DEF 14A 1 a2213592zdef14a.htm DEF 14A

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.     )

 

Filed by the Registrant  x

 

Filed by a Party other than the Registrant  o

 

Check the appropriate box:

o

Preliminary Proxy Statement

o

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

x

Definitive Proxy Statement

o

Definitive Additional Materials

o

Soliciting Material under §240.14a-12

 

DUKE ENERGY CORPORATION

(Name of Registrant as Specified In Its Charter)

 

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

x

No fee required.

o

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

(1)

Title of each class of securities to which transaction applies:

 

 

 

 

(2)

Aggregate number of securities to which transaction applies:

 

 

 

 

(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

 

 

(4)

Proposed maximum aggregate value of transaction:

 

 

 

 

(5)

Total fee paid:

 

 

 

o

Fee paid previously with preliminary materials.

o

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

(1)

Amount Previously Paid:

 

 

 

 

(2)

Form, Schedule or Registration Statement No.:

 

 

 

 

(3)

Filing Party:

 

 

 

 

(4)

Date Filed:

 

 

 

 


GRAPHIC


Table of Contents

Welcome to the Duke Energy Annual Shareholder Meeting

GRAPHIC

March 21, 2013

Dear Fellow Shareholders:

I am pleased to invite you to our annual meeting to be held on Thursday, May 2, 2013, in the O.J. Miller Auditorium located at 526 South Church Street in Charlotte, North Carolina.

As explained in the enclosed proxy statement, at this year's meeting you will be asked to vote (i) for the election of directors, (ii) for the ratification of the selection of the independent public accountant, (iii) for the approval, on an advisory basis, of Duke Energy Corporation's named executive officer compensation, (iv) for the amended Duke Energy Corporation Executive Short-Term Incentive Plan, (v) against two shareholder proposals and (vi) to consider any other business that may properly come before the meeting.

We have made significant changes to our proxy statement

This year, we have made improvements to our proxy statement including the addition of a proxy summary beginning on page 7, and the addition of certain charts and illustrations to help better explain our corporate governance and compensation programs and objectives. With this document, our aim is to communicate with you the matters to be addressed at the meeting in a way which is simple and straightforward.

Your vote is important – exercise your shareholder right and vote your shares right away

Please turn to page 13 for the instructions on how you can vote your shares over the internet, by telephone or by mail. It is important that all Duke Energy shareholders, regardless of the number of shares owned, participate in the affairs of the Company. At Duke Energy's last annual meeting, in May 2012, approximately 84 percent of the Company's shares were represented in person or by proxy.

We hope you will find it possible to attend this year's annual meeting, and thank you for your continued interest in Duke Energy.

Sincerely,

GRAPHIC

James E. Rogers

Chairman, President and
Chief Executive Officer

DUKE ENERGY – 2013 Proxy Statement    3


Table of Contents

PARTICIPATE IN THE FUTURE OF DUKE ENERGY CORPORATION, CAST YOUR VOTE RIGHT AWAY

It is very important that you vote to play a part in the future of Duke Energy. New York Stock Exchange ("NYSE") rules state that if your shares are held through a broker, bank or other nominee, they cannot vote on your behalf on non-discretionary matters.

Please cast your vote right away on all of the proposals listed below to ensure that your shares are represented.

Proposals which require your vote


 
   
  More
information

  Board
recommendation

  Broker non-votes
  Abstentions
  Votes
required
for approval

 

 

 

 

 

 

 

 

 

 

 

 

 

 
PROPOSAL 1   Election of directors   Page 15   FOR each nominee   Do not count   Do not count   Plurality, with a resignation policy

 

PROPOSAL 2

 

Ratification of Deloitte & Touche LLP as Duke Energy Corporation's independent public accountant for 2013

 

Page 33

 

FOR

 

Vote for

 

Vote against

 

Majority of shares present

 

PROPOSAL 3

 

Approval, on an advisory basis, of Duke Energy Corporation's named executive officer compensation

 

Page 35

 

FOR

 

Do not count

 

Vote against

 

Majority of shares present

 

PROPOSAL 4

 

Approval of the amended Duke Energy Corporation Executive Short-Term Incentive Plan

 

Page 67

 

FOR

 

Do not count

 

Vote against

 

Majority of shares present

 

PROPOSAL 5

 

Shareholder proposal regarding shareholder action by written consent

 

Page 69

 

AGAINST

 

Do not count

 

Vote against

 

Majority of shares present

 

PROPOSAL 6

 

Shareholder proposal regarding an amendment to our organizational documents to require majority voting for the election of directors

 

Page 71

 

AGAINST

 

Do not count

 

Vote against

 

Majority of shares present

 

Vote right away


Even if you plan to attend this year's meeting, it is a good idea to vote your shares now, before the meeting, in the event your plans change. Whether you vote by internet, by telephone or by mail, please have your proxy card or voting instruction form in hand and follow the instructions.

 

By internet using your computer
 
By telephone
  By mailing your
proxy card


GRAPHIC

 


GRAPHIC

 


GRAPHIC

Visit 24/7
www.proxyvote.com

 

Dial toll-free 24/7
1-800-690-6903
or by calling the
number provided
by your broker, bank
or other nominee if your shares are not registered in your name

 

Cast your ballot,
sign your proxy card
and send free of postage
 

4    DUKE ENERGY – 2013 Proxy Statement


Back to Contents

PARTICIPATE IN THE FUTURE OF DUKE ENERGY CORPORATION, CAST YOUR VOTE RIGHT AWAY

Visit our website



GRAPHIC

Visit our website
http://www.duke-energy.com/investors/news-events.asp
 

Review and download this proxy statement and our annual report

Listen to a live audio stream of the meeting

Attend our 2013 Annual Meeting of Shareholders




GRAPHIC

 

10:00 a.m. (EST) on Thursday, May 2, 2013
O.J. Miller Auditorium
526 South Church Street
Charlotte, N.C. 28202
  
Directions to 526 South Church Street are provided on the inside back cover.
  
GRAPHIC  526 South Church Street
GRAPHIC  Mint Street Parking Deck
GRAPHIC  Bank of America Stadium

DUKE ENERGY – 2013 Proxy Statement    5


Table of Contents

Table of Contents

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS   11
 

FREQUENTLY ASKED QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING

 

12
 

PROPOSAL 1:

 

ELECTION OF DIRECTORS

 

15
 

INFORMATION ON THE BOARD OF DIRECTORS

 

22
 

REPORT OF THE CORPORATE GOVERNANCE COMMITTEE

 

27
 

DIRECTOR COMPENSATION

 

30
 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

32
 

PROPOSAL 2:

 

RATIFICATION OF DELOITTE & TOUCHE LLP AS DUKE ENERGY CORPORATION'S INDEPENDENT PUBLIC ACCOUNTANT FOR 2013

 

33
 

REPORT OF THE AUDIT COMMITTEE

 

34
 

PROPOSAL 3:

 

ADVISORY VOTE TO APPROVE DUKE ENERGY CORPORATION'S NAMED EXECUTIVE OFFICER COMPENSATION

 

35
 

REPORT OF THE COMPENSATION COMMITTEE

 

36
 

COMPENSATION DISCUSSION AND ANALYSIS

 

36
 

EXECUTIVE COMPENSATION

 

51
 

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL

 

62
 

PROPOSAL 4:

 

APPROVAL OF THE AMENDED DUKE ENERGY CORPORATION EXECUTIVE SHORT-TERM INCENTIVE PLAN

 

67
 

SHAREHOLDER PROPOSALS

 

69
 

PROPOSAL 5:

 

SHAREHOLDER PROPOSAL REGARDING SHAREHOLDER ACTION BY WRITTEN CONSENT

 

69
 

PROPOSAL 6:

 

SHAREHOLDER PROPOSAL REGARDING AN AMENDMENT TO OUR ORGANIZATIONAL DOCUMENTS TO REQUIRE MAJORITY VOTING FOR THE ELECTION OF DIRECTORS

 

71
 

OTHER INFORMATION

 

73
 

APPENDIX A

 

75
 

APPENDIX B

 

77
 

APPENDIX C

 

78
 

6    DUKE ENERGY – 2013 Proxy Statement


Table of Contents

This proxy statement was first made available to shareholders on or about March 21, 2013.

Proxy Summary

This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider. You should read the entire proxy statement carefully before voting. Page references ("XX") are supplied to help you find further information in this proxy statement.

Eligibility to Vote (page 12)

You can vote if you were a shareholder of record at the close of business on March 5, 2013.

How to Cast Your Vote (page 13)

You can vote by any of the following methods:

                 
                 
By internet using your
computer

  By telephone
  By mailing your
proxy card

  In person
   

 

 

 

 

 

 

 

 

 
GRAPHIC
Visit 24/7
www.proxyvote.com
  GRAPHIC
Dial toll-free 24/7
1-800-690-6903
or by calling the
number provided
by your broker, bank
or other nominee if your shares are not registered in your name
  GRAPHIC
Cast your ballot, sign
your proxy card and
send free of postage
  At the annual meeting: If you are a shareholder of record, you may be admitted to the meeting by bringing your proxy card or, if your shares are held in the name of a broker, bank or other nominee, an account statement or letter from the nominee indicating your ownership as of the record date.    
                 

Business Highlights

Duke Energy's regulated utility operations provide electricity to 7.2 million customers located in six states in the Southeast and Midwest United States, representing a population of approximately 12 million people. Our non-regulated businesses own and operate diverse power generation assets in North America and Latin America, including a growing portfolio of renewable energy assets in the United States. Duke Energy operates in the United States, primarily through its direct and indirect wholly-owned subsidiaries, Duke Energy Carolinas, LLC; Progress Energy Carolinas, Inc.; Progress Energy Florida, Inc.; Duke Energy Ohio, Inc.; Duke Energy Kentucky, Inc.; and Duke Energy Indiana, Inc., as well as in Latin America through Duke Energy International, LLC.

Governance of the Company (page 22)

Board Leadership Structure

Meeting Attendance

Risk Oversight

Director Independence

Committees and Attendance

Director Qualification Standards

Criteria for Board Membership

Resignation Policy

Communications with Directors

 

DUKE ENERGY – 2013 Proxy Statement    7


Table of Contents

Board Nominees (page 16)

 
   
   
   
  Independent (Yes/No)    
   
 
   
  Director
since

   
  Committee
Memberships

  Other Public
Company Boards

Name
  Age
  Occupation
  Yes
  No
 
William Barnet, III     70     2005   Chairman, President and CEO of Barnet Development Corporation   X      

Finance and Risk Management

Regulatory Policy and Operations

  None
 
G. Alex Bernhardt, Sr.     69     1991   Chairman of Bernhardt Furniture Company   X      

Audit

Nuclear Oversight

  None
 
Michael G. Browning     66     1990   Chairman and President of Browning Investments, Inc.   X      

Audit

Corporate Governance

Finance and Risk Management

  None
 
Harris E. DeLoach, Jr.     68     2006   Chairman and CEO of Sonoco Products Company   X      

Corporate Governance

Nuclear Oversight

 

Sonoco Products Company

Goodrich Corporation

 
Daniel R. DiMicco     62     2007   Executive Chairman of Nucor Corporation   X      

Compensation

Corporate Governance

 

Nucor Corporation

 
John H. Forsgren     66     2009   Retired Vice Chairman, Executive Vice President and Chief Financial Officer of Northeast Utilities   X      

Audit

Finance and Risk Management

 

The Phoenix Companies, Inc.

 
Ann M. Gray     67     1994   Former Vice President, ABC, Inc. and Former President, Diversified Publishing Group of ABC, Inc.   X      

Compensation

Corporate Governance

Finance and Risk Management

 

The Phoenix Companies, Inc.

 
James H. Hance, Jr.     68     2005   Retired Vice Chairman and Chief Financial Officer of Bank of America Corporation   X      

Compensation

Finance and Risk Management

 

Sprint Nextel Corporation

Cousins Properties Incorporated

Ford Motor Company

The Carlyle Group, LP

 
John T. Herron     60     2013   President, CEO and Chief Nuclear Officer of Entergy Nuclear   X      

Nuclear Oversight

  None
 
James B. Hyler, Jr.     65     2008   Managing Director, Investors Management Corporation   X      

Audit

Finance and Risk Management

  None
 
E. Marie McKee     62     1999   President, Corning Museum of Glass   X      

Compensation

Corporate Governance

  None
 
E. James Reinsch     69     2009   Retired Senior Vice President and Partner, Bechtel Group and Past President of Bechtel Nuclear   X      

Nuclear Oversight

Regulatory Policy and Operations

  None
 
James T. Rhodes     71     2001   Retired Chairman, President and CEO of the Institute of Nuclear Power Operations   X      

Audit

Nuclear Oversight

  None
 
James E. Rogers     65     1988   Chairman, President and CEO of Duke Energy Corporation       X   None  

Applied Materials, Inc.

CIGNA Corporation

 
Carlos A. Saladrigas     64     2001   Chairman and CEO of Regis HR Group   X      

Audit

Regulatory Policy and Operations

 

Advance Auto Parts,  Inc.

 
Philip R. Sharp     70     2007   President of Resources for the Future   X      

Nuclear Oversight

Regulatory Policy and Operations

  None
 

 

8    DUKE ENERGY – 2013 Proxy Statement


Table of Contents

Named Executive Officers* (page 36)

Name
  Age
  Occupation
  Since
  Previous occupation
 

James E. Rogers

   

65

 

Chairman, President and CEO

   

2006

 

Chairman and CEO of Cinergy Corp. prior to its merger with Duke Energy Corporation

 

Lynn J. Good

   

53

 

Executive Vice President and Chief Financial Officer

   

2009

 

President, Commercial Businesses of Duke Energy Corporation from November 2007 until July 2009; Treasurer of Duke Energy Corporation from April 2006 until November 2007; Executive Vice President and Chief Financial Officer of Cinergy Corp. prior to its merger with Duke Energy Corporation

 

Marc E. Manly

   

61

 

Executive Vice President and President, Commercial Businesses

   

2012

 

Chief Legal Officer of Duke Energy Corporation from April 2006 until December 2012; Executive Vice President and Chief Legal Officer of Cinergy Corp. prior to its merger with Duke Energy Corporation

 

Dhiaa M. Jamil

   

56

 

Executive Vice President and President, Duke Energy Nuclear

   

2013

 

Chief Nuclear Officer of Duke Energy Corporation from 2008 until March 2013; Chief Generation Officer of Duke Energy Corporation from July 2009 until March 2013; Senior Vice President, Nuclear Support, Duke Energy Carolinas, LLC from January 2007 to July 2009

 
*
Other Named Executive Officers include the following individuals who are no longer employed by Duke Energy: William D. Johnson, Jeffrey J. Lyash, John R. McArthur and Mark F. Mulhern.

Executive Compensation (page 36)

Principles and Objectives (page 39)

Our executive compensation program is designed to:

Link pay to performance

Attract and retain talented executive officers and key employees

Emphasize performance-based compensation to motivate executives and key employees

Reward individual performance

Encourage long-term commitment to Duke Energy and align the interests of executives with shareholders

We meet these objectives through the appropriate mix of compensation, including:

base salary

short-term incentives

long-term incentives

 

DUKE ENERGY – 2013 Proxy Statement    9


Table of Contents

2012 Executive Total Compensation Mix (page 37)

GRAPHIC

Independent Public Accountant (page 33)

As a matter of good corporate governance, we are asking our shareholders to ratify the selection of Deloitte & Touche LLP as our independent public accountant for 2013.

Voting matters (page 12)

 
  Board Vote
Recommendation

  Page Reference
(for more detail)

 
   
Management Proposals              
Election of Directors     FOR each nominee     15  
   
Ratification of Deloitte & Touche LLP as Duke Energy Corporation's independent public accountant for 2013     FOR     33  
   
Approval, on an advisory basis, of Duke Energy Corporation's named executive officer compensation     FOR     35  
   
Approval of the amended Duke Energy Corporation Executive Short-Term Incentive Plan     FOR     67  
   
Shareholder Proposals              
Shareholder proposal regarding shareholder action by written consent     AGAINST     69  
   
Shareholder proposal regarding an amendment to our organizational documents to require majority voting for the election of directors     AGAINST     71  
   

 

10    DUKE ENERGY – 2013 Proxy Statement


Table of Contents

GRAPHIC


 

 

Notice of Annual Meeting
of Shareholders

May 2, 2013

10:00 a.m.
O.J. Miller Auditorium
526 South Church Street
Charlotte, North Carolina

We will convene the annual meeting of shareholders of Duke Energy Corporation on Thursday, May 2, 2013, at 10:00 a.m. in the O.J. Miller Auditorium located at 526 South Church Street in Charlotte, North Carolina.

The purpose of the annual meeting is to consider and take action on the following:

1.
Election of directors;
2.
Ratification of Deloitte & Touche LLP as Duke Energy Corporation's independent public accountant for 2013;
3.
Approval, on an advisory basis, of Duke Energy Corporation's named executive officer compensation;
4.
Approval of the amended Duke Energy Corporation Executive Short-Term Incentive Plan;
5.
A shareholder proposal regarding shareholder action by written consent;
6.
A shareholder proposal regarding an amendment to our organizational documents to require majority voting for the election of directors; and
7.
Any other business that may properly come before the meeting (or any adjournment or postponement of the meeting).

Shareholders of record as of the close of business on March 5, 2013, are entitled to vote at the annual meeting. It is important that your shares are represented at this meeting.

This year we will again be using the Securities and Exchange Commission rule that allows us to provide our proxy materials to our shareholders via the internet. By doing so, most of our shareholders will only receive a notice containing instructions on how to access the proxy materials via the internet and vote online, by telephone or by mail. If you would like to request paper copies of the proxy materials, you may follow the instructions on the notice. If you receive paper copies of the proxy materials, we ask you to consider signing up to receive these materials electronically in the future by following the instructions contained in this proxy statement. By delivering proxy materials electronically, we can reduce the consumption of natural resources and the cost of printing and mailing our proxy materials.

Whether or not you expect to be present at the annual meeting, please take time to vote now. If you choose to vote by mail, you may do so by marking, dating and signing the proxy card and returning it to us. Please follow the voting instructions that are included on your proxy card. Regardless of the manner in which you vote, we urge and greatly appreciate your prompt response.

Dated: March 21, 2013   By order of the Board of Directors,

 

 


GRAPHIC
    Julia S. Janson
Executive Vice President, Chief Legal Officer and Corporate Secretary

DUKE ENERGY – 2013 Proxy Statement    11


Table of Contents

FREQUENTLY ASKED QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING

On what am I voting?


 
   
  More
information

  Board
recommendation

  Broker non-votes
  Abstentions
  Votes
required
for approval

 

PROPOSAL 1

 

Election of directors

 

Page 15

 

FOR each
nominee

 

Do not count

 

Do not count

 

Plurality, with
a resignation
policy

 

PROPOSAL 2

 

Ratification of Deloitte & Touche LLP as Duke Energy Corporation's independent public accountant for 2013

 

Page 33

 

FOR

 

Vote for

 

Vote against

 

Majority of
shares
present

 

PROPOSAL 3

 

Approval, on an advisory basis, of Duke Energy Corporation's named executive officer compensation

 

Page 35

 

FOR

 

Do not count

 

Vote against

 

Majority of
shares
present

 

PROPOSAL 4

 

Approval of the amended Duke Energy Corporation Executive Short-Term Incentive Plan

 

Page 67

 

FOR

 

Do not count

 

Vote against

 

Majority of
shares
present

 

PROPOSAL 5

 

Shareholder proposal regarding shareholder action by written consent

 

Page 69

 

AGAINST

 

Do not count

 

Vote against

 

Majority of
shares
present

 

PROPOSAL 6

 

Shareholder proposal regarding an amendment to our organizational documents to require majority voting for the election of directors

 

Page 71

 

AGAINST

 

Do not count

 

Vote against

 

Majority of
shares
present

 

Who can vote?


Holders of Duke Energy's common stock as of the close of business on the record date, March 5, 2013, are entitled to vote, either in person or by proxy, at the annual meeting. Each share of Duke Energy common stock has one vote.

12    DUKE ENERGY – 2013 Proxy Statement


Back to Contents

FREQUENTLY ASKED QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING

How do I vote?


