A VIE is an entity that is evaluated for consolidation using more than a simple analysis of voting control. The analysis to determine whether an entity is a VIE considers contracts with an entity, credit support for an entity, the adequacy of the equity investment of an entity and the relationship of voting power to the amount of equity invested in an entity. This analysis is performed either upon the creation of a legal entity or upon the occurrence of an event requiring reevaluation, such as a significant change in an entity's assets or activities. If an entity is determined to be a VIE, a qualitative analysis of control determines the party that consolidates a VIE based on what party has the power to direct the most significant activities of the VIE that impact its economic performance as well as what party has rights to receive benefits or is obligated to absorb losses that are significant to the VIE. The analysis of the party that consolidates a VIE is a continual reassessment.

The table below shows the VIEs that Duke Energy and Duke Energy Carolinas consolidate and how these entities impact Duke Energy's and Duke Energy Carolinas' respective Consolidated Balance Sheets. None of these entities are consolidated by Progress Energy, Progress Energy Carolinas, Progress Energy Florida, Duke Energy Ohio or Duke Energy Indiana.

Other than the discussion below related to CRC, no financial support was provided to any of the consolidated VIEs during the years ended December 31, 2012 and 2011, or is expected to be provided in the future, that was not previously contractually required.

		December 31, 2012
(in millions)		DERF^(a)		CRC		CinCapV		Renewables		Other		Total
Restricted Receivables of VIEs		$	637	$	534	$	15	$	16	$	(1)	$	1,201
Other Current Assets			―		―		4		133		2		139
Intangibles, net			―		―		―		12		―		12
Restricted Other Assets of VIEs			―		―		52		2		―		54
Other Assets			―		―		10		―		2		12
Property, Plant and Equipment, Cost			―		―		―		1,543		15		1,558
Accumulated Depreciation and Amortization			―		―		―		(98)		(5)		(103)
Other Deferred Debits			―		―		―		40		―		40
	Total Assets		637		534		81		1,648		13		2,913
Accounts Payable			―		―		―		1		―		1
Non-Recourse Notes Payable			―		312		―		―		―		312
Taxes Accrued			―		―		―		62		―		62
Current Maturities of Long-Term Debt			―		―		13		459		―		472
Other Current Liabilities			―		―		4		25		―		29
Non-Recourse Long-Term Debt			300		―		48		504		―		852
Deferred Income Taxes			―		―		―		154		―		154
Asset Retirement Obligations			―		―		―		23		―		23
Other Liabilities			―		―		10		39		―		49
	Total Liabilities		300		312		75		1,267		―		1,954
Noncontrolling Interests			―		―		―		―		―		―
Net Assets of Consolidated VIEs		$	337	$	222	$	6	$	381	$	13	$	959

(a)	DERF is a wholly owned limited liability company of Duke Energy Carolinas.

		December 31, 2011
(in millions)		DERF^(a)		CRC		CinCapV		Renewables		Other		Total
Restricted Receivables of VIEs		$	581	$	547	$	13	$	13	$	3	$	1,157
Other Current Assets			―		―		2		124		8		134
Intangibles, net			―		―		―		12		―		12
Restricted Other Assets of VIEs			―		―		65		10		60		135
Other Assets			―		―		14		36		―		50
Property, Plant and Equipment, Cost			―		―		―		913		―		913
Accumulated Depreciation and Amortization			―		―		―		(62)		―		(62)
Other Deferred Debits			―		―		―		24		2		26
	Total Assets		581		547		94		1,070		73		2,365
Accounts Payable			―		―		―		1		1		2
Non-Recourse Notes Payable			―		273		―		―		―		273
Taxes Accrued			―		―		―		3		―		3
Current Maturities of Long-Term Debt			―		―		11		49		5		65
Other Current Liabilities			―		―		3		59		―		62
Non-Recourse Long-Term Debt			300		―		60		528		61		949
Deferred Income Taxes			―		―		―		160		―		160
Asset Retirement Obligation			―		―		―		13		―		13
Other Liabilities			―		―		13		37		―		50
	Total Liabilities		300		273		87		850		67		1,577
Noncontrolling Interests			―		―		―		―		1		1
Net Assets of Consolidated VIEs		$	281	$	274	$	7	$	220	$	5	$	787

(a)	DERF is a wholly owned limited liability company of Duke Energy Carolinas.

