SF-1

As filed with the Securities and Exchange Commission on January 17, 2024

Registration Nos. 333-           and 333-           -01​

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM SF-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

Duke Energy Progress, LLC (Exact name of registrant, sponsor and depositor as specified in its charter)	Duke Energy Progress SC Storm Funding LLC (Exact name of registrant and issuing entity as specified in its charter)
North Carolina (State or other jurisdiction of incorporation or organization)	Delaware (State or other jurisdiction of incorporation or organization)
1-3382 (Commission File Number)	(Commission File Number)
000017797 (Central Index Key Number)	0002008486 (Central Index Key Number)
56-0165465 (I.R.S. Employer Identification Number)	99-0724467 (I.R.S. Employer Identification Number)
411 Fayetteville Street Raleigh, North Carolina 27601 (704)-382-3853 (Address, including zip code, and telephone number, including area code, of depositor’s principal executive offices)	411 Fayetteville Street Raleigh, North Carolina 27601 (704)-382-3853 (Address, including zip code, and telephone number, including area code, of issuing entity’s principal executive offices)

Robert T. Lucas III
Deputy General Counsel
525 South Tryon Street
Charlotte, North Carolina 28202

(Name, address, including zip code, and telephone number, including area code, of agent for service)

With Copies to:

Michael F. Fitzpatrick, Jr.
Adam R. O’Brian
Hunton Andrews Kurth LLP
200 Park Avenue
New York, NY 10166
(212) 309-1071 Eric D. Tashman
Norton Rose Fulbright US LLP
555 California Street
San Francisco, California 94104
(628) 231-6803

Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   ☐

The Registrants hereby amend this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrants shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, January 17, 2024

PRELIMINARY PROSPECTUS

$    SERIES      SENIOR SECURED STORM RECOVERY BONDS

DUKE ENERGY PROGRESS, LLC

Sponsor, Depositor and Initial Servicer
Central Index Key Number: 0000017797

DUKE ENERGY PROGRESS SC STORM FUNDING LLC

Issuing Entity
Central Index Key Number: 0002008486

Tranche

Expected Weighted Average Life (Years)

Principal Amount Offered*

Scheduled Final Payment Date

Final Maturity Date

Interest Rate

Initial Price to Public(1)

Underwriting Discounts and Commissions

Proceeds to Issuing Entity (Before Expenses)

​

​

​

$

​

​

​

%

​

%

​

%

​

$

*

Preliminary, subject to change

(1)

Interest on the Bonds will accrue from      , 2024 and must be paid by the purchaser if the bonds are delivered after that date.

The total price to the public is $    . The total amount of the underwriting discounts and commissions is $    . The total amount of proceeds to Duke Energy Progress SC Storm Funding LLC before deduction of expenses (estimated to be $    ) is $    .

Duke Energy Progress, LLC or “DEP”, as “depositor”, is offering $     of Series       Storm Recovery Bonds, referred to herein as the “Series      Bonds”, “Storm Recovery Bonds” or “bonds”, in one tranche to be issued by Duke Energy Progress SC Storm Funding LLC, referred to herein as “DEP SC Storm Funding”, as the issuing entity. DEP is also the “seller”, initial “servicer” and “sponsor” with regard to the bonds.

The Series      Bonds are senior secured obligations of DEP SC Storm Funding, and are its obligations only. The Series      Senior Secured Storm Recovery Bonds are supported by “storm recovery property”, which consists of all rights and interest of DEP SC Storm Funding under the financing order, including the right to impose, bill, charge, collect and receive nonbypassable charges based on the usage of electricity from DEP’s existing or future retail customers in South Carolina receiving transmission or distribution service, or both. These charges pay principal, interest and expenses of the Series      Bonds and are known as “storm recovery charges” and upon the issuance of the bonds may not be reduced, altered or impaired except as adjusted pursuant to the true-up mechanism described herein. These charges will be paid by all existing or future South Carolina customers receiving transmission or distribution service, or both, from DEP, or its successors or assignees under rate schedules approved by the Public Service Commission of South Carolina, referred to herein as the “PSCSC”, or under special contracts. Storm recovery charges are payable by customers even if the customers elect to purchase electricity from an alternative electricity supplier following a fundamental change in regulation of public utilities in South Carolina. Storm recovery property includes the right to a mandatory true-up mechanism for making any adjustments that are necessary to correct for any overcollection or undercollection of storm recovery charges or to otherwise ensure the timely payment of principal of and interest on the bonds when due and other financing costs and other required amounts and charges payable in connection with the bonds. With respect to the foregoing, interest is due on each payment date and principal is due upon the final maturity date and the PSCSC, except for changes made pursuant to the formula-based adjustment mechanism authorized under in the financing order, may not reduce, alter, or impair storm recovery charges until any and all principal, interest, premium (if any), financing costs and other costs have been paid in full.

The Series      Bonds do not constitute a debt, liability or other obligation of, or interest in, DEP or any of its other affiliates (other than DEP SC Storm Funding). The bonds will not be insured or guaranteed by DEP, including in its capacity as sponsor, depositor, seller or servicer, or by its parent, Duke Energy Corporation, any of their respective affiliates, the indenture trustee or any other person or entity. The

Series      Bonds will be nonrecourse obligations, secured only by the collateral. The State of South Carolina, its agencies and instrumentalities, and its political subdivisions are not liable on the bonds and the bonds are not a debt of the State of South Carolina or any of its political subdivisions, agencies or instrumentalities. The bonds are not special obligations or indebtedness of the State, its agencies, or its political subdivisions. The bonds do not directly, indirectly, or contingently obligate the State of South Carolina or its agencies, instrumentalities, or political subdivisions, to levy any tax or make any appropriation for payment of the bonds, other than in their capacities as consumers of electricity.

The bonds will accrue interest from the date of issuance. The bonds are scheduled to pay principal and interest semi-annually and sequentially as described herein. We will pay interest and principal on the bonds on       and       of each year, beginning on         , 20  . The Series      Bonds are not subject to optional redemption prior to maturity.

The Series      Bonds will be payable only from revenues received by DEP SC Storm Funding under the indenture for the bonds and funds on deposit in trust accounts relating to the bonds. These amounts, together with the storm recovery property, are the source of funds for the payment of principal of and interest on the Series      Bonds. A capital subaccount will hold the depositor’s capital contribution to DEP SC Storm Funding. An excess funds subaccount will hold revenues that are collected but not needed to meet current obligations associated with the Series      Bonds. Credit enhancement for the bonds will be provided by the true-up mechanism, as well as the capital subaccount. The primary purpose of the excess funds subaccount is not to provide credit enhancement for the bonds. However, amounts in the excess funds subaccount may be used to make debt service payments on the bonds when needed.

DEP is the depositor, sponsor, seller and initial servicer with regard to the bonds. DEP is the sole member and owner of DEP SC Storm Funding’s equity interest. DEP SC Storm Funding’s Central Index Key number is 0002008486. DEP’s Central Index Key number is 0000017797.

Investing in the Series Bonds involves risks. See “Risk Factors” beginning on page 22 to read about factors you should consider before buying the Series Bonds.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The Series      Bonds will be ready for delivery in book-entry form through the facilities of The Depository Trust Company against payment in New York, New York on or about     , 2024.

Joint Book-Running Managers

Goldman Sachs & Co. LLC RBC Capital Markets

The date of this prospectus is           , 2024

TABLE OF CONTENTS

ABOUT THIS PROSPECTUS	1
OFFERING RESTRICTIONS IN CERTAIN JURISDICTIONS	2
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS	5
PROSPECTUS SUMMARY	7
SUMMARY OF RISK FACTORS	20
RISK FACTORS	22
Risks Associated with Potential Judicial, Legislative or Regulatory Actions	22
Servicing Forecasting Risks	26
Risk Associated with the Unusual Nature of the Storm Recovery Property	29
Risk Associated with Storms	30
Risks Associated with Potential Bankruptcy Proceedings of the Seller or the Servicer	30
Other Risks Associated with the Purchase of the Bonds	33
DEP’S REVIEW OF STORM RECOVERY PROPERTY	39
THE STORM RECOVERY PROPERTY AND THE FINANCING ACT	42
DEP’S FINANCING ORDER	47
THE ISSUING ENTITY	50
RELATIONSHIP TO 2021 NC STORM RECOVERY BONDS	55
DUKE ENERGY PROGRESS, LLC	56
DESCRIPTION OF THE STORM RECOVERY BONDS	62
THE INDENTURE TRUSTEE	84
SECURITY FOR THE STORM RECOVERY BONDS	87
WEIGHTED AVERAGE LIFE AND YIELD CONSIDERATIONS FOR THE BONDS	94
ESTIMATED ANNUAL FEES AND EXPENSES	96
THE SALE AGREEMENT	97
THE SERVICING AGREEMENT	107
INTERCREDITOR AGREEMENT	117
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES	118
STATE AND OTHER TAX CONSEQUENCES	122
ERISA CONSIDERATIONS	123
BANKRUPTCY AND CREDITORS’ RIGHTS ISSUES	127
USE OF PROCEEDS	131
PLAN OF DISTRIBUTION	132
AFFILIATIONS AND CERTAIN RELATIONSHIPS	134
LEGAL PROCEEDINGS	135
RATINGS	136
INVESTMENT COMPANY ACT OF 1940 AND VOLCKER RULE MATTERS	137
RISK RETENTION	138
WHERE YOU CAN FIND MORE INFORMATION	139
INCORPORATION BY REFERENCE	140
LEGAL MATTERS	141
GLOSSARY	142

i

ABOUT THIS PROSPECTUS

This prospectus is part of a registration statement filed with the Securities and Exchange Commission, or “SEC”. This prospectus provides you with a description of the Series      Senior Secured Storm Recovery Bonds being offered. You should carefully review this prospectus and the information, if any, contained in the documents referenced in this prospectus under the heading “Where You Can Find More Information.”

References in this prospectus to “we”, “us”, “our”, the “issuing entity” or “DEP SC Storm Funding” means Duke Energy Progress SC Storm Funding LLC. References to “DEP”, the “depositor” or the “sponsor” refer to Duke Energy Progress, LLC or to any successor thereto. References to the “servicer” are to DEP, and any successor servicer under the servicing agreement described in this prospectus. References to the “seller” mean DEP or any successor under the sale agreement described in this prospectus. References to the “administrator” mean DEP, or any successor or assignee under the administration agreement described in this prospectus. References to the PSCSC are to the Public Service Commission of South Carolina. References to the “Financing Act” are to Sections 58-27-1110 through 1180, South Carolina Code of Laws Annotated (“SC Code of Laws Annotated”). Unless the context otherwise requires, the term “customer” means all existing or future customers receiving transmission or distribution service, or both, from DEP or its successors or assignees under PSCSC-approved rate schedules or under special contracts, even if a customer elects to purchase electricity from an alternative electricity supplier following a fundamental change in regulation of public utilities in South Carolina. References to a “financing order”, unless the context indicates otherwise, are to the irrevocable financing order, dated October 13, 2023, issued by the PSCSC to DEP, as amended on October 23, 2023. You can find a glossary of some of the other defined terms used in this prospectus on page 142 of this prospectus.

We have included cross-references to sections in this prospectus to allow you to find further related discussions. You can also find key topics in the table of contents on the preceding pages. Check the table of contents to locate these sections.

You should rely only on the information contained or incorporated by reference in this prospectus. Neither we nor the depositor has authorized anyone else to provide you with any different information. If anyone provides you with different or inconsistent information, you should not rely on it. The bonds are not being offered in any jurisdiction where the offer or sale is not permitted. The information in this prospectus is current only as of the date of this prospectus.

1

OFFERING RESTRICTIONS IN CERTAIN JURISDICTIONS

NOTICE TO RESIDENTS OF THE EUROPEAN ECONOMIC AREA

THE BONDS ARE NOT INTENDED TO BE OFFERED, SOLD OR OTHERWISE MADE AVAILABLE TO, AND SHOULD NOT BE OFFERED, SOLD OR OTHERWISE MADE AVAILABLE TO, ANY RETAIL INVESTOR IN THE EUROPEAN ECONOMIC AREA (“EEA”). FOR THESE PURPOSES, THE EXPRESSION “RETAIL INVESTOR” MEANS A PERSON WHO IS ONE (OR MORE) OF THE FOLLOWING: (1) A RETAIL CLIENT AS DEFINED IN POINT (11) OF ARTICLE 4(1) OF DIRECTIVE 2014/65/EU (AS AMENDED, “MIFID II”); (2) A CUSTOMER WITHIN THE MEANING OF DIRECTIVE (EU) 2016/97 (AS AMENDED), WHERE THAT CUSTOMER WOULD NOT QUALIFY AS A PROFESSIONAL CLIENT AS DEFINED IN POINT (10) OF ARTICLE 4(1) OF MIFID II; OR (3) NOT A QUALIFIED INVESTOR (“QUALIFIED INVESTOR”) WITHIN THE MEANING OF REGULATION 2017/1129 (AS AMENDED, THE “PROSPECTUS REGULATION”). CONSEQUENTLY NO KEY INFORMATION DOCUMENT REQUIRED BY REGULATION (EU) NO 1286/2014 (AS AMENDED, THE “PRIIPS REGULATION”) FOR OFFERING OR SELLING THE BONDS OR OTHERWISE MAKING THEM AVAILABLE TO RETAIL INVESTORS IN THE EEA HAS BEEN PREPARED; AND THEREFORE OFFERING OR SELLING THE BONDS OR OTHERWISE MAKING THEM AVAILABLE TO ANY RETAIL INVESTOR IN THE EEA MAY BE UNLAWFUL UNDER THE PRIIPS REGULATION.

THIS PROSPECTUS IS NOT A PROSPECTUS FOR PURPOSES OF THE PROSPECTUS REGULATION. THIS PROSPECTUS HAS BEEN PREPARED ON THE BASIS THAT ANY OFFER OF BONDS IN ANY MEMBER STATE OF THE EEA (EACH, A “RELEVANT STATE”) WILL BE MADE ONLY PURSUANT TO AN EXEMPTION UNDER THE PROSPECTUS REGULATION FROM THE REQUIREMENT TO PUBLISH A PROSPECTUS FOR OFFERS OF BONDS. ACCORDINGLY, ANY PERSON MAKING OR INTENDING TO MAKE AN OFFER IN THAT RELEVANT STATE OF BONDS WHICH ARE THE SUBJECT OF THE OFFERING CONTEMPLATED IN THIS PROSPECTUS MAY ONLY DO SO IN CIRCUMSTANCES IN WHICH NO OBLIGATION ARISES FOR THE ISSUING ENTITY OR ANY OF THE UNDERWRITERS TO PUBLISH A PROSPECTUS PURSUANT TO ARTICLE 3 OF THE PROSPECTUS REGULATION, IN RELATION TO SUCH OFFER. NEITHER THE ISSUING ENTITY NOR ANY UNDERWRITER HAVE AUTHORISED, NOR DO THEY AUTHORISE, THE MAKING OF ANY OFFER OF BONDS IN CIRCUMSTANCES IN WHICH AN OBLIGATION ARISES FOR THE ISSUING ENTITY OR ANY OF THE UNDERWRITERS TO PUBLISH A PROSPECTUS FOR SUCH OFFER.

ACCORDINGLY, ANY PERSON MAKING OR INTENDING TO MAKE AN OFFER IN THAT RELEVANT MEMBER STATE OF BONDS WHICH ARE THE SUBJECT OF THE OFFERING CONTEMPLATED IN THIS PROSPECTUS MAY DO SO ONLY WITH RESPECT TO QUALIFIED INVESTORS. NEITHER WE NOR ANY UNDERWRITER HAS AUTHORIZED, NOR DO WE OR THEY AUTHORIZE, THE MAKING OF ANY OFFER OF BONDS OTHER THAN TO QUALIFIED INVESTORS.

ANY DISTRIBUTOR SUBJECT TO MIFID II THAT IS OFFERING, SELLING OR RECOMMENDING THE BONDS IS RESPONSIBLE FOR UNDERTAKING ITS OWN TARGET MARKET ASSESSMENT IN RESPECT OF THE BONDS AND DETERMINING ITS OWN DISTRIBUTION CHANNELS FOR THE PURPOSES OF THE MIFID II PRODUCT GOVERNANCE RULES UNDER COMMISSION DELEGATED DIRECTIVE (EU) 2017/593 (AS AMENDED, THE “DELEGATED DIRECTIVE”). NEITHER WE NOR ANY UNDERWRITER MAKES ANY REPRESENTATIONS OR WARRANTIES AS TO A DISTRIBUTOR’S COMPLIANCE WITH THE DELEGATED DIRECTIVE.

EACH UNDERWRITER HAS REPRESENTED AND AGREED THAT IT HAS NOT OFFERED, SOLD OR OTHERWISE MADE AVAILABLE, AND WILL NOT OFFER, SELL OR OTHERWISE MAKE AVAILABLE, ANY BONDS WHICH ARE THE SUBJECT OF THE OFFERING CONTEMPLATED BY THIS PROSPECTUS TO ANY RETAIL INVESTOR (AS DEFINED ABOVE) IN THE EEA. FOR THIS PURPOSE, THE EXPRESSION OFFER INCLUDES THE COMMUNICATION IN ANY FORM AND BY ANY MEANS OF SUFFICIENT INFORMATION

2

ON THE TERMS OF THE OFFER AND THE BONDS SO AS TO ENABLE AN INVESTOR TO DECIDE TO PURCHASE OR SUBSCRIBE FOR THE BONDS.

NOTICE TO RESIDENTS OF UNITED KINGDOM

THE BONDS ARE NOT INTENDED TO BE OFFERED, SOLD OR OTHERWISE MADE AVAILABLE TO AND SHOULD NOT BE OFFERED, SOLD OR OTHERWISE MADE AVAILABLE TO ANY RETAIL INVESTOR IN THE UNITED KINGDOM (“UK”). FOR THE PURPOSES OF THIS PROVISION:

(A)   THE EXPRESSION “RETAIL INVESTOR” MEANS A PERSON WHO IS ONE (OR MORE) OF THE FOLLOWING:

(I)   A RETAIL CLIENT AS DEFINED IN POINT (8) OF ARTICLE 2 OF REGULATION (EU) NO 2017/565 AS IT FORMS PART OF DOMESTIC LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018 (“EUWA”); OR

(II)   A CUSTOMER WITHIN THE MEANING OF THE PROVISIONS OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (AS AMENDED, THE “FSMA”) OF THE UNITED KINGDOM AND ANY RULES OR REGULATIONS MADE UNDER THE FSMA TO IMPLEMENT DIRECTIVE (EU) 2016/97, WHERE THAT CUSTOMER WOULD NOT QUALIFY AS A PROFESSIONAL CLIENT, AS DEFINED IN POINT (8) OF ARTICLE 2(1) OF REGULATION (EU) NO 600/2014 AS IT FORMS PART OF DOMESTIC LAW BY VIRTUE OF THE EUWA; OR

(III)   NOT A QUALIFIED INVESTOR AS DEFINED IN ARTICLE 2 OF THE PROSPECTUS REGULATION AS IT FORMS PART OF DOMESTIC LAW BY VIRTUE OF THE EUWA (THE “UK PROSPECTUS REGULATION”); AND

(B)   THE EXPRESSION “OFFER” INCLUDES THE COMMUNICATION IN ANY FORM AND BY ANY MEANS OF SUFFICIENT INFORMATION ON THE TERMS OF THE OFFER AND THE BONDS TO BE OFFERED SO AS TO ENABLE AN INVESTOR TO DECIDE TO PURCHASE OR SUBSCRIBE FOR THE BONDS.

CONSEQUENTLY, NO KEY INFORMATION DOCUMENT REQUIRED BY REGULATION (EU) NO 1286/2014 AS IT FORMS PART OF DOMESTIC LAW BY VIRTUE OF THE EUWA (THE “UK PRIIPS REGULATION”) FOR OFFERING OR SELLING THE BONDS OR OTHERWISE MAKING THEM AVAILABLE TO RETAIL INVESTORS IN THE UK HAS BEEN PREPARED AND THEREFORE OFFERING OR SELLING THE BONDS OR OTHERWISE MAKING THEM AVAILABLE TO ANY RETAIL INVESTOR IN THE UK MAY BE UNLAWFUL UNDER THE UK PRIIPS REGULATION. THIS PROSPECTUS HAS BEEN PREPARED ON THE BASIS THAT ANY OFFER OF BONDS IN THE UK WILL BE MADE PURSUANT TO AN EXEMPTION UNDER THE UK PROSPECTUS REGULATION FROM THE REQUIREMENT TO PUBLISH A PROSPECTUS FOR OFFERS OF BONDS. THIS IS NOT A PROSPECTUS FOR THE PURPOSES OF THE UK PROSPECTUS REGULATION.

THIS PROSPECTUS AND ANY OTHER MATERIAL IN RELATION TO THE BONDS IS ONLY BEING DISTRIBUTED TO, AND IS DIRECTED ONLY AT, PERSONS IN THE UK WHO ARE “QUALIFIED INVESTORS” ​(AS DEFINED IN THE UK PROSPECTUS REGULATION WHO ARE ALSO (I) INVESTMENT PROFESSIONALS FALLING WITHIN ARTICLE 19(5) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005 (AS AMENDED, THE “ORDER”), OR (II) HIGH NET WORTH ENTITIES OR OTHER PERSONS FALLING WITHIN ARTICLES 49(2)(A) TO (D) OF THE ORDER, OR (III) PERSONS TO WHOM IT WOULD OTHERWISE BE LAWFUL TO DISTRIBUTE IT, ALL SUCH PERSONS TOGETHER BEING REFERRED TO AS “RELEVANT PERSONS”. THE BONDS ARE ONLY AVAILABLE TO, AND ANY INVITATION, OFFER OR AGREEMENT TO SUBSCRIBE, PURCHASE OR OTHERWISE ACQUIRE SUCH BONDS WILL BE ENGAGED IN ONLY WITH, RELEVANT PERSONS. THIS PROSPECTUS AND ITS CONTENTS ARE CONFIDENTIAL AND SHOULD NOT BE DISTRIBUTED, PUBLISHED OR REPRODUCED (IN WHOLE OR IN PART) OR DISCLOSED BY

3

ANY RECIPIENTS TO ANY OTHER PERSON IN THE UK. ANY PERSON IN THE UK THAT IS NOT A RELEVANT PERSON SHOULD NOT ACT OR RELY ON THIS PROSPECTUS OR ITS CONTENTS. THE BONDS ARE NOT BEING OFFERED TO THE PUBLIC IN THE UK.

IN ADDITION, IN THE UK, EACH UNDERWRITER HAS REPRESENTED AND AGREED IN THE UNDERWRITING AGREEMENT THAT THE BONDS MAY NOT BE OFFERED OTHER THAN BY AN UNDERWRITER THAT:

•

HAS ONLY COMMUNICATED OR CAUSED TO BE COMMUNICATED AND WILL ONLY COMMUNICATE OR CAUSE TO BE COMMUNICATED AN INVITATION OR INDUCEMENT TO ENGAGE IN INVESTMENT ACTIVITY (WITHIN THE MEANING OF SECTION 21 OF THE FSMA) RECEIVED BY IT IN CONNECTION WITH THE ISSUE OR SALE OF THE BONDS IN CIRCUMSTANCES IN WHICH SECTION 21(1) OF THE FSMA DOES NOT APPLY TO US; AND

•

HAS COMPLIED AND WILL COMPLY WITH ALL APPLICABLE PROVISIONS OF THE FSMA WITH RESPECT TO ANYTHING DONE BY IT IN RELATION TO THE BONDS IN, FROM OR OTHERWISE INVOLVING THE UK.

NOTICE TO RESIDENTS OF CANADA

THE BONDS MAY BE SOLD IN THE PROVINCES OF ALBERTA, BRITISH COLUMBIA AND ONTARIO ONLY TO PURCHASERS PURCHASING, OR DEEMED TO BE PURCHASING, AS PRINCIPAL THAT ARE ACCREDITED INVESTORS, AS DEFINED IN NATIONAL INSTRUMENT 45-106 PROSPECTUS EXEMPTIONS OR SUBSECTION 73.3(1) OF THE SECURITIES ACT (ONTARIO), AND ARE PERMITTED CLIENTS, AS DEFINED IN NATIONAL INSTRUMENT 31-103 REGISTRATION REQUIREMENTS, EXEMPTIONS AND ONGOING REGISTRANT OBLIGATIONS. ANY RESALE OF THE BONDS MUST BE MADE IN ACCORDANCE WITH AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE PROSPECTUS REQUIREMENTS OF APPLICABLE SECURITIES LAWS.

SECURITIES LEGISLATION IN CERTAIN PROVINCES OR TERRITORIES OF CANADA MAY PROVIDE A PURCHASER WITH REMEDIES FOR RESCISSION OR DAMAGES IF THIS PROSPECTUS (INCLUDING ANY AMENDMENT THERETO) CONTAINS A MISREPRESENTATION, PROVIDED THAT THE REMEDIES FOR RESCISSION OR DAMAGES ARE EXERCISED BY THE PURCHASER WITHIN THE TIME LIMIT PRESCRIBED BY THE SECURITIES LEGISLATION OF THE PURCHASER’S PROVINCE OR TERRITORY. THE PURCHASER SHOULD REFER TO ANY APPLICABLE PROVISIONS OF THE SECURITIES LEGISLATION OF THE PURCHASER’S PROVINCE OR TERRITORY FOR PARTICULARS OF THESE RIGHTS OR CONSULT WITH A LEGAL ADVISOR.

PURSUANT TO SECTION 3A.3 OF NATIONAL INSTRUMENT 33-105 UNDERWRITING CONFLICTS (NI 33-105), THE UNDERWRITERS ARE NOT REQUIRED TO COMPLY WITH THE DISCLOSURE REQUIREMENTS OF NI 33-105 REGARDING UNDERWRITER CONFLICTS OF INTEREST IN CONNECTION WITH THIS OFFERING.

4

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This prospectus includes forward-looking statements, including regarding expectations, estimates and projections about the electric consumption of customers, DEP’s ability to service the storm recovery property and collect the storm recovery charges, the issuing entity’s ability to pay back the bonds, and the PSCSC’s adherence to the South Carolina state pledge to protect the right of bondholders. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events of performance (often, but not always, through the use of words or phrases such as “will,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “believe,” “could,” “should,” “estimated,” “may,” “plan,” “potential,” “projection,” “target,” “outlook,” “is designed to,” or “intended”) are not statements of historical facts and may be forward-looking. Forward-looking statements involve estimates, assumptions and uncertainties. Accordingly, any such statements are qualified in their entirety by reference to important factors included in “Risk Factors” ​(in addition to any assumptions and other factors referred to specifically in connection with such forward-looking statements) that could have a significant impact on financial results, and could cause actual results to differ materially from those contained in forward-looking statements made by or on behalf of us or DEP, in this prospectus, in presentations, on websites, in response to questions or otherwise.

The following are some factors, among others, that could cause actual results to differ materially from those expressed or implied by forward looking statements in this prospectus:

•

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

•

the accuracy of the servicer’s estimates of future demand and prices for energy;

•

the impact of extraordinary external events, such as the pandemic health event resulting from COVID-19, and their collateral consequences, including the disruption of global supply chains or the economic activity in our service territory and the influence of weather and other natural phenomena affecting electric customer energy usage in the service territory, including the economic, operational and other effects of severe storms, hurricanes, droughts and tornadoes, including extreme weather associated with climate change; costs and effects of legal and administrative proceedings, settlements, investigations and claims;

•

industrial, commercial and residential growth or decline in service territory or customer bases resulting from sustained downturns of the economy and the economic health of our service territory 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 DEP service territory could result in customers leaving the electric distribution system, excess generation resources as well as stranded costs;

•

advancements in technology;

•

additional competition in electric markets and continued industry consolidation;

•

the ability to successfully operate electric generating facilities and deliver electricity to customers including direct or indirect effects to DEP resulting from an incident that affects the United States electric grid or generating resources;

•

the impact on our facilities and business from a terrorist or other attack, war, vandalism, cybersecurity threats, data security breaches, operational events, information technology failures or other catastrophic events, such as fires, explosions, pandemic health events or other similar occurrences;

•

the accuracy of the servicer’s forecast of energy consumption;

•

the accuracy of the servicer’s estimates of the customer payment patterns, including the rate of delinquencies and any collections curves;

5

•

the reliability of the systems, procedures and other infrastructure necessary to operate the electric business in the service territory; and

•

other factors discussed in this prospectus and any of our subsequent SEC filings.

You should not place undue reliance on forward looking statements. Each forward-looking statement speaks only as of the date on which such statement is made, and, except to the extent required by law, the depositor does not undertake any obligation to update any forward-looking statement to reflect events or circumstances, including unanticipated events, after the date on which such statement is made. New factors emerge from time to time and it is not possible for management to predict all of such factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement.

6

PROSPECTUS SUMMARY

This summary highlights some information from this prospectus. Because this is a summary, it does not contain all of the information that may be important to you. You should read this prospectus in its entirety before you buy the bonds.

You should carefully consider the Risk Factors beginning on page 22 of this prospectus before you invest in the bonds

Securities offered:

Series      Senior Secured Storm Recovery Bonds of Duke Energy Progress SC Storm Funding LLC, as listed on the cover page of this prospectus (collectively, the “Series      Bonds”), beginning on the Initial Payment Date, we will pay interest semi-annually and principal semi-annually and sequentially in accordance with the sinking fund schedule described in this prospectus.

Issuing entity and Capital
Structure:

Duke Energy Progress SC Storm Funding LLC is a special purpose subsidiary of DEP, organized as a Delaware limited liability company. DEP is our sole member and owns all of our equity interests. The issuing entity has no commercial operations. We were formed for the limited purpose of purchasing, owning and administering storm recovery property, issuing storm recovery bonds from time to time (including the Series      Bonds) and performing activities incidental thereto to finance certain activities of DEP related to the recovery of storm recovery costs. These are the first storm recovery bonds which DEP SC Storm Funding has issued. We may issue additional storm recovery bonds, but only as authorized under the financing order or under a new and separate financing order and a new indenture.

The issuing entity will be capitalized with an upfront cash deposit by DEP of 0.50% of the bonds’ principal amount issued (to be held in the capital subaccount) and will establish an excess funds subaccount to retain, until the next payment date, any amounts collected and remaining after all scheduled payments due on such payment date for the bonds have been made.

Our address and phone number are as follows: 411 Fayetteville Street Raleigh, North Carolina 27601, 704-382-3853.

Federal Income Tax Status:

The bonds will be treated as debt of DEP for U.S. federal income tax purposes. See “Material U.S. Federal Income Tax Consequences” in this prospectus. For federal income tax purposes, DEP will not recognize gross income unless and until DEP bills customers for the storm recovery charges and only in connection with such billing of customers for such storm recovery charges.

The depositor, sponsor, seller and
initial servicer of the bonds:

DEP is a regulated public utility primarily engaged in the generation, transmission, distribution, and sale of electricity in portions of North Carolina and South Carolina. DEP’s service area covers approximately 29,000 square miles across North Carolina and South Carolina. DEP supplies electric service to approximately 1.6 million residential, commercial and industrial customers, approximately 185,000 of these customers are in the northeastern part of South Carolina including Florence, Darlington, and Sumter counties. During the year ended December 31, 2022, DEP billed approximately

7

6.2 billion kilowatt hours of electricity to its electric customers in South Carolina, resulting in revenues of approximately $605 million. DEP’s retail rates payable by its South Carolina customers are regulated by PSCSC. The storm recovery charges will only be imposed on DEP’s customers in South Carolina.

The address and phone number of DEP are as follows: 411 Fayetteville Street, Raleigh, North Carolina 27601. DEP’s telephone number is 704-382-3853.

DEP is an indirect, wholly owned subsidiary of Duke Energy Corporation. DEP, as initial servicer, will bill and collect storm recovery charges and will remit storm recovery charge collections daily to the indenture trustee according to the terms of the servicing agreement. Neither DEP nor Duke Energy Corporation nor any other affiliate (other than us) is an obligor of the bonds. The bonds will not be insured or guaranteed by DEP, including in its capacity as sponsor, depositor, seller or servicer, or by its parent, Duke Energy Corporation, any of their respective affiliates, the indenture trustee or any other person or entity. There are currently no other retail electric providers operating in DEP’s South Carolina service territory. See “The Servicing Agreement” in this prospectus.

DEP, as initial servicer, will be entitled to receive an annual servicing fee in an amount equal to 0.05% of the aggregate initial principal amount of the bonds plus out-of-pocket expenses. This servicing fee will be payable in equal installments on each semi-annual payment date, in arrears.

The indenture trustee will pay the servicing fee (together with any portion of the servicing fee that remains unpaid from prior payment dates) to the extent of available funds prior to the distribution of any interest on and principal of the bonds.

DEP, as administrator, will be entitled to receive an annual administration fee of $50,000 plus out-of-pocket expenses. This annual administration fee will be payable annually, in arrears. The indenture trustee will pay the administration fee (together with any portion of the administration fee that remains unpaid from prior payment dates) to the extent of available funds prior to the distribution of any interest on and principal of the bonds.

Our relationship with DEP:

On the issue date for the Series      Bonds, DEP will sell storm recovery property to us pursuant to a sale agreement between us and DEP. DEP will service the storm recovery property pursuant to a servicing agreement between us and DEP. See “The Sale Agreement” and “The Servicing Agreement” in this prospectus.

Neither the bonds nor the property securing the bonds is an obligation of DEP or any of its affiliates, except for us.

The issuing entity’s relationship
with the PSCSC:

The issuing entity is responsible to the PSCSC, as provided in its organizational documents and the basic documents. Please read “The Issuing Entity” in this prospectus.

8

Our managers:

The following is a list of our managers as of the date of this prospectus:

Name	Age	Title	Background
Karl W. Newlin	55	Manager	Karl W. Newlin has been Senior Vice President Corporate Development at Duke Energy Corporation since June 2018 and has been its Treasurer since November 2018. Prior to that, Mr. Newlin was Senior Vice President and Chief Commercial Officer — Natural Gas effective with the merger of Duke Energy Corporation and Piedmont Natural Gas Company, Inc. (“Piedmont”) in October 2016. Mr. Newlin joined Piedmont in 2010 to manage its strategic planning functions, new business development activities and joint venture investments. Mr. Newlin previously served as Managing Director, Investment Banking with Merrill Lynch & Co. in its New York and Los Angeles offices.
Cynthia S. Lee	57	Manager	Manager Cynthia S. Lee was appointed Vice President, Chief Accounting Officer and Controller of Duke Energy Corporation, effective May 2021. Prior to that, Ms. Lee served as Director, Investor Relations since June 2019 and in various accounting roles since joining Duke Energy Corporation in 2002.
​	​	Independent Manager	​

Credit ratings:

The bonds are expected to receive credit ratings from at least two nationally recognized statistical rating organizations. Please read “Ratings” in this prospectus.

Bond structure:

Sinking fund bonds: Tranche    , expected weighted average life    years. The bonds are scheduled to pay principal semi-annually. See “Weighted Average Life and Yield Considerations for the Bonds” in this prospectus.

9

Average life profile:

Stable, meaning prepayment is not permitted and the aggregate payments of principal of and interest on the bonds and the timing of such payments are not expected to change materially over the life of the bonds under the stress cases analyzed under the heading “Weighted Average Life and Yield Considerations for the Bonds — Weighted Average Life Sensitivity” in this prospectus.

Optional redemption:

No optional redemption. Non-callable for the life of the bonds.

Payment dates and interest
accrual:

Semi-annually,      and     . Interest will be calculated on a 30/360 basis. The first scheduled payment date is          , 202    (the “Initial Payment Date”).

Interest is due on each payment date for the Series      Bonds, and principal is due upon the final maturity date. Failure to pay the entire outstanding principal amount by the final maturity date will result in an event of default. See “Description of the Storm Recovery Bonds — Interest Payments Generally”, “— Principal Payments” and “— Events of Default; Rights Upon Event of Default” in this prospectus.

Tranche Scheduled Final
Payment Date Final Maturity
Date

Indenture trustee:

U.S. Bank Trust Company, National Association will act as indenture trustee under the indenture pursuant to which the bonds will be issued (the “indenture”). Please read “The Indenture Trustee” in this prospectus for a description of the trustee’s duties and responsibilities under the indenture.

Minimum denominations of the
bonds:

$2,000 and integral multiples of $1,000 in excess thereof, except for one bond, which may be of a smaller denomination.

Use of proceeds:

The issuing entity will use the proceeds of the offering to (i) purchase the storm recovery property relating to the bonds from DEP, who in turn will use the proceeds it receives from the sale of the storm recovery property to pay down a portion of its outstanding short-term debt that are intercompany moneypool borrowings which were funded by either commercial paper issued by Duke Energy Corporation or excess cash held by other utility operating companies and (ii) pay upfront bond issuance costs.

Background of transaction and
the enabling legislation, the
Financing Act:

In 2022, the South Carolina legislature enacted the “Financing Act”, codified as Sections 58-27-1110 through 1180, SC Code of Laws Annotated. The Financing Act allows public utilities to access lower-cost funds through storm recovery bonds pursuant to financing orders issued by the PSCSC.

The Financing Act permits the PSCSC to impose nonbypassable storm recovery charges on all existing or future customers receiving transmission or distribution service, or both, from DEP or its successors or assignees under PSCSC-approved rate schedules or under special contracts sufficient to pay principal of and interest on

10

the bonds and other administrative expenses of the offering. The PSCSC governs the amount and terms for collections of these storm recovery charges through one or more financing orders issued to PSCSC and upon the issuance of the bonds these storm recovery charges may not be reduced, impaired, postponed, terminated or otherwise adjusted by the PSCSC except as adjusted pursuant to the true-up mechanism described herein.

Storm recovery charges
are nonbypassable by
customers:

The storm recovery charges are nonbypassable, consumption-based charges separate and apart from DEP’s base rates; the storm recovery charges are to be paid by all existing or future customers receiving transmission or distribution service, or both, from DEP or its successors or assignees under PSCSC-approved rate schedules or under special contracts. Such customers must pay storm recovery charges even if a customer elects to purchase electricity from an alternative electric supplier following a fundamental change in regulation of public utilities in South Carolina.

See “DEP’s Financing Order — Storm Recovery Charges” in this prospectus.

Relationship to 2021 NC Storm Recovery Bonds:

In November 2021, Duke Energy Progress NC Storm Funding LLC, a special purpose wholly-owned subsidiary of DEP, issued $769.6 million aggregate principal amount of senior secured storm recovery bonds (the “2021 NC Storm Recovery Bonds”) pursuant to Section 62-172, North Carolina General Statutes, to reimburse itself for the North Carolina portion of previously incurred storm recovery costs relating to Hurricanes Florence, Michael and Dorian and Winter Storm Diego, including the retirement of related debt. DEP currently acts as servicer with respect to the 2021 NC Storm Recovery Bonds. The 2021 NC Storm Recovery Bonds were issued by a separate issuing entity, are secured by a separate storm recovery property and were issued pursuant to a separate financing order under a different statute in a different state.

Bondholders will have no recourse to the charges associated with the 2021 NC Storm Recovery Bonds and holders of the 2021 NC Storm Recovery Bonds will have no recourse to the storm recovery charges.

Initial storm recovery
charge as a percentage of
customer’s total electricity
bill:

The initial storm recovery charge is expected to represent approximately    % of the total bill, as of January 2024, received by 1,000 kWh South Carolina residential customer of DEP.

South Carolina state pledge to
protect bondholder rights:

The State of South Carolina has pledged to the bondholders that it will not:

•

alter the provisions of the Financing Act, which authorizes the PSCSC to create an irrevocable contract right or chose in action by the issuance of a financing order, to create storm recovery property, and make the storm recovery charges imposed by the financing order irrevocable, binding, and nonbypassable charges;

11

•

take or permit any action that impairs or would impair the value of storm recovery property or the security for the storm recovery bonds or revises the storm recovery costs for which recovery is authorized;

•

in any way impair the rights and remedies of bondholders, assignees, and other financing parties; or,

•

except for changes made pursuant to the formula-based adjustment mechanism authorized under the Financing Act, reduce, alter, or impair storm recovery charges that are to be imposed, billed, charged collected, and remitted for the benefit of the bondholders, any assignee and any other financing parties until any and all principal, interest, premium, financing costs and other fees, expenses, or charges incurred, and any contracts to be performed in connection with the storm recovery bonds, have been paid and performed in full.

Nothing in this pledge will preclude limitation or alteration if full compensation is made by law for the full protection of the storm recovery charges collected pursuant to a financing order and of the bondholders and any assignee or financing party entering into a contract with the electric utility. Please read “Risk Factors — Risks Associated with Potential Judicial, Legislative or Regulatory Actions — Future South Carolina legislative action might attempt to invalidate the bonds or the storm recovery property” in this prospectus.

This agreement is referred to as the “state pledge”.

The bonds will not be a debt or general obligation of the PSCSC, the State of South Carolina, or any of its political subdivisions, agencies, or instrumentalities, and are not a charge on the full faith and credit or taxing power of the State of South Carolina or any other governmental agency or instrumentality.

PSCSC mandates statutory
true-up adjustments to the
storm recovery charges:

The Financing Act permits and the financing order requires that we, or DEP, file with the PSCSC at least semi-annually (or beginning twelve months prior to the scheduled final payment date, at least quarterly) a letter applying the true-up mechanism to be reviewed by the PSCSC for any mathematical or clerical errors to correct for any overcollection or undercollection of the storm recovery charges and make any adjustments to ensure the recovery of revenues sufficient to provide for the timely payment of scheduled principal of and interest on the bonds and other required amounts and charges payable in connection with the bonds (such amounts, the “periodic payment requirement”). Under the servicing agreement, the servicer will make adjustments to the storm recovery charges at least semi-annually. In addition to the semi-annual true-up adjustment, the servicer is authorized to make interim adjustments at any time for any reason to ensure the timely payment of the periodic payment requirement.

In addition, the servicer may make interim true-up adjustments to be effective simultaneously with a base rate change that includes any change in the rate allocation among customers used to determine the storm recovery charges.

12

There is no limit or cap on level
of storm recovery charges:

Under the financing order, DEP, as initial servicer, will impose on and collect from its existing or future retail customers in South Carolina receiving transmission or distribution service, or both, even if such customer elects to purchase electricity from an alternative supplier, Storm Recovery Charges in an amount sufficient to provide for the timely payment of principal of and interest on the bonds when due and other financing costs payable in connection with the bonds. See “Description of the Storm Recovery Bonds — Events of Default; Rights Upon Event of Default” in this prospectus.

Credit/security for the bonds:

The bonds are secured by storm recovery property, by funds on deposit in the collection account, including the general subaccount, the capital subaccount and the excess funds subaccount, by our rights under the various transaction documents, by our right to compel the servicer to file for and obtain true-up adjustments, and by all payments on or under the pledged collateral and by all proceeds in respect to the pledged collateral. See “Security for the Storm Recovery Bonds” in this prospectus. Storm recovery property is a present property right created by the Financing Act and the financing order and is protected by the state pledge described in this prospectus. See “The Storm Recovery Property and the Financing Act” in this prospectus.

In general, storm recovery property permits a storm recovery charge to be:

1.

paid by all existing or future South Carolina customers receiving transmission or distribution service, or both, from DEP or its successors or assignees under PSCSC-approved rate schedules or under special contracts, even if a customer elects to purchase electricity from an alternative electric supplier following a fundamental change in regulation of public utilities in South Carolina;

2.

collected by DEP, as servicer, and remitted to the indenture trustee daily to provide for payments in respect of the bonds; and

3.

adjusted at least semi-annually (or beginning twelve months prior to the scheduled final payment date, at least quarterly), and more frequently as needed to ensure recovery of revenues sufficient to pay principal of and interest on the bonds when due and other financing costs and other required amounts and charges payable in connection with the bonds.

The storm recovery property securing the bonds consists of all rights and interests of DEP under the financing order. The storm recovery property is being sold to us by DEP in connection with the issuance of the bonds. Storm recovery property is not a receivable, and the bonds are not secured by a pool of receivables.

Credit enhancement for the bonds will be provided by the true-up mechanism, as well as by the capital subaccount. The primary purpose of the excess funds subaccount is not to provide credit enhancement for the bonds but to hold funds collected in amounts that were more than necessary to pay current debt service. However, amounts in the excess funds subaccount may be used to make debt service payments on the bonds when needed.

13

Transaction Parties:

The following chart shows the transaction parties and is a general summary of the transaction.

Allocation and flow of funds:

The following chart represents a general summary of the flow of funds.

14

Generally, DEP’s transmission and distribution customers will pay storm recovery charges and all other components of their monthly electricity bills to DEP.

On each payment date, the indenture trustee will, with respect to the storm recovery bonds, pay or allocate, all amounts on deposit in the general subaccount of the collection account in the following order of priority:

1.

payment of the indenture trustee’s fees, expenses and outstanding indemnity amounts in an amount not to exceed annually $200,000 in the then current calendar year (the “Trustee Cap”); provided, however, that the Trustee Cap shall be disregarded and inapplicable following the occurrence of an event of default;

2.

payment of the servicing fee plus any unpaid servicing fees from prior payment dates;

3.

payment of the administration fee to the extent due on that payment date and of the fees of the issuing entity’s independent manager plus any unpaid administration or management fees from prior payment dates;

4.

payment of all of our other ordinary periodic operating expenses;

5.

payment of the interest then due, including any past-due interest;

6.

payment of the principal required to be paid on the final maturity date or as a result of acceleration upon an event of default;

7.

payment of the principal then scheduled to be paid in accordance with the expected amortization schedule, including any previously unpaid scheduled principal;

8.

payment of any of our remaining unpaid operating expenses (including any fees, expenses and indemnity amounts owed to the indenture trustee but unpaid due to the limitation in clause (1) above) and any remaining amounts owed pursuant to the basic documents;

9.

replenishment of any amounts drawn from the capital subaccount;

10.

release to DEP of an amount equal to the rate of return on the amount contributed to the capital subaccount, including any portion of such rate of return for any prior payment date that has not yet been paid, so long as no event of default has occurred and is continuing;

11.

allocation of the remainder collected, if any, to the excess funds subaccount for future payments; and

12.

after the bonds have been paid in full and discharged and all of the foregoing amounts are paid in full, the balance, together with all amounts in the capital subaccount and the excess funds subaccount, to us free and clear of the lien of the indenture.

15

See “Security for the Storm Recovery Bonds — How Funds in the Collection Account Will Be Allocated” in this prospectus. The servicing fee referred to in clause (2) is described in “The Servicing Agreement”, and the amount of the administrative fee referred to in clause (3) above is described in “The Issuing Entity — The Administration Agreement” below.

On any business day on which the indenture trustee receives a written request and direction from the administrator stating that any operating expense payable by us (but only as described in clauses (1) through (4) above) will become due and payable prior to the next payment date, and setting forth the amount and nature of such operating expense, as well as any supporting documentation that the indenture trustee may reasonably request, the indenture trustee, upon receipt of such information and written direction from the administrator will make payment of such operating expenses on or before the date such payment is due from amounts on deposit in the general subaccount, the excess funds subaccount and the capital subaccount in that order as specified in such written direction.

Issuance of additional storm recovery bonds by us:

The issuing entity has been organized to serve as a special purpose limited liability company. As authorized by the financing order, our organizational documents as well as the transaction documents supporting the bonds give us the authority and flexibility to issue additional storm recovery bonds in future transactions, with the approval of the PSCSC. As a result, we may acquire additional storm recovery property and issue one or more additional series of storm recovery bonds that are supported by such additional and separate storm recovery property or other collateral. For example, such future financings may include additional series of storm recovery bonds to finance additional storm recovery costs.

Any additional storm recovery bonds may be issued by us, subject to the conditions described below. Each series of additional storm recovery bonds will be secured by separate storm recovery property created by an additional financing order. Any series of additional storm recovery bonds may include terms and provisions unique to that particular series of additional storm recovery bonds. Each series of additional storm recovery bonds will have the benefit of a true-up mechanism as required by the Financing Act.

However, we may not issue additional storm recovery bonds unless the rating agency condition for the bonds has been satisfied. In addition, we may not issue additional storm recovery bonds unless each of the following conditions is satisfied:

•

DEP requests and receives another financing order from the PSCSC;

•

each series of additional storm recovery bonds has recourse only to the storm recovery property and funds on deposit in the trust accounts held by the indenture trustee with respect to that series of additional storm recovery bonds, is nonrecourse to our other assets and does not constitute a claim against us if revenue from the storm recovery charges and funds on deposit in the trust accounts with respect to that series of

16

additional storm recovery bonds are insufficient to pay such other series in full;

•

the indenture trustee and the rating agencies then rating any series of our outstanding storm recovery bonds are provided an opinion of a nationally recognized law firm experienced in such matters to the effect that such issuance would not result in our substantive consolidation with DEP and that there has been a true sale of the storm recovery property with respect to such series, subject to the customary exceptions, qualifications and assumptions contained therein;

•

transaction documentation for the other series provides that holders of the additional storm recovery bonds of the other series will not file or join in filing of any bankruptcy petition against us;

•

if holders of such additional storm recovery bonds are deemed to have any interest in any of our assets that are dedicated to the bonds, holders of such other additional storm recovery bonds must agree that their interest in the assets that are dedicated to the bonds is subordinate to claims or rights of holders of the bonds in accordance with the related intercreditor agreement;

•

each series of additional storm recovery bonds will have its own bank accounts or trust accounts and funds for each series of storm recovery bonds shall be remitted in accordance with the related servicing agreement and related intercreditor agreement; and

•

each series of additional storm recovery bonds will bear its own indenture trustee fees, servicer fees and administration fees due under the administration agreement.

Please read “Description of the Storm Recovery Bonds – Conditions of Issuance of Additional Storm Recovery Bonds and Acquisition of Additional Storm Recovery Property” in this prospectus.

The financing order requires that, in the event a customer does not pay in full all amounts owed under any bill including storm recovery charges, any resulting shortfalls in storm recovery charges will be allocated ratably among the storm recovery charges authorized in the financing order, any similar securitization charges, and DEP’s other billed amounts in a manner consistent with DEP’s current process for allocating partial payments. Please read “The Servicing Agreement — Remittances to Collection Account” in this prospectus.

Allocation among series:

In the event a series of additional storm recovery bonds is issued, the bonds will not be subordinated in right of payment to any other series of storm recovery bonds. Each series of storm recovery bonds would be secured by its own storm recovery property, which will include the right to impose, bill, charge, collect and receive storm recovery charges calculated in respect of that series, and the right to impose interim and annual true-up adjustments in respect of that series. Each series would also have its own collection account, including any related subaccounts, into which revenue from the storm recovery charges relating to that series would be deposited and from which amounts would be withdrawn to pay the related

17

series of storm recovery bonds. Holders of one series of storm recovery bonds would have no recourse to collateral for a different series. Each series that we may issue will also have the benefit of a true-up mechanism. The administration fees, independent manager fees and other operating expenses payable by us on a payment date would be assessed to each series of storm recovery bonds on a pro rata basis, based upon the respective outstanding principal amounts of each series. See “Security for the Storm Recovery Bonds — Description of Indenture Accounts” and “— How Funds in the Collection Account Will Be Allocated” in this prospectus.

Although each series of storm recovery bonds would have its own storm recovery property, storm recovery charges relating to the bonds and storm recovery charges relating to any other series of storm recovery bonds may be collected through single electricity bills to each electric service customer. The storm recovery charges shall be identified as a separate line item on customer electricity bills and include both the rate and the amount of the charge.

In the event a customer does not pay in full all amounts owed under any bill including storm recovery charges, each servicer is required to allocate any resulting shortfalls in storm recovery charges ratably based on the amounts of storm recovery charges owing in respect of the bonds, any amounts owing to any other series and amounts owing to any other subsequently created special-purpose subsidiaries of the utilities which issue storm recovery bonds. See “The Servicing Agreement — Remittances to Collection Account” in this prospectus.

ERISA eligible:

Yes; please read “ERISA Considerations” in this prospectus.

1940 Act Registration:

The issuing entity will be relying on an exclusion or exemption from the definition of “investment company” under the 1940 Act contained Section 3(c)(5) of the 1940 Act, although there may be additional exclusions or exemptions available to the issuing entity. The issuing entity is being structured so as not to constitute a “covered fund” for purposes of the Volcker Rule under the Dodd-Frank Act.

Credit risk retention requirements:

The bonds are not subject to the 5% risk retention requirements imposed by Section 15G of the Securities Exchange Act of 1934 or the “Exchange Act” due to the exemption provided in Rule 19(b)(8) of the risk retention regulations in 17 C.F.R. Part 246 of the Exchange Act or “Regulation RR”. For information regarding the requirements of the European Union Securitization Regulation as to risk retention and other matters, please read “Risk Factors — Other Risks Associated with the Purchase of the Bonds — Regulatory provisions affecting certain investors could adversely affect the liquidity of the bonds” in this prospectus.

Our legal and covenant defeasance options:

The issuing entity may, by making certain deposits in trust and meeting specified conditions, at any time, terminate all of its obligations under the indenture and the series supplement with respect to the bonds or its obligations to comply with some of the covenants in the indenture and the series supplement, including some

18

of the covenants described under “Description of the Storm Recovery Bonds — Covenants of DEP SC Storm Funding” in this prospectus. See “Description of the Storm Recovery Bonds — DEP SC Storm Funding’s Legal and Covenant Defeasance Options” in this prospectus.

Expected settlement date:

Settling flat. DTC, Clearstream and Euroclear.            , 20  .

Continuing disclosure: surveillance/internet-based information post issuance/ dedicated Web address:

Duke Energy Corporation, the parent of DEP, will establish a dedicated web address for the life of the bonds. The principal transaction documents and other information concerning the storm recovery charges and security relating to the bonds will be posted at such web address, which is currently located at www.duke-energy.com.

Pursuant to the indenture, the indenture trustee will make available on its website (currently located at https://pivot.usbank.com) to the holders of record of the bonds regular reports prepared by the servicer containing information concerning, among other things, us and the collateral. Unless and until the bonds are issued in definitive certificated form, the reports will be made available electronically on its website to The Depository Trust Company and to the beneficial owners of the bonds. These reports will not be examined and reported upon by an independent public accountant. In addition, no independent public accountant will provide an opinion thereon. Please read “Description of the Storm Recovery Bonds — Reports to Bondholders” in this prospectus.

Neither we nor the depositor is an asset-backed issuer and the bonds are not asset-backed securities as such terms are defined by the SEC in governing regulations Item 1101 of Regulation AB. However, we are filing offering documents and plan to file with the SEC required periodic and current reports related to the bonds consistent with the disclosure and reporting regime established in Regulation AB and will also post those periodic and current reports at the website set forth above.

Risk factors:

You should consider carefully the risk factors beginning on page 22 of this prospectus before you invest in the bonds.

19

SUMMARY OF RISK FACTORS

Set forth below is a summary of the material risk factors which you should consider before deciding whether to invest in the bonds. These risks can affect the timing or ultimate payment of the bonds and value of your security. A description of such risk factors in greater details follows this summary.

Limited Source of Payment for the Bonds:   The only source of funds for the bonds is the storm recovery property and the other limited funds held by the indenture trustee. At the time of issuance of the bonds, we will have no other assets and the bonds are non-recourse to DEP. Therefore, the sources for repayment of the bonds are limited. You must rely for payment of the bonds solely upon the Financing Act, state and federal constitutional rights to enforcement of the securitization provisions of the Financing Act, the irrevocable financing order, collections of the storm recovery charges and funds on deposit in the related accounts held by the indenture trustee.

Risks Associated with Potential Judicial, Legislative or Regulatory Actions:   The storm recovery property is an asset created under the Financing Act and through regulatory proceedings at the PSCSC. Neither we nor DEP will indemnify you for any changes of law, whether as a result of Constitutional amendment, legislative enactment or any judicial proceedings.

True up adjustment filings made with the PSCSC may be challenged before the PSCSC, resulting in delays in implementation of the true-up adjustment. Additionally, subject to any required PSCSC approval, DEP may establish billing, collection and posting arrangements with customers which could impact the timing and amount of customer payments.

Also, a municipality may seek to acquire portions of DEP’s service territory, and may dispute their obligation to pay the storm recovery charges, or even if obligated to do so, may fail to bill and remit the storm recovery charges on a timely basis.

Servicing Forecasting Risks:   The collection of storm recovery charges on a timely and sufficient basis depends upon the ability of the servicer to accurately forecast customer usage. If the servicer inaccurately forecasts consumption or underestimates customer delinquencies for any reason, there could be a shortfall or material delay in storm recovery charge collections. Factors which might cause inaccurate projections of usage or customer delinquencies, include unanticipated weather conditions, cyber-attacks on DEP infrastructure, general economic conditions, natural or man-made disasters, such as storms or pandemics. DEP’s ability to collect storm recovery charges from customers may also be impacted by some of these same factors.

It may be difficult for us to find a replacement servicer should DEP default in its obligations. Assuming we can obtain a successive servicer, the successor servicer may be less effective in servicing the charges, potentially resulting in delay in collections, which might reduce the value of your investment.

Risks Associated with the Unusual Nature of Storm Recovery Property:   The unusual nature of the storm recovery property makes it unlikely that, in the event of a default, the storm recovery property could be sold. Although the bonds may be accelerated in the event of a default, as a practical matter, the storm recovery charges would likely not be accelerated.

Risk Associated with Storms:   DEP’s operations might be impacted by hurricanes, tropical storms or wind storms. Transmission, distribution and consumption of electricity might be interrupted temporarily, reducing the collections of storm recovery charges. There might be longer-lasting weather-related adverse effects on residential and commercial development and economic activity in the DEP service area, which could cause the per-kWh storm recovery charge to be greater than expected. Legislative action adverse to the bondholders might be taken in response, and such legislation, if challenged as a violation of the state pledge, might be defended on the basis of public necessity.

Risks Associated with the Potential Bankruptcy of the Seller or the Servicer:   In the event of a bankruptcy by DEP, you may experience a delay in payment or a default on payment of the bonds due to various factors, including the comingling of storm recovery charges with other revenue of the servicer, a challenge to the characterization of the sale of the storm recovery property as a financing transaction, an effort to consolidate our assets and liabilities with those of DEP, a characterization of storm recovery

20

payments to the indenture trustee as preferential transfers, the treatment of our claims against DEP as unsecured claims, and a general limitation on the remedies available in a bankruptcy, including the risk of an automatic stay.

Other Risks:   Other risks associated with the purchase of the bonds include the inadequacy of any indemnification obligations provided by DEP, the impact of a change of ratings or the issuance of an unsolicited rating, the absence of a secondary market for the bonds, the issuance of additional storm recovery bonds or similar instruments creating greater burdens on the same customers, regulatory actions affecting certain investors and losses on investments held by the indenture trustee.

21

RISK FACTORS

You should consider carefully all the information included in this prospectus, including the following factors and the statements contained under the “Cautionary Statement Regarding Forward-Looking Statements” in this prospectus, before you decide whether to invest in the bonds:

You might experience material payment delays as a result of limited sources of payment for the bonds and limited credit enhancement.

You may suffer material payment delays on your bonds if the collateral securing your bonds is insufficient to pay the accrued interest on and the principal amount of those bonds in full. The only source of funds for payments of interest on and principal of the bonds will be the collateral. The collateral for the bonds will be limited to:

•

the storm recovery property securing the bonds, including the right to impose, bill, charge, collect and receive storm recovery charges and the right to implement the true-up mechanism in respect of the storm recovery charges;

•

the funds on deposit in the accounts held by the indenture trustee; and

•

our rights under various contracts described in this prospectus.

The bonds will not be insured or guaranteed by DEP, including in its capacity as sponsor, depositor, seller or servicer, or by its parent, Duke Energy Corporation, any of their respective affiliates, the indenture trustee or any other person or entity. The bonds will be nonrecourse obligations, secured only by the collateral. Delays in payment on the bonds might result in a reduction in the market value of the bonds and, therefore, the value of your investment in the bonds.

The bonds do not constitute a debt, liability or other obligation of, or interest in, DEP or any of its other affiliates (other than us). The State of South Carolina, its agencies and instrumentalities, and its political subdivisions are not liable on the bonds and the bonds are not a debt of the State of South Carolina or any of its political subdivisions. The bonds are not special obligations or indebtedness of the State of South Carolina, its agencies, or its political subdivisions. The bonds do not directly, indirectly, or contingently obligate the State of South Carolina or its agencies, instrumentalities, or political subdivisions, to levy any tax or make any appropriation for payment of the bonds, other than in their capacities as consumers of electricity.

You must rely for payment of principal of and interest on the bonds solely upon the Financing Act, state and federal constitutional rights to enforcement of the Financing Act, the financing order, collections of storm recovery charges and funds on deposit in the related accounts held pursuant to the indenture and the series supplement. If these amounts are not sufficient to make payments or these are delays in recoveries, you may experience material payment delays or incur a loss on your investment in the bonds. Our organizational documents restrict our right to acquire other assets unrelated to the transactions described in this prospectus. Please read “The Issuing Entity” in this prospectus.

Risks Associated with Potential Judicial, Legislative or Regulatory Actions

We are not obligated to indemnify you for changes in law.

Neither we nor DEP will indemnify you for any changes in the law, including any federal preemption or repeal or amendment of the Financing Act that may affect the value of your bonds. DEP will agree in the sale agreement to institute any action or proceeding as may be reasonably necessary to block or overturn any attempts to cause a repeal, modification or amendment to the Financing Act that would be materially adverse to us, the indenture trustee, or bondholders. However, DEP may not be able to take such action and, if DEP does take action, such action may not be successful. Although DEP or any successor seller might be required to indemnify us if legal action based on the law in effect at the time of the issuance of the bonds invalidates the storm recovery property, such indemnification obligations do not apply for any changes in law after the date the bonds are issued, whether such changes in law are effected by means of any legislative enactment, any constitutional amendment or any final and non-appealable judicial decision. Please read

22

“The Sale Agreement — Seller Representations and Warranties” and “The Servicing Agreement — Servicing Standards and Covenants” in this prospectus.

Future legal action might challenge or invalidate the Financing Act or the financing order and materially adversely affect your investment.

The storm recovery property is created pursuant to the Financing Act and a financing order issued by the PSCSC pursuant to the Financing Act. The Financing Act became effective on June 17, 2022. DEP is the first utility to petition the PSCSC to issue storm recovery bonds under the Financing Act.

The Financing Act or any provisions thereof might be directly contested in courts or otherwise become the subject of litigation. In addition, the financing order or any provision thereof might be directly contested in courts or otherwise become the subject of litigation. As of the date of this prospectus, no such litigation has arisen; however, we cannot assure you that a lawsuit challenging the validity of the Financing Act or the financing order will not be filed in the future or that, if filed, such lawsuit will not be successful. If an invalidation of any relevant underlying legislative provision or financing order provision were to result from such litigation, you might lose some or all of your investment or you might experience delays in recovering your investment. See “The Storm Recovery Property and the Financing Act” and “DEP’s Financing Order” in this prospectus.

Other states have passed legislation similar to the Financing Act to authorize recoveries by utilities of specified costs, including storm recovery costs, environmental control costs, or costs associated with deregulation of the electricity market, and some of those laws have been challenged by judicial actions or utility commission proceedings. To date, none of those challenges have succeeded, but future judicial challenges might be made. An unfavorable decision challenging legislation similar to the Financing Act would not automatically invalidate the Financing Act or the financing order, but it might provoke a challenge to the Financing Act or the financing order, establish a legal precedent for a successful challenge to the Financing Act or the financing order or heighten awareness of the political and other risks of the bonds, and in that way may limit the liquidity and value of the bonds. Therefore, legal activity in other states might indirectly affect the value of your investment in the bonds.

Future South Carolina legislative action might attempt to invalidate the bonds or the storm recovery property.

Under the Financing Act, the State of South Carolina has pledged not to (i) alter the provisions of the Financing Act, which authorizes the PSCSC to create an irrevocable contract or chose in action by the issuance of a financing order, to create storm recovery property and make the storm recovery charges imposed by the financing order irrevocable, binding and nonbypassable, (ii) take or permit any action that impairs or would impair the value of the storm recovery property or the security for the storm recovery bonds, or revises the storm recovery costs for which recovery is authorized, (iii) in any way impair the rights and remedies of the bondholders, assignees, and any other financing party or, (iv) except as provided in the true-up mechanism, reduce, alter, or impair storm recovery charges that are to be imposed, billed, charged, collected, and remitted for the benefit of the bondholders, any assignee and other financing parties until any and all principal, interest, premium, financing costs and other fees, expenses, or charges incurred, and any contracts to be performed in connection with the related storm recovery bonds, have been paid and performed in full. For a description of this state pledge, see “The Storm Recovery Property and the Financing Act — The Financing Act Provides for the Recovery of Storm Recovery Costs and the Issuance of the Bonds — The Financing Act Contains a State Pledge” in this prospectus. Despite the state pledge, the South Carolina legislature might attempt to repeal the Financing Act, or attempt to amend the Financing Act, or as described below, the PSCSC might take certain actions that impair the storm recovery property. As of the date of this prospectus, neither we nor DEP is aware of any pending legislation in the South Carolina legislature that would affect any provisions of the Financing Act. To date, there have been no reported U.S. federal or South Carolina cases addressing the repeal or amendment of securitization provisions analogous to those contained in the Statute. There have been cases in which U.S. federal courts have applied the Contract Clause of the United States Constitution or South Carolina courts have applied the Contract Clause of the South Carolina Constitution to strike down legislation regarding similar matters, such as legislation reducing or eliminating taxes, public charges or other sources of revenues servicing other types of bonds issued or contracts entered into by public instrumentalities or private issuers, or otherwise substantially

23

impairing or eliminating the security for bonds or other indebtedness or contractual obligations. Based upon this case law, Hunton Andrews Kurth LLP, counsel to DEP and DEP SC Storm Funding, expects to deliver an opinion with respect to applicable federal constitutional principles relating to the impairment of contracts, that (i) in a properly prepared and presented case, a reviewing court of competent jurisdiction would conclude that the state pledge constitutes a contractual relationship between the bondholders and the State of South Carolina, and (ii) in the event that the South Carolina legislature passes any law (or the PSCSC exercising legislative powers takes any action) prior to the time that the bonds and related financing costs are fully paid and discharged that in either case alters, impairs, or reduces the value of the storm recovery property or the storm recovery charges, then, absent a demonstration by the State of South Carolina that such action or inaction is necessary to further a significant and legitimate public purpose, the bondholders (or the indenture trustee acting on their behalf) could successfully challenge, under the Contract Clause of the U.S. Constitution, the constitutionality of any such action or inaction that alters, impairs, or reduces the value of the storm recovery property or the storm recovery charges prior to the time that the bonds are fully paid and discharged, provided that the repeal or amendment or the action or inaction would substantially impair the rights of the owners of the storm recovery property or the bondholders. Preliminary injunctive relief should be available under federal law to delay implementation of any such action or inaction hereafter taken and determined to alter, impair, or reduce the value of the storm recovery property or the storm recovery charges so as to cause such an impairment in violation of the Contract Clause of the U.S. Constitution, and, upon final adjudication of a claim challenging any such action or inaction, permanent injunctive relief should be available under federal law to prevent implementation thereof. Baker, Donelson, Bearman, Caldwell & Berkowitz P.C. expects to deliver an opinion substantially to the same effect under the case law with respect to the Contract Clause of the South Carolina Constitution. Under South Carolina Law, preliminary injunctive relief, is available where a South Carolina state court hearing a request therefor finds (i) that the party requesting such injunctive relief has a likelihood of success on the merits, (ii) that such party will suffer irreparable harm if the preliminary injunctive relief is not granted, and (iii) that no adequate, alternative remedy at law exists; and a permanent injunction may be available if the party succeeds on the merits. It may be possible for the South Carolina legislature to repeal or amend the Financing Act or for the PSCSC to amend or revoke the financing order notwithstanding the pledge of the State of South Carolina, if the legislature or the PSCSC acts in order to serve a significant and legitimate public purpose, such as protecting the public health and safety or responding to a national or regional catastrophe affecting DEP’s service territory, or if the legislature otherwise acts in the valid exercise of the State of South Carolina’s police power.

In addition, any action of the South Carolina legislature adversely affecting the storm recovery property or the ability to collect storm recovery charges may be considered a taking under the United States Constitution or the South Carolina Constitution. Each of Hunton Andrews Kurth LLP and Baker, Donelson, Bearman, Caldwell & Berkowitz P.C. has advised us that they are not aware of any U.S. federal or South Carolina court cases addressing the applicability of the Takings Clause of the United States Constitution or South Carolina Constitution in a situation analogous to that which would be involved in an amendment or repeal of the Financing Act. It is possible that a court would decline even to apply a Takings Clause analysis to a claim based on an amendment or repeal of the Financing Act, since, for example, a court might determine that a Contract Clause analysis rather than a Takings Clause analysis should be applied. Hunton Andrews Kurth LLP expects to deliver an opinion to the effect that a court of competent jurisdiction, in a properly prepared and presented case, would hold that the Takings Clause of the U.S. Constitution would require the State of South Carolina to pay just compensation to the bondholders if a court determines that a repeal or amendment of the Financing Act, or any other action taken by the State of South Carolina in contravention of the state pledge, (a) completely deprived the bondholders of all economically beneficial use of the storm recovery property or (b) unduly interfered with the reasonable expectations of the bondholders arising from their investment in the bonds. In determining what is an undue interference, a court would consider the nature of the governmental action, the economic impact of the governmental action on the bondholders and the extent to which the governmental action interferes with distinct investment-backed expectations of the bondholders. Baker, Donelson, Bearman, Caldwell & Berkowitz P.C. expects to deliver an opinion substantially to the same effect under the Takings Clause of the South Carolina Constitution. In examining whether action of the South Carolina legislature amounts to a regulatory taking, both U.S. federal and South Carolina courts will consider the character of the governmental action and whether such action substantially advances the legitimate governmental interests of the State of South

24

Carolina, the economic impact of the governmental action on the bondholders and the extent to which the governmental action interferes with distinct investment-backed expectations. Even if such State action or inaction is treated as a taking and the State of South Carolina provides you with an amount deemed to be full compensation, that amount might not be sufficient for you to fully recover your investment.

Further, nothing in the state pledge precludes any limitation or alteration of the Financing Act or a financing order if full compensation is made by law for the full protection of the storm recovery charges collected pursuant to a financing order and of the holders of the related series of bonds. It is unclear what “full compensation” and “full protection” would be afforded to holders of the bonds by the State of South Carolina if such limitation or alteration were attempted. Accordingly, no assurance can be given that any such provision would not adversely affect the market value of the related series of bonds, or the timing or receipt of payments with respect to such bonds.

We cannot assure you that a repeal of or amendment to the Financing Act will not be sought or adopted or that any action or inaction by the State of South Carolina adverse to your investment in the bonds will not occur. The servicer has agreed to take legal or administrative action, including instituting legal action, as may be reasonably necessary to attempt to block or overturn any attempts to cause a repeal of or amendment to the Financing Act or a modification of the financing order or storm recovery property. However, enforcement of any rights against the State of South Carolina or the PSCSC under the state pledge may be subject to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies against State of South Carolina and local governmental entities in South Carolina. These limitations might include, for example, the necessity to exhaust administrative remedies prior to bringing suit in a court, or limitations on type and locations of courts in which the State of South Carolina or the PSCSC may be sued. See “The Servicing Agreement — Servicing Standards and Covenants” in this prospectus. However, we cannot assure that the servicer would be able to take this action or that this action would be successful.

Except as described in “The Sale Agreement — Indemnification” in this prospectus, neither DEP, nor any of its successors, assignees or affiliates will indemnify you for any change in law, including any amendment or repeal of the Financing Act, that might affect the value of the bonds.

The PSCSC might attempt to take actions which might reduce the value of your investment.

The Financing Act provides that the financing order issued to DEP is irrevocable upon the transfer of the storm recovery property to an assignee or the issuance of the bonds, whichever is earlier, and is not subject to amendment, modification or termination by subsequent action of the PSCSC, except for the periodic true-up adjustments. Apart from the financing order, the PSCSC retains the power to adopt, revise or rescind rules or regulations affecting DEP or a successor utility. The PSCSC also retains the power to interpret and implement the financing order. Any new or amended regulations or orders by the PSCSC for example, could affect the ability of the servicer to collect the storm recovery charges in full and on a timely basis. The servicer has agreed to take legal or administrative action to resist any PSCSC rule, regulation or decision that would violate the state pledge. We cannot assure you that the servicer would be successful in its efforts. Thus, future PSCSC rules, regulations or decisions might adversely affect the rating of the bonds, their price or the rate of storm recovery charge collections and, accordingly, the amortization of bonds and their weighted average lives. As a result, you could suffer a loss of your investment.

The servicer is required to file with the PSCSC, on our behalf, periodic true-up adjustments of the storm recovery charges. Under the irrevocable financing order, the PSCSC will act to administratively approve the requested adjustment (including, if applicable, the correction of any mathematical or clerical error in such calculations) within 60 days of the date of the request for adjustment. Please read “DEP’s Financing Order — True-Up Mechanism” and “The Servicing Agreement — The PSCSC’s Mandated True-Up Mechanism” in this prospectus. However, true-up adjustments could be challenged or might not be approved in a timely manner, and such an event might adversely affect the market perception and valuation of the bonds. Also, any such challenge or delay in approving a true-up adjustment could result in costly and time-consuming litigation, and such litigation could result in a shortfall or material delay in storm recovery charge collections.

25

The servicer may not fulfill its obligations to act on behalf of the bondholders to protect bondholders from actions by the PSCSC or the State of South Carolina, or the servicer may be unsuccessful in any such attempt.

The servicer will agree in the servicing agreement to take any action or proceeding necessary to compel performance by the PSCSC and the State of South Carolina of any of their obligations or duties under the Financing Act or the financing order, including any actions reasonably necessary to block or overturn attempts to cause a repeal or modification of the Financing Act or the financing order. The servicer, however, may not be able to take those actions for a number of reasons, including due to legal or regulatory restrictions, financial constraints and practical difficulties in successfully challenging any such legislative enactment or constitutional amendment. Additionally, any action the servicer is able to take may not be successful. Any such failure to perform its obligations or to successfully compel performance by the PSCSC or the State of South Carolina could negatively affect bondholders’ rights and result in a loss of their investment.

A municipal entity might assert the right to acquire portions of DEP’s electric distribution facilities and avoid payment of the storm recovery charges.

A municipality might bring a proceeding and allege that it has the right to acquire portions of an electric utility’s electric distribution facilities through the power of eminent domain for use as part of municipally-owned utility systems. If a municipality were to bring such a proceeding against DEP, DEP would first contest the municipality’s right to utilize eminent domain to acquire DEP’s electric distribution facilities. If the municipality was successful in such a proceeding, then after the final, non-appealable judgment, DEP would adhere to the covenant described below in the servicing agreement. A municipality may also seek to acquire portions of an electric utility’s electric distribution facilities by exercising a unilateral contract option to request a valuation and forced sale of the electric utility’s electric distribution facilities. There can be no assurance that one or more municipalities will not seek to acquire some or all of DEP’s electric distribution facilities while the bonds remain outstanding. The Financing Act specifies that storm recovery charges approved by a financing order shall be collected by an electric utility as well as its “successors or assignees.” In the servicing agreement, DEP has covenanted to assert in an appropriate forum that any municipality that acquires any portion of DEP’s electric distribution facilities by eminent domain or by exercising a unilateral contract option, must be treated as a successor to DEP under the Financing Act and the financing order and that customers in such municipalities remain responsible for payment of storm recovery charges. However, the involved municipality might assert that it should not be treated as a successor to DEP for these purposes and that its distribution customers are not responsible for payment of storm recovery charges. In any case, DEP cannot assure you that the storm recovery charges will be collected from customers of municipally-owned utilities who were formerly customers of DEP and that such an occurrence might not affect the timing or receipt of payments with respect to your bonds.

Neither DEP SC Storm Funding nor DEP is obligated to indemnify you for changes in law.

Neither we nor DEP nor any of their successors, assignees or affiliates will indemnify you for any changes in the law, including any federal preemption or repeal or amendment of the Financing Act that might affect the value of your bonds. DEP, as servicer, will agree in the servicing agreement to institute any action or proceeding as may be reasonably necessary to block or overturn any attempts to cause a repeal, modification or amendment to the Financing Act that would be materially adverse to us, the indenture trustee or bondholders. However, we cannot assure you that DEP would be able to take this action or that this action would be successful. Although DEP or any successor assignee might be required to indemnify us if legal action based on the law in effect at the time of the issuance of the bonds invalidates the storm recovery property, such indemnification obligations do not apply for any changes in law after the date the bonds are issued, whether such changes in law are effected by means of any legislative enactment, any constitutional amendment or any final and non-appealable judicial decision. See “The Sale Agreement — Seller Representations and Warranties” and “The Servicing Agreement — Servicing Standards and Covenants” in this prospectus.

Servicing Forecasting Risks

Inaccurate forecasting of electric consumption or collections might reduce scheduled payments on the bonds.

The storm recovery charges are calculated based on forecasted customer usage. The amount and the rate of storm recovery charge collections will depend in part on actual electricity consumption and the

26

timing of collections and write-offs. The financing order approves the methodology by which the storm recovery charges will be calculated and adjusted from time to time by the servicer pursuant to true-up adjustment letters submitted to the PSCSC as described below, which includes the allocation of cost responsibility among customer rate classes based upon the cost responsibilities approved in DEP’s most recently filed rate case. If the servicer inaccurately forecasts electricity consumption (including forecasts of electric consumption by customer rate classes) or underestimates customer delinquency or write-offs when setting or adjusting the storm recovery charges, there could be a shortfall or material delay in storm recovery charge collections, which might result in missed or delayed payments of principal and interest and lengthened weighted average life of the bonds. Please read “DEP’s Financing Order — True-Up Mechanism” and “The Servicing Agreement — The PSCSC’s Mandated True-Up Mechanism” in this prospectus.

Inaccurate forecasting of electricity consumption by the servicer might result from, among other things:

•

unanticipated weather or economic conditions, resulting in less electricity consumption than forecast;

•

general economic conditions, such as the pandemic health event resulting from COVID-19, and their collateral consequences, including the disruption of global supply chains or the economic activity in our service territories causing customers to migrate from DEP’s service territory or reduce their electricity consumption;

•

the occurrence of a natural disaster, such as a hurricane, wind storm or an act of war or terrorism, cyber-attack or other catastrophic event, including pandemics, unexpectedly disrupting electrical service and reducing electricity consumption;

•

unanticipated changes in the market structure of the electric industry;

•

large customers unexpectedly ceasing business or departing DEP’s service territory;

•

dramatic and unexpected changes in energy prices resulting in decreased electricity consumption;

•

customers consuming less electricity than anticipated because of increased energy prices, unanticipated increases in conservation efforts or unanticipated increases in electric consumption efficiency;

•

differences or changes in forecasting methodology; or

•

large customers switching to alternative sources of energy, including self-generation or co-generation of electric power in some cases without using DEP’s transmission or distribution system. Self-generators that receive no transmission or distribution service from DEP are not liable for the storm recovery charge. The Financing Act and financing order do not provide for exit fees to be charged to any customers that might leave the grid to self-generate.

Inaccurate forecasting of delinquencies or write-offs by the servicer could result from, among other things:

•

unexpected deterioration of the economy, the occurrence of a natural disaster, an act of war or terrorism or other catastrophic events, including pandemics, causing greater write-offs than expected or forcing DEP or a successor utility to grant additional payment relief to more customers;

•

an unexpected change in law that makes it more difficult for DEP or a successor distribution company to terminate service to nonpaying customers, or that requires DEP or a successor to apply more lenient credit standards for customers; or

•

the unexpected introduction into the energy markets, as a result of a fundamental change in the regulation of electric utilities in South Carolina, of alternative energy suppliers who are authorized to collect payments arising from the storm recovery charges, but who may fail to remit customer charges to the servicer in a timely manner.

Your investment in the bonds depends on DEP or its successors or assignees acting as servicer of the storm recovery property.

DEP, as servicer, will be responsible for, among other things, calculating, billing, collecting and posting the storm recovery charges from customers, submitting requests to the PSCSC to adjust these charges,

27

monitoring the collateral for the bonds and taking certain actions in the event of non-payment by a customer. The indenture trustee’s receipt of collections in respect of the storm recovery charges, which will be used to make payments on bonds, will depend in part on the skill and diligence of the servicer in performing these functions. The systems that the servicer has in place for storm recovery charge billings, collections and postings, as the same may be modified by any applicable current or future PSCSC regulations, might, in particular circumstances, cause the servicer to experience difficulty in performing these functions in a timely and completely accurate manner. If the servicer fails to make collections for any reason, then the servicer’s payments to the indenture trustee in respect of the storm recovery charges might be delayed or reduced. In that event, our payments on the bonds might be delayed or reduced.

If DEP SC Storm Funding needs to replace DEP as the servicer, DEP SC Storm Funding may experience difficulties finding and using a replacement servicer.

If DEP ceases to service the storm recovery property related to the bonds, it might be difficult to find a successor servicer. Also, any successor servicer might have less experience and ability than DEP, will need to receive approval from the PSCSC and might experience difficulties in collecting storm recovery charges and determining appropriate adjustments to the storm recovery charges and billing and/or payment arrangements may change, resulting in delays or disruptions of collections. A successor servicer might not be willing to perform except for fees higher than those approved in the financing order and might charge fees that, while permitted under the financing order, are substantially higher than the fees paid to DEP as servicer. Although a true-up adjustment would be required to allow for the increase in fees, there could be a gap between the incurrence of those fees and the implementation of a true-up adjustment to adjust for that increase that might adversely affect distributions to bondholders. In the event of the commencement of a case by or against the servicer under Title 11 of the United States Code, as amended, or the Bankruptcy Code, or similar laws, we and the indenture trustee might be prevented from effecting a transfer of servicing due to operation of the Bankruptcy Code. Any of these factors might delay the timing of payments and reduce the value of your investment.

DEP currently has accounts receivable sale arrangements under which it sells substantially all of its accounts receivable on a revolving basis. Under the joinder to the intercreditor agreement to be entered into at the time of issuance of the bonds among DEP, us, the indenture trustee, the indenture trustee of the 2021 NC Storm Recovery Bonds, and the parties to DEP’s accounts receivable sale programs, replacement of the servicer would require the agreement of the indenture trustee and the administrative agents under the accounts receivable sale programs. In the event of a default by the servicer under the servicing agreement, if the indenture trustee and the administrative agents under the accounts receivable sale programs are unable to agree on a replacement servicer, the indenture trustee would not be able to replace DEP or any successor as servicer. Any of these events could adversely affect the billing, collection and posting of the storm recovery charges and the value of your investment in the bonds. See “The Servicing Agreement” in this prospectus.

In addition to the above, it is possible that DEP may, in the future, cause other subsidiaries to issue other securities, similar to the bonds that are backed by charges owing from customers or similar types of property. DEP has covenanted in the sale agreement that, in the event of any issuance of that sort, it will also enter into a joinder to, or amend, the intercreditor agreement with the indenture trustee and the trustees for those other issuances, which would provide that the servicer for the bonds and those other issuances must be one and the same entity. Any expansion of the intercreditor agreement to include those subsequent issuances could further impair the ability of the indenture trustee to appoint a successor servicer in the event of a servicer default.

Changes to billing, collection and posting practices might reduce the value of your investment in the bonds.

The financing order specifies the methodology for determining the amount of the storm recovery charges we may impose. However, subject to any required PSCSC approval, the servicer may set its own billing, collection and posting arrangements with customers from whom it collects storm recovery charges, provided that these arrangements comply with any applicable PSCSC customer safeguards and the provisions of the servicing agreement. For example, to recover part of an outstanding bill, the servicer may agree to extend a customer’s payment schedule, including the storm recovery charges. Also, subject to any required

28

PSCSC approval, the servicer may change billing, collection and posting practices, which might adversely impact the timing and amount of customer payments and might reduce storm recovery charge collections, thereby limiting our ability to make scheduled payments on the bonds. Separately, the PSCSC might require changes to these practices. Any changes in billing, collection and posting practices or regulations might make it more difficult for the servicer to collect the storm recovery charges and adversely affect the value of your investment in the bonds.

Cyberattacks and data security breaches could adversely affect DEP’s businesses.