By Proxy – Before the annual meeting, you can give a proxy to vote your shares of Duke Energy common stock in one of the following ways:

           
           
  By internet using your computer
  By telephone
  By mailing your proxy card
 
GRAPHIC
 
GRAPHIC
 
GRAPHIC

 

Visit 24/7
www.proxyvote.com

 

Dial toll-free 24/7
1-800-690-6903
or by calling the
number provided
by your broker, bank
or other nominee if your shares
are not registered in your name

 

Cast your ballot,
sign your proxy card
and send free of postage
           

The telephone and internet voting procedures are designed to confirm your identity, to allow you to give your voting instructions and to verify that your instructions have been properly recorded. If you wish to vote by telephone or internet, please follow the instructions that are included on your notice.

If you mail us your properly completed and signed proxy card, or vote by telephone or internet, your shares of Duke Energy common stock will be voted according to the choices that you specify. If you sign and mail your proxy card without marking any choices, your proxy will be voted:

FOR the election of all nominees for director;

FOR the ratification of Deloitte & Touche LLP as Duke Energy's independent public accountant for 2013;

FOR the approval, on an advisory basis, of Duke Energy's named executive officer compensation;

FOR the approval of the amended Duke Energy Corporation Executive Short-Term Incentive Plan;

AGAINST the shareholder proposal regarding shareholder action by written consent; and

AGAINST the shareholder proposal regarding an amendment to our organizational documents to require majority voting for the election of directors;

We do not expect that any other matters will be brought before the annual meeting. However, by giving your proxy, you appoint the persons named as proxies as your representatives at the annual meeting.

In Person – You may come to the annual meeting and cast your vote there. You may be admitted to the meeting by bringing your proxy card or, if your shares are held in the name of your broker, bank or other nominee, you must bring an account statement or letter from the nominee indicating that you were the owner of the shares on March 5, 2013.

May I change or revoke my vote?


Yes. You may change your vote or revoke your proxy at any time prior to the annual meeting by:

notifying Duke Energy's Corporate Secretary in writing that you are revoking your proxy;

providing another signed proxy that is dated after the proxy you wish to revoke;

using the telephone or internet voting procedures; or

attending the annual meeting and voting in person.

Will my shares be voted if I do not provide my proxy?


It depends on whether you hold your shares in your own name or in the name of a bank or brokerage firm. If you hold your shares directly in your own name, they will not be voted unless you provide a proxy or vote in person at the meeting.

Brokerage firms generally have the authority to vote customers' unvoted shares on certain "routine" matters. If your shares are held in the name of a broker, bank or other nominee, such nominee can vote your shares for the ratification of Deloitte & Touche LLP as Duke Energy's independent public accountant for 2013 if you do not timely provide your proxy because this matter is considered "routine" under the applicable rules. However, no other items are considered "routine" and may not be voted by your broker without your instruction.

DUKE ENERGY – 2013 Proxy Statement    13


Back to Contents

FREQUENTLY ASKED QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING

If I am a participant in the Duke Energy Retirement Savings Plan, the Progress Energy 401(k) Savings & Stock Ownership Plan or the Savings Plan for Employees of Florida Progress Corporation, how do I vote shares held in my plan account?


If you are a participant in any of the plans listed above, you have the right to provide voting directions to the plan trustee, by submitting your proxy card, for those shares of Duke Energy common stock that are held by the plan and allocated to your account. Plan participant proxies are treated confidentially.

If you elect not to provide voting directions to the plan trustee, the plan trustee will vote the Duke Energy shares allocated to your plan account in the same proportion as those shares held by the plan for which the plan trustee has received voting directions from other plan participants. The plan trustee will follow participants' voting directions and the plan procedure for voting in the absence of voting directions, unless it determines that to do so would be contrary to the Employee Retirement Income Security Act of 1974.

The plan trustee for each of the respective plans is as follows:

Duke Energy Retirement Savings Plan – Fidelity Management Trust Company

Progress Energy 401(k) Savings & Stock Ownership Plan – State Street Bank & Trust Company, N.A.

Savings Plan for Employees of Florida Progress Corporation – Vanguard Fiduciary Trust Company

Because the plan trustee must process voting instructions from participants before the date of the annual meeting, you must deliver your instructions no later than April 29, 2013.

What constitutes a quorum?


As of the record date, 705,473,667 shares of Duke Energy common stock were issued and outstanding and entitled to vote at the annual meeting. In order to conduct the annual meeting, a majority of the shares entitled to vote must be present in person or by proxy. This is referred to as a "quorum." If you submit a properly executed proxy card or vote by telephone or on the internet, you will be considered part of the quorum. Abstentions and broker "non-votes" will be counted as present and entitled to vote for purposes of determining a quorum. A broker "non-vote" is not, however, counted as present and entitled to vote for purposes of voting on individual proposals other than ratification of Deloitte & Touche LLP as Duke Energy's independent public accountant. A broker "non-vote" occurs when a bank, broker or other nominee who holds shares for another person has not received voting instructions from the owner of the shares and, under NYSE listing standards, does not have discretionary authority to vote on a matter.

What vote is needed to approve the matters submitted?


Election of Directors. Directors are elected by a plurality of the votes cast at the meeting, subject to the Board of Directors' policy regarding resignations for directors who do not receive a majority of 'FOR' votes. 'Plurality' means that the nominees receiving the largest number of votes cast are elected as directors up to the maximum number of directors to be chosen at the meeting. Abstentions and broker non-votes will have no effect on the outcome of the vote for this proposal. If any nominee does not receive a majority of "FOR" votes, such nominee is required to submit his or her resignation for consideration by the Board of Directors.

Ratification of Deloitte & Touche LLP as Duke Energy's independent public accountant for 2013. The affirmative vote of a majority of the shares present and entitled to vote at the annual meeting is required to approve this proposal. Abstentions will have the same effect as votes against this proposal. Broker non-votes will have the same effect as votes for this proposal.

Approval, on an advisory basis, of Duke Energy's named executive officer compensation. The affirmative vote of a majority of shares present and entitled to vote at the annual meeting is required to approve this proposal. Abstentions will have the same effect as votes against this proposal. Broker non-votes will have no effect on the outcome of the vote for this proposal.

Approval of the amended Duke Energy Corporation Executive Short-Term Incentive Plan. The affirmative vote of a majority of shares present and entitled to vote at the annual meeting is required to approve this proposal. Abstentions will have the same effect as votes against this proposal. Broker non-votes will have no effect on the outcome of the vote for this proposal.

Shareholder proposal regarding shareholder action by written consent. The affirmative vote of a majority of the shares present and entitled to vote at the annual meeting is required to approve this proposal. Abstentions will have the same effect as votes against this proposal. Broker non-votes will have no effect on the outcome of the vote for this proposal.

Shareholder proposal regarding an amendment to our organizational documents to require majority voting for the election of directors. The affirmative vote of a majority of the shares present and entitled to vote at the annual meeting is required to approve this proposal. Abstentions will have the same effect as votes against this proposal. Broker non-votes will have no effect on the outcome of the vote for this proposal.

Who conducts the proxy solicitation and how much will it cost?


Duke Energy is requesting your proxy for the annual meeting and will pay all the costs of requesting shareholder proxies. We have hired Georgeson Inc. to help us send out the proxy materials and request proxies. Georgeson's fee for these services is $21,000, plus out-of-pocket expenses. We can request proxies through the mail or personally by telephone, fax or other means. We can use directors, officers and other employees of Duke Energy to request proxies. Directors, officers and other employees will not receive additional compensation for these services. We will reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding solicitation material to the beneficial owners of Duke Energy common stock.

14    DUKE ENERGY – 2013 Proxy Statement


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PROPOSAL 1:     ELECTION OF DIRECTORS

The Board of Directors


The Board of Directors of Duke Energy has nominated the following 16 candidates to serve on the Board. We have a declassified Board of Directors, which means all of the directors are voted on every year at the annual meeting.

If any director is unable to stand for election, the Board of Directors may reduce the number of directors or designate a substitute. In that case, shares represented by proxies may be voted for a substitute director. We do not expect that any nominee will be unavailable or unable to serve. The Corporate Governance Committee, comprised of only independent directors, has recommended each of the current directors as nominees for director and the Board of Directors has approved their nomination for election.

GRAPHIC

DUKE ENERGY – 2013 Proxy Statement    15


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PROPOSAL 1:    ELECTION OF DIRECTORS

William Barnet, III

Independent Director Nominee        


GRAPHIC

 

Age: 70
Director of Duke Energy or its predecessor companies since 2005
Chairman, President and Chief Executive Officer
Barnet Development Corporation

  Skills and Qualifications:

Mr. Barnet's qualifications for election include his management experience, his understanding of Duke Energy's South Carolina service territory, and his knowledge of finance and risk management.

  Committees:

Finance and Risk Management Committee

Regulatory Policy and Operations Committee

Other current public directorships:

None


Mr. Barnet has served as Chairman, President and CEO of Barnet Development Corporation since 1990 and had served as Chairman, President and CEO of the Barnet Company Inc. from 2001 until its dissolution in 2011. Both companies are real estate and investment firms. Mr. Barnet served two terms as mayor of Spartanburg, S.C. and is a former director of Bank of America. In March 2006, Mr. Barnet was named as a Trustee of the Duke Endowment.

G. Alex Bernhardt, Sr.

Independent Director Nominee        


GRAPHIC

 

Age: 69
Director of Duke Energy or its predecessor companies since 1991
Chairman
Bernhardt Furniture Company

  Skills and Qualifications:

Mr. Bernhardt's qualifications for election include his management experience and his knowledge and understanding of industry in Duke Energy's North Carolina service territory.

  Committees:

Audit Committee

Nuclear Oversight Committee

Other current public directorships:

None


Mr. Bernhardt has been associated with Bernhardt Furniture Company, a furniture manufacturer, since 1965. He has served as Chairman since 1996 and a director since 1976. Previously he served as President from 1976 until 1996 and CEO from 1996 until 2011. Mr. Bernhardt is a director of Communities In Schools and the North Carolina Nature Conservancy.

Michael G. Browning

Independent Director Nominee        


GRAPHIC

 

Age: 66
Director of Duke Energy or its predecessor companies since 1990
Chairman and President
Browning Investments, Inc.

  Skills and Qualifications:

Mr. Browning's qualifications for election include his management experience and his knowledge and understanding of Duke Energy's Midwest service territory. Mr. Browning's financial and investment background adds a valuable perspective to the Board and its committees.

  Committees:

Audit Committee

Corporate Governance Committee

Finance and Risk Management Committee

Other current public directorships:

None


Mr. Browning has been Chairman and President of Browning Investments, Inc., a real estate development firm, since 1981. He also serves as owner, general partner or managing member of various real estate entities. Mr. Browning is a former director of Standard Management Corporation, Conseco, Inc. and Indiana Financial Corporation.

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PROPOSAL 1:    ELECTION OF DIRECTORS


Harris E. DeLoach, Jr.

Independent Director Nominee        


GRAPHIC

 

Age: 68
Director of Duke Energy or its predecessor companies since 2006
Chairman and Chief Executive Officer
Sonoco Products Company

  Skills and Qualifications:

Mr. Deloach's qualifications for election include his first-hand knowledge of the economic and business development issues facing the communities we serve, his experience leading a public company with global operations and his understanding of Duke Energy's South Carolina service territory.

  Committees:

Corporate Governance Committee

Nuclear Oversight Committee

Other current public directorships:

Sonoco Products Company

Goodrich Corporation


Mr. DeLoach has served as Chief Executive Officer of Sonoco Products Company, a manufacturer of paperboard and paper and plastic packaging products, since July 2000. Mr. DeLoach has been Chairman of the Sonoco Products Board of Directors since April 2005. Prior to joining Sonoco Products in 1986, Mr. DeLoach was in private law practice and served as an outside counsel to Sonoco Products for 15 years.

Mr. DeLoach has announced his plan to retire as Chief Executive Officer of Sonoco Products as of March 31, 2013. He will remain as Executive Chairman.

Daniel R. DiMicco

Independent Director Nominee        


GRAPHIC

 

Age: 62
Director of Duke Energy or its predecessor companies since 2007
Executive Chairman
Nucor Corporation

  Skills and Qualifications:

Mr. DiMicco's qualifications for election include his management experience, including Chief Executive Officer of a Fortune 500 company and successfully operating a company serving many constituencies. In addition, Mr. DiMicco's experience as Chief Executive Officer of a large industrial corporation provides a valuable perspective on Duke Energy's industrial customer class.

  Committees:

Compensation Committee

Corporate Governance Committee

Other current public directorships:

Nucor Corporation


Mr. DiMicco served as President and Chief Executive Officer of Nucor Corporation, a steel company, from 2000 until December 31, 2012. He has been a member of the Nucor Board of Directors since 2000 and has served as its Chairman since 2006. Mr. DiMicco is a former chair of the American Iron and Steel Institute.

John H. Forsgren

Independent Director Nominee        


GRAPHIC

 

Age: 66
Director of Duke Energy or its predecessor companies since 2009
Retired Vice Chairman, Executive Vice President and Chief Financial Officer
Northeast Utilities

  Skills and Qualifications:

Mr. Forsgren's qualifications for election include his management and financial experience as Vice Chairman and Chief Financial Officer of a large utility company, and his extensive knowledge of the energy industry and insight on renewable energy.

  Committees:

Audit Committee

Finance and Risk Management Committee

Other current public directorships:

The Phoenix Companies, Inc.


Mr. Forsgren was Vice Chairman, Executive Vice President and Chief Financial Officer of Northeast Utilities from 1996 until his retirement in 2004. He is a former director of CuraGen Corporation and Neon Communications Group,  Inc.

DUKE ENERGY – 2013 Proxy Statement    17


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PROPOSAL 1:    ELECTION OF DIRECTORS


Ann M. Gray

Independent Director Nominee
Lead Director
       


GRAPHIC

 

Age: 67
Director of Duke Energy or its predecessor companies since 1994
Former Vice President, ABC, Inc. and Former President, Diversified Publishing Group of ABC, Inc.

  Skills and Qualifications:

Ms. Gray's qualifications for election include her business experience, both from a management perspective and as a result of her experience as a director at several public companies. Ms. Gray's public company experience has also given her in-depth knowledge of governance principles, which she utilizes on a variety of matters, including, among other things, succession planning, executive compensation and corporate governance.

  Committees:

Compensation Committee

Corporate Governance Committee

Finance and Risk Management Committee

Other current public directorships:

The Phoenix Companies, Inc.


Ms. Gray was President, Diversified Publishing Group of ABC, Inc., a television, radio and publishing company, from 1991 until 1997, and was a Corporate Vice President of ABC, Inc. and its predecessors from 1979 to 1998. Ms. Gray is a former director of Elan Corporation, plc and former trustee of JPMorgan Funds.

James H. Hance, Jr.

Independent Director Nominee        


GRAPHIC

 

Age: 68
Director of Duke Energy or its predecessor companies since 2005
Retired Vice Chairman and Chief Financial Officer
Bank of America Corporation

  Skills and Qualifications:

Mr. Hance's qualifications for election include his management and financial experience as Vice Chairman and Chief Financial Officer of one of our nation's largest financial institutions, his broad background as a director of a number of large financial and industrial corporations, and his expertise in finance.

  Committees:

Compensation Committee

Finance and Risk Management Committee

Other current public directorships:

Cousins Properties Incorporated

Ford Motor Company

Sprint Nextel Corporation

The Carlyle Group, LP


Mr. Hance was Vice Chairman of Bank of America from 1994 until his retirement in 2005 and served as Chief Financial Officer from 1988 to 2004. Since retiring in 2005, Mr. Hance has served as a director for various public companies. Mr. Hance is a certified public accountant and spent 17 years with Price Waterhouse (now PricewaterhouseCoopers LLP). He is a former director of Bank of America, Rayonier Inc., Morgan Stanley and EnPro Industries, Inc. Mr. Hance also serves as an operating executive of The Carlyle Group, LP and is a member of its board of directors.

John T. Herron

Independent Director Nominee        


GRAPHIC

 

Age: 60
Director of Duke Energy or its predecessor companies since March 1, 2013
President, CEO and Chief Nuclear Officer
Entergy Nuclear

  Skills and Qualifications:

Mr. Herron's qualifications for election include his knowledge and extensive insight gained at a variety of nuclear energy facilities over more than three decades, as well his previous management experience in the energy industry.

  Committees:

Nuclear Oversight Committee

Other current public directorships:

None


Mr. Herron has served as President, Chief Executive Officer and Chief Nuclear Officer of Entergy Nuclear since 2009. Mr. Herron joined Entergy Nuclear in 2001 and has held a variety of positions. He began his career in nuclear operations in 1979 and has held positions at a number of nuclear stations across the country. Mr. Herron also has served on the Institute of Nuclear Power Operations' board of directors. Mr. Herron has announced his retirement from Entergy Nuclear effective March 31, 2013.

18    DUKE ENERGY – 2013 Proxy Statement


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PROPOSAL 1:    ELECTION OF DIRECTORS


James B. Hyler, Jr.

Independent Director Nominee        


GRAPHIC

 

Age: 65
Director of Duke Energy or its predecessor companies since 2008
Managing Director
Investors Management Corporation

  Skills and Qualifications:

Mr. Hyler's qualifications for election include his understanding of Duke Energy's North Carolina service territory, and his knowledge and expertise in financial services and corporate finance.

  Committees:

Audit Committee

Finance and Risk Management Committee

Other current public directorships:

None


Mr. Hyler is Managing Director of Investors Management Corporation, a firm which invests in and acquires companies in various industries, since December 2011. He retired as Vice Chairman and Chief Operating Officer of First Citizens Bank in 2008, having served in these positions from 1994 until 2008. Mr. Hyler was President of First Citizens Bank from 1988 to 1994, and was Chief Financial Officer of First Citizens Bank from 1980 to 1988. Prior to joining First Citizens Bank, Mr. Hyler was an auditor with Ernst & Young for 10 years. Mr. Hyler served as a director of First Citizens BancShares from 1988 until 2008.

E. Marie McKee

Independent Director Nominee        


GRAPHIC

 

Age: 62
Director of Duke Energy or its predecessor companies since 1999
President
Corning Museum of Glass

  Skills and Qualifications:

Ms. McKee's qualifications for election include her experience in human resources which provides her with a thorough knowledge of employment and compensation practices.

  Committees:

Compensation Committee

Corporate Governance Committee

Other current public directorships:

None


Ms. McKee is President of the Corning Museum of Glass, since 1998, and served as Senior Vice President of Human Resources at Corning Incorporated, a manufacturer of components for high-technology systems for consumer electronics, mobile emissions controls, telecommunications and life sciences, from 1996 to 2010. Ms. McKee has over 30 years of experience at Corning where she held a variety of management positions with increasing levels of responsibility.

E. James Reinsch

Independent Director Nominee        


GRAPHIC

 

Age: 69
Director of Duke Energy or its predecessor companies since 2009
Retired Senior Vice President and Partner
Bechtel Group

  Skills and Qualifications:

Mr. Reinsch's qualifications for election include his management experience and extensive knowledge of the nuclear industry and construction business.

  Committees:

Nuclear Oversight Committee

Regulatory Policy and Operations Committee

Other current public directorships:

None


Mr. Reinsch was Senior Vice President and Partner of Bechtel Group from 2003 to 2008 and past president of Bechtel Nuclear from 2000 until his retirement in 2009. He has served on the boards of several international nuclear energy organizations, including the International Nuclear Energy Academy. He has also served on the U.S. Department of Energy's Hydrogen and Fuel Cell Technical Advisory Committee.

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PROPOSAL 1:    ELECTION OF DIRECTORS


James T. Rhodes

Independent Director Nominee        


GRAPHIC

 

Age: 71
Director of Duke Energy or its predecessor companies since 2001
Retired Chairman, President and Chief Executive Officer
Institute of Nuclear Power Operations

  Skills and Qualifications:

Dr. Rhodes' qualifications for election include his management experience as Chief Executive Officer of a large non-profit organization in the energy industry, as well as his in-depth knowledge of the energy and nuclear industry.

  Committees:

Audit Committee

Nuclear Oversight Committee

Other current public directorships:

None


Dr. Rhodes was Chairman and CEO of the Institute of Nuclear Power Operations, a nonprofit corporation promoting safety, reliability and excellence in nuclear plant operation, from 1998 to 1999 and Chairman, President and CEO from 1999 until his retirement in 2001. He served as President and CEO of Virginia Electric & Power Company, a subsidiary of Dominion Resources, Inc., from 1989 until 1997. Dr. Rhodes is a former member of the Advisory Council for the Electric Power Research Institute.

