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Commitments and Contingencies | 12 Months Ended
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Dec. 31, 2018
Commitments and Contingencies Disclosure [Abstract] |
Commitments and Contingencies | COMMITMENTS AND CONTINGENCIES INSURANCE General Insurance The Duke Energy Registrants have insurance and reinsurance coverage either directly or through indemnification from Duke Energy’s captive insurance company, Bison, and its affiliates, consistent with companies engaged in similar commercial operations with similar type properties. The Duke Energy Registrants’ coverage includes (i) commercial general liability coverage for liabilities arising to third parties for bodily injury and property damage; (ii) workers’ compensation; (iii) automobile liability coverage; and (iv) property coverage for all real and personal property damage. Real and personal property damage coverage excludes electric transmission and distribution lines, but includes damages arising from boiler and machinery breakdowns, earthquakes, flood damage and extra expense, but not outage or replacement power coverage. All coverage is subject to certain deductibles or retentions, sublimits, exclusions, terms and conditions common for companies with similar types of operations. The Duke Energy Registrants self-insure their electric transmission and distribution lines against loss due to storm damage and other natural disasters. As discussed further in Note 4, Duke Energy Florida maintains a storm damage reserve and has a regulatory mechanism to recover the cost of named storms on an expedited basis. The cost of the Duke Energy Registrants’ coverage can fluctuate from year to year reflecting claims history and conditions of the insurance and reinsurance markets. In the event of a loss, terms and amounts of insurance and reinsurance available might not be adequate to cover claims and other expenses incurred. Uninsured losses and other expenses, to the extent not recovered by other sources, could have a material effect on the Duke Energy Registrants’ results of operations, cash flows or financial position. Each company is responsible to the extent losses may be excluded or exceed limits of the coverage available. Nuclear Insurance Duke Energy Carolinas owns and operates McGuire and Oconee and operates and has a partial ownership interest in Catawba. McGuire and Catawba each have two reactors. Oconee has three reactors. The other joint owners of Catawba reimburse Duke Energy Carolinas for certain expenses associated with nuclear insurance per the Catawba joint owner agreements. Duke Energy Progress owns and operates Robinson, Brunswick and Harris. Robinson and Harris each have one reactor. Brunswick has two reactors. Duke Energy Florida owns Crystal River Unit 3, which permanently ceased operation in 2013 and reached a SAFSTOR condition in January 2018 after the successful transfer of all used nuclear fuel assemblies to an on-site dry cask storage facility. In the event of a loss, terms and amounts of insurance available might not be adequate to cover property damage and other expenses incurred. Uninsured losses and other expenses, to the extent not recovered by other sources, could have a material effect on Duke Energy Carolinas’, Duke Energy Progress’ and Duke Energy Florida’s results of operations, cash flows or financial position. Each company is responsible to the extent losses may be excluded or exceed limits of the coverage available. Nuclear Liability Coverage The Price-Anderson Act requires owners of nuclear reactors to provide for public nuclear liability protection per nuclear incident up to a maximum total financial protection liability. The maximum total financial protection liability, which is approximately $14.1 billion, is subject to change every five years for inflation and for the number of licensed reactors. Total nuclear liability coverage consists of a combination of private primary nuclear liability insurance coverage and a mandatory industry risk-sharing program to provide for excess nuclear liability coverage above the maximum reasonably available private primary coverage. The U.S. Congress could impose revenue-raising measures on the nuclear industry to pay claims. Primary Liability Insurance Duke Energy Carolinas and Duke Energy Progress have purchased the maximum reasonably available private primary nuclear liability insurance as required by law, which is $450 million per station. Duke Energy Florida has purchased $100 million primary nuclear liability insurance in compliance with the law. Excess Liability Program This program provides $13.6 billion of coverage per incident through the Price-Anderson Act’s mandatory industrywide excess secondary financial protection program of risk pooling. This amount is the product of potential cumulative retrospective premium assessments of $138 million times the current 99 licensed commercial nuclear reactors in the U.S. Under this program, licensees could be assessed retrospective premiums to compensate for public nuclear liability damages in the event of a nuclear incident at any licensed facility in the U.S. Retrospective premiums may be assessed at a rate not to exceed $20.5 million per year per licensed reactor for each incident. The assessment may be subject to state premium taxes. Nuclear Property and Accidental Outage Coverage Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida are members of NEIL, an industry mutual insurance company, which provides property damage, nuclear accident decontamination and premature decommissioning insurance for each station for losses resulting from damage to its nuclear plants, either due to accidents or acts of terrorism. Additionally, NEIL provides accidental outage coverage for each