BUSINESS SEGMENTS

Duke Energy evaluates segment performance based on segment income. Segment income is defined as income from continuing operations net of income attributable to noncontrolling interests. Segment income, as discussed below, includes intercompany revenues and expenses that are eliminated in the Condensed Consolidated Financial Statements. Certain governance costs are allocated to each segment. In addition, direct interest expense and income taxes are included in segment income.

Operating segments are determined based on information used by the chief operating decision-maker in deciding how to allocate resources and evaluate the performance of the business. During the first quarter of 2016, the Duke Energy chief operating decision-maker began to evaluate interim period segment performance based on financial information that includes the impact of income tax levelization within segment income. This represents a change from the previous measure, where the interim period impacts of income tax levelization were included within Other, and therefore excluded from segment income. As a result, prior period segment results presented have been recast to conform to this change.

Products and services are sold between affiliate companies and reportable segments of Duke Energy at cost. Segment assets as presented in the tables that follow exclude all intercompany assets.

DUKE ENERGY

Duke Energy has the following reportable operating segments: Regulated Utilities, International Energy and Commercial Portfolio.

Regulated Utilities conducts electric and natural gas operations that are substantially all regulated and, accordingly, qualify for regulatory accounting treatment. These operations are primarily conducted through the Subsidiary Registrants and are subject to the rules and regulations of the FERC, NRC, NCUC, PSCSC, FPSC, PUCO, IURC and KPSC.

International Energy operates and manages power generation facilities and engages in sales and marketing of electric power, natural gas and natural gas liquids outside the U.S. Its activities principally target power generation in Latin America. Additionally, International Energy owns a 25 percent interest in NMC, a large regional producer of methyl tertiary butyl ether (MTBE) located in Saudi Arabia. The investment in NMC is accounted for under the equity method of accounting. In February 2016, Duke Energy announced it had initiated a process to potentially divest its International Energy business segment, excluding the investment in NMC. See Note 2 for further information.

Commercial Portfolio builds, develops and operates wind and solar renewable generation and storage and energy transmission projects throughout the U.S. For periods subsequent to the sale of the Disposal Group, beginning in the second quarter of 2015, certain immaterial results of operations and related assets previously presented in the Commercial Portfolio segment are presented in Regulated Utilities and Other.

The remainder of Duke Energy’s operations is presented as Other, which is primarily comprised of unallocated corporate interest expense, unallocated corporate costs, contributions to the Duke Energy Foundation and the operations of Duke Energy’s wholly owned captive insurance subsidiary, Bison Insurance Company Limited (Bison).



	Three Months Ended June 30, 2016
								Total
	Regulated		International			Commercial		Reportable
(in millions)	Utilities		Energy			Portfolio		Segments		Other			Eliminations			Consolidated
Unaffiliated revenues	$	5,090	$	270		$	112	$	5,472	$	12		$	—		$	5,484
Intersegment revenues	9		—			—		9		17			(26		)	—
Total revenues	$	5,099	$	270		$	112	$	5,481	$	29		$	(26	)	$	5,484
Segment income (loss)^(a)(b)	$	718	$	(102	)	$	14	$	630	$	(120	)	$	—		$	510
Add back noncontrolling interests																3
Loss from discontinued operations, net of tax																(1		)
Net income																$	512
Segment assets	$	112,754	$	3,131		$	4,329	$	120,214	$	2,260		$	180		$	122,654


(a)	Other includes after-tax charges for costs to achieve mergers of $69 million, primarily due to unrealized losses on forward-starting interest rate swaps related to the Piedmont acquisition, and cost savings initiatives of $15 million primarily due to severance costs. See Notes 2 and 9 for additional information related to the forward-starting interest rate swaps.


(b)	International Energy includes an after-tax impairment charge of $145 million. See Note 2 for additional information.



	Three Months Ended June 30, 2015
								Total
	Regulated		International		Commercial			Reportable
(in millions)	Utilities		Energy		Portfolio			Segments		Other			Eliminations			Consolidated
Unaffiliated revenues	$	5,211	$	287	$	75		$	5,573	$	16		$	—		$	5,589
Intersegment revenues	9		—		—			9		18			(27		)	—
Total revenues	$	5,220	$	287	$	75		$	5,582	$	34		$	(27	)	$	5,589
Segment income (loss)^(a)(b)	$	632	$	52	$	(30	)	$	654	$	(51	)	$	(3	)	$	600
Add back noncontrolling interests																4
Loss from discontinued operations, net of tax^(c)																(57		)
Net income																$	547

(a) Other includes after-tax costs to achieve the Progress Energy merger of $14 million.