Cybersecurity risks have increased in recent years as a result of the proliferation of new technologies and the increased sophistication, magnitude and frequency of cyberattacks and data security breaches. DEP relies on the continued operation of sophisticated digital information technology systems and network infrastructure, which are part of an interconnected grid. Additionally, connectivity to the internet continues to increase through grid modernization and other operational excellence initiatives. Because of the critical nature of the infrastructure, increased connectivity to the internet and technology systems’ inherent vulnerability to disability or failures due to hacking, viruses, acts of war or terrorism or other types of data security breaches, DEP face a heightened risk of cyberattack from foreign or domestic sources and have been subject, and will likely continue to be subject, to attempts to gain unauthorized access to information and/or information systems or to disrupt utility operations through computer viruses and phishing attempts either directly or indirectly through its material vendors or related third parties. In the event of a significant cybersecurity breach on either DEP or with one of our material vendors or related third parties, DEP could (i) have business operations disrupted, including the disruption of the operation of our assets and the power grid, collecting revenues or the recording, processing and/or reporting billing and collection information correctly, (ii) experience substantial loss of revenues, repair and restoration costs, penalties and costs for lack of compliance with relevant regulations, implementation costs for additional security measures to avert future cyberattacks and other financial loss and (iii) be subject to increased regulation, litigation and reputational damage all of which could materially affect DEP’s ability to bill and collect storm recovery charges or otherwise service the storm recovery property.

It might be difficult for successor servicers to collect the storm recovery charge from DEP’s customers.

Any successor servicer may bring an action against a customer for non-payment of the storm recovery charge, but only a successor servicer that is a successor electric utility may terminate service for failure to pay the storm recovery charge. Partial payment of monthly electric bills shall be allocated pro rata among the storm recovery charge and other charges on the bill. A successor servicer that does not have the threat of termination of service available to enforce payment of the storm recovery charge would need to rely on the successor electric utility to threaten to terminate service for nonpayment of other portions of monthly electric utility bills. This inability might reduce the value of your investment.

Risk Associated with the Unusual Nature of the Storm Recovery Property

Foreclosure of the indenture trustee’s lien on the storm recovery property for the bonds might not be practical, and acceleration of the bonds before maturity might result in your investment being repaid either earlier or later than expected.

Under the Financing Act, the indenture and the series supplement, the indenture trustee or the bondholders have the right to foreclose or otherwise enforce the lien on the storm recovery property securing the bonds. However, in the event of foreclosure, there is likely to be a limited market, if any, for the storm recovery property. Therefore, foreclosure might not be a realistic or practical remedy. Moreover, although principal of the bonds will be due and payable upon acceleration of the bonds before maturity, we do not anticipate that the storm recovery charges will be adjusted beyond the periodic payment requirement and therefore storm recovery charges likely would not be sufficient to pay principal due and payable upon such an acceleration, and the nature of our business will result in principal of the bonds being paid as funds become available. See “DEP’s Financing Order — True-Up Mechanism” in this prospectus. If there is an acceleration of the bonds, all of the bonds will be paid pro rata; therefore, some bonds might be paid earlier than expected and some bonds might be paid later than expected.

29

Risk Associated with Storms

Storm damage to DEP’s operations might impair payment of the bonds.

DEP’s operations might be impacted by hurricanes, tropical storms, winter storms or wind storms. Transmission, distribution and consumption of electricity might be interrupted temporarily, reducing the collections of storm recovery charges. There might be longer-lasting weather-related adverse effects on residential and commercial development and economic activity in the DEP service area, which could cause the per-kWh storm recovery charge to be greater than expected. Legislative action adverse to the bondholders might be taken in response, and such legislation, if challenged as a violation of the state pledge, might be defended on the basis of public necessity. Please read “The Storm Recovery Property and the Financing Act — The Financing Act Provides for the Recovery of Storm Recovery Costs and the Issuance of the Bonds — The Financing Act Contains a State Pledge” and “Risk Factors — Risks Associated with Potential Judicial, Legislative or Regulatory Actions — Future South Carolina legislative action might attempt to invalidate the bonds or the storm recovery property” in this prospectus.

Risks Associated with Potential Bankruptcy Proceedings of the Seller or the Servicer

For a more detailed discussion of the following bankruptcy risks, please read “Bankruptcy and Creditors’ Rights Issues” in this prospectus.

The servicer will commingle the storm recovery charges with other revenues it collects, which might obstruct access to the storm recovery charges in case of the servicer’s bankruptcy and reduce the value of your investment in the bonds.

DEP, as servicer, will be required to remit estimated storm recovery charge collections to the indenture trustee no later than the second servicer business day of receipt. Prior to remitting such funds to the indenture trustee, the servicer will not segregate the storm recovery charges from the other funds it collects from customers, including amounts relating to the 2021 NC Storm Recovery Bonds or its general funds. The storm recovery charges will be estimated and segregated only when the servicer remits them to the indenture trustee.

Despite this requirement, the servicer might fail to remit the full amount of the storm recovery charges payable to the indenture trustee or might fail to do so on a timely basis. This failure, whether voluntary or involuntary, might materially reduce the amount of storm recovery charge collections available to make payments on the bonds.

Absent a default under the servicing agreement, DEP will be required to remit estimated storm recovery charges to the indenture trustee. While DEP will be responsible for identifying and calculating the actual amount of storm recovery charges in the event of a default under the servicing agreement, it may be difficult for DEP to identify such charges, given existing limitations in its billing system.

The Financing Act provides that the priority of a lien and security interest perfected in recovery property is not impaired by the commingling of the funds arising from storm recovery charges with any other funds. In a bankruptcy of the servicer, however, a bankruptcy court might rule that federal bankruptcy law takes precedence over the Financing Act and might decline to recognize our right to collections of the storm recovery charges that are commingled with other funds of the servicer as of the date of bankruptcy. If so, the collections of the storm recovery charges held by the servicer as of the date of bankruptcy would not be available to pay amounts owing on the bonds. In this case, we would have only a general unsecured claim against the servicer for those amounts. This decision could cause material delays in payments of principal or interest, or losses, on your bonds and could materially reduce the value of your investment in the bonds.

Bankruptcy of DEP or any successor or assignee could result in losses or delays in payments on the bonds.

DEP, as seller, will represent and warrant in the sale agreement that the transfer of the storm recovery property to us under that sale agreement is a valid sale and assignment of that storm recovery property from the seller to us. The seller will also represent, warrant, and covenant that it will take the appropriate actions under the Financing Act to perfect a backup grant in the sold storm recovery property. The Financing Act

30

provides that the transactions described in the sale agreement shall constitute a sale of the storm recovery property to us, and the seller and we will treat the transaction as a sale under applicable law, although for financial reporting and tax reporting purposes the transaction will be treated as debt of the seller. If the seller were to become a debtor in a bankruptcy case, and a party in interest (including the seller itself) were to take the position that the sale of the storm recovery property to us should be recharacterized as the grant of a security interest in such recovery property to secure a borrowing of the seller, delays in payments on the bonds could result. If a court were to adopt such position, then further delays as well as reductions in payments on the bonds could result.

Pursuant to the Financing Act and the financing order, upon the sale of the storm recovery property, the storm recovery property is created as a current property right, and it thereafter continuously exists as property for all purposes. Nonetheless, if the seller were to become the debtor in a bankruptcy case, a party in interest (including the seller itself) may take the position that, because the storm recovery charges are usage-based charges, recovery property comes into existence only as customers use electricity. If a court were to adopt this position, no assurance can be given that the court would not also rule that any storm recovery property relating to electricity consumed after the commencement of the seller’s bankruptcy case was not required to be transferred to us, thus resulting in delays or reductions of payments on the bonds.

A bankruptcy court generally follows state property law on issues such as those addressed by the provisions described above. However, a bankruptcy court has authority not to follow state law if it determines that the state law is contrary to a paramount federal bankruptcy policy or interest. If a bankruptcy court in a bankruptcy of DEP refused to enforce one or more of the State of South Carolina’s property law provisions described above for this reason, the effect of this decision on you as a bondholder would be similar to the treatment you would receive in a bankruptcy of DEP if the bonds had been issued directly by DEP, including without limitation possibly causing material delays in payment of, or losses on, your bonds and possibly materially reducing the value of your investment in the bonds. Specific examples of possible effects are set forth below. A decision by the bankruptcy court that, despite our separateness from DEP, our assets and liabilities and those of DEP should be substantively consolidated would have a similar effect on you as a bondholder.

The Issuing Entity has taken steps together with DEP, as the seller, to reduce the risk that in the event DEP or an affiliate of DEP were to become the debtor in a bankruptcy case, a court would order that our assets and liabilities be substantively consolidated with those of DEP or an affiliate. Such steps include, without limitation, provisions in our limited liability company agreement concerning entity separation and requiring an independent manager. Nonetheless, these steps might not be completely effective, and thus if DEP or an affiliate of DEP were to become a debtor in a bankruptcy case, a court may order that our assets and liabilities be substantively consolidated with those of DEP or the affiliate. This might cause material delays in payment of, or losses on, your bonds and might materially reduce the value of your investment in the bonds. For example:

•

without permission from the bankruptcy court, the indenture trustee might be prevented from taking actions against DEP or recovering or using funds on your behalf or replacing DEP as the servicer;

•

the bankruptcy court might order the indenture trustee to exchange the storm recovery property for other property, which might be of lower value;

•

tax or other government liens on DEP’s property that arose after the transfer of the storm recovery property to us might nevertheless have priority over the indenture trustee’s lien and might be paid from storm recovery charge collections before payments on your bonds;

•

the indenture trustee’s lien might not be properly perfected in storm recovery property collections that were commingled with other funds of DEP collected from customers as of the date of DEP’s bankruptcy, or might not be properly perfected in all of the storm recovery property, including, without limitation, if all perfection requirements are not met, and the lien might therefore be set aside in the bankruptcy, with the result that your bonds would represent only general unsecured claims against DEP;

31

•

the bankruptcy court might rule that neither our property interest nor the indenture trustee’s lien extends to storm recovery charges in respect of electricity consumed after the commencement of DEP’s bankruptcy case, with the result that your bonds would represent only general unsecured claims against DEP;

•

we and DEP might be relieved of the obligation to make any payments on your bonds during the pendency of the bankruptcy case and might be relieved of any obligation to pay interest accruing after the commencement of the case;

•

DEP might be able to alter the terms of your bonds as part of its plan of reorganization;

•

the bankruptcy court might rule that the storm recovery charges should be used to pay a portion of the cost of providing electric service;

•

the bankruptcy court might rule that the remedy provisions of the sale agreement are unenforceable, leaving us with an unsecured claim of actual damages against DEP which might be expensive and difficult to prove;

Furthermore, if DEP enters bankruptcy proceedings, it might be permitted to stop acting as servicer with consent of the PSCSC, and it may be difficult to find a third party to act as servicer. The failure of the servicer to perform its duties or the inability to find a successor servicer might cause payment delays or losses on your investment in the bonds. Also, the mere fact of a servicer or seller bankruptcy proceeding might have an adverse effect on the resale market for the bonds and on the value of the bonds.

The sale of the storm recovery property might be construed as a financing and not a sale in a case of DEP’s bankruptcy which might delay or limit payments on the bonds.

The Financing Act provides that the characterization of a transfer of recovery property as a sale or other absolute transfer will not be affected or impaired by treatment of the transfer as a financing for federal or state tax purposes or financial reporting purposes. We and DEP will treat the transaction as a sale under applicable law, although for financial reporting and income and franchise tax purposes the transaction is intended to be treated as a financing. In the event of a bankruptcy of DEP, a party in interest in the bankruptcy might assert that the sale of the storm recovery property to us was a financing transaction and not a “sale or other absolute transfer” and that the treatment of the transaction for financial reporting and tax purposes as a financing and not a sale lends weight to that position. If a court were to characterize the transaction as a financing, we expect that we would, on behalf of ourselves and the indenture trustee, be treated as a secured creditor of DEP in the bankruptcy proceedings, although a court might determine that we only have an unsecured claim against DEP. Even if we had a security interest in the storm recovery property, we would not likely have access to the related storm recovery charge collections during the bankruptcy and would be subject to the risks of a secured creditor in a bankruptcy case, including the possible bankruptcy risks described in the immediately preceding risk factor. As a result, repayment of the bonds might be significantly delayed and a plan of reorganization in the bankruptcy might permanently modify the amount and timing of payments to us of the related storm recovery charge collections and therefore the amount and timing of funds available to us to pay bondholders.

If the servicer enters bankruptcy proceedings, transfers of the storm recovery charges by the servicer prior to the date of bankruptcy might constitute preferences, which means these funds might be unavailable to pay amounts owing on the bonds.

In the event of a bankruptcy of the servicer, a party in interest might take the position that the remittance of funds prior to bankruptcy of the servicer, pursuant to the servicing agreement, constitutes a preference under bankruptcy law if the remittance of those funds was deemed to be paid on account of a preexisting debt. If a court were to hold that the remittance of funds constitutes a preference, any such remittance within 90 days of the filing of the bankruptcy petition could be avoidable, and the funds could be required to be returned to the bankruptcy estate of the servicer. To the extent that storm recovery charges have been commingled with the general funds of the servicer, the risk that a court would hold that a remittance of funds was a preference would increase. Also, the issuing entity may be considered an “insider” of the servicer. If the issuing entity is considered to be an “insider” of the servicer, any such remittance to the issuing entity made within one year of the filing of the bankruptcy petition could be avoidable as well if

32

the court were to hold that such remittance constitutes a preference. In either case, the issuing entity or the trustee would merely be an unsecured creditor of the servicer. If any funds were required to be returned to the bankruptcy estate of the servicer, the issuing entity would expect that the amount of any future storm recovery charges would be increased through the statutory true-up mechanism to recover such amount, though this would not eliminate the risk of payment delays or losses on your investment in the bonds.

Claims against DEP or any successor seller might be limited in the event of a bankruptcy of the seller.

If the seller were to become a debtor in a bankruptcy case, claims, including indemnity claims, by us against the seller under the sale agreement and the other documents executed in connection with the sale agreement likely would be unsecured claims and would be adjudicated in the bankruptcy case. In addition, the bankruptcy court might estimate any contingent claims that we have against the seller and, if it determines that the contingency giving rise to these claims is unlikely to occur, estimate the claims at a lower amount. A party in interest in the bankruptcy of the seller might challenge the enforceability of the indemnity provisions in a sale agreement. If a court were to hold that the indemnity provisions were unenforceable, we would be left with a claim for actual damages against the seller based on breach of contract principles, which would be subject to estimation and/or calculation by the court. We cannot give any assurance as to the result if any of the above-described actions or claims were made. Furthermore, we cannot give any assurance as to what percentage of their claims, if any, unsecured creditors would receive in any bankruptcy proceeding involving the seller.

The bankruptcy of DEP or any successor seller might limit the remedies available to the indenture trustee.

Upon an event of default for the bonds under the indenture, the Financing Act permits the indenture trustee to enforce the security interest in the storm recovery property, as well as the statutory lien created by the Financing Act in the storm recovery property, in accordance with the terms of the indenture. In this capacity, and pursuant to the Financing Act and the financing order, the indenture trustee is permitted to request a court to order the sequestration and payment to bondholders of all revenues arising with respect to the related storm recovery property. There can be no assurance, however, that a court would issue this order, after a DEP bankruptcy in light of the automatic stay provisions of Section 362 of the United States Bankruptcy Code. In that event, the indenture trustee would be required to seek an order from the bankruptcy court lifting the automatic stay to permit this action by a court, and an order requiring an accounting and segregation of the revenues arising from the storm recovery property. There can be no assurance that a court would grant either order.

Other Risks Associated with the Purchase of the Bonds

DEP’s obligation to indemnify DEP SC Storm Funding for a breach of a representation or warranty might not be sufficient to protect your investment.

DEP will be obligated under the sale agreement to indemnify us and the indenture trustee, for itself and on behalf of the bondholders, only in specified circumstances. DEP will not be obligated to repurchase the storm recovery property in the event of a breach of any of its representations, warranties or covenants regarding such storm recovery property. Similarly, DEP will be obligated under the servicing agreement to indemnify us and the indenture trustee, for itself and on behalf of the bondholders only in specified circumstances. Please read “The Sale Agreement” and “The Servicing Agreement” in this prospectus.

Neither the indenture trustee nor the bondholders will have the right to accelerate payments on the related bonds as a result of a breach under the sale agreement or servicing agreement, absent an event of default under the indenture and series supplement as described in “Description of the Storm Recovery Bonds — Events of Default; Rights Upon Event of Default.” Furthermore, DEP might not have sufficient funds available to satisfy its indemnification obligations, and the amount of any indemnification paid by DEP might not be sufficient for you to recover all of your investment in the bonds. In addition, if DEP becomes obligated to indemnify bondholders, the ratings on the bonds might be downgraded as a result of the circumstances causing the breach and the fact that bondholders will be unsecured creditors of DEP with respect to any of these indemnification amounts. DEP will not indemnify any person for any loss, damages, liability, obligation, claim, action, suit or payment resulting solely from a downgrade in the ratings on the

33

bonds, or for any consequential damages, including any loss of market value of the bonds resulting from a default or a downgrade of the ratings of the bonds. Please read “The Sale Agreement — Seller Representations and Warranties” and “— Indemnification” in this prospectus.

DEP SC Storm Funding might issue additional series of storm recovery bonds.

The financing order authorizes us to issue one or more series of storm recovery bonds not to exceed the aggregate principal amount of the Securitizable Balance as of the issuance date. We may also, at our sole discretion, acquire separate and additional storm recovery property, and issue one or more additional storm recovery property bonds supported by such additional storm recovery property. In addition, DEP, in its sole discretion, may sell storm recovery property to one or more entities other than us in connection with the issuance of a new series of storm recovery bonds. Any new series would be offered pursuant to a separate registration statement and may include terms and provisions that would be unique to that particular series. We may not issue additional storm recovery bonds, nor may DEP sell storm recovery property to other entities issuing storm recovery bonds, if the issuance would not satisfy the rating agency condition. If additional series of storm recovery bonds are issued, storm recovery charge revenues collected by or for the benefit of DEP will be prorated among the owners of the storm recovery property associated with each such series based on the respective amounts of storm recovery charges billed and not yet paid. However, we cannot assure you that a new series or issuance would not cause reductions or delays in payment on your bonds. In addition, some matters relating to the bonds may require the vote of the holders of all series of the bonds. Your interests in these votes might conflict with the interests of the beneficial owners of bonds of another series or with the interests of holders of other securities that might be issued. Thus, these votes could result in an outcome that is materially unfavorable to you.

The credit ratings are no indication of the expected rate of payment of principal on the bonds.

We expect the bonds will receive credit ratings from at least two nationally recognized statistical rating organizations (“NRSRO”). A rating is not a recommendation to buy, sell or hold the bonds. The ratings merely analyze the probability that we will repay the total principal amount of the bonds at the final maturity date (which is later than the scheduled final payment date) and will make timely interest payments. The ratings are not an indication that the rating agencies believe that principal payments are likely to be paid on time according to the expected sinking fund schedule.

Under Rule 17g-5 of the Exchange Act, NRSROs providing the sponsor with the requisite certification will have access to all information posted on a website by the sponsor for the purpose of determining the initial rating and monitoring the rating after the closing date in respect of the bonds. As a result, an NRSRO other than the NRSRO hired by the sponsor (the “hired NRSRO”) may issue ratings on the bonds (“unsolicited ratings”), which may be lower, and could be significantly lower, than the ratings assigned by the hired NRSROs. The unsolicited ratings may be issued prior to, or after, the closing date in respect of the bonds. Issuance of any unsolicited rating will not affect the issuance of the bonds. Issuance of an unsolicited rating lower than the ratings assigned by the hired NRSRO on the bonds might adversely affect the value of the bonds and, for regulated entities, could affect the status of the bonds as a legal investment or the capital treatment of the bonds. Investors in the bonds should consult with their legal counsel regarding the effect of the issuance of a rating by a non-hired NRSRO that is lower than the rating of a hired NRSRO. None of DEP, us, the underwriters or any of their affiliates will have any obligation to inform you of any unsolicited ratings assigned after the date of this prospectus. In addition, if we or DEP fail to make available to a non-hired NRSRO any information provided to any hired rating agency for the purpose of assigning or monitoring the ratings on the bonds, a hired NRSRO could withdraw its ratings on the bonds, which could adversely affect the market value of your bonds and/or limit your ability to resell your bonds.

The bonds’ credit ratings might affect the market value of your bonds.

A downgrading of the credit ratings of the bonds might have an adverse effect on the market value of the bonds. Credit ratings might change at any time and an NRSRO has the authority to revise or withdraw its rating based solely upon its own judgment. In addition, any downgrade in the credit ratings of the bonds may result in the bonds becoming ineligible to be held by certain funds or investors, which may require such investors to liquidate their investment in the bonds and result in lower prices and a less liquid trading market for the bonds.

34

Technological change might make alternative energy sources more attractive in the future.

Technological developments and/or tax or other economic incentives might result in the introduction of economically attractive, more fuel-efficient, more environmentally-friendly and/or more cost-effective alternatives to purchasing electricity through a utility’s distribution facilities for increasing numbers of retail customers. Manufacturers of self-generation facilities may develop smaller-scale, more fuel-efficient on-site generating and/or storage units that can be cost-effective options for a greater number of retail customers. Moreover, an increase in self-service power may result if extreme weather conditions result in shortages of grid-supplied energy or if other factors cause grid-supplied energy to be less reliable. Those customers who self-generate will also be subject to pay storm recovery charges, but only to the extent of electricity ultimately delivered by means of DEP’s facilities. Technological developments might allow greater numbers of retail customers to reduce or even altogether avoid storm recovery charges under such provisions through on-site generation and storage. This might reduce the kilowatt-hours of electric energy delivered to retail customers by means of DEP’s transmission and distribution facilities, thereby causing storm recovery charges to the remaining retail customers to increase.

Absence of a secondary market for the bonds might limit your ability to resell bonds.

The underwriters for the bonds might assist in resales of such bonds but they are not required to do so. A secondary market for the bonds might not develop. If a secondary market does develop, it might not continue or there might not be sufficient liquidity to allow you to resell any of your bonds. We do not anticipate that any bonds will be listed on any securities exchange. Please read “Plan of Distribution” in this prospectus.

You might receive principal payments for the bonds later than you expect.

The amount and the rate of collection of the storm recovery charges for the bonds will be impacted by the actual electric usage by customers and collections from customers’ electricity bills by the servicer and, together with the related storm recovery charge adjustments, will generally determine whether there is a delay in the scheduled repayment of bond principal. If the servicer collects the storm recovery charges at a slower rate than expected, it might have to request adjustments of the storm recovery charges to correct for those delays. If those adjustments are not timely and accurate, you might experience a delay in payments of principal and interest and a decrease in the value of your investment in the bonds.

DEP’s credit ratings might affect the market value of your bonds.

Although DEP is not an obligor on the bonds, a downgrading of DEP’s current credit ratings might have an adverse effect, at least temporarily, on the market value of the bonds. Credit ratings might change at any time. A rating agency has the authority to revise or withdraw its rating based solely upon its own judgment.

The ratings are no indication of the expected rate of payment of principal on the bonds and DEP SC Storm Funding might pay principal of the bonds later than expected.

The bonds will be rated by one or more established rating agencies. A rating is not a recommendation to buy, sell or hold the bonds. The ratings merely analyze the probability that we will repay the total principal amount of the bonds at its final maturity date (which is later than the expected final payment date) and will make timely interest payments. The ratings are not an indication that the rating agencies believe that principal payments are likely to be paid on time according to the expected sinking fund schedule. Thus, we might repay the principal of your bonds later than you expect, which might materially reduce the value of your investment.

Regulatory provisions affecting certain investors could adversely affect the liquidity of the bonds.

European Union (“EU”) legislation comprising Regulation (EU) 2017/2402 (as amended, the “EU Securitization Regulation”) and certain related regulatory technical standards, implementing technical standards and official guidance (together, the European Securitization Rules) impose certain restrictions and obligations with regard to securitizations (as such term is defined for purposes of the “EU Securitization

35

Regulation”). The European Securitization Rules are in force throughout the EU (and are expected also to be implemented in the non-EU member states of the European Economic Area) in respect of securitizations the securities of which were issued (or the securitization positions of which were created) on or after January 1, 2019.

Pursuant to the European Securitization Rules, EU Institutional Investors investing in a securitization (as so defined) must, among other things, verify that (a) certain credit-granting requirements are satisfied, (b) the originator, sponsor or original lender retains on an ongoing basis a material net economic interest which, in any event, shall not be less than 5%, determined in accordance with Article 6 of the EU Securitization Regulation, and discloses that risk retention, and (c) the originator, sponsor or relevant securitization special purpose entity has, where applicable, made available information as required by Article 7 of the EU Securitization Regulation. “EU Institutional Investors” include: (a) insurance undertakings and reinsurance undertakings as defined in Directive 2009/138/EC, as amended; (b) institutions for occupational retirement provision falling within the scope of Directive (EU) 2016/2341 (subject to certain exceptions), and certain investment managers and authorized entities appointed by such institutions; (c) alternative investment fund managers as defined in Directive 2011/61/EU which manage and/or market alternative investment funds in the EU; (d) certain internally-managed investment companies authorized in accordance with Directive 2009/65/EC, and managing companies as defined in that Directive; (e) credit institutions as defined in Regulation (EU) No 575/2013 (“CRR”) (and certain consolidated affiliates thereof); and (f) investment firms as defined in CRR (and certain consolidated affiliates thereof).

With respect to the United Kingdom (“UK”), relevant UK established or UK regulated persons (as described below) are subject to the restrictions and obligations of the EU Securitization Regulation as it forms part of UK domestic law by operation of the European Union (Withdrawal) Act 2018 (as amended, the “EUWA”), and as amended by the Securitisation (Amendment) (EU Exit) Regulations 2019, and as further amended from time to time, the “UK Securitization Regulation”. The UK Securitization Regulation, together with (a) all applicable binding technical standards made under the UK Securitization Regulation, (b) any EU regulatory technical standards or implementing technical standards relating to the EU Securitization Regulation (including such regulatory technical standards or implementing technical standards that are applicable pursuant to any transitional provisions of the EU Securitization Regulation) forming part of UK domestic law by operation of the EUWA, (c) all relevant guidance, policy statements or directions relating to the application of the UK Securitization Regulation (or any binding technical standards) published by the Financial Conduct Authority (the “FCA”) and/or the Prudential Regulation Authority (the “PRA”) (or their successors), (d) any guidelines relating to the application of the EU Securitization Regulation that are applicable in the UK, (e) any other transitional, saving or other provision relevant to the UK Securitization Regulation by virtue of the operation of the EUWA and (f) any other applicable laws, acts, statutory instruments, rules, guidance or policy statements published or enacted relating to the UK Securitization Regulation, in each case, as may be further amended, supplemented or replaced, from time to time, are referred to in this prospectus as the “UK Securitization Rules”.

Article 5 of the UK Securitization Regulation places certain conditions on investments in a “securitization” ​(as defined in the UK Securitization Regulation) by a UK Institutional Investor. UK Institutional Investors include: (a) an insurance undertaking as defined in section 417(1) of the Financial Services And Markets Act 2000 (as amended, the FSMA); (b) a reinsurance undertaking as defined in section 417(1) of the FSMA; (c) an occupational pension scheme as defined in section 1(1) of the Pension Schemes Act 1993 that has its main administration in the UK, or a fund manager of such a scheme appointed under section 34(2) of the Pensions Act 1995 that, in respect of activity undertaken pursuant to that appointment, is authorized for the purposes of section 31 of the FSMA; (d) an alternative investment fund manager as defined in regulation 4(1) of the Alternative Investment Fund Managers Regulation 2013 that markets or manages alternative investments funds (as defined in regulation 3 of the Alternative Investment Fund Managers Regulation 2013) in the UK; (e) a management company as defined in section 237(2) of the FSMA; (f) an undertaking for collective investment in transferable securities as defined by section 236A of the FSMA, which is an authorized open ended investment company as defined in section 237(3) of the FSMA; and (g) a CRR firm as defined in CRR, as it forms part of UK domestic law by virtue of the EUWA (and certain consolidated affiliates thereof).

Prior to investing in (or otherwise holding an exposure to) a “securitisation position” ​(as defined in the UK Securitization Regulation), a UK Institutional Investor, other than the originator, sponsor or original

36

lender (each as defined in the UK Securitization Regulation), must, among other things: (a) verify that, where the originator or original lender is established in a third country (i.e. not within the UK), the originator or original lender grants all the credits giving rise to the underlying exposures on the basis of sound and well-defined criteria and clearly established processes for approving, amending, renewing and financing those credits and has effective systems in place to apply those criteria and processes to ensure that credit-granting is based on a thorough assessment of the obligor’s creditworthiness; (b) verify that, if established in the third country (i.e. not within the UK), the originator, sponsor or original lender retains on an ongoing basis a material net economic interest that, in any event, shall not be less than 5%, determined in accordance with Article 6 of the UK Securitization Regulation, and discloses the risk retention to the affected investors; (c) verify that, where established in a third country (i.e. not within the UK), the originator, sponsor or relevant securitization special purpose entity, where applicable, made available information that is substantially the same as that which it would have made available under Article 7 of the UK Securitization Regulation (which sets out certain transparency requirements) if it had been established in the UK and has done so with such frequency and modalities as are substantially the same as those with which it would have made information available if it had been established in the UK; and (d) carry out a due-diligence assessment that enables the UK Institutional Investor to assess the risks involved, considering at least (i) the risk characteristics of the securitisation position and the underlying exposures and (ii) all the structural features of the securitization that can materially impact the performance of the securitisation position.

Neither we nor DEP believe that the bonds fall within the definition of a “securitization” for purposes of the EU Securitization Regulation or the UK Securitization Regulation as there is no tranching of credit risk associated with exposures under the transactions described in this prospectus. Therefore, such transactions are not subject to the European Securitization Rules or the UK Securitization Rules. As such, neither we nor DEP, nor any other party to the transactions described in this prospectus, intend, or are required under the transaction documents, to retain a material net economic interest in respect of such transactions, or to take, or to refrain from taking, any other action, in a manner prescribed or contemplated by the European Securitization Rules or the UK Securitization Rules. In particular, no such person undertakes to take, or to refrain from taking, any action for purposes of compliance by any investor (or any other person) with any requirement of the European Securitization Rules or the UK Securitization Rules to which such investor (or other person) may be subject at any time.

However, if a competent authority were to take a contrary view and determine that the transactions described in this prospectus do constitute a securitization for purposes of the EU Securitization Regulation or the “UK Securitization Regulation”, then any failure by an EU Institutional Investor or a UK Institutional Investor (as applicable) to comply with any applicable European Securitization Rules or UK Securitization Rules (as applicable) with respect to an investment in the bonds may result in the imposition of a penalty regulatory capital charge on that investment or of other regulatory sanctions and remedial measures.

Consequently, the bonds may not be a suitable investment for EU Institutional Investors or UK Institutional Investors. As a result, the price and liquidity of the bonds in the secondary market may be adversely affected.

Prospective investors are responsible for analyzing their own legal and regulatory position and are advised to consult with their own advisors and any relevant regulator or other authority regarding the scope, applicability and compliance requirements of the European Securitization Rules and the UK Securitization Rule, and the suitability of the bonds for investment. Neither we nor DEP, nor any other party to the transactions described in this prospectus, make any representation as to any such matter, or have any liability to any investor (or any other person) for any non-compliance by any such person with the European Securitization Rules, the UK Securitization Rules or any other applicable legal, regulatory or other requirements.

If the investment of collected storm recovery charges and other funds held pursuant to the indenture and the series supplement in the collection account results in investment losses or the investments become illiquid, you might receive payment of principal of and interest on the bonds later than you expect.

Funds held pursuant to the indenture and the series supplement in the collection account will be invested in eligible investments. Eligible investments include money market funds having a rating from

37

Moody’s Investors Service, Inc. (or any successor in interest), or Moody’s, and Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business (or any successor in interest), or S&P, of P-1 and A-1, respectively. Although investments in these money market funds have traditionally been viewed as highly liquid with a low probability of principal loss, illiquidity and principal losses have been experienced by investors in certain of these funds as a result of disruptions in the financial markets in recent years. If investment losses or illiquidity are experienced, you might experience a delay in payments of principal and interest and a decrease in the value of your investment in the bonds.

38

DEP’S REVIEW OF STORM RECOVERY PROPERTY

Pursuant to the rules of the SEC, DEP, as sponsor, has performed, as described below, a review of the storm recovery property underlying the bonds. As required by these rules, the review was designed and effected to provide reasonable assurance that disclosure regarding the storm recovery property is accurate in all material respects. DEP did not engage a third party in conducting its review.

The bonds will be secured under the indenture by the storm recovery bond collateral. The principal asset of the indenture’s trust estate is the storm recovery property relating to the bonds. The storm recovery property is a present property right authorized and created pursuant to Financing Act and the financing order. The storm recovery property includes the right to impose, bill, charge, collect and receive nonbypassable irrevocable storm recovery charges in amounts necessary to pay principal on and interest of the bonds and other required amounts and charges owing in connection with the bonds, the right under the financing order to obtain true-up adjustments of storm recovery charges under Financing Act (with respect to adjustments, in the manner and with the effect provided in the servicing agreement) and all revenue, collections, claims, right to payments, payments, money and proceeds arising out of the rights and interests created under the financing order. Under the Financing Act and the financing order, the storm recovery charges are payable by all existing or future customers receiving transmission or distribution service, or both, from DEP or its successors or assignees under PSCSC-approved rate schedules or under special contracts, even if a customer elects to purchase electricity from an alternative electricity supplier following a fundamental change in regulation of public utilities in South Carolina.

The storm recovery property is not a receivable, and the principal collateral securing the bonds is not a pool of receivables. Storm recovery charges that relate to the storm recovery property are irrevocable and not subject to reduction, impairment, postponement, termination or, except for the specified true-up adjustments to correct any overcollections or undercollections, adjustment by further action of the PSCSC. The rates at which storm recovery charges are billed to customers will be adjusted to correct any overcollections or undercollections from prior periods. These adjustments are intended to ensure the recovery of revenues sufficient to retire the principal amount of the bonds in accordance with the expected sinking fund schedule, to pay all interest on the bonds when due, to pay fees and expenses of servicing the bonds and premiums, if any, associated with the bonds and to fund any required credit enhancement for the bonds. In addition to the semi-annual true-up adjustments, the servicer is also required to implement (a) quarterly true-up adjustments, beginning twelve (12) months prior to the scheduled final payment date, and (b) may request an interim true-up adjustment at any time for any reason to ensure timely payment of scheduled principal of and interest on the bonds and other required amounts and charges owing in connection with the bonds on the next payment date. There is no cap on the level of storm recovery charges that may be imposed on electric customers as a result of the true-up mechanism to pay principal of and interest on the bonds when due and other required amounts and charges owing in connection with the bonds. All revenues and collections resulting from storm recovery charges provided for in the financing order are part of the storm recovery property. The storm recovery property relating to the bonds is described in more detail under “The Storm Recovery Property and the Financing Act” in this prospectus.

In the financing order, the PSCSC, among other things:

•

orders that the owner of storm recovery property is authorized to impose, bill, charge, collect, and adjust from time to time (as described in the financing order) a storm recovery charge to be collected on a per kWh basis from all applicable customer rate classes until the bonds are paid in full and all other costs of the bonds have been recovered in full;

•

orders that such storm recovery charges shall be in amounts sufficient to ensure the timely recovery of DEP’s storm recovery costs and financing costs including the payment of principal of and interest on the bonds;

•

orders that upon the transfer of the storm recovery property to us by DEP, we will have (i) all rights and interest of DEP with respect to the storm recovery property including, without limitation, the right to impose, bill, charge, collect and receive storm recovery charges authorized by the financing order and to obtain periodic adjustments to the storm recovery charges and (ii) all revenues, collections, claims, rights to payments, payments, money or proceeds with respect thereto; and

39

•

reaffirms that it shall not take or permit any action that impairs or would impair the value of storm recovery property or revise the storm recovery costs for which recovery is authorized, in any way impair the rights and remedies of the bondholders, assignees and other financing parties or, except for the true-up adjustment, reduce, alter, or impair storm recovery charges that are to be imposed, collected, charged and remitted for the benefit of the bondholders and other financing parties until any and all principal, interest, premium, financing costs and other fees, expenses, or charges incurred, and any contracts to be performed, in connection with the related bonds have been paid and performed in full.

Please read “The Storm Recovery Property and the Financing Act” and “DEP’s Financing Order” in this prospectus for more information.

The characteristics of storm recovery property are unlike the characteristics of assets underlying mortgage and other commercial asset based financings because storm recovery property is a creature of statute and state regulatory commission proceedings. Because the nature and characteristics of storm recovery property and many elements of storm recovery bond financings are set forth in and constrained by the Financing Act and the financing order, DEP, as sponsor, does not select the assets to be pledged as collateral in ways common to many traditional asset-based financings. Moreover, the bonds do not contain origination or underwriting elements similar to typical mortgage or other loan transactions involved in other forms of asset-backed securities. The Financing Act and the financing order require the imposition on, and collection of storm recovery charges from, existing or future customers. Since the storm recovery charges are assessed against all such customers and the true-up mechanism adjusts for the impact of customer defaults, the collectability of the storm recovery charges is not ultimately dependent upon the credit quality of particular DEP customers, as would be the case in the absence of the true-up adjustment.

The review by DEP of the storm recovery property underlying the bonds has involved a number of discrete steps and elements as described in more detail below. First, DEP has analyzed and applied the Financing Act’s requirements for recovering storm recovery costs and approval of the PSCSC for the issuance of the financing order and in its proposal with respect to the characteristics of the storm recovery property to be created pursuant to the financing order. In preparing this proposal, DEP worked with its counsel and its structuring advisor in preparing the application for a financing order. DEP has analyzed economic issues and practical issues for the scheduled payment of principal of and interest on the bonds, including the impact of economic factors, potential for disruptions due to weather or catastrophic events and its own forecasts for customer growth as well as the historic accuracy of its prior forecasts.

In light of the unique nature of the storm recovery property, DEP has taken (or, prior to the offering of the bonds, will take) the following actions in connection with its review of the storm recovery property and the preparation of the disclosure for inclusion in this prospectus describing the storm recovery property, the bonds and the proposed financing transaction:

•

reviewed the Financing Act, other relevant provisions of South Carolina statutes and any applicable rules, regulations and orders of the PSCSC as they relate to the storm recovery property in connection with the preparation and filing of the application with the PSCSC for the approval of the financing order in order to confirm that the application and proposed financing order satisfied applicable statutory and regulatory requirements;

•

actively participated in the proceeding before the PSCSC relating to the approval of the requested financing order;

•

compared the process by which the financing order was adopted and approved by the PSCSC to the Financing Act and any applicable rules and regulations of the PSCSC as they relate to the storm recovery property to confirm that it met such requirements;

•

compared the proposed terms of the bonds to the applicable requirements in the Financing Act, other relevant provisions of South Carolina statutes, the financing order and any applicable regulations of the PSCSC to confirm that they met such requirements;

•

prepared and reviewed the agreements to be entered into in connection with the issuance of the bonds and compared such agreements to the applicable requirements in the Financing Act, other

40

relevant provisions of South Carolina statutes, the financing order and any applicable regulations of the PSCSC to confirm that they met such requirements;

•

reviewed the disclosure in this prospectus regarding the Financing Act, other relevant provisions of South Carolina statutes, the financing order and the agreements to be entered into in connection with the issuance of the bonds, and compared such descriptions to the relevant provisions of the Financing Act, other relevant provisions of South Carolina statutes, the financing order and such agreements to confirm the accuracy of such descriptions;

•

consulted with legal counsel to assess if there is a basis upon which the bondholders (or the indenture trustee acting on their behalf) could successfully challenge the constitutionality of any legislative action by the State of South Carolina (including action by the PSCSC) that could repeal or amend the provisions of the Financing Act in a way that could substantially impair the value of the storm recovery property, or substantially reduce, alter or impair the storm recovery charges;

•

reviewed the process and procedures in place for it, as servicer, to perform its obligations under the servicing agreement, including billing, collecting, receiving and posting the storm recovery charges to be provided for under the storm recovery property, forecasting storm recovery charges, and preparing and filing applications for true-up adjustments to the storm recovery charges;

•

reviewed the operation of the true-up adjustment for adjusting storm recovery charge levels to meet the scheduled payments on the bonds and in this context took into account its experience with the PSCSC; and

•

with the assistance of its advisors, prepared financial models in order to set the initial storm recovery charges to be provided for under the storm recovery property at levels expected to be sufficient to pay principal of and interest on the bonds when due and other required amounts and charges owing in connection with the bonds.

In connection with the preparation of such models, DEP:

•

reviewed (i) the historical electric consumption and customer growth within its service territory and (ii) forecasts of expected energy sales and customer growth; and

•

analyzed the sensitivity of the weighted average life of the bonds in relation to variances in actual energy consumption levels and related charge collections from forecasted levels and in relation to the true-up adjustment in order to assess the probability that the weighted average life of the bonds may be extended as a result of such variances, and in the context of the operation of the true-up adjustment for adjustment of storm recovery charges to address undercollections or overcollections in light of scheduled payments on the bonds to prevent an event of default.

As a result of this review, DEP has concluded that:

•

the storm recovery property, the financing order and the agreements to be entered into in connection with the issuance of the bonds meet in all material respects the applicable statutory and regulatory requirements;

•

the disclosure in this prospectus regarding the Financing Act, other relevant provisions of South Carolina statutes, the financing order and the agreements to be entered into in connection with the issuance of the bonds is, as of its respective date, accurate in all material respects and fails to omit any material information;

•

the servicer has adequate processes and procedures in place to perform its obligations under the servicing agreement;

•

storm recovery charges, as adjusted from time to time as provided in the Financing Act and the financing order, are expected to generate sufficient revenues to pay principal of and interest on the bonds when due and other required amounts and charges owing in connection with the bonds; and

•

the design and scope of DEP’s review of the storm recovery property as described above is effective to provide reasonable assurance that the disclosure regarding the storm recovery property in this prospectus is accurate in all material respects.

41

THE STORM RECOVERY PROPERTY AND THE FINANCING ACT

The Storm Recovery Property

In general terms, all of the rights and interests of DEP that relate to the bonds under the financing order, upon transfer to us pursuant to the sale agreement, are referred to in this prospectus as the storm recovery property. The storm recovery property includes the right to impose, bill, charge, collect and receive, through the storm recovery charges payable by existing or future customers who receive electric transmission or distribution service, or both, from DEP or its successors or assignees under rate schedules approved by the PSCSC or under special contracts, including the State of South Carolina and other governmental entities, an amount sufficient to pay principal and interest and other amounts in connection with the bonds. The Financing Act provides that the right to collect payments based on the storm recovery charge is a present property right that may be pledged, assigned or sold in connection with the issuance of the bonds.

The storm recovery property is not a receivable, and the principal collateral securing the bonds is not a pool of receivables.

During 2022, approximately 36% of DEP’s total South Carolina retail billed electric consumption was by industrial customers, approximately 33% was by residential customers and approximately 30% was by commercial customers, with other entities comprising approximately 1% of DEP’s total retail billed electric consumption. Except in their capacity as customers, neither the State of South Carolina nor any political subdivision, agency, authority or instrumentality of the State of South Carolina, nor any other entity, will be obligated to provide funds for the payment of principal of and interest on the bonds.

Storm recovery charges authorized in the financing order are irrevocable and not subject to reduction, impairment, or adjustment by further action of the PSCSC, except for at least semi-annual true-up adjustments that are necessary to correct for any overcollection or undercollection of the storm recovery charges or to otherwise ensure the timely payment of principal of and interest on the bonds when due and other financing costs and other required amounts and charges payable in connection with the bonds. Please read “DEP’s Financing Order — True-Up Mechanism” in this prospectus. All revenues resulting from storm recovery charges are part of the storm recovery property.

The storm recovery property relating to the bonds is described in more detail under “The Sale Agreement — Sale and Assignment of the Storm Recovery Property” in this prospectus.

The aggregate principal amount of bonds that may be issued pursuant to the financing order may not exceed the Securitizable Balance on the date of issuance. The servicer will bill and collect storm recovery charges allocable to the bonds and will remit the collections to the indenture trustee. DEP will include the storm recovery charges (which may relate to one or more series of bonds) as a separate line item on its customers’ bills.

Because the amount of storm recovery charge collections will depend in part on the amount of electricity consumed by customers of DEP or its successor, the amount of collections may vary from year to year. Please read “Duke Energy Progress, LLC” in this prospectus.

Under the Financing Act, if a default or termination occurs under the terms of the bonds, the indenture trustee or the holders of the bonds may foreclose on or otherwise enforce their lien and security interest in the storm recovery property.

However, in the event of foreclosure, there is likely to be a limited market, if any, for the storm recovery property. Therefore, foreclosure might not be a realistic or practical remedy. Please read “Risk Factors — Risks Associated with the Unusual Nature of the Storm Recovery Property — Foreclosure of the indenture trustee’s lien on the storm recovery property for the bonds might not be practical, and acceleration of the bonds before maturity might result in your investment being repaid either earlier or later than expected” and “Description of the Storm Recovery Bonds — Events of Default; Rights Upon Event of Default” in this prospectus.

42

The Financing Act Authorizes Utilities to Recover Storm Recovery Costs Through the Issuance of Storm Recovery Bonds

On June 17, 2022, the Financing Act, codified as Sections 58-27-1110 through 1180, SC Code of Laws Annotated, became effective, authorizing public utilities in the State of South Carolina to petition the PSCSC for financing orders that authorize, among other things,

•

The issuance of storm recovery bonds;

•

The creation of storm recovery property; and

•

The imposition, collection, and periodic adjustments of storm recovery charges.

The Financing Act gives an electric utility the opportunity to finance the recovery of storm recovery costs it has incurred or expects to incur and storm recovery costs was deemed reasonable and prudent by the PSCSC through a final order approving a settlement or other final order issued by the PSCSC.

In order to finance their storm recovery costs and financing costs, South Carolina utilities may petition for a financing order under the Financing Act. As described below, DEP petitioned for the first such financing order, which was issued by the PSCSC on October 13, 2023 and amended on October 23, 2023.

The Financing Act Provides for the Issuance of a Financing Order

The Financing Act authorizes the PSCSC to issue a financing order. A financing order provides for the creation of storm recovery property, including the right to impose, bill, charge, collect and receive the storm recovery charges and for the issuance of storm recovery bonds.

In addition, a financing order will:

•

authorize the transfer of storm recovery property to an issuing entity to secure storm recovery bonds;

•

set forth procedures for establishing the initial storm recovery charges and for periodic true-up adjustments to storm recovery charges in the event of overcollection or undercollection of storm recovery charges. In accordance with the Financing Act, Within sixty days after receiving a true-adjustment letter from the servicer, the PSCSC shall either approve the request or inform the servicer of a mathematical or clerical error. If the PSCSC informs the servicer of mathematical or clerical errors in its calculation, the electrical utility may correct its error and refile its request;

•

remain in effect until the storm recovery bonds issued pursuant to the financing order have been paid in full or defeased and, in each case, the PSCSC-approved financing costs of such bonds have been recovered in full; and

•

remain in effect and unabated notwithstanding the reorganization, bankruptcy, or other insolvency proceedings, merger, or sale of the electric utility or its successors or assignees.

Having issued the financing order, the PSCSC may not, in exercising its powers and carrying out its duties regarding any matter within its authority, (i) consider storm recovery bonds issued pursuant to the financing order to be the debt of DEP other than for federal income tax purposes, (ii) consider the storm recovery charges paid under the financing order to be the revenue of DEP for any purpose, or (iii) consider the storm recovery costs or financing costs specified in the financing order to be the costs of DEP, nor may the PSCSC determine any action taken by DEP which is consistent with the financing order to be unjust or unreasonable.

The Financing Act Provides for the Creation of Storm Recovery Property to Secure the Bonds

The Financing Act authorizes the PSCSC, through issuance of a financing order, to provide for the creation of storm recovery property to secure repayment of storm recovery bonds. Storm recovery property is defined under the Financing Act as all of the following:

(i)   all rights and interests of an electric utility or its successor or assignee under a financing order, including the right to impose, bill, charge, collect and receive storm recovery charges authorized

43

in the financing order and to obtain periodic adjustments to such storm recovery charges as provided in the financing order, and

(ii)   all revenues, collections, claims, rights to payment, payments, money or proceeds arising from the rights and interests specified in the financing order, regardless of whether such revenues, collections, claims, rights to payment, payments, money or proceeds are imposed, billed, received, collected or maintained together with or commingled with other revenues, collections, rights to payment, payments, money or proceeds.

Pursuant to the Financing Act and a financing order, the owner of storm recovery property is authorized to impose and collect a nonbypassable, consumption based, storm recovery charge, which charges shall be paid by all existing or future customers receiving transmission or distribution service, or both, from the electric utility (or its successors or assignees) under PSCSC-approved rate schedules or under special contracts (i.e., contracts with large industrial users), even if the customer elects to purchase electricity from an alternative electric supplier following a fundamental change in regulation of public utilities in South Carolina. Under current law, customers of South Carolina electric utilities cannot buy their electricity from alternative electric suppliers.

The storm recovery charges authorized to be imposed and collected pursuant to the Financing Act and a financing order are designed to recover (among other financing costs) all principal of and interest on the bonds, and any other costs of issuing, supporting, repaying, refunding and servicing such bonds, as more fully described below.

The Financing Act Provides for the Recovery of Storm Recovery Costs and the Issuance of the Bonds

The Financing Act contains a number of provisions designed to facilitate the recovery of storm recovery costs and the issuance of storm recovery bonds.

A Financing Order is Irrevocable.   Once storm recovery bonds have been issued or storm recovery property has been transferred under an effective financing order, the financing order, together with the storm recovery charges established in the financing order, are irrevocable and not subject to amendment, modification or termination by the PSCSC. The only exception is for periodic true-up adjustments pursuant to the Financing Act in order to correct overcollections or undercollections of storm recovery charges and to ensure that sufficient funds are available for payments of principal of and interest on the storm recovery bonds when due and other financing costs and required amounts and charges payable in connection with such bonds. Unlike the citizens of certain other states, the citizens of South Carolina currently do not have the constitutional right to adopt or revise state laws by initiative or referendum. Thus, absent an amendment of the South Carolina Constitution, the Financing Act cannot be amended or released by direct action of the electorate of South Carolina.

The Financing Act Contains a State Pledge.   Under the Financing Act, the State of South Carolina and its agencies, including the PSCSC, has pledged to storm recovery bondholders, that it will not (i) alter the provisions of the Financing Act that make the storm recovery charges imposed by a financing order irrevocable, binding and nonbypassable, (ii) take or permit any action that impairs or would impair the value of the storm recovery property, (iii) impair the rights and remedies of the holders, assignees, and other financing parties or (iv) except for “true-up” adjustments discussed in the following paragraph, reduce, alter, or impair the storm recovery charges to be imposed, collected and remitted for the benefit of the holders of storm recovery bonds until any and all principal, interest, other financing costs and other fees, expenses, or charges incurred, and any contracts to be performed in connection with the storm recovery bonds, have been paid in full. This state pledge does not preclude any limitation or alteration of the Financing Act or a financing order if “full compensation” is made by law for the “full protection” of the storm recovery charges collected pursuant to a financing order and of the holders of the storm recovery bonds or any financing party entering into a contract with the electric utility. Further, even after a financing order is effective, the PSCSC retains the power to interpret the financing order. Please read “Risk Factors — Risks Associated with Potential Judicial, Legislative or Regulatory Actions” in this prospectus.

Storm Recovery Charge Adjustments.   The Financing Act requires the PSCSC to provide a formula-based true-up mechanism pursuant to which the storm recovery charges are to be reviewed and adjusted at

44

least semi-annually such review by the PSCSC being limited to review of mathematical or clerical errors. The purposes of these adjustments are:

•

to correct any overcollections or undercollections of the charges during the preceding remittance period, and

•

to ensure the recovery of storm recovery charges sufficient to provide for the timely payments of scheduled principal of and interest on the storm recovery bonds, financing costs and other required amounts and charges payable in connection with the storm recovery bonds.

Neither the Financing Act nor the financing order imposes any cap on the size of storm recovery charges.

Transmission and Distribution Customers Cannot Avoid Storm Recovery Charges — Nonbypassable.   The Financing Act provides that the storm recovery charges are nonbypassable. The charges will be collected from all existing or future South Carolina customers receiving transmission or distribution service, or both, from the utility or its successors or assignees under PSCSC-approved rate schedules or under special contracts, even if the customer elects to purchase electricity from an alternative electric supplier following a fundamental change in regulation of public utilities in the State of South Carolina. Self-generators that receive no transmission or distribution service from DEP are not liable for the storm recovery charge. The Financing Act and the financing order do not provide for exit fees to be charged to any customers that might leave the grid to self-generate.

Any successor to DEP, whether pursuant to any reorganization, bankruptcy, or other insolvency proceeding or whether pursuant to any merger or acquisition, sale, or other business combination, or transfer by operation of law, as a result of electric utility restructuring or otherwise, is required to cooperate with the servicer in performing and satisfying all obligations of, and will have the same rights under the financing order as, DEP in the same manner and to the same extent as DEP, including cooperating with the servicer in collecting and paying to us the revenues, collections, payments or proceeds of the storm recovery property.

The Financing Act Protects the Lien on Storm Recovery Property for the Benefit of Bondholders.   The Financing Act governs whether the transfer of storm recovery property from the electric utility to an issuer of bonds will be enforceable and will be perfected under South Carolina law and whether the security interest granted by us to the indenture trustee in the storm recovery property will be perfected under South Carolina law. The Financing Act provides that a transfer of an interest in storm recovery property to an assignee is enforceable only upon all of the following items having been attained:

•

the issuance of the financing order,

•

the seller having rights in the storm recovery property or the power to transfer rights in the storm recovery property to an assignee,

•

transfer documents having been executed and delivered to the assignee in connection with the issuance of bonds, and

•

the receipt of value for the storm recovery property.

A transfer of or security interest in the storm recovery property is perfected by means of a filing under the Financing Act. Upon perfection, the lien attaches both to storm recovery property and to all proceeds of storm recovery property, whether the related storm recovery charges have accrued or not. Perfection of the indenture trustee’s security interest in the storm recovery property is necessary in order to establish the priority of the indenture trustee’s security interests over claims of other parties to the storm recovery property.

The Financing Act provides that the priority of a security interest in storm recovery property will not be impaired by:

•

later modifications to the financing order or storm recovery property; or

•

commingling of funds arising from storm recovery property with other funds.

45

The Financing Act further provides that any other security interest that may apply to such funds, other than a security interest perfected in accordance with the Financing Act, are terminated when such funds are transferred to a segregated account for the assignee or a financing party.

The Financing Act Provides that the Transfer of Storm Recovery Property Is a True Sale.   The Financing Act provides that an electric utility’s transfer of storm recovery property is a “true sale” and is not a pledge of or a secured transaction relating to the electric utility’s right, title and interest in the storm recovery property (other than for federal and state income and franchise tax purposes) and that legal and equitable title passes to the transferee, if the agreement governing that transfer expressly states that the transfer is a sale or other absolute transfer. The Financing Act provides that the transfer as a true sale is not affected by:

•

commingling of amounts arising with respect to the storm recovery property with other amounts;

•

retention by the seller of (i) a partial or residual interest, including an equity interest, in the storm recovery property, whether direct or indirect, or whether subordinate or otherwise or (ii) the right to recover costs associated with taxes, franchise fees, or license fees imposed on the collection of storm recovery charges;

•

any recourse that the transferee may have against the electric utility;

•

any indemnification rights, obligations, or repurchase rights made or provided by the electric utility;

•

the obligation of the electric utility to collect storm recovery charges on behalf of an assignee;

•

the seller acting as servicer of the storm recovery charges;

•

the treatment of the sale, conveyance, assignment, or other transfer for tax, financial reporting, or other purposes;

•

granting or providing to holders of the bonds a preferred right to the storm recovery property or credit enhancement by the electric utility or its affiliates with respect to the related bonds; or

•

any application of the formula-based adjustment mechanism.

Please read “Risk Factors — Risks Associated with Potential Bankruptcy Proceedings of the Seller or the Servicer” and “Bankruptcy and Creditors’ Rights Issues” in this prospectus.

The Bonds are Legal Investments for South Carolina Investors that Require Statutory Authority

Under the Financing Act, the following South Carolina entities may legally invest any sinking funds, moneys, or other funds belonging to them or under their control in the bonds:

•

the South Carolina Pooled Investment Fund established pursuant to Section 6-6-10 of the SC Code of Laws Annotated;

•

banks and bankers, savings and loan associations, credit unions, trust companies, savings banks and institutions, investment companies, insurance companies, insurance associations, and other persons carrying on a banking or insurance business;

•

personal representatives, guardians, trustees, and other fiduciaries; and

•

all other persons whatsoever who are now or may hereafter be authorized to invest in bonds or other obligations of a similar nature.

46

DEP’S FINANCING ORDER

DEP’s Storm Recovery Financing Order

On October 13, 2023, the PSCSC issued to DEP its first financing order under the Financing Act and amended the financing order on October 23, 2023. No party appealed the financing order and the financing order became final and non-appealable on November 23, 2023. After issuance of the bonds, the financing order, pursuant to the Financing Act, is irrevocable and is not subject to amendment, modification or termination by further action of the PSCSC, except as contemplated by the periodic true-up adjustments.

The financing order authorizes the issuance of the bonds in one or more series in an aggregate principal amount not to exceed an amount equal to the Securitizable Balance as of the issuance date plus up-front financing costs to issue the bonds.

Storm Recovery Charges

Storm Recovery Charges Will Be Imposed in Amounts Sufficient to Pay the Bonds and Related Costs.   Under the financing order, the PSCSC authorizes the owner of storm recovery property to impose, bill, charge, collect and receive a storm recovery charge, to be collected on a per kWh basis from all applicable DEP South Carolina customers until the bonds are paid in full and all financing costs and other costs of the bonds have been recovered in full. Such storm recovery charges are designed to be in amounts sufficient to retire the principal amount of the bonds in accordance with the expected sinking fund schedule, to pay all interest on the bonds when due, to pay fees and expenses of servicing the bonds and premiums, if any, associated with the bonds and to fund any required credit enhancement for the bonds. Under the financing order, there is no limit on the amount of the storm recovery charge.

Each Rate Class Will Pay a Different Storm Recovery Charge Based upon Ratemaking Cost Allocation.   Under the Financing Act and the financing order, storm recovery charges are determined by allocating the revenue requirement payable from such charges among all South Carolina customer rate classes in accordance with the cost-of-service methodology approved by the PSCSC in DEP’s most recently filed rate case. The storm recovery charge will be a single per kilowatt hour charge assessed against each rate class of customers as part of each customer’s regular monthly billing.

The defined rate classes of customers and their respective percentage allocations of responsibility for the payment of revenue requirements to be recovered from the storm recovery charges based upon the most recently PSCSC approved rate case by DEP and therefore approved in the financing order are set forth below. The Allocation Percentages set forth below are approximate.

South Carolina Rate Class	Allocation Percentage*
Residential	​	67.01%
Commercial	​	22.32%
Industrial	​	4.08%
Lighting	​	6.59%
​	​	100.00%

*

Note: Percentages may not add up due to rounding.

In accordance with the Financing Act and the financing order, the allocation methodology for the storm recovery charges will be adjusted concurrently with the subsequent true-up adjustment filing using the customer class allocation methodology approved by the PSCSC in the then most recent general rate proceeding for DEP.

Although the storm recovery charges payable by each rate class of customers will differ, any deficiency in the payment of such charges by any class of customers, including write-offs or other reasons, will be included in determining the revenue requirement used in calculating the next “true-up” adjustment for all customers. Similarly, if the servicer decides to implement an optional interim true-up to address an expected

47

deficiency in the payment of such charges by a particular class of customers, the expected deficiency will be included in determining the revenue requirement which will be allocated among all classes of customers in the true-up adjustment. Please read “DEP’s Financing Order — True-Up Mechanism” below.

The Financing Order Provides a Procedure to Calculate the Initial Storm Recovery Charge.   The initial storm recovery charges will be determined in accordance with the financing order and filed with the PSCSC as part of the bond approval process described below. Please read “DEP’s Financing Order — Issuance Advice Letter Process” below. As of January 1, 2024, the approximate initial storm recovery charge for an average 1,000 kWh South Carolina residential customer will be $      per month. The storm recovery charges will become effective for all billing periods on and after the date of issue of the bonds and will be subject to periodic true-up as described below.

DEP Will Collect the Storm Recovery Charges as Initial Servicer.   Storm recovery charges will be assessed by DEP, as the initial servicer, for our benefit as owner of the storm recovery property. Storm recovery charges will be based on a customer’s actual consumption of electricity delivered by means of DEP’s transmission and distribution facilities from time to time. Storm recovery charges will be collected by DEP from customers as part of its normal collection activities. Storm recovery charges will be deposited by DEP into the collection account under the terms of the indenture, the series supplement and the servicing agreement. Estimated daily storm recovery charge collections will be remitted to the indenture trustee on each business day. The estimated payments made by DEP will be based upon the average number of days each bill remains outstanding, adjusted for any expected delinquencies. Estimated remittances will be reconciled with actual storm recovery bond collections at least semi-annually, and the overcollection or undercollection credited to or remitted by the servicer. Those customers who self-generate will also be subject to pay storm recovery charges, but only to the extent of electricity ultimately delivered by means of DEP’s facilities. Self-generators that receive no transmission or distribution service from DEP are not liable for the storm recovery charge. Please read “The Servicing Agreement — Remittances to Collection Account” in this prospectus.

Partial Payments of Storm Recovery Charges Will Be Pro-Rated.   If a customer pays only a portion of its bill, after the application of late charges, such partial payment will be allocated ratably among the storm recovery charges, any similar securitization charges, any similar securitization charges and DEP’s other billed amounts in a manner that is consistent with DEP’s current process for allocating partial payments.

True-Up Mechanism

Storm Recovery Charges Must Be Trued-Up At Least Semi-Annually.   The Financing Act permits and the financing order requires that we, or the electric utility, file with the PSCSC at least semi-annually (at least quarterly beginning twelve months prior to the scheduled final payment date) a letter applying the true-up mechanism to be reviewed by the PSCSC for any mathematical or clerical errors to correct for any overcollection or undercollection of the storm recovery charges and make any adjustments to ensure the recovery of revenues sufficient to provide for the timely payment of the periodic payment requirement. Under the servicing agreement, the servicer will make adjustments to the storm recovery charges at least semi-annually. In addition to the semi-annual true-up adjustment, the servicer is authorized to make interim adjustments at any time for any reason to ensure the timely payment of the periodic payment requirement. Necessary true-up adjustments are to be made to correct for overcollection or undercollection of storm recovery charges or to otherwise ensure the timely payment of the periodic payment requirement. There are no caps on the level of storm recovery charges that may be imposed on customers as a result of the true-up process.

In addition to the semi-annual true-up adjustments, the servicer (a) is also required to implement quarterly true-up adjustments beginning twelve months prior to the scheduled final payment date, and (b) may request an interim true-up adjustment at any time for any reason to ensure timely payment of principal of and interest on the bonds and other required amounts and charges owing in connection with the bonds on the next payment date.

Upon the filing of a true-up adjustment letter made pursuant to the financing order, the PSCSC shall either administratively approve the requested true-up calculation in writing or inform the servicer of any mathematical or clerical errors in its calculation as expeditiously as possible but no later than 60 days

48

following the servicer’s true-up filing; and that notification and correction of any mathematical or clerical errors shall be made so that the true-up is implemented within 60 days of the servicer’s filing of a true-up adjustment letter. If a correction is requested, the servicer will work expeditiously to file corrections to the true-up calculations. Upon administrative approval, no further action of the PSCSC will be required prior to implementation of the true-up.

Pursuant to the financing order, after the completion of three semi-annual true-up periods, DEP and the South Carolina Office of Regulatory Staff (“ORS”) shall discuss possibly reducing the time period to review filed true-up adjustment letters from 60 to 30 days. There, however, can be no assurance that the review period will be reduced to 30 days.

True-Up Mechanism and State Pledge.

The State of South Carolina has pledged in the Financing Act that it and its agencies, including the PSCSC, will not take or permit any action that would impair the value of the storm recovery property, or, except as permitted in connection with a true-up adjustment authorized by the Financing Act, reduce, alter or impair the storm recovery charges until the principal, interest and premium, if any, and any other charges incurred and contracts to be performed in connection with the related bonds, have been paid and performed in full.

Issuance Advice Letter Process

The Financing Act and the financing order provide a procedure for approval of the process by which the storm recovery bonds will be issued and the effectiveness of the initial storm recovery charges. On the first business day after pricing of the bonds and prior to their issuance, DEP is required to file with the PSCSC an issuance advice letter, which will contain, among other things:

•

the actual structure of the storm recovery bond issuance;

•

the scheduled final payment dates and legal maturities of the storm recovery bonds;

•

over-collateralization levels (if any);

•

any other credit enhancements;

•

revised estimates of the up-front financing costs proposed to be financed and estimates of the ongoing financing costs for the first collection period;

•

certifications as required by the Financing Act and Financing Order; and

•

other information specific to the storm recovery bonds from proceeds of the storm recovery bonds.

The issuance advice letter will become effective on the date of issuance of the bonds unless the PSCSC issues a stop order, prior to 12:00 p.m. ET on the fourth business day after pricing of such bonds. Unless the PSCSC issues such a stop order, it will be deemed that the PSCSC affirmatively and conclusively authorized the issuance of the bonds and delivery of the bonds will proceed without any further action of the PSCSC.

49

THE ISSUING ENTITY

General

The issuing entity is a limited liability company organized under the laws of the State of Delaware and are governed by an amended and restated limited liability company agreement. DEP is our sole member. We were formed on January 12, 2024.

The issuing entity has been organized to serve as a special purpose subsidiary of DEP, for the limited purpose of holding the storm recovery property and issuing the storm recovery bonds secured by the storm recovery property and the other collateral and related activities to finance certain activities of DEP related to the recovery of storm recovery costs. At the time of the issuance of the storm recovery bonds, our assets available to secure the bonds will consist primarily of the storm recovery property and the other collateral held under the indenture and the series supplement for the storm recovery bonds.

As authorized by the financing order, our organizational documents, as well as the transactional documents supporting the storm recovery bonds, give us the authority and flexibility to issue additional series of storm recovery bonds authorized by the financing order or one or more future financing orders issued by the PSCSC and to acquire additional storm recovery property which will be pledged to the payment of other storm recovery bonds unless a separate issuer is required to satisfy the rating agency condition. As a result, we may acquire additional storm recovery property and issue one or more additional series of storm recovery bonds that are supported by such additional and separate storm recovery property or other collateral to finance the storm recovery costs approved by a financing order, or to finance other storm recovery costs. See “Security for the Storm Recovery Bonds — Issuance of Additional Storm Recovery Bonds” and “— Allocations as Between Series of Storm Recovery Bonds” in this prospectus.

Each series of storm recovery bonds that we may issue will be backed by separate storm recovery property we acquire for the separate purpose of repaying that series. Any new series of storm recovery bonds may include terms and conditions that would be unique to that particular series. Each series that we may issue will have the benefit of a true-up mechanism.

However, additional series of storm recovery bonds may not be issued unless that rating agency condition has been satisfied. See “Security for the Storm Recovery Bonds — Issuance of Additional Storm Recovery Bonds” in this prospectus.

As of the date of this prospectus, the issuing entity has not carried on any business activities and has no operating history. Our limited liability company agreement has been filed as an exhibit to the registration statement of which this prospectus forms a part.

We will enter into a servicing agreement under which DEP, on our behalf, will manage, service and administer, and make collections in respect of, the storm recovery property. See “The Servicing Agreement” in this prospectus.

On or before the date of issuance of the storm recovery bonds, DEP will make a capital contribution to us in an amount not less than 0.5% of the initial principal amount of the bonds. Under the financing order, DEP will be entitled to a return on this capital contribution equal to the rate of interest on the storm recovery bond. This return will be available for distribution to DEP, subject to the priority of payment set forth in the indenture and the series supplement. See “Security for the Storm Recovery Bonds — How Funds in the Collection Account Will Be Allocated” in this prospectus.

Our principal place of business is 411 Fayetteville Street, Raleigh, North Carolina 27601, 704-382-3853.

Managers

Pursuant to our limited liability company agreement, our business will be managed by a management committee consisting of three or more managers. Our limited liability company agreement requires that we have at least one independent manager, whose selection and replacement will be subject to ratification by the PSCSC. The independent manager must be a natural person who, for the five-year period prior to his or

50

her appointment as an independent manager has not been and during the continuation of his or her service as independent manager is not:

•

a member, partner, equity holder, manager, director, officer or employee of DEP or any of its equity holders or Affiliates (other than as an independent director, independent manager or special member of DEP or an Affiliate of DEP that is not in the direct chain of ownership of DEP and that is required by such DEP’s creditors to be a single purpose bankruptcy remote entity); provided, that the indirect or beneficial ownership of stock of the Member or its Affiliates through a mutual fund or similar diversified investment vehicle with respect to which the owner does not have discretion or control over the investments held by such diversified investment vehicle shall not preclude such owner from being an Independent Manager;

•

a creditor, supplier or service provider (including provider of professional services) to DEP, the Member or any of their respective equity holders or Affiliates (other than a nationally-recognized company that routinely provides professional Independent Managers and other corporate services to DEP, the Member or any of its Affiliates in the ordinary course of its business);

•

a family member of any such member, partner, equity holder, manager, director, officer, employee, creditor, supplier or service provider; or

•

a Person that controls (whether directly, indirectly or otherwise) any of the bullets above.

DEP, as our sole member, will appoint the independent managers prior to the issuance of the bonds. None of our managers or officers has been involved in any legal proceedings which are specified in Item 401(f) of the SEC’s Regulation S-K. None of our managers or officers beneficially own any equity interest in us.

The following is a list of our managers as of the date of this prospectus:

Name	Age	Title	Background
Karl W. Newlin	55	Manager	Karl W. Newlin has been Senior Vice President Corporate Development at Duke Energy Corporation since June 2018 and has been its Treasurer since November 2018. Prior to that, Mr. Newlin was Senior Vice President and Chief Commercial Officer — Natural Gas effective with the merger of Duke Energy Corporation and Piedmont Natural Gas Company, Inc. (“Piedmont”) in October 2016. Mr. Newlin joined Piedmont in 2010 to manage its strategic planning functions, new business development activities and joint venture investments. Mr. Newlin previously served as Managing Director, Investment Banking with Merrill Lynch & Co. in its New York and Los Angeles offices.
Cynthia S. Lee	57	Manager	Cynthia S. Lee was appointed Vice President, Chief Accounting Officer and Controller of Duke Energy Corporation, effective May 2021. Prior to that, Ms. Lee served as Director, Investor Relations since June 2019 and in various accounting roles since joining Duke Energy Corporation in 2002.
​	​	Independent Manager	​

No compensation has been paid to any manager since we were formed. Our managers, other than any independent manager, are officers, directors or managers of DEP or its other affiliates and have not been and will not be separately compensated by us for their services on our behalf. We will pay the independent manager annual fees from our revenues and will reimburse such independent manager for reasonable and documented expenses These expenses include the reasonable compensation, expenses and disbursements of the agents, representatives, experts and counsel that the independent manager may employ in connection with the exercise and performance of their rights and duties under our limited liability company agreement,

51

the indenture, the series supplement, the sale agreement and the servicing agreement. In the event that more than one series of storm recovery bonds is issued, the administration fees, independent manager fees and other operating expenses payable by us on a payment date will be assessed to each series on a pro rata basis, based upon the respective outstanding principal amounts of each series.

The issuing entity’s limited liability company agreement provides that the managers will not be personally liable for any of our debts, obligations or liabilities to the extent permitted by law. Our limited liability company agreement further provides that, to the fullest extent permitted by law, we will indemnify the managers against any liability incurred in connection with their services as managers for us except if caused by the manager’s fraud, gross negligence or willful misconduct or in the case of an independent manager, bad faith or willful misconduct. We will pay any indemnification amounts owed to managers out of funds in the collection account, subject to the priority of payments described in “Security for the Storm Recovery Bonds — How Funds in the Collection Account Will Be Allocated” in this prospectus.

Restricted Purposes

We have been created for the limited purpose of:

•

acquiring, owning, holding, administering, servicing or entering into agreements regarding the receipt and servicing of the storm recovery property and the other collateral, along with certain other related assets with respect to one or more series of storm recovery bonds;

•

managing, selling, assigning, pledging, collecting amounts due on or otherwise deal with the storm recovery property and the other collateral and related assets with respect to one or more series of storm recovery bonds to be so acquired in accordance with the terms of the basic documents relating to such series;

•

negotiating, authorizing, executing, delivering, assuming the obligations under, and perform its duties under, the basic documents and any other agreement or instrument or document relating to the activities set forth in the above bullets; provided, that each party to any such agreement under which material obligations are imposed upon DEP SC Storm Funding shall covenant that it shall not, prior to the date which is one year and one day after the termination of the indenture and the payment in full of the storm recovery bonds and any other amounts owed under any indenture, acquiesce, petition or otherwise invoke or cause DEP SC Storm Funding to invoke the process of any court or Governmental Authority for the purpose of commencing or sustaining an involuntary case against DEP under any federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of DEP or any substantial part of the property of DEP SC Storm Funding; or ordering the winding up or liquidation of the affairs of DEP SC Storm Funding; and provided, further, that DEP SC Storm Funding shall be permitted to incur additional indebtedness or other liabilities payable to service providers and trade creditors in the ordinary course of business in connection with the foregoing activities;

•

filing with the U.S. Securities and Exchange Commission one or more registration statements, including any pre-effective or post-effective amendments thereto and any registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended (including any prospectus supplement, prospectus and exhibits contained therein) and file such applications, reports, surety bonds, irrevocable consents, appointments of attorney for service of process and other papers and documents necessary or desirable to register one or more series of storm recovery bonds under the securities or “Blue Sky” laws of various jurisdictions;

•

authorizing, executing, delivering, issuing and registering one or more series of storm recovery bonds;

•

distributing amounts released to the issuing entity;

•

making payment on the storm recovery bonds;

•

pledging our interest in storm recovery property and other collateral relating to any series of storm recovery bonds to an indenture trustee under one or more indentures and one or more series supplements in order to secure the related series of storm recovery bonds; and

52

•

engaging in any lawful act or activity and exercise any powers permitted to limited liability companies formed under the laws of the State of Delaware that, in either case, are incidental to, or necessary, suitable or convenient for the accomplishment of the above-mentioned purposes.

The issuing entity’s limited liability company agreement does not permit us to engage in any activities not directly related to these purposes, including issuing or investing in additional securities, borrowing money or making loans to other persons. The list of permitted activities set forth in our limited liability company agreement may not be altered, amended or repealed without the affirmative vote of a majority of our managers, which vote must include the affirmative vote of our independent manager. Our limited liability company agreement and the indenture will prohibit us from issuing any storm recovery bonds (as such term is defined in the Financing Act), other than the bonds that we will offer pursuant to this prospectus and any additional storm recovery bonds issued by us pursuant to a separate financing order and secured by separate recovery property. Please read “Security for the Storm Recovery Bonds — Issuance of Additional Storm Recovery Bonds” and “— Allocations as Between Series of Storm Recovery Bonds” in this prospectus.

DEP SC Storm Funding is authorized to issue additional series of storm recovery bonds that are supported by additional and separate storm recovery property and other separate collateral.

We have been organized to serve as a special purpose Delaware limited liability company, for the purpose of holding storm recovery property and issuing storm recovery bonds secured by storm recovery property and other collateral and related activities to finance certain activities of DEP related to storm recovery. At the time of issuance of the bonds, our assets will consist primarily of the storm recovery property and the other collateral held under the indenture and series supplement for the bonds. As authorized by the financing order, our organizational documents as well as the transaction documents supporting the bonds give us the authority and flexibility to issue additional storm recovery bonds (including additional storm recovery bonds authorized by one or more future financing orders), with the approval of the PSCSC. As a result, we may acquire additional, separate storm recovery property and issue one or more additional series of storm recovery bonds that are supported by such additional and separate storm recovery property or other collateral. For example, such future financings may include additional series of storm recovery bonds to finance additional storm recovery costs in South Carolina. If authorized by the PSCSC, such future financings may include storm recovery bonds issued to finance costs, if any, which result from future storms.

Each series of storm recovery bonds that we may issue will be backed by separate storm recovery property we acquire for the separate purpose of repaying that series. Any new series of storm recovery bonds may include terms and conditions that would be unique to that particular series. Each series of storm recovery bonds that we may issue will have the benefit of a true-up mechanism.

However, additional series of storm recovery bonds may not be issued if such issuance would not satisfy the rating agency condition for the bonds. See “Security for the Storm Recovery Bonds — Issuance of Additional Storm Recovery Bonds” and “— Allocations as Between Series of Storm Recovery Bonds” in this prospectus.

In addition, our organizational documents require us to operate in a manner intended to reduce the likelihood that we would be consolidated in DEP’s bankruptcy estate if DEP becomes involved in a bankruptcy proceeding. We have no intent to file a voluntary petition for relief under the Bankruptcy Code, so long as we are solvent and do not reasonably foresee becoming insolvent.

DEP SC Storm Funding’s Relationship with DEP

On the issue date of the bonds, DEP will sell storm recovery property to us pursuant to the sale agreement between us and DEP. DEP will service such storm recovery property pursuant to a servicing agreement between us and DEP related to the bonds. Please read “The Sale Agreement” and “The Servicing Agreement” in this prospectus. DEP will provide certain administrative services to us, pursuant to an administration agreement.

Our bonds will be included on the consolidated balance sheet of our parent, DEP, a regulated public utility, as required by the Financial Accounting Standards Board and the SEC Office of Chief Accountant governing corporate financial reporting for investor-owned utilities.

53

Our bonds will be treated as debt of DEP for U.S. federal income tax purposes. See “Material U.S. Federal Income Tax Consequences” in this prospectus. For federal income tax purposes, DEP will not recognize gross income unless and until DEP bills customers for the storm recovery charges and only in connection with such billing of customers for such storm recovery charges.

Ongoing PSCSC Oversight

The Issuing Entity is responsible to the PSCSC on an ongoing basis to the extent provided in our organization documents and the transaction documents. The servicer on our behalf will file periodic adjustments to storm recovery charges with the PSCSC. In addition, under the terms of the financing order, the Issuing Entity and the indenture trustee are not permitted to waive any material obligations of DEP as transferor or as servicer of the storm recovery property under the transaction documents without the consent of the PSCSC.

Continuing Disclosure: SEC Filings

Neither we nor the depositor is an asset-backed issuer and the bonds are not asset-backed securities as such terms are defined by the SEC in governing regulations Item 1101 of Regulation AB. We plan to file with the SEC required periodic and current reports related to the bonds consistent with the disclosure and reporting regime established in Regulation AB and will also post those periodic and current reports at a website associated with us or our affiliates.

DEP SC Storm Funding is a Separate and Distinct Legal Entity

Under our limited liability company agreement, we may not file a voluntary petition for relief under the Bankruptcy Code without a unanimous vote of our managers, including the independent manager. DEP has agreed that it will not cause us to file a voluntary petition for relief under the bankruptcy code without the affirmative vote of DEP and a unanimous vote of our mangers, including the independent manager. Our limited liability company agreement requires us to maintain our existence separate from DEP including:

•

taking all reasonable steps to continue our identity as a separate legal entity;

•

making it apparent to third persons that we are an entity with assets and liabilities distinct from those of DEP, other affiliates of DEP, the managers or any other person and correcting any known misunderstandings; and

•

making it apparent to third persons that, except for federal and certain other tax and accounting purposes, we are not a division of DEP or any of its affiliated entities or any other person.

The separateness provisions in our limited liability company agreement may be amended by us, with the affirmative vote of the independent manager, and DEP with written notice to the indenture trustee, as well as satisfaction of the rating agency condition and the PSCSC condition (described below). Please read “Description of the Storm Recovery Bonds — Procedure for Obtaining Consent or Deemed Consent of the PSCSC.”

The Administration Agreement

Pursuant to an administration agreement between DEP and us, DEP will provide or arrange for the provision of administrative services to us, including services relating to the required filings with the SEC with respect to the bonds, any financial statements or tax returns we might be required to file, qualifications to do business, and minutes of our managers’ meetings. We will pay DEP a fixed fee of $50,000 per annum for performing such services described above, plus out-of-pocket expenses. The $50,000 fee will be paid annually in arrears.

The administrator may not resign or be removed without satisfaction of the rating agency condition and the PSCSC condition, and without the successor administrator assuming all of the obligations of the former administrator under the administration agreement.

54

RELATIONSHIP TO 2021 NC STORM RECOVERY BONDS

DEP served as sponsor and has acted as servicer with respect to $769,627,000 original aggregate principal amount of the 2021 NC Storm Recovery Bonds, issued on November 24, 2021 which were issued to reimburse itself for the North Carolina portion of previously incurred storm recovery costs relating to Hurricanes Florence, Michael and Dorian and Winter Storm Diego in North Carolina.

The underlying structures of the 2021 NC Storm Recovery Bonds are comparable to the underlying structure of the bonds in that DEP, pursuant to the authority granted by the North Carolina Utilities Commission in a financing order, created property, namely, the right to impose, collect and receive storm recovery charges necessary to make timely payments of principal and interest and other ongoing financing costs of the 2021 NC Storm Recovery Bonds. The charges with respect to those storm recovery bonds have been included on the bills of DEP’s customers in North Carolina since December 2021. DEP services the charges authorized by the North Carolina financing order. In servicing the storm recovery property described herein, DEP will draw upon its servicing experience with the 2021 NC Storm Recovery Bonds.

Beyond its experience servicing securitization charges in connection with the 2021 NC Storm Recovery Bonds, DEP has a long history of collecting charges from its customers and allocating them accordingly, which it will be doing on the issuing entity’s behalf, as initial servicer of the storm recovery property.

55

DUKE ENERGY PROGRESS, LLC

The Depositor, Sponsor, Seller and Servicer

DEP will be the seller and initial servicer of the bonds and will be the depositor and sponsor of the transaction in which bonds covered by this prospectus are issued. DEP is a regulated public utility primarily engaged in the generation, transmission, distribution, and sale of electricity in portions of North Carolina and South Carolina. DEP’s service area covers approximately 29,000 square miles across North Carolina and South Carolina. Only DEP’s South Carolina retail customers are subject to the storm recovery charges. DEP supplies electric service to approximately 1.6 million residential, commercial and industrial customers, approximately 185,000 of these customers are in the northeastern part of South Carolina including Florence, Darlington, and Sumter counties. During the year ended December 31, 2022, DEP billed approximately 6.2 billion kilowatt hours of electricity to its electric customers in South Carolina, resulting in revenues of approximately $605 million. DEP is an indirect, wholly-owned subsidiary of Duke Energy Corporation, whose shares are listed on the New York Stock Exchange. Both we and DEP are identified by Standard Industrial Classification Code No. 4911, “Electric Services”.

DEP is subject to the jurisdiction of the PSCSC with respect to retail utility rates, accounting, utility services, certain facilities, certain asset transfers, certain corporate mergers and other matters. DEP is subject to the jurisdiction of the Federal Energy Regulatory Commission under the Federal Power Act with respect to acquisitions, operations and disposals of certain assets and facilities, services provided and rates charged, conduct among affiliates and other matters.

Following the sale of the storm recovery property to us, DEP will have no ownership or other interest in the storm recovery property transferred to us and will have no right to receive any storm recovery charges (other than collected as servicer on our behalf). Neither DEP nor any of its affiliates will purchase any bonds.

Revenues, Customer Base and Energy Consumption

The table below sets forth DEP’s total billed retail revenues from retail sales of electrical energy to its South Carolina customers for the years 2019 to 2022 and the nine months ended September 30, 2023:

Billed Retail Total Revenues ($ in 000’s)

Rate Class	2019			2020			2021			2022			September 30, 2023
Residential	​	$	251,562	​	$	233,631	​	$	236,889	​	$	249,794	​	$	213,308
Commercial	​	​	179,955	​	​	167,972	​	​	170,477	​	​	193,703	​	​	116,310
Industrial	​	​	130,298	​	​	120,026	​	​	106,975	​	​	141,372	​	​	97,723
Lighting	​	​	18,291	​	​	18,353	​	​	17,714	​	​	19,803	​	​	15,776
Total*	​	$	580,106	​	$	539,982	​	$	532,055	​	$	604,672	​	$	443,118

*

Totals may not add up due to rounding.