station for losses in the event of a major accidental outage at an insured nuclear station. Pursuant to regulations of the NRC, each company’s property damage insurance policies provide that all proceeds from such insurance be applied, first, to place the plant in a safe and stable condition after a qualifying accident and second, to decontaminate the plant before any proceeds can be used for decommissioning, plant repair or restoration. Losses resulting from acts of terrorism are covered as common occurrences, such that if terrorist acts occur against one or more commercial nuclear power plants insured by NEIL within a 12-month period, they would be treated as one event and the owners of the plants where the act occurred would share one full limit of liability. The full limit of liability is currently $3.2 billion. NEIL sublimits the total aggregate for all of their policies for non-nuclear terrorist events to approximately $1.8 billion. Each nuclear facility has accident property damage, nuclear accident decontamination and premature decommissioning liability insurance from NEIL with limits of $1.5 billion, except for Crystal River Unit 3. Crystal River Unit 3’s limit is $50 million and is on an actual cash value basis. All nuclear facilities except for Catawba and Crystal River Unit 3 also share an additional $1.25 billion nuclear accident insurance limit above their dedicated underlying limit. This shared additional excess limit is not subject to reinstatement in the event of a loss. Catawba has a dedicated $1.25 billion of additional nuclear accident insurance limit above its dedicated underlying limit. Catawba and Oconee also have an additional $750 million of non-nuclear accident property damage limit. All coverages are subject to sublimits and significant deductibles. NEIL’s Accidental Outage policy provides some coverage, such as business interruption, for losses in the event of a major accident property damage outage of a nuclear unit. Coverage is provided on a weekly limit basis after a significant waiting period deductible and at 100 percent of the available weekly limits for 52 weeks and 80 percent of the available weekly limits for the next 110 weeks. Coverage is provided until these available weekly periods are met where the accidental outage policy limit will not exceed $490 million for McGuire, Catawba and Harris, $476 million for Brunswick, $462 million for Oconee and $392 million for Robinson. NEIL sublimits the accidental outage recovery to the first 104 weeks of coverage not to exceed $328 million from non-nuclear accidental property damage. Coverage amounts decrease in the event more than one unit at a station is out of service due to a common accident. All coverages are subject to sublimits and significant deductibles. Potential Retroactive Premium Assessments In the event of NEIL losses, NEIL’s board of directors may assess member companies' retroactive premiums of amounts up to 10 times their annual premiums for up to six years after a loss. NEIL has never exercised this assessment. The maximum aggregate annual retrospective premium obligations for Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida are $159 million, $97 million and $1 million, respectively. Duke Energy Carolinas' maximum assessment amount includes 100 percent of potential obligations to NEIL for jointly owned reactors. Duke Energy Carolinas would seek reimbursement from the joint owners for their portion of these assessment amounts. ENVIRONMENTAL The Duke Energy Registrants are subject to federal, state and local regulations regarding air and water quality, hazardous and solid waste disposal and other environmental matters. These regulations can be changed from time to time, imposing new obligations on the Duke Energy Registrants. The following environmental matters impact all of the Duke Energy Registrants. Remediation Activities In addition to the ARO recorded as a result of various environmental regulations, discussed in Note 9, the Duke Energy Registrants are responsible for environmental remediation at various sites. These include certain properties that are part of ongoing operations and sites formerly owned or used by Duke Energy entities. These sites are in various stages of investigation, remediation and monitoring. Managed in conjunction with relevant federal, state and local agencies, remediation activities vary based upon site conditions and location, remediation requirements, complexity and sharing of responsibility. If remediation activities involve joint and several liability provisions, strict liability, or cost recovery or contribution actions, the Duke Energy Registrants could potentially be held responsible for environmental impacts caused by other potentially responsible parties and may also benefit from insurance policies or contractual indemnities that cover some or all cleanup costs. Liabilities are recorded when losses become probable and are reasonably estimable. The total costs that may be incurred cannot be estimated because the extent of environmental impact, allocation among potentially responsible parties, remediation alternatives and/or regulatory decisions have not yet been determined at all sites. Additional costs associated with remediation activities are likely to be incurred in the future and could be significant. Costs are typically expensed as Operation, maintenance and other in the Consolidated Statements of Operations unless regulatory recovery of the costs is deemed probable. The following tables contain information regarding reserves for probable and estimable costs related to the various environmental sites. These reserves are recorded in Accounts payable within Current Liabilities and Other within Other Noncurrent Liabilities on the Consolidated Balance Sheets.
