EMPLOYEE BENEFIT PLANS

DEFINED BENEFIT RETIREMENT PLANS

Duke Energy maintains, and the Subsidiary Registrants participate in, qualified, non-contributory defined benefit retirement plans. The plans cover most U.S. employees using a cash balance formula. Under a cash balance formula, a plan participant accumulates a retirement benefit consisting of pay credits based upon a percentage of current eligible earnings based on age and/or years of service and interest credits. Certain employees are covered under plans that use a final average earnings formula. Under these average earnings formulas, a plan participant accumulates a retirement benefit equal to the sum of percentages of their (i) highest three-year or four-year average earnings, (ii) highest three-year or four-year average earnings in excess of covered compensation per year of participation (maximum of 35 years), and/or (iii) highest three-year or four-year average earnings times years of participation in excess of 35 years. Duke Energy also maintains, and the Subsidiary Registrants participate in, non-qualified, non-contributory defined benefit retirement plans which cover certain executives. As of January 1, 2014, the qualified and non-qualified non-contributory defined benefit plans are closed to new and rehired non-union and certain unionized employees.

Duke Energy uses a December 31 measurement date for its defined benefit retirement plan assets and obligations.

Duke Energy’s policy is to fund amounts on an actuarial basis to provide assets sufficient to meet benefit payments to be paid to plan participants. Duke Energy did not make any contributions to its qualified defined benefit retirement plans during the six months ended June 30, 2014 and 2013.

Net periodic benefit costs disclosed in the tables below represent the cost of the respective benefit plan for the periods presented. However, portions of the net periodic benefit costs disclosed in the tables below have been capitalized as a component of property, plant and equipment. Amounts presented in the tables below for the Subsidiary Registrants represent the amounts of pension and other post-retirement benefit cost allocated by Duke Energy for employees of the Subsidiary Registrants. Additionally, the Subsidiary Registrants are allocated their proportionate share of pension and post-retirement benefit cost for employees of Duke Energy’s shared services affiliate that provide support to the Subsidiary Registrants. These allocated amounts are included in the governance and shared service costs discussed in Note 8.

QUALIFIED PENSION PLANS

The following tables include the components of net periodic pension costs for qualified pension plans.



	Three Months Ended June 30, 2014
(in millions)	Duke Energy			Duke Energy Carolinas			Progress Energy			Duke Energy Progress			Duke Energy Florida			Duke Energy Ohio			Duke Energy Indiana
Service cost	$	34		$	11		$	10		$	5		$	5		$	1		$	2
Interest cost on projected benefit obligation	86			21			28			14			15			5			8
Expected return on plan assets	(127		)	(33		)	(43		)	(22		)	(22		)	(6		)	(11		)
Amortization of actuarial loss	37			9			17			8			8			1			3
Amortization of prior service credit	(3		)	(2		)	(1		)	(1		)	(1		)	—			—
Other	1			—			—			1			1			—			—
Net periodic pension costs	$	28		$	6		$	11		$	5		$	6		$	1		$	2



	Three Months Ended June 30, 2013
(in millions)	Duke Energy			Duke Energy Carolinas			Progress Energy			Duke Energy Progress			Duke Energy Florida			Duke Energy Ohio			Duke Energy Indiana
Service cost	$	42		$	13		$	15		$	6		$	7		$	1		$	3
Interest cost on projected benefit obligation	80			20			29			12			14			6			7
Expected return on plan assets	(137		)	(37		)	(49		)	(24		)	(22		)	(7		)	(11		)
Amortization of actuarial loss	61			15			25			12			13			3			5
Amortization of prior service credit	(3		)	(1		)	(1		)	—			(1		)	—			—
Other	1			—			—			—			—			—			—
Net periodic pension costs	$	44		$	10		$	19		$	6		$	11		$	3		$	4



	Six Months Ended June 30, 2014
(in millions)	Duke Energy			Duke Energy Carolinas			Progress Energy			Duke Energy Progress			Duke Energy Florida			Duke Energy Ohio			Duke Energy Indiana
Service cost	$	68		$	21		$	20		$	10		$	10		$	2		$	4
Interest cost on projected benefit obligation	172			42			56			27			29			10			15
Expected return on plan assets	(255		)	(66		)	(86		)	(43		)	(43		)	(13		)	(20		)
Amortization of actuarial loss	74			18			34			16			16			2			6
Amortization of prior service credit	(7		)	(4		)	(2		)	(1		)	(1		)	—			—
Other	3			1			1			1			1			—			—
Net periodic pension costs	$	55		$	12		$	23		$	10		$	12		$	1		$	5



