Duke Energy 2014 Annual Report Download - page 155

135
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)
and medical cost claim payments is $864 million in excess of the self-
insured retention. Receivables for insurance recoveries were $616 million at
December 31, 2014 and $649 million at December 31, 2013. These amounts
are classifi ed in Other within Investments and Other Assets and Receivables
on the Consolidated Balance Sheets. Duke Energy Carolinas is not aware of any
uncertainties regarding the legal suffi ciency of insurance claims. Duke Energy
Carolinas believes the insurance recovery asset is probable of recovery as the
insurance carrier continues to have a strong fi nancial strength rating.
Progress Energy
Synthetic Fuels Matters
Progress Energy and a number of its subsidiaries and affi liates are
defendants in lawsuits arising out of a 1999 Asset Purchase Agreement. Parties
to the Asset Purchase Agreement include U.S. Global, LLC (Global) and affi liates
of Progress Energy.
In a case fi led in the Circuit Court for Broward County, Florida, in March
2003 (the Florida Global Case), Global requested an unspecifi ed amount of
compensatory damages, as well as declaratory relief. In November 2009,
the court ruled in favor of Global. In December 2009, Progress Energy made
a $154 million payment which represented payment of the total judgment,
including prejudgment interest, and a required premium equivalent to two years
of interest, to the Broward County Clerk of Court bond account. Progress Energy
continued to accrue interest related to this judgment.
On October 3, 2012, the Florida Fourth District Court of Appeals reversed
the lower court ruling. The court held that Global was entitled to approximately
$90 million of the amount paid into the registry of the court. Progress Energy
was entitled to a refund of the remainder of the funds. Progress Energy received
cash and recorded a $63 million pretax gain for the refund in December 2012.
The gain was recorded in Income from Discontinued Operations, net of tax in the
Consolidated Statements of Operations and Comprehensive Income.
On May 9, 2013, Global fi led a Seventh Amended Complaint asserting a
single count for breach of the Asset Purchase Agreement and seeking specifi c
performance. The parties reached a settlement in this matter in May 2014,
and the case has been dismissed. The amount of the settlement did not have
a material effect on the results of operations, cash fl ows or fi nancial position
of Progress Energy. As a result of the settlement of the Florida Global Case, a
second suit fi led in the Superior Court for Wake County, North Carolina, Progress
Synfuel Holdings, Inc. et al. v. U.S. Global, LLC, has been dismissed.
Duke Energy Progress and Duke Energy Florida
Spent Nuclear Fuel Matters
On December 12, 2011, Duke Energy Progress and Duke Energy Florida
sued the United States in the U.S. Court of Federal Claims. The lawsuit claimed
the Department of Energy breached a contract in failing to accept spent nuclear
fuel under the Nuclear Waste Policy Act of 1982 and asserted damages for the
cost of on-site storage. Duke Energy Progress and Duke Energy Florida asserted
damages for the period January 1, 2006 through December 31, 2010. Claims
for all periods prior to 2006 have been resolved. On March 24, 2014, the U.S.
Court of Federal Claims issued a judgment in favor of Duke Energy Progress
and Duke Energy Florida on this matter, awarding amounts of $83 million and
$21 million, respectively. The majority of the awards were recorded as a reduction
to capital costs associated with construction of on-site storage facilities. Duke
Energy Progress and Duke Energy Florida received payment of the award in
September 2014. On October 16, 2014, Duke Energy Progress and Duke Energy
Florida fi led a new action for costs incurred from 2011 through 2013.
Duke Energy Florida
Westinghouse Contract Litigation
On March 28, 2014 Duke Energy Florida fi led a lawsuit against
Westinghouse in the U.S. District Court for the Western District of North Carolina.
The lawsuit seeks recovery of $54 million in milestone payments in excess of
work performed under the terminated EPC for Levy as well as a determination
by the court of the amounts due to Westinghouse as a result of the termination
of the EPC.
On March 31, 2014, Westinghouse fi led a lawsuit against Duke Energy
Florida in U.S. District Court for the Western District of Pennsylvania. The
Pennsylvania lawsuit alleged damages under the EPC in excess of $510 million
for engineering and design work, costs to end supplier contracts and an alleged
termination fee.
On June 9, 2014, the judge in the North Carolina case ruled that the
litigation will proceed in the Western District of North Carolina. In November
2014, Westinghouse fi led a Motion for Partial Judgment on the pleadings
which was denied by the Magistrate Judge on February 20, 2015, subject to
court approval. Trial is set for February 2016. It is not possible to predict the
outcome of the litigation and whether Duke Energy Florida will incur any liability
for terminating the EPC or to estimate the damages, if any, it might incur in
connection with these matters. Ultimate resolution of these matters could have
a material effect on the results of operations, fi nancial position or cash fl ows of
Duke Energy Florida. However, appropriate regulatory recovery will be pursued
for the retail portion of any costs incurred in connection with such resolution.
Duke Energy Ohio
Antitrust Lawsuit
In January 2008, four plaintiffs, including individual, industrial and
nonprofi t customers, fi led a lawsuit against Duke Energy Ohio in federal court
in the Southern District of Ohio. Plaintiffs alleged Duke Energy Ohio conspired
to provide inequitable and unfair price advantages for certain large business
consumers by entering into non-public option agreements in exchange for
their withdrawal of challenges to Duke Energy Ohio’s Rate Stabilization Plan
implemented in early 2005. In March 2014, a federal judge certifi ed this matter
as a class action. The parties have agreed to mediation on March 31, 2015.
Trial has been set to begin on July 27, 2015. It is not possible to predict whether
Duke Energy Ohio will incur any liability or to estimate the damages, if any,
that may be incurred in connection with this matter. Ultimate resolution of this
matter could have a material effect on the results of operations, cash fl ows or
fi nancial position of Duke Energy Ohio.
Any liability related to the lawsuit attributable to the Disposal Group
will not be transferred to Dynegy upon closing of the disposal of the Midwest
generation business.
Asbestos-related Injuries and Damages Claims
Duke Energy Ohio has been named as a defendant or co-defendant in
lawsuits related to asbestos exposure at its electric generating stations. The