|  |  | Duke |  |  |  |  | Duke |  |  | Duke |  |  | Duke |  |  | Duke |
| Duke |  |  | Energy |  |  | Progress |  |  | Energy |  |  | Energy |  |  | Energy |  |  | Energy |
(in millions) | Energy |  |  | Carolinas |  |  | Energy |  |  | Progress |  |  | Florida |  |  | Ohio |  |  | Indiana |
Balance at December 31, 2015 | $ | 94 |  |  | $ | 10 |  |  | $ | 17 |  |  | $ | 3 |  |  | $ | 14 |  |  | $ | 54 |  |  | $ | 12 |
Provisions/adjustments | 19 |  |  | 4 |  |  | 7 |  |  | 2 |  |  | 4 |  |  | 7 |  |  | 1 |
Cash reductions | (15 | ) |  | (4 | ) |  | (6 | ) |  | (2 | ) |  | (4 | ) |  | (2 | ) |  | (3 | )
Balance at December 31, 2016 | 98 |  |  | 10 |  |  | 18 |  |  | 3 |  |  | 14 |  |  | 59 |  |  | 10 |
Provisions/adjustments | 8 |  |  | 3 |  |  | 3 |  |  | 2 |  |  | 2 |  |  | 3 |  |  | (4 | )
Cash reductions | (25 | ) |  | (3 | ) |  | (6 | ) |  | (2 | ) |  | (4 | ) |  | (15 | ) |  | (1 | )
Balance at December 31, 2017 | 81 |  |  | 10 |  |  | 15 |  |  | 3 |  |  | 12 |  |  | 47 |  |  | 5 |
Provisions/adjustments | 26 |  |  | 3 |  |  | 2 |  |  | 3 |  |  | (2 | ) |  | 21 |  |  | 1 |
Cash reductions | (30 | ) |  | (2 | ) |  | (6 | ) |  | (2 | ) |  | (4 | ) |  | (20 | ) |  | (1 | )
Balance at December 31, 2018 | $ | 77 |  |  | $ | 11 |  |  | $ | 11 |  |  | $ | 4 |  |  | $ | 6 |  |  | $ | 48 |  |  | $ | 5 |
As of December 31, 2016, and October 31, 2016 and 2015, Piedmont's environmental reserve was $1 million. As of December 31, 2018, and 2017, the reserve was $2 million. Additional losses in excess of recorded reserves that could be incurred for the stages of investigation, remediation and monitoring for environmental sites that have been evaluated at this time are not material except as presented in the table below.
(in millions) |
Duke Energy | $ | 46 |
Duke Energy Carolinas | 17 |
Duke Energy Ohio | 19 |
Piedmont | 2 |
North Carolina and South Carolina Ash Basins In February 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. In July 2014, Duke Energy completed remediation work identified by the EPA and continues to cooperate with the EPA's civil enforcement process. The NCDEQ has historically assessed Duke Energy Carolinas and Duke Energy Progress with NOVs for violations that were most often resolved through satisfactory corrective actions and minor, if any, fines or penalties. Subsequent to the Dan River ash release, Duke Energy Carolinas and Duke Energy Progress have been served with a higher level of NOVs, including assessed penalties for violations at Sutton and Dan River Steam Station. Duke Energy Carolinas and Duke Energy Progress continue to resolve violations through corrective actions, and associated penalties related to existing unresolved NOVs are not expected to be material. LITIGATION Duke Energy Carolinas and Duke Energy Progress Coal Ash Insurance Coverage Litigation In March 2017, Duke Energy Carolinas and Duke Energy Progress filed a civil action in the North Carolina Superior Court against various insurance providers. The lawsuit seeks payment for coal ash-related liabilities covered by third-party liability insurance policies. The insurance policies were issued between 1971 and 1986 and provide third-party liability insurance for property damage. The civil action seeks damages for breach of contract and indemnification for costs arising from the Coal Ash Act and the EPA CCR rule at 15 coal-fired plants in North Carolina and South Carolina. On January 23, 2019, the court granted the parties’ joint motion for a four month stay of the proceedings, until June 3, 2019, to allow the parties to discuss potential resolution. If the case is not fully resolved at that time, litigation will resume. The trial remains scheduled for August 2020. Duke Energy Carolinas and Duke Energy Progress cannot predict the outcome of this matter. NCDEQ State Enforcement Actions In the first quarter of 2013, SELC sent notices of intent to sue Duke Energy Carolinas and Duke Energy Progress related to alleged CWA violations from coal ash basins at two coal-fired power plants in North Carolina. The NCDEQ filed enforcement actions against Duke Energy Carolinas and Duke Energy Progress alleging violations of water discharge permits and North Carolina groundwater standards. The cases have been consolidated and are being heard before a single judge in the North Carolina Superior Court. On August 16, 2013, the NCDEQ filed an enforcement action against Duke Energy Carolinas and Duke Energy Progress related to the remaining coal-fired power plants in North Carolina, alleging violations of the CWA and violations of the North Carolina groundwater standards. Both of these cases have been assigned to the judge handling the enforcement actions discussed above. SELC is representing several environmental groups who have been permitted to intervene in these cases. The court issued orders in 2016 granting Motions for Partial Summary Judgment for seven of the 14 North Carolina plants with coal ash basins named in the enforcement actions. On February 13, 2017, the court issued an order denying motions for partial summary judgment brought by both the environmental groups and Duke Energy Carolinas and Duke Energy Progress for the remaining seven plants. On March 15, 2017, Duke Energy Carolinas and Duke Energy Progress filed a Notice of Appeal with the North Carolina Court of Appeals to challenge the trial court’s order. The parties were unable to reach an agreement at mediation in April 2017 and submitted briefs to the trial court on remaining issues to be tried. On August 1, 2018, the Court of Appeals dismissed the appeal and the matter is proceeding before the trial court. No trial date has been scheduled. Duke Energy Carolinas and Duke Energy Progress cannot predict