	Six Months Ended June 30, 2013
(in millions)	Duke Energy			Duke Energy Carolinas			Progress Energy			Duke Energy Progress			Duke Energy Florida			Duke Energy Ohio			Duke Energy Indiana
Service cost	$	84		$	25		$	30		$	11		$	15		$	3		$	6
Interest cost on projected benefit obligation	160			40			58			25			27			11			14
Expected return on plan assets	(274		)	(74		)	(99		)	(47		)	(44		)	(15		)	(22		)
Amortization of actuarial loss	122			30			50			23			25			6			11
Amortization of prior service credit	(6		)	(3		)	(2		)	—			(1		)	—			—
Other	3			1			1			—			—			—			—
Net periodic pension costs	$	89		$	19		$	38		$	12		$	22		$	5		$	9

NON-QUALIFIED PENSION PLANS

The following tables include the components of net periodic pension costs for non-qualified pension plans for registrants with non-qualified pension costs.



	Three Months Ended June 30, 2014
(in millions)	Duke Energy		Duke Energy Carolinas		Progress Energy		Duke Energy Progress		Duke Energy Florida
Service cost	$	1	$	—	$	1	$	—	$	—
Interest cost on projected benefit obligation	3		—		—		—		1
Amortization of actuarial loss	1		—		1		—		—
Net periodic pension costs	$	5	$	—	$	2	$	—	$	1



	Three Months Ended June 30, 2013
(in millions)	Duke Energy		Duke Energy Carolinas		Progress Energy		Duke Energy Progress		Duke Energy Florida
Service cost	$	1	$	—	$	—	$	—	$	—
Interest cost on projected benefit obligation	3		1		2		1		1
Amortization of actuarial loss	1		—		1		—		—
Net periodic pension costs	$	5	$	1	$	3	$	1	$	1



	Six Months Ended June 30, 2014
(in millions)	Duke Energy		Duke Energy Carolinas		Progress Energy		Duke Energy Progress		Duke Energy Florida
Service cost	$	1	$	—	$	1	$	—	$	—
Interest cost on projected benefit obligation	7		—		2		1		1
Amortization of actuarial loss	1		—		1		—		—
Amortization of prior service credit	—		—		—		—		—
Net periodic pension costs	$	9	$	—	$	4	$	1	$	1



	Six Months Ended June 30, 2013
(in millions)	Duke Energy			Duke Energy Carolinas		Progress Energy			Duke Energy Progress		Duke Energy Florida
Service cost	$	1		$	—	$	—		$	—	$	—
Interest cost on projected benefit obligation	7			1		4			1		1
Amortization of actuarial loss	3			—		2			—		—
Amortization of prior service credit	(1		)	—		(1		)	—		—
Net periodic pension costs	$	10		$	1	$	5		$	1	$	1

OTHER POST-RETIREMENT BENEFIT PLANS

Duke Energy provides, and the Subsidiary Registrants participate in, some health care and life insurance benefits for retired employees on a contributory and non-contributory basis. Employees are eligible for these benefits if they have met age and service requirements at retirement, as defined in the plans. The health care benefits include medical, dental, and prescription drug coverage and are subject to certain limitations, such as deductibles and co-payments.

Duke Energy did not make any contributions to its other post-retirement benefit plans during the three and six months ended June 30, 2014 and 2013.

The following tables include the components of net periodic other post-retirement benefit costs.



