A VIE is an entity that is evaluated for consolidation using more than a simple analysis of voting control. The analysis to determine whether an entity is a VIE considers contracts with an entity, credit support for an entity, the adequacy of the equity investment of an entity, and the relationship of voting power to the amount of equity invested in an entity. This analysis is performed either upon the creation of a legal entity or upon the occurrence of an event requiring reevaluation, such as a significant change in an entity's assets or activities. A qualitative analysis of control determines the party that consolidates a VIE. This assessment is based on (i) what party has the power to direct the most significant activities of the VIE that impact its economic performance, and (ii) 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 VIEs Duke Energy and Duke Energy Carolinas consolidate and how these entities impact Duke Energy's and Duke Energy Carolinas' respective Condensed Consolidated Balance Sheets.

Other than the discussion below related to CRC, no financial support was provided to any of the consolidated VIEs during the three or nine months ended September 30, 2013 and the year ended December 31, 2012, or is expected to be provided in the future, that was not previously contractually required.


		September 30, 2013
(in millions)		DERF^(a)		CRC		CinCapV		Renewables			Other		Total
ASSETS
Current Assets
Restricted receivables of variable interest entities			703		527		17			11		―		1,258
Other			―		―		5			199		2		206
Investments and Other Assets
Intangibles, net			―		―		―			11		―		11
Restricted other assets of variable interest entities			―		―		40			12		―		52
Other			―		―		12			4		3		19
Property, Plant and Equipment
Property, Plant and Equipment, Cost			―		―		―			1,663		16		1,679
Accumulated depreciation and amortization			―		―		―			(146)		(5)		(151)
Regulatory Assets and Deferred Debits
Other			―		―		―			34		―		34
	Total Assets		703		527		74			1,788		16		3,108
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable			―		―		―			3		―		3
Non-recourse notes payable of variable interest entities			―		325		―			―		―		325
Taxes accrued			―		―		―			12		―		12
Current maturities of long-term debt			―		―		14			62		―		76
Other			―		―		5			26		―		31
Non-recourse Long-term Debt of variable interest entities			300		―		37			928		―		1,265
Deferred income taxes			―		―		―			255		―		255
Asset retirement obligations			―		―		―			25		―		25
Other			―		―		12			102		―		114
	Total Liabilities		300		325		68			1,413		―		2,106
Net Assets of Consolidated Variable Interest Entities		$	403	$	202	$	6		$	375	$	16	$	1,002

(a)	Duke Energy Receivables Finance Company, LLC (DERF) is a wholly owned limited liability company of Duke Energy Carolinas.


		December 31, 2012
(in millions)		DERF		CRC		CinCapV		Renewables			Other		Total
ASSETS
Current Assets
Restricted receivables of variable interest entities		$	637	$	534	$	15		$	16	$	(1)	$	1,201
Other			―		―		4			133		2		139
Investments and Other Assets
Intangibles, net			―		―		―			12		―		12
Restricted other assets of variable interest entities			―		―		52			2		―		54
Other			―		―		10			―		2		12
Property, Plant and Equipment
Property, Plant and Equipment, Cost			―		―		―			1,543		15		1,558
Accumulated depreciation and amortization			―		―		―			(98)		(5)		(103)
Regulatory Assets and Deferred Debits
Other			―		―		―			40		―		40
	Total Assets		637		534		81			1,648		13		2,913
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable			―		―		―			1		―		1
Non-recourse notes payable of variable interest entities			―		312		―			―		―		312
Taxes accrued			―		―		―			62		―		62
Current maturities of long-term debt			―		―		13			459		―		472
Other			―		―		4			25		―		29
Non-recourse Long-term Debt of variable interest entities			300		―		48			504		―		852
Deferred income taxes			―		―		―			154		―		154
Asset retirement obligations			―		―		―			23		―		23
Other			―		―		10			39		―		49
	Total Liabilities		300		312		75			1,267		―		1,954
Net Assets of Consolidated Variable Interest Entities		$	337	$	222	$	6		$	381	$	13	$	959