James E. Rogers


GRAPHIC

 

Age: 65
Director of Duke Energy or its predecessor companies since 1988
Chairman, President and Chief Executive Officer
Duke Energy Corporation

  Skills and Qualifications:

Mr. Rogers' qualifications for election include his 25 years as Chief Executive Officer of a utility company, and his expertise in the energy industry, the affairs of the Company and its businesses.

  Committees:

None

Other current public directorships:

Applied Materials,  Inc.

CIGNA Corporation


Mr. Rogers has served as President, CEO and a member of the Board of Directors of Duke Energy since its merger with Cinergy Corp. in 2006 and has served as Chairman since 2007. Mr. Rogers was Chairman and CEO of Cinergy Corp. from 1994 until its merger with Duke Energy. He was formerly Chairman, President and CEO of PSI Energy, Inc. from 1988 until 1994. Mr. Rogers is a former director of Fifth Third Bancorp.

Mr. Rogers has announced his plans to retire as Chief Executive Officer of Duke Energy Corporation by December 31, 2013.

Carlos A. Saladrigas

Independent Director Nominee        


GRAPHIC

 

Age: 64
Director of Duke Energy or its predecessor companies since 2001
Chairman and Chief Executive Officer
Regis HR Group

  Skills and Qualifications:

Mr. Saladrigas' qualifications for election include his extensive expertise in the human resources, financial services and accounting arenas, as well as his understanding of Duke Energy's Florida service territory.

  Committees:

Audit Committee

Regulatory Policy and Operations Committee

Other current public directorships:

Advance Auto Parts, Inc


Mr. Saladrigas is Chairman and Chief Executive Officer of Regis HR Group, which offers a full suite of outsourced human resources services to small and mid-sized businesses. He has served in these positions since July 2008. Mr. Saladrigas also serves as Chairman and Chief Executive Officer of Concordia Holdings, Inc., which specializes in managed behavioral health, since January 2011. He served as Vice Chairman, from 2007 to 2008, and Chairman, from 2002 to 2007, of Premier American Bank in Miami, Florida. In 2002, Mr. Saladrigas retired as Chief Executive Officer of ADP Total Source (previously the Vincam Group, Inc.).

20    DUKE ENERGY – 2013 Proxy Statement


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PROPOSAL 1:    ELECTION OF DIRECTORS


Philip R. Sharp

Independent Director Nominee        


GRAPHIC

 

Age: 70
Director of Duke Energy or its predecessor companies since 2007
President
Resources for the Future

  Skills and Qualifications:

Dr. Sharp's qualifications for election include broad experience in government, including regulatory and legislative processes, as well as his understanding of governmental relations, public policy and the energy industry.

  Committees:

Nuclear Oversight Committee

Regulatory Policy and Operations Committee

Other current public directorships:

None


Dr. Sharp has served as President of Resources for the Future since 2005. He joined Duke Energy's Board of Directors in 2007, having previously served on the board of directors of one of its predecessor companies from 1995 to 2006. Dr. Sharp was a member of Congress from Indiana for 20 years, serving on the House Energy and Commerce Committee. He served on the Blue Ribbon Commission on America's Nuclear Future and as Congressional Chair of the non-profit National Commission on Energy Policy.

The Board of Directors Recommends a Vote "For" Each Nominee.

DUKE ENERGY – 2013 Proxy Statement    21


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INFORMATION ON THE BOARD OF DIRECTORS

GRAPHIC

Our Board Leadership

Our Board is currently structured with both a Chairman and CEO and with an independent lead director.

Our Board believes that combining the Chairman and Chief Executive Officer roles fosters clear accountability, effective decision-making, and alignment on corporate strategy, while complementing effective independent oversight through an independent lead director.

James E. Rogers is currently our Chairman of the Board, President and Chief Executive Officer.

The Board of Directors has appointed Ann M. Gray as independent lead director.

Our independent lead director is responsible for:

leading, in conjunction with the Corporate Governance Committee, the process for review of the Chief Executive Officer and Board,

presiding at Board of Directors' meetings when the Chairman is not present,

presiding at executive sessions of the non-management directors,

assisting in the setting of the Board of Directors' meeting agendas with the Chairman, and

serving as a liaison between the independent directors and the Chairman and the Chief Executive Officer.

Our Chairman, President and Chief Executive Officer, James E. Rogers, has announced his plan to retire by the end of 2013. Our Board of Directors has formed a committee to begin a search for a new Chief Executive Officer and, in connection with such search, has engaged an independent consultant to assist. As part of this effort, our Board will be discussing whether a combined Chairman and Chief Executive Officer continues to be the best structure for the Company going forward.

22    DUKE ENERGY – 2013 Proxy Statement


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INFORMATION ON THE BOARD OF DIRECTORS

Director Attendance

The Board of Directors of Duke Energy met 15 times during 2012, and has met 2 times so far in 2013. The overall attendance percentage for our directors was approximately 98% in 2012, and no director attended less than 75% of the total of the Board of Directors' meetings and the meetings of the committees upon which he or she served in 2012. Directors are encouraged to attend the annual meeting of shareholders. All members of the Board of Directors attended Duke Energy's last annual meeting of shareholders on May 3, 2012.

Risk Oversight

The Board is actively involved in the oversight of risks that could affect Duke Energy. This oversight is conducted primarily through the Finance and Risk Management Committee of the Board but also through the other committees of the Board, as appropriate. See below for descriptions of each of the committees. The Board and its committees, including the Finance and Risk Management Committee, satisfy its risk oversight responsibility through reports by each committee chair regarding the committee's considerations and actions, as well as through regular reports directly from officers responsible for oversight of particular risks within Duke Energy.

Independence of Directors

The Board of Directors may determine a director to be independent if the Board of Directors has affirmatively determined that the director has no material relationship with Duke Energy or its subsidiaries (references in this proxy statement to Duke Energy's subsidiaries shall mean its consolidated subsidiaries), either directly or as a shareholder, director, officer or employee of an organization that has a relationship with Duke Energy or its subsidiaries. Independence determinations are generally made on an annual basis at the time the Board of Directors approves director nominees for inclusion in the annual proxy statement and, if a director joins the Board of Directors in the interim, at such time.

The Board also considers its Standards for Assessing Director Independence which set forth certain relationships between Duke Energy and directors and their immediate family members, or affiliated entities, that the Board, in its judgment, has deemed to be material or immaterial for purposes of assessing a director's independence. In the event a director has a relationship with Duke Energy that is not addressed in the Standards for Assessing Director Independence, the independent members of the Board determine whether such relationship is material.

The Board of Directors has determined that none of the directors, other than Mr. Rogers, has a material relationship with Duke Energy or its subsidiaries, and all are, therefore, independent under the listing standards of the NYSE and the rules and regulations of the SEC. In arriving at this determination, the Board of Directors considered all transactions and the materiality of any relationship with Duke Energy and its subsidiaries in light of all facts and circumstances.

For Mr. DiMicco, the Board considered his position at Nucor Corporation ("Nucor") and its relationship with Duke Energy Indiana, Inc. ("Duke Energy Indiana") as Nucor's electric service provider to one of its plants located in the Duke Energy Indiana service territory. See Related Person Transactions on page 73 for further information. This relationship was deemed not to impair Mr. DiMicco's independence as the amount received by Duke Energy in each of the last three years is less than 2% of Nucor's consolidated gross revenues, which is the threshold that could impair independence under the rules of the NYSE and our Standards for Assessing Director Independence. In addition to these relationships, the Board considered that Duke Energy in the ordinary course of business purchases products and services from, or provides electric service to, companies at which some of our directors are officers.

DUKE ENERGY – 2013 Proxy Statement    23


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INFORMATION ON THE BOARD OF DIRECTORS

Board of Directors' Committees

The Board of Directors has the six standing, permanent committees described below:

Audit Committee

10 meetings held in 2012

Committee Chairperson
  Committee Members
   

PHOTO
  G. Alex Bernhardt, Sr.
Michael G. Browning
John H. Forsgren
James B. Hyler, Jr.
James T. Rhodes
   

Carlos A. Saladrigas

The Audit Committee selects and retains a firm of independent public accountants to conduct audits of the accounts of Duke Energy and its subsidiaries. It also reviews with the independent public accountant the scope and results of their audits, as well as the accounting procedures, internal controls, and accounting and financial reporting policies and practices of Duke Energy and its subsidiaries, and makes reports and recommendations to the Board of Directors as it deems appropriate. The Audit Committee is responsible for approving all audit and permissible non-audit services provided to Duke Energy by its independent public accountant. Pursuant to this responsibility, the Audit Committee adopted the policy on Engaging the Independent Auditor for Services, which provides that the Audit Committee will establish detailed services and related fee levels that may be provided by the independent public accountant and will review such policy annually. See page 33 for additional information on the Audit Committee's pre-approval policy.

The Board of Directors has determined that Mr. Saladrigas is an "audit committee financial expert" as such term is defined in Item 407(d)(5)(ii) of Regulation S-K. See page 20 for a description of his business experience.

Each member of the Audit Committee has been determined to be "independent" within the meaning of the NYSE's listing standards, Rule 10A-3 of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the Company's Standards for Assessing Director Independence. In addition, each of these members meets the financial literacy requirements for audit committee membership under the NYSE's rules and the rules and regulations of the SEC.

Compensation Committee

10 meetings held in 2012

Committee Chairperson
  Committee Members
   

PHOTO
  Daniel R. DiMicco
Ann M. Gray
James H. Hance, Jr.
   

E. Marie McKee

The Compensation Committee establishes and reviews the overall compensation philosophy of the Company, reviews and approves the salaries and other compensation of certain employees, including all executive officers of Duke Energy, reviews and approves compensatory agreements with executive officers, approves equity grants and reviews the effectiveness of, and approves changes to, compensation programs. This committee also makes recommendations to the Board of Directors on compensation for outside directors.

Management's role in the compensation-setting process is to recommend compensation programs and assemble information as required by the committee. When establishing the compensation program for our named executive officers, the committee considers input and recommendations from management, including Mr. Rogers, who attends the Compensation Committee meetings.

This committee has engaged Frederic W. Cook & Company, Inc. as its independent compensation consultant. The compensation consultant generally attends each committee meeting, provides advice to the committee at the meetings, including reviewing and

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INFORMATION ON THE BOARD OF DIRECTORS

    commenting on market compensation data used to establish the compensation of the executive officers and directors. The consultant has been instructed that it shall provide completely independent advice to the committee and is not permitted to provide any services to Duke Energy other than at the direction of the committee.

Each of the members has been determined to be "independent" within the meaning of the NYSE's listing standards and the Company's Standards for Assessing Director Independence, to be "outside directors" within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code") and, other than Mr. DiMicco, to be "non-employee directors" within the meaning of Rule 16b-3 of the Exchange Act.

Corporate Governance Committee

9 meetings held in 2012

Committee Chairperson
  Committee Members
   

PHOTO
  Michael G. Browning
Harris E. DeLoach, Jr.
Daniel R. DiMicco
E. Marie McKee
   

Ann M. Gray

The Corporate Governance Committee considers matters related to corporate governance and formulates and periodically revises governance principles. It recommends the size and composition of the Board of Directors and its committees and recommends potential successors to the Chief Executive Officer. This committee also recommends to the Board of Directors the slate of nominees, including any nominees recommended by shareholders, for director for each year's annual meeting and, when vacancies occur, names of individuals who would make suitable directors of Duke Energy. This committee may engage an external search firm or a third party to identify or evaluate or to assist in identifying or evaluating a potential nominee. The committee also performs an annual evaluation of the performance of the Chief Executive Officer with input from the full Board of Directors.

Each of these members has been determined to be "independent" within the meaning of the NYSE's listing standards and the Company's Standards for Assessing Director Independence.

Finance and Risk Management Committee

6 meetings in 2012

Committee Chairperson
  Committee Members
   

PHOTO
  William Barnet, III
Michael G. Browning
John H. Forsgren
Ann M. Gray
James B. Hyler, Jr.
   

James H. Hance, Jr.

The Finance and Risk Management Committee is primarily responsible for the oversight of risk at the Company. This oversight function includes reviews of Duke Energy's financial and fiscal affairs and makes recommendations to the Board of Directors regarding dividends, financing and fiscal policies, and significant transactions. It reviews the financial exposure of Duke Energy, as well as mitigation strategies, reviews Duke Energy's risk exposure as related to overall company portfolio and impact on earnings, and reviews the financial impacts of major projects as well as capital expenditures.

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INFORMATION ON THE BOARD OF DIRECTORS

Nuclear Oversight Committee

8 meetings held in 2012

Committee Chairperson
  Committee Members
   

PHOTO
  G. Alex Bernhardt, Sr.
Harris E. DeLoach, Jr.
John T. Herron
E. James Reinsch
Philip R. Sharp
   

James T. Rhodes

The Nuclear Oversight Committee provides oversight of the nuclear safety, operational and financial performance, and long-term plans and strategies of Duke Energy's nuclear power program. The oversight role is one of review, observation and comment and in no way alters management's authority, responsibility or accountability.

Regulatory Policy and Operations Committee

4 meetings in 2012

Committee Chairperson
  Committee Members
   

PHOTO
  William Barnet, III
E. James Reinsch
Carlos A. Saladrigas
   

Philip R. Sharp

The Regulatory Policy and Operations Committee provides oversight of Duke Energy's regulatory strategy, including non-nuclear regulated utilities' operations, environmental, heath and safety issues and public policy position.

Each committee operates under a written charter adopted by the Board of Directors. The charters are posted on our website at http://www.duke-energy.com/corporate-governance/board-committee-charters.asp.

BOARD OF DIRECTORS COMMITTEE MEMBERSHIP ROSTER (AS OF MARCH 21, 2013)

Name
  Audit
  Compensation
  Corporate
Governance

  Finance and Risk
Management

  Nuclear
Oversight

  Regulatory Policy and
Operations  

 

William Barnet, III

              X       X

G. Alex Bernhardt, Sr.

  X               X    

Michael G. Browning

  X       X   X        

Harris E. DeLoach, Jr.

          X       X    

Daniel R. DiMicco

      X   X            

John H. Forsgren

  X           X        

Ann M. Gray

      X    X*   X        

James H. Hance, Jr.

      X        X*        

John T. Herron

                  X    

James B. Hyler, Jr.

  X           X        

E. Marie McKee

       X*   X            

E. James Reinsch

                  X   X

James T. Rhodes

  X                X*    

James E. Rogers

                       

Carlos A. Saladrigas

   X*                   X

Philip R. Sharp

                  X    X*
 
*
Committee Chair

26    DUKE ENERGY – 2013 Proxy Statement


Table of Contents

REPORT OF THE CORPORATE GOVERNANCE COMMITTEE

The following is the report of the Corporate Governance Committee with respect to its philosophy, responsibilities and initiatives.

Philosophy and Responsibilities

We believe that sound corporate governance has three components: (i) Board of Directors' independence, (ii) processes and practices that foster solid decision-making by both management and the Board of Directors, and (iii) balancing the interests of all of our stakeholders—our investors, customers, employees, the communities we serve and the environment. The Corporate Governance Committee's charter is available on our website at http://www.duke-energy.com/corporate-governance/board-committee-charters/corporate-governance.asp and is summarized below.

Membership.    The Committee must be comprised of three or more members, all of whom must qualify as independent directors under the listing standards of the NYSE and other applicable rules and regulations.

Responsibilities.    The Committee's responsibilities include, among other things: (i) implementing policies regarding corporate governance matters; (ii) assessing the Board of Directors' membership needs and recommending nominees; (iii) recommending to the Board of Directors those directors to be selected for membership on, or removal from, the various Board of Directors' committees and those directors to be designated as chairs of Board of Directors' committees; and (iv) sponsoring and overseeing performance evaluations for the various Board of Directors' committees, the Board of Directors as a whole, and the directors and management, including the Chief Executive Officer.

Investigations and Evaluations.    The Committee may conduct or authorize investigations into or studies of matters within the scope of the Committee's duties and responsibilities, and may retain, at the Company's expense, and in the Committee's sole discretion, consultants to assist in such work as the Committee deems necessary. In addition, the Committee has the sole authority to retain or terminate any search firm to be used to identify director candidates, including sole authority to approve the search firm's fees and other retention terms, such fees to be borne by the Company. Finally, the Committee conducts an annual self-evaluation of its performance.

In connection with the settlement by the Company with the North Carolina Utilities Commission related to the resignation of Mr. William Johnson following the Company's merger with Progress Energy, Inc. (the "Progress Energy merger"), the Committee has assigned its responsibility to search for a successor to our CEO who will be retiring by the end of 2013, as well as for an additional new director to join the Board, to the newly-created Leadership Development Committee of the Board of Directors. The Leadership Development Committee is a temporary committee formed solely for this purpose, however, so the Corporate Governance Committee will retain its responsibility to identify director candidates and for succession planning in the future.

Governance Initiatives

All of our Board of Directors committee charters, as well as our Principles for Corporate Governance, Code of Business Ethics for Employees and Code of Business Conduct & Ethics for Directors are available on our website at http://www.duke-energy.com/investors/corporate-governance.asp. Any amendments to or waivers from our Code of Business Ethics for Employees with respect to executive officers or Code of Business Conduct & Ethics for Directors must be approved by the Board and will be posted on our website. During 2012 our Board of Directors held 9 executive sessions with independent directors only.

Director Candidates

Profile.    We look for the following characteristics in any candidate for nominee to serve on our Board of Directors:

fundamental qualities of intelligence, perceptiveness, good judgment, maturity, high ethics and standards, integrity and fairness;

a genuine interest in Duke Energy and a recognition that, as a member of the Board of Directors, one is accountable to the shareholders of Duke Energy, not to any particular interest group;

a background that includes broad business experience or demonstrates an understanding of business and financial affairs and the complexities of a large, multifaceted, global business organization;

diversity among the existing Board members, including racial and ethnic background, gender, experiences, skills and qualifications;

present or former chief executive officer, chief operating officer, or substantially equivalent level executive officer of a highly complex organization such as a corporation, university or major unit of government, or a professional who regularly advises such organizations;

no conflict of interest or legal impediment which would interfere with the duty of loyalty owed to Duke Energy and its shareholders;

the ability and willingness to spend the time required to function effectively as a director;

DUKE ENERGY – 2013 Proxy Statement    27


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REPORT OF THE CORPORATE GOVERNANCE COMMITTEE

compatibility and ability to work well with other directors and executives in a team effort with a view to a long-term relationship with Duke Energy as a director;

independent opinions and willingness to state them in a constructive manner; and,

willingness to become a shareholder of Duke Energy (within a reasonable time of election to the Board of Directors).

Nominees.    The Committee may engage a third party from time to time to assist it in identifying and evaluating director-nominee candidates, in addition to current members of the Board of Directors standing for re-election. The Committee will provide the third party, based on surveys of the then-current Board of Directors members and the profile described above, the characteristics, skills and experiences that may complement those of our existing members. The third party will then provide recommendations for nominees with such attributes. The Committee considers nominees recommended by shareholders on a similar basis, taking into account, among other things, the profile criteria described above and the nominee's experiences and skills. In addition, the Committee considers the shareholder-nominee's independence with respect to both the Company and the recommending shareholder. All of the nominees on the proxy card are current members of our Board of Directors and were recommended by the Committee.

