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Business Segments
 9 Months Ended
Sep. 30, 2012
Business Segments

3. Business Segments

Effective with the first quarter of 2012, management began evaluating segment performance based on Segment Income. Segment Income is defined as income from continuing operations net of income attributable to noncontrolling interests. In conjunction with management's use of the new reporting measure, certain governance costs that were previously unallocated have now been allocated to each of the segments. In addition, direct interest expense and income taxes are included in segment income. Prior year segment profitability information has been recast to conform to the current year presentation. None of these changes impacts the reportable operating segments or the Duke Energy Registrants' previously reported consolidated revenues, net income or earnings-per-share.

Duke Energy

Duke Energy has the following reportable operating segments: USFE&G, Commercial Power and International Energy.

USFE&G generates, transmits, distributes and sells electricity in North Carolina, South Carolina, west central Florida, central, north central and southern Indiana, and northern Kentucky. USFE&G also transmits, and distributes electricity in southwestern Ohio. Additionally, USFE&G transports and sells natural gas in southwestern Ohio and northern Kentucky. It conducts operations primarily through Duke Energy Carolinas, Progress Energy Carolinas, Progress Energy Florida, certain regulated portions of Duke Energy Ohio (including Duke Energy Kentucky), and Duke Energy Indiana.

Commercial Power owns, operates and manages power plants and engages in the wholesale marketing and procurement of electric power, fuel and emission allowances related to these plants, as well as other contractual positions. Commercial Power also has a retail sales subsidiary, Duke Energy Retail Sales, LLC (Duke Energy Retail), which is certified by the PUCO as a Competitive Retail Electric Service provider in Ohio. Through Duke Energy Generation Services, Inc. and its affiliates (DEGS), Commercial Power engages in the development, construction and operation of renewable energy projects. In addition, DEGS develops commercial transmission projects.

International Energy principally operates and manages power generation facilities and engages in sales and marketing of electric power and natural gas outside the U.S. It conducts operations primarily through Duke Energy International, LLC and its affiliates and its activities principally target power generation in Latin America. Additionally, International Energy owns a 25% interest in National Methanol Company, located in Saudi Arabia, which is a large regional producer of methanol and methyl tertiary butyl ether.

The remainder of Duke Energy's operations is presented as Other. While it is not considered an operating segment, Other primarily includes unallocated corporate costs, which include costs not allocable to Duke Energy's reportable business segments, primarily interest expense on corporate debt instruments, costs to achieve mergers and divestitures, and costs associated with certain corporate severance programs. It also includes, Bison Insurance Company Limited (Bison), Duke Energy's wholly owned, captive insurance subsidiary, Duke Energy's 50% interest in DukeNet Communications, LLC (DukeNet) and related telecommunications businesses, and Duke Energy Trading and Marketing, LLC, which is 40% owned by Exxon Mobil Corporation and 60% owned by Duke Energy.

Business Segment Data           
           Segment Income/
  Unaffiliated  Intersegment  Total  Consolidated
(in millions)Revenues Revenues Revenues Net Income(a)
Three Months Ended September 30, 2012           
USFE&G$ 5,830 $ 12 $ 5,842 $ 790
Commercial Power  508   17   525   12
International Energy  382   ―   382   103
 Total reportable segments  6,720   29   6,749   905
Other(c)  2   18   20   (315)
Eliminations  ―   (47)   (47)   ―
Add back of noncontrolling interest component  ―   ―   ―   4
Income from Discontinued Operations, net of tax  ―   ―   ―   4
 Total consolidated$ 6,722 $ ― $ 6,722 $ 598
Three Months Ended September 30, 2011           
USFE&G(b)$ 2,917 $ 9 $ 2,926 $ 337
Commercial Power  684   3   687   24
International Energy  360   ―   360   115
 Total reportable segments  3,961   12   3,973   476
Other  3   11   14   (5)
Eliminations  ―   (23)   (23)   ―
Add back of noncontrolling interest component  ―   ―   ―   (2)
Income from Discontinued Operations, net of tax  ―   ―   ―   1
 Total consolidated$ 3,964 $ ― $ 3,964 $ 470

           Segment Income/
  Unaffiliated  Intersegment  Total  Consolidated
(in millions)Revenues Revenues Revenues Net Income(a)
Nine Months Ended September 30, 2012           
USFE&G(b)$ 11,178 $ 29 $ 11,207 $ 1,263
Commercial Power  1,560   47   1,607   71
International Energy  1,181   ―   1,181   350
 Total reportable segments  13,919   76   13,995   1,684
Other(c)  10   41   51   (356)
Eliminations  ―   (117)   (117)   ―
Add back of noncontrolling interest component  ―   ―   ―   12
Income from Discontinued Operations, net of tax  ―   ―   ―   5
 Total consolidated$ 13,929 $ ― $ 13,929 $ 1,345
Nine Months Ended September 30, 2011           
USFE&G(b)$ 8,131 $ 27 $ 8,158 $ 975
Commercial Power  1,918   8   1,926   103
International Energy  1,114   ―   1,114   370
 Total reportable segments  11,163   35   11,198   1,448
Other  (2)   36   34   (31)
Eliminations  ―   (71)   (71)   ―
Add back of noncontrolling interest component  ―   ―   ―   6
Income from Discontinued Operations, net of tax  ―   ―   ―   1
 Total consolidated$ 11,161 $ ― $ 11,161 $ 1,424
             
(a)Segment results exclude noncontrolling interests and results of entities classified as discontinued operations.
(b)As discussed further in Note 4, Duke Energy recorded pre-tax impairment and other charges of $600 million and $222 million for the nine months ended September 30, 2012 and 2011, respectively, related to the Edwardsport Integrated Gasification Combined Cycle (IGCC) project.
(c)Includes after-tax costs to achieve of $293 million and $306 million for the three and nine months ended September 30, 2012, respectively, related to the Progress merger on July 2, 2012 (net of tax of $164 and $166 million for the three and nine months ended September 30, 2012, respectively).

