May 15, Duke Energy Ohio, Inc., and Duke Energy Kentucky, Inc. Formula Rate Annual Update Docket No. ER

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1 Gary A. Morgans Connecticut Avenue, NW Washington, DC main The Hon. Kimberly D. Bose Secretary Federal Energy Regulatory Commission 888 First Street, N.E. Washington, D.C May 15, 2015 Re: Duke Energy Ohio, Inc., and Duke Energy Kentucky, Inc. Formula Rate Annual Update Docket No. ER Dear Secretary Bose: In accordance with Section 1(b)(ii) of Duke Energy Ohio, Inc. s ( DEO ) and Duke Energy Kentucky, Inc. s ( DEK ) Formula Rate Implementation Protocols, which appear as Attachment H-22A of PJM Interconnection, L.L.C. s ( PJM ) Open Access Transmission Tariff ( OATT ), DEO and DEK (together, the Companies ) submit the enclosed Formula Rate Annual Update. 1 In accordance with the Companies Formula Rate Implementation Protocols, the Annual Update is submitted for informational purposes only, and is not a filing under Section 205 of the Federal Power Act. The Companies request that the Commission not act on or issue public notice of this 1 DEO and DEK have submitted, or will soon submit, a filing revising the FERC Form 1 source for the rate divisor for Schedule 1A (Attachment H-22A, Appendix A, line 4), to be effective June 1, The attached calculations incorporate this revision, which reduces rates to customers.

2 Honorable Kimberly D. Bose May 15, 2015 Page 2 of 2 informational filing because the Formula Rate Implementation Protocols provide specific procedures for notice, review, and challenges to the Annual Updates. Please contact the undersigned if you have any questions. Respectfully submitted, /s/ Gary A. Morgans Gary A. Morgans Steptoe & Johnson LLP 1330 Connecticut Ave, N.W. Washington, DC (202) (202) (fax) gmorgans@steptoe.com Attorney for Duke Energy Ohio, Inc., and Duke Energy Kentucky, Inc.

3 page 1 of 6 Formula Rate - Non-Levelized Utilizing FERC Form 1 Data DUKE ENERGY OHIO AND DUKE ENERGY KENTUCKY (DEOK) Line Allocated No. Amount 1 GROSS REVENUE REQUIREMENT (page 3, line 29) $ 91,179,810 REVENUE CREDITS (Note T) Total Allocator 2 Account No. 454 (page 4, line 34) $ 191,098 TP $ 186,522 3 Account No (page 4, line 35) 994,051 TP ,250 4a Revenues from Grandfathered Interzonal Transactions 0 TP b Revenues from service provided by ISO at a discount 0 TP a Legacy MTEP Credit (Appendix C, page 2, line 3, col. 12) 2,625, ,625,589 5b Firm PTP Revenue Credit Adjustment (Appendix E, line 10, col. 3) (11,710) (11,710) Corrections Related to Prior Years (Note AA) 427, ,482 6 TOTAL REVENUE CREDITS (sum lines 2-5b) $ 4,198,134 7 NET REVENUE REQUIREMENT (line 1 minus line 6) $ 86,981,677 DIVISOR 8 1 CP (Note A) 5,105, CP (Note B) 4,428, Reserved 11 Reserved 12 Reserved 13 Reserved 14 Reserved 15 Annual Cost ($/kw/yr) - 1 CP (line 7 / line 8) $ Annual Cost ($/kw/yr) - 12 CP (line 7 / line 9) $ Network Rate ($/kw/mo) (line 15 / 12) $ a Point-To-Point Rate ($/kw/mo) (line 16 / 12) $1.637 Peak Rate Off-Peak Rate 18 Point-To-Point Rate ($/kw/wk) (line 16 / 52; line 16 / 52) $ Point-To-Point Rate ($/kw/day) (line 16 / 260; line 16 / 365) $0.076 Capped at weekly rate $ Point-To-Point Rate ($/MWh) (line 16 / 4,160; line 16 / 8,760 * 1000) $0.005 Capped at weekly and daily rate $2.242

4 page 2 of 6 Formula Rate - Non-Levelized Utilizing FERC Form 1 Data DUKE ENERGY OHIO AND DUKE ENERGY KENTUCKY (DEOK) (1) (2) (3) (4) (5) Line Form No. 1 Transmission No. RATE BASE: Page, Line, Col. Company Total Allocator (Col. 3 times Col. 4) GROSS PLANT IN SERVICE 1 Production g $ 826,664,425 NA 2 Transmission g 723,185,344 TP $ 705,869,805 3 Distribution g 2,552,844,008 NA 4 General & Intangible g & g 239,184,981 W/S ,196,707 5 Common ,301,796 CE ,210,733 6 TOTAL GROSS PLANT (sum lines 1-5) $ 4,630,180,554 GP= % $ 739,277,245 ACCUMULATED DEPRECIATION 7 Production c $ 466,172,104 NA 8 Transmission c 253,017,104 TP $ 246,959,006 9 Distribution c 842,102,247 NA 10 General & Intangible c 85,847,997 W/S ,531, Common ,520,725 CE ,044, TOTAL ACCUM. DEPRECIATION (sum lines 7-11) $ 1,780,660,177 $ 260,534,669 NET PLANT IN SERVICE 13 Production (line 1 - line 7) $ 360,492, Transmission (line 2 - line 8) 470,168,240 $ 458,910, Distribution (line 3 - line 9) 1,710,741, General & Intangible (line 4 - line 10) 153,336,984 11,665, Common (line 5 - line 11) 154,781,071 8,166, TOTAL NET PLANT (sum lines 13-17) $ 2,849,520,377 NP= % $ 478,742,577 ADJUSTMENTS TO RATE BASE (Note F) 19 Account No. 281 (enter negative) k $ (234,803) NA zero $ - 20 Account No. 282 (enter negative) k (731,323,907) NP (122,868,359) 21 Account No. 283 (enter negative) k (54,593,410) NP (9,172,136) 22 Account No c 26,088,854 NP ,383, Account No. 255 (enter negative) h 0 NP TOTAL ADJUSTMENTS (sum lines 19-23) $ (760,063,266) $ (127,657,356) 25 LAND HELD FOR FUTURE USE (Note G) 214.x.d $ 121, $ 121,217 WORKING CAPITAL (Note H) 26 CWC calculated $ 13,222,225 2,317, Materials & Supplies (Note G) c & c 8,989,674 TE ,005, Prepayments (Account 165) c 2,581,432 GP , TOTAL WORKING CAPITAL (sum lines 26-28) $ 24,793,331 $ 10,735, RATE BASE (sum lines 18, 24, 25, & 29) $ 2,114,371,659 $ 361,941,450

