DUK US Equity☆

ITEM 1A. RISK FACTORS

In addition to other disclosures within this Form 10-K, including "Management's Discussion and Analysis of Financial Condition and Results of Operations – Matters Impacting Future Results" for each registrant in Item 7, and other documents filed with the SEC from time to time, the following factors should be considered in evaluating Duke Energy and its subsidiaries. Such factors could affect actual results of operations and cause results to differ substantially from those currently expected or sought. Unless otherwise indicated, risk factors discussed below generally relate to risks associated with all of the Duke Energy Registrants. Risks identified at the Subsidiary Registrant level are generally applicable to Duke Energy.

BUSINESS STRATEGY RISKS

Duke Energy’s future results could be adversely affected if it is unable to implement its business strategy.

Duke Energy’s results of operations depend, in significant part, on the extent to which it can implement its business strategy successfully. Duke Energy's strategy, which includes transforming the customer experience, achieving net-zero carbon emissions by 2050, modernizing the regulatory construct and digital transformation, is subject to business, regulatory, economic and competitive uncertainties and contingencies, and required advancements in technology to achieve net-zero carbon emissions by 2050, many of which are beyond its control. As a consequence, Duke Energy may not be able to fully implement or realize the anticipated results of its strategy.

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RISK FACTORS

REGULATORY, LEGISLATIVE AND LEGAL RISKS

The Duke Energy Registrants’ regulated utility revenues, earnings and results are dependent on state legislation and regulation that affect electric generation, electric and natural gas transmission, distribution and related activities, which may limit their ability to recover costs.

The Duke Energy Registrants’ regulated electric and natural gas utility businesses are regulated on a cost-of-service/rate-of-return basis subject to statutes and regulatory commission rules and procedures of North Carolina, South Carolina, Florida, Ohio, Tennessee, Indiana and Kentucky. If the Duke Energy Registrants’ regulated utility earnings exceed the returns established by the state utility commissions, retail electric and natural gas rates may be subject to review and possible reduction by the Commissions, which may decrease the Duke Energy Registrants’ earnings. Additionally, if regulatory bodies do not allow recovery of costs incurred in providing service, or do not do so on a timely basis, the Duke Energy Registrants’ earnings could be negatively impacted.

If legislative and regulatory structures were to evolve in such a way that the Duke Energy Registrants’ exclusive rights to serve their regulated customers were eroded, their earnings could be negatively impacted. Federal and state regulations, laws and other efforts designed to promote and expand the use of EE measures and distributed generation technologies, such as private solar and battery storage, in Duke Energy service territories could result in customers leaving the electric distribution system and an increase in customer net energy metering, which allows customers with private solar to receive bill credits for surplus power at the full retail amount. Over time, customer adoption of these technologies and increased EE could result in excess generation resources as well as stranded costs if Duke Energy is not able to fully recover the costs and investment in generation.

State regulators have approved various mechanisms to stabilize natural gas utility margins, including margin decoupling in North Carolina and rate stabilization in South Carolina. State regulators have approved other margin stabilizing mechanisms that, for example, allow for recovery of margin losses associated with negotiated transactions designed to retain large volume customers that could use alternative fuels or that may otherwise directly access natural gas supply through their own connection to an interstate pipeline. If regulators decided to discontinue the Duke Energy Registrants' use of tariff mechanisms, it would negatively impact results of operations, financial position and cash flows. In addition, regulatory authorities also review whether natural gas costs are prudently incurred and can disallow the recovery of a portion of natural gas costs that the Duke Energy Registrants seek to recover from customers, which would adversely impact earnings.

The rates that the Duke Energy Registrants’ regulated utility businesses are allowed to charge are established by state utility commissions in rate case proceedings, which may limit their ability to recover costs and earn an appropriate return on investment.

The rates that the Duke Energy Registrants’ regulated utility business are allowed to charge significantly influences the results of operations, financial position and cash flows of the Duke Energy Registrants. The regulation of the rates that the regulated utility businesses charge customers is determined, in large part, by state utility commissions in rate case proceedings. Negative decisions made by these regulators, or by any court on appeal of a rate case proceeding, could have a material adverse effect on the Duke Energy Registrants’ results of operations, financial position or cash flows and affect the ability of the Duke Energy Registrants to recover costs and an appropriate return on the significant infrastructure investments being made.

Deregulation or restructuring in the electric industry may result in increased competition and unrecovered costs that could adversely affect the Duke Energy Registrants’ results of operations, financial position or cash flows and their utility businesses.

Increased competition resulting from deregulation or restructuring legislation could have a significant adverse impact on the Duke Energy Registrants’ results of operations, financial position or cash flows. If the retail jurisdictions served by the Duke Energy Registrants become subject to deregulation, the impairment of assets, loss of retail customers, lower profit margins or increased costs of capital, and recovery of stranded costs could have a significant adverse financial impact on the Duke Energy Registrants. Stranded costs primarily include the generation assets of the Duke Energy Registrants whose value in a competitive marketplace may be less than their current book value, as well as above-market purchased power commitments from QFs from whom the Duke Energy Registrants are legally obligated to purchase energy at an avoided cost rate under PURPA. The Duke Energy Registrants cannot predict the extent and timing of entry by additional competitors into the electric markets. The Duke Energy Registrants cannot predict if or when they will be subject to changes in legislation or regulation, nor can they predict the impact of these changes on their results of operations, financial position or cash flows.

The Duke Energy Registrants’ businesses are subject to extensive federal regulation and a wide variety of laws and governmental policies, including taxes, that may change over time in ways that affect operations and costs.

The Duke Energy Registrants are subject to regulations under a wide variety of U.S. federal and state regulations and policies, including by FERC, NRC, EPA and various other federal agencies as well as the North American Electric Reliability Corporation. Regulation affects almost every aspect of the Duke Energy Registrants’ businesses, including, among other things, their ability to: take fundamental business management actions; determine the terms and rates of transmission and distribution services; make acquisitions; issue equity or debt securities; engage in transactions with other subsidiaries and affiliates; and pay dividends upstream to the Duke Energy Registrants. Changes to federal regulations are continuous and ongoing. There can be no assurance that laws, regulations and policies will not be changed in ways that result in material modifications of business models and objectives or affect returns on investment by restricting activities and products, subjecting them to escalating costs, causing delays, or prohibiting them outright.

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RISK FACTORS

The Duke Energy Registrants are subject to numerous environmental laws and regulations requiring significant capital expenditures that can increase the cost of operations, and which may impact or limit business plans, or cause exposure to environmental liabilities.

The Duke Energy Registrants are subject to numerous environmental laws and regulations affecting many aspects of their present and future operations, including CCRs, air emissions, water quality, wastewater discharges, solid waste and hazardous waste. These laws and regulations can result in increased capital, operating and other costs. These laws and regulations generally require the Duke Energy Registrants to obtain and comply with a wide variety of environmental licenses, permits, inspections and other approvals. Compliance with environmental laws and regulations can require significant expenditures, including expenditures for cleanup costs and damages arising from contaminated properties. Failure to comply with environmental regulations may result in the imposition of fines, penalties and injunctive measures affecting operating assets. The steps the Duke Energy Registrants could be required to take to ensure their facilities are in compliance could be prohibitively expensive. As a result, the Duke Energy Registrants may be required to shut down or alter the operation of their facilities, which may cause the Duke Energy Registrants to incur losses. Further, the Duke Energy Registrants may not be successful in recovering capital and operating costs incurred to comply with new environmental regulations through existing regulatory rate structures and their contracts with customers. Also, the Duke Energy Registrants may not be able to obtain or maintain from time to time all required environmental regulatory approvals for their operating assets or development projects. Delays in obtaining any required environmental regulatory approvals, failure to obtain and comply with them or changes in environmental laws or regulations to more stringent compliance levels could result in additional costs of operation for existing facilities or development of new facilities being prevented, delayed or subject to additional costs. Although it is not expected that the costs to comply with current environmental regulations will have a material adverse effect on the Duke Energy Registrants’ results of operations, financial position and cash flows due to regulatory cost recovery, the Duke Energy Registrants are at risk that the costs of complying with environmental regulations in the future will have such an effect.

The EPA has enacted or proposed federal regulations governing the management of cooling water intake structures, wastewater and CO2 emissions. New state legislation, including the North Carolina Clean Energy Plan, could impose carbon reduction goals that are more aggressive than the company's plans. These regulations may require the Duke Energy Registrants to make additional capital expenditures and increase operating and maintenance costs.

The Duke Energy Registrants' operations, capital expenditures and financial results may be affected by regulatory changes related to the impacts of global climate change.

There is continued concern, and increasing activism, both nationally and internationally, about climate change. The EPA and state regulators may adopt and implement regulations to restrict emissions of GHGs to address global climate change. Increased regulation of GHG emissions could impose significant additional costs on the Duke Energy Registrants' electric and natural gas operations, their suppliers and customers. Regulatory changes could result in generation facilities to be retired early and result in stranded costs if Duke Energy is not able to fully recover the costs and investment in generation, and could also affect demand for energy conservation and renewable products, which could impact our electric and natural gas businesses.

OPERATIONAL RISKS

The Duke Energy Registrants’ operations have been and may be affected by COVID-19 in ways listed below and in ways the registrants cannot predict at this time.

The COVID-19 pandemic has impacted the Duke Energy Registrants' business strategy, results of operations, financial position and cash flows, albeit not materially as of this filing date, from specific activities listed below:

•Decreased demand for electricity and natural gas;

•Delays in rate cases and other legal proceedings;

•An inability to obtain labor or equipment necessary for the construction of generation projects or pipeline expansion;

•The health and availability of our critical personnel and their ability to perform business functions; and

•Actions of state utility commissions or federal or state governments to allow customers to suspend or delay payment of bills related to the provision of electric or natural gas services.

Furthermore, due to the unpredictability of the COVID-19 pandemic’s ongoing impact on global health and economic stability, the Duke Energy Registrants expect that the activities listed below could negatively impact their business strategy, results of operations, financial position and cash flows:

•An inability to procure satisfactory levels of fuels or other necessary equipment to continue production of electricity and delivery of natural gas;

•An inability to maintain information technology systems and protections from cyberattack;

•An inability to obtain financing in volatile financial markets;

•Additional federal regulation tied to stimulus and other aid packages; and

•Impairment charges, which could include real estate as options for working remotely are evaluated and goodwill.

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RISK FACTORS

The Duke Energy Registrants’ results of operations may be negatively affected by overall market, economic and other conditions that are beyond their control.