the outcome of this matter. Federal Citizens Suits On June 13, 2016, RRBA filed a federal citizen suit in the Middle District of North Carolina alleging unpermitted discharges to surface water and groundwater violations at the Mayo Plant. On August 19, 2016, Duke Energy Progress filed a Motion to Dismiss. On April 26, 2017, the court entered an order dismissing four of the claims in the federal citizen suit. Two claims relating to alleged violations of NPDES permit provisions survived the motion to dismiss, and Duke Energy Progress filed its response on May 10, 2017. Duke Energy Progress and RRBA each filed motions for summary judgment on March 23, 2018. The court has not yet ruled on these motions. On May 16, 2017, RRBA filed a federal citizen suit in the U.S. District Court for the Middle District of North Carolina, which asserts two claims relating to alleged violations of NPDES permit provisions at the Roxboro Plant and one claim relating to the use of nearby water bodies. Duke Energy Progress and RRBA each filed motions for summary judgment on April 17, 2018, and the court has not yet ruled on these motions. On May 8, 2018, on motion from Duke Energy Progress, the court ordered trial in both of the above matters to be consolidated. Trial is currently scheduled to begin July 15, 2019. On June 20, 2017, RRBA filed a federal citizen suit in the U.S. District Court for the Middle District of North Carolina challenging the closure plans at the Mayo Plant under the EPA CCR Rule. Duke Energy Progress filed a motion to dismiss, which was granted by the court on March 30, 2018. RRBA had until April 30, 2018, to file an appeal to the Fourth Circuit but did not do so. On August 2, 2017, RRBA filed a federal citizen suit in the U.S. District Court for the Middle District of North Carolina challenging the closure plans at the Roxboro Plant under the EPA CCR Rule. Duke Energy Progress filed a motion to dismiss on October 2, 2017, which was granted by the court on May 29, 2018. RRBA had until June 28, 2018, to file an appeal to the Fourth Circuit but did not do so. On December 5, 2017, various parties filed a federal citizen suit in the U.S. District Court for the Middle District of North Carolina for alleged violations at Duke Energy Carolinas' Belews Creek under the CWA. Duke Energy Carolinas' answer to the complaint was filed on August 27, 2018. On October 10, 2018, Duke Energy Carolinas filed Motions to Dismiss for lack of standing, Motion for Judgment on the Pleadings and Motion to Stay Discovery. On January 9, 2019, the court entered an order denying Duke Energy Carolinas' motion to stay discovery. There has been no ruling on the other pending motions. Duke Energy Carolinas and Duke Energy Progress cannot predict the outcome of these matters. Groundwater Contamination Claims Beginning in May 2015, a number of residents living in the vicinity of the North Carolina facilities with ash basins received letters from the NCDEQ advising them not to drink water from the private wells on their land tested by the NCDEQ as the samples were found to have certain substances at levels higher than the criteria set by the DHHS. Results of CSAs testing performed by Duke Energy under the Coal Ash Act have been consistent with historical data provided to state regulators over many years. The DHHS and NCDEQ sent follow-up letters on October 15, 2015, to residents near coal ash basins who have had their wells tested, stating that private well samplings at a considerable distance from coal ash basins, as well as some municipal water supplies, contain similar levels of vanadium and hexavalent chromium, which led investigators to believe these constituents are naturally occurring. In March 2016, DHHS rescinded the advisories. Duke Energy Carolinas and Duke Energy Progress have received formal demand letters from residents near Duke Energy Carolinas' and Duke Energy Progress' coal ash basins. The residents claim damages for nuisance and diminution in property value, among other things. The parties held three days of mediation discussions, which ended at impasse. On January 6, 2017, Duke Energy Carolinas and Duke Energy Progress received the plaintiffs' notice of their intent to file suits should the matter not settle. The NCDEQ preliminarily approved Duke Energy’s permanent water solution plans on January 13, 2017, and as a result shortly thereafter, Duke Energy issued a press release, providing additional details regarding the homeowner compensation package. This package consists of three components: (i) a $5,000 goodwill payment to each eligible well owner to support the transition to a new water supply, (ii) where a public water supply is available and selected by the eligible well owner, a stipend to cover 25 years of water bills and (iii) the Property Value Protection Plan. The Property Value Protection Plan is a program offered by Duke Energy designed to guarantee eligible plant neighbors the fair market value of their residential property should they decide to sell their property during the time that the plan is offered. Payments are being made and the remaining reserves are not material. On August 23, 2017, a class-action suit was filed in Wake County Superior Court, North Carolina, against Duke Energy Carolinas and Duke Energy Progress on behalf of certain property owners living near coal ash impoundments at Allen, Asheville, Belews Creek, Buck, Cliffside, Lee, Marshall, Mayo and Roxboro. The class is defined as those who are well-eligible under the Coal Ash Act or those to whom Duke Energy has promised a permanent replacement water supply and seeks declaratory and injunctive relief, along with compensatory damages. Plaintiffs allege that Duke Energy’s