Edgar Filing: Duke Energy CORP

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2013
OR
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
_________________________

Commission file number		Registrant, State of Incorporation or Organization, Address of Principal Executive Offices, and Telephone Number	IRS Employer Identification No.
1-32853		DUKE ENERGY CORPORATION (a Delaware corporation) 550 South Tryon Street Charlotte, North Carolina 28202-1803 704-382-3853	20-2777218

Commission file number	Registrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number and IRS Employer Identification Number	Commission file number	Registrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number and IRS Employer Identification Number
1-4928	DUKE ENERGY CAROLINAS, LLC (a North Carolina limited liability company) 526 South Church Street Charlotte, North Carolina 28202-1803 704-382-3853 56-0205520	1-3274	DUKE ENERGY FLORIDA, INC. (a Florida corporation) 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, INC. (a North Carolina corporation) 410 South Wilmington Street Raleigh, North Carolina 27601-1748 704-382-3853 56-0165465	1-3543	DUKE ENERGY INDIANA, INC. (an Indiana corporation) 1000 East Main Street Plainfield, Indiana 46168 704-382-3853 35-0594457

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

Duke Energy Corporation (Duke Energy)	Yes x	No ¨	Duke Energy Florida, Inc. (Duke Energy Florida)	Yes x	No ¨
Duke Energy Carolinas, LLC (Duke Energy Carolinas)	Yes x	No ¨	Duke Energy Ohio, Inc. (Duke Energy Ohio)	Yes x	No ¨
Progress Energy, Inc. (Progress Energy)	Yes x	No ¨	Duke Energy Indiana, Inc. (Duke Energy Indiana)	Yes x	No ¨
Duke Energy Progress, Inc. (Duke Energy Progress)	Yes x	No ¨

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

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

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

(Check one):

Duke Energy	Large accelerated filer x	Accelerated filer ¨	Non-accelerated filer ¨	Smaller reporting company ¨
Duke Energy Carolinas	Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filer x	Smaller reporting company ¨
Progress Energy	Large accelerated filer x	Accelerated filer ¨	Non-accelerated filer ¨	Smaller reporting company ¨
Duke Energy Progress	Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filer x	Smaller reporting company ¨
Duke Energy Florida	Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filer x	Smaller reporting company ¨
Duke Energy Ohio	Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filer x	Smaller reporting company ¨
Duke Energy Indiana	Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filer x	Smaller reporting company ¨

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

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

Number of shares of Common Stock outstanding at November 5, 2013:


Registrant	Description	Shares
Duke Energy	Common Stock, $0.001 par value	705,993,361
Duke Energy Carolinas	All of the registrant’s limited liability company member interests are directly owned by Duke Energy.
Progress Energy	All of the registrant’s common stock is directly owned by Duke Energy.
Duke Energy Progress	All of the registrant’s common stock is indirectly owned by Duke Energy.
Duke Energy Florida	All of the registrant’s common stock is indirectly owned by Duke Energy.
Duke Energy Ohio	All of the registrant’s common stock is indirectly owned by Duke Energy.
Duke Energy Indiana	All of the registrant’s common stock is indirectly owned by Duke Energy.

This combined Form 10-Q is filed separately by seven registrants: Duke Energy, Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio and Duke Energy Indiana (collectively the Duke Energy Registrants). Information contained herein relating to any individual registrant is filed by such registrant solely on its own behalf. Each registrant makes no representation as to information relating exclusively to the other registrants.

Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio and Duke Energy Indiana meet the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and are therefore filing this form with the reduced disclosure format specified in General Instructions H(2) of Form 10-Q.

TABLE OF CONTENTS
Safe Harbor for Forward-Looking Statements

PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements

	Duke Energy Corporation Financial Statements		4

	Duke Energy Carolinas, LLC Financial Statements		9

	Progress Energy, Inc. Financial Statements		13

	Duke Energy Progress, Inc. Financial Statements		17

	Duke Energy Florida, Inc. Financial Statements		21

	Duke Energy Ohio, Inc. Financial Statements		25

	Duke Energy Indiana, Inc. Financial Statements		29

	Combined Notes to Condensed Consolidated Financial Statements
		Note 1 - Organization and Basis of Presentation	33
		Note 2 - Acquisitions and Dispositions	35
		Note 3 - Business Segments	37
		Note 4 - Regulatory Matters	40
		Note 5 - Commitments and Contingencies	48
		Note 6 - Debt and Credit Facilities	54
		Note 7 - Goodwill	56
		Note 8 - Risk Management, Derivative Instruments and Hedging Activities	57
		Note 9 - Investments in Debt and Equity Securities	71
		Note 10 - Fair Value of Financial Instruments	77
		Note 11 - Variable Interest Entities	88
		Note 12 - Earnings Per Common Share	92
		Note 13 - Stock-Based Compensation	93
		Note 14 - Employee Benefit Plans	93
		Note 15 - Severance	97
		Note 16 - Income Taxes and Other Taxes	97
		Note 17 - Related Party Transactions	99
		Note 18 - New Accounting Standards	100
		Note 19 - Subsequent Events	101