Shareholders interested in submitting nominees as candidates for election as directors must provide timely written notice to the Corporate Governance Committee, c/o Corporate Secretary, Duke Energy Corporation, P.O. Box 1321, Charlotte, NC 28201-1321. The notice must set forth, as to each person whom the shareholder proposes to nominate for election as director:

the name and address of the recommending shareholder(s), and the class and number of shares of capital stock of Duke Energy that are beneficially owned by the recommending shareholder(s);

a representation that the recommending shareholder(s) is a holder of record of stock of Duke Energy entitled to vote at the meeting and intends to appear in person or by proxy at the meeting to nominate the person(s) specified in the notice;

the name, age, business address and principal occupation and employment of the recommended nominee;

any information relevant to a determination of whether the recommended nominee meets the criteria for Board of Directors membership established by the Board of Directors and/or the Corporate Governance Committee;

any information regarding the recommended nominee relevant to a determination of whether the recommended nominee would be considered independent under the applicable NYSE rules and SEC rules and regulations;

a description of any business or personal relationship between the recommended nominee and the recommending shareholder(s), including all arrangements or understandings between the recommended nominee and the recommending shareholder(s) and any other person(s) (naming such person(s)) pursuant to which the nomination is to be made by the recommending shareholder(s);

a statement, signed by the recommended nominee, (1) verifying the accuracy of the biographical and other information about the nominee that is submitted with the recommendation, (2) affirming the recommended nominee's willingness to be a director, and (3) consenting to serve as a director if so elected;

if the recommending shareholder(s) has beneficially owned more than 5% of Duke Energy's voting stock for at least one year as of the date the recommendation is made, evidence of such beneficial ownership as specified in the rules and regulations of the SEC;

if the recommending shareholder(s) intends to solicit proxies in support of such recommended nominee, a representation to that effect; and

all other information relating to the recommended nominee that is required to be disclosed in solicitations for proxies in an election of directors pursuant to Regulation 14A under the Exchange Act, including, without limitation, information regarding (1) the recommended nominee's business experience; (2) the class and number of shares of capital stock of Duke Energy, if any, that are beneficially owned by the recommended nominee; and (3) material relationships or transactions, if any, between the recommended nominee and Duke Energy's management.

Resignation Policy

Our Principles for Corporate Governance set forth our procedures to be followed if a director-nominee is elected, but receives a majority of "withheld" votes. In an uncontested election, any nominee for director who receives a greater number of votes "withheld" from his or her election than votes "for" such election is required to tender his or her resignation following certification of the shareholder vote. The Corporate Governance Committee is then required to make a recommendation to the Board of Directors with respect to any such letter of resignation. The Board of Directors is required to take action with respect to this recommendation and to disclose its decision-making process. Full details of this policy are set out in our Principles for Corporate Governance, which is posted on our website at http://www.duke-energy.com/corporate-governance/principles.asp.

28    DUKE ENERGY – 2013 Proxy Statement


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REPORT OF THE CORPORATE GOVERNANCE COMMITTEE

Communications with Directors

Interested parties can communicate with any of our directors by writing to our Corporate Secretary at the following address:

Corporate Secretary

Duke Energy Corporation
P.O. Box 1321
Charlotte, NC 28201-1321

Interested parties can communicate with our lead director by writing to the following address:

Lead Director

c/o Corporate Secretary
Duke Energy Corporation
P.O. Box 1321
Charlotte, NC 28201-1321

Our Corporate Secretary will distribute communications to the Board of Directors, or to any individual director or directors as appropriate, depending on the facts and circumstances outlined in the communication. In that regard, the Duke Energy Board of Directors has requested that certain items that are unrelated to the duties and responsibilities of the Board of Directors be excluded, such as: spam; junk mail and mass mailings; service complaints; resumes and other forms of job inquiries; surveys; and business solicitations or advertisements. In addition, material that is unduly hostile, threatening, obscene or similarly unsuitable will be excluded. However, any communication that is so excluded remains available to any director upon request.

Corporate Governance Committee

Ann M. Gray (Chair)
Michael G. Browning
Harris E. DeLoach, Jr.
Daniel R. DiMicco
E. Marie McKee

DUKE ENERGY – 2013 Proxy Statement    29


Table of Contents

DIRECTOR COMPENSATION

Annual Retainer and Fees.    Effective upon our merger with Progress Energy on July 2, 2012, the Board of Directors approved the following compensation program for our outside directors:

 
   
  Meeting Fees  
Type of Fee
  Fee (Other Than
for Meetings)
($)

  In-Person Attendance at
Meetings Held in Conjunction
With a Regular Board
of Directors Meeting
($)

  In-Person Meetings Not
Held in Conjunction
With a Regular Board
of Directors Meeting
($)

  Telephonic
Participation
in Meetings
($)

 
   

Annual Board of Directors Retainer (Cash)

    75,000                    

Annual Board of Directors Retainer (Stock)

    125,000                    

Board of Directors Meeting Fees

          2,000     2,500     2,000  

Annual Lead Director Retainer

    75,000                    

Annual Audit Committee Chair Retainer

    25,000                    

Annual Chair Retainer (Other Committees)

    15,000                    

Audit Committee Meeting Fees

          3,000     2,500     2,000  

Nuclear Oversight Committee Meeting Fees

          4,000     2,500     2,000  

Other Committee Meeting Fees

          2,000     2,500     2,000  
   

                         

This compensation program is the same as in effect prior to July 2, 2012, except for the following adjustments that became effective upon the Progress Energy merger:

The Annual Board of Directors Retainer (Cash) was increased from $50,000 to $75,000

The Annual Board of Directors Retainer (Stock) was increased from $100,000 to $125,000

The Annual Lead Director Retainer was increased from $35,000 to $75,000

The Annual Audit Committee Chair Retainer was increased from $20,000 to $25,000

The Annual Chair Retainer (Other Committees) was increased from $10,000 to $15,000

Annual Stock Retainer for 2012. In 2012, each eligible director received the portion of his or her annual retainer that was payable in stock in the form of fully-vested shares granted under the Duke Energy Corporation 2010 Long-Term Incentive Plan. Because the increase in the annual stock retainer from $100,000 to $125,000 occurred after the annual stock retainer was provided on May 3, 2012 (in connection with the annual shareholders' meeting), an additional prorated stock grant was provided to each eligible director to reflect the increase in the annual stock retainer, offset by the prior stock retainer received for the same period of time from Duke Energy or Progress Energy.

Deferral Plans and Stock Purchases.    Directors may elect to receive all or a portion of their annual compensation, consisting of retainers and attendance fees, on a current basis, or defer such compensation under the Duke Energy Corporation Directors' Savings Plan (the "Directors' Savings Plan"). Deferred amounts are credited to an unfunded account, the balance of which is adjusted for the performance of phantom investment options, including the Duke Energy common stock fund, as elected by the director, and generally are paid when the director terminates his or her service from the Board of Directors. In connection with the merger, Duke Energy assumed the Progress Energy, Inc. Non-Employee Director Deferred Compensation Plan. Under this plan, the former Progress Energy directors were provided the opportunity to elect to defer their annual retainer and board attendance fees. Any deferred fees are deemed to be invested in stock units. The number of units in each account is adjusted from time to time to reflect the payment of dividends on the number of shares of stock represented by the units. Payments from the plan are made in cash upon termination of service. Duke Energy also assumed the Progress Energy, Inc. Non-Employee Director Stock Unit Plan ("Stock Unit Plan"). The Stock Unit Plan provided for an annual grant of stock units equivalent to $60,000 to each non-employee director prior to the merger. The number of units in each account is adjusted from time to time to reflect the payment of dividends on the number of shares of stock represented by the units. Payments from the plan are made in cash upon termination of service.

Charitable Giving Program.    The Duke Energy Foundation, independent of Duke Energy, maintains The Duke Energy Foundation Matching Gifts Program under which directors are eligible to request matching contributions of up to $5,000 per director per calendar year to qualifying institutions. In addition, Duke Energy maintains a Directors' Charitable Giving Program. Eligibility for this program has been frozen and only Ms. Gray is eligible. Under this program, Duke Energy will make, upon the director's death, donations of up to $1,000,000 to charitable organizations selected by the director. Ms. Gray may request that donations be made under this program during her lifetime, in which case the maximum donation will be reduced on an actuarially-determined net present value basis. In 2012, no donations were made on behalf of Ms. Gray.

Expense Reimbursement and Insurance.    Duke Energy provides travel insurance to directors in the amount of $500,000, and reimburses directors for expenses reasonably incurred in connection with attendance and participation at Board of Directors and committee meetings and special functions.

Gifts.    Duke Energy presented a 2012 holiday gift to each person who was an outside director as of December 31, 2012. The aggregate cost of the gifts to all directors was $1,848.

Stock Ownership Guidelines.    Outside directors are subject to stock ownership guidelines, which establish a target level of ownership of Duke Energy common stock (or common stock equivalents). Currently each outside director is required to own shares with a value equal to at least five times the annual Board of Directors cash retainer (i.e., an ownership level of $375,000) or retain 50% of his or her vested annual equity retainer. All outside directors were in compliance with the guidelines as of December 31, 2012.

30    DUKE ENERGY – 2013 Proxy Statement


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DIRECTOR COMPENSATION

The following table describes the compensation earned during 2012 by each individual who served as an outside director during 2012. For the directors who previously served on the Board of Directors of Progress Energy, the table only provides information for compensation earned by them after the Progress Energy merger.

Name
  Fees Earned
or Paid in Cash
($)(2)

  Stock
Awards
($)(3)(4)

  Change in Pension Value
and Nonqualified Deferred
Compensation Earnings
($)(5)

  All Other
Compensation
($)(6)

  Total
($)

 
   

John D. Baker, II(1)

    7,095     0     0     13     7,108  

William Barnet, III

    134,000     120,890     0     5,331     260,221  

G. Alex Bernhardt, Sr.

    146,500     120,890     13,772     5,331     286,493  

Michael G. Browning

    162,500     120,890     0     5,331     288,721  

Harris E. DeLoach, Jr.(1)

    79,592     74,366     0     225     154,183  

Daniel R. DiMicco

    134,000     120,890     0     331     255,221  

John H. Forsgren

    134,500     120,890     0     331     255,721  

Ann M. Gray

    221,500     220,890     0     4,831     447,221  

James H. Hance, Jr.

    142,000     120,890     0     331     263,221  

James B. Hyler, Jr.(1)

    81,092     74,366     0     225     155,683  

E. Marie McKee(1)

    82,510     74,366     0     5,225     162,101  

E. James Reinsch

    137,500     120,890     0     4,906     263,296  

James T. Rhodes

    161,500     120,890     0     3,904     286,294  

Carlos A. Saladrigas(1)

    81,826     74,366     0     225     156,417  

Philip R. Sharp

    152,000     120,890     0     2,831     275,721  

Theresa M. Stone(1)

    8,793     0     0     13     8,806  
   

(1)

Effective July 2, 2012, Messrs. Baker, DeLoach, Hyler and Saladrigas and Mses. McKee and Stone were appointed to the Board of Directors of Duke Energy. Effective July 27, 2012, Mr. Baker and Ms. Stone resigned from the Board of Directors of Duke Energy.

(2)

Messrs. Bernhardt, DeLoach, DiMicco, and Hyler and Dr. Rhodes elected to defer $146,500; $79,592; $134,000; $40,546; and $80,750, respectively, of their 2012 cash compensation under the Directors' Savings Plan.

(3)

This column reflects the grant date fair value of the stock awards granted to each eligible director during 2012. The grant date fair value was determined in accordance with the accounting guidance for stock-based compensation. See Note 22 of the Consolidated Financial Statements contained in our Annual Report on Form 10-K for the year ended December 31, 2012 ("Annual Report") for an explanation of the assumptions made in valuing these awards. In May 2012, each sitting director on the Duke Energy Board received 1,558 shares of stock, adjusted to reflect the Duke Energy 1-for-3 reverse stock split that occurred in July 2012 (the "Reverse Stock Split"). In order to reflect the increase in the annual stock retainer from $100,000 to $125,000 and the prior stock retainer received for the same period of time, each director who (1) was previously on the Duke Energy Board of Directors received an additional prorated stock grant of 320 shares and (2) was previously on the Progress Energy Board of Directors and was a sitting director on the Duke Energy Board of Directors in August, 2012 received an additional prorated stock grant of 1,138 shares. In consideration of extraordinary efforts during 2012, Ms. Gray received an additional 1,466 shares of stock in August 2012. Messrs. Bernhardt, Browning, DeLoach, Forsgren, Hyler, Reinsch and Saladrigas and Ms. McKee and Dr. Rhodes elected to defer their 2012 stock retainer of Duke Energy shares under the Directors' Savings Plan.

(4)

As of December 31, 2012, Dr. Rhodes held an option to acquire 2,000 shares of Spectra Energy Corp. Dr. Rhodes acquired this option in connection with Duke Energy's spin-off of its gas businesses effective January 2, 2007, to form Spectra Energy Corp.

(5)

Reflects above-market interest earned on a grandfathered investment fund previously provided under a predecessor plan to the Directors' Savings Plan. Participants can no longer defer compensation into the grandfathered investment fund, but continue to be credited with interest at the fixed rate on amounts previously deferred into such fund.

(6)

As described in the following table, All Other Compensation for 2012 includes a business travel accident insurance premium that was prorated among the directors based on their service on the Board of Directors during 2012, matching gift contributions made by The Duke Energy Foundation in the director's name to charitable organizations, and a holiday gift.

Name
  Business Travel
Accident
Insurance
($)

  Matching
Charitable
Contributions
($)

  Holiday Gift
($)

  Total
($)

 
   

John D. Baker, II

    13     0     0     13  

William Barnet, III

    199     5,000     132     5,331  

G. Alex Bernhardt, Sr.

    199     5,000     132     5,331  

Michael G. Browning

    199     5,000     132     5,331  

Harris E. DeLoach, Jr.

    93     0     132     225  

Daniel R. DiMicco

    199     0     132     331  

John H. Forsgren

    199     0     132     331  

Ann M. Gray

    199     4,500     132     4,831  

James H. Hance, Jr.

    199     0     132     331  

James B. Hyler, Jr.

    93     0     132     225  

E. Marie McKee

    93     5,000     132     5,225  

E. James Reinsch

    199     4,575     132     4,906  

James T. Rhodes

    199     3,573     132     3,904  

Carlos A. Saladrigas

    93     0     132     225  

Philip R. Sharp

    199     2,500     132     2,831  

Theresa M. Stone

    13     0     0     13  
   

DUKE ENERGY – 2013 Proxy Statement    31


SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table indicates the amount of Duke Energy common stock beneficially owned by the current directors, the executive officers listed in the Summary Compensation Table under Executive Compensation (referred to as the named executive officers), and all directors and executive officers as a group as of March 5, 2013.

Name or Identity of Group
  Total Shares
Beneficially Owned(1)(2)

  Percent
of Class

 
   

William Barnet, III

    15,221     *  

G. Alex Bernhardt, Sr.

    39,089     *  

Michael G. Browning

    77,424     *  

Harris E. DeLoach, Jr.

    13,748     *  

Daniel R. DiMicco

    23,554     *  

John H. Forsgren

    7,219     *  

Lynn J. Good

    58,039     *  

Ann M. Gray

    36,613     *  

James H. Hance, Jr.

    32,999     *  

John T. Herron(3)

    0     *  

James B. Hyler, Jr.

    2,922     *  

Dhiaa M. Jamil

    33,951     *  

William D. Johnson(4)

    278,259     *  

Jeffery J. Lyash(4)

    26,773     *  

Marc E. Manly

    37,263     *  

John R. McArthur(4)

    85,488     *  

E. Marie McKee

    985     *  

Mark F. Mulhern(4)

    63,339     *  

E. James Reinsch

    13,877     *  

James T. Rhodes

    20,215     *  

James E. Rogers

    1,820,728     *  

Carlos A. Saladrigas

    1,100     *  

Philip R. Sharp

    11,044     *  

Directors and executive officers as a group (24)

    2,406,349     *  
   

*

Represents less than 1%.

(1)

Includes the following number of shares with respect to which directors and executive officers have the right to acquire beneficial ownership within sixty days of March 5, 2013: Mr. Barnet – 117; Mr. Bernhardt – 1,324; Mr. Browning – 15,036; Mr. DeLoach – 1,151; Mr. DiMicco – 9,446; Mr. Forsgren – 6,197; Ms. Good – 8,112; Ms. Gray – 0; Mr. Hance – 0; Mr. Herron – 0; Mr. Hyler – 1,151; Mr. Jamil – 0; Mr. Johnson – 0; Mr. Lyash – 0; Mr. Manly – 0; Mr. McArthur – 0; Ms. McKee – 115; Mr. Mulhern – 0; Mr. Reinsch – 6,197; Dr. Rhodes – 1,138; Mr. Rogers – 927,917; Mr. Saladrigas – 230; Dr. Sharp – 0; and all directors and executive officers as a group – 993,458.

(2)

Does not include the following number of shares that are deemed to be held in nonqualified deferred compensation plans for the directors and executive officers, but which are not deemed to be "beneficially owned" pursuant to the applicable SEC rules: Mr. Barnet – 1,055; Mr. Bernhardt – 11,918; Mr. Browning – 22,851; Mr. DeLoach – 24,276; Mr. DiMicco – 0; Mr. Forsgren – 0; Ms. Good – 60; Ms. Gray – 0; Mr. Hance – 0; Mr. Herron – 0; Mr. Hyler – 9,325; Mr. Jamil – 1,524; Mr. Johnson – 2,723; Mr. Lyash – 3,552; Mr. Manly – 0; Mr. McArthur – 0; Ms. McKee – 47,191; Mr. Mulhern – 845; Mr. Reinsch – 0; Dr. Rhodes – 10,244; Mr. Rogers – 76,880; Mr. Saladrigas – 22,761; and Dr. Sharp – 0.

(3)

Mr. Herron joined the Board of Directors on March 1, 2013. Since that time, the Company has not had an open trading window during which Mr. Herron could have acquired shares of Duke Energy securities.

(4)

Provided as of the date of termination of employment.

The following table lists the beneficial owners of 5% or more of Duke Energy's outstanding shares of common stock as of December 31, 2012. This information is based on the most recently available reports filed with the SEC and provided to us by the company listed.

Name or Identity of Beneficial Owner
  Shares of Common Stock
Beneficially Owned

  Percentage
 
   
BlackRock Inc.
40 East 52
nd Street
New York, NY 10022
    36,366,412 (1)   5.16  
   
State Street Corporation
One Lincoln Street
Boston, MA 02111
    42,641,163 (2)   6.1  
   

(1)

According to the Schedule 13G filed by BlackRock Inc., these shares are beneficially owned as BlackRock Inc. is the parent holding company or control person in accordance with Rule 13d-1(b)(1)(ii)(G) to various investment companies, and has sole voting power with respect to 36,366,412 shares, zero shares with shared voting power, sole dispositive power with regard to 36,366,412 shares and zero shares with shared dispositive power.

(2)

According to the Schedule 13G filed by State Street Corporation, these shares are beneficially owned as State Street Corporation is the parent holding company or control person in accordance with Rule 13d-1(b)(1)(ii)(G) to various investment companies, and has zero shares with sole voting power, shared voting power with respect to 42,641,163 shares, zero shares with sole dispositive power and shared dispositive power with respect to 42,641,163 shares.

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PROPOSAL 2:     RATIFICATION OF DELOITTE & TOUCHE LLP AS DUKE ENERGY CORPORATION'S INDEPENDENT PUBLIC ACCOUNTANT FOR 2013

Representatives of Deloitte are expected to be present at the annual meeting. They will have an opportunity to make a statement and will be available to respond to appropriate questions. Information on Deloitte's fees for services rendered in 2012 and 2011 are listed below. These fees exclude accounting fees and services for Progress Energy paid prior to the Progress Energy merger.

DUKE ENERGY

Type of Fees
  2012
  2011
 
   

Audit Fees(1)

  $ 12,200,000   $ 8,500,000  

Audit-Related Fees(2)

    2,460,000     2,750,000  

Tax Fees(3)

    875,000     205,000  

All Other Fees(4)

    30,000     35,000  

 

 

TOTAL FEES:

  $ 15,565,000   $ 11,490,000  
   

             

(1)

Audit Fees are fees billed, or expected to be billed, by Deloitte for professional services for the audit of Duke Energy's consolidated financial statements included in Duke Energy's annual report on Form 10-K and review of financial statements included in Duke Energy's quarterly reports on Form 10-Q for services that are normally provided by Deloitte in connection with statutory, regulatory or other filings or engagements or for any other service performed by Deloitte to comply with generally accepted auditing standards.

(2)

Audit-Related Fees are fees billed by Deloitte for assurance and related services that are reasonably related to the performance of an audit or review of Duke Energy's financial statements, including assistance with acquisitions and divestitures and internal control reviews.

(3)

Tax Fees are fees billed by Deloitte for tax return assistance and preparation, tax examination assistance, and professional services related to tax planning and tax strategy.

(4)

All Other Fees are fees billed by Deloitte for any services not included in the first three categories.