5 page 3 of 6 Formula Rate - Non-Levelized Utilizing FERC Form 1 Data DUKE ENERGY OHIO AND DUKE ENERGY KENTUCKY (DEOK) (1) (2) (3) (4) (5) Line Form No. 1 Transmission No. Page, Line, Col. Company Total Allocator (Col. 3 times Col. 4) O&M 1 Transmission b $ 47,154,710 TE $ 41,990,854 1a Less LSE Expenses included in Transmission O&M Accounts (Note V) b, 92.b; b 19,656, ,656,001 1b Less Midcontinent ISO Exit Fees included in Transmission O&M (Note X) 0 TE Less Account b 11,970,817 TE ,659,907 3 A&G b 90,262,538 W/S ,866,990 3a Less Actual PBOP Expense (Note E) 30,714 W/S ,337 3b Plus Fixed PBOP Expense (Note E) 2,918,402 W/S ,026 3c Less PJM Integration Costs included in A&G and (Note Y) 0 W/S Internal Integration Costs included in A&G 4 Less FERC Annual Fees b 0 W/S Less EPRI & Reg. Comm. Exp. & Non-safety Advertising (Note I) 2,900,317 W/S ,650 5a Plus Transmission Related Reg. Comm. Exp. (Note I) 0 TE Common CE Transmission Lease Payments TOTAL O&M (sum lines 1, 3, 3b, 5a, 6, 7 less lines 1a, 1b, 2, 3a, 3c, 4, 5) $ 105,777,801 $ 18,540,975 DEPRECIATION EXPENSE 9 Transmission b $ 13,194,029 TP $ 12,878, General b 15,383,329 W/S ,170, Common b 12,449,212 CE , TOTAL DEPRECIATION (Sum lines 9-11) $ 41,026,570 $ 14,705,268 TAXES OTHER THAN INCOME TAXES (Note J) LABOR RELATED 13 Payroll 263.i $ 8,349,724 W/S $ 635, Highway and vehicle 263.i 11,980 W/S PLANT RELATED 16 Property 263.i 109,268,320 GP ,446, Gross Receipts 263.i 4,345,824 NA zero 0 18 Other 263.i 0 GP Payments in lieu of taxes 0 GP TOTAL OTHER TAXES (sum lines 13-19) $ 121,975,848 $ 18,082,455 INCOME TAXES (Note K) 21 T=1 - {[(1 - SIT) * (1 - FIT)] / (1 - SIT * FIT * p)} = % 22 CIT=(T/1-T) * (1-(WCLTD/R)) = % where WCLTD=(page 4, line 27) and R= (page 4, line 30) and FIT, SIT & p are as given in footnote K / (1 - T) = (from line 21) Amortized Investment Tax Credit f (enter negative) (415,547) 25 Income Tax Calculation (line 22 * line 28) $ 61,531,117 NA $ 10,532, ITC adjustment (line 23 * line 24) (641,162) NP (107,721) 27 Total Income Taxes (line 25 plus line 26) $ 60,889,955 $ 10,425, RETURN $ 171,898,416 NA $ 29,425,840 [ Rate Base (page 2, line 30) * Rate of Return (page 4, line 30)] 29 REV. REQUIREMENT (sum lines 8, 12, 20, 27, 28) $ 501,568,590 $ 91,179,810

6 page 4 of 6 Formula Rate - Non-Levelized Utilizing FERC Form 1 Data Line No. TRANSMISSION PLANT INCLUDED IN ISO RATES DUKE ENERGY OHIO AND DUKE ENERGY KENTUCKY (DEOK) SUPPORTING CALCULATIONS AND NOTES 1 Total transmission plant (page 2, line 2, column 3) $ 723,185,344 2 Less transmission plant excluded from ISO rates (Note M) 0 3 Less transmission plant included in OATT Ancillary Services (Note N) 17,315,539 4 Transmission plant included in ISO Rates (line 1 less lines 2 & 3) $ 705,869,805 5 Percentage of transmission plant included in ISO Rates (line 4 divided by line 1) TP= TRANSMISSION EXPENSES 6 Total transmission expenses (page 3, line 1, column 3) $ 47,154,710 7 Less transmission expenses included in OATT Ancillary Services (Note L) 4,133,787 8 Included transmission expenses (line 6 less line 7) $ 43,020,923 9 Percentage of transmission expenses after adjustment (line 8 divided by line 6) Percentage of transmission plant included in ISO Rates (line 5) TP Percentage of transmission expenses included in ISO Rates (line 9 times line 10) TE= WAGES & SALARY ALLOCATOR (W&S) Form 1 Reference $ TP Allocation 12 Production b 31,643, Transmission b 6,853, ,689, Distribution b 32,521, W&S Allocator 15 Other ,25,26.b 16,907, ($ / Allocation) 16 Total (sum lines 12-15) 87,925,212 6,689,171 = = WS COMMON PLANT ALLOCATOR (CE) (Note O) % Electric W&S Allocator $ (line 17 / line 20) (line 16) CE 17 Electric c 3,724,258, * = Gas d 1,646,009, Water e 0 20 Total (sum lines 17-19) 5,370,268,017 RETURN (R) $ 21 Long Term Interest (117, sum of 62.c through 67.c) 93,044, Preferred Dividends (118.29c) (positive number) 0 Development of Common Stock: 23 Proprietary Capital ( c) 2,198,695, Less Preferred Stock (line 28) 0 25 Less Account ( c) (enter negative) (616,384,737) 26 Common Stock (sum lines 23-25) 1,582,310,408 (Note P) $ % Cost Weighted 27 Long Term Debt (112, sum of 18.c through 21.c) 1,774,842,381 53% =WCLTD 28 Preferred Stock (112.3.c) 0 0% Common Stock (line 26) 1,582,310,408 47% Total (sum lines 27-29) 3,357,152, =R REVENUE CREDITS Load ACCOUNT 447 (SALES FOR RESALE) (Note Q) ( ) 31 a. Bundled Non-RQ Sales for Resale (311.x.h) 0 32 b. Bundled Sales for Resale included in Divisor on page Total of (a)-(b) 0 34 ACCOUNT 454 (RENT FROM ELECTRIC PROPERTY) (Note R) $ 191, ACCOUNT (OTHER ELECTRIC REVENUES) (Note U) (330.x.n) $ 994,051

