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. See Note 2 for information related to the planned divestiture of International Energy, excluding the investment in NMC.

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 Midwest Generation 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 September 30, 2016
								Total
	Regulated		International		Commercial			Reportable
(in millions)	Utilities		Energy		Portfolio			Segments		Other			Eliminations			Consolidated
Unaffiliated revenues	$	6,421	$	245	$	140		$	6,806	$	15		$	—		$	6,821
Intersegment revenues	9		—		—			9		17			(26		)	—
Total revenues	$	6,430	$	245	$	140		$	6,815	$	32		$	(26	)	$	6,821
Segment income (loss)^(a)(b)	$	1,200	$	64	$	(21	)	$	1,243	$	(189	)	$	—		$	1,054
Add back noncontrolling interests																5
Income from discontinued operations, net of tax^(c)																122
Net income																$	1,181
Segment assets	$	114,707	$	3,153	$	4,414		$	122,274	$	7,228		$	184		$	129,686


(a)	Other includes after-tax charges for costs to achieve mergers of $52 million, primarily due to interest expense related to the Piedmont acquisition financing, and cost savings initiatives of $12 million primarily due to severance costs.


(b)	Commercial Portfolio includes an after-tax impairment of $45 million related to certain equity method investments in renewable energy projects. See Note 13, Variable Interest Entities, for additional information.


(c)	Represents an income tax benefit resulting from deferred tax liability adjustments related to previously sold businesses. See Note 2, Acquisitions and Dispositions, for further information.



	Three Months Ended September 30, 2015
							Total
	Regulated		International		Commercial		Reportable
(in millions)	Utilities		Energy		Portfolio		Segments		Other			Eliminations			Consolidated
Unaffiliated revenues	$	6,138	$	281	$	66	$	6,485	$	(2	)	$	—		$	6,483
Intersegment revenues	9		—		—		9		19			(28		)	—
Total revenues	$	6,147	$	281	$	66	$	6,494	$	17		$	(28	)	$	6,483
Segment income (loss)^(a)(b)	$	905	$	69	$	8	$	982	$	(45	)	$	—		$	937
Add back noncontrolling interests															3
Loss from discontinued operations, net of tax															(5		)
Net income															$	935


(a)	Regulated Utilities includes an after-tax charge of $56 million related to the Edwardsport settlement. See Note 4 for further information.


(b)	Other includes $15 million of after-tax costs to achieve the 2012 Progress Energy merger.



	Nine Months Ended September 30, 2016
							Total
	Regulated		International		Commercial		Reportable
(in millions)	Utilities		Energy		Portfolio		Segments		Other			Eliminations			Consolidated
Unaffiliated revenues	$	16,761	$	761	$	366	$	17,888	$	39		$	—		$	17,927
Intersegment revenues	27		—		—		27		52			(79		)	—
Total revenues	$	16,788	$	761	$	366	$	17,915	$	91		$	(79	)	$	17,927
Segment income (loss)^(a)(b)(c)	$	2,613	$	85	$	20	$	2,718	$	(463	)	$	—		$	2,255
Add back noncontrolling interests															13
Income from discontinued operations, net of tax^(d)															124
Net income															$	2,392


(a)	Other includes after-tax charges for costs to achieve mergers of $195 million, primarily due to losses on forward-starting interest rate swaps related to the Piedmont acquisition, and cost savings initiatives of $39 million primarily due to severance costs. See Note 10 for additional information related to the swaps.


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


(c)	Commercial Portfolio includes an after-tax impairment of $45 million related to certain equity method investments in renewable energy projects. See Note 13, Variable Interest Entities, for additional information.


(d)	Includes income tax benefit of $122 million resulting from deferred tax liability adjustments related to previously sold businesses. See Note 2 for further information.



	Nine Months Ended September 30, 2015
								Total
	Regulated		International		Commercial			Reportable
(in millions)	Utilities		Energy		Portfolio			Segments		Other			Eliminations			Consolidated
Unaffiliated revenues	$	17,062	$	841	$	214		$	18,117	$	20		$	—		$	18,137
Intersegment revenues	28		—		—			28		58			(86		)	—
Total revenues	$	17,090	$	841	$	214		$	18,145	$	78		$	(86	)	$	18,137
Segment income (loss)^(a)(b)(c)	$	2,311	$	157	$	(15	)	$	2,453	$	(139	)	$	(4	)	$	2,310
Add back noncontrolling interests																10
Income from discontinued operations, net of tax^(d)																29
Net income																$	2,349


(a)	Regulated Utilities includes an after-tax charge of $56 million related to the Edwardsport settlement. Refer to Note 4 for further information.

(b) Other includes $42 million of after-tax costs to achieve the 2012 Progress Energy merger.


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


(d)	Includes after-tax impact of $53 million for the settlement agreement reached in a lawsuit related to the Midwest Generation 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						Nine Months Ended
	September 30,						September 30,
(in millions)	2016			2015			2016			2015
Duke Energy Carolinas	$	(16	)	$	(10	)	$	(50	)	$	(28	)
Progress Energy^(a)	(45		)	(3		)	(139		)	(87		)
Duke Energy Progress	(10		)	(4		)	(26		)	(12		)
Duke Energy Florida	(5		)	(3		)	(14		)	(9		)
Duke Energy Ohio	(10		)	(12		)	(29		)	(20		)
Duke Energy Indiana	(3		)	(2		)	(10		)	(6		)


(a)	Other for Progress Energy also includes interest expense on corporate debt instruments of $55 million and $166 million for the three and nine months ended September 30, 2016, respectively, and $61 million and $180 million for the three and nine months ended September 30, 2015, respectively.

The assets of the Subsidiary Registrants are substantially all included within the Regulated Utilities segment at September 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 nine months ended September 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.

FUTURE OPERATING SEGMENTS

Due to the Piedmont acquisition and the agreements to sell the International Disposal Group, the chief operating decision maker changed how the business will be managed beginning in the fourth quarter of 2016. The financial reporting structure has been realigned to include the following segments: Electric Utilities and Infrastructure, Gas Utilities and Infrastructure, and Commercial Renewables.


•	Electric Utilities and Infrastructure will be comprised of the regulated electric utilities in the Carolinas, Florida and the Midwest. This segment will also include the commercial transmission infrastructure investments.


•	Gas Utilities and Infrastructure will contain Piedmont, Duke Energy's local distribution companies in Ohio and Kentucky, and gas storage and pipeline investments.


•	Commercial Renewables will primarily include the company's non-regulated utility scale wind and solar generation assets.


•	International Energy will remain a segment until the divestiture is complete, although results of the equity method investment in NMC will be recast to Other in the fourth quarter of 2016.

See Note 2 for further information on the Piedmont and International Energy transactions.