SCHEDULE 10 - Duke Energy

1 SCHEDULE 10 -- FORMULA RATE FOR. determination OF annual TRANSMISSION. revenue REQUIREMENT AND SCHEDULE 1. annual revenue REQUIREMENT. This SCHEDULE contains the Formula Rate that the Transmission Provider will use to determine its annual Transmission revenue Requirement and its SCHEDULE 1 annual revenue Requirement (together, Formula Rates ), and the implemental protocols for the Formula Rates ( Formula Rate Implementation Protocols ). The Formula Rate Implementation Protocols are included as Exhibit A to this SCHEDULE , and apply to the Transmission Provider's calculation of its annual Transmission revenue Requirement and its SCHEDULE 1 annual revenue Requirement.

2 The Formula Rate for the Transmission Provider's annual Transmission revenue Requirement is included in Exhibit B to this SCHEDULE , and shall be used to calculate the Transmission Provider's charges under Schedules 7, 7A, and 7B and Attachment H of this Tariff. The Formula Rate for the Transmission Provider's SCHEDULE 1 annual revenue Requirement is included in Exhibit B to this SCHEDULE , and shall be used to calculate the Transmission Provider's charges under SCHEDULE 1 of this Tariff. SCHEDULE 10. Exhibit A. Page 1. SCHEDULE 10 -- FORMULA RATE FOR. determination OF annual TRANSMISSION. revenue REQUIREMENT AND SCHEDULE 1. annual revenue REQUIREMENT.

3 Exhibit A. Duke Energy Carolinas Formula Rate Implementation Protocols Section 1: General a) Formula Duke Energy Carolinas employs a Formula to calculate its base transmission rates (for Network Integration Transmission Service and Point-to-Point Transmission Service) and a Formula to calculate its rates for SCHEDULE 1- Scheduling, System Control and Dispatch Service ( SCHEDULE 1 Service ), which rates are recalculated annually, based on calendar year costs, by means of the Formulas2, in accordance with the Protocols set forth herein. The Formula, the Formula Rate Principles, and these Protocols together comprise the filed rate ( Formula Rate ) of Duke Energy Carolinas.

4 Each year Duke Energy Carolinas prepares an annual Update that trues up the transmission rates calculation by populating the Formula Rate with information from Duke Energy Carolinas' Federal Energy Regulatory Commission ( FERC or the Commission ) Form No. 1 and its books and records for the preceding calendar year and prepares Estimated Billing Rates for the next Billing Year. Duke Energy Carolinas provides on the last page of these Protocols a time-line/chart illustrating the preparation of the annual Update, the true-up, and the Estimated Billing Rates. The annual Update process does not effect change to the Formula Rate itself. b) Changes in Rates.

5 Provisions of the Formula Rate may not be changed by Duke Energy Carolinas except through an appropriate filing pursuant to Section 205 of the Federal Power Act ( FPA ) and FERC's regulations thereunder. Provisions of the Formula Rate may not be changed by any 1. The descriptive headings of the various Sections and subsections of these Protocols have been inserted for convenience of reference only and in no way shall be deemed to modify or restrict any of the terms or provisions hereof. 2. Hereafter in these Protocols the term Formula is used to refer respectively to the Formula used to calculate base transmission rates (for Network Integration Transmission Service and Point-to-Point Transmission Service) and the Formula used to calculate rates for SCHEDULE 1- Scheduling, System Control and Dispatch Service.

6 SCHEDULE 10. Exhibit A. Page 2. other party except pursuant to an order of FERC issued under Section 206. of the FPA. However, Duke Energy Carolinas may, at its discretion and at a time of its choosing, make a limited filing pursuant to FPA Section 205 to update the references in the Formula Rate to reflect any FERC changes to the format and/or content of the FERC Form No. 1 or the Uniform System of Accounts ( USoA ) that affect the calculations set forth in the Formula Rate. The sole issue in any such limited Section 205 filing shall be whether such proposed changes appropriately reflect the changes to the format and/or content of the FERC Form No.

7 1 or the USoA and whether such changes are just and reasonable, and shall not include other aspects of the Formula Rate. c) Stated Values. Values included in the Formula Rate (if any) for the following items (hereinafter, Stated Values ) may not be changed by Duke Energy Carolinas except through a full rate case filing pursuant to FPA. Section 205 or by any other party except pursuant to an order of FERC. issued under Section 206 of the FPA:3. (i) rate of return on common equity;. (ii) cap on equity component of capital structure;. (iii) the depreciation and/or amortization rates as set forth in the notes to the Formula Rate template, and composite rate methods.

8 (iv) Post-Retirement Benefits Other than Pensions ( PBOPs ), pursuant to Statement of Financial Accounting Standards No. 106, Employers'. Accounting for PBOP;. (v) amortization of extraordinary property losses;. (vi) abandoned plant costs;. (vii) transmission incentives;. (viii) construction work in progress;. (ix) GridSouth costs and amortization; and (x) revenue -related tax factor. 4. 3. The initial Stated Values for amortization of extraordinary property losses, abandoned plant costs, transmission incentives and construction work in progress will be $0. Duke is required to make a full rate case filing under Section 205 of the Federal Power Act to change these Stated Values.

9 4. The initial Stated Values for revenue -related tax factor is will be 1. Duke is required to make a full rate case filing under Section 205 of the Federal Power Act to change this Stated Value. SCHEDULE 10. Exhibit A. Page 3. d) Fundamental Predicates. The Formula Rate is premised upon data reported or recorded by Duke Energy Carolinas consistent with the following predicates ( Fundamental Predicates ): (i) FERC's USoA, (ii) applicable FERC Form No. 1 reporting requirements , (iii) FERC's policies governing formula rates for wholesale transmission service, including FERC's policies that all charges billed under formula rates are subject to: (A) challenge on grounds of imprudence, and (B) an order by FERC requiring after-the-fact refunds.

10 (iv) FERC orders establishing transmission ratemaking policies of general application to transmission-owning public utilities, including Duke Energy Carolinas; and (v) the accounting and cost allocation policies, practices and procedures of Duke Energy Carolinas to the extent consistent with the authorities listed in (i) through (iv) above. The Formula Rate is based upon each of these Fundamental Predicates as it existed as of the date these Protocols are filed with FERC. Provisions of the Formula Rate may be modified to conform to changes in these Fundamental Predicates in accordance with Sections 1(b) or 3(c) of these Protocols or as ordered by FERC.