improper maintenance of coal ash impoundments caused harm, particularly through groundwater contamination. Despite NCDEQ’s preliminary approval, Plaintiffs contend that Duke Energy’s proposed permanent water solutions plan fails to comply with the Coal Ash Act. On September 28, 2017, Duke Energy Carolinas and Duke Energy Progress filed a Motion to Dismiss and Motion to Strike the class designation. The parties entered into a Settlement Agreement on January 24, 2018, which resulted in the dismissal of the underlying class action on January 25, 2018. On September 14, 2017, a complaint was filed against Duke Energy Progress in New Hanover County Superior Court by a group of homeowners residing approximately 1 mile from Duke Energy Progress' Sutton Steam Plant. The homeowners allege that coal ash constituents have been migrating from ash impoundments at Sutton into their groundwater for decades and that in 2015, Duke Energy Progress discovered these releases of coal ash, but failed to notify any officials or neighbors and failed to take remedial action. The homeowners claim unspecified physical and mental injuries as a result of consuming their well water and seek actual damages for personal injury, medical monitoring and punitive damages. On March 6, 2018, Plaintiffs' counsel voluntarily dismissed the action without prejudice. Duke Energy Carolinas Asbestos-related Injuries and Damages Claims Duke Energy Carolinas has experienced numerous claims for indemnification and medical cost reimbursement related to asbestos exposure. These claims relate to damages for bodily injuries alleged to have arisen from exposure to or use of asbestos in connection with construction and maintenance activities conducted on its electric generation plants prior to 1985. As of December 31, 2018, there were 164 asserted claims for non-malignant cases with the cumulative relief sought of up to $42 million and 87 asserted claims for malignant cases with the cumulative relief sought of up to $21 million. Based on Duke Energy Carolinas’ experience, it is expected that the ultimate resolution of most of these claims likely will be less than the amount claimed. Duke Energy Carolinas has recognized asbestos-related reserves of $630 million and $489 million at December 31, 2018, and 2017, respectively. These reserves are classified in Other within Other Noncurrent Liabilities and Other within Current Liabilities on the Consolidated Balance Sheets. These reserves are based upon Duke Energy Carolinas' best estimate for current and future asbestos claims through 2038 and are recorded on an undiscounted basis. In light of the uncertainties inherent in a longer-term forecast, management does not believe they can reasonably estimate the indemnity and medical costs that might be incurred after 2038 related to such potential claims. It is possible Duke Energy Carolinas may incur asbestos liabilities in excess of the recorded reserves. Duke Energy Carolinas has third-party insurance to cover certain losses related to asbestos-related injuries and damages above an aggregate self-insured retention. Duke Energy Carolinas’ cumulative payments began to exceed the self-insurance retention in 2008. Future payments up to the policy limit will be reimbursed by the third-party insurance carrier. The insurance policy limit for potential future insurance recoveries indemnification and medical cost claim payments is $764 million in excess of the self-insured retention. Receivables for insurance recoveries were $739 million and $585 million at December 31, 2018, and 2017, respectively. These amounts are classified in Other within Other Noncurrent Assets and Receivables within Current Assets on the Consolidated Balance Sheets. Duke Energy Carolinas is not aware of any uncertainties regarding the legal sufficiency of insurance claims. Duke Energy Carolinas believes the insurance recovery asset is probable of recovery as the insurance carrier continues to have a strong financial strength rating. Duke Energy Progress and Duke Energy Florida Spent Nuclear Fuel Matters On October 16, 2014, Duke Energy Progress and Duke Energy Florida sued the U.S. 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, 2011, through December 31, 2013, of $48 million and $25 million, respectively. On November 17, 2017, the Court awarded Duke Energy Progress and Duke Energy Florida $48 million and $21 million, respectively, subject to appeal. No appeals were filed and Duke Energy Progress and Duke Energy Florida recognized the recoveries in the first quarter of 2018. Claims for all periods through 2013 have been resolved. On June 22, 2018, Duke Energy Progress and Duke Energy Florida filed a complaint for damages incurred for 2014 through first quarter 2018. Duke Energy Progress Gypsum Supply Agreements Matter On June 30, 2017, CertainTeed filed a declaratory judgment action against Duke Energy Progress in the North Carolina Business Court relating to a gypsum supply agreement. In its complaint, CertainTeed sought an order from the court declaring that the minimum amount of gypsum Duke Energy Progress must provide to CertainTeed under the supply agreement was 50,000 tons per month through 2029. Trial in this matter was completed on July 16, 2018. On August 29, 2018, the court issued an order and opinion finding that Duke Energy Progress is required to supply 50,000 tons of gypsum/month, but that CertainTeed’s sole remedy for Duke Energy Progress’ long-term discontinuance under the agreement is liquidated damages. On November 14, 2018, the parties reached a settlement agreement. The amount owed under the liquidated damages provision is approximately $90 million on an undiscounted basis over 10 years. Approximately $3 million