Electric Price Outlook for Indiana Low Load Factor (LLF) customers December 2016

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1 Electric Price Outlook for Indiana Low Load Factor (LLF) customers December 2016 Price projection We project our prices for Low Load Factor customers to increase 4 to 6 percent in 2017 compared to Prices are expected to increase approximately 2 to 4 percent in 2018 compared to The increases will vary, however, depending on factors such as whether you are served off our transmission or distribution system and whether you have opted out of the company s energy efficiency programs. Details on the primary cost drivers and how they may affect you are discussed below. While costs are rising, our rates today for large power customers are lower than they were in 2013, largely due to fuel contract renegotiations. Edwardsport plant update The Edwardsport IGCC plant began commercial operation in June 2013 and has been serving our Indiana customers using both coal and natural gas. In August 2016, the Indiana Utility Regulatory Commission (IURC) approved a settlement agreement we reached with state consumer groups, including the Indiana Office of Utility Consumer Counselor, the Duke Energy Indiana Industrial Group, Nucor Steel-Indiana, the Citizens Action Coalition and others. The settlement limits what you will pay for plant operations. The Edwardsport operating costs approved under the settlement began appearing in rates in September 2016; this price update includes a full year of costs in Grid modernization In June 2016, the IURC approved our seven-year plan to modernize and improve the reliability of our statewide electric grid. We re using a combination of advanced technology and infrastructure upgrades to improve the reliability of our power lines and infrastructure. In addition to investments in substations, transformers, power lines and poles, we are installing technology to help pinpoint power outages, reduce their scope and speed repairs. We ll also be able to provide you with better restoration information when outages do occur. We are estimating the plan s first bill rider (Infrastructure Improvement Rider) to be effective in April 2017 following regulatory review and approval. Note that we calculate rates in this rider according to delivery voltage, so customers taking delivery at higher voltage levels will see smaller increases. (Projections in this price update are based on the higher rates of secondary distribution service.) Coal ash management We have asked the IURC to approve a plan to recover an initial phase of costs associated with the U.S. Environmental Protection Agency s new coal combustion residuals rule. The rule regulates the disposal of the solid waste material (mostly ash) that s left over after coal is burned to generate electricity.

2 We have performed a careful analysis to make the best decisions on behalf of our customers, with objectives of protecting the environment, minimizing impact to communities and managing costs. The plan filed with state utility regulators covers the first phase of our compliance work, which focuses primarily on creating alternative ways to handle bottom ash and water at our Gibson and Cayuga power plants. Pending regulatory approval, we project that LLF customers will see a rate increase of approximately $ per kilowatt-hour (kwh) in the second half of 2017, $ per kwh in 2018 and $ per kwh in 2019 for the first phase of the compliance work. These costs will be part of our existing environmental cost riders. Later phases of the work will focus on permanent closure of ash storage areas at our coal-fired power plants and those costs are not included in the projections in this price update. Energy efficiency The projections include an increase in the energy efficiency rider due primarily to a smaller reconciliation credit included in the 2017 rate compared to A delay in filing for state regulatory approval of the rates has pushed the estimated effective date to June Duke Energy rider summary In Indiana, Duke Energy has rate adjustment riders that have an impact on billings beyond the base rate. The attached table reflects Rate LLF adjustment riders for previous months, as well as changes filed with and pending before the Indiana Utility Regulatory Commission, which are highlighted and marked "filed." Changes marked "projected" have not yet been filed with the commission and reflect projected future filings. These are not approved and may not be approved as filed. The following information is subject to change, depending on the outcome of pending and future commission proceedings.