DERF. Duke Energy Carolinas securitizes certain accounts receivable through DERF, a bankruptcy remote, special purpose subsidiary. DERF is a wholly owned limited liability company of Duke Energy Carolinas with a separate legal existence from its parent, and its assets are not intended to be generally available to creditors of Duke Energy Carolinas. As a result of the securitization, on a daily basis Duke Energy Carolinas sells certain accounts receivable, arising from the sale of electricity and/or related services as part of Duke Energy Carolinas' franchised electric business, to DERF. In order to fund its purchases of accounts receivable, DERF has a $300 million secured credit facility with a commercial paper conduit, which expires in August 2014. Duke Energy Carolinas provides the servicing for the receivables (collecting and applying the cash to the appropriate receivables). Duke Energy Carolinas' borrowing under the credit facility is limited to the amount of qualified receivables sold, which has been and is expected to be in excess of the amount borrowed, which is maintained at $300 million. The debt is classified as long-term since the facility has an expiration date of greater than one year from the balance sheet date.

The obligations of DERF under the facility are non-recourse to Duke Energy Carolinas. Duke Energy and its subsidiaries have no requirement to provide liquidity, purchase assets of DERF or guarantee performance. DERF is considered a VIE because the equity capitalization is insufficient to support its operations. If deficiencies in the net worth of DERF were to occur, those deficiencies would be cured through funding from Duke Energy Carolinas. In addition, the most significant activity of DERF relates to the decisions made with respect to the management of delinquent receivables. Since those decisions are made by Duke Energy Carolinas and any net worth deficiencies of DERF would be cured through funding from Duke Energy Carolinas, Duke Energy Carolinas consolidates DERF.

CRC. CRC was formed in order to secure low cost financing for Duke Energy Ohio, including Duke Energy Kentucky, and Duke Energy Indiana. Duke Energy Ohio and Duke Energy Indiana sell on a revolving basis at a discount, nearly all of their customer accounts receivable and related collections to CRC. The receivables which are sold are selected in order to avoid any significant concentration of credit risk and exclude delinquent receivables. The receivables sold are securitized by CRC through a facility managed by two unrelated third parties and the receivables are used as collateral for commercial paper issued by the unrelated third parties. These loans provide the cash portion of the proceeds paid by CRC to Duke Energy Ohio and Duke Energy Indiana. The proceeds obtained by Duke Energy Ohio and Duke Energy Indiana from the sales of receivables are cash and a subordinated note from CRC (subordinated retained interest in the sold receivables) for a portion of the purchase price (typically approximates 25 percent of the total proceeds). The amount borrowed by CRC against these receivables is non-recourse to the general credit of Duke Energy, and the associated cash collections from the accounts receivable sold is the sole source of funds to satisfy the related debt obligation. Borrowing is limited to approximately 75% of the transferred receivables. Losses on collection in excess of the discount are first absorbed by the equity of CRC and next by the subordinated retained interests held by Duke Energy Ohio and Duke Energy Indiana. The discount on the receivables reflects interest expense plus an allowance for bad debts net of a servicing fee charged by Duke Energy Ohio and Duke Energy Indiana. Duke Energy Ohio and Duke Energy Indiana are responsible for the servicing of the receivables (collecting and applying the cash to the appropriate receivables). Depending on the experience with collections, additional equity infusions to CRC may be required to be made by Duke Energy in order to maintain a minimum equity balance of $3 million. There were no infusions to CRC during the year ended December 31, 2012. For the years ended December 31, 2011 and 2010, respectively, Duke Energy infused $6 million and $10 million of equity to CRC to remedy net worth deficiencies. The amount borrowed fluctuates based on the amount of receivables sold. The debt is short term because the facility has an expiration date of less than one year from the balance sheet date. The current expiration date is November 2013. CRC is considered a VIE because the equity capitalization is insufficient to support its operations, the power to direct the most significant activities of the entity are not performed by the equity holder, Cinergy, and deficiencies in the net worth of CRC are not funded by Cinergy, but by Duke Energy. The most significant activity of CRC relates to the decisions made with respect to the management of delinquent receivables. These decisions, as well as the requirement to make up deficiencies in net worth, are made by Duke Energy and not by Duke Energy Ohio, Duke Energy Kentucky or Duke Energy Indiana. Thus, Duke Energy consolidates CRC. Duke Energy Ohio and Duke Energy Indiana do not consolidate CRC.