Sustained downturns or sluggishness in the economy generally affect the markets in which the Duke Energy Registrants operate and negatively influence operations. Declines in demand for electricity or natural gas as a result of economic downturns in the Duke Energy Registrants’ regulated service territories will reduce overall sales and lessen cash flows, especially as industrial customers reduce production and, therefore, consumption of electricity and the use of natural gas. Although the Duke Energy Registrants’ regulated electric and natural gas businesses are subject to regulated allowable rates of return and recovery of certain costs, such as fuel and purchased natural gas costs, under periodic adjustment clauses, overall declines in electricity or natural gas sold as a result of economic downturn or recession could reduce revenues and cash flows, thereby diminishing results of operations. Additionally, prolonged economic downturns that negatively impact the Duke Energy Registrants’ results of operations and cash flows could result in future material impairment charges to write-down the carrying value of certain assets, including goodwill, to their respective fair values.

The Duke Energy Registrants also sell electricity into the spot market or other competitive power markets on a contractual basis. With respect to such transactions, the Duke Energy Registrants are not guaranteed any rate of return on their capital investments through mandated rates, and revenues and results of operations are likely to depend, in large part, upon prevailing market prices. These market prices may fluctuate substantially over relatively short periods of time and could reduce the Duke Energy Registrants’ revenues and margins, thereby diminishing results of operations.

Factors that could impact sales volumes, generation of electricity and market prices at which the Duke Energy Registrants are able to sell electricity and natural gas are as follows:

•weather conditions, including abnormally mild winter or summer weather that cause lower energy or natural gas usage for heating or cooling purposes, as applicable, and periods of low rainfall that decrease the ability to operate facilities in an economical manner;

•supply of and demand for energy commodities;

•transmission or transportation constraints or inefficiencies that impact nonregulated energy operations;

•availability of competitively priced alternative energy sources, which are preferred by some customers over electricity produced from coal, nuclear or natural gas plants, and customer usage of energy-efficient equipment that reduces energy demand;

•natural gas, crude oil and refined products production levels and prices;

•ability to procure satisfactory levels of inventory, such as coal, natural gas and uranium; and

•capacity and transmission service into, or out of, the Duke Energy Registrants’ markets.

Natural disasters or operational accidents may adversely affect the Duke Energy Registrants’ operating results.

Natural disasters or other operational accidents within the company or industry (such as forest fires, earthquakes, hurricanes or natural gas transmission pipeline explosions) could have direct or indirect impacts to the Duke Energy Registrants or to key contractors and suppliers. Further, the generation of electricity and the transportation and storage of natural gas involve inherent operating risks that may result in accidents involving serious injury or loss of life, environmental damage or property damage. Such events could impact the Duke Energy Registrants through changes to policies, laws and regulations whose compliance costs have a significant impact on the Duke Energy Registrants’ results of operations, financial position and cash flows. In addition, if a serious operational accident were to occur, existing insurance policies may not cover all of the potential exposures or the actual amount of loss incurred. Any losses not covered by insurance, or any increases in the cost of applicable insurance as a result of such accident, could have a material adverse effect on the results of operations, financial position, cash flows and reputation of the Duke Energy Registrants.

The reputation and financial condition of the Duke Energy Registrants could be negatively impacted due to their obligations to comply with federal and state regulations, laws, and other legal requirements that govern the operations, assessments, storage, closure, remediation, disposal and monitoring relating to CCR, the high costs and new rate impacts associated with implementing these new CCR-related requirements and the strategies and methods necessary to implement these requirements in compliance with these legal obligations.

As a result of electricity produced for decades at coal-fired power plants, the Duke Energy Registrants manage large amounts of CCR that are primarily stored in dry storage within landfills or combined with water in other surface impoundments, all in compliance with applicable regulatory requirements. A CCR-related operational incident could have a material adverse impact on the reputation and results of operations, financial position and cash flows of the Duke Energy Registrants.

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RISK FACTORS

During 2015, EPA regulations were enacted related to the management of CCR from power plants. These regulations classify CCR as nonhazardous waste under the RCRA and apply to electric generating sites with new and existing landfills and, new and existing surface impoundments, and establish requirements regarding landfill design, structural integrity design and assessment criteria for surface impoundments, groundwater monitoring, protection and remedial procedures and other operational and reporting procedures for the disposal and management of CCR. In addition to the federal regulations, CCR landfills and surface impoundments will continue to be regulated by existing state laws, regulations and permits, as well as additional legal requirements that may be imposed in the future, such as the settlement reached with the NCDEQ to excavate seven of the nine remaining coal ash basins in North Carolina, and partially excavate the remaining two. These federal and state laws, regulations and other legal requirements may require or result in additional expenditures, including increased operating and maintenance costs, which could affect the results of operations, financial position and cash flows of the Duke Energy Registrants. The Duke Energy Registrants will continue to seek full cost recovery for expenditures through the normal ratemaking process with state and federal utility commissions, who permit recovery in rates of necessary and prudently incurred costs associated with the Duke Energy Registrants’ regulated operations, and through other wholesale contracts with terms that contemplate recovery of such costs, although there is no guarantee of full cost recovery. In addition, the timing for and amount of recovery of such costs could have a material adverse impact on Duke Energy's cash flows.

The Duke Energy Registrants have recognized significant AROs related to these CCR-related requirements. Closure activities began in 2015 at the four sites specified as priority by the Coal Ash Act and at the W.S. Lee Steam Station site in South Carolina in connection with other legal requirements. Excavation at these sites involves movement of CCR materials to off-site locations for use as structural fill, to appropriate engineered off-site or on-site lined landfills or conversion of the ash for beneficial use. Duke Energy has completed excavation of coal ash at three of the four high priority sites. At other sites, planning and closure methods have been studied and factored into the estimated retirement and management costs, and closure activities have commenced. As the closure and CCR management work progresses and final closure plans and corrective action measures are developed and approved at each site, the scope and complexity of work and the amount of CCR material could be greater than estimates and could, therefore, materially increase compliance expenditures and rate impacts.

The Duke Energy Registrants’ results of operations, financial position and cash flows may be negatively affected by a lack of growth or slower growth in the number of customers, or decline in customer demand or number of customers.

Growth in customer accounts and growth of customer usage each directly influence demand for electricity and natural gas and the need for additional power generation and delivery facilities. Customer growth and customer usage are affected by several factors outside the control of the Duke Energy Registrants, such as mandated EE measures, demand-side management goals, distributed generation resources and economic and demographic conditions, such as population changes, job and income growth, housing starts, new business formation and the overall level of economic activity.

Certain regulatory and legislative bodies have introduced or are considering requirements and/or incentives to reduce energy consumption by certain dates. Additionally, technological advances driven by federal laws mandating new levels of EE in end-use electric devices or other improvements in or applications of technology could lead to declines in per capita energy consumption.

Advances in distributed generation technologies that produce power, including fuel cells, microturbines, wind turbines and solar cells, may reduce the cost of alternative methods of producing power to a level competitive with central power station electric production utilized by the Duke Energy Registrants.

Some or all of these factors could result in a lack of growth or decline in customer demand for electricity or number of customers and may cause the failure of the Duke Energy Registrants to fully realize anticipated benefits from significant capital investments and expenditures, which could have a material adverse effect on their results of operations, financial position and cash flows.

Furthermore, the Duke Energy Registrants currently have EE riders in place to recover the cost of EE programs in North Carolina, South Carolina, Florida, Indiana, Ohio and Kentucky. Should the Duke Energy Registrants be required to invest in conservation measures that result in reduced sales from effective conservation, regulatory lag in adjusting rates for the impact of these measures could have a negative financial impact.

The Duke Energy Registrants future results may be impacted by changing customer expectations and demands including heightened emphasis on environmental, social and governance concerns.

Duke Energy’s outcomes are influenced by the expectations of our customers and stakeholders. Those expectations are based on the corefundamentals of reliability and affordability but are also increasingly focused on our ability to meet rapidly changing demands for new and varied products, services and offerings. Additionally, the risks of global climate change continues to shape our customers’ sustainability goals and energy needs. Failure to meet those expectations or to adequately address the risks and external pressures from regulators, investors and other stakeholders may impact favorable outcomes in future rate cases and the results of operations for the Duke Energy Registrants.

The Duke Energy Registrants’ operating results may fluctuate on a seasonal and quarterly basis and can be negatively affected by changes in weather conditions and severe weather, including extreme weather conditions associated with climate change.

Electric power generation and natural gas distribution are generally seasonal businesses. In most parts of the U.S., the demand for power peaks during the warmer summer months, with market prices also typically peaking at that time. In other areas, demand for power peaks during the winter. Demand for natural gas peaks during the winter months. Further, extreme weather conditions such as hurricanes, droughts, heat waves, winter storms and severe weather associated with climate change could cause these seasonal fluctuations to be more pronounced. As a result, the overall operating results of the Duke Energy Registrants’ businesses may fluctuate substantially on a seasonal and quarterly basis and thus make period-to-period comparison less relevant.

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RISK FACTORS

Sustained severe drought conditions could impact generation by hydroelectric plants, as well as fossil and nuclear plant operations, as these facilities use water for cooling purposes and for the operation of environmental compliance equipment. Furthermore, destruction caused by severe weather events, such as hurricanes, flooding, tornadoes, severe thunderstorms, snow and ice storms, can result in lost operating revenues due to outages, property damage, including downed transmission and distribution lines, and additional and unexpected expenses to mitigate storm damage. The cost of storm restoration efforts may not be fully recoverable through the regulatory process.

The Duke Energy Registrants’ sales may decrease if they are unable to gain adequate, reliable and affordable access to transmission assets.

The Duke Energy Registrants depend on transmission and distribution facilities owned and operated by utilities and other energy companies to deliver electricity sold to the wholesale market. The FERC’s power transmission regulations require wholesale electric transmission services to be offered on an open-access, non-discriminatory basis. If transmission is disrupted, or if transmission capacity is inadequate, the Duke Energy Registrants’ ability to sell and deliver products may be hindered.

The different regional power markets have changing regulatory structures, which could affect growth and performance in these regions. In addition, the ISOs who oversee the transmission systems in regional power markets have imposed in the past, and may impose in the future, price limitations and other mechanisms to address volatility in the power markets. These types of price limitations and other mechanisms may adversely impact the profitability of the Duke Energy Registrants’ wholesale power marketing business.

The availability of adequate interstate pipeline transportation capacity and natural gas supply may decrease.

The Duke Energy Registrants purchase almost all of their natural gas supply from interstate sources that must be transported to the applicable service territories. Interstate pipeline companies transport the natural gas to the Duke Energy Registrants' systems under firm service agreements that are designed to meet the requirements of their core markets. A significant disruption to interstate pipelines capacity or reduction in natural gas supply due to events including, but not limited to, operational failures or disruptions, hurricanes, tornadoes, floods, freeze off of natural gas wells, terrorist or cyberattacks or other acts of war or legislative or regulatory actions or requirements, including remediation related to integrity inspections, could reduce the normal interstate supply of natural gas and thereby reduce earnings. Moreover, if additional natural gas infrastructure, including, but not limited to, exploration and drilling rigs and platforms, processing and gathering systems, offshore pipelines, interstate pipelines and storage, cannot be built at a pace that meets demand, then growth opportunities could be limited.

