannot predict the ultimate outcome of the appeal of the trial court's order.
On March 29, 2017, Westinghouse filed Chapter 11 bankruptcy in the Southern District of New York, which automatically stayed the appeal. On May 23, 2017, the bankruptcy court entered an order lifting the stay with respect to the appeal. Briefing of the appeal concluded on October 20, 2017, and the parties await a decision form the Fourth Circuit Court on whether it will allow oral argument of the appeal.
Ultimate resolution of these matters could have a material effect on the results of operations, financial position or cash flows of Duke Energy Florida. See discussion of the 2017 Settlement and the Levy Nuclear Project in Note 4 for additional information regarding recovery of costs related to Westinghouse.
MGP Cost Recovery Action
On December 30, 2011, Duke Energy Florida filed a lawsuit against FirstEnergy Corp. (FirstEnergy) to recover investigation and remediation costs incurred by Duke Energy Florida in connection with the restoration of two former MGP sites in Florida. Duke Energy Florida alleged that FirstEnergy, as the successor to Associated Gas & Electric Co., owes past and future contribution and response costs of up to $43 million for the investigation and remediation of MGP sites. On December 6, 2016, the trial court entered judgment against Duke Energy Florida in the case. In January 2017, Duke Energy Florida appealed the decision to the U.S. Court of Appeals for the 6th Circuit and briefing has been completed. Duke Energy Florida cannot predict the outcome of this appeal.
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.

61

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 recorded reserves based on management’s best estimate of probable loss for legal matters, excluding asbestos-related reserves and the exit obligation discussed above related to the termination of an EPC contract.above. Reserves are classified on the Condensed Consolidated Balance Sheets in Other within Other Noncurrent Liabilities and Accounts payable and Other within Current Liabilities. The reasonably possible range of loss in excess of recorded reserves is not material, other than as described above.
(in millions)September 30, 2017
 December 31, 2016
March 31, 2019
 December 31, 2018
Reserves for Legal Matters      
Duke Energy$83
 $98
$66
 $65
Duke Energy Carolinas23
 23
8
 9
Progress Energy56
 59
57
 54
Duke Energy Progress13
 14
15
 12
Duke Energy Florida28
 28
24
 24
Duke Energy Ohio—
 4
Piedmont2
 2
1
 1

57



FINANCIAL STATEMENTSCOMMITMENTS AND CONTINGENCIES


OTHER COMMITMENTS AND CONTINGENCIES
General
As part of their normal business, the Duke Energy Registrants are party to various financial guarantees, performance guarantees and other contractual commitments to extend guarantees of credit and other assistance to various subsidiaries, investees and other third parties. These guarantees involve elements of performance and credit risk, which are not fully recognized on the Condensed Consolidated Balance Sheets and have unlimited maximum potential payments. However, the Duke Energy Registrants do not believe these guarantees will have a material effect on their results of operations, cash flows or financial position.
In addition, the Duke Energy Registrants enter into various fixed-price, noncancelable commitments to purchase or sell power or natural gas, take-or-pay arrangements, transportation, or throughput agreements and other contracts that may or may not be recognized on their respective Condensed Consolidated Balance Sheets. Some of these arrangements may be recognized at fair value on their respective Condensed Consolidated Balance Sheets if such contracts meet the definition of a derivative and the normal purchase/normal sale (NPNS)NPNS exception does not apply. In most cases, the Duke Energy Registrants’ purchase obligation contracts contain provisions for price adjustments, minimum purchase levels and other financial commitments.
5. LEASES
As described in Note 1, Duke Energy adopted the revised accounting guidance for Leaseseffective January 1, 2019, using the modified retrospective method of adoption, which does not require restatement of prior year reported results. Adoption of the new standard resulted in the recording of ROU assets and operating lease liabilities as follows:
 As of January 1, 2019
   Duke
   Duke
 Duke
 Duke
 Duke
  
 Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
ROU assets$1,750
 $153
 $863
 $407
 $456
 $23
 $61
 $26
Operating lease liabilities – current205
 28
 96
 35
 61
 1
 4
 4
Operating lease liabilities – noncurrent1,504
 127
 766
 371
 395
 22
 58
 25
As part of its operations, Duke Energy leases certain aircraft, space on communication towers, industrial equipment, fleet vehicles, fuel transportation (barges and railcars), land and office space under various terms and expiration dates. Additionally, Duke Energy Carolinas, Duke Energy Progress and Duke Energy Indiana have finance leases related to firm natural gas pipeline transportation capacity. Duke Energy Progress and Duke Energy Florida have entered into certain PPAs, which are classified as finance and operating leases.
Duke Energy has certain lease agreements, which include variable lease payments that are based on the usage of an asset. These variable lease payments are not included in the measurement of the ROU assets or operating lease liabilities on the Condensed Consolidated Financial Statements.
Certain Duke Energy lease agreements include options for renewal and early termination. The intent to renew a lease varies depending on the lease type and asset. Renewal options that are reasonably certain to be exercised are included in the lease measurements. The decision to terminate a lease early is dependent on various economic factors. No termination options have been in included in any of the lease measurements.
Duke Energy operates various renewable energy projects and sells the generated output to utilities, electric cooperatives, municipalities and commercial and industrial customers through long-term PPAs. In certain situations, these PPAs and the associated renewable energy projects qualify as operating leases. Rental income from these leases is accounted for as Nonregulated electric and other revenues in the Condensed Consolidated Statements of Operations. There are no minimum lease payments as all payments are contingent based on actual electricity generated by the renewable energy projects. Contingent lease payments were $64 million for the three months ended March 31, 2019. As of March 31, 2019, renewable energy projects owned by Duke Energy and accounted for as operating leases had a cost basis of $3,345 million and accumulated depreciation of $631 million. These assets are principally classified as nonregulated electric generation and transmission assets.

58



FINANCIAL STATEMENTSLEASES


The following table presents the components of lease expense.
 Three Months Ended March 31, 2019
   Duke
   Duke
 Duke
 Duke
 Duke
  
 Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Operating lease expense(a)
$72
 $12
 $42
 $19
 $23
 $3
 $5
 $1
Short-term lease expense(a)
7
 2
 3
 1
 2
 —
 1
 —
Variable lease expense(a)
11
 8
 2
 1
 1
 —
 —
 —
Finance lease expense               
Amortization of leased assets(b)
27
 1
 3
 1
 2
 —
 —
 —
Interest on lease liabilities(c)
17
 4
 6
 4
 2
 —
 —
 —
Total finance lease expense44
 5
 9
 5
 4
 —
 —
 —
Total lease expense$134
 $27
 $56
 $26
 $30
 $3
 $6
 $1
(a)Included in Operations, maintenance and other or, for barges and railcars, Fuel used in electric generation and purchased power on the Condensed Consolidated Statements of Operations.
(b)Included in Depreciation and amortization on the Condensed Consolidated Statements of Operations.
(c)Included in Interest Expense on the Condensed Consolidated Statements of Operations.
The following table presents rental expense for operating leases, as reported under the old lease standard. These amounts are included in Operation, maintenance and other and Fuel used in electric generation and purchased power on the Condensed Consolidated Statements of Operations.
(in millions)Year Ended December 31, 2018
Duke Energy$268
Duke Energy Carolinas49
Progress Energy143
Duke Energy Progress75
Duke Energy Florida68
Duke Energy Ohio13
Duke Energy Indiana21
Piedmont11
The following table presents operating lease maturities and a reconciliation of the undiscounted cash flows to operating lease liabilities.
 Twelve months ended March 31,
   Duke
   Duke
 Duke
 Duke
 Duke
  
 Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
2020$271
 $32
 $125
 $47
 $78
 $2
 $6
 $5
2021238
 29
 112
 46
 66
 2
 5
 5
2022192
 19
 90
 35
 55
 2
 4
 5
2023180
 19
 89
 34
 55
 2
 4
 5
2024169
 16
 89
 35
 54
 2
 4
 5
Thereafter1,057
 66
 530
 309
 221
 22
 67
 9
Total operating lease payments2,107
 181
 1,035
 506
 529
 32
 90
 34
Less: present value discount(436) (32) (198) (118) (80) (10) (29) (4)
Total operating lease liabilities(a)
$1,671
 $149
 $837
 $388
 $449
 $22
 $61
 $30
(a)Certain operating lease payments include renewal options that are reasonably certain to be exercised.

59



FINANCIAL STATEMENTSLEASES


The following table presents future minimum lease payments under operating leases, which at inception had a non-cancelable term of more than one year, as reported under the old lease standard.
 December 31, 2018
   Duke
   Duke
 Duke
 Duke
 Duke
  
 Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
2019$239
 $33
 $97
 $49
 $48
 $2
 $6
 $5
2020219
 29
 90
 46
 44
 2
 5
 5
2021186
 19
 79
 37
 42
 2
 4
 5
2022170
 19
 76
 34
 42
 2
 4
 5
2023160
 17
 77
 35
 42
 2
 5
 6
Thereafter1,017
 68
 455
 314
 141
 23
 66
 11
Total$1,991
 $185
 $874
 $515
 $359
 $33
 $90
 $37
The following table presents finance lease maturities and a reconciliation of the undiscounted cash flows to finance lease liabilities.
 Twelve months ended March 31,
   Duke
   Duke
 Duke
 Duke
 Duke
 Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
2020$185
 $19
 $69
 $44
 $25
 $1
 $1
2021191
 18
 69
 44
 25
 —
 1
2022194
 14
 69
 44
 25
 —
 1
2023179
 14
 69
 44
 25
 —
 1
2024180
 14
 69
 44
 25
 —
 1
Thereafter889
 195
 573
 558
 15
 —
 28
Total finance lease payments1,818
 274
 918
 778
 140
 1
 33
Less: amount representing interest(729) (166) (495) (467) (28) —
 (23)
Total finance lease liabilities$1,089
 $108
 $423
 $311
 $112
 $1
 $10
The following table presents future minimum lease payments under finance leases, as reported under the old lease standard.
 December 31, 2018
   Duke
   Duke
 Duke
 Duke
 Duke
 Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
2019$170
 $20
 $45
 $20
 $25
 $2
 $1
2020174
 20
 46
 21
 25
 —
 1
2021177
 15
 45
 20
 25
 —
 1
2022165
 15
 45
 21
 24
 —
 1
2023165
 15
 45
 21
 24
 —
 1
Thereafter577
 204
 230
 209
 21
 —
 27
Minimum annual payments1,428
 289
 456
 312
 144
 2
 32
Less: amount representing interest(487) (180) (205) (175) (30) —
 (22)
Total$941
 $109
 $251
 $137
 $114
 $2
 $10

60



FINANCIAL STATEMENTSLEASES


The following tables contain additional information related to leases.
  March 31, 2019
                 
    Duke
   Duke
 Duke
 Duke
 Duke
  
  Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions)ClassificationEnergy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Assets                
OperatingOperating Lease ROU Assets, net$1,698
 $146
 $835
 $388
 $447
 $22
 $61
 $27
FinanceNet property, plant and equipment1,081
 122
 428
 310
 118
 —
 10
 —
Total lease assets $2,779
 $268
 $1,263
 $698
 $565
 $22
 $71
 $27
Liabilities                
Current                
OperatingOther current liabilities$183
 $26
 $89
 $27
 $62
 $1
 $4
 $4
FinanceCurrent maturities of long-term debt121
 6
 23
 6
 17
 1
 —
 —
Noncurrent                
OperatingOperating Lease Liabilities1,488
 123
 748
 361
 387
 21
 57
 26
FinanceLong-Term Debt968
 102
 400
 305
 95
 —
 10
 —
Total lease liabilities $2,760
 $257
 $1,260
 $699
 $561
 $23
 $71
 $30
 Three Months Ended March 31, 2019
                
   Duke
   Duke
 Duke
 Duke
 Duke
  
 Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Cash paid for amounts included in the measurement of lease liabilities(a)
               
Operating cash flows from operating leases$67
 $6
 $31
 $14
 $17
 $1
 $2
 $2
Operating cash flows from finance leases17
 4
 6
 4
 2
 —
 —
 —
Financing cash flows from finance leases27
 1
 3
 1
 2
 —
 —
 —
                
Lease assets obtained in exchange for new lease liabilities (non-cash)               
Finance$175
 $—
 $175
 $175
 $—
 $—
 $—
 $—
Operating(b)
7
 —
 —
 —
 —
 —
 —
 —
(a)No amounts were classified as investing cash flows from operating leases for the three months ended March 31, 2019.
(b)Does not include ROU assets recorded as a result of the adoption of the new lease standard.

61



FINANCIAL STATEMENTSLEASES


 March 31, 2019
                
   Duke
   Duke
 Duke
 Duke
 Duke
  
 Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
 Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Weighted-average remaining lease term (years)               
Operating leases11
 9
 11
 13
 9
 18
 19
 7
Finance leases13
 19
 16
 18
 11
 —
 27
 —
Weighted-average discount rate(a)
               
Operating leases3.9% 3.7% 3.8% 3.9% 3.7% 4.2% 4.1% 3.6%
Finance leases6.9% 12.9% 11.4% 12.5% 8.3% 3.3% 11.7% —%
(a)The discount rate is calculated using the rate implicit in a lease if it is readily determinable. Generally, the rate used by the lessor is not provided to Duke Energy and in these cases the incremental borrowing rate is used. Duke Energy will typically use its fully collateralized incremental borrowing rate as of the commencement date to calculate and record the lease. The incremental borrowing rate is influenced by the lessee’s credit rating and lease term and as such may differ for individual leases, embedded leases or portfolios of leased assets.
6. DEBT AND CREDIT FACILITIES
SUMMARY OF SIGNIFICANT DEBT ISSUANCES
The following table summarizes significant debt issuances (in millions). Refer to the "Available Credit Facilities" section below regarding amounts issued under the Three Year Revolver and the Piedmont Term Loan facilities.
    Nine Months Ended September 30, 2017
      Duke
 Duke
 Duke
 Duke
 MaturityInterest
 Duke
 Energy
 Energy
 Energy
 Energy
Issuance DateDateRate
 Energy
 (Parent)
 Progress
 Florida
 Ohio
Unsecured Debt            
April 2017(a)
April 20253.364% $420
 $420
 $—
 $—
 $—
June 2017(b)
June 20202.100% 330
 330
 —
 —
 —
August 2017(c)
August 20222.400% 500
 500
 —
 —
 —
August 2017(c)
August 20273.150% 750
 750
 —
 —
 —
August 2017(c)
August 20473.950% 500
 500
 —
 —
 —
Secured Debt            
February 2017(d)
June 20344.120% 587
 —
 —
 —
 —
August 2017(e)
December 20364.110% 233
 —
 —
 —
 —
First Mortgage Bonds            
January 2017(f)
January 20201.850% 250
 —
 —
 250
 —
January 2017(f)
January 20273.200% 650
 —
 —
 650
 —
March 2017(g)
June 20463.700%
100

—
 —
 —
 100
September 2017(h)
September 20201.500%
(i) 
300

—
 300
 —
 —
September 2017(h)
September 20473.600% 500
 —
 500
 —
 —
Total issuances   $5,120
 $2,500

$800
 $900

$100

62

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





    Three Months Ended March 31, 2019
      Duke
 Duke
 Duke
 
 MaturityInterest
 Duke
 Energy
 Energy
 Energy
 
Issuance DateDateRate
 Energy
 (Parent)
 Progress
 Ohio
 
Unsecured Debt           
March 2019(a)
March 20223.251%
(b) 
$300
 $300
 $—
 $—
 
March 2019(a)
March 20223.227% 300
 300
 —
 —
 
First Mortgage Bonds           
January 2019(c)
February 20293.650% 400
 —
 —
 400
 
January 2019(c)
February 20494.300% 400
 —
 —
 400
 
March 2019(d)
March 20293.450%
600

—
 600
 —
 
Total issuances   $2,000
 $600

$600
 $800

(a)Proceeds were usedDebt issued to refinance $400 million of unsecuredpay down short-term debt at maturity and to repay a portion of outstanding commercial paper.for general corporate purposes.
(b)Debt issued to repayissuance has a portion of outstanding commercial paper.floating interest rate.
(c)Debt issued to repay at maturity $700$450 million of unsecuredfirst mortgage bonds due April 2019, pay down short-term debt to repay outstanding commercial paper and for general corporate purposes.
(d)Portfolio financing of four Texas and Oklahoma wind facilities. Secured by substantially all ofDebt issued to fund eligible green energy projects in the assets of these wind facilities and nonrecourse to Duke Energy. Proceeds were used to reimburse Duke Energy for a portion of previously funded construction expenditures.Carolinas.

62



(e)FINANCIAL STATEMENTSPortfolio financing of eight solar facilities located in California, Colorado and New Mexico. Secured by substantially all of the assets of these solar facilities and nonrecourse to Duke Energy. Proceeds were used to reimburse Duke Energy for a portion of previously funded construction expenditures.DEBT AND CREDIT FACILITIES
(f)Debt issued to fund capital expenditures for ongoing construction and capital maintenance, to repay a $250 million aggregate principal amount of bonds at maturity and for general corporate purposes.
(g)Proceeds were used to fund capital expenditures for ongoing construction, capital maintenance and for general corporate purposes.
(h)Debt issued to repay at maturity a $200 million aggregate principal amount of bonds due November 2017, pay down intercompany short-term debt and for general corporate purposes, including capital expenditures.
(i)    Debt issuance has a floating interest rate.

CURRENT MATURITIES OF LONG-TERM DEBT
The following table shows the significant components of Current Maturities of Long-Term Debt on the Condensed Consolidated Balance Sheets. The Duke Energy Registrants currently anticipate satisfying these obligations with cash on hand and proceeds from additional borrowings.
(in millions)Maturity Date Interest Rate
 September 30, 2017
Maturity Date Interest Rate
 March 31, 2019
Unsecured Debt        
Duke Energy (Parent)June 2018 6.250% $250
September 2019 5.050% $500
Duke Energy (Parent)June 2018 2.100% 500
PiedmontSeptember 2019 3.181%
(b) 
350
Duke Energy KentuckyOctober 2019 4.650% 100
Progress EnergyDecember 2019 4.875% 350
First Mortgage Bonds        
Duke Energy ProgressNovember 2017 1.516%
(b) 
200
Duke Energy CarolinasJanuary 2018 5.250% 400
Duke Energy CarolinasApril 2018 5.100% 300
Duke Energy OhioApril 2019 5.450% 450
Duke Energy FloridaJune 2018 5.650% 500
January 2020 1.850% 250
Other(a)
   335
   501
Current maturities of long-term debt   $2,485
   $2,501
(a)    Includes capitalfinance lease obligations, amortizing debt and small bullet maturities.
(b)    Debt issuanceAmount drawn under the Piedmont senior unsecured term loan facility has a floating interest rate.

63

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 2017,2019, Duke Energy amended its existing $8 billion Master Credit Facility to increase its capacity from $7.5 billion to $8 billion, and to extend the termination date of the facility from January 30, 2020, to March 16, 2022.2024. 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.
September 30, 2017March 31, 2019


 Duke
 Duke
 Duke
 Duke
 Duke
 Duke
  

 Duke
 Duke
 Duke
 Duke
 Duke
 Duke
  
Duke
 Energy
 Energy
 Energy
 Energy
 Energy
 Energy
  Duke
 Energy
 Energy
 Energy
 Energy
 Energy
 Energy
  
(in millions)Energy
 (Parent)
 Carolinas
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Energy
 (Parent)
 Carolinas
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Facility size(a)
$8,000
 $2,850
 $1,350
 $1,250
 $1,000
 $450
 $600
 $500
$8,000
 $2,650
 $1,750
 $1,400
 $650
 $450
 $600
 $500
Reduction to backstop issuances                              
Commercial paper(b)
(1,569) (404) (636) (150) —
 (25) (150) (204)(2,657) (884) (859) (150) (299) (62) (252) (151)
Outstanding letters of credit(60) (51) (4) (2) (1) —
 —
 (2)(53) (45) (4) (2) —
 —
 —
 (2)
Tax-exempt bonds(81) —
 —
 —
 —
 —
 (81) —
(81) —
 —
 —
 —
 —
 (81) —
Coal ash set-aside(500) —
 (250) (250) —
 —
 —
 —
(500) —
 (250) (250) —
 —
 —
 —
Available capacity under the Master Credit Facility$5,790

$2,395

$460

$848

$999

$425

$369
 $294
$4,709

$1,721

$637

$998

$351

$388

$267
 $347
(a)Represents the sublimit of each borrower.
(b)Duke Energy issued $625 million of commercial paper and loaned the proceeds through the money pool to Duke Energy Carolinas, Duke Energy Progress, Duke Energy Ohio and Duke Energy Indiana. The balances are classified as Long-Term Debt Payable to Affiliated Companies on the Condensed Consolidated Balance Sheets.
Three-Year RevolvingOther Credit FacilityFacilities
In June 2017, Duke Energy (Parent) entered into a three-year $1.0 billion revolving credit facility (the Three Year Revolver). Borrowings under this facility will be used for general corporate purposes.
 March 31, 2019
(in millions)Facility size
 Amount Drawn
Duke Energy (Parent) Three-Year Revolving Credit Facility$1,000
 $500
Duke Energy Progress Term Loan Facility(a)
700
 700
Piedmont Term Loan Facility350
 350
As of September 30, 2017, $270 million has been drawn under the Three Year Revolver. This balance is classified as Long-Term Debt on Duke Energy's Condensed Consolidated Balance Sheets. Any undrawn commitments can be drawn, and borrowings can be prepaid, at any time throughout the term of the facility. The terms and conditions of the Three Year Revolver are generally consistent with those governing Duke Energy's Master Credit Facility.
Piedmont Term Loan Facility
In June 2017, Piedmont entered into an 18-month term loan facility with commitments totaling $250 million (the Piedmont Term Loan). Borrowings under the facility will be used for general corporate purposes.
As of September 30, 2017, the entire $250 million has been drawn under the Piedmont Term Loan. This balance is classified as Long-Term Debt on Piedmont's Condensed Consolidated Balance Sheets. The terms and conditions of the Piedmont Term Loan are generally consistent with those governing Duke Energy's Master Credit Facility.
(a)$650 million was drawn under the term loan in January and February 2019.

6463

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



FINANCIAL STATEMENTSASSET RETIREMENT OBLIGATIONS


7. ASSET RETIREMENT OBLIGATIONS
The Duke Energy Registrants record AROs when there is a legal obligation to incur retirement costs associated with the retirement of a long-lived asset and the obligation can be reasonably estimated. Actual closure costs incurred could be materially different from current estimates that form the basis of the recorded AROs.
The following table presents the AROs recorded on the Condensed Consolidated Balance Sheets.
September 30, 2017March 31, 2019
  Duke
   Duke
 Duke
 Duke
 Duke
    Duke
   Duke
 Duke
 Duke
 Duke
  
Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Decommissioning of Nuclear Power Facilities(a)
$5,337
 $1,916
 $3,235
 $2,536
 $699
 $—
 $—
 $—
Closure of Ash Impoundments4,594
 1,650
 2,124
 2,105
 19
 42
 777
 —
Decommissioning of nuclear power facilities(a)
$5,753
 $2,368
 $3,239
 $2,709
 $530
 $—
 $—
 $—
Closure of ash impoundments6,961
 3,013
 3,197
 3,177
 20
 52
 699
 —
Other274
 35
 80
 35
 45
 39
 16
 15
321
 47
 70
 37
 33
 41
 20
 19
Total ARO$10,205
 $3,601
 $5,439
 $4,676
 $763
 $81
 $793
 $15
$13,035
 $5,428
 $6,506
 $5,923
 $583
 $93
 $719
 $19
Less: current portion619
 304
 250
 250
 —
 6
 58
 —
779
 209
 456
 452
 4
 6
 108
 —
Total noncurrent ARO$9,586

$3,297

$5,189

$4,426

$763

$75

$735
 $15
$12,256

$5,219

$6,050

$5,471

$579

$87

$611
 $19
(a)    Duke Energy amount includes purchase accounting adjustments related to the merger with Progress Energy.
ARO Liability Rollforward
Actual closure costs incurred could be materially different from current estimates that form the basis of the recorded AROs. The following table presents the change in liability associated with AROs for the Duke Energy Registrants.
  Duke
   Duke
 Duke
 Duke
 Duke
    Duke
   Duke
 Duke
 Duke
 Duke
  
Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Balance at December 31, 2016(a)
$10,611
 $3,895
 $5,475
 $4,697
 $778
 $77
 $866
 $14
Balance at December 31, 2018(a)
$10,467
 $3,949
 $5,411
 $4,820
 $591
 $93
 $722
 $19
Accretion expense(b)
329
 140
 172
 147
 25
 3
 25
 1
110
 48
 57
 50
 7
 1
 7
 —
Liabilities settled(c)
(430) (201) (193) (152) (41) (4) (26) (7)(184) (76) (97) (82) (15) (1) (10) —
Liabilities incurred in the current year48
 5
 —
 —
 —
 7
 27
 7
Revisions in estimates of cash flows(d)
(353) (238) (15) (16) 1
 (2) (99) —
2,642
 1,507
 1,135
 1,135
 —
 —
 —
 —
Balance at September 30, 2017$10,205
 $3,601
 $5,439
 $4,676
 $763
 $81
 $793
 $15
Balance at March 31, 2019$13,035
 $5,428
 $6,506
 $5,923
 $583
 $93
 $719
 $19
(a)Primarily relates to decommissioning nuclear power facilities, closure of ash impoundments, asbestos removal, closure of landfills at fossil generation facilities, retirement of natural gas mains and removal of renewable energy generation assets.
(b)For the ninethree months ended September 30, 2017,March 31, 2019, substantially all accretion expense relates to Duke Energy's regulated electric operations and has been deferred in accordance with regulatory accounting treatment.
(c)Primarily relates to ash impoundment closures and nuclear decommissioning of Crystal River Unit 3.closures.
(d)Primarily relatesRelates to favorable contract pricesincreases in closure estimates for closure ofcertain ash impoundments compared to original estimates.as a result of the NCDEQ's determination that all ash basins must be excavated. See Note 4 for more information. The incremental amount recorded represents the discounted cash flows for estimated closure costs based upon the probability weightings of the potential closure methods as evaluated on a site-by-site basis.
Asset retirement costs associated with the AROs for operating plants and retired plants are included in Net property, plant and equipment and Regulatory assets within Other Noncurrent Assets, respectively, on the Condensed Consolidated Balance Sheets.
Nuclear Decommissioning Trust Funds
Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida each maintain NDTFs that are intended to pay for the decommissioning costs of their respective nuclear power plants. The following table presents the fair value of NDTF assets legally restricted for purposes of settling AROs associated with nuclear decommissioning. Duke Energy Florida is actively decommissioning Crystal River Unit 3 and was granted an exemption from the NRC, which allows for use of the NDTF for all aspects of nuclear decommissioning. The entire balance of Duke Energy Florida's NDTF may be applied toward license termination, spent fuel and site restoration costs incurred to decommission Crystal River Unit 3 and is excluded from the table below. See Note 12 for additional information related to the fair value of the Duke Energy Registrants' NDTFs.
(in millions)March 31, 2019 December 31, 2018
Duke Energy$6,102
 $5,579
Duke Energy Carolinas3,443
 3,133
Duke Energy Progress2,659
 2,446

64



FINANCIAL STATEMENTSGOODWILL


8. GOODWILL AND INTANGIBLE ASSETS
GOODWILL
Duke Energy
The following table presents the goodwill by reportable operating segment included on Duke Energy's Condensed Consolidated Balance Sheets at September 30, 2017,March 31, 2019, and December 31, 2016.2018.
 Electric Utilities
 Gas Utilities
 Commercial
  
(in millions)and Infrastructure
 and Infrastructure
 Renewables
 Total
Goodwill Balance at December 31, 2016$17,379
 $1,924
 $122
 $19,425
Accumulated impairment charges (a)
—
 —
 (7) (7)
Goodwill Balance at September 30, 2017$17,379
 $1,924
 $115
 $19,418
(a)Duke Energy evaluated the recoverability of goodwill in the third quarter of 2017 and recorded an impairment of $7 million related to the Energy Management Solutions reporting unit within the Commercial Renewables segment. The fair value of the reporting unit was determined based on the market approach, which estimates fair value based on market comparables within the energy technologies industry.

65

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





 Electric Utilities
 Gas Utilities
 Commercial
  
(in millions)and Infrastructure
 and Infrastructure
 Renewables
 Total
Goodwill balance$17,379
 $1,924
 $122
 $19,425
Accumulated impairment charges—
 —
 (122) (122)
Goodwill, adjusted for accumulated impairment charges$17,379
 $1,924
 $—
 $19,303
Duke Energy Ohio
Duke Energy Ohio's Goodwill balance of $920 million, allocated $596 million to Electric Utilities and Infrastructure and $324 million to Gas Utilities and Infrastructure, is presented net of accumulated impairment charges of $216 million on the Condensed Consolidated Balance Sheets at September 30, 2017,March 31, 2019, and December 31, 2016.2018.
Progress Energy
Progress Energy's Goodwill is included in the 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 its annual impairment testing of goodwill from October 31 to August 31 to align with the other Duke Energy Registrants.
Impairment Testing
Duke Energy, Progress Energy, Duke Energy Ohio and Piedmont are required to perform an annual goodwill impairment test as of the same date each year and, accordingly, perform their annual impairment testing of goodwill as of August 31. Duke Energy, Progress Energy, Duke Energy Ohio and Piedmont update their test between annual tests if events or circumstances occur that would more likely than not reduce the fair value of a reporting unit below its carrying value. Except for the Energy Management Solutions reporting unit, the fair value of all other reporting units for Duke Energy, Progress Energy, Duke Energy Ohio and Piedmont exceeded their respective carrying values at the date of the annual impairment analysis. As such, no other impairment charges were recorded in the third quarter of 2017.

6665

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



FINANCIAL STATEMENTSRELATED PARTY TRANSACTIONS


9. RELATED PARTY TRANSACTIONS
The Subsidiary Registrants engage in related party transactions in accordance with applicable state and federal commission regulations. Refer to the Condensed Consolidated Balance Sheets of the Subsidiary Registrants for balances due to or due from related parties. Material amounts related to transactions with related parties included on the Condensed Consolidated Statements of Operations and Comprehensive Income are presented in the following table.
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended March 31,
(in millions)2017
 2016
 2017
 2016
2019
 2018
Duke Energy Carolinas          
Corporate governance and shared service expenses(a)
$205
 $204
 $645
 $620
$212
 $220
Indemnification coverages(b)
5
 5
 17
 16
5
 6
JDA revenue(c)
9
 10
 42
 21
23
 34
JDA expense(c)
39
 36
 91
 127
93
 54
Intercompany natural gas purchases(d)
3
 —
 5
 —
4
 4
Progress Energy          
Corporate governance and shared service expenses(a)
$208
 $182
 $555
 $515
$176
 $191
Indemnification coverages(b)
10
 9
 29
 25
9
 8
JDA revenue(c)
39
 36
 91
 127
93
 54
JDA expense(c)
9
 10
 42
 21
23
 34
Intercompany natural gas purchases(d)
19
 —
 57
 —
19
 19
Duke Energy Progress          
Corporate governance and shared service expenses(a)
$114
 $103
 $321
 $292
$106
 $118
Indemnification coverages(b)
4
 4
 11
 10
4
 3
JDA revenue(c)
39
 36
 91
 127
93
 54
JDA expense(c)
9
 10
 42
 21
23
 34
Intercompany natural gas purchases(d)
19
 —
 57
 —
19
 19
Duke Energy Florida          
Corporate governance and shared service expenses(a)
$94
 $79
 $234
 $223
$70
 $73
Indemnification coverages(b)
6
 5
 18
 15
5
 5
Duke Energy Ohio          
Corporate governance and shared service expenses(a)
$90
 $89
 $275
 $261
$85
 $89
Indemnification coverages(b)
1
 1
 3
 4
1
 1
Duke Energy Indiana          
Corporate governance and shared service expenses(a)
$93
 $96
 $281
 $279
$97
 $101
Indemnification coverages(b)
2
 2
 6
 6
2
 2
Piedmont          
Corporate governance and shared service expenses(a)
$10
 $—
 $25
 $—
$32
 $36
Indemnification coverages(b)
1
 —
 2
 —
1
 1
Intercompany natural gas sales(d)
22
 —
 62
 —
23
 23
Natural gas storage and transportation costs(e)
5
 6
(a)The Subsidiary Registrants are charged their proportionate share of corporate governance and other shared services costs, primarily related to human resources, employee benefits, information technology, legal and accounting fees, as well as other third-party costs. These amounts are primarily recorded in Operation, maintenance and other on the Condensed Consolidated Statements of Operations and Comprehensive Income.
(b)The Subsidiary Registrants incur expenses related to certain indemnification coverages through Bison, Duke Energy’s wholly owned captive insurance subsidiary. These expenses are recorded in Operation, maintenance and other on the Condensed Consolidated Statements of Operations and Comprehensive Income.
(c)Duke Energy Carolinas and Duke Energy Progress participate in a Joint Dispatch Agreement (JDA),JDA, which allows the collective dispatch of power plants between the service territories to reduce customer rates. Revenues from the sale of power and expenses from the purchase of power pursuant to the JDA are recorded in Operating Revenues and Fuel used in electric generation and purchased power, respectively, on the Condensed Consolidated Statements of Operations and Comprehensive Income.
(d)Piedmont provides long-term natural gas delivery service to certain Duke Energy Carolinas and Duke Energy Progress natural gas-fired generation facilities. Piedmont records the sales in Regulated natural gasOperating revenues, and Duke Energy Carolinas and Duke Energy Progress record the related purchases inas a component of Fuel used in electric generation and purchased power on their respective Condensed Consolidated Statements of Operations and Comprehensive Income. The amounts
(e)Piedmont has related party transactions as a customer of its equity method investments in Pine Needle, Hardy Storage, and Cardinal natural gas storage and transportation facilities. These expenses are not eliminatedincluded in accordance with rate-based accounting regulations. For the three and nine months ended September 30, 2016, which was prior to the Piedmont acquisition, Piedmont recorded $19 million and $57 million, respectively,Cost of natural gas sales with Duke Energy Progresson Piedmont's Condensed Consolidated Statements of Operations and $1 million and $3 million, respectively, with Duke Energy Carolinas.Comprehensive Income.

