ASSET RETIREMENT OBLIGATIONS

Duke Energy records an asset retirement obligation (ARO) when it has a legal obligation to incur retirement costs associated with the retirement of a long-lived asset and the obligation can be reasonably estimated. Certain assets of the Duke Energy Registrants’ 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 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.

The following table presents the AROs recorded on the Consolidated Balance Sheets.



	December 31, 2015
			Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana
Decommissioning of Nuclear Power Facilities	$	5,072	$	1,730	$	3,093	$	2,349	$	744	$	—	$	—
Closure of Ash Impoundments	4,958		2,161		2,196		2,188		7		94		507
Other^(a)	234		27		80		30		51		31		18
Total Asset retirement obligation	$	10,264	$	3,918	$	5,369	$	4,567	$	802	$	125	$	525


(a)	Includes obligations related to asbestos removal and the closure of certain landfills at fossil generation facilities. Duke Energy Ohio also includes AROs related to the retirement of natural gas mains. Duke Energy also includes AROs related to the removal of renewable energy generation assets.

North Carolina and South Carolina Ash Impoundments

On September 20, 2014, the Coal Ash Act became law and was amended on June 24, 2015, by the Mountain Energy Act. The Coal Ash Act, as amended, (i) establishes a Coal Ash Management Commission (Coal Ash Commission) to oversee handling of coal ash within the state; (ii) prohibits construction of new and expansion of existing ash impoundments and use of existing impoundments at retired facilities; (iii) requires closure of ash impoundments at Duke Energy Progress' Asheville and Sutton plants and Duke Energy Carolinas' Riverbend and Dan River stations no later than August 1, 2019 (the Mountain Energy Act provides for the potential extension of closure of the Asheville impoundment until 2022); (iv) requires dry disposal of fly ash at active plants, excluding the Asheville Plant, not retired by December 31, 2018; (v) requires dry disposal of bottom ash at active plants, excluding the Asheville Plant, by December 31, 2019, or retirement of active plants; (vi) requires all remaining ash impoundments in North Carolina to be categorized as high-risk, intermediate-risk or low-risk no later than December 31, 2015, by the NCDEQ with the method of closure and timing to be based upon the assigned risk, with closure no later than December 31, 2029; (vii) establishes requirements to deal with groundwater and surface water impacts from impoundments; and (viii) increases the level of regulation for structural fills utilizing coal ash.

In January 2016, NCDEQ published its draft risk classifications. These risk rankings were generally determined based on three primary criteria: structural integrity of the impoundments and impact to both surface and groundwaters. NCDEQ categorized 12 basins at four sites as intermediate risk and four basins at three plants as low risk. NCDEQ also categorized nine basins at six plants as “low-to-intermediate” risk, thereby not assigning a proposed risk ranking at this time. The risk rankings of these sites will be based upon receipt of additional data primarily related to groundwater quality and the completion of specific modifications and repairs to the impoundments. NCDEQ is expected to finalize its risk classifications as part of a public comment process. Duke Energy cannot predict the final classification.

The Coal Ash Act includes a variance procedure for compliance deadlines and modification of requirements regarding structural fills and compliance boundaries. Provisions of the Coal Ash Act prohibit cost recovery in customer rates for unlawful discharge of ash impoundment waters occurring after January 1, 2014. The Coal Ash Act leaves the decision on cost recovery determinations related to closure of ash impoundments to the normal ratemaking processes before utility regulatory commissions. Duke Energy has and will periodically submit to NCDEQ site-specific coal ash impoundment closure plans or excavation plans in advance of closure. These plans and all associated permits must be approved by NCDEQ before any excavation or closure work can begin.