was paid in 2018. As of December 31, 2018, $9 million is recorded in Accounts payable within Current Liabilities and $63 million in Other within Other Noncurrent Liabilities on the Consolidated Balance Sheets. The liability is recorded on a discounted basis at a rate of approximately 4 percent. These costs are probable of recovery from customers and are recorded in Regulatory Assets within Other Noncurrent Assets on the Consolidated Balance Sheets. Duke Energy Florida Fluor Contract Litigation On January 29, 2019, Fluor filed a breach of contract lawsuit in the U.S. District Court for the Middle District of Florida against Duke Energy Florida related to an EPC agreement for the combined-cycle natural gas plant in Citrus County, Florida. Fluor filed an amended complaint on February, 13, 2019. Fluor’s multicount complaint seeks civil, statutory and contractual remedies related to Duke Energy Florida’s $67 million draw in early 2019, on Fluor’s letter of credit and offset of invoiced amounts. Duke Energy Florida is attempting to recover from Fluor $110 million in additional costs incurred by Duke Energy Florida. Duke Energy Florida cannot predict the outcome of this matter. See Note 4 for additional information. Class-Action Lawsuit On February 22, 2016, a lawsuit was filed in the U.S. District Court for the Southern District of Florida on behalf of a class of Duke Energy Florida and FP&L’s customers in Florida. The suit alleges the State of Florida’s NCRS are unconstitutional and pre-empted by federal law. Plaintiffs claim they are entitled to repayment of all money paid by customers of Duke Energy Florida and FP&L as a result of the NCRS, as well as an injunction against any future charges under those statutes. The constitutionality of the NCRS has been challenged unsuccessfully in a number of prior cases on alternative grounds. Duke Energy Florida and FP&L filed motions to dismiss the complaint on May 5, 2016. On September 21, 2016, the Court granted the motions to dismiss with prejudice. Plaintiffs filed a motion for reconsideration, which was denied. On January 4, 2017, plaintiffs filed a notice of appeal to the Eleventh Circuit U.S. Court of Appeals (Eleventh Circuit). On July 11, 2018, the Eleventh Circuit affirmed the U.S. District Court's dismissal of the lawsuit. The deadline to file a petition for cert was October 9, 2018, and no petition was filed; therefore, the dismissal of the lawsuit is final. 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 an EPC for Levy as well as a determination by the court of the amounts due to Westinghouse as a result of the termination of an EPC contract. Duke Energy Florida recognized an exit obligation as a result of the termination of the EPC. On March 31, 2014, Westinghouse filed a separate lawsuit against Duke Energy Florida in U.S. District Court for the Western District of Pennsylvania alleging damages under the same EPC contract 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. On July 11, 2016, Duke Energy Florida and Westinghouse filed separate Motions for Summary Judgment. On September 29, 2016, the court issued its ruling, granting Westinghouse a $30 million termination fee claim and dismissing Duke Energy Florida's $54 million refund claim. Westinghouse's claim for termination costs continued to trial. Following a trial on the matter, the court issued an order in December 2016 denying Westinghouse’s claim for termination costs and reaffirming its earlier ruling in favor of Westinghouse on the $30 million termination fee. Judgment was entered against Duke Energy Florida in the amount of approximately $34 million, which includes prejudgment interest. Westinghouse appealed the trial court's order to the Fourth Circuit and Duke Energy Florida cross-appealed. On March 29, 2017, Westinghouse filed Chapter 11 bankruptcy in the Southern District of New York, which automatically stayed the appeal. On May 23, 2017, the bankruptcy court entered an order lifting the stay with respect to the appeal. Westinghouse and Duke Energy Florida executed a settlement agreement resolving this matter on April 5, 2018. The bankruptcy court approved the settlement and Duke Energy Florida paid approximately $34 million to Westinghouse in July 2018 pursuant to this agreement. At the request of the parties, the Fourth Circuit has dismissed the appeal. MGP Cost Recovery Action On December 30, 2011, Duke Energy Florida filed a lawsuit against FirstEnergy to recover investigation and remediation costs incurred by Duke Energy Florida in connection with the restoration of two former MGP sites in Florida. Duke Energy Florida alleged that FirstEnergy, as the successor to Associated Gas & Electric Co., owes past and future contribution and response costs of up to $43 million for the investigation and remediation of MGP sites. On December 6, 2016, the trial court entered judgment against Duke Energy Florida in the case. In January 2017, Duke Energy Florida appealed the decision to the U.S. Court of Appeals for the Sixth Circuit, which affirmed the trial court's ruling on April 10, 2018. The dismissal of the lawsuit is therefore final. 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. The table below presents recorded reserves based on management’s best estimate of probable loss for legal matters, excluding asbestos-related reserves, the CertainTeed liquidated damages obligation and the exit obligation in 2017 related to the termination of an EPC contract. Reserves are classified on the Consolidated Balance Sheets in Other within Other Noncurrent Liabilities and Other within Current Liabilities. The reasonably possible range of loss in excess of recorded reserves is not material, other than as described above.