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		102

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		127

Item 4.	Controls and Procedures		127

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings		129

Item 1A.	Risk Factors		129

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		130

Item 6.	Exhibits		131

	Signatures		133

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This document includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are based on management’s beliefs and assumptions. These forward-looking statements, which are intended to cover Duke Energy and the applicable Duke Energy Registrants, are identified by terms and phrases such as “anticipate,” “believe,” “intend,” “estimate,” “expect,” “continue,” “should,” “could,” “may,” “plan,” “project,” “predict,” “will,” “potential,” “forecast,” “target,” “guidance,” “outlook,” and similar expressions. Forward-looking statements involve risks and uncertainties that may cause actual results to be materially different from the results predicted. Factors that could cause actual results to differ materially from those indicated in any forward-looking statement include, but are not limited to:

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

· The ability to recover eligible costs, including those associated with future significant weather events, and earn an adequate return on investment through the regulatory process;

· The costs of retiring Crystal River Unit 3 could prove to be more extensive than are currently identified and all costs associated with the retirement of the Crystal River Unit 3 asset, may not be fully recoverable through the regulatory process;

· The risk that the credit ratings of the combined company or its subsidiaries may be different from what the companies expect;

· The impact of compliance with material restrictions or conditions related to the Progress Energy merger imposed by regulators could exceed our expectations;

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

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

· Additional competition in electric markets and continued industry consolidation;

· Political and regulatory uncertainty in other countries in which Duke Energy conducts business;

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

· The ability to successfully operate electric generating facilities and deliver electricity to customers;

· The impact on facilities and business from a terrorist attack, cyber security threats and other catastrophic events;

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

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

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

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

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

· The ability to control operation and maintenance costs;

· The level of creditworthiness of counterparties to transactions;

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

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

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

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

· The impact of potential goodwill impairments;

· The ability to reinvest retained earnings of foreign subsidiaries or repatriate such earnings on a tax free basis; and

· The ability to successfully complete future merger, acquisition or divestiture plans.

In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than the Duke Energy Registrants have described. Forward-looking statements speak only as of the date they are made; the Duke Energy Registrants undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise that occur after that date.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


DUKE ENERGY CORPORATION
Condensed Consolidated Statements Of Operations
(Unaudited)

		Three Months Ended September 30,					Nine Months Ended September 30,
(in millions, except per-share amounts)				2013		2012			2013		2012
Operating Revenues
Regulated electric			$	5,718	$	5,763		$	15,441	$	10,892
Nonregulated electric, natural gas, and other				908		882			2,683		2,708
Regulated natural gas				83		77			362		329
	Total operating revenues			6,709		6,722			18,486		13,929
Operating Expenses
Fuel used in electric generation and purchased power - regulated				2,013		2,222			5,394		3,848
Fuel used in electric generation and purchased power - nonregulated				428		484			1,329		1,328
Cost of natural gas and coal sold				33		40			180		184
Operation, maintenance and other				1,458		1,654			4,383		3,262
Depreciation and amortization				707		666			2,045		1,620
Property and other taxes				325		326			991		681
Impairment charges				2		266			388		668
	Total operating expenses			4,966		5,658			14,710		11,591
Gains on Sales of Other Assets and Other, net				―		14			3		21
Operating Income				1,743		1,078			3,779		2,359
Other Income and Expenses
Equity in earnings of unconsolidated affiliates				33		33			91		118
Other income and expenses, net				54		132			182		285
	Total other income and expenses			87		165			273		403
Interest Expense				379		401			1,127		857
Income From Continuing Operations Before Income Taxes				1,451		842			2,925		1,905
Income Tax Expense from Continuing Operations				457		248			952		565
Income From Continuing Operations				994		594			1,973		1,340
Income From Discontinued Operations, net of tax				14		4			11		5
Net Income				1,008		598			1,984		1,345
Less: Net Income Attributable to Noncontrolling Interests				4		4			7		12
Net Income Attributable to Duke Energy Corporation			$	1,004	$	594		$	1,977	$	1,333