In September 2014, Duke Energy Carolinas executed a consent agreement with the South Carolina Department of Health and Environmental Control (SCDHEC) requiring the excavation of an inactive ash basin and ash fill area at the W.S. Lee Steam Station. As part of this agreement, in December 2014, Duke Energy Carolinas filed an ash removal plan and schedule with SCDHEC. In April 2015, the federal Coal Combustion Residuals (CCR) rules were published and Duke Energy Carolinas subsequently executed an agreement with the conservation groups Upstate Forever and Save Our Saluda that requires Duke Energy Carolinas to remediate all active and inactive ash storage areas at the W.S. Lee Steam Station. Coal-fired generation at W.S. Lee ceased in 2014 and unit 3 was converted to natural gas in March 2015. In July 2015, Duke Energy Progress executed a consent agreement with the SCDHEC requiring the excavation of an inactive ash fill area at the Robinson Plant within eight years. Coal ash impoundments at the Robinson Plant and W.S. Lee Station sites are required to be closed pursuant to the recently issued CCR rule and the provisions of these consent agreements are consistent with the federal CCR closure requirements.

Coal Combustion Residuals

On April 17, 2015, the EPA published in the Federal Register a rule to regulate the disposal of CCR from electric utilities as solid waste. The federal regulation, which became effective in October 2015, classifies CCR as nonhazardous waste under Subtitle D of the Resource Conservation and Recovery Act and allows for beneficial use of CCR with some restrictions. The regulation applies to all new and existing landfills, new and existing surface impoundments receiving CCR and existing surface impoundments that are no longer receiving CCR but contain liquid located at stations currently generating electricity (regardless of fuel source). The rule 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. In addition to the requirements of the federal CCR regulation, CCR landfills and surface impoundments will continue to be independently regulated by most states. As a result of the EPA rule, Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Ohio and Duke Energy Indiana recorded additional asset retirement obligation amounts during 2015.

Coal Ash Liability

The ARO amount recorded on the Consolidated Balance Sheets is based upon estimated closure costs for impacted ash impoundments. The amount recorded represents the discounted cash flows for estimated closure costs based upon either specific closure plans or the 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 time frame of closure at the individual sites. Closure methods considered include removing the water from the basins, consolidating material as necessary, 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 standards set by federal and state regulations. The ARO amount will be adjusted as additional information is gained through the closure process, including acceptance and approval of compliance approaches which may change management assumptions, and may result in a material change to the balance.

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. See Note 4 for additional information on Regulatory assets related to AROs.

Cost recovery for future expenditures will be pursued through the normal ratemaking process with federal and state utility commissions, which permit recovery of necessary and prudently incurred costs associated with Duke Energy’s regulated operations.

Nuclear Decommissioning Liability

Asset retirement obligations related to nuclear decommissioning are based on site-specific cost studies. The NCUC, PSCSC, and FPSC require updated cost estimates for decommissioning nuclear plants every five years.

The following table summarizes information about the most recent site-specific nuclear decommissioning cost studies. Decommissioning costs in the table below are presented in dollars of the year of the cost study and include costs to decommission plant components not subject to radioactive contamination.



	Annual Funding		Decommissioning
(in millions)	Requirement^(a)		Costs^(a)(b)		Year of Cost Study
Duke Energy	$	14	$	8,130	2013 and 2014
Duke Energy Carolinas	—		3,420		2013
Duke Energy Progress	14		3,550		2014
Duke Energy Florida	—		1,160		2013


(a)	Amounts for Progress Energy equal the sum of Duke Energy Progress and Duke Energy Florida.


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

Duke Energy Progress’ site-specific nuclear decommissioning cost studies were filed with the NCUC and PSCSC in 2015. New funding studies were completed and filed with the NCUC and PSCSC in 2015 as well. Accordingly, in January 2016 Duke Energy Progress received approval from the PSCSC to reduce the annual funding requirement. The NCUC will decide on the appropriate funding level in 2016. Duke Energy Progress will complete and file new funding studies with the FERC in 2016.

Nuclear Decommissioning Trust Funds (NDTF)

Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida each maintain Nuclear Decommissioning Trust Funds (NDTF) that are intended to pay for the decommissioning costs of the respective nuclear power plants. 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. Use of the NTDF investments is restricted to nuclear decommissioning activities including license termination, spent fuel and site restoration. The license termination and spent fuel obligations relate to contaminated decommissioning and are recorded as ARO’s. The site restoration obligation relates to non-contaminated decommissioning and is recorded to cost of removal within Regulatory liabilities on the Consolidated Balance Sheets.