To safeguard the continued independence of the independent public accountant, the Audit Committee adopted a policy that provides that the independent public accountant is only permitted to provide services to Duke Energy and its subsidiaries that have been pre-approved by the Audit Committee. Pursuant to the policy, detailed audit services, audit-related services, tax services and certain other services have been specifically pre-approved up to certain categorical fee limits. In the event that the cost of any of these services may exceed the pre-approved limits, the Audit Committee must pre-approve the service. All other services that are not prohibited pursuant to the SEC's or other applicable regulatory bodies' rules or regulations must be specifically pre-approved by the Audit Committee. All services performed in 2012 and 2011 by the independent public accountant were approved by the Duke Energy Audit Committee and legacy Progress Energy Audit Committee pursuant to their pre-approval policies.

The Board of Directors Recommends a Vote "FOR" the Ratification of Deloitte & Touche LLP as Duke Energy Corporation's Independent Public Accountant for 2013.

DUKE ENERGY – 2013 Proxy Statement    33


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REPORT OF THE AUDIT COMMITTEE

The following is the report of the Audit Committee with respect to Duke Energy's audited financial statements for the fiscal year ended December 31, 2012.

The information contained in this Audit Committee Report shall not be deemed to be "soliciting material" or "filed" or "incorporated by reference" in future filings with the SEC, or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), except to the extent that Duke Energy specifically incorporates it by reference into a document filed under the Securities Act of 1933, as amended, or the Exchange Act.

The purpose of the Audit Committee is to assist the Board in its general oversight of Duke Energy's financial reporting, internal controls and audit functions. The Audit Committee Charter describes in greater detail the full responsibilities of the committee and is available on our website at http://www.duke-energy.com/corporate-governance/board-committee-charters/audit.asp.

The Audit Committee has reviewed and discussed the consolidated financial statements with management and Deloitte & Touche LLP ("Deloitte"), the Company's independent public accountant. Management is responsible for the preparation, presentation and integrity of Duke Energy's financial statements; accounting and financial reporting principles; establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)); establishing and maintaining internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)); evaluating the effectiveness of disclosure controls and procedures; evaluating the effectiveness of internal control over financial reporting; and, evaluating any change in internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting. Deloitte is responsible for performing an independent audit of the consolidated financial statements and expressing an opinion on the conformity of those financial statements with accounting principles generally accepted in the United States ("GAAP"), as well as expressing an opinion on the effectiveness of internal control over financial reporting.

The Audit Committee reviewed the Company's audited financial statements with management and Deloitte, and met separately with both management and Deloitte to discuss and review those financial statements and reports prior to issuance. These discussions also addressed the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements. Management has represented, and Deloitte has confirmed, that the financial statements were prepared in accordance with GAAP.

In addition, management completed the documentation, testing and evaluation of Duke Energy's system of internal control over financial reporting in response to the requirements set forth in Section 404 of the Sarbanes-Oxley Act of 2002, and related regulations. The Audit Committee was kept apprised of the progress of the evaluation and provided oversight and advice to management during the process. In connection with this oversight, the Audit Committee received periodic updates provided by management and Deloitte at each regularly scheduled Audit Committee meeting. At the conclusion of the process, management presented to the Audit Committee on the effectiveness of the Company's internal control over financial reporting. The Audit Committee also reviewed the report of management contained in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2012 ("Form 10-K") filed with the SEC, as well as Deloitte's Report of Independent Registered Public Accounting Firm included in the Company's Form 10-K related to its audit of (i) the consolidated financial statements and financial statement schedules and (ii) the effectiveness of internal control over financial reporting. The Audit Committee continues to oversee the Company's efforts related to its internal control over financial reporting and management's preparations for the evaluation in fiscal 2013.

The Audit Committee has discussed with Deloitte the matters required to be discussed by professional and regulatory requirements, including, but not limited to, the standards of the Public Company Accounting Oversight Board regarding The Auditors' Communications with Those Charged with Governance. In addition, Deloitte has provided the Audit Committee with the written disclosures and the letter required by "Public Company Accounting Oversight Board Ethics and Independence Rule 3526, Communications with Audit Committees Concerning Independence" that relates to Deloitte's independence from Duke Energy and its subsidiaries and the Audit Committee has discussed with Deloitte the firm's independence.

Based on its review of the consolidated financial statements and discussions with and representations from management and Deloitte referred to above, the Audit Committee recommended that the audited financial statements be included in Duke Energy's Form 10-K, for filing with the SEC.

Audit Committee
Carlos A. Saladrigas (Chair)
G. Alex Bernhardt, Sr.
Michael G. Browning
John H. Forsgren
James B. Hyler, Jr.
James T. Rhodes

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PROPOSAL 3:     ADVISORY VOTE TO APPROVE DUKE ENERGY CORPORATION'S NAMED EXECUTIVE OFFICER COMPENSATION

At our annual meeting in 2011, our shareholders recommended that our Board of Directors hold say-on-pay votes on an annual basis. As a result, we are providing our shareholders with the opportunity to approve, on a nonbinding, advisory basis, the compensation of our named executive officers as disclosed in this proxy statement. This proposal gives our shareholders the opportunity to express their views on the compensation of our named executive officers.

In connection with this proposal, the Board of Directors encourages shareholders to review in detail the description of the compensation program for our named executive officers that is set forth in the Compensation Discussion and Analysis beginning on page 36, as well as the information contained in the compensation tables and narrative discussion in this proxy statement.

As described in more detail in the Compensation Discussion and Analysis section, the guiding principle of our compensation philosophy is that pay should be linked to performance and that the interests of our executives and shareholders should be aligned. Our compensation program is designed to provide significant upside and downside potential depending on actual results as compared to predetermined measures of success. A significant portion of our named executive officers' total direct compensation is directly contingent upon achieving specific results that are important to our long-term success and growth in shareholder value. We supplement our pay-for-performance program with a number of compensation policies that are aligned with the long-term interests of Duke Energy and its shareholders.

We are asking our shareholders to indicate their support for the compensation of our named executive officers as disclosed in this proxy statement by voting "FOR" the following resolution:

"RESOLVED, that the shareholders of Duke Energy approve, on an advisory basis, the compensation paid to Duke Energy's named executive officers, as disclosed pursuant to Item 402 of Regulation S-K of the Securities Act of 1933, as amended, including the Compensation Discussion and Analysis, the compensation tables and the narrative discussion in Duke Energy's 2013 proxy statement."

Because your vote is advisory, it will not be binding on the Board of Directors, the Compensation Committee or Duke Energy. The Compensation Committee, however, will review the voting results and will take them into consideration when making future decisions regarding the compensation of our named executive officers.

The Board of Directors Recommends a Vote "FOR" the Approval of the Compensation of Our Named Executive Officers as Disclosed in this Proxy Statement.

DUKE ENERGY – 2013 Proxy Statement    35


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REPORT OF THE COMPENSATION COMMITTEE

The Compensation Committee of Duke Energy has reviewed and discussed the Compensation Discussion and Analysis with management and, based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.

Compensation Committee

E. Marie McKee (Chair)
Daniel R. DiMicco
John H. Forsgren
Ann M. Gray
James H. Hance, Jr.

COMPENSATION DISCUSSION AND ANALYSIS

The purpose of this Compensation Discussion and Analysis is to provide information about Duke Energy's compensation objectives and policies for our named executive officers.

Our named executive officers for 2012 include Messrs. Rogers, Manly and Jamil and Ms. Good, each of whom was employed by Duke Energy for the entire year. These individuals are sometimes referred to as "current Duke Energy" named executive officers. The discussion regarding the current Duke Energy named executive officers focuses on compensation earned by them for the entire 2012 year, both before and after the Progress Energy merger.

Our named executive officers also include four executives who were previously employed by Progress Energy, Inc. and who resigned shortly after the Progress Energy merger: Messrs. Johnson, Lyash, McArthur, and Mulhern. These individuals are sometimes referred to as "former Progress Energy" named executive officers. The discussion regarding the former Progress Energy named executive officers only focuses on compensation earned by them following the Progress Energy merger and is contained primarily under the heading "Former Progress Energy Named Executive Officers" on page 47. References to "our named executive officers" throughout the Compensation Discussion and Analysis generally refer to the current Duke Energy named executive officers.

Executive Summary


2012 was a very important year for Duke Energy:

We often say that "safety comes first" and 2012 was a testament to the focus of our employees. During the year, we achieved the best employee safety record in the company's history.

On July 2, 2012 we completed the Progress Energy merger to create the largest regulated utility company in the United States, with approximately 7 million customers across 6 regulated jurisdictions. The strategic combination gives us size and scale and is expected to deliver significant efficiencies for the benefit of our customers, our investors, our employees and our other stakeholders, over time.

Financially, our adjusted diluted earnings per share for 2012 were at the upper end of our annual guidance range. We ended 2012 with adjusted diluted earnings per share of $4.31 for purposes of our short-term incentive plan, within our guidance range of $4.20 to $4.35. We also increased our quarterly dividend by approximately 2% and had a dividend yield of approximately 4.8% as of the end of 2012. Our total shareholder return ("TSR") for 2012 exceeded the TSR of the Philadelphia Utility Index, and since we announced the Progress Energy merger in early 2011 through the end of 2012, our TSR of 32% has significantly outperformed the Philadelphia Utility Index's TSR of 17%.

We continued to advance our $9 billion fleet modernization program by successfully bringing three major new power plants into service in North Carolina – the 825-megawatt Cliffside pulverized coal plant, the 620-megawatt Dan River combined-cycle natural gas plant, and the 920-megawatt Wayne County combined-cycle natural gas plant. This modernization program will allow us to ultimately retire up to 6,800 megawatts of older, less efficient coal units across our regulated portfolio by 2015.

Our combined nuclear organization has wide-ranging experience and depth of talent. Today, we operate a nuclear fleet of approximately 10,500 megawatts with all of our 11 operating units located in the Carolinas. During 2012, our operational performance for the combined nuclear fleet was strong. We achieved a capacity factor for the fleet of over 90 percent, excluding Crystal River 3, for the thirteenth consecutive year. This exceptional performance provided our customers the benefit of efficient and reliable baseload nuclear generation.

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COMPENSATION DISCUSSION AND ANALYSIS

Pay for Performance Program

The guiding principle of our compensation philosophy is that pay should be linked to performance and that the interests of executives and shareholders should be aligned. Our compensation program is designed to provide significant upside and downside potential depending on actual results, as compared to predetermined measures of success.

As described below, the variable and equity based components of our compensation program are the short-term incentives ("STI") and long-term incentives ("LTI"). Our STI opportunities are provided under an annual cash bonus plan, the payout of which is dependent on corporate, operational and individual performance. Our LTI opportunities are provided through a three-year equity based compensation plan (i.e., restricted stock units and performance shares), the payout of which is also dependent on corporate performance.

As a result, a significant portion of our named executive officers' total direct compensation – which consists of base salary as well as target STI and LTI opportunities – is directly contingent upon achieving specific results that are important to our long-term success and growth in shareholder value. For example:

In 2012, 100% of Mr. Rogers' total direct compensation opportunity consisted of stock awards: grants of stock options, restricted stock units and performance shares. He did not receive a base salary and was not eligible for a cash bonus. In order to ensure that the entire executive team is aligned, Mr. Rogers' performance shares are subject to the same corporate performance measures applicable to the incentive opportunities provided to the other named executive officers under the STI and LTI programs.

Approximately 74% of the total direct compensation opportunity (assuming target performance) for our named executive officers was provided in 2012 in the form of STI and LTI.

The actual amount of compensation received by the named executive officers in connection with STI and LTI opportunities varies based on our stock price and the extent to which predetermined corporate, operational and individual goals are achieved. The following charts illustrate the components of the target total direct compensation opportunities provided to our named executive officers.

GRAPHIC

DUKE ENERGY – 2013 Proxy Statement    37


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COMPENSATION DISCUSSION AND ANALYSIS

Align Interests of Named Executive Officers and Shareholders

We supplement our pay for performance program with a number of compensation policies intended to align the interests of management and our shareholders. Following are key features of our executive compensation program.

     
AT DUKE ENERGY WE...
  AT DUKE ENERGY WE DO NOT...
     

GRAPHIC
  Compensate our Chief Executive Officer substantially through stock-based awards. Mr. Rogers is compensated primarily through stock awards. He does not receive a base salary or a cash bonus, and he is generally not eligible to participate in Duke Energy's employee benefit plans.  
GRAPHIC
  Provide employment agreements to a broad group. Except for our Chief Executive Officer, no other executives are provided with a comprehensive employment agreement (unless assumed in connection with the acquisition of another company).
     

GRAPHIC
  Tie a high ratio of the pay of our other executives to corporate and individual performance. In 2012, approximately 74% of the total direct compensation opportunity (assuming target performance) for our other named executive officers was provided in the form of STI and LTI.  
GRAPHIC
  Permit hedging of Duke Energy securities. We have a policy that prohibits employees (including the named executive officers) from trading in options, warrants, puts and calls or similar instruments in connection with Duke Energy securities, or selling Duke Energy securities "short," or holding such securities in margin accounts.
     

GRAPHIC
 

Require significant stock ownership. We maintain aggressive guidelines to reinforce the importance of Duke Energy stock ownership. This is intended to align the interests of executives and shareholders, and to focus the executives on our long-term success.

Mr. Rogers – a minimum level of Duke Energy shares equal to 10 times the base pay of his highest-paid direct report.

Other named executive officers – three times base pay.

Non-employee directors – five times the annual cash retainer.

Each of our named executive officers and directors was in compliance with the stock ownership policy during 2012.

 
GRAPHIC
  Provide severance benefits upon a change in control. Our change in control agreements provide cash severance only upon a "double trigger," meaning that change in control severance benefits are payable only if our named executive officers incur a qualifying termination of employment (i.e., a voluntary termination for "good reason" or an involuntary termination without "cause") and the termination occurs in connection with a change in control of Duke Energy.
     

GRAPHIC
  Maintain a stock holding policy. Each named executive officer is required to hold 50% of all shares acquired under the LTI program (after the payment of any applicable taxes), and 100% of all shares acquired upon the exercise of stock options (after payment of the exercise price and taxes), until the applicable stock ownership requirement is satisfied.  
GRAPHIC
  Provide Golden Parachute Tax Gross-Ups. We do not provide excise tax gross-ups for severance benefits received by our current Duke Energy named executive officers under the change in control agreements or under the Executive Severance Plan. However, as a result of the Progress Energy merger, we assumed a change in control severance plan (i.e., the Progress Energy, Inc. Management Change-In-Control Plan) that provides golden parachute tax gross-up payments under certain circumstances. This tax-gross up provision was adopted by Progress Energy prior to the Progress Energy merger. The former Progress Energy named executive officers who terminated employment in connection with the Progress Energy merger did not receive golden parachute tax gross-up payments upon terminating employment.
     

GRAPHIC
  Tie incentive compensation to a clawback policy. We maintain a "clawback policy," which would allow us to recover (i) certain incentive compensation based on financial results in the event those results were restated due at least partially to the recipient's fraud or misconduct, or (ii) an inadvertent payment based on an incorrect calculation.  
GRAPHIC
  Encourage excessive or inappropriate risk taking through our compensation program. Our plans focus on aligning Duke Energy's compensation policies with the long-term interests of Duke Energy and avoid rewards that could create unnecessary risks to the company, as evidenced by the policies described on page 49.
     

GRAPHIC
  Provide a consistent level of severance benefits. We maintain an Executive Severance Plan in order to provide a consistent approach to executive severance, and to provide eligible employees, including our named executive officers (excluding Mr. Rogers), with certainty and security while they are focusing on their duties and responsibilities. Under this plan, severance benefits are payable only if our named executive officers incur a qualifying termination of employment (i.e., a voluntary termination for "good reason" or an involuntary termination without "cause").  
GRAPHIC
  Provide excessive perquisites. Our perquisites program is limited to an executive physical, an airline membership club to facilitate travel, limited personal use of corporate aircraft (subject to the requirement that the executive reimburse Duke Energy for the direct operating costs for such travel), financial planning, and matching charitable contributions. See page 45 for additional details.
     

GRAPHIC
  Maintain a shareholder approval policy for severance agreements. We have a policy generally to seek shareholder approval for any future agreements with our named executive officers that provide severance benefits in excess of 2.99 times the executive's annual compensation or that provide for tax gross-ups in connection with a termination event.        
     

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COMPENSATION DISCUSSION AND ANALYSIS

     
AT DUKE ENERGY WE...
   
   
     

GRAPHIC
  Comply with an equity award granting policy. In recognition of the importance of adhering to specific practices and procedures in the granting of equity awards, the Compensation Committee has adopted a policy that applies to the granting of equity awards for employees and directors. Under this policy, annual grants to employees may be made at any regularly scheduled meeting, provided that reasonable efforts will be made to make such grants at the first regularly scheduled meeting each calendar year, and annual grants to outside directors may be made by the Board of Directors at any regularly scheduled meeting, provided that reasonable efforts will be made to make such grants at the regularly scheduled meeting that is held in conjunction with the annual meeting of shareholders each year.        
     

GRAPHIC
  Use an independent compensation consultant. The Compensation Committee has engaged Frederic W. Cook & Company, Inc. to report directly to the Compensation Committee as its independent compensation consultant. The consultant has been instructed that it is to provide completely independent advice to the Compensation Committee and is not permitted to provide any services to Duke Energy other than at the direction of the Compensation Committee.        
     

Consideration of Results of Shareholder Advisory Votes on Executive Compensation


As required by the Dodd-Frank Act, we included a shareholder vote on executive compensation in last year's annual proxy statement. Because our shareholders strongly supported the compensation of our named executive officers as disclosed in the 2012 annual proxy statement (i.e., 92.4% of the votes represented in person or by proxy), the Compensation Committee views the results of this advisory vote as confirmation that our compensation program, including our emphasis on pay-for-performance, is structured and designed to achieve our stated goals and objectives. As a result, we have continued to emphasize pay-for-performance alignment, and our 2012 compensation program, as described below, continues to reflect this philosophy.

Objectives of the Compensation Program


Our executive compensation program is designed to:

attract and retain talented executive officers and key employees by providing total compensation competitive with that of other executives and key employees of similarly sized companies and with similar complexity, whether within or outside of the utility sector;

emphasize performance based compensation, which motivates executives and key employees to achieve strong financial and operational performance in a manner that balances short-term and long-term results;

reward individual performance; and

encourage a long-term commitment to Duke Energy and align the interests of executives with shareholders, by providing a significant portion of total compensation in the form of stock based incentives and requiring target levels of stock ownership.

Setting Executive Compensation Levels


During the annual performance evaluation in early 2012, the Compensation Committee confirmed that the total direct compensation levels for the current Duke Energy named executive officers generally remained competitive, as compared to market surveys showing each element of total compensation against comparable positions at comparable companies. For utility specific positions, the market data sources were: (i) the Towers Watson CDB Energy Services Executive Compensation Database, which consists of the 106 companies listed on Appendix B; and (ii) the Philadelphia Utility Index. For general corporate positions, the market data sources also included the Towers Watson CDB General Industry Executive Compensation Database, which consists of the 108 companies with revenues between $10 billion and $20 billion, as listed on Appendix C.

After reviewing this information, in February, 2012, the Compensation Committee decided to only make compensation adjustments that addressed immediate concerns based on market survey information and internal comparisons of the compensation of our other executives.

DUKE ENERGY – 2013 Proxy Statement    39


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COMPENSATION DISCUSSION AND ANALYSIS

The Compensation Committee delayed making significant compensation adjustments for our named executive officers until after the closing of the Progress Energy merger so that it could consider whether the market data sources would continue to be appropriate following the Progress Energy merger. As a result, the Compensation Committee only made a change to the base salary of Ms. Good in February, 2012, as described on page 41.

We completed the Progress Energy merger on July 2, 2012, at which time we combined the two management teams. The Compensation Committee considered our existing executive compensation program and the Progress Energy program, and agreed to continue our existing incentive compensation program following the Progress Energy merger in a manner that would provide a consistent compensation program for the newly-consolidated management team, reflect each executive's role after the Progress Energy merger, recognize the increased scope of each executive's role in light of the combined company's increased size and complexity, and assist with the retention of the management team. In order to offer competitive compensation opportunities to attract, retain, and motivate qualified executives, the Compensation Committee intends to structure each element of compensation in the competitive range of the market data for each position, while retaining flexibility to make adjustments to specific compensation elements to respond to market conditions, promotions, individual performance, experience levels or other circumstances.

