ASSET RETIREMENT OBLIGATIONS

Asset retirement obligations recognized by Duke Energy Carolinas, Progress Energy and Duke Energy Progress relate primarily to decommissioning nuclear power facilities, closure of ash basins in North Carolina and South Carolina, asbestos removal and closure of landfills at fossil generation facilities. Asset retirement obligations recognized at Duke Energy Florida relate primarily to decommissioning nuclear power facilities, asbestos removal and closure of landfills at fossil generation facilities. Asset retirement obligations at Duke Energy Ohio relate primarily to the retirement of natural gas mains, asbestos removal and closure of landfills at fossil generation facilities. Asset retirement obligations at Duke Energy Indiana relate primarily to obligations associated with asbestos removal and closure of landfills at fossil generation facilities. Duke Energy also has asset retirement obligations related to the removal of renewable energy generation assets in addition to the above items. Certain of the Duke Energy Registrants’ assets have an indeterminate life, such as transmission and distribution facilities, and thus the fair value of the retirement obligation is not reasonably estimable. A liability for these asset retirement obligations will be recorded when a fair value is determinable.

The following table presents changes in the liability associated with asset retirement obligations.



(in millions)	Duke Energy			Duke Energy Carolinas			Progress Energy			Duke Energy Progress		Duke Energy Florida			Duke Energy Ohio			Duke Energy Indiana
Balance at December 31, 2012^(a)	$	5,176		$	1,959		$	2,420		$	1,656	$	764		$	28		$	37
Acquisitions	4			—			—			—		—			—			—
Accretion expense^(b)	239			122			113			80		33			2			—
Liabilities settled	(12		)	—			(12		)	—		(12		)	—			—
Revisions in estimates of cash flows^(c)	(449		)	(487		)	49			1		48			(2		)	(7		)
Balance at December 31, 2013^(a)	4,958			1,594			2,570			1,737		833			28			30
Acquisitions	4			—			—			—		—			—			—
Accretion expense^(b)	246			113			135			97		38			2			2
Liabilities settled^(d)	(68		)	—			(68		)	—		(68		)	—			—
Liabilities incurred in the current year^(e)	3,500			1,717			1,783			1,783		—			—			—
Revisions in estimates of cash flows^(c)	(174		)	4			291			288		3			(3		)	—
Balance at December 31, 2014	$	8,466		$	3,428		$	4,711		$	3,905	$	806		$	27		$	32


(a)	Balances at December 31, 2013 and 2012, include $8 million and $7 million, respectively, reported in Other current liabilities on the Consolidated Balance Sheets at Duke Energy, Progress Energy and Duke Energy Progress.


(b)	Substantially all accretion expense for the years ended December 31, 2014 and 2013 relates to Duke Energy’s regulated electric operations and has been deferred in accordance with regulatory accounting treatment.

(c)

For 2014, amounts for Duke Energy, Progress Energy and Duke Energy Progress primarily relate to Duke Energy Progress' site-specific nuclear decommissioning cost studies. Amounts at Duke Energy also include impacts from Duke Energy Progress' site-specific nuclear decommissioning cost studies on purchase accounting amounts. For 2013, amounts for Duke Energy, Duke Energy Carolinas, Progress Energy and Duke Energy Florida primarily relate to the site-specific nuclear decommissioning cost studies.


(d)	Amounts relate to liability settlements for Crystal River Unit 3.


(e)	Amounts primarily relate to asset retirement obligations recorded as a result of the Coal Ash Act and an agreement with the SCDHEC related to the W.S. Lee Steam Station.

The Duke Energy Registrants’ regulated operations accrue costs of removal for property that does not have an associated legal retirement obligation based on regulatory orders from state commissions. These costs of removal are recorded as a regulatory liability in accordance with regulatory accounting treatment. The Duke Energy Registrants do not accrue the estimated cost of removal for any nonregulated assets. See Note 4 for the estimated cost of removal for assets without an associated legal retirement obligation, which are included in Regulatory liabilities on the Consolidated Balance Sheets.

Ash Basins

As of December 31, 2014, as a result of the Coal Ash Act and the agreement with SCDHEC discussed in Note 5, Duke Energy Carolinas and Duke Energy Progress have asset retirement obligations in the amount of $1,735 million and $1,792 million, respectively, related to closure of ash basins in North Carolina and South Carolina.