| December 31,
(in millions) | 2018 |  |  | 2017 |
Reserves for Legal Matters |  |  |
Duke Energy | $ | 65 |  |  | $ | 88 |
Duke Energy Carolinas | 9 |  |  | 30 |
Progress Energy | 54 |  |  | 55 |
Duke Energy Progress | 12 |  |  | 13 |
Duke Energy Florida | 24 |  |  | 24 |
Piedmont | 1 |  |  | 2 |
OTHER COMMITMENTS AND CONTINGENCIES General As part of their normal business, the Duke Energy Registrants are party to various financial guarantees, performance guarantees and other contractual commitments to extend guarantees of credit and other assistance to various subsidiaries, investees and other third parties. These guarantees involve elements of performance and credit risk, which are not fully recognized on the Consolidated Balance Sheets and have unlimited maximum potential payments. However, the Duke Energy Registrants do not believe these guarantees will have a material effect on their results of operations, cash flows or financial position. Purchase Obligations Purchased Power Duke Energy Progress, Duke Energy Florida and Duke Energy Ohio have ongoing purchased power contracts, including renewable energy contracts, with other utilities, wholesale marketers, co-generators and qualified facilities. These purchased power contracts generally provide for capacity and energy payments. In addition, Duke Energy Progress and Duke Energy Florida have various contracts to secure transmission rights. The following table presents executory purchased power contracts with terms exceeding one year, excluding contracts classified as leases.
|  |  | Minimum Purchase Amount at December 31, 2018
| Contract |  |  |  |  |  |  |  |  |  |  |  |  |  |
(in millions) | Expiration |  | 2019 |  |  | 2020 |  |  | 2021 |  |  | 2022 |  |  | 2023 |  |  | Thereafter |  |  | Total |
Duke Energy Progress(a) | 2022-2031 |  | $ | 51 |  |  | $ | 52 |  |  | $ | 53 |  |  | $ | 30 |  |  | $ | 25 |  |  | $ | 215 |  |  | $ | 426 |
Duke Energy Florida(b) | 2021-2025 |  | 363 |  |  | 380 |  |  | 365 |  |  | 363 |  |  | 382 |  |  | 361 |  |  | 2,214 |
Duke Energy Ohio(c)(d) | 2020-2022 |  | 146 |  |  | 117 |  |  | 53 |  |  | 11 |  |  | — |  |  | — |  |  | 327 |
(a) | Contracts represent 100 percent of net plant output.
(b) | Contracts represent between 81 percent and 100 percent of net plant output.
(c) | Contracts represent between 1 percent and 8 percent of net plant output.
(d) | Excludes PPA with OVEC. See Note 17 for additional information.
Gas Supply and Capacity Contracts Duke Energy Ohio and Piedmont routinely enter into long-term natural gas supply commodity and capacity commitments and other agreements that commit future cash flows to acquire services needed in their businesses. These commitments include pipeline and storage capacity contracts and natural gas supply contracts to provide service to customers. Costs arising from the natural gas supply commodity and capacity commitments, while significant, are pass-through costs to customers and are generally fully recoverable through the fuel adjustment or PGA procedures and prudence reviews in North Carolina and South Carolina and under the Tennessee Incentive Plan in Tennessee. In the Midwest, these costs are recovered via the Gas Cost Recovery Rate in Ohio or the Gas Cost Adjustment Clause in Kentucky. The time periods for fixed payments under pipeline and storage capacity contracts are up to 16 years. The time periods for fixed payments under natural gas supply contracts are up to seven years. The time period for the natural gas supply purchase commitments is up to 12 years. Certain storage and pipeline capacity contracts require the payment of demand charges that are based on rates approved by the FERC in order to maintain rights to access the natural gas storage or pipeline capacity on a firm basis during the contract term. The demand charges that are incurred in each period are recognized in the Consolidated Statements of Operations and Comprehensive Income as part of natural gas purchases and are included in Cost of natural gas. The following table presents future unconditional purchase obligations under natural gas supply and capacity contracts as of December 31, 2018.
(in millions) | Duke Energy | Duke Energy Ohio | Piedmont
2019 | $ | 314 |  | $ | 38 |  | $ | 276 |
2020 | 287 |  | 30 |  | 257 |
2021 | 255 |  | 29 |  | 226 |
2022 | 225 |  | 11 |  | 214 |
2023 | 148 |  | 4 |  | 144 |
Thereafter | 1,067 |  | — |  | 1,067 |
Total | $ | 2,296 |  | $ | 112 |  | $ | 2,184 |
Operating and Capital Lease Commitments The Duke Energy Registrants lease office buildings, railcars, vehicles and other property and equipment with various terms and expiration dates. Additionally, Duke Energy Carolinas and Duke Energy Progress have capital leases related to firm natural gas pipeline transportation capacity. Duke Energy Progress and Duke Energy Florida have entered into certain purchased power agreements, which are classified as leases. Consolidated capitalized lease obligations are classified as Long-Term Debt or Other within Current Liabilities on the Consolidated Balance Sheets. Amortization of assets recorded under capital leases is included in Depreciation and amortization and Fuel used in electric generation and purchased power on the Consolidated Statements of Operations. The following tables present rental expense for operating leases. These amounts are included in Operation, maintenance and other and Fuel used in electric generation and purchased power on the Consolidated Statements of Operations.