The table below sets forth the number of South Carolina customers by class for the years 2019 to 2022 and the nine months ended September 30, 2023:

Average Number of Retail Customer Accounts

Rate Class	2019		2020		2021		2022		September 30, 2023
Residential	​	139,675	​	141,335	​	144,426	​	152,396	​	154,343
Commercial	​	31,963	​	31,695	​	31,940	​	31,595	​	30,751
Industrial	​	63	​	64	​	63	​	60	​	60
Lighting	​	737	​	831	​	826	​	817	​	828
Total	​	172,438	​	173,925	​	177,255	​	184,868	​	185,981

56

The table below sets forth DEP’s billed retail energy sales to its South Carolina customers for the years 2019 to 2022 and the nine months ended September 30, 2023:

Electric Usage (Billed GWh)

Rate Class	2019		2020		2021		2022		September 30, 2023
Residential	​	2,081	​	1,978	​	2,080	​	2,042	​	1,514
Commercial	​	1,923	​	1,768	​	1,808	​	1,855	​	978
Industrial	​	2,221	​	2,108	​	2,072	​	2,188	​	1,411
Lighting	​	77	​	76	​	73	​	72	​	54
Total	​	6,302	​	5,930	​	6,033	​	6,157	​	3,957

Percentage Concentration within DEP’s Large Commercial and Industrial Customers

For the year ended December 31, 2022, the ten largest retail electric customers represented approximately 24% of DEP’s retail kilowatt-hour sales. The ten largest customers are in the commercial and industrial rate classes. There are no material concentrations in the residential class. As of the date of this prospectus, no customer or group of related customers will be obligated to pay more than 10% of the storm recovery charges.

Estimated Consumption and Estimate Variance

DEP’s calculation of the initial storm recovery charges and subsequent adjustments are based on electricity consumption estimates for each customer rate class. Pursuant to FERC guidance, each customer is included in a customer revenue class and billed in accordance with PSCSC-approved rate tariffs which correlate to the rate classes disclosed herein depending on the type of service provided. There is no direct correlation between revenue class and rate class, with the exception of residential customers who are in both the residential revenue class and residential rate class. Individual customers within each customer revenue class will be billed for storm recovery charges based on their consumption. DEP will use these estimates to calculate and set the storm recovery charges at levels to ensure revenues sufficient to pay interest on and principal of the bonds when due, to pay fees and expenses of servicing and retiring the bonds and to replenish the capital subaccount. With respect to the foregoing, interest is due on each payment date and principal is due upon the final maturity date. See “Description of the Storm Recovery Bonds — Events of Default; Rights Upon Event of Default” in this prospectus.

DEP conducts sales estimate variance analyses on a regular basis to monitor the accuracy of energy sales estimates against recorded weather-adjusted consumption (adjusted to remove the impacts of weather). The table below presents estimates of the billed retail energy sales in GWh for the years 2018 through 2022 compared to weather-adjusted consumption for such periods. Each estimate was made in the prior year.

57

Estimate Variances (by customer class)
Weather-Adjusted Consumption Variance for Ultimate Electric Delivery (GWh)

​	2018		2019		2020		2021		2022
Residential	​		​		​		​		​
Weather Adjusted	​	18,182	​	18,009	​	18,435	​	18,807	​	18,989
Forecast	​	17,878	​	18,016	​	18,092	​	18,303	​	18,777
Variance	​	1.7%	​	0.0%	​	1.9%	​	2.8%	​	1.1%
Commercial	​	​	​	​	​	​	​	​	​	​
Weather Adjusted	​	14,025	​	13,833	​	12,930	​	13,376	​	13,636
Forecast	​	14,072	​	14,007	​	13,963	​	13,728	​	13,931
Variance	​	-0.3%	​	-1.2%	​	-7.4%	​	-2.6%	​	-2.1%
Industrial	​	​	​	​	​	​	​	​	​	​
Weather Adjusted	​	11,872	​	11,882	​	11,521	​	11,268	​	12,034
Forecast	​	11,926	​	11,971	​	11,900	​	11,746	​	11,765
Variance	​	-0.5%	​	-0.7%	​	-3.2%	​	-4.1%	​	2.3%
Lighting	​	​	​	​	​	​	​	​	​	​
Weather Adjusted	​	77	​	77	​	77	​	140	​	25
Forecast	​	82	​	72	​	76	​	76	​	77
Variance	​	-7.1%	​	8.0%	​	1.4%	​	85.9%	​	-67.1%
Total	​	​	​	​	​	​	​	​	​	​
Weather Adjusted	​	44,155	​	43,801	​	42,963	​	43,592	​	42,964
Forecast	​	43,958	​	44,065	​	44,032	​	43,852	​	44,551
Variance	​	0.4%	​	-0.6%	​	-2.4%	​	-0.6%	​	0.3%

Actual consumption depends on several factors, including temperatures and economic conditions. For example, while DEP’s methodology for estimating consumption assumes normal weather conditions, abnormally hot summers or cold winters can add growth in electricity sales, while conversely, abnormally cool summers or warm winters can suppress growth in electricity consumption. Regional economic conditions can also affect consumption as retail customers curb electricity consumption to save money, businesses close and retail customers migrate to other service territories. Accordingly, variations in weather conditions will affect the accuracy of any estimate.

Billing and Collections

The storm recovery charges collected from DEP’s South Carolina customers’ electricity bills, without exception, must be remitted on a daily basis to the indenture trustee. Under the irrevocable financing order, the PSCSC, as directed by the Financing Act, will implement the true-up mechanism for making any adjustments that are necessary to correct for any overcollection or undercollection of the storm recovery charges or to otherwise ensure the timely payment of principal of and interest on the bonds when due and other financing costs and other required amounts and charges payable in connection with the bonds.

Credit Policy.   DEP is required to provide transmission and distribution service to all qualified customers. DEP verifies all customers to ensure validity and searches its customer information system to determine whether DEP has previously served the customer. Certain accounts are secured with deposits if warranted. The amount of the deposit reflects the estimated use over a two-month period, which is what the South Carolina Administrative Code allows DEP to collect.

Residential Accounts

First time customers establishing residential electric accounts are required to pay a deposit. As a courtesy, DEP may waive the residential deposit requirement if the customer’s overall external credit score

58

meets a specific score threshold. If a deposit is required, electric service is not connected until the deposit is paid. Returning residential customers and existing residential customers connecting additional residential accounts may be required to satisfy the deposit requirement if the credit score warrants. Internal credit is not considered for additional service or returning customers.

Residential customers are cross-referenced in the customer information system to search for unsatisfied debt. If a returning customer left unsatisfied debt, the unpaid bill must be satisfied prior to connecting service.

DEP offers a Guarantee Contract for residential accounts as a cash alternative, when a deposit is required. The applicant must secure a guarantor who has established service with DEP for greater than two years with no more than one delinquent payment within the immediate twelve months. The guarantor must pass the external credit score threshold to assume additional risk. The guarantor must provide a thirty-day written notice cease responsibility. This time period allows for securing a cash deposit (or another guarantor) for the applicant. In the event of default, the debt is reported on the consumer credit reports for both the applicant and guarantor (as co-signer).

Non-Residential Accounts

Non-residential accounts are required to pay a deposit per service point (meter). As a general rule, non-residential accounts require deposit coverage. First time customers establishing non-residential accounts must pay the deposit requirement prior to connecting service. Current non-residential customers connecting additional service points may be offered the option of billing the deposit if their credit record allows. Consumer credit is not used to determine credit worthiness on non-residential accounts. Existing residential customers turning on non-residential accounts cannot use their satisfactory payment record to reduce or eliminate the deposit requirement. Credit history for each is mutually exclusive. DEP’s Retail Tariff prohibits disconnecting service for a different class of service; therefore, unpaid non-residential balances cannot be transferred to active residential accounts for collection. On an exceptional basis, commercial credit reports may be utilized to aid in deposit decision. DEP uses Moody’s or S&P for publicly traded companies, audited financials for privately held companies, and Experian Intelliscores for small to mid-sized companies to evaluate credit history.

Non-residential deposits may be satisfied with cash or a cash alternative such as a surety bond or irrevocable letter of credit. Deposit coverage remains in force for the life of the account. Surety bonds and irrevocable letters of credit are issued by surety (insurance) companies and banks which have their own specific criteria defining credit worthiness. Customers applying for those forms of coverage must meet the third party’s qualifications. In the event of the cash alternative cancellation, DEP requires that the third-party give a minimum 60-day notification by certified, returned receipt mail. The minimum 60 days is required in order to secure another form of deposit prior to cancellation to limit risk. DEP’s process is to bill a cash deposit within 24 hours of receipt of cash alternative cancellation. Electric service may be interrupted if deposit is not secured.

Billing Process.   DEP bills its customers once every 26 to 34 days and distributes approximately an equal number of bills each business day. For the year ended December 31, 2022, DEP rendered an average of approximately 77,654 bills on each business day to its customers. For accounts with potential billing error exceptions, reports are generated for manual review. This review examines accounts that have abnormally high or low bills, potential meter-reading errors and possible meter malfunctions.

Approximately 137,776 residential customers, which constitute approximately 9% of DEP’s residential customers, choose to be billed using DEP’s budget billing program. For these customers, DEP determines and bills a monthly budget based on the last twelve months of billing history for each account. The budget amount is reviewed quarterly or annually based on customer preference and adjusted if customer usage has changed more than a predetermined amount. Overpayments or underpayments for actual consumption during the prior year are reconciled on each customer’s monthly bill.

Collection and Write-Off Policy.   DEP receives approximately 18% of its total bill payments via U.S. mail. Approximately 78% of bill payments are received via electronic payments. DEP receives the remainder of payments via third-party pay agents and field collection. DEP billings are initiated by the scheduled monthly meter reading. Each month, the electric meter is read to determine previous month’s usage. Daily

59

readings are downloaded into the billing system and a bill is generated giving the customer 25 calendar days to pay. If payment is not received and the service amount is $50 or greater, the account is deemed to be in collections. All residential (Email, SMS, automated call) and non-residential (email and automated call) customers are provided notice prior to discontinuance of service for non-payment. Customer accounts are considered delinquent if not paid within 30 days of invoicing. Following notice, residential customers are subject to disconnection after 90 days following invoicing. Non-residential customers are subject to disconnection after 65 days following invoicing.

If payment is not made, within 10 days from completed disconnect order, the billing system will automatically issue a move out order for account to be made final. If usage is registered on meter after move-out is complete, order is system generated to check for possible meter tampering.

With all final bills, the customer is given 25 calendar days to pay. If payment is not received by the final due date, the account is written off 45 days after the final bill due date. The effect of all write-offs and delinquencies are taken into account in the true-up adjustment process.

DEP may change its credit, billing, collections and termination/restoration of service policies and procedures from time to time. It is expected that any such changes would be designed to enhance DEP’s ability to bill and collect customer charges on a timely basis. Please read “Risk Factors — Servicing Forecasting Risks — Changes to billing, collection and posting practices might reduce the value of your investment in the bonds” in this prospectus.

Loss Experience.   The following table sets forth information relating to DEP’s annual net write-offs for all retail customers for the years 2019 to 2022 and the nine months ended September 30, 2023:

​	2019			2020			2021			2022			September 30, 2023
Billed Electric Revenues ($ in millions)	​	$	4,284	​	$	4,016	​	$	4,025	​	$	4,582	​	$	4,047
Net Write-offs ($ in millions)	​	$	11	​	$	8	​	$	12	​	$	35	​	$	37
Percentage of Billed Retail Revenues(1)	​	​	0.26%	​	​	0.20%	​	​	0.30%	​	​	0.76%	​	​	0.91%

(1)

Segregated numbers between North Carolina retail customers and South Carolina retail customers are unavailable.

From 2019 to current, DEP’s annual ratios of net write-offs to billed retail revenues have been between 0.19% and 0.91%. DEP is not aware of any material factors, other than the impact of COVID-19, a slow economy and higher energy prices that caused these annual ratios to vary.

DEP determines a customer’s account to be inactive on the date:

•

the customer gives notice requesting discontinuance of service;

•

a new customer applies for service at a location where the customer of record has not yet discontinued service; or

•

the customer’s service remains off after non-payment.

DEP’s policy is to write-off an inactive account to bad debt expense approximately 30 days after the date the account is final billed if payment has not been received. The effect of all write-offs and delinquencies are taken into account in the true-up mechanism.

Days Revenue Outstanding.   The following table sets forth information relating to the average number of days all retail customer electricity bills remained outstanding for the years 2019 through 2022 and the nine months ended September 30, 2023:

​	2019		2020		2021		2022		September 30, 2023
Average number of days outstanding	​	25	​	29	​	34	​	40	​	29

60

Delinquencies as a Percentage of Total Billed Revenues.   The following table sets forth information relating to the delinquencies as a percentage of total billed revenues for all classes of customers of DEP on December 31st of years 2019 to 2022 and on September 30, 2023. Payments are aged when the following month’s bill is rendered. This historical information is presented because DEP’s actual accounts receivable aging experience may affect the amounts charged-off, and consequently the total amounts remitted, that arise from the storm recovery charges.

​	December 31,								September 30, 2023
​	2019		2020		2021		2022
Total accounts receivable aging (% of total outstanding) After:	​	​	​	​	​	​	​	​	​	​
30 – 59 days	​	13.1	​	9.8	​	19.5	​	10.8	​	11.9
60 – 89 days	​	1.1	​	1.5	​	9.5	​	5.8	​	5.9
90+ days	​	0.5	​	1.1	​	16.5	​	18.9	​	10.8
Total	​	14.7	​	12.4	​	45.5	​	35.5	​	25.6

The accounts receivable aging experience for DEP has deteriorated since 2019. DEP is not aware of any material factors, other than other than the impact of COVID-19, a slow economy and higher energy prices that caused the accounts receivable aging experience to vary.

DEP Legal Proceedings

There are no legal or governmental proceedings pending against DEP, the issuing entity, the sponsor, seller, or servicer, or of which any property of the foregoing is subject, that is material to the holders of the storm recovery bonds.

Prior Storm Recovery Charge Experience, Sponsor Experience or Servicing Experience Relating to Storm Recovery Charges

DEP has prior experience as a securitization sponsor and the servicer for a series of storm recovery bonds issued in 2021 by Duke Energy Progress NC Storm Funding LLC. Furthermore, DEP is highly experienced in calculating and implementing rates and charges under various cost recovery riders and billing those amounts to customers. These riders include a coal inventory rider, excess deferred income tax rider, renewable energy rider, energy efficiency rider/demand side management rider, joint municipal power agency rider and competitive procurement of renewable energy rider. These riders are subject to regular and periodic true-up, including filing with and review and approval by the PSCSC. The calculation of storm recovery charges and related billings will follow essentially the same processes as the other cost recovery riders. Though these charges are not remitted to a subsidiary, the method of calculating, imposing and collecting is the same.

Though storm recovery property is not a receivable, DEP is currently the originator, seller and servicer under a financing arrangement involving the sale of accounts receivable from its customers. In its capacity as servicer, DEP has serviced the collections of receivables from its customers as well as managed the intercreditor arrangements among the different parties for that transaction.

In addition, DEP’s affiliates, Duke Energy Florida, LLC sponsored and is the servicer for a series of nuclear asset recovery bonds issued in 2016 by Duke Energy Florida Project Financing LLC and Duke Energy Carolinas, LLC, sponsored and is the servicer for a series of storm recovery bonds issued in 2021 by Duke Energy Carolinas NC Storm Funding LLC.

61

DESCRIPTION OF THE STORM RECOVERY BONDS

The following summary describes the material terms of the bonds, the indenture and the series supplement. The forms of the bond, the indenture and the series supplement have been filed as exhibits to the registration statement of which this prospectus forms a part. Please read “Where You Can Find More Information” in this prospectus.

We will issue the bonds and secure their payment under an indenture and the series supplement that we will enter into with U.S. Bank Trust Company, National Association, as indenture trustee, referred to in this prospectus as the “indenture trustee”. We will issue the bonds in minimum denominations of $2,000 and in integral multiples of $1,000 in excess thereof, except that we may issue one bond in a smaller denomination. The initial principal balance, scheduled final payment date, final maturity date and interest rate of the bonds are stated in the table below.

General

The bonds will be issued in authorized denominations of $2,000 and in integral multiples of $1,000 above that amount, except that one bond may be in a smaller denomination. We expect to issue the bonds in one series consisting of one tranche designation with an associated expected sinking fund schedule, but we may issue the bonds in a different number of tranches depending on pricing considerations. The principal amount, interest rate, scheduled payment date, and final maturity date are listed below. The scheduled final payment date for the bonds is the date by which we expect to pay in full all interest and principal. The final maturity date of the bonds is the legal maturity date. The failure to pay principal of the bonds by the scheduled final payment date will not be an event of default under the indenture and the series supplement. An event of default would occur if there is a failure to pay principal for the final legal maturity date. True-up adjustments will occur at least semi-annually or more frequently as necessary to maintain the expected sinking fund schedule.

Tranche	Expected Weighted Average Life (Years)	Principal Amount Offered			Scheduled Final Payment Date	Final Maturity Date	Interest Rate
​	​	​	$		​	​	​	%

All bonds will be payable solely from, and secured solely by, a pledge of and lien on the storm recovery property and the other collateral relating to the bonds as provided in the indenture and the series supplement. The bonds will be nonrecourse obligations, secured only by the collateral. See “Security for the Storm Recovery Bonds — Pledge of Collateral” in this prospectus. The bonds will not constitute a debt, liability or other obligation of, or interest in, DEP or any of its other affiliates (other than us).The bonds will not be insured or guaranteed by DEP, including in capacity as sponsor, depositor, seller or servicer, or by its parent, Duke Energy Corporation, any of their respective affiliates, the indenture trustee or any other person or entity. The bonds will not be a debt or general obligation of the State of South Carolina or any of its political subdivisions, agencies, or instrumentalities, nor are they special obligations or indebtedness of the State of South Carolina or an agency or political subdivision.

Interest Payments Generally

Beginning           , 20   , we are required to pay interest semi-annually on the bonds on each       and       (or, if any payment date is not a business day, the following business day) of each year. The record date (so long as the bonds are evidenced by book-entry) for any payment of interest on and principal of the bonds will be the business day immediately before the applicable payment date.

Interest on bonds will accrue from, and including, the issue date to, but excluding, the first payment date, and thereafter from and including the previous payment date to (but excluding) the applicable payment date until the bonds have been paid in full, at the interest rate indicated in the table on the cover page of this prospectus and in the table above. Each of those periods is referred to as an “interest accrual period”. We will calculate interest on the bonds on the basis of a 360-day year of twelve 30-day months.

62

On each payment date, we will pay interest on the bonds equal to the following amounts:

•

accrued interest on the principal balance of the bonds as of the close of business on the preceding semi-annual payment date, or the date of the original issuance of the bonds, after giving effect to all payments of principal made on the preceding semi-annual payment date, if any; and

•

if there has been a payment default, any interest payable but unpaid on any prior payment date, together with interest on such unpaid interest, if any.

On each payment date, we will pay interest on the bonds before we pay principal on the bonds.

Please read “Security for the Storm Recovery Bonds — How Funds in the Collection Account Will Be Allocated” in this prospectus.

Principal Payments

On each payment date, we will pay principal of the bonds to the bondholders equal to the sum, without duplication, of:

•

the unpaid principal amount of any bond whose final maturity date is on that payment date, plus

•

the unpaid principal amount of any bond upon acceleration following an event of default relating to the bonds, plus

•

any overdue payments of principal, plus

•

any unpaid and previously scheduled payments of principal, plus

•

the principal scheduled to be paid on any bond on that payment date,

but only to the extent funds are available in the collection account after payment of certain of our fees and expenses and after payment of interest as described above under “— Interest Payments Generally” in this prospectus. If the indenture trustee receives insufficient collections of storm recovery charges for any payment date, and amounts in the collection account (and the applicable subaccounts of the collection account) are not sufficient to make up the shortfall, principal of bonds may be payable later than expected. Please read “Risk Factors — Other Risks Associated with the Purchase of the Bonds” in this prospectus. To the extent funds are so available, we will make scheduled payments of principal of the bonds to the holders of the bonds, until the principal balance has been reduced to zero.

However, on any payment date, unless an event of default has occurred and is continuing and the bonds have been declared due and payable, the indenture trustee will make principal payments on the bonds only until the outstanding principal balances of the bonds have been reduced to the principal balances specified in the applicable expected sinking fund schedule for that payment date. Accordingly, principal of the bonds may be paid later, but not sooner, than reflected in the expected sinking fund schedule, except in the case of an acceleration. The entire unpaid principal balance of the bonds will be due and payable on the final maturity date. The failure to make a scheduled payment of principal on the bonds because there are not sufficient funds in the collection account does not constitute a default or an event of default under the indenture, except for the failure to pay in full the unpaid balance upon the final maturity date.

Unless the bonds have been accelerated following an event of default, any excess funds remaining in the collection account after payment of principal, interest, applicable fees and expenses and payments to the applicable subaccounts of the collection account will be retained in the excess funds subaccount until applied on a subsequent payment date.

If an event of default (other than a breach by the State of South Carolina of the state pledge) has occurred and is continuing, then the indenture trustee or the holders of not less than a majority in principal amount of the bonds then outstanding may declare the bonds to be immediately due and payable, in which event the entire unpaid principal amount of the bonds will become due and payable. Please read “— Events of Default; Rights Upon Event of Default” in this prospectus. However, the nature of our business will result in payment of principal upon an acceleration of the bonds being made as funds become available. Please read “Risk Factors — Risks Associated With the Unusual Nature of the Storm Recovery Property — Foreclosure of the indenture trustee’s lien on the storm recovery property for the bonds might

63

not be practical, and acceleration of the bonds before maturity might result in your investment being repaid either earlier or later than expected” and “Risk Factors — You may experience material payment delays as a result of limited sources of payment for the bonds and limited credit enhancements” in this prospectus.

If there is a shortfall in the amounts available to make principal payments on the bonds that are due and payable, including upon an acceleration following an event of default, the indenture trustee will distribute principal from the collection account based on the principal amount then due and payable on the payment date; and if there is a shortfall in the remaining amounts available to make principal payments on the bonds that are scheduled to be paid, the indenture trustee will distribute principal from the collection account based on the principal amount then scheduled to be paid on the payment date.

The expected sinking fund schedule below sets forth the corresponding principal payment that is scheduled to be made on each payment date for the bonds from the issuance date to the scheduled final payment date. Similarly, the expected sinking fund schedule below sets forth the principal balance that is scheduled to remain outstanding on each payment date for the bonds from the issuance date to the scheduled final payment date.

Expected Sinking Fund Schedule

Semi-Annual Payment Date	Tranche			Principal Payment
Closing Date	​	$		​

We cannot assure you that the principal balance of the bonds will be reduced at the rate indicated in the table above. The actual reduction in principal balances may occur more slowly. The actual reduction in principal balances will not occur more quickly than indicated in the above table, except in the case of acceleration due to an event of default under the indenture. The bonds will not be in default if principal is not paid as specified in the schedule above unless the principal is not paid in full on or before the final maturity date.

EXPECTED AMORTIZATION SCHEDULE
OUTSTANDING PRINCIPAL BALANCE

Semi-Annual Payment Date	Tranche			Balance
Issuance Date	​	$		​

On each payment date, the indenture trustee will make principal payments to the extent the principal balance of the bonds exceeds the amount indicated for that payment date in the table above and to the extent of funds available in the collection account after payment of certain of our fees and expenses and after payment of interest.

Distribution Following Acceleration

Upon an acceleration of the maturity of the bonds, the total outstanding principal balance of and interest accrued on the bonds will be payable. Although principal will be due and payable upon acceleration, the nature of our business will result in principal being paid as funds become available. Please read “Risk Factors — Risks Associated with the Unusual Nature of the Storm Recovery Property — Foreclosure of the indenture trustee’s lien on the storm recovery property for the bonds might not be practical, and acceleration of the bonds before maturity might result in your investment being repaid either earlier or later than expected” and “Risk Factors — You may experience material payment delays as a result of limited sources of payment for the bonds and limited credit enhancements” in this prospectus.

No Optional Redemption

We may not voluntarily redeem the bonds.

Payments on the Bonds

The indenture trustee will pay on each payment date to the holders of the bonds, to the extent of available funds in the collection account, all payments of principal and interest then due. The indenture

64

trustee will make each payment other than the final payment with respect to any bonds to the holders of record of the bonds on the record date for that payment date. The indenture trustee will make the final payment for the bonds, however, only upon presentation and surrender of the bonds at the office or agency of the indenture trustee specified in the notice given by the indenture trustee of the final payment. The indenture trustee will send notice of the final payment to the bondholders no later than five days prior to the final payment date, specifying the date set for the final payment and the amount of the payment.

The failure to pay accrued interest on any payment date (even if the failure is caused by a shortfall in storm recovery charges received) will result in an event of default for the bonds unless such failure is cured within five business days. Any interest not paid when due (plus interest on the defaulted interest at the applicable interest rate to the extent lawful) will be payable to the bondholders on a special record date. The special record date will be at least 15 business days prior to the date on which the indenture trustee is to make such special payment (a “special payment date”). We will fix any special record date and special payment date. At least 10 days before any special record date, the indenture trustee will send to each affected bondholder a notice that states the special record date, the special payment date and the amount of defaulted interest (plus interest on the defaulted interest) to be paid. Please read “— Events of Default; Rights Upon Event of Default” in this prospectus.

The entire unpaid principal amount of the bonds will be due and payable (i) on the final maturity date or (ii) upon a declaration of acceleration by the indenture trustee or the holders of a majority in principal amount of the bonds if an event of default under the indenture and the series supplement (other than an event of default arising from any act or failure to act by the State of South Carolina or any of its agencies (including the PSCSC), officers or employees that violates the state pledge or is not in accordance with the state pledge) occurs and is continuing.

However, the nature of our business will result in payment of principal upon an acceleration of the bonds being made as funds become available. Please read “Risk Factors — You might experience payment delay as a result of limited sources of payment for the bonds and limited credit enhancement” and “Risk Factors — Risk Associated with the Unusual Nature of the Storm Recovery Property — Foreclosure of the indenture trustee’s lien on the storm recovery property for the bonds might not be practical, and acceleration of the bonds before maturity might result in your investment being repaid either earlier or later than expected” in this prospectus.

At the time, if any, we issue the bonds in the form of definitive bonds and not to The Depository Trust Company, or “DTC”, or its nominee, the indenture trustee will make payments on a payment date or a special payment date by check sent to each holder of a definitive bond of record on the applicable record date at its address appearing on the register maintained with respect to the bonds. Upon written application by a holder of the bonds in physical form to the indenture trustee not later than the applicable record date, the indenture trustee will make payments by wire transfer to an account maintained by the payee.

If any special payment date or other date specified for any payments to bondholders is not a business day, the indenture trustee will make payments scheduled to be made on that special payment date or other date on the next business day, and no interest will accrue upon the payment during the intervening period.

Principal Payments on the Bonds

After paying fees, expenses and interest as described above, the indenture trustee will pay the principal due on each payment date to the holders of the bonds. The indenture trustee will not pay principal on a payment date if making the payment would reduce the principal balance of the bonds to an amount lower than the balance specified in the expected sinking fund schedule for the bonds on that payment date, except in the case of an acceleration of the bonds following an event of default.

Registration and Transfer of the Bonds

All bonds will be represented by one or more bonds registered in the name of Cede & Co., as nominee of DTC. There will be no service charge for any registration or transfer of the bonds, but the indenture trustee may require the owner to pay a sum sufficient to cover any tax or other governmental charge.

65

We will issue the bonds in the minimum initial denominations of $2,000 and in integral multiples of $1,000 above that amount, except that one bond may be in a smaller denomination.

The indenture trustee will make payments of interest and principal on each payment date to the bondholders in whose names the bonds were registered on the record date.

The Bonds Will Be Issued in Book-Entry Form

The bonds will be available to investors only in the form of book-entry bonds. We will initially register any book-entry bonds in the name of Cede & Co., the nominee of DTC. Bondholders may also hold bonds through Clearstream Banking, société anonyme, or “Clearstream”, or Euroclear Bank S.A./N.V., as operator of the Euroclear system, or “Euroclear”, in Europe or in any other manner described in the prospectus. You may hold your bonds directly with one of these systems if you are a participant in the system or indirectly through organizations that are participants.

The Role of DTC, Clearstream and Euroclear

Cede & Co., as nominee for DTC, will hold the global bond or global bonds representing the bonds. Clearstream and Euroclear will hold omnibus positions on behalf of the Clearstream customers and Euroclear participants, respectively, through customers’ securities accounts in Clearstream’s and Euroclear’s names on the books of their respective depositaries. These depositaries will, in turn, hold these positions in customers’ securities accounts in the depositaries’ names on the books of DTC.

The Function of DTC

DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Exchange Act. DTC holds and provides asset servicing for U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments that DTC’s participants (“direct participants”) deposit with DTC. DTC also facilitates the post-trade settlement among direct participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between direct participants’ accounts, thereby eliminating the need for physical movement of securities certificates. Direct participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. The users of its regulated subsidiaries own DTCC. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a direct participant, either directly or indirectly (“indirect participants”). The DTC rules applicable to its participants are on file with the SEC. More information about DTC can be found at www.dtcc.com and www.dtc.org.

The Function of Clearstream

Clearstream holds securities for its customers and facilitates the clearance and settlement of securities transactions between Clearstream customers through electronic book-entry changes in accounts of Clearstream customers, thereby eliminating the need for physical movement of securities. Transactions may be settled by Clearstream in any of various currencies, including United States dollars. Clearstream provides to its customers, among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Clearstream also deals with domestic securities markets in various countries through established depositary and custodial relationships. Clearstream is registered as a bank in Luxembourg and therefore is subject to regulation by the Luxembourg Commission de Surveillance du Secteur Financier, which supervises Luxembourg banks. Clearstream’s customers are world-wide financial institutions including underwriters, securities brokers and dealers, banks, trust companies and clearing corporations, among others, and may include the underwriters of the bonds. Clearstream’s U.S. customers are limited to securities brokers and dealers and banks. Clearstream

66

has customers located in various countries. Indirect access to Clearstream is also available to other institutions that clear through or maintain a custodial relationship with an account holder of Clearstream. Clearstream has established an electronic bridge with Euroclear to facilitate settlement of trades between Clearstream and Euroclear.

The Function of Euroclear

Euroclear holds securities and book-entry interests in securities for Euroclear participants and facilitates the clearance and settlement of securities transactions between Euroclear participants, and between Euroclear participants and participants of certain other securities intermediaries through simultaneous electronic book-entry delivery against payment, thereby eliminating the need for physical movement of securities and any risk from lack of simultaneous transfers of securities and cash. Such transactions may be settled in any of various currencies, including United States dollars. The Euroclear System includes various other services, including, among other things, safekeeping, administration, clearance and settlement, securities lending and borrowing and interfaces with domestic markets in several countries generally similar to the arrangements for cross-market transfers with DTC described below. The Euroclear System is operated by Euroclear Bank S.A./N.V. Euroclear participants include central banks and other banks, securities brokers and dealers and other professional financial intermediaries and may include the underwriters of the bonds. Indirect access to the Euroclear System is also available to other firms that clear through or maintain a custodial relationship with a Euroclear participant, either directly or indirectly.

Terms and Conditions of Euroclear

Securities clearance accounts and cash accounts with Euroclear are governed by the Terms and Conditions Governing Use of Euroclear and the related Operating Procedures of the Euroclear System, and applicable Belgian law (collectively, the “Euroclear terms and conditions”). These Euroclear terms and conditions govern transfers of securities and cash within the Euroclear System, withdrawals of securities and cash from the Euroclear System and receipts of payments with respect to securities in the Euroclear System. All securities in Euroclear are held on a fungible basis without attribution of specific securities to specific securities clearance accounts. Euroclear acts under the Euroclear terms and conditions only on behalf of Euroclear participants and has no record of or relationship with persons or entities holding through Euroclear participants.

The Rules for Transfers Among DTC, Clearstream or Euroclear Participants

Transfers between DTC participants will occur in accordance with DTC rules. Transfers between Clearstream customers or Euroclear participants will occur in the ordinary way in accordance with their applicable rules and operating procedures and will be settled using procedures applicable to conventional securities held in registered form.

Cross-market transfers between persons or entities holding directly or indirectly through DTC, on the one hand, and directly or indirectly through Clearstream customers or Euroclear participants, on the other, will be effected through DTC in accordance with DTC rules on behalf of the relevant European international clearing system by its depositary; however, those cross-market transactions will require delivery of instructions to the relevant European international clearing system by the counterparty in that system in accordance with its rules and procedures and within its established deadlines, which will be based on European time. The relevant European international clearing system will, if the transaction meets its settlement requirements, deliver instructions to its depositary to take action to effect final settlement on its behalf by delivering or receiving bonds in DTC and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Clearstream customers and Euroclear participants may not deliver instructions directly to Clearstream’s and Euroclear’s depositaries.

Because of time-zone differences, credits of securities in Clearstream or Euroclear as a result of a transaction with a participant will be made during the subsequent securities settlement processing, dated the business day following the DTC settlement date, and those credits or any transactions in those securities settled during that processing will be reported to the relevant Clearstream customer or Euroclear participant on that business day. Cash received in Clearstream or Euroclear as a result of sales of securities by or through a Clearstream customer or a Euroclear participant to a DTC participant will be received with value on the

67

DTC settlement date but will be available in the relevant Clearstream or Euroclear cash account only as of the business day following settlement in DTC.

DTC’s Nominee Will Be the Holder of the Bonds

Bondholders that are not participants or indirect participants but desire to purchase, sell or otherwise transfer ownership of, or other interest in, bonds may do so only through participants and indirect participants. In addition, bondholders will receive all payments of principal of and interest on the bonds from the indenture trustee through the participants, who in turn will receive them from DTC. Under a book-entry format, bondholders may experience some delay in their receipt of payments because payments will be forwarded by the indenture trustee to Cede & Co., as nominee for DTC. DTC will forward those payments to its participants, who thereafter will forward them to indirect participants or bondholders. It is anticipated that the only bondholder will be Cede & Co., as nominee of DTC. The indenture trustee will not recognize beneficial owners of interest in bonds held by DTC or its nominee as bondholders, as that term is used in the indenture, and such beneficial owners will be permitted to exercise the rights of bondholders only indirectly through the participants, who in turn will exercise the rights of bondholders through DTC.

Under the rules, regulations and procedures creating and affecting DTC and its operations, DTC is required to make book-entry transfers of book-entry certificates among participants on whose behalf it acts with respect to the bonds and is required to receive and transmit payments of principal of and interest on the bonds. Participants and indirect participants with whom bondholders have accounts with respect to the bonds similarly are required to make book-entry transfers and receive and transmit those payments on behalf of their respective bondholders. Accordingly, although bondholders will not possess bonds, bondholders will receive payments and will be able to transfer their interests.

Because DTC can act only on behalf of participants, who in turn act on behalf of indirect participants and certain banks, the ability of a bondholder to pledge bonds to persons or entities that do not participate in the DTC system, or otherwise take actions in respect of those bonds, may be limited due to the lack of a physical certificate for those bonds.

DTC has advised us that it will take any action permitted to be taken by a bondholder under the indenture only at the direction of one or more participants to whose account with DTC the bonds are credited. Additionally, DTC has advised us that it will take those actions with respect to specified percentages of the collateral amount only at the direction of and on behalf of participants whose holdings include interests that satisfy those specified percentages. DTC may take conflicting actions with respect to other interests to the extent that those actions are taken on behalf of participants whose holdings include those interests.

Except as required by law, none of any underwriter, the servicer, DEP, the indenture trustee, DEP SC Storm Funding or any other party will have any liability for any aspect of the records relating to or payments made on account of beneficial interests in the certificates held by Cede & Co., as nominee for DTC, or for maintaining, supervising or reviewing any records relating to such beneficial interests.

How Storm Recovery Bond Payments Will Be Credited by Clearstream and Euroclear

Payments with respect to bonds held through Clearstream or Euroclear will be credited to the cash accounts of Clearstream customers or Euroclear participants in accordance with the applicable system’s rules and operating procedures, to the extent received by its depositary. Those payments will be subject to tax reporting in accordance with relevant United States tax laws and regulations. Please read “Material U.S. Federal Income Tax Consequences” in this prospectus. Clearstream or the Euroclear Operator, as the case may be, will take any other action permitted to be taken by a bondholder under the indenture on behalf of a Clearstream customer or Euroclear participant only in accordance with its applicable rules and operating procedures and subject to its depositary’s ability to effect those actions on its behalf through DTC.

Although DTC, Clearstream and Euroclear have agreed to the foregoing procedures in order to facilitate transfers of the bonds among participants of DTC, Clearstream and Euroclear, they are under no obligation to perform or continue to perform those procedures, and those procedures may be discontinued at any time.

68

Definitive Bonds

The bonds will be issued in registered, certificated form to bondholders, or their nominees, rather than to DTC, or its nominee, only under the circumstances provided in the indenture, which will include: (i) DEP SC Storm Funding advising the indenture trustee in writing that DTC is no longer willing or able to properly discharge its responsibilities as nominee and depositary with respect to the book-entry bonds of that series and that we are unable to locate a qualified successor; (ii) our electing to terminate the book-entry system through DTC, with written notice to the indenture trustee; or (iii) after the occurrence of an event of default under the indenture, holders of bonds aggregating a majority of the aggregate outstanding principal amount of the bonds maintained as book-entry bonds advising us, the indenture trustee and DTC in writing that the continuation of a book-entry system through DTC (or a successor) is no longer in the best interests of those bondholders. Upon surrender by DTC of the definitive securities representing the bonds and instructions for registration, the indenture trustee will issue the bonds in the form of definitive bonds, and thereafter the indenture trustee will recognize the registered holders of the definitive bonds as bondholders under the indenture or series supplement. Upon issuance of definitive bonds, the bonds evidenced by such definitive bonds will be transferable directly (and not exclusively on a book-entry basis) and registered holders will deal directly with the indenture trustee with respect to transfers, notices and payments.

The indenture trustee will make payment of principal of and interest on the bonds directly to bondholders in accordance with the procedures set forth herein and in the indenture or series supplement. The indenture trustee will make interest payments and principal payments to bondholders in whose names the definitive bonds were registered at the close of business on the related record date. The indenture trustee will make payments by wire transfer to an account maintained by the bondholder in accordance with payment instructions delivered to the indenture trustee by such bondholders. The indenture trustee will make the final payment on any bond (whether definitive bonds or notes registered in the name of Cede & Co.), however, only upon presentation and surrender of the bond on the final payment date at the office or agency that is specified in the notice of final payment to bondholders. The indenture trustee will provide the notice to registered bondholders not later than the fifth day prior to the final payment date.

Definitive bonds will be transferable and exchangeable at the offices of the transfer agent and registrar, which initially will be the indenture trustee. There will be no service charge for any registration of transfer or exchange, but the transfer agent and registrar may require payment of a sum sufficient to cover any tax or other governmental charge imposed in connection therewith.

Conditions of Issuance of Additional Storm Recovery Bonds and Acquisition of Additional Storm Recovery Property

Our acquisition of storm recovery property and issuance of storm recovery bonds with respect thereto after the acquisition and issuance described in this prospectus is subject to the following conditions, among others:

•

DEP has existing authority under the Financing Order to issue additional storm recovery bonds or requests and receives another financing order from the PSCSC;

•

DEP must serve as initial servicer and administrator for such series of the additional storm recovery bonds and that the servicer and the administrator cannot be replaced without the requisite approval of the holders of all series of storm recovery bonds then-outstanding;

•

satisfaction of the rating agency condition;

•

each series of the additional storm recovery bonds has recourse only to the storm recovery property created by the additional financing order and funds on deposit in the trust accounts held by the indenture trustee with respect to that series, is nonrecourse to the storm recovery property securing the bonds and does not constitute a claim against us if revenue from the storm recovery charges and funds on deposit in the trust accounts with respect to that series are insufficient to pay such other series in full;

•

we have provided to the indenture trustee and the rating agencies then rating any series of our outstanding storm recovery bonds an opinion of a nationally recognized law firm experienced in

69

such matters to the effect that such issuance would not result in our substantive consolidation with DEP and that there has been a true sale of the storm recovery property for such series, subject to the customary exceptions, qualifications and assumptions contained therein;

•

transaction documentation for the other series provides that holders of the storm recovery bonds of the other series will not file or join in filing of any bankruptcy petition against us;

•

if holders of such other series are deemed to have any interest in any of our assets that are dedicated to the storm recovery bonds, holders of such other storm recovery bonds must agree that their interest in the assets that are dedicated to the bonds is subordinate to claims or rights of holders of the storm recovery bonds;

•

each series will have its own bank accounts or trust accounts;

•

funds for each series of storm recovery bonds shall be remitted in accordance with the related servicing agreement and related intercreditor agreement;

•

each series of additional storm recovery bonds will have its own indenture; and

•

each series of storm recovery bonds will bear its own indenture trustee fees, servicer fees and pro rata portion administration fees due under the administration agreement.

The sale of storm recovery property created by an additional financing order and issuance of additional storm recovery bonds with respect thereto after the acquisition and issuance described in this prospectus is subject to our satisfaction of the rating agency condition.

In addition, DEP has covenanted under the sale agreement that the execution of a joinder to an existing intercreditor agreement or a new intercreditor agreement, as circumstances require, is a condition precedent to the sale of property by DEP consisting of nonbypassable charges payable by customers comparable to the storm recovery property sold by DEP pursuant to the sale agreement. Please read “Security for the Storm Recovery Bonds — Issuance of Additional Storm Recovery Bonds” in this prospectus.

Allocations as Between Series

The financing order requires storm recovery charges to be shown as a separate line item on the periodic bills sent to customers and include both the rate and the amount of each of the storm recovery charges on each bill. Although each additional series of storm recovery bonds will have its own storm recovery property reflecting the right to impose, bill, charge, collect and receive a separate storm recovery charge, storm recovery charges relating to the bonds and storm recovery charges relating to any additional series of storm recovery bonds will be collected through single periodic bills to each customer. In the event a customer does not pay in full all amounts owed under any bill including storm recovery charges, the servicer is required to allocate partial payments ratably among the storm recovery charge, other similar securitization charges and DEP’s other billed amounts that is consistent with DEP’s current process for allocating partial payments. Please read “The Servicing Agreement — Remittances to Collection Account” in this prospectus.

Access of Bondholders

Upon written request of any bondholder or group of bondholders evidencing at least 10% of the aggregate outstanding principal amount of the bonds, the indenture trustee will afford the bondholder or bondholders making such request a copy of a current list of bondholders for purposes of communicating with other bondholders with respect to their rights under the indenture or the series supplement; provided, that the indenture trustee gives prior written notice to us of such request.

The indenture or the series supplement does not provide for any annual or other meetings of bondholders.

Reports to Bondholders

On or prior to each payment date, special payment date or any other date specified in the indenture or the series supplement for payments, the servicer will deliver to us and the indenture trustee, and the indenture trustee will make available on its website (currently located at http://pivot.usabank.com), a statement

70

prepared by the servicer with respect to the payment to be made on the payment date, special payment date or other date, as the case may be, setting forth the following information:

•

the amount of the payment to bondholders allocable to (i) principal and (ii) interest;

•

the aggregate outstanding principal balance of the bonds, before and after giving effect to payments allocated to principal reported immediately above;

•

the difference, if any, between the amount specified immediately above and the principal amount scheduled to be outstanding on that date according to the related expected sinking fund schedule;

•

any other transfers and payments to be made on such payment date, including amounts paid to the indenture trustee and the servicer;

•

the amounts on deposit in the capital subaccount and the excess funds subaccount, after giving effect to the foregoing payments and the required capital amount;

•

the amount paid or to be paid to the indenture trustee since the preceding payment date;

•

the amount paid or to be paid to the servicer since the preceding payment date; and

•

the amount of any other transfers and payments made pursuant to the indenture or the series supplement since the preceding payment date.

The reports will be available to bondholders upon request to the indenture trustee or the servicer. Such reports will not constitute financial statements prepared in accordance with generally accepted accounting principles. The financial information provided to bondholders will not be examined and reported upon by an independent public accountant. In addition, an independent public accountant will not provide an opinion on the financial information.

Within the prescribed period of time for tax reporting purposes after the end of each calendar year during the term of the bonds, the indenture trustee, so long as it is acting as paying agent and transfer agent and registrar for the bonds, will, upon written request by us or any bondholder, send to persons or entities that at any time during the calendar year were bondholders and received any payment on the bonds, a statement containing certain information for the purposes of the bondholder’s preparation of United States federal and state income tax returns.

Although neither we nor the depositor are an asset-backed issuer and the bonds are not asset-backed securities as defined by the SEC in governing regulations Item 1101 of Regulation AB, we intend to file with the SEC reports related to the bonds consistent with the disclosure and regulatory regime established by Regulation AB. Such reports will be filed under the name of DEP SC Storm Funding and will include reports on Form 10-D, Form 10-K and Form 8-K. Please read “The Servicing Agreement — Evidence as to Compliance” in this prospectus.

Website Disclosure

We will, to the extent permitted by and consistent with our and the sponsor’s legal obligations under applicable securities laws, cause to be posted on a website associated with us or our affiliates, currently located at www.duke-energy.com, periodic and current reports containing, to the extent such information is reasonably available to us:

•

a statement of storm recovery charge remittances made to the indenture trustee, balances in the collection account (and each subaccount thereof) and the balance of outstanding storm recovery bonds, in each case, as of the most recent payment date;

•

the semi-annual servicer’s certificates and monthly servicer’s certificates delivered for the bonds pursuant to the servicing agreement;

•

the text (or a link to the website where a reader can find the text) of each filing of a True-Up Adjustment and the results of each such filing;

•

changes in the long-term or short-term credit ratings of the servicer assigned by the rating agencies;

•

material legislative or regulatory developments directly relevant to the bonds; and

71

•

any reports and other information that are required to be filed with the SEC under the Exchange Act, including but not limited to periodic and current reports related to the bonds consistent with the disclosure and reporting regime established in Regulation AB.

Notwithstanding the foregoing, nothing herein shall preclude the issuing entity from voluntarily suspending or terminating its filing obligations as issuing entity with the SEC to the extent permitted by applicable law.

Information on DEP’s website or that can be accessed through the website is not incorporated into and does not constitute a part of the registration statement of which this prospectus forms a part.

DEP SC Storm Funding and the Indenture Trustee May Modify the Indenture and the Series Supplement

Modifications of the Indenture that Do Not Require Consent of Storm Recovery Bondholders

From time to time, and without the consent of the bondholders (but with prior notice to the indenture trustee and the rating agencies), we and the indenture trustee may enter into one or more agreements supplemental to the indenture and to the series supplement for various purposes described in the indenture and the series supplement, including:

•

to correct or amplify the description of any property, including the collateral subject to the indenture or the series supplement, or to better convey, assure and confirm to the indenture trustee the property subject to the indenture or the series supplement, or to add additional property;

•

to add to the covenants for the benefit of the bondholders and the indenture trustee, or surrender any right or power conferred to us by the indenture or the series supplement;

•

to convey, transfer, assign, mortgage or pledge any property to or with the indenture trustee;

•

to cure any ambiguity or correct or supplement any provision in the indenture, in the series supplement or in any supplemental indenture that may be inconsistent with any other provision in the indenture, in the series supplement or in any supplemental indenture or to make any other provisions with respect to matters or questions arising under the indenture, under the series supplement or under any supplemental indenture, provided however, that (i) such action will not, as evidenced by an officer’s certificate, adversely affect in any material respect the interests of the bondholders and (ii) the rating agency condition (as defined under “Glossary”) shall have been satisfied with respect thereto;

•

to evidence and provide for the acceptance of the appointment under the indenture of a successor trustee with respect to the bonds and to add or change any of the provisions of the indenture or the series supplement as shall be necessary to facilitate the administration of the trusts thereunder by more than one trustee;

•

to evidence the succession of another person or entity to us in accordance with the terms of the indenture and in the series supplement and the assumption by any such successor of the covenants in the indenture, in the series supplement and in the bonds;

•

to modify, eliminate or add to the provisions of the indenture or the series supplement to such extent as shall be necessary to effect qualification under the Trust Indenture Act of 1939, as amended, or the Trust Indenture Act, and to add provisions expressly required by the Trust Indenture Act;

•

to qualify the bonds for registration with a clearing agency;

•

to satisfy any rating agency requirements;

•

to set forth the terms of any series that has not therefore been authorized; or

•

to authorize the appointment of any fiduciary for the bonds required or advisable with the listing of the bonds on any stock exchange and otherwise amend the indenture or the series supplement to incorporate changes requested or required by any government authority, stock exchange authority or fiduciary in connection with such listing.

72

Modifications of the Indenture or the Series Supplement that Require the Approval of Storm Recovery Bondholders

We may, with the consent of bondholders holding a majority of the aggregate outstanding principal amount of the bonds to be affected (and with prior notice to the rating agencies), enter into one or more indentures supplemental to the indenture for the purpose of, among other things, adding any provisions to or changing in any manner or eliminating any of the provisions of the indenture or modifying in any manner the rights of bondholders. In determining whether a majority of holders have consented, bonds owned by us, DEP or any other of our affiliates shall be disregarded, except that, in determining whether the indenture trustee shall be protected in relying upon any such consent, the indenture trustee shall only be required to disregard any bonds it actually knows to be so owned. No supplement, however, may, without the consent of each bondholder affected thereby, take certain actions enumerated in the indenture or in the series supplement, including:

•

change the date of payment of any installment of principal of or premium, if any, or interest on any bond, or reduce in any manner the principal amount thereof, the interest rate thereon or the premium, if any, with respect thereto;

•

change the provisions of the indenture or series supplement and any applicable supplemental indenture relating to the application of collections on, or the proceeds of the sale of, the collateral to payment of principal of or premium, if any, or interest on the bonds, or change the place of payment where, or coin or currency in which, any bond or any interest thereon is payable;

•

reduce the percentage of the aggregate amount of the outstanding bonds, , the consent of the bondholders of which is required for any supplemental indenture, or the consent of the bondholders of which is required for any waiver of compliance with those provisions of the indenture or the series supplement specified therein or of defaults specified therein and their consequences provided for in the indenture;

•

reduce the percentage of the outstanding amount of the bonds the holders of which are required to direct the indenture trustee to direct us to sell or liquidate the collateral;

•

modify any of the provisions of the indenture or series supplement in a manner so as to affect the amount of any payment of interest, principal or premium, if any, payable on any bond on any payment date or change the expected sinking fund schedules or final maturity dates of any bonds;

•

decrease the required capital amount;

•

permit the creation of any lien ranking prior to or on a parity with the lien of the indenture with respect to any of the collateral for the bonds or, except as otherwise permitted or contemplated in the indenture or the series supplement, terminate the lien of the indenture on any property at any time subject thereto or deprive the holder of any bond of the security provided by the lien of the indenture;

•

cause any material adverse U.S. federal income tax consequence to the seller, us, our managers, the indenture trustee or the beneficial owners of the bonds;

•

modify the provisions of the indenture or the series supplement with respect to amendments to the indenture and to certain of the other basic documents requiring consent of bondholders except to increase any percentage specified; or

•

impair the right to institute suit for enforcement of the provisions of the indenture or the series supplement regarding payment or application of funds.

Promptly following the execution of any supplement to the indenture, the indenture trustee will furnish or make available electronically either a copy of such supplement or written notice of the substance of the supplement to each bondholder of a bond to which such supplement relates, and a copy of such supplement to each rating agency. No supplemental indenture will be effective unless the conditions set forth in the indenture, relating to the PSCSC’s right to object (or to issue a statement that it might object) to such supplemental indenture, have been met. Please read “— Procedure for Obtaining Consent or Deemed Consent of the PSCSC” below.

73

Notification of the Rating Agencies, the PSCSC, the Indenture Trustee and the Storm Recovery Bondholders of Any Modification

If we, DEP, the administrator or the servicer or any other party to the applicable agreement:

•

proposes to amend, modify, waive, supplement, terminate or surrender, or agree to any amendment, modification, waiver, supplement, termination or surrender of, the terms of the sale agreement, the administration agreement, the servicing agreement or the intercreditor agreement; or

•

waives timely performance or observance by DEP, the administrator or the servicer under the sale agreement, the administration agreement, the servicing agreement or the intercreditor agreement, in each case in a way that would materially and adversely affect the interests of bondholders, we must first notify the rating agencies and satisfy the rating agency condition. Upon receiving notification regarding satisfaction of the rating agency condition, we must thereafter notify the indenture trustee, the PSCSC and the bondholders in writing of the proposed amendment, modification, waiver, supplement, termination or surrender and whether the rating agency condition has been satisfied with respect thereto (or, upon our written request, the indenture trustee shall so notify the bondholders on our behalf). The indenture trustee will consent to this proposed amendment, modification, supplement, waiver, termination or surrender only if the rating agency condition has been satisfied and only with the written consent of the holders of a majority of the outstanding principal amount of the bonds materially and adversely affected thereby. In determining whether a majority of holders have consented, bonds owned by us, DEP or any other of our affiliates shall be disregarded, except that, in determining whether the indenture trustee shall be protected in relying upon any such consent, the indenture trustee shall only be required to disregard any bonds it actually knows to be so owned.

Modifications to the Sale Agreement, the Administration Agreement, the Servicing Agreement and Other Basic Documents

Except as set forth under “Notification of the Rating Agencies, the PSCSC, the Indenture Trustee and the Storm Recovery Bondholders of Any Modification”, the sale agreement, the administration agreement, the servicing agreement and the intercreditor agreement may be amended, so long as such amendment does not change the true-up mechanism and the rating agency condition is satisfied in connection therewith and the PSCSC condition has been satisfied, at any time and from time to time, without the consent of the bondholders, but with the acknowledgement of the indenture trustee upon receipt by the indenture trustee of an officer’s certificate evidencing satisfaction of such rating agency condition and an opinion of counsel of external counsel evidencing that such amendment is in accordance with the provisions of such basic document. The servicing agreement does not provide any bondholder or any other person or entity with any legal or equitable right, remedy or claim in the storm recovery property, the servicing agreement or any covenants, conditions or provisions contained therein.

Enforcement of the Sale Agreement, the Administration Agreement, the Servicing Agreement and Other Basic Documents

The indenture provides that we will take all lawful actions to enforce our rights under the sale agreement, the administration agreement, the servicing agreement, the intercreditor agreement and the other basic documents. The indenture also provides that, promptly following a default, we will take all lawful actions the indenture trustee may request to compel or secure the performance and observance by each of DEP, each other party under the intercreditor agreement, the administrator and the servicer of their respective obligations to us under or in connection with the sale agreement, the administration agreement, the servicing agreement and the intercreditor agreement. So long as no event of default occurs and is continuing, we may exercise any and all rights, remedies, powers and privileges lawfully available to us under or in connection with the sale agreement, the administration agreement, the servicing agreement and the intercreditor agreement provided that such action shall not adversely affect the interest of bondholders in any material respect. However, if we or the servicer propose to amend, modify, waive, supplement, terminate or surrender, or agree to any amendment, modification, supplement, termination, waiver or surrender of, the process for adjusting the storm recovery charges, we must notify the indenture trustee and the bondholders and, when required, the PSCSC in writing of this proposal (or, upon our written request, the indenture trustee shall so notify the

74

bondholders on our behalf). In addition, the indenture trustee may consent to this proposal only with the written consent of the holders of a majority of the principal amount of the outstanding bonds affected thereby and only if the rating agency condition is satisfied. In determining whether a majority of holders have consented, bonds owned by us, DEP or any other of our affiliates shall be disregarded, except that, in determining whether the indenture trustee shall be protected in relying upon any such consent, the indenture trustee shall only be required to disregard any bonds it actually knows to be so owned.

If an event of default occurs and is continuing, the indenture trustee may, and, at the written direction of the holders of a majority of the outstanding amount of bonds or the PSCSC, shall exercise all of our rights, remedies, powers, privileges and claims against DEP, the administrator and the servicer, under or in connection with the sale agreement, the administration agreement, the servicing agreement and the intercreditor agreement, including the right or power to take any action to compel or secure performance or observance by the seller, the administrator or the servicer of each of their obligations to DEP SC Storm Funding thereunder and to give any consent, request, notice, direction, approval, extension or waiver under the sale agreement, the servicing agreement, the intercreditor agreement and the administration agreement and any right of ours to take this action shall be suspended.

Procedure for Obtaining Consent or Deemed Consent of the PSCSC

The PSCSC must consent or acquiesce prior to the implementation of any amendment, modification or supplement to the indenture or the other basic documents, or any waiver of a default under any basic document if the resulting changes to a basic document by such amendment, modification or supplement or any such waiver would be expected to result in increased costs to the customers. Each of such basic documents sets forth procedures whereby we or DEP, as the case may be, may request such consent or acquiescence. The process, described below, for obtaining PSCSC consent or acquiescence is referred to as the PSCSC condition. The “PSCSC condition” will be satisfied if, after receiving notice of any such amendment or modification or requested waiver, the PSCSC consents in writing to such action or waiver. Subject to the state pledge not to impair the value of the storm recovery property, the PSCSC may object to any such amendment, modification or waiver in its sole discretion.

Covenants of DEP SC Storm Funding

We may not consolidate with or merge into any other entity, unless:

•

the entity formed by or surviving the consolidation or merger is organized under the laws of the United States or any state of the United States;

•

the entity expressly assumes, by a supplemental indenture, the performance or observance of all of our agreements and covenants under the indenture and the series supplement;

•

the entity expressly assumes all of our obligations and succeeds to all of our rights under the sale agreement, the servicing agreement and any other basic document to which we are a party;

•

no default, event of default or servicer default under the indenture or the series supplement has occurred and is continuing immediately after the merger or consolidation;

•

the rating agency condition will have been satisfied with respect to the merger or consolidation;

•

the issuing entity has delivered to DEP, the indenture trustee and the rating agencies an opinion or opinions of outside tax counsel (as selected by us, in form and substance reasonably satisfactory to DEP and the indenture trustee, and which may be based on a ruling from the IRS) to the effect that the consolidation or merger will not result in a material adverse federal or state income tax consequence to us, DEP, the indenture trustee or the then existing bondholders;

•

any action as is necessary to maintain the lien and the perfected security interest in the collateral created by the indenture has been taken, as evidenced by an opinion of counsel of our external counsel; and

•

the issuing entity has delivered to the indenture trustee an officer’s certificate and an opinion of counsel of our external counsel, each stating that all conditions precedent in the indenture and the series supplement provided for relating to the transaction have been complied with.

75

We may not sell, convey, exchange, transfer or otherwise dispose of any of our properties or assets included in the collateral to any person or entity, unless:

•

the person or entity acquiring the properties and assets:

•

is a United States citizen or an entity organized under the laws of the United States or any State;

•

expressly assumes, by a supplemental indenture, the performance or observance of all of our agreements and covenants under the indenture and series supplement;

•

expressly agrees by the supplemental indenture that all right, title and interest so conveyed or transferred will be subject and subordinate to the rights of bondholders;

•

unless otherwise specified in the supplemental indenture referred to above, expressly agrees to indemnify, defend and hold us and the indenture trustee harmless against and from any loss, liability or expense arising under or related to the indenture or the series supplement and the bonds;

•

expressly agrees by means of the supplemental indenture that the person or entity (or if a group of persons or entities, then one specified person or entity) will make all filings with the SEC (and any other appropriate person or entity) required by the Exchange Act in connection with the storm recovery bond collateral and the bonds; and

•

if such sale, conveyance, exchange, transfer or disposal relates to our rights and obligations under the sale agreement or the servicing agreement, such person or entity assumes all obligations and succeeds to all of our rights under the sale agreement and the servicing agreement, as applicable;

•

no default, event of default or servicer default under the indenture or the series supplement has occurred and is continuing immediately after the transactions;

•

the rating agency condition has been satisfied with respect to such transaction;

•

we have delivered to DEP, the indenture trustee and the rating agencies an opinion or opinions of outside tax counsel (as selected by us, in form and substance reasonably satisfactory to DEP, and which may be based on a ruling from the IRS) to the effect that the disposition will not result in a material adverse federal or state income tax consequence to us, DEP, the indenture trustee or the then existing bondholders;

•

any action as is necessary to maintain the lien and the perfected security interest in the collateral created by the indenture has been taken as evidenced by an opinion of counsel of external counsel; and

•

we have delivered to the indenture trustee an officer’s certificate and an opinion of counsel of our external counsel, each stating that the conveyance or transfer complies with the indenture and all conditions precedent therein provided for relating to the transaction have been complied with.

We will not, among other things, for so long as any bonds are outstanding:

•

except as expressly permitted by the indenture and the other basic documents, or in connection with the issuance of any additional storm recovery bonds, sell, transfer, exchange or otherwise dispose of any of our assets unless in accordance with the remedies provisions of the indenture or the series supplement;

•

claim any credit on, or make any deduction from the principal or premium, if any, or interest payable in respect of, the bonds (other than amounts properly withheld from such payments under the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code, the Treasury regulations promulgated thereunder or other tax laws) or assert any claim against any present or former bondholder by reason of the payment of the taxes levied or assessed upon any part of the collateral;

•

terminate our existence, or dissolve or liquidate in whole or in part;

•

permit the validity or effectiveness of the indenture or the other basic documents to be impaired;

76

•

permit the lien of the indenture to be amended, hypothecated, subordinated, terminated or discharged or permit any person or entity to be released from any covenants or obligations with respect to the bonds except as may be expressly permitted by the indenture or the series supplement;

•

permit any lien, charge, pledge, claim, security interest, mortgage or other encumbrance, other than the lien and security interest granted under the indenture, to be created on or extend to or otherwise arise upon or burden the collateral or any part thereof or any interest therein or the proceeds thereof (other than tax liens arising by operation of law with respect to amounts not yet due);

•

permit the lien granted under the indenture not to constitute a valid first priority perfected security interest in the collateral;

•

elect to be classified as an association taxable as a corporation for U.S. federal income tax purposes, file any tax return or take any other action inconsistent with our treatment for U.S. federal income tax purposes and, to the extent consistent with applicable state tax law, state income and franchise tax purposes, as a disregarded entity that is not separate from our sole member;

•

change our name, identity or structure or the location of its chief executive office unless, at least ten business days prior to the effective date of any such change, we deliver to the indenture trustee (with copies to each rating agency) such documents, instruments or agreements, executed by us, as are necessary to reflect such change and to continue the perfection of the security interest of the indenture or the series supplement;

•

except to the extent permitted by applicable law, voluntarily suspend or terminate our SEC filing obligations;

•

take any action that is subject to the rating agency condition without satisfying the rating agency condition; or

•

issue any debt obligations other than the storm recovery bonds permitted by the indenture.

The issuing entity may not engage in any business other than acquiring, owning or administering storm recovery property and other collateral and issuing the bonds or additional storm recovery bonds under the financing order or additional storm recovery bonds pursuant to an additional financing order issued by the PSCSC pursuant to the Financing Act.

The issuing entity will not issue, incur, assume, guarantee or otherwise become liable for any other indebtedness except for one or more series of storm recovery bonds. Also, we will not, except as contemplated by the bonds and the basic documents, make any loan or advance or credit to, or guarantee, endorse or otherwise become contingently liable, directly or indirectly, in connection with the obligations, stocks or dividends of, or own, purchase, repurchase or acquire (or agree contingently to do so) any stock, obligations, assets or securities of, or any other interest in, or make any capital contribution to, any other person or entity. We will not, except for the acquisition of storm recovery property as contemplated by the bonds and the basic documents, make any expenditure (by long-term or operating lease or otherwise) for capital assets (either realty or personalty).

The issuing entity will not, directly or indirectly, make payments to or distributions, dividends or redemptions to any holder of its equity interest in respect of that interest except in accordance with the indenture, the series supplement and other basic documents.

The issuing entity will cause the servicer to deliver to the indenture trustee the annual accountant’s certificates, compliance certificates, reports regarding distributions and statements to bondholders required by the servicing agreement.

Events of Default; Rights Upon Event of Default

An event of default with respect to the bonds is defined in the indenture as any one of the following events:

•

a default for five business days in the payment when due of any interest on any bond (whether such failure to pay interest is caused by a shortfall in storm recovery charges received or otherwise);

77

•

a default in the payment of the then unpaid principal on the final maturity date;

•

a default in the observance or performance of any of our covenants or agreements made in the indenture or the series supplement (other than defaults described above) and the continuation of any default for a period of 30 days after the earlier of (i) the date that written notice of the default is given to us by the indenture trustee or to us and the indenture trustee by the holders of at least 25% in principal amount of the bonds then outstanding or (ii) the date that we had actual knowledge of the default;

•

any representation or warranty made by us in the indenture, the series supplement or in any certificate or other writing delivered pursuant to the indenture or the series supplement or in connection with the indenture or series supplement having been incorrect in any material respect as of the time made, and such breach not having been cured within 30 days after the earlier of (i) the date that notice of the breach is given by registered or certified mail to us by the indenture trustee or to us and the indenture trustee by the holders of at least 25% in principal amount of the bonds then outstanding or (ii) the date that we had actual knowledge of the default;

•

certain events of bankruptcy, insolvency, receivership or liquidation; or

•

a breach by the State of South Carolina or any of its agencies (including the PSCSC), officers or employees that violates the pledge of the State of South Carolina or is not in accordance with the pledge of the State of South Carolina.

If an event of default (other than as specified in the last bullet point above) should occur and be continuing with respect to the bonds, the indenture trustee or holders of a majority in principal amount of the bonds then outstanding may declare the unpaid principal of the bonds and all accrued and unpaid interest thereon to be immediately due and payable. However, the nature of our business will result in payment of principal upon an acceleration of the bonds being made as funds become available. Please read “Risk Factors — Risk Associated with the Unusual Nature of the Storm Recovery Property — Foreclosure of the indenture trustee’s lien on the storm recovery property for the bonds might not be practical, and acceleration of the bonds before maturity might result in your investment being repaid either earlier or later than expected” and “Risk Factors — You might experience material payment delays as a result of limited sources of payment for the bonds and limited credit enhancement”. The holders of a majority in principal amount of the bonds may rescind and annul that declaration and its consequences so long as we deposit with the indenture trustee any past due amounts of all storm recovery bonds and expenses of the indenture trustee and all events of default of all storm recovery bonds, other than the nonpayment caused by acceleration, have been cured. Additionally, the indenture trustee may exercise all of our rights, remedies, powers, privileges and claims against the seller or the servicer or the administrator under or in connection with the sale agreement, the servicing agreement and the administration agreement. If an event of default as specified in the last bullet above has occurred, the servicer will be obligated under the servicing agreement to institute (and the indenture trustee, for the benefit of the bondholders, will be entitled and empowered to institute) any suits, actions or proceedings at law, in equity or otherwise, to enforce the pledge of the State of South Carolina and to collect any monetary damages as a result of a breach thereof, and each of the seller, the servicer and the indenture trustee may prosecute any suit, action or proceeding to final judgment or decree. The servicer is obligated to institute and maintain such action or proceedings only if it is being reimbursed on a current basis for its costs and expenses and is not will be required to advance its own funds in order to bring any suits, actions or proceedings and, for so long as the legal actions were pending, the servicer will be required, unless otherwise prohibited by applicable law or court or regulatory order in effect at that time, to bill, collect and post the storm recovery charges, perform adjustments and discharge its obligations under the servicing agreement. The indenture trustee will not be deemed to have knowledge of any event of default or a breach of representation or warranty unless a responsible officer of the indenture trustee has actual knowledge of the default or the indenture trustee has received written notice of the default in accordance with the indenture.

If an event of default (other than a breach by the State of South Carolina or any of its agencies of the pledge of the State of South Carolina as specified in the last bullet point above) shall have occurred and be continuing, the indenture trustee may, at the written direction of the holders of a majority in principal amount of the bonds then outstanding, either sell the storm recovery property or elect to have us maintain possession

78

of all or a portion of such storm recovery property and continue to apply storm recovery charge collections as if there had been no declaration of acceleration. There is likely to be a limited market, if any, for the storm recovery property following a foreclosure, in light of the event of default, the unique nature of the storm recovery property as an asset and other factors discussed in this prospectus. In addition, the indenture trustee is prohibited from selling the storm recovery property following an event of default, other than a default in the payment of any principal or a default for five business days or more in the payment of any interest on any bond, unless:

•

the holders of all the outstanding bonds consent to the sale;

•

the proceeds of the sale are sufficient to pay in full the principal of and the accrued interest on the outstanding bonds; or

•

the indenture trustee determines that the proceeds of the collateral would not be sufficient on an ongoing basis to make all payments on the bonds as those payments would have become due if the bonds had not been declared due and payable, and the indenture trustee obtains the consent of the holders of at least two-thirds of the aggregate outstanding amount of the bonds.

Subject to the provisions of the indenture and the series supplement relating to the duties of the indenture trustee, if an event of default occurs and is continuing, the indenture trustee will be under no obligation to exercise any of the rights or powers under the bonds at the request or direction of any of the holders of bonds if the indenture trustee believes in its discretion it will not be adequately indemnified against the costs, expenses and liabilities that might be incurred by it in complying with the request. Subject to the provisions for indemnification and certain limitations contained in the indenture or in the series supplement:

•

the holders of a majority in principal amount of the outstanding bonds will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the indenture trustee; and

•

prior to the acceleration of the bonds, the holders of a majority in principal amount of the bonds then outstanding may, in certain cases, waive any default with respect thereto, except a default in the payment of principal or interest or a default in respect of a covenant or provision of the indenture or the series supplement that cannot be modified without the consent of all of the holders of the outstanding bonds affected thereby.

No holder of any bond will have the right to institute any proceeding, to avail itself of any remedies provided in the Financing Act or of the right to foreclose on the collateral, or otherwise to enforce the lien and security interest on the collateral or to seek the appointment of a receiver or indenture trustee, or for any other remedy under the indenture or the series supplement, unless:

•

the holder previously has given to the indenture trustee written notice of a continuing event of default;

•

the holders of a majority in principal amount of the outstanding bonds have made written request of the indenture trustee to institute the proceeding in its own name as indenture trustee;

•

the holder or holders have offered the indenture trustee satisfactory indemnity;

•

the indenture trustee has for 60 days failed to institute the proceeding; and

•

no direction inconsistent with the written request has been given to the indenture trustee during the 60-day period by the holders of a majority in principal amount of the outstanding bonds.

In addition, the indenture trustee and the servicer will covenant and each bondholder will be deemed to covenant that it will not, prior to the date that is one year and one day after the termination of the indenture or the series supplement, institute against us or against our managers or our member or members any bankruptcy, reorganization or other proceeding under any federal or state bankruptcy or similar law, subject to the right of a circuit court of the State of South Carolina to order sequestration and payment of revenues arising with respect to the storm recovery property.

Neither any manager nor the indenture trustee in its individual capacity, nor any holder of any ownership interest in us, nor any of their respective owners, beneficiaries, agents, officers, directors,

79

employees, successors or assigns will, in the absence of an express agreement to the contrary, be personally liable for the payment of the principal of or interest on the bonds or for our agreements contained in the indenture or the series supplement.

Actions by Bondholders

Subject to certain exceptions, the holders of a majority of the aggregate outstanding amount of the bonds issued under the indenture or the series supplement will have the right to direct the time, method and place of (i) conducting any proceeding for any remedy available to the indenture trustee and (ii) exercising any trust or power conferred on the indenture trustee under the indenture or under the series supplement; provided, that:

•

the direction is not in conflict with any rule of law or with the indenture or the series supplement and would not involve the indenture trustee in personal liability or expense;

•

subject to any other conditions specified in the indenture or the series supplement, any direction to the indenture trustee to sell or liquidate the collateral shall be by holders of 100% of the bonds;

•

if the conditions specified in the indenture have been satisfied and the indenture trustee elects to retain the collateral in accordance with the indenture, then any direction to the indenture trustee by less than 100% of bondholders to sell or liquidate the collateral will be of no force and effect; and

•

the indenture trustee may take any other action deemed proper by the indenture trustee that is not inconsistent with the direction.

If any circumstance under which the indenture trustee is required to seek instructions from the holders of the bonds with respect to any action or vote, the indenture trustee will take the action or vote for or against any proposal in proportion to the principal amount, of bonds taking the corresponding position. Notwithstanding the foregoing, the indenture allows each bondholder to institute suit for the enforcement of payment of (i) the interest, if any, on its bonds that remains unpaid as of the applicable due date and (ii) the unpaid principal, if any, of its bonds on the final maturity date.

Annual Report of Indenture Trustee

If required by the Trust Indenture Act, the indenture trustee will be required to send each year to all bondholders a brief report, commencing in March 31, 2025. The report must state, among other things:

•

any change in the indenture trustee’s eligibility and qualification to continue as the indenture trustee under the indenture;

•

any amounts advanced by it under the indenture or the series supplement;

•

any change in the amount, interest rate and maturity date of specific indebtedness owing by us to the indenture trustee in the indenture trustee’s individual capacity;

•

any change in the property and funds physically held pursuant to the indenture or the series supplement; and

•

any action taken by it that materially affects the bonds and that has not been previously reported.

Annual Compliance Statement

We will file annually, with the indenture trustee, the PSCSC and the rating agencies, a written statement as to whether we have fulfilled our obligations under the indenture.

Satisfaction and Discharge of Indenture

The indenture will cease to be of further effect with respect to the bonds and the indenture trustee, on our written demand and at its expense, will execute instruments acknowledging satisfaction and discharge of the indenture with respect to the bonds, when:

•

either all bonds that have already been authenticated or delivered, with certain exceptions set forth in the indenture, have been delivered to the indenture trustee for cancellation or either the scheduled

80

final payment date for bonds not delivered for cancellation has occurred or will occur within one year and we have irrevocably deposited or cause to be deposited in trust with the indenture trustee cash and/or U.S. government obligations that through the payments of principal and interest in accordance with their terms are in an amount sufficient to pay principal, interest and premiums, if any, on the bonds and ongoing other financing costs and all other sums payable by us with respect to the bonds when scheduled to be paid and to discharge the entire indebtedness on such bonds when due;

•

we have paid all other sums payable by us with respect to the bonds under the indenture; and

•

we have delivered to the indenture trustee an officer’s certificate, an opinion of its external counsel and, if required by the Trust Indenture Act or the indenture trustee, a certificate from a firm of independent registered public accountants, each stating that there has been compliance with the conditions precedent in the indenture relating to the satisfaction and discharge of the indenture.

DEP SC Storm Funding’s Legal and Covenant Defeasance Options

We may, at any time, terminate all of our obligations under the indenture and the series supplement, referred to herein as the “legal defeasance option”, or terminate our obligations to comply with some of the covenants in the indenture and the series supplement, including some of the covenants described under “— Covenants of DEP SC Storm Funding”, referred to herein as the “covenant defeasance option”.

We may exercise the legal defeasance option of the bonds notwithstanding our prior exercise of the covenant defeasance option. If we exercise the legal defeasance option, the bonds will be entitled to payment only from the funds or other obligations set aside under the indenture or the series supplement for payment thereof as described below. The bonds will not be subject to payment through redemption or acceleration prior to the scheduled final payment date or redemption date, as applicable. If we exercise the covenant defeasance option, the maturity of the bonds may not be accelerated because of an event of default relating to a default in the observance or performance of any of our covenants or agreements made in the indenture or in the series supplement.

The indenture provides that we may exercise our legal defeasance option or our covenant defeasance option of bonds only if:

•

we irrevocably deposit or cause to be irrevocably deposited in trust with the indenture trustee cash and/or U.S. government obligations that through the payments of principal and interest in accordance with their terms are in an amount sufficient without reinvestment, to pay principal, interest and premium, if any, on the bonds and ongoing financing costs and any other sums payable under the indenture or the series supplement with respect to the bonds when scheduled to be paid and to discharge the entire indebtedness on the bonds when due;

•

we deliver to the indenture trustee a certificate from a nationally recognized firm of independent registered public accountants expressing its opinion that the payments of principal of and interest on the U.S. government obligations when due and without reinvestment plus any deposited cash will provide cash at times and in sufficient amounts to pay in respect of the bonds:

•

principal in accordance with the expected sinking fund schedule therefore;

•

interest when due; and

•

ongoing financing costs and all other sums payable under the indenture or the series supplement with respect to the bonds;

•

in the case of the legal defeasance option, 95 days after the deposit is made and during the 95-day period no default relating to events of our bankruptcy, insolvency, receivership or liquidation occurs and is continuing at the end of the period;

•

no default has occurred and is continuing on the day of this deposit and after giving effect thereto;

•

in the case of the legal defeasance option, we deliver to the indenture trustee an opinion of its external counsel stating that it has received from, or there has been published by, the IRS a ruling, or since the date of execution of the indenture and the series supplement, there has been a change in

81

the applicable U.S. federal income tax law, and in either case confirming that the holders of the bonds will not recognize income, gain or loss for U.S. federal income tax purposes as a result of the exercise of the legal defeasance option and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if the legal defeasance had not occurred;

•

in the case of the covenant defeasance option, we deliver to the indenture trustee an opinion of our external counsel to the effect that the holders of the bonds will not recognize income, gain or loss for U.S. federal income tax purposes as a result of the exercise of the covenant defeasance option and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if the covenant defeasance had not occurred;

•

we deliver to the indenture trustee a certificate of one of our officers and an opinion of our counsel, each stating that the amendment is authorized and permitted and that all conditions precedent to the legal defeasance option or the covenant defeasance option, as applicable, have been complied with as required by the indenture or the series supplement;

•

we deliver to the indenture trustee an opinion of our external counsel to the effect that: (i) in a case under the Bankruptcy Code in which DEP (or any of its affiliates, other than us) is the debtor, the court would hold that the deposited cash or U.S. government obligations would not be in the bankruptcy estate of DEP (or any of its affiliates, other than us, that deposited the cash or U.S. government obligations); and (ii) in the event DEP (or any of its affiliates, other than us, that deposited the cash or U.S. government obligations) were to be a debtor in a case under the Bankruptcy Code, the court would not disregard the separate legal existence of DEP (or any of its affiliates, other than us, that deposited the cash or U.S. government obligations) and us so as to order substantive consolidation under the Bankruptcy Code of our assets and liabilities with the assets and liabilities of DEP or such other affiliate; and

•

the rating agency condition has been satisfied with respect to the exercise of any legal defeasance option or covenant defeasance option.

No Recourse to Others

No recourse may be taken directly or indirectly, by the bondholders with respect to our obligations or the indenture trustee’s obligations on the bonds, under the indenture or any supplement thereto or any certificate or other writing delivered in connection therewith, against (i) DEP SC Storm Funding, other than from the storm recovery bond collateral, (ii) any owner of a beneficial interest in DEP SC Storm Funding (including DEP) or (iii) any shareholder, partner, owner, beneficiary, agent, officer, director, employee or agent of the indenture trustee, the managers or any owner of a beneficial interest in DEP SC Storm Funding (including DEP) in its individual capacity, or of any successors or assigns or any of them in their respective individual or corporate capacities, except as any such person or entity may have expressly agreed. Each holder by accepting a bond specifically confirms the nonrecourse nature of these obligations and waives and releases all such liability. The waiver and release are part of the consideration for issuance of the bonds.

Notwithstanding any provision of the indenture or the series supplement to the contrary, bondholders shall look only to the storm recovery bond collateral with respect to any amounts due to the bondholders under the indenture and the bonds, and, in the event such collateral is insufficient to pay in full the amounts owed on the bonds, shall have no recourse against us in respect of such insufficiency. Each bondholder by accepting a bond specifically confirms the nonrecourse nature of these obligations and waives and releases all such liability. The waiver and release are part of consideration for issuance of the bonds.

Certain Regulatory Provisions

No Credit Risk Retention Expected.   Section 941 of the Dodd-Frank Wall Street Reform and Consumer Protection Act added section 15G to the Exchange Act, generally requiring sponsors of asset-backed securities to retain not less than 5% of the credit risk of the assets collateralizing the asset-backed securities. The final common rule adopted by the SEC and other U.S. agencies on October 22, 2014 provides that this 5% risk retention requirement does not apply to qualifying electric utility sponsored ratepayer obligation charge bond transactions. We and DEP believe that the storm recovery bonds qualify for this exception,

82

and as a result, the storm recovery bonds will not be subject to the general 5% risk retention requirement of section 15G of the Exchange Act.

We and DEP believe that the bonds will also not be subject to the 5% risk retention requirement imposed by the European Securitisation Regulation or the UK Securitisation Regulation. For the purposes of the EU Securitisation Rules and the UK Securitisation Rules, we and DEP believe the issue of the bonds does not fall within the definition of a “securitisation” as the credit risk associated with exposure is not tranched. We and DEP believe, therefore, that neither the EU Securitisation Rules nor the UK Securitisation Rules apply to the issue of the bonds.

If a European regulator or a UK regulator should decide that the issue of the bonds is a “securitisation” for the purposes of the EU Securitisation Rules or the UK Securitisaton Rules then failure to comply with one or more of the requirements set out in such rules might result in the imposition of a penal capital charge with respect to the investment made in the securitization by a credit institution and investment firm regulated in a Member State of the European Economic Area or, as the case may be, the United Kingdom and in each case its consolidated group affiliates.

None of DEP, us, any underwriter or any other party to the transaction of which this offering is a part intends to retain a material net economic interest in the transaction of which this offering is a part for the purposes of the risk retention requirements discussed in above or take any other action that may be required by investors for the purposes of their compliance with these requirements.

83

THE INDENTURE TRUSTEE

U.S. Bank Trust Company, National Association, a national banking association (“U.S. Bank Trust Co.”), will be the “indenture trustee”, and will act as the paying agent and registrar for the storm recovery bonds. U.S. Bank National Association (“U.S. Bank N.A.”) made a strategic decision to reposition its corporate trust business by transferring substantially all of its corporate trust business to its affiliate, U.S. Bank Trust Co., a non-depository trust company (U.S. Bank N.A. and U.S. Bank Trust Co. are collectively referred to herein as “U.S. Bank”). Upon U.S. Bank Trust Co.’s succession to the business of U.S. Bank N.A., it became a wholly owned subsidiary of U.S. Bank N.A. The indenture trustee will maintain the accounts of the issuing entity in the name of the indenture trustee at U.S. Bank N.A.

U.S. Bancorp, with total assets exceeding $688 billion as of September 30, 2023, is the parent company of U.S. Bank N.A., the fifth largest commercial bank in the United States. As of September 30, 2023, U.S. Bancorp operated over 2,200 branch offices in 26 states. A network of specialized U.S. Bancorp offices across the nation provides a comprehensive line of banking, brokerage, insurance, investment, mortgage, trust and payment services products to consumers, businesses, and institutions.

U.S. Bank has one of the largest corporate trust businesses in the country with office locations in 48 domestic and 2 international cities. The indenture will be administered from U.S. Bank’s corporate trust office located at 190 South LaSalle Street, 7th Floor, Chicago, Illinois 60603.

U.S. Bank has provided corporate trust services since 1924. As of September 30, 2023, U.S. Bank was acting as trustee with respect to over 127,000 issuances of securities with an aggregate outstanding principal balance of over $5.8 trillion. This portfolio includes corporate and municipal bonds, mortgage-backed and asset-backed securities and collateralized debt obligations.

The indenture trustee shall make each monthly statement available to the bondholders via the indenture trustee’s internet website at https://pivot.usbank.com. Bondholders with questions may direct them to the indenture trustee’s bondholder services group at (800) 934-6802.

U.S. Bank serves or has served as indenture trustee, paying agent and registrar on several issues of utility rate-payer backed securities.

U.S. Bank N.A. and other large financial institutions have been sued in their capacity as trustee or successor trustee for certain residential mortgage-backed securities (“RMBS”) trusts. The complaints, primarily filed by investors or investor groups against U.S. Bank N.A. and similar institutions, allege the trustees caused losses to investors as a result of alleged failures by the sponsors, mortgage loan sellers and servicers to comply with the governing agreements for these RMBS trusts. Plaintiffs generally assert causes of action based upon the trustees’ purported failures to enforce repurchase obligations of mortgage loan sellers for alleged breaches of representations and warranties, notify securityholders of purported events of default allegedly caused by breaches of servicing standards by mortgage loan servicers and abide by a heightened standard of care following alleged events of default.

