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 to provide reliable energy while maintaining low costs and balancing energy modernization objectives and carbon emissions reductions.
Duke Energy’s results of operations depend, in significant part, on the extent to which it can implement its business strategy and goals successfully. Duke Energy is working to meet growing and evolving customer energy needs while balancing reliability, costs and other priorities including the need to modernize its fleet and the regulatory constructs. Duke Energy is subject to business, policy, regulatory, technology, economic and competitive uncertainties and contingencies, many of which are beyond its control and may make those objectives difficult to achieve.
Federal or state policies could be enacted that restrict the availability of, and increase the costs associated with the use of, fuels or generation technologies, such as natural gas or nuclear power, that enable Duke Energy to reduce its carbon emissions. For example, Duke Energy anticipates that its nuclear stations in North Carolina and South Carolina will continue to qualify for significant tax incentives in the form of nuclear production tax credits as allowed under the IRA and OBBBA. Nuclear energy is a reliable and clean energy source and nuclear tax incentives allowed, including nuclear production tax credits, are expected to reduce the cost of the energy transition for our customers. If such nuclear production tax credits were eliminated or reduced, it could negatively impact our ability to return the anticipated cost benefits to customers.
22
RISK FACTORS
Additionally, new EPA rules issued in April 2024 impose stringent GHG emission reduction standards, revised air toxic limits, and wastewater discharge limitations that may impact the achievement of carbon-reductions, and operational timeline and costs associated with certain new and existing generation. Supportive policies may be needed to facilitate the siting and cost recovery of transmission and distribution upgrades needed to accommodate the build out of new generation facilities, including large volumes of renewables and energy storage. Further, the approval of our state regulators will be necessary for the Company to continue to retire existing carbon emitting assets or make investments in new generating capacity. The Company may be constrained by the ability to procure resources or labor needed to build new generation at a reasonable price as well as to construct projects on time. In addition, new technologies that are not yet commercially available or are unproven at utility scale will likely be needed, including carbon capture and sequestration and supporting infrastructure as well as new resources capable of following electric load over long durations such as advanced nuclear, hydrogen and long-duration storage. If these technologies are not developed or are not available at reasonable prices, or if we invest in early stage technologies that are then supplanted by technological breakthroughs, Duke Energy’s ability to achieve net-zero carbon emissions from electricity generation by 2050 at a cost-effective price could be at risk.
Meeting the evolving and growing energy needs of our customers will require continued operation of our existing carbon-free technologies including nuclear and renewables. The transition to and expansion of certain low-carbon resources, such as renewables without cost-effective storage, may challenge our ability to meet customer expectations of reliability and value in a carbon constrained environment, particularly as demand increases. Our nuclear fleet is central to our ability to meet these objectives and customer expectations. We are continuing our work to renew the operating licenses of the 11 reactors we operate at six nuclear stations for an additional 20 years, extending their operating lives to and beyond midcentury. Failure to receive approval from the NRC for the relicensing of any of these reactors could affect our ability to achieve net-zero carbon emissions from electricity generation by 2050.
As a consequence, Duke Energy may not be able to fully implement or realize the anticipated results of its energy modernization, which may have an adverse effect on its financial condition.
REGULATORY, LEGISLATIVE AND LEGAL RISKS
The Duke Energy Registrants’ regulated utility revenues, earnings and results of operations 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 or legislative bodies do not allow recovery of costs incurred in providing service, or do not do so on a timely basis, the Duke Energy Registrants’ results of operations, financial position or cash flows could be negatively impacted. Differences in regulation between jurisdictions with concurrent operations, such as North Carolina and South Carolina in Duke Energy Carolinas' and Duke Energy Progress' service territory, may also result in failure to recover costs.
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, commercialization and reduction of costs 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 reduce recovery of fixed costs in Duke Energy service territories or result in customers leaving the electric distribution system or an increase in customer net energy metering, which allows customers with private solar to receive bill credits for surplus power up to the full retail credit amount. Over time, customer adoption of these technologies or adoption of net metering regulatory structures could result in Duke Energy not being able to fully recover the costs of its investments.
State regulators have approved various mechanisms to stabilize natural gas utility margins, including margin decoupling in North Carolina and rate stabilization in South Carolina. Additionally, certain jurisdictions have established performance incentive mechanisms and revenue decoupling mechanisms for EU&I. Performance incentive mechanisms condition some portion of the respective utility's earnings on its performance on established measurable consumer, utility system or public policy outcomes. Revenue decoupling mechanisms provide periodic rate adjustments to ensure actual revenues match allowed revenues for certain customer classes. State regulators have also 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 or other mechanisms intended to stabilize utility margins, it would negatively impact results of operations, financial position and cash flows. In addition, regulatory authorities also review whether fuel and purchased power costs are prudently incurred and can disallow the recovery of a portion of these costs that the Duke Energy Registrants seek to recover from customers, which would adversely impact earnings and cash flows.
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 businesses 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, have, and in the future 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 adequately recover costs on a timely basis, including an appropriate return on the significant infrastructure investments being made.
23
RISK FACTORS
Increased competition and unrecovered costs 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 and their utility businesses. 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 the Public Utility Regulatory Policies Act of 1978. 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 may also face heightened competitive pressures arising from other utilities and energy suppliers that construct or install generation facilities directly for customers, as well as from customers who develop their own generation capabilities. Additionally, the establishment of municipal utilities within Duke Energy's service territories could further intensify competition. These developments have the potential to materially and adversely affect the Duke Energy Registrants' 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 and environmental regulations, 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 for 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, including tax incentives and credits, 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, which could have a material effect on the Duke Energy Registrants' results of operations, financial position or cash flows. Such potential changes that may have adverse consequences could include no longer allowing tax incentives and credits currently provided for under the IRA and OBBBA, including the ability to record or sell related tax credits to third parties.
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 CCR, air emissions, water quality, wastewater discharges, solid waste and hazardous waste. For example, new EPA rules issued in April 2024, among other things, impose stringent GHG emissions limitations on existing coal plants and new natural gas plants and more stringent air toxic limits on existing coal plants, increase limitations on wastewater discharge, and impose groundwater monitoring and corrective action requirements on previously unregulated coal ash sources at regulated facilities (CCR Management Units) and inactive surface impoundments at retired generating facilities (Legacy CCR Surface Impoundments). Potential legal challenges to such rules or actions to repeal or modify requirements may not be successful, and adherence to these rules may increase the cost of compliance, impact generation resource mix, force carbon reductions or negatively impact customer reliability and perceived value. For example, EPA Rule 111 as issued imposes stringent GHG emissions limitations and reliance on carbon capture technologies that are not yet adequately demonstrated at utility scale. These and other environmental laws and regulations can result in increased capital, operating and other costs. Additionally, new state legislation in response to such regulations could impose carbon reduction objectives that are more aggressive than the Company's plans. These regulations may require the Duke Energy Registrants to make additional capital expenditures or increase operating and maintenance 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, as well as reputational damage. 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, and are likely to, result in additional costs of operation for existing facilities or development of new facilities being prevented, delayed or subject to additional costs. The costs to comply with environmental laws and regulations could have a material effect on the Duke Energy Registrants’ results of operations, financial position or cash flows.
24
RISK FACTORS
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 and conflicting activism, both nationally and internationally, about global climate change. The EPA and state regulators have, and may adopt and implement, additional regulations to restrict emissions of GHGs to address global climate change, as well as reporting requirements regarding such emissions and related climate-goal claims. Certain local and state jurisdictions have also enacted laws to restrict or prevent new natural gas infrastructure. Increased regulation of GHG emissions and reporting requirements could impose significant additional costs on the Duke Energy Registrants' electric and natural gas operations, their suppliers and customers and affect demand for energy conservation and renewable products, which could impact both our electric and natural gas businesses. Regulatory changes and/or uncertainty of applicability of such legislative and regulatory initiatives could also result in generation facilities to be retired earlier than planned to achieve net-zero carbon emissions from electricity generation by 2050. Though we would plan to seek cost recovery for investments related to GHG emission reductions through regulatory rate structures, changes in the regulatory climate could result in the delay or failure to fully recover costs and investments, including in generation.
OPERATIONAL RISKS
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.
A continuation of adverse economic conditions including economic downturn or high commodity prices could also negatively impact the financial stability of certain of our customers and result in their inability to pay for electric and natural gas services. This could lead to increased bad debt expense and higher allowance for doubtful account reserves for the Duke Energy Registrants and result in delayed or unrecovered operating costs and lower financial results. 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. Rapidly rising prices as a result of inflation, tariffs, or other factors may impact the ability of the Company to recover costs timely or execute on its business strategy including the achievement of growth objectives.
The Duke Energy Registrants 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 negatively impact the Company's ability to accurately forecast the financial impact or reduce the Duke Energy Registrants’ revenues and margins, thereby diminishing results of operations.
The Duke Energy Registrants are exposed to financial and operational risks associated with growth including volatility in sales, supply and demand forecasts, and customer usage changes which could negatively impact the Duke Energy Registrants' 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 include the following:
•weather variability such as extreme seasonal conditions, storm-related outages, or drought impacting generation economics;
•transmission or transportation constraints, purchased power availability and competitive alternative energy sources;
•customer-owned generation, energy efficiency adoption and technological advances reducing demand; and
•fuel procurement challenges for coal, natural gas, crude oil and uranium and capacity limitations for transmission services.
At times, demand can exceed available generation capacity and emerging large loads – such as hyperscale data centers and industrial facilities – present unique risks due to their high demand, rapid fluctuations, and unpredictable operational profiles, which can further strain bulk power system reliability and grid stability. Meeting these requirements may necessitate substantial investments in generation, transmission and advanced grid infrastructure, while early termination of service agreements or stranded assets could result if investments are not fully recovered. Additionally, failure to comply with evolving regulatory requirements and reliability standards, including those established or those that may be established in the future by the NERC and regional entities, could result in penalties, operational restrictions or reputational harm. Compliance obligations related to interconnection processes, system planning and reliability performance for large loads may require significant resources and could impact project timelines and costs.
Natural disasters or operational accidents may adversely affect the Duke Energy Registrants’ operating results, financial position or cash flows.
Natural disasters or operational accidents within the Company or industry (such as wild 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. Such events can, and in the past have, negatively impacted sales volumes such as in the case of storm-related customer outages resulting in lower usage. Costs to restore service and rebuild assets after such events may be material and could impact the results of operations, financial position or cash flows of the Duke Energy Registrants, and such events may do so in the future, until complete and timely cost recovery is approved and occurs under existing relevant regulatory mechanisms across our jurisdictions.
25
RISK FACTORS
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 civil or criminal legal proceedings or changes to policies, laws and regulations whose compliance costs have a significant impact on the Duke Energy Registrants’ results of operations, financial position or 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, including potential litigation awards. 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 or 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 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 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 or cash flows of the Duke Energy Registrants.
Federal and state laws, regulations and other legal requirements, including those related to the 2015 CCR Rule and 2024 CCR Rule, may require or result in additional expenditures, including increased operating and maintenance costs, which could affect the results of operations, financial position or 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 reasonable 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. At all sites requiring CCR closure and groundwater remediation, closure methods and groundwater corrective action remedies have been studied and factored into the estimated retirement and management costs. 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 and retention of 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, advancements in technology that may impact the energy usage by large commercial customers, such as data centers, distributed generation resources and economic and demographic conditions, such as inflation, tariffs, and interest rate volatility, population changes, job and income growth, housing starts, new business formation and the overall level of economic activity.
Federal legislation enacted in 2025 eliminated the long‐term extension of certain residential solar tax credits, causing these incentives to expire after 2025, however, some states continue to offer or consider solar or energy efficiency incentives. Such incentives, along with technological advances driven by federal laws mandating new levels of EE in end-use electric and natural gas 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. In addition, the electrification of buildings and appliances currently relying on natural gas could reduce the number of customers in our natural gas distribution business.
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 or 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 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 of operations may be impacted by changing or conflicting expectations and demands, particularly regarding environmental, social and governance concerns.
Duke Energy’s ability to execute its strategy and achieve anticipated financial outcomes are influenced by the expectations of our customers, regulators, investors and stakeholders. Those expectations are based in part on the core fundamentals of reliability and value 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 continue to shape our customers’ sustainability objectives and energy needs as well as the investment and financing criteria of investors. Failure to meet these increasing expectations or to adequately address the risks and external pressures from regulators, customers, investors and other stakeholders may impact Duke Energy’s reputation, affect its ability to achieve favorable outcomes in future rate cases or impact the results of operations for the Duke Energy Registrants. Furthermore, the increasing use of social media and conflicting expectations and demands regarding environmental, social, and governance concerns, may accelerate and increase the potential scope of negative publicity we might receive and could increase the negative impact on our reputation, business, results of operations or financial condition.
26
RISK FACTORS
As it relates to electric generation, a diversified fleet with increasingly clean generation resources may facilitate more efficient financing and lower costs. Conversely, jurisdictions utilizing more carbon-intensive generation such as coal may experience difficulty attracting certain investors and obtaining the most economical financing terms available. Furthermore, with a heightened emphasis on environmental, social, and governance concerns, and climate change in particular, there is an increased risk of litigation, activism, and legislation from groups both in support of and opposed to various environmental, social and governance initiatives, which could cause delays and increase the costs of our energy modernization.
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 and changes in weather patterns from 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, changing frequency or magnitude of extreme weather conditions such as hurricanes, droughts, heat waves, winter storms and severe weather, including from 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 makes period-to-period comparison less relevant.
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, droughts, extreme temperatures, and wild fires, including from climate change, can result in lost operating revenues due to outages, property damage or total loss, including downed transmission and distribution lines, personal injury, reputational harm, and additional unexpected expenses to mitigate storm damage, including incremental financing costs. The cost of storm restoration efforts may not be fully recoverable or recoverable on a timely basis through the regulatory process and may impact the results of operations, financial position or cash flows of the Duke Energy Registrants.
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. In addition, the growth of renewables and energy storage will put strains on existing transmission assets and require transmission and distribution upgrades. 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 or regulations and laws enacted to address climate change, 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.
Risks Related to Supply Chain Disruptions, Inflation, Tariffs and Foreign Export Restrictions
Duke Energy’s operations and capital projects are exposed to supply chain disruptions, inflation, tariffs and export restrictions. These factors may increase costs, extend lead times for critical equipment and/or delay construction and maintenance activities. Rising demand for electric infrastructure and international trade developments, including potential export controls on certain rare earth materials and technologies used in electric utility infrastructure, may further constrain supply availability. These risks may result in higher costs than estimated or than allowed under approved regulatory mechanisms and could impact our financial results, capital plan execution or our ability to deliver on system modernization goals.
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, changing economic conditions, bankruptcies, transportation delays, weather, labor relations, physical or cyber attack, 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.
27
RISK FACTORS
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 also 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 advanced digital information and operational 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. Furthermore, AI, including generative AI, may be used to facilitate or perpetrate these cybersecurity threats. Duke Energy’s use of generative AI (and use by their vendors and agents) may subject them to data privacy, legal, regulatory and security risks. Because of the critical nature of the infrastructure, increased connectivity to the internet, external networks, mandatory reliability and safety obligations, 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 cyberattacks from foreign, nation-state or domestic sources and have been subject, and will likely continue to be subject, to cyberattacks designed 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 addition, advances in emerging technologies such as quantum computing could, over time, be used to break standard encryption methods, compromise secure connections or otherwise conduct cyberattacks of increasing sophistication. 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 natural gas and electric 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 does not protect Duke Energy from such cyberattacks occurring, and while it does provide some potential mitigation of the financial impacts resulting from such cyberattacks, it is subject to a number of exclusions and may be insufficient to offset any losses, costs or damage experienced.
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 cybersecurity 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 NRC regarding the protection of digital computer and communication systems and networks required for the operation of nuclear power plants. The Duke Energy Registrants that operate designated critical pipelines that transport natural gas are also subject to security directives issued by the TSA requiring such registrants to implement specific cybersecurity mitigation measures. While the Duke Energy Registrants believe they are in compliance with, or, in the case of recent directives, are in the process of implementing 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.
The Duke Energy Registrants’ operations have been and may be affected by pandemic health events in ways listed below and in ways the Duke Energy Registrants cannot predict at this time.
The COVID-19 pandemic and efforts to respond to it resulted in widespread adverse consequences on the global economy and on the Duke Energy Registrants’ customers, third-party vendors, and other parties with whom we do business. If another pandemic or health epidemic or outbreak occurs and is significantly prolonged, it could impact the Duke Energy Registrants' business strategy, results of operations, financial position or cash flows in the future as a result of delays in rate cases or other legal proceedings, an inability to obtain labor or equipment necessary for the construction of large capital projects, an inability to procure satisfactory levels of fuels or other necessary equipment for the continued production of electricity or delivery of natural gas, volatility in global equity securities markets, and the health and availability of our critical personnel and their ability to perform business functions.
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. Both Duke Energy Ohio and Duke Energy Indiana have trackers to recover approved RTO costs, but to the degree Duke Energy Ohio and Duke Energy Indiana incur significant additional fees and increased costs to participate in an RTO that are not approved for recovery, 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, while being able to allocate costs of projects built by Duke Energy Ohio and Duke Energy Indiana to others. 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 or 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 not covered by collateral requirements and those associated with complaint cases filed against an RTO that may seek refunds of revenues previously earned by RTO members.
28
RISK FACTORS
The Duke Energy Registrants have incurred, and may incur additional costs or delays in the construction of new plants or facilities and may not be able to recover their investments in whole or in part.
Duke Energy’s long-term strategy requires extensive capital investment in generation and transmission facilities. The construction of such projects involve a number of risks, including construction delays, delays in or failure to receive required regulatory approvals and/or siting or environmental permits, nonperformance by equipment and other third-party suppliers, and increases in equipment and labor costs beyond expectations. Uncertainty in long-term customer usage patterns or lower than anticipated load growth could impact the nature, timing or magnitude of the Company’s investments, and consequently, the achievement of the Company’s growth objectives. Additionally, to support expected demand growth, Duke Energy Registrants will have compounding risks due to the simultaneous development and construction of multiple facilities. Completion of these types of large projects is subject to substantial delay or cost overrun risks that have, or may occur again, in the future, including those related to labor costs, availability of materials, productivity of workforce/equipment; as well as supply chain issues including, quality, availability, disruptions and potential tariff impacts; weather related delays; start up issues; public and regulatory support; transmission grid interconnection issues; and potential for increased financing costs as a result of interest rates and impact of delays including loss of otherwise available tax credits and incentives. Project cancellations may result in significant cancellation penalties under the equipment purchase orders and construction contracts or impairment charges. If a construction project is completed, the total costs may be higher than estimated or deemed imprudent and may be disallowed or otherwise not recoverable through regulated rates.
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.
Our business could be negatively affected as a result of actions of activist shareholders.
While we strive to maintain constructive communications with our shareholders, activist shareholders may, from time to time, engage in proxy solicitations or advance shareholder proposals, or otherwise attempt to affect changes and assert influence on our Board and management. Perceived uncertainties as to the future direction or governance of the Company may cause concern to our current or potential regulators, vendors or strategic partners, or make it more difficult to execute on our strategy or to attract and retain qualified personnel, which may have a material impact on our business and operating results. In addition, actions such as those described above could cause fluctuations in the trading price of our common stock, based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals or prospects of our business.
Failure to complete strategic transactions could adversely affect the Duke Energy Registrants’ financial condition, credit profile and ability to execute their business strategy.
There can be no assurance that strategic transactions, including merger and acquisition activities and the disposition of assets or businesses, will be completed as expected or at all. These transactions are subject to various closing conditions, including regulatory approvals, and delays or failures may occur due to factors beyond our control. If the proposed transactions are not consummated, we could face a range of negative outcomes, including:
•Inability to achieve anticipated proceeds could require Duke Energy to seek alternative funding sources to execute its capital plan and impede our ability to displace previously planned issuances of long-term debt and common equity;
•Adverse impacts to our credit metrics and potential pressure on our credit ratings;
•Negative reactions from financial markets and stakeholders, including reputational effects;
•Opportunity costs, lost strategic optionality, and foregone operational or financial benefits; and
•Costs incurred in connection with these transactions, including advisory fees and management diversion, for which we may receive little or no benefit.
Additionally, even if completed, strategic transactions may not deliver the anticipated strategic, operational or financial results. Integration or separation challenges, unfavorable regulatory outcomes or unforeseen liabilities could further impact our business, results of operations or financial condition.
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; uncertainties with respect to the technological and financial aspects of decommissioning nuclear plants at the end of their licensed lives; and the threat of a terrorist attack or cyber incident and other potential liabilities arising out of the ownership or operation of nuclear facilities.
29
RISK FACTORS
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 or 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 or reputation of the Duke Energy Registrants.
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. Access to capital markets may also be critical to finance unexpected material expenditures such as unusually volatile commodity costs or significant storm restoration activities for severe weather events. 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, unfavorable capital market conditions, market prices for natural gas and coal, geopolitical risks, actual or threatened terrorist attacks, or the overall health of the energy industry. Additionally, rapidly rising interest rates could impact the ability to cost- effectively finance the capital plan or increase rates to customers and could have an impact on our ability to execute on our energy modernization. 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. Systemic 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 or 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 or if the cost of decommissioning nuclear generation facilities exceeds the amount available in decommissioning funds and such costs cannot be recovered through insurance or regulatory mechanisms, their results of operations, financial position or cash flows could be negatively affected.
30
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 adverse impact on the Duke Energy Registrants’ results of operations, financial position or 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 and preferred 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 and preferred 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, severe weather, 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 or cash flows of the Duke Energy Registrants.
In addition to maintaining our current information technology systems, Duke Energy believes the ongoing 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, including AI, 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 or 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 or financial market instability or volatility in prices for commodities including 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, transportation systems for our fuel sources including natural gas pipelines, 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 employee strike or work stoppage, an aging workforce, mismatch of skill set or complement to future needs, or unavailability of contract resources may lead to operating challenges or 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 new plant construction, 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 or cash flows could be negatively affected.
31
UNRESOLVED STAFF COMMENTS
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
Risk Management
Ensuring the security of Duke Energy’s assets, information and teammates is vital for delivering the essential service on which Duke Energy’s customers and communities depend. In light of the ever-evolving threat landscape and increasing sophistication of threat actor tactics, techniques and procedures, steadfast and advanced cybersecurity and security operations are integral parts of Duke Energy’s enterprise risk management framework. Duke Energy's enterprise risk management framework is used across the enterprise by subject matter experts to identify, assess, monitor and communicate enterprise level risks to the Chief Risk Officer. Duke Energy’s technology and cybersecurity risk management program is integrated into the Company’s overall Enterprise Risk Management program and is composed of three primary lines of defense: (1) the Cybersecurity Incident Response Team (CIRT); (2) the Duke Energy Enterprise Security Team (EST); and (3) internal and external cybersecurity audits. This framework also incorporates the identification and management of risks associated with the Company’s development and use of AI technologies, including AI‐related cybersecurity considerations. Duke Energy monitors the threat landscape to understand both how threat actors are operating currently and how they are developing capabilities using emerging technologies such as AI and quantum computing. Our risk management program is flexible and allows us to pivot as threat actors evolve.
Duke Energy’s first line of defense is the CIRT under the Office of the Chief Administrative Officer (CAO). The CIRT reports up to leaders in the Chief Security and Information Security Office, including the Chief Security and Information Security Officer (CSISO), Managing Director of Cybersecurity and Network Defense, and Director of Cybersecurity Operations, whose cybersecurity backgrounds include many years serving in operational cyber roles, leading incident response, participating in industry engagement, collaborating with federal and local cyber programs, and time analyzing security breaches across the industry.The CIRT oversees an enterprisewide process that identifies, assesses, responds to and resolves cyber incidents, both internal and those associated with the Company’s use of third-party service providers, by defining roles, responsibilities and the process for problem source identification, mitigation, and eradication triggered by a suspected cyber incident. Duke Energy manages cybersecurity threats through its 24/7 Duke Energy Cybersecurity Operations Center (CSOC), which serves as the Company’s central command center for monitoring and coordinating responses to cyberthreats. The CSOC engages in daily information sharing within the utilities industry and with government partners and monitors incoming intelligence and cyber incident impacts. The CSOC assesses the relevant information by assigning a CIRT Heat Map score, which results in CIRT activation if a certain threat level is met. It also results in the assignment of additional roles and responsibilities to enable the cybersecurity leadership and technical teams to collectively and regularly review incident information, score the impact, communicate to leadership, and respond appropriately. Another key component of Duke Energy’s first line of defense against cybersecurity threats is its Third-Party Risk Management (TPRM) process, whereby third parties providing services that meet certain criteria such as storing or transmitting Duke Energy data, hosting an application, or connecting to the Duke Energy network are required to undergo a cybersecurity assessment primarily to ascertain the risk of a third-party’s proposed services to Duke Energy. As part of this process, the Company also evaluates the cybersecurity and data‐protection risks associated with third‐party AI tools and services.
Duke Energy’s second line of defense against cybersecurity threats is the EST, which is led by the CSISO, and actively evaluates, anticipates and tests Duke Energy’s cybersecurity risk level and preventive and risk mitigation controls relative to the enterprisewide risk level and controls. The EST is responsible for infrastructure defense and security controls, performing vulnerability assessments and third-party information security assessments, employee awareness and training programs and security incident management, including oversight of the remediation of cybersecurity incidents. The EST monitors cyber activity and also reports on the status of the Company’s cybersecurity performance and any ongoing remediation efforts to the Company’s CAO, Chief Information Officer (CIO) and CSISO. The CAO and CSISO report these cybersecurity metrics, which use a vulnerability management scoring system and closely align with the National Institute of Standards and Technology Cybersecurity Framework, to the Audit Committee at each regularly scheduled Audit Committee meeting. The EST also employs tools and oversees and challenges Duke Energy’s cybersecurity and technology metrics under its Enterprise Security Risk Register to track, identify and manage risk. The EST also partners with relevant technology and compliance teams to assess controls relating to the Company’s internal use of AI technologies and to monitor emerging AI‐enabled cybersecurity threat vectors in alignment with Duke Energy’s internal AI governance policies. To this end, the EST engages outside expert firms to perform a comprehensive external penetration test each year, performs system and application penetration testing several times throughout the year, and conducts annual exercises simulating the tactics, techniques, and procedures of advanced threat actor groups to test the Company’s ability to prevent penetration, detect suspicious activity and respond to these threats in a timely manner. Lessons learned inform the ongoing improvement of security preventive and mitigating controls and procedures and the results of such testing and threat actor simulations are shared with senior management and the Board of Directors.
Duke Energy also has a senior management committee, the Executive Cybersecurity Oversight Governance Committee (ECOG), which governs enterprise-level cybersecurity risk tolerance.The ECOG, comprised of the Company's Chief Executive Officer (CEO), Chief Financial Officer (CFO), Chief Administrative Officer (CAO), Chief Legal Officer (CLO) and Chief Generation Officer (CGO) receives monthly updates from the CSISO and provides senior management throughout the Company informational technology and operational technology perspectives, oversight and governance on investments and priorities for the broader cybersecurity organization, in addition to providing final decision oversight on recommendations and response to the ever-challenging cybersecurity threat landscape. The ECOG also is leveraged to supply information and bring transparency to senior management throughout the Company on the increasing threat landscape and the actions, response and road map to combat the threats. In addition, the ECOG provides oversight of enterprise AI governance activities and reviews management’s integration of AI‐related risk considerations into the Company’s cybersecurity and technology‐risk oversight processes.
Internal and external cybersecurity audits provide a third line of defense and independently provide assurance on how effectively the Company, as a whole, manages cybersecurity risk. Each year, Duke Energy Corporate Audit Services (CAS) performs various audits of key Duke Energy security systems and functions, such as third-party risk management programs, to assess whether appropriate security controls are in place and operating effectively. In addition to these internal audits, the Company is subject to a variety of external audits, performed periodically as required by the auditing entity, including external audits performed by the NERC under the Critical Infrastructure Protection framework (CIP), TSA Pipeline Security Directive and FERC Dam Security.
32
CYBERSECURITY
Duke Energy is not currently aware of any potential cybersecurity threats, including as a result of any previous cybersecurity incidents, that have materially affected or are reasonably likely to materially affect the Company, including its business strategy, results of operations or financial condition, however, Duke Energy cannot provide assurance that it will not be materially affected in the future by cybersecurity risks or any future material incidents.
Governance
The Audit Committee has primary oversight of management’s efforts to mitigate cybersecurity and technology risk and respond to cyber incidents. The Audit Committee receives updates throughout the year from the CAO and CSISO on cybersecurity and grid security issues, including compliance with regulations, employee training and drills, at every regularly scheduled Audit Committee meeting, and engages in discussions throughout the year with management on the effectiveness of Duke Energy’s overall cybersecurity program and progress for addressing any identified risks. In 2025, the Audit Committee received three updates and the full Board of Directors received one update on cybersecurity. The Audit Committee also receives periodic updates on Duke Energy’s digital transformation and the operation of, and enhancements to, the Company’s financial systems and business and operational technical systems. These updates include, as appropriate, information regarding the Company’s AI governance practices and management’s evaluation of emerging AI‐related technology and cybersecurity risks. The reviews presented to the Audit Committee are followed with an update to the full Board of Directors by the Chair of the Audit Committee.
In addition, the Operations and Nuclear Oversight Committee (ONOC) of the Board of Directors provides oversight of the nuclear safety and cybersecurity of Duke Energy’s nuclear power program, which is integrated with the companywide cyber protocols, and the Chair of the ONOC reports out to the Board of Directors on such oversight activities. Duke Energy’s nuclear cybersecurity program and associated cybersecurity plan (CSP) were fully implemented in 2017 in accordance with NRC regulation 10 CFR 73.54, “Protection of digital computer and communication systems and networks” and leverage monitoring, testing, drills, audits, assessments, and NRC inspections to continue to validate the effectiveness of the program to protect plant assets from cybersecurity threats.
Moreover, Duke Energy’s processes ensure that the Board of Directors receive contemporaneous reporting on potentially significant cyber events including response, legal obligations, and outreach and notification to regulators and customers when needed, as well as an opportunity to provide guidance to management as appropriate.
The relevant cybersecurity risk expertise of Duke Energy’s management who serve on the ECOG and/or senior management who lead the CIRT and EST is described below. These management teams also oversee the integration of Duke Energy’s AI governance policies into the Company’s broader cybersecurity and technology‐risk management processes.
•The CEO of Duke Energy has gained cybersecurity experience through focusing on transmission and the development of long-term grid strategies and solutions and through a prior role as Chief Distribution Officer, overseeing the safe, reliable, and efficient operation of Duke Energy’s electric distribution systems, and through serving on the board of the Association of Edison Illuminating Companies.
•The EVP and Chief Financial Officer of Duke Energy (CFO) previously served as the Company’s Chief Transformation and Administrative Officer and led the Company’s business transformation through digital innovation, new ways of working and process redesign. In this role, the CFO gained an in-depth understanding of the Company's cybersecurity procedures and key threats and was responsible for the enterprise business services and technology team, including the information and technology organization.
•The EVP, Chief Generation Officer and Enterprise Operational Excellence of Duke Energy has gained cybersecurity experience through being responsible for the safe, efficient and reliable operation of Duke Energy's fleet of nuclear, natural gas, hydro, solar and coal units.
•The CSISO of Duke Energy has over 25 years of experience building and leading security teams within multiple industries. The CSISO holds a Secret Security clearance and is committed to strengthening U.S. critical infrastructure through active collaboration with federal partners at the Federal Bureau of Investigation, Department of Energy, Department of Homeland Security, and state partners including the national guard, law enforcement and universities.
•The CAO of Duke Energy has over 29 years of experience in delivering secure information technology solutions across multiple industries, leading technology delivery for all core business functions. The CAO holds a Secret Security clearance and has active interactions and partnership with the Federal Bureau of Investigation, Edison Electric Institute and State Fusion Centers in the jurisdictions that Duke Energy serves.
33
PROPERTIES
ITEM 2. PROPERTIES
ELECTRIC UTILITIES AND INFRASTRUCTURE
The following table provides information related to the EU&I's generation stations as of December 31, 2025. The MW displayed in the table below are based on winter capacity for Fossil, Nuclear and Hydro generation stations, and nameplate capacity for Renewable generation stations. 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 2,688
McGuire Nuclear Uranium NC 2,386
Catawba(a) Nuclear Uranium SC 600
Belews Creek Fossil Coal/Gas NC 2,220
Marshall Fossil Coal/Gas NC 2,078
Lincoln CT Fossil Gas/Oil NC 1,907
J.E. Rogers Fossil Coal/Gas NC 1,395
Rockingham CT Fossil Gas/Oil NC 895
Mill Creek CT Fossil Gas/Oil SC 751
Buck CC Fossil Gas NC 718
Dan River CC Fossil Gas NC 718
W.S. Lee CC(b) Fossil Gas SC 709
W.S. Lee CT Fossil Gas/Oil SC 96
Clemson CHP Fossil Gas SC 15
Bad Creek Hydro Water SC 1,640
Jocassee Hydro Water SC 780
Cowans Ford Hydro Water NC 324
Keowee Hydro Water SC 152
Other small facilities (18 plants) Hydro Water NC/SC 584
Utility-Scale Solar (seven sites) Renewable Solar NC 170
Battery Storage (two sites) Renewable Storage NC 75
Total Duke Energy Carolinas 20,901
Owned MW
Facility Plant Type Primary Fuel Location Capacity
Duke Energy Progress
Brunswick Nuclear Uranium NC 1,928
Harris Nuclear Uranium NC 1,009
Robinson Nuclear Uranium SC 793
Roxboro Fossil Coal NC 2,462
Smith CC Fossil Gas/Oil NC 1,250
H.F. Lee CC Fossil Gas/Oil NC 1,054
Smith CT Fossil Gas/Oil NC 1,000
Wayne County CT Fossil Gas/Oil NC 975
Mayo Fossil Coal NC 713
L.V. Sutton CC Fossil Gas/Oil NC 709
Asheville CC Fossil Gas/Oil NC 595
Asheville CT Fossil Gas/Oil NC 370
Darlington CT Fossil Gas/Oil SC 262
Weatherspoon CT Fossil Gas/Oil NC 164
L.V. Sutton CT Fossil Gas/Oil NC 97
Blewett CT Fossil Oil NC 68
Walters Hydro Water NC 112
Other small facilities (three plants) Hydro Water NC 116
Utility-Scale Solar (six sites) Renewable Solar NC 226
Battery Storage (four sites) Renewable Storage NC 165
Total Duke Energy Progress 14,068
34
PROPERTIES
Owned MW
Facility Plant Type Primary Fuel Location Capacity
Duke Energy Florida
Hines CC Fossil Gas/Oil FL 2,168
Citrus County CC Fossil Gas FL 1,854
Crystal River Fossil Coal FL 1,442
Bartow CC Fossil Gas/Oil FL 1,259
Intercession City CT Fossil Gas/Oil FL 1,126
Anclote Fossil Gas FL 1,025
DeBary CT Fossil Gas/Oil FL 661
Osprey CC Fossil Gas/Oil FL 638
Tiger Bay CC Fossil Gas/Oil FL 230
Bartow CT Fossil Gas/Oil FL 212
Suwannee River CT Fossil Gas FL 194
Bayboro CT Fossil Oil FL 139
University of Florida CoGen CT Fossil Gas FL 50
Utility-Scale Solar (30 sites) Renewable Solar FL 1,712
Battery Storage (seven sites) Renewable Storage FL 55
Total Duke Energy Florida 12,765
Owned MW
Facility Plant Type Primary Fuel Location Capacity
Duke Energy Ohio
East Bend Fossil Coal KY 600
Woodsdale CT Fossil Gas/Propane OH 564
Distributed generation (four sites) Renewable Solar KY 9
Total Duke Energy Ohio 1,173
Owned MW
Facility Plant Type Primary Fuel Location Capacity
Duke Energy Indiana
Gibson(c) Fossil Coal IN 2,845
Cayuga(d) Fossil Coal/Oil IN 1,015
Madison CT Fossil Gas OH 704
Edwardsport Fossil Coal/Gas IN 578
Wheatland CT Fossil Gas IN 520
Vermillion CT(e) Fossil Gas IN 477
Noblesville CC Fossil Gas/Oil IN 310
Henry County CT Fossil Gas/Oil IN 141
Cayuga CT Fossil Gas/Oil IN 110
Purdue CHP Fossil Gas IN 16
Markland Hydro Water IN 54
Distributed generation (six sites) Renewable Solar IN 21
Battery Storage (three sites) Renewable Storage IN 15
Total Duke Energy Indiana 6,806
35
PROPERTIES
Owned MW
Totals by Type Capacity
Totals by Plant Type
Total Electric Utilities 55,713
(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 EU&I's electric transmission and distribution properties as of December 31, 2025.
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 EU&I'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.
GAS UTILITIES AND INFRASTRUCTURE
GU&I 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 GU&I service territories. The following table provides information related to GU&I's natural gas distribution as of December 31, 2025.
Duke
Duke Energy
Energy Ohio Piedmont
Miles of natural gas distribution and transmission pipelines 36,400 7,700 28,700
OTHER
Duke Energy owns approximately 7.5 million square feet and leases approximately 1.8 million square feet of corporate, regional and district office space spread throughout its service territories. See Note 11, "Property, Plant and Equipment," for further information.
36
LEGAL PROCEEDINGS AND MINE SAFETY DISCLOSURES
ITEM 3. LEGAL PROCEEDINGSThe litigation matter of NTE Carolinas II, LLC Litigation included in Part 2, Item 8 of this Annual Report on Form 10-K, within Note 5, "Commitments and Contingencies" of the Consolidated Financial Statements, is incorporated herein by reference.
For open litigation, unless otherwise noted, Duke Energy cannot predict the outcome or ultimate resolution of these matters.
MTBE Litigation
In December 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 and is seeking an unspecified amount of monetary damages. 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. In December 2020, the plaintiff and defendants selected 50 focus sites, none of which had any ties to Duke Energy Merchants. In November 2025, Duke Energy Merchants entered into a settlement agreement with the state of Maryland, which included the payment of an immaterial amount to resolve the litigation. Once this matter is dismissed, it will be fully resolved.
The Town of Carrboro Litigation
On December 4, 2024, the town of Carrboro, North Carolina, filed a lawsuit against Duke Energy in the North Carolina Superior Court, Orange County, alleging that Duke Energy and its predecessor companies knew since the late 1960s that fossil fuel emissions could cause global climate changes and engaged in a campaign to conceal the dangers of fossil fuel emissions from the public, regulators, legislators, and others, resulting in a delayed transition away from fossil fuel emissions and worsening climate change. The lawsuit also alleges that Duke Energy misled the public regarding Duke Energy’s support for, and actions toward, transitioning its fossil fuel portfolio to renewable energy. The damages alleged range from road and stormwater-system impacts to increased electricity costs and recurring invasions and interferences from extreme weather events. The lawsuit asserts state-law claims for public nuisance, private nuisance, trespass, negligence, and gross negligence, and is seeking an unspecified amount of monetary damages. The case has been transferred to the North Carolina Business Court. Duke Energy filed a motion to dismiss the litigation based on lack of subject-matter jurisdiction on March 17, 2025, and filed a motion to dismiss based on failure to state a claim on which relief can be granted on May 9, 2025. Oral argument regarding Duke Energy's motions to dismiss was held on September 25, 2025. As requested by the court, supplemental briefing addressing various aspects of causation, including traceability and proximate cause, was filed on October 25, 2025. On February 12, 2026, the court granted Duke Energy's motion to dismiss the litigation based on lack of subject-matter jurisdiction. In light of the dismissal, the court denied the motion to dismiss for failure to state a claim as moot.
Other Proceedings
In addition, from time to time, the Duke Energy Registrants are parties to various legal, environmental or other regulatory proceedings, including in the ordinary course of business. Further, SEC regulations require disclosure of certain environmental matters when a governmental authority is a party to the proceedings and such proceedings involve potential monetary sanctions that the Duke Energy Registrants reasonably believe will exceed a specified threshold. Pursuant to the SEC regulations, the Duke Energy Registrants use a threshold of $1 million for such proceedings.
See Note 4, “Regulatory Matters,” and Note 5, “Commitments and Contingencies,” to the Consolidated Financial Statements, for discussion of certain other legal, environmental and other regulatory proceedings to which the Duke Energy Registrants are a party.
ITEM 4. MINE SAFETY DISCLOSURES
This is not applicable for any of the Duke Energy Registrants.
37
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, 2026, there were 106,127 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. Duke Energy owns 80.1% of Duke Energy Indiana Holdco, LLC, the holding company of Duke Energy Indiana. The remaining 19.9% minority interest investment is owned by GIC. See Note 2, "Dispositions," to the Consolidated Financial Statements for information on the investment of a minority interest in Duke Energy Florida.
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 2025
There were no repurchases of equity securities during the fourth quarter of 2025.
Unregistered Sales of Equity Securities and Use of Proceeds
None.
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, 2020, 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.
ITEM 6. SELECTED FINANCIAL DATA
This is not applicable for any of the Duke Energy Registrants.
38
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, 2025, 2024 and 2023.
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, 2024, filed with the SEC on February 27, 2025, for a discussion of variance drivers for the year ended December 31, 2024, as compared to December 31, 2023.
DUKE ENERGY
Duke Energy, an energy company headquartered in Charlotte, North Carolina, operates in the U.S. primarily through its 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
This is a transformative period for the utility industry propelled by energy modernization in support of load growth acceleration and the ongoing shift to more efficient and resilient energy infrastructure. Through our strategic investments and initiatives, we have maintained a key role in this transition, as we strengthen the energy system for our customers. In 2025, we advanced key policy and regulatory activities, executed strategic transactions to support growth and delivered safe and reliable utility services to our customers and communities. We also made progress advancing through the preliminary stages of the approval and construction for significant new generation investments. We continue to operate and maintain our infrastructure in a manner that extends the useful lives for critical assets, while executing a disciplined approach in the prioritization and deployment of capital for new investments. We are proud of the constructive regulatory outcomes that we advocated for our customers as we prepare for growth in energy demand driven by ongoing migration into our attractive service territories, continued electrification and onshoring from domestic industries, data center growth and other investments, including those related to support the broader utilization of AI.
The fundamentals of our business remain strong and allow us to deliver earnings growth and pay common stock dividends in a low-risk, predictable and transparent way. We achieved our 2025 financial commitments by delivering earnings growth above the midpoint of our adjusted earnings guidance range. Duke Energy also paid a cash dividend on its common stock for the 99th consecutive year. We are committed to manage a business portfolio that delivers a reliable and growing dividend and our company remains focused on maintaining reliability, providing value and keeping costs as low as possible to deliver on the commitments made to our customers, communities, employees, investors and other stakeholders.
39
MD&A DUKE ENERGY
Financial Results
(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 2025 Net Income Available to Duke Energy Corporation (GAAP Reported Earnings) increased primarily due to recovery of growing infrastructure investments to serve customers and growth in our service territories, partially offset by higher operation and maintenance expense, interest expense, property taxes and depreciation on a growing asset base. See “Results of Operations” below for a detailed discussion of the consolidated results of operations and the financial results for each of Duke Energy’s reportable business segments, as well as Other.
2025 Areas of Focus and Accomplishments
Acting on Investment Opportunities. We operate in some of the most attractive jurisdictions in the country and our service territories continue to experience accelerating investment opportunities driven by a deepening economic development pipeline and significant customer growth. The reliable, low-cost power we provide plays a key role in continuing to bring business and job growth to our region. To efficiently fund this growth and the related capital required in the coming years, we entered into two strategic transactions in the third quarter of 2025. In July 2025, we announced the sale of Piedmont’s Tennessee business to Spire Inc. for $2.48 billion. Subject to regulatory approvals, we expect to complete the Piedmont transaction on March 31, 2026. In August 2025, we entered into an investment agreement to receive $6 billion in exchange for an eventual anticipated 19.7% indirect investment in Duke Energy Florida. The transaction is expected to be completed through a series of closings starting in March 2026 through mid-2028. Proceeds from both transactions will support Duke Energy’s expanded capital plan and replaces certain originally planned long-term debt and common equity issuances. Both of these transactions, along with our unwavering focus on operational excellence and value creation, demonstrate our continued ability to meet the unprecedented long-term growth anticipated across our service territories. See Note 2 to the Consolidated Financial Statements, "Dispositions," for further information.
Operational Excellence. The reliable and safe operation of our power generating facilities, electric transmission and distribution systems and natural gas infrastructure in our communities continues to be foundational to serving our customers, our financial results and our credibility with stakeholders. Operational excellence is especially critical to successfully navigate effective storm response and to efficiently provide the continuity of service our customers demand, regardless of weather or circumstance. Our workforce and contract partners work hard to prepare for storm season through drills, material planning, call center readiness, contingency planning and customer communications. In such extreme circumstances, our immediate priority is, and always will be, executing the extensive storm preparation and response work to ensure the safe, timely and efficient restoration of service to impacted customers as quickly as possible. We've seen the benefits of ongoing grid hardening investments, leveraging self-healing technologies and remote restoration capabilities to automate the rerouting of power, more effectively deploy resources and reduce the frequency or duration of outages for many of our customers during severe weather events. Our ability to effectively handle all facets of storm response efforts while making ongoing investments to enhance the reliability and physical security of the grid is a testament to our team’s extensive preparation and coordination, applying lessons learned from previous storms, and on-the-ground management throughout the restoration efforts. Duke Energy is proud to have received 22 Emergency Response Awards since EEI began recognizing storm response in 1998 (including 11 for assisting other utilities), including for the severe storm season of 2024.
The effective execution of our storm response was on full display beginning in late 2024 as a result of a historic storm season that included hurricanes Debby, Helene and Milton. Our preparation, sound execution and a comprehensive communication strategy helped us to respond quickly and build stakeholder support as we completed the important work of rebuilding power infrastructure in the hardest-hit areas of our service territories. This year included fewer large storms but we remained focused on minimizing customer bill impacts from the historic 2024 storm season by seeking insurance recovery and securitization of storm related costs in jurisdictions where permitted. To minimize the financing costs related to these storms, we worked with the state commissions to timely track and recover storm costs under our approved regulatory frameworks, including storm recovery charges in Florida and the securitization of storm costs in the Carolinas so that storm costs are fully recovered across all jurisdictions by early 2026. For more information, see "Liquidity and Capital Resources," and Notes 4 and 7 to the Consolidated Financial Statements, "Regulatory Matters" and "Debt and Credit Facilities."
40
MD&A DUKE ENERGY
Our generation fleet and electric transmission and distribution systems delivered strong performance throughout the year. In January 2025, Duke Energy Carolinas and Duke Energy Progress achieved a new record for combined peak usage due to 65 hours of freezing or below freezing temperatures and that combined peak was again surpassed in January 2026 as a result of Winter Storm Fern. Additionally, a summer heat wave brought triple-digit temperatures to parts of North Carolina and South Carolina in June 2025, and our customers set a new summertime record for electricity usage, surpassing the previous record set in July 2024. We effectively prepared for the arrival of extreme weather through the identification of potential risks, maintaining adequate short-term planning reserves, leveraging outage scheduling optimization and controlling planned and emergent equipment issues. Effective operations and flexibility by our generation and transmission teams managed tight margins in an efficient manner and ensured the integrity of the grid our customers rely upon. We will continue to practice our forecasting, grid assessment, oversight and governance processes as extreme weather challenges operations from time to time, evaluate lessons learned and enhance our strategy and communications to effectively serve our customers now and in the future.
The safety and health of our workforce is a core value and we remain an industry leader in personal safety as measured by the Occupational Safety and Health Administration's (OSHA) Total Incident Case Rate (TICR). We closely tracked 2024's safety results with our 2025 TICR again coming in better than target and finishing 2025 with 100 OSHA recordable injuries. We also anticipate ranking first among North American combined gas and electric companies in an annual industry safety survey for the 11th consecutive year. In addition, we continued to see excellent year-over-year environmental performance as measured by internal metrics and had no significant environmental events.
Constructive Regulatory and Legislative Outcomes. One of our long-term strategic goals has been to achieve effective modernized regulatory constructs across all of our jurisdictions. Modernized regulatory constructs provide a variety of benefits, including more stable pricing and lower financing costs for customers, and improved earnings and cash flows for our utilities through timely recovery of investments.
In 2025, we continued to utilize these regulatory structures across most of our service territories including PBR and MYRP in North Carolina, MYRP in Florida, and grid investment riders in the Midwest. Additionally, new legislation was finalized this year in Ohio, South Carolina and North Carolina that is expected to provide additional customer benefits and further modernize recovery mechanisms, including an opportunity for a three-year rate plan with forward-looking test periods (HB15 in Ohio), the establishment of an electric rate stabilization mechanism that provides for annual adjustments to electric base rates (Act 41 in South Carolina) and more timely recovery of fuel costs and baseload generation financing costs (SB266 in North Carolina), among other provisions and regulatory recovery enhancements. All of these legislative initiatives are a testament to the strong jurisdictions in which we operate and will help continue to position us to reliably serve our customers in a cost-effective manner while making the needed investments to support our growing communities.
Overall, 2025 was a very active year for regulatory filings, which reflects the important investments and ongoing energy modernization activity across all of our service territories. We reached comprehensive settlements in many of our proceedings this year and continue to move forward a variety of regulatory initiatives, including the following:
•New rates were effective in January 2025 for Duke Energy Florida's new three-year rate plan. Also in January, Piedmont and Duke Energy Indiana received constructive general rate case orders from the NCUC and IURC, respectively. Duke Energy Kentucky received a constructive order on its electric base rate case with new rates effective in July and also filed a natural gas base rate case, receiving a constructive order in December, with new rates effective in January 2026. Also in December, both Duke Energy Progress and Duke Energy Carolinas received constructive orders from the PSCSC on their South Carolina base rate cases. New rates were effective in February 2026 for Duke Energy Progress and will be effective in March 2026 for Duke Energy Carolinas. In November, Duke Energy Carolinas and Duke Energy Progress filed PBR applications in North Carolina, which includes proposed cost recovery over a two-year MYRP period. Evidentiary hearings are scheduled to commence in the third quarter of 2026.
•In October 2025, Duke Energy Progress received an order from the NCUC granting the CPCN for the second CC unit in Person County and Duke Energy Indiana received an order from the IURC granting the CPCN for the Cayuga CC project. Also in October 2025, Duke Energy Carolinas filed for a CECPCN with the PSCSC for a new CC unit in Anderson County, South Carolina. In November 2025, Duke Energy Carolinas filed for a CPCN for two new CTs at the existing Buck CC station. These advanced natural gas plants, along with our other planned CTs, will provide critical generation as we continue to modernize our energy infrastructure in the coming years.
•As highlighted above, we reached key milestones to recover costs related to critical storm restoration activities from the 2024 historic storm season while also seeking to minimize customer bill impacts resulting from hurricanes Debby, Helene and Milton. In February 2025, the FPSC voted to approve Duke Energy Florida's storm cost recovery over 12 months beginning in March 2025. In the Carolinas, Duke Energy Carolinas and Duke Energy Progress reached constructive settlements and financing orders were issued by both the NCUC and PSCSC. We issued North Carolina storm recovery bonds in September 2025 and South Carolina storm recovery bonds in November 2025, fully recovering these unprecedented storm costs in an efficient and cost-effective manner for our customers under existing regulatory mechanisms.
•Our nuclear sites continue to positively impact the customers we serve by safely producing clean, reliable and low-cost electricity, as well as providing economic benefits for our local communities with thousands of well-paying jobs and significant tax benefits. During 2025, our advocacy efforts were critical to ensure the OBBBA preserved nuclear PTCs and related transferability markets and we continued to sell nuclear PTCs to further reduce the cost of electricity for our customers. In March 2025, the NRC issued a subsequent license renewal for Oconee that allows an additional 20 years of operation through 2054. Oconee is the first Duke Energy nuclear facility to reach this significant approval milestone to permit extension of its operations to 80 years. In April 2025, we submitted an application to the NRC for Robinson to extend the plant's operations an additional 20 years through 2050.
•In July 2025, Duke Energy Carolinas filed a license application with the FERC to extend the operating license for the Bad Creek Pumped Storage Hydroelectric Station. Located in South Carolina, Bad Creek is designed to produce significant amounts of energy when our customers need it most, performing a vital role on the company's system since 1991. If approved, the application would extend plant operations for an additional 50 years through 2077.
41
MD&A DUKE ENERGY
•In August 2025, we filed applications to combine our utilities that operate in the Carolinas by which Duke Energy Progress will merge into Duke Energy Carolinas. If approved, the proposed transaction would result in a single electric utility serving our North Carolina and South Carolina service territories. The single utility’s ability to plan, execute and operate resources more efficiently is expected to result in substantial cost savings to benefit customers by reducing the overall costs to serve. We received FERC approval in January 2026 and the targeted effective date of the transaction is January 1, 2027, subject to remaining regulatory approvals from both the NCUC and PSCSC.
See Notes 4 and 24 to the Consolidated Financial Statements, "Regulatory Matters" and "Income Taxes," respectively, for further information.
Energy Modernization. It was a dynamic year for our company as we continued to execute on our strategic priorities while the industry experiences significant change in anticipation of long-term sales growth not seen for decades.
Building a Smarter Energy Future
We continue to expect increases in demand for electricity in our service territories and our focus remains on meeting the growing and evolving energy needs of our customers through a long-range, enterprise strategy that involves modernizing our assets with reliability and focus on customer value. Although our path will not be linear as we integrate new resources, evaluate coal generation and meet the rising energy needs driven by economic and hyperscale load growth, we have already made strong progress in reducing carbon emissions from electricity generation with a 43% reduction from 2005 levels. Subject to not compromising reliability and affordability, obtaining required state and federal regulatory approvals, the availability of new technologies and substantive permitting reform, we expect to continue on a path to net-zero carbon emissions from electricity generation by 2050.
Over the next decade, we expect to deploy between approximately $200 billion and $220 billion of capital into our regulated businesses. Our energy modernization investments are designed to ensure reliable and cost-effective energy while meeting expected growth in long-term energy demand and already include approximately 7,500 MW of new natural gas generation projects under construction or seeking regulatory approval across our service territories. We're making decisions rooted in value for our customers and these investments will maintain reliability, drive economic benefits for the communities we serve, deliver cleaner energy and increase fuel diversity. We have filed and refined comprehensive IRPs consistent with this strategy in multiple jurisdictions, including updates to the systemwide Carolinas resource plan in late 2025, allowing us to make the necessary investments to meet an expected increase in demand, strengthen grid resiliency, evaluate coal plant retirements, and enable advanced natural gas generation facilities, renewables and energy storage. We are also leveraging new technology, including AI and digital tools and data analytics across the business in response to a transforming landscape. AI is being leveraged across the organization to improve reliability, optimize grid operations, enhance customer service and accelerate business transformation. This year, we deployed a personal productivity generative AI tool to approximately 10,000 employees across the enterprise and we continue to assess and prioritize high-impact investment opportunities including the development of agentic AI tools.
As we move forward to the year 2050, further technological advancement will be necessary to continue our progress. We will advocate and be actively involved in the research and development of new technologies to advance the deployment of new carbon-free dispatchable resources. This includes advanced nuclear technologies, longer-duration energy storage, carbon capture and zero-carbon fuels. As it relates to advanced nuclear, we intend to preserve flexibility through the review of various technologies including both small modular reactors and large-scale nuclear options. Our plan for energy modernization will continue to focus on delivering cleaner energy in a manner that protects grid reliability and maintains low costs for our customers while also meeting the growing energy demands of the economically vibrant communities we serve.
Modernizing the Power Grid and Natural Gas Infrastructure
Our grid improvement programs continue to be a key component of our growth strategy. In 2025, we developed and implemented a standardized data center delivery design that is repeatable, scalable and minimizes risk to meet capacity demands for AI expansion and economic growth. Further modernization of the electric grid, including smart meters, storm hardening, self-healing and targeted undergrounding, also 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 our customers. In 2025, smart, self-healing technology helped to avoid approximately 2.2 million customer outages across Duke Energy’s six-state service territory, saving around 5.2 million hours of total outage time. Around one-third of those benefits were achieved during major storms, providing a powerful tool for field crews working to restore power in the wake of severe weather. As of December 31, 2025, nearly 75% of our electric customers now benefit from self-healing technology on main power distribution lines – more than double the number served by this innovative technology just three years ago.
Investments in integrity management of our natural gas infrastructure continue to be important to ensure reliable, safe and increasingly clean delivery of natural gas to our customers. Our LDC business remains focused on reducing methane emissions, leveraging our partnerships, emissions platform, sensors and other technologies to find and fix leaks in near real time. We also use cross compression to avoid releasing natural gas into the atmosphere during certain operational activities.
Macroeconomic Environment. As the investment needs of our utilities accelerate, customer value remains front and center and we are committed to addressing the needs of all of our customers – from large industrials competing against a global market to residential customers managing their household budgets. Duke Energy has a demonstrated track record of driving efficiencies and productivity into our business while executing on our business plans. Despite elevated interest rates and impacts of inflation, supply chain disruptions and tariff uncertainty, we achieved financial results above the midpoint of our adjusted EPS guidance range and continued our cost-management journey with a focus on driving productivity, increasing flexibility and prioritizing spend based on risk and strategic value to our customers and investors. We've built a culture of continuous improvement and continue to identify ways to reduce operating costs, remaining focused on organization simplification, automation and continued operational excellence.
42
MD&A DUKE ENERGY
While interest rates and inflation have moderated to a degree, we continue to successfully navigate supply chain challenges to acquire major generation and grid equipment components. We've executed longer supply agreements for solar panels and continue to proactively secure equipment in advance of hurricane season. In response to accelerated load growth and capital investment plans, our supply chain organization has prioritized the use of framework agreements with key suppliers to secure critical equipment and services. These actions and agreements are designed to enhance agility, reduce procurement risk and ensure cost and schedule certainty in an increasingly volatile supply environment, particularly as labor markets become further constrained and changes in tariffs and trade policies, along with potential global supply chain disruptions, impact material costs. Our procurement teams continue to execute on action plans to enhance planning, augment supply, amend operations and leverage our scale to continue to mitigate these risks to the extent possible.
Recent macroeconomic headwinds aside, the level of economic development success and growth experienced in our service territories continues to be significantly above what we have experienced over the last two decades. We successfully worked with our state partners to win 87 economic development projects in 2025, representing over $30 billion in new capital investment and approximately 29,000 new jobs within our service territories. These projects include transformational manufacturing, logistics, energy, and life sciences facilities as well as data centers, including Amazon's planned $10 billion investment to launch a new high-tech cloud computing and AI innovation campus in Richmond County, North Carolina. The site selected for this project was included in Duke Energy's Site Readiness Program in 2019, a program that helps state, regional and local economic development partners increase the competitiveness of potential industrial land. The investment is expected to be among the largest in North Carolina's history. Supporting the increased generation load demands expected from projects like these is an immense opportunity for our Company and a testament to the impactful and ongoing work of continuing to bring economic development success to the communities we proudly serve.
Customer Satisfaction. Duke Energy continues to transform the customer experience through the use of customer data to inform operational priorities and performance levels. This data-driven approach allows us to identify investments that are most important to the customer experience. While customer satisfaction across our industry continues to be impacted by inflationary pressures and the impact of ongoing rate case activity on customer bills, our work continues to be recognized by customers through strong customer satisfaction scores in several jurisdictions including Duke Energy Carolinas, Duke Energy Progress, Duke Energy Florida and Piedmont as measured by J.D. Power. Additionally, with a growing national narrative on the impact of data centers and the build out of electric utility infrastructure in support of AI we remain focused on prioritizing what matters most to our customers, which is reliable service at a reasonable cost and transparent solutions that allow for informed choices and provide observable value.
Duke Energy Objectives – 2026 and Beyond
At Duke Energy, our business strategy centers on meeting rapidly growing energy needs and powering the modern economy, while delivering reliable and cost-effective energy and value to our customers and communities. To meet these goals, we are safely transforming and readying our system by investing in innovative technologies, replacing aging and less efficient generating resources, modernizing our gas and electric infrastructure and integrating efficiency, resiliency and demand management programs. The deployment of more modern critical infrastructure will meet our customers’ rapidly evolving energy demands and reduce emissions.
As we transition our business to meet anticipated increased long-term demand, we are also focused on creating sustainable value for our customers and shareholders by leveraging business transformation to exceed customer expectations, optimizing investments to drive attractive shareholder returns and providing new product offerings and solutions that deliver growth and customer value. Our approach enables us to meet our customers’ needs while also mitigating our impact on the environment. As we continue to execute on our energy modernization strategy, and target net-zero carbon emissions from electric generation by 2050, our progress will not be linear. To achieve these objectives, we are partnering with stakeholders, championing public policy that advances innovation, and continuing to leverage regulatory models that support the delivery of reliable energy, ensure timely cost recovery and promote cost stability for customers.
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.
Regulatory Matters
Coal Ash Costs
In April 2024, the EPA issued the 2024 CCR Rule, which significantly expands the scope of the 2015 CCR Rule by establishing regulatory requirements for inactive surface impoundments at retired generating facilities and previously unregulated coal ash sources at regulated facilities. Duke Energy is participating in legal challenges to the 2024 CCR Rule. Cost recovery for future expenditures is anticipated and will be pursued through the normal ratemaking process with federal and state utility commissions, which permit recovery of reasonable and prudently incurred costs associated with Duke Energy’s regulated operations. For more information, see “Other Matters” and Notes 4 and 10 to the Consolidated Financial Statements, "Regulatory Matters" and "Asset Retirement Obligations."
EPA Regulations of GHG Emissions
In April 2024, the EPA issued final rules under section 111 of the Clean Air Act (EPA Rule 111) regulating GHG emissions from existing coal-fired and new natural gas-fired power plants. Compliance with EPA Rule 111 as issued would have a material impact on the timing, nature and magnitude of future generation investments in our service territories. Cost recovery for future expenditures will be pursued through the normal ratemaking process with federal and state utility commissions, which permit recovery of reasonable and prudently incurred costs associated with Duke Energy’s regulated operations. Duke Energy is participating in legal challenges to the final rules. In June 2025, the EPA published a proposed rule to repeal EPA Rule 111 as well as an alternative proposal to repeal a narrower set of requirements. For more information, see "Other Matters."
43
MD&A DUKE ENERGY
Supply Chain
The Company continues to monitor the ongoing stability of markets for key materials and supplies, including potential restrictions on the trade of certain rare earth materials and technologies used in electric utility infrastructure. Public policy outcomes, including potential impacts from new tariffs, changes in existing tariffs, or other actions from federal executive orders, federal legislation or other rulemakings, could disrupt or impact Duke Energy's supply chain, future financial results, capital plan execution or the ability to execute on the Company's vision for a smarter energy future.
Goodwill
The Duke Energy Registrants performed their annual goodwill impairment tests as of August 31, 2025, as described in Note 12 to the Consolidated Financial Statements, "Goodwill and Intangible Assets." As of that date, all of the Duke Energy Registrants' reporting units' estimated fair values materially exceeded the carrying values except for the GU&I reporting unit of Duke Energy Ohio. No goodwill impairment charges were recorded in the accompanying Consolidated Statements of Operations. However, deteriorating economic conditions that adversely affect GU&I's future cash flows or peer company equity valuations could reduce the estimated fair value of GU&I below its carrying amount, potentially resulting in goodwill impairment charges in future periods.
Minority Interest in Florida Progress
In August 2025, Duke Energy, Progress Energy and Florida Progress entered into an investment agreement with an investor pursuant to which Florida Progress agreed to issue up to 19.7% of its issued and outstanding membership interests following a series of closings for an aggregate investment of $6 billion. The first closing is expected to occur in March 2026. Termination of the investment agreement under certain specified circumstances prior to the first closing would require the investor to pay Progress Energy a $240 million termination fee and could result in Duke Energy to seek alternative funding sources such as additional long-term debt and common equity issuances. For additional information, see Note 2 to the Consolidated Financial Statements, “Dispositions.”
Sale of Piedmont's Tennessee Business
In July 2025, Piedmont entered into a purchase agreement to sell Piedmont’s Tennessee business and expects to complete the sale on March 31, 2026. Completion of the transaction is subject to customary closing conditions, including approval from the TPUC. There can be no assurance that the transaction will be consummated. Failure to obtain required approvals or satisfy other conditions in the purchase agreement could result in termination of the transaction. The purchase agreement contains certain termination rights and provides that the buyer may be required to pay a termination fee for an amount equal to 6.5% of the purchase price to Piedmont upon termination of the purchase agreement under certain circumstances. Termination of the purchase agreement could result in Duke Energy to seek alternative funding sources such as additional long-term debt and common equity issuances. Completion of the transaction would impact the operating revenues and profitability of Piedmont, including the expected recognition of a gain on sale. In the third quarter of 2025, Duke Energy and Piedmont reclassified the Piedmont Tennessee Disposal Group to assets held for sale. For additional information, see Note 2 to the Consolidated Financial Statements, “Dispositions.”
Results of Operations
Non-GAAP Measures
Management evaluates financial performance in part based on non-GAAP financial measures, including adjusted earnings and adjusted EPS. Adjusted earnings and adjusted EPS represent income from continuing operations available to Duke Energy common stockholders in dollar and basic per share amounts, adjusted for the dollar and per share impact of special items. Special items represent certain charges and credits, which management believes are not indicative of Duke Energy's ongoing performance. However, management believes the presentation of adjusted earnings and adjusted EPS provides useful information to investors as an additional relevant comparison of Duke Energy’s performance across periods.
Management uses adjusted earnings and adjusted EPS for planning, forecasting and to report financial results to the Duke Energy Board of Directors, employees, and stockholders, as well as analysts and investors. Adjusted EPS is also used as a basis to determine 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 within the financial statement periods presented, which management does not believe are reflective of ongoing costs, are described below:
•Regulatory Matters primarily represents net impairment charges related to Duke Energy Carolinas' and Duke Energy Progress' 2024 South Carolina rate case orders and charges related to Duke Energy Indiana post-retirement benefits.
•System Post-Implementation Costs represents the net impact of charges related to nonrecurring customer billing adjustments as a result of implementation of a new customer system.
•Preferred Redemption Costs represents charges related to the redemption of Series B Preferred Stock.
•Noncore Asset Sales and Net Impairments primarily represents charges related to certain joint venture electric transmission projects and certain renewable natural gas investments.
•Captive Storm Deductible represents charges related to an insurance deductible for Hurricane Helene property losses.
Discontinued operations primarily represents the results from Duke Energy's Commercial Renewables Disposal Groups.
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.
44
MD&A DUKE ENERGY
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:
Regulatory Matters(a) — — 43 0.06
System Post-Implementation Costs(b) — — 16 0.02
Preferred Redemption Costs(c) — — 16 0.02
Noncore Asset Sales and Net Impairments(d) — — 54 0.07
Captive Storm Deductible(e) — — 18 0.02
Discontinued Operations(f) (1) — (7) (0.01)
Note: Total EPS may not foot due to rounding.
(a) Net of tax benefits of $15 million. $42 million recorded within Impairment of assets and other charges, $29 million recorded within Operating revenues, $2 million within Operation, maintenance and other, $11 million reduction recorded within Interest Expense, and a $4 million reduction within NCI for the year ended December 31, 2024.
(b) Net of tax benefit of $5 million. $17 million recorded within Operating Revenues, $1 million recorded within Operation, maintenance and other, and $3 million recorded within Other income and expenses.
(c) Recorded within Preferred Redemption Costs.
(d) Net of $11 million tax benefit. $69 million recorded within Equity in (losses) earnings of unconsolidated affiliates and $4 million recorded within Gains on sales of other assets and other, net.
(e) Net of $5 million tax benefit. $23 million recorded within Operation, maintenance and other.
(f) Recorded in Income (Loss) from Discontinued Operations, net of tax, and Net Income Attributable to NCI.
Year Ended December 31, 2025, as compared to 2024
GAAP Reported EPS was $6.31 for the year ended December 31, 2025, compared to $5.71 for the year ended December 31, 2024. In addition to the drivers below, the increase in GAAP Reported Earnings/EPS was primarily due to impairments related to the 2024 South Carolina rate case and charges related to Duke Energy Indiana post-retirement benefits in the prior year, as well as charges related to certain joint venture electric transmission projects and certain renewable natural gas investments in the prior year.
As discussed and shown in the table above, management also evaluates financial performance based on adjusted EPS. Duke Energy’s adjusted EPS was $6.31 for the year ended December 31, 2025, compared to $5.90 for the year ended December 31, 2024. The increase in Adjusted Earnings/Adjusted EPS was primarily due to recovery of growing infrastructure investments to serve customers and growth in our service territories, partially offset by higher operation and maintenance expense, interest expense, property taxes and depreciation on a growing asset base.
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 NCI 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 Electric Utilities and Infrastructure (EU&I) and Gas Utilities and Infrastructure (GU&I). The remainder of Duke Energy’s operations is presented as Other. See Note 3 to the Consolidated Financial Statements, “Business Segments,” for additional information on Duke Energy’s segment structure.
45
MD&A SEGMENT RESULTS - ELECTRIC UTILITIES AND INFRASTRUCTURE
Electric Utilities and Infrastructure
Years Ended December 31,
Operating Expenses
Fuel used in electric generation and purchased power 8,138 9,285 (1,147)
Impairment of assets and other charges (9) 37 (46)
Gains on Sales of Other Assets and Other, net 22 3 19
Other Income and Expenses, net 622 528 94
Less: Net Income Attributable to Noncontrolling Interest 104 88 16
Year Ended December 31, 2025, as compared to 2024
EU&I’s results were driven by higher revenues from rate cases across multiple jurisdictions, higher weather-normal retail sales volumes and higher transmission revenues, partially offset by higher operation and maintenance and depreciation expenses. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The variance was driven primarily by:
•a $951 million increase due to higher pricing from jurisdictional rate cases primarily at Duke Energy Carolinas, Duke Energy Indiana, Duke Energy Florida and Duke Energy Progress;
•a $753 million increase in storm recovery revenues at Duke Energy Florida;
•a $223 million increase in weather-normal retail sales volumes;
•a $161 million increase in rider revenues primarily due to the SPP at Duke Energy Florida, an increase in EE due to program performance at Duke Energy Carolinas, various riders at Duke Energy Indiana and the Uncollectible Expense Riders and Distribution Capital Investment Rider at Duke Energy Ohio;
•a $105 million increase in other revenues due to higher transmission revenues across all jurisdictions and higher Clean Energy Connection subscription revenues at Duke Energy Florida; and
•a $74 million increase in retail sales due to improved weather compared to the prior year.
Partially offset by:
•a $1,119 million decrease in fuel revenues primarily due to lower rates in the current year, partially offset by higher volumes.
Operating Expenses. The variance was driven primarily by:
•a $1,229 million increase in operation, maintenance and other primarily driven by higher storm amortization at Duke Energy Florida, increased litigation and environmental costs at Duke Energy Carolinas, an increase in TDSIC rider amortizations and plant maintenance at Duke Energy Indiana, increased customer products and services program costs and higher employee-related expenses across all jurisdictions, partially offset by lower storm costs in the current year at Duke Energy Progress and Duke Energy Carolinas;
46
MD&A SEGMENT RESULTS - ELECTRIC UTILITIES AND INFRASTRUCTURE
•a $477 million increase in depreciation and amortization primarily due to higher depreciable base across all jurisdictions and higher depreciation rates driven by rate cases; and
•a $113 million increase in property and other taxes due to a higher base on which property taxes are levied.
Partially offset by:
•a $1,147 million decrease in fuel used in electric generation and purchased power primarily due to lower recovery of fuel costs and lower purchased power driven by the expiration of contracts in the prior year at Duke Energy Florida and higher recovery of fuel costs in the prior year at Duke Energy Carolinas, partially offset by higher volumes and natural gas prices at Duke Energy Carolinas and Duke Energy Progress and higher purchased power at Duke Energy Ohio; and
•a $46 million decrease in impairment of assets and other charges primarily related to prior year charges from the 2024 South Carolina rate case order at Duke Energy Carolinas and Duke Energy Progress.
Other Income and Expense. The increase was primarily driven by higher AFUDC equity base and rates compared to the prior year across all jurisdictions.
Interest Expense. The increase was primarily driven by higher outstanding debt balances, current year return on deferred nuclear PTC liability, absence of prior year return on deferred South Carolina grid costs, partially offset by lower intercompany interest expense and current year return on deferred storm costs at Duke Energy Carolinas and Duke Energy Progress.
Income Tax Expense. The increase in tax expense was primarily due to an increase in pretax income, partially offset by an increase in the amortization of EDIT and nuclear PTCs. The ETRs for the years ending December 31, 2025, and 2024, were 13.7% and 14.4%, respectively.
Gas Utilities and Infrastructure
Years Ended December 31,
Operating Expenses
Operation, maintenance and other 518 478 40
Other income and expenses, net 68 10 58
Less: Net Loss Attributable to Noncontrolling Interest (1) (1) —
Year Ended December 31, 2025, as compared to 2024
GU&I’s results were impacted primarily by higher revenues from the 2024 Piedmont North Carolina rate case and lower impairments on certain renewable natural gas investments in the current year, partially offset by higher operation and maintenance and depreciation expenses. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues.The variance was driven primarily by:
•a $429 million increase in cost of natural gas revenues primarily due to higher commodity prices;
•a $98 million increase due to higher pricing from the 2024 Piedmont North Carolina rate case;
•a $21 million increase in Midwest rider revenue; and
•a $13 million increase due to improved weather in the Midwest.
47
MD&A SEGMENT RESULTS - GAS UTILITIES AND INFRASTRUCTURE
Operating Expenses.The variance was driven primarily by:
•a $418 million increase in the cost of natural gas primarily due to higher commodity prices, partially offset by lower storage balancing charges in the current year;
•a $40 million increase in operation, maintenance and other primarily due to higher customer information technology (IT) system costs, employee-related expenses, and environmental costs;
•a $35 million increase in depreciation and amortization primarily due to higher depreciable base, partially offset by lower Tennessee depreciation due to assets meeting the held for sale criteria; and
•a $15 million increase in property and other taxes due to a higher base on which property taxes are levied.
Other Income and Expenses, net.The increase was primarily due to impairments for investments in SustainRNG projects in the prior year.
Interest Expense. The variance was primarily due to higher outstanding debt balances, partially offset by lower intercompany interest.
Income Tax Expense. The increase in tax expense was primarily due to an increase in pretax income. The ETRs for the years ended December 31, 2025, and 2024, were 20.7% and 17.9%, respectively. The increase in the ETR was primarily due to a decrease in the amortization of EDIT.
Other
Years Ended December 31,
Gains on Sales of Other Assets and Other, net 22 22 —
Less: Preferred Dividends 56 106 (50)
Less: Preferred Redemption Costs — 16 (16)
Year Ended December 31, 2025, as compared to 2024
Other's results were primarily driven by lower interest income, higher interest expense, higher contributions to the Duke Energy Foundation and lower equity earnings from the NMC investment, partially offset by impacts from the redemption of the Company’s Series B Preferred Stock in the prior year.
Operating Expenses. The increase was driven by higher contributions to the Duke Energy Foundation.
Other Income and Expenses, net. The decrease was primarily driven by lower money pool interest income, lower equity earnings from the NMC investment and lower return on investments that fund certain employee benefit obligations.
Interest Expense. The increase was primarily due to higher outstanding debt balances and higher money pool interest expense, partially offset by lower short-term commercial paper borrowings and interest rates.
Income Tax Benefit. The increase in the tax benefit was primarily due to an increase in pretax losses. The ETRs for the years ended December 31, 2025, and 2024, were 28.3% and 31.8%, respectively. The decrease in the ETR was primarily due to tax benefits recognized in the prior year related to the utilization of previously valued carryforward attributes.
Preferred Dividends. The decrease was due to the redemption of the Company’s Series B Preferred Stock in the prior year.
Preferred Redemption Costs. The decrease was due to the redemption of the Company’s Series B Preferred Stock in the prior year.
INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX
Years Ended December 31,
Income From Discontinued Operations, net of tax $ 1 $ 10 $ (9)
Year Ended December 31, 2025, as compared to 2024
The variance was primarily driven by results of the Commercial Renewables Disposal Groups in the prior year. See Note 2 to the Consolidated Financial Statements, "Dispositions," for further information.
48
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 2,649 3,251 (602)
Impairment of assets and other charges (11) 31 (42)
Gains on Sales of Other Assets and Other, net 6 2 4
Other Income and Expenses, net 258 247 11
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 2025
Residential sales 3.7 %
Commercial sales 0.4 %
Industrial sales (1.1) %
Wholesale power sales 2.9 %
Joint dispatch sales 27.0 %
Total sales 2.0 %
Average number of customers 1.9 %
Year Ended December 31, 2025, as compared to 2024
Operating Revenues.The variance was driven primarily by:
•a $563 million decrease in fuel revenues due to lower fuel rates, partially offset by higher volumes, including JDA sales.
Partially offset by:
•a $327 million increase due to higher pricing from the 2024 South Carolina rate case and Year 2 of the North Carolina MYRP;
•a $109 million increase in weather-normal retail sales volumes;
•a $42 million increase in rider revenues primarily due to an increase in EE program performance, partially offset by the return of nuclear PTC benefit to North Carolina customers beginning in January 2025 and increased South Carolina EDIT return to customers compared to prior year;
•a $32 million increase in retail sales due to improved weather compared to the prior year;
•a $21 million increase in transmission revenues due to network demand and rates; and
•a $20 million increase in wholesale power revenues primarily due to higher capacity volumes.
49
MD&A DUKE ENERGY CAROLINAS
Operating Expenses. The variance was driven primarily by:
•a $602 million decrease in fuel used in electric generation and purchased power primarily due to the increased recovery of fuel cost in the prior year, partially offset by higher purchased power costs, including JDA, natural gas prices and volumes; and
•a $42 million decrease in impairment of assets and other charges primarily related to prior year charges from the 2024 South Carolina rate case order.
Partially offset by:
•a $262 million increase in operation, maintenance and other primarily due to higher costs related to customer products and services programs, employee-related expenses, legal and environmental and IT, partially offset by lower storm costs in the current year; and
•a $135 million increase in depreciation and amortization primarily due to higher net amortizations and depreciation rates driven by the 2024 South Carolina rate case and Year 2 of the North Carolina MYRP.
Other Income and Expenses, net. The increase was primarily due to higher AFUDC equity rate and base compared to the prior year, partially offset by lower return on pension plan assets in the current year.
Interest Expense. The increase was primarily due to higher outstanding debt balances, current year return on deferred nuclear PTC liability and absence of prior year return on deferred South Carolina grid costs, partially offset by current year return on deferred storm costs.
Income Tax Expense.The decrease in tax expense was primarily due to an increase in the amortization of nuclear PTCs, ITCs and EDIT partially offset by an increase in pretax income.
PROGRESS ENERGY
Results of Operations
Years Ended December 31,
Operating Expenses
Fuel used in electric generation and purchased power 4,267 4,755 (488)
Impairment of assets and other charges 2 6 (4)
Gains on Sales of Other Assets and Other, net 27 27 —
Other Income and Expenses, net 287 235 52
Year Ended December 31, 2025, as compared to 2024
Operating Revenues. The variance was driven primarily by:
•a $753 million increase in storm recovery revenues at Duke Energy Florida;
•a $343 million increase due to higher pricing from the 2024 Duke Energy Florida rate case and Duke Energy Progress impacts of new rate years implemented for the North Carolina MYRP;
•an $88 million increase in rider revenues primarily due to higher rates for the SPP at Duke Energy Florida;