| Years Ended December 31,
(in millions) | 2018 |  |  | 2017 |  |  | 2016 |
Duke Energy | $ | 268 |  |  | $ | 241 |  |  | $ | 242 |
Duke Energy Carolinas | 49 |  |  | 44 |  |  | 45 |
Progress Energy | 143 |  |  | 130 |  |  | 140 |
Duke Energy Progress | 75 |  |  | 75 |  |  | 68 |
Duke Energy Florida | 68 |  |  | 55 |  |  | 72 |
Duke Energy Ohio | 13 |  |  | 15 |  |  | 16 |
Duke Energy Indiana | 21 |  |  | 23 |  |  | 23 |
| Years Ended December 31, | Two Months Ended December 31, |  | Year Ended October 31,
(in millions) | 2018 |  | 2017 | 2016 |  | 2016
Piedmont | $ | 11 |  |  | $ | 7 |  | $ | 1 |  |  | $ | 5 |
The following table presents future minimum lease payments under operating leases, which at inception had a non-cancelable term of more than one year.
| December 31, 2018
|  |  | Duke |  |  |  |  | Duke |  |  | Duke |  |  | Duke |  |  | Duke |  |
| Duke |  |  | Energy |  |  | Progress |  |  | Energy |  |  | Energy |  |  | Energy |  |  | Energy |  |
(in millions) | Energy |  |  | Carolinas |  |  | Energy |  |  | Progress |  |  | Florida |  |  | Ohio |  |  | Indiana |  | Piedmont |
2019 | $ | 239 |  |  | $ | 33 |  |  | $ | 97 |  |  | $ | 49 |  |  | $ | 48 |  |  | $ | 2 |  |  | $ | 6 |  | $ | 5 |
2020 | 219 |  |  | 29 |  |  | 90 |  |  | 46 |  |  | 44 |  |  | 2 |  |  | 5 |  | 5 |
2021 | 186 |  |  | 19 |  |  | 79 |  |  | 37 |  |  | 42 |  |  | 2 |  |  | 4 |  | 5 |
2022 | 170 |  |  | 19 |  |  | 76 |  |  | 34 |  |  | 42 |  |  | 2 |  |  | 4 |  | 5 |
2023 | 160 |  |  | 17 |  |  | 77 |  |  | 35 |  |  | 42 |  |  | 2 |  |  | 5 |  | 6 |
Thereafter | 1,017 |  |  | 68 |  |  | 455 |  |  | 314 |  |  | 141 |  |  | 23 |  |  | 66 |  | 11 |
Total | $ | 1,991 |  |  | $ | 185 |  |  | $ | 874 |  |  | $ | 515 |  |  | $ | 359 |  |  | $ | 33 |  |  | $ | 90 |  | $ | 37 |
The following table presents future minimum lease payments under capital leases.
| December 31, 2018
|  |  | Duke |  |  |  |  | Duke |  |  | Duke |  |  | Duke |  |  | Duke |
| Duke |  |  | Energy |  |  | Progress |  |  | Energy |  |  | Energy |  |  | Energy |  |  | Energy |
(in millions) | Energy |  |  | Carolinas |  |  | Energy |  |  | Progress |  |  | Florida |  |  | Ohio |  |  | Indiana |
2019 | $ | 170 |  |  | $ | 20 |  |  | $ | 45 |  |  | $ | 20 |  |  | $ | 25 |  |  | $ | 2 |  |  | $ | 1 |
2020 | 174 |  |  | 20 |  |  | 46 |  |  | 21 |  |  | 25 |  |  | — |  |  | 1 |
2021 | 177 |  |  | 15 |  |  | 45 |  |  | 20 |  |  | 25 |  |  | — |  |  | 1 |
2022 | 165 |  |  | 15 |  |  | 45 |  |  | 21 |  |  | 24 |  |  | — |  |  | 1 |
2023 | 165 |  |  | 15 |  |  | 45 |  |  | 21 |  |  | 24 |  |  | — |  |  | 1 |
Thereafter | 577 |  |  | 204 |  |  | 230 |  |  | 209 |  |  | 21 |  |  | — |  |  | 27 |
Minimum annual payments | 1,428 |  |  | 289 |  |  | 456 |  |  | 312 |  |  | 144 |  |  | 2 |  |  | 32 |
Less: amount representing interest | (487 | ) |  | (180 | ) |  | (205 | ) |  | (175 | ) |  | (30 | ) |  | — |  |  | (22 | )
Total | $ | 941 |  |  | $ | 109 |  |  | $ | 251 |  |  | $ | 137 |  |  | $ | 114 |  |  | $ | 2 |  |  | $ | 10 |

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