U.S. Bank N.A. denies liability and believes that it has performed its obligations under the RMBS trusts in good faith, that its actions were not the cause of losses to investors, that it has meritorious defenses, and it has contested and intends to continue contesting the plaintiffs’ claims vigorously. However, U.S. Bank N.A. cannot assure you as to the outcome of any of the litigation, or the possible impact of these litigations on the trustee or the RMBS trusts.

On March 9, 2018, a law firm purporting to represent fifteen Delaware statutory trusts (the “DST”) that issued securities backed by student loans (the “Student Loans”) filed a lawsuit in the Delaware Court of Chancery against U.S. Bank N.A. in its capacities as indenture trustee and successor special servicer, and three other institutions in their respective transaction capacities, with respect to the DSTs and the Student Loans. This lawsuit is captioned The National Collegiate Student Loan Master Trust I, et al. v. U.S. Bank National Association, et al., C.A. No. 2018-0167-JRS (Del. Ch.) (the “NCMSLT Action”). The complaint, as amended on June 15, 2018, alleged that the DSTs have been harmed as a result of purported misconduct or omissions by the defendants concerning administration of the trusts and special servicing of the Student Loans. Since the filing of the NCMSLT Action, certain Student Loan borrowers have made

84

assertions against U.S. Bank N.A. concerning special servicing that appear to be based on certain allegations made on behalf of the DSTs in the NCMSLT Action.

U.S. Bank N.A. has filed a motion seeking dismissal of the operative complaint in its entirety with prejudice pursuant to Chancery Court Rules 12(b)(1) and 12(b)(6) or, in the alternative, a stay of the case while other prior filed disputes involving the DSTs and the Student Loans are litigated. On November 7, 2018, the Court ruled that the case should be stayed in its entirety pending resolution of the first-filed cases. On January 21, 2020, the Court entered an order consolidating for pretrial purposes the NCMSLT Action and three other lawsuits pending in the Delaware Court of Chancery concerning the DSTs and the Student Loans, which remains pending.

U.S. Bank N.A. denies liability in the NCMSLT Action and believes it has performed its obligations as indenture trustee and special servicer in good faith and in compliance in all material respects with the terms of the agreements governing the DSTs and that it has meritorious defenses. It has contested and intends to continue contesting the plaintiffs’ claims vigorously.

The indenture trustee (or any other eligible institution in any capacity under the indenture) may resign at any time upon 30 days’ prior written notice to the issuing entity. The holders of a majority of aggregate outstanding principal amount of the bonds may remove the indenture trustee (or any other eligible institution in any capacity under the indenture) upon 30 days’ prior written notice to the indenture trustee (or such other eligible institution) and may appoint a successor indenture trustee (or successor eligible institution in the applicable capacity). The issuing entity will remove the indenture trustee if the indenture trustee ceases to be eligible to continue in this capacity under the indenture, the indenture trustee becomes a debtor in a bankruptcy proceeding or is adjudicated insolvent, a receiver or other public officer takes charge of the indenture trustee or its property, the indenture trustee becomes incapable of acting or the indenture trustee fails to provide to the issuing entity any information pertaining to the indenture trustee it reasonably requests which is necessary for the issuing entity to satisfy its reporting obligations under the federal securities laws. The issuing entity will remove any person (other than the indenture trustee) acting in any capacity under the indenture that fails to constitute an eligible institution with 30 day’s prior notice. If the indenture trustee resigns or is removed or a vacancy exists in the office of indenture trustee for any reason, the issuing entity will be obligated promptly to appoint a successor indenture trustee eligible under the indenture and notice of such appointment is required to be promptly given to each Rating Agency by the successor indenture trustee. If any person (other than the indenture trustee) acting in any capacity under the indenture as an eligible institution is removed or fails to constitute an eligible institution or if a vacancy exists in any such capacity for any reason, the issuing entity will promptly appoint a successor to such capacity that constitutes an eligible institution. No resignation or removal of the indenture trustee (or any other person acting as an eligible institution) will become effective until acceptance of the appointment by a successor indenture trustee (or a successor eligible institution). The issuing entity is responsible for payment of the expenses associated with any such removal or resignation.

The indenture trustee will at all times satisfy the requirements of the Trust Indenture Act and Section 26(a)(1) of the Investment Company Act of 1940 and have a combined capital and surplus of at least $50 million and a long-term issuer rating from Moody’s in one of its generic rating categories that signifies investment grade and a long-term issuer rating from S&P of at least “A.” If the indenture trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business or assets to, another entity, the resulting, surviving or transferee entity will without any further action be the successor indenture trustee.

The indenture trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers under the indenture; provided that its conduct does not constitute willful misconduct, negligence or bad faith. The issuing entity has agreed to indemnify and hold harmless the indenture trustee and its officers, directors, employees and agents against any and all loss, liability or expense (including reasonable attorney’s fees and expenses, the fees of experts and agents and the reasonable fees, expenses and costs incurred in connection with any action, claim or suit brought to enforce the indenture trustee’s right to indemnification) incurred by it in connection with the administration and enforcement of the indenture, the series supplement and the other basic documents and the performance of its duties under the indenture and its obligations under or pursuant to the indenture, the series supplement and the other basic documents, provided that the issuing entity is not required to pay any

85

expense or indemnify against any loss, liability or expense incurred by the indenture trustee through the indenture trustee’s own willful misconduct, negligence or bad faith. Please read “Security for the Storm Recovery Bonds — How Funds in the Collection Account Will Be Allocated” in this prospectus.

The issuing entity, DEP and their respective affiliates may from time to time enter into normal banking and trustee relationships with the indenture trustee or its affiliates. Affiliates of the indenture trustee act as lender for, and provide other banking, investment banking and other financial services to, Duke Energy Corporation, DEP and their respective affiliates.

No relationships currently exist or existed during the past two years between DEP, the issuing entity and each of their respective affiliates, on the one hand, and the indenture trustee and its affiliates, on the other hand, that would be outside the ordinary course of business or on terms other than would be obtained in an arm’s length transaction with an unrelated third party.

86

SECURITY FOR THE STORM RECOVERY BONDS

General

The bonds issued under the indenture will be non-recourse obligations and will be payable solely from and secured solely by a pledge of and lien on the storm recovery property relating to the bonds and other collateral as provided in the indenture and the series supplement. Storm recovery property includes the right to impose, bill, charge, collect and receive storm recovery charges. These charges will be paid by all existing or future South Carolina customers receiving transmission or distribution service, or both, from DEP or its successors or assignees under rate schedules approved by the PSCSC or under special contracts. Storm recovery charges are payable by customers even if the customers elect to purchase electricity from an alternative electricity supplier following a fundamental change in regulation of public utilities in South Carolina. Storm recovery property includes the right to implement the true-up mechanism, at least semi-annually. See “The Storm Recovery Property and the Financing Act” in this prospectus.

Issuance of Additional Storm Recovery Bonds

We have been organized to serve as a special purpose subsidiary of DEP. As authorized by the financing order, our organizational documents as well as the transaction documents supporting the bonds give us the authority and flexibility to issue additional storm recovery bonds in future transactions, with the approval of the PSCSC and the satisfaction of the rating agency condition. As a result, we may acquire additional separate storm recovery property and issue one or more additional series of storm recovery bonds that are supported by such additional and separate storm recovery property. For example, such future financings may include additional series of storm recovery bonds to finance additional storm recovery costs for future storms. If authorized by the PSCSC, such future financings may include storm recovery bonds issued to finance costs, if any, which result from future storms.

Each series of storm recovery bonds that may be issued will be backed by separate storm recovery property we acquire for the separate purpose of repaying that series of storm recovery bonds. Each series of storm recovery bonds that may be issued will have the benefit of a true-up mechanism.

Any new series of storm recovery bonds may include terms and provisions that would be unique to that particular series of storm recovery bonds. See “Description of the Storm Recovery Bonds — Conditions of Issuance of Additional Storm Recovery Bonds and Acquisition of Additional Storm Recovery Property” in this prospectus.

Allocations as Between Series of Storm Recovery Bonds

The bonds will not be subordinated in right of payment to any other series of storm recovery bonds. In the event of a future issuance of additional storm recovery bonds, each series of storm recovery bonds will be secured by its own separate storm recovery property, which will include the right to impose, bill, charge, collect and receive storm recovery charges calculated in respect of that series, and the right to impose interim and annual true-up adjustments to correct overcollections or undercollections in respect of that series. Each series will also have its own collection account, including any related subaccounts, into which revenue from the storm recovery charges relating to that series will be deposited and from which amounts will be withdrawn to pay the related series of storm recovery bonds. Holders of one series of storm recovery bonds will have no recourse to collateral for a different series. The administration fees, independent manager fees and other operating expenses payable by us on a payment date may be assessed to each series of storm recovery bonds on a pro rata basis, based upon the respective outstanding principal amounts of each series. See “— Description of Indenture Accounts” and “— How Funds in the Collection Account Will Be Allocated” in this prospectus.

Although each series of storm recovery bonds will have its own separate storm recovery property, storm recovery charges relating to the bonds and storm recovery charges relating to any other series will be collected through single bills to individual electric service customers that include all charges related to the purchase of electricity, without separately itemizing the storm recovery charges component of the bill or the storm recovery charges components applicable to separate series. However, customer electricity bills will state that a portion of the electricity bill consists of the rights to the storm recovery charges that have

87

been sold to us. In the event a customer does not pay in full all amounts owed under any bill including storm recovery charges, each servicer is required to allocate any resulting shortfalls in storm recovery charges ratably among the amounts of storm recovery charges owing in respect of the bonds, any amounts owing to any other series and amounts owing to any other subsequently created special-purpose subsidiaries of the utilities which issue storm recovery bonds and other DEP billed amounts, in a manner that is consistent with DEP’s current process for allocating partial payments. See “The Servicing Agreement — Remittances to Collection Account” in this prospectus.

Pledge of Collateral

To secure the payment of principal of and interest on the bonds, we will grant to the indenture trustee a security interest in all of our right, title and interest (whether owned on the issuance date or thereafter acquired or arising) in and to the following property:

•

the storm recovery property created under and pursuant to the financing order and the Financing Act, and transferred by the seller to us pursuant to the sale agreement (including, to the fullest extent permitted by law, the right to impose, bill, charge, collect and receive storm recovery charges, the right to obtain true-up adjustments to those charges, and all revenue, collections, claims, rights to payments, payments, money and proceeds arising out of the rights and interests created under the financing order);

•

all storm recovery charges related to the foregoing storm recovery property;

•

the sale agreement and the bill of sale executed in connection therewith and all property and interests in property transferred under the sale agreement and the bill of sale with respect to the foregoing storm recovery property and the bonds;

•

the servicing agreement, the administration agreement, the intercreditor agreement and any subservicing, agency, administration or collection agreements executed in connection therewith, to the extent related to the foregoing storm recovery property and the bonds;

•

the collection account, relating to the bonds and established under the indenture and the series supplement, all subaccounts thereof and all amounts of cash, instruments, investment property or other assets on deposit therein or credited thereto from time to time and all financial assets and securities entitlements carried therein or credited thereto;

•

all rights to compel the servicer to file for and obtain true-up adjustments to the storm recovery charges in accordance with the Financing Act and the financing order;

•

all present and future claims, demands, causes and choses in action in respect of any or all of the foregoing, whether such claims, demands, causes and choses in action constitute storm recovery property, accounts, general intangibles, instruments, contract rights, chattel paper or proceeds of such items or any other form of property;

•

all accounts, chattel paper, deposit accounts, documents, general intangibles, goods, instruments, investment property, letters of credit, letters-of-credit rights, money, commercial tort claims and supporting obligations related to the foregoing; and

•

all payments on or under and all proceeds in respect of any or all of the foregoing. The collateral does not include:

•

cash or other property that has been released pursuant to the terms of the indenture and the series supplement;

•

amounts deposited with us on the issuance date, for payment of costs of issuance with respect to the bonds (together with any interest earnings thereon); and

•

proceeds from the sale of the bonds required to pay the purchase price of the foregoing storm recovery property paid pursuant to the sale agreement and the costs of the issuance of the bonds.

We refer to the foregoing assets in which we, as assignee of the seller, will grant the indenture trustee a security interest as the “storm recovery bond collateral”. Please read “— How Funds in the Collection Account Will Be Allocated” in this prospectus.

88

Security Interest in the Collateral

Section 58-27-1125 of the Financing Act provides that a valid and enforceable security interest in storm recovery property will attach and be perfected only upon the later of: the issuance of a financing order, the execution and delivery of a security agreement with the indenture trustee in connection with issuance of a series of bonds, the indenture trustee has rights in such bonds or the power to transfer rights in such bonds or the receipt of value for such bonds. Upon perfection by filing notice with the South Carolina Secretary of State, the lien and security interest will be continuously perfected. Section 58-27-1125(B) of the Financing Act further provides that such security interest in the storm recovery property and all proceeds of the storm recovery property, whether or not billed, accrued or collected, and whether or not deposited into the collection account and however evidenced, will have priority in the order of filing and take precedence over any subsequent judicial or other lien creditor. No continuation statements are necessary to maintain such perfection.

The relative priority of the lien and security interest perfected under Section 58-27-1125 of the Financing Act is not impaired by later modification of the financing order or the commingling of revenues arising with respect to any storm recovery property with other funds (subject to the tracing requirements of federal bankruptcy law).

The financing order creates a valid and enforceable lien and security interest in the storm recovery property and the indenture and the series supplement state that it constitutes a security agreement within the meaning of the Financing Act. The servicer pledges in the servicing agreement to file with the South Carolina Secretary of State on or before the date of issuance the filing required by Section 58-27-1125 of the Financing Act to perfect the lien of the indenture trustee in the storm recovery property. The seller will represent, at the time of issuance of the bonds, that no prior filing has been made under the terms of Section 58-27-1125 of the Financing Act with respect to the storm recovery property securing the bonds to be issued other than a filing which provides the indenture trustee with a first priority perfected security interest in the storm recovery property.

Certain items of the storm recovery bond collateral may not constitute storm recovery property and the perfection of the indenture trustee’s security interest in those items of collateral would therefore be subject to the UCC or common law and not Section 58-27-1125 of the Financing Act. These items consist of our rights in:

•

the related sale agreement, servicing agreement and administration agreement;

•

the capital subaccount or any other funds on deposit in the collection account which do not constitute storm recovery charge collections, together with all instruments, investment property or other assets on deposit therein or credited thereto and all financial assets and securities entitlements carried therein or credited thereto which do not constitute storm recovery charge collections;

•

all accounts, accounts receivable, general intangibles, chattel paper, documents, money, investment property, deposit accounts, notes, drafts, acceptances, letters of credit, letter of credit rights, insurance proceeds, condemnation awards, rights to payment of any and every kind and other forms of obligations and receivables, instruments and other property; and

•

proceeds of the foregoing items.

As a condition to the issuance of the bonds, we will have made all filings and taken any other action required by the UCC or common law to perfect the lien of the indenture trustee in all the items included in collateral which do not constitute storm recovery property. We will also covenant to take all actions necessary to maintain or preserve the lien and security interest on a first priority perfected basis. We will represent, along with the seller, at the time of issuance of the bonds, that no prior filing has been made with respect to the storm recovery property by either party under the terms of the UCC, other than a filing which provides the indenture trustee with a first priority perfected security interest in the collateral on a parity basis with that securing any outstanding bonds.

Description of Indenture Accounts

Collection Account

Pursuant to the indenture and the series supplement, we will establish a segregated trust account for each series of bonds called the “collection account” with an eligible institution (as defined below) in the

89

name of and for the benefit of the indenture trustee. The collection account will be under the sole dominion and exclusive control of the indenture trustee. There shall be established by the indenture trustee in respect of the collection account various subaccounts: a “general subaccount”, an “excess funds subaccount”, and a “capital subaccount”, which need not be separate bank accounts. For administrative purposes, the subaccounts may be established by the indenture trustee as separate accounts that will be recognized individually as subaccounts and collectively as the collection account. All amounts in the collection account not allocated to any other subaccount will be allocated to the general subaccount. Unless the context indicates otherwise, references in this prospectus to the collection account include the collection account and each of the subaccounts contained therein.

The following institutions are “eligible institutions” for the establishment of the collection account:

•

the corporate trust department of the indenture trustee or an affiliate thereof, so long as the indenture trustee or such affiliate has (i) either a short-term deposit or issuer rating from Moody’s of at least “P-1” or a long-term unsecured debt or issuer rating from Moody’s of at least “A2”, and (ii) a short-term deposit or issuer rating from S&P of at least “A-1”, or a long-term unsecured debt or issuer rating from S&P of at least “A”; or

•

a depository institution organized under the laws of the United States of America or any State (or any domestic branch of a foreign bank) (i) that has either (A) a long-term unsecured debt or issuer rating of “AA-” or higher by S&P and “A2” or higher by Moody’s, or (B) a short-term deposit, short-term (bank deposit) or issuer rating of “A-1” or higher by S&P and “P-1” or higher by Moody’s, and (ii) whose deposits are insured by the Federal Deposit Insurance Corporation;

provided, however, that if an eligible institution then being utilized for any purposes under the indenture or the series supplement no longer meets the definition of eligible institution, then the issuing entity shall replace such eligible institution within sixty (60) days of such eligible institution no longer meeting the definition of eligible institution.

Permitted Investments for Funds in the Collection Account

Funds in the collection account, general subaccount, excess funds subaccount and capital subaccount, may be invested only in such investments as meet the criteria set forth in the indenture and the series supplement.

The indenture trustee will have access to the collection account for the purpose of making deposits in and withdrawals from the collection account in accordance with the indenture and the series supplement. The servicer will select the eligible investments in which funds will be invested, unless otherwise directed by us. The indenture trustee shall have no investment discretion. Absent written instructions to invest, funds shall remain uninvested.

The servicer will remit storm recovery charge payments to the collection account in the manner described under “The Servicing Agreement — Remittances to Collection Account”.

General Subaccount

The general subaccount will hold all funds held in the collection account that are not held in the other subaccounts. The servicer will remit all storm recovery charge payments to the general subaccount. On or prior to each payment date, the indenture trustee will draw on amounts in the general subaccount to pay our expenses and to pay interest and make scheduled payments on the bonds, and to make other payments and transfers in accordance with the terms of the indenture and the series supplement. Funds in the general subaccount will be invested in the eligible investments described above.

Excess Funds Subaccount

The indenture trustee, at the direction of the servicer, will deposit in the excess funds subaccount storm recovery charge collections, together with the collection of earnings from investment and reinvestment of amounts in the collection account, available with respect to any payment date in excess of amounts necessary to make the payments specified on such payment date. The excess funds subaccount will also hold all

90

investment earnings on the collection account other than the amount of the permitted return in amounts held in the capital account in excess of such amounts.

Capital Subaccount

In connection with the issuance of the bonds, DEP, in its capacity as our sole owner, will contribute capital to us in an amount equal to the “required capital level”. This amount will be at least 0.5% of the initial principal amount of the bonds issued. DEP will fund this amount directly and not from the proceeds of the sale of the bonds. This amount will be deposited into the capital subaccount on the issuance date.

In the event that amounts on deposit in the general subaccount and the excess funds subaccount are insufficient to make scheduled payments of principal of and interest on the bonds and payments of fees and expenses contemplated by the first nine bullet points under “— How Funds in the Collection Account Will Be Allocated” below, the indenture trustee will draw on amounts in the capital subaccount to make such payments up to the amount of such insufficiency.

In the event of any such withdrawal, collected storm recovery charges available on any subsequent payment date that are not necessary to pay scheduled payments of principal of and interest on the bonds and payments of fees and expenses will be used to replenish any amounts drawn from the capital subaccount. If the bonds have been retired as of any payment date, the amounts on deposit in the capital subaccount will be released to us, free of the lien of the indenture.

How Funds in the Collection Account Will Be Allocated

On each payment date on which payments are due on the bonds, the indenture trustee will with respect to the bonds, pay or allocate, at the direction of the servicer, all amounts on deposit in the collection account (including investment earnings thereon) to pay the following amounts in the following priority:

1.

payment of the indenture trustee’s fees, expenses and outstanding indemnity amounts relating to the bonds in an amount not to exceed annually $200,000 in the then current calendar year (the Trustee Cap); provided, however, that the Trustee Cap shall be disregarded and inapplicable following the occurrence of an event of default;

2.

payment of the servicing fee plus any unpaid servicing fees from prior payment dates as described under “The Servicing Agreement — Servicing Compensation”;

3.

payment of the administration fee to the extent due on that payment date and of the fees of the issuing entity’s independent manager plus any unpaid administration or management fees from prior payment dates;

4.

payment of all of our other ordinary periodic operating expenses, such as accounting and audit fees, rating agency fees, legal fees and certain reimbursable costs of the servicer under the servicing agreement;

5.

payment of the interest then due, including any past-due interest (together with interest on such past-due interest at the applicable interest rate);

6.

payment of the principal required to be paid on the final maturity date or as a result of acceleration upon an event of default;

7.

payment of the principal then scheduled to be paid in accordance with the expected amortization schedule, including any previously unpaid scheduled principal;

8.

payment of any of our remaining unpaid operating expenses (including any fees, expenses and indemnity amounts owed to the indenture trustee but unpaid due to the limitation in clause 1 above) and any remaining amounts owed pursuant to the basic documents;

9.

replenishment of any amounts drawn from the capital subaccount;

10.

release to DEP of an amount equal to the rate of return (calculated at a rate per annum equal to the rate of interest payable on the longest maturing bond) on the amount contributed to the capital

91

subaccount, including any portion of such rate of return for any prior payment date that has not yet been paid, so long as no event of default has occurred and is continuing;

11.

allocation of the remainder collected, if any, to the excess funds subaccount for future payments; and

12.

after the bonds have been paid in full and discharged and all of the foregoing amounts are paid in full, the balance, together with all amounts in the capital subaccount and the excess funds subaccount, to us free and clear of the lien of the indenture and credited to customers through the normal ratemaking processes.

The servicing fee referred to in clause (2) is described in “The Servicing Agreement”, and the amount of the administrative fee referred to in clause (3) above is described in “The Issuing Entity — The Administration Agreement” in this prospectus.

If, on any payment date, funds in the general account are insufficient to make the allocations or payments contemplated by items 1 through 9 above, the indenture trustee will draw from amounts on deposit in the following accounts in the following order up to the amount of the shortfall:

•

from the excess funds subaccount for allocations and payments contemplated in items 1 through 9; and

•

from the capital subaccount for allocations and payments contemplated by items 1 through 8 above.

If the indenture trustee uses amounts on deposit in the capital subaccount to pay those amounts or make those transfers, as the case may be, subsequent adjustments to the related storm recovery charges will take into account, among other things, the need to replenish those amounts.

If, on any payment date, available collections of the storm recovery charges allocable to the bonds, together with available amounts in the subaccounts, are not sufficient to pay interest due on all outstanding bonds on that payment date, amounts available will be allocated pro rata based on the amount of interest payable. If, on any payment date, remaining collections of the storm recovery charges, together with available amounts in the subaccounts, are not sufficient to pay principal due and payable on all outstanding bonds on that payment date (i.e. principal required to be paid on the bonds on a final maturity date or as a result of acceleration upon an event of default), amounts available will be allocated pro rata based on the principal amount then due and payable at its final maturity or upon acceleration. If, on any payment date, remaining collections of the storm recovery charges, together with available amounts in the subaccounts, are not sufficient to pay principal scheduled to be paid on all outstanding bonds (i.e. payment of the principal then scheduled to be paid on the bonds in accordance with the expected sinking fund schedule), amounts available will be allocated pro rata based on the principal amounts then scheduled to be paid on the payment date.

On any business day on which the indenture trustee receives a written request and direction from the administrator stating that any operating expense payable by us (but only as described in clauses (1) through (4) above) will become due and payable prior to the next payment date, and setting forth the amount and nature of such operating expense, as well as any supporting documentation that the indenture trustee may reasonably request, the indenture trustee, upon receipt of such information and direction from the administrator will make payment of such operating expenses on or before the date such payment is due from amounts on deposit in the general subaccount, the excess funds subaccount and the capital subaccount in that order as specified in such written direction.

Right of Foreclosure

Section 58-27-1125(B)(7) of the Financing Act provides that if an event of default or termination occurs under the bonds, the bondholders or their representatives, as secured parties, may foreclose or otherwise enforce the lien on the storm recovery property securing such bonds as if they were a secured party under Article 9 of the UCC, and that a court may order that amounts arising from that storm recovery property be transferred to a separate account for the holder’s benefit, to which their lien and security interest will apply. Upon application by or on behalf of an indenture trustee to a circuit court in South Carolina, such court shall order sequestration and payment to the indenture trustee of revenues arising from the related storm recovery property.

92

State Pledge

The state pledge in the Financing Act is described under “The Storm Recovery Property and the Financing Act — The Financing Act Provides for the Recovery of Storm Recovery Costs and the Issuance of the Bonds — The Financing Act Contains a State Pledge” in this prospectus. The bondholders and the indenture trustee will be entitled to the benefit of the state pledge and we are authorized to and will include the state pledge on the bonds. We acknowledge that any purchase by a bondholder of a storm recovery bond is made in reliance on the state pledge.

93

WEIGHTED AVERAGE LIFE AND YIELD CONSIDERATIONS FOR THE BONDS

The actual amount of principal and interest payments in respect of the bonds on each semi-annual payment date and the weighted average life thereof will depend on the timing of receipt of storm recovery charges and the implementation of the true-up mechanism. The aggregate amount of storm recovery charges collected and the rate of principal amortization depends, in part, on energy consumption and the rate of delinquencies and write-offs. The storm recovery charges are required to be adjusted at least every six months based in part on the actual rate of collected storm recovery charges. However, we can give no assurance that the servicer will forecast accurately actual electricity consumption and the rate of delinquencies and write- offs or implement adjustments to the storm recovery charges so as to cause storm recovery charges to be collected at any particular rate. Please read “Risk Factors — Servicing Forecasting Risks — Inaccurate forecasting of electric consumption or collections might reduce scheduled payments on the bonds” and “DEP’s Financing Order — True-Up Mechanism”.

If the servicer collects storm recovery charges at a slower rate than forecast during the period of time between mandatory semi-annual true-up adjustments and does not implement an interim true-up adjustment, the bonds may be retired later than scheduled. The servicer, however, may implement a true-up at any time it believes the slower collections may affect the timely payment of principal of and interest on the bonds on a scheduled payment date prior to the mandatory semi- annual true-up adjustment.

No prepayment is permitted. Except in the event of an acceleration of the final payment date of the bonds after an event of default, the bonds will not be paid at a rate faster than that contemplated in the expected sinking fund schedule even if the receipt of collected storm recovery charges is greater than anticipated. Instead, receipts in excess of the amounts necessary to pay debt service on the bonds in accordance with the applicable expected sinking fund schedules, to pay related fees and expenses and to fund subaccounts of the related collection account will be allocated to the excess funds subaccount. Amounts on deposit in the excess funds subaccount will be taken into consideration in calculating the next true-up adjustment.

Upon an acceleration, due to the nature of our business, payment of principal of the bonds will only be made as funds become available. Please read “Risk Factors — Risk Associated with the Unusual Nature of the Storm recovery Property — Foreclosure of the indenture trustee’s lien on the storm recovery property for the bonds might not be practical, and acceleration of the bonds before maturity might result in your investment being repaid either earlier or later than expected” and “Risk Factors — You might experience material payment delays as a result of limited sources of payment for the bonds and limited credit enhancement”.

Weighted Average Life Sensitivity

Weighted average life refers to the average amount of time from the date of issuance of a security until each dollar of principal of the security has been repaid to the investor. The rate of principal payments, the aggregate amount of each interest payment and the actual final payment date will depend on the timing of the servicer’s receipt of storm recovery charges from customers. Changes in the expected weighted average lives of the bonds in relation to variances in actual energy consumption levels (retail electric sales) from forecast levels are shown below.

​	​	Weighted Average Life Sensitivity
​	Expected Weighted Average Life (Years)	-5% (       Standard Deviations from Mean)	Change (days)*	-15% (       Standard Deviations from Mean)	Change (days)*
Tranche		WAL (yrs)		WAL (yrs)

*

Number is rounded to whole days

94

Assumptions

In preparing the analysis above, the following assumptions, among others, have been made:

(i)

in relation to the initial forecast, the forecast error stays constant over the life of the bonds and is equal to an overestimate of electricity consumption of 5% (         standard deviations from mean) or 15% (         standard deviations from mean);

(ii)

the servicer makes timely and accurate semi-annually true-up adjustments (at least quarterly beginning twelve months prior to the scheduled final payment date), but makes no interim true-up adjustments;

(iii)

for purposes of setting initial storm recovery charges, the net charge-off rate as a percentage of billed revenue and average days sales outstanding per customer bill is each assumed to equal DEP’s average (mean) for the most recent         years;

(iv)

for purposes of setting subsequent storm recovery charges, and for purposes of calculating actual storm recovery charge collections, net charge-off rate as a percentage of billed revenue and the average days sales outstanding per customer bill are both held constant at DEP’s maximum (most unfavorable) for the most recent         years;

(v)

during the first payment period, interest will accrue for approximately         months and the storm recovery charges will be collected for approximately         months;

(vi)

there is no acceleration of the final maturity date of the bonds; and

(vii)

the principal amounts and interest rates of the bonds represent estimates based on current market conditions. Other than as discussed above, there can be no assurance that the weighted average lives or the events of default with respect to the bonds will be shown.

95

ESTIMATED ANNUAL FEES AND EXPENSES

Estimated initial annual fees and expenses payable from the storm recovery charges are shown below. For the priorities in application of funds under the indenture and the series supplement, please refer to “Security for the Storm Recovery Bonds — How Funds in the Collection Account Will Be Allocated” in this prospectus.

As set forth in the table below, we are obligated to pay fees to DEP, as servicer, the indenture trustee, our independent manager and DEP, as administrator. We are also obligated to pay DEP an annual return on its invested capital. The following tables illustrate these arrangement.

Recipient	Source of Payment	Fees and Expenses Payable
Servicer	storm recovery charge collections and investment earnings	$      per annum (so long as DEP is servicer), payable in installments on each payment date, plus reimbursable expenses
Indenture Trustee	storm recovery charge collections and investment earnings	$8,500 per annum, plus expenses and transaction charges, if applicable
Administrator	storm recovery charge collections and investment earnings	$50,000 per annum, payable annually, in arrears plus expenses
Independent Manager	storm recovery charge collections and investment earnings	$      per annum plus expenses
DEP return on invested capital	storm recovery charge collections and investment earnings	$      per annum

If DEP or any of its affiliates is not the servicer, an amount agreed upon by the successor servicer and the indenture trustee, provided, that the fee shall not exceed 0.60% of the original aggregate principal amount of the bonds unless such higher fee is approved by the PSCSC.

The storm recovery charges will also be used by the indenture trustee for the payment of our other financing costs and expenses relating to the bonds, such as accounting and audit fees, rating agency fees and legal fees.

96

THE SALE AGREEMENT

The following summary describes the material terms and provisions of the purchase and sale agreement, or sale agreement, pursuant to which we will purchase storm recovery property from the seller. The form of the sale agreement has been filed as an exhibit to the registration statement of which this prospectus forms a part.

Sale and Assignment of the Storm Recovery Property

On the issuance date the seller will sell to us, without recourse its entire right, title and interest in and to the storm recovery property to be transferred to us on that date, subject to the satisfaction of the conditions specified in the sale agreement and the indenture and the series supplement. If additional series of bond are issued under the financing order, then the conditions described below must also be satisfied each time a sale of storm recovery property is made, which we will refer to as an issuance date. We will finance the initial purchase of storm recovery property through the issuance of the bonds. The storm recovery property will include all of the seller’s rights under the financing order related to such storm recovery property to impose, bill, charge, collect and receive storm recovery charges, the right to obtain true-up adjustments and all revenue, collections, claims, rights to payments, payments, money and proceeds arising out of rights and interests under the financing order.

The Financing Act provides that storm recovery property shall constitute our present property right even though the imposition and collection of storm recovery charges depends on the further acts of the electric utility that have not yet occurred and on future electricity consumption. The Financing Act also provides that an agreement by an electric utility to sell, convey, assign or transfer storm recovery property that expressly states that the transfer is a sale or other absolute transfer is an absolute transfer and true sale of, and is not a pledge of or secured transaction relating to, the seller’s right, title and interest in, to and under the storm recovery property. The Financing Act provides that after the transaction contemplated by the financing order, the storm recovery property will not be subject to any claims of the seller or the seller’s creditors. As of the date hereof, there are no other creditors holding a security interest in the storm recovery property.

Under the Financing Act, each sale of storm recovery property will constitute a true sale under South Carolina law whether or not:

•

the storm recovery charges are commingled with other amounts held by DEP;

•

we have any recourse against DEP;

•

DEP retains any equity interest in the storm recovery property;

•

DEP acts as a collector of storm recovery charges relating to the storm recovery property;

•

DEP acts as a servicer of storm recovery charges relating to the storm recovery property;

•

DEP treats the transfer as a financing for tax, financial reporting or other purposes;

•

DEP grants or provides bondholders a preferred right to the storm recovery property or credit enhancement; or

•

DEP applies the true-up mechanism.

In accordance with the Financing Act, a valid and enforceable lien and security interest in the storm recovery property will be created upon the issuance of the financing order and the execution and delivery of the related sale agreement in connection with the issuance of the bonds. The Financing Act provides that the lien and security interest attaches automatically from the time that value is received for the bonds and, on perfection through the timely filing of a notice with the South Carolina Secretary of State, will be a continuously perfected lien and security interest in the storm recovery property. The Financing Act further provides that upon the issuance of the financing order, the execution and delivery of the related sale agreement and the related bill of sale and the filing of a notice with the South Carolina Secretary of State in accordance with the Financing Act, the transfer of the storm recovery property will be perfected as against all third persons, including subsequent judicial or other lien creditors.

97

Conditions to the Sale of Storm Recovery Property

Our obligation to purchase and the seller’s obligation to sell storm recovery property on the issuance date is subject to the satisfaction or waiver of each of the following conditions:

•

on or prior to the issuance date, the seller shall have delivered to us a duly executed bill of sale identifying the storm recovery property to be conveyed on that date;

•

on or prior to the issuance date, the seller shall have obtained a financing order from the PSCSC creating the storm recovery property;

•

as of the issuance date, the seller may not be insolvent and may not be made insolvent by the sale of storm recovery property to us, and the seller may not be aware of any pending insolvency with respect to itself;

•

as of the issuance date, the representations and warranties of the seller in the sale agreement must be true and correct with the same force and effect as if made on that date (except to the extent they relate to an earlier date), the seller may not have breached any covenant or agreement in the sale agreement, and the servicer shall not have defaulted or be in default under the servicing agreement;

•

as of the issuance date, we must have sufficient funds available to pay the purchase price for the storm recovery property to be conveyed and all conditions to the issuance of the bonds intended to provide the funds set forth in the indenture and the series supplement must have been satisfied or waived;

•

on or prior to the issuance date, the seller must have taken all action required to transfer ownership of storm recovery property to be conveyed on the issuance date, free and clear of all liens other than liens created by us pursuant to the basic documents and to perfect such transfer, including filing any statements or filings under the Financing Act or the South Carolina Uniform Commercial Code; and we or the servicer, on our behalf, must have taken any action required for us to grant the indenture trustee a lien and first priority perfected security interest in the collateral and maintain that security interest as of the issuance date;

•

the seller must receive and deliver to us and to the rating agencies any opinions of counsel required by the rating agencies;

•

the seller must receive and deliver to us and the indenture trustee an opinion or opinions of outside tax counsel (as selected by the seller, and in form and substance reasonably satisfactory to us and the underwriters) to the effect that (i) we will not be subject to U.S. federal income tax as an entity separate from its sole owner, (ii) that the bonds will be treated as debt of our sole owner for U.S. federal income tax purposes and (iii) for U.S. federal income tax purposes, the issuance of the bonds will not result in gross income to the seller;

•

on and as of the issuance date, our certificate of formation, our limited liability company agreement, the servicing agreement, the sale agreement, the indenture, the series supplement, the Financing Act and the financing order must be in full force and effect;

•

the bonds shall have received the highest credit ratings possible;

•

the seller must deliver to us and to the indenture trustee, the issuing entity, an officer’s certificate confirming the satisfaction of each of these conditions; and

•

the seller shall have received the purchase price.

Seller Representations and Warranties

In the sale agreement, the seller will represent and warrant to us, as of the issuance date, to the effect, among other things, that:

•

subject to the clause below regarding assumptions used in calculating the storm recovery charges as of the issuance date, all written information, as amended or supplemented from time to time, provided by the seller to us with respect to the storm recovery property (including the expected sinking fund schedule and the financing order relating to the storm recovery property) is true and correct in all

98

material respects and does not omit any material facts and all historical data for the purpose of calculating the initial storm recovery charges in the issuance advice letter and the initial true-up adjustment request are true and correct, and the assumptions used for such calculations are reasonable and made in good faith;

•

the transfer, sale, assignment and conveyance of the storm recovery property constitutes a sale or other absolute transfer of all of the seller’s right, title and interest in the storm recovery property to us; upon the execution and delivery of the sale agreement, the seller will have no right, title or interest in the storm recovery property and the storm recovery property would not be part of the estate of the seller as debtor in the event of a filing of a bankruptcy petition by or against the seller;

•

the seller is the sole owner of the storm recovery property sold to us on the transfer date and such sale will have been made free and clear of all liens other than liens created by us pursuant to the related indenture and the series supplement; all actions or filings, including filings under the Financing Act and the UCC, necessary to give us a valid first priority perfected security interest in the storm recovery property and to grant the indenture trustee a first priority perfected security interest in the storm recovery property, free and clear of all liens of the seller or anyone else have been taken or made;

•

the seller is not aware (after due inquiry) of any judgment or tax lien filings against us or the seller;

•

under the laws of the State of South Carolina (including the Financing Act) and the United States in effect on the issuance date:

•

the financing order pursuant to which the rights and interests of the seller have been created, including the right to impose, bill, charge, collect and receive the storm recovery charges and the interest in and to the storm recovery property, has become final and non-appealable and is in full force and effect;

•

as of the issuance of the bonds, those bonds are entitled to the protection provided in the Financing Act and, accordingly, the financing order and the storm recovery charges are not revocable by the PSCSC;

•

as of the issuance of the bonds, revisions to DEP’s electric tariff to implement the storm recovery charges have been filed and are in full force and effect, such revisions are consistent with the financing order, and any electric tariff implemented consistent with a financing order issued by the PSCSC is not subject to modification by the PSCSC except for true-up adjustments made in accordance with the Financing Act;

•

the process by which the financing order was adopted and approved complies with all applicable laws, rules and regulations; and

•

no governmental approvals, authorizations, consents, orders or other actions or filings, other than filings under the Financing Act or the UCC of South Carolina or Delaware, are required for the seller to execute, deliver and perform its obligations under the sale agreement except those which have previously been obtained or made or are required to be made by the servicer in the future pursuant to the related servicing agreement; and

•

under the Financing Act, the State of South Carolina may not take any action which would impair, reduce or alter the value of the storm recovery property, or impair the storm recovery charges to be imposed, collected or remitted for the benefit of the related bondholders, until the principal, interest or other charges incurred or contracts to be performed in connection with the bonds are paid or performed in full. Furthermore, under the contract clause of the United States Constitution, the State of South Carolina, including the PSCSC, cannot take any action that substantially impairs the rights of the related bondholders unless such action is a reasonable exercise of the State of South Carolina’s sovereign powers and of a character reasonable and appropriate to further a significant and legitimate public purpose. Under the Takings Clause of the United States Constitution and the Law of the Land Clause of the South Carolina Constitution, the State of South Carolina would likely be required to pay just compensation to the bondholders if a court of competent jurisdiction determines that a repeal or amendment of the Financing Act or any other action taken by the State of South Carolina in contravention of the state pledge, (a)constitutes a permanent appropriation of a substantial property interest of the bondholders in the storm recovery

99

property or (b) substantially impairs the value of the storm recovery property so as to unduly interfere with the reasonable expectations of the related bondholders arising from their investment in the bonds, unless such court finds that just compensation is provided to the bondholders; but nothing in this paragraph precludes any limitation or alteration if full compensation is made by law for the full protection of the storm recovery charges and of the related bondholders or any assignee or party entering into a contract with the seller.

These representations and warranties made above by the seller will survive the execution and delivery of the sale agreement and our pledge of the storm recovery property to the indenture trustee. The seller will further represent and warrant that:

•

the seller is a limited liability company duly organized, validly existing and in good standing under the laws of North Carolina, with requisite power and authority to own its properties and conduct its business, including all necessary foreign qualifications, as of the transfer date;

•

the seller has the requisite power and authority to execute and deliver the sale agreement and to carry out its terms; the seller has full power and authority to own the related storm recovery property and sell and assign the storm recovery property to us, and the seller has duly authorized such sale and assignment to us by all necessary action; and the execution, delivery and performance of the sale agreement has been duly authorized by the seller by all necessary action;

•

the sale agreement constitutes a legal, valid and binding obligation of the seller, enforceable against it in accordance with its terms, subject to bankruptcy, receivership, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally from time to time in effect and to general principles of equity, regardless of whether considered in a proceeding in equity or at law;

•

the consummation of the transactions contemplated by the sale agreement do not conflict with, result in any breach of any of the terms and provisions of, or constitute a default under, the seller’s organizational documents or any indenture, or other material agreement or instrument to which the seller is a party or by which it is bound, result in the creation or imposition of any lien upon the seller’s properties pursuant to the terms of any such indenture, agreement or other instrument (other than any that may be granted under the related basic documents or any liens created by us pursuant to the Financing Act) or violate any existing law or any order, rule or regulation applicable to the seller of any court or of any federal or state regulatory body, administrative agency or other government instrumentality having jurisdiction over the seller or its properties. The storm recovery property is not subject to any lien, other than the liens created by the indenture and the Financing Act;

•

except as disclosed in the sale agreement and to the seller’s knowledge, there are no proceedings or investigations pending or, to the seller’s knowledge, threatened, before any court, federal or state regulatory body, administrative agencies or other governmental instrumentality having jurisdiction over the seller or its properties:

•

asserting the invalidity of the related basic documents, the related bonds, the Financing Act or the financing order;

•

seeking to prevent the issuance of the bonds or the consummation of any of the transactions contemplated by the basic documents;

•

seeking a determination or ruling that could reasonably be expected to materially and adversely affect the performance by the seller of its obligations under, or the validity or enforceability of, the basic documents, the related series of bonds or the financing order; or

•

challenging the seller’s treatment of the related series of bonds as debt of the seller for federal and state tax purposes;

•

no governmental approvals, authorizations, consents, orders or other actions or filings, other than filings under the Financing Act or with the South Carolina Secretary of State or the UCC of Delaware, are required for the seller to execute, deliver and perform its obligations under the sale agreement except those which have previously been obtained or made or are required to be made by the servicer in the future pursuant to the related servicing agreement;

•

with respect to the Financing Act and the irrevocable financing order

100

•

the irrevocable financing order has been issued by the PSCSC in accordance with the Financing Act in compliance with all applicable laws, rules and regulations; the financing order became effective pursuant to the Financing Act and is in full force and effect and final and nonappealable, and

•

the bonds are entitled to the protections provided by the Financing Act and the financing order is not subject to impairment, and the right to impose, collect and adjust the storm recovery charge is irrevocable and not subject to reduction, impairment or adjustment, except for the periodic adjustments to the storm recovery charges provided for in the financing order;

•

there is no order by a court providing for the revocation, alteration, limitation or other impairment of the Financing Act, financing order, storm recovery property or storm recovery charges, or any rights arising under them, or that seeks to enjoin the performance of any obligations under the financing order which is adverse to the position of the related storm recovery bondholders;

•

apart from amending the Constitution of the State of South Carolina by initiative, the voters of the State of South Carolina have no initiative powers to amend, repeal or revoke the Financing Act;

•

for purposes of the Financing Act, the storm recovery property constitutes a present property right that will continue to exist until the related bonds are paid in full and the financing costs associated with those bonds have been recovered in full;

•

the storm recovery property consists of (a) the irrevocable right of the seller under the financing order to impose, bill, charge, collect and receive storm recovery charges in the amount necessary to provide for full recovery of principal of and interest on the related bonds, together with the financing costs associated with those bonds; (b) the right under the financing order to obtain true-up adjustments of the storm recovery charges and (c) all proceeds arising out of the rights and interest described in (a) and (b);

•

after giving effect to the sale of the storm recovery property under the sale agreement, DEP:

•

is solvent and expects to remain solvent;

•

is adequately capitalized to conduct its business and affairs considering its size and the nature of its business and intended purposes;

•

is not engaged and does not expect to engage in a business for which its remaining property represents unreasonably small capital;

•

reasonably believes that it will be able to pay its debts as they become due; and

•

is able to pay its debts as they mature and does not intend to incur, or believes that it will not incur, indebtedness that it will not be able to repay at its maturity; and

•

notwithstanding the foregoing, the seller makes no representation or warranty that amounts collected from the storm recovery charges will be sufficient to meet payment obligations on the bonds or assumptions made in calculating the storm recovery charges will in fact be realized.

Certain of the representations and warranties that the seller will make in the sale agreement involve conclusions of law. The seller will make those representations and warranties in order to reflect the good faith understanding of the legal basis on which the bondholders are purchasing the bonds and to reflect the agreement that, if this understanding proves to be incorrect, the seller will be obligated to indemnify us under certain circumstances to the same extent as if the seller had breached its representations and warranties under the sale agreement. Please read “— Indemnification.”

The seller will not be in breach of any representation or warranty as a result of any change in law occurring after the issuance date, including by means of any legislative enactment, constitutional amendment or voter initiative (if subsequently authorized) that renders any of the representations or warranties untrue.

101

Covenants of the Seller

In the sale agreement, the seller will make the following covenants:

•

So long as any of the related bonds are outstanding, the seller will keep in full force and effect its existence and remain in good standing or equivalent status under the laws of the jurisdiction of its organization, and will obtain and preserve its qualifications to do business in each jurisdiction in which such qualification is or will be necessary to protect the validity and enforceability of the sale agreement and each other instrument or agreement to which the seller is a party necessary to the proper administration of the sale agreement and the transactions contemplated thereby.

•

Except for the conveyances under the sale agreement or any lien for our benefit, the related bondholders or the indenture trustee, the seller will not sell, pledge, assign or transfer to any other person, or grant, create, incur, assume or suffer to exist any lien on, any of the related storm recovery property, whether existing as of the transfer date or thereafter created, or any interest therein. The seller will not at any time assert any lien against or with respect to any related storm recovery property, and will defend the right, title and interest of DEP SC Storm Funding and of the indenture trustee as our assignee in, to and under such storm recovery property against all claims of third parties claiming through or under the seller.

•

The seller will use the proceeds of the sale of the related storm recovery property in accordance with the financing order.

•

If the seller is not the servicer and the seller receives any collections of the storm recovery charges with respect to the related storm recovery property or the proceeds thereof, the seller will pay the servicer all payments received by the seller in respect thereof as soon as practicable after receipt thereof by the seller, but in no event later than two business days after the seller becomes aware of such receipt.

•

The seller will notify us and the indenture trustee promptly after becoming aware of any lien on any of the related storm recovery property, other than the conveyances under the related sale agreement, indenture and series supplement.

•

The seller will materially comply with its organizational or governing documents and all laws, treaties, rules, regulations and determinations of any governmental authority applicable to it, except to the extent that failure to so comply would not materially adversely affect our or the indenture trustee’s interests in the storm recovery property under any of the related basic documents, the timing or amount of storm recovery charges payable by customers or of seller’s performance of its material obligations under the sale agreement.

•

So long as any of the bonds are outstanding:

•

the seller will treat storm recovery property as the issuing entity’s property for all purposes and not that of the seller, except for financial accounting, U.S. federal income tax purposes and state income and franchise tax purposes;

•

the seller will treat such bonds as debt of DEP SC Storm Funding and not that of the seller, except for financial accounting and federal income tax purposes;

•

the seller will disclose in its financial statements that it is not the owner of the related storm recovery property and that our assets are not available to pay creditors of the seller or its affiliates (other than us);

•

the seller will not own or purchase any such bonds; and

•

the seller will disclose the effects of all transactions between us and the seller in accordance with generally accepted accounting principles.

102

•

The seller agrees that, upon the sale by the seller of storm recovery property to us pursuant to the sale agreement:

•

to the fullest extent permitted by law, including the Financing Act and applicable regulations of the PSCSC, we will have all of the rights originally held by the seller with respect to the related storm recovery property, including the right to collect any amounts payable by any customer in respect of such storm recovery property, notwithstanding any objection or direction to the contrary by the seller; and

•

any payment by any customer to us of storm recovery charges will discharge that customer’s obligations in respect of the related storm recovery property to the extent of such payment, notwithstanding any objection or direction to the contrary by the seller.

•

So long as any of the bonds are outstanding:

•

in all proceedings relating directly or indirectly to the related storm recovery property, the seller will affirmatively certify and confirm that it has sold all of its rights and interests in and to such property (other than for financial accounting or tax purposes);

•

the seller will not make any statement or reference in respect of the related storm recovery property that is inconsistent with our ownership interest (other than for financial accounting or tax purposes);

•

the seller will not take any action in respect of the related storm recovery property except as contemplated by the basic documents;

•

neither we nor the seller shall take any action, file any tax return or make any election inconsistent with our treatment, for U.S. federal income tax purposes and, to the extent consistent with applicable state tax law, state income and franchise tax purposes, as a disregarded entity that is not separate from the seller (or, if relevant, from another sole owner); and

•

The seller will execute and file, or cause to be executed and filed, such filings required by law to fully preserve, maintain protect and perfect our ownership interest in the related storm recovery property.

•

The seller will institute any action or proceeding necessary to compel performance by the PSCSC, the State of South Carolina or any of their respective agents of any of their obligations or duties under the Financing Act, any financing order or any issuance advice letter. The seller also agrees to take those legal or administrative actions that may be reasonably necessary to attempt (i) to protect us from claims, state actions or other actions or proceedings of third parties which, if successfully pursued, would result in a breach of any representation or warranty of the seller in the sale agreement and (ii) to block or overturn any attempts to cause a repeal of, modification of or supplement to the Financing Act, the financing order, any issuance advice letter or the rights of the related bondholders by legislative enactment or constitutional amendment that would be materially adverse to us, the indenture trustee or the bondholders or which would otherwise cause an impairment of the rights of DEP SC Storm Funding or the indenture trustee or the bondholders. The costs of any such actions or proceedings undertaken by the seller will be reimbursed by us as an operating expense.

•

So long as any of the related bonds are outstanding, the seller will pay, and will cause each of its affiliates to pay, all material taxes, assessments and governmental charges imposed upon it or any of its properties or assets or with respect to any of its franchises, business, income or property before any penalty accrues if the failure to pay any such taxes, assessments and governmental charges would, after any applicable grace periods, notices or other similar requirements, result in a lien on the related storm recovery property, provided that no such tax need be paid if the seller or one of its affiliates is contesting the same in good faith by appropriate proceedings promptly instituted and diligently conducted and if the seller or such affiliate has established appropriate reserves as shall be required in conformity with generally accepted accounting principles.

•

The seller will comply with all filing requirements, including any post closing filings, in accordance with the financing order.

•

Promptly after obtaining knowledge of any breach in any material respect of its representations and warranties or covenants in the sale agreement, the seller will notify us, the indenture trustee, the PSCSC and the rating agencies of the breach.

103

•

Even if the sale agreement, indenture or series supplement is terminated, the seller will not, prior to the date which is one year and one day after the termination of the indenture and payment in full of the bonds and other amounts owed under the indenture and the series supplement, acquiesce, petition or otherwise invoke or cause us to invoke the process of any court or government authority for the purpose of commencing or sustaining a case against us under any federal or state bankruptcy, insolvency or similar law, appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official or any substantial part of our property, or ordering the winding up or liquidation of our affairs.

•

Upon our request, the seller will execute and deliver such further instruments and do such further acts as may be necessary to carry out more effectively the provisions and purposes of the sale agreement.

•

The seller shall not continue as or become a party to any (i) new trade receivables purchase and sale agreement or similar arrangement under which it sells all or any portion of its accounts receivables owing from South Carolina retail transmission or distribution, or both, customers unless the indenture trustee, the seller and the other parties to such additional arrangement shall have entered into a joinder or amendment to the intercreditor agreement in connection therewith and the terms of the documentation evidencing such trade receivables purchase and sale arrangement or similar arrangement shall expressly exclude storm recovery property (including storm recovery charges) from any receivables or other assets pledged or sold under such arrangement or (ii) sale agreement selling to any other affiliate property consisting of charges similar to the storm recovery charges sold pursuant to the sale agreement, payable by customers pursuant to the Financing Act or any similar law, unless the seller and the other parties to such arrangement shall have entered into a joinder or amendment to the intercreditor agreement in connection with any agreement or similar arrangement described in the sale agreement.

•

So long as any of the bonds are outstanding, the seller shall not sell any “storm recovery property” or similar property, to secure another issuance of storm recovery bonds or similar bonds unless the rating agency condition has been satisfied.

Indemnification

The seller will indemnify, defend and hold harmless us, the indenture trustee (for itself and for the benefit of the bondholders), our independent manager and any of our and the indenture trustee’s respective officers, directors, managers, employees and agents against:

•

any and all amounts of principal of and interest on the bonds not paid when due or when scheduled to be paid;

•

any deposits required to be made by or to us under the basic documents or the financing order that are not made when required; and

•

any and all other liabilities, obligations, losses, claims, damages, payments, costs or expenses that may be imposed on or asserted against any person, other than any liabilities, obligations or claims for or payments of principal of or interest on the bonds, together with any reasonable costs and expenses actually incurred by such person,

in each case, as a result of a breach by the seller of any of its representations, warranties and covenants in the sale agreement, except to the extent of losses either resulting from the willful misconduct, bad faith or gross negligence of such indemnified persons or resulting from a breach of a representation or warranty made by such indemnified persons in any of the basic documents that gives rise to the seller’s breach of a covenant. The seller will have a 30-day opportunity to cure upon notice from us of a material breach of a covenant. Furthermore, bondholders shall be entitled to enforce their rights against the seller under this paragraph solely through a course of action brought for their behalf by the indenture trustee.

The seller will indemnify us and the indenture trustee (for itself and for the benefit of the bondholders)and each of their respective officers, directors, employees, trustees, managers and agents for, and defend and hold harmless each such person or entity from and against, any and all taxes (other than taxes imposed on the bondholders as a result of their ownership of bonds) that may at any time be imposed on or asserted against any such person or entity as a result of (i) the sale and assignment of the storm recovery property to us,

104

(ii) our ownership and assignment of the storm recovery property, (iii) the issuance and sale by us of the bonds or (iv) the other transactions contemplated in the basic documents, including any franchise, sales, gross receipts, general corporation, tangible personal property, privilege or license taxes, but excluding any taxes imposed as a result of a failure of such person or entity to withhold or remit taxes with respect to payments on the bonds.

The seller’s obligations provided for in the sale agreement will survive any repeal of, modification of, supplement to, or judicial invalidation of, the Financing Act or the financing order and will survive the resignation or removal of the indenture trustee or the termination of the sale agreement and will rank pari passu with other general, unsecured obligations of the seller. The seller shall not indemnify any person or entity otherwise indemnified under the sale agreement for any changes in law after the issuance date, whether such changes in law are effected by means of any legislative enactment, any constitutional amendment or any final and non-appealable judicial decision.

Amendment

The sale agreement may be amended with the prior written consent of the indenture trustee and the satisfaction of the rating agency condition and if any amendment would adversely affect in any material respect the interest of any bondholder, the consent of a majority of bondholders of Series      Bonds. In determining whether a majority of bondholders have consented, bonds owned by the issuing entity or any affiliate of the issuing entity shall be disregarded, except that, in determining whether the indenture trustee shall be protected in relying upon any such consent, the indenture trustee shall be protected in relying upon any such consent, the indenture trustee shall only be required to disregard any bonds it actually knows to be so owned. An amendment is subject to the objection of the PSCSC within the time periods and subject to the conditions set forth in the sale agreement. We will notify the rating agencies promptly after the execution of any such amendment or consent. Please read “Description of the Storm Recovery Bonds — Procedure for Obtaining Consent or Deemed Consent of the PSCSC” in this prospectus.

Assumptions of the Obligations of the Seller

Any person (a) into which the seller may be merged or consolidated and which succeeds to all or substantially all of the electric distribution business of the seller, (b) which results from the division of the seller into two or more persons and which succeeds to all or substantially all of the electric distribution business of the seller, (c) which may result from any merger or consolidation to which the seller shall be a party and which succeeds to all or substantially all of the electric distribution business of the seller, (d) which may succeed to the properties and assets of the seller substantially as a whole and which succeeds to all or substantially all of the electric distribution business of the seller, or (e) which may otherwise succeed to all or substantially all of the electric distribution business of the seller, and which person in any of the foregoing cases executes an agreement of assumption to perform every obligation of the seller under the sale agreement, shall be the successor to the seller thereunder without the execution or filing of any document or any further act by any of the parties so long as the conditions of any such assumption are met. The conditions include:

•

immediately after giving effect to such transaction, no representation or warranty made in the sale agreement will have been breached, and no servicer default, and no event that, after notice or lapse of time, or both, would become a servicer default will have occurred and be continuing;

•

the seller shall have delivered to us and to the related indenture trustee an officers’ certificate and an opinion of counsel stating that such consolidation, merger or succession and each agreement of assumption comply with the requirements of the sale agreement and that all conditions precedent relating to such transaction have been complied with;

•

the seller shall have delivered to us and to the related indenture trustee an opinion of counsel stating, in the opinion of such counsel, either (a) all filings to be made by DEP, in its capacity as seller or as servicer, including filings under the Financing Act with the South Carolina Secretary of State and the UCC, that are necessary to preserve our interests and the interests of the indenture trustee in the related storm recovery property have been executed and filed or (b) that no such action is necessary to preserve such interests,

105

•

the rating agencies will have received prior written notice of the transaction, and

•

the seller shall have delivered to us and to the indenture trustee an opinion of an independent tax counsel to the effect that, for federal income tax purposes, such consolidation or other succession to, and assumption of, the obligations of the seller will not result in a material adverse federal income tax consequence to us or to the seller, the indenture trustee or the holders of the outstanding bonds of the related series.

So long as the conditions of any such assumption are met, the depositor will automatically be released from its obligations under the related sale agreement.

106

THE SERVICING AGREEMENT

The following summary describes the material terms and provisions of the servicing agreement pursuant to which the servicer is undertaking to service the storm recovery property. The form of the servicing agreement has been filed as an exhibit to the registration statement of which this prospectus forms a part.

Servicing Procedures

The servicer will manage, service and administer, bill, collect and post all payments in respect of, the storm recovery property according to the terms of the servicing agreement. The servicer’s duties will include:

•

calculating consumption, billing the storm recovery charges, collecting the storm recovery charges from customers and posting all collections;

•

responding to inquiries of customers, the PSCSC or any other governmental authority regarding the storm recovery property or storm recovery charges;

•

investigating and handling delinquencies (and furnishing reports with respect to such delinquencies to the issuing entity);

•

processing and depositing collections and making periodic remittances;

•

furnishing periodic and current reports and statements to us, the PSCSC, the rating agencies and the indenture trustee;

•

making all filings with the PSCSC and taking all other actions necessary to perfect our ownership interests in and the indenture trustee’s lien on the storm recovery property;

•

making all filings and taking such other action as may be necessary to perfect the indenture trustee’s lien on and security interest in all collateral;

•

selling, as our agent, as our interests may appear, defaulted or written off accounts;

•

taking all necessary action in connection with true-up adjustments; and

•

performing other duties specified under the financing order.

The servicer will be required to notify us, the indenture trustee and the rating agencies in writing of any laws or PSCSC regulations promulgated after the execution of the servicing agreement that have a material adverse effect on the servicer’s ability to perform its duties under the servicing agreement. The servicer is also authorized to execute and deliver documents and to make filings and participate in proceedings on our behalf.

In addition, upon our reasonable request or the reasonable request of any rating agency, the servicer will provide to us or any rating agency public financial information about the servicer and any material information about the storm recovery property that is reasonably available, as may be reasonably necessary and permitted by law to enable us or any rating agency to monitor the servicer’s performance, and, so long as any bonds are outstanding, within a reasonable time after written request thereof, any information available to the servicer or reasonably obtainable by it that is necessary to calculate the storm recovery charges applicable to each storm recovery rate class. The servicer will also prepare any reports required to be filed by us with the SEC, as further described below, and will cause to be delivered required opinions of counsel to the effect that all filings with the State of South Carolina and the Secretary of State of the State of Delaware necessary to preserve and protect the interests of the indenture trustee in the storm recovery property have been made.

Servicing Standards and Covenants

The servicing agreement will require the servicer, in servicing and administering the storm recovery property, to employ or cause to be employed procedures and exercise or cause to be exercised the same care and diligence it customarily employs and exercises with respect to billing, collection and posting activities it conducts for its own account and, if applicable, for others.

107

The servicing agreement will require the servicer to implement procedures and policies to ensure that customers remit the storm recovery charges to the servicer on our behalf and on behalf of the bondholders. The servicer will also monitor payments and will impose collection policies on customers, as permitted under the financing order and the rules of the PSCSC.

The servicing agreement will require the servicer to (i) manage, service, administer, bill, collect and calculate storm recovery charges in accordance with the Financing Act and post collections in respect of the storm recovery property with reasonable care and in material compliance with applicable requirements of law, including all applicable regulations of the PSCSC, (ii) follow standards, policies and procedures in performing its duties as servicer that are customary in the electric distribution industry, (iii) use all reasonable efforts, consistent with its customary servicing procedures, to enforce, and maintain rights in respect of, the storm recovery property and to bill, collect and post the storm recovery charges, (iv) comply with all requirements of law, including all applicable regulations of the PSCSC applicable to and binding on it relating to the storm recovery property, (v) file all reports with the PSCSC required by the financing order, (vi) file and maintain the effectiveness of financing statements filed with the South Carolina Secretary of State with respect to the property transferred under the sale agreement and (vii) take such other action on our behalf to ensure that the lien of the indenture trustee on the collateral remains perfected and of first priority. The servicer shall follow customary and usual practices and procedures as it deems necessary or advisable in servicing the storm recovery property, which, in the servicer’s judgment, may include taking legal action at our expense but subject to the priority of payments set forth in the indenture or in the series supplement.

Notwithstanding anything to the contrary in the servicing agreement, the duties of the servicer set forth in the servicing agreement shall be qualified and limited in their entirety by the Financing Act, the financing order and any PSCSC regulation as in effect at the time such duties are to be performed.

The servicing agreement will also require the servicer to provide various reports regarding the storm recovery charges and allocation of the storm recovery charges among various classes of customers and payments to the bondholders, in each case as are necessary to effect collection, allocation and remittance of payments in respect of storm recovery charges and other collected funds as required under the basic documents.

The servicer will be responsible for instituting any action or proceeding to compel performance by the State of South Carolina or the PSCSC of their respective obligations under the Financing Act, the financing order or subsequent financing order and any true-up adjustment. The servicer will assist us in taking such legal or administrative actions, including defending against or instituting and pursuing legal actions and appearing or testifying at hearings or similar proceedings, as may be reasonably necessary to attempt to block or overturn any attempts to cause a repeal of, modification of or supplement to the Financing Act, the financing order or the rights of holders of storm recovery property by legislative enactment, constitutional amendment or other means that would be adverse to bondholders. Any costs associated with such legal or administrative action will be borne by us as an operating expense; provided, however, that the servicer will be obligated to institute and maintain such action or proceedings only if it is being reimbursed on a current basis for its costs and expenses in taking such actions in accordance with the related indenture or series supplement, and is not required to advance its own funds to satisfy these obligations.

In any proceedings related to the exercise of the power of eminent domain by any municipality to acquire a portion of DEP’s electric distribution facilities, the servicer will assert that the court ordering such condemnation must treat such municipality as a successor to DEP under the Financing Act and the financing order.

Each servicing agreement will also designate the servicer as the custodian of our records and documents.

The PSCSC’s Mandated True-Up Mechanism

The Financing Act permits and the financing order requires that storm recovery charges be reviewed and adjusted at least semi-annually (or beginning twelve months prior to the scheduled final payment date, at least quarterly) to correct for any overcollection or undercollection of the storm recovery charges or to otherwise ensure the timely payment of the periodic payment requirement. Under the servicing agreement, the servicer will make adjustments to the storm recovery charges at least semi-annually.

108

In addition to the semi-annual true-up adjustment, the servicer is authorized to make interim adjustments at any time for any reason to ensure the timely payment of the periodic payment requirement. Necessary true-up adjustments are to be made to correct for any overcollection or undercollection of the storm recovery charges or to otherwise ensure the timely payment of the periodic payment requirement.

There are no caps on the level of storm recovery charges that may be imposed on customers as a result of the true-up process. In addition to the semi-annual true-up adjustments, the servicer (a) is also required to implement quarterly true-up adjustments beginning twelve months prior to the scheduled final payment date for such bonds, and (b) may request an interim true-up adjustment at any time for any reason to ensure timely payment of principal of and interest on the bonds and other required amounts and charges owing in connection with the bonds on the next payment date. For more information on the true-up mechanism, please read “DEP’s Financing Order — True-Up Mechanism”.

Each true-up adjustment will allocate the revenue requirement among all customer rate classes in accordance with the cost-of-service methodology approved in DEP’s last rate case before the PSCSC.

As part of each true-up adjustment, the servicer will calculate the storm recovery charges that must be billed in order to generate the revenues for the semi-annual period necessary to result in:

•

all accrued and unpaid interest on the bonds being paid in full;

•

the outstanding principal balance of the bonds equaling the amount provided in the expected sinking fund schedule;

•

the amount on deposit in the capital subaccount equaling the required capital level; and

•

all of our other fees, expenses and indemnities being paid. by the next scheduled payment date.

There is no cap on the level of storm recovery charges that may be imposed on customers as a result of the true-up mechanism to pay principal of and interest on the bonds when due and ongoing financing costs.

Upon the filing of a true-up adjustment letter made pursuant to the financing order, the PSCSC shall either administratively approve the requested true-up calculation in writing or inform the servicer of any mathematical or clerical errors in its calculation as expeditiously as possible but no later than 60 days following the servicer’s true-up filing; and that notification and correction of any mathematical or clerical errors shall be made so that the true-up is implemented within 60 days of the servicer’s filing of a true-up adjustment letter. If the PSCSC identifies a mathematical or clerical error, the servicer will promptly correct the related true-up filing and resubmit. Upon administrative approval, no further action of the PSCSC will be required prior to implementation of the true-up.

Remittances to Collection Account

The servicer will remit storm recovery charges directly to the indenture trustee on a daily basis. The servicer will remit storm recovery charges based on estimated collections using a weighted average balance of days outstanding (“ADO”) on DEP’s retail bills. Storm recovery charge collections remitted will represent the charges estimated to be received for any period based upon the ADO and an estimated system-wide write-off percentage.

Each day on which those remittances are made is referred to as a daily remittance date. The estimated payments are made from collections received from customers.

No less often than semi-annually, the servicer will reconcile remittances of estimated storm recovery charge collections with actual storm recovery charge payments received by the servicer and remitted to the indenture trustee to more accurately reflect the amount of billed storm recovery charges that should have been remitted, based on ADO and the actual system-wide write-off percentage. To the extent the remittances of estimated payments arising from the storm recovery charges exceed the amounts that should have been remitted based on actual system-wide write-offs, the servicer will be entitled to withhold the excess amount from any subsequent remittance to the indenture trustee until the balance of such excess is reduced to zero. To the extent the remittances of estimated payments arising from the storm recovery charges are less than the amount that should have been remitted based on actual system wide write-offs, the servicer will remit the amount of the shortfall to the indenture trustee within two business days. Although the servicer will remit

109

estimated storm recovery charge collections for the storm recovery bonds to the indenture trustee, the servicer will not be obligated to make any payments on the bonds.

At least annually, the servicer also will remit to the indenture trustee, for our benefit, any late charges received from customers with respect of storm recovery charges.

The servicer has agreed and acknowledged that it holds all storm recovery charge collections for the storm recovery bonds received by it and any other proceeds for the storm recovery bond collateral received by it for the benefit of the indenture trustee and the bondholders and that all such amounts will be remitted by the servicer without any surcharge, fee, offset, charge or other deduction. The servicer has further agreed not to make any claim to reduce its obligation to remit all storm recovery charge payments collected by it in accordance with this servicing agreement.

Servicing Compensation

The servicer will be entitled to receive an annual servicing fee with respect to the bonds in an amount equal to:

•

0.05% on an annualized basis of the original principal amount of bonds plus out-of-pocket expenses so long as the servicer remains DEP or an affiliate; or

•

if DEP or any of its affiliates is not the servicer, an amount agreed upon by the successor servicer and the indenture trustee, provided, that the fee shall not exceed 0.60% of the original aggregate principal amount of the bonds unless the PSCSC has approved the appointment of a successor or the PSCSC does not act to either approve or disapprove such appointment on or before the expiration of 45 days following notice to the PSCSC.

The servicing fee shall be paid semi-annually, with half of the servicing fee being paid on each payment date, except for the amount of the servicing fee to be paid on the first payment date in which the servicing fee then due will be calculated based on the number of days the Servicing Agreement has been in effect. The indenture trustee will pay the servicing fee on each payment date (together with any portion of the servicing fee that remains unpaid from prior payment dates) to the extent of available funds prior to the distribution of any interest on and principal of the bonds. See “Security for the Storm Recovery Bonds — How Funds in the Collection Account Will Be Allocated” in this prospectus.

Servicer Representations and Warranties

In the servicing agreement, the servicer will represent and warrant to us, the indenture trustee and the PSCSC as of the issuance date of the bonds, among other things, that:

•

the servicer is duly organized, validly existing and is in good standing under the laws of the state of its organization, with requisite power and authority to own its properties, to conduct its business as such properties are currently owned and such business is presently conducted by it, to service the storm recovery property and hold the records related to the storm recovery property, and to execute, deliver and carry out the terms of the servicing agreement and the intercreditor agreement;

•

the servicer is duly qualified to do business, is in good standing and has obtained all necessary licenses and approvals in all jurisdictions in which the ownership or lease of property or the conduct of its business (including the servicing of the storm recovery property as required under the servicing agreement) requires such qualifications, licenses or approvals (except where a failure to qualify would not be reasonably likely to have a material adverse effect on the servicer’s business, operations, assets, revenues or properties or to its servicing of the storm recovery property);

•

the execution, delivery and performance of the terms of the servicing agreement and the intercreditor agreement have been duly authorized by all necessary action on the part of the servicer under its organizational or governing documents and laws;

•

each of the servicing agreement and the intercreditor agreement constitutes a legal, valid and binding obligation of the servicer, enforceable against it in accordance with its respective terms, subject to applicable insolvency, reorganization, moratorium, fraudulent transfer and other laws relating to or affecting creditors’ rights generally from time to time in effect and to general principles

110

of equity (including concepts of materiality, reasonableness, good faith and fair dealing), regardless of whether considered in a proceeding in equity or at law;

•

the consummation of the transactions contemplated by the servicing agreement and the intercreditor agreement do not conflict with, result in any breach of or constitute (with or without notice or lapse of time) a default under the servicer’s organizational documents or any indenture or other agreement or instrument to which the servicer is a party or by which it or any of its property is bound, result in the creation or imposition of any lien upon the servicer’s properties pursuant to the terms of any such indenture or agreement or other instrument (other than any lien that may be granted in favor of the indenture trustee for the benefit of bondholders under the basic documents) or violate any existing law or any existing order, rule or regulation applicable to the servicer of any governmental authority having jurisdiction over the servicer or its properties;

•

except as otherwise set forth in the servicing agreement and to the servicer’s knowledge, there are no proceedings or investigations pending or, to the servicer’s knowledge, threatened against the servicer before any court, federal or state regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the servicer or its properties: (i) seeking to prevent issuance of the bonds or the consummation of the transactions contemplated by the servicing agreement or any of the other basic documents, or, if applicable, any additional indenture, any additional series supplement or subsequent sale agreement; (ii) seeking any determination or ruling that might materially and adversely affect the performance by the servicer of its obligations under, or the validity or enforceability against the servicer of, the servicing agreement or any of the other basic documents, or, if applicable, any additional indenture, any additional series supplement or subsequent sale agreement; or (iii) relating to the servicer and which might materially and adversely affect the federal or state income, gross receipts or franchise tax attributes of the bonds;

•

no governmental approvals, authorizations, consents, orders or other actions or filings with any governmental authority are required for the servicer to execute, deliver and perform its obligations under the servicing agreement except those that have previously been obtained or made, those that are required to be made by the servicer in the future pursuant to the servicing agreement or the intercreditor agreement and those that the servicer may need to file in the future to continue the effectiveness of any financing statements; and

•

each report or certificate delivered in connection with any filing made to the PSCSC by the servicer on our behalf with respect to the storm recovery charges or true-up adjustments will constitute a representation and warranty by the servicer that each such report or certificate, as the case may be, is true and correct in all material respects. To the extent that any such report or certificate is based in part or upon or contains assumptions, forecasts or other predictions of future events, the representation and warranty of the servicer with respect thereto will be limited to the representation and warranty that such assumptions, forecasts or other predictions of future events are reasonable based upon historical performance and the facts known to the servicer on the date such report or certificate is delivered.

The servicer, the indenture trustee and DEP SC Storm Funding are not responsible as a result of any action, decision, ruling or other determination made or not made, or any delay (other than any delay resulting from the servicer’s failure to make any filings with the PSCSC required by the servicing agreement in a timely and correct manner or any breach by the servicer of its duties under the servicing agreement that adversely affects the storm recovery property or the true-up adjustments), by the PSCSC in any way related to the storm recovery property or in connection with any true-up adjustment, the subject of any such filings, any proposed true-up adjustment or the approval of any revised storm recovery charges and the scheduled adjustments thereto. Except to the extent that the servicer otherwise is liable under the provisions of the servicing agreement, the servicer shall have no liability whatsoever relating to the calculation of any revised storm recovery charges and the scheduled adjustments thereto, including as a result of any inaccuracy of any of the assumptions made in such calculations, so long as the servicer has acted in good faith and has not acted in a negligent manner in connection therewith, nor shall the servicer have any liability whatsoever as a result of any person or entity, including the bondholders, not receiving any payment, amount or return anticipated or expected or in respect of any bond generally.

111

The Servicer Will Indemnify DEP SC Storm Funding and Other Entities in Limited Circumstances

The servicer will indemnify, defend and hold harmless DEP SC Storm Funding and the indenture trustee (for itself and for the related bondholders’ benefit) and the independent manager and each of their respective officers, directors, employees and agents from any and all liabilities, obligations, losses, damages, payments and claims, and reasonable costs or expenses, arising as a result of:

•

the servicer’s willful misconduct, bad faith or negligence in the performance of, or reckless disregard of, its duties or observance of its covenants under the servicing agreement and the intercreditor agreement;

•

the servicer’s material breach of any of its representations or warranties that results in a default by the servicer under the servicing agreement or the intercreditor agreement; and

•

litigation and related expenses relating to its status and obligations as servicer (other than any proceeding the servicer is required to institute under the servicing agreement).

The servicer will not be liable, however, for any liabilities, obligations, losses, damages, payments or claims, or reasonable costs or expenses, resulting from the willful misconduct, bad faith or gross negligence of the party seeking indemnification, or resulting from a breach of a representation or warranty made by any such person or entity in any of the basic documents that give rise to the servicer’s breach.

Except for payment of the servicing fee and payment of the purchase price of the storm recovery property, the servicing agreement also provides that the servicer releases and discharges us and our independent manager, the indenture trustee and each of our respective officers, directors and agents from any and all actions, claims and demands that the servicer, in the capacity of servicer or otherwise, may have against those parties relating to the storm recovery property or the servicer’s activities with respect to the storm recovery property, other than actions, claims and demands arising from the willful misconduct, bad faith or gross negligence of the parties.

The servicer will indemnify the indenture trustee (in its own capacity) and its respective officers, directors and agents for any and all liabilities, obligations, losses, damages payments and claims arising from the acceptance and performance of the trusts and the duties under the servicing agreement and in the indenture, except to the extent that any such liability, obligation, loss, damage, payment and claim, and reasonable cost or expense, is due to the willful misconduct, bad faith or gross negligence of the indenture trustee.

This indemnification will survive the resignation or removal of the indenture trustee and the termination of the servicing agreement.

Evidence as to Compliance

The servicing agreement will provide that the servicer will furnish annually to us, the indenture trustee and the rating agencies, on or before the earlier of March 31 of each year, beginning March 31, 2025 or on the date on which our annual report on Form 10-K relating to the bonds is required to be filed with the SEC, certificates from a responsible officer of the servicer containing and certifying compliance with specified servicing criteria as required by Item 1122(a) and Item 1123 of the rules of the SEC known as Regulation AB promulgated under Subpart 229.1100 — Asset-Backed Securities (Regulation AB), 17 C.F.R. §§229.1100 – 229.1125, as such may be amended from time to time (or any successor or similar item or rule), during the preceding 12 months ended December 31 (or preceding period since the issuance date of the bonds in the case of the first statement), together with a certificate by an officer of the servicer certifying the statements set forth therein.

The servicing agreement also provides that a firm of independent registered public accountants will furnish annually to us, and provide to the indenture trustee, the PSCSC and the rating agencies on or before the earlier of March 31 of each year, beginning March 31, 2025 or on the date on which the annual report on Form 10-K relating to the bonds is required to be filed with the SEC, an annual accountant’s report, which will include any required attestation report that attests to and reports on the servicer’s assessment report described in the preceding paragraph, and such attestation shall be in accordance with Rules 1-02(a)(3) and 2-02(g) of Regulation S-X under the Securities Act of 1933, as amended, and the Exchange Act. The

112

report will also indicate that the accounting firm providing the report is independent of the servicer within the meaning of the rules of the Public Company Accounting Oversight Board. The cost of the annual accountant’s report will be reimbursable as an operating expense under the indenture and the series supplement.

Copies of the above reports will be filed with the SEC. Please read “Where You Can Find Additional Information” in this prospectus. You may also obtain copies of the above statements and certificates by sending a written request addressed to the indenture trustee.

The servicer will also be required to deliver to us, the indenture trustee , the PSCSC and the rating agencies monthly reports setting forth certain information relating to collections of storm recovery charges received during the preceding calendar month and, shortly before each payment date, a report setting forth the amount of principal and interest payable to bondholders on such date, the aggregate outstanding amount of the bonds, before and after giving effect to any payment of principal on such payment date, the difference between the principal outstanding on the bonds and the amounts specified in the related expected sinking fund schedule after giving effect to any such payments and the amounts on deposit in the capital subaccount and excess funds subaccount after giving effect to all transfers and payments to be made on such payment date. The servicer is required to file copies of these reports with the SEC.

In addition, the servicer is required to send copies of each filing or notice evidencing a true-up adjustment to us, the indenture trustee and the rating agencies. The servicer is also required to provide to the rating agencies any non-confidential and non-proprietary information as is reasonably requested by the rating agencies.

Matters Regarding the Servicer

The servicing agreement will provide that DEP may not resign from its obligations and duties as servicer thereunder, except when DEP delivers to the indenture trustee and PSCSC an opinion of external legal counsel to the effect that DEP’s performance of its duties under the servicing agreement is no longer permissible under applicable law. No resignation by DEP as servicer will become effective until a successor servicer has been approved by the PSCSC and assumed DEP’s servicing obligations and duties under the servicing agreement.

The servicing agreement further provides that neither the servicer nor any of its directors, officers, employees, and agents will be liable to us or to any other person or entity, except as provided under the servicing agreement, for taking any action or for refraining from taking any action under the servicing agreement or for good faith errors in judgment. However, neither the servicer nor any of its directors, officers or agents will be protected against any liability that would otherwise be imposed by reason of negligence, recklessness or willful misconduct in the performance of its duties or by reason of reckless disregard of obligations and duties under this servicing agreement. The servicer and any of its directors, officers, employees or agents may rely in good faith on the advice of counsel or on any document submitted by any person or entity respecting any matters under the servicing agreement. The servicer has also acknowledged that the PSCSC has the authority to enforce the provisions of the servicing agreement for the benefit of customers. Except as provided in the servicing agreement, the servicer is under no obligation to appear in, prosecute or defend any legal action that is not directly related to one of its duties in the servicing agreement or otherwise related to its indemnification obligations.

Any entity which becomes the successor by merger, consolidation, division, sale, transfer, lease, management contract or otherwise to all or substantially all of the servicer’s electric distribution business may assume all of the rights and obligations of the servicer under the servicing agreement without the execution or filing of any document. The following are conditions to the transfer of the duties and obligations to a successor servicer:

•

immediately after the transfer, no representation or warranty made by the servicer in the servicing agreement will have been breached and no servicer default or event which after notice of, lapse of time or both, would become a servicer default, has occurred and is continuing;

•

the servicer has delivered to us, to the PSCSC, to the related indenture trustee and the rating agencies an officer’s certificate and an opinion of counsel stating that the transfer complies with the servicing agreement and all conditions to the transfer under the servicing agreement have been complied with;

113

•

the servicer has delivered to us, to the related indenture trustee and the rating agencies an opinion of counsel stating either that all necessary filings, including those under the Financing Act and the UCC, to fully preserve and protect our interests in all of the storm recovery property have been made or that no such filings are required;

•

the servicer has given prior written notice to the rating agencies;

•

the servicer has delivered to us, the indenture trustee and the rating agencies, an opinion of counsel stating that for U.S. federal income tax purposes, such consolidation, conversion, merger or succession and such agreement of assumption will not result in material adverse U.S. federal income tax consequences for the bondholders; and

•

any applicable requirements of the intercreditor agreement have been satisfied.

So long as the conditions of any such assumptions are met, then the prior servicer will automatically be released from its obligations under the servicing agreement.

Servicer Defaults

Servicer defaults under the servicing agreement will include:

•

any failure by the servicer to remit any amount, including payments arising from the storm recovery charges into the collection account as required under the servicing agreement, which failure continues unremedied for five business days after written notice from us or the indenture trustee is received by the servicer (with a copy of such notice being provided promptly upon receipt by the servicer to the PSCSC) or after discovery of the failure by a responsible officer of the servicer;

•

any failure by the servicer to duly perform its obligations to make storm recovery charge adjustment filings in the time and manner set forth in the servicing agreement, which failure continues unremedied for a period of five business days;

•

any failure by the servicer or, if the servicer is DEP or an affiliate of DEP, by DEP to observe or perform in any material respect any covenants or agreements in the servicing agreement or the other basic documents to which it is a party, which failure materially and adversely affects the rights of bondholders and which failure continues unremedied for 60 days after written notice of this failure has been given to the servicer or, if the servicer is DEP or an affiliate of DEP, by us, or by the indenture trustee (with a copy of such notice being provided upon receipt by the servicer to the PSCSC and the indenture trustee) or after such failure is discovered by a responsible officer of the servicer;

•

any representation or warranty made by the servicer in the servicing agreement or any other basic document proves to have been incorrect in a material respect when made, which has a material adverse effect on the bondholders and which material adverse effect continues unremedied for a period of 60 days after the giving of written notice to the servicer by us, the PSCSC or the indenture trustee or after such failure is discovered by a responsible officer of the servicer; and

•

events of bankruptcy, insolvency, receivership or liquidation of the servicer.

Rights Upon a Servicer Default

In the event of a servicer default that remains unremedied, the indenture trustee, at the written direction of the holders of a majority of the outstanding principal amount of the related series of storm recovery bonds or, at the written direction of the PSCSC, subject to the terms of the intercreditor agreement, by notice then given in writing to the servicer, will terminate all the rights and obligations (other than servicer’s indemnity obligation and obligation to continue performing its functions as servicer until a successor servicer is appointed) of the servicer under the servicing agreement and under the intercreditor agreement. In addition, upon a servicer default, then we and the indenture trustee shall be entitled to apply to any court of competent jurisdiction for sequestration and payment to the indenture trustee of revenues arising with respect to the applicable storm recovery property. The indenture trustee may not give a termination notice unless the rating agency condition and the PSCSC condition are satisfied.