CinCap V. CinCap V was created to finance and execute a power sale agreement with Central Maine Power Company for approximately 35 MW of capacity and energy. This agreement expires in 2016. CinCap V is considered a VIE because the equity capitalization is insufficient to support its operations. As Duke Energy has the power to direct the most significant activities of the entity, which are the decisions to hedge and finance the power sales agreement, CinCap V is consolidated by Duke Energy.

Renewables. Duke Energy's renewable energy facilities include Green Frontier Windpower, LLC, Top of The World Wind Energy LLC, Los Vientos Windpower1A LLC, Los Vientos Windpower 1B, LLC and various solar projects, all subsidiaries of DEGS, an indirect wholly owned subsidiary of Duke Energy.

Green Frontier Windpower, LLC, Top of the World Wind Energy, LLC and the various solar projects are VIEs due to power purchase agreements with terms that approximate the expected life of the projects. These fixed price agreements effectively transfer the commodity price risk to the buyer of the power. Duke Energy has consolidated these entities since inception because the most significant activities that impact the economic performance of these renewable energy facilities were the decisions associated with the siting, negotiation of the purchase power agreement, engineering, procurement and construction, and decisions associated with ongoing operations and maintenance related activities, all of which were made solely by Duke Energy.

The debt held by these renewable energy facilities is non-recourse to the general credit of Duke Energy. Duke Energy and its subsidiaries have no requirement to provide liquidity or purchase the assets of these renewable energy facilities. Duke Energy does not guarantee performance except for the production tax credit guarantee mentioned above, an immaterial multi-purpose letter of credit and various immaterial debt service reserve and operations and maintenance reserve guarantees. The assets are restricted and they cannot be pledged as collateral or sold to third parties without the prior approval of the debt holders.

Other. Duke Energy has other VIEs with restricted assets and non-recourse debt. As of December 31, 2011 these VIEs included certain on-site power generation facilities which were sold in 2012. Duke Energy consolidated these particular on-site power generation entities because Duke Energy had the power to direct the majority of the most significant activities, which, most notably involved the oversight of operation and maintenance related activities that impact the economic performance of these entities.

The tables below show the VIEs that the Duke Energy Registrants do not consolidate and how these entities impact the Duke Energy Registrants respective Consolidated Balance Sheets. As discussed above, while Duke Energy consolidated CRC, Duke Energy Ohio and Duke Energy Indiana do not consolidate CRC as they are not the primary beneficiary.

		December 31, 2012
			Duke Energy
(in millions)		DukeNet		Renewables		FPC Capital I Trust^(a)		Other		Total		Duke Energy Ohio		Duke Energy Indiana
Receivables		$	―	$	―	$	―	$	―	$	―	$	97	$	116
Investments in equity method unconsolidated affiliates			118		147		―		27		292		―		―
Intangibles			―		―		―		104		104		104		―
Investments and other assets							9		2		11
	Total assets		118		147		9		133		407		201		116
Other current liabilities			―		―		―		3		3		―		―
Deferred credits and other liabilities			―		―		319		17		336		―		―
	Total liabilities		―		―		319		20		339		―		―
Net assets (liabilities)		$	118	$	147	$	(310)	$	113	$	68	$	201	$	116

(a)	The entire balance of Investments and other assets and $274 million of the Deferred Credits and Other Liabilities balance applies to Progress Energy.