	Three Months Ended June 30, 2014
(in millions)	Duke Energy			Duke Energy Carolinas			Progress Energy			Duke Energy Progress			Duke Energy Florida			Duke Energy Ohio			Duke Energy Indiana
Service cost	$	3		$	1		$	1		$	1		$	1		$	—		$	—
Interest cost on accumulated post-retirement benefit obligation	13			3			5			2			3			1			2
Expected return on plan assets	(3		)	(2		)	—			—			—			—			(1		)
Amortization of actuarial loss (gain)	10			—			11			8			3			(1		)	—
Amortization of prior service credit	(32		)	(2		)	(23		)	(18		)	(6		)	—			—
Net periodic other post-retirement benefit costs	$	(9	)	$	—		$	(6	)	$	(7	)	$	1		$	—		$	1



	Three Months Ended June 30, 2013
(in millions)	Duke Energy			Duke Energy Carolinas			Progress Energy			Duke Energy Progress			Duke Energy Florida		Duke Energy Ohio			Duke Energy Indiana
Service cost	$	7		$	—		$	5		$	3		$	2	$	—		$	—
Interest cost on accumulated post-retirement benefit obligation	18			3			12			6			4		1			2
Expected return on plan assets	(4		)	(2		)	—			—			—		—			—
Amortization of actuarial loss (gain)	13			1			15			9			4		(1		)	—
Amortization of prior service credit	(3		)	(2		)	(1		)	(1		)	—		—			—
Net periodic other post-retirement benefit costs	$	31		$	—		$	31		$	17		$	10	$	—		$	2



	Six Months Ended June 30, 2014
(in millions)	Duke Energy			Duke Energy Carolinas			Progress Energy			Duke Energy Progress			Duke Energy Florida			Duke Energy Ohio			Duke Energy Indiana
Service cost	$	5		$	1		$	2		$	1		$	2		$	—		$	—
Interest cost on accumulated post-retirement benefit obligation	25			6			11			5			6			1			3
Expected return on plan assets	(6		)	(4		)	—			—			—			—			(1		)
Amortization of actuarial loss (gain)	20			1			21			15			5			(1		)	—
Amortization of prior service credit	(63		)	(5		)	(47		)	(36		)	(11		)	—			—
Net periodic other post-retirement benefit costs	$	(19	)	$	(1	)	$	(13	)	$	(15	)	$	2		$	—		$	2



	Six Months Ended June 30, 2013
(in millions)	Duke Energy			Duke Energy Carolinas			Progress Energy			Duke Energy Progress			Duke Energy Florida		Duke Energy Ohio			Duke Energy Indiana
Service cost	$	14		$	1		$	11		$	6		$	4	$	—		$	—
Interest cost on accumulated post-retirement benefit obligation	36			6			23			12			8		1			3
Expected return on plan assets	(7		)	(5		)	—			—			—		—			—
Amortization of actuarial loss (gain)	26			2			29			18			8		(1		)	—
Amortization of prior service credit	(6		)	(4		)	(1		)	(1		)	—		—			—
Net periodic other post-retirement benefit costs	$	63		$	—		$	62		$	35		$	20	$	—		$	3

EMPLOYEE SAVINGS PLANS

Duke Energy sponsors and the Subsidiary Registrants participate in, employee savings plans that cover substantially all U.S. employees. Most employees participate in a matching contribution formula where Duke Energy provides a matching contribution generally equal to 100 percent of employee before-tax and Roth 401(k) contributions and, as applicable, after-tax contributions of up to 6 percent of eligible pay per pay period. Dividends on Duke Energy shares held by the savings plans are charged to retained earnings when declared and shares held in the plans are considered outstanding in the calculation of basic and diluted earnings per share.

As of January 1, 2014, for new and rehired non-union and certain unionized employees who are not eligible to participate in Duke Energy’s defined benefit plans, an additional employer contribution of 4 percent of eligible pay per pay period is provided to the employee’s savings plan account, which is subject to a three-year vesting schedule.

The following table includes pretax employer matching contributions, as well as the additional contribution of 4 percent of eligible pay per pay period for employees not eligible to participate in a defined benefit plan, made by Duke Energy and expensed by the Subsidiary Registrants.



(in millions)	Duke Energy		Duke Energy Carolinas		Progress Energy		Duke Energy Progress		Duke Energy Florida		Duke Energy Ohio		Duke Energy Indiana
Three Months Ended June 30,
2014	$	36	$	12	$	11	$	7	$	3	$	1	$	2
2013	30		10		10		6		3		1		1
Six Months Ended June 30,
2014	$	80	$	26	$	23	$	16	$	7	$	2	$	4
2013	71		24		22		12		7		2		3