7 page 5 of 6 Formula Rate - Non-Levelized Utilizing FERC Form 1 Data DUKE ENERGY OHIO AND DUKE ENERGY KENTUCKY (DEOK) General Note: References to pages in this formulary rate are indicated as: (page#, line#, col.#) Note References to data from FERC Form 1 are indicated as: #.y.x (page, line, column) Letter A DEOK 1 CP is Duke Energy Ohio ("DEO") Monthly Firm Transmission System Peak Load as reported on page 400, column b of Form 1 at the time of DEO's annual peak, plus load served by Duke Energy Kentucky at Longbranch. For years ending 12/31/2010 and 12/31/2011, this sum will be reduced by the amount of distribution load served by East Kentucky Power Cooperative via Duke Kentucky s Hebron substation. Excludes demands from grandfathered interzonal transactions and demands from service provided by ISO at a discount. B DEOK 12 CP is DEO Monthly Firm Transmission System Peak Load as reported on page 400, column b of Form 1 at the time of DEO's monthly peaks, plus load served by Duke Kentucky at Longbranch. For years ending 12/31/2010 and 12/31/2011, this sum will be reduced by the amount of distribution load served by East Kentucky Power Cooperative via Duke Kentucky s Hebron substation. Excludes demands from grandfathered interzonal transactions and demands from service provided by ISO at a discount. C Reserved D Reserved E This deduction is to remove expenses recorded by DEOK for Postretirement Benefits Other than Pensions (PBOP). PBOP expense is set forth in line 3b and is fixed until changed as the result of a filing at FERC. The fixed amount of PBOP for DEO is $2,342,494 and for Duke Energy Kentucky ("DEK") is $575,908. F The balances in Accounts 190, 281, 282 and 283, as adjusted by any amounts in contra accounts identified as regulatory assets or liabilities related to FASB 106 or 109. Balance of Account 255 is reduced by prior flow throughs and excluded if the utility chose to utilize amortization of tax credits against taxable income as discussed in Note K. Account 281 is not allocated. G Identified in Form 1 as being only transmission related. H Cash Working Capital assigned to transmission is one-eighth of O&M allocated to transmission at page 3, line 8, column 5. Prepayments are the electric related prepayments booked to Account No. 165 and reported on Page 111 line 57 in the Form 1. I Line 5 - EPRI Annual Membership Dues listed in Form 1 at 353.f, all Regulatory Commission Expenses itemized at 351.h, and non-safety related advertising included in Account Line 5a - Regulatory Commission Expenses directly related to transmission service, ISO filings, or transmission siting itemized at 351.h. J Includes only FICA, unemployment, highway, property, gross receipts, and other assessments charged in the current year. Taxes related to income are excluded. Gross receipts taxes are not included in transmission revenue requirement in the, since they are recovered elsewhere. K The currently effective income tax rate, where FIT is the Federal income tax rate; SIT is the State income tax rate, and p = "the percentage of federal income tax deductible for state income taxes". If the utility is taxed in more than one state it must attach a work paper showing the name of each state and how the blended or composite SIT was developed. Furthermore, a utility that elected to utilize amortization of tax credits against taxable income, rather than book tax credits to Account No. 255 and reduce rate base, must reduce its income tax expense by the amount of the Amortized Investment Tax Credit (Form 1, f) multiplied by (1/1-T) (page 3, line 26). Inputs Required: FIT = 35.00% SIT= 0.29% (State Income Tax Rate or Composite SIT) p = 0.00% (percent of federal income tax deductible for state purposes) L Removes dollar amount of transmission expenses included in the OATT ancillary services rates, including Account Nos , 561.2, 561.3, and 561.BA. M Removes transmission plant determined by Commission order to be state-jurisdictional according to the seven-factor test (until Form 1 balances are adjusted to reflect application of seven-factor test). N Removes dollar amount of transmission plant included in the development of OATT ancillary services rates and generation step-up facilities, which are deemed to be included in OATT ancillary services. For these purposes, generation step-up facilities are those facilities at a generator substation on which there is no through-flow when the generator is shut down. O Enter dollar amounts. P Debt cost rate = long-term interest (line 21) / long term debt (line 27). Preferred cost rate = preferred dividends (line 22) / preferred outstanding (line 28). ROE will be supported in the original filing and no change in ROE may be made absent a filing with FERC. Capitalization adjusted to exclude impacts of purchase accounting. Q Line 33 must equal zero since all short-term power sales must be unbundled and the transmission component reflected in Account No and all other uses are to be included in the divisor. R Includes income related only to transmission facilities, such as pole attachments, rentals and special use. S Reserved T The revenues credited on page 1 lines 2-5b shall include only the amounts received directly (in the case of grandfathered agreements) or from the ISO (for service under this tariff) reflecting the Transmission Owner's integrated transmission facilities. They do not include revenues associated with FERC annual charges, gross receipts taxes, ancillary services, or facilities not included in this template (e.g., direct assignment facilities and GSUs) which are not recovered under this.

8 page 6 of 6 Formula Rate - Non-Levelized Utilizing FERC Form 1 Data DUKE ENERGY OHIO AND DUKE ENERGY KENTUCKY (DEOK) General Note: References to pages in this formulary rate are indicated as: (page#, line#, col.#) Note References to data from FERC Form 1 are indicated as: #.y.x (page, line, column) Letter U V W X Y AA On Line 35, enter revenues from RTO settlements that are associated with NITS and firm Point-to-Point Service for which the load is not included in the divisor to derive Duke Energy Ohio's and Duke Energy Kentucky's zonal rates. Exclude non-firm Point-to-Point revenues, revenues related to MTEP and RTEP projects, revenues from grandfathered interzonal transactions and revenues from service provided by ISO at a discount. Account Nos , and consist of RTO expenses billed to load-serving entities and are not included in Transmission Owner revenue requirements. Reserved Midcontinent ISO Exit Fees include (1) the charge that DEOK paid to the Midcontinent ISO pursuant to the Settlement Agreement filed on July 29, 2011 in Docket No. ER and (2) the exit fees that DEOK paid to the Midcontinent ISO pursuant to the Exit Fee Agreement filed on October 5, 2011 in Docket No. ER PJM Integration Costs are the fees that PJM assessed DEOK for the costs that PJM incurred in connection with DEOK's move into PJM. Internal Integration Costs are the internal administrative costs incurred by Duke Energy Ohio and Duke Energy Kentucky to accomplish their move from the Midcontinent ISO into PJM. This amount reflects corrections to the prior year rate calculation, plus accumulated interest, and is included here in accordance with the formula rate protocols. It is shown on a combined basis, and not separately entered on the DEO and DEK tabs.

9 Appendix A Page 1 of 1 Duke Energy Ohio and Duke Energy Kentucky Transmission Formula Rate Revenue Requirement Utilizing FERC Form 1 Data Schedule 1A Rate Calculation Line Revenue No. Source Requirement A. Schedule 1A Annual Revenue Requirements 1 Total Load Dispatch & Scheduling (Account 561) Attachment H-22A, Page 4, Line 7 $ 4,133,787 2 Revenue Credits for Schedule 1A - Note A $ 153,750 3 Net Schedule 1A Revenue Requirement for Zone $ 3,980,037 B. Schedule 1A Rate Calculations 4 Annual MWh - Note B ( d & 11.d) 32,189,584 MWh 5 Schedule 1A rate $/MWh (Line 3 / Line 4) (Line 3 / Line 4) $ $/MWh Note: A B Revenue received pursuant to PJM Schedule 1A revenue allocation procedures for transmission service outside of DEOK's zone during the year used to calculate rates under Attachment H-22A. The annual MWh represent the load used by all transmission customers.