Earnings Per Share - Basic and Diluted
Income from continuing operations attributable to Duke Energy Corporation common shareholders
	Basic		$	1.40	$	0.84		$	2.78	$	2.50
	Diluted		$	1.40	$	0.84		$	2.78	$	2.50
Income from discontinued operations attributable to Duke Energy Corporation common shareholders
	Basic		$	0.02	$	0.01		$	0.01	$	0.01
	Diluted		$	0.02	$	0.01		$	0.01	$	0.01
Net Income attributable to Duke Energy Corporation common shareholders
	Basic		$	1.42	$	0.85		$	2.79	$	2.51
	Diluted		$	1.42	$	0.85		$	2.79	$	2.51
Dividends declared per share			$	―	$	―		$	2.31	$	2.265
Weighted-average shares outstanding
	Basic			706		699			706		531
	Diluted			706		699			706		531

See Notes to Condensed Consolidated Financial Statements

PART I

DUKE ENERGY CORPORATION
Condensed Consolidated Statements Of Comprehensive Income
(Unaudited)

		Three Months Ended September 30,					Nine Months Ended September 30,
(in millions)		2013			2012			2013		2012
Net Income			$	1,008	$	598		$	1,984	$	1,345
Other Comprehensive (Loss) Income, Net of Tax
Foreign currency translation adjustments				(8)		2			(137)		(85)
Pension and OPEB adjustments^(a)				―		(21)			5		(15)
Net unrealized gain (loss) on cash flow hedges^(b)				1		(2)			55		(19)
Reclassification into earnings from cash flow hedges				1		(2)			1		―
Unrealized gain on investments in auction rate securities				―		1			―		7
Unrealized (loss) gain on investments in available for sale securities				(1)		3			(5)		6
Reclassification into earnings from available for sale securities				3		(1)			3		(4)
Other Comprehensive Loss, Net of Tax				(4)		(20)			(78)		(110)
Comprehensive Income				1,004		578			1,906		1,235
Less: Comprehensive Income Attributable to Noncontrolling Interests				4		4			3		8
Comprehensive Income Attributable to Duke Energy Corporation			$	1,000	$	574		$	1,903	$	1,227

(a)	Net of insignificant tax expense and $2 million tax expense for the three and nine months ended September 30, 2013 and $10 million tax benefit and $7 million tax benefit for the three and nine months ended September 30, 2012.
(b)	Net of $1 million tax benefit and $17 million tax expense for the three and nine months ended September 30, 2013 and $1 million tax benefit and $10 million tax benefit for the three and nine months ended September 30, 2012.

See Notes to Condensed Consolidated Financial Statements

PART I

DUKE ENERGY CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)

(in millions)		September 30, 2013		December 31, 2012
ASSETS
Current Assets
Cash and cash equivalents		$	2,166	$	1,424
Short-term investments			118		333
Receivables (net of allowance for doubtful accounts of $31 at September 30, 2013 and $34 at December 31, 2012)			1,585		1,516
Restricted receivables of variable interest entities (net of allowance for doubtful accounts of $42 at September 30, 2013 and $44 at December 31, 2012)			1,258		1,201
Inventory			3,100		3,223
Other			2,191		2,425
	Total current assets		10,418		10,122
Investments and Other Assets
Investments in equity method unconsolidated affiliates			511		483
Nuclear decommissioning trust funds			4,805		4,242
Goodwill			16,345		16,365
Intangibles, net			351		372
Notes receivable			65		71
Restricted other assets of variable interest entities			52		62
Other			2,361		2,399
	Total investments and other assets		24,490		23,994
Property, Plant and Equipment
Cost			100,682		98,833
Cost, variable interest entities			1,679		1,558
Accumulated depreciation and amortization			(33,136)		(31,969)
Generation facilities to be retired, net			59		136
	Net property, plant and equipment		69,284		68,558
Regulatory Assets and Deferred Debits
Regulatory assets			10,220		11,004
Other			178		178
	Total regulatory assets and deferred debits		10,398		11,182
Total Assets		$	114,590	$	113,856
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable		$	1,819	$	2,444
Notes payable and commercial paper			1,278		745
Non-recourse notes payable of variable interest entities			325		312
Taxes accrued			706		459
Interest accrued			474		448
Current maturities of long-term debt			2,307		3,110
Other			2,330		2,511
	Total current liabilities		9,239		10,029
Long-term Debt			36,137		35,499
Non-recourse Long-term Debt of Variable Interest Entities			1,265		852
Deferred Credits and Other Liabilities
Deferred income taxes			11,489		10,490
Investment tax credits			446		458
Accrued pension and other post-retirement benefit costs			1,743		2,520
Asset retirement obligations			5,341		5,169
Regulatory liabilities			5,904		5,584
Other			1,789		2,221
	Total deferred credits and other liabilities		26,712		26,442
Commitments and Contingencies
Preferred Stock of Subsidiaries			―		93
Equity
Common stock, $0.001 par value, 2 billion shares authorized; 706 million and 704 million shares outstanding at September 30, 2013 and December 31, 2012, respectively			1		1
Additional paid-in capital			39,317		39,279
Retained earnings			2,227		1,889
Accumulated other comprehensive loss			(380)		(306)
	Total Duke Energy Corporation shareholders' equity		41,165		40,863
Noncontrolling interests			72		78
	Total equity		41,237		40,941
Total Liabilities and Equity		$	114,590	$	113,856