Duke Energy Carolinas securitizes certain accounts receivable through DERF, a bankruptcy remote, special purpose subsidiary. DERF has a separate legal existence from its parent, and its assets are not intended to be generally available to creditors of Duke Energy Carolinas. On a daily basis Duke Energy Carolinas sells certain accounts receivable, arising from the sale of electricity and/or related services, to DERF. DERF utilizes a $400 million secured credit facility with a commercial paper conduit to fund purchases of accounts receivable. The facility expires in October 2016. Duke Energy Carolinas services the receivables (collects and applies cash to the appropriate receivables). Duke Energy Carolinas' borrowing under the credit facility is limited to the amount of qualified receivables sold. The amount of receivables sold has been and is expected to be in excess of the amount borrowed. 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 securitization transaction was not structured to meet the criteria for sale accounting treatment under the accounting guidance for transfers and servicing financial assets and, accordingly, is reflected as a secured borrowing in the Consolidated Balance Sheets. 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. In addition, the most significant activity that impacts the economic performance of DERF relates to decisions made with respect to management of delinquent receivables. Duke Energy Carolinas consolidates DERF since it makes those decisions.

CRC was formed to secure low cost financing for Duke Energy Ohio 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 sold are selected to avoid any significant concentration of credit risk and exclude delinquent receivables. Receivables sold are securitized by CRC through a facility managed by two unrelated third parties and are used as collateral for commercial paper issued by the unrelated third parties. These loans provide the cash portion of proceeds paid by CRC to Duke Energy Ohio and Duke Energy Indiana. Proceeds obtained by Duke Energy Ohio and Duke Energy Indiana from sales of receivables are cash and a subordinated note from CRC. The subordinated note represents a retained interest in the sold receivables and is typically 25 percent of total proceeds. Amounts borrowed by CRC against these receivables is non-recourse to the general credit of Duke Energy. Cash collections from the accounts receivable sold are the sole source of funds to satisfy the related debt obligation. Borrowing is limited to approximately 75 percent of the transferred receivables. Losses on collection in excess of the discount are first absorbed by the equity of CRC and next by subordinated retained interests held by Duke Energy Ohio and Duke Energy Indiana. The discount 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 service the receivables (collect and apply cash to the appropriate receivables). Depending on experience with collections, additional equity infusions to CRC may be required by Duke Energy to maintain a minimum equity balance of $3 million. There were no infusions to CRC during the three or nine months ended September 30, 2013 and 2012. Amounts borrowed fluctuate based on the amounts of receivables sold. The debt is classified as 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 (i) equity capitalization is insufficient to support its operations, (ii) power to direct the most significant activities that impact economic performance of the entity are not performed by the equity holder, Cinergy Corp. (Cinergy), and (iii) deficiencies in 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. Thus, Duke Energy consolidates CRC. Duke Energy Ohio and Duke Energy Indiana do not consolidate CRC.

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. Duke Energy consolidates CinCap V as it has power to direct the most significant activities that impact economic performance of the entity, which are the decisions to hedge and finance the power sales agreement.

Certain of Duke Energy's renewable energy facilities are VIEs due to power purchase agreements with terms that approximate the expected life of the projects. These fixed price agreements effectively transfer commodity price risk to the buyer of the power. Certain other of Duke Energy's renewable energy facilities are VIEs due to Duke Energy issuing debt service reserve guarantees and operations and maintenance reserve guarantees in support of debt financings. The most significant activities that impact the economic performance of these renewable energy facilities were decisions associated with siting, negotiating purchase power agreements, engineering, procurement and construction, and decisions associated with ongoing operations and maintenance related activities. As all of these decisions were made solely by Duke Energy ,Duke Energy has consolidated these entities since inception.