10 Appendix B Page 1 of 2 Utilizing Attachment H-22A Data Duke Energy Ohio and Duke Energy Kentucky RTEP - Transmission Enhancement Charges To be completed in conjunction with Attachment H-22A. (1) (2) (3) (4) Line Attachment H-22A No. Page, Line, Col. Transmission Allocator TRANSMISSION PLANT 1 Gross Transmission Plant - Total Att. H-22A, p 2, line 2 col 5 (Note A) 705,869,805 2 Net Transmission Plant - Total Att. H-22A, p 2, line 14 col 5 (Note B) 458,910,799 O&M EXPENSE 3 Total O&M Allocated to Transmission Att. H-22A, p 3, line 8 col 5 18,540,975 4 Annual Allocation Factor for O&M (line 3 divided by line 1 col 3) 2.63% 2.63% GENERAL AND COMMON (G&C) DEPRECIATION EXPENSE 5 Total G&C Depreciation Expense Att. H-22A, p 3, lines 10 & 11, col 5 (Note H) 1,827,149 6 Annual Allocation Factor for G&C Depreciation Expense (line 5 divided by line 1 col 3) 0.26% 0.26% TAXES OTHER THAN INCOME TAXES 7 Total Other Taxes Att. H-22A, p 3, line 20 col 5 18,082,455 8 Annual Allocation Factor for Other Taxes (line 7 divided by line 1 col 3) 2.56% 2.56% 9 Annual Allocation Factor for Expense Sum of lines 4, 6 and % INCOME TAXES 10 Total Income Taxes Att. H-22A, p 3, line 27 col 5 10,425, Annual Allocation Factor for Income Taxes (line 10 divided by line 2 col 3) 2.27% 2.27% RETURN 12 Return on Rate Base Att. H-22A, p 3, line 28 col 5 29,425, Annual Allocation Factor for Return on Rate Base (line 12 divided by line 2 col 3) 6.41% 6.41% 14 Annual Allocation Factor for Return Sum of lines 11 and %

11 Appendix B Page 2 of 2 Utilizing Attachment H-22A Data Duke Energy Ohio and Duke Energy Kentucky RTEP - Transmission Enhancement Charges Network Upgrade Charge Calculation By Project Line No. Project Name (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) Annual Annual RTEP Project Allocation Annual Allocation Project Project Gross Factor for Expense Project Net Factor for Annual Return Depreciation Annual Revenue True-Up Network Upgrade Number Plant Expense Charge Plant Return Charge Expense Requirement Adjustment Charge (Note C) (Page 1 line 9) (Col. 3 * Col. 4) (Note D) (Page 1 line 14) (Col. 6 * Col. 7) (Note E) (Sum Col. 5, 8 & 9) (Note F) Sum Col. 10 & 11 (Note G) 1a $ % $0.00 $ % $0.00 $0 $0.00 $ - $0.00 1b $ % $0.00 $ % $0.00 $0 $0.00 $ - $0.00 1c $ % $0.00 $ % $0.00 $0 $0.00 $ - $ Annual Totals $0 $0 $0 3 RTEP Transmission Enhancement Charges for Attachment H-22A $0 Note Letter A B C Gross Transmission Plant is that identified on page 2 line 2 of Attachment H-22A and includes any sub lines 2a or 2b etc. and is inclusive of any CWIP included in rate base when authorized by FERC order. Net Transmission Plant is that identified on page 2 line 14 of Attachment H-22A and includes any sub lines 14a or 14b etc. and is inclusive of any CWIP included in rate base when authorized by FERC order. Project Gross Plant is the total capital investment for the project calculated in the same method as the gross plant value in line 1 and includes CWIP in rate base if applicable. This value includes subsequent capital investments required to maintain the facilities to their original capabilities. Project Net Plant is the Project Gross Plant Identified in Column 3 less the associated Accumulated Depreciation. Project Depreciation Expense is the actual value booked for the project and included in the Depreciation Expense in Attachment H-22A page 3 line 12. D E F True-Up Adjustment is included pursuant to a FERC approved methodology if applicable. G The Network Upgrade Charge is the value to be used in Schedule 12. H The Total General and Common Depreciation Expense excludes any depreciation expense directly associated with a project and thereby included in page 2 column 9.

12 Appendix C Page 1 of 2 Utilizing Attachment H-22A Data Duke Energy Ohio and Duke Energy Kentucky Legacy MTEP Credit To be completed in conjunction with Attachment H-22A. (1) (2) (3) (4) Line Attachment H-22A No. Page, Line, Col. Transmission Allocator TRANSMISSION PLANT 1 Gross Transmission Plant - Total Att. H-22A, p 2, line 2 col 5 (Note A) 705,869,805 2 Net Transmission Plant - Total Att. H-22A, p 2, line 14 col 5 (Note B) 458,910,799 O&M EXPENSE 3 Total O&M Allocated to Transmission Att. H-22A, p 3, line 8 col 5 18,540,975 4 Annual Allocation Factor for O&M (line 3 divided by line 1 col 3) 2.63% 2.63% GENERAL AND COMMON (G&C) DEPRECIATION EXPENSE 5 Total G&C Depreciation Expense Att. H-22A, p 3, lines 10 & 11, col 5 (Note H) 1,827,149 6 Annual Allocation Factor for G&C Depreciation Expense (line 5 divided by line 1 col 3) 0.26% 0.26% TAXES OTHER THAN INCOME TAXES 7 Total Other Taxes Att. H-22A, p 3, line 20 col 5 18,082,455 8 Annual Allocation Factor for Other Taxes (line 7 divided by line 1 col 3) 2.56% 2.56% 9 Annual Allocation Factor for Expense Sum of lines 4, 6 and % INCOME TAXES 10 Total Income Taxes Att. H-22A, p 3, line 27 col 5 10,425, Annual Allocation Factor for Income Taxes (line 10 divided by line 2 col 3) 2.27% 2.27% RETURN 12 Return on Rate Base Att. H-22A, p 3, line 28 col 5 29,425, Annual Allocation Factor for Return on Rate Base (line 12 divided by line 2 col 3) 6.41% 6.41% 14 Annual Allocation Factor for Return Sum of lines 11 and %

