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.

Other than the discussion below related to CRC, no financial support was provided to any of the consolidated VIEs during the three months ended March 31, 2014 and the year ended December 31, 2013, or is expected to be provided in the future, that was not previously contractually required.

The table below shows VIEs consolidated and how these entities impact the Condensed Consolidated Balance Sheets.


		March 31, 2014
		Duke Energy
		Duke Energy Carolinas		Duke Energy Progress		Duke Energy Florida
(in millions)		DERF		DEPR		DEFR		CRC		Renewables			Other		Total
ASSETS
Current Assets
Restricted receivables of variable interest entities		$	705	$	538	$	318	$	600		$	20	$	18	$	2,199
Other			―		―		―		―			115		14		129
Investments and Other Assets
Other			―		―		―		―			26		41		67
Property, Plant and Equipment
Property, plant and equipment, cost^(a)			―		―		―		―			1,663		18		1,681
Accumulated depreciation and amortization			―		―		―		―			(186)		(6)		(192)
Regulatory Assets and Deferred Debits
Other			1		1		1		―			33		―		36
Total assets			706		539		319		600			1,671		85		3,920
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable			―		―		―		―			2		―		2
Taxes accrued			―		―		―		―			4		―		4
Current maturities of long-term debt			―		―		―		―			66		15		81
Other			―		―		―		―			25		10		35
Long-term Debt^(b)			400		300		225		325			907		29		2,186
Deferred Credits and Other Liabilities
Deferred income taxes			―		―		―		―			277		―		277
Asset retirement obligations			―		―		―		―			26		―		26
Other			―		1		1		―			23		10		35
Total liabilities			400		301		226		325			1,330		64		2,646
Net assets of consolidated variable interest entities		$	306	$	238	$	93	$	275		$	341	$	21	$	1,274

(a)	Restricted as collateral for non-recourse debt of VIEs.
(b)	Non-recourse to the general assets of Duke Energy, Duke Energy Carolinas, Duke Energy Progress, and Duke Energy Florida.


		December 31, 2013
		Duke Energy
		Duke Energy Carolinas		Duke Energy Progress
(in millions)		DERF		DEPR		CRC		Renewables		Other		Total
ASSETS
Current Assets
Restricted receivables of variable interest entities		$	673	$	416	$	595	$	18	$	17	$	1,719
Other			―		―		―		89		12		101
Investments and Other Assets
Other			―		―		―		29		51		80
Property, Plant and Equipment
Property, plant and equipment, cost^(a)			―		―		―		1,662		18		1,680
Accumulated depreciation and amortization			―		―		―		(170)		(5)		(175)
Regulatory Assets and Deferred Debits
Other			1		1		―		34		―		36
Total assets			674		417		595		1,662		93		3,441
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable			―		―		―		2		―		2
Taxes accrued			―		―		―		10		―		10
Current maturities of long-term debt			―		―		―		66		14		80
Other			―		―		―		17		10		27
Long-term Debt^(b)			400		300		325		907		34		1,966
Deferred Credits and Other Liabilities
Deferred income taxes			―		―		―		290		―		290
Asset retirement obligations			―		―		―		26		―		26
Other			1		―		―		17		13		31
Total liabilities			401		300		325		1,335		71		2,432
Net assets of consolidated variable interest entities		$	273	$	117	$	270	$	327	$	22	$	1,009

(a)	Restricted as collateral for non-recourse debt of VIEs.
(b)	Non-recourse to the general assets of Duke Energy, Duke Energy Carolinas, and Duke Energy Progress.

The obligations of these VIEs are non-recourse to Duke Energy, Duke Energy Carolinas, Duke Energy Progress, and Duke Energy Florida. These entities have no requirement to provide liquidity to purchase assets of, or guarantee performance of these VIEs unless noted in the following paragraphs.

On a daily basis, Duke Energy Receivables Finance Company, LLC (DERF), a bankruptcy remote, special purpose subsidiary of Duke Energy Carolinas, buys certain accounts receivable arising from the sale of electricity and/or related services from Duke Energy Carolinas. DERF is a wholly owned limited liability company with a separate legal existence from its parent, and its assets are not generally available to creditors of Duke Energy Carolinas. DERF borrows $400 million under a credit facility to buy the receivables. Borrowing is limited to the amount of qualified receivables sold, which is expected to be in excess of the credit facility. The credit facility expires in October 2016 and is reflected on the Condensed Consolidated Balance Sheets as Long-term Debt. The secured credit facility was not structured to meet the criteria for sale accounting treatment under the accounting guidance for transfers and servicing of financial assets.

The most significant activity that impacts the economic performance of DERF is the decisions made to manage delinquent receivables. Duke Energy Carolinas consolidates DERF as it makes those decisions.

On a daily basis, Duke Energy Progress Receivables Company, LLC (DEPR), a bankruptcy remote, special purpose subsidiary of Duke Energy Progress formed in 2013, buys certain accounts receivable arising from the sale of electricity and/or related services from Duke Energy Progress. DEPR is a wholly owned limited liability company with a separate legal existence from its parent, and its assets are not generally available to creditors of Duke Energy Progress. DEPR borrows $300 million under a credit facility to buy the receivables. Borrowing is limited to the amount of qualified receivables sold, which is expected to be in excess of the credit facility. The credit facility expires in December 2016 and is reflected on the Condensed Consolidated Balance Sheets as Long-term Debt. The secured credit facility was not structured to meet the criteria for sale accounting treatment under the accounting guidance for transfers and servicing of financial assets.

The most significant activity that impacts the economic performance of DEPR is the decisions made to manage delinquent receivables. Duke Energy Progress consolidates DEPR as it makes those decisions.

