Duke Energy 2013 Annual Report Download - page 57

39
PART II
Income Tax Expense. The variance was primarily due to an increase in
pretax book income. The effective tax rates for the years ended December 31,
2013 and 2012 were 37.8 percent and 34.3 percent, respectively. The increase
in the effective tax rate is primarily due to the impact of lower AFUDC equity.
Matters Impacting Future Duke Energy Carolinas Results
Appeals of recently approved rate cases are pending at the North Carolina
Supreme Court. The NCAG and NC WARN dispute the rate of return, capital
structure and other matters approved by the NCUC. The outcome of these
appeals could have an adverse impact to Duke Energy Carolinas’ financial
position, results of operations and cash flows. See Note 4 to the Consolidated
Financial Statements, “Regulatory Matters,” for additional information.
On February 2, 2014, a break in a stormwater pipe beneath an ash basin
at Duke Energy Carolinas’ retired Dan River steam station caused a release of
ash basin water and ash into the Dan River. On February 8, 2014, a permanent
plug was installed in the stormwater pipe stopping the release of materials into
the river. For additional information related to the ash basin release, see “Other
Issues” in this section.
PROGRESS ENERGY
Introduction
Management’s Discussion and Analysis should be read in conjunction with
the accompanying Consolidated Financial Statements and Notes for the years
ended December 31, 2013, 2012, and 2011.
Basis of Presentation
The results of operations and variance discussion for Progress Energy
is presented in a reduced disclosure format in accordance with General
Instruction (I)(2)(a) of Form 10-K.
Results of Operations
Years Ended December 31,
(in millions) 2013 2012 Variance
Operating Revenues $9,533 $9,405 $ 128
Operating Expenses 7,918 8,266 (348)
Gains (Losses) on Sales of Other Assets and Other, net 3(2) 5
Operating Income 1,618 1,137 481
Other Income and Expense, net 94 130 (36)
Interest Expense 680 740 (60)
Income Before Income Taxes 1,032 527 505
Income Tax Expense 373 172 201
Income from Continuing Operations 659 355 304
Discontinued Operations, net of tax 16 52 (36)
Net Income 675 407 268
Less: Net Income Attributable to Noncontrolling Interests 37 (4)
Net Income Attributable to Parent $ 672 $ 400 $ 272
Year Ended December 31, 2013 as Compared to 2012
Operating Revenues. The variance was primarily due to:
• A $167 million increase in base revenues at Duke Energy Florida as
allowed by the 2012 Settlement;
• A $136 million increase in wholesale sales at Duke Energy Progress
(excluding fuel revenues) primarily due to a new customer contract that
began in January 2013, an amended capacity contract that began in
May 2012 and favorable weather conditions;
• A $117 million increase at Duke Energy Progress due to revised rates in
North Carolina;
• A $57 million increase in nuclear cost-recovery clause revenues at Duke
Energy Florida primarily due to an increase in recovery rates related to
the Crystal River Unit 3 uprate project, prior period true-ups, and Levy
as allowed by the 2012 Settlement; and
• A $24 million increase (net of fuel revenue) in GWh sales to retail
customers at Duke Energy Progress due to higher weather normal sales
volumes to retail customers.
Partially offset by:
• A $387 million decrease in retail fuel revenues at Duke Energy Florida
primarily due to the impact of lower residential fuel rates and a decrease
in GWh retail sales due to weather and lower usage.
Operating Expenses. The variance was primarily due to:
• A $482 million decrease in retail fuel expense at Duke Energy Florida
primarily due to the application of the NEIL settlement proceeds
including amortization associated with the 2012 Settlement, lower
system requirements, and the prior year establishment of a regulatory
liability for replacement power in accordance with the 2012 Settlement;
• A $136 million decrease in operations and maintenance expenses at
Duke Energy Progress primarily due to lower costs associated with the
merger with Duke Energy and the levelization of nuclear outage costs;
• A $71 million decrease in operations and maintenance expenses at
Duke Energy Florida primarily due to the deferral of Crystal River Unit
3-related expenses, in accordance with the 2012 Settlement, lower
costs associated with the merger with Duke Energy, and the prior year