6766

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



FINANCIAL STATEMENTSRELATED PARTY TRANSACTIONS


In addition to the amounts presented above, the Subsidiary Registrants have other affiliate transactions, including rental of office space, participation in a money pool arrangement, other operational transactions and their proportionate share of certain charged expenses. 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 the money pool. These transactions of the Subsidiary Registrants were not material forare incurred in the threeordinary course of business and nine months ended September 30, 2017, and 2016.are eliminated in consolidation.
As discussed in Note 13, 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 alsodo include a subordinated note from the affiliateCRC for a portion of the purchase price.
Equity Method Investments
Piedmont has related party transactions as a customer of its equity method investments in natural gas storage and transportation facilities. The following table presents expenses for the three and nine months ended September 30, 2017, and 2016, which are included in Cost of natural gas on Piedmont's Condensed Consolidated Statements of Operations and Comprehensive Income.
  Three Months Ended September 30, Nine Months Ended September 30,
(in millions)Type of expense20172016 20172016
CardinalTransportation Costs$2
$3
 $6
$7
Pine NeedleNatural Gas Storage Costs2
3
 6
8
Hardy StorageNatural Gas Storage Costs2
2
 7
7
Total $6
$8
 $19
$22
Piedmont had accounts payable to its equity method investments of $2 million at September 30, 2017, and December 31, 2016, related to these transactions. These amounts are included in Accounts payable on the Condensed Consolidated Balance Sheets.
Intercompany Income Taxes
Duke Energy and the Subsidiary Registrants file a consolidated federal income tax return and other state and jurisdictional returns. The Subsidiary Registrants have a tax sharing agreement with Duke Energy for the allocation of consolidated tax liabilities and benefits. Income taxes recorded represent amounts the Subsidiary Registrants would incur as separate C-Corporations. The following table includes the balance of intercompany income tax receivables and payables for the Subsidiary Registrants.
Duke
 Duke
Duke
Duke
Duke
 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
Piedmont
Carolinas
Energy
Progress
Florida
Ohio
Indiana
Piedmont
September 30, 2017 
March 31, 2019 
Intercompany income tax receivable$—
$170
$—
$120
$—
$—
$89
$1
$65
$—
$22
$6
$—
$—
Intercompany income tax payable173
—
46
—
18
104
—
—
—
11
—
—
7
7
  
December 31, 2016 
December 31, 2018 
Intercompany income tax receivable$1
$—
$—
$37
$—
$—
$—
$52
$47
$29
$—
$—
$8
$—
Intercompany income tax payable—
37
90
—
1
3
38
—
—
—
16
3
—
45
10. DERIVATIVES AND HEDGING
The Duke Energy Registrants use commodity and interest rate contracts to manage commodity price risk and interest rate risk. The primary use of commodity derivatives is to hedge the generation portfolio against changes in the prices of electricity and natural gas. Piedmont enters into natural gas supply contracts to provide diversification, reliability and natural gas cost benefits to its customers. Interest rate swapsderivatives are used to manage interest rate risk associated with borrowings.
All derivative instruments not identified as NPNS are recorded at fair value as assets or liabilities on the Condensed Consolidated Balance Sheets. Cash collateral related to derivative instruments executed under master netting arrangements is offset against the collateralized derivatives on the Condensed Consolidated Balance Sheets. The cash impacts of settled derivatives are recorded as operating activities on the Condensed Consolidated Statements of Cash Flows.
INTEREST RATE RISK
The Duke Energy Registrants are exposed to changes in interest rates as a result of their issuance or anticipated issuance of variable-rate and fixed-rate debt and commercial paper. Interest rate risk is managed by limiting variable-rate exposures to a percentage of total debt and by monitoring changes in interest rates. To manage risk associated with changes in interest rates, the Duke Energy Registrants may enter into interest rate swaps, U.S. Treasury lock agreements and other financial contracts. In anticipation of certain fixed-rate debt issuances, a series of forward-starting interest rate swaps or Treasury locks may be executed to lock in components of current market interest rates. These instruments are later terminated prior to or upon the issuance of the corresponding debt.

68

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





Cash Flow Hedges
For a derivative designated as hedging the exposure to variable cash flows of a future transaction, referred to as a cash flow hedge, the effective portion of the derivative's gain or loss is initially reported as a component of other comprehensive income and subsequently reclassified into earnings once the future transaction impacts earnings. Amounts for interest rate contracts are reclassified to earnings as interest expense over the term of the related debt. Gains and losses reclassified out of AOCI for the three and nine months ended September 30, 2017,March 31, 2019, and 2018 were not material. Duke Energy's interest rate derivatives designated as hedges include interest rate swaps used to hedge existing debt within the Commercial Renewables business.business and forward-starting interest rate swaps not accounted for under regulatory accounting.
Undesignated Contracts
Undesignated contracts primarily include contracts not designated as a hedge because they are accounted for under regulatory accounting andor contracts that do not qualify for hedge accounting.
Duke Energy’s interest rate swaps for its regulated operations employ regulatory accounting. With regulatory accounting, the mark-to-market gains or losses on the swaps are deferred as regulatory liabilities or regulatory assets, respectively. Regulatory assets and liabilities are amortized consistent with the treatment of the related costs in the ratemaking process. The accrual of interest on the swaps is recorded as Interest Expense.
In August 2016,Expense on the Duke Energy unwound $1.4 billion of forward-starting interest rate swaps associated with the Piedmont acquisition financing. The swaps were considered undesignated as they did not qualify for hedge accounting. For the three and nine months ended September 30, 2016, losses on the swaps of $22 million and $190 million, respectively, were included within Interest Expense on Duke Energy'sRegistrant's Condensed Consolidated Statements of Operations. See Note 2 for additional information related to the Piedmont acquisition.Operations and Comprehensive Income.

67



FINANCIAL STATEMENTSDERIVATIVES AND HEDGING


The following table shows notional amounts of outstanding derivatives related to interest rate risk.
September 30, 2017March 31, 2019
  Duke
   Duke
 Duke
 Duke
  Duke
   Duke
 Duke
 Duke
Duke
 Energy
 Progress
 Energy
 Energy
 Energy
Duke
 Energy
 Progress
 Energy
 Energy
 Energy
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
Cash flow hedges(a)
$703
 $—
 $—
 $—
 $—
 $—
$923
 $—
 $—
 $—
 $—
 $—
Undesignated contracts927
 400
 500
 250
 250
 27
1,321
 300
 800
 250
 550
 27
Total notional amount(a)$1,630

$400

$500

$250

$250

$27
$2,244

$300

$800

$250

$550

$27
December 31, 2016December 31, 2018
  Duke
   Duke
 Duke
 Duke
  Duke
   Duke
 Duke
 Duke
Duke
 Energy
 Progress
 Energy
 Energy
 Energy
Duke
 Energy
 Progress
 Energy
 Energy
 Energy
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
Cash flow hedges(a)
$750
 $—
 $—
 $—
 $—
 $—
$923
 $—
 $—
 $—
 $—
 $—
Undesignated contracts927
 400
 500
 250
 250
 27
1,721
 300
 1,200
 650
 550
 27
Total notional amount(a)$1,677
 $400
 $500
 $250
 $250
 $27
$2,644
 $300
 $1,200
 $650
 $550
 $27
(a)Duke Energy includes amounts related to consolidated VIEs of $703$422 million in cash flow hedges and $750$194 million in undesignated contracts as of September 30, 2017,March 31, 2019, and December 31, 2016, respectively.2018.
COMMODITY PRICE RISK
The Duke Energy Registrants are exposed to the impact of changes in the prices of electricity purchased and sold in bulk power markets and coal and natural gas purchases, including Piedmont's natural gas supply contracts. Exposure to commodity price risk is influenced by a number of factors including the term of contracts, the liquidity of markets and delivery locations. For the Subsidiary Registrants, bulk power electricity and coal and natural gas purchases flow through fuel adjustment clauses, formula-based contracts or other cost-sharing mechanisms. Differences between the costs included in rates and the incurred costs, including undesignated derivative contracts, are largely deferred as regulatory assets or regulatory liabilities. Piedmont policies allow for the use of financial instruments to hedge commodity price risks. The strategy and objective of these hedging programs are to use the financial instruments to reduce natural gas costs volatility for customers.

69

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





Volumes
The tables below include volumes of outstanding commodity derivatives. Amounts disclosed represent the absolute value of notional volumes of commodity contracts excluding NPNS. The Duke Energy Registrants have netted contractual amounts where offsetting purchase and sale contracts exist with identical delivery locations and times of delivery. Where all commodity positions are perfectly offset, no quantities are shown.
September 30, 2017March 31, 2019
  Duke
   Duke
 Duke
 Duke
    Duke
   Duke
 Duke
 Duke
 Duke
  
Duke
 Energy
 Progress
 Energy
 Energy
 Energy
  Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
Energy
 Carolinas
 Energy
 Progress
 Florida
 Indiana
 Piedmont
Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Electricity (gigawatt-hours)112
 —
 —
 —
 —
 112
 —
Electricity (GWh)6,196
 —
 —
 —
 —
 829
 5,367
 —
Natural gas (millions of dekatherms)786
 103
 193
 124
 69
 1
 489
742
 128
 174
 174
 —
 —
 1
 439
December 31, 2016December 31, 2018
  Duke
   Duke
 Duke
 Duke
    Duke
   Duke
 Duke
 Duke
 Duke
  
Duke
 Energy
 Progress
 Energy
 Energy
 Energy
  Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
Energy
 Carolinas
 Energy
 Progress
 Florida
 Indiana
 Piedmont
Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Electricity (gigawatt-hours)147
 —
 —
 —
 —
 147
 —
Electricity (GWh)15,286
 —
 —
 —
 —
 1,786
 13,500
 —
Natural gas (millions of dekatherms)890
 91
 269
 118
 151
 1
 529
739
 121
 169
 166
 3
 —
 1
 448

7068

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



FINANCIAL STATEMENTSDERIVATIVES AND HEDGING


LOCATION AND FAIR VALUE OF DERIVATIVE ASSETS AND LIABILITIES RECOGNIZED ON THE CONDENSED CONSOLIDATED BALANCE SHEETS
The following tables show the fair value and balance sheet location of derivative instruments. Although derivatives subject to master netting arrangements are netted on the Condensed Consolidated Balance Sheets, the fair values presented below are shown gross and cash collateral on the derivatives has not been netted against the fair values shown.
Derivative Assets September 30, 2017 March 31, 2019
   Duke
   Duke
 Duke
 Duke
 Duke
     Duke
   Duke
 Duke
 Duke
 Duke
  
 Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
   Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions) Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
 Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Commodity Contracts                                
Not Designated as Hedging Instruments                                
Current $48
 $6
 $10
 $5
 $4
 $2
 $28
 $2
 $16
 $3
 $5
 $5
 $—
 $1
 $5
 $2
Noncurrent 6
 2
 4
 3
 1
 —
 —
 —
 6
 2
 3
 3
 —
 —
 —
 —
Total Derivative Assets – Commodity Contracts $54
 $8
 $14
 $8
 $5
 $2
 $28
 $2
 $22
 $5
 $8
 $8
 $—
 $1
 $5
 $2
Interest Rate Contracts                                
Designated as Hedging Instruments                                
Current $1
 $—
 $—
 $—
 $—
 $—
 $—
 $—
Noncurrent $14
 $—
 $—
 $—
 $—
 $—
 $—
 $—
 2
 —
 —
 —
 —
 —
 —
 —
Not Designated as Hedging Instruments                                
Current 1
 —
 1
 —
 1
 —
 —
 —
 1
 —
 —
 —
 —
 —
 —
 —
Noncurrent 9
 —
 —
 —
 —
 —
 —
 —
Total Derivative Assets – Interest Rate Contracts $15
 $—
 $1
 $—
 $1
 $—
 $—
 $—
 $13
 $—
 $—
 $—
 $—
 $—
 $—
 $—
Total Derivative Assets $69

$8

$15

$8

$6

$2

$28
 $2
 $35

$5

$8

$8

$—

$1

$5
 $2
Derivative Liabilities September 30, 2017 March 31, 2019
   Duke
   Duke
 Duke
 Duke
 Duke
     Duke
   Duke
 Duke
 Duke
 Duke
  
 Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
   Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions) Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
 Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Commodity Contracts                                
Not Designated as Hedging Instruments                                
Current $29
 $1
 $11
 $2
 $9
 $—
 $—
 $18
 $21
 $12
 $3
 $3
 $—
 $—
 $—
 $6
Noncurrent 113
 1
 7
 1
 —
 —
 —
 105
 140
 5
 19
 4
 —
 —
 —
 115
Total Derivative Liabilities – Commodity Contracts $142
 $2
 $18
 $3
 $9
 $—
 $—
 $123
 $161
 $17
 $22
 $7
 $—
 $—
 $—
 $121
Interest Rate Contracts                                
Designated as Hedging Instruments                                
Current $7
 $—
 $—
 $—
 $—
 $—
 $—
 $—
 $25
 $—
 $—
 $—
 $—
 $—
 $—
 $—
Noncurrent 9
 —
 —
 —
 —
 —
 —
 —
 9
 —
 —
 —
 —
 —
 —
 —
Not Designated as Hedging Instruments                                
Current 24
 23
 —
 —
 —
 1
 —
 —
 42
 22
 19
 3
 17
 1
 —
 —
Noncurrent 9
 —
 4
 4
 —
 4
 —
 —
 7
 —
 3
 2
 1
 4
 —
 —
Total Derivative Liabilities – Interest Rate Contracts $49
 $23
 $4
 $4
 $—
 $5
 $—
 $—
 $83
 $22
 $22
 $5
 $18
 $5
 $—
 $—
Total Derivative Liabilities $191

$25

$22

$7

$9

$5

$—
 $123
 $244

$39

$44

$12

$18

$5

$—
 $121

7169

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



FINANCIAL STATEMENTSDERIVATIVES AND HEDGING


Derivative Assets December 31, 2016 December 31, 2018
   Duke
   Duke
 Duke
 Duke
 Duke
     Duke
   Duke
 Duke
 Duke
 Duke
  
 Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
   Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions) Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
 Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Commodity Contracts                                
Not Designated as Hedging Instruments                                
Current $108
 $23
 $61
 $35
 $26
 $4
 $16
 $3
 $35
 $2
 $2
 $2
 $—
 $6
 $23
 $3
Noncurrent 32
 10
 21
 10
 11
 1
 —
 —
 4
 1
 2
 2
 —
 —
 —
 —
Total Derivative Assets – Commodity Contracts $140
 $33
 $82
 $45
 $37
 $5
 $16
 $3
 $39
 $3
 $4
 $4
 $—
 $6
 $23
 $3
Interest Rate Contracts                                
Designated as Hedging Instruments                                
Current $1
 $—
 $—
 $—
 $—
 $—
 $—
 $—
Noncurrent $19
 $—
 $—
 $—
 $—
 $—
 $—
 $—
 3
 —
 —
 —
 —
 —
 —
 —
Not Designated as Hedging Instruments                                
Current 3
 —
 3
 1
 2
 —
 —
 —
 2
 —
 —
 —
 —
 —
 —
 —
Noncurrent 12
 —
 —
 —
 —
 —
 —
 —
Total Derivative Assets – Interest Rate Contracts $22
 $—
 $3
 $1
 $2
 $—
 $—
 $—
 $18
 $—
 $—
 $—
 $—
 $—
 $—
 $—
Total Derivative Assets $162
 $33
 $85
 $46
 $39
 $5
 $16
 $3
 $57
 $3
 $4
 $4
 $—
 $6
 $23
 $3
Derivative Liabilities December 31, 2016 December 31, 2018
   Duke
   Duke
 Duke
 Duke
 Duke
     Duke
   Duke
 Duke
 Duke
 Duke
  
 Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
   Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions) Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
 Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Commodity Contracts                                
Not Designated as Hedging Instruments                                
Current $43
 $—
 $12
 $—
 $12
 $—
 $2
 $35
 $33
 $14
 $10
 $5
 $6
 $—
 $—
 $8
Noncurrent 166
 1
 7
 1
 —
 —
 —
 152
 158
 10
 15
 6
 —
 —
 —
 133
Total Derivative Liabilities – Commodity Contracts $209
 $1
 $19
 $1
 $12
 $—
 $2
 $187
 $191
 $24
 $25
 $11
 $6
 $—
 $—
 $141
Interest Rate Contracts                                
Designated as Hedging Instruments                                
Current $8
 $—
 $—
 $—
 $—
 $—
 $—
 $—
 $12
 $—
 $—
 $—
 $—
 $—
 $—
 $—
Noncurrent 8
 —
 —
 —
 —
 —
 —
 —
 6
 —
 —
 —
 —
 —
 —
 —
Not Designated as Hedging Instruments               —
                
Current 1
 —
 —
 —
 —
 1
 —
 —
 23
 9
 13
 11
 2
 1
 —
 —
Noncurrent 26
 15
 6
 6
 —
 5
 —
 —
 10
 —
 6
 5
 1
 4
 —
 —
Total Derivative Liabilities – Interest Rate Contracts $43
 $15
 $6
 $6
 $—
 $6
 $—
 $—
 $51
 $9
 $19
 $16
 $3
 $5
 $—
 $—
Total Derivative Liabilities $252
 $16
 $25
 $7
 $12
 $6
 $2
 $187
 $242
 $33
 $44
 $27
 $9
 $5
 $—
 $141
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 Grossgross 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.

7270

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



FINANCIAL STATEMENTSDERIVATIVES AND HEDGING


Derivative Assets September 30, 2017 March 31, 2019
   Duke
   Duke
 Duke
 Duke
 Duke
     Duke
   Duke
 Duke
 Duke
 Duke
  
 Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
   Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions) Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
 Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Current                                
Gross amounts recognized $49
 $6
 $11
 $5
 $5
 $2
 $28
 $2
 $18
 $3
 $5
 $5
 $—
 $1
 $5
 $2
Gross amounts offset (3) —
 (3) (1) (2) —
 —
 —
 (4) (2) (1) (1) —
 —
 —
 —
Net amounts presented in Current Assets: Other $46
 $6
 $8
 $4
 $3
 $2
 $28
 $2
 $14
 $1
 $4
 $4
 $—
 $1
 $5
 $2
Noncurrent                                
Gross amounts recognized $20
 $2
 $4
 $3
 $1
 $—
 $—
 $—
 $17
 $2
 $3
 $3
 $—
 $—
 $—
 $—
Gross amounts offset (2) (1) (1) (1) —
 —
 —
 —
 (3) (1) (2) (2) —
 —
 —
 —
Net amounts presented in Other Noncurrent Assets: Other $18
 $1
 $3
 $2
 $1
 $—
 $—
 $—
 $14
 $1
 $1
 $1
 $—
 $—
 $—
 $—
Derivative Liabilities September 30, 2017 March 31, 2019
   Duke
   Duke
 Duke
 Duke
 Duke
     Duke
   Duke
 Duke
 Duke
 Duke
  
 Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
   Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions) Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
 Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Current                                
Gross amounts recognized $60
 $24
 $11
 $2
 $9
 $1
 $—
 $18
 $88
 $34
 $22
 $6
 $17
 $1
 $—
 $6
Gross amounts offset (4) (1) (3) (1) (2) —
 —
 —
 (4) (2) (2) (2) —
 —
 —
 —
Net amounts presented in Current Liabilities: Other $56
 $23
 $8
 $1
 $7
 $1
 $—
 $18
 $84
 $32
 $20
 $4
 $17
 $1
 $—
 $6
Noncurrent                                
Gross amounts recognized $131
 $1
 $11
 $5
 $—
 $4
 $—
 $105
 $156
 $5
 $22
 $6
 $1
 $4
 $—
 $115
Gross amounts offset (2) (1) (1) (1) —
 —
 —
 —
 (3) (1) (2) (2) —
 —
 —
 —
Net amounts presented in Other Noncurrent Liabilities: Other $129
 $—
 $10
 $4
 $—
 $4
 $—
 $105
 $153
 $4
 $20
 $4
 $1
 $4
 $—
 $115
Derivative Assets December 31, 2016 December 31, 2018
   Duke
   Duke
 Duke
 Duke
 Duke
     Duke
   Duke
 Duke
 Duke
 Duke
  
 Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
   Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions) Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
 Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Current                                
Gross amounts recognized $111
 $23
 $64
 $36
 $28
 $4
 $16
 $3
 $38
 $2
 $2
 $2
 $—
 $6
 $23
 $3
Gross amounts offset (11) —
 (11) —
 (11) —
 —
 —
 (3) (2) (2) (2) —
 —
 —
 —
Net amounts presented in Current Assets: Other $100
 $23
 $53
 $36
 $17
 $4
 $16
 $3
 $35
 $—
 $—
 $—
 $—
 $6
 $23
 $3
Noncurrent                                
Gross amounts recognized $51
 $10
 $21
 $10
 $11
 $1
 $—
 $—
 $19
 $1
 $2
 $2
 $—
 $—
 $—
 $—
Gross amounts offset (2) (1) (1) (1) —
 —
 —
 —
 (3) (1) (2) (2) —
 —
 —
 —
Net amounts presented in Other Noncurrent Assets: Other $49
 $9
 $20
 $9
 $11
 $1
 $—
 $—
 $16
 $—
 $—
 $—
 $—
 $—
 $—
 $—

7371

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



FINANCIAL STATEMENTSDERIVATIVES AND HEDGING


Derivative Liabilities December 31, 2016 December 31, 2018
   Duke
   Duke
 Duke
 Duke
 Duke
     Duke
   Duke
 Duke
 Duke
 Duke
  
 Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
   Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions) Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
 Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Current                                
Gross amounts recognized $52
 $—
 $12
 $—
 $12
 $1
 $2
 $35
 $68
 $23
 $23
 $16
 $8
 $1
 $—
 $8
Gross amounts offset (11) —
 (11) —
 (11) —
 —
 —
 (4) (2) (2) (2) —
 —
 —
 —
Net amounts presented in Current Liabilities: Other $41
 $—
 $1
 $—
 $1
 $1
 $2
 $35
 $64
 $21
 $21
 $14
 $8
 $1
 $—
 $8
Noncurrent                                
Gross amounts recognized $200
 $16
 $13
 $7
 $—
 $5
 $—
 $152
 $174
 $10
 $21
 $11
 $1
 $4
 $—
 $133
Gross amounts offset (2) (1) (1) (1) —
 —
 —
 —
 (3) (1) (2) (2) —
 —
 —
 —
Net amounts presented in Other Noncurrent Liabilities: Other $198
 $15
 $12
 $6
 $—
 $5
 $—
 $152
 $171
 $9
 $19
��$9
 $1
 $4
 $—
 $133
OBJECTIVE CREDIT CONTINGENT FEATURES
Certain derivative contracts contain objective credit contingent features. These features include the requirement to post cash collateral or letters of credit if specific events occur, such as a credit rating downgrade below investment grade. The following tables show information with respect to derivative contracts that are in a net liability position and contain objective credit-risk-related payment provisions.
September 30, 2017March 31, 2019
  Duke
   Duke
 Duke
  Duke
   Duke
Duke
 Energy
 Progress
 Energy
 Energy
Duke
 Energy
 Progress
 Energy
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
Energy
 Carolinas
 Energy
 Progress
Aggregate fair value of derivatives in a net liability position$40
 $25
 $15
 $6
 $9
$25
 $14
 $11
 $11
Fair value of collateral already posted—
 —
 —
 —
 —
—
 —
 —
 —
Additional cash collateral or letters of credit in the event credit-risk-related contingent features were triggered40
 25
 15
 6
 9
25
 14
 11
 11
December 31, 2016December 31, 2018
  Duke
   Duke
 Duke
  Duke
   Duke
Duke
 Energy
 Progress
 Energy
 Energy
Duke
 Energy
 Progress
 Energy
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
Energy
 Carolinas
 Energy
 Progress
Aggregate fair value of derivatives in a net liability position$34
 $16
 $18
 $6
 $12
$44
 $19
 $25
 $25
Fair value of collateral already posted—
 —
 —
 —
 —
—
 —
 —
 —
Additional cash collateral or letters of credit in the event credit-risk-related contingent features were triggered34
 16
 18
 6
 12
44
 19
 25
 25
The Duke Energy Registrants have elected to offset cash collateral and fair values of derivatives. For amounts to be netted, the derivative and cash collateral must be executed with the same counterparty under the same master netting arrangement.
11. INVESTMENTS IN DEBT AND EQUITY SECURITIES
The Duke Energy Registrants classify theirEnergy’s 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 $1 million and $5 million as of September 30, 2017, and December 31, 2016, respectively.
AVAILABLE-FOR-SALE (AFS) SECURITIES
All other investments in debt and equity securities are classified as AFS.
Duke Energy’s available-for-sale securities are primarily comprised of investments held in (i) the nuclear decommissioning trust fund (NDTF)NDTF at Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida, (ii) the grantor trusts at Duke Energy Progress, Duke Energy Florida and Duke Energy Indiana related to Other Post-Retirement Benefit Obligations (OPEB)OPEB plans and (iii) Bison. The Duke Energy Registrants classify investments in debt securities as AFS and investments in equity securities as FV-NI. 
For investments in debt securities classified as AFS, the unrealized gains and losses are included in other comprehensive income until realized, at which time, they are reported through net income. For investments in equity securities classified as FV-NI, both realized and unrealized gains and losses are reported through net income. Substantially all of Duke Energy’s investments in debt and equity securities qualify for regulatory accounting, and accordingly, all associated realized and unrealized gains and losses on these investments are deferred as a regulatory asset or liability.
Duke Energy classifies all otherthe majority of investments in debt and equity securities as long term, unless otherwise noted.

74

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





Investment Trusts
The investments within the NDTF investments and the Duke Energy Progress, Duke Energy Florida and Duke Energy Indiana grantor trusts (Investment Trusts)Investment Trusts are managed by independent investment managers with discretion to buy, sell and invest pursuant to the objectives set forth by the trust agreements. The Duke Energy Registrants have limited oversight of the day-to-day management of these investments. As a result, the ability to hold investments in unrealized loss positions is outside the control of the Duke Energy Registrants. Accordingly, all unrealized losses associated with debt and equity securities within the Investment Trusts are considered other-than-temporary impairments (OTTIs)OTTIs and are recognized immediately.immediately and deferred to regulatory accounts where appropriate.
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.
Substantially all amounts of the Duke Energy Registrants' gross unrealized holding losses as of September 30, 2017, and December 31, 2016, are considered OTTIs on investments within Investment Trusts that have been recognized immediately as a regulatory asset.
72



FINANCIAL STATEMENTSINVESTMENTS IN DEBT AND EQUITY SECURITIES


Other AFS Securities
Unrealized gains and losses on all other AFS securities are included in other comprehensive income until realized, unless it is determined the carrying value of an investment is other-than-temporarily impaired. The Duke Energy Registrants analyze all investment holdings each reporting period to determine whether a decline in fair value should be considered other-than-temporary. If an OTTI exists, the unrealized credit loss is included in earnings. There were no material credit losses as of September 30, 2017,March 31, 2019, and December 31, 2016.2018.
Other Investments amounts are recorded in Other within Other Noncurrent Assets on the Condensed Consolidated Balance Sheets.
DUKE ENERGY
The following table presents the estimated fair value of investments in AFS securities.debt and equity securities; equity investments are classified as FV-NI and debt investments are classified as AFS.
 September 30, 2017 December 31, 2016
 Gross
 Gross
   Gross
 Gross
  
 Unrealized
 Unrealized
 Estimated
 Unrealized
 Unrealized
 Estimated
 Holding
 Holding
 Fair
 Holding
 Holding
 Fair
(in millions)Gains
 Losses
 Value
 Gains
 Losses
 Value
NDTF           
Cash and cash equivalents$—
 $—
 $129
 $—
 $—
 $111
Equity securities2,549
 28
 4,627
 2,092
 54
 4,106
Corporate debt securities16
 2
 600
 10
 8
 528
Municipal bonds5
 2
 334
 3
 10
 331
U.S. government bonds10
 4
 984
 10
 8
 984
Other debt securities—
 1
 120
 —
 3
 124
Total NDTF$2,580
 $37
 $6,794
 $2,115
 $83
 $6,184
Other Investments           
Cash and cash equivalents$—
 $—
 $15
 $—
 $—
 $25
Equity securities52
 —
 115
 38
 —
 104
Corporate debt securities1
 —
 64
 1
 1
 66
Municipal bonds3
 1
 83
 2
 1
 82
U.S. government bonds—
 —
 44
 —
 1
 51
Other debt securities—
 —
 37
 —
 2
 42
Total Other Investments$56
 $1
 $358
 $41
 $5
 $370
Total Investments$2,636
 $38
 $7,152
 $2,156
 $88
 $6,554
The table below summarizes the maturity date for debt securities.
(in millions)September 30, 2017
Due in one year or less$92
Due after one through five years584
Due after five through 10 years514
Due after 10 years1,076
Total$2,266

75

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)





 March 31, 2019 December 31, 2018
 Gross
 Gross
   Gross
 Gross
  
 Unrealized
 Unrealized
 Estimated
 Unrealized
 Unrealized
 Estimated
 Holding
 Holding
 Fair
 Holding
 Holding
 Fair
(in millions)Gains
 Losses
 Value
 Gains
 Losses
 Value
NDTF           
Cash and cash equivalents$—
 $—
 $114
 $—
 $—
 $88
Equity securities2,923
 65
 5,061
 2,402
 95
 4,475
Corporate debt securities17
 2
 624
 4
 13
 566
Municipal bonds5
 1
 317
 1
 4
 353
U.S. government bonds25
 5
 1,102
 14
 12
 1,076
Other debt securities1
 1
 145
 —
 2
 148
Total NDTF Investments$2,971
 $74
 $7,363
 $2,421
 $126
 $6,706
Other Investments           
Cash and cash equivalents$—
 $—
 $51
 $—
 $—
 $22
Equity securities47
 —
 112
 36
 1
 99
Corporate debt securities1
 —
 57
 —
 2
 60
Municipal bonds2
 1
 89
 —
 1
 85
U.S. government bonds1
 —
 52
 1
 —
 45
Other debt securities—
 1
 61
 —
 1
 58
Total Other Investments$51
 $2
 $422
 $37
 $5
 $369
Total Investments$3,022
 $76
 $7,785
 $2,458
 $131
 $7,075
Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the three months endedMarch 31, 2019, and 2018, were as follows.
Three Months Ended Nine Months Ended
September 30, September 30,Three Months Ended
(in millions)2017
 2016
 2017
 2016
March 31, 2019 March 31, 2018
FV-NI:   
Realized gains$37
 $82
 $170
 $200
$35
 $19
Realized losses25
 42
 124
 134
30
 13
AFS:   
Realized gains10
 5
Realized losses11
 13

73



FINANCIAL STATEMENTSINVESTMENTS IN DEBT AND EQUITY SECURITIES


DUKE ENERGY CAROLINAS
The following table presents the estimated fair value of investments in AFS securities.debt and equity securities; equity investments are classified as FV-NI and debt investments are classified as AFS.
 September 30, 2017 December 31, 2016
 Gross
 Gross
   Gross
 Gross
  
 Unrealized
 Unrealized
 Estimated
 Unrealized
 Unrealized
 Estimated
 Holding
 Holding
 Fair
 Holding
 Holding
 Fair
(in millions)Gains
 Losses
 Value
 Gains
 Losses
 Value
NDTF           
Cash and cash equivalents$—
 $—
 $34
 $—
 $—
 $18
Equity securities1,395
 14
 2,553
 1,157
 28
 2,245
Corporate debt securities9
 2
 395
 5
 6
 354
Municipal bonds1
 —
 52
 1
 2
 67
U.S. government bonds3
 3
 466
 2
 5
 458
Other debt securities—
 1
 113
 —
 3
 116
Total NDTF$1,408
 $20

$3,613
 $1,165
 $44
 $3,258
Other Investments           
Other debt securities—
 —
 —
 —
 1
 3
Total Investments$1,408
 $20
 $3,613
 $1,165
 $45
 $3,261
The table below summarizes the maturity date for debt securities.
(in millions)September 30, 2017
Due in one year or less$5
Due after one through five years218
Due after five through 10 years264
Due after 10 years539
Total$1,026
 March 31, 2019 December 31, 2018
 Gross
 Gross
   Gross
 Gross
  
 Unrealized
 Unrealized
 Estimated
 Unrealized
 Unrealized
 Estimated
 Holding
 Holding
 Fair
 Holding
 Holding
 Fair
(in millions)Gains
 Losses
 Value
 Gains
 Losses
 Value
NDTF           
Cash and cash equivalents$—
 $—
 $57
 $—
 $—
 $29
Equity securities1,593
 37
 2,791
 1,309
 54
 2,484
Corporate debt securities9
 2
 354
 2
 9
 341
Municipal bonds1
 —
 62
 —
 1
 81
U.S. government bonds11
 3
 509
 5
 8
 475
Other debt securities1
 1
 140
 —
 2
 143
Total NDTF Investments$1,615
 $43

$3,913
 $1,316
 $74
 $3,553
Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the three months ended March 31, 2019, and 2018, were as follows.
Three Months Ended Nine Months Ended
September 30, September 30,Three Months Ended
(in millions)2017
 2016
 2017
 2016
March 31, 2019 March 31, 2018
FV-NI:   
Realized gains$20
 $58
 $110
 $125
$23
 $10
Realized losses13
 28
 76
 84
21
 5
AFS:   
Realized gains9
 5
Realized losses10
 10

76

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





PROGRESS ENERGY
The following table presents the estimated fair value of investments in AFS securities.debt and equity securities; equity investments are classified as FV-NI and debt investments are classified as AFS.
September 30, 2017 December 31, 2016March 31, 2019 December 31, 2018
Gross
 Gross
   Gross
 Gross
  Gross
 Gross
   Gross
 Gross
  
Unrealized
 Unrealized
 Estimated
 Unrealized
 Unrealized
 Estimated
Unrealized
 Unrealized
 Estimated
 Unrealized
 Unrealized
 Estimated
Holding
 Holding
 Fair
 Holding
 Holding
 Fair
Holding
 Holding
 Fair
 Holding
 Holding
 Fair
(in millions)Gains
 Losses
 Value
 Gains
 Losses
 Value
Gains
 Losses
 Value
 Gains
 Losses
 Value
NDTF                      
Cash and cash equivalents$—
 $—
 $95
 $—
 $—
 $93
$—
 $—
 $57
 $—
 $—
 $59
Equity securities1,154
 14
 2,074
 935
 26
 1,861
1,330
 28
 2,270
 1,093
 41
 1,991
Corporate debt securities7
 —
 205
 5
 2
 174
8
 —
 270
 2
 4
 225
Municipal bonds4
 2
 282
 2
 8
 264
4
 1
 255
 1
 3
 272
U.S. government bonds7
 1
 518
 8
 3
 526
14
 2
 593
 9
 4
 601
Other debt securities—
 —
 7
 —
 —
 8
—
 —
 5
 —
 —
 5
Total NDTF$1,172
 $17
 $3,181
 $950
 $39
 $2,926
Total NDTF Investments$1,356
 $31
 $3,450
 $1,105
 $52
 $3,153
Other Investments                      
Cash and cash equivalents$—
 $—
 $11
 $—
 $—
 $21
$—
 $—
 $47
 $—
 $—
 $17
Municipal bonds3
 —
 47
 2
 —
 44
2
 —
 49
 —
 —
 47
Total Other Investments$3
 $—
 $58
 $2
 $—
 $65
$2
 $—
 $96
 $—
 $—
 $64
Total Investments$1,175
 $17
 $3,239
 $952
 $39
 $2,991
$1,358
 $31
 $3,546
 $1,105
 $52
 $3,217
The table below summarizes the maturity date for debt securities.
74



(in millions)September 30, 2017
Due in one year or less$74
Due after one through five years309
Due after five through 10 years194
Due after 10 years482
Total$1,059
FINANCIAL STATEMENTSINVESTMENTS IN DEBT AND EQUITY SECURITIES


Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the three months endedMarch 31, 2019, and 2018, were as follows.
Three Months Ended Nine Months Ended
September 30, September 30,Three Months Ended
(in millions)2017
 2016
 2017
 2016
March 31, 2019 March 31, 2018
FV-NI:   
Realized gains$16
 $21
 $58
 $71
$12
 $9
Realized losses12
 13
 47
 49
9
 8
AFS:   
Realized gains1
 —
Realized losses1
 3

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)





DUKE ENERGY PROGRESS
The following table presents the estimated fair value of investments in AFS securities.debt and equity securities; equity investments are classified as FV-NI and debt investments are classified as AFS.
 September 30, 2017 December 31, 2016
 Gross
 Gross
   Gross
 Gross
  