On a daily basis, Duke Energy Florida Receivables Company, LLC (DEFR), a bankruptcy remote, special purpose subsidiary of Duke Energy Florida formed in 2014, buys certain accounts receivable arising from the sale of electricity and/or related services from Duke Energy Florida. DEFR is a wholly owned limited liability company with a separate legal existence from its parent, and its assets are not generally available to creditors of Duke Energy Florida. DEFR borrows $225 million under a credit facility to buy the receivables. Borrowing is limited to the amount of qualified receivables sold, which is expected to be in excess of the credit facility. The credit facility expires in March 2017 and is reflected on the Condensed Consolidated Balance Sheets as Long-term Debt. The secured credit facility was not structured to meet the criteria for sale accounting treatment under the accounting guidance for transfers and servicing of financial assets.

The most significant activity that impacts the economic performance of DEFR is the decisions made to manage delinquent receivables. Duke Energy Florida consolidates DEFR as it makes those decisions.

On a revolving basis, CRC buys certain accounts receivable arising from the sale of electricity and/or related services from Duke Energy Ohio and Duke Energy Indiana. Receivables sold are securitized by CRC through a facility managed by two unrelated third parties. The proceeds Duke Energy Ohio and Duke Energy Indiana receive from the sale of receivables to CRC are typically 75 percent cash and 25 percent in the form of a subordinated note from CRC. The subordinated note is a retained interest in the receivables sold. Cash collections from the receivables are the sole source of funds to satisfy the related debt obligation. 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 months ended March 31, 2014 and 2013. Borrowings fluctuate based on the amount of receivables sold. The credit facility expires in November 2016. The secured credit facility is reflected on the Condensed Consolidated Balance Sheets as Long-term Debt. 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, 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. Duke Energy consolidates CRC as it makes these decisions. Neither Duke Energy Ohio nor Duke Energy Indiana consolidate CRC.

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 guarantees for debt service and operations and maintenance reserves in support of debt financings. Assets are restricted and cannot be pledged as collateral or sold to third parties without prior approval of debt holders. 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. Duke Energy consolidated the entities as it makes all of these decisions.

The tables below show VIEs not consolidated and how these entities impact the Condensed Consolidated Balance Sheets.


		March 31, 2014
		Duke Energy							Duke Energy Ohio^(a)		Duke Energy Indiana^(a)
(in millions)		Renewables			Other		Total		Duke Energy Ohio^(a)		Duke Energy Indiana^(a)
Receivables			$	―	$	―	$	―	$	127	$	134
Investments in equity method unconsolidated affiliates				152		3		155		―		―
Investments and other assets				―		4		4		―		―
Total assets				152		7		159		127		134
Other current liabilities				―		2		2		―		―
Deferred credits and other liabilities				―		14		14		―		―
Total liabilities				―		16		16		―		―
Net assets (liabilities)			$	152	$	(9)	$	143	$	127	$	134

(a)	Reflects retained interest in CRC.


		December 31, 2013
		Duke Energy							Duke Energy Ohio^(a)		Duke Energy Indiana^(b)
(in millions)		Renewables			Other		Total		Duke Energy Ohio^(a)		Duke Energy Indiana^(b)
Receivables			$	―	$	―	$	―	$	114	$	143
Investments in equity method unconsolidated affiliates				153		60		213		―		―
Intangibles, net				―		96		96		96		―
Investments and other assets				―		4		4		―		―
Total assets				153		160		313		210		143
Other current liabilities				―		3		3		―		―
Deferred credits and other liabilities				―		15		15		―		―
Total liabilities				―		18		18		―		―
Net assets			$	153	$	142	$	295	$	210	$	143

(a)	Reflects OVEC and retained interest in CRC.
(b)	Reflects retained interest in CRC

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 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.

The most significant of the Other non-consolidated VIEs 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. The initial carrying value of this contract was recorded as an intangible asset when Duke Energy acquired Cinergy in April 2006. This amount is included in the December 31, 2013 table above for Duke Energy and Duke Energy Ohio. The OVEC amount was reclassified to Assets held for sale in conjunction with the planned disposition of the Midwest Generation business in the first quarter of 2014.

See discussion under Consolidated VIEs for additional information related to CRC.

The subordinated notes held by Duke Energy Ohio and Duke Energy Indiana are stated at fair value and are classified within Receivables in their Condensed Consolidated Balance Sheets. 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 the retained interests using the acceptable yield method. This method generally approximates the stated rate on the notes since the allocated basis and the face value are nearly equivalent. An impairment charge is recorded against the carrying value of both retained interests and purchased beneficial interest whenever it is determined that an other-than-temporary impairment has occurred.

Key assumptions used in estimating the fair value in 2014 and 2013 are detailed in the following table.


	Duke Energy Ohio				Duke Energy Indiana
	2014		2013		2014		2013
Anticipated credit loss ratio	0.6	%	0.6	%	0.3	%	0.3	%
Discount rate	1.2	%	1.2	%	1.2	%	1.2	%
Receivable turnover rate	12.8	%	12.8	%	10.4	%	10.3	%

The following table shows the gross and net receivables sold.

	Duke Energy Ohio						Duke Energy Indiana
(in millions)	March 31, 2014			December 31, 2013			March 31, 2014			December 31, 2013
Receivables sold		$	321		$	290		$	319		$	340
Less: Retained interests			127			114			134			143
Net receivables sold		$	194		$	176		$	185		$	197

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

	Duke Energy Ohio					Duke Energy Indiana
	Three Months Ended March 31,					Three Months Ended March 31,
(in millions)		2014		2013			2014		2013
Sales
Receivables sold		$	741	$	638		$	755	$	747
Loss recognized on sale			(4)		(3)			(3)		(3)
Cash flows
Cash proceeds from receivables sold			723		617			761		725
Return received on retained interests			2		1			2		2

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

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.