Duke Energy 2015 Annual Report Download - page 158

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PART II
DUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. •
DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, INC.
Combined Notes to Consolidated Financial Statements – (Continued)
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 filed
a new action for costs incurred from 2011 through 2013 of $48 million and $25
million, respectively.
Duke Energy Florida
Class Action Lawsuit
On February 22, 2016, Newton, et al v. Duke Energy Florida, LLC and
Florida Power & Light Company, was filed in the U.S. District Court for the
Southern District of Florida on behalf of a putative class of Duke Energy Florida
and Florida Power & Light Company’s customers in Florida. Plaintiffs allege that
Florida’s Nuclear Cost Recovery Statutes are unconstitutional and are pre-empted
by federal law. Duke Energy Florida has not yet been served with the lawsuit.
Westinghouse Contract Litigation
On March 28, 2014, Duke Energy Florida filed 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. Duke Energy Florida recognized an exit obligation as a result of the
termination of the EPC contract.
On March 31, 2014, Westinghouse filed 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 filed a Motion for Partial Judgment on the pleadings, which
was denied on March 30, 2015. The case is to be ready for trial on September
19, 2016. It is not possible to predict the outcome of the litigation, whether Duke
Energy Florida will ultimately have any liability for terminating the EPC contract 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, financial position or cash flows 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
nonprofit customers, filed 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 nonpublic 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 certified this matter
as a class action. Plaintiffs allege claims for antitrust violations under the federal
Robinson Patman Act as well as fraud and conspiracy allegations under the
federal Racketeer Influenced and Corrupt Organizations statute and the Ohio
Corrupt Practices Act.
On October 21, 2015, the parties received preliminary court approval for
a settlement agreement. A litigation settlement reserve was recorded for the full
amount of $81 million and classified in Other within Current Liabilities on Duke
Energy Ohio’s Consolidated Balance Sheets as of December 31, 2015. Duke
Energy Ohio recognized the full amount in (Loss) Income From Discontinued
Operations, net of tax in the Consolidated Statements of Operations and
Comprehensive Income for the 12 months ended December 31, 2015. A hearing
to consider objections to the settlement is scheduled for April 2016.
See Note 2 for further discussion on the Midwest Generation Exit.
W.C. Beckjord Fuel Release
On August 18, 2014, approximately 9,000 gallons of fuel oil were
inadvertently discharged into the Ohio River during a fuel oil transfer at the W.C.
Beckjord generating station. The Ohio Environmental Protection Agency (Ohio
EPA) issued a Notice of Violation related to the discharge. Duke Energy Ohio is
cooperating with the Ohio EPA, the EPA and the U.S. Attorney for the Southern
District of Ohio. No Notice of Violation has been issued by the EPA and no penalty
has been assessed. Total repair and remediation costs related to the release were
not material. Other costs related to the release, including state or federal civil or
criminal enforcement proceedings, cannot be reasonably estimated at this time.
Duke Energy Indiana
Edwardsport IGCC
On December 11, 2012, Duke Energy Indiana filed an arbitration action
against General Electric Company and Bechtel Corporation in connection with
their work at the Edwardsport IGCC facility. Duke Energy Indiana sought damages
equaling some or all of the additional costs incurred in the construction of
the project not recovered at the IURC. The arbitration hearing concluded in
December 2014. On May 6, 2015, the arbitration panel issued its final decision
unanimously dismissing all of Duke Energy Indiana’s claims. This ruling resolves
all outstanding issues in the arbitration.
Other Litigation and Legal Proceedings
The Duke Energy Registrants are involved in other legal, tax and regulatory
proceedings arising in the ordinary course of business, some of which involve
significant amounts. The Duke Energy Registrants believe the final disposition of
these proceedings will not have a material effect on their results of operations,
cash flows or financial position.