Segment Assets     
        
 Segment assets in the following table exclude all intercompany assets.
        
(in millions)September 30, 2012 December 31, 2011
USFE&G$ 96,919 $ 47,977
Commercial Power  6,897   6,939
International Energy  4,790   4,539
 Total reportable segments  108,606   59,455
Other  3,206   2,961
Reclassifications(a)  196   110
 Total consolidated assets$ 112,008 $ 62,526
        
(a)Primarily represents reclassification of federal tax balances in consolidation.

Duke Energy Ohio

Duke Energy Ohio has two reportable operating segments, Franchised Electric and Gas and Commercial Power.

Franchised Electric and Gas transmits and distributes electricity in southwestern Ohio and generates, transmits, distributes and sells electricity in northern Kentucky. Franchised Electric and Gas also transports and sells natural gas in southwestern Ohio and northern Kentucky. It conducts operations primarily through Duke Energy Ohio and its wholly owned subsidiary Duke Energy Kentucky.

Commercial Power owns, operates and manages power plants and engages in the wholesale marketing and procurement of electric power, fuel and emission allowances related to these plants, as well as other contractual positions. Duke Energy Ohio's Commercial Power reportable operating segment does not include the operations of DEGS or Duke Energy Retail, which is included in the Commercial Power reportable operating segment at Duke Energy.

The remainder of Duke Energy Ohio's operations is presented as Other. While it is not considered an operating segment, Other primarily includes certain governance costs allocated by its parent, Duke Energy (see Note 18).

Business Segment Data     
       
     Segment Income (Loss)/
  Unaffiliated  Consolidated
(in millions)Revenues(a) Net Income
Three Months Ended September 30, 2012     
Franchised Electric and Gas$ 431 $ 49
Commercial Power  341   (17)
 Total reportable segments  772   32
Other  ―   (18)
Eliminations  (15)   ―
 Total consolidated$ 757 $ 14
Three Months Ended September 30, 2011     
Franchised Electric and Gas$ 333 $ 38
Commercial Power  505   16
 Total reportable segments  838   54
Other  ―   (3)
 Total consolidated$ 838 $ 51

     Segment Income/
  Unaffiliated  Consolidated
(in millions)Revenues(a) Net Income
Nine Months Ended September 30, 2012     
Franchised Electric and Gas$ 1,291 $ 113
Commercial Power  1,137   44
 Total reportable segments  2,428   157
Other  ―   (24)
Eliminations  (42)   ―
 Total consolidated$ 2,386 $ 133
Nine Months Ended September 30, 2011     
Franchised Electric and Gas$ 1,112 $ 115
Commercial Power  1,299   50
 Total reportable segments  2,411   165
Other  ―   (8)
 Total consolidated$ 2,411 $ 157
       
(a)There was an insignificant amount of intersegment revenues for the three and nine months ended September 30, 2011.

Segment Assets      
         
 Segment assets in the following table exclude all intercompany assets.
         
(in millions)September 30, 2012 December 31, 2011
Franchised Electric and Gas $ 6,399 $ 6,293
Commercial Power   4,157   4,740
 Total reportable segments   10,556   11,033
Other   110   259
Reclassifications(a)   (172)   (353)
 Total consolidated assets $ 10,494 $ 10,939
         
(a)Primarily represents reclassification of federal tax balances in consolidation.

Duke Energy Carolinas and Duke Energy Indiana

Duke Energy Carolinas and Duke Energy Indiana each have one reportable operating segment, Franchised Electric, which generates, transmits, distributes and sells electricity in central and western North Carolina and western South Carolina, and north central, central and southern Indiana, respectively.

The remainder of Duke Energy Carolinas' and Duke Energy Indiana's operations are included in Other. While it is not considered an operating segment, Other primarily includes costs to achieve certain mergers and divestitures, certain corporate severance programs, and certain costs for use of corporate assets as allocated to Duke Energy Carolinas or Duke Energy Indiana. Duke Energy Carolinas had a net loss of $119 million and $137 million for the three and nine months ended September 30, 2012 recorded in Other primarily as a result of costs to achieve related to the Progress Energy merger. Duke Energy Indiana had a net loss was $14 million and $19 million for the three and nine months ended September 30, 2012 recorded in Other. Duke Energy Carolinas' and Duke Energy Indiana's net loss for the three and nine months ended September 30, 2011 recorded in Other was not material.

At September 30, 2012 and December 31, 2011 all of Duke Energy Carolinas' and Duke Energy Indiana's assets are each owned by the Franchised Electric operating segment. For the three and nine months ended September 30, 2012 and 2011, substantially all revenues and expenses are from the Franchised Electric operating segment of each registrant.