		December 31, 2011
		Duke Energy								Progress		Duke Energy		Duke Energy
(in millions)		DukeNet		Renewables		Other		Total		Energy		Ohio		Indiana
Receivables		$	―	$	―	$	―	$	―	$	―	$	129	$	139
Investments in equity method unconsolidated affiliates			129		81		25		235		9		―		―
Intangibles			―		―		111		111		―		111		―
	Total assets		129		81		136		346		9		240		139
Other current liabilities			―		―		3		3		―		―		―
Deferred credits and other liabilities			―		―		18		18		273		―		―
	Total liabilities		―		―		21		21		273		―		―
Net assets		$	129	$	81	$	115	$	325	$	(264)	$	240	$	139

	The following table shows the gross and net receivables sold:

			Duke Energy Ohio				Duke Energy Indiana
		December 31,					December 31,
(in millions)			2012		2011		2012		2011
Receivables sold			$	282	$	302	$	289	$	279
Less: Retained interests				97		129		116		139
Net receivables sold			$	185	$	173	$	173	$	140

	The following tables show the retained interests, sales, and cash flows related to receivables sold:

		Duke Energy Ohio						Duke Energy Indiana
		Years Ended December 31,						Years Ended December 31,
(in millions)		2012		2011		2010		2012		2011		2010
Sales
Receivables sold		$	2,154	$	2,390	$	2,858	$	2,773	$	2,658	$	2,537
Loss recognized on sale		$	13	$	21	$	26	$	12	$	16	$	17
Cash Flows
Cash proceeds from receivables sold		$	2,172	$	2,474	$	2,809	$	2,784	$	2,674	$	2,474
Collection fees received		$	1	$	1	$	1	$	1	$	1	$	1
Return received on retained interests		$	5	$	12	$	15	$	7	$	13	$	13

Cash flows from the sale of receivables are reflected within Operating Activities on Duke Energy Ohio's and Duke Energy Indiana's Consolidated Statements of Cash Flows.

Collection fees received in connection with the servicing of transferred accounts receivable are included in Operation, Maintenance and Other on Duke Energy Ohio's and Duke Energy Indiana's Consolidated Statements of Operations. The loss recognized on the sale of receivables is calculated monthly by multiplying the receivables sold during the month by the required discount which is derived monthly utilizing a three year weighted average formula that considers charge-off history, late charge history, and turnover history on the sold receivables, as well as a component for the time value of money. The discount rate, or component for the time value of money, is calculated monthly by summing the prior month-end LIBOR plus a fixed rate of 1.00 percent as of December 31, 2012, as compared to prior month-end LIBOR plus 2.39 percent as of December 31, 2011.

- Definition

Tabular disclosure of the significant judgments and assumptions made in determining whether a variable interest (as defined) held by the entity requires the variable interest entity (VIE) (as defined) to be consolidated and (or) disclose information about its involvement with the VIE, individually or in aggregate (as applicable); the nature of restrictions, if any, on the consolidated VIE's assets and on the settlement of its liabilities reported by an entity in its statement of financial position, including the carrying amounts of such assets and liabilities; the nature of, and changes in, the risks associated with involvement in the VIE; how involvement with the VIE affects the entity's financial position, financial performance, and cash flows; the lack of recourse if creditors (or beneficial interest holders) of the consolidated VIE have no recourse to the general credit of the primary beneficiary (if applicable); the terms of arrangements, giving consideration to both explicit arrangements and implicit variable interests, if any, that could require the entity to provide financial support to the VIE, including events or circumstances that could expose the entity to a loss; the methodology used by the entity for determining whether or not it is the primary beneficiary of the variable interest entity; the significant factors considered and judgments made in determining that the power to direct the activities of a VIE that most significantly impact the VIE's economic performance are shared (as defined); the carrying amounts and classification of assets and liabilities of the VIE included in the statement of financial position; the entity's maximum exposure to loss, if any, as a result of its involvement with the VIE, including how the maximum exposure is determined and significant sources of the entity's exposure to the VIE; a comparison of the carrying amounts of the assets and liabilities and the entity's maximum exposure to loss; information about any liquidity arrangements, guarantees, and (or) other commitments by third parties that may affect the fair value or risk of the entity's variable interest in the VIE; whether or not the entity has provided financial support or other support (explicitly or implicitly) to the VIE that it was not previously contractually required to provide or whether the entity intends to provide that support, including the type and amount of the support and the primary reasons for providing the support; and supplemental information the entity determines necessary to provide.

+ References

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+ Details