At least once a year, the Compensation Committee reviews tally sheets for each named executive officer, which include a summary of compensation paid in prior years, compensation for the current year, the valuation (at various assumed stock prices) of all outstanding equity awards, and a summary of amounts payable upon a termination of employment under various circumstances. This information allows the Compensation Committee to evaluate the total compensation package for each named executive officer, as well as adjustments to specific elements of the total direct compensation package. After reviewing this information: (i) the Committee was able to confirm that the 2012 target total direct compensation for the named executive officers was within the competitive range of the market data; and (ii) the Committee is able to better understand the relationship of various components of the total compensation program to each other.

Compensation Committee Advisors


The Compensation Committee has engaged Frederic W. Cook & Company, Inc. to report directly to the Compensation Committee as its independent compensation consultant. The compensation consultant generally attends each Compensation Committee meeting and provides advice to the Compensation Committee at the meetings, including reviewing and commenting on market compensation data used to establish the compensation of the executive officers and directors, the terms and performance goals applicable to incentive plan awards and analysis with respect to specific projects and information regarding trends and competitive practices. The consultant has been instructed that it is to provide completely independent advice to the Compensation Committee and is not permitted to provide any services to Duke Energy other than at the direction of the Compensation Committee. With the consent of the Chair of the Compensation Committee, the consultant may meet with management to discuss strategic issues with respect to executive compensation and assist the consultant in its engagement with the Compensation Committee. The Compensation Committee has assessed the independence of Frederic W. Cook & Company, Inc. pursuant to SEC rules, and concluded that no conflict of interest exists that would prevent the consulting firm from independently advising the Compensation Committee.

Elements of Duke Energy's Compensation Program and How They Relate to Objectives


As discussed in more detail below, during 2012, the principal components of compensation for the named executive officers were:

base salary;

 

long-term equity incentive compensation; and

short-term incentive compensation;

 

retirement and welfare benefits and perquisites.

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COMPENSATION DISCUSSION AND ANALYSIS

GRAPHIC

Following is a summary of each principal compensation component provided to the current Duke Energy named executive officers during 2012. The discussion of the compensation paid to the former Progress Energy named executive officers after the Progress Energy merger can be found under the heading "Former Progress Energy Named Executive Officers" on page 47.

Base Salary. The salary for each executive is based upon job responsibilities, level of experience, individual performance, comparisons to the salaries of executives in similar positions obtained from market surveys and internal comparisons. Mr. Rogers is paid substantially in the form of equity based compensation and he does not receive a base salary.

The Compensation Committee conducted an annual performance review in February 2012 and determined that the base salary levels established for 2011 for each of our named executive officers should remain in effect through 2012 or, if earlier, the close of the proposed Progress Energy merger, except with respect to Ms. Good. Effective as of March 1, 2012, Ms. Good's base salary was increased from $600,000 to $615,000. This adjustment was made after considering market survey information and internal comparisons to the compensation levels of our other executives.

Following the Progress Energy merger, the Compensation Committee reviewed updated market data sources based on the increased scope of each executive's role in light of the combined company's size and complexity, and made the following adjustments to base salary levels effective upon the Progress Energy merger: Ms. Good's base salary was increased from $615,000 to $625,000, and Mr. Jamil's base salary was increased from $525,000 to $550,000.

Short-Term Incentive Compensation. STI opportunities are provided to our named executive officers (other than Mr. Rogers) under the Duke Energy Corporation Executive Short-Term Incentive Plan ("STI Plan") to promote the achievement of annual performance objectives. Each year, the Compensation Committee establishes the incentive opportunity for each participating executive officer, which is based on a percentage of his or her base salary, along with the corporate, operational and individual goals that must be achieved to earn that incentive opportunity. Unless deferred, the earned STI opportunity is paid in cash.

2012 Short-Term Incentives. The Compensation Committee approved the same STI target opportunities for the named executive officers for 2012 as applied in 2011, which were as follows:

Name
  Target Incentive Opportunity
(as a % of base salary)

 

James E. Rogers

  Receives performance shares subject to same corporate goals as other executive officers under the STI Plan,
as well as individual goals

Lynn J. Good

  80%

Marc E. Manly

  80%

Dhiaa M. Jamil

  80%
 

DUKE ENERGY – 2013 Proxy Statement    41


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COMPENSATION DISCUSSION AND ANALYSIS

Corporate Objectives.    During 2012, depending on actual performance, participating named executive officers were eligible to earn up to 183.75% of the amount of their STI target opportunity. This opportunity was based on several corporate objectives, including Duke Energy's achievement of an adjusted diluted earnings per share ("EPS") goal, an operations and maintenance ("O&M") expense control goal and a reliability goal, all of which had an aggregate weighting of 80%. The Compensation Committee established the targets for each goal in February 2012 and reserved the right to make equitable adjustments to reflect the pending Progress Energy merger. In connection with the Progress Energy merger and the Reverse Stock Split, the Compensation Committee exercised its discretion to adjust the performance goals by: (i) modifying the EPS and O&M performance targets to reflect the contributions from Progress Energy, and (ii) adding two additional reliability goals to reflect the performance of the Progress Energy fleet. The 2012 corporate goals, which were selected to promote management actions beneficial to Duke Energy's various stakeholders, including investors and customers, were as follows (along with actual performance results):

Goal(1)
  Weight
  Threshold
(50%)

  Target
(100%)

  Maximum(2)
  Result
  Payout    
 
   
Adjusted Diluted EPS(3)     50 %                              

As established in February 2012

        $ 1.33   $ 1.42   $ 1.51              

As adjusted for the Progress Energy merger and the Reverse Stock Split

        $ 3.99   $ 4.26   $ 4.53   $ 4.31     118.52 %
O&M Expense Control     20 %                              

As established in February 2012

        $ 3,680M   $ 3,605M   $ 3,530M              

As adjusted for the Progress Energy merger

        $ 4,645M   $ 4,555M   $ 4,465M   $ 4,401M     150 %
Reliability(4)     10 %                              
Regulated Generation Commercial Availability
(Legacy Duke Energy Fossil Fleet)
          88.43 %   89.79 %   90.93 %   86.50 %   0 %
Nuclear Generation Capacity Factor           90.75 %   93.00 %   95.25 %   91.85 %   74.44 %
System Average Interruption Frequency Index (SAIFI)           1.18     1.07     0.96     1.09     90.91 %
System Average Interruption Duration Index (SAIDI)           152     138     124     140     92.86 %
Commercial Availability (Midwest and Renewables Yield)           88.50 %   90.80 %   92.94 %   92.92 %   149.53 %
International Equivalent Availability           92.00 %   94.00 %   96.00 %   92.98 %   74.50 %
Progress Energy Carolinas Commercial Availability
(added after the Progress Energy merger)
          84.70 %   87.00 %   89.30 %   87.00 %   100 %
Progress Energy Florida Commercial Availability
(added after the Progress Energy merger)
          79.10 %   82.40 %   85.70 %   82.50 %   101.52 %
   

(1)

For additional information about the calculation of the EPS and O&M expense control measures, see page 49.

(2)

A payout of up to 200% of the target opportunity is available for the adjusted diluted EPS goal and a payout of up to 150% of the target opportunity is available for the O&M and reliability goals.

(3)

If an adjusted diluted EPS performance level of at least $1.28 was not achieved, the participating named executive officers would not have received a payout under the 2012 STI Plan. This EPS circuit breaker was increased to $3.84 as a result of the Progress Energy merger and our Reverse Stock Split.

(4)

The reliability goals are calculated as described below. Each reliability goal contains a weighting of one-seventh of the aggregate weighting of 10% for reliability, except that each of the two reliability goals that relate to Progress Energy's fleet contain a weighting of 1/14 of the aggregate weighting for reliability.

Regulated Generation Commercial Availability (Legacy Duke Energy Fossil Fleet). A measure of regulated fossil generation reliability, determined as the weighted percentage of time the regulated fossil generation units are available to generate electricity, where the availability each hour is weighted by the difference between market price and unit cost.

Nuclear Generation Capacity Factor. A measure of the amount of electricity produced by a nuclear generating unit relative to the amount of electricity the unit is capable of producing.

System Average Interruption Frequency Index (SAIFI). A measure of the number of sustained outages (greater than five minutes in duration) experienced during the year per customer served from both transmission and distribution systems calculated in accordance with the applicable guidelines set forth in the IEEE Standard 1366 – Guide for Electric Power Distribution Reliability Indices, including application of the "major event day" exclusions described therein.

System Average Interruption Duration Index (SAIDI). A measure of the number of outage minutes experienced during the year per customer served from both distribution and transmission systems calculated in accordance with the applicable guidelines set forth in the IEEE Standard 1366 – Guide for Electric Power Distribution Reliability Indices, including application of the "major event day" exclusions described therein.

Commercial Availability (Midwest and Renewables Yield). A composite measure of (i) non-regulated fossil generation reliability, determined as the weighted percentage of time the non-regulated fossil generation units are available to generate electricity, where the availability each hour is weighted by the difference between market price and unit cost, and (ii) a renewables energy yield metric, determined by comparing actual generation to expected generation, based on wind speed at the turbines.

International Equivalent Availability. A measure of the amount of electricity that potentially could be produced by an international generating unit relative to the amount of electricity the unit is actually producing.

Regulated Generation Commercial Availability – Progress Energy Carolinas. A measure of regulated generation reliability for Progress Energy Carolinas, determined as the weighted percentage of time the regulated generation units are available to generate electricity, where the availability each hour is weighted by the difference between market price and unit cost.

Regulated Generation Commercial Availability – Progress Energy Florida. A measure of regulated generation reliability for Progress Energy Florida, determined as the weighted percentage of time the regulated generation units are available to generate electricity, where the availability each hour is weighted by the difference between market price and unit cost.

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COMPENSATION DISCUSSION AND ANALYSIS

Individual Objectives.    The remaining 20% of each participating named executive officer's 2012 opportunity under the STI Plan was based on individual objectives. The individual goals, in the aggregate, could result in a payout with respect to the target opportunity equal to 50% in the event of threshold performance, 100% in the event of target performance and 150% in the event of maximum performance. As described below, the individual goals for each of Ms. Good and Messrs. Manly and Jamil for 2012 consisted of a combination of strategic and operational objectives, which were measured based on a subjective determination.

Ms. Good's 2012 individual goals were as follows:

Goal
  Weighting
  Description
 
Progress Energy Merger     10%   Provide effective support and collaboration with respect to the Progress Energy merger, including evaluating and providing strategic guidance related to regulatory hurdles, the determination of an approach to create value for shareholders and maintain the proposed benefits for customers, and the delivery of the synergies related to the Progress Energy merger.
Regulatory Initiatives     5%   Provide effective support and collaboration to achieve key 2012 rate and regulatory initiatives.
Finance Initiatives     5%   Provide effective support and collaboration with respect to the restructuring and recapitalization in Ohio, focused investor targeting and employee engagement and focus.
 

Mr. Manly's 2012 individual goals were as follows:

Goal
  Weighting
  Description
 
Progress Energy Merger     7%   Provide legal and strategic support in connection with the Progress Energy merger.
Regulatory Initiatives     7%   Provide legal and strategic support in connection with all regulatory initiatives, including the Edwardsport IGCC project and rate case filings.
Legal / Corporate Governance / Audit / Information Technology ("IT") / Enterprise Operation Services     6%   Establish and achieve 2012 goals for legal services with each business unit and client group, develop and execute the 2012 Internal Audit Plan, continue enhancing organizational culture relating to ethical conduct and legal compliance, manage the IT function to support the scalable platform, and manage the Real Estate and Travel and Support function in an effective manner.
 

Mr. Jamil's 2012 individual goals were as follows:

Goal
  Weighting
  Description
 
Nuclear Generation     5%   Improve safety, reliability, and cost efficiency (including a focus on fleet governance and alignment) of nuclear generation.
Regulated Generation     5%   Improve safety, commercial availability, and cost efficiency (including a focus on new plant start-ups and future decommissioning of coal-fired units) for regulated generation.
Supply Chain     5%   Manage the enterprise supply chain operations in a cost effective manner, optimize the function through increased efficiencies, mitigate risks through effective vendor management, and develop alliances to support emerging business needs.
Safety     5%   Expand efforts to improve the Duke Energy enterprise safety practices and results.
 

Safety Component. In order to encourage a continued focus on safety, the Compensation Committee included the following safety measures in the 2012 STI Plan:

Safety Penalty. The STI Plan payments for each of the participating named executive officers were subject to a safety penalty of 5% depending on Duke Energy's 2012 enterprise-wide total incident case rate ("TICR"). TICR is a standard industry safety measurement that is calculated based on the number of Occupational Safety and Health Administration recordable injuries per 100 workers per year. In February 2012, the Compensation Committee established a TICR safety goal of 0.88. In connection with the merger, the Compensation Committee adjusted the TICR safety goal so that it applied in two equally-weighted parts as follows: (i) the first half of the safety penalty applied if an enterprise-wide TICR of 0.88 (measured without regard to Progress Energy) was not achieved as measured against the entire 2012 calendar year, and (ii) the second half of the safety penalty applied if an enterprise-wide TICR of 0.80 (measured with regard to Progress Energy) was not achieved as measured against the entire 2012 calendar year. Duke Energy's actual TICR result in 2012 was 0.69, which was better than the safety goal such that the safety penalty was not triggered and did not decrease the 2012 STI Plan awards.

Safety Adder. The STI Plan payments of the participating named executive officers were also eligible for a safety adder that could result in an increase of 5% if there were no work-related fatalities of any Duke Energy employee, contractor or subcontractor during 2012, including the employees, contractors and subcontractors of Progress Energy for the portion of 2012 after the merger. Because no such work-related fatalities occurred during 2012, the safety adder resulted in a 5% increase to the payments of eligible employees, including the participating named executive officers.

The aggregate achievement level with respect to the individual goals for each of Ms. Good and Messrs. Manly and Jamil was 137%, 133% and 130%, respectively. As a result of the aggregate corporate, operational and individual performance, Ms. Good and Messrs. Manly and Jamil earned bonuses under the 2012 STI Plan equal to $648,401; $626,165; and $558,004, respectively.

Long-Term Incentive Compensation. Opportunities under the LTI program are provided to our named executive officers (other than Mr. Rogers, who receives separate LTI awards based in part on the same performance measures that apply under the LTI program to the other named executive officers) to align executive and shareholder interests in an effort to maximize shareholder value. In this regard, each

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COMPENSATION DISCUSSION AND ANALYSIS

year the Compensation Committee reconsiders the design and amount of the LTI awards and generally grants equity awards at the Compensation Committee's first regularly scheduled meeting each year. Duke Energy's executive officers do not have a role in selecting the date on which LTI awards are granted. Because the closing price of Duke Energy's common stock is a key factor in determining the number of shares in each employee's LTI award, the Compensation Committee considers volatility when determining the size of LTI plan awards.

2010-2012 Performance Shares under the 2010 LTI Program. The 2010 performance share cycle commenced on January 1, 2010, and ended on December 31, 2012. The performance shares generally vest only to the extent two equally weighted performance measures are satisfied. The first measure is based on Duke Energy's relative total shareholder return ("TSR") for the three-year period from January 1, 2010 to December 31, 2012 as compared to the companies in the Philadelphia Utility Index, as follows:

Relative TSR
Performance
Percentile

  Percent Payout of
Target 2010-2012
Performance Shares

  Result
  Payout of  
Target    

 
   
75th Percentile or Higher     150%   64.7th
Percentile
    129.4 %
50th Percentile (Target)     100%            
25th Percentile     50%            
Below 25th Percentile     0%            
   

For purposes of the LTI program, "TSR" is calculated based on the change, expressed as a percentage, in the fair market value of an initial investment in common stock, over a specified period, with dividends reinvested.

The second measure is based on Duke Energy's adjusted return on equity ("ROE") for the three-year period from January 1, 2010 to December 31, 2012, as follows:

Adjusted
Achieved ROE

  Percent Payout of
Target 2010-2012
Performance Shares

  Result
  Payout of  
Target    

 
   
10% or Higher     150%     10.64%     150 %
9.5% (Target)     100%              
9%     50%              
Lower than 9%     0%              
   

For additional information about the calculation of the ROE measure, see page 50.

In the aggregate, this performance corresponds to a payout of 139.7% of the target number of 2010-2012 performance shares, plus dividend equivalents earned during the 2010-2012 performance period. The following table lists the number of 2010-2012 performance shares (adjusted for the Reverse Stock Split) to which Ms. Good and Messrs. Manly and Jamil became vested at the end of the performance cycle:

Name
  2010-2012 Performance Shares
 
   

Lynn J. Good

    22,819  

Marc E. Manly

    23,810  

Dhiaa M. Jamil

    17,361  
   

       

2012 LTI Program

The Compensation Committee approved an LTI opportunity in 2012 equal to 200% of base salary for Ms. Good and Messrs. Manly and Jamil, which was the same LTI opportunity that was provided to each of these named executive officers in 2011. Under the 2012 LTI program, 30% of each participating named executive officer's LTI opportunity was provided in the form of restricted stock units and the remaining 70% was provided in the form of performance shares, as follows (all as adjusted for the Reverse Stock Split):

 
   
  2012-2014 Performance Shares (at Target Level)    
 
Name
  Grant Date
  Based on Total
Shareholder Return

  Based on Adjusted
Return on Equity ("ROE")

  Restricted stock units
 
   
Lynn J. Good     2/27/2012     6,811     6,811     5,838  
Marc E. Manly     2/27/2012     6,644.5     6,644.5     5,696  
Dhiaa M. Jamil     2/27/2012     5,814     5,814     4,984  
   

In order to enhance our retention incentives, the 2012 restricted stock units generally vest in equal portions on each of the first three anniversaries of the grant date, provided the recipient continues to be employed by Duke Energy on each vesting date or his or her employment terminates by reason of retirement, subject to compliance with restrictive covenants (e.g., non-competition). In order to emphasize pay for performance, the 2012 performance shares generally vest at the end of the three-year performance period only to the extent two equally weighted performance measures are satisfied. The first measure is based on Duke Energy's relative TSR for the three-year performance period from January 1, 2012 to December 31, 2014, as compared to the companies in the Philadelphia Utility Index, as follows:

Relative TSR Performance Percentile
  Percent Payout of Target  
Performance Shares    

 
   
75th Percentile or Higher     150 %
50th Percentile (Target)     100 %
25th Percentile     50 %
Below 25th Percentile     0 %
   

The second measure is based on Duke Energy's adjusted ROE over the three-year performance period from January 1, 2012 to December 31, 2014, as follows:

Adjusted Achieved ROE
  Percent Payout of Target  
Performance Shares    

 
   
10.6% or Higher     150 %
10% (Target)     100 %
9.4%     50 %
Below 9.4%     0 %
   

The LTI program incorporates the adjusted ROE performance measure in 2012 in recognition of the capital intensive nature of Duke Energy's business. The Compensation Committee believes that this performance measure provides an additional incentive to efficiently and effectively allocate capital and measure overall business performance.

For additional information about the calculation of the ROE measure, see page 50.

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COMPENSATION DISCUSSION AND ANALYSIS

Retirement and Welfare Benefits and Perquisites. Our named executive officers participate in the retirement and welfare plans generally available to other eligible employees. In addition, in order to attract and retain key executive talent, we believe that it is important to provide the executive officers, including our named executive officers, with certain limited retirement benefits that are offered only to a select group of management. The retirement plans that are provided to our named executive officers, including the plans offered only to a select group of management, are described on pages 57 - 61. These benefits are comparable to the benefits provided by peers of Duke Energy, as determined based on market surveys.

Duke Energy provides the named executive officers with the same health and welfare benefits it provides to all other similarly situated employees, and at the same cost charged to all other eligible employees. The named executive officers also are entitled to the same post-retirement health and welfare benefits as those provided to similarly situated retirees.

Mr. Rogers does not participate in any of these employee benefit plans on a going forward basis except: (i) with respect to the receipt of health and welfare benefits; and (ii) he can elect to defer his stock awards under the terms of the Duke Energy Corporation Executive Savings Plan. Mr. Rogers, however, maintains balances under certain of these plans reflecting previously accrued benefits.

Additionally, in 2012, Duke Energy provided our named executive officers with certain other perquisites, which are disclosed in footnote 5 to the Summary Compensation Table. Duke Energy provides these perquisites, as well as other benefits to certain executives, in order to provide competitive compensation packages. The cost of perquisites and other personal benefits are not part of base salary and, therefore, do not affect the calculation of awards and benefits under Duke Energy's other compensation arrangements (e.g., retirement and incentive compensation plans). Unless otherwise noted, each of our named executive officers received the perquisites and other benefits described in the following table.