On or after the receipt by the servicer of a notice of termination, all authority and power of the servicer under the servicing agreement, whether with respect to the storm recovery bonds, the storm

114

recovery property, the related storm recovery charges or otherwise, shall, upon appointment of a successor servicer under the servicer agreement, without further action, pass to and be vested in such successor servicer and, without limitation, the indenture trustee is hereby authorized and empowered to execute and deliver, on behalf of the predecessor servicer, as attorney-in-fact or otherwise, any and all documents and other instruments, and to do or accomplish all other acts or things necessary or appropriate to effect the purposes of the notice of termination, whether to complete the transfer of the storm recovery property records and related documents, or otherwise. The predecessor servicer shall cooperate with the successor servicer, the indenture trustee and with us in effecting the termination of the responsibilities and rights of the predecessor servicer under the servicing agreement, including the transfer to the successor servicer for administration by it of all cash amounts that shall at the time be held by the predecessor servicer for remittance, or shall thereafter be received by it with respect to the storm recovery property or the related storm recovery charges. As soon as practicable after receipt by the servicer of such notice of termination, the servicer shall deliver the storm recovery property records to the successor servicer. All reasonable costs and expenses (including attorneys’ fees and expenses) incurred in connection with transferring the storm recovery property records to the successor servicer and amending the servicing agreement to reflect such succession as servicer pursuant to the servicing agreement shall be paid by the predecessor servicer upon presentation of reasonable documentation of such costs and expenses. Termination of DEP as servicer shall not terminate DEP’s rights or obligations under the sale agreement or any other basic document other than the servicing agreement.

Waiver of Past Defaults

The indenture trustee, with the written consent of the holders of a majority of the outstanding principal amount of the related series of bonds may waive in writing any default by the servicer in the performance of its obligations under the servicing agreement and its consequences, except a default in making any required remittances to the collection account in accordance with the servicing agreement. Upon any such waiver of a past default, such default shall cease to exist, and any default of the servicer arising therefrom shall be deemed to have been remedied for every purpose of the servicing agreement. The servicing agreement will provide that no waiver will impair the related bondholders’ rights relating to subsequent defaults.

Successor Servicer

Upon the receipt of a notice of termination or upon the servicer’s resignation or removal in accordance with the terms of the servicing agreement, the predecessor servicer shall continue to perform its functions as servicer and shall be entitled to receive the requisite portion of the servicing fees, until a successor servicer has assumed in writing the obligations of the servicer. In the event of the servicer’s removal or resignation, the related indenture trustee, at the written direction of the holders of a majority of the principal amount of the outstanding bonds of the related series, or the PSCSC, shall appoint a successor servicer with our prior written consent (which consent shall not be unreasonably withheld).

If no successor servicer has been appointed within 30 days after the delivery of the termination notice, the indenture trustee, at the written direction of the holders of not less than a majority of the outstanding amount of the related bonds, will petition the PSCSC or a court of competent jurisdiction for the appointment of, a successor servicer which is permitted to perform the duties of the servicer pursuant to the Financing Act, the PSCSC regulations, the financing order and the servicing agreement, satisfies criteria specified by the nationally recognized statistical rating agencies rating the bonds, enters into a servicing agreement with us having substantially the same provisions as the servicing agreement in effect between us and the predecessor servicer and, if applicable, its compensation is approved (or not disapproved) by the PSCSC. Any successor servicer may resign only if it is prohibited from servicing as such by applicable law.

If for any reason a third party assumes the role of the servicer under the servicing agreement, the servicing agreement will require the servicer, on an ongoing basis, to cooperate with us, the indenture trustee and the successor servicer and provide whatever information is, and take whatever actions are, reasonably necessary to assist the successor servicer in performing its obligations under the servicing agreement.

115

Amendment

The servicing agreement may be amended in writing by the servicer and us, if a copy of the amendment is provided by us to each rating agency and the PSCSC and if the rating agency condition and PSCSC condition have been satisfied, with the prior written consent of the indenture trustee; provided, that such amendment may not adversely affect the interest of any bondholder in any material respect without the consent of the bondholders of a majority of the outstanding principal amount of bonds.

116

INTERCREDITOR AGREEMENT

DEP and its affiliates currently have accounts receivable sale agreements under which it sells substantially all its accounts receivable on a revolving basis (other than the storm recovery charges, which are entitlements of ours and not the servicer, and which are excluded from such arrangements). Under DEP’s intercreditor agreement, as amended at the time of issuance of the bonds among DEP, us, the indenture trustee, the indenture trustee for the 2021 NC Storm Recovery Bonds, the parties to DEP’s account receivable sale program, (i) the storm recovery charges are excluded from the assets sold under the accounts receivable sales program and (ii) replacement of the servicers will require the agreement of both, the indenture trustee and the indenture trustee for the 2021 NC Storm Recovery Bonds and the administrative agent under the accounts receivable sales program. In the sale agreement, DEP has covenanted that it will not enter into any future sale of charges owing by electric customers to affiliates for the purpose of issuing bonds backed by such charges without causing the parties to such issuance to become party to an intercreditor agreement. Please refer to “Risk Factors — Servicing Forecasting Risks — If DEP SC Storm Funding needs to replace DEP as the servicer, DEP SC Storm Funding may experience difficulties finding and using a replacement servicer”.

117

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES

The following discussion describes the material U.S. federal income tax consequences to U.S. Holders (as defined below) and Non-U.S. Holders (as defined below) of the purchase, ownership, and disposition of the Series      Bonds acquired in this offering and, insofar as it relates to matters of U.S. federal income tax law and regulations or legal conclusions with respect thereto, constitutes the opinion of DEP’s tax counsel, Hunton Andrews Kurth LLP. Except where noted, this discussion only applies to Series      Bonds that are held as capital assets (within the meaning of the Internal Revenue Code) by holders who purchase the Series      Bonds upon their original issuance at their original issue price. This discussion does not address the tax considerations applicable to subsequent purchasers of Series      Bonds. This discussion does not describe all of the material tax considerations that may be relevant to holders in light of their particular circumstances or to holders subject to special rules, such as certain financial institutions, regulated investment companies, real estate investment trusts, banks, insurance companies, tax-exempt entities, certain former citizens or residents of the United States, dealers in securities, traders in securities that elect to use a mark-to-market method of accounting, partnerships for U.S. federal income tax purposes and other pass-through entities (and persons holding the Series      Bonds through a partnership for U.S. federal income tax purposes or other pass-through entity), U.S. Holders whose functional currency is not the U.S. dollar, passive foreign investment companies, controlled foreign corporations, and corporations that accumulate earnings to avoid U.S. federal income tax, accrual method taxpayers subject to special tax accounting rules under Section 451(b) of the Internal Revenue Code, or persons holding the Series      Bonds as part of a hedge, straddle, or other integrated transaction. In addition, this discussion does not address the effect of any state, local, foreign, or other tax laws or any U.S. Medicare contribution tax on net investment income, federal estate, gift, alternative minimum or foreign tax considerations. This discussion is based upon the Internal Revenue Code, administrative pronouncements, judicial decisions, and final, temporary, and proposed Treasury regulations, all as in effect on the date hereof, and all of which are subject to change or differing interpretations, possibly with retroactive effect, so as to result in U.S. federal income tax consequences different from those discussed below.

As used in this prospectus, the term “U.S. Holder” means a beneficial owner of a Series      Bond that is for U.S. federal income tax purposes:

•

an individual citizen or resident of the United States;

•

a corporation (or other entity taxable as a corporation) created or organized in or under the laws of the United States, any state thereof, or the District of Columbia;

•

an estate the income of which is subject to U.S. federal income taxation regardless of its source; or

•

a trust (i) with respect to which a court within the United States is able to exercise primary supervision over its administration and one or more United States persons have the authority to control all of its substantial decisions, or (ii) that was in existence on August 20, 1996 and has a valid election in effect under applicable Treasury regulations to be treated as a domestic trust.

The term “Non-U.S. Holder” means a beneficial owner of a Series      Bond that is neither a U.S. Holder nor a partnership (or other pass-through entity).

If a partnership for U.S. federal income tax purposes holds Series      Bonds, the tax treatment of such partnership and its partners will generally depend on the status of the partner and the activities of such partnership and its partners. If a holder of Series      Bonds is a partnership or a partner in such a partnership, such holder should consult with its own tax advisors regarding the U.S. federal income tax considerations of the purchase, ownership and disposition of Series      Bonds.

THIS SUMMARY IS NOT INTENDED TO CONSTITUTE A COMPLETE DESCRIPTION OF ALL TAX CONSEQUENCES RELATING TO THE PURCHASE, OWNERSHIP, AND DISPOSITION OF THE SERIES      BONDS. PROSPECTIVE INVESTORS SHOULD CONSULT WITH THEIR TAX ADVISORS REGARDING THE PARTICULAR TAX CONSEQUENCES TO THEM (INCLUDING THE APPLICATION AND EFFECT OF ANY STATE, LOCAL, AND NON-U.S. INCOME AND OTHER TAX LAWS) OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE SERIES      BONDS.

118

Taxation of the Issuing Entity and Characterization of the Series      Bonds

Concurrent with the issuance of the Series      Bonds, Hunton Andrews Kurth LLP, as special tax counsel to the issuing entity and DEP, will deliver its opinion that based upon the Internal Revenue Code, the Treasury regulations promulgated thereunder, and Revenue Procedure 2005-62, for U.S. federal income tax purposes (i) the issuance of the Series      Bonds will be a “qualifying securitization” within the meaning of Revenue Procedure 2005-62, (ii) the issuing entity will not be treated as a taxable entity separate and apart from DEP, (iii) the Series      Bonds will be treated as obligations of DEP as expressly set forth in section 6.02 of Revenue Procedure 2005-62 and (iv) DEP will not be treated as recognizing gross income upon the issuance of the Series      Bonds. By acquiring a Series      Bond, a beneficial owner agrees to treat the Series      Bond as debt of DEP for U.S. federal income tax purposes. This opinion is based on certain representations made by the issuing entity and DEP and on the application of current law to the facts as established by the indenture and other relevant documents and assumes compliance with the indenture and such other documents as in effect on the date of issuance of the Series      Bonds.

Tax Consequences to U.S. Holders

Interest

DEP and the issuing entity expect that the Series      Bonds will not be issued with more than a de minimis amount of original issue discount, or “OID”, for U.S. federal income tax purposes. Thus, stated interest on the Series      Bonds generally will be taxable to a U.S. Holder as ordinary income at the time it is received or accrued in accordance with such U.S. Holder’s regular method of accounting for U.S. federal income tax purposes. If, however, the issue price of the Series      Bonds is less than their stated principal amount and the difference is equal to or more than a de minimis amount (as set forth in the applicable Treasury regulations), U.S. Holders will be required to include the difference in income as OID as it accrues in accordance with the constant yield method (as set forth in the applicable Treasury regulations). The remainder of this discussion assumes that the Series      Bonds will not be treated as issued with OID.

Sale, Exchange, or Retirement of Series      Bonds

On a sale, exchange, or retirement of a Series      Bond, a U.S. Holder generally will recognize taxable gain or loss equal to the difference between the amount received (other than any amount received attributable to accrued but unpaid interest on the Series      Bond not previously included in income, which will be taxable as ordinary income) and the U.S. Holder’s adjusted tax basis in the Series      Bond. A U.S. Holder’s adjusted tax basis in a Series      Bond is the U.S. Holder’s cost, subject to adjustments such as reductions in basis for principal payments received previously. Gain or loss will generally be capital gain or loss, and will be long-term capital gain or loss if the Series      Bond was held for more than one year at the time of disposition. Long-term capital gains of non-corporate U.S. Holders may be eligible for reduced rates of taxation. The deductibility of capital losses by both corporate and non-corporate U.S. Holders is subject to limitations.

Information Reporting and Backup Withholding

In general, information reporting requirements will apply to certain payments of principal and interest on the Series      Bonds and to the proceeds from the sale of the Series      Bonds unless the recipient is an exempt recipient. In addition, backup withholding at the current rate will apply to the payments if a U.S. Holder fails to provide its taxpayer identification number, a certificate of exempt status, or otherwise comply with the applicable requirements of the U.S. backup withholding rules.

Backup withholding is not an additional tax. Any amounts withheld from payments to a U.S. Holder under the backup withholding rules will be allowed as a credit against such U.S. Holder’s U.S. federal income tax liability and may entitle the U.S. Holder to a refund, provided that the required information is timely furnished to the IRS. U.S. Holders should consult their own tax advisors regarding the application of backup withholding in their particular situation, the availability of an exemption from backup withholding, and the procedure for obtaining such an exemption, if available.

119

Tax Consequences to Non-U.S. Holders

Interest

Subject to the discussion below concerning backup withholding and FATCA, a Non-U.S. Holder generally will not be subject to U.S. federal income and withholding tax on interest received in respect of the Series      Bonds, provided that such interest is not effectively connected with such Non-U.S. Holder’s conduct of a U.S. trade or business and such Non-U.S. Holder (i) does not own, actually or constructively, 10% or more of the total combined voting power of DEP, (ii) is not a controlled foreign corporation for U.S. federal income tax purposes directly or indirectly related to DEP within the meaning of section 881(c)(3)(C) of the Internal Revenue Code, (iii) is not a bank whose receipt of interest on the Series      Bonds is described in section 881(C)(3)(A) of the Internal Revenue Code, and (iv) satisfies certain certification requirements under penalties of perjury (generally through the provision of a properly completed and executed IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable).

A Non-U.S. Holder that does not qualify for the exemption from withholding described above (the “Portfolio Interest Exemption”), generally will be subject to U.S. federal withholding tax at a 30% rate on payments of interest on the Series      Bonds unless (i) such interest is effectively connected with the conduct by the Non-U.S. Holder of a trade or business in the United States (and, if an applicable tax treaty so requires, is attributable to the conduct of a trade or business through a permanent establishment or fixed base in the United States) and the Non-U.S. Holder provides the applicable paying agent an IRS Form W-8ECI (or appropriate substitute form) or (ii) the Non-U.S. Holder provides a properly completed IRS Form W-8BEN or W-8BEN-E (or successor form), as applicable, establishing an exemption from or reduction in withholding under an applicable tax treaty.

If interest or other income received with respect to Series      Bonds is effectively connected with a United States trade or business conducted by a Non-U.S. Holder (and, if an applicable tax treaty so requires, is attributable to the conduct of a trade or business through a permanent establishment or fixed base in the United States), the Non-U.S. Holder generally will be subject to U.S. federal income tax on such interest or other income on a net income basis at the regular graduated rates applicable to U.S. Holders. In addition, if the Non-U.S. Holder is a foreign corporation, it may be subject to a branch profits tax equal to 30% of its effectively connected earnings and profits for the taxable year, subject to certain adjustments, unless reduced or eliminated by an applicable tax treaty.

Sale, Exchange, or Retirement of Series      Bonds

Subject to the backup withholding discussions below, a Non-U.S. Holder generally will not be subject to U.S. federal income or withholding tax on gain realized on the sale or exchange of the Series      Bonds (other than gain that represents accrued but unpaid interest not previously included in income, which will be subject to the rules described above regarding payments of interest), unless:

•

the Non-U.S. Holder is an individual who is present in the United States for 183 days or more during the taxable year and certain other conditions are met; or

•

the gain is effectively connected with the conduct by the Non-U.S. Holder of a trade or business in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment or fixed base maintained by the Non-U.S. Holder in the United States).

Except to the extent that an applicable income tax treaty otherwise provides, generally a Non-U.S. Holder will be taxed on a net income basis at the same graduated rates applicable to U.S. Holders with respect to gain that is effectively connected with the Non-U.S. Holder’s conduct of a U.S. trade or business. A corporate Non-U.S. Holder may also, under certain circumstances, be subject to the branch profits tax described above. A Non-U.S. Holder who is both an individual present in the United States for 183 days or more in the taxable year and meets certain other conditions will be subject to U.S. federal income tax at a rate of 30% (or at a reduced rate under an applicable income tax treaty) on the amount by which capital gains from U.S. sources (including gains from the sale or other disposition of the Series      Bonds) exceed capital losses allocable to U.S. sources. To claim the benefit of an applicable income tax treaty, a Non-U.S. Holder may be required to file an income tax return and disclose its position under the U.S. Treasury regulations concerning treaty-based return positions.

120

Information Reporting and Backup Withholding

Generally, the amount of interest paid to a Non-U.S. Holder and the amount of tax, if any, withheld with respect to those payments must be reported to the IRS and to the Non-U.S. Holder. Copies of the information returns reporting such interest payments and any withholding may also be made available to the tax authorities in the country in which the Non-U.S. Holder resides under the provisions of an applicable tax treaty.

In general, a Non-U.S. Holder will not be subject to backup withholding with respect to payments of interest on the Series      Bonds that are made to the Non-U.S. Holder, provided that the Non-U.S. Holder has provided certification that such Non-U.S. Holder is a Non-U.S. Holder, and the payor does not have actual knowledge or reason to know that the Non-U.S. Holder is a United States person as defined under Section 7701(a)(30) of the Internal Revenue Code.

Information reporting and, depending on the circumstances, backup withholding will apply to the proceeds of a sale or other disposition (including a retirement or redemption) of Series      Bonds within the United States or conducted through certain U.S.-related financial intermediaries unless the Non-U.S. Holder certifies to the payor under penalties of perjury that it is a Non-U.S. Holder and the payor does not have actual knowledge or reason to know that the Non-U.S. Holder is a United States person as defined under the Internal Revenue Code, or the Non-U.S. Holder otherwise establishes an exemption.

Backup withholding is not an additional tax. Any amounts withheld from a payment to a Non-U.S. Holder under the backup withholding rules will be allowed as a credit against such Non-U.S. Holder’s U.S. federal income tax liability and may entitle such Non-U.S. Holder to a refund, provided that the required information is timely furnished to the IRS. Non-U.S. Holders should consult their tax advisors regarding the application of information reporting and backup withholding in their particular situations, the availability of an exemption from backup withholding, and the procedure for obtaining such an exemption, if available.

The Foreign Account Tax Compliance Act (FATCA)

Pursuant to Sections 1471 through 1474 of the Internal Revenue Code (commonly referred to as “FATCA”), Treasury regulations thereunder, and administrative guidance, issuers of certain debt instruments and their agents, as applicable, are required to withhold 30% of the amount of any “withholdable payments” with respect to such instruments paid to (i) a foreign financial institution (whether such foreign financial institution is the beneficial owner or an intermediary) unless such institution enters into an agreement with the United States government to collect and report to the United States government, on an annual basis, information with respect to its U.S. account holders and meets certain other specified requirements (or, in certain circumstances, complies with similar reporting requirements of the non-United States government in the jurisdiction in which it is organized or located under an intergovernmental agreement between such non-United States government and the United States government) or (ii) a non-financial foreign entity (whether such non-financial foreign entity is the beneficial owner or an intermediary) unless such entity certifies that it does not have any “substantial U.S. owners” or provides certain information regarding the entity’s “substantial U.S. owners” and such entity meets certain other specified requirements. FATCA generally will apply to all payments otherwise subject to FATCA withholding without regard to whether the beneficial owner of the payment is a United States person or would otherwise be entitled to an exemption from imposition of withholding tax pursuant to an applicable tax treaty with the United States or United States domestic law.

Non-U.S. Holders should consult their own tax advisors regarding the possible implications of FATCA and whether FATCA may be relevant to such Non-U.S. Holder’s acquisition, ownership, and disposition of the Series      Bonds.

121

STATE AND OTHER TAX CONSEQUENCES

In addition to the federal income tax consequences described in “Material U.S. Federal Income Tax Consequences” in this prospectus, potential investors should consider the state and local tax consequences of the acquisition, ownership, and disposition of the energy recovery bonds offered by this prospectus. State tax law may differ substantially from the corresponding federal tax law, and the discussion above does not purport to describe any aspect of the tax laws of any state or other jurisdiction. Therefore, prospective investors should consult their tax advisors about the various tax consequences of investments in the bonds offered by this prospectus.

122

ERISA CONSIDERATIONS

This discussion is based on current provisions of ERISA and the Internal Revenue Code, existing and currently proposed regulations under ERISA and the Internal Revenue Code, the legislative history of ERISA and the Internal Revenue Code, existing administrative rulings of the United States Department of Labor (the “DOL”) and reported judicial decisions. No assurance can be given that legislative, judicial, or administrative changes will not affect the accuracy of any statements herein with respect to transactions entered into or contemplated prior to the effective date of such changes. This discussion does not purport to deal with all aspects of ERISA or the Internal Revenue Code or, to the extent not preempted, any state laws.

General

ERISA and the Internal Revenue Code impose certain requirements on employee benefit plans subject to ERISA and/or Section 4975 of the Internal Revenue Code and on persons or entities that are fiduciaries with respect to such plans. For purposes of this discussion, “Plans” refers to employee benefit plans (as defined in Section 3(3) of ERISA) subject to Title I of ERISA, plans (as defined in Section 4975(e)(1) of the Internal Revenue Code) subject to Section 4975 of the Internal Revenue Code (which includes individual retirement accounts and annuities and Keogh plans) and entities, including collective investment funds and insurance company general or separate accounts, that may be deemed to hold the assets of the foregoing by virtue of such employee benefit plan’s or plan’s investment in such entities. A fiduciary of a Plan is any person or entity that in connection with the assets of the Plan:

•

exercises discretionary authority or control over the management or disposition of plan assets; or

•

provides investment advice for a fee.

Some plans, such as governmental plans, certain church plans and non-U.S. plans, and the fiduciaries of those plans, may not be subject to the fiduciary responsibility provisions of ERISA or the prohibited transaction rules of ERISA or Section 4975 of the Internal Revenue Code. Accordingly, assets of these plans may be invested in the bonds without regard to the ERISA considerations described below, provided that a governmental or church plan that is qualified and exempt from taxation under Sections 401(a) and 501(a) of the Internal Revenue Code is subject to the prohibited transaction rules in Section 503 of the Internal Revenue Code. In addition, any such governmental, church or non-U.S. plans may be subject to the provisions of federal, state, local or other laws or regulations that are substantially similar to Title I of ERISA or Section 4975 of the Internal Revenue Code (collectively “Similar Law”). Accordingly, any fiduciary of such a plan must determine whether the acquisition, holding and disposition of the bonds will not constitute or result in a violation of Similar Law.

ERISA imposes certain general fiduciary requirements on fiduciaries of Plans that are subject to Title I of ERISA, including:

•

investment prudence and diversification; and

•

the investment of the assets of such Plan in accordance with the documents governing such Plan.

Section 406 of ERISA and Section 4975 of the Internal Revenue Code also prohibit a broad range of transactions involving the assets of a Plan and persons or entities that have certain specified relationships to the Plan, referred to as “parties in interest” ​(as defined under ERISA) or “disqualified persons” ​(as defined under the Code), unless a statutory or administrative exemption is available. For purposes of this discussion, “parties in interest” include parties in interest under ERISA and disqualified persons under the Internal Revenue Code. The types of transactions between a Plan and a party in interest that are prohibited include, but are not limited to, the following:

•

sales, exchanges or leases of property;

•

loans or other extensions of credit; and

•

the furnishing of goods or services.

Certain persons or entities that participate in a prohibited transaction may be subject to an excise tax under Section 4975 of the Internal Revenue Code or a penalty imposed under Section 502(i) of ERISA,

123

unless a statutory, administrative or individual exemption is available. In addition, the persons or entities involved in the prohibited transaction may have to cancel the transaction and the fiduciary of the Plan that engaged in the prohibited transaction may have to pay an amount to the Plan for any losses realized by the Plan or profits realized by these persons or entities. In addition, individual retirement accounts involved in the prohibited transaction (if the prohibited transaction involves the owner of the account or his or her beneficiary) may be disqualified, which would result in adverse tax consequences to the owner of the account.

Regulation of Assets Included in a Plan

A fiduciary’s investment of the assets of a Plan in the bonds may cause our assets to be deemed assets of such Plan. The DOL regulations at 29 CFR Section 2510.3-101 as modified by Section 3(42) of ERISA, (collectively, the “plan asset regulations”), provide that the assets of an entity will be deemed to be “plan assets” of a Plan that purchases an interest in the entity if the interest that is purchased by the Plan is an equity interest and none of the exceptions contained in the plan asset regulations is applicable. Under the plan asset regulations, an entity’s assets (here, our assets) generally would not be considered to be “plan assets” if, among other things:

•

the equity interests acquired by a Plan are publicly offered securities (i.e., the equity interests are part of a class of securities that is widely held by 100 or more investors independent of us and each other, are “freely transferable” ​(as determined under the Plan Asset Regulations) and are either registered under certain provisions of the federal securities laws or sold to the Plan as part of a public offering under certain conditions);

•

such entity is an “operating company” ​(i.e., it is primarily engaged in the production or sale of a product or service other than the investment of capital either directly or through a majority-owned subsidiary or subsidiaries); or

•

investment in such entity by “benefit plan investors” ​(which includes Plans) is not “significant,” which is defined under the Plan Asset Regulations to mean that immediately after the most recent acquisition of any equity interest in such entity, less than 25% of the value of each class of equity interests in such entity (disregarding interests held by persons (other than benefit plan investors) with discretionary authority or control over the assets of such entity who provide investment advice for a fee (direct or indirect) with respect to such assets, and any affiliates thereof) is held by benefit plan investors. An equity interest is defined in the plan asset regulations as an interest in an entity other than an instrument that is treated as indebtedness under applicable local law and that has no substantial equity features. Although there is no authority directly on point and assuming that the bonds are treated as indebtedness under applicable local law, it is anticipated that the bonds should be treated as indebtedness for purposes of the plan asset regulations.

If the bonds were deemed to be equity interests in us and none of the exceptions contained in the plan asset regulations were applicable, then our assets would be considered to be assets of any Plans that acquire the bonds. The extent to which the bonds are held by Plans will not be monitored. If our assets were deemed to constitute “plan assets” pursuant to the plan asset regulations, transactions we might enter into, or may have entered into in the ordinary course of business, might constitute non-exempt prohibited transactions under ERISA and or Section 4975 of the Internal Revenue Code.

In addition, the acquisition or holding of the bonds by or on behalf of, or using plan assets of, a Plan could give rise to a prohibited transaction if we or the indenture trustee, DEP, any other servicer, Duke Energy, any underwriter or certain of their affiliates has, or acquires, a relationship to an investing Plan. Before acquiring any bonds by or on behalf of, or with plan assets of, a Plan, you should consider and consult with counsel as to whether the acquisition, holding or disposition of the bonds might result in a prohibited transaction under ERISA or the Internal Revenue Code and, if so, whether any prohibited transaction exemption might apply to the purchase, holding or disposition of the bonds.

Prohibited Transaction Exemptions

If you are a fiduciary of a Plan or any other person or entity proposing to acquire the bonds on behalf of or using plan assets of, a Plan, before acquiring any bonds, you should consider the availability of one of

124

the DOL’s prohibited transaction class exemptions, referred to as PTCEs, or one of the statutory exemptions provided by ERISA or Section 4975 of the Internal Revenue Code, which include:

•

PTCE 75-1, relating to transactions effected by certain broker-dealers, reporting dealers and banks;

•

PTCE 84-14, relating to transactions effected by a “qualified professional asset manager”;

•

PTCE 90-1, relating to transactions involving insurance company separate accounts;

•

PTCE 91-38, relating to transactions involving bank collective investment funds;

•

PTCE 95-60, relating to transactions involving insurance company general accounts;

•

PTCE 96-23, relating to transactions effected by an “in-house asset manager”; and

•

the statutory service provider exemption provided under Section 408(b)(17) of ERISA and Section 4975(d)(20) of the Internal Revenue Code, relating to certain transactions between plans and certain parties in interest that are not fiduciaries or their affiliates with respect to the transaction.

We cannot provide any assurance that any of these class exemptions or statutory exemptions will apply with respect to any particular investment in the bonds by, on behalf of or using plan assets of, a Plan or, even if it were deemed to apply, that any exemption would apply to all transactions that may occur in connection with the investment. For example, even if one of these class exemptions or statutory exemptions were deemed to apply, bonds may not be purchased with assets of any Plan if we or the indenture trustee, DEP, any other servicer, Duke Energy Corporation, any underwriter or any of their affiliates:

•

has investment discretion over the assets of the Plan used to purchase the bonds; or

•

has authority or responsibility to give, or regularly gives, investment advice regarding the assets of the Plan used to purchase the bonds for a fee under an agreement or understanding that the advice will serve as a primary basis for investment decisions for the assets of the Plan, and will be based on the particular investment needs of the Plan.

Representation

Each purchaser or transferee of a bond will be deemed to have represented and warranted by virtue of its acquisition of a bond on each day from and including the date of its acquisition of the bonds through and including the date of disposition of any such bond that either (i) it is not and is not acting on behalf of, or using plan assets of, (a) a Plan or any governmental, church or non-U.S. plan that is subject to Similar Law or (ii) its acquisition, holding and disposition of the bond, in the case of a Plan, will not constitute or result in a non-exempt prohibited transaction in violation of Section 406 of ERISA or Section 4975 the Internal Revenue Code or, in the case of a governmental, church or non-U.S. plan subject to Similar Law, will not result in or constitute a violation of Similar Law.

Consultation with Counsel

The foregoing discussion is general in nature and is not intended to be all inclusive nor should it be construed as legal advice. If you are a fiduciary or other person which proposes to acquire the bonds on behalf of, or with plan assets of a Plan or a governmental, church or non-U.S. plan subject to Similar Law, you should consider your general fiduciary obligations under ERISA or the Internal Revenue Code and you should consult with your legal counsel as to the potential applicability of the plan asset regulation and other provisions of ERISA, the prohibited transaction provisions of ERISA and Section 4975 of the Internal Revenue Code to any such investment and the availability of any prohibited transaction exemption in connection with any investment or, in the case of a governmental, church or non-U.S. plan subject to Similar Law, the applicability of any Similar Law.

None of we, DEP, Duke Energy Corporation nor any initial purchaser, or any of our or their respective affiliates, is making an investment recommendation or providing investment advice on which a Plan or the fiduciary making the investment decision for such Plan has relied in connection with the decision to acquire the notes in this offering, and none of them is acting as a fiduciary to such Plan in connection with such Plan’s acquisition of any notes

125

The sale of bonds to a Plan or any governmental, church or non-U.S. plan subject to Similar Law is in no respect a representation by us, the indenture trustee, DEP, any other servicer, Duke Energy Corporation, any underwriter or any of our or their affiliates that this investment meets all relevant legal requirements for investments by such Plans or plans generally or any particular Plan or plan or that this investment is appropriate for such Plans or plans generally or any particular Plan or plan.

126

BANKRUPTCY AND CREDITORS’ RIGHTS ISSUES

Challenge to True Sale Treatment

DEP will represent and warrant that the transfer of the storm recovery property in accordance with the sale agreement constitutes a true and valid sale and assignment of the storm recovery property by DEP to us. It will be a condition of closing for the sale of the storm recovery property pursuant to the sale agreement that DEP will take the appropriate actions under the Financing Act, including filing a notice of transfer of an interest in the storm recovery property, to perfect this sale. The Financing Act provides that the sale, conveyance, assignment, or other transfer of storm recovery property by an electric utility to an assignee that the parties have in the governing documentation expressly stated to be a sale or other absolute transfer is an absolute transfer and true sale of, and not a pledge of or secured transaction relating to, the transferor’s right, title, and interest in, to, and under the storm recovery property, other than for federal and state income tax purposes. We and DEP will treat such a transaction as a sale under applicable law. However, we expect that bonds will be reflected as debt on DEP’s consolidated financial statements. In addition, we anticipate that the bonds will be treated as debt of DEP for U.S. federal income tax purposes. Please read “Material U.S. Federal Income Tax Consequences”. In the event of a bankruptcy of a party to a sale agreement, if a party in interest in the bankruptcy were to take the position that the transfer of the storm recovery property to us pursuant to that sale agreement was a financing transaction and not a true sale under applicable creditors’ rights principles, there can be no assurance that a court would not adopt this position. Even if a court did not ultimately recharacterize the transaction as a financing transaction, the mere commencement of a bankruptcy of DEP and the attendant possible uncertainty surrounding the treatment of the transaction could result in delays in payments on the bonds.

In that regard, we note that the bankruptcy court in In re LTV Steel Company, Inc., et al., 274 B.R. 278 (Bankr. N. D. Oh. 2001), issued an interim order that observed that a debtor, LTV Steel Company, Inc., which had previously entered into financing arrangements with respect both to its inventory and its accounts receivable, may have “at least some equitable interest in the inventory and receivables, and that this interest is property of the Debtor’s estate. …sufficient to support the entry of” an interim order permitting the debtor to use proceeds of the property sold in the financing. 274 B.R. at 285. The court based its decision in large part on its view of the equities of the case.

LTV Steel Company, Inc. and the investors subsequently settled their dispute over the terms of the interim order and the bankruptcy court entered a final order in which the parties admitted and the court found that the pre-petition transactions constituted true sales. The court did not otherwise overrule its earlier ruling. The LTV Steel Company, Inc. memorandum opinion serves as an example of the pervasive equity powers of bankruptcy courts and the importance that such courts may ascribe to the goal of reorganization, particularly where the assets sold are integral to the ongoing operation of the debtor’s business.

Even if creditors did not challenge the sale of storm recovery property as a true sale, a bankruptcy filing by DEP could trigger a bankruptcy filing by us with similar negative consequences for bondholders. In a more recent bankruptcy case, In re General Growth Properties, Inc., 409 B.R. 43, 54 (Bankr. S.D.N.Y. 2009), General Growth Properties, Inc. filed for bankruptcy together with many of its direct and indirect subsidiaries, including many subsidiaries that were organized as special purpose vehicles. The Southern District of New York bankruptcy court upheld the validity of the filings of these special purpose subsidiaries and allowed the subsidiaries, over the objections of their creditors, to use the lenders’ cash collateral to make loans to the parent for general corporate purposes. The creditors received adequate protection in the form of current interest payments and replacement liens to mitigate any diminution in value resulting from the use of the cash collateral, but the opinion serves as a reminder that bankruptcy courts may subordinate legal rights of creditors to the interests of helping debtors reorganize.

We and DEP have attempted to mitigate the impact of a possible recharacterization of a sale of storm recovery property as a financing transaction under applicable creditors’ rights principles. The sale agreement will provide that if the transfer of the applicable storm recovery property is thereafter recharacterized by a court as a financing transaction and not a true sale, the transfer by DEP will be deemed to have granted to us on our behalf and on behalf of the indenture trustee a first priority security interest in all of DEP’s right, title and interest in, to and under the storm recovery property and all proceeds thereof. In addition, the sale agreement will require the filing of a notice of security interest in the storm recovery property and the

127

proceeds thereof as collateral in accordance with the Financing Act. As a result of this filing, we would, in the event of a recharacterization, be a secured creditor of DEP and entitled to recover against the collateral or its value. This does not, however, eliminate the risk of payment delays or reductions and other adverse effects caused by a DEP bankruptcy. Further, if, for any reason, a storm recovery property notice is not filed under the Financing Act and we fail to perfect our interest in the storm recovery property, and the transfer is thereafter deemed not to constitute a true sale, we would be an unsecured creditor of DEP.

The Financing Act provides that, except as provided in the Financing Act, the creation, granting, perfection and enforcement of liens and security interests in storm recovery property are governed by the Financing Act and not by the South Carolina Uniform Commercial Code. Under the Financing Act, a valid and enforceable lien and security interest in storm recovery property may be created only upon the later of (i) the issuance of a financing order, (ii) the execution and delivery of a security agreement by the party granting such security interest, (iii) the party granting such security interest has rights in such storm recovery property or the power to transfer rights in such storm recovery property, or (iv) the receipt of value for the storm recovery property. Upon perfection through the filing of a financing statement to the South Carolina Secretary of State, the security interest shall be a continuously perfected lien in the storm recovery property, with priority in the order of filing and take precedence over any subsequent judicial or other lien creditor. None of this, however, mitigates the risk of payment delays and other adverse effects caused by a DEP bankruptcy.

If, for any reason, a financing statement is not filed under the Financing Act and we fail to perfect our interest in the storm recovery property sold pursuant to a sale agreement as required by the Financing Act, and the transfer is thereafter deemed not to constitute a true sale, we would be an unsecured creditor of DEP. Notwithstanding any failure on our part to perfect our interest in the storm recovery property, under the Financing Act and the financing order, a statutory lien on the storm recovery property and the proceeds thereof arises by operation of law automatically without any action on the part of DEP, us or any other person. This statutory lien secures all obligations, then existing or thereafter arising, to the holders and the indenture trustee of the holders of the storm recovery bonds issued pursuant to the financing order. Under the Financing Act, this statutory lien is valid, perfected and enforceable against the owner of the storm recovery property and all third parties upon the effectiveness of the financing order without any further public notice (although protective filings (including the filing by us of financing statements as described above) is permitted under the Financing Act). If DEP were to become a debtor in a bankruptcy case and a bankruptcy court determined that we were an unsecured creditor, there can be no assurance that the court would be made aware of the statutory lien described above or, if the court was aware of the statutory lien arising under the Financing Act and the financing order, that the court would determine that indenture trustee and the holders of the storm recovery bonds have a first priority statutory lien or are secured creditors of DEP.

Substantive Consolidation of DEP SC Storm Funding and DEP

If DEP were to become a debtor in a bankruptcy case, a party in interest might attempt to substantively consolidate our assets and liabilities with those of DEP. We and DEP have taken steps to attempt to minimize this risk. Please read “The Issuing Entity” in this prospectus. However, no assurance can be given that if DEP were to become a debtor in a bankruptcy case, a court would not order that our assets and liabilities be substantively consolidated with those of DEP. Substantive consolidation would result in payment of the claims of the beneficial owners of the bonds to be subject to substantial delay and to adjustment in timing and amount under a plan of reorganization in the bankruptcy case.

Status of Storm Recovery Property as Present Property

DEP will represent in the sale agreement, and the Financing Act provides, that the storm recovery property sold pursuant to such sale agreement constitutes a present property right on the date that it is first transferred to us in connection with the issuance of the bonds. Nevertheless, no assurance can be given that, in the event of a bankruptcy of DEP a court would not rule that the applicable storm recovery property comes into existence only as customers use electricity.

If a court were to accept the argument that the applicable storm recovery property comes into existence only as customers use electricity, no assurance can be given that a security interest in favor of the bondholders

128

would attach to the storm recovery charges in respect of electricity consumed after the commencement of the bankruptcy case or that the storm recovery property has been sold to us. If it were determined that the storm recovery property had not been sold to us, and the security interest in favor of the bondholders did not attach to the applicable storm recovery charges in respect of electricity consumed after the commencement of the bankruptcy case, then we would have an unsecured claim against DEP. If so, there would be delays and/or reductions in payments on the bonds. Whether or not a court determined that storm recovery property had been sold to us pursuant to a sale agreement, no assurances can be given that a court would not rule that any storm recovery charges relating to electricity consumed after the commencement of the bankruptcy could not be transferred to us or the indenture trustee.

In addition, in the event of a bankruptcy of DEP, a party in interest in the bankruptcy could assert that we should pay, or that we should be charged for, a portion of DEP’s costs associated with the distribution of the electricity, usage of which gave rise to the storm recovery charge receipts used to make payments on the bonds.

Regardless of whether DEP is the debtor in a bankruptcy case, if a court were to accept the argument that storm recovery property sold pursuant to the sale agreement comes into existence only as customers use electricity, a tax or government lien or other nonconsensual lien on property of DEP arising before that storm recovery property came into existence could have priority over our interest in that storm recovery property. Adjustments to the storm recovery charges may be available to mitigate this exposure, although there may be delays in implementing these adjustments.

Estimation of Claims; Challenges to Indemnity Claims

If DEP were to become a debtor in a bankruptcy case, claims, including indemnity claims, by us or the indenture trustee against DEP, as seller, under the sale agreement and the other documents executed in connection therewith would be unsecured claims and would be subject to being discharged in the bankruptcy case. In addition, a party in interest in the bankruptcy may request that the bankruptcy court estimate any contingent claims that we or the indenture trustee have against DEP. That party may then take the position that these claims should be estimated at zero or at a low amount because the contingency giving rise to these claims is unlikely to occur. If a court were to hold that the indemnity provisions were unenforceable, we or the indenture trustee, as applicable, would be left with a claim for actual damages against DEP based on breach of contract principles. The actual amount of these damages would be subject to estimation and/or calculation by the court.

No assurances can be given as to the result of any of the above-described actions or claims. Furthermore, no assurance can be given as to what percentage of their claims, if any, unsecured creditors would receive in any bankruptcy proceeding involving DEP.

Enforcement of Rights by the Indenture Trustee

Upon an event of default under the indenture or the series supplement, the indenture trustee may enforce the security interest in the storm recovery property sold pursuant to the sale agreement in accordance with the terms of the indenture and the series supplement. In this capacity, an interested party such as the indenture trustee or the PSCSC is permitted to request that a South Carolina court order the sequestration and payment to bondholders of all revenues arising with respect to the storm recovery property. There can be no assurance, however, that a judge would issue this order after a seller bankruptcy in light of the automatic stay provisions of Section 362 of the Bankruptcy Code. In that event, the indenture trustee may under the indenture seek an order from the bankruptcy court lifting the automatic stay with respect to this action by the PSCSC or a court and an order requiring an accounting and segregation of the revenues arising from the storm recovery property sold pursuant to the sale agreement. There can be no assurance that a court would grant either order.

Bankruptcy of the Servicer

The servicer is entitled to commingle the storm recovery charges that it receives with its own funds until each date on which the servicer is required to remit funds to the indenture trustee as specified in the servicing agreement. The Financing Act provides that the priority of a lien and security interest created under

129

the Financing Act is not impaired by the commingling of funds arising from storm recovery charges with other funds. In the event of a bankruptcy of the servicer, a party in interest in the bankruptcy might assert, and a court might rule, that the storm recovery charges commingled by the servicer with its own funds and held by the servicer, prior to and as of the date of bankruptcy were property of the servicer as of that date, and are therefore property of the servicer’s bankruptcy estate, rather than our property. If the court so rules, then the court would likely rule that the indenture trustee has only a general unsecured claim against the servicer for the amount of commingled storm recovery charges held as of that date and could not recover the commingled storm recovery charges held as of the date of the bankruptcy.

However, if the court were to rule in our favor on the ownership of the commingled storm recovery charges, the automatic stay arising upon the bankruptcy of the servicer could delay the indenture trustee from receiving the commingled storm recovery charges held by the servicer as of the date of the bankruptcy until the court grants relief from the stay. A court ruling on any request for relief from the stay could be delayed pending the court’s resolution of whether the commingled storm recovery charges are our property or are property of the servicer, including resolution of any tracing of proceeds issues.

The servicing agreement will provide that the indenture trustee, as our assignee, together with the other persons and entities specified therein, may vote to appoint a successor servicer that satisfies the rating agency condition. The servicing agreement will also provide that the indenture trustee, together with the other persons and entities specified therein, may petition the PSCSC or a court of competent jurisdiction to appoint a successor servicer that meets this criterion. However, the automatic stay in effect during a servicer bankruptcy might delay or prevent a successor servicer’s replacement of the servicer. Even if a successor servicer may be appointed and may replace the servicer, a successor may be difficult to obtain and may not be capable of performing all of the duties that DEP as servicer was capable of performing. Furthermore, should the servicer enter into bankruptcy, it may be permitted to stop acting as servicer.

130

USE OF PROCEEDS

Proceeds will be used to pay expenses of issuance and to purchase the storm recovery property from DEP and to pay financing costs relating to the bonds. In accordance with the financing order, DEP will use the proceeds it receives from the sale of the storm recovery property to (i) reimburse itself for previously incurred storm recovery costs relating to the following storms: Winter Storms Pax and Ulysses, Hurricanes Matthew, Florence, Michael, Dorian and Izzy and Tropical Storm Jasper, including the retirement of short-term debt that are intercompany moneypool borrowings which were funded by either commercial paper issued by Duke Energy Corporation or excess cash held by other utility operating companies and (ii) pay upfront bond issuance costs.

The costs of issuance of the bonds and other initial costs of the transaction, net of underwriting discounts and commissions of $        , are expected to be approximately $        . An aggregate of approximately $       of such costs are payable to the servicer in connection with set-up costs, including costs incurred in connection with establishing DEP SC Storm Funding and building the necessary information technology systems, processes and reports.

131

PLAN OF DISTRIBUTION

Subject to the terms and conditions in the underwriting agreement among DEP SC Storm Funding, DEP and the underwriters, for whom Goldman Sachs & Co. LLC and RBC Capital Markets, LLC are acting as representatives, we have agreed to sell to the underwriters, and the underwriters have severally agreed to purchase, the principal amount of the bonds listed opposite each underwriter’s name below:

Underwriter	Tranche
Goldman Sachs & Co. LLC	​	​	​
RBC Capital Markets, LLC	​	​	​
Total	​	$

Under the underwriting agreement, the underwriters will take and pay for all of the bonds offered, if any are taken. If an underwriter defaults, the underwriting agreement provides that the purchase commitments of the non-defaulting underwriters may be increased or the underwriting agreement may be terminated.

The Underwriters’ Sales Price for the Bonds

The bonds sold by the underwriters to the public will be initially offered at the prices to the public set forth on the cover of this prospectus. The underwriters propose initially to offer the bonds to dealers at such prices, less a selling concession not to exceed the percentage listed below. The underwriters may allow, and dealers may reallow, a discount not to exceed the percentage listed below.

​	Selling Concession		Reallowance Discount
Tranche	​	%	​	%

After the initial public offering, the public offering prices, selling concessions and reallowance discounts may change.

No Assurance as to Resale Price or Resale Liquidity for the Bonds

The bonds are a new issue of securities with no established trading market. They will not be listed on any securities exchange. The underwriters have advised the depositor and us that they intend to make a market in the bonds, but they are not obligated to do so and may discontinue market making at any time without notice. The depositor cannot assure you that a liquid trading market will develop for the bonds.

Various Types of Underwriter Transactions That May Affect the Price of the Bonds

The underwriters may engage in overallotment transactions, stabilizing transactions, syndicate covering transactions and penalty bids with respect to the bonds in accordance with Regulation M under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Overallotment transactions involve syndicate sales in excess of the offering size, which create a syndicate short position. Stabilizing transactions are bids to purchase the bonds, which are permitted, so long as the stabilizing bids do not exceed a specific maximum price. Syndicate covering transactions involve purchases of the bonds in the open market after the distribution has been completed in order to cover syndicate short positions. Penalty bids permit the underwriters to reclaim a selling concession from a syndicate member when the bonds originally sold by the syndicate member are purchased in a syndicate covering transaction. These overallotment transactions, stabilizing transactions, syndicate covering transactions and penalty bids may cause the prices of the bonds to be higher than they would otherwise be. None of us, DEP, the indenture trustee, our managers or any of the underwriters represents that the underwriters will engage in any of these transactions or that these transactions, if commenced, will not be discontinued without notice at any time. Neither we nor DEP have entered into any arrangement with any underwriter under which an underwriter may purchase additional bonds in connection with this offering.

Certain of the underwriters and their affiliates have in the past provided, and may in the future from time to time provide, investment banking and general financing and banking services to Duke Energy Corporation, DEP and its affiliates for which they have in the past received, and in the future may receive, customary fees.

132

We and DEP have agreed to indemnify the underwriters against some liabilities, including liabilities under the Securities Act of 1933, as amended, or to contribute to payments the underwriters may be required to make in respect of those liabilities.

The underwriters are offering the bonds, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters, including the validity of the bonds and other conditions contained in the underwriting agreement, such as receipt of ratings confirmations, officers’ certificates and legal opinions. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject offers in whole or in part.

The bonds are expected to be delivered against payment for the bonds on or about the date specified in the last paragraph of the cover page of this prospectus, which will be the     business day following the date of pricing of the bonds. Since trades in the secondary market generally settle in two business days, purchasers who wish to trade bonds on the date of pricing or the succeeding     business days will be required, by virtue of the fact that the bonds initially will settle in T+     , to specify alternative settlement arrangements to prevent a failed settlement.

133

AFFILIATIONS AND CERTAIN RELATIONSHIPS

We are a wholly-owned subsidiary of Duke Energy Progress, LLC. Duke Energy Progress, LLC is an indirect wholly-owned operating subsidiary of Duke Energy Corporation. Each of the sponsor, the depositor, Lead Underwriters may maintain other banking relationships in the ordinary course with U.S. Bank Trust Company, National Association.

In addition, affiliates of Goldman Sachs & Co. LLC and RBC Capital Markets, LLC are lenders under Duke Energy Corporation’s five year credit facility.

Affiliates of the indenture trustee act as lender for, and provide other banking, investment banking and other financial services to DEP, Duke Energy Corporation and their respective affiliates.

134

LEGAL PROCEEDINGS

From time to time, the issuing entity and DEP may be subject to various legal proceedings and claims that arise in the course of their business activities. Although the results of litigation and claims cannot be predicted with certainty, as of the date of this prospectus, the issuing entity and DEP do not believe they are party to any claim or litigation, the outcome of which, if determined adversely to the issuing entity or DEP, would individually or in the aggregate be reasonably expected to be material to bondholders. Regardless of the outcome, litigation can have an adverse impact on the issuing entity and DEP because of defense and settlement costs, diversion of management resources and other factors.

135

RATINGS

DEP expects that the bonds will receive credit ratings from at least two rating agencies. A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating agency. Each rating should be evaluated independently of any other rating. No person or entity is obligated to maintain the rating on any bonds and, accordingly, DEP can give no assurance that the ratings assigned to the bonds upon initial issuance will not be lowered or withdrawn by a rating agency at any time thereafter. If a rating of the bonds is lowered or withdrawn, the liquidity of the bonds may be adversely affected. In general, ratings address credit risk and do not represent any assessment of any particular rate of principal payments on the bonds other than the payment in full of the bonds by the final maturity date, as well as the timely payment of interest.

Under Rule 17g-5 under the Exchange Act, NRSROs providing the servicer with the requisite certification will have access to all information posted on a website by the servicer for the purpose of determining the initial rating and monitoring the rating after the issuance date in respect of the bonds. As a result, an NRSRO other than the hired NRSROs may issue unsolicited ratings on the bonds, which may be lower, and could be significantly lower, than the ratings assigned by the hired NRSRO. The unsolicited ratings may be issued prior to, or after, the issuance date in respect of the bonds.

Issuance of any unsolicited rating will not affect the issuance of the bonds. Issuance of an unsolicited rating lower than the ratings assigned by the hired NRSRO on the bonds might adversely affect the value of the bonds and, for regulated entities, could affect the status of the bonds as a legal investment or the capital treatment of the bonds. Investors in the bonds should consult with their legal counsel regarding the effect of the issuance of a rating by a non-hired NRSRO that is lower than the rating of a hired NRSRO.

A portion of the fees paid by DEP to a rating agency that is hired to assign a rating on the bonds is contingent upon the issuance of the bonds. In addition to the fees paid by DEP to a rating agency at closing, DEP will pay a fee to the rating agency for ongoing surveillance for so long as the bonds are outstanding. However, no rating agency is under any obligation to continue to monitor or provide a rating on the bonds.

136

INVESTMENT COMPANY ACT OF 1940 AND VOLCKER RULE MATTERS

The issuing entity will be relying on an exclusion or exemption from the definition of “investment company” under the Investment Company Act of 1940, as amended, or the “1940 Act”, contained in Section 3(c)(5) of the 1940 Act, although there may be additional exclusions or exemptions available to the issuing entity. As a result of such exclusion, the issuing entity will not be subject to regulation as an “investment company” under the 1940 Act.

In addition, the issuing entity is being structured so as not to constitute a “covered fund” for purposes of the Volcker Rule, or the “Volcker Rule”, under the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the “Dodd-Frank Act”. As part of the Dodd-Frank Act, federal law prohibits a “banking entity” — which is broadly defined to include banks, bank holding companies and affiliates thereof-from engaging in proprietary trading or holding ownership interests in certain private funds. The definition of “covered fund” in the regulations adopted to implement the Volcker Rule includes (generally) any entity that would be an investment company under the 1940 Act but for the exemption provided under Section 3(c)(1) or 3(c)(7) thereunder. Because the Issuing Entity will rely on Section 3(c)(5) of the 1940 Act, it will not be considered a “covered fund” within the meaning of the Volcker Rule regulations.

137

RISK RETENTION

This offering of Bonds is a public utility securitization exempt from the risk retention requirements imposed by Section 15G of the Exchange Act due to the exemption provided in Rule 19(b)(8) of Regulation RR.

For information regarding the requirements of the EU Securitization Regulation as to risk retention and other matters, please read “Risk Factors — Other Risks Associated with the Purchase of the Bonds — Regulatory provisions affecting certain investors could adversely affect the liquidity of the bonds” in this prospectus.

138

WHERE YOU CAN FIND MORE INFORMATION

This prospectus is part of a registration statement the depositor has filed with the SEC relating to the bonds. This prospectus describes the material terms of some of the documents that have been filed or will file as exhibits to the registration statement. However, this prospectus does not contain all of the information contained in the registration statement and the exhibits. Any statements contained in this prospectus concerning the provisions of any document filed as an exhibit to the registration statement or otherwise filed with the SEC are not necessarily complete. Each statement concerning those provisions is qualified in its entirety by reference to the respective exhibit. Information filed with the SEC can be inspected at the SEC’s Internet site located at http://www.sec.gov. You may also read and copy the registration statement, the exhibits and any other documents filed with the SEC at the SEC’s Public Reference Room located at 100 F Street, N.E., Washington, D.C. 20549 on official business days between the hours of 10:00 am and 3:00 pm. You may obtain further information regarding the operation of the SEC’s Public Reference Room by calling the SEC at 1-800-SEC-0330. You may also obtain a copy of filings with the SEC at no cost, by writing to or telephoning at the following address:

Duke Energy Progress SC Storm Funding LLC
411 Fayetteville Street
Raleigh, North Carolina 27601
704-382-3853

The SEC Securities Act file numbers are 333-        and 333-       -01.

We will also file with the SEC all the periodic and current reports that are required to be filed under the Exchange Act and the rules, regulations or orders of the SEC thereunder.

139

INCORPORATION BY REFERENCE

The SEC allows us to “incorporate by reference” into this prospectus information we or the depositor file with the SEC. This means disclosure of important information may be made by referring you to the documents containing the information. The information incorporated by reference is considered to be part of this prospectus, unless such information is updated or superseded by the information that we or the depositor file subsequently that is incorporated by reference into this prospectus.

To the extent that we are required by law to file such reports and information with the SEC under the Exchange Act, we will file annual and current reports and other information with the SEC. We are incorporating by reference any future filings made by us or the sponsor, but solely in its capacity as our sponsor with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination of the offering, excluding any information that is furnished to and not filed with the SEC. These reports will be filed under our own name as issuing entity.

We are incorporating into this prospectus any future distribution report on Form 10-D, current report on Form 8-K or any amendment to any such report which we or DEP, solely in its capacity as our depositor, make with the SEC until the offering of the bonds in completed. These reports will be filed under our own name as issuing entity. In addition, these reports will be posted on a website associated with us or our affiliates, currently located at www.duke-energy.com. These reports will be filed under our own name as issuing entity. Any statement contained in this prospectus or in a document incorporated or deemed to be incorporated by reference in this prospectus will be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in this prospectus or in any separately filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes that statement.

Any statement so modified or superseded will not be deemed, except as so modified or superseded, to constitute part of this prospectus.

Under the indenture, we may voluntarily suspend or terminate filing obligations with the SEC, to the extent it becomes permitted by applicable law.

140

LEGAL MATTERS

Certain legal matters relating to the bonds, including certain U.S. federal income tax matters, will be passed on by Hunton Andrews Kurth LLP, counsel to DEP and DEP SC Storm Funding. Certain other legal matters relating to the bonds will be passed on by Baker, Donelson, Bearman, Caldwell & Berkowitz P.C., South Carolina counsel to DEP, by Troutman Pepper Hamilton Sanders LLP, special Delaware counsel to DEP SC Storm Funding, and by Norton Rose Fulbright US LLP counsel to the underwriters.

141

GLOSSARY

As used in this prospectus the terms below have the following meanings:

“2021 NC Storm Recovery Bonds” means the $769.7 million aggregate principal amount of senior secured storm recovery bonds issued in November 2021 by Duke Energy Progress NC Storm Funding LLC pursuant to Section 62-172, North Carolina General Statutes.

“Administration agreement” means the administration agreement to be entered into on the issuance date between Duke Energy Progress SC Storm Funding LLC and DEP.

“Administrator” means DEP, and each successor or assignee of DEP (in the same capacity) pursuant to the administration agreement.

“ADO” means average balance of days outstanding.

“Bankruptcy Code” means Title 11 of the United States Code, as amended.

“Basic documents” means, the indenture (including the series supplement), our certificate of formation, our LLC agreement, the sale agreement, the servicing agreement, the bill of sale, the administration agreement, the intercreditor agreement, the joinder to an existing intercreditor agreement, the letter of representations executed by us in favor of DTC, any underwriting agreement or purchase or distribution agreement, and all documents and certificates contemplated thereby or delivered in connection therewith.

“Bondholder” means a registered holder of the bonds.

“Bonds” means the Series        Senior Secured Storm Recovery Bonds offered pursuant to this prospectus.

“Business day” means any day other than a Saturday, a Sunday or a day on which banking institutions in Charlotte, North Carolina or New York, New York, are, or DTC or the corporate trust office of the indenture trustee, is, authorized or obligated by law, regulation or executive order to remain closed.

“Capital subaccount” means the capital subaccount named in the indenture.

“Clearstream” means Clearstream Banking, société anonyme, Luxembourg.

“Code” or “Internal Revenue Code” means the Internal Revenue Code of 1986, as amended.

“Collection account” means the segregated trust account relating to the bonds designated the collection account for that series and held by the indenture trustee under the indenture.

“Customer” means any South Carolina retail customer (individuals, corporations, other businesses, and federal, state and local governmental entities) receiving transmission or distribution service from DEP or its successors or assignees under PSCSC -approved rate schedules or under special contracts, even if the customer elects to purchase electricity from an alternative electricity supplier following a fundamental change in regulation of public utilities in South Carolina.

“Definitive bonds” means bonds issued in fully registered, certificated form.

“DEP” means Duke Energy Progress, LLC.

“DEP SC Storm Funding” means Duke Energy Progress SC Storm Funding LLC, the issuing entity.

“Depositor” means Duke Energy Progress, LLC.

“DOL” means the U.S. Department of Labor.

“DTC” means The Depository Trust Company, New York, New York, and its nominee holder, Cede & Co.

“DTCC” means The Depository Trust & Clearing Corporation.

142

“Eligible institution” means:

(a) the corporate trust department of the indenture trustee or an affiliate thereof, so long as the indenture trustee or such affiliate have (i) either a short-term deposit or issuer rating from Moody’s of at least “P-1” or a long-term unsecured debt or issuer rating from Moody’s of at least “A2”, and (ii) a short-term deposit or issuer rating from S&P of at least “A-1”, or a long-term unsecured debt or issuer rating from S&P of at least “A”; or

(b) a depository institution organized under the laws of the United States of America or any State (or any domestic branch of a foreign bank) (i) that has either (A) a long-term unsecured debt or issuer rating of “AA-” or higher by S&P and “A2” or higher by Moody’s, or (B) a short-term deposit, short-term (bank deposit) or issuer rating of “A-1” or higher by S&P and “P-1” or higher by Moody’s, and (ii) whose deposits are insured by the Federal Deposit Insurance Corporation;

provided, however, that if an eligible institution then being utilized for any purposes under the indenture or the series supplement no longer meets the definition of eligible institution, then the issuing entity shall replace such eligible institution within sixty (60) days of such eligible institution no longer meeting the definition of eligible institution.

“Eligible investments” means:

Funds in the collection account may be invested at the direction of the servicer only in such investments as meet the criteria described below and which mature on or before the business day immediately preceding the next payment date:

(1)

direct obligations of, or obligations fully and unconditionally guaranteed as to timely payment by, the United States of America;

(2)

demand or time deposits of, unsecured certificates of deposit of, money market deposit accounts of or bankers’ acceptances issued by, any depository institution (including the indenture trustee or any of its affiliates, acting in its commercial capacity) incorporated or organized under the laws of the United States of America or any State thereof and subject to supervision and examination by U.S. federal or State banking authorities, so long as the commercial paper or other short-term debt obligations of such depository institution are, at the time of deposit or contractual commitment, rated at least “A-1” and “P-1” or their equivalents by each of S&P and Moody’s, or such lower rating as will not result in the downgrading or withdrawal of the ratings of the Series        Bonds;

(3)

commercial paper (including commercial paper of the indenture trustee, acting in its commercial capacity, and other commercial paper of DEP or any of its affiliates), which, at the time of purchase is rated at least “A-1” or “P-1” or their equivalents by each of S&P and Moody’s or such lower rating as will not result in the downgrading or withdrawal of the ratings of the Series        Bonds;

(4)

investments in money market funds which have a rating in the highest investment category granted thereby (including funds for which the indenture trustee or any of its affiliates is investment manager or advisor) from Moody’s and S&P;

(5)

repurchase obligations with respect to any security that is a direct obligation of, or fully guaranteed by, the United States of America or certain of its agencies or instrumentalities, entered into with eligible institutions;

(6)

repurchase obligations with respect to any security or whole loan entered into with an eligible institution or with a registered broker/dealer acting as principal and that meets the ratings criteria set forth below:

a.

a broker/dealer (acting as principal) registered as a broker or dealer under Section 15 of the Exchange Act (any such broker/dealer being referred to in this definition as a “broker/dealer”), the unsecured short-term debt obligations of which are rated at least “P-1” by Moody’s and “A-1+” by S&P at the time of entering into such repurchase obligation; or

143

b.

an unrated broker/dealer, acting as principal, that is a wholly-owned subsidiary of a non-bank or bank holding company the unsecured short-term debt obligations of which are rated at least “P-1” by Moody’s and “A-1+” by S&P at the time of purchase so long as the obligations of such unrated broker/dealer are unconditionally guaranteed by such non-bank or bank holding company; or

(7)

any other investment permitted by each rating agency.

Notwithstanding the foregoing: (1) no securities or investments which mature in 30 days or more will be eligible investments unless the issuing entity thereof has either a short-term unsecured debt rating of at least “P-1” from Moody’s or a long-term unsecured debt rating of at least “A1” from Moody’s; (2) no securities or investments described in clauses (2) through (4) above which have maturities of more than 30 days but less than or equal to 3 months will be eligible investments unless the issuing entity thereof has a long-term unsecured debt rating of at least “A1” from Moody’s and a short-term unsecured debt rating of at least “P-1” from Moody’s; (3) no securities or investments described in clauses (2) through (4) above which have maturities of more than 3 months will be eligible investments unless the issuing entity thereof has a long-term unsecured debt rating of at least “A1” from Moody’s and a short-term unsecured debt rating of at least “P-1” from Moody’s; (4) no securities or investments described in clauses (2) through (4) above which have a maturity of 60 days or less will be eligible investments unless such securities have a rating from S&P of at least “A-1”; and (5) no securities or investments described in clauses (2) through (4) above which have a maturity of more than 60 days will be eligible investments unless such securities have a rating from S&P of at least “AA-”, “A-1+” or “AAAm”.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“Euroclear Operator” or “Euroclear” means Euroclear Bank S.A./N.V.

“Euroclear participants” means participants of the Euroclear System.

“Events of Default” means those events of defaults under the indenture.

“Excess funds subaccount” means that excess funds subaccount created pursuant to the indenture.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“FATCA” means the legislation enacted in March 2010 and related Treasury guidance that, when applicable, imposes U.S. federal withholding tax at a rate of 30% on certain payments on, and the gross proceeds from the sale or other disposition of, obligations that produce U.S. source income to certain foreign entities.

“Financing Act” means Sections 58-27-1110 through 1180, SC Code of Laws Annotated.

“Financing order” means, with respect to the bonds, the irrevocable financing order, dated October 13, 2023, issued by the PSCSC to DEP as amended on October 23, 2023, and if context requires, any other financing order issued by the PSCSC to DEP pursuant to the Financing Act.

“GWh” means gigawatt-hour.

“Hired NRSROs” means the NRSROs hired by the seller.

“Indenture” means the indenture to be entered into between DEP SC Storm Funding, the indenture trustee, the securities intermediary and the account bank providing for the bonds, and any other series of storm recovery bonds that might be issued pursuant to the financing order, as the same may be amended and supplemented from time to time.

“Indenture trustee” means U.S. Bank Trust Company, National Association or any successor indenture trustee under the indenture.

“Indirect Participants” means banks, brokers, dealers, trust companies and other entities that clear through or maintain a custodial relationship with a DTC participant either directly or indirectly.

“Issuing Entity” means Duke Energy Progress SC Storm Funding LLC.

144

“Intercreditor Agreement” means the intercreditor agreement to be entered into on the issue between DEP SC Storm Funding, DEP and the other parties to DEP’s accounts receivable agreement, as the same may be amended or supplemented from time to time.

“kWh” means kilowatt-hour.

“Moody’s” means Moody’s Investors Service, Inc.

“Nonbypassable” refers to the right of the servicer to collect the storm recovery charges from all existing or future customers of DEP.

“NRSRO” means a nationally recognized statistical rating organization.

“ORS” means the South Carolina Office of Regulatory Staff.

“Participant” means an organization that participates in DTC.

“Parties in interest” means “parties in interest” under ERISA and “disqualified persons” under the Code.

“Payment date” means the date or dates on which interest and principal are to be payable.

“Periodic Payment Requirement” means, for each payment date, the scheduled principal of and interest on the bonds and other financing costs and other required amounts and charges to be accrued in connection with the bonds.

“Plan assets” means assets of Plans.

“Plan asset regulations” means the DOL regulations at 29 CFR 2510.3-101, as modified by Section 3(42) of ERISA.

“Plans” means employee benefit plans and other plans and arrangements, including individual retirement accounts and annuities, Keogh plans and some collective investment funds and insurance company general or separate accounts in which the assets of these plans, accounts or arrangements are invested.

“PSCSC” means the Public Service Commission of South Carolina.

“PSCSC condition” means, with respect to amendments, modifications, or supplements to, or waivers of defaults under, any basic document, obtaining from the PSCSC its required consent or acquiescence for the proposed action.

“PSCSC regulations” means any regulations, including temporary regulations, promulgated by the PSCSC pursuant to South Carolina law.

“PTCE” means prohibited transaction class exemption.

“Rating agency” means any of Moody’s and S&P.

“Rating agency condition” means, with respect to any action, at least ten business days’ prior written notification to each rating agency of such action, and written confirmation from each of S&P and Moody’s to the servicer, the indenture trustee and us that such action will not result in a suspension, reduction or withdrawal of the then current rating by such rating agency of the bonds issued by us; provided, that, if within such ten business day period, any rating agency (other than S&P) has neither replied to such notification nor responded in a manner that indicates that such rating agency is reviewing and considering the notification, then (i) we shall be required to confirm that such rating agency has received the rating agency condition request, and if it has, promptly request the related rating agency condition confirmation and (ii) if the rating agency neither replies to such notification nor responds in a manner that indicates it is reviewing and considering the notification within five business days following such second request, the applicable rating agency condition requirement shall not be deemed to apply to such rating agency. For the purposes of this definition, any confirmation, request, acknowledgment or approval that is required to be in writing may be in

145

the form of electronic mail or a press release (which may contain a general waiver of a rating agency’s right to review or consent).

“Record date” means one Business Day prior to the applicable Payment Date.

“Regulation AB” means the rules of the SEC promulgated under Subpart 229.1100 — Asset-Backed Securities (Regulation AB), 17 C.F.R. §§229.1100-229.1125, as such may be amended from time to time.

“Required capital level” means the amount required to be funded in the capital account for the bonds, which will equal 0.50% of the initial principal amount of the bonds issued.

“Return on invested capital” means, for any payment date with respect to any calculation period, the sum of (i) rate of return, payable to DEP, on its capital contribution equal to the rate of interest payable on the longest maturing bond plus (ii) any return on invested capital not paid on any prior payment date.

“S&P” means Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business.

“Sale agreement” means the purchase and sale agreement to be entered into on the issuance date between DEP SC Storm Funding and DEP pursuant to which DEP will sell and we will buy the storm recovery property securing the bonds.

“SC Code of Laws Annotated” means the South Carolina Code of Laws Annotated.

“Scheduled final payment date” means, each payment date on which principal is to be paid in accordance with the expected sinking fund schedule.

“SEC” means the U.S. Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended.

“Securities intermediary” means U.S. Bank National Association or any successor securities intermediary under the indenture.

“Securitizable Balance” means the sum of approximately $170.6 million, representing the storm recovering costs, adjusted to include the final amount of carrying costs through the issuance date.

“Seller” means DEP, as the seller of the storm recovery property, and each successor of DEP (in the same capacity) pursuant to the sale agreement.

“Series supplement” means that series supplement to the indenture to be entered into on the issue date between DEP SC Storm Funding and the indenture trustee or any future series supplement to the indenture to be entered into on a future date between us and the indenture trustee.

“Servicer” means DEP, as the servicer of the storm recovery property, and each successor or assignee of DEP (in the same capacity) pursuant to the servicing agreement.

“Servicer business day” means any day other than a Saturday, a Sunday or a day on which banking institutions in Columbia, South Carolina, Greenville, South Carolina or New York, New York or the corporate trustee office of the indenture trustee is authorized or obligated by law, regulation or executive order to be closed, on which the Servicer maintains normal office hours and conducts business.

“Servicing agreement” means the servicing agreement to be entered into on the issue date between DEP SC Storm Funding and DEP, as the same may be amended and supplemented from time to time, pursuant to which DEP undertakes to service the storm recovery property.

“Similar Law” means, collectively, provisions under any federal, state, local, non-U.S. or other laws or regulations that are substantially similar to Section 4975 of the Code or Title I of ERISA.

“Special payment date” means the later of the date on which any special payment is confirmed to be received by the indenture trustee, or the date the special payment is scheduled to be delivered to the indenture trustee.

146

“Special payment” means any payment received by the indenture trustee following a payment default on the bonds.

“State pledge” means the pledge of the State of South Carolina under the Financing Act in which the State of South Carolina pledges to and agrees with the bondholders, any assignee and any financing parties that the State and its agencies, including the PSCSC, will not (i) alter the provisions of the Financing Act that make the storm recovery charges imposed by the financing order irrevocable, binding, and nonbypassable, (ii) take or permit any action that impairs or would impair the value of storm recovery property, the security for the storm recovery bonds or revises the storm recovery costs, (iii) impair the rights and remedies of the holders, assignees, and other financing parties or (iv) except as part of the true-up mechanism, reduce, alter or impair storm recovery charges that are imposed, collected and remitted for the benefit of the bondholders and other financing parties, until all principal, interest, premium, financing costs and other fees, expenses, or changes incurred, and any contracts to be performed, in connection with the storm recovery bonds have been paid or performed in full.

“Storms” means the Winter Storms Pax and Ulysses, Hurricanes Matthew, Florence, Michael, Dorian and Izzy and Tropical Storm Jasper.

“Storm recovery bonds” means, unless the context requires otherwise, the storm recovery bonds offered pursuant to this prospectus.

“Storm recovery bond collateral” means (a) the storm recovery property created under and pursuant to the financing order and the Financing Act, and transferred by the seller to us pursuant to the sale agreement (including, to the fullest extent permitted by law, the right to impose, bill, charge, collect and receive the storm recovery charges, the right to obtain periodic adjustments to the storm recovery charges, and all revenue, collections, claims, rights to payments, payments, money and proceeds arising out of the rights and interests created under the financing order), (b) all storm recovery charges related to the storm recovery property, (c) the sale agreement and the bill of sale executed in connection therewith and all property and interests in property transferred under the sale agreement and the bill of sale with respect to the storm recovery property and the bonds, (d) the servicing agreement, the administration agreement, the intercreditor agreement and any subservicing, agency, administration or collection agreements executed in connection therewith, to the extent related to the foregoing storm recovery property and the bonds, (e) the collection account, all subaccounts thereof and all amounts of cash, instruments, investment property or other assets on deposit therein or credited thereto from time to time and all financial assets and securities entitlements carried therein or credited thereto, (f) all rights to compel the servicer to file for and obtain periodic adjustments to the storm recovery charges in accordance with section 58-27-1110(C)(2)(f) and section 58-27-1110(C)(4) of the Financing Act and the financing order, (g) all present and future claims, demands, causes and choses in action in respect of any or all of the foregoing, whether such claims, demands, causes and choses in action constitute storm recovery property, accounts, general intangibles, instruments, contract rights, chattel paper or proceeds of such items or any other form of property, (h) all accounts, chattel paper, deposit accounts, documents, general intangibles, goods, instruments, investment property, letters of credit, letters-of-credit rights, money, commercial tort claims and supporting obligations related to the foregoing, and (i) all payments on or under, and all proceeds in respect of, any or all of the foregoing.

“Storm recovery charge” means special, irrevocable nonbypassable charges to be paid by all existing or future customers, and authorized by the financing order to recover the storm recovery costs specified in the financing order.

“Storm recovery costs” means (i) the deferred asset balance associated with the Storms, including a return on the unrecovered balance, and with respect to the capital investments, including a deferral of depreciation expense and a return on the investment determined by the PSCSC to be prudently incurred in Docket No. 2023-89-E, plus (ii) carrying costs through the projected issuances date of the Series       Bonds, calculated at a rate authorized by the PSCSC, (iii) plus up-front Financing Costs as defined in the Financing Act.

“Storm recovery property” means the storm recovery property as defined in the Financing Act and the financing order, and that is sold by the seller to us under the sale agreement.

147

“Terms and conditions” means the Terms and Conditions Governing Use of Euroclear and the related Operating Procedures of the Euroclear System and applicable Belgium law.

“Tranche” means a weighted average life designation for the bonds.

“Treasury regulations” means proposed or issued regulations promulgated from time to time under the Internal Revenue Code.

“True-Up Mechanism” means the mechanism required by the financing order whereby storm recovery charges are reviewed and adjusted at least semi-annually or more frequently as necessary and permitted by the financing order. The rates at which storm recovery charges are billed to customers will be adjusted to correct any overcollections or undercollections from prior periods.

“Trust Indenture Act” means the Trust Indenture Act of 1939, as amended.

“UCC” means, unless the context otherwise requires, the Uniform Commercial Code, as in effect in the relevant jurisdiction, as amended from time to time.

“U.S. Holder” means a beneficial owner of a bond that is a U.S. person.

“U.S. person” means for U.S. federal income tax purposes:

(i)

a U.S. citizen or individual resident of the United States;

(ii)

a corporation (including an entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia;

(iii)

an estate the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source; or

(iv)

a trust if (A) a court in the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (B) it has a valid election in place to be treated as a U.S. person.

148

$       SERIES      SENIOR SECURED STORM RECOVERY BONDS

DUKE ENERGY PROGRESS, LLC

Depositor, Sponsor and Initial Servicer

DUKE ENERGY PROGRESS SC STORM FUNDING LLC

Issuing Entity

PROSPECTUS

Joint Book-Running Managers

Goldman Sachs & Co. LLC

RBC Capital Markets

Through and including     (the 90th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and when offering an unsold allotment or subscription.

PART II

Information Not Required in Prospectus

Item 12.   Other Expenses of Issuance and Distribution

The following table sets forth the various expenses expected to be incurred by the registrant in connection with the issuance and distribution of the securities being registered by this prospectus, other than underwriting discounts and commissions. All amounts are estimated except the Securities and Exchange Commission registration fee.

Securities and Exchange Commission registration fee	$	*
Printing expenses	​	*
Trustee fees and expenses	​	*
Legal fees and expenses	​	*
Accounting fees and expenses	​	*
Rating Agencies’ fees and expenses	​	*
Structuring agent fees and expenses	​	*
Miscellaneous fees and expenses	​	*
Total	$	*

*

To be filed by amendment.

Item 13.   Indemnification of Directors and Officers

DUKE ENERGY PROGRESS SC STORM FUNDING LLC

Section 18-108 of the Delaware Limited Liability Company Act provides that subject to such standards and restrictions, if any, as are set forth in the limited liability company agreement of a limited liability company, a limited liability company may, and shall have the power to, indemnify and hold harmless any member or manager or other person from and against any and all claims and demands whatsoever. Under the limited liability company agreement of DEP SC Storm Funding, the issuing entity will indemnify its managers to the fullest extent permitted by law against any liability incurred with respect to their services as managers under the issuing entity’s limited liability company agreement, except for liabilities arising from their own fraud, gross negligence or willful misconduct or, in the case of an independent manager, their bad faith or willful misconduct.

DUKE ENERGY PROGRESS, LLC

Part 3 of Article 3 of the North Carolina Limited Liability Company Act and the Limited Liability Company Operating Agreement of Duke Energy Progress (“DEP”) permit or require indemnification of its directors and officers in a variety of circumstances, which may include liabilities under the Securities Act. In addition, DEP maintains insurance on behalf of directors, officers, employees or agents, which may cover liabilities under the Securities Act.

The Limited Liability Company Operating Agreement of DEP provides that any person who is or was serving as a member, director, officer, employee or agent of DEP or who, at the request of DEP, is or was serving as a director, manager, officer, employee or agent of another corporation, limited liability company, partnership, joint venture, trust or other enterprise or as a trustee or administrator under an employee benefit plan, shall be indemnified by DEP, to the fullest extent permitted by law, against (a) litigation expenses, including costs, expenses and reasonable attorneys’ fees incurred by any such person in connection with any threatened, pending or completed action, suit or proceedings, whether civil, criminal, administrative or investigative, whether formal or informal, and whether or not brought by or on behalf of DEP, arising out of such person’s status as such or such person’s activities in any of the foregoing capacities, (b) liability, including payments made by such person in satisfaction of any judgment, money decree, fine (including an

II-1

excise tax assessed with respect to an employee benefit plan), penalty or settlement for which such person may have become liable in any such action, suit or proceeding, (c) payments made and personal liabilities reasonably incurred in the authorized conduct of the business of DEP or for the preservation of its business and its property and (d) reasonable costs, expenses and attorneys’ fees incurred by such person in connection with the enforcement of the indemnification rights provided in the agreement. The agreement further provides that any person who is or was serving in any of the foregoing capacities for or on behalf of DEP shall be conclusively deemed to be doing or to have done so in reliance upon, and as consideration for, such indemnification rights. The agreement also states that the rights of indemnification described above (which shall be deemed to be a contract between any such person and DEP enforceable on the part of such person notwithstanding any subsequent amendment or repeal of the agreement) shall inure to the benefit of the successors, estates or legal representatives of any such person and shall not be exclusive of any other rights to which such person may be entitled apart from the agreement, by contract, resolution or otherwise.

Item 14.   Exhibits

List of Exhibits

EXHIBIT NO.	DESCRIPTION OF EXHIBIT
1.1	Form of Underwriting Agreement*
3.1	Certificate of Formation of Duke Energy Progress SC Storm Funding LLC
3.2	Form of Amended and Restated Limited Liability Company Agreement of Duke Energy Progress SC Storm Funding LLC*
4.1	Form of Indenture between Duke Energy Progress SC Storm Funding LLC and the Indenture Trustee (including forms of the storm recovery bonds and series supplement)*
5.1	Opinion of Hunton Andrews Kurth LLP with respect to legality*
8.1	Opinion of Hunton Andrews Kurth LLP with respect to federal tax matters*
10.1	Form of Storm Recovery Property Servicing Agreement between Duke Energy Progress SC Storm Funding LLC and Duke Energy Progress, LLC, as Servicer*
10.2	Form of Storm Recovery Property Purchase and Sale Agreement between Duke Energy Progress SC Storm Funding LLC and Duke Energy Progress, LLC, as Seller*
10.3	Form of Administration Agreement between Duke Energy Progress SC Storm Funding LLC and Duke Energy Progress, LLC, as Administrator*
21.1	List of Subsidiaries
23.1	Consent of Hunton Andrews Kurth LLP (included as part of its opinions filed as Exhibit 5.1 and 8.1)*
24.1	Power of Attorney of Duke Energy Progress, LLC (included on the signature pages to this Registration Statement)
25.1	Form of T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of U.S. Bank Trust Company, National Association
99.1	Financing Order
99.2	Form of Opinion of Hunton Andrews Kurth LLP with respect to U.S. constitutional matters*
99.3	Form of Opinion of Baker, Donelson, Bearman, Caldwell & Berkowitz P.C. with respect to South Carolina constitutional matters*
99.4	Consent of Manager Nominee*
107.1	Calculation of Filing Fee Tables

*

To be filed by amendment

II-2

Item 15.   Undertakings

(a)

The undersigned registrant hereby undertakes that:

(i)

For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed to be part of this registration statement as of the time it was declared effective.

(ii)

For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(b)

As to incorporation by reference:

(i)

For purposes of determining any liability under the Securities Act of 1933, each filing of the issuing entity’s annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(ii)

For the purpose of determining any liability under the Securities Act of 1933, each filing of the annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 of a third party that is incorporated by reference in the registration statement in accordance with Item 1100(c)(1) of Regulation AB (17 CFR 229.1100(c)(1)) shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(c)

As to indemnification:

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrants pursuant to the foregoing provisions, or otherwise, each registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by a registrant of expenses incurred or paid by a director, officer or controlling person of such registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, each registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.

(d)

As to qualification of trust indentures:

The undersigned registrants hereby undertake to file an application for the purpose of determining the eligibility of the indenture trustee to act under Subsection (a) of Section 310 of the Trust Indenture Act in accordance with the rules and regulations prescribed by the Commission under Section 305(b)(2) of the Act.

II-3

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all the requirements for filing on Form SF-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Charlotte, State of North Carolina, on the 17th day of January, 2024.

DUKE ENERGY PROGRESS, LLC

By:

/s/ Lynn J. Good

Name: Lynn J. Good
Title:  Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signatures	Title	Date
/s/ Lynn J. Good Lynn J. Good	Chief Executive Officer (Principal Executive Officer)	January 17, 2024
/s/ Brian D. Savoy Brian D. Savoy	Executive Vice President and Chief Financial Officer (Principal Financial Officer)	January 17, 2024
/s/ Cynthia S. Lee Cynthia S. Lee	Vice President, Chief Accounting Officer and Controller (Principal Accounting Officer)	January 17, 2024

Each of the persons whose signatures appear below constitute and appoint Robert T. Lucas III, the undersigned’s true and lawful attorney-in-fact and agent with full and several power of substitution, for the undersigned and the undersigned’s name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) and supplements to this Registration Statement, and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or any of his substitutes, may lawfully do or cause to be done.

II-4

Duke Energy Progress, LLC Majority of Board of Directors:

/s/ Kodwo Ghartey-Tagoe Kodwo Ghartey-Tagoe	Director	January 17, 2024
/s/ T. Preston Gillespie Jr. T. Preston Gillespie Jr.	Director	January 17, 2024
/s/ R. Alexander Glenn R. Alexander Glenn	Director	January 17, 2024
/s/ Lynn J. Good Lynn J. Good	Director	January 17, 2024
/s/ Julia S. Janson Julia S. Janson	Director	January 17, 2024

II-5

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all the requirements for filing on Form SF-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Charlotte, State of North Carolina, on the 17th day of January, 2024.

DUKE ENERGY PROGRESS SC STORM FUNDING LLC

By:

/s/ Karl W. Newlin

Name:  Karl W. Newlin
Title:   Manager, President, Treasurer and Chief Financial Officer

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Karl W. Newlin Karl W. Newlin	Manager, President, Treasurer and Chief Financial Officer (Principal Executive Officer and Financial Officer)	January 17, 2024
/s/ Cynthia S. Lee Cynthia S. Lee	Manager and Controller (Principal Accounting Officer)	January 17, 2024

II-6

EX-3.1

Exhibit 3.1

CERTIFICATE OF FORMATION

OF

DUKE ENERGY PROGRESS SC STORM FUNDING LLC

The undersigned authorized person, desiring to form a limited liability company pursuant to the Limited Liability Company Act of the State of Delaware hereby certifies as follows:

1.            The name of the limited liability company is:

DUKE ENERGY PROGRESS SC STORM FUNDING LLC

2.           The Registered Office of the limited liability company in the State of Delaware is located at The Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle, Delaware 19801. The name of the registered agent at such address upon whom process against this limited liability company may be served is The Corporation Trust Company.