 Unrealized
 Unrealized
 Estimated
 Unrealized
 Unrealized
 Estimated
 Holding
 Holding
 Fair
 Holding
 Holding
 Fair
(in millions)Gains
 Losses
 Value
 Gains
 Losses
 Value
NDTF           
Cash and cash equivalents$—
 $—
 $46
 $—
 $—
 $45
Equity securities882
 11
 1,683
 704
 21
 1,505
Corporate debt securities5
 —
 144
 4
 1
 120
Municipal bonds4
 2
 281
 2
 8
 263
U.S. government bonds5
 1
 303
 5
 2
 275
Other debt securities—
 —
 4
 —
 —
 5
Total NDTF$896
 $14
 $2,461
 $715
 $32
 $2,213
Other Investments           
Cash and cash equivalents$—
 $—
 $1
 $—
 $—
 $1
Total Investments$896
 $14
 $2,462
 $715
 $32
 $2,214
The table below summarizes the maturity date for debt securities.
(in millions)September 30, 2017
Due in one year or less$16
Due after one through five years209
Due after five through 10 years136
Due after 10 years371
Total$732
 March 31, 2019 December 31, 2018
 Gross
 Gross
   Gross
 Gross
  
 Unrealized
 Unrealized
 Estimated
 Unrealized
 Unrealized
 Estimated
 Holding
 Holding
 Fair
 Holding
 Holding
 Fair
(in millions)Gains
 Losses
 Value
 Gains
 Losses
 Value
NDTF           
Cash and cash equivalents$—
 $—
 $43
 $—
 $—
 $46
Equity securities1,022
 20
 1,812
 833
 30
 1,588
Corporate debt securities6
 —
 204
 2
 3
 171
Municipal bonds4
 1
 254
 1
 3
 271
U.S. government bonds10
 1
 422
 6
 3
 415
Other debt securities—
 —
 3
 —
 —
 3
Total NDTF Investments$1,042
 $22
 $2,738
 $842
 $39
 $2,494
Other Investments           
Cash and cash equivalents$—
 $—
 $3
 $—
 $—
 $6
Total Other Investments$—
 $—
 $3
 $—
 $—
 $6
Total Investments$1,042
 $22
 $2,741
 $842
 $39
 $2,500
Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the three months endedMarch 31, 2019, and 2018, were as follows.
Three Months Ended Nine Months Ended
September 30, September 30,Three Months Ended
(in millions)2017
 2016
 2017
 2016
March 31, 2019 March 31, 2018
FV-NI:   
Realized gains$14
 $18
 $49
 $60
$10
 $8
Realized losses11
 11
 41
 42
8
 8
AFS:   
Realized gains1
 —
Realized losses1
 2

7875

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



FINANCIAL STATEMENTSINVESTMENTS IN DEBT AND EQUITY SECURITIES


DUKE ENERGY FLORIDA
The following table presents the estimated fair value of investments in AFS securities.debt and equity securities; equity investments are classified as FV-NI and debt investments are classified as AFS.
September 30, 2017 December 31, 2016March 31, 2019 December 31, 2018
Gross
 Gross
   Gross
 Gross
  Gross
 Gross
   Gross
 Gross
  
Unrealized
 Unrealized
 Estimated
 Unrealized
 Unrealized
 Estimated
Unrealized
 Unrealized
 Estimated
 Unrealized
 Unrealized
 Estimated
Holding
 Holding
 Fair
 Holding
 Holding
 Fair
Holding
 Holding
 Fair
 Holding
 Holding
 Fair
(in millions)Gains
 Losses
 Value
 Gains
 Losses
 Value
Gains
 Losses
 Value
 Gains
 Losses
 Value
NDTF                      
Cash and cash equivalents$—
 $—
 $49
 $—
 $—
 $48
$—
 $—
 $14
 $—
 $—
 $13
Equity securities272
 3
 391
 231
 5
 356
308
 8
 458
 260
 11
 403
Corporate debt securities2
 —
 61
 1
 1
 54
2
 —
 66
 —
 1
 54
Municipal bonds—
 —
 1
 —
 —
 1
—
 —
 1
 —
 —
 1
U.S. government bonds2
 —
 215
 3
 1
 251
4
 1
 171
 3
 1
 186
Other debt securities—
 —
 3
 —
 —
 3
—
 —
 2
 —
 —
 2
Total NDTF(a)
$276
 $3
 $720
 $235
 $7
 $713
Total NDTF Investments(a)
$314
 $9
 $712
 $263
 $13
 $659
Other Investments                      
Cash and cash equivalents$—
 $—
 $—
 $—
 $—
 $4
$—
 $—
 $1
 $—
 $—
 $1
Municipal bonds3
 —
 47
 2
 —
 44
2
 —
 49
 —
 —
 47
Total Other Investments$3
 $—
 $47
 $2
 $—
 $48
$2
 $—
 $50
 $—
 $—
 $48
Total Investments$279
 $3
 $767
 $237
 $7
 $761
$316
 $9
 $762
 $263
 $13
 $707
(a)During the ninethree months ended September 30, 2017,March 31, 2019, Duke Energy Florida continued to receive reimbursements from the NDTF for costs related to ongoing decommissioning activity of the Crystal River Unit 3 nuclear plant.
The table below summarizes the maturity date for debt securities.
(in millions)September 30, 2017
Due in one year or less$58
Due after one through five years100
Due after five through 10 years58
Due after 10 years111
Total$327
Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the three months endedMarch 31, 2019, and 2018, were as follows.
 Three Months Ended Nine Months Ended
 September 30, September 30,
(in millions)2017
 2016
 2017
 2016
Realized gains$2
 $3
 $9
 $11
Realized losses1
 2
 6
 7

79

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





 Three Months Ended
(in millions)March 31, 2019 March 31, 2018
FV-NI:   
Realized gains$2
 $1
Realized losses1
 —
AFS:   
 Realized losses—
 1
DUKE ENERGY INDIANA
The following table presents the estimated fair value of investments in AFS securities.debt and equity securities; equity investments are measured at FV-NI and debt investments are classified as AFS.
 September 30, 2017 December 31, 2016
 Gross
 Gross
   Gross
 Gross
  
 Unrealized
 Unrealized
 Estimated
 Unrealized
 Unrealized
 Estimated
 Holding
 Holding
 Fair
 Holding
 Holding
 Fair
(in millions)Gains
 Losses
 Value
 Gains
 Losses
 Value
Investments           
Equity securities$44
 $—
 $91
 $33
 $—
 $79
Corporate debt securities—
 —
 3
 —
 —
 2
Municipal bonds—
 1
 28
 —
 1
 28
U.S. government bonds—
 —
 —
 —
 —
 1
Total Investments$44
 $1
 $122
 $33
 $1
 $110
The table below summarizes the maturity date for debt securities.
(in millions)September 30, 2017
Due in one year or less$4
Due after one through five years12
Due after five through 10 years8
Due after 10 years7
Total$31
 March 31, 2019 December 31, 2018
 Gross
 Gross
   Gross
 Gross
  
 Unrealized
 Unrealized
 Estimated
 Unrealized
 Unrealized
 Estimated
 Holding
 Holding
 Fair
 Holding
 Holding
 Fair
(in millions)Gains
 Losses
 Value
 Gains
 Losses
 Value
Investments           
Equity securities$37
 $—
 $76
 $29
 $—
 $67
Corporate debt securities—
 —
 7
 —
 —
 8
Municipal bonds—
 1
 34
 —
 1
 33
U.S. government bonds—
 —
 1
 —
 —
 —
Total Investments$37
 $1
 $118
 $29
 $1
 $108
Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities were insignificant for the three and nine months ended September 30, 2017,March 31, 2019, and 2016.2018, were insignificant.

76



FINANCIAL STATEMENTSINVESTMENTS IN DEBT AND EQUITY SECURITIES


DEBT SECURITY MATURITIES
The table below summarizes the maturity date for debt securities.
 March 31, 2019
   Duke
   Duke
 Duke
 Duke
 Duke
 Energy
 Progress
 Energy
 Energy
 Energy
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Indiana
Due in one year or less$74
 $9
 $41
 $21
 $20
 $4
Due after one through five years537
 153
 341
 251
 90
 17
Due after five through 10 years577
 287
 245
 196
 49
 4
Due after 10 years1,259
 616
 545
 415
 130
 17
Total$2,447

$1,065

$1,172

$883

$289

$42
12. FAIR VALUE MEASUREMENTS
Fair value is the exchange price to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. The fair value definition focuses on an exit price versus the acquisition cost. Fair value measurements use market data or assumptions market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs may be readily observable, corroborated by market data or generally unobservable. Valuation techniques maximize the use of observable inputs and minimize use of unobservable inputs. A midmarket pricing convention (the midpoint price between bid and ask prices) is permitted for use as a practical expedient.
Fair value measurements are classified in three levels based on the fair value hierarchy:
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity can access at the measurement date. An active market is one in which transactions for an asset or liability occur with sufficient frequency and volume to provide ongoing pricing information.
Level 2 – A fair value measurement utilizing inputs other than quoted prices included in Level 1 that are observable, either directly or indirectly, for an asset or liability. Inputs include (i) quoted prices for similar assets or liabilities in active markets, (ii) quoted prices for identical or similar assets or liabilities in markets that are not active (iii) and inputs other than quoted market prices that are observable for the asset or liability, suchhierarchy as interest rate curves and yield curves observable at commonly quoted intervals, volatilities and credit spreads. A Level 2 measurement cannot have more than an insignificant portion of its valuation based on unobservable inputs. Instruments in this category include non-exchange-traded derivatives, such as over-the-counter forwards, swaps and options; certain marketable debt securities; and financial instruments traded in less-than-active markets.
Level 3 – Any fair value measurement that includes unobservable inputs for more than an insignificant portion of the valuation. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value. Level 3 measurements may include longer-term instruments that extend into periods in which observable inputs are not available.
Not Categorized –defined by GAAP. Certain investments are not categorized within the Fair Valuefair value hierarchy. These investments are measured at fair value using the NAV per share practical expedient. The NAV is derived based on the fair valueinvestment cost, less any impairment, plus or minus changes resulting from observable price changes for an identical or similar investment of the underlying investments but may not be readily redeemable at that fair value.same issuer.
Fair value accounting guidance permits entities to elect to measure certain financial instruments that are not required to be accounted for at fair value, such as equity method investments or the company’s own debt, at fair value. The Duke Energy Registrants have not elected to record any of these items at fair value.
Transfers between levels represent assets or liabilities that were previously (i) categorized at a higher level for which the inputs to the estimate became less observable or (ii) classified at a lower level for which the inputs became more observable during the period. The Duke Energy Registrant’s policy is to recognize transfers between levels of the fair value hierarchy at the end of the period. There were no transfers between levels during the three and nine months ended September 30, 2017,March 31, 2019, and 2016.

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 – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)





2018.
Valuation methods of the primary fair value measurements disclosed below are as follows.
Investments in equity securities
The majority of investments in equity securities are valued using Level 1 measurements. Investments in equity securities are typically valued at the closing price in the principal active market as of the last business day of the quarter. Principal active markets for equity prices include published exchanges such as the New York Stock Exchange (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 security is relatively inactive or illiquid, the measurement is Level 3.
Commodity derivatives
Commodity derivatives with clearinghouses are classified as Level 1. Other commodity derivatives, including Piedmont's natural gas supply contracts, are primarily valued using internally developed discounted cash flow models that incorporate forward price, adjustments for liquidity (bid-ask spread) and credit or non-performance risk (after reflecting credit enhancements such as collateral), and are discounted to present value. Pricing inputs are derived from published exchange transaction prices and other observable data sources. In the absence of an active market, the last available price may be used. If forward price curves are not observable for the full term of the contract and the unobservable period had more than an insignificant impact on the valuation, the commodity derivative is classified as Level 3. In isolation, increases (decreases) in natural gas forward prices result in favorable (unfavorable) fair value adjustments for natural gas purchase contracts; and increases (decreases) in electricity forward prices result in unfavorable (favorable) fair value adjustments for electricity sales contracts. Duke Energy regularly evaluates and validates pricing inputs used to estimate the fair value of natural gas commodity contracts by a market participant price verification procedure. This procedure provides a comparison of internal forward commodity curves to market participant generated curves.

77



FINANCIAL STATEMENTSFAIR VALUE MEASUREMENTS

Interest rate derivatives
Most over-the-counter interest rate contract derivatives are valued using financial models that utilize observable inputs for similar instruments and are classified as Level 2. Inputs include forward interest rate curves, notional amounts, interest rates and credit quality of the counterparties.
Other fair value considerations
See Note 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, 2016,2018, for a discussion of the valuation of goodwill and intangible assets.
DUKE ENERGY
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets. Derivative amounts in the tables below for all Duke Energy Registrants exclude cash collateral, which is disclosed in Note 10. See Note 11 for additional information related to investments by major security type for the Duke Energy Registrants.
 September 30, 2017
(in millions)Total Fair Value
Level 1
Level 2
Level 3
Not Categorized
NDTF equity securities$4,627
$4,549
$—
$—
$78
NDTF debt securities2,167
617
1,550
—
—
Other trading and AFS equity securities116
116
—
—
—
Other AFS debt securities243
59
184
—
—
Derivative assets69
4
35
30
—
Total assets7,222
5,345
1,769
30
78
Derivative liabilities(191)—
(68)(123)—
Net assets (liabilities)$7,031
$5,345
$1,701
$(93)$78

81

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)





 March 31, 2019
(in millions)Total Fair Value
Level 1
Level 2
Level 3
Not Categorized
NDTF equity securities$5,061
$4,998
$—
$—
$63
NDTF debt securities2,302
630
1,672
—
—
Other equity securities112
112
—
—
—
Other debt securities310
103
207
—
—
Derivative assets35
2
27
6
—
Total assets7,820
5,845
1,906
6
63
Derivative liabilities(244)(23)(100)(121)—
Net assets (liabilities)$7,576
$5,822
$1,806
$(115)$63
December 31, 2016December 31, 2018
(in millions)Total Fair Value
Level 1
Level 2
Level 3
Not Categorized
Total Fair Value
Level 1
Level 2
Level 3
Not Categorized
NDTF equity securities$4,106
$4,029
$—
$—
$77
$4,475
$4,410
$—
$—
$65
NDTF debt securities2,078
632
1,446
—
—
2,231
576
1,655
—
—
Other trading and AFS equity securities104
104
—
—
—
Other trading and AFS debt securities266
75
186
5
—
Other equity securities99
99
—
—
—
Other debt securities270
67
203
—
—
Derivative assets162
5
136
21
—
57
4
25
28
—
Total assets6,716
4,845
1,768
26
77
7,132
5,156
1,883
28
65
Derivative liabilities(252)(2)(63)(187)—
(242)(11)(90)(141)—
Net assets (liabilities)$6,464
$4,843
$1,705
$(161)$77
$6,890
$5,145
$1,793
$(113)$65
The following tables provide reconciliations of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements. Amounts included in earnings for derivatives are primarily included in Cost of natural gas on the Duke Energy Registrants' Condensed Consolidated Statements of Operations and Comprehensive Income. Amounts included in changes of net assets on the Duke Energy Registrants' Condensed Consolidated Balance Sheets are included in regulatory assets or liabilities. All derivative assets and liabilities are presented on a net basis.
 Three Months Ended September 30, 2017 Three Months Ended September 30, 2016
(in millions)Investments
 Derivatives (net)
 Total
 Investments
 Derivatives (net)
 Total
Balance at beginning of period$—
 $(91) $(91) $4
 $34
 $38
Purchases, sales, issuances and settlements:    

      
Settlements—
 (12) (12) —
 (9) (9)
Total gains (losses) included on the Condensed Consolidated Balance Sheet—
 10
 10
 —
 (2) (2)
Balance at end of period$—
 $(93) $(93) $4
 $23
 $27
Derivatives (net)
Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016Three Months Ended March 31,
(in millions)Investments
 Derivatives (net)
 Total
 Investments
 Derivatives (net)
 Total
2019
 2018
Balance at beginning of period$5
 $(166) $(161) $5
 $10
 $15
$(113) $(114)
Total pretax realized or unrealized gains included in comprehensive income1
 —
 1
 —
 —
 —
Purchases, sales, issuances and settlements:              
Purchases—
 55
 55
 —
 34
 34
Sales(6) —
 (6) (1) —
 (1)
Settlements—
 (30) (30) —
 (22) (22)(12) (14)
Total gains included on the Condensed Consolidated Balance Sheet—
 48
 48
 —
 1
 1
10
 4
Balance at end of period$—
 $(93) $(93) $4
 $23
 $27
$(115) $(124)

8278

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




FINANCIAL STATEMENTSFAIR VALUE MEASUREMENTS

DUKE ENERGY CAROLINAS
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets.
 September 30, 2017
(in millions)Total Fair Value
Level 1
Level 2
Level 3
Not Categorized
NDTF equity securities$2,553
$2,475
$—
$—
$78
NDTF debt securities1,060
178
882
—
—
Derivative assets8
—
8
—
—
Total assets3,621
2,653
890
—
78
Derivative liabilities(25)—
(25)—
—
Net assets$3,596
$2,653
$865
$—
$78
 December 31, 2016
(in millions)Total Fair Value
Level 1
Level 2
Level 3
Not Categorized
NDTF equity securities$2,245
$2,168
$—
$—
$77
NDTF debt securities1,013
178
835
—
—
Other AFS debt securities3
—
—
3
—
Derivative assets33
—
33
—
—
Total assets3,294
2,346
868
3
77
Derivative liabilities(16)—
(16)—
—
Net assets$3,278
$2,346
$852
$3
$77
The following table provides a reconciliation of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements.
 Investments
 Three Months Ended September 30, Nine Months Ended September 30,
(in millions)20172016 20172016
Balance at beginning of period$—
$3
 $3
$3
Total pretax realized or unrealized gains included in comprehensive income—
—
 1
—
Purchases, sales, issuances and settlements:     
Sales—
—
 (4)—
Balance at end of period$—
$3
 $—
$3
 March 31, 2019
(in millions)Total Fair Value
Level 1
Level 2
Not Categorized
NDTF equity securities$2,791
$2,728
$—
$63
NDTF debt securities1,122
212
910
—
Derivative assets5
—
5
—
Total assets3,918
2,940
915
63
Derivative liabilities(39)—
(39)—
Net assets$3,879
$2,940
$876
$63
 December 31, 2018
(in millions)Total Fair Value
Level 1
Level 2
Not Categorized
NDTF equity securities$2,484
$2,419
$—
$65
NDTF debt securities1,069
149
920
—
Derivative assets3
—
3
—
Total assets3,556
2,568
923
65
Derivative liabilities(33)—
(33)—
Net assets$3,523
$2,568
$890
$65
PROGRESS ENERGY
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets.
 September 30, 2017 December 31, 2016
(in millions)Total Fair Value
Level 1
Level 2
 Total Fair Value
Level 1
Level 2
NDTF equity securities$2,074
$2,074
$—
 $1,861
$1,861
$—
NDTF debt securities1,107
439
668
 1,065
454
611
Other AFS debt securities58
11
47
 65
21
44
Derivative assets15
1
14
 85
—
85
Total assets3,254
2,525
729
 3,076
2,336
740
Derivative liabilities(22)—
(22) (25)—
(25)
Net assets$3,232
$2,525
$707
 $3,051
$2,336
$715

83

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)





 March 31, 2019 December 31, 2018
(in millions)Total Fair Value
Level 1
Level 2
 Total Fair Value
Level 1
Level 2
NDTF equity securities$2,270
$2,270
$—
 $1,991
$1,991
$—
NDTF debt securities1,180
418
762
 1,162
427
735
Other debt securities96
47
49
 64
17
47
Derivative assets8
—
8
 4
—
4
Total assets3,554
2,735
819
 3,221
2,435
786
Derivative liabilities(44)—
(44) (44)—
(44)
Net assets$3,510
$2,735
$775
 $3,177
$2,435
$742
DUKE ENERGY PROGRESS
The following table providestables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets.
September 30, 2017 December 31, 2016March 31, 2019 December 31, 2018
(in millions)Total Fair Value
Level 1
Level 2
 Total Fair Value
Level 1
Level 2
Total Fair Value
Level 1
Level 2
 Total Fair Value
Level 1
Level 2
NDTF equity securities$1,683
$1,683
$—
 $1,505
$1,505
$—
$1,812
$1,812
$—
 $1,588
$1,588
$—
NDTF debt securities778
231
547
 708
207
501
926
298
628
 906
294
612
Other AFS debt securities1
1
—
 1
1
—
Other debt securities3
3
—
 6
6
—
Derivative assets8
1
7
 46
—
46
8
—
8
 4
—
4
Total assets2,470
1,916
554
 2,260
1,713
547
2,749
2,113
636
 2,504
1,888
616
Derivative liabilities(7)—
(7) (7)—
(7)(12)—
(12) (27)—
(27)
Net assets$2,463
$1,916
$547
 $2,253
$1,713
$540
$2,737
$2,113
$624
 $2,477
$1,888
$589

79



FINANCIAL STATEMENTSFAIR VALUE MEASUREMENTS

DUKE ENERGY FLORIDA
The following table providestables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets.
September 30, 2017 December 31, 2016March 31, 2019 December 31, 2018
(in millions)Total Fair Value
Level 1
Level 2
 Total Fair Value
Level 1
Level 2
Total Fair Value
Level 1
Level 2
 Total Fair Value
Level 1
Level 2
NDTF equity securities$391
$391
$—
 $356
$356
$—
$458
$458
$—
 $403
$403
$—
NDTF debt securities329
208
121
 357
247
110
254
120
134
 256
133
123
Other AFS debt securities47
—
47
 48
4
44
Derivative assets6
—
6
 39
—
39
Other debt securities50
1
49
 48
1
47
Total assets773
599
174
 800
607
193
762
579
183
 707
537
170
Derivative liabilities(9)—
(9) (12)—
(12)(18)—
(18) (9)—
(9)
Net assets$764
$599
$165
 $788
$607
$181
$744
$579
$165
 $698
$537
$161
DUKE ENERGY OHIO
The recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets were not material for the three months ended March 31, 2019, and 2018.
DUKE ENERGY INDIANA
The following table providestables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets.
September 30, 2017 December 31, 2016March 31, 2019 December 31, 2018
(in millions)Total Fair Value
Level 2
Level 3
 Total Fair Value
Level 2
Level 3
Total Fair Value
Level 1
Level 2
Level 3
 Total Fair Value
Level 1
Level 2
Level 3
Other equity securities$76
$76
$—
$—
 $67
$67
$—
$—
Other debt securities42
—
42
—
 41
—
41
—
Derivative assets$2
$—
$2
 $5
$—
$5
5
—
—
5
 23
1
—
22
Derivative liabilities(5)(5)—
 (6)(6)—
Net (liabilities) assets$(3)$(5)$2
 $(1)$(6)$5
Total assets$123
$76
$42
$5
 $131
$68
$41
$22
The following table provides a reconciliation of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements.
Derivatives (net)Derivatives (net)
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended March 31,
(in millions)2017
 2016
 2017
 2016
2019
 2018
Balance at beginning of period$3
 $5
 $5
 $3
$22
 $27
Purchases, sales, issuances and settlements:          
Purchases—
 —
 3
 5
Settlements(1) (2) (3) (4)(10) (14)
Total losses included on the Condensed Consolidated Balance Sheet—
 —
 (3) (1)(7) (6)
Balance at end of period$2
 $3
 $2
 $3
$5
 $7

8480

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




FINANCIAL STATEMENTSFAIR VALUE MEASUREMENTS

DUKE ENERGY INDIANAPIEDMONT
The following table providestables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets.
 September 30, 2017 December 31, 2016
(in millions)Total Fair Value
Level 1
Level 2
Level 3
 Total Fair Value
Level 1
Level 2
Level 3
Other AFS equity securities$91
$91
$—
$—
 $79
$79
$—
$—
Other AFS debt securities31
—
31
—
 31
—
31
—
Derivative assets28
—
—
28
 16
—
—
16
Total assets150
91
31
28
 126
79
31
16
Derivative liabilities—
—
—
—
 (2)(2)—
—
Net assets$150
$91
$31
$28
 $124
$77
$31
$16
 March 31, 2019 December 31, 2018
(in millions)Total Fair Value
Level 1
Level 3
 Total Fair Value
Level 1
Level 3
Derivative assets$2
$2
$—
 $3
3
—
Derivative liabilities(121)—
(121) (141)—
(141)
Net (liabilities) assets$(119)$2
$(121) $(138)$3
$(141)
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 September 30, Nine Months Ended September 30,
(in millions)2017
 2016
 2017
 2016
Balance at beginning of period$51
 $29
 $16
 $7
Purchases, sales, issuances and settlements:
      
Purchases—
 —
 52
 29
Settlements(11) (7) (27) (18)
Total (losses) gains included on the Condensed Consolidated Balance Sheet(12) (2) (13) 2
Balance at end of period$28
 $20
 $28
 $20
 Derivatives (net)
 Three Months Ended March 31,
(in millions)2019
 2018
Balance at beginning of period$(141) $(142)
Total gains and settlements20
 10
Balance at end of period$(121) $(132)
PIEDMONT
The following table provides recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets.
 September 30, 2017 December 31, 2016
(in millions)Total Fair Value
Level 1
Level 3
 Total Fair Value
Level 1
Level 3
Other trading equity securities$1
$1
$—
 $4
$4
$—
Other trading debt securities—
—
—
 1
1
—
Derivative assets2
2
—
 3
3
—
Total assets3
3
—
 8
8
—
Derivative liabilities(123)—
(123) (187)—
(187)
Net (liabilities) assets$(120)$3
$(123) $(179)$8
$(187)
The following table provides a reconciliation of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements.
 Derivatives (net)
 Three Months Ended September 30, Nine Months Ended September 30,
(in millions)2017
 2016
 2017
 2016
Balance at beginning of period$(145) $(190) $(187) $(149)
Total gains (losses) and settlements22
 (5) 64
 (46)
Balance at end of period$(123) $(195) $(123) $(195)

85

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





QUANTITATIVE INFORMATION ABOUT UNOBSERVABLE INPUTS
The following tables include quantitative information about the Duke Energy Registrants' derivatives classified as Level 3.
September 30, 2017March 31, 2019
Fair Value    Fair Value    
Investment Type(in millions)Valuation TechniqueUnobservable InputRange(in millions)Valuation TechniqueUnobservable InputRange
Duke Energy Ohio 
     
    
Financial Transmission Rights (FTRs)$2
RTO auction pricingFTR price – per megawatt-hour (MWh)$—
-$1.08
FTRs$1
RTO auction pricingFTR price – per MWh$0.17
-$2.40
Duke Energy Indiana 
     
    
FTRs28
RTO auction pricingFTR price – per MWh(0.82)-6.19
5
RTO auction pricingFTR price – per MWh(0.42)-7.85
Piedmont          
Natural gas contracts(123)Discounted cash flowForward natural gas curves – price per million British thermal unit (MMBtu)2.12
-3.36
(121)Discounted cash flowForward natural gas curves – price per MMBtu2.03
-3.15
Duke Energy          
Total Level 3 derivatives$(93)    $(115)    
December 31, 2016December 31, 2018
Fair Value    Fair Value    
Investment Type(in millions)Valuation TechniqueUnobservable InputRange(in millions)Valuation TechniqueUnobservable InputRange
Duke Energy Ohio 
     
    
FTRs$5
RTO auction pricingFTR price – per MWh$0.77
-$3.52
$6
RTO auction pricingFTR price – per MWh$1.19
-$4.59
Duke Energy Indiana 
     
    
FTRs16
RTO auction pricingFTR price – per MWh(0.83)-9.32
22
RTO auction pricingFTR price – per MWh(2.07)-8.27
Piedmont          
Natural gas contracts(187)Discounted cash flowForward natural gas curves – price per MMBtu2.31
-4.18
(141)Discounted cash flowForward natural gas curves – price per MMBtu1.87
-2.95
Duke Energy          
Total Level 3 derivatives$(166)    $(113)    

81



FINANCIAL STATEMENTSFAIR VALUE MEASUREMENTS

OTHER FAIR VALUE DISCLOSURES
The fair value and book value of long-term debt, including current maturities, is summarized in the following table. Estimates determined are not necessarily indicative of amounts that could have been settled in current markets. Fair value of long-term debt uses Level 2 measurements.
September 30, 2017 December 31, 2016March 31, 2019 December 31, 2018
(in millions)Book Value
 Fair Value
 Book Value
 Fair Value
Book Value
 Fair Value
 Book Value
 Fair Value
Duke Energy(a)$51,414
 $53,985
 $47,895
 $49,161
$56,182
 $58,242
 $54,529
 $54,534
Duke Energy Carolinas9,525
 10,653
 9,603
 10,494
10,965
 11,951
 10,939
 11,471
Progress Energy17,637
 19,615
 17,541
 19,107
19,251
 20,942
 18,911
 19,885
Duke Energy Progress7,557
 8,075
 7,011
 7,357
9,048
 9,469
 8,204
 8,300
Duke Energy Florida6,696
 7,475
 6,125
 6,728
7,265
 8,000
 7,321
 7,742
Duke Energy Ohio2,067
 2,242
 1,884
 2,020
2,960
 3,149
 2,165
 2,239
Duke Energy Indiana3,785
 4,407
 3,786
 4,260
3,722
 4,242
 3,782
 4,158
Piedmont2,036
 2,193
 1,821
 1,933
2,138
 2,243
 2,138
 2,180
(a)Book value of long-term debt includes $1.5 billion as of March 31, 2019, and $1.6 billion as of December 31, 2018, of unamortized debt discount and premium, net in purchase accounting adjustments related to the mergers with Progress Energy and Piedmont that are excluded from fair value of long-term debt.
At both September 30, 2017,March 31, 2019, and December 31, 2016,2018, fair value of cash and cash equivalents, accounts and notes receivable, accounts payable, notes payable and commercial paper, and nonrecourse notes payable of VIEs are not materially different from their carrying amounts because of the short-term nature of these instruments and/or because the stated rates approximate market rates.
13. VARIABLE INTEREST ENTITIES
A VIE is an entity that is evaluated for consolidation using more than a simple analysis of voting control. The analysis to determine whether an entity is a VIE considers contracts with an entity, credit support for an entity, the adequacy of the equity investment of an entity and the relationship of voting power to the amount of equity invested in an entity. This analysis is performed either upon the creation of a legal entity or upon the occurrence of an event requiring re-evaluation, such as a significant change in an entity’s assets or activities. A qualitative analysis of control determines the party that consolidates a VIE. This assessment is based on (i) what party has the power to direct the activities of the VIE that most significantly impact its economic performance and (ii) what party has rights to receive benefits or is obligated to absorb losses that could potentially be significant to the VIE. The analysis of the party that consolidates a VIE is a continual reassessment.

86

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)





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 ninethree months ended September 30, 2017,March 31, 2019, and the year ended December 31, 2016,2018, or is expected to be provided in the future that was not previously contractually required.
Receivables Financing – DERF / DEPR / DEFR
Duke Energy Receivables Finance Company, LLC (DERF), Duke Energy Progress Receivables, LLC (DEPR)DERF, DEPR and Duke Energy Florida Receivables, LLC (DEFR)DEFR are bankruptcy remote, special purpose subsidiaries of Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida, respectively. DERF, DEPR and DEFR are wholly owned limited liability companies with separate legal existence from their parent companies, and their assets are not generally available to creditors of their parent companies. On a revolving basis, DERF, DEPR and DEFR buy certain accounts receivable arising from the sale of electricity and related services from their parent companies.
DERF, DEPR and DEFR borrow amounts under credit facilities to buy these receivables. Borrowing availability from the credit facilities is limited to the amount of qualified receivables purchased. The sole source of funds to satisfy the related debt obligations is cash collections from the receivables. Amounts borrowed under the credit facilities are reflected on the Condensed Consolidated Balance Sheets as Long-Term Debt.
The most significant activity that impacts the economic performance of DERF, DEPR and DEFR are the decisions made to manage delinquent receivables. Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida are considered primary beneficiaries and consolidate DERF, DEPR and DEFR, respectively, as they make those decisions.
Receivables Financing – CRC
CRC is a bankruptcy remote, special purpose entity indirectly owned by Duke Energy. On a revolving basis, CRC buys certain accounts receivable arising from the sale of electricity, natural gas and related services from Duke Energy Ohio and Duke Energy Indiana. CRC borrows amounts under a credit facility to buy the receivables from Duke Energy Ohio and Duke Energy Indiana. Borrowing availability from the credit facility is limited to the amount of qualified receivables sold to CRC. The sole source of funds to satisfy the related debt obligation is cash collections from the receivables. Amounts borrowed under the credit facility are reflected on Duke Energy's Condensed Consolidated Balance Sheets as Long-Term Debt.
The proceeds Duke Energy Ohio and Duke Energy Indiana receive from the sale of receivables to CRC are typicallyapproximately 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 is considered the primary beneficiary and consolidates CRC as it makes these decisions. Neither Duke Energy Ohio nor Duke Energy Indiana consolidate CRC.

82



FINANCIAL STATEMENTSVARIABLE INTEREST ENTITIES


Receivables Financing – Credit Facilities
The following table summarizes the amounts and expiration dates of the credit facilities and associated restricted receivables described above.
Duke EnergyDuke Energy
  Duke Energy
 Duke Energy
 Duke Energy
  Duke Energy
 Duke Energy
 Duke Energy
  Carolinas
 Progress
 Florida
  Carolinas
 Progress
 Florida
(in millions)CRC
 DERF
 DEPR
 DEFR
CRC
 DERF
 DEPR
 DEFR
Expiration dateDecember 2018
 December 2018
 February 2019
 April 2019
December 2020
 December 2020
 February 2021
 April 2021
Credit facility amount$325
 $425
 $300
 $225
$350
 $475
 $325
 $250
Amounts borrowed at September 30, 2017325
 425
 300
 225
Amounts borrowed at December 31, 2016325
 425
 300
 225
Amounts borrowed at March 31, 2019350
 475
 325
 250
Amounts borrowed at December 31, 2018325
 450
 300
 225
Restricted Receivables at March 31, 2019534
 630
 495
 317
Restricted Receivables at December 31, 2018564
 699
 547
 357
Nuclear Asset-Recovery Bonds – DEFPF
Duke Energy Florida Project Finance, LLC (DEFPF)DEFPF is a bankruptcy remote, wholly owned special purpose subsidiary of Duke Energy Florida. DEFPF was formed in 2016 for the sole purpose of issuing nuclear asset-recovery bonds to finance Duke Energy Florida's unrecovered regulatory asset related to Crystal River Unit 3.
In June 2016, DEFPF issued $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.
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.