Perquisite
  Description
 
Executive Physical   Each executive is entitled to the annual reimbursement of up to $2,500 for the cost of a comprehensive physical examination. Pursuant to his employment agreement, in lieu of receiving a payment of up to $2,500, Mr. Rogers is eligible to be reimbursed for the cost of a comprehensive physical examination at the Mayo Clinic.
Airline Membership   Each executive (other than Mr. Rogers) is entitled to Chairman's Preferred Status at U.S. Airways.
Personal Travel on Corporate Aircraft   Mr. Rogers may use corporate aircraft for personal travel in North America. With advance approval from the Chief Executive Officer, the other named executive officers may use the corporate aircraft for personal travel in North America. If Mr. Rogers or any other named executive officer uses the aircraft for personal travel, he or she must reimburse Duke Energy the direct operating costs for such travel. However, Mr. Rogers is not required to reimburse Duke Energy for the cost of travel to the executive physical described above or to meetings of the board of directors of other companies on whose board he serves. Although Mr. Rogers is entitled under his employment agreement to reimbursement, including payment of a tax gross-up, for expenses associated with his spouse accompanying him on business travel, he has never requested nor received such a tax gross-up for his spouse's travel. For additional information on the use of the corporate aircraft, see footnote 5 to the Summary Compensation Table.
Financial Planning and Tax Preparation Services   Each year, we reimburse each participating executive (other than Mr. Rogers) for expenses incurred for tax and financial planning services. This program is administered on a three-year cycle, such that participating executives can be reimbursed for up to $15,000 of eligible expenses during the three-year cycle.
Matching Charitable Contributions   The Duke Energy Foundation, independent of Duke Energy, maintains The Duke Energy Foundation Matching Gifts Program under which all employees are eligible for matching contributions of up to $5,000 per calendar year to qualifying institutions.
 

Severance.    Duke Energy has entered into change in control agreements with Ms. Good and Messrs. Manly and Jamil. Under these agreements, each such named executive officer would be entitled to certain payments and benefits if (1) a change in control were to occur and (2) within two years following the change in control, (a) Duke Energy terminated the executive's employment without "cause" or (b) the executive terminated his employment for "good reason." The severance protection provided by Duke Energy is generally two times the executive's annual compensation and becomes payable only if there is both a change in control and a qualifying termination of employment. The Compensation Committee approved the two times severance multiplier after consulting with its advisors and reviewing the severance protection provided by peer companies. The Compensation Committee believes that the protection provided through these severance arrangements is appropriate in order to diminish the uncertainty and risk to the executives' roles in the context of a potential or actual change in control. The benefit levels under the change in control agreements are described in more detail under the "Potential Payments Upon Termination or Change in Control" section of this proxy statement. The change in control agreements do not provide for golden parachute excise tax gross-up payments.

In order to ensure that Duke Energy continues to provide reasonable severance benefits, the Compensation Committee has established a policy pursuant to which it generally will seek shareholder approval for any future agreement with certain individuals (e.g., a named executive officer) that provides severance benefits in excess of 2.99 times the sum of the executive's base salary and annual bonus, plus the value of continued participation in welfare, retirement and equity compensation plans determined as if the executive remained employed for 2.99 additional years. Under the policy, Duke Energy also will seek shareholder approval of any such agreement that provides for the payment of any tax gross-ups by reason of the executive's termination of employment, including reimbursement of golden parachute excise taxes.

The Duke Energy Executive Severance Plan provides varying levels of severance protection to senior executives. The Compensation Committee believes that this plan is appropriate in order to provide a consistent approach to executive severance, and to provide eligible executives with certainty and security while they are focusing on their duties and responsibilities. Severance payments and benefits would only be paid in the event that an eligible executive's employment is involuntarily terminated without "cause" or is voluntarily terminated for "good reason," and are subject to compliance with restrictive covenants (e.g., non-competition). The severance payments and benefits that would be paid in the event of a qualifying termination of employment to those senior executives who are identified as "Tier I Participants," including Ms. Good and Messrs. Manly and Jamil, generally approximate two times their annual compensation. The

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COMPENSATION DISCUSSION AND ANALYSIS

Executive Severance Plan prohibits the payment of severance if an executive also would be entitled to severance payments and benefits under a separate agreement or plan maintained by Duke Energy, including the change in control agreements described above. The Executive Severance Plan does not provide for golden parachute excise tax gross up payments. The benefit levels under the Executive Severance Plan are described in more detail under the "Potential Payments Upon Termination or Change in Control" section of this proxy statement.

Compensation of the Chief Executive Officer

The Compensation Committee is responsible for establishing the compensation of the Chief Executive Officer. The Compensation Committee's objective in this regard is to motivate and retain a Chief Executive Officer who is committed to delivering sustained superior performance for all of Duke Energy's stakeholders. The Corporate Governance Committee, however, establishes the Chief Executive Officer's individual goals and, based upon input from the other members of the Board of Directors, determines his performance with respect to those goals.

Duke Energy entered into an employment agreement with Mr. Rogers, effective February 19, 2009. Under this agreement, Mr. Rogers does not receive a base salary and he is generally not eligible to participate in Duke Energy's incentive compensation and benefit plans, including its cash bonus programs, but he is permitted to participate in Duke Energy's medical and dental plans if he pays the required premiums. Mr. Rogers also is entitled to certain fringe benefits, and he remains entitled to benefits under legacy plans and agreements of Cinergy Corp., which merged with Duke Energy in 2006.

Under the employment agreement, Mr. Rogers will be compensated through 2013, primarily through annual grants of stock options, restricted stock units and performance shares, as follows:

An annual stock option grant with a value of $1,600,000, in each case vesting ratably in three equal annual installments. Mr. Rogers generally may not dispose of any shares acquired upon exercise of any such options until January 1, 2014, except to pay the exercise price of the option or related tax withholding.

An annual restricted stock unit award with a value of $2,000,000, in each case vesting ratably in four equal quarterly installments following grant. Dividend equivalents are payable currently in cash.

An annual performance share award based on annual performance metrics consistent with those established for the other named executive officers under the STI Plan, except that the maximum payment is equal to 199.50% of the target opportunity rather than 183.75%, with a target value of $2,000,000. Dividend equivalents are accumulated and paid only if the underlying performance shares become payable.

A long term performance share award based on performance over a three year performance period, with performance metrics consistent with those established for the other named executive officers under each year's LTI program, with a target value of $2,400,000. Dividend equivalents are accumulated and paid only if the underlying performance shares become payable.

The value of the equity awards for the first calendar year of the contract (i.e., 2009) was prorated in recognition of the fact that the equity awards made under Mr. Rogers' prior agreement were intended to compensate him through April 3, 2009. The Compensation Committee believes that the equity awards called for under the agreement strike a balance between awards designed principally to reward continued employment (the restricted stock unit awards) and awards designed principally to reward both continued employment and stock price and operational performance (the stock options and performance share awards). Moreover, by linking the performance metrics under the performance shares to those applicable to Duke Energy's other named executive officers, the Compensation Committee is ensuring that all of the named executive officers are focused on achieving goals designed to increase shareholder value.

Mr. Rogers' employment agreement contains non-competition and non-solicitation obligations. The non-competition obligations survive for one year following his termination of employment for any reason, and the non-solicitation obligations survive for two years following his termination of employment for any reason.

For 2012, Mr. Rogers' annual performance shares covered 31,641 shares of Duke Energy common stock (at target performance, and as adjusted for our Reverse Stock Split). The performance criteria applicable to the annual performance shares were weighted 50%, 20%, and 10% on the same adjusted diluted EPS goal, O&M expense control goal and reliability goal, respectively, as were applicable for the other named executive officers under the 2012 STI Plan (except for a different maximum payout as described above), and the remaining 20% was based on the following individual goals:

Progress Energy Merger (weighting – 10%).  Accomplish the best result for our stakeholders with respect to the proposed Progress Energy merger, including evaluating and providing strategic guidance related to the regulatory hurdles to the merger, determining an approach that will create value for our shareholders and maintain the proposed benefits to customers, delivering on the synergies related to the Progress Energy merger, redefining and executing on our growth strategy, fostering employee engagement and focus during a year of uncertainty so we are positioned to execute on our growth strategy, and identifying and creating risk maps for all aspects of the Progress Energy merger, including the risks associated with the regulatory requirements.

Regulatory Initiatives (weighting – 10%).  Provide support with respect to regulatory initiatives, including achieving regulatory clarity and managing the Edwardsport IGCC construction project on schedule in order to achieve the targeted in-service date, providing support, guidance and strategic vision with regard to the development and prosecution of rate case filings, providing direction on influencing the legislative agencies regarding environmental and nuclear priorities, and identifying and creating risk maps for all regulatory initiatives.

The annual portion of Mr. Rogers' 2012 performance share opportunity was subject to the same 5% TICR-based safety penalty and 5% safety adder (in the event of no work-related employee or contractor fatality) that applied to the other participating named executive officers under the 2012 STI Plan. The penalty was not triggered due to the fact that Duke Energy's actual TICR was better than the pre-established target TICR level. In addition, the Compensation Committee determined that the safety adder was achieved and would increase the payout of Mr. Rogers' annual 2012 performance shares by 5%.

The aggregate achievement level with respect to Mr. Rogers' individual goals was 119.65%. Based on the actual level of achievement of the corporate objectives and individual objectives, Mr. Rogers earned 138.85% of his 2012 annual performance share opportunity, resulting in a payout of 43,933 shares, plus dividend equivalents.

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Mr. Rogers also was granted long-term performance shares in 2010 with respect to the 2010-2012 performance period. These performance shares were subject to the same two equally weighted performance measures that applied to other participating named executive officers, as described on page 44. Based on Duke Energy's performance, Mr. Rogers received a payout of 68,023 performance shares, plus dividend equivalents earned during the 2010-2012 performance period, which is equal to a payout of 139.7% of the target number of Mr. Rogers' 2010-2012 performance shares.

For 2012, the performance criteria applicable to the long-term portion of Mr. Rogers' performance shares were the same two equally weighted predetermined measures based on TSR and adjusted ROE as were applicable for the other participating named executive officers under the 2012 LTI program, as measured over the 2012-2014 performance period. If earned, such performance shares would be paid in early 2015.

Actions Taken in Connection with the Progress Energy Merger. Mr. Rogers entered into a term sheet with Duke Energy on January 8, 2011, in connection with the announcement of a merger agreement with Progress Energy. The term sheet provided that Mr. Rogers' employment agreement would be amended to reflect the fact that following the merger, Mr. Rogers would serve as Executive Chairman of the Board of Directors of Duke Energy and would cease to serve as President and Chief Executive Officer. The term sheet also provided for Mr. Rogers' compensation arrangement to remain the same as under his current employment agreement through December 31, 2013.

Upon the closing of the Progress Energy merger on July 2, 2012, Mr. Rogers' employment agreement was amended as described above in the term sheet, and Mr. Johnson assumed the role of President and Chief Executive Officer of Duke Energy. On July 3, 2012, Mr. Johnson resigned from this role, and the Board of Directors of Duke Energy requested that Mr. Rogers continue as Chief Executive Officer and President of Duke Energy rather than serving as Executive Chairman as originally contemplated. Mr. Rogers accepted the Board of Directors' request, and the prior amendment to Mr. Rogers' employment agreement was nullified on July 3, 2012, resulting in the continuation without change of Mr. Rogers' original employment agreement, which expires on December 31, 2013.

With Mr. Rogers' consent and in connection with a settlement agreement entered into on November 29, 2012 by and among Duke Energy, the staff of the North Carolina Utilities Commission and the North Carolina Utilities Commission Public Staff, Mr. Rogers has chosen to retire by December 31, 2013 at the expiration of his current employment agreement. As a result of Mr. Rogers' decision, Duke Energy currently is undertaking steps to name a new Chairman of the Board of Directors and a new Chief Executive Officer.

Former Progress Energy Named Executive Officers

On July 2, 2012, we completed the Progress Energy merger. In connection with the Progress Energy merger, Mr. Johnson was appointed our President and Chief Executive Officer, Mr. Lyash was appointed Executive Vice President – Energy Supply, Mr. McArthur was appointed Executive Vice President – Regulated Utilities, and Mr. Mulhern was appointed Executive Vice President & Chief Administrative Officer. At that time, the Compensation Committee reviewed updated market data sources in light of the increased scope of responsibilities for the former Progress Energy named executive officers and established the following total direct compensation levels:

Name
  Pre-Progress
Energy Merger
Base Salary

  Post-Progress
Energy Merger
Base Salary

  Pre-Progress
Energy Merger
Target STI
Opportunity
(as a % of
base salary)

  Post-Progress
Energy Merger
Target STI
Opportunity
(as a % of
base salary)

  Pre-Progress
Energy Merger
Target LTI
Opportunity
(as a % of
base salary)

  Post-Progress
Energy Merger
Target LTI
Opportunity
(as a % of
base salary)

 
   

William D. Johnson

  $ 1,061,000   $ 1,100,000     100 %   125 %   350 %   500 %

Jeffrey J. Lyash*

 
$

480,588
 
$

515,000
   
55

%
 
80

%
 
175

%
 
200

%

John R. McArthur

  $ 517,719   $ 525,000     55 %   70 %   175 %   200 %

Mark F. Mulhern

  $ 500,000   $ 500,000     55 %   70 %   175 %   175 %

 

 

*

The Compensation Committee adjusted Mr. Lyash's compensation two times in connection with the closing of the Progress Energy merger. First, on July 2, 2012, the Compensation Committee increased his base salary from $480,588 to $500,000, increased his annual target STI opportunity as a percentage of his base salary from 55% to 70%, and increased his annual target LTI opportunity as a percentage of his base salary from 175% to 190%. Subsequently, on July 9, 2012, the Compensation Committee increased his base salary from $500,000 to $515,000, increased his annual target STI opportunity as a percentage of his base salary from 70% to 80%, and increased his annual target LTI opportunity as a percentage of his base salary from 190% to 200%.

Mr. Johnson resigned from his position on July 3, 2012, Messrs. McArthur and Mulhern resigned from their respective positions on July 11, 2012, and Mr. Lyash resigned from his position on December 31, 2012. Following is a discussion of the compensation arrangements and decisions with respect to each of these former Progress Energy named executive officers following the merger. As described below, the severance benefits for each of these former Progress Energy named executive officers were based substantially on the benefits provided under the Progress Energy, Inc. Management Change-in-Control Plan (the "Progress Energy CIC Plan"), which plan was assumed by Duke Energy in connection with the Progress Energy merger. The Compensation Committee did not establish the severance levels under the Progress Energy CIC Plan. Instead, the severance levels under the Progress Energy CIC Plan were established by Progress Energy prior to the Progress Energy merger.

Mr. Johnson. On June 27, 2012, Duke Energy entered into a three-year employment agreement with Mr. Johnson that provided for his employment as Duke Energy's President and Chief Executive Officer, effective as of the closing of the merger on July 2, 2012. The employment agreement was based on the term sheet that was executed at the time that the merger agreement was signed on January 8, 2011, and provided Mr. Johnson with the compensation adjustments described above. The agreement also provided Mr. Johnson with severance benefit protection that was substantially the same as that provided under the Progress Energy CIC Plan, except that he would not be entitled to an excise tax gross-up relating to Section 280G of the Internal Revenue Code.

In connection with Mr. Johnson's resignation from Duke Energy on July 3, 2012, he negotiated a separation agreement with Duke Energy. In consideration for Mr. Johnson's agreement to cooperate with

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COMPENSATION DISCUSSION AND ANALYSIS

Duke Energy with respect to transition matters, his agreement to non-competition, non-solicitation, non-disparagement and confidentiality covenants, and a release of claims, the separation agreement provided Mr. Johnson with substantially the same severance benefit protection as provided under the Progress Energy CIC Plan (including, if such taxes would have been due, a tax gross-up for excise taxes relating to Section 280G of the Internal Revenue Code). The actual amount of Mr. Johnson's separation benefits were not of such an amount that they resulted in the imposition of an excise tax relating to Section 280G of the Internal Revenue Code, and, therefore, no tax gross-up was paid. In addition, in consideration of the various covenants identified above, Mr. Johnson was eligible under the separation agreement to receive a lump sum payment equal to the lesser of (i) $1,500,000 or (ii) the portion of the $1,500,000 that, when aggregated with the other payments that were contingent upon a change in control, would not be an "excess parachute payment" within the meaning of Section 280G of the Internal Revenue Code, but in any event such payment would not be less than $500,000.

Mr. Johnson also was entitled to his accrued and unpaid benefits under Progress Energy's retirement and deferred compensation plans. These benefits were earned during Mr. Johnson's employment with Progress Energy and were not enhanced or increased as a result of the separation agreement. The severance benefits paid to Mr. Johnson are set out in footnote 5 of the Summary Compensation Table on page 52 and in the Potential Payments Upon Termination or Change in Control section on page 66.

Messrs. McArthur and Mulhern. Each of Messrs. McArthur and Mulhern resigned from Duke Energy effective on July 11, 2012. In connection with the resignations, each of them entered into a separation agreement that provided substantially the same severance benefit protection as that provided upon a voluntary termination of employment for "good reason" under the Progress Energy CIC Plan. The actual severance benefits paid to each of Messrs. McArthur and Mulhern are set out in footnote 5 of the Summary Compensation Table on page 52 and in the Potential Payments Upon Termination or Change in Control section on page 66.

There was, however, one change to the severance benefits provided under the Progress Energy CIC Plan. In general, under the Progress Energy CIC Plan each of Messrs. McArthur and Mulhern would be entitled to full vesting of all assumed equity awards upon a voluntary termination of employment for good reason, with any performance shares vesting at the "target" level. The separation agreements for Messrs. McArthur and Mulhern provided that all of their performance shares would vest at the target level, except that their performance shares for the 2012-2014 performance cycle would continue to vest based on the same performance goals, as amended by the Compensation Committee after the merger, that apply to other former Progress Energy executives who remain employed with Duke Energy, subject to a minimum payout of no less than 50% of target. The two adjusted performance measures that would continue to apply to these performance shares for the 2012-2014 performance cycle (as well as to the 2012-2014 performance shares of other former Progress Energy executives who remain employed with Duke Energy) are set forth below.

The first measure is based on Progress Energy's relative TSR for the three-year performance period from January 1, 2012 to December 31, 2014 as compared to the TSR of the companies in a customized peer group comprised of highly regulated utilities. In connection with the Progress Energy merger, the Compensation Committee adjusted the TSR goal to provide that (i) it would be measured by reference to the common stock of Progress Energy for the period prior to the merger, and by reference to the common stock of Duke Energy for the period after the merger, and (ii) the peer group of companies against which the TSR is measured was amended to remove Duke Energy for the entire performance period. The peer group, after the removal of Duke Energy, consisted of the following companies: Alliant Energy Corporation, American Electric Power, Inc., Consolidated Edison, Great Plains Energy, Inc., NV Energy, Inc., PG&E Corporation, Pinnacle West Capital Corporation, Portland General Electric Company, SCANA Corporation, Southern Company, Westar Energy, Inc., Wisconsin Energy Corp. and Xcel Energy, Inc.

The second measure is based on Progress Energy's rate of "earnings growth" during the performance period. In connection with the Progress Energy merger, the Compensation Committee adjusted the earnings growth goal to provide that it would be calculated by reference to the on-going earnings per share of Duke Energy for the entire 2012-2014 performance period, with such growth measured based on an earnings per share baseline of $4.23 for the 2011 calendar year.

Duke Energy entered into a consulting agreement with Mr. McArthur in connection with a settlement agreement entered into on November 29, 2012 by and between Duke Energy, the staff of the North Carolina Utilities Commission and the North Carolina Utilities Commission Public Staff. Under this agreement, Mr. McArthur will provide advice and consulting services on matters related to legal, regulatory and legislative policy issues advanced by Duke Energy before the North Carolina General Assembly and the North Carolina Utilities Commission, as well as on methods and procedures for maintaining good relationships with government officials in North Carolina. The consulting agreement terminates on December 31, 2014, with certain exceptions, and provides Mr. McArthur with a retainer of $14,880 per month.