IN WITNESS WHEREOF, the undersigned has executed this Certificate of Formation of Duke Energy Progress SC Storm Funding LLC this 12th day of January, 2024.

By:	/s/ Cassandra M. Springer
	Cassandra M. Springer, authorized Person

EX-21.1

Exhibit 21.1

Subsidiaries of

Duke Energy Progress, LLC

Name of Subsidiary	Jurisdiction of Formation
Duke Energy Progress Receivables LLC	Delaware
Duke Energy Progress NC Storm Funding LLC	Delaware
Duke Energy Progress SC Storm Funding LLC	Delaware

EX-25.1

Exhibit 25.1

securities and exchange commission

Washington, D.C. 20549

FORM T-1

Statement of Eligibility Under

The Trust Indenture Act of 1939 of a

Corporation Designated to Act as Trustee

Check if an Application to Determine Eligibility of

a Trustee Pursuant to Section 305(b)(2) ¨

_______________________________________________________

U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION

(Exact name of Trustee as specified in its charter)

91-1821036

I.R.S. Employer Identification No.

800 Nicollet Mall Minneapolis, Minnesota	55402
(Address of principal executive offices)	(Zip Code)

Jose A. Galarza

U.S. Bank Trust Company, National Association

190 S. LaSalle Street

Chicago, IL 60603

(312) 332-7453

(Name, address and telephone number of agent for service)

DUKE ENERGY PROGRESS SC STORM FUNDING LLC
(Issuer with respect to the Securities)

Delaware	99-0724467
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

411 Fayetteville Raleigh, North Carolina	27601
(Address of Principal Executive Offices)	(Zip Code)

SENIOR SECURED STORM RECOVERY BONDS

(Title of the Indenture Securities)

FORM T-1

Item 1. GENERAL INFORMATION. Furnish the following information as to the Trustee.

a) Name and address of each examining or supervising authority to which it is subject.

Comptroller of the Currency

Washington, D.C.

b) Whether it is authorized to exercise corporate trust powers.

Yes

Item 2. AFFILIATIONS WITH THE OBLIGOR. If the obligor is an affiliate of the Trustee, describe each such affiliation.

None

Items 3-15 Items 3-15 are not applicable because to the best of the Trustee's knowledge, the obligor is not in default under any Indenture for which the Trustee acts as Trustee.

Item 16. LIST OF EXHIBITS: List below all exhibits filed as a part of this statement of eligibility and qualification.

1. A copy of the Articles of Association of the Trustee, attached as Exhibit 1.

2. A copy of the certificate of authority of the Trustee to commence business, attached as Exhibit 2.

3. A copy of the authorization of the Trustee to exercise corporate trust powers, included as Exhibit 2.

4. A copy of the existing bylaws of the Trustee, attached as Exhibit 4.

5. A copy of each Indenture referred to in Item 4. Not applicable.

6. The consent of the Trustee required by Section 321(b) of the Trust Indenture Act of 1939, attached as Exhibit 6.

7. Report of Condition of the Trustee as of September 30, 2023, published pursuant to law or the requirements of its supervising or examining authority, attached as Exhibit 7.

SIGNATURE

Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the Trustee, U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States of America, has duly caused this statement of eligibility and qualification to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Chicago, State of Illinois on the 16^th of January, 2024.

By:	/s/ Jose A. Galarza
	Jose A. Galarza
	Vice President

Exhibit 1

ARTICLES OF ASSOCIATION
OF

U. S. BANK TRUST COMPANY, NATIONAL ASSOCIATION

For the purpose of organizing an association (the “Association”) to perform any lawful activities of national banks, the undersigned enter into the following Articles of Association:

FIRST. The title of this Association shall be U. S. Bank Trust Company, National Association.

SECOND. The main office of the Association shall be in the city of Portland, county of Multnomah, state of Oregon. The business of the Association will be limited to fiduciary powers and the support of activities incidental to the exercise of those powers. The Association may not expand or alter its business beyond that stated in this article without the prior approval of the Comptroller of the Currency.

THIRD. The board of directors of the Association shall consist of not less than five nor more than twenty-five persons, the exact number to be fixed and determined from time to time by resolution of a majority of the full board of directors or by resolution of a majority of the shareholders at any annual or special meeting thereof. Each director shall own common or preferred stock of the Association or of a holding company owning the Association, with an aggregate par, fair market, or equity value of not less than $1,000, as of either (i) the date of purchase, (ii) the date the person became a director, or (iii) the date of that person's most recent election to the board of directors, whichever is more recent. Any combination of common or preferred stock of the Association or holding company may be used.

Any vacancy in the board of directors may be filled by action of a majority of the remaining directors between meetings of shareholders. The board of directors may increase the number of directors up to the maximum permitted by law. Terms of directors, including directors selected to fill vacancies, shall expire at the next regular meeting of shareholders at which directors are elected, unless the directors resign or are removed from office. Despite the expiration of a director's term, the director shall continue to serve until his or her successor is elected and qualified or until there is a decrease in the number of directors and his or her position is eliminated.

Honorary or advisory members of the board of directors, without voting power or power of final decision in matters concerning the business of the Association, may be appointed by resolution of a majority of the full board of directors, or by resolution of shareholders at any annual or special meeting. Honorary or advisory directors shall not be counted to determined the number of directors of the Association or the presence of a quorum in connection with any board action, and shall not be required to own qualifying shares.

- 1 -

FOURTH. There shall be an annual meeting of the shareholders to elect directors and transact whatever other business may be brought before the meeting. It shall be held at the main office or any other convenient place the board of directors may designate, on the day of each year specified therefor in the Bylaws, or if that day falls on a legal holiday in the state in which the Association is located, on the next following banking day. If no election is held on the day fixed or in the event of a legal holiday on the following banking day, an election may be held on any subsequent day within 60 days of the day fixed, to be designated by the board of directors, or, if the directors fail to fix the day, by shareholders representing two-thirds of the shares issued and outstanding. In all cases, at least 10 days’ advance notice of the meeting shall be given to the shareholders by first-class mail.

In all elections of directors, the number of votes each common shareholder may cast will be determined by multiplying the number of shares he or she owns by the number of directors to be elected. Those votes may be cumulated and cast for a single candidate or may be distributed among two or more candidates in the manner selected by the shareholder. On all other questions, each common shareholder shall be entitled to one vote for each share of stock held by him or her.

A director may resign at any time by delivering written notice to the board of directors, its chairperson, or to the Association, which resignation shall be effective when the notice is delivered unless the notice specifies a later effective date.

A director may be removed by the shareholders at a meeting called to remove him or her, when notice of the meeting stating that the purpose or one of the purposes is to remove him or her is provided, if there is a failure to fulfill one of the affirmative requirements for qualification, or for cause; provided, however, that a director may not be removed if the number of votes sufficient to elect him or her under cumulative voting is voted against his or her removal.

FIFTH. The authorized amount of capital stock of the Association shall be 1,000,000 shares of common stock of the par value of ten dollars ($10) each; but said capital stock may be increased or decreased from time to time, according to the provisions of the laws of the United States. The Association shall have only one class of capital stock.

No holder of shares of the capital stock of any class of the Association shall have any preemptive or preferential right of subscription to any shares of any class of stock of the Association, whether now or hereafter authorized, or to any obligations convertible into stock of the Association, issued, or sold, nor any right of subscription to any thereof other than such, if any, as the board of directors, in its discretion, may from time to time determine and at such price as the board of directors may from time to time fix.

Transfers of the Association's stock are subject to the prior written approval of a federal depository institution regulatory agency. If no other agency approval is required, the approval of the Comptroller of the Currency must be obtained prior to any such transfers.

Unless otherwise specified in the Articles of Association or required by law, (1) all matters requiring shareholder action, including amendments to the Articles of Association must be approved by shareholders owning a majority voting interest in the outstanding voting stock, and (2) each shareholder shall be entitled to one vote per share.

- 2 -

Unless otherwise specified in the Articles of Association or required by law, all shares of voting stock shall be voted together as a class, on any matters requiring shareholder approval.

Unless otherwise provided in the Bylaws, the record date for determining shareholders entitled to notice of and to vote at any meeting is the close of business on the day before the first notice is mailed or otherwise sent to the shareholders, provided that in no event may a record date be more than 70 days before the meeting.

The Association, at any time and from time to time, may authorize and issue debt obligations, whether subordinated, without the approval of the shareholders. Obligations classified as debt, whether subordinated, which may be issued by the Association without the approval of shareholders, do not carry voting rights on any issue, including an increase or decrease in the aggregate number of the securities, or the exchange or reclassification of all or part of securities into securities of another class or series.

SIXTH. The board of directors shall appoint one of its members president of this Association and one of its members chairperson of the board and shall have the power to appoint one or more vice presidents, a secretary who shall keep minutes of the directors' and shareholders' meetings and be responsible for authenticating the records of the Association, and such other officers and employees as may be required to transact the business of this Association. A duly appointed officer may appoint one or more officers or assistant officers if authorized by the board of directors in accordance with the Bylaws.

The board of directors shall have the power to:

(1) Define the duties of the officers, employees, and agents of the Association.

(2) Delegate the performance of its duties, but not the responsibility for its duties, to the officers, employees, and agents of the Association.

(3) Fix the compensation and enter employment contracts with its officers and employees upon reasonable terms and conditions consistent with applicable law.

(4) Dismiss officers and employees.

(5) Require bonds from officers and employees and to fix the penalty thereof.

(6) Ratify written policies authorized by the Association's management or committees of the board.

(7) Regulate the manner any increase or decrease of the capital of the Association shall be made; provided that nothing herein shall restrict the power of shareholders to increase or decrease the capital of the Association in accordance with law, and nothing shall raise or lower from two-thirds the percentage required for shareholder approval to increase or reduce the capital.

- 3 -

(8) Manage and administer the business and affairs of the Association.

(9) Adopt initial Bylaws, not inconsistent with law or the Articles of Association, for managing the business and regulating the affairs of the Association.

(10) Amend or repeal Bylaws, except to the extent that the Articles of Association reserve this power in whole or in part to the shareholders.

(11) Make contracts.

(12) Generally perform all acts that are legal for a board of directors to perform.

SEVENTH. The board of directors shall have the power to change the location of the main office to any authorized branch within the limits of the city of Portland, Oregon, without the approval of the shareholders, or with a vote of shareholders owning two-thirds of the stock of the Association for a location outside such limits and upon receipt of a certificate of approval from the Comptroller of the Currency, to any other location within or outside the limits of the city of Portland, Oregon, but not more than thirty miles beyond such limits. The board of directors shall have the power to establish or change the location of any office or offices of the Association to any other location permitted under applicable law, without approval of shareholders, subject to approval by the Comptroller of the Currency.

EIGHTH. The corporate existence of this Association shall continue until termination according to the laws of the United States.

NINTH. The board of directors of the Association, or any shareholder owning, in the aggregate, not less than 25 percent of the stock of the Association, may call a special meeting of shareholders at any time. Unless otherwise provided by the Bylaws or the laws of the United States, or waived by shareholders, a notice of the time, place, and purpose of every annual and special meeting of the shareholders shall be given by first-class mail, postage prepaid, mailed at least 10, and no more than 60, days prior to the date of the meeting to each shareholder of record at his/her address as shown upon the books of the Association. Unless otherwise provided by the Bylaws, any action requiring approval of shareholders must be effected at a duly called annual or special meeting.

TENTH. These Articles of Association may be amended at any regular or special meeting of the shareholders by the affirmative vote of the holders of a majority of the stock of the Association, unless the vote of the holders of a greater amount of stock is required by law, and in that case by the vote of the holders of such greater amount; provided, that the scope of the Association's activities and services may not be expanded without the prior written approval of the Comptroller of the Currency. The Association's board of directors may propose one or more amendments to the Articles of Association for submission to the shareholders.

- 4 -

In witness whereof, we have hereunto set our hands this 11^th of June, 1997.

/s/ Jeffrey T. Grubb

Jeffrey T. Grubb

/s/ Robert D. Sznewajs

Robert D. Sznewajs

/s/ Dwight V. Board

Dwight V. Board

/s/ P. K. Chatterjee

P. K. Chatterjee

/s/ Robert Lane

Robert Lane

Exhibit 2

Exhibit 4

U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION

AMENDED AND RESTATED BYLAWS

ARTICLE I

Meetings of Shareholders

Section 1.1. Annual Meeting. The annual meeting of the shareholders, for the election of directors and the transaction of any other proper business, shall be held at a time and place as the Chairman or President may designate. Notice of such meeting shall be given not less than ten (10) days or more than sixty (60) days prior to the date thereof, to each shareholder of the Association, unless the Office of the Comptroller of the Currency (the “OCC”) determines that an emergency circumstance exists. In accordance with applicable law, the sole shareholder of the Association is permitted to waive notice of the meeting. If, for any reason, an election of directors is not made on the designated day, the election shall be held on some subsequent day, as soon thereafter as practicable, with prior notice thereof. Failure to hold an annual meeting as required by these Bylaws shall not affect the validity of any corporate action or work a forfeiture or dissolution of the Association.

Section 1.2. Special Meetings. Except as otherwise specially provided by law, special meetings of the shareholders may be called for any purpose, at any time by a majority of the board of directors (the “Board”), or by any shareholder or group of shareholders owning at least ten percent of the outstanding stock.

Every such special meeting, unless otherwise provided by law, shall be called upon not less than ten (10) days nor more than sixty (60) days prior notice stating the purpose of the meeting.

Section 1.3. Nominations for Directors. Nominations for election to the Board may be made by the Board or by any shareholder.

Section 1.4. Proxies. Shareholders may vote at any meeting of the shareholders by proxies duly authorized in writing. Proxies shall be valid only for one meeting and any adjournments of such meeting and shall be filed with the records of the meeting.

Section 1.5. Record Date. The record date for determining shareholders entitled to notice and to vote at any meeting will be thirty days before the date of such meeting, unless otherwise determined by the Board.

Section 1.6. Quorum and Voting. A majority of the outstanding capital stock, represented in person or by proxy, shall constitute a quorum at any meeting of shareholders, unless otherwise provided by law, but less than a quorum may adjourn any meeting, from time to time, and the meeting may be held as adjourned without further notice. A majority of the votes cast shall decide every question or matter submitted to the shareholders at any meeting, unless otherwise provided by law or by the Articles of Association.

Section 1.7. Inspectors. The Board may, and in the event of its failure so to do, the Chairman of the Board may appoint Inspectors of Election who shall determine the presence of quorum, the validity of proxies, and the results of all elections and all other matters voted upon by shareholders at all annual and special meetings of shareholders.

Section 1.8. Waiver and Consent. The shareholders may act without notice or a meeting by a unanimous written consent by all shareholders.

Section 1.9. Remote Meetings. The Board shall have the right to determine that a shareholder meeting not be held at a place, but instead be held solely by means of remote communication in the manner and to the extent permitted by the General Corporation Law of the State of Delaware.

ARTICLE II

Directors

Section 2.1. Board of Directors. The Board shall have the power to manage and administer the business and affairs of the Association. Except as expressly limited by law, all corporate powers of the Association shall be vested in and may be exercised by the Board.

Section 2.2. Term of Office. The directors of this Association shall hold office for one year and until their successors are duly elected and qualified, or until their earlier resignation or removal.

Section 2.3. Powers. In addition to the foregoing, the Board shall have and may exercise all of the powers granted to or conferred upon it by the Articles of Association, the Bylaws and by law.

Section 2.4. Number. As provided in the Articles of Association, the Board of this Association shall consist of no less than five nor more than twenty-five members, unless the OCC has exempted the Association from the twenty-five- member limit. The Board shall consist of a number of members to be fixed and determined from time to time by resolution of the Board or the shareholders at any meeting thereof, in accordance with the Articles of Association. Between meetings of the shareholders held for the purpose of electing directors, the Board by a majority vote of the full Board may increase the size of the Board but not to more than a total of twenty-five directors, and fill any vacancy so created in the Board; provided that the Board may increase the number of directors only by up to two directors, when the number of directors last elected by shareholders was fifteen or fewer, and by up to four directors, when the number of directors last elected by shareholders was sixteen or more. Each director shall own a qualifying equity interest in the Association or a company that has control of the Association in each case as required by applicable law. Each director shall own such qualifying equity interest in his or her own right and meet any minimum threshold ownership required by applicable law.

Section 2.5. Organization Meeting. The newly elected Board shall meet for the purpose of organizing the new Board and electing and appointing such officers of the Association as may be appropriate. Such meeting shall be held on the day of the election or as soon thereafter as practicable, and, in any event, within thirty days thereafter, at such time and place as the Chairman or President may designate. If, at the time fixed for such meeting, there shall not be a quorum present, the directors present may adjourn the meeting until a quorum is obtained.

Section 2.6. Regular Meetings. The regular meetings of the Board shall be held, without notice, as the Chairman or President may designate and deem suitable.

Section 2.7. Special Meetings. Special meetings of the Board may be called at any time, at any place and for any purpose by the Chairman of the Board or the President of the Association, or upon the request of a majority of the entire Board. Notice of every special meeting of the Board shall be given to the directors at their usual places of business, or at such other addresses as shall have been furnished by them for the purpose. Such notice shall be given at least twelve hours (three hours if meeting is to be conducted by conference telephone) before the meeting by telephone or by being personally delivered, mailed, or electronically delivered. Such notice need not include a statement of the business to be transacted at, or the purpose of, any such meeting.

Section 2.8. Quorum and Necessary Vote. A majority of the directors shall constitute a quorum at any meeting of the Board, except when otherwise provided by law; but less than a quorum may adjourn any meeting, from time to time, and the meeting may be held as adjourned without further notice. Unless otherwise provided by law or the Articles or Bylaws of this Association, once a quorum is established, any act by a majority of those directors present and voting shall be the act of the Board.

Section 2.9. Written Consent. Except as otherwise required by applicable laws and regulations, the Board may act without a meeting by a unanimous written consent by all directors, to be filed with the Secretary of the Association as part of the corporate records.

Section 2.10. Remote Meetings. Members of the Board, or of any committee thereof, may participate in a meeting of such Board or committee by means of conference telephone, video or similar communications equipment by means of which all persons participating in the meeting can hear each other and such participation shall constitute presence in person at such meeting.

Section 2.11. Vacancies. When any vacancy occurs among the directors, the remaining members of the Board may appoint a director to fill such vacancy at any regular meeting of the Board, or at a special meeting called for that purpose.

ARTICLE III

Committees

Section 3.1. Advisory Board of Directors. The Board may appoint persons, who need not be directors, to serve as advisory directors on an advisory board of directors established with respect to the business affairs of either this Association alone or the business affairs of a group of affiliated organizations of which this Association is one. Advisory directors shall have such powers and duties as may be determined by the Board, provided, that the Board's responsibility for the business and affairs of this Association shall in no respect be delegated or diminished.

Section 3.2. Trust Audit Committee. At least once during each calendar year, the Association shall arrange for a suitable audit (by internal or external auditors) of all significant fiduciary activities under the direction of its trust audit committee, a function that will be fulfilled by the Audit Committee of the financial holding company that is the ultimate parent of this Association. The Association shall note the results of the audit (including significant actions taken as a result of the audit) in the minutes of the Board. In lieu of annual audits, the Association may adopt a continuous audit system in accordance with 12 C.F.R. § 9.9(b).

The Audit Committee of the financial holding company that is the ultimate parent of this Association, fulfilling the function of the trust audit committee:

(1)   Must not include any officers of the Association or an affiliate who participate significantly in the administration of the Association’s fiduciary activities; and

(2)   Must consist of a majority of members who are not also members of any committee to which the Board has delegated power to manage and control the fiduciary activities of the Association.

Section 3.3. Executive Committee. The Board may appoint an Executive Committee which shall consist of at least three directors and which shall have, and may exercise, to the extent permitted by applicable law, all the powers of the Board between meetings of the Board or otherwise when the Board is not meeting.

Section 3.4. Trust Management Committee. The Board of this Association shall appoint a Trust Management Committee to provide oversight of the fiduciary activities of the Association. The Trust Management Committee shall determine policies governing fiduciary activities. The Trust Management Committee or such sub-committees, officers or others as may be duly designated by the Trust Management Committee shall oversee the processes related to fiduciary activities to assure conformity with fiduciary policies it establishes, including ratifying the acceptance and the closing out or relinquishment of all trusts. The Trust Management Committee will provide regular reports of its activities to the Board.

Section 3.5. Other Committees. The Board may appoint, from time to time, committees of one or more persons who need not be directors, for such purposes and with such powers as the Board may determine; however, the Board will not delegate to any committee any powers or responsibilities that it is prohibited from delegating under any law or regulation. In addition, either the Chairman or the President may appoint, from time to time, committees of one or more officers, employees, agents or other persons, for such purposes and with such powers as either the Chairman or the President deems appropriate and proper. Whether appointed by the Board, the Chairman, or the President, any such committee shall at all times be subject to the direction and control of the Board.

Section 3.6. Meetings, Minutes and Rules. An advisory board of directors and/or committee shall meet as necessary in consideration of the purpose of the advisory board of directors or committee, and shall maintain minutes in sufficient detail to indicate actions taken or recommendations made; unless required by the members, discussions, votes or other specific details need not be reported. An advisory board of directors or a committee may, in consideration of its purpose, adopt its own rules for the exercise of any of its functions or authority.

ARTICLE IV

Officers

Section 4.1. Chairman of the Board. The Board may appoint one of its members to be Chairman of the Board to serve at the pleasure of the Board. The Chairman shall supervise the carrying out of the policies adopted or approved by the Board; shall have general executive powers, as well as the specific powers conferred by these Bylaws; and shall also have and may exercise such powers and duties as from time to time may be conferred upon or assigned by the Board.

Section 4.2. President. The Board may appoint one of its members to be President of the Association. In the absence of the Chairman, the President shall preside at any meeting of the Board. The President shall have general executive powers, and shall have and may exercise any and all other powers and duties pertaining by law, regulation or practice, to the office of President, or imposed by these Bylaws. The President shall also have and may exercise such powers and duties as from time to time may be conferred or assigned by the Board.

Section 4.3. Vice President. The Board may appoint one or more Vice Presidents who shall have such powers and duties as may be assigned by the Board and to perform the duties of the President on those occasions when the President is absent, including presiding at any meeting of the Board in the absence of both the Chairman and President.

Section 4.4. Secretary. The Board shall appoint a Secretary, or other designated officer who shall be Secretary of the Board and of the Association, and shall keep accurate minutes of all meetings. The Secretary shall attend to the giving of all notices required by these Bylaws to be given; shall be custodian of the corporate seal, records, documents and papers of the Association; shall provide for the keeping of proper records of all transactions of the Association; shall, upon request, authenticate any records of the Association; shall have and may exercise any and all other powers and duties pertaining by law, regulation or practice, to the Secretary, or imposed by these Bylaws; and shall also perform such other duties as may be assigned from time to time by the Board. The Board may appoint one or more Assistant Secretaries with such powers and duties as the Board, the President or the Secretary shall from time to time determine.

Section 4.5. Other Officers. The Board may appoint, and may authorize the Chairman, the President or any other officer to appoint, any officer as from time to time may appear to the Board, the Chairman, the President or such other officer to be required or desirable to transact the business of the Association. Such officers shall exercise such powers and perform such duties as pertain to their several offices, or as may be conferred upon or assigned to them by these Bylaws, the Board, the Chairman, the President or such other authorized officer. Any person may hold two offices.

Section 4.6. Tenure of Office. The Chairman or the President and all other officers shall hold office until their respective successors are elected and qualified or until their earlier death, resignation, retirement, disqualification or removal from office, subject to the right of the Board or authorized officer to discharge any officer at any time.

ARTICLE V

Stock

Section 5.1. The Board may authorize the issuance of stock either in certificated or in uncertificated form. Certificates for shares of stock shall be in such form as the Board may from time to time prescribe. If the Board issues certificated stock, the certificate shall be signed by the President, Secretary or any other such officer as the Board so determines. Shares of stock shall be transferable on the books of the Association, and a transfer book shall be kept in which all transfers of stock shall be recorded. Every person becoming a shareholder by such transfer shall, in proportion to such person's shares, succeed to all rights of the prior holder of such shares. Each certificate of stock shall recite on its face that the stock represented thereby is transferable only upon the books of the Association properly endorsed. The Board may impose conditions upon the transfer of the stock reasonably calculated to simplify the work of the Association for stock transfers, voting at shareholder meetings, and related matters, and to protect it against fraudulent transfers.

ARTICLE VI

Corporate Seal

Section 6.1. The Association shall have no corporate seal; provided, however, that if the use of a seal is required by, or is otherwise convenient or advisable pursuant to, the laws or regulations of any jurisdiction, the following seal may be used, and the Chairman, the President, the Secretary and any Assistant Secretary shall have the authority to affix such seal:

ARTICLE VII

Miscellaneous Provisions

Section 7.1. Execution of Instruments. All agreements, checks, drafts, orders, indentures, notes, mortgages, deeds, conveyances, transfers, endorsements, assignments, certificates, declarations, receipts, discharges, releases, satisfactions, settlements, petitions, schedules, accounts, affidavits, bonds, undertakings, guarantees, proxies and other instruments or documents may be signed, countersigned, executed, acknowledged, endorsed, verified, delivered or accepted on behalf of the Association, whether in a fiduciary capacity or otherwise, by any officer of the Association, or such employee or agent as may be designated from time to time by the Board by resolution, or by the Chairman or the President by written instrument, which resolution or instrument shall be certified as in effect by the Secretary or an Assistant Secretary of the Association. The provisions of this section are supplementary to any other provision of the Articles of Association or Bylaws.

Section 7.2. Records. The Articles of Association, the Bylaws as revised or amended from time to time and the proceedings of all meetings of the shareholders, the Board, and standing committees of the Board, shall be recorded in appropriate minute books provided for the purpose. The minutes of each meeting shall be signed by the Secretary, or other officer appointed to act as Secretary of the meeting.

Section 7.3. Trust Files. There shall be maintained in the Association files all fiduciary records necessary to assure that its fiduciary responsibilities have been properly undertaken and discharged.

Section 7.4. Trust Investments. Funds held in a fiduciary capacity shall be invested according to the instrument establishing the fiduciary relationship and according to law. Where such instrument does not specify the character and class of investments to be made and does not vest in the Association a discretion in the matter, funds held pursuant to such instrument shall be invested in investments in which corporate fiduciaries may invest under law.

Section 7.5. Notice. Whenever notice is required by the Articles of Association, the Bylaws or law, such notice shall be by mail, postage prepaid, e- mail, in person, or by any other means by which such notice can reasonably be expected to be received, using the address of the person to receive such notice, or such other personal data, as may appear on the records of the Association.

Except where specified otherwise in these Bylaws, prior notice shall be proper if given not more than 30 days nor less than 10 days prior to the event for which notice is given.

ARTICLE VIII

Indemnification

Section 8.1. The Association shall indemnify such persons for such liabilities in such manner under such circumstances and to such extent as permitted by Section 145 of the Delaware General Corporation Law, as now enacted or hereafter amended. The Board may authorize the purchase and maintenance of insurance and/or the execution of individual agreements for the purpose of such indemnification, and the Association shall advance all reasonable costs and expenses (including attorneys’ fees) incurred in defending any action, suit or proceeding to all persons entitled to indemnification under this Section 8.1. Such insurance shall be consistent with the requirements of 12 C.F.R. § 7.2014 and shall exclude coverage of liability for a formal order assessing civil money penalties against an institution-affiliated party, as defined at 12 U.S.C. § 1813(u).

Section 8.2. Notwithstanding Section 8.1, however, (a) any indemnification payments to an institution-affiliated party, as defined at 12 U.S.C. § 1813(u), for an administrative proceeding or civil action initiated by a federal banking agency, shall be reasonable and consistent with the requirements of 12 U.S.C. § 1828(k) and the implementing regulations thereunder; and (b) any indemnification payments and advancement of costs and expenses to an institution-affiliated party, as defined at 12 U.S.C. § 1813(u), in cases involving an administrative proceeding or civil action not initiated by a federal banking agency, shall be in accordance with Delaware General Corporation Law and consistent with safe and sound banking practices.

ARTICLE IX

Bylaws: Interpretation and Amendment

Section 9.1. These Bylaws shall be interpreted in accordance with and subject to appropriate provisions of law, and may be added to, altered, amended, or repealed, at any regular or special meeting of the Board.

Section 9.2. A copy of the Bylaws and all amendments shall at all times be kept in a convenient place at the principal office of the Association, and shall be open for inspection to all shareholders during Association hours.

ARTICLE X

Miscellaneous Provisions

Section 10.1. Fiscal Year. The fiscal year of the Association shall begin on the first day of January in each year and shall end on the thirty-first day of December following.

Section 10.2. Governing Law. This Association designates the Delaware General Corporation Law, as amended from time to time, as the governing law for its corporate governance procedures, to the extent not inconsistent with Federal banking statutes and regulations or bank safety and soundness.

***

(February 8, 2021)

Exhibit 6

CONSENT

In accordance with Section 321(b) of the Trust Indenture Act of 1939, the undersigned, U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION hereby consents that reports of examination of the undersigned by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon its request therefor.

Dated: January 16, 2024

By:	/s/ Jose A. Galarza
	Jose A. Galarza
	Vice President

Exhibit 7

U.S. Bank Trust Company, National Association

Statement of Financial Condition

as of 09/30/2023

($000’s)

	09/30/2023
Assets
Cash and Balances Due From Depository Institutions	$	971,860
Securities		4,247
Federal Funds		0
Loans & Lease Financing Receivables		0
Fixed Assets		1,548
Intangible Assets		579,147
Other Assets		165,346
Total Assets	$	1,722,148
Liabilities
Deposits	$	0
Fed Funds		0
Treasury Demand Notes		0
Trading Liabilities		0
Other Borrowed Money		0
Acceptances		0
Subordinated Notes and Debentures		0
Other Liabilities		226,499
Total Liabilities	$	226,499
Equity
Common and Preferred Stock		200
Surplus		1,171,635
Undivided Profits		323,814
Minority Interest in Subsidiaries		0
Total Equity Capital	$	1,495,649
Total Liabilities and Equity Capital	$	1,722,148

EX-99.1

Exhibit 99.1

BEFORE

THE PUBLIC SERVICE COMMISSION OF

SOUTH CAROLINA

DOCKET NO. 2023-89-E - ORDER NO. 2023-752(A)

OCTOBER 23, 2023

IN RE: Duke Energy Progress, LLC’s Petition for a Financing Order (“Phase II”) )
)
)
)
)
)
) STORM RECOVERY
FINANCING ORDER
APPROVING
COMPREHENSIVE
SETTLEMENT
AGREEMENT AND
ACCOUNTING ORDER

After the issuance of Order No. 2023-752, an inadvertent scrivener’s error was discovered in the definition of “public interest,” as defined by S.C. Code Ann. section 58-4-10(B) in the Dissent. The error does not change the substantive argument made in the Dissent or the outcome of the Order. The Office of Regulatory Staff filed a letter noting this error and acknowledged that it does not affect the outcome or conclusions contained in the Order. The Amended Order amends the Dissent with correction only to the most recent definition S.C. Code Ann. section 58-4-10(B). There are no other changes to Order No. 2023-752, and this amendment does not change any argument or analysis.

This matter comes before the Public Service Commission of South Carolina (Commission) on the May 31, 2023, Petition of Duke Energy Progress, LLC (DEP or the Company) for Issuance of a Storm Recovery Financing Order (the Petition) by the Commission pursuant to S.C. Code Ann. section 58-27-1110.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 2

I.              PROCEDURAL HISTORY AND JURISDICTION

On May 31, 2023, pursuant to S.C. Code Ann. section 58-27-1110(A) (Supp. 2023), S.C. Code Ann. Regs. 103-825 (2012), and other applicable rules and regulations of the Commission, DEP filed its Petition requesting that the Commission grant authorization for the financing of the Company’s storm recovery costs incurred due to storm recovery activities required as a result of the following storms: Pax, Ulysses, Matthew, Florence, Michael, Dorian, Izzy and Jasper (the Storms). Specifically, DEP seeks the following: (1) authorization to finance its Securitizable Balance plus up-front Financing Costs incurred in connection with the issuance of the Storm Recovery Bonds¹; (2) approval of the proposed securitization financing structure; (3) approval to issue Storm Recovery Bonds², secured by the pledge of Storm Recovery Property, in one or more series in an aggregate principal amount not to exceed the relevant Securitizable Balance plus up-front Financing Costs; (4) approval of the Financing Costs, including up-front Financing Costs and on-going Financing Costs, incurred in connection with the issuance of Storm Recovery Bonds; (5) approval to create Storm Recovery Property, including the right to (i) impose, bill, charge, collect, and receive nonbypassable Storm Recovery Charge; and (ii) obtain periodic formulaic adjustments to the Storm Recovery Charge as provided in this Financing Order; and (6) approval of the tariff to implement the Storm Recovery Charge. With regard to the Petition, the Company was represented in this proceeding by Carnal O. Robinson, Esquire; J. Ashley Cooper, Esquire; Alexandrea Breazeale, Esquire; James H. Jeffries IV, Esquire; and Kristin M. Athens, Esquire.³

¹ See Finding of Fact 4 defining Securitizable Balance

² Capitalized terms not otherwise defined herein shall have the meaning assigned to them in S.C. Code Ann. sections 58-27-1105 through 1180 referred to herein as the “Storm Securitization Statute”.

³ James H. Jeffries IV was admitted pro hac vice pursuant to Commission Order No. 2023-570. Kristin M. Athens was admitted pro hac vice pursuant to Commission Order No. 2023-499.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 3

In support of its Petition, DEP filed the Direct Testimony and Exhibits of Thomas J. Heath Jr., Structured Finance Director with Duke Energy Business Services, LLC (DEBS); Kimberly K. Smith, Rates & Regulatory Strategy Manager with Duke Energy Carolinas, LLC; Jacalyn H. Moore, Rates & Regulatory Strategy Manager with DEBS; Nicholas G. Speros, Director of Accounting with DEBS; and Katrina T. Niehaus, Managing Director, Head of the Corporate Asset Backed Securities Finance Group with Goldman Sachs & Co. Tr. pp. 46, 186, 310, 322, & 358. On July 11, 2023, DEP filed an Errata to the Petition and the Direct Testimony and Exhibits of Witness Kimberly K. Smith. Tr. p. 188. On July 21, 2023, DEP filed Supplemental Direct Testimony and Exhibits of Witness Jacalyn H. Moore. Tr. p. 324. On August 10, 2023, DEP filed Rebuttal Testimony and Exhibits, where applicable, of Thomas J. Heath, Jr., Katrina T. Niehaus, Kimberly K. Smith, Nicholas G. Speros, and Jacalyn H. Moore. Tr. pp. 48, 190. On August 22, 2023, DEP filed Revised Rebuttal Testimony of Kimberly K. Smith. Tr. p. 190. On September 8, 2023, DEP submitted Amended Rebuttal Testimony and Exhibit of Thomas J. Heath, Jr., Amended Rebuttal Testimony of Katrina T. Niehaus, and Settlement Testimony of Thomas J. Heath Jr. Tr. pp. 48; 360. On September 12, 2023, DEP filed Hearing Exhibit 7 providing the net present value savings calculation for a 10-Year and 15-Year Bond Recovery Period. Tr. p. 282.

On June 7, 2023, the South Carolina Department of Consumer Affairs (DCA) petitioned the Commission to intervene, which was granted on June 22, 2023, by Order No. 2023-70-H. DCA was represented in this proceeding by Carri Grube Lybarker, Esquire, and Roger P. Hall, Esquire. On July 26, 2023, DCA filed the Direct Testimony of Aaron Rothschild. On August 22, 2023, DCA filed Surrebuttal Testimony of Aaron Rothschild. On September 8, 2023, DCA filed Testimony of Aaron Rothschild in support of the Settlement Agreement.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 4

On June 21, 2023, Nucor Steel - South Carolina (Nucor Steel) petitioned the Commission to intervene, which was granted on July 3, 2023, by Order No. 2023-74-H. Nucor Steel was represented in this proceeding by Robert R. Smith II, Esquire, and Michael K. Lavanga, Esquire.⁴ 

The South Carolina Office of Regulatory Staff (ORS) is a party of record to proceedings before the Commission pursuant to S.C. Code Ann. Section 58-4-10(B) (Supp. 2023). ORS was represented in this proceeding by Christopher M. Huber, Esquire, Donna L. Rhaney, Esquire, and Joshua E. Austin, Esquire. On July 26, 2023, ORS filed the Direct Testimony and Exhibit of Michael L. Seaman- Huynh, Deputy Director of Energy Operations with ORS; Direct Testimony and Exhibits of Jeremy E. Traska, Managing Director of Debt Capital Markets & Advisory Group with Drexel Hamilton, LLC; Direct Testimony of Mark A. Rhoden, Chief Financial Officer with ORS, and Direct Testimony and Exhibits of Lane Kollen, Vice President and Principal with J. Kennedy and Associates, Inc. Tr. pp. 239, 251, 529, & 536. On August 22, 2023, ORS filed Surrebuttal Testimony and Exhibit of Mark A. Rhoden and Surrebuttal Testimony of Lane Kollen. Tr. pp. 241, 253. On September 8, 2023, ORS filed Settlement Testimony of Mark A. Rhoden. Tr. p. 255.

On August 25, 2023, DCA filed a letter with attachments on behalf of DCA witness Rothschild. On August 28, 2023, DEP filed a motion to strike DCA witness Rothschild’s direct and surrebuttal testimony. DCA filed its response to the motion on September 1, 2023, and ORS filed a letter and exhibit this same day. DEP filed a reply to DCA’ s response to the motion to strike on September 5, 2023. The motion was withdrawn with prejudice during the hearing of this matter.⁵

⁴ Michael K. Lavanga was admitted pro hac vice pursuant to Commission Order No. 2023-492. 

⁵ During the hearing of this matter, the pending motion was withdrawn, with prejudice. Each party confirmed that withdrawal was being freely and voluntarily made, and all parties specifically disclaimed any prejudice associated with the motion. Attorneys on behalf of each party, confirmed to the Commission that by withdrawal of the motion, the parties knowingly agreed to waive all rights and other legal remedies available to them by the withdrawal of the motion. As such, the withdrawal of the motion during the proceeding has the effect of that provision being stricken from the Comprehensive Settlement Agreement, which is reflected in Order Exhibit No. 1. Tr. p. 290:16-301:19.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 5

On September 5, 2023, DEP filed a Stipulation between DEP, ORS, DCA and Nucor Steel regarding various matters before the Commission. On September 6, 2023, the Commission convened the hearing on this matter with the Honorable Florence P. Belser presiding. At the commencement of the hearing, the Commission permitted a delay of the hearing in order to allow the Commission time to review the Stipulation filed on September 5, 2023.

When the hearing reconvened, counsel for DEP informed the Commission that the Parties had reached a global, comprehensive settlement resolving all issues in the case, and requested a recess in the proceeding to allow the Parties to memorialize the agreement and for certain Parties to file settlement testimony supporting the comprehensive settlement agreement. The Commission agreed to stay the proceeding related to DEP’ s Petition until Monday, September 11, 2023.

On September 8, 2023, ORS filed a Comprehensive Settlement Agreement⁶ (Settlement Agreement) between DEP, ORS, DCA and Nucor Steel (the Parties) attached hereto in this Financing Order as Order Exhibit No. 1. The Commission resumed the hearing on September 11, 2023, and accepted the Settlement Agreement into evidence.

DEP presented the direct, supplemental direct, rebuttal, revised or amended rebuttal, and settlement testimonies of witnesses Heath, Smith, Moore, Speros, and Niehaus. DCA presented the settlement testimony of witness Rothschild. ORS presented the direct, surrebuttal, and settlement testimonies of witnesses Rhoden, Seaman-Huynh⁷, Kollen, and Traska. The pre-filed testimonies and exhibits of DEP’s five witnesses, the settlement testimony of DCA’s witness, and the pre-filed testimony and exhibits of ORS’ s four witnesses were accepted into the record without objection.

⁶ The Stipulation filed on September 5, 2023, only addressed certain issues in the proceeding, but the Comprehensive Settlement Agreement was a proposed resolution of all issues in the proceeding.

⁷ Witness Seaman-Huynh’s Direct Testimony and Exhibit were entered into the record without him appearing to present it. An Affidavit verifying his Direct Testimony and Exhibit was filed with the Commission on September 11, 2023.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 6

The Commission also marked and accepted into evidence late-filed Hearing Exhibit 7 provided on September 12, 2023, which provides the net present value savings calculations for both a 10- year and 15-year storm bond recovery period, calculated as of May 22, 2023. Tr. p. 282.

II.             STATUTORY STANDARDS AND REQUIRED FINDINGS

The Storm Securitization Statute establishes the process by which an electrical utility may petition the Commission for a financing order authorizing the electrical utility to finance storm recovery costs associated with storm recovery activities with the proceeds of storm recovery bonds that are secured by the storm recovery property. Before granting a financing order, the Commission must find two primary conditions: (1) that the issuance of the storm recovery bonds and the imposition of a storm recovery charge will provide quantifiable net benefits to customers on a present value basis as compared to the costs that would have been incurred absent the issuance of storm recovery bonds and (2)that the structuring, marketing, and pricing of the storm recovery bonds will result in the lowest storm recovery charge consistent with market conditions at the time the storm recovery bonds are priced and the terms set forth in this Financing Order. S.C. Code Ann. § 58-27-1110(C)(2)(b) and (c) (Supp. 2023).

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 7

To support this finding, the utility must submit a petition that includes (a) a description of its storm recovery activities; (b) an estimate of the storm recovery costs; (c) the proposed level of storm recovery reserve, if any; (d) an indicator of the amount of storm recovery costs to be financed using storm recovery bonds; (e) an estimate of the financing costs related to the storm recovery bonds; (f) an estimate of the storm recovery charge necessary to recover storm recovery costs; and (g) a comparison between the net present value of the cost to customers estimated to result from the issuance of storm recovery bonds and the cost that would result from the application of the traditional method of financing and recovering storm recovery costs — this comparison must demonstrate that the issuance of storm recovery bonds and the imposition of a storm recovery charge are expected to provide quantifiable net benefits to customers on a present value basis. S.C. Code Ann. § 58-27-1110(A) (Supp. 2023).

When issued, in addition to the findings referenced above required by section 58-27-1110(C)(2)(b) and (c), the financing order must also include all elements required by section 58-27-1110(C)(2):

(a)              except for changes made pursuant to the formula-based mechanism authorized under this section, the amount of storm recovery costs, including the level of storm recovery reserves, if any, to be financed using storm recovery bonds. The Commission shall describe and estimate the amount of financing costs that may be recovered through storm recovery charges and specify the period over which storm recovery costs and financing costs may be recovered;

(b)              a finding that the proposed issuance of recovery bonds and the imposition and collections of a storm recovery charge will provide quantifiable net benefits to customers on a present value basis as compared to the costs that would have been incurred absent the issuance of storm recovery bonds;

(c)              a finding that the structuring, marketing, and pricing of the storm recovery bonds will result in the lowest storm recovery charges consistent with market conditions at the time the storm recovery bonds are priced and the terms set forth in such financing order. The financing order must provide detailed findings of fact addressing cost effectiveness and associated rate impacts upon retail customers and retail customer classes;

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 8

(d)              a requirement that, for so long as the storm recovery bonds are outstanding and until all financing costs have been paid in full, the imposition and collection of storm recovery charges authorized under a financing order shall be nonbypassable and paid by all existing and future retail customers receiving transmission or distribution service, or both, from the electrical utility or its successors or assignees under commission-approved rate schedules or under special contracts, even if a customer elects to purchase electricity from an alternative electric supplier following a fundamental change in regulation of electrical utilities in this State;

(e)              a determination of what portion, if any, of the storm recovery reserves, if any, must be held in a funded reserve and any limitations on how the reserve may be held, accessed, or used;

(f)               a formula-based true-up mechanism for making, at least annually, expeditious periodic adjustments in the storm recovery charges that customers are required to pay pursuant to the financing order and for making any adjustments that are necessary to correct for any overcollection or undercollection of the charges or to otherwise ensure the timely payment of storm recovery bonds, financing costs, and other required amounts and charges payable in connection with the storm recovery bonds;

(g)              the storm recovery property that is or shall be created in favor of an electrical utility or its successors or assignees, and that shall be used to pay or secure storm recovery bonds and all financing costs;

(h)              the degree of flexibility to be afforded to the electrical utility in establishing the terms and conditions of the storm recovery bonds including, but not limited to, repayment schedules, expected interest rates, and other financing costs, and subject to any conditions in the financing order, including the pre-bond issuance review process which the commission shall establish;

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 9

(i)               how storm recovery charges will be allocated among customer classes;

(j)               a requirement that, after the final terms of an issuance of storm recovery bonds have been established and before the issuance of storm recovery bonds, the electrical utility determines the resulting initial storm recovery charge in accordance with the financing order and that such initial storm recovery charge be final and effective upon the issuance of such storm recovery bonds without further commission action so long as the recovery charge is consistent with the financing order and the pre-bond issuance review process established by the commission in the financing order is complete;

(k)               a method of tracing funds collected as storm recovery charges, or other proceeds of storm recovery property, and the determination that such method shall be deemed the method of tracing such funds and determining the identifiable cash proceeds of any storm recovery property subject to a financing order under applicable law; and

(l)               any other conditions not otherwise inconsistent with this section that the commission determines are appropriate.

This financing order, as described in greater detail herein infra, fully satisfies each element required by section 58-27-1110(C)(2).

The Storm Securitization Statute specifies that the financing order must also include a requirement that the electrical utility file with the Commission at least annually a letter applying the formula-based mechanism, and request adjustments in the storm recovery charge, if necessary, to a level sufficient to ensure the bond payment obligations. The Commission’s review of this filing is limited to determining mathematical and clerical errors in the application of the formula-based mechanism relating to the appropriate amount of any overcollection or undercollection of storm recovery charges and the amount of an adjustment. S.C. Code Ann. § 58-27-1110(C)(4) (Supp. 2023).

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 10

III.           STANDARD OF REVIEW

With regard to the Petition, the burden of proof is the preponderance of the evidence standard. See S.C. Code Ann. § 1-23-600(A)(5) (Supp. 2023) (“Unless otherwise provided by statute, the standard of proof in a contested case is by a preponderance of the evidence.”). This means that the Commission should grant DEP’s Petition if the Company has demonstrated, by a preponderance of the evidence, that it has met the requirements of the Storm Securitization Statute, including that the issuance of the storm recovery bonds and the imposition of a storm recovery charge will provide quantifiable net benefits to customers on a present value basis as compared to the costs that would have been incurred absent the issuance of storm recovery bonds and that the structuring, marketing, and pricing of the storm recovery bonds will result in the lowest storm recovery charge consistent with market conditions at the time the storm recovery bonds are priced and the terms set forth in this Financing Order. S.C. Code Ann. § 58-27-1110(C)(2)(b) and (c) (Supp. 2023).

The record supports the issuance of a financing order under the terms of the Settlement Agreement.

The Commission’s decision on the Petition must be based upon substantial evidence in the record. Additionally, pursuant to S.C. Code Ann. section 58-27-1110(2)(1) (Supp. 2023), the Commission may impose any other conditions not otherwise inconsistent with the Securitization statute, that the Commission determines appropriate. However, in accordance with the non-severable Comprehensive Settlement Agreement presented by the Settling Parties for approval without exception, modification, or additional provisions, the Commission is not exercising its statutory authority to impose conditions beyond what has been presented in the Comprehensive Settlement Agreement, nor have the Settling Parties asked that the Commission exercise such authority. Therefore, the Commission finds that this Financing Order is based upon the substantial evidence in the record as presented by the Settling Parties.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 11

IV.           FINDINGS OF FACT AND CONCLUSIONS OF LAW

Based upon the Petition, the Settlement Agreement, the testimony, and exhibits received into evidence at the hearing and the entire record of this proceeding, the Commission makes the following findings of fact:

A. Jurisdiction

1.              DEP is a limited liability company duly organized and existing under the laws of the State of North Carolina. It is a public utility under the laws of the State of South Carolina and is subject to the jurisdiction of this Commission pursuant to S.C. Code Ann. section 58-3-140(A) (Supp. 2023) and an electrical utility under S.C. Code Ann. section 58-27-10(7) (Supp. 2023). The Company is engaged in the business of generating, transmitting, distributing, and selling electric power to the public in the northeastern portion of South Carolina, a substantial portion of the coastal plain of North Carolina extending from the Piedmont to the Atlantic coast and between the Pamlico River and the South Carolina border, the lower Piedmont section of North Carolina and area in western North Carolina in and around the City of Asheville. DEP, with its offices and principal places of business in Raleigh, North Carolina, is a wholly owned subsidiary of Duke Energy, with its offices and principal place of business in Charlotte, North Carolina.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 12

2.              The Commission has jurisdiction over the rates and charges, rate schedules, classifications, and practices of public utilities operating in South Carolina, including DEP, as generally provided in S.C. Code Ann. sections 58-27-10, et seq (2015 and Supp. 2023).

B. Petition

3.              Having received Commission Order No. 2023-260 in Docket No. 2022-256-E, determining the amount of the Company’s approved principal costs under S.C. Code Ann. section 58- 27-1110(B) (Supp. 2023), DEP is properly before the Commission requesting authorization to recover its approved storm recovery costs through the issuance of storm recovery bonds based upon its Petition pursuant to S.C. Code Ann. section 58-27-1110 (Supp. 2023).

C. Settlement Agreement

4.              On September 8, 2023, ORS filed the Settlement Agreement, signed by all parties, resolving all issues in dispute.

5.              The Commission, having carefully reviewed the Settlement Agreement, the evidence in the record, and considered the testimony of witnesses who concluded that the proposal would, in fact, provide quantifiable net benefits to customers on a present value basis as compared to the costs that would have been incurred absent the issuance of Storm Recovery Bonds and (ii) result in the lowest Storm Recovery Charge consistent with market conditions at the time the Storm Recovery Bonds are priced and the terms set forth in this Financing Order, finds and concludes that the provisions of the Settlement Agreement are just and reasonable as to all the Parties and are in the public interest. Therefore, the Settlement Agreement should be approved in its entirety. The specific terms of the Settlement Agreement are addressed in the following findings of fact: 7, 9, 11-14, 22, 24-26, 29, 35-36, 38, 41-53 and 55-57.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 13

6.              The complete Settlement Agreement, included hereto as Order Exhibit No. 1, is incorporated by reference.

D. Costs Eligible for Recovery Through Securitization

Storm Recovery Costs

7.              In accordance with the Commission’s findings of fact and conclusions of law in Order No. 2023-260, the Storm Recovery Costs of approximately $170.6 million, subject to adjustments including the final amount of carrying costs through the issuance date of the Storm Recovery Bonds, are eligible for recovery through the issuance of storm recovery bonds (the Securitizable Balance). The Storm Recovery Costs do not include an amount to pre-fund the Company’s storm recovery reserve through the issuance of Storm Recovery Bonds.

Up-front Financing Costs

8.              DEP’s estimated up-front Financing Costs updated in Heath Rebuttal Exhibit 1 and in Attachment 2, in the form of the proposed Issuance Advice Letter, Order Exhibit No. 4, are estimated between $5.96 million to $7.09 million, which includes but is not limited to legal, consulting and accounting fees and expenses, rating agency fees, plus costs of outside consultants and counsel to the Commission and the ORS, are reasonable and prudent, made in the best interest of DEP’s customers, and eligible for recovery through securitization. The up-front Financing Costs are subject to adjustment in the Issuance Advice Letter that DEP will file with the Commission after the Storm Recovery Bonds are priced, as further described in Findings of Fact 48-53.

9.              DEP is permitted to establish a regulatory asset to defer up-front financing costs in excess of final estimates included in the Issuance Advice Letter, if any; provided, however that the costs subject to deferral would not impact the storm recovery bonds or charges that are the subject of this proceeding. DEP will accrue carrying costs on the regulatory asset, net of accumulated deferred income taxes (ADIT), at DEP’s approved pre-tax weighted average cost of capital (WACC) in effect at the time the deferral costs are incurred. DEP will then request that all such costs are included in base rates during the next base rate proceeding. It is reasonable that all parties reserve their right to review the reasonableness and prudency of those costs in the next rate proceeding.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 14

On-going Financing Costs

10.           The on-going Financing Costs identified in DEP’s Petition and in Attachment 4 of the form Issuance Advice Letter, Order Exhibit No. 4, estimated to be approximately $0.4 million annually, subject to update and adjustment in the Issuance Advice Letter as described in this Financing Orders⁸, are reasonable and prudent, made in the best interest of DEP’s customers, and qualify as Financing Costs eligible for recovery pursuant to S.C. Code Ann. section 58-27-1105(7) (Supp. 2023).

Utility Assessment Fee, License Tax and Sales Tax

11.           DEP will seek an opinion from the South Carolina Department of Revenue (the SCDOR) regarding whether (i) License Tax on Utilities under S.C. Code Ann. section 12-20-100 (2014) and (ii) Sales Tax arising under S.C. Code Title 12 apply to the storm recovery charges. Until the SCDOR provides an opinion in response to DEP’s request regarding the License Tax under S.C. Code Ann. section 12-20-100, DEP proposes to collect the License Tax as an initial matter until it receives final clarification from the SCDOR. Until SCDOR provides an opinion in response to DEP’s request regarding the Sales Tax, DEP proposes to collect Sales Tax as an initial matter on the storm recovery charges from customers to whom sales of electricity are not otherwise exempt from Sales Tax until it receives final clarification from the SCDOR. Exempt customers from whom the Company does not propose to collect Sales Tax include but are not limited to all residential customers.

⁸ On-Going Financing Costs were updated in Heath’s Amended Rebuttal Exhibit 1-5.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 15

12.           If the License Tax is deemed not to apply, then the Company will file an amended consolidated return and will pass the cash refunded by the SCDOR back through an invoice from the Company, as the Servicer, to the Special Purpose Entity (SPE). The SPE will credit the License Taxes paid from customers back to customers through the next applicable true-up filing.

13.           If the Company collects Sales Taxes that are subsequently deemed not to apply, then the Company will credit customers via a miscellaneous credit on their subsequent electricity bill.

14.           The Settling Parties agreed in the Settlement Agreement that the Commission will determine if DEP should collect a Utility Assessment Fee arising under Sections 58-27-50, 58-4-60, and 58-3-100 to be included in the calculation of ongoing financing costs. S.C. Code Ann. §§ 58-27-50 & 58-3-100 (2015); S.C. Code Ann. § 58-4-60 (Supp. 2023). The Commission finds that that the SPE is not a utility as defined by South Carolina law, and no Utility Assessment Fee shall be collected on the basis of storm recovery charges of the SPE.

Capital Contribution

15.           DEP’s capital contribution to the SPE shall earn a return at the interest rate of the longest maturing tranche of the Storm Recovery Bonds, which is reasonable and prudent.

E. Structure of Bond Issuance

16.           DEP’s proposed financing structure adheres to the requirements of the Storm Securitization Statute.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 16

Special Purpose Entity

17.           For purposes of issuing storm recovery bonds, it is reasonable for DEP to create a SPE, which will be a Delaware limited liability company (LLC) with DEP as its sole member. The SPE will be an “assignee” as defined in S.C. Code Ann. Section 58-27-1105(2) (Supp. 2023), and when an interest in Storm Recovery Property is transferred, other than as security, to the SPE, the SPE may issue Storm Recovery Bonds in accordance with this Financing Order.

Storm Recovery Property

18.           It is reasonable for DEP to sell or otherwise transfer Storm Recovery Property to the SPE pursuant to the terms of this Financing Order. Upon the transfer by DEP of the Storm Recovery Property to the SPE, that SPE will have all of the rights, title, and interest of DEP with respect to such Storm Recovery Property, including the right to impose, bill, charge, collect, and receive the Storm Recovery Charge authorized by this Financing Order and to obtain periodic formulaic adjustments to the Storm Recovery Charge. Such Storm Recovery Property is expected to be pledged by the SPE to, and held and administered by, an indenture trustee as collateral for payment of the Storm Recovery Bonds to ensure that the proposed issuance of Storm Recovery Bonds and the imposition of the Storm Recovery Charge will: (i) provide quantifiable net benefits to customers on a present value basis as compared to the costs that would have been incurred absent the issuance of Storm Recovery Bonds and (ii) result in the lowest Storm Recovery Charge consistent with market conditions at the time the Storm Recovery Bonds are priced and the terms set forth in this Financing Order (collectively, the Statutory Cost Objectives).

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 17

19.           The Storm Securitization Statute provides that the State of South Carolina and its agencies, including this Commission, pledge and agree with bondholders, the owners of the Storm Recovery Property, and other financing parties that the State and its agencies, including the Commission, will not take any of the following actions as to any outstanding Storm Recovery Bonds, Storm Recovery Charge, or Storm Recovery Property: (i) alter the provisions of the Storm Securitization Statute, which authorize the Commission to create an irrevocable contract right or chose in action by the issuance of this Financing Order, create Storm Recovery Property and make the Storm Recovery Charge imposed by this Financing Order an irrevocable, binding or nonbypassable charge; (ii) take or permit any action that impairs or would impair the value of the Storm Recovery Property or the security for the Storm Recovery Bonds or revise the Storm Recovery Costs for which storm recovery is authorized; (iii) in any way impair the rights and remedies of the bondholders, assignees, and other financing parties; or (iv) except for changes made pursuant to the True-Up Mechanism, reduce, alter or impair the Storm Recovery Charge until any and all principal, interest, premium (if any), Financing Costs and other fees, expenses or charges incurred, and any contracts to be performed in connection with the Storm Recovery Bonds, have been paid and performed in full, as further described in S.C. Code Ann. section 58-27-1155(A) (Supp. 2023). This paragraph does not preclude limitation or alteration if full compensation is made by law for the full protection of the storm recovery charges collected pursuant to a financing order and of the bondholders and any assignee or financing party entering into a contract with the electrical utility. S.C. Code Ann. § 58-27-1155(A) (Supp. 2023).

Form of Transaction Documents

20.           The forms of the servicing agreement, purchase and sale agreement, administration agreement, limited liability company agreement, and indenture, originally filed as exhibits to Company witness Thomas J. Heath Jr.’s testimony (collectively, the “Transaction Documents”) are in the public interest and necessary to facilitate the transaction and are approved, subject to Finding of Fact 22.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 18

21.           It is reasonable and prudent for any modifications to the Transaction Documents to be reviewed and provided input by the Bond Advisory Team, defined below in Finding of Fact 43, to ensure that the Statutory Cost Objectives are achieved and for compliance with the terms of this Financing Order.

Offering and Sale of Bonds

22.            It is reasonable for DEP to issue the Storm Recovery Bonds through a negotiated sale or other sales option to achieve the Statutory Cost Objectives. Furthermore, DEP will have the flexibility to utilize a means of sale other than an SEC-registered sale, such as a Rule 144A offering, if market volatility or other factors indicate that such a sale would be the best manner to achieve the “Statutory Cost Objectives” defined herein. DEP agrees to consider the advice and input from the Bond Advisory Team and DCA prior to making such decision. If a means of sale other than an SEC registered sale is proposed to be utilized, the rationale for the decision shall be explained in detail in the Issuance Advice Letter submitted to the Commission.

Amortization of Storm Recovery Bonds

23.           The proposed duration of the bond repayment period is reasonable and prudent.

The expected term of the scheduled final payment date of the last maturing tranche of bonds issued pursuant to the authority granted herein, as determined in the reasonable discretion of DEP, is to be no later than 20 years, from the issuance of the series of Storm Recovery Bonds. The legal maturity date of each tranche may be longer than the scheduled final payment date for that tranche.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 19

Cap on Costs of Securitization Financing

24.           It is appropriate for the Storm Recovery Bonds, or each tranche thereof if multiple tranches are issued, to have a fixed interest rate, determined consistent with current market conditions. Unless otherwise discussed with the Bond Advisory Team (as defined herein), to ensure the issuance of Storm Recovery Bonds results in quantifiable net benefits, the weighted average interest rate on the Storm Recovery Bonds will not exceed 7.0%. If the 7.0% cap based on the weighted average interest rate on the bonds is projected to be exceeded, DEP will discuss with the Bond Team and develop a recommendation, based on the advice and input from the members and participants on the Bond Advisory Team, for the Commission on whether to proceed with the issuance in accordance with the Statutory Cost Objectives. For informational purposes, the rationale for the final interest rate decision, whether above or below such cap, shall be explained in the Issuance Advice Letter submitted to this Commission. This rationale shall include, but not be limited to, the comparisons made to determine how the interest rate(s) results in the lowest storm recovery charges consistent with market conditions at the time the storm recovery bonds are priced and the terms set forth in the Financing Order. If market conditions change and it becomes necessary, in order to best achieve the Statutory Cost Objectives, DEP will have the flexibility to utilize floating-rate securities for one or more tranches of bonds. DEP shall consider the advice and input of the Bond Advisory Team prior to making its decision to issue any floating rate bonds. DEP is further authorized to issue such bonds but will be required to execute agreements to swap the floating payments to fixed-rate payments to ensure that Statutory Cost Objectives are achieved. Tr. pp. 471:7-480:24; 360.8:17-360.9:6. If one or more tranches of bonds are to be issued as floating-rate bonds, the rationale for the decision shall be explained in the Issuance Advice Letter submitted to this Commission.

Credit Ratings of Storm Recovery Bonds

25.           DEP should strive for the Storm Recovery Bonds to achieve AAA credit ratings or the highest equivalent credit ratings given for the type of securities the SPE issues, consistent with its overarching obligation to meet the Statutory Cost Objectives. DEP agrees to necessary credit enhancements, with recovery of related costs as on-going Financing Costs, only to achieve such ratings, only if and to the extent such credit enhancements and corresponding credit ratings are warranted to meet the Statutory Cost Objectives. The cost of any such credit enhancements shall be included in the determination whether the Statutory Cost Objectives are met.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 20

26.           If the ratings from S&P Global Ratings (S&P) and Moody’s Investor Service (Moody’s) result in split bond ratings, the Company will seek advice and input from the Bond Advisory Team on whether to obtain a third rating from Fitch Ratings, Inc. (Fitch). If the final credit rating on the proposed bonds is not AAA or Aaa, the rationale for the decision shall be explained in the Issuance Advice Letter submitted to the Commission.

Security for the Storm Recovery Bonds

27.           The utilization by the SPE of a collection account, including a general subaccount, a capital subaccount, and an excess funds subaccount, is reasonable and prudent. DEP may include other subaccounts in the collection account, if necessary to obtain the highest possible credit ratings on the Storm Recovery Bonds.

DEP as Initial Servicer of the Storm Recovery Bonds

28.           DEP’s proposal to act as initial servicer of the Storm Recovery Bonds is reasonable and prudent.⁹

29.           The on-going annual servicing fee for DEP, acting as the initial servicer, in the amount of 0.05 percent (5 basis points) of the initial principal amount of the Storm Recovery Bonds plus out-of-pocket expenses provided for in the servicing agreement is necessary to compensate the servicer adequately and ensure the high credit quality of the Storm Recovery Bonds and is reasonable and prudent.

⁹ “Rating agencies expect that the Company will be the servicer but assume that a replacement servicer may require additional compensation to perform these services, without access to the Company’s existing infrastructure and customer relationships. Illustrative draft forms of both the Servicing and Administration Agreements are included in the testimony of witness Heath as Heath Exhibits 2b and 2d.” Tr. p. 358.62:21-358.63:3.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 21

DEP as Administrator of the SPE

30.            DEP’s proposal to act as an administrator of the SPE under the proposed financing transaction is reasonable and prudent.

31.            The on-going fee to be paid to the administrator of $50,000 per year plus out-of- pocket expenses included in the administration agreement is necessary to cover the costs and expenses of administering the SPE and to preserve the integrity of the bankruptcy-remote structure of the SPE and the high credit quality of the Storm Recovery Bonds and is reasonable and prudent.

Storm Recovery Bonds to be Treated as Debt for Federal Income Tax Purposes

32.            DEP shall structure the Storm Recovery Bond transactions in a way that meets all requirements for the Internal Revenue Service’s (IRS) safe harbor treatment provided for in IRS Revenue Procedure 2005-62.

F. Storm Recovery Charges

Imposition and Computation of Storm Recovery Charge

33.            To repay the Storm Recovery Bonds and on-going Financing Costs, DEP is authorized to impose the Storm Recovery Charge to be collected on a per kWh basis from all applicable customer rate classes until the Storm Recovery Bonds and related Financing Costs are paid in full.

34.            The Securitizable Balance plus up-front Financing Costs to be financed using Storm Recovery Bonds shall be the principal amount of Storm Recovery Bonds shown in Order Exhibit No. 2 to this Financing Order.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 22

35.            The calculation methodology for the Storm Recovery Charge by customer class in Smith Exhibit 3, as clarified and amended by paragraph 13 of the Settlement Agreement, is just and reasonable. It is also just and reasonable that the allocation methodology for the Storm Recovery Charge be adjusted concurrently with a subsequent true-up adjustment for any changes to the customer class allocation methodology approved by the Commission in subsequent general rate proceedings for DEP.

36.            DEP will use a weather normalization calculation methodology that matches its most current South Carolina rate case. This calculation will use 30 years of historical data to determine normal weather heating and cooling degree days in the calculation of the forecast variance factor. The variance factor will be equal to one standard deviation of the normal weather variation and will be applied by customer class to DEP’s most current retail spring or fall forecast which includes the upcoming rate period.

37.            In the event of a customer’s partial payment of a bill, after application of late charges such partial payment shall be allocated ratably among the Storm Recovery Charge, any similar securitization charges, and DEP’s other billed amounts in a manner that is consistent with DEP’s current process for allocating partial payments.

Treatment of Storm Recovery Charge in Tariff and on Retail Customer Bills

38.            DEP’s proposed Tariff implementing the Storm Recovery Charge as amended by the Settlement Agreement indicates the Storm Recovery Charge and the ownership of the charge.

39.            DEP is authorized and directed to include the Storm Recovery Charge on each customer’s bill as a separate line item and include both the rate and the amount of the charge on each bill as well as a statement that the SPE is the owner of the rights to the Storm Recovery Charge and that DEP is acting as a servicer for the SPE.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 23

True-up of Storm Recovery Charges

40.            The formulaic true-up mechanism (True-up Mechanism) and associated procedures described in DEP’s proposed Tariff, are reasonable and prudent. The True-up Mechanism is attached to this Financing Order as Order Exhibit No. 3.

41.            The ORS and the Commission shall have 60 days to review and inform the Company of any mathematical or clerical errors in its calculation pursuant to S.C. Code Ann. section 58-27-1110(C)(4) (Supp. 2023). It is reasonable for DEP and ORS to engage in a good faith discussion to discuss reducing the time period from 60 days to 30 days after the completion of three semi-annual true-up periods.

G. Accumulated Deferred Income Taxes

42.            From the date of the Financing Order, the Company will defer and compound the return on Storm Cost ADIT (Storm ADIT) at its most recently approved pre-tax WACC to a regulatory liability until base rates are reset in the next base rate case proceeding. At that time, the Storm ADIT and the deferred return on the Storm ADIT regulatory liability will be included as a reduction to rate base and will be amortized as a negative expense to return the deferred Storm ADIT benefit to customers.

H. Bond Advisory Team

43.            To ensure that the structuring, marketing, and pricing of the Storm Recovery Bonds will result in the lowest Storm Recovery Charge consistent with market conditions at the time the Storm Recovery Bonds are priced and the terms set forth in this Financing Order, it is reasonable to create an advisory body to meet regularly to review and provide input on the structuring, marketing, and pricing of the Storm Recovery Bonds (the Bond Advisory Team). It is further statutorily compliant for decisions regarding the structuring, marketing, and pricing of the Storm Recovery Bonds to be made by DEP, with advice and input from the other members and participants on the Bond Advisory Team. It is also statutorily compliant for the Bond Advisory Team to consist of representatives from DEP and the ORS. In accordance with the Comprehensive Settlement Agreement proposed by the Settling Parties, DEP and the ORS may designate staff, counsel, and consultants to participate on the Bond Advisory Team on their behalf. It is further statutorily compliant that designated staff and attorneys of DCA, and the Underwriters and their counsel be invited to also attend meetings of the Bond Advisory Team as participants, able to provide input just as ORS. DCA shall be invited to every meeting of the Bond Advisory Team.¹⁰

¹⁰ Parties assured the Commission the invitation of DCA was a practical consideration, only related to staffing and budgetary considerations. Otherwise, DCA can provide input just as ORS. Tr. pp. 156:16-157:9; 94: 17-23.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 24

44.            The ORS shall be designated as the Qualified Independent Third Party (QITP) under S.C. Code Ann. section 58-27-1110(C)(6) (Supp. 2023). ORS is charged by law with the duty to represent the public interest of South Carolina pursuant to S.C. Code Ann. section 58-4-10(B) (Supp. 2023). As QITP, ORS or their representative shall be able to participate in Bond Advisory Team meetings so that it will be able to provide the certification and any other information it believes this Commission should consider when reviewing the Issuance Advice Letter as contemplated pursuant to S.C. Code Ann. section 58-27-1110(C)(6)(a) (Supp. 2023). It is appropriate for ORS to follow its statutory charge under S.C. Code Ann. section 58-4-10(B) (Supp. 2023) in how ORS fulfills the role of QITP. This is a specific provision contained in the Comprehensive Settlement Agreement, presented by the Settling Parties for approval without exception, modification, or additional provisions. Order Exhibit No. 1, Paragraph 23. ORS, at its discretion, may designate staff, counsel, and consultants to assist ORS in fulfilling its role as QITP.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 25

45.            DEP shall provide all members and participants on the Bond Advisory Team, with timely information to allow the members and participants on the Bond Advisory Team to be informed fully and in advance regarding all aspects of the structuring, marketing, and pricing of the Storm Recovery Bonds. DEP will invite and allow the Bond Advisory Team and DCA to be present during communications with underwriters, credit rating agencies, and investors provided customary practices to ensure compliance with securities laws and regulations are followed. DEP shall invite all members of the Bond Advisory Team and the DCA to join all Bond Advisory Team meetings to review and comment on all aspects of the structuring, marketing, and pricing of the Storm Recovery Bonds, including without limitation the following: the selection and retention of underwriters and other transaction participants; the terms of all Transaction Documents; the length of the bond terms; the interest rates of the bonds (including whether the interest rate is floating or fixed); the capital contribution to the extent the amount required in the IRS Revenue Procedure 2005-62; the transaction structure; the issuance strategy; appropriate credit enhancements; and the credit rating process.

46.            It is just and reasonable for DEP to have the sole right to select all counsel and advisors for DEP and the SPE.

47.            None of the ORS, DCA or their designees, consultants or counsel are agents of DEP or the SPE. They are not issuers, sponsors, or depositors of the Storm Recovery Bonds. Their role on, or as participants with, the Bond Advisory Team is to provide advice and input that is independent of DEP. Neither ORS nor DCA are granted decision making authority with DEP on the Bond Advisory Team, per the terms of the Comprehensive Settlement Agreement presented for approval.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 26

I. Issuance Advice Letter

48.            Because the actual structure and pricing of the Storm Recovery Bonds are unknown as of the issuance of this Financing Order, the Commission finds it is reasonable and prudent to adopt the Issuance Advice Letter process prescribed by S.C. Code Ann. section 58-27-1110(C)(6) (Supp. 2023). Accordingly, within one business day after final terms of the Storm Recovery Bonds are determined, DEP shall provide to the Commission an Issuance Advice Letter as permitted in S.C. Code Ann. section 58-27-1110(C)(6)(a) (Supp. 2023), attached hereto as Order Exhibit No. 4.

49.            Such Issuance Advice Letter shall include the final terms of the Storm Recovery Bonds, up-front Financing Costs and on-going Financing Costs as well as any explanations or rationales for the final terms required pursuant to the Settlement Agreement. In accordance with S.C. Code Ann. section 58-27-1110(C)(6)(a) (Supp. 2023), the Issuance Advice Letter shall include certification from DEP, the primary underwriter(s) and the QITP (provided one business day after the Issuance Advice Letter is filed), as a condition to closing, certifying whether the sale of Storm Recovery Bonds complies with the requirements of the Storm Securitization Statute and the Financing Order. In the Issuance Advice Letter, DEP shall certify whether the issuance of Storm Recovery Bonds and the imposition and collection of a Storm Recovery Charge will in fact provide quantifiable net benefits to customers on a present-value basis as compared to the costs that would have been incurred absent the issuance of Storm Recovery Bonds. DEP and the primary underwriter(s) shall certify whether the structuring, marketing, and pricing of the Storm Recovery Bonds will in fact result in the lowest Storm Recovery Charge consistent with market conditions at the time the Storm Recovery Bonds were priced and the terms set forth in this Financing Order.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 27

50.            No later than one business day after DEP provides the Issuance Advice Letter to the Commission, the QITP shall review the Issuance Advice Letter and deliver its certification to the Commission along with any other information it believes the Commission should consider as it decides whether to accept the Issuance Advice Letter. Drafts of the Issuance Advice Letter shall be provided to the Bond Advisory Team and DCA approximately two weeks prior to the expected date of commencement of marketing the Storm Recovery Bonds. The Bond Advisory Team and DCA shall provide any comments to the draft Issuance Advice Letter one week after the receipt of the draft Issuance Advice Letter. The QITP shall certify whether the issuance of Storm Recovery Bonds and the imposition and collection of a Storm Recovery Charge will in fact provide quantifiable net benefits to customers on a present-value basis as compared to the costs that would have been incurred absent the issuance of Storm Recovery Bonds and whether the structuring, marketing, and pricing of the Storm Recovery Bonds will in fact result in the lowest Storm Recovery Charge consistent with market conditions at the time the Storm Recovery Bonds were priced and the terms set forth in this Financing Order.

51.            After the Issuance Advice Letter has been submitted, but prior to noon on the fourth business day after the final terms of the Storm Recovery Bonds are determined, DEP will be available to answer any questions from the Commission about the final agreed upon terms of the Storm Recovery Bonds. The Commission agrees with the Parties that, in connection with the submission of the Issuance Advice Letter, information designated by DEP or any other party as confidential shall be provided to the Commission under seal or in a closed session.

52.            No later than noon on the fourth business day after pricing, the Commission shall either accept the Issuance Advice Letter or deliver an order to DEP to prevent the issuance of the Storm Recovery Bonds.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 28

53.            If the actual up-front Financing Costs are less than the amount appearing in the final Issuance Advice Letter filed within one business day after actual pricing of the Storm Recovery Bonds, such unspent amount will be reflected in the next True-Up Adjustment Letter (as defined herein). Conversely, to the extent that the actual up-front Financing Costs are in excess of the amount appearing in the final Issuance Advice Letter filed within one business day after actual pricing of the Storm Recovery Bonds, then DEP shall book such excess amounts to a regulatory asset, which will accrue carrying costs at the Company’s approved pre-tax WACC in effect at the time the deferral costs are incurred. DEP will request that all such costs are included in base rates during the next base rate proceeding. The Parties reserve their right to review the reasonableness and prudency of those costs in the next rate proceeding.

J. Commission’s Independent Consultant

54.            In connection with its responsibilities under the Storm Securitization Statute, the Commission has retained an independent outside consultant (the Commission’s Consultant) to serve as advisor and counsel to the Commission. In addition, the Commission’s Consultant engaged outside legal counsel to assist in performing its responsibilities under S.C. Code Ann. section 58-27-1170 (Supp. 2023). Consistent with the requirements of S.C. Code Ann. section 58-27-1170, the Commission finds the compensation approved by the Commission to be paid to the Commission’s Consultant and its outside legal counsel does not exceed compensation generally paid by the regulated industry for such specialists and shall be considered an up-front Financing Cost.

K. Flexibility

55.            It is reasonable and prudent to allow DEP, with the advice and input from the Bond Advisory Team as described in Findings of Fact Nos. 43-47 and the Issuance Advice Letter and certification procedures described in Findings of Fact Nos. 48-53, flexibility in establishing the final terms and conditions of the Storm Recovery Bonds and therefore the ability, at its option, to cause one or more series of Storm Recovery Bonds to be issued, in order to achieve the Statutory Cost Objectives.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 29

L. Statutory Cost Objectives

56.            The issuance of Storm Recovery Bonds and imposition and collection of a Storm Recovery Charge as authorized in this Financing Order will provide quantifiable net benefits to customers on a present value basis as compared to the costs that would have been incurred absent the issuance of Storm Recovery Bonds, and will result in the lowest Storm Recovery Charge consistent with market conditions at the time the Storm Recovery Bonds are priced and the terms set forth in this Financing Order.

57.            This Financing Order adheres to the statutory requirements outlined by the Storm Securitization Statute necessary to issue a financing order authorizing an electrical utility to finance storm recovery costs.

V.            EVIDENCE AND CONCLUSIONS FOR FINDINGS OF FACT

A. Evidence and Conclusions for Findings of Fact Nos. 1-2

The evidence supporting these findings of fact and conclusions of law is contained in the Petition, the testimony and exhibits of the witnesses, and the entire record in this proceeding. These findings and conclusions are informational, procedural, and jurisdictional in nature.

B. Evidence and Conclusions for Finding of Fact No. 3

In accordance with the Storm Securitization Statute, the Petition included a description of DEP’s storm recovery activities, an estimate of the Storm Recovery Costs, the proposed level of storm recovery reserve (zero), an indicator of the amount of Storm Recovery Costs to be financed using Storm Recovery Bonds, an estimate of the Financing Costs related to the bonds, an estimate of the Storm Recovery Charge necessary to recover costs, and a comparison between the net present value of the cost to customers estimated to result from the issuance of Storm Recovery Bonds and the cost that would result from the application of the traditional method of financing and recovering its Storm Recovery Costs. As explained in the testimony of Company witness Kimberly K. Smith, DEP demonstrated that issuing Storm Recovery Bonds, and imposing the Storm Recovery Charge, is expected to result in quantifiable net benefits to customers on a present value basis as compared to the costs that would have occurred absent the issuance of Storm Recovery Bonds.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 30

  

The Commission finds and concludes that the Petition satisfies the requirements of the Storm Securitization Statute, as discussed further herein, by including each of the necessary items required by S.C. Code Ann. section 58-27-1110(A) (Supp. 2023). Therefore, pursuant to the Storm Securitization Statute, the Commission has the information necessary to issue a Financing Order as well as any other relief necessary for DEP to finance its Storm Recovery Costs.

C. Evidence and Conclusions for Findings of Fact Nos. 4-6

The evidence supporting these findings and conclusions is contained in the Petition, the Settlement Agreement, the testimony and exhibits of the witnesses, and the entire record in this proceeding.

The Commission convened and conducted a hearing in this matter and has considered all issues raised by the Parties and evidence presented. Moreover, the Commission has carefully considered the terms of the Settlement Agreement, the testimony of witnesses, and specifically considered the question of whether the terms contained in the Settlement Agreement will result in achievement of Statutory Cost Objectives, would be just, fair, and reasonable; in the public interest; and would be in accordance with applicable law and sound regulatory policy. For the reasons set forth below, the Commission adopted the Comprehensive Settlement Agreement on September 20, 2023, during a Special Called Commission Business Meeting, because the Commission finds the Comprehensive Settlement Agreement will result in achievement of the Statutory Cost Objectives; is in the public interest; and is otherwise in accordance with applicable law. The Settlement Agreement was accepted into the record of the hearing as Hearing Exhibit 1 (now Order Exhibit No. 1).

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 31

The Settlement Agreement is described by the Settling Parties as “comprehensive” and “the result of extensive negotiation and compromise among the Parties...” Order Exhibit No. 1, Paragraph 2. The Settlement Agreement covers a variety of terms within this Financing Order including the Incremental Up-front Financing Costs in Excess of the Estimated Up-front Financing Costs; the Utility Assessment Fee, License Tax and Sales Tax; the True-Up Period pursuant to S.C. Code Ann. section 58-27-1110(C)(4) (Supp. 2023); the Rate Calculations; the Storm Securitization Tariff Sheet; the Cap on Costs of Securitization Financing; Storm Cost Accumulated Deferred Income Taxes Regulatory Liability; this Financing Order; the Rating Agencies; the Means of Sale; Floating-Rate Bonds; the Bond Advisory Team; the QITP; and the Issuance Advice Letter Process.

The complete Settlement Agreement is attached as Order Exhibit No. 1 and is incorporated by reference.

Based on all the evidence, the Commission finds and concludes that the Settlement Agreement will result in achieving the Statutory Cost Objectives and is just, reasonable, and in the public interest.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 32

D. Evidence and Conclusions for Finding of Fact No. 7

The evidence supporting these findings and conclusions is contained in the Petition, the Settlement Agreement, the testimony and exhibits of the witnesses, and the entire record in this proceeding.

Storm Recovery Costs

In Order No. 2023-260, the Commission approved the February 7,2023, stipulation between DEP, the ORS, and all other parties to the proceeding that resolved several accounting issues, including a cost of debt return for the Storms during the deferral period. In that Order, the Commission also granted ORS’ s recommendations and adjustments requiring DEP to (i) subtract Modified Accelerated Cost Recovery Systems (MACRS) depreciation ADIT from the Company’s quantification of the capital cost rate base for Hurricanes Matthew (D) and Florence (D) and correct bonus depreciation to account for the update provided to ORS during this proceeding; (ii) calculate DEP’s deferred carrying costs approved in this proceeding on the capital cost rate base and regulatory asset based on the prior month balances of each of these components; and (iii) disallow recovery of the non-incremental storm restoration costs associated with work performed by native contractors as identified by the ORS, along with all deferred carrying costs associated with these non-incremental storm restoration costs. Specifically, the Commission approved the total Phase I principal costs of approximately $170.6 million consisting of: (a) deferred incremental O&M; (b) deferred capital costs and (c) estimated carrying costs through February 2024, the aggregate of such costs is referred to herein as the Securitizable Balance. See Order No. 2023-260.

In its Petition, DEP requested the authority to finance its Storm Recovery Costs through the issuance of storm recovery bonds of approximately $176.0 million, which includes the $170.6 million approved in Order No. 2023-260 plus an estimated $5.4 million in up-front Financing Costs. The requested amount is also premised on a Storm Recovery Bond issuance date on or before March 1, 2024. DEP may update the estimated deferred carrying cost component of the total amount of approved carrying costs to account for any difference in carrying costs resulting from the Company’s estimated date of issuance and actual date of issuance, net of ADIT at DEP’s approved cost of debt in effect at the time the deferred costs are incurred. Tr. p. 46.18:4-10. The Company will report to the Commission the final carrying costs and up-front Financing Costs so financed in the Issuance Advice Letter as described below. Tr. p. 186.13:15-21.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 33

S.C. Code Ann. section 58-27-1105(16)(c) (Supp. 2023) requires that DEP’s actual Storm Recovery Costs eligible for financing be reasonable and prudently incurred. The Storm Recovery Costs that were included in the Company’s Petition have been the subject of discovery and audit by ORS and other interested parties to that proceeding. Commission Order No. 2023-260 determined the amount of Storm Recovery Costs eligible to be financed using storm recovery bonds. See Order No. 2023-260 at 51. Consistent with that Order, the Commission finds that DEP’s Storm Recovery Costs are now eligible for recovery through financing. DEP shall reflect the actual amount of Storm Recovery Costs recovered by the issuance of Storm Recovery Bonds in the Issuance Advice Letter. Tr. p. 186.13:15-21.

The Commission also finds that DEP’s calculation of estimated carrying costs associated with the Storm Recovery Costs net of ADIT at DEP’s approved cost of debt in effect at the time the deferred costs are incurred is consistent with Order No. 2023-260. Further, the Commission finds that DEP’s method of calculating and reflecting its final carrying costs in the Issuance Advice Letter is reasonable and prudent and in compliance with Ordering Paragraph 8 in Order No. 2023-260. See Order No. 2023-260 at 52. Accordingly, the Commission finds that DEP should be permitted to finance its Storm Recovery Costs, including carrying costs, as provided in this Financing Order.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 34

E. Evidence and Conclusions for Findings of Fact Nos. 8-9

The evidence supporting these findings and conclusions is contained in the Petition, the Settlement Agreement, the testimony and exhibits of the witnesses, and the entire record in this proceeding.