13 Appendix C Page 2 of 2 Utilizing Attachment H-22A Data Duke Energy Ohio and Duke Energy Kentucky Legacy MTEP Credit Network Upgrade Charge Calculation By Project Line No. (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) MTEP Annual Annual Annual Project Project Project Gross Annual Allocation Expense Project Net Allocation Factor Return Depreciation Annual Revenue True-Up Network Project Name Number Plant Factor for Expense Charge Plant for Return Charge Expense Requirement Adjustment Upgrade Charge (Note C) (Page 1 line 9) (Col. 3 * Col. 4) (Note D) (Page 1 line 14) (Col. 6 * Col. 7) (Note E) (Sum Col. 5, 8 & 9) (Note F) Sum Col. 10 & 11 (Note G) 1a Hillcrest 345 kv 91 $ 17,629, % $960, $ 15,644, % $1,358, $306,707 $2,625, $ - $2,625, b Project 2 P3 $ % $0.00 $ % $0.00 $0 $0.00 $ - $0.00 1c Project 3 P3 $ % $0.00 $ % $0.00 $0 $0.00 $ - $ Annual Totals $2,625,589 $0 $2,625,589 3 Legacy MTEP Credit for Attachment H-22A, Page 1, Line 5a $2,625,589 Note Letter A B C Gross Transmission Plant is that identified on page 2 line 2 of Attachment H-22A and includes any sub lines 2a or 2b etc. and is inclusive of any CWIP included in rate base when authorized by FERC order. Net Transmission Plant is that identified on page 2 line 14 of Attachment H-22A and includes any sub lines 14a or 14b etc. and is inclusive of any CWIP included in rate base when authorized by FERC order. Project Gross Plant is the total capital investment for the project calculated in the same method as the gross plant value in line 1 and includes CWIP in rate base if applicable. This value includes subsequent capital investments required to maintain the facilities to their original capabilities. Project Net Plant is the Project Gross Plant Identified in Column 3 less the associated Accumulated Depreciation. Project Depreciation Expense is the actual value booked for the project and included in the Depreciation Expense in Attachment H-22A page 3 line 12. D E F True-Up Adjustment is included pursuant to a FERC approved methodology if applicable. G The Network Upgrade Charge is the value to be used in Schedule 26. H The Total General and Common Depreciation Expense excludes any depreciation expense directly associated with a project and thereby included in page 2 column 9.

14 DUKE ENERGY OHIO, INC. DEPRECIATION RATES Attachment H-22A Appendix D Page 1 of 2 FERC Company Actual Account Account Accrual Number Number Description Rates (A) (B) (C) (D) % Wholly Owned Transmission Plant Rights of Way Structures & Improvements Structures & Improvements - Duke Ohio - Loc. in Ky Station Equipment Station Equipment - Duke Ohio - Loc. in Ky Towers & Fixtures Towers & Fixtures - Duke Ohio - Loc. in Ky Poles & Fixtures Poles & Fixtures - Duke Ohio - Loc. in Ky Overhead Conductors & Devices Overhead Conductors & Devices - Duke Ohio - Loc. in Ky Underground Conduit Underground Conductors & Devices 2.37 Commonly Owned Transmission Plant - CCD Projects Structures & Improvements - CCD Projects Structures & Improvements - CCD Projects Station Equipment - CCD Projects Station Equipment - CCD Projects Station Equipment - CCD Projects Station Equipment - CCD Projects Towers & Fixtures - CCD Projects Towers & Fixtures - CCD Projects Towers & Fixtures - CCD Projects Towers & Fixtures - CCD Projects - Loc. In Ky Towers & Fixtures - CCD Projects Poles & Fixtures - CCD Projects Poles & Fixtures - CCD Projects Overhead Conductors & Devices - CCD Projects Overhead Conductors & Devices - CCD Projects Overhead Conductors & Devices - CCD Projects Overhead Conductors & Devices - CCD Projects - Loc. In Ky Commonly Owned Transmission Plant - CD Projects Structures & Improvements - CD Projects Station Equipment - CD Projects Station Equipment - CD Projects Towers & Fixtures - CD Projects Overhead Conductors & Devices - CD Projects 2.50 General and Intangible Plant Miscellaneous Intangible Plant Land and Land Rights N/A Structures and Improvements Office Furniture and Equipment Electronic Data Processing Equipment Transportation Equipment Trailers Tools, Shop & Garage Equipment Laboratory Equipment Power Operated Equipment Communication Equipment Miscellaneous Equipment 5.00

15 DUKE ENERGY KENTUCKY, INC. DEPRECIATION RATES Attachment H-22A Appendix D Page 2 of 2 FERC Company Actual Account Account Accrual Number Number Description Rates (A) (B) (C) (D) % Transmission Plant Rights of Way Structures & Improvements Station Equipment Station Equipment - Major Station Equipment - Electronic Poles & Fixtures Overhead Conductors & Devices 2.31 General and Intagible Plant Miscellaneous Intangible Plant Land and Land Rights Structures and Improvements Electronic Data Processing Equipment Transportation Equipment Stores Equipment 6.93

16 Utilizing Attachment H-22A Data Attachment H-22A Appendix E Page 1 of 1 Duke Energy Ohio and Duke Energy Kentucky Firm PTP Service Revenue Credit Adjustment Calculation To be completed in conjunction with Attachment H-22A. (1) (2) (3) No. Reference Company Total REVENUE CREDIT TRUE-UP 1 Difference Between Revenue Received In PJM vs. Midcontinent ISO (Note A) $0 ACCUMULATED BALANCE OF REVENUE CREDIT TRUE-UP 2 Accumulated Balance of Deferral (Note B) ($413,245) 3 Income Tax Rate for Deferral Calculation (Note C) 35.80% 4 Deferred Income Taxes on Accumulated Deferral (Line 2 * Line 3) ($147,921) 5 Accumulated Deferral for Carrying Cost Calculation (Line 2 - Line 4) ($265,324) INCOME TAXES 6 CIT = (T/(1-T)) * (1 - (WCLTD/R)) Attachment H-22, page 3, line % 7 Income Taxes (Line 6 * Line 9) ($3,087) CARRYING COST ON DEFERRAL 8 FERC Refund Rate (Note D) 3.25% 9 Carrying Cost (Line 5 * Line 8) ($8,623) 10 Revenue Credit Adjustment (Line 1 + Line 7 + Line 9) ($11,710) Note A From Appendix E, Workpaper, Column (4). B C D Accumulated balance of deferral as of December 31st of the year prior to effective date of new rates. Effective deferred tax rate during applicable test year. FERC Refund Rate is the approved rate as of December 31 of calendar year prior to the rate year (see 18 CFR Section 35.19a).

