Duke Energy 2014 Annual Report Download - page 146

126
PART II
DUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. •
DUKE ENERGY PROGRESS, INC. • DUKE ENERGY FLORIDA, INC. • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, INC.
Combined Notes to Consolidated Financial Statements – (Continued)
an application with the PUCO to adjust the MGP rider for investigation and
remediation costs incurred in 2013. As of December 31, 2014, Duke Energy
Ohio has a balance of $115 million in Regulatory assets in the Consolidated
Balance Sheets related to MGP sites which includes the $56 million authorized
for recovery in the rate case.
On May 14, 2014, the Ohio Supreme Court granted certain consumer
groups’ motion to stay the MGP rider pending their appeals of the PUCO
approval of the Gas Settlement and Duke Energy Ohio suspended billing of the
MGP rider in June 2014. Amounts collected under the rider prior to suspension
were immaterial. The appellants, the PUCO and Duke Energy Ohio all fi led briefs
addressing the merits of this matter with the Ohio Supreme Court. On July 29,
2014, the Ohio Supreme Court denied Duke Energy Ohio’s motion to lift the stay,
but required appellants to post a bond. The Ohio Supreme Court also requested
briefs on the appropriate amount of the bond. On November 5, 2014, the Ohio
Supreme Court ordered the Appellants to post a bond of approximately $2.5
million to continue the stay of the rider. The bond was to be posted within ten
days or the stay would be lifted. The Appellants failed to post the required bond
and on November 18, 2014, Duke Energy Ohio requested the PUCO to reinstate
the MGP rider. The PUCO approved reinstatement of the rider on January 15,
2015 and Duke Energy Ohio began billings of the MGP rider. Duke Energy Ohio
cannot predict the outcome of the appeals in this matter.
Regional Transmission Organization (RTO) Realignment
Duke Energy Ohio, including Duke Energy Kentucky, transferred control of
its transmission assets from MISO to PJM, effective December 31, 2011.
On December 22, 2010, the KPSC approved Duke Energy Kentucky’s
request to effect the RTO realignment, subject to a commitment not to seek
double-recovery in a future rate case of the transmission expansion fees that
may be charged by MISO and PJM in the same period or overlapping periods.
On May 25, 2011, the PUCO approved a settlement between Duke Energy
Ohio, Ohio Energy Group, the Offi ce of the Ohio Consumers’ Counsel and the
PUCO Staff related to Duke Energy Ohio’s recovery of certain costs of the RTO
realignment via a non-bypassable rider. Duke Energy Ohio is allowed to recover
all MISO Transmission Expansion Planning (MTEP) costs, including but not
limited to Multi Value Project (MVP) costs, directly or indirectly charged to Ohio
customers. Duke Energy Ohio also agreed to vigorously defend against any
charges for MVP projects from MISO.
Upon its exit from MISO on December 31, 2011, Duke Energy Ohio
recorded a liability for its exit obligation and share of MTEP costs, excluding
MVP. This liability was recorded within Other in Current liabilities and Other
in Deferred credits and other liabilities on Duke Energy Ohio’s Consolidated
Balance Sheets.
The following table provides a reconciliation of the beginning and ending
balance of Duke Energy Ohio’s recorded obligations related to its withdrawal
from MISO. As of December 31, 2014, $74 million is recorded as a Regulatory
asset on Duke Energy Ohio’s Consolidated Balance Sheets.
(in millions)
December 31,
2013
Provision /
Adjustments
Cash
Reductions
December 31,
2014
Duke Energy Ohio $ 95 $ 3 $ (4) $ 94
MVP. MISO approved 17 MVP proposals prior to Duke Energy Ohio’s exit
from MISO on December 31, 2011. Construction of these projects is expected
to continue through 2020. Costs of these projects, including operating and
maintenance costs, property and income taxes, depreciation and an allowed
return, are allocated and billed to MISO transmission owners.
On December 29, 2011, MISO fi led a tariff with the FERC providing for
the allocation of MVP costs to a withdrawing owner based on monthly energy
usage. The FERC set for hearing (i) whether MISO’s proposed cost allocation
methodology to transmission owners who withdrew from MISO prior to January
1, 2012, is consistent with the tariff at the time of their withdrawal from MISO,
and, (ii) if not, what the amount of and methodology for calculating any MVP
cost responsibility should be. On July 16, 2013, a FERC Administrative Law
Judge (ALJ) issued an initial decision. Under this initial decision, Duke Energy
Ohio would be liable for MVP costs. Duke Energy Ohio fi led exceptions to the
initial decision, requesting the FERC overturn the ALJ’s decision. After reviewing
the initial decision, along with all exceptions and responses fi led by the parties,
the FERC will issue a fi nal decision. Duke Energy Ohio fully intends to appeal to
the federal court of appeals if the FERC affi rms the ALJ’s decision. Duke Energy
Ohio cannot predict the outcome of these proceedings.
In 2012, MISO estimated Duke Energy Ohio’s MVP obligation over the
period from 2012 to 2071 at $2.7 billion, on an undiscounted basis. The
estimated obligation is subject to great uncertainty including the ultimate cost of
the projects, the annual costs of operations and maintenance, taxes and return
over the project lives, the number of years in service for the projects and the
allocation to Duke Energy Ohio.
Any liability related to the MISO MVP matter attributable to the Disposal
Group will not be transferred to Dynegy upon closing of the disposal of the
Midwest generation business.
FERC Transmission Return on Equity and MTEP Cost Settlement
On October 14, 2011, Duke Energy Ohio and Duke Energy Kentucky
submitted with FERC proposed modifi cations to the PJM Interconnection Open
Access Transmission Tariff pertaining to recovery of the transmission revenue
requirement as PJM transmission owners. The fi ling was made in connection
with Duke Energy Ohio’s and Duke Energy Kentucky’s move from MISO to PJM
effective January 1, 2012. On April 24, 2012, FERC issued an order accepting
the proposed fi ling effective January 1, 2012, except that the order denied a
request to recover certain costs associated with the move from MISO to PJM
without prejudice to the right to submit another fi ling seeking such recovery
and including certain additional evidence, and set the rate of return on equity
of 12.38 percent for settlement and hearing. A February 2013 settlement
agreement fi led with the FERC was rejected in September 2013. On October 30,
2014, the companies and six PJM transmission customers with load in the Duke
Energy Ohio and Duke Energy Kentucky zone fi led with FERC for approval of
another settlement agreement. The principal terms of the settlement agreement
are that, effective upon the date of FERC approval, (i) the return on equity will
be reduced from 12.38 to 11.38 percent and (ii) Duke Energy Ohio and Duke
Energy Kentucky will recover 30 percent of costs arising from their obligation to
pay any portion of the costs of projects included in any MTEP that was approved
prior to the date of Duke Energy Ohio’s and Duke Energy Kentucky’s integration
into PJM. The settlement is pending FERC approval. Duke Energy Ohio and Duke
Energy Kentucky cannot predict the outcome of this matter.
Duke Energy Indiana
Edwardsport IGCC Plant
On November 20, 2007, the IURC granted Duke Energy Indiana a
Certifi cate of Public Convenience and Necessity for the construction of a
618 MW IGCC power plant at Duke Energy Indiana’s existing Edwardsport
Generating Station in Knox County, Indiana with a cost estimate of $1.985 billion