Up-front Financing Costs

In the Petition, DEP requested that its up-front Financing Costs associated with the securitization process be included in the principal amount of Storm Recovery Bonds in accordance with S.C. Code Ann. section 58-27-1105(14) (Supp. 2023). Petition at 21. Company witness Heath testified that such costs include the fees and expenses to obtain the Financing Order, as well as the fees and expenses associated with the structuring, marketing, and pricing of the Storm Recovery Bonds, including the following: external and incremental internal legal fees and expenses, structuring advisory fees and expenses, any interest rate lock or swap fees and costs, underwriting fees and original issue discount, rating agency and trustee fees (including trustee’s counsel), accounting fees, information technology programming costs, servicer’s set-up costs, printing and marketing expenses, stock exchange listing fees and compliance fees, filing and registration fees, the costs of the Commission Consultant and its outside legal counsel, and costs of outside consultants retained by ORS for this proceeding and the costs of consultants retained by ORS acting as the QITP. Tr. pp. 46.18:15-23; 46.19:1-10. A complete list of all up-front Financing Costs will be included in Attachment 2 of the Issuance Advice Letter; a form of the Issuance Advice Letter, with preliminary estimates of up-front Financing Costs, is included in Order Exhibit No. 4 of this Financing Order. Company witness Heath further stated that up-front Financing Costs include reimbursement to DEP for amounts advanced for payment of such costs. Id. Company witness Heath provided a range of estimates of the up-front Financing Costs, and explained based on those figures, DEP’s estimated up-front Financing Costs of between $5.96 million to $7.09 million as reflected in Heath Rebuttal Exhibit 1. Company witness Heath also stated that the estimates will be updated to actual up-front Financing Costs incurred during the proposed Issuance Advice Letter process. Id.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 35

Company witness Smith testified that since the final up-front Financing Costs may not be known until after the Commission (i) issues its Financing Order, (ii) accepts the Issuance Advice Letter and (iii) the Company issues the Storm Recovery Bonds, if the actual up-front Financing Costs are below the amount reflected in the Issuance Advice Letter provided to the Commission, then the difference will be credited back to customers in the true-up adjustment letter process described by Company witness Smith. Tr. p. 186.14:8-22. Conversely, if the actual up-front Financing Costs are more than the amounts appearing in the Issuance Advice Letter, DEP may establish a regulatory asset to defer any prudently incurred excess amounts of up-front Financing Costs to preserve them for later recovery in its next general rate case proceeding provided, however, that the costs subject to deferral would not impact the Storm Recovery Bonds or Storm Recovery Charges. The regulatory asset would accrue carrying costs net of ADIT, at DEP’ s approved pre-tax WACC in effect at the time the deferral costs are incurred. Order Exhibit No. 1, Paragraph 15. In the Settlement Agreement, DCA, ORS and Nucor Steel reserve their right to review the reasonableness and prudency of the above costs in the next rate proceeding. Order Exhibit No. 1, Paragraph 6.

The up-front Financing Costs, such as legal fees and expenses and the costs of outside consultants and counsel, will not be known until after the financing is completed. Further, other up-front Financing Costs will vary depending on the size of the final issuance of the Storm Recovery Bonds. Specifically, the Securities and Exchange Commission (SEC) registration fee, underwriters’ fees, and rating agency fee are proportional to the amount of qualified costs actually financed. Other up-front Financing Costs, such as original issue discount, will be determined at the time of the sale. The costs approved by the Commission of a Commission Consultant and or outside legal counsel as well as the costs of any outside consultants or counsel retained by ORS are costs, which are fully recoverable from Storm Recovery Bond proceeds, will not be final until the bonds are ready to be issued. Accordingly, actual up-front Financing Costs will not be known until after the pricing of the Storm Recovery Bonds. Tr. pp. 46.18:15-23; 46.19:1-10.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 36

S.C. Code Ann. section 58-27-1105(7) (Supp. 2023) defines Financing Costs. The Commission finds that DEP’s proposed up-front Financing Costs fall within this definition, and that these issuance costs are therefore Financing Costs eligible for recovery pursuant to the Storm Securitization Statute.

F. Evidence and Conclusions for Finding of Fact No. 10

The evidence supporting these findings and conclusions is contained in the Petition, the testimony and exhibits of the witnesses, and the entire record in this proceeding.

On-going Financing Costs

In the Petition, DEP requested that its on-going Financing Costs be recovered through the Storm Recovery Charge authorized by this Financing Order. Company witness Heath testified that on-going Financing Costs include servicing fees; return on invested capital; administration fees; accounting and auditing fees; regulatory assessment fees; legal fees; rating agency surveillance fees; trustee fees (including any indemnity owed to the Trustee); independent director or manager fees; and other miscellaneous fees associated with the servicing of the Storm Recovery Bonds. Tr. p. 46.28:5-16. Witness Heath also provided estimates of on-going Financing Costs in Heath Exhibit 1, as updated in Heath Rebuttal Exhibit 1. Hearing Exhibits 1 and 2. Company witness Heath further testified that because on-going Financing Costs are recovered through the Storm Recovery Charge, DEP will include the actual amounts in the True- Up Adjustment Letters and any disparities would be resolved through the True-up Mechanism described in Company witness Nicholas G. Speros’s testimony. Tr. p. 46.33:18-22.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 37

The Commission finds that the estimates for on-going Financing Costs will result in achieving the Statutory Cost Objectives, are just and reasonable, in the public interest, and, as further described below, are eligible for recovery under the Storm Securitization Statute.

Servicing Fees and Administrative Fees

According to Company witness Heath, servicing responsibilities will include billing, monitoring, collecting, and remitting the storm recovery charge; reporting requirements imposed by the servicing agreement; implementing the True-up Mechanism; procedures required to coordinate required audits related to DEP’s role as servicer; legal and accounting functions related to the servicing obligation; and communication with rating agencies. Tr. p. 46.29:7-13. Administration fees cover expenses associated with administrative functions DEP will be providing to the SPE, separate from those of the servicer, and include maintaining the general accounting records, preparation of quarterly and annual financial statements, arranging for annual audits of the SPE’s financial statements, preparing all required external financial filings, preparing any required income or other tax returns, and related support. Tr. p. 46.30:6-14. Company witness Heath provided an estimate of the servicing and administration fees, an approximate $88,565.00 servicing fee (five basis points) and a $50,000.00 administrative fee. Tr. pp. 148:23-149:5. See also Hearing Exhibits 1, 2, and corrected Exhibit 3.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 38

The Servicing and Administration Fees collected by DEP or any Affiliate of DEP¹¹, acting as either the Servicer or the Administrator under the Servicing Agreement or Administration Agreement, respectively, will be included in DEP’s cost of service such that DEP will credit back all periodic servicing fees in excess of DEP’s or an affiliate of DEP’s incremental costs of performing servicing and administration functions. The expenses incurred by DEP, or such affiliate to perform obligations under the Servicing Agreement or Administration Agreement not otherwise recovered through the Storm Recovery Charge will likewise be included in DEP’s cost of service, subject to review as to reasonableness in an appropriate rate proceeding.

Having reviewed the testimony of the parties, the Commission finds that this treatment of the servicing and administration fees will result in achieving the Statutory Cost Objectives and is just, reasonable, and in the public interest.

G. Evidence and Conclusions for Findings of Fact Nos. 11-14

The evidence supporting these findings and conclusions is contained in the Petition, the Settlement Agreement, the testimony and exhibits of the witnesses and the entire record in this proceeding.

Utility Assessment Fee, License Tax and Sales Tax

ORS witness Rhoden testified that the Utility Assessment Fee should not be calculated or collected on storm recovery charges and should not be included as an ongoing financing cost. Tr. p. 251.11:8-11. Witness Rhoden also recommended that the Company seek “written guidance from SCDOR” as to whether the License Tax and Sales Tax arising under South Carolina law should be collected by the SPE. Tr. p. 251.12:13-15. In rebuttal, Company witness Speros noted that, with respect to the Utility Assessment Fee, the Company would defer to the Commission and the ORS as to whether it should seek written guidance regarding application of the fee. Tr. p. 312.5:20-23. As for the License Tax and Sales Tax, witness Speros explained that the Company would seek guidance from the SCDOR regarding applicability. Tr. p. 312.7:1-11.

¹¹ Any servicer, other than the Company, shall be preapproved by the Commission, which includes approval of the fee to be charged.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 39

As this is the first utility securitization transaction in South Carolina, DEP agreed to seek an opinion from the SCDOR regarding whether (i) License Tax on Utilities under S.C. Code Ann. section 12-20-100 (2014) and (ii) Sales Tax arising under S.C. Code Title 12 apply to the storm recovery charges. Order Exhibit No. 1, Paragraph 7. Until SCDOR provides an opinion in response to DEP’s request regarding the License Tax under S.C. Code Ann. section 12-20-100 (2014), DEP proposes to collect License Tax as an initial matter until it receives final clarification from SCDOR. If the License Tax is deemed not to apply, then DEP will file an amended consolidated return with the SCDOR and will pass the cash back through an invoice from the Servicer to the SPE. The SPE will credit the License Taxes paid from customers back through the next applicable true-up filing. Order Exhibit No. 1, Paragraph 9.

Until SCDOR provides an opinion in response to DEP’s request regarding the Sales Tax, DEP will collect Sales Tax as an initial matter on the storm recovery charges from customers to whom sales of electricity are not otherwise considered exempt from Sales Tax until it receives final clarification from SCDOR. Exempt customers from whom the Company does not propose to collect Sales Tax include, but are not limited to, all residential customers. If the Company collects Sales Taxes that are subsequently deemed not to apply, the Company will credit customers via a miscellaneous credit on their subsequent electricity bill. Order Exhibit No. 1, Paragraph 10. By ensuring that customers are made whole if the License Tax or Sales Tax is deemed inapplicable, the Settlement Agreement provides a safeguard to customers by mitigating the risk that the storm recovery charge will be subsequently increased to collect back taxes, while ensuring that any taxes collected initially that are deemed not to apply will flow back to customers. Tr. p. 50.8:2-9.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 40

Lastly, the Settling Parties requested a determination from this Commission as to whether the Storm Recovery Charge is subject to the Utility Assessment Fee under Sections 58-27-50, 58-4-60 and 58-7-100. S.C. Code Ann. §§ 58-27-50 & 58-3-100 (2015); S.C. Code Ann. § 58-4-60 (Supp. 2023); Order Exhibit No. 1, Paragraph 8. Based on a review of the law, and the limited review of the SPE and true-up mechanism beyond the bond issuance, the Commission determines that the SPE is not a utility as defined by South Carolina law, and no Utility Assessment Fee shall be collected on the basis of storm recovery charges of the SPE.

H. Evidence and Conclusions for Finding of Fact No. 15

The evidence supporting these findings and conclusions is contained in the Petition, the testimony and exhibits of the witnesses, and the entire record in this proceeding.

Return on Capital Contribution

The Company proposed to earn a return on its capital contribution to the SPE equal to the rate of interest payable on the longest maturing tranche of Storm Recovery Bonds. Company witness Heath testified that the proposed return on the capital contribution is necessary and consistent with general ratemaking principles because DEP will be contributing capital to the SPE for the duration of the term of the Storm Recovery Bonds (i.e., 20 years). Tr. p. 46.10:11-14. Absent the bond issuance, DEP has testified it would be able to invest such capital in other ways where it would be entitled to earn a return (i.e., lost opportunity costs), most likely in an amount higher than anticipated in this transaction (e.g., the Company’s WACC).

Moreover, in the absence of this capital contribution, the bonds would likely receive less favorable tax treatment and be more expensive for customers.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 41

Having reviewed the testimony of the parties, the Commission finds that the return is reasonable and prudent and is eligible for recovery as an on-going Financing Cost to be recovered through the Storm Recovery Charge. Further, the return on invested capital will be paid to DEP in accordance with a priority of payments.

I. Evidence and Conclusions for Finding of Fact No. 16

The evidence supporting these findings and conclusions is contained in the Petition, the testimony and exhibits of the witnesses, and the entire record in this proceeding.

A description of DEP’s proposed transaction is contained in its Petition and the testimony and exhibits submitted therewith. In brief, DEP has proposed a transaction structure that includes all of the following:

· The use of an SPE as issuer of Storm Recovery Bonds, limiting the risks to bondholders of any adverse impact resulting from a bankruptcy proceeding of DEP or any affiliate.

· The SPE’ s use of the proceeds from the issue of Storm Recovery Bonds to purchase from DEP the Storm Recovery Property and receive collections of the Storm Recovery Charge.

· DEP’s use of the proceeds from that sale to the SPE to finance and recover the Securitizable Balance and pay the up-front Financing Costs.

· The right to impose, bill, charge, collect, and receive the Storm Recovery Charge that are nonbypassable and which must be trued-up at least semi-annually, and may be trued-up more frequently at the option of the servicer, to ensure the timely payment of the debt service and on-going Financing Costs as scheduled.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 42

· The use of a collection account which includes, without limitation, a capital subaccount at the SPE funded initially by a deposit from DEP equal to at least 0.50 percent of the initial principal amount of the Storm Recovery Bonds issued by the SPE.

· A servicer, initially DEP, responsible for billing and collecting the Storm Recovery Charge from existing and future retail customers.

· Compliance with the provisions established in IRS Revenue Procedure 2005-62 to ensure favorable federal income tax treatment.

More specifically, DEP proposed that the SPE will be created and then DEP will transfer the rights to impose, bill, charge, collect, and receive the Storm Recovery Charge and to obtain true-up adjustments, along with the other rights arising pursuant to this Financing Order, to the SPE. Upon such transfer and simultaneously with the issuance of Storm Recovery Bonds, these transferred rights will become Storm Recovery Property as provided by the Storm Securitization Statute.

DEP proposed that the SPE will issue Storm Recovery Bonds and will transfer the net proceeds from the sale of such bonds to DEP in consideration for the sale of the Storm Recovery Property. The SPE will be organized and managed in a manner designed to maintain the SPE as a bankruptcy-remote entity and designed to be unaffected by a bankruptcy of DEP or any other affiliate of DEP or any of their respective successors. The Storm Recovery Bonds will be issued pursuant to an indenture and administered by an indenture trustee. Tr. p. 46.11:14-22. The Storm Recovery Bonds will be secured by and payable solely from the Storm Recovery Property created pursuant to this Financing Order. The Storm Recovery Property and other collateral will be pledged to the indenture trustee for the benefit of the holders of the Storm Recovery Bonds and to secure payment of principal, interest on the Storm Recovery Bonds, and on-going Financing Costs. DEP proposed that the servicer of the Storm Recovery Bonds collect the Storm Recovery Charge and remit those amounts to the indenture trustee on behalf of the SPE. The servicer will be responsible for making any required or allowed true-ups of the Storm Recovery Charge. If the servicer defaults on its obligations under the servicing agreement, the indenture trustee, acting for the benefit of holders of Storm Recovery Bonds, may appoint a successor servicer. DEP will act as the initial servicer (and as administrator) for the Storm Recovery Bonds. Tr. p. 46.11:9-13.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 43

The Storm Recovery Charge will be calculated to ensure the collection of an amount sufficient to pay the debt service due on the Storm Recovery Bonds together with the on-going Financing Costs, which include the servicing fee, administration fees for the SPE, rating agencies’ fees, trustee fees and expenses, legal and accounting fees, other on-going fees and expenses, and the cost of replenishing the capital subaccount (or overcollateralization subaccount, if required). These on-going Financing Costs are Financing Costs eligible for recovery pursuant to the Storm Securitization Statute and are addressed further in this Financing Order, in connection with Finding of Fact No. 10.

DEP has proposed that the Storm Recovery Charge will be calculated and adjusted pursuant to the formula-based method, the True-up Mechanism, described in Company witness Speros’s testimony and included as Order Exhibit No. 3 to this Financing Order. DEP has requested approval of a Storm Recovery Charge sufficient to recover the principal and interest on the Storm Recovery Bonds plus on-going Financing Costs. DEP proposes that the Storm Recovery Charge be adjusted at least semi-annually until 12 months prior to the scheduled final payment date of the latest maturing tranche of the Storm Recovery Bonds, at which point the Storm Recovery Charge shall be adjusted at least quarterly, to ensure that the amount collected from Storm Recovery Charge is sufficient to pay the debt service on the Storm Recovery Bonds and all on-going Financing Costs. Company witness Katrina T. Niehaus also testified that DEP’s proposed bond structure is designed to provide substantially level annual debt service and revenue requirements over the life of the bond issue and would result in declining Storm Recovery Charge over time, assuming growth in customer energy consumption, other factors being equal. Tr. p. 358.31:5-16.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 44

The Commission finds DEP’s proposed transaction structure reasonable and in compliance with the Storm Securitization Statute. Moreover, portions of DEP’s proposed transaction structure, described in this Financing Order, are necessary to enable the Storm Recovery Bonds to obtain the highest bond credit rating possible, with an objective of the highest possible credit ratings, to further ensure that the proposed issuance of the Storm Recovery Bonds on behalf of DEP, and the imposition of the Storm Recovery Charge will meet the Statutory Cost Objectives. Accordingly, DEP’s issuance structure is hereby approved.

J. Evidence and Conclusions for Finding of Fact No. 17.

The evidence supporting these findings and conclusions is contained in the Petition, the testimony and exhibits of the witnesses, and the entire record in this proceeding.

Special Purpose Entity

Under DEP’s financing structure, DEP will create an SPE as a bankruptcy-remote Delaware LLC with DEP as its sole member, as set forth in the limited liability company agreement discussed further below. The SPE will be formed for the limited purpose of acquiring Storm Recovery Property from DEP, issuing Storm Recovery Bonds in one or more series (each of which may be issued in one or more tranches), and performing other activities relating thereto or otherwise authorized by the limited liability company agreement. The rights, obligations, structure, and restrictions described in this Financing Order with respect to the SPE are applicable to each such purchaser of Storm Recovery Property to the extent of the Storm Recovery Property acquired by it and the Storm Recovery Bonds issued by it. Tr. pp. 358.15:17-358.16:11.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 45

DEP proposed the following: (i) that the SPE may issue Storm Recovery Bonds in an aggregate amount not to exceed the Securitizable Balance approved by this Financing Order plus up-front Financing Costs; and (ii) to pledge to an indenture trustee, as collateral for payment of the Storm Recovery Bonds, the Storm Recovery Property, including the SPE’s right to receive the Storm Recovery Charge as and when collected, and other collateral described in the indenture. The SPE will not be permitted to engage in any other activities and will have no assets other than the Storm Recovery Property and related assets to support its obligations under the Storm Recovery Bonds. DEP states that these restrictions on the activities of the SPE and restrictions on the ability of DEP to take action on the SPE’ s behalf are imposed to achieve the objective that the SPE will be bankruptcy-remote and not be affected by a bankruptcy of DEP or any affiliate or successor of DEP. Tr. p. 358.11-12.

DEP proposed that the SPE will be managed by a board of managers with rights and duties set forth in its organizational documents. Hearing Exhibit 2. As long as the Storm Recovery Bonds remain outstanding, the SPE will have at least one independent manager with no organizational affiliation with DEP other than possibly acting as independent manager(s) for another bankruptcy-remote subsidiary of DEP or its affiliates. The SPE will not be permitted to amend the provisions of its limited liability company agreement or other organizational documents that relate to bankruptcy-remoteness of the SPE without the consent of the independent manager(s). Similarly, the SPE will not be permitted to institute bankruptcy or insolvency proceedings or to consent to the institution of bankruptcy or insolvency proceedings against it, or to dissolve, liquidate, consolidate, convert, or merge without the consent of the independent manager(s). Other restrictions to facilitate bankruptcy-remoteness may also be included in the organizational documents of the SPE as required by the rating agencies. Tr. p. 358.54:11-21. The Commission agrees that these restrictions ensure that the SPE is bankruptcy-remote are reasonable and necessary to achieve the Statutory Cost Objectives.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 46

The SPE will have no staff to perform administrative services, such as routine corporate maintenance, reporting, and accounting functions. DEP proposed that these administrative services will be provided by DEP pursuant to the terms of the administration agreement between the SPE and DEP. Tr. pp. 46.11:9-13; 46.3:6-14.

Per rating agency and IRS requirements, DEP will transfer to the SPE an amount required to capitalize each SPE adequately (the SPE Capitalization Level) for deposit into the capital subaccount. The SPE Capitalization Level is expected to be 0.50 percent of the initial principal amount of the Storm Recovery Bonds to be issued by the SPE or such greater amount as might be needed to meet IRS or rating agency requirements. The actual SPE Capitalization Level will depend on tax and rating agency requirements. Moreover, the Commission confirms that the SPE will be an “assignee” as defined in S.C. Code Ann. section 58-27-1105(2) (Supp. 2023), when ownership of the Storm Recovery Property is transferred to such SPE, and such SPE may issue Storm Recovery Bonds in accordance with this Financing Order as discussed further herein. Tr. pp. 358.25:6-358.27:9.

K. Evidence and Conclusions for Findings of Fact Nos. 18-19

The evidence supporting these findings and conclusions is contained in the Petition, the testimony and exhibits of the witnesses, and the entire record in this proceeding.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 47

Storm Recovery Property

The Commission determines, consistent with S.C. Code Ann. section 58-27-1105(17) (Supp. 2023), that Storm Recovery Property consists of the following: (1) all rights and interests of DEP or any successor or assignee of DEP under this Financing Order, including the right to impose, bill, charge, collect, and receive Storm Recovery Charge authorized in this Financing Order and to obtain periodic true-up adjustments to such Storm Recovery Charge as provided in this Financing Order and (2) all revenues, collections, claims, rights to payments, payments, money, or proceeds arising from the rights and interests specified in this Financing Order, regardless of whether such revenues, collections, claims, rights to payment, payments, money, or proceeds are imposed, billed, received, collected, or maintained together with or commingled with other revenues, collections, rights to payment, payments, money, or proceeds.

As DEP has requested, pursuant to S.C. Code Ann. section 58-27-1110(A) (Supp. 2023), the Commission determines that it is reasonable and prudent that the creation of the Storm Recovery Property be conditioned upon, and simultaneous with, the sale of such Storm Recovery Property to the SPE and the pledge of such Storm Recovery Property to secure the Storm Recovery Bonds.

The Storm Recovery Property shall constitute an existing, present intangible property right or interest therein, notwithstanding that the imposition and collection of the Storm Recovery Charge depends on DEP performing its servicing functions relating to the collection of the Storm Recovery Charge and on future electricity consumption. Such property shall exist regardless of whether the revenues or proceeds arising from the property have been billed, have accrued, or have been collected and notwithstanding the fact that the value or amount of the property is dependent on the future provision of service to retail customers by DEP or its successors or assignees and future consumption of electricity by retail customers. Furthermore, the Storm Recovery Property shall continue to exist until the Storm Recovery Bonds are paid in full and all Financing Costs and other costs of the Storm Recovery Bonds have been recovered in full.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 48

The Storm Recovery Property also constitutes an existing present intangible property right or interest therein for purposes of contracts concerning the sale or pledge of property. See S.C. Code Ann. § 58-27-1125(A)(1) and (C)(3) (Supp. 2023). The interest of a transferee, purchaser, acquirer, assignee, or pledgee in the Storm Recovery Property, and in the revenue and collections arising from that property, is not subject to setoff, counterclaim, surcharge, or defense by DEP or any other person or in connection with the reorganization, bankruptcy, or other insolvency of DEP or any other entity. See S.C. Code Ann. § 58-27-1125(A)(5) (Supp. 2023).

The creation, attachment, granting, perfection, priority and enforcement of liens and security interests in Storm Recovery Property are governed by S.C. Code Ann. section 58-27-1125(B) (Supp. 2023). Pursuant to S.C. Code Ann. section 58-27-1125(B)(5) (Supp. 2023), the priority of a security interest in Storm Recovery Property is not affected by the commingling of the Storm Recovery Charge with other amounts. Any pledgee or secured party shall have a perfected security interest in the amount of the Storm Recovery Charge that is deposited in the collection account or any other cash or deposit account of DEP in which the Storm Recovery Charge has been commingled with other funds and any other security interest that may apply to those funds shall be terminated when such funds are transferred to the collection account.

When DEP transfers Storm Recovery Property to the SPE pursuant to this Financing Order under an agreement that expressly states that the transfer is a true sale and absolute transfer in accordance with the sale, assignment and transfer provisions of S.C. Code Ann. section 58-27-1125(C) (Supp. 2023), that transfer shall constitute an absolute transfer and true sale and not a pledge of or secured transaction or other financing arrangement, and title to the Storm Recovery Property shall immediately pass to the SPE. After such a transfer, the Storm Recovery Property shall not be subject to any claims of DEP or its creditors, other than creditors holding a properly perfected prior security interest in the Storm Recovery Property perfected by S.C. Code Ann. section 58-27-1125 (Supp. 2023).

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 49

As provided by S.C. Code Ann. section 58-27-1125(C)(2) (Supp. 2023), the characterization of the sale, conveyance, assignment, or transfer of Storm Recovery

Property as an absolute transfer and true sale or other absolute transfer and the corresponding characterization of the transferee’s property interest shall not be affected by any of the following: (1) commingling of the Storm Recovery Charge arising with respect to the Storm Recovery Property with other amounts; (2) the retention by DEP of a (i) partial or residual interest, including an equity interest, in the Storm Recovery Property, whether direct or indirect, or whether subordinate or otherwise or (ii) the right to recover costs associated with taxes, franchise fees or license fees imposed on the collection of the Storm Recovery Charge; (3) any recourse that the transferee may have against DEP; (4) any indemnification rights, obligations, or repurchase rights made or provided by DEP; (5) the obligation of DEP to collect the Storm Recovery Charge on behalf of the SPE; (6) DEP acting as the servicer of the Storm Recovery Charge or the existence of any contract that authorizes or requires DEP, to the extent that any interest in Storm Recovery Property is sold or assigned, to contract with the assignee or any financing party that it will continue to operate its system to provide service to its customers for the benefit and account of such assignee or financing party, and will account for and remit such amounts to or for the account of such assignee or financing party; (7) the treatment of the sale, conveyance, assignment, or other transfer for tax, financial reporting, or other purposes; (8) granting or providing to holders of the Storm Recovery Bonds a preferred right to the Storm Recovery Property or credit enhancement by DEP or its affiliates with respect to the Storm Recovery Bonds; or (9) any application of the True-up Mechanism.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 50

In addition, the method of tracing funds collected as the Storm Recovery Charge, or other proceeds of Storm Recovery Property and determining the identifiable cash proceeds of any storm recovery property is set forth in the servicing agreement, the final version of which shall be provided to the Commission concurrent with DEP’s filing with the SEC. Furthermore, the Company agrees to trace funds in a manner consistent with the Company’s current practice, which is tracking of funds collected based on actual daily billings to customers adjusted for (i) a weighted average balance of days outstanding and (ii) estimated write-offs rate. Tr. p. 312.4:15-19.

The Commission finds that the terms and conditions discussed above regarding Storm Recovery Property are reasonable and adhere to the requirements of the Storm Securitization Statute. In addition, the Storm Recovery Property and all other collateral is to be held and administered by an indenture trustee pursuant to the indenture, which helps ensure lower Storm Recovery Charge and that the Statutory Cost Objectives will be achieved. Accordingly, the Commission approves the (i) creation of Storm Recovery Property, including the rights to impose, bill, charge, collect, and receive Storm Recovery Charge and obtain periodic adjustments to the Storm Recovery Charge and (ii) DEP’s sale of the Storm Recovery Property to the SPE.

As provided in S.C. Code Ann. section 58-27-1125(A)(4) (Supp. 2023), if DEP defaults on any required remittance of amounts collected in respect of Storm Recovery Property specified in this Financing Order, the Court of Common Pleas in Richland County, South Carolina, upon application by an interested party, and without limiting any other remedies available to the applying party, shall order the sequestration and payment of the revenues arising from such Storm Recovery Property to the financing parties or their assignees. This Financing Order shall remain in full force and effect notwithstanding any reorganization, bankruptcy, or other insolvency proceedings with respect to DEP or its successors or assignees.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 51

L. Evidence and Conclusions For Findings of Fact Nos. 20-21

The evidence supporting these findings and conclusions is contained in the Petition, the testimony and exhibits of the witnesses, and the entire record in this proceeding.

Form of Transaction Documents

DEP submitted for approval the forms of Transaction Documents necessary for the issuance of the Storm Recovery Bonds. Hearing Exhibit 2.

The purchase and sale agreement and administration agreement are between DEP and the SPE. These contracts set out in substantial detail certain terms and conditions relating to the transaction structure for each issuance of Storm Recovery Bonds, including the proposed sale of Storm Recovery Property to the SPE, the administration of the SPE, and the servicing of the Storm Recovery Charge and Storm Recovery Bonds. Hearing Exhibit 2. Tr. p. 42.22:4-7.

The limited liability company agreement constitutes the organizing document of the SPE, with DEP as the sole member. DEP anticipates that the limited liability company agreement would be executed substantially in the form submitted to this Commission, subject to such changes deemed necessary or advisable to satisfy bankruptcy opinion and rating agency considerations.

DEP has also submitted a form of indenture between the SPE and an indenture trustee, which sets forth proposed security and terms for the Storm Recovery Bonds.

In addition, DEP will execute a servicing agreement with the SPE. DEP will be the initial servicer but may be succeeded as servicer as detailed in the servicing agreement, subject to approval of the Commission. Pursuant to the servicing agreement, the servicer is required, among other things, to impose, bill, charge, collect, and receive the Storm Recovery Charge for the benefit and account of the SPE; to make the periodic true-up adjustments of Storm Recovery Charge required or allowed by this Financing Order; and to account for and remit its collection of Storm Recovery Charge to or for the account of the SPE in accordance with the remittance procedures contained in the servicing agreement without any charge, deduction, or surcharge of any kind, other than the servicing fee specified in the servicing agreement. In the servicing agreement, DEP commits to maintaining accurate and complete accounts of the Storm Recovery Property. See Hearing Exhibit 2. Further, DEP as servicer will maintain custodial bank accounts and bank clearing accounts and must deposit collections within two days. Id. DEP also commits to remitting at least annually to the indenture trustee, for the benefit of the Issuer, any late charges received from customers in respect of the Storm Recovery Charge. Id.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 52

Under the servicing agreement, if any servicer fails to fully perform its servicing obligations, the indenture trustee or its designee may, and upon the instruction of the requisite percentage of holders of the outstanding bonds shall, appoint an alternate party to replace the defaulting servicer. The obligations of the servicer under the servicing agreement, the circumstances under which an alternate servicer may be appointed, and the conditions precedent for any amendment of such agreement will be more fully specified in the servicing agreement. The rights of the SPE under its servicing agreement will be included in the collateral pledged to the indenture trustee under its indenture for the benefit of holders of the Storm Recovery Bonds.

Drafts of these agreements were filed in order that this Commission may evaluate the principal rights and responsibilities of the parties thereto. However, Company witness Niehaus noted in her direct testimony that these drafts were merely “illustrative,” and that the actual structure of the Storm Recovery Bonds could differ “materially.” Tr. p. 358.29:13-20. The Commission hereby determines that the Transaction Documents described above are necessary to facilitate the proposed financing structure approved herein. Moreover, the Transaction Documents are reasonable and will help to achieve the Statutory Cost Objectives.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 53

Accordingly, the form Transaction Documents are approved subject to further advice and input by the Bond Advisory Team as provided in Findings of Fact 43-47 to ensure that the Statutory Cost Objectives are achieved and for compliance with this Financing Order and the Storm Securitization Statute.

M. Evidence and Conclusions for Finding of Fact No. 22

The evidence supporting these findings and conclusions is contained in the Petition, the Settlement Agreement, the testimony and exhibits of the witnesses, and the entire record in this proceeding.

Offering and Sale of the Bonds

In its Petition, DEP requested the flexibility to determine which transaction structure is best tailored to then-existing rating agency considerations, market conditions, and investor preferences, so that the financing of the Storm Recovery Costs can achieve the Statutory Cost Objectives. Petition at 32.

DEP has proposed that the Storm Recovery Bonds be offered pursuant to an SEC-registered offering in order to reach the broadest number of potential investors and ultimately achieve the lowest storm recovery charge. Petition at 30. The Company has also provided testimony to the effect that the vast majority of utility securitizations have been sold as SEC-registered public transactions. Tr. pp. 358.33-358.34. Further, DEP has provided testimony to the effect that an SEC-registered, public offering is likely to result in a lower cost of funds relative to a non-SEC- registered offering, including a Rule 144A qualified institutional offering, all else being equal, due to the enhanced transparency and liquidity of publicly registered securities. Id. The record demonstrates that it is appropriate and prudent to permit DEP to have flexibility and authority, with advice and input from the Bond Advisory Team, to pursue other sales options that result in the achievement of the Statutory Cost Objectives for customers consistent with market conditions at the time the Storm Recovery Bonds are priced. The Settlement Agreement provides that if a means of sale other than an SEC-registered sale is proposed to be utilized, the rationale for the decision shall be explained in the Issuance Advice Letter submitted to the Commission. Order Exhibit No. 1, Paragraph 19. DCA witness Rothschild testified that this additional Settlement Agreement term, whereby a detailed rationale must be provided in the issuance advice letter submitted to the Commission, provides additional transparency and accountability to the process. Tr. pp. 205.12:13-205.13:7.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 54

DEP intends to pursue a negotiated sales process for issuance of the bonds, pursuant to a sale negotiated with one or more underwriters, as described in the testimony of Company witness Niehaus, because it is expected to lead to the lowest storm recovery charge for customers. Tr. p. 46.13:18-20. Further, DEP, with the advice and input of the Bond Advisory Team including invited member DCA, will select underwriters who DEP believes are in the best position to achieve its Statutory Cost Objectives. Tr. p. 46.42:7-12.

The Commission finds that the issuance of the Storm Recovery Bonds pursuant to an SEC-registered negotiated sale process is expected to result in lower overall costs and satisfy the Statutory Cost Objectives and should therefore be approved. However, DEP is also authorized to pursue other sale options, including a Rule 144A offering, if the Statutory Cost Objective could not be achieved with a negotiated sale, and DEP determines that other sale options would satisfy the Statutory Cost Objectives. The Commission therefore finds it necessary to grant DEP flexibility and authority, with advice and input from the Bond Advisory Team, to pursue other sales options that result in the achievement of the Statutory Cost Objectives for customers consistent with market conditions at the time the Storm Recovery Bonds are priced. By allowing the Company flexibility to determine which of the above issuance structures are best tailored to then existing rating agency considerations, market conditions, and investor preferences, the financing of Storm Recovery Costs can be reasonably expected to result in the lowest Storm Recovery Charge consistent with market conditions at the time the Storm Recovery Bonds are priced, and the terms set forth in this Financing Order. In accordance with the Settlement Agreement, if a means of sale other than an SEC-registered sale is proposed to be utilized, the rationale for the decision shall be explained in the Issuance Advice Letter submitted to the Commission. Order Exhibit No. 1, Paragraph 19.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 55

N. Evidence and Conclusions for Findings of Fact Nos. 23-26

The evidence supporting these findings and conclusions is contained in the Petition, the testimony and exhibits of the witnesses, the Settlement Agreement, and the entire record in this proceeding.

Amortization, Interest Rates, and Credit Ratings of Storm Recovery Bonds

DEP proposed an approximately 20-year bond repayment period for the Storm Recovery Charge. Company witness Heath testified that the approximately 20-year proposal provides a greater level of quantifiable benefits to customers on a present value basis as compared to the costs that would have been incurred absent the issuance of storm recovery bonds, and will result in the lowest storm recovery charge consistent with market conditions at the time the storm recovery bonds are priced and the terms set forth in a financing order issued by the Commission. Tr. p. 46.14:16-22. Company witness Heath also explained that the legal maturity date of each tranche may be longer than the scheduled final payment date for that tranche. Having reviewed the testimony of the parties the Commission finds that this bond repayment period is reasonable and prudent. As requested by the Commission, DEP provided models showing the savings of a 10-year model and a 15-year model, which confirms the greater level of quantifiable benefits to customers on a present value basis. Tr. p. 282.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 56

The first payment of principal and interest for the Storm Recovery Bonds shall occur within 12 months of issuance. Payments of principal and interest thereafter shall be no less frequent than semi-annually. Annual payments of principal of and interest on the Storm Recovery Bonds shall be substantially level over the expected term of the Storm Recovery Bonds. DEP shall decide the exact scheduled final payment dates and legal final maturities of each tranche to ensure the issuance of Storm Recovery Bonds meets the Statutory Cost Objectives. The Commission finds that this proposed structure—providing substantially level annual debt service and revenue requirements over the life of the Storm Recovery Bonds—is reasonable and prudent and shall be utilized.

As to interest rates, Company witness Niehaus recommended that the Storm Recovery Bonds should be issued at a fixed rate. Tr. pp. 358.34-358.35. She explained that fixed rates result in predictable revenue requirements, which facilitates the true-up process. Id. If floating rate bonds were issued, it would be necessary to enter into interest rate swaps in order to create a fixed rate payment obligation, and the swap arrangement would increase risks for customers. Id. The Commission determines that each tranche of the Storm Recovery Bonds should have a fixed interest rate, subject to market conditions. If market conditions change, and it becomes necessary for one or more tranches of bonds to be issued as floating-rate securities in order to achieve the Statutory Cost Objectives, DEP is authorized to issue such bonds but will be required to execute agreements to swap the floating payments to fixed-rate payments in order to achieve the Statutory Cost Objectives. Tr. pp. 471:7-480:24. As noted in Findings of Fact Nos. 24 and 48-53, a decision to issue floating rate bonds or securities must be subject to advice and input from the Bond Advisory Team, and consistent with S.C. Code Ann. section 58-27-1110(C)(6)(a) (Supp. 2023), DEP, the primary underwriter(s), and the QITP would all have to certify that an issuance of Storm Recovery Bonds that has one or more floating rate tranches resulted in the lowest Storm Recovery Charge consistent with market conditions at the time the Storm Recovery Bonds were priced and the terms set forth in this Financing Order and the rationale for the decision to issue floating rate bonds would be set forth in the Issuance Advice Letter. In making this certification the costs of any interest rate swap agreements shall be included as part of the total cost of the proposed issuance. This flexibility will ensure that DEP can achieve quantifiable net benefits for customers as required by the Storm Securitization Statute and ensure that DEP achieves the Statutory Cost Objective of lowest storm recovery charges consistent with market conditions at the time the storm recovery bonds are priced. The Company anticipates that the Storm Recovery Bonds will have the highest possible credit rating from at least two nationally recognized rating agencies, S&P and Moody’s. The Commission hereby grants DEP authority to agree to necessary credit enhancements, with recovery of related costs as a form of on-going Financing Costs to achieve the Statutory Cost Objectives. In the Settlement Agreement, DEP agreed that if the ratings from S&P and Moody’s result in split bond ratings, the Company will seek advice and input from the Bond Advisory Team on whether to obtain a third rating from Fitch. DCA witness Rothschild specifically supported this term of the Settlement Agreement. Tr. pp. 205.12:21-23; 205.13:7. Consistent with the Settlement Agreement, if the final credit rating on the proposed bonds is not AAA or Aaa, the rationale for the decision shall be explained in the Issuance Advice Letter submitted to the Commission. Order Exhibit No. 1, Paragraph 18.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 57

Cap on Costs of Securitization Financing

ORS witness Kollen initially proposed a 7.0% cap on the cost of the securitization financing to “ensure that the actual financing remains cost-effective and that there will be actual quantifiable net benefits if interest rates increase prior to the actual securitization financing.” Tr. p. 239.4:4-9. In response, Company witness Heath confirmed that the Company calculated a breakeven cost of 7.70%. Tr. p. 48.8:1-4. The Settling Parties agreed that to ensure the issuance of Storm recovery Bonds results in quantifiable net benefit, the weighted average interest rate on the Storm Recovery Bonds will not exceed 7.0%. Order Exhibit No. 1, Paragraph 14. However, if the 7.0% cap based on the weighted average interest rate on the bonds is projected to be exceeded, the Parties agreed that DEP shall discuss with the Bond Advisory Team and develop a recommendation, based on their advice and input, for the Commission on whether to proceed with the issuance in accordance with the Statutory Cost Objectives. In the Settlement Agreement, DEP has further agreed for informational purposes, to include the rationale for the final interest rate decision, whether above or below the cap, in the Issuance Advice Letter. Id. The rationale, will include, but not be limited to, the comparisons made to determine how the interest rate(s) results in the lowest storm recovery charges consistent with market conditions at the time the Storm Recovery Bonds are priced and the terms set forth in this Financing Order. Id. The Commission hereby finds and concludes the 7.0% cap and related terms agreed upon in the Settlement Agreement, to be just and reasonable and necessary to achieve the Statutory Cost Objectives.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 58

O. Evidence and Conclusions for Findings of Fact No. 27

The evidence supporting these findings and conclusions is contained in the Petition, the testimony and exhibits of the witnesses, and the entire record in this proceeding.

Security for Storm Recovery Bonds

DEP proposed that the payment of the Storm Recovery Bonds and the Storm Recovery Charge authorized by this Financing Order is to be secured by the Storm Recovery Property created by this Financing Order and by certain other collateral as described herein. The Storm Recovery Bonds will be issued pursuant to an indenture under which the indenture trustee will administer the trust.

DEP proposed that the SPE will establish a collection account as a trust account to be held by its indenture trustee as collateral to facilitate the payment of the principal of interest on, and on-going Financing Costs related to, the Storm Recovery Bonds in full and on a timely basis. Tr. p. 358.23-24. The collection account will include the general subaccount, the capital subaccount and the excess funds subaccount, and may include other subaccounts if required to obtain the highest possible credit rating on the Storm Recovery Bonds in order to achieve the Statutory Cost Objectives. Id.

DEP proposes that Storm Recovery Charge remittances from the servicer with respect to the Storm Recovery Bonds will be deposited into the general subaccount for the SPE. On a periodic basis, the money in the general subaccount will be allocated to pay expenses of the SPE, to pay principal of and interest on the Storm Recovery Bonds, and to meet the funding requirements of the other subaccounts, according to specified payment priority established in the indenture. Funds in the general subaccount will be invested by the indenture trustee in short-term, high-quality investments, and such funds (including, to the extent necessary, investment earnings) will be applied by the indenture trustee to pay principal of and interest on the Storm Recovery Bonds as well as all other components of the on-going Financing Costs payable by the SPE.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 59

When the Storm Recovery Bonds are issued, DEP proposes that it will make a capital contribution to the SPE, which the SPE will deposit into its capital subaccount. Tr. p. 46.31:5-8. The capital subaccount is available, if necessary, to serve as collateral for timely payment of principal and interest on the Storm Recovery Bonds and is considered a credit enhancement. Tr. pp. 46.9:14-17; 46.31:10-12. The Storm Recovery Bond proceeds will not be used to fund this capital contribution. The amount of the capital contribution will be at least 0.50 percent of the original principal amount of the Storm Recovery Bonds issued by the SPE. The capital subaccount will serve as collateral to facilitate timely payment of principal of and interest on the Storm Recovery Bonds. To the extent that the capital subaccount must be drawn upon to pay these amounts due to a shortfall in the Storm Recovery Charge collections, it will be replenished to its original level during the next six-month period through the true-up process described below. The funds in the capital subaccount will be invested in short-term, high-quality investments and, if necessary, such funds (including investment earnings) will be used by the indenture trustee to pay principal of, and interest on, the Storm Recovery Bonds and the on-going Financing Costs payable by the SPE. It is just and reasonable for DEP to earn a rate of return on its invested capital in the SPE equal to the rate of interest payable on the longest maturing tranche of Storm Recovery Bonds and this return on invested capital should be a component of the Periodic Payment Requirement (as defined below), and accordingly, recovered from the Storm Recovery Charge.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 60

Any excess funds subaccount will hold any Storm Recovery Charge collections and investment earnings on the collection account in excess of the amounts needed to pay current principal of and interest on the Storm Recovery Bonds and to pay all of the on-going Financing Costs payable by the SPE including, but not limited to, funding or replenishing the capital subaccount. Any balance in or amounts allocated to such excess funds subaccount on a true-up adjustment date will be subtracted from any amounts required for such period for purposes of the true-up adjustment. The funds in the excess funds subaccount will be invested in short- term, high-quality investments, and such funds (including investment earnings thereon) will be available to pay principal of and interest on the Storm Recovery Bonds and the on-going Financing Costs payable by the SPE.

DEP also proposed that any collection account and the subaccounts described above are intended to facilitate the full and timely payment of scheduled principal of, and interest on, the Storm Recovery Bonds and all other on-going Financing Costs payable by the SPE. If the amount of Storm Recovery Charge collections in the general subaccount is insufficient to make, on a timely basis, all scheduled payments of principal of and interest on the Storm Recovery Bonds and to make payment on all of the other on-going Financing Costs payable by the SPE, the excess funds subaccount and the capital subaccount will be drawn down, in that order, to make such payments. Any deficiency in the capital subaccount due to such withdrawals must be replenished on a periodic basis through the true-up process.

In addition to the foregoing, there may be such additional accounts and subaccounts as are necessary to segregate amounts received from various sources, or to be used for specified purposes. Upon the maturity of the Storm Recovery Bonds and upon the discharge of all obligations with respect to such bonds, amounts remaining in each collection account, as well as later collections of Storm Recovery Charge, will be released. As noted in this Financing Order, equivalent amounts, less the amount of any capital subaccount, will be booked to a regulatory liability, will accrue carrying costs, net of ADIT at DEP’s approved pre-tax WACC in effect at the time the deferral is incurred, and will be credited back to customers in the Company’s next general rate case proceeding following the maturity of the Storm Recovery Bonds.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 61

Based upon the foregoing, the Commission finds that utilization of a collection account, including a general subaccount, a capital subaccount, and an excess funds subaccount, as proposed by DEP, is reasonable and should help achieve the Statutory Cost Objectives. Moreover, it is necessary to grant DEP the flexibility and authority to include other subaccounts in the collection account where required to obtain the highest possible credit rating on the series of Storm Recovery Bonds, which will in turn lower the Storm Recovery Charge for customers.

P. Evidence and Conclusions for Findings of Fact Nos. 28-29

The evidence supporting these findings and conclusions is contained in the Petition, the Settlement Agreement, the testimony and exhibits of the witnesses, and the entire record in this proceeding.

DEP as Initial Servicer of the Storm Recovery Bonds

DEP proposes to execute a servicing agreement with the SPE, the final version of which shall be provided to this Commission concurrent with its filing with the SEC.

Under the servicing agreement, the servicer shall be required, among other things, to: (i) impose, bill, charge, collect, and receive the Storm Recovery Charge for the benefit of the SPE; (ii) make the true-up adjustments of Storm Recovery Charge required or allowed by this Financing Order; and (iii) account for and remit the Storm Recovery Charge to or for the account of the SPE in accordance with the remittance procedures contained in the servicing agreement without any charge, deduction, or surcharge of any kind, other than the servicing fee specified in the servicing agreement. The appropriate servicing fee shall be as set forth in this Financing Order.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 62

To preserve the integrity of the bankruptcy-remote structure of the SPE and ensure the high credit quality of the Storm Recovery Bonds, the servicer must be adequately compensated for the services it provides, including the calculation, billing, and collection of the Storm Recovery Charge; remittance of the Storm Recovery Charge to the indenture trustee; and the preparation, filing, and processing of the True-up Adjustment Letter. DEP’s proposed form of servicing agreement provides for an on-going servicing fee for the initial servicer in the amount of 0.05 percent of the initial principal amount of the Storm Recovery Bonds plus out-of-pocket expenses. DEP has submitted testimony on the costs anticipated to be incurred by it in connection with the servicing functions under the servicing agreement, and the Commission finds such costs to be reasonable and prudent. Tr. pp. 46.29:14-46.30:14.

DEP’s proposed form of servicing agreement provides for an annual fee for on-going services of 0.05 percent of the initial principal amount of the Storm Recovery Bonds so long as DEP acts as servicer, plus out-of-pocket expenses. In addition to the annual on-going servicing fee, DEP shall recover its expenses as an up-front financing cost, to recover set-up costs of the servicer, including information technology programming costs to adapt DEP’s existing systems to bill, charge, collect, receive, and process the Storm Recovery Charge, and to set up necessary servicing functions. The evidence shows that these amounts represent a prudently incurred cost to DEP, and the Commission finds that those costs are reasonable.

However, the servicing fees collected by DEP, or an affiliate acting as the servicer under the Servicing Agreement will be reflected in DEP’s on-going cost of service such that any amounts in excess of DEP’s incremental cost of servicing the Storm Recovery Bonds shall be returned to DEP’s retail customers. The expenses incurred by DEP or such affiliate to perform obligations under the Servicing Agreement not otherwise recovered through the Storm Recovery Charge will likewise be reflected in DEP’s on-going cost of service.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 63

DEP has proposed that it will not be permitted to voluntarily resign from its duties as a servicer if the resignation will harm the credit rating on Storm Recovery Bonds issued by SPE. Even if DEP’s resignation as servicer would not harm the credit rating on the Storm Recovery Bonds issued by the SPE, the Commission finds and directs that DEP shall not be permitted to voluntarily resign from its duties as servicer without the express permission of the Commission. In the event DEP must resign as servicer, DEP’s replacement shall be approved by the Commission. If DEP defaults on its duties as servicer or is required for any reason to discontinue those functions, then DEP proposes that a successor servicer acceptable to the indenture trustee be named to replace DEP as servicer so long as such replacement would not cause any of the then current credit ratings of the Storm Recovery Bonds to be suspended, withdrawn or downgraded. The Commission holds that any successor servicer to DEP must also be acceptable to the Commission.

DEP has proposed that, and the Commission finds and directs that, the servicing fee payable to a substitute servicer, if a substitute servicer be approved by the Commission, should not exceed 0.60 percent per annum on the initial principal balance of the Storm Recovery Bonds issued by the SPE, unless a higher fee is approved by the Commission. Tr. p. 46.29:16-19. See also Hearing Exhibit 2.

In the Servicing Agreement, DEP, as Servicer, shall agree to credit its retail customers to the extent there are higher servicing fees payable to any substitute servicer because of DEP’s negligence, recklessness, or willful misconduct in acting as a servicer.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 64

The Commission finds and directs that the SPE and the indenture trustee shall not be permitted to waive any material obligations of DEP as transferor or as servicer of Storm Recovery Property without consent of this Commission.

Furthermore, it is contemplated that DEP shall act as the servicer for the Storm Recovery Bonds until the Storm Recovery Bonds are fully paid. In the event of a change in utility regulation in the State of South Carolina, alternative energy suppliers are required to bill and collect the storm recovery charges and meet all other credit rating agency criteria so as not to negatively affect the Storm Recovery Bonds’ credit rating, as outlined in the testimony of witness Niehaus and ORS witness Traska. Tr. pp. 358.36-358.38; 360:4-7; & 536:10-11.

The Commission thereby finds and concludes that it is reasonable for DEP to act as initial servicer, unless and until the Commission grants approval of a successor servicer, under the proposed financing transaction, which will reduce risk associated with the proposed securitization, therefore resulting in a lower Storm Recovery Charge and greater benefits to customers. Accordingly, this Financing Order requires DEP to act as initial servicer pursuant to the servicing agreement under the proposed financing structure.

Q. Evidence and Conclusions for Findings of Fact Nos. 30-31

The evidence supporting these findings and conclusions is contained in the Petition, the testimony and exhibits of the witnesses, and the entire record in this proceeding.

DEP as Administrator of the SPE

Pursuant to the administration agreement explained above, DEP will perform the administrative duties necessary to maintain the SPE. The appropriate administration fee shall be as set forth in this Financing Order.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 65

DEP’s proposed form of administration agreement provides for a $50,000 annual fee plus out-of-pocket expenses paid to an administrator for performing the services required by the administration agreement to be paid in equal installments on each payment date. Witness Heath discusses the costs anticipated to be incurred by it in connection with the administration agreement in his testimony. The Commission finds that DEP has demonstrated that this annual fee is necessary to cover any costs to be incurred by DEP in performing services as administrator. The Commission also finds and concludes that it is reasonable for DEP to act as an administrator of the SPE under the proposed financing transaction. Accordingly, this Financing Order requires DEP to act as administrator pursuant to the administration agreement under the proposed financing structure.

The administration fees collected by DEP or any affiliate acting as the administrator under the Administration Agreement will be included in DEP’s cost of service such that any amount in excess of DEP’s incremental costs of administering the SPE shall be returned to DEP’s retail customers. The expenses incurred by DEP or such affiliate to perform obligations under the Administration Agreement not otherwise recovered through the Storm Recovery Charge will likewise be included in DEP’s cost of service.

R. Evidence and Conclusions For Finding of Fact No. 32

Company witness Heath explained that the Company would not realize taxable income from receipt of cash in exchange for the issuance of the Storm Recovery Bonds provided that the transaction was structured in accordance with IRS safe harbor rules described in IRS Revenue Procedure 2005-62. Tr. p. 46.34:3-10. Therefore, the Commission believes it is just and reasonable for DEP to structure the Storm Recovery Bond transactions in a way that meets all requirements for the IRS’ safe harbor treatment, including, for federal income tax purposes, that the Storm Recovery Bonds be treated as debt of DEP.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 66

S. Evidence and Conclusion for Findings of Fact Nos. 33-37

The evidence supporting these findings and conclusions is contained in the Petition, the testimony and exhibits of the witnesses, the Settlement Agreement and the entire record in this proceeding.

DEP seeks authorization to collect from its customers, in the manner provided in this Financing Order and/or the Tariff approved hereby, a Storm Recovery Charge in an amount sufficient to provide for the timely payment of principal of and interest on the Storm Recovery Bonds and all other on-going Financing Costs as described in the Evidence and Conclusions for Findings of Fact Nos. 38-39.

To repay the Storm Recovery Bonds and on-going Financing Costs, DEP is hereby authorized to implement a Storm Recovery Charge to be collected on a per kWh basis from all applicable customer rate classes until the Storm Recovery Bonds and associated Financing Costs are paid in full. The Storm Recovery Charge is nonbypassable and must be paid by all existing or future retail customers receiving transmission or distribution services from DEP or its successors or assignees under Commission-approved rate schedules or under special contracts, even if the retail customer elects to purchase electricity from an alternative electricity supplier following a fundamental change in regulation of electrical utilities in this state. See S.C. Code Ann. §§ 58-27-1105(15) and 1110(C)(2)(d) (Supp. 2023). In the event there is a fundamental change in the regulation of electrical utilities, the Storm Recovery Charge shall be collected from retail electric customers in a manner that will not adversely affect the credit rating on the Storm Recovery Bonds.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 67

In summary, the Storm Securitization Statute provides for the recovery of Storm Recovery Costs through Storm Recovery Bonds. Accordingly, to compute the Storm Recovery Charge, DEP first applied the allocation factors to the total first year revenue requirement as presented in Smith Exhibit 3 in order to allocate the revenue requirements to each customer rate class. Specifically, DEP applied the allocation factors to the customer rate classes in the manner in which these costs would have been allocated in the cost-of-service study approved in the 2022 DEP Rate Case, Docket No. 2022-254-E as required by the Storm Securitization Statute.

Next, as presented in the testimony of Company witness Jacalyn H. Moore, the rate was calculated by dividing total revenue requirements for each customer rate class by the effective kWh sales forecast for each customer rate class. DEP used the allocation factors as well as the sales forecast to calculate the proposed initial Storm-Recovery Charge per kWh by customer rate class. The resulting Storm Recovery Charge was then set forth in the proposed Tariff, as shown in witness Moore’s Exhibit 2. (Hearing Exhibit 12).

DEP submitted the True-up Mechanism, which is a formula-based mechanism as described in S.C. Code Ann. section 58-27-1110(C)(2)(f) (Supp. 2023), used to calculate, and adjust from time to time, the Storm Recovery Charge for each customer rate class. DEP supported the Petition with the testimony of Company witness Speros, who provided the True-up Mechanism to determine the Periodic Payment Requirement (defined further below) to be recovered from the Storm Recovery Charge. This True-up Mechanism is attached as Order Exhibit No. 3.

DEP also submitted the supporting testimony of Company witness Smith with respect to allocation of these periodic costs and Company witness Moore presents in her testimony and exhibits the computation of the Storm Recovery Charge for each customer rate class for DEP. Tr. p. 181; Hearing Exhibits 12 & 13. As discussed in the testimony of witness Smith and shown in Smith Exhibits 1-4, DEP presents the estimated Storm Recovery Charge, as described in S.C. Code Ann. section 58-27-1110(16) (Supp. 2023). Tr. p. 40.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 68

As agreed to by the Parties in the Settlement Agreement, DEP will use 30 years of historical data to determine normal weather heating and cooling degree days in the calculation of the forecast variance factor. The variance factor will be equal to one standard deviation of the normal weather variation and will be applied by customer class to DEP’s most current retail Spring or Fall forecast which includes the upcoming rate period. Order Exhibit No. 1, Paragraph 12.

In S.C. Code Ann. section 58-27-1155(A) (Supp. 2023), the State and its agencies, including this Commission, pledge to and agree with the bondholders, the owners of Storm Recovery Property, and other financing parties that the State and its agencies, including this Commission, will not do any of the following: (1) alter the provisions of the Storm Securitization Statute, which authorize this Commission to create an irrevocable contract right or chose in action by the issuance of this Financing Order, to create Storm Recovery Property, and make the Storm Recovery Charge imposed by this Financing Order an irrevocable, binding or nonbypassable charge; (2) take or permit any action that impairs or would impair the value of Storm Recovery Property or the security for the Storm Recovery Bonds, or revises the Storm Recovery Costs for which recovery is authorized; (3) in any way impair the rights and remedies of the bondholders, assignees, and other financing parties; or (4) except for changes made pursuant to the True-up Mechanism, reduce, alter, or impair the Storm Recovery Charge that is to be imposed, billed, charged, collected, and remitted for the benefit of the bondholders, any assignee, and any other financing parties until any and all principal, interest, premium, Financing Costs and other fees, expenses, or charges incurred, and any contracts to be performed in connection with the related Storm Recovery Bonds, have been paid and performed in full. This paragraph does not preclude limitation or alteration if full compensation is made by law for the full protection of the storm recovery charges collected pursuant to a financing order and of the bondholders and any assignee or financing party entering into a contract with the electrical utility.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 69

The Commission hereby finds that the cost allocation formula described on DEP’s testimony, included in the Settlement Agreement and embedded in the True-up Mechanism is consistent with S.C. Code Ann. sections 58-27-1110(C)(2)(f) and 58-27-1110(C)(2)(i) (Supp. 2023) and is reasonable and reasonable. The Commission also anticipates that stress case analyses, as described in witness Niehaus’s testimony, will show that the broad-based nature of the True-up Mechanism under S.C. Code Ann. section 58-27-1110(C)(2)(f) (Supp. 2023) and the State Pledge under S.C. Code Ann. section 58-27-1155 (Supp. 2023), will serve to minimize credit risk associated with the Storm Recovery Bonds (i.e., that sufficient funds will be available and paid to discharge the principal and interest when due).

T. Evidence and Conclusions for Findings of Fact Nos. 38-39

The evidence supporting these findings and conclusions is contained in the Petition, the testimony and exhibits of the witnesses, the Settlement Agreement and the entire record in this proceeding.

DEP submitted a proposed Tariff included as Moore Exhibit 2 attached to witness Moore’s testimony to impose the Storm Recovery Charge. Hearing Exhibits 12 & 13. Pursuant to S.C. Code Ann. section 58-27-1120(1) (Supp. 2023), the tariffs shall “explicitly reflect that a portion of the charges on such bill represents [storm] recovery charges approved in a financing order issued to the electrical utility and, if the storm recovery property has been transferred to an assignee, must include a statement to the effect that the assignee is the owner of the rights to [storm] recovery charges and that the electrical utility or other entity, if applicable, is acting as a collection agent or servicer for the assignee.” In addition, the “tariff applicable to customers must indicate the [storm] recovery charge and the ownership of the charge.” S.C. Code Ann. § 58-27-1120(1) (Supp. 2023).

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 70

The tariff will also describe the methodology for calculating the storm recovery charges using the following language displayed clearly on the tariff and not contained in a footnote:

The securitization charge billing rate for each rate class shall be determined sequentially, first by calculating the forecast semi-annual or interim period revenue requirement (in $000), including the over/under recovery from the prior period, as presented in the attached format; second, by calculating the revenue requirement by class for the same period used for the forecast revenue requirement using the class allocation methodology from the most recent base rate case proceeding; third, by calculating the forecast mWh sales by class using total retail forecast mWh sales sourced from the Company’s current Spring or Fall retail load forecast allocated to rate classes using the most current annual billed kWh sales report from the Company’s billing system; fourth, by calculating the adjusted forecast retail mWh sales by reducing the forecast mWh sales by class by one standard deviation from normal weather over thirty years, calculated in the same manner used for base rate case purposes; and fifth, by calculating the securitization charge billing rates per kWh by class by dividing the forecast revenue requirement (in $000) by class by the adjusted retail mWh sales by class. (Order Exhibit No. 1, Paragraph 13).

The Commission finds that the form of DEP’s proposed Tariff introduced into evidence as Moore Exhibit 2, and attached to Company witness Moore’s testimony and the additional language included in the Settlement Agreement includes the required language necessary to effectuate S.C. Code Ann. section 58-27-1120(1) and is hereby approved. The Commission determines that DEP’s applicable Storm Recovery Charge shall be recognized as a separate line item on retail customer bills and include both the rate and the amount of the charge and in accordance with S.C. Code Ann. section 58-27-1120(2) (Supp. 2023). Moreover, all electric bills issued by DEP must state that, as approved in a financing order, all rights to the Storm Recovery Charge are owned by the SPE and that DEP is acting as collection agent or servicer for its SPE.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 71

U. Evidence and Conclusions for Findings of Fact Nos. 40-41

The evidence supporting these findings and conclusions is contained in the Petition, the testimony and exhibits of the witnesses, the Settlement Agreement and the entire record in this proceeding.

Pursuant to S.C. Code Ann. section 58-27-1110(C)(4) (Supp. 2023), the servicer of the Storm Recovery Property will file for standard true-up adjustments to the Storm Recovery Charge at least semi-annually (and at least quarterly beginning 12 months prior to the scheduled final payment date for the latest maturing tranche of a series of Storm Recovery Bonds) to ensure Storm Recovery Charge collections are sufficient to provide for the timely payment of the principal of and interest on the Storm Recovery Bonds and of all of the on-going Financing Costs payable by the SPE in respect of Storm Recovery Bonds as approved under this Financing Order. This required periodic payment of all such amounts will also include deficiencies on past due amounts for any reason for the Storm Recovery Bonds.

Pursuant to S.C. Code Ann. section 58-27-1110(C)(2)(0 (Supp. 2023), this Financing Order must include a formula-based true-up mechanism for making expeditious periodic adjustments in the Storm Recovery Charge that retail customers are required to pay pursuant to this Financing Order and for making any adjustments that are necessary to correct for any overcollection or undercollection of the charge or to otherwise ensure the timely payment of the Periodic Payment Requirement (as defined below).

Consistent with S.C. Code Ann. section 58-27-1110(C)(4) (Supp. 2023), DEP will file with the Commission at least semi-annually (and at least quarterly beginning 12 months prior to the scheduled final payment date for the latest maturing tranche of the Storm Recovery Bonds) a letter applying the formula-based True-up Mechanism and based on estimates of consumption for each rate class and other mathematical factors, requesting Commission approval to make the necessary adjustments.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 72

In addition to the semi-annual true-up adjustments, DEP proposes that the servicer of the Storm Recovery Property also be authorized to make interim true-up adjustments at any time and for any reason in order to ensure the recovery of revenues sufficient to provide for the timely payment of Periodic Payment Requirement.

The Commission accepts the Company’s true-up proposals as reasonable, and finds that it is reasonable and prudent that DEP adhere to the following requirements:

· After issuance of Storm Recovery Bonds on behalf of DEP, the servicer will submit at least semi-annually (and at least quarterly beginning 12 months prior to the scheduled final payment date of the last maturing tranche of the Storm Recovery Bonds) a letter in this docket for Commission review, as described in S.C. Code Ann. section 58-27- 1110(C)(4) (Supp. 2023), and in the form attached hereto as Appendix C.

· The True-up Adjustment Letter will apply the formula-based True-up Mechanism described herein and in Appendix C to this Financing Order for making expeditious periodic adjustments in the relevant Storm Recovery Charge to correct for any overcollection or undercollection of the charge or to otherwise ensure the timely payment of the Periodic Payment Requirement for the Storm Recovery Bonds.

· The “Periodic Payment Requirement” will be composed of the following components for each collection period: (i) the payments of the principal of and interest on the Storm Recovery Bonds issued by the SPE, in accordance with the expected amortization schedule, including deficiencies on past-due principal and interest for any reason, and (ii) on-going Financing Costs payable during the collection period and the costs of funding and/or replenishing the capital subaccount and any other credit enhancements established in connection with the Storm Recovery Bonds and other related fees and expenses.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 73

· The first Periodic Payment Requirement established through the Issuance Advice Letter procedures may be calculated based upon a set of collection periods greater or less than twelve collection periods. Notwithstanding the foregoing, in the event that any Storm Recovery Bonds are outstanding following the scheduled final payment date for the tranche of the latest maturing Storm Recovery Bonds, the Periodic Payment Requirement will be calculated so that collections are sufficient to make all payments on those Storm Recovery Bonds, and in respect of Financing Costs, no later than the immediately following payment date.

· Along with each True-up Adjustment Letter, the servicer shall provide workpapers showing all inputs and calculations, including its calculation of the Storm Recovery Charge by customer rate class. Pursuant to S.C. Code Ann. section 58-27-1110(C)(4) (Supp. 2023), the Commission, upon the filing of a True-up Adjustment Letter made pursuant to this Financing Order, shall render an administrative approval of the request, or inform the servicer of any mathematical or clerical errors in its calculation as expeditiously as possible, but no later than 60 days following the Servicer’s true-up filing. Upon administrative approval, no further action of this Commission will be required prior to implementation of the true-up. In his testimony, DEP witness Speros explained that a shorter time to review the true-up will reduce the lag between calculating the true-up and realizing collection, which should allow for more accurate collections. Tr. p. 310.8. Recognizing, however that the proposed issuance of Storm Recovery Bonds will be the first such transaction in South Carolina, DEP and ORS agreed to engage in a good faith discussion to discuss reducing the time period to review filed True-Up Adjustment Letters from 60 days to 30 days after the completion of 3 semi- annual true-up periods. (Order Exhibit No. 1, Paragraph 11).

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 74

· To ensure adequate Storm Recovery Charge collections and to avoid large overcollections and undercollections over time, the Commission directs that the servicer shall calculate the Storm Recovery Charge using DEP’s most recent MWH sales forecast by rate class from the Company’s most recent period over which the storm recovery charge will be billed and DEP’s estimates of related expenses. Each periodic true-up adjustment should ensure that Storm Recovery Charge collections are sufficient to meet the Periodic Payment Requirement. The calculation of the Storm Recovery Charge will also reflect both a projection of uncollectible Storm Recovery Charge and a projection of payment lags between the billing and collection of the Storm Recovery Charge based upon DEP’ s most recent experience regarding collection of the Storm Recovery Charge.

The Commission hereby approves the True-up Mechanism and determines that each True-up Adjustment Letter shall be based upon the cumulative differences, regardless of the reason, between the Periodic Payment Requirement (including scheduled principal and interest payments on the Storm Recovery Bonds) and the amount of Storm Recovery Charge collections and estimated Storm Recovery Charge collections to the indenture trustee.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 75

V. Evidence and Conclusions for Finding of Fact No. 42

The evidence supporting these findings and conclusions is contained in the Petition, the testimony and exhibits of the witnesses, the Settlement Agreement and the entire record in this proceeding.

The Company’s calculation of quantifiable net benefits assumes that customers will receive a reduction in base revenues for the carrying costs on the storm cost regulatory asset ADIT at the pre-tax WACC. Tr. p. 239.4:11-14. However, such a reduction in base revenues will not occur until base rates are reset in a future base rate case proceeding. Tr. p. 239.4:15-16. ORS witness Kollen recommended that the Commission direct the Company to defer carrying and compound costs on the Storm ADIT at the Company’s WACC to a regulatory liability established for this purpose, from the date the securitization financing closes until the date when the Storm ADIT is included in base rates in a future general rate case proceeding. Tr. p. 239.4:16-20. In rebuttal Company witness Smith explained its plan to include the Storm ADIT as a reduction to rate base in its Quarterly Financial Reports filed with the Commission in Docket No. 2006-270-E, as opposed proposing a deferral until the next general rate case proceeding. Tr. p. 190.4:3-7. However, as part of the Settlement Agreement, the Company has agreed to ORS witness Kollen’s proposal.

The Commission hereby approves the terms of the Settlement Agreement which state that from the date of the Financing Order, the Company will defer and compound the return on Storm ADIT at its most recently approved pre-tax WACC until base rates are reset in the next base rate case proceeding. At that time, the Storm ADIT and the deferred return on the Storm ADIT will be included as a reduction to rate base and the deferred regulatory liability will be amortized as a negative expense to return the deferred Storm ADIT benefit to customers. Order Exhibit No. 1, Paragraph 15.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 76

W. Evidence and Conclusions for Findings of Fact Nos. 43-47

The evidence supporting these findings of fact is found in the Petition, the testimony and exhibits of Company witnesses Heath and Niehaus, the testimony of DCA witness Rothschild, the Settlement Agreement and the entire record in this proceeding.

Company witness Heath testified that in order to assist the Commission to evaluate the final terms of the transaction and whether or not the statutory cost objectives were in fact met, the Company proposes the Commission adopt an Issuance Advice Letter process as contemplated by S.C. Code Ann. section 58-27-1110(C)(6) (Supp. 2023) that includes certification from the Company, the primary underwriter(s), and a Qualified Independent Third-Party designated by the Commission (provided one business day after the Issuance Advice Letter is filed). Tr. pp. 45:1-46:2. DCA witness Rothschild also testified that the Bond Advisory Team will provide an additional layer of oversight to help ensure the storm recovery bonds are priced, structured, registered, and marketed to achieve customer savings. Tr. p. 205.9:5-8. Ultimately, Mr. Rothschild testified that he believed the provisions contained in the Settlement Agreement were the result of considerable work and negotiation amongst the Settling Parties, and having DCA involved, and informed, and able to provide input in the process will achieve the Statutory Cost Objectives. Tr. p. 222:3-20.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 77

In accordance with S.C. Code Ann. section 58-27-1110(C)(6)(a) (Supp. 2023), the Commission has the authority to designate a Qualified Independent Third-Party, and the certification of DEP and the Qualified Independent Third-Party shall certify whether the issuance of Storm Recovery Bonds and the imposition and collection of a Storm Recovery Charge will in fact provide quantifiable net benefits to customers on a present value basis as compared to the costs that would have been incurred absent the issuance of the Storm Recovery Bonds. The certifications of DEP, primary underwriter(s), and the Qualified Independent Third-Party shall certify whether the sale of Storm Recovery Bonds complies with the requirements of the Storm Securitization Statute and this Financing Order, and whether the structuring, marketing, and pricing of the Storm Recovery Bonds will in fact result in the lowest Storm Recovery Charge consistent with market conditions at the time the Storm Recovery Bonds were priced and the terms set forth in this Financing Order. In addition, the Qualified Independent Third-Party shall deliver to the Commission any other information it believes the Commission should consider as to its decision regarding the Issuance Advice Letter.

In accordance with the non-severable Comprehensive Settlement Agreement presented by the Settling Parties for approval without exception, modification, or additional provisions, the Commission concludes that an advisory body shall be established consisting of DEP, the ORS, and ORS acting as the Qualified Independent Third-Party (the Bond Advisory Team) to allow for the development of a thorough understanding of the process for structuring, marketing, and pricing of storm recovery bonds in South Carolina. DEP and the ORS may designate staff, counsel, and consultants to participate on the Bond Advisory Team on their behalf. The Commission also concludes that the designated staff and attorneys of DCA and the underwriters and their counsel shall be invited to attend meetings of the Bond Advisory Team as participants. DCA shall be invited to every meeting of the Bond Advisory Team and provided the same materials as the DEP or ORS.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 78

For the Bond Advisory Team to perform its duties and to participate in the structuring, marketing, and pricing the Storm Recovery Bonds, DEP must provide the members and other participants of the Bond Advisory Team with timely information. Accordingly, DEP shall invite the entire Bond Advisory Team and other participants to participate in all Bond Advisory Team meetings. The Bond Advisory Team must also be given an opportunity to review the structuring, marketing, and pricing of the Storm Recovery Bonds, including but not limited to the selection and retention of underwriters and other transaction participants; the terms of all Transaction Documents; the length of the bond terms; the interest rates of the bonds; the capital contribution to the extent the amount required in the IRS Revenue Procedure 2005-62; the transaction structure; the issuance strategy; pricing strategy; appropriate credit enhancements; and the credit rating process. Furthermore, DEP will, with the advice and input from other participants on the Bond Advisory Team, develop appropriate and necessary disclosures in the registration statement and other marketing materials including but not limited to highlighting the credit features of the Storm Recovery Bonds such as the true-up, nonbypassable nature of the charges, the state pledge, bankruptcy and reorganization protections, and non-appealable Financing Order. However, consistent with DEP’ s statutory right to direct how it places the Storm Recovery Bonds to market, it is reasonable and prudent for DEP to have the exclusive right to select all counsel and advisors for DEP and the SPE.

X. Evidence and Conclusions for Findings of Fact Nos. 48-54

The evidence supporting these findings and conclusions is contained in the Petition, the testimony and exhibits of the witnesses, the Comprehensive Settlement Agreement and the entire record in this proceeding.

Because the actual structure and pricing of the Storm Recovery Bonds are unknown as of the issuance of this Financing Order, the Commission finds it is just, reasonable, and appropriate to require DEP to provide to the Commission, within one business day after final terms of the Storm Recovery Bonds are determined for each series of Storm Recovery Bonds, an Issuance Advice Letter as prescribed in S.C. Code Ann. section 58-27-1110(C)(6)(a) (Supp. 2023), as well as a form of True- up Adjustment Letter attached hereto as Appendices C and D, respectively.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 79

Such Issuance Advice Letter shall include the final terms of the Storm Recovery Bond, up- front Financing Costs and on-going Financing Costs, as well as any necessary explanations or rationales for the final terms required pursuant to the Comprehensive Settlement Agreement. In accordance with S.C. Code Ann. section 58-27-1110(C)(6)(a) (Supp. 2023), the Issuance Advice Letter shall include certifications from DEP, the primary underwriter(s), and the QITP (provided one business day after the Issuance Advice Letter is filed) certifying whether the sale of Storm Recovery Bonds complies with the requirements of the Storm Securitization Statute and the Financing Order. DEP shall certify whether the issuance of Storm Recovery Bonds and the imposition and collection of a Storm Recovery Charge will in fact provide quantifiable net benefits to customers on a present value basis as compared to the costs that would have been incurred absent the issuance of Storm Recovery Bonds. DEP and the primary underwriter(s) shall certify whether the structuring, marketing, and pricing of the Storm Recovery Bonds will in fact result in the lowest Storm Recovery Charge consistent with market conditions at the time the Storm Recovery Bonds were priced and the terms set forth in this Financing Order.

No later than one business day after the Company provides the Issuance Advice Letter, the QITP shall review the Issuance Advice Letter and deliver its certification to the Commission along with any other information it believes the Commission should consider as to the Commission’s decision to accept the Issuance Advice Letter. To ensure compliance with the statutory timeline, DEP will provide a draft issuance advice letter to the Bond Advisory Team, including DCA for review not later than two weeks before the expected date of commencement of marketing the Storm Recovery Bonds. The Bond Advisory Team, including DCA will review the draft issuance advice letter and provide timely feedback to DEP based on the progression of structuring, marketing, and pricing of the Storm Recovery Bonds.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 80

The QITP shall certify whether the issuance of Storm Recovery Bonds and the imposition and collection of a Storm Recovery Charge will in fact provide quantifiable net benefits to customers on a present-value basis as compared to the costs that would have been incurred absent the issuance of Storm Recovery Bonds and whether the structuring, marketing, and pricing of the Storm Recovery Bonds will in fact result in the lowest Storm Recovery Charge consistent with market conditions at the time the Storm Recovery Bonds were priced and the terms set forth in this Financing Order.

No later than noon on the fourth business day after pricing, the Commission shall either accept the Issuance Advice Letter or deliver an order to DEP to prevent the issuance of the Storm Recovery Bonds.¹² To assist the Commission with its review of the Issuance Advice Letter, after the Issuance Advice Letter has been submitted to the Commission, but prior to noon on the fourth business day after the final terms of the Storm Recovery Bonds are determined, DEP will be available to answer any questions from the Commission about the final agreed upon terms of the bond issuance contained in the Issuance Advice Letter. The Commission shall have the option to submit the questions in written form to all parties for DEP to respond or request that DEP make a presentation before the Commission. The information designated by DEP or Parties as confidential shall be provided to the Commission under seal or in a closed session. Order Exhibit No. 1, Paragraph 25.

¹² To receive the highest possible rating from credit rating agencies and minimize any perceived risk by investors that could impact pricing, the regulatory process must be complete and no longer subject to appeal before the storm recovery bonds can be sold to investors. The Commission will therefore take action on the Issuance Advice Letter in a manner that does not subject the decision to accept the Issuance Advice Letter to appeal, in accordance with S.C. Code Ann. § 58-27-1110(C)(6)(b) (Supp. 2023). S.C. Code Ann. § 58-27-1110(C)(6)(b) distinguishes between the Commission “accept[ing] the issuance advice letter” or, alternatively, “deliver[ing] an order to the electrical utility to prevent the issuance of the storm recovery bonds,” to reflect this requirement. (emphasis added). Accordingly, if the Commission decides to accept the Issuance Advice Letter, it will do so at a Commission business meeting without issuing an order

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 81

If the actual up-front Financing Costs are less than the amount appearing in the final Issuance Advice Letter filed within one business day after actual pricing of the Storm Recovery Bonds, such unspent amount will be reflected in the next True-Up Adjustment Letter (as defined herein). Conversely, to the extent that the actual up-front Financing Costs are in excess of the amount appearing in the final Issuance Advice Letter filed within one business day after actual pricing of the Storm Recovery Bonds, that DEP shall book such incurred excess amounts to a regulatory asset. The regulatory asset shall accrue carrying costs, net of ADIT, at DEP’s approved pre-tax weighted average cost of capital in effect at the time the deferral costs are incurred. DEP will request that all such costs are included in base rates during its next base rate proceeding. The Parties reserve their right to review the reasonableness and prudency of those costs in the next rate proceeding.

DEP will retain sole discretion regarding whether or when to assign, sell, or otherwise transfer any rights concerning Storm Recovery Property arising under this Financing Order, or to cause the issuance of any Storm Recovery Bonds authorized in this Financing Order, pursuant to S.C. Code Ann. section 58-27-1110(C)(5) (Supp. 2023); provided, that any issuance must satisfy the Statutory Costs Objectives and shall be subject to the provisions of the preceding paragraph. Subject to the Issuance Advice Letter procedures and the Commission’s power to issue an order to stop the transaction as described above, the SPE will issue the Storm Recovery Bonds on or after the fifth business day after pricing of the Storm Recovery Bonds.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 82

In the event either of the following occurs: (i) DEP determines that the issuance of the Storm Recovery Bonds would not achieve the Statutory Cost Objectives or (ii) the Commission does not permit issuance of the Storm Recovery Bonds, then as provided in S.C. Code Ann. section 58- 27-1110(C)(6)(b) (Supp. 2023), DEP shall not be precluded from seeking to recover Financing Costs incurred and carrying costs accrued after issuance of the Commission Order No. 2023-260 in its next general rate proceeding. S.C. Code Ann. § 58-27-1115(B) (Supp. 2023).

Y. Evidence and Conclusions for Finding of Fact No. 55

The evidence supporting these findings and conclusions is contained in the Petition, the testimony and exhibits of the witnesses, and the entire record in this proceeding. During this proceeding, the Commission retained a consultant to serve as advisors and counsel to the Commission. Consistent with the requirements of S.C. Code Ann. section 58-27-1170 (Supp. 2023), the Commission maintains documentation to support the compensation paid and approved by the Commission to the Commission’s Consultant and its outside legal counsel does not exceed compensation generally paid by the regulated industry for such specialist and such aggregate compensation shall be considered an up-front Financing Cost.

Z. Evidence and Conclusions for Finding of Fact No. 56

The evidence supporting these findings and conclusions is contained in the Petition, the Comprehensive Settlement Agreement, the testimony and exhibits of the witnesses, and the entire record in this proceeding.

S.C. Code Ann. section 58-27-1110(C)(2)(h) (Supp. 2023) requires the Commission to specify the degree of flexibility to be afforded to DEP in establishing the terms and conditions of the Storm Recovery Bonds, including, but not limited to, repayment schedules, expected interest rates, and other Financing Costs, and subject to any conditions in this Financing Order, including the pre-bond issuance review process established by the Commission.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 83

Throughout this Financing Order, the Commission has granted DEP flexibility within parameters. For instance, the SPE may issue Storm Recovery Bonds with a scheduled final payment date of no later than 20 years from the date of the issuance of the Storm Recovery Bonds; however, the legal maturity date may be longer in accordance with rating agency requirements. Pursuant to Company witness Niehaus’s testimony, this difference provides additional credit protection, allowing shortfalls in principal payments to be recovered over an additional period and therefore helping in achieving the targeted highest possible credit rating, and ensuring achievement of the Statutory Cost Objectives. Tr. p. 358:12-17. It is not necessary, nor is it possible, to enumerate here every instance in which the Commission has given DEP flexibility to establish the terms and conditions of the Storm Recovery Bonds. The flexibility required for this type of transaction incorporates the Bond Advisory Team process to ensure achievement of the Statutory Cost Objectives.

The Commission finds that Storm Recovery Bonds may be issued in one or more tranches, and the Storm Recovery Bonds must be structured by DEP to achieve the Statutory Cost Objectives. DEP shall be afforded flexibility, consistent with the terms of the Comprehensive Settlement Agreement, in determining the final terms of the Storm Recovery Bonds, including payment and maturity dates, interest rates (or the method of determining interest rates), the terms of any interest rate swap agreement, interest rate lock or similar agreement, the creation and funding of any supplemental capital, reserve or other subaccount, and the issuance of Storm Recovery Bonds through the SPE.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 84

As noted above, certain costs, such as debt service on the Storm Recovery Bonds, as well as the on-going fees of the trustee, rating agency surveillance fees, regulatory assessment fees, and the costs of any other credit enhancement or interest rate swaps, will not be known until after the pricing of a series of Storm Recovery Bonds. This Financing Order provides flexibility to recover such costs through the Storm Recovery Charge and the true-up of such charge. In this Financing Order, the Commission has established the Issuance Advice Letter, Bond Advisory Team, and independent certification procedures in order to grant DEP flexibility, while still ensuring that the structuring, marketing, and pricing of Storm Recovery Bonds achieve the Statutory Cost Objectives.

The Commission finds that a bond structure that provides for value of the costs to customers that are estimated to result from the issuance of substantially levelized annual revenue requirements over the expected life of the Storm Recovery Bonds is in the public interest and should be used. This structure offers the benefit of not relying upon electrical utility customer growth and will allow the resulting overall weighted average Storm Recovery Charge to remain level or decline over time if billing determinants remain level or grow.

AA. Evidence and Conclusions for Findings 57-58

The evidence supporting these findings and conclusions is contained in the Petition, the Settlement Agreement, the testimony and exhibits of the witnesses, and the entire record in this proceeding.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 85

S.C. Code Ann. Section 58-27-1110(A)(7) (Supp. 2023) requires an electrical utility petitioning the Commission for a financing order to provide “a comparison between the net present Storm Recovery Bonds based on current market conditions and the costs that would result from the application of the traditional method of financing and recovering Storm Recovery Costs from customers.” In addition, S.C. Code Ann. Section 58-27-1110(A)(7) (Supp. 2023) requires an electrical utility petitioning the Commission for a Financing Order to “demonstrate that the issuance of storm recovery bonds and the imposition of [the] Storm Recovery [Charge] are expected to provide quantifiable net benefits to customers on a present value basis as compared to the costs that would have occurred absent the issuance of Storm Recovery Bonds.”