17 Appendix E Workpaper Worksheet for Firm PTP Service Revenue Credit Adjustment Calculation (7) = Prior month's (1) (2) (3) (4) = (2) - (3) (5) (6) = (4) - (5) Balance + (6) Actual Firm PTP Service Actual Firm PTP Service Difference Between Revenue Monthly True-Up Adjustment Accumulated Balance of Revenue Included in Test Year Revenue Received from Received and Amount in Rates Included In H-22A Net Amount Deferred for Future Deferred Firm PTP Service Period Rate Calculation (Note A) PJM (Note B) Excluding True Up Revenue Requirement (Note C) Future Recovery Revenue Credit Adjustment Jan-12 $ 791,184 $ 1,562,590 $ (771,406) $ (771,406) $ (771,406) Feb ,305 (458,017) 1,106,322 1,106, ,916 Mar , , , , ,887 Apr , ,254 55,884 55, ,772 May , , , , ,880 Jun , ,074 64,493 64, ,374 Jul , ,566 72,995 72, ,369 Aug , ,862 84,408 84,408 1,054,777 Sep ,762 1,373,308 (973,546) (973,546) 81,231 Oct , ,232 (369,576) (369,576) (288,345) Nov , ,738 (203,595) (203,595) (491,940) Dec , ,677 (235,920) (235,920) (727,861) Total $ 8,056,287 $ 8,784,148 $ (727,861) $ (727,861) Jan ,310 $ 875,003 (247,693) $ (247,693) (975,554) Feb , ,468 (199,461) (199,461) (1,175,015) Mar , ,765 (106,436) (106,436) (1,281,452) Apr , ,294 (201,577) (201,577) (1,483,028) May , ,438 (236,620) (236,620) (1,719,648) Jun-13 - (60,655) 60,655 (1,658,993) Jul-13 - (60,655) 60,655 (1,598,338) Aug-13 - (60,655) 60,655 (1,537,683) Sep-13 - (60,655) 60,655 (1,477,028) Oct-13 - (60,655) 60,655 (1,416,373) Nov-13 - (60,655) 60,655 (1,355,718) Dec-13 - (60,655) 60,655 $ (1,295,063) Total $ 3,088,181 $ 4,079,968 $ (991,787) $ (424,585) $ (567,202) Jan-14 - (60,655) $ 60,655 $ (1,234,408) Feb-14 - (60,655) 60,655 (1,173,753) Mar-14 - (60,655) 60,655 (1,113,098) Apr-14 - (60,655) 60,655 (1,052,443) May-14 - (60,655) 60,655 (991,788) Jun-14 (82,649) 82,649 (909,139) Jul-14 (82,649) 82,649 (826,490) Aug-14 (82,649) 82,649 (743,841) Sep-14 (82,649) 82,649 (661,192) Oct-14 (82,649) 82,649 (578,543) Nov-14 (82,649) 82,649 (495,894) Dec-14 (82,649) 82,649 $ (413,245) Total $ - $ - $ - $ (881,818) $ 881,818 Jan-15 (82,649) $ 82,649 $ (330,596) Feb-15 (82,649) 82,649 (247,947) Mar-15 (82,649) 82,649 (165,298) Apr-15 (82,649) 82,649 (82,649) May-15 (82,649) 82,649 $ 0 Total $ (413,245) $ 413,245 Notes: Duke Energy Ohio and Duke Energy Kentucky (A) (B) (C) Monthly Firm PTP service revenue from Midcontinent ISO during test year applicable to currently effectives NITS and PTP service rates. Actual monthly Firm PTP service revenue received from PJM during current period. Recovery of deferral begins with the first period for billing rates approved using a test year for Attachment H-22A that includes actual operations in PJM. The recovery of the amounts deferred between January 1, 2012, and December 31, 2012, will begin on June 1, 2013, and will end on May 31, The recovery of the amounts deferred between January 1, 2013 and May 31, 2013, will begin on June 1, 2014, and will end on May 31, 2015.

18 page 1 of 6 Formula Rate - Non-Levelized Utilizing FERC Form 1 Data DUKE ENERGY OHIO Line Allocated No. Amount 1 GROSS REVENUE REQUIREMENT (page 3, line 29) $ 90,596,962 REVENUE CREDITS (Note T) Total Allocator 2 Account No. 454 (page 4, line 34) $ 172,456 TP $ 172,456 3 Account No (page 4, line 35) 945,275 TP ,275 4a Revenues from Grandfathered Interzonal Transactions 0 TP b Revenues from service provided by ISO at a discount 0 TP a Legacy MTEP Credit (Appendix C, page 2, line 3, col. 12) 2,718, ,718,684 5b Firm PTP Revenue Credit Adjustment (Appendix E, line 10, col. 3) (11,710) (11,710) 6 TOTAL REVENUE CREDITS (sum lines 2-5b) $ 3,824,706 7 NET REVENUE REQUIREMENT (line 1 minus line 6) $ 86,772,256 DIVISOR 8 1 CP (Note A) 4,245, CP (Note B) 3,694, Reserved 11 Reserved 12 Reserved 13 Reserved 14 Reserved 15 Annual Cost ($/kw/yr) - 1 CP (line 7 / line 8) $ Annual Cost ($/kw/yr) - 12 CP (line 7 / line 9) $ Network Rate ($/kw/mo) (line 15 / 12) $ a Point-To-Point Rate ($/kw/mo) (line 16 / 12) $1.957 Peak Rate Off-Peak Rate 18 Point-To-Point Rate ($/kw/wk) (line 16 / 52; line 16 / 52) $ Point-To-Point Rate ($/kw/day) (line 16 / 260; line 16 / 365) $0.090 Capped at weekly rate $ Point-To-Point Rate ($/MWh) (line 16 / 4,160; line 16 / 8,760 * 1000) $0.006 Capped at weekly and daily rate $2.681

19 page 2 of 6 Formula Rate - Non-Levelized Utilizing FERC Form 1 Data DUKE ENERGY OHIO (1) (2) (3) (4) (5) Line Form No. 1 Transmission No. RATE BASE: Page, Line, Col. Company Total Allocator (Col. 3 times Col. 4) GROSS PLANT IN SERVICE 1 Production g $ - NA 2 Transmission g 672,169,972 TP $ 672,169,972 3 Distribution g 2,160,621,705 NA 4 General & Intangible g & g 224,477,882 W/S ,689,486 5 Common ,078,903 CE ,906,666 6 TOTAL GROSS PLANT (sum lines 1-5) $ 3,314,348,462 GP= % $ 706,766,124 ACCUMULATED DEPRECIATION 7 Production c $ (14,039) NA 8 Transmission c 234,826,697 TP $ 234,826,697 9 Distribution c 695,437,497 NA 10 General & Intangible c 78,223,452 W/S ,861, Common ,838,504 CE ,310, TOTAL ACCUM. DEPRECIATION (sum lines 7-11) $ 1,117,312,111 $ 247,998,839 NET PLANT IN SERVICE 13 Production (line 1 - line 7) $ 14, Transmission (line 2 - line 8) 437,343,275 $ 437,343, Distribution (line 3 - line 9) 1,465,184, General & Intangible (line 4 - line 10) 146,254,430 12,828, Common (line 5 - line 11) 148,240,399 8,595, TOTAL NET PLANT (sum lines 13-17) $ 2,197,036,351 NP= % $ 458,767,285 ADJUSTMENTS TO RATE BASE (Note F) 19 Account No. 281 (enter negative) k $ - NA zero $ - 20 Account No. 282 (enter negative) k (545,338,977) NP (113,873,256) 21 Account No. 283 (enter negative) k (58,450,636) NP (12,205,187) 22 Account No c 33,089,463 NP ,909, Account No. 255 (enter negative) h 0 NP TOTAL ADJUSTMENTS (sum lines 19-23) $ (570,700,150) $ (119,168,970) 25 LAND HELD FOR FUTURE USE (Note G) 214.x.d $ 121, $ 121,217 WORKING CAPITAL (Note H) 26 CWC calculated $ 10,880,841 2,059, Materials & Supplies (Note G) c & c 8,969,793 TE ,997, Prepayments (Account 165) c 957,851 GP , TOTAL WORKING CAPITAL (sum lines 26-28) $ 20,808,485 $ 10,261, RATE BASE (sum lines 18, 24, 25, & 29) $ 1,647,265,903 $ 349,980,595