See Notes to Condensed Consolidated Financial Statements

PART I

DUKE ENERGY CORPORATION
Condensed Consolidated Statements Of Cash Flows
(Unaudited)

			Nine Months Ended September 30,
(in millions)			2013		2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net income			$	1,984	$	1,345
Adjustments to reconcile net income to net cash provided by operating activities:
	Depreciation, amortization and accretion (including amortization of nuclear fuel)			2,365		1,865
	Equity component of AFUDC			(121)		(209)
	Severance expense			―		73
	FERC mitigation costs			―		117
	Community support and charitable contributions expense			34		100
	Losses (gains) on sales of other assets			8		(21)
	Impairment of other long-lived assets			388		588
	Deferred income taxes			1,014		437
	Equity in earnings of unconsolidated affiliates			(91)		(118)
	Voluntary opportunity cost deferral			―		(101)
	Accrued pension and other post-retirement benefit costs			259		152
	Contributions to qualified pension plans			(27)		(79)
	(Increase) decrease in
		Net realized and unrealized mark-to-market and hedging transactions		(14)		68
		Receivables		(154)		(83)
		Inventory		119		(22)
		Other current assets		(48)		101
	Increase (decrease) in
		Accounts payable		(412)		(222)
		Taxes accrued		245		(7)
		Other current liabilities		(31)		128
	Other assets			(307)		(167)
	Other liabilities			(221)		34
	Net cash provided by operating activities			4,990		3,979
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures				(3,854)		(3,845)
Investment expenditures				(53)		(7)
Acquisitions				―		(36)
Cash acquired from the merger with Progress Energy				―		71
Purchases of available-for-sale securities				(4,591)		(2,159)
Proceeds from sales and maturities of available-for-sale securities				4,687		1,947
Net proceeds from the sales of other assets, and sales of and collections on notes receivable				59		29
Change in restricted cash				166		(27)
Other				20		38
	Net cash used in investing activities			(3,566)		(3,989)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the:
	Issuance of long-term debt			2,993		2,626
	Issuance of common stock related to employee benefit plans			8		16
Payments for the:
	Redemption of long-term debt			(2,506)		(1,934)
	Redemption of preferred stock of a subsidiary			(96)		―
Notes payable and commercial paper				537		98
Distributions to noncontrolling interests				(9)		(14)
Contributions from noncontrolling interests				―		76
Dividends paid				(1,636)		(1,211)
Other				27		4
	Net cash used in financing activities			(682)		(339)
Net increase (decrease) in cash and cash equivalents				742		(349)
Cash and cash equivalents at beginning of period				1,424		2,110
Cash and cash equivalents at end of period			$	2,166	$	1,761
Supplemental Disclosures:
Merger with Progress Energy
	Fair value of assets acquired		$	―	$	48,698
	Fair value of liabilities assumed			―		30,627
	Issuance of common stock			―		18,071
Significant non-cash transactions:
	Accrued capital expenditures			383		407
	Extinguishment of debt related to investment in Attiki Gas Supply, S. A.			―		66

See Notes to Condensed Consolidated Financial Statements

PART I

DUKE ENERGY CORPORATION

Condensed Consolidated Statements Of Equity

(Unaudited)

Accumulated Other Comprehensive Loss

(in millions)

Common

Stock

Shares

Common

Stock

Additional

Paid-in

Capital

Retained

Earnings

Foreign Currency Translation Adjustments

Net Gains (Losses) on Cash Flow Hedges

Net Gains (Losses) on Available for Sale Securities

Pension and OPEB Adjustments

Common

Stockholders'

Equity

Noncontrolling

Interests

Total

Equity

Balance at December 31, 2011

445

21,132

1,873

(45)