(b)	Commercial Portfolio includes state tax expense of $41 million, resulting from changes to state apportionment factors due to the sale of the Disposal Group, that does not qualify for discontinued operations. Refer to Note 2 for further information related to the sale.


(c)	Includes the after-tax impact of $46 million for the agreement in principle reached in a lawsuit related to the Disposal Group. Refer to Note 5 for further information related to the lawsuit.



	Six Months Ended June 30, 2016
							Total
	Regulated		International		Commercial		Reportable
(in millions)	Utilities		Energy		Portfolio		Segments		Other			Eliminations			Consolidated
Unaffiliated revenues	$	10,340	$	516	$	227	$	11,083	$	23		$	—		$	11,106
Intersegment revenues	18		—		—		9		35			(53		)	—
Total revenues	$	10,358	$	516	$	227	$	11,092	$	58		$	(53	)	$	11,106
Segment income (loss)^(a)(b)	$	1,413	$	21	$	41	$	1,475	$	(274	)	$	—		$	1,201
Add back noncontrolling interests															8
Income from discontinued operations, net of tax															2
Net income															$	1,211


(a)	Other includes after-tax charges for costs to achieve mergers of $143 million, primarily due to unrealized losses on forward-starting interest rate swaps related to the Piedmont acquisition, and cost savings initiatives of $27 million primarily due to severance costs. See Notes 2 and 9 for additional information related to the forward-starting interest rate swaps.


(b)	International Energy includes an after-tax impairment charge of $145 million. See Note 2 for additional information.



	Six Months Ended June 30, 2015
								Total
	Regulated		International		Commercial			Reportable
(in millions)	Utilities		Energy		Portfolio			Segments		Other			Eliminations			Consolidated
Unaffiliated revenues	$	10,924	$	560	$	148		$	11,632	$	22		$	—		$	11,654
Intersegment revenues	19		—		—			19		39			(58		)	—
Total revenues	$	10,943	$	560	$	148		$	11,651	$	61		$	(58	)	$	11,654
Segment income (loss)^(a)(b)	$	1,406	$	88	$	(23	)	$	1,471	$	(94	)	$	(4	)	$	1,373
Add back noncontrolling interests																7
Income from discontinued operations, net of tax^(c)																34
Net income																$	1,414

(a) Other includes after-tax costs to achieve the Progress Energy merger of $27 million.


(b)	Commercial Portfolio includes state tax expense of $41 million, resulting from changes to state apportionment factors due to the sale of the Disposal Group, that does not qualify for discontinued operations. Refer to Note 2 for further information related to the sale.


(c)	Includes after-tax impact of $53 million for the agreement in principle reached in a lawsuit related to the Disposal Group. Refer to Note 5 for further information related to the lawsuit.

SUBSIDIARY REGISTRANTS

The Subsidiary Registrants each have one reportable operating segment, Regulated Utilities, which generates, transmits, distributes and sells electricity, and for Duke Energy Ohio, also transports and sells natural gas. The remainder of operations is primarily comprised of unallocated corporate costs and classified as Other. The following table provides the amount of Other net expense.



	Three Months Ended						Six Months Ended
	June 30,						June 30,
(in millions)	2016			2015			2016			2015
Duke Energy Carolinas	$	(17	)	$	(10	)	$	(34	)	$	(18	)
Progress Energy^(a)	(45		)	(42		)	(94		)	(84		)
Duke Energy Progress	(8		)	(4		)	(16		)	(8		)
Duke Energy Florida	(5		)	(3		)	(9		)	(6		)
Duke Energy Ohio	(10		)	(6		)	(19		)	(8		)
Duke Energy Indiana	(5		)	(2		)	(7		)	(4		)


(a)	Other for Progress Energy also includes interest expense on corporate debt instruments of $55 million and $111 million for the three and six months ended June 30, 2016, respectively, and $59 million and $119 million for the three and six months ended June 30, 2015, respectively.

The assets of the Subsidiary Registrants are substantially all included within the Regulated Utilities segment at June 30, 2016.

Duke Energy Ohio

Duke Energy Ohio had two reportable operating segments, Regulated Utilities and Commercial Portfolio, during 2015 prior to the sale of the nonregulated Midwest generation business. Duke Energy Ohio's Commercial Portfolio segment had total revenues of $14 million and segment loss of $9 million for the six months ended June 30, 2015. As a result of the sale discussed in Note 2, Commercial Portfolio no longer qualifies as a Duke Energy Ohio reportable operating segment. Therefore, beginning in the second quarter of 2015, all of the remaining assets and related results of operations previously presented in Commercial Portfolio are presented in Regulated Utilities and Other.