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.

The following table presents the AROs recorded on the Condensed Consolidated Balance Sheets.



	September 30, 2016
			Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana
Decommissioning of Nuclear Power Facilities^(a)	$	5,163	$	1,808	$	3,153	$	2,428	$	725	$	—	$	—
Closure of Ash Impoundments	5,411		2,089		2,418		2,398		20		77		828
Other	256		28		86		33		53		31		19
Total asset retirement obligation	$	10,830	$	3,925	$	5,657	$	4,859	$	798	$	108	$	847
Less: current portion	539		303		236		236		—		—		—
Total noncurrent asset retirement obligation	$	10,291	$	3,622	$	5,421	$	4,623	$	798	$	108	$	847

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

North Carolina and South Carolina Ash Basins

Asset retirement obligations recorded on the Duke Energy Carolinas and Duke Energy Progress Condensed Consolidated Balance Sheets at September 30, 2016, and December 31, 2015, include the legal obligation for closure of coal ash basins and the disposal of related ash as a result of the Coal Ash Act, the EPA CCR rule and other agreements. In January 2016, the NCDEQ published draft proposed risk classifications for sites not specifically delineated by the Coal Ash Act as high priority. These risk rankings were generally determined based on three primary criteria: structural integrity of the impoundments and impacts to both surface and groundwater. The NCDEQ's draft proposed classifications categorized 12 basins at four sites as intermediate risk and four basins at three sites as low risk. Basins at high priority sites (Dan River, Riverbend, Asheville and Sutton) require closure through excavation including a combination of transferring the ash to an appropriate engineered landfill or conversion of the ash for beneficial use. Closure of high-priority basins is required to be completed no later than August 1, 2019, except for Asheville which is required to be completed no later than August 1, 2022. Intermediate risk basins require closure through excavation including a combination of converting the basin to a lined industrial landfill, transferring of the ash to an appropriate engineered landfill or conversion of the ash for beneficial use. Closure of intermediate risk basins is required to be completed no later than December 31, 2024. Low risk basins require closure through either the combination of the installation and maintenance of a cap system and groundwater monitoring system designed to minimize infiltration and erosion or other closure options available to intermediate risk basins. Closure of low risk basins is required to be completed no later than December 31, 2029. The NCDEQ's draft proposed classifications also categorized nine basins at six sites as “low-to-intermediate” risk, thereby not assigning a definitive risk ranking at that time. On May 18, 2016, the NCDEQ issued new proposed risk classifications, proposing to rank all originally proposed low risk and "low-intermediate" risk sites as intermediate.

On July 14, 2016, the governor of North Carolina signed legislation which amended the Coal Ash Act and required Duke Energy to undertake dam improvement projects and to provide access to a permanent alternative drinking water source to certain residents within a half mile of coal ash basin compliance boundaries and to certain other potentially impacted residents. The new legislation also ranks basins at the H.F. Lee, Cape Fear and Weatherspoon stations as intermediate risk consistent with Duke Energy's previously announced plans to excavate those basins. These specific intermediate basins require closure through excavation including a combination of transferring ash to an appropriate engineered landfill or conversion of the ash for beneficial use. Closure of these specific intermediate basins is required to be completed no later than August 1, 2028. Upon satisfactory completion of the dam improvement projects and installation of alternate drinking water sources by October 15, 2018, the legislation requires the NCDEQ to reclassify sites proposed as intermediate risk, excluding H.F. Lee, Cape Fear and Weatherspoon, as low risk.

Additionally, the new legislation requires the installation and operation of three large-scale coal ash beneficiation projects which are expected to produce reprocessed ash for use in the concrete industry. Closure of basins at sites with these beneficiation projects are required to be completed no later than December 31, 2029. On October 5, 2016, Duke Energy announced Buck Steam Station as a first location for one of the beneficiation projects.

Per the Coal Ash Act, final proposed classifications were to be subject to Coal Ash Management Commission (Coal Ash Commission) approval. In March 2016, the Coal Ash Commission created by the Coal Ash Act was disbanded by the Governor of North Carolina based on a North Carolina Supreme Court ruling regarding the constitutionality of the body. The new legislation eliminates the Coal Ash Commission and transfers responsibility for ash basin closure oversight to the NCDEQ.

Estimated asset retirement obligations have been recognized based on the assigned risk categories or a probability weighting of potential closure methods. Costs incurred have been deferred as regulatory assets and recovery 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.

ARO Liability Rollforward

In April 2015, the EPA published a rule to regulate the disposal of CCR from electric utilities as solid waste. The federal regulation classifies CCR as nonhazardous waste and allows for beneficial use of CCR with some restrictions. Federal CCR reporting procedures require Duke Energy to make certain closure plans available to the public during the fourth quarter of 2016. In conjunction with preparing these closure plans, the Duke Energy Registrants updated coal ash ARO liability estimates based on additional site specific information about the related costs, methods and timing of work to be performed. Actual closure costs incurred could be materially different from current estimates that form the basis of the recorded asset retirement obligations.

The following table presents the change in liability associated with asset retirement obligations for Duke Energy and the Subsidiary Registrants.



				Duke						Duke			Duke			Duke			Duke
	Duke			Energy			Progress			Energy			Energy			Energy			Energy
(in millions)	Energy			Carolinas			Energy			Progress			Florida			Ohio			Indiana
Balance at December 31, 2015^(a)	$	10,264		$	3,918		$	5,369		$	4,567		$	802		$	125		$	525
Accretion expense^(b)	290			141			171			144			28			4			16
Liabilities settled^(c)	(443		)	(204		)	(203		)	(163		)	(41		)	(4		)	(31		)
Liabilities incurred in the current year	13			—			3			3			—			—			—
Revisions in estimates of cash flows	706			70			317			308			9			(17		)	337
Balance at September 30, 2016	$	10,830		$	3,925		$	5,657		$	4,859		$	798		$	108		$	847


(a)	Primarily relates to decommissioning nuclear power facilities, closure of ash basins, asbestos removal, closure of landfills at fossil generation facilities, retirement of natural gas mains and removal of renewable energy generation assets.


(b)	For the nine months ended September 30, 2016, substantially all accretion expense relates to Duke Energy's regulated electric operations and has been deferred in accordance with regulatory accounting treatment.


(c)	Primarily relates to ash impoundment closures and nuclear decommissioning of Crystal River Unit 3.

Asset retirement costs associated with the asset retirement obligations for operating plants and retired plants are included in Net property, plant and equipment, and Regulatory assets, respectively, on the Condensed Consolidated Balance Sheets.