Fluctuations in commodity prices or availability may adversely affect various aspects of the Duke Energy Registrants’ operations as well as their results of operations, financial position and cash flows.

The Duke Energy Registrants are exposed to the effects of market fluctuations in the price of natural gas, coal, fuel oil, nuclear fuel, electricity and other energy-related commodities as a result of their ownership of energy-related assets. Fuel costs are recovered primarily through cost-recovery clauses, subject to the approval of state utility commissions.

Additionally, the Duke Energy Registrants are exposed to risk that counterparties will not be able to fulfill their obligations. Disruption in the delivery of fuel, including disruptions as a result of, among other things, bankruptcies, transportation delays, weather, labor relations, force majeure events or environmental regulations affecting any of these fuel suppliers, could limit the Duke Energy Registrants' ability to operate their facilities. Should counterparties fail to perform, the Duke Energy Registrants might be forced to replace the underlying commitment at prevailing market prices possibly resulting in losses in addition to the amounts, if any, already paid to the counterparties.

Certain of the Duke Energy Registrants’ hedge agreements may result in the receipt of, or posting of, collateral with counterparties, depending on the daily market-based calculation of financial exposure of the derivative positions. Fluctuations in commodity prices that lead to the return of collateral received and/or the posting of collateral with counterparties could negatively impact liquidity. Downgrades in the Duke Energy Registrants’ credit ratings could lead to additional collateral posting requirements. The Duke Energy Registrants continually monitor derivative positions in relation to market price activity.

Cyberattacks and data security breaches could adversely affect the Duke Energy Registrants' businesses.

Cybersecurity risks have increased in recent years as a result of the proliferation of new technologies and the increased sophistication, magnitude and frequency of cyberattacks and data security breaches. Duke Energy relies on the continued operation of sophisticated digital information technology systems and network infrastructure, which are part of an interconnected regional grid. Additionally, connectivity to the internet continues to increase through grid modernization and other operational excellence initiatives. Because of the critical nature of the infrastructure, increased connectivity to the internet and technology systems’ inherent vulnerability to disability or failures due to hacking, viruses, acts of war or terrorism or other types of data security breaches, the Duke Energy Registrants face a heightened risk of cyberattack from foreign or domestic sources and have been subject, and will likely continue to be subject, to attempts to gain unauthorized access to information and/or information systems or to disrupt utility operations through computer viruses and phishing attempts either directly or indirectly through its material vendors or related third parties. In the event of a significant cybersecurity breach on either the Duke Energy Registrants or with one of our material vendors or related third parties, the Duke Energy Registrants could (i) have business operations disrupted, including the disruption of the operation of our assets and the power grid, theft of confidential company, employee, retiree, shareholder, vendor or customer information, and general business systems and process interruption or compromise, including preventing the Duke Energy Registrants from servicing customers, collecting revenues or the recording, processing and/or reporting financial information correctly, (ii) experience substantial loss of revenues, repair and restoration costs, penalties and costs for lack of compliance with relevant regulations, implementation costs for additional security measures to avert future cyberattacks and other financial loss and (iii) be subject to increased regulation, litigation and reputational damage. While Duke Energy maintains insurance relating to cybersecurity events, such insurance is subject to a number of exclusions and may be insufficient to offset any losses, costs or damage experienced. Also, the market for cybersecurity insurance is relatively new and coverage available for cybersecurity events is evolving as the industry matures.

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RISK FACTORS

The Duke Energy Registrants are subject to standards enacted by the North American Electric Reliability Corporation and enforced by FERC regarding protection of the physical and cyber security of critical infrastructure assets required for operating North America's bulk electric system. The Duke Energy Registrants are also subject to regulations set by the Nuclear Regulatory Commission regarding the protection of digital computer and communication systems and networks required for the operation of nuclear power plants. While the Duke Energy Registrants believe they are in compliance with such standards and regulations, the Duke Energy Registrants have from time to time been, and may in the future be, found to be in violation of such standards and regulations. In addition, compliance with or changes in the applicable standards and regulations may subject the Duke Energy Registrants to higher operating costs and/or increased capital expenditures as well as substantial fines for non-compliance.

Duke Energy Ohio’s and Duke Energy Indiana’s membership in an RTO presents risks that could have a material adverse effect on their results of operations, financial position and cash flows.

The rules governing the various regional power markets may change, which could affect Duke Energy Ohio’s and Duke Energy Indiana’s costs and/or revenues. To the degree Duke Energy Ohio and Duke Energy Indiana incur significant additional fees and increased costs to participate in an RTO, their results of operations may be impacted. Duke Energy Ohio and Duke Energy Indiana may be allocated a portion of the cost of transmission facilities built by others due to changes in RTO transmission rate design. Duke Energy Ohio and Duke Energy Indiana may be required to expand their transmission system according to decisions made by an RTO rather than their own internal planning process. In addition, RTOs have been developing rules associated with the allocation and methodology of assigning costs associated with improved transmission reliability, reduced transmission congestion and firm transmission rights that may have a financial impact on the results of operations, financial position and cash flows of Duke Energy Ohio and Duke Energy Indiana.

As members of an RTO, Duke Energy Ohio and Duke Energy Indiana are subject to certain additional risks, including those associated with the allocation among RTO members, of losses caused by unreimbursed defaults of other participants in the RTO markets and those associated with complaint cases filed against an RTO that may seek refunds of revenues previously earned by RTO members.

The Duke Energy Registrants may not recover costs incurred to begin construction on projects that are canceled.

Duke Energy’s long-term strategy requires the construction of new projects, either wholly owned or partially owned, which involve a number of risks, including construction delays, nonperformance by equipment and other third-party suppliers, and increases in equipment and labor costs. To limit the risks of these construction projects, the Duke Energy Registrants enter into equipment purchase orders and construction contracts and incur engineering and design service costs in advance of receiving necessary regulatory approvals and/or siting or environmental permits. If any of these projects are canceled for any reason, including failure to receive necessary regulatory approvals and/or siting or environmental permits, significant cancellation penalties under the equipment purchase orders and construction contracts could occur. In addition, if any construction work or investments have been recorded as an asset, an impairment may need to be recorded in the event the project is canceled.

The Duke Energy Registrants are subject to risks associated with their ability to obtain adequate insurance at acceptable costs.

The financial condition of some insurance companies, actual or threatened physical or cyberattacks, and natural disasters, among other things, could have disruptive effects on insurance markets. The availability of insurance covering risks that the Duke Energy Registrants and their respective competitors typically insure against may decrease, and the insurance that the Duke Energy Registrants are able to obtain may have higher deductibles, higher premiums, and more restrictive policy terms. Further, the insurance policies may not cover all of the potential exposures or the actual amount of loss incurred. Any losses not covered by insurance, or any increases in the cost of applicable insurance, could adversely affect the results of operations, financial position or cash flows of the affected Duke Energy Registrant.

NUCLEAR GENERATION RISKS

Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida may incur substantial costs and liabilities due to their ownership and operation of nuclear generating facilities.

Ownership interests in and operation of nuclear stations by Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida subject them to various risks. These risks include, among other things: the potential harmful effects on the environment and human health resulting from the current or past operation of nuclear facilities and the storage, handling and disposal of radioactive materials; limitations on the amounts and types of insurance commercially available to cover losses that might arise in connection with nuclear operations; and uncertainties with respect to the technological and financial aspects of decommissioning nuclear plants at the end of their licensed lives.

Ownership and operation of nuclear generation facilities requires compliance with licensing and safety-related requirements imposed by the NRC. In the event of non-compliance, the NRC may increase regulatory oversight, impose fines or shut down a unit depending upon its assessment of the severity of the situation. Revised security and safety requirements promulgated by the NRC, which could be prompted by, among other things, events within or outside of the control of Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida, such as a serious nuclear incident at a facility owned by a third party, could necessitate substantial capital and other expenditures, as well as assessments to cover third-party losses. In addition, if a serious nuclear incident were to occur, it could have a material adverse effect on the results of operations, financial position, cash flows and reputation of the Duke Energy Registrants.

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RISK FACTORS

LIQUIDITY, CAPITAL REQUIREMENTS AND COMMON STOCK RISKS

The Duke Energy Registrants rely on access to short-term borrowings and longer-term debt and equity markets to finance their capital requirements and support their liquidity needs. Access to those markets can be adversely affected by a number of conditions, many of which are beyond the Duke Energy Registrants’ control.

The Duke Energy Registrants’ businesses are significantly financed through issuances of debt and equity. The maturity and repayment profile of debt used to finance investments often does not correlate to cash flows from their assets. Accordingly, as a source of liquidity for capital requirements not satisfied by the cash flows from their operations and to fund investments originally financed through debt instruments with disparate maturities, the Duke Energy Registrants rely on access to short-term money markets as well as longer-term capital markets. The Subsidiary Registrants also rely on access to short-term intercompany borrowings. If the Duke Energy Registrants are not able to access debt or equity at competitive rates or at all, the ability to finance their operations and implement their strategy and business plan as scheduled could be adversely affected. An inability to access debt and equity may limit the Duke Energy Registrants’ ability to pursue improvements or acquisitions that they may otherwise rely on for future growth.

Market disruptions may increase the cost of borrowing or adversely affect the ability to access one or more financial markets. Such disruptions could include: economic downturns, the bankruptcy of an unrelated energy company, unfavorable capital market conditions, market prices for electricity and natural gas, actual or threatened terrorist attacks, or the overall health of the energy industry. The availability of credit under Duke Energy’s Master Credit Facility depends upon the ability of the banks providing commitments under the facility to provide funds when their obligations to do so arise. Systematic risk of the banking system and the financial markets could prevent a bank from meeting its obligations under the facility agreement.

Duke Energy maintains a revolving credit facility to provide backup for its commercial paper program and letters of credit to support variable rate demand tax-exempt bonds that may be put to the Duke Energy Registrant issuer at the option of the holder. The facility includes borrowing sublimits for the Duke Energy Registrants, each of whom is a party to the credit facility, and financial covenants that limit the amount of debt that can be outstanding as a percentage of the total capital for the specific entity. Failure to maintain these covenants at a particular entity could preclude Duke Energy from issuing commercial paper or the Duke Energy Registrants from issuing letters of credit or borrowing under the Master Credit Facility.

The Duke Energy Registrants must meet credit quality standards and there is no assurance they will maintain investment grade credit ratings. If the Duke Energy Registrants are unable to maintain investment grade credit ratings, they would be required under credit agreements to provide collateral in the form of letters of credit or cash, which may materially adversely affect their liquidity.

Each of the Duke Energy Registrants’ senior long-term debt issuances is currently rated investment grade by various rating agencies. The Duke Energy Registrants cannot ensure their senior long-term debt will be rated investment grade in the future.

