ASSET RETIREMENT OBLIGATIONS

Duke Energy records an 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 AROs 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, 2018
			Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Decommissioning of nuclear power facilities^(a)	$	5,696	$	2,335	$	3,209	$	2,679	$	530	$	—	$	—	$	—
Closure of ash impoundments	4,446		1,568		2,123		2,103		20		52		702		—
Other^(b)	325		46		79		38		41		41		20		19
Total asset retirement obligation	$	10,467	$	3,949	$	5,411	$	4,820	$	591	$	93	$	722	$	19
Less: current portion	919		290		514		509		5		6		109		—
Total noncurrent asset retirement obligation	$	9,548	$	3,659	$	4,897	$	4,311	$	586	$	87	$	613	$	19


(a)	Duke Energy amount includes purchase accounting adjustments related to the merger with Progress Energy.


(b)	Primarily includes obligations related to asbestos removal. Duke Energy Ohio and Piedmont also include AROs related to the retirement of natural gas mains and services. Duke Energy includes AROs related to the removal of renewable energy generation assets.

Nuclear Decommissioning Liability

AROs 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 are stated in 2018 dollars for Duke Energy Carolinas, 2017 dollars for Duke Energy Florida and 2014 dollars for Duke Energy Progress, and include costs to decommission plant components not subject to radioactive contamination.



	Annual Funding		Decommissioning
(in millions)	Requirement^(a)		Costs^(a)		Year of Cost Study
Duke Energy	$	24	$	8,737	2014 and 2018
Duke Energy Carolinas^(b)(c)	—		4,291		2018
Duke Energy Progress	24		3,550		2014
Duke Energy Florida^(d)	—		896		2018


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


(b)	Decommissioning cost for Duke Energy Carolinas reflects its ownership interest in jointly owned reactors. Other joint owners are responsible for decommissioning costs related to their interest in the reactors.


(c)	Duke Energy Carolinas' site-specific nuclear decommissioning cost study completed in 2018 is expected to be filed with the NCUC and PSCSC by the second quarter 2019. Duke Energy Carolinas will also complete a new funding study, which will be completed and filed with the NCUC and PSCSC in 2019.


(d)	Duke Energy Florida's site-specific nuclear decommissioning cost study and a new funding study were completed and filed with the FPSC in 2018.

Nuclear Decommissioning Trust Funds

Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida each maintain NDTFs that are intended to pay for the decommissioning costs of their 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 IRS.

Use of the NDTF 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 AROs. 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 AROs associated with nuclear decommissioning. Duke Energy Florida is actively decommissioning Crystal River Unit 3 and was granted an exemption from the NRC, which allows for use of the NDTF for all aspects of nuclear decommissioning. The entire balance of Duke Energy Florida's NDTF may be applied toward license termination, spent fuel and site restoration costs incurred to decommission Crystal River Unit 3 and is excluded from the table below. See Note 16 for additional information related to the fair value of the Duke Energy Registrants' NDTFs.



	December 31,
(in millions)	2018		2017
Duke Energy	$	5,579	$	5,864
Duke Energy Carolinas	3,133		3,321
Duke Energy Progress	2,446		2,543

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 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

The NRC has acknowledged permanent cessation of operation and permanent removal of fuel from the reactor vessel at Crystal River Unit 3. Therefore, the license no longer authorizes operation of the reactor. In January 2018, Crystal River Unit 3 reached a SAFSTOR status.

Closure of Ash Impoundments

The Duke Energy Registrants are subject to state and federal regulations covering the closure of coal ash impoundments, including the EPA CCR rule and the Coal Ash Act, and other agreements. AROs recorded on the Duke Energy Registrants' Consolidated Balance Sheets include the legal obligation for closure of coal ash basins and the disposal of related ash as a result of these regulations and agreements.

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 ash 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 and other agreements. The ARO amount will be adjusted as additional information is gained through the closure and post-closure process, including acceptance and approval of compliance approaches, which may change management assumptions, and may result in a material change to the balance. See ARO Liability Rollforward section below for information on revisions made to the coal ash liability during 2018 and 2017.

Asset retirement costs associated with the AROs 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. See Note 4 for additional information on recovery of coal ash costs.

ARO Liability Rollforward

The following tables present 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			Piedmont
Balance at December 31, 2016	$	10,611		$	3,895		$	5,475		$	4,697		$	778		$	77		$	866		$	14
Accretion expense^(a)	435			184			228			195			33			3			32			1
Liabilities settled^(b)	(619		)	(282		)	(270		)	(204		)	(65		)	(7		)	(49		)	(8		)
Liabilities incurred in the current year^(c)	51			5			—			—			—			7			29			8
Revisions in estimates of cash flows	(303		)	(192		)	(19		)	(15		)	(4		)	4			(97		)	—
Balance at December 31, 2017	10,175			3,610			5,414			4,673			742			84			781			15
Accretion expense^(a)	427			179			225			196			29			4			29			1
Liabilities settled^(b)	(638		)	(281		)	(272		)	(227		)	(45		)	(5		)	(79		)	—
Liabilities incurred in the current year^(c)	39			8			5			—			5			—			25			—
Revisions in estimates of cash flows^(d)	464			433			39			178			(140		)	10			(34		)	3
Balance at December 31, 2018	$	10,467		$	3,949		$	5,411		$	4,820		$	591		$	93		$	722		$	19


(a)	Substantially all accretion expense for the years ended December 31, 2018, and 2017 relates to Duke Energy’s regulated operations and has been deferred in accordance with regulatory accounting treatment.


(b)	Amounts primarily relate to ash impoundment closures and nuclear decommissioning of Crystal River Unit 3.


(c)	Amounts primarily relate to AROs recorded as a result of state agency closure requirements at Duke Energy Indiana.

(d)

Amounts primarily relate to increases in groundwater monitoring estimates for closure of ash impoundments and an increase for nuclear decommissioning costs at Duke Energy Carolinas' nuclear sites compared to original estimates, partially offset by a reduction for nuclear decommissioning at Crystal River Unit 3 compared to original estimates and modifications to the timing of expected cash flows for coal ash AROs.