RELATED PARTY TRANSACTIONS

The Subsidiary Registrants engage in related party transactions in accordance with applicable state and federal commission regulations. Refer to the Condensed Consolidated Balance Sheets of the Subsidiary Registrants for balances due to or due from related parties. Material amounts related to transactions with related parties included in the Condensed Consolidated Statements of Operations and Comprehensive Income are presented in the following table.



	Three Months Ended March 31,
(in millions)	2017		2016
Duke Energy Carolinas
Corporate governance and shared service expenses^(a)	$	199	$	217
Indemnification coverages^(b)	6		5
JDA revenue^(c)	16		9
JDA expense^(c)	31		41
Intercompany natural gas purchases^(d)	1		—
Progress Energy
Corporate governance and shared service expenses^(a)	$	169	$	174
Indemnification coverages^(b)	10		9
JDA revenue^(c)	31		41
JDA expense^(c)	16		9
Intercompany natural gas purchases^(d)	19		—
Duke Energy Progress
Corporate governance and shared service expenses^(a)	$	103	$	100
Indemnification coverages^(b)	4		4
JDA revenue^(c)	31		41
JDA expense^(c)	16		9
Intercompany natural gas purchases^(d)	19		—
Duke Energy Florida
Corporate governance and shared service expenses^(a)	$	66	$	74
Indemnification coverages^(b)	6		5
Duke Energy Ohio
Corporate governance and shared service expenses^(a)	$	90	$	85
Indemnification coverages^(b)	1		1
Duke Energy Indiana
Corporate governance and shared service expenses^(a)	$	90	$	94
Indemnification coverages^(b)	2		2
Piedmont
Corporate governance and shared service expenses^(a)	$	6	$	—
Indemnification coverages^(b)	1		—
Intercompany natural gas sales^(d)	20		—

(a)

The Subsidiary Registrants are charged their proportionate share of corporate governance and other shared services costs, primarily related to human resources, employee benefits, information technology, legal and accounting fees, as well as other third-party costs. These amounts are recorded in Operation, maintenance and other on the Condensed Consolidated Statements of Operations and Comprehensive Income.


(b)	The Subsidiary Registrants incur expenses related to certain indemnification coverages through Bison, Duke Energy’s wholly owned captive insurance subsidiary. These expenses are recorded in Operation, maintenance and other on the Condensed Consolidated Statements of Operations and Comprehensive Income.

(c)

Duke Energy Carolinas and Duke Energy Progress participate in a JDA, which allows the collective dispatch of power plants between the service territories to reduce customer rates. Revenues from the sale of power under the JDA are recorded in Operating Revenues on the Condensed Consolidated Statements of Operations and Comprehensive Income. Expenses from the purchase of power under the JDA are recorded in Fuel used in electric generation and purchased power on the Condensed Consolidated Statements of Operations and Comprehensive Income.

(d)

Piedmont provides long-term natural gas delivery service to Duke Energy Carolinas and Duke Energy Progress' natural gas-fired generation facilities. Piedmont recorded the sales in Operating Revenues – Regulated natural gas, and Duke Energy Carolinas and Duke Energy Progress recorded the related purchases in Operating Expenses – Cost of natural gas on their Condensed Consolidated Statements of Operations and Comprehensive Income. The amounts are not eliminated in accordance with rate-based accounting regulations. For the three months ended March 31, 2016, which was prior to the Piedmont acquisition, Piedmont recorded $19 million and $1 million of natural gas sales with Duke Energy Progress and Duke Energy Carolinas, respectively.

In addition to the amounts presented above, the Subsidiary Registrants record the impact on net income of other affiliate transactions, including rental of office space, participation in a money pool arrangement, other operational transactions and their proportionate share of certain charged expenses. See Note 6 to the Consolidated Financial Statements in the Annual Report on Form 10-K for the year ended December 31, 2016 for more information regarding money pool. The net impact of these transactions was not material for the three months ended March 31, 2017 and 2016, for the Subsidiary Registrants.

As discussed in Note 12, certain trade receivables have been sold by Duke Energy Ohio and Duke Energy Indiana to CRC, an affiliate formed by a subsidiary of Duke Energy. The proceeds obtained from the sales of receivables are largely cash but also include a subordinated note from the affiliate for a portion of the purchase price.

Equity Method Investments

Piedmont has related party transactions as a customer of its equity method investments in natural gas storage and transportation facilities. Below are expenses for the three months ended March 31, 2017 and 2016, which are included in Operating Expenses – Cost of natural gas on Piedmont's Condensed Consolidated Statement of Operations and Comprehensive Income.



		Three Months Ended March 31,
(in millions)	Type of expense	2017		2016
Cardinal	Transportation Costs	$	2	$	2
Pine Needle	Gas Storage Costs	2		3
Hardy Storage	Gas Storage Costs	2		2
Total		$	6	$	7

In association with these transactions, Piedmont has accounts payable to its equity method investments of $2 million at March 31, 2017, and December 31, 2016. These amounts are included in Accounts payable on the Condensed Consolidated Balance Sheets.

Intercompany Income Taxes

Duke Energy and the Subsidiary Registrants file a consolidated federal income tax return and other state and jurisdictional returns. The Subsidiary Registrants have a tax sharing agreement with Duke Energy for the allocation of consolidated tax liabilities and benefits. Income taxes recorded represent amounts the Subsidiary Registrants would incur as separate C-Corporations. The following table includes the balance of intercompany income tax receivables and payables for the Subsidiary Registrants.



	Duke				Duke		Duke		Duke		Duke
	Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
March 31, 2017
Intercompany income tax receivable	$	19	$	139	$	47	$	48	$	8	$	—	$	—
Intercompany income tax payable	—		—		—		—		—		23		44

December 31, 2016
Intercompany income tax receivable	$	1	$	—	$	—	$	37	$	—	$	—	$	—
Intercompany income tax payable	—		37		90		—		1		3		38