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 an immaterial multi-purpose letter of credit and various immaterial debt service reserve and operations and maintenance reserve guarantees. Assets are restricted and cannot be pledged as collateral or sold to third parties without prior approval of debt holders.

The tables below show VIEs the Duke Energy Registrants do not consolidate and how these entities impact the Duke Energy Registrants' respective Condensed 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.


		September 30, 2013
			Duke Energy								Duke Energy Ohio		Duke Energy Indiana
(in millions)		DukeNet		Renewables			Other		Total		Duke Energy Ohio		Duke Energy Indiana
Receivables		$	―		$	―	$	―	$	―	$	75	$	114
Investments in equity method unconsolidated affiliates			113			152		25		290		―		―
Intangibles, net			―			―		100		100		98		―
Investments and other assets			―			―		4		4		―		―
	Total assets		113			152		129		394		173		114
Other current liabilities			―			―		2		2		―		―
Deferred credits and other liabilities			―			―		15		15		―		―
	Total liabilities		―			―		17		17		―		―
Net assets		$	113		$	152	$	112	$	377	$	173	$	114


		December 31, 2012
		Duke Energy											Duke Energy Ohio		Duke Energy Indiana
(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, net			―			―		―		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.

No financial support not previously contractually required was provided to any of the unconsolidated VIEs during the three or nine months ended September 30, 2013 and 2012, or is expected to be provided in the future. The Duke Energy Registrants are not aware of any situations where the maximum exposure to loss significantly exceeds the carrying values shown above except for the power purchase agreement with the Ohio Valley Electric Corporation (OVEC), which is discussed below, and various guarantees, reflected in the table above as Deferred credits and other liabilities.

Duke Energy owns a 50 percent interest in DukeNet. DukeNet has a 5-year, $150 million senior secured credit facility with a syndicate of ten external financial institutions. This credit facility is non-recourse to Duke Energy. DukeNet is considered a VIE because it has entered into certain contractual arrangements that provide it with additional forms of subordinated financial support. Duke Energy has no requirement to provide liquidity, purchase the assets of DukeNet, or guarantee performance. The most significant activities that impact DukeNet's economic performance relate to its business development and fiber optic capacity marketing and management activities. The power to direct these activities is jointly and equally shared by Duke Energy and the other joint venture partner. Accordingly, DukeNet is a non-consolidated VIE and is accounted for as an equity method investment.

Unless consent by Duke Energy is given, Duke Energy and its subsidiaries have no requirement to provide liquidity, purchase the assets of DukeNet, or guarantee performance.

On October 4, 2013, Duke Energy announced that it will sell its interest in DukeNet. Refer to Note 2 for more information.

Duke Energy has investments in various renewable energy project entities. Some of these entities are VIEs due to power purchase agreements with terms that approximate the expected life of the project. These fixed price agreements effectively transfer commodity price risk to the buyer of the power. Duke Energy does not consolidate these VIEs because power to direct and control key activities is shared jointly by Duke Energy and other owners. Duke Energy accounts for these investments under the equity method of accounting.

At December 31, 2012, Progress Energy had variable interests in the FPC Capital I Trust (the Trust). The Trust, a finance subsidiary, was established in 1999 for the sole purpose of issuing $300 million of 7.10% QUIPS due 2039, and used proceeds thereof to purchase $300 million of 7.10% Junior Subordinated Deferrable Interest Notes due 2039 from Florida Progress Funding Corporation (Funding Corp.). Funding Corp. is a wholly owned subsidiary of Progress Energy. The Trust had no other operations and its sole assets were subordinated notes and related guarantees. Funding Corp. was formed for the sole purpose of providing financing to Duke Energy Florida. Funding Corp. did not engage in business activities other than such financing and had no independent operations. Progress Energy guaranteed the payments of all distributions required by the Trust. On February 1, 2013, Duke Energy redeemed the $300 million of 7.10% QUIPS and subsequently terminated the Trust.