If the rating agencies were to rate the Duke Energy Registrants below investment grade, borrowing costs would increase, perhaps significantly. In addition, the potential pool of investors and funding sources would likely decrease. Further, if the short-term debt rating were to fall, access to the commercial paper market could be significantly limited.

A downgrade below investment grade could also require the posting of additional collateral in the form of letters of credit or cash under various credit, commodity and capacity agreements and trigger termination clauses in some interest rate derivative agreements, which would require cash payments. All of these events would likely reduce the Duke Energy Registrants’ liquidity and profitability and could have a material effect on their results of operations, financial position and cash flows.

Non-compliance with debt covenants or conditions could adversely affect the Duke Energy Registrants’ ability to execute future borrowings.

The Duke Energy Registrants’ debt and credit agreements contain various financial and other covenants. Failure to meet those covenants beyond applicable grace periods could result in accelerated due dates and/or termination of the agreements.

Market performance and other changes may decrease the value of the NDTF investments of Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida, which then could require significant additional funding.

Ownership and operation of nuclear generation facilities also requires the maintenance of funded trusts that are intended to pay for the decommissioning costs of the respective nuclear power plants. The performance of the capital markets affects the values of the assets held in trust to satisfy these future obligations. Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida have significant obligations in this area and hold significant assets in these trusts. These assets are subject to market fluctuations and will yield uncertain returns, which may fall below projected rates of return. Although a number of factors impact funding requirements, a decline in the market value of the assets may increase the funding requirements of the obligations for decommissioning nuclear plants. If Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida are unable to successfully manage their NDTF assets, their results of operations, financial position and cash flows could be negatively affected.

32

RISK FACTORS

Poor investment performance of the Duke Energy pension plan holdings and other factors impacting pension plan costs could unfavorably impact the Duke Energy Registrants’ liquidity and results of operations.

The costs of providing non-contributory defined benefit pension plans are dependent upon a number of factors, such as the rates of return on plan assets, discount rates, the level of interest rates used to measure the required minimum funding levels of the plans, future government regulation and required or voluntary contributions made to the plans. The Subsidiary Registrants are allocated their proportionate share of the cost and obligations related to these plans. Without sustained growth in the pension investments over time to increase the value of plan assets and, depending upon the other factors impacting costs as listed above, Duke Energy could be required to fund its plans with significant amounts of cash. Such cash funding obligations, and the Subsidiary Registrants’ proportionate share of such cash funding obligations, could have a material impact on the Duke Energy Registrants’ results of operations, financial position and cash flows.

Duke Energy is a holding company and depends on the cash flows from its subsidiaries to meet its financial obligations.

Because Duke Energy is a holding company with no operations or cash flows of its own, its ability to meet its financial obligations, including making interest and principal payments on outstanding indebtedness and to pay dividends on its common stock, is primarily dependent on the net income and cash flows of its subsidiaries and the ability of those subsidiaries to pay upstream dividends or to repay borrowed funds. Prior to funding Duke Energy, its subsidiaries have regulatory restrictions and financial obligations that must be satisfied. These subsidiaries are separate legal entities and have no obligation to provide Duke Energy with funds. In addition, Duke Energy may provide capital contributions or debt financing to its subsidiaries under certain circumstances, which would reduce the funds available to meet its financial obligations, including making interest and principal payments on outstanding indebtedness and to pay dividends on Duke Energy’s common stock.

GENERAL RISKS

The failure of Duke Energy information technology systems, or the failure to enhance existing information technology systems and implement new technology, could adversely affect the Duke Energy Registrants’ businesses.

Duke Energy’s operations are dependent upon the proper functioning of its internal systems, including the information technology systems that support our underlying business processes. Any significant failure or malfunction of such information technology systems may result in disruptions of our operations. In the ordinary course of business, we rely on information technology systems, including the internet and third-party hosted services, to support a variety of business processes and activities and to store sensitive data, including (i) intellectual property, (ii) proprietary business information, (iii) personally identifiable information of our customers, employees, retirees and shareholders and (iv) data with respect to invoicing and the collection of payments, accounting, procurement, and supply chain activities. Our information technology systems are dependent upon global communications and cloud service providers, as well as their respective vendors, many of whom have at some point experienced significant system failures and outages in the past and may experience such failures and outages in the future. These providers’ systems are susceptible to cybersecurity and data breaches, outages from fire, floods, power loss, telecommunications failures, break-ins and similar events. Failure to prevent or mitigate data loss from system failures or outages could materially affect the results of operations, financial position and cash flows of the Duke Energy Registrants.

In addition to maintaining our current information technology systems, Duke Energy believes the digital transformation of its business is key to driving internal efficiencies as well as providing additional capabilities to customers. Duke Energy’s information technology systems are critical to cost-effective, reliable daily operations and our ability to effectively serve our customers. We expect our customers to continue to demand more sophisticated technology-driven solutions and we must enhance or replace our information technology systems in response. This involves significant development and implementation costs to keep pace with changing technologies and customer demand. If we fail to successfully implement critical technology, or if it does not provide the anticipated benefits or meet customer demands, such failure could materially adversely affect our business strategy as well as impact the results of operations, financial position and cash flows of the Duke Energy Registrants.

Potential terrorist activities, or military or other actions, could adversely affect the Duke Energy Registrants’ businesses.

The continued threat of terrorism and the impact of retaliatory military and other action by the U.S. and its allies may lead to increased political, economic and financial market instability and volatility in prices for natural gas and oil, which may have material adverse effects in ways the Duke Energy Registrants cannot predict at this time. In addition, future acts of terrorism and possible reprisals as a consequence of action by the U.S. and its allies could be directed against companies operating in the U.S. Information technology systems, transmission and distribution and generation facilities such as nuclear plants could be potential targets of terrorist activities or harmful activities by individuals or groups that could have a material adverse effect on Duke Energy Registrants' businesses. In particular, the Duke Energy Registrants may experience increased capital and operating costs to implement increased security for their information technology systems, transmission and distribution and generation facilities, including nuclear power plants under the NRC’s design basis threat requirements. These increased costs could include additional physical plant security and security personnel or additional capability following a terrorist incident.

Failure to attract and retain an appropriately qualified workforce could unfavorably impact the Duke Energy Registrants’ results of operations.

Certain events, such as an aging workforce, mismatch of skill set or complement to future needs, or unavailability of contract resources may lead to operating challenges and increased costs. The challenges include lack of resources, loss of knowledge base and the lengthy time required for skill development. In this case, costs, including costs for contractors to replace employees, productivity costs and safety costs, may increase. Failure to hire and adequately train replacement employees, including the transfer of significant internal historical knowledge and expertise to new employees, or future availability and cost of contract labor may adversely affect the ability to manage and operate the business, especially considering the workforce needs associated with nuclear generation facilities and new skills required to operate a modernized, technology-enabled power grid. If the Duke Energy Registrants are unable to successfully attract and retain an appropriately qualified workforce, their results of operations, financial position and cash flows could be negatively affected.

33

UNRESOLVED STAFF COMMENTS

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

34

PROPERTIES

ITEM 2. PROPERTIES

ELECTRIC UTILITIES AND INFRASTRUCTURE

The following table provides information related to the Electric Utilities and Infrastructure's generation stations as of December 31, 2020. The MW displayed in the table below are based on summer capacity. Ownership interest in all facilities is 100% unless otherwise indicated.

Owned MW

Facility Plant Type Primary Fuel Location Capacity

Duke Energy Carolinas

Oconee Nuclear Uranium SC 2,554

McGuire Nuclear Uranium NC 2,316

Catawba(a) Nuclear Uranium SC 445

Belews Creek Fossil Coal/Gas NC 2,220

Marshall Fossil Coal/Gas NC 2,058

J.E. Rogers Fossil Coal/Gas NC 1,388

Lincoln Combustion Turbine (CT) Fossil Gas/Oil NC 1,193

Allen Fossil Coal NC 1,098

Rockingham CT Fossil Gas/Oil NC 825

W.S. Lee Combined Cycle (CC)(b) Fossil Gas SC 686

Buck CC Fossil Gas NC 668

Dan River CC Fossil Gas NC 662

Mill Creek CT Fossil Gas/Oil SC 563

W.S. Lee Fossil Gas SC 170

W.S. Lee CT Fossil Gas/Oil SC 84

Clemson CHP Fossil Gas SC 13

Bad Creek Hydro Water SC 1,440

Jocassee Hydro Water SC 780

Cowans Ford Hydro Water NC 324

Keowee Hydro Water SC 152

Other small facilities (19 plants) Hydro Water NC/SC 603

Distributed generation Renewable Solar NC 38

Total Duke Energy Carolinas 20,280

35

PROPERTIES

Owned MW

Facility Plant Type Primary Fuel Location Capacity

Duke Energy Progress

Brunswick Nuclear Uranium NC 1,870

Harris Nuclear Uranium NC 964

Robinson Nuclear Uranium SC 759

Roxboro Fossil Coal NC 2,439

Smith CC Fossil Gas/Oil NC 1,085

H.F. Lee CC Fossil Gas/Oil NC 888

Wayne County CT Fossil Gas/Oil NC 857

Smith CT Fossil Gas/Oil NC 772

Mayo Fossil Coal NC 727

L.V. Sutton CC Fossil Gas/Oil NC 607

Asheville CC Fossil Gas/Oil NC 474

Asheville CT Fossil Gas/Oil NC 320

Darlington CT Fossil Gas/Oil SC 234

Weatherspoon CT Fossil Gas/Oil NC 124

L.V. Sutton CT (Black Start) Fossil Gas/Oil NC 78

Blewett CT Fossil Oil NC 52

Walters Hydro Water NC 112

Other small facilities (3) Hydro Water NC 115

Distributed generation Renewable Solar NC 49

Asheville – Rock Hill Battery Renewable Storage NC 7

Total Duke Energy Progress 12,533

Owned MW

Facility Plant Type Primary Fuel Location Capacity

Duke Energy Florida

Hines CC Fossil Gas/Oil FL 2,054

Citrus County CC Fossil Gas FL 1,610

Crystal River Fossil Coal FL 1,422

Bartow CC Fossil Gas/Oil FL 1,169

Anclote Fossil Gas FL 1,013

Intercession City CT Fossil Gas/Oil FL 951

Osprey CC Fossil Gas/Oil FL 583

DeBary CT Fossil Gas/Oil FL 559

Tiger Bay CC Fossil Gas/Oil FL 200

Bayboro CT Fossil Oil FL 171

Bartow CT Fossil Gas/Oil FL 168

Suwannee River CT Fossil Gas FL 149

University of Florida CoGen CT Fossil Gas FL 43

Distributed generation Renewable Solar FL 195

Total Duke Energy Florida 10,287

Owned MW

Facility Plant Type Primary Fuel Location Capacity

Duke Energy Ohio

East Bend Fossil Coal KY 600

Woodsdale CT Fossil Gas/Propane OH 476

Total Duke Energy Ohio 1,076

36

PROPERTIES

Owned MW

Facility Plant Type Primary Fuel Location Capacity

Duke Energy Indiana

Gibson(c) Fossil Coal IN 2,822

Cayuga(d) Fossil Coal/Oil IN 1,005

Edwardsport Fossil Coal IN 595

Madison CT Fossil Gas OH 566

Wheatland CT Fossil Gas IN 450

Vermillion CT(e) Fossil Gas IN 360

Gallagher Fossil Coal IN 280

Noblesville CC Fossil Gas/Oil IN 264

Henry County CT Fossil Gas/Oil IN 129

Cayuga CT Fossil Gas/Oil IN 86

Markland Hydro Water IN 51

Distributed generation Renewable Solar IN 11

Camp Atterbury Battery Renewable Storage IN 4

Nabb Battery Renewable Storage IN 4

Crane Battery Renewable Storage IN 4

Total Duke Energy Indiana 6,631

Owned MW

Totals by Type Capacity

Total Electric Utilities 50,807

Totals by Plant Type

Total Electric Utilities 50,807

(a)Jointly owned with North Carolina Municipal Power Agency Number 1, NCEMC and PMPA. Duke Energy Carolinas' ownership is 19.25% of the facility.