(71)

(9)

(109)

22,772

22,865

Net income^(a)

―

1,333

―

1,333

1,344

Other comprehensive (loss) income

―

(81)

(19)

(15)

(106)

(4)

(110)

Common stock issued in connection with the Progress Energy Merger

258

―

18,071

―

18,071

―

18,071

Common stock issuances, including dividend reinvestment and employee benefits

―

Common stock dividends

―

(1,211)

―

(1,211)

―

(1,211)

Deconsolidation of DS Cornerstone, LLC^(b)

―

(82)

Contribution from noncontrolling interest in DS Cornerstone, LLC^(b)

―

Changes in noncontrolling interest in subsidiaries^(c)

―

(4)

Balance at September 30, 2012

704

39,249

1,995

(126)

(90)

―

(124)

40,905

40,995

Balance at December 31, 2012

704

39,279

1,889

(116)

(100)

―

(90)

40,863

40,941

Net income

―

1,977

―

1,977

1,984

Other comprehensive (loss) income

―

(133)

(2)

(74)

(4)

(78)

Common stock issuances, including dividend reinvestment and employee benefits

―

Common stock dividends

―

(1,636)

―

(1,636)

―

(1,636)

Premium on the redemption of preferred stock of subsidiaries

―

(3)

―

(3)

―

(3)

Distributions to noncontrolling interests

―

(9)

Balance at September 30, 2013

706

39,317

2,227

(249)

(44)

(2)

(85)

41,165

41,237

(a)

For the nine months ended September 30, 2012 consolidated net income of $1,345 million includes $1 million attributable to preferred shareholders of subsidiaries. Income attributable to preferred shareholders of subsidiaries is not a component of total equity and is excluded from the table above.

(b)

Refer to Note 2 for further information related to DS Cornerstone, LLC.

(c)

Includes payments to noncontrolling interests of $14 million for the nine months ended September 30, 2012.

See Notes to Condensed Consolidated Financial Statements

PART I

DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Statements Of Operations And Comprehensive Income
(Unaudited)

		Three Months Ended September 30,					Nine Months Ended September 30,
(in millions)		2013				2012	2013				2012
Operating Revenues			$	1,919	$	1,939		$	5,239	$	5,056
Operating Expenses
Fuel used in electric generation and purchased power				539		576			1,500		1,398
Operation, maintenance and other				456		562			1,392		1,369
Depreciation and amortization				228		233			676		687
Property and other taxes				90		100			282		279
Impairment charges				―		31			―		31
	Total operating expenses			1,313		1,502			3,850		3,764
(Losses) Gains on Sales of Other Assets and Other, net				(2)		3			―		9
Operating Income				604		440			1,389		1,301
Other Income and Expenses, net				29		48			94		130
Interest Expense				82		95			255		285
Income Before Income Taxes				551		393			1,228		1,146
Income Tax Expense				209		135			461		411
Net Income				342		258			767		735

Other comprehensive income, net of tax
Reclassification into earnings from cash flow hedges				1		―			1		2
Comprehensive Income			$	343	$	258		$	768	$	737

See Notes to Condensed Consolidated Financial Statements

PART I

DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Balance Sheets
(Unaudited)

(in millions)		September 30, 2013		December 31, 2012
ASSETS
Current Assets
Cash and cash equivalents		$	25	$	19
Receivables (net of allowance for doubtful accounts of $3 at September 30, 2013 and December 31, 2012)			140		188
Restricted receivables of variable interest entities (net of allowance for doubtful accounts of $6 at September 30, 2013 and December 31, 2012)			703		637
Receivables from affiliated companies			40		3
Notes receivable from affiliated companies			595		382
Inventory			1,033		1,062
Other			474		439
	Total current assets		3,010		2,730
Investments and Other Assets
Nuclear decommissioning trust funds			2,673		2,354
Other			845		934
	Total investments and other assets		3,518		3,288
Property, Plant and Equipment
Cost			34,916		34,190
Accumulated depreciation and amortization			(11,731)		(11,437)
Generation facilities to be retired, net			―		73
	Net property, plant and equipment		23,185		22,826
Regulatory Assets and Deferred Debits
Regulatory assets			1,794		1,727
Other			45		71
	Total regulatory assets and deferred debits		1,839		1,798
Total Assets		$	31,552	$	30,642
LIABILITIES AND MEMBER'S EQUITY
Current Liabilities
Accounts payable		$	451	$	599
Accounts payable to affiliated companies			235		128
Taxes accrued			156		114
Interest accrued			142