3 Duke Energy Indiana Rider Projections Color Code Approved Filed Projected Month Rate LLF Rider Projections as of December 2, 2016 Quarterly Annually Biannually Biannually Annually Annually Annually Quarterly Annually Biannually Annually Biannually FCR (Fuel) Charge) Rider 60 IGCC Rider 61 Qualified Pollution Control (CWIP) Rider 62 Emission Allowance Charge Rider 63 Transmission and Distribution Rider 65 Note (1) Energy Efficiency Rider 66-A Merger Amortization Credit Rider 67 MISO Rider 68 Reliability Rider 70 Clean Coal Rider 71 Federal Mandate Rider 72 Utility Total Rider Owned Cost including Renewable Energy Energy Efficiency Rider 73 Rider Total Rider Cost with Energy Efficiency Opt-out Note (2) Actual 2015 Average $ $ Jan-16 $ $ $ $ $ $ ( ) $ $ $ $ $ $ Feb-16 $ $ $ $ $ $ ( ) $ $ $ $ $ $ Mar-16 $ $ $ $ ( ) $ $ ( ) $ $ $ $ $ $ Apr-16 $ $ $ $ ( ) $ $ ( ) $ $ $ $ $ $ May-16 $ $ $ $ ( ) $ $ ( ) $ $ $ $ $ $ Jun-16 $ $ $ $ ( ) $ $ ( ) $ $ $ $ $ $ Jul-16 $ $ $ $ ( ) $ $ ( ) $ $ $ $ $ $ Aug-16 $ $ $ $ ( ) $ $ ( ) $ $ $ $ $ $ Sep-16 $ $ $ $ ( ) $ $ ( ) $ $ $ $ $ $ Oct-16 $ $ $ $ ( ) Nov-16 $ $ $ $ ( ) Dec-16 $ $ $ $ ( ) Actual 2016 Average $ $ Jan-17 $ $ $ $ ( ) $ $ ( ) $ $ $ $ $ $ Feb-17 $ $ $ $ ( ) $ $ ( ) $ $ $ $ $ $ Mar-17 $ $ $ $ ( ) $ $ ( ) $ $ $ $ $ $ Apr-17 $ $ $ $ ( ) $ $ $ ( ) $ $ $ $ $ $ May-17 $ $ $ $ ( ) $ $ $ ( ) $ $ $ $ $ $ Jun-17 $ $ $ $ ( ) $ $ $ ( ) $ $ $ $ $ $ Jul-17 $ $ $ $ ( ) $ $ $ ( ) $ $ $ $ $ $ $ Aug-17 $ $ $ $ ( ) $ $ $ ( ) $ $ $ $ $ $ $ Sep-17 $ $ $ $ $ $ $ ( ) $ $ $ $ $ $ $ Oct-17 $ $ $ $ $ $ $ ( ) $ $ $ $ $ $ $ Nov-17 $ $ $ $ $ $ $ ( ) $ $ $ $ $ $ $ Dec-17 $ $ $ $ $ $ $ ( ) $ $ $ $ $ $ $ Projected 2017 Average $ $ Jan-18 $ $ $ $ $ $ $ ( ) $ $ $ $ $ $ $ Feb-18 $ $ $ $ $ $ $ ( ) $ $ $ $ $ $ $ Mar-18 $ $ $ $ $ $ $ ( ) $ $ $ $ $ $ $ Apr-18 $ $ $ $ $ $ $ ( ) $ $ $ $ $ $ $ May-18 $ $ $ $ $ $ $ ( ) $ $ $ $ $ $ $ Jun-18 $ $ $ $ $ $ $ ( ) $ $ $ $ $ $ $ Jul-18 $ $ $ $ $ $ $ ( ) $ $ $ $ $ $ $ Aug-18 $ $ $ $ $ $ $ ( ) $ $ $ $ $ $ $ Sep-18 $ $ $ $ $ $ $ ( ) $ $ $ $ $ $ $ Oct-18 $ $ $ $ $ $ $ ( ) $ $ $ $ $ $ $ Nov-18 $ $ $ $ $ $ $ ( ) $ $ $ $ $ $ $ Dec-18 $ $ $ $ $ $ $ ( ) $ $ $ $ $ $ $ Projected 2018 Average $ $ Note (1): Note (2): Rider rates vary by delivery voltage. Consult with your representative for your specific rate. The Rider rates listed reflect service from the secondary distribution system for illustrative purposes. Represents Total Rider costs for customers who have elected to not participate in energy efficiency programs effective April 1, Consult with your representative for specific energy efficiency opt-out rates.

4 Actual and projected total rider costs are represented graphically below. HLF LLF Monthly Total Rider Costs* $0.045 $0.050 $0.040 $0.035 $0.040 $ Per kwh $0.030 $0.025 $0.020 $0.015 $0.030 $0.020 $0.010 $0.005 $0.010 $0.000 $0.000 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18 Month -Year *Does not include base rates, and includes Energy Efficiency Rider

5 LLF Annual Rider Impact Estimates Overview: The following chart shows estimates of the impacts of rate adjustment riders for the LLF Rate. The percent increase estimates comprise actual adjustments, filed adjustments and/or projections of future filings of the LLF rate adjustment riders. Remember that the percent increase estimates are not approved and may not be approved as filed; they are only projections. As previously stated, these projections are subject to change, depending on the outcome of pending and future IURC proceedings and the usage patterns of individual customers. Instructions: There are two ways to use the projection chart. The first is based on the projected increase in the cost per kilowatt-hour (kwh), and the second on percentage increases in your total average cost per kwh. Actual Cost per kwh Increase Step One: The left side of the chart shows actual cost per kwh increases from one budget or projection period to the next. Year-to-year comparisons are provided. Step Two: Estimate your billed kwh usage for the period for which cost projections are needed, and apply the appropriate cost per kwh increases. Multiply the kwh by the projected increase, and add to your current actuals to determine the estimated cost or budget increase. Percent Increase in Total Average Cost per kwh Step One: Step Two: Determine your average cost per kwh from your electric bill, by dividing "Total Current Electric Charges" by "Billed kwh Usage." Find the number in the "Customer Specific Average Price/kWh" column that is closest to your specific average cost per kwh (as calculated in Step One). Then, use the respective column of the chart to determine the projected increase. Results: The percent increases represent our best projections for the coming months and years. Please understand that they are only projections and that actual costs will vary. Depending on your forecasted usage, budgeting process and planning requirements, you may need to adjust your final figures up or down to accommodate anticipated events, unforeseen situations or the inherent differences in any forecasting or budgeting process. Annual Rider Impacts Estimates Based on Average kwh Cost (includes Energy Efficiency Rider) Annual Impacts Customerspecific Average Description $/kwh Price/kWh 2016 vs vs vs 2017 $ % 6.2% 3.6% Actual 2016 Rider Average: $ $ % 6.0% 3.5% Actual 2015 Rider Average: $ $ % 5.8% 3.3% Actual 2016 Annual Rider Increase per kwh $ $ % 5.6% 3.2% $ % 5.4% 3.1% Projected 2017 Rider Average : $ $ % 5.3% 3.0% Actual 2016 Rider Average: $ $ % 5.1% 2.9% Projected 2017 Annual Rider Increase per kwh $ $ % 5.0% 2.8% $ % 4.8% 2.8% Projected 2018 Rider Average : $ $ % 4.7% 2.7% Projected 2017 Rider Average: $ $ % 4.6% 2.6% Projected 2018 Annual Rider Increase per kwh $ $ % 4.4% 2.5% $ % 4.3% 2.5% $ % 4.2% 2.4% $ % 4.1% 2.4% $ % 4.0% 2.3% $ % 3.9% 2.2%