(b)Jointly owned with NCEMC. Duke Energy Carolinas' ownership is 87.27% of the facility.

(c)Duke Energy Indiana owns and operates Gibson Station Units 1 through 4 and is a joint owner of unit 5 with WVPA and IMPA. Duke Energy Indiana operates unit 5 and owns 50.05%.

(d)Includes Cayuga Internal Combustion.

(e)Jointly owned with WVPA. Duke Energy Indiana's ownership is 62.5% of the facility.

The following table provides information related to Electric Utilities and Infrastructure's electric transmission and distribution properties as of December 31, 2020.

Duke Duke Duke Duke Duke

Duke Energy Energy Energy Energy Energy

Energy Carolinas Progress Florida Ohio Indiana

Electric Transmission Lines

Electric Distribution Lines

Substantially all of Electric Utilities and Infrastructure's electric plant in service is mortgaged under indentures relating to Duke Energy Carolinas’, Duke Energy Progress', Duke Energy Florida's, Duke Energy Ohio’s and Duke Energy Indiana’s various series of First Mortgage Bonds.

37

PROPERTIES

GAS UTILITIES AND INFRASTRUCTURE

Gas Utilities and Infrastructure owns transmission pipelines and distribution mains that are generally underground, located near public streets and highways, or on property owned by others for which Duke Energy Ohio and Piedmont have obtained the necessary legal rights to place and operate facilities on such property located within the Gas Utilities and Infrastructure service territories. The following table provides information related to Gas Utilities and Infrastructure's natural gas distribution.

Duke

Duke Energy

Energy Ohio Piedmont

Miles of natural gas distribution and transmission pipelines 34,200 7,400 26,800

COMMERCIAL RENEWABLES

The following table provides information related to Commercial Renewables' electric generation facilities as of December 31, 2020. The MW displayed in the table below are based on nameplate capacity.

Owned MW Ownership

Facility Plant Type Primary Fuel Location Capacity Interest (%)

Commercial Renewables – Wind

Los Vientos (five sites) Renewable Wind TX 465 51 %

Mesteno(a) Renewable Wind TX 202 100 %

Sweetwater IV Renewable Wind TX 113 47 %

Frontier Renewable Wind OK 103 51 %

Top of the World Renewable Wind WY 102 51 %

Notrees Renewable Wind TX 78 51 %

Mesquite Creek Renewable Wind TX 54 26 %

Campbell Hill Renewable Wind WY 50 51 %

Ironwood Renewable Wind KS 44 26 %

Sweetwater V Renewable Wind TX 38 47 %

North Allegheny Renewable Wind PA 36 51 %

Laurel Hill Renewable Wind PA 35 51 %

Cimarron II Renewable Wind KS 34 26 %

Kit Carson Renewable Wind CO 26 51 %

Silver Sage Renewable Wind WY 21 51 %

Happy Jack Renewable Wind WY 15 51 %

Shirley Renewable Wind WI 10 51 %

Total Renewables – Wind 1,426

38

PROPERTIES

Owned MW Ownership

Facility Plant Type Primary Fuel Location Capacity Interest (%)

Commercial Renewables – Solar

Holstein(a) Renewable Solar TX 200 100 %

Rambler(a) Renewable Solar TX 200 100 %

North Rosamond(a) Renewable Solar CA 150 100 %

Lapetus(a) Renewable Solar TX 100 100 %

Conetoe II Renewable Solar NC 80 100 %

Palmer(a) Renewable Solar CO 60 100 %

Seville I & II Renewable Solar CA 34 67 %

Rio Bravo I & II Renewable Solar CA 27 67 %

Wildwood I & II Renewable Solar CA 23 67 %

Kelford Renewable Solar NC 22 100 %

Dogwood Renewable Solar NC 20 100 %

Halifax Airport Renewable Solar NC 20 100 %

Pasquotank Renewable Solar NC 20 100 %

Shawboro Renewable Solar NC 20 100 %

Caprock Renewable Solar NM 17 67 %

Creswell Alligood Renewable Solar NC 14 100 %

Pumpjack Renewable Solar CA 13 67 %

Longboat Renewable Solar CA 13 67 %

Shoreham(a) Renewable Solar NY 13 51 %

Washington White Post Renewable Solar NC 12 100 %

Whitakers Renewable Solar NC 12 100 %

Highlander I & II Renewable Solar CA 11 51 %

Other small solar(a) Renewable Solar Various 193 Various

Total Renewables – Solar 1,274

Owned MW Ownership

Facility Plant Type Primary Fuel Location Capacity Interest (%)

Commercial Renewables – Fuel Cells(a) Renewable Fuel Cell Various 43 100 %

Total Renewables – Fuel Cells 43

Owned MW Ownership

Facility Plant Type Primary Fuel Location Capacity Interest (%)

Commercial Renewables – Energy Storage

Notrees Battery Storage Renewable Storage TX 18 51 %

Beckjord Battery Storage Renewable Storage OH 2 100 %

Total Renewables – Energy Storage 20

Owned MW

Totals by Type Capacity

Fuel Cells 43

Energy Storage 20

Total Commercial Renewables(b) 2,763

(a) Certain projects, including projects within Other small solar, are in tax-equity structures where investors have differing interests in the project's economic attributes. 100% of the tax-equity project's capacity is included in the table above.

(b) Net proportion of MW capacity in operation is 3,937, which represents the amount managed or owned by Duke Energy.

OTHER

Duke Energy owns approximately 8 million square feet and leases approximately 2 million square feet of corporate, regional and district office space spread throughout its service territories.

39

LEGAL PROCEEDINGS AND MINE SAFETY DISCLOSURES

ITEM 3. LEGAL PROCEEDINGS

For information regarding legal proceedings, including regulatory and environmental matters, see Note 3, “Regulatory Matters,” and Note 4, “Commitments and Contingencies,” to the Consolidated Financial Statements.

MTBE Litigation

On December 15, 2017, the state of Maryland filed suit in Baltimore City Circuit Court against Duke Energy Merchants and other defendants alleging contamination of state waters by MTBE leaking from gasoline storage tanks. MTBE is a gasoline additive intended to increase the oxygen levels in gasoline and make it burn cleaner. The case was removed from Baltimore City Circuit Court to federal District Court. Initial motions to dismiss filed by the defendants were denied by the court on September 4, 2019, and the matter is now in discovery. On December 18, 2020, the plaintiff and defendants selected 50 focus sites, none of which have any ties to Duke Energy Merchants, and discovery is likely to be specific to those sites. Duke Energy cannot predict the outcome of this matter.

ITEM 4. MINE SAFETY DISCLOSURES

This is not applicable for any of the Duke Energy Registrants.

40

SECURITIES INFORMATION

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The common stock of Duke Energy is listed and traded on the NYSE (ticker symbol DUK). As of January 31, 2021, there were 136,857 Duke Energy common stockholders of record. For information on dividends, see the "Dividend Payments" section of Management's Discussion and Analysis.

There is no market for the common equity securities of the Subsidiary Registrants, all of which are directly or indirectly owned by Duke Energy. See Note 1, "Summary of Significant Accounting Policies," to the Consolidated Financial Statements for information on the 2021 sale of a minority interest in Duke Energy Indiana.

Securities Authorized for Issuance Under Equity Compensation Plans

See Item 12 of Part III within this Annual Report for information regarding Securities Authorized for Issuance Under Equity Compensation Plans.

Issuer Purchases of Equity Securities for Fourth Quarter 2020

There were no repurchases of equity securities during the fourth quarter of 2020.

Stock Performance Graph

The following performance graph compares the cumulative TSR from Duke Energy Corporation common stock, as compared with the Standard & Poor's 500 Stock Index (S&P 500) and the Philadelphia Utility Index for the past five years. The graph assumes an initial investment of $100 on December 31, 2015, in Duke Energy common stock, in the S&P 500 and in the Philadelphia Utility Index and that all dividends were reinvested. The stockholder return shown below for the five-year historical period may not be indicative of future performance.

NYSE CEO Certification

Duke Energy has filed the certification of its Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 as exhibits to this Annual Report on Form 10-K for the year ended December 31, 2020.

ITEM 6. SELECTED FINANCIAL DATA

This is not applicable for any of the Duke Energy Registrants.

41

MD&A DUKE ENERGY

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis includes financial information prepared in accordance with GAAP in the U.S., as well as certain non-GAAP financial measures such as adjusted earnings and adjusted EPS discussed below. Generally, a non-GAAP financial measure is a numerical measure of financial performance, financial position or cash flows that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP. The non-GAAP financial measures should be viewed as a supplement to, and not a substitute for, financial measures presented in accordance with GAAP. Non-GAAP measures as presented herein may not be comparable to similarly titled measures used by other companies.

The following combined Management’s Discussion and Analysis of Financial Condition and Results of Operations is separately filed by Duke Energy Corporation and its subsidiaries. Duke Energy Carolinas, LLC, Progress Energy, Inc., Duke Energy Progress, LLC, Duke Energy Florida, LLC, Duke Energy Ohio, Inc., Duke Energy Indiana, LLC and Piedmont Natural Gas Company, Inc. However, none of the registrants make any representation as to information related solely to Duke Energy or the subsidiary registrants of Duke Energy other than itself.

Management’s Discussion and Analysis should be read in conjunction with the Consolidated Financial Statements and Notes for the years ended December 31, 2020, 2019 and 2018.

See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in Duke Energy's Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 20, 2020, for a discussion of variance drivers for the year ended December 31, 2019, as compared to December 31, 2018.