20 page 3 of 6 Formula Rate - Non-Levelized Utilizing FERC Form 1 Data DUKE ENERGY OHIO (1) (2) (3) (4) (5) Line Form No. 1 Transmission No. Page, Line, Col. Company Total Allocator (Col. 3 times Col. 4) O&M 1 Transmission b $ 33,312,297 TE $ 29,701,969 1a Less LSE Expenses included in Transmission O&M Accounts (Note V) b, 92.b; b 19,656, ,656,001 1b Less Midcontinent ISO Exit Fees included in Transmission O&M (Note X) 0 TE Less Account b 12,520 TE ,163 3 A&G b 73,121,895 W/S ,413,694 3a Less Actual PBOP Expense (Note E) (8,900) W/S (781) 3b Plus Fixed PBOP Expense (Note E) 2,342,494 W/S ,466 3c Less PJM Integration Costs included in A&G and (Note Y) 0 W/S Internal Integration Costs included in A&G 4 Less FERC Annual Fees b 0 W/S Less EPRI & Reg. Comm. Exp. & Non-safety Advertising (Note I) 2,070,335 W/S ,594 5a Plus Transmission Related Reg. Comm. Exp. (Note I) 0 TE Common CE Transmission Lease Payments TOTAL O&M (sum lines 1, 3, 3b, 5a, 6, 7 less lines 1a, 1b, 2, 3a, 3c, 4, 5) $ 87,046,730 $ 16,473,152 DEPRECIATION EXPENSE 9 Transmission b $ 12,318,073 TP $ 12,318, General b 13,781,072 W/S ,208, Common b 10,762,246 CE , TOTAL DEPRECIATION (Sum lines 9-11) $ 36,861,391 $ 14,150,890 TAXES OTHER THAN INCOME TAXES (Note J) LABOR RELATED 13 Payroll 263.i. 4, 5, 12 $ 6,353,089 W/S $ 557, Highway and vehicle 263.i. 6 10,172 W/S PLANT RELATED 16 Property 263.i. 14, ,283,386 GP ,811, Gross Receipts 263.i. 22 4,345,824 NA zero 0 18 Other 263.i 0 GP Payments in lieu of taxes 0 GP TOTAL OTHER TAXES (sum lines 13-19) $ 112,992,471 $ 22,369,491 INCOME TAXES (Note K) 21 T=1 - {[(1 - SIT) * (1 - FIT)] / (1 - SIT * FIT * p)} = % 22 CIT=(T/1-T) * (1-(WCLTD/R)) = % where WCLTD=(page 4, line 27) and R= (page 4, line 30) and FIT, SIT & p are as given in footnote K / (1 - T) = (from line 21) Amortized Investment Tax Credit f (enter negative) (387,486) 25 Income Tax Calculation (line 22 * line 28) $ 44,970,359 NA $ 9,554, ITC adjustment (line 23 * line 24) (596,132) NP (124,480) 27 Total Income Taxes (line 25 plus line 26) $ 44,374,227 $ 9,429, RETURN $ 132,604,905 NA $ 28,173,438 [ Rate Base (page 2, line 30) * Rate of Return (page 4, line 30)] 29 REV. REQUIREMENT (sum lines 8, 12, 20, 27, 28) $ 413,879,724 $ 90,596,962

21 page 4 of 6 Formula Rate - Non-Levelized Utilizing FERC Form 1 Data Line No. TRANSMISSION PLANT INCLUDED IN ISO RATES DUKE ENERGY OHIO SUPPORTING CALCULATIONS AND NOTES 1 Total transmission plant (page 2, line 2, column 3) $ 672,169,972 2 Less transmission plant excluded from ISO rates (Note M) 0 3 Less transmission plant included in OATT Ancillary Services (Note N) 0 4 Transmission plant included in ISO Rates (line 1 less lines 2 & 3) $ 672,169,972 5 Percentage of transmission plant included in ISO Rates (line 4 divided by line 1) TP= TRANSMISSION EXPENSES 6 Total transmission expenses (page 3, line 1, column 3) $ 33,312,297 7 Less transmission expenses included in OATT Ancillary Services (Note L) 3,610,328 8 Included transmission expenses (line 6 less line 7) $ 29,701,969 9 Percentage of transmission expenses after adjustment (line 8 divided by line 6) Percentage of transmission plant included in ISO Rates (line 5) TP Percentage of transmission expenses included in ISO Rates (line 9 times line 10) TE= WAGES & SALARY ALLOCATOR (W&S) Form 1 Reference $ TP Allocation 12 Production b 19,570, Transmission b 5,848, ,848, Distribution b 27,513, W&S Allocator 15 Other ,25,26.b 13,746, ($ / Allocation) 16 Total (sum lines 12-15) 66,678,135 5,848,497 = = WS COMMON PLANT ALLOCATOR (CE) (Note O) % Electric W&S Allocator $ (line 17 / line 20) (line 16) CE 17 Electric c 2,544,725, * = Gas d 1,304,627, Water e 0 20 Total (sum lines 17-19) 3,849,352,718 RETURN (R) $ 21 Long Term Interest (117, sum of 62.c through 67.c) 78,258, Preferred Dividends (118.29c) (positive number) 0 Development of Common Stock: 23 Proprietary Capital ( c) 1,785,439, Less Preferred Stock (line 28) 0 25 Less Account ( c) (enter negative) (616,384,737) 26 Common Stock (sum lines 23-25) 1,169,054,479 (Note P) $ % Cost Weighted 27 Long Term Debt (112, sum of 18.c through 21.c) 1,457,270,887 55% =WCLTD 28 Preferred Stock (112.3.c) 0 0% Common Stock (line 26) 1,169,054,479 45% Total (sum lines 27-29) 2,626,325, =R REVENUE CREDITS Load ACCOUNT 447 (SALES FOR RESALE) (Note Q) ( ) 31 a. Bundled Non-RQ Sales for Resale (311.x.h) 0 32 b. Bundled Sales for Resale included in Divisor on page Total of (a)-(b) 0 34 ACCOUNT 454 (RENT FROM ELECTRIC PROPERTY) (Note R) $ 172, ACCOUNT (OTHER ELECTRIC REVENUES) (Note U) (330.x.n) $ 945,275