87

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 summarizes the impact of DEFPF on Duke Energy Florida's Condensed Consolidated Balance Sheets.
(in millions)September 30, 2017
December 31, 2016
March 31, 2019
December 31, 2018
Receivables of VIEs$6
$6
$5
$5
Current Assets: Regulatory assets51
50
Regulatory Assets: Current52
52
Current Assets: Other20
53
12
39
Other Noncurrent Assets: Regulatory assets1,101
1,142
1,032
1,041
Current Liabilities: Other3
17
2
10
Current maturities of long-term debt53
62
54
53
Long-Term Debt1,164
1,217
1,082
1,111
Commercial Renewables
Certain of Duke Energy’s renewable energy facilities are VIEs due to Duke Energy issuing guarantees for debt service and operations and maintenance reserves in support of debt financings. Assets are restricted and cannot be pledged as collateral or sold to third parties without prior approval of debt holders. Additionally, Duke Energy has VIEs associated with tax equity arrangements entered into with third-party investors in order to finance the cost of solar energy systems eligible for tax credits. The activities that most significantly impactimpacted the economic performance of these renewable energy facilities were decisions associated with siting, negotiating PPAs engineering, procurement and constructionEPC agreements, and decisions associated with ongoing operations and maintenance-related activities. Duke Energy is considered the primary beneficiary and consolidates the entities as it is responsible for all of these decisions.
The table below presents material balances reported on Duke Energy's Condensed Consolidated Balance Sheets related to renewables VIEs.
(in millions)September 30, 2017
December 31, 2016
March 31, 2019
December 31, 2018
Current Assets: Other$399
$223
$140
$123
Property, plant and equipment, cost3,923
3,419
4,018
4,007
Accumulated depreciation and amortization(556)(453)(733)(698)
Other Noncurrent Assets: Other280
261
Current maturities of long-term debt162
198
173
174
Long-Term Debt1,780
1,097
1,583
1,587
Deferred income taxes223
275
Other Noncurrent Liabilities: Asset Retirement Obligations107
106
Other Noncurrent Liabilities: Other247
252
212
212

83



FINANCIAL STATEMENTSVARIABLE INTEREST ENTITIES


NON-CONSOLIDATED VIEs
The following tables summarize the impact of non-consolidated VIEs on the Condensed Consolidated Balance Sheets.
 September 30, 2017
 Duke Energy Duke
 Duke
 Pipeline
 Commercial
 Other
   Energy
 Energy
(in millions)Investments
 Renewables
 
VIEs(a)

 Total
 Ohio
 Indiana
Receivables from affiliated companies$—
 $—
 $—
 $—
 $46
 $75
Investments in equity method unconsolidated affiliates895
 172
 39
 1,106
 —
 —
Other noncurrent assets18
 —
 —
 18
 —
 —
Total assets$913
 $172
 $39
 $1,124
 $46
 $75
Other current liabilities—
 —
 3
 3
 —
 —
Deferred income taxes29
 —
 —
 29
 —
 —
Other noncurrent liabilities—
 —
 12
 12
 —
 —
Total liabilities$29
 $—
 $15
 $44
 $—
 $—
Net assets$884
 $172
 $24
 $1,080
 $46
 $75
(a)Duke Energy holds a 50 percent equity interest in Duke-American Transmission Company, LLC (DATC). As of December 31, 2016, DATC was considered a VIE due to having insufficient equity to finance its own activities without subordinated financial support. However, DATC has sufficient equity to finance its own activities as of September 30, 2017, and, therefore, is no longer considered a VIE. Duke Energy's investment in DATC was $45 million at September 30, 2017.

88

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)





 March 31, 2019
 Duke Energy Duke
 Duke
 Pipeline
 Commercial
 Other
   Energy
 Energy
(in millions)Investments
 Renewables
 
VIEs 

 Total
 Ohio
 Indiana
Receivables from affiliated companies$—
 $—
 $—
 $—
 $67
 $89
Investments in equity method unconsolidated affiliates998
 187
 50
 1,235
 —
 —
Total assets$998
 $187
 $50
 $1,235
 $67
 $89
Taxes accrued(1) —
 —
 (1) —
 —
Other current liabilities—
 —
 2
 2
 —
 —
Deferred income taxes40
 —
 —
 40
 —
 —
Other noncurrent liabilities—
 —
 11
 11
 —
 —
Total liabilities$39
 $—
 $13
 $52
 $—
 $—
Net assets$959
 $187
 $37
 $1,183
 $67
 $89
December 31, 2016December 31, 2018
Duke Energy Duke
 Duke
  Duke Energy Duke
 Duke
Pipeline
 Commercial
 Other
   Energy
 Energy
  Pipeline
 Commercial
 Other
   Energy
 Energy
(in millions)Investments
 Renewables
 VIEs
 Total
 Ohio
 Indiana
 
Piedmont(a)

Investments
 Renewables
 VIEs
 Total
 Ohio
 Indiana
Receivables from affiliated companies$—
 $—
 $—
 $—
 $82
 $101
 $—
$—
 $—
 $—
 $—
 $93
 $118
Investments in equity method unconsolidated affiliates487
 174
 90
 751
 —
 —
 139
822
 190
 48
 1,060
 —
 —
Other noncurrent assets12
 —
 —
 12
 —
 —
 —
Total assets$499
 $174
 $90
 $763
 $82
 $101
 $139
$822
 $190
 $48
 $1,060
 $93
 $118
Taxes accrued(1) —
 —
 (1) —
 —
Other current liabilities—
 —
 3
 3
 —
 —
 —
—
 —
 4
 4
 —
 —
Deferred income taxes21
 —
 —
 21
 —
 —
Other noncurrent liabilities—
 —
 13
 13
 —
 —
 4
—
 —
 12
 12
 —
 —
Total liabilities$—
 $—
 $16
 $16
 $—
 $—
 4
$20

$—

$16

$36

$—

$—
Net assets$499
 $174
 $74
 $747
 $82
 $101
 $135
$802
 $190
 $32
 $1,024
 $93
 $118
(a)In April 2017, Piedmont transferred its non-consolidated VIE investments to a wholly owned subsidiary of Duke Energy. See "Pipeline Investments" section below for additional detail.
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, someincluding Duke Energy's guarantee agreement to support its share of the ACP revolving credit facility. Duke Energy's maximum exposure to loss under the terms of the guarantee is $737 million, which are reflected inrepresents 47 percent of the table aboveoutstanding borrowings under the credit facility as Other noncurrent liabilities.of March 31, 2019. For more information on various guarantees, refer to Note 54.
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.

84



FINANCIAL STATEMENTSVARIABLE INTEREST ENTITIES


The table below presents Duke Energy's ownership interest and investment balances in these joint ventures.
  VIE Investment Amount (in millions)  VIE Investment Amount (in millions)
Ownership September 30, December 31,Ownership March 31, December 31,
Entity NameInterest 2017 2016Interest 2019 2018
ACP(a)47% $595
 $265
47% $973
 $797
Sabal Trail7.5% 218
 140
Constitution24% 82
 82
24% 25
 25
Total  $895
 $487
  $998
 $822
At December 31, 2016, Piedmont had a 7 percent ownership interest in ACP and a 24 percent ownership interest in Constitution. In April 2017, Piedmont transferred its ownership interests in ACP and Constitution to a wholly owned subsidiary of Duke Energy at book value.
In October 2017, ACP executed a $3.4 billion revolving credit facility with a stated maturity date of October 2021. Duke Energy entered into a guarantee agreement to support its share of the ACP revolving credit facility. Duke Energy's maximum exposure to loss under the terms of the guarantee is limited to 47 percent of the outstanding borrowings under the credit facility. Through October 2017, ACP has borrowed $570 million against the revolving credit facility.
(a)Duke Energy evaluated this investment for impairment as of March 31, 2019, and December 31, 2018, and determined that fair value approximated carrying value and therefore no impairment was necessary.
Commercial Renewables
Duke Energy has investments in various renewable energy project entities. Some of these entities are VIEs due to Duke Energy issuing guarantees for debt service and operations and maintenance reserves in support of debt financings. Duke Energy does not consolidate these VIEs because power to direct and control key activities is shared jointly by Duke Energy and other owners.
Other VIEsPioneer
Duke Energy holds a 50 percent equity interest in Pioneer Transmission, LLC (Pioneer).Pioneer. Pioneer is considered a VIE due to having insufficient equity to finance its own activities without subordinated financial support. The activities that most significantly impact Pioneer's economic performance are decisions related to the 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, American Electric Power; therefore, Duke Energy does not consolidate Pioneer.

89

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)





OVEC
Duke Energy Ohio’s 9 percent ownership interest in OVEC is considered a non-consolidated VIE due to OVEC having insufficient equity to finance its activities without subordinated financial support. The activities that most significantly impact OVEC's economic performance include fuel strategy and supply activities and decisions associated with ongoing operations and maintenance-related activities. Duke Energy Ohio does not have the unilateral power to direct these activities, and therefore, does not consolidate OVEC.
As a counterparty to an inter-company power agreement (ICPA),ICPA, Duke Energy Ohio has a contractual arrangement to receive entitlements to capacity and energy from OVEC’s power plants through June 2040 commensurate with its power participation ratio, which is equivalent to Duke Energy Ohio's ownership interest. Costs, including fuel, operating expenses, fixed costs, debt amortization and interest expense, are allocated to counterparties to the ICPA based on their power participation ratio. The value of the ICPA is subject to variability due to fluctuation in power prices and changes in OVEC's cost of business, includingbusiness. On March 31, 2018, FES, a subsidiary of FirstEnergy and an ICPA counterparty with a power participation ratio of 4.85 percent, filed for Chapter 11 bankruptcy, which could increase costs associated with its 2,256 MW of coal-fired generation capacity. Deteriorationallocated to the counterparties. On July 31, 2018, the bankruptcy court rejected the FES ICPA, which means OVEC is an unsecured creditor in the credit quality orFES bankruptcy proceeding. Duke Energy Ohio cannot predict the impact of one or more parties to the ICPA could increase the costs of OVEC.bankruptcy filing on its OVEC interests. In addition, certain proposed environmental rulemaking could result in future increased OVEC cost allocations.
CRC
See discussion under Consolidated VIEs for additional information related to CRC.
Amounts included in Receivables from affiliated companies in the above table for Duke Energy Ohio and Duke Energy Indiana reflect their retained interest in receivables sold to CRC. These subordinated notes held by Duke Energy Ohio and Duke Energy Indiana are stated at fair value. Carrying values of retained interests are determined by allocating carrying value of the receivables between assets sold and interests retained based on relative fair value. The allocated bases of the subordinated notes are not materially different than their face value because (i) the receivables generally turn over in less than two months, (ii) credit losses are reasonably predictable due to the broad customer base and lack of significant concentration and (iii) the equity in CRC is subordinate to all retained interests and thus would absorb losses first. The hypothetical effect on fair value of the retained interests assuming both a 10 percent and a 20 percent unfavorable variation in credit losses or discount rates is not material due to the short turnover of receivables and historically low credit loss history. Interest accrues to Duke Energy Ohio and Duke Energy Indiana on the retained interests using the acceptable yield method. This method generally approximates the stated rate on the notes since the allocated basis and the face value are nearly equivalent. An impairment charge is recorded against the carrying value of both retained interests and purchased beneficial interest whenever it is determined that an OTTI has occurred.
Key assumptions used in estimating fair value are detailed in the following table.
 Duke Energy Ohio Duke Energy Indiana
 2017
 2016
 2017
 2016
Anticipated credit loss ratio0.5% 0.5% 0.3% 0.3%
Discount rate2.0% 1.5% 2.0% 1.5%
Receivable turnover rate13.4% 13.3% 10.7% 10.6%
The following table shows the gross and net receivables sold.
Duke Energy Ohio Duke Energy IndianaDuke Energy Ohio Duke Energy Indiana
(in millions)September 30, 2017
 December 31, 2016
 September 30, 2017
 December 31, 2016
March 31, 2019
 December 31, 2018
 March 31, 2019
 December 31, 2018
Receivables sold$209
 $267
 $304
 $306
$253
 $269
 $322
 $336
Less: Retained interests46
 82
 75
 101
67
 93
 89
 118
Net receivables sold$163
 $185
 $229
 $205
$186
 $176
 $233
 $218

85



FINANCIAL STATEMENTSVARIABLE INTEREST ENTITIES


The following table shows sales and cash flows related to receivables sold.
Duke Energy Ohio Duke Energy IndianaDuke Energy Ohio Duke Energy Indiana
Three Months Ended Nine Months Ended Three Months Ended Nine Months EndedThree Months Ended Three Months Ended
September 30, September 30, September 30, September 30,March 31, March 31,
(in millions)2017
 2016
 2017
 2016
 2017
 2016
 2017
 2016
2019
 2018
 2019
 2018
Sales                      
Receivables sold$438
 $481
 $1,392
 $1,442
 $720
 $722
 $2,047
 $1,980
$575
 $567
 $734
 $694
Loss recognized on sale2
 2
 7
 7
 3
 3
 9
 8
4
 3
 5
 3
Cash flows                      
Cash proceeds from receivables sold$434
 $468
 $1,421
 $1,432
 $713
 $703
 $2,064
 $1,958
$597
 $585
 $758
 $711
Collection fees received1
 1
 1
 1
 —
 —
 1
 1
Return received on retained interests—
 1
 2
 2
 2
 2
 5
 4
2
 2
 3
 2
Cash flows from sales of receivables are reflected within Operating Activities on Duke Energy Ohio’s and Duke Energy Indiana’s Condensed Consolidated Statements of Cash Flows.
14. REVENUE
Duke Energy earns substantially all of its revenues through its reportable segments, Electric Utilities and Infrastructure, Gas Utilities and Infrastructure and Commercial Renewables.
Electric Utilities and Infrastructure
Electric Utilities and Infrastructure earns the majority of its revenues through retail and wholesale electric service through the generation, transmission, distribution and sale of electricity. Duke Energy generally provides retail and wholesale electric service customers with their full electric load requirements or with supplemental load requirements when the customer has other sources of electricity.
The majority of wholesale revenues are full requirements contracts where the customers purchase the substantial majority of their energy needs and do not have a fixed quantity of contractually required energy or capacity. As such, related forecasted revenues are considered optional purchases. Supplemental requirements contracts that include contracted blocks of energy and capacity at contractually fixed prices have the following estimated remaining performance obligations:
 Remaining Performance Obligations
(in millions)2019
2020
2021
2022
2023
Thereafter
Total
Progress Energy$86
$121
$87
$82
$39
$42
$457
Duke Energy Progress7
9
9
9
9
9
52
Duke Energy Florida79
112
78
73
30
33
405
Duke Energy Indiana7
10
5
—
—
—
22
Revenues for block sales are recognized monthly as energy is delivered and stand-ready service is provided, consistent with invoiced amounts and unbilled estimates.
Gas Utilities and Infrastructure
Gas Utilities and Infrastructure earns its revenues through retail and wholesale natural gas service through the transportation, distribution and sale of natural gas. Duke Energy generally provides retail and wholesale natural gas service customers with all natural gas load requirements. Additionally, while natural gas can be stored, substantially all natural gas provided by Duke Energy is consumed by customers simultaneously with receipt of delivery.
Fixed capacity payments under long-term contracts for the Gas Utilities and Infrastructure segment include minimum margin contracts and supply arrangements with municipalities and power generation facilities. Revenues for related sales are recognized monthly as natural gas is delivered and stand-ready service is provided, consistent with invoiced amounts and unbilled estimates. Estimated remaining performance obligations are as follows:
 Remaining Performance Obligations
(in millions)2019
2020
2021
2022
2023
Thereafter
Total
Piedmont$53
$69
$65
$64
$61
$431
$743
Commercial Renewables
Commercial Renewables earns the majority of its revenues through long-term PPAs and generally sells all of its wind and solar facility output, electricity and RECs to customers. The majority of these PPAs have historically been accounted for as leases. For PPAs that are not accounted for as leases, the delivery of electricity and the delivery of RECs are considered separate performance obligations.

9086

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



FINANCIAL STATEMENTSREVENUE


Collection fees receivedOther
The remainder of Duke Energy’s operations is presented as Other, which does not include material revenues from contracts with customers.
Disaggregated Revenues
Disaggregated revenues are presented as follows:
 Three Months Ended March 31, 2019
  Duke
 Duke
Duke
Duke
Duke
 
(in millions)Duke
Energy
Progress
Energy
Energy
Energy
Energy
 
By market or type of customerEnergy
Carolinas
Energy
Progress
Florida
Ohio
Indiana
Piedmont
Electric Utilities and Infrastructure        
   Residential$2,370
$760
$1,114
$536
$578
$189
$306
$—
   General1,427
496
632
306
326
103
197
—
   Industrial711
266
222
161
61
33
190
—
   Wholesale541
119
353
315
38
14
54
—
   Other revenues172
78
172
125
47
16
17
—
Total Electric Utilities and Infrastructure revenue from contracts with customers$5,221
$1,719
$2,493
$1,443
$1,050
$355
$764
$—
         
Gas Utilities and Infrastructure        
   Residential$414
$—
$—
$—
$—
$112
$—
$302
   Commercial206
—
—
—
—
49
—
157
   Industrial48
—
—
—
—
7
—
42
   Power Generation—
—
—
—
—
—
—
13
   Other revenues63
—
—
—
—
8
—
56
Total Gas Utilities and Infrastructure revenue from contracts with customers$731
$—
$—
$—
$—
$176
$—
$570
         
Commercial Renewables        
Revenue from contracts with customers$42
$—
$—
$—
$—
$—
$—
$—
         
Other        
Revenue from contracts with customers$4
$—
$—
$—
$—
$—
$—
$—
Total revenue from contracts with customers$5,998
$1,719
$2,493
$1,443
$1,050
$531
$764
$570
         
Other revenue sources(a)
$165
$25
$79
$41
$36
$—
$4
$9
Total revenues$6,163
$1,744
$2,572
$1,484
$1,086
$531
$768
$579

87



FINANCIAL STATEMENTSREVENUE


 Three Months Ended March 31, 2018
  Duke
 Duke
Duke
Duke
Duke
 
(in millions)Duke
Energy
Progress
Energy
Energy
Energy
Energy
 
By market or type of customerEnergy
Carolinas
Energy
Progress
Florida
Ohio
Indiana
Piedmont
Electric Utilities and Infrastructure        
   Residential$2,350
$781
$1,112
$516
$595
$180
$278
$—
   General1,375
472
631
299
333
96
178
—
   Industrial664
255
208
145
62
30
173
—
   Wholesale633
119
446
397
50
—
68
—
   Other revenues139
67
129
85
43
14
17
—
Total Electric Utilities and Infrastructure revenue from contracts with customers$5,161
$1,694
$2,526
$1,442
$1,083
$320
$714
$—
         
Gas Utilities and Infrastructure        
   Residential$413
$—
$—
$—
$—
$111
$—
$302
   Commercial201
—
—
—
—
49
—
152
   Industrial48
—
—
—
—
7
—
41
   Power Generation—
—
—
—
—
—
—
13
   Other revenues55
—
—
—
—
6
—
49
Total Gas Utilities and Infrastructure revenue from contracts with customers$717
$—
$—
$—
$—
$173
$—
$557
         
Commercial Renewables        
Revenue from contracts with customers$33
$—
$—
$—
$—
$—
$—
$—
         
Other        
Revenue from contracts with customers$17
$—
$—
$—
$—
$14
$—
$—
Total revenue from contracts with customers$5,928
$1,694
$2,526
$1,442
$1,083
$507
$714
$557
         
Other revenue sources(a)
$207
$69
$50
$18
$32
$17
$17
$(4)
Total revenues$6,135
$1,763
$2,576
$1,460
$1,115
$524
$731
$553
(a)Other revenue sources include revenues from leases, derivatives and alternative revenue programs that are not considered revenues from contracts with customers. Alternative revenue programs in certain jurisdictions include regulatory mechanisms that periodically adjust for over or under collection of related revenues.
UNBILLED REVENUE
Unbilled revenues are recognized by applying customer billing rates to the estimated volumes of energy or natural gas delivered but not yet billed. Unbilled revenues can vary significantly from period to period as a result of seasonality, weather, customer usage patterns, customer mix, average price in connection with servicing transferred accounts receivableeffect for customer classes, timing of rendering customer bills and meter reading schedules, and the impact of weather normalization or margin decoupling mechanisms.
Unbilled revenues are included within Receivables and Receivables of VIEs on the Condensed Consolidated Balance Sheets as shown in Operation, maintenance and other onthe following table.
(in millions)March 31, 2019
 December 31, 2018
Duke Energy$733
 $896
Duke Energy Carolinas281
 313
Progress Energy193
 244
Duke Energy Progress108
 148
Duke Energy Florida85
 96
Duke Energy Ohio1
 2
Duke Energy Indiana18
 23
Piedmont38
 73

88



FINANCIAL STATEMENTSREVENUE


Additionally, Duke Energy Ohio’sOhio and Duke Energy Indiana’sIndiana sell, on a revolving basis, nearly all of their retail accounts receivable, including receivables for unbilled revenues, to an affiliate, CRC, and account for the transfers of receivables as sales. Accordingly, the receivables sold are not reflected on the Condensed Consolidated StatementsBalance Sheets of OperationsDuke Energy Ohio and Comprehensive Income. The loss recognized on sales ofDuke Energy Indiana. See Note 13 for further information. These receivables is calculated monthly by multiplying receivables sold duringfor unbilled revenues are shown in 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.table below.
(in millions)March 31, 2019
 December 31, 2018
Duke Energy Ohio$62
 $86
Duke Energy Indiana109
 128
14. COMMON STOCK15. STOCKHOLDERS' EQUITY
Basic Earnings Per Share (EPS)EPS is computed by dividing net income attributable to Duke Energy common stockholders, as adjusted for distributed and undistributed earnings allocated to participating securities, by the weighted average number of common shares outstanding during the period. Diluted EPS is computed by dividing net income attributable to Duke Energy common stockholders, as adjusted for distributed and undistributed earnings allocated to participating securities, by the diluted weighted average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution that could occur if securities or other agreements to issue common stock, such as stock options and equity forward sale agreements, were exercised or settled. Duke Energy’s participating securities are restricted stock units that are entitled to dividends declared on Duke Energy common stock during the restricted stock unit’s vesting periods.
The following table presents Duke Energy’s basic and diluted EPS calculations, and reconciles the weighted average number of common shares outstanding to the diluted weighted average number ofand common shares outstanding.share dividends declared.
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended March 31,
(in millions, except per-share amounts)2017
 2016
 2017
 2016
2019
 2018
Income from continuing operations attributable to Duke Energy common stockholders excluding impact of participating securities$954
 $998
 $2,356
 $2,194
$898
 $619
Weighted average shares outstanding – basic700
 689
 700
 689
Equity Forwards—
 2
 —
 1
Weighted average shares outstanding – diluted700 691 700 690
Weighted average shares outstanding – basic and diluted727
 701
Earnings per share from continuing operations attributable to Duke Energy common stockholders          
Basic$1.36
 $1.44
 $3.37
 $3.19
Diluted$1.36
 $1.44
 $3.37
 $3.18
Basic and Diluted$1.24
 $0.88
Potentially dilutive items excluded from the calculation(a)
2
 2
 2 22
 2
Dividends declared per common share$0.89
 $0.855
 $2.60
 $2.505
$0.9275
 $0.89
(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 ForwardsCommon Stock
On February 20, 2018, Duke Energy filed a prospectus supplement and executed an EDA under which it may sell up to $1 billion of its common stock through an ATM offering program, including an equity forward sales component. The EDA was entered into with the Agents. Under the terms of the EDA, Duke Energy may issue and sell, through any of the Agents, shares of common stock through September 23, 2019.
In June 2018, Duke Energy marketed two separate tranches, each for 1.3 million shares, of common stock through equity forward transactions under the ATM program. In December 2018, Duke Energy physically settled these equity forwards by delivering 2.6 million shares of common stock in exchange for net proceeds of approximately $195 million.
Separately, in March 2016,2018, Duke Energy marketed an equity offering of 10.621.3 million shares of common stock.stock through an Underwriting Agreement. In lieu of issuing equity at the time ofconnection with the offering, Duke Energy entered into equity forward sale agreements with Barclays (the Equity Forwards).agreements. The Equity Forwardsequity forwards required Duke Energy to either physically settle the transactions by issuing 10.621.3 million shares in exchange for net proceeds at the then-applicable forward sale price specified by the agreements, or net settle in whole or in part through the delivery or receipt of cash or shares. AsIn June 2018, Duke Energy physically settled one-half of September 30, 2016,the equity forwards by delivering approximately 10.6 million shares of common stock in exchange for net cash proceeds of approximately $781 million. In December 2018, Duke Energy physically settled the remaining equity forward by delivering 10.6 million shares of common stock in exchange for net cash proceeds of approximately $766 million.
In 2018, Duke Energy also issued 2.2 million shares through its DRIP with an increase in additional paid-in capital of approximately $174 million.
In March and April 2019, Duke Energy marketed two separate tranches, each for 1.1 million shares, of common stock through equity forward transactions under the ATM program. The first tranche had an initial forward price of $89.83 per share and the second tranche had an initial forward price of $88.82 per share. The equity forwards require Duke Energy to either physically settle the transaction by issuing shares in exchange for net proceeds at the then-applicable forward sale price specified by the agreements or net settle in whole or in part through the delivery or receipt of cash or shares. The settlement alternative is at Duke Energy's election. No amounts have or will be recorded in Duke Energy's Condensed Consolidated Financial Statements with respect to these ATM offerings until settlements of the equity forwards occur, which is expected by December 31, 2019. The initial forward sale price will be subject to adjustment on a daily basis based on a floating interest rate factor and will decrease by other fixed amounts specified in the relevant forward sale agreements. Until settlement of the equity forwards, earnings per share dilution resulting from the agreements, wasif any, will be determined under the treasury stock method.
Duke Energy physically settled the Equity Forwards in full in October 2016 following the close of the Piedmont acquisition. See Note 2 for additional information related to the Piedmont acquisition.
15. STOCK-BASED COMPENSATION
For employee awards, equity classified stock-based compensation cost is measured at the service inception date or the grant date, based on the estimated achievement of certain performance metrics or the fair value of the award, and is recognized as expense or capitalized as a component of property, plant and equipment over the requisite service period.
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 Nine Months Ended
 September 30, September 30,
(in millions)2017
 2016
 2017
 2016
Restricted stock unit awards$10
 $8
 $30
 $25
Performance awards7
 4
 20
 14
Pretax stock-based compensation cost$17
 $12
 $50
 $39
Tax benefit associated with stock-based compensation expense$6
 $5
 $18
 $14
Stock-based compensation costs capitalized1
 —
 2
 2

9189

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



FINANCIAL STATEMENTSSTOCKHOLDERS' EQUITY


PriorPreferred Stock
On March 29, 2019, Duke Energy completed the issuance of 40 million depositary shares, each representing 1/1,000th share of its Series A Cumulative Redeemable Perpetual Preferred Stock, at a price of $25 per depositary share. The transaction resulted in net proceeds of $974 million after issuance costs and the proceeds are being used for general corporate purposes and to reduce short-term debt. The preferred stock has a $25 liquidation preference per depositary share and earns dividends on a cumulative basis at a rate of 5.75 percent per annum. Dividends are payable quarterly in arrears on the 16th day of March, June, September and December, beginning on June 16, 2019. Dividends issued on its preferred stock are subject to approval by the Duke Energy Board of Directors. However, the deferral of dividend payments on the preferred stock prohibits the declaration of common stock dividends. Dividends declared on preferred stock will be recorded on the income statement as a reduction of net income to arrive at net income attributable to Duke Energy acquiring Piedmont, Piedmont had an incentive compensation plan for eligible officerscommon stockholders. Dividends accumulated on preferred stock will be a reduction to net income used in the calculation of basic and diluted EPS.
The Series A Preferred Stock ranks, with respect to dividends and distributions upon liquidation or dissolution:
senior to Common Stock and to each other class or series of capital stock established after the original issue date of the Series A Preferred Stock that is expressly made subordinated to the Series A Preferred Stock;
on a parity with any class or series of capital stock established after the original issue date of the Series A Preferred Stock that is not expressly made senior or subordinated to the Series A Preferred Stock;
junior to any class or series of capital stock established after the original issue date of the Series A Preferred Stock that is expressly made senior to the Series A Preferred Stock;
junior to all of existing and future indebtedness (including indebtedness outstanding under Duke Energy's credit facilities, unsecured senior notes, junior subordinated debentures and commercial paper) and other participants. Piedmont'sliabilities with respect to assets available to satisfy claims against Duke Energy; and
structurally subordinated to existing and future indebtedness and other liabilities of Duke Energy's subsidiaries and future preferred stock of subsidiaries.
The preferred stock has no maturity or mandatory redemption date, is not redeemable at the option of the holders and includes separate call options. The first call option allows Duke Energy to call the preferred stock at a redemption price of $25.50 per depositary share prior to June 15, 2024, in whole but not in part, at any time within 120 days after a ratings event where a rating agency amends, clarifies or changes the criteria it uses to assign equity credit for securities such as the preferred stock. The second call option allows Duke Energy to call the preferred stock, in whole or in part, at any time, on or after June 15, 2024, at a redemption price of $25 per depositary share. Duke Energy is also required to redeem all accumulated and unpaid dividends if either call option is exercised.
Holders of the preferred stock have no voting rights with respect to matters that generally require the approval of voting stockholders. The limited voting rights of holders of preferred stock include the right to vote as a single class on certain matters that may affect the preference or special rights of the preferred stock, except in the instance that Duke Energy elects to defer the payment of dividends for a total pretax stock-based compensation costs were approximately $2 million and $5 millionof six quarterly full dividend periods. If dividends are deferred for a cumulative total of six quarterly full dividend periods, whether or not for consecutive dividend periods, holders of the three and nine months ended September 30, 2016, respectively. The tax benefit associated with Piedmont's stock-based compensation expense forpreferred stock have the three and nine months ended September 30, 2016, was immaterial.right to nominate two additional Board members to the Duke Energy Board of Directors.
16. EMPLOYEE BENEFIT PLANS
DEFINED BENEFIT RETIREMENT PLANS
Duke Energy maintains,and certain subsidiaries maintain, and the Subsidiary Registrants participate in, qualified and non-qualified, non-contributory defined benefit retirement plans. Duke Energy’sEnergy's policy is to fund amounts on an actuarial basis to provide assets sufficient to meet benefit payments to be paid to plan participants. The following table includes information related to the Duke Energy Registrants' contributions to its U.S. qualified defined benefit pension plans.
   Duke
  
 Duke
 Energy
  
(in millions)Energy
 Ohio
 Piedmont
Anticipated 2017 contributions$19
 $4
 $11
Contributions made during the nine months ended September 30, 20178
 4
 —
Remaining estimated contributions to be made in 2017$11
 $—
 $11
Duke Energy did not make any contributions to its U.S. qualified defined benefit pension plans during the nine months ended September 30, 2016.
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 9. Duke Energy uses a December 31 measurement date for its defined benefit retirement plan assets and obligations.

9290

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



FINANCIAL STATEMENTSEMPLOYEE BENEFIT PLANS


QUALIFIED PENSION PLANS
The following tables include the components of net periodic pension costs for qualified pension plans.
Three Months Ended September 30, 2017Three Months Ended March 31, 2019
  Duke
   Duke
 Duke
 Duke
 Duke
    Duke
   Duke
 Duke
 Duke
 Duke
  
Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Service cost$40
 $12
 $12
 $6
 $5
 $1
 $2
 $3
$37
 $12
 $11
 $6
 $4
 $1
 $2
 $1
Interest cost on projected benefit obligation82
 20
 25
 12
 13
 4
 7
 3
83
 20
 26
 12
 14
 5
 6
 3
Expected return on plan assets(136) (35) (43) (21) (21) (7) (11) (6)(143) (38) (44) (23) (22) (8) (11) (5)
Amortization of actuarial loss36
 8
 14
 6
 7
 1
 3
 3
24
 6
 9
 3
 6
 1
 2
 2
Amortization of prior service credit(6) (2) (1) —
 —
 —
 —
 (1)(8) (2) (1) —
 —
 —
 —
 (3)
Other2
 —
 1
 —
 —
 —
 —
 —
Net periodic pension costs$18
 $3
 $8
 $3
 $4
 $(1) $1
 $2
$(7) $(2) $1
 $(2) $2
 $(1) $(1) $(2)
 Three Months Ended September 30, 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$36
 $12
 $11
 $6
 $4
 $1
 $2
 $3
Interest cost on projected benefit obligation83
 21
 27
 12
 14
 5
 7
 2
Expected return on plan assets(128) (35) (42) (21) (21) (6) (10) (6)
Amortization of actuarial loss33
 8
 14
 6
 7
 1
 3
 2
Amortization of prior service credit(4) (2) (1) —
 (1) —
 —
 (1)
Other2
 1
 1
 —
 1
 —
 —
 —
Net periodic pension costs$22
 $5
 $10
 $3
 $4
 $1
 $2
 $—
 Nine Months Ended September 30, 2017
   Duke
   Duke
 Duke
 Duke
 Duke
  
 Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Service cost$120
 $36
 $36
 $18
 $15
 $3
 $6
 $9
Interest cost on projected benefit obligation246
 60
 75
 36
 39
 14
 21
 9
Expected return on plan assets(408) (106) (129) (63) (63) (21) (33) (18)
Amortization of actuarial loss108
 24
 42
 18
 21
 3
 9
 9
Amortization of prior service credit(18) (6) (3) —
 —
 —
 —
 (3)
Other6
 —
 3
 1
 —
 —
 —
 1
Net periodic pension costs$54
 $8
 $24
 $10
 $12
 $(1) $3
 $7
Nine Months Ended September 30, 2016Three Months Ended March 31, 2018
  Duke
   Duke
 Duke
 Duke
 Duke
    Duke
   Duke
 Duke
 Duke
 Duke
  
Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Service cost$109
 $36
 $32
 $18
 $14
 $3
 $6
 $8
$45
 $15
 $13
 $7
 $5
 $1
 $2
 $2
Interest cost on projected benefit obligation249
 64
 80
 37
 42
 15
 21
 7
75
 18
 24
 11
 13
 5
 6
 3
Expected return on plan assets(386) (106) (126) (62) (63) (20) (31) (18)(140) (37) (45) (21) (23) (7) (10) (6)
Amortization of actuarial loss99
 24
 41
 17
 21
 3
 9
 6
33
 7
 11
 5
 6
 1
 2
 3
Amortization of prior service credit(12) (6) (3) (1) (1) —
 —
 (2)(8) (2) (1) —
 —
 —
 —
 (3)
Other6
 2
 2
 1
 1
 —
 —
 —
Net periodic pension costs$65
 $14
 $26
 $10
 $14
 $1
 $5
 $1
$5
 $1
 $2
 $2
 $1
 $—
 $—
 $(1)

93

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





NON-QUALIFIED PENSION PLANS
The following tables include the components of netNet periodic pension costs for non-qualified pension plans were not material for registrants with non-qualified pension costs.
 Three Months Ended September 30, 2017
   Duke
   Duke
 Duke
 Duke
 Energy
 Progress
 Energy
 Energy
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
Service cost$—
 $—
 $—
 $—
 $—
Interest cost on projected benefit obligation4
 —
 1
 1
 1
Amortization of actuarial loss2
 —
 1
 —
 —
Net periodic pension costs$6
 $—
 $2
 $1
 $1
 Three Months Ended September 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 obligation4
 —
 2
 —
 —
Amortization of actuarial loss2
 —
 1
 1
 1
Amortization of prior service credit(1) —
 —
 —
 —
Net periodic pension costs$6

$—

$3

$1

$1
 Nine Months Ended September 30, 2017
   Duke
   Duke
 Duke
 Duke
 Energy
 Progress
 Energy
 Energy
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
Service cost$—
 $—
 $—
 $—
 $—
Interest cost on projected benefit obligation10
 1
 3
 2
 2
Amortization of actuarial loss6
 —
 3
 —
 —
Net periodic pension costs$16
 $1
 $6
 $2
 $2
 Nine Months Ended September 30, 2016
   Duke
   Duke
 Duke
 Duke
 Energy
 Progress
 Energy
 Energy
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
Service cost$2
 $—
 $—
 $—
 $—
Interest cost on projected benefit obligation11
 1
 4
 1
 1
Amortization of actuarial loss6
 —
 2
 1
 1
Amortization of prior service credit(1) —
 —
 —
 —
Net periodic pension costs$18

$1

$6

$2

$2
the three months ended March 31, 2019, and 2018.
OTHER POST-RETIREMENT BENEFIT PLANS
Duke Energy provides, and the Subsidiary Registrants participate in, some health care and life insurance benefitsNet periodic costs for retired employees on a contributory and non-contributory basis.