DUKE ENERGY

Duke Energy is an energy company headquartered in Charlotte, North Carolina. Duke Energy operates in the U.S. primarily through its wholly owned subsidiaries, Duke Energy Carolinas, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont. When discussing Duke Energy’s consolidated financial information, it necessarily includes the results of the Subsidiary Registrants, which along with Duke Energy, are collectively referred to as the Duke Energy Registrants.

Executive Overview

At Duke Energy the fundamentals of our business are strong and allow us to deliver growth in earnings and dividends in a low-risk, predictable and transparent way. In 2020, we met our near-term financial commitments and continued to provide safe and reliable service while managing the impacts of the COVID-19 pandemic.

In early 2021, we continued to position the company for sustainable long-term growth, executing an important coal ash settlement agreement in North Carolina and announcing the $2 billion sale of a minority interest in Duke Energy Indiana, providing a source of efficient capital at an attractive valuation. We remain focused on a business portfolio that will deliver a reliable and growing dividend with 2020 representing the 94th consecutive year Duke Energy paid a cash dividend on its common stock. With these recent announcements, we also increased our long-term adjusted EPS growth rate to 5% to 7% through 2025. This growth is supported by our $59 billion capital plan from 2021 to 2025, clean energy investments that benefit our customers, timely cost-recovery mechanisms in most jurisdictions and our ability to effectively manage our cost structure.

Financial Results

42

MD&A DUKE ENERGY

(a)See Results of Operations below for Duke Energy’s definition of adjusted earnings and adjusted EPS as well as a reconciliation of this non-GAAP financial measure to net income available to Duke Energy and net income available to Duke Energy per basic share.

Duke Energy's 2020 Net Income Available to Duke Energy Corporation (GAAP Reported Earnings) were impacted by: regulatory settlements related to coal ash cost recovery in Electric Utilities and Infrastructure; the cancellation of the ACP pipeline in Gas Utilities and Infrastructure; and growth in project investments in Commercial Renewables. See “Results of Operations” below for a detailed discussion of the consolidated results of operations and a detailed discussion of financial results for each of Duke Energy’s reportable business segments, as well as Other.

2020 Areas of Focus and Accomplishments

Clean Energy Transformation. Our industry has been undergoing an incredible transformation and 2020 was a milestone year for our company where we articulated a clear vision for the future and outlined investments to achieve a clean energy future for our customers. We continue to transform the customer experience by generating cleaner energy, modernizing the energy grid, and expanding natural gas infrastructure.

Generating Cleaner Energy

In October 2020, we held our first-ever Environmental, Social, and Governance (ESG) Day for investors, successfully outlining our climate strategy and highlighting our strong progress to date in reducing carbon (a greater than 40% reduction from 2005) and our commitment to do more (at least 50% reduction by 2030 and net-zero by 2050). In the Carolinas, we participated in extensive stakeholder processes focused on carbon reduction and regulatory reform and filed comprehensive IRP consistent with that strategy. Our planned coal retirements and transition to cleaner energy sources in the Carolinas are some of the largest in the industry. We also committed to an all-electric light-duty fleet and 50% of all medium- and heavy-duty vehicles by 2030 – a pledge that also leads our industry. Our commitment for 2030 includes retiring plants, operating our existing carbon-free resources and investing in renewables, our energy delivery system, and natural gas infrastructure. As we look beyond 2030, we will need additional tools to continue our progress. We will work actively to advocate for research and development of carbon-free, dispatchable resources. That includes longer-duration energy storage, advanced nuclear technologies, carbon capture and zero-carbon fuels.

Modernizing the Power Grid

Our grid improvement programs continue to be a key component of our growth strategy. Modernization of the electric grid, including smart meters, storm hardening, self-healing and targeted undergrounding, helps to ensure the system is better prepared for severe weather, improves the system's reliability and flexibility, and provides better information and services for customers. In 2020, 98% of our jurisdictions were equipped with smart meters and we remain on track to be fully deployed across all regions by the end of this year. We continue to expand our self-optimizing grid capabilities, and in 2020, smart, self-healing technologies helped to avoid more than 800,000 extended customer outages across our six-state electric service area, saving customers more than 1.8 million hours of lost outage time. Duke Energy also has a demonstrated track record of driving efficiencies and productivity into the business and we continue to leverage new technology, digital tools and data analytics across the business in response to a transforming landscape.

Expanding Natural Gas Infrastructure

In July 2020, Duke Energy and Dominion announced the cancellation of the ACP pipeline. Litigation risks and delays presented too much uncertainty on our ability to economically complete the project on schedule to meet our customers’ needs. Additionally, Dominion reached a decision to exit their natural gas transmission business, further impeding our ability to consider ongoing investment in the project. The Company remains committed to pursuing natural gas infrastructure investments and continues to explore additional resources in eastern North Carolina for the Piedmont system and securing more transport capacity to support power generation. Construction is expected to be completed this year on a liquefied natural gas facility in Robeson County, North Carolina, on property Piedmont owns. This investment will help Piedmont provide a reliable gas supply to customers during peak usage periods and protect customers from price volatility when there is a higher-than-normal demand for natural gas. In the fall of 2020, recognizing the continued importance of natural gas to our plans, we announced a net-zero methane emission goal by 2030 related to our gas distribution business, as well as our commitment to lead on reduction of upstream methane emissions through work with our natural gas supply chain.

Constructive Regulatory and Legislative Outcomes. One of our long-term strategic goals is to achieve modernized regulatory constructs in our jurisdictions. Modernized constructs provide benefits, which include improved earnings and cash flows through more timely recovery of investments, as well as stable pricing for customers.

In 2020, we conducted the bulk of proceedings related to our North Carolina rate cases for both Duke Energy Carolinas and Duke Energy Progress and achieved a partial settlement with the North Carolina Public Staff and ten other intervening parties. In January 2021, Duke Energy Carolinas and Duke Energy Progress reached an important settlement agreement, which subject to NCUC approval, resolves historical coal ash prudence and cost recovery issues and provides clarity on coal ash cost recovery for the next decade. In 2020, we also achieved constructive rate case outcomes in Indiana (our first rate base request in 15 years) and Kentucky (electric). We have a multiyear rate plan in Florida and in January 2021 reached a constructive settlement agreement with key consumer groups, subject to FPSC approval, to bring additional certainty to rates through 2024, In addition, grid investment riders in the Midwest enable more timely cost recovery and earnings growth.

Customer Satisfaction. Duke Energy continues to transform the customer experience through our use of customer data to better inform operational priorities and performance levels. This data-driven approach allows us to identify the investments that are the most important to the customer experience. Our work has been recognized by our customers with external measures showing Duke Energy is improving customer satisfaction at a rate greater than the utility industry. Additionally, in 2020, we surpassed our internal target that measures customer satisfaction by approximately 14%.

43

MD&A DUKE ENERGY

Operational Excellence, Safety and Reliability. The reliable and safe operation of our power plants, electric distribution system and natural gas infrastructure in our communities is foundational to our customers, our financial results and our credibility with stakeholders. Our regulated generation fleet and nuclear sites had strong performance throughout the year and our electric distribution system performed well. The safety of our workforce is a core value. Our employees delivered strong safety results in 2020, and we are at or near the top of our industry. Additionally, the 2020 Atlantic hurricane season was incredibly active and marked the fifth consecutive year of above-average damaging storms. Our ability to effectively handle all facets of the 2020 storm response efforts, including navigating COVID-19 protocols, is a testament to our team’s extensive preparation and coordination, applying lessons learned from previous storms, and to on-the-ground management throughout the restoration efforts.

Leading Through COVID-19. COVID-19 impacted all that we accomplished in 2020 and demonstrated our resiliency and agility:

•As the pandemic spread, stay-at-home orders coupled with recessionary economic conditions caused overall retail electric sales to decline by approximately 2%. To offset this challenge, as well as mild weather and other COVID-related costs, we successfully achieved the high end of our goal of $400 million to $450 million of broad-based O&M reductions and other mitigating actions. The Company’s results were within its adjusted EPS guidance range and we expect to sustain approximately $200 million of the 2020 O&M cost mitigation into 2021 forward.

•Duke Energy kept electricity and gas flowing while voluntarily making significant accommodations for our customers. We led the way in our sector nationally, suspending all nonpay disconnects in all jurisdictions and waiving late payment fees and other fees until the national state of emergency was lifted. In the fall, we began returning to normal business practices, ensuring diligent communication with our customers and providing flexible payment arrangements.

•We ensured the physical safety of our workers and provided support for our employees. As cases spiked nationally, we deployed COVID-19 safety protocols for our front-line essential workers and moved 18,000 colleagues to remote work. Our COVID-19 Case Management Team managed exposures of our workforce and IT ensured our networks could handle the remote work while strengthening cyber protection. Under our COVID-19 protocols, our front-line employees completed 150 fossil and nuclear outages, executed large major projects, restored service from storms and hurricanes, and managed high-water events. Overall, our operations continued, and our team completed their work with excellence.

Duke Energy Objectives – 2021 and Beyond

Duke Energy will continue to deliver exceptional value to customers, be an integral part of the communities in which we do business and provide attractive returns to investors. We have an achievable, long-term strategy in place, and it is producing tangible results, yet the industry in which we operate is becoming more and more dynamic. We are adjusting, where necessary, and accelerating our focus in key areas to ensure the company is well positioned to be successful for many decades into the future. As we look ahead to 2021, our plans include:

•Continuing to place the customer at the center of all that we do, which includes providing customized products and solutions

•Strengthening our relationships with all our vast stakeholders in the communities in which we operate and invest

•Generating cleaner energy and working to achieve net-zero carbon emissions by 2050 and net zero methane emissions by 2030

•Modernizing and strengthening a green-enabled energy grid

•Expanding our natural gas infrastructure

•Maintaining the safety of our communities and employees

•Deploying digital tools across our business

Matters Impacting Future Results

The matters discussed herein could materially impact the future operating results, financial condition and cash flows of the Duke Energy Registrants and Business Segments.

Regulatory Matters

Coal Ash Costs

As a result of the NCDEQ settlement on December 31, 2019, Duke Energy Carolinas and Duke Energy Progress agreed to excavate seven of the nine remaining coal ash basins in North Carolina with ash moved to on-site lined landfills. At the two remaining basins, uncapped basin ash will be excavated and moved to lined landfills. The majority of spend is expected to occur over the next 15-20 years. In January 2021, Duke Energy Carolinas and Duke Energy Progress reached a settlement agreement on recovery of coal ash costs as outlined in Note 3, "Regulatory Matters," which is subject to review and approval of the NCUC. The company agreed not to seek recovery of approximately $1 billion of deferred coal ash expenditures and Duke Energy Carolinas and Duke Energy Progress took a charge of approximately $500 million each.

In 2019, Duke Energy Carolinas and Duke Energy Progress received orders from the PSCSC denying recovery of certain coal ash costs. Duke Energy Carolinas and Duke Energy Progress have appealed these decisions to the South Carolina Supreme Court and those appeals are pending. An order from regulatory or judicial authorities that rejects our proposed settlement or disallows recovery of costs related to closure of these ash basins could have an adverse impact on future results.