The asset retirement obligation amount is based upon estimated ash basin closure costs for each of Duke Energy's 32 ash basins located at 14 plants in North Carolina and an ash basin and ash fill area at a plant in South Carolina. The amount recorded represents the discounted cash flows for estimated ash basin closure costs based upon probability weightings of the potential closure methods as evaluated on a site by site basis. Actual costs to be incurred will be dependent upon factors that vary from site to site. The most significant factors are the method and timeframe of closure at the individual sites. Closure methods considered include removing the water from the basins and capping the ash with a synthetic barrier, excavating and relocating the ash to a lined structural fill or lined landfill, or recycling the ash for concrete or some other beneficial use. The ultimate method and timetable for closure will be in compliance with future standards set by the Coal Ash Management Commission established by the Coal Ash Act. The asset retirement obligation amounts will be adjusted as additional information is gained from the Coal Ash Management Commission on acceptable compliance approaches which may change management assumptions.

Asset retirement costs associated with the asset retirement obligations for operating plants and retired plants are included in Net property, plant and equipment, and Regulatory assets, respectively, on the Consolidated Balance Sheets. Of the asset retirement obligations recorded, $896 million and $603 million were recorded in Net property, plant and equipment for Duke Energy Carolinas and Duke Energy Progress, respectively, and $839 million and $1,152 million were recorded in Regulatory assets for Duke Energy Carolinas and Duke Energy Progress, respectively. The asset retirement costs recorded for Duke Energy Progress are net of $37 million of Regulatory liabilities related to cost of removal. Cost recovery for these expenditures is believed to be probable and will be pursued through the normal ratemaking process with the NCUC, PSCSC and FERC.

In December 2014, the EPA signed the first regulation for the disposal of CCR. The federal regulation classifies CCR as nonhazardous waste. The regulation applies to all new and existing landfills, new and existing surface impoundments, structural fills and CCR piles. The law establishes requirements regarding landfill design, structural integrity design and assessment criteria for surface impoundments, groundwater monitoring and protection procedures and other operational and reporting procedures to ensure the safe disposal and management of CCR. Once the rule is effective in 2015, additional ARO amounts will be recorded at the Duke Energy Registrants. For more information, see Note 5.

Nuclear Decommissioning Costs

Use of the NDTF investments are restricted to nuclear decommissioning activities. The NDTF investments are managed and invested in accordance with applicable requirements of various regulatory bodies, including the NRC, FERC, NCUC, PSCSC, FPSC and the Internal Revenue Service (IRS). The fair value of assets legally restricted for purposes of settling asset retirement obligations associated with nuclear decommissioning are $5,182 million and $2,678 million for Duke Energy and Duke Energy Carolinas at December 31, 2014, respectively, and $4,769 million and $2,477 million for Duke Energy and Duke Energy Carolinas at December 31, 2013, respectively. The NDTF balances for Progress Energy, Duke Energy Progress and Duke Energy Florida represent the fair value of assets legally restricted for purposes of settling asset retirement obligations associated with nuclear decommissioning. The NCUC, PSCSC and FPSC require updated cost estimates for decommissioning nuclear plants every five years.

The following table summarizes information about nuclear decommissioning cost studies.



(in millions)	Annual Funding Requirement		Decommissioning Costs_(a)(b)(c)		Year of Cost Study
Duke Energy Carolinas^(d)	$	21	$	3,420	2013
Duke Energy Progress^(e)	14		3,062		2014
Duke Energy Florida	—		1,083		2013


(a)	Represents cost per the most recent site-specific nuclear decommissioning cost studies, including costs to decommission plant components not subject to radioactive contamination.


(b)	Includes the Subsidiary Registrants' ownership interest in jointly owned reactors. Other joint owners are responsible for decommissioning costs related to their interest in the reactors.


(c)	Amounts are in dollars of year of cost study.


(d)	In the fourth quarter of 2014, Duke Energy Carolinas requested from the NCUC a reduction in the annual funding requirement to zero. Duke Energy Carolinas received approval from the NCUC in January 2015.


(e)	Duke Energy Progress' site-specific cost nuclear decommissioning cost studies are expected to be filed with the NCUC and PSCSC by the second quarter of 2015. Duke Energy Progress will also complete a new funding study, which will be completed and filed with the NCUC and PSCSC in 2015.

Nuclear Operating Licenses

Operating licenses for nuclear units are potentially subject to extension. The following table includes the current expiration of nuclear operating licenses.



Unit	Year of Expiration
Duke Energy Carolinas
Catawba Unit 1	2043
Catawba Unit 2	2043
McGuire Unit 1	2041
McGuire Unit 2	2043
Oconee Unit 1	2033
Oconee Unit 2	2033
Oconee Unit 3	2034
Duke Energy Progress
Brunswick Unit 1	2036
Brunswick Unit 2	2034
Harris	2046
Robinson	2030
Duke Energy Florida
Crystal River Unit 3	(a)


(a)	Duke Energy Florida has requested the NRC terminate the operating license as Crystal River Unit 3 permanently ceased operation in February 2013. Refer to Note 4 for further information on decommissioning activity and transition to SAFSTOR.