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, 2017
			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)	$	5,371	$	1,944	$	3,246	$	2,564	$	681	$	—	$	—	$	—
Closure of ash impoundments	4,525		1,629		2,094		2,075		19		39		763		—
Other^(b)	279		37		74		34		42		45		18		15
Total asset retirement obligation	$	10,175	$	3,610	$	5,414	$	4,673	$	742	$	84	$	781	$	15
Less: current portion	689		337		295		295		—		3		54		—
Total noncurrent asset retirement obligation	$	9,486	$	3,273	$	5,119	$	4,378	$	742	$	81	$	727	$	15


(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 in the table below are stated in 2013 or 2014 dollars, depending on the year of the cost study, and include costs to decommission plant components not subject to radioactive contamination.



	Annual Funding		Decommissioning
(in millions)	Requirement^(a)		Costs^(a)(b)		Year of Cost Study
Duke Energy	$	14	$	8,150	2013 and 2014
Duke Energy Carolinas	—		3,420		2013
Duke Energy Progress	14		3,550		2014
Duke Energy Florida	—		1,180		2013


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


(b)	Amounts include the Subsidiary Registrant's ownership interest in jointly owned reactors. Other joint owners are responsible for decommissioning costs related to their interest in the reactors.

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 Internal Revenue Service (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. See Note 16 for additional information related to the fair value of the Duke Energy Registrants' NDTFs.



	December 31,
(in millions)	2017		2016
Duke Energy	$	5,864	$	5,099
Duke Energy Carolinas	3,321		2,882
Duke Energy Progress	2,543		2,217

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

Duke Energy Florida has requested the NRC terminate the operating license for Crystal River Unit 3 as it permanently ceased operation in February 2013. 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 Coal Ash Act, as amended, requires excavation of the Sutton, Riverbend and Dan River basins by August 1, 2019, and Asheville basins by August 1, 2022. Excavation at these sites may include a combination of transfer of coal ash to an engineered landfill or conversion for beneficial use. Basins at the H.F. Lee, Cape Fear and Weatherspoon sites are required to be closed through excavation no later than August 1, 2028. Excavation at these sites can include conversion of the basin to a lined industrial landfill, transfer of ash to an engineered landfill or conversion for beneficial use. The remaining basins are required to be closed no later than December 31, 2024, through conversion to a lined industrial landfill, transfer to an engineered landfill or conversion for beneficial use, unless certain dam improvement projects and alternative drinking water source projects are completed by October 15, 2018. Upon satisfactory completion of these projects, the closure deadline would be extended to December 31, 2029, and could include closure through the combination of a cap system and a groundwater monitoring system.

The Coal Ash Act also required the installation and operation of three large-scale coal ash beneficiation projects to produce reprocessed ash for use in the concrete industry. Duke Energy selected the Buck, H.F. Lee and Cape Fear plants for these projects. Closure at these sites is required to be completed no later than December 31, 2029.

The Coal Ash Act includes a variance procedure for compliance deadlines and other issues surrounding the management of CCR and CCR surface impoundments and prohibits cost recovery in customer rates for unlawful discharge of ash impoundment waters occurring after January 1, 2014. The Coal Ash Act leaves the decision on cost recovery determinations related to closure of ash impoundments to the normal ratemaking processes before utility regulatory commissions. Closure plans and all associated permits must be approved by NCDEQ before any closure work can begin.

The EPA CCR rule establishes requirements regarding landfill design, structural integrity design and assessment criteria for surface impoundments, groundwater monitoring and protection procedures and other operational and reporting procedures to ensure the safe disposal and management of CCR. The EPA CCR rule has certain requirements which if not met could initiate impoundment closure and require closure completion within five years. The EPA CCR rule includes extension requirements, which if met could allow the extension of closure completion by up to 10 years.

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 2017 and 2016.

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

During 2017 and 2016, the Duke Energy Registrants updated coal ash ARO liability estimates based on additional site-specific information for 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 AROs.

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
Balance at December 31, 2015	$	10,249		$	3,918		$	5,369		$	4,567		$	802		$	125		$	525
Acquisitions^(a)	22			—			2			—			2			—			—
Accretion expense^(b)	400			187			230			194			35			5			24
Liabilities settled^(c)	(613		)	(287		)	(272		)	(212		)	(60		)	(5		)	(49		)
Liabilities incurred in the current year	51			—			3			3			—			—			29
Revisions in estimates of cash flows	502			77			143			145			(1		)	(48		)	337
Balance at December 31, 2016	10,611			3,895			5,475			4,697			778			77			866
Accretion expense^(b)	435			184			228			195			33			3			32
Liabilities settled^(c)	(619		)	(282		)	(270		)	(204		)	(65		)	(7		)	(49		)
Liabilities incurred in the current year^(d)	51			5			—			—			—			7			29
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


(a)	Duke Energy amount relates to the Piedmont acquisition. See Note 2 for additional information.


(b)	Substantially all accretion expense for the years ended December 31, 2017, and 2016 relates to Duke Energy’s regulated electric operations and has been deferred in accordance with regulatory accounting treatment.


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


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



(in millions)	Piedmont
Balance at October 31, 2015	$	20
Accretion expense	1
Liabilities settled	(7		)
Liabilities incurred in the current year	6
Revisions in estimates of cash flows	(6		)
Balance at October 31, 2016	14
Liabilities settled	(1		)
Liabilities incurred in the current year	1
Balance at December 31, 2016	14
Accretion expense	1
Liabilities settled	(8		)
Liabilities incurred in the current year	8
Balance at December 31, 2017	$	15