DEP provided the cost comparison required by S.C. Code Ann. Section 58-27-1110(A)(7) (Supp. 2023) in Smith Supplemental Exhibit 5. Hearing Exhibit 5. This exhibit shows the calculation of both the total estimated net present value of costs to customers under the Storm Recovery Charge as well as the total cumulative costs to customers under the traditional cost recovery method. Therefore, as an initial matter, the Commission concludes that DEP has provided the necessary comparison required by S.C. Code Ann. Section 58-27-1110(A)(7) (Supp. 2023).

As shown in Smith Supplemental Exhibit 5, using the traditional method of cost recovery, the net present value of total retail costs to customers is approximately $171 million. Using the storm securitization method of cost recovery and recovering Storm Recovery Costs through the Storm Recovery Charge, the net present value of total retail costs to customers is approximately $130 million. This results in approximately $41 million, or approximately 24 percent, in quantifiable net benefits to customers. The revenue requirements and customer impacts for the Traditional Recovery Model and Storm Recovery Charge Model are presented and calculated in Smith Supplemental Exhibit 5. Hearing Exhibit 5. In addition, Company witnesses Heath and Smith testified that assuming a 150-basis point increase in the assumed total interest rate for the bonds, there would still be benefits to customers greater than 10 percent on a net present value basis. Tr. pp. 46.37:5-10; 186.21:12-18.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 86

Thus, the Commission finds that the issuance of the Storm Recovery Bonds and the imposition of the Storm Recovery Charge authorized by this Financing Order will provide quantifiable net benefits to customers on a present value basis as compared to the costs that would have been incurred absent the issuance of the Storm Recovery Bonds, in accordance with S.C. Code Ann. section 58-27-1110(A)(7) (Supp. 2023).

Additionally, the Commission finds and concludes that there is ample evidence in the record the Statutory Cost Objectives will be achieved. This evidence includes the testimony of Company witness Heath that DEP will not proceed with pricing the Storm Recovery Bonds without certifications from DEP, the primary underwriter(s) and the QITP, required by the Storm Securitization Statute. Furthermore, the process established by DEP and as set forth in this Financing Order relative to the structuring, marketing and pricing of the Storm Recovery Bonds, along with the advice and input from the Bond Advisory Team and the continued oversight of the Commission through the Issuance Advice Letter process pursuant to S.C. Code Ann. section 58-27-1110(C)(6) (Supp. 2023), and the certification and letter required by Findings of Fact Nos. 48-54, ensures the Securitization will result in the lowest Storm Recovery Charge consistent with market conditions at the time the Storm Recovery Bonds are priced and the terms set forth in this Financing Order, as required by S.C. Code Ann. section 58-27-1110(C)(2)(c) (Supp. 2023). The record in this case demonstrates that professionals who collectively possess the necessary experience and professionalism in pricing, structuring, and marketing complex securities—including rate reduction securities—will bring their experience to the process, ultimately for the benefit of ratepayers, and provide their expertise to the pricing, structuring, and marketing of the Storm Recovery Bonds through their participation on the Bond Advisory Team. Many of these professionals were involved in the successful $1.3 billion securitization of Duke Energy Florida’s nuclear plant retirement costs and the successful $1.0 billion securitizations of DEC and DEP’s storm recovery costs in North Carolina, who provided assurances to the Commission that the proposal will achieve the Statutory Cost Objective. Importantly, this Financing Order establishes a and flexible procedure to allow DEP to address the requirements of market participants or any changes in market conditions as the issuance date approaches. After the bonds are priced, and as otherwise provided for in this Financing Order, DEP, the primary underwriter(s), and the QITP will give the applicable certifications as to whether the Statutory Cost Objectives have been met. Finally, through the issuance advice letter process, the Commission has a final opportunity to approve or disapprove issuance of the Storm Recovery Bonds.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 87

Finally if DEP, primary underwriter(s), or the QITP do not provide the certification contemplated by S.C. Code Ann. section 58-27-1110(C)(6)(a) (Supp. 2023), or the Commission delivers an order to prevent the issuance of the Storm Recovery Bonds pursuant to S.C. Code Ann. section 58-27- 1110(C)(6)(b), DEP agrees to hold a Bond Advisory Team meeting, to include DCA if it so chooses to participate to discuss any potential next steps, including whether to pursue another securitization financing as opposed to traditional cost recovery, and will explain its final decision to Bond Advisory Team members including DCA. Order Exhibit No. 1, Paragraph 26.

VI.           ORDERING PARAGRAPHS

NOW THEREFORE, IT IS HEREBY ORDERED THAT:

1.            The Comprehensive Settlement Agreement entered into by the Settling Parties to this Docket, is just and reasonable, is in the public interest, and is consistent with law and regulatory policy. Accordingly, the Settlement Agreement is approved in its entirety.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 88

2.            Mitigation of Rate Impacts: The proposed issuance of Storm Recovery Bonds and the imposition and collection of the Storm Recovery Charge will provide quantifiable net benefits to customers on a present value basis as compared to the costs that would have been incurred absent the issuance of Storm Recovery Bonds and will result in the lowest storm recovery charge consistent with market conditions at the time the Storm Recovery Bonds are priced and the terms set forth in this Financing Order.

3.            Authority to Securitize: DEP’s Petition for a Financing Order authorizing the issuances by DEP of Storm Recovery Bonds is granted as to DEP, subject to the terms set forth in the body of this Financing Order. DEP is hereby authorized to cause the issuance by the SPE of Storm Recovery Bonds secured by the pledge of Storm Recovery Property, in one or more series in an aggregate principal amount not to exceed the sum of the Securitizable Balance and the up- front Financing Costs. The proceeds received by DEP from the SPE’ s sale of such bonds are to be used by DEP to finance the equivalent of:

(i) recovery of Storm Recovery Costs, which includes carrying costs necessary to account for the number of days, as applicable, either greater than or less than assumed in the Carrying Costs calculation, calculated at a debt only rate of return as reflected in the Issuance Advice Letter described in this Financing Order; and

(ii) recovery of the up-front Financing Costs incurred in connection with issuance of the Storm Recovery Bonds. Carrying costs and up-front Financing Costs are subject to update, adjustment, and approval pursuant to the terms of this Financing Order and the Issuance Advice Letter procedures as provided by this Financing Order.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 89

4.            Outside Costs: Consistent with the requirements of S.C. Code Ann. section 58-27-1170 (Supp. 2023), that the Commission-approved costs associated with the Commission’s Consultant, and outside legal counsel engaged by the Commission’s Consultant and ORS’s outside consultants and outside counsel do not exceed compensation generally paid by the regulated industry for such specialists and are approved for payment under the terms of such party’s contractual arrangements with the Commission or ORS. Such costs of the Commission’s Consultant, its outside legal counsel, and ORS’s outside consultants and outside counsel qualify as up-front Financing Costs and shall be paid from proceeds of Storm Recovery Bonds.

5.            Structure: The proposed transaction structure for the Storm Recovery Bonds, as set forth in the body of this Financing Order, is approved.

6.            IRS Safe Harbor Provisions: DEP shall structure the Storm Recovery Bond transactions in a way that complies with the “safe harbor” provisions of IRS Revenue Procedure 2005-62.

7.            License Tax and Sales Tax: DEP shall comply with the Settlement Agreement in its treatment of the (i) License Tax on Utilities under S.C. Code Ann. section 12-20-100 (2014) and (ii) Sales Tax arising under S.C. Code Title 12 with respect to the storm recovery charges.

8.            Utility Assessment Fee: The Commission determines that the SPE is not a utility as defined by South Carolina law, and no Utility Assessment Fee shall be collected on the basis of storm recovery charges of the SPE.

9.            SPE: DEP is authorized to form an SPE to be structured as discussed in this Financing Order. DEP is authorized to execute a limited liability company agreement, consistent with the form included as Heath Exhibit 2e (Hearing Exhibit 2) to witness Heath’s testimony and the terms and conditions of this Financing Order. The SPE shall be funded with an amount of capital that is sufficient for the SPE to carry out its intended functions as contemplated in the Petition and this Financing Order. The Commission approves an initial capital contribution of 0.5 percent of the initial aggregate principal amount of a series of Storm Recovery Bonds or such greater amount as the credit rating agencies shall require. The capital contributions by DEP to the SPE shall be funded by DEP and not from the proceeds of the sale of Storm Recovery Bonds. DEP will be permitted to earn a rate of return on its invested capital in SPE equal to the rate of interest payable on the longest maturing tranche of Storm Recovery Bonds and this return on invested capital should be a component of the Periodic Payment Requirement.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 90

10.           Issuance: In accordance with the terms of this Financing Order and subject to the criteria and procedures described herein, the SPE is authorized to issue Storm Recovery Bonds in an aggregate principal amount not to exceed the Securitizable Balance plus up-front Financing Costs (as of the date the Storm Recovery Bonds are issued) and may pledge to an indenture trustee, as collateral for payment of the Storm Recovery Bonds, the Storm Recovery Property, including the SPE’s right to receive the related Storm Recovery Charge as and when collected, the SPE’s rights under the servicing agreement and other collateral described in the indenture. Subject to the terms of this Financing Order, DEP retains sole discretion regarding whether to assign, sell, or otherwise transfer Storm Recovery Property and to cause the Storm Recovery Bonds to be issued, including the right to defer or postpone such assignment, sale, transfer, or issuance.

11.           Form Agreements: The Commission finds good cause to authorize DEP to provide service to the SPE under the servicing agreement and for the servicing agreement to become effective at the time the transaction is permitted to proceed pursuant to the terms of this Financing Order. The Commission finds good cause to authorize DEP to administer the SPE under the administration agreement and for the administration agreement to become effective at the time the transaction is permitted to proceed pursuant to the terms of this Financing Order. The Commission finds good cause to authorize DEP to enter into a storm recovery property purchase and sale agreement with the SPE to become effective at the time the transaction is permitted to proceed pursuant to the terms of this Financing Order. The forms of such agreements are hereby approved, subject to review and input by the Bond Advisory Team to ensure that the Statutory Cost Objectives are achieved and for compliance with this Financing Order and the Storm Securitization Statute.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 91

12.           Servicing and Administration Fees: DEP shall be entitled to receive a servicing fee equal to 0.05% (5 basis points) of the initial aggregate principal amount of the Storm Recovery Bond per annum and an administrative fee of $50,000 per annum. The servicing and administration fees collected by DEP or any affiliate of DEP, acting as either the servicer or the administrator under the Servicing Agreement or Administration Agreement, respectively, will be included in DEP’s cost of service such that DEP will credit back all periodic servicing fees in excess of DEP’s or an affiliate of DEP’s incremental costs of performing servicing and administration functions. The expenses incurred by DEP, or such affiliate, to perform obligations under the Servicing Agreement or Administration Agreement not otherwise recovered through the Storm Recovery Charge will likewise be included in DEP’ s cost of service.

13.           DEP as Servicer: DEP shall act as initial servicer under the proposed financing transaction and is granted flexibility to act as servicer pursuant to the servicing agreement discussed in this Financing Order.

14.           Third-Party Supplier: In the event of a change in utility regulation in the State of South Carolina, alternative energy suppliers are required to bill and collect the storm recovery charges and meet all other credit rating agency criteria so as not to negatively affect the Storm Recovery Bonds’ credit rating.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 92

15.           Creation of Storm Recovery Property: The creation of the DEP Storm Recovery Property as described in this Financing Order is approved and, upon transfer of the Storm Recovery Property to the SPE, shall be created, and shall consist of: (1) all rights and interests of DEP or its successors or assignees under this Financing Order, including the right to impose, bill, charge, collect, and receive Storm Recovery Charge authorized in this Financing Order and to obtain periodic adjustments to such charge as provided in this Financing Order, and (2) all revenues, collections, claims, rights to payments, payments, money, or proceeds arising from the rights and interests specified in this Financing Order, regardless of whether such revenues, collections, claims, rights to payment, payments, money, or proceeds are imposed, billed, charged, received, collected, or maintained together with or commingled with other revenues, collections, rights to payment, payments, money, or proceeds. The creation of Storm Recovery Property is conditioned upon, and shall be simultaneous with, the sale or other transfer of the Storm Recovery Property to the SPE, the issuance of the Storm Recovery Bonds, and the pledge of the Storm Recovery Property to secure a series of Storm Recovery Bonds.

16.           Recovery of the Storm Recovery Charge: DEP shall impose on, and shall collect, as initial servicer, from all existing and future retail customers receiving transmission or distribution service, or both, from DEP, even if such customer elects to purchase electricity from an alternative electricity supplier, the Storm Recovery Charge in an amount sufficient to provide for the timely recovery of its Periodic Payment Requirement detailed in this Financing Order, including, without limitation, payment of principal and interest on the Storm Recovery Bonds.

17.           Approval of Tariff: The form of the Tariff schedule as shown in Moore Exhibit 2 is approved with the addition of the language in the manner proposed in the Settlement Agreement as described in Evidence and Conclusions for Findings of Fact Nos. 38-39.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 93

18.           Imposition and Collection, Nonbypassability: DEP is authorized to impose, bill, charge, collect, receive, and adjust from time to time pursuant to the True-up Mechanism as described in this Financing Order a Storm Recovery Charge, to be collected on a per kWh basis from each of its existing and future retail customers until the related Storm Recovery Bonds are paid in full and all related Financing Costs and other costs of the bonds have been recovered in full. Such Storm Recovery Charge shall be a nonbypassable charge that is separate and apart from DEP’s base rates and shall be paid by all DEP existing and future retail customers receiving transmission or distribution service, or both, from DEP or its successors or assignees under Commission-approved rate schedules as provided in this Financing Order. In the event the State of South Carolina elects to permit customers to purchase electricity from an alternative electric supplier, pursuant to S.C. Code Ann. section 58-27-1110(C)(2)(d) (Supp. 2023), such customers shall still be required to pay their portion of the Storm Recovery Charge in accordance with Ordering Paragraph 14. Such Storm Recovery Charge shall be in an amount sufficient to ensure the timely recovery of DEP’s Storm Recovery Costs and Financing Costs (up-front and on-going) detailed in this Financing Order and the Issuance Advice Letter, including payment of principal of and interest on the Storm Recovery Bonds.

19.           Allocation: That the Storm Recovery Charge shall be allocated to the customer rate classes based on DEP’s approved allocation methodology in the proposed Tariff; and that it is just and reasonable that the Storm Recovery Charge be adjusted for any changes to the customer allocation methodology approved by the Commission in subsequent general rate proceedings for DEP.

20.           Collection Period: This Financing Order and the Storm Recovery Charge authorized hereby shall remain in effect until the Storm Recovery Bonds and all Financing Costs related thereto have been paid or recovered in full. This Financing Order shall remain in effect and unabated notwithstanding the reorganization, bankruptcy, or other insolvency proceedings of DEP or its successors or assignees. Following repayment of the Storm Recovery Bonds and the relevant Financing Costs authorized in this Financing Order and release of the funds by the indenture trustee, each SPE shall distribute the final balance of its collection account to DEP, and DEP shall credit other electric rates and charges by a like amount.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 94

21.           Ownership Notification and Separate Line-Item Charge: That DEP is authorized to use its proposed procedure to explicitly reflect that a portion of the charge on such bill represents the Storm Recovery Charge approved in this Financing Order and must include a statement to the effect that the SPE is the owner of the rights to the Storm Recovery Charge and that DEP is acting as servicer for the SPE. The Tariff applicable to customers must indicate the Storm Recovery Charge and the ownership of that charge. DEP shall identify amounts owed with respect to its Storm Recovery Property as a separate line item on individual electric bills.

22.           True-up Mechanism: The True-up Mechanism as described in this Financing Order and identified in Appendix C to this Financing Order is approved and shall be adopted.

23.           True-up Adjustment Letter: DEP or its assignee(s) are authorized to recover the Periodic Payment Requirement and shall file with the Commission at least semi-annually (and at least quarterly beginning 12 months prior to the scheduled final payment date of the latest maturing tranche of Storm Recovery Bonds) a True-up Adjustment Letter as described in this Financing Order, which shall be based upon the cumulative differences, regardless of the reason, between the Periodic Payment Requirement and the actual amount of Storm Recovery Charge remittances to the indenture trustee for the series of Storm Recovery Bonds. Upon the filing of a True-up Adjustment Letter made pursuant to this Financing Order, the Commission shall either administratively approve the requested true-up calculation in writing or inform the servicer of any mathematical or clerical errors in its calculation as expeditiously as possible but no later than 60 days following the servicer’s true-up filing. Upon administrative approval, no further action of this Commission will be required prior to implementation of the true-up. DEP and ORS shall engage in a good faith discussion to discuss reducing the time period to review filed True-Up Adjustment Letters from 60 days to 30 days after the completion of 3 semi-annual true-up periods.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 95

24.           Changes to the Storm Recovery Charge: Upon any change to customer rates and charges stemming from the True-up Mechanism, DEP shall file appropriately revised tariff sheets with this Commission, provided, however, that approval of the Storm Recovery Charge shall not be delayed or otherwise adversely impacted by the Commission’s decision with respect to the tariff.

25.           Bond Advisory Team: A Bond Advisory Team shall be formed, consisting of representatives of DEP, its advisors and counsel, and the ORS acting as QITP, each of which may designate staff, counsel, and consultants to participate on the Bond Advisory Team. The designated staff and attorneys of DCA and the underwriters and the underwriters’ counsel shall be invited to attend all meetings of the Bond Advisory Team as full participants, and to provide input just as ORS.

26.           Qualified Independent Third-Party: The Commission designates ORS to serve as the QITP under S.C. Code Ann. section 58-27- 1110(C)(6) (Supp. 2023). ORS shall fulfill its role as QITP in accordance with its statutory charge to represent the public interest of South Carolina pursuant to S.C. Code Ann. section 58-4-10(B) (Supp. 2023). ORS, at its discretion, may designate staff, counsel, and consultants to assist ORS in fulfilling its role as QITP.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 96

27.           Bond Issuance Process: Consistent with S.C. Code Ann. sections 58-27-1115 and 58-27-1170 (Supp. 2023), DEP has final authority to direct how the Storm Recovery Bonds are placed to market and shall make all decisions regarding pricing, structuring, and marketing the Storm Recovery Bonds, with advice and input from the other members of the Bond Advisory Team and DCA as described in this Financing Order; and that the final structure of the transaction, including pricing, shall be subject to final review by this Commission through the Issuance Advice Letter process described in Ordering Paragraph 32 to ensure that all requirements of the Storm Securitization Statute and this Financing Order have been met.

28.           Cap on Costs of Securitization Financing: To ensure the issuance of Storm Recovery Bonds results in quantifiable net benefits, the weighted average interest rate on the Storm Recovery Bonds will not exceed 7.0%; however, if the 7.0% cap is projected to be exceeded, DEP shall discuss with the Bond Advisory Team members and DCA and develop a recommendation, based on their advice and input, for the Commission on whether to proceed with the issuance in accordance with the Statutory Cost Objectives. For informational purposes, the rationale for the final weighted average interest rate, whether above or below such cap, shall be explained in the Issuance Advice Letter submitted to the Commission. This rationale shall include, but not be limited to, the comparisons made to determine how the interest rate(s) results in the lowest storm recovery charges consistent with market conditions at the time the storm recovery bonds are priced and the terms set forth in the Financing Order. If market conditions change and it becomes necessary, in order to best achieve the Statutory Cost Objectives, for one or more tranches of bonds to be issued with a floating-rate, DEP shall consider the advice and input of the Bond Advisory Team prior to making its decision to issue any floating rate bonds. DEP is further authorized to issue such bonds but will be required to execute agreements to swap floating rate payments to fixed-rate payments to achieve the Statutory Cost Objectives. If one or more tranches of bonds are to be issued as floating-rate bonds, the rationale for the decision shall be addressed in the Issuance Advice Letter submitted to the Commission.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 97

29.            Ratings Agencies: DEP shall obtain ratings from two Rating Agencies, S&P and Moody’s. If the ratings from S&P and Moody’s result in split bond ratings, DEP shall seek advice and input from the Bond Advisory Team on whether to obtain a third rating from Fitch.

30.           Storm Cost ADIT Regulatory Liability: From the date of the Financing Order, DEP shall defer and compound the return on Storm Cost ADIT (“Storm ADIT”) at its most recently approved pre-tax WACC as a regulatory liability until base rates are reset in the next base rate case proceeding. At that time, the Storm ADIT regulatory liability and the deferred return on the Storm ADIT will be included as a reduction to rate base and the deferred regulatory liability will be amortized as a negative expense to return the deferred Storm ADIT benefit to customers.

31.           Roles of the Bond Advisory Team: DEP shall provide all members of the Bond Advisory Team as well as the designated staff and attorneys of DCA attending any Bond Advisory Team meetings with timely information so they may be informed fully and in advance regarding the structuring, marketing, and pricing of the Storm Recovery Bonds. The members and participants of the Bond Advisory Team are entitled to be present during communications with underwriters, credit rating agencies, and investors provided customary practices are followed. DEP shall invite all members of the Bond Advisory Team and the designated staff and attorneys of DCA to join all Bond Advisory Team meetings to review and provide input on all aspects of the structuring, pricing, and marketing of the Storm Recovery Bonds, including without limitation the selection and retention of underwriters and other transaction participants; the terms and conditions of all Transaction Documents (including changes from the forms approved in this Financing Order); the legal maturity dates and final scheduled payment dates of the Storm Recovery Bonds; the interest rates of the Storm Recovery Bonds (including whether the interest rate is floating or fixed); the capitalization of the Storm Recovery Bonds; the transaction structure; the issuance strategy; appropriate credit enhancements; and the credit rating process, except that that DEP shall have sole right to select and engage all counsel and advisors for DEP and the SPE.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 98

32.           Issuance Advice Letter: In accordance with S.C. Code Ann. section 58-27- 1110(C)(6)(a) (Supp. 2023), the Commission shall require DEP to provide an Issuance Advice Letter along with the True-up Adjustment Letter in final form to the Commission no later than one business day after final terms of the storm recovery bonds are determined, substantially in the form of Appendix D to this Financing Order describing the final terms of the Storm Recovery Bond issuance, up-front financing costs and on-going financing costs, as well as the explanations and rationales for the final terms as described in the Settlement Agreement. The Issuance Advice Letter shall include a certification from DEP, the primary underwriter(s), and ORS as the QITP designated by this Commission (provided one business day after the Issuance Advice Letter is filed), certifying whether the sale of Storm Recovery Bonds complies with the requirements of the Storm Securitization Statute and the Financing Order. DEP and the QITP shall certify whether the issuance of Storm Recovery Bonds and the imposition and collection of a Storm Recovery Charge will in fact provide quantifiable net benefits to customers on a present-value basis as compared to the costs that would have been incurred absent the issuance of Storm Recovery Bonds. DEP, the QITP, and the primary underwriter(s) shall certify whether the structuring, marketing, and pricing of the Storm Recovery Bonds will in fact result in the lowest Storm Recovery Charge consistent with market conditions at the time the Storm Recovery Bonds were priced and the terms set forth in this Financing Order.

33.           The QITP shall review the Issuance Advice Letter and deliver its certification to the Commission along with any other information it believes the Commission should consider as to the Commission’s decision whether to accept the Issuance Advice Letter no later than one business day after the filing of the Issuance Advice Letter with the Commission.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 99

34.           The QITP shall certify whether the issuance of Storm Recovery Bonds and the imposition and collection of a Storm Recovery Charge will in fact provide quantifiable net benefits to customers on a present-value basis as compared to the costs that would have been incurred absent the issuance of Storm Recovery Bonds and whether the structuring, marketing, and pricing of the Storm Recovery Bonds will in fact result in the lowest Storm Recovery Charge consistent with market conditions at the time the Storm Recovery Bonds were priced and the terms set forth in this Financing Order.

35.           After the Issuance Advice Letter is submitted but prior to noon on the fourth business day after pricing, DEP will be available to respond to questions from the Commission. If requested by DEP, such responses may be provided on a confidential basis.

36.           By no later than noon on the fourth business day after the final terms of the Storm Recovery Bonds are determined, the Commission shall either accept the issuance advice letter or deliver an order to the electrical utility to prevent the issuance of the storm recovery bonds.

37.           Draft Issuance Advice Letter: DEP will submit a draft issuance advice letter to the Bond Advisory Team and DCA for review not later than two weeks before the expected date of commencement of marketing the Storm Recovery Bonds. The Bond Advisory Team and DCA will review the issuance advice letter and provide timely feedback to DEP based on the progression of structuring, marketing and pricing of the Storm Recovery Bonds. The Bond Advisory Team and DCA shall provide any comments to the draft not later than one week after receipt of the draft Issuance Advice Letter from DEP.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 100

38.      Approval of Regulatory Asset: DEP’s request to establish a regulatory asset to defer any incurred excess amounts, or undercollection of the up-front Financing Costs is approved. The regulatory asset shall be in an amount equal to the difference between up-front Financing Costs identified in the final Issuance Advice Letter and actual up-front Financing Costs incurred. The regulatory asset shall accrue carrying costs, net of ADIT, at DEP’s approved pre-tax WACC in effect at the time the deferral costs are incurred. DEP shall request that all such costs be included in base rates during the next base rate proceeding and the Parties reserve their right to review the reasonableness and prudency of those costs in the next rate case proceeding.

39.      State Pledge: The SPE issuing Storm Recovery Bonds is authorized, pursuant to S.C. Code Ann. section 58-27-1155(B) (Supp. 2023) and this Financing Order, to include the State of South Carolina pledge, which includes a pledge by this Commission, with respect to Storm Recovery Property and Storm Recovery Bonds and related documentation as provided for in S.C. Code Ann. section 58-27-1155(A) (Supp. 2023). The Commission further acknowledges that the SPE issuer would be considered a financing party for purposes of S.C. Code Ann. section 58-27-1105(9) (Supp. 2023).

40.      No Liability of State or its Agencies, Instrumentalities or Political Subdivisions; Storm Recovery Bonds Not Public Debt: Neither the State of South Carolina, its agencies, and instrumentalities, nor its political subdivisions are liable on any Storm Recovery Bonds, and the Storm Recovery Bonds are not a debt or a general obligation of the State of South Carolina or any of its political subdivisions, agencies, or instrumentalities nor are they special obligations or indebtedness of the State of South Carolina, its agencies, or its political subdivisions. An issue of Storm Recovery Bonds does not, directly, indirectly, or contingently obligate the State of South Carolina or its agencies, instrumentalities, or political subdivisions, to levy any tax or make any appropriation for payment of the Storm Recovery Bonds, other than in their capacities as consumers of electricity. As provided in S.C. Code Ann. section 58-27-1145 (Supp. 2023), all Storm Recovery Bonds must contain this statement: “Neither the full faith and credit nor the taxing power of the State of South Carolina is pledged to the payment of the principal of, or interest on, this bond, nor shall the holder of this bond have any recourse against the State, its agencies, instrumentalities, or political subdivisions for the payment of the principal of, or interest on, this bond.”

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 101

41.      Irrevocability: Upon the earlier of either (i) the transfer of the Storm Recovery Property or (ii) issuance of the Storm Recovery Bonds, which shall be substantially simultaneous, this Financing Order shall become irrevocable, and, except for changes made pursuant to the True-up Mechanism authorized and otherwise described in this Financing Order, the Commission may not amend, modify, or terminate this Financing Order by any subsequent action nor reduce, impair, postpone, terminate, or otherwise adjust the Storm Recovery Charge pursuant to this Financing Order.

BY ORDER OF THE COMMISSION:

Florence P. Belser, Chair
Public Service Commission of
South Carolina
FOR THE MAJORITY

******************

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 102

Commissioner Thomas J. Ervin, dissenting: Based on my review of the law and the facts, I cannot approve the proposed Settlement Agreement in this proceeding. The proposed financing mechanism fails to ensure the lowest storm recovery charges for ratepayers, as required by law. Therefore, I must respectfully dissent.

This is the first utility securitization proceeding in South Carolina under the Securitization Act. Duke Energy Progress, LLC’s (DEP) storm recovery costs total roughly $170.6 million, which is currently a utility liability. The Act provides for a mechanism for the Commission to review and approve a requested utility securitization, which, if approved, makes the utility’s ratepayers solely responsible for repaying these costs, which will appear as a line item on ratepayers’ monthly utility bills once the securitization bonds are issued. The Commission’s Order is intended to see that ratepayers are protected throughout the securitization process. Unfortunately, the Majority Opinion falls short of the legal requirements established by the South Carolina General Assembly. See S.C. Code Ann. section 58-27-1110 (Supp. 2023).

In enacting legislation for securitizing storm costs, the South Carolina Legislature made it clear that “[i]t is in the interest of the State and its citizens to encourage and facilitate the use of securitized bonds...and to empower the commission to review a securitization mechanism to determine whether it is consistent with the public interest and worthy of approval.” S.C. Code Ann. section 58-27-1100 (Supp. 2023) (emphasis added). The Commission is explicitly authorized to evaluate DEP’s financing mechanism.

Unfortunately, the Majority has relinquished its authority in this case by adopting the proposed Settlement Agreement. The Commission’s hands are effectively tied by the “all-or-nothing” posture of the case. Duke Energy Progress, LLC’s request should be denied for the following reasons.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 103

First, Act 227 of 2022 (the Securitization Act) requires the Commission to ensure lowest storm recovery charges before approving a financing order. Specifically, the Commission shall not issue a financing order unless the following elements, among others, are met:

1) a finding that the proposed issuance of the recovery bonds and the imposition and collection of a storm recovery charge will provide quantifiable net benefits to customers on a present value basis as compared to the costs that would have been incurred absent the issuance of storm recovery bonds;

2) a finding that the structuring, marketing, and pricing of the storm recovery bonds will result in the lowest storm recovery charges consistent with market conditions at the time the storm recovery bonds are priced and the terms set forth in such financing order....

S.C. Code Ann. section 58-27-1110(C)(2)(b) and (c) (Supp. 2023) (emphasis added).

Electrical utilities are afforded a certain amount of flexibility in establishing financing terms and conditions. This is necessary because market conditions may change. We cannot predict the future. However, without sufficient protections in place for the ratepayers, the proposed Financing Order fails to ensure the lowest cost for ratepayers.

Bond Advisory Team

The proposed Settlement Agreement provides for the use of a Bond Advisory Team (Bond Team) involving DEP and the Office of Regulatory Staff (ORS). Unfortunately, it lacks a meaningful ratepayer representative. In order to help meet the lowest cost standard, the process should have certain safeguards, including a ratepayer representative on the Bond Team. The Department of Consumer Affairs (DCA) is statutorily given the responsibility of representing ratepayer interests. Unfortunately, DCA has been excluded from being a “formal member” of the Bond Team by the proposed Settlement Agreement. ¹³

¹³ As an “informal member” of the Bond Team, the proposed Settlement Agreement provides that DCA will be invited to attend all meetings and provided the same information provided to “formal members” of the Bond Team. However, DCA will not be involved in certifying the process. Tr. pp. 86-87.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 104

The other “informal member” of the Bond Tam is the underwriter(s) and their counsel. Company Witness Heath noted “we deal with underwriters frequently” ... “and we know what their perspective is in a transaction.” Tr. p. 80:19-21. Unfortunately, what is best for the underwriter is not always going to be best for the consumer. The underwriters clearly have no fiduciary duty to the ratepayers. Tr. pp. 380:22-381:1. If there is no one on the Bond Team advocating solely for the ratepayers’ interests,¹⁴ the result may not be the lowest storm recovery charge. The statutory mandate to provide lowest costs for the consumer reaffirms the importance of DCA’ s presence in this lopsided process.

Instead of collaboration and joint decision-making authority, the proposed Settlement Agreement allows the investor-owned utility to have the final say concerning any and all terms of the securitization process. “The way the bond advisory team operates is going to be the call of...the full participating members.” Tr. p. 81:20-23. As such, DCA will have very limited input in how the securitization process is implemented and structured. The tragic result is that ratepayers are without a voice in this process. This is clearly a violation of the statute, which requires the Commission to guarantee that ratepayers get the lowest storm recovery charges.

¹⁴ As discussed further below, ORS does not just represent ratepayer interests. If ORS represented just ratepayers -- and no one else — there would be no need for DCA, and ORS as a member of the Bond Advisory Team would be sufficient. However, ORS and DCA do not represent the exact same interests.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 105

ORS as the QITP

The Settlement Agreement also provides that ORS will act as the Qualified Independent Third Party (QITP) under S.C. Code Ann. section 58-27-1110(C)(6) (Supp. 2023). Settlement Agreement, p. 10 (1[ 23; Tr. p. 70:9-10. This is problematic for several reasons. First, the law states that the QITP is to be “designated by the [C]ommission...” S.C. Code Ann. section 58-27-1110(C)(6)(a) (Supp. 2023) (emphasis added). Therefore, the Commission relinquished its statutory authority when it decided to allow the Parties to unilaterally determine the QITP:

Q: Well, the statute says we get to pick the independent qualified expert....the General Assembly, in its wisdom, understood that, and gave us the authority to appoint who we deem independent and qualified as an expert to participate in this process. Wouldn’t you agree with that?

A: We’re asking you to approve an -- a settlement that --where we have agreed to the ORS serving as that qualified independent third party. And we’re asking you to approve that settlement in its entirety. So I guess, if you -- if you didn’t --if you didn’t like the settlement, then, for whatever reason, you could -- you would not approve it.

Tr. pp. 103:6-104:5. Witness Rothschild agreed that the Commission has the authority to designate the qualified independent third-party expert. Tr. p. 225:21-24. The Majority surrendered this safeguard.

Second, ORS does not meet the basic requirements of a QITP. By law, the QITP must certify “whether the sale of storm recovery bonds complies with the requirements of this article and the financing order.” S.C. Code Ann. section 58-27-1110(C)(6)(a) (Supp. 2023). ORS “would be providing a certification as to achievement of the statutory objectives...the quantifiable benefits and lowest storm recovery charges consistent with market conditions at the time the bonds are priced.” Tr. p. 84:17-22. Every witness who testified agreed that securitization of storm recovery costs is a highly complex task, requiring an expert with significant skill and experience.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 106

ORS is simply not qualified to serve in this capacity. ORS has never been involved in a securitization bond process before. See Tr. pp. 263:23-264:10. If ORS intends to hire someone to do the job, we do not know who they will choose, if they will meet the qualifications, or if they will even hire anyone at all. By adopting the proposed Settlement Agreement, the Parties are asking the Commission to simply trust them instead of providing lawful checks and balances as contemplated by the statute. This is highly unorthodox. Unfortunately, the majority decision could lead to significant adverse consequences for the ratepayers in the DEP jurisdictional territory. This outcome does not implement what the South Carolina General Assembly envisioned under the Securitization Act.

Third, ORS is neither independent nor a third party under any rational interpretation of the statute. Because “qualified independent third party” is not defined in the Act, we must look to its ordinary meaning. As South Carolina courts have consistently held, “[t]he legislature’s intent should be ascertained primarily from the plain language of the statute” Enos v. Doe, 380 S.C. 295, 303, 669 S.E.2d 619, 622 (Ct. App. 2008). The plain language suggests independence from a financial interest in the bonds but also independence from anyone who has a financial interest in the pricing of the bonds to be paid by ratepayers. Although ORS may not have an interest in the pricing of the bonds, ORS’ s interests are not completely independent from the utility’s interests. By law, ORS represents the public interest, which includes not only ratepayers, but also the general public and utilities. “Public interest” means:

the concerns of the using and consuming public with respect to public utility services, regardless of the class of customer, and preservation of continued investment in and maintenance of utility facilities so as to provide reliable and high quality utility services.

S.C. Code Ann. section 58-4-10(B) (Supp. 2023) (emphasis added).

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 107

ORS is not truly independent from this proceeding. Nor is ORS a third party. This is evidenced by the fact that they are a party to the proceeding. ORS helped draft the Settlement Agreement that is guiding the process at issue. How can they be expected to be a check on the process they helped create? The Commission must ensure proper alignment of interests so that the QITP can function as a check on the utility and the underwriter.

Flexible Provisions

Throughout the hearing, DEP witnesses gave assurances that certain flexible provisions in the proposed Settlement Agreement were unlikely to be used and were included just in case. DEP witnesses testified that the likelihood of using a flexible provision, such as the “floating-rate bond,” is so remote that it should not cause concern. However, Witness Heath noted that if the floating-rate bond is used, there would likely be an interest rate swap, which would cost ratepayers more in the long run. Tr. p. 58:3-5. ORS Witness Traska reiterated the risk of “unanticipated costs to the ratepayer.” Tr. p. 536.15:20-22. Witness Niehaus agreed: “[w]ith floating rate bonds, the most common way to mitigate charge volatility is to use interest rate swaps or hedges, which introduce counterparty risk and additional costs to the transaction.” Tr. p. 360.8:13-15. “In today’s market, floating rate bonds, swaps, and hedges are expected to create additional documentation costs and introduce additional risks for customers...These additional costs do not support the goal of obtaining the lowest charges for customers.” Tr. pp. 358.34:19-358.35:2. DEP could have provided assurances that if this and other provisions are triggered, they would not pursue a sale. DEP has failed to provide this assurance.

The proposed Settlement Agreement also contemplates a Rule 144A sale. Rule 144A sales are private offerings involving a smaller pool of investors. Tr. 358.33. Witness Heath conceded that “a fully registered transaction, fully registered and marketed to the broadest spectrum of potential investors, is the means of sale that will achieve the lowest storm recovery charges consistent with market conditions, not a 144A filing.” Tr. p. 52:12-19. Nonetheless, DEP requests “the flexibility” “to pursue a 144A offering.” Id. This is not in the best interest of the ratepayers.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 108

Likewise, there is also a provision that the weighted average interest rate on the storm recovery bonds will not exceed 7.0%. However, if it is projected to be exceeded, DEP will decide whether or not to proceed with the issuance. According to Witness Heath, “if interest rates were to...continue to go up over the next several months and...if it ever got to 7.75 percent, there would be zero savings for customers for doing the -- the storm recovery bonds compared to traditional recovery.” Tr. p. 66:17-22. It is difficult to reconcile the need for a 7.0% cap when there is a provision that allows it to be exceeded.

Although DEP is planning on servicing the bonds, “in a very unlikely scenario that DEP would not service these bonds, that million-dollar fee is for hiring a replacement servicer.” Tr. p. 149:20-22. Again, the contingencies built into the proposed Financing Order could mean greater costs for the ratepayer, who is ultimately “on the hook” for costs.

Finally, the formation of various “subaccounts” was referenced in DEP’ s testimony. Tr. pp. 358.24-358.26. Witness Niehaus explained that there was a need for a collection account, a general subaccount, a capital subaccount, and an excess funds subaccount. Id. However, she did not explain the need for other subaccounts within the collection account, which is a provision in the proposed Financing Order. By creating more subaccounts, DEP will add more costs for the ratepayers.

The Commission and the ratepayers are being asked to trust DEP in their request for flexibility, but DEP has rejected the safeguards the Securitization Act specifically requires. Why is ORS designated as the QITP? Is the QITP duly qualified, independent, and a third-party, as required by law? How does a floating-rate bond help reach the lowest cost objective required by statute? How can the Majority make a finding of fact of “lowest cost charges to the ratepayers” that includes an adjustable rate? Why is there a 7.0% interest rate cap that can be exceeded? Why is there a provision that allows for a 144A sale when it will not benefit the rate payers? Will corporate securities be used? Or asset-backed securities? I still do not have answers to these questions.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 109

Ultimately, I do not think flexible terms for the Company outweigh the lowest cost mandate for the consumer. Therefore, I must respectfully disagree with the Majority.

Any Other Conditions Not Inconsistent

Pursuant to S.C. Code Ann. section 58-27-1110(2)(1) (Supp. 2023), the Commission “may impose any other conditions not otherwise inconsistent with [the securitization statute] that the [C]ommission determines to be appropriate.” However, the non-severable Settlement Agreement ignores this provision of law, and intentionally excludes the Commission from utilizing its power to protect the ratepayers. While there may be benefits to reaching a settlement agreement, settlement agreements do not always serve the ratepayers’ interests.

Conclusion

The Commission is limited in its ability to review cases. But here, the Commission’s hands were tied by the “all-or-nothing” proposed Settlement Agreement. DEP’s proposed Financing Order is also fundamentally flawed as it fails to protect ratepayers’ interests. In my opinion, the Company has failed to make reasonable and prudent efforts to minimize costs for its ratepayers. Therefore, I must respectfully dissent.

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
PAGE 110

 

Thomas J Ervin, Commissioner 
Fourth Congressional District 
Public Service Commission of South Carolina 
FOR THE DISSENT

Order Exhibit No. 1

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
Page 1 of 18

BEFORE

THE PUBLIC SERVICE COMMISSION OF

SOUTH CAROLINA

DOCKET NO. 2023-89-E

IN RE: Duke Energy Progress, LLC’s Petition for a Storm Securitization Financing Order (“Phase II”) Order  ) ) ) ) COMPREHENSIVE
SETTLEMENT
AGREEMENT

Pursuant to S.C. Code Ann. §1-23-320(F), and all other applicable statutes and regulations, this Settlement Agreement (“Settlement Agreement”) is made by and among Duke Energy Progress, LLC (“DEP” or the “Company”), the South Carolina Office of Regulatory Staff (“ORS”), the South Carolina Department of Consumer Affairs (“DCA”), and Nucor Steel — South Carolina (“Nucor”) (collectively referred to as the “Settling Parties”, “Parties”, or sometimes individually as “Party”);

WHEREAS, the above-captioned proceeding has been established by the Public Service Commission of South Carolina (“Commission”) pursuant to the procedure established in S.C. Code Ann. § 58-27-1110, and the Parties to this Settlement Agreement are parties of record in the above-captioned docket;

WHEREAS, the DCA by law may advocate for the interest of consumers in matters before the Commission pursuant to S.C. Code Ann. § 37-6-604(C) and filed a timely petition to intervene in this proceeding pursuant to S.C. Code Ann. Reg. 103-825(A)(3);

WHEREAS, a petition to intervene filed by Nucor pursuant to S.C. Code Ann. Reg. 103-825(A)(3) was granted by the Commission.

WHEREAS, the Parties have varying legal positions regarding certain issues in this proceeding;

Page 1 of 18

Order Exhibit No. 1

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
Page 2 of 18

WHEREAS, the Parties filed a stipulation resolving the majority of issues in this proceeding on September 5, 2023;

WHEREAS, the Parties have engaged in further discussions to determine whether a comprehensive settlement agreement on all issues among all parties would be in their best interest and, in the case of ORS, in the public interest, and in the case of DCA, in the interest of consumers; and

WHEREAS, following these additional discussions, the Parties have each determined that their interests, the DCA determined the consumer interest,¹⁵ and ORS determined that the public interest, would be best served by stipulating to all matters at issue in the above-captioned case under the terms and conditions set forth below:

NOW, THEREFORE, the Parties hereby stipulate and agree to the following terms.

A.      SETTLEMENT OF TESTIMONY AND WAIVER OF CROSS-EXAMINATION

1.      Without constraining, inhibiting, or impairing their arguments or positions in future proceedings, the Parties agree as follows in this proceeding:

2.      The Parties agree to stipulate into the record before the Commission this Settlement Agreement.

3.      The Parties agree to stipulate into the record before the Commission without summarization the pre-filed testimony and exhibits (collectively, the “Stipulated Testimony”) of the below witnesses who have pre-filed testimony to date, including any testimony and exhibits supporting approval of this Settlement Agreement. The Parties agree that any pre-filed testimony not listed below shall not be entered into the record. The Parties also agree to waive cross-examination of all pre-filed testimony. However, the Parties reserve the right to engage in cross or redirect examination of witnesses (identified below) as necessary to respond to issues raised by the examination of their witnesses, if any, by non-parties or the Commission, that are outside the scope of the Settlement Agreement. The Parties further agree the scope of any such cross or redirect examination will be limited to clarifying the terms of the Settlement Agreement or reaffirming the witness’s support of the Settlement Agreement as a just and reasonable compromise.

¹⁵ The DCA’s mission is to protect consumers from inequities in the marketplace through advocacy, mediation, enforcement, and education. Consumer interest for the purpose of DCA’s representation includes South Carolina residents who purchase utility services primarily for a personal, family, or household use.

Page 2 of 18

Order Exhibit No. 1

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
Page 3 of 18

DEP witnesses:

1.      Thomas J. Heath, Jr. (Direct, Amended Rebuttal, and Settlement) 

2.      Katrina T. Niehaus (Direct, Amended Rebuttal) 

3.      Kimberly K. Smith (Direct, Supplemental Direct, and Revised Rebuttal) 

4.      Nicholas G. Speros (Direct and Rebuttal) 

5.      Jacalyn H. Moore (Direct, Supplemental Direct, and Rebuttal)

ORS witnesses:

1.      Mark A. Rhoden (Direct Surrebuttal, and Settlement) 

2.      Michael L. Seaman-Huynh (Direct) 

3.      Lane Kollen (Direct and Surrebuttal) 

4.      Jeremy E. Traska (Direct)

DCA Settlement witness:

1.      Aaron L. Rothschild (Settlement testimony only)

4.      The Parties agree to offer no other evidence in the proceeding other than the
Stipulated testimony and Exhibits and this Settlement Agreement unless the additional evidence is to support the Settlement Agreement, consists of changes comparable to that which would be presented via an errata sheet or through a witness noting a correction or clarification, consists of a witness adopting the testimony of another if permitted by the Commission, or is responsive to issues raised by examination of the Parties’ witnesses by non-Parties, parties which are not signatories to this Settlement Agreement, the Commission, or by late-filed testimony by non-parties. The Parties agree that nothing herein will preclude each Party from advancing its respective positions in the event that the Commission does not approve the Settlement Agreement in its entirety.

Page 3 of 18

Order Exhibit No. 1

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
Page 4 of 18

5.      The Parties agree that this Settlement Agreement pertains to matters addressed in this case, and unless specified otherwise, nothing in this Settlement Agreement binds Parties from taking an alternative position in any current or future proceeding in South Carolina or any other jurisdiction. The Parties agree that the Settlement Agreement terms agreed upon in this case are reasonable, in the public interest, and in accordance with South Carolina law and regulatory policy. Parties’ agreement that the terms of the Settlement Agreement are reasonable as a whole does not in any way indicate any Party’s position as to the reasonableness of any single term taken out of the context of the agreement.

B.      SETTLEMENT TERMS

1.      This Settlement Agreement is a compromise of all the positions advanced by the Parties. The Parties agree to and accept the proposal set out immediately below, and this proposal is hereby adopted, accepted, and acknowledges as the final agreement of the Parties.

2.      The Parties agree that this Settlement Agreement is comprehensive and non-severable. This Settlement Agreement is the result of extensive negotiation and compromise among the Parties, and it resolves all issues presented including all pending motions. The Parties agree that if the Commission declines to approve the Settlement Agreement in its entirety and without modification, any Party may withdraw from the Settlement Agreement and be released from its terms without penalty or obligation.

Page 4 of 18

Order Exhibit No. 1

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
Page 5 of 18

Incremental up-front Financing Cost Regulator Asset.

3.      DEP will establish a regulatory asset to defer up-front financing costs in excess of final estimates included in the Issuance Advice Letter, if any; provided, however, that the costs subject to deferral would not impact the storm recovery bonds or charges that are the subject of this proceeding.

4.      DEP will accrue carrying costs on the regulatory asset, net of accumulated deferred income taxes (“ADIT”), at DEP’s approved pre-tax weighted average cost of capital in effect at the time the deferral costs are incurred. As with all provisions in this Settlement Agreement, unless specified otherwise, nothing in this provision is precedential or binds Parties from taking an alternative position in any current or future proceeding in South Carolina or any other jurisdiction.

5.      DEP will request that all such costs are included in base rates during the next base rate proceeding.

6.      The Parties reserve their right to review the reasonableness and prudency of those costs in the next rate proceeding.

Utility Assessment Fee, License Tax, and Sales Tax.

7.      DEP will seek an opinion from the South Carolina Department of Revenue (the “SCDOR”) regarding whether (i) License Tax on Utilities under S.C. Code Ann. § 12-20-100 and (ii) Sales Tax arising under S.C. Code Title 12 apply to the storm recovery charges.

8.      The Parties agree the Commission will determine if DEP should collect a Utility Assessment Fee arising under S.C. Code Ann. §§ 58-27-50, 58-4-60, and 58-3-100 to be included in the calculation of ongoing financing costs.

9.      Until the SCDOR provides an opinion in response to DEP’s request regarding the License Tax under S.C. Code Ann. § 12-20-100, the Company proposes to collect such taxes as an initial matter until it receives final clarification from the SCDOR. If the License Tax is deemed not to apply, then the Company will file an amended consolidated return and will pass the cash back through an invoice from the Servicer to the special purpose entity (“SPE”). The SPE will credit the License Taxes paid from customers back through the next applicable true-up filing.

Page 5 of 18

Order Exhibit No. 1

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
Page 6 of 18

10.      Until the SCDOR provides an opinion in response to DEP’s request regarding the Sales Tax, the Company proposes to collect Sales Tax as an initial matter on the storm recovery charges from customers to whom sales of electricity are not otherwise considered exempt from Sales Tax until it receives final clarification from the SCDOR. Exempt customers from whom the Company does not propose to collect Sales Tax include but are not limited to all residential customers. If the Company collects Sales Taxes that are subsequently deemed not to apply, then the Company will credit customers via a miscellaneous credit on their subsequent electricity bill.

True-up Period Pursuant to S.C. Code Ann. § 58-27-1110(C)(4).

11.      DEP agrees that the time period for the Commission to either approve the request under S.C. Code Ann. § 58-27-1110(C)(4) or inform the Company of any mathematical or clerical errors in its calculation shall be the sixty (60) days for which the statute provides. However, DEP and ORS agree to engage in a good faith discussion to discuss reducing the time period from sixty (60) days to thirty (30) days after the completion of three (3) semi-annual true-up periods.

Rate Calculations.

12.      DEP will use a weather normalization calculation methodology that matches its most current South Carolina rate case (currently Docket No. 2022-254-E). This calculation will use 30 years of historical weather data to determine normal weather heating and cooling degree days in the calculation of the forecast variance factor. The variance factor will be equal to one standard deviation of the normal weather variation and will be applied by customer class to the Company’s most current retail Spring or Fall forecast which includes the upcoming rate period.

Page 6 of 18

Order Exhibit No. 1

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
Page 7 of 18

Storm Securitization Tariff Sheet (“STS Tariff”).

13.      The Parties agree the following language shall be displayed clearly on the STS tariff and not contained in a footnote:

The securitization charge billing rate for each rate class shall be determined sequentially, first by calculating the forecast semi-annual or interim period revenue requirement (in $000), including the over/under recovery from the prior period, as presented in the attached format; second, by calculating the revenue requirement by class for the same period used for the forecast revenue requirement using the class allocation methodology from the most recent base rate case proceeding; third, by calculating the forecast mWh sales by class using total retail forecast mWh sales sourced from the Company’s current Spring or Fall retail load forecast allocated to rate classes using the most current annual billed kWh sales report from the Company’s billing system; fourth, by calculating the adjusted forecast retail mWh sales by reducing the forecast mWh sales by class by one standard deviation from normal weather over thirty years, calculated in the same manner used for base rate case purposes; and fifth, by calculating the securitization charge billing rates per kWh by class by dividing the forecast revenue requirement (in $000) by class by the adjusted retail mWh sales by class.

Cap on Costs of Securitization Financing.

14.      The Parties agree to a 7.0% cap based on the weighted average interest rate on the bonds in the securitization financing. However, if the fi_nancing cost cap is projected to be exceeded, DEP agrees to discuss with the Bond Advisory Team and develop a recommendation, based on their advice and input, for the Commission on whether to proceed with the issuance in accordance with the statutory cost objectives. The Parties agree that the Commission’s decision whether to accept the issuance advice letter is governed by the terms of S.C. Code Ann. § 58-27-1100 et seq. However, for informational purposes, the rationale for the final interest rate decision, whether above or below the cap, shall be explained in the issuance advice letter submitted to the Commission. This rationale shall include, but not be limited to, the comparisons made to determine how the interest rate(s) results in the lowest storm recovery charges consistent with market conditions at the time the storm recovery bonds are priced and the terms set forth in the financing order.

Page 7 of 18

Order Exhibit No. 1

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
Page 8 of 18

Storm Cost Accumulated Deferred Income Taxes (“ADIT”) Regulatory Liability.

15.      From the date of the financing order, the Company will defer and compound the return on Storm ADIT at its most recently approved pre-tax weighted average cost of capital (“WACC”) until base rates are reset in the next base rate case proceeding. At that time, the Storm ADIT and the deferred return on the Storm ADIT will be included as a reduction to rate base and the deferred regulatory liability will be amortized as a negative expense to return the deferred Storm ADIT benefit to customers.

Financing Order.

16.      DEP will amend the proposed financing order included in its Petition to include the following language regarding third-party energy providers:

In the event of a change in utility regulation in the State of South Carolina, alternative energy providers are required to bill and collect the storm recovery charges and meet other all other Credit Rating Agency criteria so as not to negatively affect the Storm Recovery Bonds’ credit rating.

17.      The Parties agree to file a Joint Proposed Financing Order consistent with the stipulated matters set forth herein.

Ratings Agencies.

18.      DEP will obtain ratings from two Ratings Agencies, those being S&P and Moody’s. If the ratings from S&P and Moody’s result in split bonds ratings, DEP will seek advice and input from the Bond Advisory Team on whether to obtain a third rating from Fitch. If the final credit rating on the proposed bonds is not AAA or Aaa, the rationale for the decision shall be explained in the issuance advice letter submitted to the Commission.

Page 8 of 18

Order Exhibit No. 1

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
Page 9 of 18

Means of Sale.

19.      DEP will have the flexibility to utilize a means of sale other than an SEC-registered sale, such as a Rule 144A offering, if market volatility or other factors indicate that such a sale would be the best manner to achieve the “Statutory Cost Objectives” defined in DEP’s proposed financing order. DEP agrees to consider the advice and input from the Bond Advisory Team prior to making such decision. If a means of sale other than an SEC-registered sale is proposed to be utilized, the rationale for the decision shall be explained in the issuance advice letter submitted to the Commission.

Floating-Rate Bonds.

20.      DEP will have the flexibility to utilize floating-rate bonds if market conditions change and it becomes necessary for one or more tranches of bonds to be issued as floating-rate securities in order to achieve the “Statutory Cost Objectives” defined in DEP’s proposed financing order. DEP agrees to consider the advice and input from the Bond Advisory Team prior to making such decision. If one or more tranches of bonds is to be issued as floating-rate securities, the rationale for the decision shall be explained in the issuance advice letter submitted to the Commission.

Bond Advisory Team.

21.      The Parties agree that the Bond Advisory Team (“BAT’) shall consist of the following formal members:

1. DEP: Designated Duke Energy Progress, LLC employees, advisors and counsel

2. ORS: Designated ORS staff, attorneys and consultants

Page 9 of 18

Order Exhibit No. 1

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
Page 10 of 18

22.      The Parties agree that the following entities will be invited to participate in BAT meetings:

1. Underwriters and their counsel.

2. DCA: Designated staff and attorneys. DCA will be invited to attend all BAT meetings and provided the same information provided to formal members of the BAT. The Parties agree DCA’s participation in BAT meetings will not prevent its participation in any future proceedings involving DEP, its affiliates, or parent company.

Qualified Independent Third Party (“QITP”)

23.      The Parties agree to ORS acting as the QITP under S.C. Code Ann. § 58-27-1110(C)(6). ORS is charged by law with the duty to represent the public interest of South Carolina pursuant to S.C. Code Ann. § 58-4-10(B). The Parties understand and agree it is appropriate for ORS to follow its statutory charge under S.C. Code Ann. § 58-4-10(B) in how ORS fulfills the role of QITP.

Disclosure.

24.      The Parties agree that DEP will work with the members of the Bond Advisory Team to develop appropriate and necessary disclosures in the registration statement and other marketing materials including but not limited to highlighting the credit features of the storm recovery bonds such as the true-up, nonbypassable nature of the charges, the state pledge, bankruptcy and reorganization protections, and non-appealable Financing Order.

Page 10 of 18

Order Exhibit No. 1

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
Page 11 of 18

Issuance Advice Letter Process.

25.      The Parties agree that after the Issuance Advice Letter has been submitted to the Commission, but prior to noon on the fourth business day after the final terms of the storm recovery bonds are determined, DEP will be available to answer any questions from the Commission about the final agreed upon terms of the bond issuance contained in the issuance advice letter. The Commission shall have the option to submit the questions in written form to all parties for DEP to respond or request that the Company make a presentation before the Commission. Settling Parties agree that information designated by DEP or the parties as confidential shall be provided to the Commission under seal or in a closed session.

26.      If DEP, underwriters, or the QITP do not provide the certification contemplated by S.C. Code Ann. § 58-27-1110(C)(6)(a), or the Commission delivers an order to prevent the issuance of the storm recovery bonds pursuant to S.C. Code Ann. § 58-27-1110(C)(6)(b), DEP agrees to hold a BAT meeting for members and DCA to discuss any potential next steps, including whether to pursue another securitization financing as opposed to traditional cost recovery, and will explain its final decision to BAT members and DCA.

27.      The Parties agree to hold in abeyance all pending motions before the Commission The Parties agree that if the Commission enters a directive adopting the Settlement Agreement, all pending motions will be considered moot.

C.      REMAINING SETTLEMENT TERMS AND CONDITIONS

1.      The Parties agree that this Settlement Agreement is reasonable, is in the public interest, is in accordance with law and regulatory policy, and agree to support the resolution of issues agreed to herein in this proceeding and not to undertake any action to undermine that support. This Settlement Agreement in no way constitutes a waiver or acceptance of the position of any Party or its affiliates in any current or future proceeding in South Carolina or any other jurisdiction. Except as specifically provided otherwise previously herein, this Settlement Agreement does not establish any precedent with respect to the issues resolved herein and in no way precludes any Party from advocating an alternative position in any current or future proceeding in South Carolina or any other jurisdiction.

Page 11 of 18

Order Exhibit No. 1

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
Page 12 of 18

2.      Further, ORS is charged by law with the duty to represent the public interest of South Carolina pursuant to S.C. Code Ann. § 58-4-10(B), which reads in part as follows:

... ‘public interest’ means the concerns of the using and consuming public with respect to public utility services, regardless of the class of customer and preservation of continued investment in and maintenance of utility facilities so as to provide reliable and high quality utility services.

ORS believes this Settlement Agreement reached among the Parties serves the public interest, as defined above.

3.      Except as necessary to effectuate the terms of this Settlement Agreement, the Parties agree that signing this Settlement Agreement: (a) will not constrain, inhibit, impair, or prejudice their arguments held in future or collateral proceedings; (b) will not constitute a precedent or evidence of acceptable practice in future proceedings; and (c) will not limit the relief, rates, recovery, or rates of return that any Party may seek or advocate in any future proceeding.

4.      The Parties agree this Settlement Agreement must be read and construed as a whole, and to cooperate in good faith with one another in recommending and advocating to the Commission that this Settlement Agreement be accepted and approved by the Commission in its entirety as a fair and reasonable resolution of certain issues currently pending in the above-captioned proceeding and detailed herein, and to take no action inconsistent with its adoption by the Commission. The Parties agree to use their best efforts before any reviewing court in the event of an appeal to defend and support any Commission order issued approving this Settlement Agreement and the terms and conditions contained herein.

5.      The Parties ask the Commission to approve this Settlement Agreement in its entirety without exception, modification, or additional provisions.

Page 12 of 18

Order Exhibit No. 1

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
Page 13 of 18

6.      This Settlement Agreement shall be interpreted according to South Carolina law.

7.      This Settlement Agreement contains the final and complete agreement of the Parties on certain issues described previously herein. There are no other terms or conditions to which the Parties have agreed that require approval of the Commission.

8.      The Parties on behalf of themselves and their agents (including but not limited to their attorneys, hired consultants, and any independent contractors) agree that they have entered into this Settlement Agreement freely and voluntarily and that none of them have been pressured or unduly encouraged to enter into this Settlement Agreement.

9.      The Parties represent that the terms of this Settlement Agreement are based upon full and accurate information known as of the date this Settlement Agreement is executed. If, after execution, any Party is made aware of information that conflicts, nullifies, or is otherwise materially different than that information upon which this Settlement Agreement is based, any Party may withdraw from the Settlement Agreement with written notice to the other Parties.

10.      This Settlement Agreement shall bind and inure to the benefit of the signatories hereto and their representatives, predecessors, successors, assigns, agents, shareholders, officers, directors (in their individual and representative capacities), subsidiaries, affiliates, parent corporations, if any, joint ventures, heirs, executors, administrators, trustees, and attorneys.

11.      Each Party shall act in good faith in its performance under this Settlement Agreement and in its dealings with the other Parties under or in connection with this Settlement Agreement.

12.      The Parties to this Settlement Agreement agree that any party to this proceeding not currently a signatory to this Settlement Agreement may join in the Settlement Agreement.

Page 13 of 18

Order Exhibit No. 1

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
Page 14 of 18

13.      The terms and conditions herein fully represent the final and complete agreement of the Parties hereto. There are no other terms to which the Parties have agreed. Therefore, each Party acknowledges its consent and agreement to this Settlement Agreement, by affixing its signature or by authorizing its counsel to affix his or her signature to this document where indicated below. Counsel’s signature represents his or her representation that his or her client has authorized the execution of the agreement. Facsimile signatures and e-mail signatures shall be as effective as original signatures to bind any Party. This document may be signed in counterparts, with the various signature pages combined with the body of the document constituting an original and provable copy of this Settlement Agreement. The Parties agree that in the event any Party should fail to indicate its consent to this Settlement Agreement and the terms contained herein, then this Settlement Agreement shall be null and void and will not be binding on any Party.

[SIGNATURES ON THE FOLLOWING PAGES]

Page 14 of 18

Order Exhibit No. 1

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
Page 15 of 18

Representing Duke Energy Progress, LLC

Carnal O. Robinson, Esquire

Duke Energy Progress, LLC

40 West Broad Street

Greenville, South Carolina 29601

(864) 238-4385

camal.robinson@duke-energy.com

J. Ashley Cooper, Esquire

Alexandra B. Breazeale, Esquire

Baker, Donelson, Bearman, Caldwell & Berkowitz P.C.

40 Calhoun Street, Suite 200B

Charleston, South Carolina 29401

(854) 214-5910

(854) 214-5916

jacooper@bakerdonelson.com

abreazeale@bakerdonelson.com

James H. Jeffries, IV, Esquire

McGuireWoods LLP

201 North Tryon Street, Suite 3000

Charlotte, North Carolina 28202

(704) 343-2348

jjeffries@mcguirewoods.com

Kristin M. Athens, Esquire

McGuireWoods LLP

501 Fayetteville Street, Suite 500

Raleigh, North Carolina 27601

(919) 835-5909

kathens@mcguirewoods.com

Page 15 of 18

Order Exhibit No. 1

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
Page 16 of 18

Representing the South Carolina Office of Regulatory Staff

Christopher M. Huber, Esquire

Donna L. Rhaney, Esquire

Joshua E. Austin, Esquire

South Carolina Office of Regulatory Staff

1401 Main Street, Suite 900

Columbia, SC 29201

Phone: (803) 737-5252 (CH)

(803) 737-0609 (DR)

(803) 737-0817 (JA)

Email: chuber@ors.sc.gov

drhaney@ors.sc.gov

jaustin@ors.sc.gov

Page 16 of 18

Order Exhibit No. 1

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
Page 17 of 18

Representing the South Carolina Department of Consumer Affairs

s/ Roger P. Hall

Carri Grube Lybarker, Esquire

Roger P. Hall, Esquire

S.C. Department of Consumer Affairs

293 Greystone Blvd., Suite 400

P.O. Box 5757

Columbia, South Carolina 29250

Phone: (803)734-4200

Email: clybarker@scconsumer.gov

rhall@scconsumer.gov

Page 17 of 18

Order Exhibit No. 1

DOCKET NO. 2023-89-E – ORDER NO. 2023-752(A)
OCTOBER 23, 2023
Page 18 of 18

Representing Nucor Steel — South Carolina

s/Michael K. Lavanga

Michael K. Lavanga, Esquire

Stone Mattheis Xenopoulos & Brew, PC

1025 Thomas Jefferson Street, NW

Eighth Floor, West Tower

Washington, DC 20007

mkl@smxblaw.com

Robert R. Smith, II, Esquire

Moore & Van Allen, PLLC

100 North Tryon Street

Suite 4700

Charlotte, NC 28202

Page 18 of 18

Order Exhibit No. 2
Docket No. 2023-89-E – Order No. 2023-752(A)
October 23, 2023
Page 1 of 1

SUMMARY OF CALCULATION OF DEP’S
PRINCIPAL AMOUNT OF STORM RECOVERY BONDS

(IN MILLIONS)

Securitizable Balance: Estimated Storm Recovery Costs (incremental O&M costs, deferred capital costs and carrying costs)16	$	170.6
Estimated up-front Financing Costs17	$	6.5
Principal Amount of Storm Recovery Bonds	$	177.1

¹⁶ Order No. 2023-260 at 51.

¹⁷ Final Up-front Financing Costs to be included in the Issuance Advice Letter.

Order Exhibit No. 3
Docket No. 2023-89-E – Order No. 2023-752(A)
October 23, 2023
Page 1 of 2

[Form of Standard True-up Adjustment Letter]

[              , 20 ]

The Honorable Jocelyn G. Boyd

Chief Clerk/Administrator

The Public Service Commission of South Carolina

101 Executive Center Drive, Suite 100 1

Columbia, South Carolina 29210

Re: Duke Energy Progress, LLC’s Petition for a Storm Securitization Financing Order (“Phase II”)
Docket No.: 2023-89-E

Dear Ms. Boyd:

Pursuant to the Public Service Commission of South Carolina (Commission) [ , 20 ] Order in Docket No. 2023-89-E (the DEP Financing Order), Duke Energy Progress, LLC (DEP) as Servicer of the [ ] (Storm Recovery Bonds) has provided a request for an adjustment to the storm recovery bond charge (Storm Recovery Charge). This adjustment is intended to satisfy the requirements of S.C. Code Ann. § 58-27-1110(C)(4), and the Financing Order by ensuring that the Storm Recovery Charge will recover amounts sufficient to timely provide for payments of debt service and other required amounts in connection with the Storm Recovery Bonds.

Per the Financing Order, “After issuance of Storm Recovery Bonds on behalf of DEP, the servicer will submit at least semi-annually¹⁸ (and at least quarterly beginning 12 months prior to the last scheduled final payment date of the last maturing tranche of...Storm Recovery Bonds) a letter in this docket for Commission review, as described in S.C. Code Ann. § 58-27-1110(C)(4), and in the form attached hereto...and as an exhibit to the servicing agreement” (True-up Adjustment Letter). The Storm Recovery Bonds were issued on [     , 20 ]. DEP provided its first True-up Adjustment Letter on [      , 20 ].

¹⁸ Except for the period after the bond issuance which may be longer.

Order Exhibit No. 3
Docket No. 2023-89-E – Order No. 2023-752(A)
October 23, 2023
Page 2 of 2

Ordering Paragraph [22] of the Financing Order describes how such True-up Adjustment Letters are to be handled. Upon the providing of a True-up Adjustment Letter made pursuant to this Financing Order, the Commission shall either administratively approve the requested true-up calculation in writing or inform the servicer of any mathematical or clerical errors in its calculation as expeditiously as possible but no later than 60 days following the servicer’s true-up submission. Upon administrative approval, no further action of this Commission will be required prior to implementation of the true-up. Attached is the [TBD] Revised Sheet No. [ ] reflecting the change in the Storm Recovery Charge.

Per DEP’s request in its True-up Adjustment Letter and in accordance with the Financing Order, the proposed adjustments to the Storm Recovery Charge will be effective on [     , 20 ].

Respectfully submitted,

Duke Energy Progress, LLC

Attachments

Order Exhibit No. 4
Docket No. 2023-89-E – Order No. 2023-752(A)
October 23, 2023
Page 1 of 13

DUKE ENERGY PROGRESS, LLC
Storm Recovery Charge True-up Mechanism Form
For the Period __________, 20__ through __________, 20__,

Order Exhibit No. 4
Docket No. 2023-89-E – Order No. 2023-752(A)
October 23, 2023
Page 2 of 13

[Form of Issuance Advice Letter]

[           , 20 ]

The Honorable Jocelyn G. Boyd

Chief Clerk/Administrator

The Public Service Commission of South Carolina

101 Executive Center Drive, Suite 100

2 Columbia, South Carolina 29210

Re: Duke Energy Progress, LLC’s Petition for a Storm Securitization Financing Order (“Phase II”)
Docket No.: 2023-89-E

Dear Ms. Boyd:

Pursuant to the financing order in the above-captioned docket (Financing Order), Duke Energy Progress, LLC (the Company) hereby transmits for filing this combined Issuance Advice Letter and Form of True-up Adjustment Letter. Any terms not defined herein shall have the meanings ascribed thereto in the Financing Order or S.C. Code Ann. §§ 58-27-1100-1180.

In the Financing Order, the Commission requires the Company to provide an Issuance Advice Letter to the Commission following pricing of a series of Storm Recovery Bonds.

The terms of pricing and issuance of the first series of Storm Recovery Bonds are as follows:

Name of Storm Recovery Bonds: [ ]

Name of SPE: [ ]

Name of Storm Recovery Bond Trustee:

Expected Closing Date: [ ]

Preliminary Bond Ratings¹⁹: Moody’s, [Aaa(sf)]; Standard & Poor’s, [AAA(sf)];

Fitch, [AAAsf] (final ratings to be received prior to closing)

Total Principal Amount of Storm Recovery Bonds to be Issued (i.e., Amount of Storm Recovery Costs and up-front Financing Costs to be financed): $[ ] (See Attachment 1) Estimated up-front Financing Costs: $[ ] (See Attachment 2)

Interest Rates and Expected Amortization Schedules of the Storm Recovery Bonds (See Attachment 3):

Distributions to Investors: Semi-annually

Method of Interest Rate: Fixed ____________; Floating __________

Weighted Average Coupon Rate²⁰: [       ]%

Annualized Weighted Average Yield²¹: [ ]%

¹⁹ The Company anticipates receiving bond ratings from at least two of the three major rating agencies.

²⁰ Weighted by modified duration and principal amount of each tranche.

²¹ Weighted by modified duration and principal amount, calculated including selling commissions.

Order Exhibit No. 4
Docket No. 2023-89-E – Order No. 2023-752(A)
October 23, 2023
Page 3 of 13

Initial Balance of capital subaccount: $[              ]

Estimated/Actual on-going Financing Costs for first year of Storm Recovery Bonds:
$[          ] (See Attachment 4)

The Financing Order requires the Company to confirm, using the methodology approved therein, that the actual terms of the Storm Recovery Bonds result in compliance with the Financing Order. The Company certifies that the following are true:

1.      the issuance of Storm Recovery Bonds and imposition and collection of Storm Recovery Charge as authorized in this Financing Order provide quantifiable net benefits to customers on a present-value basis as compared to the costs that would have been incurred absent the issuance of Storm Recovery Bonds;

2.      the aggregate principal amount of Storm Recovery Bonds issued does not exceed the Securitizable Balance;

3.      the Storm Recovery Bonds will be issued in one or more series comprised of one or more tranches having scheduled final payment of not more than approximately [20] years;

4.      the Storm Recovery Bonds have received a rating of Aaa(sf) / AAA(sf) from at least two of the three major rating agencies;²²

5.      the Storm Recovery Bonds are structured to achieve substantially level debt service payments on an annual basis;

6.      the issuance of the Storm Recovery Bonds has been structured in accordance with IRS Revenue Procedure 2005-62;

7.      [the weighted average interest rate on the Storm Recovery Bonds in the securitization financing is less than 7.00%; and]

²² If not Aaa(sf)/AAA(sf), DEP will provide an explanation.

Order Exhibit No. 4
Docket No. 2023-89-E – Order No. 2023-752(A)
October 23, 2023
Page 4 of 13

8.      the structuring, marketing, and pricing of the Storm Recovery Bonds resulted in the lowest Storm Recovery Charge consistent with market conditions at the time the Storm Recovery Bonds are priced and the terms set forth in this Financing Order;²³

9.      [Add discussion regarding floating rate bonds or 144A including rationale for such, as necessary.]

The initial storm recovery charge (the “Initial Charge”) has been calculated in accordance with the methodology described in the Financing Order and based upon the structuring and pricing terms of the Storm Recovery Bonds set forth in this combined Issuance Advice Letter and Form of True-up Adjustment Letter.

Attachment 5 provides the Revenue Requirements for calculating the Initial Charge. Attachment 6 calculates the Initial Charge based upon the cost allocation formula approved in the Financing Order. Attachment 7 is a comparison between the net present value of costs to customers that are estimated to result from the issuance of Storm Recovery Bonds and the costs that would result from the application of the traditional method of recovering Storm Recovery Costs from customers. Also attached are the calculations and supporting data for such tables. The Company’s certification is Attachment 8.

Pursuant to the Financing Order, the transaction may proceed and the Initial Charge will take effect unless a stop order is issued by the Commission prior to noon on [ , 20 ] (4 business days after pricing); and the Company, as servicer, or any successor servicer and on behalf of the trustee as assignee of the SPE, is required to apply at least semi-annually for mandatory periodic adjustment to the Storm Recovery Charge. The Initial Charge shall remain in effect until changed in accordance with the provisions of Ordering Paragraph 23 of the Financing Order.

The Company’s certification required by the Financing Order is set forth in Attachment 8, which also includes the statement of the actions taken by the Company to achieve the Statutory Cost Objectives as required by the Financing Order.

Respectfully submitted,

Duke Energy Progress, LLC

Attachments

²³ DEP will provide the necessary rationales and explanations herein as required by the Settlement Agreement.

Order Exhibit No. 4
Docket No. 2023-89-E – Order No. 2023-752(A)
October 23, 2023
Page 5 of 13

TOTAL PRINCIPAL AMOUNT OF STORM RECOVERY BONDS TO BE ISSUED (TOTAL AMOUNT OF STORM RECOVERY COSTS AND UP-FRONT FINANCING COSTS TO BE FINANCED)

Storm Recovery Costs, including estimated carrying costs through February 2024 Estimated up-front Financing Costs included in Proposed Structure (refer to attachment 2)	$ $
Total Storm Recovery Bond Issuance (rounded up)	$

Order Exhibit No. 4
Docket No. 2023-89-E – Order No. 2023-752(A)
October 23, 2023
Page 6 of 13

ESTIMATED UP-FRONT FINANCING COSTS

Underwriters’ Fees and Expenses Servicer Set-up Fee (including IT Programming Costs) Legal Fees Rating Agency Fees ORS Financial Advisor Fees ORS Legal Fees DEP Structuring Advisor Fee [Commission’s Consultant’s Fees] Accounting Fees SEC Fees SPE Set-up Fee Marketing and Miscellaneous Fees and Expenses Printing / Edgarizing Expenses Trustees/Trustees Counsels Fee and Expenses Original Issue Discount Other Ancillary Agreements

$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $

TOTAL ESTIMATED UP-FRONT FINANCING COSTS

$

Order Exhibit No. 4
Docket No. 2023-89-E – Order No. 2023-752(A)
October 23, 2023
Page 7 of 13

EXPECTED AMORTIZATION SCHEDULE

A.      General Terms

Tranche Price Coupon Fixed/
Floating Average Life Expected Final Maturity Legal Final Maturity

B.      Scheduled Amortization Requirement of Storm Recovery Bonds

Series [ ], Tranche [A-1]
Payment Date	Beginning Principal Balance	Interest	Principal	Total Payment	Ending Principal Balance

Series [ ], Tranche [A-2]
Payment Date	Beginning Principal Balance	Interest	Principal	Total Payment	Ending Principal Balance

Order Exhibit No. 4
Docket No. 2023-89-E – Order No. 2023-752(A)
October 23, 2023
Page 8 of 13

ESTIMATED ANNUAL ON-GOING FINANCING COSTS

	Annual Amount
Servicing Fee24 Return on Invested Capital Administration Fee Accounting Fees Regulatory Assessment Fees Legal Fees Rating Agency Surveillance Fees Trustee Fees Independent Manager Fees Miscellaneous Fees and Expenses	$ $ $ $ $ $ $ $ $ $
TOTAL ESTIMATED ANNUAL ON-GOING FINANCING COSTS	$

 

²⁴ Low end of the range assumes the Company is the servicer (0.05%). Upper end of the range reflects a substitute servicer (0.60%).

Order Exhibit No. 4
Docket No. 2023-89-E – Order No. 2023-752(A)
October 23, 2023
Page 9 of 13

REVENUE REQUIREMENT AND INPUT VALUES

Initial Payment Period from [    , 20 ] to [    , 20 ]	Bond Repayment	Total
Forecasted retail kWh sales Percent of billed amounts expected to be charged-off Forecasted % of billings paid in the applicable period Forecasted retail kWh sales billed and collected Storm Recovery Bond principal payment Storm Recovery Bond interest payment Forecasted On-going Financing Costs (excluding principal and interest) Total collection requirement for applicable period	$ $ $ $	% % $ $ $ $

Order Exhibit No. 4
Docket No. 2023-89-E – Order No. 2023-752(A)
October 23, 2023
Page 10 of 13

 

Quantifiable Net Benefits to Customers

[To be updated]

[Workpapers to be attached]

Order Exhibit No. 4
Docket No. 2023-89-E – Order No. 2023-752(A)
October 23, 2023
Page 11 of 13

Form of Company Certification

[         , 20 ]

The Honorable Jocelyn G. Boyd

Chief Clerk/Administrator

The Public Service Commission of South Carolina

101 Executive Center Drive, Suite 100

1 Columbia, South Carolina 29210

Re: Duke Energy Progress, LLC’s Petition for a Storm Securitization Financing Order (“Phase II”)
Docket No.: 2023-89-E

Dear Ms. Boyd:

Duke Energy Progress, LLC (the “Company”) submits this Certification pursuant to Ordering Paragraph 24 of the Financing Order in Docket No. 2023-89-E (the “Financing Order”). All capitalized terms not defined in this letter shall have the meanings ascribed to them in the Financing Order.

In its issuance advice letter dated [   , 20  ], the Company has set forth the following particulars of the Storm Recovery Bonds:

Name of Storm Recovery Bonds:

Name of SPE: [ ]

Name of Storm Recovery Bond Trustee:

Closing Date: [          , 20  ]

Preliminary Bond Ratings²⁵: Moody’s [Aaa(sf)]; Standard & Poor’s [AAA(sf)];

Fitch [AAAsf] (final ratings to be received prior to closing)

Total Principal Amount of Storm Recovery Bonds to be Issued: $ (See Attachment 1)

Estimated up-front Financing Costs: $ (See Attachment 2)

Interest Rates and Expected Amortization Schedule: (See Attachment 3)

Distributions to Investors: Semi-annually

Weighted Average Coupon Rate²⁶:         %

Annualized Weighted Average Yield:           %²⁷

Initial Balance of capital subaccount: $

Estimated/Actual on-going Financing Costs for first year of Storm Recovery Bonds:

$[           ]

As required by the Financing Order, the Company prepared a comparison between the net present value of costs to customers that are estimated to result from the issuance of Storm Recovery Bonds and the costs that would have been incurred absent the issuance of the Storm Recovery Bonds.

²⁵ The Company anticipates receiving bond ratings from at least two of the three major rating agencies.

²⁶ Weighted by modified duration and principal amount of each tranche.

²⁷ Weighted by modified duration and principal amount, calculated including selling commissions.

Order Exhibit No. 4
Docket No. 2023-89-E – Order No. 2023-752(A)
October 23, 2023
Page 12 of 13

In accordance with the procedures set forth in the Financing Order, the following actions were taken in connection with the structuring and pricing and Financing Costs of the Storm Recovery Bonds in order to satisfy the statutory cost objectives:

· [Included credit enhancements in the form of the true-up mechanism and an equity contribution to [ ] of 0.50% of the original principal amount of the bonds;

· Developed rating agency presentations and worked actively with the rating agencies during the rating agency process to achieve Aaa(sf) / AAAsf from at least two of the three major rating agencies;

· Worked to select key transaction participants, including lead underwriters and co-managers through an RFI process to determine that they have relevant experience and execution capabilities, and who were aligned with DEP’s objectives, namely broad distribution to investors and willingness to market the bonds in a manner consistent with the superior credit quality and uniqueness of the bonds;

· Hired a diverse group of underwriters, including underwriters with international and mid-tier expertise in order to attract a wide variety of potential investors;

· Reviewed detailed marketing plans submitted by underwriter(s);

· Provided information to the Bond Advisory Team and DCA on a timely basis so that they were fully informed could review and provide input on the structuring, marketing, and pricing of the Storm Recovery Bonds;

· Worked with the members of the Bond Advisory Team to develop appropriate and necessary disclosures in the registration statement and other marketing materials including but not limited to highlighting the credit features of the Storm Recovery Bonds, such as the true-up, nonbypassable nature of the charges, the state pledge, bankruptcy and reorganization protections, and non-appealable Financing Order.

· Allowed sufficient time for investors to review [relevant marketing materials] and preliminary prospectus and to ask questions regarding the transaction;

· Arranged issuance of rating agency pre-sale reports during the marketing period;

· During the period that the bonds were marketed, held numerous market update discussions with the underwriting team to develop recommendation for pricing;

· Had multiple conversations with all of the members of the underwriting team during the marketing phase in which we stressed the requirements of the Financing Order;

· Developed and implemented a marketing plan designed to encourage each of the underwriters to aggressively market the bonds to a broad base of prospective corporate and asset backed securities investors, including investors who have not previously purchased this type of security;

· Conducted roadshows with over [ ] investors;

· Provided other potential investors with access to an internet roadshow for viewing at investors’ convenience;

· Adapted the bond offering to market conditions and investor demand at the time of pricing consistent with the guidelines outlined within the Financing Order. Variables impacting the final structure of the transaction were evaluated including the length of the average lives and maturity of the bonds and the interest rate requirements at the time of pricing so that the structure of the transaction would correspond to investor preferences and rating agency requirements for the highest rating possible;

Order Exhibit No. 4
Docket No. 2023-89-E – Order No. 2023-752(A)
October 23, 2023
Page 13 of 13

· Developed bond allocations and preliminary price guidance designed to achieve customer savings; and

· Additional items to be included if DEP determines appropriate.

Based on the statutory criteria and procedures, the record in this proceeding, and other provisions of this Financing Order, DEP certifies the statutory requirements for issuance of a financing order and Storm Recovery Bonds have been met, specifically that the issuance of the Storm Recovery Bonds on behalf of DEP and the imposition and collecting of Storm Recovery Charge authorized by this Financing Order provide quantifiable net benefits to customers of DEP on a present-value basis as compared to the costs that would have been incurred absent the issuance of Storm Recovery Bonds and that the structuring and pricing of the Storm Recovery Bonds issued on behalf of DEP result in the lowest Storm Recovery Charge payable by the customers of DEP consistent with market conditions at the time such Storm Recovery Bonds are priced and the terms set forth in the Financing Order.

This certification is being provided to the Commission by the Company in accordance with the terms of the Financing Order, and no one other than the Commission shall be entitled to rely on the certification provided herein for any purpose.

Respectfully Submitted,

Duke Energy Progress, LLC

EX-FILING FEES

Exhibit 107.1

Calculation of Filing Fee Table

Form SF-1

(Form Type)

Duke Energy Progress, LLC (Exact name of registrant, sponsor and depositor as specified in its charter) Duke Energy Progress SC Storm Funding LLC (Exact name of registrant and issuing entity as specified in
its charter)

Table 1: Newly Registered Securities

	Security Type	Security Class Title	Fee Calculation or Carry Forward Rule	Amount Registered	Proposed Maximum Offering Price Per Unit	Maximum Aggregate Offering Price (1)	Fee Rate	Amount of Registration Fee (1)
Fees to Be Paid	Asset-Backed Securities	Senior Secured Storm Recovery Bonds, Series	457(o)	$1,000,000	100%	$1,000,000	0.00014760	$147.60
Total Offering Amount						$1,000,000		$147.60
Net Fee Due								$147.60

(1) Estimated solely for the purpose of calculating the registration fee.