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





The following tables include the components of net periodic other post-retirement benefit costs.
 Three Months Ended September 30, 2017
   Duke
   Duke
 Duke
 Duke
 Duke
  
 Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Service cost$1
 $—
 $—
 $—
 $—
 $—
 $—
 $—
Interest cost on accumulated post-retirement benefit obligation9
 2
 4
 2
 2
 —
 1
 —
Expected return on plan assets(3) (2) —
 —
 —
 —
 —
 —
Amortization of actuarial loss2
 —
 5
 3
 2
 —
 —
 —
Amortization of prior service credit(29) (2) (21) (14) (8) —
 —
 —
Net periodic other post-retirement benefit costs$(20) $(2) $(12) $(9) $(4) $—
 $1
 $—
 Three Months Ended September 30, 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
 $—
 $—
 $—
 $—
 $1
Interest cost on accumulated post-retirement benefit obligation9
 2
 4
 2
 3
 —
 1
 —
Expected return on plan assets(2) (2) (1) —
 —
 —
 —
 —
Amortization of actuarial loss (gain)2
 —
 5
 3
 2
 (1) —
 —
Amortization of prior service credit(35) (4) (26) (16) (8) —
 (1) —
Net periodic other post-retirement benefit costs$(26) $(4) $(17) $(11) $(3) $(1) $—
 $1
 Nine Months Ended September 30, 2017
   Duke
   Duke
 Duke
 Duke
 Duke
  
 Duke
 Energy
 Progress
 Energy
 Energy
 Energy
 Energy
  
(in millions)Energy
 Carolinas
 Energy
 Progress
 Florida
 Ohio
 Indiana
 Piedmont
Service cost$3
 $—
 $—
 $—
 $—
 $—
 $—
 $—
Interest cost on accumulated post-retirement benefit obligation27
 6
 11
 6
 6
 —
 1
 —
Expected return on plan assets(10) (6) —
 —
 —
 —
 —
 —
Amortization of actuarial loss (gain)6
 (2) 15
 9
 6
 (1) —
 —
Amortization of prior service credit(87) (6) (63) (41) (23) —
 —
 —
Net periodic other post-retirement benefit costs$(61) $(8) $(37) $(26) $(11) $(1) $1
 $—
 Nine Months Ended September 30, 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$2
 $—
 $1
 $—
 $—
 $—
 $—
 $1
Interest cost on accumulated post-retirement benefit obligation26
 6
 11
 6
 6
 1
 3
 1
Expected return on plan assets(9) (6) (1) —
 —
 —
 (1) (1)
Amortization of actuarial loss (gain)5
 (2) 16
 9
 7
 (2) (1) —
Amortization of prior service credit(106) (10) (77) (50) (26) —
 (1) —
Net periodic other post-retirement benefit costs$(82) $(12) $(50) $(35) $(13) $(1) $—
 $1

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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)





DEFINED CONTRIBUTION RETIREMENT PLANS
EMPLOYEE SAVINGS PLANS
Duke Energy sponsors,plans were not material for the three months ended March 31, 2019, and the Subsidiary Registrants participate in, employee savings plans that cover substantially all U.S. employees. 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
 Piedmont
Three Months Ended September 30,               
2017$43
 $14
 $12
 $9
 $4
 $1
 $2
 $2
201639
 13
 12
 8
 3
 1
 2
 2
Nine Months Ended September 30,            
2017$147
 $49
 $42
 $30
 $13
 $3
 $7
 $5
2016130
 44
 39
 27
 11
 3
 6
 5
MONEY PURCHASE PENSION PLAN
Duke Energy provides, and Piedmont participates in, the Money Purchase Pension (MPP) plan, which is a defined contribution pension plan that allows certain employees to direct investments and assume risk of investment returns. In January 2017, a $2 million contribution was made to the MPP plan.2018.
17. INCOME TAXES
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 Nine Months EndedThree Months Ended
September 30, September 30,March 31,
2017
 2016
 2017
 2016
2019
 2018
Duke Energy27.6% 34.0% 30.4% 31.7%9.6% 22.5%
Duke Energy Carolinas32.9% 34.3% 34.1% 34.4%17.7% 22.0%
Progress Energy29.1% 32.8% 31.9% 34.7%17.3% 13.2%
Duke Energy Progress31.7% 31.4% 32.4% 33.5%17.8% 14.1%
Duke Energy Florida34.8% 36.0% 36.1% 37.0%19.3% 16.3%
Duke Energy Ohio33.3% 36.8% 34.4% 32.5%16.9% 32.4%
Duke Energy Indiana38.3% 35.2% 39.0% 34.0%24.1% 25.9%
Piedmont(a)
47.6% 40.0% 36.1% 37.7%21.8% 24.1%
(a) Piedmont is in a net loss position for the three months ended September 30, 2017, and 2016.
The decrease in the effective tax rate (ETR) for Duke Energy for the three months ended September 30, 2017, is primarily due to higher research credits, tax benefits of legal entity restructuring and prior year unfavorable impacts of finalizing federal tax audits. The decrease in the ETR for Duke Energy for the nine months ended September 30, 2017, is primarily due to higher research credits, tax benefits of legal entity restructuring and higher production tax creditsa one-time valuation allowance charge in the prior year, an adjustment related to wind projects placedthe income tax recognition for equity method investments recorded in service; partially offset by lower investment tax credits duethe first quarter of 2019 and the amortization of excess deferred taxes. This adjustment was immaterial and relates to lower solar investments.prior years.
The decrease in the ETR for Duke Energy Carolinas for the three months ended September 30, 2017, is primarily due to the favorable impactamortization of research credits, provision to return true ups, and lower North Carolina corporate tax rates.excess deferred taxes.
The decreaseincrease in the ETR for Progress Energy for the three and nine months ended September 30, 2017, is primarily due to the favorable impact of research creditsa reduction in AFUDC equity and lower North Carolina corporate tax rates.
The decreaseamortization of excess deferred taxes in the ETR for Duke Energy Progress for the nine months ended September 30, 2017, is primarily due to the favorable impact of research credits and lower North Carolina corporate tax rates.current year.
The decrease in the ETR for Duke Energy Florida for the three months ended September 30, 2017, is primarily due to the favorable impact of research credits.
The decrease in the ETR for Duke Energy Ohio for the three months ended September 30, 2017, is primarily due to the favorable impact of research credits. The increase in the ETR for Duke Energy Ohio for the nine months ended September 30, 2017,Progress is primarily due to an immaterial outlower amortization of period adjustmentexcess deferred taxes in the prior year related to deferred tax balances associated with property, plant and equipment.current year.

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



FINANCIAL STATEMENTSINCOME TAXES


The increase in the ETR for Duke Energy Indiana for the three months ended September 30, 2017,Florida is primarily due to state tax credits recordeda reduction in AFUDC equity in the priorcurrent year.
The increasedecrease in the ETR for Duke Energy Ohio is primarily due to the amortization of excess deferred taxes.
The decrease in the ETR for Duke Energy Indiana for the nine months ended September 30, 2017, is primarily due to an immaterial outthe amortization of period adjustment in the prior year related toexcess deferred tax balances associated with property, plant and equipment.taxes.
The increase in the ETR for Piedmont for the three months ended September 30, 2017, is primarily due to favorable tax return true ups and lower North Carolina corporate tax rates in relation to pretax losses. The decrease in the ETR for Piedmont for the nine months ended September 30, 2017, is primarily due to favorable tax return true ups and lower North Carolina corporate tax rates.
TAXES ON FOREIGN EARNINGS
Asthe amortization 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.excess deferred tax liabilities associated with historical unremitted foreign earnings by approximately $95 million for the nine months ended September 30, 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 (Loss) Income from Discontinued Operations, net of tax on the Condensed Consolidated Statements of Operations. See Note 2 for additional information related to the sale of the International Disposal Group.taxes.
18. SUBSEQUENT EVENTS
For information on additional subsequent events related to business segments,the Commercial Renewables segment, regulatory matters, commitments and contingencies and VIEs,stockholders' equity, see Notes 2, 3, 4 5 and 13.15, respectively.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following combined Management’s Discussion and Analysis of Financial Condition and Results of Operations is separately filed by Duke Energy Corporation (collectively with its subsidiaries, Duke Energy) and Duke Energy Carolinas, LLC (Duke Energy Carolinas), Progress Energy, Inc. (Progress Energy), Duke Energy Progress, LLC (Duke Energy Progress), Duke Energy Florida, LLC (Duke Energy Florida), Duke Energy Ohio, Inc. (Duke Energy Ohio), Duke Energy Indiana LLC (Duke Energy Indiana) and Piedmont Natural Gas Company, Inc. (Piedmont) (collectively referred to as the Subsidiary Registrants).Piedmont. However, none of the registrants make any representation as to information related solely to Duke Energy or the Subsidiary Registrants of Duke Energy other than itself.
DUKE ENERGY
Duke Energy is an energy company headquartered in Charlotte, North Carolina. Duke Energy operates in the United States (U.S.)U.S. primarily through its wholly owned subsidiaries, Duke Energy Carolinas, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont. When discussing Duke Energy’s consolidated financial information, it necessarily includes the results of the Subsidiary Registrants, which, along with Duke Energy, are collectively referred to as the Duke Energy Registrants. Piedmont's results of operations are included in Duke Energy's results for the three and nine months ended September 30, 2017, but not for the three and nine months ended September 30, 2016, as Piedmont's earnings are only included in Duke Energy's consolidated results subsequent to the acquisition date. See below for 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 ninethree months ended September 30, 2017,March 31, 2019, and with Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 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, 2016.2018.
Executive Overview
Hurricane IrmaNCDEQ Coal Ash Evaluation
On April 1, 2019, NCDEQ issued a closure determination requiring Duke Energy Carolinas and Duke Energy Progress to excavate all remaining coal ash impoundments at the Allen, Belews Creek, Rogers, Marshall, Mayo and Roxboro facilities in North Carolina. Duke Energy is making strong progress to permanently close every ash basin in North Carolina in ways that fully protect people and the environment, while keeping costs down as much as possible for customers. With respect to the final six sites, which NCDEQ has ruled as low risk, science and engineering support a variety of closure methods including capping in place and hybrid cap-in-place as appropriate solutions that protect public health and the environment. These closure options are also consistent with how hundreds of other basins around the country are expected to be closed. Because the process by which NCDEQ arrived at its excavation decision lacked full consideration of the science and engineering, Duke Energy Carolinas and Duke Energy Progress filed Petitions for Contested Case Hearings in the Office of Administrative Hearings on April 26, 2019, to challenge NCDEQ’s determination that all ash basins must be excavated.

Duke Energy estimates the undiscounted, unadjusted cost to close the remaining impoundments by excavation, as outlined in the NCDEQ closure determination, will be approximately $4 billion to $5 billion more than the prior project cost estimate of $5.6 billion in the aggregate for the closure for all Duke Energy Carolinas and Duke Energy Progress impoundments. Excavation would likely extend beyond the required federal and state deadlines for impoundment closure. Duke Energy intends to seek recovery of all costs through the ratemaking process consistent with previous proceedings. For more information, see Note 4, "Commitments and Contingencies," to the Condensed Consolidated Financial Statements.
Regulatory Activity
In September 2017, Hurricane Irma caused widespread damage across2019, Duke Energy advanced regulatory activity underway in multiple jurisdictions as follows:
New base rates were implemented in the Southeast region, atDuke Energy Ohio Electric Base Rate Case on January 2, 2019.
On January 11, 2019, Duke Energy Progress filed a request with the PSCSC, which included a request for the continuation of prior deferrals requested for ice storms and hurricanes Florence, Michael and Matthew. The request was approved on January 30, 2019.
On January 30, 2019, Duke Energy Kentucky entered into a settlement agreement with the Attorney General of Kentucky related to the Natural Gas Base Rate Case. The settlement provides for an approximate $7 million increase in natural gas base revenue and approval of the proposed Weather Normalization Mechanism. The KPSC issued its peak leaving approximately 1.3 million Order approving the settlement without material modification on March 27, 2019.
The evidentiary hearing on the Duke Energy Carolinas 2018 South Carolina Rate Case concluded on March 27, 2019. A PSCSC Commission Directive was issued on May 1, 2019. A final order and revised customer rates are expected by mid-2019.
On April 1, 2019, Piedmont filed an application with the NCUC, its first general rate case in North Carolina in six years. Piedmont expects new rates arising from this proceeding to take effect by the end of 2019.
The evidentiary hearing on the Duke Energy Progress 2018 South Carolina Rate Case concluded on April 17, 2019. A PSCSC Commission Directive was issued on May 8, 2019. A final order and revised customer rates are expected by mid-2019.
Duke Energy Florida customers without power. Duke Energy's restoration efforts in responsecontinues to this devastatingmake progress on storm utilized a team of over 12,000 linecost recovery related to hurricanes Irma, Nate, and service crewsMichael. The FPSC has scheduled the hearing for Hurricane Irma and hundreds of employee volunteers.Hurricane Nate costs on May 21, 2019, to consider the Storm restoration costs (including capital) forCost Settlement Agreement filed with the FPSC. Duke Energy Florida service territoryfiled a separate petition with the FPSC on April 30, 2019, to recover incremental storm restoration costs for Hurricane Michael and to apply tax savings resulting from the Tax Act toward storm costs in lieu of implementing a storm surcharge. Storm costs are currently estimated atexpected to be fully recovered by approximately $500 million. The vast majority of these costs have been deferred to the balance sheet for future recovery from customers in Florida, per existing state statute. Lost revenues associated with Hurricane Irma were approximately $20 million in the third quarter of 2017. year-end 2021.
See Note 43 to the Condensed Consolidated Financial Statements, "Regulatory Matters" for additional information.
Regulatory Activity
In the third quarter of 2017, Duke Energy advanced regulatory activity underway in multiple jurisdictions, achieving several key milestones.
In August 2017, Duke Energy Carolinas filed a base rate case with the North Carolina Utilities Commission. The rate request was driven by capital investments in new, highly efficient natural gas combined-cycle plants and other plant upgrades, coal ash basin closure activities and grid improvement projects. Hearings are scheduled to commence in February 2018.
In Florida, Duke Energy worked closely with stakeholders to build upon and extend the existing settlement agreement from 2013. In late August, Duke Energy Florida reached a favorable agreement with numerous parties in the state, including the consumer advocate, and that agreement was approved by the Florida Public Service Commission (FPSC) in late October. As outlined in the settlement, Duke Energy Florida agreed to no longer recover any remaining costs associated with the canceled Levy Nuclear Project and as a result incurred a pretax impairment charge of $135 million during the third quarter.
See Note 4 to the Condensed Consolidated Financial Statements, "Regulatory Matters" for additional information.
2016 Acquisition of Piedmont Natural Gas
On October 3, 2016, Duke Energy completed the acquisition of Piedmont for a total cash purchase price of $5.0 billion and assumed Piedmont's existing long-term debt, which had a fair value of approximately $2.0 billion at the time of the acquisition. The acquisition provides a foundation for Duke Energy to establish a broader, long-term strategic natural gas infrastructure growth platform to complement the existing natural gas pipeline investments and regulated natural gas business in the Midwest.
Duke Energy incurred pretax nonrecurring transaction and integration costs associated with the acquisition of $23 million and $69 million for the three and nine months ended September 30, 2017, respectively, and $65 million and $256 million for the three and nine months ended September 30, 2016, respectively. Acquisition-related costs in the prior year were principally due to losses on forward-starting interest rate swaps related to the acquisition financing of $22 million and $190 million for the three and nine months ended September 30, 2016, respectively. For additional information on the swaps see Note 10 to the Condensed Consolidated Financial Statements, "Derivatives and Hedging."
Duke Energy expects to incur system integration and other acquisition-related transition costs, primarily through 2018, that are necessary to achieve certain anticipated cost savings, efficiencies and other benefits. See Note 2 to the Condensed Consolidated Financial Statements, "Acquisitions and Dispositions," for additional information regarding the transaction.

9893

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MD&ADUKE ENERGY


2016 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. The transactions generated cash proceeds of $1.9 billion, excluding transaction costs, which were primarily used to reduce Duke Energy holding company debt. Due to the transactions, results of the International Disposal Group are classified as discontinued operations. See Note 2 to the Condensed Consolidated Financial Statements, "Acquisitions and Dispositions" for additional information.
Results of Operations
Non-GAAP Measures
Management’s Discussion and Analysis includes financial information prepared in accordance with generally accepted accounting principles (GAAP)GAAP in the U.S., as well as certain non-GAAP financial measures.measures such as adjusted earnings and adjusted earnings per share discussed below. Generally, a non-GAAP financial measure is a numerical measure of financial performance, financial position or cash flows that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP financial measures should be viewed as a supplement to, and not a substitute for, financial measures presented in accordance with GAAP. Non-GAAP measures presented may not be comparable to similarly titled measures used by other companies because other companies may not calculate the measures in the same manner.
Management evaluates financial performance in part based on non-GAAP financial measures, including adjusted earnings and adjusted diluted earnings per share (EPS).EPS. Adjusted earnings and adjusted diluted EPS represent income from continuing operations attributable to Duke Energy in dollar and per-share amounts, adjusted for the dollar and per-share impact of special items. As discussed below, special items represent certain charges and credits, which management believes are not indicative of Duke Energy's ongoing performance.
Management believes the presentation of adjusted earnings and adjusted diluted EPS provides useful information to investors, as it provides them with an additional relevant comparison of Duke Energy’s performance across periods. Management uses these non-GAAP financial measures for planning and forecasting and for reporting financial results to the Duke Energy Board of Directors, employees, stockholders, analysts and investors. Adjusted diluted EPS is also used as a basis for employee incentive bonuses. The most directly comparable GAAP measures for adjusted earnings and adjusted diluted EPS are Net Income Attributable to Duke Energy Corporation (GAAPGAAP Reported Earnings)Earnings and DilutedGAAP Reported EPS, Attributable to Duke Energy Corporation common stockholders (GAAP Reported EPS), respectively.
Special items included infor the periods presented includethree months ended March 31, 2018 included the following items, which management believes do not reflect ongoing costs:items:
Costs to Achieve Mergers representPiedmont Merger represents charges that result from strategic acquisitions.the Piedmont acquisition.
Cost Savings Initiatives represent severanceRegulatory Settlements represents charges related to companywide initiatives, excluding merger integration, to standardize processes and systems, leverage technology and workforce optimization.rate case orders, settlements or other actions of regulators.
Commercial Renewables ImpairmentsSale of Retired Plant represents other-than-temporary and asset impairments.the loss associated with selling Beckjord, a nonregulated generating facility in Ohio.
Florida SettlementImpairment of Equity Method Investment represents an impairment chargeOTTI of an investment in Constitution.
Impacts of the Tax Act represents an AMT valuation allowance recognized related to the Levy nuclear project based on a settlement agreement approved by regulators.
Adjusted earnings also include operating results of the International Disposal Group, which have been classified as discontinued operations. Management believes inclusion of the 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.Tax Act.
Three Months Ended September 30, 2017,March 31, 2019, as compared to September 30, 2016March 31, 2018
GAAP Reported EPS was $1.36$1.24 for the thirdfirst quarter of 20172019 compared to $1.70$0.88 for the thirdfirst quarter of 2016.2018. The decreaseincrease in GAAP Reported EPS was primarily due to less favorable weather, an impairment at Duke Energy Florida and prior year income from discontinued operations including International Energy which was sold in 2016; partially offset byregulatory settlements, impairments charges, an AMT valuation allowance and a lower effective tax rate, lower costs associated with the Piedmont acquisition and growth from investments.loss on sale of a retired plant.
As discussed above, management also evaluates financial performance based on adjusted diluted EPS. Duke Energy’s thirdfirst quarter 20172019 adjusted diluted EPS was $1.59$1.24 compared to $1.68$1.28 for the thirdfirst quarter of 2016. 2018. The decrease in adjusted earnings was primarily due to unfavorable weather and volumes, higher depreciation and interest expenses and share dilution from equity issuances, partially offset by positive rate case impacts and an adjustment related to the income tax recognition for equity method investments. This adjustment was immaterial and relates to prior years.
The following table reconciles non-GAAP measures, including adjusted diluted EPS, to their most directly comparable GAAP measures.
 Three Months Ended September 30,
 2017 2016
(in millions, except per-share amounts)Earnings EPS Earnings EPS
GAAP Reported Earnings/GAAP Reported EPS$954
 $1.36
 $1,176
 $1.70
Adjustments:       
Costs to Achieve Mergers(a)
14
 0.03
 52
 0.07
Cost Savings Initiatives(b)
—
 —
 12
 0.02
Commercial Renewables Impairments (c)
56
 0.08
 45
 0.07
Florida Settlement (d)
84
 0.12
 —
 —
Discontinued Operations(e)
2
 —
 (122) (0.18)
Adjusted Earnings/Adjusted Diluted EPS$1,110
 $1.59
 $1,163
 $1.68

99

PART I

 Three Months Ended March 31,
 2019 2018
(in millions, except per-share amounts)Earnings EPS Earnings EPS
GAAP Reported Earnings/GAAP Reported EPS$900
 $1.24
 $620
 $0.88
Adjustments:       
Costs to Achieve Piedmont Merger(a)
—
 —
 13
 0.02
Regulatory Settlements(b)
—
 —
 66
 0.09
Sale of Retired Plant(c)
—
 —
 82
 0.12
Impairment of Equity Method Investment(d)
—
 —
 42
 0.06
Impacts of the Tax Act (AMT valuation allowance)—
 —
 76
 0.11
Adjusted Earnings/Adjusted Diluted EPS$900
 $1.24
 $899
 $1.28
(a)Net of $9$4 million tax benefit in 2017 and $32 million tax benefit in 2016.benefit.
(b)Net of $7$20 million tax benefit in 2016.benefit.
(c)Net of $28$25 million tax benefit in 2017 and $26 million tax benefit in 2016.benefit.
(d)Net of $51$13 million tax benefit in 2017.
(e)The 2016 amount represents tax adjustments related to previously sold businesses not related to the International Disposal Group.benefit.
The decrease in adjusted earnings for the three months ended September 30, 2017, compared to the same period in 2016 was primarily due to:
Lower regulated electric revenues due to less favorable weather in the current year, including lost revenues related to Hurricane Irma;
The prior year operating results of the International Disposal Group, which was sold in December 2016; and
Higher financing costs, primarily due to the Piedmont acquisition.
Partially offset by:
Higher regulated electric revenues from increased pricing and riders driven by new rates in Duke Energy Progress South Carolina, base rate adjustments in Florida, and energy efficiency rider revenues in North Carolina;
Additional earnings from incremental investments in the Atlantic Coast Pipeline (ACP) natural gas pipeline; and
Lower income taxes due to prior year unfavorable tax adjustments and benefits in the current year from legal entity restructuring.
Nine Months Ended September 30, 2017, as compared to September 30, 2016
Duke Energy's GAAP Reported EPS was $3.36 for the nine months ended September 30, 2017, compared to $3.44 for the nine months ended September 30, 2016. The decrease in GAAP Reported EPS was driven by less favorable weather compared to the prior year, an impairment at Duke Energy Florida and prior year income from discontinued operations including International Energy which was sold in 2016; partially offset by lower costs associated with the Piedmont acquisition, lower severance charges, effective cost control and growth from investments.
As discussed above, management also evaluates financial performance based on adjusted diluted EPS. Duke Energy’s adjusted diluted EPS for the nine months ended September 30, 2017, was $3.63 compared to $3.88 for the nine months ended September 30, 2016. The following table reconciles non-GAAP measures, including adjusted diluted EPS, to their most directly comparable GAAP measures.
 Nine Months Ended September 30,
 2017 2016
(in millions, except per-share amounts)Earnings EPS Earnings EPS
GAAP Reported Earnings/GAAP Reported EPS$2,356
 $3.36
 $2,379
 $3.44
Adjustments:       
Costs to Achieve Mergers(a)
43
 0.06
 195
 0.28
Cost Savings Initiatives(b)
—
 —
 39
 0.06
Commercial Renewables Impairments (c)
56
 0.08
 45
 0.07
Florida Settlement (d)
84
 0.12
 —
 —
Discontinued Operations(e)
4
 0.01
 21
 0.03
Adjusted Earnings/Adjusted Diluted EPS$2,543
 $3.63
 $2,679
 $3.88
(a)Net of $26 million tax benefit in 2017 and $120 million tax benefit in 2016.
(b)Net of $24 million tax benefit in 2016.
(c)Net of $28 million tax benefit in 2017 and $26 million tax benefit in 2016.
(d)Net of $51 million tax benefit in 2017.
(e)The 2016 amount includes an impairment charge related to certain assets in Central America that were sold in 2016, partially offset by a tax benefit related to previously sold businesses not related to the International Disposal Group.
The decrease in adjusted earnings for the nine months ended September 30, 2017, compared to the same period in 2016 was primarily due to:
Lower regulated electric revenues due to unfavorable weather compared to the prior year; and
The prior year operating results of the International Disposal Group, which was sold in December 2016. The 2016 operating results included a benefit from the revaluation of deferred income taxes. See Note 17 to the Condensed Consolidated Financial Statements, "Income Taxes," for additional information.
Partially offset by:
Higher regulated electric revenues from increased pricing and riders driven by new rates in Duke Energy Progress South Carolina, base rate adjustments in Florida and energy efficiency rider revenues in North Carolina, as well as growth in weather-normal retail volumes;
Lower operations, maintenance and other expense, net of amounts recoverable in rates, at Electric Utilities and Infrastructure resulting from ongoing cost efficiency efforts and lower year-to-date storm costs than the prior year;
Higher allowance for funds used during construction (AFUDC) equity due to capital investments at the electric utilities; and
Additional earnings from incremental investments in the ACP and Sabal Trail natural gas pipelines.

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SEGMENT RESULTS
The remaining information presented in this discussion of results of operations is on a GAAP basis. Management evaluates segment performance based on segment income. Segment income is defined as income from continuing operations net of income attributable to noncontrolling interests. Segment income includes intercompany revenues and expenses that are eliminated onin 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 was realigned to includeincludes the following segments: Electric Utilities and Infrastructure, Gas Utilities and Infrastructure and Commercial Renewables. The remainder of Duke Energy’s operations is presented as Other. 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 the Piedmont acquisition and International Energy sale and Note 3, “Business Segments,” for additional information on Duke Energy’s segments.segment structure.

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Electric Utilities and Infrastructure
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended March 31,
(in millions)2017
 2016
 Variance
 2017
 2016
 Variance
2019
 2018
 Variance
Operating Revenues$6,129
 $6,340
 $(211) $16,234
 $16,430
 $(196)$5,329
 $5,323
 $6
Operating Expenses                
Fuel used in electric generation and purchased power1,872
 2,016
 (144) 4,875
 5,102
 (227)1,630
 1,685
 (55)
Operation, maintenance and other1,297
 1,291
 6
 3,833
 3,819
 14
1,282
 1,325
 (43)
Depreciation and amortization777
 729
 48
 2,228
 2,139
 89
947
 835
 112
Property and other taxes277
 274
 3
 808
 799
 9
301
 274
 27
Impairment charges132
 9
 123
 134
 12
 122
—
 43
 (43)
Total operating expenses4,355
 4,319
 36
 11,878
 11,871
 7
4,160
 4,162
 (2)
Gains on Sales of Other Assets and Other, net—
 1
 (1) 4
 3
 1
(Losses) Gains on Sales of Other Assets and Other, net(3) 1
 (4)
Operating Income1,774
 2,022
 (248) 4,360
 4,562
 (202)1,166
 1,162
 4
Other Income and Expenses67
 75
 (8) 222
 215
 7
Other Income and Expenses, net91
 88
 3
Interest Expense305
 287
 18
 925
 829
 96
338
 317
 21
Income Before Income Taxes1,536
 1,810
 (274) 3,657
 3,948
 (291)919
 933
 (14)
Income Tax Expense516
 621
 (105) 1,273
 1,391
 (118)169
 183
 (14)
Segment Income$1,020
 $1,189
 $(169) $2,384
 $2,557
 $(173)$750
 $750
 $—
          

    

Duke Energy Carolinas gigawatt-hours (GWh) sales24,135
 25,508
 (1,373) 66,159
 67,890
 (1,731)
Duke Energy Carolinas GWh sales21,828
 22,627
 (799)
Duke Energy Progress GWh sales18,827
 20,033
 (1,206) 50,026
 54,011
 (3,985)16,348
 17,226
 (878)
Duke Energy Florida GWh sales12,132
 12,440
 (308) 31,177
 31,542
 (365)8,321
 9,119
 (798)
Duke Energy Ohio GWh sales6,672
 7,214
 (542) 18,632
 19,117
 (485)6,164
 6,072
 92
Duke Energy Indiana GWh sales8,795
 9,073
 (278) 24,975
 26,624
 (1,649)8,033
 8,485
 (452)
Total Electric Utilities and Infrastructure GWh sales70,561
 74,268
 (3,707) 190,969
 199,184
 (8,215)60,694
 63,529
 (2,835)
Net proportional megawatt (MW) capacity in operation    

 48,909
 49,411
 (502)
Net proportional MW capacity in operation49,725
 48,831
 894
Three Months Ended September 30, 2017,March 31, 2019, as Comparedcompared to September 30, 2016March 31, 2018
Electric Utilities and Infrastructure’s results were impacted by less favorable weather and an impairment ata positive contribution from the 2018 Duke Energy Florida, partiallyCarolinas and Duke Energy Progress North Carolina rate cases, Duke Energy Florida's base rate adjustments due to the Citrus County CC being placed in service, lower operation, maintenance and other expense and lower income tax expense.
These drivers were offset by growthunfavorable weather in the current year, unfavorable weather-normal retail sales volumes, higher depreciation from investments.a growing asset base and higher interest expense. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The variance was driven primarily by:
a $163 million decrease in fuel revenues due to lower retail sales volumes; and
a $160 million decrease in retail sales, net of fuel revenues, due to less favorable weather in the current year, including lost revenues related to Hurricane Irma.
Partially offset by:
a $90$177 million increase in retail pricing primarily due to the prior year Duke Energy Carolinas and Duke Energy Progress North Carolina rate cases and Duke Energy Florida's base rate adjustments for the Osprey acquisition and Hines Chillers and the Duke Energy Progress South Carolina rate case, as well as increased rider revenues related to energy efficiency programs, Duke Energy Florida's nuclear asset securitization, and Midwest capital investments.
Operating Expenses. The variance was driven primarily by:
a $123 million increase in impairment charges primarily due to write-off of remaining unrecovered Levy Nuclear Project costs at Duke Energy Florida in the current year; and
a $48 million increase in depreciation and amortization expense primarily due to additional plant ingeneration assets being placed into service.

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Partially offset by:
a $144 million decrease in fuel expense, including purchased power, driven by lower retail sales.
Interest Expense. The increase was primarily due to higher debt outstanding in the current year to fund growth.
Income Tax Expense. The variance was primarily due to a decrease in pretax income and higher research credits, partially offset by the North Carolina corporate tax rate reduction in the prior year. The effective tax rates for the three months ended September 30, 2017, and 2016 were 33.6 percent and 34.3 percent, respectively.
Nine Months Ended September 30, 2017, as Compared to September 30, 2016
Electric Utilities and Infrastructure’s results were impacted by less favorable weather compared to the prior year and an impairment at Duke Energy Florida, partially offset by growth from investments and higher weather-normal retail sales volumes. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The variance was driven primarily by:
a $380$66 million decrease in retail sales, net of fuel revenues, due to unfavorable weather compared toin the prior year, including lost revenues related to Hurricane Irma; andcurrent year;
a $256$58 million decrease in fuel related revenues due primarily due to lower sales volumes and decreases in fuel rates billed to customers; and
a $30 million decrease in weather-normal retail sales volumes.
Partially offset by:
a $346 million increase in rider revenues related to energy efficiency programs, Duke Energy Florida's nuclear asset securitization, Midwest transmission and distribution capital investments, and Duke Energy Indiana's Edwardsport Integrated Gasification Combined Cycle (IGCC) plant, as well as an increase in retail pricing due to Duke Energy Florida's base rate adjustments for the Osprey acquisition and Hines Chillers and the Duke Energy Progress South Carolina rate case; and
a $59 million increase in weather-normal sales volumes to retail customers.
Operating Expenses. The variance was driven primarily by:
a $122$55 million increasedecrease in fuel used in electric generation and purchased power primarily due to lower purchased power and lower deferred fuel and capacity expenses;
a $43 million decrease in operation, maintenance and other expense primarily due to prior year impacts associated with the North Carolina rate cases; and
a $43 million decrease in impairment charges primarily due to the write-off of remaining unrecovered Levy Nuclear Project costs in the currentprior year atimpacts associated with the Duke Energy Florida; andProgress North Carolina rate case.
an $89
95

MD&ASEGMENT RESULTS - ELECTRIC UTILITIES AND INFRASTRUCTURE


Partially offset by:
a $112 million increase in depreciation and amortization expense primarily due to higher amortization of deferred coal ash costs, additional plant in service;
Partially offset by:service and new depreciation rates associated with the prior year Duke Energy Carolinas and Duke Energy Progress North Carolina rate cases; and
a $227$27 million decreaseincrease in fuel expense, including purchased power,property and other taxes primarily due to lower retailhigher property taxes for additional plant in service in the current year and a favorable sales and changesuse tax credit in generation mix.the prior year at Duke Energy Progress.
Interest Expense. The increasevariance was driven primarily due toby higher debt outstanding in the current year and Duke Energy Florida's Crystal River 3 (CR3) regulatory assetAFUDC debt return ending in June 2016 upon securitization.the fourth quarter of 2018 on the Citrus County CC at Duke Energy Florida.
Income Tax Expense. The variance was primarily due to a decrease inlower pretax income and higher research credits,amortization of excess deferred taxes. The ETRs for the three months ended March 31, 2019, and 2018 were 18.4 percent and 19.6 percent, respectively. The decrease in the ETR was primarily due to the amortization of excess deferred taxes partially offset by lower AFUDC equity in the North Carolina corporate tax rate reduction. The effective tax rates for the nine months ended September 30, 2017, and 2016 were 34.8 percent and 35.2 percent, respectively.current year.
Matters Impacting Future Electric Utilities and Infrastructure Results
An orderOn May 1, 2019, and May 8, 2019, Duke Energy Carolinas and Duke Energy Progress, respectively, received a Commission Directive from regulatory authorities disallowingthe PSCSC granting the companies’ requests for retail rate increases but denying recovery of costs relatedcertain coal ash costs. Duke Energy Carolinas and Duke Energy Progress intend to closure of ash impoundments could have an adverse impact onfile a Petition for Rehearing with the PSCSC. Electric Utilities and Infrastructure's financial position, results of operations, financial position and cash flows.flows could be adversely impacted if coal ash costs are not ultimately approved for recovery. See Note 4 and Note 73 to the Condensed Consolidated Financial Statements, “Regulatory Matters” and "Asset Retirement Obligations,"Regulatory Matters," respectively, 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 futurewere eligible for reassessment as low risk pursuant to legislation signed by the former North Carolina governorenacted on July 14, 2016. Electric UtilitiesOn November 14, 2018, NCDEQ issued final low-risk classifications for these impoundments, indicating that Duke Energy Carolinas and Infrastructure's estimated asset retirement obligations (AROs) relatedDuke Energy Progress have satisfied the permanent replacement water supply and certain dam improvement requirements set out in the Coal Ash Management Act. On April 1, 2019, NCDEQ issued a closure determination requiring Duke Energy Carolinas and Duke Energy Progress to the closure of North Carolinaexcavate all remaining coal ash impoundments are based upon the mandated closure method or a probability weighting of potential closure methods for the impoundments that may be reassessed to low risk. As the final risk ranking classifications in North Carolina, are delineated,even though they had been deemed low risk. On April 26, 2019, Duke Energy Carolinas and Duke Energy Progress filed a Petition for Contested Case Hearings in the Office of Administrative Hearings to challenge NCDEQ's determination that all ash basins must be excavated. Duke Energy Carolinas and Duke Energy Progress intend to seek recovery of all costs through the ratemaking process consistent with previous proceedings. As the final closure plans and corrective action measures are developed and approved for each site, the closure work progresses and the closure method scope and remedial action methods are determined, the complexity of work and the amount of coal combustion material could be different than originally estimated and, therefore, could materially impact Electric Utilities and Infrastructure's results of operations, financial position.position and cash flows. See Note 9 in Duke Energy's Annual Report on Form 10-K for4 to the year ended December 31, 2016, "Asset Retirement Obligations,Condensed Consolidated Financial Statements, "Commitments and Contingencies," for additional information.
Duke Energy is a party to multiple lawsuits and could be subject to fines and other penalties related to operations at certain North Carolina facilities with ash basins. In addition, the orders issued in the Duke Energy Carolinas and Duke Energy Progress North Carolinas rate cases supporting recovery of past coal ash remediation costs have been appealed by various parties. The outcome of these appeals, lawsuits and potential fines and penalties could have an adverse impact on Electric Utilities and Infrastructure's financial position, results of operations, financial position and cash flows. See Note 5Notes 3 and 4 to the Condensed Consolidated Financial Statements, "Regulatory Matters" and “Commitments and Contingencies,” respectively, for additional information.