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MD&A DUKE ENERGY

Duke Energy Indiana has interpreted the CCR rule to identify the coal ash basin sites impacted and has assessed the amounts of coal ash subject to the rule and a method of compliance. In 2020, the Hoosier Environmental Council filed a petition challenging the Indiana Department of Environmental Management's partial approval of Duke Energy Indiana’s ash pond closure plans. Interpretation of the requirements of the CCR rule is subject to further legal challenges and regulatory approvals, which could result in additional ash basin closure requirements, higher costs of compliance and greater AROs. Additionally, Duke Energy Indiana has retired facilities that are not subject to the CCR rule. Duke Energy Indiana may incur costs at these facilities to comply with environmental regulations or to mitigate risks associated with on-site storage of coal ash.

Storm Costs

Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida’s service territories were impacted by several named storms in 2018. Hurricane Florence, Hurricane Michael and Winter Storm Diego caused flooding, extensive damage and widespread power outages to the service territories of Duke Energy Carolinas and Duke Energy Progress. Duke Energy Florida’s service territory was also impacted by Hurricane Michael, a Category 5 hurricane and the most powerful storm to hit the Florida Panhandle in recorded history. In September 2019, Hurricane Dorian impacted Duke Energy Progress and Duke Energy Florida's service territories. In 2020, Duke Energy Carolinas and Duke Energy Progress reached partial settlements in the 2019 North Carolina rates cases by filing a petition to securitize deferred storm costs, which is subject to review and approval of the NCUC. In January 2021, Duke Energy Florida filed a settlement agreement with the FPSC, which if approved, allows recovery of the remaining storm cost balance for hurricanes Michael and Dorian. An order from regulatory authorities disallowing the deferral and future recovery of storm restoration costs could have an adverse impact.

Grid Improvement Costs

Duke Energy Carolinas received an order from the NCUC in 2018, which denied the Grid Rider Stipulation and deferral treatment of grid improvement costs. Duke Energy Carolinas and Duke Energy Progress have petitioned for deferral of future grid improvement costs in their 2019 rate cases. Partial settlements filed with the NCUC in July 2020 included the allowance for deferral for certain grid projects placed in service from June 2020 through December 2022. There could be adverse impacts if grid improvement costs are not ultimately approved for recovery and/or deferral treatment.

Rate Cases

In 2019, Duke Energy Carolinas and Duke Energy Progress filed general rate cases with the NCUC. Several partial settlement agreements have been filed with the NCUC and are awaiting approval. The outcome of these rate cases could have a material impact.

MGP

The PUCO has issued an order authorizing recovery of MGP costs at certain sites in Ohio with a deadline to complete the MGP environmental investigation and remediation work prior to December 31, 2016. This deadline was subsequently extended to December 31, 2019. Duke Energy Ohio has filed for a request for extension of the deadline. A hearing on that request has not been scheduled. Disallowance of costs incurred, failure to complete the work by the deadline or failure to obtain an extension from the PUCO could result in an adverse impact.

For additional information, see Note 3 to the Consolidated Financial Statements, “Regulatory Matters.”

Sale of Minority Interest in Duke Energy Indiana

In January 2021, Duke Energy entered into a definitive agreement providing for the sale of a 19.9% minority interest in Duke Energy Indiana with an affiliate of GIC, Singapore's sovereign wealth fund. The sale is subject to the satisfaction of certain customary conditions described in the investment agreement, including receipt of the approval of the FERC and completion of review by the Committee on Foreign Investments in the United States. Failure to obtain related approvals or satisfy the conditions in the investment agreement could result in the termination of the transaction and could result in an adverse impact. For additional information, see Note 1 to the Consolidated Financial Statements, “Summary of Significant Accounting Policies.”

Commercial Renewables

Duke Energy continues to monitor recoverability of renewable merchant plants located in the Electric Reliability Council of Texas West market and PJM, due to declining market pricing and declining long-term forecasted energy prices, primarily driven by lower forecasted natural gas prices. Based on the most recent recoverability test, the carrying value approximated the aggregate estimated future undiscounted cash flows for the assets under review. A continued decline in energy market pricing would likely result in a future impairment. Impairment of these assets could result in adverse impacts. For additional information, see Note 10 to the Consolidated Financial Statements, "Property, Plant and Equipment."

In February 2021, a severe winter storm impacted certain Commercial Renewables assets in Texas. Extreme weather conditions limited the ability for these solar and wind facilities to generate and sell electricity into the Electric Reliability Council of Texas market. Both lost revenues and higher than expected purchased power costs are expected to negatively impact the operating results of these generating units. The estimated financial impact of the storm is expected to have a material impact on the Commercial Renewables segment's 2021 operating results. See Note 25 to the Consolidated Financial Statements, "Subsequent Events."

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MD&A DUKE ENERGY

COVID-19

Duke Energy cannot predict the extent to which the COVID-19 pandemic will impact its results of operations, financial position and cash flows in the future. Duke Energy will continue to actively monitor the impacts of COVID-19 including the economic slowdown caused by business closures or by reduced operations of businesses and governmental agencies. The pandemic and resultant economic slowdown continues to cause an increase in certain costs, such as bad debt, and a reduction in the demand for energy. Duke Energy has mitigation plans in place to partially offset these impacts, and the ability to execute these plans is critical to preserving future financial results.The Company is in the process of reviewing the long-term real estate strategy due to a potential change of in-office work policies after the COVID-19 pandemic. The plan may result in a reduction of physical work space which could create accounting impacts starting in 2021. Accounting impacts may include reassessments of lease terms and lease modifications which could result in termination penalties, as well as, asset impairments on property, plant and equipment. See Item 1A. Risk Factors for discussion of risks associated with COVID-19 and Liquidity and Capital Resources within this section for a discussion of liquidity impacts of COVID-19.

Within this Item 7, see Liquidity and Capital Resources for a discussion on risks associated with the Tax Act.

Results of Operations

Non-GAAP Measures

Management evaluates financial performance in part based on non-GAAP financial measures, including adjusted earnings and adjusted EPS. These items represent income from continuing operations available to Duke Energy common stockholders in dollar and per-share amounts, adjusted for the dollar and per-share impact of special items. As discussed below, special items include certain charges and credits, which management believes are not indicative of Duke Energy's ongoing performance. Management believes the presentation of adjusted earnings and adjusted EPS provides useful information to investors, as it provides them with an additional relevant comparison of Duke Energy’s performance across periods.

Management uses these non-GAAP financial measures for planning and forecasting, and for reporting financial results to the Board of Directors, employees, stockholders, analysts and investors. Adjusted EPS is also used as a basis for employee incentive bonuses. The most directly comparable GAAP measures for adjusted earnings and adjusted EPS are GAAP Reported Earnings and EPS Available to Duke Energy Corporation common stockholders (GAAP Reported EPS), respectively.

Special items included in the periods presented include the following, which management believes do not reflect ongoing costs:

•Gas Pipeline Investments represents costs related to the cancellation of the ACP pipeline and additional exit costs related to Constitution.

•Regulatory Settlements represents charges related to Duke Energy Carolinas' and Duke Energy Progress' CCR Settlement Agreement and the partial settlements in the 2019 North Carolina rate cases.

•Severance represents the reversal of 2018 costs, which were deferred as a result of a partial settlement in the Duke Energy Carolinas and the Duke Energy Progress 2019 North Carolina rate cases.

•Impairment Charges represents a reduction of a prior year impairment at Citrus County CC and an OTTI on the remaining investment in Constitution.

Duke Energy’s adjusted earnings and adjusted EPS may not be comparable to similarly titled measures of another company because other companies may not calculate the measures in the same manner.

Reconciliation of GAAP Reported Amounts to Adjusted Amounts

The following table presents a reconciliation of adjusted earnings and adjusted EPS to the most directly comparable GAAP measures.

Years Ended December 31,

(in millions, except per share amounts) Earnings EPS Earnings EPS

Adjustments to Reported:

Gas Pipeline Investments(a) 1,711 2.32 — —

Regulatory Settlements(b) 872 1.19 — —

Severance(c) (75) (0.10) — —

Impairment Charges(d) — — (8) (0.01)

Discontinued Operations (7) (0.01) 7 0.01

(a) Net of tax benefit of $399 million.

(b) Net of tax benefit of $263 million.

(c) Net of tax expense of $23 million.

(d) Net of tax expense of $3 million.

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MD&A DUKE ENERGY

Year Ended December 31, 2020, as compared to 2019

GAAP Reported EPS was $1.72 for the year ended December 31, 2020, compared to $5.06 for the year ended December 31, 2019. The decrease in GAAP Reported Earnings/EPS was primarily due to the cancellation of the ACP pipeline and the CCR Settlement Agreement filed with the NCUC.

As discussed and shown in the table above, management also evaluates financial performance based on adjusted EPS. Duke Energy’s adjusted EPS was $5.12 for the year ended December 31, 2020, compared to $5.06 for the year ended December 31, 2019. The increase in Adjusted Earnings/Adjusted EPS was primarily due to positive rate case contributions, growth in wholesale, lower operations and maintenance expense in response to the pandemic and growth in Commercial Renewables, partially offset by higher depreciation expense from a growing asset base, impacts of the pandemic, mild weather and the loss of ACP earnings.

SEGMENT RESULTS

The remaining information presented in this discussion of results of operations is on a GAAP basis. Management evaluates segment performance based on segment income. Segment income is defined as income from continuing operations net of income attributable to noncontrolling interests and preferred stock dividends. Segment income includes intercompany revenues and expenses that are eliminated in the Consolidated Financial Statements.

Duke Energy's segment structure includes the following segments: Electric Utilities and Infrastructure, Gas Utilities and Infrastructure and Commercial Renewables. The remainder of Duke Energy’s operations is presented as Other. See Note 2 to the Consolidated Financial Statements, “Business Segments,” for additional information on Duke Energy’s segment structure.

Electric Utilities and Infrastructure

Years Ended December 31,

Operating Expenses

Fuel used in electric generation and purchased power 6,128 6,904 (776)

Gains on Sales of Other Assets and Other, net 11 1 10

Other Income and Expenses, net 344 353 (9)

Year Ended December 31, 2020, as compared to 2019

Electric Utilities and Infrastructure’s variance is primarily due to impairment charges and revenue reductions related to the CCR settlement agreement filed with the NCUC to resolve coal ash cost recovery issues, unfavorable weather and lower volumes driven by impacts from the COVID-19 pandemic, partially offset by base rate adjustments in various jurisdictions. The following is a detailed discussion of the variance drivers by line item.