The following table presents the fair value of NDTF assets legally restricted for purposes of settling asset retirement obligations associated with nuclear decommissioning.



	December 31,
(in millions)	2015		2014
Duke Energy	$	4,670	$	5,182
Duke Energy Carolinas	2,686		2,678
Duke Energy Progress^(a)	1,984		1,701
Duke Energy Florida^(a)(b)	—		803

(a) Amounts for Progress Energy equal the sum of Duke Energy Progress and Duke Energy Florida.


(b)	Duke Energy Florida is actively decommissioning Crystal River Unit 3 and was granted an exemption from the NRC which allows for unrestricted use of the NDTF. Therefore, the entire balance of Duke Energy Florida’s NDTF may be applied towards license termination, spent fuel and site restoration costs incurred to decommission Crystal River Unit 3.

Nuclear Operating Licenses

Operating licenses for nuclear units are potentially subject to extension. The following table includes the current expiration of nuclear operating licenses. Duke Energy Florida has requested the NRC terminate the operating license for Crystal River Unit 3 as it permanently ceased operation in February 2013. Refer to Note 4 for further information on decommissioning activity and transition to SAFSTOR.



Unit	Year of Expiration
Duke Energy Carolinas
Catawba Units 1 and 2	2043
McGuire Unit 1	2041
McGuire Unit 2	2043
Oconee Units 1 and 2	2033
Oconee Unit 3	2034
Duke Energy Progress
Brunswick Unit 1	2036
Brunswick Unit 2	2034
Harris	2046
Robinson	2030

ARO Liability Rollforward

The following table presents changes in the liability associated with AROs.



				Duke						Duke			Duke			Duke			Duke
	Duke			Energy			Progress			Energy			Energy			Energy			Energy
(in millions)	Energy			Carolinas			Energy			Progress			Florida			Ohio			Indiana
Balance at December 31, 2013	4,958			1,594			2,570			1,737			833			28			30
Acquisitions	4			—			—			—			—			—			—
Accretion expense^(a)	246			113			135			97			38			2			2
Liabilities settled^(b)	(68		)	—			(68		)	—			(68		)	—			—
Liabilities incurred in the current year^(c)	3,500			1,717			1,783			1,783			—			—			—
Revisions in estimates of cash flows^(d)	(174		)	4			291			288			3			(3		)	—
Balance at December 31, 2014	8,466			3,428			4,711			3,905			806			27			32
Acquisitions^(e)	226			—			226			204			23			—			—
Accretion expense^(a)	384			165			203			169			34			4			15
Liabilities settled^(b)	(422		)	(200		)	(195		)	(125		)	(70		)	(4		)	(23		)
Liabilities incurred in the current year^(c)	1,016			178			282			282			—			116			418
Revisions in estimates of cash flows^(f)	594			347			142			132			9			(18		)	83
Balance at December 31, 2015	$	10,264		$	3,918		$	5,369		$	4,567		$	802		$	125		$	525


(a)	Substantially all accretion expense for the years ended December 31, 2015 and 2014 relates to Duke Energy’s regulated electric operations and has been deferred in accordance with regulatory accounting treatment.


(b)	For 2014, amounts relate to nuclear decommissioning of Crystal River Unit 3. For 2015, amounts primarily relate to ash impoundment closures and nuclear decommissioning of Crystal River Unit 3.


(c)	For 2014, amounts primarily relate to AROs recorded as a result of the Coal Ash Act and an agreement with the SCDHEC related to the W.S. Lee Steam Station. For 2015, amounts primarily relate to AROs recorded as a result of the EPA's rule for disposal of CCR.


(d)	Amounts for Progress Energy and Duke Energy Progress primarily relate to Duke Energy Progress' site-specific nuclear decommissioning cost studies. The Duke Energy amount also includes the impact of Duke Energy Progress' site-specific nuclear decommissioning cost studies on purchase accounting amounts.


(e)	Duke Energy Progress amount relates to the NCEMPA acquisition. See footnote 2 for additional information.


(f)	Primarily relates to the closure of ash impoundments.