22 page 5 of 6 Formula Rate - Non-Levelized Utilizing FERC Form 1 Data DUKE ENERGY OHIO General Note: References to pages in this formulary rate are indicated as: (page#, line#, col.#) Note References to data from FERC Form 1 are indicated as: #.y.x (page, line, column) Letter A DEOK 1 CP is Duke Energy Ohio ("DEO") Monthly Firm Transmission System Peak Load as reported on page 400, column b of Form 1 at the time of DEO's annual peak, plus load served by Duke Energy Kentucky at Longbranch. For years ending 12/31/2010 and 12/31/2011, this sum will be reduced by the amount of distribution load served by East Kentucky Power Cooperative via Duke Kentucky s Hebron substation. (1) Excludes demands from grandfathered interzonal transactions and demands from service provided by ISO at a discount. B DEOK 12 CP is DEO Monthly Firm Transmission System Peak Load as reported on page 400, column b of Form 1 at the time of DEO's monthly peaks, plus load served by Duke Kentucky at Longbranch. For years ending 12/31/2010 and 12/31/2011, this sum will be reduced by the amount of distribution load served by East Kentucky Power Cooperative via Duke Kentucky s Hebron substation. (2) Excludes demands from grandfathered interzonal transactions and demands from service provided by ISO at a discount. C Reserved D Reserved E This deduction is to remove expenses recorded by DEOK for Postretirement Benefits Other than Pensions (PBOP). PBOP expense is set forth in line 3b and is fixed until changed as the result of a filing at FERC. The fixed amount of PBOP for DEO is $2,342,494 and for Duke Energy Kentucky ("DEK") is $575,908. F The balances in Accounts 190, 281, 282 and 283, as adjusted by any amounts in contra accounts identified as regulatory assets or liabilities related to FASB 106 or 109. Balance of Account 255 is reduced by prior flow throughs and excluded if the utility chose to utilize amortization of tax credits against taxable income as discussed in Note K. Account 281 is not allocated. G Identified in Form 1 as being only transmission related. H Cash Working Capital assigned to transmission is one-eighth of O&M allocated to transmission at page 3, line 8, column 5. Prepayments are the electric related prepayments booked to Account No. 165 and reported on Page 111 line 57 in the Form 1. I Line 5 - EPRI Annual Membership Dues listed in Form 1 at 353.f, all Regulatory Commission Expenses itemized at 351.h, and non-safety related advertising included in Account Line 5a - Regulatory Commission Expenses directly related to transmission service, ISO filings, or transmission siting itemized at 351.h. J Includes only FICA, unemployment, highway, property, gross receipts, and other assessments charged in the current year. Taxes related to income are excluded. Gross receipts taxes are not included in transmission revenue requirement in the, since they are recovered elsewhere. K The currently effective income tax rate, where FIT is the Federal income tax rate; SIT is the State income tax rate, and p = "the percentage of federal income tax deductible for state income taxes". If the utility is taxed in more than one state it must attach a work paper showing the name of each state and how the blended or composite SIT was developed. Furthermore, a utility that elected to utilize amortization of tax credits against taxable income, rather than book tax credits to Account No. 255 and reduce rate base, must reduce its income tax expense by the amount of the Amortized Investment Tax Credit (Form 1, f) multiplied by (1/1-T) (page 3, line 26). Inputs Required: FIT = 35.00% SIT= 0.00% (State Income Tax Rate or Composite SIT) p = 0.00% (percent of federal income tax deductible for state purposes) L Removes dollar amount of transmission expenses included in the OATT ancillary services rates, including Account Nos , 561.2, 561.3, and 561.BA. M Removes dollar amount of transmission expenses included in the OATT ancillary services rates, including Account Nos , 561.2, 561.3, and 561.BA. Removes transmission plant determined by Commission order to be state-jurisdictional according to the seven-factor test (until Form 1 balances are adjusted to reflect application of seven-factor test). N Removes dollar amount of transmission plant included in the development of OATT ancillary services rates and generation step-up facilities, which are deemed to be included in OATT ancillary services. For these purposes, generation step-up facilities are those facilities at a generator substation on which there is no through-flow when the generator is shut down. O Enter dollar amounts. P Debt cost rate = long-term interest (line 21) / long term debt (line 27). Preferred cost rate = preferred dividends (line 22) / preferred outstanding (line 28). ROE will be supported in the original filing and no change in ROE may be made absent a filing with FERC. Capitalization adjusted to exclude impacts of purchase accounting. Q Line 33 must equal zero since all short-term power sales must be unbundled and the transmission component reflected in Account No and all other uses are to be included in the divisor. R Includes income related only to transmission facilities, such as pole attachments, rentals and special use. S Reserved T The revenues credited on page 1 lines 2-5b shall include only the amounts received directly (in the case of grandfathered agreements) or from the ISO (for service under this tariff) reflecting the Transmission Owner's integrated transmission facilities. They do not include revenues associated with FERC annual charges, gross receipts taxes, ancillary services, or facilities not included in this template (e.g., direct assignment facilities and GSUs) which are not recovered under this.

23 page 6 of 6 Formula Rate - Non-Levelized Utilizing FERC Form 1 Data DUKE ENERGY OHIO General Note: References to pages in this formulary rate are indicated as: (page#, line#, col.#) Note References to data from FERC Form 1 are indicated as: #.y.x (page, line, column) Letter U V W X Y On Line 35, enter revenues from RTO settlements that are associated with NITS and firm Point-to-Point Service for which the load is not included in the divisor to derive Duke Energy Ohio's and Duke Energy Kentucky's zonal rates. Exclude non-firm Point-to-Point revenues, revenues related to MTEP and RTEP projects, revenues from grandfathered interzonal transactions and revenues from service provided by ISO at a discount. Account Nos , and consist of RTO expenses billed to load-serving entities and are not included in Transmission Owner revenue requirements. Reserved Midcontinent ISO Exit Fees include (1) the charge that DEOK paid to the Midcontinent ISO pursuant to the Settlement Agreement filed on July 29, 2011 in Docket No. ER and (2) the exit fees that DEOK paid to the Midcontinent ISO pursuant to the Exit Fee Agreement filed on October 5, 2011 in Docket No. ER PJM Integration Costs are the fees that PJM assessed DEOK for the costs that PJM incurred in connection with DEOK's move into PJM. Internal Integration Costs are the internal administrative costs incurred by Duke Energy Ohio and Duke Energy Kentucky to accomplish their move from the Midcontinent ISO into PJM. (1) For the purpose of calculating the DEO annual peak, the DEK annual peak as reported on page 401, column d of Form 1, was subtracted from the DEO annual peak as reported on page 400. (2) For the purpose of calculating the DEO monthly peak, the DEK monthly peak as reported on page 401, column d of Form 1, was subtracted from the DEO monthly peak as reported on page 400.