On June 22, 2018, Duke Energy Carolinas received an order from the NCUC, which denied the Grid Rider Stipulation and deferral treatment of grid improvement costs. Duke Energy Carolinas may petition for deferral of grid modernization costs outside of a general rate case proceeding if it can show financial hardship or a stipulation that includes greater consensus among intervening parties on costs being classified as grid modernization. While Duke Energy Progress did not request recovery of these costs in its most recent case with the NCUC, Duke Energy Progress may request recovery of certain grid modernization costs in future regulatory proceedings. Electric Utilities and Infrastructure's results of operations, financial position and cash flows could be adversely impacted if grid modernization costs are not ultimately approved for recovery and/or deferral treatment.
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PART I

InDuring the fourth quarterlast half of 2016,2018, Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida’s service territories were impacted by several named storms. Hurricane MatthewFlorence, Hurricane Michael and Winter Storm Diego caused historic flooding, extensive damage and widespread power outages withinto the service territories of Duke Energy Carolinas and Duke Energy Progress. Duke Energy Florida’s service territory was also impacted by Hurricane Michael, a Category 5 hurricane and the most powerful storm to hit the Florida Panhandle in recorded history. A significant portion of the incremental operation and maintenance expenses related to these storms have been deferred. On December 21, 2018, Duke Energy Carolinas and Duke Energy Progress service territory.filed with the NCUC petitions for approval to defer the incremental storm costs incurred to a regulatory asset for recovery in the next base rate case. Duke Energy Progress filed a petitionsimilar request with the North Carolina Utilities Commission (NCUC) requesting an accounting order to defer incremental operationPSCSC on January 11, 2019, which also included a request for the continuation of prior deferrals requested for other storms, 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 will address this request inon January 30, 2019, the PSCSC issued a directive approving the deferral request. Duke Energy Progress' currently pending rate case. A finalFlorida filed a petition on April 30, 2019, with the FPSC to recover incremental storm costs consistent with the provisions in its 2017 Settlement. An order from the NCUC that disallowsregulatory authorities disallowing the deferral and future recovery of all or a significant portion of the incremental storm restoration costs incurred could result inhave an adverse impact on Electric Utilities and Infrastructure's financial position, results of operations, financial position and cash flows. See Note 43 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.

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On February 6, 2018, the FPSC approved a stipulation that would apply tax savings resulting from the Tax Act toward storm costs effective January 2018 in lieu of implementing a storm surcharge. On May 31, 2018, Duke Energy Florida filed for recovery of the storm costs relating to Hurricane Irma and Hurricane Nate, as well as the replenishment of Duke Energy Florida's storm reserve. Storm costs are currently expected to be fully recovered by approximately mid-2021. On April 9, 2019, Duke Energy Florida filed an unopposed motion to approve a settlement resolving all outstanding issues related to the May 31, 2018 filing. The commission has scheduled a hearing to begin on May 21, 2019, to consider this Storm Cost Agreement. An order disallowing recovery of these costs could have an adverse impact on Electric Utilities and Infrastructure's results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy has several rate cases pending. Duke Energy Kentucky filed an electric rate case withRegistrants' Annual Reports on Form 10-K for the Kentucky Public Service Commission (KPSC) on September 1, 2017, to recover costsyear ended December 31, 2018, for discussion of capital investments in generation, transmission and distribution systems and to recover other incremental expenses since its previous rate case. Duke Energy Carolinas and Duke Energy Progress filed general rate cases with the NCUC on August 25, 2017, and June 1, 2017, respectively, to recover costs of complying with Coal Combustion Residuals (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. In March 2017, Duke Energy Ohio filed an electric distribution base rate case application and supporting testimony with the Public Utility Commission of Ohio (PUCO). Electric Utilities and Infrastructure's earnings could be impacted adversely if these rate increases are delayed or denied by the KPSC, NCUC or PUCO. See Note 4 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
On August 29, 2017, Duke Energy Florida filed a 2017 Second Revised and Restated Settlement Agreement (2017 Settlement) with the FPSC. The 2017 Settlement was approved by the FPSC on October 25, 2017. See Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information about the 2017 Settlement. In accordance with the 2017 Settlement, Duke Energy Florida will not seek recovery of any costsrisks associated with the ongoing Westinghouse contract litigation, which is currently being appealed. See Note 5 to the Condensed Consolidated Financial Statements, “Commitments and Contingencies” for additional information about the litigation. An unfavorable appeals ruling on that matter could have an adverse impact on Electric Utilities and Infrastructure’s financial position, results of operations and cash flows. 
In September 2017, Hurricane Irma caused extensive damage and widespread power outages within the Duke Energy Florida service territory. Duke Energy Florida has not completed the final accumulation of storm restoration costs incurred. Total storm restoration costs, including capital, are currently estimated at approximately $500 million. In accordance with a regulatory order with FPSC, certain incremental operation and maintenance storm restoration costs are classified as a regulatory asset recognizing the probable recoverability of these costs under FPSC's storm rule. The Company will make a petition by the end of 2017 to FPSC for recovery of costs. Duke Energy Florida's cash flows could be impacted by the timing of cost recovery. See Note 4, "Regulatory Matters," to the Condensed Consolidated Financial Statements for additional information.Tax Act.
Gas Utilities and Infrastructure
 Three Months Ended September 30, Nine Months Ended September 30,
(in millions)2017
 2016
 Variance
 2017
 2016
 Variance
Operating Revenues$272
 $89
 $183
 $1,243
 $358
 $885
Operating Expenses           
Cost of natural gas68
 6
 62
 402
 64
 338
Operation, maintenance and other93
 30
 63
 291
 90
 201
Depreciation and amortization57
 19
 38
 171
 59
 112
Property and other taxes25
 12
 13
 81
 44
 37
Total operating expenses243
 67
 176
 945
 257
 688
Operating Income29
 22
 7
 298
 101
 197
Other Income and Expenses22
 7
 15
 60
 13
 47
Interest Expense26
 6
 20
 78
 19
 59
Income Before Income Taxes25
 23
 2
 280
 95
 185
Income Tax Expense6
 8
 (2) 101
 32
 69
Segment Income$19
 $15
 $4
 $179
 $63
 $116
            
Piedmont LDC throughput (dekatherms) (a)
107,490,775
 —
 107,490,775
 334,781,316
 —
 334,781,316
Duke Energy Midwest LDC throughput (Mcf)9,904,644
 9,568,340
 336,304
 52,940,410
 57,023,986
 (4,083,576)
(a)     Includes throughput subsequent to Duke Energy's acquisition of Piedmont on October 3, 2016.
 Three Months Ended March 31,
(in millions)2019
 2018
 Variance
Operating Revenues$756
 $727
 $29
Operating Expenses     
Cost of natural gas327
 313
 14
Operation, maintenance and other110
 108
 2
Depreciation and amortization65
 61
 4
Property and other taxes33
 31
 2
Total operating expenses535
 513
 22
Operating Income221
 214
 7
Other Income and Expenses, net40
 (35) 75
Interest Expense30
 27
 3
Income Before Income Taxes231
 152
 79
Income Tax Expense5
 36
 (31)
Segment Income$226
 $116
 $110
 

    
Piedmont LDC throughput (dekatherms)151,665,924
 154,901,379
 (3,235,455)
Duke Energy Midwest LDC throughput (Mcf)38,538,272
 37,126,065
 1,412,207
Three Months Ended September 30, 2017,March 31, 2019, as Comparedcompared to September 30, 2016March 31, 2018
Gas Utilities and Infrastructure’s higher results were primarily impacted by the prior year OTTI recorded on the Constitution investment and an adjustment related to the income tax recognition for equity method investments. This adjustment was immaterial and relates to prior years. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues.The variance was driven by:
a $14 million increase primarily due to increased investmentshigher natural gas prices associated with off-system sales;
a $7 million increase primarily due to NCUC approval related to tax reform accounting from fixed rate contracts;
a $5 million increase primarily due to North Carolina and Tennessee IMR increases; and
a $4 million increase due to customer growth.
Operating Expenses.The variance was driven by:
a $14 million increase in cost of natural gas primarily due to the impact of higher natural gas prices on off-system sales and unbilled revenue; and
a $4 million increase in depreciation and amortization expense primarily due to additional plant in service.
Other Income and Expenses, net. The increase was primarily due to the prior year OTTI recorded on the Constitution investment and higher earnings from ACP in the ACP pipeline. Piedmont's losses includedcurrent year.
Income Tax Expense. The variance was primarily due to an adjustment related to the income tax recognition for equity method investments, partially offset by an increase in Gas Utilitiespretax income. This adjustment was immaterial and Infrastructure's results were $5 millionrelates to prior years. The ETRs for the three months ended September 30, 2017. All variances areMarch 31, 2019, and 2018 were 2.2 percent and 23.7 percent, respectively. The decrease in the ETR was primarily due to an adjustment related to the inclusionincome tax recognition for equity method investments that was recorded during the first quarter of Piedmont's results of operations as a result of Duke Energy's acquisition of Piedmont on October 3, 2016, except for the following:
Other Income2019. This adjustment was immaterial and Expenses. The variance was driven primarily by increased investments in the ACP pipeline.relates to prior years.

10397

PART I
MD&ASEGMENT RESULTS - GAS UTILITIES AND INFRASTRUCTURE


Nine Months Ended September 30, 2017, as Compared to September 30, 2016
Gas Utilities and Infrastructure’s higher results were due to the inclusion of Piedmont's earnings in the current year as a result of Duke Energy's acquisition of Piedmont on October 3, 2016, as well as growth from investments in ACP and Sabal Trail pipelines. Piedmont's earnings included in Gas Utilities and Infrastructure's results were $95 million for the nine months ended September 30, 2017. All variances are related to the inclusion of Piedmont's results of operations, except for the following:
Other Income and Expenses. The variance was driven primarily by increased investments in the ACP and Sabal Trail pipelines.
Matters Impacting Future Gas Utilities and Infrastructure Results
Gas Utilities and Infrastructure has a 2447 percent ownership interest in Constitution Pipeline Company, LLC (Constitution), aACP, which is building an approximately 600-mile interstate natural gas pipeline project slatedintended to transport diverse natural gas supplies into southeastern markets. Affected states (West Virginia, Virginia and North Carolina) have issued certain necessary permits; the project remains subject to major northeastern markets. On April 22, 2016,other pending federal and state approvals, which will allow full construction activities to begin. In 2018, FERC issued a series of Notices to Proceed, which authorized the New York State Departmentproject to begin certain construction-related activities along the pipeline route. Project cost estimates are a range of Environmental Conservation denied Constitution’s application$7.0 billion to $7.8 billion, excluding financing costs. ACP expects to achieve a late 2020 in-service date for key segments of the project, while it expects a necessary water quality certificationremainder to extend into 2021. Project construction activities, schedule and final costs are subject to uncertainty due to abnormal weather, work delays (including delays due to judicial or regulatory action) and other conditions and risks that could result in potential higher project costs, a potential delay in the targeted in-service dates, permanent or temporary suspension of AFUDC and potential impairment charges. ACP and Duke Energy will continue to consider their options with respect to the foregoing in light of their existing contractual and legal obligations. See Notes 3 and 13 to the Condensed Consolidated Financial Statements, "Regulatory Matters" and "Variable Interest Entities," respectively, for additional information.
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy Registrants' Annual Reports on Form 10-K for the New York portionyear ended December 31, 2018, for discussion of risks associated with 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 charge of up to the recorded investment in the project, net of any cash and working capital returned, may be recorded. With the project on hold, funding of project costs has ceased until resolution of legal actions. At September 30, 2017, Duke Energy's investment in Constitution was $82 million.
Rapidly rising interest rates without timely or adequate updates to the regulated allowed return on equity or failure to achieve the anticipated benefits of the Piedmont merger, including cost savings and growth targets, could significantly impact the estimated fair value of reporting units in Gas Utilities and Infrastructure. In the event of a significant decline in the estimated fair value of the reporting units, goodwill impairment charges could be recorded. The carrying value of goodwill within Gas Utilities and Infrastructure was approximately $1,924 million at September 30, 2017.Tax Act.
Commercial Renewables
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended March 31,
(in millions)2017
 2016
 Variance
 2017
 2016
 Variance
2019
 2018
 Variance
Operating Revenues$95
 $139
 $(44) $333
 $365
 $(32)$106
 $101
 $5
Operating Expenses                
Operation, maintenance and other56
 98
 (42) 191
 253
 (62)66
 55
 11
Depreciation and amortization39
 34
 5
 116
 96
 20
40
 38
 2
Property and other taxes9
 8
 1
 26
 20
 6
6
 7
 (1)
Impairment charges76
 —
 76
 76
 —
 76
Total operating expenses180
 140
 40
 409
 369
 40
112
 100
 12
Gains on Sales of Other Assets and Other, net1
 2
 (1) 5
 4
 1
Operating (Loss) Income(84) 1
 (85) (71) —
 (71)(6) 1
 (7)
Other Income and Expenses(10) (76) 66
 (12) (78) 66
Other Income and Expenses, net(2) 2
 (4)
Interest Expense22
 15
 7
 64
 38
 26
21
 22
 (1)
Loss Before Income Taxes(116) (90) (26) (147) (116) (31)(29) (19) (10)
Income Tax Benefit(65) (65) —
 (146) (127) (19)(35) (39) 4
Less: Loss Attributable to Noncontrolling Interests(2) (1) (1) (3) (2) (1)(7) —
 (7)
Segment (Loss) Income$(49)
$(24) $(25) $2
 $13
 $(11)
Segment Income$13
 $20
 $(7)
                
Renewable plant production, GWh1,760
 1,801
 (41) 6,276
 5,619
 657
2,068
 2,180
 (112)
Net proportional MW capacity in operation    

 2,908
 2,725
 183
Net proportional MW capacity in operation(a)
2,996
 2,943
 53
(a)Certain projects are included in tax-equity structures where investors have differing interests in the project's economic attributes. In 2019, 100 percent of the tax-equity project's capacity is included in the table above.
Three Months Ended September 30, 2017,March 31, 2019, as Comparedcompared to September 30, 2016March 31, 2018
Commercial Renewables' results were unfavorably impacted by lower investment tax credits (ITCs), higher interest expense on new debt financingswind production and higher lossesoperating expenses, partially offset by results from Duke Energy's REC Solar investment.tax-equity structures. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The decrease wasincrease is primarily due to lower engineering, procurement and construction revenues froman increase in the number of EPC agreements at REC Solar.Solar, offset by unfavorable wind portfolio revenue due to low winds.
Operating Expenses. The increase was primarily due to a $69 million pretax impairment chargean increase in the current year related to a wholly owned non-contracted wind project, partially offset by lower operations and maintenance expensenumber of EPC agreements at REC Solar. For additional information see Note 3 toSolar and higher operating expenses in the Condensed Consolidated Financial Statements, “Business Segments.”solar portfolio.
Other Income and Expenses.Expenses, net. The decrease is due to mark-to-market losses in the solar portfolio.
Income Tax Benefit. The variance was primarily due to a $71 million pretax impairment chargereduction in the prior year related to certain equity method investments. For additional information see Note 3 to the Condensed Consolidated Financial Statements, “Business Segments.”
Interest Expense. The increase was primarily due to new project financings.
Income Tax Benefit. Lower ITCs due to lower solar investments in the current year were offset by higher production tax credits (PTCs) related to wind projects placed in service.


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PART I

Nine Months Ended September 30, 2017, as Compared to September 30, 2016
Commercial Renewables' results were impacted by lower ITCs, higher interest expense on new debt financings and higher losses from REC Solar, partially offset by increased PTCs. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The decrease was primarily due to lower engineering, procurement and construction revenues from REC Solar.
Operating Expenses. The increase was primarily due to a $69 million pretax impairment charge in the current year related to a wholly owned non-contracted wind project and higher operating expenses related to new wind and solar projects placed in service, partially offset by lower operations and maintenance expense at REC Solar. For additional information see Note 3 to the Condensed Consolidated Financial Statements, “Business Segments.”
Other Income and Expenses. The variance was primarily due to a $71 million pretax impairment charge in the prior year related to certain equity method investments. For additional information see Note 3 to the Condensed Consolidated Financial Statements, “Business Segments.”
Interest Expense. The variance was primarily due to new project financings and less capitalized interest due to fewer projects under construction.
Income Tax Benefit.The variance was primarily due to an increase in PTCs related to wind projects placed in service, partially offset by lower ITCs due to lower solar investmentsgenerated in the current year.
Loss Attributable to Noncontrolling Interests. The increase is driven by the new tax equity structures entered into during 2018.
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 tax credit extensions, long-term growth rates and discount rates could significantly impact the estimated fair value of the Commercial Renewables reporting units. In the event of a significant decline in the estimated fair value of the Commercial Renewables reporting units, goodwill or other asset impairment charges could be recorded. The carrying value of goodwill within Commercial Renewables was approximately $115 million at September 30, 2017.
Persistently low market pricing for wind resources, primarily in the Electric Reliability Council of Texas West market,and PJM West markets, persistently low renewable resources and the future expiration of tax incentives including ITCsinvestment tax credits and PTCsproduction tax credits could result in adverse impacts to the future results of operations, financial position and cash flows of Commercial Renewables.

98

MD&ASEGMENT RESULTS - COMMERCIAL RENEWABLES


On April 24, 2019, Duke Energy executed an agreement to sell a minority interest in a portion of certain renewable assets. The portion of Duke Energy’s commercial renewables energy portfolio to be sold includes 49 percent of 37 operating wind, solar and battery storage assets and 33 percent of 11 operating solar assets across the U.S. Duke Energy Renewable Services, an operations and maintenance business for third-party customers, and REC Solar are not included in the potential transaction. The sale will result in pretax proceeds to Duke Energy of $415 million. Duke Energy will retain control of these assets, and, therefore, no gain or loss is expected to be recognized in the Condensed Consolidated Statements of Operations upon closing of the transaction. Duke Energy will also retain the majority of the remaining tax benefits from the projects. Duke Energy will continue to develop projects, grow its portfolio and manage its renewables assets. The sale is subject to customary closing conditions, including approvals from the FERC, the Public Utility Commission of Texas and the Committee on Foreign Investment in the U.S. The transaction is expected to close in the second half of 2019.
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy Registrants' Annual Reports on Form 10-K for the year ended December 31, 2018, for discussion of risks associated with the Tax Act.
Other
 Three Months Ended September 30, Nine Months Ended September 30,
(in millions)2017
 2016
 Variance
 2017
 2016
 Variance
Operating Revenues$35
 $32
 $3
 $103
 $91
 $12
Operating Expenses           
Fuel used in electric generation and purchased power13
 14
 (1) 42
 37
 5
Operation, maintenance and other21
 70
 (49) 47
 145
 (98)
Depreciation and amortization27
 37
 (10) 79
 108
 (29)
Property and other taxes3
 8
 (5) 10
 25
 (15)
Impairment charges—
 —
 —
 7
 2
 5
Total operating expenses64
 129
 (65) 185
 317
 (132)
Gains on Sales of Other Assets and Other, net4
 3
 1
 15
 14
 1
Operating Loss(25) (94) 69
 (67) (212) 145
Other Income and Expenses51
 24
 27
 100
 60
 40
Interest Expense150
 157
 (7) 423
 553
 (130)
Loss Before Income Taxes(124) (227) 103
 (390) (705) 315
Income Tax Benefit(93) (49) (44) (193) (276) 83
Less: Income Attributable to Noncontrolling Interests3
 3
 —
 8
 7
 1
Net Expense$(34) $(181) $147
 $(205) $(436) $231
 Three Months Ended March 31,
(in millions)2019
 2018
 Variance
Operating Revenues$21
 $35
 $(14)
Operating Expenses28
 54
 (26)
Losses on Sales of Other Assets and Other, net—
 (101) 101
Operating Loss(7) (120) 113
Other Income and Expenses, net44
 14
 30
Interest Expense171
 157
 14
Loss Before Income Taxes(134) (263) 129
Income Tax (Benefit) Expense(45) 1
 (46)
Less: Income Attributable to Noncontrolling Interests—
 2
 (2)
Net Loss$(89) $(266) $177
Three Months Ended September 30, 2017,March 31, 2019, as Comparedcompared to September 30, 2016March 31, 2018
Other's lower net expenseThe variance was driven by tax benefits, insurance proceeds resulting from settlementthe prior year loss on sale of the shareholder litigation related to the Progress Energy merger, prior year donations to the Duke Energy Foundationretired Beckjord station and lower severance expenses.income taxes due to a 2018 adjustment to record a valuation allowance. The following is a detailed discussion of the variance drivers by line item.
Operating Expenses.Revenues. The decrease was primarilyLower operating revenues were due to amounts in the prior year donationsrelated to Duke Energy Ohio’s entitlement of capacity and energy from OVEC’s power plants. In the current year, the revenues and expenses for OVEC are reflected in the Electric Utilities and Infrastructure segment due to the 2018 PUCO Order that approved Duke Energy Foundation, less captive insurance losses for Bison Insurance Company Limitedto recover or credit amounts through Rider PSR. These amounts are deemed immaterial. Therefore, the prior period amounts were not restated.
Operating Expenses. Lower operating expenses were due to the absence in the current year of transaction and integration costs associated with the Piedmont acquisition and OVEC fuel expense.
Losses on Sales of Other Assets and Other, net. The variance was driven by the prior year severance expenseloss on sale of the retired Beckjord station, a nonregulated facility retired during 2014, including the transfer of coal ash basins and other real property and indemnification from all potential future claims related to cost savings initiatives.the property, whether arising under environmental laws or otherwise.
Other Income and Expenses.Expenses, net. The increase was driven by insurance proceeds resulting from settlement of the shareholder litigation related to the Progress Energy merger and higher earnings from the equity method investment in National Methanol Company (NMC).
Interest Expense. The decrease was driven by prior year losses on forward-starting interest rate swaps related to Piedmont pre-acquisition financing, partially offset by additional long-term debt outstanding in the current year. For additional information see Notes 2 and 10 to the Condensed Consolidated Financial Statements, "Acquisitions and Dispositions" and "Derivatives and Hedging," respectively.

105

PART I

Income Tax Benefit.The variance was primarily due to higher tax benefits resulting from legal entity restructuring, the 2016 North Carolina corporate tax rate reduction and prior year unfavorable impacts of finalizing federal tax audits, partially offset by lower pretax losses.
Nine Months Ended September 30, 2017, as Compared to September 30, 2016
Other's lower net expense was driven by prior year lossesreturns on forward-starting interest rate swaps, prior year donations to the Duke Energy Foundation, insurance proceeds resulting from settlement of the shareholder litigation related to the Progress Energy merger and decreased severance expenses. The following is a detailed discussion of the variance drivers by line item.
Operating Expenses. The decrease was primarily due to prior year severance expenses related to cost savings initiatives, prior year donations to the Duke Energy Foundation and lower franchise taxes resulting from a North Carolina law change.
Other Income and Expenses. The increase was driven by insurance proceeds resulting from settlement of the shareholder litigation related to the Progress Energy merger and higher earnings from the equity method investment in NMC.investments that fund certain employee benefit obligations.
Interest Expense. The decrease was primarily by prior year losses on forward-starting interest rate swaps related to Piedmont pre-acquisition financing, partially offset by higher interest costs on $3.75 billion of debt issued in August 2016 to fund the acquisition. For additional information see Notes 2 and 10 to the Condensed Consolidated Financial Statements, "Acquisitions and Dispositions" and "Derivatives and Hedging," respectively.
Income Tax Benefit. The variance was primarily due to a decreasehigher short-term interest rates and an increase in pretax losses, partially offset by tax benefits resulting from legal entity restructuring and the net impact of North Carolina corporate tax rate reductions in 2017 and 2016.outstanding debt.
Matters Impacting Future Other Results
Included in Other is Duke Energy Ohio's 9 percent ownership interest in the Ohio Valley Electric Corporation (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. For information on Duke Energy's regulatory filings related to OVEC, see Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters.”
The retired Beckjord generating station (Beckjord), a nonregulated facility retired during 2014, is not subject to the U.S. Environmental Protection Agency (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, 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. In October 2017, Duke Energy's economic ownership interest in NMC decreased from 25 percent to 17.5 percent.
On November 2, 2017, the U.S. House of Representatives issued its proposal for comprehensive tax reform. The U.S. Senate has not yet issued its related proposal. There is uncertainty as to whether any form of tax reform will become law and, if so, what provisions may be included in the final tax reform. 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.

(LOSS) INCOME FROM DISCONTINUED OPERATIONS, NET OF TAXIncome Tax (Benefit) Expense.
 Three Months Ended September 30, Nine Months Ended September 30,
(in millions)2017
 2016
 Variance
 2017
 2016
 Variance
(Loss) Income From Discontinued Operations, net of tax$(2) $180
 $(182) $(4) $190
 $(194)
Three Months Ended September 30, 2017, as Compared to September 30, 2016
The variance was primarily driven by a $122 million income tax benefit in the prior year resulting from immaterial out of period deferred tax liability adjustments, as well as earnings from the International Disposal Group, which was sold in December 2016. For additional information see Note 2 to the Condensed Consolidated Financial Statements, "Acquisitions and Dispositions."
Nine Months Ended September 30, 2017, as Compared to September 30, 2016
The variance was primarily driven by a $122 million income tax benefit in the prior year resulting from immaterial out of period deferred tax liability adjustments, as well as operating earnings from the International Disposal Group,valuation allowance against AMT credits partially offset by an impairment charged related to certain assetsa lower pretax loss in Central America that were sold in 2016. For additional information see Note 2 to the Condensed Consolidated Financial Statements, "Acquisitions and Dispositions."current year.


10699

PART I
MD&ADUKE ENERGY CAROLINAS


DUKE ENERGY CAROLINAS
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the ninethree months ended September 30, 2017,March 31, 2019, and 20162018 and the Annual Report on Form 10-K for the year ended December 31, 2016.2018.
Results of Operations
Nine Months Ended September 30,Three Months Ended March 31,
(in millions)2017
 2016
 Variance
2019
 2018
 Variance
Operating Revenues$5,581
 $5,641
 $(60)$1,744
 $1,763
 $(19)
Operating Expenses          
Fuel used in electric generation and purchased power1,394
 1,391
 3
472
 473
 (1)
Operation, maintenance and other1,431
 1,481
 (50)440
 451
 (11)
Depreciation and amortization804
 802
 2
317
 272
 45
Property and other taxes206
 206
 —
80
 72
 8
Impairment charges—
 13
 (13)
Total operating expenses3,835
 3,880
 (45)1,309
 1,281
 28
Losses on Sales of Other Assets and Other, net—
 (1) 1
Operating Income1,746
 1,760
 (14)435
 482
 (47)
Other Income and Expenses99
 121
 (22)
Other Income and Expenses, net31
 39
 (8)
Interest Expense314
 316
 (2)110
 107
 3
Income Before Income Taxes1,531
 1,565
 (34)356
 414
 (58)
Income Tax Expense522
 539
 (17)63
 91
 (28)
Net Income$1,009
 $1,026
 $(17)$293
 $323
 $(30)
The following table shows the percent changes in GWh sales and average number of customers. The percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized.
Increase (Decrease) over prior year20172019
Residential sales(6.76.4)%
General service sales(2.11.8)%
Industrial sales(0.51.0)%
Wholesale power sales3.9(16.8)%
Joint dispatch sales87.631.4 %
Total sales(2.53.5)%
Average number of customers1.52.0 %
NineThree Months Ended September 30, 2017,March 31, 2019, as Comparedcompared to September 30, 2016March 31, 2018
Operating Revenues. The variance was driven primarily by:
a $213$32 million decrease in retail sales, net of fuel revenues, due to less favorableunfavorable weather in the current year.year;
Partially offset by:
an $89a $25 million increasedecrease in rider revenues and retail pricing primarily related to energy efficiency programs; and
a $30$14 million decrease in weather-normal retail sales volumes.
Partially offset by:
a $51 million increase in weather-normal sales volumesretail pricing due to retail customers, netthe impacts of fuel revenues;the prior year North Carolina rate case.
Operating Expenses. The variance was driven primarily by:
a $15$45 million increase in wholesale power revenues, net of sharingdepreciation and fuel revenues,amortization expense primarily due to additional volumes for customers served under long-term contracts;plant in service, new depreciation rates associated with the prior year North Carolina rate case and higher amortization of deferred coal ash costs associated with the prior year North Carolina rate case.
an $8Partially offset by:
a $13 million increasedecrease in fuel revenues primarily dueimpairment charges related to changesprior year coal ash costs in generation mix.South Carolina.
Operating Expenses.Other Income and Expenses, net. The variance was primarily due to a $50 million decrease in operation, maintenance and other expense primarily duelower AFUDC equity related to lower expenses at generating plants, lower storm restoration costs and lower severance expenses, partially offset by higher energy efficiency program costs and higher distribution maintenance expenses.
Other Income and Expenses. The variance was primarily due to a decrease in recognition of post in-service equity returns for projects that had been completed prior to being reflected in customer rates.W.S. Lee CC.
Income Tax Expense. The variance was primarily due to a decrease in pretax income and the favorable impactamortization of research credits.excess deferred taxes. The effective tax ratesETRs for the ninethree months ended September 30, 2017,March 31, 2019, and 20162018 were 34.117.7 percent and 34.422.0 percent, respectively. The decrease in the ETR was primarily due to the amortization of excess deferred taxes.

100

MD&ADUKE ENERGY CAROLINAS


Matters Impacting Future Results
An orderOn May 1, 2019, Duke Energy Carolinas received a Commission Directive from regulatory authorities disallowingthe PSCSC granting its request for a retail rate increase but denying recovery of costs relatedcertain coal ash costs. Duke Energy Carolinas intends to closure of ash impoundments could have an adverse impact onfile a Petition for Rehearing with the PSCSC. Duke Energy Carolinas' financial position, results of operations, financial position and cash flows.flows could be adversely impacted if coal ash costs are not ultimately approved for recovery. See Note 43 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,"Regulatory Matters," for additional information.

107

PART I

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 futurewere eligible for reassessment as low risk pursuant to legislation signed by the former North Carolina governorenacted on July 14, 2016. On November 14, 2018, NCDEQ issued final low-risk classifications for these impoundments, indicating that Duke Energy Carolinas' estimated AROs relatedCarolinas had satisfied the permanent replacement water supply and certain dam improvement requirements set out in the Coal Ash Management Act. On April 1, 2019, NCDEQ issued a closure determination requiring Duke Energy Carolinas to the closure of North Carolinaexcavate all remaining coal ash impoundments are based upon the mandated closure method or a probability weighting of potential closure methods for the impoundments that may be reassessed to low risk. As the final risk ranking classifications in North Carolina are delineated,Carolina. On April 26, 2019, Duke Energy Carolinas filed a Petition for Contested Case Hearings in the Office of Administrative Hearings to challenge NCDEQ's determination that all ash basins must be excavated. Duke Energy Carolinas intends to seek recovery of all costs through the ratemaking process consistent with previous proceedings. As the final closure plans and corrective action measures are developed and approved for each site, the closure work progresses, and the closure method scope and remedial action methods are determined, the complexity of work and the amount of coal combustion material could be different than originally estimated and, therefore, could materially impact Duke Energy Carolinas' results of operations, financial position.position and cash flows. See Note 9 in Duke Energy's Annual Report on Form 10-K for4 to the year ended December 31, 2016, "Asset Retirement Obligations,Condensed Consolidated Financial Statements, "Commitments and Contingencies," for additional information.
Duke Energy Carolinas is a party to multiple lawsuits and subject to fines and other penalties related to operations at certain North Carolina facilities with ash basins. In addition, the order issued in the Duke Energy Carolinas North Carolinas rate case supporting recovery of past coal ash remediation costs has been appealed by various parties. The outcome of these appeals, lawsuits, fines and penalties could have an adverse impact on Duke Energy Carolinas’ financial position, results of operations, financial position and cash flows. See Note 5Notes 3 and 4 to the Condensed Consolidated Financial Statements, "Regulatory Matters" and “Commitments and Contingencies,” respectively, for additional information.
On June 22, 2018, Duke Energy Carolinas filedreceived an order from the NCUC, which denied the Grid Rider Stipulation and deferral treatment of grid improvement costs. Duke Energy Carolinas may petition for deferral of grid modernization costs outside of a general rate case proceeding if it can show financial hardship or a stipulation that includes greater consensus among intervening parties on August 25, 2017, to recover costs of complying with CCR regulations and the Coal Ash Act,being classified as well as costs of capital investments in generation, transmission and distribution systems and any increase in expenditures subsequent to previous rate cases.grid modernization. Duke Energy Carolinas' earningsresults of operations, financial position and cash flows could be adversely impacted if grid modernization costs are not ultimately approved for recovery and/or deferral treatment.
During the last half of 2018, Duke Energy Carolinas’ service territory was impacted by several named storms. Hurricane Florence, Hurricane Michael and Winter Storm Diego caused flooding, extensive damage and widespread power outages in the service territory. A significant portion of the incremental operation and maintenance expenses related to these storms have been deferred. On December 21, 2018, Duke Energy Carolinas filed with the NCUC a petition for approval to defer the incremental storm costs incurred to a regulatory asset for recovery in the next base rate increase is delayed or denied bycase. An order from regulatory authorities disallowing the NCUC.deferral and future recovery of storm restoration costs could have an adverse impact on Duke Energy Carolinas' results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy Registrants' Annual Reports on Form 10-K for the year ended December 31, 2018, for discussion of risks associated with the Tax Act.