Operating Revenues. The variance was driven primarily by:

•an $826 million decrease in fuel revenues driven by lower sales volumes as well as an accelerated refund of fuel costs at Duke Energy Florida in response to the COVID-19 pandemic;

•a $237 million decrease in wholesale revenue primarily driven by the CCR Settlement Agreement filed with the NCUC in January 2021 and decreased volumes;

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MD&A SEGMENT RESULTS - ELECTRIC UTILITIES AND INFRASTRUCTURE

•a $207 million decrease in retail sales, net of fuel revenues, due to unfavorable weather;

•a $130 million decrease in rider revenues from EE programs;

•a $44 million decrease in nuclear cost recovery rider revenue due to recovery of the Crystal River 3 uprate regulatory asset in 2019 at Duke Energy Florida; and

•a $17 million decrease in weather-normal retail sale volumes driven by lower nonresidential customer demand due to impacts from the COVID-19 pandemic.

Partially offset by:

•a $214 million increase due to higher pricing from the Indiana retail rate case, net of rider revenues;

•a $92 million increase in retail pricing due to Duke Energy Florida's base rate adjustments related to annual increases from the 2017 Settlement Agreement and the Solar Base Rate Adjustment; and

•a $32 million increase due to higher pricing from South Carolina retail rate cases, net of a return of EDIT to customers.

Operating Expenses. The variance was driven primarily by:

•a $979 million increase in impairment charges primarily driven by the CCR Settlement Agreement filed with the NCUC in January 2021;

•a $117 million increase in depreciation and amortization expense primarily due to additional plant in service and new depreciation rates from the Indiana retail rate cases; and

•a $13 million increase in property and other taxes primarily due to prior year property tax reassessments.

Partially offset by:

•a $776 million decrease in fuel used in electric generation and purchased power primarily due to lower generation demand and lower fuel and natural gas costs; and

•a $106 million decrease in operation, maintenance and other expense primarily driven by cost mitigation efforts.

Interest Expense. The variance was primarily due to lower interest rates on outstanding debt.

Income Tax Expense. The ETRs for the years ended December 31, 2020, and 2019, were 11.3% and 18.2%, respectively. The decrease in the ETR was primarily due to an increase in the amortization of excess deferred taxes.

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MD&A SEGMENT RESULTS - GAS UTILITIES AND INFRASTRUCTURE

Gas Utilities and Infrastructure

Years Ended December 31,

Operating Expenses

Operation, maintenance and other 430 446 (16)

Depreciation and amortization 258 256 2

Impairment charges 7 — 7

Other Income and Expenses

Equity in (losses) earnings of unconsolidated affiliates (2,017) 114 (2,131)

Other Income and Expenses, net 56 26 30

Income Tax (Benefit) Expense (349) 22 (371)

Year Ended December 31, 2020, as compared to 2019

Gas Utilities and Infrastructure’s results were impacted primarily by the cancellation of the ACP pipeline. The following is a detailed discussion of the variance drivers by line item.

Operating Revenues.The variance was driven primarily by:

•a $167 million decrease due to lower natural gas costs passed through to customers, lower volumes, and decreased off-system sales natural gas costs; and

•a $47 million decrease due to return of EDIT to customers.

Partially offset by:

•an $87 million increase due to North Carolina base rate case increases.

Operating Expenses.The variance was driven primarily by:

•a $167 million decrease in cost of natural gas due to lower natural gas prices, lower volumes and decreased off-system sales natural gas costs.

Equity in (losses) earnings of unconsolidated affiliates. The variance was driven primarily by the cancellation of the ACP pipeline.

Other Income and Expenses, net.The variance was driven primarily by AFUDC equity and other income related to Belews Creek and Marshall Power Generation contracts.

Income Tax (Benefit) Expense. The increase in tax benefit was primarily due to a decrease in pretax income driven by the impact of the cancellation of the ACP pipeline. The ETRs for the years ended December 31, 2020, and 2019, were 21.6% and 4.8%, respectively. The increase in the ETR was primarily due to an adjustment, recorded in the first quarter of 2019, related to the income tax recognition for equity method investments. The equity method investment adjustment was immaterial and relates to prior years.

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MD&A SEGMENT RESULTS - COMMERCIAL RENEWABLES

Commercial Renewables

Years Ended December 31,

Operating Expenses

Operation, maintenance and other 285 297 (12)

Property and other taxes 27 23 4

Impairment charges 6 — 6

Losses on Sales of Other Assets and Other, net (1) (3) 2

Operating Loss (16) (4) (12)

Other Income and Expenses, net 7 5 2

Loss Before Income Taxes (75) (94) 19

Add: Loss Attributable to Noncontrolling Interests 296 177 119

Net proportional MW capacity in operation(a) 3,937 3,485 452

(a) Certain projects are included in tax-equity structures where investors have differing interests in the project's economic attributes. Amounts shown represent 100% of the tax-equity project's capacity.

Year Ended December 31, 2020, as compared to 2019

Commercial Renewables' results were favorable primarily due to growth of new project investments. Since December 31, 2019, Commercial Renewables has placed in service approximately 500 MW of capacity.

The following is a detailed discussion of the variance drivers by line item.

Operating Revenues. The variance was primarily driven by a $39 million increase associated with the growth of new projects placed in service, partially offset by a $24 million decrease primarily within the distributed energy portfolios for lower engineering and construction activities related to delays from COVID-19.

Operating Expenses. The variance was primarily driven by a $52 million increase in operating expenses due to the growth of new projects placed in service. This was partially offset by a $24 million decrease in operating expenses within the distributed energy portfolios for lower engineering and construction costs related to delays from COVID-19.

Interest Expense. The decrease was primarily driven by non-qualifying hedge activity in the prior year, higher capitalized interest in the current year for solar and wind projects in development and lower outstanding debt balances.

Income Tax Benefit. The decrease in the tax benefit was primarily driven by an increase in taxes associated with tax equity investments and a decrease in PTCs generated.

Loss Attributable to Noncontrolling Interests. The increase was driven primarily by the growth of new projects financed by tax equity.

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MD&A SEGMENT RESULTS - OTHER

Other

Years Ended December 31,

Operating Revenues $ 97 $ 95 $ 2

Losses on Sales of Other Assets and Other, net — (2) 2

Other Income and Expenses, net 92 145 (53)

Less: Net Income Attributable to Noncontrolling Interests 1 — 1

Year Ended December 31, 2020, as compared to 2019

The variance was primarily driven by a reversal of corporate allocated severance costs, obligations to the Duke Energy Foundation in 2019, and lower state income tax expense, partially offset by lower returns on investments, higher loss experience related to captive insurance claims, the declaration of preferred stock dividends, and lower earnings on the NMC investment. The following is a detailed discussion of the variance drivers by line item.

Operating Expenses. The decrease was primarily due to the deferral of 2018 corporate allocated severance costs due to the Duke Energy Carolinas and Duke Energy Progress partial settlements in the 2019 North Carolina retail rate case and obligations to the Duke Energy Foundation in 2019, partially offset by higher loss experience related to captive insurance claims and higher franchise tax expense.

Other Income and Expenses, net. The variance was primarily due to lower returns on investments that fund certain employee benefit obligations and lower earnings on the NMC investment primarily due to lower pricing.

Interest Expense. The variance was primarily due to lower outstanding short-term debt and lower interest rates.

Income Tax Benefit. The decrease in the tax benefit was primarily driven by a decrease in pretax losses, partially offset by an increase in state income tax benefits. The ETRs for the years ended December 31, 2020, and 2019, were 33.8% and 29.6%, respectively. The increase in the ETR was primarily due to an increase in state income tax benefits in 2020, in relation to pretax losses.

Preferred Dividends. The variance was driven by the declaration of preferred stock dividends on preferred stock issued in late 2019.

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MD&A DUKE ENERGY CAROLINAS

SUBSIDIARY REGISTRANTS

Basis of Presentation

The results of operations and variance discussion for the Subsidiary Registrants is presented in a reduced disclosure format in accordance with General Instruction (I)(2)(a) of Form 10-K.

DUKE ENERGY CAROLINAS

Results of Operations

Years Ended December 31,

Operating Expenses

Fuel used in electric generation and purchased power 1,682 1,804 (122)

Gains on Sales of Other Assets and Other, net 1 — 1

Other Income and Expenses, net 177 151 26

The following table shows the percent changes in GWh sales and average number of customers for Duke Energy Carolinas. The below percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized.

Increase (Decrease) over prior year 2020 2019

Residential sales (3.1) % (2.9) %

General service sales (6.7) % (0.1) %

Industrial sales (8.0) % (1.9) %

Wholesale power sales (2.0) % (13.6) %

Joint dispatch sales (46.0) % 4.7 %

Total sales (5.9) % (2.6) %

Average number of customers 1.9 % 2.1 %

Year Ended December 31, 2020, as compared to 2019

Operating Revenues.The variance was driven primarily by:

•a $151 million decrease in fuel revenues due to lower prices and retail sales volumes;

•a $149 million decrease in retail sales due to unfavorable weather in the current year;

•a $73 million decrease in rider revenues primarily due to EE programs; and

•a $50 million decrease in wholesale revenue primarily driven by the CCR Settlement Agreement filed with the NCUC in January 2021.

Partially offset by:

•a $25 million increase due to higher pricing from the South Carolina retail rate case, net of a return of EDIT to customers; and

•a $22 million increase in weather-normal retail sales volumes.

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MD&A DUKE ENERGY CAROLINAS

Operating Expenses. The variance was driven primarily by:

•a $459 million increase in impairment charges primarily driven by the CCR Settlement Agreement filed with the NCUC in January 2021; and

•a $74 million increase in depreciation and amortization expense primarily due to additional plant in service and new depreciation rates associated with the South Carolina rate case.

Partially offset by:

•a $125 million decrease in operation, maintenance and other expense primarily driven by the deferral of 2018 severance costs due to the partial settlement agreement between Duke Energy Carolinas and the Public Staff of the NCUC related to the 2019 North Carolina retail rate case, and cost mitigation efforts, partially offset by higher storm restoration costs; and

•a $122 million decrease in fuel used in electric generation and purchased power primarily due to lower retail sales volumes, net of a prior period true up.

Other Income and Expenses, net. The variance was primarily due to higher AFUDC equity in the current year.

Interest Expense. The variance was primarily due to higher debt outstanding in the current year.

Income Tax Expense. The decrease in tax expense was primarily due to a decrease in pretax income and an increase in the amortization of excess deferred taxes.

PROGRESS ENERGY

Results of Operations

Years Ended December 31,

Operating Expenses

Fuel used in electric generation and purchased power 3,479 4,024 (545)

Gains on Sales of Other Assets and Other, net 9 — 9

Other Income and Expenses, net 129 141 (12)

Less: Net Income Attributable to Noncontrolling Interests 1 — 1

Net Income Attributable to Parent $ 1,045 $ 1,327 $ (282)

Year Ended December 31, 2020, as compared to 2019

Operating Revenues. The variance was driven primarily by: