DUKE ENERGY CORPORATION

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DUKE ENERGY CORP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

05/09/2022 | 11:54am EDT
The following combined Management's Discussion and Analysis of Financial
Condition and Results of Operations is separately filed by Duke Energy and Duke
Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida,
Duke Energy Ohio, Duke Energy Indiana and Piedmont. 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.

DUKE ENERGY


Duke Energy is an energy company headquartered in Charlotte, North Carolina.
Duke Energy 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.

Management's Discussion and Analysis should be read in conjunction with the
Condensed Consolidated Financial Statements and Notes for the three months ended
March 31, 2022, and with Duke Energy's Annual Report on Form 10-K for the year
ended December 31, 2021.

Executive Overview

Advancing Our Clean Energy Transformation

During the first quarter, we continued to execute on our clean energy transformation, delivering strong, sustainable value for shareholders, customers, communities and employees.


•We're targeting energy generated from coal to represent less than 5% by 2030
and a full exit by 2035, subject to regulatory approvals. We've made strong
progress in reducing carbon emissions from electricity generation (a 44%
reduction from 2005) and have committed to do more (at least 50% reduction by
2030 and net-zero by 2050).

•We continued to execute financings under our Sustainable Financing Framework,
raising approximately $2 billion during the quarter under the structure, with
proceeds being allocated to eligible projects such as electric grid investments
that support the deployment of renewables, new solar generation and battery
storage, storm hardening and electric vehicle infrastructure, as well as
expenditures that enable opportunities for diverse and small businesses.

Regulatory Activity. During the first quarter of 2022, we continued to monitor
developments while moving our regulatory strategy forward. See Note 3 to the
Condensed Consolidated Financial Statements, "Regulatory Matters," for
additional information.

•In April 2022, the MGP Settlement was approved without modification by the PUCO. The MGP Settlement resolved certain issues related to MGP remediation costs and the Tax Act as it related to Duke Energy Ohio's natural gas operations.


•In April 2022, Piedmont Natural Gas filed a request with the South Carolina
Public Service Commission to recover recent capital investments and update its
operating costs and billing rates through a general rate case proceeding.

•In March 2022, the Indiana Supreme Court issued an opinion, which absent IURC
preapproval of deferred accounting treatment determined DEI could not recover
coal ash closure costs incurred between base rate cases. In connection with the
rate case application filed in Indiana in 2019 by Duke Energy Indiana, the IURC
issued an order in June 2020, which among other things provided for recovery of
approximately $211 million of certain coal ash closure costs incurred by DEI
prior to the IURC Order. The Court remanded the matter back to the IURC for
proceedings consistent with the opinion. Duke Energy Indiana filed a request for
rehearing with the Supreme Court on April 11, 2022.

•In February 2022, the NCUC adopted rules to govern the application and review
process for the PBR authorized under HB 951. In April 2022, the NCUC adopted
rules to govern the securitization of 50% of the North Carolina retail portion
of the remaining net book value of retiring coal plants pursuant to HB 951. The
rules are constructive and consistent with the policy objectives of HB 951. We
remain engaged in next steps including developing an initial carbon reduction
plan.

•In January 2022, the NCUC issued an order approving the stipulation of partial
settlement related to the 2021 Piedmont North Carolina Rate Case, which included
a base rate increase of $67 million, subject to completion of the Robeson County
LNG facility and the Pender Onslow County expansion project.

Matters Impacting Future Results

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


Regulatory Matters

Coal Ash Costs

Future spending of coal ash costs, including amounts recorded for depreciation
and liability accretion, is expected to continue to be deferred and recovered in
future rate cases or rider filings. The majority of spend is expected to occur
over the next 15-20 years.

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MD&A MATTERS IMPACTING FUTURE RESULTS




Duke Energy Indiana has interpreted the CCR rule to identify the coal ash basin
sites impacted and has assessed the amounts of coal ash subject to the rule and
a method of compliance. In 2020, the Hoosier Environmental Council filed a
petition challenging the Indiana Department of Environmental Management's (IDEM)
partial approval of five of Duke Energy Indiana's ash pond site closure plans at
Gallagher Station. The petition does not challenge the other basin closures
approved by IDEM at other Indiana stations. Interpretation of the requirements
of the CCR rule is subject to further legal challenges and regulatory approvals,
which could result in additional ash basin closure requirements, higher costs of
compliance and greater AROs. Additionally, Duke Energy Indiana has retired
facilities that are not subject to the CCR rule. Duke Energy Indiana may incur
costs at these facilities to comply with environmental regulations or to
mitigate risks associated with on-site storage of coal ash. In January 2022,
Duke Energy Indiana received a letter from the EPA regarding interpretation of
the CCR rule. See Note 4 to the Condensed Consolidated Financial Statements,
"Commitments and Contingencies" for more information.

Commercial Renewables


Duke Energy continues to monitor recoverability of renewable merchant plants
located in the ERCOT West market and in the PJM West market, due to fluctuating
market pricing and long-term forecasted energy prices. Based on the most recent
recoverability test, the carrying value approximated the aggregate estimated
future undiscounted cash flows for the assets under review. A continued decline
in energy market pricing or other factors unfavorably impacting the economics
would likely result in a future impairment. Impairment of these assets could
result in adverse impacts. For additional information, see Note 2 to the
Condensed Consolidated Financial Statements, "Business Segments."

In February 2021, a severe winter storm impacted certain Commercial Renewables
assets in Texas. Extreme weather conditions limited the ability for these solar
and wind facilities to generate and sell electricity into the ERCOT market. Duke
Energy has been named in multiple lawsuits arising out of this winter storm. For
more information, see Note 4 to the Condensed Consolidated Financial Statements,
"Commitments and Contingencies."

Supply Chain


Duke Energy is monitoring supply chain disruptions, including the cost and
availability of key components of planned generating facilities, which could
impact the timing of in-service or economics of renewable projects and may
result in adverse impacts on operating results. The Company is also monitoring
the impacts on future financial results and clean energy goals due to the
availability of solar panels as a result of the U.S. Department of Commerce
investigation into the potential circumvention of anti-dumping and
countervailing duties by certain Chinese companies.

Results of Operations

Non-GAAP Measures


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. 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 presented may not be
comparable to similarly titled measures used by other companies because other
companies may not calculate the measures in the same manner.

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 Corporation common stockholders in dollar and per share amounts, adjusted
for the dollar and per share impact of special items. As discussed below,
special items represent certain charges and credits, which management believes
are not indicative of Duke Energy's ongoing performance. The most directly
comparable GAAP measures for adjusted earnings and adjusted EPS are GAAP
Reported Earnings (Loss) and GAAP Reported Earnings (Loss) Per Share,
respectively.

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

•Regulatory Matters represents the net impact of charges related to the 2022 Indiana Supreme Court ruling on coal ash.

•Gas Pipeline Investments represents additional exit obligations related to ACP.

Three Months Ended March 31, 2022, as compared to March 31, 2021


GAAP reported EPS was $1.08 for the first quarter of 2022 compared to a $1.25 in
the first quarter of 2021. In addition to the drivers below, GAAP reported EPS
decreased primarily due to charges related to the Indiana Supreme Court ruling
on coal ash.

As discussed above, management also evaluates financial performance based on
adjusted EPS. Duke Energy's first quarter 2022 adjusted EPS was $1.30 compared
to $1.26 for the first quarter of 2021. The increase in adjusted EPS was
primarily due to higher volumes, partially offset by higher operation and
maintenance expense, including storm costs, and lower returns on benefit trusts.

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MD&A DUKE ENERGY

The following table reconciles non-GAAP measures, including adjusted EPS, to their most directly comparable GAAP measures.


                                                           Three Months 

Ended March 31,

                                                         2022                          2021
  (in millions, except per share amounts)            Earnings         EPS   

Earnings EPS


  GAAP Reported Earnings/GAAP Reported EPS   $    818            $ 1.08      $      953      $ 1.25
  Adjustments:

  Regulatory Matters(a)                           173              0.22               -           -
  Gas Pipeline Investments(b)                       -                 -     

5 0.01

  Adjusted Earnings/Adjusted EPS             $    991            $ 1.30     

$ 958 $ 1.26

(a)Net of tax benefit of $62 million and $22 million in noncontrolling interests. (b)Net of tax benefit of $1 million.

SEGMENT RESULTS


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

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

Electric Utilities and Infrastructure

                                                                       Three Months Ended
                                                                           March 31,
(in millions)                                                                           2022             2021           Variance
Operating Revenues                                                                $ 6,002          $ 5,281          $     721
Operating Expenses
Fuel used in electric generation and purchased power                                1,837            1,462                375
Operation, maintenance and other                                                    1,426            1,282                144
Depreciation and amortization                                                       1,131            1,057                 74
Property and other taxes                                                              337              311                 26
Impairment of assets and other charges                                                214                -                214
Total operating expenses                                                            4,945            4,112                833
Gains on Sales of Other Assets and Other, net                                           2                -                  2
Operating Income                                                                    1,059            1,169               (110)
Other Income and Expenses, net                                                        114              104                 10
Interest Expense                                                                      376              340                 36
Income Before Income Taxes                                                            797              933               (136)
Income Tax Expense                                                                     83              113                (30)
Add: Loss Attributable to Noncontrolling Interest                                       9                -                  9
Segment Income                                                              

$ 723 $ 820 $ (97)


Duke Energy Carolinas GWh sales                                                    22,549           21,962                587
Duke Energy Progress GWh sales                                                     17,969           16,537              1,432
Duke Energy Florida GWh sales                                                       9,902            8,554              1,348
Duke Energy Ohio GWh sales                                                          5,997            6,004                 (7)
Duke Energy Indiana GWh sales                                                       7,950            7,726                224
Total Electric Utilities and Infrastructure GWh sales                              64,367           60,783              3,584
Net proportional MW capacity in operation                                          49,340           50,026               (686)


Three Months Ended March 31, 2022, as compared to March 31, 2021


Electric Utilities and Infrastructure's lower segment income is due to the
Indiana Supreme Court ruling on recovery of certain coal ash costs and higher
storm costs, partially offset by higher retail sales volumes. The following is a
detailed discussion of the variance drivers by line item.

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MD&A SEGMENT RESULTS - ELECTRIC UTILITIES AND INFRASTRUCTURE

Operating Revenues. The variance was driven primarily by:

•a $266 million increase in fuel revenues primarily due to higher fuel prices and retail sales volumes;

•a $243 million increase in weather-normal retail sales volumes;


•a $126 million increase in retail base rate pricing due to general rate cases
in North Carolina, net of rider impacts as well as multiyear rate adjustments in
Florida; and

•a $46 million increase in wholesale revenues primarily due to higher capacity volumes.


Partially offset by

•a $46 million decrease due to the Indiana Supreme Court ruling on recovery of certain coal ash costs.

Operating Expenses. The variance was driven primarily by:

•a $375 million increase in fuel used in electric generation and purchased power due to higher fuel prices and volumes from customer demand;

•a $214 million increase in impairment of assets and other charges primarily due to the Indiana Supreme Court ruling on recovery of certain coal ash costs;

•a $144 million increase in operation, maintenance and other primarily driven by higher storm costs and higher outage and maintenance costs;


•a $74 million increase in depreciation and amortization primarily due to higher
plant in service and resolution of prior year rate cases, partially offset by
lower depreciation related to the extension of the lives of nuclear facilities;
and

•a $26 million increase in property and other taxes primarily due to higher
payroll taxes due to CARES Act employee retention credits in the prior year,
increased property tax as well as higher revenue related taxes.

Interest Expense. The variance was primarily driven by interest expense on excess deferred tax liabilities.


Income Tax Expense. The decrease in tax expense was primarily due to a decrease
in pretax income. The ETRs for the three months ended March 31, 2022, and 2021,
were 10.4% and 12.1%, respectively. The decrease in the ETR was primarily due to
the amortization of excess deferred taxes in relation to lower pretax income.

Gas Utilities and Infrastructure

                                                                  Three Months Ended March 31,
(in millions)                                                                                2022                   2021              Variance
Operating Revenues                                                               $       1,032          $         775          $        257
Operating Expenses
Cost of natural gas                                                                        481                    276                   205
Operation, maintenance and other                                                           182                    102                    80
Depreciation and amortization                                                               79                     68                    11
Property and other taxes                                                                    41                     35                     6

Total operating expenses                                                                   783                    481                   302

Operating Income                                                                           249                    294                   (45)

Other Income and Expenses, Net                                                              17                     17                     -
Interest Expense                                                                            40                     33                     7
Income Before Income Taxes                                                                 226                    278                   (52)
Income Tax (Benefit) Expense                                                               (28)                    33                   (61)

Segment Income                                                                   $         254          $         245          $          9

Piedmont LDC throughput (dekatherms)                                               180,187,101            149,626,582            30,560,519
Duke Energy Midwest LDC throughput (Mcf)                                            37,246,072             37,109,003               137,069


Three Months Ended March 31, 2022, as compared to March 31, 2021


Gas Utilities and Infrastructure's results were impacted primarily by margin
growth. The following is a detailed discussion of the variance drivers by line
item.

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MD&A SEGMENT RESULTS - GAS UTILITIES AND INFRASTRUCTURE

Operating Revenues. The variance was driven primarily by:


•a $205 million increase due to higher natural gas costs passed through to
customers and increased off-system sales natural gas costs, partially offset by
lower residential volumes;

•a $35 million increase due to base rate increases;

•a $7 million increase due to rider revenues related to Ohio Capital Expenditure Program (CEP); and

•a $6 million increase due to customer growth.

Partially offset by:

•a $15 million decrease due to the MGP settlement.

Operating Expenses. The variance was driven primarily by:


•a $205 million increase in cost of natural gas due to higher natural gas costs
passed through to customers and increased off-system sales natural gas costs,
partially offset by lower residential volumes;

•an $80 million increase in operation, maintenance and other primarily due to the MGP settlement; and

•an $11 million increase in depreciation and amortization due to additional plant in service and lower CEP deferrals.


Income Tax Benefit. The decrease in tax expense was primarily due to an increase
in the amortization of excess deferred taxes related to the Ohio MGP Settlement
and a decrease in pretax income. The ETRs for the three months ended March 31,
2022, and 2021, were -12.4% and 11.9%, respectively. The decrease in the ETR was
primarily due to an increase in the amortization of excess deferred taxes
related to the Ohio MGP Settlement.

Commercial Renewables

                                                                      Three Months Ended
                                                                          March 31,
(in millions)                                                                           2022             2021           Variance
Operating Revenues                                                                $   121          $   119          $       2
Operating Expenses
Operation, maintenance and other                                                       82               72                 10
Depreciation and amortization                                                          60               53                  7
Property and other taxes                                                               10                9                  1

Total operating expenses                                                              152              134                 18
Losses on Sales of Other Assets and Other, net                                         (1)               -                 (1)
Operating Loss                                                                        (32)             (15)               (17)
Other Income and Expenses, net                                                          -              (25)                25
Interest Expense                                                                       18               13                  5
Loss Before Income Taxes                                                              (50)             (53)                 3
Income Tax Benefit                                                                    (33)             (29)                (4)
Add: Loss Attributable to Noncontrolling Interests                                     28               51                (23)
Segment Income                                                              

$ 11 $ 27 $ (16)


Renewable plant production, GWh                                                     2,988            2,588                400
Net proportional MW capacity in operation(a)                                        4,753            4,294                459


(a)Certain projects are included in tax equity structures where investors have
differing interests in the project's economic attributes. One hundred percent of
the tax equity project's capacity is included in the table above.

Three Months Ended March 31, 2022, as compared to March 31, 2021


Commercial Renewables' results were unfavorable primarily driven by fewer
project investments financed by tax equity being placed into service in the
current year and higher operating expenses for projects placed in service since
the prior year, offset by the impacts for losses experienced in the prior year
from Texas Storm Uri.

Operating Expenses. The variance was primarily driven by a $14 million increase
for higher operating expenses, depreciation, property tax expense, and other
development costs from the growth of new projects and a $4 million increase for
higher operating expenses attributed to maintenance and other operating
expenses.

Other Income and Expenses, net. The increase was primarily due to $29 million of losses experienced in the prior year from Texas Storm Uri offset by approximately $5 million decrease in equity earnings.

Interest Expense. The increase is primarily due to a $4 million gain recorded in the prior year for an interest rate swap that did not qualify for hedge accounting.

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MD&A SEGMENT RESULTS - COMMERCIAL RENEWABLES

Income Tax Benefit. The increase in the tax benefit was primarily due to a decrease in taxes associated with tax equity investments.


Loss Attributable to Noncontrolling Interests. The variance was driven by a $23
million decrease for fewer projects placed in service financed with tax equity
in the current year and a $12 million net decrease in losses allocated to tax
equity members from existing tax equity structures offset by a $12 million
increase for losses experienced in the prior year from Texas Storm Uri.

Other

                                                                   Three Months Ended
                                                                       March 31,
(in millions)                                                                       2022            2021           Variance
Operating Revenues                                                             $   30          $   26          $       4

Operating Expenses                                                                 33              28                  5
Gains on Sales of Other Assets and Other, net                                       1               -                  1
Operating Loss                                                                     (2)             (2)                 -
Other Income and Expenses, net                                                     (6)             21                (27)
Interest Expense                                                                  159             151                  8
Loss Before Income Taxes                                                         (167)           (132)               (35)
Income Tax Benefit                                                                (36)            (32)                (4)

Less: Preferred Dividends                                                          39              39                  -
Net Loss                                                                       $ (170)         $ (139)         $     (31)

Three Months Ended March 31, 2022, as compared to March 31, 2021

The higher net loss was driven by lower return on investments and higher interest expense partially offset by higher equity earnings from the NMC investment.


Other Income and Expenses, net. The variance was primarily due to lower return
on investments that fund certain employee benefit obligations partially offset
by higher equity earnings from the NMC investment.

Interest Expense. The variance was primarily due to higher outstanding long-term debt.


Income Tax Benefit. The increase in the tax benefit was primarily due to an
increase in pretax losses, partially offset by unfavorable tax impacts related
to lower investment returns on certain employee benefit obligations. The ETRs
for the three months ended March 31, 2022, and 2021, were 21.6% and 24.2%,
respectively. The decrease in the ETR was primarily due to unfavorable tax
impacts related to lower investment returns on certain employee benefit
obligations.

DUKE ENERGY CAROLINAS

Results of Operations

                                                                  Three Months Ended March 31,
(in millions)                                                   2022               2021            Variance
Operating Revenues                                    $     1,888          $   1,716          $      172
Operating Expenses
Fuel used in electric generation and purchased power          448                422                  26
Operation, maintenance and other                              512                441                  71
Depreciation and amortization                                 379                359                  20
Property and other taxes                                       93                 83                  10
Impairment of assets and other charges                          3                  -                   3
Total operating expenses                                    1,435              1,305                 130

Operating Income                                              453                411                  42
Other Income and Expenses, net                                 55                 48                   7
Interest Expense                                              141                124                  17
Income Before Income Taxes                                    367                335                  32
Income Tax Expense                                             27                 23                   4
Net Income                                            $       340          $     312          $       28


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MD&A DUKE ENERGY CAROLINAS




The following table shows the percent changes in GWh sales and average number of
customers. The 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         2022
                  Residential sales                        (3.6) %
                  General service sales                     4.2  %
                  Industrial sales                          4.7  %
                  Wholesale power sales                    (4.6) %
                  Joint dispatch sales                    (30.0) %
                  Total sales                               2.7  %
                  Average number of customers               2.0  %

Three Months Ended March 31, 2022, as compared to March 31, 2021

Operating Revenues. The variance was driven primarily by:

•a $99 million increase in weather-normal retail sales volumes;

•a $31 million increase in fuel revenues due to higher prices and volumes in the current year; and

•a $20 million increase due to higher pricing from the North Carolina retail rate case, net of a return of EDIT to customers.

Operating Expenses. The variance was driven primarily by:

•a $71 million increase in operation, maintenance and other expense primarily due to higher storm restoration costs and higher outage and maintenance costs;


•a $26 million increase in fuel used in electric generation and purchased power
primarily due to higher natural gas prices and changes in the generation mix,
partially offset by the recovery of fuel expenses and lower coal prices; and

•a $20 million increase in depreciation and amortization primarily due to an
increase in assets placed into service, and new depreciation rates associated
with the North Carolina rate case, partially offset by the extension of the
lives of nuclear facilities.

Interest Expense. The variance was driven by interest expense on excess deferred tax liabilities.


Income Tax Expense. The increase in tax expense was primarily due to an increase
in pretax income, partially offset by amortization of excess deferred taxes.

PROGRESS ENERGY

Results of Operations

                                                                   Three Months Ended March 31,
(in millions)                                                    2022               2021            Variance
Operating Revenues                                     $     2,992          $   2,505          $      487
Operating Expenses
Fuel used in electric generation and purchased power         1,064                795                 269
Operation, maintenance and other                               645                601                  44
Depreciation and amortization                                  536                485                  51
Property and other taxes                                       152                142                  10

Total operating expenses                                     2,397              2,023                 374
Gains on Sales of Other Assets and Other, net                    2                  -                   2
Operating Income                                               597                482                 115
Other Income and Expenses, net                                  35                 43                  (8)
Interest Expense                                               211                192                  19
Income Before Income Taxes                                     421                333                  88
Income Tax Expense                                              67                 43                  24
Net Income                                                     354                290                  64

Three Months Ended March 31, 2022, as compared to March 31, 2021

Operating Revenues. The variance was driven primarily by:

•a $237 million increase in fuel cost recovery driven by higher fuel prices and volumes in the current year;

•a $124 million increase in weather-normal retail sales volumes;

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MD&A PROGRESS ENERGY




•a $106 million increase in retail pricing due to the North Carolina rate case
and base rate adjustments at Duke Energy Florida related to annual increases
from the 2021 Settlement Agreement and the solar base rate adjustment; and

•a $32 million increase in wholesale revenues, net of fuel, due to higher capacity volumes.

Partially offset by:

•a $22 million decrease in capacity revenue primarily due to accelerated recovery of retired Crystal River coal units in 2021.

Operating Expenses. The variance was driven primarily by:

•a $269 million increase in fuel used in electric generation and purchased power primarily due to higher demand and higher natural gas prices;


•a $51 million increase in depreciation and amortization primarily due to
increased rates at Duke Energy Florida and higher amortization of deferred coal
ash and storm costs at Duke Energy Progress, partially offset by the extension
of the lives at nuclear facilities at Duke Energy Progress; and

•a $44 million increase in operation, maintenance and other expense primarily due to higher storm costs at Duke Energy Progress.

Interest Expense. The variance was driven primarily by interest expense on excess deferred tax liabilities and higher outstanding debt at Duke Energy Progress.


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

DUKE ENERGY PROGRESS

Results of Operations

                                                                  Three Months Ended March 31,
(in millions)                                                   2022               2021            Variance
Operating Revenues                                    $     1,632          $   1,401          $      231
Operating Expenses
Fuel used in electric generation and purchased power          574                436                 138
Operation, maintenance and other                              391                357                  34
Depreciation and amortization                                 306                285                  21
Property and other taxes                                       49                 49                   -

Total operating expenses                                    1,320              1,127                 193
Gains on Sales of Other Assets and Other, net                   1                  -                   1
Operating Income                                              313                274                  39
Other Income and Expenses, net                                 22                 24                  (2)
Interest Expense                                               85                 69                  16
Income Before Income Taxes                                    250                229                  21
Income Tax Expense                                             35                 19                  16
Net Income                                            $       215          $     210          $        5


The following table shows the percent changes in GWh sales and average number of
customers. The 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 period         2022
                 Residential sales                          (4.5) %
                 General service sales                      10.3  %
                 Industrial sales                           27.8  %
                 Wholesale power sales                       1.0  %
                 Joint dispatch sales                       51.4  %
                 Total sales                                 8.7  %
                 Average number of customers                 2.0  %

Three Months Ended March 31, 2022, as compared to March 31, 2021

Operating Revenues. The variance was driven primarily by:

•a $120 million increase in fuel cost recovery driven by higher fuel prices and volumes in the current year;

•a $56 million increase due to higher pricing from the North Carolina retail rate case, net of a return of EDIT to customers;

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MD&A DUKE ENERGY PROGRESS

•a $33 million increase in weather-normal retail sales volumes in the current year; and

•a $16 million increase in wholesale revenues, net of fuel, due to higher capacity volumes.

Operating Expenses. The variance was driven primarily by:


•a $138 million increase in fuel used in electric generation and purchased power
primarily due to higher natural gas prices and changes in the generation mix,
partially offset by the recovery of fuel expenses and lower coal prices;

•a $34 million increase in operation, maintenance and other expense primarily due to higher storm costs; and


•a $21 million increase in depreciation and amortization due to higher
amortization of deferred coal ash costs and amortization related to deferred
storm costs, partially offset by lower depreciation related to the extension of
the lives of nuclear facilities.

Interest Expense. The variance was driven primarily by interest expense on excess deferred tax liabilities and higher outstanding debt.

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

DUKE ENERGY FLORIDA

Results of Operations

                                                                  Three Months Ended March 31,
(in millions)                                                   2022               2021            Variance
Operating Revenues                                    $     1,355          $   1,101          $      254
Operating Expenses
Fuel used in electric generation and purchased power          490                359                 131
Operation, maintenance and other                              249                242                   7
Depreciation and amortization                                 231                200                  31
Property and other taxes                                      103                 93                  10

Total operating expenses                                    1,073                894                 179
Gains on Sales of Other Assets and Other, net                   1                  -                   1
Operating Income                                              283                207                  76
Other Income and Expenses, net                                 15                 18                  (3)
Interest Expense                                               84                 80                   4
Income Before Income Taxes                                    214                145                  69
Income Tax Expense                                             43                 28                  15
Net Income                                            $       171          $     117          $       54


The following table shows the percent changes in GWh sales and average number of
customers. The percentages for retail customer classes represent billed sales
only. Wholesale power sales include both billed and unbilled sales. 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 period         2022
                 Residential sales                           0.9  %
                 General service sales                       4.0  %
                 Industrial sales                           (0.9) %
                 Wholesale and other                        77.4  %
                 Total sales                                15.8  %
                 Average number of customers                 1.9  %

Three Months Ended March 31, 2022, as compared to March 31, 2021

Operating Revenues. The variance was driven primarily by:

•a $117 million increase in fuel revenue primarily due to higher retail sales volumes and higher fuel rate in current year in response to an increase in natural gas prices;

•a $91 million increase in weather-normal retail sales volumes;


•a $50 million increase in retail pricing due to base rate adjustments related
to annual increases from the 2021 Settlement Agreement and the solar base rate
adjustment; and

•a $16 million increase in wholesale power revenues, net of fuel, primarily due to higher capacity revenues and bulk power sales.

Partially offset by:

•a $22 million decrease in capacity revenue primarily due to accelerated recovery of the retired coal units Crystal River 1 and 2 in 2021.

                                       88

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MD&A DUKE ENERGY FLORIDA

Operating Expenses. The variance was driven primarily by:

•a $131 million increase in fuel used in electric generation and purchased power primarily due to higher natural gas prices;

•a $31 million increase in depreciation and amortization primarily due to an increase in depreciation rates starting in January 2022; and

•a $10 million increase in property and other taxes primarily due to an increase in gross receipts taxes.


Income Tax Expense. The increase in tax expense was primarily due to an increase
in pretax income.

DUKE ENERGY OHIO

Results of Operations

                                                                   Three Months Ended March 31,
(in millions)                                                   2022               2021            Variance
Operating Revenues
Regulated electric                                     $      412          $     363          $       49
Regulated natural gas                                         226                169                  57

Total operating revenues                                      638                532                 106
Operating Expenses
Fuel used in electric generation and purchased power          127                 82                  45

Cost of natural gas                                           107                 51                  56
Operation, maintenance and other                              178                108                  70
Depreciation and amortization                                  80                 74                   6
Property and other taxes                                      101                 92                   9

Total operating expenses                                      593                407                 186

Operating Income                                               45                125                 (80)
Other Income and Expenses, net                                  6                  5                   1
Interest Expense                                               30                 25                   5
Income Before Income Taxes                                     21                105                 (84)
Income Tax (Benefit) Expense                                  (56)                14                 (70)

Net Income                                             $       77          $      91          $      (14)


The following table shows the percent changes in GWh sales of electricity,
dekatherms of natural gas delivered and average number of electric and natural
gas customers. The 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.

                                                     Electric   Natural Gas
            Increase (Decrease) over prior year          2022          2022
            Residential sales                         (4.9) %        1.5  %
            General service sales                     (1.0) %        1.0  %
            Industrial sales                          (2.9) %       (2.3) %
            Wholesale electric power sales           (19.0) %           n/a
            Other natural gas sales                       n/a       (2.8) %
            Total sales                               (0.1) %        0.4  %
            Average number of customers                1.0  %        0.8  %

Three Months Ended March 31, 2022, as compared to March 31, 2021

Operating Revenues. The variance was driven primarily by:

•a $93 million increase in fuel related revenues primarily due to higher natural gas prices and increased volumes;


•a $10 million increase in retail revenue riders, primarily due to the Ohio
Capital Expenditure Program (CEP), Distribution Capital Investment Rider (DCI),
excise tax riders as a result of increased revenue and Kentucky Gas Weather
Normalization rider, partially offset by decreases in Kentucky Environmental
Surcharge Mechanism and the Ohio Tax Cuts and Jobs Act rider;

•a $9 million increase in weather-normal retail sales volumes;

•a $6 million increase in revenues related to OVEC collections and OVEC sales into PJM; and

•a $5 million increase in PJM transmission revenues as a result of increased capital spend.


Partially offset by:

•a $15 million decrease due to the MGP settlement.

                                       89

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MD&A DUKE ENERGY OHIO

Operating Expenses. The variance was driven primarily by:

•a $101 million increase in fuel expense primarily driven by higher retail prices and increased volumes for natural gas and purchased power;

•a $70 million increase in operation, maintenance and other expense primarily due to the MGP settlement and higher storm costs;

•a $9 million increase in property and other taxes primarily due to increased plant in service, higher kilowatt and natural gas distribution taxes due to increased usage and a lower Network Integration Transmission Service tax deferral; and

•a $6 million increase in depreciation and amortization primarily driven by lower CEP deferrals and an increase in distribution plant in service.


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

DUKE ENERGY INDIANA

Results of Operations

                                                                  Three Months Ended March 31,
(in millions)                                                  2022               2021            Variance
Operating Revenues                                    $      822          $     745          $       77
Operating Expenses
Fuel used in electric generation and purchased power         319                217                 102
Operation, maintenance and other                             192                178                  14
Depreciation and amortization                                156                152                   4
Property and other taxes                                      25                 21                   4
Impairment of assets and other charges                       211                  -                 211
Total operating expenses                                     903                568                 335

Operating (Loss) Income                                      (81)               177                (258)
Other Income and Expenses, net                                10                  9                   1
Interest Expense                                              45                 50                  (5)
(Loss) Income Before Income Taxes                           (116)               136                (252)
Income Tax (Benefit) Expense                                 (37)                24                 (61)
Net (Loss) Income                                     $      (79)         $     112          $     (191)


The following table shows the percent changes in GWh sales and average number of
customers. The 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        2022
                   Residential sales                       (3.8) %
                   General service sales                    0.3  %
                   Industrial sales                        (5.3) %
                   Wholesale power sales                   11.9  %
                   Total sales                              2.9  %
                   Average number of customers              1.3  %

Three Months Ended March 31, 2022, as compared to March 31, 2021

Operating Revenues. The variance was driven primarily by:

•a $77 million increase in fuel revenues primarily due to higher fuel cost recovery driven by customer demand and fuel prices;

•a $16 million increase in weather-normal retail sales volumes driven by higher nonresidential customer demand;

•a $14 million increase in wholesale revenues primarily due to an increase in BPM sharing provision; and

•a $9 million increase in retail sales due to favorable weather in the current year.


Partially offset by:

•a $46 million decrease due to the Indiana Supreme Court ruling on recovery of certain coal ash costs.

                                       90

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MD&A DUKE ENERGY INDIANA

Operating Expenses. The variance was driven primarily by:

•a $211 million increase in impairment of assets and other charges primarily due to the Indiana Supreme Court ruling on recovery of certain coal ash costs;


•a $102 million increase in fuel used in electric generation and purchased power
expense primarily due to higher purchased power expense and higher natural gas
costs; and

•a $14 million increase in operation, maintenance and other primarily due to higher storm costs and employee benefits.


Income Tax Benefit. The decrease in tax expense was primarily due to the change
in pretax income from the coal ash impairment based on the Indiana Supreme Court
Opinion.

PIEDMONT

Results of Operations

                                                    Three Months Ended March 31,
    (in millions)                                             2022       2021       Variance

    Operating Revenues                   $      805                   $ 606      $     199
    Operating Expenses
    Cost of natural gas                         374                     225            149
    Operation, maintenance and other             95                      78             17
    Depreciation and amortization                54                      48              6
    Property and other taxes                     16                      14              2

    Total operating expenses                    539                     365            174

    Operating Income                            266                     241             25
    Other Income and Expenses, net               13                      17             (4)
    Interest Expense                             32                      29              3
    Income Before Income Taxes                  247                     229             18
    Income Tax Expense                           33                      26              7
    Net Income                           $      214                   $ 203      $      11

The following table shows the percent changes in dekatherms delivered and average number of customers. The percentages for all throughput deliveries represent billed and unbilled sales. Amounts are not weather-normalized.

                   Increase (Decrease) over prior year        2022
                   Residential deliveries                  (4.7) %
                   Commercial deliveries                    2.9  %
                   Industrial deliveries                    1.1  %
                   Power generation deliveries             45.8  %
                   For resale                              (3.9) %
                   Total throughput deliveries             20.4  %
                   Secondary market volumes                18.8  %
                   Average number of customers              1.6  %


The margin decoupling mechanism adjusts for variations in residential and
commercial use per customer, including those due to weather and conservation.
The weather normalization adjustment mechanisms mostly offset the impact of
weather on bills rendered, but do not ensure full recovery of approved margin
during periods when winter weather is significantly warmer or colder than
normal.

Three Months Ended March 31, 2022, as compared to March 31, 2021

Operating Revenues. The variance was driven primarily by:


•a $149 million increase due to higher natural gas costs passed through to
customers and increased off-system sales natural gas costs, partially offset by
lower residential volumes;

•a $35 million increase due to base rate increases; and

•a $6 million increase due to customer growth.

Operating Expenses. The variance was driven primarily by:


•a $149 million increase due to higher natural gas costs passed through to
customers and increased off-system sales natural gas costs, partially offset by
lower residential volumes.

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

                                       91

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MD&A LIQUIDITY AND CAPITAL RESOURCES

LIQUIDITY AND CAPITAL RESOURCES

Sources and Uses of Cash


Duke Energy relies primarily upon cash flows from operations, debt and equity
issuances and its existing cash and cash equivalents to fund its liquidity and
capital requirements. Duke Energy's capital requirements arise primarily from
capital and investment expenditures, repaying long-term debt and paying
dividends to shareholders. Additionally, due to its existing tax attributes,
Duke Energy does not expect to be a significant federal cash taxpayer until
around 2030. Duke Energy's Annual Report on Form 10-K for the year ended
December 31, 2021, included a summary and detailed discussion of projected
primary sources and uses of cash for 2022 to 2024.

As of March 31, 2022, Duke Energy had approximately $853 million of cash on hand
and $6.1 billion available under its $9 billion Master Credit Facility. Duke
Energy expects to have sufficient liquidity in the form of cash on hand, cash
from operations and available credit capacity to support its funding needs.
Refer to Note 5 to the Condensed Consolidated Financial Statements, "Debt and
Credit Facilities," for information regarding Duke Energy's debt issuances and
maturities, and available credit facilities including the Master Credit
Facility.

Cash Flow Information

The following table summarizes Duke Energy's cash flows.

                                                                             Three Months Ended
                                                                                  March 31,
(in millions)                                                                    2022                2021
Cash flows provided by (used in):
Operating activities                                                $     1,795             $    2,088
Investing activities                                                     (2,699)                (3,137)
Financing activities                                                      1,404                  1,185

Net increase in cash, cash equivalents and restricted cash                  500                    136

Cash, cash equivalents and restricted cash at beginning of period

                                                                      520                    556

Cash, cash equivalents and restricted cash at end of period $ 1,020

             $      692


OPERATING CASH FLOWS

The following table summarizes key components of Duke Energy's operating cash
flows.

                                                                Three Months Ended
                                                                     March 31,
       (in millions)                                        2022         2021       Variance
       Net income                                      $   820      $   941      $    (121)
       Non-cash adjustments to net income                1,582        1,446            136

Payments for asset retirement obligations (119) (114)

            (5)

       Working capital                                    (488)        

(185) (303)

Net cash provided by operating activities $ 1,795 $ 2,088

$ (293)

The variance was primarily due to timing of accruals and payments in working capital accounts.


INVESTING CASH FLOWS

The following table summarizes key components of Duke Energy's investing cash
flows.

                                                                   Three Months Ended
                                                                        March 31,
   (in millions)                                               2022          2021       Variance

Capital, investment and acquisition expenditures $ (2,568) $ (2,215) $ (353)


   Other investing items                                     (131)         (922)           791
   Net cash used in investing activities                 $ (2,699)     $ 

(3,137) $ 438



The variance relates primarily to payment made in 2021 to fund ACP's outstanding
debt and lower overall investments in the Commercial Renewables segment,
partially offset by increases in capital expenditures due to higher overall
investments in the Electric Utilities and Infrastructure and Gas Utilities and
Infrastructure segments.

                                       92

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MD&A LIQUIDITY AND CAPITAL RESOURCES

FINANCING CASH FLOWS


The following table summarizes key components of Duke Energy's financing cash
flows.

                                                                             Three Months Ended
                                                                                  March 31,
(in millions)                                                         2022             2021          Variance
Issuances of long-term debt, net                                $ 2,291          $   532          $  1,759
Issuances of common stock                                             -                5                (5)

Notes payable, commercial paper and other short-term borrowings

                                                          (44)           1,187            (1,231)
Dividends paid                                                     (799)            (783)              (16)
Contributions from noncontrolling interests                          23              303              (280)

Other financing items                                               (67)             (59)               (8)
Net cash provided by financing activities                       $ 1,404     

$ 1,185 $ 219

The variance was primarily due to:

•a $1.8 billion increase in net proceeds from issuances of long-term debt, primarily due to timing of issuances and redemptions of long-term debt.

Partially offset by:

•a $1.2 billion decrease in net borrowings from notes payable and commercial paper; and

•a $280 million decrease in contributions from noncontrolling interests.

OTHER MATTERS

Environmental Regulations


The Duke Energy Registrants are subject to federal, state and local regulations
regarding air and water quality, hazardous and solid waste disposal, coal ash
and other environmental matters. These regulations can be changed from time to
time and result in new obligations of the Duke Energy Registrants. Refer to Note
3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for
further information regarding potential plant retirements and regulatory filings
related to the Duke Energy Registrants.

© Edgar Online, source Glimpses

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