Mr. Lyash. In addition to the compensation adjustments described above, the Compensation Committee provided Mr. Lyash with a retention agreement on July 9, 2012 under which he would be paid $1,000,000, less applicable taxes, subject to him remaining continuously employed with Duke Energy until the second anniversary of the Progress Energy merger. Effective on December 31, 2012, Mr. Lyash resigned from Duke Energy, resulting in the forfeiture of this retention agreement. In connection with Mr. Lyash's resignation, he entered into a separation agreement that provided substantially the same severance benefit protection as that provided upon a voluntary termination of employment for "good reason" under the Progress Energy CIC Plan. The actual severance benefits paid to Mr. Lyash are set out in footnote 5 of the Summary Compensation Table on page 52 and in the Potential Payments Upon Termination or Change in Control section on page 66.

Amendment to Progress Energy Supplemental Plan. In connection with the Progress Energy merger and pursuant to the terms of the merger agreement entered into by Duke Energy and Progress Energy, on July 2, 2012, the Compensation Committee amended the Duke Energy Corporation Executive Cash Balance Plan (the "ECBP") to provide that the portion of the Progress Energy Supplemental Senior Executive Retirement Plan (the "Progress Energy Supplemental Plan") relating to the ten active participants in the Progress Energy Supplemental Plan, including the former Progress Energy named executive officers, was merged into the ECBP. As a result, the nonqualified retirement benefits that were originally to be provided to the former Progress Energy named executive officers under the Progress Energy Supplemental Plan are instead provided pursuant to the amended ECBP. The amended ECBP provides that the former Progress Energy named executive officers would participate in the

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COMPENSATION DISCUSSION AND ANALYSIS

ECBP and be entitled to nonqualified retirement pension benefits equal to the greater of:

The sum of (i) the accrued benefit under the Progress Energy Supplemental Plan frozen as of the closing of the Progress Energy merger (based on applicable service and compensation earned prior to the closing of the merger) and (ii) future benefits under the ECBP with respect to service and compensation levels following the closing of the Progress Energy merger; or

The benefits earned under the Progress Energy Supplemental Plan, as increased by post-Progress Energy merger service and cost of living adjustments.

Risk Assessment of Compensation Policies and Practices

In consultation with the Compensation Committee, members of management from Duke Energy's Human Resources, Legal and Risk Management groups assessed whether our compensation policies and practices encourage excessive or inappropriate risk taking by our employees, including employees other than our named executive officers. This assessment included a review of the risk characteristics of Duke Energy's business and the design of our incentive plans and policies.

Management reported its findings to the Compensation Committee, and after review and discussion, the Compensation Committee concluded that our plans and policies do not encourage excessive or inappropriate risk taking. Although a significant portion of our executive compensation program is performance based, the Compensation Committee has focused on aligning Duke Energy's compensation policies with the long-term interests of Duke Energy and avoiding rewards that could create unnecessary risks to the company, as evidenced by the following:

We do not use highly leveraged STI goals, but instead the STI opportunities are based on balanced performance metrics that promote long-term goals, and all payouts are capped at a pre-established percentage of the target payment opportunity;

Our LTI opportunities generally vest over a period of three years in order to focus our executives on long-term performance and enhance retention. Our performance shares are granted annually and have overlapping three-year performance periods, so any inappropriate risks taken to increase the payout under one award could jeopardize the potential payouts under other awards;

We use a variety of performance metrics (i.e., adjusted diluted EPS, O&M expense, reliability, safety, TSR, adjusted ROE) that correlate to long-term value, and our performance goals are set at levels that we believe are reasonable in light of past performance and market conditions;

Our stock ownership policy requires the members of our Executive Leadership Team, including our named executive officers, to hold a minimum level of Duke Energy shares to ensure that each executive has personal wealth tied to the long-term success of Duke Energy and is therefore aligned with shareholders; and

We maintain a "clawback policy," which allows Duke Energy to require the reimbursement of any incentive compensation, the payment of which was predicated upon the achievement of financial results that were subsequently the subject of a restatement caused or partially caused by the recipient's fraud or misconduct. It also entitles us to recover inadvertent payments based on an incorrect calculation.

Tax and Accounting Implications

Deductibility of Executive Compensation. The Compensation Committee reviews and considers the deductibility of executive compensation under Section 162(m) of the Internal Revenue Code, which provides that Duke Energy generally may not deduct, for federal income tax purposes, annual compensation in excess of $1 million paid to certain employees. Performance based compensation paid pursuant to shareholder approved plans is not subject to the deduction limit as long as such compensation is approved by "outside directors" within the meaning of Section 162(m) of the Internal Revenue Code and certain other requirements are satisfied.

Although the Compensation Committee generally intends to structure and administer executive compensation plans and arrangements so that they will not be subject to the deduction limit of Section 162(m) of the Internal Revenue Code, the Compensation Committee may, from time to time, approve payments that cannot be deducted in order to maintain flexibility in structuring appropriate compensation programs in the interests of shareholders. For example, restricted stock unit awards received by certain employees, and amounts paid to certain employees under the STI Plan with respect to individual objectives, may not be deductible for federal income tax purposes, depending on the amount and other types of compensation received by such employees.

Accounting for Stock Based Compensation. Duke Energy recognizes stock-based compensation based upon the estimated fair value of the awards, net of estimated forfeitures. The recognition period for these costs begins at either the applicable service inception date or grant date and continues throughout the requisite service period, or for certain share based awards until the employee becomes retirement eligible, if earlier. Share based awards, including stock options, but not performance shares, granted to employees that are already retirement eligible are deemed to have vested immediately upon issuance, and therefore, compensation cost for those awards is recognized on the date such awards are granted.

Non-GAAP Financial Measures. As described previously in this Compensation Discussion and Analysis, Duke Energy uses various financial measures, including adjusted diluted EPS and O&M expense, in connection with short-term and long-term incentives. Adjusted diluted EPS is a non-GAAP financial measure as it represents diluted EPS from continuing operations attributable to Duke Energy common shareholders, adjusted for the per share impact of special items and the mark-to-market impacts of economic hedges related to certain generation assets in the Commercial Power segment. Duke Energy's management also uses adjusted diluted EPS as a measure to evaluate operations of the Company. The O&M expense measure used for incentive plan purposes also is a non-GAAP financial measure as it too is adjusted for the impact of certain of these items. Special items represent certain charges and credits which management believes will not be recurring on a regular basis, although it is reasonably possible such charges and credits could recur. The impact of an asset impairment is a special item that generally is excluded from adjusted EPS. Mark-to-market adjustments reflect the mark-to-market impact of derivative contracts, which is recognized in GAAP earnings immediately as such derivative contracts do not qualify for hedge accounting or regulatory accounting treatment, used in Duke Energy's hedging of a portion of the economic value of its generation assets in the Commercial Power segment. The economic value of the generation assets is subject to fluctuations in fair value due to market price volatility of the input and output commodities (e.g., coal, power) and, as such, the economic hedging involves both purchases and sales of those input and output commodities related to the generation assets. Because the operations of the generation assets are accounted for under the accrual method, management believes that excluding the impact of mark-to-market changes of the economic hedge contracts from

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COMPENSATION DISCUSSION AND ANALYSIS

adjusted earnings until settlement better matches the financial impacts of the hedge contract with the portion of the economic value of the underlying hedged asset. The most directly comparable GAAP measures for adjusted diluted EPS and O&M expense measures used for incentive plan purposes are reported diluted EPS from continuing operations attributable to Duke Energy Corporation common shareholders and reported O&M expense from continuing operations, which include the impact of special items and the mark-to-market impacts of economic hedges in the Commercial Power segment. For purposes of the LTI program, adjusted ROE is calculated based on the average of the annual adjusted ROE, with equity determined on a quarterly basis, earned by Duke Energy during the applicable performance period with each annual adjusted ROE being calculated by dividing adjusted net income by average shareholders' equity, which is calculated by reference to shareholders' equity as reported on Duke Energy's consolidated balance sheet, excluding goodwill. Under this calculation, adjusted net income is determined in a manner similar to the methodology used for calculating adjusted diluted EPS for purposes of the STI Plan.

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EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table provides compensation information for our Chief Executive Officer (Mr. Rogers) and our Chief Financial Officer (Ms. Good) and the three other most highly compensated executive officers who were employed on December 31, 2012 (Messrs. Lyash, Manly, and Jamil). The table also provides compensation information for Mr. Johnson, who served as our Chief Executive Officer for a period during 2012, as well as Messrs. McArthur and Mulhern, each of whom would have been among the three most highly compensated executive officers if they had remained employed through December 31, 2012. The table provides information for 2010 and 2011 only to the extent that the named executive officer was included in the Duke Energy Summary Compensation Table for those years. For the named executive officers who joined us from Progress Energy (Messrs. Johnson, Lyash, McArthur and Mulhern), the table only provides information for compensation earned after the Progress Energy merger.

Name and Principal Position
  Year
  Salary
($)

  Bonus
($)

  Stock
Awards
($)(1)

  Option
Awards
($)(2)

  Non-Equity
Incentive Plan
Compensation
($)(3)

  Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)(4)

  All Other
Compensation
($)(5)

  Total
($)

 
James E. Rogers(6)   2012   0     0   6,373,023   1,600,000     0     388,257     369,229   8,730,509
Chairman, President &   2011   0     0   6,439,381   1,600,001     0     328,742     412,134   8,780,258
Chief Executive Officer   2010   0     0   6,440,180   1,600,000     0     352,289     422,712   8,815,181
 
Lynn J. Good   2012   617,500     0   1,220,361   0     648,401     523,790     76,515   3,086,567
Executive Vice President &   2011   595,833     0   1,213,768   0     495,545     187,708     84,317   2,577,171
Chief Financial Officer   2010   575,000     0   1,163,575   0     710,528     437,235     77,000   2,963,338
 
William D. Johnson(7)   2012   6,346     0   0   0     0     5,032,838     23,616,736   28,655,920
Former President & Chief                                            
Executive Officer                                            
 
Jeffrey J. Lyash(8)   2012   259,481     0   0   0     0     698,580     6,382,816   7,340,877
Former Executive Vice                                            
President of Energy Supply                                            
 
Marc E. Manly   2012   600,000     0   1,190,573   0     626,165     528,654     201,381   3,146,773
Executive Vice President   2011   600,000     0   1,213,768   0     499,010     384,160     130,172   2,827,110
and President,   2010   600,000     0   1,214,108   0     653,820     567,171     49,341   3,084,440
Commercial Businesses                                            
 
Dhiaa M. Jamil(9)   2012   537,500     0   1,041,760   0     558,004     192,123     90,821   2,420,208
Executive Vice President &   2011   520,833     0   1,062,092   0     415,669     135,802     68,619   2,203,015
President, Duke Energy                                            
Nuclear                                            
 
John R. McArthur(10)   2012   12,620     0   1,606,027   0     0     2,565,871     4,811,433   8,995,951
Former Executive Vice                                            
President of Regulated                                            
Utilities                                            
 
Mark F. Mulhern(11)   2012   13,942     0   2,999,145   0     0     704,321     2,212,415   5,929,823
Former Executive Vice                                            
President & Chief                                            
Administrative Officer                                            
 

(1)

This column does not reflect the value of stock awards that were actually earned or received by the named executive officers during each of the years listed above. Rather, as required by applicable SEC rules, this column reflects the aggregate grant date fair value of the performance shares (based on the probable outcome of the performance conditions as of the date of grant) and restricted stock units granted to our named executive officers in the applicable year. The aggregate grant date fair value of the performance shares granted in 2012 to Messrs. Rogers, Manly, and Jamil, and Ms. Good, assuming that the highest level of performance would be achieved, is $7,590,092; $1,259,997; $1,102,509; and $1,291,570, respectively. Pursuant to the terms of the Progress Energy merger agreement, Duke Energy was required to assume Progress Energy equity awards and convert them to Duke Energy performance shares of equivalent value. This column also reflects the incremental fair value related to the modification, upon the termination of employment of Messrs. McArthur and Mulhern on July 11, 2012, of the restricted stock units and the target number of performance shares that were granted by Progress Energy to Messrs. McArthur and Mulhern under the Progress Energy, Inc. 2007 Equity Incentive Plan for the 2010-2012, 2011-2013, and 2012-2014 performance periods. In connection with the termination of employment of Messrs. McArthur and Mulhern, the restricted stock units became vested and the performance shares for the 2010-2012 and 2011-2013 performance periods were settled at the target number of shares and the performance shares for the 2012-2014 performance period continued to vest based on the applicable performance goals, as amended by the Compensation Committee after the Progress Energy merger, subject to a minimum payout of 50% of the target number of shares. This column does not reflect the portion of Mr. McArthur's restricted stock units and performance shares that would have vested in any event due to the fact that he was eligible for retirement. The aggregate grant date fair value of the awards was determined in accordance with the accounting guidance for stock-based compensation. See Note 22 of the Consolidated Financial Statements contained in our Annual Report for an explanation of the assumptions made in valuing these awards.

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EXECUTIVE COMPENSATION

(2)

This column does not reflect the value of shares that were actually acquired upon the exercise of stock options by Mr. Rogers during each of the years listed above. Rather, as required by applicable SEC rules, this column reflects the aggregate grant date fair value of the stock options granted to Mr. Rogers in the applicable year. The aggregate grant date fair value was determined in accordance with the accounting guidance for stock-based compensation. See Note 22 of the Consolidated Financial Statements contained in our Annual Report for an explanation of the assumptions made in valuing these awards.

(3)

With respect to the applicable performance period, this column reflects amounts payable under the Duke Energy Corporation Executive Short-Term Incentive Plan. Unless deferred, the 2012 amounts were paid in March 2013.

(4)

This column includes the amounts listed below. The amounts listed were earned over the 12-month period ending on December 31, 2012.

 
  Rogers
($)

  Good
($)

  Johnson
($)

  Lyash
($)

  Manly
($)

  Jamil
($)

  McArthur
($)

  Mulhern
($)

 

Change in Actuarial Present Value of Accumulated Benefit Under:

                                 

Duke Energy Retirement Cash Balance Plan

  0   0   0   0   0   75,611     0   0

Duke Energy Executive Cash Balance Plan

  0   488,483   0   0   432,996   116,512     0   0

Cinergy Corp. Non-Union Employees' Pension Plan

  67,586   35,307   0   0   95,658   0     0   0

Progress Energy Supplemental Senior Executive Retirement Plan*

  0   0   4,966,826   635,268   0   0     2,520,947   646,793

Progress Energy Pension Plan*

  0   0   58,473   63,312   0   0     44,924   57,528

Above-Market Interest Earned on Amounts Deferred Under the Deferred Compensation Agreement for Mr. Rogers and the Deferred Compensation Plan for Key Management Employees for Mr. Johnson

  320,671   0   7,539   0   0   0     0   0
 

TOTAL

  388,257   523,790   5,032,838   698,580   528,654   192,123     2,565,871   704,321
 

*

As reflected in the "Pension Benefits" table, Messrs. Johnson and McArthur elected to receive a complete distribution of their benefits under the Progress Energy Pension Plan following their termination of employment in 2012. The change in the actuarial present value of their benefit under the Progress Energy Pension Plan has been calculated as if the distribution had not occurred. The amounts listed above for the change in actuarial present value under the Progress Energy Supplemental Senior Executive Retirement Plan and the Progress Energy Pension Plan were earned throughout 2012 (both before and after the Progress Energy merger).

(5)

The All Other Compensation column includes the following for 2012:

 
  Rogers
($)

  Good
($)

  Johnson
($)

  Lyash
($)

  Manly
($)

  Jamil
($)

  McArthur
($)

  Mulhern
($)

 
   
Matching Contributions Under the Duke Energy Retirement Savings Plan/Progress Energy 401(k) Plan     0   15,000     577   7,512   15,000   15,000     577     577  
Make-Whole Matching Contribution Credits Under the Duke Energy Corp Executive Savings Plan or the Progress Energy Management Deferred Compensation Plan     0   51,783     2,148   6,721   50,941   42,190     691     706  
Personal Use of Airplane*     366,997   0     0   0   125,958   28,122     0     0  
Airline Membership     0   0     0   0   0   0     0     0  
Holiday Gift     132   132     0   0   132   132     0     0  
Charitable Contributions Made in the Name of the Executive**     2,100   5,000     0   0   5,000   5,000     0     0  
Financial Planning Program     0   4,600     0   0   4,350   377     0     0  
Luncheon Club Dues***     0   0     128   157   0   0     126     109  
Internet and phone line***     0   0     370   539   0   0     45     50  
AD&D policy coverage***     0   0     0   60   0   0     0     0  
Relocation expenses     0   0     9,851   130,446   0   0     0     0  
Company paid legal fees     0   0     0   25,000   0   0     85,667     84,158  
Payout of Unused Vacation     0   0     99,979   39,615   0   0     19,688     43,029  
Cash Severance Accrued at Termination of Employment     0   0     10,300,000   3,193,000   0   0     3,045,000     2,050,000  
Continued Health and Welfare Benefits     0   0     35,030   40,928   0   0     40,386     33,786  
Value of Accelerated Vesting of Stock Awards at Termination of Employment****     0   0     13,168,653   2,938,838   0   0     1,619,253     0  
   
TOTAL     369,229   76,515     23,616,736   6,382,816   201,381   90,821     4,811,433     2,212,415  
   

*

Regarding use of corporate aircraft, named executive officers are required to reimburse Duke Energy the direct operating costs of any personal travel. With respect to flights on a leased or chartered airplane, direct operating costs equal the amount that the third party charges Duke Energy for such trip. With respect to flights on the Company-owned airplane, direct operating costs include the amounts permitted by the Federal Aviation Regulations for non-commercial carriers. Named executive officers are permitted to invite their spouse or other guests to accompany them on business trips when space is available; however, in such events, the named executive officer is imputed income in accordance with IRS guidelines. The additional cost included in the table above is the amount of the IRS-specified tax deduction disallowance, if any, plus any additional carbon credits purchased with respect to the named executive officer's personal travel.

**

Certain charitable contributions made by the named executive officers are not eligible for matching under the Matching Gifts Program and therefore are not listed above. The former Progress named executive officers were not eligible for the Matching Gifts Program in 2012.

***

These types of perquisites were provided by Progress Energy prior to the Progress Energy merger. Duke Energy has discontinued the practice of providing such perquisites.

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EXECUTIVE COMPENSATION

****

The amounts reflected above for the value of accelerated vesting of stock awards (including amounts for Messrs. McArthur and Mulhern reflected in the "Stock Awards" column) include the following amounts that were offset for Messrs. Johnson, Lyash, McArthur and Mulhern as a result of an inadvertent overpayment in February, 2012, of performance shares for the 2009-2011 performance period: $634,289; $149,185; $160,939; and $129,081.

(6)

Mr. Rogers did not receive salary or bonus from Duke Energy during 2010-2012. As previously described, he is covered under an employment agreement with Duke Energy that provides compensation primarily through stock-based awards.

(7)

Mr. Johnson resigned effective July 3, 2012.

(8)

Mr. Lyash resigned effective December 31, 2012.

(9)

Mr. Jamil served as Executive Vice President and Chief Nuclear Officer as of December 31, 2012.

(10)

Mr. McArthur resigned effective July 11, 2012.

(11)

Mr. Mulhern resigned effective July 11, 2012.

GRANTS OF PLAN-BASED AWARDS

 
   
   
  Estimated Possible
Payouts Under Non-Equity
Incentive Plan Awards(1)
  Estimated Future Payouts
Under Equity Incentive
Plan Awards(2)
  All Other
Stock
Awards:
Number
of Shares
of Stock
or Units
(#)(3)

  All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)(4)

   
  Grant
Date Fair
Value of
Stock
and
Option
Awards
($)(6)

 
 
   
   
  Exercise
or Base
Price of
Option Awards
($/Sh)(5)

 
Name
  Grant Type
  Grant
Date

 

Threshold
($)

  Target
($)

  Maximum
($)

 

Threshold
(#)

  Target
(#)

  Maximum
(#)

 
   
James E. Rogers   Annual Performance Shares   2/27/2012                     15,030   31,641     63,124                       2,000,028  
James E. Rogers   Long-Term Perf. Shares   2/27/2012                     9,492   18,985     28,477                       1,172,957  
James E. Rogers   Long-Term Perf. Shares   2/27/2012                     9,492   18,985     28,477                       1,200,010  
James E. Rogers   Restricted Stock Units   2/27/2012                                     31,641                 2,000,028  
James E. Rogers   Options   2/27/2012                                           339,702     63.21     1,600,000  
Lynn J. Good   Cash Bonus         234,650   494,000