108101

PART I
MD&APROGRESS ENERGY


PROGRESS ENERGY
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the ninethree months ended September 30, 2017,March 31, 2019, and 20162018 and the Annual Report on Form 10-K for the year ended December 31, 2016.2018.
Results of Operations
Nine Months Ended September 30,Three Months Ended March 31,
(in millions)2017
 2016
 Variance
2019
 2018
 Variance
Operating Revenues$7,435
 $7,645
 $(210)$2,572
 $2,576
 $(4)
Operating Expenses          
Fuel used in electric generation and purchased power2,588
 2,832
 (244)925
 976
 (51)
Operation, maintenance and other1,650
 1,699
 (49)567
 623
 (56)
Depreciation and amortization958
 904
 54
455
 384
 71
Property and other taxes386
 375
 11
137
 123
 14
Impairment charges137
 4
 133
—
 29
 (29)
Total operating expenses5,719
 5,814
 (95)2,084
 2,135
 (51)
Gains on Sales of Other Assets and Other, net19
 18
 1
—
 6
 (6)
Operating Income1,735
 1,849
 (114)488
 447
 41
Other Income and Expenses65
 79
 (14)
Other Income and Expenses, net31
 35
 (4)
Interest Expense595
 497
 98
219
 209
 10
Income Before Income Taxes1,205
 1,431
 (226)300
 273
 27
Income Tax Expense384
 496
 (112)52
 36
 16
Net Income821
 935
 (114)248
 237
 11
Less: Net Income Attributable to Noncontrolling Interests7
 8
 (1)
Less: Net (Loss) Income Attributable to Noncontrolling Interests(1) 2
 (3)
Net Income Attributable to Parent$814
 $927
 $(113)$249
 $235
 $14
NineThree Months Ended September 30, 2017,March 31, 2019, as Comparedcompared to September 30, 2016March 31, 2018
Operating Revenues. The variance was driven primarily by:
a $256$51 million decrease in fuel and capacity revenues primarily due to lower retail salesa decrease in demand and changesa decrease in generation mix at Duke Energy Progress, as well as decreasedfuel and capacity rates billed to retail customers at Duke Energy Florida, partially offset by an increase in fuel rates to retail customers; andFlorida;
a $132$36 million decrease in retail sales, net of fuel revenues, due to less favorableunfavorable weather in the current year, including lost revenues related to Hurricane Irma at Duke Energy Florida.year; and
a $14 million decrease in weather-normal retail sales volumes.
Partially offset by:
an $81a $111 million increase in retail pricing primarily due to the base rate adjustment for the Osprey acquisition and the completionimpacts of the Hines Energy Complex Chiller Uprate Project, as well as theprior year Duke Energy Progress SouthNorth Carolina rate case; and
a $79 million increase in rider revenuescase, Duke Energy Florida's base rate adjustments related to energy efficiency programs at Duke Energy Progress, as well as nuclear asset securitization beginning in July 2016the Citrus County CC being placed into service and extended uprate project revenues beginning inannual increases from the 2017 at Duke Energy Florida.Settlement Agreement.
Operating Expenses. The variance was driven primarily by:
a $244 million decrease in fuel expense primarily due to lower retail sales and changes in generation mix at Duke Energy Progress, as well as decreased purchased power and lower capacity costs, partially offset by higher generation and deferred fuel costs at Duke Energy Florida; and
a $49$56 million decrease in operation, maintenance and other expense primarily due to prior year impacts associated with the Duke Energy Progress North Carolina rate case, lower storm restorationoutage costs at Duke Energy Progress lower planned outage costs and lower severance expenses, partially offset by higher storm restorationemployee benefit costs at Duke Energy Florida.
Partially offset by:Progress and Duke Energy Florida;
a $133$51 million increasedecrease in fuel used in electric generation and purchased power primarily due to lower purchased power and lower deferred fuel and capacity expenses; and
a $29 million decrease in impairment charges primarily due to the write-off of remaining unrecovered Levy Nuclear Project costs in the currentprior year atimpacts associated with the Duke Energy Florida; andProgress North Carolina rate case.
Partially offset by:
a $54$71 million increase in depreciation and amortization expense primarily due to nuclear regulatory assethigher amortization as well asof deferred coal ash costs, new depreciation rates associated with the prior year Duke Energy Progress North Carolina rate case and Citrus County CC being placed in service and other additional plant in service at Duke Energy Florida.Florida; and
a $14 million increase in property and other taxes primarily due to higher property taxes due to additional plant in service at Duke Energy Florida in the current year and a favorable sales and use tax credit in the prior year at Duke Energy Progress.
Interest Expense. The variance was driven primarily due to higher debt outstanding, as well as interest charges on North Carolina fuel overcollections at Duke Energy Progress and lower debt returns driven by the CR3 regulatory assetAFUDC debt return ending in June 2016 upon securitizationthe fourth quarter of 2018 on the Citrus County CC at Duke Energy Florida.

109102

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MD&APROGRESS ENERGY


Income Tax Expense. The varianceincrease in tax expense was primarily due to a decreasean increase in pretax income.income and lower AFUDC equity in the current year. The effective tax ratesETRs for the ninethree months ended September 30, 2017,March 31, 2019, and 20162018 were 31.917.3 percent and 34.713.2 percent, respectively. The decreaseincrease in the effective tax rateETR was primarily due to lower AFUDC equity and amortization of excess deferred taxes in the favorable impact of research credits and lower North Carolina corporate tax rates.current year.
Matters Impacting Future Results
An orderOn May 8, 2019, Duke Energy Progress received a Commission Directive from regulatory authorities disallowingthe PSCSC granting its request for a retail rate increase but denying recovery of costs relatedcertain coal ash costs. Duke Energy Progress intends to closure of ash impoundments could have an adverse impact onfile a Petition for Rehearing with the PSCSC. Progress Energy’s financial position,Energy's results of operations, financial position and cash flows.flows could be adversely impacted if coal ash costs are not ultimately approved for recovery. See Note 43 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,"Regulatory Matters," 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 futurewere eligible for reassessment as low risk pursuant to legislation signed by the former North Carolina governorenacted on July 14, 2016. On November 14, 2018, NCDEQ issued final low-risk classifications for these impoundments, indicating that Duke Energy Progress Energy's estimated AROs relatedhad satisfied the permanent replacement water supply and certain dam improvement requirements set out in the Coal Ash Management Act. On April 1, 2019, NCDEQ issued a closure determination requiring Duke Energy Progress to the closure of North Carolinaexcavate all remaining coal ash impoundments are based upon the mandated closure method or a probability weighting of potential closure methods for the impoundments that may be reassessed to low risk. As the final risk ranking classifications in North Carolina are delineated,Carolina. On April 26, 2019, Duke Energy Progress filed a Petition for Contested Case Hearings in the Office of Administrative Hearings to challenge NCDEQ's determination that all ash basins must be excavated. Duke Energy Progress intends to seek recovery of all costs through the ratemaking process consistent with previous proceedings. As the final closure plans and corrective action measures are developed and approved for each site, the closure work progresses, and the closure method scope and remedial action methods are determined, the complexity of work and the amount of coal combustion material could be different than originally estimated and, therefore, could materially impact Progress Energy's results of operations, financial position.position and cash flows. See Note 9 in Duke Energy's Annual Report on Form 10-K for4 to the year ended December 31, 2016, "Asset Retirement Obligations,Condensed Consolidated Financial Statements, "Commitments and Contingencies," for additional information.
Duke Energy Progress is a party to multiple lawsuits and subject to fines and other penalties related to operations at certain North Carolina facilities with ash basins. As noted above, the order issued in the Duke Energy Progress North Carolinas rate case supporting recovery of past coal ash remediation costs has been appealed by various parties. The outcome of these appeals, lawsuits, fines and penalties could have an adverse impact on Progress Energy’s financial position, results of operations, financial position and cash flows. See Note 5Notes 3 and 4 to the Condensed Consolidated Financial Statements, "Regulatory Matters" and “Commitments and Contingencies,” respectively, for additional information.
InDuke Energy Carolinas received an order from the fourth quarterNCUC, which denied the Grid Rider Stipulation and deferral treatment of 2016,grid improvement costs. The NCUC did allow Duke Energy Carolinas to petition for deferral of grid modernization costs outside of a general rate case proceeding if it can show financial hardship or a stipulation that includes greater consensus among intervening parties on costs being classified as grid modernization. While Duke Energy Progress did not request recovery of these costs in its most recent case with the NCUC, Duke Energy Progress may request recovery of certain grid modernization costs in future regulatory proceedings. If the NCUC were to rule similarly, Progress Energy's results of operations, financial position and cash flows could be adversely impacted if grid modernization costs are not ultimately approved for recovery and/or deferral treatment.
During the last half of 2018, Duke Energy Progress and Duke Energy Florida’s service territories were impacted by several named storms. Hurricane MatthewFlorence, Hurricane Michael and Winter Storm Diego caused historic flooding, extensive damage and widespread power outages withinto the service territory of Duke Energy Progress. Duke Energy Florida’s service territory was also impacted by Hurricane Michael, a Category 5 hurricane and the most powerful storm to hit the Florida Panhandle in recorded history. A significant portion of the incremental operation and maintenance expenses related to these storms have been deferred. On December 21, 2018, Duke Energy Progress service territory.filed with the NCUC a petition for approval to defer the incremental storm costs incurred to a regulatory asset for recovery in the next base rate case. Duke Energy Progress filed a petitionsimilar request with the NCUC requesting an accounting order to defer incremental operationPSCSC on January 11, 2019, which also included a request for the continuation of prior deferrals requested for other storms, 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 will address this request inon January 30, 2019, the PSCSC issued a directive approving the deferral request. Duke Energy Progress' currently pending rate case. A finalFlorida anticipates filed a petition on April 30, 2019, with the FPSC to recover incremental storm costs consistent with the provisions in its 2017 Settlement. An order from the NCUC that disallowsregulatory authorities disallowing the deferral and future recovery of all or a significant portion of the incremental storm restoration costs incurred could result inhave an adverse impact on Progress Energy's financial position, results of operations, financial position and cash flows.
Duke Energy Progress filed a general rate case with See Note 3 to the NCUC on June 1, 2017. Duke Energy Progress will seek 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. Progress Energy's earnings could be adversely impacted if the rate increase is delayed or denied by the NCUC.Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
On August 29, 2017,February 6, 2018, the FPSC approved a stipulation that would apply tax savings resulting from the Tax Act toward storm costs effective January 2018 in lieu of implementing a storm surcharge. On May 31, 2018, Duke Energy Florida filed for recovery of the 2017storm costs relating to Hurricane Irma and Hurricane Nate, as well as the replenishment of Duke Energy Florida's storm reserve. Storm costs are currently expected to be fully recovered by approximately mid-2021. On April 9, 2019, Duke Energy Florida filed an unopposed motion to approve a settlement resolving all outstanding issues related to the May 31, 2018 filing. The commission has scheduled a hearing to begin on May 21, 2019, to consider this Storm Cost Settlement with the FPSC. The 2017 Settlement was approved by the FPSCAgreement. An order disallowing recovery of these costs could have an adverse impact on October 25, 2017.Progress Energy's results of operations, financial position and cash flows. See Note 43 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information aboutinformation.
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the 2017 Settlement.  In accordance with the 2017 Settlement, Duke Energy Florida will not seek recoveryRegistrants' Annual Reports on Form 10-K for the year ended December 31, 2018, for discussion of any costsrisks associated with the ongoing Westinghouse contract litigation, which is currently being appealed.  See Note 5 to the Condensed Consolidated Financial Statements, “Commitments and Contingencies” for additional information about the litigation.  An unfavorable appeals ruling on that matter could have an adverse impact on Duke Energy Florida’s financial position, results of operations and cash flows. 

In September 2017, Hurricane Irma caused extensive damage and widespread power outages within the Duke Energy Florida service territory. Duke Energy Florida has not completed the final accumulation of storm restoration costs incurred. Total storm restoration costs, including capital, are currently estimated at approximately $500 million. In accordance with a regulatory order with FPSC, certain incremental operation and maintenance storm restoration costs are classified as a regulatory asset recognizing the probable recoverability of these costs under FPSC's storm rule. The Company will make a petition by the end of 2017 to FPSC for recovery of costs. Duke Energy Florida's cash flows could be impacted by the timing of cost recovery. See Note 4, "Regulatory Matters," to the Condensed Consolidated Financial Statements for additional information.Tax Act.

110103

PART I
MD&ADUKE ENERGY PROGRESS


DUKE ENERGY PROGRESS
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the ninethree months ended September 30, 2017,March 31, 2019, and 20162018 and the Annual Report on Form 10-K for the year ended December 31, 2016.2018.
Results of Operations
Nine Months Ended September 30,Three Months Ended March 31,
(in millions)2017
 2016
 Variance
2019
 2018
 Variance
Operating Revenues$3,878
 $4,103
 $(225)$1,484
 $1,460
 $24
Operating Expenses          
Fuel used in electric generation and purchased power1,214
 1,441
 (227)515
 509
 6
Operation, maintenance and other1,032
 1,067
 (35)335
 381
 (46)
Depreciation and amortization536
 526
 10
290
 235
 55
Property and other taxes120
 119
 1
44
 35
 9
Impairment charges—
 1
 (1)—
 32
 (32)
Total operating expenses2,902
 3,154
 (252)1,184
 1,192
 (8)
Gains on Sales of Other Assets and Other, net3
 2
 1
—
 1
 (1)
Operating Income979
 951
 28
300
 269
 31
Other Income and Expenses47
 47
 —
Other Income and Expenses, net24
 18
 6
Interest Expense217
 188
 29
77
 81
 (4)
Income Before Income Taxes809
 810
 (1)247
 206
 41
Income Tax Expense262
 271
 (9)44
 29
 15
Net Income$547
 $539
 $8
$203
 $177
 $26
The following table shows the percent changes in GWh sales and average number of customers. The percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized.
Increase (Decrease) over prior period20172019
Residential sales(4.610.9)%
General service sales(2.05.2)%
Industrial sales0.52.6 %
Wholesale power sales(5.69.7)%
Joint dispatch sales(35.310.6)%
Total sales(7.45.1)%
Average number of customers1.3 %
NineThree Months Ended September 30, 2017,March 31, 2019, as Comparedcompared to September 30, 2016March 31, 2018
Operating Revenues. The variance was driven primarily by:
a $242$54 million decreaseincrease in fuel revenues due to lower retail sales and changes in generation mix;pricing from impacts of the prior year North Carolina rate case; and
a $73$15 million increase in JAAR revenues in conjunction with implementation of new base rates.
Partially offset by:
a $19 million decrease in retail sales, net of fuel revenues, due to less favorableunfavorable weather in the current year.
Partially offset by:year;
a $41$16 million increase in rider revenues primarily due to energy efficiency programs;
a $29 million increase in retail pricing due to the Duke Energy Progress South Carolina rate case;
a $21 million increasedecrease in wholesale power revenues, net of fuel revenues, primarily due to higherlower peak demand.demand; and
a $14 million decrease in weather–normal retail sales volumes.
Operating Expenses. The variance was driven primarily by:
a $227 million decrease in fuel expense primarily due to lower retail sales and changes in generation mix; and
a $35$46 million decrease in operation, maintenance and other expense primarily due to prior year impacts associated with the North Carolina rate case and lower storm restoration costs.employee benefit and outage costs; and
Interest Expense. Thea $32 million decrease in impairment charges due to prior year impacts associated with the North Carolina rate case.
Partially offset by:
a $55 million increase wasin depreciation and amortization expense primarily due to higher debt outstanding, as well as interest charges onamortization of deferred coal ash costs and new depreciation rates associated with the prior year North Carolina fuel overcollections.rate case; and
a $9 million increase in property and other taxes primarily due to a favorable sales and use tax credit in the prior year.

104

MD&ADUKE ENERGY PROGRESS


Income Tax Expense. The varianceincrease in tax expense was primarily due to the favorable impact of research credits and lower North Carolina corporate tax rates.an increase in pretax income. The effective tax ratesETRs for the ninethree months ended September 30, 2017,March 31, 2019, and 20162018 were 32.417.8 percent and 33.514.1 percent, respectively. The decreaseincrease in the effective tax rateETR was primarily due to lower amortization of excess deferred taxes in the favorable impact of research credits and lower North Carolina corporate tax rates.current year.

111

PART I

Matters Impacting Future Results
An orderOn May 8, 2019, Duke Energy Progress received a Commission Directive from regulatory authorities disallowingthe PSCSC granting its request for a retail rate increase but denying recovery of costs related to closure ofcertain coal ash impoundments could have an adverse impact oncosts. Duke Energy Progress’ financial position,Progress intends to file a Petition for Rehearing with the PSCSC. Duke Energy Progress' results of operations, financial position and cash flows.flows could be adversely impacted if coal ash costs are not ultimately approved for recovery. See Note 43 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,"Regulatory Matters," 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 futurewere eligible for reassessment as low risk pursuant to legislation signed by the former North Carolina governorenacted on July 14, 2016. On November 14, 2018, NCDEQ issued final low-risk classifications for these impoundments, indicating that Duke Energy Progress' estimated AROs relatedProgress had satisfied the permanent replacement water supply and certain dam improvement requirements set out in the Coal Ash Management Act. On April 1, 2019, NCDEQ issued a closure determination requiring Duke Energy Progress to the closure of North Carolinaexcavate all remaining coal ash impoundments are based upon the mandated closure method or a probability weighting of potential closure methods for the impoundments that may be reassessed to low risk. As the final risk ranking classifications in North Carolina are delineated,Carolina. On April 26, 2019, Duke Energy Progress filed a Petition for Contested Case Hearings in the Office of Administrative Hearings to challenge NCDEQ's determination that all ash basins must be excavated. Duke Energy Progress intends to seek recovery of all costs through the ratemaking process consistent with previous proceedings. As the final closure plans and corrective action measures are developed and approved for each site, the closure work progresses, and the closure method scope and remedial action methods are determined, the complexity of work and the amount of coal combustion material could be different than originally estimated and, therefore, could materially impact Duke Energy Progress' results of operations, financial position.position and cash flows. See Note 9 in Duke Energy's Annual Report on Form 10-K for4 to the year ended December 31, 2016, "Asset Retirement Obligations,Condensed Consolidated Financial Statements, "Commitments and Contingencies," for additional information.
Duke Energy Progress is a party to multiple lawsuits and subject to fines and other penalties related to operations at certain North Carolina facilities with ash basins. As noted above, the order issued in the Duke Energy Progress North Carolinas rate case supporting recovery of past coal ash remediation costs has been appealed by various parties. The outcome of these appeals, lawsuits, fines and penalties could have an adverse impact on Duke Energy Progress’ financial position, results of operations, financial position and cash flows. See Note 5Notes 3 and 4 to the Condensed Consolidated Financial Statements, "Regulatory Matters" and “Commitments and Contingencies,” respectively, for additional information.
InDuke Energy Carolinas received an order from the fourth quarterNCUC, which denied the Grid Rider Stipulation and deferral treatment of 2016,grid improvement costs. The NCUC did allow Duke Energy Carolinas to petition for deferral of grid modernization costs outside of a general rate case proceeding if it can show financial hardship or a stipulation that includes greater consensus among intervening parties on costs being classified as grid modernization. While Duke Energy Progress did not request recovery of these costs in its most recent case with the NCUC, Duke Energy Progress may request recovery of certain grid modernization costs in future regulatory proceedings. If the NCUC were to rule similarly, Duke Energy Progress' results of operations, financial position and cash flows could be adversely impacted if grid modernization costs are not ultimately approved for recovery and/or deferral treatment.
During the last half of 2018, Duke Energy Progress' service territory was impacted by several named storms. Hurricane MatthewFlorence, Hurricane Michael and Winter Storm Diego caused historic flooding, extensive damage and widespread power outages withinin the service territory. A significant portion of the incremental operation and maintenance expenses related to these storms have been deferred. On December 21, 2018, Duke Energy Progress service territory.filed with the NCUC a petition for approval to defer the incremental storm costs incurred to a regulatory asset for recovery in the next base rate case. Duke Energy Progress filed a petitionsimilar request with the NCUC requesting an accounting order to defer incremental operationPSCSC on January 11, 2019, which also included a request for the continuation of prior deferrals requested for other storms, 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 will address this request in Duke Energy Progress' currently pending rate case. A finalon January 30, 2019, the PSCSC issued a directive approving the deferral request. An order from the NCUC that disallowsregulatory authorities disallowing the deferral and future recovery of all or a significant portion of the incremental storm restoration costs incurred could result inhave an adverse impact on Duke Energy Progress' financial position, results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy Progress filed a general rate caseRegistrants' Annual Reports on Form 10-K for the year ended December 31, 2018, for discussion of risks associated with the NCUC on June 1, 2017. Duke Energy Progress will seek 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' earnings could be adversely impacted if the rate increase is delayed or denied by the NCUC.Tax Act.

112105

PART I
MD&ADUKE ENERGY FLORIDA


DUKE ENERGY FLORIDA
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the ninethree months ended September 30, 2017,March 31, 2019, and 20162018 and the Annual Report on Form 10-K for the year ended December 31, 2016.2018.
Results of Operations
Nine Months Ended September 30,Three Months Ended March 31,
(in millions)2017
 2016
 Variance
2019
 2018
 Variance
Operating Revenues$3,551
 $3,538
 $13
$1,086
 $1,115
 $(29)
Operating Expenses          
Fuel used in electric generation and purchased power1,374
 1,391
 (17)410
 467
 (57)
Operation, maintenance and other610
 623
 (13)230
 237
 (7)
Depreciation and amortization423
 378
 45
165
 150
 15
Property and other taxes265
 256
 9
93
 88
 5
Impairment charges137
 4
 133
Total operating expenses2,809
 2,652
 157
898
 942
 (44)
Operating Income742
 886
 (144)188
 173
 15
Other Income and Expenses45
 30
 15
Other Income and Expenses, net13
 21
 (8)
Interest Expense211
 143
 68
82
 71
 11
Income Before Income Taxes576
 773
 (197)119
 123
 (4)
Income Tax Expense208
 286
 (78)23
 20
 3
Net Income$368
 $487
 $(119)$96
 $103
 $(7)
The following table shows the percent changes in GWh sales and average number of customers. The percentages for retail customer classes represent billed sales only. Wholesale power sales include both billed and unbilled sales. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized.
Increase (Decrease) over prior period20172019
Residential sales(3.66.9)%
General service sales(1.34.9)%
Industrial sales(1.410.7)%
Wholesale and other18.5(33.0)%
Total sales(1.28.8)%
Average number of customers1.51.7 %
NineThree Months Ended September 30, 2017,March 31, 2019, as Comparedcompared to September 30, 2016March 31, 2018
Operating Revenues. The variance was driven primarily by:
a $52 million increase in retail pricing primarily due to the base rate adjustment for the Osprey acquisition and the completion of the Hines Energy Complex Chiller Uprate Project;
a $38 million increase in rider revenues primarily due to nuclear asset securitization beginning in July 2016 and extended power uprate project revenues beginning in 2017; and
a $30 million increase in weather-normal sales volumes to retail customers in the current year.
Partially offset by:
a $59 million decrease in retail sales, net of fuel revenues, due to less favorable weather in the current year, including lost revenues related to Hurricane Irma;
a $31 million decrease in wholesale power revenues primarily due to contracts that expired in the prior year; and
a $14$51 million decrease in fuel and capacity revenues primarily due to a decrease in demand and a decrease in fuel and capacity rates billed to retail customers, partiallycustomers;
a $17 million decrease in retail sales, net of fuel revenues, due to unfavorable weather in the current year; and
a $12 million decrease in retail rider revenues primarily related to decreased revenue requirements in the current year.
Partially offset by anby:
a $57 million increase in fuel ratesretail pricing due to retail customers.base rate adjustments related to the Citrus County CC being placed in service and annual increases from the 2017 Settlement Agreement.
Operating Expenses. The variance was driven primarily by:
a $133$57 million increasedecrease in impairment chargesfuel used in electric generation and purchased power primarily due to the write-off of remaining unrecovered Levy Nuclear Project costs in the current year;lower purchased power and lower deferred fuel and capacity expenses; and
a $45$7 million decrease in operations, maintenance and other expense primarily due to lower employee benefit costs.
Partially offset by:
a $15 million increase in depreciation and amortization expense primarily due to nuclear regulatory asset amortization, as well asthe Citrus County CC being placed in service and additional plant in service; and
a $5 million increase in property and other taxes primarily due to higher property taxes due to additional plant in service.

113

PART I

Partially offset by:
a $17 million decrease in fuel expense primarily due to decreased purchased power and lower capacity costs, partially offset by higher generation and deferred fuel costs; and
a $13 million decrease in operation, maintenance and other expense primarily due to lower planned outage costs and lower severance expenses, partially offset by higher storm restoration costs in the current year.
Other Income and Expenses.Expenses, net. The variance was driven primarily by higher AFUDC equity.equity return ending on the Citrus County CC in the fourth quarter of 2018.
Interest Expense. The variance was driven primarily due to higher debt outstanding and lower debt returns driven by the CR3 regulatory assetAFUDC debt return ending on the Citrus County CC in June 2016 upon securitization.the fourth quarter of 2018.

106

MD&ADUKE ENERGY FLORIDA


Income Tax Expense. The varianceincrease in tax expense was primarily due to a decreaselower AFUDC equity in pretax income.the current year. The effective tax ratesETRs for the ninethree months ended September 30, 2017,March 31, 2019, and 20162018 were 36.119.3 percent and 37.016.3 percent, respectively. The increase in the ETR was primarily due to lower AFUDC equity in the current year.
Matters Impacting Future Results
In September 2017,On October 10, 2018, Hurricane IrmaMichael made landfall on Florida's Panhandle as a Category 5 hurricane, the most powerful storm to hit the Florida Panhandle in recorded history. The storm caused extensivesignificant damage and widespread power outages within the service territory of Duke Energy Florida, service territory.particularly from Panama City Beach to Mexico Beach. Duke Energy Florida has not completed the final accumulation of total estimated storm restoration costs incurred. TotalGiven the magnitude of the storm, restoration costs, including capital, are currently estimated at approximately $500 million. In accordance with a regulatory order with FPSC, certain incremental operation and maintenance storm restoration costs are classified as a regulatory asset recognizing the probable recoverability of these costs under FPSC's storm rule. The Company will make a petition by the end of 2017 to FPSC for recovery of costs. Duke Energy Florida's cash flows could be impacted by the timing of cost recovery. See Note 4, "Regulatory Matters," to the Condensed Consolidated Financial Statements for additional information.
On August 29, 2017, Duke Energy Florida filed the 2017 Settlementa petition on April 30, 2019, with the FPSC. TheFPSC to recover incremental storm costs consistent with the provisions in its 2017 Settlement was approved bySettlement. An order from regulatory authorities disallowing the FPSCfuture recovery of storm restoration costs could have an adverse impact on October 25, 2017.Duke Energy Florida's financial position, results of operations and cash flows. See Note 43 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information aboutinformation.
On February 6, 2018, the 2017 Settlement. In accordance withFPSC approved a stipulation that would apply tax savings resulting from the 2017 Settlement,Tax Act toward storm costs effective January 2018 in lieu of implementing a storm surcharge. On May 31, 2018, Duke Energy Florida will not seekfiled for recovery of anythe storm costs associated withrelating to Hurricane Irma and Hurricane Nate, as well as the ongoing Westinghouse contract litigation, which isreplenishment of Duke Energy Florida's storm reserve. Storm costs are currently being appealed. See Note 5expected to be fully recovered by approximately mid-2021. On April 9, 2019, Duke Energy Florida filed an unopposed motion to approve a settlement resolving all outstanding issues related to the Condensed Consolidated Financial Statements, “Commitments and Contingencies” for additional information about the litigation.May 31, 2018 filing. The commission has scheduled a hearing to begin on May 21, 2019, to consider this Storm Cost Settlement Agreement. An unfavorable appeals ruling on that matterorder disallowing recovery of these costs could have an adverse impact on Duke Energy Florida’s financial position,Florida's results of operations, financial position and cash flows. See Note 3 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.

See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy Registrants' Annual Reports on Form 10-K for the year ended December 31, 2018, for discussion of risks associated with the Tax Act.
114

PART I

DUKE ENERGY OHIO
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the ninethree months ended September 30, 2017,March 31, 2019, and 20162018 and the Annual Report on Form 10-K for the year ended December 31, 2016.2018.
Results of Operations
Nine Months Ended September 30,Three Months Ended March 31,
(in millions)2017
 2016
 Variance
2019
 2018
 Variance
Operating Revenues          
Regulated electric$1,036
 $1,053
 $(17)$355
 $336
 $19
Regulated natural gas360
 358
 2
176
 174
 2
Nonregulated electric and other30
 22
 8
—
 14
 (14)
Total operating revenues1,426
 1,433
 (7)531
 524
 7
Operating Expenses          
Fuel used in electric generation and purchased power – regulated283
 340
 (57)93
 92
 1
Fuel used in electric generation and purchased power – nonregulated42
 37
 5
—
 15
 (15)
Cost of natural gas69
 64
 5
54
 54
 —
Operation, maintenance and other385
 367
 18
132
 131
 1
Depreciation and amortization193
 175
 18
64
 70
 (6)
Property and other taxes204
 195
 9
84
 77
 7
Impairment charges1
 —
 1
Total operating expenses1,177
 1,178
 (1)427
 439
 (12)
Gains on Sales of Other Assets and Other, net1
 2
 (1)
Operating Income250
 257
 (7)
Other Income and Expenses12
 6
 6
Losses on Sales of Other Assets and Other, net—
 (106) 106
Operating Income (Loss)104
 (21) 125
Other Income and Expenses, net9
 6
 3
Interest Expense67
 63
 4
30
 22
 8
Income from Continuing Operations Before Income Taxes195
 200
 (5)
Income Tax Expense from Continuing Operations67
 65
 2
Income from Continuing Operations128
 135
 (7)
(Loss) Income from Discontinued Operations, net of tax(1) 36
 (37)
Net Income$127
 $171
 $(44)
Income (Loss) Before Income Taxes83
 (37) 120
Income Tax Expense (Benefit)14
 (12) 26
Net Income (Loss)$69
 $(25) $94

107

MD&ADUKE ENERGY OHIO


The following table shows the percent changes in GWh sales of electricity, dekatherms of natural gas delivered and average number of electric and natural gas customers. The percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized.
 ElectricNatural Gas
Increase (Decrease) over prior year2019
2019
Residential sales(1.6)%4.5%
General service sales(1.9)%5.5%
Industrial sales0.5 %0.8%
Wholesale electric power sales42.0 %n/a
Other natural gas salesn/a
—%
Total sales1.5 %3.8%
Average number of customers0.7 %0.8%
Three Months Ended March 31, 2019, as compared to March 31, 2018
Operating Revenues. The variance was driven primarily by:
a $19 million increase in base price as a result of rate case impacts;
a $5 million increase in weather-normal sales volumes; and
a $4 million increase in point-to-point transmission revenues.
Partially offset by:
a $9 million decrease in rider revenues related to the implementation of new base rates;
a $9 million decrease in FTR revenues; and
a $3 million decrease in OVEC revenues.
Operating Expenses. The variance was driven primarily by:
a $14 million decrease in fuel used in electric generation and purchased power expense due to prior year's outage at East Bend Station and the deferral of OVEC related purchased power costs; and
a $6 million decrease in depreciation and amortization expense primarily due to the ending of smart grid amortizations.
Partially offset by:
a $7 million increase in property and other taxes primarily due to higher property tax expense.
Other Income and Expenses, net. The variance was driven primarily by an increase in intercompany money pool interest income.
Losses on Sales of Other Assets and Other, net. The increase was driven by the loss on the prior year sale of Beckjord.
Interest Expense. The variance was driven primarily by higher debt outstanding in the current year.
Income Tax Expense. The increase in tax expense was primarily due to an increase in pretax income. The ETRs for the three months ended March 31, 2019, and 2018 were 16.9 percent and 32.4 percent, respectively. The decrease in the ETR was primarily due to the amortization of excess deferred taxes.
Matters Impacting Future Results
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy Registrants' Annual Reports on Form 10-K for the year ended December 31, 2018, for discussion of risks associated with the Tax Act.

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DUKE ENERGY INDIANA
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the three months ended March 31, 2019, and 2018 and the Annual Report on Form 10-K for the year ended December 31, 2018.
Results of Operations
 Three Months Ended March 31,
(in millions)2019
 2018
 Variance
Operating Revenues$768
 $731
 $37
Operating Expenses     
Fuel used in electric generation and purchased power257
 232
 25
Operation, maintenance and other189
 181
 8
Depreciation and amortization131
 130
 1
Property and other taxes19
 20
 (1)
Total operating expenses596
 563
 33
Losses on Sales of Other Assets and Other, net(3) —
 (3)
Operating Income169
 168
 1
Other Income and Expenses, net19
 7
 12
Interest Expense43
 40
 3
Income Before Income Taxes145
 135
 10
Income Tax Expense35
 35
 —
Net Income$110
 $100
 $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) over prior year20172019
Residential sales(5.81.3)%
General service sales(3.20.3)%
Industrial sales(1.30.2)%
Wholesale power sales127.3(38.2)%
Total sales(2.55.3)%
Average number of customers0.81.4 %
NineThree Months Ended September 30, 2017,March 31, 2019, as Comparedcompared to September 30, 2016
Operating Revenues. The variance was driven primarily by:
a $59 million decrease in fuel revenues primarily due to lower electric fuel prices and sales volumes, partially offset by higher costs passed through to natural gas customers due to higher natural gas prices; and
a $16 million decrease in electric retail sales, net of fuel revenues, due to less favorable weather in the current year.
Partially offset by:
a $40 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;
a $17 million increase in PJM Interconnection, LLC (PJM) transmission revenues; and
a $9 million increase in other revenues related to OVEC.

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Operating Expenses. The variance was driven primarily by:
an $18 million increase in operation, maintenance and other expense due to higher energy efficiency program costs and higher transmission and distribution operations costs;
an $18 million increase in depreciation and amortization expense due to additional plant in service and a true up related to Smart Grid assets in the prior year;
a $9 million increase in property and other taxes primarily due to higher property taxes;
a $5 million increase in nonregulated fuel expenses related to OVEC; and
a $5 million increase in natural gas costs due to higher natural gas prices.
Partially offset by:
a $57 million decrease in fuel expense driven by lower sales volumes and lower electric fuel costs.
Other Income and Expenses. The increase was primarily driven by higher AFUDC equity.
Interest Expense. The increase was primarily driven by interest related to new debt issued in June 2016.
Discontinued Operations, Net of Tax. The variance was driven by a prior year income tax benefit resulting from immaterial out of period deferred tax liability adjustments related to the Midwest Generation Disposal Group.
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 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 DecemberMarch 31, 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.
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.
On September 1, 2017, Duke Energy Kentucky filed a base rate case with the KPSC to recover costs of capital investments in generation, transmission and distribution systems and to recover other incremental expenses since its last rate case filed in 2006. Duke Energy Kentucky’s earnings could be adversely impacted if the rate increase is delayed or denied by the KPSC.