Duke Energy has investments in various other entities that are not consolidated VIEs. The most significant of these investments is Duke Energy Ohio's 9 percent ownership interest in OVEC. Through its ownership interest in OVEC, Duke Energy Ohio has a contractual arrangement to buy power from OVEC's power plants through June 2040. Proceeds from the sale of power by OVEC to its power purchase agreement counterparties are designed to be sufficient to meet its operating expenses, fixed costs, debt amortization and, interest expense, as well as earn a return on equity. Accordingly, the value of this contract is subject to variability due to fluctuations in power prices and changes in OVEC's costs of business, including costs associated with its 2,256 MW of coal-fired generation capacity. As discussed in Note 5, proposed environmental rulemaking could increase the costs of OVEC, which would be passed through to Duke Energy Ohio. The initial carrying value of this contract was recorded as an intangible asset when Duke Energy acquired Cinergy in April 2006. In addition, Duke Energy has guaranteed performance of certain entities in which it no longer has an equity interest.

As discussed above, CRC is consolidated only by Duke Energy. Accordingly, the retained interest in the sold receivables recorded on the Condensed Consolidated Balance Sheets of Duke Energy Ohio and Duke Energy Indiana are eliminated in consolidation at Duke Energy.

Proceeds obtained from sales of receivables are largely cash but do include a subordinated note from CRC. The subordinated note is a retained interest and is classified within Receivables in Duke Energy Ohio's and Duke Energy Indiana's Condensed Consolidated Balance Sheets. Retained interests reflected on the Condensed Consolidated Balance Sheets of Duke Energy Ohio and Duke Energy Indiana approximate fair value.

Carrying values of retained interests are determined by allocating carrying value of the receivables between assets sold and interests retained based on relative fair value. The allocated basis of the subordinated notes are not materially different than their face value because (i) the receivables generally turnover in less than two months, (ii) credit losses are reasonably predictable due to the broad customer base and lack of significant concentration, and (iii) the equity in CRC is subordinate to all retained interests and thus would absorb losses first. The hypothetical effect on fair value of the retained interests assuming both a 10 percent and a 20 percent unfavorable variation in credit losses or discount rates is not material due to the short turnover of receivables and historically low credit loss history. Interest accrues to Duke Energy Ohio and Duke Energy Indiana on retained interests using the acceptable yield method. This method generally approximates the stated rate on the notes since the allocated basis and face value are nearly equivalent. An impairment charge is recorded against the carrying value of both retained interests and purchased beneficial interest whenever it is determined an other-than-temporary impairment has occurred. Key assumptions used in estimating fair value in 2013 and 2012 are detailed in the following table.

The following table shows the gross and net receivables sold.

	Duke Energy Ohio						Duke Energy Indiana
(in millions)	September 30, 2013			December 31, 2012			September 30, 2013			December 31, 2012
Receivables sold		$	235		$	282		$	332		$	289
Less: Retained interests			75			97			114			116
Net receivables sold		$	160		$	185		$	218		$	173

The following tables show sales and cash flows related to receivables sold.

	Duke Energy Ohio					Duke Energy Indiana
	Three Months Ended September 30,					Three Months Ended September 30,
(in millions)		2013		2012			2013		2012
Sales
Receivables sold		$	514	$	518		$	765	$	711
Loss recognized on sale			3		3			2		3
Cash flows
Cash proceeds from receivables sold			518		531			758		733
Collection fees received			―		―			―		―
Return received on retained interests			1		1			2		2



	Duke Energy Ohio					Duke Energy Indiana
	Nine Months Ended September 30,					Nine Months Ended September 30,
(in millions)	2013			2012		2013			2012
Sales
Receivables sold		$	1,664	$	1,618		$	2,214	$	2,118
Loss recognized on sale			9		10			8		9
Cash flows
Cash proceeds from receivables sold			1,674		1,651			2,204		2,130
Collection fees received			1		1			1		1
Return received on retained interests			4		4			5		5

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

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