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DUKE ENERGY INDIANA
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the nine months ended September 30, 2017, and 2016 and the Annual Report on Form 10-K for the year ended December 31, 2016.
Results of Operations
 Nine Months Ended September 30,
(in millions)2017
 2016
 Variance
Operating Revenues$2,302
 $2,225
 $77
Operating Expenses     
Fuel used in electric generation and purchased power744
 690
 54
Operation, maintenance and other541
 526
 15
Depreciation and amortization336
 345
 (9)
Property and other taxes56
 67
 (11)
Impairment charges—
 8
 (8)
Total operating expenses1,677
 1,636
 41
Gains on Sales of Other Assets and Other, net1
 —
 1
Operating Income626
 589
 37
Other Income and Expenses27
 15
 12
Interest Expense132
 136
 (4)
Income Before Income Taxes521
 468
 53
Income Tax Expense203
 159
 44
Net Income$318
 $309
 $9
The following table shows the percent changes in GWh sales and average number of customers. The percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized.
Increase (Decrease) over prior year2017
Residential sales(5.5)%
General service sales(2.5)%
Industrial sales0.1 %
Wholesale power sales(19.8)%
Total sales(6.2)%
Average number of customers0.8 %
Nine Months Ended September 30, 2017, as Compared to September 30, 20162018
Operating Revenues. The variance was driven primarily by:
a $64 million increase in rider revenues related to the Edwardsport IGCC plant and energy efficiency programs; and
a $47$23 million increase in fuel revenues primarily due to higher purchased power costs passed throughfuel rates billed to customers, and higher financial transmission right (FTR) revenues.
Partiallypartially offset by:
an $18 million decrease in retail salesby lower wholesale fuel revenues due to less favorable weather in the current year;expiration of a contract with a wholesale customer; and
a $15$19 million decreaseincrease in wholesale powerrate rider revenues net of fuel, primarily duerelated to a decrease in demandhigher rates for the Edwardsport IGCC plant, the TDSIC rider and contracts that expired in the current year.MISO rider revenues.
Operating Expenses. The variance was driven primarily by:
a $54$25 million increase in fuel used in electric generation and purchased power expense primarily due to higher purchased power volumes and prices;amortization of deferred fuel costs; and
a $15an $8 million increase in operation, maintenance and other expense due to growth in energy efficiency programs and higher transmission costs.
Partially offset by:
an $11 million decrease in property and other taxes primarily due to utilization of ITCs;
a $9 million decrease in depreciationhigher transmission costs and amortization primarily duecustomer related costs related to the 2017 deferral of certain asset retirement obligations and the completion of the amortization of a regulated asset for costs associated with the termination of a gasification services agreement in 2000, partially offset by new IGCC rider rates that result in a lower deferral amount and higher depreciation due to additional plant in service; and

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an $8 million decrease in impairments and other charges primarily due to the early retirement of certain metering equipment in the prior year.
energy efficiency programs.
Other Income and Expenses.Expenses, net. The increase was primarily driven by higher AFUDC equity.
Income Tax Expense. The variance was primarily due to an increase in pretax income. The effective tax rates for the nine months ended September 30, 2017, and 2016 were 39.0 percent and 34.0 percent, respectively. The increase in the effective tax rate was primarily due to an immaterial out of period adjustment in the prior year related to deferred tax balances associated with property, plant and equipment.life insurance proceeds.

109

MD&ADUKE ENERGY INDIANA


Matters Impacting Future Results
On April 17, 2015, the EPA published in the Federal Register a rule to regulate the disposal of CCR from electric utilities as solid waste. Duke Energy Indiana has interpreted the rule to identify the coal ash basin sites impacted and has assessed the amounts of coal ash subject to the rule and a method of compliance. Duke Energy Indiana's interpretation of the requirements of the CCR rule is subject to potential legal challenges and further regulatory approvals, which could result in additional ash basin closure requirements, higher costs of compliance and greater AROs. Additionally, Duke Energy Indiana has retired facilities that are not subject to the CCR rule. Duke Energy Indiana may incur costs at these facilities to comply with environmental regulations or to mitigate risks associated with on-site storage of coal ash. An order from regulatory authorities disallowing recovery of costs related to closure of ash basins could have an adverse impact on Duke Energy Indiana's financial position, results of operations, financial position and cash flows. See Note 43 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
The Indiana Utility Regulatory Commission (IURC) approved a settlement agreement betweenSee "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy Indiana and multiple parties that resolves all disputes, claims and issues fromRegistrants' Annual Reports on Form 10-K for the IURC proceedings related to post-commercial operating performance and recoveryyear ended December 31, 2018, for discussion of ongoing operating and capital costs atrisks associated with the Edwardsport IGCC generating facility. The settlement agreement imposed a cost cap for retail recoverable operations and maintenance costs through 2017. An inability to manage operating 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.Tax Act.

118

PART I

PIEDMONT
Management’s Discussion and Analysis should be read in conjunction with the Condensed Consolidated Financial Statements and Notes for the ninethree months ended September 30, 2017, Piedmont'sMarch 31, 2019, and 2018 and the Annual Report on Form 10-K for the year ended October 31, 2016, and the Form 10‑QT as of December 31, 2016, for the transition period from November 1, 2016, to December 31, 2016.2018.
Results of Operations
Nine Months Ended September 30,Three Months Ended March 31,
(in millions)2017
 2016
 Variance
2019
 2018
 Variance
Operating Revenues     $579
 $553
 $26
Regulated natural gas$877
 $815
 $62
Nonregulated natural gas and other7
 8
 (1)
Total operating revenues884
 823
 61
Operating Expenses          
Cost of natural gas333
 289
 44
273
 259
 14
Operation, maintenance and other226
 221
 5
80
 82
 (2)
Depreciation and amortization109
 103
 6
42
 39
 3
Property and other taxes38
 33
 5
12
 12
 —
Impairment charges7
 —
 7
Total operating expenses713
 646
 67
407
 392
 15
Operating Income171
 177
 (6)172
 161
 11
Other Income and Expenses     
Equity in earnings of unconsolidated affiliates8
 25
 (17)2
 2
 —
Other income and expenses, net(1) (1) —
4
 3
 1
Total other income and expenses7
 24
 (17)6
 5
 1
Interest Expense59
 50
 9
22
 21
 1
Income Before Income Taxes119
 151
 (32)156
 145
 11
Income Tax Expense43
 57
 (14)34
 35
 (1)
Net Income$76
 $94
 $(18)$122
 $110
 $12
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 year20172019
Residential deliveries(19.26.7)%
Commercial deliveries(11.85.5)%
Industrial deliveries(4.34.2)%
Power generation deliveries(11.01.8)%
For resale(6.93.3)%
Total throughput deliveries(10.52.1)%
Secondary market volumes6.213.2 %
Average number of customers1.61.2 %
Piedmont's throughput was 334,781,316 dekatherms and 374,214,204 dekatherms for the nine months ended September 30, 2017, and 2016, respectively. Due to the margin decoupling mechanism in North Carolina and weather normalization adjustment (WNA)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 fullprecise recovery of approved margin during periods when winter weather is significantly warmer or colder than normal.
NineThree Months Ended September 30, 2017,March 31, 2019, as Comparedcompared to September 30, 2016March 31, 2018
Operating Revenues. The variance was driven primarily by:
a $44$14 million increase due to higher natural gas costs passed through to customers primarily due to higher natural gas prices; andprices associated with off-system sales;
a $17$7 million increase in revenues to residential and commercial customers, net of natural gas costs passed through to customers, primarily due to Integrity Management Rider (IMR)NCUC approval related to tax reform accounting from fixed rate adjustments and customer growth, partially offset by wholesale marketing revenue.contracts;

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MD&APIEDMONT


a $5 million increase primarily due to North Carolina and Tennessee IMR increases; and
a $4 million increase primarily due to customer growth.
Partially offset by:
a $5 million decrease due to a reduction of rates in South Carolina.
Operating Expenses. The variance was primarily driven by:
a $44$14 million increase in costscost of natural gas primarily due to the impact of higher natural gas prices;prices on off-system sales and unbilled revenue.
an $11 million increase in depreciation expense
Matters Impacting Future Results
See "Item 7. Management's Discussion and propertyAnalysis of Financial Condition and franchise taxes due to additional plant in service; and
a $7 million increase due to an impairmentResults of software resulting from planned accounting system and process integration in 2018.
Equity in Earnings of Unconsolidated Affiliates. The decrease was primarily due to equity earnings from the investment in SouthStar Energy Services, LLC (SouthStar)Operations," in the prior year. Piedmont sold its 15 percent membership interest in SouthStarDuke Energy Registrants' Annual Reports on October 3, 2016.
Income Tax Expense. The variance was primarily due to a decrease in pretax income. The effective tax ratesForm 10-K for the nine monthsyear ended September 30, 2017, and 2016 were 36.1 percent and 37.7 percent, respectively. The decrease inDecember 31, 2018, for discussion of risks associated with the effective tax rate was primarily due to favorable tax return true ups and lower North Carolina corporate tax rates.Tax Act.

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PART I

LIQUIDITY AND CAPITAL RESOURCES
Sources and Uses of Cash
Duke Energy relies primarily upon cash flows from operations, debt and equity issuances and its existing cash and cash equivalents to fund its liquidity and capital requirements. Duke Energy’s capital requirements arise primarily from capital and investment expenditures, repaying long-term debt and paying dividends to shareholders. See Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2016,2018, for a summary and detailed discussion of projected primary sources and uses of cash for 20172019 to 2019.2021. There have been no material changes to Duke Energy's liquidity and capital requirements from December 31, 2018, except as noted below:
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 issued $2 billion of debt and certain of its other subsidiaries in a money pool arrangement. The companies with short-term funds may provide short-term loans to affiliates participatingdrew $650 million under this arrangement.
the Duke Energy andProgress Term Loan Facility during 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 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
three months ended March 31, 2019. Refer to Note 6 to the Condensed Consolidated Financial Statements, "Debt and Credit Facilities," for further information regarding Duke Energy's debt issuances, debt maturities and available credit facilities including the Master Credit Facility.
Shelf Registration
In September 2016,March 2019, Duke Energy filed a registration statement (Form S-3) with the U.S. Securities and Exchange Commission (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 timeissued preferred stock for net proceeds of future offerings. The registration statement also allows for the issuance of common stock by Duke Energy.
In January 2017, Duke Energy amended its Form S-3 to add Piedmont as a registrant and included in the amendment a prospectus for Piedmont under which it may issue debt securities in the same manner as other Duke Energy Registrants.
DEBT MATURITIES
$974 million. Refer to Note 615 to the CondensedConsolidated Financial Statements, "Debt and Credit Facilities,"Stockholders' Equity," for further information regarding significant components of Current Maturities of Long-Term Debt on the Condensed Consolidated Balance Sheets.
CASH FLOWS FROM OPERATING ACTIVITIES
Cash flows from operations of Electric Utilities and Infrastructure and Gas Utilities and Infrastructure are primarily driven by sales of electricity and natural gas, respectively, and costs of operations. These cash flows from operations are relatively stable and comprise a substantial portion of Duke Energy’s operating cash flows. Weather conditions, working capital and commodity price fluctuations, and unanticipated expenses including unplanned plant outages, storms, legal costs and related settlements 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 and Revolving Facilities, to support these operations, including Hurricane Irma storm restoration costs. 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 Reports on Form 10-K for additional information).
Restrictive Debt Covenants
The Duke Energy Registrants’ debt and credit agreements contain various financial and other covenants. The Master Credit Facility contains a covenant requiring the debt-to-total capitalization ratio not to exceed 65 percent for all borrowers except Piedmont. 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 September 30, 2017, each of the Duke Energy Registrants was 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 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 Moody’s Investors Service, Inc. (Moody’s) and Standard & Poor’s Rating Services (S&P). In April 2017, Fitch Ratings, Inc. (Fitch) withdrew credit ratings of the Subsidiary Registrants, with the exclusion of Piedmont, which was not previously rated by Fitch due to commercial reasons. Fitch will continue to provide credit ratings for Duke Energy Corporation.
In May 2017, Moody’s changed its rating outlook for Duke Energy Corporation to stable from negative and affirmed Duke Energy Corporation's credit ratings. In August 2017, Moody's changed its rating outlook for Duke Energy Ohio to positive from stable and affirmed Duke Energy Ohio's credit ratings.

121Energy's equity issuances.

PART I

Cash Flow Information
The following table summarizes Duke Energy’s cash flows.
 Nine Months Ended Three Months Ended
 September 30, March 31,
(in millions) 2017
 2016
 2019
 2018
Cash flows provided by (used in):        
Operating activities $5,011
 $5,611
 $1,239
 $1,391
Investing activities (6,360) (5,555) (2,713) (2,264)
Financing activities 1,239
 5,266
 1,433
 947
Changes in cash and cash equivalents included in assets held for sale —
 11
Net (decrease) increase in cash and cash equivalents (110) 5,333
Cash and cash equivalents at beginning of period 392
 383
Cash and cash equivalents at end of period $282
 $5,716
Net (decrease) increase in cash, cash equivalents and restricted cash (41) 74
Cash, cash equivalents and restricted cash at beginning of period 591
 505
Cash, cash equivalents and restricted cash at end of period $550
 $579
OPERATING CASH FLOWS
The following table summarizes key components of Duke Energy’s operating cash flows.
 Nine Months Ended Three Months Ended
 September 30, March 31,
(in millions) 2017
 2016
 2019
 2018
 Variance
Net income $2,361
 $2,392
 $893
 $622
 $271
Non-cash adjustments to net income 3,937
 3,585
 1,301
 1,610
 (309)
Contributions to qualified pension plans (8) —
 —
 (141) 141
Payments for asset retirement obligations (420) (443) (152) (122) (30)
Payment for disposal of other assets —
 (105) 105
Working capital (859) 77
 (803) (473) (330)
Net cash provided by operating activities $5,011
 $5,611
 $1,239
 $1,391
 $(152)

111

MD&ALIQUIDITY AND CAPITAL RESOURCES


The variance was primarily due to:
a $936$38 million decrease in net income after adjustment for non-cash items primarily due to decreases in current year non-cash adjustments, partially offset by increases in revenues due to rate increases in the current year; and
a $330 million increase in cash flowsoutflows from working capital primarily due to thefluctuations in coal stock inventory and timing of the payment of accruals, increased taxes accrued resulting from an increased effective tax rate, warmer winter weatherpartially offset by current year decreases in accounts receivable due to higher miscellaneous and the absence of the International Disposal Group's operating cash flows.trade receivables at December 31, 2018.
Partially offset by:
a $321$141 million increasedecrease in net income after non-cash adjustments, primarily duecontributions to lower operation, maintenancequalified pension plans; and other expense and the additional Piedmont earnings contribution
a $105 million payment for disposal of Beckjord in the currentprior year.
INVESTING CASH FLOWS
The following table summarizes key components of Duke Energy’s investing cash flows.
 Nine Months Ended Three Months Ended
 September 30, March 31,
(in millions) 2017
 2016
 2019
 2018
 Variance
Capital, investment and acquisition expenditures $(6,211) $(5,450) $(2,630) $(2,161) $(469)
Other investing items (149) (105) (83) (103) 20
Net cash used in investing activities $(6,360) $(5,555) $(2,713) $(2,264) $(449)
The variance wasrelates primarily due to:
a $761 millionto an increase in capital investment and acquisition expenditures due to growthhigher overall investments in regulated generation investmentsthe Electric Utilities and natural gas infrastructure, partially offset by a reduction in Commercial Renewables capital expenditures.

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Infrastructure and Gas Utilities and Infrastructure segments.
FINANCING CASH FLOWS
The following table summarizes key components of Duke Energy’s financing cash flows.
 Nine Months Ended Three Months Ended
 September 30, March 31,
(in millions) 2017
 2016
 2019
 2018
 Variance
Issuances of long-term debt, net $3,675
 $7,659
 $1,536
 $753
 $783
Issuances of common stock 13
 21
 (8)
Issuances of preferred stock 974
 —
 974
Notes payable and commercial paper (619) (647) (408) 791
 (1,199)
Dividends paid (1,825) (1,731) (649) (599) (50)
Other financing items 8
 (15) (33) (19) (14)
Net cash provided by financing activities $1,239
 $5,266
 $1,433
 $947
 $486
The variance was primarily due to:
a $3,984$974 million increase in proceeds from the issuance of preferred stock; and
a $783 million increase in proceeds from net decrease in issuances of long-term debt driven principally byprimarily due to the prior year $3,750 milliontiming of senior unsecured notes used to fund a portionissuances and redemptions of the Piedmont acquisition, and prior year $1,294 million nuclear asset-recovery bonds,long-term debt.
Partially offset by a $1,047 million increase in current year redemptions; andby:
a $94$1,199 million current year increasedecrease in dividends paid.
Summarynet proceeds from issuances of Significant Debt Issuances
Refer to Note 6notes payable and commercial paper primarily due to the Condensed Consolidated Financial Statements, "Debtuse of proceeds from the preferred stock issuance and Credit Facilities," for further information regarding significantincreased long-term debt issuances.issuances to pay down outstanding commercial paper.
OTHER MATTERS
Environmental Regulations
The Duke Energy Registrants are subject to federal, state and local regulations regarding air and water quality, hazardous and solid waste disposal 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 43 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for further information regarding potential plant retirements and regulatory filings related to the Duke Energy Registrants.
Coal Combustion Residuals
In April 2015, the EPA published a rule to regulate the disposal of CCR from electric utilities as solid waste. The federal regulation classifies CCR as nonhazardous waste and allows for beneficial use of CCR with some restrictions. The regulation applies to all new and existing landfills, new and existing surface impoundments receiving CCR and existing surface impoundments that are no longer receiving CCR but contain liquid located at stations currently generating electricity (regardless of fuel source). The rule establishes requirements regarding landfill design, structural integrity design and assessment criteria for surface impoundments, groundwater monitoring, protection and remedial procedures and other operational and reporting procedures to ensure the safe disposal and management of CCR. 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 U.S. Court of Appeals for the District of Columbia (D.C. Circuit Court). On April 18, 2016, the EPA filed a motion with the federal court to settle five issues raised in litigation. On June 14, 2016, the court approved the motion with respect to all of those issues. Duke Energy does not expect a material impact from the settlement or that it will result in additional ARO adjustments. The Utility Solid Waste Activities Group filed a petition with the EPA seeking to have EPA reconsider certain provisions of the final rule, extend remaining compliance deadlines and ask the D.C. Circuit Court to hold the litigation in abeyance. While EPA has confirmed that it will reconsider certain provisions of the final rule, the D.C. Circuit Court denied EPA’s petition to hold the litigation in abeyance. Oral argument is scheduled for November 20, 2017.
In addition to the requirements of the federal CCR regulation, CCR landfills and surface impoundments will continue to be independently regulated by most states. 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 Retirement Obligations,” in Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2016.

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Coal Ash Management Act of 2014
Asset retirement obligationsOn March 26, 2019, NCDEQ granted Duke Energy’s application in part, extending by four months until December 1, 2019, the Coal Ash Act’s closure deadline applicable to the Sutton plant impoundments.

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MD&AOTHER MATTERS


AROs recorded on the Duke Energy Carolinas and Duke Energy Progress Condensed Consolidated Balance Sheets at September 30, 2017,March 31, 2019, and December 31, 2016,2018, include the legal obligation for closure of coal ash basins and the disposal of related ash as a result of the Coal Ash Act, the EPA CCR rule and other agreements. On July 14, 2016, the Coal Ash Act was amended, requiring Duke Energy to undertake dam improvement projects and to provide access to a permanent alternative drinking water source to certain residents within a half- mile of coal ash basin compliance boundaries and to certain other potentially impacted residents. The legislation ranked 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-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-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 all remaining sites, 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 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 is required to be completed no later than December 31, 2029. On October 5, 2016, Duke Energy announced Buck Steam Station as a first location for one of the beneficiation projects. On December 13, 2016, Duke Energy announced H.F. Lee as the second location. On June 30, 2017, Duke Energy announced the Cape Fear Plant as the third beneficiation location.
Provisions of the Coal Ash Act prohibit cost recovery in customer rates for unlawful discharge of ash impoundment waters occurring after January 1, 2014. The Coal Ash Act leaves the decision on cost recovery 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, 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 NCDEQ before closure work can begin.
For more information, see Note 9, “Asset7, "Asset Retirement Obligations,” in Duke Energy’s Annual Report on Form 10-K for the 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. Oral argument was held on September 14, 2017. It is unknown when the courts will rule on the petitions. The Duke Energy Registrants cannot predict the outcome of these matters.
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. As originally written, affected facilities were required to comply between 2018 and 2023, depending on timing of new Clean Water Act (CWA) permits and waste stream. Most of the steam electric generating facilities the Duke Energy Registrants own are affected sources. The Duke Energy Registrants are well-positioned to meet the majority of the requirements of the rule due to current efforts to convert to dry ash handling. Petitions challenging the rule have been filed by several groups. On March 16, 2015, Duke Energy Indiana filed its own legal challenge to the rule with the Seventh Circuit Court of Appeals specific to the ELG rule focused on the limits imposed on IGCC facilities (gasification wastewater). All challenges to the rule were consolidated in the Fifth Circuit Court of Appeals. The Fifth Circuit Court of Appeals granted EPA's request to stay the pending litigation on the ELG rule until August 12, 2017, and on August 22, 2017, the Fifth Circuit Court of Appeals granted EPA’s Motion to Govern Further Proceedings, thereby severing and suspending the claims related to flue gas desulfurization wastewater, bottom ash transport water and gasification wastewater. Claims regarding gasification wastewater were stayed, pending the issuance of the variance to Duke Energy Indiana. The litigation will continue as to claims related to other waste streams. 
On August 7, 2017, EPA issued a public notice regarding its proposed decision to grant a variance to Duke Energy Indiana for mercury and total suspended solids for gasification wastewater at its Edwardsport facility. The public comment period has ended, but EPA has not finalized its decision. Separate from the litigation, EPA finalized a rule on September 12, 2017, postponing the initial applicability date for bottom ash transport water and flue gas desulfurization wastewater from 2018 to 2020 and retaining the end applicability date of 2023. Also, as part of the rule, EPA reiterated its intent to conduct a new rulemaking to revise limitation guidelines for bottom ash transport water and flue gas desulfurization wastewater.
The Duke Energy Registrants cannot predict the outcome of these matters.

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Estimated Cost and Impacts of Rulemakings
Duke Energy will incur capital expenditures to comply with the environmental regulations and rules discussed above. The following table provides five-year estimated costs, excluding AFUDC, of new control equipment that may need to be installed on existing power plants primarily to comply with the Coal Ash Act requirements for conversion to dry disposal of bottom ash and fly ash, CWA 316(b) and ELGs through December 31, 2021. The table excludes ash basin closure costs recorded in Asset retirement obligations on the Condensed Consolidated Balance Sheets. For more information related to AROs, see Note 9, “Asset Retirement Obligations” in Duke Energy’s Annual Report on Form 10‑K for the year ended December 31, 2016.
(in millions)Estimated Cost
Duke Energy$1,340
Duke Energy Carolinas580
Progress Energy420
Duke Energy Progress310
Duke Energy Florida110
Duke Energy Ohio90
Duke Energy Indiana250
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 December 3, 2015, the EPA proposed a rule to lower the Cross-State Air Pollution Rule (CSAPR) Phase 2 state ozone season nitrogen oxide (NOX) emission budgets for 23 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. On September 7, 2016, the EPA 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 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 took effect on May 1, 2017. In Kentucky and Indiana, where Duke Energy Registrants own and operate coal-fired electric generating units (EGUs) subject to the final rule requirements, near-term responses include changing unit dispatch to run certain generating units less frequently and/or purchasing NOx allowances from the trading market. Longer term, upgrading the performance of existing NOx controls is an option. The Indiana Utility Group and the Indiana Energy Association jointly filed a petition for reconsideration asking that the EPA correct errors it made in calculating the Indiana budget and increase the budget accordingly. EPA has yet to act on the petition. Numerous parties have filed petitions with the D.C. Circuit Court challenging various aspects of the CSAPR Update Rule. Briefing in the case began on August 21, 2017. The date for oral argument has not been established. The Duke Energy Registrants cannot predict the outcome of these matters.
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 apply to plants that commenced construction after January 8, 2014. The EPA set an emissions standard for coal units of 1,400 pounds of CO2 per gross MWh, which would require the application of partial carbon capture and storage (CCS) technology for a coal unit to be able to meet the limit. Utility-scale CCS is not currently a demonstrated and commercially available technology for coal-fired EGUs, and therefore the final standard effectively prevents the development of new coal-fired generation. The EPA set a final standard of 1,000 pounds of CO2 per gross MWh for new natural gas combined-cycle units.
On March 28, 2017, President Trump signed an executive order directing EPA to review the rule and determine whether to suspend, revise or rescind it. On the same day, the Department of Justice (DOJ) filed a motion with the D.C. Circuit Court requesting that the court stay the litigation of the rule while it is reviewed by EPA. Subsequent to the DOJ motion, the D.C. Circuit Court canceled oral argument in the case, which had been scheduled for April 17, 2017. On August 10, 2017, the court ordered that the litigation be suspended indefinitely. The rule remains in effect pending the outcome of litigation and EPA’s review. 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
On October 23, 2015, the EPA published in the Federal Register the final Clean Power Plan (CPP) rule to regulate CO2 emissions from existing fossil fuel-fired EGUs. The CPP established CO2 emission rates and mass cap goals that apply to existing fossil fuel-fired EGUs. Petitions challenging the rule have been filed by several groups and on February 9, 2016, the Supreme Court issued a stay of the final CPP rule, halting implementation of the CPP until legal challenges are resolved. States in which the Duke Energy Registrants operate have suspended work on the CPP in response to the stay. Oral arguments before 10 of the 11 judges on D.C. Circuit Court were heard on September 27, 2016. The court has not issued its opinion in the case.

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On March 28, 2017, President Trump signed an executive order directing EPA to review the CPP and determine whether to suspend, revise or rescind the rule. On the same day, the DOJ filed a motion with the D.C. Circuit Court requesting that the court stay the litigation of the rule while it is reviewed by EPA. On April 28, 2017, the court issued an order to suspend the litigation for 60 days. On August 8, 2017, the court, on its own motion, extended the suspension of the litigation for an additional 60 days. On October 10, 2017, EPA issued a Notice of Proposed Rulemaking to repeal the CPP based on a change to EPA’s legal interpretation of the section of the Clean Air Act (CAA) on which the CPP was based. In the proposal EPA indicates that it has not determined whether it will issue a rule to replace the CPP, and if it will do so, when and what form that rule will take. The comment period on EPA's proposal ends December 15, 2017. Litigation of the CPP remains on hold in the D.C. Circuit and the February 2016 U.S. Supreme Court stay of the CPP remains in effect. 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, 2016.Statements.
North Carolina Legislation
In July 2017, the North Carolina General Assembly passed House Bill 589 and it was subsequently enacted into law by the governor. The law includes, among other things, overall reformBased on an independent evaluation process, Duke Energy will produce or purchase a total of the application of the Public Utility Regulatory Policies Act of 1978 (PURPA) for new solar projects in the state, a requirement for the utility to procure approximately 2,600602 MW of renewable energy through a competitive biddingfrom projects under the North Carolina’s Competitive Procurement of Renewable Energy program. The process used was approved by the NCUC to select projects that would deliver the greatest cost and recovery of costs relatedsystem benefits to customers. Six Duke Energy projects, totaling about 270 MW, were selected during the competitive bidding process through the fuel clause and a competitive procurement rider. Duke Energy is evaluating the impact of this law.
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-Kprocess. Next steps include executing contracts for the year ended December 31, 2016.
New Accounting Standards
See Note 1projects and finalizing a report to be filed with the Condensed Consolidated Financial Statements, “Organization and Basis of Presentation,” for a discussion of the impact of new accounting standards.NCUC around June 2019.
Off-Balance Sheet Arrangements
During the three and nine months ended September 30, 2017,March 31, 2019, there were no material changes to Duke Energy’s off-balance sheet arrangements. See Note 13 to the Condensed Consolidated Financial Statements, "Variable Interest Entities," for a discussion of off-balance sheet arrangements regarding Atlantic Coast Pipeline.ACP. For additional information on Duke Energy’s off-balance sheet arrangements, see “Off-Balance Sheet Arrangements” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2016.2018.
Contractual Obligations
Duke Energy enters into contracts that require payment of cash at certain specified periods, based on certain specified minimum quantities and prices. During the three and nine months ended September 30, 2017,March 31, 2019, there were no material changes in Duke Energy's contractual obligations. For an in-depth discussion of Duke Energy’s contractual obligations, see “Contractual Obligations” and “Quantitative and Qualitative Disclosures about Market Risk” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2016.
Subsequent Events
See Note 18 to the Condensed Consolidated Financial Statements, “Subsequent Events,” for a discussion of subsequent events.2018.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
During the three and nine months ended September 30, 2017,March 31, 2019, there were no material changes to the Duke Energy Registrants' disclosures about market risk. For an in-depth discussion of the Duke Energy Registrants' market risks, see “Quantitative and Qualitative Disclosures about Market Risk” in Item 7 of the Annual Report on Form 10-K for the Duke Energy Registrants.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by the Duke Energy Registrants in the reports they file or submit under the Securities Exchange Act of 1934 (Exchange Act) areis recorded, processed, summarized and reported, within the time periods specified by the SEC rules and forms.
Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by the Duke Energy Registrants in the reports they file or submit under the Exchange Act areis accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

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Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, the Duke Energy Registrants have evaluated the effectiveness of their disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2017,March 31, 2019, and, based upon this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these controls and procedures are effective in providing reasonable assurance of compliance.
Changes in Internal Control over Financial Reporting
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)13a-15 and 15d-15(f)15d-15 under the Exchange Act) that occurred during the fiscal quarter ended September 30, 2017,March 31, 2019, and have concluded no change has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.

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PART II.
OTHER INFORMATION



ITEM 1. LEGAL PROCEEDINGS
For information regarding material legal proceedings, including regulatory and environmental matters, see Note 4,3, "Regulatory Matters," and Note 5,4, "Commitments and Contingencies," to the Condensed Consolidated Financial Statements. For additional information, see Item 3, "Legal Proceedings," in Duke Energy’sEnergy's Annual Report on Form 10-K for the year ended December 31, 2016.2018.
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this report, careful consideration should be given to the factors discussed in Part I, “Item 1A. Risk Factors” in the Duke Energy Registrants' Annual Report on Form 10-K for the year ended December 31, 2018, which could materially affect the Duke Energy Registrants’ financial condition or future results.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
ISSUERPURCHASES OF EQUITY SECURITIES
There were no issuer purchases of equity securities during the third quarter of 2017.None.

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PART II
EXHIBITS


ITEM 6. EXHIBITS
Exhibits filed herein are designated by an asterisk (*). All exhibits not so designated are incorporated by reference to a prior filing, as indicated. Items constituting management contracts or compensatory plans or arrangements are designated by a double asterisk (**). The Companycompany agrees to furnish upon request to the Commissioncommission a copy of any omitted schedules or exhibits upon request on all items designated by a triple asterisk (***).
     Duke   Duke Duke Duke Duke  
Exhibit Duke Energy Progress Energy Energy Energy Energy  
Number Energy Carolinas Energy Progress Florida Ohio Indiana Piedmont
4.13.1
Seventeenth Supplemental Indenture,Certificate of Designations with respect to Series A Preferred Stock, dated as of August 10, 2017March 28, 2019 (incorporated by reference to Exhibit 4.13.1 to Registrant's Current Report on Form 8-K filed on August 10, 2017,March 29, 2019, File No.no. 1-32853).
X              
4.24.1
Eighty-SeventhEighty-Ninth Supplemental Indenture dated as of September 1, 2017 (incorporated by reference to Exhibit 4.1 to Registrant'sRegistrant’s Current Report on Form 8-K filed on September 8, 2017,March 7, 2019, File No.no. 1-3382).
      X        
*10.14.2
AmendmentTwenty-First Supplemental Indenture (incorporated by reference to Duke Energy Corporation Executive Savings Plan, effective as of January 1, 2014.Exhibit 4.1 to Registrant’s Current Report on Form 8-K filed on March 11, 2019, File no. 1-32853).
X              
*1210.1
ComputationAmendment No.4 and Consent, dated as of Ratio of EarningsMarch 18, 2019, among Duke Energy Corporation, Duke Energy Carolinas, LLC, Duke Energy Ohio, Inc., Duke Energy Indiana, LLC, Duke Energy Kentucky, Inc., Duke Energy Progress, LLC, Duke Energy Florida, LLC, and Piedmont Natural Gas Company, Inc., the Lenders party thereto, the Issuing Lenders party thereto, and Wells Fargo Bank, National Association, as Administrative Agent and Swingline Lender (incorporated by reference to Fixed Charges – DUKE ENERGY CORPORATION.Exhibit 10.1 to Registrants’ Current Report on Form 8-K filed on March 21, 2019, File nos. 1-32853. 1-4928, 1-3382, 1-3274, 1-1232, 1-3543, 1-6196).

XXXXXXX
*10.2
2019 Performance Share Award Agreement.

X
*10.3
2018 Restricted Stock Unit Award Agreement.

X              
*31.1.1
Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
X              
*31.1.2
Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  X            
*31.1.3
Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
    X          
*31.1.4
Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
      X        
*31.1.5
Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
        X      
*31.1.6
Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
          X    

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EXHIBITS


*31.1.7
Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
            X  
*31.1.8
Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
              X
*31.2.1
Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
X              
*31.2.2
Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  X            
*31.2.3
Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
    X          
*31.2.4
Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
      X        
*31.2.5
Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
        X      
*31.2.6
Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
          X    

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PART II

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

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EXHIBITS


*32.2.3
Certification Pursuant to 18 U.S.C. SectionU.S.C.Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
    X          
*32.2.4
Certification Pursuant to 18 U.S.C. SectionU.S.C.Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
      X        
*32.2.5
Certification Pursuant to 18 U.S.C. SectionU.S.C.Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
        X      
*32.2.6
Certification Pursuant to 18 U.S.C. SectionU.S.C.Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
          X    
*32.2.7
Certification Pursuant to 18 U.S.C. SectionU.S.C.Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
            X  
*32.2.8
Certification Pursuant to 18 U.S.C. SectionU.S.C.Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
              X
*101.INS
XBRL Instance Document.

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

130

PART II

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

131117

PART II
SIGNATURES


SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized.
  

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

   
Date:November 3, 2017May 9, 2019/s/ STEVEN K. YOUNG
  Steven K. Young
Executive Vice President and Chief Financial Officer (Principal Financial Officer)
   
Date:November 3, 2017May 9, 2019/s/ WILLIAM E. CURRENS JR.DWIGHT L. JACOBS
  William E. Currens Jr.Dwight L. Jacobs
Senior Vice President, Chief Accounting Officer,
Tax and Controller
(Principal Accounting Officer)

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